Urbano v. Comm'r of Internal Revenue
| Decision Date | 10 June 2004 |
| Docket Number | No. 14466–02L.,14466–02L. |
| Citation | 122 T.C. 384,122 T.C. No. 22 |
| Parties | William F. URBANO and Flota L. Urbano, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
William F. Urbano and Flota L. Urbano, pro sese.
Karen Nicholson Sommers, for respondent.
Following R's audit of Ps' 1993 through 1996 Federal income tax returns, R's revenue agent (A) prepared a Form 4549–CG, Income Tax Examination Changes, that listed $7,556.09 as the total amount of Federal income taxes, penalties, and interest Ps owed for those years. Ps signed the form, consenting to R's immediate assessment and collection of the $7,556.09 and waiving their right to challenge in this Court the findings of A contained in that form, and delivered the signed form to A with a check for the stated amount. Subsequently, R determined that A had understated the interest due for 1993 by prematurely taking into account net operating loss (NOL) carrybacks to that year in disregard of sec. 6601(d)(1), I.R.C. R determined that Ps were liable for recalculated interest of $39,558.63 for 1993, instead of $1,548.23 as originally calculated by A, and filed a notice of Federal tax lien to secure Ps' payment of $31,455.49 of that interest considered by R still to be owed for 1993 as of the time of the lien's filing. At the hearing held under sec. 6320(b), I.R.C., Ps challenged the existence and amount of the interest underlying the lien and, alternatively, requested an abatement of interest under sec. 6404(a)(1) and (e)(1), I.R.C. R's Office of Appeals (O) upheld R's recalculation of the interest as correct and sustained R's filing of the lien as proper.
Held: Ps' waiver in the Form 4549–CG does not preclude Ps from challenging in this proceeding the existence and amount of interest underlying the lien.
Held, further, under sec. 6330(c)(2)(B) and (d), I.R.C., as made applicable by sec. 6320(c), I.R.C., this Court has jurisdiction to decide Ps' alternative claims that (1) R's recalculation of interest for 1993 was incorrect and (2) R is precluded from collecting the amount reflected in the recalculation.
Held, further, Ps' interest for 1993 must be computed by taking their NOL carrybacks into account at the times set forth in sec. 6601(d)(1), I.R.C. The fact that A listed in the Form 4549–CG a lower amount of interest for 1993 and that Ps paid that lower amount does not preclude R from now collecting the proper amount of interest.
Held, further, Ps do not qualify for an abatement of interest under sec. 6404(a)(1) or (e)(1), I.R.C.
This case is before the Court for decision without trial. See Rule 122. 1 Petitioners petitioned the Court under section 6330(d)(1), as made applicable by section 6320(c), to review the determination of respondent's Office of Appeals (Appeals) sustaining respondent's filing of a notice of Federal tax lien (NFTL). Respondent filed the NFTL to secure the payment of $31,455.49 shown in his records to be due from petitioners as of March 25, 2002, with respect to their 1993 Federal income tax. The $31,455.49 is all attributable to interest (disputed interest) that respondent assessed on April 27, 1998. Respondent's records show that petitioners' liability for 1993 has increased to $43,818.27 as of August 6, 2002, to reflect (1) fees and collection costs of $16 which respondent recorded on April 15, 2002, and (2) unassessed accrued interest of $12,346.78.
Petitioners argue that they are not liable for the disputed interest because they promptly paid respondent the $7,556.09 for Federal income taxes, penalties, and interest that the revenue agent who audited their 1993 through 1996 Federal income tax returns had agreed with them was their total Federal income tax liability for those years. The revenue agent had set forth the $7,556.09 on a Form 4549–CG, Income Tax Examination Changes, which petitioners promptly signed and returned to the revenue agent with their payment. Respondent's service center in Fresno, California (service center), later concluded that the revenue agent had understated the amount of interest petitioners owed by prematurely taking into account net operating loss (NOL) carrybacks to 1993 in disregard of section 6601(d)(1).
We decide first whether petitioners may challenge in this proceeding the existence and amount of the disputed interest. We hold they may. We decide second whether we are empowered to decide petitioners' alternative claims that (1) the service center's recalculation of interest for 1993 was incorrect and (2) respondent is precluded from collecting the amount reflected in the recalculation. We hold we are. We decide third whether the amount of the disputed interest, without consideration of any abatement thereof, equals as of the time of the lien the amount then sought by respondent. We hold it does. We decide fourth whether any of the disputed interest qualifies for abatement under section 6404(a)(1) or (e)(1). We hold it does not.
The facts in this background section are obtained from the parties' stipulation of facts, the exhibits submitted therewith, and the pleadings. Petitioners resided in Monarch Beach, California, when their petition was filed.
Petitioners' 1993 Federal income tax return reported for that year that petitioners had negative total income of $113,381, negative taxable income of $175,161, and Federal income tax of zero. The return reported that the computation of total income included interest income of $11,558, capital losses totaling $2,657, deductible rental and partnership losses totaling $25,000, and NOL carryovers totaling $97,282.2 The return also reported that petitioners had sold their home during 1993 at a gain of $904,596 and that they planned on replacing the home within the applicable period of section 1034. On or about June 4, 1996, petitioners amended their 1993 return primarily to recognize $630,764 of the gain realized on the sale of their home and to offset that gain by $604,345 of NOLs inclusive of (1) the previously mentioned $97,282, (2) $25,000 reportedly from 1993, (3) $171,055 reportedly from 1994, and (4) $311,008 reportedly from 1995. The amended return reported that petitioners' Federal income tax liability for 1993 continued to be zero.
Respondent's revenue agent audited petitioners' 1993 through 1996 Federal income tax returns and concluded his audit on or about February 3, 1998, with the issuance of a letter to petitioners' representative, Sam Bellavia, C.P.A. (Bellavia). That letter was accompanied by a Form 4549–CG (with supporting schedules) completed by the revenue agent as to his audit of petitioners' 1993 through 1996 tax returns. The letter and the Form 4549–CG (inclusive of the supporting schedules) informed Bellavia of the revenue agent's adjustments to petitioners' 1993 through 1996 tax returns and the revenue agent's conclusion that those adjustments resulted in the following additional tax, penalties, and interest:
+--------------------------------------------------------+
¦ ¦1993 ¦1995 ¦
+------------------------------------+---------+---------¦
¦ ¦ ¦ ¦
+------------------------------------+---------+---------¦
¦Alternative minimum tax ¦$3,221.00¦$1,510.00¦
+------------------------------------+---------+---------¦
¦Sec. 6662 accuracy-related penalty ¦644.20 ¦302.00 ¦
+------------------------------------+---------+---------¦
¦Interest computed until Mar. 5, 1998¦1,548.23 ¦330.66 ¦
+------------------------------------+---------+---------¦
¦ ¦5,413.43 ¦2,142.66 ¦
+--------------------------------------------------------+
As to 1993, the revenue agent listed on the Form 4549–CG and the supporting schedules that he had determined the following adjustments as increases or decreases to the taxable income petitioners reported on their 1993 return:
+--------------------------------------+
¦Capital gain ¦$630,764 ¦
+------------------------+-------------¦
¦Sec. 465 limited at risk¦6,880 ¦
+------------------------+-------------¦
¦Itemized deductions ¦1,983 ¦
+------------------------+-------------¦
¦NOL carryback from 1994 ¦(166,364) ¦
+------------------------+-------------¦
¦NOL carryback from 1996 ¦( 301,269 )¦
+------------------------+-------------¦
¦ ¦171,994 ¦
+--------------------------------------+
The revenue agent's letter to Bellavia advised Bellavia to discuss the adjustments with petitioners and, if acceptable to them, to have them sign and date the Form 4549–CG and return it to the revenue agent. The letter stated that “It would be appreciated if they [petitioners] would remit the balance due of $7,556.09 [$5,413.43 + $2,142.66] at that time.” On March 3, 1998, petitioners signed the Form 4549– CG and returned it to the revenue agent with a check for $7,556.09. The Form 4549–CG stated immediately above their signatures:
Consent to Assessment and Collection—I do not wish to exercise my appeal rights with the Internal Revenue Service or to contest in United States Tax Court the findings in this report. Therefore, I give my consent to the immediate assessment and collection of any increase in tax and penalties, and accept any decrease in tax and penalties shown above, plus additional interest as provided by law. It is understood that this report is subject to acceptance by the District Director.
Subsequently, respondent transferred the case to the service center for assessment. Following its review of the Form 4549–CG and supporting schedules, the service center concluded that the revenue agent had understated the amount of interest due for 1993 by prematurely netting the NOL carrybacks from 1994 and 1996 against the adjustments for 1993. The service center determined that the deficiency and related interest for 1993 were $130,926 and $39,558.63, respectively.
On...
To continue reading
Request your trial
-
Billings v. Commissioner of Internal Revenue, 127 T.C. No. 2 (U.S.T.C. 7/25/2006)
...extent that Congress has not provided the Court with jurisdiction to decide a matter, the Court may not decide it. See Urbano v. Commissioner, 122 T.C. 384, 389 (2004); Fernandez v. Commissioner, 114 T.C. 324, 328 I agree with the overruling of Ewing v. Commissioner, 118 T.C. 494 (2002), be......
-
Smith v. Comm'r of Internal Revenue
...of a closing agreement is "subject solely to [section] 7121"), aff'd, 47 F.3d 168 (6th Cir. 1995); see also Urbano v. Commissioner, 122 T.C. 384, 393 (2004) (stating that section 7121 sets forth the exclusive means by which a closing agreement between the Commissioner and a taxpayer may be ......
-
Broz v. Comm'r of Internal Revenue
...or settlement to be binding on both a taxpayer and the Commissioner. Rohn v. Commissioner, supra; see also Urbano v. Commissioner, 122 T.C. 384, 393, 2004 WL 1277966 (2004). Negotiations with the IRS are enforceable only if they comply with the procedures. Rohn v. Commissioner, supra. A set......
-
Greene-Thapedi v. Comm'r of Internal Revenue
...redetermine the correct amount of the taxpayer's interest liability where the claim falls outside of section 6404, see Urbano v. Commissioner, 122 T.C. 384, 389–393 (2004). In interest-abatement proceedings brought under section 6404(h), this Court has held that we have jurisdiction to dete......