Drake v. Commissioner, Docket No. 20454-03L.
| Decision Date | 24 July 2006 |
| Docket Number | Docket No. 20454-03L. |
| Citation | 92 T.C.M. 37 |
| Parties | Gregory Drake v. Commissioner. |
| Court | U.S. Tax Court |
Timothy J. Burke, for petitioner;
Louise R. Forbes, for respondent.*
SUPPLEMENTAL MEMORANDUM FINDINGS OF FACT AND OPINION
The instant case relates to the administrative hearing and determination of respondent's Appeals Office pursuant to section 6330 with respect to petitioner's 1991, 1992, 1994, 1995, and 1997 tax years.1 On October 12, 2005, we filed the initial opinion in this case, Drake v. Commissioner [Dec. 56,166], 125 T.C. 201 (Drake I). In Drake I, we concluded that a memorandum received by the settlement officer assigned to conduct petitioner's administrative hearing under section 6330 (section 6330 hearing) constituted a prohibited ex parte communication which may have damaged petitioner's credibility before respondent's Appeals Office. Consequently, we held that respondent's Appeals officer abused his discretion in determining that the proposed levy against petitioner should be sustained. We retained jurisdiction of the case and remanded it to respondent's Appeals Office for a new section 6330 hearing with an independent Appeals officer who had received no communication relating to the credibility of petitioner or petitioner's representative. On November 17, 2005, petitioner filed a motion for litigation costs and fees pursuant to section 7430 and Rule 231. In accordance with an order of this Court, a newly assigned Appeals officer conducted a new section 6330 hearing with petitioner (the section 6330 hearing on remand). On March 13, 2006, respondent's Appeals Office issued a notice of determination, sustaining the proposed collection action against petitioner. On April 13, 2006, petitioner filed a "Motion to Compel Settlement".
The issues to be decided are (1) whether the ultimate determination of respondent's Appeals Office to sustain the proposed collection action is an abuse of discretion; (2) whether to grant or deny petitioner's "Motion to Compel Settlement"; and (3) whether petitioner is entitled to an award of costs and fees pursuant to section 7430.
Some of the underlying facts of this case are set forth in Drake I, and we incorporate by reference the portions of Drake I that are relevant to our disposition of the instant case.
Petitioner Gregory Drake and Barbara Drake are husband and wife. At the time of the filing of the petition, petitioner resided in South Yarmouth, Massachusetts.
As of August 19, 1997, respondent had filed Notices of Federal Tax Lien against petitioner for income tax liabilities for 1991, 1992, and 1995. On that date, Barbara Drake and petitioner filed a joint bankruptcy petition under chapter 13 of the Bankruptcy Code with the U.S. Bankruptcy Court for the District of Massachusetts. Thereafter, respondent filed a proof of claim with respect to the unpaid Federal income tax liabilities of Barbara Drake and petitioner. During the 1997 bankruptcy proceeding, Barbara Drake and petitioner received authority to sell three properties which were subject to Federal tax liens. The sale yielded $161,250.65, and a Federal tax lien attached to the sale proceeds.
Subsequently, the bankruptcy trustee filed a motion to dismiss the case for failure to file a repayment plan, and Barbara Drake and petitioner filed a Motion for Authority to Disburse Funds. The bankruptcy court granted the motion to dismiss and issued an order mooting the Motion for Authority to Disburse Funds. Upon the dismissal of the case on June 30, 1999, Neal E. Satran (Mr. Satran), the attorney representing Barbara Drake and petitioner in the 1997 bankruptcy, distributed to Barbara Drake and petitioner sale proceeds in the amount of $151,139.74 (the 1997 bankruptcy sale proceeds).2 Petitioner gratuitously transferred the 1997 bankruptcy sale proceeds to his sons, Darren Drake and Gregory Drake, who placed the proceeds in a joint personal brokerage account under their names.3 At no time were the 1997 bankruptcy sale proceeds commingled with other funds. On October 6, 1999, Notices of Federal Tax Lien were filed against Barbara Drake and petitioner with respect to their 1994, 1995, and 1997 tax years.
On January 10, 2000, respondent issued computer-generated notices of outstanding income tax liabilities to Barbara Drake and petitioner. On January 14, 2000, respondent received from Barbara Drake and petitioner a Form 433-A, Collection Information Statement for Individuals (collection information statement). On the collection information statement, no response was provided to the question of whether assets had recently been sold or otherwise transferred for less than their full value.
On July 19, 2000, respondent mailed to Barbara Drake and petitioner a Final Notice, Notice of Intent to Levy and Notice of Your Right to a Hearing, with respect to their 1991, 1992, 1994, 1995, and 1997 tax years. The notice asserted an unpaid tax of $121,478.17 and penalties and interest of $88,607.27. Pursuant to a power of attorney, Timothy J. Burke (Mr. Burke) timely requested a section 6330 hearing on behalf of Barbara Drake and petitioner. Subsequently, on behalf of Barbara Drake, Mr. Burke submitted a Form 8857, requesting relief from joint and several liability pursuant to section 6015 for each of the years in dispute. We discuss Barbara Drake's request for section 6015 relief in greater detail below.
Settlement Officer Eugene O'Shea was assigned to conduct the requested section 6330 hearing, and he determined from Internal Revenue Service (IRS) records that petitioner had previously filed for bankruptcy protection. On January 30, 2002, prior to the section 6330 hearing, Settlement Officer O'Shea conferred with Advisor Sid Gordon of the Internal Revenue Service Insolvency Unit (Advisor Gordon) regarding the 1997 bankruptcy and requested related documentation. On the same date, Advisor Gordon faxed to Settlement Officer O'Shea a copy of Advisor Gordon's prior memorandum to respondent's counsel Louise R. Forbes (Attorney Forbes). In the memorandum, dated October 5, 1999, Advisor Gordon stated that the 1997 bankruptcy sale proceeds had been distributed to Barbara Drake and petitioner, that the proceeds should have been distributed to the creditors of Barbara Drake and petitioner, and that Advisor Gordon believed that Mr. Satran and petitioner had "used the Court to bypass the Federal tax Lien." The memorandum further stated:
According to the settlement sheets the debtor received $161,094.73 from the three sales. Although the Bankruptcy Court approved the sales under 11 USC 363 the IRS received nothing. Attorney Satran had knowledge of the Internal Revenue Service Federal Tax Liens due to the considerable litigation involved in this case. In fact Attorney Satran filed a motion with the Court to disburse the funds including [sic] the IRS liens. It is a mockery to the integrity [of the] Bankruptcy Court if an Attorney can use it to defeat a Federal Tax Lien allowing a Debtor to walk away with the proceeds. The Bankruptcy Code was used because 11 USC 363 was authorized by the Court.
I informed Attorney Campobasso that Attorney Satran had previously been suspended by the Bankruptcy Court. Chief, US Bankruptcy Court Judge Carol J Keener suspended attorney Satran from 01/30/1996 through 11/29/1996. The action of Attorney Satran in a chapter 11 case [involving] Paula Wyner, Carlton House of Brockton, Inc. was the cause of the suspension. I think the Court should be informed of the conduct of Attorney Satran in this case.
On January 30, 2002, Mr. Burke attended a meeting with Settlement Officer O'Shea on behalf of both Barbara Drake and petitioner. At the meeting, Settlement Officer O'Shea did not inform Mr. Burke of his communications with Advisor Gordon. Mr. Burke provided a copy of a collection information statement signed by petitioner on January 24, 2002.4 On the collection information statement, petitioner stated that he had not transferred any assets out of his name for less than their actual value in the last 10 years. A Form 656, Offer-in-Compromise (offer-in-compromise form), had been completed but was not submitted to Settlement Officer O'Shea for consideration. Petitioner concedes that the parties informally suspended consideration of any offer-in-compromise pending a determination of Barbara Drake's request for section 6015 relief, which would influence whether petitioner filed an individual offer-in-compromise or a joint offer-in-compromise.
On September 4, 2002, petitioner submitted to respondent's Appeals Office an "amended" offer-in-compromise form. The amended offer-in-compromise listed petitioner alone as the taxpayer and offered to pay $5,500 in satisfaction of petitioner's tax liabilities for 1991, 1992, 1993, 1994, 1995, 1997, and 1999. In a letter to Mr. Burke dated September 4, 2002, Settlement Officer O'Shea acknowledged receiving the amended offer-in-compromise but noted that consideration of the original offer-in-compromise had been informally suspended by the parties pending the determination of Barbara Drake's request for section 6015 relief. Accordingly, Settlement Officer O'Shea informed Mr. Burke that no original offer-in-compromise had been submitted for consideration and returned the amended offer-in—compromise to Mr. Burke. Petitioner concedes that the reason for returning the amended offer-in-compromise form was to avoid any administrative confusion.
On January 17, 2003, the section 6330 matter was transferred from Settlement Officer O'Shea to Appeals Officer Jeffrey Kaplan, who had been assigned to the administrative appeal of Barbara Drake's request for section 6015 relief. Appeals Officer Kaplan subsequently advised Mr. Burke that no...
To continue reading
Request your trial