                         T.C. Memo. 2006-151



                       UNITED STATES TAX COURT



                    GREGORY DRAKE, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent*



     Docket No. 20454-03L.             Filed July 24, 2006.



     Timothy J. Burke, for petitioner.

     Louise R. Forbes, for respondent.



         SUPPLEMENTAL MEMORANDUM FINDINGS OF FACT AND OPINION


     WELLS, Judge:    The instant case relates to the

administrative hearing and determination of respondent’s Appeals

Office pursuant to section 6330 with respect to petitioner’s




     *
      This opinion supplements Drake v. Commissioner, 125 T.C.
201 (2005).
                                   - 2 -

1991, 1992, 1994, 1995, and 1997 tax years.1       On October 12,

2005, we filed the initial opinion in this case, Drake v.

Commissioner, 125 T.C. 201 (Drake I).        In Drake I, we concluded

that a memorandum received by the settlement officer assigned to

conduct petitioner’s administrative hearing under section 6330

(section 6330 hearing) constituted a prohibited ex parte

communication which may have damaged petitioner’s credibility

before respondent’s Appeals Office.        Consequently, we held that

respondent’s Appeals officer abused his discretion in determining

that the proposed levy against petitioner should be sustained.

We retained jurisdiction of the case and remanded it to

respondent’s Appeals Office for a new section 6330 hearing with

an independent Appeals officer who had received no communication

relating to the credibility of petitioner or petitioner’s

representative.      On November 17, 2005, petitioner filed a motion

for litigation costs and fees pursuant to section 7430 and Rule

231.       In accordance with an order of this Court, a newly assigned

Appeals officer conducted a new section 6330 hearing with

petitioner (the section 6330 hearing on remand).       On March 13,

2006, respondent’s Appeals Office issued a notice of

determination, sustaining the proposed collection action against




       1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
                                 - 3 -

petitioner.   On April 13, 2006, petitioner filed a “Motion to

Compel Settlement”.

      The issues to be decided are (1) whether the ultimate

determination of respondent’s Appeals Office to sustain the

proposed collection action is an abuse of discretion; (2) whether

to grant or deny petitioner’s “Motion to Compel Settlement”; and

(3) whether petitioner is entitled to an award of costs and fees

pursuant to section 7430.

                            FINDINGS OF FACT

I.    General Background

      Some of the underlying facts of this case are set forth in

Drake I, and we incorporate by reference the portions of Drake I

that are relevant to our disposition of the instant case.

      Petitioner Gregory Drake and Barbara Drake are husband and

wife.   At the time of the filing of the petition, petitioner

resided in South Yarmouth, Massachusetts.

II.   The 1997 Bankruptcy

      As of August 19, 1997, respondent had filed Notices of

Federal Tax Lien against petitioner for income tax liabilities

for 1991, 1992, and 1995.     On that date, Barbara Drake and

petitioner filed a joint bankruptcy petition under chapter 13 of

the Bankruptcy Code with the U.S. Bankruptcy Court for the

District of Massachusetts.     Thereafter, respondent filed a proof

of claim with respect to the unpaid Federal income tax
                                 - 4 -

liabilities of Barbara Drake and petitioner.   During the 1997

bankruptcy proceeding, Barbara Drake and petitioner received

authority to sell three properties which were subject to Federal

tax liens.   The sale yielded $161,250.65, and a Federal tax lien

attached to the sale proceeds.

     Subsequently, the bankruptcy trustee filed a motion to

dismiss the case for failure to file a repayment plan, and

Barbara Drake and petitioner filed a Motion for Authority to

Disburse Funds.   The bankruptcy court granted the motion to

dismiss and issued an order mooting the Motion for Authority to

Disburse Funds.   Upon the dismissal of the case on June 30, 1999,

Neal E. Satran (Mr. Satran), the attorney representing Barbara

Drake and petitioner in the 1997 bankruptcy, distributed to

Barbara Drake and petitioner sale proceeds in the amount of

$151,139.74 (the 1997 bankruptcy sale proceeds).2   Petitioner

gratuitously transferred the 1997 bankruptcy sale proceeds to his

sons, Darren Drake and Gregory Drake, who placed the proceeds in

a joint personal brokerage account under their names.3   At no


     2
      This amount represents the $161,250.65 received from the
bankruptcy sale, less attorney’s fees and expenses.
     3
      The parties stipulated as follows: “Petitioner gifted the
proceeds, or $151,139.74, from [the 1997] bankruptcy proceeding
to his sons, Darren Drake and Gregory Drake, Jr.” We note,
however, that the record otherwise suggests that petitioner
gratuitously transferred only $150,000 of the proceeds to his
sons. To the extent that the parties are unable to hereinafter
reconcile this apparent contradiction, based on the
                                                    (continued...)
                               - 5 -

time were the 1997 bankruptcy sale proceeds commingled with other

funds.   On October 6, 1999, Notices of Federal Tax Lien were

filed against Barbara Drake and petitioner with respect to their

1994, 1995, and 1997 tax years.

     On January 10, 2000, respondent issued computer-generated

notices of outstanding income tax liabilities to Barbara Drake

and petitioner.   On January 14, 2000, respondent received from

Barbara Drake and petitioner a Form 433-A, Collection Information

Statement for Individuals (collection information statement).     On

the collection information statement, no response was provided to

the question of whether assets had recently been sold or

otherwise transferred for less than their full value.

III. The Initial Section 6330 Hearing

     On July 19, 2000, respondent mailed to Barbara Drake and

petitioner a Final Notice, Notice of Intent to Levy and Notice of

Your Right to a Hearing, with respect to their 1991, 1992, 1994,

1995, and 1997 tax years.   The notice asserted an unpaid tax of

$121,478.17 and penalties and interest of $88,607.27.   Pursuant

to a power of attorney, Timothy J. Burke (Mr. Burke) timely

requested a section 6330 hearing on behalf of Barbara Drake and

petitioner.   Subsequently, on behalf of Barbara Drake, Mr. Burke

submitted a Form 8857, requesting relief from joint and several


     3
      (...continued)
aforementioned stipulation, the Court finds that petitioner
gratuitously transferred the entire $151,139.74 to his sons.
                               - 6 -

liability pursuant to section 6015 for each of the years in

dispute.   We discuss Barbara Drake’s request for section 6015

relief in greater detail below.

A.   Proceedings Before Settlement Officer O’Shea

     Settlement Officer Eugene O’Shea was assigned to conduct the

requested section 6330 hearing, and he determined from Internal

Revenue Service (IRS) records that petitioner had previously

filed for bankruptcy protection.   On January 30, 2002, prior to

the section 6330 hearing, Settlement Officer O’Shea conferred

with Advisor Sid Gordon of the Internal Revenue Service

Insolvency Unit (Advisor Gordon) regarding the 1997 bankruptcy

and requested related documentation.   On the same date, Advisor

Gordon faxed to Settlement Officer O’Shea a copy of Advisor

Gordon’s prior memorandum to respondent’s counsel Louise R.

Forbes (Attorney Forbes).   In the memorandum, dated October 5,

1999, Advisor Gordon stated that the 1997 bankruptcy sale

proceeds had been distributed to Barbara Drake and petitioner,

that the proceeds should have been distributed to the creditors

of Barbara Drake and petitioner, and that Advisor Gordon believed

that Mr. Satran and petitioner had “used the Court to bypass the

Federal tax Lien.”   The memorandum further stated:

          According to the settlement sheets the debtor
     received $161,094.73 from the three sales. Although
     the Bankruptcy Court approved the sales under 11 USC
     363 the IRS received nothing. Attorney Satran had
     knowledge of the Internal Revenue Service Federal Tax
     Liens due to the considerable litigation involved in
                               - 7 -

     this case. In fact Attorney Satran filed a motion with
     the Court to disburse the funds including [sic] the IRS
     liens. It is a mockery to the integrity [of the]
     Bankruptcy Court if an Attorney can use it to defeat a
     Federal Tax Lien allowing a Debtor to walk away with
     the proceeds. The Bankruptcy Code was used because 11
     USC 363 was authorized by the Court.

          I informed Attorney Campobasso that Attorney
     Satran had previously been suspended by the Bankruptcy
     Court. Chief, US Bankruptcy Court Judge Carol J Keener
     suspended attorney Satran from 01/30/1996 through
     11/29/1996. The action of Attorney Satran in a chapter
     11 case [involving] Paula Wyner, Carlton House of
     Brockton, Inc. was the cause of the suspension. I
     think the Court should be informed of the conduct of
     Attorney Satran in this case.

     On January 30, 2002, Mr. Burke attended a meeting with

Settlement Officer O’Shea on behalf of both Barbara Drake and

petitioner.   At the meeting, Settlement Officer O’Shea did not

inform Mr. Burke of his communications with Advisor Gordon.      Mr.

Burke provided a copy of a collection information statement

signed by petitioner on January 24, 2002.4   On the collection

information statement, petitioner stated that he had not

transferred any assets out of his name for less than their actual

value in the last 10 years.   A Form 656, Offer-in-Compromise

(offer-in-compromise form), had been completed but was not

submitted to Settlement Officer O’Shea for consideration.

Petitioner concedes that the parties informally suspended

consideration of any offer-in-compromise pending a determination



     4
      Barbara Drake was not listed as a taxpayer and did not sign
the form.
                                - 8 -

of Barbara Drake’s request for section 6015 relief, which would

influence whether petitioner filed an individual offer-in-

compromise or a joint offer-in-compromise.

     On September 4, 2002, petitioner submitted to respondent’s

Appeals Office an “amended” offer-in-compromise form.   The

amended offer-in-compromise listed petitioner alone as the

taxpayer and offered to pay $5,500 in satisfaction of

petitioner’s tax liabilities for 1991, 1992, 1993, 1994, 1995,

1997, and 1999.   In a letter to Mr. Burke dated September 4,

2002, Settlement Officer O’Shea acknowledged receiving the

amended offer-in-compromise but noted that consideration of the

original offer-in-compromise had been informally suspended by the

parties pending the determination of Barbara Drake’s request for

section 6015 relief.   Accordingly, Settlement Officer O’Shea

informed Mr. Burke that no original offer-in-compromise had been

submitted for consideration and returned the amended offer-in-

compromise to Mr. Burke.    Petitioner concedes that the reason for

returning the amended offer-in-compromise form was to avoid any

administrative confusion.

B.   Proceedings Before Appeals Officer Kaplan

     On January 17, 2003, the section 6330 matter was transferred

from Settlement Officer O’Shea to Appeals Officer Jeffrey Kaplan,

who had been assigned to the administrative appeal of Barbara

Drake’s request for section 6015 relief.   Appeals Officer Kaplan
                                - 9 -

subsequently advised Mr. Burke that no offer-in-compromise was

presently before the Appeals Office, as no original offer-in-

compromise had been submitted for consideration and the amended

offer-in-compromise had been returned to Mr. Burke.   Appeals

Officer Kaplan informed Mr. Burke that any offer-in-compromise

should be larger than the $5,500 amended offer-in-compromise

submitted on September 4, 2002.   Appeals Officer Kaplan also

noted that the former residence of Barbara Drake and petitioner

was now owned by their son and that the transfer appeared

questionable.

     In a conversation on June 16, 2003, Mr. Burke informed

Appeals Officer Kaplan that Darren Drake, the son of Barbara

Drake and petitioner, had foreclosed upon and bought petitioner’s

house.    Appeals Officer Kaplan requested documentation related to

the foreclosure and transfer.

     In a letter dated July 2, 2003, Appeals Officer Kaplan made

the following request, reproduced verbatim, for the production of

documents:

     1.    Documentation regarding what was done with the
           funds received by the taxpayers from the sale of
           property as part of their bankruptcy proceedings,
           along with how much was actually received.

     2.    Documentation of the value of the property located
           at 40 Keel Cape Drive, South Yarmouth, MA, prior
           to the foreclosure.

     3.    Documentation of the foreclosure.
                                - 10 -

     4.      Documentation regarding the amount owed on the
             mortgage by the taxpayers at the time of the
             foreclosure.

     5.      Documentation regarding the entity that acquired
             the mortgage from the prior mortgage holder prior
             to the foreclosure.

     6.      Copies of the mortgage.

     7.      Documentation of the acquisition of the property
             by Darren Drake.

     8.      An updated Collection Information Statement for
             Mr. and Mrs. Drake.

     9.      Completed Offer-in-Compromise Questionnaire.

     10.     An updated Collection Information Statement for
             their businesses.

Appeals Officer Kaplan informed Mr. Burke that he would make a

determination pursuant to section 6330 (section 6330

determination) based on information already within his possession

unless Mr. Burke submitted the requested documents by July 30,

2003.     In addition, Appeals Officer Kaplan informed Mr. Burke

that any offer-in-compromise should also be submitted.      In August

of 2003, Mr. Burke provided respondent’s Appeals Office with a

portion of the requested documents but did not submit

documentation related to the 1997 bankruptcy sale proceeds.      On

August 26, 2003, Appeals Officer Kaplan informed Mr. Burke that

he had not received all of the requested information.       Again, on

September 16, 2003, Appeals Officer Kaplan verbally reminded Mr.

Burke that all of the requested information had not been received

by respondent.
                               - 11 -

     On September 30, 2003, Barbara Drake filed a bankruptcy

petition under chapter 13 of the Bankruptcy Code with the U.S.

Bankruptcy Court for the District of Massachusetts.5   We discuss

the 2003 bankruptcy in greater detail below.   In October of 2003,

Mr. Burke advised Appeals Officer Kaplan that Barbara Drake had

filed a bankruptcy petition under chapter 13 of the Bankruptcy

Code, that the automatic stay of 11 U.S.C. sec. 362 (2000)

applied to petitioner as well as Barbara Drake, and that 11

U.S.C. sec. 1301 precluded any collection action against either

Barbara Drake or petitioner.   On October 27, 2003, Appeals

Officer Kaplan requested legal advice from Attorney Forbes

concerning the preclusion of any collection action against

petitioner.   Attorney Forbes advised that 11 U.S.C. sec. 1301 did

not preclude the collection action against petitioner.

Consequently, on October 27, 2003, Appeals Officer Kaplan advised

Mr. Burke that the collection action could and would proceed

against petitioner.   Additionally, Appeals Officer Kaplan advised

Mr. Burke that information previously requested had not been

received by the Appeals Office and that the Appeals Office would



     5
      The 2003 bankruptcy petition filed by Barbara Drake should
not be confused with the earlier joint bankruptcy petition filed
by Barbara Drake and petitioner and dismissed on June 30, 1999,
for failure to file a repayment plan. The latter bankruptcy
petition is described above with respect to the 1997 bankruptcy.
We note that Barbara Drake subsequently converted the 2003
bankruptcy from ch. 13 to ch. 7. In re Drake, 336 Bankr. 155,
156 (Bankr. D. Mass. 2006).
                                - 12 -

close the case and issue a determination based on information

already in its possession unless Mr. Burke submitted the

information immediately.     Appeals Officer Kaplan did not receive

the requested information and closed the case file on October 29,

2003.

C.    The Original Notice of Determination

        On November 10, 2003, respondent’s Appeals Office issued

petitioner a section 6330 determination (the original notice of

determination), determining that all statutory administrative and

procedural requirements had been met and that available

information did not establish that an offer-in-compromise was a

viable collection alternative.     The original notice of

determination did not purport to make a determination with

respect to Barbara Drake.     Petitioner timely petitioned this

Court for judicial review of the original notice of

determination.     Both the petition and a subsequently filed

amended petition named Gregory Drake, alone, as the petitioner,

and Mr. Burke signed both documents on behalf of only Gregory

Drake.     Neither the petition nor the amended petition purported

to be filed on behalf of Barbara Drake.

IV.     Drake I

        As discussed above, in Drake I, we held that the

communication between Advisor Gordon and Settlement Officer

O’Shea on January 30, 2002, constituted a prohibited ex parte
                               - 13 -

communication pursuant to Rev. Proc. 2000-43, 2000-2 C.B. 404,

which may have damaged petitioner’s credibility before Settlement

Officer O’Shea and Appeals Officer Kaplan.   Accordingly, we held

that Appeals Officer Kaplan abused his discretion in sustaining

the proposed collection action.   We retained jurisdiction of the

case and remanded it to respondent’s Appeals Office for a new

section 6330 hearing with an independent Appeals officer who had

received no communication relating to the credibility of

petitioner or petitioner’s representative.   Because we remanded

the case for a new hearing, we did not address petitioner’s

remaining contentions, which are discussed below.

V.    Petitioner’s Motion for Litigation Costs

      On November 17, 2005, petitioner filed a motion for

litigation costs and fees pursuant to section 7430 and Rule 231.

With the motion, petitioner submitted the affidavit of Mr. Burke,

the affidavit of Mr. Burke’s associate Melissa Halbig, and

related billing records.   On December 22, 2005, respondent filed

a response to petitioner’s motion for litigation costs and fees.

VI.   Barbara Drake’s Request for Section 6015 Relief

      On August 30, 2000, respondent received Barbara Drake’s

aforementioned request for section 6015 relief.   Respondent

denied Barbara Drake’s request for section 6015 relief on

February 5, 2002, and she appealed the determination to

respondent’s Appeals Office.   The Appeals Office assigned to the
                               - 14 -

case Appeals Officer Kaplan, who was subsequently assigned to the

section 6330 hearing of Barbara Drake and petitioner.      On January

29, 2004, respondent’s Appeals Office sent Barbara Drake a Final

Notice of Determination Concerning Your Request for Relief from

Joint and Several Liability under Section 6015 (the section 6015

determination), denying the requested relief.    Barbara Drake

subsequently filed with this Court a Petition for Relief from

Joint and Several Liability (the section 6015 petition),

challenging the section 6015 determination.     Drake v.

Commissioner, 123 T.C. 320, 321-322 (2004).

     At the time that Barbara Drake filed the section 6015

petition, the 2003 bankruptcy had been neither closed nor

dismissed.   Id. at 322.   Furthermore, the bankruptcy court had

neither granted nor denied Barbara Drake a discharge.      Id.

Consequently, we granted respondent’s motion to dismiss Barbara

Drake’s section 6015 case on the ground that she filed the

section 6015 petition in violation of the automatic stay imposed

under 11 U.S.C. sec. 362(a)(8)(2000).    Id. at 325.

VII. The 2003 Bankruptcy

     The aforementioned 2003 bankruptcy commenced with the filing

of Barbara Drake’s chapter 13 petition on September 30, 2003.

See 11 U.S.C. sec. 301(a)(2000).   Schedule D of Barbara Drake’s

bankruptcy petition listed, inter alia, a secured lien of the
                               - 15 -

Internal Revenue Service (IRS) in the amount of $270,295.76.         In

re Drake, 336 Bankr. 155, 156 (Bankr. D. Mass. 2006).      In

November of 2003, the IRS filed a proof of claim with the

bankruptcy court.   Id.   Barbara Drake filed an objection,

contending that she was entitled to section 6015 relief with

respect to the years listed in the proof of claim.     Id.      In

December of 2004, Barbara Drake was discharged from bankruptcy.

Id.   Subsequently, Barbara Drake filed with the bankruptcy court

a “Motion to Request the Determination of a Tax Liability”.6         Id.

The IRS moved to dismiss Barbara Drake’s motion.     Id.

      The bankruptcy court held sua sponte that respondent’s

Appeals Office had issued the section 6015 determination in

violation of the automatic stay of 11 U.S.C. sec. 362(a)(1).7

Id. at 159.   Because Barbara Drake had been discharged from

bankruptcy subsequent to the issuance of the section 6015

determination, however, the bankruptcy court concluded that the

automatic stay no longer bars administrative action under section




      6
      Barbara Drake filed the aforementioned motion soon after
the Tax Court dismissed her sec. 6015 case for lack of
jurisdiction in Drake v. Commissioner, 123 T.C. 320 (2004).
      7
      Although we held in Drake v. Commissioner, 123 T.C. at 325,
that Barbara Drake filed the sec. 6015 petition in violation of
the automatic stay imposed under 11 U.S.C. sec. 362(a)(8)(2000),
we did not address explicitly whether the sec. 6015 determination
also violated the automatic stay.
                               - 16 -

6015.8   Id. at 160.   Consequently, rather than deciding Barbara

Drake’s section 6015 request, the bankruptcy court decided that

the “interests of justice are better served by allowing * * *

[Barbara Drake’s] appeal to proceed at the IRS.”    Id.   On May 16,

2006, the bankruptcy court denied a motion for reconsideration

filed by the United States.    On May 30, 2006, the United States

filed a Notice of Appeal to the U.S. District Court for the

District of Massachusetts.

VIII. The Section 6330 Hearing on Remand

     On October 17, 2005, in accordance with our holding in Drake

I, we ordered respondent to offer petitioner a new section 6330

hearing with an independent Appeals officer on a date no later

than November 10, 2005.    In addition, we ordered the parties to

each file with the Court a status report no later than January 6,

2006.

A.   Proceedings Before Appeals Officer Kramer

     On behalf of petitioner, Mr. Burke met with Appeals Officer

Linda Kramer at the IRS Appeals Office in Boston, Massachusetts,

on November 4, 2005.    Appeals Officer Kramer had no prior

involvement with petitioner and had received no communication

relating to the credibility of petitioner or petitioner’s



     8
      In addition, the bankruptcy court noted that there were no
assets to be administered and the property subject to the IRS
lien was no longer the property of the bankruptcy estate. In re
Drake, 336 Bankr. at 160.
                              - 17 -

representative.9   At the conclusion of the aforementioned

conference, respondent’s Associate Area Counsel John V. Cardone

(Attorney Cardone) met with Mr. Burke and Appeals Officer Kramer

to discuss the possibility of an offer-in-compromise.10   On

behalf of petitioner, Mr. Burke submitted another collection

information statement, and he agreed to submit a new offer-in-

compromise by November 14, 2005.    Petitioner was asked to submit

certain documents by November 14, 2005, to verify petitioner’s

collection information statement.   Attorney Cardone informed Mr.

Burke that any offer-in-compromise should include the 1997

bankruptcy sale proceeds.

     Mr. Burke subsequently submitted on petitioner’s behalf an

offer-in-compromise in the amount of $75,000, representing

approximately one-half of the 1997 bankruptcy sale proceeds.   The

offer-in-compromise was based on doubt as to collectibility and

the promotion of effective tax administration.   On January 19,

2006, respondent accepted the offer-in-compromise for processing.


     9
      On Mar. 31, 2006, we ordered petitioner to file a response,
setting forth clear and concise assignment of each and every
error which petitioner alleges to have been committed with
respect to the supplemental notice of determination. Petitioner
made no contention that Appeals Office Kramer either had a prior
involvement with petitioner or had received a communication
relating to the credibility of petitioner or petitioner’s
representative. Consequently, those issues are deemed to be
conceded by petitioner. See Rule 331(b)(4).
     10
      Pursuant to sec. 7122(b), any offer-in-compromise
exceeding $50,000 requires the opinion of the General Counsel for
the Department of the Treasury or his delegate.
                              - 18 -

B.   The Jeopardy Levy

     On November 22, 2005, respondent levied upon the 1997

bankruptcy sale proceeds, and named Darren Drake and Gregory

Drake, Jr., as “nominees and/or transferees”.   Respondent

notified petitioner of the jeopardy levy in a letter dated

November 28, 2005.   In the letter, respondent made the following

contentions in support of the jeopardy levy:

     (1) You did not answer a question about the transfer of
     funds to your sons on the first financial statement
     that you submitted during the CDP process. On a
     subsequent financial statement you falsely answered the
     question regarding a transfer of assets.

     (2) You did not tell the Appeals Officer where the
     funds were when requested to do so during the CDP
     process.

     (3) The funds were in the name of third parties and can
     easily be dissipated.

     (4) Even after we informed your representative that the
     government was now fully aware of the facts involving
     the money in the account, you submitted an offer in
     compromise that your representative knew in advance
     would be unacceptable.

     On April 13, 2006, petitioner filed with the Court a “Motion

for Stay of Levy”, requesting that the Court order a stay of the

jeopardy levy on grounds that respondent made the jeopardy levy

in bad faith, for the purpose of advancing respondent’s

negotiating position in settlement discussions.

C.   The Global Settlement Negotiations

     During the section 6330 hearing on remand, the parties

engaged in negotiations to resolve the tax liabilities of both
                               - 19 -

Barbara Drake and petitioner for the years in issue (the global

settlement).11   The parties first discussed such a global

settlement in a telephone conference on December 16, 2005.

     In a letter to Attorney Cardone dated December 19, 2005, Mr.

Burke stated:    “It is my understanding that the Service has

offered to resolve both Mr. Drake’s and Mrs. Drake’s matters in

exchange for the Drake family’s foregoing all claims relative to

the levy which has been made upon funds held by the Mr. and Mrs.

Drake’s son(s).”    In response to an apparent request by

respondent that petitioner drop his motion for litigation costs

and fees, Mr. Burke’s letter further stated that the award of

litigation costs and fees is “a matter for the consideration by

the Court and not a matter for negotiation.”

     In a letter to Mr. Burke dated December 20, 2005, Attorney

Cardone stated that respondent would agree to take no further

collection action against Barbara Drake and petitioner with

respect to the years in issue upon the following terms:

     •    Darren Drake and Gregory Drake, Jr., waive all
          rights to bring a claim against the United States
          under 26 U.S.C. sec. 7426(a).

     •    Darren Drake and Gregory Drake, Jr., will provide
          whatever consents are necessary to allow Citigroup
          Smith Barney to liquidate the brokerage account
          that was the subject of the IRS levy and to turn
          the proceeds over to the IRS. Normal costs and


     11
      The parties’ global settlement negotiations should be
distinguished from petitioner’s offer-in-compromise, which
pertains to the tax liabilities of petitioner alone.
                              - 20 -

          commissions would be charged against the proceeds.

     •    Barbara Drake would be granted innocent spouse
          relief for the outstanding balance of the Subject
          Liabilities, after application of the Smith Barney
          proceeds. Barbara Drake waives any right she may
          have to file a refund claim for the Subject
          Liabilities.

     •    The IRS would accept the Smith Barney proceeds as
          an Offer in Compromise from Gregory Drake for
          satisfaction of the Subject Liabilities.

     •    Gregory Drake agrees to a motion to dismiss the
          above-referenced CDP case as moot, with no costs
          or attorneys fees awarded to either party.

     •    Gregory Drake, Darren Drake, and Gregory Drake,
          Jr., reserve whatever rights they may have to file
          amended income tax returns with respect to this
          matter.

The aforementioned terms are sometimes hereinafter generally

referred to as the settlement terms.   In a letter to Mr. Burke

dated December 21, 2005, Attorney Cardone stated that the Appeals

officer would be instructed that the parties were unable to reach

a settlement unless Barbara Drake and petitioner were to accept

all of the settlement terms as of December 28, 2005.

Accordingly, in a letter dated December 30, 2005, Attorney

Cardone informed Mr. Burke that the settlement terms had not been

accepted and that the offer had, therefore, lapsed.

     Despite Attorney Cardone’s letter stating that respondent’s

offer had lapsed, Mr. Burke and Attorney Cardone again discussed

the prospective global settlement in a telephone conference on

January 6, 2006.   During this conference, Mr. Burke informed
                                 - 21 -

Attorney Cardone that Barbara Drake and petitioner accepted the

settlement terms.     In a letter to Mr. Burke on that date,

Attorney Cardone stated as follows:

     Dear Attorney Burke:

          Pursuant to our conversation of this date, we are
     enclosing the original and two copies of a Decision
     document in the [instant] case. The original and one
     copy should be signed, dated, and returned to this
     office for filing with the Tax Court. The third copy
     is for your records.

          We are enclosing a release for Gregory Drake Jr.
     and Darren Drake. Please review the document. The
     release should be signed and dated and returned to this
     office.

          We are also enclosing facsimile memorandums from
     Gregory Drake, Jr. and Darren Drake to Smith Barney.
     Gregory Drake, Jr. and Darren Drake need to execute the
     appropriate memorandum and fax to Smith Barney.

With the letter, Mr. Cardone sent the following documents to Mr.

Burke:     (1) A proposed stipulated decision with respect to the

instant case (the proposed stipulated decision); (2) a waiver of

any claims of Darren Drake and Gregory Drake, Jr., against the

United States pursuant to section 7426(a) (the proposed waiver);

and (3) a memorandum from each of Darren Drake and Gregory Drake,

Jr., authorizing Citigroup to liquidate by sale all assets in

their joint brokerage account containing the 1997 bankruptcy sale

proceeds.     Both the proposed stipulated decision and the proposed

waiver referenced the settlement terms.12     None of the


     12
          The proposed stipulated decision stated, inter alia, that
                                                       (continued...)
                               - 22 -

aforementioned documents, however, were at any time signed by Mr.

Burke, Barbara Drake, Darren Drake, Gregory Drake, Jr., or

petitioner.

     Petitioner and respondent each referenced the global

settlement negotiations in the status reports that we ordered to

be filed with this Court by January 6, 2006.   Petitioner’s status

report stated that “counsel have undertaken extensive

negotiations to resolve the subject matter and believe that they

have achieved a basis for settlement.”   Respondent’s status

report stated that the “parties have engaged in settlement

negotiations in an attempt to resolve petitioner’s outstanding

income tax liabilities.   As of this date, the parties have not

resolved the outstanding income tax liabilities but negotiations

are on going.”

     In a letter to Mr. Burke dated January 13, 2006, Attorney

Forbes stated as follows:   “As of this date, the terms of the

settlement have not been accepted by your client and related

parties.   * * *   We are hereby withdrawing the proposed January

6, 2006 settlement unless Barbara Drake agrees to the vacatur of


     12
      (...continued)
“petitioner and respondent will resolve the liabilities that are
the subject of this action in accordance with the terms of the
December 20, 2005, letter from respondent to petitioner’s
counsel, Timothy J. Burke.” The proposed waiver stated, inter
alia, as follows: “In accordance with the December 20, 2005
letter from [Attorney Cardone to Mr. Burke] and pursuant to their
agreement with the terms of that letter, Gregory Drake, Jr., and
Darren Drake, hereby waive any and all claims * * *.”
                             - 23 -

the January 11, 2006 Memorandum Decision and January 12, 2006

Order of the Bankruptcy Court.”

     In a letter to Appeals Officer Kramer dated January 28,

2006, Mr. Burke stated, inter alia, (1) that he believed that the

section 6330 hearing on remand included Barbara Drake as a

consequence of the bankruptcy court’s decision in In re Drake,

336 Bankr. at 156; (2) that all parties to the matter agreed to

the settlement terms; and (3) that the “taxpayers” were amending

their offer-in-compromise to reflect the settlement terms, with

the exception of the proposed waiver of petitioner’s claim for

litigation costs and fees.

     On April 13, 2006, petitioner filed a “Motion to Compel

Settlement”, contending that Mr. Burke accepted a settlement

offer from respondent on January 6, 2006, and requesting that the

Court enforce such settlement.

D.   The Supplemental Notice of Determination

     On March 13, 2006, respondent’s Appeals Office issued to

petitioner a notice of determination (the supplemental notice of

determination), setting forth the following determination:

     The proposed collection action is sustained. You did
     not provide sufficient information for the evaluation
     of your proposed collection alternative. Consequently,
     your Offer could not be evaluated and is being
     rejected. The jeopardy levy is sustained. The
     attachment to this Determination Letter contains
     additional details.

In the aforementioned attachment to the supplemental notice of
                              - 24 -

determination, respondent’s Appeals Office stated, inter alia,

that (1) the parties had been unable to settle the instant case;

(2) that petitioner was precluded from challenging the underlying

liability for his 1995 tax year because he had the opportunity to

dispute the liability during the 1997 bankruptcy proceeding; (3)

that Barbara Drake is not a party to the instant case because she

was not a party to the petition filed with the Tax Court pursuant

to section 6330(d) and Rule 331(a); (4) that the jeopardy levy

was appropriate because petitioner appeared to be designing to

quickly place his property beyond the reach of the Government and

because petitioner’s financial solvency appears to be imperiled;

and (5) that petitioner’s offer-in-compromise is rejected on the

ground that petitioner failed to submit requested financial

verification documents necessary to evaluate the offer.   On April

13, 2006, petitioner filed a response to the supplemental notice

of determination.

                              OPINION

I.   Sections 6330 and 6331

     If any person liable to pay any tax neglects or refuses to

pay such tax within 10 days after notice and demand for payment,

section 6331(a) authorizes the Secretary to collect such tax by

levy upon property belonging to the person.   Notwithstanding

section 6331(a), section 6330(a) provides that no levy may be

made unless the Secretary first notifies the person in writing of
                                 - 25 -

the right to a hearing before an impartial officer of

respondent’s Appeals Office.13

     At the section 6330 hearing, the Appeals officer must verify

that the requirements of any applicable law or administrative

procedure have been met.    Sec. 6330(c)(1).   The person may raise

any relevant issue relating to the unpaid tax or the proposed

levy, including appropriate spousal defenses, challenges to the

appropriateness of collection actions, and offers of collection

alternatives such as an offer-in-compromise.    Sec. 6330(c)(2)(A).

The person may challenge the existence or amount of the

underlying tax liability, however, only if the person did not

receive any statutory notice of deficiency for such tax liability

or did not otherwise have an opportunity to dispute such tax

liability.    Sec. 6330(c)(2)(B).

     At the conclusion of the hearing, the Appeals officer must

determine whether and how to proceed with collection.    See sec.

6330(c)(3).   In making that determination, the Appeals officer

must take the following into consideration:    (1) Verification

that the requirements of any applicable law or administrative

procedure have been met; (2) relevant issues raised by the

taxpayer; (3) appropriate challenges to the underlying tax



     13
      Such prior notification under sec. 6330(a), however, is
not required where the Secretary finds that the collection of the
tax is in jeopardy. Secs. 6331(a), 6330(f). We discuss that
exception in greater detail below.
                                - 26 -

liability by the taxpayer; and (4) whether any proposed

collection action balances the need for the efficient collection

of taxes with the legitimate concern of the taxpayer that the

collection action be no more intrusive than necessary.     Sec.

6330(c)(3).

      Section 6330(d)(1) provides this Court with jurisdiction to

review a section 6330 determination if we have jurisdiction over

the underlying tax.    Where the underlying tax liability is

properly in issue, we review the determination de novo.     Freije

v. Commissioner, 125 T.C. 14, 23 (2005).     Where the underlying

tax is not in issue, we review the determination for abuse of

discretion.   Id.

II.   The Hearing on Remand

      In exercising judicial review of a section 6330

determination, the Court may under certain circumstances remand a

case to respondent’s Appeals Office while retaining jurisdiction.

See Lunsford v. Commissioner, 117 T.C. 183, 189 (2001); Parker v.

Commissioner, T.C. Memo. 2004-226; Harrell v. Commissioner, T.C.

Memo. 2003-271.     The resulting section 6330 hearing on remand

provides the parties with the opportunity to complete the initial

section 6330 hearing while preserving the taxpayer’s right to

receive judicial review of the ultimate administrative

determination.    The section 6330 hearing on remand supplements

the initial section 6330 hearing, and the initial hearing and the
                               - 27 -

hearing on remand together constitute the taxpayer’s

administrative hearing for purposes of section 6330.14     See

Parker v. Commissioner, supra (“In appropriate circumstances, we

may remand a case to the Appeals Office for further investigation

and consideration of the taxpayer’s contentions.”).    In the

instant case, respondent’s notice of determination, dated March

13, 2006, is properly treated as a supplemental notice of

determination.    Petitioner continues to dispute the issues raised

in the original notice of determination and has raised additional

issues with respect to the supplemental notice of determination.

As petitioner previously had filed a petition under section 6330

with this Court, the determinations of respondent’s Appeals

Office are ripe for judicial review.    Sec. 6330(d)(1).   We

separately address below the issues raised by petitioner with

respect to the original notice of determination and the

supplemental notice of determination.

III. Issues With Respect to the Initial Section 6330 Hearing

       We now address the issues that were raised by petitioner

with respect to the initial hearing but not addressed in Drake

I.15


       14
      We note that a person is entitled to only one notification
pursuant to sec. 6330(a)(1) and one administrative hearing
pursuant to sec. 6330(b)(2).
       15
      Because we held in Drake I that the ex parte communication
between Advisor Gordon and Settlement Officer O’Shea on Jan. 30,
                                                   (continued...)
                             - 28 -

A.   Whether the Initial Section 6330 Hearing Was Conducted in

     Good Faith.

     In response to the original notice of determination,

petitioner contended that Settlement Officer O’Shea and Appeals

Officer Kaplan were biased, were not impartial, and did not

conduct the administrative review in good faith.16   Since the

completion of the initial hearing, however, petitioner

participated in the hearing on remand with Appeals Officer

Kramer, who had no prior involvement with petitioner and had

received no communication relating to the credibility of

petitioner or petitioner’s representative.   In light of the

hearing on remand, we are satisfied that petitioner received a


     15
      (...continued)
2002, constituted a prohibited ex parte communication, we did not
decide petitioner’s remaining contentions in that opinion.
     16
      Although the aforementioned contentions appear redundant,
petitioner’s briefs set forth separate arguments with respect to
each. Petitioner alleged the following facts in support of his
contentions: (1) Settlement Officer O’Shea and Advisor Gordon
engaged in an ex parte communication on Jan. 30, 2002; (2)
Appeals Officer Kaplan and Attorney Forbes engaged in an ex parte
communication on Oct. 27, 2003; (3) Appeals Officer Kaplan
requested that petitioner submit updated financial documentation
without investigating financial statements previously submitted
by petitioner; (4) Appeals Officer Kaplan simultaneously
requested that petitioner submit financial information and that
petitioner increase his offer-in-compromise; (5) Appeals Officer
Kaplan determined that the transfer of petitioner’s home to
Darren Drake appeared questionable even though Appeals Officer
Kaplan had no experience and performed no research with respect
to bankruptcy foreclosure issues; and (6) respondent’s Appeals
Office authorized Settlement Officer O’Shea and Appeals Officer
Kaplan to both conduct the sec. 6330 hearing and to negotiate an
offer-in-compromise.
                             - 29 -

section 6330 hearing before an impartial Appeals officer for

purposes of section 6330(b)(3), and we conclude that petitioner’s

aforementioned contentions are now moot.   See Sapp v.

Commissioner, T.C. Memo. 2006-104.

B.   Whether Petitioner’s Fifth Amendment Right to Due Process

     Was Violated.

     Petitioner also contends that his Fifth Amendment right to

due process was violated by the absence of “recognizable”

procedures to be followed in the section 6330 hearing.    The

Secretary, however, has promulgated regulations to govern section

6330 hearings, see sec. 301.6330-1, Proced. & Admin. Regs., and

respondent’s Internal Revenue Manual sets forth related

administrative procedures in detail, 4 Administration, Internal

Revenue Manual (CCH), sec. 8.7.2.3. to 8.7.2.3.14.   Petitioner

fails to specify how such regulations and procedures are

inadequate or even to acknowledge their existence.   Under the

circumstances of the instant case, we conclude that petitioner’s

Fifth Amendment right to due process was not violated.    See Rule

142(a).

C.   Whether Petitioner Submitted a Viable Offer-in-Compromise.

     We understand petitioner to contend further that he

submitted a viable collection alternative for consideration and

that Settlement Officer O’Shea and Appeals Officer Kaplan did not

balance the need for the efficient collection of taxes with
                               - 30 -

petitioner’s legitimate concern that the collection action be no

more intrusive than necessary.

     The record does not support petitioner’s contention.

Although petitioner completed an offer-in-compromise form, Mr.

Burke did not submit the form to Settlement Officer O’Shea for

consideration during their meeting on January 30, 2002, or at any

time thereafter.   Petitioner concedes that the parties informally

suspended consideration of any offer-in-compromise pending a

determination of Barbara Drake’s request for section 6015 relief.

On September 4, 2002, subsequent to respondent’s denial of

section 6015 relief to Barbara Drake, petitioner submitted an

“amended” offer-in-compromise.    In a letter dated September 4,

2002, Settlement Officer O’Shea informed Mr. Burke that no

original offer-in-compromise had been submitted for

consideration, and he returned the amended offer-in-compromise to

Mr. Burke.   Petitioner concedes that the reason for returning the

amended offer-in-compromise was to avoid any administrative

confusion.   On April 10, 2003, Appeals Officer Kaplan informed

Mr. Burke that no offer-in-compromise was presently before the

Appeals Office.    A letter from Appeals Officer Kaplan to Mr.

Burke dated July 2, 2003, stated as follows:

          I have enclosed several collection information
     statements and the Offer in Compromise Questionnaire.
     If the taxpayers’ intent is to submit an Offer in
     Compromise as an alternative collection resolution to
     their case, please submit this document at this time.
     I have included the Offer in Compromise packet in this
                                - 31 -

      envelope.

On September 16, 2003, Appeals Officer Kaplan verbally reminded

Attorney Burke that he had not received the information requested

on July 2, 2003.   Finally, on October 27, 2003, Appeals Officer

Kaplan informed Mr. Burke that information previously requested

had not been received and that the Appeals Office would issue a

determination based on information already in its possession

unless Mr. Burke submitted the information immediately.

      The record clearly demonstrates not only that petitioner

failed to submit a viable offer-in-compromise for the

consideration of respondent’s Appeals officer, but that

Settlement Officer O’Shea and Appeals Officer Kaplan repeatedly

provided petitioner with the opportunity to submit an offer-in-

compromise for consideration.    Based on the administrative

record, we hold that Settlement Officer O’Shea and Appeals

Officer Kaplan balanced the need for the efficient collection of

taxes with concern that the collection action be no more

intrusive than necessary.

IV.   Issues With Respect to the Supplemental Notice of

      Determination

      We now address the issues raised by petitioner with respect

to the supplemental notice of determination.
                               - 32 -

A.   Whether Barbara Drake Is Properly Included in Petitioner’s

     Section 6330 Hearing.

     Petitioner contends that the issues raised by Barbara Drake

and by petitioner are “inextricably intertwined” and that

respondent’s Appeals Officer erred in determining that Barbara

Drake was not properly included in petitioner’s section 6330

hearing on remand.

     For this Court to have jurisdiction of a taxpayer’s section

6330 action, the person must be issued a notice of determination

under section 6330 by respondent’s Appeals Office, and the person

must timely file a petition with this Court for judicial review

of the section 6330 determination.      Sec. 6330(c) and (d); Rules

330 and 331.   In the instant case, although Mr. Burke submitted a

request for a section 6330 hearing on behalf of both Barbara

Drake and petitioner, respondent’s Appeals Office issued the

original notice of determination to petitioner alone.

Subsequently, Mr. Burke filed a section 6330 petition with this

Court on behalf of petitioner alone.     As noted above, neither the

petition nor the amended petition purported to be filed on behalf

of Barbara Drake.    Consequently, Barbara Drake is not a party to

the instant case, and this Court has no jurisdiction over the

issue of whether she was entitled to participate in the section
                             - 33 -

6330 hearing on remand.17

B.   Whether Petitioner May Challenge the Underlying Liability

     for 1995.

     Petitioner contends that respondent’s Appeals officer erred

in determining that petitioner may not challenge the underlying

liability for petitioner’s 1995 tax year.

     As noted above, in a section 6330 hearing, a taxpayer may

challenge the existence or amount of the underlying tax liability

only if the taxpayer did not receive a statutory notice of

deficiency for the tax liability or did not otherwise have an

opportunity to dispute the tax liability.    Sec. 6330(c)(2)(B).

In the instant case, the record demonstrates that petitioner had

the opportunity to dispute the 1995 tax liability during

petitioner’s 1997 bankruptcy proceeding.    See Kendricks v.

Commissioner, 124 T.C. 69, 77 (2005).   Consequently, we conclude

that petitioner may not challenge the underlying 1995 Federal

income tax liability in the instant case.    See id.

C.   Whether the Jeopardy Levy Was Proper.

     Petitioner contends that respondent imposed the jeopardy



     17
      Barbara Drake does not appear to have been issued a notice
of determination under sec. 6330 with respect to the taxable
years in issue. While respondent’s Appeals Office may issue a
sec. 6330 determination to Barbara Drake upon the resolution of
her sec. 6015 matter, unless such a determination is issued and a
petition is timely filed with this Court by her, we lack
jurisdiction with respect to Barbara Drake’s collection
proceedings.
                                - 34 -

levy in bad faith as a means of advancing respondent’s

negotiating position in settlement discussions and that

respondent’s Appeals officer erred in sustaining the jeopardy

levy.

     If the Secretary believes that the assessment or collection

of a tax deficiency will be jeopardized by delay, he shall

immediately assess the deficiency and issue notice and demand for

payment to the person liable for the payment of the tax.18    Sec.

6861(a).    The existence of one or more of the following

conditions supports a determination that the collection of a tax

is in jeopardy:

          (i) The taxpayer is or appears to be designing
     quickly to depart from the United States or to conceal
     himself or herself.

          (ii) The taxpayer is or appears to be designing to
     quickly place his, her, or its property beyond the
     reach of the Government either by removing it from the
     United States, by concealing it, by dissipating it, or
     by transferring it to other persons.

          (iii) The taxpayer’s financial solvency is or
     appears to be imperiled.

Sec. 1.6851-1(a), Income Tax Regs.; sec. 301.6861-1(a), Proced. &

Admin. Regs.    Notice and demand may be issued for the immediate

payment of a tax whose collection is determined to be in

jeopardy.    Sec. 6331(a).   Upon a failure or refusal to pay such


     18
      Pursuant to sec. 1.6851-1, Income Tax Regs., and sec.
301.6861-1, Proced. & Admin. Regs., the Secretary authorizes
certain IRS employees to determine whether the collection of a
tax is in jeopardy.
                                   - 35 -

tax, the Secretary may immediately levy upon the property or

rights to property of the person subject to the tax liability

without regard to the 10-day period otherwise required under

section 6331(a).19       Pursuant to section 6330(f), the person

subject to such a jeopardy levy is entitled to a section 6330

hearing within a reasonable period of time after the jeopardy

levy.        Pursuant to section 6330(d), this Court has jurisdiction

to review the determination of respondent’s Appeals Office with

respect to a jeopardy levy.        Dorn v. Commissioner, 119 T.C. 356,

359 (2002).        We review such determinations for abuse of

discretion.        Zapara v. Commissioner, 124 T.C. 223, 228 (2005).

        In the instant case, respondent’s Appeals Office

incorporated petitioner’s jeopardy levy hearing into petitioner’s

section 6330 hearing on remand, and the Appeals officer sustained

the jeopardy levy.        The actions of petitioner with respect to the

1997 bankruptcy sale proceeds demonstrate that the jeopardy levy

was proper.        Petitioner received the bankruptcy sale proceeds

after the discharge of Barbara Drake and petitioner from the 1997

bankruptcy, and a Federal tax lien attached.        Subsequently,

petitioner gratuitously transferred the bankruptcy sale proceeds

to Darren Drake and Gregory Drake, Jr., who took the proceeds


        19
      Assuming that sec. 6331(k)(1) applies to a jeopardy levy
case, in the instant case, sec. 6331(k)(1) did not preclude a
jeopardy levy against petitioner because respondent accepted
petitioner’s offer-in-compromise for processing only after the
jeopardy levy had been imposed.
                              - 36 -

subject to the Federal tax lien and who thereafter held the

proceeds in their personal brokerage account.   However, on a

collection information statement received by respondent on

January 14, 2000, petitioner did not respond to the question of

whether assets had recently been sold or otherwise transferred

for less than their full value.   On January 30, 2002, Mr. Burke

provided Settlement Officer O’Shea with a copy of another

collection information statement, signed by petitioner on January

24, 2002, on which petitioner responded “no” to the question of

whether petitioner had transferred any assets out of his name for

less than their actual value in the last 10 years.   Furthermore,

during the initial section 6330 hearing, petitioner failed to

provide documents requested by Appeals Officer Kaplan relating to

the whereabouts of the 1997 bankruptcy sale proceeds.

     Petitioner appears to have been designing to quickly place

the 1997 bankruptcy sale proceeds beyond the reach of the

Government by transferring such proceeds to third parties, who

might have dissipated the funds absent an immediate collection

action.   Based on the administrative record in the instant case,

we conclude that respondent’s Appeals officer did not abuse her

discretion in sustaining the jeopardy levy against petitioner.

D.   Whether the Parties Completed a Global Settlement Agreement.

     Petitioner contends that respondent set forth a global

settlement offer pursuant to the terms of Attorney Cardone’s
                                 - 37 -

letter to Mr. Burke dated December 20, 2006; that Mr. Burke

orally accepted respondent’s offer on behalf of petitioner and

petitioner’s family during Mr. Burke’s telephone conference with

Attorney Cardone on January 6, 2006; and that Attorney Cardone

demonstrated that the parties had completed the global settlement

agreement by sending to Mr. Burke the proposed stipulated

decision, the proposed waiver, and the memoranda from Darren

Drake and Gregory Drake, Jr.20    Consequently, petitioner contends

that respondent’s Appeals officer erred in determining that the

parties did not enter into a settlement agreement.21

     Parties to a controversy before this Court may settle the

matter by agreement.   Dorchester Indus. v. Commissioner, 108 T.C.

320, 329 (1997), affd. without published opinion 208 F.3d 205 (3d

Cir. 2000).   The parties may not repudiate a valid settlement.

Id. at 330.   In the absence of fraud or mistake, we have declined

to set aside a settlement that was duly executed by the parties

and filed with the Court.   Id.    We do not, however, enforce a


     20
      The aforementioned contentions are primarily set forth in
petitioner’s “Motion to Compel Settlement”, which, for reasons
set forth in this opinion, we deny.
     21
      With respect to the global settlement, an attachment to
the supplemental notice of determination states as follows:
“Your representative and IRS Area Counsel attempted to reach
settlement terms for this and other related cases. That attempt
was unsuccessful.” Separately, the attachment stated: “In a
telephone conversation on February 13, 2006, the Settlement
Officer informed your representative that she did not agree that
the case now included Mrs. Drake and that she would no longer
hold the CDP case in abeyance in hopes of an outside settlement.”
                                 - 38 -

settlement not intended by both parties.        Id.

     General principles of contract law determine whether the

parties reached a settlement.      Id.    An objective manifestation of

mutual assent to essential terms is a prerequisite to the

formation of a contract.   Id.     Mutual assent generally requires

an offer and an acceptance.      Id.    A settlement agreement may be

reached in the absence of a writing, through offer and

acceptance.   Id.

     In the instant case, we conclude that the parties did not

mutually assent to the settlement.        We agree with petitioner that

Attorney Cardone’s letter to Mr. Burke dated December 20, 2005,

constituted a settlement offer.        The record demonstrates,

however, that petitioner did not timely accept respondent’s

offer.   Mr. Burke’s letter to Attorney Cardone dated December 19,

2005, demonstrates that the parties disagreed as to whether the

global settlement should include a provision barring the award of

litigation costs.   Mr. Cardone’s letter to Mr. Burke dated

December 21, 2005, stated that respondent’s offer would lapse

unless Barbara Drake and petitioner accepted all of the

settlement terms by December 28, 2005.        Barbara Drake and

petitioner did not accept the terms of the settlement agreement

as of that date, and, consequently, respondent’s offer lapsed by

its own terms.   We, therefore, conclude that Mr. Burke’s

purported oral acceptance of the settlement terms on January 6,
                               - 39 -

2006, was late and therefore ineffective.

     Although the parties appear to have neared a settlement

agreement during the conference on January 6, 2006, the parties’

subsequent actions demonstrate that such an agreement was never

completed.   (1) Although Attorney Cardone sent to Mr. Burke the

proposed stipulated decision and the proposed waiver, each

referencing the settlement terms outlined in Attorney Cardone’s

letter to Mr. Burke dated December 20, 2005, the documents were

never signed.   (2) The status report filed with this Court by

petitioner in January of 2006 stated that “counsel have

undertaken extensive negotiations to resolve the subject matter

and believe that they have achieved a basis for settlement” but

did not state that the parties had completed the settlement

agreement on January 6, 2006, as petitioner now claims.    (3) The

status report filed with this Court by respondent in January of

2006 stated that “the parties have not resolved the outstanding

income tax liabilities but negotiations are on going.”    (4)

Neither petitioner nor respondent at any time filed with this

Court a stipulated decision or a related motion for entry of

decision.    (5) Although the settlement terms purport to resolve

Barbara Drake’s section 6015 claim, Barbara Drake’s “Motion to

Request the Determination of a Tax Liability” remained pending

before the bankruptcy court until that court issued its opinion

on January 11, 2006, subsequent to the date on which petitioner
                             - 40 -

now claims to have completed the global settlement agreement.22

Finally, (6) Attorney Forbes’s letter to Mr. Burke dated January

13, 2006, stated that petitioner and related parties had not

accepted the settlement terms and that respondent was “hereby

withdrawing the proposed January 6, 2006 settlement unless

Barbara Drake agrees to the vacatur of the January 11, 2006

Memorandum Decision and January 12, 2006 Order of the Bankruptcy

Court.”23

     Based on the administrative record in the instant case, we

conclude that no objective manifestation of mutual assent existed

with respect to the global settlement.   Although Mr. Burke and

Attorney Cardone attempted to reach agreement as to most if not

all of the settlement terms outlined in Mr. Cardone’s letter of

December 20, 2005, the record demonstrates that the parties did

not complete an enforceable settlement agreement.24




     22
      We note that Mr. Burke is listed as a counsel of record in
In re Drake, 336 Bankr. 155 (Bankr. D. Mass. 2006), in addition
to representing petitioner in the instant case.
     23
      Attorney Forbes’s letter is consistent with respondent’s
position as set forth in respondent’s “Response to Motion to
Compel”, which contended that the documents sent by Attorney
Cardone to Mr. Burke on Jan. 6, 2006, constituted a settlement
offer requiring the signature of petitioner and the related
parties for acceptance.
     24
      Because we hold that the global settlement agreement is
not enforceable, we need not address whether the Court has
jurisdiction with respect to a settlement agreement governing
parties other than the petitioner.
                               - 41 -

E.   Whether Appeals Officer Kramer Improperly Rejected

     Petitioner’s Offer-in-Compromise.

     We understand petitioner to contend that Appeals Officer

Kramer improperly rejected petitioner’s offer-in-compromise.25

Petitioner contends that Appeals Officer Kramer erred in

determining that petitioner did not submit requested financial

verification documents because Appeals Officer Kramer neither

requested documentation nor set forth a deadline for petitioner

to submit such documentation after accepting petitioner’s offer-

in-compromise for processing on January 19, 2006.   Petitioner

further contends that the global settlement agreement “mooted”

any request for documentation made prior to January 6, 2006.

     If an offer-in-compromise that has been accepted by the IRS

for processing does not contain sufficient information to permit

the IRS to evaluate whether the offer should be accepted, the IRS

will request that the taxpayer provide the needed additional

information.26   Sec. 301.7122-1(d)(2), Proced. & Admin. Regs.   In


     25
      With respect to petitioner’s offer-in-compromise,
petitioner’s primary contention is that “Respondent erred in
failing to compromise the parties’ dispute on the terms of the
[global settlement] Agreement.” Because we previously addressed
petitioner’s contention that the parties entered into a
settlement agreement, we now address petitioner’s related
contention that petitioner did not receive a request for further
information from respondent.
     26
      If the taxpayer does not submit the additional information
that the IRS has requested within a reasonable time period after
such a request, sec. 301.7122-1(d)(2), Proced. & Admin. Regs.,
                                                   (continued...)
                             - 42 -

the instant case, during the conference between Mr. Burke and

Appeals Officer Kramer on November 4, 2005, Mr. Burke was asked

to submit additional documents needed for the evaluation of

petitioner’s offer-in-compromise by November 14, 2005.

Petitioner neither disputes that such a request was made nor

contends that such documents were in fact submitted in response

to the request.

     Based on the administrative record in the instant case, we

are unable to conclude that the global settlement negotiations

affected the document request as alleged by petitioner.   More

than 4 months elapsed from the date of the document request until

the issuance of the supplemental notice of determination, and

Appeals Officer Kramer was not required to make further requests.

We conclude that the record demonstrates that Appeals Officer

Kramer’s rejection of the offer-in-compromise was not an abuse of

discretion.27


     26
      (...continued)
provides that the IRS may return the offer to the taxpayer.
     27
      Petitioner alleges that he received from respondent a
letter dated Jan. 19, 2006, which stated: “If your offer in
compromise requires further actions, the Appeals employee will
set a deadline for completion. These actions can include adding
periods of liability or providing more financial information. If
the deadline is not met, your offer in compromise will be
returned.” Because respondent had already requested further
financial information as of the date of the alleged letter, such
language appears to be surplusage. Nonetheless, petitioner had
been provided ample opportunity to submit the requested documents
prior to Jan. 19, 2006, and petitioner could have but apparently
                                                   (continued...)
                                - 43 -

V.   Whether Petitioner Is Entitled to Litigation Costs

     Petitioner contends that he substantially prevailed with

respect to the most significant issue presented in the proceeding

before this Court,28 that he meets the net worth requirements of

28 U.S.C. 2412(d)(2)(B), that he exhausted administrative

remedies, and that he did not unreasonably protract the court

proceedings.   Consequently, petitioner contends that he is

entitled to litigation costs in the amount of $20,007.45.

     Section 7430(a) provides that an individual may recover

litigation costs incurred in a court proceeding brought against

the United States in connection with the determination of a tax

or penalty.    Litigation costs may be awarded pursuant to section

7430 if (1) the individual is the prevailing party, (2) the

individual has exhausted administrative remedies, (3) the

individual has not unreasonably protracted the court proceedings,

and (4) the claimed litigation costs are reasonable.    Sec.

7430(a), (b)(1), (3), (c)(4).    The requirements of section 7430

are conjunctive, and the individual has the burden of proving

that each of these requirements has been satisfied.    See Rule

232(e); Minahan v. Commissioner, 88 T.C. 492, 497 (1987).


     27
      (...continued)
did not contact respondent’s Appeals officer to resolve any
confusion.
     28
      Specifically, petitioner contends that he prevailed in
Drake I, on the basis of his argument that the initial sec. 6330
hearing was improper.
                              - 44 -

     To qualify as the prevailing party, the individual must

substantially prevail with respect to either the amount in

controversy or the most significant issue or set of issues

presented in the Court proceeding, and the individual must

satisfy the net worth requirement of section 7430(c)(4)(ii).29

Sec. 7430(c)(4)(A).   The Court looks to the final outcome of the

case to determine whether the individual has substantially

prevailed within the meaning of section 7430(c)(4)(A).    Cassuto

v. Commissioner, 936 F.2d 736, 741 (2d Cir. 1991), affg. in part

and revg. in part 93 T.C. 256 (1989); Bowden v. Commissioner,

T.C. Memo. 1999-30.   The issuance of the Drake I opinion did not

represent the final outcome of the instant case, as we remanded

the case to respondent’s Appeals Office for a new section 6330

hearing while retaining jurisdiction.   Consequently, we conclude

that petitioner did not substantially prevail for purposes of

section 7430(c)(4)(A) based upon the decision of this Court in

Drake I.

     The most significant issue raised in the instant proceeding

is whether the ultimate determination of respondent’s Appeals

Office to sustain the proposed levy action against petitioner

constitutes an abuse of discretion.    Petitioner has not prevailed



     29
      Sec. 7430(c)(4)(A)(ii), as relevant here, effectively
limits the award of litigation costs to individuals with a net
worth of $2 million or less. Stieha v. Commissioner, 89 T.C.
784, 789-790 (1987).
                                - 45 -

on that issue.     Consequently, petitioner is not the prevailing

party and is not entitled to an award of litigation costs

pursuant to section 7430.     We need not decide whether petitioner

exhausted administrative remedies, whether petitioner

unreasonably protracted the court proceedings, or whether the

claimed litigation costs are reasonable.

VI.   Conclusion

      The record demonstrates that respondent’s Appeals Office (1)

verified that the requirements of applicable laws and

administrative procedures had been met, (2) properly addressed

the issues raised by petitioner during the initial section 6330

hearing and the section 6330 hearing on remand, and (3) and

balanced the need for the efficient collection of taxes with the

concern that the collection action be no more intrusive than

necessary.   Consequently, we hold that the decision of

respondent’s Appeals Office to sustain the proposed levy against

petitioner is not an abuse of discretion.      Accordingly, we hold

that petitioner is not entitled to an award of litigation costs

as the prevailing party.     Additionally, petitioner’s “Motion to

Compel Settlement” will be denied.       We have considered all of the

parties’ contentions.     To the extent not addressed herein, such

contentions are without merit or are unnecessary to reach.
                        - 46 -

To reflect the foregoing,


                                  An appropriate order will

                             be issued.
