T.C. Mem o. 2 01 6- 21 7

UNITED STAT ES TAX COURT

RICHARD ISAAC FINE AND MARYELLEN O LMAN-FINE, Pet it io ne rs v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 23 55 3- 15 L. Fi le d No ve m be r 29 , 20 16
.

Ri ch ardIsa ac Fi ne an d M aryelle n Ol m an -Fi ne , pro ses e. St ev enMi tc he ll Ro th , forres po nd en t.

MEMORANDUM OPINION LAUBER, Ju dg e: In thi s co ll ect io n due pro ces s (C DP) cas e, pe ti ti on ers se ekrev ie w pu rs ua ntto sec ti on s 6 32 0( c) an d 6 33 0( d) (1 ) of t he de te rm in at io n b y 1
All st atut ory

refe ren ces are t o the Int ern al Rev enue Co de ineffe ctat a ll 1 rel ev an t t im es , andall Ru le refe ren ces are t o the Tax C ou rt Rul es of P ract ic e an d (co nt in ue d...)- 2 -

[* 2] th e In te rn al Rev enue Serv ic e (IR S o r res po nd en t) t o uph ol d the fil in g o f a
no ti ce o f Fed eral tax li en(NFTL). Res po nd en t h as m ov edforsu m m ary jud gm en t
un de r Ru le 12 1, co nt en di ng th atth ere a re n o d is pu te d i ss ue s o f m at eri al factan d th athi s d et erm in at io n t o s us ta in th e p ro po se d c ol le ct io n a ct io n was pro pe r as a
m at te r of law. We agre e an d a cco rd in gl y wil l g ran t the m ot io n. Bac kg ro un d The fol lo win g fa ct s ar e b as edon th e p art ie s’ pl ead in gs an d m ot io ns , in cl udi ng th e at ta ch edde cl arat io ns an d e xh ib it s. See Ru le 12 1( b) . Peti ti on ers res id ed in Cal ifo rn iawhen th ey

fil edth ei r pe ti ti on . Pet it io ne rs fil edjoi ntFed eral in co m e ta x re turn s fo r ta x years 2 01 0- 20 12 bu t d idno t p ay

th e ta x s ho wn as du e o n tho se returns . The IR S subs eque nt ly
as se ss edth e ta x fo r al l thr ee years. OnJan uary 2, 2 01 4, i n a n e ffo rt t o c ol le ct th es e unp ai d l iabi li ti es , th e IRS sen t p et it io ne rs a Fi na l No ti ce o f Fed eral Tax Li en
an d No ti ce o f You r Ri gh t t o aHeari ng . Peti ti on ers ti m el y subm it te d aFo rm 12 15 3, Re qu es t fo r a Co ll ect io n Du e Pro ces s o r Equ iv al en t Hea rin g. Inth ei r requ es t p et it io ne rs st at edth atth ey co ul d n otpa y

th e b al an ces owedan d s ou gh t a
co ll ect io n a lt ern at iv e in th e fo rm of a n o ffer -in -co m

pr om is e (OIC) . Peti ti on ers di d (...co nt inue d) 1 Pro cedur e. W e ro un d a ll m on et ary am ou nt s t o the ne ares t d ol lar.- 3 -

[* 3] no t i nd ic at e an y

in te nt io n t o c ha ll en ge th e co rrec tn es s o f th e ta x l iabi li ti es th atth ey ha d re po rte d o n the ir 2 01 0- 20 12 returns . Pet it io ne rs ’ cas e was ass ig ne d t o S et tl em en t Offi cer Gee rli ng s (S O1) fro m th e IRS App eal s Off

ic e. On J anua ry

29 , 20 15 , SO1 h el d aface -to -fac e CDP h earin g wi thpe ti ti on ers . At th e h eari ng SO1 i nd ic at edhi s wi ll in gn es s t o re co m m en d th atpe ti ti on ers ’ acco un t b e p la cedincurren tl y no t co ll ect ib le (CNC) s ta tu s. On Mar ch13 , 20 15 , SO1 s en t p et it io ne rs a Fo rm 12 25 7, Su m

m ary Not ic e o f Det erm ina ti on , W ai ve r of

Rig htto Ju di ci al Rev ie w of aCo ll ect io n Du e Pro ces s Det erm ina ti on , W ai ve r of

Su sp en si on of Lev y

Acti on , andW ai ve r of

Peri od s o f Lim it at io n in Sect io n 6 33 0( e)(1 ). SO1 i nf orm edpe ti ti on ers th atth ey sh ou ldex ecu te Fo rm 12 25 7 a ndreturn i t t o h im if the y wis he d t o p ur su e th e CNC o pt io n. One weeklat er, o n M arch 20 , 20 15 , SO1 re ti redfro m th e IRS witho utha vin g re cei ve d a n e xe cu te d F orm 12 25 7 fr om

pe ti ti on ers . The ca se was re as si gn ed to Set tl em en t Offi cer Ho na ke r (SO2 ). He rev ie wedth e adm in is tra ti ve fil e an d fo un d i nc on si st en ci es inth e d oc um en tary ev id en ce p et it io ne rs ha d s ub m it te d. On Apr il 23 , 20 15 , SO2 s en t a l et te r to pe ti ti on ers ask in g the m to ex pl ai n the se in co nsi st en ci es . He all owe d the m un ti l M ay

14 , 20 15 , to subm itad di ti on al do cu m en ts . On M ay 14 , 20 15 , pet it io ne rs subm it te d the Fo rm 12 25 7, wh ic h the y

ha d si gn edon Marc h 2 4, 2 01 5, an d aFo rm 43 3- A, Col le ct io n In fo rm at io n S ta te m en t- 4 -

[* 4] fo r W ag e Earn ers an d S el f-Em pl oyed In di vi du al s, wi th att ach edba nk st at em en ts . Peti ti on ers in si st edth atSO1 h adalr eady ag reedto pl ace t he ir a cco un t in CNC s ta tu s. SO2 ex pl ai ne d tha t SO1 co ul d o nl y ha ve m ad e a rec omm en da ti on to th is effe ct ; tha t the Fo rm 12 25 7 p et it io ne rs subm it te d wo ul d b eco m e eff ect iv e on ly if co un te rs ig ne d b y

anApp eal s Tea m

Man ag er; an d tha t n o s uc h app ro va l ha d yet b eengi ve n. BetweenMay andAug us t 2 01 5 S O2 re vi ewedpe ti ti on ers ’ ba nkst at em en ts . He al so rev ie wedth ird -p arty in fo rm at io n re po rts , whi chpe ti ti on ers ha d fa il edto
subm it , rel at in g t o the ir i nv es tm en t as se ts . On th e b as is of t hi s re vi ew he de te rm in edth atpe ti ti on ers ha d m on th ly inc om e o f atlea st$9 ,99 4 a ndall owabl e
m on th ly exp en se s o f $7 ,45 0. Be cau se pe ti ti on ers co ul d a ffo rdto pa y th e IRS $2 ,54 4 p er m on th , he c on cl ud edth atth ei r acc ou ntsh ou ldno t b e p la cedinCNC st atus . Dur in g the CDP p ro ces s p et it io ne rs adva nc ednu m ero us othe r co nt en ti on s, in cl ud in g a ss ert io ns th at : (1 ) th e IRS ha d fa il edto res po ndto th ei r 20 12 whi st le
bl owe r co m

pl ai ntass ert in g tha t Lo s An ge le s C ount y ha d m ad e il le ga l co nt rib uti on s t o C al ifo rn iaSta te jud ge s’ ret ire m en t ac co un ts ; (2 ) th e IRS ha d i m pr op erl y is su edlev y

no ti ces to th em

for tax y ears 20 05 an d 2 00 6; an d (3 ) pe ti ti on er wi fe ha d a n o ut st an di ng cla im forrel ie f fro m

joi ntan d s ev eral li ab il ity for tax y ear- 5 -

[* 5] 20 06 . SO2 co nc lu de d tha t the se is su es were b ey on d the sco pe of p et it io ne rs ’ CDP h eari ng fortax y ears 20 10 -2 01 2 a ndth athe othe rwis e la ck edau th or ity to ad dr es s the se is su es . Pet it io ne rs di d n otsubm itan y co ll ect io n a lt ern at iv e to SO2 o r rai se an y ch al le ng e to th ei r un de rlyin g t ax li ab il it ie s fo r 20 10 -2 01 2. SO2 rev ie wedth ei r adm in is tra ti ve fil e an d c on firm edth atth e ta x l iabi li ti es inqu es ti on ha d b eenpro pe rly ass es se d a ndth atall othe r requi rem en ts of app li cab le law an d a dm in is tra ti ve pr oc edur e h adbe enm et . SO2 ac co rd in gl y clo se d the cas e an d, o n Au gu st17 , 20 15 , is su edpe ti ti on ers a no ti ce o f de te rm in at io n s us ta in in g the NFTL fil in g. On Se pt em

be r 16 , 20 15 , pet it io ne rs ti m el y pe ti ti on edth is Co urt fo r rev ie w. Inth ei r pe ti ti onth ey

di d n otrai se an y

sp eci fic ch al le ng e to SO2’s d et erm in at io n. Rathe r, th ey

ass ert edth atth e n ot ic e o f de te rm in at io n was “ in va li d” ; tha t i t “ co nta in s fa ls e st at em en ts ”; an d tha t i t “ m an ife st s b adfai th , refu sa l t o fo ll ow IR S Co de
an d IR M an d c riminal co nduc t i n v io la ti on of 1 8 U.S. Co de Sect io n 1 51 9, am on gs t ot he r th in gs .” On J un e 2 2, 2 01 6, re sp on de ntfil eda m ot io n fo r su m m ary jud gm en t, t o whi chpe ti ti on ers res po nd edonAug us t 1 , 20 16 . In the ir r es po ns e p et it io ne rs adva nc ednu m ero us fri vo lo us arg um en ts , in cl ud in g a ss ert io ns th atres po nd en t’s
m ot io n “ is a sh am ”; th atres po nd en t’s co un se l an d S O2 ar e “ vi ol at in g s ta tu te s an d- 6 -

[* 6] m ak in g fa ls e st at em en ts ”; an d tha t the do cu m en ts att ach edto SO2’s de cl arat io n, wh ic h c on st itut e th e adm in is tra ti ve reco rdof t he CDP p ro ceed in g, d o no t co ns ti tu te IRS “bu si ne ss reco rd s.” Th ei r on ly argu m en t ad dr es se d t o the
m eri ts is th atth e IRS sh ou ldbe bo un d b y SO1’s d et erm in at io n tha t the ir a cco un t sh ou ldbe pl acedinCNC s ta tu s. Dis cu ss io n A. Su m

m ary Ju dg m en t The pu rp os e o f su m

m ary jud gm en t i s t o e xp ed it e li ti ga ti on an d a vo idco st ly, ti m e-co ns um in g, an d u nn eces sa ry tri al s. Fl a. Peac h C or

p. v . Comm is si on er, 9 0 T.C. 67 8, 6 81 (19 88 ). The C ou rt m ay gra ntsu m

m ary jud gm en t wh enth ere i s n o ge nu in e d is pu te as t o a ny m at eri al factan d ade ci si on m ay be ren de redas am at te r of law. Ru le 12 1( b) ; Su nd stran d C or p. v . Commis si on er, 9 8 T.C. 5 18 , 52 0 (1 99 2) , aff’d, 1 7 F .3d96 5 (7 th Cir . 19 94 ). In d eci di ng whet he r to grantsu m m ary jud gm en t, we co ns tru e fac tu al m at eri al s an d i nf eren ces dra wn fr om

th em inth e li gh t
m os t fa vo rab le to th e n on m ov in g p arty . Sun ds tra ndCo rp ., 98 T.C. at 5 20 . Howev er, the no nm ov in g p arty m ay no t re stup on m ere a ll eg at io ns or d en ia ls of h is pl ead in gs bu t i ns te adm

us t s etforth sp eci fic fact s s ho win g tha t the re i s a g enui ne di sp ut e fo r tr ia l. Ru le 12 1( d) ; s ee Su nd st ran d C or p., 9 8 T.C. at52 0.- 7 -

[* 7] Pet it io ne rs ha ve no t s ho wn tha t the re i s a g enui ne di sp ut e fo r tr ia l. The y
as se rt t ha t the do cu m en ts att ach edto SO2’s d ecl arat io n, wh ic h c on st itut e th e adm in is tra ti ve reco rdof t he CDP p ro ceed in g, d o n otco ns ti tu te IRS “bu si ne ss reco rd s,” b utth is ass ert io n i s m eri tl es s. Th es e d oc um en ts th em se lv es est ab li sh all fact s tha t ar e m at eri al to res ol ut io n o f th is cas e, an d we a cco rd in gl y co nc lu de th at th is cas e is ap pr op ria te forsu m m ary ad jud ic at io n. B. St an dardof R ev ie w Pet it io ne rs do no t ch al le ng e th e am ou nt s o f th ei r un de rlyin g t ax li ab il it ie s fo r 20 10 -2 01 2. In c as es su chas thi s, we re vi ew th e IRS de te rm in at io n fo r ab us e 2 of di sc ret io n o nl y . Goza v . Comm is si on er, 1 14 T.C. 17 6, 1 81 -1 82 (20 00 ). Abu se of di sc ret io n e xi st s wh ena de te rm in at io n i s arbi trary , cap ric io us , or wi th ou t s ou nd ba si s i n fa ctor l aw. See M ur ph y v. Co m m is si on er, 1 25 T.C. 30 1, 3 20 (20 05 ), aff’d, 4 69 F.3d27 (1s t Ci r. 20 06 ).

Pet it io ne rs fil edreturns for 20 10 -2 01 2 re po rti ng th e ta x l iabi li ti es at i ss ue , 2 an d the y di d n otch al le ng e th es e und erl y in g t ax li ab il it ie s dur in g the CDP h eari ng orinth ei r pe ti ti on to th is Co urt. The y are thu s p recl ud edfro m

ch al le ng in g tho se li ab il it ie s n ow. See Ru le 33 1( b) (4 ) (“ Any iss ue no t ra is edinth e as si gn m en ts of erro r sh al l b e d eem edto be co nc ed ed .”); Tho m ps on v. Co m

m is si on er, 1 40 T.C. 17 3, 1 78 (20 13 ) (“ A tax pa y er i s p recl ud edfro m di sp ut in g the un de rlyin g l iabi li ty if i t was no t p ro pe rly rais edinth e CDP h eari ng .”); sec . 30 1.6 33 0- 1( f)(2 ), Q&AF3 , Pro ced . & Adm in . Reg s.- 8 -

[* 8] C. Ana lysis Inde ci di ng whethe r SO2 ab us edhi s d is cret io n i n s us ta in in g the NFTL fil in g, we co ns id er wh ethe r he : (1 ) pr op erl y ve rif ie d tha t the requi rem en ts of a ny ap pl ic ab le law o r adm in is tra ti ve pro cedur e h av e b eenm et ; (2 ) co ns id eredany rel ev an t i ss ue s p et it io ne rs rai se d; an d (3 ) de te rm in edwhethe r “ an y pro po se d
co ll ect io n a ct io n b al an ces th e n eedforth e eff ic ie ntco ll ect io n o f ta xe s wi thth e le gi ti m at e co nc ernof * * * [pe ti ti on ers ] th atan y co ll ect io n a ct io n b e n o m or e in tru si ve th anne ces sa ry .” See s ec. 6 33 0( c)(3 ). Our re vi ew of th e rec or d e st ab
li sh es th atSO2 ana lyzed the tra ns cri pt s o f pe ti ti on ers ’ acco un t an d d et erm in edth at th e ta x l iabi li ti es were p ro pe rly ass es se d. Th e o nl y is su e is whet he r pe ti ti on ers rai se d any leg it im at e que st io n c on cern in g the ir e nt it le m en t t o aco ll ect io n a lt erna ti ve . 1. Ent it le m en t t o C NC St atus To b e en ti tl edto ha ve hi s ac co un t p la cedinCNC s tatu s, the tax pa y er m us t de m on st rat e th at , onth e b as is of h is ass et s, equi ty, in co m e, an d e xp en se s, h e h as no ap pa ren t ab il ity

to m ak e p aym en ts on th e o ut st an di ng tax li ab il ity . See Fo le y v. Co m m is si on er, T.C. Mem o. 2 00 7- 24 2, 9 4 T.C.M . (CCH) 2 10 , 21 2; Int ern al Rev enue Man ua l (I RM) pt . 5.1 6.1 .1 (Au g. 2 5, 2 01 4) . A taxpa y er’s ab il ity to m ak e pa ym en ts is de te rm in edby calcu la ti ng th e ex ces s o f in co m e o ve r ne ces sary li vi ng- 9 -

[* 9] ex pe ns es . IRM p t. 5 .16 .1.2 (Ja n. 1 , 20 16 ). An SO d oe s n otab us e h is di sc ret io n wh enhe em

pl oys lo cal an d n at io na l s tand ard s t o c al cu la te th e ta xp ay er’s ex pe ns es an d abi li ty to p ay . See Fri edm anv. Co m m is si on er, T.C. Mem o. 2 01 3- 44 , at * 10 (no ti ng th atbu rd enis on tax pa y er t o ju st ify dep artur e fro m lo cal st an da rd s) . In re vi ewin g fo r ab us e o f di sc ret io n, the Co urt d oe s n ot
subs ti tu te it s ju dg m en t fo r th atof t he SO or r ecal cu la te a ta xp ay er’s ab il ity to pa y . See O’Don ne ll v. Co m

m is si on er, T.C. Mem o. 2 01 3- 24 7, at*1 5. InFeb ru ary 20 15 SO1 i nd ic at edhi s wi ll in gn es s t o re co m m en d tha t p et it io ners ’ acco un t b e p la cedin to CNC s ta tu s. Ho wev er, p et it io ne rs as o f th enha d n ot pr ov id edhi m

with aco m

pl et edFo rm

43 3- A or wi th fin an ci al do cu m en ts sh owi ng th atth ei r ne ces sa ry

li vi ng ex pe ns es ex ceed edth ei r in co m e. Nor h adpe ti ti on ers returne d t o S O1, as of t he da te he ret ire d fr om th e IRS , an e xe cu te d F orm 12 25 7 fo rm al ly requ es ti ng CNC rel ie f. Pet it io ne rs di d s ub mitanex ecu te d F orm 12 25 7 t o S O2 o n M ay

14 , 20 15 , aft er the cas e was reas si gn edto hi m . Howev er, a Fo rm 12 25 7 d oe s n otbe co m e effe ct iv e unt il itha s b eenap pr ov edan d c ou nt ers ig ne d b y anIRS Ap pe al s Tea m Man ag er. Fo rm

12 25 7 e xp li ci tl y

st at es : “ My ag reem en t t o the Su m m ary Not ic e of Dete rm in at io n s ho wn b el ow, t o wai ve jud ic ia l re vi ew an d t o wai ve th e su sp en si onof l ev y

act io n u nd er s ect io n 6 33 0( e)(1 ), is effe ct iv e upo n the writ te n app ro va l- 10 -

[* 10 ] by a pers on inth e Offi ce o f App eal s wi th th e au th or ity to bi ndth e IRS .” The auth or ity

to bi ndth e IRS to a CNC d et erm in at io n l ie s wi th th e App eal s Tea m Man ag er. See IRM p t. 8 .22 .9.5 .3 (No v. 1 3, 2 01 3)
. Afte r car efu l re vi ew of

pe ti ti on ers ’ Fo rm

43 3- A andba nkreco rd s, SO2 di sa gr eedwith S O1’s re co m m en da ti on th atth ei r acc ou ntbe pl acedinCNC s ta tu s. He acc or di ng ly didno t s ub m itth e Fo rm 12 25 7 fo r ap pr ov al by an App eal s Tea m Man ag er. Bec au se th e Fo rm 12 25 7 tha t p et it io ne rs subm itte d o n M ay 14 , 20 15 , was ne ve r co un te rs ig ne d b y anApp eal s Tea m

Man ag er, i t n ev er b ecame effect iv e
an d i t d idno t b in d the IRS. Pet it io ne rs have rai se d n o m at eri al di sp ut e o f fac t as to th e co rrec tn es s o f th is co nc lu si on . SO2 pe rfo rm edanin de pe nd en t ev al ua ti on to de te rm in e whe th er p et it io ne rs qu al ifi edforCNC s ta tu s. He s ou gh t an d o bt ai ne d fr om pe ti ti on ers ad di ti on al fin an ci al in fo rm at io n tha t was no t av ai labl e to SO1. Aft er re vi ewin g thi s i nf orm ati on , SO2 co nc lu de d tha t p et it io ne rs co ul d m ak e m on th ly paym en ts of $ 2,5 44 an d th atCNC s ta tu s was th eref or e in ap pr op ria te . In re ach in g thi s co nc lu si on , SO2 de te rm in edpe ti ti on ers ’ m on th ly inc om e an d u se d p rev ai li ng na ti on al an d l oc al st an da rd s t o c om

pu te th ei r al lo wab le m on th ly liv in g e xp en se s. Pet it io ne rs do no t ch al le ng e SO2 ’s det erm in at io n i n e ithe r res pe ct , andwe fin d tha t h e d idno t ab us e- 11 -

[* 11 ] hi s d is cret io n i n c on cl ud in g tha t the y were n oten ti tl edto ha ve th ei r acc ou nt pl acedinCNC s ta tu s. 2. Oth er Is su es At the ir C DP he ari ng pe ti ti on ers were en ti tl edto m ak e o ffer s o f co ll ect io n al te rn at iv es , su chas a n OIC or a n i ns ta ll m en t ag reem en t. See sec . 63 30 (c)( 2) an d (3 ). On the ir F orm

12 15 3 p et it io ne rs ex pr es se d i nt eres t i n a n OIC , bu t the y ne gl ect edto pu t an y

off er o n the tab le forth e ta x years a t i ss ue an d fa il edto subm it 3 th e fi nanc ia l d oc um en ta ti onth atwou ldha ve be enrequi redforco ns id erat io n o f an of fer. Inany

ev en t, as SO2 o bs erv ed , pet it io ne rs wou ldno t h av e qua li fie d fo r an OIC ev enif the y

ha d s ub m itte d a n o fferbe cau se th ey ha d fa il edto m ak e es ti m at ed ta x p aym en ts for20 13 -2 01 5 a ndth us were n otcurren t o n the ir F ed eral tax ob li ga ti on s. See Fri edm an , at * 10 ; IR M p t. 5 .8.7 .2.2 .2(1 ) (Ma r. 7, 2 01 4)
. Pet it io ne rs rai se d n um ero us othe r is su es inth ei r co rres po nd en ce wi thSO2, in cl ud in g awhi st le bl owe r co m pl ai nt , a cla im

forrel ie f fro m

joi ntan d s ev eral li ab il ity for 20 06 , andlev y

no ti ces for

20 05 -2 00 6. We will no t ad dr es s the se is su es be cau se th ey

are i rrel ev an t t o o urrev ie w of the IRS co ll ect io n a ct io n fo r 20 10 -2 01 2. Fi nd in g n o abu se of d is cret io n i n S O2’s d eci si on to up ho ldth e NFTL

Pet it io ne rs ha d p rev io us ly sub mit te d a n OIC fortax y ears 20 05 an d 2 00 6, 3 whi chth e IRS reject edon Octo be r 17 , 20 12
.- 12 -

[* 12 ] fil in g fo r th os e y ears , we wil l g ran t s umm ary jud gm en t fo r res po nd en t an d
su st ai n the pro po se d c ol le ct io n a ct io n. To re fle ctth e fo reg oi ng , An ap pr op ria te ord er an d d eci si on wil l b e en te red
.