Opinion
20111-22L
04-21-2023
LI-CHIEN TSAI AND DEBIE C. TSAI, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER AND DECISION
Kathleen Kerrigan Chief Judge.
On March 13, 2023, respondent filed a Motion for Summary Judgment seeking to sustain respondent's notice of determination pertaining to the 2001 tax year. Petitioners filed an Objection to respondent's Motion on April 4, 2023.
Background
On May 26, 2009, Peking Investment Holdings, LLC, as the tax matters partner, filed a Petition on behalf of Peking Investment Fund, LLC (Peking) at docket number 12772-09. Petitioner Lie-Chien Tsai participated in Peking's case as an intervenor. On September 23, 2019, the Court entered a stipulated decision resolving the case.
On October 13, 2020, respondent issued petitioners Letter 4735, Notice of Computational Adjustment, for the 2001 taxable year. The notice provided that petitioners were liable for unpaid taxes as a result of an adjustment to a partnership (Peking) in which they had invested. On November 17, 2020, petitioners wrote to respondent requesting additional information on how respondent had reached the computations. Petitioners also asserted that various third parties may have partially or wholly satisfied their portion of the Peking tax liability.
On January 4, 2021, respondent issued petitioners Notice CP501, which asserted that petitioners were liable for $1,546,848 in unpaid taxes for the 2001 tax year. On January 12, 2021, petitioners submitted Form 9423, Collection Appeal Request (CAP). They checked the box for appealing a levy or proposed levy. Petitioners again argued, without substantiation, that other third parties may have satisfied their tax liability.
On May 10, 2021, respondent issued Notice CP504, Final Balance Due Reminder - Notice of Intent to Seize (Levy) Your Property or Rights to Property. On May 19, 2021, petitioners submitted a second CAP request, this time seeking to appeal a federal tax lien. Petitioners argued, without substantiation, that third parties may have satisfied the liability on their behalf. On June 28, 2021, respondent informed petitioners that their CAP requests had been denied because they involved an audit reconsideration.
On August 11, 2021, petitioners filed a Freedom of Information Act (FOIA) request for any evidence of third-party payments received by respondent on behalf of petitioners. On September 13, 2021, respondent's disclosure manager requested additional time to search the records inventory. The disclosure manager later informed petitioners that after a search had been conducted, no records had been discovered.
On January 6, 2022, respondent issued petitioners Letter 1058-A, Final Notice - Notice of Intent to Levy and Notice of Your Rights to a Hearing, for the 2001 taxable year. On January 7, 2022, petitioners sent respondent a completed Form 12153, Request for a Collection Due Process (CDP) or Equivalent Hearing. They checked the box for "Collection alternative: I Cannot Pay Balance," and requested that the notice of federal tax lien be withdrawn. Petitioners did not raise the underlying liability in the Petition. They attached a statement which again asserted that third parties had made payments on their behalf without substantiation. Respondent then transferred petitioners' request for a CDP hearing to the Independent Office of Appeal (Appeals).
On March 21, 2022, respondent sent petitioners Letter 4837 which scheduled a telephonic conference for April 26, 2022, and requested that they complete and return Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals. On April 6, 2022, petitioners requested that the telephonic conference be postponed. On April 22, 2022, petitioners faxed the settlement officer a letter asserting that unrelated third parties had entered into agreements with respondent to pay petitioners' tax liabilities. They provided no evidence of those agreements.
On May 10, 2022, the settlement officer held a telephonic conference with petitioners' counsel where counsel again alleged that part of the 2001 tax liability may have been paid by third parties. Petitioners' counsel requested a two-week extension to conduct further research on the matter. On May 24, 2022, petitioners' counsel informed the settlement officer that he was unable to obtain the information needed and requested a notice of determination be issued. The settlement officer verified that that all legal and procedural requirements were followed. On August 26, 2022, respondent issued petitioners a Notice of Determination Concerning Collection Action under Section 6320 or 6330. On September 13, 2022, petitioners filed the Petition.
Unless otherwise indicated, all statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure. All monetary amounts are rounded to the nearest dollar.
Discussion
Summary judgment serves to expedite litigation and avoid unnecessary and expensive trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Either party may move for summary judgment upon all or part of the legal issues in controversy. Rule 121(a). The Court grants summary judgment if the pleadings and other acceptable materials show no genuine dispute as to any material fact and a decision may be rendered as a matter of law. Rule 121(b); see, e.g., Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994); Bond v. Commissioner, 100 T.C. 32, 36 (1993).
The Court will view any factual inferences in the light most favorable to petitioners, the nonmoving party. Bond, 100 T.C. at 36. The nonmoving party may not rest upon mere allegations or denials in their pleadings but must set forth specific facts showing that there is a genuine dispute for trial. Sundstrand Corp., 98 T.C. at 520.
Petitioners have failed to demonstrate, by affidavits or other acceptable materials, that there is a genuine issue for trial. Rule 121(d). Consequently, we conclude that there is no dispute as to any material fact and that a decision may be rendered as a matter of law.
Section 6331(a) authorizes the Secretary to levy upon the property and property rights of a taxpayer who fails to pay a tax within ten days after notice and demand. Before the Secretary may levy upon the taxpayer's property, the Secretary must notify the taxpayer of the Secretary's intention to make the levy. § 6331(d)(1). The Secretary must also notify the taxpayer of his or her right to a CDP hearing. § 6330(a)(1). If the taxpayer requests a CDP hearing, the hearing is conducted by Appeals. § 6330(b)(1). At the hearing the taxpayer may raise any relevant issue relating to the unpaid tax or the proposed collection action. § 6330(c)(2)(A).
Section 6330 requires the Secretary to provide a person notice and opportunity for a hearing before an impartial officer or employee of Appeals before levying on the person's property. The person may challenge the existence or the amount of the underlying tax liability for any period only if the person did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the liability. § 6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000).
Following the hearing, the Appeals officer must determine whether proceeding with the proposed levy action is appropriate. In making that determination, the Appeals officer is required to take into consideration: (1) whether the requirements of any applicable law or administrative procedure have been met; (2) any issues appropriately raised by the taxpayer; and (3) whether the proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that any collection action be no more intrusive than necessary. § 6330(c)(3); see also Lunsford v. Commissioner, 117 T.C. 183, 184 (2001).
Section 6221 provides that the tax treatment of partnership items is determined at the partnership level. If a determination of partnership items in a partnership-level proceeding is memorialized by final court decision, the underlying tax liability is conclusive and any further challenge to it is precluded. Malone v. Commissioner, 148 T.C. 372, 375 (2017). Where the underlying tax liability cannot be challenged, our review is for abuse of discretion. Sego, 114 T.C. at 610. Furthermore, petitioners did not raise the underlying liability in their petition. An abuse of discretion occurs if Appeals exercises its discretion "arbitrarily, capriciously, or without sound basis in fact or law." Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
The Court does not conduct an independent review and substitute its judgment for that of the settlement officer. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff'd, 469 F.3d 27 (1st Cir. 2006). If the Appeals officer follows all statutory and administrative guidelines and provides a reasoned, balanced decision, the Court will not reweigh the equities. Link v. Commissioner, T.C. Memo. 2013-53 at *12.
The settlement officer did not abuse her discretion by sustaining the proposed levy because of petitioners' failure to substantiate their case. In response to respondent's Letter 1058-A, petitioners submitted Form 12153, checking the box for "Collection alternative: I Cannot Pay Balance." Respondent then issued petitioners Letter 4837 requesting that they complete and return Form 433-A. They failed to do so. It was not an abuse of discretion for the settlement officer to reject collection alternatives and sustain the proposed collection action on the basis of their failure to submit requested financial information. See Huntress v. Commissioner, T.C. Memo. 2009-161, at slip op. 5.
Throughout the appeals process, petitioners asserted that unrelated third parties may have satisfied the tax debt. They submitted no financial information evidencing the alleged payments nor did they produce any agreements that would have supported payments made by third parties. Petitioners could not state with certainty whether funds received from third parties should have been applied to their account. It was not abuse of discretion for the settlement officer to sustain the proposed levy on the basis of petitioners' failure to submit evidence.
Even though petitioners did not provide any evidence to support their contention, the settlement officer reviewed the account transcript for the 2001 tax year. The transcript shows no payments having been made towards petitioners' account balance. The settlement officer's reliance on the account transcript as evidence of non-payment was not an abuse of discretion. See Roberts v. Commissioner, 118 T.C. 365, 369-71 (2002), aff'd, 329 F.3d 1224 (11th Cir. 2003).
Petitioners' FOIA request did not yield any evidence that would support their assertion. Even if petitioners could show that others had agreed to pay the tax on their behalf, respondent is not obligated to pursue every person responsible for paying the taxes. See Howard v. United States, 711 F.2d 729, 735 (5th Cir. 1983), aff'g No. CA3-81-1427-F, 1982 WL 1675 (N.D. Tex. 1982). Respondent therefore did not abuse its discretion in sustaining the proposed levy.
To reflect the foregoing, it is hereby
ORDERED that respondent's Motion for Summary Judgment dated March 13, 2023, is granted. It is further
ORDERED AND DECIDED that respondent's notice of determination, dated August 26, 2022, upon which this case is based, is sustained.