In Uncategorized on 11/17/2014 at 17:57

The Barzini Boot

This well-worn chivalric saying was drummed into my youthful head when I was still youthful, long, long ago. I believed it, and still do.

Perhaps Ronald L. Kirkpatrick, Sr., believed it too, but that must have been before Judge Cohen delivered 2014 T. C. Memo. 234, filed 11/17/14.

Luigi Barzini, Jr., that mordant critic of Italian life, wrote that chivalry never took hold in Italy. He cited as an example of the chilvalric creed the saying abovecited.

I’m relying on memory here, so give me a little slack, but Barzini asked why should one not kick a man when he’s down? What better time is there? Of course, one should not kick a man when he’s down if he’s old, or a policeman is watching.

Barzini’s work drew a firestorm of criticism when he published it. It’s largely forgotten now, half-a-century on.

But Ron’s story brings it back, and IRS is apparently a disciple of the post-chivalric society, with Judge Cohen’s express approval.

Ron owed about $20K for one year’s personal income tax, that he disclosed on his 1040, so entered into an installment agreement with IRS, which he was paying.

Ron was also chairman of the board of directors of a C Corp which owed about $450K in 941 payments not made.

“In Letter 2850, Approval of Request to Pay Taxes in Installments…the IRS informed [C Corp] that its request to pay its Form 941 tax liabilities through an installment agreement had been approved. The … letter addressed only Accurate and not petitioner.” 2104 T. C. Memo. 234, at p. 3.

So IRS suspended Ron’s personal income tax installment agreement, because he was a responsible person for the TFRPs for the C Corp, even though the C Corp was apparently paying its obligations under its own installment agreement and even though Ron was paying on time on his agreement.

Ron asked for a CDP, and there was some back-and-forth about what he could pay. Maybe Ron was playing games with not disclosing a bank account and some real estate. But that apparently doesn’t enter into Judge Cohen’s opinion, other than as a throwaway “on the basis of the record”.

Ron paid his back personal income tax liability in full and asked for a NOD so as to petition Tax Court. He got it.

Ron claimed he should be covered by the C Corp agreement, but never produced it.

And although the IRM might have given Ron a leg up, it applies to entering into installment agreements with businesses, not dealing with those already in effect.

I won’t speculate why Ron didn’t produce the C Corp’s installment agreement. I will note, however, that there was no allegation that the C Corp wasn’t current on an installment agreement, or might be on the brink of default.

Judge Cohen: “Moreover, the settlement officer acknowledged and considered petitioner’s argument. While petitioner does not appear to have raised specifically IRM pt. and (7) during the section 6330 hearing, the settlement officer nonetheless looked at relevant IRM parts in reviewing petitioner’s case. In view of the record, we cannot conclude that her determination was arbitrary, capricious, or without sound basis in fact or law, which is the test to be applied. Whether or not other resolutions could have been reached by the settlement officer or by the Court is not the applicable test. The settlement officer did not abuse her discretion in sustaining the proposed levy.” 2104 T. C. Memo. 234, at p. 12.

Takeaway– Practitioners, when your client is a responsible person, make sure s/he goes on the installment agreement with the business entity. If not, be prepared for the Barzini Boot.

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