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Lambert v. Commissioner (T.C. Memo. 2020-53)

On May 6, 2020, the Tax Court issued a Memorandum Opinion in the case of Lambert v. Commissioner (T.C. Memo. 2020-53). The basic issue before the court in Lambert was whether the Tax Court had jurisdiction to hear the petitioner’s arguments regarding his underlying liability for tax and the trust fund recovery penalty (TFRP).

Factual Background

Petitioner was the vice president of a concrete business (CJB) that was incorporated in Massachusetts. CBJ had the obligation to pay Federal employment taxes and excise (“trust fund”) taxes. Petitioner was a “responsible person” for CBJ, meaning that he had the authority (and duty) to direct the act of collection, accounting for, and paying over trust fund monies (employment taxes) to the IRS. The requisite funds, however, were not withheld or paid over to the IRS from September 2004 through December 2006.

Procedural Background

In December 2010, the IRS issued a Letter 1153 (TFRP letter) to the petitioner. The petitioner timely protested his liability for the TFRPs, a CDP hearing was held, but no settlement was reached. The IRS assessed the TFRPs on July 4, 2011. Happy Independence Day to you too, IRS. Clearly someone in Appeals does not partake in the pomp and revelry of our Nation’s declaration of its independence from its oppressors by lighting off incendiary devices? Get it together, Jacques.

In November 2017, the IRS issued notice of a federal tax lien (NFTL) filing for each TFRP. The petitioner requested to be considered for an offer in compromise (OIC) but failed to submit any required documentation. Petitioner did not attend the CDP conference (insofar as he didn’t answer his phone), the IRS followed up but heard nothing, and in May 2018, the IRS issued a notice of determination finding the NFTL was appropriate and sustaining the lien.

The petitioner timely filed a tax court petition, in which he argued that he was not provided a hearing to discuss his proposed collection alternatives; payment of the tax would be a financial hardship on his family; his former partner is responsible for the tax and settled with the IRS; and he provided the requested information timely. The IRS filed a motion for summary judgment, in which it argued that (1) the petitioner is precluded from challenging the TFRP assessment, and (2) the determination sustaining the NFTL should be upheld. Twice the petitioner was ordered to respond, and twice he failed to do so. At calendar call, the petitioner stated, on the record, in front of the judge, that “I have no defenses to the motion.”

It appears he’s forfeiting.

Interesting strategy, Cotton. Let’s see how it plays out.

Petitioner’s Claim of “No Hearing Provided” Debunked

The petitioner’s argument that he was not provided a hearing, falls flat. The Tax Court looked at the record and saw that the petitioner requested and attended a CDP hearing in 2010 and requested but failed to attend a CDP hearing in 2017. Thus, the court wastes little time with this argument. See Treas. Reg. § 301.6320-1(d)(2), Q&A-D6. The Tax Court does cite two Tax Court cases that demonstrate that the petitioner is not the first, and will not be the last, to raise the argument in similar circumstances.

In Leibold v. Commissioner, T.C. Memo. 2012-210, *14, the Tax Court held that IRS acted within its discretion to proceed with NFTL without face-to-face pre-collection hearing where all applicable law and administrative procedure was followed and taxpayer failed to offer any collection alternatives, raise permitted nonliability issue, or provide financial information requested by IRS. Similarly, in Peter D. Dahlin Attorney at Law, P.S. v. Commissioner, T.C. Memo. 2007-310, *9, the Tax Court noted that once a taxpayer has been given a reasonable opportunity for a hearing but has failed to avail himself of that opportunity, then the IRS may make a determination to proceed with collection based upon a review of the case file.

Petitioner’s Claim of “But Think of My Family!” Debunked

Petitioner also raised the issue that payment of the tax would work a financial hardship on his family. Perhaps, the Tax Court notes, the petitioner should have thought of his family when he refused to submit any of the information requested by the IRS to substantiate his request for collection alternatives.

What did your children mean to you then, Christopher?

Neither is the Tax Court persuaded by the petitioner’s assertion that he provided the information that the IRS requested in a timely manner. This outright falsehood, the Tax Court observes, “is simply not supported by the record.” After the petitioner’s request for an OIC, he apparently went radio silent.

The IRS gave him no less than four opportunities to provide the documentation, but the petitioner did not take advantage of any of the opportunities. The Tax Court held, therefore, that the IRS did not abuse its discretion when it rejected the petitioner’s collection alternative. Olsen v. United States, 414 F.3d 144, 154 (1st Cir. 2005); Pough v. Commissioner, 135 T.C. at 351.

Petitioner’s Claim of “I’m Paul, Rob Peter” Debunked

Petitioner pointed the finger of liability at his former partner at CBJ was responsible for the taxes, and that ne’er-do-well partner settled with the IRS. Unfortunately for the petitioner, the judge interpreted the petitioner’s argument as a round-about way of arguing that he was not liable for the taxes, and because the petitioner had a “prior opportunity” to dispute his underlying liability for the TFRP in a CDP hearing, no matter how much he waggled his finger at someone else. See Pough v. Commissioner, 135 T.C. 344, 349 (2010); Bletsas v. Commissioner, T.C. Memo. 2018-128, *11-*12, aff’d, 784 F. App’x 835 (2d Cir. 2019).

Original opinion: (T.C. Memo. 2020-53) Lambert v. Commissioner

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