T.C. Memo. 2004-7
UNITED STATES TAX COURT
DEAVRAH M. CHANDLER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11710-02L. Filed January 6, 2004.
Deavrah M. Chandler, pro se.
James A. Kutten, for respondent.
MEMORANDUM OPINION
COHEN, Judge: This proceeding was commenced in response to
a Notice of Determination Concerning Collection Action(s) Under
Section 6320 and/or 6330. The issue for decision is whether
there was an abuse of discretion in rejecting petitioner’s offer
to compromise for $100 petitioner’s unpaid Federal income tax
liabilities for 1997 and 1998 exceeding $13,600. Unless
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otherwise indicated, all section references are to the Internal
Revenue Code in effect for the years in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
Background
Petitioner resided in Texas at the time the petition was
filed. Petitioner filed her 1997 Federal individual income tax
return on October 21, 1999. On December 13, 1999, the tax
liability reflected on that return was assessed in the amount of
$16,502. Petitioner’s tax liability was partially offset by
Federal income tax withholding, and late filing and failure to
pay additions to tax and interest were assessed. Subsequently,
overpayments from 1999 and 2000 were applied to petitioner’s 1997
tax liability.
Petitioner filed her 1998 Federal income tax return on
February 9, 2001. On March 5, 2001, the tax liability reflected
on that return was assessed in the amount of $21,244.
Petitioner’s tax liability was partially offset by Federal income
tax withholding, and late filing and failure to pay additions to
tax and interest were assessed. As of September 9, 2001, the
total amount owing on petitioner’s Federal income tax liabilities
for 1997 and 1998 was $14,183.24.
On September 9, 2001, respondent sent to petitioner, in care
of Frank L. Zerjav (Zerjav), her authorized representative, a
Final Notice - Notice of Intent to Levy and Notice of Your Right
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to a Hearing. On behalf of petitioner, Zerjav submitted a
Request for Collection Due Process Hearing, Form 12153. On
November 7, 2001, petitioner signed a Form 656, Offer in
Compromise, proposing to compromise her 1997 and 1998 Federal
income tax liabilities for $100. The offer in compromise, with
supporting information, was submitted to the Brookhaven Service
Center in Holtsville, New York.
On February 8, 2002, an Appeals officer sent to petitioner a
letter advising her that the hearing that she had requested was
tentatively scheduled for February 26, 2002, but that another
time for a hearing could be arranged. The letter stated:
If you want us to consider any collection alternatives,
such as an installment agreement or offer-in-
compromise, please complete the enclosed financial
statements. These may include Form 433-A, Collection
Information Statement for Individuals and/or
Form 433-B, Collection Information Statement for
Businesses. Provide complete verification of your
income and expenses. We must be able to review this
information to determine that collection alternatives
are possible.
Zerjav responded to the Appeals officer’s February 8, 2002,
letter. Zerjav stated that an offer in compromise had been
submitted to the Brookhaven Service Center, and he requested that
the hearing be rescheduled “for after the valuation currently
being held with the Brookhaven Service Center.” On February 14,
2002, the Appeals officer explained in a telephone conference
with Zerjav that, because this was a “CDP” (section 6330
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collection due process) case, the offer in compromise would be
reviewed by the Office of Appeals rather than by the service
center.
On March 21, 2002, the Appeals officer sent to Zerjav a
letter stating that the offer in compromise had been reviewed but
that additional information was needed. Additional information
was submitted to the Appeals officer by Zerjav on April 23, 2002.
The Appeals officer reviewed the financial information submitted
by Zerjav on behalf of petitioner. She also independently
researched petitioner’s financial data and assets and concluded
that relevant information had not been disclosed by petitioner or
by Zerjav. Based on the information that she had obtained, the
Appeals officer determined that petitioner could pay her entire
1997 and 1998 income tax liabilities. The Appeals officer
considered petitioner’s reported income for 1999, 2000, and 2001.
The information relied on by the Appeals officer included
information about petitioner’s income for 2001, including a
withdrawal of more than $100,000 from an individual retirement
account and $40,000 in gross proceeds from the sale of real
property, and petitioner’s spouse’s income tax returns.
On June 11, 2002, a Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330 was sent to
petitioner. In addition to setting forth a determination that
the requirements of applicable law and administrative procedures
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had been met, explanatory materials attached to the notice of
determination stated the following:
The Offer in Compromise
An offer to compromise the 1997 and 1998 income tax
liabilities as to Doubt as to Collectibility was
received on 12-11-2001 by the IRS. The taxpayer
offered $100.00 on a liability totaling $13,688.60 as
of May 6, 2002. A Form 433-A was received. Complete
verification of the financial statement was not
received by Appeals. The financial statement was not
accurate. Initial review of the information that was
received indicated a net realizable equity in assets of
more than $44,719. The household income for 2001 was
determined to be an average of $12,438.00. Her
allowable expenses were determined to be $4,754. The
taxpayer has sufficient assets to full pay and also has
the ability to make monthly payments in order to full
pay. Because she can full pay, she does not qualify
for an offer in compromise. Therefore, an offer in
compromise is not currently a viable alternative.
The petition in this case asserted:
3. The collection action as determined by the
Commissioner is for income taxes for the calendar years
1997 through 2001 none of which is in dispute. The
Petitioner seeks relief under the Offer in Compromise
OIC program.
Only the calendar years 1997 and 1998 are involved in this
proceeding, however. Among the errors alleged by petitioner in
the petition were quarrels with the Appeals officer’s computation
of petitioner’s ability to pay and the absence of “independent
review”. Specifically, the petition alleges:
h) The entire offer consideration process was
conducted solely by the Appeals Division which further
violates the intent of Congress under the IRS
Restructuring and Reform Act of 1998 (the Act) to the
extent Petitioner has been denied the opportunity of an
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independent review of the rejected offer as required
under the Act.
* * * * * *
5. Petitioner has at all times acted in good
faith in connection with her tax affairs. Therefore
denial of an offer that would give her a “fresh start”
is misplaced. Moreover, no alternatives such as income
collateral agreements were made available to either the
Petitioner or her representative prior to issuance of
this Determination.
After the case was set for trial, respondent filed a Motion for
Summary Judgment. Although petitioner was ordered to serve on
respondent and file with the Court a written response to the
Motion for Summary Judgment, she failed to do so. However, when
the case was called for hearing on the Motion for Summary
Judgment, petitioner was permitted to testify and to present the
testimony of her representative as a means of explaining her
position. See Rule 121(b), (d).
Discussion
The primary dispute in this case arises from an apparent
misunderstanding by petitioner and her representative of the
effect of sections 6320 and 6330. Sections 6320 (pertaining to
liens) and 6330 (pertaining to levies) were enacted as part of
the Internal Revenue Service Restructuring and Reform Act of
1998, Pub. L. 105-206, sec. 3401, 112 Stat. 746, to provide new
procedural protections for taxpayers in collection matters.
Section 6330 generally provides that the Commissioner may not
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proceed with collection of taxes by way of a levy on a taxpayer’s
property until the taxpayer has been given notice of, and the
opportunity for, an administrative review of the matter. The
statute specifically provides that “such hearing shall be held by
the Internal Revenue Service Office of Appeals.” Sec.
6330(b)(1). A taxpayer is entitled to only one hearing with
respect to the taxable period(s) involved in the proposed lien or
levy. Sec. 6330(b)(2). If the taxpayer is dissatisfied with the
determination made after the hearing, judicial review of the
determination, such as that sought in this case, is available.
See generally Goza v. Commissioner, 114 T.C. 176, 179-181 (2000).
Section 6330(c) specifies the matters considered at the
hearing. In this case, there is no dispute that the requirements
of applicable laws and procedures regarding the assessment have
been met, sec. 6330(c)(1), and there is no dispute with respect
to the underlying tax liability, sec. 6330(c)(2)(B). Section
6330(c)(2)(A) provides:
(A) In general.--The person may raise at the
hearing any relevant issue relating to the unpaid tax
or the proposed levy, including–-
(i) appropriate spousal defenses;
(ii) challenges to the appropriateness of
collection actions; and
(iii) 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.
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The only collection alternative offered by petitioner during the
process before Appeals was an offer in compromise for $100. No
other issues were raised. We review respondent’s determination
for abuse of discretion. Goza v. Commissioner, supra at 182.
Petitioner asserted during the hearing on the Motion for
Summary Judgment that she was faced with more than $300,000 in
unpaid taxes, that she had rejected a suggestion to pursue
bankruptcy as a means of avoiding her debts, and that she faced
hardship in paying her tax liabilities. She also argued that the
information submitted with the offer in compromise was out of
date and that she was prepared to update the information to
establish her inability to pay.
Petitioner apparently is seeking relief from taxes for other
years that are not involved in the proposed levy and the
determination that is the basis of this proceeding. This case
involves only unpaid liabilities for 1997 and 1998, totaling
approximately $13,600, and not petitioner’s total outstanding tax
obligations. In any event, petitioner’s claims of current
financial hardship cannot be considered in this proceeding
because they were not raised before the Appeals officer. See
Magana v. Commissioner, 118 T.C. 488, 493-494 (2002).
Through the testimony of her representative, petitioner also
attempted to raise a dispute with the facts set forth in
respondent’s Motion for Summary Judgment concerning whether
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petitioner would have been amenable to collection alternatives
other than the $100 offer in compromise that she had submitted.
The statute, however, contemplates that the taxpayer raise at the
hearing relevant issues, including offers of collection
alternatives. Sec. 6330(c)(2)(A)(iii). The statute requires the
Appeals officer only to consider the “offers of collection
alternatives” raised and information presented by the taxpayer.
See, e.g., Crisan v. Commissioner, T.C. Memo. 2003-318; Willis v.
Commissioner, T.C. Memo. 2003-302; O’Brien v. Commissioner,
T.C. Memo. 2003-290; Schulman v. Commissioner, T.C. Memo. 2002-
129. It does not require continuous negotiation. In reviewing
the determination made by the Appeals Office, we are limited to
reviewing the information that petitioner presented. Having
reviewed the financial data in the record, we conclude that it
was not an abuse of discretion to reject the $100 offer in
compromise.
Petitioner also complains that there was no review within
the Appeals Office and that there was an abuse of discretion by
the Appeals officer in not referring the offer in compromise
evaluation to IRS collection personnel, with whom petitioner’s
representative had experience. In some cases, assistance from
revenue officers may be sought. See, e.g., Van Vlaenderen v.
Commissioner, T.C. Memo. 2003-346. Petitioner does not have a
right under section 6330, however, to more than one hearing or to
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a hearing before anyone other than the Office of Appeals. Sec.
6330(b).
We conclude, therefore, that the matters disputed by
petitioner are not material, that the material facts are not in
dispute, and that respondent is entitled to judgment as a matter
of law.
An appropriate order and
decision will be entered.