                              T.C. Memo. 2013-281



                        UNITED STATES TAX COURT



                 CHRISTOPHER A. BIBBY, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 14687-12L.                        Filed December 12, 2013.



      Danny M. Carr, for petitioner.

      Timothy S. Murphy, Robert D. Heitmeyer, and John D. Davis, for

respondent.



                           MEMORANDUM OPINION


      NEGA, Judge: This action was commenced in response to a Notice of

Determination Concerning Collection Action(s) Under Section 6320 and/or 6330

(notice of determination) with respect to petitioner’s 2007 and 2008 Federal

income tax liabilities. The remaining issue for decision is whether the settlement
                                        -2-

[*2] officer abused her discretion in denying petitioner relief from a jeopardy levy.

All section references are to the Internal Revenue Code in effect at all relevant

times, and all Rule references are to the Tax Court Rules of Practice and

Procedure.

                                    Background

      The stipulated facts are incorporated herein by reference. Petitioner resided

in Michigan at the time the petition was filed.

      Petitioner filed tax returns for tax years 2007 and 2008. Respondent

determined that, largely as a result of $203,000 of overstated withholding credits,

petitioner received over $213,000 of refunds to which he was not entitled.

Petitioner admits spending the refunds for the following items: (1) $32,133.88 for

a used car; (2) $25,270 for offerings and tithes to his church; (3) $21,077 for

wedding and honeymoon expenses; (4) $61,815 on home repairs; (5) $9,482.50 for

tax return preparation and filing; (6) $1,955.66 on furniture purchases; and (7)

$36,365 for various items such as food, clothing, and bill payment. Petitioner

admits transferring his interest in his personal residence to a property holding

company wholly owned by petitioner and his wife. Petitioner also made a $25,000

loan to Diamond & Associates, in repayment of which Diamond & Associates

quitclaimed three properties to petitioner, which petitioner subsequently
                                         -3-

[*3] transferred to EMG, LLC, a separate business entity wholly owned by

petitioner and his wife. On April 14, 2011, respondent’s Frivolous Filers Unit

made math error assessments for petitioner’s claimed overwithholding credits and

issued Forms 3552, Notice of Tax Due on Federal Tax Return, for 2007 and 2008.

On July 25, 2011, respondent issued to petitioner a Notice CP504, Notice of Intent

to Levy, pertaining to petitioner’s liability for tax year 2007.

      The case was then assigned to an Internal Revenue Service (IRS) revenue

officer who sought approval from IRS Counsel’s Office to issue a jeopardy levy.

Having received approval from IRS Counsel’s Office, the IRS revenue officer

issued a jeopardy levy against petitioner’s bank accounts and wages on December

2, 2011, in reference to petitioner’s 2007 and 2008 liabilities. On December 6,

2011, respondent issued a Letter 2439 (CG), Notice of Jeopardy Levy and Right to

Appeal, to petitioner. On December 15, 2011, respondent issued a Notice of

Federal Tax Levy and Your Right to Appeal Hearing to petitioner. On January 4,

2012, petitioner timely submitted a Form 12153, Request for a Collection Due

Process or Equivalent Hearing (section 6330).

      An IRS settlement officer was assigned to the case. The IRS settlement

officer and petitioner’s counsel conducted a collection due process hearing on

February 23, 2012. The settlement officer relied on the revenue officer’s notes
                                        -4-

[*4] and the Integrated Data Retrieval System (IDRS) transcripts to verify that all

the requirements of applicable law or administrative procedure were met.

Petitioner submitted to the IRS settlement officer: Forms 433-A, Collection

Information Statement for Wage-Earners and Self-Employed Individuals; two

Forms 433-B, Collection Information Statement for Businesses, and

documentation supporting petitioner’s entries on all those forms. At the collection

due process hearing, petitioner’s counsel sought an installment agreement in

exchange for release of the levy on petitioner’s wages. The IRS settlement officer

found that petitioner’s Forms 433-A failed to disclose $24,265 of wage income

and $35,761 of income from the Freudenberg-Nok Co., reported on forms 1099-R,

Distributions from Pensions, Amenities, Retirements or Profit-Sharing Plans,

IRA’s, Insurance Contracts, etc. On March 22, 2012, the settlement officer

requested from petitioner’s representative clarification about the nature and

duration of the Freudenberg-Nok payments. Petitioner’s representative promised

to contact petitioner and fax a written verification to IRS Appeals, but no response

was forthcoming. During that same phone conversation petitioner’s representative

was informed that, among other issues, petitioner needed to address the equity

interests in the three real properties transferred by Diamond & Associates in

repayment of petitioner’s $25,000 loan. On the basis of the sum of petitioner’s
                                         -5-

[*5] disclosed and undisclosed income as well as petitioner’s disclosed monthly

expenses, the IRS settlement officer contacted petitioner’s counsel and conveyed

her decision that the wage levy did not constitute a financial hardship on

petitioner.

      Still in pursuit of an installment agreement, petitioner’s counsel provided,

upon request of the IRS settlement officer, additional information listing the

disposition of the proceeds of the 2007 and 2008 refunds. One such item was the

equity interest in the three properties Diamond & Associates transferred to

petitioner, which petitioner then transferred to EMG, LLC. The IRS settlement

officer took the position that the three properties in question were petitioner’s

assets alone and suggested that they be transferred back to the direct and sole

ownership of petitioner. EMG, LLC, transferred the three properties by quitclaim

deed to petitioner and his spouse but not solely to petitioner. The IRS settlement

officer made clear that an installment agreement (and lifting of the jeopardy levy)

depended on: (1) the transfer of the three properties to petitioner’s sole ownership

and (2) the subsequent equity liquidation of the three properties. Petitioner could

not or would not agree to these conditions precedent.

      The negotiations having broken down, petitioner requested a determination

letter. The IRS Appeals officer mailed the notice of determination to petitioner on
                                         -6-

[*6] May 8, 2012. Citing, inter alia, petitioner’s failure to provide certain

requested information regarding his expenditures and his finances, and his transfer

of title to the properties in a manner designed to shelter his equity, the notice of

determination sustained the jeopardy levy.

      Under the stipulation, there is no dispute between the parties as to the

underlying tax liabilities. The parties have agreed to submit the case without trial

pursuant to Rule 122.

                                      Discussion

      Petitioner argues that the settlement officer failed to independently

determine the appropriateness or the legality of the jeopardy levy.

      Respondent argues that the settlement officer independently balanced the

efficient collection of the tax with the legitimate concerns of petitioner and

determined that the jeopardy levy was not overly intrusive and that no better

method of collecting the tax was available.

      If the Secretary believes that the assessment or collection of a tax deficiency

will be jeopardized by delay, he shall immediately assess the deficiency and issue

notice and demand for payment to the person liable for the payment of the tax.1

      1
     Pursuant to sec. 1.6851-1, Income Tax Regs., and sec. 301.6861-1, Proced.
& Admin. Regs., the Secretary authorizes certain IRS employees to determine
                                                                   (continued...)
                                          -7-

[*7] Sec. 6861. The existence of one or more of the following conditions supports

a determination that collection of the tax is in jeopardy: (1) the taxpayer is or

appears to be designing quickly to depart from the United States or to conceal

himself or herself; (2) the taxpayer is or appears to be designing quickly to place

his, her or its property beyond the reach of the Government by removing it from

the United States, by concealing it, by dissipating it, or by transferring it to other

persons; (3) the taxpayer’s financial solvency is or appears to be imperiled. Sec.

1.6851-1(a), Income Tax Regs.; sec. 301.6861-1(a), Proced. &Admin. Regs.

      Notice and demand may be issued for the immediate payment of a tax the

collection of which is determined to be in jeopardy. Sec. 6331(a). Upon a failure

or refusal to pay such tax, the Secretary may immediately levy upon the property

or rights to property of the person subject to the tax liability without regard to the

10-day period otherwise required under section 6331(a). Pursuant to section

6330(d), this Court has jurisdiction to review the determination of the IRS Appeals

Office with respect to a jeopardy levy. Dorn v. Commissioner, 119 T.C. 356, 359

(2002).




      1
      (...continued)
whether the collection of a tax is in jeopardy.
                                         -8-

[*8] Section 6330 generally provides that the Commissioner cannot proceed with

levy on a taxpayer’s property until the taxpayer has been given notice and the

opportunity for a section 6330 hearing and, if dissatisfied, judicial review of the

administrative determination. In this case, the general requirement of section 6330

affording a prior opportunity for a hearing does not apply because respondent

made a finding under section 6331(a) that a jeopardy levy was appropriate.

Rather, pursuant to section 6330(f), petitioner is to be afforded an opportunity for

a hearing within a “reasonable period of time after the levy.” See Bussell v.

Commissioner, 130 T.C. 222, 236-237 (2008). Because the underlying liabilities

are not in issue here, we review the Appeals determination for abuse of discretion.

See Sego v. Commissioner, 114 T.C. 604, 610 (2000); see also Living Care

Alternatives of Utica, Inc. v. United States, 411 F.3d 621, 631 (6th Cir. 2005)

(defining abuse of discretion as “clear taxpayer abuse and unfairness by the IRS”).

      The administrative record indicates that, on March 22, 2012, the settlement

officer requested from petitioner’s representative clarification about the nature and

duration of the Freudenberg-Nok payments. Petitioner’s representative promised

to contact petitioner and fax a written verification to IRS Appeals. During that

same phone conversation petitioner’s representative was informed that, among

other issues, petitioner needed to address the equity interests in the three real
                                         -9-

[*9] properties. Neither petitioner nor petitioner’s representative ever conveyed

any additional information about the Freudenberg-Nok amounts. Petitioner did

not transfer the three properties to his sole ownership but instead requested a

determination letter.

      Petitioner incorrectly claimed and received large tax refunds and then

proceeded to freely spend from those refunds. Petitioner also transferred certain

real property received in satisfaction of a loan to Diamond & Associates to EMG,

LLC, and then jointly to himself and his wife. We find that these facts justify the

determination to sustain the jeopardy levy because petitioner was quickly

dissipating the funds or otherwise attempting to put them beyond the reach of

respondent by transferring funds to third parties. It should also be noted that

petitioner has not disputed his tax liabilities. Petitioner did not fully cooperate

with the settlement officer’s reasonable information requests about sources of

unreported income and the transfer of certain real property other than to

petitioner’s direct ownership. In the light of petitioner’s failure to provide the

requested financial information regarding the Freudenberg-Nok amounts,

respondent’s denial of an installment agreement was not an abuse of discretion.

See McLaine v. Commissioner, 138 T.C. 228, 243 (2012) (finding that the

Appeals officer’s denial of an installment agreement was not an abuse of
                                         - 10 -

[*10] discretion where the taxpayer failed to provide requested financial

information); see also Orum v. Commissioner, 123 T.C. 1, 13 (2004) (“Installment

agreements are based upon the taxpayer’s current financial condition. * * * [T]he

Appeals officer could have reasonably rejected an installment agreement proposal

by petitioners on the basis of * * * petitioners’ failure to timely provide the

requested information.” (internal citations omitted)), aff’d, 412 F.3d 819 (7th Cir.

2005). In contrast, this Court finds that respondent afforded petitioner all legal

rights required under the Code and the regulations. The settlement officer

independently reviewed the revenue officer’s notes and the IDRS transcripts to

verify that all the requirements of applicable law or administrative procedure were

met. Her actions satisfied the verification requirements of section 6330(c)(1) and

(3)(A). We also find the settlement officer to have complied with the requirements

stated in section 6330(c)(3)(B) and (C). Upon review of the facts and the

administrative record, the Court finds that petitioner has failed to satisfy his

burden of proving that the IRS abused its discretion in this matter. Rather, the

Court finds that the facts and circumstances of the case, including petitioner’s

failure to fully cooperate, justified the jeopardy levy.
                                  - 11 -

[*11] To reflect the foregoing,


                                           Decision will be entered

                                  for respondent.
