                        T.C. Memo. 2003-153



                      UNITED STATES TAX COURT



               SILVIA S. RODRIGUEZ, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 9686-00L.            Filed May 27, 2003.



     Silvia S. Rodriguez, pro se.

     Nancy C. Carver, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COLVIN, Judge:   On August 11, 2000, respondent sent

petitioner a Notice of Determination Concerning Collection

Action(s) Under Section 6320 and/or 6330 (the lien or levy

determination), in which respondent determined to proceed with

collection of deficiencies in petitioner’s income tax, additions
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to tax, and interest for 1988-89.    Petitioner did not file tax

returns for tax years 1988-2000.

     The issues for decision are:

     1.   Whether respondent was time barred from collecting taxes

due for 1988-89.    We hold that respondent is not.

     2.   Whether respondent’s refusal to consider petitioner’s

offer in compromise because petitioner had not filed all required

tax returns was an abuse of discretion.       We hold that it was not.

     Section references are to the Internal Revenue Code in

effect for the applicable years.

                           FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

A.   Petitioner

     Petitioner is a self-employed real estate broker who lived

in Gaithersburg, Maryland, when she filed the petition.      She has

been a real estate broker from before 1990 to the time of trial.

She owned a business known as Sylvia International Realty.      She

had not filed income tax returns for tax years 1988 through 2000

as of the time of trial.

B.   Respondent’s Notice of Deficiency and Collection Activity
     Relating to Petitioner’s 1988-89 Tax Years

     Respondent issued a notice of deficiency to petitioner for

tax years 1988-89, and petitioner timely filed a petition in this

Court.    Sheryl Fast (Fast), a paralegal for respondent, worked

with petitioner in settling that case.    In October and November
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1996, petitioner signed stipulated decisions in which she agreed

that she had deficiencies in income tax of $1,113 for 1988 and

$3,426 for 1989 and was liable for additions to tax of $272.30

for 1988 and $1,086.50 for 1989 for failure to file a return

under section 6651(a) and failure to pay estimated tax under

section 6654.     Petitioner also agreed that respondent could

assess and collect the deficiencies, additions to tax, and

interest.   Respondent assessed petitioner’s tax for 1988-89 on

March 31, 1997.

C.   Petitioner’s Offer In Compromise

     Petitioner contacted Fast because petitioner received a

notice (not otherwise described in the record) from respondent

stating that she owed taxes for 1988-89.     Fast told petitioner

how to submit an offer in compromise, and that respondent would

not consider her offer in compromise unless petitioner had filed

all required tax returns.     Fast checked respondent’s computer

records and discovered that respondent had no record of

petitioner’s having filed returns for 1991-95.     Fast told

petitioner that respondent would not collect taxes owed by

petitioner for 1988-89 until March 20, 1998, to give petitioner

time to submit an offer in compromise.

     At a time not stated in the record, a friend of petitioner’s

delivered copies of what appeared to be two or three of

petitioner’s returns to Fast.     Those copies did not have original
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signatures.   On February 2, 1998, petitioner gave Fast a copy of

what appeared to be her 1996 return, dated August 11, 1997.    It

did not have an original signature.

     On February 17, 1998, petitioner submitted a Form 656, Offer

in Compromise, to Fast.   In it, petitioner offered to pay $1,500

of the taxes she owed for 1988-89.     In a letter dated March 16,

1998, Fast told petitioner that she had received a copy of

petitioner’s 1991 return that did not have an original signature.

Fast also told petitioner that respondent would not consider the

offer in compromise because respondent had no record that

petitioner had filed original tax returns for 1991-95.    Fast also

told petitioner that respondent would begin to collect tax from

her on March 20, 1998, and that petitioner must file returns for

1991-95 before respondent would process her offer in compromise.

     In April 1998, petitioner gave Fast what appeared to be

copies of her tax returns for 1992, dated August 5, 1993, and for

1993, dated August 1, 1994.   Those copies did not bear original

signatures.

     Petitioner had not filed original returns for 1988-2000 as

of the time of trial, and had given Fast copies of what appeared

to be petitioner’s returns for only 4 of those 11 years.

D.   Notice of Intent To Levy and Section 6330 Hearing

     On October 25, 1999, respondent issued to petitioner a

Notice of Intent To Levy and Notice of Your Right to a Hearing
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relating to petitioner’s 1988-89 tax years.    On November 16,

1999, petitioner filed a Request for a Collection Due Process

Hearing, Form 12153, related to her 1989 tax year in which she

stated that she wanted respondent to consider her offer in

compromise for that year.   In her request for a hearing, she said

that she had health and financial difficulties.

     Respondent’s Appeals officer, J. Chris Neighbor (Neighbor),

reviewed petitioner’s request for a hearing and her offer in

compromise.   On February 18, 2000, Neighbor told petitioner by

letter that respondent would not consider her offer in compromise

because she had not filed returns for 1991-98.    Neighbor

scheduled a hearing for March 14, 2000, to review petitioner’s

tax liabilities for 1988-891 and asked her to let him know within

10 days if she preferred a different date.    He also asked

petitioner to give him the following items:    (1) A financial

statement for petitioner and her business; (2) signed income tax

returns for 1991-98; (3) petitioner’s most recent mortgage

statement showing the remaining balance and the amount of the

monthly payment; and (4) information about Silvia International

Realty, such as whether it produces income and has employees.

Neighbor sent blank financial statement forms for petitioner to

complete.

     1
        Respondent apparently assumed petitioner requested a
hearing under sec. 6330(b) for both 1988 and 1989, even though
her request only stated 1989.
                                - 6 -

       Petitioner did not complete the forms or send any mortgage

statements to Neighbor.    On March 9, 2000, petitioner asked

Neighbor to reschedule the hearing because she was ill.     On March

22, 2000, Neighbor rescheduled the hearing for May 25, 2000, and

again asked petitioner to give him the information described

above.

       On May 18, 2000, petitioner sent copies of her 1991, 1992,

1993, and 1996 returns to Neighbor.     The copies did not bear

original signatures.    On May 24, 2000, petitioner asked

respondent to postpone the May 25 hearing for health reasons.

She told Neighbor she would contact him after June 1, 2000.

       By letter dated June 19, 2000, Neighbor told petitioner

that, in consideration of her health problems, he had postponed

the May 25 hearing, and she had until July 20, 2000, to propose

collection alternatives.    Neighbor told petitioner that

respondent had received from petitioner copies of certain

returns, but that original returns had not been filed with the

IRS.    He invited her to contact him so that they could schedule a

hearing before July 20, 2000.    He told her that he would issue a

notice of determination after that time.

       On July 10, 2000, petitioner told Neighbor that she had

filed original returns with the Philadelphia Service Center;

however, she did not say which returns she had filed.     She also

asked Neighbor to postpone the July 20, 2000, deadline to August
                               - 7 -

30, 2000, because of her poor health.    On July 18, 2000,

petitioner sent some of the financial information to Neighbor

that he had requested.   Petitioner did not give Neighbor any of

her mortgage statements.

      Neighbor checked respondent’s records and found that

respondent had no record that petitioner had filed returns for

1991-98.   Neighbor did not consider petitioner’s offer in

compromise because the Internal Revenue Manual, Part 5, Section

8, states that respondent will not consider offers in compromise

unless the taxpayer has filed all required tax returns.

      On August 11, 2000, respondent sent petitioner a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 (the lien or levy determination), in which respondent

determined to proceed with collection of deficiencies in

petitioner’s income tax, additions to tax, and interest for 1988-

89.

                              OPINION

A.    Whether Respondent Is Time Barred From Collecting
      Petitioner’s Taxes for 1988-89

      Petitioner contends that respondent is time barred from

collecting taxes she owes for 1988-89.    For reasons stated next,

we conclude that respondent may collect taxes from petitioner for

1988-89.

      A claim that the time to assess tax has expired is a

challenge to the underlying tax liability.    Hoffman v.
                                  - 8 -

Commissioner, 119 T.C. 140, 145 (2002); Boyd v. Commissioner, 117

T.C. 127, 130 (2001).      Thus, petitioner may not now claim that

the assessment period expired before respondent issued the notice

of deficiency because she received a notice of deficiency and

could have raised that issue in her deficiency case.     See sec.

6330(c)(2)(B).

       Respondent is not time barred under section 6501 from

collecting or assessing tax due from petitioner for 1988-89

because she did not file returns for those years.     Respondent is

also not time barred under section 6502 from collecting taxes due

from petitioner for 1988-89.     The Commissioner may collect tax by

levy if the levy is made within 10 years after the assessment of

tax.    Sec. 6502(a)(1).   Petitioner signed decision documents in

1996, and respondent assessed petitioner’s taxes due for 1988-89

on March 31, 1997.    Thus, respondent has at least until March 31,

2007, to collect petitioner’s 1988-89 taxes.

B.     Whether Respondent’s Refusal To Consider Petitioner’s Offer
       In Compromise for Tax Years 1988-89 Was an Abuse of
       Discretion

       Petitioner contends that respondent’s refusal to consider

her offer in compromise for 1988-89 because she had not filed all

required income tax returns was an abuse of discretion.     We

disagree.
                                 - 9 -

     1.      Whether Petitioner Had Filed All Required Tax Returns

     Petitioner testified that she filed original income tax

returns for 1991-2000 with the Philadelphia Service Center.     We

are not persuaded by her testimony.      The parties stipulated the

admission into evidence of respondent’s Form 2866, Certificate of

Official Record, which states that respondent has no record of

petitioner’s having filed income tax returns for tax years 1988-

2000.     Fast and Neighbor both testified that they searched

respondent’s records.     Fast found that respondent had no record

that petitioner had filed returns for 1991-95.     Neighbor found

that respondent had no record that petitioner had filed returns

for 1991-98.     Respondent’s certificate of official record and the

testimony of Fast and Neighbor were more persuasive in showing

that petitioner had not filed returns for 1988-2000 than

petitioner’s testimony and the copies of some of her returns were

in showing that she had.     Thus, we find that petitioner did not

file returns for 1988-2000.

     Petitioner contends that respondent erred in not filing the

copies of the returns for 1991, 1992, 1993, and 1996 that she

gave to Fast and Neighbor.     We disagree.   Those returns did not

include petitioner’s original signature.      Sec. 6061(a); Beard v.

Commissioner, 82 T.C. 766 (1984), affd. 793 F.2d 139 (6th Cir.

1986); sec. 1.6061-1(a), Income Tax Regs.     Petitioner did not

provide copies of her returns for 1990, 1994, 1995, 1997, 1998,
                                - 10 -

1999, or 2000.    Petitioner does not contend that she was not

required to file tax returns for any of these years.     We conclude

that petitioner had not filed all required tax returns when she

filed her offer in compromise.

     2.     Whether Respondent’s Refusal To Consider Petitioner’s
            Offer In Compromise Because Petitioner Had Not Filed
            All Required Tax Returns Was an Abuse of Discretion

     Petitioner contends that respondent’s refusal to consider

her offer in compromise because she had not filed required income

tax returns was unreasonable and thus an abuse of discretion.       We

disagree.

     Petitioner did not submit all of the financial information

supporting her offer in compromise that was requested by

Neighbor.    The Commissioner will not process an offer that lacks

sufficient information to permit the Commissioner to evaluate its

acceptability.     Sec. 301.7122-1T(c)(2), Temporary Proced. &

Admin. Regs., 64 Fed. Reg. 39020 (July 21, 1999).     Section

5.8.3.3(2) and (4) of the Internal Revenue Manual, promulgated on

February 4, 2000, and in effect at all time relevant here,

provides that the Commissioner may not process an

offer in compromise if the taxpayer has not filed all required

tax returns.     2 Administration, Internal Revenue Manual (CCH),

sec. 5.8.3.3(2), (4), at 16,283.     The Commissioner’s decision not

to process an offer in compromise or a proposed collection

alternative from taxpayers who have not filed all required tax
                               - 11 -

returns is not an abuse of discretion.   Londono v. Commissioner,

T.C. Memo. 2003-99; Ashley v. Commissioner, T.C. Memo. 2002-286;

Richter v. United States, 90 AFTR 2d 2002-5998, 2002-2 USTC par.

50,607 (C.D. Cal. 2002); AJP Mgmt. v. United States, 87 AFTR 2d

2001-347, 2001-1 USTC par. 50,184 (C.D. Cal. 2000); TTK Mgmt. v.

United States, 87 AFTR 2d 2001-350, 2001-1 USTC par. 50,185 (C.D.

Cal. 2000).   The Commissioner may set reasonable priorities for

Internal Revenue Service staff as needed to effectively

administer the revenue laws.   The decision not to accept the

offer in compromise submitted by petitioner on account of her

failure to file all required returns was an entirely reasonable

exercise of the Commissioner’s discretion in administering the

offer in compromise program.

     We conclude that respondent’s determination to proceed with

collection as to petitioner’s 1988-89 tax liabilities was not an

abuse of discretion.

     Accordingly,

                                         Decision will be entered

                                    for respondent.
