Powers v. Commissioner of Internal Revenue, T.C. Memo. 2009-229 (U.S.T.C. 10/5/2009)

• Court: U.S. Tax Court
• Writing for the Court: Chabot
• Decision Date: 05 October 2009
• Docket Number: No. 10758-06L.,10758-06L.
• Citation: Powers v. Commissioner of Internal Revenue, T.C. Memo. 2009-229 (U.S.T.C. 10/5/2009), No. 10758-06L. (T.C. Oct 05, 2009)
• Parties: FERNANDO POWERS, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

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T.C. Memo. 2009-229

FERNANDO POWERS, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 10758-06L.

United States Tax Court.

Filed October 5, 2009.

P submitted a 2001 Form 1040, listing as "-0-" his income, adjusted gross income, tax and credits, other taxes, and amount owed. On this form P claimed three daughters as dependents; he also claimed a refund for the Federal income tax withheld amounts shown on the Form W-2 and the Form 1099-R attached thereto. R made adjustments to P's 2001 Form 1040. R contends that R sent to P a notice of deficiency and P received it; P contends otherwise. R assessed and initiated collection proceedings. P requested a hearing. Ultimately, R sent to P a notice of determination to proceed with collection. P then petitioned this Court. R moved for summary judgment and to impose a penalty under sec. 6673(a)(1), I.R.C. 1986.

1. Held: R failed to show there is no genuine issue as to the material fact of whether R sent a notice of deficiency to P.

2. Held, further, R failed to show there is no genuine issue as to the material fact of whether P received a notice of deficiency.

3. Held, further, R is entitled to summary judgment that the settlement officer employed in R's Appeals Office was permitted to conduct the administrative collection hearing.

4. Held, further, R is entitled to summary judgment that R's settlement officer was impartial.

5. Held, further, R is entitled to summary judgment that R's answer was timely filed in accordance with our Rules, and so P is not entitled to a default judgment.

6. Held, further, because P's actions in the further proceedings in the instant case may affect our ruling as to sec. 6673(a)(1), I.R.C. 1986, R's motion to impose a penalty will be denied; this matter is to be reexamined at an appropriate later time, at the Court's own motion if necessary.

Fernando Powers, pro se.

Carol-Lynn E. Moran, for respondent.

MEMORANDUM OPINION

CHABOT, Judge.

This matter is before us on respondent's motion for summary judgment under Rule 121¹ and to impose a penalty under section 6673.² Petitioner commenced this case in response to Notices of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330.³ Respondent moved for summary judgment "upon all issues presented in this case". We separately consider and rule on a number of those issues. We then consider and rule on respondent's motion to impose a penalty under section 6673.

Our statements as to the facts are based on the parties' exhibits, those matters that are admitted in the pleadings and other documents in the Court's file (e.g., petitioner's request for admissions and respondent's response thereto), and those matters that are admitted in the motion papers.

Background

When the petition was filed in the instant case, petitioner resided in New Jersey.

In early 2002 petitioner sent to respondent a Form 1040, U.S. Individual Income Tax Return, for 2001, hereinafter sometimes referred to as petitioner's 2001 Form 1040. Attached to petitioner's 2001 Form 1040 were (1) a Form 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., showing a total distribution from a "Thrift and Stock Plan" of $9,984.91, with $1,996.98 Federal income tax withheld and $105 New Jersey State tax withheld, and (2) a Form W-2, Wage and Tax Statement, showing compensation of $35,287.17, with $159.92 Federal income tax withheld and $718.72 New Jersey State income tax withheld.

During 2002 employees of the Internal Revenue Service (hereinafter collectively referred to as the IRS) and petitioner communicated with each other. On December 1, 2002, the IRS sent a letter to petitioner stating that petitioner's 2001 Form 1040 "cannot be processed". The letter stated there was enclosed a report proposing "tax and penalties" and asked for a response within 30 days. On December 12, 2002, the IRS received a letter in response from petitioner, contending the IRS has no authority to "change" his tax return and stating that he did not intend to "self-assess" any 2001 income tax liability against himself.

The IRS prepared a notice of deficiency addressed to petitioner and dated May 21, 2003. (There is a dispute as to whether this notice of deficiency was sent and, if it was sent, whether petitioner received it.)

Table 1 compares certain items on petitioner's 2001 Form 1040 with corresponding items on the notice of deficiency.

Table 1
                Petitioner's 2001 Notice
                Item Form 1040 of Deficiency
                      Filing status              Single/head1             Single
                                                 of household
                      Adjusted gross income         -0-                $51,991.002
                      Dependents                     3                     -0-
                      Personal exemption            -0-                (2,900.00)
                      Deductions                    -0-                (4,550.00)3
                      Taxable income                -0-                44,541.00
                      Sec. 1 income tax             -0-                 8,863.00
                      Credits                       -0-                   300.004
                      "IRA tax"                     -0-                   998.005
                      Total tax liability           -0-                 9,561.00
                      Withholding                $2,156.90              2,155.006
                      Refund                      2,156.90                 -0-
                      Balance due                   -0-                  7,406.00
                      Sec. 6651(a)(1) addition       -                   1,851.50
                      Sec. 6654 addition             -                     286.407
                      Interest (to 12/31/2002)       -                     404.21
                      Amount due                    -0-                  9,948.11
                

On October 13, 2003, respondent assessed the amounts shown in table 2.

Table 2
                Item Amount
                      Additional tax                       $9,561.00
                      Late filing "penalty"                 1,666.35
                      Failure to pay tax "penalty"1           666.54
                      Estimated tax "penalty"2                286.40
                      Interest                                770.90
                

The parties agree that respondent sent to petitioner a notice of tax lien for 2001, dated June 28, 2005.

Respondent sent to petitioner a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320, dated July 7, 2005, hereinafter sometimes referred to as the notice of filing. In the notice of filing respondent stated that on June 30, 2005, respondent had filed a notice of tax lien in the amount of $10,796.19 on account of petitioner's 2001 income tax liability (see supra note 3, regarding an unrelated 2002 item), that this "lien attaches to all property you currently own and to all property you may acquire in the future", and that petitioner has "a right to request a hearing with us to appeal this collection action and to discuss your payment method options." Enclosed with the notice of filing was a Form 12153, Request for a Collection Due Process Hearing (hereinafter sometimes referred to as the hearing request), and an instruction that petitioner "must request [his] hearing by 08/08/2005."

On July 24, 2005, petitioner submitted a hearing request identifying the taxable periods as 1996 through 2002 and stating: "1996 and prior we were a family of 5, then from 1996-97 to present day I'm single with three children." In the hearing request, petitioner listed the following reasons for disagreement with respondent:

1. If I had a liability my children were never computed in by the IRS! [At this point in the hearing request petitioner set forth the names and Social Security numbers of the three children.]

2. I was never given DPH (Due Process Hearing) when I requested for it, or an audit! IRS is subject to 6320.

3. IRS never responded to my letters or responses to the IRS or my request for a face to face hearings. (Please read your mission statement)

4. IRS has failed to follow their statutory laws and manuals in violation of 7214 title 26, that they are subject to. Yick Wo v. Hopkins. U.S. Supreme Court. [Reproduced literally.]

Respondent's settlement officer, Darryl Lee (hereinafter sometimes referred to as Lee), replied to the hearing request on February 23, 2006. Lee is a settlement officer employed in respondent's Philadelphia Appeals Office; he is not an appeals officer. In that reply, Lee verified receipt of the hearing request and said: "The items that you mention in your CDP request are items that: 1. Courts have determined are frivolous or groundless, or 2. Appeals does not consider. These are moral, religious, political, constitutional, conscientious, or similar grounds." Lee referred petitioner to a Web site containing examples of arguments that are considered frivolous or groundless, and then noted: "Appeals does not provide a face-to-face conference if the only items you wish to discuss are those mentioned above." Lee asked petitioner to write within 15 days to "describe the legitimate issues you will discuss" at a hearing and stated that a telephone conference would be available to petitioner: "I have scheduled a telephone conference for you on March 30, 2006 at 10:00 am."⁴

Petitioner replied to Lee in a letter apparently sent on or about March 7, 2006, stating that Lee did not specify which of petitioner's arguments were frivolous and asking Lee to do so. Petitioner stated: "I want to have a face to face meeting and be able to record as I have done so for other previous years". Petitioner added: "I do not have a long distance phone to use to call you or anyone available on that date that you placed on your letter to me which is March 30, 2006." In this letter, as in the hearing request and his 2001 Form 1040, petitioner stated that he is a single parent of three daughters.

Lee replied to petitioner on March 23, 2006, again denying petitioner a face-to-face hearing because petitioner did not inform him, "in writing, of the legitimate issues" that petitioner intended to raise at the hearing. Lee stated: "At this time, you...