Tinnerman v. Comm'r Of Internal Revenue

• Decision Date: 13 July 2010
• Docket Number: Docket No.: 21270-08L.
• Parties: WILLIAM R. TINNERMAN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
• Court: U.S. Tax Court

WILLIAM R. TINNERMAN, Petitioner

v.COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No.: 21270-08L.

United States Tax Court

Filed : July 13, 2010.

Donald W. Wallis and Steven L. Zakrocki, for petitioner.

Randall L. Eager, for respondent.

MEMORANDUM OPINION

COHEN, Judge:

This case was commenced in response to notices of determination concerning collection action sustaining the filing of a Federal tax lien and a notice of intent to levy with respect to civil penalties, additions to tax, and income tax deficiencies due from petitioner for periods from 1996 to 2002. Each of the amounts in dispute was the subject of priorlitigation and decisions against petitioner. The issues for decision are whether the notices of determination were an abuse of discretion and whether a penalty under section 6673 should be imposed against petitioner. All section references are to the Internal Revenue Code, and all Rule references are to the Tax Court Rules of Practice and Procedure.

Background

All of the facts have been stipulated, and the stipulated facts are incorporated in our findings by this reference. Petitioner resided in Florida at the time that he filed his petition.

The Internal Revenue Service (IRS) assessed frivolous return penalties against petitioner under section 6702 for 1996, 1997, and 1998. A final notice of intent to levy with respect to those penalties was sent to petitioner on December 19, 2003. Petitioner requested a collection due process (CDP) hearing under section 6330, and a notice of determination sustaining the proposed collection action was ultimately sent to petitioner. Petitioner filed a petition in this Court at docket No. 10187-04L challenging the notice of determination, but that case was dismissed for lack of jurisdiction on September 14, 2004.

On October 12, 2004, petitioner filed an appeal of the notice of determination regarding the section 6702 penalties with the U.S. District Court for the Middle District of Florida. On May 11, 2005, the District Court case was dismissed with prejudice. On November 4, 2005, the District Court judgment was affirmed by the Court of Appeals for the Eleventh Circuit. Among other things, the Court of Appeals, in its unpublished per curiam opinion, explained that petitioner

has not presented a single meritorious argument * * *. In fact, he only claimed he had not participated in any activity that would bring out tax liability, the Internal Revenue Code and Regulations did not apply to him, and he was not yet considered a taxpayer. He also refused to participate in the telephonic CDP hearing offered to him and failed to use the faxed correspondence with the appeals officer as an opportunity to raise meritorious challenges to his tax liability. He was provided an opportunity to be heard but did not take advantage of it. * * * [Tinnerman v. IRS, 156 Fed. Appx. 111, 112-113 (11th Cir. 2005).]

The Court of Appeals held that the District Court did not err in granting the IRS' motion for judgment on the pleadings.

Petitioner failed to file timely tax returns for 1999, 2000, 2001, and 2002. The IRS prepared a substitute for return under section 6020(b) for each year and determined in two statutory notices of deficiency (one for 1999, 2000, and 2001, and a separate one for 2002) deficiencies and additions to tax for petitioner's failure to file, failure to pay, and failure to pay estimated taxes for each year. Petitioner filed petitions in this Court in response to both notices of deficiency. The cases (the deficiency cases) were consolidated for trial and resulted in the opinion filed November 14, 2006, as Tinnerman v. Commissioner, T.C. Memo. 2006-250. As set forth in that opinion, the Court concluded that petitioner received income passed through from his solely owned S corporation and was required to file returns for the years in issue, that his failures to file were fraudulent, that the additions to tax were appropriate, and that his frivolous arguments justified a penalty of $10,000 under section 6673. Decisions were entered in each case on November 21, 2006, and were not appealed. The income taxes, additions to tax, and penalties were assessed for 1999 through 2002.

On October 23, 2007, the IRS issued a Final Notice of Intent to Levy and Notice of Your Right to a Hearing with respect to the amounts assessed for 1999 through 2002 pursuant to the decisions entered November 21, 2006. On November 6, 2007, the IRS issued a Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320 with respect to the income tax liabilities for 1999 through 2002, the section 6673 penalties imposed by this Court, and the section 6702 penalties for 1996 through 1998. Petitioner requested a hearing by a letter dated November 19, 2007, in which he denied that he was a taxpayer, denied that he was required to file any return, and denied that he was involved in any taxable activities (i.e., the same arguments characterized as meritless by the Court of Appeals in its November 4, 2005, opinion). Attached to his letter was a stack of documents, approximately 2-1/2 inches high, expounding on his frivolous contentions.

Petitioner's request for a hearing was acknowledged by the IRS Appeals team manager, and, on February 26, 2008, an Appeals settlement officer (the settlement officer) sent a letter to petitioner proposing to schedule a conference. On March 1, 2008, petitioner sent the settlement officer 177 pages of documents that he titled "The Federal Judiciary & Internal 'indirect' Federal Taxation" in which he expounded on his view, among other things, that income taxes did not apply to him, that he was not required to file tax returns, that this Court's jurisdiction did not apply to him, and that IRS procedures had not been followed with respect to assessment of the tax liabilities in issue. In several subsequent letters, petitioner declined either a face-to-face or telephone conference with the settlement officer, denied that there was any requirement to file a return or pay a tax, and asserted that the IRS records contained unspecified and unidentifiable "irregularities". Among other things, petitioner argued that despite the limitation on arguments concerning the underlying tax liabilities when a taxpayer has received a notice of deficiency under section 6330(c)(2)(B), he was entitled to challenge: "the character of the liability assessed"; the validity of the notice of deficiency; and the method of assessment of the taxes in dispute. Petitioner failed to offer any collection alternatives or to present any financial information upon which collectionalternatives could be considered. During the exchange of correspondence, and as the parties have stipulated, petitioner raised no legitimate issues.

On July 31, 2008, two Notices of Determination Concerning Collection Actions(s) Under Section 6320 and/or 6330 were sent to petitioner sustaining the lien filing and the proposed levy. The notices set out a determination that the requirements of law and administrative procedure had been met and explained that the need for efficient collection justified the intrusiveness of the collection action. The notices further explained that petitioner had declined a telephone hearing and chosen a correspondence hearing; petitioner had presented only frivolous or groundless issues; petitioner had not complied with his filing obligations; and petitioner had failed to provide financial information or collection alternatives.

In the petition, petitioner asserted "Procedural Due Process Violations involving nonfiled returns", including failure to specify certain forms used in assessment and in recording of the lien. He stated the facts upon which he relied as follows:

(c) When no return is filed, without IRM reporting requirements consistent with IRM provisions in 3.21.3.2 thru 2.9 (01-01-2008) and subsequent SB/SE "instructions" to prepare a Substitute for Return (SFR) applicable to the property distribution at issue, no jurisdictionover the "presumed" underlying tax liability exists. Statutory and constitutional provisions prohibit it.

Although petitioner initially requested Birmingham, Alabama, as the place of trial, he moved to change the place of trial to Columbia, South Carolina, asserting that counsel in Greenville, South Carolina, had agreed to represent him but only if the place of trial was Columbia. Thereafter, however, counsel located in St. Augustine, Florida, entered their appearances. The case was set for trial in Columbia on March 1, 2010. On February 18, 2010, respondent filed a motion for summary judgment and to impose a penalty under section 6673 and a motion to permit levy. The parties thereafter executed the stipulation and agreed to submit the case fully stipulated. The motion for summary judgment and the motion to permit levy were denied as untimely because the case would not be resolved any sooner than it would be if decided on the stipulation. Insofar as respondent's motion seeks a penalty under section 6673, it remains pending. After the briefs were filed, respondent filed a motion seeking a penalty against petitioner's counsel under section 6673(a)(2).

Discussion

Section 6321 imposes a lien in favor of the United States on all property and property rights of a taxpayer liable for taxes after a demand for the payment of the taxes has been made and the taxpayer fails to pay. The lien arises when the assessment is made. Sec. 6322. The IRS files a notice of Federal tax lien to preserve priority and put other creditors on notice. See sec. 6323. Section 6320(a) requires the Secretary to send written notice to the taxpayer of the filing of a notice of lien and of the taxpayer's right to an administrative hearing on the matter. The hearing generally shall be conducted consistent with procedures set forth in section 6330(c), (d), (e), and (g). Sec. 6320(c). Similarly, before proceeding with a levy, the IRS must issue a final notice of intent to levy and notify the taxpayer of the...