                        T.C. Memo. 2012-252



                   UNITED STATES TAX COURT



               LOREN LIPSON, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 2187-10L.                          Filed August 30, 2012.



      P filed a petition for judicial review pursuant to I.R.C. sec.
6330(d)(1)(A) in response to R’s determination that levy action was
appropriate.

      Held: R’s determination is sustained.


Cruz Saavedra, for petitioner.

Aely K. Ullrich, for respondent.
                                          -2-

[*2]                         MEMORANDUM OPINION


       WHERRY, Judge: This case is before the Court on a petition for review of a

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

and/or 6330 (notice of determination).1 Petitioner seeks review of respondent’s

determination to proceed with a proposed levy with respect to his 2006 tax year.

The sole issue is whether respondent’s determination to proceed with the proposed

levy to collect petitioner’s unpaid tax liabilities constitutes an abuse of discretion.

                                      Background

       This case was submitted fully stipulated pursuant to Rule 122. The parties’

stipulation of facts, with accompanying exhibits, is incorporated herein by this

reference. Petitioner resided in California when he filed his petition.

       Petitioner filed his 2006 Form 1040, U.S. Individual Income Tax Return, on

April 15, 2007, but failed to fully pay the liability reported on the Form 1040.

Petitioner’s 2006 underlying tax liability is not in dispute.

       On March 16, 2009, respondent issued to petitioner a Final Notice of Intent

to Levy and Notice of Your Right to a Hearing, showing a total amount due of


       1
       Unless otherwise indicated, all section references are to the Internal Revenue
Code of 1986, as amended, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
                                          -3-

[*3] $149,378.10, for the 2006 tax year. Petitioner timely filed Form 12153,

Request for a Collection Due Process or Equivalent Hearing, on which he checked

the box next to “installment agreement”. In documents attached to the Form 12153

petitioner stated that a levy “would cause a severe hardship on the taxpayer by not

allowing payment of necessary living expenses. The taxpayer does not have assets

to liquidate for payment of the liabilities nor do they [sic] have the ability to borrow

funds for payment.”

      By letters dated October 27, 2009, Settlement Officer Sharon R. Lavenberg

notified petitioner that she had been assigned his case and scheduled a telephone

conference with his counsel, Cruz Saavedra, for November 30, 2009. Settlement

Officer Lavenberg’s letter to Mr. Saavedra also requested that petitioner submit

Form 433-A, Collection Information Statement for Wage Earners and Self-

Employed Individuals, and informed petitioner that

      For me to consider alternative collection methods such as an
      installment agreement or offer in compromise, you must provide any
      items listed below. In addition, you must have filed all federal tax
      returns required to be filed.

      Appeals cannot approve an installment agreement or accept an offer-in-
      compromise unless all required estimated tax payments for the current
      year’s income tax liability have been made. If you wish to pursue one
      of these alternatives during the CDP hearing process, you must arrange
      for the payment of any required estimated tax payments. Delinquent
      estimated tax payments can be included in an installment
                                        -4-

        [*4] agreement. However, the estimated tax payments must be paid in
        full before an offer-in-compromise can be accepted. Our records
        indicate that you have not made estimated tax payments for the
        following period(s): 12/2009.

        In preparation for the November 30, 2009, collection due process (CDP)

telephone hearing Mr. Saavedra sent Settlement Officer Lavenberg a facsimile dated

November 30, 2009, in which he proposed that petitioner be placed on an

installment agreement of $10,000 per month, beginning January 1, 2010. Mr.

Saavedra proposed that the installment agreement also include approximately

$80,000 of unpaid tax liabilities that would accrue when petitioner filed his 2009

Federal income tax return. Mr. Saavedra stated that petitioner had not been able to

make timely estimated tax payments for 2009 “due to prior payments being made to

the IRS, uneven amounts of earned income (hard to plan) and payments required to

be made to his wife pending dissolution of their marriage.” Attached to the fax was

an updated Form 433-A for petitioner which inter alia showed total monthly income

of $18,194, total monthly expenses of $22,000, and investments of $406,805.

Petitioner’s listed expenses include voluntary monthly payments of $10,000 to his

wife.

        The CDP hearing was held via telephone on November 30, 2009. As of the

date of the CDP hearing, petitioner had still not made any estimated income tax
                                         -5-

[*5] payments for the 2009 tax year. During the CDP hearing Settlement Officer

Lavenberg explained that she would not accept the installment agreement because

petitioner had already defaulted on two installment agreements, was not in

compliance with current tax payments, and was not showing an ability to make the

proposed installment agreement payments.2 During the CDP hearing Mr. Saavedra

acknowledged that petitioner’s only chance was to sell his house. Petitioner’s house

is worth several million dollars, and he has sufficient equity in the house to pay the

taxes at issue; but according to petitioner the disposition of the house was restricted

by the court which had jurisdiction over the divorce, pending the final division of the

marital property.

      Respondent issued a notice of determination dated December 16, 2009,

sustaining the proposed levy action. In the background portion of the notice of

determination, it is explained that petitioner’s Form 433-A showed expenses

exceeding his income, that he had already defaulted on two installment

agreements, and that he had showed no ability to make the installment payments.

The notice of determination noted that petitioner had “requested [an] installment

agreement but * * * does not qualify [for any collection alternatives] because he is


      2
        Respondent alleges petitioner defaulted on two prior installment agreements.
On brief petitioner for the first time disputes whether he defaulted on one of the
installment agreements, although he admits he defaulted on the other.
                                         -6-

[*6] not in compliance with his estimated tax payments for 12/2009.” Petitioner

timely petitioned this Court, stating in part: “Petitioner disagrees with the decision

of the Appeals Office to deny his request for an Installment Agreement on the

grounds that he was not in compliance with estimated tax payments.”

                                      Discussion

      Section 6331(a) authorizes the Commissioner to levy upon property or

property rights of a taxpayer liable for taxes who fails to pay those taxes within 10

days after a notice and demand for payment is made. Section 6331(d) provides that

the levy authorized in section 6331(a) may be made with respect to unpaid tax

liability only if the Commissioner has given written notice to the taxpayer 30 days

before the levy. Section 6330(a) requires the Commissioner to send a written notice

to the taxpayer of the amount of the unpaid tax and of the taxpayer’s right to a

section 6330 hearing at least 30 days before the first levy is made.

      If an administrative hearing is requested in a levy case, the hearing is to be

conducted by Appeals. Sec. 6330(b)(1). At the hearing, the Appeals officer

conducting it must verify that the requirements of any applicable law or

administrative procedure have been met. Sec. 6330(c)(1).

      A taxpayer may raise any relevant issue relating to the unpaid tax or the

proposed levy, including a spousal defense, appropriateness of the collection
                                         -7-

[*7] action, and/or collection alternatives such as an offer-in-compromise or an

installment agreement. Sec. 6330(c)(2); sec. 301.6330-1(e)(1), Proced. & Admin.

Regs. Following the hearing, the Appeals officer must determine among other

things whether the proposed collection action should proceed. In making the

determination the Appeals officer shall take into consideration: (1) whether the

requirements of all applicable law and administrative procedure have been satisfied;

(2) any relevant issues raised by the taxpayer during the section 6330 hearing; and

(3) whether the proposed collection action balances the need for efficient collection

of taxes with the taxpayer’s legitimate concern that any collection action be no more

intrusive than necessary. Sec. 6330(c)(3).

      This Court has jurisdiction to review the Appeals officer’s determination.

Sec. 6330(d)(1). As is the case here, where the taxpayer’s underlying liability was

not properly at issue in the hearing, we review the determination for abuse of

discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v.

Commissioner, 114 T.C. 176, 181-182 (2000). An Appeals officer’s

determination is not an abuse of discretion unless the determination is arbitrary,

capricious, or without sound basis in law or fact. Giamelli v. Commissioner, 129

T.C. 107, 111 (2007). The Court of Appeals for the Ninth Circuit, the court to

which this case is appealable absent stipulation of the parties to the contrary, has
                                         -8-

[*8] held that the Court’s review is confined to the record at the time the

Commissioner’s decision was rendered. Keller v. Commissioner, 568 F.3d 710,

718 (9th Cir. 2009), aff’g in part as to this issue T.C. Memo. 2006-166.

      Petitioner argues that Settlement Officer Lavenberg abused her discretion in

denying his installment agreement. Among the issues that may be raised at Appeals

and are reviewed for an abuse of discretion are “offers of collection alternatives”

such as an installment agreement. Sec. 6330(c)(2)(A)(iii); see Salahuddin v.

Commissioner, T.C. Memo. 2012-141.

      Petitioner asserts that “respondent’s determination that petitioner’s lack of

current compliance barred him from any alternative to the intended levy is wrong as

a matter of law and results in an abuse of discretion.” Internal Revenue Manual

(IRM) pt. 5.14.1.2(8)(F) (Sept. 26, 2008) states that “current returns for taxes must

be filed and current deposits paid to qualify for an agreement” but goes on to state

in a subsequent provision that “If it appears a taxpayer will have a balance due at

the end of the current year, the accrued liability may be included in an agreement.”

Id. pt. 5.14.1.4.1(19). Petitioner states that “The Appeals Office had discretion to

approve petitioner’s proposed installment agreement.” This is true. However, that

does not mean Settlement Officer Lavenberg had to accept petitioner’s proposed

installment agreement.
                                          -9-

[*9] Settlement Officer Lavenberg did rely, in part, on petitioner’s failure to pay

current taxes in rejecting his proposed installment agreement. However, this

reliance does not constitute an abuse of discretion. See Orum v. Commissioner, 123

T.C. 1, 13 (2004), aff’d, 412 F.3d 819 (7th Cir. 2005). Additionally, Settlement

Officer Lavenberg also analyzed and relied on petitioner’s submitted Form 433-A,

which she determined did not reflect an ability of petitioner to pay the proposed

installment payments of $10,000 per month. See IRM pt. 5.14.1.4(4) (Sept. 26,

2008) (stating “Installment agreements must reflect taxpayers’ ability to pay on a

monthly basis throughout the duration of agreements.”). She also looked at the fact

that petitioner owned investments totaling $406,805. Id. pt. 5.14.1.4(6) states that

“Taxpayers do not [generally] qualify for [an] installment agreement[ ] if balance

due accounts can be fully or partially satisfied by liquidating assets”.

      The Court does not normally make an independent determination of what

would be an acceptable alternative. Murphy v. Commissioner, 125 T.C. 301, 320

(2005), aff’d, 469 F.3d 27 (1st Cir. 2006). If Appeals or settlement officers follow

all statutory and administrative guidelines and provide a reasoned balanced

decision, the Court will not reweigh the equities. Fifty Below Sales & Mktg., Inc.

v. United States, 497 F.3d 828, 830 (8th Cir. 2007). We do not conclude that

Settlement Officer Lavenberg abused her discretion in denying petitioner’s
                                          - 10 -

[*10] proposed installment agreement considering that he had defaulted on prior

installment agreements,3 he had sufficient assets to pay the liabilities, and his listed

expenses on Form 433-A exceeded his income.4

      Petitioner also argues that “a levy on petitioner’s wages and other earnings

would render petitioner unable to pay his basic living expenses” and that Settlement

Officer Lavenberg abused her discretion by failing to take this into consideration.

Petitioner argues Settlement Officer Lavenberg should have considered section

301.6343-1(b), Proced. & Admin. Regs. which provides:

            (b) Conditions requiring release.--The director must release the
      levy upon all or a part of the property or rights to property levied

      3
         Petitioner did not raise until trial the issue of whether he had defaulted on
two installment agreements as opposed to one. Our review is confined to the record
at the time the Commissioner’s decision was rendered. See Keller v.
Commissioner, 568 F.3d 710, 718 (9th Cir. 2009), aff’g in part as to this issue T.C.
Memo. 2006-166.
      4
        In denying his proposed installment agreement, petitioner argues that
Settlement Officer Lavenberg did not analyze national and local standards or
Internal Revenue Manual pt. 5.15.1.23 (May 9, 2008) (Retirement or Profit Sharing
Plans). IRM pt. 5.15.1.7(5) (May 9, 2008) states “National and local expense
standards are guidelines”. IRM pt. 5.15.1.23 provides that when determining the
value of a pension plan, if the plan is a 401(k) plan and the taxpayer is close to
retirement, then “equity is the cash value less any expense for liquidating the
account and early withdrawal penalty, or consider the plan as income, if the income
from the plan is necessary to provide for necessary living expenses.” In the CDP
hearing neither petitioner nor Mr. Saavedra raised the national and local expense
standards or that petitioner’s retirement plan should be discounted or considered
future income.
                                         - 11 -

       [*11] upon if he or she determines that one of the following conditions
       exists--

          *             *      *         *          *          *          *

              (4) Economic hardship--(i) General rule.--The levy is creating
       an economic hardship due to the financial condition of an individual
       taxpayer. This condition applies if satisfaction of the levy in whole or
       in part will cause an individual taxpayer to be unable to pay his or her
       reasonable basic living expenses. The determination of a reasonable
       amount for basic living expenses will be made by the director and will
       vary according to the unique circumstances of the individual taxpayer.
       Unique circumstances, however, do not include the maintenance of an
       affluent or luxurious standard of living.

       On his Form 12153 petitioner stated that a levy on his “income and/or bank

accounts would cause a severe hardship * * *. The taxpayer does not have assets to

liquidate for payment of the liabilities”. Respondent’s brief asserts, and the

settlement officer’s notes support, that petitioner did not again mention until he filed

his petition that a levy would result in his being unable to pay necessary living

expenses.

       In the fax sent to Settlement Officer Lavenberg by Mr. Saavedra in

preparation for the November 30, 2009, CDP hearing, there is no mention of how a

levy would cause petitioner to be unable to pay necessary living expenses, although

the letter did state:

       Taxpayer has been in the process of getting a divorce for several years
       and has been required to make payments to his spouse during
                                        - 12 -

      [*12] this time which has caused great disruption in the handling of his
      own finances. Taxpayer is requesting that the dissolution court order
      the sale of the family residence so that these and other obligations can
      be paid from the proceeds. The wife, who resides there, is resisting
      such action.

      Respondent contends, and we agree, that petitioner’s statement that he was

experiencing a disruption in his finances as a result of the divorce proceedings does

not equate to his being unable to pay for basic necessities. See Fargo v.

Commissioner, 447 F.3d 706, 709-710 (9th Cir. 2006), aff’g T.C. Memo. 2004-13.

The letter contains no other explanation as to how a levy on his investments, house,

or income would prevent him from paying living expenses. In his reply brief

petitioner argues that he “did submit evidence that a levy would cause economic

hardship.” The evidence alluded to is petitioner’s updated Form 433-A, which was

attached to the fax.

      As explained above, the Form 433-A showed petitioner had investments

totaling over $400,000. It showed monthly income of $18,194. Petitioner had

stated he could get additional work, earning an additional $10,000 per month.

Included in the expenses listed were the monthly payments of $10,000 petitioner

was voluntarily making to his spouse. Petitioner did not explain how levying

against his investments or home would leave him unable to pay necessary living
                                        - 13 -

[*13] expenses. Petitioner acknowledges that his earnings, coupled with the

voluntary payments to his wife, “do not suggest economic hardship.”

      Settlement Officer Lavenberg did not abuse her discretion. She made sure all

applicable law and administrative procedure had been satisfied, she considered the

issues petitioner raised during the CDP hearing, and, on the evidence before her, she

concluded that the proposed collection action was not more intrusive than

necessary. Settlement Officer Lavenberg’s rejection of petitioner’s proposed

installment agreement and the determination to proceed with collection for his 2006

tax year was not an abuse of discretion; therefore, the proposed collection action is

sustained.

      The Court has considered all of petitioner’s contentions, arguments, requests,

and statements. To the extent not discussed herein, the Court concludes that they

are meritless, moot, or irrelevant.

      To reflect the foregoing,


                                                       Decision will be entered

                                                 for respondent.
