T.C. Summary Opinion 2006-83
UNITED STATES TAX COURT
RUSSEL S. BANKSON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 22863-04S. Filed May 22, 2006.
Russel S. Bankson, pro se.
Catherine G. Chang, for respondent.
PANUTHOS, Chief Special Trial Judge: This case was heard
pursuant to the provisions of sections 6330(d) and 7463 of the
Internal Revenue Code in effect when the petition was filed. The
decision to be entered is not reviewable by any other court, and
this opinion should not be cited as authority. Unless otherwise
indicated, all subsequent section references are to the Internal
Revenue Code in effect at relevant times.
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This proceeding arises from a petition for judicial review
filed in response to a Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330 (notice of
determination) sent to petitioner on November 4, 2004. The issue
for decision is whether respondent abused his discretion in
sustaining a notice of Federal tax lien filed against petitioner.
Background
Some of the facts have been stipulated, and they are so
found. The record consists of the stipulation of facts and
supplemental stipulation of facts with attached exhibits,
additional exhibits introduced at trial, and the testimony of
petitioner. At the time of filing the petition, petitioner
resided in Emeryville, California.
Petitioner filed Federal income tax returns for the taxable
years 2000 and 2001 but did not pay the taxes reported thereon.
Respondent assessed the taxes shown on the returns, as well as
related penalties and interest, and filed a notice of Federal tax
lien against petitioner on May 29, 2003, in the total amount of
$13,220.86. Respondent sent petitioner a Notice of Federal Tax
Lien Filing and Your Right to a Hearing Under IRC 6320 on June 3,
2003.
Petitioner timely submitted a Form 12153, Request for a
Collection Due Process Hearing. Petitioner also submitted an
offer-in-compromise (OIC), in which he offered to pay $3,800 to
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compromise his tax liabilities for the taxable years 2000 and
2001.1 The OIC was based on doubt as to collectibility.
Included with the OIC was a Form 433-A, Collection Information
Statement for Wage Earners and Self-Employed Individuals. The
Form 433-A states that petitioner is unemployed, earns no income,
and has monthly expenses of $745. Also included with the OIC was
a letter from Heidi Bernd (Ms. Bernd). The letter is dated June
6, 2003, and states: “I hereby confirm that Russel S. Bankson * *
* has resided in my household since 9/01/01 and does not pay
contractual rent. He does, however, contribute to household
expenses as his available income allows.”
Petitioner’s OIC was assigned to an Appeals officer, who
held an administrative hearing with petitioner by correspondence.
In April 2004, the Appeals officer sent petitioner a letter
requesting, inter alia, information about his employment history
and expenses, as well as “verification of income” for Ms. Bernd.
Petitioner’s reply letter reiterates that he is unemployed. It
also explains that petitioner performs various personal services
for Ms. Bernd, such as chauffeuring and shopping, in exchange for
living with her. The letter includes copies of petitioner’s
credit card statements for certain months in 2003, but does not
include verification of Ms. Bernd’s income.
1
Petitioner’s OIC also included the taxable years 1999 and
2002. Those taxable years are not before the Court.
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Petitioner and the Appeals officer exchanged additional
correspondence. At some point during that time, respondent
learned that petitioner was president of an active California
corporation (the corporation). This information is not listed in
the OIC or in petitioner’s letters to the Appeals officer.
Respondent sent petitioner a letter in August 2004 again
requesting his employment history, as well as “Financial and
other records with respect to any related corporations in which
you were an officer or shareholder.”
Petitioner claims he did not receive respondent’s August
2004 letter. He acknowledges, however, that he did not provide
respondent with certain financial information, including
information about the corporation, verification of Ms. Bernd’s
income, and a breakdown of the respective contributions toward
living expenses that he and Ms. Bernd made. He also concedes his
OIC does not list any constructive income in the form of reduced
rent that he received from Ms. Bernd in exchange for performing
services for her.
In November 2004, respondent issued petitioner a notice of
determination sustaining the filing of the notice of Federal tax
lien. The notice of determination states: (1) Petitioner failed
to provide adequate financial information, and (2) petitioner has
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the ability to pay his tax liabilities in full.2 The notice of
determination does not include an estimate of petitioner’s assets
and liabilities. However, the record contains an undated
document titled “Appeals Case Memorandum” (the Appeals
memorandum). This document states that petitioner “has a credit
line of $4,200” and “retirement funds of more than $2,300. These
two assets total $6,500 (which is more than the amount
[petitioner] offered).” Neither the notice of determination nor
the Appeals memorandum includes an estimate of petitioner’s
future income.
Discussion
Section 6321 imposes a lien in favor of the United States on
all property and rights to property of a person when a demand for
the payment of the person’s liability for taxes has been made and
the person fails to pay those taxes. Such a lien arises when an
assessment is made. Sec. 6322. Section 6323(a) requires the
Secretary to file a notice of Federal tax lien if the lien is to
be valid against any purchaser, holder of a security interest,
mechanic’s lienor, or judgment lien creditor. Lindsay v.
Commissioner, T.C. Memo. 2001-285, affd. 56 Fed. Appx. 800 (9th
Cir. 2003).
2
The notice of determination includes other grounds in
support of respondent’s position. Based on our resolution of
issue for decision infra, we do not address these additional
grounds.
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Section 6320 provides that a taxpayer shall be notified in
writing by the Secretary of the filing of a notice of Federal tax
lien and provided with an opportunity for an administrative
hearing. An administrative hearing under section 6320 is
conducted in accordance with the procedural requirements of
section 6330. Sec. 6320(c). At the administrative hearing, a
taxpayer is entitled to raise any relevant issue relating to the
unpaid tax, including a spousal defense or collection
alternatives such as an offer-in-compromise or an installment
agreement. Sec. 6330(b) and (c)(2); sec. 301.6320-1(e)(1),
Proced. & Admin. Regs. A taxpayer also may challenge the
existence or amount of the underlying tax liability, including a
liability reported on the taxpayer’s original return, if the
taxpayer “did not receive any statutory notice of deficiency for
such tax liability or did not otherwise have an opportunity to
dispute such tax liability.” Sec. 6330(c)(2)(B); see also Urbano
v. Commissioner, 122 T.C. 384, 389-390 (2004); Montgomery v.
Commissioner, 122 T.C. 1, 9-10 (2004).
At the conclusion of the hearing, the Appeals officer must
determine whether and how to proceed with collection, taking into
account, among other things, collection alternatives proposed by
the taxpayer and whether any proposed collection action balances
the need for the efficient collection of taxes with the
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legitimate concern of the taxpayer that the collection action be
no more intrusive than necessary. See sec. 6330(c)(3).
Section 6330(d) provides for judicial review of the
administrative determination in the Tax Court or a Federal
District Court, as may be appropriate. Where the validity of the
underlying tax liability is properly at issue, the Court will
review the matter de novo. Where the validity of the underlying
tax liability is not properly at issue, however, the Court will
review the Commissioner’s administrative determination for abuse
of discretion. Goza v. Commissioner, 114 T.C. 176, 181-182
(2000).
Here, petitioner does not seek to challenge his underlying
tax liabilities. He disputes only the rejection of his OIC. We
therefore review respondent’s determination for abuse of
discretion. See Lunsford v. Commissioner, 117 T.C. 183, 185
(2001).
Petitioner makes two main arguments. First, although he
acknowledges refusing to provide respondent with certain
financial information, petitioner claims that such information
was irrelevant to his OIC. Second, petitioner disputes the
determination that he was able to pay his tax liabilities in
full. In particular, petitioner challenges the statement in the
Appeals memorandum that his $4,200 line of credit constitutes an
asset available for collection.
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Section 7122(a) authorizes the Secretary to compromise any
civil case arising under the internal revenue laws. Grounds for
compromise include doubt as to collectibility, which “exists in
any case where the taxpayer’s assets and income are less than the
full amount of the liability.” Sec. 301.7122-1(b)(2), Proced. &
Admin. Regs. Evaluation of an OIC based on doubt as to
collectibility requires complete financial information from the
taxpayer. See Roman v. Commissioner, T.C. Memo. 2004-20. Where
the taxpayer refuses to provide such information, the
Commissioner’s rejection of an OIC does not constitute abuse of
discretion. See id.; Willis v. Commissioner, T.C. Memo.
2003-302; see also sec. 301.7122-1(d)(2), Proced. & Admin. Regs.
Petitioner failed to provide complete financial information
to respondent. For example, petitioner did not mention his role
as president of the corporation in his OIC and failed to supply
information on this subject when requested to do so.3 Petitioner
contends he did not have to provide such information because he
has no ownership interest in the corporation. Even if this is
true, however, respondent was entitled to request information to
3
As mentioned supra, petitioner contends he did not receive
respondent’s August 2004 letter, which requests information about
any corporation in which petitioner was an officer or
shareholder. Even if this is true, however, both the Form 433-A,
Collection Information Statement for Wage Earners and Self-
Employed Individuals, and respondent’s April 2004 letter request
employment information. Petitioner nevertheless failed to
provide information about the corporation.
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verify this assertion and to determine whether petitioner earned
income from the corporation.
Respondent also was entitled to request information
concerning petitioner’s living arrangements. Petitioner
testified that he refused to provide income information for Ms.
Bernd because he did not wish to impose upon her. The Internal
Revenue Manual (IRM) provides, however, that where a taxpayer
shares living expenses with a person who is not liable for the
taxes owed, the offer investigator “should secure sufficient
information concerning the not liable person to determine the
taxpayer’s proportionate share of the total household income and
expenses.” IRM sec. 5.8.5.5.3(3) (May 15, 2004). This
information allows the investigator to “Determine which expenses
are shared and which expenses are the sole responsibility of the
taxpayer.” IRM sec. 5.8.5.5.3(3)a and d.4
Petitioner also failed to provide a breakdown of the amount
he paid toward his living expenses or to include in his OIC the
value of the constructive income he received from Ms. Bernd.
See, e.g., Langlois v. Commissioner, T.C. Memo. 1988-415 n.7
(income includes payment in kind for services rendered), affd.
4
We have held that reliance on IRM guidelines in evaluating
collection alternatives does not constitute an abuse of
discretion. See, e.g., Orum v. Commissioner, 123 T.C. 1, 13
(2004), affd. 412 F.3d 819 (7th Cir. 2005); Etkin v.
Commissioner, T.C. Memo. 2005-245; Castillo v. Commissioner, T.C.
Memo. 2004-238; Schulman v. Commissioner, T.C. Memo. 2002-129.
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without published opinion 886 F.2d 1316 (6th Cir. 1989).
Petitioner appears to argue that detailed income and expense
information was unnecessary because his expenses exceeded his
income; thus, even if he had constructive income, it was entirely
offset by the imputed rent he paid to Ms. Bernd. As noted supra,
however, respondent required complete financial data to evaluate
petitioner’s OIC. See Roman v. Commissioner, supra. Petitioner
cannot selectively withhold information because he believes it to
be irrelevant.
We conclude that petitioner failed to provide complete
financial information to respondent. Respondent’s rejection of
petitioner’s OIC therefore does not constitute abuse of
discretion. See id.; Willis v. Commissioner, supra. With
respect to respondent’s determination of petitioner’s ability to
pay, we share petitioner’s concern about the statement in the
Appeals memorandum that petitioner’s $4,200 line of credit
constitutes an asset. We can find no support in the IRM for this
position. Based on our resolution of the case, however, we do
not decide whether this determination is correct. In reaching
our holding, we have considered all arguments made, and, to the
extent not mentioned, we conclude that they are moot, irrelevant,
or without merit.
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Reviewed and adopted as the report of the Small Tax Case
Division.
To reflect the foregoing,
Decision will be entered
for respondent.