DocketNumber: No. 20009-06S
Citation Numbers: 2008 T.C. Summary Opinion 39, 2008 Tax Ct. Summary LEXIS 41
Judges: \"Dean, John F.\"
Filed Date: 4/16/2008
Status: Non-Precedential
Modified Date: 4/17/2021
PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b), THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE.
DEAN,
This case arises from a request for relief from joint and several liability under
Some of the facts have been stipulated and are so found. The stipulation of facts and the exhibits received into evidence *42 are incorporated herein by reference. At the time the petition was filed, petitioner resided in California.
Petitioner married Mr. Thompson in 1979. During the first part of the marriage, petitioner did not work outside of the home. Petitioner started working as an administrative assistant for her current employer, IA Interior Architects, in November 1994. 1 Mr. Thompson was employed as a certified public accountant, specializing in tax controversies, audits, and tax returns; he opened his own firm around 1989.
Petitioner and Mr. Thompson filed a joint Form 1040, U.S. Individual Income Tax Return, for each of the years at issue. The Federal income tax returns were filed without remittance of the taxes due. The assessed taxes, as of the date of filing, are summarized as follows:
1995 | $ 14,977 |
1996 | 8,733 |
1997 | 9,294 |
No notices of deficiency were issued.
Petitioner and Mr. Thompson separated in 1997, and petitioner was referred by the Battered Women of Contra Costa County to an attorney, Mr. Moats. Mr. Moats represented petitioner in her divorce and bankruptcy proceedings. Petitioner filed for *43 bankruptcy in March 1999. Petitioner's unpaid tax liabilities for 1988 through 1994 were discharged on June 16, 1999; the unpaid tax liabilities for 1995 through 1997 were not discharged.
Mr. Thompson filed for divorce in November 1998, and it became final on December 29, 1999. The divorce decree provides that petitioner and Mr. Thompson were to remain jointly liable for the payment of the Federal income tax liabilities for 1995 through 1997. Petitioner was to negotiate her tax liabilities "to the lowest total amount and monthly payments possible" by submitting an offer-in-compromise (OIC) to the Internal Revenue Service (IRS). Thereafter, Mr. Thompson agreed to pay petitioner 50 percent of each monthly payment. The divorce decree reserved Mr. Thompson's rights to discharge his tax liabilities for 1986 through 1997 in bankruptcy or to submit an OIC. Mr. Thompson filed for bankruptcy, and his unpaid tax liabilities for 1988 through 1997 were discharged on June 4, 2004.
On August 30, 2000, the IRS issued a Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing under
On October 13, 2003, the IRS issued to petitioner seven Notices CP 504, "Urgent We intend to levy on certain assets. Please respond NOW", stating that the IRS intended to levy upon petitioner's assets for 1988 through 1990, 1993, and 1995 through 1997. Each notice showed a "Current Balance" for the referenced year even though petitioner's tax liabilities for 1988 through 1994 had been discharged in bankruptcy. In response, petitioner contacted the IRS and Mr. Moats to resolve her tax matters.
On October 28, 2003, the IRS issued to petitioner a
Tax | |||||
1040 | 1988 | $ 2,299.81 | $ 602.14 | -0- | $ 2,901.95 |
1040 | 1989 | 16,679.32 | 4,583.03 | -0- | 21,262.35 |
1040 | 1990 | 3,539.61 | 3,539.61 | -0- | 16,313.19 |
1040 | 1993 | 23,541.93 | 6,741.93 | -0- | 30,013.86 |
1040 | 1995 | 12,051.08 | 9,221.13 | $ 2,754.24 | 24,026.45 |
1040 | 1996 | 497.17 | 207.63 | 14.80 | 719.62 |
1040 | 1997 | 5,204.43 | 1,613.16 | 624.08 | |
*3*Total amount due | 102,679.09 |
On September 14, 2004, the IRS issued *45 to petitioner a Letter 2050, Please Call US About Your Overdue Taxes or Tax Returns. The notice is reproduced as follows:
Tax | |||||
SPASMT | 1995 | $ 12,051.08 | $ 11,243.10 | $ 2,754.24 | $ 26,048.42 |
SPASMT | 1996 | 497.17 | 274.64 | 14.80 | 786.61 |
SPAMST | 1997 | 5,204.43 | -0- | 624.08 | |
*3*Total amount due | 32,663.54 |
On September 19, 2005, the IRS issued to petitioner a Notice CP 49, Overpaid Tax Applied to Other Taxes You Owe, informing petitioner that the IRS applied her $ 40.51 refund for 2004 to her account.
Sometime in December 2005, petitioner was referred by the State Bar of California to her present counsel, who filed petitioner's Form 8857, Request for Innocent Spouse Relief (And Separation of Liability and Equitable Relief). Petitioner's prior counsel, Mr. Moats, disappeared and did not return petitioner's file until the 2-year limitations period had expired. The State bar issued an order on July 8, 2005, declaring Mr. Moats ineligible to practice law. Mr. Moats tendered his resignation with charges pending on October 20, 2005, effective December 4, 2005.
Petitioner's request for relief, received by respondent on March 20, 2006, was denied because it was received more than 2 years *46 after the first collection activity, the
II.
Respondent argues that the
As a general rule, notices containing technical defects are valid unless the taxpayer has *48 been prejudiced or misled by the error and he has not been afforded a meaningful opportunity to litigate the claim. See
The Court has stated that in determining whether a notice is valid despite an error, it looks at the notice, any attachments, and the circumstances surrounding the notice's issuance and receipt to determine whether the taxpayer could have been reasonably confused or misled. See
If there is a requisite showing of prejudice or detriment to the taxpayer because of the IRS's actions, the IRS may be precluded from claiming the benefit of a limitations period. See
As respondent contends, it is plausible that petitioner was not misled or prejudiced given that petitioner knew 1988 through 1990 and 1993 had been discharged in bankruptcy while 1995 through 1997 had not. On the other hand, while taking into account the circumstances of the issuance and receipt of the (1) A collections officer informed petitioner that the tax for those 4 years had not been discharged in bankruptcy, the officer could not delay collection activity, petitioner should file an OIC promptly, and petitioner should contact respondent's bankruptcy office; (2) Ms. Bustamenten 2informed petitioner that the tax for the 4 years had been removed but added back in, and she would have to figure it out because the IRS's records were not appropriately associated with petitioner's Social Security number. Allegedly, Ms. Bustamente also informed petitioner that she could not file an OIC because her account was frozen, collections could not take any action against her, and no one could do anything until her account was correct; (3) Ms. Bustamente contacted petitioner on April 1,2004, to inform petitioner that her account had been corrected, and she remained jointly liable for *52 1995 through 1997. Allegedly, Ms. Bustamente also advised petitioner that she could not submit an OIC until Mr. Thompson was discharged from bankruptcy because a joint tax return was filed and collections could not take any action against her until his bankruptcy was closed. Allegedly, Ms. Bustamente stated that the IRS would notify petitioner when Mr. Thompson was out of bankruptcy; (4) petitioner called the IRS's collections office monthly to confirm her "extension". But petitioner stopped calling in May 2005 because a collections officer, allegedly, told her to quit calling, her account was clear, there was no attempt to collect from her, Mr. Thompson was still in bankruptcy, petitioner was wasting the IRS's time, and if the IRS needed petitioner, they would contact her; and (5) petitioner contacted the collections office and Ms. Bustamente after receiving the letter 2050. Ms. Bustamente informed petitioner that Mr. Thompson received a discharge in mid-2004. Petitioner testified that she commented: "you mean to tell me that when the IRS told me not to call them anymore, that there was no effort to collect from me * * * Fred had already been discharged", and Ms. Bustamente allegedly *53 replied "apparently so. Well, we're behind in our posting."
Although respondent did not challenge the substance of petitioner's testimony, the Court, nevertheless, finds that petitioner has not proven that she was misled or prejudiced with respect to the notice's issuance and her receipt thereof. See
The parties agree that respondent sent the following enclosures to petitioner with her
Had petitioner requested a CDP hearing as prescribed by the *55
The Court also notes that petitioner failed to submit an OIC as directed by her 2000 divorce decree. To a limited extent, petitioner could have protected herself by submitting the OIC and by seeking reimbursement from Mr. Thompson. Petitioner failed to exercise her rights with respect to Mr. Thompson and is now attempting to *56 use that failure as a basis for proceeding against the Government via a request for relief from joint and several liability. Finally, petitioner may still be able to file an OIC, and it appears that she may still be able to enforce the agreement with Mr. Thompson as directed by her divorce decree.
The Court finds that, on the basis of all the facts and circumstances, the
IV.
Petitioner has made an argument sounding in estoppel. To establish equitable estoppel against the Government in the Ninth Circuit, 6 a litigant must show the following: (1) The party to be estopped must know the facts; (2) he must intend that his conduct be acted on or must so act that the party asserting estoppel has a right to believe it is intended; (3) the party asserting estoppel must be ignorant of the true facts; (4) the party asserting estoppel must rely on the former's conduct to his detriment; (5) affirmative *57 misconduct by the Government going beyond mere negligence; (6) the Government's misconduct will cause a serious injustice; and(7) the public's interest will not suffer undue damage. 7 See
Even if the Court were to accept petitioner's unsupported, self-serving *58 testimony as to the IRS's representations, the Court concludes that petitioner has not established the elements for estoppel. It is well settled that a Government agent's providing inaccurate information does not constitute affirmative misconduct. See
V.
A.
The central premise of equitable tolling is that the person is excusably ignorant of the limitations period.9*60 See
Petitioner's testimony that the IRS's personnel advised petitioner that her account was frozen and no one could do anything until the accounts were segregated and Mr. Thompson received a discharge in bankruptcy is unsupported, self-serving testimony *61 that the Court is reluctant to rely on. Thus, the Court finds that the equities do not favor tolling.
Petitioner sent the
As a general rule, attorney negligence is not grounds for invoking equitable estoppel. See
But the Court of Appeals for the Ninth Circuit and some of the other Courts of Appeals have created an exception to the general rule. Those courts have equitably tolled a limitations period where the client diligently pursued his claim and the attorney's conduct was so egregious as to constitute an extraordinary circumstance. See
At first blush, petitioner's situation appears to favor tolling. Mr. Moats did not file, nor, as far as it appears from the record, advise his client to file, a timely request for relief from joint and several liability *63 or a request for a CDP hearing. Mr. Moats disappeared and did not return petitioner's file until the limitations period had expired -- apparently, a few weeks before trial. Mr. Moats has been found ineligible to practice law by his State bar, and he has resigned with charges pending.
Insufficient evidence, however, was submitted to the Court for it to make a determination as to whether the circumstances justify invoking equitable tolling. Mr. Moats's failure to file, or failure to advise his client to file, a request for a CDP hearing or a request for relief from joint and several liability under
With so many holes in the record, the Court finds that equitable tolling does not apply. See
Petitioner contends that the 2-year limitations period was extended on account of various extensions granted by the IRS to petitioner because of the: (1) Time the IRS needed to segregate the accounts; (2) IRS's representations that neither it nor petitioner could do anything until Mr. Thompson received a discharge in bankruptcy; or (3) period in which petitioner was preparing an OIC.
There is nothing in the record establishing that the IRS granted extensions to petitioner other than petitioner's self-serving testimony, on which the Court is reluctant to rely.
The Court does not agree that the IRS's representations served to create an extension of the limitations period. This argument is nothing more than a backdoor attempt at estoppel, which the Court has already rejected. Additionally, there is nothing in the record other than petitioner's testimony showing that the statements were made.
In the context of an OIC, section 301.7122-1(i), Proced. & Admin. Regs., provides that the statute of limitations *65 on collection will be suspended in limited circumstances. No similar provision applies with respect to the 2-year limitations period for requests for relief from joint and several liability under
Petitioner contends that because the
Because the Court has determined that the
Other arguments made by the parties and not discussed herein were considered and rejected as irrelevant, without merit, and/or moot.
To reflect the foregoing,
1. The record does not contain any information as to petitioner's education level.↩
2. It was represented that Ms. Bustamente is a bankruptcy specialist in respondent's collections insolvency office.↩
3. It was represented that Ms. Bustamente recalls having conversations with petitioner but claims to have no recollection of the substance of the conversations.↩
4.
5. The Court may apply equitable principles to cases properly within its jurisdiction. See
6. But for
7. The Court applies a similar test for equitable estoppel. The party must show: (1) A false representation or wrongful, misleading silence by the party against whom estoppel is to be invoked; (2) an error in a statement of fact and not an opinion or statement of law; (3) ignorance of the true facts; (4) reasonable reliance on the act or statement; (5) a detriment suffered because of the false representation or wrongful, misleading silence; and (6) affirmative misconduct by the Government. See
8. See
9. The limitations period specified in
10. The Court has applied a similar test: a taxpayer seeking to apply equitable tolling must show, at a minimum, that the IRS did something that reasonably induced him to believe that the limitations period was being tolled or extended. See
11. Even if the Court were to find that the 2-year limitations period for requesting relief from joint and several liability was suspended on account of a submission of an OIC, suspension would not apply as petitioner failed to file an OIC as required by the regulations. Thus, an OIC was not pending within the meaning of the regulations. Cf.
Baltzell v. Mitchell , 3 F.2d 428 ( 1925 )
Jack E. Golsen and Sylvia H. Golsen v. Commissioner of ... , 445 F.2d 985 ( 1971 )
estate-of-louis-yaeger-deceased-judith-winters-ralph-meisels-abraham-k , 889 F.2d 29 ( 1989 )
Sandvik v. United States , 177 F.3d 1269 ( 1999 )
Frank Smaldone v. Daniel Senkowski, Superintendent, Clinton ... , 273 F.3d 133 ( 2001 )
Heriberto Baldayaque v. United States , 338 F.3d 145 ( 2003 )
Sanderling, Inc. v. Commissioner of Internal Revenue , 571 F.2d 174 ( 1978 )
Jerry L. Cantrell v. Knoxville Community Development ... , 60 F.3d 1177 ( 1995 )
Paul George Schlueter, III v. Benjamin Varner District ... , 384 F.3d 69 ( 2004 )
79-fair-emplpraccas-bna-48-74-empl-prac-dec-p-45735-75-empl , 165 F.3d 236 ( 1999 )
Planned Investments, Inc., Michigan Corporation v. United ... , 881 F.2d 340 ( 1989 )
Urban Redevelopment Corporation v. Commissioner of Internal ... , 294 F.2d 328 ( 1961 )
No. 04-10470 , 398 F.3d 686 ( 2005 )
Stallard v. United States , 12 F.3d 489 ( 1994 )
Ibrahn Ben Miranda v. Ray Castro, Warden Attorney General ... , 292 F.3d 1063 ( 2002 )
United States v. Ruby Company, a Utah Corporation , 588 F.2d 697 ( 1978 )
Judy Lehman, Wife Mark Lehman, Husband v. United States of ... , 154 F.3d 1010 ( 1998 )
Gladys T. Geiger v. Commissioner of Internal Revenue , 440 F.2d 688 ( 1971 )
Sergey Spitsyn v. Robert Moore, Warden , 345 F.3d 796 ( 2003 )