                               T.C. Memo. 2017-105



                         UNITED STATES TAX COURT



                  CYNTHIA GONZALEZ, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 182-13W.                           Filed June 7, 2017.



      Cynthia Gonzalez, pro se.

      Rachel G. Borden and John T. Arthur, for respondent.



                           MEMORANDUM OPINION


      GUY, Special Trial Judge: This whistleblower action, commenced pursuant

to section 7623(b)(4),1 is before the Court on respondent’s motion for summary


      1
       Unless otherwise indicated, section references are to sections of the
Internal Revenue Code, as amended and in effect at all times relevant to this
proceeding, and Rule references are to the Tax Court Rules of Practice and
                                                                       (continued...)
                                        -2-

[*2] judgment, filed August 7, 2015, first supplement to motion for summary

judgment, filed April 4, 2016,2 and second supplement to motion for summary

judgment, supported by a declaration (submitted by Program Analyst Steven

Mitzel (PA Mitzel)), filed May 17, 2016. PA Mitzel’s declaration states that he

was assigned to process petitioner’s whistleblower claim in November 2012 and

describes the events (with a review of the documents contained in the

Whistleblower Office administrative file) that led him to recommend to the

Director of the Whistleblower Office that petitioner’s whistleblower claim be

denied.

      On September 15, 2015, petitioner filed a letter in opposition to

respondent’s motion, and on May 2, 2016, she filed a response to respondent’s

first supplement to motion for summary judgment.




      1
      (...continued)
Procedure.
      2
       Attached to respondent’s first supplement to motion for summary judgment
are documents contained in the Internal Revenue Service (IRS) Whistleblower
Office (Whistleblower Office) administrative file.
                                         -3-

[*3]                               Background3

       On or about October 2, 2009, petitioner submitted to the Whistleblower

Office a Form 211, Application for Award for Original Information, alleging that,

during the taxable years 2004, 2006, and 2007, a corporation (taxpayer 1) and an

individual taxpayer/controlling shareholder (taxpayer 2) had understated taxable

income and that taxpayer 2 had claimed deductions for personal expenses and had

failed to report constructive dividends.4 The Whistleblower Office assigned claim

Nos. 2010-000210, 2010-000211, 2011-011077, and 2011-011129 to petitioner’s

claims.

       The Whistleblower Office forwarded the information petitioner had

provided to the IRS Large Business and International Division (LB&I) for

consideration. Following a review of that information, the LB&I began

examinations of taxpayers 1 and 2, taxpayer 3 (taxpayer 2’s spouse) and two

partnerships (taxpayers 4 and 5). Revenue Agent Diane Todd conducted the

examinations and, upon completion of her work, forwarded to the Whistleblower




       3
       The following facts are drawn from the pleadings and other documents in
the record in this case and are not in dispute.
       4
      We refer to the target taxpayers in generic terms to protect the identity of
taxpayers who are not parties to this suit. See Rule 345(b).
                                         -4-

[*4] Office five Forms 11369, Confidential Evaluation Report on Claim for

Award, dated October 2, 2009, along with various attachments.

      The first Form 11369 and its attachments indicate that taxpayer 1 agreed to

the assessment and collection of income tax deficiencies of $19,249 and $13,572

for the taxable years 2009 and 2010, respectively, attributable to the

recharacterization and disallowance of portions of the deductions that taxpayer 1

had claimed for advertising and promotion expenses. No penalties were assessed.

Taxpayer 1 subsequently remitted to the IRS the additional taxes along with

statutory interest of $1,525.68 and $506.58, for 2009 and 2010, respectively, for a

total of $34,853.26.

      The second Form 11369 and its attachments indicate that the IRS did not

assert or determine an underpayment of tax or attempt to assess or collect any

amounts from taxpayers 2 or 3 for the taxable year 2008 as a result of the

information that petitioner provided.

      The third Form 11369 and the related documents indicate that the IRS did

not assert or determine an underpayment of tax or attempt to assess or collect any

amount from taxpayer 5 for the taxable year 2008 as a result of the information

that petitioner provided.
                                          -5-

[*5] The fourth and fifth Forms 11369 contain information that is already

included in the third Form 11369 but include references to taxpayers 4 and 5.

Although the preparation and compilation of the fourth and fifth Forms 11369

leave something to be desired, when considered together the documents indicate

that the IRS did not assert or determine any adjustments to items reported by

taxpayers 4 or 5 for the taxable year 2008, nor did the IRS assert or determine an

underpayment of tax or attempt to assess or collect any amount from any taxpayers

identified by petitioner other than taxpayer 1.

      In the light of the information contained in the Forms 11369 and the

attachments thereto, PA Mitzel recommended that petitioner’s claims for a

whistleblower award be denied. On December 6, 2012, the Whistleblower Office

issued to petitioner a final determination stating in pertinent part: “Under Internal

Revenue Code Section 7623, an award may be paid only if the information

provided results in the collection of additional tax, penalties, interest or other

proceeds. In this case, the information you provided did not result in the

collection of any proceeds. Therefore, you are not entitled to an award.”5




      5
        Contrary to the statement in the final determination, the record reflects that
the IRS collected tax proceeds from taxpayer 1 as a result of the information that
petitioner provided to the Whistleblower Office.
                                         -6-

[*6] Petitioner invoked the Court’s jurisdiction under section 7623(b)(4) by

filing a timely petition for review of the final determination. Respondent filed an

answer to the petition, followed by a motion for leave to file an amended answer.

Although the Court directed petitioner to file an objection, if any, to respondent’s

motion for leave, she failed to do so. Consequently, the Court granted

respondent’s motion and filed respondent’s amended answer, which included

affirmative allegations in support of respondent’s assertion that the “amounts in

dispute” in this matter did not exceed the $2 million threshold prescribed in

section 7623(b)(5)(B) as a prerequisite for a whistleblower award.6

                                     Discussion

      Summary judgment is intended to expedite litigation and avoid unnecessary

and expensive trials. See FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73,

74 (2001). Summary judgment may be granted with respect to all or any part of

the legal issues in controversy “if the pleadings, answers to interrogatories,

depositions, admissions, and any other acceptable materials, together with the


      6
        Respondent subsequently filed a motion for entry of an order that undenied
allegations be deemed admitted in accordance with Rule 37(c). Although the
Court directed petitioner to file a reply to respondent’s amended answer, she failed
to do so. Consequently, the Court granted respondent’s Rule 37(c) motion, and
petitioner was deemed to have admitted the affirmative allegations in respondent’s
amended answer.
                                         -7-

[*7] affidavits or declarations, if any, show that there is no genuine dispute as to

any material fact and that a decision may be rendered as a matter of law.” Rule

121(a) and (b); see Elec. Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002).

The moving party bears the burden of proving that no genuine dispute exists as to

any material fact and that he is entitled to judgment on the substantive issues as a

matter of law. See, e.g., Espinoza v. Commissioner, 78 T.C. 412, 416 (1982).

      Section 7623(b) provides for mandatory whistleblower awards if certain

requirements are met. A whistleblower award under section 7623 generally is

dependent on two preliminary prerequisites: (1) the Commissioner’s commencing

an administrative or judicial action and (2) the collection of tax proceeds. See

Cohen v. Commissioner, 139 T.C. 299, 302 (2012), aff’d, 550 F. App’x 10 (D.C.

Cir. 2014); Cooper v. Commissioner, 136 T.C. 597, 600 (2011).

      Section 7623(b)(4) establishes the Court’s jurisdiction to review

whistleblower awards. Under that provision, upon the filing of a timely petition

for review, the Court is vested with jurisdiction to review any determination

regarding a whistleblower award under subsection (b).

      There is no dispute that the information that petitioner provided to the IRS

led to an examination of the target taxpayers and that the IRS subsequently

assessed and collected tax from one of those taxpayers. Qualification for a
                                          -8-

[*8] whistleblower award under section 7623(b) is limited in relevant part,

however, by section 7623(b)(5)(B), which provides that subsection (b) shall apply

with respect to “any action--if the tax, penalties, interest, additions to tax, and

additional amounts in dispute exceed $2,000,000.”7

        Section 301.7623-2(e)(2), Proced. & Admin. Regs. (effective August 12,

2014, after the events in dispute in this case transpired), provides in pertinent

part:

               (2) Amount in dispute.--(i) In general.--For purposes of section
        7623(b)(5) and §§ 301.7623-1 through 301.7623-4, the term amount
        in dispute means the greater of the maximum total of tax, penalties,
        interest, additions to tax, and additional amounts that resulted from
        the action(s) with which the IRS proceeded based on the information
        provided, or the maximum total of such amounts that were stated in
        formal positions taken by the IRS in the action(s). * * *

Respondent avers that section 301.7623-2(e)(2), Proced. & Admin. Regs., is

consistent with IRS guidance in effect when petitioner submitted her

whistleblower claim. See Internal Revenue Manual pt. 25.2.2.9.2(3) (June 18,

2010).

        7
        In Lippolis v. Commissioner, 143 T.C. 393, 398-401 (2014), the Court
explained that the provisions of sec. 7623(b)(5) are not a prerequisite to the
Court’s jurisdiction but rather create an affirmative defense that must be pleaded
in the answer and proved by the Commissioner. As discussed above, respondent
pleaded in the amended answer that the amounts in dispute in the actions taken by
the IRS as a result of the information that petitioner provided to the Whistleblower
Office did not exceed the $2 million threshold of sec. 7623(b)(5)(B).
                                        -9-

[*9] As a preliminary matter, we acknowledge that the documents contained in

the Whistleblower Office administrative record suggest that the $2 million

threshold of section 7623(b)(5)(B) has not been met here. The first Form 11369

and the attachments thereto indicate that the examination of taxpayer 1 resulted in

relatively minor proposed adjustments to deductions that taxpayer 1 had claimed

for advertising and promotion expenses for the taxable years 2009 and 2010. The

remaining Forms 11369 indicate that the examinations of taxpayers 2, 3, 4, and 5

resulted in no proposed tax adjustments.

      Nevertheless, we are not satisfied that respondent, as the moving party and

as the party asserting an affirmative defense, see Lippolis v. Commissioner, 143

T.C. 393, 398-401 (2014), has established the facts necessary to show that he is

entitled to judgment as a matter of law. In particular, although we know the

contents of the Whistleblower Office administrative file, respondent’s motion and

related documents do not address whether additional records may exist in other

IRS departments and offices that are relevant to the question whether the “amount

in dispute” in this matter exceeded $2 million. Absent an affidavit or a declaration

from an appropriate IRS representative stating that a diligent and comprehensive

search of IRS records has been conducted, all appropriate personnel have been

contacted, and there is no record that the IRS has asserted an underpayment of tax
                                        -10-

[*10] or made any effort to assess or collect tax in excess of $2 million from the

taxpayers identified in petitioner’s claims or any taxpayers related to those

taxpayers, respondent has failed to show that there is no dispute as to a material

fact and that a decision may be rendered in his favor as a matter of law.

Consequently, we will deny respondent’s motion as supplemented.8

      To reflect the foregoing,


                                               An order will be issued

                                       denying respondent’s motion

                                       as supplemented.




      8
       This opinion is being released concurrently with, and applies the same
analysis as that used in, Lippolis v. Commissioner, T.C. Memo. 2017-104.
