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Lufkin v. Commissioner (T.C. Memo. 2021-71)

On June 8, 2021, the Tax Court issued a Memorandum Opinion in the case of Lufkin v. Commissioner (T.C. Memo. 2021-71). The primary issue presented in Lufkin was whether the pro se petitioner was liable for certain Form 941 liabilities.

Background

The IRS assessed the Form 941 liabilities, which arose in connection with the petitioner’s law practice, for the periods at issue in December 1998 and June 1999, respectively. After the petitioner underwent multiple chapter 7 bankruptcy proceedings between 2000 and 2011, the IRS issued petitioner a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (CDP notice) in October 2014, in an effort to collect the Form 941 liabilities.

In response to the CDP notice the petitioner timely submitted Form 12153 (Request for a Collection Due Process or Equivalent Hearing). The petitioner asserted that he was not liable for the Form 941 liabilities because another entity had assumed them. The petitioner argued in the alternative that the periods of limitations for collection of the Form 941 liabilities had expired and that they had been discharged in one of his prior bankruptcy proceedings. The petitioner did not propose any collection alternative during the CDP hearing.

Challenging Underlying Liability at a CDP Hearing

IRC § 6330(b) allows a taxpayer to challenge a proposed levy before the IRS Office of Appeals (Appeals) in a CDP hearing. Treas. Reg. § 301.6330-1(b)(1). Further, IRC § 6330(d) provides for Tax Court review of an Appeals determination to sustain the levy. A taxpayer may challenge in a CDP hearing the existence or amount of the underlying tax liability that the IRS is seeking to collect, provided that the taxpayer did not already have a chance to challenge it. IRC § 6330(c)(2)(B); Katz v. Commissioner, 115 T.C. 329, 339 (2000).

If a taxpayer fails to properly raise the underlying liability at the CDP hearing, he is precluded from challenging it. Thompson v. Commissioner, 140 T.C. 173, 178 (2013) (citing Giamelli v. Commissioner, 129 T.C. 107, 114 (2007)). 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 to do so. Moriarty v. Commissioner, T.C. Memo. 2017-204, *9; Treas. Reg. § 301.6330-1(f)(2), Q&A-F3.

Where a taxpayer properly challenges the validity of his underlying liability for the period in question, the Tax Court reviews the matter on a de novo basis. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). The petitioner has the burden of proof regarding his underlying liabilities. See Rule 142(a); Thompson, 140 T.C. at 178. Other than the merits of the underlying liabilities, the Tax Court reviews an Appeals determination for abuse of discretion. Goza, 114 T.C. at 182. The petitioner asserts that he is not the taxpayer liable for the Form 941 liabilities for the periods at issue, and because he raised this underlying liability argument in the CDP hearing, the Tax Court reviewed it de novo.

Make Copies. For Pete’s Sake, Make Freaking Copies.

The petitioner failed to produce any “substantive evidence” establishing how another entity or person was either liable for the Form 941 liabilities or submitted payments to the IRS for the liabilities. He alleged that in 2000 respondent seized the documentation necessary to prove his claim, but that respondent either lost or destroyed this documentation following the purported seizure. In effect, the petitioner asked the Tax Court to relieve him of his burden of proof and overlook his failure to offer any evidence as to this issue. The Tax Court declined to do so. See Am. Police & Fire Found., Inc. v. Commissioner, 81 T.C. 699, 706-707 (1983) (finding that the taxpayer’s burden of going forward with the evidence did not shift merely because the Commissioner unintentionally lost the taxpayer’s records); Malinowski v. Commissioner, 71 T.C. 1120, 1125 (1979) (same).

Limitations Period—Swing and a Miss

The petitioner also argued that the periods of limitations on collection expired, which is an affirmative defense that places the burden of proof on the petitioner. See Tax Court Rule 39; Tax Court Rule 142(a); Jordan v. Commissioner, 134 T.C. 1, 5-6 (2010), supplemented by T.C. Memo. 2011-243. Although the Tax Court’s precedent is somewhat ambiguous as to whether the expiration of the period of limitations on collection is properly considered a challenge to the underlying tax liability (and therefore subject to de novo review) or subject to an abuse of discretion standard of review, see Weiss v. Commissioner, 147 T.C. 179, 187 (2016), it did not, ultimately, matter, because the Tax Court concluded that the result would be the same under either standard, as the petitioner produced no “evidence” to establish when the periods of limitations expired.

Laches?  Not so Much.

Finally, the petitioner alleged in his petition without any evidentiary or legal support that even if the periods of limitations had not expired, the equitable doctrine of laches (prejudicial delay) operates to preclude respondent’s collection of the Form 941 liabilities. It is well settled that the United States is not generally subject to the doctrine of laches in enforcing its rights. See Guar. Trust Co. v. United States, 304 U.S. 126, 132-133 (1938) (citing United States v. Thompson, 98 U.S. 486, 489 (1878)). Even if this doctrine applied, the Tax Court deemed the petitioner to have abandoned this alternative argument as he did not raise it either at trial or in his posttrial brief. See Mendes v. Commissioner, 121 T.C. 308, 312-313 (2003).

Constitutional Argument? Why not…

The petitioner repeatedly alleged that respondent’s supposed destruction of all records pertinent to the Form 941 liabilities amounted to a violation of procedural due process under the Thirteenth Amendment to the Constitution. The petitioner, however, “failed to establish any nexus between his CDP case and the Thirteenth Amendment, which deals exclusively with the abolishment of slavery and involuntary servitude.” The Tax Court had to dig pretty far back to find a petitioner that had argued the Thirteenth Amendment’s effect on tax collection, but it found a couple other whack-a-doodles in the 50s and 60s. See Faraco v. Commissioner, 29 T.C. 674, 677 (1958), aff’d, 261 F.2d 387 (4th Cir. 1958); Rau v. Commissioner, T.C. Memo. 1966-254.

(T.C. Memo. 2021-71) Lufkin v. Commissioner

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