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Severo v. Commissioner of Internal Revenue

November 20, 2009

MICHAEL V. SEVERO; GEORGINA C. SEVERO, PETITIONERS-APPELLANTS, TAX CT.
v.
COMMISSIONER OF INTERNAL REVENUE, RESPONDENT-APPELLEE.



Appeal from a Decision of the United States Tax Court. No. 6346-06L.

The opinion of the court was delivered by: Hall, Circuit Judge

FOR PUBLICATION

Argued and Submitted October 9, 2009 -- Pasadena, California.

Before: Cynthia Holcomb Hall and Richard C. Tallman, Circuit Judges, and David M. Lawson,*fn1 District Judge.

OPINION

Taxpayers Michael and Georgina Severo ("the Severos") appeal from the decision of the United States Tax Court granting summary judgment in favor of the Internal Revenue Service ("IRS") and permitting the IRS to proceed with its collection action relating to the Severos' 1990 tax liability. We have jurisdiction pursuant to 26 U.S.C. § 7482(a)(1) and affirm the decision of the Tax Court.

I. Background

The Severos' 1990 joint tax return, after extensions, was due October 15, 1991. They filed their tax return three days late without paying most of their taxes. On November 18, 1991, the IRS assessed income tax liability of $63,499.00, plus $4,180 for failure to pay estimated taxes and $2,339 for failure to pay tax.

On September 28, 1994, the Severos filed for relief under Chapter 11 of the Bankruptcy Code, which was converted into Chapter 7 liquidation on September 12, 1995. Their first post-conversion meeting of creditors occurred on November 9, 1995, and the Severos received their Chapter 7 discharge on March 17, 1998.

The IRS first attempted to collect the 1990 tax liability on November 28, 2004, when it levied against a $196 tax refund claimed by the Severos on their 2003 California state income tax return. By that time, the petitioners owed income taxes for each year between 1994 and 2002, in addition to the tax liability for 1990. On August 18, 2005, the Severos paid $142,479.82 toward their tax delinquency, but at least some part of their 1990 tax liability remained outstanding. On September 7, 2005, the IRS mailed to the Severos a notice of intent to make a second levy on their property relating to their outstanding 1990 federal income taxes, and on September 8, 2005 the IRS filed a notice of federal tax lien on all of the Severos' property and property rights.

Upon receiving notice of the federal tax lien, the Severos requested a collection due process hearing. See 26 U.S.C. § 6320(a)(3)(B). At the time they filed their petition, the Severos resided in Arcadia, California. During the hearing with a Settlement Officer, the taxpayers argued that (a) the IRS was precluded from placing a lien against the Severos' property because the ten-year statute of limitations had expired; and (b) the Severos' 1998 bankruptcy discharge discharged the petitioners' tax debt to the IRS.

The Appeals Office of the IRS rejected the Severos' arguments and issued a notice of adverse determination on March 3, 2006. The taxpayers appealed to the United States Tax Court, which granted summary judgment in favor of the Commissioner on November 15, 2007. The taxpayers unsuccessfully moved for reconsideration and then timely appealed to this court.

II. Standard of Review

[1] We review the Tax Court's grant of summary judgment de novo. Talley Indus. Inc. v. Comm'r, 116 F.3d 382, 385 (9th Cir. 1997). We review the Tax Court's determination regarding the applicability of the statute of limitations de novo, but must be "cognizant of the established policy that limitations statutes barring the collection of taxes otherwise due and unpaid are strictly construed in favor of the Government." Richmond v. United States, 172 F.3d 1099, 1101 (9th Cir. 1999) (quotation omitted). We also review de ...


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