T.C. Memo. 2003-199

UNITED STATES TAX COURT

JOHN AND DONNA RINGGOLD, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 11961-01L. Filed July 9, 2003.

John and Donna Ringgold, pro sese.

Sylvia L. Shaughnessy, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

FOLEY, Judge: The issue for decision is whether respondent

abused his discretion in determining to proceed with collection

of petitioners’ 1997 tax liability. 
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FINDINGS OF FACT

On April 1, 1999, John and Donna Ringgold (petitioners)

executed and sent respondent Form 4549-CG, Income Tax Examination

Changes, in which petitioners agreed to the immediate assessment

and collection of additional tax liabilities for 1995 and 1997. 

The form set forth deficiencies, additions to tax, penalties, and

interest through April 21, 1999, totaling $20,100.33. In an

accompanying letter, petitioners offered to settle their entire

tax liability for $12,803.00 (i.e., the amount of the balance due

excluding additions to tax, penalties, and interest) and

requested 60 days from April 15, 1999, to secure the necessary

funds. 

Several weeks later, Mr. Ringgold asked respondent’s auditor

whether the terms of his letter had been accepted. The auditor

responded affirmatively, but was under the mistaken impression

that petitioners’ letter was merely a request for a short-term

extension of time to pay the liability. On April 6, 1999, the

auditor prepared and sent to petitioners Form 433-D, Installment

Agreement, for $20,100.33 (i.e., the entire amount of the

liability per the audit report), put a hold on the collection

activity for 120 days, and closed the file as “agreed”. On June

7, 1999, respondent made an additional assessment, and on

September 6, 2000, sent petitioners a Notice of Federal Tax Lien
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1 Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the year in issue.

Filing and Your Right to a Hearing Under IRC 63201 relating to

petitioners’ 1997 tax liability.

On September 21, 2000, petitioners timely filed Form 12153,

Request for a Collection Due Process Hearing, in which they

contended that their 1997 tax liability was satisfied pursuant to

an offer in compromise.

The Appeals officer reviewed the files and transcripts of

account and determined that respondent had not received from

petitioners Form 656, Offer in Compromise, or Form 433-A,

Collection Information Statement for Individuals. On June 12,

2001, the Appeals officer held a hearing with petitioners, during

which she explained to petitioners that settlement of tax

liabilities for less than the amount owed requires the completion

of Form 656. She informed petitioners that a binding settlement

agreement had not been executed between petitioners and the

auditor, but that petitioners could discuss an offer in

compromise or installment agreement relating to petitioners’ 1997

tax liability. Petitioners, however, declined to discuss these

collection alternatives. 
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By notice dated September 7, 2001, respondent determined to

proceed with collection. In response, petitioners, while

residing in San Diego, California, filed a petition and amended

petition on September 20, and October 18, 2001, respectively.

OPINION

Petitioners’ sole contention is that they do not owe the

liability for which the lien was recorded because they were

“given an offer in compromise in fact” by the auditor. 

Respondent contends that petitioners and the auditor did not

execute a binding agreement. We agree with respondent. 

The law regarding compromises is well established. The

regulations and procedures under section 7122 provide the

exclusive method of effectuating a compromise. Shumaker v.

Commissioner, 648 F.2d 1198, 1199-1200 (9th Cir. 1981) (citing

Botany Worsted Mills v. United States, 278 U.S. 282, 288-289

(1929)), revg. on another issue T.C. Memo. 1979-71. Petitioners

and the auditor did not enter into a binding agreement to

compromise petitioners’ 1997 tax liability. First, petitioners

did not submit Form 433-A for respondent to determine whether

there was doubt as to collectibility. See sec. 301.7122-1(a),

Proced. & Admin. Regs. Second, petitioners did not submit an

offer in compromise on the appropriate form (i.e., Form 656), and

were never notified in writing that an offer in compromise had

been accepted. Laurins v. Commissioner, 889 F.2d 910, 912 (9th
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Cir. 1989), affg. Norman v. Commissioner, T.C. Memo. 1987-265;

sec. 301.7122-1(d)(1), (3), Proced. & Admin. Regs. Finally,

there was no mutual assent because the auditor misunderstood the

nature of petitioners’ request. See Dorchester Indus. Inc. v.

Commissioner, 108 T.C. 320, 330 (1997) (stating “A prerequisite

to the formation of a contract is an objective manifestation of

mutual assent to its essential terms”) (citing Manko v.

Commissioner, T.C. Memo. 1995-10), affd. without published

opinion 208 F.3d 205 (3d Cir. 2000). Accordingly, respondent’s

determination is sustained. 

Contentions we have not addressed are irrelevant, moot, or

meritless.

To reflect the foregoing,

Decision will be entered

for respondent.