T.C . M e m o. 2017-235

UNITED STATES TAX C OUR T

PATR IC K

S. B ER O AND JENNIFER M . B ER O, Pe t itione rs v. C OM M ISSIONER OF INTER NAL REVENUE, R e sponde nt

Doc ke t No. 7873-14L. File d Nove m be r 27, 2017.

Jose ph Fa lc one , for pe titione rs. Alissa L. Va n d e rKooi, R obe rt D. He itm e y e r, and R e be c c a M . C la rk, for
re sponde nt.

M EM OR

ANDUM FINDINGS OF FAC T AND OPINION GALE, Judge : Pursua

n t to se c tions 6320(c ) and 6330(d)(1), 1 pe titione rs
se e k re vie w of the de t e rm i nation of theInte rna l R e ve nue Se rvic e Offic e of Appe a ls

1 Unle ss othe rwise note d, a ll se c tion re fe re nc e s a re to the Inte rna l R e ve nue C ode of 1986, a s a

m e nde d, a

n d a ll R ule re fe re nc e s a

re to the Ta x C ourt R

ule s of Pra c tic e a nd Proc e dure . All dolla

r am ounts ha

ve be e n rounde d

to the ne are st dolla r.- 2 -

[*2] (Appe a ls) to sustain a notic e of Fe de ra l tax lie n (NFTL) filing a nd a propose d le vy to c olle c t pe titione rs’ unpa id joint Fe d e ra l inc om e tax lia bilitie s for tax a

ble y e ars 2008, 2009, 2010, 2 and 2011. Theissue s for de c ision a re : (1) whe the r the
se ttle m e nt offic e r (SO) who c onduc te d pe t itione rs’ c olle c tion dueproc e ss (C DP) he aring a buse d he r disc re tion in susta ining theNFTL filing a

nd the propose d le vy
and (2) whe the r pe titione rs unde rwe n t a m a te ria l c ha

nge in c irc um sta

nc e s be twe e n the C DP he aring a

nd tria l wa

rranting a re m and to Appe a ls for c o nside ra tion of the i r c h an ge d c irc um sta

nc e s. FINDINGS OF FAC T Som e of the fa c ts a

re stipula te d a nd a re so found. Thestipula

t ion of fa c ts
and its e xhibits a

re inc orporate d

he re in by this re fe re nc e . Pe t itione rs re s ide d in M ic higa n whe n the y

file d the ir pe tition. R e sponde nt issue d to e a c h pe titione r a Le tte r 1058, Fina l Notic e of Inte nt to Le vy and Notic e of Your R ight to a He aring (le vy notic e ), proposing a le v y to
c olle c t a n a ggre gat e of $55,648 in ta x, pe na ltie s , a

nd a c c rue d

inte re st for 2008,

2 The pa rtie s a gre e tha

t the 2010 lia

bility wa s pa id a fte r re sponde nt initia te d the s e c olle c tion a c tions a

nd is not a

t issue in this c a se .- 3 -

[*3] 2009, a

nd 2011. 3 Pe titione rs tim e ly re que ste d a C D P he aring with re spe c t to the l e vy notic e s. R e sponde nt a lso issue d to pe titione rs a Le tte r 3172, Notic e of Fe de ra l Tax Lie n Filing a nd Your Right to a

He aring Unde r IR C 6320 (lie n notic e ), a dvising the m of the filing of a

lie n to se c ure the c olle c tion of inc om e taxlia bilitie s in the
sam e am ounts a s spe c i fie d in the le vy notic e s (e x c l uding pe na ltie s a n d a c c rue d inte re s t) for 2008, 2009, a nd 2011. 4 Pe titione rs tim e ly re que ste d a

C DP he aring with re spe c t to thelie n notic e . On Ja nua ry 14, 2014, a s pa

rt of a C DP he aring c ove ring both the lie n a nd le vy notic e s , pe titione rs’ re p re se ntative se nt a le tte r to the SO proposing a n insta llm e nt a gre e m e nt. Unde r its te rm s, pe titione rs would pa y $260 pe r m onth for thre e y e ars sta

rting in April 2014, $725 pe r m onth for thre e y e ars sta rting in April 2017, a nd $1,018 pe r m onth sta

rting in April 2020 until the ir outsta nding ta x lia bilitie s we re satisfie d

in full. Pe titione rs c l a im e d the y propose d the se ste ppe d

3 Pe titione rs’ 2008 a

nd 2009 lia

b ilitie s a rise from a stipula te d de c i sion e nte re d in this C ourt susta i n ing de fic ie nc ie s a n d pe na ltie s for those y e ars, a n d the 2011 lia bility re pre se nts the unpa id ta

x re porte d a s due on the i r 2011 Fe d e ra l inc o m e tax re turn. Pe titione rs do not dispute the unde rly ing ta

x lia bilitie s. 4 The NFTL a l so liste d

an outsta nding lia b i lity for 2010 whic h ha s be e n pa id. Se e supra note 2.- 4 -

[*4] inc re a se s be c a

use , onc e the y ha d

pa i d off a

loa n from a c re dit union, the

c re dit union would le

nd the m a dditiona l funds to pa

y off the ir outsta

nding ta x lia bilitie s. On Ja nua ry 20, 2014, pe titione rs subm itte d a Form 433-A, C olle c tion Inform a t ion Sta

te m e nt for W a ge Ea

rne rs a nd Se lf-Em

ploy e d Individua ls, to theSO whic h showe d , a fte r taking into a c c ount the ir m onthly inc om e and e xpe n se s, the y ha d $1,545 le ft ove r e a c h m onth to pa y towa rds the ir outsta

n ding ta x lia bilitie s. On the sa m e da y , pe titione rs’ re pre se ntative provide d the SO with doc um e ntation 5 supporting the ir c om

p utations. The SO c a lc ulate d tha t pe titione rs c o uld pa

y $2,497 pe r m onth towa

rds the ir outsta

nding ta x lia bilitie s a fte r a djusting the Form 433-A a s follows:

5 Subm itte d doc um e ntation supporting pe titione rs’ unse c ure d de b t inc lude d: (1) JPM orga

n C ha se B ank sta

te m e n ts showing monthly pa ym e nts of $615 on a sm a ll busine ss loa

n , (2) a Disc ove r c re dit c ard pa

ym e nt history

showing m onthly pa ym e nts of a

pproxim at e ly

$225, a nd (3) a n AC S Educ a tion Se rvic e s stude nt loa n pa ym e nt history showing m onthly pa ym e nts of $304.- 5 -

[*5] Total living ex penses Ex pense items Actual monthly ( tax pay er calculated) Allowable (SO calculated) Difference F ood, clothing , and misc. $1,710 $1,465 ($245) Housing and utilities 2,796 2,796
--- Vehicle ownership costs 737 737
--- Vehicle operating

costs 790 590 (200) Health insurance 398 398
--- Out of pocket health care costs 240 240
--- L ife insurance 507
- -- (507) Current y ear tax es (income/F I CA) 3,411 3,411
--- Secured debts 600 600
--- Other ex penses 1,265 1,265
--- Total living ex penses 12,454 11,502 (952) Net difference/ability

to pay (petitioners’ total income of $13,999

! total living ex penses) 1,545 2,497 952 In he r a bility -to-pa

y c a lc ulation, theSO a c c ounte d for the thre e ite m s of
unse c ure d de bt tha

t pe titione rs substa

ntia te d a s follows. First, petitione rs’ Form 433-A c la im e d the $615 m onthly pa ym e nt on theJPM orga

n C ha se B ank loa

n a s a n
e xpe nse o f pe titione r Pa tric k S. B e ro’ s sole proprie torship in re a c hing the inc om e figure for tha

t busine ss. The SO a c c e pte d tha t c a lc ulation. Se c ond, the $225
m onthly pa ym e nt on theDisc o ve r c re dit c ard de bt wa s a c c ounte d for in tha t the SO- 6 -

[*6] use d the m a xim

um am o unt a llowa

ble unde r the nationa l sta

nda rds for “ Food, C lothing, a

nd M isc .” , the c a te gory

unde r whic h c re dit c ard pa ym e nts a re ta ke n into
a c c ount. Se e Inte rna l R e ve nue M an ua l (IRM ) pt. 5.15.1.8(1) (Oc t. 2, 2012). Third, pe titione rs’ Form

433-A liste d the $304 m onthly pa ym e nt on thestude nt loa n a s a n “ Othe r e xpe nse ” in re a c hing tota l m onthly living e xpe nse s, a

nd the SO
a c c e pte d tha t figure
. The SO did not a c c e pt pe titione rs’ propose d insta llm e nt a gre e m e nt, but inste a d offe re d two a lte rnative s: (1) m onthly pa ym e n ts of $2,500 (in ac c orda nc e with he r c a lc ulation of the ir a b ility to pa y ) or (2) an initia l pa

ym e nt of $1,000 to bring the ir outsta

nding lia bilitie s be low $50,000, re nde ring the m e ligible for a

“ stre a m line d insta llm e n t a gre e m e nt” 6 re q uiring pa ym e nts of only

$700 pe r m onth. Pe titione rs re

je c te d both a lte rnative s a

nd indic a te d tha

t if the i r own propose d insta llm e nt a gre e m e nt wa s not a c c e pte d the y wishe d to proc e e d

to Ta x C ourt.

6 A “ stre am line d

insta l l m e nt a gre e m e nt” is de signe d to re duc e taxpa y e r burde n s by

e lim i nating there quire m e nt to subm it a Form 433-A. Inte rna l R e ve nue M an ua l (IRM ) pt. 5.14.5.1 (Aug. 5, 2010). Suc h a gre e m e nts we re pre viously lim ite d to ta

xpa y e rs with unpaid ba la

nc e s of a sse ssm e nts (e xc luding a c c rue d pe na ltie s a

n d inte re st) not e x c e e ding $25,000. Se e id. pt. 5.14.5.2(1) (M ar. 11, 2011). The SO propose d the “ s tre am line d insta l lm e nt a gre e m e n t” a l te rnative on Ja nua ry 21, 2014. Interim

guida nc e in e ffe c t at tha

t tim e ha d ra ise d the $25,000 c e iling to $50,000. I.R .S. M e m . SB SE-05-0313-021 (M ar. 1, 2013). The $50,000 c e iling wa s la

te r re fle c te d in a

c ha nge to the IRM . Se e IRM pt. 5.14.5.2(1) (M a y 23, 2014).- 7 -

[*7] On M arc h

11, 2014, the SO issue d notic e s of de te rm ination re je c ting pe titione rs’ propose d insta llm e nt a gre e m e nt a nd susta ining theNFTL filing a nd the propose d le vy . Ea c h notic e sta

te d tha t during a Fe brua ry 10, 2014, c a ll with pe titione rs’ re pre se n tative , “ [t] he SO e xpla ine d to the re p re se ntat ive tha t his fina nc ia l s show he [M r. B e ro] c an pa y m ore and the a gre e m e nt he wa nts will not pa y within the

c olle c tion sta

tute e xpira

t ion da te ”
. 7 The notic e s a lso showe d pe titione rs’ “ M inim

um M onthly Paym e nt Am ount” a s $2,497. At tria l ne ithe r party

sought to supple

m e nt the a dm inistra

tive re c ord, a

nd pe titione rs e xpre ssly

c onc e de d tha

t the a dm i nistra

tive re c ord whic h the pa

rtie s ha d stipula te d wa s a c c ura te and suffic ie n t for purpose s of de c i ding whe t he r the SO
a buse d he r disc re tion in re

je c ting pe titione rs’ propose d insta l lm e nt a gre e m e nt. A tria l wa s c onduc t e d for the purpose of re c e iving e vide nc e with re spe c t to pe titione rs’ c la im

tha t a c ha nge in the ir c irc um sta

nc e s be twe e n the issua

nc e of the notic e s of de te rm i nation a n d tria l wa

rrante d a re m and to Appe a l s for a supple m e nta l de t e rm i nation. Pe titione rs offe re d the te stim ony of M r. B e ro to the e ffe c t

tha t a c re ditor ha d
a gre e d shortly

be fore tria l to c onsolida

te his outsta

n ding nonta

x de bts in a

m anne r

7 A doc um e nt in thestipula te d C DP a dm inistra

tive file sugge sts the c olle c tion pe riod e xpira

tion da te for the 2009 lia

bility wa s August 27, 2022, a

nd that full pa ym e nt of tha

t lia bility unde r pe titione rs’ propose d insta llm e nt a gre e m e nt would not oc c ur until Oc tobe r 28, 2022.- 8 -

[*8] tha t would pe rm it la

rge r m onthly

pa ym e n ts (i.e ., $750) on the outsta nding ta x lia bilitie s for 48 m onths, followe d by m onthly pa ym e nts of $1,000 for a

nothe r 12
m onths, a t whic h tim e the c re ditor would c onsolida te the re m a ining ta

x de bt a nd
a dva nc e funds for pa

y ing the Gove rnm e nt in full. Pe titione rs offe re d no doc um e nta

ry e vide nc e of this a gre e m e nt.

OPINION I. Statutory

Fra m e work Se c tion 6301 e m

powe rs the Se c re ta

ry to c olle c t the taxe s im

pose d by the inte rna l re ve nue la

ws. To furthe r that obje c t ive , C ongre s s ha s provide d tha t the Se c re t ary m ay e ffe c t the c olle c t ion of ta xe s by , am ong othe r m e thods, lie ns a nd le vie s. Se e ge ne ra lly

Living C are Alts. of Utic a , Inc . v. Unite d State s, 411 F.3d 621, 624-625 (6th C ir. 2005). Se c tion 6321 im pose s a lie n in fa vor of the Unite d Stat e s on a ll prope rty

and rights to prope

rty of a ny pe rson lia

b le for taxe s (ta xpa y e r) a fte r a

de m and for the pa

ym e nt of the taxe s ha s be e n m a de and the taxpa y e r fa ils to pa

y those taxe s . The lie n a

rise s at the tim e a sse ssm e nt is m a de
and c ontinue s until the

lia b i lity is sa tisfie d or be c om e s une nforc e a ble by la p se of tim e . Se c . 6322. The Se c re ta ry ge n e ra lly m

ust file a lie n notic e with c e rta i n State or loc a l a uthoritie s whe re a taxpa

y e r’ s prope rty

is situa t e d for the lie n to be va lid
a ga inst c e rta in c a te g orie s of third pa rtie s. Se c . 6323(a ), (f); B e hling v.- 9 -

[*9] C om m issione r, 118 T.C
. 572, 575 (2002). Se c tion 6331(a ) a uthoriz e s the Se c re t ary to le vy upon a ll prope rty

or prope rty

rights of a taxpa

y e r if the taxpa

y e r fa ils to pa y the tax within 10 da

y s a fte r notic e and de m a

n d for pa ym e nt is m a de
. W he n the Se c re t ary

pursue s c olle c tion by

lie n or le vy , he m

ust notify the
a ffe c te d taxpa

y e r in writing of his right to a C DP he aring with a

n im pa rtia l Appe a ls e m

ploy e e (Appe a ls offic e r). Se e se c . 6320(a ) and (b) (re lating to liens);
se c . 6330(a ) and (b) (re lating to le vie s). At the he aring the taxpa y e r m ay ra ise any
re le va nt issue , inc luding c ha lle nge s to the a ppropria t e ne ss of the c o lle c tion a c tions
and possible

c olle c tion a lte rnat ive s suc h a s a n insta llm e nt a gre e m e nt. Se c . 6330(c )(2)(A). Additiona lly , the taxpa y e r m ay c ha lle nge the e xiste nc e or am ount of the unde rly ing ta

x lia bility , but only

if he did not re c e ive a notic e of de fic ie nc y with re spe c t to, or othe rwise h a ve an opportunity

to dispute , it. Se e se c . 6330(c )(2)(B ). Following the

he aring, the Appe a l s offic e r m ust issue a

notic e of de te rm i nation c onc e rning the propose d c olle c tion a c tion. Se e se c . 301.6320- 1(b)(2), Q& A-B 3, se c . 301.6330-1(e )(3), Q& A-E8(i), Proc e d. & Adm in. R e gs. In
m aking thede te rm i nation theAppe a ls offic e r is re q uire d to ta

ke into c onside ra tion: (1) whe the r the re quire m e nts of a pplic a ble la w a nd a dm inistra

tive proc e dure have be e n m e t; (2) a

ny re le va nt issue s ra ise d by the taxpa y e r; a nd (3) whe the r the- 10 -

[*10] propose d c olle c tion a c tion a ppropria te ly ba la nc e s the ne e d

for e ffic ie nt
c olle c tion of ta

xe s with the taxpa

y e r’ s le gitim at e c o n c e rns tha t the c o lle c tion a c tion be no m o re intrusivetha

n ne c e ssa ry . Se c . 6330(c )(3). Pursua nt to se c tions 6320(c ) and 6330(d)(1), we have jurisdic tion to re vie w the Appe a ls offic e r’ s de te rm ination. Se e M urphy v. C o m m issione r, 125 T.C . 301, 308 (2005), a ff’ d, 469 F.3d 27 (1st C ir. 2006). To the e xte nt tha

t the va lidity

of the unde rly ing ta

x lia bility is prope rly

at issue , the C ourt will re v ie w the de te rm ination de novo. Goz a

v. C om m issione r, 114 T.C . 176, 181-182 (2000). To the e xte nt tha

t the v a lidity

of the unde rly ing ta

x lia bility is not prope rly

at issue , the C ourt will
re vie w the de te rm ination for a buse of disc re tion. Id. a

t 182. An a buse of disc re t ion oc c urs whe n the Appe a ls offic e r’ s de te rm ination is without sound ba sis in fa c t or la w. Se e M urphy

v. C om m issione r, 125 T.C . at 308 (c iting Fre ije v. C om

m issione r, 125 T.C . 14, 23 (2005)); W o odra l v. C om m issione r, 112 T.C . 19, 23 (1999); Fowle r v. C om m issione r, T.C
. M e m o. 2004-163. In re vie w ing for a buse of disc re tion, the C ourt doe s not m a k e an inde pe nde nt e va luation of wha t would bean a c c e pta

ble c olle c tion a lte rnative . Se e Thom pson v. C om

m issione r, 140 T.C . 173, 179 (2013); M urphy v. C om

m issione r, 125 T.C . at 320; Lipson v. C om m issione r, T.C . M e m o. 2012-252, a t *9. If a n Appe a ls offic e r follows a ll sta tutory and a dm inistra

tive guide l ine s a

nd provide s a- 11 -

[*11] re a sone d a

nd ba la n c e d de c ision, theC ourt will not rewe igh the e quitie s. Thom pson v. C om

m issione r, 140 T.C . at 179. As pe titione rs do not c h a l le nge the ir unde rly ing ta

x lia bilitie s, we will re vie w the SO’ s de te rm i nations for a buse of disc re tion. II. Partie s’ Argum e nts R e sponde nt a

rgue s tha t the SO did not a

buse he r disc re t ion in susta i ning the NFTL filing a

nd the propose d le vy a fte r re je c ting pe t itione rs’ propose d insta llm e nt
a gre e m e nt be c a

use the i r m onthly

a bility to pa y , e ve n by

the ir own c a lc ulation, wa s substa ntia lly gre a te r tha

n the am ount offe re d in the ir propose d a g re e m e nt. Pe titione rs c ounte r that: (1) the notic e s of de te rm ination did not inc lude a finding that pe titione rs’ propose d insta llm e nt a gre e m e nt offe re d le ss tha n the ir a bility to pa y ; (2) the SO e rre d in de te rm ining tha t pe titione rs’ propose d insta l lm e nt
a gre e m e nt would fa il to pa y the ir outsta

nding ta xlia bilitie s be fore the lim ita

tions pe riod e xpire d; (3) the a d m inistra tive re c ord is insuffic i e nt for the C o urt to re vie w the SO’ s c a lc ulations unde rly ing suc h a de te rm ination; a

nd (4) the re fina

nc ing of the i r nonta

x de bts be twe e n the C DP he a ring a nd tria l c onstitute s a

m a t e ria l c ha

nge in c i rc um sta

nc e s wa rran ting a re m and to Appe a ls. W i th re spe c t to pe titione rs’
c ha nge d c irc um s ta

nc e s a rgum e nt, re sponde nt disa g re e s, a rguing tha

t a ny inc re a se d liquidity should not qua

l ify the m for re m and.- 12 -

[*12] A. Ability

To Pa y Se c tion 6159(a

) a uthoriz e s the Se c re ta

ry to e nte r into a

n insta llm e n t
a gre e m e nt, a llowing the

taxpa y e r to pa y a tax lia bility ove r tim e , upon de te rm ining that the propose d

insta l lm e nt a gre e m e nt would fa c ilita te full or pa

rtia l c olle c tion of the l ia bility . Se e Thom

pson v. C om

m issione r, 140 T.C . at 179; se c . 301.6159-1(a), Proc e d . & Adm in. R e gs. The C ourt give s due de fe re nc e to the Se c re ta ry ’ s de te rm i nation be c a

use the Se c re ta

ry ha s the disc re tion to a c c e pt or re je c t any propose d insta llm e nt a g re e m e nt. Thom pson v. C o m

m issione r, 140 T.C . at 179;
se c . 301.6159-1(a), (c )(1)(i), Proc e d. & Adm in. R e gs. Pe titione rs a

rgue tha t the notic e s of de te rm ination did not m a k e a de te rm i nation tha

t the ir propose d insta llm e n t a gre e m e nt offe re d le ss tha n the ir
a bility to pa y and did not re

je c t the propose d a gre e m e nt on tha t ground. Se e SEC v. C he ne ry

C orp., 318 U.S. 80, 93-95 (1943); Antioc o v. C om m issione r, T.C
. M e m o. 2013-35, a

t *24-*25. W e disa gre e . Ea c h notic e re fe re n c e d a te le phone c a ll the SO m a de to pe titione rs’ re pre se n tative in whic h she a dvise d him tha t pe titione rs’ fina

nc ia ls showe d the y

c ould pa y m ore tha n the y we re offe ring. Ea c h notic e a lso showe d that the SO c a l c ulate d

pe titione rs’ “ M i nim

um M onthly Paym e nt Am ount” to be $2,497. W e are satisfie d tha t one of the princ ipa l re a sons theSO re je c te d- 13 -

[*13] pe titione rs’ propose d insta llm e nt a gre e m e nt wa s its fa i lure to offe r m onthly pa ym e nts e qua l to the ir a

bility to pa y and tha t she a d vise d the m

of tha t re a son. This re a s on fully

justifie d re

je c tion of pe titione rs’ propose d insta llm e nt
a gre e m e nt. For suc h a gre e m e nts, a n Appe a ls offic e r m a

y a c c e pt, a t a m inim um , a
m onthly pa ym e nt e q ua l to thetaxpa

y e r’ s a b ility to pa y , e qua l to thee xc e ss of his
m onthly inc om e ove r a llowa

ble e xpe nse s. B oulwa

re v. C om m issione r, T.C
. M e m o. 2014-80, a

t *29; Frie dm an v. C o m

m issione r, T.C . M e m o. 2013-44, a t *9; IRM pt. 5.14.1.3(7) (M ar. 4, 2011). TheSO wa s we ll within her disc re tion to
re je c t pe titione rs’ propose d insta llm e nt a gre e m e nt sinc e the ir propose d initia l
m onthly pa ym e nts of $260 (for 36 months) did not e qua l or e xc e e d the ir own
c a lc ulat ion of the i r a

bility to pa

y , whic h wa s $1,545 pe r m onth. 8 The IRM

8 The SO m a de thre e downwa rd a d justm e nts to pe titione rs’ a llowa ble e xpe nse s , inc re a sing the ir m onthly a bility to pa y to $2,497. Her $245 re duc tion in the “ Food, C lothing, a

nd M isc
. ” e xpe nse is in c onform anc e with IR M pt. 5.15.1.7(3) (Oc t. 2, 2012), whic h provide s tha t taxpa y e rs a re a llowe d

the m onthly nationa l sta

nda rd am ount for the ir fam ily siz e re ga rdle ss of a c t

ua l e xpe nse s. Pe titione rs’ c la im e d e xpe nse e x c e e d e d the the n-c urre nt na t iona l sta nda rd am ount for a four-pe rson house hold. TheSO’ s re a soning be hind thetwo othe r a d justm e nts is not c le ar from

the re c ord. She like ly

re duc e d pe t itione rs’ c l a im e d “ V e hic le Owne rship C o sts” by $200 be c a use pe titione rs’ figure e xc e e de d the loc a l sta nda rd for 2013, se e id. pt. 5.15.1.7(4), a nd he r e lim ination of the i r c la im e d “ Life Insura nc e ” e xpe nse of $507 pre sum a bly arose from

a de te rm ination tha

t it wa s a whole life ra the r tha

n a te rm polic y , se e id. pt. 5.15.1.10(3). Pe titione rs ha

ve not take n issue with the s e a djustm e nts. In a ny e ve nt, we ne e d

not c onside r the m furthe r, a s the m o nthly pa ym e nt pe titione rs offe re d in the ir propose d insta llm e nt a gre e m e nt fe ll so short of the ir own c om puta t ion of the ir m o nthly

a b ility to pa y (c ontinue d...)- 14 -

[*14] provision a

pplic a ble at the tim e the SO m a de he r de t e rm i nat ion to re je c t pe titione rs’ proposa l sta

te d : “ Insta llm e nt a gre e m e n t s m ust re fle c t taxpa

y e rs’
a bility to pa y on a m onthly

ba sis throughout the duration of a gre e m e nts.” IRM pt. 5.14.1.4(4) (June

1, 2010) (e m

pha sis a dde d). 9 An Appe a ls offic e r prope rly
e xe rc ise s his disc re tion by a dhe ring to IR

M provisions gove

rning a c c e pta

nc e of
c olle c tion a lte rnative s . Se e Ve ne z ia no v. C om

m issione r, T.C . M e m o. 2011-160; Etkin v. C om

m issione r, T.C . M e m o. 2005-245; Sc hulm a n v. C om m issione r, T.C
. M e m o. 2002-129. The

SO wa s not re q

uire d to “ ha ggle ” with pe titione rs on the
m onthly pa ym e nt a m o unt a fte r the y

re je c t e d both of he r a l te rnat ive pa ym e nt proposa l s. Se e B oulwa

re v. C om m issione r, at *31. The C ourt doe s not re c a lc ulate a taxpa y e r’ s a b ility to pa

y nor substitute

its judgm e nt for tha

t of the Appe a ls offic e r. O’ D onne ll v. C om m issione r, T.C
. M e m o. 2013-247. Howe v e r, the C ourt c an c o nside r whe the r the Appe a ls offic e r’ s de c ision to re

je c t a n insta llm e nt a gre e m e nt wa s the re sult of a fa ilure to prope rly
c onside r the taxpa

y e r’ s fina nc ia l inform a tion in the re c o rd. Se e Gurule v.

8 (...c ontinue d) that the SO’ s a djustm e nts a

re im m a te ria l. He r re

je c tion of pe titione rs’ propose d a gre e m e nt would bejustifie d e ve n if he r a djustm e nts we re not ta k e n into a c c ount. 9 This provision wa s subse que ntly libe ra liz e d to sta

t e : “ Ge ne ra lly Insta llm e nt a gre e m e nts should re fle c t taxpa y e rs’ a bility to pa y on a m onthly ba sis throughout the

duration of a gre e m e nts.” IRM pt. 5.14.1.4(4) (Sep t . 19, 2014).- 15 -

[*15] C om

m issione r, T.C
. M e m o. 2015-61. In a pre tria l m e m orandum

and at tria l, pe titione rs’ c ounse l c onte nde d tha t the SO ha d not prope rly a c c ounte d for pe titione rs’ unse c ure d de bt, inc luding the ir ba nk a nd c re dit c ard loa

n s, in
c a lc ulat ing the i r a

bility to pa y . Pe titione rs’ posttria l brie fs a re sile nt re ga

rding this
argum e nt, a

nd we de e m

it a b a ndone d. Se e R

ule 151(e )(4) and (5) (re quiring tha t a pa rty ’ s brie f state the points a nd a rgum e nts on whic h he re lie s); M c La ine v. C om m issione r, 138 T.C . 228, 243 (2012) (finding tha t the taxpa

y e r a ba ndone d his
c la im by fa iling to raise the issue on brie f). Eve n if the argum e nt we re not a ba ndone d, it la c ks m e rit a s the SO’ s a bility

to-pa y c a lc u lation a c c ounte d for a ll thre e ite m s of unse c ure d de bt tha t pe titione rs substa ntia te d. The $615 m onthly

pa ym e nt on theJPM orga

n C ha s e B ank loa

n wa s
c la im e d a s a

n e xpe nse of M r. B e ro’ s sole proprie torship a nd a c c e pte d by

the SO. The $225 m o nthly

pa ym e n t on the Disc ove r c re dit c ard de bt wa s e ffe c tive ly
a c c ounte d for a s pa

rt of pe titione rs’ “ Food, C lothing, a n d M isc .” e xpe n se s. 1 0

1 0 Paym e n ts on c re d it c ard de bt a re c la ssifie d in Public a tion 1854, How to Pre pa re a C olle c tion Inform a t ion Sta te m e nt, a nd IR M pt. 5.15.1.8(1) (Oc t. 2, 2012) a s a n e xpe nse tha

t is inc lude d unde r the “ M isc e lla ne ous” c a te gory

within the “ Food, C lothing, a

nd M i sc .” am ount. The“ Food, C lothing, a nd M isc .” a llowa

ble am ount is ba se d on na

t iona l sta nda rds. De viation from

this a m ount is a llowe d whe n a taxpa y e r provide s doc um e ntation substa n tia ting tha t the e xpe nse s a

re a ne c e ssa ry living e xpe nse . Id. pt. 5.15.1.8(3). W hile pe titione rs provide d a pa ym e nt history for the ir Disc ove r c re dit c ard, the y did not produc e ite m iz e d sta te m e nts proving ne c e ssa

ry e xpe nse s be y ond the sta nda rd am ount. IR

M pt. (c ontinue d...)- 16 -

[*16] The $304 m o nthly

pa ym e nt on M r. B e ro’ s stude nt loa n wa s c la im e d

on the Form 433-A in re a c hing tota l (m onthly) living e xpe nse s, a n d tha t figure wa s
a c c e pte d by the SO. The SO the re fore prope rly a c c ounte d for a ll of pe t itione rs’
unse c ure d de bt tha

t wa s substa

n tia te d in the re c ord in c a lc ulat ing the ir a b ility to pa y . B
. C olle c t ion Sta

tute Expira

tion W e are satisfie d tha

t (1) the SO m a d e a

de t e rm ination tha

t the initia l
m onthly pa ym e nts offe re d in pe titione rs’ propose d insta l lm e nt pla n did not e qua l the i r a b ility to pa y , (2) the SO a dvise d pe titione rs of this de te rm ination, a n d (3) the de te rm i nation wa s re a sona ble and wa s not a

n a buse of disc re tion. B e c a

use the fore going is suffic ie nt to sustai n the re je c tion of pe titione rs’ propose d insta llm e nt
a gre e m e nt, we find it unne c e ssa ry to c onside r whe the r the SO c orre c tly de t e rm ine d that the ir propose d insta llm e nt a gre e m e nt would not ha v e re s ulte d in the full pa ym e nt of a ll lia

bilitie s be fore e xpira

tion of thepe riod of limita tions on
c olle c tion. 1 1 Eve n if pe titione rs’ c onte ntions we re c orre c t, it would not c ha nge the

1 0 (...c ontinue d ) 5.15.1.8(3) a lso sta

te s tha t “ [d] e viations from

the sta nda rd am ount a

re not a l lowe d for m isc e lla

ne o u s e xpe n se s.” The SO a llowe d the m axim um am ount unde r the se sta nda rds, a nd the re fore pe titione rs’ c re dit c ard de bt wa s a c c ounte d for in the a bility -to-pa

y c a lc ulat i on. 1 1 Although the C ourt m

ust e x tra pola te som e what, the a d

m inistra t ive re c ord (c ontinue d...)- 17 -

[*17] fa c t tha

t the i r offe r of $260 pe r m onth for the first 36 m onths fe ll fa r short of the i r a b ility to pa y . C
. M a te ria l C ha

nge in C irc um s ta

nc e s W hile the C ourt ge ne ra lly m ay not c onside r e ithe r (1) issue s or a rgum e nts that a taxpa y e r doe s not ra ise a s pa

rt of a C DP he aring or (2) inform a tion tha t the Appe a ls offic e r did not ha ve at the tim e of a

C DP he aring, se e Gia

m e lli v. C om m issione r, 129 T.C . 107, 112-113 (2007); M a ga na v. C om m issione r, 118 T.C
. 488, 493 (2002), a

lim ite d e xc e ption is ma de whe re the re ha s be e n a m a te ria l
c ha nge in a taxpa y e r’ s c irc um sta

nc e s be twe e n the tim e of the C DP he aring a nd tria l tha t would justify

a re m and for re c onside ra tion of his a b ility to pa

y , se e Gurule v. C om

m issione r, T.C . M e m o. 2015-61; C hurc hill v. C om m issione r, T.C
. M e m o. 2011-182. B ut se e Ke hoe v. C om m issione r, T.C . M e m o. 2013-63.

1 1 (...c ontinue d ) te nds to support the

SO’ s c onc lusion tha

t the c o lle c tions lim

ita tion pe riod would have e xpire d be fore full pa ym e nt of pe titione rs’ lia

bilitie s unde r the ir propose d insta llm e nt a gre e m e nt. A doc um e nt in thestipula te d C DP a dm inistra

tive file sugge s ts the e xpira

tion da te for the 2009 lia

bility wa s August 27, 2022, a

n d tha t full pa ym e n t of tha

t lia b ility unde r pe titione rs’ propose d insta llm e nt a gre e m e nt would not oc c ur until Oc tobe r 28, 2022. As for pe titione rs’ c onte ntion tha t the a dm inistra

tive re c ord is insuffic ie nt for our re vie wof the SO’ s c a lc ulations unde rly ing suc h a

c onc lusion, pe titione rs’ c ounse l wa ive d tha t a rgum e nt a t tria l whe n he re pre se nte d to the C o urt tha t the stipula

t e d a d m inistra tive re c ord wa s suffic i e nt for purpose s of de c i d ing whe the r the SO ha d a buse d he r disc re tion in re je c ting the ir propose d insta l lm e nt a gre e m e nt.- 18 -

[*18] Pe titione rs re ly

princ ipa lly

on Gurule and C hurc hill to support the ir c la im that re fina nc ing the ir nonta

x loa ns into a sm a lle r m onthly

pa ym e n t is a m a te ria l
c ha nge in c irc um sta

nc e s. In Gurule the C ourt gra n te d a re m and be c a

use of a
m a te ria l c ha

nge in c irc um s ta

nc e s: The taxpa

y e rs’ son’ s de a th a fte r issua nc e of the notic e of de te rm ination c a use d the m

to ha ve to borrow a dditiona l a

m ounts from the i r se c tion 401(k) pla

n a c c ount to pa

y for fune ra l e xpe nse s. Sim ila rly , in C hurc hill theC ourt gra

nte d a re m and for a

m a te ria l c ha

nge in c irc um sta

nc e s whe re the t a xpa y e r divorc e d be twe e n the C DP he aring a nd tria l. In e a c h c a se the taxpa y e rs suffe re d a

n a dve rse c ha

nge in c irc um sta

nc e s a ffe c ting the i r a

bility to pa y . Se e Gurule v. C om

m issione r, at *35-*36; C hurc hill v. C o m m issione r, T.C
. M e m o. 2011-182, slip op. a t 1 3 . B y c ontra st, in Ke h oe , the C ourt re j e c te d the taxpa y e r’ s re que st for re m and on theground of c ha nge d c irc um sta

nc e s whe re , a fte r issua nc e of the notic e of de te rm ination, he be c am e e ligible to m ake pe na lty -fre e withdra wa ls from his IR A, thus im

proving his liquidity . The C ourt re a sone d tha t this im prove m e nt in fina

nc ia l c irc um sta

nc e s would not ha

ve a ffe c te d the C om m issione r’ s de c ision to proc e e d with theNFTL filing. Ke hoe v. C om m issione r, at *14-*16. Pe titione rs c la im

tha t the ne wly

arise n opportunity

to re fina nc e the ir nonta

x de bt would inc re a se the ir liquidity and e na ble the m to m ake la

rge r m onthly- 19 -

[*19] pa ym e nts of $750-$1,000 a s pa rt of a ne w insta llm e nt a gre e m e n t. Howe ve r,
e ve n putting a side the ir fa i lure to substa ntia te the c la i m e d re fina

n c i ng opportunity , any suc h c ha nge would not c o nstitutethe kind of a dve rse c h ange in c irc um sta nc e s that ha s be e n found to justify a re m and to Appe a ls unde r our c a se la w. C onse que ntly , we c o nc lude tha t a re m and is not wa

rrante d. To re fle c t the fore going,
De c ision will be e nte re d for
re sponde n t.