hershal weber petitioner v commissioner of internal revenue respondent docket no 27369-10l filed date in p filed a federal_income_tax return for reporting an overpayment and electing to have it applied to his estimated income_tax however in r deter- mined that p was liable for an sec_6672 penalty attrib- utable to unpaid trust_fund_taxes of c and applied p’s income_tax overpayment to that penalty liability instead in the balance of c’s trust fund tax_liability was satisfied by third-party payments when p thereafter filed his federal_income_tax return in he claimed a credit thereon for the overpaid income_tax thereby reporting a income_tax overpayment and elected to have that asserted overpayment applied to his estimated income_tax the irs notified p that it adjusted his credits downward to eliminate the claimed income_tax overpayment thereby eliminating any overpayment for and yielding a balance due when p filed his federal_income_tax return in he nonetheless claimed a credit thereon for overpaid income_tax which consisted solely of the previously disallowed credit elect overpayment from the irs notified p that it adjusted his credits downward to eliminate the claimed income_tax overpay- ment yielding a balance due greater than he had reported when p did not pay the balance due for r issued to p a notice of proposed levy and p requested a hearing under sec_6330 at the hearing p contended that his sec_6672 penalty was overpaid and that his liability would be satisfied if that overpayment were applied to his liability r determined to proceed with the levy to collect p’s federal_income_tax liability held p is not entitled to apply a credit elect overpayment from toward his income_tax_liability because after application of his income_tax overpayment to his sec_6672 penalty liability he had no overpayment available for crediting verdate 0ct jun jkt po frm fmt sfmt v files weber sheila weber v commissioner to and therefore no overpayment available for cred- iting to held further in a hearing under sec_6330 concerning collection of p’s unpaid income_tax_liability we do not have jurisdiction to adjudicate p’s claim of an sec_6672 penalty overpayment donald jay pols for petitioner deborah aloof for respondent opinion gustafson judge this is a collection_due_process cdp appeal pursuant to sec_6330 sec_1 in which petitioner hershal weber asks us to review a determination by the office of appeals appeals of the internal_revenue_service irs to proceed with a levy in order to collect his income_tax for the year the issue is whether the tax that the irs proposes to collect has already been paid_by mr weber’s alleged overpayment of a sec_6672 penalty liability respondent the commissioner of internal revenue moved for summary_judgment and mr weber filed an opposition supported by exhibits we will grant the commissioner’s motion background for purposes of the commissioner’s motion we assume correct the facts asserted by mr weber and supported by his exhibits as well as facts demonstrated by the commissioner that mr weber did not dispute income_tax in mr weber earned_income from which federal_income_tax was withheld in date mr weber filed his federal_income_tax return on that return he reported an overpayment of dollar_figure consisting entirely of amounts withheld in and elected pursuant to c f_r sec_301_6402-3 proced admin regs to have that overpayment applied to his estimated income_tax for the succeeding year ie we assume that he had in fact overpaid his liability in this amount tax_year unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as in effect at all relevant times codified in u s c and all rule references are to the tax_court rules_of_practice and procedure verdate 0ct jun jkt po frm fmt sfmt v files weber sheila united_states tax_court reports is not at issue here but the overpayment is rel- evant to the tax that is at issue trust fund penalty liability mr weber evidently had some connection to s g services inc s g the irs determined that in three quarters of cal- endar year s g had failed to pay over trust_fund_taxes withheld from its employees’ wages pursuant to sec_3102 and sec_3402 by date the irs determined that mr weber had been a responsible_person of s g in and on date the irs therefore assessed penalties against mr weber under sec_6672 in amounts totaling dollar_figure the record indicates that the irs determined that one or more other individuals were also responsible per- sons of s g and assessed sec_6672 penalties against them as against mr weber mr weber’s liability for that sec_6672 penalty is not at issue here but it is relevant to mr weber’s contentions as we explain below mr weber states that he neither disputes nor admits the merits of this trust fund recovery penalty in this proceeding but in his administrative claim_for_refund discussed below he contends that the assessment was erro- neous satisfaction of the trust fund penalty liability in and various payments were made against the unpaid trust fund tax_liabilities of s g or against the corresponding penalty liabilities under sec_6672 most important to this suit is a credit against mr weber’s sec_6672 penalty liability made from his income_tax over- payment by letter dated date-ie before the end of tax_year and long before mr weber filed his return-the irs advised mr weber that his reported overpayment of dollar_figure had been applied not to his estimated income_tax but instead to his sec_6672 penalty liability although mr weber’s tax_return was filed in date and processed in date the irs applied these credits with an effective date of july the tally of these assessments that was attached to mr weber’s request for a cdp hearing overstated the penalty for the quarter ended by dollar_figure and therefore overstated the total by the same amount verdate 0ct jun jkt po frm fmt sfmt v files weber sheila weber v commissioner 2007-the date on which the sec_6672 penalty had been assessed almost a year later in date the irs received from responsible persons other than mr weber a payment of dollar_figure toward s g’s liabilities in date the irs executed an agreement with mr weber on form summary notice_of_determination waiver of right to judicial review of a collection_due_process determination and waiver of suspension of levy action in which mr weber acknowledged that he had received collection notices concerning the sec_6672 penalty liabilities but in which he waived his right to a cdp hearing before appeals con- cerning those liabilities the agreement stated as follows the irs office of appeals’ determination with regard to mr weber the trust fund portion of the liabilities have sic been satisfied at the cor- porate level by the redesignation of a dollar_figure payment made on the satisfaction of the trust fund portion of the tax at the corporate level will offset to your sec_6672 penalty account resulting in no balance due remaining levy action as to the sec_6672 penalty is no longer needed and will not take place the irs has adjusted the account for mr weber’s sec_6672 penalty not only by payments that he made but also by payments from the other responsible persons irs transcripts for mr weber’s penalty liability for the three quarters at issue show small balances due but for purposes of the commissioner’s motion we assume that if the redesignation to which the irs agreed is properly accomplished then the irs has collected through his sec_6672 penalty payments the penalty payments by other responsible persons of s g and s g’s own payments of the trust fund liabilities a total amount greater than s g’s trust fund liabilities on date mr weber filed claims for refund with the irs by submitting form sec_843 claim_for_refund and request for abatement on date the irs disallowed those refund claims on date mr weber filed a refund_suit in federal district_court chal- lenging that disallowance weber v united_states no verdate 0ct jun jkt po frm fmt sfmt v files weber sheila united_states tax_court reports cv-732 e d n y our record does not show any disposition of that refund_suit income_tax our record does not show precisely when in mr weber filed his federal_income_tax return but we assume in his favor that he filed it after date-ie after appeals had determined he had no balance due remaining on his sec_6672 liability on that return mr weber reported a tax_liability of dollar_figure that we assume to be correct in addition to claiming withholding credits of dollar_figure and excess social_security remittances of dollar_figure on line estimated_tax payments and amount applied from return he reported credits totaling dollar_figure-ie the amount of his claimed overpayment-and he there- fore reported an overall overpayment for in the amount of dollar_figure on line he elected to have that claimed over- payment applied to his estimated income_tax for the suc- ceeding year ie as we have noted however before that time the irs’s date letter had advised him that his reported overpayment had not been applied to his esti- mated income_tax but rather to his sec_6672 penalty liability the irs therefore evidently spotted as excessive the credit claimed on line and it sent mr weber a letter dated date advising him that it had reduced the amount of his estimated_tax payments and that he therefore still owed dollar_figure of the tax he had reported due for our record does not show whether or when mr weber paid that liability and is not at issue in our case income_tax for the year at issue-ie 2008-mr weber filed his fed- eral income_tax return in date he reported a tax_liability that we assume to be correct he also reported on line of that return a credit_amount of dollar_figure that this amount was determined by taking mr weber’s tax_liability of dollar_figure less withholding credits of dollar_figure and excess social_security remittances of dollar_figure which resulted in an under- payment of dollar_figure to that underpayment the commissioner applied penalties of dollar_figure and interest of dollar_figure for an unpaid balance of dollar_figure verdate 0ct jun jkt po frm fmt sfmt v files weber sheila weber v commissioner included a supposed overpayment of dollar_figure from his return of course months before he filed his return he had received the irs’s date letter indicating that his overpayment had not been applied to but had instead been applied to his penalty liability leaving him with no overpayment for that could be applied to consistent with its prior action as to the irs sent mr weber a letter dated date advising him that it had adjusted his estimated_tax payments ie to reduce them by the claimed overpayment of dollar_figure and that he had a balance due on his income_tax account of dollar_figure on which penalties and interest were also due collection action for income_tax when mr weber did not pay the balance due the irs sent him a final notice-notice of intent to levy and notice of your right to a hearing on date the irs received from mr weber a form request for a collection_due_process or equivalent_hearing by which he requested a cdp hearing pursuant to sec_6330 he attached to that form a calculation of trust fund penalty overpayment asserting that the total overpayment for trust funds was dollar_figure the irs granted him that hearing before its office of appeals at the hearing mr weber’s representative argued that because s g’s trust fund liability had been fully satisfied by payments other than mr weber’s the irs should correct its prior actions as to mr weber’s income_tax liabilities for and so that his income_tax overpayment would be credited to his income_tax_liability as originally requested and the resulting overpayment would then be credited against-and would satisfy-his income_tax_liability he argued that if those actions were taken his income_tax_liability would be satisfied and no levy would be appropriate mr weber derived this overpayment by taking the total amount of payments made by him- self by other responsible persons and by s g-dollar_figure-against the total amount of the trust fund penalties assessed against him-dollar_figure but mistakenly stated by him as dollar_figure mr weber concluded that the difference ie dollar_figure was an overpayment mr weber then reasoned that since the trust_fund_taxes had been overpaid by dollar_figure his entire payment-dollar_figure-was unnecessary for satisfying these liabilities verdate 0ct jun jkt po frm fmt sfmt v files weber sheila united_states tax_court reports on date appeals issued a notice of deter- mination upholding the proposed levy an attachment to the notice_of_determination stated the office of appeals does not have jurisdiction on the other tax periods that you believe caused the liability on tax period on date mr weber filed a timely petition with this court challenging that determination at the time he filed his petition mr weber resided in new york discussion i general legal principles a collection_due_process at issue here is the irs’s proposal to collect mr weber’s income_tax_liability by means of a levy sec_6330 provides that before the irs may make a levy on any prop- erty pursuant to sec_6331 the taxpayer is entitled to notice of the commissioner’s intent to levy and of the tax- payer’s right to a hearing before the irs office of appeals sec_6330 and b that hearing addresses the taxable_period to which the unpaid tax specified in the notice of pro- posed levy relates sec_6330 at the agency- level cdp hearing the taxpayer may raise any relevant issue relating to the unpaid tax or the proposed levy sec_6330 emphasis added -language important here for reasons we explain below the taxpayer may make chal- lenges to the appropriateness of collection actions and may make offers of collection alternatives which may include the posting of a bond the substitution of other assets an install- ment offer-in-compromise sec_6330 the appeals officer must consider those issues verify the requirements of applicable law and administrative procedure have been met and consider whether any pro- posed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the person involved that any collection action be no more intrusive than necessary sec_6330 agreement an or mr weber does not complain of any failure by the irs to comply with these provisions except that he contends it erred by failing to apply against his income_tax_liability verdate 0ct jun jkt po frm fmt sfmt v files weber sheila weber v commissioner his claimed credit elect overpayment from derived from his claimed credit elect overpayment from or in the alternative to credit to his liability his alleged sec_6672 penalty overpayment which he asks us to deter- mine both parties ask us to review for abuse_of_discretion see 125_tc_301 aff ’d 469_f3d_27 1st cir the determination by appeals to proceed with collection as we show below mr weber’s contention involves the assertion that appeals made errors of law and if a determination is indeed based upon an error of law then by definition it constitutes an abuse_of_discretion see 121_tc_111 b summary_judgment under rule the tax court’s analog to rule of the federal rules of civil procedure the court may grant sum- mary judgment where there is no genuine issue of any mate- rial fact and a decision may be rendered as a matter of law the moving party here the commissioner bears the burden of showing that no genuine issue of material fact exists and the court will view any factual material and inferences in the light most favorable to the nonmoving party 85_tc_812 cf 477_us_242 same standard under fed r civ p the opposing party is to be afforded the benefit of all reasonable doubt and any inference to be drawn from the underlying facts contained in the record must be viewed in a light most favorable to the party opposing the motion for summary_judgment 78_tc_412 in this case we assume the facts as shown by mr weber the non-moving party or as shown by the commissioner and not disputed by mr weber c credit elect overpayments mr weber contends that the irs erred by failing to apply his claimed income_tax overpayment against his income_tax_liability and by failing to apply his claimed income_tax overpayment against his income_tax_liability at issue here when a taxpayer has made an overpayment_of_tax the irs has discretion to credit that overpayment to verdate 0ct jun jkt po frm fmt sfmt v files weber sheila united_states tax_court reports another liability-a discretion given to it by sec_6402 sec_5 which provides in the case of any overpayment the secretary may credit the amount of such overpayment against any liability in respect of an internal revenue tax on the part of the person who made the overpayment and shall refund any balance to such person emphasis added that is the irs shall refund any overpayment not other- wise credited but the irs may credit an overpayment to another liability in the case of a prior year’s overpayment reported on the succeeding year’s tax_return such as is at issue here con- gress underscored the irs’s discretion to allow credits or over- payments by providing in sec_6402 the secretary is authorized to prescribe regulations providing for the cred- iting against the estimated income_tax for any taxable_year of the amount determined by the taxpayer or the secretary to be an overpayment of the income_tax for a preceding_taxable_year pursuant to that authority the secretary promulgated c f_r sec_301_6402-3 proced admin regs which provides if the taxpayer indicates on its return or amended_return that all or part of the overpayment shown by its return or amended_return is to be applied to its estimated income_tax for its succeeding taxable_year such indication shall constitute an election to so apply such overpayment see 314_f3d_944 n 8th cir irs v luongo in re luongo 259_f3d_323 5th cir 505_f2d_506 2d cir 86_tc_770 discussing kalb aff ’d in part rev’d in part 827_f2d_884 3d cir 67_fedclaims_598 from the plain language of the statute the irs has no obligation to credit any individual’s tax overpayment to specific preexisting outstanding tax_liabilities upon the tax- payer’s request the statute sec_6402 gives the irs the discretionary authority to cred- it tax overpayments to any_tax liability see 73_f3d_764 8th cir cert_denied 519_us_862 136_led_110 117_sct_168 in re ryan 64_f3d_1516 11th cir holding that u s c sec_6402 gives the irs the discretionary authority to credit tax overpayments to any_tax liability 34_f3d_536 7th cir 519_fsupp_178 n d ohio finding that the government may apply tax overpayments to subsequent years’ liabilities but is not required to do so the statute and case law are clear that the discre- tionary authority of the irs supersedes any desires or wishes on the part of a taxpayer to have their overpayment credited to specific preexisting tax_liabilities for purposes of the commis- sioner’s motion for summary_judgment we assume that in a collection_due_process case we can review for an abuse_of_discretion the irs’s decision under sec_6402 to credit an overpayment to a nondetermination year rather than to the year at issue cf n states power co v united_states 73_f3d_764 8th cir in a proper case the failure to credit overpayments might be reviewable on an abuse-of-discretion basis 110_tc_291 see also orian v commissioner tcmemo_2010_234 slip op pincite and cases cited thereat verdate 0ct jun jkt po frm fmt sfmt v files weber sheila weber v commissioner the subject of such an election is known as a ‘credit elect overpayment’ or simply a ‘credit elect ’ 483_f3d_1345 fed cir how- ever sec_301_6402-3 makes it clear that the tax- payer’s election to apply an overpayment to the succeeding year is not binding on the irs notwithstanding paragraph a of this section the internal_revenue_service within the applicable_period of limitations may credit any overpay- ment of individual fiduciary or corporation income_tax including interest thereon against any outstanding liability for any_tax or for any interest additional_amount additions to the tax or assessable penalty owed by the taxpayer making the overpayment emphasis added thus a taxpayer may request a credit elect overpayment but the irs has discretion whether to allow it or instead to credit the overpayment to another liability owed by the tax- payer or to refund it d responsible_person penalty the liability to which the irs applied mr weber’s income_tax overpayment was the penalty imposed by sec_6672 sometimes known as the responsible_person penalty or the trust fund recovery penalty tfrp an employer is required by sec_3102 and sec_3402 to withhold from an employee’s wages and then pay over to the irs both income_tax under sec_3402 and the employee’s share of social_security and medicare_tax ie federal insurance contribu- tions act fica tax under sec_3102 under sec_7501 the amount of tax so collected or withheld shall be held to be a special fund in trust for the united_states con- sequently these withheld taxes are referred to as trust_fund_taxes one of the means congress has enacted to ensure that these trust_fund_taxes are paid over to the government is sec_6672 under which the officers or employees of the employer responsible for effectuating the collection and pay- ment of trust-fund taxes who willfully fail to do so are made personally liable to a ‘penalty’ equal to the amount of the delinquent taxes 436_us_238 sec_6672 provides any person required to collect truthfully account for and pay over any_tax imposed by this title who willfully fails to collect such tax or truthfully account for and pay over such tax or willfully attempts in any manner to verdate 0ct jun jkt po frm fmt sfmt v files weber sheila united_states tax_court reports evade or defeat any such tax or the payment thereof shall in addition to other penalties provided by law be liable to a penalty equal to the total amount of the tax evaded or not collected or not accounted for and paid over the trust fund penalty of sec_6672 is a means of col- lecting from the responsible persons here mr weber and others the unpaid trust fund liability of the employer here s g the irs collects the trust fund liability no more than once consequently the irs cross-references payments against the trust fund liability itself and payments against the sec_6672 penalty liabilities of responsible persons and those payments ultimately reduce the amount of the penalty liability of each responsible_person however where there are multiple responsible persons who have paid pen- alties under sec_6672 arising from the same unpaid trust_fund_taxes the irs faces the risk that if it stops collecting after receiving amounts that equal the trust fund shortage one assessed person may later prove himself not responsible and therefore entitled to a refund for that reason the tfrp is considered ‘collected’ only after the passage of two years from the date of payment with no claim_for_refund filed by or for the payor in those two years so there may be cases where the service retains more than payment from two or more taxpayers until the tfrp is conclusively collected internal_revenue_manual pt date see avildsen v united_states in re 794_f2d_1248 ndollar_figure 7th cir if the corporate trust fund tax obligations are subsequently paid_by the corpora- tion this payment may also relieve the corporate officials of their separate liability for delin- quent trust_fund_taxes under sec_6672 784_f2d_1238 5th cir as a matter of policy it the government does not retain pay- ments exceeding the underlying withholding_tax delinquency 370_f2d_612 2d cir had the government’s claim in the bankruptcy been defeated by an adjudication that the payments should have been credited to lincoln the employer the gov- ernment concedes that it would be bound to release appellants the responsible officers for it is its practice not to attempt enforcement of sec_6672 liability if the corporate obligation is met and an adjudication that the payments should have been credited to lincoln would have entitled lincoln to credits as great as its entire tax obligation internal_revenue_manual irm pt policy statement para date the withheld income and employ- ment taxes or collected excise_taxes will be collected only once whether from the business or from one or more of its responsible persons pt date even though the service may make assessments against more than one responsible_person for a specific quarterly liability it only collects the total amount once bold in original see irm pt dollar_figure date in addition for the circumstance in which more than one person has been held liable for the sec_6672 penalty and one of those persons believes he is entitled to contribution from one or more of the other persons congress has provided that a taxpayer may bring a separate suit claiming a right of contribution pursuant to sec_6672 verdate 0ct jun jkt po frm fmt sfmt v files weber sheila weber v commissioner related tfrp cases para for that reason the mere presence of a credit balance in the penalty account of a responsible_person does not assure that he is entitled to a refund in addition the settling of the penalty account of a responsible_person may be complicated by questions about liability for interest and additions to tax under sec_6651 both by the employer on its liability for the trust fund tax in the first instance and by the responsible_person on his liability for the penalty the liability at issue in this collection review case is mr weber’s unpaid income_tax_liability not a sec_6672 penalty however such a penalty was assessed against mr weber and his overpayment of income_tax was credited toward that liability and not toward his income_tax_liability as he had requested the irs’s refusal to alter that crediting after s g’s trust fund tax_liability was satisfied by another taxpayer’s payment is important to mr weber’s contentions here ii whether the tax at issue is unpaid mr weber complains that appeals refused to consider a collection alternative but by that he really means that it failed to consider his contention that the liability at issue should be treated as having been satisfied and therefore as not unpaid his position was and is that in view of the resolution of s g’s withholding_tax liability his income_tax overpayment-originally credited against a sec_6672 penalty to compensate for s g’s unpaid liability-should now be credited instead to his income_tax_liability as he elected on his return and that if it is the result will be a income_tax overpayment that when applied to his income_tax_liability as he elected on his return will satisfy that liability and render moot any fur- ther collection for alternatively mr weber contends that because of the satisfaction of s g’s trust fund liability from other sources he has overpaid his sec_6672 penalty see also irm pt date in related trust fund recovery penalty cases where all responsible parties are not in agreement with an appeals settlement based on hazards_of_litigation a form_2751 proposed assessment of trust fund recovery penalty should be se- cured from the agreeing responsible_person s inform the agreeing responsible_person s by clos- ing letter that the case can be reopened if the department of justice decides to join all poten- tially responsible persons in a refund_suit before the assessment limitation period expires verdate 0ct jun jkt po frm fmt sfmt v files weber sheila united_states tax_court reports and that overpayment if applied would be sufficient to sat- isfy his unpaid income_tax_liability a the claimed credit elect overpayment as we have held we have jurisdiction to consider mr weber’s claim of a credit elect that would satisfy the liability at issue here but we hold that his claim of a credit elect cannot be sustained the credit elect overpayment claimed on the return depends on the credit elect overpayment claimed on the return on his tax_return for the year at issue mr weber claimed a credit that included dollar_figure of an asserted over- payment of income_tax if such a credit elect overpay- ment is applied to his liability as he requested then the liability is satisfied and no levy should occur we note that a credit elect overpayment is not a claimed overpayment of an unrelated liability that the taxpayer asks us to adju- dicate and then to offset against the different liability that is the subject of the irs’s collection efforts rather the credit elect overpayment is a credit that a taxpayer is explicitly permitted by regulation to report on the income_tax return for the year at issue in such an instance-where a credit elect overpayment is claimed on the return for the year at issue-we have held that the validity of the underlying tax_liability ie the amount unpaid after application of credits to which the taxpayer is entitled is properly at issue in a cdp case see 116_tc_60 we therefore have jurisdiction to consider mr weber’s contention that he is entitled to apply a credit elect overpayment from to the liability at issue here however that overpayment depended in turn on the validity of a credit elect overpayment claimed on the return mr weber’s tax_return for had reported an overpayment and had requested it be applied as a credit against his estimated income_tax if the credit elect overpayment from claimed on the return is not allowed then there is no overpayment from to pass on to and the liability remains unsatisfied there- fore to address mr weber’s contention we must decide the verdate 0ct jun jkt po frm fmt sfmt v files weber sheila weber v commissioner merits of the credit elect overpayment from as reported on the return mr weber was not entitled to a credit elect overpayment on his return mr weber claims and the commissioner does not dispute that he overpaid his income_tax by dollar_figure it is clear that on his return he elected that this overpayment be applied to his estimated income_tax however at the time mr weber filed that return in a sec_6672 pen- alty had been assessed against him and at that time had not been paid the payments that he now contends satisfied that liability were not made until months later thus when the irs received mr weber’s income_tax return in it was confronted with the question whether to treat the overpayment as an estimated payment toward mr weber’s future income_tax_liability which would ultimately be due in date or instead to credit the overpayment against his already due and owing liability for a sec_6672 penalty as we have shown in part i c above sec_6402 gives the irs broad discretion in the crediting of overpayments and a taxpayer’s election under c f_r sec_301_6402-3 to apply an overpayment to estimated_tax for the succeeding year is not binding on the irs see sec_301_6402-3 we see no basis for criticizing the irs’s exercise of its discretion to apply the overpayment to the due-and-owing sec_6672 penalty rather than the future and only potential income_tax_liability con- sequently we must say that the overpayment was prop- erly applied to the penalty liability the irs did not disallow mr weber the overpayment he claimed for rather it allowed the claim but applied that overpayment to his outstanding liability for a sec_6672 penalty after the irs thus allowed mr weber the credit against the penalty liability the overpayment was no longer in the words of freije v commissioner as we stated in 125_tc_14 our jurisdiction under sec_6330 encompasses consideration of facts and issues in nondetermination years where the facts and issues are relevant in evaluating a claim that an unpaid tax has been paid if there are scenarios in which a cascading series of multiple credit elect overpayments might implicate years or issues so remote from the year at issue that they should not fall within a cdp case this case does not present such a scenario and we do not here test the outer limits of our cdp jurisdiction verdate 0ct jun jkt po frm fmt sfmt v files weber sheila united_states tax_court reports t c an available credit it had been used up the government’s defense to any subsequent claim_for_refund of a income_tax overpayment would be accord and satisfaction the claim has already been allowed under sec_7422 the credit of an overpayment of any_tax here income_tax in satisfaction of any_tax liability here the sec_6672 penalty shall for the purpose of any suit_for_refund of such tax_liability so satisfied be deemed to be a payment in respect of such tax_liability ie of sec_6672 penalty at the time such credit is allowed emphasis added as a result if the irs holds mr weber’s money wrongly it holds it not as an overpaid income_tax but as an over- paid sec_6672 penalty but there is no regulation that permits a taxpayer to elect to have an overpayment of a sec_6672 penalty applied to his income_tax_liability and there is no line on the federal_income_tax return form that permits the reporting of an overpaid sec_6672 penalty as a credit to income_tax a credit elect overpayment can be an issue in a cdp case as in landry but mr weber has no valid claim of a credit elect overpayment after the income_tax overpayment was credited against the sec_6672 penalty the income_tax overpayment was no longer available for application to income_tax in the absence of that credit elect overpayment mr weber had no income_tax overpayment that could be credited to his liability for income_tax the income_tax_liability could thus not be satisfied by cascading credit elect overpay- ments from and b overpayment of sec_6672 penalty the argument remaining to mr weber is that his sec_6672 penalty liability has been overpaid and that the over- payment is available to be credited to his income_tax_liability he cites our opinion in freije v commissioner t c pincite in which we stated that- see 549_f3d_530 7th cir under sec_7422 when the irs applies an overpayment as a credit to a liability for a separate tax_year the taxpayer must file a refund claim for the year in which the irs applied the credit see 314_f3d_944 8th cir 613_f2d_518 ndollar_figure 5th cir see also recchie v united_states cl_ct income_tax overpayment applied in to a tax_deficiency held to be tax deemed paid in for the purpose of the statute_of_limitations verdate 0ct jun jkt po frm fmt sfmt v files weber sheila weber v commissioner a relevant issue relating to the unpaid tax or the proposed levy quoting sec_6330 surely includes a claim such as the one here that the unpaid tax has in fact been satisfied by a remittance that the commissioner improperly applied elsewhere meaningful review of a claim that a tax sought to be collected by levy has been paid_by means of a remittance or an available credit will typically require consideration of facts and issues in nondetermination years as those years may constitute the years to which a remittance was applied or from which a credit origi- nated emphasis added fn ref omitted mr weber contends that s g’s trust fund liability has been satisfied by other_payments leaving available the amount_paid by credit from his income_tax that was originally credited against his corresponding penalty assessment and he contends in his refund claim that he did not owe the pen- alty at all he asks us to hold that the resulting overpayment of sec_6672 penalty is an available credit that could sat- isfy the income_tax_liability at issue here and should preclude the irs from proceeding otherwise to collect that liability but there are flaws in this contention threshold requirements before a cdp petitioner could contend that overpayments other than credit elect overpayments ought to be applied to satisfy the liability at issue he would have to show that he had satisfied the threshold requirements for claiming a refund see 136_tc_422 citing sec_6402 sec_6514 these threshold require- ments include the prior full payment of the liability the filing of a proper administrative claim see sec_7422 see 362_us_145 only requirements through as num- bered here are actually implicated in sec_6514 the statute that we looked to in 136_tc_422 the flora full-payment rule is founded on u s c sec_1346 which according to the supreme court’s subtle reading requires full payment as a prerequisite to court review sec_6330 by contrast necessarily allows court review where there is unpaid tax if overpayment jurisdiction were read into sec_6330 then a flora-like full_payment_rule limiting that jurisdiction would be difficult to base on the statute however the full-payment rule would in any event be satisfied in this case the supreme court observed that excise_tax deficiencies may be divisible into a tax on each transaction or event and there- fore present an entirely different problem with respect to the full-payment rule id pincite n and the courts have thereafter held that the sec_6672 penalty is divisible so that a taxpayer may litigate the penalty after having paid an amount corresponding to the tax withheld from a single employee see eg 961_f2d_867 n 9th cir bland v commissioner tcmemo_2012_84 slip op pincite n there is no question that mr weber’s payment of penalty exceeded the trust fund amount attributable to one employee the requirement of sec_7422 that a claim be filed can give rise to complicated dis- putes about the adequacy and validity of an informal claim see united_states v kales continued verdate 0ct jun jkt po frm fmt sfmt v files weber sheila united_states tax_court reports the timely filing of that claim see sec_6511 the dis- allowance of the claim or the passage of six months see sec_6532 and the timely filing of the refund_suit see id the irs disputes mr weber’s fulfillment of only one of these requirements-ie the timeliness of his date refund claim however we find that for purposes of the commis- sioner’s motion the claim was timely under sec_6511 the period of limitations applicable in the case of claims for refund of the sec_6672 penalty is two years from the date of payment in this case the allegedly overpaid penalty must have been paid no earlier than two years before mr weber filed his refund claim in date when an overpayment of one liability arises from the application of an overpayment from another liability the timing rules of sec_6513 for the effective date of payments do not apply rather sec_7422 applies favret v united_states a f t r 2d ria u s tax cas cch para big_number e d la sec_7422 provides the credit of an overpayment of any_tax in satisfaction of any_tax liability shall for the purpose of any suit_for_refund of such tax_liability so satis- fied be deemed to be a payment in respect of such tax_liability at the time such credit is allowed emphasis added thus the question before us is at what time was mr weber’s overpayment of his liability allowed as a credit against his sec_6672 penalty the irs’s position is that the credit was allowed on its effective date in date requiring a refund claim no later than income_tax u s and about whether the complaint that the taxpayer files in court is at substan- tial variance with his administrative refund claim see 364_us_122 -disputes that may not often arise in the tax court’s deficiency suits but that could indeed arise in cdp cases if we had the expanded jurisdiction that mr weber pro- poses see 17_f3d_1029 7th cir and cases cited thereat pham v united_states 42_fedclaims_886 although mr weber’s income_tax overpayment was credited against the penalty liability and was thus paid in his overpayment of the sec_6672 penalty arguably did not arise until the third party made the dollar_figure payment in date if that third-party payment were the event that commenced the running of the two-year period of sec_6511 for mr weber then a claim filed as late as date would have been timely however sec_6511 looks to the time the tax was paid not overpaid likewise the corresponding look-back provision of sec_6511 al- lows a refund of the portion of the tax paid during the years immediately preceding the filing of the claim given the way sec_6511 operates it is thus incumbent on the payor of sec_6672 penalty to file timely protective claims for refund of his payments of penalty even if they are not yet overpayments verdate 0ct jun jkt po frm fmt sfmt v files weber sheila weber v commissioner date while mr weber asserts that the credit could not have been allowed until he filed his income_tax return reporting such overpayment in date requiring a refund claim no later than date -or more likely when the irs processed the return in date given that mr weber filed his claim_for_refund on date the determination of when the credit was allowed is deter- minative as to whether his refund claim was timely sec_6407 provides that a refund_or_credit is deemed allowed on the date the secretary first authorizes the sched- uling of an overassessment and sec_301 proced admin regs elaborates that the relevant date is the date an enumerated irs official certifies the allowance of the overassessment in the instant case it would seem all but impossible and the commissioner has not shown that the irs actually certified mr weber’s overpayment before his filing of his return in date the irs did have in hand mr weber’s withheld tax in date but at that time he had not yet filed his return so the irs could not yet know his income_tax_liability and could not yet know how much of that withholding would be available to credit to another liability the irs’s only proof of a supposed date crediting is its transcripts that show an effective date of the crediting-ie the same date that it recorded the penalty assessments the allowance of this earlier effective date which would affect in mr weber’s favor the running of interest on his penalty assessment is not at all inconsistent with and does not dis- prove a later actual date of allowing and posting the credit therefore making the inferences favorable to mr weber the irs did not allow the credit from his over- payment against his sec_6672 penalty until sometime after it received his return in date therefore mr weber’s claim_for_refund submitted less than two years later in date was timely in previous cases in which cdp petitioners have asked us to determine an unrelated overpayment that would satisfy the irs account transcript for mr weber’s penalty for the quarter ended date gives for the penalty assessment an entry that includes both a date of evidently an effective date and a cycle of evidently a posting date see dingman v commissioner tcmemo_2011_116 slip op pincite n in which the fifth and sixth digits are the posting cycle within the year see irm pts date date the transcript gives no posting date for the credit entry verdate 0ct jun jkt po frm fmt sfmt v files weber sheila united_states tax_court reports the liability that the irs proposed to collect the petitioners had failed to meet the threshold requirements for refund litigation and we dismissed the cases on those grounds see brady v commissioner t c pincite assuming that it would be appropriate in this case to consider the merits of petitioner’s claims of overpayments in prior years conn v commissioner tcmemo_2011_166 slip op pincite if we assume our jurisdiction in cases governed by sec_6330 may permit us to consider overpayment claims arising from nondetermination years however since mr weber has ful- filled those requirements we must now address the premise assum ed in those cases and answer the question whether in a cdp case we have jurisdiction to determine an overpay- ment of an unrelated liability we hold that we do not have that jurisdiction lack of refund jurisdiction in cdp proceedings mr weber’s contention proposes that we turn from the subject of his income_tax liability-the liability whose collection is at issue-and address the distinct question of his sec_6672 penalty liability we do have jurisdiction to review the collection of a sec_6672 penalty liability see eg 132_tc_301 when the irs has issued a determination to proceed with collection of such a liability but the irs does not propose collection of any such liability for mr weber rather mr weber asks us to find that he has overpaid that penalty liability and then to order the irs to apply the overpayment to his income_tax or more precisely asks us to hold that it would be an abuse_of_discretion for the irs to do anything other than to apply it to his income_tax_liability and to overrule appeals’s determination to proceed with a levy mr weber’s argument would thus require us to adjudicate his right to a sec_6672 penalty refund a refund jurisdiction generally however congress has indeed established a detailed refund scheme that subjects complaining taxpayers to var- ious requirements before they can bring suit 553_us_1 in post- payment circumstances a taxpayer seeking a refund of verdate 0ct jun jkt po frm fmt sfmt v files weber sheila weber v commissioner taxes erroneously or unlawfully assessed or collected may bring an action against the government either in united_states district_court see u s c sec_1346 or in the united_states court of federal claims see id sec_1346 sec_1491 clintwood elkhorn u s pincite under the tax litigation regime congress created the tax court’s principal jurisdiction pursuant to sec_6213 is over pre-payment deficiency cases in a deficiency case within this court’s jurisdiction the tax_court has also been explicitly granted jurisdiction to determine an overpayment of income_tax for the same taxable_year of gift_tax for the same calendar_year or calendar_quarter or of estate_tax in respect of the taxable_estate of the same decedent sec_6512 emphasis added that is the tax court’s over- payment jurisdiction in deficiency cases is explicitly limited to determining an overpayment of the same liability already at issue in a deficiency case involving income_tax for for example we could determine an overpayment of income_tax but could not determine an overpayment of a sec_6672 penalty where the tax_court does have jurisdiction to determine an overpayment in a deficiency case the court nonetheless may not order a refund of that overpayment until days after its decision has become final sec_6512 and even where the tax_court does have jurisdiction to determine an overpayment and to order a refund of that overpayment sec_6512 provides the tax_court shall have no juris- diction under this subsection to restrain or review any credit or reduction made by the secretary under sec_6402 con- sequently in that 120-day period the irs retains its discre- tion under sec_6402 to credit or refund the overpayment and if the irs allows the determined overpayment by cred- iting it to another liability rather than refunding it or applying it as the taxpayer might have preferred the tax_court has no jurisdiction to upset the irs’s action the foregoing description is intended to show how explicit congress has been in establishing a remedy for litigating tax_refund claims in forums other than the tax_court and in establishing a circumscribed exception for litigating such claims in a tax_court deficiency case verdate 0ct jun jkt po frm fmt sfmt v files weber sheila united_states tax_court reports b cdp proceedings contrasted the instant case is obviously not a refund_suit brought in district_court nor in the court of federal claims and it is not a deficiency case to which sec_6512 might apply to limit overpayment jurisdiction in deficiency cases rather it is a collection review case brought pursuant to sec_6330 it is true as we noted above that in determining whether tax is unpaid we sometimes do have the responsibility as in freije to determine the presence of available credits freije involved contentions that the irs had misapplied pay- ments that if applied correctly would have satisfied the determination-year liability that the irs proposed to collect and mr weber’s analogous contention that the irs mis- applied his credit elect has been dealt with above our reasoning in freije might also warrant bringing into consid- eration in a cdp case other available credits -such as a credit carryover prescribed by statute that would affect the tax_liability for the determination_year or an overpayment that had been determined in a refund or deficiency_suit but that had not yet been refunded or credited or an overpay- ment that had been determined by the irs eg in response to a claim_for_refund but that had not yet been refunded or credited mr weber however asks us not to consider a credit that is already available because it has already been deter- mined but rather to make available a credit that is cur- rently not available because the irs has disallowed it he contends that there is a positive balance in his penalty account and that we could decide this case in his favor as an see eg 471_fedappx_21 2d cir the tax_court erred in declining to consider wright’s final argument which was that he did not receive a refund for dollar_figure on remand the tax_court should resolve this last issue and determine whether the refund-if such refund was due to wright-was sent to him in wright a cdp case involving collection of and income_tax the taxpayer pointed to an irs transcript for his year that reflected a dollar_figure credit and the allowance of a dollar_figure refund asserted that he had never received the refund and contended that it should therefore be applied to satisfy his determination_year liability see taxpayer-appellant’s reply brief filed with the court of ap- peals for the second circuit on date pincite n citing exhibit a to the commissioner’s motion for summary_judgment filed date in wright v commissioner docket no 01l that is wright involved an alleged existing credit and not a taxpayer’s request that the tax_court adjudicate a refund claim for example sec_39 allows the carryback and carryforward of business credits listed in sec_38 and in such carrybacks and carryforwards were claimed on lines and of form_3800 general_business_credit and thus could contribute to the total credit claimed on line of form_1040 u s individual_income_tax_return verdate 0ct jun jkt po frm fmt sfmt v files weber sheila weber v commissioner almost arithmetical matter-but that is not the case whether the penalty has really been overcollected is a poten- tially complex question that may depend not only on the bal- ance in his account which in fact is still negative but also on the pendency of refund claims by other responsible per- sons and on liabilities for interest and additions to tax see supra pp mr weber thus asks us not to allocate an uncontroversial credit but rather to adjudicate a disputed refund claim that is unrelated to the liability the irs pro- poses to collect and this stretches freije past the breaking point unlike sec_6512 which gives us overpayment juris- diction in a deficiency case section 6330-the statute confer- ring our cdp jurisdiction-has no provisions conferring and delimiting any overpayment jurisdiction mr weber’s posi- tion would require us to conclude that in enacting the cdp regime in sec_6330 congress intended to implicitly grant us jurisdiction to adjudicate refund claims for unrelated liabilities this would contradict our prior holding that con- gress did not intend sec_6330 to provide for the allowance of tax refunds and credits 126_tc_1 to circumscribe mr weber’s position would also require us to conclude that in conferring this supposed cdp overpayment jurisdic- tion congress determined not that jurisdiction as it circumscribed overpayment jurisdiction in deficiency cases that is this supposed grant of cdp over- payment jurisdiction would apparently include no restriction as in sec_6512 but rather would include the power in effect not only to determine an overpayment but also- critical to the relief mr weber seeks-to direct how it shall be credited this supposed grant of cdp overpayment juris- diction would have no apparent full-payment rule see supra note but would in that respect evidently be broader than the refund jurisdiction of the district courts most tax litiga- tion is restricted to a specific taxable_period at issue and in a cdp hearing appeals review s only a particular collection episode-a given notice of lien or notice of proposed levy 135_tc_114 aff ’d 676_f3d_1129 d c cir by contrast a cdp hearing with the expanded reach that mr weber proposes would then not be confined to consideration of the taxable_period to which verdate 0ct jun jkt po frm fmt sfmt v files weber sheila united_states tax_court reports the unpaid tax specified in the notice of proposed levy relates sec_6330 rather a cdp hearing could become an almost plenary review of the taxpayer’s situation vis-a-vis the irs for all liabilities and for all periods and a delinquent taxpayer would have the power to halt irs collection of any given tax simply by filing a refund claim for any other tax however unrelated it might be to the tax that the irs pro- posed to collect there is nothing in the text or legislative_history of sec_6330 to suggest that in establishing the cdp regime congress intended to so constrain the collection of revenue in addition there would be several other practical prob- lems and conceptual anomalies generated by the adjudication of such a claim in this cdp proceeding first mr weber waived in writing his right to a cdp hearing before irs appeals concerning his penalty liability that would have been the natural occasion to dispute his liability for this pen- alty and if this were a cdp hearing concerning the penalty that prior opportunity would deprive both appeals and this court of jurisdiction to entertain his challenge to underlying liability see sec_6330 however in this collection review case concerning his income_tax his challenge to liability for the sec_6672 penalty is raised as an issue con- cerning whether the income_tax should be deemed unpaid so the congressional intent to offer only one oppor- tunity would be side-stepped if mr weber’s view prevailed second if collection of mr weber’s income_tax must await litigation of his claim of overpaid penalty then that wait may be substantial responsible_person cases like other cases involving substantive tax disputes can be factu- ally and legally complex and can take years to resolve to properly adjudicate mr weber’s claim would require a deter- mination of whether he was in fact a responsible_person who willfully failed to pay over s g’s trust_fund_taxes so that the sec_6672 penalty was properly assessed and if so whether the trust_fund_taxes of s g along with any interest and penalties that may have accrued against the entity and all responsible persons have by now been over- paid when taking into consideration payments by him by other responsible persons and or by s g then if such an overpayment does exist a determination must be made whether there are other possible claimants to that overpay- verdate 0ct jun jkt po frm fmt sfmt v files weber sheila weber v commissioner ment and to what extent those other claimants have claims currently pending or have time left to file such a claim thereafter a determination of each respective claimant’s share in such overpayment would also be necessary only then would mr weber’s share of any such overpayment be known and possibly available to apply to his income_tax_liability third if a taxpayer may assert an overpayment of an unrelated liability in a cdp proceeding mr weber does not say whether the irs may raise in turn as it could in a refund_suit an issue not stated in the refund claim as an offset to reduce the amount of the overpayment see 284_us_281 or a counterclaim for an unre- lated liability see u s c sec_1346 sec_1503 sec_6330 is silent on the point-surprisingly silent if congress meant to confer jurisdiction to entertain overpayment claims fourth where the deadline for filing a refund_suit see sec_6532 was looming and where the taxpayer has been cau- tious and like mr weber has filed not only a cdp case in this court but also an actual refund_suit in one of the courts with refund jurisdiction the courts are presented with the vexing question of which court should proceed to adjudicate the claim and which should defer sec_7422 which applies only when a deficiency case is pending in the tax_court and not a cdp case would not answer the question it is true that mr weber has disclaimed any intention to dis- pute in this court his underlying liability for the penalty and has said he argues here only an allegedly excessive collection of the penalty but this tactical decision on his part does not solve the problems the courts would face in other cases if his view were adopted but his tactic was not imitated moreover his approach involves inevitable difficul- ties he proposes to litigate his excessive collection argument here and his non-liability argument in district_court but these are two aspects of a single cause of action that he thereby purports to split when one court reached an out- come whether favorable or unfavorable its judgment might be res_judicata for his entire claim and might cut off the aspect still supposedly pending in the other court an overpayment of a sec_6672 penalty or any other liability that has been determined by the irs or a court but has not been either refunded or applied to another liability verdate 0ct jun jkt po frm fmt sfmt v files weber sheila united_states tax_court reports may be an available credit that under freije could be taken into account in a cdp hearing to determine whether the tax at issue remains unpaid and whether the irs can proceed with collection but a mere claim of an overpayment is not an available credit but is instead a claim for a credit and such a claim need not be resolved before the irs can pro- ceed with collection of the liability at issue mr weber’s sec_6672 penalty liability is distinct from and unrelated to his income_tax_liability his remedy regarding his sec_6672 penalty refund claim is to be found in the district_court refund_suit he has already commenced conclusion the irs’s office of appeals did not abuse its discretion in determining to proceed with a levy to collect mr weber’s unpaid income_tax notwithstanding his contention that his liability for a sec_6672 penalty was overpaid an appropriate order and decision will be entered f verdate 0ct jun jkt po frm fmt sfmt v files weber sheila


internal_revenue_service department of the treasury washington dc number release date index number x person to contact telephone number refer reply to cc psi - plr-111819-00 date date b d1 a year dear this letter responds to a letter dated date and subsequent correspondence written on behalf of x by its authorized representative requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 of year a and b are the shareholders of x a the president of x represents that it was intended for x to be an s_corporation beginning in year its first taxable_year x believed that its attorney would timely prepare and file a form_2553 election by a small_business_corporation however x’s attorney believed that x would prepare and file its own form_2553 therefore a form_2553 was not timely filed for x for year sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation for x's first taxable_year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for its year taxable_year mr david ortiz within days following the date of this letter then such election will be treated as timely made for x’s year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representatives sincerely yours j thomas hines acting branch chief branch office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c tax exempt and government entities jul a9 uniform issue list t ep ch td legend company a company b company c company d company e plan x plan y dear this is in response to a request for a private_letter_ruling dated date as supplemented by two letters dated date a letter dated date and a letter dated date submitted on your behalf by your authorized representative concerning the status of certain securities held by plan x under sec_402 of the internal_revenue_code code additional correspondence dated june and was also submitted page in support of your request your authorized representative has presented the following facts and representations er as a wholly-owned subsidiary of company company a was incorporated on b company a provides effective company c became a wholly-owned subsidiary of company b through a merger agreement in which a wholly-owned subsidiary of company b merged with and into company c merger following the merger the separate corporate existence of the merger subsidiary ceased in connection with the merger company b changed its name to company d on the assets and liabilities of the business operations of the former division of company d were transferred to company a which is essentially a continuation of that division _' company a made an initial_public_offering of approximately _ percent of its in issued and outstanding shares in shareholders the remaining shares of company a stock held by company d occurred on company a stock asaresult holders of company d stock also became holders of company d approved a plan to spin off to its the spin-off - company d entered into an agreement and plan of merger merger with on company e and a wholly-owned subsidiary of company e formed for the purpose of the merger the effective date of the merger was subsidiary merged with and into company d resulting in company d becoming a wholly- owned subsidiary of company e upon completion of the merger in connection with merger company e exchanged shares of company e common_stock for each outstanding share of company d common_stock ' under the terms of merger this - company b established plan y effective asaresult of merger plan y is now sponsored by company d plan y is qualified under code sec_401 and includes a leveraged employee_stock_ownership_plan esop plan y holds company d common_stock through the esop and also through the self-directed investments of plan participants as part of the transfer of the worked in this division were transferred to company a and its subsidiaries ‘division described above employees who the transferred employees participated in plan y effective prior to the assets of plan y allocated to the accounts of these participants and certain terminated participants were transferred to a successor plan plan x which was established effective of the unallocated assets and liabilities of the plan y esop was also transferred to plan x x is a defined_contribution_plan intended to qualify under code sec_401 and contains a leveraged_esop that is intended to be an esop within the meaning of code sec_4975 a portion plan page prior to the spin-off of company aon plan x were automatically invested in the company d stock subject_to certain plan x diversification provisions company d stock as a result of the spin-off plan x held shares of company d common_stock and shares of company a participants could also self-direct their own contributions into employer matching_contributions to __ employer matching_contributions to plan x are automatically beginning on invested in company a common_stock subject_to certain plan x diversification provisions participants may also self-direct their own contributions into company a common_stock participants may continue to keep a portion of their accounts invested in company d common_stock or they may reallocate all of any part of their investments to other funds available for transfers under plan x however no contributions made to plan x on or after may be invested in the company d stock fund and no amount invested in the other investment funds under plan x may be transferred to the company d stock fund any dividends_paid on the company d common_stock are allocated to the company a stock fund set up for employee contributions as described above pursuant to the merger of company d and company e shares of company e common_stock will be exchanged for shares of company d common_stock thus following the merger plan x will hold company e shares in place of company d shares company e shares held by plan x will be subject_to the same rules as currently apply to company d shares participants will not be permitted to invest additional_amounts in company e shares and dividends_paid on company e shares will be invested in company a stock plan x’s suspense_account presently holds only stock of company a together with a small amount of other short-term investments based on the foregoing facts and representations your authorized representatives have requested the following ruling the shares of company e common_stock that will be acquired by plan x in connection with the merger of company e and company d will be securities_of_the_employer_corporation for purposes of code sec_402 accordingly the net_unrealized_appreciation in such shares may be excluded from gross_income upon distribution to a participant or beneficiary to the extent provided in code sec_402 your second requested ruling was withdrawn by your authorized representative in a letter dated date your third requested ruling will be addressed in later correspondence your fourth requested ruling is rendered moot by our response to your first requested ruling code sec_402 states that except as provided in this section any amount actually distributed to any distributee by any employees’ trust described in sec_401 which is page exempt from tax under sec_501 shall be taxable to the distributee in the taxable_year of the distributee in which distributed under sec_72 relating to annuities code sec_402 states in pertinent part that for purposes of sec_402 and sec_72 in the case of a distribution other than a lump sum distribution the amount actually distributed to any distributee from a_trust described in sec_402 shall not include any net_unrealized_appreciation in securities_of_the_employer_corporation attributable to amounts contributed by the employee code sec_402 states in pertinent part that for purposes of sec_402 and sec_72 in the case of any lump sum distribution which includes securities_of_the_employer_corporation there shall be excluded from gross_income the net_unrealized_appreciation attributable to that part of the distribution which consists of securities_of_the_employer_corporation code sec_402 states that the term securities_of_the_employer_corporation includes securities of a parent or subsidiary_corporation as defined in subsections e and f of sec_424 of the employer_corporation sec_1_402_a_-1 of the income_tax regulations provides that the amount of net_unrealized_appreciation in securities_of_the_employer_corporation which are distributed by the trust is the excess of the market_value of such securities at the time of distribution over the cost or other basis of such securities to the trust sec_1_402_a_-1 of the regulations sets forth the manner in which the cost or other basis to the trust of a distributed security of the employer_corporation is calculated for purposes of determining the net_unrealized_appreciation on such security in revrul_73_29 1973_1_cb_198 securities of an employer_corporation held by its qualified_trust were transferred to the qualified_trust of an unrelated corporation when the first employer sold part of its business and transferred some of its employees to the unrelated corporation it was held that shares of stock of the seller corporation distributed from the buyer’s qualified_trust to employees of the buyer corporation who were former employees of the seller corporation were securities_of_the_employer_corporation and will retain their character of employer_securities even after those shares and the employees on whose account they were held were transferred to the unrelated corporation in revrul_73_312 1973_2_cb_142 securities of an employer_corporation held by its qualified_trust were exchanged for securities of a successor_corporation when the employer_corporation merged into the successor_corporation the plan was then terminated and distributions were made to participants it was held that the stock of the predecessor_corporation was held or acquired by the exempt trust while the employees were covered under the predecessor corporation’s plan thus it was further held that this stock was stock of the employer_corporation within the meaning of code sec_402 and would have been so treated if it had been distributed to the employees after the merger the revenue_ruling states page that the mere conversion of the stock into stock of the successor_corporation did not change its status as stock of the employer within the meaning of code sec_402 in the present case plan x holds company d common_stock y was sponsored by company d for the benefit of its employees and thus the shares of company d stock held in plan y were employer_securities in accordance with code sec_402 we have determined that these shares remained employer_securities upon their transfer to plan x maintained by company d’s wholly-owned subsidiary company a as described above we have also determined that the subsequent spin-off of company a from company d did not affect the status of company d stock as employer_securities because they were employer_securities when acquired by plan x see rev_rul plan x’s predecessor_plan plan the issue presented here is whether the company e shares received as a result of the merger of company d and company e should be treated as employer_securities the principles underlying the revenue rulings discussed above are applicable here in both rulings the status of stock as employer_securities was not affected by corporate transactions that resulted in a qualified_plan holding stock of a former employer the mere conversion of employer_securities company d stock into the stock of its merger partner company e will not change its status as stock of the employer within the meaning of code sec_402 accordingly we conclude with respect to your first requested ruling that the shares of company e common_stock that will be acquired by plan x in connection with the merger of company e and company d will be securities_of_the_employer_corporation for purposes of code sec_402 accordingly the net_unrealized_appreciation in such shares may be excluded from gross_income upon distribution to a participant or beneficiary to the extent provided in code sec_402 this ruling letter is based on the assumption that plan x will be qualified under code sec_401 and that the plan x esop will meet the requirements of sec_4975 and that its related trust will be tax-exempt under sec_501 at all times relevant to the transactions described herein no opinion is expressed about the tax treatment of the transactions under other provisions of the _ code and regulations or about the tax treatment of any conditions existing at the time of or effects resulting from the transactions that are not specifically covered by the above rulings in particular we are not expressing any opinion relating to the calculation of basis for purposes of determining net_unrealized_appreciation under code sec_402 this ruling letter is directed only to the taxpayer who requested it sec_6110 of the code provides that this ruling may not be used or cited as precedent page if you have any questions about this letter please contact please refer to t ep ra t ‘copies of this letter have been sent to your authorized representatives in accordance with the power_of_attorney on file in this office sincerely yours frat v btrer frances v sloan manager employee_plans technical branch enclosures notice deleted copy of ruling letter ce


t c memo united_states tax_court pamela l lengua petitioner v commissioner of internal revenue respondent docket no 19255-12l filed date pamela l lengua pro_se halvor r melom for respondent memorandum findings_of_fact and opinion kerrigan judge the petition in this case was filed in response to a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination dated date upholding a proposed levy collection action for tax periods ending september and december and september and date respondent has abated the trust fund recovery penalty associated with the quarterly period ending date therefore that quarterly period is no longer in issue see 130_tc_79 aff’d 444_fedappx_950 9th cir we must consider whether respondent’s determination to proceed with the collection action regarding petitioner’s sec_6672 liabilities for the remaining periods in issue was an abuse_of_discretion unless otherwise indicated all section references are to the internal_revenue_code in effect at all relevant times and all rule references are to the tax_court rules_of_practice and procedure we round all monetary amounts to the nearest dollar findings_of_fact petitioner resided in california when the petition was filed petitioner was president of hey baby enterprises inc hbe a california corporation incorporated in date at all times during and hbe filed form sec_941 employer’s quarterly federal tax_return for quarterly periods ending september and date and date hbe reported tax_liabilities of dollar_figure dollar_figure and dollar_figure respectively hbe did not file a form_941 for the quarterly period ending date pursuant to sec_6020 respondent filed a substitute for return for hbe for that quarterly period showing a liability of dollar_figure hbe did not pay the tax_liabilities in full for the periods in issue on date respondent mailed a letter to petitioner’s last_known_address notifying her of respondent’s intent to assess trust fund recovery penalties tfrps pursuant to sec_6672 for the periods in issue the letter further notified petitioner that she could request a hearing in response petitioner received the letter but she did not request a hearing in response to it as of date hbe had not fully paid the tax_liabilities for the periods in issue therefore respondent assessed against petitioner tfrps of dollar_figure dollar_figure dollar_figure and dollar_figure for the quarterly periods ending september and date and september and date respectively the assessed balance due for petitioner’s tfrp liability for the quarterly period ending date is currently dollar_figure no amounts have been credited against that liability the assessed balance due for petitioner’s tfrp liability for the quarterly period ending date is currently dollar_figure no amounts have been credited against that liability finally the assessed balance due for petitioner’s tfrp liability for the quarterly period ending december is currently dollar_figure offsetting credits and debits of dollar_figure were applied on date on date respondent sent petitioner a letter final notice_of_intent_to_levy and notice of your right to hearing regarding her tfrp liabilities for the periods in issue on date petitioner filed a form request for a collection_due_process or equivalent_hearing cdp hearing request in the cdp hearing request petitioner wrote the amounts listed on the final notice_of_intent_to_levy dated are incorrect not all payments have been credited actual amounts are lower she did not request any collection alternatives on date petitioner sent respondent a letter in which she claimed that she was being assessed for her corporation’s tax_liabilities resulting in double liabilities on date respondent sent petitioner a letter explaining the appeals process on date the settlement officer sent petitioner a letter scheduling a telephone cdp hearing for date the date letter explained that the appeals_office cannot approve an installment_agreement or accept an offer-in-compromise unless all estimated_tax payments for the current year’s income_tax_liability have been made the date letter also explained that delinquent estimated_tax payments can be included in an installment_agreement but the estimated_tax payments must be paid in full before an offer-in-compromise can be accepted the date letter noted that petitioner had not made estimated_tax payments for additionally the date letter requested that petitioner provide a completed form 433-a collection information statement for wage earners and self-employed individuals a completed form 443-b collection information statement for businesses and other supporting documents petitioner’s unfiled federal_income_tax return for and proof of estimated_tax payments for collectively the requested documents petitioner did not respond to the date letter petitioner did not contact the settlement officer on date for the scheduled telephone cdp hearing on date respondent sent petitioner a followup letter asking her to provide the requested documents within days on march and petitioner’s husband attempted to reach the settlement officer by phone the settlement officer declined to discuss the case with him on date a telephone cdp hearing was held petitioner explained that her corporate tax_liabilities were before another settlement officer and that she was seeking an installment_agreement for those liabilities the settlement officer extended the deadline for petitioner to submit the requested documents to date on or around date petitioner provided a form 433-a and some supporting documentation which indicated that she had equity of dollar_figure in her home the settlement officer estimated that petitioner’s residence was worth dollar_figure and was subject_to an encumbrance of dollar_figure on date petitioner sent respondent a letter which explained that hbe had made the following voluntary payments dollar_figure on date dollar_figure on date dollar_figure on date and dollar_figure on date the settlement officer verified these payments and determined that they had been applied to the quarterly period ending date on date the settlement officer spoke with petitioner and suggested that she take out a loan to pay her tfrp liabilities on date respondent issue the notice_of_determination sustaining the levy and delaying collection until date respondent delayed collection to give petitioner time to refinance the mortgage on her residence in the notice_of_determination the settlement officer verified that all requirements of applicable law and administrative procedure had been met the settlement officer also determined that the collection action balanced the need for efficient collection of unpaid penalties with the legitimate concern that such actions be no more intrusive than necessary on date petitioner filed the petition with this court stating the irs has incorrectly imposed a civil penalty liability on me personally i trust fund recovery penalty opinion sec_6672 imposes a penalty--commonly referred to as the tfrp--for willfully failing to collect account for and pay over income and employment_taxes of employees these penalties are assessed and collected in the same manner as taxes against a person who is an officer_or_employee of a corporation who as such officer_or_employee is under a duty to perform in this case the duties to which sec_6672 refers sec_6671 such persons are referred to as responsible persons a term which may be broadly applied 132_tc_301 the parties stipulated that petitioner is the responsible_person for hbe ie the person required to collect truthfully account for and pay over the tax_liabilities shown on the form sec_941 for hbe for the periods in issue the parties further stipulated that petitioner is liable for the tfrps assessed on date ii scope of review under certain circumstances a taxpayer may raise challenges in a cdp proceeding to the commissioner’s determination of his or her underlying tax_liabilities see sec_6330 a taxpayer may challenge in a cdp proceeding the amount of the tax assessed by the commissioner if he or she did not receive a statutory_notice_of_deficiency or did not otherwise have an opportunity to dispute the tax_liability id see also 122_tc_1 moreover the court will consider an underlying tax_liability on review only if the taxpayer properly raised the issue during the cdp hearing 129_tc_107 see also sec_301_6330-1 q a-f3 proced admin regs where the assessments against the taxpayer are tfrps the commissioner does not issue or mail a notice_of_deficiency see sec_6212 instead in general the commissioner must provide the taxpayer with a notice of the tfrps sec_6672 notice before assessment sec_6672 a letter provides a taxpayer with a sec_6672 notice and the means of protesting a proposed tfrp administratively with the commissioner mason v commissioner t c pincite we have held that the receipt of letter constitutes an opportunity to dispute the taxpayer’s liability within the meaning of sec_6330 e g solucorp ltd v commissioner tcmemo_2013_118 morgan v commissioner tcmemo_2011_290 on date respondent sent petitioner a letter notifying her of respondent’s intent to assess tfrps for the periods in issue petitioner received it but she did not respond to it or contest the proposed amounts petitioner thus had a prior opportunity to challenge the underlying liabilities see mason v commissioner t c pincite solucorp ltd v commissioner tcmemo_2013_118 consequently petitioner was precluded from challenging the underlying liabilities during her cdp hearing petitioner disputes the underlying liabilities in her petition claiming that the sec_6672 penalties were duplicative of her corporation’s employment_tax liabilities that her corporation is on an installment_agreement and that payments made by her corporation have not been properly credited because petitioner was precluded from challenging the underlying liabilities during her cdp hearing she is likewise precluded from challenging them before this court even if petitioner could challenge her underlying liabilities before this court her claims would fail petitioner does not dispute that she as the president of her corporation has the power to ensure that it complies with its legal_obligation regarding employment_taxes the liability imposed on responsible persons pursuant to sec_6672 is separate and distinct from an employer’s liability for trust_fund_taxes mason v commissioner t c pincite see also solucorp ltd v commissioner at consequently the commissioner is not required to attempt to collect the underlying trust taxes from the employer before attempting to collect sec_6672 penalties against a responsible_person pursuant to sec_6672 see mason v commissioner t c pincite see also 783_f2d_1546 11th cir 588_f2d_952 5th cir petitioner’s liabilities for sec_6672 penalties are separate and distinct from hbe’s form_941 tax_liabilities see freeman v commissioner tcmemo_2011_38 because the validity of the underlying liabilities as determined by the commissioner are not properly in issue we review the determination for abuse_of_discretion 114_tc_604 114_tc_176 iii abuse_of_discretion an abuse_of_discretion occurs if the appeals_office exercises its discretion arbitrarily capriciously or without sound basis in fact or law 112_tc_19 see also 568_f3d_710 9th cir aff’g in part tcmemo_2006_166 sec_6330 requires the settlement officer to consider the following during a cdp hearing whether the requirements of any applicable law or administrative procedure have been met any issues appropriately raised by the taxpayer and whether the proposed collection action balances the need for the efficient collection_of_taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary see also 117_tc_183 we note that the settlement officer in this case properly based her determination on the factors specified by sec_6330 petitioner did not request any collection alternatives at the hearing in addition petitioner filled out a form 433-a on date and provided supporting documents the form 433-a states that petitioner had no monthly income had dollar_figure in her bank account and had dollar_figure of equity in a residence the settlement officer estimated that the value of the residence was dollar_figure with an encumbrance of dollar_figure which left dollar_figure in available equity the settlement officer concluded that petitioner would have sufficient assets to pay her liabilities if she obtained a loan the levy action was suspended in order to give petitioner time to refinance the mortgage on her residence the settlement officer did not abuse her discretion by determining that petitioner did not qualify for collection alternatives because petitioner had sufficient assets to pay the liabilities in full we have held that there is no abuse_of_discretion for failing to consider a collection alternative when the taxpayer failed to submit a collection alternative for review see 124_tc_69 moreover it is proper to include the equity in real_estate owned by the taxpayer in a computation of available assets see sullivan v commissioner tcmemo_2009_4 the internal_revenue_manual pt date states that t he equity in real_estate should be pursued as a means to full y pay or reduce the tax_liability it also instructs appeals officers to ask the taxpayer to secure a loan and that the taxpayer’s r efusal to pro-actively seek a loan will be considered refusal to pay id see also antioco v commissioner tcmemo_2013_35 at the settlement officer gave petitioner time to arrange a loan consequently we hold that the settlement officer did not abuse her discretion in upholding the proposed collection action we have considered the other arguments of the parties and they are either without merit or need not be addressed in view of our resolution of the issue to reflect the foregoing decision will be entered for respondent


internal_revenue_service number release date index number ---------------------------- ----------------------------------------------- --------------------- -------------------------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ----------- id no ------------- telephone number -------------------- refer reply to cc psi b01 plr-125580-07 date date ---------------- ------------------- ------------------------------ legend legend x -------------------------------------------------- state d1 d2 trust -------------------------------------------------- dear --------------- this responds to the letter dated date and related correspondence submitted on behalf of x requesting relief under ' f of the internal_revenue_code acode for an inadvertent termination of s election ----------------------------------------------- -------------------------- facts the information submitted states that x was incorporated under the laws of state on d1 and elected to be treated as an s_corporation effective d1 on d2 a portion of the stock of x was transferred to trust an ineligible shareholder plr-125580-07 x and its shareholders represent that they intended that trust elect to be treated as an electing_small_business_trust esbt effective d2 and consistently treated trust as such the trustee of trust however did not file a timely esbt election law and analysis sec_1361 defines an s_corporation as a small_business_corporation for which an election under sec_1362 is in effect for the taxable_year sec_1361 provides that a small_business_corporation cannot have as a shareholder a person other than an estate a_trust described in sec_1361 or an organization described in sec_1361 who is not an individual sec_1362 provides that an election under '1362 a shall be terminated whenever at any time on or after the first day of the taxable_year for which the corporation is an s_corporation the corporation ceases to be a small_business_corporation sec_1361 provides that a_trust all of which is treated under sec_1361 states that an esbt is a permissible shareholder of an subpart e of part i of subchapter_j of chapter as owned by an individual who is a citizen or resident_of_the_united_states may be an s_corporation shareholder s_corporation sec_1361 defines an esbt in part as a_trust if- i ii iii such trust does not have as a beneficiary any person other than i an individual ii an estate iii an organization described in paragraph or of sec_170 or iv an organization described in sec_170 which holds a contingent_interest in such trust and is not a potential_current_beneficiary no interest in such trust was acquired by purchase and an election under this subsection applies to such trust sec_1361 provides that an election to be an esbt shall be made by the trustee any such election shall be applied to the taxable_year of the trust for which made and all subsequent taxable years of such trust unless revoked with the consent of the secretary corporation a was not effective for the taxable_year for which made determined without regard to sec_1362 by reason of a failure to meet the requirements of sec_1362 provides that if an election under sec_1362 by any plr-125580-07 sec_1361 or to obtain shareholder consent or b was terminated under sec_1362 or the secretary determines that the circumstances resulting in such ineffectiveness or termination were inadvertent no later than a reasonable period of time after discovery of the circumstances resulting in the termination steps were taken - a so that the corporation is a small_business_corporation or b to acquire the required shareholder consents and the corporation and each person who was a shareholder of the corporation at any time during the period specified pursuant to this subsection agrees to make such adjustments consistent with the treatment of the corporation as an s_corporation as may be required by the secretary with respect to such period then notwithstanding the circumstances resulting in such termination such corporation shall be treated as an s_corporation during the period specified by the secretary conclusion based solely upon the representations made and the information submitted we conclude that the s election of x terminated on d2 when a portion of the stock of x was transferred to trust we further conclude however that the termination was an inadvertent termination within the meaning of sec_1362 under sec_1362 trust will be treated as an esbt effective d2 provided trust qualified as an esbt from d2 and make any adjustments that are necessary to comply with this ruling x will be treated as an s_corporation from d2 and thereafter provided that x’s s election was otherwise valid and has not otherwise terminated under sec_1362 this ruling is contingent upon x and all its shareholders treating x as having been an s_corporation and trust as an esbt for the period beginning d2 and thereafter within days from the date of this letter the trustee of trust shall file an esbt election on behalf of trust with the appropriate campus if these conditions are not met then this ruling is null and void except as specifically set forth above no opinion is expressed or implied concerning the federal tax consequences of the above-described facts under any other provision of the code including whether x was otherwise eligible to be an s_corporation or whether trust was otherwise eligible to be an esbt this ruling is directed only to the taxpayer who requested it sec_6110 of the code provides that it may not be used or cited as precedent plr-125580-07 in accordance with the power_of_attorney on file with this office a copy of this letter_ruling will be sent to your authorized representative sincerely david r haglund senior technician reviewer office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for ' purposes cc