                         T.C. Memo. 2002-2



                      UNITED STATES TAX COURT



   ESTATE OF DONNY DAVID DOSTER, DECEASED, JIMMY MACK DOSTER,
               INDEPENDENT EXECUTOR, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 9411-00L.                    Filed January 4, 2002.



     Walker Arenson and Robert A. Helms, for petitioner.

     Carol B. Reeve, Marilyn S. Ames, and Gordon P. Sanz, for

respondent.


                        MEMORANDUM OPINION

     FOLEY, Judge:   The issues for decision are whether:    (1)

Respondent’s reconsideration of his denial of the estate’s
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section 61611 extension request was an abuse of discretion; (2)

respondent’s denial of the estate’s request for abatement of a

section 6651(a)(2) addition to tax for failure to pay was an

abuse of discretion; and (3) respondent’s determination

sustaining the proposed collection action was an abuse of

discretion.

                             Background

     The parties submitted this case fully stipulated pursuant to

Rule 122.   When the petition was filed, petitioner’s

representative, Jimmy Mack Doster, Independent Executor

(executor), resided in Sulphur Springs, Texas.     At the time of

his death, Donny David Doster was domiciled in Texas.

     On February 5, 1997, Donny Doster and his wife, Judy Doster,

won a $35.3 million Texas lottery jackpot (Lotto), payable in 20

annual installments of $1,768,000.     On March 15, 1997, the

Dosters formed Texas East-West Limited Partnership to collect and

invest the Lotto proceeds.   Mr. and Mrs. Doster each received a

2-percent general partnership interest and a 48-percent limited

partnership interest.



     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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     On July 30, 1997, Mr. Doster died.   On that date, Mr.

Doster’s interest in the partnership, which passed to his estate,

consisted primarily of the right to receive half of each of the

19 remaining Lotto installments.   Texas law prohibited the sale

or assignment of such installments.

I.   Request for Extension of Time To Pay Estate Taxes

     On April 29, 1998, the estate filed Form 706, United States

Estate Tax Return, reporting estate tax liability of $1,730,845.

The Form 706 stated that the gross estate’s value was $5,110,517,

which included Mr. Doster’s share of the partnership, valued at

$4,428,616.   The Form 706 also stated that the estate was

entitled to deductions for funeral expenses, debts of decedent,

and interests passing to the surviving spouse of $55,019, $4,507,

and $243,850, respectively.

     Accompanying the return was a payment of $346,169 and Form

4768, Application for Extension of Time to File a Return and/or

Pay U.S. Estate Taxes (extension request), in which the estate

sought permission to pay the $1,419,430 balance over 10 years.

The estate contended it had reasonable cause for an extension

because it could not “borrow * * * except at a rate of interest

higher than that generally available”, or sell its interest in

the Lotto installments.   The estate further contended that

liquidation of the partnership interest would not yield a
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reasonable amount of proceeds and, thus, would result in undue

hardship.

II.    Notice of Assessment and Demand for Payment

       On June 1, 1998, respondent assessed the reported $1,730,845

estate tax liability, interest of $12,181, and a $17,308 section

6651(a)(2) addition to tax for failure to timely pay (addition to

tax).    That day respondent sent the estate the notice of

assessment and demand for payment (notice and demand), which

included an explanation of the addition to tax and the procedure

to request relief.

III.    Denial of Extension Request

       On October 9, 1998, respondent denied the extension request

because:

       A discretionary extension of time to pay for reasonable
       cause under section 6161(a)(1) may not exceed 12 months
       and under 6161(a)(2) may not exceed 10 years; therefore
       you have to apply one year at a time & establish why
       the executor can not full[y] pay the estate tax due.
       There are sufficient estate assets (and partnership
       assets) that the heirs can borrow against to satisfy
       the Federal estate tax liability.

       On October 19, 1998, the estate appealed the denial.   On

December 8, 1998, and January 5, 1999, by teleconference, the

Appeals officer and the estate’s attorneys discussed the appeal.

On December 8, 1998, the estate’s attorneys provided copies of a

loan application rejection from the executor’s bank and, on
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January 22, 1999, a copy of the partnership’s limited partnership

agreement.   The Appeals Office (Appeals) informed petitioner’s

counsel that it was sustaining respondent’s denial.   In a letter

dated February 11, 1999 (Appeals’ denial), respondent informed

the estate that the estate’s creditors must be paid before

beneficiaries; the estate had sufficient liquidity to pay the

tax; and the estate could borrow additional funds if necessary.

      On February 9, 1999, respondent sent the estate a Final

Notice of Intent to Levy and Notice of Your Right to a Hearing.

On March 3, 1999, respondent received the estate’s Request for a

Collection Due Process Hearing, Form 12153.   At the section 6330

hearing (hearing), on April 28, 1999, the estate presented

evidence that it had sought to obtain a loan to pay the tax.

Between May 5, 1999, and June 15, 2000, the Appeals officer and

the estate’s attorneys had several telephone conferences to

discuss the estate’s continued efforts to secure a loan and

various other issues raised at the hearing.

IV.   Denial of Abatement Request

      On June 16, 1999, more than 1 year after respondent sent the

notice and demand, the estate requested an abatement of the

section 6651(a)(2) addition to tax (request for abatement).     On

June 30, 1999, respondent denied the estate’s request and
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asserted that the estate had not shown that its failure to pay

was due to reasonable cause.

      Effective September 1, 1999, the Texas legislature amended

Tex. Govt. Code Ann. sec. 466.410 (Vernon Supp. 2001) to allow

assignment of future lottery payments.    On September 9, 1999, the

estate appealed respondent’s abatement request denial and

asserted that, prior to the September 1 effective date, neither

the estate nor the partnership could have borrowed against the

lottery proceeds to pay the estate tax.   Appeals, on February 10,

2000, concluded that the estate had sufficient liquidity to pay

the estate tax and sustained respondent’s denial of the request

for abatement.

V.   Section 6330 Proceedings

      On August 9, 2000, Appeals issued a Notice of Determination

Concerning Collection Action(s) Under Section 6320 and/or 6330

(determination), sustaining respondent’s collection efforts.

Appeals determined:

      The North Texas Appeals office previously heard the
      appeal and denied the extension after an administrative
      conference in February of 1999. The Appeals Officer
      found that the estate as of February 1999 had
      sufficient cash flow to pay the taxes and/or had the
      ability to borrow to pay the taxes.

      During the course of the CDP proceeding you raised the
      issue of abating the penalties under IRC §6551(a)(2).
      Your request was referred to the North Texas District
      of the I.R.S. for administrative consideration. Your
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     request was denied. You appealed the decision and the
     matter was referred to an Appeals Officer who was not
     previously involved in the CDP.

     The Appellate conferee found that the executor did not
     exercise ordinary business care and prudence and
     sustained the assertion of the penalty.

     ·    We have reconsidered your request for extension of
          time to pay and have concluded that the decision
          of the appellate conferee was correct and not an
          abuse of discretion.

     ·    We have reviewed your request for abatement of the
          penalty and have concluded that the decision of
          the appellate conferee was correct and not an
          abuse of discretion. We did not find that your
          failure to pay the estate tax was due to
          reasonable cause. Since you have previously had
          an opportunity to dispute this penalty liability
          in an administrative appeals proceeding, this is
          not an issue appropriately raised under IRC §
          6330.

     During the section 6330 proceedings, respondent offered, but

the estate refused to accept, an installment agreement that would

divert the estate’s partnership income stream to respondent until

the tax liability was satisfied.

                         Discussion

I.   Court’s Review of Extension Request Denial

     Section 6330 provides taxpayers a right to a hearing before

respondent levies on their property.   Pursuant to section

6330(c)(2) the taxpayer may raise, at the hearing, relevant

issues relating to the unpaid tax.    A taxpayer may not raise an
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issue previously raised and considered in a hearing or other

administrative or judicial proceeding in which the taxpayer

participated meaningfully.    Sec. 6330(c)(4) (preclusion rule).

The resulting determination must take into consideration the need

for efficient tax collection as well as the legitimate concerns

of the taxpayer that any collection action be no more intrusive

than necessary.    Sec. 6330(c)(3)(C).   This Court has jurisdiction

to review such determination upon a timely taxpayer request.

Sec. 6330(d).    Where the underlying liability is not properly at

issue, we review respondent’s determination for abuse of

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

     After conducting administrative proceedings, on February 11,

1999, Appeals sustained respondent’s denial of the extension

request.   At the hearing, the estate sought review of the

Appeals’ denial.    Respondent contends that, pursuant to the

section 6330(c)(4) preclusion rule, the estate may not raise and

respondent is not required to address the Appeals’ denial.      The

estate contends that issues raised in proceedings conducted

before January 19, 1999, section 6330’s effective date, are not

subject to the section 6330(c)(4) preclusion rule.

     We agree with respondent that there is no authority for the

estate’s contention that section 6330(c)(4) limits the definition

of a “previous administrative * * * proceeding” to one occurring
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after section 6330's effective date.      See Goza v. Commissioner,

supra at 182-183 (holding that receipt of a notice of deficiency

issued prior to January 19, 1999, precluded the taxpayer from

challenging the underlying liability).     We need not decide

whether review of Appeals’ denial of the extension request is

precluded by section 6330(c)(4) because the Appeals’ denial was

raised by the estate and reconsidered by respondent.     Indeed,

respondent stated in the determination:     “We have reconsidered

your request for extension of time to pay and have concluded that

the decision of the appellate conferee was correct and not an

abuse of discretion.”   In sustaining the extension denial, the

Appellate conferee asserted his objection to allowing

distributions to the beneficiary prior to payment of the estate’s

tax liability, and found unpersuasive the estate’s contention

that it could not pay the estate tax liability because it could

not “borrow * * * except at a rate of interest higher than that

generally available”.   Respondent’s refusal to reverse the

Appellate conferee’s decision was not an abuse of discretion.

II.   The Request for Abatement

      The estate contends that it was entitled to raise, and have

considered at the hearing, its request for abatement.     Respondent

contends that this issue could not be raised during the hearing

because the estate took advantage of the opportunity to challenge
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the addition to tax in a separate administrative proceeding.      We

need not determine whether the request for abatement was

appropriately precluded because it was raised by petitioner and

considered and rejected by respondent.      Indeed, the determination

letter states that “We have reviewed your request for abatement

of the penalty and have concluded that the decision of the

appellate conferee was correct and not an abuse of discretion.

We did not find that your failure to pay the estate tax was due

to reasonable cause.”   The estate failed to establish reasonable

cause for its failure to pay timely the estate tax.      We conclude

that this determination was not an abuse of discretion.

III. Court Review of Collection Alternatives

     It was appropriate for respondent to consider the estate’s

request for an extension insofar as it was proposed or considered

as a collection alternative.   We conclude that respondent’s

rejection of such request was not an abuse of discretion.

     Respondent is required, pursuant to section 6330(c)(3)(C),

to consider “whether any proposed collection action balances the

need for the efficient collection of taxes with the legitimate

concern of the person that any collection action be no more

intrusive than necessary.”   See also H. Conf. Rept. 105-599 at

264 (1998), 1998-3 C.B. 747, 1018.      Respondent did so, even

though his consideration of this issue was sometimes couched as a
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review of the Appeals’ denial.   Respondent offered to allow the

estate to pay the tax and addition to tax by diverting all of the

estate’s partnership income to respondent until the liability is

satisfied (i.e., approximately 2 years).   The estate refused this

offer, insisting that it had a right to make payments over 10

years (i.e., the same contention made in the estate’s request for

extension).

     As respondent pointed out in numerous letters to petitioner,

the estate should pay respondent prior to distributing assets to

the beneficiaries.   Although the estate had a right to only half

of the annual payments, the estate’s share of the installments

could have paid off the estate’s Federal estate tax liability in

approximately 2 years.   In addition, in September 1999, Texas law

changed, allowing the sale or assignment of the payment stream,

almost a year before the Appeals officer issued the

determination.   To the extent respondent considered installment

payments as a collection alternative, there was no abuse of

discretion.

     Contentions we have not addressed are moot, irrelevant, or

meritless.
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To reflect the foregoing,


                                  Decision will be entered

                             for respondent.
