Court Opinion

ID: 9895341
Source: CourtListenerOpinion
Date Created: 2023-11-06 20:02:24.098399+00
Date Added: 2024-06-11T09:12:09.156462
License: Public Domain

United States Tax Court

                              T.C. Memo. 2023-132

                                   LIOR BLAS,
                                    Petitioner

                                          v.

              COMMISSIONER OF INTERNAL REVENUE,
                          Respondent

                                    LEO BLAS,
                                     Petitioner

                                          v.

              COMMISSIONER OF INTERNAL REVENUE,
                          Respondent

                                    —————

Docket Nos. 1031-17, 12485-20L.                          Filed November 6, 2023.

                                    —————

Lior Blas, pro se. 1

Amy Chang and Gregory M. Hahn, for respondent.

         MEMORANDUM FINDINGS OF FACT AND OPINION

       PUGH, Judge: We tried these two consolidated cases at our
Anchorage, Alaska, remote trial session. The year in issue, 2014, is the
same in both cases. The deficiency case, at Docket No. 1031-17,
challenges the Internal Revenue Service’s (IRS’s or respondent’s) notice
of deficiency increasing petitioner’s income tax liability for 2014 by the
amount of the advance premium tax credit (APTC) benefit that was
applied against his monthly health insurance premiums in 2014. The

        1 Petitioner filed his petitions in these consolidated cases using two separate

first names—Lior and Leo—but confirmed at trial he goes by both names.

                                 Served 11/06/23
                                           2

[*2] collection case, at Docket No. 12485-20L, challenges, under section
6330(d), respondent’s notice of determination sustaining the proposed
collection by levy of tax petitioner reported on his 2014 Form 1040, U.S.
Individual Income Tax Return. 2 For the reasons summarized below we
sustain respondent’s determinations in both cases.

                              FINDINGS OF FACT

      The facts we find are derived from the pleadings, trial testimony,
documents admitted into evidence, stipulated facts and documents, and
include the administrative record of the collection case. Petitioner
resided in Alaska when he timely filed both petitions.

A.      Health Insurance Coverage

       In November 2013 petitioner was unemployed and without health
insurance. Petitioner was concerned that he would be penalized if he did
not have health insurance coverage for 2014; therefore, he applied for
health insurance through the Federal Health Insurance Marketplace
(Marketplace) website. On his application petitioner indicated that his
household income was $15,000. He qualified for the maximum APTC
benefit on the basis of the information he supplied on the application.
Petitioner enrolled in the MODA Health Plan, Inc. (MODA), “Be Aligned
Plan” with a coverage start date of January 1, 2014. The monthly
premium for the Be Aligned Plan was $694 (a total of $8,328 for 2014).
In December 2013 MODA sent petitioner a letter thanking him for
choosing MODA. MODA also issued an insurance card to petitioner and
mailed it to his home address in Chugiak, Alaska.

       In December 2013 petitioner secured employment with MRI
Contract Staffing (MRI). Petitioner was employed with MRI throughout
2014. MRI paid him wages of $82,000 over the course of 2014. Petitioner
never reported this improvement in his financial situation to the
Marketplace. Petitioner did not receive health insurance from MRI. Nor
did he have Medicare or TRICARE coverage at any point during 2014.

      Petitioner’s Marketplace coverage with MODA continued
throughout 2014. The APTC payments covered the full amount of his
2014 insurance premiums; therefore, MODA did not send him any

        2 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C., in effect at all relevant times, regulation references are to the
Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and
Rule references are to the Tax Court Rules of Practice and Procedure.
                                           3

[*3] billing statements regarding his 2014 health insurance coverage.
MODA sent a billing statement in December 2014 notifying petitioner
that a premium of $237 was due for insurance coverage beginning
January 2015. MODA sent additional letters and billing statements to
petitioner in 2015 seeking payment of outstanding insurance premiums
for his 2015 health insurance coverage. On January 12, 2015, petitioner
received from the Marketplace a Form 1095–A, Health Insurance
Marketplace Statement, and a letter informing him that he was
required to complete and file Form 8962, Premium Tax Credit (PTC),
with his 2014 federal income tax return.

B.      Tax Return and Examination

      Petitioner filed his 2014 Form 1040 on October 19, 2015. On it he
reported adjusted gross income (AGI) of $83,742, consisting of wages
($82,000), taxable interest ($58), and other income ($1,884), less student
loan interest ($200). He claimed one personal exemption and no
dependents. Petitioner did not attach Form 8962 to his return. He
reported a balance due of $3,690 on his return. Respondent assessed the
tax shown, a section 6651(a)(2) addition to tax, and statutory interest.

      On January 25, 2016, during the examination of petitioner’s 2014
federal tax return, the IRS asked petitioner to complete and file Form
8962. Petitioner completed this form by reporting a family size of two, 3
a modified AGI of $83,942, and a value of $8,328 on line 11, column (f),
Annual Advance Payment of PTC.

       On November 22, 2016, respondent issued the notice of deficiency
to petitioner for 2014. Respondent determined that petitioner received
the benefit of APTC payments of $8,328, was not entitled to any PTC for
2014, and therefore was responsible for repaying the excess APTC paid
on his behalf. At the time, petitioner had a balance due with respect to
the tax he reported on his Form 1040.

C.      Administrative Hearing

       On July 31, 2019, respondent sent petitioner a Letter 1058, Notice
of Intent to Levy and Notice of Your Right to a Hearing (levy notice)
regarding the tax petitioner reported on his Form 1040. Petitioner
timely filed a request for an administrative hearing. Settlement Officer
Simarjit Singh (SO Singh) was assigned petitioner’s administrative

         3 Petitioner had a family size of one for 2014, but if we assume he had a family

size of two our conclusions would not change.
                                    4

[*4] hearing request. At the administrative hearing, petitioner told SO
Singh that he was disputing the tax he reported on his 2014 Form 1040
in his deficiency case. SO Singh indicated that petitioner’s deficiency
case “was for the proposed underreporting [of] income that had no
bearing [in] regards to [the] liability listed on the [levy notice].”
Respondent issued petitioner the notice of determination on September
29, 2020.

D.    U.S. Bankruptcy Court Proceedings

       At the same time petitioner has been seeking relief in this Court,
he also has been pursuing relief in bankruptcy. Petitioner initially filed
a petition with the U.S. Bankruptcy Court for the District of Alaska
(bankruptcy court) on November 30, 2017. He filed that bankruptcy
petition under 11 U.S.C. chapter 13 but his case was converted to a
chapter 7 proceeding on February 13, 2019. The parties did not notify
the Court promptly that it should stay the pending deficiency case
pursuant to 11 U.S.C. § 362(a)(8). The bankruptcy court discharged
petitioner’s debt on May 31, 2019.

      This Court tried the deficiency case on June 18, 2018, and on
November 18, 2019, issued Blas v. Commissioner, T.C. Memo. 2019-152,
and entered a decision for respondent. We subsequently withdrew the
memorandum opinion and vacated the decision because they were based
on evidence from a trial that occurred during the automatic stay.

       Because the automatic stay was lifted when the bankruptcy court
discharged petitioner’s debt on May 31, 2019, the proceedings before this
Court could and did resume, and we tried both cases remotely. But
during posttrial briefing, on August 15, 2022, petitioner again filed a
petition in the bankruptcy court under 11 U.S.C. chapter 13. As a result,
all proceedings again were automatically stayed pursuant to 11 U.S.C.
§ 362(a)(8). Petitioner’s newest bankruptcy case was dismissed on
March 2, 2023, once again lifting the stay of proceedings in this Court.

                               OPINION

I.    Deficiency Case

      A.     Burden of Proof and Production

      First we address the burden of proof in this case. Ordinarily, the
burden of proof in cases before the Court is on the taxpayer. Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933). Generally, under section
                                          5

[*5] 7491(a)(1), “[i]f, in any court proceeding, a taxpayer introduces
credible evidence with respect to any factual issue relevant to
ascertaining the liability of the taxpayer for any tax imposed by subtitle
A or B, the Secretary shall have the burden of proof with respect to such
issue.” Higbee v. Commissioner, 116 T.C. 438, 442 (2001). Petitioner has
not presented credible evidence sufficient to shift the burden of proof to
respondent as to any relevant factual issue under section 7491(a).

      We now turn to the burden of production. Petitioner argues that
respondent must produce evidence that the APTC payments were made
on his behalf. Respondent disagrees and contends that nothing in the
Code places the burden on him to produce affirmative proof of the APTC
payments. Specifically, respondent argues that he does not bear the
burden of production under section 6201(d).

       But the resolution of this case does not hinge on which party has
the burden of proof or production. At trial petitioner admitted that, at
the very least, he “inquired” about his eligibility for insurance. The
record includes a letter to petitioner from MODA indicating that he was
insured as of December 2013, and a copy of his insurance card. The
record also includes a Form 1095–A listing the PTCs attributable to him
to cover his insurance for 2014. Viewed together, this evidence
constitutes sufficient proof that he acquired coverage through the
Marketplace for which advance payments of his insurance premiums
were made.

       Petitioner contends that proving the absence of something (in his
case, payments for health insurance coverage) is not possible. We agree
that proving the absence of something is not always easy, but we need
not debate about how one might prove the absence of something because
respondent has submitted relevant admissible evidence of payments
made on petitioner’s behalf. 4

       B.      Advance Premium Tax Credit

       Section 36B allows a PTC to subsidize the cost of health insurance
purchased through a health insurance exchange by taxpayers meeting
certain statutory requirements. See Treas. Reg. § 1.36B-2(a). The PTC
is generally available to individuals with household income between
100% and 400% of the federal poverty line amount for the year at issue.

        4 At trial petitioner repeatedly raised relevance objections which we said were

best considered in the context of the entire record. Our analysis demonstrates the
relevance of, and weight that should be accorded, that evidence.
                                           6

[*6] § 36B(c)(1)(A), (d)(3)(B); see also McGuire v. Commissioner, 149 T.C.
254, 259 (2017). The federal poverty line amount is established by the
most recently published poverty guidelines in effect on the first day of
the open enrollment period preceding that tax year. Treas. Reg. § 1.36B-
1(h). Notably, the applicable federal poverty line for a family of one in
Alaska is $14,350 and 400% of that is $57,400. See Annual Update of the
HHS Poverty Guidelines, 78 Fed. Reg. 5182, 5183 (Jan. 24, 2013).

       Recipients can choose to receive the PTC benefits in advance, in
which case the payments are made directly to the insurer. See § 36B;
McGuire, 149 T.C. at 260. At the end of the year, a taxpayer who received
an APTC must reconcile the amount of the PTC already received with
the entitlement amount. § 36B(f)(2). The taxpayer may do so by
completing a Form 8962 and filing it with his federal tax return. If the
APTC is greater than the entitlement amount, the taxpayer must repay
the excess APTC, reflected as an increase in tax. § 36B(f)(2)(A); see also
Keel v. Commissioner, T.C. Memo. 2018-5, at *6.

       Petitioner elected to receive the APTC benefit. He qualified for
the APTC on the basis of his representation on his Marketplace
application that his household income was $15,000. The 2014 monthly
premiums for the Be Aligned Plan—totaling $8,328 for the year—were
paid on petitioner’s behalf. He secured employment with MRI, which
paid him wages of $82,000 in 2014. His household income for 2014
therefore exceeded 400% of the federal poverty line amount for the year
at issue ($57,400); consequently, he is not entitled to any of the APTC
he received. Because petitioner is responsible for repaying the excess
APTC paid on his behalf, 5 we sustain respondent’s deficiency
determination.

II.     Collection Case

        A.      Standard of Review

      Where the amount of a taxpayer’s underlying tax liability is
properly at issue in a collection case, we review the IRS’s determination
de novo. Goza v. Commissioner, 114 T.C. 176, 181–82 (2000). Section
6330(c)(2)(B) permits taxpayers to challenge the existence or amount of

        5 Petitioner also raised an alternative argument that even if he had a deficiency

resulting from the APTC he had offsetting deductions. But he did not substantiate any
deductions.
                                         7

[*7] their underlying tax liability only if they did not receive a notice of
deficiency or otherwise have a prior opportunity to contest that liability.

      Where the underlying tax liability is not properly at issue, we
review the IRS’s determinations for abuse of discretion. Hoyle v.
Commissioner, 131 T.C. 197, 200 (2008), supplemented by 136 T.C. 463
(2011); Goza, 114 T.C. at 182. Abuse of discretion exists when a
determination is arbitrary, capricious, or without sound basis in fact or
law. See Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469
F.3d 27 (1st Cir. 2006). The burden is on the taxpayer to prove that the
settlement officer abused her discretion. Rule 142(a); see Woodral v.
Commissioner, 112 T.C. 19, 23 (1999).

       In deciding whether a settlement officer abused her discretion in
sustaining the collection action we consider whether she (1) properly
verified that the requirements of any applicable law or administrative
procedure have been met; (2) considered any relevant issues the
taxpayer raised; and (3) determined whether “any proposed collection
action balances the need for the efficient collection of taxes with the
legitimate concern of the [taxpayer] that any collection action be no more
intrusive than necessary.” See § 6330(c)(3).

       B.      Underlying Liability

        The parties agree that petitioner’s underlying liability for 2014 is
properly at issue in the collection case. Specifically, respondent points
out that at the administrative hearing petitioner informed SO Singh
that he was disputing the tax he reported on his 2014 Form 1040 in his
deficiency case. SO Singh did not think the underlying liability was at
issue; therefore respondent states that petitioner attempted to raise the
issue in the administrative hearing but was deprived of the opportunity
to discuss the issue further. Accepting that petitioner’s underlying
liability is properly at issue, we review the IRS’s determination de novo.
See Goza, 114 T.C. at 181–82. Petitioner, however, offered no evidence
at trial relating to his underlying tax liability as he reported it, and we
see nothing to contradict the tax liability he reported on his 2014 Form
1040 but did not pay. 6

        6 The IRS received a payment of $2,198.75 related to petitioner’s chapter 7

bankruptcy proceeding. Petitioner’s balance due from the tax he reported on his 2014
Form 1040 was reduced accordingly. In our Order dated April 8, 2022, we explained
that partial payment does not require us to dismiss the collection action.
                                          8

[*8]   C.      Nonliability Issues

       Petitioner identified no issues with the actions of SO Singh other
than the argument we rejected, that the IRS could not proceed with
collection because of his bankruptcy proceeding. 7 Our own review of the
administrative record identified no abuse of discretion by SO Singh. The
record shows that SO Singh properly verified that the requirements of
applicable law and administrative procedure were followed, considered
relevant issues raised by petitioner, and properly balanced the need for
efficient collection of taxes with petitioner’s legitimate concern that the
collection action be no more intrusive than necessary. See § 6330(c)(3).
Consequently, we uphold respondent’s determination.

       We have considered all arguments made and, to the extent not
mentioned above, we conclude that they are moot, irrelevant, or without
merit.

       To reflect the foregoing,

       Appropriate decisions will be entered.

        7 At trial petitioner reiterated arguments he made in various filings; namely,

that the collection action was blocked by his bankruptcy. We rejected these arguments
in our Order dated April 15, 2022. (This Order mistakenly identified July 31, 2019, as
the date of assessment instead of the date the levy notice was issued; this does not
affect our conclusion that the IRS could proceed with collection.) We do so again now.
When the IRS issued the levy notice on July 31, 2019, the automatic stay related to
petitioner’s chapter 7 bankruptcy proceeding was no longer in effect. In sum, the IRS
was not barred from proceeding, nor are we.