United States Tax Court

T.C. Memo. 2024-37

MERRIE P. WYCOFF,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

__________

Docket No. 4034-21L. Filed March 28, 2024.

__________

Merrie P. Wycoff, pro se.

Jonathan D. Walker and Melinda K. Fisher, for respondent.

MEMORANDUM OPINION

LAUBER, Judge: In this collection due process (CDP) case 

petitioner seeks review pursuant to section 6330(d)(1)1 of the 

determinations by the Internal Revenue Service (IRS or respondent) 

regarding her tax liabilities for 2001 and 2002. The IRS Independent 

Office of Appeals (Appeals) issued her a notice of determination 

sustaining the proposed collection action and rejecting her request for a 

collection alternative in the form of an offer-in-compromise (OIC), an 

installment agreement (IA), and/or currently not collectible (CNC) 

status. After being docketed in this Court the case was remanded to 

Appeals for further consideration. Following a supplemental hearing 

Appeals issued a supplemental notice of determination, finding 

1 Unless otherwise indicated, statutory references are to the Internal Revenue 

Code, Title 26 U.S.C., in effect at all relevant times, and Rule references are to the Tax 

Court Rules of Practice and Procedure.

Served 03/28/24
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[*2] petitioner ineligible for CNC status and sustaining the proposed 

collection action.

Respondent has filed a Motion for Summary Judgment, 

contending that there are no disputes of material fact and that the 

settlement officers did not abuse their discretion in rejecting petitioner’s 

request for a collection alternative. Separately, respondent filed a 

Motion to Impose a Sanction, contending that petitioner’s position in the 

case is frivolous and groundless. See § 6673(a). Agreeing with 

respondent on both points, we will grant his Motions.

Background

The following facts are based upon the parties’ pleadings and 

respondent’s Motion papers, Declarations, and attached Exhibits, which 

include the Administrative Record of the CDP proceeding along with a 

Certificate of Genuineness of the Administrative Record. See

Rule 121(c). Petitioner resided in Colorado when she filed her Petition.

I. Petitioner’s Tax Liabilities

Petitioner’s husband was a successful entrepreneur. His 

principal business was Zap! Products, Inc. (Zap), which manufactured 

various cleaning products. Petitioner has been the sole owner of Zap 

since her husband’s death in March 2018.

The IRS examined the joint Federal income tax returns filed by 

petitioner and her husband for 2001 and 2002 and sent them a timely 

notice of deficiency. They timely petitioned this Court in October 2009. 

See Wycoff v. Commissioner, Docket No. 24158-09. Following a trial the 

Court issued an opinion sustaining the bulk of the adjustments and 

penalties determined in the notice of deficiency. See Wycoff v. 

Commissioner, T.C. Memo. 2017-203. We entered a Decision in January 

2018, determining deficiencies of $3,743,741 and $1,200, and 

accuracy-related penalties of $743,061 and $240, respectively. We also 

held that petitioner was not entitled to “innocent spouse” relief under 

section 6015 with respect to any of the tax liabilities redetermined for 

2001 and 2002.

The IRS assessed petitioner’s 2001 and 2002 liabilities as 

redetermined in our Decision. Petitioner and her husband failed to pay 

those liabilities upon notice and demand for payment. On October 15, 

2018, in an effort to collect petitioner’s unpaid liabilities, the IRS sent 

her two Notices of Intent to Seize Your Assets and Notice of Your Right 
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[*3] to a Hearing (collectively, levy notice). As of October 13, 2023, 

petitioner’s outstanding Federal income tax liabilities exceeded 

$13 million.

II. Collection Due Process Proceedings

A. Initial CDP Hearing

Petitioner, through her former counsel, timely submitted Form 

12153, Request for a Collection Due Process or Equivalent Hearing. She 

requested a collection alternative in the form of “an installment 

agreement, an offer in compromise, or placing the account in currently 

not collectible status.” Her case was assigned to a settlement officer 

(SO1) in Appeals, who verified that petitioner’s 2001 and 2002 liabilities 

had been properly assessed and that all requirements of applicable law 

and administrative procedure had been satisfied.

On April 8, 2019, SO1 sent petitioner and her representative a 

letter scheduling a telephone conference for May 1, 2019. SO1 informed 

petitioner that, to enable Appeals to consider a collection alternative, 

she needed to supply before the hearing a completed Form 433–A, 

Collection Information Statement for Wage Earners and Self-Employed 

Individuals, with supporting financial information. If petitioner wished 

to propose an OIC, she was instructed also to submit Form 656, Offer in 

Compromise. The CDP hearing was later rescheduled to May 15, 2019.

On May 15, 2019, petitioner’s representative sent SO1 a package 

of documents, including a completed Form 433–A for petitioner and 

Form 433–B, Collection Information Statement for Businesses, for Zap 

(petitioner’s wholly owned company). Included in the package was a 

letter urging that petitioner and Zap were undergoing financial stress. 

The letter requested that petitioner’s accounts be placed in CNC status.

The Form 433–A identified five personal bank accounts with 

balances that totaled $247,406. Aside from equity of $5,000 in personal 

property, no other personal assets were reported. The Form 433–B 

showed that Zap had no assets, liabilities of $1.4 million (consisting of 

accounts payable), and income of $1,417,037 (stemming from 

compromised settlement adjustments to accounts payable that Zap, an 

accrual-basis taxpayer, had previously deducted).

The telephone conference took place as scheduled. SO1 confirmed 

her receipt of the financial information and explained that she was 

planning to submit an Appeals Referral Investigation (ARI) request to 
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[*4] the IRS Collection Division (Collection), which would analyze the 

documents to determine petitioner’s ability to pay. She noted that 

petitioner still had not supplied a completed Form 656. At no point 

during the Appeals process did petitioner make a formal request for a 

collection alternative in the form of an IA or OIC.

On October 7, 2019, Collection responded to SO1’s ARI request, 

concluding that petitioner had the ability to pay at least a portion of her 

tax liabilities and was not eligible for CNC status. Collection found the 

following:

• Petitioner had $247,408 of cash in five personal bank accounts. 

Although petitioner’s representative alleged that this cash could 

not be applied to her tax liability, Collection found no evidence to 

support that allegation.

• Petitioner had equity of $1.8 million in her personal residence. 

That residence was titled to a limited liability company (LLC) of 

which petitioner’s two daughters were the managing members. 

Collection determined that the LLC was a nominee of petitioner.

• Shortly after this Court entered its decision in 2018, petitioner 

transferred $350,000 to a third party. Collection determined that 

this was not the legitimate repayment of a loan, as alleged by 

petitioner’s representative, but a transfer for no consideration.

SO1 forwarded the ARI results to petitioner’s representative, who 

reiterated the arguments he had previously advanced unsuccessfully. 

On the basis of Collection’s determination that petitioner had “equity in 

assets to pay towards the balances due,” SO1 recommended that the levy 

notice be sustained. She forwarded a draft notice of determination to 

her Appeals Team Manager, who approved her recommendation to 

sustain the levy.

On March 19, 2021, Appeals sent petitioner a notice of 

determination, informing her that it was “unable to consider the 

collection alternatives of IA or OIC as you’ve made no formal request for 

either.” The notice rejected her request for CNC status because her 

bank accounts had “funds available for payment towards [her] 

outstanding liabilities” and she had not shown that liquidation of the 

accounts would “cause [her] to be unable to meet necessary living 

expenses or result in hardship.” The notice determined, however, that 

“Appeals must return the matter to Collection to complete [its] 
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[*5] investigation” with respect to the ownership of the personal 

residence and the purported loan transaction.

B. Remand and Supplemental CDP Hearing

On June 21, 2021, petitioner timely petitioned this Court, 

contending that SO1 abused her discretion by sustaining the proposed 

levy and rejecting her request for CNC status. By Order served January 

27, 2022, we granted the parties’ joint Motion to Remand the case to 

Appeals for a supplemental CDP hearing on the two issues identified in 

the preceding paragraph. On February 7, 2022, respondent issued a 

remand memorandum and advised that Appeals should reconsider 

petitioner’s request for CNC status after issuing a second ARI to 

Collection.

In March 2022 the remanded case was assigned to a new 

settlement officer (SO2) who reviewed the record and verified that all 

applicable legal requirements had been satisfied. Collection invited 

petitioner to supply additional information for its consideration, but she 

supplied none. Collection issued a second ARI concluding, on the basis 

of the information already in the case file, that petitioner had failed to 

provide evidence that the $350,000 paid to a third party in 2018 was the 

repayment of a loan.

With respect to whether petitioner was the true owner of her 

primary residence, valued at $1.8 million, Collection concluded that 

additional investigation would be needed to establish a fraudulent 

transfer. But when the supplemental hearing was held on December 20, 

2022, petitioner chose not to participate. Having heard nothing further 

from petitioner during the ensuing three months, Appeals issued, on 

April 11, 2023, a supplemental notice of determination sustaining the 

proposed levy. The notice concluded that Appeals’ original decision to 

deny petitioner’s request for CNC status was proper because she had 

“sufficient assets from which to pay” at least a portion of her tax 

liabilities. Even without considering the $350,000 transfer to a third 

party and petitioner’s likely equity in her $1.8 million residence, 

Appeals concluded that her bank account balances of $247,408 “alone 

are sufficient . . . to determine that CNC status is not acceptable.”

On January 5, 2024, respondent concurrently filed a Motion for 

Summary Judgment and Motion to Impose a Penalty. We directed 

petitioner to file a single Response to the Motions by February 23, 2024. 

Petitioner responded to the Motions by mailing a letter to the Court, 
6

[*6] filed on February 14, 2024. The letter, the content of which is very 

difficult to decipher, makes no substantive arguments. Rather, it states 

(among other things) that petitioner “do[es] not argue . . . facts, 

jurisdiction, or venue.” We have recharacterized this letter as 

petitioner’s Response to the IRS Motions for Summary Judgment and to 

Impose a Penalty.2

Discussion

I. Summary Judgment Standard

The purpose of summary judgment is to expedite litigation and 

avoid unnecessary and time-consuming trials. FPL Grp., Inc. & Subs. 

v. Commissioner, 116 T.C. 73, 74 (2001). We may grant summary 

judgment when there is no genuine dispute as to any material fact and 

a decision may be rendered as a matter of law. Rule 121(a)(2); 

Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 

17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary 

judgment, we construe factual materials and inferences drawn from 

them in the light most favorable to the nonmoving party. Sundstrand 

Corp., 98 T.C. at 520. We find that there exist no genuine disputes of 

material fact and that summary adjudication is appropriate.

Petitioner’s filings devote no attention to the issues raised in 

respondent’s Motion for Summary Judgment. She does not allege any 

genuine dispute of material fact and admits that she is not contesting 

the facts that respondent alleges. We find the case appropriate for 

summary judgment.

II. Standard of Review

Section 6330(d)(1) does not prescribe the standard of review that 

this Court should apply in reviewing an IRS administrative 

determination in a CDP case. The general parameters for such review 

are marked out by our precedents. Where the taxpayer’s underlying 

liability is not properly in dispute, we review the IRS’s determination 

for abuse of discretion only. Jones v. Commissioner, 338 F.3d 463, 466 

(5th Cir. 2003); Goza v. Commissioner, 114 T.C. 176, 182 (2000). Abuse 

of discretion exists when a determination is arbitrary, capricious, or 

2 The Court subsequently received from petitioner two similar letters, filed on 

February 20, 2024. Those letters are likewise incoherent and state that petitioner 

“do[es] not argue . . . facts, jurisdiction, or venue.”
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[*7] without sound basis in fact or law. See Murphy v. Commissioner, 

125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006).

Taxpayers may challenge their underlying tax liabilities at a CDP 

hearing only if they did not receive a statutory notice of deficiency for 

those liabilities or did not otherwise have an opportunity to dispute 

them. § 6330(c)(2)(B). Petitioner received a notice of deficiency for 2001 

and 2002 and challenged the Commissioner’s determination in the case 

at Docket No. 24158-09. We entered a decision for respondent in that 

case, and the decision is now final. See § 7481(a). Petitioner did not 

dispute her underlying liability at her initial or supplemental CDP 

hearing, and therefore she cannot challenge it here. See Thompson v. 

Commissioner, 140 T.C. 173, 178 (2013). We thus review the SOs’ 

determinations for abuse of discretion only. See § 6330(c)(3); Goza, 114 

T.C. at 182.

III. Abuse of Discretion

In deciding whether the SOs abused their discretion, we consider 

whether they (1) properly verified that the requirements of applicable 

law or administrative procedure were met, (2) considered relevant 

issues petitioner raised, and (3) considered “whether any proposed 

collection action balances the need for the efficient collection of taxes 

with the legitimate concern of [petitioner] that any collection action be 

no more intrusive than necessary.” § 6330(c)(3). Our review of the 

record establishes that the SOs properly discharged all of their 

responsibilities under section 6330(c).

At her initial CDP hearing petitioner was entitled to make offers 

of collection alternatives, including an OIC or an IA. See § 6330(c)(2) 

and (3). But petitioner did not propose either form of relief. There is no 

abuse of discretion when Appeals does not consider an OIC where (as 

here) a completed Form 656 was not submitted. Gentile v. 

Commissioner, T.C. Memo. 2013-175, 106 T.C.M. (CCH) 75, 77, aff’d, 

592 F. App’x 824 (11th Cir. 2014). And it is not an abuse of discretion 

for an SO to decline to consider an IA where the taxpayer does not place 

a specific proposal on the table. See McLaine v. Commissioner, 138 T.C. 

228, 243 (2012). Accordingly, SO1’s determination that petitioner was 

ineligible for an IA or an OIC was appropriate.

The only collection alternative petitioner proposed was her 

request that her accounts be placed in CNC status. To be entitled to 

such relief, taxpayers must demonstrate, on the basis of their assets, 
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[*8] equity, income, and expenses, that they have no apparent ability to 

make payments on their outstanding tax liabilities. See Foley v. 

Commissioner, T.C. Memo. 2007-242, 94 T.C.M. (CCH) 210, 212. An 

account may not be placed in CNC status if the taxpayer has income or 

equity in assets unless enforced collection would cause hardship. 

See Siebert v. Commissioner, T.C. Memo. 2021-34, 121 T.C.M. (CCH) 

1230, 1236 (citing Internal Revenue Manual (IRM) 5.16.1.2.9(1) 

(Aug. 25, 2014)). Hardship exists if the taxpayer is unable to pay 

reasonable basic living expenses. Margolis-Sellers v. Commissioner, 

T.C. Memo. 2019-165, 118 T.C.M. (CCH) 488, 498 (citing IRM 

5.16.1.2.9(1)).

The initial notice of determination indicated that further 

investigation was needed to address questions relating to petitioner’s 

$1.8 million equity in her residence and $350,000 transfer to a third 

party. The case was remanded to Appeals to investigate those matters. 

When the Court remands a case to Appeals, the further hearing is a 

supplement to the taxpayer’s original CDP hearing, not a new hearing 

in and of itself. See Kelby v. Commissioner, 130 T.C. 79, 86 (2008). 

Because a supplemental notice of determination was issued, we review 

the position taken by Appeals in that notice. Ibid.

That notice found the denial of petitioner’s request for CNC status 

to be proper. Appeals determined that petitioner, far from being unable 

to pay anything at all, had reported on her Form 433–A assets that could 

be used to reduce her tax liabilities. Considering the information that 

petitioner herself supplied, SO2 concluded that she could pay at least 

some of her tax liabilities and that she had not shown that payment 

would cause hardship. Collection determined, in responding to the 

second ARI request, that petitioner had supplied no evidence that the 

$350,000 transfer in 2018 was the repayment of a bona fide loan. In any 

event, SO2 determined that petitioner’s reported bank account balances 

of $247,408 “alone are sufficient for Appeals to determine that CNC 

status is not acceptable.” This Court will neither substitute its 

judgment for that of an SO nor recalculate a taxpayer’s ability to pay. 

See O’Donnell v. Commissioner, T.C. Memo. 2013-247, 106 T.C.M. (CCH) 

477, 481.

The record shows that SO2 performed a balancing test, finding 

that the proposed levy action adequately balances the need for efficient 

tax collection with petitioner’s concerns. Given petitioner’s history of 

noncompliance, the magnitude of her outstanding liabilities, and her 
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[*9] equity, we conclude that SO2 did not abuse her discretion in 

sustaining the proposed levy.

IV. Motion to Impose a Penalty

The Court may impose a penalty of up to $25,000 if a taxpayer 

has instituted or maintained proceedings primarily for delay or has 

taken positions that are frivolous or groundless. § 6673(a)(1)(A) and (B).

Petitioner has repeatedly been warned of this fact. In April 2022 she 

began filing letters with the Court without the advice of her now-former 

counsel. We have stricken three letters from the record since then, 

warning petitioner numerous times about the risk of penalty for 

frivolous filings.

Since July 12, 2022, when we issued our first Order cautioning 

petitioner, she has submitted more than 20 letters containing 

arguments that are frivolous and have been identified as such by the 

IRS. See I.R.S. Notice 2010-33, 2010-17 I.R.B. 609, 609–12. Even 

though petitioner is not a lawyer, a modest inquiry using an internet 

search engine would have led her to online sources showing the frivolous 

nature of these arguments. See Wnuck v. Commissioner, 136 T.C. 498, 

504 (2011) (“Anyone with the inclination to do legal research . . . will 

confront such authorities.”).

The purpose of section 6673 is to compel taxpayers to think and 

to conform their conduct to settled principles before they file and litigate. 

Takaba v. Commissioner, 119 T.C. 285, 295 (2002). This is because 

frivolous and groundless claims “divert the Court’s time, energy, and 

resources away from more serious claims and increase the needless costs 

imposed on other litigants.” Kernan v. Commissioner, T.C. Memo. 

2014-228, 108 T.C.M. (CCH) 503, 512, aff’d, 670 F. App’x 944 (9th Cir. 

2016). With a view to deterring abuse of judicial and IRS resources, this

Court must exercise its discretion to determine when a penalty under 

section 6673 is appropriate, and in what amount. See Precourt v. 

Commissioner, T.C. Memo. 2010-24, 99 T.C.M. (CCH) 1112, 1118.

Petitioner has continued her pattern of frivolous filings despite 

our warnings. However, her filings display confusion and make it clear 

that she has suffered from loss of representation by her former counsel. 

We will therefore exercise our discretion to impose a modest penalty of 

$250.
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[*10] To reflect the foregoing,

An appropriate order and decision will be entered.