                                            VANCE L. WADLEIGH, PETITIONER v. COMMISSIONER                                       OF
                                                     INTERNAL REVENUE, RESPONDENT
                                                        Docket No. 10783–07L.                      Filed June 15, 2010.

                                                  R issued a notice of intent to levy on P’s pension income to
                                               collect P’s unpaid Federal income tax for 2001. P timely
                                               requested a hearing under sec. 6330, I.R.C. At the hearing P
                                               argued: (1) His liability for the unpaid 2001 Federal income
                                               tax was discharged in his 2005 bankruptcy; (2) the notice of
                                               intent to levy was invalid because his pension was not yet in
                                               payout status; and (3) a prior notice of levy for a similar
                                               amount of unpaid tax was issued and later released. R’s Office
                                               of Appeals determined that the proposed levy could proceed.
                                               P contends the Appeals Office abused its discretion. Held: The
                                               sec. 6321, I.R.C., lien that attached to P’s interest in his pen-
                                               sion was not discharged by his 2005 bankruptcy because his
                                               interest in his pension was excluded from his bankruptcy
                                               estate pursuant to 11 U.S.C. sec. 541 (2006). Held, further,
                                               although P’s discharge in bankruptcy relieved him of personal
                                               liability for the unpaid 2001 Federal income tax, the discharge
                                               does not prevent R from collecting P’s unpaid 2001 Federal
                                               income tax in rem by levy on P’s pension income, notwith-
                                               standing R’s failure to file a valid notice of Federal tax lien
                                               with respect to the 2001 Federal income tax liability. Held,
                                               further, although R may not enforce a levy on P’s interest in
                                               his pension until the pension enters payout status, R’s notice
                                               of intent to levy is not invalid merely because it was mailed
                                               to P 9 months before P’s pension entered payout status. Held,

                                      280




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                                               further, R’s release of a prior levy does not release the sec.
                                               6321, I.R.C., lien that R held with respect to P’s interest in
                                               his pension. Held, further, R’s Office of Appeals verified that
                                               the requirements of any applicable law and administrative
                                               procedure had been satisfied and considered all of P’s argu-
                                               ments. However, because the Appeals Office assumed that P’s
                                               wage income would continue after P started receiving his pen-
                                               sion without any support in the administrative record for the
                                               assumption, we shall exercise our discretion to remand this
                                               case to the Appeals Office for further proceedings.

                                           John A. Strain, for petitioner.
                                           Spencer T. Stowe, for respondent.

                                                                                  OPINION

                                         MARVEL, Judge: Pursuant to section 6330(d), 1 petitioner
                                      seeks review of respondent’s determination to sustain a pro-
                                      posed levy on petitioner’s interest in his pension. The levy
                                      relates to petitioner’s unpaid 2001 Federal income tax
                                      liability. The issue for decision is whether respondent abused
                                      his discretion when he sustained the proposed levy. To
                                      resolve this issue, we must first decide whether a section
                                      6321 lien that was not perfected by the filing of a valid notice
                                      of Federal tax lien (NFTL) may be enforced by a levy on peti-
                                      tioner’s pension income after petitioner’s personal liability for
                                      the unpaid tax has been discharged in bankruptcy.

                                                                               Background
                                         The parties submitted this case fully stipulated pursuant
                                      to Rule 122. The stipulation of facts is incorporated by this
                                      reference. On the date he filed his petition, petitioner resided
                                      in California.
                                         On June 28, 2002, respondent recorded an NFTL purport-
                                      edly relating to petitioner’s 2001 tax liability. When the NFTL
                                      was recorded, petitioner had not yet filed his 2001 Federal
                                      income tax return. In fact, respondent intended to issue the
                                      NFTL with respect to petitioner’s 2000 Federal income tax
                                      liability but identified the wrong year (2001) on the NFTL and
                                      recorded it in error. 2 Respondent has since withdrawn the
                                      NFTL. The record contains no evidence that respondent

                                       1 Unless otherwise indicated, all section references are to the Internal Revenue Code, and all

                                      Rule references are to the Tax Court Rules of Practice and Procedure.
                                       2 Petitioner’s 2000 Federal income tax liability is not at issue.




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                                      recorded any other NFTL with respect to petitioner’s 2001 tax
                                      liability.
                                         On or about August 16, 2002, petitioner filed a 2001 Form
                                      1040, U.S. Individual Income Tax Return. Petitioner reported
                                      a balance due on the return but did not pay the balance
                                      when he filed the return. On September 16, 2002, respondent
                                      assessed the tax shown on the return, an addition to tax for
                                      failure to pay timely, an addition to tax for failure to pay
                                      estimated tax, and interest. Petitioner has not paid the
                                      resulting liability (collectively, the 2001 tax liability).
                                         On August 18, 2005, petitioner and his wife, Linda
                                      Wadleigh, filed a voluntary chapter 7 bankruptcy petition in
                                      the U.S. Bankruptcy Court for the Central District of Cali-
                                      fornia. On Schedule B, Personal Property, of the bankruptcy
                                      petition, petitioner listed his interest in his Honeywell Pen-
                                      sion Plan account (pension). However, on Schedule C, Prop-
                                      erty Claimed as Exempt (schedule C), of the bankruptcy peti-
                                      tion, petitioner claimed the pension was exempt property.
                                      Petitioner included the following statement on schedule C:
                                      The interest in the Honeywell Pension Plan is claimed as exempt to the
                                      extent, if any, that said Pension Plan is property of the estate, and the
                                      claims of exemption include any increases in the value of Debtors’ interests
                                      therein. Debtors contend that their interest in the Honeywell Plan are [sic]
                                      excluded from the bankruptcy estate under 11 U.S.C. § 541(c)(2); Patterson
                                      v. Shumate, 504 U.S. 753 (1992).

                                         As reflected on schedule C, petitioner claimed his interest
                                      in the pension was excluded from the bankruptcy estate
                                      pursuant to 11 U.S.C. sec. 541(c)(2) (2006), which provides:
                                      ‘‘A restriction on the transfer of a beneficial interest of the
                                      debtor in a trust that is enforceable under applicable non-
                                      bankruptcy law is enforceable in a [bankruptcy] case’’, as
                                      interpreted in Patterson v. Shumate, 504 U.S. 753, 758–759
                                      (1992). 3 Alternatively, petitioner claimed the pension was
                                         3 In Patterson v. Shumate, 504 U.S. 753, 758–759 (1992), the Supreme Court held that a debt-

                                      or’s interest in a pension plan which is subject to the antialienation provision of the Employee
                                      Retirement Income Security Act of 1974 (ERISA), Pub. L. 93–406, sec. 206(d)(1), 88 Stat. 864
                                      (current version at 29 U.S.C. sec. 1056(d)(1) (2006)), is a beneficial interest in trust that is sub-
                                      ject to a restriction on transfer enforceable under applicable nonbankruptcy law, and therefore
                                      a debtor may exclude his interest in the ERISA-qualified pension plan from his bankruptcy es-
                                      tate under 11 U.S.C. sec. 541(a)(1) and (c)(2) (2006). For purposes of this Opinion and consistent
                                      with the Supreme Court’s opinion in Patterson v. Shumate, supra, the phrase ‘‘ERISA-qualified
                                      pension plan’’ means a qualified plan that contains the antialienation clause required for quali-
                                      fication under ERISA sec. 206(d)(1), 29 U.S.C. sec. 1056(d)(1). See In re Baker, 114 F.3d 636,
                                      638 (7th Cir. 1997).




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                                      exempt property under 11 U.S.C. sec. 522(b)(2) (2006) and
                                      Cal. Civ. Proc. Code sec. 703.140(b)(10)(E) (West 2009), 4 if
                                      and to the extent the pension was properly includable in the
                                      bankruptcy estate.
                                         When petitioner filed for bankruptcy, he was fully vested
                                      in his pension, but the pension was not yet in payout status
                                      and did not contain a lump-sum or similar option that would
                                      have permitted petitioner to withdraw funds from the pen-
                                      sion before reaching retirement age. Petitioner’s right to
                                      receive monthly payments of $1,242.13 under the pension
                                      matured on November 1, 2007.
                                         On December 8, 2005, petitioner received a discharge in
                                      the bankruptcy case. Petitioner’s 2001 Federal income tax
                                      liability was included in the discharge.
                                         On August 31, 2006, respondent mailed petitioner a notice
                                      of intent to levy on petitioner’s pension income to collect peti-
                                      tioner’s unpaid 2000 Federal income tax liability. On
                                      November 16, 2006, however, respondent withdrew the notice
                                      of intent to levy.
                                         On January 29, 2007, more than 9 months before peti-
                                      tioner’s pension entered payout status, respondent mailed
                                      petitioner a Final Notice—Notice of Intent to Levy and
                                      Notice of Your Right to a Hearing (notice of intent to levy)
                                        4 Both State and Federal law limit the amount a debtor may exempt. In addition, States may

                                      opt out of the Federal exemption scheme, thereby limiting debtors who file for bankruptcy in
                                      those States to the exemptions provided under relevant State law. 11 U.S.C. sec. 522(b)(2);
                                      Greene v. Savage, 583 F.3d 614, 618 (9th Cir. 2009).
                                        Pursuant to 11 U.S.C. sec. 522(b)(2), California has opted out of the exemption scheme pro-
                                      vided in the Bankruptcy Code. Cal. Civ. Proc. Code sec. 703.130 (West 2009). However, Cali-
                                      fornia has enacted an exemption scheme that mirrors 11 U.S.C. sec. 522(d)(10)(E) with respect
                                      to pension and profit-sharing plans. See Cal. Civ. Proc. Code sec. 703.140(b)(10)(E) (West 2009),
                                      which provides:
                                           The following exemptions may be elected as provided in subdivision (a):

                                                           *          *         *          *        *         *         *
                                           (10) The debtor’s right to receive any of the following:

                                                        *          *          *         *         *         *         *
                                        (E) A payment under a stock bonus, pension, profit-sharing, annuity, or similar plan or con-
                                      tract on account of illness, disability, death, age, or length of service, to the extent reasonably
                                      necessary for the support of the debtor and any dependent of the debtor, unless all of the fol-
                                      lowing apply:
                                         (i) That plan or contract was established by or under the auspices of an insider that employed
                                      the debtor at the time the debtor’s rights under the plan or contract arose.
                                         (ii) The payment is on account of age or length of service.
                                         (iii) That plan or contract does not qualify under Section 401(a), 403(a), 403(b), 408, or 408A
                                      of the Internal Revenue Code of 1986.




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                                      with respect to petitioner’s 2001 tax liability. The notice of
                                      intent to levy stated in pertinent part as follows:
                                      You have received a discharge under Chapter 7 of the Bankruptcy Code.
                                      Thus, you are relieved from personal liability for the following tax liabil-
                                      ities:

                                                                                                           Amount including
                                                                                                            penalties and
                                             Kind of tax                        Period                         interest

                                                                                                             $57,805.33 (As of
                                             1040–Income                       12/31/2001                      08–30–2007)

                                      However, at least one Notice of Federal Tax Lien for the above tax liabil-
                                      ities was properly filed before your bankruptcy. Despite your relief from
                                      personal liability, the federal tax liens remain attached to your prepetition
                                      property, and the IRS is permitted to take collection action, based on these
                                      federal tax liens, against your prepetition property at any time within the
                                      period permitted by law for collection of the tax. Also, the Service can
                                      pursue administrative collection from property excluded from the Bank-
                                      ruptcy estate based solely on its statutory lien.
                                      This letter is your notice of our intent to levy against prepetition property
                                      under Internal Revenue Code (IRC) section 6331 and your right to receive
                                      Appeals consideration under IRC section 6330.
                                      Prepetition property is property that you held prior to your bankruptcy
                                      filing that was not sold or liquidated by the Chapter 7 trustee for the pay-
                                      ment of your debts. Prepetition property includes three types of property:
                                      (1) property you exempted from the bankruptcy estate under section 522
                                      of the Bankruptcy Code; (2) property abandoned by the bankruptcy trustee
                                      under section 554 of the Bankruptcy Code; and (3) property excluded from
                                      the bankruptcy estate under applicable law, as opposed to property you
                                      exempted from the bankruptcy estate. An example of excluded property is
                                      an interest in a section 401(k) plan or other employer-sponsored plan that
                                      meets the requirements of the Employee Retirement Income Security Act
                                      of 1974 (ERISA). * * *

                                        Although the notice of intent to levy does not expressly
                                      identify the pension, the parties have stipulated that the
                                      pension is the prepetition property on which respondent
                                      plans to enforce his levy. Neither party disputes that the
                                      pension is to be paid pursuant to a qualified plan under the
                                      Employee Retirement Income Security Act of 1974 (ERISA),
                                      Pub. L. 93–406, 88 Stat. 829, or that the plan is subject to
                                      the antialienation provision of ERISA sec. 206(d)(1), 88 Stat.
                                      864 (current version at 29 U.S.C. sec. 1056(d)(1) (2006)).




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                                         On or about February 12, 2007, petitioner timely filed a
                                      Form 12153, Request for a Collection Due Process Hearing,
                                      objecting to the proposed levy. Petitioner did not challenge
                                      the existence or amount of the 2001 tax liability. Instead,
                                      petitioner raised five contentions relating to the appropriate-
                                      ness of respondent’s proposed collection action: (1)
                                      Respondent had issued a levy notice for a similar amount on
                                      August 31, 2006, and released the levy on November 16,
                                      2006; (2) the notice of intent to levy referenced the same
                                      retirement payments addressed in the November 16, 2006,
                                      release and was inconsistent as to the tax year and amount
                                      due; 5 (3) petitioner had not received an analysis regarding
                                      what property, if any, secured respondent’s claim on peti-
                                      tioner’s discharged taxes; (4) because petitioner’s pension was
                                      not property to which petitioner was entitled at the time of
                                      the bankruptcy filing, the pension was not property to which
                                      respondent’s lien could attach; and (5) petitioner’s liability
                                      for the unpaid 2001 Federal income tax was discharged in
                                      bankruptcy on December 8, 2005.
                                         Adlai Climan (Mr. Climan), a settlement officer in the
                                      Internal Revenue Service (IRS) Office of Appeals, was
                                      assigned to handle petitioner’s section 6330 hearing. During
                                      a conversation with Mr. Climan that was part of the hearing
                                      process, petitioner argued that respondent could not levy on
                                      petitioner’s pension income because his 2001 tax liability was
                                      discharged in bankruptcy and respondent had released a
                                      similar levy on petitioner’s interest in his pension. 6 Peti-
                                      tioner did not propose any collection alternatives, such as an
                                      offer-in-compromise or an installment agreement, or provide
                                      any financial information, such as a Form 433–A, Collection
                                      Information Statement for Wage Earners and Self-Employed
                                      Individuals. 7
                                         After his conversation with petitioner, Mr. Climan
                                      reviewed Form 4340, Certificate of Assessments, Payments,
                                      and Other Specified Matters, for petitioner’s 2001 taxable
                                        5 Page 1 of the notice of intent to levy states that the amount due, including additions to tax

                                      and interest, was $57,805.33 as of Aug. 30, 2007, and page 3 states that the total amount owed
                                      as of May 29, 2006, was $71,016.86. Petitioner asserts the notice is inconsistent with transcripts
                                      respondent mailed to him in December 2006.
                                        6 The record does not disclose when the conversation occurred, nor does it indicate whether

                                      the conversation was by telephone or in person.
                                        7 Petitioner maintains he was never asked to provide financial information. Respondent

                                      counters that petitioner was asked for such information. Regardless, the parties do not dispute
                                      that petitioner did not submit financial information during the sec. 6330 hearing.




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                                      year, reviewed financial information contained in petitioner’s
                                      2003–2005 Federal income tax returns, and consulted the
                                      applicable national and local standards. From this informa-
                                      tion Mr. Climan calculated petitioner’s ability to pay the
                                      2001 tax liability. In making his calculations Mr. Climan
                                      assumed that petitioner would continue to work for the same
                                      compensation he had earned in 2005. Mr. Climan calculated
                                      petitioner’s monthly income by dividing the wage income
                                      reported on petitioner’s 2005 return by 12. From his calcula-
                                      tions Mr. Climan determined: (1) ‘‘[Petitioner] has more than
                                      sufficient income to live on [and] attachment of the pension
                                      income will not create a financial hardship’’; (2) the proposed
                                      levy was necessary for payment of the subject liability; and
                                      (3) the proposed levy would balance the Government’s need
                                      to collect the tax with petitioner’s legitimate concern that
                                      any collection action be no more intrusive than necessary.
                                      Accordingly, Mr. Climan determined that the proposed levy
                                      should be sustained.
                                         On April 10, 2007, the Office of Appeals issued a Notice of
                                      Determination Concerning Collection Action(s) Under Section
                                      6320 and/or 6330 (notice of determination) sustaining the
                                      proposed levy. The notice of determination was accompanied
                                      by an ‘‘Appeals Case Memo’’ (memorandum) in which the
                                      Appeals Office briefly explained its decision. With respect to
                                      the filing of an NFTL, the memorandum stated as follows:
                                           Notices of Federal Tax Lien were filed as follows:
                                                                   Date recorded
                                      2000:                          5/25/05
                                      2001:                          7/18/02*
                                      * A severe error has been committed by Collection as regards this
                                      NFTL. This NFTL actually pertains to the year 2000, but the employee
                                      filing the lien * * * apparently entered the wrong year in the computer-
                                      ized request. The assessment date on this NFTL for 2001 shows as 11/26/
                                      2001. This is the assessment date for the 1040–2000 (see above). This
                                      NFTL for 2001 shows a recording date (7/18/02) prior to the assessment
                                      date (9/16/02) of the return for 2001. This NFTL is to be withdrawn,
                                      or corrected to properly show the year 2001, as it was improperly
                                      filed. This, however, is not the subject of this CDP hearing.

                                         In the section of the memorandum devoted to specific
                                      issues, the Appeals Office provided the following explanation
                                      regarding its conclusion that respondent may pursue peti-
                                      tioner’s pension:




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                                      the government may not attach any of Wadleigh’s future earnings or
                                      assets he has retained after the bankruptcy discharge for the years 2000
                                      and 2001.
                                      The government, however, is not precluded from attaching (or levying)
                                      assets excluded from the bankruptcy, in this case, Wadleigh’s pension
                                      plan. See 11 USC section 541; certain retirement savings accounts or pen-
                                      sion plans may be excluded from the bankruptcy estate.
                                      This issue has been discussed in 2006 TNT 167–19, and IRM 5.9.2.9.1.1
                                      in that it is not even required that a Notice of Federal Tax Lien be filed
                                      for the government to be allowed to proceed in this fashion (NFTLs were
                                      filed in Wadleigh’s case). Thus, the government may proceed against
                                      Wadleigh’s pension income for both of the years 2000 and 2001, and the
                                      issuance of the Letter 4066 regarding 2001 is appropriate.

                                        Petitioner timely filed a petition with this Court asking us
                                      to review the Appeals Office’s determination.

                                                                                Discussion
                                      I. Section 6330
                                        The Commissioner may not levy on a taxpayer’s property
                                      or rights to property unless he has first notified the taxpayer
                                      in writing of his right to request a hearing under section
                                      6330. Sec. 6330(a). If the taxpayer requests a hearing under
                                      section 6330(a) (hereinafter hearing), the hearing shall be
                                      conducted by an impartial officer or employee of the IRS
                                      Office of Appeals. Sec. 6330(b)(1), (3). At the hearing the tax-
                                      payer may raise any relevant issue relating to the Commis-
                                      sioner’s proposed collection activity, including (1) appropriate
                                      spousal defenses, (2) challenges to the appropriateness of
                                      collection action, and (3) offers of collection alternatives. Sec.
                                      6330(c)(2)(A); Sego v. Commissioner, 114 T.C. 604, 609
                                      (2000); Goza v. Commissioner, 114 T.C. 176, 180 (2000). The
                                      taxpayer may challenge the existence or amount of the
                                      underlying tax liability only if the taxpayer did not receive
                                      a notice of deficiency for such liability or did not otherwise
                                      have an opportunity to dispute the liability. Sec.
                                      6330(c)(2)(B).
                                        Following a hearing, the Appeals Office must issue a notice
                                      of determination regarding the validity of the proposed
                                      collection action. In making the determination the Appeals
                                      Office must take into consideration: (1) Verification pre-
                                      sented by the Secretary that the requirements of applicable




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                                      law and administrative procedure have been met; (2) rel-
                                      evant issues raised by the taxpayer; and (3) whether the pro-
                                      posed collection action appropriately balances the need for
                                      efficient collection of taxes with the taxpayer’s legitimate
                                      concerns regarding the intrusiveness of the proposed collec-
                                      tion action. Sec. 6330(c)(3).
                                      II. Standard of Review
                                         We have jurisdiction to review a notice of determination.
                                      Sec. 6330(d)(1). If the validity of the underlying tax liability
                                      was properly at issue in the hearing, we review the deter-
                                      mination regarding liability de novo. Sego v. Commissioner,
                                      supra at 610; Goza v. Commissioner, supra at 181–182. We
                                      review any other determination for abuse of discretion. Sego
                                      v. Commissioner, supra at 610; Goza v. Commissioner, supra
                                      at 182. A determination will not constitute an abuse of
                                      discretion unless it is arbitrary, capricious, or without sound
                                      basis in fact or law. See Swanson v. Commissioner, 121 T.C.
                                      111, 119 (2003) (if Commissioner’s determination based on
                                      erroneous legal interpretation, determination may be set
                                      aside as abuse of discretion); Woodral v. Commissioner, 112
                                      T.C. 19, 23 (1999).
                                         Petitioner did not challenge the existence or amount of his
                                      2001 tax liability at his hearing or at trial. However, he does
                                      challenge the determination to proceed with collection. In
                                      challenging the determination petitioner has raised several
                                      issues that require us to decide the legal effect of the section
                                      6321 statutory lien during and after a bankruptcy proceeding
                                      and related legal questions. When we are faced with a ques-
                                      tion of law, the standard of review has no impact on our
                                      analysis because under either standard an erroneous legal
                                      determination must be rejected. Kendricks v. Commissioner,
                                      124 T.C. 69, 75 (2005); Swanson v. Commissioner, supra at
                                      119. Even if we characterize the applicable standard of
                                      review as abuse of discretion, we do not uphold a discre-
                                      tionary determination that is infected by a material error of
                                      law. Kendricks v. Commissioner, supra at 75; Swanson v.
                                      Commissioner, supra at 119.




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                                      III. Scope of Review
                                         When reviewing a notice of determination for abuse of
                                      discretion under section 6330(d), we have held that in some
                                      circumstances we may consider evidence that was presented
                                      at trial but was not included in the administrative record.
                                      Robinette v. Commissioner, 123 T.C. 85, 101 (2004), revd. 439
                                      F.3d 455, 460–462 (8th Cir. 2006). Respondent invites us to
                                      overrule our Opinion in Robinette and limit our review to the
                                      administrative record. We decline respondent’s invitation to
                                      overrule our holding in Robinette because the scope of review
                                      does not materially affect the outcome at this time, given our
                                      conclusion to remand this case for further proceedings.
                                      IV. Bankruptcy, the Section 6321 Lien, and the Section
                                          6331 Levy
                                        Before turning to our review of respondent’s notice of
                                      determination, we must first examine the scope of the section
                                      6321 lien, the effect of a discharge in bankruptcy on an
                                      otherwise valid section 6321 lien where the Commissioner
                                      fails to file a valid NFTL, and the Commissioner’s ability to
                                      levy pursuant to section 6331 on property that is subject to
                                      a section 6321 lien, in order to determine whether
                                      respondent may levy on petitioner’s interest in his pension.
                                           A. Section 6321
                                         If any person liable to pay any tax neglects or refuses to
                                      pay the tax upon notice and demand, the amount of the tax
                                      (together with any costs, penalties, and interest) shall be a
                                      lien in favor of the United States on all property and rights
                                      to property belonging to the taxpayer. Sec. 6321; sec.
                                      301.6321–1, Proced. & Admin. Regs. A person’s liability to
                                      pay a tax is established by assessment, which is the formal
                                      recording of a liability in the records of the Commissioner.
                                      Secs. 6201, 6203. The notice and demand requirement in sec-
                                      tion 6321 refers to the action required by section 6303, which
                                      provides that the Commissioner, as soon as practicable and
                                      within 60 days of assessment, must provide written notice,
                                      stating the amount of the liability and demanding payment
                                      thereof, to each person liable for the unpaid tax.
                                         When a taxpayer fails to pay an assessed tax liability after
                                      receiving a notice and demand for payment, the section 6321




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                                      lien arises by operation of law and continues until the
                                      liability is satisfied or becomes unenforceable by lapse of
                                      time. 8 Sec. 6322. The section 6321 lien attaches to all prop-
                                      erty and rights to property belonging to the taxpayer,
                                      including property acquired by the taxpayer after the lien
                                      arises. Sec. 6321; Glass City Bank v. United States, 326 U.S.
                                      265, 268–269 (1945). An unqualified right to receive property
                                      in the future is itself a property right to which the section
                                      6321 lien attaches. See United States v. Natl. Bank of Com-
                                      merce, 472 U.S. 713, 725 (1985); Connor v. United States, 27
                                      F.3d 365, 366 (9th Cir. 1994). However, the section 6321 lien
                                      is not valid against a purchaser, holder of a security interest,
                                      mechanic’s lienor, or judgment lien creditor until an NFTL
                                      has been filed. Sec. 6323(a).
                                         Petitioner filed a 2001 Federal income tax return on
                                      August 16, 2002, that showed a Federal income tax liability
                                      and a balance due. Respondent assessed the liability and
                                      issued a timely notice and demand for payment on Sep-
                                      tember 16, 2002. By reason of the above, a section 6321 lien
                                      attached to all of petitioner’s property, including his pension
                                      income, notwithstanding that the pension had not yet
                                      entered payout status. See sec. 6321. However, respondent
                                      never filed a valid NFTL with respect to petitioner’s 2001 Fed-
                                      eral income tax liability. Respondent concedes the 2001 NFTL
                                      was recorded in error and withdrawn, and we infer from the
                                      record that respondent did not subsequently file a valid NFTL
                                      with respect to the 2001 tax liability. We find, therefore, that
                                      respondent has only a section 6321 lien with respect to peti-
                                      tioner’s 2001 tax liability.
                                           B. The Effect of Bankruptcy on a Section 6321 Lien
                                        The purpose of bankruptcy is to give the debtor a fresh
                                      start by discharging many of the debtor’s liabilities. Carlson
                                      v. Commissioner, 116 T.C. 87, 101 (2001). When a bank-
                                      ruptcy court enters a discharge order in a bankruptcy pro-
                                      ceeding, the debtor is discharged from personal liability for
                                      all dischargeable debts. 11 U.S.C. sec. 524(a) (2006). How-
                                      ever, liens and other secured interests generally survive
                                      bankruptcy. Farrey v. Sanderfoot, 500 U.S. 291, 297 (1991).
                                        8 The sec. 6321 lien is sometimes called a ‘‘secret lien’’ because it arises by operation of law

                                      without any public filing requirement. Hult v. Commissioner, T.C. Memo. 2007–302.




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                                      (280)                        WADLEIGH v. COMMISSIONER                                         291


                                      Thus, a discharge in bankruptcy will not necessarily prevent
                                      the postdischarge enforcement of a valid prepetition lien on
                                      any prepetition property of the debtor that survived the
                                      bankruptcy. Isom v. United States, 901 F.2d 744, 745 (9th
                                      Cir. 1990). ‘‘[A] bankruptcy discharge extinguishes only one
                                      mode of enforcing a claim—namely, an action against the
                                      debtor in personam—while leaving intact another—namely,
                                      an action against the debtor in rem.’’ Johnson v. Home State
                                      Bank, 501 U.S. 78, 84 (1991); Iannone v. Commissioner, 122
                                      T.C. 287, 292–293 (2004). We must examine whether peti-
                                      tioner’s pension interest was prepetition property that sur-
                                      vived the bankruptcy and whether the section 6321 lien that
                                      was not perfected by the filing of a valid NFTL is a valid
                                      prepetition lien that survived the bankruptcy.
                                         The filing of a petition in bankruptcy automatically creates
                                      a bankruptcy estate consisting of ‘‘all legal or equitable
                                      interests of the debtor in property as of the commencement
                                      of the case.’’ 11 U.S.C. sec. 541(a)(1) (2006). The bankruptcy
                                      estate includes all of the debtor’s prepetition property and
                                      rights to property except property excluded from the estate
                                      under 11 U.S.C. sec. 541 (2006). Title 11 U.S.C. sec.
                                      541(c)(2), as interpreted in Patterson v. Shumate, 504 U.S. at
                                      760, 9 permits a debtor to exclude an interest in an ERISA-
                                      qualified pension plan from his bankruptcy estate. 10
                                          9 In Patterson v. Shumate, 504 U.S. at 762, the Supreme Court held that ‘‘a debtor may ex-

                                      clude his interest in an ERISA-qualified pension plan from the bankruptcy estate’’. The
                                      bankruptcy trustee in Patterson argued that the Court’s holding rendered 11 U.S.C. sec.
                                      522(d)(10)(E) superfluous, but the Court rejected the argument, observing that 11 U.S.C.
                                      sec. 522(d)(10)(E) ‘‘exempts from the bankruptcy estate a much broader category of interests
                                      than * * * [11 U.S.C. sec.] 541(c)(2) excludes.’’
                                          10 We have located only one opinion by a Court of Appeals that has addressed the issue of

                                      whether the exclusion of an ERISA-qualified pension interest from a bankruptcy estate is man-
                                      datory or permissive. In Rains v. Flinn, 428 F.3d 893, 905–906 (9th Cir. 2005), the Court of
                                      Appeals for the Ninth Circuit held that the exclusion of such a pension from a debtor’s bank-
                                      ruptcy estate was permissive rather than mandatory. If exclusion is permissive, then it is logical
                                      to assume that the debtor must decide in a bankruptcy proceeding whether the debtor will ex-
                                      clude or exempt an ERISA-qualified pension interest. Excluding or exempting such an interest
                                      may have substantially different consequences, particularly with respect to unpaid Federal tax
                                      liabilities. See, e.g., Madigan, ‘‘Using Unfiled Dischargeable Tax Liens to Attach to ERISA-
                                      Qualified Pension Plan Interests After Patterson v. Shumate’’, 14 Bankr. Dev. J. 461, 465 (1998).
                                      We note, however, that several courts have held that an ERISA-qualified pension plan that is
                                      listed as exempt property on schedule C of the debtor’s bankruptcy petition is excluded from
                                      a debtor’s bankruptcy estate, notwithstanding the debtor’s listing of the pension as exempt prop-
                                      erty. See, e.g., Ostrander v. Lalchandani, 279 Bankr. 880, 886 (Bankr. 1st Cir. 2002); United
                                      States v. Rogers, 558 F. Supp. 2d 774, 787 (N.D. Ohio 2008); In re Wilson, 206 Bankr. 808, 809
                                      (Bankr. W.D.N.C. 1996); Rich v. United States, 197 Bankr. 692, 695 (Bankr. N.D. Okla. 1996)
                                      (‘‘if Debtor’s * * * [retirement plan] is ERISA qualified, it is excluded from the bankruptcy es-
                                      tate.’’), affd. per order (N.D. Okla., Jan. 9, 1998); In re Hanes, 162 Bankr. 733, 741 (Bankr. E.D.
                                                                                                      Continued




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                                         Title 11 U.S.C. sec. 522 allows a debtor to exempt from his
                                      bankruptcy estate a personal residence, a car, certain prop-
                                      erty used in a trade or business, retirement funds, and cer-
                                      tain other assets, to ensure that the debtor has at least some
                                      property with which to make a fresh start. Carlson v.
                                      Commissioner, supra at 102. Exempt property initially is
                                      part of the debtor’s bankruptcy estate, see Taylor v. Freeland
                                      & Kronz, 503 U.S. 638, 642 (1992), but is removed from the
                                      bankruptcy estate (and is therefore unavailable to satisfy
                                      creditors’ claims) for the benefit of the debtor as a result of
                                      the debtor’s exemption, Pasquina v. Cunningham, 513 F.3d
                                      318, 323 (1st Cir. 2008). Property that is exempt from the
                                      bankruptcy estate pursuant to 11 U.S.C. sec. 522 is not avail-
                                      able to satisfy prepetition debts during or after the bank-
                                      ruptcy, except debts secured by liens that are not avoided in
                                      the bankruptcy and section 6321 liens with respect to which
                                      an NFTL has been filed. 11 U.S.C. sec. 522(c).
                                         Unlike exempt property, which is part of a debtor’s bank-
                                      ruptcy estate but is unavailable to satisfy creditors’ claims,
                                      excluded property never becomes part of the bankruptcy
                                      estate and is therefore never subject to the bank-
                                      ruptcy trustee’s or the debtor’s power to avoid the section
                                      6321 lien. See U.S. IRS v. Snyder, 343 F.3d 1171, 1178–1179
                                      (9th Cir. 2003); Traina v. Sewell, 180 F.3d 707, 710 (5th Cir.
                                      1999). Thus, if a section 6321 lien on excluded property has
                                      not expired or become unenforceable under section 6322, it
                                      survives the bankruptcy. 11
                                         Petitioner was granted a discharge in bankruptcy on
                                      December 8, 2005. The discharge included petitioner’s 2001
                                      tax liability. On schedule C of his bankruptcy petition, peti-
                                      tioner contended that his pension was excluded from the
                                      bankruptcy estate pursuant to 11 U.S.C. sec. 541(c)(2) and
                                      Patterson v. Shumate, 504 U.S. 753 (1992). Alternatively
                                      petitioner claimed that his pension was exempt property, but
                                      only if and to the extent that his pension was includable in
                                      the bankruptcy estate. On the basis of the record before us
                                      and our review of 11 U.S.C. sec. 541, we conclude that peti-
                                      Va. 1994). We also note that there is no formal procedure within the bankruptcy process to clar-
                                      ify what property is excluded. At least one court has commented on the confusion that results
                                      from this lack of clarity. See In re Stevens, 177 Bankr. 619, 620 n.2 (Bankr. E.D. Ark. 1995).
                                         11 The Commissioner has taken the position that ‘‘A Notice of Federal Tax Lien need not be

                                      on file to pursue collection against assets excluded from the bankruptcy estate.’’ Internal Rev-
                                      enue Manual (IRM) pt. 5.9.2.9.1.1(2) (Mar. 1, 2007).




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                                      tioner’s pension was properly excludable from his bankruptcy
                                      estate under 11 U.S.C. sec. 541(c)(2) and Patterson v.
                                      Shumate, supra at 765, and that petitioner excluded the pen-
                                      sion from his bankruptcy estate. As a result, the section 6321
                                      lien that attached to the pension before bankruptcy contin-
                                      ued to attach to petitioner’s interest in his pension even after
                                      petitioner’s personal liability for his 2001 tax liability was
                                      discharged in bankruptcy.
                                            C. Section 6331
                                            Section 6331(a) provides:
                                        SEC. 6331(a). AUTHORITY OF SECRETARY.—If any person liable to pay
                                      any tax neglects or refuses to pay the same within 10 days after notice and
                                      demand, it shall be lawful for the Secretary to collect such tax * * * by
                                      levy upon all property and rights to property (except such property as is
                                      exempt under section 6334) belonging to such person or on which there is
                                      a lien * * * [12]

                                      The notice and demand requirement in section 6331(a) is
                                      satisfied if the Commissioner issues a written notice of
                                      unpaid tax liability and demand for payment and the notice
                                      is given to the taxpayer in person, left at the taxpayer’s
                                      dwelling or usual place of business, or sent via certified or
                                      registered mail to the taxpayer’s last known address. Sec.
                                      6331(d).
                                        Once the Commissioner has assessed a Federal tax liability
                                      and given the requisite notice, he may collect the unpaid tax
                                      by levy on ‘‘all property and rights to property’’ belonging to
                                      the taxpayer. See sec. 6331(a). However, the Commissioner
                                      must stand in the taxpayer’s shoes; he acquires through levy
                                      only those property rights that the taxpayer himself pos-
                                      sesses. United States v. Novak, 476 F.3d 1041, 1062 (9th Cir.
                                      2007). Thus, if the Commissioner levies on a taxpayer’s pen-
                                      sion, he will receive property from the levy only if the
                                      pension is already in payout status or the taxpayer has the
                                      right to demand a lump-sum distribution of his pension
                                      interest. Id.; see also U.S. IRS v. Snyder, supra at 1175 (IRS
                                      cannot, outside bankruptcy, enforce its lien on debtor’s
                                      interest in ERISA-qualified plan until plan enters payout
                                      status).
                                           12 None   of the sec. 6334 exemptions is relevant to the instant case.




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                                      V. Review of Appeals Office’s Determination
                                           A. Compliance With Law and Administrative Procedure
                                         Section 6330(c)(1) requires the hearing officer to obtain
                                      verification from the Secretary that the requirements of
                                      applicable law and administrative procedure have been met.
                                      The record shows that Mr. Climan verified the following: (1)
                                      Petitioner had an unpaid Federal income tax liability for
                                      2001; (2) respondent properly assessed petitioner’s 2001 tax
                                      liability as required by section 6203; (3) respondent timely
                                      mailed petitioner a notice and demand for payment as
                                      required by section 6303; (4) petitioner neglected or refused
                                      to pay his 2001 liability; and (5) respondent mailed petitioner
                                      a notice of intent to levy and a notice of his right to request
                                      a hearing as required by sections 6330 and 6331(d). Mr.
                                      Climan correctly concluded that petitioner’s 2001 tax liability
                                      had been discharged in bankruptcy and that respondent was
                                      barred from attaching any of petitioner’s future earnings or
                                      postpetition assets to satisfy the 2001 liability. However, Mr.
                                      Climan also determined that respondent was not precluded
                                      from levying on any prepetition property that was excluded
                                      from petitioner’s bankruptcy estate (in this case, petitioner’s
                                      pension).
                                         Petitioner contends that respondent failed to follow
                                      applicable law and administrative procedure. Specifically,
                                      petitioner argues that respondent failed to follow the step-by-
                                      step instructions provided in the Internal Revenue Manual
                                      before levying on money accumulated in a pension or retire-
                                      ment plan. See 1 Administration, Internal Revenue Manual
                                      (IRM) (CCH), pt. 5.11.6.2, at 16,798–16,801 (Mar. 15, 2005). A
                                      review of relevant IRM provisions is instructive in
                                      ascertaining the procedures the IRS expects its employees to
                                      follow in deciding whether to levy on a taxpayer’s interest in
                                      a pension plan or other retirement account. 13
                                        13 Although this Court has held that procedures set forth in the IRM ‘‘do not have the force

                                      or effect of law’’ and a failure to adhere to IRM procedures does not rise to the level of a con-
                                      stitutional violation, see, e.g., Vallone v. Commissioner, 88 T.C. 794, 807–808 (1987) (checks ob-
                                      tained in violation of IRM not a constitutional violation requiring suppression); Riland v. Com-
                                      missioner, 79 T.C. 185 (1982) (failure to abide by IRM procedures not a violation of due process),
                                      and that the IRM does not create enforceable rights for taxpayers, see Fargo v. Commissioner,
                                      447 F.3d 706, 713 (9th Cir. 2006), affg. T.C. Memo. 2004–13, sec. 6330(c)(1) specifically requires
                                      that the Appeals officer at the sec. 6330 hearing shall obtain verification from the Secretary
                                      that the requirements of any applicable law or administrative procedure have been met. More-
                                      over, sec. 6330(c)(3) provides that the determination by an Appeals officer under sec. 6330(c)




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                                         The IRM ‘‘serves as the single, official source of IRS ‘instruc-
                                      tions to staff ’ relating to the administration and operation of
                                      the Service.’’ IRM pt. 1.11.2.1.1(1) (Apr. 1, 2007). 14 It ‘‘pro-
                                      vides a central repository of uniform guidelines on operating
                                      policies and procedures for use by all IRS offices.’’ Id. Several
                                      provisions of the IRM address the Commissioner’s ability to
                                      levy on retirement income and retirement accounts. 1
                                      Administration, IRM (CCH), pt. 5.11.6.1(1), at 16,797 (June 29,
                                      2001), which applies to levies on retirement income, directs
                                      IRS employees to ‘‘Use discretion before levying retirement
                                      income’’ but provides no specific guidance regarding how that
                                      discretion is to be exercised. In contrast, IRM pt. 5.11.6.2,
                                      which covers ‘‘money accumulated in a pension or retirement
                                      plan, as well as Individual Retirement Arrangements (IRAs)’’
                                      and specifically does not cover ‘‘levying retirement income’’,
                                      directs IRS employees to levy on assets accumulated in pen-
                                      sion or retirement accounts only after following detailed
                                      procedures. Id. pt. 5.11.6.2(4)–(12), at 16,799–16,801 (Mar.
                                      15, 2005). 15
                                         The record establishes that Mr. Climan exercised discre-
                                      tion as directed by IRM pt. 5.11.6.1(1). Although Mr. Climan
                                      did not follow the detailed procedures set forth in IRM pt.
                                      5.11.6.2(4)–(12), he was not required to do so. The procedures
                                      set forth in IRM pt. 5.11.6.2 apply only to situations in which
                                      the Commissioner seeks to levy on money accumulated in
                                      pension or retirement accounts; they do not apply to a pro-
                                      shall take into consideration the verification presented under sec. 6330(c)(1). Because petitioner
                                      has questioned whether Mr. Climan followed applicable IRM procedures in making his deter-
                                      mination, we examine the IRM procedures. However, because we conclude that the Appeals Of-
                                      fice met the verification requirement of sec. 6330(c)(1), we need not and do not decide whether
                                      the procedures described in the IRM are administrative procedures that come within the
                                      verification requirement of sec. 6330(c)(1).
                                         14 Before its amendment in 2007, 1 Administration, IRM (CCH) pt. 1.11.2.1(2), at 5,027 (Oct.

                                      10, 2003), stated in pertinent part as follows:
                                      The IRM outlines business rules and administrative procedures and guidelines used by the agen-
                                      cy to conduct business. It contains policy, direction and delegations of authority that are nec-
                                      essary to carry out IRS responsibilities to administer tax law and other legal provisions. The
                                      business rules, operating guidelines and procedures and delegations guide managers and em-
                                      ployees in carrying out day to day responsibilities. [Emphasis added.]
                                         15 With respect to retirement accounts that are excluded from the bankruptcy estate, 1 Admin-

                                      istration, IRM (CCH) pt. 5.11.6.2(12), at 16,801 (Mar. 15, 2005), states that the IRS may levy
                                      on such accounts to collect taxes discharged in bankruptcy if an NFTL was filed before the
                                      bankruptcy, and it instructs employees to consider levying on retirement accounts ‘‘if there is
                                      no other property that survived the bankruptcy.’’ However, IRM pt. 5.11.6.2(12) also contains
                                      the following note: ‘‘Where no Notice of Federal Tax Lien was filed before bankruptcy, it is not
                                      settled whether the IRS can levy to collect discharged taxes from excluded retirement accounts.
                                      Counsel should be consulted in such situations.’’




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                                      posed levy on payments from a pension plan that constitute
                                      retirement income to the recipient. The proposed levy is
                                      directed to petitioner’s retirement income. We therefore con-
                                      clude that the Appeals Office obtained verification that the
                                      requirements of all applicable law and administrative proce-
                                      dure had been met in accordance with section 6330(c)(1) and
                                      that it considered that verification in making its determina-
                                      tion as required by section 6330(c)(3).
                                           B. Consideration of Petitioner’s Arguments
                                         Petitioner raised five contentions in his Form 12153, which
                                      we can condense into three core arguments: (1) Respondent’s
                                      proposed levy was invalid because a previous levy on peti-
                                      tioner’s pension was released; (2) petitioner’s 2001 Federal
                                      income tax liability was discharged in petitioner’s 2005 bank-
                                      ruptcy; and (3) the proposed levy was invalid because it was
                                      made before petitioner’s pension entered payout status. All
                                      three arguments are unavailing.
                                           1. A Release of Levy Does Not Release the Underlying Lien
                                              on Petitioner’s Pension.
                                         Petitioner’s first argument confuses the lien that arises
                                      under section 6321 with respondent’s ability to levy pursuant
                                      to section 6331. The lien on petitioner’s pension arose when
                                      petitioner’s 2001 Federal income tax liability was assessed
                                      and petitioner failed to pay the liability upon notice and
                                      demand. See sec. 6321. The lien was not released when peti-
                                      tioner’s 2001 tax liability was discharged in bankruptcy
                                      because the pension was excluded from the bank-
                                      ruptcy estate, see supra pp. 292–293, nor was the lien
                                      released by respondent’s withdrawal of any prior levy
                                      notices. See sec. 6322.
                                           2. Petitioner’s Discharge in Bankruptcy Did Not Prevent
                                              Respondent From Levying on Petitioner’s Prepetition
                                              Assets That Remained Subject to Respondent’s Section
                                              6321 Lien.
                                        Petitioner’s second argument fails because, as discussed
                                      above, a discharge in bankruptcy shields a debtor from per-
                                      sonal liability with respect to discharged debts but does not
                                      prevent the Commissioner from proceeding in rem against




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                                      any prepetition assets of the debtor that survived the bank-
                                      ruptcy and remain subject to a valid section 6321 lien. See
                                      supra pp. 290–293. In the case of exempt property, the sec-
                                      tion 6321 lien survives the bankruptcy where, pursuant to
                                      section 6323(a), the Commissioner filed an NFTL before the
                                      bankruptcy; in the case of excluded property, the lien sur-
                                      vives the bankruptcy whether or not the Commissioner filed
                                      an NFTL. See supra pp. 291–293. Because petitioner’s pension
                                      was excluded from his bankruptcy estate, the section 6321
                                      lien remains attached to the pension, notwithstanding
                                      respondent’s failure to properly record an NFTL. Accordingly,
                                      respondent may collect petitioner’s unpaid 2001 tax liability
                                      in rem by levying on petitioner’s pension income, even
                                      though petitioner’s personal liability for the unpaid 2001
                                      Federal income tax was discharged in bankruptcy.
                                           3. Respondent’s Notice of Levy Was Valid
                                         We reject petitioner’s final argument because respondent
                                      did not levy prematurely. In fact, respondent has not yet
                                      levied on petitioner’s pension income; the only thing
                                      respondent has done is to issue a notice of intent to levy
                                      pursuant to section 6330. Petitioner’s argument confuses the
                                      notice of intent to levy under section 6330 with the levy
                                      itself. Petitioner is correct that respondent could not have
                                      withdrawn funds from petitioner’s pension until it entered
                                      payout status on November 1, 2007. But we are unaware of
                                      any authority holding that a notice of intent to levy on pen-
                                      sion income that is mailed to a taxpayer pursuant to section
                                      6330 before the pension has entered payout status is
                                      improper, let alone invalid, and we can discern no restriction
                                      in section 6330 that prevents the Commissioner from issuing
                                      a notice of intent to levy once the Commissioner has identi-
                                      fied an appropriate levy source, even if the notice of intent
                                      to levy is issued before the date when the actual levy may
                                      commence to reach payments from the plan (in this case, the
                                      date when petitioner’s pension enters payout status).




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                                           C. Balancing the Need for Efficient Collection of Taxes With
                                             the Taxpayer’s Concern That Collection Be No More
                                             Intrusive Than Necessary
                                         Section 6330(c)(3)(C) requires a hearing officer to balance
                                      the Commissioner’s obligation to collect a validly assessed
                                      but unpaid tax liability against a taxpayer’s legitimate con-
                                      cern that the collection action may be too intrusive. We
                                      review for abuse of discretion the hearing officer’s determina-
                                      tion regarding the appropriate balance.
                                         As discussed above, the IRM states that a hearing officer
                                      must exercise discretion in determining whether to levy on a
                                      taxpayer’s retirement income but does not tell the hearing
                                      officer how to exercise that discretion. 1 Administration, IRM
                                      (CCH), pt. 5.11.6.1(1), at 16,797 (June 29, 2001). Mr. Climan
                                      chose to exercise his discretion by examining whether a levy
                                      on petitioner’s retirement income would cause economic
                                      hardship. Our problem with that determination arises from
                                      the method Mr. Climan used to analyze whether economic
                                      hardship would result from the levy.
                                         Mr. Climan calculated petitioner’s income as if petitioner
                                      would continue to have income from wages after he started
                                      to receive his pension. Specifically, Mr. Climan took peti-
                                      tioner’s reported income (including wage income) from
                                      petitioner’s 2005 Federal income tax return and divided the
                                      figure by 12 to arrive at an average monthly income figure.
                                      He then calculated petitioner’s allowable expenses by
                                      extracting information from petitioner’s 2003–2005 Federal
                                      income tax returns and consulting the applicable national
                                      and local standards. He then calculated petitioner’s net
                                      monthly income by subtracting petitioner’s average allowable
                                      monthly expenses from petitioner’s average monthly income.
                                         The problem that is readily apparent from this method-
                                      ology is that Mr. Climan assumed petitioner would continue
                                      to work after he started to receive his pension income in
                                      November 2007. Mr. Climan did not assume in making his
                                      income calculations that petitioner would retire, and there is
                                      nothing in the administrative record to explain why he made
                                      that assumption. The administrative record contains no
                                      indication that petitioner would continue to work for com-
                                      pensation after November 2007. Without that information in
                                      the administrative record or, at a minimum, without some




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                                      evidence in the administrative record that the information
                                      was requested and not provided, we simply cannot evaluate
                                      whether the Appeals Office abused its discretion.
                                         Petitioner suggests on brief that his $1,242 monthly pen-
                                      sion payment has become a ‘‘lifeline’’ and that he will face
                                      economic hardship if he is denied this income stream. We are
                                      unwilling to dismiss petitioner’s concern without some
                                      information in the administrative record to confirm that the
                                      hearing officer asked petitioner (1) whether he would con-
                                      tinue to work for compensation after he started to receive his
                                      pension and (2) to submit financial information to show his
                                      financial situation as of November 2007 when he became
                                      entitled to his pension income.
                                         We may under certain circumstances remand a case to the
                                      Commissioner’s Appeals Office while retaining jurisdiction.
                                      See Lunsford v. Commissioner, 117 T.C. 183, 189 (2001). The
                                      resulting section 6330 hearing on remand provides the par-
                                      ties with an opportunity to complete the initial section 6330
                                      hearing while preserving the taxpayer’s right to receive
                                      judicial review of the ultimate administrative determination.
                                      Drake v. Commissioner, T.C. Memo. 2006–151, affd. 511 F.3d
                                      65 (1st Cir. 2007). Because the administrative record is
                                      insufficient to enable us to properly evaluate whether the
                                      Appeals Office abused its discretion in determining that a
                                      levy on petitioner’s pension income could proceed, we shall
                                      remand this case to enable the parties to clarify and supple-
                                      ment the administrative record as appropriate. 16
                                      VI. Conclusion
                                        We have considered the parties’ remaining arguments and,
                                      to the extent not discussed above, conclude those arguments
                                      are irrelevant, moot, or without merit. For the reasons
                                      identified above, we will remand this case to the Appeals
                                      Office for further proceedings consistent with this Opinion.

                                        16 Respondent reserved objections to pars. 33 and 34 of the stipulation of facts, which relate

                                      to changes in petitioner’s health that have occurred since the Appeals Office issued the notice
                                      of determination. On remand respondent should consider information offered by petitioner re-
                                      garding his financial condition, including any information regarding his medical condition and
                                      costs that bear on his financial condition. We shall reserve ruling on respondent’s objections
                                      until the Appeals Office’s review on remand is completed and a supplemental notice of deter-
                                      mination is issued.




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                                           To reflect the foregoing,
                                                                                 An appropriate order will be issued.
                                                                               f




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