Giamelli v. Comm'r of Internal Revenue

• Decision Date: 30 October 2007
• Docket Number: No. 23150–04L.,23150–04L.
• Citation: 129 T.C. 107,129 T.C. No. 14
• Parties: Joseph GIAMELLI, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Tax Court

129 T.C. 107

129 T.C. No. 14

Joseph GIAMELLI, Petitioner

v.COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 23150–04L.

United States Tax Court.

Oct. 30, 2007.

P and his wife filed a joint Federal income tax return for the 2001 tax year reporting a tax due. P failed to pay the amount due with the joint return. R accepted the return as filed and assessed the tax reported therein. Sec. 6201(a)(1), I.R.C. R issued to P a notice of Federal tax lien, and P filed a request for a collection review hearing pursuant to sec. 6320, I.R.C. During the pendency of the collection review hearing, P and R attempted to negotiate an installment agreement. R issued a notice of determination rejecting the proposed installment agreement when P failed to make estimated tax payments for later tax years. After filing a petition in this Court for review of R's determination, P was killed in an automobile accident. The estate of P now wishes to be substituted for P and, for the first time on appeal of R's determination, seeks to raise challenges to P's underlying liability.

Held: R did not abuse his discretion in rejecting the installment agreement when P failed to make estimated tax payments.

Held, further, the estate of P may not raise the underlying tax liability on appeal of R's determination when the underlying liability was not properly raised during the collection review hearing before R's Appeals Office.

Erasmo S. Bruno, for petitioner.

Marc L. Caine, for respondent.

OPINION

GOEKE, Judge.

This case is before the Court for review of a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice of determination).¹ Respondent has moved to dismiss for lack of prosecution on the grounds that no party has been substituted for Joseph Giamelli since his death. Alternatively, respondent has moved for summary judgment on the grounds that there is no evidence that the Appeals officer abused her discretion in sustaining the proposed collection action. Because Mrs. Giamelli, as the executrix of Mr. Giamelli's estate, has moved to be substituted as the petitioner in this case, respondent's motion to dismiss for lack of prosecution shall be denied. Further, because Mrs. Giamelli has failed to present any evidence to create a genuine question of fact whether the Appeals officer abused her discretion sustaining the proposed collection action, respondent's motion for summary judgment shall be granted.

Background

Joseph Giamelli and his wife, Joann Giamelli, resided in New York at the time this petition was filed. Mr. and Mrs. Giamelli filed a joint Form 1040, U.S. Individual Income Tax Return, for the 2001 tax year. While Mr. and Mrs. Giamelli reported a tax due, they did not include payment of the tax due with the return. Respondent then assessed the tax due shown on the return and sent Mr. and Mrs. Giamelli notice and demand for payment.

When Mr. and Mrs. Giamelli failed to pay, respondent issued a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 listing an unpaid balance of assessment of $723,527.01. Mr. Giamelli, while represented by counsel, then submitted to respondent Form 12153, Request for a Collection Due Process Hearing, and, according to Mrs. Giamelli, signed her name without her knowledge or permission.

Mr. Giamelli's request for a collection review hearing was assigned to one of respondent's Appeals officers. Mr. Giamelli informed the Appeals officer that he wished to enter into an installment agreement in which he would pay $14,300 on a monthly basis to satisfy the 2001 tax liability. During the ensuing months, as Mr. Giamelli and the Appeals officer were discussing the installment agreement, Mr. Giamelli continued to send monthly checks of $14,300 to respondent in partial payment of the 2001 tax liability.

On October 5, 2004, the Appeals officer informed Mr. Giamelli that, under Internal Revenue Service (IRS) guidelines, the installment agreement could not be processed if he was not compliant with his estimated tax payments for tax years after 2001. Mr. Giamelli did not become compliant with his estimated tax payments.

On November 15, 2004, respondent issued to Mr. and Mrs. Giamelli the notice of determination sustaining the proposed collection action for the 2001 tax liability. On December 3, 2004, Mr. Giamelli, without Mrs. Giamelli's knowledge or signature, filed a petition for lien or levy action under section 6320(c). The only issue raised by Mr. Giamelli in his petition was his desire to be allowed to enter into an installment agreement with respondent for the 2001 tax year. After the petition was filed, Mr. Giamelli and respondent agreed to an installment agreement to resolve the outstanding 2001 tax liability, and Mr. Giamelli agreed to sign the necessary decision document to submit to the Court.

In July 2005, before the decision document was executed, Mr. Giamelli was killed in an automobile accident. Subsequently, respondent received a telephone call from Erasmo Bruno, informing respondent of Mr. Giamelli's death and that Mrs. Giamelli had been named the executrix of his estate. Mr. Bruno further informed respondent that he was now counsel for Mrs. Giamelli and the estate and indicated to respondent that Mrs. Giamelli was withdrawing from the installment agreement.

At a hearing before this Court on respondent's motions, Mr. Bruno filed a motion to substitute the Estate of Joseph Giamelli, Deceased, Joann Giamelli, Executrix, as the petitioner in this case. Mr. Bruno represented to the Court that Mrs. Giamelli had received letters to administer her husband's estate. Mr. Bruno further informed the Court that Mrs. Giamelli, in her personal capacity, had no knowledge of the outstanding tax liability and had not authorized or signed the petition filed with this Court by Mr. Giamelli. Accordingly, the Court dismissed the portion of this case relating to Mrs. Giamelli in her personal capacity for lack of jurisdiction.

Mrs. Giamelli, as executrix of the estate, now wishes to disclose certain wrongdoings of her husband that she believes would alter the underlying tax liability for 2001. The estate has suggested to the Court that Mr. Giamelli was involved in a fraudulent scheme whereby certain bribes were paid by Mr. Giamelli which were not disclosed on the income tax return in order to conceal this illegal activity. The estate would like to disclose this alleged fraudulent scheme in order to deduct the alleged illegal payments and thereby show that the tax due should be less than originally reported.

Discussion

I. Motion To Dismiss for Lack of Prosecution

Respondent first moves for dismissal for lack of prosecution because no party has been substituted for Mr. Giamelli since his death in July of 2005.

Under Rule 63(a), “If a petitioner dies, the Court, on motion of a party or the decedent's successor or representative or on its own initiative, may order substitution of the proper parties.” Under Rule 60(c), the capacity of an individual to be substituted is determined by local law. Under New York law, “A personal representative is a person who has received letters to administer the estate of a decedent.” N.Y. Est. Powers & Trusts Law sec. 1–2.13 (McKinney 1998).

At a hearing before this Court on respondent's motion to dismiss, counsel for Mrs. Giamelli filed a motion to substitute as the petitioner, the Estate of Joseph Giamelli, Deceased, Joann Giamelli, Executrix, in the place of Joseph Giamelli. Counsel represented to the Court that Mrs. Giamelli had received letters to administer her husband's estate. While Mrs. Giamelli's motion did not include a copy of the letters to administer the estate, we are satisfied on counsel's representation that Mrs. Giamelli has been appointed the executrix of her husband's estate and that she wishes to continue with his petition in that capacity.

Accordingly, because we find that Mrs. Giamelli wishes to be substituted for Mr. Giamelli, in her capacity as the executrix of Mr. Giamelli's estate, an appropriate order will be entered amending the caption of this case. Further, respondent's motion to dismiss for lack of prosecution will be denied.

II. Motion for Summary Judgment

Respondent has also filed a motion for summary judgment pursuant to Rule 121(a). Respondent argues for summary judgment on the grounds that the Appeals officer properly exercised her discretion in rejecting the proposed installment agreement and sustaining the proposed collection action because Mr. Giamelli was not in compliance with his current tax obligations.

Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be granted where there is no genuine issue of any material fact and a decision may be rendered as a matter of law. Rule 121(a) and (b); see Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir.1994). The moving party bears the burden of proving that there is no genuine issue of material fact, and factual inferences will be read in a manner most favorable to the party opposing summary judgment. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985).

This collection review proceeding was filed pursuant to section 6320, which provides for Tax Court review of respondent's administrative determinations to proceed with the collection of tax liabilities via liens. Where the validity of the underlying tax liability is at issue in a collection review proceeding, the Court will review the matter de novo. Davis v. Commissioner, 115 T.C. 35, 39 (2000). However, where the underlying liability is not at issue, we review the Appeals officer's determinations regarding the collection action for an abuse of discretion. Goza v. Commissioner, 114 T.C. 176 (2000). Mr. Giamelli did not challenge the validity of the underlying tax liability, and thus this Court would pursuant to precedent review respondent...