TAX COURT OPINION

Case: Chester Lee McDowell, Sr.
Docket Number: 14479-12L
Judge: Morrison
Opinion Type: bench
Filed: 11/25/2013
Pages: 7

UNITED STATES TAX COURT WASHINGTON, DC 20217 CHESTER LEE MCDOWELL, SR., Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 14479-12L. ) ) ) ) ORDER OF SERVICE OF TRANSCRIPT Pursuant to Rule 152(b), Tax Court Rules of Practice of Procedure, there is transmitted herewith to petitioner and to respondent a copy of the pages of the transcript of the trial of the above case before Judge Richard T. Morrison, at Winston-Salem, North Carolina, on October 1, 2013, 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, an appropriate decision will be entered. (Signed) Richard T. Morrison Judge Dated: Washington, D.C. November 25, 2013 SERyg S - 2 20S Capital Reporting Company 3 1 Bench Opinion by Judge Richard T. Morrison 2 October 1, 2013 3 4 5 6 7 8 9 10 11 12 13 14 lß 16 17 18 Chester Lee McDowell, Sr. v. Commissioner Docket No. 14479-12L THE COURT: The Court has decided to render oral findings of fact and opinion in this case and the following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied on as precedent in any other case. References to sections are to the Internal Revenue Code of 1986, as amended. References to rules are to the Tax Court Rules of Practice and Procedure. This Bench Opinion is made pursuant to the authority granted by section 7459(b) and Rule 152 . Mr. Steven M. Webster appeared on behalf of the respondent (the "IRS") . Mr. Chester Lee McDowell, 19 Sr., the petitioner, appeared on his own behalf. 2) . This case is an appeal, pursuant to section 2L 22 23 24 25 6330 (d) (1), by which McDowell seeks this Court's review of a determination by the IRS Appeals Office. The Office sustained a proposed levy to collect frivolous return penalties for the tax years 1999, 2000, 2001, 2002, 2005 and 2006. Its notice of 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 determination was +&ewe on May 3, 2012. McDowell was a resident of North Carolina when he filed his petition. The IRS is authorized to collect a tax by levy. Sec. 6331(a). A "tax" includes the liability for the section 6702 frivolous return penalty. See sec. 6665(a) (2). Section 6330 (a) (1) and (b) (1) provides that before the IRS may impose a levy, it must notify the taxpayer that the taxpayer has a right to an administrative hearing, and it must conduct such a hearing if one is requested. The pertinent procedures for this hearing are set forth in section 6330 (c). First, the Appeals Office must obtain verification from the Treasury Secretary that the requirements of any applicable law or administrative procedure have been met. Sec. 6330 (c) (1). Second, the taxpayer may "raise at the hearing any relevant issue relating to the unpaid tax or the espeéd levy", 1 including challenges to the appropriateness of the collection action and offers of collection alternatives. Sec. 6330 (c) (2) (A). Section 6330(c) (2) (B) provides that the taxpayer may contest the existence and amount of the underlying tax liability, but only if the taxpayer did not receive a notice of deficiency and "did not otherwise have an 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com I ! Capital Reporting Company 5 1 opportunity to dispute such tax liability." S 2 Baltic v. Commissioner, 129 T.C. 178, 180-181 (2007); 3 4 5 6 7 8 9 Oyer v. Commissioner, T.C. Memo 2003-178, slip op. at 15-17. After the Appeals Office has issued its determination, the taxpayer may appeal the determination to the Tax Court, pursuant to section 6330 (d) (1), as McDowell has done. In such an appeal, we review de novo any determination of the Appeals 30 Office as to the underlying tax liability that is 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 properly at issue. See Murphy v. Commission, 125 T.C. 301, 308 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006); Sego v. Commissioner, 114 T.C. 604, 610 (2000) Goza v. Commissioner, 114 T.C. 176, 181-182 (2000) . As to other matters, we review the determination of the Appeals Office for abuse of discretion--that is, we decide whether the determination was arbitrary, capricious, or without sound basis in fact or law. Murphy, 125 T.C. at 308. See Sego, 114 T.C. at 610; Goza, 114 T.C. at 182. The IRS conceded in court that it improperly assessed McDowell's liability for frivolous return penalties for the years 1999, 2000, 2001, and 2002. It therefore concedes that McDowell is not liable for the penalties for those years; and that the Appeals 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 Office abused its discretion in sustaining a proposed 2 3 4 5 levy for those years. The IRS contends that the assessments were proper for the remaining two years, 2005 and 2006; that McDowell is liable for the penalties for these two years; and that the Appeals 6 Office did not abuse its discretion in sustaining a 7 8 9 proposed levy for those two years' penalty liabilities. A taxpayer is liable for a frivolous return 10 penalty under section 6702 if three requirements are ]l met. First, the taxpayer must file a document that ]2 ]3 ]4 15 ]6 ]7 18 39 20 21 22 23 24 25 purports to be an income tax return. Sec. 6702(a) (1). Second, the purported return must suffer from one of the following defects: it either (a) lacks the information needed to judge the substantial correctness of the self-assessment or (b) contains information indicating the self-assessment on the purported return is substantially incorrect. Id. Third, the defect must be due to a position (a) that is frivolous or (b) demonstrates a desire to delay or impede the administration of federal income ta \od (a desire that is evidenced on the purported return). Sec. 6702 (a) (2). On or about November 14, 2007, McDowell submitted a Form 1040 for 2005 and a Form 1040X for 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 2006 that falsely reported that he earned $0 of 2 income in each year despite being employed by the engineering department of the Norfolk Southern Railroad. We find that the two forms purport to be tax returns; that they lack the information needed to judge the substantial correctness of McDowell's claim that he earned $0 in income; and that the forms were intended to delay or impede the administration of tax laws. Therefore we conclude that McDowell is liable for the section 6702 (a) penalty for 2005 and 2006. McDowell's main attack on the determination of the Appeals Office is that he did not receive a hearing because it did not offer a face-to-face 10 11 12 13 14 meeting with him near his residence in North 15 Carolina. On January 27, 2012, the Appeals Office in 15 Holtsville, New York, informed McDowell that he could 17 13 19 request a face-to-face hearing at the Appeals Office closest to his residence. However, on March 21, 2012, the Appeals Office wrote a second letter to 20 McDowell that (correctly) recognized that his request 2:. for a hearing, dated December 12, 2011, contained 22 . only frivolous reasons for a hearing, and, on that 23 2' 25 basis, refused to grant McDowell a face-to-face hearing at any location of the Appeals Office. This refusal was not an abuse of discretion. Sec. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 301. 6330-1 (d) (2 ) , Q&A-D8, Proced . & Admin . Regs . ; see also Lundsford v. Commissioner, 117 T.C. 183, 189 (2001) . McDowell made other arguments. None of them are 5 meritorious. The Appeals Office did not abuse its discretion with respect to the collection of the 2005 and 2006 frivolous return penalty liabilities. To reflect the foregoing, an appropriate decision will be entered. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 9:57 a.m., the above- entitled matter was concluded.) 6 7 8 9 10 11 12 13 15 16 17 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com