Offer in Compromise, Doubt as to liability. Section 7122(a) authorizes the Secretary to compromise any civil case arising under the internal revenue laws. Compromises may be made on three grounds: (1) Doubt as to liability (DATL); (2) doubt as to collectibility (DATC); and (3) promotion of effective tax administration (ETA). ETA is further divided into hardship and nonhardship ETA. Sec. 301.7122-1(b), Proced. & Admin. Regs. An IRS Appeals Officer did not abuse his discretion by rejecting an offer-in-compromise (OIC) and deciding to proceed with collection of an individual's 1982 tax liability. The taxpayer submitted an OIC based on doubt as to liability, claiming that the 1982 tax year was covered with other tax years in a 1995 OIC entered into with the IRS. The Tax Court, however, ruled in 1999 that the taxpayer was liable for the 1982 taxes and the IRS assessed the tax following that decision. Since an OIC may not be entered into until after a tax is assessed, the 1995 OIC could not have covered the 1982 taxes. Further, since the Tax Court's 1999 decision held that the taxpayer was liable for the 1982 taxes there was no doubt as to liability for those taxes. The Appeals Officer also did not abuse his discretion by rejecting the new OIC based on doubt as to collectibility or economic hardship because the taxpayer did not file a Form 433-A to provide the financial information required to consider a compromise based on these grounds and also ignored the officer's request for such information. -


Fred L. and Beverly R. Amtower v. Commissioner.

Dkt. No. 24636-06L , TC Memo. 2008-88, 95 TCM 1344, April 7, 2008


MEMORANDUM FINDINGS OF FACT AND OPINION

GOEKE, Judge: This case is before the Court on respondent's motion for summary judgment pursuant to Rule 121. 1 The issue we must decide is whether respondent's Appeals Office abused its discretion in determining to proceed with collection of petitioners' tax liability for taxable year 1982.

For the reasons stated below, we shall grant respondent's motion for summary judgment.


FINDINGS OF FACT

At the time the petition was filed, petitioners resided in Georgia.

On March 7, 2005, respondent sent petitioners a Letter 1058, Final Notice of Intent to Levy and Notice of Your Right to a Hearing (notice of intent to levy), with respect to their 1982 tax year liability.

Petitioners' tax liability for the year 1982 was determined in the case of Amtower v. Commissioner, docket No. 761-87. That case was resolved in accordance with the Court's disposition of certain issues in the case of Krause v. Commissioner [Dec. 48,383] 99 T.C. 132 (1992), affd. sub nom. Hildebrand v. Commissioner [94-2 USTC ¶50,305] 28 F.3d 1024 (10th Cir. 1994). Krause was the test case for the Elektra/Hemisphere group of cases. Id. at 133. The decision in docket No. 761-87 was entered on September, 27, 1999. Petitioners' liability for tax year 1982 was assessed on or about February 2, 2000.

The record establishes that petitioners entered into an offer-in-compromise with respondent in 1995 for a number of other outstanding tax years (the 1995 compromise) while their 1982 tax liability was pending before this Court. Neither party has been able to produce a copy of this offer-in-compromise. Petitioners argue that they believed the 1982 liability was included in the 1995 compromise when they entered into it. Respondent has produced evidence, however, that petitioners informed respondent in October 2000 of their intention to submit a new offer to compromise the 1982 tax liability, and they submitted an offer-in-compromise in January 2001.

In response to a notice of intent to levy, petitioners filed a Form 12153, Request for a Collection Due Process Hearing, for the 1982 tax liability. After the Fresno, California, Appeals Office sent petitioners a letter informing them that a telephone hearing had been scheduled and enclosing a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, requesting additional information, petitioners requested that the matter be forwarded to the Atlanta Appeals Office for a face-to-face hearing. On August 18, 2005, respondent received a Form 656, Offer in Compromise, dated July 5, 2005, from petitioners for tax year 1982 (the 2005 compromise). Petitioners did not enclose a completed Form 433-A with the 2005 compromise. On their Form 656, petitioners checked the "Doubt as to Liability" box, indicating that they were submitting the offer because they believed that the 1982 liability was included in the 1995 compromise, and therefore they were not liable for any tax. On September 13, 2005, a settlement officer from the Atlanta Appeals Office sent petitioners a letter informing them that a telephone hearing had been scheduled for October 25, 2005. The settlement officer included a Form 433-A, which he instructed petitioners to complete and return if petitioners wanted the settlement officer to consider alternative collection methods, including future offers-in-compromise.

On October 25, 2005, the telephone hearing was held. During the call, petitioners continued to assert their belief that the 1982 tax liability was included in the 1995 compromise. Petitioners did not raise any other issues or collection alternatives but requested that they be granted until November 30, 2005, to submit an additional offer-in-compromise for the 1982 tax year. Petitioners did not file any additional offers-in-compromise and did not provide a completed Form 433-A to the settlement officer.

On November 3, 2006, respondent issued a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice of determination) to petitioners sustaining the proposed collection action and rejecting the 2005 compromise. On December 1, 2006, petitioners filed a petition with this Court for review of respondent's determination to proceed with the collection action of petitioners' 1982 tax liability. On October 15, 2007, respondent filed a motion for summary judgment. On November 13, 2007, petitioners filed an objection to respondent's motion for summary judgment.


OPINION

Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Fla. Peach Corp. v. Commissioner [Dec. 44,689] 90 T.C. 678, 681 (1988). The Court may grant summary judgment where there is no genuine issue of any material fact and a decision may be rendered as a matter of law. Rule 121(b); Sundstrand Corp. v. Commissioner [Dec. 48,191] 98 T.C. 518, 520 (1992), affd. [94-1 USTC ¶50,092] 17 F.3d 965 (7th Cir. 1994). The moving party bears the burden of proving that there is no genuine issue of material fact, and the Court will view any factual material and inferences in the light most favorable to the nonmoving party. Dahlstrom v. Commissioner [Dec. 42,486] 85 T.C. 812, 821 (1985). Rule 121(d) provides that where the moving party properly makes and supports a motion for summary judgment "an adverse party may not rest upon the mere allegations or denials of such party's pleading," but must set forth specific facts, by affidavits or otherwise, "showing that there is a genuine issue for trial."

This collection review proceeding was filed pursuant to section 6330. Section 6330(a) provides that no levy may be made on any property or right to property of any person unless the Secretary has notified such person in writing of the right to a hearing before the levy is made. Section 6330(b)(1) and (3) provides that if a person requests a hearing, that hearing shall be held before an impartial officer or employee of the IRS. At the hearing, a taxpayer may raise any relevant issue, including appropriate spousal defenses, challenges to the appropriateness of the collection action, and collection alternatives, including offers-in-compromise. Sec. 6330(c)(2)(A). A taxpayer is precluded from contesting the existence or amount of the underlying tax liability at the hearing unless the taxpayer failed to receive a notice of deficiency for the tax in question or did not otherwise have an opportunity to dispute the tax liability. Sec. 6330(c)(2)(B); see also Sego v. Commissioner [Dec. 53,938] 114 T.C. 604, 609 (2000).

Following a hearing, the Appeals Office must make a determination whether the proposed levy action may proceed. The Appeals Office is required to take into consideration: (1) The verification presented by the Secretary that the requirements of applicable law and administrative procedures have been met; (2) the relevant issues raised by the taxpayer; and (3) whether the proposed levy action appropriately balances the need for efficient collection of taxes with a taxpayer's concerns that the levy action be no more intrusive than is necessary. Sec. 6330(c)(3).

Section 6330(d) grants the Court jurisdiction to review the determination by the Appeals officer to proceed with collection action via levy after the hearing. Where the validity of the underlying tax liability is at issue in a collection review proceeding, the Court will review the matter de novo. Davis v. Commissioner [Dec. 53,969] 115 T.C. 35, 39 (2000). Where the underlying tax liability is not at issue, however, the Court will review the determination of the Appeals Office for an abuse of discretion. Goza v. Commissioner [Dec. 53,803] 114 T.C. 176, 182 (2000).

Because petitioners had an opportunity before their hearing to contest their 1982 tax liability, the underlying liability was not properly at issue, and we review respondent's determination for an abuse of discretion. An abuse of discretion is proven by showing that the Commissioner exercised this discretion arbitrarily, capriciously, or without sound basis in fact or law. Woodral v. Commissioner [Dec. 53,206] 112 T.C. 19 (1999).

Section 7122(a) authorizes the Secretary to compromise any civil case arising under the internal revenue laws. Compromises may be made on three grounds: (1) Doubt as to liability (DATL); (2) doubt as to collectibility (DATC); and (3) promotion of effective tax administration (ETA). ETA is further divided into hardship and nonhardship ETA. Sec. 301.7122-1(b), Proced. & Admin. Regs.

Petitioners oppose respondent's motion for summary judgment on two grounds: (1) Summary judgment is not proper because the question of whether the 1982 tax liability was included in the 1995 compromise remains open and further discovery is needed; and (2) respondent abused his discretion by not evaluating petitioners' 2005 compromise as to DATC and ETA.

The 1995 Compromise

Petitioners first argue that summary judgment is improper because respondent has not produced a copy of the 1995 compromise showing that the 1982 tax liability was not included and as a result we must deny respondent's motion because we are left with a question of material fact for trial.

As stated above, petitioners' 1982 tax liability arose from an order of this Court dated September 27, 1999. Amtower v. Commissioner, docket No. 761-87. Petitioners' 1982 tax liability was finally determined when the Court entered a decision in docket No. 761-87 on September 27, 1999, 4 years after the 1995 compromise. It is important to note Internal Revenue Service (IRS) guidelines concerning offers-in-compromise as they relate to unassessed taxes. According to the Internal Revenue Manual (IRM) in effect during 1995, "Taxpayers may submit an offer to compromise taxes which have not yet been assessed. IRS has no statutory authority to compromise unassessed taxes. Therefore, before the offer can be accepted, the taxes must be assessed." IRM sec. 57(10)1.42 (Sept. 22, 1994). Although petitioners could have included the outstanding 1982 liability in an offer-in-compromise, that offer could not be accepted until the tax was assessed, according to the procedures described in the IRM. Because petitioners' 1982 tax liability was not assessed until after this Court entered a decision against them in docket No. 761-87 in 1999, that liability could not have been included in the 1995 compromise without departing from those procedures.

Respondent has also produced evidence that petitioners filed a subsequent offer-in-compromise for their 1982 tax liability in January 2001. Respondent rejected that offer in June 2001. Had petitioners' 1982 tax liability been compromised, filing further offers-in-compromise would have been unnecessary.

Because we find that the 1982 tax liability was not included in petitioners' 1995 compromise, respondent has carried his burden of proving that there are in that respect no genuine issues of material fact that would preclude summary judgment. We will now review for an abuse of discretion respondent's determination to proceed with the proposed levy.

The 2005 Compromise

Petitioners argue that respondent abused his discretion by: (1) Failing to evaluate petitioners' 2005 compromise on the basis of DATC and promotion of ETA; and (2) requiring both a copy of the 1995 compromise and a Form 433-A before he would consider petitioners' offer-in-compromise.

In order to have an offer considered, taxpayers must submit a Form 12153 and all other information prescribed or requested by the Secretary. Sec. 301.7122-1(d), Proced. & Admin. Regs. Taxpayers submitting offers-in-compromise based solely on DATL will not be required to provide financial statements. Id. However, a settlement officer may not consider offers-in-compromise based on DATC or ETA unless the taxpayers submit a Form 433-A. Rev. Proc. 2003-71, sec. 4.03, 2003-2 C.B. 517, 518.

At petitioners' October 25, 2005, hearing, petitioners alleged that the 1982 tax liability should have been included in the 1995 compromise. Petitioners claimed only DATL as to liability on their offer-in-compromise. Petitioners admit that they never submitted a Form 433-A.

In support of their position, petitioners refer to information contained in a Government Accountability Office (GAO) report, "IRS Offers in Compromise, Performance Has Been Mixed; Better Management Information and Simplification Could Improve the Program," GAO-06-525 (Apr. 20, 2006) (GAO Report), attached to their opposition to respondent's motion. The GAO Report focuses in part on confusion in the application process caused by applicants' being required to check a box indicating their desire to have the offer-in-compromise evaluated under either DATL, DATC, or ETA. In response to confusion concerning applicants' being required to choose one of the three types of offers, the GAO Report, relying on representations made by the offer-in-compromise program manager, indicates that although a taxpayer might check only one of the three boxes, the taxpayer's offer will be evaluated under all three. Id. at 37.

Petitioners, however, confuse the program manager's assurances contained in the GAO Report that the offer will be evaluated on all three grounds (even if only one box is checked) with respondent's ability to impose requirements before consideration of the offer. Petitioners appear to believe that if an offer-in-compromise satisfies the requirements of one of the grounds for review, it satisfies the requirements for all three, whether those other two grounds impose additional requirements for consideration or not.

The current version of the IRM states that an ETA offer will be considered only after the IRS determines that the taxpayer does not qualify under DATL or DATC and that the taxpayer must submit a Form 433-A. 1 Administration, IRM (CCH), pt. 5.8.11.1(3), at 16,373 (Sept. 1, 2005); see also Rev. Proc. 2003-71, sec. 4.03.

Petitioners admitted they did not file a Form 433-A. The settlement officer, in his sworn declaration, addressed his decision to reject petitioners' offer on all three grounds for compromise. The settlement officer stated that he could not evaluate collection alternatives other than DATL because petitioners did not file a Form 433-A. This Court has previously held that it is not an abuse of discretion for Appeals personnel to refuse to consider collection alternatives such as offers-in-compromise where a taxpayer fails to submit requested financial information. Schwersensky v. Commissioner [Dec. 56,599(M)] T.C. Memo. 2006-178; Sapp v. Commissioner [Dec. 56,519(M)] T.C. Memo. 2006-104.

The settlement officer also stated that he rejected the 2005 compromise upon DATL grounds because the tax liability at issue had been adjudicated before this Court. This Court has previously held that the Commissioner's decision to reject a taxpayer's offer-in-compromise on the basis of DATL was a reasonable exercise of discretion where there was no doubt as to the liability. See Oyer v. Commissioner [Dec. 55,193(M)] T.C. Memo. 2003-178, affd. 97 Fed. Appx. 68 (8th Cir. 2004); see also Baltic v. Commissioner, 129 T.C. 19 (2007).

Respondent requested on numerous occasions that petitioners submit a Form 433-A. The Form 12153 states on its face that if the applicant wants an offer-in-compromise to be evaluated under either DATC, ETA, or both, the applicant must submit a Form 433-A. Petitioners filed their offer-in-compromise without the required supporting documents and now ask us to rule that it was an abuse of discretion for respondent not to consider their offer. We decline to do so. The record establishes that Appeals requested a collection information statement from petitioners, and we are satisfied that petitioners ignored the request. Thus, it was not an abuse of discretion for the settlement officer to decline to consider petitioners' 2005 compromise under either DATC or ETA. See Schwersensky v. Commissioner, supra.

Accordingly, we hold that no genuine issue of material fact exists requiring trial and that respondent is entitled to summary judgment. Respondent's determination to proceed with the proposed levy to collect petitioners' tax liability for 1982 was not an abuse of discretion.

To reflect the foregoing,

An appropriate order and decision will be entered.

1 Unless otherwise indicated, all Rule references are to the Tax Court Rules of Practice and Procedure, and all section references are to the Internal Revenue Code, as amended.


74-2 USTC ¶9605]Charles B. Barnes and Philip B. Buzzell, Trustees under the Will of William O. Blake, Late of Boston, Massachusetts, Deceased v. The United States
U. S. Court of Claims, No. 291-67, 201 CtCls 879, 4/20/73, Adopting Ct. Cls. Com. Rpt., 727 CCH ¶7910

[Code Sec. 7422]


[1939 Code Sec. 3761(a) same as 1954 Code Sec. 7122(a)]

Compromise agreement: No prospective effect.--A compromise agreement entered into between the taxpayer and the Justice Department in 1949 formally covered only pending litigation for taxable years 1935 through 1938 and, therefore, had no prospective effect.
Philip B. Buzzell, Charles M. Ewing, 73 Tremont St., Boston, Mass., for plaintiff. Robert N. Dorosin, Department of Justice, Washington, D. C. 20503, for defendant.
Before DAVIS, Acting Chief Judge, LARAMORE, Senior Judge, SKELTON, NICHOLS, KASHIWA, KUNZIG and BENNETT, Judges.
It should be further noted that there is a very strong presumption against any interpretation of a settlement between a taxpayer and the Department of Justice regarding claims raised in litigation for particular tax years that would give the settlement effect for future years not then in issue. The authority of the IRS and the Attorney General to enter into compromise agreements with taxpayers regarding the tax liabilities of taxpayers under the internal revenue laws is set forth in specific acts of Congress; and those statutes are the exclusive authority for tax settlements. Botany Worsted Mills v. United States [1 USTC ¶348], 278 U. S. 282 (1929); Country Gas Service, Inc. v. United States [69-1 USTC ¶9178], 405 F. 2d 147 (1st Cir. 1969); Yarborough v. United States [56-1 USTC ¶9295], 230 F. 2d 56 (4th Cir.), cert. denied, 351 U. S. 969 (1956); Cabin Creek Consol. Coal Co. v. United States [43-2 USTC ¶9590], 137 F. 2d 948 (4th Cir. 1943); Cleveland Trust Co. v. United States [67-1 USTC ¶12,438], 266 F. Supp. 824 (N. D. Ohio 1966), aff'd [70-1 USTC ¶12,649], 421 F. 2d 475 (6th Cir.), cert. denied, 400 U. S. 819 (1970). Further, the authority for settlements regarding tax liabilities not involved in pending litigation is governed by a section of the Internal Revenue Code distinct from the section regarding compromise of claims in litigation. Thus, under the pertinent section of the code in force during the period of negotiation of the 1949 settlement, Internal Revenue Code of 1939, ch. 2, §3760, 53 Stat. 462 (now section 7121 of the 1954 Code), entitled "Closing Agreements," the IRS had the exclusive authority to enter into settlements involving taxpayers' liabilities not the subject of pending litigation:
(a) Authorization. The Commissioner * * * is authorized to enter into an agreement in writing with any person relating to the liability of such person * * * in respect of any internal revenue tax for any taxable period. [Emphasis supplied.]
By contrast, the section pertaining to compromise of pending tax litigation, Internal Revenue Code of 1939, ch. 2, §3761, 53 Stat. 462 (now section 7122 of the 1954 Code), was less broadly worded, with the role of the Attorney General clearly delineated:
(a) Authorization. The Commissioner, with the approval of the Secretary * * *, may compromise any civil * * * case arising under the internal revenue laws prior to reference to the Department of Justice for * * * defense; and the Attorney General may compromise any such case after reference to the Department of Justice for * * * defense. [Emphasis supplied.]
It does not appear that the latter section has ever been authoritatively construed in litigation but on its face, and considering also section 3760, section 3761 would seem only to authorize the Attorney General to enter into compromise agreements pertaining to actual cases referred to the Department of Justice for defense. It is well settled that when a single issue is raised in litigation involving more than one tax year, each tax year constitutes a separate cause of action. See Sunnen, supra. Thus, when a tax issue is resolved in a final judgment relating to one tax year there is no res judicata bar that prevents relitigation of the identical issue for other tax years (although collateral estoppel may apply in an appropriate case). Id. By analogy, when pending litigation relating to one or more tax years is resolved by compromise under the relevant statutory authority, similar or identical claims for other periods are not affected. Latimer v. United States, 52 F. Supp. 228, 237-38 (S. D. Cal. 1943). In the present case, the 1949 settlement by its terms referred only to the tax years in dispute; and it may be that the Attorney General's compromise authority was limited to the tax years actually involved in the pending litigation, under the then applicable statute. This may well have been the meaning of the above-quoted paragraph in the Assistant Attorney General's letter dated October 6, 1948. At the very least, there is a strong presumption that the settlement was intended to apply only to those years. Since plaintiffs have offered nothing to overcome that presumption, it is concluded that the 1949 settlement permitted plaintiffs to take depreciation deductions respecting the Blake Building only for the years 1935 through 1938; and that the IRS was not estopped to challenge similar deductions for any later years. 16

IV--Conclusion
For the reasons stated above, it is concluded that the plaintiffs have not established on any of the asserted grounds that they were or are entitled to depreciation deductions on account of the Blake Building for the tax years 1959 through 1963. The deductions were properly disallowed by the IRS, and plaintiffs have no grounds for complaint regarding the deficiencies subsequently assessed. Since the plaintiffs have not established entitlement to any refunds, their petition must be dismissed.
* * *
["Findings of Fact" and "Conclusion of Law" omitted.--CCH.]
1 The parties are in agreement that if the lessors had retained this amount, the lessee would have been entitled to a rent reduction in excess of $8,000 per annum over the full 75-year lease term.
2 The parties have consistently used the term "additional sum" as a shorthand expression describing those funds advanced from the lessors to the lessee for construction purposes under the 1908 agreement, in excess of the amount of the condemnation proceeds. Therefore, the same use of the term is made herein.
3 For the years 1934 and 1935, assessors of the City of Boston valued the Blake Building property at $1,500,000, with $135,000 allocated to the Blake Building.
4 In 1910 the original lessee, George A. Carpenter, had entered into a sublease of the Blake Building basement with the Boston Edison Company, for a 50-year term at a fixed annual rental of $22,000. Also in 1910 the original lessors had entered into a contingent lease with the Boston Edison Company providing that if the 1904 lease between the Blakes and Carpenter should be terminated while the sublease between Carpenter and Boston Edison was still in effect, the Blakes would lease the basement to Boston Edison from the date of termination of the 1904 lease until the termination date of the 1910 sublease, at a fixed annual rental of $22,000. In December 1910, the Blakes, Carpenter, and the Boston Edison Company executed an agreement providing that if the 1904 lease was terminated prior to February 1, 1959, from the date of termination of the 1904 lease Boston Edison would pay one-half of the $22,000 rental to the lessors and the other half to the lessee. It was one-half of Carpenter's interest in the latter agreement that secured the contingent and absolute liability assumed by the lessee's estate on the lessee's repayment obligation.
5 Charles Bertram Currier [CCH Dec. 15,421], 7 T. C. 980 (1946), was expressly overruled by the Tax Court in Albert L. Rowan [CCH Dec. 20,456], 22 T. C. 865 (1954).
6 Section 167 of the Internal Revenue Code of 1954 provides in pertinent part:
§167. Depreciation.
(a) General rule.
There shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear (including a reasonable allowance for obsolescence)--
(1) of property used in the trade or business, or
(2) of property held for the production of income.
* * *
(g) Basis for depreciation
The basis on which exhaustion, wear and tear, and obsolescence are to be allowed in respect of any property shall be the adjusted basis provided in section 1011 for the purpose of determining the gain on the sale or other disposition of such property.
Section 1011 of the Internal Revenue Code of 1954 provides in pertinent part:
§1011. Adjusted basis for determining gain or loss.
The adjusted basis for determining the gain or loss from the sale or other disposition of property, whenever acquired, shall be the basis (determined under section 1012 or other applicable sections of this subchapter * * *) adjusted as provided in section 1016.
Section 1012 of the Internal Revenue Code of 1954 provides in pertinent part:
§1012. Basis of property--cost.
The basis of property shall be the cost of such property * * *.
7 The claim for 1961 apparently was lost; however, neither party appears to argue that it was substantially different from the claims for other years.
8 It seems indisputable that plaintiffs intended the July 17, 1963 letter to constitute a part of the formal claim; and it appears that the IRS considered the letter along with the actual claims. It is well established that when a taxpayer submits letters to the IRS accompanying, supplementing, or explaining its more formal claim documents, and intended to be considered with them, the IRS and the courts must consider such letters as part of the refund claims in appraising the sufficiency of such claims. Bonwit Teller & Co. v. United States [2 USTC ¶709], 283 U. S. 258 (1931); Cumberland Portland Cement Co. v. United States [52-1 USTC ¶9345], 122 Ct. Cl. 580, 104 F. Supp. 1010 (1952); see also Berenfeld v. United States, 194 Ct. Cl. 903, 908, 442 F. 2d 371, 374 (1971).
9 Section 7422(a) of the Internal Revenue Code of 1954 provides, in relevant part:
No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected * * * until a claim for refund * * * has been duly filed with the Secretary or his delegate, according to the provisions of law in that regard, and the regulations of the Secretary or his delegate established in pursuance thereof.
Treas. Reg. §301.6402-2(b)(1) provides, in relevant part:
* * * The claim must set forth in detal each ground upon which a * * * refund is claimed and facts sufficient to apprise the Commissioner of the exact basis thereof. * * *
10 The forms for 1959 and 1960 do not specify the grounds upon which the refund claims are predicated; presumably plaintiffs considered the grounds sufficiently established by the July 17, 1963 letter or the claim forms for 1962 and 1963, or both.
11 In this context, it may be noted that the reversionary interest of a lessor in a building erected by the lessee at the latter's expense is not normally depreciable, First Nat'l Bank of Kansas City v. Nee [51-1 USTC ¶9342], 190 F. 2d 61 (8th Cir. 1951), even where the useful life of the building is greater than the unexpired term of the lease. Goelet v. United States [58-1 USTC ¶9474], 161 F. Supp. 305 (S. D. N. Y. 1958), aff'd [59-1 USTC ¶9445], 266 F. 2d 881 (2d Cir. 1959).
12 The right of the lessee to depreciation deductions with respect to the Blake Building is not, of course, at issue in this proceeding.
13 Defendant attempted to assert in its brief to the Commissioner the same collateral estoppel argument made with respect to the additional sum issue, supra. For the reasons discussed with regard to that issue, no collateral estoppel effect can be accorded to the earlier litigation.
14 The same taxpayer, Catherine Blake Currier, had successfully relied on the estate tax payment theory in Charles Bertram Currier, supra, subsequently overruled in Rowan, supra. The earlier Currier case, was, of course, for a prior tax year.
15 By motion filed October 26, 1970, plaintiffs sought to invoke discovery of a document alleged to be a letter, dated July 23, 1948, from the Acting Chief Counsel of the IRS to the Assistant Attorney General, Tax Division, which plaintiffs claimed would show that defendant intended to accord prospective effect to the proposed settlement regarding depreciation of the Blake Building. The trial commissioner, agreeing with defendant that the letter was privileged and that no good cause for production had been made, denied the motion by order dated January 4, 1971. The court, by order entered February 17, 1971, denied plaintiffs' request for review of the commissioner's order. It was, and remains, difficult to understand how any such letter could be used to vary the unambiguous terms of a later-negotiated settlement, the terms of which were submitted by the plaintiffs, totally devoid of language indicating settlement for years not then in issue.
16 Defendant asserts that plaintiffs made no argument regarding the alleged prospective effect of the 1949 settlement in the subsequent tax refund litigation in the District Court for the District of Massachusetts, Barnes, supra, even though that suit also involved disallowance by the IRS of plaintiffs' asserted depreciation deductions with respect to the Blake Building. At the very least, it is somewhat anomalous that plaintiffs would wait so long to assert what they contend was a firm agreement with the Government regarding the validity of depreciation deductions for years after 1938.



Dkt. No. 8725-05L , TC Memo. 2006-181, August 29, 2006.



[Code Sec. 7122]


Compromises: Acceptance of offers: Abuse of discretion. --
An IRS appeals officer did not abuse his discretion by refusing an individual's offer in compromise and proceeding to collection when the taxpayer failed to provide all the required and requested financial statements to substantiate his offer. --CCH.




MEMORANDUM FINDINGS OF FACT AND OPINION

FOLEY, Judge: The issue for decision is whether respondent abused his discretion in proceeding with collection of petitioner's income tax liabilities relating to 1989 through 2000.


FINDINGS OF FACT

On May 15, 2003, respondent issued petitioner a Final Notice of Intent to Levy and Notice of Your Right to a Hearing relating to 1989 through 2000 (the years in issue). In the notice, respondent determined that petitioner was liable for taxes and additions to tax totaling $130,835 and $41,445, respectively, relating to the years in issue.

On May 27, 2003, petitioner timely filed a Form 12153, Request for a Collection Due Process Hearing (request), and stated that he did "not have sufficient assets to cover the assessed liabilities." On November 11, 2003, petitioner sent respondent a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals. On November 25, 2003, petitioner supplemented his Form 433-A with copies of statements relating to petitioner's checking, credit card, and telephone accounts. Petitioner also attached a copy of a statement relating to a car lease in the name of Leo Shrier, petitioner's father.

On November 25, 2003, respondent conducted a telephone conference with petitioner. During the conference, petitioner requested that his account be placed in "currently not collectible status" because he was unemployed. On February 13, 2004, petitioner's counsel informed respondent that petitioner was employed and would submit an offer-in-compromise (OIC) relating to his income tax liabilities. While petitioner was unemployed, petitioner's parents made several deposits into his checking account (deposits). In a letter dated February 27, 2004, respondent requested that petitioner provide an "affidavit from * * * [petitioner's] parents as to the amount of money they gave him and * * * cancelled checks corresponding to the deposits." Respondent also asked petitioner to explain the car lease expense.

On March 23, 2004, petitioner submitted to respondent a Form 656, Offer in Compromise, in the amount of $2,000 based on doubt as to collectibility (March OIC). Petitioner attached an updated Form 433-A to the March OIC but did not attach any additional financial documents. In a letter dated November 17, 2004, respondent requested additional financial information. In a second letter, also dated November 17, 2004, respondent requested that petitioner "provide the documents specified on Form 433A * * * [and] an affidavit from * * * [petitioner's] parents as to the amount of money they gave him." Respondent warned petitioner that if the requested documents were not received by December 17, 2004, the March OIC would not be accepted.

On December 17, 2004, petitioner sent respondent an amended OIC in the amount of $2,000 based on doubt as to collectibility and effective tax administration (December OIC). Petitioner attached to the December OIC an updated Form 433-A, statements relating to petitioner's checking account, statements relating to an employee profit-sharing plan, and wage statements from his current employer.

In a letter dated March 3, 2005, respondent stated that the December OIC was insufficient because petitioner did not provide the requisite documentation relating to petitioner's ability to pay. Respondent also informed petitioner that his claimed living expenses (e.g., food, housing, and transportation) were in excess of the allowable amount. Respondent also asserted that petitioner had not disclosed that he was living with another individual.

On April 15, 2005, respondent issued petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 relating to 1989 and 1991 through 2000. On May 12, 2005, petitioner, while residing in Aventura, Florida, filed his petition with the Court relating to the years in issue and 2001. On July 15, 2005, respondent issued petitioner a Decision Letter Concerning Equivalent Hearing Under Section 6320 and/or 6330 of the Internal Revenue Code relating to 1990.

On March 2, 2006, the Court filed respondent's motion to dismiss for lack of jurisdiction and to strike as to the taxable year 2001. On March 29, 2006, the Court granted respondent's motion.


OPINION

Petitioner does not dispute the underlying tax liabilities. Where the validity of the liability is not at issue, the Court reviews the Commissioner's administrative determination for abuse of discretion. Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 182 (2000). Respondent's determination will be sustained unless the determination is arbitrary, capricious, clearly unlawful, or without sound basis in fact or law. Woodral v. Commissioner [Dec. 53,206], 112 T.C. 19, 23 (1999).

Petitioner contends that respondent abused his discretion by not accepting the December OIC. Section 7122 1 authorizes respondent to grant an OIC as an alternative to pursuing a collection action, but petitioner must provide detailed financial statements and supporting documentation. Sec. 301.7122-1(d)(2), Proced. & Admin. Regs. Respondent, on numerous occasions, requested supporting documentation from petitioner. Petitioner, however, failed to provide the requested information. Indeed, respondent was unable to properly evaluate the December OIC because petitioner did not provide the supporting documentation relating to petitioner's expenses (i.e., housing, food, transportation, and health care) and certain deposits. Accordingly, respondent did not abuse his discretion by not accepting an OIC and proceeding with the proposed collection action. Id.

Contentions we have not addressed are irrelevant, moot, or meritless.

To reflect the foregoing,

Decision will be entered for respondent.

1 Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue.