T.C. Memo. 2018-35



                         UNITED STATES TAX COURT



              ARGOSY TECHNOLOGIES, LLC, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 29856-14L.                        Filed March 22, 2018.



      John J. Petito (a member), for petitioner.

      Luanne S. DiMauro, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      KERRIGAN, Judge: This proceeding was commenced in response to a

Notice of Determination Concerning Collection Action(s) under Section 6320

and/or 6330 (notice of determination) dated December 1, 2014. Respondent

determined to proceed with the proposed levy to collect petitioner’s unpaid

income tax liabilities for tax years 2010 and 2011. Late filing penalties under
                                          -2-

[*2] section 6698 were assessed for the late filing of Forms 1065, U.S. Return of

Partnership Income, for tax years 2010 and 2011.

      The issue for consideration is whether the proposed collection action should

be sustained. Unless otherwise indicated, all section references are to the Internal

Revenue Code in effect at all relevant times. Sections 6221-6232, included in

subchapter C, “Tax Treatment of Partnership Items”, were added to the Internal

Revenue Code by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA),

Pub. L. No. 97-248, sec. 402(a), 96 Stat. at 648.

                                FINDINGS OF FACT

      Petitioner, a limited liability company (LLC), was domiciled in New York

when it timely filed its petition.

      On June 28, 2014, respondent sent petitioner a Final Notice of Intent to

Levy and Notice of Your Right to a Hearing. Petitioner timely submitted a Form

12153, Request for a Collection Due Process or Equivalent Hearing. Petitioner

did not request a collection alternative; it only raised the underlying liabilities.

Petitioner asserted that it was not a partnership but a single-member LLC.

      For tax years 2010 and 2011 John Petito and his wife were reported on

peititoner’s Schedules B-1, Information on Partners Owning 50% or More of the

Partnership, as owning 100% of petitioner. Mr. Petito signed the hearing request,
                                        -3-

[*3] which further asserted that petitioner could not be charged a partnership

penalty. Schedules K-1, Partner’s Share of Income, Deductions, Credits, and

Other Items, for tax years 2010 and 2011 for petitioner were attached to the

hearing request.

      Petitioner’s tax returns for both tax years 2010 and 2011 included the

following statement: “This partnership’s section 6231(A)(1)(B)(ii) election to be

covered under TEFRA unified audit procedures is still in existence and in force.”

These returns were not timely filed.

      On October 15, 2014, the Appeals officer mailed petitioner a letter

scheduling a telephone collection due process (CDP) hearing for October 31,

2014. The letter explained that petitioner would need to fill out a Form 433-A,

Collection Information Statement for Wage Earners and Self-Employed

Individuals, if it was requesting either an installment agreement or an offer-in-

compromise. The letter further explained that if petitioner did not respond to the

letter or participate in the conference, a determination would be made on the basis

of petitioner’s CDP request. Petitioner did not call in for the scheduled CDP

conference.

      On December 1, 2014, the Appeals officer issued a notice of determination

sustaining the proposed levy. The Appeals case memorandum acknowledges that
                                         -4-

[*4] petitioner contends it was a single-member entity. The Appeals officer

verified through transcript analysis that assessment was properly made pursuant to

section 6201 for each tax year in issue. The Appeals officer concluded that all of

the requirements of applicable law or administrative procedure had been met.

      On December 15, 2014, petitioner filed its petition, asserting that it is a

single-member LLC and cannot be charged a partnership penalty and that the

Appeals officer abused his discretion.

                                     OPINION

      Section 6331(a) authorizes the Secretary to levy upon the property and

property rights of a taxpayer who fails to pay a tax within 10 days after notice and

demand. Before the Secretary may levy upon the taxpayer’s property, the

Secretary must notify him or her of the Secretary’s intention to impose the levy.

Sec. 6331(d)(1). The Secretary must also notify the taxpayer of his or her right to

a CDP hearing. Sec. 6330(a)(1). This Court has jurisdiction to review the

Commissioner’s administrative determinations. Sec. 6330(d)(1).

      Under certain circumstances a taxpayer may raise challenges to the

Commissioner’s determination of his or her underlying tax liabilities in a CDP

proceeding. See sec. 6330(c)(2)(B). A taxpayer may challenge the amount of the

assessed tax in a CDP proceeding if he or she did not receive a statutory notice of
                                        -5-

[*5] deficiency or did not otherwise have an opportunity to dispute the tax

liability. Id.; see also Montgomery v. Commissioner, 

, 7 (2004).

      Where the validity of the taxpayer’s tax liability is properly at issue, we

review the determination de novo. Goza v. Commissioner, 

, 181-182

(2000). Where the taxpayer’s underlying tax liability is not before us, we review

the determination for abuse of discretion only. Id. at 182. To establish an abuse

of discretion, petitioner must show that the Appeals officer’s decision was

arbitrary, capricious, or without sound basis in fact or law. Giamelli v.

Commissioner, 

, 111 (2007); Woodral v. Commissioner, 

,

23 (1999). The Court does not conduct an independent review and substitute its

judgment for that of the Appeals officer. Murphy v. Commissioner, 

,

320 (2005), aff’d, 

 (1st Cir. 2006).

      Petitioner contends that its underlying liabilities were raised in its CDP

hearing request, in which it stated that a single-member LLC could not be subject

to partnership penalties. Petitioner did not have a prior opportunity to dispute the

assessed tax liabilities. Although petitioner did not call in for the scheduled

conference, it did challenge the underlying liabilities and there was written

correspondence. See sec. 301.6330-1(d)(2), Q&A-D6, Proced. & Admin. Regs.;

see also Davis v. Commissioner, 

, 41 (2000).
                                         -6-

[*6] Petitioner contends that it is a single-member LLC, and not a partnership,

and therefore was not required to file a partnership return. Section 6031 requires

every partnership as defined in section 761(a) to file a tax return for each taxable

year. Section 6698 imposes a penalty against the partnership for the failure to

timely file a partnership return.

      For tax years 2010 and 2011 Mr. and Mrs. Petito were reported on

petitioner’s Schedules B-1 as owning 100% of Argosy. Pursuant to section

6231(a)(1)(B)(ii), petitioner elected to be covered under TEFRA. It filed

partnership returns and selected on its Forms 1065 that it was a domestic LLC.

      Since petitioner represented itself as a partnership on its tax returns, it may

not argue that it is another entity and disclaim its validity. See Halstead v.

Commissioner, 

 (2d Cir. 1961), aff’g T.C. Memo. 1960-106; Brennan

v. Commissioner, T.C. Memo. 2012-187, aff’d sub nom. Ashland v.

Commissioner, 584 F. App’x 573 (9th Cir. 2014). Petitioner contends that a Mr.

and Mrs. Petitio were one partner. However, there is no evidence of an election

pursuant to section 761(f).

      Section 6698 provides an exception to the penalty for late filing if it can be

shown that the failure is due to reasonable cause. Petitioner did not argue

reasonable cause. Rather petitioner argued that it was a single-member LLC. We
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[*7] conclude that petitioner is liable for the section 6698 penalty for tax years

2010 and 2011.

      Petitioner contends that respondent’s determination constitutes an abuse of

discretion. Section 6330(c)(3) requires the Appeals officer to consider the

following during a CDP hearing: (1) whether the requirements of any applicable

law or administrative procedure have been met; (2) any issues appropriately raised

by the taxpayer; and (3) whether the proposed collection action balances the need

for the efficient collection of taxes with the legitimate concern of the taxpayer that

any collection action be no more intrusive than necessary. See Lunsford v.

Commissioner, 

, 184 (2001). We note that the Appeals officer

properly based his determination on the factors specified by section 6330(c)(3).

      Petitioner did not request any collection alternatives, and the only issue it

raised was the underlying tax liabilities. The Appeals officer did not abuse his

discretion in sustaining the proposed levy for tax years 2010 and 2011.

      Any contention we have not addressed is irrelevant, moot, or meritless.

      To reflect the foregoing,


                                               Decision will be entered for

                                        respondent.