In Uncategorized on 09/25/2018 at 16:37

Or, Appeals Hits the Trifecta

The “elevator pitch” may be the chance to change your career path, but a chat with a Collection Officer during an OIC is not a proceeding for “prior proceeding” CDP purposes.

This from Judge Buch writing for a unanimous Court in James Loveland, Jr., and Tina C. Loveland, 151 T. C. 7, filed 9/25/18.

IRS gets three (count ’em, three) strikes from Judge Buch: they abused their discretion by failing to consider Jim’s and Tina’s OIC, IA, and economic hardship.

Jim is a disabled ex-boilermaker and Tina just survived breast cancer. They lost their home in the ’08 Great Meltdown. They stopped paying their taxes. IRS gave them a NITL.

Jim and Tina proffered an OIC with all the info. They were negotiating with a CO, who bounced their OIC. Jim and Tina went to Appeals to contest the bounce, with an IA as a back-up, but Appeals told them they couldn’t raise IA if they wanted to appeal the OIC.

So Jim and Tina dropped the IA and went back to negotiating.

As they were trying to mortgage another piece of property they owned so as to pay their taxes down below $50K to do a small-claimer, IRTS dropped a NFTL, thereby blowing up the mortgage process.

Jim and Tina timely appealed. The AO asked for the usual financials. Jim and Tina said they gave them with the OIC. The AO refused to consider anything except proposing an $853 per month IA, when Jim and Tina proposed $800. Apparently the back-and-forth with the CO on the OIC was a “prior opportunity.” But, as we shall see, that’s not enough.

IRS wanted summary J, but didn’t furnish the AO’s declaration until Jim and Tina had already responded to the motion, so they got a second chance.

“We are faced with a unique question here: whether negotiations with a collections officer constitute a previous administrative proceeding under section 6330(c)(4)(A)(i) and section 301.6320-1(e)(1), Proced. & Admin. Regs. The Lovelands made an offer-in-compromise in a separate collection proceeding that is not before us. Then, in the CDP hearing underlying this case, they renewed their offer-in-compromise. In response to a January 23, 2017, letter from the Commissioner, the Lovelands resubmitted their previously rejected offer-in-compromise along with their financial information.” 151 T.C. 7, at p. 14 (Footnote omitted, but it says IRS claimed Jim and Tina never gave financial information, except Judge Buch says they did).

” Section 301.6320-1(e)(1), Proced. & Admin. Regs., states that ‘the taxpayer may not raise an issue that was raised and considered at a previous CDP hearing under section 6330 or in any other previous administrative or judicial proceeding if the taxpayer participated meaningfully in such hearing or proceeding.’ Whether a previously rejected collection alternative can be raised at a CDP hearing does not hinge on whether the taxpayer had a prior opportunity to challenge the rejection; it hinges on whether the rejected collection alternative was actually considered at a previous administrative or judicial proceeding. In other words it is not a question of whether there was a prior opportunity, but whether there was a prior proceeding.” 151 T. C. 7, at pp. 14-15. (Emphasis by the Court).

Jim and Tina could have gone to Appeals on the OIC, but that meant dumping their IA, so they didn’t. Thus, no prior proceeding, thus the OIC and the IA are still in play.

And the Section 6320 levy regs only talk about prior opportunity to contest amounts, not spousals, appropriateness (like maybe hardship, ETA, etc.) and OICs.

Of course Appeals is entitled to updated financials where circumstances have changed. See my blogpost “Back to the Future,” 8/1/11. But the AO never looked at the old and never asked for any new.

And the AO never considered Jim’s and Tina’s ailments or hardships.

IRS hits the trifecta. Abuse of discretion three ways.

This one goes back to Appeals.


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