Kenneth M. Moore v. Commissioner.
U.S. Tax Court, Dkt. No. 11227-12L, TC Memo. 2013-278, December 9,
2013.
[Appealable, barring stipulation to the contrary, to CA-9.—CCH.]
IRS settlement officer: Abuse
of discretion: Levy: Collection alternatives: Offer-in-compromise: Reasonable
collection potential.–
An IRS settlement officer (SO) did not abuse her discretion in
rejecting an individual’s proposed offer-in-compromise (OIC), which was based
on doubt as to collectability, and sustaining a proposed levy. He claimed that
she erred in calculating his reasonable collection potential because her
calculation failed to take into account that his and his spouse’s pension
benefits would be depleted to cover living expenses before the statutory period
for collection expired. In determining that his reasonable collection potential
exceeded the amount that he had offered in the OIC, she reviewed his financial
information, recalculated his income and expenses and performed an alternate
calculation which took into account the depletion of the pension benefits.
There was also no information presented regarding special circumstances that
would justify her accepting the OIC.—CCH.
Basil
J. Boutris, for petitioner; Kimberly A. Kazda, for respondent
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MEMORANDUM FINDINGS OF FACT AND OPINION
HAINES, Judge: Petitioner filed a
petition with this Court in response to a Notice of Determination Concerning
Collection Action(s) Under Section
6320 and/or 6330. 1Pursuant
to section 6330(d), petitioner seeks review of
respondent's [*2] determination to
proceed with collection of unpaid trust fund recovery penalties assessed
against petitioner for various periods. The issue for decision is whether the
Internal Revenue Service (IRS) Appeals Office abused its discretion in
sustaining the proposed levy action against petitioner.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Those exhibits attached to the stipulation which were found admissible are
incorporated by this reference. Petitioner resided in California when the
petition was filed.
Respondent mailed a final notice of intent to levy (levy
notice) to petitioner for trust fund recovery penalties under section 6672 for periods ending June 30,
September 30, and December 31, 2007; and March 31, September 30, and December
31, 2008 (periods at issue). In response to the levy notice, petitioner
timely requested a section 6330 hearing.
On the Form 12153, Request for a Collection Due Process or Equivalent
Hearing, in which petitioner requested a hearing, he stated that he was
interested in an installment agreement or an offer-in-compromise (OIC) as a
collection alternative.
[*3] The IRS Appeals Office assigned a settlement officer
to conduct petitioner's section
6330 hearing. Petitioner submitted financial information and
an OIC based on doubt as to collectibility. He proposed to pay a total of
$12,000 over 10 years to satisfy his outstanding tax liabilities estimated to
be $173,000. In a letter, the settlement officer notified petitioner that his
reasonable collection potential was greater than a total of $12,000 and as a
result his OIC would be rejected. Thereafter, petitioner mailed the
settlement officer a letter, stating that he believed his income and expenses
were incorrectly calculated. Upon further consideration, the settlement
officer revised her calculations but still determined that petitioner had a
reasonable collection potential greater than $12,000.
Respondent mailed petitioner a determination notice
sustaining the proposed collection action for the periods at issue. In
evaluating petitioner's OIC the settlement officer determined that petitioner
and his spouse had monthly income from Social Security benefits and pension
benefits of $4,178, and monthly allowable expenses of $3,400, which exceeded
the amount of expenses petitioner claimed in his OIC proposal. She also
determined petitioner had net realizable equity in assets of $9,210. On the
basis of these calculations, she determined petitioner had a reasonable collection
potential of $97,902.
[*4] The determination notice included a note in which
the settlement officer stated petitioner and his spouse would likely deplete
their pension benefits before the statutory period for collection ended
because of the rate at which they had been drawing on those benefits.
Accounting for this circumstance, the settlement officer provided an
alternative calculation of petitioner's reasonable collection potential. As
part of that calculation, she found the rate at which petitioner and his
spouse had previously depleted their pension benefits over an extended period
of months. She estimated that petitioner and his spouse's monthly income from
the pension benefits would continue for 35 months. Using a 35-month term and
holding all other variables from her initial calculation constant, she
calculated that petitioner had a reasonable collection potential of $36,440,
more than three times petitioner's OIC.
Petitioner filed a petition with this Court contesting the
determination notice.
OPINION
Petitioner conceded at trial that
the underlying liabilities are not at issue. We therefore review the Appeals
Office's determination for abuse of discretion. Goza v. Commissioner,
114 T.C. 176, 181-182 (2000). “An abuse of discretion occurs when a decision
is based on an erroneous view of the law or a clearly [*5] erroneous assessment of the facts.” Keller
v. Commissioner, 568 F.3d 710,716 (9th Cir. 2009). Petitioner contends
that the settlement officer's rejection of his OIC based on doubt as to
collectibility constituted an abuse of discretion. We disagree. Section 7122(a) provides that “[t]he Secretary
may compromise any civil * * * case arising under the internal revenue laws”.
Whether to accept an OIC is left to the Secretary's discretion. Fargo
v. Commissioner, 447 F.3d 706, 712 (9th Cir. 2006), aff'g T.C.
Memo. 2004-13; sec. 301.7122-1(c)(1), Proced. & Admin. Regs. The
regulations under section 7122 set
forth three grounds for the compromise of a tax liability: (1) doubt as to
liability; (2) doubt as to collectibility; or (3) promotion of effective tax
administration. Sec. 301.7122-1(b), Proced & Admin. Regs. In his hearing,
petitioner sought a compromise based on doubt as to collectibility. 2
The Secretary may compromise a tax
liability based on doubt as to collectibility where the taxpayer's assets and
income are less than the full amount of the assessed liability. Sec.
301.7122-1(b)(2), Proced. & Admin. Regs. Under IRS procedures, the IRS
will not accept a compromise that is less than the [*6] reasonable
collection potential 3 of
the case, absent a showing of special circumstances. See Rev. Proc. 2003-71, sec. 4.02(2), 2003-2 C.B. 517,
517.
Petitioner offered $12,000 to settle his outstanding tax
liabilities, which were estimated to exceed $173,000. The settlement officer
reviewed the information submitted by petitioner during the hearing,
determined that petitioner had a reasonable collection potential of $97,902,
and rejected petitioner's OIC. Petitioner claims that the settlement officer
erred in calculating his reasonable collection potential because her
calculation failed to take into account that the pension benefits of
petitioner and his spouse would be depleted to cover living expenses before
the statutory period for collection expired.
The settlement officer recognized
that petitioner and his spouse would likely deplete their pension benefits
before the statutory period for collection ended. She did an alternative
calculation taking this circumstance into account and found that petitioner
had a reasonable collection potential of $36,440, more than three times
petitioner's $12,000 OIC. Moreover, petitioner did not show that [*7] he presented information to the
settlement officer regarding “special circumstances” that would justify her
accepting his OIC. Accordingly, we find the settlement officer did not abuse
her discretion in rejecting petitioner's OIC.
Petitioner also asserted in his petition and his pretrial
memorandum that the settlement officer abused her discretion by refusing to
allow him to submit an installment agreement proposal in addition to his OIC.
Petitioner did not stipulate facts, present admissible evidence, or otherwise
address this issue at trial. Accordingly, the issue is deemed conceded. See Rule
149(b); Cerone v. Commissioner, 87 T.C. 1 n.1 (1986).
In conclusion, petitioner failed to establish that the
settlement officer abused her discretion, and respondent may proceed with the
proposed levy action.
In reaching our holdings herein, we have considered all
arguments made, and, to the extent not mentioned above, we conclude they are
moot, irrelevant, or without merit.
To reflect the foregoing,
Decision will be entered for respondent.
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