Attorney-at-Law

“CRAFTY – AKIN TO THE WEASEL” – PART DEUX

In Uncategorized on 11/16/2021 at 16:01

It isn’t only IRS who fits that bill.

William E. Ruhaak, 157 T. C. 9, filed 11/16/21*, although once whanged with a $5K Section 6673 friovolity chop, followed by a $750 hit from 7 Cir for appealing same, is an inventive sort. He timely files Letter 12153 in response to the latest NITL, but asks for an equivalent hearing.  He tells the SO he wants to put in a “statement of conscience” why he doesn’t pay taxes.

Judge Gale reckons Wm E is avoiding getting chopped in a CDP by seeking an equivalent hearing. “Although petitioner’s testimony and the other materials in the record are not clear on this point, it appears that one reason petitioner might have desired an equivalent hearing may have been to avoid the $5,000 penalty under sec. 6702(b) for making a ‘specified frivolous submission’. The penalty applies to a CDP hearing request if any portion of the request ‘is based on a position which the Secretary has identified as frivolous’ or ‘reflects a desire to delay or impede the administration of Federal tax laws.’ Sec. 6702(b)(2)(A), (B)(i). However, the IRS will not impose the sec. 6702(b) penalty when a taxpayer has not timely requested a CDP hearing and has instead requested an equivalent hearing. See Internal Revenue Manual (IRM) pt. 5.1.9.3.16(1) (Feb. 7, 2014) (current version at IRM pt. 5.1.9.3.15(1) (Aug. 27, 2021)).” 157 T. C. 9, at pp. 9-10, footnote 6.

But Wm E is timely for a CDP, and despite his protests, that’s what he got. Judge Gale finds the SO didn’t have to give Wm E a short delay in the CDP hearing because all he was going to do is frivol again.

True, the Letter 12153 form has a check-the-box for equivalent hearing as well as CDP. But Judge Gale says the equivalent hearing can be had only if the application comes after the 30-day window for a CDP has closed, even though a Q&A in the Regs might be read otherwise in isolation. But Judge Gale is never isolated.

“We therefore must construe section 301.6330-1(i)(2), Q&A-17, Proced. & Admin. Regs., in the context of the referenced provisions of paragraph (i). Paragraph (i) provides in relevant part: ‘A taxpayer who fails to make a timely request for a CDP hearing is not entitled to a CDP hearing. Such a taxpayer may nevertheless request an administrative hearing with Appeals, which is referred to * * * as an ‘equivalent hearing.” Sec. 301.6330-1(i)(1), Proced. & Admin. Regs. (emphasis added). The phrase  ‘[s]uch a taxpayer’ limits the class of taxpayers who may request an equivalent hearing to those described in the immediately preceding sentence, that is, those who ‘fail[] to make a timely request for a CDP hearing’. In other words only those taxpayers who fail to timely request a CDP hearing are eligible to request an equivalent hearing. Logically, a taxpayer cannot yet have failed to make a timely request for a CDP hearing before the 30-day period for requesting a CDP hearing has expired. Paragraph (i)(1) of section 301.6330-1, Proced. & Admin. Regs., thus renders a taxpayer ineligible to request an equivalent hearing during that 30-day period. In that context, section 301.6330-1(i)(2), Q&A-17, Proced. & Admin. Regs., merely explains that once the 30-day period ends and a taxpayer becomes eligible to request an equivalent hearing, the taxpayer must make any request for an equivalent hearing within the remainder of the one-year period commencing on the day after the date of the levy notice.” 157 T. C. 9, at pp. 19-20.

But Wm E gets a bye on the Section 6673 chop.

“In view of the fact that the Court has previously sanctioned petitioner under section 6673(a)(1), see supra note 5, and respondent warned in his pretrial memorandum that he would seek a section 6673 penalty if petitioner advanced any frivolous arguments, we consider whether such a penalty is also appropriate in this case. * * * * The principal position that petitioner advanced in this case is that he was entitled to an equivalent hearing (rather than a CDP hearing) because he had made the request ‘within the one-year period commencing the day after the date of the CDP Notice’ as provided in section 301.6330-1(i)(2), Q&A-17, Proced. & Admin.  Regs. As our preceding discussion illustrates, this position was not frivolous because section 301.6330-1(i)(2), Q&A-I7, Proced. & Admin. Regs., when read in isolation, was susceptible of the interpretation petitioner placed on it. We therefore will not impose a section 6673 penalty on petitioner in this case.” 157 T. C. 9, at pp. 25-26.

But Judge Gale strongly admonishes Wm E not to try frivoling again.

Still and all, though I’m no fan of frivolites, I gotta give Wm E a Taishoff “Good Try, First Class.” By sliding in the equivalent hearing request while the CDP clock is running, he manages to get a stay of collection while the CDP is pending and while his Tax Court petition is pending. Even better, he ducks a Section 6673 frivolity chop for this maneuver.

*Wm E Ruhaak 157 T C 9 11 16 21

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