                  T.C. Summary Opinion 2003-135



                     UNITED STATES TAX COURT



     RALPH M. CONLON AND ROSEMARY L. CONLON, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 15759-02S.             Filed September 29, 2003.



     Ralph M. Conlon and Rosemary L. Conlon, pro sese.

     Irene S. Carroll, for respondent.



     ARMEN, Special Trial Judge:    This case was heard pursuant to

the provisions of sections 6330(d) and 7463.1   The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.

     Respondent issued to petitioners a Notice of Determination

Concerning Collections Action(s) Under Section 6320 and/or 6330

     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986 as amended.
                                - 2 -

for unpaid Federal income tax and related liabilities for 1991.

       The issues for decision are:

       (1) Whether petitioners may challenge the existence or

amount of their underlying tax liability for 1991.    We hold that

they may not.

       (2) Whether respondent abused his discretion in refusing to

accept petitioners’ offer in compromise.    We hold that he did

not.

Background

       Some of the facts have been stipulated, and they are so

found.    Petitioners resided in Canyon Country, California, at the

time that their petition was filed with the Court.

       On October 16, 1992, petitioners jointly filed a Form 1040,

U.S. Individual Income Tax Return, for 1991.    The address given

on the 1991 return was 27424 Sand Canyon Road, Canyon Country,

California, 91351 (Sand Canyon Road address).    Petitioners also

used the Sand Canyon Road address for the filing of their 1992

tax return.

       On or about June 23, 1993, respondent notified petitioners

that their 1991 tax return had been selected for examination.

       During the examination of petitioners’ 1991 income tax

return, petitioners signed and filed with the Internal Revenue

Service a Form 2848, Power of Attorney and Declaration of

Representative, naming Bruce M. Mark (Mr. Mark) as their
                               - 3 -

representative.   Mr. Mark had been petitioners’ accountant for

approximately 25 years.   The Form 2848 was signed by petitioners

and Mr. Mark and dated October 6, 1993.    The Form 2848 provided

that “Notices and other written communications will be sent to

the first representative listed in line 2.”    Mr. Mark was the

first, and only, representative listed in line 2.

     During October 1993, petitioners moved to Wellington,

Nevada.   Petitioners did not notify respondent of their new

address prior to August 26, 1994.

     On August 26, 1994, respondent sent a notice of deficiency

to petitioners at the Sand Canyon Road address.    On that same

date, a copy of the notice of deficiency was sent to Mr. Mark.

In the notice, respondent determined a deficiency in petitioners’

income tax and an accuracy-related penalty for the taxable year

1991 in the amounts of $8,026 and $533.60, respectively.

Petitioners did not receive the notice of deficiency; in

contrast, Mr. Mark received the copy that was sent to him.

     On November 3, 1994, Mr. Mark prepared petitioners’ 1993 tax

return using their Wellington, Nevada, address.

     After the notice of deficiency was issued, but prior to the

end of the 90-day period in which petitioners could file a

petition with this Court, Mr. Mark contacted respondent’s

Examination Division on several occasions with respect to

respondent’s deficiency determination.    Thus, on November 1,
                                - 4 -

1994, Mr. Mark telephoned to request audit reconsideration.

During a second telephone conversation on November 18, 1994, Mr.

Mark indicated that he would be providing additional information

to counter respondent’s deficiency determination.   At that time,

respondent’s agent informed Mr. Mark that the last day to file a

petition with the Court was November 24, 1994.2

     Neither petitioners nor Mr. Mark contested respondent’s

determinations in the notice of deficiency by filing a petition

with this Court.

     On March 6, 1995, respondent assessed against petitioners

the deficiency and penalty determined in the notice of

deficiency, together with statutory interest, and thereafter

began collection proceedings against petitioners.

     On November 1, 2001, respondent issued to petitioners a

Final Notice of Intent to Levy and Notice of Your Right to a

Hearing (notice of intent to levy), pursuant to sections 6330(a)

and 6331(d)(2), pertaining to petitioners’ outstanding liability

for 1991.

     On November 5, 2001, petitioners submitted a Form 656, Offer

in Compromise, to respondent.   Petitioners did not check any of

the boxes under the reason for submission of the offer–-doubt as

to liability, doubt as to collectibility, or effective tax


     2
        Nov. 24, 1994, was Thanksgiving Day; accordingly, the
last day was Nov. 25, 1994. See sec. 7503.
                               - 5 -

administration.   Petitioners checked the box for “Deferred

Payment Offer (Offered amount will be paid over the life of the

collection statute)”.   Petitioners offered to pay the tax

deficiency without paying any penalty or interest.    Petitioners

listed the monthly payment as $300 for a total of 27 months.

     After submitting the offer in compromise, petitioners

submitted to respondent a Form 433-A, Collection Information

Statement for Wage Earners and Self-Employed Individuals.

Petitioners listed a total balance in their bank accounts of

$10,466.65.   Petitioners also listed owning outright a house

valued at $400,000 and a car valued at $14,000.   Petitioners

listed their monthly income as $1,538 and their monthly expenses

as $990.

     On November 21, 2001, petitioners timely submitted a Form

12153, Request for a Collection Due Process Hearing, and

requested a hearing with respondent’s Appeals Office.

Petitioners’ stated objections in the Form 12153 concerned the

underlying tax liability for 1991 and the offer in compromise

that they had previously submitted.

     Appeals Officer Michael Glyer was assigned petitioners’

case.   Appeals Officer Glyer determined that petitioners were not

entitled to contest their underlying tax liability.   Appeals

Officer Glyer also reviewed the offer in compromise based on the

financial information submitted by petitioners and determined
                                 - 6 -

petitioners’ offer in compromise could not be accepted because

they could pay their tax liability in full.

     On September 11, 2002, the Appeals Office issued a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 (notice of determination) notifying petitioners of

the determination to proceed with collection of the 1991 income

tax liability.

     On October 7, 2002, petitioners filed a Petition for Lien or

Levy Action Under Code Section 6320(c) or 6330(d) (the petition).

In the petition, petitioners allege, in part:    “In 1991, we had

over a 200,000 loss * * *.   We feel we are entitled to the full

loss. * * * The letter of deficiency was sent to our tax

representatives, we have no knowledge of result’s [sic].”

     Respondent contends:    (1) Petitioners cannot dispute their

underlying 1991 tax liability; and (2) there was no abuse of

discretion by respondent in refusing to accept petitioners’ offer

in compromise.

Discussion

     A.   Underlying Liability

     In general, section 6330 prohibits the Commissioner from

proceeding with collection by levy until the taxpayer has been

given notice and an opportunity for an administrative review of

the matter (in the form of a hearing before the Internal Revenue

Service’s Office of Appeals).    If the Commissioner issues a
                                - 7 -

determination letter to the taxpayer following an administrative

hearing, section 6330(d)(1) allows the taxpayer to file a

petition for judicial review of the administrative determination.

Davis v. Commissioner, 115 T.C. 35, 37 (2000); Goza v.

Commissioner, 114 T.C. 176, 179 (2000).    We have jurisdiction

over this matter because petitioners filed a timely petition for

review of respondent’s determination to proceed with collection

by levy.    Sec. 6330(d)(1); Lunsford v. Commissioner, 117 T.C. 159

(2001); Sarrell v. Commissioner, 117 T.C. 122 (2001); Sego v.

Commissioner, 114 T.C. 604, 610 (2000); Offiler v. Commissioner,

114 T.C. 492, 498 (2000).

       Although section 6330 does not prescribe the standard of

review that the Court is to apply in reviewing the Commissioner’s

administrative determination, we have held that, where the

validity of the underlying tax liability is properly at issue,

the Court will review the matter on a de novo basis.     Sego v.

Commissioner, supra; Goza v. Commissioner, supra at 181-182.

Where the validity of the underlying tax liability is not

properly placed at issue, the Court will review the

Commissioner’s determination for abuse of discretion.     Sego v.

Commissioner, supra at 610; Goza v. Commissioner, supra at 181-

182.

       Section 6330(c)(2)(B) provides that the underlying tax

liability is properly at issue only if the taxpayer did not
                                 - 8 -

receive any statutory notice of deficiency for such tax liability

or did not otherwise have an opportunity to dispute such tax

liability.

     B.     Receipt of Notice of Deficiency

     For purposes of section 6330(c)(2)(B), receipt of a

statutory notice of deficiency means receipt in time to petition

this Court for redetermination of the deficiency determined in

such notice.     Sec. 301.6330-1(e)(3), Q&A-E2, Proced. & Admin.

Regs.     It is therefore clear that section 6330(c)(2)(B)

contemplates actual receipt of the notice of deficiency by the

taxpayer.     See Tatum v. Commissioner, T.C. Memo. 2003-115.

     In the instant case, respondent mailed, by certified mail, a

notice of deficiency to petitioners at the Sand Canyon Road

address.    However, petitioners did not receive the notice of

deficiency.

     C.     Otherwise Had an Opportunity To Dispute

     Respondent contends that petitioners, through the execution

of the power of attorney with Mr. Mark and his involvement as

their representative in their case, “otherwise had an opportunity

to dispute” their 1991 tax liability for purposes of section

6330(c)(2)(B).

     Under the common law of agency, authority may be granted by

an express statement or may be derived from implication of the

principal’s words or deeds.     See John Arnold Executrak Sys., Inc.
                               - 9 -

v. Commissioner, T.C. Memo. 1990-6 (citing 1 Restatement, Agency

2d, sec. 26 (1957)).   The scope of an agent’s authority is

evaluated in an objective manner, taking into consideration what

a reasonable person in the agent’s position would conclude that

the principal intended, regardless of whether that is what the

principal actually intended.   See id.

     In order to bind the principal, the agent must either have

actual or apparent authority, or the principal must ratify the

agent’s acts.   See Trans World Travel v. Commissioner, T.C. Memo.

2001-6.   Authority is examined taking into account all the

circumstances, including the relationship of the parties, the

common business practices, the nature of the subject matter, and

the facts of which the agent has notice concerning objects the

principal desires to accomplish.   See id. (citing Restatement,

supra at sec. 34).

     The extent of an agent’s authority is a factual question to

be decided on the basis of all the facts and circumstances

revealed by the record.   Adams v. Commissioner, 85 T.C. 359, 369-

373 (1985); Kraasch v. Commissioner, 70 T.C. 623, 627-629 (1978);

1 Restatement, Agency 2d, sec. 34 (1957).

     This Court has held that a representative, acting under an

actual or apparent grant of authority from the taxpayer, has the

requisite authority to petition this Court in the name of the

taxpayer.   See Kraasch v. Commissioner, supra (taxpayer’s agent
                              - 10 -

was authorized to file a petition with this Court); Shopsin v.

Commissioner, T.C. Memo. 1984-151 (taxpayers’ accountant had

acted within scope of his employment in signing the petition and

as taxpayers’ authorized agent in filing the petition), affd.

without published opinion 751 F.2d 371 (2d Cir. 1984).

     Mr. Mark had been petitioners’ accountant for more than 25

years.   Mr. Mark prepared petitioners’ 1991 tax return.

Petitioners, through the execution of Form 2848, gave actual

authority to Mr. Mark to handle all of their tax matters with

respect to their 1991 taxable year.    Mr. Mark acted within the

scope of his agency when he handled, on behalf of petitioners,

the examination of their 1991 taxable year.

     Mr. Mark received a copy of the notice of deficiency for

1991 from respondent.   After receiving the notice of deficiency,

Mr. Mark contacted respondent requesting audit reconsideration.

Mr. Mark was also informed by respondent as to the last date on

which a petition could be filed on behalf of petitioners with the

Court.   Although authorized, Mr. Mark did not avail himself of

the opportunity to file a petition with this Court on behalf of

petitioners to dispute their underlying tax liability for 1991.

     The record is clear that petitioners explicitly granted to

Mr. Mark the authority to act on their behalf with respect to

their 1991 taxable year through Form 2848.    We are convinced that

petitioners had, or should have had, sufficient knowledge of the
                                 - 11 -

status of their case and that they gave their consent and

approval to Mr. Mark’s acts.     See Kraasch v. Commissioner, supra

at 629.    Accordingly, if Mr. Mark failed to file a petition with

this Court on behalf of petitioners, any prejudice is

attributable to the inaction of their agent.

     We hold that petitioners otherwise had an opportunity to

dispute their underlying tax liability for 1991 through their

representative.    Thus, petitioners are not entitled to dispute

their underlying tax liability for 1991.     Sec. 6330(c)(2)(B).

     D.    Offer in Compromise

     As stated above, a taxpayer is entitled to notice before

levy, including notice of the right to a fair hearing before an

impartial officer of the Internal Revenue Service Office of

Appeals.    Secs. 6330(a) and (b), and 6331(d).   If the taxpayer

requests a hearing, he or she may raise in that hearing any

relevant issue relating to the unpaid tax or the proposed levy,

including an offer in compromise.     Sec. 6330(c)(2)(A).   A

determination shall be made that shall take into consideration

those issues, and “whether any proposed collection action

balances the need for the efficient collection of taxes with the

legitimate concern of the person that any collection action be no

more intrusive than necessary.”     Sec. 6330(c)(3)(C).

     In the instant case, petitioners question whether the
                               - 12 -

Appeals Office failed to properly consider their proposed offer

in compromise.    We review respondent’s action for abuse of

discretion, on the basis of the arguments and information

available to the Appeals officer when the discretion was

exercised.    See Sego v. Commissioner, 114 T.C. at 610.

     The Appeals officer reviewed the financial information

provided to him by petitioners and determined that he was unable

to accept petitioners’ offer in compromise.    Specifically, the

Appeals officer’s determination was predicated on a financial

analysis of petitioners’ monthly income and expenses, assets, and

ability to pay, based on data provided by petitioners on Form

433-A.    Petitioners offered to pay $8,026 on a total liability

that as of March 24, 2003, was in excess of $21,000.    Respondent

concluded that the net realizable equity in petitioners’ assets

was considerably greater than the amount offered in compromise.

See Schenkel v. Commissioner, T.C. Memo. 2003-37.

     Based on financial information petitioners provided,

respondent rejected their offer in compromise.    We find this

action to be a reasonable exercise of discretion by respondent in

administering the offer in compromise program.

     E.      Conclusion

     There is no basis in the record for the Court to conclude

that respondent abused his discretion with respect to any of the
                              - 13 -

matters in issue.   Accordingly, for the reasons discussed above,

respondent’s determination to proceed by levy with the collection

of petitioners’ outstanding liability for 1991 should be

sustained, and we so hold.

     We have considered all of petitioners’ arguments and

contentions that are not discussed herein relating to whether

respondent may proceed with collection with respect to

petitioners’ outstanding liability for 1991, and we find those

arguments and contentions to be without merit and/or irrelevant.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To give effect to the foregoing,

                                         Decision will be entered

                                    for respondent.
