SCOTUS Reports

Tag: United States Tax Court

  • Rader v. Comm’r, 143 T.C. 376 (2014): Validity of Substitutes for Returns and Additions to Tax

    Rader v. Commissioner, 143 T. C. 376 (2014)

    In Rader v. Commissioner, the U. S. Tax Court upheld the IRS’s use of substitutes for returns (SFRs) to assess tax deficiencies against a non-filing taxpayer, Steven Rader, for the years 2003-2006 and 2008. The court rejected Rader’s technical challenges to the SFRs and his Fifth Amendment claim, confirming his liability for the deficiencies and related additions to tax. The decision underscores the IRS’s authority to prepare SFRs and the stringent requirements for taxpayers to challenge them, emphasizing the consequences of failing to file tax returns and the limited scope of judicial review in such cases.

    Parties

    Vivian L. Rader and Steven R. Rader, the petitioners, were both Colorado residents at the time the petitions were filed. The respondent was the Commissioner of Internal Revenue. Vivian L. Rader and Steven R. Rader were co-petitioners at the trial court level, but during the trial, it was stipulated that any tax deficiencies and related additions to tax would be attributed solely to Steven R. Rader.

    Facts

    Steven Rader, a self-employed plumber, did not file federal income tax returns for the years 2003 through 2006 and 2008. The IRS conducted an examination and used the bank deposits method to reconstruct Rader’s income for those years, determining that he had substantial earnings from his plumbing business. Additionally, Rader received income from the sale of two parcels of Colorado real property in 2006, from which 10% of the proceeds were withheld due to the buyers’ inability to confirm Rader’s non-foreign person status under section 1445 of the Internal Revenue Code. Rader failed to provide the required taxpayer identification number or certification of non-foreign status, which would have exempted the sales from the withholding requirement.

    Procedural History

    The IRS issued notices of deficiency to Vivian L. Rader and Steven R. Rader for the years 2003-2006 on February 11, 2011, and a separate notice to Steven R. Rader for 2008. These notices were based on substitutes for returns (SFRs) prepared by the IRS under section 6020(b). The IRS later amended its answer to change the filing status from “single” to “married filing separate” for the years 2003-2006, which increased the proposed deficiencies and additions to tax. At trial, the parties stipulated that any deficiencies and related additions to tax would be attributed solely to Steven R. Rader.

    Issue(s)

    1. Whether the IRS’s substitutes for returns (SFRs) were valid under section 6020(b) of the Internal Revenue Code.
    2. Whether Steven Rader was liable for the income tax deficiencies as determined by the IRS for the years 2003-2006 and 2008.
    3. Whether the tax withheld from the proceeds of the 2006 real property sales could be used to offset Steven Rader’s tax deficiency for that year.
    4. Whether Steven Rader’s Fifth Amendment claim was valid in refusing to testify about his non-filing of returns.
    5. Whether Steven Rader was liable for additions to tax under sections 6651(a)(1), 6651(a)(2), and 6654 of the Internal Revenue Code for the years in question.
    6. Whether Steven Rader was subject to a penalty under section 6673(a)(1) for maintaining proceedings primarily for delay or based on frivolous arguments.

    Rule(s) of Law

    1. Under section 6020(b), the IRS may prepare a substitute for return (SFR) if a taxpayer fails to file a required return. The SFR must be subscribed, contain sufficient information to compute the tax liability, and purport to be a return.
    2. Section 6211 defines a “deficiency” as the amount by which the tax imposed exceeds the excess of the tax shown on the return plus previous assessments over rebates. The definition excludes credits under sections 31 and 33 from the computation of a deficiency.
    3. Section 1445 requires withholding on dispositions of U. S. real property interests by foreign persons, giving rise to a credit under section 33.
    4. Section 6651 imposes additions to tax for failure to file or pay taxes, unless the failure is due to reasonable cause and not willful neglect.
    5. Section 6654 imposes an addition to tax for underpayment of estimated tax, with no exception for reasonable cause.
    6. Section 6673 authorizes the Tax Court to impose a penalty of up to $25,000 if a taxpayer institutes or maintains proceedings primarily for delay or if the taxpayer’s position is frivolous or groundless.

    Holding

    1. The IRS’s SFRs were valid under section 6020(b).
    2. Steven Rader was liable for the income tax deficiencies as determined by the IRS for the years 2003-2006 and 2008.
    3. The tax withheld from the proceeds of the 2006 real property sales could not be used to offset Steven Rader’s tax deficiency for that year because it constituted a section 33 credit, which is excluded from the deficiency calculation under section 6211.
    4. Steven Rader’s Fifth Amendment claim was invalid as there was no evidence of a criminal investigation.
    5. Steven Rader was liable for the additions to tax under sections 6651(a)(1), 6651(a)(2), and 6654 for the years in question, but the increase in the section 6651(a)(2) addition to tax based on the amended answer was rejected due to the lack of an amended SFR.
    6. Steven Rader was subject to a $10,000 penalty under section 6673(a)(1) for maintaining proceedings primarily for delay and based on frivolous arguments.

    Reasoning

    The court found that the IRS’s SFRs met the requirements of section 6020(b), as they were subscribed, contained sufficient information to compute the tax liability, and purported to be returns. The court rejected Rader’s argument that the SFRs were invalid due to the lack of a Form 1040 or a statutory citation, citing precedents that upheld the validity of SFRs without these elements. The court also rejected Rader’s claim that the tax withheld under section 1445 could offset his 2006 deficiency, reasoning that the withheld tax constituted a section 33 credit, which is excluded from the deficiency calculation under section 6211. Rader’s Fifth Amendment claim was dismissed due to the lack of evidence of a criminal investigation and the absence of a well-founded fear of prosecution. The court upheld the additions to tax under sections 6651 and 6654, finding no evidence of reasonable cause or lack of willful neglect. The increase in the section 6651(a)(2) addition to tax was rejected because the amended answer did not include a new SFR. Finally, the court imposed a penalty under section 6673(a)(1) due to Rader’s frivolous arguments and apparent intent to delay tax collection.

    Disposition

    The court entered a decision in favor of Steven Rader in docket No. 11409-11 (2003-2006 tax years) and appropriate decisions in docket Nos. 11476-11 and 27722-11 (2003-2006 and 2008 tax years, respectively), reflecting the court’s findings on the tax deficiencies, additions to tax, and the penalty under section 6673(a)(1).

    Significance/Impact

    Rader v. Commissioner reinforces the IRS’s authority to prepare SFRs and the validity of those SFRs in the absence of taxpayer-filed returns. The decision highlights the importance of timely filing and paying taxes, as well as the consequences of failing to do so, including the imposition of additions to tax and potential penalties for frivolous litigation. The case also clarifies the treatment of withheld taxes under section 1445 as credits that do not offset deficiencies, emphasizing the need for taxpayers to provide necessary documentation to avoid such withholding. This decision serves as a reminder to taxpayers of the importance of complying with tax filing and payment obligations and the limited grounds for challenging IRS determinations based on SFRs.

  • 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.

  • Ringo v. Commissioner, 143 T.C. 297 (2014): Jurisdiction Over Whistleblower Award Determinations

    Ringo v. Commissioner, 143 T. C. 297 (2014)

    In Ringo v. Commissioner, the U. S. Tax Court established that it retains jurisdiction over whistleblower award determinations once a timely petition is filed, even if the IRS later claims the determination was made in error. This ruling clarifies the court’s authority under I. R. C. § 7623(b)(4), ensuring whistleblowers can seek judicial review of IRS decisions denying their claims for awards based on information provided leading to tax collections.

    Parties

    Mica Ringo, the Petitioner, filed a claim for a whistleblower award against the Commissioner of Internal Revenue, the Respondent, in the United States Tax Court. Ringo was the whistleblower seeking judicial review of a determination by the IRS Whistleblower Office, while the Commissioner represented the IRS in defending the determination.

    Facts

    On February 17, 2011, Mica Ringo filed a Form 211, Application for Award for Original Information, with the IRS Whistleblower Office. He filed an amended Form 211 on October 6, 2011. On November 7, 2012, the Whistleblower Office mailed Ringo a letter stating he was ineligible for a whistleblower award under I. R. C. § 7623 because his information did not result in the collection of any proceeds. Ringo timely petitioned the Tax Court on December 7, 2012, invoking jurisdiction under I. R. C. § 7623(b)(4). On June 11, 2013, the Whistleblower Office sent another letter to Ringo, stating the November 7, 2012, letter was sent in error and that they were still considering his application.

    Procedural History

    After receiving the November 7, 2012, letter denying his eligibility for an award, Ringo filed a petition with the Tax Court on December 7, 2012, invoking jurisdiction under I. R. C. § 7623(b)(4). The Commissioner subsequently moved to dismiss the case for lack of jurisdiction, arguing that the November 7, 2012, letter was not a definitive determination because the Whistleblower Office later claimed it was still considering Ringo’s application. The Tax Court reviewed the motion to dismiss and ruled on the issue of jurisdiction.

    Issue(s)

    Whether the November 7, 2012, letter from the IRS Whistleblower Office constituted a “determination” under I. R. C. § 7623(b)(4), thereby conferring jurisdiction on the Tax Court, despite the subsequent June 11, 2013, letter stating the November 7 letter was sent in error?

    Rule(s) of Law

    I. R. C. § 7623(b)(4) states that “[a]ny determination regarding an award under paragraph (1), (2), or (3) may, within 30 days of such determination, be appealed to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter). ” The court’s jurisdiction is determined by the facts as they exist at the time the jurisdiction is invoked, and once jurisdiction is established, it generally continues unimpaired until the court’s decision or termination by the court.

    Holding

    The Tax Court held that the November 7, 2012, letter was a determination under I. R. C. § 7623(b)(4), and thus, the court had jurisdiction over the matter. The court’s jurisdiction was not terminated by the subsequent June 11, 2013, letter stating that the November 7 letter was sent in error.

    Reasoning

    The court reasoned that a determination for purposes of I. R. C. § 7623(b)(4) was made in the November 7, 2012, letter, which explicitly stated Ringo was ineligible for a whistleblower award. The court relied on precedent such as Cooper v. Commissioner, 135 T. C. 70 (2010), which held that a letter not labeled as a determination but stating the applicant was not entitled to an award and providing an explanation was sufficient to invoke the court’s jurisdiction. The court also emphasized that jurisdiction depends on facts at the time it is invoked and is not affected by subsequent events or the IRS’s later reconsideration of its determination. The court analogized to deficiency cases, where a notice of deficiency, even if erroneous or conceded, continues to provide a basis for jurisdiction. The court concluded that the June 11, 2013, letter did not nullify the jurisdiction already established by the timely filing of the petition in response to the November 7, 2012, letter.

    Disposition

    The Tax Court denied the Commissioner’s motion to dismiss for lack of jurisdiction, affirming that the court had jurisdiction over the matter based on the November 7, 2012, letter and Ringo’s timely petition.

    Significance/Impact

    Ringo v. Commissioner clarifies the jurisdiction of the Tax Court under I. R. C. § 7623(b)(4), ensuring that whistleblowers have access to judicial review once a determination denying an award is made, regardless of the IRS’s subsequent actions or reconsiderations. This ruling is significant for whistleblower law, as it solidifies the rights of whistleblowers to challenge IRS determinations and ensures the integrity of the judicial process in reviewing such claims. Subsequent cases have followed this precedent, reinforcing the court’s authority in whistleblower disputes and the importance of timely petitions in preserving jurisdiction.

  • Ringo v. Commissioner, 143 T.C. No. 15 (2014): Jurisdiction in Whistleblower Award Determinations

    Ringo v. Commissioner, 143 T. C. No. 15 (2014)

    In Ringo v. Commissioner, the U. S. Tax Court clarified its jurisdiction over whistleblower award determinations under I. R. C. § 7623. Mica Ringo challenged a letter from the IRS Whistleblower Office denying him an award. The Court held that such a letter constituted a ‘determination’ sufficient to invoke its jurisdiction, even if the IRS later claimed it was sent in error. This ruling reaffirms the Court’s authority to review IRS decisions on whistleblower awards, impacting how such cases are handled and reinforcing legal oversight of administrative actions.

    Parties

    Mica Ringo, the Petitioner, filed a petition against the Commissioner of Internal Revenue, the Respondent, in the United States Tax Court.

    Facts

    Mica Ringo submitted a Form 211 application for a whistleblower award to the IRS Whistleblower Office on February 17, 2011, and an amended application on October 6, 2011. On November 7, 2012, the Whistleblower Office sent Ringo a letter stating he was ineligible for an award because the information he provided did not result in the collection of any proceeds. Ringo timely filed a petition with the Tax Court on December 7, 2012. On June 11, 2013, the Whistleblower Office informed Ringo that the November 7, 2012, letter was sent in error and that his application was still under consideration. The Commissioner then moved to dismiss the case for lack of jurisdiction.

    Procedural History

    Ringo filed a petition with the U. S. Tax Court on December 7, 2012, challenging the November 7, 2012, determination by the IRS Whistleblower Office. The Commissioner moved to dismiss the case for lack of jurisdiction, arguing that the November 7, 2012, letter was not a definitive determination because the Whistleblower Office was still considering Ringo’s application. The Tax Court independently assessed its jurisdiction and denied the Commissioner’s motion to dismiss.

    Issue(s)

    Whether a letter from the IRS Whistleblower Office denying a whistleblower award, which is later claimed to be sent in error, constitutes a ‘determination’ under I. R. C. § 7623(b)(4) sufficient to invoke the jurisdiction of the U. S. Tax Court?

    Rule(s) of Law

    I. R. C. § 7623(b)(4) provides that ‘[a]ny determination regarding an award under paragraph (1), (2), or (3) may, within 30 days of such determination, be appealed to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter). ‘

    Holding

    The U. S. Tax Court held that the November 7, 2012, letter from the IRS Whistleblower Office constituted a ‘determination’ under I. R. C. § 7623(b)(4), and thus, the Tax Court had jurisdiction over the matter. The Court further held that the subsequent June 11, 2013, letter stating that the initial determination was sent in error did not terminate the Court’s jurisdiction.

    Reasoning

    The Court reasoned that its jurisdiction depends on the facts as of the time the petition was filed. The November 7, 2012, letter clearly stated that Ringo was ineligible for an award, which satisfied the requirement of a ‘determination’ under I. R. C. § 7623(b)(4). The Court cited precedent such as Cooper v. Commissioner, which held that a letter not labeled as a determination but stating ineligibility for an award is sufficient to invoke the Court’s jurisdiction. The Court also drew an analogy to notices of deficiency, noting that even if the IRS later concedes or claims error, the initial determination provides a basis for jurisdiction. The Court emphasized that its jurisdiction, once invoked, is not ousted by subsequent events, relying on cases like Charlotte’s Office Boutique, Inc. v. Commissioner. The Court rejected the Commissioner’s argument that the June 11, 2013, letter negated the November 7, 2012, determination, stating that the Court’s jurisdiction was unaffected by the IRS’s continued consideration of Ringo’s application.

    Disposition

    The U. S. Tax Court denied the Commissioner’s motion to dismiss for lack of jurisdiction.

    Significance/Impact

    Ringo v. Commissioner has significant implications for whistleblower cases under I. R. C. § 7623. It clarifies that the Tax Court’s jurisdiction is invoked by the IRS’s initial determination of ineligibility, even if that determination is later claimed to be erroneous. This ruling strengthens the oversight role of the Tax Court over IRS decisions on whistleblower awards, ensuring that taxpayers have a reliable avenue for appeal. It also underscores the principle that once jurisdiction is properly invoked, it cannot be easily divested by subsequent administrative actions or errors. This case may influence how the IRS handles whistleblower award determinations and communications to ensure clarity and finality in their decisions.

  • Yari v. Commissioner, 143 T.C. 157 (2014): Calculation of IRC Sec. 6707A Penalty for Non-Disclosure of Listed Transactions

    Yari v. Commissioner, 143 T. C. 157 (2014)

    In Yari v. Commissioner, the U. S. Tax Court ruled on how to calculate the IRC Sec. 6707A penalty for failing to disclose participation in listed transactions. The court held that the penalty must be calculated based on the tax shown on the original return, not on subsequent amended returns, even if they reflect the true tax liability. This decision underscores the strict liability nature of the penalty and its focus on the disclosure obligation rather than actual tax savings.

    Parties

    Steven Yari, the petitioner, challenged the Commissioner of Internal Revenue, the respondent, regarding the calculation of a penalty assessed under IRC Sec. 6707A for the 2004 tax year. The case progressed from the IRS Appeals Office to the U. S. Tax Court.

    Facts

    Steven Yari engaged in a Roth IRA transaction identified by the IRS as a listed transaction. He and his wife filed a joint federal income tax return for 2004, which did not disclose their participation in the transaction. The IRS assessed a $100,000 penalty under IRC Sec. 6707A for the non-disclosure. During the audit, Yari discovered an error on the original return and filed amended returns that included income from the transaction, resulting in a negative taxable income. Despite these amendments, the IRS maintained the original penalty calculation. The Small Business Jobs Act of 2010 retroactively changed the penalty calculation method, but the IRS declined to recalculate Yari’s penalty based on the amended returns.

    Procedural History

    The IRS issued a notice of intent to levy to collect the penalty, prompting Yari to request a collection due process (CDP) hearing. The hearing was suspended when Congress amended IRC Sec. 6707A, and the IRS reconsidered the penalty calculation. The IRS upheld the original penalty, and the Appeals Office affirmed this decision. Yari then petitioned the U. S. Tax Court for review of the notice of determination sustaining the collection action. The Tax Court reviewed the case de novo regarding the penalty amount.

    Issue(s)

    Whether the IRC Sec. 6707A penalty for failing to disclose a listed transaction should be calculated based on the tax shown on the original return or the tax shown on subsequent amended returns?

    Rule(s) of Law

    IRC Sec. 6707A imposes a penalty on any person who fails to include on any return or statement information required under IRC Sec. 6011 about a reportable transaction. The penalty amount for listed transactions is 75% of the decrease in tax shown on the return as a result of such transaction (or which would have resulted if the transaction were respected for federal tax purposes). For individuals, the penalty has a minimum of $5,000 and a maximum of $100,000.

    Holding

    The U. S. Tax Court held that the IRC Sec. 6707A penalty must be calculated using the tax shown on the original return, not on subsequent amended returns. The court rejected Yari’s argument that the penalty should reflect the actual tax savings as shown on the amended returns.

    Reasoning

    The court’s reasoning focused on the plain language of IRC Sec. 6707A, which links the penalty to the tax shown on the return giving rise to the disclosure obligation. The court found the statute clear and unambiguous, emphasizing that the penalty aims to penalize the failure to disclose, not the actual tax savings achieved by the transaction. The court also considered legislative history and the context of the statutory scheme, noting that Congress had the opportunity to link the penalty to the tax required to be shown but chose instead to base it on the tax reported. The court rejected arguments based on the potential harshness of the penalty, affirming that IRC Sec. 6707A imposes a strict liability penalty. The court’s interpretation was further supported by comparing IRC Sec. 6707A with other sections, like IRC Sec. 6651, which explicitly allow for adjustments based on the tax required to be shown.

    Disposition

    The U. S. Tax Court entered a decision for the Commissioner, upholding the $100,000 penalty as calculated based on the tax shown on Yari’s original 2004 tax return.

    Significance/Impact

    This decision clarifies the calculation of the IRC Sec. 6707A penalty, emphasizing that it is based on the tax shown on the original return, not on subsequent amendments. It underscores the strict liability nature of the penalty and its focus on the disclosure obligation. The ruling impacts taxpayers who fail to disclose participation in listed transactions, as it removes the possibility of reducing the penalty through amended returns that reflect true tax liabilities. This case may influence future interpretations and applications of similar penalty provisions in the tax code, emphasizing the importance of timely and accurate disclosure of reportable transactions.

  • 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.

  • Snow v. Comm’r, 142 T.C. 413 (2014): Finality of Tax Court Decisions and Jurisdictional Exceptions

    Snow v. Comm’r, 142 T. C. 413 (2014)

    In Snow v. Comm’r, the U. S. Tax Court upheld the finality of its earlier decisions dismissing the taxpayers’ petitions for lack of jurisdiction. The court ruled that it lacked jurisdiction to vacate its final decisions, emphasizing the narrow exceptions to the finality rule. This decision underscores the stringent adherence to the principle of finality in tax litigation, limiting the court’s ability to revisit final judgments absent fraud, voidness due to lack of jurisdiction, or clerical error.

    Parties

    The petitioners were Douglas P. Snow and Deborah J. Snow in the first case, and Douglas P. Snow in the second case. The respondent was the Commissioner of Internal Revenue. The cases were initially filed in the U. S. Tax Court as Docket Nos. 6838-95 and 6839-95.

    Facts

    In May 1993, the Commissioner mailed notices of deficiency to the Snows for their 1987 and 1990 tax years. The Snows filed petitions with the Tax Court in 1995, challenging the notices of deficiency. Both parties moved to dismiss for lack of jurisdiction; the Snows argued that the notices were not mailed to their last known address, while the Commissioner contended that the petitions were untimely. The cases were assigned to a Special Trial Judge, who initially recommended granting the Snows’ motions. However, after review, the report was revised to grant the Commissioner’s motions, and the Tax Court dismissed the cases on October 15, 1996. In 2005, following the Supreme Court’s decision in Ballard v. Commissioner, the Snows received the initial report of the Special Trial Judge. In 2013, they sought to vacate the 1996 dismissal orders.

    Procedural History

    The Tax Court initially dismissed the cases for lack of jurisdiction on October 15, 1996, treating the orders as final decisions that became effective on January 13, 1997. In 2005, after the Supreme Court’s decision in Ballard, the Tax Court informed the Snows of the Special Trial Judge’s initial report, which had recommended granting their motions to dismiss. The Snows moved for leave to file motions to vacate the 1996 dismissal orders in 2013, which the Tax Court denied in 2014, reaffirming the finality of its earlier decisions.

    Issue(s)

    Whether the Tax Court has jurisdiction to vacate its final decisions dismissing the Snows’ petitions for lack of jurisdiction, given the absence of recognized exceptions such as fraud on the court or a void decision due to lack of jurisdiction?

    Rule(s) of Law

    The finality of a Tax Court decision is governed by 26 U. S. C. § 7481, which states that a decision becomes final upon the expiration of the time allowed for filing an appeal. Exceptions to finality include fraud on the court, a decision void for lack of jurisdiction, or clerical errors. The court may also consider Federal Rules of Civil Procedure, such as Rule 60(b), for relief from a judgment, but only within a reasonable time and under narrow circumstances.

    Holding

    The Tax Court held that it lacked jurisdiction to vacate its final decisions dismissing the Snows’ petitions for lack of jurisdiction. The court found no evidence of fraud, mutual mistake, or clerical error that would justify vacating the decisions. The court also determined that the Snows’ motions were not filed within a reasonable time as required by Federal Rule of Civil Procedure 60(c).

    Reasoning

    The court’s reasoning focused on the strict application of the finality rule for Tax Court decisions, as mandated by 26 U. S. C. § 7481. The court emphasized that the recognized exceptions to finality are narrowly construed to preserve the integrity of final judgments. The court analyzed each potential exception: it had jurisdiction to decide its own jurisdiction in 1996, there was no evidence of fraud, and there was no mutual mistake or clerical error. The court also rejected the Snows’ argument that the lack of notice of the Special Trial Judge’s initial report constituted a due process violation, as it did not affect the court’s jurisdiction or the finality of the decisions. The court further noted that even if it had jurisdiction to apply Federal Rule of Civil Procedure 60(b), the Snows’ motions were not filed within a reasonable time, as required by Rule 60(c).

    Disposition

    The Tax Court denied the Snows’ motions for leave to file motions to vacate the 1996 orders of dismissal.

    Significance/Impact

    This case reaffirms the stringent application of the finality rule in tax litigation, limiting the Tax Court’s ability to revisit its decisions absent narrowly defined exceptions. It highlights the importance of timely filing and the limited recourse available to taxpayers once a decision becomes final. The decision also underscores the procedural impact of the Supreme Court’s ruling in Ballard v. Commissioner on the Tax Court’s practices regarding Special Trial Judges’ reports, although it did not alter the finality of the court’s earlier decisions.

  • Debough v. Commissioner, 142 T.C. 297 (2014): Interaction of Sections 1038 and 121 of the Internal Revenue Code

    Debough v. Commissioner, 142 T. C. 297 (2014)

    In Debough v. Commissioner, the U. S. Tax Court ruled that a taxpayer who reacquired his principal residence after a defaulted installment sale must recognize previously excluded gain under Section 121 upon reacquisition, as mandated by Section 1038 of the Internal Revenue Code. Marvin E. Debough sold his home in 2006, excluding $500,000 of gain, but had to repossess it in 2009 after the buyers defaulted. The court clarified that without resale within one year, as stipulated in Section 1038(e), the general rule of Section 1038(b) applies, requiring recognition of gain received before reacquisition. This decision underscores the interaction between these sections and their impact on homeowners facing similar circumstances.

    Parties

    Marvin E. Debough, the petitioner, sought a redetermination of a deficiency in federal income tax assessed by the respondent, the Commissioner of Internal Revenue. Throughout the litigation, Debough was represented by Matthew L. Fling, while the Commissioner was represented by John Schmittdiel and Randall L. Eager.

    Facts

    In 1966, Marvin E. Debough purchased his primary residence and surrounding land for $25,000. On July 11, 2006, he sold this property to Stonehawk Corp. and Catherine Constantine Properties, Inc. (collectively, the buyers) under a contract for deed, with a total purchase price of $1,400,000. The sale included a down payment of $250,000, with the remaining $1,150,000 to be paid over time with interest at 5% per annum. Debough reported an adjusted basis of $742,204 in the property, which included half of the original cost, capital improvements, a stepped-up basis from his deceased spouse, and sale expenses. However, the parties later stipulated a basis of $779,704. Debough and his deceased spouse excluded $500,000 of gain from their 2006 tax return under Section 121 and reported the remaining gain on an installment basis. Debough received payments totaling $505,000 before the buyers defaulted in 2009. After serving a notice of cancellation, Debough reacquired the property on or about July 29, 2009, incurring $3,723 in repossession costs. He reported $97,153 in long-term capital gains for 2009 but later amended his return to exclude this amount. The Commissioner assessed a deficiency, determining Debough should recognize $448,080 in long-term capital gains for 2009, including the previously excluded $500,000.

    Procedural History

    The Commissioner issued a notice of deficiency to Debough on June 18, 2012, asserting a deficiency of $58,893 in federal income tax for the 2009 taxable year. Debough timely filed a petition with the United States Tax Court seeking redetermination of the deficiency. The parties stipulated facts under Tax Court Rule 122. The Tax Court, with Judge Negah presiding, considered the case and ruled in favor of the Commissioner, ordering that a decision be entered for the respondent.

    Issue(s)

    Whether a taxpayer who reacquires his principal residence after an installment sale where gain was previously excluded under Section 121 must recognize that previously excluded gain upon reacquisition under Section 1038?

    Rule(s) of Law

    Section 1038 of the Internal Revenue Code provides that no gain or loss results from the reacquisition of real property sold on an installment basis and later reacquired in satisfaction of the debt secured by the property, except to the extent of money and other property received before reacquisition. Section 1038(b) mandates recognition of gain to the extent that the amount of money and the fair market value of other property received before reacquisition exceeds the gain on the sale reported as income before reacquisition. Section 1038(e) provides an exception for reacquisition of a principal residence, allowing nonrecognition of gain if the property is resold within one year of reacquisition. Section 121 permits taxpayers to exclude up to $500,000 of gain from the sale of a principal residence if certain conditions are met.

    Holding

    The Tax Court held that Marvin E. Debough was required to recognize long-term capital gain upon the reacquisition of his property under Section 1038, including the $500,000 previously excluded under Section 121, because he did not resell the property within one year of reacquisition as required by Section 1038(e).

    Reasoning

    The court reasoned that Section 1038 applies to the reacquisition of real property sold on an installment basis and later reacquired in satisfaction of the debt secured by the property. The court noted that Congress intended for Section 1038 to prevent recognition of gain or loss based on fluctuations in the fair market value of the property upon reacquisition, but not to the extent of cash or other property received by the seller before reacquisition. The court interpreted the specific exception in Section 1038(e) for principal residences as evidence that Congress intended for the general rule of Section 1038(b) to apply in cases like Debough’s, where the property was not resold within one year of reacquisition. The court rejected Debough’s argument that the absence of a specific provision mandating the recognition of previously excluded Section 121 gain meant that Section 1038 did not apply to recapture such gain. Instead, the court found that the mandatory language of Section 1038(b) required recognition of gain to the extent of money received before reacquisition, which in Debough’s case included the $505,000 received before the buyers defaulted. The court also noted that this interpretation was consistent with the basic principles of federal income tax law, which include any accession to wealth in gross income unless specifically excluded by statute.

    Disposition

    The Tax Court entered a decision for the respondent, the Commissioner of Internal Revenue, affirming the deficiency in federal income tax for the 2009 taxable year.

    Significance/Impact

    The decision in Debough v. Commissioner has significant implications for taxpayers who sell their principal residences on an installment basis and later reacquire them due to buyer default. It clarifies that the exclusion of gain under Section 121 is not permanent if the property is reacquired and not resold within one year, as provided by Section 1038(e). This ruling emphasizes the importance of understanding the interplay between Sections 1038 and 121 and may affect the financial planning of homeowners considering installment sales of their residences. The case also reinforces the principle that statutory exclusions and deductions must be explicitly provided by Congress and cannot be inferred from silence in the tax code.

  • Chandler v. Comm’r, 142 T.C. 279 (2014): Valuation of Conservation Easements and Reasonable Cause for Penalties

    Chandler v. Commissioner, 142 T. C. 279 (2014)

    In Chandler v. Commissioner, the U. S. Tax Court ruled that taxpayers Logan M. Chandler and Nanette Ambrose-Chandler could not claim charitable contribution deductions for facade easements on their historic homes due to lack of proof of value. The court also addressed penalties, allowing a reasonable cause defense for misvaluations in 2004 and 2005, but not for 2006 due to statutory changes. This case underscores the complexities of valuing conservation easements and the stringent application of penalty rules following tax law amendments.

    Parties

    Logan M. Chandler and Nanette Ambrose-Chandler were the petitioners throughout the litigation. The respondent was the Commissioner of Internal Revenue. The case was heard in the United States Tax Court.

    Facts

    Logan M. Chandler and Nanette Ambrose-Chandler owned two single-family residences in Boston’s South End Historic District. They granted facade easements on these properties to the National Architectural Trust (NAT), claiming charitable contribution deductions for 2004, 2005, and 2006 based on appraised values of the easements. The deductions were claimed over several years due to statutory limitations. In 2005, they sold one of the homes and reported a capital gain, claiming a basis increase due to improvements. The Commissioner disallowed the deductions and basis increase, asserting the easements had no value and imposing gross valuation misstatement and accuracy-related penalties on the underpayments. The Chandlers argued they had reasonable cause for any underpayments.

    Procedural History

    The Chandlers filed a petition with the United States Tax Court contesting the Commissioner’s determinations. The court’s review involved the application of de novo standard for factual findings and a review of legal conclusions for correctness. The court considered the valuation of the easements, the basis increase on the sold property, and the applicability of penalties under the Internal Revenue Code.

    Issue(s)

    Whether the charitable contribution deductions claimed by the Chandlers for granting conservation easements exceeded the fair market values of the easements?

    Whether the Chandlers overstated their basis in the property they sold in 2005?

    Whether the Chandlers are liable for accuracy-related penalties under section 6662 of the Internal Revenue Code?

    Rule(s) of Law

    Under section 170 of the Internal Revenue Code, taxpayers may claim charitable contribution deductions for the fair market value of conservation easements donated to certain organizations. Section 6662 imposes accuracy-related penalties for underpayments resulting from negligence, substantial understatements of income tax, or valuation misstatements. The Pension Protection Act of 2006 amended the rules for gross valuation misstatement penalties, eliminating the reasonable cause exception for charitable contribution property for returns filed after July 25, 2006.

    Holding

    The Tax Court held that the Chandlers failed to prove their easements had any value, and thus were not entitled to claim related charitable contribution deductions. The court also held that the Chandlers adequately substantiated a portion of the basis increase they claimed on the home they sold, entitling them to reduce their capital gain by that substantiated amount. The Chandlers were liable for accuracy-related penalties for unsubstantiated basis increases in 2005 and for gross valuation misstatement penalties for their 2006 underpayment, but not for 2004 and 2005 underpayments due to reasonable cause and good faith.

    Reasoning

    The court’s reasoning on the valuation of the easements focused on the credibility of expert appraisals. The Chandlers’ expert, Michael Ehrmann, used the comparable sales method, but the court found his analysis flawed due to the inclusion of properties outside Boston and significant subjective adjustments. The Commissioner’s expert, John C. Bowman III, failed to isolate the effect of the easements from other variables affecting property values. The court concluded that the easements did not diminish property values beyond existing local restrictions, leading to the disallowance of the deductions.

    Regarding the basis increase, the court acknowledged the Chandlers’ substantiation of $147,824 in improvement costs but disallowed the remaining claimed increase due to lack of documentation. The court rejected the Commissioner’s argument that the Chandlers may have already deducted the renovation costs on their business returns, as the Commissioner did not provide sufficient evidence during the examination.

    On penalties, the court applied the pre-Pension Protection Act rules for 2004 and 2005 underpayments, finding that the Chandlers had reasonable cause for their misvaluations due to their reliance on professional advice and lack of valuation experience. However, for the 2006 underpayment, the court applied the amended rules, denying a reasonable cause defense and upholding the gross valuation misstatement penalty. The court also found the Chandlers negligent in not maintaining adequate records for the full basis increase, thus upholding the accuracy-related penalty for 2005.

    Disposition

    The Tax Court’s decision was to be entered under Rule 155, sustaining the Commissioner’s disallowance of the charitable contribution deductions, allowing a partial basis increase, and imposing penalties as outlined in the holding.

    Significance/Impact

    Chandler v. Commissioner highlights the challenges taxpayers face in valuing conservation easements and the importance of maintaining thorough documentation for basis increases. The case also illustrates the impact of statutory changes on penalty assessments, particularly the elimination of the reasonable cause exception for gross valuation misstatements. This decision has implications for taxpayers claiming deductions for conservation easements, emphasizing the need for credible and localized valuation analyses. Subsequent cases have cited Chandler in discussions of easement valuation and penalty application, reinforcing its doctrinal significance in tax law.

  • Kraft v. Commissioner, 142 T.C. 259 (2014): Collection Due Process and IRS Levy Authority

    Kraft v. Commissioner, 142 T. C. 259 (2014)

    In Kraft v. Commissioner, the U. S. Tax Court upheld the IRS’s decision to proceed with a levy against Bruce Kraft for his 2009 tax liability, rejecting his request to collect from his spendthrift trust instead. The court ruled that the IRS did not abuse its discretion by not invading the trust first, as it was not required to collect from a specific asset to satisfy the taxpayer’s debt. This decision clarifies that the IRS has broad discretion in choosing which assets to levy upon, emphasizing the efficiency of tax collection over taxpayer preferences.

    Parties

    Bruce M. Kraft, the petitioner, filed a case against the Commissioner of Internal Revenue, the respondent, in the United States Tax Court. Throughout the litigation, Kraft was represented by various counsel, including Kenneth A. Burns, William D. Hartsock, and Sherry L. McDonald, while Whitney N. Moore represented the Commissioner.

    Facts

    Bruce M. Kraft, a resident of Washington, D. C. , filed his 2009 Federal income tax return late on December 28, 2010, reporting a tax liability of $141,045. He made partial payments totaling $80,500 by March 14, 2011, but the liability grew due to additions to tax, penalties, and interest. On May 24, 2011, the IRS issued a Final Notice of Intent to Levy and Notice of Your Right to a Hearing for the 2009 tax year, reflecting a balance due of $150,125 as of June 23, 2011. Kraft timely requested a Collection Due Process (CDP) hearing, proposing that the IRS levy on assets of the Bruce Kraft Discretionary Trust UTD 1999 (Kraft Trust), an irrevocable spendthrift trust governed by District of Columbia law, instead of his personal income distributions. During the CDP hearing, Kraft did not contest the underlying tax liability but focused on the collection method.

    Procedural History

    Following the CDP hearing, the Appeals Office issued a Notice of Determination on January 11, 2012, sustaining the proposed levy. Kraft petitioned the U. S. Tax Court for review on February 7, 2012. The Commissioner moved for summary judgment on October 21, 2013, which was heard on December 9, 2013. The court directed the parties to brief whether the IRS was required to invade the Kraft Trust before levying on Kraft’s personal assets. After considering the briefs submitted by February 10, 2014, the court granted the Commissioner’s motion for summary judgment on April 23, 2014, finding no abuse of discretion in the IRS’s decision to proceed with the levy.

    Issue(s)

    Whether the IRS abused its discretion by not determining to invade the Kraft Trust to satisfy Kraft’s 2009 tax liability instead of proceeding with a levy on Kraft’s personal assets?

    Rule(s) of Law

    Under I. R. C. sec. 6330, the IRS must provide taxpayers with a hearing before proceeding with a levy, during which the taxpayer may raise relevant issues, including collection alternatives. The IRS has broad authority to levy upon any property or rights to property belonging to the taxpayer under I. R. C. sec. 6331(a). The Appeals officer must balance the need for efficient tax collection with the taxpayer’s concern that any collection action be no more intrusive than necessary, as per I. R. C. sec. 6330(c)(3)(C). Additionally, under District of Columbia law, a creditor or assignee of the settlor may reach the maximum amount that can be distributed to or for the settlor’s benefit from an irrevocable trust, even if it has a spendthrift provision, as outlined in D. C. Code sec. 19-1305. 05(a)(2).

    Holding

    The U. S. Tax Court held that the IRS did not abuse its discretion by not determining to invade the Kraft Trust in order to satisfy Kraft’s 2009 tax liability. The court affirmed that the IRS was not required to collect involuntary payments from a specific source, such as the Kraft Trust, and could proceed with a levy on Kraft’s personal assets.

    Reasoning

    The court reasoned that the IRS’s decision to levy on Kraft’s personal assets was within its discretion, as it had the authority to levy upon any property belonging to the taxpayer. The court emphasized that the IRS was not obligated to specifically levy on the Kraft Trust, despite Kraft’s preference, and that a thorough investigation into the trust’s assets would be required before such a levy could be considered, which had not been conducted. The court also noted that even if the IRS were to levy on the trust, potential opposition from the trustees could lead to further litigation and delay. The court found that the Appeals officer appropriately balanced the need for efficient tax collection with Kraft’s concern that the collection action be no more intrusive than necessary, as required by I. R. C. sec. 6330(c)(3)(C). The court’s decision was supported by the principle that a settlor-beneficiary’s creditors can reach the maximum amount that can be distributed from an irrevocable trust under District of Columbia law, as per D. C. Code sec. 19-1305. 05(a)(2). The court concluded that the IRS’s choice of collection method was not an abuse of discretion and granted the Commissioner’s motion for summary judgment.

    Disposition

    The U. S. Tax Court granted the Commissioner’s motion for summary judgment, affirming the IRS’s decision to proceed with a levy on Kraft’s personal assets to satisfy his 2009 tax liability.

    Significance/Impact

    Kraft v. Commissioner reinforces the broad discretion the IRS has in selecting assets for levy to satisfy tax liabilities, highlighting that taxpayers cannot dictate which assets the IRS must target. This decision underscores the IRS’s authority under I. R. C. sec. 6331(a) to choose any property or rights to property belonging to the taxpayer for collection purposes. The case also clarifies the application of state law regarding spendthrift trusts in the context of IRS collection actions, affirming that creditors, including the IRS, can reach assets in such trusts under certain conditions. This ruling may influence future cases involving collection alternatives and the IRS’s discretion in choosing levy targets, emphasizing the importance of balancing efficient tax collection with the least intrusive method for taxpayers.