Edward F. Murphy, Petitioner, Appellant v . Commissioner of Internal Revenue, Respondent, Appellee.U.S. Court of Appeals, 1st Circuit; 06-1109, November 20, 2006, 469 F3d 27.Affirming the Tax Court, 125 TC 301.
A. Extra-Record EvidenceDuring the evidentiary hearing before the Tax Court, Murphy testified about the circumstances that made him unable to offer a larger settlement payment, and the appeals officer testified concerning the process that she employed to evaluate Murphy's offer-in-compromise. The IRS objected to the introduction of this testimony on the basis that the Tax Court should not consider evidence that was not part of the administrative record of the CDP hearing. The court rejected this argument but still excluded the evidence as irrelevant. The IRS urges us to affirm this ruling on an alternative ground: Tax Court review should be limited to the administrative record.We recently considered this issue in the context of a taxpayer appeal to the district court from the denial of an offer-in-compromise made during a CDP hearing. See Olsen [2005-2 USTC ¶50,637], 414 F.3d at 155. The reasons supporting application of the administrative record rule in district court CDP hearing appeals have equal force where the appeal takes place in the Tax Court. The Tax Court, like the district court, is charged with determining whether the IRS's rulings during a CDP hearing were within its discretion. Thus, judicial review normally should be limited to the information that was before the IRS when making the challenged rulings. See Robinette [