Harold F. Behling v. Commissioner ( 2002 )

118 T.C. No. 36UNITED STATES TAX COURT
HAROLD F. BEHLING, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4242-01L. Filed June 17, 2002.
R disallowed a loss claimed by P on his Federal
income tax return and issued a notice of deficiency. P
received the deficiency notice and corresponded with R
regarding the loss. R advised P that R would not
change R’s determination. R also advised P of the
deadline for filing a petition for redetermination with
this Court. P, however, did not file a petition, and R
assessed the deficiency.
Subsequently, R filed a notice of Federal tax lien
and provided P with notice of such filing. P filed a
request for an administrative hearing. During the
course of the hearing, R’s Appeals officer considered
the merits of the loss. In the notice of
determination, R informed P that the notice of Federal
tax lien would not be withdrawn because P had failed to
demonstrate that he was entitled to the loss.
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P filed a Petition for Lien or Levy Action that
was limited to allegations challenging R’s disallowance
of the loss. Subsequently, R filed a motion for
summary judgment.
Held: Because P received the deficiency notice
and had an opportunity to dispute R’s determination, P
is statutorily barred from challenging the existence or
amount of his liability in this proceeding. Sec.
6330(c)(2)(B), I.R.C. The fact that R’s Appeals
officer considered the merits of the loss at the
administrative hearing and the further fact that the
notice of determination addressed those merits do not
constitute a waiver of the statutory bar.
Held, further, sec. 301.6320-1(e)(3), Q&A-E11, Proced.
& Admin. Regs., is reasonable and consistent with sec.
6330(c)(2)(B), I.R.C., and its validity is sustained.
Harold F. Behling, pro se.
Pamela J. Sewell, Sheara L. Gelman, and Alan Levine for
respondent.
OPINION
DAWSON, Judge: This case was assigned to Special Trial
Judge Robert N. Armen, Jr., pursuant to the provisions of section
7443A(b)(4) and Rules 180, 181, and 183.1 The Court agrees with
and adopts the opinion of the Special Trial Judge, which is set
forth below.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
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OPINION OF THE SPECIAL TRIAL JUDGE
ARMEN, Special Trial Judge: This matter is before the Court
on respondent’s Motion for Summary Judgment, filed pursuant to
Rule 121(a). Respondent contends that there is no genuine issue
as to any material fact and that the notice of determination
should be sustained as a matter of law.
Summary judgment is intended to expedite litigation and
avoid unnecessary and expensive trials. Fla. Peach Corp. v.
Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be
granted with respect to all or any part of the legal issues in
controversy "if the pleadings, answers to interrogatories,
depositions, admissions, and any other acceptable materials,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that a decision may be
rendered as a matter of law." Rule 121(a) and (b); Sundstrand
Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965(7th Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988);
Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The moving
party bears the burden of proving that there is no genuine issue
of material fact, and factual inferences will be read in a manner
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).
We are satisfied that there is no genuine issue as to any
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material fact and that a decision may be rendered as a matter of
law. As explained below, we shall grant respondent’s Motion for
Summary Judgment.
Background
On March 17, 1997, respondent issued a joint notice of
deficiency to Harold F. Behling (petitioner) and his wife. In
the notice, respondent determined a deficiency of $5,179 in their
Federal income tax for the taxable year 1993. The deficiency was
based on respondent’s disallowance of a flow-through loss claimed
by petitioner in respect of Behling Automotive, Inc., an S
corporation (hereinafter the S corporation). In this regard,
respondent determined that petitioner had previously exhausted
his basis in the S corporation.
On March 24, 1997, petitioner wrote a letter to respondent
referencing the notice of deficiency. In the letter, petitioner
stated that he wished to file an amended return for 1993 and
requested a further explanation of the determined deficiency. On
May 2, 1997, respondent wrote to petitioner informing him that
his proposed amended return would not change respondent’s
determination in the notice of deficiency and that the time for
filing a petition for redetermination with the Tax Court would
expire on June 17, 1997. Petitioner did not file a petition with
the Court challenging the notice of deficiency. Accordingly, on
August 1, 1997, respondent assessed the deficiency (and statutory
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interest) against petitioner.
On August 28, 2000, respondent filed with the Emery County
Recorder in Castledale, Utah, a Form 668(Y)(c), Notice of Federal
Tax Lien, which disclosed that petitioner had an outstanding
Federal income tax liability of $6,937.87 for 1993. Respondent
timely issued to petitioner a Notice of Federal Tax Lien Filing
and Your Right to a Hearing Under IRC 6320. On September 14,
2000, petitioner filed with respondent a Request for a Collection
Due Process Hearing, Form 12153, that included allegations
challenging the existence and amount of his tax liability for
1993.
On January 17, 2001, the Internal Revenue Service Office of
Appeals in Salt Lake City conducted an administrative hearing
that petitioner attended. On January 22, 2001, Appeals Officer
Robert White wrote a letter to petitioner stating, in part, that
he would recommend that the assessment made against petitioner
for 1993 be abated. However, the Appeals officer’s
recommendation to abate the assessment was ultimately rejected by
his supervisor.
By notice of determination dated March 15, 2001, respondent
informed petitioner that the notice of lien filed against him
would not be withdrawn because petitioner failed to show that he
had sufficient basis in the S corporation to cover the loss
claimed on his 1993 return.
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Petitioner filed with the Court an imperfect Petition for
Lien or Levy Action Under Section 6320(c) or 6330(d),2 and,
later, an amended petition. The amended petition is limited to
allegations challenging the existence and amount of petitioner’s
tax liability for 1993.
After respondent filed an answer to the petition, respondent
filed a Motion for Summary Judgment. In short, respondent
contends that petitioner’s challenge to the existence and/or
amount of his tax liability for 1993 is not properly before the
Court in this proceeding, and petitioner otherwise failed to
raise a valid issue for judicial review. Petitioner filed an
objection to respondent’s motion. Petitioner maintains that he
has proven that he had sufficient basis in the S corporation to
cover the loss claimed on his 1993 tax return.
This matter was called for hearing at the Court's motions
sessions held in Washington, D.C. Petitioner and counsel for
respondent appeared at the hearing and presented arguments in
respect of respondent's motion.
Discussion
Section 6321 imposes a lien in favor of the United States on
all property and rights to property of a person when demand for
payment of that person’s liability for taxes has been made and
2
At the time that the petition was filed, petitioner
resided in Ferron, Utah.
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the person fails to pay those taxes. The lien arises when the
assessment is made. Sec. 6322. Section 6323(a) requires the
Secretary to file notice of Federal tax lien if such lien is to
be valid against any purchaser, holder of a security interest,
mechanic’s lienor, or judgment lien creditor. Lindsay v.
Commissioner, T.C. Memo. 2001-285.
Section 6320 provides that the Secretary shall furnish the
person described in section 6321 with written notice of the
filing of a notice of lien under section 6323. The notice
required by section 6320 must be provided not more than 5
business days after the day the notice of lien is filed. Sec.
6320(a)(2). Section 6320 further provides that the person may
request administrative review of the matter (in the form of an
Appeals Office hearing) within the 30-day period beginning on the
day after the 5-day period described above. Section 6320(c)
provides that the Appeals Office hearing generally shall be
conducted consistent with the procedures set forth in section
6330(c), (d), and (e).
Section 6330(c) provides for review with respect to
collection issues such as spousal defenses, the appropriateness
of the Commissioner's intended collection action, and possible
alternative means of collection. Section 6330(c)(2)(B) provides
that the existence or the amount of the underlying tax liability
can be contested at an Appeals Office hearing if the person did
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not receive a notice of deficiency or did not otherwise have an
earlier opportunity to dispute such tax liability. Goza v.
Commissioner, 114 T.C. 176, 180-181 (2000); see Sego v.
Commissioner, 114 T.C. 604, 609 (2000). Section 6330(d) provides
for judicial review of the administrative determination in the
Tax Court or Federal District Court.
Respondent asserts that there is no dispute as to a material
fact and respondent is entitled to judgment as a matter of law
because section 6330(c)(2)(B) bars petitioner from challenging
the existence or amount of his underlying tax liability for 1993
in this proceeding. Respondent further asserts that petitioner
has not raised a valid issue for review; i.e., a spousal defense,
a challenge to the appropriateness of the collection action, or
an alternative means of collection.
The record in this proceeding shows that respondent issued a
notice of deficiency to petitioner for 1993 disallowing the flow-
through loss claimed by him in respect of the S corporation. The
record also shows that although petitioner promptly received the
notice of deficiency, he did not file a petition for
redetermination with the Court challenging the notice. Under
such circumstances, section 6330(c)(2)(B) plainly states that
petitioner is barred from challenging the existence or amount of
his tax liability for 1993 in this proceeding. See Goza v.
Commissioner, supra at 182-183; see also Sego v. Commissioner,
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supra at 610.
We observe that the facts here differ in one respect from
the facts in Goza v. Commissioner, supra. Specifically, the
taxpayer in Goza was not permitted to challenge the existence or
amount of his underlying tax liability during the administrative
hearing. By contrast, the Appeals officer in the instant case
did permit petitioner to present information regarding the amount
of his tax liability during the administrative hearing. In this
regard, the notice of determination issued to petitioner makes
specific reference to petitioner’s failure to provide
substantiation of his basis in the S corporation.
In Sego v. Commissioner, supra, the taxpayers may have
been permitted to challenge the existence or amount of their
underlying tax liability during the administrative hearing. In
this regard, we note that the notice of determination that the
Appeals Office issued to the taxpayer-husband in that case
stated, in part, as follows:
Challenges to the existence or amount of liability
were raised * * * .
* * * * * * *
The assessments are deemed correct because you have
failed to present any credible evidence to overcome the
Commissioner’s presumption of correctness. You have
continued to procrastinate with regards to providing
additional information or evidence to support your
position.
Nevertheless, in Sego v. Commissioner, supra, this Court held,
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inter alia, that section 6330(c)(2)(B) barred the taxpayers from
challenging the existence or amount of their underlying tax
liability in the judicial proceeding.
Respondent maintains that section 6330(c)(2)(B) remains a
bar to petitioner’s attempt in the present proceeding to
challenge the amount of his underlying liability for 1993.
Specifically, respondent cites and relies on section 301.6320-
1(e)(3), Q&A-E11, Proced. & Admin. Regs.3 The regulation states
as follows:
Q-E11. If an Appeals officer considers the merits
of a taxpayer’s liability in a CDP hearing when the
taxpayer had previously received a statutory notice of
deficiency or otherwise had an opportunity to dispute
the liability prior to the NFTL [notice of Federal tax
lien], will the Appeals officer’s determination
regarding those liability issues be considered part of
the Notice of Determination?
A-E11. No. An Appeals officer may consider the
existence and amount of the underlying tax liability as
a part of the CDP hearing only if the taxpayer did not
receive a statutory notice of deficiency for the tax
liability in question or otherwise have a prior
opportunity to dispute the tax liability. Similarly,
an Appeals officer may not consider any other issue if
the issue was raised and considered at a previous
3
The regulation applies to any notice of Federal tax lien
that is filed on or after Jan. 19, 1999. Sec. 301.6320-1(j),
Proced. & Admin. Regs. The lien in the present case was filed on
Aug. 28, 2000.
We note that the final regulation added Q&A-E11 to sec.
301.6320-1(e)(3), Proced. & Admin. Regs., which Q&A had not
previously been part of the temporary regulation. See sec.
301.6320-1T(e)(3), Temporary Proced. & Admin. Regs., 64 Fed. Reg.
3403 (Jan. 22, 1999); see also T.D. 8979, 2002-6 I.R.B. 466,
468(discussing the addition of Q&A-E11 to the final regulation).
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hearing under section 6330 or in any other previous
administrative or judicial proceeding in which the
person seeking to raise the issue meaningfully
participated. In the Appeals officer’s sole
discretion, however, the Appeals officer may consider
the existence or amount of the underlying tax
liability, or such other precluded issues, at the same
time as the CDP hearing. Any determination, however,
made by the Appeals officer with respect to such a
precluded issue shall not be treated as part of the
Notice of Determination issued by the Appeals officer
and will not be subject to any judicial review.
Because any decisions made by the Appeals officer with
respect to such precluded issues are not properly a
part of the CDP hearing, such decisions are not
required to appear in the Notice of Determination
issued following the hearing. Even if a decision
concerning such precluded issues is referred to in the
Notice of Determination, it is not reviewable by a
district court or the Tax Court because the precluded
issue is not properly part of the CDP hearing.
The regulations under section 6330 are interpretative
regulations. They must be upheld “unless unreasonable and
plainly inconsistent with the revenue statutes”. Commissioner v.
South Tex. Lumber Co., 333 U.S. 496, 501 (1948).
Applying the above-referenced standard to section 301.6320-
1(e)(3), Q&A-E11, Proced. & Admin. Regs., we hold that the
regulation is not unreasonable or plainly inconsistent with
section 6330.4 To the contrary, the regulation is consistent
4
Although the regulation provides guidance to taxpayers
that accurately describes the procedures the Internal Revenue
Service may follow, it is for this Court rather than the
Commissioner to decide the scope of our jurisdiction with respect
to applicable statutes enacted by Congress. See sec. 7442.
Therefore, we interpret the regulation’s references to “judicial
review” as signifying that the Commissioner does not intend, when
he considers a taxpayer’s underlying tax liability in a sec. 6330
hearing involving facts similar to those herein, to waive the
(continued...)
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with the plain language of section 6330(c)(2)(B), which states
that neither the existence nor the amount of the underlying tax
liability can be challenged during the collection review process
unless the person did not receive a notice of deficiency or did
not otherwise have an earlier opportunity to dispute such tax
liability. From the Court’s perspective, section 301.6320-
1(e)(3), Q&A-E11, Proced. & Admin. Regs., presents a reasonable
and “taxpayer-friendly” approach to the collection review process
reflecting “respondent’s good-faith effort to further a
fundamental policy underlying section 6330; i.e., to provide a
taxpayer with a final opportunity for administrative review” of
his or her tax liability. Kennedy v. Commissioner, 116 T.C. 255,
262 (2001). As in Kennedy, in which we held that the
Commissioner’s decision to grant the taxpayer a so-called
“equivalent hearing” did not result in a waiver by the
Commissioner of the 30-day time limit within which the taxpayer
was required to request an Appeals Office hearing, we hold in
this case that respondent’s decision to permit petitioner to
offer information at the Appeals Office hearing relevant to the
existence or amount of his underlying tax liability did not
result in a waiver by respondent of the restriction set forth in
section 6330(c)(2)(B).
4
(...continued)
limitations imposed by sec. 6330(c)(2)(B) or sec. 6330(c)(4).
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In sum, petitioner is statutorily barred from challenging
the existence or amount of his income tax liability for 1993 in
this proceeding. Petitioner has failed to raise a spousal
defense, make a valid challenge to the appropriateness of
respondent’s intended collection action, or offer alternative
means of collection. These issues are now deemed conceded. Rule
331(b)(4). Accordingly, in the absence of a valid issue for
review, we conclude that respondent is entitled to judgment as a
matter of law sustaining the notice of determination dated March
15, 2001.
To order to give effect to the foregoing,
An order granting respondent’s
Motion For Summary Judgment and
decision for respondent will be
entered.