T.C. Memo. 2003-318
UNITED STATES TAX COURT
JAMES J. CRISAN AND VERONICA L. CRISAN, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11953-02L. Filed November 17, 2003.
James J. Crisan and Veronica L. Crisan, pro sese.
Michelle M. Lippert, for respondent.
MEMORANDUM OPINION
HAINES, Judge: Respondent sent petitioner James Crisan (Mr.
Crisan) and petitioner Veronica Crisan (Mrs. Crisan),
collectively petitioners, a Notice of Determination Concerning
Collection Action(s) under Section 6320 and/or 6330 (notice of
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determination).1 The issue for decision is whether there was an
abuse of discretion in the determination that collection action
could proceed for 1998 and 1999 (years in issue).
Background
All of the facts have been stipulated. The stipulated facts
and the attached exhibits are incorporated herein by this
reference.
Petitioners resided in Warren, Ohio, at the time they filed
the petition. As of May 15, 2003, petitioners owed tax
liabilities of $25,398 and $6,683 for 1998 and 1999,
respectively, including additions to tax and interest.
The tax liabilities for the years in issue resulted from
petitioners’ failure to make sufficient quarterly payments of
estimated taxes to cover the taxes that resulted from bonuses
received by Mr. Crisan. Petitioners proposed an installment
agreement with monthly payments of $100. Respondent rejected
this proposal as “unrealistic and unreasonable” given the size of
the tax liabilities.
When no installment payment amount could be agreed to by the
parties, respondent issued each petitioner a Final Notice of
Intent to Levy and Notice of Your Right to a Hearing on January
25, 2001. On February 20, 2001, petitioners sent respondent a
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue.
Amounts are rounded to the nearest dollar.
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Form 12153, Request for a Collection Due Process Hearing,
stating:
We are financially unable to pay this tax in full. It
would work a substantial financial hardship on us if the IRS
would levy on any of our income or few assets. We would
like to be considered for an offer in compromise or payment
arrangements.
After petitioners failed to attend the first scheduled meeting on
March 28, 2002, the section 6330 hearing (the hearing) was
rescheduled and held on April 17, 2002. In the letter scheduling
the meeting, the Appeals officer included a Form 433-A,
Collection Information Statement for Individuals, which
petitioners were asked to complete and bring to the hearing.
At the hearing, the Appeals officer preliminarily computed
that petitioners had the ability to pay at least $1,200 per month
on the basis of Mr. Crisan’s income and expenses listed on the
Form 433-A. The Appeals officer also noted that Mr. Crisan might
be able to settle the tax liabilities from his section 401(k)
plan, but was unsure of the amount in the account. The Appeals
officer then requested that petitioners finish completing the
Form 433-A, indicate the amount they are able to pay each month,
and consider taking money out of Mr. Crisan’s section 401(k) plan
to fully pay the tax liabilities. The requested information was
due to respondent by May 20, 2002.
Petitioners submitted an updated Form 433-A, dated April 25,
2002. On the Form 433-A, petitioners reported that Mr. Crisan is
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an attorney and attached Mr. Crisan’s Form W-2, Wage and Tax
Statement, for 2001, which reported $119,120 of wages, tips, and
other compensation.
During a telephone conversation on April 29, 2002, the
Appeals officer requested again that petitioners provide an offer
of a monthly installment amount to pay off the tax liabilities.
On May 13, 2002, Mr. Crisan sent the Appeals officer a letter
requesting a 2-week extension of time, stating that he was unable
to commit to a monthly payment amount because he wanted to review
his pension plan policies. Other than the proposed installment
payment amount of $100 per month, petitioners never made a formal
offer of an installment agreement and sent no further information
or correspondence to respondent.
On June 12, 2002, respondent sent petitioners a notice of
determination for the years in issue. Respondent sustained the
levy action, stating:
We have determined that no relief is to be granted in
this case. You have requested that the liability at issue
be resolved via an offer in compromise. However, your
financial data indicate that you can satisfy the liability
by liquidating assets or with an installment agreement.
Your request for additional time to consider your options is
unrealistic and is denied. Appeals believes that the need
for efficient collection of taxes has been balanced with
your concern for the intrusiveness of the proposed
assessment.
Further, respondent explained:
An offer in compromise, doubt as to collectibility is
not appropriate as the taxpayers have the assets to
immediately full [sic] pay the tax liability. In addition,
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the taxpayers have excess monthly income that would allow
them to full [sic] pay the tax liability in full. As such
an offer in compromise is inappropriate.
The file indicates that the Service has been attempting
to resolve this matter with the taxpayers since July 2000.
It is now almost 2 years later and still the taxpayers need
more time. I do not feel that additional time is
appropriate.
As a result of the notice of determination, petitioners filed the
instant petition.
The calendar call for the Cleveland, Ohio, trial session was
held on June 2, 2003. Mrs. Crisan did not appear at the calendar
call, and her default was entered. Petitioners’ motion for
continuance, filed May 27, 2003, and renewed at the trial, was
denied as untimely. The Court noted the “continuous delays”
caused by petitioners throughout the proceedings. Mr. Crisan
requested that he submit a trial memorandum and that the case be
submitted fully stipulated. The Court suggested that a trial be
held later that afternoon in order for Mr. Crisan to place
evidence, such as testimony, on the record. Mr. Crisan refused
the offer from the Court. Mr. Crisan stated that he chose to
forgo the trial by not testifying or submitting further evidence,
relying solely upon the stipulations and trial memoranda. The
Court granted Mr. Crisan’s request but warned Mr. Crisan that he
would be unable to submit any further evidence.
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Discussion
Petitioners make three arguments regarding the notice of
determination: (1) Petitioners lack sufficient assets to satisfy
the tax liabilities; (2) petitioners’ offer to enter into an
installment agreement was improperly rejected by respondent; and
(3) respondent did not give petitioners the opportunity to make
an offer in compromise.
Before a levy may be made on any property or right to
property, a taxpayer is entitled to notice of intent to levy and
notice of the right to a fair hearing before an impartial officer
of the Appeals Office. Secs. 6330(a) and (b), 6331(d). If the
taxpayer requests a hearing, he may raise in that hearing any
relevant issue relating to the unpaid tax or the proposed levy,
including challenges to the appropriateness of the collection
action and “offers of collection alternatives, which may include
the posting of a bond, the substitution of other assets, an
installment agreement, or an offer-in-compromise”. Sec.
6330(c)(2)(A). A determination is then made which takes into
consideration those issues, the verification that the
requirements of applicable law and administrative procedures have
been met, and “whether any proposed collection action balances
the need for the efficient collection of taxes with the
legitimate concern of the person that any collection action be no
more intrusive than necessary”. Sec. 6330(c)(3)(C).
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Petitioners raise issues only as to collection alternatives,
in that they dispute respondent’s rejection of their proposed
installment agreement and rejection of an offer in compromise.
We review the determination for an abuse of discretion because
the underlying tax liability is not at issue. Lunsford v.
Commissioner, 117 T.C. 183, 185 (2001); Nicklaus v. Commissioner,
117 T.C. 117, 120 (2001).
Respondent’s rejection of petitioners’ proposed installment
agreement was not an abuse of discretion. Installment agreements
are based upon the taxpayers’ current financial condition. See 2
Administration, Internal Revenue Manual (CCH), sec. 5.19.1.5.4.1,
at 18,299-50. Respondent’s determination was based on the
information provided to the Appeals officer by petitioners.
Schulman v. Commissioner, T.C. Memo. 2002-129. At the hearing,
respondent preliminarily computed a monthly payment amount of
$1,200. The Appeals officer gave petitioners the opportunity to
resubmit a monthly installment payment amount, to which
petitioners failed to timely respond. We find that the Appeals
officer could have reasonably determined that petitioners’
proposed installment payment of $100 per month should be rejected
on the basis of petitioners’ submitted income and expense
information.
Additionally, respondent’s determination not to enter into
an offer in compromise agreement with petitioners was not an
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abuse of discretion. Section 7122(a) authorizes the Secretary to
compromise any civil case arising under the internal revenue
laws. The regulations set forth three grounds for the compromise
of a liability: (1) Doubt as to liability; (2) doubt as to
collectibility; or (3) promotion of effective tax administration.
Sec. 301.7122-1T(b), Temporary Proced. & Admin. Regs., 64 Fed.
Reg. 39024 (July 21, 1999); see sec. 7122(c)(1). Doubt as to
liability is not at issue in the instant case.
The Secretary may compromise a liability on the ground of
doubt as to collectibility when “the taxpayer’s assets and income
are less than the full amount of the assessed liability”. Sec.
301.7122-1T(b)(3)(i), Temporary Proced. & Admin. Regs., supra.
Additionally, the Secretary may compromise a liability on the
ground of “effective tax administration” when: (1) Collection of
the full liability will create economic hardship; or (2)
exceptional circumstances exist such that collection of the full
liability will be detrimental to voluntary compliance by
taxpayers; and (3) compromise of the liability will not undermine
compliance by taxpayers with tax laws. Sec. 301.7122-1T(b)(4),
Temporary Proced. & Admin. Regs., supra; see 2 Administration,
Internal Revenue Service (CCH), sec. 5.8.11.2, at 16,385-15
(taxpayer’s liability may be eligible for compromise to promote
effective tax administration if not eligible for compromise based
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on doubt as to liability or doubt as to collectibility, and
taxpayer has exceptional circumstances to merit the offer).
Petitioners argue that they lack sufficient assets to
satisfy the tax liabilities. The Appeals officer reviewed
petitioners’ submitted financial information at the hearing and
determined that an offer in compromise was not appropriate. We
received as exhibits the financial information presented to the
Appeals officer and find that the Appeals officer could have
reasonably concluded that there are sufficient income and assets
to satisfy the tax liabilities. On the basis of respondent’s
consideration of petitioners’ information, we conclude that
respondent’s refusal to enter into an offer in compromise was not
an abuse of discretion.
As a result, we hold that the issuance of the notice of
determination was not an abuse of respondent’s discretion, and
respondent may proceed with collection.
In reaching our holding herein, we have considered all
arguments made, and, to the extent not mentioned above, we
conclude that they are moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be
entered for respondent.