T.C. Memo. 2009-135

UNITED STATES TAX COURT

ROBERT JUDGE, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 28615-07L. Filed June 10, 2009.

Howard M. Koff, for petitioner.

John R. Mikalchus, for respondent.

MEMORANDUM OPINION

GOEKE, Judge: Petitioner seeks review of respondent’s

determination to proceed with a proposed levy to collect income

tax liabilities for tax years 2001, 2002, 2003, and 2004. The

issue for decision is whether respondent abused his discretion in

sustaining the levy. For the reasons stated herein, we hold that

respondent abused his discretion.
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1All Rule references are to the Tax Court Rules of Practice

and Procedure, and unless otherwise indicated all section

references are to the Internal Revenue Code. 

Background

The parties submitted this case fully stipulated under Rule

122.1 The stipulation of facts and the attached exhibits are

incorporated herein by this reference. Petitioner resided in New

York at the time of filing his petition.

Petitioner filed individual income tax returns that reported

tax due for the years at issue. The unpaid tax resulted from

insufficient estimated income tax payments. Petitioner did not

submit any payments with his returns. In 2004 petitioner entered

into and subsequently defaulted on an installment agreement with

respect to 2001. In 2005 petitioner submitted an offer-incompromise with respect to the years at issue. The Internal

Revenue Service (IRS) rejected the offer-in-compromise on the

basis that petitioner’s reasonable collection potential exceeded

the offer. 

In April 2007 respondent issued a notice of intent to levy

for the years at issue. At that time petitioner had unpaid

assessments in excess of $200,000 plus accrued interest for the

years at issue. Petitioner timely requested a collection due

process hearing (CDP hearing) and indicated that he would pursue

an installment agreement or an offer-in-compromise. The Appeals

Office requested that petitioner provide a completed Form 433-A,
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Collection Information Statement for Wage Earners and SelfEmployed Individuals. Petitioner submitted a Form 433-A to the

Appeals Office on July 2, 2007. Upon receipt of the Form 433-A

the Appeals Office assigned the case to a settlement officer. In

October 2007 the Appeals Office discovered that the settlement

officer had not received the case file because the file was

apparently delivered to an incorrect address. Once he received

the case file, the settlement officer could not find the Form

433-A. In an October 11, 2007, letter, the settlement officer

requested that petitioner submit a Form 433-A, a signed 2006

return, and proof of 2007 estimated tax payments within 14 days,

i.e., by October 25, 2007. The settlement officer did not inform

petitioner that he could not find the Form 433-A petitioner had

previously submitted. Petitioner had filed his 2006 return

electronically before the date of this letter. 

On November 8, 2007, the settlement officer held a telephone

conference with petitioner’s representative. During the hearing

petitioner’s representative stated that petitioner sent the

requested documents 2 days before, but the settlement officer had

not received the documents. Petitioner’s representative stated

that he believed petitioner’s income was overstated on the Form

433-A and requested a brief extension of time to prepare a

revised Form 433-A. Petitioner’s representative also stated that

petitioner qualified for an offer-in-compromise. The settlement
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officer denied the request for an extension. Shortly after the

hearing, the settlement officer received the Form 433-A and the

2006 return. During the CDP hearing petitioner did not challenge

the underlying tax liabilities for 2000 through 2004. On

November 19, 2007, respondent issued a notice of determination

sustaining the levy for the years at issue. 

Discussion

Petitioner argues that the settlement officer abused his

discretion because he refused to grant a brief extension of time

for petitioner to submit a revised Form 433-A to correct his

income information. Because petitioner does not dispute the

underlying tax liabilities, we review respondent’s determination

sustaining the collection action for abuse of discretion. See

Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v.

Commissioner, 114 T.C. 176, 182 (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). 

At a CDP 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). Following the hearing, the

Appeals officer must determine whether the collection action
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2In the attachment to the notice of determination, the

settlement officer justified his denial of a brief extension as

follows: “The information was to be submitted by October 25th

and still not received, further extension was denied.”

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). 

It is not an abuse of discretion for an Appeals officer to

sustain a collection action on the basis of a taxpayer’s failure

to submit requested financial information. See Cavazos v.

Commissioner, T.C. Memo. 2008-257; Chandler v. Commissioner, T.C.

Memo. 2005-99. Respondent argues that the settlement officer did

not abuse his discretion because petitioner failed to provide the

financial information necessary to consider collection

alternatives. The record clearly establishes otherwise. The

settlement officer denied petitioner’s request for a brief

extension at the hearing on the ground that petitioner failed to

provide a Form 433-A before the October 25 deadline, which is

clearly incorrect because petitioner provided a Form 433-A to the

Appeals Office in July 2007, 4 months before the hearing.2 The

Appeals Office misplaced petitioner’s Form 433-A, but the
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settlement officer never informed petitioner of this fact. The

settlement officer’s basis for denying petitioner’s request for a

brief extension, i.e., petitioner’s failure to provide a Form

433-A before the hearing, is contrary to the facts in the record. 

Accordingly, we hold that he abused his discretion in denying a

brief extension and sustaining the levy. 

In denying a brief extension, the settlement officer also

failed to consider that petitioner resubmitted the Form 433-A at

the settlement officer’s request on November 6, 2007. The

settlement officer had not received petitioner’s second

submission of the Form 433-A before the CDP hearing on November

8, 2007. The settlement officer knew petitioner had sent it, and

he received the Form 433-A shortly after the hearing. The record

does not establish the date the settlement officer received the

Form 433-A or whether he received the form before the issuance of

the notice of determination on November 19, 2007. However, the

settlement officer denied petitioner’s request for a brief

extension on the basis that he did not receive the Form 433-A by

the October 25 deadline. This short delay in petitioner’s

submission of the second Form 433-A does not justify respondent’s

sustaining the levy without granting a brief extension for

petitioner to revise his income information, especially in view

of the fact that the settlement officer failed to acknowledge 
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that the Appeals Office lost petitioner’s first Form 433-A

submitted 4 months before the CDP hearing. 

Respondent contends that the settlement officer could not

have considered the Form 433-A because it was incorrect. The

record supports petitioner’s claim that his income information

was overstated on the second Form 433-A that petitioner

submitted. The second Form 433-A listed petitioner’s monthly net

business income as nearly double his net profit from his business

reported on his 2006 Schedule C, Profit or Loss From Business. 

In view of this clear inconsistency and the fact that the Appeals

Office lost petitioner’s first Form 433-A, we believe that it was

unreasonable for the settlement officer to refuse to grant

petitioner a brief extension. 

Irrespective of whether or not the Form 433-A was correct,

the record establishes that the settlement officer did not make

any determination based on the financial information petitioner

provided as section 6330 requires. Section 6330 requires the

settlement officer to consider information the taxpayer

presented. The settlement officer did not make any determination

based upon the information petitioner provided regarding

petitioner’s ability to pay the tax liabilities or whether he

would qualify for collection alternatives such as an offer-incompromise. See Crisan v. Commissioner, T.C. Memo. 2003-318;

Schulman v. Commissioner, T.C. Memo. 2002-129. The settlement
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officer could not have done so when he decided at the CDP hearing

to deny the extension because the Appeals Office misplaced the

Form 433-A petitioner sent in July 2007 and the settlement

officer had not yet received the second Form 433-A petitioner

sent 2 days before the hearing.

Respondent also argues that petitioner failed to provide an

offer-in-compromise before the CDP hearing. The settlement

officer did not request that petitioner submit an offer-incompromise before the CDP hearing date. Nor did the settlement

officer base his decision to deny a brief extension on the fact

that petitioner did not provide an offer-in-compromise before the

CDP hearing. Respondent argues that the settlement officer

reasonably determined that collection alternatives would be

ineffective on the basis of the defaulted installment agreement

and previously rejected offer-in-compromise. However, the record

does not indicate that the settlement officer considered these

past collection alternatives when making his determination.

We hold that the settlement officer’s refusal to grant a

brief extension for petitioner to correct the income information

on his Form 433-A was an abuse of discretion and denied

petitioner his right to a fair hearing. Petitioner’s past

cooperation with the Appeals Office persuades us that he would

have timely submitted the revised financial information if

granted an extension. Petitioner had not previously requested an
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extension and had cooperated with the Appeals Office. Cf. Roman

v. Commissioner, T.C. Memo. 2004-20 (taxpayer received repeated

extensions and still failed to provide the requested

information); Rodriguez v. Commissioner, T.C. Memo. 2003-153

(same). Accordingly, we shall remand this matter for the Appeals

Office to consider an offer-in-compromise or other collection

alternative.

To reflect the foregoing,

An appropriate order will

be issued.