T.C. Memo. 2003-199
UNITED STATES TAX COURT
JOHN AND DONNA RINGGOLD, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11961-01L. Filed July 9, 2003.
John and Donna Ringgold, pro sese.
Sylvia L. Shaughnessy, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
FOLEY, Judge: The issue for decision is whether respondent
abused his discretion in determining to proceed with collection
of petitioners’ 1997 tax liability.
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FINDINGS OF FACT
On April 1, 1999, John and Donna Ringgold (petitioners)
executed and sent respondent Form 4549-CG, Income Tax Examination
Changes, in which petitioners agreed to the immediate assessment
and collection of additional tax liabilities for 1995 and 1997.
The form set forth deficiencies, additions to tax, penalties, and
interest through April 21, 1999, totaling $20,100.33. In an
accompanying letter, petitioners offered to settle their entire
tax liability for $12,803.00 (i.e., the amount of the balance due
excluding additions to tax, penalties, and interest) and
requested 60 days from April 15, 1999, to secure the necessary
funds.
Several weeks later, Mr. Ringgold asked respondent’s auditor
whether the terms of his letter had been accepted. The auditor
responded affirmatively, but was under the mistaken impression
that petitioners’ letter was merely a request for a short-term
extension of time to pay the liability. On April 6, 1999, the
auditor prepared and sent to petitioners Form 433-D, Installment
Agreement, for $20,100.33 (i.e., the entire amount of the
liability per the audit report), put a hold on the collection
activity for 120 days, and closed the file as “agreed”. On June
7, 1999, respondent made an additional assessment, and on
September 6, 2000, sent petitioners a Notice of Federal Tax Lien
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Filing and Your Right to a Hearing Under IRC 63201 relating to
petitioners’ 1997 tax liability.
On September 21, 2000, petitioners timely filed Form 12153,
Request for a Collection Due Process Hearing, in which they
contended that their 1997 tax liability was satisfied pursuant to
an offer in compromise.
The Appeals officer reviewed the files and transcripts of
account and determined that respondent had not received from
petitioners Form 656, Offer in Compromise, or Form 433-A,
Collection Information Statement for Individuals. On June 12,
2001, the Appeals officer held a hearing with petitioners, during
which she explained to petitioners that settlement of tax
liabilities for less than the amount owed requires the completion
of Form 656. She informed petitioners that a binding settlement
agreement had not been executed between petitioners and the
auditor, but that petitioners could discuss an offer in
compromise or installment agreement relating to petitioners’ 1997
tax liability. Petitioners, however, declined to discuss these
collection alternatives.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue.
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By notice dated September 7, 2001, respondent determined to
proceed with collection. In response, petitioners, while
residing in San Diego, California, filed a petition and amended
petition on September 20, and October 18, 2001, respectively.
OPINION
Petitioners’ sole contention is that they do not owe the
liability for which the lien was recorded because they were
“given an offer in compromise in fact” by the auditor.
Respondent contends that petitioners and the auditor did not
execute a binding agreement. We agree with respondent.
The law regarding compromises is well established. The
regulations and procedures under section 7122 provide the
exclusive method of effectuating a compromise. Shumaker v.
Commissioner, 648 F.2d 1198, 1199-1200 (9th Cir. 1981) (citing
Botany Worsted Mills v. United States, 278 U.S. 282, 288-289
(1929)), revg. on another issue T.C. Memo. 1979-71. Petitioners
and the auditor did not enter into a binding agreement to
compromise petitioners’ 1997 tax liability. First, petitioners
did not submit Form 433-A for respondent to determine whether
there was doubt as to collectibility. See sec. 301.7122-1(a),
Proced. & Admin. Regs. Second, petitioners did not submit an
offer in compromise on the appropriate form (i.e., Form 656), and
were never notified in writing that an offer in compromise had
been accepted. Laurins v. Commissioner, 889 F.2d 910, 912 (9th
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Cir. 1989), affg. Norman v. Commissioner, T.C. Memo. 1987-265;
sec. 301.7122-1(d)(1), (3), Proced. & Admin. Regs. Finally,
there was no mutual assent because the auditor misunderstood the
nature of petitioners’ request. See Dorchester Indus. Inc. v.
Commissioner, 108 T.C. 320, 330 (1997) (stating “A prerequisite
to the formation of a contract is an objective manifestation of
mutual assent to its essential terms”) (citing Manko v.
Commissioner, T.C. Memo. 1995-10), affd. without published
opinion 208 F.3d 205 (3d Cir. 2000). Accordingly, respondent’s
determination is sustained.
Contentions we have not addressed are irrelevant, moot, or
meritless.
To reflect the foregoing,
Decision will be entered
for respondent.