                               T.C. Memo. 2019-119



                         UNITED STATES TAX COURT



                    MERRICK RAYLE, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 26253-14L.                         Filed September 12, 2019.



      Merrick Scott Rayle, pro se.

      Kerrington A. Hall, for respondent.



                           MEMORANDUM OPINION


      LAUBER, Judge: In this collection due process (CDP) case, petitioner

seeks review pursuant to sections 6320(c) and 6330(d)(1)1 of a determination by


      1
       All statutory references are to the Internal Revenue Code in effect at all
relevant times, and all Rule references (unless otherwise noted) are to the Tax
Court Rules of Practice and Procedure. We round all monetary amounts to the
                                                                       (continued...)
                                        -2-

[*2] the Internal Revenue Service (IRS or respondent) to uphold collection action.

The sole question remaining for decision is whether the settlement officer abused

her discretion in concluding that petitioner did not qualify for a streamlined

installment agreement. Respondent has moved for summary judgment under Rule

121, contending that there are no disputed issues of material fact and that his

determination to sustain the proposed collection actions was proper as a matter of

law. We agree and accordingly will grant the motion.

                                    Background

      The following facts are based on the parties’ pleadings and motion papers,

including the attached affidavits and exhibits. Petitioner resided in Indiana when

he timely filed his petition.

      This case involves petitioner’s Federal income tax liabilities for 2009 and

2010. The IRS examined his returns for those years and, on January 8, 2013, is-

sued him a notice of deficiency that determined deficiencies and penalties totaling

$43,939. On April 16, 2013, he filed a petition with this Court seeking redetermi-

nation; because the deficiency for each year was less than $50,000, he filed his

case as a small tax case. Rayle v. Commissioner, T.C. Dkt. No. 8466-13S (July


      1
       (...continued)
nearest dollar.
                                        -3-

[*3] 18, 2013); see sec. 7463(a)(1). We dismissed that case for lack of jurisdiction

because the petition was filed more than 90 days after the IRS issued the notice of

deficiency. See sec. 6213(a). Although decisions in small tax cases are not ap-

pealable, see sec. 7463(b), petitioner appealed. The U.S. Court of Appeals for the

Seventh Circuit dismissed his appeal for lack of jurisdiction on December 8, 2014.

      In an effort to collect petitioner’s unpaid liabilities for 2009 and 2010, the

IRS sent him on March 18 and April 7, 2014, respectively, a notice of Federal tax

lien (NFTL) filing and a notice of intent to levy. As of the latter date the IRS had

assessed interest on the deficiencies and failure-to-pay additions to tax under

section 6651(a)(2). Petitioner’s aggregate outstanding tax liability for the two

years thus totaled $50,244.

      Petitioner timely requested a CDP hearing, and a telephone hearing was

held with a settlement officer (SO1) in the IRS Appeals Office in Holtsville, New

York. After the hearing SO1 issued a notice of determination sustaining the col-

lection actions. Following petitioner’s timely petition we remanded the case to the

Appeals Office for a supplemental hearing, which was conducted by SO1.

      Petitioner provided no financial information and did not call in for the

scheduled hearing. SO1 accordingly issued a supplemental notice of determina-

tion sustaining the collection actions. We remanded the case for a second supple-
                                        -4-

[*4] mental hearing with instructions that it be conducted by a different settlement

officer at a location nearer to petitioner’s residence. We directed that this hearing

be held no later than December 29, 2016.

      On November 14, 2016, the case was reassigned to a settlement officer

(SO2) in the Chicago Appeals Office. SO2 reviewed the administrative file and

confirmed that the tax liabilities in question had been properly assessed and that

all other legal and administrative requirements had been satisfied. That same day

she sent petitioner a letter proposing a face-to-face conference on December 1,

2016. The letter asked that petitioner bring to that conference a completed Form

433-A, Collection Information Statement for Wage Earners and Self-Employed

Individuals, along with verification of income, expenses, and asset valuation.2

      2
        One reason for the previous remands was to enable the Appeals Office to
clarify the import of a letter that petitioner received from the Memphis Service
Center on April 2, 2014, while his appeal was pending to the Seventh Circuit from
our dismissal in docket No. 8466-13S. That letter stated that petitioner’s account
for 2009 was in currently not collectible (CNC) status and that “no further collec-
tion action will take place until appeals are finished.” Our decision in docket No.
8466-13S was not appealable and became final 90 days after it was entered. See
secs. 7463(b), 7481(b). Even if it had been appealable, the Seventh Circuit dis-
missed petitioner’s appeal on December 8, 2014, and its decision became final 90
days thereafter. See sec. 7481(a)(2)(A); Sup. Ct. R. 13. SO1 concluded that the
April 2, 2014, letter had been issued in error. While not resolving that question,
SO2 explained that CNC status is provisional, that it is subject to reversal at any
time, and that the CNC code for petitioner’s 2009 year was reversed no later than
January 18, 2016. In opposing respondent’s motion for summary judgment, peti-
                                                                        (continued...)
                                         -5-

[*5] Petitioner and SO2 had scheduling conflicts, and we twice extended the

deadline for the hearing, which was held on April 19, 2017. At the hearing peti-

tioner produced a Form 433-A but no documents to verify his reported financial

information. The Form 433-A indicated that he could pay the IRS $5,857 per

month ($13,464 gross income minus $7,607 in living expenses). SO2 explained

that a revenue officer (RO) from the IRS Collection Division would contact him to

verify his income and expenses.

      At the hearing petitioner attempted to challenge his underlying tax liabilities

for 2009 and 2010. SO2 explained that he could not do this because he had re-

ceived a notice of deficiency for those years but failed to file a timely Tax Court

petition. See sec. 6330(c)(2)(B). Although our remand order had made clear that

petitioner’s underlying liabilities were not at issue, he insisted that he was entitled

to dispute them.

      SO2 advised petitioner that, if he wished to pursue an installment agreement

(IA), he needed to make a proposal with a specific monthly payment. The parties

agreed to a deadline of May 1, 2017, for submission of a proposed IA with sup-

porting bank statements. Petitioner missed that deadline but on May 8 proposed

      2
        (...continued)
tioner agrees that “the sole remaining issue is whether petitioner qualifies for a
streamlined installment agreement.”
                                        -6-

[*6] an IA offering payments of $500 per month. SO2 noted that petitioner had

defaulted on a previous IA for different tax years executed in February 2013.

      An RO was assigned to verify the information on petitioner’s Form 433-A.

The RO sent petitioner a letter requesting copies of tax returns and specified finan-

cial information, setting a deadline of August 2, 2017. On August 14 petitioner

submitted some but not all of the requested information.

      On the basis of the information she had received, the RO disallowed peti-

tioner’s claimed monthly vehicle expense of $967--he listed no vehicles as assets--

and adjusted several other expenses for lack of proof. The RO calculated that peti-

tioner had gross monthly income of $13,464 (as shown on his Form 433-A) and

total allowable expenses of $5,794, yielding a minimum monthly payment of

$7,670.

      On August 22, 2017, petitioner informed the RO that he wished to claim

additional allowable business expenses. The RO agreed to consider these items if

properly verified, but petitioner ignored her deadlines for supplying substantiation.

On October 3, 2017, having received no further substantiation, the RO closed her

investigation and returned the case to SO2.

      On December 4, 2017, SO2 informed petitioner that the RO’s calculations

were correct on the basis of the expenses he had substantiated. She invited him to
                                           -7-

[*7] submit, by December 31, additional information to verify his reported

expenses. He responded three weeks late, stating that he disagreed with the RO’s

calculations, asserting that his monthly disposable income was only $1,043, and

proposing an IA with payments of $1,000 per month.

      Resolving doubts in petitioner’s favor, SO2 concluded that he could pay the

IRS at least $2,850 a month. She arrived at this figure by subtracting the total

monthly expenses petitioner had reported on his Form 433-A ($7,607) from his

average monthly income as reported on his 2016 return ($10,457). On February 2,

2018, she offered petitioner an IA on these terms, inviting him again to supply

verification of any additional expenses.

      Alternatively, SO2 suggested that petitioner might wish to pursue a stream-

lined IA under which he would discharge his aggregate tax liabilities over a six-

year period. See Internal Revenue Manual (IRM) pt. 5.14.5.2 (Dec. 23, 2015).

For petitioner to qualify for a streamlined IA, his total assessed tax liability could

not exceed $50,000. Ibid. As of February 2018, his aggregate assessed liability

for the 2009, 2010, and 2015 tax years was $55,433. (The 2015 liability consisted

of $224 of interest and additions to tax assessed during the previous six months.)

SO2 agreed to consider a streamlined IA if petitioner paid $5,433 to bring his un-

paid balance down to $50,000. She asked that he inform her within two weeks
                                         -8-

[*8] whether he was interested in pursuing a regular IA at $2,850 per month or a

streamlined IA on these terms.

      Petitioner did not respond by the February 16 deadline SO2 had set. On

March 25 he informed her that he was interested in a streamlined IA but was un-

willing to pay $5,433 in order to qualify. He asserted that no upfront payment was

required because his 2009-2010 Tax Court case was a “small tax case” that origin-

ally involved a tax liability of less than $50,000. According to his calculations

(which he did not explain) his required monthly payment under a streamlined IA

would be $674.

      SO2 concluded that petitioner did not qualify for a streamlined IA because

he refused to make an upfront payment of $5,433 to reduce his balance to

$50,000.3 She concluded that he could pay $2,850 per month under a regular IA

and so rejected his offer to pay $1,000 per month. And she concluded that he

could not challenge his underlying tax liabilities for 2009 and 2010 because he

had received a notice of deficiency for those years but failed timely to petition this




      3
      On November 14, 2016, December 1, 2017, and January 26, February 2,
and September 24, 2018, SO2 reviewed petitioner’s account transcripts, which
showed on each occasion that his outstanding unpaid assessed balance exceeded
$50,000.
                                        -9-

[*9] Court. On October 3, 2018, the IRS issued petitioner a 13-page supplemental

notice of determination sustaining the proposed levy and the NFTL filing.

      On May 8, 2019, respondent filed a motion for summary judgment. Peti-

tioner opposed that motion, contending that SO2 abused her discretion by “failing

to consider all issues relevant to his proposed Streamlined Installment Agree-

ment.” In a supporting declaration petitioner avers that “[t]he sole remaining issue

* * * is whether petitioner qualifies for a Streamlined Installment Agreement.”

                                     Discussion

A.    Summary Judgment Standard

      The purpose of summary judgment is to expedite litigation and avoid costly,

time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90

T.C. 678, 681 (1988). Under Rule 121(b) we may grant summary judgment when

there is no genuine dispute as to any material fact and a decision may be rendered

as a matter of law. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992),

aff’d, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judg-

ment, we construe factual materials and inferences drawn from them in the light

most favorable to the nonmoving party. Ibid. However, the nonmoving party may

not rest upon the mere allegations or denials in his pleadings but instead must set

forth specific facts showing that there is a genuine dispute for trial. Rule 121(d);
                                       - 10 -

[*10] see Sundstrand Corp., 98 T.C. at 520. Petitioner has not identified any

material fact in dispute, and we find that this case is appropriate for summary

adjudication.

B.    Standard of Review

      Neither section 6320(c) nor section 6330(d)(1) prescribes the standard of

review that we should apply in reviewing an IRS administrative determination in a

CDP case. The general parameters for such review are marked out by our prece-

dents. Where the validity or amount of the taxpayer’s underlying liability is at is-

sue, we review the Commissioner’s determination de novo. Goza v. Commission-

er, 114 T.C. 176, 181-182 (2000). Where the taxpayer’s underlying liability is not

properly before us, we review the IRS action for abuse of discretion. Id. at 182.

      Petitioner received a notice of deficiency for 2009 and 2010; he filed an

untimely petition for redetermination; we dismissed for lack of jurisdiction; and

the Seventh Circuit did the same. Section 6330(c)(2)(B), as well as principles of

res judicata, precludes petitioner from challenging his 2009 and 2010 tax liabilities

now. See Commissioner v. Sunnen, 333 U.S. 591, 598 (1948); Koprowski v.

Commissioner, 138 T.C. 54, 60 (2012); Kanofsky v. Commissioner, T.C. Memo.

2014-153, 108 T.C.M. (CCH) 99, 103, aff’d, 618 F. App’x 48 (3d Cir. 2015). We

accordingly review the IRS action for abuse of discretion only. Goza, 114 T.C. at
                                          - 11 -

[*11] 182. Abuse of discretion exists when a determination is arbitrary,

capricious, or without sound basis in fact or law. See Murphy v. Commissioner,

125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006).

C.    Abuse of Discretion

      In reviewing an SO’s determinations we consider whether he or she:

(1) properly verified that the requirements of applicable law or administrative

procedure have been met, (2) considered any relevant issues petitioner raised, and

(3) considered “whether any proposed collection action balances the need for the

efficient collection of taxes with the legitimate concern of * * * [petitioner] that

any collection action be no more intrusive than necessary.” See sec. 6330(c)(3).

Our review of the record establishes that SO2 properly discharged, during the

lengthy supplemental hearing process, all of her responsibilities under section

6330(c).

      Section 6159 authorizes the Commissioner to enter into an IA if he deter-

mines that it will facilitate full or partial collection of a taxpayer’s unpaid liability.

See Thompson v. Commissioner, 140 T.C. 173, 179 (2013). Subject to exceptions

not relevant here, the decision to accept or reject an IA lies within the Commis-

sioner’s discretion. See Rebuck v. Commissioner, T.C. Memo. 2016-3; Kuretski

v. Commissioner, T.C. Memo. 2012-262, aff’d, 755 F.3d 929 (D.C. Cir. 2014);
                                       - 12 -

[*12] sec. 301.6159-1(a), (c)(1)(i), Proced. & Admin. Regs. We will not substitute

our judgment for the SO’s, recalculate the taxpayer’s ability to pay, or

independently determine what would be an acceptable offer. See Thompson, 140

T.C. at 179; Lipson v. Commissioner, T.C. Memo. 2012-252. As a rule, an SO

may “accept, at a minimum, a monthly payment equal to the excess of a taxpayer’s

monthly income over the taxpayer’s allowable expenses.” Boulware v.

Commissioner, T.C. Memo. 2014-80, 107 T.C. (CCH) 1419, 1426, aff’d, 816 F.3d

133 (D.C. Cir. 2016); see Bero v. Commissioner, T.C. Memo. 2017-235; Friedman

v. Commissioner, T.C. Memo. 2013-44. An SO is not required to negotiate with a

taxpayer indefinitely in an effort to reach an agreement. See Kreit Mech. Assocs.,

Inc. v. Commissioner, 137 T.C. 123, 134 (2011).

      Petitioner initially proposed an IA with payments of $500 per month, and

later increased his offer by proposing payments of $1,000 per month. But his own

Form 433-A showed that he could pay $5,857 per month. The RO and SO2

repeatedly offered him opportunities to substantiate additional expenses, but he

never did so.

      After months of delays, missed deadlines, and back-and-forth with petition-

er, SO2 resolved many doubts in his favor. She accepted all of the monthly ex-

penses reported on his Form 433-A ($7,607), even though the RO had found more
                                           - 13 -

[*13] than $1,800 to be unsubstantiated. And she reduced his monthly income

from $13,464 (as shown on his Form 433-A) to $10,457 (as reported on his 2016

tax return). Using these figures SO2 determined that petitioner could pay the IRS

at least $2,850 per month. She proposed an IA calling for such payments, but

petitioner declined this generous offer.

      As an alternative SO2 helpfully suggested that petitioner might wish to con-

sider a streamlined IA, which differs from a regular IA in that it can be processed

more quickly and does not depend on verification of income and expenses as re-

ported on Form 433-A. See IRM pt. 5.14.5.1 (May 23, 2014). For a taxpayer to

qualify for a streamlined IA, his aggregate unpaid assessed liability must be

$50,000 or less and he must agree to pay that liability in full in six years. See id.

pt. 5.14.5.2. The $50,000 cap on assessed liability includes assessed interest, pen-

alties, and additions to tax, but excludes accruals of penalties and interest if they

have not yet been assessed. Ibid. The required minimum monthly payment is

calculated by dividing the total unpaid assessed balance by 72.

      On five distinct dates between November 14, 2016, and September 24,

2018, SO2 reviewed petitioner’s account transcripts, which showed that his total

unpaid assessed balance on each occasion exceeded $50,000. She accordingly

determined that he did not qualify for a streamlined IA. But she offered him the
                                        - 14 -

[*14] opportunity to qualify by making an upfront payment to reduce his balance

to $50,000. As of February 2018, when his assessed balance was $55,433, the

upfront payment required would have been $5,433. Petitioner refused this offer,

insisting that he did not need to make an upfront payment in order to qualify.

      Petitioner is mistaken. He bases his argument on the fact that the notice of

deficiency issued to him in January 2013 determined deficiencies and penalties

totaling $43,939, so that his case qualified as a “small tax case” under section

7463(a)(1). During the ensuing five years, however, a great deal of interest ac-

crued on those assessed amounts, as well as additions to tax under section

6651(a)(2) for failure to pay. The IRS duly assessed that interest and those addi-

tions to tax. Those assessments--which are properly includible in his aggregate

assessed balance--brought his total unpaid assessed liability to $55,433 by Febru-

ary 2018. See IRM pt. 5.14.5.2.

      The Commissioner has exercised his discretion to entertain IA proposals on

a streamlined basis only when the taxpayer’s total unpaid assessed balance, as of

the date the taxpayer makes the proposal, is $50,000 or less. Ibid. The fact that

petitioner’s liability was less than $50,000 five years previously is irrelevant under

the procedures the Commissioner has prescribed.
                                         - 15 -

[*15] Petitioner does not dispute that his total unpaid assessed balance exceeded

$50,000 when SO2 made her determination. And he does not contend that he

made any payments that would have reduced his balance below $50,000. SO2

thus correctly determined that petitioner did not qualify for a streamlined IA under

the applicable IRM provisions. An SO does not abuse her discretion by adhering

to IRM provisions governing acceptance of collection alternatives. See Veneziano

v. Commissioner, T.C. Memo. 2011-160, 102 T.C.M. (CCH) 22, 24; Etkin v.

Commissioner, T.C. Memo. 2005-245, 90 T.C.M. (CCH) 417, 421; Schulman v.

Commissioner, T.C. Memo. 2002-129, 83 T.C.M. (CCH) 1738, 1742 n.6.

      SO2 carefully considered every issue petitioner raised during the lengthy

CDP proceeding.4 Although petitioner continually missed deadlines, SO2 gave

him every opportunity to supply verification of additional expenses. She offered


      4
        At various points petitioner asserted that he was making timely payments
on an existing IA. After checking his transcripts, SO2 determined that he had, but
had defaulted on, a previous IA executed in February 2013. See supra p. 6. Peti-
tioner repeatedly asserted, incorrectly, that he had fully paid his 2015 tax liability.
Although he had paid the substantive tax liability for 2015, there remained a bal-
ance of $224 attributable to recently assessed interest and additions to tax. See
supra p. 7. In any event, even ignoring his 2015 liability, his unpaid liability for
2009 and 2010 comfortably exceeded $50,000. At one point petitioner contended
that SO1 had engaged in a prohibited ex parte communication. The communica-
tion to which he referred was a conversation between SO1 and her manager at
Appeals; because this communication was within the Appeals Office, it was not
“ex parte.” See Rev. Proc. 2012-18, 2012-10 I.R.B. 455.
                                        - 16 -

[*16] him a regular IA with terms more generous than those his own Form 433-A

would have warranted. And she offered him a streamlined IA conditioned on his

making an upfront payment of $5,433 to reduce his balance as the IRM required.

Petitioner refused all of her offers.

      We find that SO2 did not abuse her discretion in determining that petitioner

was ineligible for a streamlined IA. In making her determination, she properly

balanced the need for efficient collection of taxes with petitioner’s legitimate con-

cern that the collection action be no more intrusive than necessary. Finding no

abuse of discretion in this or any other respect, we will grant summary judgment

for respondent and sustain the proposed levy and NFTL filing.

      To reflect the foregoing,


                                                 An appropriate order and decision

                                        will be entered for respondent.
