T.C. Summary Opinion 2016-38
UNITED STATES TAX COURT
ROBERT CARTER, JR. AND LOLA CARTER, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 21915-15S L. Filed August 8, 2016.
Robert Carter, Jr., and Lola Carter, pro se.
Ardney J. Boland, III, for respondent.
SUMMARY OPINION
THORNTON, Judge: This case was heard pursuant to the provisions of
section 7463 of the Internal Revenue Code in effect when the petition was filed.1
1
All section references are to the Internal Revenue Code in effect at all
relevant times. We round all monetary amounts to the nearest dollar.
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Pursuant to section 7463(b), the decision to be entered is not reviewable by any
other court, and this opinion shall not be treated as precedent for any other case.
In this collection due process (CDP) case petitioners seek review pursuant
to sections 6320(c) and 6330(d)(1) of the determination by the Internal Revenue
Service (IRS or respondent) to uphold a notice of Federal tax lien (NFTL) filing
relating to petitioners’ unpaid Federal income tax liability for 2010. The issues for
decision are whether petitioners are permitted to dispute their underlying liability
for 2010 and whether the IRS abused its discretion in sustaining the collection
action.
Background
The parties have stipulated some facts. We incorporate the stipulation of
facts and the accompanying exhibits by this reference. Petitioners resided in
Louisiana when they petitioned the Court.
Petitioners filed their Federal income tax return for 2010 late and reported
their tax liability as zero, claiming charitable contribution deductions, a deduction
for the business use of their home, and $473,309 in casualty or theft loss
deductions. The IRS selected petitioners’ return for examination. On July 24,
2013, the IRS mailed to petitioners’ last known address, which is the same address
listed on the petition, a notice of deficiency determining that petitioners were not
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entitled to deductions for charitable contributions, the business use of their home,
or eight separate casualty or theft losses. The notice of deficiency determined a
deficiency of $18,671 and a section 6662(a) accuracy-related penalty of $3,734.
Petitioners received the 2010 notice of deficiency but did not petition the Tax
Court for redetermination.
On June 2, 2014, the IRS assessed the tax, accuracy-related penalty, and
interest. In an effort to collect these assessed amounts, on December 9, 2014, the
IRS sent petitioners a Letter 3172, Notice of Federal Tax Lien Filing and Your
Right to a Hearing Under IRC 6320. Petitioners timely submitted a Form 12153,
Request for a Collection Due Process or Equivalent Hearing. In their request
petitioners did not seek a collection alternative. Rather, they argued that the
assessment for 2010 was incorrect.2
On April 9, 2015, the Office of Appeals (Appeals) mailed petitioners a letter
offering a face-to-face hearing and requesting any information or evidence that
petitioners planned on submitting for consideration. Appeals also assigned
petitioners’ case to a settlement officer (SO). On May 14, 2015, the SO mailed
2
In their request for a CDP hearing petitioners also raised arguments with
respect to their 2009 taxable year, stating that it should have been included in the
NFTL. It was not included in the NFTL; therefore, it was not properly at issue in
the CDP hearing. See sec. 301.6320-1(e)(1), Proced. & Admin. Regs.
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petitioners a letter scheduling a telephone CDP hearing for June 18, 2015. The
letter also requested documentation to support their dispute of the underlying
liability and to comply with the requirements for collection alternatives.
Petitioners were again offered a face-to-face hearing or a correspondence hearing.
The SO was unable to verify that petitioners had received the notice of
deficiency and determined that they could dispute their underlying liability. On
June 18, 2015, when the SO called petitioners for their scheduled CDP hearing,
they were unavailable; she left a message informing them that she would follow up
with a letter and providing her telephone number for a return call. There is no
indication that petitioners responded to her message. The SO mailed petitioners a
followup letter providing an additional 14 days to either contact her or submit any
supporting documentation regarding the disputed liability. Petitioners neither
responded to the SO nor submitted any documentation in response to her letter.
After the additional 14 days, the SO waited another four weeks for a
response. But having requested on multiple occasions and through multiple
mediums of communication documentation supporting petitioners’ dispute of their
underlying liability and having received no substantive response3--much less any
3
The only document petitioners provided was a copy of a fax addressed to a
case advocate at the Taxpayer Advocate Service.
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of the requested information--the SO sustained the proposed collection action. On
July 31, 2015, Appeals issued to each petitioner a Notice of Determination
Concerning Collection Action Under Section 6320 and/or 6330 concerning their
income tax liability for taxable year 2010. Petitioners timely sought review in this
Court.
Petitioners made three assignments of error in their petition: (1) frivolous
return penalties relating to their taxable year 2011; (2) the disallowed casualty or
theft loss deductions claimed on their 2010 Federal income tax return; and (3) the
propriety of the IRS audits of their 2010 return.4
Discussion
In reviewing an IRS administrative determination in a CDP case, if the
underlying tax liability is properly in dispute, the Court reviews that issue de novo.
Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). Other matters the Court
reviews for abuse of discretion by the IRS. Id. at 182. Abuse of discretion exists
when a determination is arbitrary, capricious, or without sound basis in fact or law.
See Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st
Cir. 2006).
4
On January 26, 2016, respondent filed a motion to dismiss for lack of
jurisdiction the portions of this case that relate to the assessed frivolous return
penalties for 2011. We granted this motion on March 17, 2016.
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Taxpayers may dispute their underlying tax liability in a CDP case only if
they did not receive a notice of deficiency or otherwise have a prior opportunity to
contest that liability. Sec. 6330(c)(2)(B). Although the SO could not determine
whether petitioners had received a notice of deficiency, we have found on the
basis of the record that petitioners did in fact receive it.
Respondent provided to the Court a copy of the properly completed U.S.
Postal Service Form 3877, showing that the notice of deficiency was sent by
certified mail to petitioners’ last known--and current--address on July 24, 2013.5
A properly completed Form 3877 reflecting the timely mailing of a notice of
deficiency to a taxpayer at the taxpayer’s last known address by certified mail,
absent evidence to the contrary, establishes that the notice was properly mailed to
the taxpayer. United States v. Ahrens, 530 F.2d 781, 784 (8th Cir. 1976) (“The
form [3877] is considered highly probative evidence that the notice of deficiency
was sent to the addresses specified.”); Coleman v. Commissioner, 94 T.C. 82, 90-
91 (1990). Furthermore, compliance with Form 3877 mailing procedure raises a
presumption of official regularity in favor of the Commissioner. See Coleman v.
Commissioner, 94 T.C. at 91. If the presumption is raised and the taxpayer does
5
The parties stipulated that “respondent issued a Notice of Deficiency to
petitioners for the taxable year 2010” and that “the PS Form 3877 * * * was
completed when * * * [the stipulated notice] was mailed to petitioners.”
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not rebut the presumption, the Court may find that the taxpayer received the notice
of deficiency, thus precluding challenges to the underlying liability under section
6330(c)(2)(B). See, e.g., Sego v. Commissioner, 114 T.C. 604, 611 (2000); Clark
v. Commissioner, T.C. Memo. 2008-155.
Because respondent introduced into evidence the properly completed Form
3877, he is entitled to rely upon presumptions of official regularity and delivery.
See Sego v. Commissioner, 114 T.C. at 611. Petitioners have not seriously
disputed receiving the notice of deficiency.6 And there is no evidence that the
notice was returned to respondent. Thus, the presumptions of official regularity
and delivery have not been rebutted. See Bailey v. Commissioner, T.C. Memo.
2005-241. “Where the presumption is raised, and not rebutted with contrary
evidence, we may find that the taxpayer received the notice of deficiency and that
challenges to the underlying tax liability are precluded”. Venhuizen v.
6
Mr. Carter testified at trial that “[he couldn’t] look at a letter and know
whether or not * * * [he] received it”; that “all * * * [of respondent’s
correspondence] look[s] the same”; and that “[he] ha[d] no intentions of saying
that * * * [he] didn’t receive any of this stuff. * * * [He didn’t] know if it was in
there or not.” Mrs. Carter testified that “mail came through, but * * * [she] just
* * * [couldn’t] say with 100 percent accuracy that that is something that * * *
[she] saw” and that “[she couldn’t] say that * * * [she didn’t see it] either.”
Petitioners further testified about their poor recordkeeping, misplaced documents,
and family events which might have distracted them. But they did not provide any
evidence to support their vague assertion of nonreceipt.
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Commissioner, T.C. Memo. 2012-270, at *10-*11 (noting that a taxpayer’s vague
statement regarding possible nonreceipt of the notice of deficiency was
insufficient to negate the presumption that the notice was properly issued).
We accordingly find that petitioners received the July 24, 2013, notice of
deficiency for taxable year 2010. See Diamond v. Commissioner, T.C. Memo.
2012-90, slip op. at 9 (“The record contains no credible evidence to rebut the
presumption that the notice was properly mailed to petitioner. At the hearing peti-
tioner did not unequivocally deny that he received the notice of deficiency, and his
testimony that he does not have a copy of the notice or remember signing for it is
not enough to rebut the presumption afforded respondent. Thus, we find that peti-
tioner received the notice of deficiency[.]”). Because they had, but did not take
advantage of, a prior opportunity to contest their 2010 tax liability, they were not
entitled to challenge that liability at the CDP hearing, and likewise they are not
entitled to challenge it in this proceeding. See sec. 6330(c)(2)(B); Bailey v.
Commissioner, T.C. Memo. 2016-94, at *7.
In any event, petitioners failed to participate in their CDP hearing in any
meaningful way: They did not submit any of the requested documentation; they
did not answer the SO’s telephone call or return her message; and they did not
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respond to any of the SO’s letters.7 Petitioners have therefore failed to present any
claim that we can review. See Giamelli v. Commissioner, 129 T.C. 107, 115-116
(2007); Magana v. Commissioner, 118 T.C. 488, 493-494 (2002). For that reason
as well, they are precluded from challenging their underlying liability in this
proceeding.8 See, e.g., Pough v. Commissioner, 135 T.C. 344, 349 (2010);
Lunnon v. Commissioner, T.C. Memo. 2015-156, at *15 (noting that a taxpayer
does not properly raise an issue if he fails to present any evidence to Appeals with
respect to that issue after being given a reasonable opportunity to do so), aff’d, __
F. App’x __, 2016 WL 3397578 (10th Cir. June 14, 2016). We accordingly
7
Mrs. Carter testified that the telephone number called by the SO was hers;
that around the time of that call, petitioners’ youngest son was getting married;
that “there w[ere] a lot of things going on”; and that “if indeed a voicemail was
left, * * * [she] did not go back and retrieve it.”
8
The SO could not verify petitioners’ receipt of the notice of deficiency and
invited petitioners to challenge their underlying liability for 2010 and submit
documents to support their claim of $473,309 in casualty or theft loss deductions.
Although the SO appeared willing to consider their underlying tax liability, that
decision does not require a de novo review. Where an Appeals officer exercises
her discretion to address an issue that the taxpayer is not entitled to raise during
the CDP process, any decision made with respect to that issue is not part of the
notice of determination and hence is not reviewable by this Court. See Ding v.
Commissioner, T.C. Memo. 2015-20, at *10; sec. 301.6320-1(e)(3), Q&A-E11,
Proced. & Admin. Regs. In any event, petitioners submitted no evidence to the
SO concerning these losses; that issue was not properly presented to her and is not
properly before us.
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review the SO’s actions for abuse of discretion only. See Goza v. Commissioner,
114 T.C. at 182.
In deciding whether the SO abused her discretion in sustaining the collec-
tion actions we consider whether she: (1) properly verified that the requirements
of any applicable law or administrative procedure have been met; (2) considered
any relevant issues petitioners raised; and (3) determined whether “any proposed
collection action balances the need for the efficient collection of taxes with the
legitimate concern of * * * [petitioners] that any collection action be no more
intrusive than necessary.” See sec. 6330(c)(3).
The record shows that the SO analyzed the transcript of petitioners’ account
and verified that the requirements of applicable law and administrative procedure
were followed. The SO stated in her case activity report that she had reviewed
petitioners’ account transcript and confirmed that the “assessment was properly
made” and that “the IRS met all applicable requirements of law & administrative
procedures”.
We find that, in sustaining the proposed collection action, the SO properly
balanced “the need for the efficient collection of taxes with the legitimate concern
of * * * [petitioners] that any collection action be no more intrusive than neces-
sary.” See id. Petitioners did not request a collection alternative, and they did not
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submit the financial information required for consideration of a collection
alternative.
Once taxpayers have been given a reasonable opportunity for a hearing but
fail to avail themselves of it, the Commissioner may proceed to make a determina-
tion on the basis of the case file. See, e.g., Oropeza v. Commissioner, T.C. Memo.
2008-94, aff’d, 402 F. App’x 221 (9th Cir. 2010); Taylor v. Commissioner, T.C.
Memo. 2004-25, aff’d, 130 F. App’x 934 (9th Cir. 2005). On the record before us,
we conclude that petitioners were given a reasonable opportunity for a hearing but
failed to avail themselves of it. Finding no abuse of discretion in any respect, we
will sustain the IRS’ determination to uphold the collection action. To reflect the
foregoing,
Decision will be entered for
respondent.