Tax Court in Brief | Kotrides c. Commissioner | Due Process for Collections, Abuse of Discretionary Power and Summary Judgment | law of the free man

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Tax litigation: The week of June 27, 2022 to July 1, 2022

Kotrides v. Commissioner, Memo TC. 2022-67 | June 28, 2022 | Urda, J.| Dekt. No. 17918-19L


Short summary: Dino Kotrides failed to file his 2014 federal tax return. So the IRS prepared a substitute return for him. The IRS sent Kotrides a notice of deficiency. He did not file a motion to challenge the notice. The IRS assessed federal income tax, tax additions, and statutory interest. Years later, and to cash in, the IRS filed and sent Kotrides, a Notice of Federal Tax Lien (NFTL). Kotrides timely requested a Collection Due Process (CDP) hearing, expressing interest in a lien release. The case was assigned to an Independent Appeals Office Adjudication Officer (OS), who scheduled a CDP telephone hearing. The ER asked Kotrides to provide his 2015-2018 federal income tax returns (which he had not filed), proof of any estimated tax payments, and a Form 433-A, Collection Information Statement for Employees and Self-Employed Persons. Kotrides did not provide any information in response. The OS gave more time to produce. But, Kotrides did not produce anything. The Appeals Office supported the NFTL’s filing and confirmed compliance with applicable law and administrative process requirements and that Kotrides offered no alternative collection. In Tax Court, Kotrides claimed that his tax liability stemmed from his misperception that he was not required to file a return. The IRS filed a motion for summary judgment. Kotrides did not respond, despite additional time and the opportunity to obtain pro bono counsel.

Key issues:

  • Was the IRS entitled to judgment, at law, regarding its request to the Tax Court to support the NFTL?

Main holdings:

  • Kotrides has not responded to the motion for summary judgment, and on that basis alone the Tax Court can rule against him. Further, the undisputed facts established all of the legal requirements and administrative processes for the NFTL.

Main points of law:

  • Summary judgment. The purpose of summary judgment is to expedite litigation and avoid costly, time-consuming and unnecessary trials. Peach Corp. vs. Commissioner, 90TC 678, 681 (1988). Under rule 121(b), the Tax Court can grant summary judgment where there is no real dispute as to a material fact and a decision can be made at law. Sundstrand Corp. vs. Commissioner98 TC 518, 520 (1992), aff’d, 17 F.3d 965 (7th Cir. 1994). The Tax Court reviews the factual documents and the inferences drawn from them from the perspective that is most favorable to the unmoving party. Identifier. The non-moving party may not rely on mere allegations or denials of the pleadings, but rather must state specific facts showing that there is a genuine dispute to be judged. rule 121(d); see Celotex Corp. vs. catrett477 US 317, 324 (1986).
  • Failure to Respond to Motion for Summary Judgment. If a taxpayer does not respond to a motion for summary judgment, the Tax Court may make a decision against the taxpayer on that ground alone. See Rule 121(d).
  • Standard of Review of Determination by Appeals. The Tax Court has jurisdiction to review a decision of the Independent Appeals Office under sections 6320(c) and 6330(d)(1). See Murphy v. Commissioner, 125 TC 301, 308 (2005), affirmed, 469 F.3d 27 (1st Cir. 2006). Where the validity of the underlying tax liability is duly in question, the Court reviews the determination of the underlying tax liability de novo. Sego c. Commissioner, 114 TC 604, 610 (2000). The Court reviews all other decisions for abuse of power and under this standard the Court must uphold the decision of the Appeals Office unless it is arbitrary, capricious or without solid basis in fact or law. See Sego114 CT at 610.
  • Underlying Liability. A taxpayer can only challenge the existence or the amount of his underlying tax liability during a CDP proceeding if he has not received a notice of statutory deficiency for the tax year in question. or if he did not have the opportunity to contest it. See 26 USC §§ 6320(c), 6330(c)(2)(B). If a taxpayer has received a notice of deficiency but does not file a petition in a timely manner, the taxpayer will likely be barred from later challenging the deficiency in a CDP proceeding. “The sending of a correctly addressed letter creates a ‘presumption that it has reached its destination and has in fact been received by the person to whom it was addressed’.” BM Constr. vs. Commissioner, Memo TC. 2021-13, at *12.
  • Abuse of discretionary power. In determining whether the Appeals Office abused its discretion, the Court considers whether the RE (1) properly verified that the requirements of applicable law or administrative procedure were met, (2) considered all relevant issues that the taxpayer may raise, and (3) weighed “whether any proposed collection action balances the need for effective tax collection with the legitimate concern” of the affected taxpayer that any collection action be no more intrusive than necessary. 26 USC § 6330(c)(3); see also at § 6320(c). The Tax Court has the authority to review compliance with the audit requirement whether or not the taxpayer raised this issue at the CDP hearing. See Hoyle v. Commissioner131 TC 197, 200–03 (2008), supplemented by 136 TC 463 (2011).
  • Extension requests. The reasonableness of a request for an extension and the reasonableness of a denial of such a request depend on the particular facts of the case. See Dinino v. Commissioner, Memo TC. 2009-284, 2009 WL 4723652, at *9. If the RE is acting within IRS guidelines for submitting information, there is probably no abuse of authority. See Dinino, 2009 WL 4723652, at *9. “It is not necessary for the commissioner to wait a certain time before taking a decision on a proposal [collection procedure].” Gazi v. Commissioner, Memo TC. 2007-342, 2007 WL 4119009, at *9; see Reg. § 301.6330-1(e)(3), Q&A-E9; Treasures. Reg. § 301.6320-1(e)(3), Q&A-E9.
  • Balancing analysis. A taxpayer may argue that the ER failed to consider “whether a proposed collection action balances the need for effective tax collection with the person’s legitimate concern that any collection action be no more intrusive than necessary” . See 26 USC § 6330(c)(3)(C); see also id. at § 6320(c). But, not to affirm this entails a concession of the question. See Rules 121(d), 331(b)(4).

Knowledge: Dino Kotrides did not respond to the IRS’ motion for summary judgment. If a taxpayer does not respond to a motion for summary judgment, the Tax Court may make a decision against the taxpayer on that ground alone. See Rule 121(d). Kotrides did not provide the information requested by the ER. Kotrides did not file any subsequent federal income tax returns. Kotrides has not requested an extension of time to respond to requests for information. Kotrides did not take the opportunity to receive pro bono counsel. In summary: The law helps those who help themselves – the vigilant, rarely the sleepy and never the willing.

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