                         T.C. Memo. 2006-186



                       UNITED STATES TAX COURT



     RUDOLPH HARRIS, SR., AND VERLINE HARRIS, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 21486-03L.              Filed August 30, 2006.



     Rudolph Harris, Sr., pro se.

     Monica J. Miller, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     VASQUEZ, Judge:    Pursuant to section 6330(d),1 petitioners

seek review of respondent's determination regarding collection of

their 1995, 1996, 1997, 1998, and 1999 income tax liabilities.




     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code.
                                   - 2 -

                          FINDINGS OF FACT

     At the time they filed the petition, Rudolph Harris, Sr.,

and Verline Harris resided in Tampa, Florida.       Mr. and Mrs.

Harris filed Federal income tax returns reporting as follows:2

                                        Withholding
                                       plus payments
         Year            Tax            with return          Tax Due
         1995          $3,461              $1,761            $1,700
         1996           2,262               1,214             1,048
         1997           2,591                 518             2,073
         1998           1,787                 981               806
         1999           3,555               2,761               794

     According to Internal Revenue Service (IRS) transcripts of

account, on or about October 29, 2001, the IRS received an offer-

in-compromise (OIC) from Mr. and Mrs. Harris to settle their

1995, 1996, 1997, 1998, and 1999 tax liabilities (first OIC).

The boxes for “Doubt as to Collectibility” and “Effective Tax

Administration” are marked on the first OIC.        On March 29, 2002,

the IRS rejected the first OIC.

     On or about July 26, 2002, Mr. and Mrs. Harris submitted

another OIC to settle their 1995, 1996, 1997, 1998, and 1999 tax

liabilities (second OIC).       The boxes for “Doubt as to

Collectibility” and “Effective Tax Administration” are marked on

the second OIC.    At this time, Mr. and Mrs. Harris were 71 years



     2
          All amounts are rounded to the nearest dollar.
                                - 3 -

old, were retired, and had an adult child living with them who

was a dependent for tax purposes.   On the second OIC, Mr. Harris

wrote:   “As the record will verify, I am re-submitting this Offer

in Compromise which will include basically statements of both our

incomes.   As you know Verline, my wife and I are both retired.   I

am also submitting copies of health status from our doctors.”

     On February 20, 2003, an entry was made on a 10-page

document entitled “ICS History Transcript” (ICS transcript)--

which reflects Mr. and Mrs. Harris’s collection case history.

The entry states that Mr. Harris provided a statement from his

doctor that Mr. Harris has severe osteoarthritis, he is totally

disabled, and he cannot work.   It also was noted that Mrs. Harris

provided statements from two doctors.   Mrs. Harris was diagnosed

with a “non-Q wave myocardial infarction”.   She has a history of

coronary artery disease, class 1 to 11 angina pectoris, a history

of hyperlipidemia even on medication, a history of goiter,

hypothyroidism even on medication, and insulin-dependent diabetes

mellitus with diabetic retinopathy.

     An undated and unsigned handwritten document regarding the

reasonable collection potential for Mr. and Mrs. Harris’s 1995,

1996, 1997, 1998, and 1999 tax years, prepared by a revenue

officer,3 lists $574 as available (presumably per month) for


     3
        According to the ICS transcript, on Jan. 9, 2003, Aisha
Akil was assigned to petitioners’ case. Accordingly, Revenue
                                                   (continued...)
                               - 4 -

payment of the tax liabilities for these years.   This document

appears to have been prepared in response to the second OIC as it

notes “1000 offer 7/26/02, 95-99” at the top of the first page.

It also notes “Updated medical info [illegible]”.   The figures

listed by the revenue officer in the “Claimed” and “Allowed R/O”

columns for income and expenses are not supported by any original

documentation.   The “Total RCP per Revenue Officer” is blank.4

     On or about April 21, 2003, the IRS rejected the second OIC.

     On or about June 13, 2003, respondent filed a Notice of

Federal Tax Lien (NFTL), prepared and/or filed by Revenue Officer

Akil, with the Clerk of the Circuit Court of Hillsborough County

in Tampa, Florida.   The NFTL listed the unpaid balances as

follows:   $399, $2,352, $3,757, $1,991, and $1,136 for 1995,

1996, 1997, 1998, and 1999, respectively (the NFTL lists a total

unpaid balance of $9,635).

     On June 19, 2003, respondent mailed Mr. and Mrs. Harris

separate notices of Federal tax lien filing and Notices of

Federal Tax Lien Filing and Your Right to a Hearing Under Section

6320.




     3
      (...continued)
Officer Akil appears to be the revenue officer who prepared this
document as well as the entries on the ICS transcript after Jan.
9, 2003.
     4
        RCP would appear to stand for reasonable collection
potential.
                                 - 5 -

     On July 14, 2003, Mr. and Mrs. Harris submitted a Form

12153, Request for a Collection Due Process Hearing, regarding

the NFTL for 1995, 1996, 1997, 1998, and 1999.

     On August 14, 2003, Appeals Officer Pamela Ludwig was

assigned to Mr. and Mrs. Harris’s hearing request.   The Appeals

officer’s case activity record and case screening notes, which

are scant, indicate that Mr. and Mrs. Harris are current in

filing through tax year 2002, they do not have outstanding tax

liabilities for any other periods, they had filed the two

aforementioned OICs, and their balance due as of November 30,

2003, is $13,543--an increase of almost $4,000 since the filing

of the NFTL 5 months earlier.    According to the Appeals officer’s

case activity record, on October 3, 2003, the Appeals officer

transferred the case to a settlement officer to be worked in

conjunction with the appeal of the second OIC that was rejected

on April 21, 2003.

     Settlement Officer Peter Salinger was assigned to Mr. and

Mrs. Harris’s hearing request.    The settlement officer also was

assigned to the appeal of their second OIC.   The settlement

officer considered the second OIC as a collection alternative in

connection with Mr. and Mrs. Harris’s hearing request.

     As part of the section 6330 proceedings, the settlement

officer did not review or consider originals or copies of:     The

second OIC (i.e., the Form 656, Offer-in-Compromise); the
                                - 6 -

documents Mr. and Mrs. Harris previously submitted supporting the

second OIC--i.e., Forms 433-A, Collection Information Statement

for Wage Earners and Self-Employed Individuals, or the medical

records from the three doctors referred to in the body of the

second OIC; or the income and expense worksheets.5

     On November 24, 2003, respondent issued Mr. and Mrs. Harris

a Notice of Determination Concerning Collection Action(s) Under

Section(s) 6320 and/or 6330 determining that the NFTL would not

be withdrawn.

                               OPINION

     Section 6320 provides that the Secretary shall furnish the

person described in section 6321 with written notice (i.e., the

hearing notice) of the filing of a notice of lien under section

6323.    Section 6320 further provides that the taxpayer may

request administrative review of the matter (in the form of a

hearing) within a 30-day period.    The hearing generally shall be

conducted consistent with the procedures set forth in section

6330(c), (d), and (e)--which provide for, among other things, the

conduct of the hearing, the making of a determination, and

jurisdiction for court review of the section 6330 determination.

Sec. 6320(c).



     5
        Respondent submitted an affidavit of the settlement
officer listing the materials he reviewed before the
determination was made in this case. Neither the settlement
officer nor any other IRS employee testified at trial.
                                - 7 -

     Pursuant to section 6330(c)(2)(A), a taxpayer may raise at

the section 6330 hearing any relevant issue with regard to the

Commissioner’s collection activities, including spousal defenses,

challenges to the appropriateness of the Commissioner’s intended

collection action, and alternative means of collection.      Sego v.

Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, 114

T.C. 176, 180 (2000).   Mr. and Mrs. Harris are not challenging

their underlying liabilities.   See sec. 6330(c)(2)(B).

Therefore, we review respondent’s determination for an abuse of

discretion.   See Sego v. Commissioner, supra at 610.

     Respondent stated that the settlement officer considered Mr.

and Mrs. Harris’s second OIC as part of their section 6330

hearing.    Respondent relies on Schenkel v. Commissioner, T.C.

Memo. 2003-37, for the proposition that there was no abuse of

discretion in this case.    Schenkel, however, is distinguishable

from the case at bar.

     In Schenkel, the Appeals officer received a completed Form

433-A directly from the taxpayer.    The taxpayer listed his

assets, his monthly income, and his total monthly living

expenses.   The Appeals officer reviewed the taxpayer’s OIC

considering all the financial information the taxpayer submitted.

The Appeals officer himself calculated the taxpayer’s total

allowable monthly living expenses.      Upon an independent review of

the underlying documentation, the Appeals officer concluded that
                               - 8 -

the taxpayer’s OIC was unacceptable because the taxpayer could

pay his full tax liability within the period of limitations for

collection.

     In this case, the settlement officer did not conduct an

independent review.   Although the settlement officer reviewed

documents prepared by respondent’s agents regarding the second

OIC, the settlement officer did not review the second OIC and/or

the documents supporting the second OIC--the Forms 433A and 656,

the income and expense worksheets, and the medical records.

Instead, the settlement officer relied solely on the conclusory,

undocumented, and unsupported figures from the handwritten

determination of reasonable collection potential prepared by the

revenue officer.

     Accordingly, we conclude that, unlike the Appeals officer in

Schenkel, the settlement officer in this case did not conduct an

independent administrative review of the rejection of the OIC.

Sec. 7122(d)(1).   Additionally, the evidence does not establish

that the settlement officer prepared a monthly income and

allowable expense analysis based on all of the information Mr.

and Mrs. Harris provided or that the figures the settlement

officer relied on represented national standard expenses.    Sec.

7122(c)(2); sec. 301.7122-1(b)(2), (k), Proced. & Admin. Regs.

(the regulation applies as the OIC in issue was pending or

submitted on or after July 18, 2002).
                                 - 9 -

     The officer or employee of Appeals conducting a section 6330

hearing cannot turn a blind eye to or ignore relevant documents

in the Commissioner’s possession--especially when those documents

are specifically mentioned in other documents the officer or

employee of Appeals reviews or the officer or employee of Appeals

knows the documents exist.   Upon the basis of the foregoing, we

conclude that the determination for the years in issue was an

abuse of discretion.6

     To reflect the foregoing,

                                              Decision will be entered

                                         for petitioners.




     6
        Additionally, respondent conceded at trial and on brief
that Mr. and Mrs. Harris’s 1995 tax liabilities have been fully
satisfied.
