T.C. Summary Opinion 2004-47

UNITED STATES TAX COURT

GEORGE IRA NICOL, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 10308-02S. Filed April 12, 2004.

George Ira Nicol, pro se.

Catherine S. Tyson, for respondent.

 DEAN, Special Trial Judge: This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time that the petition was filed. Unless otherwise

indicated, subsequent section references are to the Internal

Revenue Code in effect for the years in issue, and all Rule

references are to the Tax Court Rules of Practice and Procedure. 

The decision to be entered is not reviewable by any other court,

and this opinion should not be cited as authority.
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1Sec. 6330 was enacted as part of the Internal Revenue

Service Restructuring and Reform Act of 1998 (RRA 1998), Pub. L.

105-206, sec. 3401, 112 Stat. 746. Sec. 6330 is effective with

respect to collection actions initiated more than 180 days after

July 22, 1998; i.e., after Jan. 18, 1999. See RRA 1998 sec.

3401(d), 112 Stat. 750. 

The petition in this case was filed in response to a Notice

of Determination Concerning Collection Action(s) Under Section

6320 and/or 6330. Pursuant to section 6330(d),1 petitioner seeks

review of the determination to proceed with collection of

petitioner's tax liability of $7,210 for 1993. At trial,

petitioner also challenged the amount of interest that has

accrued on his tax liability. The issues for decision are: (1)

Whether the Appeals officer abused his discretion by not offering

petitioner collection alternatives, under section 6330(d)(2);

and, (2) whether the Appeals officer should have abated interest

assessed with respect to petitioner's deficiency for the 1993 tax

year.

The stipulated facts and exhibits received into evidence are

incorporated herein by reference. At the time the petition in

this case was filed, petitioner resided in San Benito, Texas.

Background

A. Petitioner's Individual Income Tax Returns for 1993 and 1997

On April 15, 1994, petitioner filed a Form 4868, Extension

of Time To File U.S. Individual Income Tax Return regarding his

1993 Federal Individual Income Tax Return. Petitioner also
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submitted a payment of $3,000. On August 18, 1994, petitioner

submitted a Form 2688, Application for Additional Extension of

Time To File U.S. Individual Income Tax Return. 

Subsequently, petitioner failed to file timely his income

tax return for tax year 1993. On July 16, 1997, respondent filed

a substitute for return for petitioner. On October 17, 1997,

respondent sent to petitioner a notice of deficiency pertaining

to that year determining a tax deficiency of $6,845. On July 29,

1998, after receiving the notice of deficiency, petitioner

submitted a Form 1040, U.S. Individual Income Tax Return, for tax

year 1993 reporting a tax liability of $6,269 and claiming as a

payment credit the $3,000 he had paid with his Form 4868.

Petitioner did not file a petition with this Court with

respect to the notice of deficiency for the 1993 tax year. When

respondent assessed the deficiency on May 10, 1999, respondent

lowered the amount of petitioner's liability from the amount

stated in the notice of deficiency to an amount based upon the

Form 1040 submitted by petitioner. 

Petitioner married Juanita Nicol in 1996. On August 28,

1999, petitioner and Mrs. Nicol (separately, petitioner and Mrs.

Nicol; together, the Nicols) submitted their joint 1997 Form 1040

to respondent showing tax due in the amount of $1,157. The

Nicols did not pay the tax due as shown on the return at the time

of filing. Respondent assessed the Nicols' tax liability for tax
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year 1997 based on the return. Prior to trial, the tax

pertaining to the 1997 return was paid in full. The Court

dismissed the 1997 tax year from the petition. Mrs. Nicol was

dismissed from the case because she had no involvement in the

1993 tax year which pertained solely to petitioner's individual

income tax liability. 

B. Notice of Intent To Levy and Notice of Federal Lien

The Nicols previously had an installment agreement in place

covering 1993 and 1997. They stopped making the $50 monthly

payments under that agreement and respondent found them to be in

default. Respondent sent petitioner a Notice of Intent to Levy

dated July 24, 2000.

On October 19, 2000, respondent sent petitioner a Final

Notice, Notice of Intent to Levy, and Notice of Your Right to a

Hearing for unpaid taxes in the amount of $9,443.31 for 1993.

Subsequently, respondent filed a Notice of Federal Tax Lien on

May 24, 2001. 

C. Appeals Office Hearing

On June 8, 2001, Mrs. Nicol filed a Form 12153, Request for

a Collection Due Process Hearing (CDP Hearing), and attached a

Form 8379, Injured Spouse Claim and Allocation, for tax year

1997. On that same date, petitioner also filed a Form 12153 for

tax year 1993. 
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On July 5, 2001, petitioner filed another Form 12153

regarding tax year 1993 to which he attached a letter in which he

offered to make 10 monthly payments of $100 to settle the 1993

liability. The Nicols did not submit a Form 656, Offer in

Compromise. 

Mrs. Nicol, and to a lesser extent, petitioner, conducted

the CDP Hearing with the Appeals officer via telephone and faxes.

The vast majority of the communications between Mrs. Nicol and

the Appeals officer pertained to her request for injured spouse

relief and the reallocation of the Nicols' 1998 and 2000 tax

refunds from petitioner's 1993 individual tax liability to the

Nicols' 1997 joint tax liability. 

Although the Nicols were not married until 1996 and the 1993

tax liability is petitioner's sole responsibility, their refunds,

$1,116 for tax year 1998, $2,317 for tax year 2000, and $600 for

the midyear 2000 refund were originally applied to petitioner's

liability from tax year 1993. During the CDP Hearing, the

Appeals officer reviewed Mrs. Nicol's injured spouse claim and

determined that applying the full amount of the refunds to

petitioner's 1993 tax liability was incorrect. The correct

amount of the refund to be applied to the 1993 year was 100

percent of petitioner's refund and 50 percent of Mrs. Nicol's

refund. Based upon Mrs. Nicol's injured spouse claim, one

quarter of the original refund amounts for tax years 1998 and
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2An INTST is an internal IRS interest and penalty

computation program. It shows the amount of taxes, tax

penalties, and interest due from or owing to the taxpayer with

respect to a tax account as of a specific date, based upon both

posted and pending transactions. Kay v. IRS, 82 AFTR 2d 6138,

98-2 USTC par. 50,707 (C.D. Cal. 1998), affd. without published

opinion 225 F.3d 663 (9th Cir. 2000).

2000 were reversed and then reallocated to the 1997 joint tax

liability. Subsequently, the Nicols informed the Appeals officer

that they could not pay their outstanding tax liabilities for

1993 and 1997.

During the CDP hearing, Mrs. Nicol also inquired about the

interest for 1997. The Appeals officer sent Mrs. Nicol INTST2

printouts of her joint tax account with petitioner on February

22, 2002, and again on March 6, 2002. There is no evidence in

the record that either petitioner or Mrs. Nicol ever asked for an

abatement of interest for 1997 or that they ever inquired about

or requested an abatement of the interest for 1993.

D. Notices of Determination

In Notices of Determination Concerning Collection Action(s)

Under Section 6320 and/or 6330, dated May 16, 2002, respondent

determined that the legal, administrative, and procedural

requirements for proceeding with collection by lien of

petitioner's income tax had been met.

On June 17, 2002, petitioner timely filed a petition in this

Court challenging the 1993 deficiency and alleging that

respondent failed to offer or discuss collection alternatives. 
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At trial, petitioner contested the interest that had accrued on

the 1993 deficiency.

Discussion

Section 7491, which shifts the burden of proof to the

Secretary in certain circumstances, is inapplicable to this case

because examination of petitioner's 1993 tax return commenced

prior to July 22, 1998, the effective date of section 7491. See

Warbelow's Air Ventures, Inc. v. Commissioner, 118 T.C. 579, 582

n.8 (2002), affd. 80 Fed. Appx. 16 (9th Cir. 2003).

1. Respondent's Determination To Proceed With Collection

Section 6330 provides for a hearing before a levy is

imposed. Section 6330(c) sets forth, in pertinent part, the

issues that may be considered at the hearing, as follows:

SEC. 6330(c). Matters Considered at Hearing.--

In the case of any hearing conducted under this section– 

* * * * * * *

(2) Issues at hearing.--

(A) In general.-–The person may

raise at the hearing any relevant issue

relating to the unpaid tax or proposed

levy, including–- 

(i) appropriate spousal defenses;

(ii) challenges to the

appropriateness of collection

actions; and 

(iii) offers of collection

alternatives, which may include the

posting of a bond, the substitution of

other assets, an installment agreement,

or an offer-in-compromise.
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(B) Underlying liability.–-The person may also

raise at the hearing challenges to the existence or

amount of the underlying tax liability for any tax

period if the person did not receive any statutory

notice of deficiency for such tax liability or did not

otherwise have an opportunity to dispute such tax

liability. 

In his petition, petitioner challenges his underlying 1993

tax liability. Because petitioner received a notice of

deficiency for the 1993 tax year and failed to file a petition in

this Court, he is not entitled to challenge the existence or

amount of his underlying 1993 tax liability in this collection

proceeding. See secs. 6320(c), 6330(c)(2)(B); Sego v.

Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, 114

T.C. 176, 180-181 (2000). Where the validity of the tax

liability is not properly at issue, the Court will review the

Commissioner's administrative determination for abuse of

discretion. Sego v. Commissioner, supra at 610; Goza v.

Commissioner, supra at 182.

Petitioner contends that the Appeals officer abused his

discretion by failing to offer or discuss an offer in compromise

or an installment agreement. Section 6330 contemplates, however,

that it is the taxpayer who will raise at the hearing relevant

issues, including offers of collection alternatives. Sec.

6330(c)(2)(A)(iii). The statute requires the Appeals officer

only to consider the "offers of collection alternatives" raised

and information presented by the taxpayer. Chandler v.
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3Sec. 301.7122-1, Proced. & Admin. Regs., contains an

effective date provision stating that the section applies to

offers in compromise pending on or submitted on or after July 18,

2002. Sec. 301.7122-1(k), Proced. & Admin. Regs. Previous

temporary regulations by their terms apply to offers in

compromise submitted on or after July 21, 1999, through July 19,

2002. Sec. 301.7122-1T(j), Temporary Proced. & Admin. Regs., 64

Fed. Reg. 39027 (July 21, 1999). Because the final and temporary

regulations do not differ materially in substance in any way

relevant here, the Court need not resolve which section would

apply in petitioner's circumstances. The Court further notes

that temporary regulations are entitled to the same weight and

binding effect as final regulations. Peterson Marital Trust v.

Commissioner, 102 T.C. 790, 797 (1994), affd. 78 F.3d 795 (2d

Cir. 1996). For simplicity and convenience, citations are to the

final regulations.

Commissioner, T.C. Memo. 2004-7; see also, e.g., Crisan v.

Commissioner, T.C. Memo. 2003-318; Willis v. Commissioner, T.C. 

Memo. 2003-302; O'Brien v. Commissioner, T.C. Memo. 2003-290;

Schulman v. Commissioner, T.C. Memo. 2002-129.

a. Offer in Compromise

Section 7122(a) authorizes the Commissioner to compromise a

taxpayer's outstanding liabilities. The regulations and

procedures under section 7122 provide the exclusive method of

effectuating a nonjudicial compromise.3 Laurins v. Commissioner,

889 F.2d 910, 912 (9th Cir. 1989), affg. Norman v. Commissioner,

T.C. Memo. 1987-265; Shumaker v. Commissioner, 648 F.2d 1198,

1199-1200 (9th Cir. 1981) (citing Botany Worsted Mills v. United

States, 278 U.S. 282, 288-289 (1929)), affg. in part, revg. and

remanding in part per curiam on other grounds T.C. Memo. 1979-71.
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An offer in compromise must be submitted on special forms

prescribed by the Secretary. Laurins v. Commissioner, supra at

912; Riederich v. Commissioner, 985 F.2d 574 (9th Cir. 1993),

affg. without published opinion T.C. Memo. 1991-164. Section

601.203(b), Statement of Procedural Rules, identifies Form 656 as

the form required for an offer in compromise. Petitioner

admittedly did not submit a Form 656 or otherwise describe his

income, assets, and other financial information required by Form

656 to respondent. 

b. Installment Agreement

The Court assumes, arguendo that petitioner intended that

his offer to make monthly payments would be treated by respondent

as an installment agreement. An installment agreement

contemplates payment in full of an amount acknowledged as owed

and is based on the taxpayer's current financial condition. See

sec. 6159; sec. 301.6159-1, Proced. & Admin. Regs.; 2

Administration, Internal Revenue Manual (CCH), sec. 5.19.1.5.4.1

at 18,299-65; Form 433-D, Installment Agreement; see also Crisan

v. Commissioner, supra; Martin v. Commissioner, T.C. Memo. 2003-

288.

Respondent's determination was based on information provided

by petitioner and Mrs. Nicol to the Appeals officer which

reflected petitioner's and Mrs. Nicol's current financial

condition. See Crisan v. Commissioner, supra; Schulman v.
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Commissioner, supra. Petitioner informed respondent's Appeals

officer that he could not pay off the liability. 

The Court notes that respondent also considered the fact

that petitioner had defaulted on a prior installment agreement as

an additional reason to proceed with collection. Mrs. Nicol

testified that they did not default on the installment agreement

and that they indicated that their refunds for tax years 1998 and

2000 would be applied to satisfy the liabilities. However, the

Nicols admitted in their petition that they were unable to make

consistent payments under the installment agreement. See Wells

v. Commissioner, T.C. Memo. 2003-234 (taxpayer's default on

installment agreement was an additional reason to proceed with

collection). At trial, petitioner did not present evidence or

make any arguments that would persuade the Court that an

installment agreement was an appropriate alternative to enforced

collection.

Petitioner has failed to demonstrate that the proposed levy

action is inappropriate, another collection alternative is more

appropriate, or some other relevant issue adversely affects

respondent's proposed collection activity. The Court therefore

concludes that respondent's determination to proceed by levy with

the collection of petitioner's income tax liability was not an

abuse of discretion.
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2. Abatement of Interest

At trial, petitioner contested the interest that had accrued

on the 1993 deficiency. This issue arguably goes beyond the

scope of the issues defined in the petition. See Rule 331(b)(4). 

However, respondent did not object. Accordingly, the Court

regards this issue as having been tried by consent, and it shall

be treated as if it had been raised in the petition. See Rule

41(b).

If, as part of a CDP Hearing, a taxpayer makes a request for

abatement of interest, the Court has jurisdiction over the

request for abatement of interest that is the subject of the

Commissioner's collection activities. Katz v. Commissioner, 115

T.C. 329, 340-341 (2000). Generally, the Court considers only

arguments, issues, and other matters that were raised by the

taxpayer at the CDP Hearing or otherwise brought to the attention

of the Appeals Office. Magana v. Commissioner, 118 T.C. 488, 493

(2002); Miller v. Commissioner, 115 T.C. 582, 589 n.2 (2000),

affd. per curiam 21 Fed. Appx. 160 (4th Cir. 2001); Sego v.

Commissioner, 114 T.C. at 612. 

The record does not demonstrate that petitioner raised at

the CDP Hearing any issue concerning the accrued interest on the

1993 deficiency. While Mrs. Nicol inquired about the interest on

the 1997 deficiency, she never inquired about interest on the

1993 deficiency, nor did she ask for an abatement of either. 
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Assuming arguendo (1) that the record before the Court had

established that petitioner raised such an issue at his CDP

Hearing, (2) that the Court considered petitioner's request to be

a request for abatement of interest under section 6404, and (3)

that the Court has jurisdiction under section 6404(i) to consider

that request, see Washington v. Commissioner, 120 T.C. 114, 123

n.12 (2003); Katz v. Commissioner, supra at 342-343, the Court

concludes that petitioner has failed to prove that respondent

abused his discretion in failing to abate interest. Petitioner

failed to establish any error or delay attributable to the

Appeals officer's being erroneous or dilatory in performing a

ministerial act requiring the abatement of interest with respect

to the taxable year 1993. See sec. 6404(e).

Reviewed and adopted as the report of the Small Tax Case

Division.

Decision will be entered

for respondent.