McLaine v. Commissioner
138 T.C. 228
| Tax Ct. | 2012Background
- Petitioner Colvin exercised nonqualified stock options in 1999, creating substantial reported income.
- Petitioner and former spouse filed a 1999 joint return with no withholding and substantial tax due.
- Respondent assessed the 1999 tax, two failure-to-pay additions, and later an additional failure-to-pay addition.
- A CDP hearing occurred; petitioner sought collection alternatives and argued a third-party payment credit.
- Excel and Teleglobe/VarTec bankruptcies and related claims raised questions about whether third-party payments offset Colvin's liability.
- The court ultimately sustained collection actions and rejected claimed credits and collection alternatives.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Credit for third-party payment | Colvin contends VarTec paid the taxes, warranting a 31 credit. | Respondent argues no third-party payment occurred and thus no credit applies. | No third-party payment; no 31 credit. |
| Abuse of discretion re collection alternatives | Colvin asserts Appeals Office failed to consider offers or installment options. | Respondent contends petitioner did not provide required financial information or an offer-in-compromise. | No abuse of discretion; no collection alternatives offered. |
| Abatement of assessed interest | Colvin seeks interest abatement due to handling or timing of credits/payments. | Respondent opposes abatement; no timely or erroneous handling shown. | No abatement of interest. |
| Additions to tax for timely payment and estimated tax | Colvin claims reasonable cause or other relief removes violations under 6651(a)(2) and 6654. | Respondent maintains no reasonable cause; late payments and underpayments are improper. | Additions sustained; no relief. |
| Sustaining Appeals’ collection determination | Colvin challenges the validity of sustaining collection actions. | Respondent supports continuation of collection action. | Appeals’ collection determination sustained. |
Key Cases Cited
- Davis v. Commissioner, 115 T.C. 35 (2000) (Form 4340 suffices to verify liability where no irregularity shown)
- Otte v. United States, 419 U.S. 43 (1974) (continuous employment not required for wages to be wages)
- Begier v. IRS, 496 U.S. 53 (1990) (withholding defined; withholding at source concept)
- Union Pac. R.R. v. Mason City & Fort Dodge R.R., 199 U.S. 160 (1905) (distinct questions properly decided are not mere dicta)
- Whalen v. Commissioner, T.C. Memo. 2009-37 (2009) (constructive withholding discussion limited; deficiency context)