                          T.C. Summary Opinion 2012-43



                         UNITED STATES TAX COURT



             RICK E. PAYNE AND DEE M. PAYNE, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 27091-10SL.                         Filed May 8, 2012.



      Rick E. Payne and Dee M. Payne, pro sese.

      Peter T. McCary, for respondent.



                              SUMMARY OPINION


      WELLS, Judge: This case was heard pursuant to the provisions of section

7463 of the Internal Revenue Code in effect when the petition was filed.1


      1
       Unless otherwise indicated, section references are to the Internal Revenue
Code of 1986, as amended, and Rule references are to the Tax Court Rules of
Practice and Procedure.
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Pursuant to section 7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent for any other case.

The instant case is before the Court on respondent’s motion for summary judgment

pursuant to Rule 121. We must decide whether respondent’s Appeals Office abused

its discretion when it upheld respondent’s notice of Federal tax lien (NFTL) with

respect to petitioners’ 2007 and 2008 tax years.

                                      Background

      The facts set forth below are based upon examination of the pleadings,

moving papers, responses, and attachments. Petitioners are husband and wife who

resided in Georgia at the time they filed their petition.

      Petitioners timely filed tax returns for their 2007 and 2008 tax years, but

they failed to pay the full amount of their tax liability for each year. On April 23,

2010, respondent filed an NFTL with respect to petitioners’ tax liabilities for 2007

and 2008. On April 27, 2010, respondent mailed to petitioners a Letter 3172,

Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320.

Petitioners timely submitted a Form 12153, Request for a Collection Due Process

or Equivalent Hearing. On the Form 12153 petitioners requested an installment

agreement and the withdrawal of the NFTL. In an attachment to the Form 12153

petitioners explained that petitioner Rick E. Payne had lost his job during 2006,
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that they had filed for bankruptcy during 2008, that they were still struggling

financially, and that they were in the process of seeking a loan modification on their

home mortgage.

      On June 30, 2010, respondent’s Appeals Office mailed a letter to petitioners

indicating that the Appeals Office had received their Form 12153 and that their case

had been assigned to Settlement Officer P.R. Brewton. On August 2, 2010, Ms.

Brewton mailed a letter to petitioners scheduling a telephone conference for August

17, 2010. Ms. Brewton included a blank Form 433-A, Collection Information

Statement for Wage Earners and Self-Employed Individuals, and she instructed

petitioners to complete the form and submit all of the required attachments within 14

days. She wrote: “I cannot consider collection alternatives at your conference

without this information.”

      Petitioners failed to contact Ms. Brewton at the time scheduled for their

conference, and they did not submit the Form 433-A. On August 17, 2010, Ms.

Brewton mailed petitioners another letter again requesting that they submit the

financial information requested in her letter of August 2, 2010. She warned that if

petitioners did not submit the requested information by August 31, 2010, she would

make a determination on the basis of the information in the administrative file.
                                        -4-

      On August 27, 2010, Mr. Payne telephoned Ms. Brewton and informed her

that petitioners had not received her August 2, 2010, letter. Ms. Brewton informed

Mr. Payne that the August 2, 2010, letter had been sent to the same address as the

August 17, 2010, letter, and that it had not been returned as undeliverable. Mr.

Payne requested an extension of time until the end of September to submit the Form

433-A. Ms. Brewton refused to give petitioners an extension until the end of

September, and she also refused Mr. Payne’s request for a two-week extension.

She told Mr. Payne that petitioners should submit the completed Form 433-A within

seven days, by September 3, 2010. She warned him that she had to receive the

completed Form 433-A by September 3, 2010, if petitioners wanted her to consider

an installment agreement. According to her case activity report, Ms. Brewton

“concluded the conference sustaining the lien filing” and scheduled another

telephone conference for September 3, 2010, to discuss the Form 433-A and an

installment agreement. After their telephone call, she mailed petitioners another

blank Form 433-A.

      Mr. Payne called Ms. Brewton on September 3, 2010, at the scheduled time.

He informed her that petitioners had been unable to complete the Form 433-A and

collect the required supporting documentation by the deadline. Mr. Payne asked

Ms. Brewton a number of questions about the collection process and about
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installment agreements. He also stated that he would try to save enough money to

pay the balance down to $25,000 so that petitioners would be eligible for a

“streamlined” installment agreement. Ms. Brewton wrote in her case activity report

that she “ended the call sustaining the collection action”.

      Petitioners never submitted the Form 433-A, and on November 3, 2010,

respondent’s Appeals Office mailed to petitioners a Notice of Determination

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

determination). Petitioners timely filed their petition in this case.

      On or about June 15, 2011, respondent’s counsel mailed petitioners a letter

informing them that he intended to file a motion for summary judgment. On

July 1, 2011, respondent’s counsel spoke with Mr. Payne on the telephone, and

Mr. Payne informed him that petitioners’ son had recently passed away and

requested more time to consider respondent’s motion for summary judgment.

Respondent’s counsel mailed petitioners a letter on or about July 15, 2011,

advising them that they should file a motion for a continuance with the Tax Court

and informing them that he would not object to the granting of such a motion.

However, petitioners did not file a motion for a continuance, and on September 2,

2011, respondent’s counsel filed his motion for summary judgment. On

September 8, 2011, petitioners finally filed a motion for a continuance with the
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Court, explaining that their son had passed away during April. On September 12,

2011, the Court issued orders that petitioners respond by October 12, 2011, to

respondent’s motion for summary judgment and that respondent respond by October

12, 2011, to petitioners’ motion for a continuance.

      By the time petitioners filed their motion for a continuance, respondent’s

counsel had changed his mind about whether a continuance was proper, and in a

response filed on September 22, 2011, respondent objected to petitioners’ motion.

Respondent’s response explained that respondent had changed his mind because

petitioners had delayed filing their motion for a continuance.

      On October 20, 2011, the Court continued the trial and extended the time for

petitioners to file a response to respondent’s motion for summary judgment from

October 12, 2011, to November 21, 2011. On November 15, 2011, the Court held a

conference call with the parties. On November 16, 2011, the Court issued an order

that, on or before December 15, 2011, respondent mail petitioners the required

forms for submitting a collection alternative. The Court also ordered that, on or

before February 1, 2012, petitioners submit to the Court any proposed collection

alternatives on the forms respondent provided. Petitioners did not submit any

collection alternatives by February 1, 2012, nor did they ever file a response to

respondent’s motion for summary judgment.
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                                      Discussion

      Summary judgment is intended to expedite litigation and avoid unnecessary

and expensive trials and may be granted where there is no genuine issue of material

fact and a decision may be rendered as a matter of law. Rule 121(a) and (b); Fla.

Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). The moving party bears

the burden of proving that there is no genuine issue of material fact, and factual

inferences are viewed in the light most favorable to the nonmoving party.

Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965

(7th Cir. 1994). However, the party opposing summary judgment must set forth

specific facts that show a genuine issue of material fact exists and may not rely

merely on allegations or denials in the pleadings. Rule 121(d).

      Where the underlying tax liability is not in issue, we review the determination

of the Appeals Office for abuse of discretion. See Sego v. Commissioner, 114 T.C.

604, 610 (2000). In reviewing for abuse of discretion, we will reject the

determination of the Appeals Office only if the determination was arbitrary,

capricious, or without sound basis in fact or law. See Murphy v. Commissioner,

125 T.C. 301, 308 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006). Petitioners do not

dispute the underlying liabilities. Consequently, we review the determination of the

Appeals Office for abuse of discretion.
                                          -8-

      Where, as in the instant case, we review the Appeals Office’s determination

to sustain the filing of an NFTL for abuse of discretion, we review the reasoning

underlying that determination to decide whether it was arbitrary, capricious, or

without sound basis in fact or law. We do not substitute our judgment for that of the

Appeals Office, and we do not decide independently whether we believe the lien

should be withdrawn. See id. at 320.

      Pursuant to section 6321, the Federal Government obtains a lien against “all

property and rights to property, whether real or personal” of any person liable for

Federal taxes upon demand for payment and failure to pay. See Iannone v.

Commissioner, 122 T.C. 287, 293 (2004). The lien arises automatically on the date

of assessment and persists until the tax liability is satisfied or becomes

unenforceable by reason of lapse of time. Sec. 6322; Iannone v. Commissioner, 122

T.C. at 293. The purpose of filing, pursuant to section 6323, notice of the lien that

arises under section 6321 is to protect the Government’s interest in a taxpayer’s

property against the claims of other creditors. Filing an NFTL validates the

Government’s lien against a subsequent purchaser, holder of a security interest,

mechanic’s lienor, or judgment lien creditor. See sec. 6323(a); Stein v.

Commissioner, T.C. Memo. 2004-124; Lindsay v. Commissioner, T.C. Memo.

2001-285, aff’d, 56 Fed. Appx. 800 (9th Cir. 2003).
                                         -9-

      If the Commissioner chooses to file an NFTL, he must provide the taxpayer

with written notice not more than five business days after the filing, and he must

advise the taxpayer of the right to a hearing before the Appeals Office. Sec.

6320(a). If the taxpayer requests such a hearing, the Appeals Office must verify that

the requirements of any applicable law or administrative procedure have been met.

Secs. 6320(c), 6330(c)(1). The Appeals Office must also determine whether the

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

with the legitimate concern of the taxpayer that any collection action be no more

intrusive than necessary. Secs. 6320(c), 6330(c)(3). Finally, the Appeals Office

must consider any issues raised by the taxpayer at the hearing, including appropriate

spousal defenses, challenges to the appropriateness of collection actions, and offers

of collection alternatives such as an installment agreement. Secs. 6320(c),

6330(c)(2) and (3).

      Respondent contends that the determination of the Appeals Office should be

sustained because petitioners failed to provide a completed Form 433-A and

attachments. We have consistently held that it is not an abuse of discretion for the

Appeals Office to reject collection alternatives and sustain the proposed collection

action on the basis of the taxpayer’s failure to submit requested financial

information. See Huntress v. Commissioner, T.C. Memo. 2009-161; Prater v.
                                        - 10 -

Commissioner, T.C. Memo. 2007-241; Roman v. Commissioner, T.C. Memo. 2004-

20. In doing so, the Appeals Office is following the requirements of section

301.6320-1(e)(1), Proced. & Admin. Regs. However, an Appeals officer’s

unreasonable denial of a request for more time to submit evidence may be an abuse

of discretion. See Shanley v. Commissioner, T.C. Memo. 2009-17.

      Assuming that petitioners never received the August 2, 2010, letter, the time

that Ms. Brewton allowed petitioners to complete the Form 433-A and compile the

required documentation was less than seven days. Considering that, when Mr.

Payne talked to Ms. Brewton on the telephone on August 27, 2010, he did not yet

have the blank Form 433-A and that Ms. Brewton instructed him that she had to

receive the completed Form 433-A by September 3, 2010, we calculate that

petitioners had considerably less than one week to complete the Form 433-A and

gather the required associated documentation. It is possible, depending on the date

Ms. Brewton mailed the blank Form 433-A, that petitioners had as little as 24 to 48

hours to complete the Form 433-A and gather documentation in time to mail it to

Ms. Brewton so that she would receive it before September 3, 2010. Given the

number of questions Mr. Payne asked during both telephone conversations with Ms.

Brewton and given his age and obvious unfamiliarity with the process, we are not

surprised that petitioners found it difficult to complete the Form 433-A and gather
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the supporting documentation in time to mail them in such a short period, i.e., before

September 3, 2010.

      Additionally, we suspect that Mr. Payne may have been confused by Ms.

Brewton’s statement, at the end of their telephone conversations on both August 27

and September 3, 2010, that she was sustaining the collection actions.

Respondent’s counsel suggests that petitioners could have submitted their Form

433-A after September 3, 2010, but before the notice of determination was issued,

and the Appeals Office would have considered it. However, according to her notes,

Ms. Brewton specifically told Mr. Payne during their telephone call on August 27,

2010, that petitioners would not be eligible for an installment agreement unless she

received their paperwork by September 3, 2010. Whether Ms. Brewton later told

Mr. Payne something else is unclear from her notes, but we surmise from their

actions that petitioners understood that their opportunity for an installment

agreement or other collection alternative was foreclosed after September 3, 2010.

      Ms. Brewton’s refusal to grant petitioners an extension of 14 days to

complete the Form 433-A appears inconsistent with the guidance in the Internal

Revenue Manual (IRM). With regard to “no response cases”, the IRM advised:
                                     - 12 -

     (1) If there is no response to the substantive contact letter, you must
make a second attempt to contact the taxpayer.

      (2) The case activity record must clearly document a minimum of 2
attempts.

      (3) Letter 4000, Final Chance Letter is the preferred method for your
second attempt.

     Note: If the second attempt is by telephone, you must thoroughly
document the contact in the case activity record.

        (4) Ask the taxpayer if they have any further information for
consideration before making a determination on the information already
available; do not schedule a second conference unless circumstances warrant
rescheduling, such as the taxpayer did not receive the original conference
letter due to a change of address.

       (5) Give a taxpayer that is delaying or not responding a reasonable, but
specific, deadline to respond. As a general rule, allow 14 days in the Final
Chance Letter. However, depending on the facts and circumstances, fewer
than 14 days may be considered.

            (a.) Giving a taxpayer fewer than, or more than, 14 days may be
      considered reasonable depending on the facts and circumstances.

             (b.) We need to establish that we gave the taxpayer a reasonable
      chance to respond as well as provide them with the opportunity for a
      fair and impartial CDP hearing.


EXAMPLE:

The taxpayer has been provided 3 opportunities of 14 days each to provide a
financial statement. Each opportunity was granted after the taxpayer called
with a somewhat plausible reason why he wasn’t able to comply earlier.
                                            - 13 -

      The SO is ready to close the case yet grants the taxpayer a final opportunity
      of 5 days to provide a CIS.

IRM pt. 8.22.2.2.6.2 (Dec. 1, 2006). On the basis of the record, we are not

persuaded that petitioners were given a “reasonable chance to respond” because

they were not given a reasonable time to complete the Form 433-A and provide

supporting documentation, despite their “somewhat plausible reason” for why they

were not able to complete the Form 433-A sooner, i.e., that they did not receive the

August 2, 2010, letter.

      However, because we questioned whether Ms. Brewton provided petitioners

with a “reasonable chance” to complete the Form 433-A and compile the required

attachments, we ordered respondent to provide forms to petitioners to submit a

collection alternative and allowed them an additional opportunity to propose a

collection alternative by February 1, 2012. Had petitioners submitted a proposed

collection alternative, we would have considered remanding the case to

respondent’s Appeals Office to consider the collection alternative, on the basis of

our foregoing concerns as to the reasonableness of the time they were given

to complete the Form 433-A. However, petitioners failed to submit a proposed

collection alternative despite the additional time granted by the Court.
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      The Court may dismiss a case at any time and enter a decision against the

taxpayer for failure properly to prosecute his case, failure to comply with the Rules

of this Court or any order of the Court, or for any cause which the Court deems

sufficient. Rule 123(b); Edelson v. Commissioner, 829 F.2d 828, 831 (9th

Cir.1987), aff’g T.C. Memo. 1986-223; McCoy v. Commissioner, 696 F.2d 1234,

1236 (9th Cir. 1983), aff’g 76 T.C. 1027 (1981). Dismissal is appropriate where the

taxpayer’s failure to comply with the Court’s Rules and orders is due to willfulness,

bad faith, or fault. See Dusha v. Commissioner, 82 T.C. 592, 599 (1984);

McCammon v. Commissioner, T.C. Memo. 2007-3; Curci v. Commissioner, T.C.

Memo. 2005-273.

      Throughout the pendency of their case, petitioners have repeatedly failed to

file requested motions, responses, and other documents. Despite instructions from

respondent’s counsel and ample time, petitioners failed to file a motion for a

continuance until after respondent filed his motion for summary judgment.

Petitioners failed to file a response to respondent’s motion for summary judgment,

even after we extended the time for them to do so. Petitioners failed to submit a

proposed collection alternative by February 1, 2012, in compliance with our order of

November 16, 2011. According to respondent’s counsel, when he contacted

petitioners on February 3, 2012, they informed him that they had elected not to
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complete a collection alternative form at this time. Petitioners have failed to

prosecute the instant case despite repeated opportunities and ample time.

      On the basis of petitioners’ repeated failures to comply with our orders and

apparent disinterest in pursuing any collection alternatives, we will dismiss their

case for lack of prosecution. Accordingly, we will deny respondent’s motion for

summary judgment as moot.

      In reaching these holdings, we have considered all the parties’ arguments,

and, to the extent not addressed herein, we conclude that they are moot, irrelevant,

or without merit.

      To reflect the foregoing,


                                                  An appropriate order and order of

                                         dismissal will be entered.
