Carlson -WA/OR TP Loses CDP Case in Tax Court

[jcolvin2]

http://www.ustaxcourt.gov/InOpTodays/Ca ... CM.WPD.pdf

T.C. Memo. 2012-76
UNITED STATES TAX COURT
KAREN LEE CARLSON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10633-10L. Filed March 20, 2012.
Karen Lee Carlson, pro se.
Amy B. Ulmer, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
THORNTON, Judge: Pursuant to sections 6320(c) and 6330(d), petitioner
seeks review of respondent’s determinations sustaining the filing of a Federal tax lien with respect to petitioner’s Federal income tax liabilities for 2001, 2002, 2003,
and 2004 and sustaining a proposed levy to collect these taxes.1
FINDINGS OF FACT
Petitioner resided in Oregon when she filed her petition. For the tax years
2001 through 2004 she received income, as reported by third-party payers to the
Internal Revenue Service (IRS), in these aggregate amounts:
Year Amount
2001 $148,639
2002 155,475
2003 155,064
2004 103,382

Petitioner failed to file Federal income tax returns for these years. After
preparing substitutes for returns on petitioner’s behalf, respondent mailed her
separate notices of deficiency for each of the years 2001 through 2004. These
notices were returned to respondent as “not deliverable as addressed, unable to
forward.”

On February 21, 2005, respondent assessed petitioner’s 2002 income
tax plus additions to tax and accrued interest. On April 23, 2007, he assessed petitioner’s income taxes for 2001, 2003, and 2004, plus additions to tax and
accrued interest.2 Petitioner failed to pay the assessed amounts.

On September 9, 2009, respondent mailed to petitioner a Letter 1058, Final
Notice of Intent to Levy and Notice of Your Right to a Hearing. On September
17, 2009, respondent filed a notice of Federal tax lien (NFTL) with respect to
petitioner’s liabilities for taxable years 2001 through 2004. On September 17,
2009, respondent mailed to petitioner a Letter 3172, Notice of Federal Tax Lien
Filing and Your Right to a Hearing Under IRC 6320.

On October 8, 2009, petitioner timely submitted two Forms 12153, Request
for a Collection Due Process or Equivalent Hearing, regarding the NFTL and the
notice of intent to levy. On these Forms 12153 the only stated reason for
disagreeing with the proposed collection actions was “income figures inaccurate”.
On these Forms 12153 petitioner did not indicate a desire to raise collection
alternatives or a spousal defense.

By letter to petitioner dated February 26, 2010, respondent’s settlement
officer scheduled a telephone hearing for March 31, 2010, and requested that
petitioner mail any documents that she wanted to have considered at least 14 days
before the conference. This letter also requested that petitioner provide income tax
returns for the tax years 2001 through 2004. The letter explained that for the
settlement officer to consider collection alternatives, petitioner had to provide tax
returns for 2005, 2007, and 2008; proof of estimated tax payments for tax year
2009; and a completed Form 433-A, Collection Information Statement for Wage
Earners and Self-Employed Individuals, with supporting documentation. Petitioner
provided no documents to the settlement officer in response to this letter.

During the telephone conference on March, 31, 2010, petitioner’s
representative (who is also petitioner’s husband), Charles Allen Harman, spoke on
behalf of petitioner, who did not participate in the call. According to the settlement
officer’s log, Mr. Harman initially asserted that the information returns submitted by
third-party payers with respect to petitioner were invalid. After the settlement
officer advised him that petitioner should provide corrected information statements,
Mr. Harman raised frivolous arguments that petitioner was not a “taxpayer” and that
her reported income was not, in fact, “income”. After advising Mr. Harman that she
was unable to help because petitioner had not provided the requested documents
and was not in compliance with filing requirements, the settlement officer
terminated the telephone call.

On April 5, 2010, the settlement officer issued a Notice of Determination
Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice)
sustaining the notice of Federal tax lien filing and proposed levy action. The
notice indicates that although petitioner had challenged her underlying liability,
she had failed to provide requested information to show the correct amount of her
income. The notice states that the settlement officer verified that: (1) all
applicable laws, regulations, and administrative procedures had been followed in
connection with the assessments and proposed collection of the taxes at issue; (2)
on balance, the proposed collection by NFTL and levy was no more intrusive than
necessary; (3) petitioner had not raised any valid challenge to the collection action
contemplated; (4) petitioner had not suggested any collection alternative; and (5) the
settlement officer had not had any prior involvement with respect to petitioner’s
income tax liabilities for the years at issue.

Petitioner timely petitioned this Court, seeking review of the determination to
proceed with the proposed collection actions. The petition disputes that Mr.
Harman raised frivolous arguments during the telephone conference and asserts that
the settlement officer failed to provide adequate information about what
documentation was needed to correct the third-party payer information reports and
prematurely terminated the telephone conference without giving Mr. Harman
adequate opportunity to respond to the settlement officer’s concerns. In particular,
according to the petition, the premature termination of the telephone conference
denied Mr. Harman the opportunity to reply that “the figures assessed as taxes owed
appeared to be the total of all monies or other compensation received by Ms.
Carlson as private sector receipts for the periods in question”. The petition also
asserts that the IRS followed improper procedures by making an actual levy eight
days after issuing the notice of intent to levy. The petition asserts no error with
respect to the additions to tax for failure to timely file, failure to timely pay, and failure to pay estimated tax under section 6651(a)(1) and (2) and section 6654 for
the years at issue.

OPINION

Respondent concedes that because petitioner had no prior opportunity to
dispute her underlying liabilities, she is entitled to do so in this proceeding. See
Callahan v. Commissioner, 130 T.C. 44, 50 (2008). We review petitioner’s
underlying liabilities de novo. See Sego v. Commissioner, 114 T.C. 604, 610
(2000). Other issues we review for abuse of discretion. See id. at 609-610. The
burden of proof is upon petitioner to show error in respondent’s determination as to
her underlying liabilities. See Rule 142(a).3

In challenging her underlying liabilities in this proceeding, as in the
administrative proceedings below, petitioner has raised only frivolous and
groundless arguments. Prominent among these frivolous arguments is that because
she resided in Washington or Oregon during the years at issue, she did not live in
the United States and so is not subject to U.S. taxation. See United States v.
Cooper, 170 F.3d 691 (7th Cir. 1999) (imposing a sanction for filing a frivolous
appeal that asserted that only residents of Washington, D.C., and other Federal enclaves are citizens of the United States subject to Federal tax laws). Similarly
lacking even colorable merit are petitioner’s remaining arguments, including her
argument that only gain from the sale of capital assets and property described under
section 1231(b) constitutes taxable income, that her income is not taxable because
she is not incorporated, and that her wages are not taxable because the third-party
information returns did not correctly apply the definition of wages and employment
as defined in section 3121(a) and (b). See Lindberg v. Commissioner, T.C. Memo.
2010-67 (sustaining section 6702 frivolous-return penalty for reporting zero wages
on basis that Form W-2, Wage and Tax Statement, did not correctly apply definition
of wages under sections 3401 and 3121).

Section 6201(d) provides that if, in any court proceeding, a taxpayer fully
cooperates with the Commissioner and raises a reasonable dispute with respect to
an information return, the Commissioner has the burden of producing reasonable
and probative evidence to verify the information return. Although some of
petitioner’s assertions might be construed as attacking the validity of the thirdparty
information returns on which respondent predicated his assessments, she has
not raised a reasonable dispute regarding the information returns. She has not
disputed any specific item of income determined by respondent, nor has she denied receiving compensation during the years at issue. To the contrary, her
petition acknowledges receiving “monies or other compensation * * * as private
sector receipts for the periods in question”. And in her pretrial memorandum she
states that she “worked for private company and received private sector receipts”.Petitioner has not asserted or shown that the correct amounts of her taxable income
differ from the amounts shown on the third-party information returns upon which
respondent’s determinations are predicated.

The petition contains no specific allegations or supporting facts regarding the
section 6651(a)(1) and (2) and 6654 additions to tax. Petitioner’s frivolous and
groundless arguments at trial and on brief similarly do not raise any legitimate issue
or defense regarding these additions to tax. We deem petitioner to have conceded
the section 6651(a)(1) and (2) and 6654 additions to tax and hold that respondent
has no burden of production under section 7491(c) with respect to them. See Funk
v. Commissioner, 123 T.C. 213, 217-218 (2004); Swain v. Commissioner, 118 T.C.
358, 363-365 (2002).

Petitioner suggests that the settlement officer abused her discretion by
terminating the telephone conference prematurely. The administrative record
reflects that the settlement officer terminated the telephone conference after Mr.
Harman persisted in making only frivolous arguments. We are not persuaded that the settlement officer abused her discretion in this regard. In any event, because
petitioner has raised no colorable claim in this proceeding, we do not believe it is
necessary, productive, or appropriate to remand this case to respondent’s Appeals
Office for any additional hearing. See Lunsford v. Commissioner, 117 T.C. 183,
189 (2001).

Petitioner has asserted that respondent prematurely levied upon her property
eight or nine days after issuing the notice of intent to levy. But respondent’s
records show that respondent has not yet made any levy upon petitioner’s
property.4

Petitioner has offered no collection alternatives and asserted no spousal
defenses. From our review of the record we are satisfied that respondent has
satisfied the requirements of sections 6320 and 6330. Consequently, we shall
sustain respondent’s determinations.

Section 6673(a)(1) authorizes the Tax Court to require a taxpayer to pay to
the United States a penalty of up to $25,000 whenever it appears that proceedings
have been instituted or maintained by the taxpayer primarily for delay or that the
taxpayer’s position in the proceedings is frivolous or groundless. Respondent has not asked that we impose a section 6673 penalty. We strongly warn petitioner that
she may be subject to a section 6673 penalty, even upon the Court’s own motion,
if she persists in maintaining proceedings in this Court primarily for delay or
continues to press frivolous arguments.

To reflect the foregoing,
Decision will be entered
for respondent.

1Unless otherwise indicated, all section references are to the Internal Revenue
Code, and all Rule references are to the Tax Court Rules of Practice and Procedure.
All monetary amounts are rounded to the nearest dollar.

2Petitioner’s underlying tax liabilities, exclusive of additions to tax and
accrued interest, for tax years 2001 through 2004 are as follows:
Year Deficiency
2001 $40,582
2002 41,668
2003 38,742
2004 23,663
The additions to tax assessed against petitioner were as follows:
Sec. Sec. Sec.
Year 6651(a)(1) 6651(a)(2) 6654
2001 $9,131 $10,146 $1,622
2002 9,375 4,792 1,392
2003 8,717 6,005 1,014
2004 5,324 2,248 687

3Petitioner does not contend and the record does not suggest that the burden
of proof as to any factual issue should shift to respondent pursuant to sec. 7491(a).

4It appears that petitioner has confused the Letter 3172, issued eight days
after the notice of intent to levy, with notice of an actual levy.

[LPC]

Affirmed on appeal, with $8,000 in sanctions for a frivolous appeal.

Karen Lee Carlson v. Commissioner, No. 12-72030 (9th Cir. 5/29/2015), aff'g T.C. Memo. 2012-76.

KAREN LEE CARLSON, PRO SE,
Petitioner-Appellant,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellee.

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

MEMORANDUM[1]

APPEAL FROM A DECISION OF THE
UNITED STATES TAX COURT

Submitted May 13, 2015[2]

Before: LEAVY, CALLAHAN, and M. SMITH, Circuit Judges.

Karen Lee Carlson, appeals pro se from the Tax Court's decision, following a bench trial, concerning her income tax liability for tax years 2001 through 2004. We have jurisdiction under 26 U.S.C. § 7482(a)(1). We review de novo the Tax Court's legal conclusions, and review for clear error its factual findings. Johanson v. Comm'r, 541 F.3d 973, 976 (9th Cir. 2008). We affirm.

Contrary to Carlson's contention, the Tax Court correctly concluded that Carlson had received taxable income, such as compensation for work performed for private companies, while she resided in Oregon and Washington. See 26 U.S.C. § 61(a) (broadly defining "gross income" as "all income from whatever source derived, including (but not limited to) . . . compensation for services"); id. § 62 (defining "adjusted gross income" as gross income less deductions and excluding "the performance of services by the taxpayer as an employee" as a deduction); id. § 63 (defining "taxable income" as gross income less allowable deductions); United States v. Hanson, 2 F.3d 942, 945 (9th Cir. 1993) (rejecting the argument that a natural born citizen of a state is not subject to the tax code), superseded on other grounds by statute; Grimes v. Comm'r, 806 F.2d 1451, 1453 (9th Cir. 1986) (holding that tax on income is constitutional and defining taxable income).

Moreover, the district court did not abuse its discretion by excluding Charles Allen Harman's proposed testimony regarding statutes and case law. See Keller v. Comm'r, 568 F.3d 710, 725 (9th Cir. 2009) (applying abuse of discretion standard to Tax Court's evidentiary decision to restrict testimony).

We do not consider matters not specifically and distinctly raised and argued in the opening brief. See Padgett v. Wright, 587 F.3d 983, 985 n.2 (9th Cir. 2009) (per curiam).

Respondent's motion for sanctions in the amount of $8,000, filed on March 15, 2013, is granted. See Fed. R. App. P. 38; Adriana Int'l Corp. v. Thoeren. 913 F.2d 1406, 1417 (9th Cir. 1990) (noting this court's discretion to award sanctions for bringing a frivolous appeal, defined as "if the result is obvious or the appellant's arguments are wholly without merit").

Carlson's requests for relief, set forth in her opening and reply briefs, are denied.

AFFIRMED.

FOOTNOTES

1 This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3.

2 The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2).

END OF FOOTNOTES

[Famspear]

....Moreover, the district court did not abuse its discretion.....

As at least one other commentator has pointed out, the Court of Appeals probably mean to say "the Tax Court did not abuse its discretion....."

[jcolvin2]

The person who made the frivolous arguments at the administrative level (and who the taxpayer apparently wanted to call at trial) was Charles Allen Harman. There does not seem to be much about him online. The taxpayer was located in Washington and Oregon. There was a Charles Allen Harman who formerly worked for Shearson Lehman in Everett, Washington. It is possible that they are one in the same person. The Charles Allen Harman broker was fined and barred from the securities industry for writing an NSF check for an option position:

http://brokercheck.finra.org/Individual/1162428
http://brokercheck.finra.org/Report/View/1162428/1

Reporting Source: Regulator
Details:
COMPLAINT NO. SEA-415 FILED JULY 30, 1987 BY NASD DISTRICT NO. 1 AGAINST RESPONDENT CHARLES ALLEN HARMAN ALLEGING VIOLATIONS OF ARTICLE III, SECTION 1 OF THE RULES OF FAIR PRACTICE IN THAT RESPONDENT HARMAN TENDERED CHECKS TO HIS EMPLOYER-MEMBER IN PAYMENT FOR HIS OPTIONS POSITION WITH THE FIRM KNOWING THERE WERE INSUFFICIENT FUNDS IN HIS ACCOUNT TO COVER THESE CHECKS.

DECISION RENDERED NOVEMBER 27, 1987, WHEREIN RESPONDENT IS CENSURED, FINED $45,000.00, BARRED FROM ASSOCIATION WITH ANY MEMBER OF THE ASSOCIATION IN ANY CAPACITY AND, SHOULD HE SEEK REINSTATEMENT, HE MUST PROVIDE THE BOARD OF GOVERNORS WITH PROOF THAT RESTITUTION HAS BEEN MADE. IF NO FURTHER ACTION, DECISION IS FINAL JANUARY 10, 1988.
DECISION IS FINAL JANUARY 10, 1988.

[Hyrion]

The person who made the frivolous arguments at the administrative level (and who the taxpayer apparently wanted to call at trial) was Charles Allen Harman.

That's also, apparently, her husband:

petitioner’s representative (who is also petitioner’s husband), Charles Allen Harman