Opinion ID: 201691
Heading Depth: 2
Heading Rank: 3

Heading: Determination of the IRS Appeals Officer

Text: 24 Olsen argues the appeals officer misconstrued or overlooked the above statutory standards, and abused her discretion. We do not agree. 25 In a CDP hearing, taxpayers are expected to provide all relevant information requested by [the IRS Office of] Appeals, including financial statements, for its consideration of the facts and issues involved in the hearing. Treas. Reg. § 301.6330-1(e)(1) (2004). The IRS Office of Appeals repeatedly asked Burke for information it believed necessary to evaluate fully Olsen's offer to compromise for $5,000 a tax liability which (including the $105,000 employment taxes) was well in excess of $100,000. Olsen did not contest the IRS's calculation of the total amount of the employment or other tax deficiency but rather defended his proposed offer in compromise solely on his purported inability to pay more. Focus was thus upon Olsen's ability to pay, making it reasonable for the IRS to inquire carefully into his circumstances. Yet Olsen was less than forthcoming with the information requested by the IRS in areas where joint income tax filings and his wife's bank deposits raised questions as to his true worth. Not only were his responses slow in coming, they remained incomplete; and, except for blanket assertions, little alternative information was tendered that might have clarified matters. The appeals officer unsuccessfully asked three times — in letters dated November 2002, January 2003, and April 2003 — for a Form 433-B for Olsen's venture capital business and a Form 433-B for Tektonic Partners LLC. In the January and April 2003 letters, the appeals officer requested the following information: the source of over $115,000 in unexplained deposits into Mrs. Olsen's bank accounts, a Form 433-B for the other Tektonic partnerships, and information regarding Tektonic Partners LLC located in Boston. 5 26 The appeals officer warned Burke in her November 13, 2002 letter, that, [i]f the requested information and documentation ... is not provided, I cannot consider the offer in compromise as a collection alternative. In the letter dated January 27, 2003, the officer warned that [f]ailure of the Olsens to provide the information by the due dates will result in a determination hearing being made with the information contained in the file. Similarly, in the April 8, 2003 letter, the officer warned Burke that [i]f the information requested is not provided ... my determination may be made with the information currently available. The instructions to Form 656, Offer in Compromise, also warned Olsen that failure to respond to inquiries for information in a timely manner constitutes grounds for giving no further consideration to an offer in compromise. Despite these warnings, the requested information was not provided. 27 Olsen complains that some of the information he did not provide could not be considered by the IRS appeals officer because that information related to assets or business entities owned by his wife, not by him. He also contends the district court erred in finding that he owned certain assets. 28 Olsen is correct that the district court itself was seemingly inaccurate when it recounted that he owned two cars which were unencumbered by liens and that he leased a third automobile, and that a federal tax lien could be placed on these vehicles. See Olsen, 326 F.Supp.2d at 186. The case activity records reflect that Olsen purchased a 1998 Camry in the year 2000. After several inquiries by the appeals officer, Burke informed the officer that the Camry was owned by Olsen's daughter. The case activity records indicate that Mrs. Olsen owned one of the other cars and leased the third. But the court's factual errors relative to ownership of the cars were not central to the outcome. Olsen's version of who owned what seems adequately to have been passed along to the appeals officer and to have been understood by her. The district court premised its affirmation of the appeals officer's determination mainly upon the affirmative steps taken by the appeals officer to obtain the financial information necessary to evaluate the offer and Olsen's failure to provide that information. Id. at 189. 29 As for the district court's finding that Olsen owned certain business ventures, the record demonstrates that Olsen did in fact claim that he had an interest in a venture capital business. Olsen stated on his Form 433-A that he receives $2,000 in net business income each month but did not identify its source. His income tax returns for the years 1996 to 2000 indicated that his business was a venture capital[ ] business. Thus, given Olsen's insistence that he could not pay his conceded liability, it was entirely reasonable for the appeals officer to seek more information about Olsen's venture capital business and, as well, to want to look with care into the family's assets so as to verify Olsen's inability to pay. 6 30 Olsen contends that the appeals officer improperly asked for financial information about business entities in which his wife alone had an interest. On this premise, Olsen argues that he justifiably failed to provide collection information statements for Tektonic Partners LLC as well as for the three other Tektonic partnerships. He also failed to respond to the officer's inquiry regarding the Tektonic Partners located in Boston. The information was, however, relevant to evaluating Olsen's offer in compromise, irrespective of whether the business interests belonged to him, his wife, or both of them. Olsen's income tax returns for the years 1999 to 2001 showed well over $100,000 in income from Tektonic Partners LLC each of those years. And the tax return for one of the partnerships, Tektonic Partners — TX, LLC, listed Olsen as a 90% owner. 7 31 [T]he decision to accept or reject an offer to compromise ... is left to the discretion of the Secretary. Treas. Reg. § 301.7122-1(c)(1) (2004); see also 26 U.S.C. § 7122 (2000) (The Secretary may compromise any civil or criminal case arising under the internal revenue laws ....) (emphasis added). Even where a taxpayer is offering to compromise a tax liability for which the taxpayer's spouse has no liability, the Secretary may, in appropriate circumstances, seek information about the nonliable spouse's income and assets. Treas. Reg. § 301.7122-1(c)(2)(ii)(A) (2004) provides that information concerning a nonliable spouse may be considered, inter alia, to the extent ... property has been transferred by the taxpayer to the nonliable spouse for the purpose of removing the property from consideration by the IRS in evaluating the compromise or for the purpose of verifying the amount of and responsibility for expenses claimed by the taxpayer. 32 In the instant case, both rules are material. The facts in the record are open to the suggestion that Olsen may have transferred his own interests in Tektonic to his wife. The record indicates that Olsen may have held an interest in the Tektonic partnerships at least through the year 2001. The Olsens' joint income tax returns showed income from Tektonic Partners LLC in the amount of $131,000 for 1999, $165,750 for 2000, and $158,010 for 2001. The tax return for the year 2001 for Tektonic Partners — TX, LLC listed Olsen as a 90% owner. On October 14, 2002, Olsen signed the year 2001 tax return for Tektonic Partners LLC as the general partner designated as the tax matters partner for the tax year of [the] return. This same tax return indicated, however, that Mrs. Olsen owned 100% of the interest of Tektonic Partners LLC. On December 10, 2002, just two months after Olsen signed this tax return as the tax matters partner, Burke informed the appeals officer that Olsen had no interest in Tektonic Partners LLC and that 100% of the interest was owned by his wife. Based on these statements, it was not unreasonable for the appeals officer to suspect that Olsen may have owned interests in the Tektonic partnerships at least through the year 2001 and that he may have transferred his interests to his wife for the purpose of removing the assets from consideration by the IRS in evaluating his offer in compromise. 8 33 The regulation permitting consideration of information about a nonliable spouse for the purpose of verifying the amount of and responsibility for expenses claimed by the taxpayer is also relevant here. Treas. Reg. § 301.7122-1(c)(2)(ii)(A) (2004). On his Form 433-A, Olsen indicated the amount he pays for certain living expenses, such as food, housing, utilities, and insurance. For example, he stated that he paid $120 per month for life insurance. An insurance statement Olsen later submitted showed that he was insured for $1 million at a monthly premium of $1,424.70 (annual premium of $15,830). Because Olsen claimed to pay only $120 of the monthly premium, the appeals officer had reason to question the source of the remaining $1,304.70 each month. Olsen had earlier contended in his offer in compromise that he had insufficient funds to pay the full amount of his tax liability, and that [h]is spouse is a piano teacher whose income has not approached $30,000 on an annual basis for the past ten years. At the same time, there were over $115,000 in unexplained deposits into his wife's bank account over a six-month period. In light of these circumstances, the appeals officer was entitled to review Mrs. Olsen's assets and income in order to verify the amount of and responsibility for the life insurance expense and other expenses claimed by Olsen. 34 Given Olsen's failure to cooperate fully despite the appeals officer's repeated attempts to obtain the information deemed necessary to evaluate the offer (and, in particular, Olsen's claimed inability to pay), we cannot say the appeals officer abused her discretion in determining the collection action to be no more intrusive than necessary. 26 U.S.C. § 6330(c) (2000). 35