T.C. Memo. 2007-302
UNITED STATES TAX COURT
STUART HULT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2116-05L. Filed October 4, 2007.
Stuart Hult, pro se.
Jamie J. Song, for respondent.
MEMORANDUM OPINION
CARLUZZO, Special Trial Judge: In a Notice of Determination
Concerning Collection Action(s) Under Section 6320 and/or 6330,1
dated January 5, 2005, respondent determined that the Notice of
1
Section references are to the Internal Revenue Code of
1986, as amended, in effect for the relevant period. Rule
references are to the Tax Court Rules of Practice and Procedure.
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Federal Tax Lien, filed on or about October 21, 2003, is an
appropriate collection device with respect to petitioner’s
outstanding Federal income tax liabilities for the years 1996
through 1999, inclusive, which liabilities, including additions
to tax and interest, at the time totaled more than $56,000
(petitioner’s outstanding tax liabilities).
The issue for decision is whether respondent abused his
discretion:2 (1) By refusing to release or withdraw the above-
referenced Notice of Federal Tax Lien, and/or (2) by rejecting
petitioner’s proposed collection alternative.
Background
The absence of a stipulation of facts notwithstanding,
see Rule 91, the relevant facts in this case are relatively
straightforward and easily summarized.
Petitioner’s outstanding tax liabilities arise from
amounts reported on Federal income tax returns. As best as can
be determined from the record, each return was filed late, and
the unpaid tax liability shown on each return is attributable
2
In his request for an administrative hearing, petitioner
alleged that the “IRS assigns arbitrary amounts due without
providing any basis for its outstanding amount determinations”.
Similarly, in the petition, petitioner alleges that “lien
collection amounts are arbitrary”. Because nothing was submitted
supporting those allegations during either the administrative
hearing or the trial, we do not consider petitioner to have
challenged the existence or the amount of his outstanding tax
liabilities. Consequently, we review respondent’s collection
action for abuse of discretion. Sego v. Commissioner, 114 T.C.
604, 610 (2000).
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either entirely or largely to the imposition of the alternative
minimum tax. See sec. 55.
In an offer-in-compromise dated October 26, 2000 (the 2000
offer), petitioner proposed to satisfy his outstanding tax
liabilities with an $8,256 cash offer, payable within 90 days
from the date the offer was accepted by respondent. The 2000
offer, which was received by respondent on November 2, 2000, was
based upon “doubt as to collectability”. Along with the 2000
offer, petitioner submitted various financial information and
documents in support of his claim that he had “insufficient
assets and income to pay the full amount” of his outstanding tax
liabilities.
The manner in which the 2000 offer was handled by respondent
is not entirely clear–-to say that it languished would be
somewhat of an understatement. According to petitioner, the 2000
offer was transferred from one of respondent’s offices to
another, over and over again. In the meantime, petitioner
suffered the horror of being present at the World Trade Center
during the September 11, 2001, terrorist attack, apparently lost
his job, and moved from New York to Vermont, where he resided
when the petition was filed in this case.
In a letter dated June 16, 2003, petitioner was advised that
the 2000 offer was assigned to Revenue Officer Joseph Barry
(Mr. Barry). In the opening paragraph of the letter, Mr. Barry
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apologized to petitioner “for the long delay in getting back” to
him. The letter went on to note that Mr. Barry had “reviewed the
[2000] offer file carefully” and concluded that “all of it is too
dated to be of any use in evaluating” the 2000 offer. Mr. Barry
noted that he needed “current information and documentation to
accurately evaluate” the 2000 offer. In addition to numerous
specific requests for additional information and documentation,
Mr. Barry requested that petitioner provide “copies of all 2002
W-2s received by anyone in * * * [petitioner’s] household”.
Although petitioner was married during all times relevant to this
proceeding, his outstanding tax liabilities did not arise from
joint returns.
Petitioner’s presentation at trial makes it clear that at
the time he received Mr. Barry’s letter, he was less than pleased
with the situation. Nevertheless, in a letter dated July 25,
2003, he responded to Mr. Barry’s request for current financial
information. For the most part he complied; however, in response
to the request for information regarding his spouse, petitioner
noted that his filing status for the years to which his
outstanding tax liabilities and the 2000 offer relate was
“married filing separately”. Petitioner, in effect, objected to
Mr. Barry’s request for information relating to petitioner’s
wife.
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From representations made in petitioner’s July 25 letter, it
appears that along with the letter, petitioner submitted a new
offer-in-compromise (the 2003 offer).3 According to the 2003
offer, petitioner proposed to satisfy his outstanding tax
liabilities with a cash offer of $1,000 payable within 90 days
from the date that respondent accepted it. As in the case of the
2000 offer, the 2003 offer was based upon “doubt as to
collectability”.
In a letter dated August 6, 2003, from Mr. Barry, petitioner
was asked to supplement some of his responses, and once again,
Mr. Barry requested information relating to the 2002 income of
petitioner’s wife. According to Mr. Barry, the income of
petitioner’s wife was “relevant to * * * petitioner’s offer”.
Elsewhere in the letter, petitioner was advised that “for the IRS
to accept an offer based upon doubt as to collectability, the
amount offered must be at least equal to the taxpayer’s net
equity in assets”. On the basis of an analysis of petitioner’s
financial status included in the letter, Mr. Barry concluded that
petitioner’s “current offer does not appear to meet that
criterion”. It cannot be determined whether references to
petitioner’s “offer” or “current offer” made in the August 6
3
The exact date that the 2003 offer was submitted cannot be
determined. It is referenced in petitioner’s July 25, 2003,
letter to Mr. Barry but dated July 27, 2003. Mr. Barry
acknowledged receipt of the 2003 offer on Aug. 25, 2003.
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letter relate to the 2000 offer or the 2003 offer. Be that as it
may, it is clear that from August 2003 the focus of the parties
was on the 2003 offer.4
Mr. Barry’s August 6 letter to petitioner also advised
petitioner that Mr. Barry intended to file a Notice of Federal
Tax Lien unless petitioner appealed his decision to do so in the
manner explained in the letter. Mr. Barry’s decision to file a
Notice of Federal Tax Lien was made, at least in part, in order
to establish the priority of the Government’s interest in real
estate owned by petitioner. See sec. 6323.
Petitioner’s response to Mr. Barry’s August 6 letter came in
a letter dated September 12, 2003. Petitioner provided some of
the additional information but once again refused to provide
information regarding his wife’s 2002 income.5
4
In a memorandum dated Sept. 25, 2003, Mr. Barry notes that
the 2000 offer was “returned”. Otherwise the ultimate
disposition of the 2000 offer remains as much a mystery as its
status from July 2000 through June 2003.
5
The dispute between Mr. Barry and petitioner on this point
is somewhat puzzling inasmuch as the information sought was
apparent from a copy of the 2002 joint Federal income tax return
filed by petitioner and his wife. The return shows adjusted
gross income of $149,421. It appears that the 2002 joint return
was reviewed by Mr. Barry, and petitioner must have been aware
that Mr. Barry had access to that return.
It should also be noted that, under the circumstances, Mr.
Barry’s request for petitioner’s wife’s income was consistent
with sec. 301.7122-1(c)(2)(ii)(A), Proced. & Admin. Regs.
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In a Form 9423, Collection Appeal Request, dated September
23, 2003, petitioner appealed Mr. Barry’s decision to file a
Notice of Federal Tax Lien. In that document petitioner argued
that a Notice of Federal Tax Lien should not be filed because,
among other reasons: (1) The 2003 offer was still pending; (2)
filing the notice would add to the health problems he was
suffering as a survivor of the terrorist attack on the World
Trade Center; (3) he was cooperating fully with respondent in
attempting to resolve his tax problems; (4) filing the notice
would adversely affect his ability to obtain credit; and (5)
filing the notice could adversely affect his ability to secure
future employment.
Petitioner’s appeal of Mr. Barry’s decision to file a Notice
of Tax Lien was handled by Appeals Officer Deborah L. Ross.
After conferring with petitioner’s representative, Ms. Ross, in a
comprehensive memorandum dated October 20, 2003, that addresses
each of the arguments advanced by petitioner, “sustained” Mr.
Barry’s decision to file a Notice of Federal Tax Lien with
respect to petitioner’s outstanding tax liabilities. The letter
advising petitioner of Ms. Ross’s decision, and the reasons for
that decision, also notified petitioner that if he were to
“successfully negotiate an acceptable offer-in-compromise, the
lien would be released upon payment of the amount offered”.
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As noted above, on or about October 21, 2003, a Notice
of Federal Tax Lien was filed with respect to petitioner’s
outstanding tax liabilities (the NFTL). By letter dated
October 27, 2003, petitioner was advised of the event and
notified of his right to request an administrative hearing to
dispute it, which he did in a request dated November 27, 2003.
A short time earlier, by letter dated November 19, 2003,
petitioner was advised that the 2003 offer had been rejected
because: (1) It was “less than * * * [petitioner’s] reasonable
collection potential”; and (2) petitioner had “failed to provide
the requested information and documentation” about his wife’s
income and expenses. That letter also advised petitioner that he
could appeal the rejection of the 2003 offer, which he did by
letter dated December 18, 2003.
Petitioner’s request for an administrative hearing with
respect to the NFTL and his appeal of the rejection of the 2003
offer were assigned to Settlement Officer Michael Blais (Mr.
Blais). For reasons discussed in a memorandum dated December 15,
2004, Mr. Blais upheld the rejection of the 2003 offer.
During the administrative hearing conducted in connection
with the NFTL, petitioner offered an installment agreement as an
alternative collection action. Under the terms of the proposed
installment agreement, petitioner offered to pay $100 per month
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towards his outstanding tax liabilities. Mr. Blais rejected
the proposed installment agreement because it would not allow
petitioner’s outstanding tax liabilities to be paid within the
applicable periods of limitation. Having previously upheld the
rejection of the 2003 offer, Mr. Blais further concluded that the
NFTL was an appropriate collection action with respect to
petitioner’s outstanding tax liabilities, and he caused the
above-referenced notice of determination that forms the basis for
this case to be issued on January 5, 2005.
Discussion
Petitioner availed himself of three separate, albeit more or
less related, administrative appeals that preceded this
proceeding. He appealed Mr. Barry’s (the revenue officer)
decision to file the NFTL; he appealed Mr. Barry’s rejection of
the 2003 offer; and he challenged the filing of the NFTL in a
section 6320(c) hearing. Technically, only his challenge to the
filing of the NFTL is reviewable in this proceeding. After all,
as noted in countless opinions, we are a Court of limited
jurisdiction, and our jurisdiction in this proceeding is
established exclusively, and limited, by section 6330(d).
Consequently, even though the appeal of the rejection of the
2003 offer and petitioner’s request for a section 6320(c) hearing
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were considered by the same settlement officer, Mr. Blais,6 and
even though the issues raised in those proceedings were
inexorably intertwined so that, more likely than not, the
determination that the NFTL was an appropriate collection action
must have been, at least to some extent, influenced by the
decision with respect to the rejection of the 2003 offer, we do
not consider the appropriateness of that decision because the
2003 offer was not submitted during the course of the section
6320(c) administrative hearing. See sec. 301.6320-1(f)(2),
Q&A-F3, Proced. & Admin. Regs.7
Instead, our focus is on respondent’s rejection of the
installment agreement offered by petitioner during the section
6320 administrative hearing, and respondent’s refusal to withdraw
or release the NFTL. According to petitioner: (1) The
installment agreement should have been accepted in lieu of the
NFTL; and (2) the NFTL should not have been filed while the 2003
offer was under consideration. Petitioner advances several other
procedural grounds (some of which will be addressed below) in
6
Sec. 6330(b)(3) provides, in relevant part: “The hearing
under this subsection shall be conducted by an officer or
employee who has had no prior involvement with respect to the
unpaid tax * * * before the first hearing under * * * section
6320. A taxpayer may waive the requirement of this paragraph.”
Petitioner does not suggest that Mr. Blais should not have been
assigned to both matters.
7
Mr. Blais upheld the rejection of the 2003 offer under
procedures established under sec. 7122(e).
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support of his position that respondent’s refusal to withdraw or
release the NFTL is an abuse of discretion.8 According to
respondent, neither the rejection of petitioner’s proposed
collection alternatives nor the other grounds raised by
petitioner give rise to the relief that he seeks. For the
following reasons, we agree with respondent.
Petitioner’s claim that it was improper to file the NFTL
while the 2003 offer was under consideration is easily rejected.
Unlike section 6331(k)(1), which precludes a levy while an offer-
in-compromise is under consideration, there is no such
restriction in section 6321, which provides: “If any person
liable to pay any tax neglects or refuses to pay the same after
demand, the amount * * * shall be a lien in favor of the United
States upon all property and rights to property, whether real or
personal, belonging to such person.”
8
Petitioner also argues that the NFTL is invalid because:
(1) He did not receive notice as required under sec. 6320(a)(2) -
a moot point as a timely sec. 6320(c) hearing was requested,
Call v. Commissioner, T.C. Memo. 2005-289, affd. 230 Fed. Appx.
758 (9th Cir. 2007); and (2) the NFTL was not signed, which is
not necessary. See Milam v. Commissioner, T.C. Memo. 2004-94.
Petitioner also complains about the manner in which he was
treated by various Internal Revenue Service employees in
connection with the collection of his outstanding tax
liabilities. We need not address those complaints, however,
because even if legitimate, none would have any impact on his
entitlement to the relief he seeks in this proceeding.
Among other complaints raised by petitioner that will not be
addressed here are: (1) Respondent took an unreasonably long
time to consider the 2000/2003 offer; and (2) Mr. Barry is
incompetent.
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In addition to the lien that arises under section 6321,
sometimes referred to as a “secret lien”, a notice of Federal tax
lien filed in accordance with section 6323 operates to protect
the Government’s interest in a taxpayer’s property against the
claims of other creditors of the taxpayer. Consistent with the
purpose of section 6323, in this case, the NFTL was filed in
order to protect the Government’s interest in certain real estate
owned by petitioner and his spouse. It was not improper for
respondent to file the NFTL while the 2003 offer was under
consideration, and respondent’s refusal to withdraw or release
the lien on that ground is not an abuse of discretion.
Section 6159 allows the Commissioner “to enter into written
agreements with any taxpayer under which such taxpayer is allowed
to make payment on any tax in installment payments”, if the
Commissioner “determines that such agreement will facilitate full
or partial collection of such liability.” We begin our
consideration of petitioner’s claim that respondent should have
accepted his proposed installment agreement in lieu of the NFTL
by noting that an installment agreement is not necessarily an
alternative to a notice of Federal tax lien. In those situations
where the taxpayer and the Commissioner have entered into an
installment agreement, a notice of Federal tax lien may still be
filed. See Crisan v. Commissioner, T.C. Memo. 2007-67; sec.
301.6159-1(d)(3), Proced. & Admin. Regs.
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As it stands, to be entitled to the relief he seeks in this
case, petitioner must establish that, in and of itself,
respondent’s refusal to agree to the installment agreement that
he proposed during the administrative hearing was an abuse of
discretion. This he has failed to do.
Accepting or rejecting an installment agreement proposed by
a taxpayer is within the discretion of the Commissioner. See
sec. 301.6159-1(b)(1)(i), Proced. & Admin. Regs. Discretionary
decisions made in response to an installment agreement proposed
by a taxpayer will not be upset unless it is demonstrated that
the decision was arbitrary in one way or another and could not be
supported in law and in fact. See Freije v. Commissioner, 125
T.C. 14 (2005); Schulman v. Commissioner, T.C. Memo. 2002-129.
In this case, the settlement officer took into account
petitioner’s outstanding tax liabilities and reviewed what
financial information petitioner submitted.
Based upon his review, the settlement officer noted that the
installment agreement proposed by petitioner would not be
sufficient to pay off petitioner’s outstanding tax liabilities
within the applicable periods of limitation. After reviewing
petitioner’s financial situation, the settlement officer also
concluded that the installment agreement proposed by petitioner
did not accurately represent petitioner’s ability to pay. We
do not substitute our judgment for the settlement officer’s on
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such matters. See Murphy v. Commissioner, 125 T.C. 301, 320
(2005), affd. 469 F.3d 27 (1st Cir. 2006). Whether we agree or
disagree on the point is unimportant. It can hardly be said the
settlement officer’s conclusion was in any way arbitrary,
capricious, or without sound basis in fact. Respondent’s refusal
to accept the installment agreement proposed by petitioner during
the section 6320 administrative hearing was not an abuse of
discretion.
At the section 6320(c) administrative hearing, petitioner
challenged the appropriateness of respondent’s proposed
collection activity and offered a collection alternative. See
sec. 6330(c)(2)(A)(ii) and (iii). The record establishes that
the settlement officer took into account petitioner’s challenge,
considered petitioner’s collection alternative, and otherwise
proceeded in the manner contemplated by sections 6320 and 6330.
Petitioner has not called our attention to any specific
provisions of the relevant statutes, regulations, or provisions
of the Internal Revenue Manual that the settlement officer has
violated or failed to take into account.
Considering all of the facts and circumstances, we are
satisfied that respondent’s determination that the NFTL is an
appropriate collection action with respect to petitioner’s
outstanding tax liabilities is supported in law and in fact. It
follows that the determination is not an abuse of discretion, see
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Freije v. Commissioner, supra, and respondent may proceed with
collection as proposed in the above-referenced notice of
determination.
To reflect the foregoing,
Decision will be entered
for respondent.