Judges: "Goeke, Joseph Robert"
Attorneys: Richard George Barry, Pro se. Louise R. Forbes , for respondent.
Filed: Mar. 24, 2010
Latest Update: Dec. 05, 2020
Summary: T.C. Memo. 2010-57 UNITED STATES TAX COURT RICHARD GEORGE BARRY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 28733-08L. Filed March 24, 2010. Richard George Barry, pro se. Louise R. Forbes, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION GOEKE, Judge: The issue for decision is whether respondent may proceed to collect section 66721 trust fund recovery penalties (TFRP) by lien for the following periods: 1 Unless otherwise indicated, all section references are to
Summary: T.C. Memo. 2010-57 UNITED STATES TAX COURT RICHARD GEORGE BARRY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 28733-08L. Filed March 24, 2010. Richard George Barry, pro se. Louise R. Forbes, for respondent. MEMORANDUM FINDINGS OF FACT AND OPINION GOEKE, Judge: The issue for decision is whether respondent may proceed to collect section 66721 trust fund recovery penalties (TFRP) by lien for the following periods: 1 Unless otherwise indicated, all section references are to t..
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T.C. Memo. 2010-57
UNITED STATES TAX COURT
RICHARD GEORGE BARRY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 28733-08L. Filed March 24, 2010.
Richard George Barry, pro se.
Louise R. Forbes, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
GOEKE, Judge: The issue for decision is whether respondent
may proceed to collect section 66721 trust fund recovery
penalties (TFRP) by lien for the following periods:
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code.
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Assessed Penalty
Tax Period Amount Due Assessed
Mar. 31, 1997 $3,271.23 $1,552.53
Sept. 30, 1997 2,083.90 24.62
June 30, 1998 34,620.43 15,980.28
Sept. 30, 1998 38,293.14 17,050.59
Dec. 31, 1998 24,921.06 11,350.82
Total 45,958.84
For the reasons stated herein, we sustain respondent’s
determination to proceed with the collection action.
FINDINGS OF FACT
Petitioner resided in Massachusetts at the time he filed his
petition.
Petitioner operated Barry Moving & Storage Services, Inc.
(Barry Moving), beginning as early as 1995 and was responsible
for overseeing the company’s quarterly deposits for employee
withholding taxes. Petitioner filed for bankruptcy under chapter
7 of the Bankruptcy Code, 11 U.S.C. sec. 727, on July 13, 1999,
in response to a lawsuit filed against Barry Moving. The
bankruptcy court issued a discharge order on January 4, 2000.
On December 8, 1999, while petitioner’s bankruptcy case was
still pending, respondent sent petitioner by certified mail a
Letter 1153, Trust Funds Recovery Penalty Letter, proposing to
assess against petitioner the TFRP of $45,9592 attributable to
unpaid liabilities pursuant to section 6672 for the tax periods
2
Total amount rounded up.
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listed above. The Letter 1153 was sent to petitioner’s last
known address and informed him that he had the right to appeal or
protest the proposed assessment and that he had to mail a written
appeal within 60 days of the date of the letter to preserve his
right to appeal. Petitioner did not appeal.
On March 20, 2000, the TFRP were assessed against petitioner
as a responsible party for the tax liabilities of Barry Moving.
Respondent assessed further TFRP against petitioner for the
unpaid employment taxes of Barry Relocation Services, a business
operated by petitioner’s ex-wife.3
On February 5, 2008, respondent recorded a notice of Federal
tax lien (NFTL). The amount of the recorded lien was $40,851.
On February 7, 2008, respondent issued to petitioner a Notice of
Federal Tax Lien Filing and Your Right to a Hearing Under IRC
6320. In response, petitioner timely submitted a Form 12153,
Request for a Collection Due Process or Equivalent Hearing (CDP
hearing). The sole issue petitioner raised in his CDP hearing
request was his underlying liability for the TFRP.
On July 23, 2008, petitioner’s CDP hearing was held by
telephone. During the hearing petitioner argued that he was not
3
Before trial respondent’s counsel conceded the assessments
related to Barry Relocation Services and stated that those
amounts would be abated. Accordingly, assessments related to
Barry Relocation Services are moot and will not be discussed in
this opinion.
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liable for the TFRP because they had been paid by Barry Moving.
The settlement officer explained to petitioner that he could
raise the underlying liability if he had not otherwise had an
opportunity to do so. The settlement officer concluded the CDP
hearing by telling petitioner he would review the information
provided and inform petitioner of his final determination.
Following the CDP hearing the settlement officer sent
petitioner a letter informing him that he was precluded from
raising the underlying liability since he received a Letter 1153
pertaining to all tax periods at issue. However, the settlement
officer gave petitioner a final opportunity to submit previously
requested information to assist in respondent’s final
determination.
On October 23, 2008, respondent issued to petitioner a
Notice of Determination Concerning Collection Action(s) Under
Section 6320 and/or 6330 sustaining the proposed lien. On
November 26, 2008, petitioner timely filed a petition in this
Court challenging respondent’s determination.
OPINION
Section 6672(a) imposes a penalty on any person required to
collect, truthfully account for, and pay over tax who willfully
fails to do so or who willfully attempts to evade or defeat any
such tax. Section 6672(b)(1) and (2) provides: (1) That no
penalty may be imposed unless the Secretary notifies the taxpayer
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in person or in writing by mail to an address as determined under
section 6212(b) that the taxpayer shall be subject to assessment
for such penalty; and (2) that in-person delivery or mailing of
the notice must precede any notice and demand for payment of the
section 6672 penalty by at least 60 days.
Petitioner argues respondent abused his discretion in
sustaining the proposed lien. Section 6321 imposes a lien in
favor of the United States on all property and property rights of
a taxpayer liable for taxes after a demand for the payment of the
taxes has been made and the taxpayer fails to pay. Section
6320(a) requires the Secretary to send written notice to the
taxpayer of the filing of a notice of lien and of the taxpayer’s
right to an administrative hearing on the matter. At the hearing
a taxpayer may raise any relevant issue, including challenges to
the appropriateness of the collection action and possible
collection alternatives such as an offer-in-compromise. Sec.
6330(c)(2)(A). A taxpayer may contest the validity of the
underlying tax liability, but only if the taxpayer did not
receive a statutory notice of deficiency or otherwise have an
opportunity to dispute the tax liability. See sec.
6330(c)(2)(B); see also Hoyle v. Commissioner,
131 T.C. 197, 199
(2008).
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Following the CDP hearing the Appeals officer must make a
determination whether the lien filing was appropriate and is
required to consider: (1) Whether the Secretary has met the
requirements of applicable law and administrative procedure; (2)
the relevant issues raised by the taxpayer; and (3) whether the
proposed collection action appropriately balances the need for
efficient collection of taxes with a taxpayer’s concerns that the
collection action be no more intrusive than is necessary. Sec.
6330(c)(3).
Petitioner argues that the Appeals officer abused his
discretion by denying petitioner an opportunity to challenge the
underlying liability at his CDP hearing. Respondent argues that
petitioner was not entitled to raise his underlying liability for
the TFRP because petitioner received the Letter 1153. Petitioner
testified at trial that he did not receive the Letter 1153
respondent issued.
A taxpayer is precluded from contesting the existence or
amount of the underlying tax liability at the hearing unless the
taxpayer did not receive a notice of deficiency for the tax in
question or did not otherwise have an opportunity to dispute the
tax liability. Sec. 6330(c)(2)(B); see also Sego v.
Commissioner,
114 T.C. 604, 609 (2000). We find petitioner’s
testimony that he did not actually receive the Letter 1153 to be
credible. Accordingly, we will apply a de novo standard for our
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review of the collection action. See Davis v. Commissioner,
115
T.C. 35, 39 (2000).
At trial petitioner did not contend that he was not liable
for the TFRP. Rather, petitioner argues that the collection
action is improper because Barry Moving paid the taxes due.
Petitioner testified that quarterly filings and deposits for
employee withholding taxes had been consistent and timely since
Barry Moving began operations. However, at trial petitioner was
unable to produce bank records or any other documentation
supporting his claim that Barry Moving paid the taxes at issue
and thus has failed to substantiate that Barry Moving paid them.
Further, petitioner’s liability for the TFRP was not
discharged in bankruptcy because it is not a dischargeable debt.
Although petitioner received a discharge pursuant to chapter 7 of
the Bankruptcy Code, not all Federal tax debts are dischargeable.
See 11 U.S.C. sec. 523 (2006); Washington v. Commissioner,
120
T.C. 114, 121 (2003). Section 6672 TFRP are not a dischargeable
debt. The U.S. Supreme Court in United States v. Sotelo,
436
U.S. 268, 282 (1978), held that liability “under Internal Revenue
Code § 6672 must be held nondischargeable under Bankruptcy Act §
17(a)(1)(e).” “Section 17(a)(1)(e) of the Bankruptcy Act * * *
was the statutory predecessor of § 523 of the Bankruptcy Code and
is essentially the same nondischargeable tax claim language.”
Clark v. United States, 64 Bankr. 437, 441 (Bankr. M.D. Fl.
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1986). The Supreme Court also stated that despite the reference
to the liability as a section 6672 “penalty” the funds involved
were in substance “taxes”. United States v. Sotelo, supra at
275; see also In re Spelts, 304 Bankr. 452, 456-457 (Bankr. D.
Colo. 2003). Since Sotelo, Federal courts have held that
liability for a section 6672 TFRP is not a dischargeable debt.
See, e.g., Severance v. United States,
593 F.2d 4, 5 (5th Cir.
1979) (finding the section 6672 liability nondischargeable
whether or not the liability was levied within 3 years of filing
for bankruptcy). Section 6672 TFRP are therefore
nondischargeable under 11 U.S.C. section 523.
In conclusion, because petitioner failed to demonstrate that
he paid the amounts at issue and did not contest his trust fund
liability under section 6672, and because his liability for the
TFRP was not discharged by the Bankruptcy Court, respondent may
proceed with collection of the TFRP by lien.
To reflect the foregoing,
An appropriate order
of dismissal and decision will
be entered.