United States of America v. Robertson et al

Filing 18

FINDINGS OF FACT AND CONCLUSIONS OF LAW. The Court will grant the Petition filed by the IRS and approve the sale of Robertson's residence. The Court will issue a separate Judgment as required by Rule 58(a). Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (km)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

In the Matter of the Tax Indebtedness of
JOE W. ROBERTSON and ALICIA J.
ROBERTSON

Case No. 1:16-CV-11-BLW
FINDINGS OF FACT &
CONCLUSIONS OF LAW

INTRODUCTION
The Internal Revenue Service (IRS) seeks approval to sell Joseph Robertson’s
home and apply the proceeds to the back taxes he owes. The Court held an evidentiary
hearing on August 29, 2016, and took the matter under advisement. For the reasons
expressed below, the Court will approve the sale.
FINDINGS OF FACT
Joseph Robertson and his then-wife, Alicia Robertson, did not file tax returns for
1999 through 2005. The IRS assessed a tax deficiency for those years of over a million
dollars. See Robertson Affidavit (Dkt. No. 7) at ¶ 11. The Robertsons responded in 2006
by having their accountant prepare tax returns for the years 1999–2005 and provide them
to the Taxpayer Advocate Service, who forwarded them to the IRS. After initially
accepting some of the returns, the IRS audited all of those tax periods in 2007.
The Robertsons’ accountant calculated their tax deficiency for those years to be
about $41,000, relying on substantial deductions the IRS had not considered. But the
Robertsons claim that the supporting evidence for all of these deductions was destroyed
when their basement flooded.
Findings of Fact & Conclusions of Law – page 1

Robertson testified that during this time, he sought help from the IRS’s Taxpayer
Advocate’s Office, and was assisted by a Taxpayer Advocate named Anthony Subiak.
Robertson testified that the two of them talked numerous times over the telephone, and
that Subiak worked for over a year before calculating Robertson’s tax deficiency as
$27,000, a figure even lower than Robertson’s accountant calculated. Subiak explained,
according to Robertson’s testimony, that the accountant had failed to take into account
some favorable tax savings.
Subiak’s analysis was obviously of great value to Robertson because it was so
much less than the IRS’s deficiency calculation of over a million dollars. Thus, one
would assume that Robertson would do everything in his power to obtain Subiak’s
written analysis.
Robertson testified that Subiak mailed his tax analysis to Robertson on two
occasions, but both times the analysis was returned because Subiak was not aware that
the Robertsons had moved to a new home. While Subiak was trying to call Robertson to
determine why the mailings were being returned, Subiak’s calls went unreturned because
Robertson had given his cell phone to his daughter, who apparently either did not get
Subiak’s messages or failed to pass them along.
So at the very moment that Robertson was to receive a tax analysis that slashed his
deficiency calculation by nearly a million dollars, he made it nearly impossible for
anyone to contact him. At the evidentiary hearing, Robertson made no attempt to explain
why he failed to inform Subiak that he could not be reached at his old address or cell
phone number.
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By the time Robertson finally asked why he had not received the analysis, Subiak
told him that after unsuccessfully attempting to reach Robertson by mail and cell phone,
he had “closed them [the tax analysis papers] out and sent them to a file.” Robinson did
not explain what this meant or why Subiak could not retrieve the analysis and send it to
the correct address. When asked whether he had contacted Subiak more recently to
confirm this story, Robertson testified that Subiak had retired two or three years earlier.
Beyond this, Robertson did not describe any efforts he has made to contact Subiak. The
Court is left simply with Robertson’s account, described above.
Throughout 2007 and 2008, the IRS audit of the tax returns prepared by the
Robertsons’ accountant was continuing. When the Robertsons failed to produce any
evidence to support their deductions – the evidence having allegedly been lost in a
basement flood, as discussed above – the IRS refused to allow the deductions, assessed a
tax deficiency of about $1,000,000, and sent deficiency notices to the Robertsons in
2008. The notices gave the Robertsons 90 days to file a petition with the Tax Court to
challenge the IRS assessments. The Robertsons failed to file any challenge and have not
cured the deficiency. Today they owe, with interest and penalties, $1,602,723.46. See
Petition (Dkt.No. 1) at p. 5.
The IRS began its efforts to collect this sum in 2009. The Robertsons responded
by filing an offer in compromise that was denied in 2010.
The IRS evaluated the assets the Robertsons had to pay the back taxes and
determined that the only real asset of value was their principal residence. There was no

Findings of Fact & Conclusions of Law – page 3

evidence submitted by the Robertsons at the hearing that alternatives exist to selling the
home.
The address of the home is 3886 N. 1700 E., Buhl, Idaho, 83361. This property is
within the jurisdiction of the Court. Joseph Robertson’s step-son Andrew resides in the
home and has temporary custody of his infant son. There are ongoing court proceedings
between Andrew and the mother of the infant to determine the custody of their infant son.
Robertson did not produce any evidence that Andrew and his infant son lack other
housing options.
Robinson argues that the levy is improper because the IRS has failed to satisfy the
legal prerequisites for levying on a principal residence, specifically by failing to (1)
properly verify his liability, (2) investigate alternative remedies, and (3) take into account
the fact that a minor child resides in the home. The Court will consider each of these
arguments after reviewing the legal standards that govern the Court’s analysis.
LEGAL STANDARDS
Congress allows the IRS to levy upon a taxpayer’s property to collect back taxes.
See 26 U.S.C. § 6334. However, a taxpayer’s principal residence is exempt from that
levy unless the levy is approved by a United States District Court Judge or Magistrate
Judge. See 26 U.S.C. § 6334(a)(13)(B) & 6334(e)(1).
That approval process begins with the IRS “filing a petition with the appropriate
United States District Court demonstrating that the underlying liability has not
been satisfied, the requirements of any applicable law or administrative procedure
relevant to the levy have been met, and no reasonable alternative for collection of
Findings of Fact & Conclusions of Law – page 4

the taxpayer’s debt exists.” See 26 C.F.R. § 301.6334-1(d)(1). The petition for judicial
approval “will ask the court to issue to the taxpayer an order to show cause why the
principal residence property should not be levied and will also ask the court to issue
notice of hearing.” See 26 C.F.R. § 301.6334-1(d)(1).
Here, the IRS filed a petition with the Court that satisfies those requirements. The
Court issued the Order to Show Cause and held an evidentiary hearing where Robinson
was represented by counsel and had the opportunity to call witnesses and make argument.
CONCLUSIONS OF LAW
The IRS has satisfied the statutory and regulatory requirements to levy upon the
Robertsons’ home. The Robertsons failed to file tax returns from 1999 through 2005.
Based on that failure, the IRS issued a valid assessment of a tax deficiency, gave the
Robertsons an opportunity to challenge that assessment, and started collection efforts
only after the Robertsons failed to file any challenge to the assessment. The Robertsons
now owe $1,602,723.46. The IRS has verified that this sum was validly assessed,
remains unpaid, and that all the legal and administrative requirements for levying on a
principal residence were satisfied. There is no evidence that alternatives exist for
collection other than the sale of the Robertsons’ home.
Robertson responds that the Court should consider Subiak’s analysis concluding
he only owed $27,000. But Robertson failed to produce that analysis – or any evidence
whatsoever documenting his alleged year-long discussions with Subiak – and his
testimony about the returned mailings, home address confusion and loaned cell phone is
simply not credible. Moreover, if Robertson’s testimony of Subiak’s analysis is
Findings of Fact & Conclusions of Law – page 5

submitted to estop the IRS from seeking more than $27,000, it is governed by the wellestablished principle that the Government can only be estopped if there is evidence of
“affirmative misconduct.” Rider v. United States Postal Service, 862 F.2d 239, 241 (9th
Cir.1988). Robertson has not made that showing here.1
Robertson argues that the IRS has failed to verify his tax liability. But IRS agent
Brent Birrell testified that he examined the entire file and determined that the assessment
was issued properly and remains unpaid. Robertson’s argument that the IRS failed to
fully “investigate” his tax liability is really just a thinly veiled argument that a new
assessment should be done. That argument must fail because the taxpayer “is not
permitted to challenge the merits underlying the tax liability” in this proceeding. See 26
C.F.R. § 301.6334-1(d)(2). This is because a tax “assessment is given the force of a
judgment, and if the amount assessed is not paid when due, administrative officials may
seize the debtor’s property to satisfy the debt.” Bull v. U.S., 295 U.S. 247, 260 (1935).
Robertson argues that the Cohen Rule requires the IRS to investigate a taxpayer’s
claimed deductions even if the taxpayer cannot fully substantiate those deductions, and
that this required investigation never took place. Putting aside for a moment the fact that
this argument improperly challenges the assessment, not the levy, the Cohen Rule only
requires that the IRS investigate “reasonable leads furnished by the taxpayer.” See
Edelson v. C.I.R., 829 F.2d 828, 830 (9th Cir. 1987).2 Robertson has furnished nothing to

1

Accordingly, the Court will grant the IRS’s motion in limine.

2

Moreover, Edelson involved a dispute over income, not deductions.

Findings of Fact & Conclusions of Law – page 6

the IRS or to this Court that would warrant a follow-up investigation. Having submitted
no supporting evidence, Robertson is not entitled to the benefits of the Cohen Rule.
Robertson argues that a reasonable alternative to collection is an offer in
compromise for doubt as to liability. But that is simply another way to argue that the
assessment should be challenged in this proceeding, an argument the Court rejected
above and will reject here.
Finally, Robertson argues that IRS regulations forbid the sale of a home if a minor
child is living therein. But the evidence at the hearing established that Robertson’s stepson has only temporary custody of the infant, and no evidence was introduced that the
step-son and infant lacked housing options. Robertson offers no legal authority that these
circumstances would preclude the sale of the home.
For all of these reasons, the Court will grant the Petition filed by the IRS and
approve the sale of Robertson’s residence. The Court will issue a separate Judgment as
required by Rule 58(a).

DATED: September 12, 2016

_________________________
B. Lynn Winmill
Chief Judge
United States District Court

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Findings of Fact & Conclusions of Law – page 7