T.C. Memo. 2003-178
UNITED STATES TAX COURT
DALE L. OYER, TRANSFEREE, ET AL.,1 Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 11887-02L, 11888-02L, Filed June 17, 2003.
11889-02L, 11893-02L.
John Harley Trader, for petitioners.
Robert M. Fowler, for respondent.
MEMORANDUM OPINION
THORNTON, Judge: This matter is before the Court on
respondent’s motions for summary judgment in these consolidated
1
Due to an identity of issues, the following cases have
been consolidated herewith for the purpose of this opinion: Acme
Leasing Trust, Transferee, docket No. 11888-02L; ABC Seamless
Trust, Transferee, docket No. 11889-02L; and Shirley J. Oyer,
Transferee, docket No. 11893-02L.
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cases. The issue for decision is whether respondent may proceed
with collection of petitioners’ transferee tax liabilities.
Summary judgment is intended to expedite litigation and
avoid unnecessary and expensive trials. Fla. Peach Corp. v.
Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be
granted where there is no genuine issue of any material fact and
a decision may be rendered as a matter of law. Rule 121(a) and
(b);2 see Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520
(1992), affd. 17 F.3d 965 (7th Cir. 1994); Zaentz v.
Commissioner, 90 T.C. 753, 754 (1988). The moving party bears
the burden of proving that there is no genuine issue of material
fact, and factual inferences will be read in a manner most
favorable to the party opposing summary judgment. Dahlstrom v.
Commissioner, 85 T.C. 812, 821 (1985); Jacklin v. Commissioner,
79 T.C. 340, 344 (1982). When a motion for summary judgment is
made and properly supported, the adverse party may not rest upon
mere allegations or denials of the pleadings but must set forth
specific facts showing that there is a genuine issue for trial.
Rule 121(d).
As discussed below, on the basis of our review of the
record, we conclude that there is no dispute as to a material
2
Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code, as amended.
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fact and that respondent is entitled to summary judgment as a
matter of law.
Background
The record establishes or the parties do not dispute the
following:
A. The Corporation’s Tax Deficiency
On September 15, 1999, respondent timely mailed to ABC
Seamless Siding & Guttering, Inc. (the corporation), a notice of
deficiency. In the notice, respondent determined that for its
taxable year ending December 31, 1995, the corporation had an
income tax deficiency and related penalties totaling $75,767.50.
In response, the corporation timely petitioned this Court at
docket No. 18699-99 (the corporation’s deficiency case).
On February 15, 2001, this Court entered a stipulated
decision in the corporation’s deficiency case, determining that
there was a $41,873 deficiency in the corporation’s income tax
for the taxable year 1995. The stipulated decision was signed
for the corporation by the same counsel who represents
petitioners in the instant cases.
B. Statutory Notices of Transferee Liability
On October 11, 2000, respondent mailed to petitioners
substantially identical statutory notices of liability,
determining that each petitioner was liable as a transferee of
the corporation for its income taxes and penalties in the amount
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of $94,738.85 for the taxable year ending December 31, 1995.3 In
response, petitioners filed substantially identical petitions
with this Court in the following cases (the transferee liability
cases): Dale L. Oyer, docket No. 673-01; Acme Leasing Trust,
docket No. 674-01; Shirley J. Oyer, docket No. 675-01; and ABC
Seamless Trust, docket No. 676-01.
C. Stipulated Decisions in Petitioners’ Transferee Liability
Cases
On March 2, 2001, before respondent had filed an answer in
any of the transferee liability cases, this Court entered
stipulated decisions in those cases, determining that each
petitioner was liable as a transferee of assets of the
corporation in the amount of $58,008 plus interest as provided by
law from March 15, 1996, to the date of payment.4 Each
stipulated decision was signed for the petitioner by the same
counsel who represents petitioners in the instant cases.
3
This amount represents the corporation’s $75,767.50
deficiency and related penalties, as determined in the
corporation’s notice of deficiency, plus an additional $16,135
attributable to the corporation’s reported but unpaid tax
liability and a $2,836.35 penalty with respect thereto.
4
Ostensibly, this amount represents the sum of the
corporation’s $41,873 deficiency, as determined in the stipulated
decision entered in the corporation’s deficiency case, and the
corporation’s $16,135 reported but unpaid tax liability, as
referenced in the preceding note.
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D. Notices of Federal Tax Liens
On May 11, 2001, respondent filed notices of Federal tax
lien with respect to each petitioner’s transferee liability,
showing an $89,079.25 unpaid balance of assessment with respect
to each petitioner. In separate letters dated May 16, 2001,
respondent notified each petitioner of this action and of the
right to a hearing under section 6320.
E. Petitioners’ Requests for Hearings
Each petitioner timely submitted a Form 12153, Request for a
Collection Due Process Hearing. Attached to these Forms 12153
were substantially identical memoranda, asserting that each
asserted tax lien was defective, erroneous, and improper because:
(1) The stipulated decision in the corporation’s deficiency case
was jurisdictionally defective because the underlying notice of
deficiency was invalid in that it determined a deficiency for the
corporation’s taxable year ending December 31, 1995, rather than
for the corporation’s final taxable period ending August 31,
1995; and (2) alternatively, each transferee’s liability should
be limited to $19,041, which petitioners seemed to suggest was
the maximum value of assets that any of them actually received
from the corporation.
F. The Appeals Office Hearings
On July 25, 2001, an Appeals officer held a telephone
hearing with respect to the collection proceedings against
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petitioners ABC Seamless Trust and Acme Leasing Trust. On August
14, 2001, the Appeals officer held an in-person hearing with
respect to the collection proceedings against petitioners Dale
Oyer and Shirley Oyer.
On or about November 12, 2001, each petitioner submitted to
the Appeals officer an offer in compromise based on doubt as to
liability. In these offers in compromise, each petitioner
offered to pay $50 to compromise the unpaid balance of assessment
of transferee tax liability.
In addition, each petitioner submitted to respondent
substantially identical documents dated November 15, 2001, and
captioned “Amendment to Request for a Collection Due Process
Hearing”. In these documents, petitioners alleged that in
determining their transferee liabilities, respondent had failed
to take into consideration certain “additional liabilities” of
the corporation that petitioners contended would more than offset
the value of any assets that the corporation transferred to them.
G. Respondent’s Notices of Determination
On June 13, 2002, respondent issued to each petitioner a
Notice of Determination Concerning Collection Action(s) Under
Sections 6320 and/or 6330 (the notices). In the notices,
respondent determined that petitioners could not challenge their
underlying tax liabilities in these collection proceedings
because these liabilities had been determined in prior judicial
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actions. In the notices, respondent also determined that
petitioners’ offers in compromise based on doubt as to liability
were unacceptable because each petitioner’s underlying tax
liability was based on a Tax Court decision and because each
petitioner was noncompliant with income tax filing requirements.
In the notices, respondent determined that all applicable legal
and administrative procedures had been met and that collection
actions could proceed against petitioners.
H. The Petitions
On July 18, 2002, petitioners filed with the Court
substantially identical petitions challenging the notices.5 In
the petitions, petitioners challenge their transferee tax
liabilities and also challenge the Appeals officer’s rejection of
their offers in compromise.
I. Respondent’s Motions for Summary Judgment
On January 31, 2003, respondent filed substantially
identical motions for summary judgment in each petitioner’s case.
On February 13, 2003, petitioners filed substantially identical
responses opposing respondent’s motions for summary judgment in
each case. On February 24, 2003, the Court held a hearing in
5
When these petitions were filed, Dale Oyer resided in
Kansas City, Missouri, and Shirley Oyer resided in Shawnee,
Kansas. The petitions for Acme Leasing Trust and ABC Seamless
Trust each listed the same Kansas City, Missouri, mailing
address.
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Kansas City, Missouri, on respondent’s motions for summary
judgment.
Discussion
A. Statutory Framework
Section 6321 imposes a lien in favor of the United States on
all property and property rights of a person who is liable for
and fails to pay taxes after demand for payment has been made.
The lien arises when assessment is made and continues until the
assessed liability is paid. Sec. 6322. For the lien to be valid
against certain third parties, the Secretary must file a notice
of Federal tax lien and, within 5 business days thereafter,
provide written notice to the taxpayer. Secs. 6320(a), 6323(a).
The taxpayer may then request an administrative hearing before an
Appeals officer. Sec. 6320. Once the Appeals officer issues a
determination, the taxpayer may seek judicial review in the Tax
Court or a District Court, as appropriate. Sec. 6330(d).
Section 6330(c) prescribes the matters that a person may
raise at an Appeals Office hearing, including spousal defenses,
the appropriateness of the Commissioner’s intended collection
action, and possible alternative means of collection. Of
particular significance here is section 6330(c)(2)(B), which
provides:
(B) Underlying liability.--The person
may also raise at the hearing challenges to
the existence or amount of the underlying tax
liability for any tax period if the person
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did not receive any statutory notice of
deficiency for such tax liability or did not
otherwise have an opportunity to dispute such
tax liability.
Moreover, except in certain limited circumstances, a person is
generally precluded from raising at the Appeals Office hearing
any issue raised and considered in any previous administrative or
judicial proceeding. Sec. 6330(c)(4).
B. Petitioners’ Challenges to Their Underlying Tax Liabilities
In this collection proceeding, petitioners challenge their
underlying tax liabilities as transferees of the corporation for
its 1995 tax liability. More particularly, having previously
agreed to this Court’s stipulated decisions in the transferee
liability cases, petitioners now seek in this collection
proceeding to repudiate those stipulated decisions on various
grounds. They argue, among other things, that respondent’s
notice of deficiency to the corporation was invalid and that
consequently this Court’s stipulated decisions in the
corporation’s deficiency case and in the transferee liability
cases were jurisdictionally defective. Petitioners also contend
that the stipulated decisions in the transferee liability cases
failed to take into account certain of the corporation’s
liabilities (apparently because petitioners failed to assert them
in the transferee liability cases), which, if considered, would
more than offset the value of any assets the corporation
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transferred to them, thereby reducing their transferee
liabilities to zero.
1. Res Judicata
Under the general rule of res judicata, “when a court of
competent jurisdiction has entered a final judgment on the merits
of a cause of action, the parties to the suit and their privies
are thereafter bound ‘not only as to every matter which was
offered and received to sustain or defeat the claim or demand,
but as to any other admissible matter which might have been
offered for that purpose.’” Commissioner v. Sunnen, 333 U.S.
591, 597 (1948) (quoting Cromwell v. County of Sac, 94 U.S. 351,
352 (1876)).
The stipulated decision that this Court entered in each
petitioner’s transferee liability case was res judicata for
purposes of determining each petitioner’s transferee liability.
See Baptiste v. Commissioner, 29 F.3d 433, 436-437 (8th Cir.
1994), affg. in part and revg. in part 100 T.C. 252 (1993);
Krueger v. Commissioner, 48 T.C. 824 (1967). These stipulated
decisions preclude petitioners from relitigating their transferee
liabilities in this collection proceeding. See Katz v.
Commissioner, 115 T.C. 329, 340 n.16 (2000); Gunderson v.
Commissioner, T.C. Memo. 2002-26.
Petitioners argue that res judicata is inapplicable here
because the stipulated decisions in the transferee liability
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cases were entered before respondent filed answers therein.
Petitioners’ argument is without merit. A stipulated decision
reflects the compromise and settlement of a tax case, which is
governed by general principles of contract law. Robbins Tire &
Rubber Co. v. Commissioner, 52 T.C. 420, 435-436, supplemented by
53 T.C. 275 (1969). The decision in a stipulated case is deemed
rendered on the date the Court enters it. See sec. 7459(c).
Neither the ability of the parties to enter into a stipulated
settlement nor the ability of the Court to enter a decision
reflecting the stipulated settlement depends upon the
Commissioner’s filing an answer.
Petitioners also argue that res judicata is inapplicable
here because this Court lacked jurisdiction in the transferee
liability cases in that the corporation’s notice of deficiency
was invalid. Petitioners argue that the corporation’s notice of
deficiency was invalid because it was based on the taxable year
ending December 31, 1995, whereas the corporation’s final tax
period ended August 31, 1995, just before it was liquidated.
Petitioners are mistaken in their premises as to the
prerequisites of this Court’s jurisdiction in a transferee
liability case. The Tax Court has jurisdiction in a case
commenced by respondent’s issuance to a transferee of a notice of
liability. See sec. 6901; Rule 13(a); Groetzinger v.
Commissioner, 69 T.C. 309 (1977). The validity of a notice of
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transferee liability does not depend upon the issuance to the
transferor of a valid notice of deficiency. See Kuckenberg v.
Commissioner, 35 T.C. 473, 483 (1960), affd. on this issue 309
F.2d 202 (9th Cir. 1962); Cleveland v. Commissioner, 28 B.T.A.
578 (1933), affd. sub nom. Flynn v. Commissioner, 77 F.2d 180
(5th Cir. 1935); Espinosa v. Commissioner, T.C. Memo. 2000-66,
affd. 24 Fed. Appx. 825 (9th Cir. 2001). Consequently, the
alleged defect in the corporation’s notice of deficiency would
not, in and of itself, impair this Court’s jurisdiction in the
transferee liability cases.6
In any event, the notice of deficiency to the corporation
would not be invalid merely because it covered the entire 1995
year. See Burford v. Commissioner, 76 T.C. 96, 100 (1981), affd.
without published opinion 786 F.2d 1151 (4th Cir. 1986);
Sanderling, Inc. v. Commissioner, 66 T.C. 743, 749 (1976) (“where
the notice [of deficiency] is based on the taxpayer’s final tax
period and covers the entire period of the taxpayer’s operations,
it is a valid determination for that period”), supplemented by
67 T.C. 176 (1976), affd. 571 F.2d 174 (3d Cir. 1978).
6
Moreover, we note that petitioners’ transferee liabilities
are not predicated entirely on the corporation’s deficiency as
determined in the notice of deficiency. Rather, as previously
noted, petitioners’ transferee liabilities, as determined in the
notices of transferee liability, also include $16,135
attributable to the corporation’s reported but unpaid 1995 tax
liability. This $16,135 amount was not subject to deficiency
procedures.
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2. Section 6330(c)(2)(B)
In addition to principles of res judicata, the provisions of
section 6330(c)(2)(B) prevent petitioners from challenging in
this collection proceeding the existence and amount of their
transferee tax liabilities.
In an effort to avoid this result, petitioners urge upon us
a novel interpretation of section 6330(c)(2)(B). They contend
that section 6330(c)(2)(B) authorizes a person to challenge the
amount or existence of tax liability in a collection proceeding
if the person meets either of two purportedly disjunctive
criteria: (1) If the person did not receive any statutory notice
of deficiency; or (2) if the person did not otherwise have an
opportunity to dispute the tax liability. Petitioners contend
they meet the former criterion because they received no statutory
notices of deficiency but only statutory notices of transferee
liability. Thus, petitioners conclude, the literal language of
section 6330(c)(2)(B) permits them to challenge their underlying
tax liabilities.
We are unaware that any court has explicitly addressed the
merits of the highly literal construction of section
6330(c)(2)(B) that petitioners urge upon us. In numerous cases,
however, this Court and other courts have implicitly rejected
petitioners’ reading of section 6330(c)(2)(B). See, e.g.,
Aguirre v. Commissioner, 117 T.C. 324 (2001) (taxpayers who
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signed a Form 4549 waiver, consenting to the immediate assessment
and collection of taxes, and consequently received no statutory
notice of deficiency, were barred from challenging their
underlying tax liability in the collection proceeding); Sego v.
Commissioner, 114 T.C. 604 (2000) (taxpayers who deliberately
refused to accept delivery of deficiency notices repudiated their
opportunity to contest the notices of deficiency); Dami v. IRS,
89 AFTR 2d 2002-1368, 2002-1 USTC par. 50,433 (W.D. Pa. 2002)
(taxpayer who received a “Recovery Letter” with respect to a
trust fund recovery penalty was barred from challenging the
underlying tax liability in his collection proceeding); Konkel v.
Commissioner, 86 AFTR 2d 2000-6939, 2001-2 USTC par. 50,520 (M.D.
Fla. 2000) (similar to Dami v. IRS, supra). Close analysis of
petitioners’ statutory interpretation exposes its error and
confirms the essential soundness of this line of judicial
precedents.
In the first instance, we are unpersuaded that petitioners
received no “notice of deficiency” within the meaning of section
6330(c)(2)(B). For present purposes, the notices of transferee
liability that petitioners received were the equivalents of
notices of deficiency.7
7
Sec. 6901(a) provides that transferee liability for the
transferor’s income taxes must be “assessed, paid, and collected
in the same manner and subject to the same provisions and
limitations” as the transferor’s tax liability. Consequently, to
(continued...)
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But even if we were to assume, arguendo, that petitioners’
notices of transferee liability were not notices of deficiency
within the meaning of section 6330(c)(2)(B), we still must reject
their strained and illogical argument that the statute sets forth
two alternative criteria authorizing challenges to underlying tax
liability in collection proceedings. Section 6330(c)(2)(B)
plainly sets forth a single operative criterion, in the form of a
stricture: the person seeking to challenge the underlying tax
liability in a collection proceeding must not have had another
opportunity to raise the challenge. Presumably for the sake of
clarity and emphasis, the statute refers particularly to persons
who have not received notices of deficiency while referring more
generally to persons who “otherwise” lacked opportunities to
dispute their tax liabilities. Contrary to petitioners’
argument, however, these references do not denote separate
criteria; they merely circumscribe the two categories of persons
7
(...continued)
proceed against a transferee to assess and collect under sec.
6901 the transferor’s income tax deficiency, the Commissioner
must use the same deficiency procedures that would apply in
assessing and collecting the deficiency from the transferor.
Those deficiency procedures include mailing a notice of
deficiency as required by sec. 6212. See Dillman v.
Commissioner, 64 T.C. 797, 800 (1975). Sec. 6901(f) explicitly
equates the mailing of the requisite notice of transferee
liability with the mailing of a notice of deficiency, by
referring to the “mailing to the transferee * * * of the notice
provided for in section 6212”.
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that, taken together, make up the complete class of persons who
satisfy the single operative criterion.
Moreover, petitioners’ argument founders again in failing to
appreciate that what it mischaracterizes as separate criteria are
expressed as negations (i.e., persons who did not receive
deficiency notices or persons who did not otherwise have an
opportunity to dispute the tax liability). Rather than
signifying alternative circumstances in which a person will be
qualified to challenge the underlying tax liability (as
petitioners contend), these negations denote, in essence,
circumstances in which a person may be disqualified from doing
so.8
In sum, the sense of section 6330(c)(2)(B) is that a person
may challenge the tax liability in a collection proceeding if
that person lacked another opportunity to raise the challenge, by
8
The flaws in petitioners’ logic might be made more evident
with a homely example: a child is told that she may have dessert
if she did not eat a cookie on the schoolbus or did not otherwise
have sweets after school. This ingenious child--petitioners’
figurative progeny--confesses that she ate sweets all afternoon
but argues that she is still entitled to dessert because she ate
no cookie on the bus. Result: no dessert.
If the child is not only ingenious but persistent as well,
she might protest that this result effectively transforms
disjunctive criteria (not eat a cookie or not otherwise have
sweets) into conjunctive criteria (not eat a cookie and not
otherwise have sweets). She might be answered that there never
were two criteria to be either disjoined or conjoined, but only
the one operative criterion that she not eat sweets after school,
the business about the cookie being a prime example of the
stricture.
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virtue of not having received a notice of deficiency or
otherwise. Because petitioners had (and availed themselves of)
previous opportunities to dispute their underlying transferee tax
liabilities, section 6330(c)(2)(B) bars them from challenging
those liabilities in this collection proceeding.
In conclusion, principles of res judicata apply here and
operate, along with section 6330(c)(2)(B), to prevent petitioners
from challenging in this collection proceeding the existence and
amount of their transferee tax liabilities.9
C. Petitioners’ Offers in Compromise
In their various offers in compromise on the basis of doubt
as to liability, each petitioner proposed to pay $50 in
satisfaction of the unpaid balance of assessments of transferee
liability. Respondent rejected these offers in compromise on
grounds that the transferee liabilities had been determined in
the transferee liability cases and that petitioners were not in
compliance with income tax filing requirements. We review
respondent’s action for abuse of discretion, on the basis of the
arguments and information available to the Appeals officer when
the discretion was exercised. See Sego v. Commissioner, 114 T.C.
at 610.
9
Respondent has not raised and we do not reach any issue as
to whether petitioners are also precluded from challenging their
underlying tax liabilities by sec. 6330(c)(4).
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Given that each petitioner had previously entered into a
stipulated decision agreeing to transferee liability of $58,008
plus interest (an amount that by May 11, 2001, had grown to
$89,079.25), we do not believe the Appeals officer abused his
discretion in rejecting each petitioner’s offer to compromise
that transferee liability for $50. Regulations promulgated under
section 7122(c) provide that the Secretary may compromise a
liability on various grounds, including doubt as to liability,
but state: “Doubt as to liability does not exist where the
liability has been established by a final court decision or
judgment concerning the existence or amount of the liability.”
Sec. 301.7122-1T(b)(2), Temporary Proced. & Admin. Regs, 64 Fed.
Reg. 39020 (July 12, 1999). As previously discussed, the
stipulated decisions in petitioners’ transferee liability cases
constitute final decisions on the merits. See Baptiste v.
Commissioner, 29 F.3d at 436. Respondent’s decision to reject
petitioners’ offers in compromise based on doubt as to liability
was a reasonable exercise of discretion given that there was no
doubt as to petitioners’ liabilities, within the meaning of the
applicable regulations or otherwise.10
10
In light of this holding, we need not address
petitioners’ argument that respondent erred in determining that
they were noncompliant with income tax filing requirements.
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We have considered all contentions the parties have raised.
To the extent not addressed herein, these contentions are without
merit or unnecessary to reach.
On the record before us, we shall grant respondent’s
motions.
To reflect the foregoing,
Orders granting respondent’s
motions and appropriate decisions
will be entered.