                              T.C. Memo. 2018-211



                         UNITED STATES TAX COURT



               JAMES ANTHONY RANSOM, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 22420-17L.                        Filed December 26, 2018.



      James Anthony Ransom, pro se.

      William J. Gregg and Bartholomew Cirenza, for respondent.



                           MEMORANDUM OPINION


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

seeks review pursuant to section 6330(d)(1)1 of the determination by the Internal

Revenue Service (IRS or respondent) to uphold a notice of intent to levy. Respon-


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

[*2] dent 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 action 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 declarations and exhibits. Petitioner resided in the District

of Columbia when he filed his petition.

      Petitioner is a contractor for nonprofit organizations, frequently working

abroad in such remote locations as South Sudan. He filed Federal income tax re-

turns for 2012, 2013, and 2015. For 2012 and 2013 the IRS issued him notices of

deficiency. When he did not petition this Court within 90 days of those notices,

the IRS assessed his tax liabilities for those years, including interest and (where

applicable) additions to tax. For 2015 the IRS assessed the tax shown on petition-

er’s return, which he has not paid in full. As of March 2017 petitioner’s aggregate

outstanding liability was $88,418.2


      2
       This amount included accuracy-related penalties under section 6662(a) for
2012 and 2013. Respondent represents that the IRS will abate those penalties be-
cause he lacks evidence that the penalties received supervisory approval as re-
quired by section 6751(b).
                                        -3-

[*3] On March 16, 2017, in an effort to collect these unpaid liabilities, the IRS

mailed petitioner a Letter 11, Notice of Intent to Levy and Notice of Your Right to

a Hearing. He timely requested a CDP hearing, checking the box for “Installment

Agreement.” (He also checked the box for “lien withdrawal,” but the IRS had not

filed an NFTL for any relevant year.) Petitioner stated that he “did not owe the

full amount for 2012” and that he had “filed modifications to that return with no

acknowledgment or review by [the] IRS.”3

      After receiving petitioner’s case a settlement officer (SO) from the IRS Ap-

peals Office confirmed that the tax liabilities had been properly assessed and that

all other requirements of applicable law and administrative procedure had been

met. On July 11, 2017, the SO sent petitioner a letter acknowledging receipt of his

hearing request and scheduled a telephone CDP hearing for August 18, 2017.

      The SO informed petitioner that he could not challenge his 2012 and 2013

tax liabilities because he had had a prior opportunity to do so when he received

notices of deficiency for those years. The SO explained that petitioner needed to

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


      3
        This statement appears to refer to a Form 1040X, Amended U.S. Individual
Income Tax Return, for 2012, which petitioner filed in March 2017. At the time
this case was assigned to a settlement officer, the IRS had not yet processed that
return.
                                         -4-

[*4] Employed Individuals, with supporting financial information if he wished the

SO to consider a collection alternative. The SO ascertained upon review of

petitioner’s account that he was earning self-employment income in 2017 but had

made no estimated tax payments. The SO informed petitioner that to be eligible

for a collection alternative he would need to pay $11,278 towards his 2017

account immediately. The SO requested that he submit this payment and the

requested financial information by August 11, 2017.

      Petitioner did not submit the information or the payment before the hearing.

The telephone conference was held as scheduled on August 18, 2017. Petitioner

stated that he wished to reinstate a previous installment agreement that had been

terminated on June 27, 2016. The SO replied that this might be possible but that

petitioner would first need to submit the required financial information and be-

come current on his 2017 estimated tax liability. In light of petitioner’s travel

schedule, the SO agreed to extend for one month, to September 16, 2017, the

deadline for submitting the payment and the Form 433-A documentation.

      On August 21, 2017, the SO received petitioner’s Form 433-A and support-

ing information. On August 28, 2017, petitioner made a partial payment of $2,500

towards his 2017 estimated tax liability, leaving a balance due of $14,417 as of
                                       -5-

[*5] September 15, 2017.4 Petitioner made no further payments towards that

balance due.

      Because petitioner had failed to come into compliance with his 2017 esti-

mated tax obligation, the SO determined that he was not eligible for a collection

alternative at that time. The SO accordingly closed the case and, on September 28,

2017, issued a notice of determination sustaining the proposed levy. Following

petitioner’s timely petition to this Court, respondent filed a motion for summary

judgment, to which petitioner has responded.

                                    Discussion

I.    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

      4
        Another quarter had passed since the SO had initially communicated with
petitioner, bringing his total estimated tax liability to $16,917. After he paid
$2,500, there remained a balance of $14,417.
                                         -6-

[*6] 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); see Sundstrand Corp., 98 T.C. at 520. We conclude that there are no

material facts in dispute and that this case is appropriate for summary adjudication.

II.   Standard of Review

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

review this Court should apply in reviewing an IRS administrative determination

in a CDP case. But our case law tells us what standard to adopt. Where the valid-

ity of the taxpayer’s underlying tax liability is properly at issue, we review the

IRS’ determination de novo. Goza v. Commissioner, 114 T.C. 176, 181-182

(2000). Where the taxpayer’s underlying liability is not before us, we review the

IRS’ decision for abuse of discretion only. See id. at 182.

      A taxpayer may dispute his underlying liability in a CDP case if he did not

receive a valid notice of deficiency or otherwise have a prior opportunity to con-

test his liability. Sec. 6330(c)(2)(B). A notice of deficiency is valid if it was

properly mailed to the taxpayer at his last known address. Sec. 6212(b)(1); Hoyle

v. Commissioner, 131 T.C. 197, 200, 203-204 (2008), supplemented by 136 T.C.

463 (2011). A taxpayer’s last known address is generally the address appearing on
                                          -7-

[*7] his “most recently filed and properly processed Federal tax return.” Sec.

301.6212-2(a), Proced. & Admin Regs. Even if improperly addressed, a notice of

deficiency is valid if it is actually received by the taxpayer in time to file a petition

to this Court. See Bongam v. Commissioner, 146 T.C. 52, 56-57 (2016).

      Petitioner at the CDP hearing did not challenge his underlying liability for

2013 or 2015 and is thus precluded from challenging those liabilities now. See

sec. 6330(c)(2)(B); Giamelli v. Commissioner, 129 T.C. 107, 115 (2007); Sego v.

Commissioner, 114 T.C. 604, 609 (2000); sec. 301.6330-1(e)(3), Q&A-E2, Pro-

ced. & Admin. Regs. In his response to the motion for summary judgment, peti-

tioner appears to advance a challenge to his underlying tax liability for 2012 by as-

serting that the notice of deficiency for that year was incorrectly addressed. But

the address appearing on that notice is identical to the address appearing on peti-

tioner’s 2013 tax return (his most recently filed tax return as of the date that notice

was mailed).

      The IRS has supplied a copy of a completed U.S. Postal Service Form 3877

showing that the notice of deficiency for 2012 was sent to the address appearing

on petitioner’s 2013 return. This notice was thus properly mailed to him at his last

known address. See Crain v. Commissioner, T.C. Memo. 2012-97, 103 T.C.M.

(CCH) 1533, 1535. He did not allege in his CDP hearing request, during the CDP
                                         -8-

[*8] hearing, or in his petition to this Court that he did not receive this notice. He

was therefore precluded from challenging his 2012 tax liability at the CDP hearing

and in this Court. See sec. 6330(c)(2)(B); Giamelli, 129 T.C. at 115.5

       Because petitioner’s underlying tax liabilities are not properly before us, we

review the SO’s action for abuse of discretion only. Goza, 114 T.C. at 182; sec.

301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs. 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).

III.   Analysis

       In deciding whether the SO abused his discretion in sustaining the proposed

levy, we consider whether he: (1) properly verified that the requirements of any

applicable law or administrative procedure have been met, (2) considered any rele-

vant issues petitioner raised, and (3) determined whether “any proposed collection


       5
        Petitioner appears to have filed, in March 2017, an amended 2012 return
with an IRS service center. The IRS had not processed this return at the time of
the CDP hearing, and petitioner does not allege that he supplied a copy of the
amended return to the SO. But whether he did or not would be irrelevant because
his receipt of a notice of deficiency precluded him from challenging his underlying
liability. If petitioner believes he is entitled to a refund for 2012, he must litigate
that claim through a refund suit. See Weber v. Commissioner, 138 T.C. 348, 366-
367 (2012).
                                         -9-

[*9] 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 the SO properly discharged all of his responsibilities under section

6330(c).

      In concluding that petitioner was not eligible for a collection alternative, the

SO relied on petitioner’s failure to pay in full his estimated tax liability for 2017.

The SO clearly informed petitioner of the need to make that payment, but he paid

only $2,500 toward his liability of $16,917. Petitioner contends that he was un-

able to discharge this liability in full because one of his consulting contracts termi-

nated on August 31, 2017. But the termination of that contract postdated the CDP

hearing by two weeks; petitioner has not shown that he was incapable of making

the required estimated tax payments during the previous eight months.

      We have consistently held that an SO does not abuse his discretion when he

declines to consider collection alternatives for a taxpayer who fails to comply with

current estimated tax obligations. See Giamelli, 129 T.C. at 111-112; Starkman v.

Commissioner, T.C. Memo. 2012-236; Internal Revenue Manual pt. 5.14.1.4.1(19)

(Sept. 26, 2008) (“Compliance with filing * * * [and] paying estimated taxes * * *

must be current from the date the installment agreement begins.”). “[A]lthough
                                         - 10 -

[*10] * * * [an SO] could accept an installment agreement that included

petitioner’s current estimated tax liabilities, she acted within her discretion in

declining to do so.” Boulware v. Commissioner, T.C. Memo. 2014-80, 107

T.C.M. (CCH) 1419, 1425, aff’d, 816 F.3d 133 (D.C. Cir. 2016). The requirement

of current compliance as a condition of executing an installment agreement

“ensures that current taxes are paid and avoids ‘the risk of pyramiding liability.’”

Hull v. Commissioner, T.C. Memo. 2015-86, 109 T.C.M. (CCH) 1438, 1441

(quoting Schwartz v. Commissioner, T.C. Memo. 2007-155); see Orum v.

Commissioner, 412 F.3d 819 (7th Cir. 2005), aff’g 123 T.C. 1 (2004).

      Finding no abuse of discretion in any respect, we will grant summary judg-

ment for respondent and affirm the proposed collection action.


                                                  An appropriate order and decision

                                        will be entered.
