DocketNumber: No. 18038-05L
Citation Numbers: 2009 T.C. Memo. 217, 98 T.C.M. 57943, 2009 Tax Ct. Memo LEXIS 218
Judges: \"Gale, Joseph H.\"
Filed Date: 9/17/2009
Status: Non-Precedential
Modified Date: 11/21/2020
MEMORANDUM FINDINGS OF FACT AND OPINION
GALE, Judge: Pursuant to
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. Petitioner resided in Massachusetts when he filed the petition.
Petitioner was the sole shareholder of V&M Management, Inc. (V&M Management), an S corporation, from 1994 and at all relevant times thereafter. V&M Management owned and operated a 275-unit apartment complex known as Mandela Apartments in Roxbury, Massachusetts. On January 8, 1996, V&M Management filed a petition for reorganization pursuant to chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Massachusetts in Boston. *219 The bankruptcy court appointed an independent trustee (the bankruptcy trustee) to administer the reorganization.
On September 26, 1997, the bankruptcy court confirmed a plan of reorganization, the crux of which involved selling Mandela Apartments and its related property. On December 18, 1997, the bankruptcy trustee sold Mandela Apartments and its related property by means of an installment sale. 2 In 1997 the bankruptcy trustee and a limited partnership were coapplicants on a low-income housing tax credit application seeking to secure low-income housing tax credits for Mandela Apartments in subsequent years. 3*220 The trustee intended to syndicate the tax credits to provide the funds to make payments to V&M Management's creditors.
The bankruptcy trustee prepared and filed Forms 1120S, U.S. Income Tax Return for an S Corporation, on behalf of V&M Management for taxable years 1997 through 1999. V&M Management's income tax returns for each of those years reported income from the installment sale. V&M Management did not claim any low-income housing tax credits on its income tax returns for any of the years 1997 through 1999.
Petitioner received an extension for filing his income tax return for his 1995 taxable year until October 15, 1996. Petitioner filed an income tax return for 1995 that respondent received on November 15, 1999. Petitioner reported a $ 5,613 income tax liability on his 1995 return but made no payment. On March 20, 2000, respondent assessed the reported $ 5,613 tax liability, as well as additions to tax under
Petitioner filed an income tax return for his 1999 taxable year that was received by respondent on December 14, 2004. Petitioner reported adjusted gross income of *221 $ 310,692 and a tax liability of $ 536,931 on the return. Respondent adjusted petitioner's reported tax liability downward to $ 107,502 and on February 7, 2005, assessed that amount, as well as additions to tax under
Respondent issued petitioner a notice of deficiency for his 1997 taxable year, and petitioner filed a Tax Court petition in response thereto. In 2003 this Court issued its Opinion in
On April 13, 2005, respondent sent petitioner a Final Notice of Intent to Levy and Notice of Your Right to a Hearing for petitioner's 1995 and 1999 taxable years. Petitioner timely requested a hearing, and a telephone conference was conducted on July 29, 2005. The only issues petitioner raised during *222 the hearing were challenges to the underlying tax liabilities.
Respondent issued petitioner a notice of determination sustaining the proposed levy on August 24, 2005, and petitioner timely filed a petition in response thereto.
OPINION
If a hearing is requested, the hearing is to be conducted by an officer or employee of the Commissioner's Appeals Office with no prior involvement with respect to the unpaid tax at issue.
At the conclusion of the hearing, the Appeals officer must determine whether and how to proceed with collection and shall take into account (1) the verification that the requirements of any applicable law or administrative procedure have been met; (2) the relevant issues raised by the taxpayer; (3) challenges to the underlying tax liability by the taxpayer, where permitted; and (4) whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary.
With respect to determinations made before October 17, 2006, 4we *224 have jurisdiction to review the Appeals Office's determination where we have jurisdiction over the type of tax involved in the case.
Where it is properly at issue, we review the underlying tax liability de novo; the Appeals officer's determinations concerning collection matters are reviewed for abuse of discretion. See, e.g.,
The parties agree that petitioner did not receive a notice of deficiency or otherwise have an opportunity to dispute his underlying tax liabilities for 1995 and 1999. Therefore, the underlying tax liabilities for 1995 and 1999 are properly at issue, see
However, under
A.
Petitioner reported a $ 5,613 income tax liability on his 1995 return but made no payments toward the liability. Petitioner's only challenge to the 1995 liability is his claim that he is entitled to an investment interest expense carryforward from his 1994 taxable year to reduce the 1995 liability.
A noncorporate taxpayer may deduct investment interest for any taxable year only to the extent of any net investment income.
Petitioner *227 reported no investment income on his 1995 return which could be offset by an investment interest expense carryforward, and petitioner has adduced no evidence in this proceeding that he had such investment income in 1995. 7 In sum, petitioner has not shown that his underlying tax liability for 1995 as reported on his return should be adjusted to account for an investment interest expense carryforward. Accordingly, the assessment of the amounts reported as due on the 1995 return was proper.
With respect to the 1995 addition to tax under
With respect to the 1995 addition to tax under
B.
Petitioner filed his return for 1999 on December 14, 2004. Attached to the 1999 return was a Schedule K-1 (Form 1120S), Shareholder's Share of Income, Credits, Deductions, etc., from V&M Management. The return reported adjusted gross income of $ 310,692 and a tax liability of $ 536,739 (the amount listed as a net
Notwithstanding the position he took on the return, petitioner argues that he should not be taxed on passthrough income earned by his S corporation while it was in chapter 11 bankruptcy reorganization. He contends that the bankruptcy trustee was the real owner of V&M *230 Management when its assets were sold and that he was no longer the actual owner of V&M Management in 1999. Petitioner further argues that the assets of V&M Management were sold in 1997 and he should therefore have no income from V&M Management in 1999. Petitioner argues in the alternative that if he is liable for taxes in 1999 from the sale of V&M Management's assets, then he should be entitled to offset the tax with low-income housing credits.
Petitioner has previously argued to this Court that V&M Management's bankruptcy filing caused him to cease to be obligated for V&M Management's tax liability. Petitioner's argument was considered and rejected by this Court and the Court of Appeals for the First Circuit. See
V&M Management reported the sale of its assets on its corporate income tax returns for 1997, 1998, and 1999 as an installment sale, with installment sale income in each of those years. See generally
Petitioner alternatively argues that he should be allowed to offset any tax for 1999 by means of low-income housing credits that the bankruptcy trustee secured for Mandela Apartments.
Petitioner has not demonstrated his entitlement to a low-income housing credit for 1999. V&M Management sold Mandela Apartments on December 14, 1997, so V&M Management was not an owner of Mandela Apartments in 1999. Thus, the only way petitioner could be entitled to offset his 1999 tax with a low-income housing credit attributable to the Mandela Apartments would be if he were entitled to carry forward a credit from 1997 or from an earlier year in which V&M Management owned Mandela Apartments.
In
With respect to years before 1997, petitioner has neither claimed nor introduced any evidence *236 showing that he was entitled to low-income housing credits for any pre-1997 year. This precludes any demonstration that petitioner was entitled to a carryforward of a low-income housing tax credit from an earlier year to 1999 under
With respect to the 1999 addition to tax under
Petitioner's 1999 return showed $ 536,931 as the tax due. Respondent reduced that amount to $ 107,502 and computed an addition to tax under
Petitioner did not raise any issues at his hearing other than the underlying tax liabilities. The Appeals officer verified that the requirements of applicable law and administrative procedure had been met through the examination of computer records. He further took into account whether the proposed collection action balanced the need for the efficient collection of taxes with the legitimate concern of petitioner that the collection action be no more intrusive that necessary. See
We therefore hold that respondent may proceed with the levy that is the subject of the notice of determination at issue. To reflect the foregoing,
1. Unless otherwise noted, section references are to the Internal Revenue Code of 1986, as amended, and Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. V&M Management's corporate income tax returns list the sale of Mandela Apartments and related property, such as appliances, on several different Forms 6252, Installment Sale Income. For convenience, we refer to the sale of Mandela Apartments and related property in the singular throughout this opinion.↩
3. In connection with the redetermination of petitioner's 1997 Federal income tax liability, the Court of Appeals for the First Circuit found that the credits had been awarded to the Mandela Apartments' new owners in 1998.
4. Pursuant to the Pension Protection Act of 2006,
5. However, as discussed
6. Petitioner failed to cooperate with respondent in preparing this case for trial, including (by his own admission) spurning respondent's counsel's requests for information and meetings until the day before trial. Consequently, petitioner is not entitled to any shift in the burden of proof with respect to the underlying tax liabilities. See
7. We note, however, that petitioner attached a Form 4952, Investment Interest Expense Deduction, to his 1995 return claiming an investment interest expense of $ 965,226, which he intended to carry forward to 1996. Petitioner was allowed to carry forward and deduct a $ 965,226 investment interest expense in his 1997 taxable year. See
8. Petitioner has made no claim for abatement or otherwise disputed the interest assessed with respect to the 1995 tax liability.↩
9. As this Court observed in
10. As applicable for 1999, these requirements were contained in
11. Respondent has made no claim that
12. Petitioner attached to his posttrial brief a Feb. 26, 1998, letter that petitioner apparently believes shows that low-income housing credits were awarded to Mandela Apartments in 1997 (notwithstanding the Court of Appeals finding that the credits were awarded in 1998. See
13. In
14. Petitioner has made no claim for abatement or otherwise disputed the interest assessed with respect to the 1999 tax liability.
Mourad v. Commissioner of IRS , 387 F.3d 27 ( 2004 )
Frank J. Evans and Margueritte A. Evans v. Commissioner of ... , 413 F.2d 1047 ( 1969 )
Welch v. Helvering , 54 S. Ct. 8 ( 1933 )
Montana v. United States , 99 S. Ct. 970 ( 1979 )
Goza v. Commissioner , 114 T.C. 176 ( 2000 )
Montgomery v. Comm'r , 122 T.C. 1 ( 2004 )