T.C. M em o . 2 0 2 0 -5 7

UNITED STATES TAX COURT

M ARTIN D. KIRKLEY AND SHEILA G. KIRKLEY, Pet i t i o n ers v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 9 2 8-1 7L. Fi l edM ay 1 3 , 2 0 2 0
.

J o s ep h G. Sh an no n h o u s e IV, fo r p et i t i o n ers . W i l l i am F. Cas t o r an dVas s i l i k i Eco n o m i d es Farri o r, fo r res p o nd en t .

M EM ORANDUM OPINION COLVIN, J u dg e: Res p o n d en ti s s u eda n o t i ce o f d et erm i nat i o n t o p et i t i o n ers
s u s t ai n i n g res p o n d en t ’ s l i en no t i ce an dp ro po s edl ev y n o t ice. Th e i s s u es fo r d eci s i o n are:-2
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[* 2 ] 1 . Reg ard i n g res po n d en t ’ s d et erm i nat i on t o s us t ai n th e l i en n o t i ce, wh et h er p et i t i o n ers t i m el y

req u es t eda co l l ect i o n du e p ro ces s (CDP) h eari n g i n res p o n s e t o t h ei r recei p t o f a l i en n o ti ce an d , i f t h ey d i dn o t , wh ateffect th i s h as o n o ur ju ri s d i ct i o n i n th i s cas e. 2 . Reg ard i n g res po n d en t ’ s d et erm i nat i on t o s us t ai n th e p ro p o s edl ev y
n o t i ce, wh et h er res p o n d en t ’ s reject io n o f p et i t i o ners ’ p ro p o s edi n s tal l m en t ag reem en to n th e g ro u n d s thatth ey h adn o t fi rs ts o l dal m o s tal l o f t h ei r p ro p ert y , i n cl u d i n g th ei r res i d en ce, was an ab u s e o f d i s cret i o n . W e h o l dth at i t was b ecau s e i t w as b as edo n th e erro n eo u s as s u m p t i o n thatth e In t ern al Rev en u e M an u al (IRM ) p ro v id es n o d i s cret io n t o res po n d en t’ s ag en t s t o accep tan i ns t al l m en tag reem en t
u n l es s th e t ax p ay er fi rs t s el l s al l o f h i s o r h er p ro p ert y . W e wi l l rem an dthi s cas e t o t h e In tern al Rev en u e Serv ice (IRS) Ap p eal s Offi ce t o al l o w co n s i d erat i o n o f t h es e i s su es . Th i s cas e was s ub m i t t edfu l l y s ti p u lat ed wi th o u ttri al p u rs u an tt o Ru l e 1 2 2
. 1

1 Un l es s o t h erwi s e i nd i cat ed , s ect io n referen ces are t o t h e In t ern al Rev en u e Co d e i n effect atal l rel ev an t t i m es . Ru l e referen ces are t o t he Tax Co u rtRu l es o f Pract i ce an d Pro cedu re. M o net ary am o un t s are ro u n dedt o th e n eares td ol l ar. Pet i t io n ers res i d edi n Ok l ah o m a wh en t h e p et it io n was fi led
.-3
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[* 3 ] Back gro u n d A. Back g ro u n d Pet i t i o ners are h u s b an d an dwi fe an dare t h e s ol e o wn ers o f an S co rp o rat i o n. Pet i t io ners h adn o tp ai d an d d o n o td en y th atthey are l i ab l e fo r t h e fo l l o w i n g am o u nt s o f Fed eral i n co m e t ax , p en al t i es , an di nt eres tas o f Ap ri l 1 8 , 2 0 1 8 :
Year Defi ci en cy In t eres t Ad di t io n t o t ax s ec. 6 65 1 (a)(1 ) 2 01 3 $ 9 0 5 ,8 1 0 $ 1 2 5,4 7 1 $ 16 1 ,1 2 2 2 01 4 2 ,2 9 1 ,0 66 2 3 1 ,6 7 9 4 6 0 ,5 3 4 OnDecem

b er 2 2, 2 01 5 , res p o n d en ti s s u edt o p et i t i o ners a No t i ce o f Fed eral Tax Li en Fi l i n g an d Yo u r Ri gh tt o a Heari n g Un d er IRC 6 3 2 0 (l i en n o t i ce) fo r t ax y ears 2 0 1 3 an d2 0 1 4 . OnJ an u ary 2 2 , 2 0 1 6, res p on d en ti s s u edt o p et i t i o n ers a Fi n al No ti ce - No t i ce o f In t en tt o Lev y an d No t ice o f Yo ur Ri g h t t o a Heari n g (l ev y n o t ice) fo r t ax y ears 2 0 1 3 an d2 0 1 4. B. Th e CDP Pro ces s 1
. Pet i t i o ners ’ Fo rm

1 2 1 5 3 an dFo rm

4 3 3 -A OnFeb ru ary 8 , 2 0 1 6 (ap p aren t l y 1 7 d ay s aft er res p o n d en ti ss u ed t he l ev y
n o t i ce an d4 8 d ay s aft er h e i s s u edth e l i enn o t i ce), p et i ti o n ers s ub m i t t eda Fo rm 1 2 1 5 3 , Req u es t fo r a Co l l ect i o n Du e Pro ces s o r Equ i v al en t Heari n g , fo r t h e l i en-4
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[* 4 ] n o t i ce an dth e l ev y

n ot i ce. In thei r req ues tp et i t i o n ers i n qu i red ab o u t en t eri n g
an i n s t al l m en tag reem en tan ds t at ed t h atth ey were at t em

p t in g t o b o rro w ag ai n s t t h ei r h om e eq u i t y . OnFeb ru ary 1 8 , 2 0 16 , p et i t i o n ers s en ta l et t er t o an IRS
rev en u e o ffi cer (RO) an d at t ach eda Fo rm 4 3 3 -A, Co l l ect io n In fo rm at i o n St at em en tfo r W ag e Earn ers an dSel f-Em pl oy edIn d iv i dual s , a Fo rm 4 3 3 -B, Co l lect i on In fo rm at i o n St at em en tfo r Bu s in es s es , an ds i x m o n t h s o f b an k
s t at em en t s fro m

th ei r p ers o n al acco un t s . Inth o s e m at eri al s p et i t i o n ers s ai dth ey h ad b een p ay i n g $ 4 7 ,5 5 8 p er m o n t h i n d el i n qu en t St at e o r l o cal t ax es , wh i ch th ey
wo u l dh av e rep ai d wi t h o ne m o re p aym en t . 2
. In s tal l m en t Ag reem en t OnJ u ne 8 , 2 0 16 , th e IRS s et tl em en to ffi cer (SO) as s i g n edt o p et i t i o ners ’
cas e t ol dp et i t i o ners th ati n o rd er fo r h er t o co n s i d er an i n s t al l m en tag reem en tthey
m u stco m p l et e a Fo rm

9 4 65 , In s t al l m en tAg reem en tReq ues t , b y J u n e 2 3 , 2 0 1 6 , an d i f t h ei r ap p li cat i o n s fo r a h o m e eq u i t y l o an were d en i ed , th ey

m us ts ubm i t
co p ies o f t he l o an ap p li cat i o ns an dtw o l o an d en i al l et t ers . Th e SO al s o s t at edth at i f p et it i o n ers d i dn o t recei v e l o an ap p ro v al th ey wo ul d“b e req u i redt o s el l * * * [t hei r] as set s an dp ay

o v er th e eq u i t y

b efo re * * * [t h e p art ies co u l d ] en ter i n t o an i n s t al l m en tag reem en tfo r th e rem ai n in g u np ai db al an ce.”-5
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[* 5 ] Pet i t i o ners s en t a l et t er t o th e SO d at edJ u n e 2 3 , 2 0 1 6 , i n wh i ch th ey
s ub m i t t edth e Fo rm

9 4 6 5 , o n e l o an d en i al l et ter, an da Fo rm 4 3 3 -F, Co l l ect i o n In fo rm at i o n St at em en t . Inth atl et t er p et i t i o n ers s ai d t h ato n e l o an ap p l i cat i o n h ad b een den i ed b y

p h o n e an dth ey

were cu rren tl y

p urs u i n g l oan s el s ewh ere. On th e Fo rm 9 4 6 5 p et it i o n ers p ro p o s edt o p ay $ 5 0 ,0 0 0 o f t h ei r u np ai dFed eral t ax p er
m o nt h
. OnOct o b er 2 0 , 2 01 6 , th e SO reco rd edi n h er cas e act i v i t y reco rdthats h e recei v edan em ai l fro m

th e RO wh o rev i ewedp et i ti o n ers ’ cas e “ s t at i n g th ath e h ad
co m p l et edth e fi n an ci al i n v es t i g at i o n o n * * * [p et it io n ers ] i n Ap ri l o f 2 0 16 ”. Sh e
reco rd edth atth e RO co ncl u d edp et it i o n ers ’ d i sp o s ab l e i n co m e was $ 3 ,4 39 2 p er
m o nt h . Th ere are n o en t ri es i n th e cas e act i v i t y reco rd aft er Oct o b er 2 0 , 2 0 1 6
. Al s o o n Oct o b er 2 0 , th e SO s en tp et i t i o ners a l et t er i n wh i ch t h e SO rei t erat edth atb efo re s h e ap p ro v es thei r p ro p o s edi n s t al l m en tag reem en t , p et i t i o n ers m

u s tp ro vi de co pi es o f t wo l oan ap pl i cat io n s an dd en i al l et t ers . Th e SO s t at edth at i f p et i t i on ers co u l dn o to b tai n a l o an th ey were “ ex p ect edt o s el l al l
as s et s, wi t h th e ex cep t io n o f two v eh i cl es , an d p ro v i d e ev id en ce t h atth es e as s et s h av e b een p l aced up fo r s al e.” Th e l et ter l i s t eda v ari ety o f as s et s p et i t io n ers

2 Th e SO s t at es p et i t i o n ers ’ d i s po s ab le i n co m e am o u ntas ei t her $ 3,4 3 9 o r $ 3 ,4 3 8 i n h er s ubs equ en t co m m u n i cat i on s wi t h p et i t i o n ers . Fo r s i m p l i ci t y we as s u m e th e am o un ti s $ 3 ,4 39
.-6
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[* 6 ] o wn edi n cl ud i n g th ei r p ri n ci p al res i den ce an d real p ro p erty u s ed b y th e S co rp o rat i o n. By l et t er d at ed No v em

b er 2 1 , 2 0 1 6 , p et i t i o ners t o ldth e SO t h atth ey h ad ap p li edfo r a l o an fro m

a b an ki n Ok l ah o m a Ci t y . OnDecem

b er 6 , 2 0 16 , th e p art i es d is cu s s edan i n s t al l m en tag reem en ti n wh i ch p et i t i on ers v o l u nt eered t o p ay $ 50 ,0 0 0 p er m o n t h an da l um p s u m fro m t h ei r eq u i t y

i n real es t at e an do t h er p ro p ert y wh i ch th ey s ol d . Al s o o n th atd ay th e SO s en tp et i t i on ers a l et t er wi t h a Fo rm 4 3 3 -D, In s tal l m en t Ag reem en t , an d a Fo rm 1 2 2 5 7 , Su m

m ary No t i ce o f Det erm i n at i o n , W ai v er o f Ri g htt o J u di ci al Rev i ew o f a Co l lect i o n Du e Pro ces s Det erm i n at i o n , W ai v er o f Su s p en s i o n o f Lev y Act i o n , an d W ai v er o f Peri o d s o f Li m i t at i o n i n Sect io n 6 3 3 0 (e)(1 ). Th e SO s t at ed i n th e l et t er t hats h e wo u ld reco m m en dt o h er m an ag er t h atth e i n st al lm en tag reem en tb e accep t edi f p et i t io n ers s ig n ed , d at ed , an dretu rn edth e fo rm s t o h er b efo re Decem b er 2 0 , 2 0 16 . Th e Fo rm

4 3 3 -D, wh i ch ap p ears t o h av e b een fi l l edo u tb y t h e SO, s t at edth atp et it i on ers wo u l dp ay a l u m p s u m o f $ 1 ,0 1 9 ,6 6 0 o f th ei r u npai d Fed eral t ax fro m

th e s al e o f t h ei r as s et s b y J u n e 1 , 2 0 1 7 , an d$ 5 0,0 0 0 p er m o n t h b eg in n i n g o n Feb ru ary

2 0 , 2 01 7
. OnDecem

b er 1 9, 2 01 6 , th e SO recei v edth e Fo rm 4 3 3 -D s i g n edb y p et i t i o n ers . Pet i t i o n ers s t at edth atth ey p ro b ab l y co u l d m ak e t h e l u m

p-s u m-7
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[* 7 ] p aym en tb y

J u n e 2 0 1 7 . Ho wev er, p et i t i o n ers d i dn o ts i g n t h e Fo rm 1 2 2 5 7 b ecau s e th ei r co u n s el ad v i s edth em n o tt o wai v e t h ei r ap p eal ri g h ts . OnDecem

b er 2 7, 2 01 6 , th e SO s en ta l et t er t o p et i t i o n ers s t at i ng th ats h e
co u ldn o taccep tthe p ro p os edi n s t al l m en t ag reem en t b ecau s e: (1 ) t h e IRM d i dn o t p erm i tres p o n d en tt o en t er i n t o an i n s tal l m en tag reem en tb efo re p et i t i o ners l i qu i dat edth ei r as s et s an dp ai dth e p ro ceed s t o res p o nd en t, (2 ) p et i t i o n ers co u l d
n o tp ay $ 5 0 ,0 0 0 p er m o n t h as s h o wn b y th e RO’ s es t i m at e t hatp et i t i o n ers co u l d p ay o n l y $ 3 ,4 38 p er m o nt h , an d(3 ) p et i t i o n ers h ad“ s i g n i fi can tequ i t y i n as s et s t h atm u s tfi rs t b e l i qu i d at ed .” Sh e al s o s t at edth atn o co l l ect i o n al t ern at i v e was
av ai l ab l e t o p et i t i o ners an dthata No t i ce o f Det erm in at i o n Co n cern i n g Co l l ect i o n Act i o n (s ) Un d er Sect i o n 6 3 2 0 an d/ o r 6 3 3 0 o f t h e In t ern al Rev en u e Co d e (n o t i ce
o f d et erm i nat i o n ) was g o i n g t o b e i s s ued
. OnJ an u ary

1 1 , 2 0 1 7 , res p o n d en ti ss u eda n o t i ce o f d et erm i n at io n t o p et i t i o n ers reject i n g th e p ro p o s edi n st al l m en tag reem en tan d s us t ai n i n g th e l i en
n o t i ce an dth e l ev y

n ot i ce. Th e n o t i ce o f d et erm i n at i o n i n cl u des an at t ach m en t wh i ch ap p ears t o h av e b een wri t t en b y t he SO. Th e at t ach m en t s tat es th at p et i t i o n ers ’ p ro p o sedi n s t al l m en tag reem en t h adb een reject ed“b ecau s e * * * [p et i ti o n ers ’ ] equi t y

i s req u i redt o b e p ai do v er fi rs t .” Ital so s t at es th at p et i t i o n ers ---8
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[* 8 ] h av e a m o n t h l y

ab i li t y t o p ay o nl y $ 3,4 3 9 p er m on t h. Si n ce an i n s t al l m en tag reem en tfo r t h i s am o u n two ul dn o tres ul ti n fu l l p aym en to f t h e t ax es wi t h i n t h e co l l ect i o n s s t atu t e, l iqu i dat i on o f * * * [p et i t i o n ers ’ ] as s etequ i ty i s m an d at ory

i n acco rd an ce wi th IRM 5 .1 4 .2 .1 .2 (3 ), (4 ), (5 ) an d(6 ). * * * [S] i n ce l o an s ap p ear t o b e u n at tai n ab l e, t h en al l as s et s wi t h th e ex cep t i on o f t wo o f * * * [p et i t i o n ers ’ ] v eh i cl es m

u s tb e s o l d an dth e eq u i t y p ai do ver fi rs t . Th e at t ach m en tt o the n ot i ce al s o s t at es th ataft er th e SO s en t t h e Fo rm 4 3 3 -D o n Decem b er 6 , 2 0 1 6, t he SO h ad “ co n fi rm edth atIRM 5 .1 4 .1 .4 (5 ) req u i res th at equ it y b e p ai do ver b efo re en t eri n g i n to th e ag reem en t .” At tach edt o th e n o t i ce
was a co p y

o f t h e l i s to f as s et s i n cl u d edi n t h e Oct o b er 2 0 , 2 0 1 6 , l et t er, wh i ch i n cl u d edp et i t i on ers ’ p ri n ci p al res i den ce an dreal p ro p ert y u s edb y th e S
co rp o rat i o n. Di s cu ss i o n Th e i s s u es fo r d eci si o n are: (1 ) reg ard i ng th e l i en n o t i ce, wh et h er p et i t i o n ers t i m el y

req u es t eda CDP h eari ng an d, i f n o t , h o w th ataffect s o ur ju ri s d i ct i o n i n th i s cas e; an d(2 ) reg ard in g th e l ev y n o t i ce, wh et h er t h e d et erm i n at i o n t h atp et i t i o ners m u s tl i qu i d at e al l o f t h ei r p ro p ert y , i n cl u d in g th ei r
res i den ce, as a co nd i t i o n fo r res p o nd en t ’ s accep t an ce o f an i n s tal l m en tag reem en t , was an ab u s e o f d i s cret i o n .-9
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[* 9 ] A. St an dardo f Rev i ew Wh ere, as h ere, t h e ex i s ten ce an dam o u n to f a t ax pay er’ s u n d erl y i n g t ax l i ab i l i t y is n o ti n d i sp u t e, we rev i ew t h e Co m m is s i o n er’ s d et erm i n at i o n fo r ab u s e
o f d i s cret i o n . Go za v . Co m m i s s i o ner, 1 1 4 T.C. 1 76 , 1 8 2 (2 0 00 ). Anab u se o f d i s cret i o n o ccu rs i f t he SO ex erci s es h i s o r h er d i s cret i o n “ arb i t rar[i l ] y , cap ri ci ou s [l y ] , o r wi t h o u t s ou n db as is i n facto r l aw.” Gi am el l i v . Co m m i s s i o n er, 1 2 9 T.C. 1 0 7 , 1 1 1 (2 0 0 7 ). If t h e SO fo l l o ws al l s tatu t o ry an dad m i n i s t rat iv e g u i d el i n es an dp ro v i d es a reas o n ed , b al an cedd eci s i o n , we wi l l n otrewei g h t h e equ it i es . Th om

ps o n v . Co m

m i s s i o n er, 1 4 0 T.C. 1 7 3 , 1 7 9 (2 0 1 3 ). B. Li en No t i ce Acco rd i ng t o o u r reco rd , res p o n d en ti s s u ed t h e l ien n o t i ce t o p et i t i o ners o n Decem b er 2 2 , 2 0 15 , an dp et i t i o n ers s ub m i t t ed t h e CDP h eari n g req u es t4 8 d ay s l at er o n Feb ru ary 8 , 2 0 1 6
. Sect i o n 6 3 2 0 (a)(3 )(B) es t ab l i sh es a 3 0 -d ay p eri o d du ri n g wh i ch a t ax p ay er m ay req ues ta CDP h eari n g aft er t h e i ss u an ce o f a l i en
n o t i ce. Ho wev er, t h e p art i es s t i p u l at edth atp et i t i o n ers s ub m it t eda “ t im el y Fo rm 1 2 1 5 3 * * * wi t h res p ectt o th e CDP Lev y No t i ce an d CDP Li en No t i ce.” Onrem an dthe p art i es s h o u l dco n si d er wh et h er t he CDP h eari n g req u es t
was t i m el y

wi t h res p ectt o th e l i en n o t i ce an d , i f n o t , h o w th ataffect s o ur ju ri s d i ct i o n i n th i s cas e. See, e.g
. , W i l so n v . Co m m is s io n er, 1 3 1 T.C. 4 7 (2 0 0 8 );-1 0
-

[* 1 0 ] Crai g v . Co m

m i ss i o n er, 1 1 9 T.C. 2 5 2 , 2 56 -2 6 0 (2 0 0 2 ); Ki m v . Co m m i s s i o n er, T.C. M em o . 2 0 0 5 -9 6
. C. Pet i t i o ners ’ Req u es tfo r an In s t al l m en tAg reem en t Pet i t i o ners ’ req u es tfo r a CDP h eari n g reg ard i n g th e l ev y n ot i ce was cl earl y t i m el y . Th u s , we wi ll n ex t d eci d e wh et h er res p o n d en t ’ s d et erm i nat i on t o s u s t ai n t h e n o ti ce o f l ev y

was an ab u s e o f d is cret i o n . Th e n o t i ce o f d et erm i n at i o n s t at es th atth e SO reject ed p et i t i o n ers ’ p ro p o s ed i n s t al l m en tag reem en tb ecau s e IRM p t . 5 .1 4 .1 .4 (5 ) an d5 .1 4 .2 .1 .2 (3 ), (4 ), (5 ),
an d (6 ) (Sep t . 1 9 , 2 0 1 4 ) req u i res thatp et i ti o n ers s el l al l o f t h ei r as s et s b efo re
res p o n d en t wi l l en t er i n to an i n s t al l m en tag reem en t . Ho wev er, n ei t h er o f t h o s e IRM p ro vi s i on s au to m at i cal l y m an d at es s al e o f al l o f a t ax p ay er’ s p ro p ert y as a p reco n di t i o n o f en t eri n g i n to an i n s t al l m en tag reem en t . IRM p t . 5 .1 4 .1 .4 (5 ) s t at es i n p ert in en tp artth atth e SO s h o u l d“ ex p l o re t he p o s s i b i l i ty

o f l i qu i d at i n g o r b o rro wi n g ag ai ns t* * * as s et s ” wh en co n s id eri n g an i n s t al l m en tag reem en t“ u n l es s * * * th e as s eti s n eces saryfo r t he p ro du ct i o n o f i n co m e o r t h e h eal t h an dwel fare o f t h e fam i l y .” Th e p ro p ert y l i s t edt o b e s o l di n t h e Oct o ber 2 0 , 2 0 1 6 , l et t er fro m th e SO an di n t he n o ti ce o f d et erm i n at i o n i n cl u d es p ro p ert y u s edb y p et i t i o n ers ’ S co rp orat io n an d p et i t i o n ers ’ p ri n ci p al
res i den ce. Th e reco rdd o es n o ts h o w wh et h er t h e SO co n s i dered wh eth er t h o s e-1 1
-

[* 1 1 ] p ro p ert i es were “ as s et [s ] n eces s ary fo r t h e p ro du ct io n o f i n co m e o r t h e h eal t h an dwel fare o f t h e fam i ly .” IRM p t . 5 .1 4 .2 .1 .2 (3 ) s t at es th atwh en a t ax pay er h as equ i t y i n as s et s “ t h e t ax p ay er wi l l n o rm al l y b e req u i redt o m ak e a g o odfai t h at t em p tt o u t il i ze eq u i t y b efo re t h e Serv i ce [IRS] wi l l ap p ro v e a” p art i al p aym en t i n s t al l m en tag reem en t (i
. e., a p aym en tp l an wh ere t h e t ax p ay er p ay s l es s th an t he t o t al o u ts tan d i n g l i ab i l i t y ). Ho wev er, IRM p t . 5 .1 4 .2 .1 .2 (5 ) s t at es th atwh enthe t ax p ay er can n o t

“ s ecu re a l o an o r l i qu i d at e an as s etfo l l o wi n g a g o o d fai t h at t em p tt o d o s o , th e
* * * [SO] wi l l n eedt o m ak e a s ei zu re/ l ev y d et erm i n at i o n”. IRM p t . 5 .1 4 .2 .1 .2 d o es no treq u i re t ax p ay ers t o l iqu i d at e al l o f t h ei r as s et s ; i n s t ead , i t req u ires th at t h e SO m ak e a “ l ev y d et erm i n at i o n ”. M ak i n g a l ev y d et erm in at i o n i s n o tth e s am e t h i n g as i m

p o s i n g a l ev y . Bu d i s h v . Co m m i s s i o n er, T.C. M em o . 2 0 1 4 -2 3 9 , at* 1 9 , * 2 2 , * 2 5 . Thu s , IRM p t . 5 .1 4.2 .1 .2 d o es n o t s up po rtth e SO’ s co n cl us i o n th at p et i t i o n ers were req u i redt o l iqu i d at e al l th ei r as s et s b efo re t h e IRS wo u l daccep t
an i n s t al l m en tag reem en t . In Bu d i s h v . Co m

m i s s i o n er, at* 9 , an Ap p eal s o ffi cer (AO) co n cl ud edth at t h e IRM req u i reda l i en n o t i ce t o b e fi l edb efo re an i n s t al l m en tag reem en t co u l db e
en t ered . Th e AO m i s i n t erp ret edth e ci tedIRM p ro v i s i o n as s h o wn b y th e factth at t h e ci t edp ro v i s i o n p ro v i d es d i scret io n b y s t at i ng th atth ere m ay b e o ccas i on s i n-1 2
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[* 1 2 ] wh i ch i ti s n o tn eces s ary t o fi l e a l i en n o t i ce. Id . at* 1 8 -* 1 9 . Si m i l arl y , th e SO h ere i n t erp ret edth e IRM n o tt o al l o w th e ex erci s e o f d i s cret i o n i n d et erm i n i n g wh et h er t o accep t t h e i n s t al l m en tag reem en t wi th o u tp et it i on ers ’ fi rs t s el l i n g th ei r
res i den ce an d m o s to f t h ei r o t h er p ro p ert y . Th e IRM p ro v i s i o ns th e SO ci t ed i n s t ru ctIRS p ers on nel t o co n s i d er wh et h er l i qu i d at i n g an db o rro wi n g ag ai n s t
as s et s s h o u l db e req u i red . Nei t h er p ro vi s i o n s t at es th atp et i t i o n ers m u s tl i qu i d at e al l o f t h ei r as s et s b efo re res p o nd en twi l l accep t a p ro po s edi ns t al l m en tag reem en t . Res p o n d en tco n t en d s th atth e SO d i d n otab u s e h er d i scret i o n b y l i s t i n g p et i t i o n ers ’ p ri n ci pal res i d en ce as an as s etth atth ey m u s t l i qui d at e. Res p on d en t ci t es anex am

p l e i n IRM p t. 5
. 14 .1 .4 (5 ) as s up p o rt . Th atex am p le s t at es : If a t ax p ay er h as th e ab il i t y t o p ay $ 3 ,0 0 0 p er m o n t h o n a $ 2 0 0 ,0 0 0 l i ab i l i t y an d has a h o m e v al u edat $ 4 0 0 ,0 0 0 wi t h equ i ty o f $ 2 0 0,0 0 0 , req u es t th ath e at t em

p tt o b o rro w o n the av ai l ab l e eq u it y i n th e h o m e p ri o r t o g ran t i n g an i n s t al l m en t ag reem en t . If t h e t ax p ay er d o es n o t at t em ptt o b o rro w o n th e h o m e h e m u s tb e n o t i fi edth at , th o u g h t h e i n s t al l m en tag reem en treq u es ti s p en d i ng , i twi l l b e reco m m en d edfo r reject i o n. If t h e t ax p ay er i s ab l e t o g eta h o m e eq ui t y l o an an d t he m o n i es are u s edt o p ay

t ax es , th e am o u n to f t h e p aym en to n th e l o an wi l l b e co n s i dered an al l o wab l e ex pen s e. Ho wev er, i f t h e t ax p ay er ap p l ies fo r a l o an b utth e l o an i s n o tap p ro v ed , ev ery effo rts h o u l d b e m ad e t o p res erv e t h e i n s tal l m en tag reem en t . Itwo u ldp ro m o te v o l u n t ary co m p l i an ce an db e i n i n t eres to f t h e g o v ern m en t . Th i s ex am

pl e d o es n o ts up po rtres p on d en t’ s p o s i t io n . Th e fi nal two qu o t ed
s en t en ces s t at e t hati t i s i n th e Go v ern m en t’ s i n teres tt o m ak e “ ev ery effo rt* * * t o-1 3
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[* 1 3 ] p res erv e t he i n st al lm en tag reem en t ” i f t h e t ax p ay er can n ots ecu re a h o m e equ it y l o an . IRM p t . 5 .1 4 .1 .4 (5 ) (i n cl u d i n g th e ci t edex am p l e) d o es n o ts t at e t h at t o en t er i n t o an i n s t al l m en tag reem en tt ax p ay ers m u s t s el l th ei r h o m e i f t h ey
can n oto b t ai n a l o an . Sect io n 6 3 3 0 (c)(3 )(C) req u i res IRS p ers o n nel t o co n si d er “ wh et h er an y p ro p os edco l l ect i o n act i o n [e.g ., a l ev y ] b al an ces the n eed fo r t h e effi ci en t
co l l ect i o n o f t ax es wi t h th e l eg i t i m at e co n cern * * * th atan y co l l ect i o n act i o n b e
n o m o re i n t ru s i v e t h an n eces s ary .” In Bu d i s h v . Co m m i s s io n er, at* 24 , th e AO

“ g av e l i tt l e, i f an y , co n s id erat i o n t o * * * [t h e t ax p ay er’ s ] arg u m en t s an d , i n s t ead , d eci d ed a n o t i ce o f l i en s h o ul db e fi l edb ecau se o f h er m i s tak en b el i ef t h ats h e l ack edd is cret i on t o d o o t h erwi s e u nd er t he IRM .” In Bu di s h th e AO fai l edt o p ro p erl y b al an ce t h e n eedfo r t h e effi ci en tco l l ect i o n o f t h e t ax p ay er’ s t ax l i ab i l i t y wi t h th e t ax p ay er’ s l eg i t i m at e co n cern th at t h e co l l ect i on act i o n b e n o m o re i n t ru si v e t h an n eces s ary

as req u i redb y

s ect i o n 6 3 3 0 (c)(3 )(C). Hav in g n o t p erfo rm edth e requ i redan al y s is u n d er s ect i on 6 3 3 0(c)(3 )(C), t he AO co m m i t t ed
an ab us e o f d i s cret i o n . Id . Th atan al y s i s al s o ap p li es h ere. In th i s cas e IRM p t . 5 .1 4 .1 .4 (5 ) an d5
. 1 4 .2 .1 .2 (3 ), (4 ), (5 ), an d (6 ) p ro v i d ed d i s cret i o n t o d et erm i n e wh et h er p et i t i o n ers m u s tl i qu i d at e al l th ei r as s et s . Th e
cas e act i vi t y

reco rd , wh ere t h e SO reco rd edh er n o t es o n th i s cas e, co n t ai ns n o-1 4
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[* 1 4 ] en tri es aft er Oct o b er 2 0 , 2 0 1 6 , ev en th o u g h t h ere was ex t en s i v e
co m m u n icat io n b et w een th e p art i es aft er t h i s d at e. Th erefo re, th e cas e act i v i t y
reco rdp ro v i des n o i n s i g h tas t o wh y th e SO co n cl u d edth at t he IRM p ro v i d edh er wi t h n o d i s cret i on . Th e reco rdd o es n o t s h o w th atth e SO b al an cedthe n eed t o co l l ect t ax wi t h t h e l eg i t i m at e co n cern th atth e co l l ect i o n act i o n b e n o m o re i n t ru s i v e t han
n eces s ary . See s ec. 6 3 3 0 (c)(3 )(C). By fai l i n g t o p erfo rm t h atan al y si s , th e SO ab u sedh er d i s cret i on b y

reject i n g th e Fo rm

4 3 3 -D i ns t al l m en tag reem en tan db y i s su i ng th e n o t i ce o f d et erm i n at i o n . D. Co n cl u si o n W e wi l l rem an dthi s cas e t o t h e IRS Ap p eal s Offi ce fo r a s up p l em en t al h eari n g reg ard i ng t h e l i en an dl ev y n o t i ce i n acco rd an ce wi t h th i s o p i ni o n an dfo r t h e i s s uan ce o f a s up p lem en t al n o t i ce. W e al s o n o t e t h atth e reco rdd o es n o t
res o l ve p et i t i o ners ’ cl ai m th atth ey can p ay $ 50 ,0 0 0 p er m o n t h an d t h e RO’ s
es t i m at e th atth ey can affo rd t o p ay o n l y $ 3 ,4 3 8 p er m o n t h . Th e p art ies s h o u l d at t em p tt o res o l v e t hi s fact u al is s u e o n rem an d an dco n si d er an y o t h er i s s u e p ro p erl y b eari n g o n p et i t io ners ’ el i g i bi l i t y fo r ani n st al l m en tag reem en t .-1 5
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[* 1 5 ] To refl ectthe fo reg o i n g , Anap p ro p ri at e o rd er wi ll b e i s s u ed
.