                       T.C. Memo. 2008-75



                     UNITED STATES TAX COURT



                  DEAN FANGONILO, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 19747-06L.             Filed March 31, 2008.



     Irvin W. Fegley, for petitioner.

     Emily Giometti, for respondent.



                       MEMORANDUM OPINION


     DEAN, Special Trial Judge:    This case is before the Court

on respondent’s motion for summary judgment, as supplemented,

filed pursuant to Rule 121.   Rule references are to the Tax Court

Rules of Practice and Procedure.   Section references are to the

Internal Revenue Code of 1986 as amended.    The motion arises in

the context of a petition filed in response to a Notice of
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Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 (notice) that respondent sent to petitioner.

                              Background

     At the time the petition was filed, petitioner resided in

California.    The parties do not disagree as to the following

facts.

Origin of the Tax Liability

     Petitioner filed his Federal income tax return for 2002 on

July 7, 2003, showing no tax due.    After examination, petitioner

signed a consent to the assessment of additional tax on March 9,

2005.    As a result of the examination, respondent assessed tax of

$14,423 plus statutory additions on June 20, 2005.    As of August

22, 2006, there was a balance due of $17,137.85 on petitioner’s

account for 2002.

Administrative Activity

     On November 22, 2005, after receiving respondent’s Notice of

Intent to Levy and Notice of Your Right to a Hearing, petitioner

submitted Form 12153, Request for a Collection Due Process

Hearing (request).    Petitioner stated in the request that he had

“Filed An Offer To Compromise This Liability As A Way Of

Resolving It.”   The offer-in-compromise (OIC) had been submitted

on September 15, 2005.    The Appeals officer assigned to consider

the proposed levy was able to confirm that petitioner had filed

an OIC covering 1991 and 1999 through 2004 and that petitioner
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had appealed respondent’s rejection of the offer of $250.    The

Court assumes that an appeal was denied.    Petitioner did not

submit a new or amended Form 656, Offer In Compromise, to the

Appeals officer considering his request for relief under section

6330.

     During discussions between the Appeals Office and

petitioner’s counsel, two “additional” grounds for relief were

raised:    (1) Alternative means of collection due to economic

hardship, or (2) placing the liability into “currently not

collectible” status.

     Petitioner, who is now 71, submitted financial information

to the Appeals officer including a Form 1040, U.S. Individual

Income Tax Return, for 2005, signed and dated June 7, 2006; Form

433-A, Collection Information Statement for Wage Earners and

Self-Employed Individuals (collection statement); copies of bank

statements, and insurance information.    Further, petitioner

stated that he was responsible for a portion of the household

expenses of the home in which he resided, one quarter of the

mortgage payment and one fifth of the electric and water bills.

Petitioner submitted a copy of monthly mortgage statements, a

Pacific Gas and Electric bill, and a water bill for the house.

Petitioner’s name did not appear on any of the household expense

bills.    He disclosed monthly living expenses of $3,092.10 and

gross monthly income of $900 on the Form 433-A.    Petitioner also
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disclosed documents showing that he was entitled to receive three

approximately equal payments on May 26 and November 25, 2006, and

on May 25, 2007, totaling $56,319 due to the “termination” of a

contract with Farmers Insurance Group.

     Petitioner’s counsel represented to the Appeals officer that

petitioner’s friend and roommate provided economic support to

petitioner.   Petitioner provided the Appeals officer with copies

of checks drafted by the roommate to pay the household expenses,

including petitioner’s portion.   The Appeals officer requested

from petitioner information about the roommate’s income and

contributions to the household expenses.   Petitioner’s roommate

refused to disclose any of her financial information.

     Respondent issued the notice upholding the proposed

collection action because “The financial information that you

provided did not enable a determination as to your ability to

pay”.

                            Discussion

Standard for Granting Summary Judgment

     The standard for granting a motion for summary judgment

under Rule 121 is stated in Rule 121(b) as follows:

     A decision shall * * * be rendered if the pleadings,
     answers to interrogatories, depositions, admissions,
     and any other acceptable materials, together with the
     affidavits, if any, show that there is no genuine issue
     as to any material fact and that a decision may be
     rendered as a matter of law. * * *
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     The parties agree that there is no material issue of fact

for trial.   They differ, however, as to what the result of this

circumstance should be.

Section 6330

     Section 6330 generally provides that the Commissioner cannot

proceed with collection by way of a levy until the taxpayer has

been given notice and the opportunity for an administrative

review of the matter (in the form of an Appeals Office hearing)

and, if dissatisfied, the person may obtain judicial review of

the administrative determination.   See Davis v. Commissioner, 115

T.C. 35, 37 (2000); Goza v. Commissioner, 114 T.C. 176, 179

(2000).   The taxpayer requesting the hearing may raise any

relevant issue with regard to the Commissioner’s intended

collection activities, including spousal defenses, challenges to

appropriateness of the collection action, and offers of

collection alternatives.   Sec. 6330(c)(2)(A); see Sego v.

Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner,

supra at 180.

     The taxpayer may raise challenges “to the existence or

amount of the underlying tax liability”, however, only if he “did

not receive any statutory notice of deficiency for such tax

liability or did not otherwise have an opportunity to dispute

such tax liability.”   Sec. 6330(c)(2)(B).   Petitioner is not

challenging the underlying tax liability.
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     Where the validity of the tax liability is not properly part

of the appeal, the taxpayer may challenge the determination of

the Appeals officer for abuse of discretion.   Sego v.

Commissioner, supra at 609-610; Goza v. Commissioner, supra at

181-182.

     Respondent’s Position

     Because petitioner did not provide respondent with his

roommate’s financial information,1 respondent concludes that

petitioner’s reasonable living expenses cannot be properly

determined.   Respondent argues that any financial support

petitioner received is relevant in determining his ability to

fulfill his tax obligations.

     Respondent relies on 2 Administration, Internal Revenue

Manual (IRM)(CCH), pt. 5.15.1.4, at 17,656 (May 1, 2004).    The

manual section provides that for collection purposes, the

taxpayer is allowed only the expenses he is required to pay, and

“Consideration must be given to any other income into the

household and any expenses shared with a not liable person(s).”

Id. pt. 5.15.1.4(1).   The manual provision also provides that the

assets and income of a “not liable” person may be considered in



     1
      The Internal Revenue Manual appears to contemplate that if
the “not liable” person’s information is necessary, the
Commissioner will conduct “an in-house verification” and that the
information will not be shared with the taxpayer. 1
Administration, Internal Revenue Manual (CCH), pt. 5.8.5.5.4(4),
at 16,339-12 (Sept. 1, 2005).
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the computation of the taxpayer’s ability to pay.    Id. pt.

5.15.1.4(2).   When the taxpayer indicates that his or her income

is not commingled with that of the not liable person and

responsibility for expenses is divided between the cohabitants,

expenses are to be allowed according to the expenses “assigned to

the taxpayer” or the taxpayer’s “percentage of income to the

total expenses, whichever is less.”    Id. pt. 5.15.1.4(3).

     Petitioner’s Position

     Petitioner argues that 2 Administration, IRM (CCH), pt.

5.15.1.4 should not be applied here.   According to petitioner,

the manual provision “clearly ought to apply and does apply in

order to determine whether the taxpayer is paying more than his

share of expenses.”   Because petitioner’s monthly living expenses

far exceed his $900 monthly income, he argues that it is not

necessary to inquire into the not liable person’s income and

expenses.   A reasonable approach, suggests petitioner, would be

to use “government guidelines to determine his expenses.”

     Petitioner’s position appears to find support in a manual

provision not addressed by the parties, 1 Administration, IRM

(CCH), pt. 5.8.5.5.4(4), at 16,339-12 (Sept. 1, 2005), concerning

OICs.   Under this provision, where a taxpayer can document that

income is not commingled “(as in the case of roommates who share

housing)” and household expenses are divided “equitably” between

cohabitants, the total allowable expenses should not exceed the
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total allowable housing standard for the taxpayer.       “In this

situation, it would not be necessary to obtain the income

information of the non-liable person(s)”.     Id.

     The provision, however, warns the reader that there must be

sufficient financial information to verify the total household

expenses and prove that the taxpayer is paying his/her

proportionate share of the expenses.     See Olsen v. United States,

414 F.3d 144, 153-154 (1st Cir. 2005).

     Petitioner also complains that he raised two “alternative”

grounds for relief that were denied, “economic hardship” or

placing the liability in “currently not collectible” status.

     If the liability of a taxpayer can be collected in full but

would create an economic hardship, the Commissioner can consider

an OIC to promote effective tax administration.      Sec. 301.7122-

1(b)(3)(i), Proced. & Admin. Regs.; 1 Administration, IRM (CCH),

pt. 5.8.11.2.1(1), at 16,375 (Sept. 1, 2005).       The Commissioner

advises his employees that the existence of hardship criteria

does not require that an offer be accepted, and if “the taxpayer

does not offer an acceptable amount, the offer should not be

recommended for acceptance.”   Id. pt. 5.8.11.2.1(11), at 16,377.

Petitioner’s prior offer of $250 had been rejected.       According to

the undisputed facts, petitioner did not make a higher offer to

the Appeals officer considering this case after having been

notified that an earlier offer had been rejected.
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     Since petitioner did not submit an offer of “an acceptable

amount” to the Appeals officer charged with conducting the

section 6330 hearing, there was no abuse of discretion in

respondent’s failing to accept an OIC as an alternative to

collection.    See Speltz v. Commissioner, 454 F.3d 782 (8th Cir.

2006), affg. 124 T.C. 165 (2005).

     A taxpayer may request that his Federal income tax liability

be designated currently not collectible where, “based on the

taxpayer’s assets, equity, income and expenses,” he has no

apparent ability to make payments on the outstanding tax

liability.    Foley v. Commissioner, T.C. Memo. 2007-242.   Although

petitioner’s income was not sufficient to meet his stated monthly

living expenses, he had a liquid asset worth more than $56,000,

which exceeds his tax liability.2   Respondent’s refusal to treat

petitioner’s tax liability as currently not collectible was not

an abuse of discretion.

                             Conclusion

     Petitioner has failed to show that there is a genuine issue

of material fact for trial, and respondent’s motion for summary

judgment, as supplemented, will be granted.    Respondent did not

abuse his discretion in approving the proposed collection

activity.    Although the Court has granted respondent’s motion,



     2
      Petitioner also owned a one-half interest in an account
worth about $2,400 at the time of the hearing under sec. 6330.
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petitioner can still submit another OIC on the form required by

respondent under the rubric of effective tax administration

because of economic hardship.



                                          An appropriate order and

                                     decision will be entered

                                     granting respondent’s motion

                                     for summary judgment, as

                                     supplemented.
