For the backstory, see my blogpost “The Song the Old Cow Died On,” 7/15/14. Now Judge Gerber sings Appeals the same song with which Judge Haines serenaded them in the abovementioned blogpost.

This is the story of Lucrezia Iona Canaday, 2015 T. C. Sum. Op. 57, filed 9/15/15.

Lucrezia Iona wanted the celebrated First-Time Homebuyer Credit – Part Deux, but decided discretion was the better part of cliché, and dropped a Form 1040X wherein she omitted the FTHBC2 she had previously claimed.

IRS demanded additional tax because the credit was no longer in play. Lucrezia Iona asked for audit reconsideration, but IRS said no, and hit her with a NITL for the shortfall. Lucrezia Iona asked for a CDP, got one, but only tried to contest liability, not collection alternatives.

The AO claimed Lucrezia Iona had had a chance to contest at audit reconsideration, so gave her a NOD. Lucrezia Iona timely petitioned.

IRS moves for summary J, and loses.

Not because the facts are in dispute, because they aren’t, but because audit reconsideration didn’t give Lucrezia Iona the statutory chance to contest liability. Only Appeals can do that.

As Judge Holmes would say, now pay attention.

“Although petitioner did contest the merits of the underlying liability before the collection hearing, she was not allowed a prior opportunity to contest the liability before Appeals. In Lewis v. Commissioner, 128 T.C. 48, 61 n.9 (2007), this Court considered section 6330(c)(2)(B) and noted that we read section 6330(c)(2)(B) to allow ‘a taxpayer who has had neither a conference with Appeals nor an opportunity for a conference with Appeals to raise the underlying liability in a collection review proceeding before Appeals and this Court.’” 2015 T. C. Sum. Op. 57, at p. 7. (Emphasis in original).

So IRS’ summary J motion fails, and Lucrezia Iona gets to go back to Appeals and talk about liability.