T.C. Memo. 2007-304
UNITED STATES TAX COURT
ALFRED A. DIFFEE, JR. AND NORMA J. DIFFEE, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16567-06. Filed October 9, 2007.
Paul R. Tom, for petitioners.
G. Chad Barton, for respondent.
MEMORANDUM OPINION
MARVEL, Judge: This matter is before the Court on
respondent’s motion for summary judgment, filed under Rule 121.1
1
All Rule references are to the Tax Court Rules of Practice
and Procedure, and all section references are to the Internal
Revenue Code in effect for the years at issue. Some monetary
amounts are rounded to the nearest dollar.
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Background
This is an appeal from respondent’s determination upholding
the proposed use of a levy to collect petitioners’ unpaid Federal
income tax liabilities for 2001 and 2002. Petitioners resided in
Oakhurst, Oklahoma, when the petition was filed.
On July 2, 2005, respondent sent petitioners a Final Notice
of Intent to Levy and Notice of Your Right to a Hearing for the
years at issue. Petitioners timely submitted a Form 12153,
Request for a Collection Due Process Hearing. In their request,
petitioners asserted that a levy would be “devastating” and
requested payment of their tax liabilities through an installment
agreement.
On September 13, 2005, respondent sent petitioners a letter
acknowledging petitioners’ request for a section 6330 hearing.
On May 1, 2006, Settlement Officer Greg Clark (Officer Clark)
sent petitioners a letter scheduling a telephone conference on
May 23, 2006, to discuss collection alternatives. In addition,
Officer Clark requested that petitioners produce a Form 433-A,
Collection Information Statement for Wage Earners and Self-
Employed Individuals (Form 433-A); Form 1040, U.S. Individual
Income Tax Return, for 2004 and 2005 (returns); proof of
estimated payments for 2005 and 2006; and copies of bank
statements for all accounts in petitioners’ name or held for
their benefit for the most current 3 months (bank statements).
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Petitioners submitted information requested by Officer
Clark.2 On their Form 433-A, petitioners reported the following
total income and total living expenses:
Total income Total living expenses
Source Gross Expense items Actual
monthly monthly
Wages $2,700.00 Food, clothing, misc. $904
Net rental 250.00 Housing and utilities 1,004
Pension/Social Transportation 814
Security 2,152.83
Total 5,102.83 Health care 700
Taxes (income and FICA) 1,100
Total 4,522
Officer Clark made several adjustments to petitioners’ total
income and total living expenses reported on their Form 433-A.
First, Officer Clark increased petitioners’ wage income to
$3,4323 using Norma J. Diffee’s (Mrs. Diffee) pay statement for
the period ending April 22, 2006. Second, he decreased
petitioners’ housing and utilities to $932, the maximum allowed
under the national standards. Third, Officer Clark reduced
petitioners’ transportation expense to $500, which reflected
their monthly motorcycle payment and operating expenses for the
2
We cannot determine from the record whether petitioners
provided proof of estimated payments for 2005 and 2006.
3
Officer Clark determined this amount by dividing Mrs.
Diffee’s total earnings for the first 16 weeks of 2006 by 16
weeks and then multiplying that number by 52 weeks. The total
was divided by 12 months to yield petitioners’ monthly wage
income. We calculated that the monthly wage income is $3,433
after rounding.
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two vehicles petitioners disclosed on their Form 433-A.4 Fourth,
Officer Clark decreased petitioners’ tax expense to $871. He
estimated petitioners’ Federal and State income taxes and their
tax under the Federal Insurance Contributions Act (FICA).
Officer Clark determined petitioners’ estimated Federal and State
income tax by multiplying by 63 percent the amount of income tax
reported on petitioners’ Federal income tax return and State
income tax return for 2005. Officer Clark computed petitioners’
FICA tax from Mrs. Diffee’s earnings statement for the first 16
weeks of 2006. Finally, Officer Clark reduced petitioners’
health care expense to $250 because petitioners did not provide
documentation or explanation of the $700 claimed on the Form 433-
A. Officer Clark also considered that petitioners did not list
any medical expenses as an itemized deduction on their last filed
Federal income tax return.
After all adjustments, Officer Clark determined that
petitioners had the ability to pay $2,377 per month5 under an
installment agreement. The following table shows the amounts
Office Clark used in making his determination:
4
Petitioners disclosed that they owned a 2006 Honda Goldwing
motorcycle and a 1996 Ford Ranger.
5
Officer Clark determined this amount by reducing
petitioners’ total income by their total living expenses.
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Total income Total living expenses
Source Gross monthly Expense items Actual monthly
Wages $3,432 Food, clothing, misc. $904
Net rental 250 Housing and utilities 932
Pension/Social
1
Security 2,152 Transportation 500
Total 5,834 Health care 250
1
Taxes (income and FICA) 871
Total 3,457
1
It appears that in making his calculations, Officer Clark
rounded petitioners’ pension/Social Security amount down and that
he rounded petitioners’ tax expense amount up. Both roundings
favor petitioners.
On June 20, 2006, Officer Clark and petitioners’
representative held a telephone conference and discussed the
income and expenses listed on petitioners’ Form 433-A. During
the conference, Officer Clark agreed to increase petitioners’
expenses by $500 per month for additional employment expenses.6
Officer Clark offered petitioners an installment agreement with
monthly payments of $1,877.
On June 22, 2006, Officer Clark sent petitioners’
representative a Form 12257, Summary Notice of Determination,
Waiver of Right to Judicial Review of a Collection Due Process
Determination, and Waiver of Suspension of Levy Action, and a
Form 433-D, Installment Agreement. On July 6, 2006, Officer
Clark telephoned petitioners’ representative to follow up on the
installment agreement. Petitioners’ representative informed
Officer Clark that petitioners could not make the proposed
6
The increase in employment expenses was for Mrs. Diffee’s
meals on the road.
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monthly payment under the installment agreement, and that they
requested that Officer Clark issue a notice of determination. On
July 18, 2006, respondent issued petitioners a Notice of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330.
On August 24, 2006, the petition was timely filed.
Petitioners allege that respondent ignored the reality of their
income, health status, and expenses, and therefore, respondent
abused his discretion. Petitioners request the Court to set
aside respondent’s determination and consider other collection
alternatives.
On May 10, 2007, we issued petitioners a notice setting
their case for trial during the Court’s October 15, 2007,
Oklahoma City, Oklahoma, trial session. On July 24, 2007,
respondent filed a motion for summary judgment. On July 30,
2007, we ordered petitioners to respond to respondent’s motion
for summary judgment by August 13, 2007. Petitioners failed to
respond.
Discussion
I. Summary Judgment
Summary judgment is a procedure designed to expedite
litigation and avoid unnecessary, time-consuming, and expensive
trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 678, 681
(1988). Summary judgment may be granted with respect to all or
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any part of the legal issues presented “if the pleadings, answers
to interrogatories, depositions, admissions, and any other
acceptable materials, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that a
decision may be rendered as a matter of law.” Rule 121(b);
Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd.
17 F.3d 965 (7th Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753,
754 (1988). The moving party bears the burden of establishing
that there is no genuine issue of material fact, and factual
inferences will be drawn in a manner most favorable to the party
opposing summary judgment. Dahlstrom v. Commissioner, 85 T.C.
812, 821 (1985); Jacklin v. Commissioner, 79 T.C. 340, 344
(1982). The nonmoving party, however, cannot rest upon the
allegations or denials in his pleadings but must “set forth
specific facts showing that there is a genuine issue for trial.”
Rule 121(d); Dahlstrom v. Commissioner, supra at 820-821.
II. Section 6330
Section 6330(a) provides that no levy may be made on any
property or right to property of any person unless the Secretary
has notified such person in writing of the right to a hearing
before the levy is made. If the person makes a request for a
hearing, a hearing shall be held before an impartial officer or
employee of the Internal Revenue Service Office of Appeals
(Appeals Office). Sec. 6330(b)(1), (3). At the hearing, a
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taxpayer may raise any relevant issue, including appropriate
spousal defenses, challenges to the appropriateness of the
collection action, and collection alternatives. Sec.
6330(c)(2)(A). A taxpayer may contest the existence or amount of
the underlying tax liability at the hearing if the taxpayer did
not receive a notice of deficiency for the tax liability in
question or did not otherwise have an earlier opportunity to
dispute the tax liability. Sec. 6330(c)(2)(B); see also Sego v.
Commissioner, 114 T.C. 604, 609 (2000).
Following a hearing, the Appeals Office must make a
determination whether the proposed levy action may proceed. The
Appeals Office is required to take into consideration: (1)
Verification presented by the Secretary that the requirements of
applicable law and administrative procedure have been met, (2)
relevant issues raised by the taxpayer, and (3) whether the
proposed levy action appropriately balances the need for
efficient collection of taxes with a taxpayer’s concerns
regarding the intrusiveness of the proposed levy action. Sec.
6330(c)(3).
Section 6330(d)(1) grants this Court jurisdiction to review
the determination made by the Appeals Office in connection with
the section 6330 hearing. Where the underlying tax liability is
not in dispute, the Court will review the determination of the
Appeals Office for abuse of discretion. Lunsford v.
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Commissioner, 117 T.C. 183, 185 (2001); Sego v. Commissioner,
supra at 610; Goza v. Commissioner, 114 T.C. 176, 182 (2000). An
abuse of discretion occurs if the Appeals Office exercises its
discretion “arbitrarily, capriciously, or without sound basis in
fact or law.” Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
Petitioners do not dispute their underlying tax liabilities
for any of the relevant years. Accordingly, we shall review
respondent’s determination for abuse of discretion in deciding
whether to grant respondent’s summary judgment motion.
In their petition, petitioners allege that respondent abused
his discretion by failing to consider the reality of petitioners’
income, health status, and expenses when determining petitioners’
ability to pay under an installment agreement. Respondent argues
that he did not abuse his discretion by sustaining the proposed
levy.
On the record presented in support of respondent’s summary
judgment motion, we conclude that there is no material fact in
dispute regarding the exercise of respondent’s discretion.
Petitioners did not file any response to respondent’s summary
judgment motion. Because they did not respond, we are left with
the task of reviewing the motion record without the benefit of
petitioners’ guidance.
The record shows that Officer Clark did not abuse his
discretion by making adjustments to petitioners’ Form 433-A.
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First, Officer Clark calculated Mrs. Diffee’s monthly wage income
by using the earnings statement provided by petitioners. Her
earnings statement reported that she earned $12,673.92 for the
first 16 weeks of 2006. Officer Clark used this number to
calculate petitioners’ monthly wage income.
Second, Officer Clark adjusted petitioners’ housing and
utilities expense in accordance with the Internal Revenue
Service’s (Service) national standards. Under the national
standards, the maximum monthly housing and utilities allowance
for a family of two in Tulsa County, where petitioners reside, is
$932. Neither of these adjustments reflects an abuse of Officer
Clark’s discretion. See McDonough v. Commissioner, T.C. Memo.
2006-234 (no abuse of discretion by Appeals officer for using the
housing and utilities standard allowances rather than taxpayer’s
actual expense).
Third, Officer Clark did not abuse his discretion by
decreasing petitioners’ transportation expense. Officer Clark
considered petitioners’ monthly operating expenses for two
vehicles and petitioners’ monthly motorcycle payment.7
Fourth, Officer Clark did not abuse his discretion by
redetermining petitioners’ estimated tax expense. In his
calculation, Officer Clark included Federal and State income
7
Petitioners did not have an outstanding loan on the Ford
Ranger.
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taxes and the FICA tax. Officer Clark computed petitioners’ FICA
tax from Mrs. Diffee’s earnings statement for the first 16 weeks
of 2006.
Finally, Officer Clark decreased petitioners’ health care
expense. His decision was based on several factors. First,
petitioners did not provide Officer Clark with any documentation
or explanation regarding the $700 health care expense claimed on
the Form 433-A. Second, petitioners did not claim any itemized
deductions for medical expenses on their Federal income tax
return for 2005. Because petitioners failed to present any
evidence of Mr. Diffee’s medical condition during the section
6330 hearing, Officer Clark did not abuse his discretion by
reducing petitioners’ health care expense.
The record discloses that Officer Clark adjusted his
calculations based on information he received from petitioners.
During a conference with petitioners’ representative, Officer
Clark agreed to increase petitioners’ expense by $500 per month
for Mrs. Diffee’s meals on the road. This allowance reduced
petitioners’ monthly payment under the installment agreement to
$1,877.8 However, petitioners refused Officer Clark’s proposed
changes to their installment agreement and requested that he
issue the determination letter.
8
Officer Clark originally proposed a monthly payment of
$2,377.
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The uncontested record before us indicates that Officer
Clark’s adjustments were not arbitrary, capricious, or without
sound basis in law or fact. See Woodral v. Commissioner, supra
at 23. Officer Clark made reasonable adjustments by evaluating
petitioners’ disclosures on and attachments to their Form 433-A,
petitioners’ last filed Federal and State income tax returns, and
the Service’s national standards. Accordingly, respondent did
not abuse his discretion in rejecting petitioners’ proposed
installment agreement and sustaining the proposed collection
action.
We conclude that there is no genuine issue of material fact
requiring a trial in this case, and we hold that respondent is
entitled to the entry of a decision sustaining the proposed levy
as a matter of law.
An appropriate order and
decision will be entered.