john j mclaine petitioner v commissioner of internal revenue respondent docket no 15932-07l filed date in p exercised nonqualified_stock_options nqos pre- viously issued to him by e his recent employer and simulta- neously sold the option_stock receiving from e the sale pro- ceeds less the exercise price undiminished by withheld income taxes p reported the gain but did not pay the balance shown as due on his return r issued a notice_of_intent_to_levy to collect the balance interest and additions to tax for fail- ures to pay tax and estimated_tax p had a collection_due_process_hearing and r’s appeals_office determined to proceed with collection p challenges the determination primarily on verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner the ground that he is entitled to a credit under sec_31 for payment by a successor to e in a later year of the tax due on his option gain held p is not entitled to a credit under sec_31 for any payment after by e or a successor of e of the taxes associated with p’s nqo exercise because no payment was made by e or a successor to e of the nonwithheld taxes related to the exercise held further the appeals officer did not abuse his discre- tion by refusing to consider collection alternatives held further p is not entitled to any abatement of interest held further p is liable for the additions to tax assessed under sec_6651 and sec_6654 held further appeals’ determination to proceed with collection of the assessments against p for is sustained james r walker and christopher d freeman for peti- tioner frederick lockhart and sarah barkley for respondent colvin chief_judge this case is before us to review a notice_of_determination concerning collection action s under sec_6320 and or notice issued by respond- ent’s appeals_office the notice concerns petitioner’s federal_income_tax and it sustains an appeals officer’s determination that respondent may proceed by levy to collect that tax we review the notice pursuant to sec_6330 the events giving rise to the notice begin with petitioner’s exercise in of nonqualified_stock_options nqos awarded to him by a previous employer petitioner realized gross_income on the exercise of the nqos which he and his then wife reported on their joint federal_income_tax return return on that return petitioner reported no federal_income_tax withheld and a substantial amount of unpaid tax due which along with additions to tax and interest respondent now seeks to collect unless otherwise indicated all section references are to the internal_revenue_code_of_1986 as amended and all rule references are to the tax_court rules_of_practice and procedure we round all dollar amounts to the nearest dollar verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports the issues for decision are whether respondent’s appeals_office erred in not giving petitioner credit for a third-party payment of his income_tax_liability we hold that respondent did not err whether respondent’s refusal to provide collection alter- natives as described in sec_6330 was an abuse_of_discretion we hold that it was not whether petitioner is entitled to partial abatement of assessed interest we hold that he is not whether petitioner is liable for the additions to tax for failure_to_pay_tax under sec_6651 and for failure to pay estimated_taxes under sec_6654 we hold that he is and whether appeals’ determination to proceed with collec- tion of the assessments against p for is sustained we hold that it is findings_of_fact introduction some of the facts have been stipulated and are so found petitioner resided in colorado when he filed the petition judge halpern who was the trial judge in this case fully agrees with these findings_of_fact personal history petitioner was born in he has a bachelor’s degree in business from the university of scranton and a master’s degree in business administration from depaul university he married tammy mclaine in and they were divorced in we refer to her herein as petitioner’s former spouse employment by excel during the early to mid-1990s excel communications inc excel was a privately held company in the business of selling and reselling telephone services initially petitioner worked as a consultant to excel in he was hired as an employee by excel and became a senior vice president and its chief financial officer cfo after it hired petitioner excel experienced rapid growth its sales grew from dollar_figure million in to more than dollar_figure bil- verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner lion in and its workforce grew from to over big_number employees in petitioner was part of the management team that took excel public in excel acquired telco a virginia-based long-dis- tance telecommunications company also in after the telco acquisition petitioner was promoted to president and chief operating officer of excel but he continued as its cfo in date on account of a disagreement as to the future of excel petitioner left its employment throughout his employment by excel petitioner’s ever- increasing roles and responsibilities coupled with his lack of personal time resulted in his operating in a highly stressful and volatile business environment exercise of nqos during the time petitioner was employed by excel it awarded him nqos pursuant to its stock_option plan plan petitioner became entitled to exercise those options when he left excel the plan required that an optionee who exercises an option shall upon notification of the amount due pay to the company amounts necessary to satisfy applicable federal state and local_tax withholding require- ments teleglobe inc teleglobe a subsidiary of bell canada enterprises bce acquired excel in as a result peti- tioner’s excel nqos became exercisable in teleglobe stock petitioner exercised some of those options in date and the balance in date with respect to the options exercised in together exercise petitioner elected an alternative under the plan that required excel teleglobe to immediately sell the option shares and remit to him the excess of the proceeds of sale over the exercise price option proceeds or spread amount petitioner received dollar_figure as a result of the exercise and that election paine webber the brokerage firm appointed to administer the plan facilitated the exercise petitioner received from paine webber forms 1099-b proceeds from broker and barter_exchange transactions listing the gross_proceeds from the exercise those forms were the source for the amounts petitioner and his former spouse reported on the verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports return excel teleglobe mailed a form 1099-misc mis- cellaneous income to petitioner at a post office box in colo- rado reporting dollar_figure of miscellaneous income peti- tioner did not receive that form when petitioner received the option proceeds he knew that no taxes had been withheld petitioner received no notifica- tion from excel teleglobe of any_tax amounts due to it from him as a result of the exercise nor has he reimbursed it any amount for taxes it paid with respect to that exercise disposition of the option proceeds petitioner returned most of the proceeds from the exercise and stock sales to paine webber for investment in high technology stocks including worldcom he invested the remainder in limited_liability companies including a home construction company an online auction house and a ven- ture capital firm all of those investments either failed or resulted in substantial losses with the result that petitioner was left with only a small fraction of his option proceeds by date the filing_date of his return between april and date he tried to raise funds suffi- cient to pay his tax_liability by attempting unsuccess- fully to borrow against or to sell his colorado and florida homes the return petitioner reported the option proceeds on schedule d capital_gains_and_losses of the return petitioner and his former spouse reported total taxable_income of dollar_figure tax due of dollar_figure no amount of income_tax_withholding total payments with the request for extension of time to file of dollar_figure and an amount owed of dollar_figure which was not remitted with the return they had obtained an automatic four-month extension of time to file and an additional two-month extension to date they filed the return on date at the time petitioner and his former spouse filed the return neither excel nor teleglobe had remitted any_tax to the internal_revenue_service irs on petitioner’s behalf for petitioner was uncertain at that time whether that was the case verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner respondent’s assessments for respondent’s account transcript form_4340 certificate of assessments payments and other specified matters for petitioner’s taxable_year shows petitioner’s dollar_figure tax payment to have been made in part on date dollar_figure and in part on date the balance of dollar_figure as an application of an overpayment for rather than on date with the request for extension of the return filing_date on the basis of information provided in the return and the nonpayment of the reported amount due on date respondent assessed the dollar_figure reported income_tax_liability and additions to tax of dollar_figure for failure to pay estimated_taxes and dollar_figure for failure_to_pay_tax timely on date respondent assessed an additional failure-to-pay addition_to_tax of dollar_figure relief from joint liability for petitioner’s former spouse petitioner and his former spouse were divorced in thereafter she requested and received relief from joint liability with respect to the return as a result on date respondent reversed the assessed debit bal- ance of dollar_figure in petitioner’s and her joint account with respondent and transferred it to petitioner’s separate_account with respondent the collection_due_process_hearing on date respondent sent petitioner a letter 1058a final notice_of_intent_to_levy and notice of your right to a hearing with respect to petitioner’s federal_income_tax seeking dollar_figure as the unpaid amount from prior notices and dollar_figure in additional interest for a total of dollar_figure in response petitioner submitted a form request for a collection_due_process_hearing requesting consideration of collection alternatives including an offer-in-compromise and a partial payment installment_agreement in date appeals officer michael jeka conducted a face-to-face hearing with petitioner’s counsel followed by additional phone conferences and correspondence petitioner verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports argued at the hearing and in subsequent correspondence with mr jeka that his tax_liability had been assessed against and paid_by excel or teleglobe and that he was enti- tled to a credit for that third-party payment or for with- holding without payment of his tax_liability mr jeka and petitioner’s counsel also discussed the possibility of respondent’s accepting an offer-in-compromise from peti- tioner or the execution of an installment_agreement to the extent of petitioner’s tax_liability and petitioner’s defense based on alcoholism against the imposition of additions to tax mr jeka was unable to confirm from respondent’s com- puter records that excel had withheld taxes from the pay- ments associated with the exercise or that either excel or teleglobe had subsequently paid those taxes mr jeka declined to consider any collection alternatives an offer-in- compromise or an installment_agreement because petitioner had not submitted either an offer-in-compromise or sup- porting financial information after obtaining repeated exten- sions of time to do so and he rejected petitioner’s alcoholism defense to the assessed additions to tax on the basis of his reading of applicable caselaw subsequently in date respondent mailed to peti- tioner the notice sustaining the proposed collection action petitioner’s alcoholism petitioner has had a problem with excessive consumption of alcohol at times petitioner stopped drinking in but resumed in petitioner’s drinking gradually increased after he left excel’s employment in and in particular from to when his investments turned sour by he recog- nized that he had a drinking problem nevertheless his drinking continued to increase so that by mid-2001 he was drinking throughout the day including during breaks at business meetings and late at night or throughout the night by himself as a result he began to have trouble managing his personal affairs such as timely payment of bills and mort- gage obligations despite those problems he was asked to and did take over the management of a venture capital firm in date verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner subsequently petitioner tried to stop drinking for a time with intermittent success petitioner checked himself into the betty ford center center in rancho mirage california in the summer of he was admitted with a diagnosis of alcohol dependence notes from his physical examination indicate his general appearance as bright and alert male in no distress his mental status is noted affect is normal orientation is normal memory is normal he was dis- charged in date and he no longer drinks alcohol the excel employment_tax audit and appeal respondent conducted an employment_tax audit of excel and its subsidiaries without distinction excel or sometimes excel group for and in relevant part the exam- ining agent’s proposed adjustments concerned excel’s treat- ment of the option proceeds and the proceeds from nqos exercised by two other excel executives nqo exercise issue the agent took the position that all three individuals should have been treated as employees receiving wages as a result of their exercises of their respective nqos with the result that a member of the excel group was liable for income federal_insurance_contributions_act fica and fed- eral unemployment tax act tax withholding payments that it had not made in connection with the nqo exercises the agent’s report for an excel subsidiary excel management service inc excel management service for reflected a proposed_adjustment for additional fica_taxes of dollar_figure and additional income_tax_withholding of dollar_figure the basis for those proposed adjustments was the agent’s re- characterization-from to employee wages-of all of the option proceeds received by the three executives compensation nonemployee subsequently excel represented by ernst young l l p protested to the irs appeals_office the agent’s proposed adjustments the appeals officer stated his findings and rec- ommendations in his appeals transmittal and case memo plus attachments dated date they were to reduce the agent’s proposed imposition of employment_taxes so as to impose only the medicare portion of the fica_taxes on the option proceeds received by the three executives with verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports respect to those proceeds the appeals officer stated as fol- lows the payments to the three workers were in the nature of stock_options the issue is whether the exercise of nonqualified_stock_options caused these executives to have compensation subject_to employment_taxes each of the workers changed their status into inde- pendent contractors the taxpayer claims that at the time the options were exercised they were not corporate officers but independent contractors robinson and hamrick filed returns and paid all the related_income taxes mcclaine sic mclaine was the chief financial officer and filed for both years but he has an outstanding balance for i propose government concede backup withholding and fica but leave the medical sic wages ie the proposed_adjustment for failure to withhold and pay medicare taxes in-place later in his writeup of the nqo exercise issue the appeals officer made the following additional comments dan robinson has filed his and returns reporting the income as something other than wages john mcclaine sic has filed his and returns but has an unpaid balance for jerry hamrick has filed his return reporting the income as something other than wages all three earned wages in each of the years in excess of the fica limits and two paid the income taxes corresponding to the option income the taxpayer proposed that the option wages be applied to the hospital insur- ance portion of the employment_taxes the taxes as proposed by compliance with respect to mcclaine sic will be left unchanged previously on date the cfo of excel management service executed on behalf of that corporation a form_2504 agreement to assessment and collection of additional tax and acceptance of overassessment excise or employment_tax in which the corporation agreed to the immediate_assessment and collection of only the medicare taxes totaling dollar_figure dollar_figure per quarter attributable to the option proceeds received by the three executives on date respondent made four assessments of dollar_figure one for each quarter of calendar_year no other tax assessments appear on the employment_tax transcripts forms for excel management service those transcripts also indicate that the four assessments plus the assessed interest thereon remained unpaid as of date verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner teleglobe and vartec bankruptcies and arbitration in date teleglobe sold excel and certain other subsidiaries to vartec telecom inc vartec in date vartec filed claims against teleglobe which had previously filed for bankruptcy for obligations of the excel group allegedly arising before vartec’s acquisition of the excel group including a claim for the excel group’s potential liability for employment_taxes occasioned by the exercise at the time of the trial in this case vartec’s legal representatives did not know whether anyone had paid those taxes to the commissioner in date vartec had sued bce teleglobe’s parent concerning claims against teleglobe which included vartec’s potential liability for excel’s failure to withhold taxes occasioned by the exercise that suit ultimately resulted in either an arbitration award or a mediation award to vartec the arbitrator rendered his decision in date subsequently the parties settled their dispute although the terms of the settlement are not clear from the record in date vartec and its subsidiaries including the excel group filed for bankruptcy protection in the u s bankruptcy court for the northern district of texas vartec bankruptcy the commissioner’s proofs of claim in the teleglobe bankruptcy the commissioner filed a proof_of_claim in date in the amount of dollar_figure against one of the teleglobe entities the commissioner’s proof_of_claim included two wt-fica claims for of dollar_figure and dollar_figure both listed as pending assessment in the vartec bankruptcy the commissioner also filed three proofs of claim against excel management service in date and in august and date respec- tively the first in the amount of dollar_figure included a wt-fica claim for of dollar_figure listed as an unassessed in the amount of dollar_figure amended the first claim and included wt-fica claims of dollar_figure for each quarter of dollar_figure in total for those amounts were agreed upon at the conclusion of excel’s appeal of its employment_tax audit they were liability the second verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports assessed on date but were listed in the second proof_of_claim as unassessed liabilities the third proof_of_claim stating a claim of dollar_figure included wt- fica claims of dollar_figure for each quarter of which were also listed as unassessed liabilities the dollar_figure proof_of_claim filed in the teleglobe bank- ruptcy was disallowed and expunged by the delaware bankruptcy court in date opinion i the parties’ arguments a constructive withholding petitioner contends that vartec paid the taxes associated with the exercise in or he offers as proof that the commissioner voluntarily reduced his proof_of_claim in the vartec bankruptcy he points out that by way of the date amended proof_of_claim against excel manage- ment service the commissioner reduced the claim in his original date proof_of_claim from dollar_figure including a wt-fica claim for of dollar_figure to a claim of dollar_figure including only dollar_figure of wt-fica claims for petitioner argues the irs’ voluntary reduc- tions in its proofs of claim against excel is corroborative of petitioner’s assertion that his income_tax_liability was ultimately paid subsequent to the vartec teleglobe arbitra- tion but also pursuant to the irs audit of excel petitioner supports that argument by arguing that the appeals officer who handled excel’s appeal in connection with the nqo exercise issue sustained the agent’s audit adjustment with respect to petitioner he bases that argu- ment on the appeals officer’s statement that the agent’s pro- posed adjustment with respect to petitioner will be left unchanged presumably the thrust of that argument is to demonstrate that respondent never intended to waive his claim against excel and its successor corporations for the taxes associated with the option proceeds necessarily conceding that any payment by vartec of an amount that should have been but admittedly was not with- held from the option proceeds could not constitute an actual withholding from those proceeds petitioner argues that verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner nonetheless he is entitled to a sec_31 credit for income_tax constructively withheld he further argues that as a result no penalties or additions to tax are applicable to him petitioner bases his theory of constructive with- holding on our report in whalen v commissioner tcmemo_2009_37 as to whether vartec did in fact pay the taxes associated with the exercise respondent argues rather than evidencing payment of an employer_income_tax_withholding liability attributable to petitioner’s stock_options exercise the vartec proofs of claim and amended proofs of claim corroborate the appeals_office settlement of the proposed adjustments to excel’s 1999-year employment_tax liability which settlement included a concession of the income_tax_withholding liability previously proposed by the service’s exam- ination function the settlement was for an additional employment_tax liability in the amount of dollar_figure for each calendar_quarter of or dollar_figure total for the year the executed agreement to assessment of additional employment_tax reflects precisely this as do the assessments shown on the form_941 transcripts for excel management b scope and standard of review the parties dispute the scope and standard of review applicable in this case however we decline to resolve the scope and standard of review issues they raise because we find that no payment was made by excel or a successor cor- poration in or of the nonwithheld taxes related to the exercise in addition we find that there is insufficient evidence to establish that any such payment occurred whether or not we apply the de novo standard adopted by this court in 123_tc_85 rev’d 439_f3d_455 8th cir under these circumstances we need not resolve the parties’ dispute as to the scope and standard of review see kohn v commissioner tcmemo_2009_117 aff’d 377_fedappx_578 8th cir the form_4340 also shows subsequent credits for and overpayments total- ing dollar_figure and a payment of dollar_figure the parties agree that the additions to tax issues are subject_to a de novo scope and standard of review verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports ii respondent’s right to collect petitioner’s unpaid tax_liability a the payment issue burden_of_proof even though petitioner has argued for de novo review of the factual issue of whether a third party in effect paid his underlying tax_liability payment issue he has not invoked sec_7491 to argue that respondent bears the burden_of_proof with respect to that issue we will assume without deciding that de novo review is proper and base our resolution of the payment issue upon a preponderance of all of the evidence in the record therefore assignment of the burden_of_proof is unnecessary see eg 124_tc_95 discussion as noted supra petitioner’s argument that vartec paid the withholding taxes associated with the exercise is essen- tially premised on the fact that the dollar_figure wt-fica claim for against excel management service that was included in the commissioner’s date proof_of_claim filed in the vartec bankruptcy was reduced to a dollar_figure claim in his date amended proof_of_claim filed in that bankruptcy we agree however with respondent that the reduction in the proof_of_claim amount is more likely corroborative of a decision by the commissioner to adopt the appeals officer’s settlement of the excel audit as reflected on the form_2504 wherein the commissioner sought only the medicare taxes associated with all of the option exer- cises than it is of vartec’s payment of the taxes that excel should have withheld from petitioner in connection with the exercise we also dispute petitioner’s characterization of the appeals officer’s statement in his recommended settlement of the excel audit that the taxes proposed by the agent with respect to petitioner will be left unchanged as noted above peti- tioner apparently reads into that statement an intent to con- tinue to pursue excel and its successor corporations for the taxes associated with the exercise whatever the appeals officer’s intent when he included that statement in verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner his recommendations for resolving the nqo exercise issue for and the form_2504 executed by the parties and later reflected in the actual assessments against the excel group reflect the commissioner’s decision not to pursue excel or any successor_corporation for failure to withhold income taxes on the exercise we find no merit in petitioner’s reliance on respondent’s form_4340 for petitioner and his former wife jointly which shows a date reversal of the existing dollar_figure debit balance as proof that p etitioner has no outstanding tax_liability for and his rejection as improper of respondent’s transfer of that debit balance to petitioner individually as noted supra respondent made that reversal and transfer incident to granting petitioner’s former wife relief from the outstanding joint tax_liability arising from the exercise we agree with respondent that the reversal and transfer of the outstanding assessed balance from petitioner and his former wife jointly to petitioner individually was in accordance with irs proce- dures see internal_revenue_manual pts date date and did not indicate that petitioner has no outstanding liability for the forms for both petitioner’s and the excel group’s taxable_year reflect no assessment or payment of with- holding taxes attributable to petitioner’s income from the exercise petitioner cites a treasury_inspector_general_for_tax_administration report which he states describes the irs’s difficulty in ‘cross posting’ tax_payments to all affected ‘payee’ accounts notwithstanding the exist- ence of that report it is well established that a form_4340 or a computer printout of a taxpayer’s transcript of account absent a showing of irregularity provides sufficient verification of the taxpayer’s outstanding liability to satisfy the requirements of sec_6330 requirement that the appeals officer conducting a collection_due_process cdp hearing obtain verification that the requirements of any applicable law or administrative procedure had been met see eg 115_tc_35 roberts v commissioner tcmemo_2004_100 tornichio v commissioner tcmemo_2002_291 petitioner has not demonstrated any irregularity in the preparation of the fore- going transcripts and we see no reason to depart from that verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports principle in this case see davis v commissioner t c pincite tornichio v commissioner tcmemo_2002_291 conclusion no third-party payment of the nonwithheld taxes was made related to the exercise b sec_31 credit issue on the assumption that vartec paid the nonwithheld taxes in or petitioner contends and respondent disagrees that he is entitled to a credit under sec_31 and sec_1_31-1 income_tax regs the parties also dispute the effect of whalen v commissioner tcmemo_2009_37 where in dicta we suggested that an employer’s actual pay- ment to the irs of the tax that the employer should have withheld could plausibly be characterized as withholding_tax under chapter with a corresponding sec_31 credit being allowed to a proper recipient for an appropriate year emphasis added whalen was a deficiency case not a collec- tion case ms whalen contended that she was entitled to a credit against a deficiency for of taxes that should have been withheld in but were not paid until she lost that argument petitioner is not entitled to a credit under sec_31 because as we have found above no third-party payment was made we may one day be presented with a case in which the irs proposes to collect a party’s liability that has been paid_by another person for now however the better course is to observe the wise limitations on our function and to confine ourselves to deciding only what is necessary to the disposition of the immediate case 349_us_366 accord 297_us_288 brandeis j concurring 113_us_33 our silence on the issue should not be construed as our agreement with either party’s argument c the appeals officer’s refusal to consider collection alternatives in the cover letter to his form requesting a cdp hearing petitioner asked respondent to consider collection verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner alternatives including an offer-in-compromise based upon doubt as to collectibility and an installment_agreement moreover he and mr jeka addressed those matters during and after the cdp hearing petitioner failed however to submit the financial information that mr jeka requested nor did he submit an offer-in-compromise before the expira- tion of repeated deadlines that mr jeka extended to him for doing both as a result petitioner and mr jeka agreed to neither an offer-in-compromise nor an installment agree- ment in his petition petitioner claims that mr jeka’s failure to provide collection alternatives was an abuse_of_discretion he does not however raise the issue in his briefs therefore we consider petitioner to have abandoned that claim e g 89_tc_46 see rule e and requiring that a party’s brief state the points and arguments on which he relies moreover even if petitioner had raised the collection alternatives issue in his briefs his failure to submit an offer-in-compromise or requested financial information to mr jeka would cause us to sustain mr jeka’s determination not to offer collection alternatives under the circumstances mr jeka’s action did not represent an abuse_of_discretion see 124_tc_69 123_tc_1 aff’d 412_f3d_819 7th cir d conclusion mr jeka properly sustained collection with respect to peti- tioner’s unpaid tax_liability iii petitioner’s entitlement to an abatement of assessed interest a introduction petitioner asks for the abatement of interest both on account of mr jeka’s conduct and because the irs did not timely credit his dollar_figure payment b application of sec_6404 petitioner argues for the first time in his opening brief that assessed interest from date the date on which the verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports appeals_office issued the notice_of_determination must be abated pursuant to sec_6404 abatement of interest attributable to an erroneous or dilatory perform- ance of a ministerial or managerial act by an irs officer_or_employee we conclude that petitioner is precluded from raising an issue under sec_6404 because he did not raise it in his petition at his hearing before mr jeka in his pretrial memorandum or at trial see rule b 118_tc_572 brecht v commis- sioner tcmemo_2008_213 further the evidence does not support petitioner’s allegations that mr jeka was erroneous or dilatory in his actions or that mr jeka showed institu- tional bias at every turn therefore petitioner is not enti- tled to an abatement of interest pursuant to sec_6404 c whether respondent timely credited petitioner’s tax_payments for discussion petitioner argues that he paid dollar_figure in discharge of his income_tax_liability on date with the filing of his request for an extension of time to file the return respondent’s form_4340 for reflects a dollar_figure payment on date and a dollar_figure payment on date petitioner seeks an abatement of the interest on dollar_figure attributable to the period from date to date and dollar_figure attributable to the period from date to date for petitioner it is a longstanding position of this court that a form_4340 or a computer printout of a taxpayer’s transcript of account absent a showing of irregularity provides sufficient verification of the taxpayer’s outstanding liability to satisfy the requirement of sec_6330 that the appeals officer conducting a cdp hearing obtain verification that the requirements of any applicable law or administrative proce- dure had been met see eg davis v commissioner t c pincite roberts v commissioner tcmemo_2004_ it is not clear why petitioner selected that date as the date from which no additional interest should run verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner tornichio v commissioner tcmemo_2002_291 in the light of petitioner’s failure to demonstrate any irregu- larity in the preparation of the foregoing transcripts we see no reason to depart from that principle in this case see davis v commissioner t c pincite tornichio v commis- sioner tcmemo_2002_291 petitioner offers only the return as evidence of his date payment of dollar_figure that is insufficient to overcome the contrary evi- dence provided by the form_4340 for a tax_return signed under penalty of perjury does not establish the truth of the facts stated therein e g 71_tc_633 conclusion petitioner is not entitled to any interest abatement based upon payment of dollar_figure of his tax_liability on date d conclusion petitioner is not entitled to any interest abatement for iv the additions to tax a sec_6651 addition_to_tax for failure to make timely payment of tax due introduction respondent assessed dollar_figure and dollar_figure on date and date respectively as additions to tax under sec_6651 for petitioner’s failure to timely pay his income_tax_liability respondent bears the burden of production with respect to those additions see sec_7491 in order to carry that burden respondent must produce sufficient evidence to establish that it is appropriate to impose the additions see 116_tc_438 once respondent has done so the burden_of_proof is on petitioner to show that the additions are improper see id pincite as discussed supra in section iii c of this report the form_4340 for petitioner’s taxable_year supports a finding that petitioner made no pay- ments of income_tax owed for until july and october verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports and that those payments totaling dollar_figure were his only payments in discharge of his total reported income_tax_liability of dollar_figure therefore respondent has satisfied his burden of production under sec_7491 sec_6651 imposes an addition_to_tax of up to of the tax shown on a return for failure to make timely pay- ment thereof unless it is shown that such failure is due to reasonable_cause and not due to willful neglect petitioner argues that there was reasonable_cause for his failure to timely pay his tax_liability undue financial hard- ship his alcoholism and retroactive application of sec_31 credits we have already decided that petitioner is not entitled to any sec_31 credits as an offset to his income_tax underpayment for therefore we will con- sider only the first two grounds for petitioner’s claim of reasonable_cause undue_hardship petitioner alleges undue_hardship on the ground that he lacked the ability to ascertain the amount or existence of his outstanding income_tax_liability despite his good_faith attempts to do so and paid as much of the income_tax_liability as he could attempting to satisfy his obligations despite the fact that this payment placed him in a very difficult financial situation neither of those alleged circumstances supports petitioner’s claim of reasonable_cause for the late payment in part and nonpayment in part of his income_tax_liability before the date due_date of his return petitioner knew that he had received the option proceeds unreduced by any_tax payments either withheld by excel or remitted by him the plan required excel to notify the optionee of the amount due on exercise including amounts necessary to satisfy applicable tax withholding requirements excel’s alleged failure to fulfill that requirement does not excuse petitioner’s failure to pay all of the income_tax that he knew was due with respect to his taxable_income which included the spread amount that petitioner reported as short-term_capital_gain see mcwhorter v commissioner tcmemo_2008_263 employer’s failure to withhold taxes that should have been withheld does not excuse an verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner employee’s failure_to_file a return or pay taxes nor relieve him of the additions to tax under sec_6651 nor does petitioner’s very difficult financial situation constitute reasonable_cause for his failure to timely pay his income_tax_liability petitioner argues that he feared the necessity of twice paying that liability once to respondent and once as reimbursement to excel but as discussed supra by obtaining proof of payment from petitioner excel pursuant to sec_3402 either could have avoided liability for the same tax or if it had in fact paid it obtained a refund thereof moreover petitioner’s illiquidity as of date was a problem of his own making after his exer- cise of the nqos petitioner had the funds necessary to pay the taxes associated with his income from the exer- cise the fact that he lost most of those funds by investing them in high technology stocks and ventures that ultimately failed and did not retain sufficient funds to pay his tax does not provide a basis for his claim of reasonable_cause for his nonpayment or late payment of tax see sec_301_6651-1 proced admin regs which in relevant part provides as follows a failure to pay will be considered to be due to reasonable_cause to the extent that the taxpayer has made a satisfactory showing that he exercised ordinary business care and prudence in providing for payment of his tax_liability and was nevertheless either unable to pay the tax or would suffer an undue_hardship if he paid on the due_date a taxpayer who invests funds in speculative or illiquid assets has not exercised ordi- nary business care and prudence in providing for the payment of his tax_liability unless at the time of the investment the remainder of the tax- payer’s assets and estimated income will be sufficient to pay his tax or it can be reasonably foreseen that the speculative or illiquid investment can be utilized by sale or as security for a loan to realize sufficient funds to satisfy the tax_liability petitioner’s alcoholism in defense of his position that his alcoholism constituted reasonable_cause for his failure to timely pay his tax_liability petitioner argues that he was essentially incapaci- tated by his drinking problem on the date due_date of the return that argument is seriously undercut however by his argument of undue financial hardship in connection with the latter argument petitioner testified that between the date due_date and the october verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports filing_date of the joint_return he was well aware of his outstanding tax_liability for and that he took a number of steps attempting to borrow against and then to sell his two homes to raise the funds necessary to discharge that liability those actions are hardly the actions of a man incapacitated by alcoholism moreover although petitioner testified that in he rec- ognized that his drinking was getting problematic it was not until that he began drinking throughout the day and sometimes night even during the period how- ever he was able to continue his consulting business and upon his admittance to the center on date center personnel noted that he was a bright and alert male in no distress and that his affect orientation and memory were all normal because petitioner was not incapacitated by alcoholism on the due_date of the joint_return or thereafter that condition does not constitute reasonable_cause for his failure to timely pay the income taxes shown on that return see eg hazel v commissioner tcmemo_2008_134 jones v commissioner tcmemo_2006_176 harbour v commis- sioner tcmemo_1991_532 gardner v commissioner tcmemo_1982_542 conclusion petitioner has not shown that his failure to timely pay the tax_liability shown on the return was due to reasonable_cause and not due to willful neglect therefore mr jeka properly sustained collection with respect to the additions to tax under sec_6651 petitioner has neither alleged nor shown a causal relationship between his having operated in a highly stressful and volatile business environment throughout his employment by excel and his failure to timely pay his tax_liability because we have sustained supra respondent’s crediting of petitioner’s dollar_figure payment in partial discharge of his income_tax_liability as of date rather than as of date as alleged by petitioner we also reject petitioner’s additional argument that his sec_6651 addition must be reduced to reflect the earlier payment verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner b the sec_6654 addition_to_tax for failure to make timely estimated_tax payment sec_1 discussion respondent assessed an addition_to_tax of dollar_figure under sec_6654 for petitioner’s failure to timely pay estimated_tax petitioner argues that imposition of the sec_6654 addition_to_tax for underpayment or in this case non- payment of estimated_tax for would be against equity and good conscience within the meaning of sec_6654 because respondent’s form_4340 for petitioner for shows no payments of tax for until july and date and petitioner showed a substantial tax_liability on his prior year return facts establishing that peti- tioner had a required_annual_payment for within the meaning of sec_6654 we find that respondent has satisfied his burden of production under sec_7491 the burden_of_proof is on petitioner to show that he is cov- ered by one of the relief provisions of sec_6654 which in this case means sec_6654 sec_6654 contains no provision relating to reasonable_cause and lack of willful neglect petitioner makes the same arguments undue_hardship alcoholism that he made in alleging reasonable_cause under sec_6651 for the reasons given for rejecting those arguments as they related to respondent’s additions to tax under that provision we reject them as justification for reversing respondent’s imposition of the addition_to_tax under sec_6654 the evidence of undue_hardship and alcoholism does not support a finding that imposition of the sec_6654 addition_to_tax herein would be against equity and good conscience within the meaning of sec_6654 here again we reject petitioner’s additional argument that respondent failed to take into account petitioner’s alleged payment of dollar_figure on date the return_due_date we reject that argument not only for the reasons stated supra note with respect to respondent’s imposition of the addition_to_tax under sec_6651 but also because date was not within any period during which an estimated_tax payment for was due rather it con- stituted the termination_date for the running of interest from each of the four estimated pay- ment dates for see sec_6654 verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports conclusion mr jeka properly sustained collection with respect to the addition_to_tax under sec_6654 decision will be entered for respondent reviewed by the court cohen foley vasquez gale thornton marvel goeke wherry kroupa gustafson paris and morri- son jj agree with this opinion of the court halpern j concurring i concur with the results reached by the majority with respect to all of the issues i write sepa- rately however to express my disagreement with the major- ity’s failure to hold in deciding the sec_31 credit issue that even if vartec in a later year paid the nonwithheld taxes associated with the exercise petitioner as a matter of law would not be entitled to a sec_31 credit for that payment i introduction petitioner’s sole argument is that he is entitled to a sec_31 credit against his tax_liability for vartec’s or payment of nonwithheld taxes associated with the exercise respondent argues that vartec did not make the alleged payment and as a matter of law any such payment would not entitle petitioner to a sec_31 credit the majority holds that petitioner’s argument fails because a preponderance_of_the_evidence does not support the existence of such a payment i would also hold that peti- tioner’s argument fails because as respondent argues any such payment would not as a matter of law entitle him to a sec_31 credit moreover i would make the latter holding the principal holding in the case the majority would postpone addressing the legal issue until we are presented with a case in which the irs proposes to collect a party’s liability that has been paid_by another person see op ct the above-quoted language implies that an employer’s payment of nonwithheld taxes attrib- utable to a prior year may constitute a payment of the employee’s tax_liability as discussed infra such a payment discharges the employer’s not the employee’s tax obligation see infra sec ii b and c verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner p it further cautions our silence on the legal issue should not be construed as our agreement with either party’s argument see id p the majority leaves open the possibility that on the basis of our decision in whalen v commissioner tcmemo_2009_37 employees will be encouraged to argue as did petitioner that an employee whose employer failed to withhold taxes during a particular taxable_year is entitled to a sec_31 credit for the employer’s payment in a subsequent taxable_year of the non- withheld taxes the majority notes that whalen was a deficiency case not a collection case thus implying that the case is somehow distinguishable and therefore that the majority’s postpone- ment in deciding the legal issue would not encourage employees to advance an argument similar to that advanced by petitioner i would submit that an employer’s payment of a prior year’s nonwithheld taxes either is or is not creditable by the employee under sec_31 regardless of the con- text in which that issue arises for the reasons set forth below i believe the law is clear that an employer’s or former employer’s payment to the internal_revenue_service irs of taxes that should have been but were not withheld in a prior year does not entitle the employee to a sec_31 credit for that payment under those circumstances we have a duty not to mislead taxpayers by perpetuating a case whalen that may very well encourage needless litigation therefore we should hold in the alternative that as a matter of law the vartec pay- the majority seems to not share this concern describing as obiter dictum our suggestion in whalen v commissioner tcmemo_2009_37 that an employer’s subsequent-year payment to the internal_revenue_service irs of taxes that should have been withheld in a prior year could plausibly be characterized as withholding eligible for the sec_31 credit see op ct p in whalen we went on to state however that the employer’s delinquent payment in of the amount it failed to withhold in could not properly be credited to the taxpayer employee for because the tax is considered withheld by the employer for the tax- payer’s income_tax therefore we added the taxpayer is properly denied the use of the sec_31 credit to determine an overpayment for in other words in addition to the earlier statement that it was plausible to characterize the employer’s payment as with- holding for we denied the taxpayer a sec_31 credit because we considered the pay- ment as withheld for we went beyond granting that one could plausibly argue for con- structive withholding to adopting constructive withholding for as the reason we denied the taxpayer a withholding credit for it is difficult to dismiss our reasoned analysis of why the taxpayer lost as merely something said in passing ie obiter dictum black’s law dictionary 9th ed latin ‘something said in passing’ ‘often shortened to dic- tum’ petitioner did not unreasonably attach more weight to it than that verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports ment alleged by petitioner even if proven would not entitle him to a sec_31 credit therefor ii sec_31 credit issue a background sec_3402 requires the withholding of income_tax on wages sec_3401 defines wages generally as remu- neration for services performed by an employee for his employer the medium in which the remuneration is paid is immaterial and may include stock sec_31_3401_a_-1 employment_tax regs moreover remuneration for services constitutes wages even though paid after the recipient’s employment relationship with the employer has ended 419_us_43 a continuing employment relationship is not a prerequisite for a pay- ment’s qualification as ‘wages ’ sec_31_3401_a_-1 employment_tax regs to the same effect as otte and relied on by the u s supreme court therein the option proceeds constituted wages subject_to_withholding of income_tax even though petitioner received them after having left excel’s employ petitioner concedes that neither excel or paine webber withheld taxes on his behalf in nevertheless he argues that vartec’s alleged or payment of those nonwithheld taxes entitles him to a corresponding credit for under sec_31 and sec_1_31-1 income_tax regs petitioner is mistaken the fact that this case can be disposed of on the basis of our finding no payment would not make a holding with respect to sec_31 creditability dictum the u s supreme court an- nounced the pertinent principle over years ago in 199_us_160 whenever a question fairly arises in the course of a trial and there is a distinct decision of that question the ruling of the court in respect thereto can in no just sense be called mere dictum 103_us_118 in which this court said p it cannot be said that a case is not authority on one point because although that point was properly presented and decided in the regular course of the consideration of the cause some- thing else was found in the end which disposed of the whole matter here the precise question was properly presented fully argued and elaborately considered in the opinion the decision on this question was as much a part of the judgment of the court as was that on any other of the several matters on which the case as a whole depended verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner b sec_3403 imposes an independent liability upon employers for failure to withhold taxes in its entirety sec_3403 provides the employer shall be liable for the payment of the tax required to be deducted and withheld under this chapter chapter sections and shall not be liable to any person for the amount of any such payment sec_31_3403-1 employment_tax regs which imple- ments sec_3403 emphasizes that employers required to deduct and withhold tax under sec_3402 are liable under sec_3403 for the payment of such tax whether or not it is collected from the employee by the employer thus the employer’s tax_liability under sec_3403 is independent of the employee’s liability under sec_1 and a to pay tax on the same wages see whalen v commissioner tcmemo_2009_37 the employer’s sec_3403 liability for nonwithheld taxes can be abated however if the employer shows that the employee paid the taxes in question sec_3402 there is no equivalent general abatement or credit provi- sion applicable to employees thus an employee’s liability for income taxes is not subject_to abatement or credit under sec_31 merely because the employee proves that the employer paid the tax he had previously failed to withhold see sec_3403 there is an exception however in the limited circumstances wherein the employer pays the employee’ sec_4 in pertinent part sec_3402 provides if the employer in violation of the provisions of this chapter fails to deduct and withhold the tax under this chapter and thereafter the tax against which such tax may be credited is paid the tax so required to be deducted and withheld shall not be collected from the employer sec_3402 would appear to represent congressional anticipation of our concern in whalen v commissioner tcmemo_2009_37 wherein we observed to conclude that withholding_tax is a separate tax invites the possibility of an employee’s income being taxed twice there is of course only one tax but there are two separate and independent collection mechanisms from the employer pursuant to sec_3402 or sec_3403 and from the employee on the basis of gen- erally sec_1 a a and a limited exception to that observation inapplicable herein is provided by sec_4999 with respect to an employer’s excess golden parachute payments to an employee the effect of that provision is to require the employer to treat its payment of the excise_tax applicable to such payments as additional income_tax_withholding that treatment assures the employee of a sec_31 credit for the employer’s payment and in effect prohibits the commissioner from looking to him for payment of that tax with respect to the same excess_parachute_payment as a practical matter sec_3402 may discourage the commissioner from pursuing the em- ployee for taxes previously collected from the employer because that provision would permit the employer to recoup its payment to the extent it can show that the same tax amount was col- lected from the employee verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports taxes that the employer did not timely withhold and the employee reimburses him under the correction and settle- ment procedures adopted by the regulations under sec_6205 discussed infra section ii c of this concurring opinion absent satisfaction of that exception employer payments of nonwithheld taxes under sec_3403 do not constitute pay- ments of taxes that have actually been withheld at the source as required by sec_1_31-1 income_tax regs therefore such payments are not creditable by the employee under sec_31 discussed infra section ii d of this concurring opinion c sec_6205 and the regulations governing corrections of prior underwithholdings in relevant part sec_6205 provides if less than the correct amount of tax imposed by section is paid with respect to any payment of wages or compensation proper adjust- ments with respect to both the tax and the amount to be deducted shall be made without interest in such manner and at such times as the sec- retary may by regulations prescribe the fact that an employer may make proper adjustments with respect to both the tax and the amount to be deducted from employee wages on an interest-free basis incentivizes employers to make voluntary corrections of employment_tax returns reflecting underwithholdings the regulations under sec_6205 permit an employer to correct an underwithholding of income_tax on an interest-free basis on a supplemental return filed as late as the last day on which the return is required to be filed for the return_period in which the error was acertained sec_31_6205-1 employment_tax regs moreover audit adjustments resulting from employment_tax audits alleging income_tax underwithholding may be paid interest free by the employer after the conclusion of the audit and appeals process provided the payment is accompanied by a signed form_2504 agreement to assessment and collection of addi- except as otherwise noted the sec_6205 regulations cited throughout this concurring opinion were in effect in and during the period of the excel audit and appeal and the teleglobe and vartec bankruptcies the regulations are superseded by regulations finalized on date t d 2008_32_irb_293 which apply to any error acertained on or after date id the regulations do not change in any material respect the prior regulations cited herein verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner tional tax and acceptance of overassessment and is made before the employer receives a notice_and_demand for pay- ment sec_31_6205-1 employment_tax regs as amended in revrul_2009_39 situation 2009_52_irb_951 obsoleting revrul_75_464 situation 1975_2_cb_474 to the same effect when the employer corrects an underwithholding of income_tax and pays amounts pursuant to sec_3403 the sec_6205 regulations restrict the situations in which the employer is entitled to employee reimbursements in general an employer is permitted to collect income_tax_withholding shortfalls from its employees if it collects the underwithheld amount within the same calendar_year as the underwith- holding by deducting such amount from remuneration of the employee if any under the employer’s control whether or not the remuneration constitutes wages sec_31_6205-1 employment_tax regs undercollections in a calendar_year not so corrected are a matter for settlement between the employee and the employer within such cal- endar year id i interpret that last provision to cover situa- tions in which the employer is unable to deduct the requisite amount from employee remuneration before yearend eg because the employee is entitled to too little or to no addi- tional remuneration from the employer before then it is not clear whether settlement before yearend means actual pay- ment before yearend by the employee or execution before yearend of a binding obligation to pay after yearend eg where the employee has insufficient funds to pay by yearend moreover it is not clear whether such a binding obligation must be in the form of a debt_instrument either bearing arm’s-length interest or if no or too little interest is pro- vided for governed by the interest imputation rules of sec_7872 there is no need to opine on those issues because none of the circumstances described in sec_31 c employment_tax regs is present in this case it is only during the limited period in which an employer may seek reimbursement from an employee for the amount of the former’s underwithholding corrections that a failure to do so will result in debt forgiveness income to the employee under sec_61 employer underwith- holding corrections after the expiration of that period because they do not give rise to a right of reimbursement from the employee do not discharge any debt that could result in debt forgive- ness income to the employee moreover because all underwithholding corrections by an em- ployer pursuant to sec_3403 discharge the employer’s rather than the employee’s tax obliga- tion 279_us_716 payment by an employer of an continued verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports d application of the sec_31 credit sec_31 provides to every employee a credit against the employee’s income_tax obligation with respect to his or her wages for t he amount withheld as tax under chapter sections sec_1_31-1 income_tax regs limits the credit to t he tax deducted and withheld at the source upon wages under chapter of the internal_revenue_code that regulation further provides if the tax has actually been withheld at the source credit or refund shall be made to the recipient of the income even though such tax has not been paid over to the government by the employer it is clear from that language that an employee’s right to a sec_31 credit for employer_income_tax_withholding is dependent on a finding that the tax has actually been with- held by the employer the requisite actual withholding would occur only if the employer withholds the required amounts from its wage payments to the employee pursuant to sec_3402 or corrects its failure to withhold the required amount pursuant to sec_6205 and the regula- tions thereunder and recoups from the employee its payment of the underwithholding during the calendar_year in which the underwithholding occurred as permitted by sec_31_6205-1 employment_tax regs only under those circumstances not present herein is it reasonable to conclude that there has been actual with- holding by the employer ie at the source therefore any assumed or payment of taxes that should have been withheld from the proceeds of petitioner’s option exercises does not constitute an amount withheld as tax under chapter under sec_31 likewise it does not constitute tax deducted and withheld at the source as required by sec_1_31-1 income_tax regs settles or permitting an employee to automatically claim a sec_31 credit for any employer payment of tax pursuant to sec- employee’s income_tax obligation in consideration of the employee’s services performed on behalf of the employer constitutes income to the employee is inapplicable thereto i recognize that conclusion is inconsistent with our observation in whalen v commissioner tcmemo_2009_37 that such a payment could plausibly be characterized as withholding_tax under chapter with a corresponding sec_31 credit being allowed to a proper recipient for an appropriate year but it is the argument of this section ii d that the payment in whalen could not have been creditable under sec_31 for any year verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila mclaine v commissioner tion would benefit equally employees who paid taxes on their wage income whether or not withheld and reported on a form_w-2 wage and tax statement and employees such as petitioner who never paid taxes on that income thereby unjustly enriching the latter moreover such a result would open the door to unwarranted tax planning arrangements designed to frustrate the commissioner’s right to collect interest and additions to tax or penalties on late payments or underpayments of tax pursuant to sec_6601 sec_6651 and sec_6654 for example employees who have pur- posely underpaid their taxes on wage income and had their returns audited and been assessed significant deficiencies and interest not unlike petitioner would have the proce- dural ability to persuade their employers former employers to voluntarily and retroactively pay those payroll_taxes under the interest-free adjustment procedures of sec_31_6205-1 employment_tax regs by agreeing to reimburse the employer or former employer in full thus enabling the employees to use the sec_31 credit to effectively erase their liability for interest and perhaps additions to tax and penalties with respect to the defi- ciencies where the employer has made a payment under sec_3403 in a year after the year of underwithholding the commissioner should be permitted to collect the appro- priate interest and additions to tax from the employee even though the commissioner may be required to refund the tax amount to the employer pursuant to sec_3402 or petitioner’s arguments to the contrary are not persuasive his basic argument that so-called constructive withholding satisfies the requirements of sec_31 and that under whalen v commissioner tcmemo_2009_37 vartec’s or payment of nonwithheld taxes in bankruptcy con- stituted a constructive withholding of those taxes flies in the face of the specific requirement in sec_1_31-1 income_tax regs that availability of the credit be limited to tax that has actually been withheld at the source it is also inconsistent with the u s supreme court’s description of by treating vartec’s assumed or payment in partial discharge of the commis- sioner’s proof_of_claim in the vartec bankruptcy as withholding_tax associated with petitioner’s exercise ie as tax actually withheld at the source that payment would nec- essarily be deemed to have been made on the original due_date of the return date see sec_6513 528_us_431 verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila united_states tax_court reports withholding in 496_us_53 which peti- tioner cites as supportive of his position in begier a case in which a trustee in bankruptcy unsuccessfully disputed the defendant’s right to retain the debtor’s prepetition payments to it of withheld taxes the court stated in pertinent part sec_3402 requires that every employer making payment of wages shall deduct and withhold upon such wages the employee’s federal_income_tax emphasis added withholding thus occurs at the time of payment to the employee of his net wages the common meaning of with- holding supports our interpretation see webster’s third new inter- national dictionary defining withholding to mean the act or procedure of deducting a tax payment from income at the source emphasis added id pincite iii conclusion assuming that excel or vartec paid all or a portion of petitioner’s outstanding self-assessed liability with respect to his income from the exercise he would not be entitled to a credit under sec_31 for that payment and we should say so holmes j agrees with this concurring opinion f and finally borrowing from judge holmes’ baseball analogy in 138_tc_213 holmes j concurring if an umpire calls a pitch a ball and if the catcher complains that the pitch was in fact over the plate it would not be improper for the umpire to point out to the catcher that even if the pitch crossed the corner of the plate it was below the batter’s knees and still a ball verdate 0ct jun jkt po frm fmt sfmt v files mclaine sheila


id office uilc cca-729855-08 -------------- number release date from ------------------- sent tue am to -------------------- cc --------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------- subject re transferee case that may ----------------- since our last communication this issue has been resolved with our transferee_liability branch we recommend ------------------------------------------------------------------------------------------------- ---------------------------------- a tefra partnership can be a transferee under the transferee_liability procedures a transferee is any transferee of property who is liable at law or in equity for the taxpayer- transferor's tax_liability sec_6901 irm the existence and the extent of the transferee_liability are determined under the law of the state in which the transfer occurred if a corporation has unpaid income taxes and liquidated and distributed its assets to its sole shareholder a tefra partnership under state law the partnership could be a transferee of the corporation-transferor see sec_301_6901-1 transferee includes shareholder of dissolved corporation under state law a partnership is an entity separate from its partner a partnership may incur liabilities and debts acquire partnership property and have actions brought against it the partnership here can be directly liable for the transferee assessment by virtue of the transfer this transferee_liability situation is comparable to partnership employment_tax assessments to which the tefra procedures do not apply the 30-day_letter and any resulting notice of liability of the partnership would be in the name of and issued to the partnership if the partnership transferred any of the transferred assets to any partner even a limited_partner a 30-day_letter and notice of liability should be issued to such partner in the partner’s name as transferee of the transferee when preparing the recomputation of tax on form_4549 the service would show the transferor's name ssn and tax period on all schedules since the recomputed tax is actually the transferor's see irm note after the assessment against the partnership the service can take administrative collection action eg lien levy against the partnership itself furthermore the government can enforce a tax_lien and take administrative levy action against a general_partner based on the assessment notice_and_demand directed to the partnership upon assessment against the partnership the general partners will become derivatively liable under state law without the need for separate assessments cf cc-2005-003 date confirming that 124_sct_1548 does not alter the service’s longstanding position that it may administratively collect a partnership’s employment_taxes from general partners based on their derivative liability under state law


clifford a abrahamsen and sole k abrahamsen petitioners v commissioner of internal revenue respondent docket no filed date sec_893 excludes from gross_income and exempts from taxation income received by an employee of a foreign government or international_organization if certain conditions are met the sec_893 exemption can be waived and it must be waived by a person who wishes to become a perma- nent resident_of_the_united_states the exemption does not apply to income received by a permanent resident after filing the waiver sec_1_893-1 income_tax regs p-w entered the united_states in to work for finland’s permanent mission to the united nations mission in new york she left the mission to work for a bank and while employed there obtained u s permanent resident status as a condition of obtaining that status she executed in a waiver of rights privileges exemptions and immunities otherwise available to her by virtue of her occupation in she re- commenced employment with the mission and remained employed by the mission throughout the years at issue ps did not report as income the wages the mission paid to p-w during ps claim that her wages were exempt from taxation pursuant to sec_893 the u s -finland tax_treaty the vienna convention on diplomatic relations the vienna convention on consular relations and the inter- national organizations immunities act held sec_893 does not apply to wages p-w received from the mission during because she had previously executed a valid waiver of rights privileges exemptions and immunities held further neither the u s -finland tax_treaty the vienna convention on diplomatic relations the vienna convention on consular relations nor the international organizations immunities act provides an income_tax exemp- tion to permanent u s residents working in nondiplomatic positions for international organizations stephen m rosenberg and richard b feldman for peti- tioners jane j kim for respondent verdate mar apr jkt po frm fmt sfmt v files boundv wit bv864a abraha jamie united_states tax_court reports opinion lauber judge this case is before the court on the par- ties’ cross-motions for summary_judgment under rule the issues for decision are whether ms abrahamsen’s wages for are exempt from federal_income_tax and whether petitioners are liable for sec_6662 accuracy- related penalties petitioners resided in new york when they petitioned the court background in ms abrahamsen a finnish citizen came to new york to work for finland’s permanent mission to the united nations mission the mission is finland’s official diplo- matic delegation to the united nations ms abrahamsen entered the u s on a g-1 visa which is issued to govern- ment officials and employees entering the u s as non- immigrants to work for organizations such as the united nations see u s c sec_1101 c f_r sec dollar_figure she was employed by the mission in an administrative support role ms abrahamsen left the mission in and began working for the new york branch of kansallis-osake-pankki kansallis a finnish bank she apparently held an e-1 visa while initially employed with kansallis an e-1 visa is known as a treaty_trader visa and like a g-1 visa treats its holder as a nonimmigrant for immigration law purposes see u s c sec_1101 c f_r sec_41 ms abrahamsen was employed by kansallis from to on date ms abrahamsen obtained perma- nent resident status in the united_states as a condition of obtaining that status she executed u s citizenship and immigration services uscis form i-508 waiver of rights privileges exemptions and immunities by signing form i-508 ms abrahamsen acknowledged that she was then employed in an occupation under which she had non- immigrant status and declared that she desired to acquire and or retain the status of an alien lawfully admitted for unless otherwise indicated all statutory references are to the internal_revenue_code in effect for the tax years at issue and all rule references are to the tax_court rules_of_practice and procedure verdate mar apr jkt po frm fmt sfmt v files boundv wit bv864a abraha jamie abrahamsen v commissioner permanent residence she affirmed by signing this form that she agreed to waive all rights privileges exemptions and immunities which would otherwise accrue to her under any law or executive_order by reason of her occupational status ms abrahamsen recommenced employment with the mis- sion apparently during the spring of she worked for the mission in various capacities including secretary date-date adviser date-date and attache date-present the united nations did not notify the united_states that she was holding a diplomatic title during the years at issue and her name did not appear on the list of officers entitled to diplomatic privileges and immunities that is maintained by the u s mission to the united nations petitioners did not report as income for the wages that ms abrahamsen received from the mission after exam- ining petitioners’ returns the internal_revenue_service irs or respondent mailed petitioners timely notices of deficiency for these notices increased petitioners’ income by including ms abrahamsen’s wages from the mission and determined a sec_6662 accuracy-related_penalty for each year petitioners timely petitioned this court seeking redetermination of the deficiencies and penalties the parties have filed cross-motions for summary judg- ment petitioners contend that ms abrahamsen’s wages from the mission were exempt from taxation pursuant to sec_893 and provisions of international law respondent con- tends that ms abrahamsen’s wages are taxable and that petitioners are liable for accuracy-related_penalties there is some uncertainty concerning the type of visa ms abrahamsen held at various times petitioners say that she entered the united_states on a g-1 visa whereas respondent says that she had an e-1 visa by the time she obtained permanent resident status quite possibly both parties are correct in any event her immigration status during these earlier years is immaterial to our analysis the parties agree that she was a permanent resident during the tax years at issue and the form i-508 that she signed in would waive her nonimmigrant rights regardless whether she pre- viously held a g-1 or an e-1 visa verdate mar apr jkt po frm fmt sfmt v files boundv wit bv864a abraha jamie united_states tax_court reports i summary_judgment discussion summary_judgment is intended to expedite litigation and avoid unnecessary and expensive trials see 116_tc_73 either party may move for summary_judgment upon all or any part of the legal issues in controversy rule a a motion for sum- mary judgment or partial summary_judgment will be granted only if it is shown that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law see rule b 118_tc_226 the moving party bears the burden of proving that there is no genuine dispute as to any material fact and the court views all factual materials and inferences in the light most favorable to the nonmoving party 85_tc_812 we agree that summary_judgment is appropriate as to the taxability of ms abrahamsen’s wages and we will grant respondent’s motion and deny petitioners’ motion insofar as it relates to this issue with respect to the penalties peti- tioners contend that they reasonably and in good_faith relied upon the advice of tax professionals to complete their returns we conclude that petitioners’ ability to satisfy the sec_6664 reasonable_cause exception to the accuracy-related_penalty presents a triable issue that pre- cludes summary_judgment we will therefore deny both motions for summary_judgment insofar as they concern the penalties ii taxability of wages alien individuals who are lawful permanent residents of the united_states are treated as resident aliens of the united_states sec_7701 resident aliens like other individual taxpayers must include compensation_for services such as wages in their gross_income 138_tc_340 because ms abrahamsen was a resident_alien during the tax years at issue her wages would be included in gross_income under general principles petitioners contend that her wages were exempt from fed- verdate mar apr jkt po frm fmt sfmt v files boundv wit bv864a abraha jamie abrahamsen v commissioner eral income_tax under sec_893 or provisions of inter- national law a sec_893 sec_893 excludes from gross_income and exempts from taxation income received by an employee of a foreign govern- ment or international_organization as compensation_for offi- cial services performed for that entity to qualify for this exemption the individual must not be a u s citizen the services performed must be similar to services performed by u s government employees abroad and the foreign govern- ment must provide a corresponding exemption to u s government employees performing similar services in that country sec_893 the exemption afforded by sec_893 can be waived how- ever and a nonresident_alien must waive it if she wishes to become a permanent resident_of_the_united_states see c f_r sec_245 b to waive this exemption an individual executes and files with the attorney_general the relevant waiver form specified in the immigration and nationality act pub_l_no sec_247 sec_66 stat pincite current version pincite u s c sec_1257 see sec_1_893-1 income_tax regs the required form is uscis form i-508 the exemption from taxation provided by sec_893 does not apply to income that an individual receives after filing form i-508 see sec_1_893-1 income_tax regs petitioners originally argued that ms abrahamsen had not waived her sec_893 exemption even though such a waiver was required in order to secure the permanent resident status she acquired in however respondent has pro- duced a copy of the form i-508 that ms abrahamsen executed on date in connection with obtaining that status petitioners do not dispute that this form is gen- uine or that the signature on the form is ms abrahamsen’s petitioners nevertheless argue that the waiver should not be enforced given what they term the unique facts of this case we do not find the facts petitioners recite to be unique petitioners claim that english is ms abrahamsen’s second language that she signed the waiver more than years ago that form i-508 was difficult to understand and that she did not appreciate the long-term effects of signing the verdate mar apr jkt po frm fmt sfmt v files boundv wit bv864a abraha jamie united_states tax_court reports waiver we expect that many foreign nationals seeking permanent resident status in the united_states could advance similar arguments if such arguments were suffi- cient to nullify the forms i-508 they signed the carefully constructed waiver procedure set forth in the regulations would become the exception rather than the rule more importantly petitioners cite no statute or judicial precedent to support their assertion that we can ignore a val- idly executed waiver we accordingly conclude that the waiver was effective as of date all income that ms abrahamsen received from the mission after that date is ineligible for the sec_893 exemption and is subject_to fed- eral income_tax unless some other exemption applies see 99_tc_273 taxpayer became ineligible for the benefits under sec_893 when he filed his waiver under sec_247 of the immigration and nationality act aff ’d in part rev’d in part 25_f3d_84 2d cir b u s -finland tax_treaty petitioners alternatively contend that ms abrahamsen’s wages from the mission are tax exempt pursuant to the u s - finland income_tax treaty see convention for the avoidance of double_taxation with respect to taxes on income u s - fin date tax_treaties cch para treaty specifically petitioners contend that tax exemption is afforded by article of the treaty which concerns remu- neration received for government service article paragraph of the treaty contains a saving clause that overrides certain of its other provisions this saving clause provides that n otwithstanding any provision of the treaty except paragraph a contracting state may tax a person who is treated as a resident under its taxation laws treaty tax_treaties cch para at big_number article paragraph states that benefits conferred under article dealing with government service are unaffected by the saving clause but only in the case of individuals who are neither citizens of nor lawful permanent residents in that state ibid during the years at issue ms abrahamsen was a lawful permanent resident in the united_states and the exclusion set forth in article paragraph does not apply the saving verdate mar apr jkt po frm fmt sfmt v files boundv wit bv864a abraha jamie abrahamsen v commissioner clause is thus operative and it authorizes the united_states to tax any person who is treated as a resident under its tax- ation laws as a permanent resident ms abrahamsen was a resident for u s tax purposes see sec_7701 thus regardless whether her compensation from the mission was derived from government service within the meaning of article her wages were subject_to federal_income_tax under the saving clause c diplomatic status petitioners argue that ms abrahamsen’s wages were exempt from taxation pursuant to other provisions of inter- national law central to these arguments is the assertion that ms abrahamsen held diplomatic status for the years at issue petitioners provide no support for this assertion rather they simply describe her duties and conclude that her position with the mission is clearly diplomatic in nature the evidence respondent provided shows this assertion to be incorrect at least for u s tax purposes during the rel- evant period ms abrahamsen was employed by the mission as either an adviser or an attache the united nations did not notify the united_states that she held a diplomatic title with regard to either position and her name did not appear on the list of officers entitled to diplomatic privileges and immunities maintained by the u s mission to the united nations concluding as we do that ms abrahamsen did not have diplomatic status or rank we address petitioners’ argu- ments briefly petitioners posit that article of the vienna convention on diplomatic relations vcdr exempts ms abrahamsen’s wages from taxation convention on diplomatic relations and optional protocol on disputes u s -vienna date u s t however article applies only to a the treaty was amended in see protocol to the u s - fin income_tax treaty date tax_treaties cch para this amendment which applies to petitioners’ federal_income_tax liabil- ities for see id art ix does not affect the analysis under the amendment the united_states may tax ms abrahamsen as a resi- dent see id arts i and ii because she was a u s permanent resident during she is covered by the saving clause see id art i and verdate mar apr jkt po frm fmt sfmt v files boundv wit bv864a abraha jamie united_states tax_court reports diplomatic agent article of the vcdr defines a diplo- matic agent as a head of the mission or a member of the diplomatic staff of the mission diplomatic staff is defined to mean the members of the staff of the mission having dip- lomatic rank because ms abrahamsen did not have diplo- matic rank she was not a diplomatic agent under the vcdr and article therefore did not exempt her wages from taxation petitioners next argue that ms abrahamsen’s wages are exempt from tax pursuant to the international organizations immunities act ioia see u s c sec 288d even if the ioia applied to ms abrahamsen which respondent disputes the law does not confer the benefits petitioners claim under the ioia employees of foreign governments and international organizations are immune from suit and legal process relating to acts performed by them in their offi- cial capacity and falling within their functions as such rep- resentatives officers or employees u s c sec 288d b this case arises from ms abrahamsen’s earning income within the united_states as a permanent resident_of_the_united_states she is not being subjected to liability for any act performed in her official capacity and the earning of income is not part of her official function as a representative of finland to the united nations therefore the ioia does not exempt her wages from federal_income_tax see 84_fsupp_472 s d n y ioia does not confer general diplomatic status immunity but confers immunity on u n officers and employees only for the category of acts performed by them in their official capacity and falling within their functions as such officers or employees sec_1_893-1 income_tax regs quoting the relevant provisions of the ioia including that n o per- vccr on consular relation sec_4 there is no merit to petitioners’ suggestion that article of the vi- enna convention exempts ms abrahamsen’s wages from u s tax the vccr does not apply to the mis- sion see 533_fsupp2d_457 s d n y holding that t he tax sta- tus of the consular portions of the premises is controlled by article of the vienna convention on consular relations and that t he tax status of the u n mission portions of the premises is controlled by the vienna convention on diplomatic relations rev’d on other grounds 618_f3d_172 2d cir verdate mar apr jkt po frm fmt sfmt v files boundv wit bv864a abraha jamie abrahamsen v commissioner son shall by reason of the provisions of this title be consid- ered as receiving diplomatic status other than such as are specifically set forth herein iii penalties and interest petitioners argue that even if ms abrahamsen’s income is subject_to tax the court should vacate assessed penalties and interest as noted earlier we will deny both parties’ motions for summary_judgment insofar as they address peti- tioners’ liability for the sec_6662 penalty it is well set- tled that this court’s deficiency jurisdiction generally does not extend to statutory interest 115_tc_293 aff ’d 32_fedappx_278 9th cir sec_6404 which gives us jurisdiction of actions brought within days after the irs mails the taxpayer a final_determination not to abate interest has no application here iv conclusion shown because petitioners have not that ms abrahamsen’s wages are exempt from taxation they must be included in petitioners’ gross_income for the years at issue we will therefore grant respondent’s motion and deny peti- tioners’ motion insofar as they relate to this issue finding there to be a genuine dispute of material fact as to whether the reasonable_cause exception to the sec_6662 accuracy- related penalty applies we will deny both parties’ motions for summary_judgment insofar as they address that point an appropriate order will be issued f verdate mar apr jkt po frm fmt sfmt v files boundv wit bv864a abraha jamie


cca_2013091217263252 ----------------- id office uilc number release date from ---------------------- sent thursday date pm to ------------------------ cc ------------------------------------------------------ subject confirmation ----------------- this is to confirm our telephone conversation of earlier today in that conversation we indicated that we agree with the position taken by the technical advisors regarding the application of sec_469 to the distribution of assets from a grat even though we agree that the taxpayers' interpretation of the statutory provision appears reasonable we believe that the technical advisors’ position provides the best reading of the statute feel free to call ------------------------------or me if you would like to discuss further thanks ----------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------- ------------------