T.C. Memo. 2004-7

UNITED STATES TAX COURT

DEAVRAH M. CHANDLER, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 11710-02L. Filed January 6, 2004.

Deavrah M. Chandler, pro se.

James A. Kutten, for respondent.

MEMORANDUM OPINION

COHEN, Judge: This proceeding was commenced in response to

a Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330. The issue for decision is whether

there was an abuse of discretion in rejecting petitioner’s offer

to compromise for $100 petitioner’s unpaid Federal income tax

liabilities for 1997 and 1998 exceeding $13,600. Unless
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otherwise indicated, all section references are to the Internal

Revenue Code in effect for the years in issue, and all Rule

references are to the Tax Court Rules of Practice and Procedure.

Background

Petitioner resided in Texas at the time the petition was

filed. Petitioner filed her 1997 Federal individual income tax

return on October 21, 1999. On December 13, 1999, the tax

liability reflected on that return was assessed in the amount of

$16,502. Petitioner’s tax liability was partially offset by

Federal income tax withholding, and late filing and failure to

pay additions to tax and interest were assessed. Subsequently,

overpayments from 1999 and 2000 were applied to petitioner’s 1997

tax liability.

Petitioner filed her 1998 Federal income tax return on

February 9, 2001. On March 5, 2001, the tax liability reflected

on that return was assessed in the amount of $21,244. 

Petitioner’s tax liability was partially offset by Federal income

tax withholding, and late filing and failure to pay additions to

tax and interest were assessed. As of September 9, 2001, the

total amount owing on petitioner’s Federal income tax liabilities

for 1997 and 1998 was $14,183.24. 

 On September 9, 2001, respondent sent to petitioner, in care

of Frank L. Zerjav (Zerjav), her authorized representative, a

Final Notice - Notice of Intent to Levy and Notice of Your Right
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to a Hearing. On behalf of petitioner, Zerjav submitted a

Request for Collection Due Process Hearing, Form 12153. On

November 7, 2001, petitioner signed a Form 656, Offer in

Compromise, proposing to compromise her 1997 and 1998 Federal

income tax liabilities for $100. The offer in compromise, with

supporting information, was submitted to the Brookhaven Service

Center in Holtsville, New York.

On February 8, 2002, an Appeals officer sent to petitioner a

letter advising her that the hearing that she had requested was

tentatively scheduled for February 26, 2002, but that another

time for a hearing could be arranged. The letter stated:

If you want us to consider any collection alternatives,

such as an installment agreement or offer-incompromise, please complete the enclosed financial

statements. These may include Form 433-A, Collection

Information Statement for Individuals and/or

Form 433-B, Collection Information Statement for

Businesses. Provide complete verification of your

income and expenses. We must be able to review this

information to determine that collection alternatives

are possible.

Zerjav responded to the Appeals officer’s February 8, 2002,

letter. Zerjav stated that an offer in compromise had been

submitted to the Brookhaven Service Center, and he requested that

the hearing be rescheduled “for after the valuation currently

being held with the Brookhaven Service Center.” On February 14,

2002, the Appeals officer explained in a telephone conference

with Zerjav that, because this was a “CDP” (section 6330
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collection due process) case, the offer in compromise would be

reviewed by the Office of Appeals rather than by the service

center. 

On March 21, 2002, the Appeals officer sent to Zerjav a

letter stating that the offer in compromise had been reviewed but

that additional information was needed. Additional information

was submitted to the Appeals officer by Zerjav on April 23, 2002. 

The Appeals officer reviewed the financial information submitted

by Zerjav on behalf of petitioner. She also independently

researched petitioner’s financial data and assets and concluded

that relevant information had not been disclosed by petitioner or

by Zerjav. Based on the information that she had obtained, the

Appeals officer determined that petitioner could pay her entire

1997 and 1998 income tax liabilities. The Appeals officer

considered petitioner’s reported income for 1999, 2000, and 2001. 

The information relied on by the Appeals officer included

information about petitioner’s income for 2001, including a

withdrawal of more than $100,000 from an individual retirement

account and $40,000 in gross proceeds from the sale of real

property, and petitioner’s spouse’s income tax returns.

On June 11, 2002, a Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330 was sent to

petitioner. In addition to setting forth a determination that

the requirements of applicable law and administrative procedures
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had been met, explanatory materials attached to the notice of

determination stated the following:

The Offer in Compromise

An offer to compromise the 1997 and 1998 income tax

liabilities as to Doubt as to Collectibility was

received on 12-11-2001 by the IRS. The taxpayer

offered $100.00 on a liability totaling $13,688.60 as

of May 6, 2002. A Form 433-A was received. Complete

verification of the financial statement was not

received by Appeals. The financial statement was not

accurate. Initial review of the information that was

received indicated a net realizable equity in assets of

more than $44,719. The household income for 2001 was

determined to be an average of $12,438.00. Her

allowable expenses were determined to be $4,754. The

taxpayer has sufficient assets to full pay and also has

the ability to make monthly payments in order to full

pay. Because she can full pay, she does not qualify

for an offer in compromise. Therefore, an offer in

compromise is not currently a viable alternative.

The petition in this case asserted:

3. The collection action as determined by the

Commissioner is for income taxes for the calendar years

1997 through 2001 none of which is in dispute. The

Petitioner seeks relief under the Offer in Compromise

OIC program. 

Only the calendar years 1997 and 1998 are involved in this

proceeding, however. Among the errors alleged by petitioner in

the petition were quarrels with the Appeals officer’s computation

of petitioner’s ability to pay and the absence of “independent

review”. Specifically, the petition alleges:

h) The entire offer consideration process was

conducted solely by the Appeals Division which further

violates the intent of Congress under the IRS

Restructuring and Reform Act of 1998 (the Act) to the

extent Petitioner has been denied the opportunity of an
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independent review of the rejected offer as required

under the Act.

* * * * * *

5. Petitioner has at all times acted in good

faith in connection with her tax affairs. Therefore

denial of an offer that would give her a “fresh start”

is misplaced. Moreover, no alternatives such as income

collateral agreements were made available to either the

Petitioner or her representative prior to issuance of

this Determination.

After the case was set for trial, respondent filed a Motion for

Summary Judgment. Although petitioner was ordered to serve on

respondent and file with the Court a written response to the

Motion for Summary Judgment, she failed to do so. However, when

the case was called for hearing on the Motion for Summary

Judgment, petitioner was permitted to testify and to present the

testimony of her representative as a means of explaining her

position. See Rule 121(b), (d).

Discussion

The primary dispute in this case arises from an apparent

misunderstanding by petitioner and her representative of the

effect of sections 6320 and 6330. Sections 6320 (pertaining to

liens) and 6330 (pertaining to levies) were enacted as part of

the Internal Revenue Service Restructuring and Reform Act of

1998, Pub. L. 105-206, sec. 3401, 112 Stat. 746, to provide new

procedural protections for taxpayers in collection matters. 

Section 6330 generally provides that the Commissioner may not
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proceed with collection of taxes by way of a levy on a taxpayer’s

property until the taxpayer has been given notice of, and the

opportunity for, an administrative review of the matter. The

statute specifically provides that “such hearing shall be held by

the Internal Revenue Service Office of Appeals.” Sec.

6330(b)(1). A taxpayer is entitled to only one hearing with

respect to the taxable period(s) involved in the proposed lien or

levy. Sec. 6330(b)(2). If the taxpayer is dissatisfied with the

determination made after the hearing, judicial review of the

determination, such as that sought in this case, is available. 

See generally Goza v. Commissioner, 114 T.C. 176, 179-181 (2000).

Section 6330(c) specifies the matters considered at the

hearing. In this case, there is no dispute that the requirements

of applicable laws and procedures regarding the assessment have

been met, sec. 6330(c)(1), and there is no dispute with respect

to the underlying tax liability, sec. 6330(c)(2)(B). Section

6330(c)(2)(A) provides:

(A) In general.--The person may raise at the

hearing any relevant issue relating to the unpaid tax

or the proposed levy, including–-

(i) appropriate spousal defenses;

(ii) challenges to the appropriateness of

collection actions; and

(iii) 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.
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The only collection alternative offered by petitioner during the

process before Appeals was an offer in compromise for $100. No

other issues were raised. We review respondent’s determination

for abuse of discretion. Goza v. Commissioner, supra at 182.

Petitioner asserted during the hearing on the Motion for

Summary Judgment that she was faced with more than $300,000 in

unpaid taxes, that she had rejected a suggestion to pursue

bankruptcy as a means of avoiding her debts, and that she faced

hardship in paying her tax liabilities. She also argued that the

information submitted with the offer in compromise was out of

date and that she was prepared to update the information to

establish her inability to pay. 

Petitioner apparently is seeking relief from taxes for other

years that are not involved in the proposed levy and the

determination that is the basis of this proceeding. This case

involves only unpaid liabilities for 1997 and 1998, totaling

approximately $13,600, and not petitioner’s total outstanding tax

obligations. In any event, petitioner’s claims of current

financial hardship cannot be considered in this proceeding

because they were not raised before the Appeals officer. See

Magana v. Commissioner, 118 T.C. 488, 493-494 (2002).

Through the testimony of her representative, petitioner also

attempted to raise a dispute with the facts set forth in

respondent’s Motion for Summary Judgment concerning whether
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petitioner would have been amenable to collection alternatives

other than the $100 offer in compromise that she had submitted. 

The statute, however, contemplates that the taxpayer raise at the

hearing relevant issues, including offers of collection

alternatives. Sec. 6330(c)(2)(A)(iii). The statute requires the

Appeals officer only to consider the “offers of collection

alternatives” raised and information presented by the taxpayer. 

See, e.g., Crisan v. Commissioner, T.C. Memo. 2003-318; Willis v.

Commissioner, T.C. Memo. 2003-302; O’Brien v. Commissioner,

T.C. Memo. 2003-290; Schulman v. Commissioner, T.C. Memo. 2002-

129. It does not require continuous negotiation. In reviewing

the determination made by the Appeals Office, we are limited to

reviewing the information that petitioner presented. Having

reviewed the financial data in the record, we conclude that it

was not an abuse of discretion to reject the $100 offer in

compromise.

Petitioner also complains that there was no review within

the Appeals Office and that there was an abuse of discretion by

the Appeals officer in not referring the offer in compromise

evaluation to IRS collection personnel, with whom petitioner’s

representative had experience. In some cases, assistance from

revenue officers may be sought. See, e.g., Van Vlaenderen v.

Commissioner, T.C. Memo. 2003-346. Petitioner does not have a

right under section 6330, however, to more than one hearing or to
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a hearing before anyone other than the Office of Appeals. Sec.

6330(b).

We conclude, therefore, that the matters disputed by

petitioner are not material, that the material facts are not in

dispute, and that respondent is entitled to judgment as a matter

of law.

An appropriate order and

decision will be entered.