Opinion
25628-21L
01-18-2024
RENEE T. STUART, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND ORDER OF DISMISSAL
Patrick J. Urda, Judge.
This collection due process (CDP) case was continued from the Court's December 19, 2022, Jacksonville, Florida trial session and jurisdiction was retained by the undersigned. Three motions are pending before this Court: (1) petitioner Renee T. Stuart's motion for summary judgment [Doc. 15; (2) the Commissioner's motion to dismiss on ground of mootness [Doc. 27]; and (3) Ms. Stuart's motion for reasonable litigation or administrative costs [Doc. 31]. We will deny Ms. Stuart's motion for summary judgment, grant the Commissioner's motion to dismiss, and deny Ms. Stuart's motion for reasonable litigation or administrative costs.
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C. (I.R.C.), in effect at all relevant times. "Doc." references are to the documents in the record for this case as compiled by the Clerk of this Court, using .pdf pagination. All monetary amounts are rounded to the nearest dollar.
Background
In 2016, the Commissioner issued to Ms. Stuart and her husband, Douglas Stuart, a notice of deficiency that determined a deficiency of $7,276 and an accuracy-related penalty of $1,455 for their 2013 tax year. [Doc. 27 at 13.] The Stuarts did not petition this Court for redetermination, see section 6213(a), and the IRS thereafter assessed the deficiency in July 2016. [Id. at 11.]
Mr. Stuart subsequently filed for bankruptcy relief in the U.S. District Court of the Middle District of Florida. [Doc. 15 at 75-84.] The IRS filed a proof of claim, which included a priority claim with respect to the Stuarts' 2013 tax liabilities. [Id. at 85-90.] In April 2017, the district court approved a settlement that directed the bankruptcy trustee to pay $5,500 "toward the priority component of the IRS claim." [Id. at 104.] Although the trustee dutifully issued the check to the IRS, the amount was not credited against the Stuarts' 2013 tax liability. [Id. at 147.] The Stuarts' outstanding 2013 liability was fully satisfied in April 2019 by means of offsets of overpayments from Ms. Stuart's 2017 and 2018 taxes. [Doc. 27 at 12.]
Despite the full payment of the 2013 liability, the IRS issued to Ms. Stuart a levy notice for this period in December 2019. [Doc. 27 at 35.] Ms. Stuart timely requested a CDP hearing with the IRS Office of Appeals and contended the IRS had misapplied the $5,500 payment, which had not been properly credited to the Stuarts' 2013 tax year. [Id. at 31.] After receiving additional documentation from Ms. Stuart, the settlement officer attempted to locate the missing check, but to no avail. [Id. at 31-32.] He accordingly apprised the Centralized Insolvency Operation of the issue. [Id. at 32.]
The Office of Appeals thereafter issued a notice of determination that did not sustain the proposed levy, as the liability had been satisfied in full by means of a refund offset. [Doc. 27 at 33-36.] With respect to the missing payment, the notice stated "[s]ince your 2013 tax balance was subsequently paid in full . . ., you were no longer in jeopardy of the proposed levy action and there was nothing further for Appeals to consider." [Id. at 36.] It further recommended that Ms. Stuart contact the Centralized Insolvency Operation to discuss the missing payment. [Id.] During the pendency of Ms. Stuart's case in this Court, the $5,500 bankruptcy payment was located and applied to the Stuarts' 2013 tax year. [Docs. 24, 25.]
Discussion
I. Mootness
This Court is a court of limited jurisdiction, see Naftel v. Commissioner, 85 T.C. 527, 529 (1985), and we may exercise jurisdiction only to the extent expressly authorized by statute, see Bremen v. Commissioner, 66 T.C. 61, 66 (1976). As the party invoking the Court's jurisdiction, Ms. Stuart bears the burden of demonstrating that jurisdiction exists. See David Dung Le, M.D., Inc. v. Commissioner, 114 T.C. 268, 270 (2000), aff'd, 22 Fed.Appx. 837 (9th Cir. 2001).
We have jurisdiction to review an Office of Appeals determination pursuant to section 6330(d)(1). See Murphy v. Commissioner, 125 T.C. 301, 308 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006). Where the validity of the underlying tax liability is properly at issue, we review the determination regarding the underlying tax liability de novo. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181-82 (2000). We review all other determinations for abuse of discretion. See Sego, 114 T.C. at 610; Goza, 114 T.C. at 182.
In this case, Ms. Stuart seeks to challenge the settlement officer's work in attempting to track down the missing $5,500 payment, which was to be applied to her 2013 tax year. We cannot entertain this challenge, however, because this case is moot. The IRS "applied available credits from other tax years to satisfy in full [Ms. Stuart's] outstanding liability for 2013" and "there no longer exists an unpaid liability . . . upon which collection could be based." Amada Iris Gluck Irrevocable Trust v. Commissioner, 154 T.C. 259, 265 (2020). "[W]hatever right [Ms. Stuart] may have to challenge . . . in this proceeding arises only in connection with her challenge to the proposed collection action." Greene-Thapedi v. Commissioner, 126 T.C. 1, 8 (2006). "Inasmuch as the proposed levy is moot, [Ms. Stuart] has no independent basis to challenge" collection issues, such as the settlement officer's efforts during the CDP hearing to locate the misplaced check. Id.; cf. Vigon v. Commissioner, 149 T.C. 97, 105 (2017) (holding that valid liability challenges "may remain even after the collection issues have been resolved or become moot").
Given our conclusion that this case is moot, we will deny Ms. Stuart's motion for summary judgment contending that the IRS "failed to provide proper credit" for the $5,500 payment. [Doc. 15 at 9.] This does not leave Ms. Stuart without other avenues of relief: "[i]n post-payment circumstances, '[a] taxpayer seeking refund of taxes erroneously or unlawfully assessed or collected may bring an action against the Government either in the United States district court . . . or in the United States Court of Federal Claims." Weber v. Commissioner, 138 T.C. 348, 366-67 (2012).
II. Motion for Reasonable Administrative or Litigation Costs
Although Ms. Stuart's substantive challenge is moot, we nonetheless retain jurisdiction to consider her motion for costs pursuant to section 7430. See Foote v. Commissioner, T.C. Memo. 2013-276, at *9 n.10 ("[T]his Court permits a motion for costs filed after dismissal of a case for lack of jurisdiction."). Ms. Stuart seeks $10,749 in attorneys' fees, $1,380 in future fees, and $406 in costs, claiming that she prevailed with the respect to the central issue in the case, i.e., the misapplication of the bankruptcy payment. [Doc. 31 at 17.]
Ms. Stuart's motion pursues both administrative and litigation costs. [Doc. 31.] She fails to demonstrate, however, that she requested reasonable administrative costs from the IRS as provided in section 7430(b)(4). We will therefore only consider her motion as to litigation costs. See, e.g., Bent v. Commissioner, T.C. Memo. 2009-146, 2009 WL 1766596, at *3, *5.
Section 7430(a) provides for the award of administrative and litigation costs to a taxpayer in a proceeding involving, inter alia, the collection of any tax, interest, or penalty. In general, such an award may be made where the taxpayer establishes that: (1) she is the prevailing party, (2) she did not unreasonably protract the proceedings, (3) the amount of the costs requested is reasonable, and (4) she exhausted the administrative remedies available. I.R.C. § 7430(a), (b)(1), (b)(3), (c)(1).
A taxpayer will not be treated as the prevailing party, however, if the Commissioner establishes that "the position of the United States in the proceeding was substantially justified." I.R.C. § 7430(c)(4)(B)(i). "A [litigation] position is substantially justified if it has a reasonable basis in fact and law and is justified to a degree that could satisfy a reasonable person." Mikel v. Commissioner, T.C. Memo. 2015-173, at *5 (citing Pierce v. Underwood, 487 U.S. 552, 565 (1988); Huffman v. Commissioner, 978 F.2d 1139, 1147 (9th Cir. 1992); Swanson v. Commissioner, 106 T.C. 76, 86 (1996)). "The relevant inquiry is whether the Commissioner knew or should have known that his position was invalid when adopted, given the facts available and legal precedent related to the case." Da Silva v. Commissioner, T.C. Memo. 2012-235, at *7 (citing Nalle v. Commissioner, 55 F.3d 189, 191 (5th Cir. 1995), aff'g T.C. Memo. 1994-182). The fact that the Commissioner concedes an issue is not determinative of the reasonableness of the Commissioner's position. See Wasie v. Commissioner, 86 T.C. 962, 969 (1986).
Both parties agree that the central issue in this proceeding is whether the settlement officer abused his discretion in connection with the investigation of the missing $5,500 trustee payment. [Doc. 31 at 12-14; Doc. 35 at 20.] The Commissioner's position that the settlement officer did not abuse his discretion is substantially justified. To put it simply, the application of the refund offsets to satisfy the Stuarts' 2013 liability mooted the levy action and thus eliminated the subject of the settlement officer's review. Given this state of affairs, the settlement officer did not abuse his discretion by ending his involvement with the matter by issuing an appropriate notice of determination on mootness grounds and then referring Ms. Stuart to the proper office to locate the missing payment (which happily occurred).
In consideration of the foregoing, it is
ORDERED that Ms. Stuart's motion for summary judgment [Doc. 15] filed October 18, 2022, is denied. It is further
ORDERED that the Commissioner's motion to dismiss on ground of mootness [Doc. 27] filed June 20, 2023, is granted, and this case is dismissed on ground of mootness. It is further
ORDERED that Ms. Stuart's motion for reasonable litigation or administrative costs [Doc. 31] filed September 7, 2023, is denied.