511 F.3d 65 (1st Cir. 2007), 06-2507, Drake v. C.I.R.

Docket Nº:06-2507.
Citation:511 F.3d 65
Party Name:Gregory DRAKE, Petitioner, Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent, Appellee.
Case Date:December 20, 2007
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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511 F.3d 65 (1st Cir. 2007)

Gregory DRAKE, Petitioner, Appellant,



No. 06-2507.

United States Court of Appeals, First Circuit

Dec. 20, 2007

Heard Sept. 7, 2007.

On Appeal from a Decision of the United States Tax Court.

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Timothy J. Burke with whom Burke & Associates was on brief for petitioner, appellant.

Rachel I. Wollitzer, Tax Division, Department of Justice, with whom Eileen J. O'Connor, Assistant Attorney General, and Kenneth L. Greene, Tax Division, Department of Justice, were on brief for respondent, appellee.

Before BOUDIN, Chief Judge, TORRUELLA, Circuit Judge, and Schwarzer, [*] Senior District Judge.

BOUDIN, Chief Judge.

Gregory Drake's decade-long battle with the IRS is recounted in rich detail in the Tax Court's decision. Drake v. Comm'r, 92 T.C.M. (CCH) 37 (2006) ("Drake II"). The present phase began when the IRS

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Appeals Office on November 10, 2003, upheld an IRS proposed tax levy. On appeal, the Tax Court remanded, finding that Drake's initial hearing was tainted by improper ex parte communications between an IRS insolvency unit advisor and the settlement officer handling Drake's case. Drake v. Comm'r, 125 T.C. 201, 210, 2005 WL 2560781 (2005) ("Drake I").

A second hearing occurred before a new IRS appeals officer on November 4, 2005. At that time Timothy Burke, Drake's counsel, and two IRS agents discussed settlement, and Drake submitted a compromise offer on November 14. Drake then filed a motion for his attorney's fees incurred in relation to the first hearing. In the same month, the IRS imposed a jeopardy levy—which it may do subject to a hearing "within a reasonable period of time after the levy"—on the proceeds of a 1997 bankruptcy sale of Drake's house, comprising around $150,000 held in brokerage accounts in the names of Drake's sons. 26 U.S.C. § 6330(f) (2000).

Throughout December 2005, the parties continued settlement discussions. By letter on December 20, 2005, the IRS made a detailed global settlement offer, seeking to resolve all outstanding issues involving Drake, his wife Barbara, and his two sons; the sons' involvement turned on their control of the sale-of- house proceeds. Drake was given until December 28 to accept the offer, and when he failed to do so, the IRS informed him that the offer was no longer available.

Nevertheless, Burke had a conference call with IRS counsel on January 6, 2006, after which the IRS sent Burke a set of settlement documents with a letter stating:

Pursuant to our conversation of this date, we are enclosing the original and two copies of a Decision document in the above-referenced case. The original and one copy should be signed, dated, and returned to this office for filing with the Tax Court.

The documents were to be signed by Burke and Drake's sons.1 Neither Burke nor Drake's sons signed and returned the settlement documents.

On January 13, 2006, the IRS sent a letter to Burke stating that "[a]s of this date, the terms of the settlement have not been accepted by your client and related parties.... We are hereby withdrawing the proposed January 6, 2006 settlement ...." Burke responded, taking the position that the parties had agreed to settle "on the terms reflected in the December 20, 2005 letter.... It is the taxpayers' position that the Service breached the parties agreement on January 13, 2006 by way of its letter of that date."

The IRS also considered Burke's proposal as an offer-in-compromise. Burke's proposal included the same terms as the January 6 settlement offer except that he reserved the right to seek attorney's fees. In a March 13, 2006, notice of determination, the IRS rejected that offer while upholding the jeopardy levy and the IRS's collection action.

Drake challenged the second notice of determination, and on July 24, 2006, the Tax Court issued a new decision which is now before us on appeal. It found no procedural defects in Drake's second collection hearing and no final settlement between the parties barring the IRS from its

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full assessment; it also ruled that the IRS had not abused its discretion in imposing a jeopardy levy and in rejecting Drake's offer-in-compromise, and that Drake was not entitled to attorney's fees. Drake now appeals.

Our review of the Tax Court's decision is in most respects similar to our review of district court decisions: factual findings for clear error and legal rulings de novo. Interex, Inc. v. Comm'r, 321 F.3d 55, 58 (1st Cir. 2003); Kinan v. Cohen, 268 F.3d 27, 32 (1st Cir. 2001). As to the IRS's rejection of Drake's offer-in-compromise and its imposition of the jeopardy levy, review turns on whether the IRS abused its discretion. Murphy v. Comm'r, 469 F.3d 27, 32 (1st Cir. 2006); Olsen v. United States, 414 F.3d 144, 150 (1st Cir. 2005).


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