146 T.C. No. 2
Tax Ct.2016Background
- LG Kendrick, LLC (single-member LLC operated by Michael Lunnon) failed to file Forms 941/940 and pay employment taxes for specified quarters in 2009–2010; IRS prepared substitutes for returns and assessed employment taxes.
- IRS mailed levy (Letter 1058) and NFTL (Letter 3172) notices; petitioner timely requested a section 6320/6330 hearing.
- Appeals issued two original notices of determination: they sustained most liens/levies but did not address the NFTL for the Dec. 31, 2010 Form 941 liability; a second original notice addressed only the proposed levy for that period.
- Tax Court granted respondent’s motion to remand; Appeals provided additional records and issued a supplemental notice of determination that added the Dec. 31, 2010 lien and again sustained the collection actions.
- Court considers (1) whether it has jurisdiction to review the NFTL for Dec. 31, 2010; (2) whether petitioner may challenge underlying liabilities; and (3) whether Appeals abused its discretion.
Issues
| Issue | Lunnon’s Argument | Commissioner’s Argument | Held |
|---|---|---|---|
| Jurisdiction to review NFTL for 12/31/2010 Form 941 | Omission was clerical; petitioner substantively received hearing; supplemental notice cures omission | Omission was inadvertent; supplemental notice clarifies original determination | Original notices did not embody a determination for the lien; supplemental notice cannot create jurisdiction where original was invalid; Court lacks jurisdiction for this NFTL |
| Ability to contest underlying liabilities in Appeals/Court | IRS bears burden to prove employees; evidence obtained after original hearing is untimely and cannot be relied on | Petitioner had a reasonable opportunity on remand to present evidence; Appeals may rely on documents gathered after original hearing | Petitioner failed to properly raise or present evidence after reasonable opportunity on remand; may not challenge underlying liabilities in this review |
| Reliance on evidence developed after original hearing (remand/Chenery issue) | Remand evidence cannot be used to uphold determinations if Appeals did not rely on it originally (invokes Chenery) | Remand may augment administrative record; Appeals may rely on additional evidence to comply with remand | Appeals properly relied on supplemental documentary evidence obtained for remand; no Chenery violation |
| Abuse of discretion in sustaining lien/levy (for periods where Court has jurisdiction) | Petitioner argued determinations were improper because underlying liabilities unproven | Commissioner verified legal requirements and petitioner failed to provide financials or request alternatives | No abuse of discretion; Appeals appropriately verified procedures and balanced collection needs over intrusiveness; determinations sustained for periods within Court’s jurisdiction |
Key Cases Cited
- Lunsford v. Commissioner, 117 T.C. 159 (Tax Ct. 2001) (written notice embodying a determination and a timely petition are jurisdictional prerequisites)
- Ginsberg v. Commissioner, 130 T.C. 88 (Tax Ct. 2008) (supplemental notice supplements but does not create new jurisdiction if original notice was invalid)
- Sego v. Commissioner, 114 T.C. 604 (Tax Ct. 2000) (standard of review: de novo for underlying liabilities when properly raised; otherwise abuse-of-discretion)
- Goza v. Commissioner, 114 T.C. 176 (Tax Ct. 2000) (scope of review and abuse-of-discretion standard for collection determinations)
- Wadleigh v. Commissioner, 134 T.C. 280 (Tax Ct. 2010) (Appeals must verify legal and procedural requirements and consider taxpayer’s concerns)
- Hoyle v. Commissioner, 136 T.C. 463 (Tax Ct. 2011) (on remand Appeals may augment the administrative record to cure deficiencies)