T.C. Su m m ary Op i n i o n 2 0 2 1 -8

UNITED STATES TAX COURT
IVAN T. CLOVER AND ESTHER O. CLOVER, Pet i t i o ners v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 1 4 9 44 -1 8 SL. Fi l edAp ri l 1 4 , 2 0 2 1
.
Iv an T. Cl o v er an dEs th er O. Cl o v er, p ro s es e. Su s an T. M o s l ey an dCat h eri n e J . Cab al l ero , fo r res p o n den t .

SUM M ARY OPINION GUY, Sp eci al Tri al J u d g e: Th i s co l l ect i o n rev i ew cas e was h eard p urs u an t t o the p ro v i s i o n s o f s ect i o n 7 4 6 3 o f t he In t ern al Rev en u e Co de i n effect wh en th e p et i t i o n was fi l ed
. 1 Pu rs u an t t o s ect i o n 7 4 6 3(b ), t h e d eci si on t o b e en t ered i s n o t

1 Un l es s o t h erwi s e i nd i cat ed , al l s ect i o n referen ces are t o th e In t ern al (co n ti n u ed ...) Served 04/14/21-2
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rev i ewab l e b y

an y o t her co u rt , an d t h i s o p i n i o n s h al l n o tb e t reat ed as p reced en t fo r an y o t h er cas e. Th e In t ern al Rev en u e Serv i ce (IRS) Offi ce o f Ap p eal s (Ap peal s Offi ce) i s su eda n o t i ce o f d et erm i n at i o n t o p et i t i o n ers s u s t ai n i n g a p ro p o s edl ev y act i o n t o co l l ectu np ai d Fed eral i nco m e t ax an drel at ed as ses s m en t s fo r t h e t ax ab l e y ears 2 0 1 2 , 2 0 1 3 , an d 2 0 1 4 (y ears i n i s s u e). Pet i t i o n ers , h u s b an d an dwi fe, i n v o k edth e Co u rt ’ s juri s d i ct i o n b y

fi l i n g a t i m el y

p et it i on fo r rev i ew u n d er s ect i o n 6 3 30 (d ). Pet i t io n ers res i d edi n Cal i fo rn i a wh en th e p et it i on was fi l ed
. Back gro u n d I. Pet i t i o n ers ’ Tax Retu rn s 2 A. 2 0 1 1 Pet i t i o ners fi l eda t i m el y

jo i n tFed eral i n co m e t ax return fo r t he t ax ab l e y ear 2 0 1 1 rep o rt i n g t ax du e o f $ 7 ,2 0 3 . Pet i t i o n ers fai ledt o rem itfu l l p aym en t wi t h

1 (...co n t in u ed ) Rev en u e Co de o f 1 98 6 , as am en d edan di n effect atal l rel ev an tt i m es . Al l m o net ary am o un t s are ro un dedt o th e n eares td o ll ar. 2 Th e reco rdi ncl u d es Fo rm s 4 3 40 , Cert i fi cat e o f As s es s m en t s , Paym en t s , an d Oth er Sp eci fi edM at t ers , o r s i m i l ar t y pes o f t ran s cri p t s o f acco u n t , s u m m ari zi n g th e act i o n s t ak en i n p et i t i o n ers ’ acco u n t s fo r t h e t ax ab le y ears 2 0 0 8 t o 2 0 1 4.-3
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t h ei r t ax retu rn . Res p o n d en ts ub s eq u en t l y as s es sedth e rep o rt edt ax , ad d i t i o n s t o t ax fo r fai l ure t o t i m el y

p ay an dfai l u re t o p ay es t im at edt ax , an di n t eres t . B. 2 0 1 2 , 2 0 13 , an d2 0 1 4 Pet i t i o ners fi l edt i m el y

jo i n tFed eral i n co m e t ax retu rn s fo r 2 0 1 2 , 2 0 1 3 , an d 2 0 1 4 rep o rt i n g t ax du e o f $ 3 ,9 1 0 , $ 3 ,9 0 4 , an d$ 4 ,8 3 5, res p ect iv el y . Pet i t i o n ers fai l edt o rem i t fu l l p aym en twi th th ei r t ax retu rn s . Res p o n den ts ub s eq uen t l y as s es s edth e rep ort edt ax , ad d i t i o n s t o t ax fo r fai l ure t o t i m el y p ay an dfai l u re t o p ay es t i m at edt ax , an di nt eres t, fo r each o f t h o s e t ax ab l e y ears . II. Co l l ect i o n Du e Pro ces s OnNo vem

b er 2 7, 2 0 1 7 , th e IRS s en ta n o ti ce o f i n t en t t o l ev y t o p et i t i o n ers reg ard i n g th e u np ai d t ax , ad d i t i o n s t o t ax , an di n t eres tfo r t h e y ears i n i s s u e. In a t i m el y requ es tfo r an ad m in i s t rat i v e h eari n g , p et i t i o n ers s t at edi n rel ev an tp artth at t h ey were u n ab le t o p ay

th e t ax du e fo r t he y ears i n i s s ue an das s ert edth atth ey

“ were n o tl i ab l e” fo r t h e am o u n t s th atth e IRS was s eek i n g t o co ll ectb ecau s e t h ey h ad al read y

p ai do v er $ 1 6 ,8 4 0 fo r t h e y ears i n i s s u e. Pet i t i o n ers s ub m i t t eda s ch edu l e t o th e Ap p eal s Offi ce l i st i ng p aym en t s (b y ch eckn u m

b er, d at e, an d
am ou n t ) wh i ch th ey

b el iev edthe IRS h adm i s ap pl i ed
. OnAp ri l 2 0 , 2 0 1 8, p et i t i o n ers ’ rep res en t at i v e p art i ci p at ed i n an Ap p eal s Offi ce ad m i n i s t rat i ve h eari ng . Inres p o n s e t o p et i t io n ers ’ cl ai m th atth e IRS h ad-4
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fai l edt o p ro p erl y

acco u n t fo r cert ai n p aym en t s fo r t he y ears i n i s s u e, t he Ap p eal s Offi ce p ro v i dedtran scri p t s o f acco u n t fo r t he t ax ab l e y ears 2 0 0 8 t o 2 0 14 an d req u es t edth at p et i t io n ers s ub m i tco p i es o f can cel ed ch eck s rel at edt o an y p aym en t s t hatthey

b el i ev edh adb een m i s ap p l i ed
. OnM ay 2 3 , 2 0 1 8 , n o th av i n g h eard fro m p et i t i o n ers , th e Ap p eal s Offi ce ag ai n req u es t edth atth ey s ub m i tco p ies o f an y

ch eck s rel at edt o p urp o rt ed ly
m i s ap p li edp aym en t s an di nd i cat edth atp et it i on ers co u l den t er i n t o a s t ream l i n ed
m o nt h l y p aym en t p l an o f $ 1 7 9 fo r t h e y ears i n i s s u e i f th ey s ub m i t t edFo rm 4 3 3 -D, In s tal l m en tAg reem en t , o n o r b efo re J u n e 1 1 , 2 0 1 8 . Pet i t i o n ers s ub s eq u en t l y

s ub m it t edFo rm

4 3 3 -D t o th e IRS fo r t h e t ax ab l e y ears 2 01 2 t o 2 0 15
an d 2 0 1 7 . Th e IRS d i dn o tag ree t o t h i s p ro p o s edi ns t al l m en tag reem en t . As o f J u n e 2 9 , 2 0 1 8, n o t h av i n g recei v edan y ad di t i o n al i n fo rm at i o n fro m p et i t i o n ers , th e Ap p eal s Offi ce cl o s edth e ad m i n is t rat i v e p ro ceed i ng . Ab ou tth at s am e t i m e, p et i t i o n ers ’ rep res en t at i v e s en ta l et ter t o th e Ap p eal s Offi ce en cl o s i n g co p ies o f n u m ero us can cel edch eck s an ds t at i n g thatp et it i on ers were wi l l in g t o en t er i nt o a s t ream l i n edp aym en tp l an . OnJ u l y 3 , 2 0 1 8 , th e Ap p eal s Offi ce i s s u ed t h e n o ti ce o f d et erm i n at i o n ati s s u e i n th i s cas e s u s t ai n i n g th e p ro po s edl ev y act i o n fo r t h e y ears i n i s su e.-5
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III. Pet i t io n ers ’ Can cel edCh eck s Th e reco rdi n cl u d es th e can cel edch eck s th atp et i t i o n ers b el at ed l y s ub m i t t ed t o the Ap p eal s Offi ce i n s up p o rto f t h ei r cl ai m th atthe IRS h adm i s ap pl i ed p aym en t s fo r t h e y ears i n i s su e. No n e o f t h e ch eck s d es i g n at es o r o t h erwi s e s p eci fi es th e t ax ab l e y ear o r th e u np ai dt ax l iab i l i t y t o wh i ch t h e p aym en t s s h o u l d b e ap pl i ed
. Di s cu ss i o n Sect io n 6 3 3 0 p ro v i des p ro cedu res fo r ad m in i s t rat i ve an d ju d i ci al rev i ew o f t h e Co m m i s s i o n er’ s p ro p os edl ev y act i on s . An y p ers on recei vi n g a n o t i ce o f p ro p os edl ev y

m ay req u es tan ad m i n i s t rat iv e h eari n g wi th the Ap p eal s Offi ce. Th e Ap p eal s Offi ce i n turn i s o b l i g edt o 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 o r ad m i n i s t rat i v e p ro cedu re h av e b een m eet . Sec. 6 3 3 0 (c)(1 ), (3 )(A). Th e p ers o n m ay

rai s e atth e ad m in i st rat i ve h eari ng an y rel ev an ti s s u e rel at i n g t o th e u np ai dt ax o r t h e co l l ect i on act i o n , i n cl u d in g ch al l en g es t o t h e ap p ro p ri at en es s o f t h e co l l ect i o n act i o n an do ffers o f co l l ect i on al t ern at i v es . Sec. 6 3 3 0 (c)(2 )(A), (3 )(B). Th e p ers o n m ay al s o rai s e at t h e h eari n g ch al l en ges t o th e ex i s t en ce o r am o u n to f t h e u n d erl y i n g l i ab il it y i f t he p ers o n d i dn ot recei v e a s t atu to ry n o t i ce o f d efi ci en cy

fo r s u ch t ax l i ab i l it y

o r d idn o t o t h erwi s e h av e an o p p o rtu ni t y

t o d is p ut e s u ch l i ab i l i t y . Sec. 6 3 3 0 (c)(2 )(B). Fi nal l y , th e Ap p eal s-6
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Offi ce m u s tco n s i der wh et her t h e co l l ect i o n act i on b al an ces th e n eedfo r effi ci en t co l l ect i o n ag ai ns t t h e p ers o n ’ s co ncern t hatco l l ect io n b e n o m o re i n t ru s i v e t h an n eces s ary . Sec. 6 33 0 (c)(3 )(C). Sect io n 6 3 3 0 (d ) v es t s th e Co u rtwi t h juri s di ct io n t o rev i ew ad m in i s t rat i v e d et erm i n at i o n s i n co ll ect i o n act i o n s . Wh ere t h e u n d erl y i n g t ax l i ab i l it y i s p ro p erl y ati ss u e, we ap p l y a d e n o vo s t an d ardo f rev i ew. Go za v . Co m m i s s io n er, 1 1 4 T.C. 1 7 6 , 1 8 1 -1 8 2 (2 0 00 ). W e rev i ew i s s u es th atd o n o t rel at e t o t h e u n derl y i n g t ax l i ab i l i t y fo r ab u s e o f d is cret i on . Id . at1 8 2 . An ab us e o f d i s cret i o n o ccu rs i f t h e Ap p eal s Offi ce ex erci s es i t s d is cret i o n “ arb i t rari ly , cap ri ci o u sl y , o r wi t h o u ts o u n d b as i s i n fact o r l aw.” W o od ral v . Co m m i s s i on er, 1 1 2 T.C. 1 9 , 2 3 (1 9 9 9 ). Res p o n d en ts eek s t o co l l ect p et i t io n ers ’ u np ai dt ax , ad d i t i o n s t o t ax , an d i n t eres tfo r t h e y ears i n i s s u e. Al t h ou g h p et i t i o n ers m ai n tai n th atth ey ch al l en g ed t h e am o un to f t h ei r u n d erl y in g t ax l i ab i l i t i es fo r t h e y ears i n i s s u e b efo re t h e Ap p eal s Offi ce, t h e ad m i ni st rat i v e reco rdd o es n o ti n cl u d e an y ev i d en ce o f s u ch a cl ai m . Th e reco rdrefl ect s th atp et i t i o n ers fi rs tas s ert edthatth ey m ay h av e i n co rrect l y

rep o rt edt ax du e fo r th e y ears i n i s s u e o n l y aft er t h e Ap p eal s Offi ce h ad
co m p l et edi t s ad m i n i st rat i v e rev i ew. Co n s eq u en t l y , p et it i o n ers ’ at t em p tt o ch al l en g e t h e am o u n t o f t h ei r u n d erl y i n g t ax l i ab il i ti es i s b ey o n dth e s co p e o f o u r rev i ew i n thi s cas e. See 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 4 -1 1 5 (2 0 0 7 ).-7
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Pet i t i o ners d i das s ert , h o wev er, t h atth e p ro p o s edl ev y act i o n s h o u l dn o tb e s u s t ai n edb ecau s e t h e IRS h adm i s ap p l i edth ei r p aym en t s an d a p ro p er acco u n t i n g wo u l ds h o w th atth ey

fu l l y p ai dth e am o un t s as s es s edfo r t h e y ears i n i s s ue. Th e reco rds h o ws o t herwi s e. Pet i t i o ners s en t n u m ero us ch eck s t o th e IRS wi th o u td es i g n at in g t h e s p eci fi c t ax ab l e p eri o dt o wh i ch t h e p aym en t s were t o b e ap p l ied . Un der t he ci rcu m s t an ces , th e IRS was free t o “ ap p l y th e p aym en tt o p eri o ds i n t h e o rd er o f p ri o ri t y thatth e Serv i ce d et erm i n es wi l l s erv e i t s b es t i nt eres t . ” See Rev . Pro c. 2 0 0 2 -2 6 , s ec. 3 .0 2 , 2 0 0 2 -1 C.B. 7 4 6 , 7 4 6 . Th e reco rdrefl ect s th atth e IRS p ro p erl y ap p l i edp et i t i o n ers ’ p aym en t s t o o ffs etth ei r u np ai dt ax , ad d i t i o n s t o t ax , an d i n teres tdu l y

as s es s edfo r t h e t ax ab l e y ear 2 0 1 1, wi t h th e b al an ce o f th e p aym en t s ap p l i edt o th e y ears i n i s s ue an d t ax ab l e y ears th ereaft er. As a fi n al m at ter, p et i t io n ers as s ertth atthey accep tedth e Ap p eal s Offi ce’ s o ffer t o en t er i n to a s t ream l i n edi n st al lm en tp aym en tp lan . Th e reco rds h ows th at t h e Ap p eal s Offi ce o ffered p et i t i o n ers a s t ream l i n edi n s t al l m en tp lan fo r t h e y ears i n i ss u e, wh ereas p et i t i o n ers co u n t ered wi t h an o ffer t o en t er i n t o an i ns t al l m en t p l an fo r t h e y ears i n i s su e as wel l as th e t ax ab l e y ears 2 01 5 an d2 0 1 7 . Th e Ap p eal s Offi ce d i dn o taccep t p et i t i o n ers ’ p ro po s edi n s t al l m en tag reem en t .-8
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Onth i s reco rd , we co n cl u d e th atth e Ap p eal s Offi ce d i dn o tab us e i t s d i s cret i o n i n s u s t ai ni ng th e p ro p o s edl ev y act i o n . To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t eredfo r res p o nd en t .