NORMAN HINERFELD, Petitioner v. COMMISSIONER OF INTERNALREVENUE, Respondent, Docket No. 20946-08L. 139 TC No. 10, Filed September 27, 2012.
The Tax Court has held that communications between IRS's Appeals Division and Area Counsel regarding an amended offer in compromise (OIC) did not fall in the category of prohibited ex parte communications. The case concerned an OIC with regard to unpaid trust fund recovery penalties under Code Sec. 6672.
R issued to P a final notice of intent to levy with regard to P’s unpaid trust fund recovery penalties totaling $471,696. P timely requested a collection due process (CDP) hearing with the Office of Appeals (Appeals) and submitted to Appeals an offer-in-compromise (OIC) of $10,000, followed by an amended OIC of $74,857. The settlement officer assigned to the case recommended that the amended OIC be accepted and submitted the matter to R’s Area Counsel for review in accordance with I.R.C. sec. 7122(b). Upon review, Area Counsel discovered that P and his wife were named as defendants in a lawsuit alleging that P had fraudulently conveyed assets to his wife. Area Counsel recommended that P’s amended OIC be rejected, and the
Appeals Team Manager agreed. Appeals issued to P a final notice of determination rejecting his amended OIC and determining that it was appropriate to proceed with the proposed levy. P filed a timely petition for review with the Court.
P argued that the discussions where Area Counsel alerted SO Berger to the lawsuit and the possibility of a fraudulent conveyance and recommended rejection of his OIC constituted prohibited ex partecommunications which compromised the independence of Appeals. Consequently, P contended, the case should be remanded for a supplemental hearing. IRS contended that the discussions between Area Counsel and Appeals were not prohibited ex parte contacts.
Held: Although the matter was raised for the first time in P’s post trial briefs, the Court will consider P’s argument that Appeals and Area Counsel engaged in prohibited ex parte communications during the CDP hearing.
Held, further, Appeals and Area Counsel were obliged to communicate with regard to P’s amended OIC in accordance with I.R.C. sec. 7122(b), and consequently their communications were not prohibited ex parte communications within the meaning of Rev. Proc.2000-43, 2000-2 C.B. 404.
Held, further, Appeals did not abuse its discretion in deciding to accept Area Counsel’s recommendation to reject P’s amended OIC or in determining to proceed with the proposed levy.
The Tax Court pointed out that Q&A 11 of Rev Proc 2000-43, specifically addresses communications between Appeals and the Office of Chief Counsel. Acknowledging the need for Appeals employees to obtain legal advice from the Office of Chief Counsel, it provides three limitations on communications between Appeals employees and Office of Chief Counsel attorneys:
(1) Appeals employees must not communicate with Chief Counsel attorneys who have previously provided advice to IRS employees who made the determination Appeals is reviewing; (2) requests for legal advice where the answer is uncertain should be referred to the Chief Counsel's National Office and handled as requests for field service advice or technical advice; and
(3) although Appeals employees may obtain legal advice from the Office of Chief Counsel, they remain responsible for making independent evaluations and judgments concerning the cases appealed to them, and Counsel attorneys are prohibited from offering advice that includes settlement ranges for any issue in an appealed case.
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