T.C. Mem o. 2 01 4- 11 6

UNITED STAT ES TAX COURT
JOSE L. URIBE AND MARIA E. URIBE, Pe ti ti on ers v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 13 33 7- 12 L. File d J un e 1 1, 2 01 4.

Mi tc he ll Stu artFu ers t, J os ep h A. DiRuz zo , III, Je nn ife r Co rreaRie ra, an d Sanpr eetK. Dhal iwal , forpe ti ti on ers . DerekP. Ric hm an , forres po nd en t.

MEMORANDUM FINDINGS OF FACT AND OPINION BUCH, Ju dg e: The s ol e is su e b efo re the Co urt i s wh ethe r res po nd en t ab us edhi s d is cret io n i n s us ta in in g the no ti ce o f Fed eral tax li en(NFTL) fil in g- 2 -

[* 2] un de r se ct io n 6 32 0 an d p ro po se d l ev y un de r se ct io n 6 33 0. We ho ldth athe 1 di d n otab us e h is di sc ret io n i n d en y in g wi th dr awal of t he li enbu t d idab us e h is di sc ret io n i n d en y in g c ol le ct io n a lt ern at iv es . FINDINGS OF FACT The Urib es fil edFo rm

10 40 , U.S. Ind iv idua l In co m e Tax Return, fo r th em se lv es an d F orm

11 20 S, U.S. Inc om e Tax Return fo r anS Co rp or at io n, fo r th ei r bu si ne ss , LacunaHairSal on & Sp a, In c., forth e 2 00 7 t ax ab le y ear. 2 Subs eque nt ly, res po nd en t o pe ne d a n e xa m in at io n o f th e returns , andat t he en d o f th e ex am in at io n the Urib es si gn eda Fo rm 45 49 , Inc om e Tax Exam in at io n Ch an ge s. Th e Uri be s l at er re qu es te d aud itreco ns id erat io n. On Se pt em

be r 26 , 20 11 , res po nd en t m ai le d the Urib es a Not ic e o f In te ntto Lev y an d No ti ce o f You r Ri gh t t o aHeari ng . The l ev y no ti ce i nf

orm edth e Uri be s th atres po nd en t i nt en de d t o c ol le ctth ei r 20 07 li ab il ity th ro ug h l ev y . Abo uttwo week s l at er re sp on de ntm ai le d the Urib es a Not ic e o f Fed eral Tax Li enFil in g a nd

Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o the Int ern al 1 Rev enue Co de ineffe ctat a ll rel ev an t t im es , andall Ru le refe ren ces are t o the Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e. The Urib es ’ S co rp or at io n h as si nc e b eenren am edNew Creati ve Co nc ep t, 2 In c.- 3 -

[* 3] You r Ri gh t t o aHeari ng Und er IR C 6 32 0. Th e li ab il it ie s co ve redby the
no ti ces to ta le d o ve r $1 20 ,00 0. The Urib es ti m el y

fil edFo rm

12 15 3, Re qu es t fo r a Co ll ect io n Du e Pro ces s orEqu iv al en t Hea rin g, i n re sp on se to th e li enan d l ev y no ti ces . The Fo rm

12 15 3 reque st edli enwithd rawal , bu t the Urib es di d n otch ecka bo x re qu es ti ng a co ll ect io n a lt ern at iv e. The Uri be s at ta ch eda le tt er s ta ti ng th atth ey want edto
en te r in to anin st al lm en t ag reem en t af te r th e au di t re co ns id erat io n p ro ces s co nc lu de d. On M arch 22 , 20 12 , th e se tt le m en t o ffi cer m ai le d the Urib es a le tt er sc he du li ng a te le ph on e h eari ng . In ea rly Apri l 2 01 2 the set tl em en t o ffi cer h el d the te le ph on e h eari ng with the Urib es ’ at to rn ey , Mr. Fu ers t. The set tl em en t o ffi cer to ldMr. Fu ers t tha t the Urib es were p recl ud edfro m rai si ng th e und erl y in g li ab il ity . Mr. Fu ers t t es ti fie d a t tria l tha t h e to ldth e se tt le m en t o ffi cer t ha t the Urib es face d aha rd sh ip be cau se of t he eco no m ic do wnturn a ndth atth ey were in te res te d i n aco ll ect io n a lt ern at iv e. Mr. Fu ers t p ro po se d two o pt io ns for 3 At tria l re sp on de ntob

jecte d t o M r. Fu ers t’s t es ti m on y be cau se he is am on g 3 th e co un se l o f rec or d i n thi s ca se . Howev er, b ecau se he was p art ic ip at in g o nl y as a wit ne ss du rin g tria l, the Co urt o ve rru le d thi s o bjec ti on . Next , res po nd en t ob jecte d b ecau se he ha d n otbe enin fo rm edwithi n the ti m e requi redby the Co urt’s St an di ng Pretria l Ord er tha t the Urib es were p lann in g t o c al l M r. Fu ers t t o t es ti fy
. The Co urt re se rv edrul in g o n the ob jecti on . W e wil l al lo w th e te st im on y be cau se (co nt in ue d...)- 4 -

[* 4] res ol vi ng th e co ll ect io n i ss ue s: a co ll ect io n a lt ern at iv e b as edon whatth e Urib es ex pe ct edth ei r li ab il ity to be aft er au di t re co ns id erat io n o r a s ho rt- te rm ag reem en t as to th e cu rren tl y ass es se d l iabi li ty so tha t the ag reem en t wo ul d b e rev is edaft er au di t re co ns id erat io n. Th ro ug ho utth e p ro ces s M r. Fu ers t b el ie ve d th atth e li ab il ity

wou ldbe ad

jus te d, an d a ll co ll ect io n a lt ern at iv es th athe pro po se d
on be ha lf o f th e Uri be s wer e p red ic at edon au di t re co ns id erat io n. At n o t im e dur in g the co ll ect io n h eari ng pro ces s d idth e se tt le m en t o ffi cer oran y othe r In te rn al Rev enue Serv ic e em pl oyee as k the Urib es to pro vi de fin an ci al in fo rm at io n o r to co m pl et e a Fo rm

43 3- A, Col le ct io n In fo rm at io n St at em en t fo r W ag e Earn ers an d S el f-Em pl oyed In di vi du al s. Res po nd en t i ss ue d aNot ic e o f Det erm in at io n C on cern in g C ol le ct io n Acti on (s ) Und er Se ct io n 6 32 0 a nd63 30 onApri l 2 4, 2 01 2, s us ta in in g the NFTL
an d the pro po se d l ev y . The Uri be s, wh il e res id in g i n F lo rid a, ti m el y pe ti ti on ed
. OPINION The Secr et ary m

us t n ot ify a tax pa y er i n wri ti ng of h is or h er ri gh t t o re qu es t a h eari ng up on th e fi li ng of ano ti ce o f li enor b efo re the Secr et ary canlev y ag ai ns t
(...co nt inue d) 3 we do no t fi ndth atres po nd en t was pre jud ic ed ; the tes ti m on y

do es no t co nf

li ct with a ny m at eri al fact s as st at edinth e adm in is tra ti ve reco rd
.- 5 -

[* 5] an y pro pe rty or ri gh t t o p ro pe rty. The h eari ng s ar e o fte n c al le d c ol le ct io n 4 du e p ro ces s, o r CDP, h eari ng s. Ina CDP h eari ng a ta xp ay er m ay rai se any is su e rel ev an t t o a n u np ai d t ax or c ol le ct io n a ct io n, i nc lu di ng ap pr op ria te sp ou sa l de fen se s, ch al le ng es to th e ap pr op ria te ne ss of c ol le ct io n a ct io ns , andoff ers of
co ll ect io n a lt ern at iv es . In a dd it io n, a t ax pay er m ay ch al le ng e th e ex is te nc e o r 5
am ountof t he un de rlyin g t ax li ab il ity if the tax pay er d idno t re cei ve a st atut ory no ti ce o f de fic ie nc y

or d idno t o th erwi se have th e o pp ortu ni ty to d is pu te th e li ab il ity . Whi le th e te rm “un de rlyin g l iabi li ty” is n otde fin edinsec ti on 63 20 or 6 63 30 , we hav e p rev io us ly int erp ret edth is term “ to in cl ud e an y

am ou nt s o wedby a ta xp ay er p ur su an t t o the tax laws .” Forpu rp os es of s ect io n 6 33 0( c)(2 )(B) , a 7 ta xp ay er wh o s ig ne d F orm 45 49 is de em edto ha ve ha d the op po rtu ni ty to d is pu te th e und erl y in g l iabi li ty. 8

Secs . 63 20 (a), 6 33 0( a)(1 ). 4 Secs . 63 30 (c)( 2) (A), 63 20 (c). 5 Sec. 6 33 0( c)(2 )(B)
. 6 Katz v. Co m

m is si on er, 1 15 T.C. 32 9, 3 39 (20 00 ). 7 Agu irr e v . Comm is si on er, 1 17 T.C. 32 4, 3 27 (20 01 ); Gi lm er v . 8 Co m m is si on er, T.C. Mem o. 2 00 9- 29 6.- 6 -

[* 6] If the va li di ty of th e und erl y in g l iabi li ty is p ro pe rly at is su e, we wil l re vi ew th atde te rm in at io n d e n ov o. In c on tra st , wher e th e v al id ity of t he un de rlyin g 9 li ab il ity is no t p ro pe rly at is su e, we wil l re vi ew th e d et erm in at io n fo r ab us e o f di sc ret io n. An ab us e o f di sc ret io n wi ll be fou ndwher e th e d et erm in at io n was

1 0 arb itrary, capri ci ou s, o r witho utso un d b as is infactor l aw. 1 1 The de te rm in at io n b y

th e App eal s o ffi cer m

us t t ak e in to co ns id erat io n: (1) th e v eri fic at io n tha t the requi rem en ts of app li cab le law an d a dm in is tra ti ve pr oc edur e h av e b eenm et ; (2 ) rel ev an t i ss ue s ra is edby the tax pa y er; an d (3 ) whe th er an y

pro po se d c ol le ct io n a ct io n b al an ces th e n eedfor effi ci en t co ll ect io n with the leg it im at e co nc ernof t he tax pay er tha t an 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 . 1 2 Bec au se th e Uri be s s ig ne d aFo rm 45 49 ag reei ng to th e und erl y in g l iabi li ty, th ey were p recl ud edfro m

rai si ng th ei r un de rlyin g l iabi li ty dur in g the CDP

Seg o v . Comm is si on er, 1 14 T.C. 60 4, 6 09 -6 10 (20 00 ); Go za v . 9 Co m m is si on er, 1 14 T.C. 17 6, 1 81 -1 82 (20 00 ). Seg o v . Comm is si on er, 1 14 T.C. at 6 10 ; Go za v . Comm is si on er, 1 14 T.C. 1 0 at18 2. Giam el li v. Co m

m is si on er, 1 29 T.C. 10 7, 1 11 (20 07 ). 1 1 Sec. 6 33 0( c)(3 ). 1 2- 7 -

[* 7] he ari ng . Acco rd in gl y , we rev ie w res po nd en t’s d et erm in at io ns forab us e o f

1 3 di sc ret io n. I. W ithd rawal of No ti ce o f Fed eral Tax Li en Upo n d em an d fo r pa ym en t an d fa il ur e to pa y , th e Fed eral Gov ern m en t ob ta in s a l ie n a ga in st“ al l p ro pe rty andrig ht s t o p ro pe rty, whethe r rea l o r pe rs on al ” o f an y

pe rs on li ab le for

Fed eral tax . After

ob ta in in g the li en , th e 1 4 Secr et ary m ay

fil e a n ot ic e o f th e li ento ob ta in pri or ity ov er o th er cr ed it or s. The 1 5 Secr et ary m ay

withd raw a n ot ic e o f li enif c ert ai n c irc um st an ces are p res en t, s uc h
as th e fi li ng of t he no ti ce was pre m atur e; th e ta xp ay er en te redin to anag reem en t t o sa ti sf y th e li ab il ity ; wi th dr awal wou ldfaci li ta te co ll ect io n; or wi th th e co ns en t o f th e ta xp ay er o r th e Nat io na l Tax pa y er Advo cat e, withdrawal wou ldbe inth e b es t in te res ts of t he tax pa y er an d the Uni te d S ta te s. 1 6 The st atut e al lo win g wi th dr awal of ano ti ce o f li enis pe rm is si ve . The Urib es pre se nt edno ev id en ce t o s ho w why th e n ot ic e o f li ensh ou ldbe withd rawn
Agu irr e v . Commis si on er, 1 17 T.C. at 3 27 ; Gi lm er v . Commis si on er, T.C. 1 3 Mem o. 2 00 9- 29 6. Sec. 6 32 1. 1 4 Sec. 6 32 3( a). 1 5 Sec. 6 32 3(

j). 1 6- 8 -

[* 8] othe r th anMr. Fu ers t’s v ag ue st at em en ts ab ou t h ard sh ip . Accor di ng ly, we fin d tha t the set tl em en t o ffi cer d idno t ab us e h er d is cret io n i n n otwithd rawi ng th e NFTL. II. Den ia l o f Co ll ect io n Al te rn at iv e Mr. Fu ers t ap pr oa ch edth e CDP h eari ng fro m th e p ers pe ct iv e th atth e Urib es ’ un de rlyin g l iabi li ty w ou ldbe ad jus te d, an d h e o ffer edco ll ect io n al te rn at iv es pre di cat edon ly on the res ul t o f th e au di t re co ns id erat io n tha t h e
an ti ci pa te d. Ho wev er, wh il e h is foc us m ay have be enm is pl aced , th e se tt le m en t of fic er co ul d n otpro pe rly eval ua te whet he r th e Uri be s qua li fie d fo r a co ll ect io n al te rn at iv e b ecau se sh e d idno t as k the m to pro vi de any

fin an ci al in fo rm at io n. The reg ul at io ns pro vi de th at“ [t]ax pa y ers wil l b e ex pe ct edto pro vi de all rel ev an t i nf

orm at io n re qu es te d b y

App eal s, i nc lu di ng fin an ci al st at em en ts , forit s co ns id erat io n o f th e fac ts an d i ss ue s i nv ol ve d i n the he ari ng .” W e h av e al so 1 7
co ns is te nt ly hel d tha t a s et tl em en t o ffi cer d oe s n otab us e h is di sc ret io n i n d en y in g a co ll ect io n a lt ern at iv e whe n the tax pa y er d idno t p ro vi de th e reque st edfin an ci al

Sec. 3 01 .63 20 -1 (e)( 1) , Pro ced . & Adm in . Reg s. (e m ph as is ad de d) ; s ec. 1 7 30 1.6 33 0- 1( e)(1 ), Pro ced . & Adm in . Reg s. (e m ph as is ad de d)
.- 9 -

[* 9] in fo rm at io n. Thi s i ll us tra te s the im po rta nc e o f kn owi ng th e ta xp ay er’s 1 8 ab il ity to pa y when ev al ua ti ng whethe r he is eli gi bl e fo r a co ll ect io n a lt ern at iv e. Neit he r th e se tt le m en t o ffi cer n oran y IRS em pl oyee as ke d fo r th e Uri be s’ fin an ci al in fo rm at io n. Re ga rd le ss of t he fin al am ountof t he li ab il ity , itis im po ss ib le for

th e se tt le m en t o ffi cer t o e va lu at e th e Uri be s’ abi li ty to p ay witho ut kn owi ng th ei r fi nanc ia l i nf orm at io n. By notreque st in g thi s p iv ot al in fo rm at io n, th e se tt le m en t o ffi cer c ou ldba se he r de te rm in at io n o nl y on th e in fo rm at io n M r. Fu ers t p ro vi de d i n h is reque stforanin st al lm en t ag reem en t an d n oton whatsh ou ld ha ve be enco ns id ered , whi chwas the Urib es ’ el ig ib il ity foranin st al lm en t ag reem en t b as edon th ei r ab il ity to pa y . W e h av e th e d is cret io n t o re m an d acas e to th e Offi ce o f App eal s fo r co ns id erat io n o f a m at te r th atwas n otpro pe rly con si de red
. W e ex erci se th at 1 9 di sc ret io n h ere a ndrem an d the cas e in ord er fo r th e Uri be s’ fin an ci al in fo rm at io n to be co ns id eredas p artof t he ir r eque stfora co ll ect io n a lt ern at iv e.

See M ayhu gh v. Co m

m is si on er, T.C. Mem o. 2 01 4- 98 ; Kl in ge nb erg v. 1 8 Co m m is si on er, T.C. Mem o. 2 01 1- 24 7, af f’d, 55 1 F ed . App x. 3 54 (9t h C ir. 2 01 4) ; Sch wers en sky

v. Co m m is si on er, T.C. Mem o. 2 00 6- 17 8; See Ho y le v. Co m

m is si on er, 1 31 T.C. 19 7 (2 00 8) ; M ed . Pract ic e 1 9 So lu ti on s, LLC v . Comm is si on er, T.C. Mem o. 2 00 9- 21 4.- 10 -

[* 10 ] III. Co nc lu si on W e fi ndth atres po nd en t d idno t ab us e h is di sc ret io n i n d ecl in in g t o withd raw the NFTL. H owe ve r, we wil l o rd er a re m an d o n the is su e o f co ll ect io n al te rn at iv es be cau se we fin d tha t re sp on de ntdi d n otap pr op ria te ly eval ua te th e Urib es ’ reque stforanin st al lm en t ag reem en t. To re fle ctth e fo reg oi ng , An ap pr op ria te ord er wi ll be is su ed
.