123 T.C. 85 (T.C. 2004), 12052-01L, Robinette v. Commissioner of Internal Revenue

Docket Nº:12052-01L
Citation:123 T.C. 85, 123 T.C. No. 5
Opinion Judge:VASQUEZ, Judge
Party Name:JAMES M. ROBINETTE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Attorney:Thomas L. Overbey and Laurie M. Boyd, for petitioner. Martha J. Weber, for respondent.
Judge Panel:Vasquez, Juan F., opinion; Wells, Thomas B., concurrence; Thornton, Michael B., concurrence; Marvel, L. Paige, concurrence; Haines, Harry A., concurrence; Wherry, Robert A., Jr., concurrence; Halpern, James S., dissent; Holmes, Mark V., dissent GERBER, COHEN, SWIFT, WELLS, and LARO, JJ., agree wi...
Case Date:July 20, 2004
Court:United States Tax Court

Page 85

123 T.C. 85 (T.C. 2004)

123 T.C. No. 5

JAMES M. ROBINETTE, Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 12052-01L

United States Tax Court

July 20, 2004

Respondent abused his discretion in determining to proceed with collection.

SYLLABUS

On Oct. 31, 1995, P and R entered into an offer-in-compromise. The terms of the offer-in-compromise required P to, among other things, timely file his 1995 through 1999 tax returns. On the morning of Oct. 15, 1999, the day P's 1998 return was due, P's accountant (A) prepared P's return. That afternoon, A drove to P's office to obtain P's signature on P's return. A returned to his office. Thereafter, A affixed postage to the envelope containing P's return using a private postage meter. A deposited the envelope containing P's return in a U.S. Postal Service mailbox in his office building.

R's records indicate that R received all of P's returns except for P's 1998 return. R declared P's offer-in-compromise in default. After a hearing in which P raised the issue of compliance with the terms of the offer-in-compromise, R issued a notice of determination in which R determined to proceed with collection of the unpaid tax liabilities.

Held : Pursuant to sec. 6330(c), I.R.C., abuse of discretion is the applicable standard of review.

Held, further, When reviewing R's determination for an abuse of discretion under sec. 6330, I.R.C., we may consider evidence presented at trial which was not included in the administrative record.

Held, further, R abused his discretion in determining to proceed with collection.

Thomas L. Overbey and Laurie M. Boyd, for petitioner.

Martha J. Weber, for respondent.

Vasquez, Juan F., opinion; Wells, Thomas B., concurrence; Thornton, Michael B., concurrence; Marvel, L. Paige, concurrence; Haines, Harry A., concurrence; Wherry, Robert A., Jr., concurrence; Halpern, James S., dissent; Holmes, Mark V., dissent

OPINION

Page 86

VASQUEZ, Judge

This case was commenced in response to a Notice of Determination Concerning Collection Action(s) Under Sections 6320 [1] and/or 6330. The issue is whether respondent may proceed with collection of petitioner's 1983, 1984, 1985, 1986, 1987, 1988, 1989, 1990, and 1991 tax liabilities.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The stipulation of facts, first supplemental stipulation of facts, second supplemental stipulation of facts, and the attached exhibits are incorporated herein by this reference. At the time he filed the petition, petitioner resided in Jonesboro, Arkansas.

Since approximately 1990, Douglas W. Coy has served as petitioner's accountant. Mr. Coy has prepared petitioner's tax returns for all the tax years in which he has represented petitioner.

Petitioner's Offer-in-Compromise

On October 31, 1995, petitioner and respondent entered into an offer-in-compromise. The offer-in-compromise related to income tax liabilities for 1983, 1984, 1985, 1986, 1987, 1988, 1989, 1990, and 1991, and trust fund recovery penalties for unpaid employment taxes for periods ending March 31, June 30, and September 30, 1988, June 30 and December 31, 1989, and March 31, June 30, and September 30, 1990. The offer-in-compromise was submitted on the basis of doubt as to collectibility. The amount of individual income tax and statutory additions compromised totaled $989,475.[2] Petitioner

Page 87

offered to pay $100,000 to compromise the outstanding liabilities and penalties.[3] Petitioner paid $1,000 with the submission of the offer and the remaining $99,000 with borrowed funds within 60 days after acceptance of the offer.

Petitioner agreed to the following terms and conditions:

(d) I * * * will comply with all the provisions of the Internal Revenue Code related to filing my * * * returns * * * for five (5) years from the date IRS accepts the offer.

* * * * * * *

(j) I * * * understand that I * * * remain responsible for the full amount of the tax liability unless and until IRS accepts the offer in writing and I * * * have met all the terms and conditions of the offer. IRS won't remove the original amount of the tax liability from its records until I * * * have met all the terms and conditions of the offer.

* * * * * * *

(o) If I * * * fail to meet any of the terms and conditions of the offer, the offer is in default, and IRS may:

* * * * * * *

(iv) file suit or levy to collect the original amount of tax liability, without further notice of any kind.

Petitioner's 1998 Individual Income Tax Return

Petitioner received an extension to file his 1998 individual income tax return (petitioner's 1998 return) on or before October 15, 1999. On the morning of October 15, 1999, Mr. Coy received via facsimile petitioner's Schedule K-1, Shareholder's Share of Income, Credits, Deductions, etc., for Professional Acres Leasing Group from the accounting firm of Osborne & Osborne. Upon receipt of the Schedule K-1 on October 15, 1999, Mr. Coy completed petitioner's 1998

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return. For 1998, petitioner was entitled to a refund of $3,300.

At approximately 3:45 to 4 p.m. on October 15, 1999, Mr. Coy left his office in Little Rock, Arkansas, en route by car to three other cities in Arkansas in order to review State and Federal income tax returns with four of his clients, including petitioner, and to obtain his clients' signatures on their returns. First, Mr. Coy drove to Mount Pleasant, Arkansas, to deliver the returns of Howard and Jane Lamb for review and signatures. After the Lambs signed their tax returns, Mr. Coy drove to Melbourne, Arkansas, to deliver the returns of David and Theresa Sharp for review and signatures. After the Sharps signed their tax returns, Mr. Coy delivered the returns of Fred Lamb, also in Melbourne, Arkansas, for review and signature. After Mr. Lamb signed his tax returns, Mr. Coy drove to Jonesboro, - 6 - Arkansas, to deliver the returns of petitioner for review and signature.

Mr. Coy arrived at petitioner's office between 8:45 and 9 p.m. Petitioner signed the returns in the presence of Mr. Coy and Frances Robinette, petitioner's wife and office manager.

After the clients signed their tax returns, Mr. Coy took the signed returns from his clients so that he could mail them from his office in Little Rock, Arkansas.

Mr. Coy returned to his office in Little Rock, Arkansas, sometime after 11 p.m., but before midnight. Mr. Coy made a copy of the signature page of petitioner's 1998 return. Mr. Coy affixed postage to the envelope containing petitioner's 1998 return using a private postage meter. The postage from the private postage meter displayed a postmark of October 15, 1999. Before midnight, Mr. Coy placed the envelope containing petitioner's 1998 return in a U.S. Postal Service mailbox in the building where his office is located.

At this same time, Mr. Coy mailed the returns of Mr. Sharp. Mr. Sharp was not assessed late filing penalties or late payments by the Internal Revenue Service (IRS) with respect to his 1998 individual income tax return.

Petitioner's 1995, 1996, 1997, 1999, and 2000 Individual Income Tax Returns

Petitioner received extensions to file his 1995 individual income tax return on or before October 15, 1996. Petitioner's

Page 89

1995 individual income tax return was prepared by Mr. Coy on October 15, 1996. For 1995, petitioner paid the $2,593 shown as owed on his return.

Petitioner received extensions to file his 1996 individual income tax return on or before October 15, 1997. Petitioner's 1996 individual income tax return was received by the IRS on October 20, 1997. For 1996, petitioner was entitled to a refund of $14,435.

Petitioner received extensions to file his 1997 individual income tax return on or before October 15, 1998. Petitioner's 1997 individual income tax return was prepared by Mr. Coy on October 14, 1998, and received by the IRS on October 19, 1998. For 1997, petitioner was entitled to a refund of $5,644.

Petitioner received extensions to file his 1999 individual income tax return on or before October 15, 2000. Petitioner's 1999 individual income tax return was prepared by Mr. Coy on October 15, 2000, and received by the IRS on October 19, 2000. For 1999, petitioner was entitled to a refund of $2,631.

Petitioner received extensions to file his 2000 individual income tax return on or before October 15, 2001. Petitioner's 2000 income tax return was received by the IRS on October 17, 2001.

Each of the aforementioned years, including 1998, on or about October 15, Mr. Coy, or a person from Mr. Coy's office, delivered to petitioner at petitioner's office his original individual income tax return, and petitioner would sign it.

IRS Collection Efforts

On February 21, 2000, the IRS sent petitioner a " Request for Your Tax Return" for 1998. Petitioner received this letter. On March 17, 2000, the IRS notified petitioner that it had received his required Statement of Annual Income for 1998 but needed a copy of his 1998 Form 1040, U.S. Individual Income Tax Return. On April 17, 2000, the IRS sent petitioner a letter stating: " Your Tax Return is Overdue -- Contact us Immediately" for 1998. The letter also stated:

*** OFFER IN COMPROMISE ***

Our records indicate that we've accepted an offer in compromise from you. You agreed to file and pay all your federal taxes for the five (5) year period after we accepted this offer. If you don't file the requested delinquent Page 90

return, we may reinstate the amount you owe that we previously compromised.

Petitioner forwarded to Mr. Coy by fax all notices from the IRS concerning his 1998 return and offer-in-compromise, as he was " scared to death" of these notices.

The Austin, Texas, Service Center monitored petitioner's offer-in-compromise. Revenue Officer Kathy Santino of the Oklahoma City, Oklahoma, office was assigned to examine whether petitioner's offer-in-compromise was in...

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