TAX COURT OPINION

Case: Raj B. Singh
Docket Number: 25714-18L
Judge: Morrison
Opinion Type: bench
Filed: 10/02/2019
Pages: 37

SD UNITED STATES TAX COURT WASHINGTON, DC 20217 RAJ B. SINGH, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 25714-18 L. ORDER OF SERVICE OF TRANSCRIPT Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and respondent a copy of the pages of the transcript in the above case before Richard T. Morrison, at St. Paul, Minnesota, on September 12, 2019, containing his oral fimdings of fact and opinion rendered at the conclusion of trial. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent. (Signed) Richard T. Morrison Judge Dated: Washington, D.C. October 2, 2019 SERVED Oct 03 2019 RECEIVED 9/18/19 IN THE UNITED STATES TAX COURT SD In the Matter of: ) RAJ B. SINGH, ) Docket No. 25714-18L Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) Pages: 1 through 35 Place: St. Paul, Minnesota Date: September 12, 2019 cribers 9733406-2250loperationseescnbersnet|www.escribersaet IN THE UNITED STATES TAX COURT In the Matter of: RAJ B. SINGH Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) Docket No. 25714-18L ) ) ) ) ) ) ) ) ) & U.S. Cthse. W. E. Burger Federal Bldg. 316 North Robert Street Room 444, 4th Floor St. Paul, Minnesota 55101 September 12, 2019 The above-entitled matter came on for bench opinion, pursuant to notice at 4:13 p.m. BEFORE: HONORABLE RICHARD T. MORRISON Judge APPEARANCES: For the Petitioners: No Appearance For the Respondent: No Appearance 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 - 1913)406-2250|operätions@escribersenet|www.escrìbers.net P R O C E E D I N G S 2 (4:13 p.m.) THE COURT: Be seated. THE CLERK: Recalling from the calendar docket number 25714-18L, Raj B. Singh. (Whereupon, a bench opinion was rendered.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 1 8 19 20 21 22 2 3 2 4 25 5h153 (973) 406-2250| operations@escribersnet j www.escribers.n et Bench Opinion by Judge Richard T. Morrison 3 September 12, 2019 Raj B. Singh v. Commissioner Docket No. 25714-18L THE COURT: The Court has decided to render oral findings of fact and opinion in this cas and the following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied on as precedent in any other case. This Bench 1 2 3 4 5 6 7 8 9 10 Opinion is made pursuant to the authority granted by 11 section 7459(b) of the Internal Revenue Code and Rule 152 12 of the Tax Court Rules of Practice and Procedure. 13 References to sections are to the Internal 14 Revenue Code. References to rules are to the Tax Court 15 Rules of Practice and Procedure. 16 17 The Internal Revenue Service Office of Appeals issued a Notice of Determination Concerning Collection 18 Action(s) Under Section 6320 and/or 6330 of the Internal 19 Revenue Code to Raj B. Singh (referred to here as 20 petitioner), sustaining the filing of a notice of Federal 21 tax lien for his unpaid 2015 income tax liability. On the 22 23 24 record before us, we sustain the notice of determination. The taxpayer bears the burden of proof, except that in certain exceptional circumstances the burden of 25 proof on certain factual issues will be shifted to (s73)406-2250|operations@erribers.net|w.vmescribersmet respondent. 4 See Rule 142(a). Petitioner does not conten that the burden of proof has shifted to respondent, nor does respondent concede that it has. Accordingly, the burden of proof in this case remains with t e- petitioner. § This case was calendared for the Court's SePtember 9, 2019, rial session in St. Paul, Minnesota. 7 The parties have submitted this case fully stipulated under Rule 122. The parties have also filed a stipulation of facts. We find the following facts based upon the admissions in the pleadings, upon the stipulation of facts, and upon the exhibits to the stipulation of facts. FINDINGS OF FACT Petitioner resided in California when he filed 1 2 3 4 5 6 7 8 9 10 11 12 13 14 his petition. 15 Following a timely request for an extension, 16 petitioner timely filed his Federal income tax return for 17 18 the tax year 2015 on October 17, 2016. The return reported a tax liability of $274,422, withholding of 19 $114,039, and a balance due of $160,383. Petitioner did 20 21 22 23 not pay any of the balance due until after the filing of the notice of Fede al tax lien that was subject of the collection-review hearing. On November 21, 2016, the IRS (referred to here 24 as respondent) assessed the tax shown on the return, 25 additions to tax for failure to pay tax under section 73)406-2250|operations@escribers.netlwww.escribersnet 5 6651(a)(2), additions to tax for failure to pay estimated tax under section 6654, and interest. On the same day, respondent sent petitioner a notice of balance due and demand for payment. On September 14, 2017, respondent sent petitioner a Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320, to collect petitioner's unpaid 2015 tax liability. The notice informed him of the filing of a notice of Federal tax lien and of his right to a collection-review hearing. On October 23, 2017, petitioner sent respondent a timely request for a collection-review hearing by the 1 2 3 4 5 6 7 8 9 10 11 12 13 deadline provided in the Letter 3172. Petitioner checked 14 15 the boxes indicating he was requesting an installment agreement and currently-not-collectable status as 16 collection alternatives, and he checked the box indicating 17 18 that he was requesting withdrawal of the notice of Federal tax lien. The attachment to the request stated that 19 petitioner wished to enter into an installment agreement 20 and that withdrawing the notice of Federal tax lien would 21 22 23 facilitate his obtaining a bank loan to pay the taxdPand allow him to refinance his house. On November 28, 2017, Settlement Officer Alicia 24 Howard (referred to here as SO Howard) sent petitioner a 25 letter advising that the Office of Appeals had received 973) 406-2 250 ! aperations@escribersnet l www.esaíbers.net . 1 his collection-review hearing request and asking 6 2 3 4 5 6 7 8 9 petitioner to submit a completed form 433-F, Collection Information Statement. From December 2017 until March 2018, SO Howard and petitioner's representative experienced several communication difficulties that need not be recounted in detail. On March 4, 2018, SO Howard received petitioner's collection information statement. In section 10 C of the Form 433-F, other assets, petitioner reported 11 12 "shares in a closely held real estate corporation" with a current value of $2,500,000, a balance owed of $2,345,000, . 13 and equity of $125,000. In section F, non-wage household 14 15 income, petitioner did not report that he received any income from the real estate corporation. The real estate 16 corporation referenced in the Form 433-F is RJS 17 18 19 Investments, Inc., and it will be discussed later in this section. Attached to the statement was an installment agreement proposal with the following terms: petitioner 20 would pay $2,860 per month for 60 months, respondent would 21 waive additions to tax and interest, respondent would 22 withdraw the notice of Federal tax lien, and respondent 23 would not proceed by levy to collect. 24 On March 5, 2018, SO Howard held a telephone 25 conference with dÑes petitioner and his representative as Ø73)406-2250loperations@escribers.net|www.escribers.net 7 part of petitioner's collection-review hearing. During this conference, the representative explained that petitioner had lost a high-paying job and that petitioner did not receive an anticipated bonus. The representative also explained that petitioner intended to pay the tax liability, and that therefore the notice of Federal tax lien was unnecessary and should be withdrawn. SO Howard explained that petitioner's collection information statement listed expenses in excess of respondent's 1 2 3 4 5 6 7 8 9 10 applicable local standards and that the amounts needed to 11 12 13 14 15 be substantiated. She also explained that even if the living expenses were accepted, petitioner had the ability to pay $10,208 per month and satisfy the tax liability through 23 monthly payments of this amount. Based on the information that petitioner provided, SO Howard stated 16 that petitioner did not meet the conditions for withdrawal 17 of the notice of Federal tax lien under section 6323(j). 18 19 On March 5, 2018, after the telephone conference was held, SO Howard sent a letter to petitioner and his r 20 representative. The letter stated that petitioner did not 21 qualify for withdrawal of the notice of the Federal tax 22 23 lien. The letter also requested: "You need to go over the collection information statement that was provided to 24 me and substantiate your expenses. The case is being held 25 until March 12, 2018." 73)406-2250|operations@escribersnetlwww.escribers.net On March 12, 2018, the representative sent a 8 letter to SO Howard. In the letter, the representative stated that all tax returns had been timely filed and that all Federal income taxes had been paid, with the exception of the 2015 tax liability at issue. He reiterated that Petitioner had lost a high-paying job in October 2015 and that petitioner had been expecting a year-end bonus to pay the 2015 tax liability. He explained that the unpaid tax liability was due to a distributive share of partnership income with no corresponding distribution, as well as the inclusion in gross income of the value of an apartment 1 2 3 4 5 6 7 8 9 10 11 12 provided by petitioner's former employer. He proposed an 13 14 15 installment agreement of $2,860 per month for 60 months. The representative explained that petitioner would have borrowed to pay the tax liability but, for already being 16 the guarantor of a multi-million-dollar loan owed by an 17 LLC in which he holds a majority interest. As grounds for 18 withdrawing the notice of Federal tax lien, he explained 19 that the notice might cause the lender to deem itself 20 21 22 23 unsecuredand demand immediate payment A from the LLC, and that petitioner would be unable to make payments both under his guaranty and the installment agreement with respondent. He further explained that the notice of 24 Federal tax lien impeded petitioner's ability to engage in 25 transactions that could generate income to pay the tax ribers 73)406-2 250| operations@escriberséet j www.escribers.net liability. The letter finally explained that petitioner was open to varying the payment amount and duration of the 9 installment agreement. We pause here to note that although the letter from the representative dated March 12, 2018, claimed the loan was owed by an LLC in which petitioner was a member, all subsequent correspondence from the representative claimed that the loan was owed by a non-LLC corporation in which petitioner was majority shareholder. In summarizing the correspondence between SO Howard and the representative, we include the business entity type that was described in their correspondence. After reviewing the administrative record, we find that the loan was owed by a Subchapter S corporation named RJS Investments, Inc., in which petitioner was 60-percent shareholder. On August 22, 2018, SO Howard sent a letter to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 petitioner and his representative explaining that the 18 19 information in their previous letter did not alter her conclusion that withdrawal of the notice of Federal tax 20 lien was unwarranted. SO Howard explained that although 21 petitioner had not sustained his living expenses, she 22 would accept an installment agreement of $10,208 per month 23 for 23 months. The letter concluded, "Unfortunately, 24 there is nothing else that we are able to do for you in 25 AhPeals and the[Àhpeal is being closed." Clíbers (973)406-2250|operations@æribers.net|www.escribersmet On September 5, 2018, 10 the representative sent SO Howard a letter explaining that petitioner wished to enter into an installment agreement, but that petitioner could not afford $10,208 per month because of payments petitioner was making on other personal liabilities and the possibility of capital calls from the corporation in which he owned an interest. He proposed $2,860 per month for six months, increasing to $5,000 per month for the next ten months, and the balance paid over the next seven 1 2 3 4 5 6 7 8 9 10 months in equal installments. The representative 11 reiterated that the notice of Federal tax lien should be 12 withdrawn because it might come to the attention of the 13 corporation's lender and cause it to "call the loan and 14 15 sue the taxpayer on his guaranty." The letter asserted that another reason the lien notice should be withdrawn 16 was because it impeded petitioner's ability to borrow and 17 18 earn funds to pay the tax liability. The letter concluded, "the lien is both contrary to the government's 19 interest in collecting taxes and could result in 20 21 22 23 24 25 substantial damage to the xpayer. Under the applicable test provided in the regulations, the lien should be released." On September 24, 2018, SO Howard sent a letter to petitioner and his representative proposing an installment agreement of $2,860 per month for 12 months, 4973)406-2250|operations@escribers.net|wwiv.escribers.net 11 increasing to $5,000 per month for the next 12 months, and then increasing to $10,208 per month until the balance was paid. With regards to withdrawing the notice of Federal tax lien, the letter stated,_ "You indicated that the lien does not facilitate collection, however it did. The balance is from 2016 and there is no indication of a collection alternative being proposed until the notice of 1 2 3 4 5 6 7 8 EF}deral tax lien was filed, thereford,) the lien did {{jpA A A facilitate collection." 9 A She noted that petitioner had not 10 provided any documentation concerning his personal 11 12 13 14 15 16 17 guaranty. She requested that petitioner sign and return an enclosed installment agreement form by October 8, 2018. The form described an installment agreement with the payment structure proposed in the letter. The letter stated: "If you accept this agreemen(,3 please sign and KTW return the form 433-D no later than October 8, 201(,]after AA that the Appeal will be closed with the issuance of the 18 Notice of Determination." 19 On October 8, 2018, the representative sent SO 20 Howard a letter explaining that he had just returned from 21 22 vacation, that petitioner accepted SO Howard's proposed installment agreement, but that two issues had to be 23 resolved. First, he insisted on a waiver of the additions 24 to tax. Second, he insisted that the notice of Federal 25 tax lien be withdrawn. As grounds for withdrawing the (973)406-2250|operationseextíbers.net|www.escribers.net notice of Federal tax lien, he explained that the 12 corporation's loan was due December 31, 2018, and that the notice would hinder petitioner's borrowing to pay off the loan. The representative's letter did not enclose a form/(741 433-D that was signed by petitioner. On November 2, 2018, the representative sent a follow-up letter to SO Howard, enclosing a letter from 1 2 3 4 5 6 7 8 MidCountry Bank dated September 10, 2018, that discussed 9 the corporation's loan. The MidCountry Bank letter 10 11 stated: "Please be advised that MidCountry Bank is not in a position to renew or extend the loans detailed below. 12 Both loans mature on 12/31/18. * * * Please make whatever 13 preparations that are necessary to pay the loans off on or 14 before the maturity date." The bank's letter indicated 15 16 that the balance owed on the first loan was $3,264,478.27 and the balance owed on the second loan was $102,530.06. 17 The representative explained in his letter that petitioner 18 would be applying for new loans, presumably with the 19 corporation as borrower and petitioner as guarantor, and 20 21 22 23 24 25 that the notice of Federal tax lien would keep petitioner from obtaining loans to pay the bank. On November 16, 2018, SO Howard learned, and we so find, that petitioner had filed his Federal income tax return for the tax year 2017 and that it reported a tax liability of $94,310.70, without estimated payments. SO (9Ž3)406-2250|operations@e ribertnet|www.e cribers.net Howard similarly learned, and we so find, 13 that petitioner had not made any estimated payments as of November 16, 2018 for the tax year 2018. On November 16, 2018halmost a year after SO Howard's first letter to petitioner and his representative, the Office of Appeals issued a notice of determination to petitioner and his representative, sustaining the filing of the notice of Federal tax lien for petitioner's unpaid 2015 tax liability. 1 2 3 4 5 6 7 8 9 10 On December 27, 2018, petitioner filed a timely 11 petition with the Court. In his petition, petitioner 12 alleged that SO Howard abused her discretion (1) by 13 withdrawing an installment agreement that SO Howard had 14 15 16 17 18 19 20 21 22 proposedg/and that petitioner had accepted, (2) by RTna refusing petitioner's request for a waiver of additions to tax, and (3) by not withdrawing the notice of Federal tax lien. DISCUSSION Our opinion in this case is as follows. Section 6321 provides that if any person liable to pay any tax neglects or refuses to do so after demand, the amount gives rise to a lien in favor of the United 23 States on all property and rights to property, real or 24 personal, belonging to that person. The lien arises at 25 the time of assessment and continues until the liability 73) 406-2250l operati ns@escribers.net| wwwæscribers.n et is either satisfied or becomes unenforceable by lapse of 14 time. Sec. 6322. Section 6323 authorizes respondent to file a notice of Federal tax lien. oß 6320 requires 49% Sec A that respondent send written notice to the taxpayer of the filing of a notice Federal tax lien and of the taxpayer's right to an administrative hearing known as a collection- review hearing. See Katz v. Commissioner, 115 T.C. 329, 333 (2000). In a collection-review hearing, taxpayers may raise any issue relevant to an unpaid tax or the lien, including challenges to the appropriateness of collection actions and offers of collection alternatives. Secs. 6320(c) and 6330(c)(2) (A). In addition, taxpayers may challenge the existence or amount of the underlying tax liability if they did not receive a statutory notice of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 deficiency or did not otherwise have an opportunity to 17 18 dispute the liability. Sec. 6330(c) (2) (B). If the taxpayer seeks Tax Court review of the 19 notice of determination, we can consider only those issues 20 that were properly raised at the collection-review 21 hearing. Treas. Reg. secs. 301.6320-1(f)(2), Q&A-F3, 22 301.6330-1(f)(2), Q&A-F3. An issue was not properly 23 raised if the taxpayer failed to request consideration of 24 the issue or requested consideration but did not present 25 evidence to the Office of Appeals after being given a cribe s 73)406-2250|operations@esalbers.net|wwwæsaibersnet reasonable opportunity to do so. Id.; see also Roman v. 15 Commissioner, T.C. Memo. 2004-20, slip op. at 13. The determination by the Office of Appeals must take into a consideration: (1) the verification that the requirements of applicable law and administrative procedure have been met; (2) issues raised by the taxpayer, and (3) whether any proposed collection action balances the need for efficient collection with the legitimate concern of the taxpayer that any collection 1 2 3 4 5 6 7 8 9 10 action be no more intrusive than necessary. Sec. 6330(c). 11 12 13 14 15 The Court has previously held that it is not required to apply a limited scope of review and may accept evidence outside the administrative record in collection- revlew cases. See Robinette v. Commissioner, 123 T.C. 85, 101 (2004), rev'd, 439 F.3d 455 (8th Cir. 2006); see also 16 Murphy v. Commissioner, 125 T.C. 301, 313 (2005), aff'd, 17 469 F.3d 27 (1st Cir. 2006). Howeve in cases appealable 18 to the United States Court of Appeals for the Ninth 19 Circuit, such as this case in the absence of a stipulation 20 of the parties to the contrary, our review of respondent's 21 22 23 24 25 determination is limited to the administrative record. See Keller v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009) (adopting Robinette v. Commissioner, 439 F.3d 455, 459-460 (8th Cir. 2006), rev'g 123 T.C. 85 (2004)), aff'g in part as to this issue T.C. Memo. 2006-166 and aff'g in ribers 73)406-2250|operationsøertribers.netlwww.escribersnet part, vacating in part decisions in related cases. The 16 Ninth Circuit has crafted four "narrow" exceptions to the administrative record rule: "(1) if admission is necessary to determine 'whether the agency has considered all relevant factors and has explained its decision,' (2) if 'the agency has relied on documents not in the record,' (3)'when supplementing the record is necessary to explain technical terms or complex subject matter,' or (4)'when plaintiffs make a showing of agency bad faith.'" Lands 1 2 3 4 5 6 7 8 9 10 Council v. Powell, 395 F.3d 1019, 1030 (9th Cir. 2005) 11 (quoting S uthde ..t Gâter For Biological Diversity v. U.S. Sw C*• 12 Forest Sery Se, 100 F.3d 1443, 1450 (9th Cir. 1996); see RT 13 14 15 also Meyer v. Commissioner, T.C. Memo. 2013-268, at *12 n.9 (recognizing these exceptions in the context of review under section 6330(d)(1)). If the evidence in the 16 administrative record or the explanation in the notice of 17 18 determination are inadequate for the Court's review, or if the Office of Appeals has not considered all relevant 19 factors, or if the administrative record does not support 20 the determination, then "the proper course, except in rare 21 circumstances, is to remand to the agency for additional 22 23 24 investigation or explanation." Florida Power & Light Co. . Lorion, 470 U.S. 729, 744 (1985). If the validity of the underlying liability is 25 properly at issue, we review the determination de novo. (973)406-2250|operations@escribers.netjwwwescribers.net 17 Sego v. Commissioner, 114 T.C. 604, 609-10 (2000); Goza v. Commissioner, 114 T.C. 176, 181-82 (2000). "A taxpayer's underlying tax liability includes penalties and additions to tax that are part of the unpaid tax that [respondent] seeks to collect." Dykstra v. Commissioner, T.C. Memo. 2017-156, slip op. at 16-17. If the validity of the underlying liability is not properly at issue, we review the determination for abuse of discretion. Sego v. Commissioner, 114 T.C. at 610; Goza v. Commissioner, 114 1 2 3 4 5 6 7 8 9 10 T.C. at 182. Taxpayers can prove that the Office of 11 ApPeals abused its discretion by showing that its 12 determination was "arbitrary, capricious, or without sound 13 basis in fact or law." Giamelli v. Commissioner, 129 T.C. 14 15 107, 111 (2007). The only issues raised by petitioner are that SO 16 Howard abused her discretion-5k withdrawing an installment A 17 agreement, in refusing petitioner's request for a waiver 18 of the additions to tax, and in not withdrawing the notice 19 of Federal tax lien. 20 Respondent does not argue that petitioner had a 21 previous opportunity to dispute his liability for the 22 additions to tax. Respondent argues that petitioner's 23 liability for the additions to tax is reviewed under an 24 abuse-of-discretion standard. Under either a de novo or 25 abuse-of-discretion standard, we sustain the Office of (973)406-2250|operatioÀs@escribersmet www.esëribers et Appeals' decision not to abate the additions to tax for 18 reasons given later. We reviewdh the Settlement Officer's alleged withdrawal of the installment agreement and failure to withdraw the notice of Federal tax lien under an abuse-of-discretion standard. See Johnson v. Commissioner, 136 T.C. 475, 488 (2011), aff'd 502 F. App'x 1 (D.C. Cir. 2013). As explained in greater detail later, we conclude that SO Howard did not abuse her discretion in 1 2 3 4 5 6 7 8 9 10 concluding that an installment agreement was not a viable 11 collection alternative and not to withdraw the notice of 12 Federal tax lien. We also conclude that petitioner was 13 14 15 16 not eligible for the waiver of the additions to tax under the First Time Abate administrative waiver policy. 1. Withdrawal of installment agreement We first consider petitioner's assertion that SO 17 Howard abused her discretion in "withdrawing" an 18 installment agreement that petitioner alleges SO Howard 19 Proposed, and he accepted. Petitioner's assertion rests 20 on his view that the September 24, 2018, letter from SO 21 Howard was an offer to enter into an installment agreement 22 23 and that the representative's October 8, 2018, letter was an acceptance of the installment agreement proposed in SO 24 Howard's September 24, 2018, letter. The notice of 25 determination implicitly took a different view. It aibers (973)406-2250|operations@escribersnetjww.w.escribers.net observed that whereas the September 19 letter from SO Howard invited petitioner to sign and return a Form 433-D to SO Howard by October 8, 2018,. petitioner did not sign and return the Form 433-D by that deadline. This observation implies that no installment agreement was ever finalized between petitioner and respondent. We consider petitioner to argue that the notice of determination erred because, in his view, the exchange of the two letters formed a binding installment agreement. As an alternative 1 2 3 4 5 6 7 8 9 10 argument, perhaps petitioner is arguing that even if there 11 12 13 14 15 was no final installment agreement, respondent erred by not continuing to negotiate an installment agreement and instead issuing the notice of determination. Of these two arguments, we consider the first to be properly raised, the second not to be properly raised. However, we reject 16 both arguments. 17 18 19 Section 6159(a) authorizes respondent to enter into installment agreements with taxpayers to satisfy their tax liabilities if respondent determines that such 20 agreements will facilitate collection of the liabilities. 21 The Internal Revenue Manual states generally that 22 23 installment agreements "should reflect taxpayers' ability to pay." IRM pt. 5.14.1.4 (09-19-2014). A settlement 24 officer is instructed to analyze a taxpayer's income and 25 allowable expenses to determine the amount of disposable income the taxpayer has available to apply to the tax 20 liability. Id. A proposed installment agreement must be submitted according to the procedures, and in the form and manner, prescribed by respondent. Treas. Reg. sec. 301.6159-1(b). A proposed installment agreement becomes pending when respondent accepts it for processing, and remains pending until respondent accepts the proposal, notifies the taxpayer that the proposal has been rejected, or the taxpayer withdraws the proposal. Treas. Reg. sec. 301.6159-1(b)(2). A proposed installment agreement is not accepted by respondent until he notifies the taxpayer or taxpayer's representative of its acceptance. Treas. Reg. sec. 301.6159-1(c)(1)(i). Except in limited circumstances not applicable in this case, respondent has discretion to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 accept or reject installment agreement proposals. Treas. 17 Reg. secs. 301.6159-1(c)(1)(i) & (c)(1)(iii). 18 An installment agreement must be in writing and 19 must take the form of either (1) a document signed by the 20 taxpayer and respondent (such as a Form 433-D) or (2) a 21 written confirmation of an agreement entered into by the 22 taxpayer and respondent that is mailed or personally 23 delivered to the taxpayer. Sec. 6159(a); Treas. Reg. sec. 24 25 301.6159-1(c)(2). Generally, a proposed installment agreement cribers 73) 406-2 250 { operationseescribers.net I www.escribers.net becomes effective from the date respondent notifies the taxpayer or taxpayer's representative of the acceptance. Treas. Reg. sec. 301.6159-1(c)(3)(i). A proposed installment agreement is rejected when respondent notifies 21 the taxpayer or taxpayer's representative of the rejection, the reasons for the rejection, and the right to an appeal. Treas. Reg. sec. 301.6159-1(d) (1). Typically, current compliance with tax laws, including compliance with estimated tax payment 1 2 3 4 5 6 7 8 9 10 obligations, is a prerequisite to eligibility for 11 12 13 collection alternatives, including installment agreements. Cox v. Commissioner, 126 T.C. 237, 257-258 (2006), rev'd on other grounds, 514 F.3d 1119 (10th Cir. 2008); Orum v. 14 Commissioner, 412 F.3d 819, 821 (7th Cir. 2005) 15 (explaining that the elimination of a taxpayer's tax debts 16 can only be accomplished "if current taxes are paid while 17 18 old tax debts are retired"). Petitioner alleges that he accepted SO Howard's 19 offer to enter into an installment agreement. An 20 installment agreement can consist of a document signed by 21 the taxpayer and respondent, such as a Form 433-D. 22 Although SO Howard's September letter enclosed a Form 433- 23 24 D, that Form 433-D was not signed by respondent. Furthermore petitioner never signed the Form 433-D. 25 Therefore, the Form 433-D was signed by neither petitioner shun (973)406-2250}operations@escribennet[www.esaibersnet nor respondent. 22 In theory, an installment agreement can also be a written confirmation of an agreement entered into by a taxpayer and respondent that is mailed or personally delivered to the taxpayer. The Form 433-D had a signature line for respondent. The signature line was left blank. It remains blank to this day. Therefore the Form 433-D did not evince respondent's final agreement to the terms of the Form 433-D. By leaving the signature line blank, respondent communicated that he had not yet approved the Form 433-D. Indeed, the Form 433-D cautioned that the 1 2 3 4 5 6 7 8 9 10 11 12 Proposed installment agreement may require managerial 13 approval and that petitioner would be notified as to 14 whether it was approved or not. Although the October 8, 15 16 17 18 2018, letter from the representative evinced petitioner's agreement to an installment agreement, the letter proposed terms different from SO Howard's September letter (and Form 433-D). The representative's October letter insisted 19 on new terms -- the waiver of the additions to tax and 20 withdrawal of the notice of federal tax lien. The 21 22 23 24 25 representative's October letter did not ,reflect terms proposed in the Form 433-D attached to SO Howard's letter, for example, petitioner's agreement that he would timely file and pay all federal taxes, or petitioner's agreement that respondent could modify or terminate the agreement if 9'/3)406-2250|operations@escribersnet|wwwascribers.net 23 petitioner's financial condition significantly changed. Therefore the representative's October letter was a Proposal to negotiate an installment agreement different the terms proposed by SO Howard. We conclude that A the two letters did not evince any agreement between Petitioner and SO Howard. In summary, there was no installment agreement. The notice of determination did not err in suggesting there was no installment agreement. We note that petitioner did not make any payments pursuant to the alleged installment agreement that petitioner claims he and respondent entered into. From October 8, 2018, the date of the representative's 1 2 3 4 5 6 7 8 9 10 11 12 13 letter that petitioner claims constituted acceptance, 14 until the issuance of the notice of determination on 15 November 16, 2018, and thereafter, petitioner did not make 16 any payments against his 2015 tax liability. The absence 17 of any installment payments is indicative of the fact that 18 the representative's October letter was a proposal to 19 negotiate a different installment agreement and that there 20 was no installment agreement. 21 22 23 24 Perhaps petitioner is suggesting that SO Howard erred by imposing a two-week deadline for petitioner to sign and return the Form 433-D. We decline to hold that this was an error. Given the long duration of the 25 collection-review proceeding, it was not an abuse of (973) 406-2250| operationseescribers.net j www.escribers.n et discretion for SO Howard to impose the two-week deadline. 24 See Pough v. Commissioner, 135 T.C. 344,351 (2010) (stating that "when an Appeals officer gives a taxpayer an adequate timeframe to submit requested items, it is not an abuse of discretion to move ahead if the taxpayer fails to submit [them]."). Perhaps petitioner is arguing that once he failed to meet SO Howard's deadline for submitting the Form 433-D, SO Howard should have extended the deadline or imposed a new one. We hold that this was not an error. That is because SO Howard learned on November 8, 2018, that petitioner had become noncompliant with his ongoing tax obligations. Specifically, petitioner had recently filed his Federal income tax return for tax year 2017, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 made no estimated tax payments, and the return reported an 16 unpaid tax liability of $94,310.70. SO Howard also 17 18 observed that petitioner had not made any estimated tax payments for tax year 2018. Given petitioner's then- 19 current noncompliance, SO Howard did not abuse her 20 discretion in declining to extend the deadline for 21 Petitioner to return the signed Form 433-D. See IRM pts. 22 5.14.1.4.2(1),(4),(17),(18)(07-16-2018); Friedman v. 23 Commissioner, T.C. Memo. 2015-196, 110 T.C.M. (CCH) 350, 24 25 352-353, (finding no abuse of discretion in rejecting collection alternatives where the taxpayer had failed to (973)406-2250loperationscescribers.net|www.escribersaet 25 show that he had made estimated payments); Hull v. Commissioner, T.C. Memo. 2015-86, 109 T.C.M. (CCH) 1438, 1441 (explaining that the requirement of current compliance ensures that current taxes are being paid and avoids the pyramiding of tax liabilities). SO Howard's October letter also imposed another condition on negotiating an installment agreement: it required petitioner to send SO Howard a Form 433-D. petitioner contends this was an error, we disagree. If It was not an error for SO Howard to require petitioner to sign and return the Form 433-D as a requirement for consideration of an installment agreement. See Taylor v. 1 2 3 4 5 6 7 8 9 10 11 12 13 Commissioner, T.C. Memo. 2009-27 (holding that it was not 14 15 an abuse of discretion for a settlement officer to reject an installment agreement as a collection alternative 16 because the taxpayer did not submit a Form 433-D). An 17 Appeals officer properly exercises discretion by adhering 18 to IRM provisions governing acceptance of collection 19 alternatives. See Veneziano v. Commissioner, T.C. Memo. 20 21 22 2011-160; Etkin v. Commissioner, T.C. Memo. 2005-245; Schulman v. Commissioner, T.C. Memo. 2002-129. The record shows that SO Howard did not send 23 petitioner a "written confirmation of an agreement" under 24 Treas. Reg. sec. 301.6159-1(c)(2), in response to the 25 representative's October letter. If petitioner contends 9733406-2250|operations®escribers.netlwww.esaibers.net 26 this was an error, we disagree. Petitioner and respondent did not reach an agreement. Therefore, no written confirmation of an agreement was appropriate. We note again the absence of any installment payments and that this is indicative of the fact that the second type of installment agreement permitted under Treas. Reg. sec. 301.6159-1(c)(2), did not occur, and that there was no installment agreement. We hold there was no error in the notice of 1 2 3 4 5 6 7 8 9 10 determination's treatment of the installment agreement 11 12 13 issue. 2. Waiver of additions to tax We next consider petitioner's assertion that SO 14 Howard abused her discretion in refusing to waive the 15 additions to tax for failure to pay tax under section 6654 1 .1(a) (2) and for failure to pay estimated tax under section 17 18 6654. As we previously explained, we sustain SO Howard's refusal to waive the additions to tax under either a de 19 novo standard of review or abuse-of-discretion standard. 20 21 22 Petitioner alleges that SO Howard failed to consider petitioner's request to waive the additions to tax, but the notice of determination shows this request 23 was considered. Indeed, SO Howard determined that 24 Petitioner met respondent's internal requirements for 25 waiving the additions to tax, but that petitioner should $73)406-2250{operations@escribers.net jvrww.escnbers.net first satisfy the tax liability before requesting abatement of the additions to tax. As we now explain, however, SO Howard incorrectly determined that petitioner 27 met the criteria for waiver of the additions to tax. The First Time Abate administrative waiver Policy is described in IRM pt. 20.1.1.3.3.2.1 (11-21- 2017). The waiver is available for the addition to tax for failure to pay tax under section 6651(a)(2), among other additions to tax, but not the addition to tax for 1 2 3 4 5 6 7 8 9 10 failure to pay estimated tax under section 6654. IRM pt. 11 20.1.1.3.3.2.1(1) (11-21-2017). To qualify for the 12 waiver, the taxpayer must not have had any of the eligible 13 additions to tax imposed, absent a reversal, in any of the 14 Preceding three years. See IRM pts. 20.1.1.3.3.2.1(4), 15 16 17 18 19 20 21 (5)(11-21-2017). Additionally, the taxpayer (1) must have filed, or filed a valid extension for, all required returns currently due; and (2) must have paid, or arranged to pay, any tax currently due. IRM pt. 20.1.1.3.3.2.1(2) (11-21-2017). Applying a de novo standard of review, we find that petitioner was not eligible for the First Time Abate 22 waiver with respect to both additions to tax. Petitioner 23 24 was not eligible for a waiver of the addition to tax for failure to pay estimated tax under section 6654 because it 25 is not listed in the IRM as an eligible addition to tax. (973)406-2250|operations©escribers.net|wwwescribers.net 28 We also find that petitioner was not eligible for a waiver of the addition to tax for failure to pay tax under section 6651(a)(2) because petitioner had not paid, and had not arranged to pay, taxes currently due. SPecifically, petitioner had not paid, and had not arranged to pay, his 2015 and 2017 tax liabilities. Accordingly, petitioner was not eligible for the First Time Abate waiver with respect to either addition to tax. Applying an abuse-of-discretion standard of 1 2 3 4 5 6 7 8 9 10 review, we would find that the determination not to waive 11 12 13 14 15 the additions to tax should be sustained. Petitioner is not eligible for waiver. Even if we were to remand the case to the Office of Appeals, it would likely determine he was not eligible. Respondent does not argue that the determination 16 should be sustained on the ground that the IRM's waiver 17 policy is not binding. We therefore do not consider such 18 19 20 an argument. 3. Withdrawal of notice of Federal tax lien We last consider petitioner's assertion that SO 21 Howard abused her discretion in refusing to withdraw the 22 notice of Federal tax lien. We conclude that SO Howard 23 did not abuse her discretion in refusing to withdraw the 24 notice of Federal tax lien. 25 Section 6323 (j) (1) provides that a notice of 913y406-2250loperations@escribers.net|wwwascnbers.net Federal tax lien may be withdrawn under the following 29 conditions: (1) the filing was premature or not in accordance with administrative procedures; (2) the taxpayer has entered into an agreement to satisfy the tax liability underlying the lien through installment payments, unless the agreement provides otherwise; (3) withdrawal will facilitate collection; and (4) with the consent of the taxpayer or the National Taxpayer Advocate, the withdrawal would be in the best interests of the taxpayer and the United States. If respondent determines that conditions for withdrawal are present, respondent 1 2 3 4 5 6 7 8 9 10 11 12 may, but is not required to, authorize withdrawal of the 13 notice of Federal tax lien. Treas. Reg. sec. 301.6323(j)- 14 15 1(c). If respondent determines that none of the conditions for withdrawal are present, respondent cannot 16 authorize the withdrawal of the notice of Federal tax 17 lien. Treas. Reg. sec. 301.6323(j)-1(c). secause 18 withdrawal of the notice of Federal tax lien is a 19 collection alternative, see Treas. Reg. sec. 301.6320- 20 1(e)(3), Q&A-E6, the taxpayer is required to provide 21 APPeals with relevant information to determine whether the 22 conditions for withdrawal are present, see Roudakov v. 23 Commissioner, T.C. Memo. 2017-121, at *11-*12. 24 We hold that SO Howard did not abuse her 25 discretion when she declined petitioner's request to 1973)406-2250|operati nseescribersne.ttwww.escribers.net 30 1 2 3 4 5 6 7 8 9 withdraw the notice of Federal tax lien. Petitioner does not allege that the first criteria for withdrawal of the Federal tax lien was present, and in any event, it was plainly not present here. With respect to the second criteria for withdrawal, petitioner alleges that he entered into an installment agreement. As we previously explained, petitioner did not enter into an installment agreement to 10 satisfy the tax liability underlying the notice of Federal 11 12 tax lien. Petitioner did not sign and return the Form 433-D. Moreover, petitioner had become noncompliant with 13 his ongoing tax obligations, and therefore was not 14 eligible for a collection alternative. The second 15 criteria for withdrawal was not present. 16 17 With respect to the third and fourth criteria for withdrawal, petitioner alleges that withdrawal of the 18 notice of Federal tax lien would facilitate collection and 19 would be in the best interests of the United States. 20 specifically, he alleges that withdrawal of the notice of 21 Federal tax lien would allow him to refinance a multi- |nto 22 million-dollar loan owed by RJS Investments, in which he 23 holds a majority interest, and which loan he personally 24 guaranteed. Petitioner alleges that with the notice of 25 Federal tax lien in effect, he might be unable to (973)406-2250|operations@escribersnet|www.escibersaet refinance the corporation's loan with another lender, so 31 the loan would go into default and the lender might sue him on his personal guaranty, Petitioner also alleges that if the notice of Federal tax lien were to come to the lender's attention, the lender might decide to demand accelerated repayment. According to petitioner, both scenarios would negatively affect collection and not be in the best interests of the United States. As noted earlier, petitioner provided SO Howard 1 2 3 4 5 6 7 8 9 10 with a letter from MidCountry Bank, the lender, explaining 11 12 13 that the multi-million-dollar loan balance was due in full on December 31, 2018, and that the bank would not agree to renew or extend the payment due date. However, petitioner 14 critically failed to provide documentation about his 15 personal guaranty and about the terms of the loan. SO 16 Howard pointed out this lack of documentation in her 17 1etter dated September 24, 2018. The administrative 18 19 20 record does not disclose whether SO Howard specifically requested documentation about the personal guaranty and loan prior to the letter dated September 24, 2018. 21 Although the date of the bank's letter, September 10, 22 23 24 25 2018, suggests that SO Howard did request the documentation prior to the September 24, 2018, letter, we are unable to conclude that she did. In any event, the representative failed to include the requested (973)406-2250|opentions@escnbers.net|www.escriber.s.net 32 documentation in his letter to SO Howard dated November 2, 2018, or any point thereafter. SO Howard did not err in insisting upon documentation about petitioner's personal guaranty because the MidCountry Bank letter only established that the corporation owed a loan, not that petitioner guaranteed it. As we previously explained, taxpayers are required to provide Appeals with relevant information to determine whether the conditions for withdrawal are present. In this case, that includes documentation bearing upon whether there was a personal guaranty, and whether the notice of Federal tax lien impeded collection of the underlying tax liability vis-a- vis the loan. Petitioner did not establish that the corporation was generating income that could enable him to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 pay his tax liability, such that a failure to refinance 17 would impede collection. See IRM pt. 5.12.9.3.3(2) (10- 18 14-2013), Ex. 3. Petitioner did not establish that he 19 would borrow additional amounts to be applied to his tax 20 21 liability. See IRM pts. 5.12.9.3.3(2) (a), (c),(d) (10-14- 2013). The connection petitioner asks to make between the 22 notice of Federal tax lien, his personal guaranty, and 23 collection, is not sufficiently supported by the 24 administrative record for us to conclude that SO Howard 25 abused her discretion in the handling of the matter. (973).406-2250|operationseescribers.net|www.escribersinet Although withdrawal of the notice of Federal tax lien would be in petitioner's best interest, it does not 33 necessarily follow that it would be in the best interesti/ 7 of respondent to relinquish its secured creditor status. A See IRM pt. 5.12.9.3.4(5)(12-07-2015). The third and fourth criteria for withdrawal were not present. SO Howard did not abuse her discretion when she declined petitioner's request to withdraw the notice of Federal tax lien. It is evident from our review of the record that SO Howard verified that the requirements of applicable law and administrative procedure were followed. Petitioner alleges that SO Howard failed to balance the efficient collection of taxes against the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 intrusiveness of the notice of Federal tax lien, but the 16 notice of determination shows SO Howard weighed these 17 factors. None of the conditions for withdrawal were 18 present and there was no viable collection alternative to 19 the filing of the notice of Federal tax lien. Appeals did 20 21 not abuse its discretion in determining that sustaining the filing of the notice of Federal tax lien was 22 appropriate, balanced the need for efficient collection of 23 24 taxes, and was no more intrusive than necessary. In sustaining the determination of the Appeals 25 Office, we have considered all petitioner's arguments. To 73)406-2250lowationseescribers,netlwww.escribers.net the extent not discussed here, we conclude they are 34 irrelevant, moot, or without merit. To reflect the foregoing, an appropriate decision will be entered for respondent. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 4:59 p.m., the above-entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 EM . $733406-225Ò|operations@escribers.net|www.escribers.net 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CERTIFICATE OF TRANSCRIBER AND PROOFREADER 35 CASE NAME: Raj B. Singh v. Commissioner DOCKET NO.: 25714-18L We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 35 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Mason Booker on September 12, 2019 before the United States Tax Court at its session in St. Paul, MN, in accordance with the applicable provisions of the current verbatim reporting contract of the Court and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording. Meribeth Ashley, CET-507 Transcriber 9/17/19 Date Traci Fine, CLDT-169 Proofreader 9/18/19 Date (973)406-2250|operationseescribers.netlwww.escribersnet