T.C. Mem o. 2 01 5- 10 3

UNITED STAT ES TAX COURT

MOHAMM AD A. KA KEH AND TONI L. KAKEH, Pet it io ne rs v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 10 72 8- 13 L. Fi le d J un e 2 , 20 15 . Tho m as Kevi n S pe nc er, fo r pe ti ti on ers . Jo hn D. Elli s, fo r res po nd en t.

MEMORANDUM OPINION LAUBER, Ju dg e: In thi s co ll ect io n due pro ces s (C DP) cas e, pe ti ti on ers se ekrev ie w pu rs ua ntto sec ti on s 6 32 0( c) an d 6 33 0( d) (1 ) of t he de te rm in at io n b y 1

All st atut ory

refe ren ces are t o the Int ern al Rev enue Co de ineffe ctat a ll 1 rel ev an t t im es , andall Ru le refe ren ces are t o the Tax C ou rt Rul es of P ract ic e an d Pro cedur e. W e ro un d a ll do ll ar am ou nt s t o the ne ares t d ol lar.- 2 -

[* 2] th e In te rn al Rev enue Serv ic e (IR S o r res po nd en t) t o uph ol d ano ti ce o f Fed eral tax li enfil in g. Th e p art ie s h av e fi le d c ro ss -m ot io ns forsu m m ary jud gm en t u nd er Ru le 12 1. Th e que st io ns forde ci si on are wh ethe r certa in li ti ga ti on pro ceed s wer e p ro pe rly tax ab le inth e y ear r ecei ve d b y pe ti ti on ers an d whe th er the IRS s et tl em en t o ffi cer ( SO) ab us edhi s d is cret io n i n re jecti ng th ei r of fer- in -co m

pr om is e (OIC) . There are n o d is pu te s o f m at eri al fact , andwe ag ree with re sp on de nton bo th po in ts . W e wil l ac co rd in gl y gra nthi s s umm ary jud gm en t m ot io n a ndde ny pet it io ne rs ’ su m m ary jud gm en t m ot io n. Bac kg ro un d The fol lo win g fa ct s ar e b as edon th e p art ie s’ pl ead in gs an d m ot io n p ap ers , in cl ud in g a tt ach edex hi bi ts an d a ffi da vi ts . See Ru le 12 1( b) . Peti ti on ers res id edin Virg in iawhen th ey

pe ti ti on edth is Co urt. InApri l 2 01 0, af

te r se ve ral y ears of l it ig at io n re ga rd in g awhi st le bl owe r cl ai m , pet it io ne r hu sb an d (M r. Kak eh ) ex ecu te d aset tl em en t ag reem en t wi th hi s fo rm er em

pl oyer. Purs ua ntto th atag reem en t h e rec ei ve d s et tl em en t p ro ceed s o f $4 33 ,08 4, o f whi ch$3 10 ,95 2 was de si gn at edco m pe ns at ory dam ag es an d $1 22 ,13 2 was de si gn at edco m pe ns at io n fo r lo stwage s. Pet it io ne rs us ed$3 85 ,24 0 of th es e se tt le m en t p ro ceed s t o p ur ch as e th e h om e in whi chth ey no w res id e.- 3 -

[* 3] Pet it io ne rs fil edth ei r 20 10 Fed eral in co m e ta x re tu rnon Octo be r 26 , 20 11 , ap pr ox im at el y

si x m on th s l at e. On thi s re turnth ey in cl ud edinth ei r gr os s i nc om e th e $ 43 3,0 84 of s et tl em en t p ro ceed s. Ho wev er, the y pa idon ly a sm al l p orti on of th e $ 12 9,2 51 tax li ab il ity rep orte d o n tha t re tu rn . On Dece m be r 5, 2 01 1, the IRS as se ss edth e o ut st an di ng tax an d a dd it io ns to tax . On J anua ry

10 , 20 12 , pet it io ne rs subm it te d an OIC on Fo rm 65 6, Offe r in Co m pr om is e, pr op os in g t o d is ch arg e th ei r ou ts tand in g t ax li ab il ity of $ 13 1,9 19 for $3 ,00 0. As th e rea so n fo r th is off er, p et it io ne rs ch eck edth e b ox cap ti on ed“ Doubt as to Co ll ect ib il ity .” They didno t ch eckth e b ox cap ti on ed“ Exc ep ti on al Cir cu m st an ces (Effec ti ve Tax Adm in is tra ti on ).” If a t ax pa y er al le ge s the lat te r ba si s fo r co m pr om is e, Fo rm

65 6 re qu ire s tha t h e subm it“ a wri tt ennarrat iv e ex pl ai ni ng * * * [h is ] ci rcu m st an ces ” an d s ho w th at“ requi rin g fu ll pa ym en t wo ul d c au se an eco no m ic ha rd sh ip .” Pet it io ne rs subm it te d wi th th ei r of fer aco m pl et edFo 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. Th is in di cat edth atth ey

ha d $ 39 7,7 10 of e qu ity

inth ei r ho m e as well as aret ire m en t acco un t wo rth $8 2,7 57 . They in cl ud eda le tt er ex pl ai ni ng th atMr. Kak ehha d m on th ly m ed ic al ex pe ns es of $ 38 4 o n a cco un t o f sp eci fie d h eal th co nd it io ns . The IRS C ol le ct io n Di vi si on reject edpe ti ti on ers ’ OIC o n the gro un d tha t the am ou nt- 4 -

[* 4] off ered , $3 ,00 0, was subs tant ia ll y les s than the ir r eas on ab le co ll ect io n po te nt ia l (R CP), wh ic h the IRS d et erm in edto be $4 02 ,08 5 (a fte r al lo win g ap pr op ria te di sc ou nt s t o the ir r ep orte d a ss etva lu es ). In M ay 20 12 pe ti ti on ers ap pe al edth is reject io n o f th ei r OIC. On J un e 1 4, 2 01 2, i n a n e ffo rt t o c ol le ctth e as se ss edtax , th e IRS sen t p et iti on ers a Not ic e o f Fed eral Tax Li enFil in g a ndYou r Ri gh t t o aHeari ng Und er IRC 6 32 0. OnJu ly 13, 2 01 2, p et it io ne rs subm it te d F orm 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 Hea rin g. Th ei r OIC ap pe al an d the ir r eque st fo r a CDP h eari ng were co ns ol id at ed , andon Jan ua ry 22 , 20 13 , pet it io ne rs ha d a face -to -fac e h eari ng with an S O fro m th e IRS App eal s Off

ic e. Dur in g the CDP h eari ng pe ti ti on ers rai se d b ot h the ir u nd erl y in g t ax li ab il ity fo r 20 10 an d the reject io n o f th ei r OIC. W ith re sp ectto th ei r un de rlyin g t ax li ab il ity , th e SO d et erm in edth atMr. Kak eh ’s set tl em en t p ro ceed s wer e n otex cl ud ab le fro m gro ss in co m e und er s ect io n 1 04 (a) an d tha t p et it io ne rs ha d p ro pe rly repo rte d th e en ti re $ 43 3,0 84 for20 10 , th e y ear i n wh ic h the y rece iv edth e m on ey . Howev er, the SO ag reedto ab at e b ot h the lat e-fi li ng ad di ti on to tax an d the fai lu re-t opa y -ti m el y

ad di ti onto tax . W ith re sp ectto th e OIC, the SO m ad e se ve ral co nc es si on s i n p et it io ne rs ’ fav or . He eli m in at edth e v al ue of p et it io ne rs ’ car f ro m hi s co ll ect io n a na lysis ; h e- 5 -

[* 5] reduc edth e co ll ect io n v al ue of p et it io ne rs ’ ho m e; an d h e acc ep te d a ll of t he ir m on th ly exp en se s as cla im ed . Desp it e th es e fav or ab le ad jus tm en ts , th e SO d et er- 2 m in edth atpe ti ti on ers ha d e qu ity of a t l eas t $ 33 7,2 91 inth ei r as se ts , whi chwas su ffi ci en t t o p ay

th ei r 20 10 tax li ab il ity

inful l. Mr. Kak ehask edth e SO to co ns id er h is ag e (6 8) , th e num be r of hi s d ep en de nt s, an d h is li mit edret ire m en t i nc om e as reas on s h e sh ou ldno t h av e to pa y th e ba lanc e due . He di d n otreque stco ns id erat io n o f an y he al th pro bl em s ex cep t t o as k tha t h is m on th ly m ed ic al ex pe ns es of $ 38 4 b e ta ke n i nt o a cco un t, wh ic h the SO ag reedto do . The SO s ug ge st eda ho m e equi ty loan o r a rev ers e m ortg ag e as a m ech an is m

foracce ss in g the equi ty in p et it io ne rs ’ ho m e, whi chwas andco nt in ue s to be un en cum

be red . Peti ti on ers refu se d t o c on si de r th es e o pt io ns . 3 Upo n re vi ew of

th e adm in is tra ti ve fil e th e SO co nf irmed th atpe ti ti on ers ’ ta x l iabi li ty for 2 01 0 h adbe enpro pe rly ass es se d a ndth atall othe r requi rem en ts of Thi s l as t co nc es si onwas n ottri vi al . Peti ti on ers ’ cl ai m edho us eh ol d e x- 2 pe ns es , whi chth ey

were n otask edto subs tant ia te , in cl ud ed$3 ,12 6 o f m on th ly ho us in g a ndut il ity

co st s, ev enth ou ghth ey

ha d n o e nc um

br an ce o n the ir h om e. Pet it io ne rs all eg e in th ei r pe ti ti on th atth ey subs eque nt ly rais edth ei r of fer 3 fro m $3 ,00 0 t o $ 18 ,00 0, wi th th e requi si te fun ds to be withd rawnfro m Mr. Kak eh ’s ret ire m en t ac co un t. The SO inhi s ac ti vi ty repo rt m ak es no refe ren ce t o anin crea se d o ffer , andpe ti ti on ers pro vi de d n o d oc um en tary ev id en ce tha t s uc h a n of fer was actua ll y

m ad e. Becaus e we wou ldreac h the same con cl us io n re ga rd le ss of whet he r pe ti ti on ers ’ fin al off er was $3 ,00 0 o r $1 8,0 00 , any factu al di sp ut e o n th is po in t i s i m

m at eri al to ou r de ci si on .- 6 -

[* 6] ap pl ic ab le law an d a dm in is tra ti ve pro cedur e h adbe enm et . He det erm in ed th atpe ti ti on ers were i ne li gi bl e fo r anOIC b ecau se th ei r as se ts were s uf fic ie ntto pa y th e o ut st an di ng li ab il ity

inful l. The SO acco rd in gl y clo se d the cas e, an d o n Apr il 18 , 20 13 , th e IRS is su eda no ti ce o f de te rm in at io n re jecti ng pe ti ti on ers ’ pr op os edOIC an d s us ta in in g the no ti ce o f ta x l ie n fi li ng . Peti ti on ers ti m el y so ug htrev ie w inth is Co urt, an d o n J anua ry 12 , 20 15 , th e p art ie s fi le d c ro ss m ot io ns forsu m

m ary jud gm en t. Dis cu ss io n A. Su m

m ary Ju dg m en t The pu rp os e o f su m

m ary jud gm en t i s t o e xp ed it e li ti ga ti on an d a vo idco st ly, ti m e-co ns um in g, an d u nn eces sa ry tri al s. Fl a. Peac h C or

p. v . Comm is si on er, 9 0 T.C. 67 8, 6 81 (19 88 ). Und er Ru le 12 1 the Co urt m ay gra ntsu m

m ary jud gm en t whe n the re i s n o g enui ne di sp ut e as to any m at eri al factan d ade ci si on m ay be ren de redas am at te r of

law. Ru le 12 1( b) ; Su nd st ran d C or p. v . Commis si on er, 9 8 T.C. 51 8, 5 20 (19 92 ), aff’d, 1 7 F .3d96 5 (7 th Cir . 19 94 ). The p art ie s ag ree t ha t the re are n o m at eri al fact s i n d is pu te , andwe co nc lu de th atth is cas e is ap pr op ria te for su m m ary ad jud ic at io n.- 7 -

[* 7] B. Und erl y in g Li ab il ity Neit he r se ct io n 6 32 0( c) n orsec ti on 63 30 (d )(1 ) pr es cri be s the st an da rdof rev ie w th atth is Co urt s ho ul d app ly in re vi ewin g a n IR S adm in is tra ti ve de te rm in at io n i n aCDP cas e. The g en eral pa ram et ers forsu chrev ie w are m ark edou t b y ou r pr eced en ts . Whe re the am ou ntof t he tax pa y er’s und erl y in g t ax li ab il ity is at is su e, we rev ie w th e Co m m is si on er’s d et erm in at io n d e n ov o. Go za v . Comm is si on er, 1 14 T.C. 17 6, 1 81 -1 82 (20 00 ). Sect io n 6 33 0( c)(2 )(B) pe rm it s a t ax pa y er t o c ha ll en ge ina CDP h eari ng th e ex is te nc e o r am ou ntof h is un de rlyin g t ax li ab il ity on ly whe re (a s i s tru e h ere) he di d n otrece iv e a n ot ic e o f de fic ie nc y or o th erwi se have a pr io r op po rtu ni ty to co nt es t tha t l iabi li ty. Res po nd en t ag rees th atpe ti ti on ers pro pe rly rais edth ei r un de rlyin g t ax li ab il ity

at t he CDP h eari ng . See s ec. 3 01 .63 20 -1 (f)(2 ), Q&A-F3 , Pro ced . & Adm in . Reg s.; see als o Gi am el li v. Co m m is si on er, 1 29 T.C. 10 7, 1 15 (2 00 7) . W e wil l ac co rd in gl y rev ie w de n ov o the IRS d et erm in at io n o n thi s p oi nt . Sect io n 6 1( a) p ro vi de s tha t “ [e]xce ptas o th erwi se pro vi de d * * * , gro ss in co m e m ean s al l i nc om e fro m what ev er s ou rce d eri ve d.” See Co m m is si on er v . Glen sh aw Glas s C o., 3 48 U.S. 42 6, 4 29 -4 30 (19 55 ). Pro ceed s fr om set tl em en t o f li ti ga ti on co ns ti tu te gro ss in co m e unl es s the tax pa y er p ro ve s tha t s uc h p ro ceed s fal l wi th ina sp eci fic st atut ory ex cl us io n. Se e Co m

m is si on er v . Sch le ie r, 51 5 U.S.- 8 -

[* 8] 32 3, 3 28 -3 37 (19 95 ); S av e v . Comm is si on er, T.C. Mem o. 2 00 9- 20 9, 9 8 T.C.M. (CC H) 21 8; see als o, e.g ., sec . 10 4( a)(2 ) (ex cl ud in g fr om gro ss in co m e da m ag es rece iv ed“ onacco un t o f pe rs on al ph y si cal in juri es or p hysic al si ckne ss ”). Pet it io ne rs rece iv ed$4 33 ,08 4 i n s et tl em en t p ro ceed s i n 2 01 0 a ndco rrec tl y rep orte d the en ti re am ountas g ro ss in co m e o n the ir 2 01 0 re tu rn . Peti ti on ers do no t co nt en d tha t the ir s et tl em en t p ro ceed s fa ll un de r any st atut ory ex em pt io n o r ex cl us io n, n ordo th ey

all eg e an y

fact s tha t wo ul d s up po rt s uc h afin di ng . Thei r arg um en t atth e CDP h eari ng was l im it edto ti m in g. Th ey co nt en de d tha t the se tt le m en t p ro ceed s, p art ia ll y de si gn at edco m

pe ns at io n fo r lo stwage s, s ho ul d b e al lo cat edto Mr. Kak eh ’s com pe ns at io n fo r 20 04 an d b e ta xe d a s i f he ha d re cei ve d th e in co m e in th aty ear. W e d is ag ree. Am ou nt s ar e in cl ud edingro ss in co m e fo r th e ta xabl e y ear i n whi chth ey

are ac tu al ly or co ns tru ct iv el y rece iv edby a cash ba si s t ax pa y er. Sec . 45 1( a); Greenv. Co m

mis si on er, T.C. Mem o. 2 01 4- 23 (fi nd in g tha t t ax pa y er’s se tt le m en t awa rd , recei ve d i n 2 00 9 b utrel at in g t o l os t wag es for20 02 an d 2 00 3, was pro pe rly tax ab le in20 09 ); Kn ol l v . Comm is si on er, T.C. Mem o. 2 00 3- 27 7 (ap pl y in g thi s p rin ci pl e with re sp ectto a si m il ar awar d) . Peti ti on ers rece iv edth e se tt le m en t p ro ceed s i n 2 01 0, an d the re i s n othi ng inth e rec or d t o i nd ic at e th atth ey- 9 -

[* 9] “ co ns tru ct iv el y ” rec ei ve d a ny po rti on of t he pro ceed s b efo re 2 01 0. We acco rd in gl y

su st ai n re sp on de nt ’s det erm in at io n o n thi s i ss ue . C. Abu se of Di sc ret io n W e rev ie w th e SO’s adm in is tra ti ve de te rm in at io ns reg ard in g n on li ab il ity is su es forab 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 08 ); Goz a, 11 4 T.C. at18 2. Ab us e o f di sc ret io n e xi st s wh ena de te rm in at io n i s arbi tra ry , cap ric io us , or wi th ou t s ou ndba si s i n fa ctor l aw. See M ur 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 ). In d eci di ng whe th er the SO ab us edhi s d is cret io n i n s us ta in in g the no ti ce o f li enfil in g, we co ns id er wh ethe r he : (1 ) pr op erl y ve rif ie d tha t the requi rem en ts of a ny app li cab le law or a dm in is tra ti ve pro cedur e h av e b eenm et ; (2 ) co ns id eredan y rel ev an t i ss ue s pe ti ti on ers rai se d; an d (3 ) de te rm in edwhet he r “ an y pro po se d c ol le ct io n a ct io n ba lanc es 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 ern of th e p ers onth 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 .” See se cs . 63 20 (c), 6 33 0( c)(3 ). Ourrev ie w of the reco rdrev eal s tha t the SO co nduc te d ath or ou gh rev ie w of pe ti ti on ers ’ acco un t, d et erm in edth atth e ta x h adbe enpro pe rly ass es se d, an d ve rif ie d tha t o th er re qu ire m en ts of app li cab le law an d a dm in is tra ti ve pro cedur e- 10 -

[* 10 ] were fo ll owe d. Pe ti ti on ers ’ pr im ary co nt en ti on is th atth e SO ab us edhi s di sc ret io n b y

gi vi ng in su ffi ci en t co ns id erat io n t o the ir p ro po se d OIC . Sect io n 7 12 2( a) au th or iz es th e IRS to co m pr om is e anou ts tand in g t ax li ab il ity . The reg ul at io ns setforthth ree g ro un ds forsu chco m pr om is e: (1) do ub t as to li ab il ity ; (2 ) do ub t as to co ll ect ib il ity ; o r (3 ) pr om 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 ), Pro ced . & Adm in . Reg s. Th e Sec ret ary m ay co m pr om is e a t ax li ab il ity

ba se d o n d oubtas t o c ol le ct ib il ity wher e th e ta xp ay er’s as se ts an d i nc om e ren de r fu ll co ll ect io n u nl ik el y . Id. s ub pa ra. (2 ). Co nv ers el y th e IRS m ay rejectanOIC whe re the tax pa y er’s RCP is gre at er tha n the am ou nthe pro po se s t o p ay . See J oh ns on v. Co m m is si on er, 1 36 T.C. 47 5, 4 86 (20 11 ), aff’d wi th ou t publ is he d o pi ni on , 50 2 F ed . App x. (D.C. Ci r. 20 13 ). App eal s o ffi cers are g en eral ly dire ct edto rejectoff

ers subs tant ia ll y

be lo w th e ta xp ay er’s RCP wher e th e o ffer i s p rem is ed , as i t was he re, o n d oubtas t o c ol le ct ib il ity . See Re v. Pr oc . 20 03 - 71 , 20 03 -2 C.B. 5 17 . Thi s C ou rt d oe s n otin de pe nd en tl y rev ie w th e rea so nabl en es s o f th e ta xp ay er’s p ro po se d c ol le ct io n a lt ern at iv e. Our re vi ew is li m it edto asc ert ai ni ng whet he r th e SO’s de ci si on to rejectth atoff er was arb itrary, capri ci ou s, o r witho utso un d ba si s i n l aw orfact . Mur ph y , 12 5 T.C. at32 0. We do no t s ub st itut e o urjud gm en t- 11 -

[* 11 ] forth atof t he SO as t o the acce pt ab il ity of apa rti cu lar of

fer. See , e.g., Jo hn so n, 1 36 T.C. at 4 88 . Pet it io ne rs du rin g 2 01 0 re cei ve d s et tl em en t p ro ceed s o f $4 33 ,08 4 andus ed $3 85 ,24 0 o f th is m on ey

to pu rch as e a h om e. They do no t d is pu te th e SO’s de te rm in at io n tha t the y

no w hav e atlea st$3 37 ,29 1 o f equi ty in the ir a ss et s. By bor ro win g a ga in stth es e as se ts , pet it io ne rs co ul d h av e d is ch arg edth ei r 20 10 tax li ab il ity inful l; th e co nv ers io n o f cas h i nt o re al pro pe rty didno t re li ev e th em of th is res po ns ib il ity . The SO d idno t ab us e h is di sc ret io n b y de cl in in g p et it io ne rs ’ of fer t o d is ch arg e th ei r $1 31 ,91 9 t ax li ab il ity for$3 ,00 0. Se e, e.g ., Reedv. Co m m is si on er, 1 41 T.C. 24 8, 2 56 -2 57 (20 13 ); B ro m ba chv. Co m

m is si on er, T.C. Mem o. 2 01 2- 26 5, at*2 1; Tay lo r v. C omm is si on er, T.C. Mem o. 2 00 9- 27 , 97 T.C.M. (CC H) 11 09 , 11 15 (no ti ng SO’s su gg es ti on of arev ers e m ortg ag e as a m etho d o f sa ti sf

y in g t ax pa y er’s l iabi li ty w itho utcrea ti ng eco no m ic hard sh ip ); Lin dl ey v. Co m m is si on er, T.C. Mem o. 2 00 6- 22 9 (f in di ng th atSO di d n otab us e hi s d is cret io n b y

reject in g OIC th atwas $ 25 ,53 5 b el ow t axpa y er’s RCP ), aff’d o n th is is su e sub n om . Kell er v . Comm is si on er, 5 68 F.3d71 0 (9 th Cir . 20 09 ). Altho ug h p et it io ne rs ba se d the ir OIC on do ub t as to co ll ect ib il ity , th ey co nte ndinth ei r su m

m ary jud gm en t p ap ers th atth e SO sh ou ldha ve co ns id eredanalte rn at iv e g ro un d fo r co m pr om is e, na m el y , “pr om ot io n o f effe ct iv e ta x- 12 -

[* 12 ] admin is tra ti on .” See s ec. 3 01 .71 22 -1 (b )(3 ), Pro ced . & Adm in . Reg s. Th is gr ou ndm ay

jus ti fy co m pr om is e whe re fu ll co ll ect io n “ wou ldcau se th e ta xp ay er eco no m ic ha rd sh ip ,” ib id ., by ren de rin g h im

“un ab le to pa y

hi s * * * reas on ab le ba si c li vi ng ex pe ns es ,” se c. 30 1.6 34 3- 1( b) (4 ), Pro ced . & Adm in . Reg s. Th is m ay be tru e, fo r ex am

pl e, whe re the tax pa y er’s m ed ic al co nd it io n i s s o s ev ere tha t h is

“ fin an ci al res ou rces wil l b e ex haus te d p ro vi di ng forcare an d s up po rt dur in g the co ur se of t he co nd it io n.” Sec. 3 01 .71 22 -1 (c)( 3) (i) (A), Pro ced . & Adm in . Reg s. Pet it io ne rs co nt en d tha t M r. Kak eh ’s hea lth p res en te d aco nd it io n o f th is so rt. In th ei r vi ew, a rem an d t o the IRS Ap pe al s Off ic e is ap pr op ria te be cau se th e rec or d do es no t es tabl is h tha t the SO pro pe rly con si de redth es e m at te rs . W e are unpe rs ua de d b y

th is arg um en t. Pet it io ne rs di d n oturg e “ ex cep ti on al ci rcu m st an ces ” o r “pr om ot io n o f effe ct iv e ta x a dm in is tra ti on ” as gro un ds forco m pr om is e ei th er o n the ir F orm 65 6 o r atth e IRS App eal s Off ic e. Nor d idth ey

de sc rib e Mr. Kak eh ’s m ed ic al co nd it io n a s o ne th atco ul d e xh au stth ei r fi na nc ia l res ou rces du rin g the ne ar t erm . Ind eed , un ti l the ir m ot io n fo r su m m ary jud gm en t, pe ti ti on ers m en ti on edMr. Kak eh ’s hea lth o nl y inco nn ect io n wi th th e $ 38 4 m on th ly cos t o f hi s m ed ic at io ns , whi chth e SO al lo wedinful l wh enco m pu ti ng pe ti ti on ers ’ RCP. Se e Jo hn so n v . Commis si on er, T.C. Mem o. 2 00 7- 29 (ho ld in g th atth e SO p ro pe rly con si de redth e ta xp ay er’s m ed ic al co nd it io n b y all owi ng th e- 13 -

[* 13 ] ful l am ou ntof m ed ic al ex pe ns es cla im ed ), aff’d i n re le va ntpa rt s ub no m . Kell er, 5 68 F.3d71 0. Th is Co urt wi ll no t co ns id er s ect io n 6 33 0( c)(2 ) is su es th at were n otpro pe rly rais edat t he CDP h eari ng . See Giam el li , 12 9 T.C. at11 5. Bec au se pe ti ti on ers di d n otadva nc e “pr om ot io n o f effe ct iv e ta x a dm in is tra ti on ” o r th e requi si te supp orti ng fact s atth e CDP h eari ng , we wil l n otco ns id er the se arg um en ts inrev ie win g the SO’s det erm in at io n. Se e ib id .; Ma ga nav. Co m m is si on er, 1 18 T.C. 48 8, 4 93 (20 02 ). Mo reo ve r, rem an d i s ap pr op ria te on ly whe re a n ew he ari ng is jus ti fie d a nd wil l b e p ro du ct iv e. Pet it io ne rs off eredto co m

pr om is e th ei r $1 31 ,91 9 t ax li ab il ity fo r $3 ,00 0 e ve n tho ug h the y ha d e qu ity

inass et s o f atlea st$3 37 ,29 1. Th ey fla tl y refu se d t o c on si de r an y

form of b orro win g a ga in stth ei r un en cu m be redreal est at e. Eve n i f we acc ep t the ir u ns up po rte d a ll eg at io n tha t the y lat er i nc reas edth ei r of

fer to $1 8,0 00 , th atoff

er was st il l a s m al l fr act io n o f th ei r ta x l iabi li ty andof t he ir ab il ity to pa y . The p ur

po se of arem an d i s t o fa ci li ta te th e co rrec ti on of e rro rs or ov ers ig ht s b y

th e App eal s o ffi cer, n otto affo rda “ do ov er” t o t ax pay ers who se po si ti onat t he CDP h eari ng was u nr eas on ab le . It ap pe ars to us th atpe ti ti on ers are se ek in g a“ do ov er” h ere. Pet it io ne rs pre se nt edMr. Kak eh ’s hea lth t o the IRS Ap pe al s Off ic e as a rel at iv el y st ab le co nd it io n tha t re qu ire d the ex pe nd itur e o f $3 84 pe r m on thon- 14 -

[* 14 ] m ed ic at io ns . If hi s co nd it io n s ho ul d d ecl in e to th e p oi ntwher e “ itis reas on ab ly fores eeab le th at* * * [p et it io ne rs ’] fin an ci al res ources wil l b e ex haus te d p ro vi di ng for

[hi s] care a ndsupp ort,” s ee s ec. 3 01 .71 22 -1 (c)( 3) (i) (A), Pro ced . & Adm in . Reg s., p et it io ne rs are fr ee t o s ub m ita ne w OIC pr em is edon su chfact s. Ho wev er, the SO di d n otab us e h is di sc ret io n i n re jecti ng th e o ffer th ey actua ll y m ad e o n the ba si s o f th e rec or d tha t was actua ll y be fo re h im . 4

Pet it io ne rs in cl ud edwith the ir s umm ary jud gm en t p ap ers a do ct or ’s no te 4 de sc rib in g M r. Kak eh ’s m ed ic al co nd it io n. Th is no te was n otpre se nt edto th e SO du rin g the CDP h eari ng , whi choc curredalm os t two years p rev io us ly. Pet it io ne rs do no t co nt en d tha t M r. Kak eh“ ha s ex pe rie nc eda m at eri al ch an ge incir cum st an ces be twee n the ti m e o f th e se ct io n 6 33 0 h eari ng an d the tri al th ataffe ct s the RCP c al cu la ti on .” See Gu ru le v. Co m mis si on er, T.C. Mem o. 2 01 5- 61 , at * 35 (fi nd in g tha t the de ath o f th e ta xp ay ers ’ so n fo ll owi ng is su an ce o f no ti ce o f de te rm in at io n c au se d a“ m at eri al ch an ge incir cum st an ces ” aff ect in g the ir abi li ty to pa y ). In u rg in g re m an d, p et it io ne rs rel y he av il y on And ers on v. Co m

m is si on er, T.C. Mem o. 2 01 3- 26 1, an d P om ero y v. Co m m is si on er, T.C. Mem o. 2 01 3- 26 . Tho se cas es are d is ti ng ui sh ab le ; i n e ach th e ta xp ay er p res en te d v ery se rio us m ed ic al co nd it io ns du rin g the CDP h eari ng it se lf a s a g ro un d fo r co m pr om is e ba se d o n “ ex cep ti on al cir cu m st an ces .” Cf. And ers on , T.C. Mem o. 2 01 3- 26 1, at *1 0 (Ap pe al s Off

ic e was in fo rm edth atth e ta xp ay er h adbe endi ag no se d wi th pr os ta te can cer andha d h adtwo he artatt ack s) ; Po m ero y , T.C. Mem o. 2 01 3- 26 , at *6 (App eal s Off

ic e was in fo rm edth atth e ta xp ay er h adsu ffer eda stro ke an d was ne ar d eath) . Peti ti on ers adva nc edno co m pa rab le arg um en t o r fac ts to th e SO h ere.- 15 -

[* 15 ] Fi nd in g n o abu se of d is cret io n i n a ny resp ect , we con cl ud e th atres po nd en t is en ti tl edto jud gm en t as a m at te r of law an d s us ta inth e supp le m en ta l n ot ic e o f de te rm in at io n i ss ue d Ap ril 18 , 20 13 . To refl ectth e fo reg oi ng , An ap pr op ria te ord er an d d eci si on wil l b e en te red .