ROBERTS v. COMMISSIONER

T.C. Summary Opinion 2005-40

UNITED STATES TAX COURT

JOHN B. ROBERTS, JR., AND JEAN ROBERTS, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 3049-03S. Filed April 13, 2005.

John B. Roberts, Jr., and Jean Roberts, pro se.

Nancy E. Hooten, for respondent.

COUVILLION, Special Trial Judge: This case was heard

pursuant to section 7463 in effect when the petition was filed.1

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

and this opinion should not be cited as authority. Petitioners

seek a review under section 6330(d) of respondent’s decision to

1
Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code in effect for the years at
issue.
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proceed with collection of petitioners’ joint Federal income tax

liabilities for the 1988, 1992, 1993, and 1997 tax years.

Some of the facts were stipulated. Those facts, with the

annexed exhibits, are so found and are made part hereof.

Petitioners’ legal residence at the time the petition was filed

was Ranger, Georgia.

Petitioners previously lived and worked in Florida. Mr.

Roberts was a carpenter who worked generally as a handyman, and

Mrs. Roberts worked as a retail clerk.

Even though this case involved petitioners’ 1988, 1992,

1993, and 1997 tax years, petitioners had tax deficiencies for

several prior years. In 1990, petitioners filed a chapter 7

bankruptcy petition in which they listed total assets of $3,150

and liabilities of $1,896,695.60. The liabilities included

$14,533 in taxes owed to the United States; however, the tax

years for which the taxes were due were not indicated. The

record shows, however, that the deficiencies were from the

taxable years 1972, 1977, 1978, 1985, and 1986, but collection of

the deficiencies for the years 1972, 1977, and 1978 was barred

under the 10-year statute of limitations. The record is not

clear as to whether petitioners received a discharge in

bankruptcy; however, both parties stipulated that, sometime

during 1990, petitioners’ bankruptcy proceeding was “no longer

pending”.
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With respect to the years at issue in this case, petitioners

filed Federal income tax returns in which all or a portion of the

taxes shown on the returns was not paid. Petitioners were

assessed the taxes shown on their returns. No notice of

deficiency was ever issued to petitioners for any of the years

included in this petition, but petitioners are not challenging

the underlying deficiencies. Instead, petitioners claim that

their tax liabilities for the taxable years 1992, 1993, and 1997

have been fully satisfied by intermittent payments made

throughout 1996 and 1997 and the application of overpayment

credits from the years 1996 to 2000 and 2002. Petitioners also

contend that their tax liability for the taxable year 1988 was

fully satisfied during the 1990 bankruptcy through the collection

by respondent of a second mortgage held by petitioner husband.

Petitioners’ bankruptcy petition reflects the assignment of

the second mortgage to the IRS to satisfy tax deficiencies for

several preceding years, and petitioners claim the deficiencies

satisfied by the assignment included 1988. Petitioner husband

testified he intended all payments made throughout 1996 and 1997

to be applied against the 1992 deficiency because the 1988

deficiency was satisfied by the assignment; however, respondent

applied them to both the 1988 and the 1992 deficiencies.

Respondent does not dispute the receipt of periodic payments from

petitioners but contends that the mortgage satisfaction did not
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apply to the 1988 deficiency; therefore, the sole issue for

decision is whether the collection by respondent of the second

mortgage should have been applied to petitioners’ 1988 tax

liability.

On February 27, 2001, respondent notified petitioners of an

intent to levy with respect to petitioners’ unpaid tax

liabilities for 1988, 1992, 1993, and 1997. The notice listed

the following amounts due:

Year Amount

1988 $6,824.33
1992 548.28
1993 2,701.54
1997 2,178.67

Petitioners filed a timely Form 12153, Request for a

Collection Due Process Hearing. In their request, petitioners

stated their belief that the tax liabilities for the subject

years had been overpaid and “over the past nine years concerning

these matters” they had “never had a hearing concerning moneys

paid [the IRS] in excess of what I owed.” Petitioners thereafter

received a letter from an Appeals officer that included

transcripts of petitioners’ accounts showing assessments and

payments made. Petitioners were also asked to provide

documentation, such as canceled checks, to show payments not

applied to their accounts. Petitioners were also asked to

provide financial information regarding possible collection
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alternatives. Petitioners were thereafter accorded an Appeals

hearing by telephone. In that hearing, petitioners took the

position that the IRS had applied the proceeds of the mortgage

indebtedness identified in petitioners’ bankruptcy petition to

the 1988 deficiency, and that application, combined with the

periodic payments and applied overpayments, should have resulted

in an overpayment of petitioners’ tax liabilities for all the

years in question.

A notice of determination was issued to petitioners in

January 2003 concluding “the information provided does not

warrant the abatement of any part of the tax liabilities.” With

respect to the possibility of collection alternatives, the notice

of determination stated that such relief was not available

because petitioners had not filed an income tax return for the

year 2001, nor were petitioners “making any estimated payments”.

Petitioners filed a timely petition in this Court appealing the

Appeals Office determination.

The Court must decide whether petitioners are entitled to

any relief from the Appeals Office determination. Where the

underlying tax liability is properly at issue in the hearing, we

review that issue on a de novo basis. Goza v. Commissioner, 114

T.C. 176, 181-182 (2000). However, where the underlying tax

liability is not at issue, as in this case, this Court reviews

the determination to see whether there has been an abuse of

discretion. Sego v. Commissioner, 114 T.C. 604 (2000). An abuse
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of discretion by respondent is defined as any action that is

unreasonable, arbitrary or capricious, clearly unlawful, or

lacking sound basis in law, taking into account all the facts and

circumstances. See, e.g., Thor Power Tool Co. v. Commissioner,

439 U.S. 522, 532-533 (1979); Swanson v. Commissioner, 121 T.C.

111, 119 (2003).

During the telephone conference call with the Appeals

officer, petitioner husband did not dispute the underlying

deficiency but raised the misapplied payment issue. On January

5, 1990, shortly after receipt of Form 668, Notice of Federal Tax

Lien, petitioners had filed for bankruptcy. Petitioner husband

testified he and his wife filed for bankruptcy on the advice of

Revenue Agent Robert Spivey, whom they had been meeting in

connection with their liabilities. In their bankruptcy petition,

petitioners included the IRS as a creditor. As previously

stated, petitioners owed the IRS a total of $14,533 arising from

tax deficiencies for the taxable years 1972, 1977, 1978, 1985,

and 1986, but the IRS could collect only on the deficiencies from

1985 and 1986.

As noted earlier, in their bankruptcy proceeding,

petitioners listed a second mortgage held by them that had been

“attached” by the IRS. The mortgage had a value of $15,000, and,

upon the advice of Mr. Spivey, petitioners assigned the mortgage

to the IRS for collection. At one of their meetings, petitioner

husband testified Mr. Spivey assisted him in preparing his tax
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return and determined petitioners would owe the IRS additional

moneys.2 Mr. Spivey then advised petitioners that $10,000 was

realized from the collection of the mortgage held by petitioners

and that all of their tax liabilities, including those from 1988,

had been paid.

These contentions of petitioner husband are not reflected

in the transcripts of petitioners’ tax accounts with the IRS.

Although copies of the mortgage deed and the satisfaction of

mortgage document were admitted into evidence, no additional

evidence was admitted to substantiate petitioners’ contention

that proceeds from this mortgage were applied to the 1988

liability. Petitioners presented no additional documentation to

support this claim. Mr. Spivey was no longer employed by the

IRS, and petitioner husband claimed he was unable to locate him

for assistance at the hearing with the Appeals officer.

The appeals record shows petitioners called numerous times

inquiring about Mr. Spivey’s whereabouts and subsequently

requested that the Appeals officer locate and question him. The

Appeals officer declined to do so and informed petitioners that

locating Mr. Spivey and verifying former payments was

2
Petitioners do not allege the revenue officer prepared a
substitute return, just that he aided in petitioners’
preparation. Petitioners filed their 1988 joint income tax
return on Jan. 16, 1990, 11 days after filing for bankruptcy.
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petitioners’ responsibility.3 During the telephone conference,

petitioners requested a delay in discussions on a payment

schedule or any further collection alternatives until the issue

of misapplied payments was resolved and an exact balance

determined.

The Appeals officer later discovered petitioners did not

file their 2001 Federal income tax return, and she immediately

issued a notice of determination stating that petitioners did

“not qualify for collection alternatives such as Offer in

Compromise or Installment Agreement since you are not in

compliance due to your not filing your tax return for the year

2001 and not making any estimated payments.”

Although petitioners claim their 1988 tax liability should

have been satisfied in 1990, at the trial of this case, they did

not present conclusive evidence or testimony substantiating this

claim. Petitioners did not subpoena the mortgagee, John

Donnelly, with respect to collection of the mortgage by the IRS

and did not subpoena Revenue Officer Spivey to confirm the

veracity of their claim.

The Appeals officer could have easily investigated the

matter; however, this Court has previously held that, even if the

Appeals officer erred in failing to consider the accuracy of the

3
Sec. 6330 does not afford the taxpayer the right to have a
witness subpoenaed for the Appeals hearing. Therefore, the
Appeals officer had no duty to subpoena Mr. Spivey. Davis v.
Commissioner, 115 T.C. 35, 41-42 (2000).
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assessments, unless the taxpayer avers facts sufficient to prove

the error, the Appeals officer’s determination may still be

upheld. Poindexter v. Commissioner, 122 T.C. 280 (2004).

Additionally, the Form 4340, Certificate of Assessments,

Payments, and Other Specified Matters, which was attached to the

Certificate of Official Record and admitted into evidence, shows

no evidence of payments that would support petitioners’ claim.

This Court and other courts have held numerous times that a Form

4340 “provides at least presumptive evidence that a tax has been

validly assessed under section 6203”. Davis v. Commissioner, 115

T.C. 35, 40 (2000); see also Roberts v. Commissioner, 329 F.3d

1224 (11 Cir. 2003), affg. 118 T.C. 365 (2002). Therefore, it is

not an abuse of discretion for Appeals to rely on a Form 4340 in

this case for the purpose of complying with section 6330(c)(1).

Davis v. Commissioner, supra at 41.

Petitioners received an appropriate hearing for purposes of

section 6330(b)(1). Day v. Commissioner, T.C. Memo. 2004-30;

Leineweber v. Commissioner, T.C. Memo. 2004-17; sec. 301.6330-

1(d)(2), Q&A-D6, Proced. & Admin. Regs. Respondent properly

verified that the requirements of applicable law and

administrative procedures were met and balanced the need for

efficient collection of taxes with the legitimate concern of

petitioners that the collection action be no more intrusive than

necessary. On this record, the Court holds that there was no
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abuse of discretion in sustaining the notice of intent to levy.

Respondent, therefore, is sustained.

Reviewed and adopted as the report of the Small Tax Case

Division.

Decision will be entered

for respondent.