T.C. Memo. 2007-161
UNITED STATES TAX COURT
LARRY BRUCE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 24303-05L. Filed June 21, 2007.
Respondent filed a Notice of Federal Tax Lien against
P for the unpaid balance of his Federal income taxes for
2003. After notice to P and a hearing, R’s settlement
officer issued a notice of determination upholding the
proposed collection action. R moved for summary judgment on
all issues.
Held: R’s motion for summary judgment will be granted.
R may proceed with collection by lien.
E. Kenneth Wall, for petitioner.
Jeffrey E. Gold, for respondent.
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MEMORANDUM OPINION
NIMS, Judge: Petitioner asks this Court to review a Notice
of Determination Concerning Collection Action(s) Under Section
6320 and/or 6330 (notice of determination). This case is before
the Court on respondent’s motion for summary judgment pursuant to
Rule 121.
Rule 121(a) provides that either party may move for summary
judgment upon all or any part of the legal issues in controversy.
Full or partial summary judgment may be granted only if it is
demonstrated that no genuine issue exists as to any material
fact, and a decision may be entered as a matter of law. Rule
121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520
(1992), affd. 17 F.3d 965 (7th Cir. 1994).
We conclude that there is no genuine issue as to any
material fact and that a decision may be rendered as a matter of
law.
Unless otherwise indicated, all section references are to
sections of the Internal Revenue Code in effect for the tax year
at issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
Background
At the time he filed the petition in this case, petitioner
resided in Lumberton, North Carolina.
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Petitioner is a long-haul trucker who spends a great deal of
time on the road. In 2003, he won more than $1 million dollars
from a slot machine in New Jersey. Petitioner timely filed an
income tax return and reported the winnings, calculating income
tax due of $326,772 offset by withholding of $2,188, but paid
nothing beyond the withheld amount. Respondent assessed the
reported tax plus additions to tax and interest on May 31, 2004.
Respondent’s revenue officer attempted negotiations to
secure payment of the assessed balance to no avail. During a
meeting with the revenue officer on May 10, 2005, petitioner
filled out a Form 433-A, Collection Information Statement for
Wage Earners and Self-Employed Individuals, but did not provide
any supporting documentation. Ignoring requests and suggestions
by respondent’s revenue officer, petitioner took no steps toward
payment of his tax obligation.
Respondent sent to petitioner a Final Notice - Notice of
Intent to Levy and Notice of Your Right to a Hearing on May 10,
2005. Respondent filed a Notice of Federal Tax Lien on, or
around, May 12, 2005, and sent petitioner a Notice of Federal Tax
Lien Filing and Your Right to a Hearing Under IRC 6320 on May 19,
2005. Petitioner mailed requests for Appeals hearings on June
10, 2005. The mailing was timely with respect to the lien
notice, but not with respect to the levy notice. Attachments to
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the hearing requests, prepared by petitioner’s representative,
stated that petitioner was working on an offer-in-compromise
(OIC) to resolve his tax liability.
By letter dated October 11, 2005, respondent’s settlement
officer informed petitioner that his request for a hearing was
timely and scheduled a telephone conference for November 1, 2005.
In response to petitioner’s mention of an OIC in the hearing
request, the settlement officer also requested a completed Form
433-A, with required attachments, copies of petitioner’s 2004
Federal and State income tax returns, and a Form 656, Offer in
Compromise, with the required processing fee. The settlement
officer asked that this information be submitted within 14 days
to allow time for review before the telephone conference.
Petitioner never forwarded an OIC, the necessary financial
information, or any other documentation.
Neither petitioner, nor his representative, ever confirmed
the hearing or otherwise corresponded with the settlement officer
with respect to the scheduled hearing. Nevertheless, a telephone
conference in which petitioner’s representative participated was
conducted on November 1, 2005, as initially scheduled. On
December 2, 2005, the settlement officer issued a determination
sustaining the Federal tax lien filing.
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Petitioner filed the petition on December 27, 2005. In it,
petitioner stated that he was appealing the notice of
determination and wanted a redetermination of the additions to
tax. The only specifically listed errors, as required by Rule
331, were: (1) That petitioner was denied his right to a fair
hearing; (2) that the filing of the Notice of Federal Tax Lien
was erroneous; and (3) that the balance due on the Notice of
Federal Tax Lien was erroneous.
Discussion
Respondent moved for summary judgment on all issues pursuant
to Rule 121. Summary judgment is intended to expedite litigation
and avoid unnecessary trials. Fla. Peach Corp. v. Commissioner,
90 T.C. 678, 681 (1988). A motion for summary judgment may be
granted if there is no genuine issue as to any material fact and
a decision may be rendered as a matter of law. See Rule 121(b);
Electronic Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002).
The moving party bears the burden of showing 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. Bond v. Commissioner, 100 T.C. 32, 36 (1993);
Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985). The party
opposing summary judgment must set forth specific facts which
show that a genuine question of material fact exists and may not
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rely merely on allegations or denials in the pleadings. Grant
Creek Water Works, Ltd. v. Commissioner, 91 T.C. 322, 325 (1988);
Casanova Co. v. Commissioner, 87 T.C. 214, 217 (1986).
Section 6321 creates a lien in favor of the United States on
all property and rights to property belonging to a person liable
for taxes when payment has been demanded and neglected. The lien
arises by operation of law when the Internal Revenue Service
(IRS) assesses the amount of unpaid tax. Sec. 6322. The IRS
files a Notice of Federal Tax Lien to preserve priority and put
other creditors on notice. See sec. 6323.
Section 6320 provides that the Secretary shall furnish the
person described in section 6321 with written notice of the
filing of a lien under section 6323. This notice must be
provided not more than 5 business days after the day the notice
of lien is filed and must advise the taxpayer of the opportunity
for administrative review in the form of a hearing. Sec.
6320(a)(2). Sec. 6320 further provides that the taxpayer may
request a hearing within the 30-day period beginning on the day
after the 5-day period. The hearing generally shall be conducted
consistent with the procedures set forth in section 6330(c), (d),
and (e). Sec. 6320(c).
A taxpayer may raise any relevant issue at the hearing,
including challenges to “the appropriateness of collection
actions” and may make “offers of collection alternatives, which
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may include the posting of a bond, the substitution of other
assets, an installment agreement, or an offer-in-compromise.”
Sec. 6330(c)(2)(A). The Appeals officer must consider those
issues, verify that the requirements of applicable law and
administrative procedures have been met, and consider “whether
any proposed collection action balances the need for the
efficient collection of taxes with the legitimate concern of the
person [involved] that any collection action be no more intrusive
than necessary.” Sec. 6330(c)(3)(C).
After the Appeals hearing process, section 6330 gives this
Court jurisdiction to review the Appeals officer’s determination.
Where the underlying tax liability is properly at issue, we
review the Appeals determination with respect to the existence
and amount of tax liability de novo. Sego v. Commissioner, 114
T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181-182
(2000). When the underlying tax liability is not properly at
issue, we review the Appeals officer’s determination using an
abuse of discretion standard. Sego v. Commissioner, supra at
610; Goza v. Commissioner, supra at 181-182.
At the hearing, a taxpayer may challenge the existence and
amount of the underlying tax liability if he or she received no
notice of deficiency or did not otherwise have an opportunity to
dispute such tax liability. Sec. 6330(c)(2)(B). A self-reported
tax liability along with statutory penalties and interest
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constitute an “underlying tax liability” and may be the proper
subject of challenge at the hearing. See Montgomery v.
Commissioner, 122 T.C. 1, 8 (2004).
In the case before us, petitioner would have been entitled
to challenge his self-reported tax liability. However, it is
arguable whether petitioner raised the issue of his underlying
tax liability in his imprecise petition. In any event,
petitioner is precluded from challenging his underlying tax
liability in the instant proceeding because he did not challenge
it at the administrative hearing. Bourbeau v. Commissioner, T.C.
Memo. 2003-117; Tabak v. Commissioner, T.C. Memo. 2003-4; see
Miller v. Commissioner, 115 T.C. 582, 589 n.2 (2000), affd. 21
Fed. Appx. 160 (4th Cir. 2001); sec. 301.6320-1(f)(2), Q&A-F5,
Proced. & Admin. Regs.; see also sec. 6330(c) and (d).
Petitioner’s Form 12153, Request for a Collection Due
Process Hearing, indicated that the amount of the self-reported
tax liability was disputed; however, petitioner’s representative
stated at the hearing that no such challenge to the amount of
assessment existed. Accordingly, in this proceeding we do not
consider petitioner’s underlying tax liability. For this reason
we do not address petitioner’s argument regarding abatement of
the section 6651 failure to pay addition to tax based on
reasonable cause, which first surfaced in petitioner’s objection
to respondent’s motion for summary judgment.
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Since the underlying tax liability is not at issue, we
review the Appeals officer’s determination using the abuse of
discretion standard. Under this standard, a determination will
be affirmed unless action was taken that was arbitrary or
capricious, lacks sound basis in fact, or is not justifiable in
light of the facts and circumstances. Freije v. Commissioner,
125 T.C. 14, 23 (2005).
Petitioner broadly assigned error to a denial of his right
to a fair hearing. Based on the information before us and the
arguments in his opposition to summary judgment, we believe his
primary contention to be that the Appeals officer abused her
discretion by failing to recommend any collection alternatives in
lieu of the Federal tax lien. In his opposition to summary
judgment, petitioner presents a laundry list of collection
alternatives that he believes would have been appropriate.
However, the Appeals officer is only required to consider the
“offers of collection alternatives” raised and information
presented by the taxpayer. Chandler v. Commissioner, T.C. Memo.
2004-7. The only collection alternative even remotely pursued by
petitioner at the Appeals hearing was an offer-in-compromise.
However, petitioner’s attempt at securing an OIC was weak at
best. See discussion below. Therefore, it was not an abuse of
discretion for respondent’s settlement officer to decline to give
more consideration to the matter than she did.
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Petitioner’s representative indicated in an attachment to
the Form 12153, request for a hearing, dated June 10, 2005, that
petitioner was working on an OIC at the time. Even assuming
petitioner’s representative reiterated a desire to enter into an
OIC at the hearing, the settlement officer did not abuse her
discretion by sustaining the Notice of Federal Tax Lien filing.
Petitioner never actually submitted an OIC or any other
collection alternative at the telephone hearing on November 1,
2005, 5-1/2 months after the notice of lien and almost 5 months
after stating he was working on an OIC in his request for a
hearing. Petitioner’s representative indicated at the hearing
that petitioner was aware of the consequences of not cooperating
during the Appeals process. Petitioner did not submit a
reviewable OIC or any other current financial information before
the determination was made on December 2, 2005, 31 days after the
hearing.
The only information concerning petitioner’s ability to pay
was the Form 433-A, that had been in respondent’s file since
respondent’s revenue officer was attempting collection, almost
seven months before the determination. This form was poorly
filled out, incomplete, and did not have any supporting
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documentation attached. Further, the information was not current
and was grossly insufficient to permit reasonable consideration
of an OIC.
There is no abuse of discretion in failing to consider an
OIC, when no OIC has been made after a taxpayer has been given a
reasonable opportunity to submit one. Kendricks v. Commissioner,
124 T.C. 69, 79 (2005). Petitioner had adequate opportunity to
make an OIC but did not and, therefore, there were no less
intrusive means of collection for the Appeals officer to
consider. Consequently, the settlement officer considered each
item required by section 6330 and reached the determination that
the filing of the notice of lien was appropriate.
Furthermore, the information in the Form 433-A weighed
dramatically against the appropriateness of respondent’s
accepting an OIC. Petitioner listed $5,000 per month in income
with $2,725 per month in expenses. (Petitioner indicated that
these expenses were for himself and his girlfriend. While the
allowance of all of these expenses is questionable at the very
least, we include all of them for illustration.) Petitioner
valued his assets as: over $4,000 in a checking account, a house
worth $80,000, “nice furniture” worth $100,000, a Peterbilt
sleeper cab worth $100,000, a utility trailer worth $65,000, and
a pickup truck worth $53,000. Petitioner owned all of these
assets free and clear, with no encumbrances. The Form 433-A
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showed that petitioner had no other debt. Petitioner, who early
in the collections stage had more than $400,000 in net worth and
more than $2,000 per month in disposable income, was seeking
leniency for not paying taxes on his million dollar gambling
winnings. Under these facts and circumstances, it was not an
abuse of discretion for respondent’s settlement officer to
sustain the filing of the Notice of Federal Tax Lien.
We briefly address petitioner’s assignment of error that
respondent erroneously filed the Notice of Federal Tax Lien. No
facts in the petition indicate any basis for this assertion, but
petitioner’s opposition to summary judgment reveals his view that
respondent sent the notification letter late; i.e., beyond the 5-
business-day period as provided in section 6320, and therefore,
the lien is invalid. In support of his view, petitioner points
out that the Notice of Federal Tax Lien shows the date the
document was prepared and signed as May 11, 2005. According to
petitioner, since the notification of the lien filing was not
mailed to him until May 19, 2005, 6 business days later, the lien
is invalid, and it was an abuse of discretion for respondent to
sustain the lien filing.
We disagree that May 11, the date the lien notice was
prepared and signed, has any consequence in this case. The
notice of lien sent to petitioner, the statement of the Appeals
officer, and the Appeals Case Memorandum referral all say that
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the revenue officer filed the lien on May 12, 2005. Petitioner’s
transcript of account and certified Form 4340, Certificate of
Assessments, Payments, and Other Specified Matters, both show the
notice of lien as filed on May 13, 2005.
Regardless of which of the two aforementioned dates, May 12
or May 13, was the one on which the lien notice was actually
filed, respondent’s mailing of the notice to petitioner on May
19, does not give rise to an abuse of discretion. In cases where
notice to the taxpayer was at issue, we have said that proper
mailing and receipt were irrelevant when a hearing was timely
requested within the prescribed 30-day period that begins to run
on the day after the fifth business day following the filing of
the notice of lien. See Call v. Commissioner, T.C. Memo. 2005-
289, affd. 99 AFTR 2d 2007-2526, 2007-1 USTC par. 50,492 (9th
Cir. 2007); Stein v. Commissioner, T.C. Memo. 2004-124. In those
situations, we viewed the error in a notice as harmless and not
resulting in an abuse of discretion that would prevent us from
sustaining the lien. See Call v. Commissioner, supra; Stein v.
Commissioner, supra. The same logic applies to the facts of this
case. Respondent received petitioner’s hearing request on June
13, 2005, which falls well within the 30-day period described in
section 6320 whether the Notice of Federal Tax Lien was filed on
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May 11, 12, or 13. Thus, the date the lien notice was prepared
and signed has no significance and does not bear on whether there
was an abuse of discretion in this case.
Based upon the record before us, we have determined that
there is no genuine issue of material fact. We hold that the
settlement officer’s determination sustaining the Notice of
Federal Tax Lien filing was not an abuse of discretion. We
therefore shall grant respondent’s motion for summary judgment.
We have considered all of the parties’ contentions and
arguments that are not discussed herein, and we find them to be
without merit, irrelevant, and/or moot.
An appropriate order and
decision will be entered for
respondent.