Tax Court in Brief | mighty v. Commissioner | Due process for recovery and 1,862 days between notice of deficiency and determination | law of the free man


Freeman Law’s “Tax Court Brief” covers all of the Tax Court’s substantive opinions, providing a weekly summary of its decisions in clear, concise prose.

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Tax litigation: The week of May 2, 2022 to May 6, 2022

  • DelPonte c. Comm’r, 158 TC No. 7 | May 5, 2022 | Holmes, J. | Dekt. No. 1144-05, 1334-06, 20679-09, 20680-09, 20681-09
  • Mazzei v. Comm’r, TC memorandum 2022-43 | May 2, 2022 | Thornton, J. | Dekt. No. 16702-09.
  • Podlucky c. Commissioner, TC Memo. 2022-45| May 5, 2022 | Lauber, J. | Dekt. No. 453-17
  • Wolfson v. Comm’r, TC Memo. 2022-46 | May 5, 2022 | Lauber, judge | File No. 21343-21L

mighty v. Comm’r, TC Memo. 2022-44| May 4, 2022 | Lauber, J. | Dekt. No. 19064-21L


Summary: Edgerton Mighty and Eulalee Mighty (together, Mighty) requested review of the IRS’ decision to uphold the filing of a notice of federal tax lien for 2014. The story begins when Mighty filed a tax return in timely for 2014, which the IRS selected for review. In 2016, the IRS found that Mighty (1) failed to support itemized deductions and (2) failed to report “other income” based on a Form 1099-C, Cancellation of Debt. , issued by a JPMorgan Chase Bank, NA (Chase) for cancellation of debt, an amount included in 2014 gross income. On March 22, 2016, the IRS sent Mighty a timely notice of deficiency by certified mail. Mighty failed to timely file a motion with the United States Tax Court for review. About a year later, Mighty filed an amended return for 2014 in which they explained that the Chase Form 1099-C amount should not be attributed to Mighty. The IRS agreed, so the IRS reduced the portions of the deficit and penalty attributable to the debt forgiveness income; deficiencies for itemized deductions remained. A year later, Mighty signed Form 4549, Income Tax Examination Changes, which reflected the IRS changes. A year later, the IRS issued Mighty a Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing. Mighty timely submitted Form 12153, Request for Collection Due Process or Equivalent Hearing. Mighty continued – for some reason – to dispute alleged liability relating to the Chase 1099-C form. The Settlement Officer (SO) verified that Mighty’s tax liability for 2014 had been properly assessed, that the accuracy penalty had received the required oversight approval, and that all other legal and administrative requirements had been met. satisfied. A year later (now September 2020), the OS has acknowledged receipt of Mighty’s hearing request. The ER advised Mighty that if he requested an alternative collection, he would need to submit Form 433–A, Collection Information Statement for Employees and Self-Employed. They didn’t, but later AS offered them another chance to do so. Mighty then submitted Form 433-D, Installment Agreement, offering to make monthly payments. Later, Mighty phoned the SO, again requesting the debt cancellation income. No installment payment agreement has been concluded. On April 27, 2021, 1,862 days after the IRS’ initial Notice of Deficiency, the IRS issued the Notice of Determination supporting the NFTL filing. Mighty timely filed a petition with the United States Tax Court, listing Chase Form 1099-C as the reason they “disagree with the IRS’ decision in this matter.”

Key issue:

  • What standard of review should the United States Tax Court apply to Mighty’s petition and the underlying determination of insufficiency by the IRS?
  • Whether, in accordance with this standard, the IRS settlement agent has properly discharged its responsibilities under Sections 6320(c) and 6330(c)?

Main holdings:

  • Because there was no dispute as to receipt of the notice of insufficiency, and because Mighty had had the opportunity to contest his liability for 2014 by suing the United States Tax Court in response to notice of deficiency, Mighty was not entitled to challenge his 2014 tax liability, and the determination of the underlying deficiency is being reviewed for abuse of authority only.
  • The RE has properly discharged all of its responsibilities under Sections 6320(c) and 6330(c) — the RE has confirmed that all applicable legal and administrative requirements have been met; she verified that the notice of deficiency had been sent to Mighty’s last known address and that his tax liability had been correctly assessed; and confirmed that the accuracy penalty for 2014 had received supervisory approval required under section 6751(b)(1).

Main points of law:

  • Summary judgment proceedings. The purpose of summary judgment is to expedite litigation and avoid costly, time-consuming and unnecessary trials. Peach Corp. vs. Commissioner, 90TC 678, 681 (1988). The US Tax Court can grant summary judgment where there is no real dispute as to a material fact and a decision can be made at law. rule 121(b); Sundstrand Corp. vs. Commissioner98 TC 518, 520 (1992), aff’d, 17 F.3d 965 (7th Cir. 1994). When the moving party properly presents and supports a motion for summary judgment, “an opposing party may not rely on the mere allegations or denials of that party’s argument” but must state specific facts demonstrating genuine litigation for the trial. . Rule 121(d).
  • Examination standard. When the validity of a taxpayer’s underlying liability is properly in issue, the Tax Court reviews the IRS’ determination de novo. Goza v. Commissioner, 114 TC 176, 181–82 (2000). When the taxpayer’s underlying liability is not properly in issue, the Court reviews the IRS’ decision only for abuse of power. See id. at 182.
  • Abuse of discretionary power. There is abuse of discretionary power when a decision is arbitrary, capricious or without solid basis in fact or in law. See Murphy v. Commissioner125 TC 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006). A taxpayer may dispute underlying liability in a collection due process case, but only if they have not received a valid notice of deficiency or had no opportunity to dispute liability. . 26 USC § 6330(c)(2)(B); Sego c. Commissioner114 TC 604, 609 (2000).
  • A notice of deficiency is valid if properly mailed to the taxpayer at his last known address. 26 USC § 6212(b)(1); Treasures. Reg. § 301.6212-2(a).
  • In deciding whether an IRS Settlement Officer (SO) abused its discretion in supporting the collection action, the Court considers whether the SO (1) properly verified that the requirements of applicable law or administrative procedure have been followed, (2) considered all relevant issues the taxpayer has raised, and (3) considered “whether any proposed collection action balances the need for effective tax collection with the legitimate concern of [taxpayers] that any collection action be no more intrusive than necessary. 26 USC § 6330(c)(3); to see at § 6320(c); Hartmann v. Commissioner, Memo TC. 2018-154, 116 TCM (CCH) 301, 304 (“[A]n The OS is not required to negotiate indefinitely or wait for a specific time before making a decision. “), aff’d785 F. App’x 906 (3rd Cir. 2019).

Knowledge: This case illustrates the many opportunities a taxpayer may have to challenge a notice of tax deficiency or reach a reasonable resolution with the IRS once the notice of deficiency becomes a firm determination of tax liability. . But, the taxpayer must act on these opportunities. Failure to file a timely petition in the United States Tax Court upon receipt of a Notice of Deficiency will place the taxpayer at a disadvantage, assuming the IRS has complied with its requirements. procedural in drafting and issuing the notice of deficiency. In Powerful, the IRS has repeatedly explained that the debt forgiveness income has already been corrected. Basically, Mighty continued to challenge what wasn’t challenged or rated. And, despite multiple opportunities, Might failed to submit and follow through on a proposal to enter a collection alternative. The IRS, as well as a taxpayer’s tax liability, is often bound by certain statutory deadlines and procedures. By failing to take advantage of these procedures in a timely manner, a taxpayer’s challenge to the underlying tax liability may become futile, or even prohibited, in law.

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