Gerome v. Commissioner of Internal Revenue, 082418 FEDTAX, 19994-17 L

Docket Nº:19994-17 L
Opinion Judge:Diana L. Leyden Special Trial Judge
Case Date:August 24, 2018
Court:United States Tax Court

ARTHUR A. GEROME, Petitioner,



No. 19994-17 L

United States Tax Court

August 24, 2018


Diana L. Leyden Special Trial Judge

On September 21, 2017, petitioner filed the petition commencing this case to review the Internal Revenue Service's (IRS) [1] Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330[2] (notice of determination), dated August 22, 2017. The notice of determination sustained a proposed levy with respect to petitioner's unpaid tax liabilities for 2010, 2011, 2012, and 2014.

On April 4, 2018, respondent filed a Motion for Summary Judgment (motion) pursuant to Rule 121, supported by a declaration of Lusic Boyadhzyan, Settlement Officer, (SO) of the IRS Office of Appeals (Appeals Office). Respondent contends that he is entitled to judgment as a matter of law sustaining the determination that it is appropriate to proceed with the proposed levy. By order dated April 13, 2018, the Court directed petitioner to file a response to respondent's motion on or before May 7, 2018, and warned that failure to comply with the order could result in the granting of respondent's motion and a decision may be entered against him. Petitioner has not filed a response. By order dated August 17, 2018, respondent's motion was assigned for disposition to the undersigned. See sec. 7443A(b)(4), (c).

Upon review of the record on respondent's motion, the Court concludes that there are no genuine issues of material fact and that respondent is entitled to judgment as a matter of law as provided herein.

Petitioner resided in California at the time the petition in this case was filed.

A. Background

Petitioner failed to pay tax liabilities with respect to 2010, 2011, 2012, and 2014. The IRS sent a Final Notice of Intent to Levy and Notice of Your Right to a Hearing dated July 15, 2016, notifying petitioner of the unpaid tax liabilities for 2010, 2011, 2012, and 2014 and his right to a hearing. On August 4, 2016, the IRS received petitioner's Form 12153, Request for Collection Due Process or Equivalent Hearing, in which petitioner disputed the proposed levy and checked the collection alternative boxes for installment agreement, offer-in-compromise, and "I cannot pay balance". Petitioner attached a memorandum to the Form 12153 and stated that he reserved the right to dispute the underlying tax liability.

The IRS sent petitioner a letter dated August 8, 2016, informing him that it had received his Form 12153 and in order for the IRS to consider the proposed offer-in-compromise petitioner had to provide a Form 43 3-A, Collection Information Statement for Wage Earners and Self-Employed Individuals by August 29, 2016.

On October 27, 2016, petitioner submitted a Form 656, Offer-in-Compromise and Form 433-A (OIC) directly to the IRS Centralized Offer-in-Compromise unit (COIC) in Holtsville, New York. On the Form 433-A (OIC) petitioner completed the section titled "Calculate Your Minimum Offer Amount" and reported an offer amount of $1, 457. However, on the Form 656 petitioner checked both boxes in the reason for the offer section, Doubt as to Collectibility and Exceptional Circumstances (Effective Tax Administration), and offered $500 to compromise amounts owed for years 2001 through 2015. COIC made a preliminary determination to reject petitioner's offer-in-compromise because it had determined that the reasonable collection potential (RCP) was in excess of the balance of the tax liabilities and, therefore, petitioner could fully pay the outstanding tax liabilities.

Petitioner's collection due process (CDP) hearing was assigned to the SO. The SO telephoned petitioner's representative on May 24, 2017, to try to conduct the telephone CDP hearing. The SO spoke with petitioner's representative and discussed the SO's preliminary review of the offer-in-compromise. Petitioner had submitted bank statements with the offer-in-compromise. The bank statements reflected some transfers to an investment account for which petitioner had not provided statements. The bank statements also reflected some unidentified deposits. During the telephone call the SO requested copies of the investment account's statements and an explanation of certain unidentified deposits into petitioner's bank account. The SO scheduled the CDP hearing for June 1, 2017.

On June 1, 2017, the SO held the telephone CDP hearing with petitioner's representative. Petitioner's representative requested more time to submit the requested investment account statements. The SO gave petitioner's representative until June 12, 2017, to submit the investment account statements. On June 14 and June 29, 2017, the SO received from petitioner's representative investment account statements for the period November 2015 to July 2016. The statements indicated that the beginning balance of the account in November 2015 was $19, 620 and the ending balance in July 2016 was $12. Petitioner did not provide any information regarding the decline in the account balance or explain whether any funds were withdrawn to pay for medical or other necessary living expenses. Additionally, petitioner did not provide any explanation as to the unidentified bank account deposits.

The SO reviewed the documents that petitioner submitted and determined that petitioner's RCP was less than what COIC had calculated. The SO determined the decline in the investment account was a dissipated asset because petitioner had not provided any explanation as to the reason for the decline or the use of any withdrawn funds. Accordingly, the SO calculated a revised RCP of $41, 820, which consisted of $19, 620 from dissipated assets and $22, 200 from future income.[3]

On August 22, 2017, the IRS issued a notice of determination to petitioner sustaining the proposed levy with respect to petitioner's unpaid 2010, 2011, 2012, and 2014 tax liabilities.

On September 21, 2017, petitioner timely filed a petition disputing the notice of determination. In his petition, petitioner argues that the SO erred in considering the decline in the balance of petitioner's investment account as a dissipated asset. Petitioner did not raise the issue of the underlying tax liabilities in his petition and did not submit any documents to challenge the underlying tax liabilities for 2010, 2011, 2012, or 2014 during the CDP hearing.

A. Discussion

1. Summary Judgment

Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Florida Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Either party may move for summary judgment upon all or any part of the legal issues in controversy. Rule 121(a). The Court may grant summary judgment only "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits or declarations, if any, show that there is no genuine dispute as to any material fact and that a decision may be rendered as a matter of law." Rule 121(a) and (b); see Naftel v. Commissioner, 85 T.C. 527, 529(1985).

Respondent, as the moving party, bears the burden of proving that no genuine dispute exists as to any material fact and that respondent is entitled to judgment as a matter of law. See FPL Group, Inc. v. Commissioner, 115 T.C. 554, 559 (2000); Bond v. Commissioner, 100 T.C. 32, 36 (1993); Naftel v. Commissioner, 85 T.C. at 529. In deciding whether to grant summary judgment, the factual materials and inferences drawn from them must be considered in the light most favorable to the nonmoving party. FPL Group, Inc. v. Commissioner, 115 T.C. at 559; Bond v. Commissioner, 100 T.C. at 36; Naftel v....

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