# T .C . Memo . 2009-7 8

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3A975722d53dc387a0

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

T .C . Memo . 2009-7 8

UNITED STATES TAX COUR T

JAMES W . BRYANT, Petitioner v .
COMMISSIONER OF INTERNAL REVENUE, Responden t

Docket No . 21133-06L .

Filed April 13, 2009 .

'James W . Bryant, pro s .e . ,
Denise A . DiLoreto and Paul J . Krazeise, Jr . , for
respondent .

MEMORANDUM-OPINIO N

GOEKE,

Judge : This case is before the Court on the parties '

cross-motions for summary judgment under Rule 121 .1 The issue i n

'Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code .

SERVED Apr 13 2009

- 2 this collection case is whether respondent abused his discretion
by setting off a portion of petitioner's 2003 tax overpayment
against petitioner's discharged 1997 tax liability .
For the reasons stated below ,

we shall grant respondent's

motion for summary judgment and deny petitioner's motion for
summary judgment .

Backgroun d
At the time the petition .was filed, petitioner resided in
Kentucky .
Petitioner and his spouse filed a joint Form 1040, U .S .
Individual Income Tax .Return, for 1997, but failed to pay . the tax
due . Respondent assessed the amount due, and petitioner . filed a
collection petition with this Court . See Bryant v . Commissioner ,
docket No . 14178-99L . That case was closed after a stipulated
decision was entered on February 13, 2001 .
Petitioner filed a Form 1040 for tax year 2000 on which he
claimed head of household filing status .? Petitioner again
failed to make the tax payment shown on the return, and
respondent assessed the amount due .

On December 9, 2003, petitioner filed a chapter 7 bankruptc y
petition in the U .S . Bankruptcy Court for the Western District of
Kentucky (bankruptcy court) . The bankruptcy court issued

'Petitioner divorced his spouse in 2000 .

a

discharge order'on March 24, 2004, discharging petitioner's 1997
income tax liability but not his 2000 income tax liability .
On June 10, 2004, petitioner filed his Form 1040 for 2003 .
The return showed an overpayment of $6,445 . Instead of issuing
petitioner a refund, respondent prorated his 2003 overpayment
according to the number of days in the year ; applied a portion,
based on the number of days that had passed in 2003 before
petitioner filed his bankruptcy petition, against his 1997 tax
liability ; and applied the remainder-to petitioner's 2000 tax
liability . Of the $6,445 overpayment, $6,058 .30 was set off
against petitioner's discharged

1997 tax liability ; the remaining

$386 .70 was set off against petitioner's 2000 tax liability .
On December 3, 2005, respondent issued to petitioner a
Letter 1058, Final Notice of Intent to Levy and Notice of Your
Right to a Hearing (notice of intent to levy), with respect to
the remainder of his 2000 tax liability .
In response to the notice of intent to levy petitioner filed
a Form 12153,' Request for a Collection Due Process Hearing, for
the 2000 tax liability . Petitioner requested that-respondent
apply his entire 2003 overpayment to his 2000 tax liability .
On September 7, 2006, a telephone hearing was held . The
only issue petitioner raised during the hearing was that
respondent improperly set off his=2003 overpayment against his
discharged 1997 income tax liability . Petitioner argued that the

bankruptcy court's order discharging his 1997 liability barred
respondent's later use of setoff .
On September 21, 2006, respondent issued a Notice of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330 (notice of determination) to petitioner sustaining
the proposed collection action . On October 17, 2006, petitioner
filed a petition with this Court for review of respondent's
determination to proceed with the collection . action for
petitioner's 2,000 tax liability .
On October 16, 2007, respondent filed a motion for summary
judgment . On November 26, 2007, petitioner filed his response to
respondent's motion . Because petitioner's response . also moves
for summary judgment, the response was also filed as a crossmotion for summary judgment .
On June 24, 2008, this Court issued an order denying
petitioner's and respondent's respective motions for summary
judgment without prejudice,-and granting petitioner leave to seek
to reopen his bankruptcy case to determine whether respondent's
setoff of petitioner's prepetition 2003 overpayment against
petitioner's 1997 tax liability violated, petitioner's discharge
order .
On August 15, 2008, petitioner moved to reopen his
bankruptcy case in bankruptcy court . On September-24, 2008,
petitioner filed a `Motion and Memorandum in Support of Relief

- 5
Sought from Post Discharge Set Off" . .

In re Bryant , 399 Bankr .

477, 478 (Bankr .-W .D . Ky . 2009) .
On January 13, 2009, the bankruptcy court denied
petitioner's motion, holding that petitioner's discharge did not
bar the setoff at issue and that petitioner could not exempt his
refund from his bankruptcy estate . See In re Bryant ,

supra at

477 .
Petitioner also arguedin his motion that respondent's
setoff was improper because petitioner had requested that
respondent apply the-2003 overpayment to petitioner's 2000
liability-.before respondent had applied it to petitioner's 1997
liability . The bankruptcy court, noting that the instant case
was ongoing ., declined to rule on this alternative argument
because the issue was not one of bankruptcy law that had been
referred to the bankruptcy court .
On February 11 and 12, 2009, respondent and petitioner filed
respective status reports informing the Court of the bankruptcy
court's action . Respondent's status report renews his motion for
summary judgment . Petitioner's status report repeats the
alternative argument in petitioner's bankruptcy motion that
respondent should have applied the 2003 overpayment in accordance
with petitioner's request .

./
.1'

- 6 Discussio n

Summary judgment is in-tended to expedite litigation and
avoid unnecessary and expensive trials .

Fla . Peach Corp . v .

Commissioner , 90 T .C .•678, 681 (1988) . The Court may grant
summary judgment wherethere,is no genuine issue of material fac t
and a decision may be rendered as a matter of law . Rule 121(a)
and (b) ;

Sundstrand Corp . v . Commissioner , 98 T .C . 518, 520

(1992), affd . 17 F .3d 965 (7th Cir . 1994) . The moving party
bears the burden of proving that there is :no genuine issue .of ._
material fact,

.and the. Court will view any factual inferences in

the light most favorable to the nonmoving

party-., .Dahlstrom v .

Commissioner , 85 T .C . 812, 821 (1985) . . Rule 12 1 (d) provides that
where the moving party properly makes and supports a motion for
summary judgment, "an adverse party may not rest upon the mere
allegations or denials of such party's pleading .," but must set
forth specific facts, by affidavits or otherwise, "showing . that
there is a genuine issue for trial . "
This collection review proceeding was filed pursuant to
section 6330 . Section 6330(a) provides that no levy may be made
on any property or right to property of any person unless the
Secretary has notified such person in writing of the right to a
hearing before the levy is made . Section 6330(b)(1) and (3)
provides that if a person requests a hearing, . that hearing shall
be held before an impartial officer or employee of the Internal

7 Revenue Service (IRS) . At the hearing a taxpayer may raise any
relevant issue relating to the unpaid tax or the proposed levy,
including appropriate spousal defenses, challenges to the
appropriateness of collection actions, and collection
alternatives, including . offers-in-compromise . Sec .
6330(c)(2)(A) . A taxpayer is permitted to contest the existence
or amount of the underlying tax liability if the taxpayer did not
receive any statutory notice of deficiency for the tax liability
in question or did not otherwise have an opportunity to dispute
the tax liability . Sec . 6330(c)(2)(B) ; see . also Sego v .
Commissioner , . 114 . T .C . 604, 609 (2000) .
Following a hearing, the Appeals Office must determine
whether the proposed levy action may proceed . The Appeals Office
is required to take into consideration : (1) The verification
presented by the Secretary that the requirements of applicable
law and administrative procedures have been met ; (2) the relevant
issues raised by the taxpayer ; and (3) whether the proposed levy
action appropriately balances the need for efficient collection
of taxes with a taxpayer's concerns that the levy action be no
more intrusive than is necessary . Sec . 6330(c) .
Section 6330(d) .grants theCourt jurisdiction to review the
determination by the Appeals officerto proceed with collection
action via levy after the'hearing . Where the validity of the
underlying tax liability is at issue in a collection review

proceeding, the Court will review the matter de novo .

Davis v .

Commissioner , 115 T .C . 35, 39 (2000) . Where the underlying tax
liability is not at issue, however, the Court will review the
determination of the Appeals Office for an abuse of discretion .
Goza v . Commissioner , 114 T .C . 176, 182 (2000) .
There is no issue of material fact that precludes summary
judgment . The proprietyof the setoff at issue is strictly a
question of law . As stated above,- . .the bankruptcy court found
that respondent's setoff did not,violate-petitioner's . discharge
order and that petitioner could not exempt his refund from his
bankruptcy estate . Accordingly, we will not address that issue .
We do, however, . address petitioner's alternative argument .
Petitioner argues .that respondent's setoff was improper
because petitioner specifically requested respondent to apply the
2003 overpayment against petitioner's 2000 liability long before
respondent applied the . 2003 . overpayment to petitioner's 199 7
liability . Petitioner points to statements in the Internal
Revenue Manual and in records of his account ; in support of this
contention .
When a taxpayer owing more than one tax .or owing tax for
more than 1 year makes voluntary payments to the IRS, he or she
may, by specific written directions,, assign the application of
those payments to any portion of the liability .
States , 808 F .2d 411, 416 (5th Cir . 1987) ;

Wood v . United

O'Dell v . United

9 States , 326 F .2d 451, 456 (10th Cir . 1964) . Under the voluntary
payment rule, when a taxpayer who has outstanding tax liabilities
voluntarily makes a payment, the IRS usually will honor the
taxpayer's request as to how to apply that payment .

United

States v . Ryan , 64 F .3d 1516, 1522 (11th Cir . 1995) . However,
section 6402(a) and the regulations promulgated thereunder
demonstrate that a taxpayer's right to designate the application
of his voluntary payment does not extend to an overpayment reported on a return .
Section 6402(a) allows the IRS to credit an "overpayment,
including any'interest allowed thereon, against any liability in
respect of an internal revenue tax on the part of the person who
made the overpayment" and, subject to certain limitations, refund
any balance to the person . In lieu of a refund, a taxpayer can
instruct the IRS to credit his' overpayment against the estimated
tax for the taxable year immediately succeeding the year of the
overpayment . Sec . 301 .6402-3(a)(5), Proced . & Admin . Regs . The
IRS need only refund, or apply to the taxpayer's estimated tax,
that portion of the overpayment that exceeds the taxpayer's
"outstanding liability for any tax" . Sec . 301 .6402-3(a)(6)(i),
Proced . & Admin . Regs . ; see N . States Power Co . v . United States ,
73 F .3d 764, 767 (8th Cir . 1996)("`[Section] 6402(a), plainly
gives the IRS the discretion to apply overpayments to any tax
liability ."') (quoting United States v . Ryan ,

supra , at 1523) ;

- 10 'Pettibone Corp . v . United States , 34 F .3d 536, 538

.(7th Cir .

1994) (section 6402(a) "leaves to the Commissioner's discretion
whether to apply overpayments to delinquencies, or to refund them
to the taxpayer") .
Respondent's application of the pre-bankruptcy portion of
petitioner's 2003 overpayment to petitioner's 1997 tax liability
falls .. within respondent's-authority to credit overpayments to any
liability for any tax year and, therefore, was proper . See
Richmond v . Commissioner , T .C . Memo . 2005-238 . .
Because there are no genuine issues of material fact
requiring trial, we find that respondent did not abuse his
discretion and is therefore entitled to summary judgment .
Respondent may proceed with the-proposed levy to collec t
,petitioner's tax liability for 2000 .
To reflect the foregoing,

An appropriate order an d
decision will be entered .

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3A975722d53dc387a0. Public record. Not legal advice.