                         T.C. Summary Opinion 2014-114



                         UNITED STATES TAX COURT



 KENNETH JOHN MELIKIAN AND SHARON KAYE MELIKIAN, Petitioners
      v. COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 17257-13S L.                        Filed December 29, 2014.



      Kenneth John Melikian and Sharon Kaye Melikian, pro sese.

      John Chinnapongse and Connor J. Moran, for respondent.



                              SUMMARY OPINION


      KERRIGAN, Judge: This case was heard pursuant to the provisions of

section 7463 of the Internal Revenue Code in effect when the petition was filed.

Pursuant to section 7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent for any other case.
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      Unless otherwise indicated, all section references are to the Internal

Revenue Code in effect for the relevant times, and all Rule references are to the

Tax Court Rules of Practice and Procedure.

      This proceeding was commenced in response to a Notice of Determination

Concerning Collection Action(s) under Section 6320 and/or 6330 (notice of

determination) dated June 20, 2013. The issue for our consideration is whether

respondent may proceed with the collection action as determined.

                                    Background

      Petitioners resided in California when the petition was filed. Some of the

facts are stipulated and are so found.

      Petitioners’ liabilities at issue arise from income tax returns they filed for

tax years 2002, 2003, 2006, 2009, 2010, and 2011 (tax years at issue). On

December 18, 2012, respondent filed a notice of Federal tax lien (NFTL) and

issued petitioners a Letter 3172, Notice of Federal Tax Lien Filing and Notice of

Your Right to Hearing, for the tax years at issue. Petitioners sent respondent a

Form 12153, Request for a Collection Due Process or Equivalent Hearing, which

respondent received on January 25, 2013. Petitioners requested a collection due

process (CDP) hearing for the tax years at issue and requested that the NFTL be
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withdrawn because they had an installment agreement. Their request for a hearing

did not dispute the underlying tax liabilities.

      On April 3, 2013, the settlement officer sent petitioners a letter to schedule a

telephone CDP hearing for May 1, 2013. On May 21, 2013, the settlement officer

sent petitioners a letter detailing her attempts to contact them and requesting that

they submit by June 5, 2013, information that they wanted to be considered.

      On June 4, 2013, the settlement officer received by facsimile a letter from

petitioner husband requesting that the NFTL be withdrawn and a copy of a

December 12, 2012, letter from the Internal Revenue Service regarding

petitioners’ installment agreement. The December 12, 2012, letter states that

“[e]nforcement action could include filing a lien against your property.” On June

5, 2013, the settlement officer held a CDP hearing with petitioner husband, who

raised the issues of an NFTL’s being filed when there was an installment

agreement in place and also equitable estoppel.

      On June 20, 2013, the settlement officer issued the notice of determination

sustaining the NFTL. In deciding to sustain the NFTL, the settlement officer

noted that petitioners had defaulted on prior installment agreements. On July 29,

2013, petitioners filed a petition raising the issue of an NFTL’s being filed when
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there is an installment agreement. Petitioners also contended that respondent

should have been estopped from filing the NFTL.

      Petitioners do not dispute the underlying income tax liabilities for the tax

years at issue or the settlement officer’s verification of compliance with applicable

law and administrative procedure.

                                     Discussion

      Section 6320(a)(1) requires the Secretary to provide written notice to a

taxpayer when the Secretary has filed an NFTL against the taxpayer’s property and

property rights. See secs. 6321, 6323. Additionally the Secretary must notify the

taxpayer of his or her right to a CDP hearing. Sec. 6320(a)(3).

      Where the validity of the underlying tax liability is properly in issue, we

review the underlying tax liability de novo. Sego v. Commissioner, 114 T.C. 604,

610 (2000); Goza v. Commissioner, 114 T.C. 176, 182 (2000). In cases such as

this where there is no challenge to the underlying liability, the Court reviews

administrative determinations by the Appeals Office regarding nonliability issues

for abuse of discretion. Hoyle v. Commissioner, 131 T.C. 197, 200 (2008); Goza

v. Commissioner, 114 T.C. at 182. In determining abuse of discretion, we

consider whether the determination was arbitrary, capricious, or without sound

basis in fact or law. See, e.g., Murphy v. Commissioner, 125 T.C. 301, 320
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(2005), aff’d, 469 F.3d 27 (1st Cir. 2006); Woodral v. Commissioner, 112 T.C. 19,

23 (1999). The Court does not conduct an independent review and substitute its

judgment for that of the settlement officer. Murphy v. Commissioner, 125 T.C. at

320. If the settlement officer follows all statutory and administrative guidelines

and provides a reasoned, balanced decision, the Court will not reweigh the

equities. Link v. Commissioner, T.C. Memo. 2013-53, at *12.

      Following a CDP hearing the settlement officer must determine whether to

sustain the filing of the NFTL. In making that determination, the settlement

officer is required by section 6330(c)(3) to consider: (1) whether the requirements

of any applicable law or administrative procedure have been met; (2) any issues

appropriately raised by the taxpayer; and (3) whether the proposed collection

action balances the need for the efficient collection of taxes and the legitimate

concern of the taxpayer that any collection action be no more intrusive than

necessary. Lunsford v. Commissioner, 117 T.C. 183, 184 (2001); Diamond v.

Commissioner, T.C. Memo. 2012-90, slip op. at 6-7; see also sec. 6320(c).

      Section 6323(j)(1) provides:

             (1) In general.--The Secretary may withdraw a notice of a lien
      filed under this section and this chapter shall be applied as if the
      withdrawn notice had not been filed, if the Secretary determines that--
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                    (A) the filing of such notice was premature or otherwise
             not in accordance with administrative procedures of the
             Secretary,

                   (B) the taxpayer has entered into an agreement under
             section 6159 to satisfy the tax liability for which the lien was
             imposed by means of installment payments, unless such
             agreement provides otherwise,

                    (C) the withdrawal of such notice will facilitate the
             collection of the tax liability, or

                   (D) with the consent of the taxpayer or the National
             Taxpayer Advocate, the withdrawal of such notice would be in
             the best interest of the taxpayer (as determined by the National
             Taxpayer Advocate) and the United States.

      Petitioners did not dispute that they had defaulted on their installment

agreements. Respondent contends that the NFTL was filed to protect the

Government’s interest.

      Petitioners contend that they were told that if they remained in compliance

in regard to their installment agreement, an NFTL would not be filed. Petitioners

further contend that respondent was estopped from filing the NFTL. Even though

petitioner husband raised the issue of equitable estoppel at the CDP hearing, he

testified that the issue was not addressed and the settlement officer appeared not to

understand the concept.
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Abuse of Discretion

      Entering into an installment agreement does not preclude the filing of an

NFTL. Crisan v. Commissioner, T.C. Memo. 2007-67, slip op. at 7. Section

6323(j)(1) is permissive. Id. The Commissioner may withdraw an NFTL pursuant

to section 6323(j)(1), but respondent’s failure to do so in this case is not an abuse

of discretion. See id. Petitioners did not produce any evidence to support their

contention that the filing of the NFTL would impair their ability to pay their

outstanding tax liabilities. Respondent filed the NFTL to protect the

Government’s interest.

      The December 12, 2012, letter states that a lien is a method of enforcement

and does not state that an NFTL would not be filed because there is an installment

agreement. We have held that it is not an abuse of discretion for a settlement

officer to refuse to withdraw an NFTL filing because the taxpayers have an

installment agreement. Karakaedos v. Commissioner, T.C. Memo. 2012-53.

      On the basis of the facts presented, the Court holds that respondent did not

abuse his discretion in sustaining the filing of the NFTL.

Equitable Estoppel

      Equitable estoppel is a judicial doctrine that precludes a party from denying

its own representations which induced another to act to his or her detriment.
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Hofstetter v. Commissioner, 98 T.C. 695, 700 (1992). This Court has recognized

that estoppel is applied against the Commissioner “‘with utmost caution and

restraint.’” Id. (quoting Estate of Emerson v. Commissioner, 67 T.C. 612, 617

(1977)).

      The taxpayer must establish the following elements before equitable

estoppel will be applied against the Government: (1) a false representation or

wrongful, misleading silence by the party against whom estoppel is claimed; (2) an

error in statement of fact and not in an opinion or statement of law; (3) ignorance

of the true facts; (4) the taxpayer’s reasonable reliance on the acts or statements of

the one who against whom estoppel is claimed; and (5) adverse effects suffered by

the taxpayer from the acts or statements of the one against whom estoppel is

claimed. Norfolk S. Corp. v. Commissioner, 104 T.C. 13, 60 (1995), aff’d, 140

F.3d 240 (4th Cir. 1998). Estoppel requires a finding that the taxpayer relied on

the Government’s representations and suffered a detriment because of the reliance.

Id.

      The U.S. Court of Appeals for the Ninth Circuit, to which an appeal in this

case would lie but for section 7463(b), requires the party seeking to apply the

doctrine against the Government to prove affirmative misconduct. Purcell v.

United States, 1 F.3d 932, 939 (9th Cir. 1993). Affirmative misconduct requires
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“‘ongoing active misrepresentations’” or a “‘pervasive pattern of false promises’”,

as opposed to an isolated act of misinformation. Id. at 940 (quoting S & M Inv.

Co. v. Tahoe Reg’l Planning Agency, 911 F.2d 324, 329 (9th Cir. 1990)).

Regardless of whether petitioner husband was able to fully discuss this issue at his

CDP hearing, there was no affirmative misconduct.

      Petitioners suffered no detriment that is legally recognizable. See Fincourt

B Shelton PC v. Commissioner, T.C. Memo. 2013-273. Petitioners did not change

a position to their detriment. See Reuben v. Commissioner, T.C. Memo. 2001-

193. Accordingly, we hold that equitable estoppel should not be applied against

respondent.

      We have considered all arguments made by the parties, and to the extent not

mentioned or addressed, they are irrelevant or without merit.

      To reflect the foregoing,


                                              Decision will be entered for

                                       respondent.
