T.C. Mem o. 2 01 5- 98

UNITED STAT ES TAX COURT

KATHY L . RIGGS, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 16 52 2- 13 L. Fi le d M ay 26 , 20 15 .
P fai le d t o c ol le ctan d re m item pl oym en t t ax es on be ha lf o f a co rp or at io n t ha t s he co nt ro ll ed . This co rp or at io n’s s uc ces so r-i nin te res t, a s eco ndco rp or at io n, ev en tu al ly ent eredch . 11 ba nkrupt cy an d m ad e se ve ral ad equa te pro te ct io n p aym en ts to R. Thes e pa ym en ts were m ad e b y

ch eck s wh ic h i nd ic at edth ey were t o b e ap pl ie d a ga in stP’s pe rs on al li ab il it y forth e trus t fundreco ve ry pe na lt y . R, ho wev er, ap pl ie d the se ch eck s ag ai ns t the co rp or at io n’s ta x d eb t an d i ni ti at edth is co ll ect io n a ct io n a ga in stP. At P’s co ll ect io n due pro ces s h eari ng , th e App eal s o ffi cer d en ie d P curren tl y no t co ll ect ib le (CNC) s ta tu s. P ap pe al s thi s d et erm in at io n u nd er I.R.C. s ec. 6 33 0. Held : Th is Co urt h as juri sd ic ti on un de r I.R.C. s ec. 6 33 0 be cau se th e b an kr

up tc y st ay ap pl ic ab le to P’s co rp or at io n d oe s n ot ap pl y to he r as anin di vi du al . Held , furth er, P i s n oten ti tl edto CNC s ta tu s b ecau se of t he equi ty in h er as se ts .-2
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[* 2] Held , furth er, R co rrec tl y ap pl ie d t he pa ym en ts ag ai ns t the co rp or at e ta x l iabi li ty.

Kath y L. Rig gs , pro se. Mark J . Tob er, fo r res po nd en t.

MEMORANDUM FINDINGS OF FACT AND OPINION GOEKE, Ju dg e: Pet it io ne r, Kath y Rig gs , li ve d i n J ack so nv il le , Flo rid a, at th e ti m e sh e fi le d ape ti ti on with t hi s C ou rt. Des pi te he r le ga l o bl ig at io n, s he fai le d t o c ol le ctan d re mitpa y ro ll tax es on be ha lf o f Am be r Co ns tru ct io n C o. (Am be r Co ns tru ct io n) , a co rp or at io n t ha t s he co nt ro ll ed . Con se qu en tl y , res po nd en t as se ss eda pe na lt y ag ai ns t h er u nd er s ect io n 6 67 2 i n t he am ou ntof Am be r Co ns tru ct io n’s u np ai d p ayro ll tax es . Peti ti on er t im el y fil eda reque stfora co ll ect io n due pro ces s h eari ng be fo re an IRS Ap pe al s o ffi cer. Th e App eal s o ffi cer su st ai ne d t he de te rm in at io n. Pe ti ti on er n ow ap pe al s thi s d et erm in at io n u nd er se ct io n 6 33 0( d) . 1

All sec ti on refe ren ces are t o t he Int ern al Rev enue Co de ineffe ctat a ll 1 rel ev an t t im es , un le ss ot he rwis e in di cat ed .-3
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[* 3] FINDINGS OF FACT Pet it io ne r in co rp or at edAm be r Co ns tru ct io n i n 1 99 7 u nd er the Sta te law o f Fl or id a. At al l t im es pe ti ti on er was th e o wne r an d p res id en t o f Am be r Co ns tru ct io n. Du rin g i ts pe rio d o f op erat io n t he co m pa ny pro vi de d s erv ic es to ge ne ral co nt ract or s i n a ndaro un d J ack so nv il le , Flo rid a. It a ls o a ccru edsubs ta nt ia l unpa idFed eral em

pl oym en t t ax es rel at edto cert ai n p eri od s fr om Decem be r 20 03 to Decem be r 20 11 . InNov em

be r 20 11 res po nd en t i ss ue d p et it io ne r a p ro po se d a ss es sm en t reg ard in g h er p ers on al li ab il it y forth e trus t fu ndreco ve ry pe na lt y ba se d upo n h er st atus as ares po ns ib le off ic er o f Am

be r Co ns tru ct io n. Inanatt em ptto co ll ectth e unpa idem

pl oym en t t ax of Am

be r Co ns tru ct io n a fte r itwas a ss es se d, re sp on de nt al so fil eda li enag ai ns t p et it io ne r as th e co rp or at io n’s n om in ee i n Ap ril 20 12 . Thi s co rp or at e n om in ee l ie n a tt ach edon ly to an off ic e b ui ld in g o n C ol um

bi a Park Driv e (Co lu m

bi a Park p ro pe rty). Thro ug ho utth is pe rio d p et it io ne r co nt in ue d t o o pe rat e th e co nt ract in g bu si ne ss . Howev er, atso m e p oi ntsh e cea se d u si ng th e en ti ty Am be r Co ns tru ct io n an d i ns te adbe ga n u si ng a ne w who ll y own edco rp or at io n, Am

be r Reb ar, In c. (Am be r Reb ar). Th is sec on d c or po rat io n fi le d ape ti ti on forch ap te r 11 ba nkrupt cy on May 15, 2 01 2. Onit s b an krup tc y sch edul es , Am

be r Reb ar l is te d n um ero us-4
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[* 4] art ic le s o f pe rs on al pro pe rty bu t n o i nt eres ts inreal pro pe rty. In th es e pr oc eed in gs th e b an krup tc y co urt p erm it te d Am

be r Reb ar t o p ay

pe ti ti on er a s al ary of $2 ,18 1 pe r week . The co urt ev en tu al ly adjus te d t hi s amoun t t o $ 1,0 95 pe r

2 week . Ina se pa rat e p ro ceed in g b efo re a Di st ric t Co urt, re sp on de ntest ab li sh edth at Am be r Reb ar was th e su cces so r-i n- in te res t t o Am be r Co ns tru ct io n’s t ax li ab il it ie s. Thu s, i n Am

be r Reb ar’s b an krup tc y

pro ceed in g, re sp on de ntfil eda pr oo f of cla im ag ai ns t the co rp or at io n fo r unpa idFed eral em pl oym en t t ax es . Am

be r Reb ar an d res po nd en t the n e nt eredin to anad equa te pro te ct io n a gr eem en t tha t o n Oct ob er 3 , 20 12 , was co nv ert edin to anord er b y th e b an kr

up tc y co urt. Beg in ni ng on Octo be r 25 , 20 12 , th e ag reem en t re qu ire d R eb ar t o m ak e m on th ly paym en ts to res po nd en t of $3 ,42 0. Am

be r Reb ar co m

pl ie d wi th th e o rd er fo r se ve n m on th s. Eachch eck
m ai le d b y pe ti ti on er o n b eh al f of

Am be r Reb ar i nd ic at edth atitwas t o b e ap pl ie d to pe ti ti on er’s l iabi li ty for the tru stfun d re co ve ry pe na lt y . Eve ntua ll y , res po nd en t al so in it ia te d c ol le ct io n e ffo rts ag ai ns t p et it io ne r as anin di vi du al . On Nov em be r 30 , 20 12 , res po nd en t i ss ue d afin al no ti ce o f in te ntto le vy onpe ti ti on er’s p ers on al ass et s. Subs eque nt ly, res po nd en t fi le d ano ti ce o f Fed eral tax li enag ai ns t p et it io ne r. Pet it io ne r th enreque st eda co ll ect io n due All am ou nt s ar e ro un de d t o t he ne ares t d ol la r. 2-5 -

[* 5] pro ces s h eari ng , see ki ng rev ie w of re sp on de nt ’s effo rts to co ll ectth e tr us t fundreco ve ry

pe na lt y by lev y . Pet it io ne r arg ue d a t the he ari ng th atsh e was en ti tl edto no nc ol le ct ib le or cu rren tl y no t co ll ect ib le (CNC) s ta tu s b ecau se sh e h adno di sp os ab le in co m e. Pet it io ne r cl ai m edth e b an krup tc y co urt d et erm in edth e am ou ntAm be r Reb ar co ul d p ay th e IRS as a de qu at e p ro te ct io n a fte r de te rm in in g the off ic er s al ary pe ti ti on er n eed edto pa y

he r m on th ly exp en se s. Thus , sh e as se rte d, h er s al ary as se t an d a dju st edby the ba nkrupt cy co urt l eftno di sp os ab le in co m e to pa y th e trus t fundpe na lt y . The App eal s o ffi cer, h owe ve r, no te d t he re was equi ty in s ev eral of pe ti ti on er’s as se ts . Firs t, p et it io ne r is th e so le own er o f th e Co lu m bi a Park pr op erty with $ 92 ,54 0 o f equi ty. Seco nd , pet it io ne r own s a b oa t jo in tl y with h er hu sb an d wi th $4 5,3 98 of e qu it y . Thir d, b efo re Dece m be r 30 , 20 12 , pet it io ne r ha d anin te res t as a joi ntten an t wi th a ri gh t o f su rv iv or sh ip with h er p aren ts ina res id en ce o n Ol iv er Cr eekDriv e (Ol iv er Cr eekpro pe rty) with $3 17 ,54 0 o f equi ty. On Dec em

be r 30 , 20 12 , pet it io ne r tr an sf erre d t hi s p ro pe rty so le ly to h er p aren ts by qu it cl ai m de ed . At no po in t d idpe ti ti on er p ay tax es on th e Oli ve r Cre ekpro pe rty orcla im itas a n a ss eton a lo anap pl ic at io n.-6
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[* 6] Bec au se of t he equi ty in the se ass et s tha t co ul d b e li qu id at edor b orro wed ag ai ns t t o p ay

th e trus t fu ndpe na lt y , th e App eal s o ffi cer c on cl ud edpe ti ti on er was no t en ti tl edto CNC s ta tu s. No ot he r co ll ect io n a lt ern at iv es were co ns id eredby th e App eal s o ffi cer b ecau se no ne were re qu es te d b y pe ti ti on er. Pet it io ne r ha s fi le d ape ti ti on with thi s C ou rt s eek in g re vi ew of th e App eal s of fic er’s d et erm in at io n a ndres po nd en t’s al lo cat io n o f th e ad equa te pro te ct io n pa ym en ts . Thro ug ho utth e adm in is tra ti ve rev ie w pro ces s an d a t the ti m e p et it io ne r fil edhe r pe ti ti on with thi s C ou rt, Am be r Reb ar h ada pe nd in g b an krup tc y cas e. The ori gi na l b an krup tc y

cas e, fi le d o n M ay

15 , 20 12 , was d is m is se d o n M ay 17 , 20 13 . Howev er, two d ay s b efo re, o n M ay 15 , 20 13 , pet it io ne r fi le d ane w ba nkrupt cy

pe ti ti on . The s eco ndcas e d idno t cl os e unt il Sep te m be r 30 , 20 14 , well aft er p et it io ne r’s tru stfun d p en al ty case c am e b efo re thi s C ou rt i n J ul y 20 13 . OPINION I. Ju ris di ct io n Thi s C ou rt m

us t fi rs t d eci de whet he r itha s juris di ct io n t o re vi ew th e App eal s o ffi cer’s d et erm in at io n. If aba nkrupt cy st ay was i n p la ce wh enth e pe ti ti on was fi le d, the pe ti ti on wou ldbe in va li d a ndwe wou ldlac k juris di ct io n. The re ar e two rel ev an t Ba nkrupt cy Co de pro vi si on s u nd er wh ic h ast ay m ay ari se . Tit le 11 U.S.C. sec . 36 2 (2 01 2) pro vi de s ei gh t s pe ci fic in st an ces when civ il-7 -

[* 7] act io ns are au to m at ic al ly stayed b y a pe nd in g b an krup tc y . Titl e 1 1 U.S.C. se c. 10 5 (2 01 2) , onth e o th er h an d, au th or iz es a co urt t o i ss ue a st ay inin st an ces no t p ro vi de d fo r un de r 11 U.S.C. sec . 36 2( a). So li du s Networks , Inc . v. Exc el In no va ti on s, In c. (Inre Exc el Inn ov at io ns , Inc .), 50 2 F .3d10 86 , 10 94 (9t h C ir. 20 07 ); P eo pl e Pl ace Au to HandCarwas h, LLC v . Comm is si on er, 1 26 T.C. 35 9, 36 5 (2 00 6) . The co urt i n Am be r Reb ar’s b an krup tc y

di d n otis su e a s tay

un de r 11 U.S.C. se c. 10 5. Thus , th is Co urt wi ll co ns id er o nl y whethe r th e au to m at ic st ay un de r 11 U.S.C. sec . 36 2 i nc lu de d p et it io ne r in it s s co pe . Tit le 11 U.S.C. sec . 36 2( a)(1 ) pr ov id es a st ay fora pr oc eed in g “ ag ai ns t the de bt orth atwas o r co ul d h av e b eenco m m en cedbe fo re the co m

m en cem en t o f th e cas e und er thi s t it le , or t o re co ve r a cl ai m ag ai ns t the de bt orth ataro se be fo re the co m m en cem en t o f th e cas e und er thi s t it le ”. As an off ic er o f Am

be r Reb ar, pe ti ti on er cl ai m s re sp on de nt ’s act io n i s s ta y edby thi s p ro vi si on an d t he no ti ce o f de te rm in at io n was is su edto he r in vi ol at io n o f 11 U.S.C. sec . 36 2( a)(1 ) an d was th eref or e in va li d. Pe ti ti on er ci te s A.H. Ro bi ns Co . v. Pi cci ni n, 7 88 F.2d99 4 (4 th Ci r. 19 86 ), as supp ort fo r th is pro po si ti on . The co m pa ny in A.H. Ro bi ns m anuf actur eda co nt race pt iv e d ev ic e cal le d th e Dal ko n S hi el d. Id . at 9 96 . This de vi ce was ev en tu al ly foundto be de fect iv e, an d t he co m

pa ny file d fo r ch ap te r 11 ba nkrupt cy as ares ul t o f th e g ro win g n um be r-8
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[* 8] of c iv il cla im s p en di ng ag ai ns t i t. Id . Tho ug h t he ir c la im s ag ai ns t the co m pa ny were st ay ed , pl ai nt iff s at te m pt edto pro ceedag ai ns t s ev eral co rp or at e of fic ers an d o th er co de fen da nt s. Id . Init s an al y si s, the co urt n ot edth at“ [s ]ubs ect io n (a )(1 ) is ge ne ral ly saidto be av ai labl e o nl y

to th e d eb to r,” tho ug h i t m ay ap pl y to th irdpa rti es wher e th ere i s su ch“ id en ti ty betweenth e d eb to r an d t he th ird -p arty de fen da ntth atth e d eb to r m ay be sai d t o b e th e rea l p arty de fen da nt ”. Id . at 9 99 . The co urt re co gn iz ed , ho wev er, tha t a s ta y

wou ldno t ex te ndto th irdpa rti es th atwere “ in de pe nd en tl y li ab le .” Id . (qu ot in g In re Me ta l Ct r., Inc ., 31 B.R. 4 58 , 46 2 (B an kr . D. Con n. 19 83 )). Ult im at el y , bec au se th e co de fen dant s (o th er tha n t he in su rer) ha d ri gh ts to in de m ni ty andst atus as a dd it io na l i ns ur ed s u nd er the de bt or ’s in su ran ce p ol ic y , th e co urt co nc lu de d t he co m pa ny was th e rea l p arty

de fen dantan d t ha t a ju dg m en t ag ai ns t the co de fen dant s wo ul d i n e ffec t b e a jud gm en t ag ai ns t the de bt or . Thu s, act io ns ag ai ns t the no nd eb to r co rp or at e o ffi cers were s ta y ed . Inth e p res en t ca se , Am

be r Reb ar i s n otth e “ real pa rty defe nd an t.” Th e pa rti es ha ve pre se nt edno ev id en ce o r arg um en t t o s ho w th atpe ti ti on er wi ll be in de m ni fie d b y th e co rp or at io n i f sh e is for cedto pa y th e trus t fu ndreco ve ry pe na lty . Furthe rm or e, th e Co urt o f App eal s fo r th e Ele ve nth C irc ui t h as he ldth at anin di vi du al ’s li ab il it y

forth e trus t fundreco ve ry pe na lt y is “ se pa rat e an d-9
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[* 9] di st in ct ” fro m

th e p ayro ll tax ob li ga ti on s i m po se d o n e m

pl oyers. Un it ed St at es v. Hu ck ab ee Au to Co ., 78 3 F .2d15 46 -1 54 8, 1 54 9 (1 1t h C ir. 1 98 6) . The refo re, b ecau se pe ti ti on er i s “ in de pe nd en tl y li ab le ” fo r th is tru stfun d re co ve ry pe na lty an d l ack s “ id en ti ty” with th e co rp or at e d eb to r, A.H. Rob in s wo ul d n ot in cl ud e p et it io ne r withi n t he sco pe of Am be r Reb ar’s b an krup tc y

st ay . Pet it io ne r ha s al so fai le d t o c on si de r ou r ho ld in g i n P eo pl e Pl ace Au to Hand Carwa sh , LLC v. Co m

m is si on er, 1 26 T.C. 35 9 (2 00 6) . In Pe op le Pla ce the ta xp ay er was anLLC, andit s m em be rs were i nv ol ve d i n b an krup tc y pro ceed in gs . Id . at 3 60 . Whe n t he IRS at te m pt edto co ll ectunpa idem pl oym en t t ax es fro m

th e LLC, th e co m

pa ny sou gh t p ro te ct io n u nd er 1 1 U.S.C. s ec. 3 62 (a) b y cla im in g t he IRS a ct io n was au to m at ic al ly stayed b y vi rtu e o f it s m em

be rs ’ pe nd in g b an krup tc y cas e. Id . at 3 61 . Thi s C ou rt r eject edth e ta xp ay er’s cl ai m s i n P eo pl e Pl ace. In do in g s o, we ackno wled ge d t ha t u nd er Ro bi ns , a ba nkrupt cy st ay m ay be ex te nd edto st ay act io ns ag ai ns t a n on de bt orwher e th e d eb to r is th e ‘real p arty de fen da nt .’ Id. at 36 5. We con cl ud ed , ho wev er, tha t a s ta y ap pl ic ab le to no nd eb to rs “ wou ldno t ari se purs ua ntto th e au to m at ic st ay pro vi si on s o f 11 U.S.C. sec . 36 2( a) b utrathe r pu rs ua ntto th e b an krup tc y co urt’s equi tabl e p owe r to is su e anord er as ‘ ne ces sa ry orap pr op ria te to carry

ou t the pro vi si on s’ of the Ban krup tc y Co de , as p ro vi de d b y-1 0-

[* 10 ] 11 U.S.C. sec ti on10 5( a) (2 00 0) .” Id . Becau se th e b an krup tc y co urt d idno t is su e anord er u nd er 1 1 U.S.C. s ec. 1 05 , we hel d t ha t the IRS ac ti on ag ai ns t the LLC was n otst ay edas ares ul t o f it s m em be r’s ba nkrupt cy . Id. Lik ewis e, inAm

be r Reb ar’s b an krup tc y , th e co urt d idno t i ss ue a st ay un de r 11 U.S.C. sec . 10 5. In st ead , th e o nl y st ay ap pl ic ab le to th e co rp or at e d eb to r was th e au to m at ic st ay

pro vi de d fo r un de r 11 U.S.C. sec . 36 2( a). The refo re, b ecau se 11 U.S.C. sec . 36 2( a) d oe s n otap pl y to pe ti ti on er, res po nd en t’s co ll ect io n a ct io n was no t s ub

ject t o aba nkrupt cy

st ay . As res po nd en t i ss ue d ava li d n ot ic e o f de te rm in at io n a ndpe ti ti on er t im el y fil eda pe ti ti onforrev ie w, we hav e juri sd ic ti on to co ns id er the m eri ts of t he cas e. II. Su st ai ni ng th e Co ll ect io n Act io n A. CNC Sta tu s Pet it io ne r cl ai m s the IRS Ap pe al s o ffi cer e rredby fail in g t o d es ig na te he r li ab il it y for th e trus t fu ndreco ve ry

pe na lt y curren tl y no t co ll ect ib le . Sin ce thi s is su e d oe s n otrel at e to pe ti ti on er’s und erl y in g l iabi li ty, we wil l re vi ew th e App eal s o ffi cer’s d en ia l o f CNC s ta tu s fo r ab us e o f di sc ret io n. Se e Goz a v . Co m m is si on er, 1 14 T.C. 17 6, 1 82 (20 00 ). “ An ab us e o f di sc ret io n o ccu rs if the App eal s Off

ic e ex erci se s i ts di sc ret io n ‘arb it rari ly, cap ric io us ly, orwitho utso un d-1 1-

[* 11 ] ba si s i n fa ctor l aw’.” V in at ie ri v . Comm is si on er, 1 33 T.C. 39 2, 4 00 (20 09 ) (quo ti ng W oo dr al v. Co m m is si on er, 1 12 T.C. 19 , 23 (19 99 )). CNC s tatu s, wh ic h s us pe nd s IR S co ll ect io n e ffo rts , “ is a ‘col le ct io n al te rn at iv e’ tha t the tax pa y er m ay pro po se an d t ha t the Offic e o f App eal s m us t ta ke in to co ns id erat io n.” Wrig htv. Co m m is si on er, T.C. Mem o. 2 01 2- 24 , sl ip op . at7. CNC s ta tu s m ay

be av ai labl e if

, “ ‘bas edon th e ta xp ay er’s as se ts , equ it y , in co m e an d e xp en se s,’ he h as no ap pa ren t ab il ity to m ak e p aym en ts on th e ou ts ta nd in g t ax li ab il it y .” Fan go ni lo v. Co m m is si on er, T.C. Mem o. 2 00 8- 75 , sl ip op . at 9 (qu ot in g F ol ey

v. Co m m is si on er, T.C. Mem o. 2 00 7- 24 2) . Pet it io ne r cl ai m s tha t s he was u nabl e to sel l o r us e an y of h er as se ts as co ll at eral fora lo anbe cau se of r es po nd en t’s l ie ns . There fo re, b ecau se sh e was un ab le to us e th e equi ty in the se ass et s t o p ay he r pe na lt y

li ab il ity , pet it io ne r arg ue s tha t the App eal s o ffi cer’s d en ia l o f CNC s ta tu s co ns ti tu te d a n abu se of di sc ret io n. Rel y in g o n t he Int ern al Rev enue Man ua l (I RM) , res po nd en t cl ai m s tha t an IRS l ie n d oe s n otreduc e a t ax pay er’s co ll ect io n p ot en ti al . Res po nd en t as se rts th at co ll ect io n p ot en ti al an d e li gi bi li ty for co ll ect io n a lt ern at iv es sh ou ldbe ba se d o n th e n etreal iz ab le equi ty (NRE) inpe ti ti on er’s as se ts . NRE is m eas ur edby the ex te ntto whi chanass et ’s qu ic k s al e v al ue ex ceed s al l l ie ns with p rio rit y ov er a-1 2-

[* 12 ] Fed eral tax li en . IRM p t. 5 .8.5 .4.1 (1 ) (Oct . 22 , 20 10 ). Thu s, o nl y cert ai n no nt ax li en s re du ce the va lu at io n o f anass et ’s equ ity un de r in te rn al IRS p ol ic ie s. Ourde ci si on inFo le y

v. Co m m is si on er, T.C. Mem o. 2 00 7- 24 2, s up po rts res po nd en t’s p os it io n. InSep te m be r of 20 00 th e ta xp ay ers inFo le y pu rch as eda ho m e fi na nc edth ro ug h am ortg ag e wit h aba ll oo n p aym en t due inJu ne 20 07 . Id., sl ip op . at 2 . In 2 00 5 the IRS i ni ti at eda le vy acti on ag ai ns t the tax pa y ers , andth e App eal s o ffi cer d en ie d t he tax pa y ers ’ reque stforCNC s ta tu s. Id . In s us ta in in g th is de te rm in at io n, we h el d t ha t “ th e App eal s o ffi cer d idno t ab us e h is di sc ret io n in reject in g p et it io ne rs ’ reque stto po stpo ne th e le vy un ti l af te r Ju ne 20 07 to all ow pe ti ti on ers to refi na nc e o r se ll th ei r res id en ce.” Id . at 6 . Inth e p res en t ca se , pet it io ne r al so ha s s ub st an ti al equi ty in a num be r of as se ts . Pet it io ne r ha s $ 92 ,54 0 o f equi ty in the Co lu m bi a Park p ro pe rty. 3 Pet it io ne r al so ha s a jo in t o wne rs hi p i nt eres t i n abo atwith $ 45 ,39 8 o f equi ty.

Pet it io ne r di sp ut es th atth e Oli ve r Cre ekpro pe rty sh ou ldbe co ns id eredin 3 de te rm in in g wh ethe r sh e is eli gi bl e fo r CNC s ta tu s. Th ou gh sh e was li st edon th e de edas h ol di ng a joi ntin te res t i n t he pro pe rty with he r pa ren ts , pet it io ne r cl ai m s th is was fo r es ta te pl an ni ng pu rp os es an d t ha t s he ne ve r trul y own edth e p ro pe rty. Bec au se of p et it io ne r’s equi ty in the Co lu m bi a Park p ro pe rty andth e b oa t, we d o no t re ach th e que st io n o f whe th er i t was pro pe r to als o c on si de r pe ti ti on er’s s ha re of th e equi ty in the Oli ve r Cre ek pro pe rty. E qu it y

inth e Co lu m

bi a Park p ro pe rty an d t he bo atis a su ffi ci en t re as on to de ny pet it io ne r CNC s ta tu s.-1 3-

[* 13 ] Des pi te th is subs ta nt ia l equi ty in s ev eral ass et s, h owe ve r, pe ti ti on er ar gu es th athe r acc ou ntsh ou ldbe de si gn at edcurren tl y no t co ll ect ib le be cau se sh e la ck s su ffi ci en t i nc om e to pa y

th e tr us t fu ndreco ve ry

pe na lt y . In Am

be r Reb ar’s i ni ti al ba nkrupt cy

cas e, pe ti ti on er’s s al ary was setat $ 2,1 81 pe r week . The co urt ev en tu al ly adjus te d t hi s amoun t t o $ 1,0 95 pe r week , whi chpe ti ti on er cl ai m s was le ss th anha lf o f he r typic al y earl y sal ary. W e ad dr es se d asi m il ar cl ai m inFan go ni lo v. Co m

m is si on er, T.C. Mem o. 20 08 -7 5. InFan go ni lo , th e ta xp ay er o wedth e IRS $1 7,1 38 . Tho ug h t he tax pa y er la ck edsu ffi ci en t i nc om e to m eethi s l iv in g e xp en se s, we uph el d the App eal s of fic er’s d en ia l o f CNC s ta tu s b ecau se th e ta xp ay er h adanin te res t i n a n i ns ur an ce po li cy wort h a t l eas t $ 56 ,00 0. Id ., sl ip op . at 9 . Tho ug h we n ot edinFan go ni lo th atth e v al ue of t he tax pay er’s as se t ex ceed edhi s t ax li ab il it y , th is was n ot di sp os it iv e o f th e is su e. InW il li s v . Comm is si on er, T.C. Mem o. 2 00 3- 30 2, s li p op . at 8 , we hel d t ha t the tax pay ers were n oten ti tl edto CNC s ta tu s wh ere t he y ha d th e ab il it y

to m ak e p aym en ts inpa rti al sat is fact io n o f th e ta x d eb t. As ares ul t, pe ti ti on er’s l ackof i nc om e is no t d et erm in at iv e. W e h ol d t he App eal s o ffi cer’s de ni al of C NC st atus was n otanab us e o f di sc ret io n, b ecau se of p et it io ne r’s equi ty in th e b oa t an d t he Co lu m bi a Park p ro pe rty.-1 4-

[* 14 ] B. Co ll ect io n Al te rn at iv es Eve n i f no t en ti tl edto CNC s ta tu s, p et it io ne r cl ai m s s he is st il l en ti tl edto a di ffer en t co ll ect io n a lt ern at iv e. Sect io n 6 33 0( c)(2 ) li st s the is su es a ta xp ay er m ay rai se at aco ll ect io n due pro ces s h eari ng be fo re an App eal s o ffi cer. Th is li stof enum erat edis su es sp eci fic al ly inc lu de s “ of fers of c ol le ct io n a lt ern at iv es , whi ch
m ay in cl ud e th e p os ti ng of abo nd , th e subs ti tu ti on of o th er as se ts , an i ns ta ll m en t ag reem en t, o r anoff

er-i n- co m pr om is e.” Sec . 63 30 (c)( 2) (A)(i ii ). Howev er, thi s Co urt h as he ldth at“ we do no t h av e au th or it y to co ns id er s ect io n 6 33 0( c)(2 ) is su es th atwere n otrai se d b efo re the App eal s Off ic e.” Gia m el li v. Co m

m is si on er, 1 29 T.C. 10 7, 1 15 (20 07 ). At h er co ll ect io n due pro ces s h eari ng , pet it io ne r so ug hton ly to h av e h er acco un t p la cedinCNC s ta tu s. Becaus e p et it io ne r di d n otrai se th e is su e o f ot he r 4
co ll ect io n a lt ern at iv es , we wil l n otco ns id er the m onap pe al . See Ma ga nav. Co m m is si on er, 1 18 T.C. 48 8, 4 93 -4 94 (20 02 ) (ref us in g t o c on si de r a co ll ect io n al te rn at iv e b as edon ha rd sh ip wher e th e ta xp ay er fa il edto rai se th e is su e b efo re th e App eal s o ffi cer) . Pet it io ne r’s co ll ect io n due pro ces s re qu es t s ta te d: “ W e are reque st in g t ha t 4 Ms . Rig gs ’ pe rs on al acco un t b e d es ig na te d a s C urren tl y NotCo ll ect ib le (‘CNC’ ) / ‘53’d’ or o th erwi se cro ss -ref eren cedto refl ectth e m on th ly paym en ts m ad e v ia Am be r Reb ar, In c.’s Ch ap te r 11 Ban krup tc y cas e.”-1 5-

[* 15 ] III. App li cat io n o f Am be r Reb ar’s Ad equa te Pro te ct io n P aym en ts The las t i ss ue for

th e Co urt t o a dd res s i s the im pa ctof Am

be r Reb ar’s ad equa te pro te ct io n p aym en ts . Res po nd en t ap pl ie d t he se pa ym en ts to reduc e Am be r Reb ar’s t ax de bt , y etpe ti ti on er cl ai m s the se pa ym en ts sh ou ldhave be en ap pl ie d t o re du ce h er p ers on al li ab il it y forth e trus t fu ndreco ve ry pe na lt y . If we d et erm in edth atres po nd en t’s s et tl em en t o ffi cer m ad e a l eg al erro r, we wou ldno t s us ta in th e co ll ect io n a ct io n re ga rd le ss of t he st an dardof r ev ie w. See Al es si o Azz ari , Inc . v. Co m m is si on er, 1 36 T.C. 17 8, 1 91 (20 11 ); S wan so n v . Co m m is si on er, 1 21 T.C. 11 1, 1 19 (20 03 ); s ee al so Dix on v. Co m mis si on er, 1 41 T.C. 17 3, 1 83 -1 84 (20 13 ). InUni te d S ta te s v . Energ y Res . Co., 4 95 U.S. 54 5, 5 51 (19 90 ), th e Supr em e Co urt h el d “ th at* * * [abankrupt cy co urt] m ay

ord er the IRS t o app ly tax pa ym en ts to off

se t tru stfun d o bl ig at io ns [rathe r th anth e n on -tr us t-f un d t ax li ab il it ie s] wher e itco nc lu de s tha t thi s ac ti onis ne ces sa ry fora reo rg an iz at io n’s su cces s.” R es po nd en t ri gh tfu ll y di st in gu is he s En erg y

Res ou rces by not in g t ha t the ba nkrupt cy

co urt n ev er o rd eredth atAm be r Reb ar’s ad equa te pro te ct io n p aym en ts be ap pl ie d t owa rd s p et it io ne r’s pe na lt y li ab il it y . There fo re, res po nd en t ar gu es th e pa ym en ts m ad e b y

Am be r Reb ar were pro pe rly app li edag ai ns t the co m pa ny’ s t ax li ab il it y .-1 6-

[* 16 ] Howev er, eac h c he ck pe ti ti on er m ai le d o n b eh al f of Am be r Reb ar i nd ic at ed itwas “ fo r” the tru stfun d re co ve ry pe na lty . By

th e IRS ’ own po li cy , if a t ax pa y er

“ vo lu nt ari ly ten de rs a pa rti al paym en t tha t i s ac cep te d b y th e Servi ce an d t he ta xp ay er p ro vi de s s pe ci fic writ te n d ire ct io ns as t o t he ap pl ic at io n o f th e p aym en t, th e Servi ce wi ll ap pl y

th e p aym en t i n a cco rd an ce wi thth os e d ire ct io ns .” Rev . Pro c. 20 02 -2 6, s ec. 1 , 20 02 -1 C.B. 7 46 , 74 6. Itis cle ar tha t p et it io ne r pr ov id ed in st ru ct io ns on ho w th e ad equa te pro te ct io n p aym en ts were t o b e ap pl ie d. Howev er, p et it io ne r’s in st ru ct io ns are n otco nt ro ll in g i f th e p aym en t was in vo lu nt ary. Tip pi n v . Commis si on er, 1 04 T.C. 51 8, 5 27 (19 95 ); Am os v. Co m m is si on er, 4 7 T.C. 6 5, 6 9 (1 96 6) . The ad equa te pro te ct io n p aym en ts were d ire ct edby the ba nkrupt cy co urt, an d t ho se pa ym en ts were m ad e with re sp ectto Am be r Reb ar’s l iabi li ti es , no t pe ti ti on er’s. The refo re, n ei th er p et it io ne r no r Am be r Reb ar, wit ho utpe rm is si on fro m th e b an krup tc y

co urt, wo ul d h av e th e ri gh t t o a ll oc at e th e p aym en ts be twee n Am be r Reb ar’s t ax li ab il it y

an d a ny resi du al li ab il ity sh e h adin di vi du al ly for the tru stfun d re co ve ry

pe na lt y . Con se qu en tl y , we ho ldth atres po nd en t h adau th or ity

5 See Di xo n v . Comm is si on er, 1 41 T.C. 17 3, 1 93 -1 94 (20 13 ) (“ Ju stas the re 5 is no Co de pro vi si on expl ic it ly m an da ti ng th atanem pl oyer’s (la te ) pa ym en t o f em pl oym en t t ax m

us t b e cre di te d t owa rda res po ns ib le pe rs on ’s li ab il it y forth e se ct io n 6 67 2 p en al ty, so to o the re i s n o C od e p ro vi si on ex pl ic it ly m an da ti ng th at (co nt in ue d...)-1 7-

[* 17 ] to ap pl y

th e se ve n m on th s o f ad equa te pro te ct io n p aym en ts as r es po nd en t sa w fit . . Acco rd in gl y ,
Deci si on wil l b e en te redfor res po nd en t.

(...co nt inue d) 5 anem pl oyer’s (de si gn at edlat e) p aym en t o f em pl oym en t t ax be cred it edto wardth e de si gn at edem

pl oyee’s li ab il it y

forin co m e ta x. Bu t i n b ot h c as es * * * the pa ym en t o f th e o ne ne ces sa ril y sat is fie s the ot he r. The IR S m us t al lo w a cred itin bo th si tu at io ns [.]”).