T.C. Mem o. 2 01 4- 15 2

UNITED STAT ES TAX COURT

MIC AH J. BERGDALE, Peti ti on er v . COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 15 17 4- 11 L. Fi le d J ul y 30 , 20 14
.

Mark D. All is on , Jo hn A. Calabr o, an d Ti m ot hy J. Sul li va n, fo r pe ti ti on er. Ja ne J. Kim, for

res po nd en t.

MEMORANDUM FINDINGS OF FACT AND OPINION
W ELLS, Ju dg e: Pet it io ne r se ek s re vi ew, pu rs ua ntto sec ti on 63 20 , of
res po nd en t’s d et erm in at io n t o p ro ceedwith c ol le ct io n o f pe ti ti on er’s unp ai d
em pl oym en t t ax li ab il it ie s fo r pe rio ds en di ng Sep te m be r 30 an d Dec em

be r 31 , 20 04 , andMarc h 3 1, 2 00 5, an d unp ai d F UTA tax li ab il it ie s fo r pe ti ti on er’s 2 00 4- 2 -

[* 2] ta x year. W e h av e b eenask edto de ci de whet he r th e App eal s Off ic e ab us ed 1 it s d is cret io n i n s us ta in in g re sp on de nt ’s col le ct io n a ct io ns . FINDINGS OF FACT So m e o f th e fac ts an d c ert ai n e xh ib it s h av e b eenst ip ul at ed . The p art ie s’ st ip ul at edfact s an d t he att ach edex hi bi ts are i nc or po rat edinth is op in io n b y refe ren ce an d a re fo un d a cco rd in gl y . At th e ti m e o f fi li ng th e p et it io n, p et it io ne r
res id edinNew York
. Pet it io ne r was th e fo un de r an d s ol e m em be r of Dig it al Cri te rio n, LLC (DC LLC), whi chwas o rg an iz edinIll in oi s o n No ve m be r 26 , 20 03 . DC LLC sel fas se ss edbu t d idno t p ay

tru stfun d p orti on s o f it s FI CA ta xe s fo r th e p eri od s
en di ng Sep te m

be r 30 an d Dec em

be r 31 , 20 04 , andMarc h 3 1, 2 00 5, an d F UTA tax fo r it s 2 00 4 t ax y ear ( em

pl oym en t t ax li ab il it ie s) . Duri ng 20 05 an d 2 00 6
res po nd en t fi le d a ga in stDC LLC no ti ces of l ie n fo r th e em pl oym en t t ax li ab il it ie s in Co okCo un ty andinth e St at e o f Il li no is . Res po nd en t s en t t o DC LLC a Let te r 31 72 , Not ic e o f Fed eral Tax Li enFil in g a ndYou r Ri gh t t o aHeari ng Und er IR C

Unl es s o th erwi se in di cat ed , sec ti on an d In te rn al Rev enue Co de refe ren ces 1 are t o t he Int ern al Rev enue Co de of 1 98 6, as am en de d a ndas i n e ffec t atall rel ev an t t im es , andRu le refe ren ces are t o t he Tax C ou rt Rul es of P ract ic e an d Pro cedur e.- 3 -

[* 3] 63 20 , foreach of t he li enno ti ces fil edag ai ns t DC LLC. On Ap ril 30 , 20 06 , pe ti ti on er d is so lv edDC LLC. On Dec em

be r 1, 2 01 0, re sp on de ntfil edag ai ns t p et it io ne r a n ot ic e o f Fed eral tax li en(NFTL) with t he Reg is te rs Offic e o f Bro nx Co un ty, Bro nx , New York, fo r th e em

pl oym en t t ax li ab il it ie s. Th e NFTL st at edth atpe ti ti on er’s unp ai d
em pl oym en t t ax li ab il it ie s t ot al ed$3 1,0 28 .02 . Res po nd en t s en t p et it io ne r a Let te r 31 72 to in fo rm

hi m of t he fil in g o f th e NFTL andof h is rig htto a co ll ect io n due pr oc es s (C DP) h eari ng . On Dece m be r 20 , 20 10 , res po nd en t re cei ve d fr om pe ti ti on er a Fo 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 Heari ng , reque st in g re sp on de ntto withd raw the li en . Peti ti on er’s reque stfora CDP h eari ng was a ss ig ne d t o S et tl em en t Offi cer Ho wardSm ith i n t he App eal s Offi ce. On M arch 24 , 20 11 , Mr. Sm ith s en t p et it io ne r a l et te r to sch edul e a CDP he ari ng forApri l 6 , 20 11 , andto in fo rm hi m th athe wou ldne edto subm ita Fo rm 44 3- A, Col le ct io n In fo rm at io n S ta te m en t fo r W ag e Earn ers an d S el f-Em pl oyed In di vi du al s, o r a Fo rm

43 3- B, Co ll ect io n In fo rm at io n S ta te m en t fo r Bu si ne ss es , if he want edMr. Sm ith t o c on si de r co ll ect io n a lt ern at iv es . On March 28 , 20 11 , pe ti ti on er fa xe d alet te r to Mr. Sm ith c on te nd in g tha t (1 ) th e li enwas i nv al id , (2) th e ta x was in va li d, (3 ) res po nd en t s ho ul d n otha ve reject eda pr ev io us ly sub m it te d- 4 -

[* 4] of fer- in -co m

pr om is e, an d (4 ) th e ta x was be co min g u nc ol le ct ib le . On Apr il 6, 2 01 1, M r. Sm ith a ndpe ti ti on er p art ic ip at edina co nf eren ce ca ll du rin g wh ic h Mr. Sm ith e xp la in edth e NFTL aga in stpe ti ti on er fo r th e em pl oym en t t ax li ab il it ie s at tri bu te d t o DC LLC. Aft er the CDP co nf eren ce ca ll pe ti ti on er s ub mit te d aFo rm 43 3- A anda Fo rm

43 3- B to Mr. Sm ith. Al th ou ghpe ti ti on er h adpre vi ou sl y
subm it te d o ffer s- in -co m

pr om is e to th e In te rn al Rev enue Serv ic e in 20 05 an d 20 10 , he d idno t s ub m ita Fo rm 65 6, Offe r in Co m

pr om is e, to Mr. Sm ith dur in g th e CDP h eari ng . On M ay 19 , 20 11 , pet it io ne r an d M r. Sm ith p art ic ip at edina face -to -fac e CDP h eari ng to di sc us s h is off er-i n- co m pr om is e an d t o re vi ew hi s fi na nc ia l do cu m en ts . Duri ng th e h eari ng Mr. Sm ith i nd ic at edto pe ti ti on er tha t an off er-i nco m pr om is e o f $2 5,0 00 wou ldbe acce pt ab le . Peti ti on er i nf orm edMr. Sm ith t ha t he wou ldatt em

ptto fin d s ou rces fro m

whi chto fun d a n o ffer -in -co m pr om is e o f $2 5,0 00
. On M ay 21 , 20 11 , pet it io ne r fax eda le tt er t o M r. Sm ith i nf ormin g h im

th at pe ti ti on er wo ul d n otbe ab le to fun d a n o ffer -in -co m pr om is e o f $2 5,0 00 an d in st eadpro po si ng a ne w off er-i n- co m pr om is e o f $1 0,0 00 . The l et te r was no t si gn edun de r pe na lty

of p erjury

an d d idno t i nc lu de a Fo rm 65 6, a wai ve r to all ow- 5 -

[* 5] Mr. Sm ith t o c on ta ctth irdpa rti es , or an i ns ta ll m en t p aym en t o f th e
co m pr om is e am ou nt . On J un e 1 3, 2 01 1, M r. Sm ith i ss ue d t o DC LLC a No ti ce o f Det erm in at io n Co nc ern in g C ol le ct io n Act io n( s) Und er Se ct io n 6 32 0 a nd/o r 63 30 (no ti ce o f de te rm in at io n) . In the no ti ce o f de te rm in at io n, M r. Sm ith (1 ) reject edpe ti ti on er’s of fer- in -co m

pr om is e o f $1 0,0 00 be cau se , in te r al ia , itwas n otpro pe rly subm it te d
an d (2 ) su st ai ne d t he NFTL. OPINION I. Ju ris di ct io n Altho ug h n ei th er p arty

ha s que st io ne d wh ethe r we h av e juri sd ic ti onov er the in st an t ca se , th is Co urt m ay rai se th e is su e atany

ti m e su a sp on te . Urban o v . Co m m is si on er, 1 22 T.C. 38 4, 3 89 (20 04 ). “ The fai lu re t o que st io n o ur juri sd ic ti on is no t a wai ve r of

th e ri gh t t o d o s o, fo r if

we lac k juris di ct io n o ve r anis su e, we do
no t h av e th e p owe r to de ci de it .” Id . In g en eral , ou r juri sd ic ti on to rev ie w a
co ll ect io n a ct io n i s d ep en de nton th e is su an ce o f a v al idno ti ce o f de te rm in at io n
an d ati m el y

pe ti ti on forrev ie w. Secs . 63 20 (c), 6 33 0( d) (1 ); Off il er v . Co m m is si on er, 1 14 T.C. 49 2, 4 98 (20 00 ). The reas on th atwe ad dr es s o urjuri sd ic ti onis th atth e n ot ic e o f de te rm in at io n was is su edto DC LLC andno t t o p et it io ne r in di vi du al ly even- 6 -

[* 6] th ou gh (1) res po nd en t fi le d t he NFTL agai ns t p et it io ne r an d s en t the Lett er 31 72 to pe ti ti on er an d (2 ) pe ti ti on er re qu es te d the CDP h eari ng by fili ng Fo rm 12 15 3. Pe ti ti on er the n fi le d ape ti ti on to th is co urt. Un de r si m il ar ci rcu m st an ces in Med . Pract ic e So lu ti on s LLC v . Comm is si on er, 1 32 T.C. 12 5, 1 27 (20 09 ), aff’d witho utpubl is he d o pi ni on sub n om . Brit to n v . Shu lm an , 20 10 W L 35 65 79 0 (1 st Ci r. 20 10 ), th e ta xp ay er ar gu edth atth is Co urt l ack edjuri sd ic ti on to su st ai n t he Co m m is si on er’s act io ns to co ll ectunpa idem pl oym en t t ax li ab il it ie s b ecau se th e
no ti ce o f de te rm in at io n was is su edto he r si ng le -m em be r li m it edli ab il ity

co m pa ny
an d n otto he r as anin di vi du al . W e co nc lu de d t ha t, fo r pu rp os es of e m pl oym en t ta x l iabi li ti es forwage s p ai d b efo re J anua ry 1, 2 00 9, the ap pl ic ab le reg ul at io ns pr ov id edth at“ th e * * * [li m it edli ab il ity co m pa ny] an d i ts so le m em

be r are a si ng le tax pa y er o r pe rs on to who m no ti ce i s g iv en .” Id . As in Med . Pract ic e So lu ti on s LLC, we co nc lu de th atforpu rp os es of the in st an t p ro ceed in g, DC LLC
an d p et it io ne r are a si ng le tax pa y er o r pe rs on to who m no ti ce i s g iv en . See i d. Add it io na ll y , we con cl ud e th atth e m is labe le d n ot ic e o f de te rm in at io n was a ha rm le ss erro r be cau se (1) pe ti ti on er was no ti fie d o f th e fi li ng of the NFTL and th e sp eci fic em

pl oym en t t ax li ab il it ie s co ve redby the NFTL, (2) p et it io ne r reque st edan d was gra nt edtwo CDP h eari ng s, an d (3 ) pe ti ti on er t im el y pe ti ti on ed th is Co urt fo r rev ie w of the no ti ce o f de te rm in at io n. Se e Me d. Pr act ic e So lu ti on s- 7 -

[* 7] LLC v. Co m

m is si on er, T.C. Mem o. 2 01 0- 98 , 20 10 W L 17 80 87 4, at*7 -* 8 n.1 5. Acco rd in gl y , we con cl ud e th atwe ha ve juri sd ic ti on pu rs ua ntto sec ti on 63 30 (d )(1 ) to de te rm in e whe th er the App eal s Off ic e ab us edit s d is cret io n i n
su st ai ni ng th e NFTL. See Me d. Pr act ic e So lu ti on s LLC v . Comm is si on er, 1 32 T.C. at 1 27
. II. Rev ie w of R es po nd en t’s No ti ce o f Det erm in at io n Purs uantto sec ti on 63 21 , th e Fed eral Gov ern m en t o bt ai ns a li enag ai ns t “ al l pr op erty an d ri gh ts to pro pe rty, whethe r rea l o r pe rs on al ” o f any pe rs on li ab le for Fed eral tax es up on de m an d fo r paym en t an d fa il ur e to pa y . See Ian no ne v. Co m m is si on er, 1 22 T.C. 28 7, 2 93 (20 04 ). Howev er, s ect io n 6 32 0( a)(1 ) requi res th e Co m m is si on er t o g iv e a t axpa y er wri tt enno ti ce o f th e fi li ng of ano ti ce o f Fed eral tax li enup on th attax pa y er’s p ro pe rty. T he no ti ce o f fi li ng m us t i nf orm th e ta xp ay er o f th e ri gh t t o re qu es t a h eari ng inth e App eal s Off ic e. Sec. 63 20 (a)( 3) (B), (b )(1 ). Sect io n 6 33 0( c), (d ),(e), an d (g ) ge ne ral ly gov ern s the co nduc t o f a h eari ng reque st edun de r se ct io n 6 32 0. Se c. 63 20 (c). At t he he ari ng , th e ta xp ay er m ay rai se any rel ev an t i ss ue s, i nc lu di ng ap pr op ria te sp ou sa l d efen se s, ch al le ng es to th e ap pr op ria te ne ss of c ol le ct io n a ct io ns , andco ll ect io n a lt ern at iv es . Sec. 63 30 (c)( 2) (A). The t ax pay er m ay ch al le ng e th e und erl y in g t ax li ab il ity at t he- 8 -

[* 8] he ari ng on ly if th e ta xp ay er d idno t re cei ve a st atut ory no ti ce o f de fic ie nc y

or ot he rwis e h av e anop po rtu ni ty to d is pu te th e ta x l iabi li ty. Sec. 6 33 0( c)(2 )(B) . In ad di ti on to co ns id eri ng is su es rai se d b y th e ta xp ay er u nd er s ect io n 6 33 0( c)(2 ), th e App eal s Off

ic e m us t v eri fy th atth e requi rem en ts of a ny app li cab le law o r adm in is tra ti ve pro cedur e h av e b eenm et . Sec. 6 33 0( c)(1 ), (3 ). Whe re the va li di ty of th e und erl y in g t ax li ab il ity is pro pe rly in i ss ue , th e Co urt wi ll rev ie w th e m atte r de no vo . Seg o v . Comm is si on er, 1 14 T.C. 60 4, 6 10 (2 00 0) ; Go za v . Comm is si on er, 1 14 T.C. 17 6, 1 81 -1 82 (20 00 ). Howev er, wh ere th e v al id ity

of t he un de rlyin g t ax li ab il ity is no t p ro pe rly in i ss ue , th e Co urt wi ll
rev ie w th e Co m

m is si on er’s d et erm in at io n fo r ab us e o f di sc ret io n. Se go v. Co m m is si on er, 1 14 T.C. at 6 10 ; Go za v . Comm is si on er, 1 14 T.C. at 1 81 -1 82 . At tri al pe ti ti on er co nc ed edan y ch al le ng e to th e v al id ity

of t he un de rlyin g t ax li ab il it ie s. Acco rd in gl y , we rev ie w th e App eal s Off ic e’s de te rm in at io n fo r ab us e 2 of di sc ret io n.

Mo reo ve r, ina li enor l ev y act io n u nd er s ec. 6 32 0 o r 63 30 be fo re thi s 2 Co urt, the pe ti ti on m

us t co nt ai n “ [c]lear an d c on ci se ass ig nm en ts of e achan d ev ery erro r whi chth e p et it io ne r al le ge s t o h av e b eenco m m it te d i n t he no ti ce o f de te rm in at io n.” Rul e 3 31 (b )(4 ). Any is su e n otrai se d i n t he ass ig nm en ts of e rro r sh al l b e d eem edto be co nc ed ed . Id. Inhi s p et it io n, p et it io ne r di d n otch al le ng e th e v al id ity

of t he un de rlyin g t ax li ab il it ie s an d, the refo re, we p recl ud e h im fro m do in g s o n ow.- 9 -

[* 9] Inrev ie win g t he App eal s Off ic e’s de te rm in at io n fo r ab us e o f di sc ret io n, we wil l re ject t he de te rm in at io n o f th e App eal s Off ic e o nl y if the de te rm in at io n was arb itrary, capri ci ou s, o r witho utso un d b as is infactor l aw. See Ru le 14 2( a); 3 Mu rp hy v. Co m

m is si on er, 1 25 T.C. 30 1, 3 08 (20 05 ), aff’d, 4 69 F.3d27 (1s t Ci r. 20 06 ). W e d o n otsubs ti tu te our jud gm en t fo r th atof t he App eal s Off ic e, an d we do no t d eci de in de pe nd en tl y whet he r we b el ie ve th atth e li enno ti ce s ho ul d b e withd rawn . See Murp hy v. Co m m is si on er, 1 25 T.C. at 3 20 . Ins te ad , we con si de r whe th er, i n t he co ur se of m ak in g i ts de te rm in at io n, the App eal s Off ic e (1 ) ve rif

ie d th atth e requi rem en ts of app li cab le law an d a dm in is tra ti ve pro cedur e h av e b een
m et , (2) co ns id eredany

rel ev an t i ss ue rai se d b y

th e ta xp ay er tha t re la te s t o the
unpa idtax or t he pro po se d l ie n a ct io n, an d (3 ) de te rm in edwhet he 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 t he pe rs on 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 . Sec. 6 33 0( c)(1 )-(3 ). A. Reject io n o f Pet it io ne r’s Offer- in -Co m pr om is e Pet it io ne r co nt en ds th atth e App eal s Off ic e ab us edit s d is cret io n wh enit de ni edhi s p ro po se d o ffer -in -co m pr om is e. Res po nd en t co nt en ds th atth e App eal s
Pet it io ne r ha s n otrai se d s ec. 7 49 1, an d, the refo re, we wil l n otco ns id er the 3 is su e. Co ns eque nt ly, pe ti ti on er b ears th e b ur de n o f pr oo f. See Ru le 14 2( a).- 10 -

[* 10 ] Offi ce d idno t ab us e it s d is cret io n b ecau se pe ti ti on er fa il edto subm ita va li d of fer- in -co m

pr om is e o n aFo rm

65 6 a s re qu ire d b y

sec ti on 60 1.2 03 (b ), Sta te m en t of Pro cedur al Ru le s. We agre e wit h re sp on de nt . The set tl em en t o f di sp ut edtax li ab il it ie s i s g ov ern edby sect io ns 71 21 an d 71 22 , whi chau th or iz e th e Co m m is si on er t o s et tl e an y

tax di sp ut es an d
co m pr om is e an y

civ il or c riminal cas e ari si ng un de r th e in te rn al rev enue laws
. Hol landv. Co m

mis si on er, T.C. Mem o. 2 01 3- 20 5, at*1 0. Th e reg ul at io ns an d pr oc edur es pu rs ua ntto sec ti on 71 22 pro vi de th e ex cl us iv e m etho d o f effe ct in g a bi nd in g n on

jud ic ia l co m

pr om is e. Laur in s v . Comm is si on er, 8 89 F.2d91 0, 9 12 (9 th Cir . 19 89 ), aff’g No rm anv. Co m m is si on er, T.C. Mem o. 1 98 7- 26 5; Shum ak er v. Co m m is si on er, 6 48 F.2d11 98 , 11 99 -1 20 0 (9 th Cir . 19 81 ) (ci ti ng Bo tany W or st edMi ll s v . Uni te d S ta te s, 2 78 U.S. 28 2, 2 88 -2 89 (19 29 )), aff ’g inpart, re v’g in pa rt a ndrem an di ng pe r cu ria m on ot he r gr ou nd s T.C. Me m o. 1 97 9- 71 . Sect io n 30 1.7 12 2- 1( d) , Pro ced . & Adm in . Reg s., p ro vi de s: An o fferto co m

pr om is e a t ax li ab il ity

pu rs ua ntto sec ti on 71 22 m us t be subm it te d a cco rd in g t o t he pro cedur es , andinth e fo rm an d m an ne r, pr es cri be d b y

th e Sec ret ary. An o fferto co m pr om is e a t ax li ab il ity m us t b e m ad e in writ in g, m us t b e si gn edby the tax pa y er un de r pe na lty

of p erjury , andm

us t co nt ai n a ll of t he in fo rm at io n pr es cri be d o r reque st edby the Secr et ary. * * *- 11 -

[* 11 ] See Nas h v . Comm is si on er, T.C. Mem o. 2 00 8- 25 0, 2 00 8 WL 47 91 55 5, at*2 ; Har baug h v . Comm is si on er, T.C. Mem o. 2 00 3- 31 6, 2 00 3 WL 22 67 42 16 , at*3
. An OIC m

us t b e subm itte d o n asp eci al form pre sc rib edby the Secr et ary. Ri ed eri chv. Co m

m is si on er, 9 85 F.2d57 4, 1 99 3 WL 28 23 0, at*1 (9t h C ir. 1 99 3) , aff’g wi th ou t p ub li sh edop in io n T.C. Me m o. 1 99 1- 16 4; Laur in s v . Comm is si on er, 88 9 F .2dat 9 12 . Sect io n 6 01 .20 3( b) , Sta te m en t o f Pro cedur al Ru le s, s pe ci fie s Fo rm 65 6 a s the form

requi redforanoff

er-i n- co m pr om is e: Offers inco m

pr om is e are requi redto be subm it te d o n F orm 65 6, pr op erl y ex ecu te d, an d a cco m

pa ni edby a fin an ci al st at em en t o n F orm 43 3 (i f ba se d o n i nabi li ty to p ay ). Fo rm 65 6 i s u se d i n a ll cas es reg ard le ss of wh ethe r th e am ou ntof t he off er i s t en de redinful l atth e ti m e th e o fferis fil edor the am ou ntof t he off er i s t o b e p ai d b y de ferr edpa ym en t o r pa ym en ts . * * * See a ls o Go dwi n v . Comm is si on er, T.C. Mem o. 2 00 3- 28 9, 2 00 3 WL 22 33 30 18 , at *1 1 (“ Tax pa y ers who wis h t o p ro po se anoff er-i n- co m pr om is e m

us t s ub mita Fo rm 65 6, Offe r in Co m

pr om is e[.]”), aff’d, 1 32 Fed . App x. 7 85 (11 thCir . 20 05 ); Ri ng go ldv. Co m

m is si on er, T.C. Mem o. 2 00 3- 19 9, 2 00 3 WL 21 54 04 34 , at * 1- *2
. Pet it io ne r adm it s tha t h e d idno t s ub m ithi s o ffer -in -co m pr om is e o n a pr op erl y co m pl et edFo rm

65 6. We prev io us ly hav e h el d t ha t the re i s n o abu se of di sc ret io n wh enth e se tt le m en t o ffi cer fa il s t o c on si de r a t ax pa y er’s reque stforan- 12 -

[* 12 ] off er-i n- co m pr om is e whe n aFo rm

65 6 was no t fi le d. Se e Ken dr ic ks v. Co m m is si on er, 1 24 T.C. 69 , 79 (20 05 ); Ho ll an d v . Comm is si on er, at*1 1; Gent il e v. Co m m is si on er, T.C. Mem o. 2 01 3- 17 5, at*9 ; Warin g v . Comm is si on er, T.C. Mem o. 2 01 1- 27 0, 2 01 1 WL 55 55 69 4, at*2 ; Lu dz ackv. Co m m is si on er, T.C. Mem o. 2 01 1- 11 1, 2 01 1 WL 21 32 96 6, at*2 . Accor di ng ly, we co nc lu de th atth e App eal s Off

ic e d idno t ab us e it s d is cret io n i n d eny in g p et it io ne r’s in fo rm al offerin -co m pr om is e. As we n ot edab ov e, pe ti ti on er d oe s n otco nt en d t ha t a F orm 65 6 was fil ed ; in st eadhe co nt en ds th atres po nd en t s ho ul d n otbe pe rm it te d t o a ll eg e th at pe ti ti on er fa il edto fil e a Fo rm 65 6. Sp eci fic al ly, pe ti ti on er co nt en ds th at
res po nd en t’s p os it io n tha t p et it io ne r fai le d t o fi le a Fo rm 65 6 was a ne w leg al th eo ry th atres po nd en t i m

pr op erl y rai se d fo r th e fi rs t t im e attri al an d t ha t al lo win g
res po nd en t t o p ro ceedwith t he th eo ry wou ldbe un du ly prejud ic ia l t o h im . W e di sa gr ee. Itis well est ab li sh edth ata pa rty m ay rel y up on a th eo ry

if the op po si ng pa rty has be enpro vi de d wi thfai r warn in g o f th e in te nt io n t o b as e anarg um en t up on th atth eo ry . See Pag el Inc . v. Co m m is si on er, 9 1 T.C. 2 00 , 21 1- 21 2 (1 98 8) , aff’d, 9 05 F.2d11 90 (8t h C ir. 1 99 0) . “ Fai r warn in g” m ean s tha t the Co m m is si on er’s fai lu re t o g iv e n ot ic e, in th e n ot ic e o f de te rm in at io n o r in th e pl ead in gs , of h is in te nt io n t o re ly on apa rti cu lar th eo ry di d n otpre

jud ic e th e- 13 -

[* 13 ] tax pa y er’s ab il ity

to pre pa re a ca se . See i d. Th e Co m m is si on er m ay di sc ha rg e h is du ty of in fo rm in g the tax pa y er b y ex pr es sl y

no ti fy in g t he tax pa y er o f th e in te nd edth eo rie s i n t he no ti ce o f de te rm in at io n o r in th e Co m m is si on er’s
an swe r. See Fo x C he vr ol et , Inc . v. Co m m is si on er, 7 6 T.C. 7 08 , 73 5 (1 98 1) (ci ti ng Co m m is si on er v . Trans po rt M fg . & Equ ip . Co., 4 78 F.2d73 1, 7 36 (8t h C ir. 1 97 3) , aff’g Ri ss v. Co m

m is si on er, 5 6 T.C. 3 88 (19 71 ) an d 5 7 T.C. 4 69 (19 71 )). Inth e
no ti ce o f de te rm in at io n, re sp on de ntin fo rm edpe ti ti on er tha t p et it io ne r ha d n ot
subm it te d a n o ffer -in -co m pr om is e. Res po nd en t re it erat edth is co nt en ti on inhi s pr etria l m em or an du m , st at in g t ha t “ [p ]etit io ne r fai le d t o s ub m ita fo rm al [of fer- in
co m pr om is e] ”. See W il so n v . Comm is si on er, T.C. Mem o. 2 00 2- 61 (fi nd in g n o pr ejud ic e o r di sa dv an ta ge to tax pa y ers wher e th e Co m m is si on er d is cu ss es ne w le ga l the or ie s i n h is pre tri al m em or an du m), aff’d, 7 1 F ed . App x. 6 23 (9t h C ir. 20 03 ); S ch aefe r v. C ommis si on er, T.C. Mem o. 1 99 2- 20 5 (s am e). Add it io na ll y , th e is su e b efo re u s i s wh ethe r th e App eal s Off ic e ab us edit s d is cret io n;
res po nd en t’s the ory

is no t a s ep arat e le ga l i ss ue , bu t “ m erel y supp orts or
am pl ifi es ” h is arg um en t tha t the App eal s Off ic e d idno t ab us e it s d is cret io n. Se e Mo or e v . Comm is si on er, T.C. Mem o. 2 01 3- 24 9, at*1 5. Acco rd in gl y , res po nd en t is no t b arre d fr om

ass ert in g t he po si ti onth atpe ti ti on er fa il edto fil e a Fo rm 65 6.- 14 -

[* 14 ] Pet it io ne r al so co nt en ds th ata Fo rm 65 6 i s n otrequi redif an i nf orm al
se tt le m en t h as be enreac he d, re lying on ou r pr ev io us an al y si s i n J oh ns on v. Co m m is si on er, 1 36 T.C. 47 5 (2 01 1) , aff’d, 5 02 Fed . App x. 1 (D.C. Cir . 20 13 ). Pet it io ne r al le ge s tha t h e reque st edanin fo rm al off er-i n- co m pr om is e whe n h e
subm it te d awrit te n l et te r, al on g wi tha Fo rm 43 3- A anda Fo rm

43 3- B an d o th er
supp orti ng fin an ci al do cu m en ta ti on , andth atMr. Sm ith h adora ll y ag reedto an of fer- in -co m

pr om is e o f $6 ,00 0. Pe ti ti on er’s rel ia nc e o n J oh ns onis mis pl aced . In Jo hn so n, the tax pa y er s ub m it te d dur in g asi ng le CDP h eari ng th ree f orm al off ers in -co m pr om is e o n F orm s 6 56 , bef or e subm it ti ng anad

jus tm en t t o t he fin al Fo rm 65 6 o n alet te r fro m

hi s at to rn ey . Id. at47 8- 48 0. Th is Co urt co nc lu de d t ha t the in fo rm al let te r ad

jus ti ng th e ta xp ay er’s o ffer -in -co m pr om is e co ul d b e ch arac te riz edas a n a m en dm en t t o apre vi ou sl y fil edFo rm

65 6 andth atth ere was

“ no pro vi si on inth e p ert in en t re gu la ti on s o r Rev enue Pro cedur e th atpre cl ud es an
am en dm en t t o a n * * * [of fer- in -co m

pr om is e] or requi res th atsu chanam en dm en t ta ke an y pa rti cu la r fo rm .” Id . at 4 88 -4 89 . Howev er, p et it io ne r ne ve r subm it te d a Fo rm 65 6 dur in g t he th en -o ng oi ng CDP h eari ng an d, the refo re, p et it io ne r’s 4

Altho ug h p et it io ne r pr ev io us ly sub mitte d OIC s dur in g 2 00 5 a nd20 10 , 4 ne ithe r OIC was subm it te d dur in g o r in co nn ect io n t o the CDP h eari ng inth e in st an t ca se , whi chco m

m en ceddu rin g 2 01 1. Th eref or e, th e 2 00 5 a nd20 10 OICs do no t qua li fy

as p rev io us OICs du rin g t he CDP h eari ng inqu es ti on .- 15 -

[* 15 ] in fo rm al let te r co ul d n otha ve qu al ifi edas a n a m en dm en t t o apre vi ou sl y fil edFo rm

65 6. Mo reo ve r, pe ti ti on er’s d is cu ss io ns with M r. Sm ith a ndall eg ed 5
or al ag reem en t t o a n o ffer -in -co m pr om is e h av e n o b eari ng on ou r an al y si s. Adm in is tra ti ve ne go ti at io ns reg ard in g c om pr om is e o f a t ax li ab il ity

are n ot bi nd in g a ga in steit he r pa rty andno t en fo rceabl e wit ho utco m pl ia nc e with s ect io n 71 22 . Roh n v . Comm is si on er, T.C. Mem o. 1 99 4- 24 4, 1 99 4 WL 23 23 60 , at * 5. Acco rd in gl y , we do no t co nc lu de th atpe ti ti on er m ad e a v al idoff er-i n- co m pr om is e
orth athe reac he d a n i nf

orm al set tl em en t wi th Mr. Sm ith. Se e Harb au gh v.
Pet it io ne r al so rel ie s o n S ul li va n v . Comm is si on er, T.C. Mem o. 2 00 9- 4, 5 20 09 W L 20 97 9, i n s up po rt o f hi s co nt en ti on . Howev er, Su ll iv anis a Mem or an du m

Opi ni on of t hi s C ou rt, andMem or an du m Opi ni on s ar e n otbi nd in g pr eced en t. Hu ffm anv. Co m m is si on er, 1 26 T.C. 32 2, 3 50 (20 06 ) (ci ti ng Dun away v. Co m m is si on er, 1 24 T.C. 80 , 87 (20 05 )), aff ’d, 51 8 F .3d35 7 (6 th Cir . 20 08 ); s ee al so Nico v. Co m

mis si on er, 6 7 T.C. 6 47 , 65 4 (1 97 7) , aff’d i n p art , rev ’d inpa rt o n ot he r gr ou nd s, 5 65 F.2d12 34 (2dCir . 19 77 ). Mo reo ve r, th e fac ts of S ul li va n a re subs ta nt ia ll y

si m il ar t o t ho se of J oh ns on v. Co m m is si on er, 1 36 T.C. 47 5 (2 01 1) , aff’d, 5 02 Fed . App x. 1 (D.C. Cir . 20 13 ). In S ul li va n, the tax pa y ers subm it te d th ree f orm al off ers -in -co m

pr om is e o n F orm s 6 56 be fo re s ub m it ti ng anad jus tm en t to th e fi na l Fo rm

65 6 a t the reque stof t he Co m m is si on er’s ex am in in g o ffi cer. Su ll iv anv. Co m

mis si on er, 2 00 9 WL 20 97 9, at*1 0. We con cl ud edth atth e ad jus tm en t was “ no t a f

orm al OIC fo r pu rp os es of s ect io n 7 12 2” , bu t we ne ve rth el es s an al yzedth e ad jus tm en t as a co ll ect io n a lt ern at iv e p ur su an t t o s ec. 63 30 (c)( 2) (A)(i ii ). Id. Pe ti ti on er n ev er s ub mit te d a n o ffi ci al Fo rm 65 6 dur in g t he th en -o ng oi ng CDP h eari ng , andth e in fo rm al off er-i n- co m pr om is e le tt er d idno t in cl ud e a s ig na tu re u nd er p en al ty of pe rjury, a thi rd -p arty waiv er, o r anin st al lm en t pa ym en t. Acco rd in gl y , we con cl ud e th atpe ti ti on er’s i nf orm al let te r was no t a co ll ect io n a lt ern at iv e th atwou ldgi ve ris e to a di sp os it io n s im il ar t o t ha t i n Su ll iv an .- 16 -

[* 16 ] Co m

m is si on er, 2 00 3 WL 22 67 42 16 , at * 3- *4 ; Ri ng go ldv. Co m m is si on er, 20 03 W L 21 54 04 34 , at * 1- *2 (“ [P]eti ti on ers di d n otsubm itanoff er-i nco m pr om is e o n t he ap pr op ria te form (i.e ., Form 65 6) [.]”). Pet it io ne r’s fin al co nt en ti on is th athe lac ke d kno wled ge of t he requi rem en t to fil e a Fo rm

65 6 b ecau se Mr. Sm ith n ev er i nf orm edhi m

of t ha t re qu ire m en t. Pet it io ne r al le ge s tha t M r. Sm ith i ns te adadvi se d h im no t t o fi le a Fo rm

65 6 be cau se , if the off

er am ountwas l es s tha n h is reas on ab le co ll ect io n p ot en ti al , res po nd en t wo ul d re

ject t he off

er-i n- co m pr om is e an d s ub m is si on wou ldbe m oo t. Res po nd en t co nt en ds th atpe ti ti on er was in fo rm edof t he requi rem en t t o fi le a Fo rm 65 6. Mr . Sm ith c red ib ly test ifi edth athe reg ul arl y in fo rm edtax pa y ers of t he requi rem en t t o fi le a Fo rm 65 6 a s p artof h is ex pl an at io n o f th e o ffer -in
co m pr om is e p ro cedur es an d t ha t h e ex pl ai ne d t ho se pro cedur es to pe ti ti on er du rin g t he CDP co nf

eren ce ca ll on Apri l 6 , 20 11 . Mr. Sm ith a ls o e xp la in edth at he en co ur ag edtax pa y ers to fil e o ffer s- in -co m pr om is e b utth ateachtax pa y er h adto
m ak e h is or h er o wn d eci si on . Peti ti on er’s co nt en ti onth athe lac ke d kno wled ge of th e requi rem en t t o fi le a Fo rm 65 6 i s fu rth er und erm in edby the factth athe
subm it te d v al idoff

ers -in -co m

pr om is e dur in g 2 00 5 a nd20 10 an d p res um ab ly kne w th e subm is si onpro ces s dur in g t ho se y ears . As we st at edab ov e, pe ti ti on er b ears th e b ur de n o f pr oo f. See Ru le 14 2( a). Pet it io ne r ha s n otcarr ie d h is bu rd enof- 17 -

[* 17 ] pro vi ng th atMr. Sm ith d idno t i nf orm hi m of t he requi rem en t t o fi le a Fo rm 65 6, m uc h l es s tha t M r. Sm ith t ol d h im no t t o fi le th e Fo rm

65 6. Upo n the ba si s o f th e fo reg oi ng , we con cl ud e th atth e App eal s Off ic e d id
no t ab us e it s d is cret io n i n d en y in g p et it io ne r’s in fo rm al off er-i n- co m pr om is e. B. Refu sa l To W ithd raw NFTL Inth e n ot ic e o f de te rm in at io n, re sp on de ntals o s us ta in edth e NFTL, whi ch pe ti ti on er co nt en ds sh ou ldbe withd rawn . Howev er, p ur su an t t o s ect io n 6 32 3( j),
anNFTL m ay

be withd rawnwitho utful l p aym en t an d wi th ou t p reju di ce u nd er the fo ll owi ng co nd it io ns : (1 ) th e fi li ng of t he NFTL was p rem atur e o r ot he rwis e n ot in acco rd an ce wi th admin is tra ti ve pro cedur es of t he Int ern al Rev enue Serv ic e; (2) th e ta xp ay er h aden te redin to anin st al lm en t ag reem en t u nd er s ect io n 6 15 9 t o
sa ti sf y th e ta x l iabi li ty for wh ic h t he NFTL was impos edby m ean s o f in st al lm en t pa ym en ts , un le ss su chag reem en t p ro vi de s o th erwi se ; (3 ) withd rawal of t he NFTL wil l fa ci li ta te co ll ect io n o f th e ta x l iabi li ty; (4) with the co ns en t o f th e ta xp ay er o r th e Nat io na l Tax pa y er Advo cat e, th e wit hd rawal of s uc h n ot ic e wou ldbe inth e be stin te res t o f th e ta xp ay er (d et erm in edby the Nati on al Taxp ay er Advo cat e o r th e ta xp ay er) andth e Uni te d S tate s. See sec . 30 1.6 32 3( j)-1, Pr oc ed . & Adm in . Reg s. If the Co m

m is si on er d et erm in es co nd it io ns forwithd rawal are p res en t, the- 18 -

[* 18 ] Co m

m is si on er m ay , bu t i s n otrequi redto , aut ho riz e th e wit hdrawal . Sec. 30 1.6 32 3(

j)-1( c), Pro ced . & Adm in . Reg s. Inhi s p et it io n, p et it io ne r co nt en ds th atth e NFTL has da m ag edhi s p ers on al cred itrep ort, re su lt edinth e cl os ur e o f hi s b an k a cco un ts an d c red itcardacco un ts , res ul te d i n alo ss of h is bu si ne ss ’ rel at io ns hi ps with c li en ts , andcau se d fo recl os ur e pr oc eed in gs on hi s co op ap art m en t. Pet it io ne r al so co nt en ds th atth e NFTL hi nd eredhi s ab il ity

to ge ne rat e fi na nc in g t o s at is fy hi s emplo ym en t t ax li ab il it ie s. Howev er, dur in g t he CDP h eari ng an d t hr ou gh ou t the in st an t ca se , pet it io ne r
ne ithe r av erre d c red ib le ev id en ce b ey on d h is ba re al le ga ti on s n oradva nc edan y de ta il edarg um en t p ur su an t t o s ect io n 6 32 3( j) insupp ort o f hi s co nt en ti on . See Kli kav. Co m

m is si on er, T.C. Mem o. 2 01 2- 22 5, at*1 0- *1 1. Acco rd in gl y , we
co nc lu de th atres po nd en t d idno t ab us e h is di sc ret io n wh enhe up he ldth e NFTL. III. Co nc lu si on Pet it io ne r ha s n otadvanc edan y arg um en t o r in tro du cedan y ev id en ce tha t
wou ldcau se us to co nc lu de th atth e d et erm in at io ns to su st ai n the NFTL andreject hi s o ffer -in -co m

pr om is e were arb itrary, capri ci ou s, o r witho utso un d b as is infact
. Pet it io ne r di d n otsubm ita va li d F orm 65 6 o r ot he r co ll ect io n a lt ern at iv e an d d id
no t o ffercred ib le ev id en ce i n s up po rt o f li enwithdrawal pu rs uantto sec ti on 63 23 (j). The Ap pe al s Off ic e d et erm in edth atth e requi rem en ts of app li cab le law- 19 -

[* 19 ] an d a dm in is tra ti ve pro cedur e were m etan d c on cl ud edth atth e p ro po se d
co ll ect io n a ct io n app ro pr iate ly bal an cedth e n eedforeffi ci en t co ll ect io n o f ta xe s with p et it io ne r’s co nc ern s re ga rd in g t he in tru si ve ne ss of t he act io n. Co ns eque nt ly, we ho ldth atth e App eal s Off ic e d idno t ab us e it s d is cret io n wh enitis su eda no ti ce of de te rm in at io n re

jecti ng pe ti ti on er’s o ffer -in -co m pr om is e an d uph ol di ng th e pr op os edco ll ect io n a ct io n. Inreac hi ng th es e h ol di ng s, we h av e co ns id eredall th e p art ie s’ arg um en ts , an d, t o t he ex te ntno t ad dr es se d h erei n, we co nc lu de th atth ey are m oo t, i rrel ev an t,
orwitho utm eri t. To re fle ctth e fo reg oi ng , Deci si on wil l b e en te redfor
res po nd en t.