Estate of Atkinson v. Comm'r , 93 T.C.M. 1108 ( 2007 )

T.C. Memo. 2007-89
UNITED STATES TAX COURT
ESTATE OF MELVINE B. ATKINSON, DECEASED, CHRISTOPHER J.
MACQUARRIE, PERSONAL REPRESENTATIVE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2865-05L. Filed April 17, 2007.
A petition was filed on behalf of the estate for
judicial review pursuant to sec. 6330, I.R.C., in
response to a determination by R that levy action is
appropriate.
Held: R’s determination to proceed with
collection is sustained.
Mitchell I. Horowitz, for petitioner.
Stephen R. Takeuchi, for respondent.
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MEMORANDUM FINDINGS OF FACT AND OPINION
WHERRY, Judge: This case is before the Court on a petition
for judicial review of a Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330.1 The issue
for decision is whether respondent abused his discretion in
sustaining the proposed levy action for the Estate of Melvine B.
Atkinson’s (the estate) Federal estate tax liabilities.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.2
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code (Code) of 1986, as amended.
2
In the stipulation of facts, the estate and respondent both
reserved relevancy objections to attached exhibits. Fed. R.
Evid. 402 provides the general rule that all relevant evidence is
admissible, while evidence which is not relevant is not
admissible. Fed. R. Evid. 401 defines the relevant evidence as
“evidence having any tendency to make the existence of any fact
that is of consequence to the determination of the action more
probable or less probable than it would be without the evidence.”
While the relevancy of some exhibits is certainly limited, the
Court finds that the exhibits meet the threshold definition of
relevant evidence and are admissible. The Court will give the
exhibits only such consideration as is warranted by their
pertinence to the Court’s analysis of the case.
The estate also reserved objections based on Fed. R. Evid.
106, alleging that exhibits “[failed] to include communications
between the Respondent’s counsel and the Petitioner’s prior
counsel, who represented the Petitioner in protracted Tax Court
litigation (including two appeals thereof)”. The Court overrules
the estate’s objection as the evidence the estate seeks admitted
is not relevant to the instant case.
The estate also reserved objections, based on Fed. R. Evid.
403, “to the introduction of the Petitioner’s personal affairs
(continued...)
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The stipulations of the parties, with accompanying exhibits, are
incorporated herein by this reference.
Melvine B. Atkinson (decedent) was a resident of Miami
Beach, Florida, when she died testate on June 7, 1993.
Christopher J. MacQuarrie (Mr. MacQuarrie) was appointed executor
of decedent’s estate. Mr. MacQuarrie was already serving as the
trustee of decedent’s trusts, the Melvine B. Atkinson Irrevocable
Trust and the Melvine B. Atkinson Charitable Remainder Annuity
Trust (collectively, the trusts).3 At the time the petition was
filed on behalf of the estate, Mr. MacQuarrie resided in Ocala,
Florida.
2
(...continued)
* * * because its probative value is substantially outweighed by
the danger of unfair prejudice and confusion of the issues.” The
Court concludes that the documents in question do not create an
undue risk of prejudice or confusion of the issues and are
admissible.
Respondent also reserved objections to certain exhibits
based “on the ground that these documents were not submitted to
the revenue officer or settlement officer and therefore are not
part of the administrative record.” The Court noted respondent’s
objection but reserved its ruling. “[E]vidence that * * * [a
taxpayer] might have presented at the section 6330 hearing (but
chose not to) is not admissible in a trial conducted pursuant to
section 6330(d)(1) because [where as here, the Appeals officer
was open to receive the evidence at or before the hearing and was
not ignoring proffered evidence] it is not relevant to the
question of whether the Appeals officer abused her discretion.”
Murphy v. Commissioner, 125 T.C. 301, 315 (2005), affd. 469 F.3d
27 (1st Cir. 2006). The estate had ample opportunities to
present evidence to respondent’s revenue and Appeals officers.
Accordingly, the Court sustains respondent’s objection.
3
On Aug. 9, 1991, decedent created the trusts and executed
her Last Will and Testament.
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An estate tax return was filed for decedent on September 13,
1994. Thereafter, respondent audited the estate and determined a
deficiency. In response, the estate timely petitioned this
Court. The Court found that the estate was liable for a reduced
deficiency. See Estate of Atkinson v. Commissioner, 115 T.C. 26
(2000), affd. 309 F.3d 1290 (11th Cir. 2002). On January 24,
2002, a deficiency of $717,790 plus interest was assessed against
the estate.
Respondent issued to the estate a Notice of Federal Tax Lien
Filing and Your Right to a Hearing Under IRC 6320 on March 10,
2004, with respect to the estate’s unpaid estate tax. The estate
did not respond. Respondent then issued to Mr. MacQuarrie a
summons for appearance on April 6, 2004, at respondent’s Ocala,
Florida, office. Additionally, the summons required Mr.
MacQuarrie to bring to his summons appearance the following
documents relating to the period of June 7, 1993, to March 1,
2004: (1) A listing of all assets of the estate; (2) copies of
statements of all bank accounts, stock accounts, or other asset
accounts owned or controlled by the estate; (3) copies of all
canceled checks for any bank accounts owned or controlled by the
estate; and (4) a listing of all distributions made from the
assets of the estate by source, date, amount, and payee.
Mr. MacQuarrie designated his attorney, Robert S. Williams
(Mr. Williams), as his attorney-in-fact, on March 30, 2004, by
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executing and delivering to respondent an Internal Revenue
Service (IRS) Form 2848, Power of Attorney and Declaration of
Representative. Mr. Williams began correspondence with Amelia
Clark (Ms. Clark), the revenue officer appointed to handle the
estate’s unpaid tax liabilities. On April 5, 2004, the day
before Mr. MacQuarrie was to appear in response to the summons,
Mr. Williams spoke with Ms. Clark and requested that the summons
appearance date be rescheduled to April 13, 2004.
On April 13, 2004, Mr. MacQuarrie and Mr. Williams met with
Ms. Clark and her manager, Richard Bartholomew, at the IRS office
in Ocala, Florida, to discuss the following: (1) The filing
status of the estate’s tax returns; (2) the current assets and
liabilities of the estate; (3) the administrative expenses of the
estate; (4) charitable distributions of approximately $340,000 to
the Mayo Clinic from the estate; and (5) some personal affairs of
Mr. MacQuarrie. During the meeting, Ms. Clark prepared a
financial statement for the estate based on the information
provided by Mr. MacQuarrie and Mr. Williams, but Mr. MacQuarrie,
acting on advice from Mr. Williams, declined to sign the
statement. At the end of the meeting, Ms. Clark informed Mr.
MacQaurrie and Mr. Williams that the estate’s delinquent tax
returns were to be filed within 30 days and that Mr. MacQuarrie
needed to submit a signed financial statement for the estate.
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On June 1, 2004, Ms. Clark spoke with Mr. Williams and
requested the following: (1) Charles Schwab account information
from January 1, 1999, through June 1, 2004, for the trusts;
(2) information about the class action lawsuits in which the
estate was a class member;4 (3) information about the estate’s
real estate; (4) an original signed copy of the estate’s
financial statements, including those of the trusts; (5) a copy
of the estate’s court pleadings regarding fees; and (6) Mr.
MacQuarrie’s presence at the next meeting. Shortly after Ms.
Clark’s and Mr. Williams’ telephone conversation, the estate
received by mail A Notice of Intent to Levy and Your Right to a
Hearing, which had been issued by respondent on May 27, 2004. In
response, the estate timely submitted a Form 12153, Request for a
Collection Due Process Hearing, on June 20, 2004. In an
attachment to Form 12153, Mr. Williams described the estate’s
disagreement with the levy, in pertinent part, as follows:
The collection action in this case is premature, and
the Internal Revenue Service should grant an extension
of time to pay the outstanding estate taxes. The
assets remaining in the Estate consist of cash and
security class action lawsuits of unknown value. The
cash remaining in the Estate is needed for
administrative expenses to deal with the outstanding
tax liability and the class action lawsuits.
The class action lawsuits have no value that can be
determined at this time, but have significant
potential. However, the expenses of levying them could
4
The estate was a class member in the Citigroup, Sun Micro
Systems, TYCO, and Worldcom class action lawsuits.
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exceed the actual value of such assets. As a result,
the Estate’s assets cannot be rightfully levied by the
Government.
* * * * * * *
As a result of the revenue officer’s failure to suggest
a course for working this matter out, the taxpayer has
not had the opportunity to seek possible collection
alternatives. Such alternatives would include a
partial payment immediately, with some cash being used
to pursue the class action claims. Hopefully, the
class action cases will then bring sufficient sums to
cover the outstanding estate taxes. Or the Estate
could pursue an Offer in Compromise based on doubt as
to the Estate’s ability to pay the tax liability. Or
the taxpayer could pursue some other alternative based
upon the good faith suggestions of the government. In
any event, a levy is not an appropriate action to take
under the circumstances.
On April 27, 2004, the estate submitted a Form 433-B, Collection
Information Statement for Businesses, which indicated that the
estate had $338,720.19 in investments and $162,169 in cash.
By letter dated November 2, 2004, to Mr. Williams, a face-
to-face Appeals conference was initially scheduled for November
22, 2004, at the Appeals Office in Tampa, Florida. On November
19, 2004, Mr. Williams spoke with James Feist (Mr. Feist), the
Appeals officer assigned to the estate’s case, and they agreed to
postpone the scheduled hearing for 2 to 3 weeks to allow the
estate additional time to prepare the delinquent tax returns.
The face-to-face hearing was rescheduled for December 17, 2004.
Mr. Williams called Mr. Feist the morning of the rescheduled
hearing to request another postponement. Mr. Williams explained
that he had changed law firms and was experiencing difficulty in
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obtaining client files from his previous firm that were needed to
complete the estate’s tax returns.5 Mr. Feist declined Mr.
William’s request for another extension and told Mr. Williams
that the hearing would be held that day, either in-person or
telephonically.
A telephonic collection hearing was held on December 17,
2004, between Mr. Feist and Mr. Williams. During the hearing,
Mr. Feist declined to discuss collection alternatives, explaining
to Mr. Williams that the estate was precluded from collection
alternatives due to its delinquent tax returns, and informed Mr.
Williams that he would issue a notice of determination sustaining
the levy. Mr. Feist provided Mr. Williams with the following
suggestions: (1) Forward the delinquent returns and old
brokerage statements to Ms. Clark; (2) estimate the remaining
administrative costs needed to close the estate (including the
collection activity); and (3) pay to respondent the money the
estate receives from the Mayo Clinic.6
5
Mr. Williams changed law firms from Akerman Senterfitt to
Straley Robin & Williams, both of which were located in Tampa,
Florida. Mr. Williams was experiencing difficulty in obtaining
files because of an alleged dispute between the estate and
Akerman Senterfitt over allegedly unpaid fees related to the
estate’s litigation in the Tax Court and the Court of Appeals for
the Eleventh Circuit.
6
The estate was to request the return of approximately
$340,000 in charitable distributions to the Mayo Clinic.
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The notice of determination in this case was issued on
January 7, 2005. The notice of determination reflected that the
unpaid estate tax liability was $1,650,674.72, as calculated
through March 10, 2004. An attachment to the notice of
determination stated in relevant part:
The four basic collection alternatives to avoid
enforced collection action are full payment,
installment agreement, Offer in Compromise, or closing
the account as “Currently Not Collectible” based on
financial hardship. Outside of full payment,
procedures for the other collection alternatives
require that the entity file any outstanding tax
returns and that the entity submit a full financial
statement and verification information for analysis.
Neither of these two requirements has been fulfilled by
the estate.
* * * * * * *
At the point the Notice of Intent to Levy was mailed,
the value of the estate had dwindled from a reported $7
million in January 2000 to $338,720.19 as reported on
the Form 433-B financial statement signed by Mr.
MacQuarrie on April 13, 2004. No payments of any
amount have been remitted toward the assessments of
January 24, 2002. Without full financial disclosure
and full compliance with outstanding returns, no
collection alternative is available outside of full
payment.
* * * * * * *
The class action lawsuits have not been initiated by
the estate. Therefore there should be no
administrative expenses necessary to monitor them. The
only known administrative expenses accruing at this
time are for return preparation and Collection/Appeals
representation.
* * * * * * *
* * * The enforcement action taken by the Collection
Division in issuing the Notice was appropriate and
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reasonable under the circumstances, and all legal and
procedural requirements were met.
The estate has failed to file returns, failed to
provide full financial disclosure, failed to make
significant voluntary payments on the amount due, and
failed to submit a viable collection alternative. As a
result, it has failed to show that the issuance of the
Notice is overly intrusive or that a better collection
alternative is available. Therefore, the issuance of
the Notice balances the efficient collection of the
taxes with a concern that the collection action be no
more intrusive than necessary.
A timely petition was filed with this Court on February 4, 2005.
A hearing was held on November 14, 2005, where pending
motions were disposed of, and the trial was started with the
filing of the stipulation of facts.7 The parties indicated that
the only witness would be Mr. Williams unless there was a
rebuttal witness called. The estate asked to delay Mr. Williams’
testimony for up to 30 days so that another attorney could be
employed to conduct Mr. Williams’ examination. The request was
granted, and the trial was adjourned until December 14, 2005.
Subsequently, on December 14, 2005, the trial was continued so
7
In the stipulation of facts, the estate reserved
evidentiary objections to the contact sheets based on Fed. R.
Evid. 404, which provides in pertinent part “Evidence of a
person’s character or trait of character is not admissible for
the purpose of proving action in conformity therewith on a
particular occasion”. The estate’s reliance on Fed. R. Evid. 404
is misplaced as respondent is not attempting to prove any act on
the part of Mr. MacQuarrie, and Mr. MacQuarrie was not called as
a witness at trial. The Court concludes that the contact sheets
are admissible.
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that Mr. Williams could provide testimony regarding his contact
with respondent’s revenue and Appeals officers.8
At trial, Mr. Williams’ uncontested testimony established
that at the time the estate received the notice of intent to
levy, the estate and respondent were still communicating,
exchanging documents and information, and working to arrange for
the payment of the estate taxes. Specifically, Mr. Williams
stated that during his conversation with Ms. Clark on June 1,
2004, she did not inform him that the notice of intent to levy
had been issued, and instead requested information and documents,
which caused him to believe that they were still cooperating.
OPINION
I. Collection Action
A. General Rules
Pursuant to section 6331(a), if a taxpayer liable to pay
taxes fails to do so within 10 days after notice and demand for
payment, the Secretary is authorized to collect such tax by levy
upon the taxpayer’s property. The Secretary is obliged to
provide the taxpayer with 30 days’ advance notice of levy and to
include in the notice information regarding the administrative
appeals available to the taxpayer. Sec. 6331(d)(2), (4).
Section 6330 elaborates on section 6331 and provides that upon a
8
The Court granted Mr. Williams’ oral motion to withdraw as
counsel on Dec. 14, 2005. Mitchell I. Horowitz replaced Mr.
Williams as the estate’s counsel.
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timely request a taxpayer is entitled to a collection hearing
before the IRS Office of Appeals. Sec. 6330(a)(3)(B) and (b)(1).
At the collection hearing, the taxpayer may raise “any
relevant issue relating to the unpaid tax or the proposed levy,”
including appropriate spousal defenses, challenges to the
appropriateness of collection actions, and offers of collection
alternatives. Sec. 6330(c)(2)(A). The taxpayer may not contest
the validity of the underlying tax liability unless the taxpayer
did not receive a notice of deficiency for such tax liability or
did not otherwise have an opportunity to dispute the tax
liability. Sec. 6330(c)(2)(B). In rendering a determination,
the Appeals officer must verify that the requirements of any
applicable law and administrative procedure have been met. Also,
the Appeals officer must consider and weigh relevant issues
relating to the unpaid tax or proposed levy, and “whether any
proposed collection action balances the need for the efficient
collection of taxes with the legitimate concern of the person
that any collection action be no more intrusive than necessary.”
Sec. 6330(c)(3)(C).
The taxpayer is entitled to appeal the determination of the
Appeals Office if made on or before October 16, 2006, to the Tax
Court or a U.S. District Court, depending on the type of tax at
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issue. Sec. 6330(d)(1).9 Where the validity of the underlying
tax liability is properly at issue, the Court will review the
matter de novo. Sego v. Commissioner, 114 T.C. 604, 610 (2000);
Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). The Court
reviews any other administrative determination regarding the
proposed levy action for an abuse of discretion. Sego v.
Commissioner, supra at 610; Goza v. Commissioner, supra at 182.
B. Review for Abuse of Discretion
The estate tax liability was previously litigated and
determined by this Court. That decision was affirmed by the
Court of Appeals for the Eleventh Circuit. See Estate of
Atkinson v. Commissioner, 115 T.C. 26 (2000), affd. 309 F.3d 1290
(11th Cir. 2002). Accordingly, the estate’s underlying tax
liability is not properly at issue, and the administrative record
will be reviewed for an abuse of discretion. An abuse of
discretion has occurred if the “Commissioner exercised * * *
[his] discretion arbitrarily, capriciously, or without sound
basis in fact or law.” Woodral v. Commissioner, 112 T.C. 19, 23
(1999).
The estate argues that respondent abused his discretion for
the following reasons: (1) The estate’s administrative expenses
were not considered adequately by respondent; (2) Ms. Clark had
9
Determinations made after Oct. 16, 2006, are appealable
only to the Tax Court. See Pension Protection Act of 2006, Pub.
L. 109-280, sec. 855, 120 Stat. 1019.
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insufficient information to make any collection determination;
(3) Mr. Feist issued the notice of determination after being
assigned the case for only 2 months, “which was a grossly
inadequate period of time given the complexities of the case”;
and (4) Mr. Feist insisted on proceeding with the final hearing
even though Mr. Williams had not yet recovered his files.
The estate alleges that respondent failed to consider
adequately the administrative expenses of the estate. However,
the notice of determination indicates that Mr. Feist considered
all of the administrative expenses that the estate raised. The
Appeals officer determined that expenses relating to the class
action lawsuits were not appropriate expenses of the estate
because the estate did not initiate the litigation and did not
need to incur those expenses. The notice of determination also
indicates that Mr. Feist considered the administrative expenses
of the estate related to preparing the estate’s tax returns and
pursuing the collection hearing. Thus, the record reflects that
appropriate consideration was given to the administrative
expenses raised by the estate. Accordingly, the Court concludes
that respondent did not abuse his discretion in this regard.
The estate contends that respondent abused his discretion
because Ms. Clark lacked sufficient information to make a
collection determination, and Mr. Feist held the collection
hearing before Mr. Williams retrieved his files. “An Appeals
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officer does not abuse her discretion when she fails to take into
account information that she requested and that was not provided
in a reasonable time.” Murphy v. Commissioner, 125 T.C. 301, 315
(2005), affd. 469 F.3d 27 (1st Cir. 2006).
Ms. Clark initially requested at Mr. MacQuarrie’s April 13,
2004, summons appearance that the estate file the estate’s
delinquent tax returns within 30 days. After the 30 days had
lapsed and the estate failed to comply, Ms. Clark issued the
above-mentioned Notice of Intent to Levy and Your Right to a
Hearing on May 27, 2004. Almost 6 months later, on November 19,
2004, and only days before the estate’s previously scheduled
collection hearing, the estate requested a delay in the hearing
date to afford the estate additional time to prepare the returns.
Mr. Feist obliged and rescheduled the collection hearing for
December 17, 2004. On the morning of the rescheduled hearing,
the estate once again asked for additional time to prepare the
returns. Mr. Feist declined the estate’s request.
In total, from the time Ms. Clark initially requested the
estate’s delinquent tax returns, the estate had approximately 8
months to prepare and file the returns and failed to do so. In
Roman v. Commissioner, T.C. Memo. 2004-20, this Court stated:
No statutory or regulatory provision requires that
taxpayers be afforded an unlimited opportunity to
supplement the administrative record. Nor are
petitioner’s contentions regarding lack of warning well
taken where the record in this case is replete with
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explicit deadlines that respondent generously extended
for petitioner’s benefit.
The Court concludes that respondent did not abuse his discretion
by: (1) Failing to take into account information respondent
requested of the estate and that the estate failed to produce;
and (2) proceeding with the collection hearing despite the
estate’s lack of files. See Morlino v. Commissioner, T.C. Memo.
2005-203; Roman v. Commissioner, supra.
The estate also alleges that Mr. Feist spent a “grossly
inadequate period of time” considering the case. The regulations
promulgated under section 6330 provide that there is no period of
time within which the Appeals Office must conduct a collection
hearing or issue a notice of determination. The regulations
provide, in pertinent part, that while there is no set time
deadline to conduct the Appeals hearing, “Appeals will, however,
attempt to conduct a CDP hearing and issue a Notice of
Determination as expeditiously as possible under the
circumstances.” Sec. 301.6330-1(e)(3), Q&A-E9, Proced. & Admin.
Regs. “[T]here is neither requirement nor reason that the
Appeals officer wait a certain amount of time before rendering
his determination as to a proposed levy.” Clawson v.
Commissioner, T.C. Memo. 2004-106; see Murphy v. Commissioner,
supra at 322; Manjourides v. Commissioner, T.C. Memo. 2005-242;
Morlino v. Commissioner, supra.
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In Clawson v. Commissioner, supra, the notice of
determination was issued less than 3 months after the taxpayers
requested a collection hearing and only 9 days after the
telephonic collection hearing was conducted. In Manjourides v.
Commissioner, supra, less than 3 weeks passed between the
telephonic collection hearing and the issuance of the notice of
determination. In the instant case, the notice of determination
was issued more than 6 months after the estate requested a
collection hearing. The record reflects that Mr. Feist had the
estate’s case under consideration starting sometime between
September 1 and October 22, 2004. The telephonic collection
hearing was held on December 17, 2005, and the notice of
determination was issued approximately 3 weeks later on January
7, 2005.
In total, Mr. Feist had the estate’s case under
consideration for at least 2 months and as many as 4 months.
While Mr. Feist may have been predisposed to an expeditious
conclusion of the estate’s case, the Court sees nothing wrong
with that, given the facts of the instant case. See Morlino v.
Commissioner, supra. Suffice it to note that the determined
deficiency to be collected was $717,790, plus interest, and that
as of March 10, 2004, the total amount due was $1,650,674.72.
Due to questionable investments and other factors, including
legal fees contesting this very tax deficiency, the estate had
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already shrunk from over $7 million to $500,889.1910 by March 13,
2004, ignoring speculative class action assets. Respondent did
not abuse his discretion by expeditiously deciding the estate’s
case if, in fact, 2 to 4 months is expeditious.
II. Conclusion
The Court concludes that respondent’s determination to
proceed with collection by levy of the estate taxes was not an
abuse of discretion, and respondent may proceed with collection.
The Court has considered all of the estate’s contentions,
arguments, requests, and statements. To the extent not discussed
herein, we conclude that they are meritless, moot, or irrelevant.
To reflect the foregoing,
Decision will be entered
for respondent.
10
This amount consists of $338,720.19 in investments and
$162,169 in cash.