ROBERTS v. COMMISSIONER

T.C. Summary Opinion 2005-31

UNITED STATES TAX COURT

THOMAS E. ROBERTS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 12473-03S. Filed March 24, 2005.

Thomas E. Roberts, pro se.

Catherine S. Tyson, for respondent.

CARLUZZO, Special Trial Judge: This section 6330(d) case

was heard pursuant to the provisions of section 7463.1 The

decision to be entered is not reviewable by any other court, and

this opinion should not be cited as authority.

1
Section references are to the Internal Revenue Code of
1986, as amended. Rule references are to the Tax Court Rules of
Practice and Procedure.
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Background

Some of the facts have been stipulated and are so found. At

the time the petition was filed, petitioner resided in Horseshoe

Bay, Texas.

In 1985, petitioner incorporated Tom Roberts Ford/Mercury,

Inc. (the corporation), which owned and operated a new car

dealership located in Madisonville, Texas. At all times

relevant, petitioner served as president of the corporation.

Shortly after its incorporation, the corporation was in need

of operating capital. As president of the corporation,

petitioner obtained a loan from First Madisonville National Bank

(First Madisonville) on behalf of the corporation. The note

evidencing the loan with First Madisonville was made in the name

of the corporation and was signed by corporate officers,

including petitioner as president of the corporation. The note

was for a fixed principal amount and various assets of the

corporation were pledged as security.

As president of the corporation, petitioner executed

additional loan notes with First Madisonville, including a

revolving credit loan. All of the proceeds from the loans

executed on behalf of the corporation went to the corporation.

Per bank policy, petitioner, as a “principal” of the corporation,

was a guarantor of the corporation’s loans.
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From time to time the corporate loans were renewed, which

renewals were evidenced by the execution of new notes. At first,

these renewal notes were signed on behalf of the corporation by

petitioner in his capacity as a corporate officer. With respect

to some renewal loans, petitioner pledged his personal assets as

security. At or about the same time, petitioner also executed

loan notes and renewal notes with First Madisonville in his

individual capacity.

On June 20, 1988, the corporation forfeited its corporate

charter. On September 23, 1988, the corporation filed a

bankruptcy petition in the Southern District of Texas, Houston

Division.

In or around 1990, First Madisonville requested that

petitioner sign a renewal loan note for the corporation’s prior

loans (the final renewal note). The final renewal note

(approximately $40,000, exclusive of accrued interest) is signed

by petitioner in his individual capacity, not in his capacity as

an officer of the corporation.

In 1997, petitioner was having significant financial

problems. In addition to the corporation, petitioner had a

financial interest in another automobile dealership that also

went out of business. According to petitioner, as of that time

“all of * * * [his] money was gone.”
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First Madisonville made unsuccessful attempts to collect on

the final renewal note. Efforts to foreclose on the security

were frustrated by another creditor with priority with respect to

the pledged assets. Consequently, the bank determined that it

would not be financially worthwhile to pursue legal action

against petitioner or the corporation.

In 1997, First Madisonville determined that the final

renewal note was uncollectible and issued to petitioner a Form

1099-C, Cancellation of Debt, which reported discharge of

indebtedness income of $51,792 for that year (the Form 1099-C

income).

Petitioner filed a 1997 Form 1040, U.S. Individual Income

Tax Return. Petitioner did not report the Form 1099-C income on

that return. In a notice of deficiency dated October 20, 1999,

respondent determined a deficiency in petitioner’s 1997 Federal

income tax. Among other adjustments made in the notice of

deficiency, respondent increased petitioner’s 1997 income by the

amount of the Form 1099-C income. Petitioner did not petition

this Court in response to that notice and the deficiency and

related amounts were assessed in due course.

On October 24, 2001, respondent mailed to petitioner a final

notice of intent to levy with respect to his outstanding 1997

Federal income tax liability.
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On November 1, 2001, petitioner submitted a Form 12153,

Request for a Collection Due Process Hearing, requesting a

hearing under section 6330 with respect to the 1997 taxable year.

On the form, petitioner stated, in part, that the Form 1099-C

income should be charged to the corporation and any tax liability

resulting from that income should be treated as the corporation’s

liability.

Following his request for an administrative hearing, in a

February 22, 2002, telephone conversation petitioner informed

respondent’s Appeals officer that he would provide additional

information with respect to the discharged debt.

On March 15, 2002, petitioner was contacted by an Appeals

officer. Petitioner informed the Appeals officer that he was

trying to obtain the supporting documentation with respect to the

discharged debt. On April 18, 2002, the Appeals officer again

spoke with petitioner and was told that petitioner had not been

able to obtain the necessary information from First Madisonville.

After receiving no information from petitioner, the Appeals

officer informed petitioner by letter that a hearing was

scheduled for May 27, 2002. Petitioner canceled the meeting and

rescheduled it for June 11, 2002. On June 10, 2002, petitioner

canceled the second scheduled hearing.
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On June 27, 2002, the Appeals officer held a telephone

hearing with petitioner. During the hearing, petitioner informed

the Appeals officer that he would submit an offer in compromise

based on doubt as to collectibility by August 1, 2002. On August

1, 2002, petitioner notified the Appeals officer that he would

need an additional 2 weeks to file the offer in compromise.

On August 27, 2002, the Appeals officer notified petitioner

by letter that he had an additional 2 weeks to submit an offer in

compromise.

On January 29, 2003, petitioner’s case was transferred to a

different Appeals officer. This Appeals officer determined that

there had been no action by petitioner with respect to his offer

in compromise.

On May 16, 2003, the Appeals officer notified petitioner

that he had until June 9, 2003, to submit his offer in

compromise. The Appeals officer provided petitioner with a Form

656, Offer in Compromise, and a Form 433-A, Collection

Information Statement for Wage Earners and Self-Employed

Individuals.

On June 11, 2003, petitioner submitted to the Appeals

officer a Form 656 based on doubt as to liability, and a Form

433-A. In the offer in compromise, petitioner stated that “This

tax was a result of a bank charging off a loan they made to a
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corporation.” Petitioner did not provide any additional or

supporting information with the offer in compromise.

On June 24, 2003, respondent requested additional

information from petitioner with respect to his claim in the

offer in compromise that the tax liability belonged to the

corporation. Petitioner did not provide any additional

information.

On July 24, 2003, respondent issued to petitioner a Notice

Of Determination Concerning Collection Action(s) Under Section

6320 and/or 6330. In the notice of determination, respondent

determined, in part, that: (1) All legal and procedural

requirements had been met; (2) petitioner’s offer in compromise

was properly rejected because petitioner did not provide any

additional information to support his position that the

discharged debt belonged to the corporation; and (3) the proposed

collection action was no more intrusive than necessary.

Discussion

Section 6330(a) provides that no levy may be made on any

property or right to property of any person unless the Secretary

has notified such person in writing of the right to a hearing

before the levy is made. If the taxpayer requests a hearing, a

hearing shall be held by the Internal Revenue Service Office of

Appeals. Sec. 6330(b)(1). At the hearing, a taxpayer may raise

any relevant issue, including appropriate spousal defenses;
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challenges to the appropriateness of the collection action; and

collection alternatives, such as an offer in compromise. Sec.

6330(c)(2)(A); Sego v. Commissioner, 114 T.C. 604, 609 (2000);

Goza v. Commissioner, 114 T.C. 176, 180 (2000). Additionally, at

the hearing, a taxpayer may contest the existence and amount of

the underlying tax liability if the taxpayer did not receive a

notice of deficiency for the tax in question or did not otherwise

have an opportunity to dispute the tax liability. Sec.

6330(c)(2)(B); Sego v. Commissioner, supra; Goza v. Commissioner,

supra at 182-183.

Following a hearing, the Appeals Office must make a

determination whether the proposed levy action may proceed. In

so doing, the Appeals Office is required to take into

consideration the verification presented by the Secretary, the

issues raised by the taxpayer, and whether the proposed levy

action appropriately balances the need for efficient collection

of taxes with the taxpayer’s concerns that any collection action

be no more intrusive than necessary. Sec. 6330(c)(3).

The taxpayer may petition the Tax Court or, depending upon

the nature of the underlying tax, a Federal District Court for

judicial review of the Appeals Office’s determination. Sec.

6330(d). If the taxpayer files a timely petition for judicial

review, the applicable standard of review depends on whether the

underlying tax liability is at issue. Where the underlying tax
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liability is properly at issue, the Court reviews any

determination regarding the underlying tax liability de novo.

Sego v. Commissioner, supra at 610; Goza v. Commissioner, supra

at 181-182. The Court reviews other administrative

determinations regarding the proposed levy action for abuse of

discretion. Sego v. Commissioner, supra.

Petitioner makes no claim that the Appeals officer failed to

obtain verification that the requirements of any applicable law

or administrative procedure have been met. See sec. 6330(c)(1).

Instead, petitioner’s challenge to respondent’s determination

raises issues almost exclusively related to the existence of his

1997 Federal income tax liability. See sec. 6330(c)(2)(B).2

Although a notice of deficiency was issued to petitioner for

1997, respondent concedes that petitioner did not receive that

notice. Consequently, respondent does not dispute petitioner’s

right to challenge the existence or the amount of his 1997

Federal income tax liability in this proceeding.

After careful consideration of the evidence presented in

this proceeding, we find that petitioner has failed to establish

2
Sec. 6330(c)(2)(B) 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 did not receive any statutory
notice of deficiency for such tax liability or did not
otherwise have an opportunity to dispute such tax
liability.
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that the discharge of indebtedness income belongs to the

corporation and not him. Specifically, petitioner failed to

prove that the discharge of indebtedness income resulted

exclusively from the cancellation of corporate indebtedness.

Furthermore, other than petitioner’s generalized statement that

“all of * * * [his] money was gone” at the time, there is no

evidence in the record that petitioner was insolvent. See sec.

108(a)(1)(B), (d)(3).3

Finally, we must consider whether it was an abuse of

discretion for the Appeals Office to reject petitioner’s offer in

compromise. Accordingly, we review whether respondent’s

determination regarding the offer in compromise was arbitrary,

capricious, or without sound basis in fact or law. Woodral v.

Commissioner, 112 T.C. 19, 23 (1999); Fowler v. Commissioner,

T.C. Memo. 2004-163.

Upon review of the record, it is clear that the Appeals

Office considered petitioner’s offer in compromise. Petitioner

was given several opportunities to provide additional information

and documentation to support his assertion that the discharged

debt properly belonged to the corporation. While petitioner

continually made assurances to the Appeals Office that such

3
While the record contains only outdated financial
information, to the extent any inference can be drawn with
respect to petitioner’s financial condition the financial
information does not suggest that petitioner was insolvent. For
example, on petitioner’s 1986 Federal tax return, he reported
total income of $840,466. Additionally, on petitioner’s
“Statement of Financial Condition” as of Jan. 13, 1988, his
“Assets in excess of Liabilities” were $5,478,025.
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information would be forthcoming, no such supporting

documentation was provided. Accordingly, the Appeals Office only

had petitioner’s self-serving statements to support his

contention.

We find that the Appeals Office considered petitioner’s

offer in compromise and, in light of his failure to provide

supporting documentation, respondent’s determination to reject

petitioner’s offer in compromise was not an abuse of discretion.

Therefore, respondent’s determination to proceed with collection

is therefore sustained.

Reviewed and adopted as the report of the Small Tax Case

Division.

To reflect the foregoing and respondent’s concession of an

adjustment made in the notice of deficiency dated October 20,

1999,

Decision will be entered

under Rule 155.