On March 29, 2022, the Tax Court issued a Memorandum Opinion in the case of Golditch v. Commissioner (T.C. Memo. 2022-26). The primary issues presented in Golditch v. Commissioner were (i) whether the taxpayer was permitted to challenge his underlying tax liability at CDP hearing; (ii) whether the taxpayer’s argument that liabilities were not properly assessed because substitutes for return were invalid was frivolous; and (iii) whether the imposition of frivolous position penalty on taxpayer was warranted.

Held: Oh, Jason, frivolity will get you nowhere…especially with Judge Lauber presiding…

Background to Golditch v. Commissioner

Judge Lauber leads with this ignominious line, which never bodes well for the petitioner:

Petitioner is a serial nonfiler.^[1]

The many years for which he failed to file Federal income tax returns include 2011 and 2012. The IRS prepared for each year a substitute for return (SFR) that met the requirements of IRC § 6020(b). The SFRs showed income tax liabilities of $2,875 for 2011 and $10,445 for 2012. The IRS also determined additions to tax for both years. Notices of deficiency were sent to the petitioner’s last known address, and to no one’s surprise, the petitioner did not file a Tax Court petition to contest his underlying liability.

The IRS then filed a notice of federal tax lien (NFTL) and sent a Notice of Federal Tax Lien Filing and Your Right to a Hearing under IRC § 6320 (lien notice) to the petitioner. The lien notice informed the petitioner that, if he wished to appeal the NFTL filing or discuss collection alternatives, he needed to request a CDP hearing by August 5, 2016. The lien notice was sent by certified mail and addressed to the petitioner at his last known address. Once more, and with gusto, he failed to request a CDP hearing in response to the lien notice.

In a further attempt to collect these liabilities, the IRS sent a levy notice to the petitioner. The levy notice indicated that petitioner’s 2011 and 2012 liabilities had grown to $24,806. This time, the petitioner timely requested a CDP hearing, listing very same last known address as his current address. In his hearing request, he asserted that he had not received either notice of deficiency, and he wanted to challenge his underlying liability for each year.

The CDP Hearing Fiasco in Golditch v. Commissioner

The Settlement Officer (SO) assigned to the case sent the petitioner a letter, again mailed to the same address, scheduling a telephone conference for January 2020. The SO instructed the petitioner to call to reschedule if he could not keep that appointment.

The SO’s letter noted that the proposed conference call would be the petitioner’s main opportunity to explain why he disagreed with the collection action and to discuss collection alternatives. The SO informed the petitioner that he could not dispute his underlying liabilities because he had had a prior opportunity to do so when he received the lien notice in 2016.

Finally, the SO explained that she would be unable to consider a collection alternative unless the petitioner sent her a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and came into compliance with his tax filing obligations by submitting Forms 1040, U.S. Individual Income Tax Return, for tax years 2013-2018. The SO calculated that, as of January 2020, the petitioner’s liabilities for all open years totaled a whopping $214,441.67.

To no one’s surprise, least of all the SO, the petitioner did not submit any of the requested Forms 1040 and did not call in to the telephone conference as scheduled. On the date of the CDP hearing, after waiting around for the goober to call to no avail, the SO sent the petitioner a “last chance” letter informing him that he had 14 days to call the SO or send her additional information; otherwise, she would close the case.

It may shock your conscience, dear reader, that the petitioner did nothing, and the SO closed the case. On February 25, 2020, Appeals issued the petitioner a notice of determination upholding the levy notice, and he timely petitioned the Tax Court. On October 5, 2021, the IRS filed a Motion for Summary Judgment, to which the petitioner—for perhaps the first time in his life—timely replied.

Challenging Underlying Liabilities

A taxpayer may challenge his underlying liability at a CDP hearing, but only if he did not receive a statutory notice of deficiency for that liability or did not otherwise have a prior opportunity to dispute it.^[2] For three distinct reasons, petitioner is not entitled to challenge his underlying liability for 2011 or 2012 in the Tax Court.

First Discrete Reason the Petitioner was Shit out of Luck

The petitioner received (or deliberately refused to accept) notices of deficiency for both years. A notice of deficiency is sufficient if mailed to the taxpayer at his last known address.^[3] A taxpayer’s last known address is generally the address appearing on his “most recently filed and properly processed Federal tax return.”^[4]

The petitioner did not dispute that the address to which the notices of deficiency were sent was his “last known address.”^[5] Indeed, the opinion points out, he received the levy notice at that address, timely requested a CDP hearing, and listed the very same address as his return address.

He showed such address on his petition to the Tax Court and in his response to the Summary Judgment Motion. He received service from the Tax Court in paper form (rather than electronically), and he has evidently received every document served on him at that damned address.

The IRS even supplied a U.S. Postal Service Form 3877, which shows that the notices of deficiency were sent via certified mail to petitioner’s last known address. The tracking numbers on the notices of deficiency match the tracking numbers on the Form 3877, and the Form 3877 is stamped and signed by the Postal Service. The Form has no obvious omissions. A properly completed Form 3877 by itself is generally sufficient, absent evidence to the contrary, to establish that the notice was properly mailed to the taxpayer.^[6]

The petitioner asserted in his petition and in his response to the summary judgment motion: “I do not recall receiving the Notice of Deficiency.” But he supplies no evidence to support the proposition that he did not receive it. He has resided at the address for a very long time, and he has repeatedly received mail at that address from the IRS and the Tax Court.

In a prior appearance before the Tax Court, in 2010, he asserted that he had not received the notice of deficiency issued to him for 2002-2005, likewise mailed to the very same address. The Tax Court found that assertion wholly implausible, indeed quite laughable, concluding simply that that “Golditch received the notice.” The Tax Court reached the same conclusion here.

Second Discrete Reason the Petitioner was Shit out of Luck

Even if the petitioner did not receive the notices of deficiency, the IRS sent him a lien notice in June 2016, and he did not file a CDP hearing request at that time although entitled to do so.

If [a] taxpayer previously received a CDP Notice…with respect to the same tax and tax period and did not request a CDP hearing with respect to that earlier CDP Notice, the taxpayer had a prior opportunity to dispute the existence or amount of the underlying tax liability.^[7]

The petitioner does not deny that he received the lien notice. In any event, the IRS has provided a properly completed Form 3877 showing that this notice was sent to him via certified mail to the last known address.

Third, and Final, Discrete Reason the Petitioner was Shit out of Luck

Even if the petitioner were entitled to dispute his underlying liabilities at the CDP hearing, he failed to pursue that challenge or submit any evidence as to what his correct liabilities were. A taxpayer may dispute his underlying tax liability in a CDP case only if he properly raised that issue at the CDP hearing.^[8]

“An issue is not properly raised if the taxpayer fails … to present to Appeals any evidence with respect to that issue after being given a reasonable opportunity.”^[9] The petitioner did not submit any evidence about his tax liabilities; indeed, he did not attend the CDP hearing and did not communicate with the SO after submitting his hearing request.^[10]

Because the petitioner’s underlying liabilities were not properly at issue, the Tax Court reviewed the SO’s action for abuse of discretion only…and found none.

Abuse of Discretion

In deciding whether the SO abused her discretion in sustaining the collection action, the Tax Court considers whether she:

1. properly verified that the requirements of applicable law or administrative procedure have been met;
2. considered any relevant issues the petitioner raised; and
3. considered “whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of [the petitioner] that any collection action be no more intrusive than necessary.”^[11]

The Tax Court’s review of the record establishes that the SO properly discharged all of her responsibilities under IRC § 6330(c)(3).

The SO properly concluded that the petitioner did not qualify for a collection alternative. It helped that the petitioner proposed no such alternative, he declined to supply financial information, and he refused to come into compliance with his Federal tax obligations by submitting delinquent returns for 2013-2018. Each of these failings by itself was disqualifying.^[12]

The petitioner’s principal argument in the Tax Court was, in a word, frivolous.

He admits that he filed no returns for 2011 and 2012 and that the IRS prepared SFRs for him, as authorized by IRC § 6020(b). However, the petitioner asserted that his tax liabilities for those years were not properly assessed because an SFR is valid only if signed by the Secretary of the Treasury in person.

No Court has ever accepted that argument. IRC § 7701(a)(11)(B) explicitly defines the term “Secretary,” as used in the Internal Revenue Code, to mean “the Secretary of the Treasury or his delegate.”^[13] The petitioner’s argument is similar to those contained in The Truth About Frivolous Tax Arguments, a “compendium of frivolous positions” and the case law refuting them that the IRS publishes and occasionally updates.^[14]

In his petition, the petitioner also “request[ed] a Face to Face CDP hearing to raise the underlying tax liability.” To the extent he is arguing that the SO abused her discretion by not offering him a face-to-face hearing, we reject that argument as well.

A “CDP hearing may, but is not required to, consist of a face-to-face meeting.”^[15] The petitioner has supplied no evidence that he requested a face-to-face hearing. On the contrary: he failed to participate in his scheduled CDP hearing, ignored the SO’s letters, and refused to communicate with her at all.

Judge Lauber laying down the boom.

Frivolous Position Penalty

IRC § 6673(a)(1) authorizes the Tax Court to require a taxpayer to pay to the United States a penalty, not in excess of $25,000, “[w]henever it appears to the Tax Court that—(A) proceedings before it have been instituted or maintained…primarily for delay, [or] (B) the taxpayer’s position in such proceeding is frivolous or groundless.” The purpose of IRC § 6673 is to compel taxpayers to conform their conduct to settled tax principles and to deter the waste of judicial and IRS resources.^[16] “Frivolous and groundless claims divert the Court’s time, energy, and resources away from more serious claims and increase the needless cost imposed on other litigants.”^[17]

It was obvious to the Tax Court that the petitioner instituted and maintained this suit “primarily for delay” as part of a longstanding effort to avoid or defer indefinitely the collection of his Federal income tax liabilities. This is the third CDP case petitioner has prosecuted in Tax Court.^[18]

In these earlier cases, the Tax Court recounted the many “irrelevant or frivolous issues” that he raised with the IRS, including the assertion that he was not a “taxpayer” obligated to file income tax returns or pay taxes. The Tax Court concluded that he had used the CDP process “to delay the IRS’s collection efforts, not to raise legitimate issues.” According to Judge Lauber:

His actions in these proceedings display more of the same.

He initiated a CDP hearing and then ignored all communications from the SO.

He petitioned the Tax Court and then advanced only frivolous and wholly implausible arguments. His argument—that he did not receive notices of deficiency mailed to an address at which he has lived for 20 years—is a copy of an argument he made, and the Tax Court explicitly rejected, more than a decade ago.

At the end of the day, the Tax Court decided to impose “a modest penalty of $2,000 in this case.”^[19] However, the Tax Court rebuked and warned the petitioner that he may face a much larger penalty if he engages in similar conduct in a future appearance here.

Forshame, Jason. Forshame.

 

Golditch v. Commissioner

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Footnotes for Golditch v. Commissioner:

1. See Golditch v. Commissioner, T.C. Memo. 2010-260 (“Golditch failed to file federal income-tax returns for the years 2001, 2002, 2003, 2004, and 2005.”). More recently, the SO determined that petitioner had filed no returns for 2013-2018. So, you know, same rodeo, different horse. ↑
2. IRC § 6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000). ↑
3. IRC § 6212(b)(1); Hoyle v. Commissioner, 131 T.C. 197, 200, 203-04 (2008), supplemented by 136 T.C. 463 (2011). ↑
4. Treas. Reg. § 301.6212-2(a). ↑
5. IRC § 6212(b)(1). ↑
6. See Coleman v. Commissioner, 94 T.C. 82, 90-91 (1990); Ruddy v. Commissioner, T.C. Memo. 2017-39, aff’d per curiam, 727 F. App’x 777 (4th Cir. 2018). ↑
7. Treas. Reg. § 301.6330-1(e)(3), Q&A-E7; see Smith v. Commissioner, T.C. Memo. 2016-186; Mays v. Commissioner, T.C. Memo. 2006-197. ↑
8. Giamelli v. Commissioner, 129 T.C. 107, 113 (2007). ↑
9. Treas. Reg. § 301.6330-1(f)(2), Q&A-F3; see Giamelli, 129 T.C. at 112-16. ↑
10. See Sullivan v. Commissioner, T.C. Memo. 2019-153. ↑
11. IRC § 6330(c)(3). ↑
12. See Gentile v. Commissioner, T.C. Memo. 2013-175 (no alternative proposed), aff’d, 592 F. App’x 824 (11th Cir. 2014); Coleman v. Commissioner, T.C. Memo. 2010-51 (no financial information provided), aff’d, 420 F. App’x 663 (8th Cir. 2011); Boulware v. Commissioner, T.C. Memo. 2014-80 (not in compliance with Federal tax obligations), aff’d, 816 F.3d 133 (D.C. Cir. 2016). ↑
13. See, e.g., Winslow v. Commissioner, 139 T.C. 270, 273 (2012) (holding that Congress has permitted the Secretary to delegate his authority with respect to preparation of SFRs); Nicklaus v. Commissioner, T.C. Memo. 2005-156, aff’d, 202 F. App’x 171 (9th Cir. 2006). ↑
14. See The Truth About Frivolous Tax Arguments, Internal Revenue Service (Mar. 2018). ↑
15. Treas. Reg. § 301.6330-1(d)(2), Q&A-D6. ↑
16. Coleman v. Commissioner, 791 F.2d 68, 71-72 (7th Cir. 1986); Salzer v. Commissioner, T.C. Memo. 2014-188. ↑
17. Kernan v. Commissioner, T.C. Memo. 2014-228, aff’d, 670 F. App’x 944 (9th Cir. 2016). ↑
18. See Golditch v. Commissioner, T.C. Memo. 2010-260; Golditch v. Commissioner, T.C. Memo. 2006-237. ↑
19. See Gardner v. Commissioner, T.C. Memo. 2017-107 (imposing a $10,000 penalty where taxpayer “wasted the resources of [the Commissioner’s] counsel and the Tax Court”). ↑

 

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