T.C. Memo. 2010-19

UNITED STATES TAX COURT

KELLY J. MASELLI, Petitioner v. 

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 27000-07L. Filed February 3, 2010.

Mark Harrington Westlake, for petitioner.

John R. Bampfield, for respondent.

MEMORANDUM OPINION

COHEN, Judge: This case was commenced in response to a

Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330 with respect to petitioner’s Federal

income tax liabilities for 2002, 2003, 2004, and 2005. The issue

for decision is whether it was an abuse of discretion for the

Internal Revenue Service’s (IRS) Appeals Office to reject
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petitioner’s proposed installment agreement. Unless otherwise

indicated, all section references are to the Internal Revenue

Code, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

Background

This case was submitted fully stipulated under Rule 122, and

the stipulated facts are incorporated as our findings by this

reference. Petitioner resided in Montgomery County, Tennessee,

at the time she filed her petition. At all material times

petitioner was a real estate broker.

Petitioner and her former husband were divorced on August

22, 2005. At that time she had not filed Federal income tax

returns for 2002, 2003, and 2004. 

On March 30, 2007, the IRS sent petitioner a Letter 1058,

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

Hearing, for 2002, 2003, 2004, and 2005. The 2002 tax liability

in the Letter 1058 was based on a substitute for return the IRS

prepared under section 6020. After the IRS sent the Letter 1058,

petitioner filed a corrected 2002 return showing no tax

liability, and the IRS updated her file accordingly. Petitioner

also filed tax returns for 2003, 2004, and 2005. The outstanding

tax liabilities for 2003, 2004, and 2005 resulted from

insufficient estimated tax payments or withholding credits.
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In response to the Letter 1058, through her counsel,

petitioner submitted a Form 12153, Request for a Collection Due

Process or Equivalent Hearing, on April 26, 2007, requesting that

an installment agreement be considered as a collection

alternative. Petitioner noted her reason for the request in an

attachment to the form that claimed the tax liabilities arose

because:

1. The taxpayer erroneously reported income of her exhusband on her 2002, 2003, 2004 and 2005 tax returns. 

After amendment and correction of the tax returns to

eliminate that portion of the income properly taxable

to her ex-husband, the taxpayer’s net liability will be

substantially reduced.

2. Rental income from property co-owned by the

taxpayer and her ex-husband was applied to improvements

and non-deductible principal payments on loans. As a

result the taxpayer’s net taxable income exceeded

disposable cash flow.

3. In 2005 sales of rental properties co-owned by the

taxpayer and her ex-husband, did not generate

sufficient net cash proceeds to satisfy the secured

mortgage indebtedness necessary to clear title for sale

and also pay the applicable capital gains from the

sales. Although little or no net cash proceeds were

available, the total amount realized significantly

exceeded reported cost basis.

The hearing on petitioner’s request was scheduled for

September 11, 2007. In a September 7, 2007, letter petitioner’s

counsel outlined petitioner’s contentions. Enclosed with the

September 7, 2007, letter was petitioner’s completed Form 433-A,

Collection Information Statement for Wage Earners and SelfEmployed Individuals, with attached bank statements, home loan

statements, and vehicle loan statements. Also enclosed with the
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letter was a completed Form 433-B, Collection Information

Statement for Businesses, for Gateway Realty & Investment Group,

L.L.C., along with supporting financial documents. Petitioner

owns the business with her husband, Mike Maselli, whom she

married after 2005. 

On the Form 433-A, petitioner reported monthly household

income of $12,900, consisting of $2,000 attributable to

petitioner; $8,000 attributable to her husband’s business income;

and $2,900 attributable to her husband’s pension. Petitioner

claimed monthly expenses consisting of $1,546 for food, clothing,

and miscellaneous; $3,948 for housing and utilities; $1,165 for

transportation; $225 for healthcare; $428 for taxes, $3,166 for

court-ordered payments; $993 for life insurance; $515 for secured

or legally perfected debts; and $728 for other expenses, totaling

$12,700 (claimed amount rounded to nearest hundred). Petitioner

proposed an installment payment of $200 per month until her

income increased, based on her calculation of an excess monthly

income of $185.

At the time petitioner submitted her Form 12153, she was in

compliance with income tax filing requirements, but was not in

compliance with estimated tax payments for 2007. Petitioner’s

counsel submitted petitioner’s payment for the outstanding 2007

estimated income tax liability when he attended the face-to-face
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hearing on September 11, 2007, bringing petitioner into

compliance for 2007. 

During the collection due process (CDP) hearing, the

settlement officer reviewed the completed Forms 433-A and 433-B

and prepared a list of additional information that she would need

from petitioner, requesting that the information be submitted by

September 28, 2007. Petitioner, through her counsel, timely

supplied the information.

The settlement officer determined that petitioner could pay

$819 per month. Her determination was based on petitioner’s

earning 18 percent of the household income. In her calculations

the settlement officer used 18 percent of the following expense

amounts according to the IRS national and local standards for

Montgomery County, Tennessee: $1,331 for food, clothing, and

miscellaneous; $1,308 for housing and utilities; $181 for

operation of an automobile; and $478 for the finance payment on

an automobile. The settlement officer noted that she used all

information petitioner had supplied to date to determine

petitioner’s ability to pay.

On October 2, 2007, the settlement officer’s independent

research of Montgomery County, Tennessee, property records

verified petitioner’s ownership of her claimed personal residence

and identified a property on Public Square in Clarksville,

Tennessee, as owned by petitioner with her former husband. The
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Public Square property had not been included on petitioner’s Form

433-A. 

That same day, a followup telephone call occurred between

the settlement officer and petitioner’s counsel. Petitioner’s

counsel agreed to provide information regarding petitioner’s real

property ownership, among other items, the following week for the

settlement officer’s consideration. During the phone call, the

settlement officer advised petitioner’s counsel that the 2007 IRS

national and local standard expense allowances became effective

October 1, 2007, and that petitioner’s life insurance expense of

$993 claimed on her Form 433-A would not be allowed because she

had an “excessive amount”. 

On October 5, 2007, the settlement officer reviewed

petitioner’s credit report that revealed, among other items not

pursued by the settlement officer, a “Marriott Ownership”

(Florida vacation homes) and a GMAC loan that had not been

reported on the submitted Form 433-A. The settlement officer

left a voice message for petitioner’s counsel on October 5, 2007,

requesting information regarding these items. 

On October 16, 2007, the settlement officer left a voice

message for petitioner’s counsel informing him that the case

would be closing because the requested information had not been

received the prior week. On October 17, 2007, petitioner’s

counsel left a voice message for the settlement officer
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requesting an extension until October 19, 2007, to supply the

information. That same day, the settlement officer left a voice

message for petitioner’s counsel after hearing his message and

stated that she had closed the case and would be sustaining the

IRS’s proposed collection action.

In a letter dated October 18, 2007, and hand-delivered to

the Appeals Office the following day, petitioner’s counsel

represented that under the divorce decree, petitioner was to

receive a West Palm Beach, Florida, timeshare property and her

former husband was to receive a Daytona Beach, Florida, timeshare

property. Petitioner’s counsel asserted that the transfers had

not been made because petitioner had been sued by her former

husband for reimbursement of his tax liabilities. Further, in

the letter he asserted that there were outstanding assessments on

the Florida properties that neither petitioner nor her former

husband could pay. The following documents were enclosed with

the letter for the settlement officer’s review: (1) Complete

recorded divorce decree; (2) an unsigned copy of the quitclaim

deed conveying Public Square property to petitioner’s former

husband; and (3) a copy of the retail buyers’ order for a

Chevrolet car.

The final decree of divorce stated that petitioner’s former

spouse “shall receive the realty known as 128 Public Square and

the Dayton [sic] Beach Condominium time share” and that
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petitioner would receive the “West Palm Beach time share”, among

other real properties listed. Additionally, the decree stated

that the “Court hereby orders the Parties to execute quitclaim

deeds herewith conveying their interest in said realty.” 

The submitted retail buyers’ order for a Chevrolet Malibu,

dated May 15, 2004, noted the use of GMAC financing and listed

petitioner as purchaser with a copurchaser. Petitioner’s

handwritten note accompanying the document stated that she

cosigned for the vehicle, but does not make the payments. In the

letter dated October 18, 2007, from petitioner’s counsel, he

noted that the copurchaser was the daughter of petitioner’s

former husband.

The settlement officer reviewed the documents accompanying

petitioner’s counsel’s letter dated October 18, 2007, and

concluded that (1) the quitclaim deed for the Public Square

property provided was unsigned, so a question remained regarding

petitioner’s ownership of this property; (2) no information on

the value of or liens on the Florida timeshare properties was

provided; and (3) insufficient information was provided about the

Chevrolet Malibu. The settlement officer concluded that the

“financial information provided is still not complete therefore

the determination to sustain the proposed levy action stands.”

The Appeals Office sent petitioner a Notice of Determination

Concerning Collection Action(s) Under Section 6320 and/or 6330
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dated October 24, 2007, sustaining the levy for the years at

issue. An attachment to the notice of determination explained:

Additional information was received and reviewed

on 10/19/2007 but was still incomplete. Insufficient

information was provided to determine Mrs. Maselli’s

interest and/or equity in the Florida vacation

properties, the Chevrolet car and the property on

Public Square in Clarksville, Tennessee.

Since the financial information submitted is

incomplete Appeals cannot make an accurate collection

determination. No consideration can be given to

taxpayer’s offer of an installment agreement or to any

other collection resolution.

* * * * * * *

I balanced the competing interests in finding the

proposed levy appropriate. You offered to resolve your

debt via a monthly installment agreement but failed to

provide full financial information for consideration of

this or any other collection alternative. Therefore

the proposed levy balances the need for efficient

collection with your concern that any collection action

be no more intrusive than necessary. 

Discussion

At a section 6330 hearing a taxpayer may raise any relevant

issue relating to the collection action, including challenges to

the appropriateness of the collection actions and possible

collection alternatives. Sec. 6330(c)(2)(A). Section 6159(a)

gives the Secretary discretionary authority to enter into

installment agreements as a collection alternative to satisfy tax

liabilities when it is determined that this will facilitate full

or partial collection. Eligibility for an installment agreement

is based on the taxpayer’s current financial condition. See

generally Internal Revenue Manual (IRM) pt. 5.14.1.5 (July 12,

2005). Generally, there is no abuse of discretion when an
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Appeals Office employee relies on guidelines published in the IRM

to evaluate a proposed installment agreement. See, e.g., Orum v.

Commissioner, 123 T.C. 1, 13 (2004), affd. 412 F.3d 819 (7th Cir.

2005); Etkin v. Commissioner, T.C. Memo. 2005-245.

Following the hearing, the Appeals officer must determine

whether the collection action should proceed. The Appeals

officer must consider: (1) Whether the requirements of

applicable law and administrative procedure have been met, (2)

any issues the taxpayer raised, and (3) whether the collection

action balances the need for efficient collection of taxes with

the taxpayer’s legitimate concern that any collection action be

no more intrusive than necessary. Sec. 6330(c)(3).

Because petitioner does not dispute the underlying tax

liabilities, we review the Appeals Office’s determination

sustaining the collection action for abuse of discretion. See

Sego v. Commissioner, 114 T.C. 604, 610 (2000). An abuse of

discretion occurs when the Appeals officer’s determination was

arbitrary, capricious, or without sound basis in fact or law. 

Murphy v. Commissioner, 125 T.C. 301, 308 (2005), affd. 469 F.3d

27 (1st Cir. 2006). 

Petitioner argues that the Appeals Office’s settlement

officer abused her discretion by rejecting petitioner’s

installment agreement proposal and making a determination without

considering all information that petitioner supplied. Respondent
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asserts that the settlement officer did not abuse her discretion

because petitioner did not produce all of the required financial

information. The settlement officer determined that petitioner

provided insufficient information regarding petitioner’s interest

and/or equity in the Florida vacation properties, the Chevrolet

car, and the property on Public Square in Clarksville, Tennessee. 

Accordingly, the settlement officer rejected petitioner’s

proposed collection alternative.

Section 6330 requires the Appeals conferee to consider

information the taxpayer presented. The administrative record

shows that the settlement officer reviewed petitioner’s

information regarding the proposed installment agreement,

including the supplemental information enclosed with the letter

dated October 18, 2007, from petitioner’s counsel. Accordingly,

the settlement officer denied petitioner’s installment agreement

proposal because she could not make an accurate determination

regarding petitioner’s equity in assets and corresponding ability

to make a one-time payment to fully or partially satisfy balance

due accounts. See generally IRM pt. 5.14.1.5. We conclude that

because the settlement officer duly considered all the

information that petitioner submitted, she did not abuse her

discretion in this regard. 

Petitioner further argues that the settlement officer abused

her discretion by not providing petitioner with a reasonable
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opportunity to supply requested information. As we stated in

Roman v. Commissioner, T.C. Memo. 2004-20, 

No statutory or regulatory provision requires that

taxpayers be afforded an unlimited opportunity to

supplement the administrative record. * * * The

statute only requires that a taxpayer be given a

reasonable chance to be heard prior to the issuance of

a notice of determination. * * *

Further, the Appeals Office shall “attempt to conduct a CDP

hearing and issue a Notice of Determination as expeditiously as

possible under the circumstances.” Sec. 301.6330-1(e)(3), Q&AE9, Proced. & Admin. Regs.; see Murphy v. Commissioner, supra at

322 (citing Clawson v. Commissioner, T.C. Memo. 2004-106); see

also Williams v. Commissioner, T.C. Memo. 2009-159.

Petitioner’s counsel asked for an extension of the original

deadline to October 19, 2007, to supply additional information

that the settlement officer requested. The settlement officer

received and considered all information that petitioner supplied,

including the additional information submitted on October 19,

2007. We conclude that the settlement officer did not abuse her

discretion because she is not required to afford an unlimited

opportunity to supplement the administrative record. Any such

requirement would unduly prolong proceedings and would be a tool

of those intending delay.

In sum, nothing in the record justifies a conclusion that

the settlement officer abused her discretion, and petitioner has

not shown that the Appeals Office’s determination to proceed with
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collection for petitioner’s unpaid tax liabilities for 2003,

2004, and 2005 was arbitrary, capricious, or without sound basis

in fact or law.

In reaching our decision, we have considered all arguments

made, and, to the extent not mentioned, we conclude that they are

moot, irrelevant, or without merit. 

To reflect the foregoing,

Decision will be entered

for respondent.