T.C. Memo. 2017-11
UNITED STATES TAX COURT
ESTATE OF RUBEN A. MYERS, DECEASED, KEN NORTON, EXECUTOR,
Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 20823-15L. Filed January 10, 2017.
P asks us to review a determination by IRS Appeals sustaining
a lien notice and a notice of proposed levy to collect delinquent
installment payments of estate tax. The gravamen of P's complaint is
that R abused his discretion during the 10-year period before the
delinquency by not pursuing collection from nonprobate assets not
under P's control. Following the CDP hearing, the settlement officer
prioritized collection actions first against nonprobate assets and
certain jointly owned probate property. P misunderstands the I.R.C.
sec. 6324(a)(1) special estate tax lien, which attaches automatically
on the date of death to the gross estate without any action by R and
which lapses in 10 years. P also misunderstands the scope of our
review under I.R.C. sec. 6330(d). We do not conduct broad-ranging
inquiry into the means by which R has sought to collect estate tax
over the years since decedent's death. Our narrow focus is on
whether the settlement officer abused his discretion in sustaining the
filing of the lien notice and the proposed levy notice. Moreover, we
will not remand this case for consideration of changed circumstances
-2-
[*2] because the 10-year duration of the special estate tax lien lapsed
during the pendency of this case after R froze collection actions on
the filing of the petition. Although the special estate tax lien has
lapsed, the period for asserting I.R.C. sec. 6324(a)(2) transferee
liability may be open.
Held: IRS Appeals' determination is sustained.
William Burwell Sellers, for petitioner.
Edwin B. Cleverdon, for respondent.
MEMORANDUM OPINION
HALPERN, Judge: This case is before the Court to review a determination
(determination) made by the Internal Revenue Service (IRS) Appeals Office
(Appeals) following a collection due process (CDP) hearing conducted pursuant to
sections 6320(b) and (c) and 6330(b) and (c).1 The determination was that
respondent's issuance of a notice of Federal tax lien (NFTL) should be sustained
and that, as explained in more detail infra pp. 11-15, respondent may proceed by
levy, seizure, or litigation to collect unpaid estate tax. Petitioner assigned
1
Unless otherwise indicated, all section references are to the Internal
Revenue Code of 1986, as amended and in effect when the petition was filed, and
all Rule references are to the Tax Court Rules of Practice and Procedure. We
round all dollar amounts to the nearest dollar.
-3-
[*3] numerous errors to the determination. Respondent denies any error. We
review the determination pursuant to section 6330(d)(1).
Background
Introduction
The parties have submitted this case for decision without a trial pursuant to
Rule 122. They have stipulated certain facts and the authenticity of certain
documents. In pertinent part, Rule 122(a) provides that "[a]ny case not requiring a
trial for the submission of evidence (as, for example, where sufficient facts have
been admitted, stipulated, established by deposition, or included in the record in
some other way) may be submitted". Rule 151(e) addresses the form and content
of briefs. Paragraph (e)(3) thereof requires the inclusion in an opening brief of
proposed findings of fact, based on the evidence, with reference to the pages of the
transcript or the exhibits or other sources relied upon to support the proposed
finding. In his opening brief, petitioner proposes that we find some facts the
source of which he identifies as the "Summary of Facts" section of his pretrial
memorandum. Respondent objects to those proposed findings as well as to certain
others the source of which respondent correctly identifies as allegations in the
petition that respondent denied in the answer as not being supported by the factual
record in this case. We agree that petitioner's proposed findings that respondent
-4-
[*4] objects to are not supported by the factual record, and we will disregard them.
The facts stipulated are so found, and the documents stipulated are accepted as
authentic.
Summary of Facts
When he filed the petition, petitioner resided in Heflin, Alabama.
Respondent is here attempting to collect unpaid estate tax. Decedent,
Ruben A. Myers, passed away on November 15, 2005. On February 15, 2007,
petitioner filed a Federal estate tax return and began making installment payments
of estate tax pursuant to sections 6161 and 6166. From 2007 through 2013,
petitioner timely made the required payments. In 2014, petitioner became
delinquent in those payments. Revenue Officer (RO) Dale Baustert was assigned
to collect the delinquent payments. On or about October 7, 2014, RO Baustert
filed the NFTL with the appropriate authority. Soon thereafter, he notified
petitioner that the NFTL had been filed and of his right to a CDP hearing. On
October 29, 2014, RO Baustert notified petitioner of respondent's intent to levy to
collect the delinquent tax and of petitioner's right to a CDP hearing (levy notice).
As stated in the levy notice, petitioner's unpaid liability for estate tax, interest, and
penalties was then $380,289.
-5-
[*5] In response to both the NFTL and the levy notice, petitioner timely
submitted to Appeals a Form 12153, Request for a Collection Due Process or
Equivalent Hearing, asking for an offer-in-compromise (OIC), stating that he was
unable to pay the balance due, and requesting withdrawal of the NFTL. Petitioner
did not dispute the underlying estate tax liability, interest, or penalties at issue.
After petitioner submitted the Form 12153, RO Baustert made an
inappropriate contact with the settlement officer assigned to conduct petitioner's
CDP hearing. The case was, for that reason, assigned to another settlement
officer, Settlement Officer (SO) Stephan Harding.
SO Harding sent petitioner a letter on March 9, 2015, scheduling a
face-to-face CDP hearing for April 9, 2015. His letter requested that, within 14
days, petitioner provide him with financial and other information, including a
completed Form 656, Offer in Compromise, as well as documentation supporting
the withdrawal of the lien and any other documentation petitioner wished SO
Harding to review. Petitioner provided SO Harding with the financial information
requested, but he did not submit a Form 656.
SO Harding held the hearing as scheduled. At the hearing, he verified the
following.
-6-
[*6] (a) The requirements of any applicable law or administrative procedure had
been met.
(b) IRS records confirmed the proper issuance of the notice and demand,
the NFTL, and the notice of a right to a CDP hearing.
(c) Respondent properly assessed the tax shown on the CDP notice.
(d) Notice and demand for payment was mailed to petitioner's last known
address.
(e) There was a balance due when the NFTL filing was requested.
(f) He (SO Harding) had no prior involvement with respect to the specific
tax periods either in Appeals or in Compliance.
(g) The IRS followed all legal and procedural requirements, and the actions
taken were appropriate under the circumstances.
At the hearing, petitioner stated that, for him to pay the delinquent estate tax
liability from probate assets, he would have to sell family farmlands that would be
difficult to liquidate, and he suggested that the IRS take action to collect the
delinquent liability from third parties who had received cash or liquid assets
attributable to decedent that were included in the gross estate but that were not
probate assets. He represented that, under Alabama law, he had no access to
nonprobate assets as a source of funds to pay the estate tax liability.
-7-
[*7] On July 15, 2015, Appeals sent to petitioner a Notice of Determination
Concerning Collection Action(s) Under Section 6320 and/or 6330 of the Internal
Revenue Code (notice).2 The notice recited SO Harding's determination to sustain
the filing of the NFTL and the issuance of the levy notice. He explained that,
because petitioner had not submitted a Form 656, and on the basis of the financial
information petitioner provided, he had concluded that petitioner was not eligible
for an OIC. He rejected the alternative of an installment agreement because
petitioner had not requested one and, on the basis of the provided financial
information, he had determined that such an agreement would not be appropriate.
He determined, on the basis of the financial information petitioner provided, that
petitioner did not qualify for noncollectible status or hardship.
With respect to petitioner's suggestion that the IRS should satisfy the estate
tax liability from nonprobate assets, SO Harding stated that he had taken into
account petitioner's concerns, balancing those concerns against respondent's
2
The notice is signed by Darrell Pharms, Appeals Team Manager. The
notice itself contains only a "Summary of Determination"; it is, however,
accompanied by an attachment that appears to be SO Harding's memorandum
supplying the detail behind the summary of determination and repeating it
verbatim. Moreover, in the motion, respondent speaks of the settlement officer's
making the necessary determination to proceed with collection. We will,
therefore, for the most part, speak in terms of SO Harding's making the
determination to proceed with collection.
-8-
[*8] collection policies (as laid out in the Internal Revenue Manual). He
determined that the IRS would "pursue collection of * * * [the estate] taxes first
from the nonprobate assets and [certain real property in which petitioner had a
partial interest]". He sustained RO Baustert's proposed levy "subject to this
[aforesaid] sequence of levying/sale/collection from estate assets."
Finally, with respect to withdrawal of the NFTL, he explained that
petitioner had not provided the documentation necessary to support withdrawal of
the notice, and, on the basis of the information available, he had concluded that
there was insufficient justification to withdraw it.
Petitioner filed the petition on August 17, 2015.
The special estate tax lien provided for in section 6324, discussed infra p.
13, expired on November 15, 2015, 10 years after decedent's death.
Respondent has not taken any action to attach or otherwise pursue
collection of the estate tax liability with respect to nonprobate assets.
Discussion
I. Introduction
Our task is to determine whether SO Harding erred in determining to sustain
the filing of the NFTL and the issuance of the levy notice. Although petitioner
-9-
[*9] assigned numerous errors to that determination,3 in both his opening and
reply briefs, petitioner states only the following two issues to be decided:
"Whether the Commissioner abused his discretion by failing to file a lien against
the non-probate assets before the statute of limitations ran which foreclosed on the
possibility of collecting from non-probate assets, and determining that levying
probate assets of the estate was efficient." We will limit our consideration to those
3
Petitioner assigned the following errors.
a. The Commissioner failed to take into account the significant
doubt as to the ability to collect the liability given the size of the
liability, the previous payments made, the decline in value of the
assets and the non-probate assets which the Petitioner cannot seize or
otherwise access.
b. The Commissioner failed to take into account all the facts
and circumstances surrounding the assessment against Petitioner, the
proposed levy and the lack of viable collection alternatives.
c. The Commissioner failed to utilize his equitable power to
determine that holding the Petitioner liable for additional tax would
be unfair and inequitable.
d. The Revenue Officer assigned to this case, Dale Baustert
engaged in ex-parte communications with [sic] substantially
prejudiced the Petitioner and his attempts to reach a resolution of the
outstanding tax liability.
e. The Commissioner failed to remove Mr. Baustert from the
case and reassign it as the Petitioner request [sic] on several occasions
to an officer who was not prejudiced against Petitioner.
- 10 -
[*10] issues in determining whether SO Harding erred in sustaining the filing of
the NFTL and the issuance of the levy notice. See, e.g., Bernstein v.
Commissioner, 22 T.C. 1146, 1152 (1954) (holding against the taxpayer with
respect to an issue because, among other things, the taxpayer did not press the
issue on brief), aff'd per curiam, 230 F.2d 603 (2d Cir. 1956); Lime Cola Co. v.
Commissioner, 22 T.C. 593, 606 (1954) ("Petitioners in their brief do not argue
anything about * * * [the issue]; and, although they do not expressly abandon the
issue * * * we presume they no longer press it.").
II. Standard of Review
Sections 6320 and 6330 provide a taxpayer the right to notice and the
opportunity for an Appeals hearing before the Commissioner can collect unpaid
taxes by means of a lien or levy against the taxpayer's property. Where the
validity of the taxpayer's underlying tax liability is not at issue (as it is not here),
the Court reviews Appeals' determination regarding collection actions under an
abuse of discretion standard of review. E.g., Sego v. Commissioner, 114 T.C. 604,
610 (2000). In reviewing for abuse of discretion, we must uphold Appeals'
determination unless it is arbitrary, capricious, or without sound basis in fact or
law. See Murphy v. Commissioner, 125 T.C. 301, 325 (2005), aff'd, 469 F.3d 27
(1st Cir. 2006). We do not substitute our judgment for that of the Appeals officer,
- 11 -
[*11] and we do not decide independently whether we believe the levy should
proceed or the NFTL should be withdrawn. See id. at 320. Instead, we consider
whether, in the course of making its determination, Appeals (1) verified that the
requirements of applicable law and administrative procedure have been met, (2)
considered any relevant issue raised by the taxpayer that relates to the unpaid tax
or the proposed levy, including any collection alternative, and (3) determined
whether any proposed collection action balances the need for the efficient
collection of taxes with the legitimate concern of the person that any collection
action be no more intrusive than necessary. See sec. 6330(c)(1)-(3).
III. Analysis
A. The Determination To Proceed With Collection
Petitioner is responsible for payment of the estate tax due on account of the
transfer of decedent's taxable estate. See secs. 2001(a), 2002. That is so
notwithstanding that the gross estate may include property that was not owned by
decedent at the time of his death, that did not pass through probate, and, thus, that
was never in petitioner's possession (i.e., nonprobate assets). See sec. 20.2002-1,
Estate Tax Regs. Once petitioner became delinquent in paying the estate tax,
respondent both filed an NFTL with respect to the probate property under
petitioner's control and notified him of respondent's intent to levy to collect the
- 12 -
[*12] unpaid tax. See secs. 6321, 6331(d)(1). Petitioner invoked his rights to a
CDP hearing, at which he was entitled to raise "any relevant issue relating to the
unpaid tax or the proposed levy". See sec. 6330(c)(2)(A). Petitioner requested
that respondent first pursue collection of the delinquent estate tax from the holders
of nonprobate assets included in the gross estate. SO Harding was
accommodating to that suggestion, and he included in the determination the
statement that the IRS would "pursue collection of * * * [the estate] taxes first
from the nonprobate assets".
It is true that if the estate tax is not paid when due the Commissioner may
pursue collection from transferees and others who receive, or had on the date of
the decedent's death, nonprobate assets includible in the gross estate under
sections 2034 through 2042. See secs. 6324(a)(2), 6901(a)(1)(A)(ii), (h).
Moreover, a lien for estate tax attaches at the date of the decedent's death to every
part of the gross estate whether or not the property comes into the possession of an
executor or administrator. See sec. 6324(a)(1); sec. 301.6324-1(a)(1), Proced. &
Admin. Regs.
A principal aspect of petitioner's complaint with respect to the
determination is that "[t]he Commissioner abused his discretion by failing to file a
lien against the non-probate assets". Apparently, petitioner is referring to the
- 13 -
[*13] actions (or nonactions) of SO Baustert and, perhaps, other collection
personnel in failing to file the special (section 6324) estate tax lien before
petitioner defaulted on his payment obligation and respondent undertook
administrative collection actions. We say that because petitioner states: "Despite
having full authority under IRS Section 6324 * * * the revenue officer in the case
sat idly by for ten (10) years, and refused to attach the non-probate assets from the
estate."
We first observe that petitioner misunderstands section 6324. Unlike the
general tax lien provided for in section 6321, which was the subject of the NFTL
and which attaches to all property belonging to a taxpayer after assessment,
demand, and nonpayment of the tax and which secures the payment of all types of
Federal taxes, including estate taxes, the special estate tax lien comes into being
without assessment or notice and demand automatically on the date of death, and it
attaches to all of the property the value of which is included in the gross estate
whether or not the property comes into the possession of the executor or
administrator. It continues for 10 years unless, before the end of the 10-year
period, the estate tax is paid in full or becomes unenforceable by expiration of the
period of limitations on collection. See sec. 6324(a)(1). Petitioner's claim that
respondent abused his discretion by failing to file a special estate tax lien against
- 14 -
[*14] the nonprobate assets the value of which was included in decedent's gross
estate is without merit, since that lien came into existence upon decedent's death
without the necessity of respondent's doing anything.
Putting aside petitioner's misunderstanding of the special estate tax lien, the
gravamen of his argument seems to be that the NFTL and the levy notice are not
efficient and the least intrusive means to collect the remaining estate tax because
respondent unreasonably delayed for 10 years proceeding against nonprobate
assets, and the unreasonableness of that delay is shown by SO Harding's belated
decision that respondent should so proceed. Petitioner explains:
As part of the balancing analysis done by the IRS, the Notice of
Determination noted that the non-probate assets should be attached
first. From this determination, it can be undisputed that the IRS
viewed the attachment of the non-probate assets as no more intrusive
than necessary. The IRS had ten (10) years to attach the non-probate
assets and for reasons known only to the Commissioner, his agents
failed to take any action to secure an interest in the non-probate assets
for the payment of the tax liability. * * * [S]uch inaction clearly
worked to the detriment of the estate. Therefore, it is unreasonable
that the Commissioner * * * would attach the probate assets. * * *
The petitioner should not suffer due to the dilatory actions of the IRS
which clearly constitute an abuse of discretion.
Petitioner's argument reflects a basic misunderstanding of the scope of our
review under section 6330(d)(1). The statute does not give us license to conduct a
broad-ranging inquiry into the means by which respondent has sought to collect
- 15 -
[*15] estate tax from petitioner over the many years since decedent's death. Our
focus is a narrow one: We ask only whether SO Harding abused his discretion in
sustaining the filing of the lien notice and the proposed levy action.
Petitioner makes no argument that SO Harding failed to verify that issuance
of the lien notice and the proposed levy action met the requirements of any
applicable law or administrative procedure. Nor does petitioner identify any
arguments he made at the hearing that SO Harding failed to consider. In
particular, SO Harding considered, and honored, petitioner's request that
respondent take action to avoid the need to proceed against family farmlands to
secure payment of the estate tax due. SO Harding determined that respondent
should pursue collection of the tax first from nonprobate assets and from parcels
of real estate other than the family farmlands and proceed against the farmlands
only if the amounts obtained from those other sources proved inadequate to satisfy
the outstanding liability. Thus, petitioner can hardly complain that the collection
action SO Harding recommended failed to "balance[] the need for the efficient
collection of taxes with the legitimate concern of * * * [petitioner] that any
collection action be no more intrusive than necessary." Cf. sec. 6330(c)(3)(C).
- 16 -
[*16] On the record before us, we find that SO Harding did not abuse his
discretion in determining to sustain the filing of the lien notice and, subject to the
specified sequence of collection actions, the proposed levy action.
B. Postdetermination Events
We are left only to consider that, as the parties have stipulated, the section
6324 special estate tax lien encumbering the nonprobate assets included in the
gross estate expired on November 15, 2015, and respondent has not taken any
action to attach or otherwise pursue collection of the estate tax liability with
respect to nonprobate assets. Those are events occurring after Appeals issued the
determination on July 1, 2015. And while pursuant to our authority under section
6330(d) to review CDP determinations we may take into account changed
circumstances, see Churchill v. Commissioner, T.C. Memo. 2011-182, 2011 WL
3300235, at *6 ("[W]e do have authority to remand a CDP case for consideration
of changed circumstances when remand would be helpful, necessary, or
productive."), petitioner has not convinced us that a remand would be helpful,
necessary, or productive. Respondent explains that, pursuant to his collection
procedures, he froze collection actions three months before the special estate tax
lien lapsed when, on August 17, 2015, petitioner filed the petition. See Internal
Revenue Manual (IRM) pt. 5.1.9.3.5.1 (June 24, 2014) (stating that levy actions
- 17 -
[*17] are suspended on filing of timely CDP notice). "In other words," argues
respondent, "[he] agreed to petitioner's request to pursue non-probate assets, but
petitioner's actions prevented the collection action from going forward."
The regulations provide that the section 6324 special estate tax lien may be
enforced by administrative levy. Sec. 301.6331-1(a)(1), Proced. & Admin. Regs.
Notably, it may also be enforced by judicial foreclosure. See, e.g., United States v.
Davis, 52 F.3d 781 (8th Cir. 1995). In general, levy actions that are the subject of
a CDP hearing are suspended during the period of the hearing and any appeal. See
sec. 6330(e)(1). Nonlevy collection actions, such as initiating judicial proceedings
to collect the tax that gives rise to a CDP hearing, are permitted during that period.
See secs. 301.6320-1(g)(2), Q&A-G3, 301.6330-1(g)(2), Q&A-G3, Proced. &
Admin. Regs. We have no evidence of why respondent did not pursue judicial
proceedings to foreclose on the estate's nonprobate assets, but it may have been his
judgment that there was insufficient time given the apparent absoluteness of the
lien's 10-year duration. See sec. 6324(a)(1); Davis, 52 F.3d 781 (10-year period is
durational); United States v. Cleavenger, 517 F.2d 230 (7th Cir. 1975) (same).
IRM pt. 5.17.2.9.1(2) (Dec. 12, 2014) states that the IRS will follow Davis and
Cleavenger; "lien foreclosure must be completed before expiration of ten years."
- 18 -
[*18] We see no grounds for remand in respondent's suspension of collection
action during the pendency of this action.
Before we close, we point out that there may still be ways for respondent to
collect the estate tax liability from third parties. For example, the period of
limitations applicable to the personal liability imposed on transferees and others
by section 6324(a)(2) is not the 10-year period from the date of death provided in
section 6324(a)(1). It is the 10-year collection period provided in section 6502(a)
running from the date of assessment. See United States v. Bevan, No. 2:07-cv-
1944 MCE JFM PS, 2008 WL 5179099, at *6 (E.D. Cal. Dec. 10, 2008); United
States v. Degroft, 539 F. Supp. 42, 44 (D. Md. 1981). We do not know the date
the estate tax was assessed, but the parties have stipulated that the estate tax return
was filed February 15, 2007, a date that almost certainly was before the date the
estate tax was assessed. The 10-year period for imposing personal liability is
probably still open.
IV. Conclusion
We will sustain Appeals' determination sustaining the filing of the lien
notice and the proposed levy action.
Decision will be entered for respondent.