T.C. M em o . 2 0 1 8 -1 8 4

UNITED STATES TAX COURT

W .T. SNIPES, Pet i t i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 7 9 02 -1 5 L. Fi l edNo vem b er 1 , 2 0 18
. P h as Fed eral i n co m e t ax l i ab i li t ies o f ap pro x im at el y $ 2 3 .5 m i l l i o n fo r t ax y ears 2 0 0 1 -0 6 . Th es e l i ab i l i t i es are l arg el y a res u lto f P’ s fai l u re t o fi l e Fed eral i n co m e t ax retu rn s . R as s es s ed thes e d efi ci en ci es , fi l eda n o t i ce o f Fed eral t ax l i en (NFTL), an d i s su ed n o t i ce an dd em an dfo r p aym en to f t h e l i ab i l it i es , an d , wh en P d i d n o t p ay , i ss u ed t o P a n o ti ce o f t h e fi l i n g . P t i m el y req u es t eda co l lect i o n du e p ro ces s h eari n g u n d er I.R.C. s ec. 6 3 3 0(d ) an ds t at ed th ath e wan t eda co l l ect i o n al t ern at i v e--i .e., an o ffer-i n -co m p ro m i s e (OIC) o r cu rren t l y n o t co l l ect i b l e s t atu s --an dwan t edth e NFTL wi th drawn . P d i dn o tch al l en g e h i s u n d erl y i n g t ax l i ab i li t ies . P m ad e a cas h OIC o f $ 8 4 2 ,0 6 1, l es s than 4 % o f h i s t o t al u n d erl y i n g l i ab i l i ty . R i s s uedP a n o t i ce o f d et erm i n at i on reject i ng h i s OIC an ds u st ai ni n g the NFTL. P fi leda p et i t i o n i n th i s Co u rt . Hel d : In v i ew o f P’ s fai l u re t o p ro v i d e b o n a fi d e d o cu m en t at i o n t o p ro v e h i s as s et s an d fi n an ci al co n d i ti o n , as wel l as th e d i sp ari ty i n h i s OIC v ers u s h i s reas o n ab l e co l l ect i o n p o t en t i al as d et erm i nedb y

R, th e s et t l em en to ffi cer d i d n otab u s e h er d i scret i o n- 2
-

b y reject i n g P’ s OIC, refu s i n g t o co n du ctan ex p ed i t edtran s feree i n v es t i gat i o n , o r s u s t ai n i n g th e fi l in g o f t h e NFTL. Vi v i an D. Ho ard an dRo b ertB. Gard ner III, fo r p et i t i o n er. J o el D. M cM ah an an dAs h l ey Y. Sm it h, fo r res p o nd en t .

M EM ORANDUM FINDINGS OF FACT AND OPINION KERRIGAN, J u dg e: Th e p et it i o ni nth is cas e was fi l edi n res po n s e t o a No t i ce o f Det erm i n at io n Co n cern i ng Co l l ect io nAct i o n (s ) Un d er Sect i o n6 3 2 0
an d/ o r 6 3 3 0 (n o t i ce o f d et erm i n at i o n ) d at edOct o b er 6 , 2 01 5 , th at was i s s uedb y th e In t ern al Rev en u e Serv i ce (IRS o r res p o n d en t ) Offi ce o f Ap p eal s . Th e n o t i ce
o f d et erm i n at i o n s u s t ai nedthe fi l i n g o f th e n ot i ce o f Fed eral t ax l i en (NFTL) reg ard i n g p et i t io ner’ s u np ai d i n co m e t ax l i ab i l i t i es fo r 2 0 0 1 , 2 0 0 2 , 2 0 0 3 , 2 0 0 4 , 2 0 0 5 , an d2 0 0 6 (y ears i n i s s u e). 1 Th e i s s u e fo r co n si derat io ni s wh et h er t h e d et erm i n at i on t o p ro ceed wi th t h e NFTL i nl i euo f a p ro p o sedco l l ect i o n al t ern at i v e was an ab u s e o f d i s cret i o n . [* 2 ]

1 Th e 2 0 02 l i ab i l i ty was p ai di nfu l l b efo re t h e t ri al o f th is cas e an d i s n o l o n g er ati s s u e.- 3 -

[* 3 ] Un l es s o th erwi s e i n di cat ed , al l s ect i o n referen ces are t o th e In t ern al Rev en u e Co d e i n effect atal l rel ev an tt i m es . W e ro u n dal l m o n et ary am o u n t s t o th e n eares td o ll ar. FINDINGS OF FACT So m e o f th e fact s h av e b een s ti p u lat ed , an dth e s t i p u l at edfact s an dex h i b i t s are i n co rp o rat edi n o u r fi n di n g s b y th is referen ce. Pet i t i o n er res i dedi nNew J ers ey wh en h e t im el y

fi l edh i s p et i t i o n . OnAu gu s t2 7 , 2 0 1 3 , res p o n d en tfi ledan NFTL ag ai n s tp et i t i o ner’ s p ro p ert y . Atth e t i m e o f t h e fi l i n g o f t h e NFTL p et i t io n er’ s as s es s edi n co m e t ax l i ab i l i t i es (u n d erl y in g l i ab i l i t i es ) fo r t h e y ears i n i s su e were t he fo ll o wi n g :

Year Un d erl y i n g l i ab i l i ty 2 0 0 1 $2 ,5 7 3 , 9 7 8 2 0 0 2 1 ,4 9 7 , 6 4 5 2 0 0 3 4 ,5 7 6 , 9 2 6 2 0 0 4 5 ,6 2 5 , 6 1 2 2 0 0 5 3 ,5 2 6 , 9 4 6 2 0 0 6 5 ,7 7 7 , 5 4 3 Th e l i ab i l i t i es t o tal edap p ro x i m at el y $ 2 3 .5 m i l l i o n . OnSep t em

b er 4 , 2 0 1 3, p et i t i o n er fi l eda Fo rm 1 2 15 3 , Requ es tfo r a Co l l ect i o n Du e Pro ces s o r Equi v al en t Heari n g (CDP req u es t ). In th e CDP req ues t- 4 -

[* 4 ] p et i t i o n er req u es t ed an i n s t al l m en tag reem en t o r an o ffer-i n -co m p ro m i s e (OIC) as co l l ect i on al tern at i v es . InAp ri l 2 0 1 4 p et i t i o n er m ad e a cas h OIC o f l es s th an 4 % o f h is t o tal u nd erl y i n g l i ab i l it y , $ 8 4 2 ,0 6 1 , o nth e b as i s o f d o ub tas t o
co ll ect i b i l it y . OnJ u n e 1 8 , 2 0 1 4, p et i t i o n er’ s CDP h eari ng was h el d . Inan effo rt t o v eri fy p et i t i o ner’ s i n co m e an das s et s t o d et erm i ne p et i t i o n er’ s reas o n ab l e co l l ect i o n p o t en t ial (RCP), t h e s et tl em en to ffi cer i s s u edan i n v es t i gat o ry req u es tt o
res p o nd en t ’ s Co m

p li an ce Di v i s i o n . Pet it i o n er h adnu m ero u s as set s an dreal
es t at e h o l d i ng s , wh i ch were h el di nm u l ti p le en ti t ies . Inrev i ewi n g the i n fo rm at i o n co l l ect edfro m b o th p et i t i o n er an dth e Co m p li an ce Di v i s i o n, th e
s et t l em en to ffi cer s p en tco n s i d erab l e t i m e an d effo rten d eav o ri n g t o d et erm i n e p et i t i o ner’ s i n co m e an das s et s , as wel l as th e am o u n to f eq u it y h e h el d i nh i s
as s et s , tru s t s , an db u s i n es s es . Th e s et t l em en to ffi cer was u n ab l e t o d efi n i t i v el y d et erm i n e th atp et i t i o n er
n o l on g er o wn edcert ai n p ro p ert i es p et i t i o n er cl ai m ed t o h av e l o s t o r t ran s ferred , an d p et i ti o n er co ul dn o t p ro v i d e b o n a fi d e d ocu m en t at i on o f t h es e p ro pert i es ’ d i s s i p at i o n. Th e s et tl em en to ffi cer d et erm i n edthatp et i t i on er’ s RCP was $ 1 7 ,4 8 2 , 1 5 2 . Pet i ti o n er d id n o ti n creas e h i s OIC. OnOct o b er 6 , 2 0 1 5,- 5 -

[* 5 ] res p o n d en t i s s u edt o p et i t i o n er a n o t ice o f d et erm i n at i o n reject i n g h i s OIC
an d s u s t ai n i n g th e NFTL. Befo re tri al b o th p art i es fi l edm o t i o n s fo r s u m m ary ju dg m en t . By o rd er d at ed Oct ob er 6 , 2 0 1 6 , th e Co u rt reject ed th e p art i es ’ m o t i on s fo r s u m m ary ju d g m en tan d rem an d edp et i t io n er’ s cas e t o res p o n d en t ’ s Ap p eal s Offi ce. Th e Co u rto rd eredth e rem an dfo r t h e Ap peal s Offi ce t o co n ductad d i ti o n al p ro ceed i n g s t o s up p l em en t th e reco rdan dt o co n s id er p et i ti o n er’ s RCP i nth e l i g h to f h i s cu rren t ci rcu m s t an ces . Onrem an dth e s et t l em en t o ffi cer co n duct eds up p l em en t al CDP p ro ceed i n g s . Th e s et t l em en t o ffi cer i s s u edad d i t io n al Ap p eal s Referral In v es ti g at io n s req u es t s t o res p o n d en t ’ s Co m p l i an ce Di v i s i on i n an effo rtt o i n v es t i g at e th e d is p o s i t i o n o f p et i t i o n er’ s real es tat e h o l d in g s . Pet i t i o n er
m ai n tai n edh i s o ri g i n al OIC. Pet i t i o n er co n t en d eddu ri n g b o th CDP p ro ceed i n g s t h ath i s fi n an ci al ad vi s er, W . J o h n s o n , h adt ak eno u t l o an s an dd i sp o sedo f as s et s an d i nco m e o n h i s b eh al f, d iv ert i n g the fu n d s wi th o u t p et i ti o n er’ s kn o wl ed g e o r b en efi t . Pet i t i o ner p ro v i d edres po n d en twi th affi d av i t s fro m M r. J o hn s on reg ard i n g h i s
m i s co n du ct an dm i s u s e o f p et i t i o n er’ s as s et s an di nco m e. Ho wev er, p et i t i o n er- 6 -

[* 6 ] d i d n o tp ro v i d e an y

d efi n i t i v e o r o th erwi s e b o n a fi d e d o cu m en t at i o ns h o wi n g th e d i s s i p at io n o r d i v ers i o n o f h i s as s et s o r i n co m e. Pet i t i o n er req u es t edth atres p o n d en t co ndu ct a t ran s feree i n v es t i g at i o no f M r. J o h n s o n . Pet i t i o n er req u es t edth ath i s OIC b e accep t edwi th th e co n d i t i o n o f p ro v i n g M r. J o hn s on ’ s tran s feree l i ab i l i ty v i a t h e t ran s feree i n v es t i g at i o no r t h at h i s cas e b e l ab el ed “ cu rren t ly n o tco l l ect i b l e” du ri ng th e i n v es t i g at i o n ’ s p en d en cy . Th e s et tl em en to ffi cer req u es t ed p erm i s s io nfro m h er m an ag er t o
co ndu ctan ex ped i t edtran s feree i n v es t i g at io no f M r. J o hn s o n . Th e s et t l em en t
o ffi cer’ s m an ag er ex p l ai nedthatth e CDP h eari n g co u l dn o tb e h el do p en fo r a tran s feree i n v es t i g at i o n , n o r co u l dth e IRS accep tan OIC wi th co n d i t i o n s i m p o s edo n i t . Fo l l o wi n g rev i ew o f p et i t i on er’ s cas e t h e s et t l em en t o ffi cer red u ced p et i t i o ner’ s RCP t o $ 9,5 8 1 ,0 2 7 i nan effo rt t o co m p ro m i s e fo r s et t l em en t p u rp o s es . Pet i t i o n er m ai n t ai n edh i s o ri g i n al OIC o f $ 8 4 2 ,0 6 1 . Th e s et t lem en t
o ffi cer u l t i m at el y

co n cl u dedthati t was n oti nth e b es t i n teres to f t h e Go v ern m en t t o accep tp et i ti o n er’ s OIC. Th e s et t l em en to ffi cer’ s m an ag er rev i ewedth e
s et t l em en to ffi cer’ s act i o ns reg ard i n g p et i t io n er’ s cas e an dh er reject i o n o f p et i t i o ner’ s OIC. OnDecem b er 2 9 , 2 01 7 , res po n den ti s s u edp et i t i o n er a
s upp l em en t al n ot i ce o f d et erm i n at i o ns us t ai n i n g th e NFTL an d ag ai n reject i n g- 7 -

[* 7 ] p et i t i o n er’ s OIC. Th e s up p l em en t al n o t i ce o f d et erm i n at i o n was s ig nedb y th e s et t l em en t o ffi cer’ s m an ag er. OPINION Sect i o n 6 3 2 0(a)(1 ) req u i res th e Secret ary t o p ro vi d e wri tt en n o ti ce t o a t ax p ay er wh en th e Secret ary h as fi l edan NFTL ag ai n s tth e t ax p ay er’ s p ro p ert y
an d p ro p ert y

ri gh t s . See s ecs . 6 3 2 1 , 6 3 2 3 . Th e Secret ary m u s tal s o n ot i fy

th e t ax p ay er o f h i s ri g htt o a CDP h eari n g b efo re th e IRS Ap p eal s Offi ce. Sec. 6 3 2 0 (a)(3 ). Th e t ax p ay er can rai s e ch al l en g es t o th e u n d erl y i n g t ax l i ab i l i ty g i v in g ri s e t o th e l ien i n a CDP cas e o n l y i f h e d idn o trecei v e a s t atu t o ry n o t i ce o f d efi ci en cy

fo r the t ax l i ab i li ty

o r d i dn o to th erwi s e h av e an o p p ortu n i ty t o d i s p u t e i t . Secs . 6 3 2 0(c), 6 3 3 0 (c)(2 )(B). No l i ab i l i ty ch al l en g e i s rai s edi nth i s cas e. Fo l l o wi n g a h eari n g the Ap p eal s Offi ce s h al l m ak e a d et erm in at io nt ak i n g i n t o acco u n tal l i s s u es p ro p erl y rai s edb y the t ax p ay er an d“ wh et h er an y p ro p o s ed
co ll ect i o n act i o n b al an ces the n eedfo r t he effi ci en tco l l ect io n o f t ax es wi th th e l eg i t i m at e co n cern o f t h e p ers o n th at an y co l l ect i o n act io n b e n o m o re i nt ru s i v e th an n eces s ary .” Sec. 6 3 30 (c)(3 ). W e n o t e t h at the s et t l em en t o ffi cer p ro p erl y b as edh er d et erm i n at i o n on th e fact o rs s p eci fi edb y s ect i on 6 3 3 0(c)(3 ).- 8 -

[* 8 ] I. St an d ardo f Rev i ew Wh ere t h e v al i di ty

o f t h e u n d erl y i n g t ax l i ab i l i ty i s p ro p erl y

ati s s u e, t h i s Co u rtrev iews th e l i ab i l i ty d et erm i n at i on d e n o v o . Seg o v . Co m m i s s i o ner, 1 1 4 T.C. 6 04 , 6 1 0 (2 0 0 0 ). Th e Co u rtrev i ews ad m i n i s trat i v e d et erm i n at i o n s m ad e b y th e Ap p eal s Offi ce reg ard in g n o n l i ab i l i ty i s s ues fo r ab u s e o f d is cret i o n . Go za v . Co m m i s s i o n er, 1 1 4 T.C. 1 76 , 1 8 2 (2 0 0 0 ). Th e v al id i ty o f p et it i on er’ s u n d erl y i n g t ax l i ab i li t i es i s n o tati ss u e h ere. Acco rd in g l y , we rev i ew fo r ab u se o f d i s cret i o n . In d et erm i ni n g wh eth er t h ere h as b een an ab u s e o f d is cret i o n, we co n s i d er wh et h er t h e d et erm i n at i o n b y th e Ap p eal s Offi ce was arb i trary , cap ri ci o u s , o r wi th o u ts o u n db as is i n facto r l aw. See, e.g
. , M u rp h y v . Co m m i s s io n er, 1 2 5 T.C. 3 0 1 , 3 2 0 (2 0 0 5 ), aff’ d , 4 69 F.3 d2 7 (1 s tCi r. 2 0 0 6 ); W oo dral v . Co m m i s s i o n er, 1 1 2 T.C. 1 9 , 2 3 (1 9 99 ). Th e Co u rtd o es n o tco n du ctan i n d ep en d en t rev i ew o f wh atwo u ldb e anaccep t ab l e OIC. M u rp h y v . Co m m i s si on er, 1 2 5 T.C. at3 2 0 . If th e s et t l em en t o ffi cer fo l lo ws al l s t atut o ry an d ad m i n i st rat i v e g u i d el in es an d p ro v i d es a reas o n ed , b al an cedd eci s io n , th e Co u rt wi ll n otrewei g h th e equi t i es . Li nkv . Co m

m i ss i o n er, T.C. M em o . 2 01 3 -5 3 , at * 1 2
. II. Ab u s e o f Di s cret i on Th e Co u rth as p rev io us l y h el dth ati t i s n otreq u i redt o ap pl y a l i m i t ed
s co p e o f rev i ew an dm ay

accep tev i d en ce o u ts i d e t h e ad m i n i st rat i v e reco rdi n- 9 -

[* 9 ] CDP cas es . See Ro b i n et t e v . Co m m i ss i o n er, 1 2 3 T.C. 8 5 , 1 0 1 (2 0 0 4 ), rev ’ d , 4 3 9 F.3 d4 5 5 (8 th Ci r. 2 0 0 6 ); s ee al so M urp h y v . Co m m i s s i o n er, 1 2 5 T.C. at 3 1 3
. 2 Th e Co u rto f Ap peal s fo r t h e Th i rdCi rcu i t h as n o ts p eci fi cal l y ad dres s ed th i s i ss u e i n a p reced en ti al o p in i o n . Our rev i ew wi l l n o t b e l im it ed t o t h e ad m i ni s trat iv e reco rd
. Pet i t i o n er co n t en d s th atth e s et t l em en to ffi cer ab u s edh er d i s cret io ni n refu s i n g h i s OIC b y

fai l i ng t o (1 ) cal cu l at e p et i ti o n er’ s ex actRCP, (2 ) ex cl u d e d i s s i p at ed as s et s , (3 ) co n du ctan ex p ed i t edtran s feree i n v es t i g at i o ni nt o M r. J o hn s o n , (4 ) co n s i d er wh et h er t h e NFTL wo u l dcau s e p et i t i o n er eco n om i c h ard s hi p , an d (5 ) s at i s fy

th e rev i ew o b l i g at i o n s o f s ect i o n 7 1 2 2 (e)(1 ). 3 III. Pet i t i o n er’ s OIC Sect i o n 7 1 2 2(a) au th o ri zes th e IRS t o co m p ro m i s e an o u t st an d in g t ax l i ab i l i ty . Th e reg u l at i o n s s etfo rt h th ree g ro u n d s fo r co m p ro m i s e: (1 ) d oub tas t o

2 Th e b ro ad s co p e o f rev i ew i nRo b i n et t e i s n o tco n tro l l i n g i n t h e Co urto f Ap p eal s fo r t h e Fi rs t , Ei g h th , an dNi n th Ci rcu i t s . See Dal t o n v . Co m m i ss i o n er, 6 8 2 F.3 d1 4 9 (1 stCi r. 2 01 2 ), rev ’ g 1 3 5 T.C. 3 93 (2 0 10 ), an d T.C. M em o . 2 0 1 1
- 1 3 6 ; Kel l er v . Co m

m i s s i o n er, 5 6 8 F.3 d7 1 0 , 7 1 8 (9 th Ci r. 2 0 0 9 ), aff’ g i n p artas t o th i s i s s u e T.C. M em o . 2 0 0 6-1 6 6 an d aff’ g i np art , v acat i n g i np artd eci s i o ns i n rel at ed cas es ; Ro b i n et te v . Co m m i s s i o n er, 1 2 3 T.C. 8 5, 1 0 1 (2 0 0 4), rev ’ d , 4 3 9 F.3 d4 5 5 (8 th Ci r. 2 0 0 6).

3 Pet i t i on er rep eat ed l y

referen ces a p ro po s edl ev y thro u g ho u th i s Si m u l t an eo u s Op en i n g Bri ef an dSi m u l t an eo us An s weri n g Bri ef. Th ere i s n o l ev y ati ss u e i n th i s cas e; acco rd i n g ly , we wi l l n o tad dres s i t .- 1 0
-

[* 1 0 ] l i ab i l i ty , (2 ) d o ub tas t o co ll ect i b il i ty , o r (3 ) p ro m o t i o no f effect i v e t ax ad m i ni s trat io n. Sec. 3 0 1 .7 1 2 2 -1 (b ), Pro ced . & Adm i n . Reg s . Atp et i t io n er’ s i n i t ial an ds up p l em en t al h eari n g s h e b as edh i s OIC o nd oub tas t o co l l ect i b i l i ty . Th e Secret ary

m ay co m p ro m i s e a t ax l i ab i l i ty

o nth e b as i s o f d o ub tas t o
co ll ect i b i l it y

wh ere t h e t ax p ay er’ s as s et s an d i n co m e ren d er fu ll co l l ect io n
u n l ik el y . Id . s ub p ara. (2 ). Co n v ers el y , the IRS m ay rejectan OIC wh en th e t ax p ay er’ s RCP ex ceed s th e am o u n th e p ro po s es t o p ay . See J o h n so n v . Co m m i s s i o n er, 1 3 6 T.C. 4 75 , 4 8 6 (2 0 1 1 ), aff’ d , 5 0 2 F. Ap p ’ x 1 (D.C. Ci r. 2 0 1 3 ). Gen eral l y , s et t l em en to ffi cers are d i rect edt o reject o ffers s ub s t an t i al l y b el o w th e t ax p ay er’ s RCP u n l es s “ sp eci al ci rcu m s t an ces ” ju s t i fy accep t an ce o f s u ch an
o ffer. See Fai rl am

b v . Co m m is s i o n er, T.C. M em o . 2 0 1 0 -2 2 , s l i p o p. at1 1; Rev
. Pro c. 2 0 0 3 -7 1 , s ec. 4 .0 2 (2 ), 2 0 0 3 -2 C.B. 5 1 7 , 5 1 7
. Ou r rev i ew i s l i m i t edt o as cert ai n in g wh et h er t h e d eci s i o nt o rejectth at
o ffer was arb i trary , cap ri ci o u s , o r wi th o u ts o un db as i s i n fact o r l aw. M u rp h y v . Co m m i s s i o n er, 1 2 5 T.C. at3 2 0 . W e d o n ots ub s t i tu t e o ur ju d g m en tfo r t he
s et t l em en to ffi cer’ s as t o th e accep t ab il i ty o f an y p art i cu l ar o ffer. See, e.g ., J o hn s o n v . Co m

m i s si o ner, 1 3 6 T.C. at4 8 8
.- 1 1
-

[* 1 1 ] A. Pet i t i o n er’ s RCP Th e s et t l em en to ffi cer d i dn o tab u s e h er d i s cret i o n b y fai l i n g t o d et erm i n e p et i t i o ner’ s ex actRCP. As p arto f t he RCP d et erm i n at i o n , th e s et t lem en to ffi cer
co ns i d eredp et i ti on er’ s tran s fers o f real p ro pert y b efo re an ddu ri n g h i s fi rs tCDP h eari n g th ro u g h h i s tru s t s an den t i ti es . Th e s et t l em en to ffi cer s p en tco n s id erab l e t i m e an deffo rti n h er en d eav o r t o d et erm i n e p et i ti o n er’ s i n co m e an d as s et s , as wel l as hi s equ it y

i n h i s as s et s , tru s t s , an d b u s i n es s es . Pet it i on er o b ject ed g en eral l y t o th e am o u n t o f t h e RCP an das s ert edth ath e d i dn o to wn p ro p ert i es th atwere b ei n g at tri b ut edt o h i m . Th e s et t l em en to ffi cer was u n ab l e t o d efi n i t iv el y

d et erm i n e t h atp et i t i o n er n o l o ng er o wn edcert ai n p ro p ert i es , an d p et i t i o ner co u l dn o tp ro v i d e b o n a fi d e d o cu m en t at i o no f t h es e p ro p ert i es ’ d i s s i p at i o n. Wh i l e th e In t ern al Rev enu e M an u al (IRM ) d i rect s th e Ap p eal s Offi ce t o cal cu l at e an RCP t o ev al u at e d o ub tas t o co l lect i b il i ty o ffers , i td o es n o treq u i re th e l ev el o f p reci s i o n s ug g es t edb y p et it io n er. See, e.g ., IRM p t . 5 .8 .4 .3 (2 ) (J u l y 1 8 , 2 0 1 7 ), 5 .8 .4 .3 .1 (Ap r. 3 0 , 2 0 1 5), 5 .8 .4 .9 (M ay 1 0 , 2 0 1 3 ), 5 .8
. 5 .1 1 (1 ) (Oct . 2 2 , 2 0 1 0 ). Gi v en th e d i s p ari ty b etween p et it i o n er’ s $ 8 42 ,0 6 1 OIC an d the s et t l em en t
o ffi cer’ s cal cu l at i o n o f $ 9 ,5 8 1 ,0 2 7 as h is RCP, as wel l as p et i ti o n er’ s i n ab i l i ty t o- 1 2
-

[* 1 2 ] cred i b ly

d o cu m en t h i s as s et s , th e s et t l em en to ffi cer an dh er m an ag er h ad
am p l e ju s t i fi cat i o n t o reject th e o ffer. B. Di s s i p at edAs s et s Th e s et t l em en to ffi cer d i dn o tab u s e h er d i s cret i o n b y co n s i d eri n g p o t en t ial l y

d i s s ip at edas s et s o f p et i t i o n er. Th e IRM es t ab li s hes th atd is s i p at ed
as s et s s h o u l dg en eral l y n o tb e u s edt o cal cu l at e RCP ex cep ti ncert ai n ci rcu m s tan ces . IRM p t . 5 .8 .5 .1 8 (1 ) (Sep t . 3 0 , 2 0 1 3 ). Ho wev er, t h e IRM al s o
es t ab l i sh es th ati f i ti s d et erm i n edth attran s feree as ses s m en ts h o u ldb e p u rs u edb y th e Ap p eal s Offi ce du ri n g t h e i n v es t i g at i o n o f an OIC, th e Ap p eal s Offi ce s h o u l d ei th er s ecu re a wi thd rawal l et ter fro m th e t ax p ay er fo r t he OIC o r, i f t h e OIC i s
n o t w i thd rawn , th e Ap p eal s Offi ce s h o u l drejectth e OIC an dth en i n cl u d e t h e
v al u e o f t h e t ran s feree am o u n ti nth e RCP. See IRM p t . 5 .8 .1 0 .5 (Sep t . 2 7 , 2 0 1 1 ). Ev en tho ug h th e s et t l em en to ffi cer i n cl ud edp o t en t i al ly d is s i p at edas s et s i n p et i t i o ner’ s RCP, s h e d idn o t ab u s e h er d i s cret i o n . Sh e was p ro p erl y fo l lo wi n g p ub l i s hed g ui dan ce t h atd i rect s s et t l em en to ffi cers t o rejectan OIC wh ere i s s u es
o f t ran s feree l i ab il i ty

are p res en tu n l es s th e t ax p ay er i n cl u d es th e t ran s feree
am o u n ti n h i s o ffer. See i d . Pet i ti o n er h ad m u l t i pl e en t i t i es i nwh i ch h i s m u l t i p l e
as s et s , p art i cu l arl y

h i s real es t at e p ro p ert i es , were h el d. Th e s et t l em en t o ffi cer
co ul dn o td et erm i ne p et i ti o n er’ s as s et s cl earl y . M o reo v er, p et i t i on er d i dn o t- 1 3
-

[* 1 3 ] p ro v i d e b o na fi d e o r d efi n i t i v e d o cu m en t at i on s h o wi n g t h ath e n o l o n g er
o wn edth e as s et s i n qu es t i on o r t o wh atex t en t , i f an y , h e h adb en efi tedfro m th ei r d i s s i p at i o n. He p ro v i d edo n l y affi d av i t s b y

M r. J o h n s o n . Th e s et t lem en to ffi cer
was ju st i fi edi n h er cal cu l at i o n o f p et i t i o ner’ s RCP. C. Tran s feree In v es t i g at i o n Th e s et t l em en to ffi cer d i dn o tab u s e h er d i s cret i o n b y fai l i n g t o co n du ctan
ex ped i t edtran s feree i n v es t i g at i o no f M r. J o hn s on . Pet i t i on er was i n fo rm edth at
an ex p ed i t edtran s feree i nv es t i g at i o nb y th e IRS fi el d d i v i si o nco u l d n otb e
co m p l et eddu ri ng h i s CDP p ro ceed i n g s . Pet i ti o n er p ro v i dedn o s up p o rtfo r h i s
co nt en t i o n th ata t ax p ay er i n a CDP p ro ceed i n g h as th e au th ori ty o r ri g ht t o
co m p el th e IRS t o co n du ctan ex ped i t edtran s feree l i ab il i ty i n v es ti g at i o no f a th i rdp art y . Fu rt h er, t h e s tru ctu re o f th e Ap p eal s Offi ce i s n o td es ig n ed fo r a s et t l em en t
o ffi cer t o co n du cti n d ep th i n v es t i g at i o n s , n o r d o es i t au th o ri ze t h e s et t lem en t
o ffi cer o r t h e Ap p eal s Offi ce t o d i rect t ax p ay er ex am i nat i o n s . See Dal t o nv . Co m m i s s i o n er, 6 8 2 F.3 d1 49 , 1 5 5 (1 s tCi r. 2 0 1 2) (“ Th e CDP p ro ces s n ei th er al l o ws fo r d i s co v ery , n o r d o es i tb ri n g b efo re t h e IRS al l o f t h e p art i es i n i n t eres t [.] ”), rev ’ g 1 3 5 T.C. 3 9 3 (2 0 1 0 ), an d T.C. M em o . 2 01 1 -1 3 6 . Th e Ap p eal s Offi ce i s a s ep arat e o ffi ce, i n d ep en d en t o f t h e IRS fi el dd i vi s i o nan d i t s fu n ct i on s .- 1 4
-

[* 1 4 ] See IRS Res tru ctu ri n g an dRefo rm Act o f 1 99 8 , Pub . L. No . 1 0 5-2 0 6 , s ec. 1 0 0 1 (a)(4 ), 1 12 St at . at6 8 9 . Un d er t h i s s tru ctu re s et t l em en to ffi cers rev i ew t h e act i o n s o f t h e IRS fi el dd iv i s i on , b u tth ey can n o tp erfo rm

th e i n v es t i gat i ve fu n ct i o n s o f t h e fi el dd iv is i o n , an dth ey rem ai n i n d ep en d en t. See, e.g ., IRM p t . 5 .8 .1 0 .5 (1 ) (Sep t . 2 7 , 2 01 1 ) (p ro v i d in g i n fo rm at i o no nh o w a tran s feree i n v es t i g at io n wi l l b e i n i t i at edan dco ndu ct ed ); IRM p t . 5 .8 .5 .6 (7 ) (Sep t . 3 0 , 2 0 1 3 ) (“ Iti s n o tn eces s ary

t o act ual l y

s eeko r o b tai n an y

s p eci fi c l eg al rem ed y

i no rd er t o ad dres s * * * [t ran s feree/ no m i n ee/ al t er eg o ] i s s u es i nan o ffer. Ho wev er, t h e
o ffer fi le m

u s tb e cl earl y d o cu m en t edwi th th e b as i s fo r i n cl u di n g th e v al u e o f a tran s ferred as s eti n th e RCP. Care s h o u l db e t ak ens o th atth e d et erm i n at i o nt o i n cl u d e as s et s h el db y o th ers i s reas o n ab l e.”). D. Eco no m i c Hard s h i p Th e s et t l em en to ffi cer d i dn o tab u s e h er d i s cret i o n i nd et erm i n in g th at p et i t i o ner wo u l d n o t s u ffer eco n o m i c h ard sh i p as a res u l to f t h e co l l ect i o no f a l i ab i l i ty equ al t o th e RCP. Eco n o m i c h ard sh i p i s co n s id ereda “ s peci al ci rcu m s tan ce” u n d er wh i ch a s et t l em en to ffi cer can accep tan OIC t h ati s
co ns i d ereds i g n i fi can t l y

b el o w a t ax p ay er’ s RCP. See M urp h y v . Co m m i s s i o n er, 1 2 5 T.C. at3 09 ; M cCl an ah an v . Co m m i s s i o n er, T.C. M em o . 2 0 0 8 -1 6 1 , s l i p o p. at 7 -8 ; IRM p t. 5
. 8.4 .2 (4 ) (M ay 1 0 , 2 0 1 3 ).- 1 5
-

[* 1 5 ] Fact o rs i n d i cat i n g “ eco no m i c h ard sh i p ” i n cl u d e: (1 ) a l o n g -t erm i l l n es s , m ed i cal co n d i t i o n , o r d is ab i l i ty th atren d ers th e t ax p ay er i ncap ab l e o f earn i n g a l i v i ng , wh ere i ti s “ reas on ab l y fo res eeab l e t h att ax p ay er’ s fi n an ci al res o u rces wi l l b e ex h au s t edp ro v i d i n g fo r care an ds up po rtdu ri ng th e co u rs e o f t h e co n d i t i o n ”; (2 ) a s i tu at i o n wh ere t h e t ax p ay er’ s m o n th l y i n co m e i s ex h au s t edb y

p ro v i d i n g fo r
care o f d ep en den t s wi th o uto ther m ean s o f s up p o rt ; an d(3 ) a s i tu at io n wh ere, al th o u gh th e t ax p ay er h as cert ai n as s et s , th e t ax p ay er i s u n ab l e t o b o rro w ag ai n s t th e eq u i ty i n t h o s e as s et s an d t h e l i qu i d at i o no f t h e as s et s wo u ldren d er t h e t ax p ay er u n ab l e t o m eetb as i c l i v i n g ex p en s es . Sec. 3 0 1 .7 1 2 2 -1 (c)(3 )(i ), Pro ced
. & Ad m i n . Reg s .; IRM p t . 5 .8 .1 1 .2 .1 (6 ) (Au g . 5 , 2 0 1 5 ). Pet i t i o n er d o es n otco n ten dth ath e h ad a l o n g -t erm i l l n es s , a m ed i cal
co nd i t io n , o r a d i s ab i l i ty . No r d o es h e cl ai m thath e ex h au s t s h i s m o nt h ly i n co m e p ro v i d in g fo r t h e care o f d ep en d en t s wi th n o o th er m ean s o f s up p o rt . Pet i t i o n er
co nt en d s th atp aym en to f h i s RCP as cal cu l at edb y th e IRS wo u ldren d er h i m
u n ab l e t o m eet b as i c l i v i n g ex p en s es . Th e t ax p ay er m

u sts ub m i tco m

p let e an d cu rren tfi n an ci al d o cu m en t at i o n t o th e Co m m i s s i on er t o p ro v e eco n o m i c h ard s hi p . See Vi nat i eri v . Co m m i s s i o n er, 1 3 3 T.C. 3 9 2 , 3 9 8 -3 9 9 (2 0 0 9 ). Pet i t i o n er h as n o ts ub m i t t edco m p l et e an dcu rren t fi n an ci al d at a t o res p o n d en t , as h e d i dn otp ro v id e d efi n i t i v e o r b o n a fi de- 1 6
-

[* 1 6 ] d o cu m en t at i on o f h i s as set s . Acco rd i n g l y , p et i t i o n er’ s s et t lem en to ffi cer
co ul dn o td et erm i ne t h at h e co u l dn o t b orro w ag ai n s t th e eq u i ty o f h i s real p ro p ert y i nt eres t s o r o th er as s et s , o r t h atth e l i qu i d at i o no f t h es e i n t eres t s wo u ld
ren d er h i m

u n ab l e t o m eetb as i c l i v i n g ex p en s es . Pet i ti o n er d i dn o tm ak e a
s h owi n g o f eco n om i c h ard s h ip n eces s ary t o qu al i fy fo r s p eci al ci rcu m s t an ces . Ab s en ta s ho wi n g o f s p eci al ci rcu m s t an ces , s et t l em en to ffi cers are d i rect ed t o rejecto ffers s ub s t an t i al l y b el o w th e t ax p ay er’ s RCP wh ere t h e OIC i s p rem i s ed
o n d o ub t as t o co l l ect ib i l i ty . See Cl i ffo rd v . Co m m i s s i o n er, T.C. M em o . 2 0 1 4
- 2 4 8 , at* 8 -* 9 ; s ee al s o Rev . Pro c. 2 0 0 3 -7 1 , s ec. 4 .0 2 (2 ). Thu s , th e s et t l em en t
o ffi cer d i dn o tab u s e h er d i s cret i o nwh en s h e reject edp et i t i o ner’ s OIC an dcl o s ed th e cas e. W e o n ly

d eci d e wh et h er t h ere was an ab u s e o f d is cret i o n an dd o n o t recal cu l at e a d ifferen tam o un tfo r anaccep t ab l e i n s tal l m en tag reem en t o r OIC. M urp hy v . Co m

m i ss i o n er, 1 2 5 T.C. at3 2 0 ; Sp el t z v . Co m m i s s i o ner, 1 2 4 T.C. 1 6 5 , 1 7 9 -1 8 0 (2 0 0 5 ), aff’ d , 4 5 4 F.3 d7 8 2 (8 th Ci r. 2 0 0 6 ). E. Rev iew Ob l i g at i o n s o f Sect i o n7 1 2 2(e)(1 ) Pet i t i o n er co n t en d s th atres p o n d en tfai l edt o m eet the i nd ep en d en t ad m i ni s trat iv e rev i ew req u i rem en to f s ect i o n7 1 22 (e)(1 ). Sect i o n 7 1 2 2 (e)(1 ) an d i t s co rres p o n d i ng reg u lat io n s req u ire t hatth e Secret ary es tab l i s h p ro cedu res fo r
an i n d ep en d en t ad m i ni st rat i v e rev i ew o f OIC reject i on s . See s ec. 3 0 1 .7 1 2 2 -1 (f),- 1 7
-

[* 1 7 ] Pro ced . & Adm i n. Reg s . Pet it i o n er as s ert s thatrev i ew b y res p on d en t ’ s Ap p eal s Offi ce m an ag er, wh o rev i ewedth e s et t lem en to ffi cer’ s d et erm in at i o n t o reject pet i ti o n er’ s OIC, d o es n o tqu al i fy as an “ i n d ep en d en t ” rev i ewer u n d er t h e ab ov e s t atu t e an dreg u l at i o n . In th e co n tex to f a co ll ect i on h eari n g b efo re t h e Ap p eal s Offi ce, t h e p res cri b edi n d ep en d en tad m i n i s trat i v e rev i ew o f t h e p ro p o s edreject io no f an
o ffer i s ty p i cal l y d o n e b y an Ap p eal s Offi ce m an ag er. See Lo n d o n o v . Co m m i s s i o n er, T.C. M em o . 2 0 0 3 -9 9
. Gen eral l y , wh ere a s et t l em en to ffi cer’ s p ro p o s edreject io n o f an o ffer was rev i ewedan dap p ro v edb y h er Ap p eal s Offi ce
m an ag er, t h e i n d ep en d en trev i ew req u i rem en th as b een m et . See i d .; s ee al s o IRM p t . 8
. 2 2.9 .4
. 3 .1 (4 ) (Au g . 9 , 2 0 1 7). In th i s cas e th e s et t l em en t o ffi cer’ s
m an ag er rev i ewedh er reject i o n o f p et i t i o n er’ s OIC. IV. Co n cl u s i o n Pet i t i o n er h as fai l ed t o es t ab l i s h th atth e s et t l em en to ffi cer d i dn o tp ro p erl y d et erm i n e t h atth e req u i rem en t s o f an y ap pl i cab l e l aw o r ad m i n i s trat i v e p ro cedure h adb een m et . W e fi n d th at th e s et tl em en to ffi cer p ro p erl y b as edh er d et erm i n at i on o n th e requ i redfact o rs . Acco rd i n gl y , we co n cl ud e t h at th e
s et t l em en to ffi cer d i dn o tab u s e h er d i s cret i o n i nd et erm i n i n g th at accep t an ce o f p et i t i o ner’ s OIC was n ot i n th e b es ti n t eres to f t h e Un it edSt at es .- 1 8
-

[* 1 8 ] W e h av e co ns i dered al l o th er arg u m en t s m ad e an dfact s p res en t edi n reach in g o u r d eci s i o n , an d t o th e ex t en tn o td i s cu s s edab o v e, we co n cl u d e th at th ey are m o o t , i rrel ev an t , o r wi th o u tm eri t . Fo r t h e fo reg o i n g reas o n s , th e s up p l em en t al n o t ice o f d et erm i n at i o nwi l l b e
s u st ai n ed
. Deci s i o n wi l l b e en t eredfo r
res p o nd en t .