T.C. Memo. 2011-149
UNITED STATES TAX COURT
RODNEY SANCHEZ, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 14551-09L. Filed June 28, 2011.
Rodney Sanchez, pro se.
Brooke Laurie, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
MARVEL, Judge: Petitioner seeks review of respondent’s
determination to sustain the filing of a notice of Federal tax
lien (NFTL) with respect to unpaid Federal income tax liabilities
- 2 -
for 2003 and 2004 pursuant to sections 6320 and 6330(c), (d), and
(e).1 We must decide whether to sustain the determination.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulations of fact and facts drawn from stipulated exhibits
are incorporated herein by reference. At the time the petition
was filed, petitioner resided in Texas.
Petitioner timely filed joint Forms 1040, U.S. Individual
Income Tax Return, for 2003 and 2004 with his then wife, Analisa
Sanchez (Ms. Sanchez). When petitioner and Ms. Sanchez filed the
returns, they did not fully pay the balances due shown on the
returns. However, they subsequently paid them.
Respondent examined the 2003 and 2004 returns. By notice of
deficiency dated April 23, 2007, respondent determined an income
tax deficiency and a section 6662 accuracy-related penalty for
each year. Separate copies of the notice of deficiency were sent
to petitioner and Ms. Sanchez at their last known address. Ms.
Sanchez, who was residing at the last known address when the
notice of deficiency was mailed, received her copy. Petitioner,
who had moved to a different residence, did not receive his copy;
his undelivered copy was returned to respondent. Neither
petitioner nor Ms. Sanchez petitioned this Court regarding the
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code as amended.
- 3 -
notice of deficiency. After the period for petitioning this
Court expired, respondent assessed the deficiencies, penalties,
and interest for 2003 and 2004.
On May 14, 2008, respondent sent Letter 1058, Final Notice
of Intent to Levy and Notice of Your Right to a Hearing (levy
notice), to petitioner by certified mail. Petitioner signed the
post office receipt confirming that he received the levy notice
on May 20, 2008. On May 22, 2008, respondent sent Letter 3172,
Notice of Federal Tax Lien Filing and Your Right to a Hearing
Under IRC 6320 (lien notice), to petitioner by certified mail.
On July 7, 2008, respondent received petitioner’s request for a
collection due process hearing or equivalent hearing (hearing
request). The envelope was postmarked June 30, 2008. The
hearing request was timely as to the lien notice but was not
timely as to the levy notice. Consequently, petitioner was
entitled to receive, and received, a section 6320/6330 hearing
with respect to the lien notice. Petitioner received an
equivalent hearing with respect to the levy notice.
Petitioner’s case was initially assigned to Settlement
Officer Shirley J. Rivers (SO Rivers) but was transferred to
Settlement Officer Bart A. Hill (SO Hill) after petitioner raised
an issue regarding the underlying liabilities. On April 8, 2009,
SO Hill held a telephone hearing with petitioner that covered
both the lien notice and the levy notice. SO Hill and petitioner
- 4 -
also communicated during the hearing process through
correspondence. During the hearing process SO Hill requested the
following documentation from petitioner: (1) A completed Form
433-A, Collection Information Statement for Wage Earners and
Self-Employed Individuals; (2) signed income tax returns for 2006
and 2007; (3) proof of estimated tax payments for 2008 and a
draft of petitioner’s 2008 return; and (4) documentation to
support petitioner’s challenges to the underlying liabilities.
Petitioner did not produce any of this documentation.2
On May 7, 2009, respondent issued a notice of determination
that sustained the filing of the NFTL and confirmed that the
requirements of sections 6320 and 6330(c) and (d) had been
satisfied. Petitioner filed a timely joint petition contesting
the determination, which contained his signature and the
purported signature of Ms. Sanchez. However, because Ms. Sanchez
2
Petitioner declined to stipulate the complete
administrative record, but he made no argument that the
administrative record respondent identified was incomplete or
otherwise inaccurate. Respondent offered Exhibits 32 and 33,
consisting of declarations of SO Rivers and SO Hill with exhibits
attached, in order to introduce the complete administrative
record considered by the Appeals Office in making its
determination. Petitioner objected to the admission of the
exhibits, and we reserved ruling at trial. We now overrule
petitioner’s objections and admit the exhibits, which were
properly authenticated and which we admit for the purpose of
providing us with the complete administrative record and not for
the truth of the matters asserted therein. See Hoyle v.
Commissioner, 136 T.C. ___, ___ (2011) (slip op. at 17-18).
- 5 -
did not sign or ratify the petition,3 we granted respondent’s
motion to dismiss for lack of jurisdiction as to Ms. Sanchez. We
also granted respondent’s motion to dismiss petitioner’s case
insofar as it relates to the equivalent hearing held with respect
to the levy notice.
We subsequently held a trial at which petitioner testified.
Petitioner, a high school graduate, operated a sole
proprietorship, On the Level Foundation Repair, during 2003 and
2004. When respondent issued the notice of deficiency,
petitioner was going through an acrimonious divorce and did not
reside in the marital home at 5410 Wooldridge Road, Corpus
Christi, Texas, the address respondent used in issuing the notice
of deficiency. Respondent concedes that petitioner did not
receive the notice of deficiency for 2003 and 2004 and that
petitioner was entitled to contest the underlying liabilities for
2003 and 2004 during the section 6320/6330 hearing process.
However, petitioner failed to present any information during the
section 6320/6330 hearing or at trial to prove that the
3
Ms. Sanchez spoke with respondent’s counsel and confirmed
she did not sign the petition.
- 6 -
underlying liabilities were incorrect4 or that the notice of
determination was erroneous.
OPINION
I. Collection Hearing Procedure
Section 6321 imposes a lien on all property and property
rights of a taxpayer liable for taxes where a demand for the
payment of the taxes has been made and the taxpayer fails to pay
those taxes. Section 6320(a) requires the Secretary to send
written notice to the taxpayer of the filing of a notice of lien
and of the taxpayer’s right to an administrative hearing on the
matter. Section 6320(b) affords the taxpayer the right to a fair
hearing before an impartial hearing officer. Section 6320(c)
requires that the administrative hearing be conducted pursuant to
section 6330(c), (d) (other than paragraph (2)(B) thereof), and
(e). At the hearing, a taxpayer may raise any relevant issue,
including appropriate spousal defenses, challenges to the
4
The 2003 and 2004 income tax deficiencies are primarily due
to the disallowance of deductions for some but not all of
petitioner’s expenses reported on Schedule C, Profit or Loss From
Business. Although petitioner contends that the resulting
liabilities are too high, we have no evidence on which to base
such a finding. We encourage petitioner to pursue audit
reconsideration of the 2003 and 2004 liabilities and to produce
substantiation for his disallowed Schedule C deductions at that
time. We encourage respondent to work with petitioner if he
requests audit reconsideration and provides the necessary
documents and information to support his contention that the 2003
and 2004 tax liabilities are excessive. We remind petitioner of
what we told him at trial--his tax problems will only get worse
if he ignores them and continues his pattern of noncompliance.
- 7 -
appropriateness of the collection action, and collection
alternatives. Sec. 6330(c)(2)(A). A taxpayer is precluded,
however, from contesting the existence or amount of the
underlying tax liability unless the taxpayer did not receive a
notice of deficiency for the tax liability in question or did not
otherwise have an opportunity to dispute the tax liability. Sec.
6330(c)(2)(B); see also Sego v. Commissioner, 114 T.C. 604, 609
(2000).
Following a hearing, the Appeals Office is required to issue
a notice of determination regarding the validity of the filed
Federal tax lien. In making a determination, the Appeals Office
is required to take into consideration: (1) The verification
presented by the Secretary that the requirements of any
applicable law and administrative procedure have been met, (2)
the relevant issues raised by the taxpayer, and (3) whether the
proposed collection action appropriately balances the need for
efficient collection of taxes with the taxpayer’s concerns
regarding the intrusiveness of the proposed collection action.
Sec. 6330(c)(3). If the taxpayer disagrees with the Appeals
Office’s determination, the taxpayer may seek judicial review by
appealing to this Court. Sec. 6330(d). Where the underlying tax
liability is properly at issue, the Court reviews any
determination regarding the underlying tax liability de novo.
Sego v. Commissioner, supra at 610. The Court reviews all other
- 8 -
determinations of the Appeals Office for abuse of discretion.
Lunsford v. Commissioner, 117 T.C. 183, 185 (2001); Sego v.
Commissioner, supra at 610; Goza v. Commissioner, 114 T.C. 176,
182 (2000). The Appeals Office abuses its discretion if its
determination is made “arbitrarily, capriciously, or without
sound basis in fact.” Mailman v. Commissioner, 91 T.C. 1079,
1084 (1988).
II. Validity of Notice of Federal Tax Lien
Petitioner made a vague argument at trial that respondent
failed to properly assess the underlying tax liabilities for 2003
and 2004 on the basis that he did not receive the notice of
deficiency. Petitioner also argued that he did not receive a
notice of assessed tax that was signed and properly labeled.
However, petitioner’s principal argument is that he has not been
given a fair chance to resolve this tax case because he did not
receive the notice of deficiency or a notice of tax due. He also
maintains that he has been burdened by personal and business
problems, that he simply has not had the time or the money to
deal with his tax problems, and that the assessed tax
deficiencies are erroneous and excessive.
We have reviewed the record and can identify no procedural
or substantive defect that would justify a decision refusing to
- 9 -
uphold the filing of the NFTL.5 Respondent’s Appeals Office
verified that the requirements of any applicable law or
administrative procedure have been met as required by section
6330(c)(1); it considered the issues petitioner raised during the
administrative hearing as required by section 6330(c)(2),
including petitioner’s challenge to the underlying liabilities
for 2003 and 2004; and it appropriately balanced the need for
efficient tax collection with petitioner’s legitimate concern
that any collection action be no more intrusive than necessary as
required by section 6330(c)(3)(C). Petitioner did not offer any
evidence during the administrative hearing or at trial to prove
that the underlying liabilities were too high, nor did he submit
the documentation regarding his financial condition and his tax
compliance that the Appeals Office reasonably requested during
the administrative hearing process. Respondent did not abuse his
discretion in determining that the NFTL was properly filed, and
we sustain that determination.6
5
Petitioner does not dispute that respondent mailed a notice
of deficiency with respect to 2003 and 2004 to him and to Ms.
Sanchez at their last known address as required by sec. 6212(a)
and (b). Petitioner contends only that he did not receive the
notice of deficiency.
6
Because petitioner did not timely request a sec. 6330
hearing with respect to the levy notice, we do not consider
respondent’s action with respect to the levy notice as we have no
jurisdiction to do so.
- 10 -
We are sympathetic to petitioner, who seemed genuinely
overwhelmed at trial by his tax and other problems. We reiterate
that petitioner must become current in his tax filings and
estimated tax payments so that his tax problems do not worsen.
We encourage petitioner to request audit reconsideration of the
2003 and 2004 liabilities but only if he is prepared to provide
respondent with substantiation of his business expenses for those
years. If petitioner is able to find a buyer for one or more of
the properties he owns,7 we also encourage him to work with
respondent to obtain a release or subrogation of the lien in
appropriate circumstances.
We have considered all issues raised by the parties and, to
the extent they are not discussed herein, we conclude that they
are without merit or are unnecessary to reach.
To reflect the foregoing,
Decision will be entered
for respondent.
7
Petitioner stated at trial that he owns a commercial
building and his home but that the lien was impairing his ability
to sell the properties for a fair price.