Tax Court in Brief | Kotrides v. Commissioner | Collection Due Process, Abuse of Discretion, and Summary Judgment

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Tax Litigation:  The Week of June 27th, 2022, through July 1st, 2022

Kotrides v. Commissioner, T.C. Memo. 2022-67 | June 28, 2022 | Urda, J.| Dkt. No. 17918-19L


Short Summary: Dino Kotrides did not file his 2014 federal income tax return. So, the IRS prepared a substitute for return for him. The IRS sent Kotrides a notice of deficiency. He did not file a petition to challenge the notice. The IRS assessed federal income tax, additions to tax, and statutory interest. Years later, and to collect, the IRS filed and sent to Kotrides, a notice of federal tax lien (NFTL). Kotrides timely requested a collection due process (CDP) hearing, expressing his interest in a lien discharge. The case was assigned to a settlement officer (SO) in the Independent Office of Appeals, who scheduled a telephone CDP hearing. The SO requested that Kotrides provide his 2015–18 federal income tax returns (which he had not filed), proof of any estimated tax payments, and a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals. Kotrides provided no information in response. The SO gave additional time to produce. But, Kotrides produced nothing. The Office of Appeals sustained the NFTL filing and confirmed compliance with the requirements of applicable law and administrative procedure and that Kotrides proposed no collection alternatives. In the Tax Court, Kotrides claimed that his tax liability stemmed from his misapprehension that he was not required to file a return. The IRS filed a motion for summary judgment. Kotrides did not respond, despite being given additional time and a chance to obtain pro bono counsel.

Key Issues:

  • Whether the IRS was entitled to judgment, as a matter of law, with regard to its request that the Tax Court sustain the NFTL?

Primary Holdings:

  • Kotrides failed to respond to the motion for summary judgment, and on that basis alone, the Tax Court may enter decision against him. Also, the undisputed facts established all lawful requirements and administrative processes for the NFTL.

Key Points of Law:

  • Summary Judgment. The purpose of summary judgment is to expedite litigation and avoid costly, time-consuming, and unnecessary trials. Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Under Rule 121(b) the Tax Court may grant summary judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965 (7th Cir. 1994). The Tax Court reviews factual materials and inferences drawn from them in the light most favorable to the nonmoving party. Id. The nonmoving party may not rest upon the mere allegations or denials of the pleadings but instead must set forth specific facts showing that there is a genuine dispute for trial. Rule 121(d); see Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).
  • Failure to Respond to Motion for Summary Judgment. If a taxpayer fails to respond to a motion for summary judgment, the Tax Court may enter decision against the taxpayer for that reason alone. See Rule 121(d).
  • Standard of Review of Determination by Appeals. The Tax Court has jurisdiction to review an Independent Office of Appeals determination pursuant to sections 6320(c) and 6330(d)(1). See Murphy v. Commissioner, 125 T.C. 301, 308 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006). Where the validity of the underlying tax liability is properly at issue, the Court reviews the determination regarding the underlying tax liability de novo. Sego v. Commissioner, 114 T.C. 604, 610 (2000). The Court reviews all other determinations for abuse of discretion, and under that standard, the Court must uphold the Office of Appeals determination unless it is arbitrary, capricious, or without sound basis in fact or law. See Sego, 114 T.C. at 610.
  • Underlying Liability. A taxpayer may raise a challenge to the existence or amount of his or her underlying tax liability during a CDP proceeding only if the taxpayer did not receive a statutory notice of deficiency for the tax year at issue or otherwise have an opportunity to dispute it. See 26 U.S.C. §§ 6320(c), 6330(c)(2)(B). If a taxpayer received notice of deficiency but does not timely petition, the taxpayer will likely be barred from later challenging the deficiency in a CDP proceeding. “The mailing of a properly addressed letter creates a ‘presumption that it reached its destination and was actually received by the person to whom it was addressed.’” BM Constr. v. Commissioner, T.C. Memo. 2021-13, at *12.
  • Abuse of Discretion. In determining whether the Office of Appeals abused its discretion, the Court considers whether the SO (1) properly verified that the requirements of applicable law or administrative procedure have been met, (2) considered any relevant issues the taxpayer may raise, and (3) weighed “whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern” of the applicable taxpayer that any collection action be no more intrusive than necessary. 26 U.S.C. § 6330(c)(3); see also at § 6320(c). The Tax Court has authority to review satisfaction of the verification requirement regardless of whether the taxpayer raised that issue at the CDP hearing. See Hoyle v. Commissioner, 131 T.C. 197, 200–03 (2008), supplemented by 136 T.C. 463 (2011).
  • Extension Requests. The reasonableness of an extension request, and the reasonableness of a denial of such a request, depend on the particular facts of the case. See Dinino v. Commissioner, T.C. Memo. 2009-284, 2009 WL 4723652, at *9. If the SO acts consistently with IRS guidelines as to the submission of information, there is likely no abuse of discretion. See Dinino, 2009 WL 4723652, at *9. “There is no requirement that the Commissioner wait a certain amount of time before making a determination as to a proposed [collection procedure].” Gazi v. Commissioner, T.C. Memo. 2007-342, 2007 WL 4119009, at *9; see Reg. § 301.6330-1(e)(3), Q&A-E9; Treas. Reg. § 301.6320- 1(e)(3), Q&A-E9.
  • Balancing Analysis. A taxpayer may assert that the SO failed to consider “whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person that any collection action be no more intrusive than necessary.” See 26 U.S.C. § 6330(c)(3)(C); see also id. at § 6320(c). But, failing to so assert results in a concession of the issue. See Rules 121(d), 331(b)(4).

Insights:  Dino Kotrides did not respond to the IRS’s motion for summary judgment. If a taxpayer fails to respond to a motion for summary judgment, the Tax Court may enter decision against the taxpayer for that reason alone. See Rule 121(d). Kotrides did not provide information requested by the SO. Kotrides did not file subsequent federal income tax returns. Kotrides did not request extensions of time to respond to information requests. Kotrides did not take the opportunity to receive pro bono counsel. In summary: The law helps those who help themselves—the vigilant, rarely the sleeping, and never the acquiescent.

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