                                T.C. Memo. 2013-278



                         UNITED STATES TAX COURT



                  KENNETH M. MOORE, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 11227-12L.                        Filed December 9, 2013.


      Basil J. Boutris, for petitioner.

      Kimberly A. Kazda, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      HAINES, Judge: Petitioner filed a petition with this Court in response to a

Notice of Determination Concerning Collection Action(s) Under Section 6320

and/or 6330.1 Pursuant to section 6330(d), petitioner seeks review of respondent’s


      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
                                                                       (continued...)
                                         -2-

[*2] determination to proceed with collection of unpaid trust fund recovery

penalties assessed against petitioner for various periods. The issue for decision is

whether the Internal Revenue Service (IRS) Appeals Office abused its discretion

in sustaining the proposed levy action against petitioner.

                               FINDINGS OF FACT

      Some of the facts have been stipulated and are so found. Those exhibits

attached to the stipulation which were found admissible are incorporated by this

reference. Petitioner resided in California when the petition was filed.

      Respondent mailed a final notice of intent to levy (levy notice) to petitioner

for trust fund recovery penalties under section 6672 for periods ending June 30,

September 30, and December 31, 2007; and March 31, September 30, and

December 31, 2008 (periods at issue). In response to the levy notice, petitioner

timely requested a section 6330 hearing. On the Form 12153, Request for a

Collection Due Process or Equivalent Hearing, in which petitioner requested a

hearing, he stated that he was interested in an installment agreement or an offer-in-

compromise (OIC) as a collection alternative.




      1
       (...continued)
Practice and Procedure. Amounts are rounded to the nearest dollar.
                                          -3-

[*3] The IRS Appeals Office assigned a settlement officer to conduct petitioner’s

section 6330 hearing. Petitioner submitted financial information and an OIC

based on doubt as to collectibility. He proposed to pay a total of $12,000 over 10

years to satisfy his outstanding tax liabilities estimated to be $173,000. In a letter,

the settlement officer notified petitioner that his reasonable collection potential

was greater than a total of $12,000 and as a result his OIC would be rejected.

Thereafter, petitioner mailed the settlement officer a letter, stating that he believed

his income and expenses were incorrectly calculated. Upon further consideration,

the settlement officer revised her calculations but still determined that petitioner

had a reasonable collection potential greater than $12,000.

      Respondent mailed petitioner a determination notice sustaining the

proposed collection action for the periods at issue. In evaluating petitioner’s OIC

the settlement officer determined that petitioner and his spouse had monthly

income from Social Security benefits and pension benefits of $4,178, and monthly

allowable expenses of $3,400, which exceeded the amount of expenses petitioner

claimed in his OIC proposal. She also determined petitioner had net realizable

equity in assets of $9,210. On the basis of these calculations, she determined

petitioner had a reasonable collection potential of $97,902.
                                          -4-

[*4] The determination notice included a note in which the settlement officer

stated petitioner and his spouse would likely deplete their pension benefits before

the statutory period for collection ended because of the rate at which they had been

drawing on those benefits. Accounting for this circumstance, the settlement

officer provided an alternative calculation of petitioner’s reasonable collection

potential. As part of that calculation, she found the rate at which petitioner and his

spouse had previously depleted their pension benefits over an extended period of

months. She estimated that petitioner and his spouse’s monthly income from the

pension benefits would continue for 35 months. Using a 35-month term and

holding all other variables from her initial calculation constant, she calculated that

petitioner had a reasonable collection potential of $36,440, more than three times

petitioner’s OIC.

      Petitioner filed a petition with this Court contesting the determination

notice.

                                      OPINION

      Petitioner conceded at trial that the underlying liabilities are not at issue.

We therefore review the Appeals Office’s determination for abuse of discretion.

Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). “An abuse of discretion

occurs when a decision is based on an erroneous view of the law or a clearly
                                          -5-

[*5] erroneous assessment of the facts.” Keller v. Commissioner, 568 F.3d

710,716 (9th Cir. 2009). Petitioner contends that the settlement officer’s rejection

of his OIC based on doubt as to collectibility constituted an abuse of discretion.

We disagree. Section 7122(a) provides that “[t]he Secretary may compromise any

civil * * * case arising under the internal revenue laws”. Whether to accept an

OIC is left to the Secretary’s discretion. Fargo v. Commissioner, 447 F.3d 706,

712 (9th Cir. 2006), aff’g T.C. Memo. 2004-13; sec. 301.7122-1(c)(1), Proced. &

Admin. Regs. The regulations under section 7122 set forth three grounds for the

compromise of a tax liability: (1) doubt as to liability; (2) doubt as to

collectibility; or (3) promotion of effective tax administration. Sec.

301.7122-1(b), Proced & Admin. Regs. In his hearing, petitioner sought a

compromise based on doubt as to collectibility.2

      The Secretary may compromise a tax liability based on doubt as to

collectibility where the taxpayer’s assets and income are less than the full amount

of the assessed liability. Sec. 301.7122-1(b)(2), Proced. & Admin. Regs. Under

IRS procedures, the IRS will not accept a compromise that is less than the




      2
        Doubt as to liability and doubt as to effective tax administration are not at
issue in this case.
                                         -6-

[*6] reasonable collection potential3 of the case, absent a showing of special

circumstances. See Rev. Proc. 2003-71, sec. 4.02(2), 2003-2 C.B. 517, 517.

      Petitioner offered $12,000 to settle his outstanding tax liabilities, which

were estimated to exceed $173,000. The settlement officer reviewed the

information submitted by petitioner during the hearing, determined that petitioner

had a reasonable collection potential of $97,902, and rejected petitioner’s OIC.

Petitioner claims that the settlement officer erred in calculating his reasonable

collection potential because her calculation failed to take into account that the

pension benefits of petitioner and his spouse would be depleted to cover living

expenses before the statutory period for collection expired.

      The settlement officer recognized that petitioner and his spouse would

likely deplete their pension benefits before the statutory period for collection

ended. She did an alternative calculation taking this circumstance into account

and found that petitioner had a reasonable collection potential of $36,440, more

than three times petitioner’s $12,000 OIC. Moreover, petitioner did not show that


      3
       In general reasonable collection potential is “calculated by multiplying a
taxpayer’s monthly income available to pay taxes by the number of months
remaining in the statutory period for collection, and adding to that product the
realizable net equity in the taxpayer’s assets.” Johnson v. Commissioner, 136 T.C.
475, 485 (2011), aff’d, 502 Fed. Appx. 1 (D.C. Cir. 2013).
                                          -7-

[*7] he presented information to the settlement officer regarding “special

circumstances” that would justify her accepting his OIC. Accordingly, we find the

settlement officer did not abuse her discretion in rejecting petitioner’s OIC.

      Petitioner also asserted in his petition and his pretrial memorandum that the

settlement officer abused her discretion by refusing to allow him to submit an

installment agreement proposal in addition to his OIC. Petitioner did not stipulate

facts, present admissible evidence, or otherwise address this issue at trial.

Accordingly, the issue is deemed conceded. See Rule 149(b); Cerone v.

Commissioner, 87 T.C. 1 n.1 (1986).

      In conclusion, petitioner failed to establish that the settlement officer abused

her discretion, and respondent may proceed with the proposed levy action.

      In reaching our holdings herein, we have considered all arguments made,

and, to the extent not mentioned above, we conclude they are moot, irrelevant, or

without merit.

      To reflect the foregoing,

                                                      Decision will be entered for

                                                respondent.
