                               T.C. Memo. 2015-40



                         UNITED STATES TAX COURT



              WILLIAM FREDERICK DEPREE, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 7213-13L.                         Filed March 10, 2015.



      William Frederick Depree, pro se.

      John D. Ellis, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


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

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



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

[*2] Revenue Service (IRS or respondent) to uphold a notice of intent to levy. The

IRS filed the levy notice to assist in collecting petitioner’s unpaid Federal income

tax liabilities for 2009 and 2010. The issues for decision are whether petitioner at

the CDP hearing properly raised his underlying tax liabilities for these years and

whether the IRS abused its discretion in declining to consider his request for an

offer-in-compromise (OIC).

                               FINDINGS OF FACT

      The parties filed a stipulation of facts and related exhibits at trial. We incor-

porate the stipulation of facts and the accompanying exhibits by this reference.

Petitioner resided in the District of Columbia when he petitioned the Court.

      Petitioner was employed during 2009 and 2010 as a security guard and de-

scribes himself as a “professional researcher” in various fields of art and science.

He filed Federal income tax returns for 2009 and 2010 reporting wages of $41,478

and $43,929, respectively. He had no tax withheld from his wages for either year,

paid no estimated tax, and submitted no payment with either return. The IRS as-

sessed the tax on the basis of these returns.

      The IRS sent petitioner a notice and demand for payment. In October 2011

petitioner requested and was granted an installment agreement whereby he would

pay his total outstanding tax liabilities in $250 monthly installments. Petitioner
                                         -3-

[*3] made three payments totaling $750 but then defaulted. The IRS accordingly

terminated the installment agreement and, on November 5, 2012, issued petitioner

a Letter 1058, Final Notice of Intent to Levy and Notice of Your Right to a

Hearing. Petitioner timely filed Form 12153, Request for a Collection Due

Process or Equivalent Hearing, indicating that he desired an OIC.

      On December 7, 2012, the IRS sent petitioner a letter enclosing a Form 656,

Offer in Compromise, and requesting that he “complete the enclosed Form * * *

for further consideration.” On February 11, 2013, a settlement officer (SO) from

the IRS Appeals Office mailed petitioner a letter scheduling a telephone CDP

hearing for March 6, 2013. This letter indicated that the SO would consider col-

lection alternatives but noted that petitioner needed to submit financial informa-

tion sufficient to enable the IRS to determine his ability to pay. The letter indi-

cated that the SO would also consider “whether * * * [petitioner] owe[d] the

amount due.” Before his scheduled CDP hearing petitioner did not submit Form

656, did not propose any specific collection alternative, did not submit the partial

payment that must accompany an OIC, did not submit any documentation concern-
                                         -4-

[*4] ing his 2009 and 2010 tax liabilities, and did not ask for additional time to

submit any of this material.2

      During the March 6, 2013, hearing petitioner stated that he was challenging

his underlying tax liabilities on the ground that he owed no tax for either year.

Although he informed the SO that he was “an inventor and artist” who “used his

money for creative research,” he articulated no theory and submitted no evidence

in support of his assertion that his correct tax liability for each year was zero. He

told the SO that he wanted an OIC; when asked why he had not submitted Form

656, he stated that he had previously submitted “an offer for $750 that was walked

all over and not considered.” (This was apparently a reference to the installment

agreement on which he had paid $750 before defaulting.) The SO told petitioner

that she could not consider an OIC in the absence of a properly supported Form

656. She indicated that petitioner might be eligible for another installment

agreement, but when he replied that he was interested in nothing but an OIC, she

informed him that she could afford him no relief.




      2
        At trial petitioner disputed his receipt of the SO’s February 11, 2013, letter.
However, that letter was mailed to his current address, and he called in for the
CDP hearing at the appointed date and time, using the telephone number stated in
the letter. The Court does not credit petitioner’s testimony on this point.
                                         -5-

[*5] The SO stated in her case activity report that petitioner’s balance due of

$7,933 was “due to insufficient withholding due to self assessed returns” and that

her “review of * * * [petitioner’s] account transcript shows that the proper

assessment was made” and that the “mailing of notice and demand was proper.”

On March 8, 2013, the IRS issued a Notice of Determination Concerning Col-

lection Action(s) Under Section 6320 and/or 6330 sustaining the levy.

      On March 30, 2013, petitioner submitted amended returns for 2009 and

2010 on which he claimed section 41 “research and experimentation” tax credits

of $3,986,580 and $4,443,670, respectively. The IRS did not process these

returns. On April 1, 2013, petitioner timely petitioned this Court for review of the

notice of determination. As the basis for his disagreement with the IRS

determination, he states in his petition: “Amended tax forms [for] 2009-2010

adding * * * tax research credits, which applied changed the tax owed to zero.”

                                      OPINION

A.    Standard of Review

      Section 6330(d)(1) does not prescribe the standard of review that this Court

should apply in reviewing an IRS administrative determination in a CDP case.

The general parameters for such review are marked out by our precedents. Where

the validity of the underlying tax liability is properly at issue, the Court reviews
                                         -6-

[*6] the Commissioner’s determination de novo. Goza v. Commissioner, 114 T.C.

176, 181-182 (2000). Where the underlying tax liability is not properly at issue,

the Court reviews the IRS decision for abuse of discretion. Id. at 182. Abuse of

discretion exists when a determination is arbitrary, capricious, or without sound

basis in fact or law. See Murphy v. Commissioner, 125 T.C. 301, 320 (2005),

aff’d, 469 F.3d 27 (1st Cir. 2006).

      Respondent agrees that petitioner was not foreclosed from disputing his

underlying tax liabilities at the CDP hearing. However, this Court may consider a

taxpayer’s challenge to his underlying tax liability only if he properly raised that

challenge before the IRS. See sec. 301.6330-1(f)(2), Q&A-F3, Proced. & Admin.

Regs. An issue is not properly raised at the CDP hearing if the taxpayer fails to

request consideration of the relevant issue by Appeals or if he requests consider-

ation but fails to present any evidence after being given a reasonable opportunity

to do so. Ibid.; see Thompson v. Commissioner, 140 T.C. 173, 178 (2013).

      The SO provided petitioner an opportunity to contest his underlying tax

liabilities for 2009 and 2010, but he failed to mount a proper challenge because he

articulated no basis for relief and submitted no evidence. He admitted at trial that

he did not refer to research credits during his CDP hearing and provided the SO

with no documentation concerning these claims. Although he told the SO that he
                                         -7-

[*7] was “an inventor and artist” who “used his money for creative research,” this

did not put her on notice that he was about to file amended returns claiming

research credits. Petitioner submitted with his amended returns no documentation

to support his claim for research credits totaling over $8 million; this claim is

implausible on its face. Given these facts, we conclude that petitioner did not

properly raise his underlying tax liability for 2009 or 2010 at the CDP hearing, and

he is thus barred from disputing those liabilities in this Court. We will therefore

review the SO’s determination for abuse of discretion only. See Goza, 114 T.C. at

182.

B.     Analysis

       In deciding whether the SO abused her discretion in sustaining the levy, we

consider whether she: (1) properly verified that the requirements of any applicable

law or administrative procedure have been met; (2) considered any relevant issues

petitioner raised; and (3) determined whether “any proposed collection action bal-

ances the need for the efficient collection of taxes with the legitimate concern of

* * * [petitioner] that any collection action be no more intrusive than necessary.”

See sec. 6330(c)(3).

       It is clear from our review of the record that the SO analyzed the transcript

of petitioner’s account and verified that the requirements of applicable law and
                                         -8-

[*8] administrative procedure were followed. The SO stated in her case activity

report that she had reviewed petitioner’s account transcript and confirmed that

“the proper assessment was made.” Petitioner did not allege in his petition that

any assessment was improper, and this issue is therefore deemed conceded. See

Rule 331(b)(4) (“Any issue not raised in the assignments of error shall be deemed

to be conceded.”); Pierson v. Commissioner, 115 T.C. 576, 580 (2000) (deeming

conceded issues not raised in the taxpayer’s petition); Goza, 114 T.C. at 183;

Busche v. Commissioner, T.C. Memo. 2011-285, 102 T.C.M. (CCH) 566, 575

(noting that taxpayer’s challenge to her underlying liability failed because “she did

not plead in her petition that her liability is less than was assumed in the proposed

levy”).

      The SO did not abuse her discretion in declining to consider petitioner’s

request for an OIC. Despite being informed of the need to submit Form 656 and

supporting financial data, petitioner failed to do so. He also failed to submit the

required partial payment. See sec. 7122(c)(1) (requiring partial payment of either

20% of a lump-sum OIC or of the amount of the first proposed installment in a

periodic payment OIC). Petitioner stated that an OIC was the only collection

alternative in which he was interested, but he put no offer on the table. The SO

plainly did not abuse her discretion in deciding that he was ineligible for a collec-
                                         -9-

[*9] tion alternative under these circumstances. See Kindred v. Commissioner,

454 F.3d 688, 696 (7th Cir. 2006) (“Without an actual offer in compromise to

consider, it would be most difficult for either the Tax Court or this court to

conclude that the appeals officer might have abused his discretion; for the appeals

officer could not mistakenly reject something which has not been presented to

him.”); Kendricks v. Commissioner, 124 T.C. 69, 73-74, 79 (2005) (finding no

abuse of discretion when taxpayers did not submit an OIC to the settlement officer

conducting the CDP hearing even though they had sent an OIC request to another

IRS office); Bergdale v. Commissioner, T.C. Memo. 2014-152 at *11-*12

(“[T]here is no abuse of discretion when the settlement officer fails to consider a

taxpayer’s request for an offer-in-compromise when a Form 656 was not filed.”);

Romero v. Commissioner, T.C. Memo. 2009-264, 98 T.C.M. (CCH) 473, 475

(“Without the submission of a formal OIC, we cannot determine whether

respondent abused his discretion.”); O’Neil v. Commissioner, T.C. Memo. 2009-

183, 98 T.C.M. (CCH) 90, 94 (finding no abuse of discretion where taxpayer

discussed OIC with settlement officer but failed to submit a written offer); Godwin

v. Commissioner, T.C. Memo. 2003-289, 86 T.C.M. (CCH) 451, 457 (“Taxpayers

who wish to propose an offer in compromise must submit a Form 656[.]”).
                                       - 10 -

[*10] Finding no abuse of discretion in any respect, we will sustain the IRS

determination to uphold the notice of levy. To reflect the foregoing,


                                                Decision will be entered for

                                      respondent.
