                               T.C. Memo. 2015-7



                        UNITED STATES TAX COURT



            EUGENE JIM KIPP AND BILLIE JO KIPP, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 18765-13L.                        Filed January 12, 2015.



      Eugene Jim Kipp and Billie Jo Kipp, pro sese.

      S. Mark Barnes, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      VASQUEZ, Judge: Pursuant to section 6330(d)(1),1 petitioners seek review

of respondent’s determination to proceed with collection by levy of their unpaid

Federal income tax for 2008, 2009, and 2011. The sole issue for decision is


      1
      Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect at all relevant times.
                                        -2-

[*2] whether respondent abused his discretion in sustaining the proposed levy

action for these years.

                               FINDINGS OF FACT

I.    Background

      The tax liabilities at issue arose from self-reported underpayments on

petitioners’ Federal income tax returns for 2008, 2009, and 2011. In 2011

petitioners submitted two separate offers-in-compromise (OICs) to the Internal

Revenue Service (IRS) to settle their outstanding tax liabilities for 2008 and

2009.2 On February 9, 2011, the IRS returned the first OIC as not processable.

On April 2, 2012, the IRS returned the second OIC for, among other reasons,

failure to make estimated tax payments for the current tax year.3

      On February 11, 2013, the IRS mailed petitioners Letter 1058A, Final

Notice--Notice of Intent to Levy and Notice of Your Right to a Hearing, with

respect to their outstanding income tax liabilities for 2008, 2009, and 2011. On

February 26, 2013, the IRS received petitioners’ Form 12153, Request for a

Collection Due Process or Equivalent Hearing. On that Form 12153 petitioners


      2
         Petitioners submitted both offers in 2011, so neither offer included the tax
liability for 2011.
      3
        By April 30, 2012, petitioners were aware that the second OIC had been
returned.
                                        -3-

[*3] indicated an interest in submitting an OIC and acknowledged that they owed

the tax due.

II.   Collection Due Process (CDP) Hearing

      On June 11, 2013, Settlement Officer Aaron Hansen of the IRS Office of

Appeals (Appeals) mailed petitioners a letter stating that Appeals had received

their request for a CDP hearing and scheduling a telephone CDP hearing for July

9, 2013.

      In the letter Settlement Officer Hansen stated that he could consider

collection alternatives, such as an installment agreement or an OIC, only if

petitioners provided: (1) a completed Form 433-A, Collection Information

Statement for Wage Earners and Self-Employed Individuals; (2) proof of

estimated tax payments for 2013; and (3) a completed Form 656, Offer in

Compromise, with the required fee, payments, and supporting documentation.

Settlement Officer Hansen instructed petitioners to submit the listed items by June

25, 2013. He also informed petitioners that they could request a face-to-face

hearing by June 25, 2013. Petitioners neither submitted the requested information

nor requested a face-to-face hearing by June 25, 2013.

      In the letter Settlement Officer Hansen instructed petitioners to call him at

the scheduled hearing time. Petitioners, however, did not call Settlement Officer
                                        -4-

[*4] Hansen at the scheduled time because they mistakenly thought that Settlement

Officer Hansen was supposed to initiate the call. Approximately an hour after the

scheduled time, petitioner husband realized his mistake and called Settlement

Officer Hansen, but Settlement Officer Hansen did not answer. Petitioner husband

left a message on Settlement Officer Hansen’s voicemail. Settlement Officer

Hansen called petitioners back about 30 minutes later, but they did not answer.

Settlement Officer Hansen left a message on their voicemail informing them that

they had 14 days to respond.

      On July 9, 2013, Settlement Officer Hansen mailed petitioners a letter

offering them another opportunity to submit the requested information. In the

letter he informed petitioners that they had failed to submit the requested

information by the original deadline and that he was extending the deadline to July

23, 2013. Settlement Officer Hansen received a fax from petitioners dated July

11, 2013, of a partially completed Form 433-A.4 On July 12, 2013, petitioner

husband called Settlement Officer Hansen to inform him that he had recently faxed

in the Form 433-A, but Settlement Officer Hansen did not answer. Settlement

Officer Hansen called petitioners back, but petitioners did not answer, and he left a


      4
       The Form 433-A did not include any of petitioner husband’s income in the
gross monthly income calculation.
                                        -5-

[*5] message with petitioners’ son. Petitioners and Settlement Officer Hansen

made several more attempts to reach each other by phone but were unsuccessful

each time.

      Settlement Officer Hansen did not receive any further correspondence from

petitioners. As a result, he concluded that their prior fax and voicemail

correspondence adequately constituted petitioners’ CDP hearing.

      Throughout the course of the CDP hearing, petitioners did not submit a

written proposal for a collection alternative. As noted above, petitioners

submitted two OICs relating to 2008 and 2009, but both offers were returned to

them more than a year before the CDP hearing.

      On July 30, 2013, the IRS issued petitioners a Notice of Determination

Concerning Collection Action(s) Under Section 6320 and/or 6330.5 Petitioners,

while residing in Montana, timely petitioned this Court for review of the

determination.




      5
        Before the notice of determination was issued, Settlement Officer Hansen
verified that all legal and administrative requirements for collection had been met.
                                         -6-

[*6]                                   OPINION

I.     Statutory Framework

       Section 6331(a) authorizes the Secretary to levy upon property and property

rights of a taxpayer liable for tax if the taxpayer fails to pay the tax within 10 days

after notice and demand for payment is made. Section 6330(a) provides that no

levy may be made on any property or right to property of any person unless the

Secretary has notified such person in writing of the right to a hearing before the

levy is made.

       If a taxpayer requests a hearing in response to a notice of levy pursuant to

section 6330, a hearing shall be held before an impartial officer or employee of

Appeals. Sec. 6330(b)(1), (3). At the hearing the taxpayer may raise any relevant

issue, including appropriate spousal defenses, challenges to the appropriateness of

the collection action, and collection alternatives. Sec. 6330(c)(2)(A).

       Following a hearing Appeals must determine whether proceeding with the

proposed levy action is appropriate. In making that determination Appeals is

required to take into consideration: (1) verification presented by the Secretary

during the hearing process that the requirements of applicable law and

administrative procedure have been met, (2) relevant issues raised by the taxpayer,

and (3) whether the proposed levy action appropriately balances the need for
                                        -7-

[*7] efficient collection of taxes with the taxpayer’s concerns regarding the

intrusiveness of the proposed collection action. Sec. 6330(c)(3).

II.   Standard of Review

      Section 6330(d)(1) grants this Court jurisdiction to review the determination

made by Appeals in connection with the section 6330 hearing. Where, as here, the

underlying tax liabilities are not at issue, we review the Commissioner’s

determination for abuse of discretion. See Sego v. Commissioner, 114 T.C. 604,

610 (2000); Goza v. Commissioner, 114 T.C. 176, 182 (2000).

      An abuse of discretion occurs when the exercise of discretion is arbitrary,

capricious, or without sound basis in fact or law. Giamelli v. Commissioner, 129

T.C. 107, 111 (2007) (citing Sego v. Commissioner, 114 T.C. at 610, and Woodral

v. Commissioner, 112 T.C. 19, 23 (1999)). Acting without a sound basis in fact or

law means that an agency such as the IRS “makes an error of law * * * or rests its

determination on a clearly erroneous finding of fact * * * [or] ‘applies the correct

law to facts which are not clearly erroneous but rules in an irrational manner.’”

United States v. Sherburne, 249 F.3d 1121, 1125-1126 (9th Cir. 2001) (citations

omitted) (quoting Friedkin v. Sternberg (In re Sternberg), 85 F.3d 1400, 1405 (9th

Cir. 1996)); see also Cooter & Gell v. Hartmarx Corp, 496 U.S. 384, 402-403

(1990). In reviewing for abuse of discretion, we generally consider only the
                                         -8-

[*8] arguments, issues and other matters that were raised at the CDP hearing or

otherwise brought to the attention of Appeals. Giamelli v. Commissioner, 129

T.C. at 115; see also sec. 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs.

III.   Determination To Sustain the Proposed Levy Action

       Petitioners argue that Settlement Officer Hansen abused his discretion in

denying a collection alternative. Respondent argues that petitioners were

ineligible for a collection alternative because they failed to provide the required

forms and information.

       It is not an abuse of discretion for Appeals to reject collection alternatives

and sustain a proposed collection action when taxpayers do not submit the

requested financial information. See Balsamo v. Commissioner, T.C. Memo.

2012-109, slip op. at 10; Huntress v. Commissioner, T.C. Memo. 2009-161, slip

op. at 12; Cavazos v. Commissioner, T.C. Memo. 2008-257, slip op. at 11.

Additionally, it is not an abuse of discretion for Appeals to decline to consider a

collection alternative where no written proposal is placed before the reviewing

officer. Kendricks v. Commissioner, 124 T.C. 69, 79 (2005). Furthermore, we do

not require the IRS to reopen an OIC that it returned to a taxpayer years before a

CDP hearing commenced. See Reed v. Commissioner, 141 T.C. 248, 254-256

(2013), supplemented by T.C. Memo. 2014-41. Finally, it is not an abuse of
                                        -9-

[*9] discretion for Appeals to consider a taxpayer ineligible for an OIC on the

ground that the taxpayer is not in compliance with current tax obligations. See

Giamelli v. Commissioner, 129 T.C. at 111-112; Internal Revenue Manual pt.

5.8.7.2.2.2 (May 10, 2011).

      On Form 12153 petitioners indicated an interest in submitting an OIC. At

the hearing, however, petitioners did not submit a Form 656 for an OIC.

Although petitioners had submitted two OICs to the IRS, they were both disposed

of more than a year before the commencement of the CDP hearing. Thus,

petitioners had no outstanding requests for any collection alternative for

Settlement Officer Hansen to consider. Petitioners assert that they did not submit

a Form 656 to Settlement Officer Hansen because they had been waiting for the

IRS to respond to their previously submitted OIC. The record shows, however,

that by April 30, 2012, petitioners were aware that the IRS had returned their

previously submitted OIC. Furthermore, petitioners submitted an incomplete

Form 433-A and did not provide proof of estimated tax payments for 2013. Given

that petitioners did not submit (1) Form 656, (2) adequate financial information,

and (3) proof of estimated tax payments for 2013, we cannot find that Settlement

Officer Hansen abused his discretion in denying a collection alternative.
                                       - 10 -

[*10] Petitioners also argue that Settlement Officer Hansen abused his discretion

in concluding that the correspondence between him and petitioners constituted a

proper CDP hearing. We disagree. A CDP hearing is an informal proceeding, not

a formal adjudication. Katz v. Commissioner, 115 T.C. 329, 337 (2000); Davis v.

Commissioner, 115 T.C. 35, 41 (2000); sec. 301.6330-1(d)(2), Q&A-D6, Proced.

& Admin. Regs. Although a CDP hearing may occur face-to-face, a proper

hearing may also occur by telephone or by correspondence. Katz v.

Commissioner, 115 T.C. at 337-338; Barry v. Commissioner, T.C. Memo. 2011-

127, slip op. at 11-12. Once a taxpayer has been given a reasonable opportunity

for a hearing but does not avail himself of that opportunity, the Appeals officer

may make a determination based on the administrative file. Calafati v.

Commissioner, 127 T.C. 219, 223 (2006).

      Petitioners did not request a face-to-face hearing. Settlement Officer

Hansen scheduled a telephone CDP hearing for petitioners and, when they did not

call in, gave them a final opportunity to submit the requested information by

extending the deadline. Settlement Officer Hansen gave petitioners multiple

opportunities to contest the proposed levy, but petitioners did not take advantage

of these opportunities. Thus, we find that the correspondence hearing in this case

constituted a proper CDP hearing.
                                         - 11 -

[*11] Finally, petitioner husband argues in his posttrial brief that his posttraumatic

stress disorder (PTSD) prevents him from functioning and causes unwarranted

consequences. However, petitioner husband presented no facts of his PTSD at

trial, and there is nothing in the administrative record that indicates that he

mentioned his condition at any time during the Appeals process. Even if we were

to accept that petitioner husband suffers from PTSD, we do not have authority to

consider section 6330(c)(2) issues that were not raised before Appeals. See

Giamelli v. Commissioner, 129 T.C. at 115; Magana v. Commissioner, 118 T.C.

488, 493 (2002).

      The record reflects that Settlement Officer Hansen determined that the

requirements of applicable law and administrative procedure were met and

concluded that sustaining the proposed levy action appropriately balanced the

need for efficient collection of taxes with petitioners’ interest in a collection

alternative. Accordingly, we hold that respondent did not abuse his discretion in

sustaining the proposed levy action.
                                      - 12 -

[*12] In reaching our holding, we have considered all arguments made, and to the

extent not mentioned, we consider them irrelevant, moot, or without merit.

      To reflect the foregoing,


                                                     Decision will be entered for

                                               respondent.
