T.C. Memo. 2009-159

UNITED STATES TAX COURT

MICHAEL WILLIAMS AND SHERYL WILLIAMS, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 21031-07L. Filed June 30, 2009. 

Steven R. Mather and Elliott H. Kajan, for petitioners.

Linette B. Angelastro, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

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

Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330 (notice of determination) with respect

to petitioners’ 1996 Federal income tax liability. The remaining

issue for decision is whether the settlement officer abused his

discretion in declining to postpone his determination so that
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petitioners’ could submit an offer-in-compromise. Unless

otherwise indicated, all section references are to the Internal

Revenue Code.

FINDINGS OF FACT

Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference. 

Petitioners resided in California at the time their petition was

filed. 

From about 1971 through 1998 Walter J. Hoyt III and other

members of the Hoyt family organized, promoted, and operated

numerous cattle and sheep-breeding partnerships (Hoyt

partnerships), as most recently described in Keller v.

Commissioner, __F.3d__ (9th Cir. June 3, 2009). In 1996,

petitioners participated in Shorthorn Genetic Engineering 1982-1

(SGE), a Hoyt partnership that owned partnership interests in

operating-tier Hoyt partnerships. Petitioners filed their 1996

joint Federal income tax return on July 30, 1997, with an

attached Schedule E, Supplemental Income and Loss, reporting a

partnership loss of $216,497 from SGE. The Internal Revenue

Service (IRS), however, determined that SGE was subject to

provisions of the Tax Equity and Fiscal Responsibility Act of

1982 (TEFRA), Pub. L. 97-248, 96 Stat. 324, and disallowed the

partnership’s claimed loss for 1996.
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On September 27, 2006, after partnership-level proceedings

were completed, the IRS assessed tax of $22,102 and interest of

$20,478.82 for petitioners’ taxable year 1996 as a result of a

partnership-tier adjustment before the TEFRA assessments of

docket No. 25205-07. The assessment was followed with a Notice

and Demand bill for the 1996 tax liability, which petitioners

failed to pay. On February 17, 2007, the IRS sent to petitioners

a Letter 1058, Final Notice of Intent to Levy and Notice of Your

Right to a Hearing. 

Petitioners submitted a Form 12153, Request for a Collection

Due Process Hearing (section 6330 hearing), to review the levy

action. In their request petitioners asserted that a levy would

be improper because of equity and hardship concerns and that an

offer-in-compromise was warranted. Petitioners’ primary concern

was that they were “unwitting victims” of the Hoyt abusive tax

shelters and therefore should not be subject to penalties and

interest that resulted primarily from the “longstanding” nature

of the Hoyt partnership cases. 

A settlement officer sent a letter informing petitioners

that a telephonic Appeals conference was scheduled for June 11,

2007, at which time petitioners could discuss their disagreement

with the levy and/or alternatives to the collection action. The

letter also requested petitioners to provide, before the

conference, a completed Form 433-A, Collection Information
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Statement for Wage Earners and Self-Employed Individuals, all

supporting documentation for Form 433-A, and, if it was their

intent, a Form 656, Offer in Compromise. The letter reemphasized

that collection alternatives could not be considered at the

conference unless the requested information was sent before the

conference date. 

Petitioners, through their counsel, informed the settlement

officer that they had additional TEFRA-related assessments that

involved Hoyt partnerships pending for other years as a result of

Court proceedings. They proposed that an offer-in-compromise

encompassing all their assessments would be an appropriate

resolution. The settlement officer requested details on the

TEFRA matters along with the Form 433-A and related documents,

reasoning that an offer-in-compromise could be determined while

awaiting the assessments but cautioning that he would not hold

the case indefinitely. The settlement officer received and

reviewed the requested documents. 

On June 11, 2007, the settlement officer and petitioners’

counsel had a telephone conference. During the conference, the

settlement officer again explained that he could not hold

petitioners’ case indefinitely and suggested that, after the

issuance of a notice of determination, he could grant an

extension of 120 days before any collection action, thus

providing petitioners with 150 days free from levy during which
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the additional tax liabilities could be assessed and an offer-incompromise filed. The telephone conference ended with the

settlement officer agreeing to wait until July 6, 2007, to follow

up; but if at that time the assessments were not imminent, he

would issue the notice of determination. Petitioner’s counsel

agreed. 

On July 2, 2007, an agent of petitioners’ counsel (the

agent) called the settlement officer asking him to postpone any

decision for another month to further allow the assessments to be

made. In checking respondent’s Integrated Data Retrieval System

(IDRS), the settlement officer saw no pending assessments and

reiterated his agreement with petitioners’ counsel from the prior

telephone conference. 

In a followup telephone conversation with the agent, the

settlement officer agreed to hold petitioners’ case until August

3, 2007. If no additional assessments were pending at that time,

however, he would issue the notice of determination along with

the 120-day extension to pay. The agent agreed.

On August 7, 2007, the agent called the settlement officer

requesting more time for Appeals to hold the case and to await

the assessments. The settlement officer checked IDRS and still

saw no pending assessments. The settlement officer, determining

that there was no doubt as to collectibility of the assessed 1996

tax liability and that he was unable to determine collectibility
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of the assessments that had not yet been made, decided to close

the case as planned. 

The Appeals Office sent to petitioners a notice of

determination, dated August 20, 2007, upon which this case is

based. The notice of determination stated that petitioners owed

tax liabilities for 1993, 1994, and 1995 that were not formally a

part of their section 6330 hearing but would be included in any

collection alternative offered by Appeals for a total tax

liability of approximately $70,000. A review of their financial

documents showed that petitioners had the ability to pay in full

this tax liability. The notice of determination also indicated

that petitioners’ case had been held by the Appeals Office for

over 2 months. 

The notice of determination concluded that the pending levy

was not an appropriate measure and was not sustained. The

Appeals Office granted petitioners a 120-day extension to pay

under Internal Revenue Manual (IRM) pt. 5.14.5.1 (Mar. 30, 2002). 

If full payment was not received after that time, however, it was

determined that the IRS might levy without any further contact

with petitioners. 

For trial purposes only, this case was consolidated with

another case involving petitioners--docket No. 25205-07. In that

case, the timeliness of assessments for 1990-1995 is disputed. 

See T.C. Memo. 2009-158, filed this date.
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OPINION

Petitioners argue that respondent insists on tax liabilities

being assessed before those liabilities can be considered in an

offer-in-compromise. Petitioners claim, however, that respondent

delayed making assessments of the liabilities related to

petitioners’ case, and, thus, these pending assessments were

effectively excluded from being considered in any offer-incompromise that petitioners could have proposed. Petitioners

ultimately contend that the settlement officer refused to hold

open the section 6330 hearing until the other tax years’

liabilities had been assessed and that he abused his discretion

by not considering an offer-in-compromise that included those

liabilities.

Respondent maintains that: (1) Petitioners proposed no

collection alternatives that the settlement officer could act on;

(2) petitioners could fully pay the tax in issue; and (3) the

settlement officer gave proper consideration to petitioners’

concerns.

Section 6330 generally provides that the Commissioner cannot

proceed with levy on a taxpayer’s property until the taxpayer has

been given notice of and the opportunity for a section 6330

hearing and, if dissatisfied, with judicial review of the

administrative determination. Because the underlying liability

is not in issue here, we review the Appeals determination for
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abuse of discretion. See Sego v. Commissioner, 114 T.C. 604, 610

(2000). To demonstrate that there was an abuse of discretion,

petitioners must show that the settlement officer’s determination

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

See Giamelli v. Commissioner, 129 T.C. 107, 111 (2007). 

Petitioners have not done so. 

Petitioners argue that the settlement officer abused his

discretion in not holding their case open until the pending

liabilities from other years were assessed. Petitioners,

however, present neither evidence nor authority that supports

their view. To the contrary, the Appeals Office shall “attempt

to conduct a * * * [section 6330] hearing and issue a Notice of

Determination as expeditiously as possible under the

circumstances.” Sec. 301.6330-1(e)(3), Q&A-E9, Proced. & Admin.

Regs.; see Murphy v. Commissioner, 125 T.C. 301, 322 (2005)

(citing Clawson v. Commissioner, T.C. Memo. 2004-106), affd. 469

F.3d 27 (1st Cir. 2006). The settlement officer held

petitioners’ Appeals case open for over 2 months in a cooperative

effort regarding the tax liabilities outside of the section 6330

hearing. The settlement officer did not abuse his discretion by

declining to delay further his determination. 

Petitioners assert that they should have been allowed to

make an offer-in-compromise within the Appeals process but that

the settlement officer “made it clear” that no offer was going to
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be accepted where there are pending assessments, thus leaving

petitioners with no alternatives. While the settlement officer

testified that an offer-in-compromise cannot be accepted with

respect to pending assessments, he also stated that such an offer

can nevertheless be submitted and considered. The settlement

officer might have considered an offer-in-compromise that

included the pending assessments had petitioners timely submitted

one. Petitioners chose not to submit any offer-in-compromise at

any time during the Appeals process. 

Petitioners’ agent testified that the settlement officer was

always “very reasonable”, that “in a very professional manner * *

* he recognized the difficulties that were being presented to * *

* [petitioners]”, and that he “pointed out * * * an alternative

[the IRS Compliance Division] for filing an offer-in-compromise”. 

Petitioners’ agent and counsel, however, preferred consideration

by the Office of Appeals.

Section 7122(a) authorizes compromise of a taxpayer’s

Federal income tax liability. “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.” 

Kindred v. Commissioner, 454 F.3d 688, 696 (7th Cir. 2006); see

sec. 7122; sec. 301.7122-1(c)(1), Proced. & Admin. Regs.; see

also Fargo v. Commissioner, 447 F.3d 706, 713 (9th Cir. 2006)

(recognizing that the IRM “contains numerous provisions that vest
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Appeals Officers with the discretion to accept or reject offersin-compromise”), affg. T.C. Memo. 2004-13. Accordingly, the

settlement officer did not abuse his discretion in failing to

consider an offer-in-compromise that petitioners never made. See

Kindred v. Commissioner, supra at 696 (stating that “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”); Kendricks

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

“there was no offer in compromise before Appeals, there was no

abuse of discretion in Appeals’ failing to consider an offer in

compromise”). 

Petitioners presented neither evidence nor argument showing

any unwarranted actions or reasoning used by the settlement

officer in reaching his determination. 

To reflect the foregoing,

Decision will be entered

for respondent.