Court Opinion

ID: 4335936
Source: CourtListenerOpinion
Date Created: 2018-11-14 02:33:39.476245+00
Date Added: 2024-06-11T13:29:23.278554
License: Public Domain

126 T.C. No. 13

                UNITED STATES TAX COURT

      LOUIS A. AND CHRISTINE COX, Petitioners v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket Nos. 21733-03L, 14693-04L.     Filed May 3, 2006.

     Ps’ 1999 and 2000 taxable years became the subject
of IRS collection activity through issuance of notices
of intent to levy. Appeals Officer S thereafter
conducted a simultaneous equivalent hearing with
respect to 1999 and collection hearing pursuant to sec.
6330, I.R.C., with respect to 2000. A principal focus
during that proceeding was the availability of
collection alternatives. The Appeals Office sustained
the proposed collection activity in November of 2003.
Meanwhile, Ps’ 2001 and 2002 taxable years had likewise
become the subject of a notice of intent to levy. Ps’
request for a hearing regarding these years was
assigned to S, who began his consideration thereof in
early 2004. Collection alternatives were again a
primary issue raised. Following a hearing with S, a
notice of determination sustaining the proposed levy
action was issued in July of 2004.
                               - 2 -

          Held: The administrative record and notices of
     determination underlying these cases are sufficient to
     support meaningful judicial review.

          Held, further, the Appeals officer was not
     disqualified from conducting the collection hearing for
     2001 and 2002 on account of prior involvement within
     the meaning of sec. 6330(b)(3), I.R.C., nor does the
     record otherwise call into question his impartiality.

          Held, further, because the record does not show any
     abuse of discretion, R’s determinations to proceed with
     collection action, except to the extent modified by
     settlements between the parties, are sustained.

     Theodore H. Merriam and Kevin A. Planegger, for petitioners.

     Frederick J. Lockhart, Jr., for respondent.

                              OPINION

     WHERRY, Judge:   These consolidated cases arise from

petitions for judicial review filed in response to Notices of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330.1   The issue for decision is whether respondent may

proceed with collection of income tax liabilities for years 2000,

2001, and 2002.

     1
         Unless otherwise indicated, section references are to
the Internal Revenue Code of 1986, as amended, and Rule
references are to the Tax Court Rules of Practice and Procedure.
                                - 3 -

                             Background

       These cases were submitted fully stipulated pursuant to Rule

122.    The stipulations of the parties, with accompanying

exhibits, are incorporated herein by this reference.

       Petitioners are husband and wife.   Petitioner Louis A. Cox

(Mr. Cox) is a consulting engineer and software developer.

Throughout the years in issue, he operated a sole proprietorship

providing engineering and software services under the name of Cox

Associates.    In addition, in 2001 and 2002, Mr. Cox also provided

consulting services through Cox Associates, Inc., an S

corporation.    Mr. Cox and petitioner Christine Cox (Mrs. Cox)

each held a 50-percent stock ownership interest in this

corporation.    Generally, the corporation handled larger projects

involving subcontractors and/or government contracts.    Smaller

projects were handled through the sole proprietorship.    Mrs. Cox

provided accounting, bookkeeping, and administrative services for

the businesses.

       Following an extension of time, petitioners timely filed a

joint Form 1040, U.S. Individual Income Tax Return, for 1999 in

October of 2000.    They reported adjusted gross income of

$325,748, taxable income of $276,971, total tax of $101,094,

total payments of $1,000, and an amount owed (after an addition

of $4,222 from Form 2210, Underpayment of Estimated Tax by
                               - 4 -

Individuals, Estates and Trusts) of $104,316.    The return was not

accompanied by payment.

     The Internal Revenue Service (IRS) assessed the reported

amounts for 1999, as well as further additions to tax and

interest, on November 11, 2000, and sent petitioners a notice of

balance due.   Petitioners apparently entered into an installment

agreement in December of 2000 and made a number of payments, but

an assessed balance remained at the termination of the agreement.

On March 14, 2002, a Final Notice - Notice of Intent to Levy and

Notice of Your Right to a Hearing, was issued to petitioners for

1999.

     Petitioners filed a joint Form 1040 for 2000 on April 12,

2002.   They reported adjusted gross income of $442,932, taxable

income of $381,450, total tax of $145,393, no payments, and an

amount owed (with addition as in 1999) of $151,954.   Again no

payment accompanied the return.   Assessment of the reported

amounts, along with additions to tax and interest, was made on

May 20, 2002, and a notice of balance due was sent on that date.

     On October 31, 2002, the IRS issued to petitioners a Final

Notice - Notice of Intent To Levy and Notice of Your Right to a

Hearing, with respect to their 2000 liability.   On November 27,

2002, petitioners’ representative, Theodore H. Merriam

(Mr. Merriam) submitted to the IRS two Forms 12153, Request for a

Collection Due Process Hearing, one pertaining to 1999 and the
                                - 5 -

other to 2000.    With each he enclosed an attachment explaining

petitioners’ disagreement with the proposed levy.    Cover

materials from Mr. Merriam communicated an understanding that the

Form 12153 for 1999 would be treated as a request for an

“equivalent” hearing.    With respect to both years, petitioners

sought less intrusive methods of collection, “including but not

limited to * * * an installment agreement or an offer in

compromise”, and requested abatement of delinquency additions to

tax.

       By a letter dated May 23, 2003, Bruce H. Skidmore

(Mr. Skidmore), the Appeals officer to whom petitioners’ case had

been assigned, scheduled a hearing for June 18, 2003, and

provided general information concerning the requisites for an

installment agreement or offer-in-compromise.    The letter noted

that consideration of collection alternatives required taxpayers

to be in current compliance with filing and payment obligations

and to submit current financial information; i.e., Form 433-A,

Collection Information Statement for Wage Earners and Self-

Employed Individuals, and/or Form 433-B, Collection Information

Statement for Businesses.    The hearing was twice rescheduled at

petitioners’ request, on grounds of needing more time to prepare

and submit returns for 2001 and 2002 and Forms 433-A and B.    A

telephone conference was eventually set for August 12, 2003.
                                - 6 -

     Meanwhile, on July 24, 2003, petitioners filed a Form 1040

for 2001.   The return reported adjusted gross income of $190,054,

taxable income of $104,746, total tax of $38,175, total payments

of $6,000, and an amount owed (after a $1,511 Form 2210 addition)

of $33,686.   No payment was made with the return.   Amounts due,

with further additions to tax and interest, were assessed on

September 8, 2003, at which time a notice of balance due was

sent.

     The scheduled telephone conference for 1999 and 2000 was

conducted on August 12, 2003.   The participants discussed the

changing nature of petitioners’ business and their financial

circumstances.   To wit, Mr. Cox’s consulting endeavors had

previously focused on the telecommunications industry, where work

had since “dried up” due to the economic downturn.   He was at

that time soliciting a more diversified clientele, but contracts

were smaller and income reduced.    It was agreed that petitioners

would provide Forms 433 by the end of August for the

consideration of collection alternatives, and options discussed

included an offer-in-compromise or currently not collectible

status.

     On August 28, 2003, Mr. Merriam telephoned Mr. Skidmore to

request 3 more weeks to submit financial information and to

communicate that petitioners’ 2002 Form 1040 had been mailed.

The return for 2002 was timely filed, pursuant to extensions,
                               - 7 -

when it was received on August 29, 2003.    The return reported

adjusted gross income of $464,889, taxable income of $423,722,

total tax of $146,460, total payments of $487, and an amount owed

(again including a $1,569 Form 2210 addition) of $147,542.    No

payment was submitted with the return.   Amounts due, with

additions to tax and interest, were assessed on October 6, 2003,

and a notice of balance due was sent.

     On September 19, 2003, Kevin A. Planegger (Mr. Planegger),

another representative of petitioners’ employed at the same firm

as Mr. Merriam, sent two letters to Mr. Skidmore.    One presented

explanation and reasoning with respect to petitioners’ request

that additions to tax for 2000 be abated.    The other asked that

petitioners be granted a further extension to October 3, 2003, to

provide financial and collection information.    Mr. Planegger also

called on October 1, 2003, and requested still more time.

     Mr. Skidmore then sent a letter dated October 16, 2003,

setting a deadline of October 27, 2003, for “full and complete

financials” from petitioners and addressing the arguments that

petitioners had proffered concerning the additions to tax.    On

October 27, 2003, Mr. Planegger sent to Mr. Skidmore a completed

Form 433-A for petitioners and Form 433-B for Cox Associates,

Inc., each signed on October 24, 2003, as well as a letter

discussing certain of the income and expense items reflected

thereon.   The Form 433-A showed monthly income of $14,457 and
                               - 8 -

expenses of $14,648.   The expenses included housing and utility

costs of $7,081, attributable to multiple mortgages

overencumbering petitioners’ residence (valued at $900,000 in the

Form 433-A), and life insurance costs of $2,959.   The cover

letter explained that the home secured indebtedness obtained to

finance petitioners’ business activities and that the life

insurance on Mr. Cox’s life was a condition for such financing.

The Form 433-B incorporated an attached profit and loss statement

for January through July of 2003 showing total income of $139,261

and expenses of $137,361.10, resulting in net income of

$1,899.90.

     Mr. Skidmore reviewed the information submitted and

documented his analysis in extensive notes.   By a letter dated

October 31, 2003, he communicated to petitioners his preliminary

conclusions and underlying concerns with respect to current

compliance, to claimed expenses and his inability to reconcile

amounts on the Forms 433 with bank and financial statements

provided, and to collection alternatives.   Mr. Planegger spoke

with Mr. Skidmore by telephone on November 10, 2003, and

requested to have until the end of the month to prepare a

response to the letter.   Mr. Skidmore indicated that with the

delays to date he was inclined to proceed but would look at

anything received while the case was still in his hands.
                               - 9 -

     Mr. Skidmore completed his consideration and calculated

monthly net income of $8,550 (total income of $14,457 less

allowable expenses of $5,907), for a collection potential from

petitioners’ future income over 60 months of $513,000, plus net

realizable equity in assets of $34,161.   In this computation,

Mr. Skidmore allowed only standard housing expenses of $1,299 as

documentation relating to the $7,081 was unclear and the cost of

maintaining a home was not converted to a business expense merely

by use as security for alleged business loans.   He also

disallowed the life insurance expenses as nothing showed that it

was not a personal asset benefiting petitioners and completely

under their control.   Mr. Skidmore did not find that any

collection alternatives were appropriate on the record presented,

but he did conclude that the addition to tax for failure to file

timely for 1999 should be abated.

     On November 17, 2003, petitioners sent a letter to

Mr. Skidmore responding to the conclusions in his October 31,

2003, letter.   Therein they presented further argument regarding

compliance, housing expenses, and collection alternatives.    They

emphasized their alleged efforts to return to compliance,

defended their housing costs or alternatively requested a year to

modify any expenses deemed excessive, and repeatedly advocated

for placement of their accounts in “currently uncollectible

status”, acknowledging that neither an installment agreement nor
                              - 10 -

an offer-in-compromise was a viable option in their

circumstances.2

     On November 25, 2003, the IRS issued to petitioners a

Decision Letter Concerning Equivalent Hearing Under Section 6320

and/or 6330 of the Internal Revenue Code with respect to 1999,

sustaining the proposed levy collection action but abating the

late filing addition.   Likewise, also on November 25, 2003, a

Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330 was issued to petitioners with respect

to 2000.3   The notice summarized the determination as follows:

     2
       It appears from the record that the Nov. 17, 2003, letter
may have been received by the IRS after Mr. Skidmore completed
his consideration of petitioners’ 1999 and 2000 case. However,
as indicated infra, the substance of the information therein was
fully considered by Mr. Skidmore in conjunction with his
subsequent review of petitioners’ 2001 and 2002 tax years and did
not alter (and thus would not as to 1999 and 2000 have altered)
his conclusions. Any timing issues are immaterial on these
facts.
     3
       It appears from the administrative file that the IRS
prepared two notices of determination dated Nov. 25, 2003, with
respect to petitioners’ 2000 tax year. The notices are identical
except for the certified mail numbers handwritten on the first
pages and the fact that one is signed by Appeals Team Manager
Marianne Hudson and the other is signed by Appeals Team Manager
Wesley D. Anderson. It is unclear if both were sent to
petitioners. Perhaps, despite being addressed to both
petitioners, one was intended for Mr. Cox and the other for
Mrs. Cox. In any event, petitioners attached the notice signed
by Marianne Hudson to their petition for 2000, and it is that
notice that the parties annexed to the stipulation of facts and
stipulated was the document upon which the case at docket No.
21733-03L was based. Consistent with the parties’ approach, the
Court will treat the stipulated notice as the operative document
for purposes of this proceeding and will disregard the possible
                                                   (continued...)
                              - 11 -

     Your lack of current tax compliance defeated the
     finding of collection alternatives, and the financial
     information you provided indicated an ability to make
     significant payments on the outstanding tax, if not
     fully pay it over the next few years. You did not
     evidence that a levy would be overly intrusive. You
     did not show reasonable cause for penalty abatement.

Petitioners filed a petition with this Court challenging the

November 25, 2003, determination on December 22, 2003, at which

time they resided in Denver, Colorado.

     In the meantime, on October 20, 2003, the IRS had issued to

petitioners a Final Notice - Notice of Intent To Levy and Notice

of Your Right to a Hearing with respect to 2001 and 2002.

Petitioners timely submitted a Form 12153, received by the IRS on

November 19, 2003, in response to the notice of intent to levy.

An attachment explaining their disagreement essentially reprised

(almost verbatim) the points made in their November 17, 2003,

letter to Mr. Skidmore and focused on a request for placement of

their accounts in currently not collectible status.

     This case was again assigned to Mr. Skidmore.    By a letter

dated April 8, 2004, Mr. Skidmore offered a hearing to be held on

April 27, 2004.   On April 20, 2004, petitioners’ representative

called and requested that Mr. Skidmore recuse himself and have a

different Appeals officer handle the 2001 and 2002 case on

account of Mr. Skidmore’s work on prior years.   Upon review of

     3
      (...continued)
second copy.
                              - 12 -

that request with a supervisor, it was determined that

reassignment was not required and would only create delay.   Mr.

Skidmore contacted petitioners’ representative with the foregoing

information, and the two scheduled a telephonic hearing for May

19, 2004.

     On May 19, 2004, Mr. Planegger called and, pursuant to his

request for more time to complete updated Forms 433-A and 433-B,

the hearing was rescheduled for June 8, 2004.   In a followup

letter of the same date, Mr. Planegger confirmed the hearing

appointment and a June 4, 2004, deadline to submit updated

financial information.   The letter also reiterated objection to

Mr. Skidmore’s consideration of the case.   After two additional

requests from petitioners’ representative to postpone, the

hearing was reset for June 22, 2004, with the revised financial

data to be provided by June 18.

     Under cover of a letter dated June 17, 2004, petitioners

sent a profit and loss statement for Cox Associates, Inc.,

showing a net loss of $12,996.81 during the January through April

2004 period, an income statement for Mr. Cox’s sole

proprietorship showing a net loss of $2,094 for the same period,

a purported “Personal Balance Sheet” for petitioners, and copies

of various bank statements.   The letter stated that petitioners’

assets and liabilities had not changed since Forms 433-A and 433-
                              - 13 -

B were submitted the previous year, and no revised forms were

provided.

     Mr. Skidmore again documented his consideration of and

concerns with the information provided in extensive notes.      He

noted the uncorroborated or unexplained nature of much of what

was supplied, an inability to reconcile various claimed figures

with the documentation, the high cashflow through and commingling

between bank accounts, the apparent failure to make lifestyle

changes to reduce expenses since requesting a year to do so in

November of 2003, and the seemingly continued problems with

filing and payment requirements.   These concerns were discussed

at the ensuing hearing conducted on June 22, 2004.

     On July 13, 2004, a Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330 was issued to

petitioners with respect to 2001 and 2002.   The notice summarized

the determination:   “The only issue you raised for consideration

was that you be found to be currently not collectible.    The

financial information you provided did not establish that.      There

were no procedural errors found, neither was it found that a levy

would be overly intrusive.”   Petitioners’ petition challenging

this notice, having been timely mailed, was filed on August 16,

2004, at which time they continued to reside in Denver, Colorado.

     Each petition raised a number of largely identical

assignments of error, disputing the conclusions in the
                              - 14 -

determinations as to:   (1) Intrusiveness of the proposed

collection actions; (2) current tax law compliance; (3) ability

to pay and interpretation of submitted financial information; (4)

availability of currently not collectible status for unpaid

liabilities; (5) abatement of delinquency additions to tax; and

(6) adequacy of the administrative record for judicial review.

With respect to the proceeding for 2001 and 2002, petitioners

also alleged that they were denied their right to a fair hearing

before an impartial Appeals officer with no prior involvement in

the case.

     As previously indicated, these cases were submitted fully

stipulated.   In conjunction with that submission, the parties

filed a stipulation of settled issues in which they agreed to

additions to tax under section 6651(a)(1) for taxable years 2000

and 2001 to the extent of 50 percent of the amounts assessed and

to abatement of the remaining 50 percent for each year.

                            Discussion

I.   Collection Actions--General Rules

      Section 6331(a) authorizes the Commissioner to levy upon all

property and rights to property of a taxpayer where there exists

a failure to pay any tax liability within 10 days after notice

and demand for payment.   Sections 6331(d) and 6330 then set forth

procedures generally applicable to afford protections for

taxpayers in such levy situations.     Section 6331(d) establishes
                                - 15 -

the requirement that a person be provided with at least 30 days’

prior written notice of the Commissioner’s intent to levy before

collection may proceed.   Section 6331(d) also indicates that this

notification should include a statement of available

administrative appeals.   Section 6330(a) expands in several

respects upon the premise of section 6331(d), forbidding

collection by levy until the taxpayer has received notice of the

opportunity for administrative review of the matter in the form

of a hearing before the IRS Office of Appeals.   Section 6330(b)

grants a taxpayer the right to a fair hearing before an impartial

Appeals officer upon request.

     Section 6330(c) addresses the matters to be considered at

the hearing:

          SEC. 6330(c). Matters Considered at Hearing.--In
     the case of any hearing conducted under this section--

               (1) Requirement of investigation.--The
          appeals officer shall at the hearing obtain
          verification from the Secretary that the
          requirements of any applicable law or
          administrative procedure have been met.

               (2) Issues at hearing.--

                    (A) In general.--The person may raise at
               the hearing any relevant issue relating to
               the unpaid tax or the proposed levy,
               including--

                          (i) appropriate spousal defenses;

                         (ii) challenges to the
                    appropriateness of collection actions;
                    and
                                - 16 -

                           (iii) offers of collection
                      alternatives, which may include the
                      posting of a bond, the substitution of
                      other assets, an installment agreement,
                      or an offer-in-compromise.

                      (B) Underlying liability.--The person
                 may also raise at the hearing challenges to
                 the existence or amount of the underlying tax
                 liability for any tax period if the person
                 did not receive any statutory notice of
                 deficiency for such tax liability or did not
                 otherwise have an opportunity to dispute such
                 tax liability.

      Once the Appeals officer has issued a determination

regarding the disputed collection action, section 6330(d) allows

the taxpayer to seek judicial review in the Tax Court or a

District Court, depending upon the type of tax.   In considering

whether taxpayers are entitled to any relief from the

Commissioner’s determination, this Court has established the

following standard of review:

      where the validity of the underlying tax liability is
      properly at issue, the Court will review the matter on
      a de novo basis. However, where the validity of the
      underlying tax liability is not properly at issue, the
      Court will review the Commissioner’s administrative
      determination for abuse of discretion. [Sego v.
      Commissioner, 114 T.C. 604, 610 (2000).]

II.   Analysis

      A.   Adequacy of the Administative Record and Notices of

           Determination

      Petitioners raise certain alleged procedural defects that

they argue preclude legitimate judicial review of the

administrative proceedings.   The thrust of their argument appears
                                - 17 -

to be that the absence of a more formal record of the hearing or

any significant administrative record, coupled with vague and

conclusory notices of determination, prevents meaningful review.

     As this Court has noted on a number of occasions, hearings

conducted under sections 6320 and 6330 are informal proceedings,

not formal adjudications.   Katz v. Commissioner, 115 T.C. 329,

337 (2000); Davis v. Commissioner, 115 T.C. 35, 41 (2000).      There

inheres no right to subpoena witnesses or documents in connection

with these hearings.   Roberts v. Commissioner, 118 T.C. 365, 372

(2002), affd. 329 F.3d 1224 (11th Cir. 2003); Nestor v.

Commissioner, 118 T.C. 162, 166-167 (2002); Davis v.

Commissioner, supra at 41-42.    Taxpayers are entitled to be

offered a face-to-face hearing at the Appeals Office nearest

their residence.   Where the taxpayer declines to participate in a

proffered face-to-face hearing, hearings may also be conducted by

telephone or correspondence.    Katz v. Commissioner, supra at 337-

338; Dorra v. Commissioner, T.C. Memo. 2004-16; sec. 301.6330-

1(d)(2), Q&A-D6 and D7, Proced. & Admin. Regs.   Furthermore, once

a taxpayer has been given a reasonable opportunity for a hearing

but has failed to avail himself or herself of that opportunity,

we have approved the making of a determination to proceed with

collection based on the Appeals officer’s review of the case

file.   See, e.g., Taylor v. Commissioner, T.C. Memo. 2004-25,

affd. 130 Fed. Appx. 934 (9th Cir. 2005); Leineweber v.
                                - 18 -

Commissioner, T.C. Memo. 2004-17; Armstrong v. Commissioner, T.C.

Memo. 2002-224; Gougler v. Commissioner, T.C. Memo. 2002-185;

Mann v. Commissioner, T.C. Memo. 2002-48.

     The Court has also ruled that taxpayers are entitled,

pursuant to a request made under section 7521(a)(1), to audio

record section 6330 hearings.    Keene v. Commissioner, 121 T.C. 8,

19 (2003).    Nonetheless, we have never held or implied that any

particular type of record is a necessary prerequisite for

meaningful review.    Rather, our precedent and the administrative

records underlying each of those proceedings counsel that a broad

continuum exists in terms of the evidence we have found

sufficient to support judicial consideration.

     Furthermore, precedent from other courts speaks with like

import.    The Court of Appeals for the Sixth Circuit dealt with

this issue at some length in Living Care Alternatives of Utica,

Inc. v. United States, 411 F.3d 621 (6th Cir. 2005).

Acknowledging that the record in collection cases is in many

instances “surprisingly scant”, the court nonetheless went on to

explain:    “No transcript or official record of the hearing is

required and, accordingly, one rarely exists.”    Id. at 625.

The Courts of Appeals for the First and Eighth Circuits have also

generally endorsed this view.    Robinette v. Commissioner, 439

F.3d 455, 459, 461-462 (8th Cir. 2006), revg. on other grounds

123 T.C. 85 (2004); Olsen v. United States, 414 F.3d 144, 150-151
                              - 19 -

(1st Cir. 2005).   Petitioners look to Mesa Oil, Inc. v. United

States, 86 AFTR 2d 2000-7312, at 2000-7317, 2001-1 USTC par.

50,130, at 87,101 (D. Colo. 2000), for support, but even the

District Court in that case stated:

     The government is correct that these rulings and
     provisions support the informal nature of the hearing.
     Yet informality does not completely obviate the need
     for a record of some sort. While a full stenographic
     record is not required, there must be enough
     information contained in the documentation created by
     the IRS for a court to draw conclusions about statutory
     compliance and whether the AO abused his or her
     discretion. * * *

     Here, the parties have stipulated and included in the record

the full Appeals Office administrative file, including the

collection function investigative file incorporated therein, for

each of the years in issue.   These materials contain extensive

contemporaneous notes by IRS personnel as well as the

correspondence between the parties.    Mr. Skidmore’s notes of what

transpired at the section 6330 hearings are a notable feature of

this compendium.   Taken together, the assemblage provides a

singularly clear portrayal of administrative developments as they

occurred.   In addition, petitioners do not contend ever to have

made a request under section 7521 to record the hearing.   On the

facts of these cases, the Court is satisfied that the

administrative record is adequate for proper judicial review.

See Living Care Alternatives of Utica, Inc. v. United States,

supra at 629-630 (distinguishing Mesa Oil, Inc. v. United States,
                              - 20 -

supra); Olsen v. United States, supra at 155-156 (concluding that

an administrative record containing an offer-in-compromise, the

Appeals officer’s communications and the taxpayer’s responses,

and the Appeals officer’s conclusions was sufficient); see also

Robinette v. Commissioner, supra at 461-462 (agreeing with Olsen

v. United States, supra).

     A similar conclusion is warranted with respect to

petitioners’ related assertion that the notices of determination

are too vague and conclusory to comport with, and to facilitate

judicial review consistent with, due process.    Petitioners

complain that the notices lack a cogent explanation of the

Appeals officer’s analysis showing how he considered and weighed

all of the evidence and issues raised by petitioners.

     Section 6330(c)(3) provides that a determination for

purposes of the statute must take into account:    (1) Verification

that requirements of applicable law and procedure have been met;

(2) issues raised by the taxpayer at the hearing; and (3) whether

the proposed collection action balances the need for efficient

collection with concern that collection be no more intrusive than

necessary.   Regulations elaborate as follows:

     The Notice of Determination will set forth Appeals’
     findings and decisions. It will state whether the IRS
     met the requirements of any applicable law or
     administrative procedure; it will resolve any issues
     appropriately raised by the taxpayer relating to the
     unpaid tax; it will include a decision on any
     appropriate spousal defenses raised by the taxpayer; it
     will include a decision on any challenges made by the
                              - 21 -

     taxpayer to the appropriateness of the collection
     action; it will respond to any offers by the taxpayer
     for collection alternatives; and it will address
     whether the proposed collection action represents a
     balance between the need for the efficient collection
     of taxes and the legitimate concern of the taxpayer
     that any collection action be no more intrusive than
     necessary. The Notice of Determination will also set
     forth any agreements that Appeals reached with the
     taxpayer, any relief given the taxpayer, and any
     actions the taxpayer or the IRS are required to take.
     Lastly, the Notice of Determination will advise the
     taxpayer of the taxpayer’s right to seek judicial
     review within 30 days of the date of the Notice of
     Determination. [Sec. 301.6330-1(e)(3), A-E8(i),
     Proced. & Admin. Regs.]

     The notices of determination precipitating these cases

expressly address verification of legal and procedural

requirements, issues raised, and balancing of efficiency and

intrusion.   While petitioners would apparently like to see even

greater detail, the discussions provided as to each of the

foregoing components are sufficient to enable the Court to follow

the Appeals officer’s reasoning and conclusions.   Furthermore,

the Court is mindful that a notice of determination, as a single,

relatively succinct document following an often lengthy

administrative process, must necessarily be to some degree

summary in nature.

     For example, petitioners direct our attention to the fact

that they offered collection alternatives, including an offer-in-

compromise and currently not collectible status, and argue that

Mr. Skidmore failed adequately to address these issues in the

notices of determination.   They emphasize that the November 25,
                              - 22 -

2003, notice does not mention currently not collectible status.

However, both notices discuss collection alternatives and

highlight specific reasons why these were rejected.   Although the

November 25, 2003, notice does not use the words “currently not

collectible status”, it enumerates particular problems with

respect to petitioners’ ability to qualify for “an Offer in

Compromise or other collection alternative”, and the grounds

listed are patently relevant to evaluation of currently not

collectible status.   In point of fact, the majority of

petitioners’ complaints about the notices would seem to relate

more to the possibility of an abuse of discretion, and hence will

be dealt with infra, than to the legal sufficiency of the

documents.

     The Court concludes that both the administrative record and

the notices of determination are sufficient to support judicial

review.4

     4
       We note that we do not decide or reconsider whether we are
limited to the administrative record in conducting our review, as
that is not at issue in these cases.
                              - 23 -

     B.   Impartiality of the Appeals Officer

     Petitioners have, throughout the administrative and

litigation process, consistently objected to the consideration of

their 2001 and 2002 years by Mr. Skidmore on grounds of prior

involvement.   Section 6330(b)(3) subsumes in the statutory right

to a fair hearing the requirement of an impartial officer:    “The

hearing under this subsection shall be conducted by an officer or

employee who has had no prior involvement with respect to the

unpaid tax specified in subsection (a)(3)(A) before the first

hearing under this section or section 6320.    A taxpayer may waive

the requirement of this paragraph.”    Petitioners’ position is

that Mr. Skidmore’s looking into their 2001 and 2002 liabilities

in connection with his handling of the 1999 and 2000 years

constitutes disqualifying prior involvement.    They also allege

more generally that prejudice engendered by his prior dealings

with them prevented Mr. Skidmore from taking an unbiased look at

their 2001 and 2002 years.

     With respect to the key phrase “prior involvement”,

regulations amplify the statutory language as set forth below:

          Q-D4. What is considered to be prior involvement
     by an employee or officer of Appeals with respect to
     the tax and tax period or periods involved in the
     hearing?

          A-D4. Prior involvement by an employee or officer
     of Appeals includes participation or involvement in an
     Appeals hearing (other than a CDP hearing held under
     either section 6320 or section 6330) that the taxpayer
     may have had with respect to the tax and tax periods
                              - 24 -

     shown on the CDP Notice. [Sec. 301.6330-1(d)(2), Q&A-
     D4, Proced. & Admin. Regs.]

     Hence, both the statutory and the regulatory language

suggest a relatively permissive standard under which

participation in earlier collection proceedings would not

constitute disqualifying prior involvement for purposes of

section 6320 or 6330.   Legislative history is supportive of such

a construction, providing:

          The conferees anticipate that the IRS will combine
     Notice of Intent to Levy and Notice of Lien hearings
     whenever possible. If multiple hearings are held, it
     is expected that, to the extent practicable, the same
     appellate officer will hear the taxpayer with regard to
     both lien and levy issues. If the taxpayer requests a
     hearing following receipt of a Notice of Lien or Notice
     of Intent to Levy and, prior to the date of the
     hearing, receives the other notice, the scheduled
     hearing will serve for both purposes and the taxpayer
     is obligated to raise all relevant issues at such
     hearing. [H. Conf. Rept. 105-599, at 266 (1998), 1998-
     3 C.B. 747, 1020.]

Thus, given the above authorities, there can be little doubt that

some form of exception to the bar on prior involvement is

countenanced and intended for participation in earlier collection

proceedings.   However, by their terms, the foregoing appear to be

directed toward multiple proceedings where the same year or years

are specifically the subject of the collection actions.   Proper

application to proceedings where different tax periods are in

issue is less explicit.

     Caselaw, too, offers only limited guidance.   This Court has

characterized the policy of the bar as follows:    “The
                              - 25 -

impartiality requirement ensures that a hearing officer has had

no prior involvement in the determination and assessment of the

underlying tax liability that is the subject of the hearing.”

Criner v. Commissioner, T.C. Memo. 2003-328.    Our dispositions to

date have relied principally on the fact that the Appeals

employee personally “did not participate in, and was not involved

in, any previous Appeals Office hearing” concerning the tax

periods that were the subject of those cases.    Day v.

Commissioner, T.C. Memo. 2004-30; Harrell v. Commissioner, T.C.

Memo. 2003-271.   Our cases have not explored the contours of the

exception for prior involvement in earlier section 6320 or 6330

proceedings.

     Nor is jurisprudence from other courts particularly

enlightening.   Few cases seem to address the meaning of prior

involvement, much less in the context in which it is framed here.

Moreover, some of what little exists is at least arguably more

restrictive than the statute itself and, accordingly, offers

minimal assistance.   For example, in Cox v. United States, 345 F.

Supp. 2d 1218, 1224 (W.D. Okla. 2004), the District Court

remanded a case to Appeals on unrelated procedural grounds with

the following instruction:   “The court finds that, at least in

the circumstances presented here, the statute’s requirement that

the presiding officer must have had no prior involvement with the

unpaid tax disqualifies the original appeals officer from re-
                              - 26 -

hearing the matter.”   The court does not mention the statutory

exception for an Appeals officer’s involvement in other section

6320 or 6330 proceedings concerning a taxpayer.   Mesa Oil, Inc.

v. United States, 86 AFTR at 2000-7316 to 7317, 2001-1 USTC par.

50,130 at 87,100 to 87,101, can be read to imply that even

reviewing the IRS administrative file before contacting the

taxpayer for a hearing might constitute disqualifying prior

involvement.   Yet any such prohibition would seem to infringe

upon realities of the administrative process and possibly even

other requirements of the statute itself; e.g., those pertaining

to verification.

     Against this backdrop, the Court cannot conclude that the

situation now before us represents the type of harm that the

restriction on prior involvement was intended to prevent.    Two

potential rationales, both drawn from the language of the statute

and regulations, lead to this result.   First, as a technical

matter, the subsequent years have never been the subject of;

i.e., been directly in dispute in, a proceeding before the IRS.

To the extent that there has never technically been a proceeding

concerning the later years, a fortiori there cannot have been

disqualifying involvement in a proceeding by IRS personnel.     The

regulatory definition in particular, phrased in terms of an

earlier “Appeals hearing   * * * with respect to the tax and tax

periods”, suggests that prior involvement contemplates a
                              - 27 -

situation where the specific year or years were the explicit

target of an administrative proceeding.   See sec. 301.6330-

1(d)(2), A-D4, Proced. & Admin. Regs.   Stated otherwise, the

regulations indicate that prior involvement as used in the

section 6330 context does not arise where consideration of later

years was peripheral to a proceeding the subject of which was an

earlier year or years.

     Second, from a practical standpoint, the law clearly permits

multiple collection hearings with respect to a given period to be

conducted by the same Appeals officer when that period is, for

example, the subject of multiple notices under section 6320

and/or 6330.   Logically, then, it is difficult to argue that an

appreciably greater or different harm could ensue where a period

is first considered informally in the course of one collection

proceeding initiated regarding another period and then becomes

the direct subject of a subsequent proceeding.   It would make

little substantive sense to have operation of the exception turn

on mere coincidences of timing in the issuance of the various

actionable notices.

     In addition, given the practical realities that collection

problems often develop or continue serially over a number of

years and that many Appeals Offices are small with limited staff,

a construction that could progressively disqualify an entire

office vis-a-vis a taxpayer with multiple years in arrears would
                               - 28 -

be unworkable.    Likewise, since much of the relevant information

would remain unchanged regardless of the period under

consideration, wasteful redundancy could be sanctioned by too

narrow a reading of the exception, and the avoidance thereof

likely formed part of the reasoning behind inclusion of the

exception in the statute.    Accordingly, the Court concludes that

Mr. Skidmore’s consideration of the 2001 and 2002 years during

the collection hearing process concerning 2000 did not lead to

disqualification on grounds of prior involvement as that

terminology is used in section 6330(b)(3).

     The foregoing conclusion does not, however, necessarily end

the inquiry with respect to a potential violation of section

6330(b)(3).   The question remains as to whether the provision

also incorporates a general requirement of impartiality, in the

sense of no prejudice or bias, that might have been transgressed

on these facts.   The Court has spoken briefly to this point in

the context of a lien action under section 6320:

     Section 6320(b)(3) limits the definition of “impartial
     officer” * * *, and that definition does not address,
     and arguably does not permit, a challenge to the
     objectivity of the hearing officer who presides over a
     hearing under sections 6320 and 6330. However, we
     shall assume without deciding, for purposes of this
     analysis, that sections 6320 and 6330 permit a
     challenge in appropriate cases to a demonstrably biased
     hearing officer. See secs. 6320(c), 6330(c)(2)(A) (A
     person may raise at the hearing any relevant issue
     relating to the proposed collection action including
     the enumerated issues). [Criner v. Commissioner, T.C.
     Memo. 2003-328.]
                             - 29 -

     Taking the same approach of assuming arguendo that a claim

advancing prejudice is colorable under the section, we again find

it unnecessary to decide the underlying issue of statutory

construction in that petitioners’ allegations of bias are not

borne out by the totality of the record.    Petitioners highlight

two factual circumstances in support of their position.    First,

petitioners focus on a reference to “a baseless claim for

inflated housing and insurance costs” in notes made by

Mr. Skidmore on April 26, 2004, recording his activity in

processing the 2001 and 2002 case.    The April 26, 2004, entry

reads, in relevant part:

     Review of the case for 1999-2000 (closed five months
     ago) found that the issues raised were collection
     alternatives, and that they qualified for none because
     they made a baseless claim for inflated housing and
     insurance costs in an effort to show they had no
     ability to pay, seeking to justify a lifestyle at the
     expense of the government. Specifically, it was
     concluded that “You did not provide sufficient
     financial information so that these could be
     specifically evaluated, but what you did provide
     evidenced two significant problems: (1) The testimony
     provided indicated no projection of future income could
     now be made with confidence in its accuracy. This
     would defeat the making of a projection of your future
     ability to pay. It is suggested that you again
     consider these alternatives after your new business
     income has a sufficient history upon which to base
     projections. (2) Analysis of your income and expenses
     showed large discretionary income which could be
     applied to your tax liabilities.” I called the Rep. to
     inquire if they had different issues for 2001-2002, and
     what they wished to do about the scheduled hearing * *
     *
                              - 30 -

     Thus, while the remark complained of by petitioners may

sound harsh standing alone, it was made in the context of a

review which went on to consider and accurately to summarize the

particular reasons for the result reached in the earlier matter.

Moreover, as the facts found above indicate, Mr. Skidmore then

proceeded to grant repeated requests from petitioners for more

time to prepare for the hearing and to submit updated financial

information.   His notes also document and discuss his analysis of

the financial materials ultimately provided by petitioners,

commenting in detail about specific items and why they continued

to fall short of establishing petitioners’ qualification for

collection alternatives.   This accommodation of petitioners’

scheduling needs and careful review of the particular evidence

offered indicates a willingness to consider anew the merits of

petitioners’ then-existing circumstances and is the antithesis of

prejudgment.

     The second factual point emphasized by petitioners in their

quest to show bias is the timing of Mr. Skidmore’s conclusion

that a determination letter should be issued; i.e, that the

decision was made on the same day as the hearing was held.

Again, however, the record reveals nothing inappropriate.

Petitioners submitted their financial documentation prior to the

hearing and offered nothing further at the conference that would

justify delay for additional review.   Mr. Skidmore’s notes with
                              - 31 -

regard to the hearing, conducted with petitioners’

representative, close as follows:

     We discussed the financials and my conclusions. He
     could name no specific modifications to expenses. He
     had no response to my statement that it appeared the
     941s were overdue. We agreed this TP needed an OIC,
     but I explained why he could not qualify now. Rep.
     said he agreed they would have to look down the road
     for an OIC in the future. He wanted a Determination
     Letter, and will surely appeal to Tax Court, just for
     delay. He did not name any respect in which he
     disagreed with my findings.

     On this record, and even assuming that section 6330(b)(3)

subsumes a requirement of impartiality in a broad or generalized

sense, the Court is satisfied that Mr. Skidmore conducted a

thorough review of the 2001 and 2002 years that belies

allegations of being tainted by prejudice.

     C.   Appropriateness of the Collection Determinations

     Having concluded that alleged procedural shortcomings do not

preclude judicial review or otherwise invalidate the

determinations at issue, the Court turns to whether the

determinations to proceed with collection should be sustained on

the merits.   At the outset, it should be reiterated that with the

settlement by the parties of the controverted additions to tax,

no issue of underlying liability remains in dispute.

Accordingly, we review respondent’s determinations to proceed

with collection for abuse of discretion.   Action constitutes an

abuse of discretion under this standard where arbitrary,
                              - 32 -

capricious, or without sound basis in fact or law.   Woodral v.

Commissioner, 112 T.C. 19, 23 (1999).

     Petitioners contend that the determinations generating these

cases evince an abuse of discretion on three principal grounds:

(1) Failure to satisfy the verification requirement of section

6330(c)(3)(A); (2) failure to address or properly to evaluate all

issues raised by petitioners per the mandate of section

6330(c)(3)(B); and (3) failure properly to weigh intrusion per

section 6330(c)(3)(C).   Respondent disagrees with each claim.

     Section 6330(c)(3)(A) incorporates a directive that the

determination take into consideration the section 6330(c)(1)

“verification from the Secretary that the requirements of any

applicable law or administrative procedure have been met.”   The

referenced requirements are not further illuminated by statute or

regulation.   The Court has repeatedly rejected challenges based

on this provision where the Appeals officer had secured formal or

informal transcripts showing both that the subject taxes were

properly assessed and that the taxpayer had been notified of

those assessments through issuance of notices of balance due.

Burke v. Commissioner, 124 T.C. 189, 194-195 (2005); Roberts v.

Commissioner, 118 T.C. at 371 n.10; Nestor v. Commissioner, 118

T.C. at 166; Lunsford v. Commissioner, 117 T.C. 183, 188 (2001).

Mr. Skidmore did so here.
                              - 33 -

     Petitioners maintain, however, that more is demanded.    They

rely on the following passage from legislative history:

          During the hearing, the IRS is required to verify
     that all statutory, regulatory, and administrative
     requirements for the proposed collection action have
     been met. IRS verifications are expected to include
     (but not be limited to) showings that:
               (1) the revenue officer recommending the
          collection action has verified the taxpayer’s
          liability;
               (2) the estimated expenses of levy and sale
          will not exceed the value of the property to be
          seized;
               (3) the revenue officer has determined that
          there is sufficient equity in the property to be
          seized to yield net proceeds from sale to apply to
          the unpaid tax liabilities; and
               (4) with respect to the seizure of the assets
          of a going business, the revenue officer
          recommending the collection action has thoroughly
          considered the facts of the case, including the
          availability of alternative collection methods,
          before recommending the collection action. [H.
          Conf. Rept. 105-599, at 264 (1998), 1998-3 C.B.
          747, 1018.]

According to petitioners, the fourth enumerated item is

applicable to their circumstances.     They contend that it imposes

an “elevated review” and was improperly ignored in the

determinations.

     The difficulty with petitioners’ position is that the

statute as enacted requires by its terms verification “that the

requirements of any applicable law or administrative procedure

have been met.”   Sec. 6330(c)(1).   Petitioners have alerted us to

no law or administrative procedure that would direct revenue

officers to engage in the specific analysis suggested, much less
                               - 34 -

document such analysis in a manner or form that would enable

objective verification thereof by an Appeals officer in some

future proceeding.   Moreover, the structure of section 6330 as

enacted is such that the Appeals officer is expressly instructed

to consider collection alternatives, presumably de novo, and

courts are granted jurisdiction to review the Appeals officer’s

exercise of discretion, not that of an earlier revenue officer.

Petitioners’ approach does not harmonize with the language of the

statute.   The Court concludes that the verification requirement

was met on the facts of these cases.

     Petitioners also advance complaints with respect to the

Appeals officer’s consideration of issues they raised in

connection with the hearing.   These complaints, apparently

seeking to show contravention of section 6330(c)(3)(B), center on

the interrelated categories of compliance and collection

alternatives.   Regarding compliance, neither party disputes that

current compliance with tax laws is generally considered a

prerequisite, under established IRS policy, of eligibility for

collection alternatives.   See, e.g., Rodriguez v. Commissioner,

T.C. Memo. 2003-153; Londono v. Commissioner, T.C. Memo. 2003-99;

Tabak v. Commissioner, T.C. Memo. 2003-4.   Nor is there any

material disagreement that petitioners’ compliance record for the

years in issue was, in petitioners’ words, “not exemplary” or, in

respondent’s characterization, “abysmal”.   Petitioners argue,
                              - 35 -

however, that respondent has improperly focused on past, as

opposed to current, compliance; that petitioners were in at least

“substantial” compliance with their Federal tax obligations for

2003 forward; and that their noncompliance for earlier years was

justified by circumstances beyond their control.   Hence, they

maintain that Mr. Skidmore improperly relied on noncompliance in

support of his determinations.

     Undoubtably, the administrative record shows that

Mr. Skidmore looked in detail at the filing and payment history

for the years in issue.   Such a review would seem to be inherent

in the very nature of the proceedings and does not raise a

spectre of impropriety.   The fact that he may also have believed

erroneously that returns for 1996, 1997, and 1998 were filed late

likewise does not eliminate the possibility that he may have

appropriately relied on current noncompliance in recommending

that levy action be sustained.   More salient is the fact that his

notes and the communications sent to petitioners reflect an

ongoing concern with failure to make sufficient provision for

estimated taxes.

     When petitioners filed their 2003 return in August of 2004,

pursuant to an extension, they reported tax of $22,508 but only

$414 of withholding and no estimated payments.   Although here

petitioners paid the balance of the tax due with the return, they

obviously were not in compliance with estimated payment
                               - 36 -

obligations throughout the pendency of their cases before

Mr. Skidmore from early 2003 to mid-2004.    The notice of

determination for 2000 was issued on November 25, 2003, and that

for 2001 and 2002 was issued on July 13, 2004.    Estimated

payments, intended to ensure that current taxes are paid, are a

significant component of the Federal tax system, and Mr. Skidmore

was entitled to rely on their absence in reaching his

conclusions.   In fact, petitioners’ circumstances illustrate one

of the reasons for requiring current compliance before granting

collection alternatives such as an offer-in-compromise or an

installment agreement; namely, the risk of pyramiding tax

liability.   See Orum v. Commissioner, 412 F.3d 819, 821 (7th Cir.

2005), affg. 123 T.C. 1 (2004).

     As to alleged mitigating circumstances during the years in

issue, the Court understands that petitioners had little control

over medical exigencies or an industry slowdown.    Petitioners

claim that these circumstances establish that financial

inability, rather than lack of desire, was responsible for their

dilatory filings and payments.    Again, however, current

compliance is most germane.    In addition, as Mr. Skidmore noted

repeatedly, petitioners’ assertions of financial hardship are

difficult to square with the substantial cashflow through their

accounts.    Mr. Skidmore concluded that petitioners’ broad

assertions of business need and use did not satisfactorily
                              - 37 -

explain why some of the extensive funds could not be employed to

pay taxes, and the Court concurs.

     On the matter of collection alternatives, petitioners on

brief specifically find fault with Mr. Skidmore’s evaluation of

currently not collectible status and of an offer-in-compromise.

The Internal Revenue Manual (IRM) provides for the reporting of

accounts as currently not collectible, pursuant to which accounts

are removed from active inventory.     IRM, sec. 5.16.1.1 (Sept.

2005).   The IRM enumerates a variety of reasons that will support

currently not collectible status, including where collection

would create undue hardship by leaving taxpayers unable to meet

necessary living expenses.   Id.; see also Willis v. Commissioner,

T.C. Memo. 2003-302.

     Petitioners’ claims of financial hardship rest in large part

on the inclusion in their living expenses of housing costs

greatly in excess of the amount considered standard for their

geographic area; i.e., $7,081 claimed versus a $1,299 standard

allowance.   Petitioners attempted to explain and justify their

housing expenditures in their October 27 and November 17, 2003,

letters to Mr. Skidmore and in the attachment to their Form 12153

for 2001 and 2002 (which is substantially identical to the

November 17 letter).   They indicated that the figure represented

payments made on three loans overencumbering their home and

offered the following generalized statement in explanation:    “The
                              - 38 -

loan money proceeds were used to help finance the development of

the optical network optimization software at a time when the

anticipated return was many times the amount of the loans.”    They

also described their house as “extensively modified to include

facilities to operate a successful consulting business”,

mentioning that rooms were used to store books, records, and

equipment, as well as to meet with clients.   By way of apparent

analogy and without any support, they then “respectfully

[suggested] that a $5,000 or $6,000 per month business expense

for renting commercial office space would be allowed with very

little scrutiny.”

     Mr. Skidmore, in his analysis of petitioners’ financial

circumstances for purposes of collection alternatives did not

accept housing expenses in excess of the standard allowance.    He

also removed a claimed $2,959 life insurance expense from the

computation.   Petitioners’ explanation of that expense, in their

October 27, 2003, letter had likewise been limited to a

generalized:   “U.S. Bank required Mr. Cox to have a life

insurance policy for the lines of credit which were approved

based on the business income as well as the equity in the house.

The whole-life policy also provides a potential ‘line of credit’

for the business.”   Petitioners allege on brief that

Mr. Skidmore’s failure to consider their business rationale for

these expenses reveals an abuse of discretion.
                               - 39 -

     The Court disagrees.    Petitioners’ broad-brushed intonations

of business justification lack any sufficient corroboration in

the record.    While evidence may support the existence of and

payments on mortgage loans and the life insurance policy, the

documents proffered provide no link to business use.    There has

been no adequate effort by petitioners to trace the proceeds of

the loans to any business-related outlays or to connect the

insurance policy to any specific business-related agreement or

transaction.   Mr. Skidmore’s unwillingness to credit petitioners’

generalized, unsubstantiated assertions at face value hardly

connotes an abuse of discretion.

     Moreover, the inconsistencies between, and lack of

evidentiary support for, a substantial number of the amounts

shown in the financial materials submitted by petitioners largely

vitiate the possibility of any convincing portrayal of hardship.

It simply is unclear what funds were available and where they

were going.    For Mr. Skidmore to conclude that the record did not

adequately establish currently not collectible status for

petitioners’ accounts was reasonable.

     Like reasoning would also apply with respect to other forms

of collection alternative.    Petitioners state on brief that the

Appeals officer refused to consider an offer-in-compromise

because of difficulty in projecting future income.    They fault

him for not explaining why a 3- or 5-year average, allegedly
                              - 40 -

sanctioned in the IRM, could not be used.   On this point, suffice

it to say that petitioners’ representative during the

administrative process expressed concurrence in the

unavailability of an offer-in-compromise, and petitioners never

submitted an actual offer, a concrete proposal for Mr. Skidmore

to consider.   Discretion typically cannot be exercised, much less

abused, in the abstract.   See, e.g., Kendricks v. Commissioner,

124 T.C. 69, 79 (2005); Neugebauer v. Commissioner, T.C. Memo.

2003-292.

     Finally, petitioners frame challenges to the determinations

in issue on the dictates of section 6330(c)(3)(C).    They

summarize their allegations in this regard as set forth below:

          In both Notices of Determination, the Appeals
     Officer recognizes that the petitioners had
     “significant financial problems.” * * * Levies would
     only serve to harass the taxpayers, jeopardize full
     collection by scaring off customers/clients (who
     receive notices of levy) and make remaining in
     compliance impossible. In his Notices of
     Determination, the Appeals Officer did not offer any
     explanation or analysis why the IRS needs the most
     intrusive collection possible, did not justify why
     liquidation of the business was necessary to ensure
     collection, or detail why the plaintiff’s offer of
     collection alternatives was not appropriate (other than
     the compliance issue which was addressed in the
     petitioners’ November 17, 2003 letter). The Appeals
     Officer simply did not consider the impact that his
     determinations would have on these taxpayers, and did
     not perform the required balancing test. By neglecting
     to consider the impact of its determination on the
     plaintiff, the Appeals Office was unable to
     legitimately examine whether the collection action was
     more intrusive than necessary.
                               - 41 -

     The short answer to this challenge is that, as detailed

above, petitioners did not during the administrative process

establish the propriety of any alternative to counterbalance

against the proposed levies.   The notices of determination so

communicate, observing that because petitioners did not present

any acceptable alternatives, it did not appear that any less

intrusive action would “meet the liability”.   They explicitly

address the balancing analysis and appropriately highlight

several of the facts undergirding Mr. Skidmore’s conclusions.

Furthermore, petitioners’ contentions that Mr. Skidmore came to

these conclusions “summarily” are contradicted by the record.

The body of notes and correspondence compiled reveals instead

that the focus of Mr. Skidmore’s efforts throughout the entire

process centered upon attempting to obtain and evaluate

information concerning petitioners’ financial circumstances in

light of possible eligibility for collection alternatives.     The

notes also make reference specifically to intrusiveness and his

thinking thereon.   His eventual determinations that asking the

Government merely to wait and see did not afford a reasonable and

viable option were neither arbitrary, nor capricious, nor

baseless.

     In conclusion, the facts of these cases do not establish any

abuse of discretion.   The Court will sustain respondent’s

proposed collection actions as to taxable years 2000, 2001, and
                              - 42 -

2002, except to the extent modified by the referenced settlements

between the parties.   To reflect the foregoing,

                                         Appropriate decisions

                                    will be entered.