T.C. M em o . 2 0 1 7 -1 5 6

UNITED STATES TAX COURT
ANN E. DYKSTRA, Pet i ti o ner v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 8 9 8 4-1 5L. Fi l edAu gu s t 8 , 2 0 1 7
. An n E. Dy

k s tra, p ro s e. Les l ey A. Hal e, fo r res p o n d en t .

M EM ORANDUM FINDINGS OF FACT AND OPINION PUGH, Ju d g e: Pet i t io n er, wh i l e res i di n g i n Cal i fo rn i a, t i m el y p et i t i o n edth e Co u rtfo r rev i ew o f res p o n den t ’ s two No t i ces o f Det erm i n at io n Co n cern i n g Co l lect i on Act i o n (s ) Un d er Sect i o n 6 32 0 an d/ o r 6 3 3 0 , 1 s u s t ai n i n g th e No t i ce o f

1 Un l es s o th erwi s e i n d i cat edal l s ect i o n referen ces are t h e In t ern al Rev en u e (co n ti n u ed ...)- 2
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[* 2 ] In t en tt o Lev y an dth e fi l i ng o f a No t i ce o f Fed eral Tax Li en wi th res p ectt o p et i t i o n er’ s o u ts t an d i n g Fed eral i n co m e t ax l iab i l i t i es fo r 2 0 0 5 , 2 0 0 8 , an d2 0 1 1
. Th e i s s u e fo r d eci s io n i s wh eth er res p o n d en tm ay p ro ceed wi th t h e co l l ect i o n act i on s i d en t i fi edi n t h e n o t i ces o f d et erm in at io n . FINDINGS OF FACT So m e o f t h e fact s h av e b een s ti p u lat ed , an dth e s t i p u l at edfact s are i n co rp o rat edi n o u r fi n d in g s b y th i s referen ce. I. Pet i t i o n er’ s 2 0 0 5 Tax Year Pet i t i o ner, a real es t at e p ro fes si o n al , t i m el y req u es t edan dwas g ran t edan
ex t en s i o n o f t i m e t o fi l e h er 2 0 0 5 Fed eral i n co m e t ax retu rnu n t i l Oct o ber 1 5 , 2 0 0 6 . Wh en s h e fi ledth e ex ten s i o n req u es t , s h e m ad e a p aym en t o f $ 30 ,0 0 0 t o ward h er 2 0 05 t ax l i ab i li ty . Sh e d i dn o t fi l e h er 2 0 0 5 t ax return b y th e Oct o b er 1 5 , 2 0 0 6 , du e d at e. As a co n s equ en ce res p o n d en tm o v edp et i t i o n er’ s $ 30 ,0 0 0 p aym en t t o an “ Ex ces s Co l l ect i o n s ” acco u n t . OnJ u l y 1 , 2 00 8 , res p o n den tal s o p rep areda s ub s t i tu te fo r retu rn fo r p et i t i o n er’ s 2 0 0 5 t ax y ear. OnAp ri l 2 9 , 2 0 1 3, p et i t i o n er fi l edh er 2 00 5 t ax retu rn . OnDecem b er 2 3 , 2 0 1 3 , res p o n d en tas s es s ed

1 (...co n t in u ed ) Co d e (Co d e) o f 1 9 86 , as am en d edan d i n effect atal l rel ev an tt i m es . Ru l e referen ces are t o th e Tax Co u rtRu l es o f Pract i ce an dPro cedu re.- 3
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[* 3 ] i n co m e t ax o f $ 42 ,5 3 7 , an ad d i t i o n t o t ax fo r fai l u re t o fi l e t i m el y u n der
s ect i on 6 6 5 1 (a)(1 ) o f $ 1 0,5 8 7, an di n teres to f $ 2 3 ,2 43
. II. Pet i t i on er’ s 2 0 0 7 Tax Year Pet i t i o ner al s o t im el y

req u es t edan dwas g ran t edan ex ten s i o n o f t i m e t o fi l e h er 2 0 07 Fed eral i n co m e t ax retu rn u n t i l Oct o b er 1 5 , 2 0 0 8 . Wh en s h e fi l edth e
ex t en s i o n req u es t , s h e m ad e a p aym en tt o wardh er 2 0 0 7 t ax l i ab il i ty , o f wh i ch $ 1 9 ,3 5 3 was cred i t edt o wardthatl i ab i li ty . Sh e d i dn o tfi l e h er 2 0 0 7 ret u rn u n t i l Au g u s t1 , 2 0 1 3 . Her acco u n t tran s cri p t refl ect s an en try fo r “ Di s al l o wedcl ai m ” d at edNo v em

b er 2 4, 2 0 1 4 , an ds h ows th ata p aym en t o f $ 1 0 ,6 4 7 m ad e o n Ap ri l 1 5 , 2 0 0 8 , was rem o v ed fro m h er acco un t . III. Pet i t io n er’ s 2 0 0 8 Tax Year Fo l l owi n g a s im i l ar p at t ern , p et i t io n er t i m el y req u es t edan dwas g ran t edan
ex t en s i o n o f t i m e t o fi l e h er 2 0 0 8 Fed eral i n co m e t ax retu rnu n t i l Oct o ber 1 5 , 2 0 0 9 . Sh e d i dn o t fi l e h er 2 0 0 8 t ax retu rn u n t i l Sep t em b er 9 , 2 0 1 3 . Onh er 2 0 08 t ax return s h e cl ai m ed cred i tfo r an o verp aym en tfro m 2 0 0 7 o f $ 10 ,6 4 7 . (Wh i l e th e 2 0 08 retu rn i s n otp arto f t h e reco rd , we accep tp et i t i o ner’ s t es t i m o n y o n th i s p o i n t .) Res p o n d en tas s es sed i n co m e t ax o f $ 1 4 9 ,9 9 5 , an ad d i t io n t o t ax fo r fai l u re t o m ak e es t i m at edt ax p aym en ts u n d er s ect i o n 6 6 5 4 (a) o f $ 6 2 8 , an ad d i t io n t o t ax fo r fai l u re t o fi l e t i m el y

u nd er s ect i o n 6 6 5 1 (a)(1 ) o f $ 3 3 , 4 8 6 , an ad d i t i o n t o t ax fo r- 4
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[* 4 ] fai l u re t i m el y

t o p ay t ax s h o wnu n d er s ect i o n 6 6 5 1 (a)(2 ) o f $ 3 7 ,2 0 7 , an d i n t eres to f $ 3 0 ,7 1 8 . Res p on d en t ’ s as s es s m en t d i dn o tt ak e i n t o acco u ntthe cl ai m ed$ 1 0 ,6 47 cred i t. IV. Pet i t i o n er’ s 2 01 1 Tax Year Pet i t i o ner l i k ewi s e t i m el y req u es t edan dwas g ran t ed an ex t en s i o n o f t i m e t o fi le h er 2 0 1 1 Fed eral i nco m e t ax return u n t i l Oct o ber 1 5, 2 0 12 . Sh e d i d n o tfi l e h er 2 0 11 t ax retu rn u n t i l Oct o b er 1 5 , 2 0 1 3 . Res po n d en tth en as s es sedi n co m e t ax
o f $ 3 0,0 8 7 , as rep o rt edo n p et it i o n er’ s o ri g i n al retu rn , al o n g wi th an ad di t i o n t o t ax fo r fai l ure t o m ak e es t im at edt ax p aym en t s u n d er s ect i o n 6 6 5 4 (a) o f $ 1 4 9 , an ad d it i o n t o t ax fo r fai l u re t o fi l e t i m el y u nd er s ect i o n 6 6 5 1 (a)(1 ) o f $ 2 ,5 3 9 , an ad d it i o n t o t ax fo r fai l u re t i m el y t o p ay t ax s h o wnu n d er s ect i o n 6 6 5 1 (a)(2 ) o f $ 1 ,1 2 8 , an di n t eres to f $ 6 3 7 . Pet i t i o n er fi ledtwo s u cces s i ve 2 0 11 am en d edt ax retu rn s i n J u n e an d J u l y

2 0 1 4 . Th e fi rs tam en d edretu rn cl ai m ed a refu n do f $ 1 3 ,4 6 9 . Anat tach ed ex p l an at i o n s t at edthat“ [a] n Am en d edRetu rn i s b ei n g fi l ed t o i ncl ud e an NOL carry

b ackfro m

th e y ear 2 0 1 3 an dt o co rrect M o rt gag e In t eres t p ai ddue t o a co rrect ed1 0 9 8 recei vedo n Feb ru ary 1 0 , 2 0 1 4 , fro m

Ban ko f Am eri ca.” Th e s eco n dam en d edretu rn cl ai m ed an ad di t i o n al refu n d o f $ 2 , 3 5 8
. Anat tach eds t at em en tex pl ai n edth at“ [a] Seco n dAm en dedRetu rn i s b ei n g fi l ed t o i ncl ud e p aym en ts m ad e b y th e Tax pay er t o th e St at e o f Cal i fo rn i a p aym en t s n o t- 5
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[* 5 ] i n cl u d edi n the o ri g i nal retu rn o r t h e fi rs tam en d edretu rn .” Th e s t at em en t fu rt her ex p l ai n ed th at“ [d ] u e t o p ri o r y ears p aym en t s m ad e t o th e St at e o f Cal i fo rn i a, Sch edu l e A i n creas es b y $ 9 0 ,5 4 9 .0 0 .” Th e reco rd d o es n o ti ncl u d e an y
s up p ort i n g d o cu m en t at i on reg ard i n g th o s e p aym en t s t o t h e St at e o f Cal ifo rn i a. Pet i t i o ner d i dn o tfi l e h er 2 0 0 5 retu rn t i m el y (wi th i n th e ex t en s i o n p eri o d ) b ecau s e s h e b ecam e o v erwh el m edb y wo rkan dh adret ai n edh er l o n gt i m e
acco u n t an ti n Ut ah , wh o d i d n o tp ri o ri t i ze h er ret u rn . When th e fi n an ci al
m el t d o wnb eg an i n 2 0 07 , wh ich was a v ery s tres s fu l t i m e fo r p et i ti o n er es p eci al l y g i v en h er jo b i n real es t at e, h er d el i n qu en tretu rn s “ s t art edp i l i n g up ”. Ul t i m at el y , p et i t i o n er h i reda n ew acco u n tan t . Sh e wo rk edwi th th e n ew acco u n t an tt o fi l e al l
o f t h e o v erdu e ret u rn s an dwas cu rren twi th h er fi l i n g o b l i g at io n s b y th e en do f 2 0 1 3
. V. Co l l ect i o n Heari n g OnM arch 1 7 , 2 0 1 4 , res po n d en ti s s u edt o p et i t i o n er a No t ice o f In t en tt o Lev y an d No t i ce o f Yo u r Ri g h tt o a Heari n g fo r h er t ax l i ab i l i t i es fo r 2 0 05 , 2 0 0 8 , an d 2 0 1 1 (l ev y

n o t ice). On M arch 2 7 , 2 0 1 4 , res p o n d en t fi l eda No t i ce o f Fed eral Tax Li en fo r t h o s e y ears an d i s s u edp et i t i o n er a No ti ce o f Fed eral Tax Li en Fi l i n g
an d Yo u r Ri g h tt o a Heari n g Un d er IRC 6 3 2 0 (l ien n o t i ce). Atth att i m e,- 6
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[* 6 ] p et i t i o n er’ s as s es sed l i ab i li t i es fo r 2 0 0 5, 2 0 0 8 , an d 2 0 1 1 were $ 7 5 ,1 7 7 , $ 2 1 4 ,2 3 8 , an d$ 15 ,7 36 , res p ect i v el y (t o tal i n g $ 3 0 5 ,1 5 1 ). Pet i t i o ner fi l eda Fo rm 1 2 1 5 3 , Requ es tfo r a Co l l ect i o n Du e Pro ces s o r Equ iv al en tHeari n g , wi th res p ectt o th e l ev y n o t i ce (l ev y

req u es t) an da s eco n d Fo rm 1 2 1 5 3 wi th res p ectt o th e l i en n o t i ce (l i en req u es t ). Onb ot h req u es t s p et i t i o n er ch eck edth e b o x es req u es ti n g an In st al l m en tAg reem en tan dan Offer-i n Co m p ro m i s e (OIC). Bo th req u es t s were s ub m it t edb y Kat h l een M i l l er, an at t o rn ey rep res en t i n g p et i t io n er. In an at t ach m en tt o h er l ev y req u es tp et i t i o n er s t at ed , i n p art , th e b as is fo r h er req u es t :

1
. Itd o es n o tap p ear t h atal l av ai lab l e p aym en t s an d cred i t s h av e b een reco g n i zedan dap p l i edb y th e IRS t o th e t ax y ears wh i ch are s ubjecto f t h e No t i ce. Fo r ex am p l e, t h e t ran s cri pto f acco u n tfo r 2 0 0 5 p ro v i dedb y

th e IRS i n d icat es recei ptan drem o val o f a $ 3 0 ,0 00
. 0 0 p aym en tm ad e b y Tax p ay er fo r s ai dy ear. 2
. Tax p ay er s eek s ab at em en to f t h e p en al t i es an das s ert s th at th e l at e fi li n g an dp aym en ti s du e t o reas o n ab l e cau s e an d n o twi l l fu l n eg l ect . 3
. Tax p ay er d es i res t o n eg ot iat e an i ns t al l m en tag reem en t , o ffer i n co m

p ro m i s e o r al t ern at i v e m ean s i n wh ich t o p ay l i ab i l i t i es d et erm i neddue fo r t h e s ub jecty ears . In an at tach m en tt o h er l i en req u es t p et it i on er ad d edth e fo l lo wi n g t o th e
s t at em en t s ab o v e: “ 4 . Tax p ay er wi ll b e req ues t i n g a Cert i fi cat e o f Di s ch arg e fro m Fed eral Tax Li en wi th res p ect t o th e p o s s i b l e s al e o f real p ro p ert y ”.- 7
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[* 7 ] Bo th o f p et i t i o n er’ s req u es t s were as s i g n ed t o Set tl em en t Offi cer Sy l v es ter R. Fern an d o (SO Fern an d o ). OnJ u n e 2 4 , 2 0 1 4 , SO Fern an d o co n du ct ed a face-t o face ad m i n i s trat i v e h eari n g wi th p et i t i o n er an dh er rep res en t at i v e, W il l iam Sh i n e. Am o n g t h e d o cu m en t s p et i t i on er s ub m i t t edb efo re t h e h eari n g was a Fo rm 4 3 3 -A (OIC), Co l l ect i o n In fo rm at i o n St at em en t fo r W ag e Earn ers an dSel f-Em p l o y ed In d i v i du al s , rep ort i ng equ i ty o f $ 6 0 0 ,2 9 9 i n v ari o u s as s et s (i n cl u d in g real p ro p erty , i n v es t m en t s , an dret i rem en t acco u n ts ) an dn eg at i v e i n co m e. Du ri n g th e h eari n g p et i ti o n er ad v i s edSO Fern an do th ats h e h add eci d edn o tt o fi l e a Fo rm 6 5 6 , Offer i n Co m

p ro m i s e, an dwan tedt o p ro ceed wi th an i n s t al l m en t ag reem en t . SO Fern an d o req u es t ed a rev i s edFo rm 4 3 3-A (OIC) fo r an i ns t al l m en tag reem en t al o n g wi th s up p o rt i n g d o cu m en t at i on b y J u l y 8 , 2 0 1 4. Aft er g ran t i n g o n e
ex t en s i o n , SO Fern an d o cal l edp et i t io n er o n Au gu s t 6 , 2 0 1 4 , t o ad v i se h er t h at h e h ad n o trecei v edh er rev i s edFo rm 4 3 3 -A, th ati th adb een o v er a m on th s i n ce t h ei r face-t o -face h eari n g , an dth ath e was g o i n g t o cl o s e t h e cas e. Pet i ti o n er ad v i s ed SO Fern an d o th at s he wan t edt o m ak e a p art i al p aym en t . SO Fern an d o ex p l ai n ed th ats h e co ul dd o s o b u tthatth e p art i al p aym en two u l d n o tb e an i n s t al l m en t ag reem en tp aym en t. Pet i t i o ner t h en s ub m i t t eda Fo rm 6 5 6 , a rev i s edFo rm

4 3 3 -A (OIC), an ap p li cat io n fee o f $ 1 8 6 , an d a d ep o si to f $ 1 , 0 00 . On th e Fo rm 6 5 6 s h e ch eck ed- 8
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[* 8 ] th e b o x i n d i cat i n g “ Ex cep t i o n al Ci rcu m s t an ces (Effect i v e Tax Ad m i n i s trat i o n)” an di n ex p l an at i o n s t at edth at“ I h av e b een u n em p l o y ed s i n ce J an u ary o f 2 0 1 4 . I am

h op i n g t o av o i ds el l i n g m y s ecu ri t i es an d m

y ret i rem en t
acco u n t s, du e t o cau s i ng m o re t ax ab l e i n co m e wi th p en al t i es o n t o p o f an [s i c] cap i t al g ai n s I m ay

i n cu r. I am

o fferi n g wh atI can affo rdatth is t i m e.” Un d er t h e

“ Peri o di c Paym en t ” s ect i o n o f t h e Fo rm 6 5 6 p et i t i o n er i n co rrect l y en t ered$ 1 ,0 0 0
as th e am o u nto f the o ffer an d th en s t at edth ats h e wo u ldm ak e i n s t al l m en t p aym en t s o f $ 1 ,0 00 p er m o nt h “ u n t i l p ai d ”, ev en th o u g h th i s s ect io n o f th e Fo rm 6 5 6 s t at es th atth e du rat i o n o f i n s t al lm en t p aym en t s can n o tex ceed 2 4 m o n th s an d th at“ [t ] ot al p aym en ts m

u stequ al th e t o tal o ffer am o u n t ”. Th e rev i s edFo rm 4 3 3
- A ag ai n rep o rt edequ i ty

o f $ 6 0 0 ,2 9 9 , rep o rt edp o s i t i v e i n co m e al o n g wi th
ex p en s es ex ceed i n g th ati n co m e, an d i n d icat edan o ffer o f “ $ 1 0 0 0 .0 0 / m o ”. Pet i t i o ner al s o p ro v i d edo th er d o cu m en t at i o n i n s upp o rt o f h er o ffer. (Th e
reco rdi s u ncl ear wh en the ad d i t i o n al i nfo rm at i on was p ro v i d ed , b u tth e t i m i n g i s
n o trel ev an t t o o u r an al y s is .) In cl u d edam o n g th e d o cu m en t at i o n were fi n an ci al i n fo rm at i o n , co p i es o f v ari ou s retu rn s fo r rel ev an t y ears , a d et ai l edex p l an at i o n o f wh y s h e h adfal l en b eh i ndo n h er t ax fi l i n g s an dp aym en t s , an da d i s cu s s i o n o f t h e fi nan ci al m el td o wnan di t s effect o n h er an dh er wo rk , al o n g wi th s up p ort i ng i n fo rm at i o n reg ard i n g th e fi n an ci al m el t d o wn . Co p i es o f t h e t wo am en d edt ax- 9
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[* 9 ] retu rn s fo r 2 0 11 , th e 2 0 13 retu rn , an dth e co rrect ed Fo rm 1 0 9 8, M o rt gag e In t eres t St at em en t , were i n cl u d edi n th e d ocu m en t s s ub m i tt ed t o SO Fern an d o . SO Fern an d o cal l edp et i t i o n er o n Feb ru ary 3 an dag ai n o n Feb ru ary 6 , 2 01 5 , t o ad v is e h er t h at h e was reject i n g h er o ffer, h er req u es tt o cred i t the $ 3 0 ,0 0 0 p aym en t fo r 2 0 0 5 , an dh er req u es tfo r p en al ty ab at em en t . SO Fern an d o rev i ewed th e ad m in i s trat i ve fi l e t o v eri fy th atth e req u i rem en t s o f an y ap p l i cab l e l aw an d ad m i n is trat i v e p ro cedu re h adb een m et . Inh i s Ap p eal s Cas e M em o ran du m
ex p lai n i n g h i s reject i o n o f p et i t i o n er’ s o ffer, SO Fern an d o cal cu l at edp et i t io n er’ s t o t al reas o n ab le co ll ect i o n p o t en t i al t o b e $ 84 0 , 7 5 0 . He cal cu l at edp et i t i o n er’ s

“ M on th l y Su rp l u s o f In co m e o v er Ex p en s es ” t o b e $ 3 ,6 7 8 . M ul t i p l y i n g t h i s
am ou n tb y th e 4 7 m o n th s h e d et erm i n edwere l efti n th e p eri o d o f l i m i t at io n s fo r
co l l ect i o n , h e cal cu l at ed p et i ti o n er’ s “ Val u e o f Fu tu re In co m e” t o b e $ 1 7 2 ,8 6 6
. He cal cu lat edp et i t i o n er’ s n etreal i zab l e eq u i ty i n fi n an ci al as s et s t o b e $ 3 2 0 ,4 5 5 , 2 8 0 % o f t h e qui cks al e v al u e o f h er real es t at e t o b e $ 3 29 ,8 2 9 , an dth e qu i cks al e
v al u e o f h er v eh i cl es t o b e $ 1 7 ,6 0 0 . He s t at edthatp et it i on er’ s o ffer was $ 1 ,0 0 0. He al s o n o tedth atp et i ti o n er h adfai l ed t o d i s cl o s e p en s i o n i n co m e (o f $ 6 ,7 3 9 p er

2 Th e d i fferen ces b et ween th e v al u es th at p et i t i o n er rep o rt edo n h er Fo rm 4 3 3 -A an dth e v al u es th at SO Fern an d o u s edap p ear l arg el y t o b e at tri b ut ab l e t o th e fact th atSO Fern an d o u s ed1 0 0 % o f t h e v al u e o f al l o f p et i t io n er’ s fi nan ci al as s et s wh ereas Fo rm 4 3 3 -A al l o ws t ax p ay ers t o d i sco u n t(rep ortl es s th an 1 0 0 % o f) t h e v al u e o f i n v es t m en tan dret i rem en tacco un t s , wh i ch p et i t i o ner d id
.- 1 0 -

[* 1 0 ] m on th ), fai l edt o fi l e a retu rn fo r 2 0 0 5 , an dfai l edt o m ak e s u ffi ci en t
es t i m at edt ax p aym en t s fo r 2 0 1 4 . OnM arch 2 , 2 0 1 5 , res p on d en ti s s u edn o t i ces o f d et erm i n at i o n s us t ai n i n g th e p ro p o s edco l l ect i o n act i o n s . Attri al res po n d en t co n ced ed th atth e $ 3 0,0 0 0 p aym en tm ad e i n 2 0 0 6 wo u l d b e cred i t edt o pet i t i o ner’ s acco u n tfo r 2 0 0 5 , wi th co rres p o n di n g reduct i o n s t o ad d it i o n s t o t ax an di n t eres t. Pet i t i o n er rai s edtwo ad d i t io n al i s s u es th at
res p o n d en t arg u es were n o trai s edb efo re SO Fern an d o : (1 ) t h e cred i t i n g o f an
o v erp aym en t o f h er 2 0 0 7 t ax t o wardh er o u t st an d in g 2 00 8 l i ab i l it y an d (2 ) a refu ndfo r 2 0 1 1 b as edo n h er am en d edretu rn s fo r t h aty ear. OPINION A t ax p ay er m ay

req u es tan ad m i n i s trat i v e h eari n g b y the Ap p eal s Offi ce t o
rev i ew a p ro p o s edco l lect i o n act i o n up o n recei p to f a n o ti ce o f t h e p ro p o s edact i o n (s u ch as th e l i en n o ti ce an dthe l ev y n ot i ce s en tt o p et i t i o ner). Secs . 6 3 2 0 (b )(1 ), 6 3 3 0 (b )(1 ). Atth e h eari n g wi th an Ap p eal s s et t l em en to ffi cer t h e t ax p ay er m ay rai s e an y rel ev an ti ss u e rel at i n g t o t h e u np ai dt ax o r t h e p ro p o s edco l l ect i o n act i o n. Secs . 6 32 0 (c), 6 3 3 0 (c)(2 )(A). A t ax p ay er m ay ch al l en g e t h e ex i s t en ce o r am o u n t
o f h er u n d erl y in g t ax l i ab il i ty i f t h e t ax pay er d idn o t recei ve a n o t i ce o f d efi ci en cy
o r d i dn oto th erwi s e h av e an o p p o rtu n i ty t o d i s p u t e t h e t ax l i ab i l i ty . Sec. 6 3 3 0 (c)(2 )(B). Th e s et t lem en to ffi cer m u s tco ns i d er wh et h er th e p ro po s ed- 1 1 -

[* 1 1 ] co ll ect i o n act io n b al an ces th e n eedfo r effi ci en tco l l ect i o n ag ai ns tth e t ax p ay er’ s co n cern th atco l l ect i o n b e n o m ore i nt ru s i v e t h ann eces s ary . Sec. 6 3 3 0 (c)(3 )(C). Th e s et t lem en to ffi cer al s o m u st v eri fy th atth e req u i rem en t s o f
an y ap p li cab l e l aw an dad m i n i s trat i v e p ro cedu re h av e b een m et . Sec. 6 3 3 0 (c)(1 ). On ce t h e s et t l em en to ffi cer m ak es a d et erm i n at i o n, the t ax p ay er m ay ap peal th e d et erm i n at i o n t o th is Co u rt . Sec. 6 33 0 (d )(1 ). In rev iewi n g a d et erm i n at i o n u n der s ect i o n 6 3 2 0 o r 6 3 3 0 we co n s i d er o n l y i s su es th atth e t ax p ay er p ro p erl y rai s ed du ri n g the ad m i n i s trat i v e h eari n g. Secs
. 3 0 1 .6 3 2 0 -1 (f)(2 ), Q&A-F3 , 3 0 1 .6 3 3 0 -1 (f)(2 ), Q&A-F3 , Pro ced . & Ad m i n . Reg s .;
s ee Gi am el l i v . Co m

m i s si o n er, 1 2 9 T.C. 1 0 7 , 1 1 5 (2 0 07 ). A t ax p ay er d o es n o t p ro p erl y rai s e an i s su e, i n cl u d i n g an i s su e co ncern i n g h er u nd erl y in g t ax l iab i l i ty , i f s he “ fai l s t o p res en tt o Ap p eal s an y ev i d en ce wi th res pect t o thati s s u e aft er b ei n g g i v en a reas o n ab l e o p p o rtu n i ty t o p res en ts u ch ev i d en ce.” Secs . 3 0 1.6 3 2 0
- 1 (f)(2 ), Q&A-F3 , 3 0 1.6 3 3 0 -1 (f)(2 ), Q&A-F3 , Pro ced . & Ad m i n . Reg s .; s ee Po u g h
v . Co m m i s s i o n er, 1 3 5 T.C. 3 44 , 3 4 9 (2 0 1 0). Th e t ax p ay er al s o m u s t rai s e t h e i s su e i n h er p et i t i o n t o thi s Co u rt . Ru le 3 3 1 (b )(4 ) (“ An y i s s ue n o t rai s edi n th e
as s i g n m en t s o f erro r s h al l b e d eem ed t o b e co nced ed .”). Wh ere t h e v al i d i ty o f t he t ax p ay er’ s u nd erl y i n g l iab i l i ty i s p ro p erl y

ati s s u e du ri n g th e ad m i n is trat i v e h eari n g , we rev i ew t h e Ap p eal s Offi ce’ s d et erm i n at i o n- 1 2 -

[* 1 2 ] o f t h ati s s u e d e n o vo . Seg o v . Co m m is s i o n er, 1 1 4 T.C. 6 0 4 , 6 1 0 (2 0 0 0 ). Wh ere t here i s n o d i s p u t e as t o th e t ax p ay er’ s u n d erl y i n g l i ab i l i ty , we rev i ew t h e Ap p eal s Offi ce’ s d et erm i n at io n fo r ab u se o f d i s cret i o n . Go za v . Co m m i s s i o n er, 1 1 4 T.C. 1 7 6 , 1 8 2 (2 0 0 0 ); s ee al s o Seg o v . Co m m i s s i o n er, 1 1 4 T.C. at 6 0 9-6 1 0
. Anab u s e o f d i s cret i o n ex is t s wh en a d et erm i n at i o n i s arb i trary , cap ri ci o us , o r wi th o u ts o u n d b as i s i n facto r l aw. See M u rp h y v . Co m m i ss i o ner, 1 2 5 T.C. 3 0 1 , 3 2 0 (2 00 5 ), aff’ d, 4 6 9 F.3 d2 7 (1 s tCi r. 2 0 06 ). A d eci si o n o n th e b as i s o f an
erro neo u s v i ew o f th e l aw o r a cl earl y erro n eo u s as s es sm en to f fact s wo ul d
co n st i tu t e anab us e o f d i s cret i o n . Kel l er v . Co m m i s s i o n er, 5 68 F.3 d 7 1 0 , 7 1 6 (9 t h Ci r. 2 0 09 ), aff’ g i n p artT.C. M em o . 2 0 0 6-1 6 6
. I. New Is s u es W e fi rs td i s p o s e o f t w o i s s u es thatres po n den tcl ai m s p et i t i o n er rai s edfo r th e fi rs tt i m e attri al : (1 ) ap p l i cat i o n o f an o verp aym en tfro m 2 0 0 7, a y ear t h ati s
n o tb efo re u s , ag ai n s tp et i t i on er’ s o u ts t an d i n g l i ab i l i ty fo r 2 0 0 8 , a y ear t h ati s b efo re u s , an d (2 ) ap p li cat i o n o f an o v erp aym en tcl ai m edi n an am en d edretu rn fo r 2 0 1 1 , a y ear t h ati s b efo re u s , ag ai ns tp et i t i o n er’ s o u t s t an d i n g l i ab i li ty fo r 2 0 0 8
. A. 2 0 0 7 Ov erp aym en t Th e reco rdb efo re u s i s u n cl ear as t o wh eth er p et i t i o ner o r h er rep res en t at i v es rai s edth e i s s u e o f t he 2 0 0 7 o v erp aym en tdu ri n g th e ad m i n is trat i v e- 1 3 -

[* 1 3 ] h eari n g o r i n t h ei r v ari o u s ex ch an g es wi th SO Fern an d o. Wh i l e p et i ti o n er’ s l ev y req u es tan dl i en req u es t s tat e t h at“ [i ] t d oes n o tap p ear t h atal l av ai l ab l e p aym en t s an dcred it s h av e b een reco g n i zedan dap p l iedb y the IRS t o th e t ax y ears wh i ch are s ub

j ect o f t h e No t i ce”, t he ex am p l e g i v en o f t h e fai l u re was th e m i s s i n g $ 3 0 ,0 0 0 p aym en tfo r 2 0 05 . Pet i t i on er’ s t es t i m o n y was u n cl ear as t o wh et h er s h e
o r h er rep res en t at i v es d i scu ss edth e 2 00 7 o v erp aym en twi th SO Fern an d o . W e
n eed no tres o l v e t hi s am

b i g u it y , h o wev er, b ecau s e we fi n dth at , ev en i f we as s u m e th atth e i s s u e i s p ro p erl y

b efo re u s u n d er Gi am el l i v . Co m m i s s i o n er, 1 29 T.C. at 1 1 5 , p et it i o n er’ s cl ai m

fo r refu n do r cred i t fo r an o v erp aym en t fo r 2 0 0 7 was t o o l at e fo r h er t o recei v e cred i tfo r th e p aym en ts h e h adm ad e o n Ap ri l 1 5 , 2 0 0 8 , t o ward h er 2 0 07 l i ab il i ty . Wh i l e t h e 2 0 0 7 return i s n o ti n the reco rd , th e t ran s cri p ti n d i cat es th ati twas fi led on Au g u s t 1 , 2 0 1 3
. An d t h e 2 0 0 8 retu rn cl ai m in g th e cred i tfo r t he
o v erp aym en t was fi l edo n Sep t em ber 9 , 2 0 1 3 . Un der t he p ro v i si o n s o f s ect i o n 6 5 1 1 (b )(2 )(A), i f a refu n dcl ai m was fi l edwi th i n three y ears o f t h e fi l i n g o f t h e retu rn (as we as su m e h ere b ecau s e t he 2 0 0 7 retu rn i t s el f s eek s th e refu nd ), th en th e t ax p ay er i s en t i t l ed t o a refu n do f t ax p ai d wi thi n th e t h ree y ears i m m ed i at el y p reced i n g th atcl ai m . Pet i t i o ner o ffered a t ran s cri p to f h er acco u n tfo r 2 00 7
s h o wi n g th atth ere was a p aym en tan da p aym en trem o v ed , i n th e am o u n t s h e- 1 4 -

[* 1 4 ] s eek s t o h av e cred i t ed , o n Ap ri l 1 5 , 2 0 0 8 --wh i ch i s m ore t han th ree y ears b efo re h er refu n dcl ai m . 3 Th erefo re s h e i s n o ten t i t l edt o cred i tfo r t h e
o v erp aym en t ag ai n sth er l i ab il i ty fo r 2 0 0 8 . See Lan dry

v . Co m m i s s i o ner, 1 1 6 T.C. 6 0 (2 00 1 ). W e d i s t i n g u is h th i s p aym en tfro m the $ 3 0 ,0 0 0 p aym en tp et it i o n er
m ad e o n Ap ri l 1 5 , 2 00 6, t owardh er 2 00 5 l i ab i l i ty thatres p o n den tco n ced es s h ou l d b e cred i t edt o her acco u n t . Fo r t h atp aym en t , p et i t io n er was n o t m ak in g a refu n d cl ai m b u twas s eek i n g cred i tfo r t h atp aym en t ag ai n s th er o u t s t an d i ng l i ab il i ty fo r 2 0 0 5
. B. 2 0 1 1 Refu n dCl ai m W e l i k ewi s e fo u n dn o referen ce i n SO Fern an d o ’ s cas e act i v i ty rep o rtt o th e 2 0 1 1 refu n dth atp et i t i o ner cl ai m edo n h er am en d ed2 0 1 1 ret u rn s , b u tp et it i o n er d i dp ro v i d e co p ies o f t h o se am en d edretu rn s t o SO Fern an d o , al o n g wi th o th er

3 Res p o n den tal s o arg u es th atwe l ackjuri s d i ct i o n o v er wh et h er t h e 2 0 0 7 o v erp aym en t s h ou l db e cred i tedb ecau se i ti s a y ear n otb efo re u s an dcred itwas n o tal read y

d et erm in edt o b e av ai l ab l e b y a co u rto r b y

th e Co m m is s i o n er, ci t i n g W eb er v . Co m

m i s s i o n er, 1 3 8 T.C. 3 4 8 (2 0 1 2 ). Bu t th ere we co n cl u d edth atwe h av e juri sd i ct i o n t o co n s i d er an el ect i o n t o ap p l y an o v erp aym en tcl ai m edfro m a n o n co l l ect i o n y ear o n a s ub s equ en tco l l ect i o n y ear ret urn . As we ex p l ai n edi n Co n n v . Co m

m i s s i o n er, T.C. M em o . 2 0 1 1 -1 6 6 , 2 0 1 1 W L 2 7 0 9 8 8 7, at* 5, wh i l e o u r ju ri s di ct i o n m ay

p erm i tu s t o co ns i d er o verp aym en tcl ai m s ari s i n g fro m n o n d et erm i n at io n y ears , we s t i l l can n otcred i tal l eg ed o v erp aym en t s th at were n o t t i m el y as s ert edo r l it i g at edp u rs u an tt o th e refu n d p ro v i s i o ns o f t h e Co d e. W e d et erm i n edth atth e t ax p ay er i n W eb er m ettho s e th res ho l dreq ui rem en t s. W eb er v . Co m m i s s i o n er, 1 3 8 T.C. at3 6 5 . Pet i t i o n er d i d n o t .- 1 5 -

[* 1 5 ] d o cu m en t s. W e wi l l treat h er 2 0 11 t ax l i ab il i ty as p ro p erl y

b efo re SO Fern an do an d t h erefo re s ub jectt o o ur d e n ov o rev i ew. Pet i t i o ner b ears th e b u rd en
o f es t ab l i s h i n g thats h e i s en t i t l edt o th e ad d i t i o n al d edu ct i o ns cl ai m edo n h er
am en d edretu rn s. Dedu ct i o n s are a m at t er o f l eg i s l at i v e g race, an dp et it i on er m u s t p ro v e h er en t i t l em en t t o d edu ct i o n s . See INDOPCO, In c. v . Co m m is s i o n er, 5 0 3 U.S. 7 9 , 8 4 (1 99 2 ); New Co l o n i al Ice Co
. v . Hel v eri n g, 2 9 2 U.S. 4 3 5 , 4 40 (1 9 3 4 ). Sh e was rep res en tedi n th e ad m i n i st rat i v e h eari n g b y a l awy er an dan acco u n t an t . Th e o nl y d o cu m en tat i o n i n t h e reco rdth ats up p o rt s h er cl ai m edd edu ct i o n s o n h er 2 0 1 1 am en d edreturn s i s (1 ) th e 2 0 1 3 retu rn s up p ort i ng th e n eto p erat in g l o s s (NOL) carryb ack cl ai m ; an d (2 ) t h e co rrect edFo rm 1 0 9 8
. Becau s e s he p ro v i d ed
n o d o cu m en t at i on t o s up p o rtd edu ct i o n s o f p ri o r p aym en t s t o th e St at e o f Cal i fo rn i a, we reject h er refu n dcl ai m t o th e ex t en t i ti s at tri b ut ab l e t o th o s e p aym en t s. As t o th e NOL carry

b ackfro m

2 0 1 3 , we h av e h el drep eat ed l y th att ax p ay ers
can n otrel y

s o l el y o n th ei r o wni n co m e t ax retu rn s t o es t ab l i s h th e l os s es th ey
s u s t ai n ed . See W il k i n s o n v . Co m m i s si o n er, 7 1 T.C. 6 33 , 6 39 (1 9 79 ). “ Th e fact th ata retu rn i s s ig n edu n d er p en al ty o f p erju ry i s n o ts u ffi ci en tt o s ub s t an t i at e d educt i o n s cl ai m edo n i t.” Id . (ci t in g Ro b ert s v . Co m m i s s i o ner, 6 2 T.C. 8 3 4 , 8 3 7 , 8 3 9 (1 97 4 )). Tax pay ers i n s t eadm u s tp ro du ce u n d erl y i ng s o u rce d o cu m en t s t o- 1 6 -

[* 1 6 ] p ro v e t h e l o s s es th ey are rep o rt i n g . See J as p ers o n v . Co m m i s s i o n er, T.C. M em o. 2 0 1 5 -1 8 6 , at * 7 , aff’ d , 6 5 8 F. Ap p ’ x 9 62 (1 1 th Ci r. 2 01 6 ). W e t herefo re
m u strejecth er cl ai m t o th e ex t en ti ti s b as edo n the NOL carryb ackfro m 2 0 1 3
. Th atl eav es th e co rrect ed m o rt gag e i n t eres td edu ct i o n . Res po n d en t d i dn o t p ro v id e an y

reas o n wh y

thatco rrect edFo rm

1 09 8 i s n o ts u ffi ci en tt o s up p o rtth e d educt i o n o f t h atco rrect ed am o u n t . W e t h erefo re wi ll al l o wp et i ti o n er t h at d educt i o n . As the reco rd d o es n o ti n di cat e h o w al l o wi n g th at d edu ct i o n wi l l ch an ge p et i t i o ner’ s u n d erl y i n g l i ab i l i ty , we wi l l d i rect th e cal cu l at i o n o f t he l i ab i l i ty co m

p u t at i o n s co n s i s t en twi th o u r co n cl u s i o n s h ere. II. Ad d it i o n s t o Tax Res p o n d en td o es n otarg u e t h atp et i t i o n er h ada p ri o r o p p ortu n i ty t o ch al l en g e t h e ad d i t io n s t o t ax (wh i ch p et i t i o n er cal l ed“p en al ty ab at em en t ”) b u t
as s ert s th atwe rev i ew res p o n d en t ’ s d et erm i n at i o n t o up h o ldth e i m p o si ti o n o f ad d it i o n s t o t ax fo r t h e rel ev an ty ears fo r ab us e o f d i s cret i o n . W e d i s ag ree. A t ax p ay er’ s u n d erl y i n g t ax l i ab i l i t y i ncl u d es p en al t i es an d ad d i t io n s t o t ax thatare p arto f t he u np ai d t ax th atth e Co m m i s s i o n er s eek s t o co ll ect . Sec. 6 33 0 (a)(1 ); s ee Gray v . Co m m i s s i o n er, 1 38 T.C. 2 9 5 , 3 0 0 (2 0 1 2 ); Kat z v . Co m m i s si on er, 1 1 5 T.C. 3 2 9 , 3 3 9 (2 0 0 0); Nu tri ti o n Fo rm u l at o rs , In c. v . Co m

m i s s i o n er, T.C. M em o. 2 0 1 6
- 6 0 , at* 1 6 . Becau s e n o th in g i n th e reco rdi n d i cat es th atp et i ti o n er h ad a p ri o r- 1 7 -

[* 1 7 ] o p p o rtu n i ty t o ch al l en g e h er u n d erl y i n g l i ab i l i t i es , we rev i ew d e n o v o p et i t i o n er’ s req ues tfo r red et erm i n at i o n o f h er l i ab il i ty fo r t h e ad d i t i o n s t o t ax . See Seg o v . Co m

m i s s io n er, 1 1 4 T.C. at6 1 0 . Pet i t i o n er h as th e b u rd en o f p ro o f as t o
an y d efen s es . See Ru l e 1 4 2 (a); Hi g b ee v . Co m m i s s i o n er, 1 16 T.C. 4 3 8, 4 4 6 -4 4 7 (2 0 0 1). Pet i t i o ner was as s es sedth e fo l lo wi n g : s ect i o n 6 6 5 1 (a)(1 ) ad d i ti o n s t o t ax fo r fai l u re t o t i m el y

fi l e a ret u rn , wi th res p ectt o 2 0 0 5, 2 0 08 , an d2 0 1 1 ; s ect i o n 6 6 5 1 (a)(2 ) ad d i t i o n s t o t ax fo r fai l u re t o p ay t ax s ho wno n a retu rn o n o r b efo re th e d at e p res cri b ed(t ak i ng i n t o acco u n tan y ex t en s i o n o f t i m e fo r p aym en t ), wi t h
res p ectt o 2 0 08 an d2 0 11 ; an ds ect i o n 6 6 5 4 (a) ad di ti o n s t o t ax fo r fai l u re t o m ak e
es t i m at edt ax p aym en t s , wi th res p ectt o 2 0 0 8 an d2 0 1 1. Th e ad d i t i o n s t o t ax u n d er s ect i o n 6 6 5 1 (a)(1 ) an d(2 ) wi ll n o tap p l y i f p et i t i o n er can s h o w thath er fai l u re was du e t o reas o n ab l e cau s e an dn o twi l l fu l
n eg lect . Reas o n ab le cau s e ex i s t s fo r p u rp o ses o f s ect i o n 6 6 5 1 (a)(1 ) i f th e t ax p ay er
m ak es a s at i s fact o ry

s h o wi ng th ats h e ex erci s ed o rd i n ary care an d p ru d en ce an d
was n ev ert h el es s u n ab le t o fi le t h e ret u rn wi thi n th e p res cri b edt i m e. See s ec. 3 0 1 .6 6 5 1 -1 (c)(1 ), Pro ced . & Ad m i n . Reg s . Reas o n ab l e cau s e ex i s t s fo r p u rp o s es
o f s ect i o n 6 6 51 (a)(2 ) i f t h e t ax pay er m ak es a s at i s fact o ry s h o wi n g th ats h e
ex erci s edo rd i n ary

care an dp ru d en ce i n p ro v i d i n g fo r p aym en to f h er t ax l i ab i l it y- 1 8 -

[* 1 8 ] b u tn ev ert hel es s ei th er was u n ab l e t o p ay th e t ax t i m el y

o r wo u l d s u ffer
u n du e h ard s h i p i f t h e p aym en twere m ad e o n t i m e. See s ec. 3 0 1 .6 65 1 -1 (c)(1 ), Pro ced
. & Ad m i n . Reg s . Th e s ect i o n 6 6 5 4 ad d i t i o n t o t ax i s m an d at o ry u nl es s th e t ax p ay er s at i s fi es o n e o f t h e co m p u t at i o n al ex cep t i o n s i n s ect i o n 6 6 5 4 (d ) o r t h e
o th er ex cep t io n s i n s ect i o n 6 6 5 4 (e). See Gro s sh an d l er v . Co m m i s s io n er, 7 5 T.C. 1 , 2 0-2 1 (1 9 80 ). Pet i t i o ner t es t i fi edth ats h e d i dn o tm eeth er fi l i n g an dp aym en to b li gat i o n s b ecau s e s h e was o v erwh el m edb y wo rkan dth en th e fi nan ci al cri s i s an di t s effect
o n h er l i v el i h o o d. Wh i l e thes e were d iffi cu l tt i m es fo r p et i t i o ner, h er ex pl an at i o n d o es no td em o n s trat e t h ats h e ex erci s ed o rd i n ary care an dp ru d en ce i n m eet i n g h er
o b l i g at i o ns . Pet i t io n er d i dn o targ u e, n o r d o es the reco rds u g g es t , thatan y o f t he
ex cep t i o n s i n s ect i o n 6 6 5 4 wo u l dap p l y . W e t h erefo re s us t ai n res p o n d en t ’ s d et erm i n at i o n s as t o th e ad di ti o n s t o t ax . III. Reject io n o f Co l l ect i o n Al t ern at i v e W e n o wtu rn t o res p on d en t ’ s d en i al o f p et it i on er’ s req u es tfo r an OIC o r an i n s t al l m en tag reem en t . Sect io n 7 1 2 2 au th o ri zes th e co m p ro m i s e o f a t ax p ay er’ s Fed eral i nco m e t ax l i ab i l i ty , an dreg u l at io n s ad op t edu n d er t h ats ect i o n s etfo rt h th ree g ro u n d s fo r co m

pro m i s e: (1 ) d o ub t as t o l iab i li ty ; (2 ) d o ub tas t o
co l l ect i b i l i ty ; an d(3 ) p ro m o ti o n o f effect i v e t ax ad m in i s trat i o n . Sec. 3 0 1.7 1 2 2 -1 ,- 1 9 -

[* 1 9 ] Pro ced . & Ad m i n. Reg s . W i th res p ect t o th e th i rdg ro u nd , p arag rap h (b )(3 )(i ) o f t h e reg u l at i o n al l ows fo r a co m p ro m i s e t o b e en t eredi n to t o p ro m o te effect i v e t ax ad m i n i s trat i o n wh ere co l l ect i o n i n fu l l co ul d b e ach i ev edb utwo u l d
cau s e eco n o m i c h ard sh i p. Parag rap h (c)(3 )(i ) o f th e reg u lat i o n s et s fo rt h fact o rs th atwo u l ds up p o rt(b u t are n o t co n cl u s iv e o f) a fi n d in g o f eco n o m i c h ard s h i p . Th o se fact o rs i n cl u de:

(A) Tax p ay er i s i ncap ab l e o f earn i n g a l i vi n g b ecau s e o f a l o n g t erm i l ln es s , m ed ical co n d i t i o n , o r d i s ab il i ty , an di ti s reas o n ab l y fo res eeab l e t h att ax p ay er’ s fi n an ci al res o u rces wi ll b e ex h au s ted p ro v i d in g fo r care an ds up p o rtdu ri n g the co u rs e o f t h e co n d i t i o n ; (B) Al th o ug h t ax p ay er h as cert ai n m o n th l y i n co m e, t h ati n co m e i s ex h au s t edeach m o n th i n p ro v i d i ng fo r t h e care o f d ep en d en ts wi th n o o th er m ean s o f s up p o rt ; an d (C) Al th o ug h t ax p ay er h as cert ai n as s et s , th e t ax p ay er i s u n ab l e t o b o rro wag ai n stth e eq u i ty i n th o s e as s et s an dl i qu i d at i o n o f t h o s e as s et s t o p ay

o u t s tan d i n g t ax l i ab i l it i es wo u l dren der t h e t ax p ay er u n ab l e t o m eet b as i c l i v i n g ex p en s es . SO Fern an d o m ad e t wo fact u al erro rs i n ev al uat i n g p et i t i o n er’ s OIC o n th e b as i s o f effect iv e t ax ad m i n i s trat i o n . Fi rs t , h e co n cl u d edth atp et i ti o n er h adn o t y et fi l eda 2 0 05 t ax retu rn . Res p o n d en to ffered n o ex pl an at i o n fo r SO Fern an d o ’ s fai l u re t o fi n di n fo rm at i o n reg ard i ng th e fi l in g o f p et i t i o n er’ s 2 0 0 5 return an d p et i t i o n er’ s acco u n ttran s cri p trefl ect s th e fi li n g . Seco n d , h e co n cl u d ed th at p et i t i o n er m ad e an o ffer-i n -co m p ro m i s e o f $ 1,0 0 0 i n t o t al rat h er t h an i n s t al l m en t- 2 0 -

[* 2 0 ] p aym en ts o f $ 1 ,0 0 0 p er m o n th , as s h e i n ten d ed . Gi v en the b ackan dfo rt h b et ween SO Fern an d o an d p et it i o n er an dh er rep res en t at i ves reg ard i n g an i n s t al l m en tag reem en to r ano ffer-i n -co m p ro m i s e, t h i s m ay

n o th av e b een an erro r
as SO Fern an d o’ s n o t es i n d i cat e t h atp et i t i o n er ad v i s ed h i m th at s he wan t edt o
m ak e a p art i al p aym en t . Bu twe co ncl u d e t hattreat i n g p et i t i o n er’ s i m p ro p erl y
co m p l et edFo rm

6 5 6 p ro p o s i ng an p aym en t o f $ 1 ,0 0 0 p er m o n th “ u n ti l p ai d ” as an
o ffer o f o n ly

$ 1 , 0 0 0 i s n o ta reas o n ab l e i n t erp ret at i on o f t h e o ffer o n t h e Fo rm 6 5 6
. No twi th s t an d i n g th es e erro rs , we can n o t co n cl ud e t h at SO Fern an d o ’ s reject i o n o f p et i ti o n er’ s o ffer was an ab u s e o f d i scret i o n . He was co rrect that p et i t i o n er h ada h i s t o ry

o f n o n co m

p li an ce du ri n g t h e rel ev an ty ears , ev en h adh e d i s co v eredth e fi l i n g o f t h e 2 0 0 5 retu rn i n 2 0 1 3 . Fu rt h er, we s ee n o fau l twi th h i s
co n cl u s i o n th atp et i t i o n er co u l dp ay h er o u t s t an d i ng l i ab i l i t i es (o r atth e l eas ta far l arg er p ro p o rt i on o f thes e l i ab i l i t i es ). Pet i t i o ner d i dn o t ch al l en g e SO Fern an d o ’ s i n cl u s i o n o f h er p en s i o n i n co m e i n h i s cal cu l at io n o f th e v al u e o f h er fu tu re i n co m e. An dp et i t i o ner’ s Fo rm 4 3 3 -A v al u edh er as s et s ato v er $ 6 0 0 ,0 00 , wel l i n
ex ces s o f h er as s es sedl i ab i l i ti es o f $ 3 0 5,1 5 1 . SO Fern an d o m ay n o th av e b een
reas on ab l e i n co n s tru i n g p et i t io n er’ s o ffer as a $ 1 ,0 00 OIC rat her t h an an i n s t al l m en tag reem en to f $ 1 ,0 0 0 p er m o n th fo r s om e u n sp eci fi eddu rat i o n . Bu t- 2 1 -

[* 2 1 ] ev enh adh e as s u m edthatth e o ffer was fo r $ 1,0 0 0 p er m o n th fo r 4 7 m o n t h s (t he du rat i o n h e u sed i n cal cu l at i n g p et it i o n er’ s “ Val u e o f Fu tu re In co m e”), t h e
o ffer wo u l dh av e b een $ 4 7 , 0 0 0 , an am o un tfar b el o wth e v al u e o f h er fi nan ci al
as s et s. Th erefo re we fi nd h i s erro rs t o b e h arm l es s . Onth e b as is o f o u r rev i ew o f t h e ad m i n is trat i v e reco rdan dn o t i ce o f d et erm i n at i o n , th e Co u rtco n cl u d es th atth e s et t l em en to ffi cer s at is fi ed the
v eri fi cat i o n req u i rem en t s o f s ect i o n 6 3 3 0 an dth atres p o n d en t ’ s co ll ect i o n act i o n
s h o u ldb e s u s t ai ned , wi th ap p ro p ri at e redu ct io n s t o p et i t i on er’ s l i ab i l i t i es fo r 2 0 0 5
an d 2 0 1 1 t o b e d et erm i n ed , co ns i s t en twi th o u r co n cl u s i o n s ab o v e. W e h av e co n s id eredal l arg u m en t s m ad e i n reach i n g o u r d eci s i on an d , t o th e
ex t en tn o td i s cu ss edab o v e, we co n cl u d e t h atth ey are m o ot , i rrel ev an t , o r wi th o u t
m eri t . To refl ectthe fo reg o i n g an d res p on d en t ’ s co nces s i o n , Anap p ro p ri at e o rd er wi l l b e i s s u ed
.