1 Unless otherwise indicated, all section references are to

the Internal Revenue Code, as amended.

T.C. Summary Opinion 2005-141

UNITED STATES TAX COURT

LEONARD T. AND BONNIE S. WHITFIELD, Petitioners v. COMMISSIONER

OF INTERNAL REVENUE, Respondent

Docket No. 3653-04S. Filed September 27, 2005.

Leonard T. Whitfield and Bonnie S. Whitfield, pro sese.

Jonae A. Harrison, for respondent.

PANUTHOS, Chief Special Trial Judge: This case was heard

pursuant to the provisions of sections 6330(d) and 7463.1 The

decision to be entered is not reviewable by any other court, and

this opinion should not be cited as authority.
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Respondent issued each petitioner a separate Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 (notice of determination) for unpaid Federal income

taxes and related liabilities for 1991, 1992, 1993, and 1998.

 The notices of determination relate to a notice of intent

to levy dated March 24, 2003, for the above years. The parties

agree that there is no tax liability for the tax year 1998;

accordingly that year is not in issue in this case. 

The issue for decision is whether respondent’s determination

to proceed with a notice of levy was an abuse of discretion.

Background

Some of the facts have been stipulated, and they are so

found. Petitioners resided in Mesa, Arizona, at the time the

petition was filed.

On April 15, 1994, petitioners filed delinquent tax returns

for the tax years 1983 through 1993. There were unpaid balances

due from these returns. Petitioners made two payments on

September 7 and 21, 1993, of $937.27 and $937.18, respectively. 

The record is not clear as to what tax years these payments were

applied. 

At some point in 1994 petitioners entered into an

installment agreement with respondent to make monthly payments of
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2 The installment agreement was not made part of the

record.

3 Petitioners assert that 28 payments were made. Since

there are other issues in this proceeding relating to the

application of payments and whether respondent is bound by a

response to a balance inquiry, we do not deem the dispute about

whether petitioners made 27 payments or 28 payments to be

relevant to our findings and conclusions.

$590 per month.2 Petitioners made 27 equal monthly payments in

the amount of $590 each. The payments commenced in approximately

August 1994.3

In October 1996 petitioners requested from the IRS a written

statement as to the balance of taxes due. By letter dated

October 3, 1996, respondent provided petitioners a statement as

to the balance of taxes due. The attachments reflected the

following information as to petitioners’ tax liabilities:

Form Tax Year Balance Due As of (date)

1040 1983 $1,692.15 11-03-96

1040 1984 2,398.44 11-03-96

1040 1988 139.98 11-03-96

1040 1990 2,958.92 11-03-96

1040 1991 3,535.22 11-03-96

1040 1993 1,929.13 11-03-96

Petitioners made a payment of $11,580, dated December 30,

1996, which was applied by the IRS on January 7, 1997. The IRS

acknowledged the payment by letter dated February 4, 1997. 

Petitioners were advised that their accounts for the tax years

1984, 1988, and 1990 were paid in full. By letter dated February 
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6, 1997, petitioners were advised that the $11,580 payment was

applied as follows:

Amount Form Tax Period

 $1,692.15 1040 Dec. 31, 1983

 1,238.86 1040 Dec. 31, 1984

 142.14 1040 Dec. 31, 1988

 3,004.40 1040 Dec. 31, 1990

We also applied $3,587.49 to your Form 1040 for 1991

and $1,914.96 to your Form 1040 for 1993. 

Petitioners subsequently received notices that they owed

taxes for the years 1991, 1992, and 1993. 

Petitioners present two arguments. They first assert that

the IRS misapplied payments made by them to other tax years. 

Secondly, they argue that the letters from the IRS reflect that

petitioners’ outstanding accounts have been paid in full;

therefore, petitioners conclude that there should be no tax

liability.

Discussion

Section 6331(a) authorizes the Secretary to levy upon

property and property rights of a taxpayer liable for taxes who

fails to pay those taxes within 10 days after the notice and

demand for payment is made. Section 6331(d) provides that the

levy authorized in section 6331(a) may be made with respect to

“unpaid tax” only if the Secretary has given written notice to

the taxpayer 30 days before the levy. Section 6330(a) requires

the Secretary to send a written notice to the taxpayer of the
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amount of the unpaid tax and of the taxpayer’s right to a section

6330 hearing at least 30 days before the levy is begun. 

If a section 6330 hearing is requested, the hearing is to be

conducted by the Office of Appeals, and, at the hearing, the

Appeals officer conducting it must verify that the requirements

of any applicable law or administrative procedure have been met. 

Sec. 6330(b)(1), (c)(2). The taxpayer may raise at the hearing

“any relevant issue relating to the unpaid tax or the proposed

levy”. Sec. 6330(c)(2)(A). The taxpayer may also raise

challenges to the existence or amount of the underlying tax

liability at a hearing if the taxpayer did not receive a

statutory notice of deficiency with respect to the underlying tax

liability or did not otherwise have an opportunity to dispute

that liability. Sec. 6330(c)(2)(B); see Montgomery v.

Commissioner, 122 T.C. 1 (2004). 

This Court has jurisdiction under section 6330 to review the

Commissioner’s administrative determinations. Sec. 6330(d); see

Iannone v. Commissioner, 122 T.C. 287, 290 (2004). Where, as

here, the validity of the underlying tax liability is not at

issue, we review the determination for abuse of discretion. Sego

v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner,

114 T.C. 176, 183 (2000). Whether an abuse of discretion has

occurred depends upon whether the exercise of discretion is

without sound basis in fact or law. See Freije v. Commissioner,
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4 Rev. Rul. 73-305, 1973-2 C.B. 43, was superseded by Rev.

Proc. 2002-26, 2002-1 C.B. 746, which provides that unless the

taxpayer provides specific written directions as to the

application of the payment, the Commissioner will apply the

payments that “will serve its best interest.”

125 T.C. 14 (2005); Ansley-Sheppard-Burgess Co. v. Commissioner,

104 T.C. 367, 371 (1995).

We note at the outset that the years before the Court in

this collection action are 1991, 1992, and 1993. Nevertheless,

petitioners have asserted that respondent misapplied payments to

tax years which are not subject to this collection action. In

this connection, we have jurisdiction to review the issue of

whether respondent has properly applied and accounted for

payments applied to other tax years since the appropriateness of

the collection action for the determination years may be affected

by consideration of such facts and issues. Freije v.

Commissioner, supra. 

We have carefully reviewed the record in this matter as to

petitioners’ assertions regarding the misapplication of offsets

and payments to nondetermination years. The record does not

reflect a misapplication of payments by respondent. We note that

there is nothing in the record reflecting a direction by

petitioners as to how payments should be applied. Without a

specific direction from petitioners, respondent is free to apply

payments and offsets as he chooses. Rev. Rul. 73-305, 1973-2

C.B. 43.4 Of course, if the record reflected an application of a

payment to a year where there is not a proper assessment of tax,
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then the application would be improper, and petitioners’

assertion that payments should be applied to a liability for the

years in issue would require further consideration and analysis. 

See Freije v. Commissioner, supra at 36-37. This is not the

situation in this case. Petitioners have not provided any

evidence that respondent applied payments or offsets in a manner

inconsistent with directions or that payments or offsets were

applied against improper assessments. Accordingly, we reject

petitioners’ arguments in this regard.

We now consider petitioners’ argument that respondent should

be bound by the response to their balance inquiry. As we

understand the facts, petitioners asked respondent for the amount

due, and respondent’s response was not entirely accurate; in fact

it did not include all the tax liabilities due at the time of the

response. Petitioners seek to interpret this response as an

agreement by respondent as to the amount which would satisfy

their tax liabilities for the years stated. 

As pointed out by respondent, section 7121 provides a basis

for parties to enter into a closing agreement binding the

parties. In this case, the parties did not enter into a closing

agreement. The prior installment agreement (which was not made

part of the record) does not constitute a closing agreement. See

Person v. Commissioner, T.C. Memo. 1985-211. 

To the extent that petitioners claim that they have been

adversely affected by erroneous information provided by
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respondent, we view petitioners’ argument as one seeking to

equitably estop respondent from proceeding with collection

action. Accordingly, we consider whether the doctrine of

equitable estoppel should apply in this case.

Equitable estoppel is a judicial doctrine that precludes a

party from denying the party’s own representations which induced

another to act to his or her detriment. The doctrine of

equitable estoppel is applicable against the Commissioner, but it

is applied with utmost caution and restraint. Schuster v.

Commissioner, 312 F.2d 311, 317 (9th Cir. 1962), affg. 32 T.C.

998 (1959); Boulez v. Commissioner, 76 T.C. 209, 214-215 (1981),

affd. 810 F.2d 209 (D.C. Cir. 1987).

A taxpayer must establish the following elements before

equitable estoppel will be applied against the Government: (1) A

false representation or wrongful, misleading silence by the party

against whom the estoppel is claimed; (2) an error in a statement

of fact and not an opinion or statement of law; (3) the

taxpayer’s ignorance of the true facts; (4) reasonable reliance

on the acts or statements of the one against whom estoppel is

claimed; and (5) adverse effects suffered by the taxpayer from

the acts or statements of the one against whom estoppel is

claimed. Norfolk S. Corp v. Commissioner, 104 T.C. 13, 60

(1995), affd. 140 F.3d 240 (4th Cir. 1998). If any one of these

elements is missing, equitable estoppel does not apply.
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Regardless of respondent’s assertions about the unpaid

liabilities, petitioners paid amounts that in fact were due and

owing. The payments were applied by respondent. Petitioners

have not established that payments were misapplied. Making

payments of a legally due tax does not constitute detrimental

reliance. Hudock v. Commissioner, 65 T.C. 351, 364 (1975). 

Since at least one element of collateral estoppel has not been

satisfied, respondent is not collaterally estopped from

proceeding in this case. 

We sustain respondent’s determination to proceed with

collection of the income tax liabilities for the years in issue.

An appropriate decision will

be entered for respondent.