Clarke v. Commissioner of Internal Revenue, 081612 FEDTAX, 11538-11L

Docket Nº:11538-11L
Opinion Judge:GOEKE, Judge
Party Name:WAYNE CLARKE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Attorney:Beverly L. Winstead, for petitioner. Michael A. Raiken, for respondent.
Case Date:August 16, 2012
Court:United States Tax Court

T.C. Memo. 2012-238

WAYNE CLARKE, Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

No. 11538-11L

United States Tax Court

August 16, 2012

Beverly L. Winstead, for petitioner.

Michael A. Raiken, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

GOEKE, Judge

The petition in this case was filed in response to a notice of determination concerning collection action sustaining a final notice of intent to levy with respect to income tax, additions to tax, and interest for 2008 and 2009. The issues for decision are:

(1) whether the settlement officer (SO) assigned to this case abused his discretion by not adequately considering petitioner's installment agreement request. We hold the SO did not abuse his discretion; and

(2) whether the SO abused his discretion in using national standards to determine petitioner's reasonable collection potential rather than using petitioner's actual expenses. We hold the SO did not abuse his discretion.

FINDINGS OF FACT

At the time the petition was filed, petitioner resided in Maryland.

During 2007, 2008, and 2009 petitioner was self-employed as a consultant and operated his consulting activities through a limited liability company called Clarke & Associates, LLC. Clarke & Associates was wholly owned by petitioner and was treated as a disregarded entity during those years.

On October 20, 2008, petitioner filed his 2007 Federal income tax return reporting $498, 5761 of taxable income and self-assessed tax of $176, 586. Respondent assessed the tax reported on the return on November 24, 2008. Petitioner made a payment of $5, 000 with the 2007 tax return but made no estimated tax payments or other advance payment of his income tax liability.

Since filing the 2007 tax return, petitioner has made $42, 444 in additional payments toward the 2007 tax liability.

On October 22, 2009, petitioner filed his 2008 tax return reporting $234, 168 of taxable income and self-assessed tax of $81, 428. Respondent assessed the tax reported on the return on November 16, 2009. Petitioner made no estimated tax payments or other advance payments of his 2008 tax liability, made no payments with his return, and has made no payments toward the liability since the return was filed.

On April 15, 2010, petitioner filed his 2009 return reporting $165, 795 of taxable income and self-assessed tax of $49, 505. Respondent assessed the tax reported on the return on May 13, 2010. Petitioner made no estimated tax payments or other advance payments of his 2009 tax liability, made no payments with his return, and has made no payments toward the liability since the return was filed.

In addition to liability for the previously described unpaid tax (as well certain additions to tax2 and interest), petitioner also had a $49 unpaid liability remaining from his 2005 tax as of January 4, 2011.

On September 18, 2009, petitioner purchased a home for $950, 000. In order to help pay for the home, petitioner obtained a mortgage for $741, 757. To make the downpayment, petitioner withdrew approximately $183, 000 from his brokerage account. The home has at least 4, 000 square feet of interior finished living space, is on a lot of approximately two acres in a gated "golf course community", and has four bedrooms and five bathrooms. Petitioner lived there with his son and no one else. Before purchasing the home, petitioner stayed in a rental.3

Petitioner's work as a consultant involved convincing residential and commercial real estate developers and executives to develop land in Prince Georges County, Maryland, the county in which he lived. Petitioner set up an office in one of the rooms in his home where he would meet potential and existing business clients. Before buying the home petitioner did not have his own office and would often meet clients in restaurants or hotel lobbies.

The parties stipulated that "On November 13, 2009, petitioner requested an installment agreement for the payment of his tax liabilities for 2005, 2007, 2008, and 2009." This stipulation appears to be incorrect in part, given that petitioner did not file his 2009 tax return until April 15, 2010. However, the 2008 Form 4340, Certificate of Assessments, Payments, and Other Specified Matters, submitted into evidence does show a "PENDING INSTALLMENT AGREEMENT" on November 13, 2009, as well as on November 17, 2009. The 2008 Form 4340 reflects no payments made as a result of an installment agreement, and an entry for April 21, 2010, states: "REVERSES PENDING INSTALLMENT AGREEMENT". The parties did not expand upon the facts regarding this requested installment agreement.

On August 18, 2010, petitioner submitted a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals. This Form 433-A stated that petitioner's total monthly income was $14, 773 and his total monthly living expenses were $14, 026. The monthly living expenses included $6, 105 for housing and utilities.

On November 5, 2010...

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