                           NOT FOR PUBLICATION                             FILED
                    UNITED STATES COURT OF APPEALS                         AUG 19 2019
                                                                        MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

CRAIG K. POTTS; KRISTEN H. POTTS,                No. 17-73472

              Petitioners-Appellants,            Tax Ct. No. 12116-16L

 v.
                                                 MEMORANDUM*
COMMISSIONER OF INTERNAL
REVENUE,

              Respondent-Appellee.


                           Appeal from a Decision of the
                             United States Tax Court

                           Submitted August 15, 2019**
                              Pasadena, California

Before: SCHROEDER and GRABER, Circuit Judges, and LEFKOW,*** District
Judge.

      Petitioners Craig K. Potts and Kristen H. Potts timely initiated a collection

due process case with the Internal Revenue Service ("IRS") concerning the IRS’s

      *
        This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
        The panel unanimously concludes that this case is suitable for decision
without oral argument. Fed. R. App. P. 34(a)(2).
      ***
        The Honorable Joan Lefkow, United States District Judge for the
Northern District of Illinois, sitting by designation.
intent to levy Petitioners’ unpaid tax liabilities for tax years 2005 and 2013. A

settlement officer set a deadline in March 2016 for Petitioners to submit an offer in

compromise and supporting financial information. When Petitioners failed to meet

that deadline, the settlement officer extended the deadline to April 2016 but

warned Petitioners that no further extensions would be granted. When Petitioners

again failed to submit any documents by the April deadline, the settlement officer

closed the case. Petitioners timely sought review from the tax court, which denied

relief. Petitioners now seek review from this court. We affirm.

      1. The tax court correctly granted summary judgment to the Commissioner

of Internal Revenue. See Sollberger v. Comm’r, 691 F.3d 1119, 1123 (9th Cir.

2012) (holding that we review de novo the tax court’s grant of summary

judgment).

      (a) The tax court correctly held that the settlement officer acted well within

her discretion by closing the case. Petitioners never submitted an offer in

compromise or any financial documents—by the initial deadline or by the extended

deadline, despite being warned that a failure to submit the requested documents

would result in the closing of the case. Similarly, the settlement officer properly

completed the legal prerequisites to closing the case.




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         (b) The tax court correctly held that Petitioners waived any challenge to

liability for the 2013 tax year by declining to dispute 2013 liability both before the

settlement officer and before the tax court. At most, Petitioners mentioned, in

passing, that they had made offers in compromise concerning the 2013 liability in

proceedings outside the present collection proceedings and were contemplating

making an offer in compromise concerning the 2013 liability. Those assertions are

not fairly understood as an actual challenge to the 2013 liability in the collection

proceedings. See 26 C.F.R. § 301.6330-1(f)(2) (A-F3) ("In seeking Tax Court

review of a Notice of Determination, the taxpayer can only ask the court to

consider an issue, including a challenge to the underlying tax liability, that was

properly raised in the taxpayer’s collection due process hearing. An issue is not

properly raised if the taxpayer fails to request consideration of the issue by Appeals

. . . .").

         (c) The tax court correctly held that Petitioners had an earlier opportunity to

challenge their liability for 2005 tax year and that, accordingly, they could not

challenge that liability in this collection proceeding. See 26 U.S.C.

§ 6330(c)(2)(B) ("The person may also raise at the hearing challenges to the

existence or amount of the underlying tax liability for any tax period if the person

did not receive any statutory notice of deficiency for such tax liability or did not


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otherwise have an opportunity to dispute such tax liability."). Petitioners clearly

had an earlier opportunity to dispute their 2005 liability because, in 2013,

Petitioners affirmatively settled their liability for the 2005 tax year by signing a

Form 870-AD. See, e.g., Deese v. Comm’r, 94 T.C.M. (CCH) 546, 2007 WL

4302435, at *2 (T.C. 2007) (holding that, by settling with the IRS via a Form 870-

AD, the taxpayers "gave up any right to challenge their underlying liabilities in a

collection proceeding").

      We reject Petitioners’ argument that the 2013 settlement was not an earlier

opportunity to dispute the 2005 liability on the ground that the IRS allegedly

destroyed their original tax records. Even assuming that records were lost, the tax

court correctly held that Petitioners "were fully aware of that fact no later than

November 2010," when the IRS returned all documents to Petitioners with a cover

letter stating that the agency was returning all documents to Petitioners. Petitioners

settled with the IRS in 2013, after receiving the IRS’s 2010 package returning all

documents to Petitioners. Whether or not their 2013 settlement binds them for all

purposes, Whitney v. United States, 826 F.2d 896 (9th Cir. 1987), the tax court

correctly concluded that Petitioners had an "opportunity to dispute [the 2005] tax

liability" for purposes of 26 U.S.C. § 6330(c)(2)(B).




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      2. The tax court did not abuse its discretion by denying Petitioners’ motion

to amend their tax court petition in order to challenge their 2013 tax liability. See

Kelley v. Comm’r, 877 F.2d 756, 761 (9th Cir. 1989) (holding that we review for

abuse of discretion the tax court’s denial of leave to amend), abrogated on other

grounds by Bufferd v. Comm’r, 506 U.S. 523 (1993). Because Petitioners failed to

challenge the 2013 tax liability before the settlement officer, amendment of the tax

court petition would have been futile.

      3. The tax court did not abuse its discretion or otherwise err by denying

Petitioners’ motion to remand to the IRS because of outstanding offers in

compromise or amended tax returns initiated by Petitioners outside this collection

proceeding.

      AFFIRMED.




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