SCOTUS Reports

Tag: Collection Due Process

  • Weiss v. Comm’r, 147 T.C. 179 (2016): Timeliness of Collection Due Process Hearing Requests

    Weiss v. Commissioner of Internal Revenue, 147 T. C. 179 (U. S. Tax Court 2016)

    In Weiss v. Commissioner, the U. S. Tax Court clarified that the 30-day period for requesting a Collection Due Process (CDP) hearing starts from the mailing date of the IRS levy notice, not the date printed on the notice. This ruling ensures that taxpayers have the full 30 days to request a hearing, impacting how the IRS and taxpayers manage collection actions and the suspension of the collection statute of limitations.

    Parties

    Charles J. Weiss, the petitioner, filed a petition against the Commissioner of Internal Revenue, the respondent, in the U. S. Tax Court. Weiss sought review of the IRS’s determination to uphold a notice of intent to levy against him for unpaid federal income tax liabilities for the tax years 1986 through 1991.

    Facts

    Charles J. Weiss owed over $550,000 in federal income tax liabilities for the years 1986 to 1991. In an effort to collect these liabilities, the IRS prepared a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (levy notice) dated February 11, 2009. An IRS Revenue Officer (RO) attempted to hand-deliver the notice on February 11 but was prevented by Weiss’s dog. The RO then mailed the notice on February 13, 2009, using the original February 11-dated notice. Weiss’s wife received the notice on February 17, 2009. Weiss filed a request for a CDP hearing on either March 13 or 14, 2009, which was received by the IRS on March 16, 2009. Weiss argued that he intentionally filed the request late to receive an equivalent hearing, which would not suspend the collection statute of limitations.

    Procedural History

    The IRS issued a notice of determination on May 6, 2011, sustaining the proposed levy. Weiss timely petitioned the U. S. Tax Court for review. The Tax Court reviewed the IRS’s determination for abuse of discretion, focusing on whether the CDP hearing request was timely filed based on the mailing date of the levy notice.

    Issue(s)

    Whether the 30-day period for requesting a CDP hearing under I. R. C. § 6330(a)(3)(B) begins on the date the levy notice is mailed or the date printed on the notice when these dates differ?

    Rule(s) of Law

    The Internal Revenue Code section 6330(a)(3)(B) provides that a taxpayer may request a CDP hearing within 30 days of receiving a notice of intent to levy. The regulations under 26 C. F. R. § 301. 6330-1(b)(1) and (c)(1) state that the 30-day period commences the day after the date of the CDP Notice. The Tax Court has established that the mailing date of the notice controls when it is later than the date on the notice itself.

    Holding

    The U. S. Tax Court held that the 30-day period for requesting a CDP hearing under I. R. C. § 6330(a)(3)(B) is calculated from the date the levy notice is mailed, not the date printed on the notice. Therefore, Weiss’s request for a CDP hearing, filed within 30 days of the mailing date, was timely.

    Reasoning

    The court reasoned that when the date on a levy notice is earlier than the mailing date, the mailing date governs the start of the 30-day period. This principle ensures that taxpayers have the full 30 days to request a hearing, consistent with the court’s prior rulings on notices of deficiency and notices of determination in CDP cases. The court cited Bongam v. Commissioner to support its reasoning, emphasizing a broad, practical construction of jurisdictional provisions to favor taxpayer rights. The court rejected Weiss’s argument that the mismatch between the notice’s date and mailing date should invalidate the notice, as such mismatches have not historically led to invalidation. Additionally, the court found no merit in Weiss’s claim of prejudice or estoppel, noting his implausible testimony and the fact that he sought to avoid collection action.

    Disposition

    The U. S. Tax Court upheld the IRS’s determination to sustain the proposed levy action against Weiss.

    Significance/Impact

    Weiss v. Commissioner clarifies the starting point for the 30-day period to request a CDP hearing, ensuring that taxpayers have the full period to respond based on the mailing date of the levy notice. This ruling impacts IRS collection procedures and taxpayer rights, reinforcing the importance of the mailing date in determining the timeliness of CDP hearing requests. Subsequent courts have followed this precedent, affecting how the IRS administers collection actions and how taxpayers engage with the CDP process.

  • Bongam v. Commissioner, 146 T.C. 52 (2016): Validity of Notice of Determination in Collection Due Process Cases

    Bongam v. Commissioner, 146 T. C. 52 (U. S. Tax Ct. 2016)

    In Bongam v. Commissioner, the U. S. Tax Court ruled that a Notice of Determination sent by the IRS is valid if actually received by the taxpayer without prejudicial delay, even if not mailed to the last known address. This decision expands the court’s jurisdiction in collection due process (CDP) cases by emphasizing actual receipt over strict adherence to mailing procedures, impacting how taxpayers can challenge IRS collection actions.

    Parties

    Isaiah Bongam, the petitioner, filed a petition pro se against the Commissioner of Internal Revenue, the respondent, in the United States Tax Court. The case involved a motion by the respondent to dismiss for lack of jurisdiction, which the court ultimately denied.

    Facts

    The IRS assessed Isaiah Bongam a civil penalty of $772,282 under section 6672 for various quarters from 2005 through 2009. To collect this liability, the IRS issued Bongam a Notice of Federal Tax Lien Filing and Your Right to a Hearing (NFTL Notice) on October 1, 2013, which was sent by certified mail to his last known address in Bowie, Maryland. Bongam timely requested a Collection Due Process (CDP) hearing, using an address in Washington, D. C. After the hearing, the IRS sent a Notice of Determination denying relief to Bongam at the Washington, D. C. address by certified mail on April 30, 2014. This notice was returned as undeliverable. Subsequently, on August 4, 2014, the IRS remailed the same Notice of Determination to Bongam’s Maryland address by regular mail, which he received and within 30 days of receiving it, he filed a petition in the Tax Court.

    Procedural History

    The IRS moved to dismiss Bongam’s case for lack of jurisdiction on September 16, 2015. The Tax Court held an evidentiary hearing on November 2, 2015, in Washington, D. C. The court analyzed whether the Notice of Determination was valid and whether it had jurisdiction over the case. The court ultimately denied the IRS’s motion to dismiss, finding that the remailed notice was valid because it was actually received by Bongam in time to file a timely petition.

    Issue(s)

    Whether a Notice of Determination sent by the IRS to a taxpayer’s last known address is a prerequisite for the Tax Court’s jurisdiction in a CDP case, and whether a notice sent to an incorrect address but remailed to the correct address and received by the taxpayer without prejudicial delay is valid?

    Rule(s) of Law

    The Tax Court’s jurisdiction under sections 6320 and 6330 depends on the issuance of a valid notice of determination and the filing of a timely petition for review. A notice of determination is valid if it is sent by certified or registered mail to the taxpayer’s last known address, as established in Weber v. Commissioner, 122 T. C. 258 (2004). However, actual receipt of the notice by the taxpayer without prejudicial delay can also validate the notice, as per McKay v. Commissioner, 89 T. C. 1063 (1987), and other precedents regarding notices of deficiency.

    Holding

    The Tax Court held that the Notice of Determination originally mailed to Bongam at his Washington, D. C. address was invalid because it was not sent to his last known address and was returned undeliverable. However, the court further held that the notice remailed to Bongam’s Maryland address was valid because he actually received it without prejudicial delay, allowing him to file a timely petition. The court clarified that the critical date for the running of the 30-day period is the date on which the notice was mailed to or actually received by the taxpayer, not the date listed on the notice.

    Reasoning

    The Tax Court reasoned by analogy to its deficiency jurisdiction cases, where actual receipt of a notice of deficiency without prejudicial delay validates the notice even if not sent to the last known address. The court interpreted section 6330(d)(1) to not explicitly require mailing to the last known address for a valid notice of determination in CDP cases. The court emphasized the practical construction of its jurisdictional provisions, as noted in Lewy v. Commissioner, 68 T. C. 779 (1977), and Traxler v. Commissioner, 61 T. C. 97 (1973). The court also considered the IRS’s remailing of the notice to Bongam’s correct address as sufficient to validate the notice, supported by cases like Terrell v. Commissioner, 625 F. 3d 254 (5th Cir. 2010), and Kasper v. Commissioner, 137 T. C. 37 (2011). The court noted that the date on the notice does not control the start of the 30-day period, as per August v. Commissioner, 54 T. C. 1535 (1970). The court’s reasoning prioritized actual receipt over strict mailing procedures to allow taxpayers the greatest opportunity to seek judicial review.

    Disposition

    The Tax Court denied the respondent’s motion to dismiss for lack of jurisdiction, finding that the remailed Notice of Determination was valid and that Bongam’s petition was timely filed within 30 days of receiving the notice.

    Significance/Impact

    Bongam v. Commissioner expands the Tax Court’s jurisdiction in CDP cases by clarifying that actual receipt of a Notice of Determination by the taxpayer without prejudicial delay can validate the notice, even if it was not originally sent to the last known address. This ruling provides taxpayers with more flexibility in challenging IRS collection actions, emphasizing the importance of actual notice over procedural formalities. The decision aligns the court’s approach in CDP cases with its long-standing precedents on deficiency notices, potentially affecting how the IRS communicates with taxpayers and how courts interpret statutory notice requirements. This case also highlights the court’s willingness to adopt a practical construction of its jurisdictional provisions, favoring substantive justice over strict adherence to technicalities.

  • Lee v. Commissioner, 144 T.C. 40 (2015): Requirements of Notice for Trust Fund Recovery Penalties Under IRC Section 6672

    Lee v. Commissioner, 144 T. C. 40 (U. S. Tax Ct. 2015)

    In Lee v. Commissioner, the U. S. Tax Court denied the Commissioner’s motion for summary judgment, ruling that a genuine dispute of material fact existed regarding whether the IRS properly served John Chase Lee with notice of trust fund recovery penalties under IRC Section 6672. The court emphasized that proper notice, either through mailing or personal service, is a prerequisite for assessing such penalties. This decision underscores the importance of procedural compliance in tax penalty assessments and the taxpayer’s right to challenge the underlying liability if notice procedures are not followed.

    Parties

    John Chase Lee, the Petitioner, sought review of the Commissioner of Internal Revenue’s determination to uphold the filing of a Notice of Federal Tax Lien (NFTL) and a notice of intent to levy. The Commissioner of Internal Revenue was the Respondent, represented by Wendy Dawn Gardner.

    Facts

    John Chase Lee was intermittently the CEO of Wi-Tron, Inc. , a company that incurred employment tax liabilities during every quarter of 2007 and 2008. On December 18, 2009, a revenue officer met with Lee and requested a 4180 interview to determine if Lee was a responsible person for the employment taxes, but Lee declined, wishing to consult legal counsel. On March 30, 2010, another meeting was held with Lee, the revenue officer, his manager, and Tarlochan Bains, Wi-Tron’s COO. The Commissioner claimed that at this meeting, Lee was personally served with Letter 1153, proposing the assessment of trust fund recovery penalties under IRC Section 6672. Lee, however, denied receiving the letter. On July 14, 2010, trust fund recovery penalties were assessed against Lee for all periods of 2007 and 2008.

    Procedural History

    After the penalties were assessed, the Commissioner issued a Final Notice of Intent to Levy and Notice of Your Right to a Hearing on August 12, 2010, and a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 on August 24, 2010. Lee requested a Collection Due Process (CDP) hearing on September 3, 2010. The Appeals Officer initially sustained the collection action because Lee was not current with his estimated tax payments. Lee petitioned the U. S. Tax Court for review. The court remanded the case for a supplemental hearing to review whether Lee received notice of the intent to assess the penalties and if he was allowed an opportunity to challenge the assessment. After the supplemental hearing, the Appeals Officer determined that Lee had received Letter 1153 and had an opportunity to appeal, which he did not exercise. The Commissioner then moved for summary judgment, which the court denied due to a genuine dispute regarding the service of Letter 1153.

    Issue(s)

    Whether the Commissioner properly served John Chase Lee with Letter 1153, proposing the assessment of trust fund recovery penalties under IRC Section 6672, either through mailing or personal service?

    Rule(s) of Law

    Under IRC Section 6672, a person responsible for collecting and paying over employment taxes may be liable for a penalty equal to the total amount of the tax not paid over if they willfully fail to do so. Section 6672(b) requires the IRS to provide notice at least 60 days before assessing the penalty, which can be done by mailing in accordance with IRC Section 6212(b) or by personal service. IRC Sections 6330 and 6320 provide taxpayers with the right to a CDP hearing before the IRS can levy property or file a NFTL. At the CDP hearing, the Appeals Officer must verify that the requirements of applicable law and administrative procedure have been met, including the proper issuance of notice under Section 6672(b).

    Holding

    The U. S. Tax Court held that there was a genuine dispute of material fact as to whether John Chase Lee was properly served with Letter 1153, thus denying the Commissioner’s motion for summary judgment.

    Reasoning

    The court reasoned that proper notice under IRC Section 6672(b) is a prerequisite for assessing trust fund recovery penalties, and the Appeals Officer must verify that such notice was properly issued. The court emphasized that the issue of whether the notice was properly issued is reviewable under IRC Section 6330(c)(1), regardless of whether the taxpayer raised it at the CDP hearing. The court found that the Commissioner failed to provide sufficient evidence to prove that Lee was personally served with Letter 1153. The court noted that the Integrated Collection System (ICS) Transcript did not contain a contemporaneous entry of service on the date of the meeting, and no signed copy of the Letter 1153 was provided. The court also considered Lee’s contention that he did not receive the letter and his history of responding to IRS correspondence, indicating a genuine dispute that required a trial.

    Disposition

    The U. S. Tax Court denied the Commissioner’s motion for summary judgment and ordered a trial to resolve the factual dispute regarding the service of Letter 1153.

    Significance/Impact

    Lee v. Commissioner reinforces the importance of procedural compliance in the assessment of trust fund recovery penalties under IRC Section 6672. The case highlights that proper notice, whether by mailing or personal service, is a critical requirement that must be verified by the Appeals Officer during a CDP hearing. This decision may encourage taxpayers to challenge assessments if they believe they did not receive proper notice, and it underscores the necessity for the IRS to maintain clear and contemporaneous records of notice service. The ruling also affirms the court’s jurisdiction to review verification issues under IRC Section 6330(c)(1), even if not raised by the taxpayer during the administrative process, ensuring that the IRS adheres to legal and administrative procedures before enforcing tax collection actions.

  • C. Lynn Moses v. Commissioner of Internal Revenue, T.C. Memo 2014-220: Collection Due Process and Tax Liability Determination

    C. Lynn Moses v. Commissioner of Internal Revenue, T. C. Memo 2014-220 (U. S. Tax Court 2014)

    In a ruling on a collection due process (CDP) hearing, the U. S. Tax Court upheld the IRS’s determination to proceed with a levy against C. Lynn Moses for unpaid taxes from 1999-2002. The court found that Moses failed to provide evidence to challenge the tax liabilities determined by the IRS through bank deposit analysis, and upheld the tax deficiencies and associated penalties. Additionally, the court ruled that the IRS did not abuse its discretion in conducting the CDP hearing via telephone rather than in person, given Moses’s lack of cooperation and failure to provide requested financial documentation.

    Parties

    C. Lynn Moses was the petitioner, appearing pro se. The respondent was the Commissioner of Internal Revenue, represented by Kimberly L. Clark. The case originated in the U. S. Tax Court, docket number 1710-12L.

    Facts

    C. Lynn Moses did not file federal income tax returns for the years 1999 through 2002. The IRS, after conducting a bank deposit analysis of Moses’s Key Bank account, determined that Moses was engaged in a real estate trade or business and had unreported income for those years. Additionally, Moses was found to have failed to report his share of his wife’s community income. The IRS sent notices of deficiency to Moses’s last known addresses, which were returned unclaimed. The IRS subsequently assessed Moses’s tax liabilities and penalties for these years. Moses did not pay the assessed amounts, leading the IRS to issue a final notice of intent to levy and a notice of his right to a CDP hearing.

    Procedural History

    Moses requested a CDP hearing, expressing a desire for a face-to-face meeting and the intent to challenge the tax liabilities, verify IRS procedures, and discuss collection alternatives. The IRS’s Office of Appeals assigned Settlement Officer Eric D. Edwards to Moses’s case, who scheduled a telephone hearing. Moses failed to submit requested financial documentation and did not participate in the scheduled telephone hearings. Settlement Officer Edwards issued a notice of determination sustaining the proposed levy, which Moses challenged in the U. S. Tax Court. The court reviewed the IRS’s determination under an abuse of discretion standard.

    Issue(s)

    Whether C. Lynn Moses failed to report gross income for the years 1999-2002, making him liable for the assessed tax deficiencies and additions to tax under sections 6651(a)(1) and (2) and 6654(a)?

    Whether the IRS abused its discretion in sustaining the proposed levy action against Moses?

    Rule(s) of Law

    Section 6331(a) authorizes the IRS to levy upon a taxpayer’s property if the tax remains unpaid after notice and demand. Section 6330(a) mandates that no levy may occur without the taxpayer being notified of their right to a hearing. Section 6330(c)(2)(B) precludes a taxpayer from contesting the underlying tax liability in a CDP hearing if they had a prior opportunity to dispute such liability. The IRS’s determination of a deficiency is presumed correct, and the taxpayer bears the burden of proving it incorrect (Rule 142(a); Welch v. Helvering, 290 U. S. 111 (1933)).

    Holding

    The court held that Moses failed to rebut the presumption of correctness regarding the IRS’s deficiency determinations for the years 1999-2002, thus sustaining the tax liabilities as determined by the IRS, except for the conceded amounts. Moses was also found liable for additions to tax under sections 6651(a)(1) and (2) for all years at issue, and under section 6654(a) for the years 2000-2002. The court further held that the IRS did not abuse its discretion in sustaining the proposed levy action against Moses.

    Reasoning

    The court’s reasoning was based on the IRS’s use of the bank deposit method to reconstruct Moses’s income, a method long sanctioned by courts (Estate of Mason v. Commissioner, 64 T. C. 651 (1975)). The IRS established a minimal evidentiary foundation linking Moses to an income-producing activity, shifting the burden to Moses to prove the deficiency determinations were erroneous, which he failed to do. The court also considered the IRS’s compliance with section 7491(c), which places the burden of production on the IRS for additions to tax, but found the IRS met this burden by introducing evidence of Moses’s failure to file and pay taxes, and the preparation of substitute for returns (SFRs). The court rejected Moses’s argument for a face-to-face hearing, citing precedent that such a hearing is not required under section 6330 and that Moses’s failure to cooperate and provide financial documentation justified the IRS’s decision to proceed via telephone.

    Disposition

    The U. S. Tax Court upheld the IRS’s determination to proceed with the levy action against Moses for the unpaid taxes from 1999-2002, including the assessed deficiencies and additions to tax, except for the amounts conceded by the IRS.

    Significance/Impact

    This case reinforces the IRS’s authority to use the bank deposit method for reconstructing income and the legal presumption of correctness for IRS deficiency determinations. It also underscores the importance of taxpayer cooperation in CDP hearings and the IRS’s discretion in determining the format of such hearings. The decision highlights the procedural and evidentiary requirements for challenging tax liabilities and the consequences of non-compliance with IRS requests for documentation.

  • Buczek v. Commissioner, 143 T.C. 301 (2014): Tax Court Jurisdiction and Frivolous Hearing Requests

    Buczek v. Commissioner, 143 T. C. 301 (2014)

    In Buczek v. Commissioner, the U. S. Tax Court clarified its jurisdiction over disregarded hearing requests under I. R. C. sec. 6330(g). The court upheld its authority to review the IRS’s determination that a taxpayer’s request for a collection due process hearing is frivolous, but dismissed the case for lack of jurisdiction because the petitioner, Daniel Richard Buczek, failed to raise any non-frivolous issues in his request. This ruling reinforces the court’s role in overseeing IRS determinations while maintaining the statutory limits on judicial review of frivolous claims.

    Parties

    Daniel Richard Buczek, the petitioner, filed a case against the Commissioner of Internal Revenue, the respondent, in the United States Tax Court. Buczek represented himself pro se, while John M. Janusz appeared as counsel for the Commissioner.

    Facts

    On November 13, 2013, the Commissioner sent Buczek a final notice of intent to levy to collect his unpaid Federal income tax and interest assessed for 2009. Buczek returned the notice to the Appeals Office on November 20, 2013, with a timely filed Form 12153, Request for a Collection Due Process or Equivalent Hearing, along with seven additional pages. Each page of the notice was marked with statements such as “Pursuant to UCC 3-501,” “Refused from the cause,” “Consent not given,” and “Permission DENIED. ” Buczek did not check any boxes on the Form 12153 but wrote “common law hearing” on the line for other reasons for requesting the hearing. He did not request any collection alternatives, assert inability to pay the tax, seek relief under section 6015, or raise any other relevant issues related to the unpaid tax or proposed levy. The Appeals Office, after determining Buczek’s disagreement was frivolous, issued a “disregard letter” on March 12, 2014, stating it was disregarding his entire hearing request under I. R. C. sec. 6330(g) and returning it to the IRS Collection Division to proceed with collection.

    Procedural History

    Buczek and his wife filed a petition in docket No. 1390-14 on January 27, 2014, seeking review of a notice of deficiency for an unspecified year. The court dismissed Buczek from that case for lack of jurisdiction on April 24, 2014, and ordered the notice of the disregard letter to be filed as an imperfect petition to commence this case regarding the collection of his 2009 tax liability. Buczek filed an amended petition on May 5, 2014. On July 2, 2014, the Commissioner filed a motion to dismiss for lack of jurisdiction, which was the matter before the court.

    Issue(s)

    Whether the Tax Court has jurisdiction to review the Commissioner’s determination to disregard a taxpayer’s request for a Collection Due Process hearing under I. R. C. sec. 6330(g) when the request raises no issues specified in I. R. C. sec. 6330(c)(2)?

    Rule(s) of Law

    The Tax Court has jurisdiction under I. R. C. sec. 6330(d)(1) to review the Commissioner’s determination to disregard a taxpayer’s request for a Collection Due Process hearing if the request raises issues specified in I. R. C. sec. 6330(c)(2). I. R. C. sec. 6330(g) prohibits judicial review of portions of a hearing request determined to be frivolous. The court’s jurisdiction depends on the issuance of a valid notice of determination and a timely petition for review.

    Holding

    The Tax Court held that it has jurisdiction to review the Commissioner’s determination to disregard a taxpayer’s request for a Collection Due Process hearing if the request raises issues under I. R. C. sec. 6330(c)(2). However, because Buczek did not raise any such issues, the court lacked jurisdiction to review the Commissioner’s determination to proceed with collection and granted the Commissioner’s motion to dismiss for lack of jurisdiction.

    Reasoning

    The court reasoned that its jurisdiction under I. R. C. sec. 6330(d)(1) is triggered by a valid notice of determination and a timely petition for review. The court’s decision in Thornberry v. Commissioner, 136 T. C. 356 (2011), established that it has jurisdiction to review the Commissioner’s determination that a taxpayer’s request for a hearing is frivolous. However, in Thornberry, the taxpayers had raised legitimate issues under I. R. C. sec. 6330(c)(2) in their hearing request, which were deemed excluded from the frivolous portions of the request. In contrast, Buczek’s request did not raise any such issues, and thus, there were no issues to be excluded from the frivolous portions of his request. The court emphasized that I. R. C. sec. 6330(g) prohibits judicial review of the frivolous portions of a hearing request but does not prohibit review of the determination that the request is frivolous. Since Buczek’s request did not raise any non-frivolous issues, the court lacked jurisdiction to review the Commissioner’s determination to proceed with collection.

    Disposition

    The court granted the Commissioner’s motion to dismiss for lack of jurisdiction.

    Significance/Impact

    The Buczek decision clarifies the scope of the Tax Court’s jurisdiction over disregarded hearing requests under I. R. C. sec. 6330(g). It upholds the court’s authority to review the Commissioner’s determination that a taxpayer’s request for a hearing is frivolous, thereby protecting taxpayers from arbitrary determinations. However, it also reinforces the statutory limits on judicial review of frivolous claims, ensuring that taxpayers must raise legitimate issues to invoke the court’s jurisdiction. The decision distinguishes Buczek’s case from Thornberry, highlighting the importance of raising non-frivolous issues in a hearing request to maintain the court’s jurisdiction over the Commissioner’s determinations.

  • Buczek v. Commissioner, 143 T.C. No. 16 (2014): Jurisdiction and Review of Frivolous Tax Hearing Requests

    Buczek v. Commissioner, 143 T. C. No. 16 (2014)

    In Buczek v. Commissioner, the U. S. Tax Court upheld its jurisdiction to review the IRS’s determination to disregard a taxpayer’s hearing request as frivolous, affirming the precedent set in Thornberry. Daniel Buczek’s request for a collection due process hearing was dismissed as frivolous by the IRS, and the court found it lacked jurisdiction over the case due to the absence of legitimate issues in Buczek’s request. This ruling underscores the court’s authority to scrutinize IRS decisions while clarifying the limits of judicial review in cases involving frivolous claims.

    Parties

    Daniel Richard Buczek, Petitioner, pro se, and Commissioner of Internal Revenue, Respondent, represented by John M. Janusz.

    Facts

    Daniel Richard Buczek received a final notice of intent to levy to collect his unpaid federal income tax and interest for 2009. In response, Buczek submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing, along with seven additional pages. Each page of the notice of intent to levy was stamped with phrases indicating Buczek’s rejection of the notice. On the Form 12153, Buczek did not check any boxes for specific issues but wrote “common law hearing” as the reason for his request. The attached pages did not raise any relevant issues related to the unpaid tax or the proposed levy.

    Procedural History

    The Appeals Office sent Buczek a letter on March 12, 2014, disregarding his hearing request under the authority of I. R. C. § 6330(g) due to its frivolous nature. Buczek and his wife filed a notice of the disregard letter in another docket, which the court dismissed Buczek from for lack of jurisdiction. The court ordered the notice to be filed as an imperfect petition in this case. Buczek filed an amended petition, and the Commissioner filed a motion to dismiss for lack of jurisdiction on July 2, 2014.

    Issue(s)

    Whether the U. S. Tax Court has jurisdiction to review the Commissioner’s determination to disregard Buczek’s entire hearing request as frivolous under I. R. C. § 6330(g)?

    Rule(s) of Law

    I. R. C. § 6330(g) allows the Appeals Office to disregard any portion of a taxpayer’s hearing request that is deemed frivolous or reflects a desire to delay or impede federal tax administration, treating it as if it were never submitted. I. R. C. § 6330(d)(1) grants the Tax Court jurisdiction to review determinations made by the Appeals Office in response to a valid hearing request.

    Holding

    The U. S. Tax Court lacks jurisdiction to review the Commissioner’s determination to disregard Buczek’s entire hearing request as frivolous because Buczek did not raise any issues specified in I. R. C. § 6330(c)(2) that may be considered in an administrative hearing.

    Reasoning

    The court affirmed its jurisdiction to review the Commissioner’s determination that a taxpayer’s hearing request is frivolous, as established in Thornberry v. Commissioner. However, the court distinguished Buczek’s case from Thornberry, noting that Buczek’s request did not raise any legitimate issues under I. R. C. § 6330(c)(2). The court emphasized that I. R. C. § 6330(g) prohibits judicial review of the portions of a hearing request determined to be frivolous, and since Buczek’s entire request was properly treated as if it had never been submitted, the court lacked jurisdiction to review the Commissioner’s determination to proceed with collection.

    The court analyzed the differences between Buczek’s case and Thornberry, where the taxpayers had raised legitimate issues in their hearing request. The court clarified that its jurisdiction to review the Appeals Office’s determination under I. R. C. § 6330(g) does not violate or eviscerate the statute but serves to protect taxpayers from arbitrary and capricious determinations.

    Disposition

    The court granted the Commissioner’s motion to dismiss for lack of jurisdiction.

    Significance/Impact

    Buczek v. Commissioner reaffirmed the Tax Court’s jurisdiction to review IRS determinations under I. R. C. § 6330(g) while clarifying the limits of such review. The case distinguishes between hearing requests that raise legitimate issues and those that do not, impacting how taxpayers must frame their requests to ensure judicial review. This ruling reinforces the importance of raising specific issues under I. R. C. § 6330(c)(2) to maintain the court’s jurisdiction and highlights the court’s role in overseeing the IRS’s application of the frivolous submission rule.

  • Greenoak Holdings Ltd. v. Comm’r, 143 T.C. 170 (2014): Taxpayer Standing in Collection Due Process Appeals

    Greenoak Holdings Ltd. v. Comm’r, 143 T. C. 170 (U. S. Tax Court 2014)

    In Greenoak Holdings Ltd. v. Comm’r, the U. S. Tax Court ruled it lacked jurisdiction over a petition filed by third parties claiming ownership of assets potentially subject to levy for unpaid estate taxes. The court clarified that only the taxpayer, the estate in this case, has standing to appeal a collection due process (CDP) notice of determination. This decision underscores the limits of third-party rights in tax collection disputes and the procedural protections afforded to taxpayers under the Internal Revenue Code.

    Parties

    Greenoak Holdings Limited, Southbrook Properties Limited, and Westlyn Properties Limited (collectively, “Petitioners”) were the appellants in this case. They were represented by Michael Ben-Jacob. The respondent was the Commissioner of Internal Revenue, represented by Frederick C. Mutter. The estate of James B. Irwin was the taxpayer involved, with Howard L. Crown as the initial personal representative, later succeeded by Jill McCrory.

    Facts

    James B. Irwin died on September 21, 2009, and Howard L. Crown was appointed as the personal representative of the estate. The estate filed a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, in December 2010, reporting both probate and nonprobate assets. Among the nonprobate assets listed was the Karamia Settlement, an offshore trust owned by the decedent, which in turn owned the Petitioners. The estate failed to timely pay the reported estate tax, leading the Commissioner to issue a Final Notice of Intent to Levy and Notice of Your Right to a Hearing on November 28, 2012, to Crown. The estate requested a collection due process (CDP) hearing, which was held on April 18, 2013. On May 1, 2013, the Commissioner issued a notice of determination sustaining the levy on the estate’s nonprobate assets. The estate did not appeal this determination, but the Petitioners filed a petition with the U. S. Tax Court on May 30, 2013, asserting their ownership interest in the assets potentially subject to levy.

    Procedural History

    The U. S. Tax Court issued an order to show cause on June 19, 2013, directing the parties to explain why the estate should not be substituted as the petitioner. On July 11, 2013, the Commissioner moved to dismiss for lack of jurisdiction, arguing that the Petitioners were not proper parties to appeal the notice of determination. Crown, on behalf of the estate, agreed with the Commissioner’s position. On January 16, 2014, Crown resigned as personal representative, and Jill McCrory was appointed as his successor. McCrory filed supplemental responses on May 6, 2014, arguing that the Petitioners had standing to appeal and that the estate should be substituted as a party. The Tax Court ultimately dismissed the case for lack of jurisdiction on September 16, 2014.

    Issue(s)

    Whether a third party, who claims an ownership interest in property that might be subject to levy, has standing to appeal a notice of determination issued to the taxpayer under I. R. C. § 6330(d)?

    Rule(s) of Law

    The controlling legal principle is found in I. R. C. § 6330, which provides taxpayers with procedural protections before the Internal Revenue Service (IRS) can levy on their property to collect unpaid taxes. Specifically, I. R. C. § 6330(d) states that “[t]he person may, within 30 days of a determination under this section, appeal such determination to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter). ” The regulations under § 6330 further clarify that the “person” entitled to notice and appeal rights is the taxpayer liable for the unpaid tax, not third parties who may claim an interest in the property subject to levy.

    Holding

    The U. S. Tax Court held that it lacked jurisdiction over the Petitioners’ appeal because they were not the taxpayers liable for the unpaid estate tax, nor were they authorized representatives of the taxpayer. The court ruled that only the estate, as the taxpayer, had standing to appeal the notice of determination under I. R. C. § 6330(d).

    Reasoning

    The court’s reasoning focused on the statutory language and legislative history of I. R. C. § 6330, which consistently refers to “the person” as the taxpayer liable for the unpaid tax. The court noted that the purpose of § 6330 was to provide taxpayers with due process protections before the IRS could levy on their property. The court rejected the Petitioners’ argument that they were “persons” entitled to appeal rights under § 6330(d) because they claimed an ownership interest in property potentially subject to levy. The court emphasized that the regulations under § 6330 explicitly state that only the taxpayer is entitled to notice and appeal rights, and third parties must pursue other remedies, such as a wrongful levy action under I. R. C. § 7426. The court also considered the legislative history, which further supported the conclusion that § 6330 was intended to benefit taxpayers, not third parties. The court dismissed the successor personal representative’s attempt to reverse the estate’s original position and substitute the estate as a party, noting that the estate had not filed a timely petition.

    Disposition

    The U. S. Tax Court dismissed the case for lack of jurisdiction, as the Petitioners were not proper parties to appeal the notice of determination issued to the estate.

    Significance/Impact

    The Greenoak Holdings Ltd. v. Comm’r decision clarifies the limits of third-party standing in collection due process appeals under I. R. C. § 6330. It establishes that only the taxpayer liable for the unpaid tax has the right to appeal a notice of determination, and third parties claiming an interest in property subject to levy must pursue other remedies, such as a wrongful levy action under I. R. C. § 7426. This ruling has important implications for tax practitioners and taxpayers, as it underscores the importance of timely filing by the taxpayer to preserve appeal rights in collection disputes. The decision also highlights the procedural protections afforded to taxpayers under the Internal Revenue Code and the limited role of third parties in such proceedings.

  • Greenoak Holdings Ltd. v. Commissioner, 143 T.C. 8 (2014): Jurisdiction in Collection Due Process Appeals under I.R.C. § 6330

    Greenoak Holdings Ltd. v. Commissioner, 143 T. C. 8 (2014)

    In Greenoak Holdings Ltd. v. Commissioner, the U. S. Tax Court ruled it lacked jurisdiction over a petition filed by entities asserting ownership interests in property potentially subject to levy, clarifying that only the taxpayer liable for the unpaid tax has standing to appeal under I. R. C. § 6330. The decision reinforces the statutory framework designed to protect taxpayers, not third parties, during IRS collection actions, and underscores the exclusive remedy of wrongful levy actions for third parties under I. R. C. § 7426.

    Parties

    Greenoak Holdings Limited, Southbrook Properties Limited, and Westlyn Properties Limited, collectively referred to as Petitioners, appealed to the U. S. Tax Court against the Commissioner of Internal Revenue, the Respondent. The petitioners were represented by Michael Ben-Jacob, and the respondent by Frederick C. Mutter.

    Facts

    James B. Irwin died on September 21, 2009, and his estate failed to timely pay reported estate taxes. Howard L. Crown, the estate’s personal representative, requested a Collection Due Process (CDP) hearing after receiving a notice of intent to levy from the IRS. The IRS Appeals officer sustained the levy on the estate’s nonprobate assets, which included the Karamia Settlement, an offshore trust that owned the petitioners. The petitioners, asserting ownership interests in the trust’s assets, filed a petition with the Tax Court, despite the estate not filing a petition.

    Procedural History

    The IRS issued a notice of determination to the estate’s personal representative on May 1, 2013, sustaining the proposed levy on nonprobate assets. The petitioners filed a petition with the Tax Court on May 30, 2013, without a petition from the estate. The respondent moved to dismiss for lack of jurisdiction, arguing that the petitioners were not the proper parties to appeal the notice of determination issued to the estate. The Tax Court issued an order to show cause why the estate should not be substituted as petitioner, and after further submissions, the court considered the jurisdictional issue.

    Issue(s)

    Whether entities claiming ownership interests in property potentially subject to levy by the IRS have the right to appeal a notice of determination issued to the taxpayer under I. R. C. § 6330?

    Rule(s) of Law

    I. R. C. § 6330 provides taxpayers with procedural protections before the IRS can levy property to collect unpaid taxes. The section mandates prelevy notice to the taxpayer and allows for a CDP hearing to challenge the levy. I. R. C. § 6330(d) grants jurisdiction to the Tax Court to review a notice of determination issued to the taxpayer. I. R. C. § 7426(a)(1) provides the exclusive remedy for third parties claiming wrongful levy by the IRS.

    Holding

    The Tax Court held that it lacked jurisdiction over the petition filed by the petitioners because they were not the taxpayers liable for the unpaid estate tax, and thus not entitled to appeal the notice of determination issued to the estate under I. R. C. § 6330(d).

    Reasoning

    The court’s reasoning hinged on the interpretation of the term “person” in I. R. C. § 6330, which it determined unambiguously refers to the taxpayer liable for the unpaid tax. The court analyzed the statutory language, legislative history, and regulations to conclude that only the taxpayer, not third parties with alleged ownership interests in property subject to levy, is entitled to prelevy notice, a CDP hearing, and judicial review. The court rejected the petitioners’ argument that they were “persons” under the statute, emphasizing that the IRS is authorized to levy only on the property of the taxpayer. The court also noted that third parties have the right to bring a wrongful levy action under I. R. C. § 7426(a)(1), but such actions fall under the jurisdiction of district courts, not the Tax Court. The court considered the legislative intent to provide due process protections to taxpayers, not to extend such rights to third parties. Additionally, the court addressed the change in the estate’s representation, finding that the new personal representative’s attempt to substitute the estate as petitioner was untimely and could not confer jurisdiction.

    Disposition

    The Tax Court dismissed the petition for lack of jurisdiction under I. R. C. § 6330(d).

    Significance/Impact

    The decision in Greenoak Holdings Ltd. v. Commissioner clarifies the scope of the Tax Court’s jurisdiction in CDP appeals, reinforcing that only the taxpayer liable for the tax has standing to appeal a notice of determination. This ruling underscores the distinction between the rights of taxpayers and those of third parties in IRS collection actions, directing third parties to pursue wrongful levy actions under I. R. C. § 7426. The decision impacts legal practice by limiting the avenues through which third parties can challenge IRS levies, emphasizing the need for taxpayers to actively engage in the CDP process to protect their rights.

  • Eichler v. Commissioner, 143 T.C. 30 (2014): Validity of Notices of Intent to Levy and Installment Agreement Conditions

    Eichler v. Commissioner, 143 T. C. 30, 2014 U. S. Tax Ct. LEXIS 32, 143 T. C. No. 2 (T. C. 2014)

    In Eichler v. Commissioner, the U. S. Tax Court upheld the IRS’s issuance of notices of intent to levy during a pending installment agreement request, clarifying that such notices are not prohibited by law. The court remanded the case for further review on the IRS’s requirement of an $8,520 downpayment for the installment agreement, citing potential economic hardship and factual disputes. This ruling provides critical guidance on the IRS’s collection practices and the procedural rights of taxpayers.

    Parties

    Renald Eichler, the Petitioner, filed a case against the Commissioner of Internal Revenue, the Respondent, in the United States Tax Court.

    Facts

    Renald Eichler was assessed trust fund recovery penalties for the fourth quarter of 2008, the first and second quarters of 2009, amounting to $89,760, $82,725, and $16,889, respectively. On April 11, 2011, Eichler’s representative submitted a request for a partial pay installment agreement of $350 per month, accompanied by a completed Form 433-A and supporting financial documentation. The IRS received this request on April 28, 2011. Despite the IRS’s obligation to input the request into its system within 24 hours, it was not entered until June 6, 2011. On May 9, 2011, the IRS sent Eichler three Letters CP 90, notices of intent to levy, for the unpaid penalties. Eichler timely requested a collection due process (CDP) hearing, seeking withdrawal of the notices and approval of his installment agreement. During the CDP hearing, the IRS settlement officer proposed an installment agreement requiring an $8,520 downpayment, which Eichler rejected due to potential economic hardship. The IRS’s final determination sustained the proposed levy and rejected Eichler’s request to withdraw the notices of intent to levy.

    Procedural History

    Eichler sought review of the IRS’s determination in the U. S. Tax Court under section 6330(d). The case was presented on cross-motions for summary judgment. The Tax Court reviewed whether the IRS abused its discretion in refusing to rescind the notices of intent to levy and in requiring the $8,520 downpayment as a condition of the installment agreement.

    Issue(s)

    Whether section 6331(k)(2) precludes the IRS from issuing notices of intent to levy after a taxpayer submits an offer for an installment agreement?

    Whether the IRS abused its discretion in determining that Eichler should make an $8,520 downpayment as a condition of his installment agreement?

    Rule(s) of Law

    Section 6331(k)(2) states that “No levy may be made under subsection (a) on the property or rights to property of any person with respect to any unpaid tax. . . during the period that an offer by such person for an installment agreement under section 6159 for payment of such unpaid tax is pending with the Secretary. “

    Section 301. 6331-4(b)(1) of the regulations provides that while levy is prohibited, “The IRS may take actions other than levy to protect the interests of the Government. “

    Section 6159 authorizes the Secretary to enter into an installment agreement upon determining that it would facilitate full or partial collection of the tax liability.

    Holding

    The Tax Court held that section 6331(k)(2) did not preclude the IRS from issuing the notices of intent to levy after Eichler submitted his offer for an installment agreement. The court further held that the IRS’s determination not to rescind the notices of intent to levy was not an abuse of discretion. However, the court remanded the case for further proceedings regarding the appropriateness of the $8,520 downpayment as a condition of the installment agreement, due to the lack of clarity on the economic hardship issue.

    Reasoning

    The court reasoned that section 6331(k)(2) specifically prohibits the IRS from making a levy during the pendency of an installment agreement offer, but it does not bar the issuance of notices of intent to levy. The court cited the regulations under section 301. 6331-4(b)(1), which allow the IRS to take actions other than levy to protect its interests, indicating that a notice of intent to levy is preliminary to a collection action and not barred by the statute. The court also considered the Internal Revenue Manual (IRM) provisions, noting that while the IRM directs the Collection Division to rescind notices in certain circumstances, it does not require Appeals to do so, and thus, the IRS did not abuse its discretion by following the IRM provisions applicable to Appeals.

    Regarding the $8,520 downpayment, the court found that the record did not allow for meaningful review of the IRS’s determination. The court noted that Eichler’s representative had asserted potential economic hardship due to the couple’s age and limited financial resources. The court concluded that the IRS’s failure to expressly consider these issues warranted a remand for further clarification and consideration of any new collection alternatives Eichler might propose.

    Disposition

    The Tax Court denied the parties’ cross-motions for summary judgment and remanded the case to the IRS Appeals for further proceedings concerning the $8,520 downpayment condition of the installment agreement.

    Significance/Impact

    Eichler v. Commissioner provides important guidance on the IRS’s collection practices, particularly the issuance of notices of intent to levy during pending installment agreement requests. The decision clarifies that such notices are not prohibited by law, distinguishing them from actual levies. The remand on the issue of the downpayment condition emphasizes the importance of considering potential economic hardship in determining installment agreement terms. This case may influence future IRS practices in handling similar taxpayer requests and could impact how taxpayers negotiate installment agreements to avoid economic hardship.

  • Eichler v. Commissioner, 143 T.C. No. 2 (2014): IRS Levy Notices and Installment Agreements

    Eichler v. Commissioner, 143 T. C. No. 2 (U. S. Tax Court 2014)

    In Eichler v. Commissioner, the U. S. Tax Court ruled that the IRS was not prohibited from issuing notices of intent to levy while a taxpayer’s request for an installment agreement was pending. The court held that the IRS did not abuse its discretion in refusing to rescind these notices. However, the court remanded the case for further review of the IRS’s determination to require a significant downpayment as a condition of an installment agreement, citing insufficient evidence to assess potential economic hardship on the taxpayer.

    Parties

    Renald Eichler was the petitioner, represented by Mark Harrington Westlake. The respondent was the Commissioner of Internal Revenue, represented by John R. Bampfield.

    Facts

    Renald Eichler requested a partial payment installment agreement from the IRS to address assessed trust fund recovery penalties totaling $189,374 for the last quarter of 2008 and the first two quarters of 2009. Before the IRS processed Eichler’s request, it sent him three Letters CP 90, which were Final Notices of Intent to Levy and Notices of Your Right to a Hearing. Eichler timely requested a Collection Due Process (CDP) hearing, where he renewed his installment agreement request and argued that the Letters CP 90 should be withdrawn as invalid. During the CDP hearing, the IRS settlement officer proposed an installment agreement contingent on Eichler making an $8,520 downpayment, which Eichler rejected due to potential economic hardship.

    Procedural History

    The IRS assessed trust fund recovery penalties against Eichler in December 2010. In April 2011, Eichler requested an installment agreement, which the IRS received but did not process promptly. The IRS sent Letters CP 90 in May 2011. Eichler filed a timely request for a CDP hearing, which occurred in October 2011. The IRS settlement officer’s final determination sustained the proposed levy and rejected Eichler’s request to withdraw the Letters CP 90. Eichler sought review in the U. S. Tax Court, where both parties moved for summary judgment.

    Issue(s)

    Whether I. R. C. sec. 6331(k)(2) precludes the IRS from issuing a notice of intent to levy while a taxpayer’s offer for an installment agreement is pending?

    Whether the IRS abused its discretion by not rescinding the Letters CP 90 under relevant provisions of the Internal Revenue Manual?

    Whether the IRS’s determination requiring an $8,520 downpayment as a condition of an installment agreement was an abuse of discretion?

    Rule(s) of Law

    I. R. C. sec. 6331(k)(2) states that “No levy may be made under subsection (a) on the property or rights to property of any person with respect to any unpaid tax” during the pendency of an offer for an installment agreement under section 6159. Section 6330(d) allows for judicial review of the IRS’s determination in a CDP hearing. The Internal Revenue Manual (IRM) provides guidance on IRS procedures but does not confer rights on taxpayers.

    Holding

    The Tax Court held that I. R. C. sec. 6331(k)(2) does not prohibit the IRS from issuing notices of intent to levy while an installment agreement offer is pending. The court further held that the IRS’s determination not to rescind the Letters CP 90 was not an abuse of discretion. However, the court found that the record did not allow for meaningful review of the IRS’s determination regarding the appropriateness of the $8,520 downpayment, and thus remanded the case for further proceedings on this issue.

    Reasoning

    The court reasoned that the plain language of I. R. C. sec. 6331(k)(2) prohibits the IRS from making a levy, but not from issuing notices of intent to levy. The court cited regulations under section 301. 6331-4(b)(1) that allow the IRS to take actions other than levy to protect government interests, such as issuing notices of intent to levy. The court also addressed the IRM provisions, noting that while the Collection Division is directed to rescind notices under certain circumstances, Appeals is not required to do so when an installment agreement is pending. The court found no abuse of discretion in the IRS’s application of these provisions. Regarding the downpayment, the court noted the lack of evidence in the record about the IRS’s consideration of Eichler’s economic hardship claims, necessitating remand for further review.

    Disposition

    The Tax Court denied the parties’ cross-motions for summary judgment and remanded the case for further proceedings on the issue of the appropriateness of the $8,520 downpayment.

    Significance/Impact

    Eichler v. Commissioner clarifies that the IRS can issue notices of intent to levy while an installment agreement request is pending, which has implications for taxpayer rights and IRS collection practices. The case also underscores the importance of the IRS providing clear reasoning for its determinations, particularly when imposing conditions that could cause economic hardship. This ruling may influence future IRS practices in handling installment agreements and levies, emphasizing the need for thorough documentation and consideration of taxpayer circumstances.