West v. Comm'r

T.C. Memo. 2010-250

UNITED STATES TAX COURT

DAVID WEST, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 2674-06L. Filed November 16, 2010.

David West, pro se.

Andrea D. Haddad, for respondent.

MEMORANDUM OPINION

GALE, Judge: Pursuant to section 6330(d)(1),1 petitioner

seeks review of respondent’s determination to maintain a lien

with respect to petitioner’s unpaid income tax for 1999. Pending

1
Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as in effect for the relevant
periods, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
 - 2 -

before us are respondent’s motion for summary judgment (motion)

and petitioner’s motion for summary judgment2 (cross-motion)

under Rule 121. For the reasons set forth below, we shall grant

respondent’s motion and deny petitioner’s cross-motion.

Background3

At the time of filing the petition, petitioner resided in

New Hampshire.

Petitioner did not timely file an income tax return for

taxable year 1999. On April 16, 2003, respondent mailed

petitioner a statutory notice of deficiency for 1999, which

petitioner received. In response to the notice, on June 16,

2003, petitioner submitted a Form 1040, U.S. Individual Income

Tax Return, for 1999 in which he reported tax liability of

$90,519.56 and a balance due of $81,625.32. Petitioner did not

pay the balance reported as due. On August 25, 2003, respondent

assessed the $90,519.56 tax liability petitioner reported as due,

as well as additions to tax for failure to pay estimated tax of

2
Petitioner’s cross-motion does not specifically seek
removal of the lien. Instead, petitioner requests that his
previously rejected offer-in-compromise be accepted. Since
acceptance of petitioner’s offer-in-compromise would eliminate
the liability giving rise to the lien, we treat his motion as
seeking elimination of the lien that is at issue in this case.
3
The following findings are established in the
administrative record or through party admissions and/or are
undisputed.
 - 3 -

$4,347,42, for failure to timely file of $18,365.70, and for

failure to timely pay of $16,733.19.

On February 10, 2004, respondent issued to petitioner a

Final Notice, Notice of Intent to Levy and Notice of Your Right

to a Hearing under IRC 6330, with respect to the assessed tax

liability for 1999. Petitioner untimely submitted a Form 12153,

Request for a Collection Due Process Hearing, over a year later

(dated February 22, 2005) and was given an equivalent hearing.4

In early April 20045 petitioner submitted a Form 656, Offer

in Compromise, whereby he sought to compromise his 1999 liability

for $8,974.02 on the basis of effective tax administration and

doubt as to liability (OIC). Attached to the Form 656 was a

seven-page explanation of petitioner’s position (Form 656

attachment). On the first page of the Form 656 attachment

petitioner explained that he was claiming both an effective tax

administration basis and a doubt as to liability basis for his

OIC. He further explained that the doubt as to liability basis

related solely to the estimated tax addition for 1999, which

petitioner believed had been miscalculated because the addition,

4
Petitioner sought review of the 2004 levy in the petition
in this case. Those portions of the petition seeking review of
the levy were dismissed for lack of jurisdiction.
5
Petitioner dated the document Apr. 2, 2004, and respondent
stamped it received on Apr. 7, 2004.
 - 4 -

he contended, was due entirely to sales of stock that occurred

during the last week of 1999.

Petitioner explained his effective tax administration ground

in the remaining six pages of the Form 656 attachment. Therein,

petitioner contended that effective tax administration dictated

acceptance of his OIC because his 1999 tax liability was

principally due to large capital gains arising from the sale of

stock during the last week of 1999 that were largely offset by

large capital losses incurred from stock sales during 2000. The

Form 656 attachment stated that petitioner calculated his

$8,974.02 OIC by computing the 1999 tax he would owe if his

capital losses (and certain interest expense) after 1999 were

allowed to offset his capital gains for 1999 and he were given a

credit for $3,962.35 of alternative minimum tax as a result of

the exercise in an earlier year of incentive stock options to

acquire the stock sold at a gain in 1999. The Form 656

attachment also cited as an argument for acceptance of

petitioner’s OIC an incident in 1987 where petitioner’s inability

to understand section 422 had caused him to forfeit an

opportunity to exercise certain very valuable incentive stock

options. Finally, the Form 656 attachment cited petitioner’s

difficulty in finding employment and the fact that the unresolved

1999 tax liability would likely preclude his borrowing against
 - 5 -

the equity in his house to pay off certain unsecured debt,

necessitating a sale of the house.

On June 2, 2004, one of respondent’s offer examiners

rejected petitioner’s OIC. On June 30, 2004, petitioner

appealed the rejection to respondent’s Office of Appeals. An

Appeals officer (2004 Appeals officer) reviewed petitioner’s OIC

and sustained the offer examiner’s rejection (2004 administrative

proceeding), advising petitioner in a November 12, 2004, letter

that his OIC had been rejected because an amount larger than his

offer appeared collectible and that “We have not found that an

exceptional circumstance exists that allows our acceptance of

your offer.”

On January 20, 2005, respondent issued to petitioner a

Notice of Federal Tax Lien Filing and Your Right to a Hearing

Under IRC 6320 with respect to his 1999 tax liability.6

Petitioner timely submitted a Form 12153 dated February 22,

2005.7 In the correspondence between petitioner and the Appeals

employee assigned to his hearing request (CDP hearing officer)

petitioner requested that his OIC previously rejected by the

Appeals Office be reconsidered, and the CDP hearing officer

6
A notice of lien had been filed with respect to
petitioner’s residence in Hampton Falls, N.H.
7
The Form 12153 requested a hearing with respect to both the
Jan. 20, 2005, notice of Federal tax lien filing and the Feb. 10,
2004, notice of intent to levy. See text supra at note 4.
 - 6 -

refused. The Appeals Office subsequently issued a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 (notice of determination) on December 30, 2005,

determining that the lien should be sustained. Petitioner timely

petitioned the Court in response to the notice of determination,

and the parties subsequently filed motions for summary judgment.

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 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(a) and (b). Factual

inferences are viewed in a light most favorable to the nonmoving

party, and the moving party bears the burden of proving that

there is no genuine issue of material fact. Craig v.

Commissioner, 119 T.C. 252, 260 (2002); Dahlstrom v.

Commissioner, 85 T.C. 812, 821 (1985); Jacklin v. Commissioner,

79 T.C. 340, 344 (1982).

Section 6321 imposes a lien in favor of the United States on

all property and rights to property of a person liable for taxes

(taxpayer) when a demand for the taxes has been made and the
 - 7 -

taxpayer fails to pay. The lien arises when an assessment is

made. Sec. 6322. Generally, in order for the lien to be valid

against third parties, the Secretary must file a notice of lien

with certain State or local authorities where the taxpayer’s

property is situated. Sec. 6323(a), (f); Lindsay v.

Commissioner, T.C. Memo. 2001-285, affd. 56 Fed. Appx. 800 (9th

Cir. 2003).

Section 6320 provides that the Secretary shall furnish the

taxpayer with written notice of the filing of a notice of lien

and of the taxpayer’s right to a hearing concerning the lien.

Sec. 6320(a)(1), (3). If the taxpayer timely requests a hearing,

the hearing is to be conducted by an officer or employee of the

Commissioner’s Office of Appeals who has had no prior involvement

with respect to the unpaid taxes. Sec. 6320(b)(1), (3), (c).

The taxpayer may raise at the hearing “any relevant issue”

relating to the unpaid tax or the proposed lien, including offers

of collection alternatives such as an offer-in-compromise. Secs.

6320(c), 6330(c)(2)(A). The taxpayer may also raise challenges

to the existence or amount of the underlying tax liability if he

did not receive any statutory notice of deficiency with respect

to such liability or otherwise have an opportunity to dispute it.

Sec. 6330(c)(2)(B). However, pursuant to section 6330(c)(4), an

issue may not be raised at the hearing if the issue was raised

and considered in a previous administrative or judicial
 - 8 -

proceeding in which the taxpayer meaningfully participated.

“Section 6330(c)(4) expressly provides that taxpayers, at

collection hearings before respondent’s Appeals Office, may not

raise issues that were previously raised by taxpayers and

considered in any other administrative or judicial proceeding in

which the taxpayers meaningfully participated.” Magana v.

Commissioner, 118 T.C. 488, 492 (2002); sec. 301.6320-1(e)(1),

Proced. & Admin. Regs.; see also McIntosh v. Commissioner, T.C.

Memo. 2003-279; Wooten v. Commissioner, T.C. Memo. 2003-113.

At the conclusion of the hearing, the Appeals employee must

determine whether and how to proceed with collection, taking into

account, inter alia, the issues properly raised by the taxpayer.

Sec. 6330(c)(3).

We have jurisdiction to review the Appeals Office’s

determinations. Sec. 6330(d). Determinations with respect to

the underlying tax liability are reviewed de novo, whereas

determinations concerning collection matters are reviewed for

abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610

(2000); Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).

In his motion, respondent asserts that the sole issue

petitioner raised during the hearing requested pursuant to

section 6320(a)(3)(B) and (b) (CDP hearing) was whether the prior

rejection of petitioner’s OIC by respondent’s Appeals Office in

the 2004 administrative proceeding was proper. Petitioner does
 - 9 -

not dispute that assertion in his response to respondent’s

motion. He asserts instead merely that “appropriate

consideration” was not given to his OIC in the 2004

administrative proceeding. We therefore conclude that the only

issue petitioner raised at his CDP hearing that remains before us

is the rejection of his OIC as a collection alternative to the

lien.8

In his submissions, petitioner argues that the CDP hearing

officer erred in refusing to consider his OIC, claims that the

OIC had not received appropriate consideration in the 2004

administrative proceeding, and advances arguments in support of

the merits of his OIC. Respondent contends that petitioner’s OIC

8
As noted, petitioner’s OIC as originally submitted to the
offer examiner and reviewed by the Appeals Office included a
claim that there was doubt as to liability with respect to the
estimated tax addition for 1999. Given this doubt as to
liability claim in the OIC, petitioner’s attempt to renew
consideration of the OIC at his CDP hearing could be construed as
a challenge to a portion of the underlying tax liability for
1999. However, petitioner was precluded from challenging the
underlying tax liability at his CDP hearing pursuant to sec.
6330(c)(2)(B), which precludes such a challenge where the person
subject to collection action has had “an opportunity to dispute
such tax liability.” Sec. 6330(c)(2)(B). The offer of a hearing
pursuant to sec. 6330, which petitioner received in connection
with the notice of intent to levy mailed to him on Feb. 10, 2004,
constituted “an opportunity to dispute” his underlying tax
liability for 1999 within the meaning of sec. 6330(c)(2)(B). See
Bell v. Commissioner, 126 T.C. 356, 358 (2006); McCollin v.
Commissioner, T.C. Memo. 2010-93; Nelson v. Commissioner, T.C.
Memo. 2009-108; Miller v. Commissioner, T.C. Memo. 2007-35. He
was therefore precluded pursuant to sec. 6330(c)(2)(B) from
disputing the underlying tax liability for 1999 at his CDP
hearing held with respect to the notice of Federal tax lien
filing.
 - 10 -

had been previously considered and rejected by the Appeals Office

in the 2004 administrative proceeding and, consequently, pursuant

to section 6330(c)(4) could not be raised at the CDP hearing.

Section 6330(c)(4), as applicable to petitioner’s hearing

request,9 provided10 as follows:

SEC. 6330(c). Matters Considered at Hearing.--In
the case of any hearing conducted under this section--

* * * * * * *

(4) Certain issues precluded.--An issue
may not be raised at the hearing if--

(A) the issue was raised and considered at a
previous hearing under section 6320 or in any
other previous administrative or judicial
proceeding; and

(B) the person seeking to raise the issue
participated meaningfully in such hearing or
proceeding.

Consequently, the propriety of the CDP hearing officer’s refusal

to consider the OIC depends upon whether the OIC was “raised and

considered at a * * * previous administrative * * * proceeding”

and whether petitioner “participated meaningfully” in the

previous proceeding.

9
Sec. 6330(c)(4) applies to hearings concerning liens held
pursuant to sec. 6320. Sec. 6320(c).
10
Sec. 6330(c)(4) was amended in the Tax Relief and Health
Care Act of 2006, Pub. L. 109-432, div. A, sec. 407(b)(2), 120
Stat. 2961, so that subpars. (A) and (B) were redesignated cls.
(i) and (ii) of subpar. (A).
 - 11 -

There can be no dispute that petitioner’s OIC was “raised”

in the 2004 administrative proceeding. It was the sole subject

of the 2004 administrative proceeding; the 2004 Appeals officer

reviewed the offer examiner’s rejection of the OIC and sustained

it. Nor can it be disputed that the OIC for which petitioner

contended in his CDP hearing was the same collection alternative

considered in the 2004 administrative proceeding. Petitioner

attached to his CDP hearing request the same six pages of the

Form 656 attachment, containing the explanation of his offer

based on effective tax administration, that he had attached to

the Form 656 he submitted in the 2004 administrative

proceeding.11 Finally, the 2004 administrative proceeding was

indisputably an “administrative * * * proceeding” within the

meaning of section 6330(c)(4); the 2004 Appeals officer’s review

11
Respondent contends that the Form 656 and the Form 656
attachment are not part of the administrative record in this case
because the CDP hearing officer did not review the documents. We
disagree. Even assuming the Form 656 and the Form 656 attachment
were not reviewed by the CDP hearing officer, they were
nonetheless a part of petitioner’s administrative file and were
therefore available for her review. Moreover, petitioner
submitted six of the seven pages of the Form 656 attachment
(labeled as such, covering petitioner’s explanation of the
effective tax administration grounds for his OIC) as an
attachment to his Form 12153. The CDP hearing officer
undisputably reviewed the Form 12153 and its attachment.
Consequently, the Form 656 and the Form 656 attachment are part
of the administrative record. See Thompson v. U.S. Dept. of
Labor, 885 F.2d 551, 553-556 (9th Cir. 1989). The same is true
concerning the 2004 Appeals officer’s Nov. 12, 2004, letter,
cited in our findings.
 - 12 -

of the rejection of petitioner’s OIC was performed in accordance

with section 7122(d).12

Whether petitioner’s OIC was “considered” in the 2004

administrative proceeding requires a closer look for purposes of

summary judgment. Petitioner contends in his objection to

respondent’s motion that his OIC did not receive “appropriate”

consideration, that the offer examiner rejected it solely on the

basis of ability to pay, and that the 2004 Appeals officer who

reviewed the rejection and sustained it “shortshrifted me and

refused to make an appropriate effort to learn about my

situation.”

In connection with petitioner’s CDP hearing, the CDP hearing

officer took the position that further consideration of

petitioner’s OIC was foreclosed by virtue of the 2004

administrative proceeding. Implicit in this position was the CDP

hearing officer’s conclusion that petitioner’s OIC had been

“considered” in the 2004 administrative proceeding for purposes

of section 6330(c)(4). The basis for the CDP hearing officer’s

conclusion is reflected in her notes, recorded in the Appeals

case activity records for the CDP hearing, which state that she

reviewed the entries in the Appeals case activity records and the

Appeals case memo (2004 Appeals case memo) prepared by the 2004

12
Sec. 7122(d) was redesignated sec. 7122(e) in the Tax
Increase Prevention and Reconciliation Act of 2005, Pub. L. 109-
222, sec. 509(a), 120 Stat. 362 (2006).
 - 13 -

Appeals officer. The CDP hearing officer’s notes contain a level

of detail with respect of the content of the 2004 Appeals case

memo--the nature of petitioner’s OIC, the name of the 2004

Appeals officer, and the Internal Revenue Manual (IRM) provision

upon which the rejection was based, IRM pt. 5.8.11.2.2(3) (May

15, 2004)--which persuades us that there is no genuine issue of

material fact concerning whether the CDP hearing officer reviewed

the record of the 2004 administrative proceeding in reaching the

conclusion that petitioner’s OIC had been “considered” in that

proceeding. Moreover, the CDP hearing officer had before her

petitioner’s written description of the OIC that he had submitted

in the 2004 administrative proceeding. Thus, the CDP hearing

officer could compare petitioner’s submitted grounds for the OIC

with the 2004 Appeals case memo in reaching her determination

that the OIC had been “considered” in the 2004 administrative

proceeding. Our own examination of the Form 656 attachment and

of the 2004 Appeals case memo analyzing it persuades us that the

CDP hearing officer’s determination that petitioner’s OIC had

been “considered” in the 2004 administrative proceeding was

proper.

Petitioner contends that the 2004 Appeals officer’s

consideration of his OIC in the 2004 administrative proceeding

was inadequate--that the 2004 Appeals officer did not make the

“appropriate effort” to understand his situation and, in essence,
 - 14 -

did not grasp his arguments based on effective tax

administration. However, as discussed below, a comparison of two

documents in the administrative record--the Form 656 attachment

and the 2004 Appeals case memo--is sufficient to convince us that

there is no genuine issue of material fact and that respondent is

entitled to a decision in his favor as a matter of law on the

issue of whether petitioner’s OIC was “considered” in a previous

administrative proceeding within the meaning of section

6330(c)(4).

In the Form 656 attachment, petitioner explained that his

grounds for seeking an offer-in-compromise based on effective tax

administration were the lack of “proportionality” in his tax

liability arising from the fact that he had realized large

capital gains in 1999 as a result of sales of stock of a high

technology company that occurred during the last week of that

year, while in 2000 he had incurred large capital losses as a

result of stock sales of companies in the same sector. But for

the fact that his capital gains and losses straddled taxable

years, petitioner contended, he would have been able to offset

the gains with the losses, with the result that his 1999 capital

gains would not have resulted in any significant income tax

liability. Petitioner further suggested that the unfairness of

his circumstances was exacerbated by the fact that the settlement

dates for many of the late-1999 stock sales occurred in 2000. As
 - 15 -

an additional circumstance of unfairness, petitioner cited the

fact that the stock he sold at a gain in 1999 had been acquired

through the exercise of incentive stock options in an earlier

unspecified year and that he had incurred and paid alternative

minimum tax (AMT) of $3,962.35 as a result of the exercise of the

incentive stock options. In petitioner’s view, the fact that he

also incurred a capital gains tax liability under the regular tax

upon the sale of the stock in 1999 constituted double taxation.

The Form 656 attachment further stated that petitioner had

calculated his $8,974.02 offer by computing the 1999 income tax

he would owe if his 2000 capital losses (and certain interest

expense incurred after 1999) were allowed to offset his capital

gains for 1999 and he were given a credit against the 1999

liability for the $3,962.35 in AMT paid when he acquired the

stock pursuant to incentive stock options. In addition, the Form

656 attachment cited as an argument for acceptance of

petitioner’s OIC his contention that he had been “burned” in 1987

by the operation of section 422 when he sought to exercise

incentive stock options upon his departure from a company at that

time. In petitioner’s view, the complexities of section 422,

which he could not understand, had resulted in the company’s

refusal to allow him to exercise the most valuable of the options

he held, and in his circumstances he was unable to effectively

contend otherwise.
 - 16 -

The Form 656 attachment also discussed petitioner’s

compliance history, maintaining that there were mitigating

circumstances for his failure to timely file for 1999 and that

his failure to timely file for 2000 through 2002 was excusable

because he had overpaid his taxes for those years. Finally, the

Form 656 attachment cited petitioner’s precarious financial

condition arising from his difficulty in finding employment and

the fact that the unresolved 1999 tax liability would probably

preclude his borrowing against the equity in his house to pay off

certain unspecified unsecured debt, necessitating a sale of the

house.

In the Internal Revenue Service Restructuring and Reform Act

of 1998, Pub. L. 105-206, sec. 3462(a), 112 Stat. 764, Congress

added section 7122(c), directing the Secretary to “prescribe

guidelines for officers and employees of the Internal Revenue

Service to determine whether an offer-in-compromise is adequate

and should be accepted to resolve a dispute.” The legislative

history indicates that Congress intended that the guidelines

provide for compromises of income tax liabilities on the basis of

factors other than doubt as to liability or collectibility, such

as compromises to “promote effective tax administration.” H.

Conf. Rept. 105-599, at 289 (1998), 1998-3 C.B. 747, 1043.

Regulations adopted pursuant to section 7122 set forth

guidelines for evaluating offers-in-compromise to promote
 - 17 -

effective tax administration (ETA offers). Under section

301.7122-1(b)(3)(i), Proced. & Admin. Regs., ETA offers may be

accepted where collection in full could be achieved but would

cause economic hardship, or, under section 301.7122-1(b)(3)(ii),

Proced. & Admin. Regs., even where collection in full could be

achieved without economic hardship:

the IRS may compromise to promote effective tax
administration where compelling public policy or equity
considerations identified by the taxpayer provide a
sufficient basis for compromising the liability. Compromise
will be justified only where, due to exceptional
circumstances, collection of the full liability would
undermine public confidence that the tax laws are being
administered in a fair and equitable manner. A taxpayer
proposing compromise under this paragraph (b)(3)(ii) will be
expected to demonstrate circumstances that justify
compromise even though a similarly situated taxpayer may
have paid his liability in full.

The regulations cite as examples of appropriate circumstances for

accepting a “non-hardship” ETA offer a taxpayer whose medical

condition rendered him unable to manage any of his financial

affairs for many years who seeks to compromise his liability when

the medical disability ends, or a taxpayer who incurs a tax

liability as a result of erroneous advice received from the IRS.

Sec. 301.7122-1(c)(3)(iv), Proced. & Admin. Regs. Even in the

foregoing circumstances, the regulations provide that acceptance

of a compromise is within the Secretary’s discretion. Id.
 - 18 -

Additional detailed instructions concerning acceptance of

nonhardship ETA offers are contained in the IRM.13

5.8.11.2.2 (05-15-2004)
Public Policy or Equity Grounds

1. Where there is no Doubt as to Liability (DATL), no
Doubt as to Collectibility (DATC), and the
liability could be collected in full without
causing economic hardship, the Service may
compromise to promote Effective Tax Administration
(ETA) where compelling public policy or equity
considerations identified by the taxpayer provide
a sufficient basis for accepting less than full
payment. Compromise is authorized on this basis
only where, due to exceptional circumstances,
collection in full would undermine public
confidence that the tax laws are being
administered in a fair and equitable manner.
Because the Service assumes that Congress imposes
tax liabilities only where it determines it is
fair to do so, compromise on these grounds will be
rare.

2. The Service recognizes that compromise on
these grounds will often raise the issue of
disparate treatment of taxpayers who can pay
in full and whose liabilities arose under
substantially similar circumstances. Taxpayers
seeking compromise on this basis bear the burden of
demonstrating circumstances that are compelling
enough to justify compromise notwithstanding this
inherent inequity.

3. Compromise on public policy or equity grounds
is not authorized based solely on a
taxpayer’s belief that a provision of the tax
law is itself unfair. Where a taxpayer is
clearly liable for taxes, penalties, or
interest due to operation of law, a finding
that the law is unfair would undermine the

13
The IRM provisions set out above are from the version
applicable as of May 15, 2004, covering the period when the
Appeals officer determined that rejection of petitioner’s OIC
should be sustained.
 - 19 -

will of Congress in imposing liability under
those circumstances.

Examples provided in the IRM of instances where compromises

sought on grounds of inequity would not promote effective tax

administration and should be rejected include a taxpayer’s claim

that a tax liability resulting from discharge of indebtedness

rather than from wages is inequitable, or the claim of a

taxpayer-partner that his tax liability arising from a TEFRA

partnership-level proceeding is unfair because it is due to the

actions of the tax matters partner. Id.

The 2004 Appeals case memo states as follows with respect to

petitioner’s compliance history:

The taxpayer did not file income tax returns for 1999
through 2002 until after he received an SFR [substitute for
return] statutory notice of deficiency on the 1999 period on
4-16-03; he subsequently filed returns for all 4 periods on
6-16-03. The 2000 through 2002 returns, which reflected
overpayments, were processed prior to the posting of the
1999 balance due assessment * * * .

We conclude that there is no genuine issue of material fact

concerning whether petitioner’s compliance history as raised in

the Form 656 attachment was considered in the 2004 administrative

proceeding.14

14
Moreover, the 2004 Appeals case memo did not cite
petitioner’s noncompliance as a factor in sustaining the
rejection of his OIC. See sec. 301.7122-1(c)(3)(ii), Proced. &
Admin. Regs.
 - 20 -

The 2004 Appeals case memo states as follows with respect to

economic hardship:

The taxpayer is 45 years old and single, with no dependents.
He is a computer software engineer; he indicated that he was
unemployed at the time he completed the Collection
Information Statement, but during the appeals conference he
stated that he was doing free-lance consulting work which
was generating income.

* * * * * * *

The COIC [Centralized Offer in Compromise] Examiner did not
verify the taxpayer’s financial information, but completed a
“Full Pay Worksheet” based on the taxpayer’s own figures
from his CIS [Collection Information Statement]. This
indicated that the taxpayer had NRE [net realizable equity]
of $208,486. This consisted of $149,520 NRE in real
property; $45,778 in brokerage and investment accounts; and
$13,188 in vehicle equity (2 vehicles).

* * * * * * *

As for the economic hardship factors, the taxpayer really
raises nothing more than his assertion that if the tax is
not compromised, he will be forced to sell his house in
order to pay his mother back the $56,000 that he borrowed
from her. Both the COIC Examiner and I explained to the
taxpayer that imminent seizure of his house was not
contemplated, and the COIC Examiner suggested that while the
taxpayer was unemployed, the liability could be reported as
currently not collectible, after the filing of a notice of
federal tax lien. * * * But there is no reason that the
unsecured loan from the taxpayer’s mother should be
considered as having a priority over the tax liability for
purposes of an OIC analysis. The taxpayer is also
relatively young, has no children, and has no health
problems--all factors generally considered in determining if
economic hardship criteria have been met.

We conclude there is no genuine issue of material fact concerning

whether petitioner’s economic hardship as raised in the Form 656

attachment was considered in the 2004 administrative proceeding.
 - 21 -

The 2004 Appeals case memo states as follows with respect to

the Form 656 attachment’s explanation of petitioner’s reasons

that his OIC based on effective tax administration should be

accepted:

As for the equity considerations, the taxpayer claims only
that it is not fair that he can’t use his stock losses in
later years to immediately and fully offset the gains he
experienced in 1999, and he complains that IRC §422 is
difficult to understand. Per IRM 5.8.11.2.2(3), compromise
on public policy or equity grounds is not authorized based
solely on a taxpayer’s belief that a provision of the tax
law is itself unfair. Where a taxpayer is clearly liable
for taxes, penalties, or interest due to operation of law, a
finding that the law is unfair would undermine the will of
Congress in imposing liability under those circumstances.

The 2004 Appeals case memo demonstrates that the 2004 Appeals

officer was aware of petitioner’s argument in the Form 656

attachment that his inability to offset 1999 capital gains with

2000 capital losses should constitute effective tax

administration grounds for compromising his liability. The

Appeals officer did not accept the argument, but her failure to

do so in these circumstances does not show that she failed to

adequately consider it. Instead, her decision to reject such a

ground reflects a straightforward application of IRM pt.

5.8.11.2.2(3), to the effect that a nonhardship effective tax

administration compromise is not authorized where it is based

solely on the taxpayer’s claim that the tax law itself is unfair,

as compromise of the tax in such circumstances would thwart the

will of Congress. Congress first enacted a capital loss
 - 22 -

carryforward for individuals in 1938, see Revenue Act of 1938,

ch. 289, sec. 117(e), 52 Stat. 502,15 but Congress has not

provided for a capital loss carryback, the principal unfairness

identified by petitioner as grounds for an effective tax

administration compromise. See secs. 1212(b), 172(d)(2)(A); see

also Merlo v. Commissioner, 126 T.C. 205 (2006), affd. 492 F.3d

618 (5th Cir. 2007). We conclude that there is no genuine issue

of material fact and that respondent is entitled to summary

judgment on the issue of whether petitioner’s capital loss

carryback argument was “considered” in a previous administrative

proceeding within the meaning of section 6330(c)(4).

The same considerations apply with respect to petitioner’s

contentions that section 422 is too complex. In the Form 656

attachment, petitioner cited in support of his OIC a 1987

incident where he contends that his inability to understand

section 422 rendered him unable to negotiate effectively with a

former employer who would not allow him to exercise the most

valuable of certain incentive stock options he had been granted

pursuant to that employment. The Appeals case memo’s reference

to petitioner’s complaint that section 422 is difficult to

understand demonstrates that the 2004 Appeals officer was aware

of petitioner’s section 422 argument. Her refusal to treat the

15
The capital loss carryforward provision for individuals is
currently codified as sec. 1212(b).
 - 23 -

argument as grounds for an effective tax administration

compromise does not support any inference that she failed to

consider it; rather, her treatment reflects a straightforward

application of IRM pt. 5.8.11.2.2(3). Moreover, the 1987

incentive stock options incident did not result in the 1999

income tax liability for which petitioner was seeking compromise.

We conclude that there is no genuine issue of material fact and

that respondent is entitled to summary judgment on the issue of

whether petitioner’s section 422 complexity argument was

“considered” in a previous administrative proceeding within the

meaning of section 6330(c)(4).

The Appeals case memo does not mention the argument in the

Form 656 attachment concerning the settlement dates of

petitioner’s 1999 stock sales; i.e., petitioner’s contention that

the unfairness of his inability to offset his 1999 capital gains

with his 2000 capital losses is exacerbated by the fact that the

settlement dates for his 1999 stock sales occurred in 2000.

Viewing the silence of the Appeals case memo in the light most

favorable to petitioner, we draw the inference that the Appeals

officer failed to consider the settlement date argument. But any

failure of the Appeals officer or, subsequently, the CDP hearing

officer,16 to consider the settlement date argument was harmless

16
We assume arguendo for purposes of deciding respondent’s
motion that if the settlement date argument was not considered at
(continued...)
 - 24 -

error. The Internal Revenue Service’s use of the trade date,

rather than the settlement date, as the date of a stock sale for

Federal income tax purposes follows expressed congressional

intent. See Rev. Rul. 93-84, 1993-2 C.B. 225 (citing S. Rept.

99-313, at 131 (1986), 1986-3 C.B. (Vol. 3) 1, 131, and H. Conf.

Rept. 99-841 (Vol. II), at II-297 (1986), 1986-3 C.B. (Vol. 4) 1,

297). Thus, any claim by petitioner that the use of his 1999

trade dates rather than his 2000 settlement dates created

unfairness justifying an effective tax administration compromise

would also clearly run afoul of IRM pt. 5.8.11.2.2(3). Since the

settlement date argument would not have provided any basis for an

effective tax administration compromise, any failure to consider

the argument in the 2004 administrative proceeding or in the CDP

hearing would not have affected the outcome of either and is not

a bar to summary judgment.

Finally, the Appeals case memo did not reference

petitioner’s AMT argument to the effect that a portion of his

effective tax administration compromise should be based on his

having earlier paid AMT when he exercised incentive stock options

to acquire the stock whose sale in 1999 generated the tax

liability petitioner sought to compromise. Petitioner considered

16
(...continued)
the 2004 administrative proceeding, it would have been preserved
for consideration at petitioner’s CDP hearing with respect to the
lien.
 - 25 -

the earlier AMT liability and the subsequent capital gains tax

liability arising from the same stock to constitute unfair double

taxation that should support effective tax administration relief

under section 7122. As with petitioner’s settlement date

argument, we draw the inference most favorable to petitioner that

the Appeals case memo’s silence regarding petitioner’s AMT

argument indicates that the Appeals officer failed to consider

it.

However, we have previously considered and rejected the

claim that the tax liability arising from the treatment of

incentive stock options under the AMT regime should be eliminated

on fairness grounds through an effective tax administration

compromise of the liability pursuant to section 7122. See Speltz

v. Commissioner, 124 T.C. 165 (2005), affd. 454 F.3d 782 (8th

Cir. 2006). In Speltz, the taxpayers, like petitioner, argued

that an Appeals officer had “‘failed to properly consider’”, and

had abused his discretion in rejecting, their ETA offer premised

on the “‘unintended and unfair’” tax liability caused by the

treatment of incentive stock options under the AMT.17 Id. at

17
The taxpayers in Speltz v. Commissioner, 124 T.C. 165
(2005), affd. 454 F.3d 782 (8th Cir. 2006), had incurred a
substantial AMT liability upon the exercise of incentive stock
options, only to have the acquired stock decline precipitously in
value before it was sold. In contrast, petitioner incurred a
modest AMT liability when he exercised incentive stock options,
and he then sold the acquired stock in 1999 at a substantial
gain.
 - 26 -

175. Concluding that a compromise of the liability pursuant to

section 7122 was not appropriate, we observed:

Accepting petitioners’ position would result in
nullification of a portion of the statutory scheme [for the
taxation of incentive stock options] by administrative or
judicial action. We cannot conclude that section 7122 gives
the Court a license to make adjustments to complex tax laws
on a case-by-case basis. * * * Moreover, we cannot conclude
that it is an abuse of discretion for the Appeals officer to
decline to do so. In this case, we conclude that the
Appeals officer correctly applied the provisions of the
regulations and of the Internal Revenue Manual, specifically
those portions cautioning against granting relief based on
inequity where to do so would undermine congressional
intent. [Id. at 178-179.]

Because petitioner’s AMT argument would not have constituted

proper grounds for acceptance of an ETA offer, any failure by the

2004 Appeals officer or, subsequently, the CDP hearing officer,

to consider it was harmless error. Since petitioner’s AMT

argument would not have provided any basis for an effective tax

administration compromise, any failure to consider the argument

in the 2004 administrative proceeding or in the CDP hearing would

not have affected the outcome of either and is not a bar to

summary judgment.

The Appeals case memo demonstrates that the 2004 Appeals

officer considered petitioner’s compliance history and economic

hardship issues raised in the Form 656 attachment and concluded

that petitioner had not shown economic hardship (and did not

treat his compliance history as an adverse factor). The Appeals

case memo further demonstrates that the 2004 Appeals officer
 - 27 -

considered the capital loss carryback and section 422 arguments

raised in the Form 656 attachment as grounds for petitioner’s

OIC, and rejected them as inadequate grounds for a nonhardship

effective tax administration compromise, pursuant to IRM pt.

5.8.11.2.2(3). As for petitioner’s remaining arguments in the

Form 656 attachment, even if it is assumed that the 2004 Appeals

officer did not consider petitioner’s settlement date or AMT

arguments, these arguments are so clearly precluded by IRM pt.

5.8.11.2.2(3) as grounds for an ETA offer that any failure to

consider them was harmless error. After a careful review of

petitioner’s explanation of his OIC in the Form 656 attachment,

we find that he advanced no other arguments.

Petitioner’s principal grievance concerns his inability to

carry back a capital loss from 2000 to offset a capital gain for

1999. Allowing him to do so would nullify the statutory scheme

for capital losses that has been in place for over 70 years.

Given the now widely recognized performance of high technology

stocks over 1999 and 2000, there is every reason to believe that

petitioner’s experience was not an isolated one. Granting

petitioner an effective tax administration compromise of his

liabilities on this ground would give him disparate treatment as

compared to similarly situated taxpayers without a compelling

justification, in contravention of the guidance in the

regulations and the IRM. See sec. 301.7122-1(b)(3)(ii), Proced.
 - 28 -

& Admin. Regs.; IRM pt. 5.8.11.2.2(2). The same can be said for

petitioner’s grievances with respect to the treatment of

incentive stock options under the AMT regime, the complexity of

section 422 generally, and the use of trade rather than

settlement dates for establishing the timing of a capital gain or

loss. Each represents a claim that a provision of the tax law is

unfair. The 2004 Appeals officer’s rejection of petitioner’s

grounds for an effective tax administration compromise does not

demonstrate a lack of “consideration” of the issue; her decision

reflects adherence to the regulations and IRM. See Speltz v.

Commissioner, supra at 178-179. We accordingly conclude that

respondent is entitled to summary judgment on the issue of

whether the OIC petitioner sought to raise in his CDP hearing was

“considered” in a previous administrative proceeding within the

meaning of section 6330(c)(4)(A).

The remaining issue is whether petitioner “participated

meaningfully” in the previous administrative proceeding within

the meaning of section 6330(c)(4)(B). Petitioner contends in his

objection to respondent’s motion that the 2004 Appeals officer

“hung up the phone on me as I pleaded for a hearing”. The

officer’s entries in the Appeals case activity records confirm

that she hung up on petitioner, though her entries reflect that

she did so after petitioner insisted on going over his Form 656

attachment line by line and she had advised him that all relevant
 - 29 -

issues had been discussed, in her view. We do not resolve the

participants’ versions of these events for purposes of summary

judgment. Instead, petitioner’s submission of the detailed Form

656 attachment, which is undisputed, and the 2004 Appeals case

memo, which establishes that the 2004 Appeals officer reviewed

the Form 656 attachment, are sufficient standing alone to

demonstrate that petitioner “participated meaningfully” in the

2004 administrative proceeding within the meaning of section

6330(c)(4)(B). Respondent is entitled to summary judgment in his

favor on that issue.

Since we conclude that respondent is entitled to summary

judgment in his favor on the issues of whether the OIC that

petitioner sought to raise at his CDP hearing had been “raised”

and “considered” at a previous administrative proceeding in which

petitioner “participated meaningfully” within the meaning of

section 6330(c)(4), it follows that respondent is entitled to

summary judgment in his favor on the issue of whether the CDP

hearing officer’s refusal, pursuant to section 6330(c)(4), to

consider petitioner’s OIC at his CDP hearing was proper. As the

rejection of his OIC was the sole issue petitioner raised at his

CDP hearing, it further follows that respondent is entitled to

judgment as a matter of law that the lien at issue in this case

may be maintained.
 - 30 -

To reflect the foregoing,

An appropriate order and

decision will be entered.