T.C. Memo. 2003-346
UNITED STATES TAX COURT
RANDALL G. VAN VLAENDEREN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15164-02L. Filed December 29, 2003.
Randall G. Van Vlaenderen, pro se.
Monica J. Miller, for respondent.
MEMORANDUM OPINION
COHEN, Judge: This case was commenced in response to a
Notice of Determination Concerning Collection Action(s) Under
Section 6320 and/or 6330. The notice of determination sustained
a proposed levy with respect to petitioner’s unpaid taxes for
1986, 1990, 1991, 1992, 1993, 1994, 1995, 1997, and 1999. The
issue for decision is whether the Appeals officer’s rejection of
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petitioner’s Form 656, Offer in Compromise, was an abuse of
discretion. Unless otherwise indicated, all section references
are to the Internal Revenue Code in effect for the years in
issue.
Background
Most of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioner resided in Florida at the time that his petition was
filed.
Petitioner is self-employed and works in the real estate
business. He filed Federal income tax returns for 1986, 1990,
1991, 1992, 1993, 1994, 1995, 1997, and 1999, reflecting unpaid
balances due. The balances were duly assessed, and, with
penalties and accrued interest, the total unpaid liabilities
exceed $78,000. Petitioner did not submit a timely Federal
income tax return for 1998 and did not file any return for that
year prior to May 2002. Petitioner’s Federal income tax returns
for 2001 and 2002 were filed during the pendency of this dispute.
On March 15, 2001, two forms of Final Notice - Notice of
Intent to Levy and Notice of Your Right to a Hearing were sent to
petitioner. One notice related to his liability for 1990, 1991,
and 1992 in the total amount of $27,066.28, and a second notice
related to his liability for 1986, 1993, 1994, 1995, 1997, and
1999, totaling $40,524.01. Petitioner submitted a Request for a
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Collection Due Process Hearing in which he asserted that an
installment agreement had been inappropriately terminated, that
his prior spouse might be partially liable, and that he had
requested an offer in compromise.
By letter dated February 6, 2002, Appeals Officer Beverly A.
Henry (Appeals Officer Henry) notified petitioner that she had
scheduled a conference for March 5, 2002, and that the hearing
that he had requested could be conducted by telephone or
correspondence. On March 5, 2002, Appeals Officer Henry
conducted a telephone conference in which petitioner indicated
his intention to submit an offer in compromise. On March 29,
2002, petitioner submitted an offer in compromise relating to the
above liabilities, proposing that the sum of $3,763 be paid in
more than 90 days but within 24 months from written notice of
acceptance of the offer.
On April 9, 2002, Appeals Officer Henry sent a letter to
petitioner in which she stated:
You have requested consideration of certain issues that
require the expertise of the investigative functions of
the Service.
While the Office of Appeals will maintain jurisdiction
of your case, we have requested further assistance to
research and verify the information you have provided.
It may be necessary for a Revenue Officer to contact
you for information necessary to expedite this review.
The Revenue Officer may need to contact third parties
to verify some of this information. The information we
have requested is needed to help us reach a resolution
of your appeal.
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If you have any questions, please contact me at the
telephone number shown above.
The Appeals officer transmitted the documents for an offer
in compromise investigation to IRS Collections (Group 4100). On
April 17, 2002, the offer in compromise was returned to the
Appeals officer with the statement that the Form 433-A,
Collection Information Statement for Wage Earners and Self-
Employed Individuals, financial information was not verified;
petitioner had not filed his return for 1998; and that the total
unpaid liability was over $78,000. On April 17, 2002, the
Appeals officer notified petitioner that the offer in compromise
could not be considered because petitioner had not complied with
the filing requirements with respect to his 1998 return. On
May 2, 2002, the Appeals officer again wrote to petitioner as
follows:
This is to follow-up on your Offer in Compromise
submitted for consideration.
Our records indicate that this 1998 tax return has not
been processed. I need an original signature in order
to process. Please sign the return and return to me by
May 13, 2002.
The law requires you to be in compliance with all
filing requirements. This includes filing all federal
tax returns and making estimated tax payments if
required. The record indicates that you have filed an
extension for the year 2001 tax return, and you are not
making estimated tax payments.
Based on the above, an Offer in Compromise cannot be
considered at this time because you are not in
compliance with the filing requirements. Please
contact me so that we can discuss this further.
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Petitioner subsequently submitted the documentation
requested by the Appeals officer, and, in a memorandum dated
May 30, 2002, the Appeals officer concluded that petitioner was
then in compliance with the filing requirements. Thus, the
revenue officer proceeded to consider petitioner’s offer in
compromise.
The revenue officer to whom petitioner’s offer in compromise
was referred by the Appeals officer considered the financial
information that petitioner had submitted, including bank
records. The information submitted by petitioner claimed that
his total monthly income was $1,812 and that his total monthly
living expenses were $2,059, reflecting a monthly financial
deficit. The revenue officer concluded that the income shown by
petitioner was not consistent with the bank deposits reflected on
his monthly statements and that the net business income reported
by petitioner was not reliable because the claimed business
expenses were commingled in the bank account with personal
expenses. The revenue officer calculated petitioner’s ability to
pay based on the value of his vehicle and his average monthly
bank deposits, less necessary living expenses, and concluded that
the amount of $59,676 was the reasonable collection potential
“based on cash offer” shown by the information petitioner had
submitted.
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On July 30, 2002, the Appeals officer again wrote to
petitioner as follows:
The Revenue Officer has completed the investigation of
your Offer in Compromise submitted as a collection
alternative.
The investigation reveals that your offer in the amount
of $3,763 is not adequate. The financial analysis
indicates that your offer should be increased to at
least $59,676. I have attached copies of the
Asset/Equity Table (AET) and Income/Expense Table (IET)
to support this determination.
I have also enclosed Form 656 [Offer in Compromise] for
you to submit an “amended offer” for $59,676 if this is
acceptable to you.
If you have any questions or wish to discuss further,
please contact me at the telephone number shown above.
If I do not receive a response from you, I will assume
that you no longer wish to pursue this matter. I will
issue my determination based on the available
information in your case file.
Petitioner did not contact the Appeals officer by telephone,
as she had suggested. By letter dated August 14, 2002, mailed
August 19, 2002, and received by the Appeals Office on August 20,
2002, petitioner submitted an amended offer in compromise in the
amount of $9,756. Petitioner’s transmittal letter indicated that
he believed that his options were to appeal within 30 days to the
Office of Appeals or to submit another offer, based on
instructions in the Form 656 package. Petitioner also suggested
that the revenue officer’s method of calculating income did not
consider the expenses of running his business, as reflected on
his tax returns for 1999, 2000, and 2001.
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On April 19, 2002, Appeals Officer Henry signed a memorandum
in which she recommended that the Notice of Intent to Levy should
not be withdrawn. The memorandum was approved by the Appeals
Office team manager on August 21, 2002. The attachment to the
Appeals Office memorandum concluded that the levy was no more
intrusive than necessary, the taxpayer’s offer was not adequate,
and:
There is no evidence to indicate that the taxpayer
would voluntarily pay the liability if the Notice of
Intent to Levy were removed. The proposed levy action
balances the need for efficient collection of taxes
with the taxpayer’s legitimate concern that any
collection action be no more intrusive than necessary.
On August 28, 2002, Appeals Officer Henry notified petitioner
that the Appeals Office had issued a determination letter. She
enclosed another Form 656 package to be completed and sent to
“the appropriate office for your area.”
Discussion
Neither the amount of petitioner’s liability nor the
procedural facts in this case are in dispute. Petitioner
contends that there was an abuse of discretion because he was not
provided information on how to appeal Appeals Officer Henry’s
determination that the levy proposed in March 2001 would not be
withdrawn and because the Appeals officer relied on erroneous
calculations by the revenue officer with respect to petitioner’s
monthly income.
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Respondent argues that, because the matter was already being
considered by the Office of Appeals pursuant to petitioner’s
request for a section 6330 hearing, the Form 656 instructions
concerning appeals from rejections of offers in compromise do not
apply to this case. Respondent also argues that there is no
requirement that the Appeals Office wait a particular period of
time after requesting an amended offer. In any event, respondent
argues that petitioner’s amended offer was inadequate and would
not have changed the Appeals officer’s determination. Finally,
respondent contends that, because the Appeals officer relied on a
financial analysis and articulated reasons for her determination,
there was no abuse of discretion.
Section 7122(a) authorizes compromise of a taxpayer’s
Federal income tax liability. Grounds for compromise include
doubt as to liability, doubt as to collectibility, or 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). The record reflects that doubt as to
collectibility exists, but there is disagreement as to the
collectible amount. There is no indication in the record that
collection of the full liability would create economic hardship
or affect voluntary compliance by taxpayers. See sec. 301.7122-
1T(b)(4), Temporary Proced. & Admin. Regs., supra.
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We approach the dispute in this case in the context of
review of a hearing conducted under section 6330. Under section
6330, a taxpayer is entitled to one hearing in which he may
propose alternatives to collection, such as the levy action
proposed by respondent on March 15, 2001. See sec. 6330(b), (c),
and (d). Where, as here, liability is not an issue, the Appeals
officer’s determination is reviewed for abuse of discretion.
Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). Generally,
we consider only issues raised at the hearing before the Appeals
Office. Magana v. Commissioner, 118 T.C. 488, 493 (2002). Thus,
we do not conduct an independent review of what would be an
acceptable offer in compromise. We review only whether the
Appeals officer’s refusal to accept the offer in compromise made
by petitioner was arbitrary, capricious, or without sound basis
in fact or law. See Woodral v. Commissioner, 112 T.C. 19, 23
(1999).
It is possible, as petitioner contends, that the revenue
officer’s financial analysis, based on the information that
petitioner had provided, was flawed. We cannot, however,
conclude that the information that petitioner provided was
reliable or that consideration of his amended offer in compromise
of $9,756 would have changed the determination. The Appeals
officer’s determination was based on analysis of the information
that petitioner submitted. The Appeals officer adopted the
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revenue officer’s conclusion that petitioner could pay $59,676 in
compromise of unpaid liabilities for 9 years exceeding $78,000.
The determination also indicated that the proposed levy was
necessary to induce payment, which was not an unreasonable
conclusion in view of petitioner’s long history of delinquency.
Based on the information considered by the Appeals officer, we
cannot conclude that rejection of petitioner’s initial offer was
an abuse of discretion or that rejection of petitioner’s amended
offer would be an abuse of discretion. See Crisan v.
Commissioner, T.C. Memo. 2003-318; Willis v. Commissioner, T.C.
Memo. 2003-302; O’Brien v. Commisioner, T.C. Memo. 2003-290;
Schulman v. Commissioner, T.C. Memo. 2002-129.
To reflect the foregoing,
Decision will be entered
for respondent.