TAX COURT OPINION

Case: Billy D. Freeman, Jr.
Docket Number: 3941-10L
Judge: Marvel
Opinion Type: bench
Filed: 11/17/2011
Pages: 12

UNITED STATES TAX COURT WASHINGTON, DC 20217 BILLY D. FREEMAN, JR. , PEtitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) O R D E R Docket No. 3941-10L. Pursuant to Rule 152 (b) , Tax Court Rules of Practice and Proced.ure, it is ORDERED that the Clerk of the Court shall transtnit herewith the trial in the above case before Judge L. Paige the to petitioner and to respondent a copy of transcript of Marvel at Oklaho a City, Oklahoma, on November 3, 2011, containing her o al conclusion of th trial. the pages of findings of fact and opinion rendered at the In accordan e with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) L. Paige Marvel udge Dated : Washington, D . C. November 17, 2011 SERVED NOV 1 8 2011 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 2 Bench Opinion by Judge L. Paige Marvel Freeman v..Commissioner Docket No. 3941-10L November 3, 2011 THE COURT: THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT AND OPINION IN THIS CASE, AND THE FOLIOWING REPRESENTS THE COURT'S ORAL FINDINGS OF FACT AND OPINION. THE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER C SE. This bench opinion is made pursuant to section 7459(b) of the Internal Revenue Code of 1986 as amen ed and Rule 152 of the Tax Court Rules of Practic and Procedure. Unless otherwise indicated, subsequ nt section references made in this bench opinion are to the Internal Revenue Code of 1986, as amended, in effect for the relevant period, and rule references are to the Tax Court Rules of Practice and Procedure. Michael J. Romero appeared on behalf of petitioner Billy D. Freeman, Jr. Ann L. Darnold appeared on behalf of respondent. , Petitioner Billy D. Freeman, Jr. (henceforth petitioner) petitioned this Court pursuant to section 6330(d) (1) to review an adverse determination by respondent's Appeals Office upholding respondent's Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 proposed levy to collect an unpaid Federal income tax liability with respect to petitioner's 2006 taxable year (2C06). The two issues we must decide are whether petitioner may challenge the merits of the underlying tax,liability for 2006 and whether the Appeals Office abused its discretion in upholding the propose levy. FINDINGS OF FACT Some of the facts have been stipulated. The stipulations of fact are incorporated herein by this reference. When he petitioned this Court, petitioner resided in Oklahoma. NellymmmmN Petitioner filed his Federal income tax return for 2006 on March 26, 2008. The tax , liability reported on the 2006 return was paid through withholding tax credits and a payment that petitioner submitted when he filed .the 2006 return. p Respondent selected the 20Ò6 return for examination, and on November 24, 2008, he issued a notice of deficiency to petitioner with respect to 2006. In the notice, respondent determined an income tax deficiency of $70,331, an addition to tax under section 6651(a) (1) of $17,579.50, and a section 6662 accuracy-related penalty of $14, 063 . 60 . Respondent mailed the notice of·deficiency Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 17 18 19 20 21 22 23 24 25 4 for 200(cid:16)254to petitioner at several different addresses, one of which was petitioner' s last known address . Petitioner does not dispute that the ,, notice c f deficiency for 2006 was mailed to him at his last knc wn address or that he actually received the notice cf deficiency Petitioner did not file a petitior to contest the determinations in the notice of deficiency. After the 90-day period for petitioning this Court expired, respondent, on April 6, 2009, assessed the inccme tax deficiency, the section 6651(a) (1) additior to tax, and the section 6662 accuracy-related penalty plus accrued interest (collectively the 2006 tax liatïlity) and mailed a notice of balance due to petitiorer. L,, On August 24, 2009, respondent mailed petitioner Letter 1058, Final Notice-Notice of Intent to Levy, with respect to the unpaid 2006 tax liability. On September 23, 2009, petitioner submitted a timely Form 12153, Request for a Collection Due Process or Equivalent Hearing, in which he requested a hearing under section 6330 with respect to the proposed levy. . Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5 In the Form 12153, petitioner explained why he disac reed with the proposed levy as follows : ''Income figure was part of a sealed order in Federal court Csse No. 00 SC-61-EA (M) . This. case along with the correlating settlement figure was put under seal by a Fec eral Judge . The IRS has no right to the income figure from the case; the taxpayer reported the amount that was included .on form 1099 froth his attorney . " . Petitioner' s section 6330 hearing request was assigned to a settlement officer in respondent's Appeals Office. By letter dated November 25, 2009, copies cf which were mailed to both petitioner and his counsel, the settlement officer scheduled the section 6330 hearing for December 15, 2009. In that.letter the settlement officer asked petitioner to complete a Form 433-A, Collection Information Statement For Wage Earners and Self-Em lo(cid:0)570edIndividuals. The settlement officer also ex lained that because petitioner did not petitio this Court after a valid notice of deficiency was issued to him, he could not contest the existence or amou t of the underlying tax liability for 2006. Pëtitioner did not submit the requested Form Heritage Reporting Corporation (202) 628-4888 , 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24- 25 6 433-A before or during the section 6330 hearing. During the section 6330 hearing with petitioner's authorized representative, the settlement officer verified with petitioner's represer.tative that the notice of deficiency had been mailed to. petitioner's current and last known address arid exp]ained again that petitioner could not challence the existence or amount of the underlying liability. Petitioner' s representative did not request any collection alternative to the levy and asserted only that information regarding the details of the settlement, including the settlement amount, was sealed and could not form the basis for the assessed deficiercy. Â The Appeals Office interpreted petitioner's a:rgument as a challenge to the existence and amount of the underlying liability for 2006 and on January 13, 2010, issued a notice of determination that rejected petitioner's argument. In the notice of determination, the Appeals Of f ice conf irmed that it had veri f ied as required by section 6330 (c) (1) that all applicable legal and administrative requirements had been met, it addressed petitioner' s only argument as required by section Heritage Reporting Corporation (202) 628-4888 7 1 2 3 4 6330(c) t2), and it confirmed that as required by section 6330 (c) (3)·it had balanced efficient tax administration with any concerns by petitioner regarding the intrusiveness of the proposed collection .5 action. The Appeals Office sustained the proposed 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 levy in the notice of determination. Petitioner timely petitioned this Court for a review of the Appeals Office's determination. On November 2, 2011, we held a trial in this case at which petitioner testified. Upon completion of the trial, we announced that we did not believe that any post-trial briefing was necessary and that we may issue a bench opinion after completing a review of the record. We gave counsel for both parties the opporturity to present oral argument regarding their respective positions. DISCUSSION I. Section 6330 Section 6331(a) provides.that if any person liable to pay any tax refuses to pay the tax within 10 days after notice and demand, the Secretary may collect the tax by levying upon the person's property or rights to property. Section 6330.(a) (1), however, provides that the Secretary may not levy on any property or right to property unless he has first Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 8 informed the taxpayer in writing of the taxpayer's right to a hearing. If the taxpayer timely requests a hearing, the hearing shall be held before an impartial of f icer or employee of the Internal Revenue Service (IRS) Appeals Officel Sec. 6330(b) (1), (3). At the section 6330 hearing, the taxpayer may raisie any relevant issue, including appropriate spousal defenses, chällenges to the appropriateness of collection action, and collection alternatives. Sec. 6330 (c) (2) (A) . . The taxpayer may also dispute the existence or_amount of the underlying. tax liability, . but only if he did not receive a nòtice of deficiency or did not have a prior opportunity to dispute the liability.. Sec. 6330 (c) (2) (B) ; Sego v.. Commissioner, 114 T.C. 604, 609 (2000). A taxpayer who presents a relevant, nonfrivolous reason for objecting to a proposed levy ordinarily will be offered a face-to-face hearing at the Appeals Office closest to the täxpayer' s· residence . Sec . 301. 6330 -1 (d) (2) , Q&A-D7, Proced. & Admin. Regs. . Following the .section. 6330 hearing, the Appeals Of f ïce must determine whether the proposed levy may proceed. In making the determination, the Appeals O.ffice must consider three elements. First, the Appeals Office~ must verify that the Secretary . Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 follöwed all applicable laws and administrative proceduá es . Sec . 6330 (c) (1) , (3) (A) . Second, the Appeals Office must consider all relevant issues. raised by the taxpayer at the hearing. Sec. 6330 (c) (2) , (3) (B) . . Third, the Appeals Office must consider whether the proposed collection action appropriately balances the need for efficient collection of taxes with the legitimate· concern of the taxpayer that any coll.ection action be no more intrusive than necessary. Sec . 6330 (c) (3) (C) . II. Standard of Review . This Court has jurisdiction to review the Appeals Office' s determination. Sec. 6330 (d) (1) . However, the standard of review that we apply depends upon whether . the underlying liability was properly at issue -in the section 6330 hearing.. If the underlying liability is properly at issue, we review the determination regarding the underlying liability de novo. Sego v. Commissioner, supra, at 610 . If the underlying liability is not properly at issue, we revien the determination for abuse of discretion. Id. We will not conclude that a determinlation is an abuse of discretion unless it is arbitrary, capricióus, or without sound basis in fact Heritage Reporting Corporation (202) 628-4888 1 2. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 10 or law. L Woodral v. Commissioner, 112 T.C. 19, 23 (1999) . III. Challenge to Ekistence or.Amount of the Underlying Liability The only argument that petitioner made during the section 6330 hearing and at trial focused on an order that was allegedly issued by another Federal court in a whistleblöwer action sealing informat ion regarding the details of an alleged settlemint and the amount of that settlement. Petitioner,. who was one of the parties to the whistleblower actïon, received an award as part o.f the set lement . Petitioner claimed during the section 6330 he ri g and at t-rial that he received a Form 1099 from th United States Department of Justice for part but not all of the award in the qui tam whistleblower action and that he reported the amount shown on the Form 1099 on his 2006 return. In the notice óf deficiency issued to petitioner for 2006, respondent determined that petitioner had underreported the amount of the qui tam award that he had received and that the full amount of the qui tam award was taxable . Petitioner did not petition this Court to contest the notice of deficiency. Neither the Form 1099 nor the 2006 return Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 11 is a part of the record. The _Appeals Office construed petitioner's argument as a challenge to the amount of the underlying liability· and concluded that because a valid nc tice of deficiency had been mailed to petitior er, he . was precluded by section 6330 (c).(2) (B) from ch llengìng the underlying liability. Petitioner testified that he received the notice of deficiency for 2006 and, through counsel, concedeC that the notice of deficiency was mailed to his last known address Consequently, we agree that petitioner's argument, which the Appeals Office properl construed as a challenge to the underlying liability for 2006, is barred by section 6330 (c) (2). (B) . IV. Review for Abúse of Discretion Petitioner |identified no action on the part of the Appeals Office and no part of the notice of determinatiön that could fairly be characterized as an abuse of discretion. As required by section 6330 (c) (3) , the Appeals Office (1) verified.during the section 6330 hearing that the requirements of any applicable law or administrative procedure have been met, (2) considered the only argument raised by petitioner and properly Herìtage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 12 rejected it, and (3) concluded that the proposed levy balances the need for the efficient collection of taxes wj th petitioner' s legitimate concern that any collecti on action be no more intrusive than necessary. Petitioner did not raise any other relevant issue, 2nd he did not request a collection alternative or submit any financial information in support of a colle cti on alternatiye . Consequently, we f ind and hold that the determination of the Appeals Office that the proposed levy may proceed was not an abuse of discretion. We sustain the determination on this record. Decision will be entered for respondent. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT ANE OPINION IN THIS CASE. (Whereupon, at 10 i26 a.m. , the bench opinion in the above-entitled matter was concluded.) // // // // // // // // . Heritage Reporting Corporation (202) 628"4888