T.C. Memo. 2008-226
UNITED STATES TAX COURT
ALLAN BARRY MARKS AND ROSALIND J. MARKS, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 14073-07L. Filed October 7, 2008.
Allan Barry Marks and Rosalind J. Marks, pro se.
Justin L. Campolieta, for respondent.
MEMORANDUM OPINION
THORNTON, Judge: This case is before us 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.
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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 1994 through 1999. When they
petitioned the Court, petitioners resided in Florida.
On February 23, 2006, respondent sent petitioners a Notice
of Intent to Levy and Notice of Your Right to a Hearing (the
notice of intent to levy) regarding unpaid taxes for 1994 through
1999. Petitioners timely requested a hearing. With petitioners’
acquiescence, respondent’s Appeals settlement officer conducted
the hearing by telephone in March and April 2007.
Petitioners requested that a collection alternative be
considered. They submitted a Form 433-A, Collection Information
Statement for Wage Earners and Self-Employed Individuals, listing
monthly income of $7,814 and monthly expenses of $7,498.
After reviewing petitioners’ information, the settlement
officer proposed an installment agreement with monthly payments
of $1,826. In arriving at this amount, the settlement officer
used updated information provided by petitioners to determine
their gross monthly income to be $8,642.2 The settlement officer
allowed living expenses that generally approximated or exceeded
the amounts that petitioners had listed on their Form 433-A, with
2
Petitioners have not disputed this determination of their
gross monthly income in this proceeding or, insofar as the record
reveals, in the sec. 6330 hearing.
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one notable exception. In making allowance for housing and
utilities expenses, the settlement officer allowed $1,291 on the
basis of the maximum standard allowance for a family of two
living in Miami-Dade County, Florida, rather than the $2,145 that
petitioners had listed.3
According to the settlement officer’s case activity report,
in a telephone conversation on April 2, 2007, petitioner husband
stated that he was in agreement with a monthly installment
payment of $1,826 as proposed by the settlement officer. By
letter dated April 3, 2007, the settlement officer sent
petitioners a proposed installment agreement reflecting monthly
payments of this amount. On April 9, 2007, the settlement
officer received a telephone message from petitioner wife stating
petitioners could not afford the proposed monthly installment
payments and requesting that they be lowered to between $450 and
$500. The settlement officer rejected this proposal and
countered that the monthly installment payment should be phased
in so as to increase to $1,826 after 1 year.4 Petitioners did
not accept this offer.
3
Although the settlement officer also used the standard
allowance guidelines for food, clothing, and miscellaneous
expenses, the result in this instance was a higher allowance
($1,306) than petitioners had claimed ($1,041).
4
The record does not reveal the starting amount or phase-in
schedule for the proposed monthly payment.
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By Notice of Determination Concerning Collection Action(s)
Under Section 6320 and/or 6330, dated May 22, 2007, respondent’s
Appeals Office sustained the issuance of the notice of intent to
levy.
Pursuant to section 6330, petitioners seek review of
respondent’s determination. Petitioners’ amended petition
assigns as error: (1) That the settlement officer “proposed an
installment payment agreement for significantly less than the
amount proposed”; and (2) that “some” of the living expenses
allowed by the settlement officer in calculating the net monthly
income available for installment payments do not “correctly or
reasonably reflect or represent the actual amounts associated
with those expenses.”5
On July 11, 2008, respondent filed a motion for summary
judgment. On August 22, 2008, petitioners filed their response.
Discussion
Summary judgment is intended to expedite litigation and
avoid unnecessary and expensive trials. Fla. Peach Corp. v.
Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be
granted where there is no genuine issue of any material fact and
a decision may be rendered as a matter of law. Rule 121(a) and
5
The amended petition also assigns as error: (1) That
respondent had misapplied certain payments relating to an earlier
installment agreement; and (2) that assessments for tax years
1994, 1995, and 1996 are barred by the statute of limitations.
The parties agree that these issues have been resolved.
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(b); see 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 proving that there is no genuine issue of material
fact, and factual inferences will be read 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). When a motion for summary judgment is
made and properly supported, the adverse party may not rest upon
mere allegations or denials of the pleadings but must set forth
specific facts showing that there is a genuine issue for trial.
Rule 121(d).
If a taxpayer fails to pay any Federal income tax liability
within 10 days of notice and demand, the Secretary is authorized
to collect the tax by levy on the person’s property. Sec.
6331(a). First, however, the taxpayer must be notified of the
right to an administrative hearing before the Appeals Office of
the Internal Revenue Service. Sec. 6330(a) and (b)(1). At the
hearing, the taxpayer may generally raise relevant issues
relating to the unpaid tax or the proposed levy, including offers
of collection alternatives, which may include, among other
things, an installment agreement or offer in compromise. Sec.
6330(c)(2)(A). Within 30 days after the Appeals Office issues a
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notice of determination, the taxpayer may appeal the
determination to the Tax Court. Sec. 6330(d)(1).
Petitioners have not challenged their underlying liability.
Accordingly, we review respondent’s determination for abuse of
discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000).
Under this standard of review, the determination will not be
disturbed unless it is arbitrary, capricious, or without sound
basis in fact or law. See, e.g., Murphy v. Commissioner, 125
T.C. 301, 320 (2005), affd. 469 F.3d 27 (1st Cir. 2006). For the
reasons discussed below, we conclude that there is no genuine
issue in dispute regarding the exercise of respondent’s
discretion.
Section 6159(a) authorizes the Secretary to enter into
installment agreements “under which such taxpayer is allowed to
make payment on any tax in installment payments if the Secretary
determines that such agreement will facilitate full or partial
collection of such liability.”6 Eligibility for an installment
agreement is based on the taxpayer’s current financial condition.
See generally 2 Administration, Internal Revenue Manual (IRM)
(CCH), pt. 5.14.1.5, at 17,508 (July 12, 2005). In requesting an
installment agreement, a taxpayer must provide specific
6
Pursuant to an exception not relevant here, the
Commissioner is required to enter into an installment agreement
in certain circumstances, generally involving tax liabilities of
less than $10,000. Sec. 6159(c).
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information, including a proposed monthly payment or other
periodic payment amount. 2 Administration, IRM (CCH), pt.
5.14.1.3(4), at 17,505 (July 12, 2005). The amount of the
taxpayer’s installment payment depends on his or her ability to
pay. 2 Administration, IRM (CCH), pt. 5.14.1.5(5), at 17,509
(July 12, 2005). “The taxpayer must agree to the maximum monthly
payment based upon the taxpayer’s ability to pay.” 2
Administration, IRM (CCH), pt. 5.14.2.2.1(7), at 17,530 (July 12,
2005). Allowable expenses are determined by reference to the
Financial Analysis Handbook (a separate section of the IRM) and
the national and local financial standards referenced therein.
See 2 Administration, IRM (CCH), pt. 5.14.1.5(1), at 17,508 (July
12, 2005).
Petitioners allege that in past years they had one or more
installment agreements (apparently covering at least some of the
same liabilities at issue here) with significantly lower monthly
payments than the settlement officer proposed in the section 6330
hearing. Petitioners also allege that in October 2004 one of
respondent’s agents proposed (apparently with respect to the same
liabilities that are at issue here) an installment agreement
providing for monthly payments of $1,000. Petitioners appear to
contend that the settlement officer erred by insisting upon
monthly installment payments that were significantly larger than
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those called for in their prior installment agreements or in
respondent’s alleged October 2004 proposal.
Petitioners’ contention is without merit. Respondent was
not bound by the terms of any prior installment agreement or of
an offer alleged to have been made but not accepted more than 2
years earlier. Petitioners acknowledge that they assented to the
termination of their previous installment agreement because “the
payment was not covering the accruing interest and penalties.”
The administrative record shows that during the section 6330
hearing the settlement officer considered this history and
appropriately proposed an installment agreement on the basis of
current information.
Petitioners contend that the settlement officer abused her
discretion by determining their basic living expenses partly by
reference to standard expense allowances. We disagree.
After considering all the information submitted by
petitioners, the settlement officer applied standard allowances
with respect to two categories of expenses: (1) Food, clothing,
and miscellaneous; and (2) housing and utilities. The settlement
officer allowed petitioners a standard allowance of $1,306 for
food, clothing, and miscellaneous expenses, even though
petitioners had claimed only $1,041 for this amount.
Accordingly, with respect to this item, petitioners have no
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reason to complain about the settlement officer’s use of the
standard allowance.
In essence, petitioners’ disagreement is with the settlement
officer’s use of respondent’s local standards for housing and
utilities expenses for Miami-Dade County, Florida. Petitioners
do not contend that the settlement officer misapplied these
standard allowances or that their use would have deprived
petitioners of the means to provide for basic living expenses.
Instead, they seek to challenge the legitimacy of respondent’s
standard allowances, contending that they “are not believed to be
representative of actual expenses for the applicable categories
and grouping of items of expense, not just with respect to the
Petitioners, but also with respect to all taxpayers in the
Petitioners’ geographic region”. Contrary to Rule 121(d),
however, petitioners have set forth no specific facts showing
that there is a genuine issue for trial in this regard.7
7
Petitioners contend that they should be permitted to
conduct discovery with respect to respondent’s derivation of the
standard allowance guidelines. They contend further that they
should be permitted to supplement their response to respondent’s
motion for summary judgment to take into account the fruits of
this discovery. Discovery must generally be completed and any
motion to compel discovery must be filed no later than 45 days
before the date set for call of a case from the trial calendar
(in this case, the discovery deadline would be Sept. 19, 2008).
Rule 70(a)(2). Petitioners have filed no motion to compel
discovery. In any event, we are unpersuaded of the relevancy of
the derivation of respondent’s county-wide standard housing and
utilities allowance in the absence of any proof or assertion of
specific facts showing that application of the standard allowance
(continued...)
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This Court has sustained the Commissioner’s use of the IRS’s
published national and local allowances as guidelines for basic
living expenses in evaluating the adequacy of proposed
installment agreements and offers-in-compromise. See, e.g.,
Speltz v. Commissioner, 124 T.C. 165, 179 (2005), affd. 454 F.3d
782 (8th Cir. 2006); Fernandez v. Commissioner, T.C. Memo. 2008-
210; Klein v. Commissioner, T.C. Memo. 2007-325; Lemann v.
Commissioner, T.C. Memo. 2006-37; Etkin v. Commissioner, T.C.
Memo. 2005-245; Hawkins v. Commissioner, T.C. Memo. 2005-88.
More particularly, this Court has generally found no abuse of
discretion where Appeals officers used the housing and utilities
standard allowances rather than the taxpayer’s actual expenses.
See Diffee v. Commissioner, T.C. Memo. 2007-304; McDonough v.
Commissioner, T.C. Memo. 2006-234; Schulman v. Commissioner, T.C.
Memo. 2002-129; cf. Fowler v. Commissioner, T.C. Memo. 2004-163
(holding that an Appeals officer abused his discretion in
determining, on the basis of the standard allowance guidelines,
that the taxpayers could not live as cheaply as they had claimed
and so could not afford their proposed installment payments).
Ultimately, the only issue in this proceeding is whether
there was an abuse of discretion in refusing petitioners’
7
(...continued)
would leave petitioners without the resources to meet basic
living expenses--a matter which is within petitioners’ own
knowledge and as to which no discovery from respondent is needed.
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requested collection alternative and determining that the
proposed levy should proceed. Clearly there was not. The
settlement officer followed applicable procedures in considering
petitioners’ request for a collection alternative and in
proposing monthly installment payments. Petitioners countered
with an informal proposal for monthly installment payments of
$450 to $500. This proposal, however, was for less than half the
$1,144 of available net monthly income that would be indicated
taking into account their undisputed $8,642 of gross monthly
income and making allowance for the $7,498 of total living
expenses that petitioners listed on their Form 433-A (rather than
the standard allowances used by the settlement officer).
Rejection of this offer was not arbitrary, capricious, or without
sound basis.
In conclusion, we are satisfied that there is no genuine
issue as to any material fact and that a decision may be rendered
as a matter of law.
To reflect the foregoing,
An appropriate order and
decision will be entered.