Morgan v. Commissioner of the Internal Revenue

The Internal Revenue Service (IRS) (defendant) assessed tax deficiencies against W. Richard Morgan and Janice Morgan (plaintiffs) for 1981, 1982, and 1983. The Morgans filed for bankruptcy. The bankruptcy court discharged Morgans’ 1983 tax liability but gave the IRS the right to collect the liability from the Morgans’ assets that remained after the bankruptcy. The bankruptcy court refused to discharge the Morgans’ 1981 and 1982 tax liabilities. On May 19, 1998, an IRS agent, Revenue Officer Elizabeth Cooper, wrote a letter to the Morgans’ attorney seeking a compromise agreement and installment plan for the 1981 and 1982 tax liabilities. The letter also indicated that the IRS was going to abate the 1983 tax liability. The Morgans’ attorney wrote a letter to Cooper asking whether the IRS would stop collection proceedings against the Morgans for the delinquent taxes if they began making installment payments for the 1981 and 1982 tax liabilities. Though Cooper was aware at the time of the letter that the IRS was not going to abate the Morgans’ 1983 tax liability, Cooper never responded to the attorney’s letter. In December 1999, the IRS notified the Morgans of its decision to levy the Morgans’ property to recover the tax liabilities for 1981, 1982, and 1983. After a hearing, the IRS Office of Appeals ruled that the IRS could not levy the 1981 or 1982 tax liabilities but could levy the 1983 tax liability. The Morgans appealed to the United States Tax Court, arguing that because the IRS had previously indicated that it would abate the Morgans’ 1983 tax liability, the IRS was estopped from levying the 1983 tax liability. The tax court affirmed the Office of Appeals. The Morgans appealed.