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Aviles v. Commissioner (T.C. Memo. 2020-12)

On January 14, 2020, the Tax Court issued a Memorandum Opinion in the case of Aviles v. Commissioner (T.C. Memo. 2020-12). The issue presented in Aviles was whether the Tax Court should revisit its holding in Giamelli v. Commissioner, 129 T.C. 107 (2007), thereby permitting a petitioner, who failed to challenge his underlying tax liability at a CDP hearing, to raise the challenge for the first time in Tax Court.

Challenging Underlying Tax Liabilities at CDP Hearing

A taxpayer may challenge the existence or amount of his underlying liability in a CDP proceeding only under two conditions.  First, the taxpayer may challenge the liability if it did not receive a statutory notice of deficiency (SNOD) in regard to the tax liability.   Second, if the taxpayer or did not “otherwise have an opportunity” to dispute its liability, then it would be a violation of its due process rights under the Code. See IRC § 6330(c)(2)(B). The Tax Court found that the petitioner had no prior opportunity to dispute his liabilities, and therefore raising and disputing them at the CDP hearing would have been appropriate. However, the taxpayer did participate in a CDP hearing, and he failed to raise a challenge then.

Failure to Challenge Underlying Tax Liabilities in CDP Appeal

A taxpayer is precluded from disputing his underlying liability in Tax Court if it was not properly raised in the CDP hearing. See Thompson v. Commissioner, 140 T.C. 173, 178 (2013); Giamelli v. Commissioner, 129 T.C. 107, 113-114 (2007) (same); Treas. Reg. § 301.6330-1(f)(2), Q&A-F3. Liability is not “properly raised” in a CDP hearing if the taxpayer fails to present to Appeals any evidence with respect to the liability issue after being given a reasonable opportunity to do so. See Moriarty v. Commissioner, T.C. Memo. 2017-204, *3; Treas. Reg. § 301.6330-1(f)(2); see also Obeirne v. Commissioner, T.C. Memo. 2018-210, at *9.

Revisiting Giamelli or Not?

Petitioner understands that his goose is cooked on the underlying liability for failure to raise the issue at the CDP level, and so he does what every warm-blooded American does with :02 seconds left on the clock, down 6, fifty yards from the endzone, band already filing onto the field: he prays that the spirit of Doug Flutie and the Holy Mother will bless his attempt, and he heaves up a Hail Mary towards the endzone of redemption.

The Hail Mary in this case was to ask the Tax Court to set aside its 2007 decision of Giamelli, which, if you have read more than a couple of “underlying liability” cases, has something of a favored child status amongst the Tax Court judges. See, inter alia, Carpenter v. Commissioner, 152 T.C. 202, 220 (2019); Klein v. Commissioner, 149 T.C. 341, 349 (2017); LG Kendrick, LLC v. Commissioner, 146 T.C. 17, 34 (2016), aff’d, 684 F. App’x 744 (10th Cir. 2017); Kraft v. Commissioner, 142 T.C. 259, 265 (2014); Thompson, 140 T.C. at 178. Thus, the Tax Court declined to acquiesce to the petitioner’s request to set aside such an oft-used precedent, and the Hail Mary, like so many before it, fell well short of the goal line.

Original opinion: (T.C. Memo. 2020-12) Aviles v. Commissioner

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