Opinion
7077-23L
07-15-2024
MICHAEL SAUSVILLE, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Tamara W. Ashford Judge
This matter is before the Court to decide on respondent's Motion for Summary Judgment, filed May 2, 2024, pursuant to Rule 121. Respondent contends that no genuine dispute exists as to any material fact and that the notice of determination of the Internal Revenue Service (IRS) Independent Office of Appeals (Appeals) approving a notice of intent to levy (levy notice) with respect to petitioner's unpaid federal income tax liability for the 2017 taxable year should be sustained as a matter of law.
Unless otherwise indicated, Rule references are to the Tax Court Rules of Practice and Procedure, statutory references are to the Internal Revenue Code, Title 26 U.S.C, in effect at all relevant times, and regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times. Some monetary amounts are rounded to the nearest dollar.
By Order served on the parties on May 6, 2024, the Court ordered petitioner to file a response to respondent's motion no later than June 3, 2024. On June 10, 2024, petitioner filed a document titled "Answer," which the Court recharacterized that same day as a Response to Motion for Summary Judgment. As explained below, we will grant summary judgment for respondent.
Background
Petitioner timely filed a Form 1040, U.S. Individual Income Tax Return, for 2017 (2017 return). On the 2017 return petitioner reported wages from Caesars Enterprise, LLC, of $64,077; gross and taxable Social Security benefits of $23,771 and $20,205, respectively; and a $36,761 business loss from his sole proprietorship "Sweet Fotos," which he detailed on a Schedule C, Profit or Loss From Business (Sole Proprietorship), attached to the 2017 return. As pertinent here, on the Schedule C petitioner reported the following expenses: $25,776 for car and truck expenses; $203 for insurance; $761 for office expenses; $4,596 for travel expenses; $1,455 for meals and entertainment expenses; $2,256 for other expenses; and $1,100 for expenses for business use of his home.
By letter dated September 23, 2019, the IRS notified petitioner that the 2017 return had been selected for audit and requested that he provide substantiation for the claimed car and truck expenses, travel expenses, meals and entertainment expenses, and other expenses by October 23, 2019. In response to this letter petitioner ultimately provided the IRS with various receipts substantiating some of his business expenses and a calendar reflecting total miles for each month in 2017.
During the audit, the IRS allowed all of petitioner's claimed Schedule C expenses except for the car and truck expenses. Accordingly, by letter dated August 17, 2020, the IRS notified petitioner of the proposed disallowance of the car and truck expenses and assertion of an accuracy-related penalty. In response to this letter petitioner did not provide any other substantiation to the IRS.
Consequently, on October 15, 2020, the IRS sent via certified mail a notice of deficiency to petitioner that was addressed to him at the same address as his address of record in this case. The notice of deficiency determined that (1) petitioner's claimed Schedule C deduction for car and truck expenses of $25,776 should be disallowed and (2) petitioner should be liable for an accuracy-related penalty of $1,278. The parties stipulate that petitioner received the notice of deficiency on October 19, 2020. When petitioner did not file a petition with this Court for redetermination of the deficiency and the accuracy-related penalty, the IRS then assessed the amounts determined in the notice of deficiency (plus interest).
We note that the September 23, 2019, and the August 17, 2020, IRS letters were addressed to that same address.
When petitioner failed to pay the assessed liability (plus interest) despite the IRS's having provided him with notice and demand for payment, the IRS sent him a levy notice dated August 30, 2021. The levy notice advised petitioner that the IRS intended to levy to collect his outstanding liability for 2017 which, through the date of the levy notice, totaled $7,428, and that he had a right to a hearing to appeal the proposed collection action.
In response to the levy notice petitioner timely submitted Form 12153, Request for a Collection Due Process or Equivalent Hearing (CDP hearing request). On his CDP hearing request he challenged his underlying liability, stating that he had "[n]o review or opportunity to verify his business deduction[s]." Petitioner did not request a collection alternative, but he did check the box for lien discharge (despite no such lien having been filed with respect to his assessed liability).
Petitioner's CDP hearing request was assigned to Appeals officer Mildred C. Foster (AO Foster), and by letter to petitioner dated December 16, 2022, she acknowledged receipt of the request and scheduled a telephone CDP hearing for January 19, 2023. She also indicated that the scheduled hearing was his opportunity to discuss with her the reasons he disagreed with the proposed levy or to discuss collection alternatives. Additionally, AO Foster outlined the issues she had to consider during the hearing, and to that end she advised petitioner to send her within 14 days "a statement identifying each inaccurate liability assessment on [his] account," together with documentation verifying his statement. Finally, she informed petitioner that if he preferred to reschedule the hearing or have a correspondence or in-person conference he should call or write her within 14 days.
On December 26, 2022, and January 12, 2023, petitioner attempted to contact AO Foster, requesting that the CDP hearing be rescheduled; ultimately, AO Foster agreed to reschedule the hearing to February 1, 2023. However, AO Foster never received by the date of the rescheduled hearing any information from petitioner.
On February 1, 2023, AO Foster held a telephone CDP hearing with petitioner. During the hearing petitioner maintained that he never had an opportunity to provide documentation for the disallowed car and truck expenses and had not received certain other IRS letters. AO Foster reviewed with petitioner the letters that the IRS had sent to him and confirmed that these letters had been sent to the proper mailing address, i.e., his address of record in this case. In response to petitioner's inquiry whether they could reach a compromise, AO Foster reviewed with him the different available collection alternatives and instructed him on how to file an offer in compromise. She also reviewed the audit reconsideration process, and petitioner stated that he would like to pursue that process and did not want to propose a collection alternative. Finally, AO Foster informed petitioner that the proposed levy would be sustained though, and she advised him of the time frame within which to appeal her determination to this Court. Petitioner did not raise any other issues during the hearing.
On February 6, 2023, AO Foster concluded that the issuance of the levy notice to petitioner was appropriate. Accordingly, Appeals issued a notice of determination dated April 24, 2023, sustaining the proposed levy and detailing the basis for the determination in an attached summary.
On May 7, 2023, petitioner, while residing in Nevada, timely filed a Petition with this Court for review of the notice of determination. In his Petition, he merely reiterates what he asserted in his CDP hearing request and during the CDP telephone hearing; to wit, that he never received any correspondence from the IRS requesting that he substantiate his 2017 claimed Schedule C car and truck expenses.
On April 8, 2024, the parties filed a Stipulation of Facts; Exhibits 1-J to 14-J attached to the Stipulation of Facts comprise of the complete Administrative Record of the CDP administrative proceeding in this case.
The Stipulation of Facts also includes an additional exhibit-Exhibit 15-P, which is a travel milage log that petitioner prepared on December 7, 2019, and sent to the IRS during the audit of the 2017 return. Respondent has reserved an objection for relevancy to this exhibit. We agree with respondent that this exhibit is not relevant, and thus we do not consider it in resolving respondent's summary judgment motion. See Ragsdale v. Commissioner, T.C. Memo. 2019-33, at *21-22 (and cases cited thereat).
Discussion
The purpose of summary judgment is to expedite litigation and avoid unnecessary and expensive trials. FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). The Court shall grant summary judgment if the moving party shows that there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law. Rule 121(a)(2); see also Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992) aff'd, 17 F.3d 965 (7th Cir. 1994). The burden is on the moving party to demonstrate that there is no genuine dispute as to any material fact; consequently, factual inferences will be viewed in a light most favorable to the party opposing summary judgment. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v. Commissioner, 79 T.C. 340, 344 (1982). The nonmoving party may not rest upon the mere allegations or denials of his pleadings, but must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); Sundstrand Corp., 98 T.C. at 520. On the basis of the record in this case, we conclude that there is no genuine dispute as to any material fact. Consequently, we may render a decision as a matter of law.
Under section 6331(a), if any person is liable to pay any tax neglects or refuses to do so after notice and demand, the Commissioner is authorized to collect the unpaid amount by way of a levy upon all property belonging to such person or upon which there is a lien. Pursuant to section 6330(a), the Commissioner must provide the person with written notice of and an opportunity for an administrative hearing to review the proposed levy.
If an administrative hearing is requested in a levy case, the hearing is to be conducted by Appeals. § 6330(b)(1). At the hearing, the taxpayer may raise any relevant issues, including spousal defenses, challenges to the appropriateness of the collection action, and collection alternatives. § 6330(c)(2)(A). Additionally, the taxpayer may challenge the existence or amount of his underlying tax liability if he did not receive a notice of deficiency with respect to the liability or did not otherwise have an earlier opportunity to dispute the liability. § 6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, 114 T.C. 176, 180- 81 (2000); Archer v. Commissioner, T.C. Memo. 2016-230, at *14.
Following the hearing the Appeals officer must determine among other things whether the proposed collection action is appropriate. In reaching the determination, the Appeals officer must take into consideration: (1) whether the requirements of applicable law and administrative procedure have been met, (2) all relevant issues raised by the taxpayer, and (3) whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that collection be no more intrusive than necessary. § 6330(c)(3); see also Lunsford v. Commissioner, 117 T.C. 183, 184 (2001).
Section 6330(d)(1) grants this Court jurisdiction to review the determination made by Appeals in a levy case. Where the underlying liability is properly at issue, the Court reviews any determination by Appeals regarding the underlying liability de novo. Goza, 114 T.C. 181-82. Where the underlying liability is not properly at issue, we review any determination by Appeals for abuse of discretion; that is, whether the determination was arbitrary, capricious, or without sound basis in fact or law. Hoyle v. Commissioner, 131 T.C. 197, 200 (2008); Murphy v. Commissioner, 125 T.C. 301, 308 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006); Goza, 114 T.C. at 182.
Petitioner's primary complaint throughout the CDP hearing process has been directed towards his underlying liability for 2017. He seemingly continues to do the same before this Court. However, the law is clear: if a taxpayer received a notice of deficiency with respect to his underlying liability or had an earlier opportunity to dispute the liability, he may not contest the liability in a CDP hearing (or thereafter in this Court). See § 6330(c)(2)(B); Sego, 114 T.C. at 609; Goza, 114 T.C. at 180-81; Archer, T.C. Memo. 2016-230, at *14; Treas. Reg. § 301.6330-1(e)(3), Q&A-E2.
The undisputed facts confirm that petitioner received a notice of deficiency for 2017 with respect to his federal income taxes, but he did not petition this Court to dispute that notice of deficiency. Thus, petitioner's underlying liability for 2017 is not at issue and we will review Appeals' determination for abuse of discretion only.
On the basis of our review of the Administrative Record, we find that AO Foster considered all the requisite factors under section 6330(c)(3) when making her determination. Indeed, petitioner does not contend otherwise and that thus the determination was arbitrary, capricious, or without sound basis in fact or law.
Additionally, we note that AO Foster did not abuse her discretion by declining to wait until petitioner availed himself of and completed the audit reconsideration process before having the notice of determination issued. See Jones v. Commissioner, T.C. Memo. 2007-142, slip op. at 5-6. We also note that, on the basis of our review of the Administrative Record, it was not an abuse of discretion for AO Foster to (1) allow petitioner in any event to challenge his underlying liability for 2017 and (2) determine that petitioner failed to present any documents for consideration in that regard.
Respondent having shown that there is no genuine dispute of material fact and that he is entitled to judgment as a matter of law, we will grant his Motion for Summary Judgment. With regard to petitioner's outstanding tax liability for 2017, he should note that he is of course free to continue to negotiate with the IRS concerning that liability, but he is entitled to only one CDP hearing and Tax Court proceeding with respect to the proposed levy. See Ragsdale, T.C. Memo. 2019-33, at *35 (citing Perrin v. Commissioner, T.C. Memo. 2012-22, slip op. at 8). Upon due consideration, it is hereby
ORDERED that respondent's Motion for Summary Judgment, filed May 2, 2024, is granted. It is further
ORDERED AND DECIDED that respondent may proceed with the collection action with respect to petitioner's unpaid federal income tax liability for the 2017 taxable year, as described in the Notice of Determination Concerning Collection Actions under [ ] Sections 6320 or 6330 of the Internal Revenue Code, dated April 24, 2023.