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Charlie Sheen Settles Tax Dispute With IRS

AUG. 5, 2022

Charlie Sheen v. Commissioner

DATED AUG. 5, 2022
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Charlie Sheen v. Commissioner

CHARLIE SHEEN
Petitioner,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent.

UNITED STATES TAX COURT

PETITIONER'S STATUS REPORT

PURSUANT to very recent developments, as reported below, the following is a report of petitioner's counsel on the status of this case.

1. As the Court is aware, this case is one of two cases presently docketed before the Tax Court. This case involves the petitioner's 2015 tax year, whereas the other related case (i.e., Charlie Sheen v. Commissioner, Docket No. 29680-21L) involves the petitioner's 2017 and 2018 tax years.

2. Approximately one year ago, Petitioner expressed concern regarding the publicity that his case was attracting in the media, and this concern was brought by Petitioner's Counsel to Respondent's Counsel to see whether the Commissioner would support a Motion to seal the record in the case. Respondent contacted the National Office and reported to Petitioner's Counsel in an email dated November 18, 2021, that the National office cited the case of Willie Nelson Music Co. v. Commissioner, 85 T.C. 914 (1985), which concludes that the public interest in access to public court information generally outweighs an individual taxpayer's fear of embarrassment or harm to reputation. She thus informed Petitioner's Counsel that Respondent does object to any such Motion.

3. Happily, the parties have just reached a resolution in the related case, which will resolve not only that case (i.e., Charlie Sheen v. Commissioner, Docket No. 29680-21L), but also this case utilizing an Offer-In-Compromise which has been accepted by the Commissioner in his written acceptance letter to the Petitioner, dated July 25, 2022. In other words, the accepted Offer-In-Compromise resolves the tax liabilities for all years 2015, 2017 and 2018.

4. There is currently a Motion pending for Summary Judgment which is awaiting the Court's ruling. The Motion for Summary Judgment was made by Respondent's Counsel on October 12, 2021; Response to that Motion was filed by Petitioner's Counsel on January 1, 2022; and Respondent filed her Reply to Response to Motion for Summary Judgment on February 22, 2022. The parties realize that this Motion for Summary Judgment is likely now moot in view of the satisfactory resolution of both cases afforded by the Offer-In-Compromise, which is believed to be in the best interest of all parties.

5. Also, now moot, is Petitioner's urge to consolidate the two cases in view of the overall resolution of both cases utilizing the Offer-In-Compromise.

6. Petitioner is in receipt of the Supplemental Notice of Determination as issued by the IRS Independent Office of Appeals' Settlement Officer, dated July 22, 2022, as ordered by the Tax Court's remand of that case (i.e., Charlie Sheen v. Commissioner, Docket No. 29680-21L).

7. Respondent's Counsel has reported to Petitioner's Counsel that she is drafting the appropriate Documents to report upon and transmit the Supplemental Notice of Determination to the Tax Court, and that she is preparing the Decision Documents which will close out and resolve each of these discrete cases, and she expects to have those documents completed sometime shortly after August 15, 2022.

Date: August 5, 2022

Most respectfully submitted,

STEVEN LAWRENCE JAGER
Fineman West & Company, LLP
Counsel for Petitioner
Tax Court Bar Number JS0165
14140 Ventura Boulevard, Ste 207
Sherman Oaks, CA 91423
Telephone: (818) 501-5797
Email: siager@fwllp.com


PETITIONER'S RESPONSE TO RESPONDENT'S MOTION FOR SUMMARY JUDGMENT

 

PURSUANT to the Court's order served on December 1, 2021, petitioner hereby responds to respondent's motion for summary judgment filed on October 12, 2021 (the “Motion for Summary Judgment”), and respectfully states:

Summary of the Case

1. This case is a lien and levy action under I.R.C. Section §6320(c) and Rules 330 - 334 of the Court's Rules of Practice and Procedure.

2. The underlying tax liability in this case involves petitioner's 2015 tax year, now approximating $6,017,400, the amount of which is not in dispute.

3. Petitioner believes that the Administrative Record in this case may, possibly, not be completely accurate and complete, as it appears to be missing the Collection Information Statement, Form 433-A, as signed and dated by the Petitioner. Whether the Settlement Officer was provided with this Collection Information Statement is an important and material fact, which is not conducive to summary judgment. In point 12 of respondent's motion, counsel suggests that “Mr. Schriebman indicated he had a Form 433-A that was completed but did not appear to be accurate,” with a strong implication that the Form was never submitted to the SO, Mr. Matuszczak. In fact, the Notice of Determination explicitly states “he pointed out that you hadn't provided a financial statement” [See Declaration of Michael Matuszczak, Exhibit A, “Attachment to Letter 3193;” also Id, Exhibit J]. Further scouring of the “administrative record” as presented by Respondent does not reveal a copy of the Collection Information Statement. Yet, in the papers and documents transferred from Mr. Schriebman's file to the undersigned counsel for petitioner, there is quite definitely a copy of the Form 433 A, and notes suggesting that the Form 433-A was received by the SO, Mr. Matuszczak. Both the petitioner and petitioner's counsel are troubled that there is no copy of the Form 433-A in the administrative record. A copy of the Form 433-A is attached hereto as Exhibit 1.

4. Further to an inaccurate and incomplete administrative record, petitioner is troubled by the SO's seeming rush to close-out the Collection Due Process Hearing, without giving petitioner's then attorney, Robert Schriebman, an opportunity to meaningfully represent his client. The pendency of the Collection Due Process Hearing, itself, lasted only a mere 34 calendar days from May 17, 2018, the date that SO Michael Matuszczak sent his initial letter to the Petitioner, through and including June 20, 2018, the date that the Collection Due Process Hearing was concluded. This appears to be a very brief period of time, given the immense complexity of the Petitioners' financial situation. Because Mr. Schriebman was only retained on June 20, 2018, and the SO, Mr. Matuszczak, refused to grant him a continuance of that day's CDP Hearing, he deprived attorney Schriebman of the chance to become acclimated to the case, and was, thus, not afforded an adequate (nor reasonable) opportunity to meaningfully represent his client. Whether SO Matuszczak's letter giving the petitioner only 14 days to provide full documentation along with Form 433-A was a reasonable amount of time is a material fact that cannot be fully appreciated, let alone determined, by summary judgment, given the complexity of the petitioner's financial circumstances.

5. Almost immediately upon being retained to succeed attorney Robert Schriebman, the undersigned and current counsel for petitioner, invited respondent's counsel on February 21, 2019 to consider filing a motion with the court to remand this case back to the independent office of Appeals, so that the resolution of this case could be considered along with the then-newly-filed Collection Due Process Hearing request for tax year 2017.

6. The email sent to respondent's counsel alerted her then that there could very well be a problem with the administrative record, as she was advised that there was a copy of Form 433-A in the file documents which were transferred from attorney Schriebman to the undersigned.

7. Simultaneously, as the undersigned petitioner's counsel was preparing the filing of Form 12153 in response to the 2017 Notice (i.e., the filing of the 2017 Collection Due Process Hearing Request), complete disclosure was made in the body of the Attachment to Form 12153, to alert the Commissioner's Settlement Officer of the idea that the cases for both years could be better-considered together as one overall resolution, and went on to state, “The Taxpayer, therefore, will not object if such a Motion were now made by the Commissioner [as the Respondent] to Request the remand to the Appeals Division of the 2015 case.” Respondent's counsel declined that suggestion to consider a motion to remand at that time. This fact has been admitted by respondent's counsel in her Answer to the petition filed in Charlie Sheen v. Commissioner, Docket Number 29680-21L, page 3, ¶ (i).

8. An Offer-In-Compromise (“OIC”), based upon doubt as to collectability (Offer Number 1001598278), was the proffered collection alternative, introduced during the Collection Due Process Hearing which commenced in January 2020 filed for tax years 2017 and 2018. The OIC, dated January 2, 2020, offers to settle and compromise the tax liabilities for all years in which there is a tax liability owed by petitioner, specifically, tax years 2015, 2017 and 2018.

9. At the present time — i.e., as of the filing of this Response to Respondent's motion for summary judgment, the Commissioner has announced his rejection of that OIC, and that rejection was delivered to the petitioner along with his Notices of Determination closing out the Collection Due Process Hearings for tax years 2017 and 2018. The OIC's rejection and the Commissioner's reasoning (or lack thereof) is now the subject of a recent petition to this court for abuse of discretion. See Charlie Sheen v. Commissioner, Docket Number 29680-21L.

10. Petitioner believes quite earnestly and fervently that it would be most appropriate to consolidate the cases for the 2015 year (i.e., Charlie Sheen v. Commissioner, Docket Number 14774-18L) together with the case covering years 2017 and 2018 (i.e., Charlie Sheen v. Commissioner, Docket Number 29680-21L). Not only is the viable collection alternative the same for all three tax years, but moreover, they are all based upon the same financial analysis, which has been quite rigorously investigated by the same Settlement Officer, and if remanded as a result of the petition filed in Docket Number 29680-21L, will continue to be subject to the scrutiny, judgment and discretion of a (different) single Settlement Officer. This belief was expressed within the petition [see Docket Number 29680-21L, Attachment to Form T.C. 2, Petition, page 4 of 5 pages, item (i); and Id at page 5 of 5 pages, “prayer” item (iv)]. Were the Court to grant the respondent's motion for summary judgment, the petitioner would be deprived of the opportunity to consolidate these cases. Consolidation of the two cases will further enhance and promote judicial efficiency and economy.

Standard of Review

11. In a motion for summary judgment, the moving party bears the burden of demonstrating that (1) no genuine issue of material fact exists, and (2) that they are entitled to judgment as a matter of law. Tax Court Rule 121(b); and Sundstrand Corp, v. Commissioner, 98 T.C. 518, 520 (1992).

12. In determining whether a genuine issue of material fact exists, the court construes factual materials and inferences drawn from them in a light most favorable to the nonmoving party. Id.

13. The nonmoving party may not rest upon mere allegations or denials in its pleadings, and must set forth specific facts showing there is a genuine dispute for trial. Tax Court Rule 121(d); and also see Celotex v. Catrett, 477 U.S. 317, 324 (1986).

The Administrative Record

14. Petitioner agrees that judicial review non-liability issues in Collection Due Process cases is generally limited to the administrative record, and Respondent's counsel correctly cites Keller v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009) as her authority for her statement. But the real question to ask is whether the administrative record is correct and complete, and in this case, this would seem to be a real and material question of fact.

15. The Court has previously acknowledged that inaccuracies in the administrative record are likely, if not inevitable. The issue of an Appeals Office hearing record's accuracy, was given recognition by Judge Wherry in Joseph Giamelli v. Commissioner, 129 T.C. 107 (2007), where he wrote, “the 'record' in a Section 6320 and/or 6330 case is not sacrosanct.” Continuing, he subsequently wrote, “Errors in the record will inevitably occur from time to time, given the large number of records, their complexity, and the number of people participating in the various stages of the collection due process (CDP) procedures.” The Court in Giamelli made room for the possibility of an error in the record, and so should we in this case. As indicated in #3 above, whether the Settlement Officer was provided with the Collection Information Statement is an important and material fact that cannot be decided by summary judgment. Importantly, this issue was brought up to respondent's counsel much earlier in this litigation (in February, 2019) and a remedy was suggested that would have brought parity to the analysis of petitioner's ability to pay this 2015 liability alongside his ability to also pay his 2017 (and 2018) liabilities.

The Settlement Officer was an Too Great off a Rash to Close-Out the Collection Due Process Hearing

16. To whatever extent, therefore, that SO Matuszczak justified his determination based upon the failure to submit Form 433-A, represents a potential injustice were the motion for summary judgment to be granted. Moreover, if it could be determined that SO Matuszczak had received the Form 433-A prior to June 20, 2018, i.e., prior to the date that Mr. Schriebman's Power of Attorney was first valid, then SO Matuszczak would have realized (or at least should have realized) that there were many complexities to the petitioner's financial affairs that could have been substantively addressed in further discussion, and moreover, these complexities should have been a signal to him to realize that 14 days is simply not sufficient nor adequate for compiling a collection information of the magnitude required for this petitioner.

17. In her motion for summary judgment, respondent's counsel points out that it is not an abuse of discretion for an Appeals Officer to reject a collection alternative if the taxpayer fails to provide requested financial information within a reasonable time [emphasis added]. As support for this statement, respondent's counsel cites McLaine v. Commissioner, 138 T.C. No. 10, 2012. What is a reasonable amount of time?

18. In McLaine, that Settlement Officer declined to consider collection alternatives because that Petitioner had not submitted either an OIC or supporting financial information after obtaining repeated extensions of time to do so. The McLaine Court notes that “Petitioner failed, however, to submit the financial information that Mr. Jeka [the Settlement Officer] requested; nor did he submit an offer-in-compromise before the expiration of repeated deadlines that Mr. Jeka extended to him for doing both.” Contrast that guidance which implies that the Settlement Officer acts reasonably when he offers multiple extensions of deadlines, to the Settlement Officer in our case, Mr. Matuszczak, who patently refused to grant any extension whatsoever beyond 14 days. The record indicates that Petitioner's Power of Attorney called 5 days prior to the imposed deadline, yet Mr. Matuszczak declined to grant any additional time beyond June 20, 2018. No extension granted. Then when attorney Schriebman entered the case on June 20, 2018, a request was respectfully made that the CDP Hearing be continued, but SO Matuszczak remained intransigent, inflexible and unyielding. If SO Jeka in the McLaine case is emblematic of what it means to impose a reasonable amount of time, then SO Matuszczak's inflexibility and rush to close out the CDP Hearing cannot possibly be said to be reasonable. Petitioner asserts, therefore, that SO Matuszczak failed to give the Petitioner a reasonable amount of time to prepare and submit the requested financial and collection information, especially in view of the complexity of the petitioner's financial affairs.

19. As noted in #4 above, only 34 days elapsed from the issuance of Mr. Matuszczak's initial letter of May 17, 2018 until June 20, 2018 when he refused to extend or to continue the CDP conference beyond that date. Not only was this an incredibly swift Hearing, but attorney Schriebman was unfairly denied an adequate and reasonable opportunity to represent the petitioner.

Conclusion

20. Therefore, due to the likely unfaithfulness of this administrative record, the unreasonable and even capricious behavior of the Settlement Officer, and the petitioner's desire and intention to ask the Court that this case be consolidated together with Docket Number 29680-21L, a motion for summary judgment is not appropriate in this matter, and the Court should deny the Motion for Summary Judgment.

WHEREFORE, petitioner respectfully requests that the Court deny the Motion for Summary Judgment.

Date: January 1, 2022

STEVEN L. JAGER, CPA
Counsel for Petitioner
Tax Court Bar Number JS0165
Fineman West & Company, LLP
14140 Ventura Boulevard, Ste 207
Sherman Oaks, CA 91423
Telephone: (818) 501-5797
Facsimile: (818) 501-8560
Email: siager@fwllp.com

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