T.C. Memo. 2009-135
UNITED STATES TAX COURT
ROBERT JUDGE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 28615-07L. Filed June 10, 2009.
Howard M. Koff, for petitioner.
John R. Mikalchus, for respondent.
MEMORANDUM OPINION
GOEKE, Judge: Petitioner seeks review of respondent’s
determination to proceed with a proposed levy to collect income
tax liabilities for tax years 2001, 2002, 2003, and 2004. The
issue for decision is whether respondent abused his discretion in
sustaining the levy. For the reasons stated herein, we hold that
respondent abused his discretion.
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Background
The parties submitted this case fully stipulated under Rule
122.1 The stipulation of facts and the attached exhibits are
incorporated herein by this reference. Petitioner resided in New
York at the time of filing his petition.
Petitioner filed individual income tax returns that reported
tax due for the years at issue. The unpaid tax resulted from
insufficient estimated income tax payments. Petitioner did not
submit any payments with his returns. In 2004 petitioner entered
into and subsequently defaulted on an installment agreement with
respect to 2001. In 2005 petitioner submitted an offer-in-
compromise with respect to the years at issue. The Internal
Revenue Service (IRS) rejected the offer-in-compromise on the
basis that petitioner’s reasonable collection potential exceeded
the offer.
In April 2007 respondent issued a notice of intent to levy
for the years at issue. At that time petitioner had unpaid
assessments in excess of $200,000 plus accrued interest for the
years at issue. Petitioner timely requested a collection due
process hearing (CDP hearing) and indicated that he would pursue
an installment agreement or an offer-in-compromise. The Appeals
Office requested that petitioner provide a completed Form 433-A,
1
All Rule references are to the Tax Court Rules of Practice
and Procedure, and unless otherwise indicated all section
references are to the Internal Revenue Code.
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Collection Information Statement for Wage Earners and Self-
Employed Individuals. Petitioner submitted a Form 433-A to the
Appeals Office on July 2, 2007. Upon receipt of the Form 433-A
the Appeals Office assigned the case to a settlement officer. In
October 2007 the Appeals Office discovered that the settlement
officer had not received the case file because the file was
apparently delivered to an incorrect address. Once he received
the case file, the settlement officer could not find the Form
433-A. In an October 11, 2007, letter, the settlement officer
requested that petitioner submit a Form 433-A, a signed 2006
return, and proof of 2007 estimated tax payments within 14 days,
i.e., by October 25, 2007. The settlement officer did not inform
petitioner that he could not find the Form 433-A petitioner had
previously submitted. Petitioner had filed his 2006 return
electronically before the date of this letter.
On November 8, 2007, the settlement officer held a telephone
conference with petitioner’s representative. During the hearing
petitioner’s representative stated that petitioner sent the
requested documents 2 days before, but the settlement officer had
not received the documents. Petitioner’s representative stated
that he believed petitioner’s income was overstated on the Form
433-A and requested a brief extension of time to prepare a
revised Form 433-A. Petitioner’s representative also stated that
petitioner qualified for an offer-in-compromise. The settlement
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officer denied the request for an extension. Shortly after the
hearing, the settlement officer received the Form 433-A and the
2006 return. During the CDP hearing petitioner did not challenge
the underlying tax liabilities for 2000 through 2004. On
November 19, 2007, respondent issued a notice of determination
sustaining the levy for the years at issue.
Discussion
Petitioner argues that the settlement officer abused his
discretion because he refused to grant a brief extension of time
for petitioner to submit a revised Form 433-A to correct his
income information. Because petitioner does not dispute the
underlying tax liabilities, we review respondent’s determination
sustaining the collection action for abuse of discretion. See
Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v.
Commissioner, 114 T.C. 176, 182 (2000). An abuse of discretion
occurs when the Appeals officer’s determination was arbitrary,
capricious, or without sound basis in fact or law. Murphy v.
Commissioner, 125 T.C. 301, 308 (2005), affd. 469 F.3d 27 (1st
Cir. 2006).
At a CDP hearing a taxpayer may raise any relevant issue
relating to the collection action including challenges to the
appropriateness of the collection actions and possible collection
alternatives. Sec. 6330(c)(2)(A). Following the hearing, the
Appeals officer must determine whether the collection action
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should proceed. The Appeals officer must consider: (1) Whether
the requirements of applicable law and administrative procedure
have been met, (2) any issues the taxpayer raised, and (3)
whether the collection action balances the need for efficient
collection of taxes with the taxpayer’s legitimate concern that
any collection action be no more intrusive than necessary. Sec.
6330(c)(3).
It is not an abuse of discretion for an Appeals officer to
sustain a collection action on the basis of a taxpayer’s failure
to submit requested financial information. See Cavazos v.
Commissioner, T.C. Memo. 2008-257; Chandler v. Commissioner, T.C.
Memo. 2005-99. Respondent argues that the settlement officer did
not abuse his discretion because petitioner failed to provide the
financial information necessary to consider collection
alternatives. The record clearly establishes otherwise. The
settlement officer denied petitioner’s request for a brief
extension at the hearing on the ground that petitioner failed to
provide a Form 433-A before the October 25 deadline, which is
clearly incorrect because petitioner provided a Form 433-A to the
Appeals Office in July 2007, 4 months before the hearing.2 The
Appeals Office misplaced petitioner’s Form 433-A, but the
2
In the attachment to the notice of determination, the
settlement officer justified his denial of a brief extension as
follows: “The information was to be submitted by October 25th
and still not received, further extension was denied.”
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settlement officer never informed petitioner of this fact. The
settlement officer’s basis for denying petitioner’s request for a
brief extension, i.e., petitioner’s failure to provide a Form
433-A before the hearing, is contrary to the facts in the record.
Accordingly, we hold that he abused his discretion in denying a
brief extension and sustaining the levy.
In denying a brief extension, the settlement officer also
failed to consider that petitioner resubmitted the Form 433-A at
the settlement officer’s request on November 6, 2007. The
settlement officer had not received petitioner’s second
submission of the Form 433-A before the CDP hearing on November
8, 2007. The settlement officer knew petitioner had sent it, and
he received the Form 433-A shortly after the hearing. The record
does not establish the date the settlement officer received the
Form 433-A or whether he received the form before the issuance of
the notice of determination on November 19, 2007. However, the
settlement officer denied petitioner’s request for a brief
extension on the basis that he did not receive the Form 433-A by
the October 25 deadline. This short delay in petitioner’s
submission of the second Form 433-A does not justify respondent’s
sustaining the levy without granting a brief extension for
petitioner to revise his income information, especially in view
of the fact that the settlement officer failed to acknowledge
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that the Appeals Office lost petitioner’s first Form 433-A
submitted 4 months before the CDP hearing.
Respondent contends that the settlement officer could not
have considered the Form 433-A because it was incorrect. The
record supports petitioner’s claim that his income information
was overstated on the second Form 433-A that petitioner
submitted. The second Form 433-A listed petitioner’s monthly net
business income as nearly double his net profit from his business
reported on his 2006 Schedule C, Profit or Loss From Business.
In view of this clear inconsistency and the fact that the Appeals
Office lost petitioner’s first Form 433-A, we believe that it was
unreasonable for the settlement officer to refuse to grant
petitioner a brief extension.
Irrespective of whether or not the Form 433-A was correct,
the record establishes that the settlement officer did not make
any determination based on the financial information petitioner
provided as section 6330 requires. Section 6330 requires the
settlement officer to consider information the taxpayer
presented. The settlement officer did not make any determination
based upon the information petitioner provided regarding
petitioner’s ability to pay the tax liabilities or whether he
would qualify for collection alternatives such as an offer-in-
compromise. See Crisan v. Commissioner, T.C. Memo. 2003-318;
Schulman v. Commissioner, T.C. Memo. 2002-129. The settlement
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officer could not have done so when he decided at the CDP hearing
to deny the extension because the Appeals Office misplaced the
Form 433-A petitioner sent in July 2007 and the settlement
officer had not yet received the second Form 433-A petitioner
sent 2 days before the hearing.
Respondent also argues that petitioner failed to provide an
offer-in-compromise before the CDP hearing. The settlement
officer did not request that petitioner submit an offer-in-
compromise before the CDP hearing date. Nor did the settlement
officer base his decision to deny a brief extension on the fact
that petitioner did not provide an offer-in-compromise before the
CDP hearing. Respondent argues that the settlement officer
reasonably determined that collection alternatives would be
ineffective on the basis of the defaulted installment agreement
and previously rejected offer-in-compromise. However, the record
does not indicate that the settlement officer considered these
past collection alternatives when making his determination.
We hold that the settlement officer’s refusal to grant a
brief extension for petitioner to correct the income information
on his Form 433-A was an abuse of discretion and denied
petitioner his right to a fair hearing. Petitioner’s past
cooperation with the Appeals Office persuades us that he would
have timely submitted the revised financial information if
granted an extension. Petitioner had not previously requested an
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extension and had cooperated with the Appeals Office. Cf. Roman
v. Commissioner, T.C. Memo. 2004-20 (taxpayer received repeated
extensions and still failed to provide the requested
information); Rodriguez v. Commissioner, T.C. Memo. 2003-153
(same). Accordingly, we shall remand this matter for the Appeals
Office to consider an offer-in-compromise or other collection
alternative.
To reflect the foregoing,
An appropriate order will
be issued.