                  T.C. Memo. 2004-238



                UNITED STATES TAX COURT



 HECTOR CASTILLO AND MOONEEM CASTILLO, Petitioners v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 2557-03L.                Filed October 14, 2004.


     Ps filed a petition for judicial review pursuant to
sec. 6330, I.R.C., in response to a determination by R to
proceed with collection by levy of assessed income tax
liabilities plus penalties and interest for 1992, 1993,
1994, 1996, 1997, 1998, and 1999.

     Held: R’s rejection of an installment agreement
proposed by Ps did not constitute an abuse of
discretion, and R’s determination that Ps could pay
$5,243 per month was reasonable.

     Held, further, R may proceed with collection of
balances due as determined in a “NOTICE OF
DETERMINATION CONCERNING COLLECTION ACTION(S) UNDER
SECTION 6320 and/or 6330”.



Frank Agostino and Julia F. Moore, for petitioners.

Joseph J. Boylan, for respondent.
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                          MEMORANDUM OPINION


     NIMS, Judge:     This case arises from a petition for judicial

review filed in response to a “NOTICE OF DETERMINATION CONCERNING

COLLECTION ACTION(S) UNDER SECTION 6320 and/or 6330” (Notice).

Unless otherwise indicated, all section references are to the

Internal Revenue Code in effect for the years in issue, and all

Rule references are to the Tax Court Rules of Practice and

Procedure.    The parties do not challenge the Court’s jurisdiction

over this case.    Petitioners do not dispute their liability for

underlying taxes, interest, and penalties.     The sole issue for

decision is whether respondent’s rejection of petitioners’

proposed installment agreement constitutes an abuse of

discretion.

                              Background

     The parties submitted this case without trial pursuant to

Rule 122.     The stipulations of the parties, with accompanying

exhibits, are incorporated herein by this reference.     At the time

the petition was filed in this case, petitioners resided in

Oakland, New Jersey.

     Petitioner Hector Castillo is a physician with investments

in real estate and other business ventures.     Petitioner Mooneem

Castillo is not employed outside the home.     Petitioners filed

joint Forms 1040, U.S. Individual Income Tax Returns, for the
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taxable years 1992, 1993, 1994, 1996, 1997, 1998, and 1999.

As of April 22, 2002, petitioners’ total unpaid income tax

liability, including penalties and interest, for the foregoing

taxable years was $605,330.

     On April 22, 2002, respondent issued to petitioners a letter

entitled “FINAL NOTICE–-NOTICE OF INTENT TO LEVY AND NOTICE OF

YOUR RIGHT TO A HEARING” relating to petitioners’ unpaid income

tax liabilities plus penalties and interest for the

aforementioned years.   Thereafter, on April 26, 2002, petitioners

sent Form 12153, Request for a Collection Due Process Hearing, to

respondent’s Appeals Office.   Petitioners disagreed with

respondent’s decision to levy and indicated they were unable to

pay the assessments in full at that time.   Petitioners also

assured the Appeals Office that they would use the proceeds from

the sale of two listed real estate properties to pay respondent

in the future.

     Petitioners later submitted personal financial information

that reflected $343,842 in liquid assets and $811,408 equity in

real estate.

     Petitioners’ counsel contacted the respondent’s Appeals

Office and requested a $1,500 monthly installment agreement under

section 6159.    Petitioners also offered to pay the balance of the

liability when they managed to sell some of their properties.

After reviewing petitioners’ financial information, respondent
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determined that petitioners had the ability to pay $5,243 per

month and could fully pay or provide a significant partial

payment through the liquidation of their assets.

     Section 6502(a)(1) provides a 10-year period of limitations

on collection after assessment of tax, but section 6502(a)(2)(A)

also provides that respondent may extend the collection period in

connection with granting installment agreements.    Respondent’s

policy limits Collection Statute Expiration Date (CSED)

extensions to 5 years beyond the original CSED for each tax

account.   2 Administration, Internal Revenue Manual (CCH), sec.

5.14.2.1, at 17,523.    Thus, the Appeals officer correctly advised

petitioners that a $1,500 monthly installment agreement would not

satisfy petitioners’ $605,330 liability within the original CSED

plus 5 years for each tax account.

     Respondent rejected the proposed $1,500 monthly installment

agreement in the aforementioned Notice.    The Appeals officer

based his decision on the period of limitations and respondent’s

Internal Revenue Manual which provides:

           If taxpayers have the ability to fully or
           partially satisfy * * * [their] accounts by:

           •   using cash;

           •   withdrawing cash from bank or other accounts;

           •   borrowing on equity in real or personal property;
               or,

           •   selling real or personal property, then:
                                  - 5 -

            a.   request full or partial payment * * * .

                    *     *   *    *      *     *    *

            c.   installment agreements will be
                 recommended for rejection if there is
                 sufficient equity or cash available to:

            •    fully pay the taxes, and full payment is not
                 received by a set date. [2 Administration,
                 Internal Revenue Manual, sec. 5.14.1.4(6),
                 at 17,508.]

     Subsequent to the administrative hearing, petitioners made a

$100,000 payment to respondent and listed more properties for

sale with a real estate broker.     Petitioners contend that these

factors demonstrate their willingness to pay the tax liability

and respondent’s rejection of the installment agreement was an

abuse of discretion.

                              Discussion

I.   Standard of Review

     Because the underlying tax liability is not in dispute, we

review the Appeals officer’s actions under an abuse of discretion

standard.    Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).

Under the abuse of discretion standard, a determination will be

affirmed unless the respondent took action that was arbitrary or

capricious, lacks sound basis in law, or is not justifiable in

light of the facts and circumstances.         Mailman v. Commissioner,

91 T.C. 1079, 1084 (1988).
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II.    The Administrative Hearing

       Before a levy may be made on any property or right to

property, a taxpayer is entitled to notice of intent to levy and

notice of the right to a fair hearing before an impartial officer

of the IRS Appeals Office.    Secs. 6330(a) and (b), 6331(d).

Taxpayers may raise challenges to “the appropriateness of

collection actions” and may make “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”.    Sec. 6330(c)(2)(A).   The Appeals officer

must consider those issues, verify that the requirements of

applicable law and administrative procedures have been met, and

must consider “whether any proposed collection action balances

the need for the efficient collection of taxes with the

legitimate concern of the person [involved] that any collection

action be no more intrusive than necessary.”    Sec. 6330(c)(3)(C).

       Here, petitioners stipulate that all administrative

procedures have been met so the sole issue for our consideration

is whether respondent’s rejection of petitioners’ collection

alternative was an abuse of discretion.

III.    The Proposed Installment Agreement

       The rejection of the proposed $1,500 monthly installment

agreement and determination that petitioners can pay $5,243 per

month was not arbitrary in light of petitioners’ financial
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situation.   Respondent’s calculation was based on a financial

analysis of petitioners’ monthly net income generated by Dr.

Castillo’s medical practice and real estate investments.

      Respondent has the discretion to accept or reject an

installment agreement proposed by a taxpayer under section 6159.

Sec. 301.6159-1(b)(1)(i), Proced. & Admin. Regs.    Section 6159

requires respondent to enter into installment agreements in

certain circumstances not applicable to the facts before us.      See

sec. 6159(c).   Respondent’s rejection of the proposed installment

agreement on the grounds that it would not satisfy petitioners’

liability within the period of limitations on collection after

assessment contained in section 6502, plus allowable extensions,

is not an abuse of discretion.    See McCorkle v. Commissioner,

T.C. Memo. 2003-34.

IV.   Section 6330(c)(3)(C) Balancing Test

      Petitioners argue that respondent failed to balance the

Government’s need for the efficient collection of taxes with the

concern of the “person”, i.e., petitioners in this case, that any

collection action be no more intrusive than necessary.

Petitioners also assert that respondent’s reliance on 2

Administration, Internal Revenue Manual, sec. 5.14.1.4(6), at

17,508, was a violation of section 6330(c)(3)(C).    We are

unpersuaded by these arguments.
                               - 8 -

     Petitioners claim they cannot fully pay the liability, but

the financial information submitted to the Appeals officer shows

assets and equity exceeding $1.15 million.   The liabilities date

back to April 15, 1993, and petitioners have had a number of

years to liquidate part or all of their assets or borrow against

their equity.   It is not an abuse of discretion for respondent to

require that taxpayers with sufficient assets to satisfy their

liabilities pay them off more rapidly than would be accomplished

by the proposed installment agreement.   See Clawson v.

Commissioner, T.C. Memo. 2004-106.

     Petitioners claim that they are entitled to an installment

agreement so that they can sell their properties in an “orderly

fashion”, but the Appeals officer was not given any assurances

that the sales would occur within a reasonable period of time,

and in light of petitioners’ apparent indifference to their past

income tax liabilities in this case, the action of the Appeals

officer is fully justified.    Moreover, petitioners’ $100,000

payment subsequent to the Appeals hearing does not change our

holding, even if indeed it is relevant to our consideration of

this case.   See Robinette v. Commissioner, 123 T.C. 85 (2004).

In any event, the $100,000 payment leaves a balance of at least

$500,000, a sum too large to be discharged within the collection

period by monthly installments of $1,500.
                                 - 9 -

     We have considered all of the contentions and arguments of

the parties that are not discussed herein, and we find them to be

without merit, irrelevant, or moot.

     We hold that respondent correctly determined that collection

efforts should proceed.

     To reflect the foregoing,



                                         Decision will be entered

                                  for respondent.
