T.C. Mem o. 2 01 5- 15 9

UNITED STAT ES TAX COURT

LYNN ED WARD YORK AND CYNTH IA LEE YO RK, Pet it io ne rs v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 52 9- 14 L. Fi le d Au gu st13 , 20 15
. Ly nn EdwardYorkan d C ynt hi a Lee Yo rk , pro ses e. Harry J. Negro , forres po nd en t.

MEMORANDUM FINDINGS OF FACT AND OPINION KERRIGAN, Ju dg e: The p et it io n i n thi s ca se was fi le d i n re sp on se to a Not ic e o f Det erm in at io n C on cern in g C ol le ct io n Act io n( s) un de r Sec ti on63 20
an d/ or63 30 (no ti ce o f de te rm in at io n) fortax y ears 20 03 , 20 08 , 20 09 , 20 10 , and 20 11 (y ears at i ss ue ). W e m us t co ns id er wh ethe r res po nd en t’s d et erm in at io n t o- 2 -

[* 2] pr oc eedwith c ol le ct io n a ct io ns reg ard in g u np ai d t ax li ab il it ie s fo r th e ta x y ears at i ss ue was p ro pe r. Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o the Int ern al Rev enue Co de ineffe ctat a ll rel ev an t t im es . W e ro un d a ll m on et ary am ou nt s t o th e n eare stdo ll ar. FINDINGS OF FACT So m e o f th e fac ts are s ti pu la te d andare s o fo un d. Pe ti ti on ers res id edin Pen ns y lv an iawhen th e p et it io n was fil ed . Peti ti on ers are tru ckdri ve rs an d are o n th e ro adfreque nt ly. Pet it io ne rs fil edFed eral in co m e ta x re tu rn s fo r th e ta x years a t i ss ue , bu t th ey di d n otpay

th e fu ll am ou ntof t he ir s el f-re po rte d i nc om e ta x l iabi li ty for eac h ta x year. On M arch 26 , 20 13 , res po nd en t s en t p et it io ne rs a Lett er 3 17 2, No ti ce o f Fed eral Tax Li enFil in g andYou r Ri gh t t o aHeari ng Und er Se ct io n 6 32 0 (NF TL), fo r th e ta x years a t i ss ue . As of th e d at e o f th e NFTL, pet it io ne rs owedth e fo ll owi ng : Year Unp ai d b al an ce 20 03 $2 ,48 4 20 08 2,5 37- 3 -

[* 3] 20 09 4,9 58 20 10 9,0 57 20 11 8,3 19 The to ta l b al an ce was $2 7,3 55
. Pet it io ne rs ti m el y

fil eda Fo rm

12 15 3, Re qu es t fo r a Co ll ect io n Du e Pro ces s
orEqu iv al en t Hearin g, re ga rd in g the NFTL. O n M ay 20 , 20 13 , sep arat e fro m

th e Fo rm 12 15 3, p et it io ne rs fil eda reque stforanoff er-i n- co m pr om is e (OIC) fortax y ear 2 00 2 andth e ta x years a t i ss ue . This reque stin cl ud ed : a Fo rm 65 6, Offe r in Co m pr om is e; a Fo rm

43 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; bankin fo rm at io n; an d an e xp lana ti on of pe ti ti on ers ’ fin an ci al st atus . Peti ti on ers ’ pr op os edOIC was a lu m p- su m paym en t of $1 5,0 00 . Peti ti on ers in di cat edth atth e rea so n fo r th ei r OIC was ex cep ti on al ci rcu m st an ces an d e ffec ti ve tax adm in is tra ti on . The s ettl em en t o ffi cer m ai le d a le tt er t o p et it io ne rs sch edul in g atel ep ho ne co ll ect io n due pro ces s (C DP) h eari ng fo r Ju ne 25 , 20 13 . The co nf eren ce ca ll was h el d, an d p et it io ne rs ’ reque stforan OIC was di sc us se d. Th e se tt le m en t o ffi cer i nf orm edpe ti ti on ers th atth ei r OIC was be in g c on si de red
. Afte r th e CDP h eari ng res po nd en t re as si gn edpe ti ti on ers ’ cas e to a di ffer en t
se tt le m en t o ffi cer. OnSep te m be r 20 , 20 13 , th e n ew se tt le m en t o ffi cer s en t a l et te r- 4 -

[* 4] sc he du li ng a CDP h eari ng forOcto be r 30 , 20 13 . This let te r reque st edth e fo ll owi ng in fo rm at io n: subs tant ia ti on of h eal th in su ran ce p rem iu m s;
subs tant ia ti on of o ut -o f-p oc ke t h eal th care co st s; subs tant ia ti on of apaym en t ag reem en t wi th th e St at e fo r de li nque nttax es ; s ub st an ti at io n o f al l s ecuredde bt s;
an d aco py of p et it io ne rs ’ 20 12 Fo rm 10 40 , U.S. Ind iv idua l In co m e Tax Return, with a ll sch edul es . Peti ti on ers di d n otparti ci pa te inth e co nf eren ce ca ll , no r di d th ey subm itth e reque st edin fo rm at io n. OnOcto be r 30 , 20 13 , th e se tt le m en t of fic er m ai le d p et it io ne rs anad di ti on al let te r st at in g tha t s he ha d n othe ardfro m th em an d re it erat in g tha t the reque st edin fo rm at io n s ho ul d b e subm it te d wi th in14 da y s. The set tl em en t o ffi cer c al cu la te d p et it io ne rs ’ m on th ly inc om e an d e xp en se s
us in g the in fo rm at io n tha t p et it io ne rs pro vi de d wi th th ei r of fer- in -co m

pr om is e. The set tl em en t o ffi cer d et erm in edth atpe ti ti on ers ha d n etm on th ly inc om e o f $1 ,05 7 andth atth ey

ha d re cei ve d d eath b en efi ts of app ro xi m at el y $3 0,0 00 an d $6 7,0 00 du rin g 2 01 3. On No ve m

be r 4, 2 01 3, p et it io ne rs lef t a p ho ne m es sa ge forth e se tt le m en t of fic er ex pl ai ni ng th atth ey di d n otparti ci pa te inth e h eari ng onOcto be r 30 , 20 13 , be cau se th ey

were o n the roa d fo r work. Th e se tt le m en t o ffi cer r eturne d the ir c al l, bu t was un ab le to reac h the m an d l efta m es sa ge . Sin ce the set tl em en t o ffi cer h ad- 5 -

[* 5] no t h eardfro m

pe ti ti on ers , sh e cal le d andlef t an ot he r m es sa ge onNov em be r 13 , 20 13
. On Dec em

be r 2, 2 01 3, re sp on de ntis su edpe ti ti on ers a no ti ce o f de te rm in at io n s us ta in in g the NFTL. In th e n ot ic e o f de te rm in at io n the set tl em en t of fic er s ta te d tha t s he ha d v eri fie d tha t al l re qu ire m en ts of app li cab le law an d adm in is tra ti ve pro cedur e h adbe enm et . On Ja nu ary 8, 2 01 4, p et it io ne rs fil eda pe ti ti on ex pr es si ng co nc ernab ou t the OIC’s be in g re jecte d. OPINION 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 at is su e, we
rev ie w th e d et erm in at io n d e n ov o. Se go v. Co m m is si on er, 1 14 T.C. 60 4, 6 10 (2 00 0) . Peti ti on ers di d n otrai se th ei r un de rlyin g t ax li ab il it ie s. Th e Co urt
rev ie ws ad m in is tra ti ve de te rm in at io ns by the Co m m is si on er’s Ap pe al s Off

ic e reg ard in g n on li ab il ity

is su es for

ab us e o f di sc ret io n. Ho y le v. Co m m is si on er, 1 31 T.C. 19 7, 2 00 (20 09 ). W e co ns id er wh ethe r th e d et erm in at io n was arb itrary, cap ric io us , or wi th ou t s ou ndba si s i n fa ctor l aw. See, e.g ., Mur ph y v. Co m m is si on er, 1 25 T.C. 30 1, 3 20 (20 05 ), aff’d, 4 69 F.3d27 (1s t Ci r. 20 06 ); W oo dr al v. Co m

m is si on er, 1 12 T.C. 19 , 23 (19 99 ). The C ou rt d oe s n otco nduc t
anin de pe nd en t re vi ew an d s ub st itut e it s ju dg m en t fo r th atof the set tl em en t of fic er. Murp hy v. Co m

m is si on er, 1 25 T.C. at 3 20 . If th e se tt le m en t o ffi cer- 6 -

[* 6] fo ll ows all st atut ory

an d a dm in is tra ti ve gu id el in es an d p ro vi de s a r eas on ed , ba lanc edde ci si on , th e Co urt wi ll no t re weig h the equi ti es . Linkv. Co m m is si on er, T.C. Mem o. 2 01 3- 53 , at * 12
. Fo ll owi ng a CDP h eari ng th e se tt le m en t o ffi cer m us t d et erm in e whe th er t o
su st ai n the fil in g o f th e NFTL. In m ak in g tha t d et erm in at io n, the set tl em en t of fic er i s re qu ire d b y

sec ti on 63 30 (c)( 3) to co ns id er: (1) whet he r th e requi rem en ts of an y ap pl ic ab le law o r adm in is tra ti ve pro cedur e h av e b eenm et ; (2 ) an y is su es ap pr op ria te ly rais edby the tax pa y er; an d (3 ) whe th er the pro po se d c ol le ct io n act io n b al an ces th e n eedforth e eff ic ie ntco ll ect io n o f ta xe s an d the leg it im at e
co nc ernof the tax pa y er tha t an y co ll ect io n a ct io n b e n o m or e in tru si ve th an
ne ces sa ry . Lun sf

or d v . Comm is si on er, 1 17 T.C. 18 3, 1 84 (20 01 ); Di am on d v
. Co m m is si on er, T.C. Mem o. 2 01 2- 90 , sl ip op . at 6 -7 ; s ee al so sec . 63 20 (c). Sect io n 6 32 3(

j)(1) pro vi de s: (1 ) Inge ne ral .--Th e Sec ret ary m ay withdraw a n ot ic e o f a l ie n fil edun de r th is sec ti on an d thi s ch ap te r sh al l b e ap pl ie d a s i f th e withdrawnno ti ce h adno t b eenfil ed , if the Secr et ary de te rm in es th at --

(A) th e fi li ng of s uc h n ot ic e was pre m atur e o r ot he rwis e no t i n a cco rd an ce wi th adm in is tra ti ve pro cedur es of the Secr et ary, (B) the tax pay er h as en te redin to anag reem en t u nd er se ct io n 6 15 9 t o s at is fy

th e ta x l iabi li ty for wh ic h the li enwas- 7 -

[* 7] im po se d b y m ean s o f in st al lm en t p aym en ts , un le ss su ch ag reem en t p ro vi de s o th erwi se , (C) the withdrawal of s uc h n ot ic e wil l fa ci li ta te th e co ll ect io n o f th e ta x l iabi li ty, or (D) 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 withdrawal of s uc h n ot ic e wou ldbe in th e b es t i nt eres ts of t he tax pa y er (a s d et erm in edby the Nati on al Tax pa y er Advo cat e) an d the Uni te d S ta te s. Pet it io ne rs co nt en d tha t the y di d n otreal iz e th e Sep te m be r 20 , 20 13 , let te r
was set ti ng up a cal l fo r a CDP h eari ng . The l et te r ex pl ai ns cle arl y th e p ur po se of th e cal l an d re qu es ts in fo rm at io n fr om pe ti ti on ers . A set tl em en t o ffi cer h as th e di sc ret io n t o d eci de when to en d the adm in is tra ti ve CDP p ro ceed in gs wher e reque st edin fo rm at io n and/o r co m pl et edform s ar e n otpro vi de d t o h er. See sec . 30 1.6 33 0- 1( e)(3 ), Q&A-E9 , Pro ced . & Adm in . Reg s. Itwas n otanab us e o f di sc ret io n fo r th e se tt le m en t o ffi cer t o re co m m en d the no ti ce o f de te rm in at io n b e
su st ai ne d a s a r es ul t o f pe ti ti on ers ’ fai lu re t o p ro vi de th e reque st edin fo rm at io n i n
a rea so nabl e ti m e. See M ur ph y v. Co m m is si on er, 1 25 T.C. 30 1. A tax pa y er m ay

off er t o c om pr om is e a Fed eral tax de btas aco ll ect io n al te rn at iv e to a pr op os edlev y . Secs . 63 20 (b )(4 ), 63 30 (c)( 2) (A)(i ii ). Sect io n 71 22 (c) aut ho riz es th e Co m m is si on er t o p res cri be gu id el in es to de te rm in e whe th er
anoff er-i n- co m pr om is e sh ou ldbe acce pt ed . The Co m m is si on er m ay

acce ptan- 8 -

[* 8] off er-i n- co m pr om is e o n o ne of t hr ee g ro un ds : d oubtas t o l iabi li ty, do ub t as to co ll ect ib il ity , andpro m ot io n o f effe ct iv e ta x a dm in is tra ti on . Sec. 3 01 .71 22
- 1( b) (1 ), (2 ), an d (3 ), Pro ced . & Adm in . Reg s.; see Sm ith v . Comm is si on er, T.C. Mem o. 2 00 7- 73 , sl ip op . at 1 4, af f’d inpart s ub no m . Kell er v . Comm is si on er, 5 68 F.3 d 7 10 (9t h C ir. 2 00 9)
. Pet it io ne rs co nt en d tha t the y wantto ha ve anoff

er-i n- co m pr om is e acc ep te d
an d the li enrem ov edonth e g ro un d o f pr om ot io n o f effe ct iv e ta x a dm in is tra ti on . The Secr et ary m ay

co m pr om is e a l iabi li ty on the gro un d o f effe ct iv e ta x adm in is tra ti on when : (1 ) co ll ect io n o f th e fu ll li ab il ity wil l cr eat e eco no m ic ha rd sh ip or ( 2) ex cep ti on al cir cu m st an ces ex is t s uc h tha t the co ll ect io n o f th e fu ll li ab il ity wou ldun de rm in e p ub li c co nf id en ce tha t the tax laws are fa irl y an d equi tabl y admin is te red . Spe lt z v . Comm is si on er, 1 24 T.C. 16 5, 1 72 -1 74 (20 05 ), aff’d, 4 54 F.3d78 2 (8 th Cir . 20 06 ); s ec. 3 01 .71 22 -1 (b )(3 ), Pro ced . & Adm in
. Reg s. 1. Eco no m ic Hard sh ip Fact or s s up po rti ng (bu t n otco nc lu si ve of) a de te rm in at io n tha t co ll ect io n
wou ldcau se eco no mic hard sh ip in cl ud e, bu t ar e n otli m it edto :

(A) Tax pa y er i s i nc ap ab le of e arn in g ali vi ng be cau se of alo ng te rm il ln es s, m ed ic al co nd it io n, o r di sabi li ty, an d i t i s re as on ab ly- 9 -

[* 9] fo res eeab le th attax pa y er’s fi na nc ia l re so ur ces wil l b e ex haus te d pr ov id in g fo r car e an d s up po rt dur in g the co ur se of t he co nd it io n; (B) Al th ou gh tax pa y er h as cert ai n m on th ly inc om e, th atin co m e is ex haus te d e ach m on th inpro vi di ng forth e car e o f de pe nd en ts with no othe r m ean s o f supp ort; an d (C) Al th ou gh tax pa y er h as cert ai n a ss et s, the tax pa y er i s u nabl e to bo rro w aga in stth e equi ty in tho se ass et s an d l iqui da ti on of t ho se as se ts to pay

ou ts tand in g t ax li ab il it ie s wo ul d re nd er the tax pa y er un ab le to m eetba si c li vi ng ex pe ns es . Sec. 3 01 .71 22 -1 (c)( 3) (i) , Pro ced . & Adm in . Reg s. Pet it io ne rs tes ti fie d tha t the y ha d g on e th ro ug h m

uc h e m ot io na l an d fin an ci al tu rm oi l o ve r th e p as t s ev eral y ears . They wan te d an OIC acce pt edso th at th ey co ul d h av e a fre shst art . Howev er, the y do no t co nt en d tha t ei th er h ada lo ng te rm il ln es s, m ed ic al co nd it io n, o r di sabi li ty. Nor d o the y cla im th atth ey ex haus t th ei r m on th ly inc om e p ro vi di ng forth e car e o f de pe nd en ts with n o o th er m ean s o f
supp ort. The y

do no t cl ai m

th atbo rro win g a ga in stth e equi ty in the ir r eal pro pe rty in te res ts wou ldren de r th em un ab le to m eetba si c li vi ng ex pe ns es . Accor di ng ly, th ey ha ve no t s ho wn tha t the co ll ect io n o f th e fu ll li ab il ity wou ldcau se eco no m ic ha rd sh ip . There fo re, p et it io ne rs do no t qua li fy foranOIC o n thi s g ro un d. 2. Co m

pe ll in g P ub li c Po li cy

or Equi ty Con si de rat io ns The Secr et ary m ay

en te r in to a co m

pr om is e to pro m ot e eff

ect iv e ta x adm in is tra ti on wher e co m pe ll in g p ub li c p ol ic y

or e qu ity co ns id erat io ns id en ti fie d- 10 -

[* 10 ] by the tax pay er p ro vi de a su ffi ci en t b as is for co m pr om is in g the li ab il ity . Id. pa ra. (b )(3 )(i i). A co m

pr om is e wil l b e jus ti fie d o nl y wher e, be cau se of
ex cep ti on al cir cu m st an ces , col le ct io n o f th e fu ll li ab il ity wou ldun de rm in e p ub li c
co nf id en ce tha t the tax laws are b ei ng adm in is te redina fai r an d e qu it ab le m an ne r. A tax pay er p ro po si ng a co m pr om is e o n the ba si s o f effe ct iv e ta x a dm in is tra ti on wil l b e ex pe ct edto de m on strat e ci rcu m st an ces th atjus ti fy a co m pr om is e ev en th ou gh a si m il arl y

si tu at edtax pa y er m ay

ha ve pa idhi s l iabi li ty in fu ll . Id. Exa m pl es of c as es wher e a co m pr om is e is all owe d fo r pu rp os es of p ub li c p ol ic y
an d e qu ity

in cl ud e: (1) a ta xp ay er wh o was ho sp it al iz edreg ul arl y fora nu m

be r of y ears an d was un ab le to m an ag e h is fin an ci al affa irs in curs si gn ifi can t t ax li ab il it ie s, p en al ti es , andin te res t an d (2 ) a t ax pa y er l earn s atau di t tha t h e rec ei ve d
erro ne ou s ad vi ce fr om

th e In te rn al Rev enue Serv ic e an d, as a res ul t, i s fa ci ng ad di ti on al tax es , pen al ti es , andad di ti on s t o t ax . Spe lt z v . Comm is si on er, 1 24 T.C. at17 3; sec . 30 1.7 12 2- 1( c)(3 )(C) (iv ), Pro ced . & Adm in . Reg s. Pet it io ne rs ha ve id en ti fie d n o p ub li c p ol ic y or e qu ity co ns id erat io ns th at
wou ldjus ti fy

a co m pr om is e o n the ba si s o f effe ct iv e ta x a dm in is tra ti on . Acco rd in gl y , th ey

do no t qua li fy

foranOIC o n thi s g ro un d. Any con te nt io ns we ha ve no t ad dr es se d are i rrel ev an t, m oo t, o r m eri tl es s.- 11 -

[* 11 ] To re fle ctth e fo reg oi ng , Deci si on wil l b e en te red fo r res po nd en t.