Jimmy Asiegbu Prince v. Commissioner , 133 T.C. No. 12 ( 2009 )

133 T.C. No. 12UNITED STATES TAX COURT
JIMMY ASIEGBU PRINCE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13858-08L. Filed November 2, 2009.
To collect P’s 1997, 1998, 1999, and 2002 unpaid
income tax liabilities and additions to tax discharged
in P’s 2005 bankruptcy filing, R served a notice of
jeopardy levy on the Los Angeles County District
Attorney’s Office with respect to funds that the Los
Angeles Police Department had seized from P before the
bankruptcy on suspicion of fraudulent credit card
transactions.
Held: P cannot raise third-party claims in a lien
or levy case.
Held, further, jeopardy levy is proper here where
funds belong to P’s prebankruptcy estate and are
subject to a prebankruptcy lien filed by R.
Jimmy Asiegbu Prince, pro se.
Vivian Bodey and Debra Bowe, for respondent.
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OPINION
WHERRY, Judge: This matter is before the Court on
respondent’s motion for summary judgment. In a May 7, 2008,
Notice of Determination Concerning Collection Action(s) Under
Section 6320 and/or 6330, respondent determined that it was
appropriate to collect petitioner’s unpaid income tax liabilities
and additions to tax (unpaid tax liabilities) for 1997, 1998,
1999, and 2002 by serving a notice of jeopardy levy. Petitioner
on June 6, 2008, timely petitioned the Court to review that
determination. On April 17, 2009, respondent filed a motion for
summary judgment. Petitioner filed a response to that motion,
and respondent filed a reply to petitioner’s response. A hearing
was held on the matter on June 25, 2009, in Los Angeles,
California. Following the hearing, petitioner filed a brief
responding to the arguments respondent made in his reply and at
the hearing. As explained below, the Court will grant
respondent’s motion for summary judgment.
Background
Respondent initially determined in a February 2002 notice of
deficiency that petitioner had Federal income tax deficiencies
for 1997, 1998, and 1999. Petitioner timely petitioned the Court
to redetermine respondent’s determinations. On March 6, 2003,
while petitioner’s deficiency case at docket No. 9120-02 was
pending, the Los Angeles Police Department (LAPD) seized
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$263,899.93 from petitioner on suspicion that he had engaged in
fraudulent credit card transactions. Thereafter, the Court
issued an opinion in favor of respondent and a September 30,
2003, order and decision in which we decided that petitioner was
liable for Federal income tax deficiencies and additions to tax
for 1997, 1998, and 1999. Prince v. Commissioner, T.C. Memo.
2003-247. Petitioner filed a notice of appeal, but the appeal
was dismissed. On January 28, 2004, respondent assessed the
deficiencies and additions to tax as stated in the Court’s
September 30, 2003, order and decision.
On April 7, 2005, respondent filed a notice of Federal tax
lien with the Los Angeles County Recorder for 1997, 1998, 1999,
and 2002. Subsequently, on June 2, 2005, petitioner filed a
petition under chapter 7 of the Bankruptcy Code with the U.S.
Bankruptcy Court for the Central District of California.
Petitioner did not include the funds that had been seized by the
LAPD in the schedules of debtor’s assets filed with his
bankruptcy petition although at least $212,237.89 of such funds
apparently remained in the possession of the LAPD at that time.1
1
Petitioner listed a total of $15,106 in assets, including
$405 of cash on hand and $176 in a checking account. The
remaining assets consisted of noncash personal property.
Petitioner’s schedules of creditors’ claims listed a total of
$587,557.74 in liabilities, all of which were classified as
unsecured. Included among them were petitioner’s unpaid Federal
tax liabilities for the tax years 1997, 1998, 1999, and 2002 in
an aggregate amount of $304,200, the amount of the unpaid balance
(continued...)
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Petitioner claimed all of the assets that he did include in the
schedules of debtor’s assets as exempt from his bankruptcy
estate, and the bankruptcy trustee did not object to the
exemptions claimed. The bankruptcy court treated petitioner’s
bankruptcy petition as a no-asset case and discharged
petitioner’s dischargeable debts on January 27, 2006.
In early December 2007 the Los Angeles Inter-Agency
Metropolitan Crime Task Force informed respondent that the money
seized from petitioner would soon be returned to him. On
December 7, 2007, respondent served a notice of jeopardy levy on
the Los Angeles County District Attorney’s Office. Also on
December 7, 2007, respondent sent petitioner a Notice of Jeopardy
Levy and Right of Appeal. Respondent’s revenue officer, Farrell
Stevens, spoke with petitioner about the jeopardy levy on
December 14, 2007, and on December 20, 2007, respondent received
from petitioner a Form 12153, Request for a Collection Due
Process or Equivalent Hearing.
On the Form 12153 petitioner stated that he did not owe
respondent the money that had been collected because (1) the
1
(...continued)
due shown on the Apr. 7, 2005, notice of Federal tax lien. This
amount was categorized under unsecured priority claims--an
apparent error since respondent’s Federal tax lien should have
accorded it secured party status. The Court requested the
parties to notify the bankruptcy court about this case and of the
omission from the debtor’s schedules of assets of the $212,237.89
in funds seized by the Los Angeles Police Department.
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underlying liability was incorrect,2 (2) his liabilities were
discharged in bankruptcy, and (3) some of the levied funds did
not belong to him. After a face-to-face meeting and a telephone
conference, respondent’s Appeals settlement officer, Adlai
Climan, issued the aforementioned notice of determination
sustaining the jeopardy levy action. An Appeals case memorandum
attached to the notice of determination indicated that (1)
petitioner was precluded from challenging the underlying
liabilities for 1997, 1998, and 1999 because the Court had
decided those years, (2) the money seized by the LAPD was pre-
bankruptcy-petition property that was still subject to lien and
levy action even if petitioner was no longer personally liable
after his debts were discharged in bankruptcy, and (3) there was
no credible evidence that petitioner did not own the levied
money.
Discussion
A party moving for summary judgment bears the burden of
demonstrating that no genuine issue of material fact exists and
that he or she is entitled to judgment as a matter of law. Rule
2
While petitioner’s petition questioned the correctness of
the underlying tax assessments, his filed documents and oral
argument addressed only the 1997, 1998, and 1999 assessments, all
of which resulted from the Court’s opinion in Prince v.
Commissioner, T.C. Memo. 2003-247. Petitioner did not raise any
specific objection to the unpaid portion of the self-reported
2002 tax liability. In any event, the total 1997, 1998, and 1999
unpaid balance due exceeds the amount of respondent’s jeopardy
levy.
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121(b);3 Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520
(1992), affd. 17 F.3d 965 (7th Cir. 1994). Facts are viewed in
the light most favorable to the nonmoving party. Dahlstrom v.
Commissioner, 85 T.C. 812, 821 (1985). Where a motion for
summary judgment has been properly made and supported by the
moving party, the nonmoving party may not rest upon mere
allegations or denials contained in that party’s pleadings but
must by affidavits or otherwise set forth specific facts showing
that there is a genuine issue for trial. Rule 121(d); Dahlstrom
v. Commissioner, supra at 820-821.
In his petition, petitioner challenges the notice of
determination on the following grounds: (1) “The assessment was
grossly wrong. Audit was done without supporting documents.
Required audit documents were confiscated by Los Angeles Police
Department at the time of the Audit. New audit is necessary to
determine accurate assessment”; (2) “All the monies confiscated
by IRS do not belong to the Petitioner”; (3) “IRS drove
Petitioner to file Bankruptcy; Assessed funds were discharged by
[sic] via Bankruptcy filing in 2005”; (4) “The CDP hearing
officer’s mind was biased from the set [sic] go; biased mind as a
result of Detective Maddox unproven falsified and fabricated
Reports that lead to the service of a Search and Seizure Warrant
3
Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as amended. All Rule
references are to the Tax Court Rules of Practice and Procedure.
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against my assets”; and (5) “The CDP Officer made up his mind not
to believe our testimony or accept the evidence provided from
us.”
In his objection to respondent’s motion for summary judgment
petitioner raises the same arguments raised in his petition and
also argues that a jeopardy levy was not appropriate under the
circumstances, that he was not timely informed of the jeopardy
levy, and that the settlement officer’s bias led him to
inappropriately foreclose consideration of collection
alternatives. He also raised these arguments at the June 25,
2009, hearing and in his brief filed after the hearing.
If a taxpayer’s underlying liability is properly at issue,
the Court reviews any determination regarding the underlying
liability de novo. Sego v. Commissioner, 114 T.C. 604, 610
(2000). We review any other administrative determination
regarding the proposed collection action for abuse of discretion.
See Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). A
taxpayer’s underlying liability is properly at issue in a section
6330 collection case if the taxpayer “did not receive any
statutory notice of deficiency for such tax liability or did not
otherwise have an opportunity to dispute such tax liability.”
Sec. 6330(c)(2)(B). Although petitioner would like us to review
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the underlying liabilities for 1997, 1998, and 1999,4 those
liabilities are not properly at issue because petitioner received
a statutory notice of deficiency for those years and actually
disputed the liabilities before the Court. Prince v.
Commissioner, T.C. Memo. 2003-247. Therefore, we limit ourselves
to reviewing respondent’s collection action for abuse of
discretion.5
We are not persuaded by petitioner’s argument that
respondent’s jeopardy levy was improper because the levied money
did not all belong to him. We have long held that the doctrine
of standing is “inherently applicable to our proceedings.”
Anthony v. Commissioner, 66 T.C. 367, 373 (1976). Under that
doctrine “‘the plaintiff generally must assert his own legal
rights and interests, and cannot rest his claim to relief on the
legal rights or interests of third parties.’” Valley Forge
Christian Coll. v. Ams. United for Separation of Church & State,
454 U.S. 464, 474 (1982) (quoting Warth v. Seldin, 422 U.S. 490,
499 (1975)). Petitioner does not have standing in this
proceeding to seek the return of money or property that does not
belong to him, and he cannot rest his case on the rights of those
4
Petitioner has not disputed his self-reported underlying
tax liability with respect to 2002. See supra note 2.
5
This review extends to respondent’s interpretation and
application of bankruptcy law. See discussion infra.
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to whom the money or property does belong even if those third
parties purport to authorize petitioner to do so.6
To the extent respondent incorrectly levied against third
parties, those third parties may have the right to bring a
wrongful levy action against the United States under section 7426
in a U.S. District Court within the specified limitations period,
generally “9 months from the date of the levy or agreement giving
rise to such action.” See sec. 6532(c)(1).7
In his brief filed after the June 25, 2009, hearing,
petitioner claims that he is the authorized representative to
pursue such an action on behalf of at least two of these third
parties. In a lien or levy case, as a court of limited
jurisdiction, we have no jurisdiction over petitioner’s claims
asserted on behalf of third parties. See, e.g., EC Term of Years
6
A taxpayer who ends up overpaying on an unpaid tax
liability because of a levy upon third-party funds in the
taxpayer’s possession as, for example, a custodian or bailee of
such funds, may have standing to recover the funds to the extent
of the overpayment in a refund action in the appropriate U.S.
District Court. See Thompson v. United States, 429 F. Supp. 13(E.D. Pa. 1977). We note that petitioner cannot bring such an
action here because petitioner’s unpaid tax liabilities with
respect to 1997, 1998, and 1999 resulted from the Court’s opinion
in Prince v. Commissioner, T.C. Memo. 2003-247, that is res
judicata and the unpaid tax liabilities exceed the amount of the
levied funds. See supra note 2.
7
Such a course would also appear to be available to the
trustee in petitioner’s bankruptcy case were he to conclude that
petitioner’s omission from the debtor’s schedules of assets of
the funds seized by the LAPD warrants a reopening of the
bankruptcy proceedings.
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Trust v. United States, 550 U.S. 429, 435 (2007) (where third
party’s property is wrongfully levied upon to pay taxpayer’s
unpaid tax liability, an action under section 7426 in the
appropriate U.S. District Court within the allowable limitations
period is the proper remedy). See also United States v.
Williams, 514 U.S. 527 (1995) (third party whose property was the
subject of a wrongful lien and who was forced to pay tax, under
protest, on behalf of taxpayer to remove such lien has standing
to bring a refund action under 28 U.S.C. section 1346(a)(1) in
the appropriate U.S. District Court).
We are similarly unpersuaded by petitioner’s argument that
his bankruptcy discharge precluded respondent from collection
action. Because respondent’s collection action is based, in
part, upon respondent’s interpretation and application of
bankruptcy law, we review this interpretation and application for
errors. “If respondent’s determination was based on erroneous
views of the [bankruptcy] law * * *, then we must * * * find that
there was an abuse of discretion.” Swanson v. Commissioner, 121
T.C. 111, 119 (2003). Unlike in Swanson, respondent has conceded
that petitioner’s bankruptcy discharge relieved petitioner from
personal liability for his unpaid tax liabilities. Respondent
argues, however, that a valid tax lien survives bankruptcy and
“even though [p]etitioner [is] no longer personally liable for
the tax liabilities for tax years 1997, 1998 and 1999 * * *, the
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lien continues to attach to [p]etitioner’s pre-bankruptcy
property.” This interpretation and application of bankruptcy law
by respondent is consistent with our own prior holdings.
In Bussell v. Commissioner, 130 T.C. 222, 235 (2008), we
held that “A discharge under 11 U.S.C. section 727 relieves the
debtor of personal (or in personam) liability. * * * Such a
discharge, however, does not protect the debtor’s assets if those
assets were subject to a Federal tax lien that was properly filed
pursuant to section 6323 before the bankruptcy petition was
filed.” See also Iannone v. Commissioner, 122 T.C. 287, 292-293
(2004) (Federal tax liens are not extinguished by personal
discharge in bankruptcy, remain in effect, and attach to assets
owned before the date of filing the bankruptcy petition). The
funds seized by the LAPD were subject to a Federal tax lien that
was properly filed before petitioner filed his bankruptcy
petition, and petitioner did not include these funds in the
schedules of debtor’s assets attached to his bankruptcy petition.
Accordingly, petitioner’s discharge in bankruptcy did not protect
the seized funds from respondent’s jeopardy levy.
Petitioner’s argument that Settlement Officer Climan was
biased is also unconvincing. Petitioner’s claim rests “upon the
mere allegations * * * and [he has not] set forth specific facts
showing” that Settlement Officer Climan was biased or how any
bias on the part of the settlement officer would have affected
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the ultimate determination with respect to the jeopardy levy.
See Rule 121(d).
We also find unpersuasive petitioner’s argument that the
jeopardy levy was not appropriate. We note initially that
petitioner did not raise this issue before the Appeals Office and
that we generally do not have authority to consider issues raised
before the Court for the first time in this lien or levy action.
See Giamelli v. Commissioner, 129 T.C. 107, 115 (2007). In any
event, even if petitioner had raised the issue before the Appeals
Office, we would still be unpersuaded.
Under section 6331(a) a jeopardy levy is appropriate when
“the Secretary makes a finding that the collection of * * * tax
is in jeopardy”. Section 1.6851-1(a)(1), Income Tax Regs.,
provides that collection is in jeopardy when at least one of the
following conditions exists: (1) “The taxpayer is or appears to
be designing quickly to depart from the United States or to
conceal himself or herself”; (2) “The taxpayer is or appears to
be designing quickly to place his, or her, or its property beyond
the reach of the Government either by removing it from the United
States, by concealing it, by dissipating it, or by transferring
it to other persons”; or (3) “The taxpayer’s financial solvency
is or appears to be imperiled.” On the basis of the record
before us, we do not find respondent’s determination that a
jeopardy levy was appropriate to be an abuse of discretion. In
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particular, we note that because of the bankruptcy court’s
discharge of petitioner’s tax liabilities, respondent’s
collection efforts can proceed only against petitioner’s pre-
bankruptcy-estate assets that are subject to a valid lien, such
as the levied funds. If respondent is prevented from levying
upon such funds and the funds are then dissipated, respondent may
be unable to collect all of the unpaid tax liabilities.
Finally, we are unconvinced by petitioner’s argument that he
did not receive timely notice of the jeopardy levy. We note
again that because petitioner did not raise this issue before the
Appeals Office, we may not consider it now. See Giamelli v.
Commissioner, supra at 115. Regardless, petitioner’s argument is
not convincing. Under section 7429(a)(1)(B) the Secretary has 5
days from the date of the jeopardy levy to give a taxpayer
written notice of the information upon which he relied in
determining that collection was in jeopardy. Respondent sent a
notice of the jeopardy levy and of petitioner’s right to
administrative and judicial review of the levy on December 7,
2007, the day respondent had served the jeopardy levy.
Petitioner had received this notice by December 14, 2007, the day
petitioner placed an unsolicited call and engaged in a telephone
discussion with Revenue Officer Stevens regarding an
administrative review of the jeopardy levy. Petitioner
subsequently took full advantage of such a review. Therefore,
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even though there is no evidence to support petitioner’s claim of
having failed to receive a timely section 7429(a)(1)(B) notice of
the jeopardy levy, we hold that any such error would have been
harmless under these circumstances. See Golub v. Commissioner,
T.C. Memo. 2008-122.
Respondent’s motion for summary judgment has been properly
made and is well supported, and petitioner has not set forth
specific facts showing that there exists any genuine issue as to
any material fact. Summary judgment is therefore appropriate.
See Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. at
520.
The Court has considered all of petitioners’ contentions,
arguments, requests, and statements. To the extent not discussed
herein, the Court concludes that they are meritless, moot, or
irrelevant.
To reflect the foregoing,
An appropriate order and
decision will be entered.