T.C. Memo. 2010-210
UNITED STATES TAX COURT
DAN K. AND PAULA SHAW, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1642-08L. Filed September 27, 2010.
Ps filed a petition for judicial review pursuant
to sec. 6320, I.R.C., in response to a determination by
R that lien action was appropriate.
Held: Ps are liable for the addition to tax for
failure to pay their tax liability in a timely manner.
R’s filing of the lien to protect the Government’s
interest and denial of an installment agreement do not
constitute an abuse of discretion. R’s determination
to proceed with collection action is sustained.
Robert E. McKenzie and Kathleen M. Lach, for petitioners.
Gorica B. Djuraskovic, for respondent.
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MEMORANDUM FINDINGS OF FACT AND OPINION
WHERRY, Judge: This case is before the Court on a petition
for judicial review of a Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330.1 The issues
for decision are (1) whether petitioners are liable for the
failure to pay addition to tax imposed by section 6651(a)(2); (2)
whether respondent abused his discretion in not agreeing to an
installment payment agreement or offer-in-compromise; and (3)
whether respondent may proceed with collection by means of a
filed tax lien with respect to petitioners’ Federal income tax
liability for the 2005 tax year.
FINDINGS OF FACT
Some of the facts have been stipulated, and the stipulated
facts and the accompanying exhibits are hereby incorporated by
reference into our findings. Petitioners resided in Nevada when
they filed their petition.
Dan Shaw is a real estate developer in Las Vegas, Nevada,
and has owned his own real estate development business since
1990. Early in this decade he was involved with the Castaways
hotel and casino, which closed in 2004 because of financial
difficulties. Ms. Shaw is still involved in expensive litigation
concerning union dues and health benefits which arose as the
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code (Code) of 1986, as amended.
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result of the Castaways’ closure. Other real property
investments or investment entities in which Mr. Shaw was involved
have suffered foreclosures or deeds in lieu of foreclosures. In
2006 these events resulted in approximately $2.8 million of
taxable income, a portion of which was so-called phantom income
from relief of indebtedness reported on Schedule E, Supplemental
Income and Loss, of petitioners’ Form 1040, U.S. Individual
Income Tax Return.
In 2006 Mr. Shaw began providing consulting services to
banks to supplement his income from his real estate business,
which was suffering because of poor real estate and economic
conditions.
Petitioners presumably filed their 2005 Federal income tax
return by October 15, 2006, its extended due date. It was
received by respondent on October 20, 2006, showing tax due which
was not paid with the return. On December 4, 2006, the tax shown
on the return was assessed, together with a $34,201.96 addition
to tax under section 6651(a)(2) for failure to timely pay the
Federal income tax liability, a $2,351.71 addition to tax under
section 6654(a) for failure to make estimated tax payments, and
statutory interest.2 On December 20, 2006, petitioners submitted
2
Respondent assessed $37,376.43 of additional income tax, a
$25,658.13 addition to tax under sec. 6651(a)(2), and $24,557.90
of additional statutory interest on Mar. 19, 2007, and abated
$144,285 of previously assessed 2005 tax on Dec. 31, 2007.
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to respondent a Form 433-A, Collection Information Statement for
Wage Earners and Self-Employed Individuals.
Thereafter, on April 10, 2007, respondent filed a Notice of
Federal Tax Lien with respect to petitioners’ unpaid tax
liability for 2005.3 Respondent sent petitioners a Notice of
Federal Tax Lien Filing and Your Right to a Hearing Under IRC
6320 for 2005 on April 19, 2007. On May 16, 2007, petitioners
responded with a timely Form 12153, Request for a Collection Due
Process Hearing, in which they (1) asserted that “The filing of a
federal tax lien at this time will hinder the taxpayers’ ability
to liquidate assets and/or secure financing in order to pay the
liability in full”; (2) claimed entitlement to an offer-in-
compromise or an installment agreement; and (3) disagreed with
the amount of their tax liability and argued that they had
reasonable cause for failing to pay their tax liability. A
3
The notice of Federal tax lien indicates that it was
“prepared and signed” on Apr. 10, 2007. Although the parties
have stipulated that it was also filed on that date, a copy of
the certified literal transcript for petitioners’ 2005 tax year
appears to indicate that it was actually filed on Apr. 13, 2007.
The apparent discrepancy is not an issue in this case because
petitioners do not argue that respondent failed to send them a
notification letter within 5 business days of filing the notice
as required by sec. 6320(a). Moreover, even if the notification
letter was untimely, it does not give rise to an abuse of
discretion. Petitioners nevertheless timely requested a hearing
within the 30-day period beginning on the day after the fifth
business day following the filing of the notice of Federal tax
lien. See Bruce v. Commissioner, T.C. Memo. 2007-161.
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collection due process hearing was scheduled for July 31, 2007,
at 10 a.m.
On July 25, 2007, petitioners sent respondent additional
financial information for consideration. Thereafter, on August
17, 2007, petitioners sent respondent’s settlement officer,
Michael A. Freitag, a request for an installment agreement to
address their unpaid 2003 and 2005 Federal income tax
liabilities.
In order to pay off the 2005 tax liability of over $1
million, petitioners proposed the following payment plan: (1) A
lump-sum downpayment of $100,000 within 10 days of acceptance of
the agreement, (2) monthly payments of $1,200 beginning 30 days
after the lump-sum downpayment and continuing for 53 months,
except as provided in (3) below, (3) a lump sum payment of
$300,000 in lieu of the 24th payment of the installment
agreement, and (4) a balloon payment of the balance due in the
54th month. Petitioners indicated that Dan Shaw’s “income at any
given month is unpredictable”. He “does not receive a regular
ongoing salary” but rather “receives sporadic distributions from
his various partnership interests generally related to real
estate activity, which at the moment is in a downturn.”
In a September 7, 2007, response Mr. Freitag listed several
problems with the proposal, including that (1) “the monthly
income on the current 433-A submitted shows as $57,000+ per month
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and not the $26,000+ per the W-2’s”; (2) “the expenses claimed
are excessive and exceed the national standards”; and (3) “it
appears that the taxpayer can liquidate assets and business
interests and pay the liability in full.”
On September 21, 2007, petitioners sent Mr. Freitag a letter
in which they offered to make additional annual lump sum payments
and disagreed with Mr. Freitag’s “strict adherence to the use of
IRS national standards for expenses, without consideration of the
taxpayers’ unique facts and circumstances”. The letter also
explained that Mr. Shaw’s partial interests in real estate
projects were not “readily liquid” because they were often small
minority ownership positions and market conditions were
depressed. On October 15, 2007, petitioners sent Mr. Freitag an
unsigned copy of their 2006 tax return. On October 23 and 25,
2007, petitioners sent Mr. Freitag updated financial information.
On December 20, 2007, respondent sent petitioners two
separate Notices of Determination Concerning Collection Action(s)
Under Section 6320 and/or 6330 for 2005. Attachments to the
notices of determination stated that petitioners “are not
requesting release or withdrawal of the Notice of Federal Tax
Lien, and there is no indication they meet the conditions for
withdrawal or release.” The attachments further indicated that
petitioners did not raise the issue of reasonable cause at their
hearing.
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The attachments also call into question petitioners’ claims
of receiving only sporadic income. In that regard, the
attachments state that respondent
is currently receiving approximately $13,000.00 a month
from a levy for periods that are not subject to this
CDP [collection due process] hearing. In addition, the
Revenue Officer’s history indicated that the
representative stated on three separate occasions
during 2007 that the levied year would be full paid
within a few weeks.
The attachments indicated that Mr. Freitag had determined
that petitioners’ income was approximately $58,000 per month4 and
that their claimed expenses were “excessive and exceeded national
standards.” Finally, the attachments stated that respondent took
proper action in filing a notice of Federal tax lien.
Petitioners filed their timely petition with this Court on
January 18, 2008. Petitioners assert in the petition that at the
hearing and in the determination letter respondent abused his
discretion by (1) denying their request for a reasonable
installment agreement, (2) failing to consider abatement of
penalties for reasonable cause, and (3) sustaining the lien
against petitioners.
Petitioners assert respondent erred in sustaining the lien
because he ignored facts concerning petitioners’ legal and
accounting expenses, other secured debt, and “fluctuating
4
Any discrepancy between this $58,000 amount and the
“$57,000 +” amount referenced by Mr. Freitag in his Sept. 7,
2007, letter is not explained by the record.
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income”. Petitioners also assert that respondent prematurely
issued the notices of determination without a final courtesy call
or counteroffer and failed to determine whether petitioners had
reasonable cause for not paying their 2005 taxes.
More specifically, petitioners claim that the $58,000 was an
average monthly figure and that they did not receive this amount
on a regular monthly basis. They acknowledge that their expenses
were greater than respondent’s national standards but cite
respondent’s ability to deviate from the standards. In their
view, reasonable cause for failing to timely pay taxes existed in
the light of their financial circumstances, which were beyond
their control.
Respondent disagrees that petitioners provided sufficient
evidence to entitle them to an abatement of penalties for
reasonable cause. He contends Mr. Freitag considered
petitioners’ sporadic income but nevertheless acted within his
discretion in rejecting the installment agreement. Respondent
argues, therefore, that the conditions for withdrawing a notice
of Federal tax lien under section 6323(j) were not met and a
Federal tax lien is appropriate and one of the least intrusive
methods of collection.
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OPINION
I. Collection Actions--General Rules
Section 6321 imposes a lien in favor of the United States
upon all property and rights to property of a taxpayer who fails
to pay any tax liability after demand for payment. The lien
generally arises at the time assessment is made. Sec. 6322.
Section 6323, however, provides that such lien shall not be valid
against any purchaser, holder of a security interest, mechanic’s
lienor, or judgment lien creditor until the Secretary files a
notice of lien with the appropriate public officials. Section
6320 then sets forth procedures applicable to afford protections
for taxpayers in lien situations.
Section 6320(a)(1) establishes the requirement that the
Secretary notify in writing the person described in section 6321
of the filing of a notice of lien under section 6323. This
notice required by section 6320 must be sent not more than 5
business days after the notice of tax lien is filed and must
advise the taxpayer of the opportunity for administrative review
of the matter in the form of a hearing before the Internal
Revenue Service Office of Appeals. Sec. 6320(a)(2) and (3).
Section 6320(b) and (c) grants a taxpayer who so requests the
right to a fair hearing before an impartial Appeals officer,
generally to be conducted in accordance with the procedures
described in section 6330(c), (d), and (e).
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Section 6330(c) addresses the matters to be considered at
the hearing:
SEC. 6330(c). Matters Considered at Hearing.--In
the case of any hearing conducted under this section--
(1) Requirement of investigation.--The
appeals officer shall at the hearing obtain
verification from the Secretary that the
requirements of any applicable law or
administrative procedure have been met.
(2) Issues at hearing.--
(A) In general.--The person may raise at
the hearing any relevant issue relating to
the unpaid tax or the proposed levy,
including--
(i) appropriate spousal defenses;
(ii) challenges to the
appropriateness of collection actions;
and
(iii) offers of collection
alternatives, which may include the
posting of a bond, the substitution of
other assets, an installment agreement,
or an offer-in-compromise.
(B) Underlying liability.--The person
may also raise at the hearing challenges to
the existence or amount of the underlying tax
liability for any tax period if the person
did not receive any statutory notice of
deficiency for such tax liability or did not
otherwise have an opportunity to dispute such
tax liability.
Once the Appeals Office has issued a determination regarding
the disputed collection action, section 6330(d) allows the
taxpayer to seek judicial review in the Tax Court. In
considering whether taxpayers are entitled to any relief from the
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Commissioner’s determination, this Court has established the
following standard of review:
where the validity of the underlying tax liability is
properly at issue, the Court will review the matter on
a de novo basis. However, where the validity of the
underlying tax liability is not properly at issue, the
Court will review the Commissioner’s administrative
determination for abuse of discretion. [Sego v.
Commissioner, 114 T.C. 604, 610 (2000).]
II. Challenges to Underlying Liabilities
Challenges to the underlying tax liability may be raised
only where the taxpayer did not receive a notice of deficiency or
otherwise have an opportunity to dispute such liability. See
sec. 6330(c)(2)(B).
Respondent assessed an addition to tax under section
6651(a)(2) with respect to petitioners’ 2005 tax year.
Petitioners challenged their liability for the addition to tax in
their May 16, 2007, hearing request, arguing that they had
reasonable cause for their failure to pay. Although they did not
pursue the reasonable cause defense at their section 6330
hearing, they raise it anew in this proceeding.5
5
Petitioners claim that they did not have enough time to
raise their reasonable cause defense before Appeals because
respondent prematurely issued the notices of determination. We
note that there is no requirement that respondent’s Appeals
Office wait a certain amount of time before issuing a notice of
determination. See Clawson v. Commissioner, T.C. Memo. 2004-106.
To the contrary, the Appeals Office shall “attempt to conduct a
* * * [sec. 6330] hearing and issue a Notice of Determination as
expeditiously as possible under the circumstances.” Sec.
301.6320-1(e)(3), Q&A-E9, Proced. & Admin. Regs. The settlement
(continued...)
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Because petitioners did not receive a notice of deficiency
for their 2005 tax year and did not otherwise have an opportunity
to dispute their tax liability, they are permitted to challenge
their underlying tax liability for 2005, including their
liability for the addition to tax. See sec. 6330(c)(2)(B); Katz
v. Commissioner, 115 T.C. 329, 339 (2000) (defining “underlying
tax liability” for section 6330 purposes to include additions to
tax). Although respondent contends that we should review the
Appeals Office’s determination regarding the section 6651(a)(2)
addition to tax under an abuse of discretion standard, we will
instead review the matter de novo, as we would any other review
of an underlying tax liability. See also Sego v. Commissioner,
supra at 610; Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).
Section 6651(a)(2) imposes an addition to tax for failure to
timely pay the amount of tax shown on a return. The addition is
equal to 0.5 percent of the amount shown as tax on the return for
5
(...continued)
officer in this case issued the notices of determination almost 6
months after the sec. 6330 hearing. In the interim, the
settlement officer corresponded with petitioners and considered
evidence and arguments they submitted. The record does not
reflect that respondent issued the notices of determination
prematurely.
In any event, petitioners clearly raised their reasonable
cause defense in their hearing request, and we assume arguendo
that petitioners have preserved this right. See Meeh v.
Commissioner, T.C. Memo. 2008-282 (reviewing taxpayers’
underlying liability where the issue was raised only in a sec.
6330 hearing request and before the Court); see also sec.
301.6320-1(f)(2), Q&A-F3, Proced. & Admin. Regs.
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each month, or fraction thereof, during which the failure to pay
continues, up to a maximum of 25 percent. See id. The date
prescribed for payment of income tax is the due date for filing
the return determined without regard to any extension of time for
filing. See id.; sec. 6151(a).
The Commissioner has the burden of production with respect
to a taxpayer’s liability for the addition to tax. Sec. 7491(c).
To meet that burden, respondent must come forward with sufficient
evidence indicating that it is appropriate to impose the addition
to tax. See Higbee v. Commissioner, 116 T.C. 438, 446 (2001).
Respondent has met that burden. However, the section 6651(a)(2)
addition to tax is not imposed if the taxpayer proves that the
failure to pay is due to reasonable cause and not willful
neglect. Reasonable cause for failing to pay is shown if the
taxpayer
exercised ordinary business care and prudence in
providing for payment of his tax liability and was
nevertheless either unable to pay the tax or would
suffer an undue hardship * * * if he paid on the due
date. * * * [A] taxpayer who invests funds in
speculative or illiquid assets has not exercised
ordinary business care and prudence in providing for
the payment of his tax liability unless, at the time of
the investment, the remainder of the taxpayer's assets
and estimated income will be sufficient to pay his tax
or it can be reasonably foreseen that the speculative
or illiquid investment made by the taxpayer can be
utilized (by sale or as security for a loan) to realize
sufficient funds to satisfy the tax liability. A
taxpayer will be considered to have exercised ordinary
business care and prudence if he made reasonable
efforts to conserve sufficient assets in marketable
form to satisfy his tax liability and nevertheless was
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unable to pay all or a portion of the tax when it
became due.
Sec. 301.6651-1(c)(1), Proced. & Admin. Regs.
Petitioners did not timely pay their 2005 tax liability.
They claim, however, that their failure to pay was due to
reasonable cause and that they are therefore not liable for a
section 6651(a)(2) addition to tax. Petitioners attribute their
failure to pay to an economic downturn beginning in late 2006 and
to the aftermath of a failed investment. They cite a reduction
in their wages and investment income, an increase in expenses due
to settlements and accounting and legal fees, and a tax liability
resulting largely from cancellation of indebtedness income.
To support their argument, petitioners introduced a Form
433-A dated December 20, 2006. It contains petitioners’
estimates of their monthly income and expenses as of December 20,
2006. Mr. Shaw also testified about petitioners’ income and
expenses during the period August through October 2007.
Given the record before us, we cannot conclude that
petitioners had reasonable cause for their failure to timely pay
their 2005 tax liability. Although we do not doubt that
petitioners were negatively affected by the economic downturn in
late 2006, the focus of our analysis is earlier. See generally
Godwin v. Commissioner, T.C. Memo. 2003-289 (rejecting taxpayer’s
argument that he could not pay his 1997 Federal income tax
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liability because he did not receive enough income in subsequent
years), affd. 132 Fed. Appx. 785 (11th Cir. 2005).
Petitioners’ 2005 tax was due on April 15, 2006. See secs.
6072(a), 6151(a). The evidence petitioners provided, however,
pertains only to their ability to pay in December 2006 and during
the period August to October 2007. Petitioners have provided
only limited evidence regarding their ability to pay as of the
date payment was actually due, and we are unable to presume that
any such evidence would be favorable to petitioners. See Wichita
Terminal Elevator Co. v. Commissioner, 6 T.C. 1158, 1165 (1946),
affd. 162 F.2d 513 (10th Cir. 1947).
Indeed, to the extent petitioners’ failure to pay was caused
by an economic downturn in late 2006, it stands to reason that
petitioners had a greater ability to pay on April 15, 2006,
before the downturn. Petitioners’ net worth was invested almost
entirely in leveraged real property. While there was some
diversification of the real property investments, which included
a Houston, Texas, office building and some S corporation,
partnership, or LLC interests, the portfolio was not diversified
with more liquid stocks and bonds or money market investments and
was very illiquid. The latter problem was aggravated by the fact
that the interests owned were in closely held S corporations,
partnerships, or LLCs and were by and large minority interests.
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Given the highly leveraged nature of petitioners’ business,
the lack of liquidity was not up to the prudent man standard. We
have some sympathy for the “phantom income” problem, which often
arises in economic downturns because of depreciation on highly
leveraged debt-financed properties.6 Nevertheless, this is
foreseeable and was not the only income at issue here. It is the
duty of taxpayers with those investments to provide reasonable
liquid reserves or a liquidity source to protect the fisc against
foreseeable economic downturns. Petitioners have failed to meet
their burden of proving reasonable cause and are thus liable for
the section 6651(a)(2) addition to tax.7
6
The record does not permit an accurate determination of the
source of the Castaways and S corporation, partnership, or LLC
income, and the parties dispute how much was due to “phantom
income” and how much was rental income. For example, there was
apparently substantial rental income generated by El Capitan
Associates, LLC, in 2005.
7
Even if petitioners had proved that they were unable to pay
their 2005 Federal income tax liability when it was due without
suffering undue hardship, we are not convinced that they
exercised ordinary business care and prudence in providing for
payment of the liability. See sec. 301.6651-1(c)(1), Proced. &
Admin. Regs. As a real estate developer in Las Vegas with almost
two decades of experience, Mr. Shaw knew, or should have known,
that real estate investments in office buildings, hotels, and
casinos are often boom and bust. The failure of the Castaways--
hardly a remote possibility--resulted in petitioners’ being
liable for tax on some cancellation of indebtedness income.
Nevertheless, petitioners did not set aside money or marketable
assets that could have been used to pay that liability.
According to Mr. Shaw’s testimony, petitioners pledged most of
their assets to raise capital for the Castaways hotel and casino
and faced substantial lawsuits as the result of labor disputes
and unfunded liabilities resulting from the Castaways.
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III. Installment Agreement
Section 6159(a) gives the Secretary discretionary authority
“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 Secretary determines that such
agreement will facilitate full or partial collection of such
liability.” The Commissioner has the discretion to accept or
reject an installment agreement proposed by a taxpayer. See sec.
301.6159-1(b)(1)(i), Proced. & Admin. Regs. We review the
Commissioner’s rejection of an installment agreement for abuse of
discretion. See Orum v. Commissioner, 123 T.C. 1, 12-13 (2004),
affd. 412 F.3d 819 (7th Cir. 2005). We do not conduct an
independent review of what would be an acceptable collection
alternative, nor do we substitute our judgment for that of the
Appeals Office. See Murphy v. Commissioner, 125 T.C. 301, 320
(2005), affd. 469 F.3d 27 (1st Cir. 2006); McCall v.
Commissioner, T.C. Memo. 2009-75.
Because the amount due exceeds $10,000, petitioners are not
guaranteed an installment agreement by section 6159(c).
Petitioners are also not eligible for a so-called streamlined
installment agreement because their liability exceeds $25,000.
See IRM pt. 5.14.1.2(4), 5.14.5.2(1) (Sept. 26, 2008); IRS News
Release IR-2002-41 (Apr. 3, 2002). Petitioners must, therefore,
qualify under the existing and proposed regulations section
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301.6159-1, Proced. & Admin. Regs.8 In both instances, section
301.6159-1(a), Proced. & Admin. Regs., indicates that an
installment agreement is authorized if the Commissioner
“determines that such an installment agreement will facilitate
the collection of the tax liability” in whole or in part.
Likewise, the filing of a notice of tax lien as a condition of an
installment agreement or in conjunction with one is specifically
authorized by section 301.6159-1(d), Proced. & Admin. Regs., now
section 301.6159-1(c)(3)(iii)(B), Proced. & Admin. Regs.
(permitting the agreement to “contain terms that protect the
interests of the Government”).
The settlement officer considered at least two versions of
petitioners’ proposed installment agreement providing for
$100,000 of upfront earnest money, monthly installments of $1,200
per month with certain specified annual balloon payments. But he
rejected them as not facilitating collection or being in the best
interests of the Government. His explanation noted that the
Internal Revenue Service was already collecting $13,000 a month
from a levy source with respect to other tax periods and his
analysis that, on average, petitioners could pay up to $58,000
per month against their tax liability. He also believed
8
The proposed regulation was originally published in the
Fed. Reg. on Dec. 31, 1997, but was withdrawn on Mar. 5, 2007,
when a newer version of the proposed regulation was also
published in the Fed. Reg. That latter version was adopted by
Treas. Doc. 9473 (Nov. 24, 2009, effective Nov. 15, 2009).
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petitioners could liquidate assets or business interests
permitting payment in full in less time than the 4-1/2-year
period petitioners proposed.9 In the light of these facts, while
the Court might have reached a different conclusion we cannot say
that there was an abuse of discretion by the settlement officer
or respondent’s Appeals Office in rejecting petitioners’ request
for an installment agreement.
IV. Offer-in-Compromise
Petitioners, in their written Form 12153 indicated a desire
for an offer-in-compromise, but they never submitted the required
Form 656, Offer in Compromise, and supporting documents to
respondent. Petitioners did not actively pursue this option at
their Appeals hearing. They attribute that failure to the
alleged premature issuance of the determination letter.
Petitioners’ briefs in this case likewise do not specifically
address the offer-in-compromise collection alternative. The
record does not indicate that, given these facts, respondent has
abused his discretion in not accepting an offer-in-compromise
from petitioners. See generally sec. 7122(a); sec. 301.7122-1,
Proced. & Admin. Regs. In any event, we deem petitioners to have
9
We note that the installment agreement was proposed in the
fall of 2007. Thus, petitioners have already enjoyed de facto 3
years of its proposed 4-1/2-year term; and if the proposed
payment terms had been complied with, the outstanding balance
would, today, be materially reduced.
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abandoned this issue in view of their failure to specifically
address it at trial or on brief.
V. Intrusiveness of Proposed Collection Action
In rendering a determination with respect to a proposed
collection action an Appeals officer must consider issues raised
by the taxpayer, verify that the requirements of applicable law
and administrative procedures have been met, and consider
“whether any proposed collection action balances the need for the
efficient collection of taxes with the legitimate concern of the
person [involved] that any collection action be no more intrusive
than necessary.” Sec. 6330(c)(3).
Settlement Officer Freitag determined that “the proposed
collection action balances the need for efficient collection with
the taxpayer’s concern than any collection action be no more
intrusive than necessary.” Petitioners argue that the settlement
officer abused his discretion by “sustaining the levy action
against Petitioners”, adding that “The most intrusive action the
Service can take against a taxpayer is enforced collection.”
Petitioners are mistaken. The collection action sustained
by the settlement officer was the filing of a notice of Federal
tax lien, not a levy against petitioners’ property.10
10
We note there is an important distinction between a lien
and a levy. A lien “is merely a security interest and does not
involve the immediate seizure of property. A lien enables the
taxpayer to maintain possession of protected property while
(continued...)
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Petitioners have not explained why respondent’s filing of a
notice of Federal tax lien was overly intrusive and have not made
specific arguments why respondent should withdraw the notice of
Federal tax lien.11 In light of the record before us, respondent
did not abuse his discretion by sustaining the notice of Federal
tax lien.
The Court has considered all of petitioners’ contentions,
arguments, requests, and statements. To the extent not discussed
herein, we conclude that they are meritless, moot, or irrelevant.
To reflect the foregoing,
Decision will be entered
for respondent.
10
(...continued)
allowing the government to preserve its claim should the status
of property later change.” United States v. Barbier, 896 F.2d
377, 379 (9th Cir. 1990).
11
Even if we had held that respondent abused his discretion
by rejecting petitioners’ proposed installment agreement, it
would not have followed that respondent must withdraw the notice
of Federal tax lien. Sec. 6323(j)(1) is discretionary. As noted
earlier above, the Commissioner “may” but is not required to
withdraw a Federal tax lien after an installment agreement has
become effective and may require a lien as a condition of an
installment agreement. See Crisan v. Commissioner, T.C. Memo.
2007-67.