TAX COURT OPINION

Case: Walter Pascal Vangreen
Docket Number: 10572-09L
Judge: Colvin
Opinion Type: bench
Filed: 01/27/2010
Pages: 13

UNITED STATES TAX COURT WASHINGTON , DC 2021 7 WALTER PASCAL VANGREEN, Petitioner , v . ) Docket No . 10572-09L . COMMISSIONER OF INTERNAL REVENUE , Respondent . O R D E R Pursuant to Rule 152 ( b), Tax Court Rules of Practice and Procedure, it i s ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge David Gustafson at New York , New York, on January 12 , 2010, containing his oral findings of fact and opinion rendered at the . conclusion of the trial . In accordance with the oral findings of fact and opinion, decision will be entered for respondent . (Signed) David Gustafson Judg e Dated : Washington, D .C . January 27, 2010 ERVED JAN 2 7 2010 3 1 BENCH OPINION BY JUDGE DAVID GUSTAFSON 2 VANGREEN V . COMMISSIONER DOCKET NO . : 4795-09 3 January 12, 201 0 4 The Court has decided to render ora l 5 Findings of Fact and opinion in this case, and th e 6 following represents the Court's oral Findings of Fact 7 and Opinion . The oral Findings of Fact and Opinio n 8 shall not be relied on as precedent in any other case . 9 This Bench Opinion is made pursuant to the 10 authority granted by section(cid:127)7459(b) of the Internal 11 Revenue Code of 1986, as amended, and Rule 152 of the 12 Tax Court Rules of Practice and Procedure . 13 By a "Notice of Determination" date d 14 April 24, 2009 (Ex . 13-J), the IRS gave notice to 15 petitioner Walter Pascal Vangreen that the IRS' s 16 Office of Appeals had sustained the determination to I 17 proceed with a levy, in order to collect income tax 18 that he owed . We will affirm that determination . 19 Trial of this case was conducted o n 20 January 11, 2010, in New York City . The parties ' 21 "Stipulation of Facts", with Exhibits 1-J through 23-J 22 was admitted into evidence, and Mr . Vangreen gave his 23 -testimony and offered Exhibits 24-P and 25-P,, whic h 24 were also admitted into evidence . Heritage Reporting Corporation (202) 628-4888 4 1 FINDINGS OF FACT 2 IRS collection attempt s 3 This suit involves the IRS's attempt t o 4 collect income tax from Mr . Vangreen for eight years-- 5 1998, 1999, 2000, 2001, 2002, 2004, 2005, and 200 6 6 (i .e ., 1998 through 2006, exclusive of 2003) . In 2008 7 IRS collection personnel--chiefly, a Mr . Mark Zipkin-- 8 were dealing with him, to attempt to collect thos e 9 liabilities . In February 2008 Mr . Vangreen submitted 10 to Mr . Zipkin a financial statement on Form 433- A 11 (Ex . 7-J), which showed that he owned an apartment 12 worth $560,000 with mortgage loans totaling about 13 $236,000 and, therefore, equity of about $324,000 . 14 By August of 2008 those tax liabilities, 15 with interest and additions, exceeded $200,000 . On 16 -_ .August 21, 2008, the IRS sent to Mr . Vangreen a notice 17 of intent to levy (Ex . 1-J, Stip . 2) . The notic e 18 advised Mr . Vangreen of his right to request a 19 collection due process (CDP) hearing before the IRS 20 Office of Appeals . On September 17, 2008, h e 21 submitted such a request on Form 12153 (Ex . 2-J, Stip . 22 3), indicating that he desired an Installmen t 23 Agreement as a collection alternative, and explaining : 24 "I recently received a letter threatening to attach my 25 bank account & salary which would cause hardship an d Heritage Reporting Corporation (202) 628-4888 5 1 damage my future ability to pay ." Mr . Vangreen did 2 not challenge his liability for the taxes--either on 3 the Form 12153 or in this lawsuit . (Stip . 19 .) To 4 the Form 12153 Mr . Vangreen attached a statement 5 (Ex . 8-J) that read, "I'm in the final stages o f 6 refinancing with Wells Fargo bank and have receive d 7 the commitment letter [i .e ., Ex . 10-J] and all documents from the attorneys of WELLS FARGO and wil l 9 be closing early October . Any seizure of bank 10 accounts or salary would prevent the closing fro m 11 going thru!" (The dates on Exhibits 8-J and 10-J make 12 it clear that, contrary to the parties' stipulation 13 (Stip . 12, 14), those documents could not have been 14 attached to the February 2008 Form 433-A (Ex . 7-J) .) 15 In October 2008 Mr . Vangreen's apartment was 16 worth about $675,000 (Ex . 9-J), and had a mortgag e 17 debt of about $258,000, and thus equity of about 18 $417,000 . He refinanced the mortgage loan, b y 19 borrowing from Wells Fargo a total of about $417,000, 20 from which the old mortgage was paid off . The IRS had 21 recorded a lien of only $84,000 against that property 22 (despite his debt totaling more than $200,000), so the 23 attorneys handling the closing prepared a check fo r 24 the IRS in the amount of $84,000, and Mr . Vangreen 25 took the remainder of the loan proceeds for himself, Heritage Reporting Corporatio n (202) 628-4888 6 1 which he testified was $90,000 (although the numbers 2 do not reconcile) . He did not pay that remainder to 3 the IRS because he felt confident that he could later 4 do another refinance and pay off his tax debt, or else 5 if necessary he could later sell his apartment and use 6 the sale proceeds to pay off the tax debt . If th e 7 current value was $675,000 and his new mortgage was 8 $417,000, his remaining equity was about $258,000 . 9 His tax liability was now apparently well unde r 10 $200,000, after the $84,000 payment . 11 The CDP hearing 12 On December 19, 2008, the appeals officer 13 assigned to Mr . Vangreen's CDP case, Mr . Thomas 14 Conley, sent him a letter scheduling a telephone CDP 15 hearing for January 15, 2009, and directin g 16 Mr . Vangreen to phone Mr . Conley at 10 :30 a .m . 17 (Ex . 5-J, Stip . 8 .) The letter also requested a copy 18 of Mr . Vangreen's 2007 return (which he had in fact 19 not yet filed) . Mr . Vangreen admits he received the 20 letter but says he did not open it . He explains this 21 failure by saying that the IRS Appeals Office's letter 22 was not sent by certified mail, and Mr . Vangree n 23 assumed that the IRS would have been satisfied, for 24 the time being, by his recent payment of $84,000 from 25 the refinancing of his apartment . Mr . Vangreen di d Heritage Reporting Corporation (202) 628-4888 7 1 not call Mr . Conley at the appointed time . (Stip . 8 .) 2 When Mr . Conley received no phone call from 3 Mr . Vangreen, he sent a follow-up letter (Ex . 6-J) on 4 January 15, 2009 (Stip . 10) . The follow-up lette r 5 asked Mr . Vangreen to contact him within 10 days "[i)f 6 you are still interested in a hearing" . Agai n 7 Mr . Vangreen did not open the letter and did no t 8 telephone Mr . Conley . As a result, Mr . Vangreen di d 9 not participate in his CDP hearing (Stip . 21) and thus 10 did not ever propose a specific installment agreement . 11 He admits that, in fact, he did not ever speak wit h 12 Mr . Conley after he filed his request for a hearing 13 and before the notice of determination was issued . 14 The record before Mr . Conley in the IRS's 15 Office of Appeals thus included the information that .16 Mr . Vangreen had previously given to the IRS' s 17 collection personnel, and the request for a hearing 18 (with its attachments) that Mr . Vangreen sent to the 19 Office of Appeals . (Stip . 18 .) Based on tha t 20 information, Mr . Conley prepared a Notice o f 21 Determination (Ex . 13-J) upholding the decision by the 22 collection personnel to proceed with a levy . Th e 23 notice stated in particular that "you have not 24 supported your proposal of an alternative to 25 collection" and noted that Mr . Vangreen ha d Heritage Reporting Corporation (202) 628-4888 8 3 1 "sufficient equity in assets to secure a loan to pay 2 the balance in full" . The notice also noted tha t 3 Mr . Vangreen had still not filed his 2007 return (due 4 in April 2008) (Ex . 22-J), which Mr . Conley determined 5 by consulting the IRS's computerized records . 6 The notice was issued on April 24, 2009 . it 7 advised Mr . Vangreen of his right to appeal th e 8 determination to the Tax Court, and he timely filed 9 his petition in this Court on May 4, 2009 . At that 10 time he resided in New York . (Stip . 1 . ) 11 OPINION 12 I . "Collection Due Process" revie w 13 When a taxpayer fails to pay any Federal 14 income tax liability within 10 days of notice an d 15 demand, the IRS may collect the unpaid tax by levy on 16 the taxpayer's property, pursuant to section 6331 . 17 However, before the IRS may proceed with that levy, 18 the taxpayer is entitled to administrative and 19 judicial review pursuant to section 6330 . 20 Administrative review is carried out by way of a 21 hearing before the IRS's Office of Appeals (under 22 section 6330(b) and (c)) . At that CDP hearing, the 23 taxpayer may generally raise relevant issues relating 24 to the unpaid tax, including offers of collectio n 25 alternatives . Such collection alternatives may Heritage Reporting Corporation (202) 628-4888 9 1 include, among other things, an installment agreement . 2 Sec . 6330(c)(2)(A) . The taxpayer may challenge th e 3 existence or amount of the underlying tax liability at 4 the CDP hearing, but only if he had no prio r 5 opportunity to so challenge . Sec . 6330(c)(2)(B) . 6 The appeals officer must make a 7 determination whether or not the IRS should proceed 8 with the levy . The appeals officer is required by 9 section 6330(c)(3) to take into consideration : 10 (1) "verification from the Secretary that th e 11 requirements of any applicable law and administrative 12 procedure have been met" ; (2) relevant issues raised 13 by the taxpayer ; and (3) "whether any propose d 14 collection action balances the need for the efficient 15 collection of taxes with the legitimate concern of the 16 person that any collection action be no more intrusive 17 than necessary" . If the Office of Appeals then issues 18 a notice of determination to proceed with the levy , 19 then the taxpayer may appeal the determination to this 20 Court within 30 days ( see sec . 6330(d)(1)), a s 21 Mr . Vangreen has done . 22 II . Application of CDP principles to this case 23 A . Verification under section 6330(c)(1 ) 24 Mr . Vangreen does not dispute that the IRS 25 verified that the requirements of applicable law and Heritage Reporting Corporation (202) 628-4888 1 0 1 administrative procedure have been met . 2 B . Underlying liability issues under 3 section 6330 (c) (2) (B ) 4 Mr . Vangreen has not disputed his underlying 5 liability for the eight years at issue here--neithe r 6 in his request for a CDP hearing, nor in his petition 7 filed in this Court, nor at the trial . 8 C . Collection issue s 9 Where the underlying liability is not a t 10 issue, we review the appeals officer's determinations 11 regarding the collection action for an abuse o f 12 discretion . Goza v . Commissioner , 114 T .C . 176 13 (2000) . Accordingly, we review the IRS' s 14 determination in this case for abuse of discretion ; 15 that is, whether the determination was arbitrary, 16 capricious, or without sound basis in fact or law . 17 See Murphy v . Commissioner , 125 T .C . 301, 320 (2005), 18 affd . 469 F .3d 27 (1st Cir . 2006) ; Sego v . 19 Commissioner , 114 T .C . 604, 610 (2000) . We do not 20 substitute our own judgment for the appeals officer's 21 and attempt to decide how, in our opinion, he might 22 best have handled Mr . Vangreen's situation . Rather, 23 we decide whether the appeals officer abused hi s 24 discretion in making the determination he made . 25 Mr . Vangreen's principal contention is that Heritage Reporting Corporatio n (202) 628-4888 11 1 the appeals officer abused his discretion by declinin g 2 his request for an installment agreement . However, 3 for four reasons, we cannot find an abuse o f 4 discretion : 5 First, Mr . Vangreen made no specifi c 6 proposal to the Office of Appeals . It was not a n 7 abuse of discretion for an appeals officer to fail to 8 consider a collection alternative when the taxpaye r 9 had proposed none . Kendricks v . Commissioner , 124 10 T .C . 69, 79 (2005) ; Long v . Commissioner , T .C . Memo . 11 2010-7 . 12 Second, it was not an abuse of discretion 13 for the Office of Appeals to consider Mr . Vangree n 14 ineligible for an installment agreement on the ground 15 that he was not in compliance with current ta x 16 obligations . See Giamelli v . Commissioner ,. 129 T .C . 17 107, 111-112 (2007) ; Internal Revenue Manual part 18 5 .14 .1 .4 .1 . 19 Third, since Mr . Vangreen's position was 20 that the IRS should forestall collection because he 21 hoped to refinance his apartment a second time to 22 generate the necessary funds, it was proper for the 23 Office of Appeals to note that in his previou s 24 refinance, he had given the IRS only $84,000 and had 25 kept $90,000 for himself . Whatever his reasons for Heritage Reporting Corporatio n (202) 628-4888 1 2 1 doing so, this act undermined confidence about th e 2 extent to which the IRS would really benefit from any 3 refinancing . 4 Fourth, given the information available to 5 the Office of Appeals in April 2009--when the equit y 6 in Mr . Vangreen's apartment exceeded his liability--it 7 was not unreasonable for the Office of Appeals t o 8 conclude that he could fully pay his liability (now 9 less than $200,000) by refinancing his apartment (now 10 with equity of $258,000) . While Mr . Vangreen ha s 11 criticisms about the assumptions and reasoning 12 underlying that conclusion, his criticisms--and the 13 information on which they are based--were no t 14 communicated by him to the office of Appeals at the 15 critical time . .16 Mr . Vangreen seems to have assumed that the 17 Office of Appeals could and would consult with th e 18 collection personnel who were most familiar wit h 19 Mr . Vangreen's affairs, but in fact such consultations 20 are prohibited : Section 6330(b)(3), which is entitled 21 "Impartial Officer", provides : "The hearing under this 22 subsection shall be conducted by an officer o r 23 employee who has had no prior involvement with respect 24 to the unpaid tax * * * ." To further implement this 25 impartiality principle, appeals officers are no t Heritage Reporting Corporation (202) 628-4888 13 1 allowed to have ex-parte communications with other IR S 2 employees that would appear to compromise th e 3 independence of their review function . See Industrial 4 Investors v . Commissioner , T .C . Memo . 2007-93 ("The 5 Commissioner then made the guarantee of impartiality 6 part of the IRS's standard operating procedure b y 7 issuing Revenue Procedure 2000-43, 2000-2 C .B . 404") . 8 Ex-parte communications are "communications that take 9 place between Appeals and another Service functio n 10 without the participation of the taxpayer or th e 11 taxpayer's representative" and are "prohibited to the 12 extent that such communications appear to compromise 13 the independence of Appeals ." Rev . Proc . 2000-43 , 14 Q&-A-1, sec . 3, 2002-2 C .B . 404, 405 . It was not IRS 15 collection personnel but Mr . Vangreen who wa s 16 responsible to give to Mr . Conley in the Appeals 17 Office the information necessary to evaluate his 18 ability to pay . 19 D . Intrusivenes s 20 Under section 6330(c)(3), the office of 21 Appeals is supposed to ensure that the "propose d 22 collection action balances the need for the efficient 23 collection of taxes with the legitimate concern of the 24 person that any collection action be no more intrusive 25 than necessary" . Mr . Vangreen made no specifi c Heritage Reporting Corporation (202) 628-4888 14 1 complaint about intrusiveness, and we cannot criticiz e 2 the balancing that was done by the Office of Appeals 3 in this instance . Mr . Vangreen had not proposed a 4 specific installment agreement, and he had not shown 5 that he was eligible for it . On the other hand, his 6 tax liability was substantial and had accrued over a 7 long period of years, and he had not even filed all 8 his tax returns that were then due . The Appeal s 9 Office did not abuse its discretion by determining 10 that no further delay was appropriate in th e 11 collection of Mr . Vangreen's substantial and long 12 overdue taxes . 13 An appropriate order will be issued , 14 sustaining the IRS's determination to proceed to 15 collect by levy . 16 This concludes . the Court's oral Findings o f 17 Fact and opinion in: this case . 1 8 1 9 2 0 2 1 2 2 2 3 24 25 (Whereupon, at 2 :10 p .m ., the bench opinion in the above - entitled matter was concluded .) / I /1 Heritage Reporting Corporation (202) 628-4888