Jimmy Asiegbu Prince v. Commissioner

133 T.C. No. 12

• Court: United States Tax Court
• Decided: November 2, 2009
• Docket: 13858-08L
• Status: Unknown

Opinion

133 T.C. No. 12

UNITED STATES TAX COURT

JIMMY ASIEGBU PRINCE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 13858-08L. Filed November 2, 2009.

To collect P’s 1997, 1998, 1999, and 2002 unpaid income tax liabilities and additions to tax discharged in P’s 2005 bankruptcy filing, R served a notice of jeopardy levy on the Los Angeles County District Attorney’s Office with respect to funds that the Los Angeles Police Department had seized from P before the bankruptcy on suspicion of fraudulent credit card transactions.

Held: P cannot raise third-party claims in a lien or levy case.

Held, further, jeopardy levy is proper here where funds belong to P’s prebankruptcy estate and are subject to a prebankruptcy lien filed by R.

Jimmy Asiegbu Prince, pro se.

Vivian Bodey and Debra Bowe, for respondent. - 2 -

OPINION

WHERRY, Judge: This matter is before the Court on

respondent’s motion for summary judgment. In a May 7, 2008,

Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330, respondent determined that it was

appropriate to collect petitioner’s unpaid income tax liabilities

and additions to tax (unpaid tax liabilities) for 1997, 1998,

1999, and 2002 by serving a notice of jeopardy levy. Petitioner

on June 6, 2008, timely petitioned the Court to review that

determination. On April 17, 2009, respondent filed a motion for

summary judgment. Petitioner filed a response to that motion,

and respondent filed a reply to petitioner’s response. A hearing

was held on the matter on June 25, 2009, in Los Angeles,

California. Following the hearing, petitioner filed a brief

responding to the arguments respondent made in his reply and at

the hearing. As explained below, the Court will grant

respondent’s motion for summary judgment.

Background

Respondent initially determined in a February 2002 notice of

deficiency that petitioner had Federal income tax deficiencies

for 1997, 1998, and 1999. Petitioner timely petitioned the Court

to redetermine respondent’s determinations. On March 6, 2003,

while petitioner’s deficiency case at docket No. 9120-02 was

pending, the Los Angeles Police Department (LAPD) seized - 3 -

$263,899.93 from petitioner on suspicion that he had engaged in

fraudulent credit card transactions. Thereafter, the Court

issued an opinion in favor of respondent and a September 30,

2003, order and decision in which we decided that petitioner was

liable for Federal income tax deficiencies and additions to tax

for 1997, 1998, and 1999. Prince v. Commissioner, T.C. Memo.

2003-247. Petitioner filed a notice of appeal, but the appeal

was dismissed. On January 28, 2004, respondent assessed the

deficiencies and additions to tax as stated in the Court’s

September 30, 2003, order and decision.

On April 7, 2005, respondent filed a notice of Federal tax

lien with the Los Angeles County Recorder for 1997, 1998, 1999,

and 2002. Subsequently, on June 2, 2005, petitioner filed a

petition under chapter 7 of the Bankruptcy Code with the U.S.

Bankruptcy Court for the Central District of California.

Petitioner did not include the funds that had been seized by the

LAPD in the schedules of debtor’s assets filed with his

bankruptcy petition although at least $212,237.89 of such funds

apparently remained in the possession of the LAPD at that time.1

1 Petitioner listed a total of $15,106 in assets, including $405 of cash on hand and $176 in a checking account. The remaining assets consisted of noncash personal property. Petitioner’s schedules of creditors’ claims listed a total of $587,557.74 in liabilities, all of which were classified as unsecured. Included among them were petitioner’s unpaid Federal tax liabilities for the tax years 1997, 1998, 1999, and 2002 in an aggregate amount of $304,200, the amount of the unpaid balance (continued...) - 4 -

Petitioner claimed all of the assets that he did include in the

schedules of debtor’s assets as exempt from his bankruptcy

estate, and the bankruptcy trustee did not object to the

exemptions claimed. The bankruptcy court treated petitioner’s

bankruptcy petition as a no-asset case and discharged

petitioner’s dischargeable debts on January 27, 2006.

In early December 2007 the Los Angeles Inter-Agency

Metropolitan Crime Task Force informed respondent that the money

seized from petitioner would soon be returned to him. On

December 7, 2007, respondent served a notice of jeopardy levy on

the Los Angeles County District Attorney’s Office. Also on

December 7, 2007, respondent sent petitioner a Notice of Jeopardy

Levy and Right of Appeal. Respondent’s revenue officer, Farrell

Stevens, spoke with petitioner about the jeopardy levy on

December 14, 2007, and on December 20, 2007, respondent received

from petitioner a Form 12153, Request for a Collection Due

Process or Equivalent Hearing.

On the Form 12153 petitioner stated that he did not owe

respondent the money that had been collected because (1) the

1 (...continued) due shown on the Apr. 7, 2005, notice of Federal tax lien. This amount was categorized under unsecured priority claims--an apparent error since respondent’s Federal tax lien should have accorded it secured party status. The Court requested the parties to notify the bankruptcy court about this case and of the omission from the debtor’s schedules of assets of the $212,237.89 in funds seized by the Los Angeles Police Department. - 5 -

underlying liability was incorrect,2 (2) his liabilities were

discharged in bankruptcy, and (3) some of the levied funds did

not belong to him. After a face-to-face meeting and a telephone

conference, respondent’s Appeals settlement officer, Adlai

Climan, issued the aforementioned notice of determination

sustaining the jeopardy levy action. An Appeals case memorandum

attached to the notice of determination indicated that (1)

petitioner was precluded from challenging the underlying

liabilities for 1997, 1998, and 1999 because the Court had

decided those years, (2) the money seized by the LAPD was pre-

bankruptcy-petition property that was still subject to lien and

levy action even if petitioner was no longer personally liable

after his debts were discharged in bankruptcy, and (3) there was

no credible evidence that petitioner did not own the levied

money.

Discussion

A party moving for summary judgment bears the burden of

demonstrating that no genuine issue of material fact exists and

that he or she is entitled to judgment as a matter of law. Rule

2 While petitioner’s petition questioned the correctness of the underlying tax assessments, his filed documents and oral argument addressed only the 1997, 1998, and 1999 assessments, all of which resulted from the Court’s opinion in Prince v. Commissioner, T.C. Memo. 2003-247. Petitioner did not raise any specific objection to the unpaid portion of the self-reported 2002 tax liability. In any event, the total 1997, 1998, and 1999 unpaid balance due exceeds the amount of respondent’s jeopardy levy. - 6 -

121(b);3 Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520

(1992), affd. 17 F.3d 965 (7th Cir. 1994). Facts are viewed in

the light most favorable to the nonmoving party. Dahlstrom v.

Commissioner, 85 T.C. 812, 821 (1985). Where a motion for

summary judgment has been properly made and supported by the

moving party, the nonmoving party may not rest upon mere

allegations or denials contained in that party’s pleadings but

must by affidavits or otherwise set forth specific facts showing

that there is a genuine issue for trial. Rule 121(d); Dahlstrom

v. Commissioner, supra at 820-821.

In his petition, petitioner challenges the notice of

determination on the following grounds: (1) “The assessment was

grossly wrong. Audit was done without supporting documents.

Required audit documents were confiscated by Los Angeles Police

Department at the time of the Audit. New audit is necessary to

determine accurate assessment”; (2) “All the monies confiscated

by IRS do not belong to the Petitioner”; (3) “IRS drove

Petitioner to file Bankruptcy; Assessed funds were discharged by

[sic] via Bankruptcy filing in 2005”; (4) “The CDP hearing

officer’s mind was biased from the set [sic] go; biased mind as a

result of Detective Maddox unproven falsified and fabricated

Reports that lead to the service of a Search and Seizure Warrant

3 Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended. All Rule references are to the Tax Court Rules of Practice and Procedure. - 7 -

against my assets”; and (5) “The CDP Officer made up his mind not

to believe our testimony or accept the evidence provided from

us.”

In his objection to respondent’s motion for summary judgment

petitioner raises the same arguments raised in his petition and

also argues that a jeopardy levy was not appropriate under the

circumstances, that he was not timely informed of the jeopardy

levy, and that the settlement officer’s bias led him to

inappropriately foreclose consideration of collection

alternatives. He also raised these arguments at the June 25,

2009, hearing and in his brief filed after the hearing.

If a taxpayer’s underlying liability is properly at issue,

the Court reviews any determination regarding the underlying

liability de novo. Sego v. Commissioner, 114 T.C. 604, 610

(2000). We review any other administrative determination

regarding the proposed collection action for abuse of discretion.

See Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). A

taxpayer’s underlying liability is properly at issue in a section

6330 collection case if the taxpayer “did not receive any

statutory notice of deficiency for such tax liability or did not

otherwise have an opportunity to dispute such tax liability.”

Sec. 6330(c)(2)(B). Although petitioner would like us to review - 8 -

the underlying liabilities for 1997, 1998, and 1999,4 those

liabilities are not properly at issue because petitioner received

a statutory notice of deficiency for those years and actually

disputed the liabilities before the Court. Prince v.

Commissioner, T.C. Memo. 2003-247. Therefore, we limit ourselves

to reviewing respondent’s collection action for abuse of

discretion.5

We are not persuaded by petitioner’s argument that

respondent’s jeopardy levy was improper because the levied money

did not all belong to him. We have long held that the doctrine

of standing is “inherently applicable to our proceedings.”

Anthony v. Commissioner, 66 T.C. 367, 373 (1976). Under that

doctrine “‘the plaintiff generally must assert his own legal

rights and interests, and cannot rest his claim to relief on the

legal rights or interests of third parties.’” Valley Forge

Christian Coll. v. Ams. United for Separation of Church & State,

454 U.S. 464, 474 (1982) (quoting Warth v. Seldin, 422 U.S. 490,

499 (1975)). Petitioner does not have standing in this

proceeding to seek the return of money or property that does not

belong to him, and he cannot rest his case on the rights of those

4 Petitioner has not disputed his self-reported underlying tax liability with respect to 2002. See supra note 2. 5 This review extends to respondent’s interpretation and application of bankruptcy law. See discussion infra. - 9 -

to whom the money or property does belong even if those third

parties purport to authorize petitioner to do so.6

To the extent respondent incorrectly levied against third

parties, those third parties may have the right to bring a

wrongful levy action against the United States under section 7426

in a U.S. District Court within the specified limitations period,

generally “9 months from the date of the levy or agreement giving

rise to such action.” See sec. 6532(c)(1).7

In his brief filed after the June 25, 2009, hearing,

petitioner claims that he is the authorized representative to

pursue such an action on behalf of at least two of these third

parties. In a lien or levy case, as a court of limited

jurisdiction, we have no jurisdiction over petitioner’s claims

asserted on behalf of third parties. See, e.g., EC Term of Years

6 A taxpayer who ends up overpaying on an unpaid tax liability because of a levy upon third-party funds in the taxpayer’s possession as, for example, a custodian or bailee of such funds, may have standing to recover the funds to the extent of the overpayment in a refund action in the appropriate U.S. District Court. See Thompson v. United States, 429 F. Supp. 13 (E.D. Pa. 1977). We note that petitioner cannot bring such an action here because petitioner’s unpaid tax liabilities with respect to 1997, 1998, and 1999 resulted from the Court’s opinion in Prince v. Commissioner, T.C. Memo. 2003-247, that is res judicata and the unpaid tax liabilities exceed the amount of the levied funds. See supra note 2. 7 Such a course would also appear to be available to the trustee in petitioner’s bankruptcy case were he to conclude that petitioner’s omission from the debtor’s schedules of assets of the funds seized by the LAPD warrants a reopening of the bankruptcy proceedings. - 10 -

Trust v. United States, 550 U.S. 429, 435 (2007) (where third

party’s property is wrongfully levied upon to pay taxpayer’s

unpaid tax liability, an action under section 7426 in the

appropriate U.S. District Court within the allowable limitations

period is the proper remedy). See also United States v.

Williams, 514 U.S. 527 (1995) (third party whose property was the

subject of a wrongful lien and who was forced to pay tax, under

protest, on behalf of taxpayer to remove such lien has standing

to bring a refund action under 28 U.S.C. section 1346(a)(1) in

the appropriate U.S. District Court).

We are similarly unpersuaded by petitioner’s argument that

his bankruptcy discharge precluded respondent from collection

action. Because respondent’s collection action is based, in

part, upon respondent’s interpretation and application of

bankruptcy law, we review this interpretation and application for

errors. “If respondent’s determination was based on erroneous

views of the [bankruptcy] law * * *, then we must * * * find that

there was an abuse of discretion.” Swanson v. Commissioner, 121

T.C. 111, 119 (2003). Unlike in Swanson, respondent has conceded

that petitioner’s bankruptcy discharge relieved petitioner from

personal liability for his unpaid tax liabilities. Respondent

argues, however, that a valid tax lien survives bankruptcy and

“even though [p]etitioner [is] no longer personally liable for

the tax liabilities for tax years 1997, 1998 and 1999 * * *, the - 11 -

lien continues to attach to [p]etitioner’s pre-bankruptcy

property.” This interpretation and application of bankruptcy law

by respondent is consistent with our own prior holdings.

In Bussell v. Commissioner, 130 T.C. 222, 235 (2008), we

held that “A discharge under 11 U.S.C. section 727 relieves the

debtor of personal (or in personam) liability. * * * Such a

discharge, however, does not protect the debtor’s assets if those

assets were subject to a Federal tax lien that was properly filed

pursuant to section 6323 before the bankruptcy petition was

filed.” See also Iannone v. Commissioner, 122 T.C. 287, 292-293

(2004) (Federal tax liens are not extinguished by personal

discharge in bankruptcy, remain in effect, and attach to assets

owned before the date of filing the bankruptcy petition). The

funds seized by the LAPD were subject to a Federal tax lien that

was properly filed before petitioner filed his bankruptcy

petition, and petitioner did not include these funds in the

schedules of debtor’s assets attached to his bankruptcy petition.

Accordingly, petitioner’s discharge in bankruptcy did not protect

the seized funds from respondent’s jeopardy levy.

Petitioner’s argument that Settlement Officer Climan was

biased is also unconvincing. Petitioner’s claim rests “upon the

mere allegations * * * and [he has not] set forth specific facts

showing” that Settlement Officer Climan was biased or how any

bias on the part of the settlement officer would have affected - 12 -

the ultimate determination with respect to the jeopardy levy.

See Rule 121(d).

We also find unpersuasive petitioner’s argument that the

jeopardy levy was not appropriate. We note initially that

petitioner did not raise this issue before the Appeals Office and

that we generally do not have authority to consider issues raised

before the Court for the first time in this lien or levy action.

See Giamelli v. Commissioner, 129 T.C. 107, 115 (2007). In any

event, even if petitioner had raised the issue before the Appeals

Office, we would still be unpersuaded.

Under section 6331(a) a jeopardy levy is appropriate when

“the Secretary makes a finding that the collection of * * * tax

is in jeopardy”. Section 1.6851-1(a)(1), Income Tax Regs.,

provides that collection is in jeopardy when at least one of the

following conditions exists: (1) “The taxpayer is or appears to

be designing quickly to depart from the United States or to

conceal himself or herself”; (2) “The taxpayer is or appears to

be designing quickly to place his, or her, or its property beyond

the reach of the Government either by removing it from the United

States, by concealing it, by dissipating it, or by transferring

it to other persons”; or (3) “The taxpayer’s financial solvency

is or appears to be imperiled.” On the basis of the record

before us, we do not find respondent’s determination that a

jeopardy levy was appropriate to be an abuse of discretion. In - 13 -

particular, we note that because of the bankruptcy court’s

discharge of petitioner’s tax liabilities, respondent’s

collection efforts can proceed only against petitioner’s pre-

bankruptcy-estate assets that are subject to a valid lien, such

as the levied funds. If respondent is prevented from levying

upon such funds and the funds are then dissipated, respondent may

be unable to collect all of the unpaid tax liabilities.

Finally, we are unconvinced by petitioner’s argument that he

did not receive timely notice of the jeopardy levy. We note

again that because petitioner did not raise this issue before the

Appeals Office, we may not consider it now. See Giamelli v.

Commissioner, supra at 115. Regardless, petitioner’s argument is

not convincing. Under section 7429(a)(1)(B) the Secretary has 5

days from the date of the jeopardy levy to give a taxpayer

written notice of the information upon which he relied in

determining that collection was in jeopardy. Respondent sent a

notice of the jeopardy levy and of petitioner’s right to

administrative and judicial review of the levy on December 7,

2007, the day respondent had served the jeopardy levy.

Petitioner had received this notice by December 14, 2007, the day

petitioner placed an unsolicited call and engaged in a telephone

discussion with Revenue Officer Stevens regarding an

administrative review of the jeopardy levy. Petitioner

subsequently took full advantage of such a review. Therefore, - 14 -

even though there is no evidence to support petitioner’s claim of

having failed to receive a timely section 7429(a)(1)(B) notice of

the jeopardy levy, we hold that any such error would have been

harmless under these circumstances. See Golub v. Commissioner,

T.C. Memo. 2008-122.

Respondent’s motion for summary judgment has been properly

made and is well supported, and petitioner has not set forth

specific facts showing that there exists any genuine issue as to

any material fact. Summary judgment is therefore appropriate.

See Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. at

520.

The Court has considered all of petitioners’ contentions,

arguments, requests, and statements. To the extent not discussed

herein, the Court concludes that they are meritless, moot, or

irrelevant.

To reflect the foregoing,

An appropriate order and

decision will be entered.