T.C. Memo. 2009-46
UNITED STATES TAX COURT
TOMI M. PETERSON AND MARILYNN J. PETERSON, Petitioners
v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4521-07L. Filed February 25, 2009.
Tomi M. Peterson and Marilynn J. Peterson, pro sese.
Trent D. Usitalo, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
SWIFT, Judge: In this collection case under section 6330,
petitioners challenge respondent’s proposed levy relating to
petitioners’ outstanding individual Federal income taxes for
1999, 2001, and 2002 in the approximate total amount of $70,000.
Also pending is respondent’s motion for partial summary judgment.
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The primary issue for decision is whether respondent abused
his discretion in sustaining respondent’s proposed levy.
Unless otherwise indicated, all section references are to
the Internal Revenue Code.
FINDINGS OF FACT
The authenticity of many exhibits has been stipulated, but
no narrative facts have been stipulated. Petitioners resided in
Michigan at the time of filing their petition.
Petitioners have experienced a string of difficulties--
losses of jobs, home, and water in a building they were
occupying; deaths in their family; illnesses; and tax problems.
Petitioners’ efforts to represent themselves have been persistent
but often counterproductive. Our jurisdiction and ability to
provide relief to petitioners are limited.
On audit for 1999, 2001, and 2002, respondent made
mathematical adjustments to petitioners’ 1999 and 2002 Federal
income taxes, and respondent assessed the additional income taxes
relating thereto without issuing to petitioners a notice of
deficiency. Petitioners do not challenge respondent’s
mathematical adjustments for 1999 and 2002.
Respondent made a number of income adjustments relating to
petitioners’ 2001 Federal income tax, and on September 29, 2003,
respondent mailed to petitioners a notice of deficiency relating
thereto. Petitioners acknowledge receipt of this notice of
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deficiency. Petitioners did not file a petition to challenge
respondent’s deficiency determination against them for 2001, and
respondent assessed the deficiency.
On January 9, 2006, respondent mailed to petitioners a final
notice of intent to levy relating to their outstanding 1999,
2001, and 2002 Federal income taxes, penalties, additions to tax,
and interest. On January 24, 2006, petitioners appealed
respondent’s levy notice and requested a collection hearing with
respondent’s Appeals Office.
During the collection Appeals Office hearing that was held
on November 2, 2006, petitioners submitted to respondent an
offer-in-compromise (OIC) under which petitioners proposed to pay
a total of $20,000. With the OIC petitioners tendered to
respondent a $4,000 check as earnest money and a $150 check for
the OIC application fee.
Respondent’s Appeals officer determined that although
petitioners’ monthly cash income was minimal, because petitioners
owned two parcels of real property with an estimated value of
approximately $80,000, the reasonable collection potential from
petitioners was approximately $68,000. Accordingly, respondent’s
Appeals Office rejected petitioners’ OIC.
At the Appeals Office hearing respondent’s Appeals officer
noted petitioners’ illnesses and agreed to consider a revised OIC
on the basis of special circumstances and effective tax
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administration if petitioners would submit a revised OIC with
documentation verifying the seriousness of their illnesses (e.g.,
statements from doctors). Petitioners did not submit any further
information or documentation about their illnesses within the
time period specified by respondent.
Also at the Appeals Office hearing, petitioners suggested
their monthly Social Security retirement and disability payments
as a possible source of tax payments. Respondent’s Appeals
officer discouraged petitioners from basing a revised OIC on
monthly Social Security payments because it appeared that
petitioners needed all of their Social Security payments just to
meet basic living expenses.
During the Appeals Office hearing, although petitioners
complained about the penalties, additions to tax, and interest
that had accrued against them for the years 1999, 2001, and 2002,
petitioners never raised a specific claim for abatement under
section 6404 of penalties, additions to tax, or interest.
On January 23, 2007, respondent issued to petitioners a
notice of determination sustaining the proposed levy. In spite
of the fact that respondent’s proposed levy was sustained,
because of petitioners’ illnesses and because respondent’s
Appeals Office determined that immediate levy action against
petitioners’ monthly minimal income likely would cause
petitioners undue hardship, respondent’s Appeals Office
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determined to suspend any collection action against petitioners
for 1 year (until January 23, 2008) to give petitioners time to
submit to respondent a revised OIC or to sell their real
property.
From January 23, 2007, until January 23, 2008, respondent
suspended any levy action against petitioners and placed
petitioners’ outstanding 1999, 2001, and 2002 Federal income
taxes in uncollectible status.
Disagreeing with respondent’s rejection of their OIC, on
February 26, 2007, petitioners timely filed their petition in
this case.
The May 20, 2008, evidentiary hearing constituted both a
hearing on respondent’s motion for partial summary judgment and a
trial of the issues raised.
On November 10, 2008, petitioners filed with the Court a
motion to reopen the evidentiary record and to open up discovery.
Petitioners’ motion will be denied.
OPINION
Petitioners do not contest the amount of their 1999, 2001,
and 2002 Federal income taxes as determined by respondent. In
collection cases under section 6330(d) where the underlying tax
adjustments are not in dispute, we review respondent’s
administrative determinations for an abuse of discretion. Goza
v. Commissioner, 114 T.C. 176 (2000).
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Respondent’s determination of petitioners’ approximate
$68,000 collection potential has not been meaningfully challenged
by petitioners. No appraisal of petitioners’ real property has
been offered into evidence. No credible evidence disputes the
amount respondent used for the valuation of petitioners’ real
property.
At trial petitioners stated that “if we find an abuse of
discretion” an abatement under section 6404 of the penalties,
additions to tax, and interest determined by respondent should be
granted.
At their collection Appeals Office hearing, however,
petitioners did not affirmatively raise as an issue their
entitlement under section 6404 to abatement of penalties,
additions to tax, and interest, and petitioners therefore, among
other reasons, are precluded from seeking section 6404 abatement
relief. See Giamelli v. Commissioner, 129 T.C. 107 (2007);
Magana v. Commissioner, 118 T.C. 488, 493 (2002).
In sustaining respondent’s notice of levy but in deferring
any levy for 1 year, respondent’s Appeals Office exercised
exemplary discretion and restraint. Unfortunately, instead of
taking advantage of respondent’s restraint--obtaining
documentation of their illnesses and revising their OIC--
petitioners filed the instant lawsuit.
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Petitioners complain that some of respondent’s OIC
instructions were not clear and did not correctly explain changes
to respondent’s OIC program under which in some circumstances
amounts due under OICs could be paid in installments.
Petitioners assert that with better instructions they would have
formally revised their OIC.
We reiterate that even after respondent’s adverse notice of
determination was issued, respondent’s levy was suspended for 1
year to allow petitioners time to submit a revised OIC. Again at
trial petitioners were given an opportunity to revise their OIC.
In view of the additional time and opportunities petitioners were
given, petitioners’ complaints about respondent’s confusing OIC
informational material are not credible.
We sustain respondent’s levy notice.
In view of our holding, respondent’s motion for partial
summary judgment is moot and will be denied.
An appropriate order and
decision will be entered.