                          T.C. Summary Opinion 2013-18



                         UNITED STATES TAX COURT



               JOEL CHRISTOPHER WILSON, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 21543-11S L.                       Filed February 25, 2013.



      Joel Christopher Wilson, pro se.

      Bradley C. Plovan, for respondent.



                              SUMMARY OPINION


      GUY, Special Trial Judge: This case was heard pursuant to the provisions of

section 7463 in effect when the petition was filed.1 Pursuant to section 7463(b), the



      1
       Unless otherwise indicated, all section references are to the Internal Revenue
Code, as amended and in effect at all relevant times.
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decision to be entered is not reviewable by any other court, and this opinion shall

not be treated as precedent for any other case.

      This case is an appeal from respondent’s notice of determination upholding

the proposed use of a levy to collect petitioner’s unpaid Federal income tax

liabilities for 2005 and 2006.

                                     Background

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

facts and the accompanying exhibits are incorporated herein by this reference.

Petitioner resided in Maryland at the time the petition was filed.

      On October 15, 2005, petitioner filed a petition for relief under chapter 7 of

the Bankruptcy Code with the U.S. Bankruptcy Court for the District of Maryland

(bankruptcy court). On February 8, 2006, the bankruptcy court issued a discharge

order pursuant to 11 U.S.C. sec. 727 (2006).

      Petitioner subsequently filed Federal income tax returns for the taxable years

2005 and 2006. Petitioner’s income tax withholding was sufficient to satisfy the tax

liability that he reported on his 2005 return. Petitioner reported total tax of $9,689

and tax withholding of $13,333 on his return for 2006. After issuing petitioner a

refund of $3,644 for 2006, respondent determined that he was not entitled to any

withholding tax credits for that year.
                                         -3-

      Respondent issued separate notices of deficiency to petitioner for the taxable

years 2005 and 2006. Petitioner filed timely petitions with the Court at docket Nos.

5419-08 and 360-09S for the taxable years 2005 and 2006, respectively. On July

21, 2009, the Court entered a stipulated decision at docket No. 5419-08 that

petitioner was liable for a tax deficiency of $8,182 and an accuracy-related penalty

under section 6662(a) of $1,548 for the taxable year 2005. On December 4, 2009,

the Court entered a stipulated decision at docket No. 360-09S that petitioner was

liable for a tax deficiency of $1,287 for the taxable year 2006.

      Respondent subsequently entered assessments against petitioner for tax,

penalties, and interest for 2005 and 2006 (in accordance with the stipulated

decisions described above) and issued notices of balance due for those years. When

petitioner failed to pay the amounts due, respondent issued a final notice of intent to

levy for 2005 and 2006 pursuant to section 6330(a). Petitioner responded to the

notice by making a timely request for an administrative hearing with the Office of

Appeals (Appeals Office) stating: “I am losing my employment and heading in to

bankruptcy and my expenses far exceed any payment possibility.” Petitioner

requested that the Appeals Office place his accounts for 2005 and 2006 in

“currently not collectible” status.
                                         -4-

       Petitioner’s case was assigned to Settlement Officer Deborah Douglas (SO

Douglas). After several false starts, in late July 2011 petitioner submitted to SO

Douglas a Form 433-A, Collection Information Statement for Wage Earners and

Self-Employed Individuals, with supporting documentation including his earnings

statement for the biweekly pay period ending July 7, 2011, a residential lease

agreement in which he agreed to pay rent at a monthly rate of $1,600 for the period

December 1, 2009, to November 30, 2011, various utility bills (phone, Internet,

cable television, gas, and electric), car loan statements, and credit card statements.

       The documentation submitted with petitioner’s Form 433-A indicates that he

did not have any significant cash or other assets on hand that could be liquidated to

pay his outstanding tax liabilities.

       Petitioner reported that his monthly wages were $5,256. Petitioner’s earnings

statement for the biweekly pay period ending July 7, 2011, indicated that his year-

to-date gross earnings were $36,334. In addition to Federal and State income tax

withholding, Social Security and Medicare tax, and health insurance premiums,

petitioner’s earnings statement indicated that he contributed $78.85 to a

retirement account identified as 401K-C (with a year-to-date total of $1,090)
                                          -5-

and $50.99 to a retirement account identified as 401K-L (with no year-to-date total

listed).

       Petitioner reported the following monthly living expenses:

                          Expense                      Amount
                  Food, clothing, and misc.              $350
                  Housing and utilities                 2,273
                  Vehicle ownership costs                 677
                  Vehicle operating costs                 480
                  Health insurance                        134
                  Taxes (income and FICA)               1,320
                  Other secured debts                     487
                     Total                              5,721

       Petitioner owned a 2005 Mercedes E Class sedan and was making monthly

payments on two car loans on the vehicle of $572.39 and $194.39, respectively.

Petitioner also had outstanding balances totaling approximately $1,200 on several

credit cards.

       SO Douglas reviewed petitioner’s financial statement and supporting

documents and compared the monthly living expenses that he reported with

national and local living expense standards for Frederick County, Maryland--

petitioner’s place of residence at the time. See sec. 7122(d)(2) (directing the
                                         -6-

Secretary to publish national and local living expense standards for use in evaluating

offers-in-compromise). SO Douglas adjusted petitioner’s monthly income and

living expenses as follows: (1) increased his monthly wages from $5,256 to $5,677

to account for year-to-date earnings reported on his earnings statement and adding

back $154 representing the monthly amount that he contributed to the retirement

account identified as 401K-C;2 (2) increased the amount of his monthly expense for

food, clothing, and miscellaneous items from $350 to $534; (3) increased his

monthly expense for Federal and State income and employment taxes from $1,320

to $1,401 to account for amounts actually withheld from his wages; (4) increased

the amount of his monthly expense for health care insurance from $134 to $146;3 (5)

decreased his monthly housing and utilities expense from $2,273 to $1,568;4 (6)

decreased his monthly expense for auto ownership from $677 to $496; (7)


      2
        SO Douglas noted that petitioner failed to provide any documentation with
regard to the nature of his contributions to the sec. 401(k) retirement accounts listed
on his earnings statement.
      3
       This adjustment (in petitioner’s favor) was made in error inasmuch as the
relevant national and local living expense standard allows $60 per month for health
care expenses for an individual under the age of 65. An allowance of $146 per
month is provided for individuals over the age of 65. Petitioner is under the age of
65.
      4
        Respondent conceded at trial that the correct amount of the monthly housing
and utilities expense under the national and local standard for August 2011 was
$1,806.
                                         -7-

decreased his monthly auto operating expense from $480 to $270; and (8) decreased

his secured debt from $487 to $194. In sum, SO Douglas concluded that

petitioner’s monthly wages totaled $5,677 and his basic monthly living expenses

totaled $4,609, leaving him with $1,068 per month that could be used to pay his

outstanding tax liabilities.

       On August 22, 2011, the Appeals Office issued to petitioner a Notice of

Determination Concerning Collection Action(s) Under Sections 6320 and/or 6330

sustaining the proposed levy. Petitioner filed a timely petition with the Court in

which he averred that he is “unable to pay any outstanding debt to the IRS due to

the petitioner having income of $5,256.00 and expenses of $5,721.00 monthly”.

       Petitioner contends that the national and local standards that SO Douglas

relied upon are unrealistic for the Washington, D.C., metropolitan area and SO

Douglas failed to recognize that his actual living expenses exceeded the national and

local standards. Petitioner also asserted that his basic living expenses should be

measured against the national and local living expense allowances for Loudoun

County, Virginia, where he now resides. Finally, petitioner maintains that his tax

liability for 2005 was discharged in full by the bankruptcy court in February 2006.
                                          -8-

                                      Discussion

      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 an administrative hearing before the levy is made. Upon timely request,

the person is entitled to an administrative hearing before the Appeals Office. Sec.

6330(b)(1).

      In rendering an administrative determination in a collection review proceeding

under section 6330, the Appeals Office must verify that the requirements of any

applicable law and administrative procedure have been met in processing the

taxpayer’s case. Sec. 6330(c)(1). The Appeals Office also must consider any

issues raised by the taxpayer relating to the collection action, including offers of

collection alternatives, appropriate spousal defenses, and challenges to the

appropriateness of the collection action. Sec. 6330(c)(2)(A). A taxpayer may

challenge the existence or amount of his or her underlying tax liability if the

taxpayer did not receive a notice of deficiency or did not otherwise have an

opportunity to dispute such tax liability. Sec. 6330(c)(2)(B). Finally, the Appeals

Office must consider whether the collection action balances the need for efficient

collection against the taxpayer’s concern that collection be no more intrusive than

necessary. Sec. 6330(c)(3)(C).
                                          -9-

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

determination made by the Appeals Office. If the taxpayer’s underlying tax liability

is properly in dispute, the Court will review the determination de novo, and

otherwise the Court will review the determination for abuse of discretion. Goza v.

Commissioner, 114 T.C. 176, 181-182 (2000). An abuse of discretion occurs if the

Appeals Office exercises its discretion “arbitrarily, capriciously, or without sound

basis in fact or law.” Woodral v. Commissioner, 112 T.C. 19, 23 (1999).

      We begin our analysis with petitioner’s contention that his underlying tax

liability for 2005 was discharged by the bankruptcy court. Petitioner first raised and

abandoned this argument in the deficiency case that he prosecuted before the Court

at docket No. 5419-08. Consistent with section 6330(c)(2)(B), petitioner is barred

from raising such a challenge in this proceeding because he had a prior opportunity

to do so in his earlier deficiency case. See, e.g., Kuykendall v. Commissioner, 129

T.C. 77, 80 (2007).

      Even if petitioner were permitted to challenge his liability for 2005 in this

case, it is clear that the bankruptcy court’s discharge order affected only debts

arising before the date of the “order for relief”, i.e., October 15, 2005, which is the

date he filed his petition for relief under chapter 7 of the Bankruptcy Code. See 11
                                         - 10 -

U.S.C. secs. 301, 727(b) (2006). Petitioner’s tax liability for 2005 arose and was

due to be paid on April 17, 2006, which was the due date of his tax return for 2005.

See sec. 6151; Imarah v. Commissioner, T.C. Memo. 2008-137, slip op. at 12 n.14.

In sum, the bankruptcy court’s discharge order had no impact on petitioner’s tax

liability for 2005.

       We turn now to petitioner’s argument that respondent abused his discretion

by refusing to place his tax accounts for the years in issue in currently not collectible

(CNC) status. Petitioner’s request for CNC status amounted to a proposed

collection alternative, and the Appeals Office was obliged to consider the matter in

accordance with section 6330(c)(2)(A)(iii). See Pitts v. Commissioner, T.C. Memo.

2010-101.

       Pursuant to section 7122(a), Congress authorized the Secretary to

compromise any civil or criminal case arising under the internal revenue laws.

Section 7122(d)(1) directs the Secretary to prescribe guidelines for IRS officers and

employees to determine whether a compromise is adequate and should be accepted

to resolve a dispute. Section 7122(d)(2) directs the Secretary to develop and

publish schedules of national and local allowances designed to ensure that taxpayers

entering into a compromise have adequate means to provide for basic living

expenses.
                                          - 11 -

       Section 301.7122-1(b)(2), Proced. & Admin. Regs., states that the Secretary

may agree to compromise a civil tax liability if there is doubt as to collectibility,

e.g., where the taxpayer’s assets and income are less than the full amount of the

liability. In addition, a compromise based on economic hardship may be warranted

if the imposition of a levy in whole or in part will cause an individual taxpayer to be

unable to pay his or her reasonable basic living expenses. Sec. 301.6343-1(b)(4)(i),

Proced. & Admin. Regs.; see Vinatieri v. Commissioner, 133 T.C. 392, 398 (2009).

It is worth noting here that reasonable basic living expenses do not include the

maintenance of an affluent or luxurious standard of living. Sec. 301.6343-1(b)(4)(i),

Proced. & Admin. Regs. In accord with the foregoing, the Commissioner’s internal

procedures indicate that a taxpayer’s account may be placed in CNC status when a

levy will cause the taxpayer to be unable to provide for necessary living expenses.

See Internal Revenue Manual pt. 1.2.14.1.14 (Nov. 19, 1980) (Policy Statement 5-

71).

       SO Douglas reviewed petitioner’s financial information and concluded that

sustaining the levy would not cause unwarranted economic hardship. Although the

record reflects that SO Douglas strayed slightly from the applicable national and

local standards, the errors she made were harmless. Ultimately, we are not
                                          - 12 -

persuaded that the Appeals Office abused its discretion in determining to proceed

with the proposed levy.

      The Court has sustained the Commissioner’s use of the IRS’ published

national and local allowances as guidelines for basic living expenses in evaluating

the adequacy of proposed installment agreements and offers-in-compromise. See

Speltz v. Commissioner, 124 T.C. 165, 179 (2005), aff’d, 454 F.3d 782 (8th Cir.

2006); Aldridge v. Commissioner, T.C. Memo. 2009-276; Fernandez v.

Commissioner, T.C. Memo. 2008-210. More particularly, the Court has generally

found no abuse of discretion where the Appeals Office used the housing and utilities

standard allowances rather than the taxpayer’s actual expenses. See, e.g., Aldridge

v. Commissioner, T.C. Memo. 2009-276; Marks v. Commissioner, T.C. Memo.

2008-226.

      SO Douglas reviewed petitioner’s earnings statement and correctly increased

his monthly wages from $5,256 to $5,677 to properly account for his year-to-date

gross earnings and amounts he contributed to a retirement plan. See Aldridge v.

Commissioner, T.C. Memo. 2009-276 (voluntary contributions to a retirement

account are not considered a basic living expense).5 The record reflects that the

      5
         Petitioner did not offer any documentation during the administrative hearing
or at trial indicating that the retirement plan contributions listed on his monthly
                                                                            (continued...)
                                        - 13 -

national and local standard amount for housing and utilities expenses applicable

in petitioner’s case was $1,806 as opposed to the $1,568 that SO Douglas allowed.

Adjusting for that item, the record reflects that petitioner’s monthly income

exceeded his reasonable living expenses by several hundred dollars.

      Although petitioner submitted documentation showing that his monthly living

expenses, and particularly his housing and utilities expenditures, exceeded the

national and local standards, he did not provide any information relating to

extraordinary circumstances or other factors under section 301.6343-1(b)(4)(ii)(E)

or (F), Proced. & Admin. Regs., that would justify a departure from the standards.

See Aldridge v. Commissioner, T.C. Memo. 2009-276; McDonough v.

Commissioner, T.C. Memo. 2006-234, aff’d sub nom. Keller v. Commissioner, 568

F.3d 710 (9th Cir. 2009). Petitioner has not shown that application of the national

and local standards would deprive him of “adequate means to provide for basic

living expenses.” Sec. 7122(d)(2)(B); see Fernandez v. Commissioner, T.C. Memo.

2008-210. In the absence of such a showing, it was not an abuse of discretion for

the Appeals Office to rely upon the national and local standards, even if doing so




      5
       (...continued)
earnings statement were mandatory as opposed to voluntary. See Internal Revenue
Manual pt. 5.8.5.9 (Oct. 22, 2010).
                                          - 14 -

forced petitioner to change his lifestyle. See, e.g., Speltz v. Commissioner, 124

T.C. at 179; Perrin v. Commissioner, T.C. Memo. 2012-22.

      As a final matter, petitioner contends that consideration should be given to the

fact that he now resides in Loudoun County, Virginia, where his housing expenses

are greater than when he lived in Frederick County, Maryland. A remand to the

Appeals Office for further consideration may, in some limited circumstances, be

appropriate because of a material change in a taxpayer’s factual circumstances. See

Churchill v. Commissioner, T.C. Memo. 2011-182. However, petitioner has never

offered an explanation for moving to Loudoun County. Without more, there simply

is no justification for a remand in this case.

      Consistent with the preceding discussion, we hold that the Appeals Office

determination to proceed with collection was not an abuse of discretion and the

proposed levy is sustained.

      To reflect the foregoing,


                                                   Decision will be entered

                                         for respondent.
