In the

United States Court of Appeals

For the Seventh Circuit ____________

Nos. 05-1424 & 05-1435

DAVID and LYNETTE KINDRED,

Petitioners-Appellants,

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent-Appellee.

____________

Appeals from an Order of the

United States Tax Court.

Nos. 5658-04L & 5860-04L.

____________

ARGUED OCTOBER 25, 2005—DECIDED JULY 20, 2006

____________

Before COFFEY, MANION, and KANNE, Circuit Judges.

COFFEY, Circuit Judge. After their income tax return was

reviewed, taxpayers David and Lynette Kindred (collectively the “taxpayers”) were determined by the Internal

Revenue Service (“IRS” or “the Service”) to be deficient in

their payments for the tax year 1999. The taxpayers were

informed of this when they were sent a statutory notice of

deficiency, which provided them the opportunity to challenge the IRS’ determination in the United States Tax

Court (“Tax Court”). They failed to do so, and the tax was

assessed as due in owing on December 16, 2002. Shortly

thereafter, the Kindreds were sent a demand for payment

via certified mail and informed that, if they failed to satisfy
2 Nos. 05-1424 & 05-1435

1 Citations using the abbreviation “IRC” refer to the Internal

Revenue Code, which can be found at 26 U.S.C. § 1 et seq. In

addition, citations found in this opinion using the abbreviation “Treas. Reg.” refer to regulations promulgated by the

Department of the Treasury pursuant to authority conferred in

the IRC, which may be found at Treas. Reg. 1.1-1 et seq.

2 Although the IRS is entitled to summon taxpayers and to

“examine any books, papers, records, or other data which may

be relevant or material” in order to perform an audit, it ap-

(continued...)

the tax obligation, a lien in favor of the United States

government would attach to all of their real and personal

property. See IRC § 6321.1

 The assessment went unpaid,

and in an effort to prevent a lien from attaching, the

Kindreds promptly notified the IRS that they wished to

exercise their right to request a hearing pursuant to IRC

§ 6330, challenging inter alia their underlying tax liability.

The IRS sustained the lien holding that the Kindreds’

claims were barred by statute, see § 6330(c)(2)(B), and the

Kindreds filed a petition with the Tax Court. After the close

of the pleadings, the IRS moved for summary judgment

pursuant to Rule 121(b) of the United States Tax Court

Rules of Practice and Procedure and the Tax Court granted

the motion. We affirm.

I. BACKGROUND

On July 15, 1999, David and Lynette Kindred filed a joint

income tax return, Form 1040, for the tax year 1998.

Suspecting that the Kindreds had under-reported their

taxable income by approximately $628,000, the IRS flagged

the return for examination, more commonly referred to

as an audit. See generally IRC § 7602; Treas. Reg.

§§ 301.7602-1 et seq. According to the record, the Kindreds

failed to communicate with the IRS concerning their return

and refused to take part in the examination process.2

 The
Nos. 05-1424 & 05-1435 3

2 (...continued)

pears that the IRS did not choose to do so in this case. IRC

§ 7602(a)(1)-(3).

3 It is undisputed that the statutory notice of deficiency was

sent via certified mail on May 9, 1999 and that the Kindreds

received said notice.

4 Section 6501 of the Internal Revenue Code provides inter alia

that “the amount of any tax imposed by this title shall be assessed

within 3 years after the return was filed (whether or not such

return was filed on or after the date prescribed) . . . .” The mailing

of a statutory notice of deficiency tolls the running of the threeyear limitations statute “for the period during which the Secretary

is prohibited from making the assessment or from collecting by

levy or proceeding in court . . . and for 60 days thereafter.” IRC

§ 6503(a)(1). Pursuant to IRC § 6213, once the Kindreds were sent

a statutory notice of deficiency, they had 90 days in which to file

a petition with the Tax Court. This, in addition to the 60-day

waiting period proscribed by § 6503(a)(1), means that the IRS was

precluded from actually assessing the tax liability until approximately December 12, 2002.

IRS thereafter determined, without the Kindreds participation, that the couple had attempted to avoid paying taxes on

their income by placing their assets into various trusts;

something the Service has characterized in the past as an

“abusive tax trust scheme.” See, e.g., Muhich v. Commissioner, 238 F.3d 860, 863 (7th Cir. 2001).

Accordingly, on May 9, 20023

 the IRS sent the Kindreds

a statutory “notice of deficiency” informing them that they

owed $991,096.43 in tax, penalties and interest. See IRC

§§ 6211(a), 6212(a), 7522(a), 6601(a), 6662(a); Treas. Reg.

§§ 301.6211-1 et seq. Included in the notice of deficiency was

information advising them of their statutory right to

challenge the proposed assessment of tax deficiency by

filing a petition with the Tax Court within 90 days. See IRC

§ 6503(a); Treas. Reg. § 301.6503(a)-1.4
4 Nos. 05-1424 & 05-1435

5 Revenue officers represent the collection arm of the United

States Department of the Treasury. See, e.g., Tennessee v. Davis,

100 U.S. 257, 261 (1879); Barnes v. Philadelphia & R.R. Co., 84

U.S. 294, 304 (1872). According to the Internal Revenue Manual

§ 5.1.1.2, revenue officers working for an IRS field officer undertake the following assignments: (1) managing “balance

due accounts”; (2) undertaking “delinquent return investigations”;

(3) performing “courtesy investigations”; (4) investigating “Federal

Tax Deposit alerts”; (5) taking part in “compliance initiative

projects”; and (6) evaluating “Offers in Compromise.” All revenue

officers are to discharge their duties in “[c]ompliance with Service

policy and guidelines” and “results achieved are to be commensurate with the resources expended.” Internal Revenue Manual

§ 5.1.1.3.2.

The Kindreds failed to contest the IRS’ determination,

and on December 16, 2002, the tax was statutorily assessed

as due in owing. See IRC §§ 6201 et seq.; Treas. Reg.

§ 301.6203-1. The same day, the Kindreds were sent a

notice of payment, stating that, in order to avoid further

collection efforts by the Service, they should immediately

remit $991,096.43, the amount in arrears. See IRC

§ 6303(a). Similar notices were sent on January 19, 2003,

June 8, 2003 and July 6, 2003, advising the Kindreds that

if they failed to pay the outstanding tax balance immediately, the IRS would seek a federal tax lien against their

assets.

The Kindreds once again refused to either remit payment

or to acknowledge the IRS’ collection efforts in any manner.

At that point, the IRS assigned a revenue officer5

 to the

Kindreds’ case in order to ensure payment of the tax and

oversee any future collection activities. See Treas. Reg.

301.7430-1(g), Example 8. On September 9, 2003, the

designated revenue officer paid a visit to the Kindreds’

home in order to discuss their tax liability and to inquire as

to how they would like to proceed. The revenue officer found
Nos. 05-1424 & 05-1435 5

6 Although the record is unclear, it appears that the revenue

officer left some type of notification at the Kindreds’ residence

advising them that he wanted to speak with them regarding

their unpaid taxes.

7 Collection Due Process hearings are informal affairs. Indeed,

the regulations provide that no transcript need be created and

that the hearing itself may be conducted via telephone or the mail.

See Treas. Reg. § 301.6330-1(d)(2)A-D6. As Treas. Reg.

§ 301.6330-1(d)(2)A-D6 states: “The formal hearing procedures

required under the Administrative Procedure Act, 5 U.S.C. 551 et

seq., do not apply to CDP hearings. CDP hearings are much like

Collection Appeal Program (CAP) hearings in that they

(continued...)

the Kindreds to be unavailable at their residence and they

did not attempt to get in contact with him after the visit.6

With the tax liability unliquidated and no other options

available, the IRS sent the Kindreds a notice entitled:

“Notice of Federal Tax Lien Filing and Your Right to a

Hearing Under IRC § 6320.” See IRC §§ 6320, 6321. This

notice informed the Kindreds of the amount owed as well as

their right to challenge the lien, within 30 days, by requesting an administrative proceeding known as a “Collection

Due Process” (“CDP”) hearing. See IRC §§ 6320, 6330.

After receiving the required statutory notice of the filing

of a levy, the Kindreds timely exercised their statutory right

to request a CDP hearing pursuant to IRC § 6330. When

they completed the required CDP hearing request form, IRS

Form 12153, the Kindreds were asked to explain why they

did not agree with the IRS’ filing of a federal tax lien. In

response, they stated: “We disagree with the determination

of the taxes and additions owed and the calculation of the

amounts, if any.” The IRS responded by assigning an

appeals officer to the case and scheduling a hearing for

January 15, 2004.7
6 Nos. 05-1424 & 05-1435

7 (...continued)

are informal in nature and do not require the Appeals officer or

employee and the taxpayer, or the taxpayer’s representative, to

hold a face-to-face meeting. A CDP hearing may, but is not

required to, consist of a face-to-face meeting, one or more written or oral communications between an Appeals officer or employee and the taxpayer or the taxpayer’s representative, or some

combination thereof. A transcript or recording of any face-to-face

meeting or conversation between an Appeals officer or employee

and the taxpayer or the taxpayer’s representative is not required. The taxpayer or the taxpayer’s representative does not

have the right to subpoena and examine witnesses at a CDP

hearing.”

8 Furthermore, the Kindreds also failed to appear at their

scheduled CDP hearing on January 15, 2004. When they did not

appear, the appeals officer sent a follow up letter, giving them yet

(continued...)

In the documents that the Kindreds submitted to the

appeals officer prior to the hearing, they maintained their

objection to the accuracy of the taxes, penalties and interest

which had been assessed by the IRS. In addition, they

argued that instead of being subject to a levy, they should

be entitled to pursue collection alternatives pursuant to IRC

§ 6330(c)(2), such as “the posting of bond, the substitution

of other assets, or an offer in compromise.” In particular,

the Kindreds sought to submit an offer in compromise

which, if accepted, could have reduced the amount determined to be owed to the IRS. See generally Young v. United

States, 535 U.S. 43, 53 (2002). In response, the appeals

officer requested additional financial information and

documentation from the Kindreds in order to ascertain

whether it would be in the IRS’ interests to pursue collection alternatives. See Treas. Reg. 301.6330-1(e)(1); IRC

§ 7122. However, the Kindreds failed to submit a formal

written offer in compromise or the financial information

required for an appeals officer to entertain collection

alternatives.8

 Indeed, the Kindreds refused to submit any
Nos. 05-1424 & 05-1435 7

8 (...continued)

another opportunity to submit financial information which would

allow him to consider collection alternatives. The appeals officer

requested that they do so by January 29, 2004. The Kindreds

failed to respond and, on February 13, 2004, the determination

was rendered and filed.

9 David and Lynette Kindred filed separate petitions in the Tax

Court although both petitions raised essentially the same

issues. As a result, the Tax Court issued two separate decisions in

the cases. However, since the issues raised and the Tax

Court’s determinations were essentially identical, we discuss

the two cases as one unless otherwise noted.

10 In general, taxpayers filing joint returns are joint and severally

liable for any deficiencies, penalties and interest assessed against

them regarding the return. See Grossman v. Commissioner, 182

F.3d 275, 278 (4th Cir. 1999); Shea v. Commissioner, 780 F.2d

(continued...)

financial information at all.

As such, the appeals officer refused to consider collection alternatives and was left with only the question of

whether the Kindreds could challenge the Service’s mathematical calculation and/or the accuracy of the taxes,

penalties and interest assessed. The appeals officer concluded that the Kindreds were precluded from doing so

because such an argument could be properly classified as a

challenge to the underlying liability, which is barred in a

CDP hearing by IRC § 6330(c)(2)(B). Accordingly, the levies

were sustained.

Unhappy with this determination, David and Lynette

Kindred individually filed petitions in the United States

Tax Court,9

 arguing that the appeals officer had abused his

discretion by refusing to entertain their arguments challenging the mathematical accuracy of the IRS’ assessments

and by failing to entertain any collection alternatives, such

as an offer in compromise or “innocent spouse” relief.10 See
8 Nos. 05-1424 & 05-1435

10 (...continued)

561, 564 (6th Cir. 1986). As discussed infra, IRC § 6015 constitutes an exception to this rule and provides that where one spouse

fails to report income, an “innocent” spouse may seek relief from

joint and several liability as long as certain conditions set forth in

§ 6015(b)(1) are met.

11 The Kindreds raised this argument for the first time in the Tax

Court, explaining that they had not been provided Form 4340,

which lists the date of assessment of the tax, until after their

petition in Tax Court had been filed.

12 Only Mrs. Kindred raised the issue of “innocent spouse” relief

in her petition in the Tax Court.

IRC § 6015(b)(1). Also, they averred that, in addition to

being inaccurate, the assessments made by the Service were

untimely pursuant to the three-year limitations period set

forth in IRC § 6501.11 At the close of pleadings, the IRS

moved for summary judgment pursuant to Rule 121(a) of

the Tax Court Rules of Practice and Procedure. The Tax

Court granted the IRS’ motion, finding that the IRS appeals

officer had not abused his discretion in sustaining the

respective levies, that the petitioners had failed to present

a question of material fact and that entry of judgment in

favor of the IRS was proper as a matter of law. See Kindred

v. Commissioner, No. 5658-04L (Nov. 5, 2004); Kindred v.

Commissioner, No. 5860-04L (Nov. 5, 2004). The court

concluded that: (a) the petitioners were barred from challenging their underlying tax liability during the CDP

hearing pursuant to IRC § 6330(c)(2)(B); (b) although no

offer in compromise was ever proposed or formally submitted by the Kindreds, they were precluded from proffering

one “under [the] guise of an offer in compromise based on

doubt as to liability”; (c) failure to raise an “innocent

spouse” defense during the administrative process precluded them from doing so for the first time in a petition to

the Tax Court;12 and (d) the petitioners’ arguments that the

IRS’ assessment of tax was outside the three-year limita-
Nos. 05-1424 & 05-1435 9

13 David and Lynette Kindred lodged separate appeals from the

Tax Court. This court, on its own motion, consolidated the appeals

in an Order issued on March 15, 2005.

14 Much like Rule 56(c) of the Federal Rules of Civil Procedure,

Rule 121(b) of the United States Tax Court Rules of Practice

(continued...)

tions period of § 6501 were entirely without merit. The

Kindreds appealed pursuant to the jurisdiction conferred on

this court under IRC § 7482(a).13

II. ISSUES

On appeal, the Kindreds challenge the Tax Court’s grant

of summary judgment in favor of the IRS based on three

perceived errors. Initially, they contend that, contrary to

the Tax Court’s determination, the IRS appeals officer

abused his discretion when he failed to allow them to

introduce proposed “collection alternatives” such as an offer

in compromise during the CDP proceedings. IRC

§ 6330(c)(2)(A)(iii). They also maintain that they should

have been allowed to introduce evidence during the CDP

proceedings which, they argue, would have entitled them to

an “innocent spouse” defense. See Grossman, 182 F.3d at

278; IRC §§ 6330(c)(2)(A)(i), 6015(a). Finally, the Kindreds

take exception with the Tax Court’s determination that the

IRS’ assessment of tax liability was timely within the

meaning of IRC § 6501.

III. ANALYSIS

We review the Tax Court’s grant of summary judgment in

favor of the IRS, “in the same manner and to the same

extent as decisions of the district courts in civil actions tried

without a jury.” IRC § 7482(a)(1). The material facts are

undisputed and petitioners present only questions of law.14
10 Nos. 05-1424 & 05-1435

14 (...continued)

and Procedure proscribes that summary judgment is only

proper where “the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together

with the affidavits, if any, show that there is no genuine issue

as to any material fact and that a decision may be rendered as

a matter of law.”Spellman v. Commissioner, 845 F.2d 148, 152

(7th Cir. 1988) (noting that “the pertinent language in the Tax

Court’s summary-judgment rule . . . is materially identical to

that of Rule 56”).

15 During the administrative process neither of the petitioners

ever disputed the fact that they received a statutory notice of

deficiency. Thus, they were statutorily precluded from challenging

their underlying tax liability at the CDP hearing stage. See IRC

§ 6330(c)(2)(B).

Thus, we review the Tax Court’s decision to grant summary

judgment de novo. See Krukowski v. Commissioner, 279

F.3d 547, 550 (7th Cir. 2002); Connor v. Commissioner, 218

F.3d 733, 736 (7th Cir. 2000). See L & C Springs Assocs. v.

Commissioner, 188 F.3d 866, 869 (7th Cir. 1999). In addition, because it is evident from the record before us that the

petitioners’ underlying tax liability is not at issue,15 we

review the administrative determinations of the IRS

appeals officer during the CDP hearing process under an

abuse of discretion standard. See Orum v. Commissioner,

412 F.3d 819, 820 (7th Cir. 2005); Sego v. Commissioner,

114 T.C. 604, 610 (2000) (holding that “where the validity

of the underlying tax liability is not properly at issue, the

Court will review the Commissioner’s administrative

determination for abuse of discretion”); Craig v. Comm’r,

119 T.C. 252, 260 (2002), cf. Jones v. Comm’r, 338 F.3d 463,

466 (5th Cir. 2003) (stating that: “In a collection due process

case in which the underlying tax liability is properly at

issue, the Tax Court (and hence this Court) reviews the

underlying liability de novo and reviews the other administrative determinations for an abuse of discretion.”). Put
Nos. 05-1424 & 05-1435 11

16 As the Sixth and First Circuits have acknowledged, while

§ 6330 was intended to guard against taxpayer harassment at

the hands of the IRS, it does not strip the Service of the right

to undertake legitimate tax collection activities. See Living

Care Alternatives of Utica, Inc. v. United States, 411 F.3d 621, 625

(6th Cir. 2005); Olsen v. United States, 414 F.3d 144, 151 (1st Cir.

2005). Accordingly, the standard of review is highly deferential as

Congress intended.

17 Or taxpayers if married and filing jointly.

simply, if we conclude that the IRS appeals officer did not

abuse his discretion in upholding the levy imposed on the

petitioners, then summary judgment was properly granted

and we will affirm the Tax Court’s decision.16

A. Collection Due Process Hearings

As mentioned above, IRC § 6321 authorizes the Secretary

of the Treasury to levy against “any person liable to pay any

tax [who] neglects or refuses to pay the same after demand.”

The lien, when in place, attaches to “all property and rights

to property, whether real or personal, belonging to such

person.” § 6321. In order for the IRS to collect overdue tax

via lien, however, a notice and demand for payment must be

served on the taxpayer17 within 60 days of the assessment

of the tax. IRC § 6303. If payment is not remitted by the

taxpayer, a lien may be sought as soon as the tenth day

following transmittal of the notice and demand. Treas. Reg.

§ 301.6331-1.

Prior to 1998, the abovementioned service of a notice

and demand for payment, along with a failure or refusal by

the taxpayer to pay the assessed amounts, was all that was

procedurally required prior to an IRS lien attaching to a

person’s property. See, e.g., Commissioner v. Shapiro, 424

U.S. 614, 617-18, 629-32 (1976). Taxpayers were entitled to

post-deprivation proceedings to challenge a levy, see id., but
12 Nos. 05-1424 & 05-1435

18 The bill was also popularly known by the pseudonym “Taxpayer

Bill of Rights.” See Preslar v. Commissioner, 167 F.3d 1323, 1327

n.2 (10th Cir. 1999).

19 While taxpayers have a right to a “hearing,” such proceedings

may be conducted either in a formal setting with all the parties

present or via written or oral communications.

there was no procedure in place for a taxpayer to challenge

the IRS’ decision to levy against their property prior to the

lien attaching, as long as the IRS could demonstrate that

either: (a) the underlying liability was not properly at issue;

or (b) where the IRS would have been “jeopardized by delay”

in collecting the tax due. See Shapiro, 424 U.S. at 617-18;

Living Care, 411 F.3d at 624; see also Phillips v. Commissioner, 283 U.S. 589, 595-97 (1931) (holding that where

“adequate opportunity [was] afforded for a later determination of [ ] legal rights, summary proceedings to secure

prompt performance of pecuniary obligations to the government” were entirely consistent with the Due Process Clause

of the Fifth Amendment).

On July 22, 1998, Congress enacted the IRS Restructuring and Reform Act of 1998, Pub.L. No. 105-206, § 3401, 112

Stat. 685,18 which was specifically intended to provide taxpayers with additional pre-deprivation opportunities to oppose IRS collection actions. See Pub.L.

No. 105-206, § 1001, 112 Stat. 685, 689 (stating that inter

alia the bill is intended to “ensure an independent appeals

function within the Internal Revenue Service”). Section

6330 of the IRC was enacted as part of that bill and

grants taxpayers the right to request a pre-deprivation

hearing19 in order to allow them to present arguments as to

why the filing of a lien would not constitute an appropriate

collection device, before that lien actually attaches. In

particular, IRC § 6330(c)(2)(A) authorizes the Secretary of

the Treasury to consider “any relevant issue relating to the

unpaid tax or the proposed levy” during a CDP hearing.
Nos. 05-1424 & 05-1435 13

20 Section 301.6330-1(e)(3)A-E6 of the Treasury Regulations gives

some additional examples of collection alternatives, such as “a

proposal to withhold the proposed or future collection action in

circumstances that will facilitate the collection of the tax liability,

an installment agreement . . . the posting of a bond, or the

substitution of other assets.”

This includes “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.” § 6330(c)(2)(A)(iii). The statute does, however, limit

challenges to the “existence or amount of underlying tax

liability” to situations in which a taxpayer has “not

receive[d] any statutory notice of deficiency for such tax

liability or did not otherwise have an opportunity to dispute

such tax liability.” § 6330(c)(2)(B).

1. The Kindreds’ Right to Submit an Offer in Compromise

The Kindreds initially argue that they should have been

permitted to submit an offer in compromise premised on

“doubt as to liability” during the CDP hearing process under

IRC § 6330(c)(2)(A)(iii). The failure to entertain such an

offer, they assert, constitutes an abuse of discretion on the

part of the appeals officer. In addition, they take issue with

the Tax Court’s determination that the Kindreds, by

attempting to introduce collection alternatives, were simply

trying to challenge their underlying tax liability under the

“guise of an offer in compromise based on doubt as to

liability.”

As stated above, IRC § 6330(c)(2)(A) gives taxpayers faced

with an IRS levy the right to proffer collection alternatives

at the CDP hearing stage, including offers-in-compromise.20

This right, however, carries with it certain obligations on

the part of the taxpayer. For instance, Treas. Reg.
14 Nos. 05-1424 & 05-1435

21 As the Sixth Circuit noted in Living Care, review of CDP

hearings is often based on a particularly scant record which

consists mainly of “parties’ appellate briefs and the Notice of

Determination letter . . . . No transcript or official record of the

hearing is required and, accordingly, one rarely exists.” 411 F.3d

at 625.

While the record consists of some additional information—such

as exhibits provided by the IRS concerning when certain events

(continued...)

§ 301.6330-1(e)(1) states that “[t]axpayers will be expected

to provide all relevant information requested by [the

appeals officer], including financial statements, for its

consideration of the facts and issues involved in the hearing.” In addition, the regulations implore taxpayer participation in the CDP hearing process. Indeed, Treas. Reg.

§ 301.6330-1(e)(3)A-E8(ii) specifically provides that,

“taxpayers are encouraged to discuss their concerns with

the IRS office collecting the tax.” Suggested collection plans

submitted during a CDP hearing are weighed according to

“whether [the] collection action balances the need for the

efficient collection of taxes with the legitimate concern of

the person that any collection be no more intrusive than

necessary.” Treas. Reg. § 301.6330-1(e)(3)A-E8(i). The

decision to entertain, accept or reject an offer in compromise

is squarely within the discretion of the appeals officer and

the IRS in general. See IRC § 7122; Treas. Reg. § 301.7122-

1(c)(1).

The Kindreds’ argument that they should have been

allowed to submit an offer in compromise is frivolous. To

begin with, the Tax Court’s review, as well as our review, is

strictly confined to only those issues which were originally

raised during the CDP hearing. See Treas. Reg.

§ 301.6330-1(f)(2), Q-F5 & A-F5; Living Care v. United

States, 411 F.3d 621, 625 (6th Cir. 2005). Although the

record of the CDP hearing proceedings in this case is

sparse,21 it is clear that the Kindreds failed to ever actu
Nos. 05-1424 & 05-1435 15

21 (...continued)

took place—the Kindreds’ case is no exception. Indeed, because

the Kindreds failed to ever show up to their scheduled CDP

hearing, obviously no transcript exists. In addition, the communications that transpired between the appeals officer and the

Kindreds prior to a determination was made are not included

in the record on appeal. Therefore, aside from the appeals officer’s

actual written decision, which is in the record, we are left with

little outside the pleadings to parse.

ally make an offer in compromise, much less submit one to

the IRS appeals officer for consideration in accordance with

the requirements set forth in IRC §§ 6330(c)(3) and 7122.

Without an actual offer in compromise to consider, it would

be most difficult for either the Tax Court or this court to

conclude that the appeals officer might have abused his

discretion; for the appeals officer could not mistakenly

reject something which has not been presented to him. See

Kendrics v. Commissioner, 124 T.C. 69, 79 (2005) (holding

that: “Since there was no offer in compromise before [the

appeals officer], there was no abuse in discretion in [the

officer] failing to consider an offer in compromise.”); Magna

v. Commissioner, 118 T.C. 488, 493 (2002) (holding that it

would be “anomalous . . . to conclude that [an] Appeals

Office abused its discretion under section 6330(c)(3) in

failing to grant relief, or in failing to consider arguments,

issues, or other matters not raised by the taxpayers or not

otherwise brought to the attention of [an] Appeals Office”

during a CDP hearing).

The Kindreds attempt to dodge the proverbial bullet,

however, by stating that the IRS appeals officer “would not

permit” them to submit an offer in compromise. However,

we have been unable to discern anything in the record

which would lend support to this statement or lead us to

believe that the appeals officer did any such thing. Indeed,

it is eminently clear that the Kindreds failed to participate
16 Nos. 05-1424 & 05-1435

22 It should be noted that this represents yet another two-week

period prior to the appeals determination in which the Kindreds

could have, but did not, submit financial information and/or

an offer in compromise.

in the CDP hearing process in any meaningful way. For

example, it is undisputed that, when asked to do so, the

Kindreds failed to provide financial information of any kind

to the appeals officer as required by Treas. Reg. § 301.6330-

1(e)(1). This alone would have provided the appeals officer

with a reason to refuse to consider any proffered offer in

compromise. See Olsen, 414 F.3d at 151 (stating that

“failure to respond to inquiries for information in a timely

manner constitutes grounds for giving no further consideration to an offer in compromise.”).

What’s more, the Kindreds even failed to attend their

scheduled hearing in Las Vegas, Nevada, on January 15,

2004. The appeals officer, if he had seen fit, could have

issued a determination that day sustaining the levy and

denying the Kindreds any additional time to submit an offer

in compromise. However, he did not do so and instead offered the Kindreds another fourteen days—until

January 29, 2004—to submit the requested financial

information along with an offer in compromise. True to

form, the Kindreds failed to do so and, thus, on February

13, 2004 a determination sustaining the levy was issued.22

The only explanation given for this complacency was offered

by the Kindreds’ representative during the administrative

proceedings, who stated: “I explained to [the appeals officer]

that I would require adequate time, based upon the near

lack of records and need to acquire information from the

Service itself, to prepare any [offer in compromise]. He [(the

appeals officer)] extended the hearing until January 29,

2004 but would not give any additional time for preparing

the [offer in compromise]. I was unable to submit an [offer

in compromise].” This statement, at the very least, serves to
Nos. 05-1424 & 05-1435 17

23 They had approximately three months from the date they

requested a hearing, October 30, 2003, until the determination

was rendered on February 13, 2004, to submit the requisite

financial information along with an offer in compromise.

24 As the appeals officer stated in his written decision sustaining

the lien against the Kindreds, they “were offered the opportunity

to discuss alternative methods of collection, whether administrative procedures [were] properly followed by the IRS, and the

degree of intrusiveness caused by the filing of the Notice of

Federal Tax Lien,” but failed to do so.

undermine the veracity of the Kindreds’ claim that they

were not “permitted to submit” an offer in compromise. To

the contrary, their own representative’s statement illustrates the fact that they were given numerous opportunities

to submit the required financial information and/or an offer

in compromise, but failed to do so. The fact that the

Kindreds were unable, or unwilling, to timely supply the

financial information that the regulations require in order

for the IRS to consider an offer in compromise, see Treas.

Reg. § 301.6330-1(e)(1), falls far short of establishing that

the appeals officer’s determination was hasty under the

circumstances23 and certainly does not mean that he abused

his discretion by “refusing” to allow the Kindreds to submit

such an offer.24 See, e.g., Olsen, 414 F.3d at 151; Murphy v.

Commissioner, 125 T.C. 301, 323 (2005) (holding that it was

reasonable for appeals officer to sustain levy where the

taxpayer had a two month period of time to submit a

reasonable offer in compromise, but failed to do so); Chandler v. Commissioner, T.C. Memo 2005-99 (2005) (when

petitioner failed to supply requested financial information

after being given six weeks to do so it was not an abuse of

discretion for the appeals officer to issue a determination

sustaining a levy); Roman v. Commissioner, T.C. Memo

2004-20 (2005) (reasonable for appeals officer to sustain

levy where, after being give six weeks to do so, the taxpayer
18 Nos. 05-1424 & 05-1435

failed to supply the requisite financial information in

conjunction with an offer in compromise).

Also, while our review of the Tax Court’s decision is

de novo, we pause for the sake of completeness and note

that the Tax Court had good reason to believe that the

Kindreds wished to submit an offer in compromise only as a

“guise” to lodge an impermissible collateral attack on their

underlying liability. As recently as their brief before this

court the Kindreds maintained their former intention to

introduce an offer which would be predicated on “doubt as

to liability.” It is true that the Kindreds would be precluded

from challenging their underlying liability during a CDP

proceeding, see infra p. 20-22. However, as discussed above

we are convinced that there are more fundamental reasons

for concluding that the appeals officer did not abuse his

discretion in not considering an offer in compromise, e.g.,

because no offer was in front of him and because the

Kindreds failed to supply the necessary financial information.

2. Innocent Spouse Defense

The Kindreds next argument on appeal closely tacks their

claims regarding the consideration of an offer in compromise. It is their assertion that the appeals officer “ignored

Appellant Lynette Kindred’s spousal defense.” See IRC

§ 6015. Nevertheless, the Kindreds maintain that “Lynette

Kindred’s spousal defense [would have been] part and

parcel of the [offer in compromise],” which, as discussed

above, was never properly before the appeals officer.

Innocent spouse relief or “relief from joint and several

liability,” such as that claimed by the Kindreds, falls under

the provisions of IRC § 6015(b)(1). That section requires

that: “(A) a joint return has been made for a taxable year;

(B) on such return there is an understatement of tax

attributable to erroneous items of one individual filing the

joint return; (C) the other individual filing the joint re-
Nos. 05-1424 & 05-1435 19

turn establishes that in signing the return he or she did not

know, and had no reason to know, that there was

such understatement; (D) taking into account all the facts

and circumstances, it is inequitable to hold the other

individual liable for the deficiency in tax for such taxable

year attributable to such understatement; and (E) the other

individual elects (in such form as the Secretary may

prescribe) the benefits of this subsection not later than the

date which is 2 years after the date the Secretary has begun

collection activities with respect to the individual making

the election.” However, in order to be eligible for relief

under § 6015, a taxpayer is first required to submit IRS

Form 8857, “Request for Innocent Spouse Relief.” See Treas.

Reg. § 6015-5(a). Form 8857 must be filed with the IRS

within two years of the date of the first collection activity

and requires that the taxpayer make certain statements

regarding their tax liability and marital status under

penalties of perjury. Id. at 6015-5(b).

Not surprisingly, the Kindreds did not submit a Form

8857. Nor did they even inform the appeals officer that they

wished to seek innocent spouse relief under § 6015(b).

Indeed, the first mention of a possible innocent spouse

defense is on Lynette Kindred’s petition in the Tax Court.

We agree with the Tax Court’s conclusion that this was

far too late to introduce such an argument. See Kindred v.

Commissioner, No. 5860-04L, at *2 (Nov. 5, 2004). The

regulations clearly state that, “[a] taxpayer may raise any

appropriate spousal defenses at a CDP hearing,” however,

“the taxpayer must do so in writing according to the rules

prescribed by the Commissioner or the Secretary.” Treas.

Reg. § 301.6330-1(e)(2). The Kindreds’ failure to submit

Form 8857 or any notice whatsoever of their intention to

raise a spousal defense during the CDP hearing process

is thus fatal to their claim that the appeals officer abused

his discretion by not considering such a defense. See supra

p. 13; Living Care, 411 F.3d at 625; Magna v. Commis-
20 Nos. 05-1424 & 05-1435

sioner, 118 T.C. at 493; see also Treas. Reg. § 6330-1(f)(2) AF5 (stating that: “In seeking Tax Court . . . review of Appeals’ Notice of Determination, the taxpayer can only ask

the court to consider an issue that was raised in the taxpayer’s CDP hearing.”). In addition, if it is the Kindreds’

contention that their spousal defense was to be included in

their non-existent offer in compromise, that argument

would also fail for the reasons outlined above. See supra.

p. 11-15.

B. Petitioners’ Challenge to the Timeliness of the IRS’

Assessment of an Income Tax Deficiency

In their final argument on appeal, the Kindreds claim

that “the Tax Court erred in determining that the assessment by the [IRS] on December 20, 2002 for tax year 1998

was timely because it violates the [IRC § 6501].” We

disagree.

Contrary to the Kindreds’ statement, the Tax Court did

not determine that the assessment of the tax by the IRS

was timely under IRC § 6501. Instead, what the Tax Court

found was that “[b]ecause petitioner received a statutory

notice of deficiency for 1998, she is precluded from challenging her underlying tax liability.” There was good reason for

this determination.

As noted above, IRC § 6330(c)(2)(B) limits challenges as

to the “existence or amount of underlying tax liability” to

situations in which a taxpayer has “not receive[d] any

statutory notice of deficiency for such tax liability or did not

otherwise have an opportunity to dispute such tax liability.”

It is well settled law that a challenge to the IRS’ ability to

assess a tax under the statute of limitations codified at IRC

§ 6501 constitutes a “challenge to the underlying tax

liability.” See Pomerantz v. Commissioner, T.C. Memo 2005-

295 (2005); Jensen v. Commissioner, 87 T.C.M. 1340, 1343

(2004); Wolk v. Commissioner, T.C. Summ.Op. 2003-173

(2003); Hoffman v. Commissioner, 119 T.C. 140, 145 (2002).
Nos. 05-1424 & 05-1435 21

25 In fact, Treas. Reg. 301.6330-1(e)(4) Example 1, specifically

states that if the IRS sends a statutory notice of deficiency to

a taxpayer, and that taxpayer “receives the notice of deficiency in

time to petition the Tax Court for a redetermination of the

asserted deficiency . . . . [and] [t]he taxpayer does not timely file

a petition with the Tax Court . . . [he/she] is precluded from

challenging the existence or amount of the tax liability in a

subsequent CDP hearing.” That is precisely what happened here.

The Kindreds have never disputed that they received the statutory notice of deficiency in time to petition the Tax Court

for redetermination of the underlying tax liability. In addition,

they never disputed the IRS’ assessment in any way, that is, until

the CDP hearing; something that is specifically disallowed by the

regulations.

The Kindreds do not dispute the fact that they received a

statutory notice of deficiency. Thus, their claim that the IRS

was barred from assessing the tax based on the expiration

of the three-year statute of limitations in IRC § 6501, which

constitutes a challenge to the underlying tax liability, is

barred by IRC § 6330(c)(2)(B). The proper time to challenge

the amount, existence or timeliness of the IRS’ proposed

assessment would have been to file a petition with the Tax

Court within 90 days of receipt of the statutory notice of

deficiency. See IRC § 6213(a).25 The Kindreds failed to do

this and are thus precluded from doing so at this stage. See

IRC § 6330(c)(2)(B). In addition, this is yet another claim

that the Kindreds failed to present to the appeals officer

during CDP hearing proceedings, therefore they were

precluded from raising it either in a petition before the Tax

Court or in this court. Living Care, 411 F.3d at 625; Magna

v. Commissioner, 118 T.C. at 493; see also Treas. Reg.

§ 6330-1(f)(2) A-F5.

IV. CONCLUSION

We are convinced that the Tax Court properly concluded
22 Nos. 05-1424 & 05-1435

that the IRS appeals officer did not abuse his discretion

during the Kindreds’ CDP hearing. Accordingly, summary

judgment was properly granted in favor of the IRS and the

decision of the Tax Court is

AFFIRMED.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—7-20-06