The Tax Court in Brief – March 7th, 2022 – March 11th, 2022

Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.

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Tax Litigation:  The Week of March 7, 2022, through March 11, 2022

Cosio v. Comm’r, T.C. Memo. 2022-18 | March 9, 2022 | Weiler, J. | Dkt. No. 23623-17L

Short Summary: Carl Cosio (“Mr. Cosio”) 2012 Form 1040 on August 1, 2016, and his 2015 Form 1040 on November 15, 2016. The IRS assessed Mr. Cosio with the tax liabilities reported, credited him for any payments and withholdings, and assessed certain late filing penalties, failure to pay penalties, and interest. On April 17, 2017, the IRS issued a Notice of Intent to Levy with respect to tax year 2015. Mr. Cosio then submitted Form 12153, requesting a Collection Due Process hearing for tax years 2006 through 2015. The IRS notified Mr. Cosio that his request for certain tax years was untimely but granted a CDP hearing for tax year 2015 and an equivalent hearing for tax year 2012.

Even though the IRS notified Mr. Cosio of the scheduled telephone conference for the hearings, neither Mr. Cosio nor his representative attended. Further, Mr. Cosio did not respond to further communications attempts by the IRS settlement officer. On October 12, 2017, the settlement officer issued a Notice of Determination, sustaining the proposed levy action for tax year 2015. Mr. Cosio timely filed a petition with the Tax Court for tax years 2012 and 2015. On May 11, 2018, the IRS filed a motion to dismiss for lack of jurisdiction with respect to tax year 2012. The Tax Court granted the motion.

Key Issue:

  • Whether IRS Office of Appeals’ determination to sustain the proposed levy action for tax year 2015 was appropriate.

Primary Holding:

  • IRS Office of Appeals’ determination to sustain the proposed levy action for tax year 2015 was appropriate.

Key Points of Law:

  • The Tax Court has jurisdiction to review a notice of determination by IRS Appeals in a Collection Due Process case. I.R.C. § 6330(d)(1).
  • If the validity of the underlying tax liability is not properly at issue, the Tax Court will review the Commissioner’s administrative determination for abuse of discretion. Abuse of discretion exists when the determination was arbitrary, capricious, or without sound basis in fact or law. See Goza v. Comm’r, 114 T.C. 176, 182 (2000); Murphy v. Comm’r, 125 T.C. 301, 308, 320 (2005); Sego v. Comm’r, 114 T.C. 604, 610 (2000).
  • It is not an abuse of discretion for IRS Appeals to move ahead with its final determination after an Appeals officer gives a taxpayer an adequate timeframe to submit requested items and the taxpayer fails to submit those items. See Pough v. Comm’r, 135 T.C. 344, 351 (2010).
  • In reviewing a determination under Section 6330(c)(2), the Tax Court only considers issues that the taxpayer properly raised during the Collection Due Process hearing. See Giamelli v. Comm’r, 129 T.C. 107, 115 (2007); Treas. Reg. § 301.6330-1(f)(2).
  • In reviewing a determination, the Tax Court considers whether IRS Appeals: (1) verified that the requirements of applicable law and administrative procedure have been met; (2) considered all relevant issues raised by the taxpayer, including offers of collection alternatives such as an offer-in-compromise; and (3) determined whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that collection be no more intrusive than necessary. I.R.C. § 6330(c)(3).

Insight: Cosio underscores the relatively high bar the taxpayer must meet for the Tax Court to find an abuse of discretion by IRS Appeals. In this case, the taxpayer did not help his case by (1) not communicating (directly or through his representative) with the IRS settlement officer, and (2) not providing any evidence or documentation requested by the IRS settlement officer. Additionally, the Tax Court noted that because the taxpayer did not receive a notice of deficiency, he could have challenged the underlying tax liability in his Collection Due Process hearing. However, because the taxpayer did not communicate or provide any evidence for consideration, the issue was not preserved for judicial review.

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