14 1 T.C. No . 7

UNITED STAT ES TAX COURT
TOM REED, Peti ti on er v . COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 27 60 4- 11 L. File d S ep te m be r 23 , 20 13
.
P fai le d t o fi le Fed eral in co m e ta x re tu rn s t im el y fory ears 19 87 th ro ug h 2 00 1. P s ub se qu en tl y subm it te d d el in qu en t re turn s b utfai le d to ful ly sati sf

y th e o ut st an di ng tax li ab il it ie s. P s ub m it te d t wo se pa rat e o ffer s- in -co m

pr om is e (OICs ) to set tl e th e o ut st an di ng tax li ab il it ie s. R re

jecte d t he fir stOIC. R returne d t he sec on d OIC . R is su eda fi na l n ot ic e o f in te ntto lev y . P reque st eda co ll ect io n due pr oc es s h eari ng (co ll ect io n h eari ng ). P rai se d i ss ue s dur in g t he co ll ect io n h eari ng reg ard in g R ’s han dl in g o f th e two OICs an d reque st edth atth e returne d OIC be reo pe ne d. R co nc lu de d t ha t h e d id no t h av e th e au th or ity

to reo pe n t he returne d OIC an d s us ta in edth e fin al no ti ce o f in te ntto lev y . P co nt en ds th atR ab us edhi s d is cret io n i n s us ta in in g t he fin al no ti ce o f in te ntto lev y . P arg ue s tha t R abu se d h is di sc ret io n b y co nc lu di ng th athe lac ke d t he auth or ity to reo pe n a n OIC ba se d o n do ub t as to co ll ect ib il ity

th atR returne d t o P y ears be fo re the co ll ect io n h eari ng co m

m en ced . R arg ue s thi s C ou rt l ack s juris di ct io n-2
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to de te rm in e whe th er h e ab us edhi s d is cret io n b ecau se P pr op os edno ne w OIC du rin g t he co ll ect io n h eari ng . R furth er ar gu es th atth is Co urt l ack s juris di ct io n b ecau se P ha s n o ju di ci al rev ie w rig ht s rel at in g t o R ’s reject in g o r returni ng anOIC. Held , th is Co urt h as juri sd ic ti on to de te rm in e whe th er R ab us ed hi s d is cret io n i n s us ta in in g t he fin al no ti ce o f in te ntto lev y . Held , furth er, R ca nn otbe requi redto reo pe n a n OIC ba se d o n do ub t as to co ll ect ib il ity

th atR returne d t o P y ears be fo re the co ll ect io n h eari ng co m

m en ced
. Held , furth er, R d idno t ab us e h is di sc ret io n i n s us ta in in g the fin al no ti ce o f in te ntto lev y .
Geo rg e W. Co nn el ly, Jr ., Heath er M. Pe si ko ff, an d R en es haN. Fou nt ai n, fo r pe ti ti on er. Dav idBau di li o M or a an d Go rd on P. San z, fo r res po nd en t.

OPINION KROUPA, Ju dg e: Thi s co ll ect io n re vi ew m at te r is be fo re the Co urt b ecau se pe ti ti on er ch al le ng es a de te rm in at io n n ot ic e. See s ec. 6 33 0( d) (1 ). Res po nd en t 1 is su edth e d et erm in at io n n ot ic e su st ai ni ng a fi na l n ot ic e o f in te ntto lev y (pr op os ed
All sec ti on refe ren ces are t o t he Int ern al Rev enue Co de ineffe ctat a ll 1 rel ev an t t im es .-3
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le vy acti on ). The p rimary is su e we are ask edto de ci de is whet he r res po nd en t ab us edhi s d is cret io n i n s us ta in in g t he pro po se d l ev y act io n. We ho ldhe di d n ot . Dete rm in in g wh ethe r res po nd en t ab us edhi s d is cret io n re qu ire s u s t o fi rs t co ns id er thr ee que st io ns . Two of th es e que st io ns in vo lv e wel l-tro dd enarea s o f la w. The rem ai ni ng qu es ti on in vo lv es anis su e o f fi rs t i m pr es si on . Thatqu es ti on is : can re sp on de ntbe requi redto reo pe n a n o ffer -in -co m pr om is e (OIC) ba se d o n do ub t as to co ll ect ib il ity

th athe ha d re turn edto pe ti ti on er as unpr oc es sabl e y ears be fo re a co ll ect io n due pro ces s h eari ng (co ll ect io n h eari ng ) co m m en ced ? W e

2 ho ldth atres po nd en t ca nn otbe requi redto reo pe n a n OIC ba se d o n d oubtas t o co ll ect ib il ity

th athe ha d re tu rn edto pe ti ti on er as unpr oc es sabl e y ears be fo re the
co ll ect io n h eari ng co m

m en ced
.

Thi s que st io n c on cern s the in te ract io n o f se cs . 71 22 an d 6 33 0 a ndth e 2 co ns eque nc es th atflo w fro m th e Co m m is si on er’s rejec ti ng anOIC v ers us hi s returni ng anOIC. The C ou rt p rev io us ly addres se d adi ffer en t que st io n o n s im il ar fact s. See Llo y d v . Comm is si on er, T.C. Mem o. 2 00 8- 15 . The Co urt atfir stha d di ffi cu lty de ci ph eri ng th e ta xp ay er’s ex actarg um en t i n Ll oyd. The C ou rt ul ti m at el y

co nc lu de d, h owe ve r, th atth e ta xp ay er i n Ll oyd was arg ui ng th atan App eal s o ffi cer abu se d h is di sc ret io n i n fa il in g t o u se th e ta xp ay er’s rea so nabl e co ll ect io n p ot en ti al as c al cu la te d i n c on ne ct io n wi th anearl ie r, returne d OIC
. Pet it io ne r he re, o n t he ot he r ha nd , arg ue s re sp on de ntab us edhi s d is cret io n b y co nc lu di ng inth e d et erm in at io n n ot ic e th athe lac ke d the au th or ity to reo pe n a n OIC b as edon do ub t as to co ll ect ib il ity th athe ha d re turn edto pe ti ti on er as unpr oc es sabl e y ears be fo re the co ll ect io n h eari ng co m m en ced
.-4
- Bac kg ro un d So m e o f th e fac ts ha ve be enst ip ul at edan d a re s o fo un d. Th e st ip ul at io n o f fact s an d i ts acco m

pa nyin g e xh ib it s ar e in co rp or at edby thi s re fere nc e. Pet it io ne r res id edinTexa s atth e ti m e h e fi le d t he pe ti ti on . Pet it io ne r fai le d t o fi le Fed eral in co m e ta x re tu rn s t im el y fory ears 19 87 th ro ug h 2 00 1 (years at i ss ue ). Pet it io ne r ev en tu al ly file d re tu rn s fo r th e y ears at 3 is su e (d el in qu en t re tu rn s) , bu t d idno t fu ll y sat is fy hi s l iabi li ti es forth e ta xe s, pe na lt ie s an d i nt eres t ar is in g fr om th e d el in qu en t re tu rn s (o ut st an di ng tax li ab il it ie s)
. Pet it io ne r subs eque nt ly sub m it te d t wo s ep arat e OICs to set tl e h is

4
ou ts ta nd in g t ax li ab il it ie s. A. The 2 00 4 Off

er Pet it io ne r fi rs t s ub m itte d a n OIC in20 04 (20 04 off er) t o re sp on de nt ’s Hou st on Offer i n C om

pr om is e Uni t (o fferun it ). Res po nd en t d et erm in edth e ou ts ta nd in g t ax li ab il it ie s atth e ti m e p et it io ne r subm it te d the 20 04 off er t o b e m or e th an$4 80 ,00 0. Pe ti ti on er p ro po se d i n t he 20 04 off er t o s et tl e h is Pet it io ne r an d re sp on de ntha ve st ip ul at edth atth e y ears gi vi ng ris e to th e 3 un de rlyin g F ed eral in co m e ta x l iabi li ti es sp an19 87 th ro ug h 2 00 1. We no te , ho wev er, tha t ea chof t he OICs pe ti ti on er s ub m it te d i nc lu de d 1 98 6 a s wel l. The un de rlyin g F ed eral in co m e ta x l iabi li ti es are n otpre se nt ly at is su e. Acco rd in gl y , we m erel y

no te th is di sc rep an cy . The co nt en ts of t he de li nque ntreturns are n otpre se nt ly at is su e. 4-5
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ou ts ta nd in g t ax li ab il it ie s fo r $2 2,0 00 (whi chwas l es s tha n 5 % of t he ou ts ta nd in g ta x l iabi li ti es ) ba se d o n d oubtas t o c ol le ct ib il ity . The o fferun itco nc lu de d
res po nd en t co ul d re as on ab ly col le ctm or e fro m pe ti ti on er tha n p et it io ne r ha d pr op os edto pa y

inth e 2 00 4 o ffer . Accor di ng ly, th e o fferun itpro po se d t ha t the 20 04 off er b e reject ed
. Pet it io ne r ap pe al edth e p ro po se d re jecti on to th e In te rn al Rev enue Serv ic e App eal s Off

ic e in Hou st on , Texa s (Ho us to n Ap pe al s) . Hou st on App eal s de te rm in edth atpe ti ti on er h adrece iv ed$2 58 ,00 0 fr om a real est at e sa le in20 01
. Hou st on App eal s fu rth er d et erm in edth atpe ti ti on er u se d asm al l p orti on of t he real
es ta te pro ceed s t o p ay

bu si ne ss ex pe ns es an d l os t the rem ai ni ng pro ceed s thr ou gh hi gh -ri skda y

tra di ng inth e st oc k m ark et . Hou st onApp eal s the refo re fo un d t ha t pe ti ti on er h addi ss ip at edth e rea l es ta te pro ceed s wi th in te nt io na l d is reg ardforhi s ou ts ta nd in g t ax li ab il it ie s. Ho us to n Ap pe al s i nc lu de d t he di ss ip at edreal est at e pr oc eed s i n t he cal cu la ti onof a n a ccep tabl e o fferam ou ntan d s us ta in edth e o ffer
un it ’s dec is io n t o re

ject t he 20 04 off

er. B. The 2 00 8 Off

er Pet it io ne r ne xtsubm it te d a n OIC to th e o fferun itin20 08 (20 08 off er). Th e 20 08 off er p ro po se d s et tl in g t he ou ts tand in g t ax li ab il it ie s (wh ic h e xc eed edalm os t on e-h al f m il li on do ll ars ) fo r $3 5,1 96 , bas edon do ub t as to co ll ect ib il ity . The o ffer-6
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un itde te rm in edth atpe ti ti on er h adfai le d t o d em on st rat e h e was inco m pl ia nc e with h is Fed eral in co m e ta x o bl ig at io ns at t he ti m e h e subm it te d t he 20 08 off er. The off er u ni t re tu rn ed th e 2 00 8 o fferto pe ti ti on er as unpr oc es sabl e. Pet it io ne r 5 th enex ch an ge d s ev eral let te rs with t he off er u ni t. Pet it io ne r at te m

pt edth ro ug h t he le tt er ex ch an ge to ha ve th e o fferun itreco ns id er i ts returni ng th e 2 00 8 o ffer . To th is en d, p et it io ne r arg ue d t ha t h e was infactinco m pl ia nc e wit h h is Fed eral in co m e ta x o bl ig at io ns at t he ti m e h e subm it te d the 20 08 off er. Pet it io ne r al so arg ue d i n t he let te r ex ch an ge th athe sh ou ldbe gi ve n t he op po rtu ni ty to b eco m e co m pl iantif, i n fa ct , he was no t atth e ti m e h e subm itte d t he 20 08 off er. Pet it io ne r co nt in ue d t o m ak e p aym en ts du rin g t he pe nd en cy of the let te r ex ch an ge co ns is te nt with t he 20 08 off

er. The let te r ex ch an ge ul ti m at el y fai le d, h owe ve r, to co nv in ce th e o fferun itto alt er i ts de ci si on to return t he 20 08 off er t o p et it io ne r. C. The C ol le ct io n Du e Pro ces s Hearin g Res po nd en t s ub se qu en tl y is su eda fi na l n ot ic e o f in te ntto lev y (le vy no ti ce) fo r th e y ears at i ss ue . Peti ti on er t im el y reque st eda co ll ect io n h eari ng . Sett le m en t Offi cer Li an a A. Whi te (SO Whi te ) atHou st on App eal s was ass ig ne d t o c on du ct
The di st in ct io n b etweena reject edOIC an d areturne d OIC is im po rta nt , as 5 we la te r ex pl ai n. Br ie fly, a taxpa y er h as th e ri gh t t o a dm in is tra ti ve ly app eal th e Co m m is si on er’s rejec ti ng anOIC b utha s n o ri gh t t o app eal th e Co m m is si on er’s returni ng anOIC.-7
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th e co ll ect io n h eari ng . The rel ev an t i ss ue s p et it io ne r rai se d a t the co ll ect io n he ari ng in vo lv edth e m an ne r by whic h re sp on de ntha d h an dl edth e 2 00 4 o fferan d th e 2 00 8 o ffer . SO Whi te is su edth e d et erm in at io n n ot ic e in lat e 2 01 1 s us ta in in g th e p ro po se d l ev y

act io n. Pe ti ti on er t im el y fil edth e p et it io n. Dis cu ss io n W e m us t n ow d eci de whet he r res po nd en t ab us edhi s d is cret io n i n s us ta in in g th e p ro po se d l ev y

act io n. We focu s o n t he m an ne r by whic h re sp on de ntad dr es se d th e is su es pe ti ti on er ra is eddu rin g t he co ll ect io n h eari ng . Pet it io ne r adva nc es two th eo rie s t o a rg ue res po nd en t ab us edhi s d is cret io n. Pet it io ne r fi rs t at ta ck s SO Whi te ’s con cl us io n t ha t s he lac ke d t he au th or ity to reo pe n t he 20 08 off

er dur in g t he co ll ect io n h eari ng . See s ec. 6 33 0( c)(2 )(A)(i ii ). Pet it io ne r co nt en ds th atSO Whi te ’s con cl us io n l ack s a s ou ndba si s i n fa ctor l aw. Pet it io ne r ne xtatt ack s re sp on de nt ’s reject in g t he 20 04 off er an d re tu rn in g t he 20 08 off er. Pet it io ne r m ak es sev eral rel at edarg um en ts un de r th is th eo ry . The th ru stof t he se arg um en ts is th atres po nd en t i m pr op erl y reject edth e 2 00 4 o fferan d im pr op erl y returne d t he 20 08 off

er. Pet it io ne r arg ue s tha t re sp on de ntab us edhi s di sc ret io n i n s us ta in in g t he pro po se d l ev y act io n i n l ig htof t he se im pr op rie ti es .-8
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W e fi rs t ad dr es s the sco pe of o urjuri sd ic ti onbe cau se res po nd en t ar gu es we la ckjuri sd ic ti on . W e n ex t ad dr es s the st an da rdof o urrev ie w. W e th enad dr es s each of p et it io ne r’s th eo rie s an d i ts rel at edarg um en ts , intu rn . A. Scop e o f Ju ris di ct io n W e n ow re vi ew th e sc op e o f ou r juri sd ic ti on . The Tax Co urt i s a c ou rt o f li mit edjuri sd ic ti on . Sec. 7 44 2; Naft el v. Co m m is si on er, 8 5 T.C. 5 27 , 52 9 (1 98 5)
. W e m ay ex erci se juri sd ic ti on on ly to the ex te ntex pr es sl y auth or iz edby Con gr es s. St ewartv. Co m

m is si on er, 1 27 T.C. 10 9, 1 12 (20 06 ). Ques ti on s o f juri sd ic ti on are fund am en ta l an d m

us t b e ad dr es se d wh en ev er i t ap pe ars th is Co urt m ay lac k juri sd ic ti on . Whe el er’s Pea ch tre e Ph arm acy, In c. v. Co m mis si on er, 3 5 T.C. 1 77 , 17 9 (1 96 0) . W e h av e juri sd ic ti on to de te rm in e whe th er we h av e juri sd ic ti on . St ewartv. Co m

m is si on er, 1 27 T.C. at 1 12
. Res po nd en t ar gu es th is Co urt l ack s juris di ct io n b ecau se pe ti ti on er p ro po se d
no ne w OIC du rin g t he co ll ect io n h eari ng an d t he Co urt the refo re h as no th in g t o co ns id er. Res po nd en t al so arg ue s thi s C ou rt l ack s juris di ct io n b ecau se pe ti ti on er ha s n o ri gh t o f jud ic ia l re vi ew of res po nd en t’s re

jecti ng th e 2 00 4 o fferor r eturni ng th e 2 00 8 o ffer . W e are pe rp le xe d b y th e arg um en ts th atres po nd en t ra is es as t he y ap pe ar t o m is s the th ru stof t he th eo rie s p et it io ne r adva nc es . Mor eo ve r, itis fund am en ta l tha t we h av e juri sd ic ti on inco ll ect io n m at te rs if the Co m m is si on er-9
-

is su es a de te rm in at io n n ot ic e an d atax pa y er t im el y fil es a pe ti ti on . See Seg o v . Co m m is si on er, 1 14 T.C. 60 4 (2 00 0) ; Go za v . Comm is si on er, 1 14 T.C. 17 6 (2 00 0)
. Bo th co nd it io ns ap pl y

he re. Acco rd in gl y , we hav e juri sd ic ti on to rev ie w th e de te rm in at io n S O W

hi te m ad e to su st ai n t he pro po se d l ev y act io n. Se c. 63 30 (d ); Offi le r v. C omm is si on er, 1 14 T.C. 49 2, 4 98 (20 00 ). B. Sta nd ardof R ev ie w W e n ow fo cu s o n t he st an da rdwe ap pl y inde te rm in in g wh ethe r res po nd en t ab us edhi s d is cret io n. Pe ti ti on er d oe s n otarg ue th e v al id ity of h is ou ts tand in g t ax li ab il it ie s. Acco rd in gl y , we rev ie w th e d et erm in at io n s us ta in in g t he pro po se d l ev y act io n fo r ab us e o f di sc ret io n. Se go v. Co m m is si on er, 1 14 T.C. at 6 10 ; Go za v . Co m m is si on er, 1 14 T.C. at 1 81 -1 82 . W e m us t the refo re d eci de whet he r res po nd en t ac te d i n am anne r th atwas arb itrary, capri ci ou s o r witho uta so un d ba si s i n fa ctor l aw. Murp hy v. Co m m is si on er, 1 25 T.C. 30 1, 3 20 (20 05 ), aff’d, 46 9 F .3d27 (1s t Ci r. 20 06 ). C. Autho rit y

To Re op enth e 2 00 8 Off er W e n ow ad dr es s p et it io ne r’s co nt en ti on th atSO Whi te ha d the au th or ity to reo pe n t he 20 08 off

er dur in g t he co ll ect io n h eari ng . SO Whi te pro po se d, dur in g th e co ll ect io n h eari ng , a co ll ect io n a lt ern at iv e b as edon pe ti ti on er’s the n- cu rren t fin an ci al da ta . Peti ti on er re jecte d t he co ll ect io n a lt ern at iv e SO Whi te pro po se d.-1 0-

Pet it io ne r arg ue d t ha t SO Whi te ha d t o i ns te adreo pe n t he 20 08 off er an d app ly the pa ym en ts pe ti ti on er m ad e dur in g t he pe nd en cy of h is let te r ex ch an ge with the of fer u ni t t owardth e 2 00 8 o ffer . SO Whi te co nc lu de d t ha t s he lac ke d aut ho rit y to reo pe n t he 20 08 off

er. Pet it io ne r co nt en ds SO Whi te ’s con cl us io n h as no so un d ba si s i n fa ctor l aw an d the refo re re sp on de ntab us edhi s d is cret io n. Pe ti ti on er ur ge s u s t o s o fi ndbe cau se reo pe ni ng th e 2 00 8 o fferwou ldpe rm itres po nd en t t o tre atpe ti ti on er as ha vi ng m ethi s p aym en t o bl ig at io ns un de r th e 2 00 8 o ffer . And do in g s o wo ul d s eem in gl y ex ti ng ui sh hi s o ut st an di ng tax li ab il it ie s as he pa idth e am ou nthe off

eredto pa y

inth e 2 00 8 o ffer
. Thi s i ss ue of f

irs t i m pr es si on co nc ern s the in te ract io n o f se ct io ns 71 22 an d 63 30 an d t he co ns eque nc es th atflo w fro m th e Co m m is si on er’s rejec ti ng anOIC
ve rs us hi s re tu rn in g a n OIC . W e b eg in by revi ewin g t he auth or ity Co ng res s gr an te d t o t he Co m

m is si on er t o c om

pr om is e unp ai d t ax li ab il it ie s. See sec . 71 22
. W e th entu rnto whet he r th e Co m mis si on er ca n e xe rci se th is co m pr om is e au th or ity in th e co nt ex t o f a co ll ect io n h eari ng . See s ec. 6 33 0. 1. Se ct io n 7 12 2 W e fi rs t l oo k t o t he Co m m is si on er’s au th or ity

to co m pr om is e anunpa idtax li ab il ity . The Co m

m is si on er i s re qu ire d t o c ol le ctall Fed eral in co m e ta x li ab il it ie s. Sec . 63 01 . The Co m m is si on er h as di sc ret io n, h owe ve r, to co m pr om is e-1 1-

anunpa idtax li ab il ity . Sec. 7 12 2( a). The pe rti ne ntreg ul at io ns setforthdo ub t as to co ll ect ib il ity

as o ne of t hr ee g ro un ds forco m pr om is in g an u np ai d t ax li ab il ity . Sec. 3 01 .71 22 -1 (b )(2 ), Pro ced . & Adm in . Reg s. Do ub t as to co ll ect ib il ity ex is ts whe re a t ax pa y er’s as se ts an d i nc om e are les s tha n t he tax pa y er’s unp ai d t ax li ab il ity . Id. 2. Se ct io n 6 33 0 W e n ow turn t o t he Co m

m is si on er’s ex erci se of t hi s co m pr om is e au th or ity in th e co nt ex t o f a co ll ect io n h eari ng . A tax pa y er h as a ri gh t t o aco ll ect io n he ari ng with a n Ap pe al s o ffi cer b efo re the Co m m is si on er ca n l ev y

on th e ta xp ay er’s p ro pe rty. Sec. 63 30 . The Ap pe al s o ffi cer m ay co ns id er an OIC pr op os eddu rin g aco ll ect io n h eari ng . Sec. 6 33 0( c)(2 )(A)(i ii ). A tax pa y er m us t pr op os e anOIC fo r itto be co ns id ereddu rin g t he co ll ect io n h eari ng . See Su ll iv an v. Co m m is si on er, T.C. Mem o. 2 00 9- 4; Godwinv. Co m m is si on er, T.C. Mem o. 20 03 -2 89 , aff’d, 1 32 Fed . App x. 7 85 (11 th Cir . 20 05 ). 3. In te ract io n o f Sec ti on s 7 12 2 a nd63 30 W e n ow ad dr es s wh ethe r th e Co m m is si on er ca n b e requi redto reo pe n a n OIC b as edon do ub t as to co ll ect ib il ity th athe returne d t o atax pa y er y ears be fo re a co ll ect io n h eari ng co m

m en ced . Peti ti on er u rg es us to ad op t the th eo ry th at-1 2-

res po nd en t can b e requi redto do so . See s ec. 6 33 0( c)(2 )(A)(i ii ). W e d ecl in e to ad op t p et it io ne r’s th eo ry

fortwo reas on s. Fi rs t, ad op ti ng th e th eo ry pe ti ti on er ad va nc es wou ldim pe rm is si bl y

ex pa nd th e Co m m is si on er’s au th or ity

to co m pr om is e anunpa idtax li ab il ity . The Co m m is si on er m

us t ev al ua te anOIC p ro po se d dur in g aco ll ect io n h eari ng acco rd in g t o h is au th or ity to co m pr om is e anunpa idtax li ab il ity . See s ecs . 63 30 , 71 22 ; J oh ns on v. Co m

m is si on er, 1 36 T.C. 47 5, 4 84 -4 85 (20 11 ), aff’d, 5 02 Fed
. App x. 1 (D.C. Cir . 20 13 ). Here, p et it io ne r reque st edin20 11 th atres po nd en t co ns id er the 20 08 off

er b as edon do ub t as to co ll ect ib il ity . Tax pa y ers m

us t s ub m itcurren t fi na nc ia l d at a whe n p ro po si ng anOIC b as ed
on do ub t as to co ll ect ib il ity . See Su ll iv anv. Co m m is si on er, T.C. Mem o. 2 00 9- 4; Godwinv. Co m

m is si on er, T.C. Mem o. 2 00 3- 28 9. Th e th eo ry pe ti ti on er ad va nc es wou ldim pe rm is si bl y

ex pa ndth e Co m

m is si on er’s au th or ity

by allo win g t he Co m m is si on er t o e va lu at e anOIC b as edondo ub t as to co ll ect ib il ity us in g a ta xp ay er’s p as t fi nanc ia l ci rcu m st an ces . See s ec. 7 12 2( d) (1 ); s ee, e.g ., Int ern al Rev enue Man ua l (I RM) pt . 5.8 .5.3 (1 ) (Oct . 22 , 20 10 ) (fi na nc ia l d at a sh ou ldbe no m or e th ansi x m on th s o ld ); I RM p t. 5 .15 .1.1 (4 ) (Oct . 2, 2 01 2) (sa m e). Pres en tl y , forex am

pl e, pe ti ti on er’s the ory

wou ldha ve all owe d p et it io ne r to effe ct iv el y

pro po se anOIC b as edon do ub t as to co ll ect ib il ity in20 11 us in g h is-1 3-

fin an ci al da tafro m

20 08 . Res po nd en t, i n turn, wo ul d b e fo rcedto ev al ua te th e OIC b as edon do ub t as to co ll ect ib il ity us in g fi na nc ia l d at a th aton ly by m ere ch an ce re fle ct s p et it io ne r’s th en -cu rren t fi na nc ia l ci rcu m st an ces . Andsec on d, ad op ti ng th e th eo ry pe ti ti on er ad va nc es wou ldsubs ta nt ia ll y in te rfer e wit h the st atut ory sch em e Co ng res s cr eat ed . Taxp ay ers m ay curren tl y se ekadm in is tra ti ve rev ie w of the Co m m is si on er’s rejec ti ng anOIC. Sec. 7 12 2( e). Tax pay ers curren tl y

ha ve no rig ht , ho wev er, t o s eekrev ie w of the Co m m is si on er’s returni ng anOIC. Sec. 3 01 .71 22 -1 (f)(5 )(i i), Pr oc ed . & Adm in . Reg s. Th e th eo ry pe ti ti on er ad va nc es wou ld , ineffe ct , creat e ad di ti on al layers o f adm in is tra ti ve an d jud ic ia l re vi ew of

th e Co m m is si on er’s returni ng anOIC b efo re a co ll ect io n he ari ng co m

m en ces . See s ec. 6 33 0( d) . Peti ti on er’s the ory wou ldno t cr eat e an al og ou s l ay ers of r ev ie w, ho wev er, fo r th e Co m m is si on er’s returni ng anOIC aft er a co ll ect io n h eari ng co nc lu de s. See id . Whe th er a t ax pa y er m ay acce ss th es e ne w layers o f rev ie w wou ldth eref or e d ep en d o n wh enth e Co m m is si on er re tu rn s anOIC. Pet it io ne r of

fers no , andwe canfin d n o, re as on ab le ex pl an at io n fo r su ch di sp arat e tr eat m en t b as edon ly on wh enth e Co m m is si on er re tu rn s an OIC. D. Reject in g t he 20 04 Offer W e n ow turn t o re sp on de nt ’s reject in g t he 20 04 off er. Pet it io ne r subm it te d th e 2 00 4 o fferba se d o n d oubtas t o c ol le ct ib il ity . An OIC b as edon do ub t as to-1 4-

co ll ect ib il ity

is acce pt ab le if i t re fle ct s the tax pa y er’s rea so nabl e co ll ect io n po te nt ia l (R CP). Mu rp hy v. Co m m is si on er, 1 25 T.C. at 3 09 ; Re v. Pr oc . 20 03 -7 1,
se c. 4.0 2( 2) , 20 03 -2 C.B. 5 17 , 51 7. AnOIC wil l g en eral ly be reject edif the RCP
m eet s o r ex ceed s the am ou ntoff eredinth e OIC. IRM pt . 5.8 .4.3 (May 10 , 20 13 ). The va lu e o f di ss ip at edass et s m ay be in cl ud edina ta xp ay er’s RCP . See Tu ck er v. Co m m is si on er, T.C. Mem o. 2 01 1- 67 , aff’d, 6 76 F.3d11 29 (D.C. Cir . 20 12 ); IRM pt . 5.8 .5.1 6 (Oc t. 2 2, 2 01 0)
. SO Whi te rev ie wedth e acc ou nttra ns cri pt s an d o th er i nf orm at io n i n res po nd en t’s fi le s re la ti ng to res po nd en t’s re jecti ng th e 2 00 4 o ffer . SO Whi te de te rm in edth atHou st on App eal s h adreject edth e 2 00 4 o fferba se d o n i ts fin di ng th atpe ti ti on er re cei ve d a nddi ss ip at edap pr ox im at el y $2 58 ,00 0 fr om

th e rea l es ta te sa le in20 01 . SO Whi te de te rm in edth atHou st on App eal s h adpro pe rly inc lu de d th e d is si pa te d re al est at e p ro ceed s i n t he cal cu la ti on of a n a ccep tabl e o fferam ou nt . SO Whi te furth er d et erm in edth atres po nd en t’s re jecti ng th e 2 00 4 o fferwas p ro pe r ba se d o n areas on edan al y si s o f th e fac ts be fo re h er. Acco rd in gl y , res po nd en t d id
no t ab us e h is di sc ret io n i n s us ta in in g the pro po se d l ev y act io n i n l ig htof h is reject in g t he 20 04 off

er. 6 Mo reo ve r, itap pe ars th atpe ti ti on er m ay ha ve be enpre cl ud edfro m ev en 6 rai si ng th is is su e atth e co ll ect io n h eari ng in20 11 be cau se itwas ra is edan d (co nt in ue d...)-1 5-

E. Retu rn in g t he 20 08 Offer W e n ow turn t o re sp on de nt ’s returni ng th e 2 00 8 o ffer . The Co m m is si on er ha s an est ab li sh edpo li cy of r equi rin g t ax pa y ers to be inco m pl ianc e wit h c urren t fil in g a ndest im at edtax pa ym en t re qu ire m en ts to be eli gi bl e fo r co ll ect io n al te rn at iv es . See Ott o’s E-Z Cl eanEnt ers ., Inc . v. Co m m is si on er, T.C. Mem o. 20 08 -5 4. Acco rd in gl y , th e Co m m is si on er d oe s n otab us e h is di sc ret io n b y returni ng anOIC b as edon a ta xp ay er’s fai lu re t o m eetcurren t t ax ob li ga ti on s. Sch arri ng haus env. Co m

m is si on er, T.C. Mem o. 2 00 8- 26 (ci ti ng Ch ris to ph er Cro ss , Inc . v. Un it edSta te s, 4 61 F.3d61 0, 6 13 (5t h C ir. 2 00 6) ). SO Whi te rev ie wedth e fi le s an d tran sc rip ts pe rta in in g t o 2 00 7 a nd20 08
. SO Whi te tes ti fie d, an d t he reco rdco nf irms, th atpe ti ti on er was requi redto pa y an ad di ti on to tax forfai lu re t o p ay est im at edtax for20 07 . SO Whi te fou ndth is ad di ti on to tax aro se fro m pe ti ti on er’s fai lu re t o m eethi s cu rren t es ti m at edtax ob li ga ti on s atth e ti m e h e subm it te d t he 20 08 off er fo r co ns id erat io n. SO Whit e de te rm in edth atres po nd en t’s re tu rn in g t he 20 08 off er was pro pe r ba se d o n a reas on edan al y si s o f th e fac ts be fo re h er. Acco rd in gl y , res po nd en t d idno t ab us e (...co nt inue d) 6 co ns id eredat t he adm in is tra ti ve he ari ng onpe ti ti on er’s ap pe al of t he reject io n o f th e 2 00 4 o ffer . See s ec. 6 33 0( c)(4 ); P erk in s v . Comm is si on er, 1 29 T.C. 58 , 63 (2 00 7) . Res po nd en t d oe s n otrai se th is arg um en t, h owe ve r, an d we t he refo re n eed no t d eci de th is is su e.-1 6-

hi s d is cret io n i n s us ta in in g t he pro po se d l ev y act io n i n l ig htof h is returni ng th e 20 08 off er. F. Co nc lu si on Pet it io ne r di d n otrai se an y ot he r m eri to rio us ch al le ng es to SO Whi te ’s de te rm in at io n t o s us ta in th e p ro po se d c ol le ct io n a ct io n. No r di d p et it io ne r ot he rwis e in tro du ce an y

cred ib le ev id en ce o r pe rs ua si ve arg um en ts th atwou ld
co nv in ce u s tha t SO Whi te act edina m an ne r th atwas arb itrary, capri ci ou s o r witho uta so un d b as is infactor l aw. The reco rdrefl ect s tha t SO Whi te ve rif ie d t ha t re sp on de ntsat is fie d a ll ap pl ic ab le leg al an d a dm in is tra ti ve requi rem en ts , con si de redall rel ev an t i ss ue s pe ti ti on er ra is ed , andba la nc edth e in tru si ve ne ss of the pro po se d c ol le ct io n a ct io ns ag ai ns t the ne edfor

effe ct iv e ta x c ol le ct io n. Se e se c. 63 30 (c). We th eref or e co nc lu de SO Whi te di d n otab us e h er d is cret io n b y su st ai ni ng th e p ro po se d
co ll ect io n a ct io n. W e h av e co ns id eredall arg um en ts m ad e in reac hi ng ou r de ci si on , and , to th e ex te ntno t m en ti on ed , we con cl ud e th atth ey are m oo t, i rrel ev an t, o r witho ut
m eri t.-1 7-

To re fle ctth e fo reg oi ng , Deci si on wil l b e en te red fo r res po nd en t.