                               T.C. Memo. 2016-217



                         UNITED STATES TAX COURT



  RICHARD ISAAC FINE AND MARYELLEN OLMAN-FINE, Petitioners v.
       COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 23553-15L.                         Filed November 29, 2016.




      Richard Isaac Fine and Maryellen Olman-Fine, pro sese.

      Steven Mitchell Roth, for respondent.



                           MEMORANDUM OPINION


      LAUBER, Judge: In this collection due process (CDP) case, petitioners

seek review pursuant to sections 6320(c) and 6330(d)(1)1 of the determination by


      1
       All statutory references are to the Internal Revenue Code in effect at all
relevant times, and all Rule references are to the Tax Court Rules of Practice and
                                                                       (continued...)
                                         -2-

[*2] the Internal Revenue Service (IRS or respondent) to uphold the filing of a

notice of Federal tax lien (NFTL). Respondent has moved for summary judgment

under Rule 121, contending that there are no disputed issues of material fact and

that his determination to sustain the proposed collection action was proper as a

matter of law. We agree and accordingly will grant the motion.

                                     Background

      The following facts are based on the parties’ pleadings and motions, inclu-

ding the attached declarations and exhibits. See Rule 121(b). Petitioners resided

in California when they filed their petition.

      Petitioners filed joint Federal income tax returns for tax years 2010-2012

but did not pay the tax shown as due on those returns. The IRS subsequently

assessed the tax for all three years. On January 2, 2014, in an effort to collect

these unpaid liabilities, the IRS sent petitioners a Final Notice of Federal Tax Lien

and Notice of Your Right to a Hearing. Petitioners timely submitted a Form

12153, Request for a Collection Due Process or Equivalent Hearing. In their re-

quest petitioners stated that they could not pay the balances owed and sought a

collection alternative in the form of an offer-in-compromise (OIC). Petitioners did


      1
      (...continued)
Procedure. We round all monetary amounts to the nearest dollar.
                                         -3-

[*3] not indicate any intention to challenge the correctness of the tax liabilities

that they had reported on their 2010-2012 returns.

      Petitioners’ case was assigned to Settlement Officer Geerlings (SO1) from

the IRS Appeals Office. On January 29, 2015, SO1 held a face-to-face CDP hear-

ing with petitioners. At the hearing SO1 indicated his willingness to recommend

that petitioners’ account be placed in currently not collectible (CNC) status. On

March 13, 2015, SO1 sent petitioners a Form 12257, Summary Notice of Determi-

nation, Waiver of Right to Judicial Review of a Collection Due Process Determi-

nation, Waiver of Suspension of Levy Action, and Waiver of Periods of Limitation

in Section 6330(e)(1). SO1 informed petitioners that they should execute Form

12257 and return it to him if they wished to pursue the CNC option.

      One week later, on March 20, 2015, SO1 retired from the IRS without hav-

ing received an executed Form 12257 from petitioners. The case was reassigned

to Settlement Officer Honaker (SO2). He reviewed the administrative file and

found inconsistencies in the documentary evidence petitioners had submitted. On

April 23, 2015, SO2 sent a letter to petitioners asking them to explain these incon-

sistencies. He allowed them until May 14, 2015, to submit additional documents.

      On May 14, 2015, petitioners submitted the Form 12257, which they had

signed on March 24, 2015, and a Form 433-A, Collection Information Statement
                                         -4-

[*4] for Wage Earners and Self-Employed Individuals, with attached bank

statements. Petitioners insisted that SO1 had already agreed to place their account

in CNC status. SO2 explained that SO1 could only have made a recommendation

to this effect; that the Form 12257 petitioners submitted would become effective

only if countersigned by an Appeals Team Manager; and that no such approval

had yet been given.

          Between May and August 2015 SO2 reviewed petitioners’ bank statements.

He also reviewed third-party information reports, which petitioners had failed to

submit, relating to their investment assets. On the basis of this review he deter-

mined that petitioners had monthly income of at least $9,994 and allowable

monthly expenses of $7,450. Because petitioners could afford to pay the IRS

$2,544 per month, he concluded that their account should not be placed in CNC

status.

          During the CDP process petitioners advanced numerous other contentions,

including assertions that: (1) the IRS had failed to respond to their 2012 whistle-

blower complaint asserting that Los Angeles County had made illegal contribu-

tions to California State judges’ retirement accounts; (2) the IRS had improperly

issued levy notices to them for tax years 2005 and 2006; and (3) petitioner wife

had an outstanding claim for relief from joint and several liability for tax year
                                        -5-

[*5] 2006. SO2 concluded that these issues were beyond the scope of petitioners’

CDP hearing for tax years 2010-2012 and that he otherwise lacked authority to

address these issues.

      Petitioners did not submit any collection alternative to SO2 or raise any

challenge to their underlying tax liabilities for 2010-2012. SO2 reviewed their

administrative file and confirmed that the tax liabilities in question had been pro-

perly assessed and that all other requirements of applicable law and administrative

procedure had been met. SO2 accordingly closed the case and, on August 17,

2015, issued petitioners a notice of determination sustaining the NFTL filing.

      On September 16, 2015, petitioners timely petitioned this Court for review.

In their petition they did not raise any specific challenge to SO2’s determination.

Rather, they asserted that the notice of determination was “invalid”; that it “con-

tains false statements”; and that it “manifests bad faith, refusal to follow IRS Code

and IRM and criminal conduct in violation of 18 U.S. Code Section 1519, amongst

other things.”

      On June 22, 2016, respondent filed a motion for summary judgment, to

which petitioners responded on August 1, 2016. In their response petitioners

advanced numerous frivolous arguments, including assertions that respondent’s

motion “is a sham”; that respondent’s counsel and SO2 are “violating statutes and
                                        -6-

[*6] making false statements”; and that the documents attached to SO2’s

declaration, which constitute the administrative record of the CDP proceeding, do

not constitute IRS “business records.” Their only argument addressed to the

merits is that the IRS should be bound by SO1’s determination that their account

should be placed in CNC status.

                                    Discussion

A.    Summary Judgment

      The purpose of summary judgment is to expedite litigation and avoid costly,

time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90

T.C. 678, 681 (1988). The Court may grant summary judgment when there is no

genuine dispute as to any material fact and a decision may be rendered as a matter

of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992),

aff’d, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judg-

ment, we construe factual materials and inferences drawn from them in the light

most favorable to the nonmoving party. Sundstrand Corp., 98 T.C. at 520. How-

ever, the nonmoving party may not rest upon mere allegations or denials of his

pleadings but instead must set forth specific facts showing that there is a genuine

dispute for trial. Rule 121(d); see Sundstrand Corp., 98 T.C. at 520.
                                          -7-

[*7] Petitioners have not shown that there is a genuine dispute for trial. They

assert that the documents attached to SO2’s declaration, which constitute the

administrative record of the CDP proceeding, do not constitute IRS “business

records,” but this assertion is meritless. These documents themselves establish all

facts that are material to resolution of this case, and we accordingly conclude that

this case is appropriate for summary adjudication.

B.    Standard of Review

       Petitioners do not challenge the amounts of their underlying tax liabilities

for 2010-2012.2 In cases such as this, we review the IRS determination for abuse

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

of discretion exists when a determination is arbitrary, capricious, or without sound

basis in fact or law. See Murphy v. Commissioner, 125 T.C. 301, 320 (2005),

aff’d, 469 F.3d 27 (1st Cir. 2006).




      2
         Petitioners filed returns for 2010-2012 reporting the tax liabilities at issue,
and they did not challenge these underlying tax liabilities during the CDP hearing
or in their petition to this Court. They are thus precluded from challenging those
liabilities now. See Rule 331(b)(4) (“Any issue not raised in the assignments of
error shall be deemed to be conceded.”); Thompson v. Commissioner, 140 T.C.
173, 178 (2013) (“A taxpayer is precluded from disputing the underlying liability
if it was not properly raised in the CDP hearing.”); sec. 301.6330-1(f)(2), Q&A-
F3, Proced. & Admin. Regs.
                                         -8-

[*8] C.      Analysis

      In deciding whether SO2 abused his discretion in sustaining the NFTL

filing, we consider whether he: (1) properly verified that the requirements of any

applicable law or administrative procedure have been met; (2) considered any

relevant issues petitioners raised; and (3) determined whether “any proposed

collection action balances the need for the efficient collection of taxes with the

legitimate concern of * * * [petitioners] that any collection action be no more

intrusive than necessary.” See sec. 6330(c)(3). Our review of the record estab-

lishes that SO2 analyzed the transcripts of petitioners’ account and determined that

the tax liabilities were properly assessed. The only issue is whether petitioners

raised any legitimate question concerning their entitlement to a collection alter-

native.

      1.     Entitlement to CNC Status

      To be entitled to have his account placed in CNC status, the taxpayer must

demonstrate that, on the basis of his assets, equity, income, and expenses, he has

no apparent ability to make payments on the outstanding tax liability. See Foley v.

Commissioner, T.C. Memo. 2007-242, 94 T.C.M. (CCH) 210, 212; Internal

Revenue Manual (IRM) pt. 5.16.1.1 (Aug. 25, 2014). A taxpayer’s ability to make

payments is determined by calculating the excess of income over necessary living
                                         -9-

[*9] expenses. IRM pt. 5.16.1.2 (Jan. 1, 2016). An SO does not abuse his

discretion when he employs local and national standards to calculate the

taxpayer’s expenses and ability to pay. See Friedman v. Commissioner, T.C.

Memo. 2013-44, at *10 (noting that burden is on taxpayer to justify departure from

local standards). In reviewing for abuse of discretion, the Court does not

substitute its judgment for that of the SO or recalculate a taxpayer’s ability to pay.

See O’Donnell v. Commissioner, T.C. Memo. 2013-247, at *15.

      In February 2015 SO1 indicated his willingness to recommend that petition-

ers’ account be placed into CNC status. However, petitioners as of then had not

provided him with a completed Form 433-A or with financial documents showing

that their necessary living expenses exceeded their income. Nor had petitioners

returned to SO1, as of the date he retired from the IRS, an executed Form 12257

formally requesting CNC relief.

      Petitioners did submit an executed Form 12257 to SO2 on May 14, 2015,

after the case was reassigned to him. However, a Form 12257 does not become

effective until it has been approved and countersigned by an IRS Appeals Team

Manager. Form 12257 explicitly states: “My agreement to the Summary Notice

of Determination shown below, to waive judicial review and to waive the suspen-

sion of levy action under section 6330(e)(1), is effective upon the written approval
                                         - 10 -

[*10] by a person in the Office of Appeals with the authority to bind the IRS.”

The authority to bind the IRS to a CNC determination lies with the Appeals Team

Manager. See IRM pt. 8.22.9.5.3 (Nov. 13, 2013).

      After careful review of petitioners’ Form 433-A and bank records, SO2

disagreed with SO1’s recommendation that their account be placed in CNC status.

He accordingly did not submit the Form 12257 for approval by an Appeals Team

Manager. Because the Form 12257 that petitioners submitted on May 14, 2015,

was never countersigned by an Appeals Team Manager, it never became effective

and it did not bind the IRS. Petitioners have raised no material dispute of fact as

to the correctness of this conclusion.

      SO2 performed an independent evaluation to determine whether petitioners

qualified for CNC status. He sought and obtained from petitioners additional

financial information that was not available to SO1. After reviewing this informa-

tion, SO2 concluded that petitioners could make monthly payments of $2,544 and

that CNC status was therefore inappropriate. In reaching this conclusion, SO2

determined petitioners’ monthly income and used prevailing national and local

standards to compute their allowable monthly living expenses. Petitioners do not

challenge SO2’s determination in either respect, and we find that he did not abuse
                                        - 11 -

[*11] his discretion in concluding that they were not entitled to have their account

placed in CNC status.

      2.     Other Issues

      At their CDP hearing petitioners were entitled to make offers of collection

alternatives, such as an OIC or an installment agreement. See sec. 6330(c)(2) and

(3). On their Form 12153 petitioners expressed interest in an OIC, but they ne-

glected to put any offer on the table for the tax years at issue3 and failed to submit

the financial documentation that would have been required for consideration of an

offer. In any event, as SO2 observed, petitioners would not have qualified for an

OIC even if they had submitted an offer because they had failed to make estimated

tax payments for 2013-2015 and thus were not current on their Federal tax obliga-

tions. See Friedman, at *10; IRM pt. 5.8.7.2.2.2(1) (Mar. 7, 2014).

      Petitioners raised numerous other issues in their correspondence with SO2,

including a whistleblower complaint, a claim for relief from joint and several

liability for 2006, and levy notices for 2005-2006. We will not address these

issues because they are irrelevant to our review of the IRS collection action for

2010-2012. Finding no abuse of discretion in SO2’s decision to uphold the NFTL


      3
       Petitioners had previously submitted an OIC for tax years 2005 and 2006,
which the IRS rejected on October 17, 2012.
                                          - 12 -

[*12] filing for those years, we will grant summary judgment for respondent and

sustain the proposed collection action.

      To reflect the foregoing,


                                                   An appropriate order and decision

                                      will be entered.
