                        T.C. Memo. 2009-46



                      UNITED STATES TAX COURT



     TOMI M. PETERSON AND MARILYNN J. PETERSON, Petitioners
         v. COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 4521-07L.                Filed February 25, 2009.



     Tomi M. Peterson and Marilynn J. Peterson, pro sese.

     Trent D. Usitalo, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     SWIFT, Judge:   In this collection case under section 6330,

petitioners challenge respondent’s proposed levy relating to

petitioners’ outstanding individual Federal income taxes for

1999, 2001, and 2002 in the approximate total amount of $70,000.

Also pending is respondent’s motion for partial summary judgment.
                                -2-

     The primary issue for decision is whether respondent abused

his discretion in sustaining respondent’s proposed levy.

     Unless otherwise indicated, all section references are to

the Internal Revenue Code.


                         FINDINGS OF FACT

     The authenticity of many exhibits has been stipulated, but

no narrative facts have been stipulated.    Petitioners resided in

Michigan at the time of filing their petition.

     Petitioners have experienced a string of difficulties--

losses of jobs, home, and water in a building they were

occupying; deaths in their family; illnesses; and tax problems.

Petitioners’ efforts to represent themselves have been persistent

but often counterproductive.   Our jurisdiction and ability to

provide relief to petitioners are limited.

     On audit for 1999, 2001, and 2002, respondent made

mathematical adjustments to petitioners’ 1999 and 2002 Federal

income taxes, and respondent assessed the additional income taxes

relating thereto without issuing to petitioners a notice of

deficiency.   Petitioners do not challenge respondent’s

mathematical adjustments for 1999 and 2002.

     Respondent made a number of income adjustments relating to

petitioners’ 2001 Federal income tax, and on September 29, 2003,

respondent mailed to petitioners a notice of deficiency relating

thereto.   Petitioners acknowledge receipt of this notice of
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deficiency.   Petitioners did not file a petition to challenge

respondent’s deficiency determination against them for 2001, and

respondent assessed the deficiency.

     On January 9, 2006, respondent mailed to petitioners a final

notice of intent to levy relating to their outstanding 1999,

2001, and 2002 Federal income taxes, penalties, additions to tax,

and interest.   On January 24, 2006, petitioners appealed

respondent’s levy notice and requested a collection hearing with

respondent’s Appeals Office.

     During the collection Appeals Office hearing that was held

on November 2, 2006, petitioners submitted to respondent an

offer-in-compromise (OIC) under which petitioners proposed to pay

a total of $20,000.   With the OIC petitioners tendered to

respondent a $4,000 check as earnest money and a $150 check for

the OIC application fee.

     Respondent’s Appeals officer determined that although

petitioners’ monthly cash income was minimal, because petitioners

owned two parcels of real property with an estimated value of

approximately $80,000, the reasonable collection potential from

petitioners was approximately $68,000.   Accordingly, respondent’s

Appeals Office rejected petitioners’ OIC.

     At the Appeals Office hearing respondent’s Appeals officer

noted petitioners’ illnesses and agreed to consider a revised OIC

on the basis of special circumstances and effective tax
                                -4-

administration if petitioners would submit a revised OIC with

documentation verifying the seriousness of their illnesses (e.g.,

statements from doctors).   Petitioners did not submit any further

information or documentation about their illnesses within the

time period specified by respondent.

     Also at the Appeals Office hearing, petitioners suggested

their monthly Social Security retirement and disability payments

as a possible source of tax payments.   Respondent’s Appeals

officer discouraged petitioners from basing a revised OIC on

monthly Social Security payments because it appeared that

petitioners needed all of their Social Security payments just to

meet basic living expenses.

     During the Appeals Office hearing, although petitioners

complained about the penalties, additions to tax, and interest

that had accrued against them for the years 1999, 2001, and 2002,

petitioners never raised a specific claim for abatement under

section 6404 of penalties, additions to tax, or interest.

     On January 23, 2007, respondent issued to petitioners a

notice of determination sustaining the proposed levy.    In spite

of the fact that respondent’s proposed levy was sustained,

because of petitioners’ illnesses and because respondent’s

Appeals Office determined that immediate levy action against

petitioners’ monthly minimal income likely would cause

petitioners undue hardship, respondent’s Appeals Office
                                 -5-

determined to suspend any collection action against petitioners

for 1 year (until January 23, 2008) to give petitioners time to

submit to respondent a revised OIC or to sell their real

property.

     From January 23, 2007, until January 23, 2008, respondent

suspended any levy action against petitioners and placed

petitioners’ outstanding 1999, 2001, and 2002 Federal income

taxes in uncollectible status.

     Disagreeing with respondent’s rejection of their OIC, on

February 26, 2007, petitioners timely filed their petition in

this case.

     The May 20, 2008, evidentiary hearing constituted both a

hearing on respondent’s motion for partial summary judgment and a

trial of the issues raised.

     On November 10, 2008, petitioners filed with the Court a

motion to reopen the evidentiary record and to open up discovery.

Petitioners’ motion will be denied.


                              OPINION

     Petitioners do not contest the amount of their 1999, 2001,

and 2002 Federal income taxes as determined by respondent.   In

collection cases under section 6330(d) where the underlying tax

adjustments are not in dispute, we review respondent’s

administrative determinations for an abuse of discretion.    Goza

v. Commissioner, 114 T.C. 176 (2000).
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     Respondent’s determination of petitioners’ approximate

$68,000 collection potential has not been meaningfully challenged

by petitioners.   No appraisal of petitioners’ real property has

been offered into evidence.   No credible evidence disputes the

amount respondent used for the valuation of petitioners’ real

property.

     At trial petitioners stated that “if we find an abuse of

discretion” an abatement under section 6404 of the penalties,

additions to tax, and interest determined by respondent should be

granted.

     At their collection Appeals Office hearing, however,

petitioners did not affirmatively raise as an issue their

entitlement under section 6404 to abatement of penalties,

additions to tax, and interest, and petitioners therefore, among

other reasons, are precluded from seeking section 6404 abatement

relief.    See Giamelli v. Commissioner, 129 T.C. 107 (2007);

Magana v. Commissioner, 118 T.C. 488, 493 (2002).

     In sustaining respondent’s notice of levy but in deferring

any levy for 1 year, respondent’s Appeals Office exercised

exemplary discretion and restraint.    Unfortunately, instead of

taking advantage of respondent’s restraint--obtaining

documentation of their illnesses and revising their OIC--

petitioners filed the instant lawsuit.
                               -7-

     Petitioners complain that some of respondent’s OIC

instructions were not clear and did not correctly explain changes

to respondent’s OIC program under which in some circumstances

amounts due under OICs could be paid in installments.

Petitioners assert that with better instructions they would have

formally revised their OIC.

     We reiterate that even after respondent’s adverse notice of

determination was issued, respondent’s levy was suspended for 1

year to allow petitioners time to submit a revised OIC.   Again at

trial petitioners were given an opportunity to revise their OIC.

In view of the additional time and opportunities petitioners were

given, petitioners’ complaints about respondent’s confusing OIC

informational material are not credible.

     We sustain respondent’s levy notice.

     In view of our holding, respondent’s motion for partial

summary judgment is moot and will be denied.


                                     An appropriate order and

                              decision will be entered.
