                         T.C. Memo. 2007-303



                       UNITED STATES TAX COURT



                   WAYNE ALLEN MOOTZ, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 9671-06L.                  Filed October 4, 2007.



     Wayne Allen Mootz, pro se.

     Lisa K. Hunter, for respondent.



                          MEMORANDUM OPINION


     CHIECHI, Judge:    This case is before the Court on respon-

dent’s motion for summary judgment (respondent’s motion).       We

shall grant respondent’s motion.

                              Background

     The record establishes and/or the parties do not dispute the

following.
                                - 2 -

     Petitioner resided in Dubuque, Iowa (Dubuque), at the time

he filed the petition in this case.

     On April 2, 2003, petitioner filed a Federal income tax

(income tax) return for his taxable year 2001 (2001 income tax

return).    In his 2001 income tax return, petitioner showed income

tax due of $6,036, which he did not pay when he filed that

return.

     At a time not disclosed by the record, respondent determined

that petitioner made a mathematical error in his 2001 income tax

return.    Respondent corrected that mathematical error, which

resulted in a reduction of the income tax due of $6,036 shown in

that return.    The correct amount of income tax that petitioner

should have shown due in that return is $5,736.

     On May 12, 2003, respondent assessed the correct amount of

income tax due of $5,736 that petitioner should have shown in his

2001 income tax return, additions to tax under section

6651(a)(1)1 and (2) of $1,290.60 and $372.84, respectively, and

interest as provided by law.2   (We shall refer to any such unpaid

assessed amounts with respect to petitioner’s taxable year 2001,

as well as interest provided by law accrued after May 12, 2003,


     1
      All section references are to the Internal Revenue Code in
effect at all relevant times. All Rule references are to the Tax
Court Rules of Practice and Procedure.
     2
      Respondent credited respective refunds of $661.06 and
$109.45 due to petitioner from certain other taxable years
against the liability for petitioner’s taxable year 2001.
                               - 3 -

as petitioner’s unpaid 2001 income tax liability.)

     Respondent issued to petitioner the notice and demand for

payment required by section 6303(a) with respect to petitioner’s

unpaid 2001 income tax liability.

     On April 15, 2003, petitioner filed an income tax return for

his taxable year 2002 (2002 income tax return).   In his 2002

income tax return, petitioner showed tax due of $244, which he

did not pay when he filed that return.

     On May 19, 2003, respondent assessed the income tax due of

$244 shown in petitioner’s 2002 income tax return, an addition to

tax under section 6651(a)(2) of $2.44, and interest as provided

by law.   (We shall refer to any such unpaid assessed amounts with

respect to petitioner’s taxable year 2002, as well as interest

provided by law accrued after May 19, 2003, as petitioner’s

unpaid 2002 income tax liability.)

     Respondent issued to petitioner the notice and demand for

payment required by section 6303(a) with respect to petitioner’s

unpaid 2002 income tax liability.

     On October 7, 2004, respondent filed a notice of Federal tax

lien with respect to petitioner’s unpaid 2001 income tax liabil-

ity and petitioner’s unpaid 2002 income tax liability.

     On October 8, 2004, respondent issued to petitioner a notice

of Federal tax lien filing and your right to a hearing (notice of

tax lien) with respect to petitioner’s unpaid 2001 income tax
                               - 4 -

liability and petitioner’s unpaid 2002 income tax liability.

     On November 8, 2004, petitioner’s authorized representative

mailed to respondent Form 12153, Request for a Collection Due

Process Hearing (petitioner’s Form 12153), and requested a

hearing with respondent’s Appeals Office (Appeals Office).     In

that form, petitioner’s authorized representative indicated

disagreement with the notice of tax lien3 and stated:   “The

tax payer [sic] believes he should be given the opportunity to

work out a fair payment plan or settlement as he is unable to pay

said taxes in full.”

     On March 1, 2005, a settlement officer with the Appeals

Office (settlement officer) sent a letter (settlement officer’s

March 1, 2005 letter) to petitioner with respect to petitioner’s

Form 12153.   In that letter, the settlement officer stated in

pertinent part:



     3
      In petitioner’s Form 12153, petitioner’s authorized repre-
sentative indicated disagreement with not only the notice of tax
lien that respondent issued to petitioner but also a notice of
intent to levy and your right to a hearing (notice of intent to
levy) that respondent issued to petitioner. In this connection,
the record indicates that on Aug. 2, 2004, respondent issued a
notice of intent to levy with respect to petitioner’s taxable
year 2001. Petitioner’s authorized representative did not mail
Form 12153 with respect to that notice of intent to levy until
Nov. 2, 2004, which was more than 30 days after the date on which
respondent issued that notice. As discussed below, the notice of
determination concerning collection action(s) under section 6320
and/or 6330 (notice of determination) addresses only the notice
of tax lien and makes no determination with respect to the notice
of intent to levy issued with respect to petitioner’s taxable
year 2001.
                           - 5 -

I have scheduled a telephone conference on April 14,
2005 at 1:00 PM. I will call your representative at
* * * the number you indicated on your CDP request. If
this time is not convenient, the phone number has
changed, or you prefer a face-to-face conference or a
hearing by correspondence, please let me know within
fourteen (14) days.

      *      *        *     *      *      *      *

During the hearing, I must consider:

     •    Whether the IRS met all the requirements of
          any applicable law or administrative proce-
          dure.

     •    Relevant issues you wish to discuss.   These
          can include:

                 1.   Collection alternatives to the
                      lien. These could include full
                      payment of the liability, or, if
                      you qualify: installment agreement,
                      offer in compromise or temporary
                      delay of collection action,

                 2.   Challenges to the appropriateness
                      of collection action. For example,
                      bankruptcy may impact appropriate-
                      ness. We will determine if the
                      Notice of Federal Tax Lien filing
                      was appropriate, and whether you
                      qualify for a lien withdrawal or
                      other lien option.

                 3.   Spousal defenses.

                 4.   Whether you owe the tax, but only
                      if you have not otherwise had an
                      opportunity to dispute it with
                      Appeals.

     •    The balance between the need for efficient
          tax collection and your legitimate concern
          that the collection action be no more intru-
          sive than necessary.

      *      *        *     *      *      *      *
                              - 6 -


     Our records indicate that you may have some business
     tax returns that you are required to file. No Forms
     941 have been filed for 2002, although you did file
     Form 940 for that year reporting wages. In 2003, you
     filed Forms 941 for only the first and second quarters,
     and did not file Form 940 for the year. Neither were
     any further Forms 941 filed for the third quarter of
     2003 or any quarters thereafter.

     Before alternatives to the Federal Tax Lien may be
     considered, except for full payment, you must be in
     full compliance with all filing and payment require-
     ments, including any business returns for which you are
     liable.

     Accordingly, you must file all delinquent tax returns
     and bring all delinquent payments up to date, including
     any required Estimated Income Tax Payments. Additional
     time will not be extended to file delinquent returns or
     make delinquent payments, so that collection alterna-
     tives may be considered.

     Assuming that you will be in full compliance, I enclose
     a Collection Information Statement that you should
     complete and return to my office, if you are unable to
     pay the amount due in full. This information will be
     used to determine how the tax can be paid, and to
     consider alternatives to the proposed lien and levy.
     Please note supporting documentation requested in each
     section.

     Please send me the items above within fourteen (14)
     days from the date of this letter. I cannot consider
     collection alternatives in your hearing without the
     information requested above. [Reproduced literally.]

     On March 16, 2005, the settlement officer sent petitioner a

letter rescheduling the telephonic conference from April 14 to

May 3, 2005.

     On March 16, 2005, petitioner’s authorized representative

sent a letter to the settlement officer (petitioner’s March 16,
                               - 7 -

2005 letter).   Petitioner’s authorized representative enclosed

with that letter (1) completed Form 433-A, Collection Information

Statement for Wage Earners and Self-Employed Individuals (Form

433-A), dated March 15, 2005 (petitioner’s March 15, 2005 Form

433-A); (2) a copy of completed Form 433-A dated September 16,

2003, that petitioner had previously sent to respondent;

(3) completed Form 940, Employer’s Annual Federal Unemployment

(FUTA) Tax Return (Form 940), for his taxable year 2003; and

(4) copies of (a) an exchange of correspondence during the summer

of 2003 that included letters between petitioner’s authorized

representative and a revenue officer with respondent’s collection

division and (b) petitioner’s completed Form 656, Offer in

Compromise (offer-in-compromise), dated September 16, 2003, that

petitioner had previously sent to respondent.

     Petitioner’s March 15, 2005 Form 433-A contained several

sections identified as sections 1 through 9.    In section 5 of

that form, petitioner indicated that he maintained a checking

account that had a balance of $350.    In sections 5 and 6 of

petitioner’s March 15, 2005 Form 433-A, petitioner provided the

responses indicated to the following questions:

     16.   LIFE INSURANCE. Do you have life insurance with a
           cash value? : No 9 Yes

           *      *       *      *       *      *      *

     17a. Are there any garnishments against your wages?
          : No 9 Yes
                                   - 8 -

           *      *          *      *      *      *           *

    17b. Are there any judgments against you?          9 No       : Yes

           *      *          *      *      *      *           *

     17e. In the past 10 years did you transfer any assets
          out of your name for less than their actual value?
          : No 9 Yes

           *         *        *      *      *      *          *

     17f. Do you anticipate any increase in household income
          in the next two years? : No 9 Yes

           *         *        *      *      *      *          *

     17g. Are you a beneficiary of a trust or estate?
          : No 9 Yes

           *         *        *      *      *      *          *

     17h. Are you a participant in a profit sharing plan?
          : No 9 Yes

     In section 7 of petitioner’s March 15, 2005 Form 433-A,

petitioner indicated that he owned (1) a 1991 Cadillac valued at

$1,500, (2) “Furniture/Personal Effects” valued at $1,000,

(3) inventory valued at $15,000 with respect to which there was

an $8,000 outstanding loan balance, and (4)(a) a one-half inter-

est in a duplex on University Avenue in Dubuque (University

Avenue property) valued at $40,000 and (b) a one-half interest in

a duplex on Wilson Street in Dubuque (Wilson Street property)

valued at $40,000.       (We shall refer collectively to the Univer-

sity Avenue property and the Wilson Street property as the real

properties.)   According to petitioner’s March 15, 2005 Form 433-

A, petitioner had borrowed $50,000 from his brother with respect
                                 - 9 -

to one of the real properties.

     In section 8 of petitioner’s March 15, 2005 Form 433-A,

petitioner indicated that he owned various accounts and/or notes

receivable with a total amount due of $3,000.

     In section 9 of petitioner’s March 15, 2005 Form 433-A,

petitioner listed various income items and various living expense

items.   With respect to the income items listed in that section,

petitioner indicated that he had total monthly income of $1,010

consisting of $500 of monthly net income from business and $510

of monthly net rental income.    With respect to the expense items

listed in section 9 of petitioner’s March 15, 2005 Form 433-A,

petitioner indicated that he had total monthly living expenses of

$1,128 consisting of $393 of monthly expenses for food, clothing,

housekeeping supplies, and personal care products, $400 of

monthly expenses for housing and utilities, $200 of monthly

expenses for transportation, $35 of monthly expenses for taxes,

and $100 of other unidentified monthly expenses.

     On March 21, 2005, in response to petitioner’s March 16,

2005 letter, the settlement officer sent a letter to petitioner’s

authorized representative (settlement officer’s March 21, 2005

letter).   In that letter, the settlement officer stated in

pertinent part:

     In response to your March 16, 2005 letter, this will
     advise you that I received and processed Form 940 and
     the related remittance for American Office Equipment
     [petitioner’s business]. However, our records indicate
                             - 10 -

     that Mr. Mootz still has a Form 941 filing requirement
     for some portion of calendar year 2002, since the Form
     940 that he filed for that year reports $5,460.00 in
     taxable wages for unemployment purposes. Also, your
     letter to Revenue Officer * * * dated April 1, 2003
     confirms that wages were paid to an employee named
     * * * that were not reported on Forms 941 or W-3.

     Accordingly, Mr. Mootz has to file Form(s) 941 that
     reflect the wages he actually paid in 2002, whether
     more or less than the amount set forth above. I am
     sure you are aware that wages of part time employees
     are fully taxable for federal purposes.

     I have determined that Mr. Mootz actually submitted two
     offers, one on June 19, 2003, and a second on September
     22, 2003. Records indicate that both were returned
     shortly after submission due to lack of filing compli-
     ance, and/or failure to maintain currency on business
     filings and payment for two consecutive quarters prior
     to the quarter in which the offer was submitted.
     Hence, there is no offer currently pending. Until Mr.
     Mootz becomes fully compliant with all filing and
     payment requirements, he is not eligible to have an
     offer considered.

     In that regard, please advise whether or not Mr. Mootz
     is required to make Estimated Income Tax Payments for
     2005 based on his current income, and provide a copy of
     his 2004 Form 1040. Please submit this information no
     later than five days before our conference that I had
     to reschedule to May 3, 2005. [Reproduced literally.]

     On April 11, 2005, in response to the settlement officer’s

March 21, 2005 letter, petitioner’s authorized representative

sent to the settlement officer (1) a copy of petitioner’s income

tax return for his taxable year 2004; (2) Form 941, Employer’s

Quarterly Federal Tax Return, for each quarter of taxable year

2002; and (3) information relating to petitioner’s estimated tax

payments for his taxable year 2005.
                              - 11 -

     On May 3, 2005, the settlement officer held a telephonic

conference with petitioner’s authorized representative (May 3,

2005 conference).   During that conference, the settlement officer

asked petitioner’s authorized representative questions about some

of the answers in petitioner’s March 15, 2005 Form 433-A, includ-

ing whether the $40,000 value shown for each of the real proper-

ties represented petitioner’s one-half interest in each such

property and the purpose for which petitioner had borrowed

$50,000 from his brother.   The only question that petitioner’s

authorized representative was able to answer was with respect to

the $40,000 value shown in petitioner’s March 15, 2005 Form 433-

A.   In response to that question, petitioner’s authorized repre-

sentative informed the settlement officer that he believed that

the $40,000 shown in that form represented the value of peti-

tioner’s one-half interest in each of the real properties.

Petitioner’s authorized representative told the settlement

officer that he would obtain from petitioner answers to the

remaining questions that the settlement officer asked.   Peti-

tioner’s authorized representative also informed the settlement

officer during the May 3, 2005 conference that he was aware of

one pending judgment against petitioner,4 that petitioner had

received $100,000 from his mother to pay personal living ex-


     4
      As discussed below, petitioner’s authorized representative
later advised the settlement officer that the pending judgment
was in the amount of $12,000.
                                  - 12 -

penses, and that petitioner did not have any borrowing potential.

     During the May 3, 2005 conference, the settlement officer

and petitioner’s authorized representative also discussed collec-

tion alternatives.       The settlement officer indicated that it did

not appear that petitioner had sufficient income to fund an

installment agreement and that an offer-in-compromise might be

the best alternative.      Petitioner’s authorized representative

informed the settlement officer that petitioner intended to ask

his mother for a loan in order to fund any offer-in-compromise,

but that he was uncertain whether petitioner’s mother would be

willing to do so.    Petitioner’s authorized representative agreed

to contact the settlement officer by no later than May 20, 2005,

as to whether petitioner intended to submit an offer-in-compro-

mise.

     On May 5, 2005, petitioner’s authorized representative sent

a letter to the settlement officer (May 5, 2005 letter).      In that

letter, petitioner’s authorized representative stated in perti-

nent part:

     I had a long talk with Mr. Mootz today. * * *

     Enclosed are copies of the signed four (4) 941s for
     2002. He indicates he filed them, without payment, in
     late April.

             *       *        *      *     *      *      *

     As to judgments, there is a 2001/2002 Discover Card
     judgment in Dubuque County Small Claims Court of about
     $6,000.00 and a 2000 judgment by Tri-State Adjustment
     for about $250.00. He also is currently being sued for
                              - 13 -

     about $12,000.00 by Asset Acceptance Corp in Dubuque
     County District Court. The matter is pending.

     As to the two rental units on University Avenue and
     Wilson Street, he owns a one half (½) interest with his
     brother, Michael. Michael has over $100,000.00 coming
     for his investment in the purchases and improvements.
     However, there is no note and mortgage. While there
     hasn’t been a recent appraisal of the properties, it
     appears Mr. Mootz’s one half interest could be
     $50,000.00 or so for each. If the two properties were
     sold for a total of $200,000.00, it appears Michael
     could be entitled to the full purchases price.

     Mr. Mootz indicates he owes his mother about
     $120,000.00. There is no note or mortgage. Mr. Mootz
     has four brothers and it is highly unlikely he would
     inherit anything from his mother.

     Mr. Mootz indicates that he has not had any employees
     since the period he reported having an employee.

     Mr. Mootz had originally made a lump sum offer to the
     IRS of $10,000.00. He intended to borrow said sum from
     a relative as he would be unable to borrow money from
     conventional sources. After he made the offer I.R.S.
     apparently received $2,000.00 for the State of Iowa,
     forfeiting his $2,000.00 state sales tax bond. He
     should be given credit for said sum on his offer of
     compromise. [Reproduced literally.]

     On June 17, 2005, the settlement officer reviewed the

information that petitioner’s authorized representative submitted

in his May 5, 2005 letter.   After that review, the settlement

officer made the following pertinent entries in his “Case Activ-

ity Records”:

     R/E equity is estimated at $50K apiece in ea of rental
     properties, altho POA says that TP owes substantial
     sums to both brother and mother, neither of whom have
     notes or mortgages to secure their debts. Thus, TP
     legally has about $100K equity in these properties, so
     an offer is out of the question. * * * Liens are filed
     on basically all IMF and BMF accounts at this time, so
                              - 14 -

     would precede any subsequent judgments, and may be
     ahead of those already on file * * * [Reproduced liter-
     ally.]

The settlement officer also concluded that petitioner did not

have sufficient income to fund an installment agreement.

     On June 20, 2005, in response to the settlement officer’s

requests in the settlement officer’s March 21, 2005 letter,

petitioner’s authorized representative mailed to the settlement

officer copies of (1) petitioner’s check in payment of estimated

tax due on April 15, 2005, and Form 1040-ES, Payment Voucher 1,

for petitioner’s taxable year 2005 and (2) a bill from the

Internal Revenue Service (IRS) that appears to relate to peti-

tioner’s Federal tax liability for 2004 and a check signed by

petitioner in payment of that bill.

     On June 22, 2005, the settlement officer held a telephonic

conference with petitioner’s authorized representative (June 22,

2005 conference).   During that conference, petitioner’s autho-

rized representative agreed that petitioner was unable to fund an

installment agreement.   The settlement officer indicated that an

offer-in-compromise would probably not be accepted because of

petitioner’s equity in the real properties.   Nonetheless, peti-

tioner’s authorized representative indicated that petitioner

still wished to submit an offer-in-compromise.

     On June 22, 2005, the settlement officer sent to peti-

tioner’s authorized representative the materials needed for
                               - 15 -

petitioner to submit an offer-in-compromise and requested that

petitioner return any such offer directly to the settlement

officer by no later than July 6, 2005.

     On June 29, 2005, petitioner’s authorized representative

sent a letter to the settlement officer (June 29, 2005 letter).

In that letter, petitioner’s authorized representative stated in

pertinent part:

     Enclosed is   Mr. Mootz’s signed Offer In Compromise and
     Mr. Mootz’s   check for $150.00 for the processing fee.
     Since Wayne   originally attempted to settle this matter
     in 2003, he   has made substantial payments to the I.R.S.

     As to Wayne’s interest in the two parcels of real
     estate, it should be noted he only owns a one half (½)
     interest. Arguably, the value of an undivided one half
     (½) interest to a third party would be limited at best.
     While his brother owns the other one half interest,
     Wayne also owes him a substantial sum for expenses,
     etc. paid by his brother in connection with the real
     estate. While this sum has not been quantified by a
     note and/or mortgage Wayne contends it is a legal
     obligation. [Reproduced literally.]

     Petitioner’s authorized representative submitted with his

June 29, 2005 letter petitioner’s offer-in-compromise dated June

28, 2005 (petitioner’s June 28, 2005 offer-in-compromise).5      In

item 5 of petitioner’s June 28, 2005 offer-in-compromise, peti-

tioner provided the responses indicated to the following ques-

tions:




     5
      The copy of petitioner’s June 28, 2005 offer-in-compromise
that is in the record does not appear to be complete. Item 8
appears to be missing.
                                 - 16 -

         Item 5 — To:   Commissioner of Internal Revenue Ser-
         vice

         I/We * * * submit this offer to compromise the tax
         liabilities plus any interest, penalties, additions
         to tax, and additional amounts required by law (tax
         liability) for the tax type and period marked below:
         * * *
         : 1040/1120 Income Tax — Year(s) 2000 to 2002, in-
            clusive
         : 941 Employer’s Quarterly Federal Tax Return —
            Quarterly period(s) 1998 to 2001, inclusive
         : 940 Employer’s Annual Federal Unemployment (FUTA)
            Tax Return — Year(s) 1998 to 2001, inclusive[6]

     In items 6 and 7 of petitioner’s June 28, 2005 offer-in-

compromise, petitioner provided the responses indicated to the

following questions:

         Item 6 — I/We submit this offer for the reason(s)
         checked below:
         9 Doubt as to Liability — “I do not believe I owe
            this tax.” You must include a detailed explana-
            tion of the reason(s) why you believe you do not
            owe the tax in Item 9.
         : Doubt as to Collectibility — “I have insufficient
            assets and income to pay the full amount.” You
            must include a complete Collection Information
            Statement, Form 433-A and/or Form 433-B.




     6
      In item 5 of petitioner’s June 28, 2005 offer-in-compro-
mise, petitioner offered to compromise his respective Federal tax
liabilities for certain taxable years that the settlement officer
did not show as petitioner’s liabilities in his “Rejection or
Withdrawal Memorandum” discussed infra note 7. In addition, as
also discussed infra note 7, in his “Rejection or Withdrawal
Memorandum”, the settlement officer showed as petitioner’s
liabilities his respective Federal tax liabilities for certain
taxable years that petitioner did not offer to compromise in item
5 of petitioner’s June 28, 2005 offer-in-compromise.
                             - 17 -

     9   Effective Tax Administration — “I owe this amount
         and have sufficient assets to pay the full amount,
         but due to my exceptional circumstances, requiring
         full payment would cause an economic hardship or
         would be unfair and inequitable.” You must in-
         clude a complete Collection Information Statement,
         Form 433-A and/or Form 433B and complete Item 9.


     Item 7
     I/We offer to pay $ 10,000.00 (must be more than
     zero). Complete item 10 to explain where you will
     obtain the funds to make this offer.

     Check only one of the following:

     9   Cash Offer (Offered amount will be paid in 90 days
         or less.)

           *      *      *      *       *     *      *

     9   Short-Term Deferred Payment Offer (Offered amount
         paid in MORE than 90 days but within 24 months
         from written notice of acceptance of the offer.)

           *      *      *      *       *     *      *

     9   Deferred Payment Offer (Offered amount will be
         paid over the remaining life of the collection
         statute.)

     $3,000.00 within 90 days * * * from written notice of
     acceptance of the offer; and

     beginning in the first month after written notice of
     acceptance of the offer $200.00 on the 4th day of
     each month for a total of 35 months.

In items 9 and 10 of petitioner’s June 28, 2005 offer-in-compro-

mise, petitioner provided the responses indicated to the follow-

ing questions:
                               - 18 -

     Item 9 — Explanation of Circumstances

     I am requesting an offer in compromise for the rea-
     son(s) listed below:

     Note:        If you are requesting compromise based on
                  doubt as to liability, explain why you
                  don’t believe you owe the tax. If you be-
                  lieve you have special circumstances af-
                  fecting your ability to fully pay the
                  amount due, explain your situation. You
                  may attach additional sheets if necessary.

     I am financially unable to make payments.    See my
     financial information provided to I.R.S.



     Item 10 — Source of Funds

     I/we shall obtain the funds to make this offer from
     the following source(s):

     Loan from relatives

     On August 22, 2005, the settlement officer sent a letter to

petitioner.   In that letter, the settlement officer stated in

pertinent part:

     I have forwarded your Offer in Compromise to an offer
     examiner for investigation. You may be contacted in
     the near future concerning any additional information
     necessary to evaluate your offer.

     When the completed investigation is returned to my
     office, I will advise you as to the examiner’s recom-
     mendation, and schedule a conference if appropriate to
     discuss the findings. If your offer cannot be recom-
     mended for acceptance, we will discuss other alterna-
     tives to the proposed lien or levy. [Reproduced liter-
     ally.]

     On March 17, 2006, the settlement officer sent a letter to

petitioner.   In that letter, the settlement officer stated in
                                   - 19 -

pertinent part:

     I have received the results of investigation of your
     Offer in Compromise. The examiner’s recommendation was
     that the offer should not be accepted because Net
     Realizable Equity in assets is substantially greater
     than the amount you offered as set forth below:

                  ASSET/EQUITY TABLE


     OFFER DEPOSIT           -0-
     CASH/BK ACCTS           100
     LIFE INS                -0-
     PENS/IRA/401(k)         -0-
     REAL PROP (2)        85,400
     PERS PROP               -0-
     TOOLS/EQUP              -0-
     1991 CADILLAC         1,000
     1993 GMC              2,000
     BUS INVENTORY        29,608
     ACCTS REC             3,500
     TOTAL               121,608


     If you wish to appeal the examiner’s findings, please
     submit information no later than March 31, 2006 to show
     the areas of disagreement and I will schedule a confer-
     ence to discuss the examiner’s findings and any addi-
     tional information you submit.

     If the offer cannot be recommended for acceptance, we
     will discuss other collection alternatives. [Repro-
     duced literally.]

     On March 29, 2006, petitioner sent a letter to the settle-

ment officer (petitioner’s March 29, 2006 letter).   In that

letter, petitioner stated in pertinent part:

     I have worked with you and your people for the past
     four years. In that time you have levied against me
     and taken about $3,000 dollars. Also I have paid over
     $3,000 dollars in legal fees. From the very start your
                             - 20 -

     people told me we could work out a reasonable compro-
     mise. Now you refuse my offer. * * *

           *      *      *      *       *     *      *

     The property you have listed was paid for solely by my
     brother.

     My inventory is very dated * * *

     In view of these events , I do not feel I was treated
     fairly. [Reproduced literally.]

Petitioner did not provide any documents or other information

corroborating the contentions advanced in petitioner’s March 29,

2006 letter that petitioner’s brother paid for the real proper-

ties and that petitioner’s inventory was “very dated”.

     On March 30, 2006, the settlement officer telephoned (March

30, 2006 telephone call) petitioner’s authorized representative

and informed him (1) that petitioner’s June 28, 2005 offer-in-

compromise of $10,000 was not adequate and would not be accepted

to resolve the various Federal tax liabilities of petitioner for

various taxable years, including petitioner’s unpaid 2001 income

tax liability and petitioner’s unpaid 2002 income tax liability,7


     7
      The “Rejection or Withdrawal Memorandum” dated Mar. 30,
2006, that the settlement officer prepared with respect to
petitioner’s June 28, 2005 offer-in-compromise showed that
petitioner had total outstanding Federal tax liabilities of
$48,183.10. The “Appeals Transmittal and Case Memo” dated Apr.
19, 2006, that the settlement officer prepared with respect to
that offer-in-compromise showed that petitioner had total out-
standing Federal tax liabilities of $32,449. The Court is unable
to reconcile the difference between the respective outstanding
Federal tax liabilities shown in the settlement officer’s “Rejec-
tion or Withdrawal Memorandum” and the settlement officer’s
                                                   (continued...)
                               - 21 -

(2) that it appeared that the case should be returned to respon-

dent’s collection division, and (3) that he would be closing the

case.    During the March 30, 2006 telephone call, petitioner’s

authorized representative told the settlement officer that he had

previously advised petitioner that petitioner’s June 28, 2005

offer-in-compromise would probably not be accepted, but that

petitioner had no other way to discharge his outstanding Federal

tax liabilities.

     The settlement officer prepared a written recommendation

explaining the reasons why he had concluded that petitioner’s

June 28, 2005 offer-in-compromise was not adequate and would not

be accepted to resolve petitioner’s Federal tax liabilities,

including petitioner’s unpaid 2001 income tax liability and


     7
      (...continued)
“Appeals Transmittal and Case Memo”.

     As discussed supra note 6, in item 5 of petitioner’s June
28, 2005 offer-in-compromise, petitioner offered to compromise
his respective Federal tax liabilities for certain taxable years
that the settlement officer did not show as petitioner’s liabili-
ties in his “Rejection or Withdrawal Memorandum”. As also
discussed supra note 6, in his “Rejection or Withdrawal Memoran-
dum”, the settlement officer showed as petitioner’s liabilities
his respective Federal tax liabilities for certain taxable years
that petitioner did not offer to compromise in item 5 of peti-
tioner’s June 28, 2005 offer-in-compromise. We presume that, in
filing petitioner’s June 28, 2005 offer-in-compromise, petitioner
was unaware of those other Federal tax liabilities and that the
settlement officer concluded that they should have been included
in petitioner’s June 28, 2005 offer-in-compromise. See Internal
Revenue Manual (IRM) 5.8.2.3.1(2) (“A taxpayer may submit an
offer that does not include all outstanding liabilities. Prior
to accepting the offer, the Form 656 must be amended to include
all outstanding tax liabilities.”).
                             - 22 -

petitioner’s unpaid 2002 income tax liability.   In that recommen-

dation, the settlement officer stated in pertinent part:

                   SUMMARY AND RECOMMENDATION

     The taxpayer sought to compromise, under authority of
     IRC 7122, individual income and employment taxes shown
     on the attachment for the sum of $10,000.00, with
     $3,000.00 to be paid within ninety days of notice of
     acceptance, and $200.00 per month for a term of 35
     months. This, the taxpayer’s first offer, submitted in
     connection with his Collection Due Process case, was
     based solely on the basis of collectibility; effective
     tax administration or doubt as to liability was not an
     issue.

     I recommend that the offer be rejected, since a greater
     amount than the amount offered appears to be collect-
     ible.

                           BACKGROUND

     Mr. Mootz (59), an unmarried person, has been self
     employed in office supply business for many years, with
     employment tax deficiencies going back to 1997. He has
     an unremarkable record of compliance with filing and
     payment of employment taxes, which comprise the bulk of
     the taxes at issue. He allegedly has had no employees
     since mid-2003.

     There are no minor children in the home, and no health
     issues that would support an Effective Tax Administra-
     tion approach. He lives in a home that he owns with
     his brother, each having a 50% interest. They also own
     another parcel with the same manner of ownership.
     Although Mr. Mootz alleges that his brother loaned him
     the funds to obtain the 50% ownership interests, no
     mortgages of record exist to memorialize any such
     arrangement, so filed Notices of Federal Tax Lien enjoy
     priority over the alleged unsecured debt and secure the
     government’s interest in both properties.

                     DISCUSSION AND ANALYSIS

     The examiner determined that the taxpayer had ability
     to pay $132,828, with Net Realizable Equity of $121,608
     coming from $85,400 equity in real properties, along
                                - 23 -

     with business inventory, accounts receivable, vehicles
     and cash on hand. Future income value was set at
     $11,220.00.

     The taxpayer was given opportunity to protest the
     examiner’s findings, but provided no additional infor-
     mation to support reduction in the values assigned.

           *      *      *        *       *   *      *

     The examiner determined future income value based on an
     excess of $110.00/month, but failed to make contingent
     allowances for health care or life insurance, both of
     which should have been factored into necessary living
     expenses. Since it was anticipated that the cost of
     these items would exceed the $110.00 projected excess
     per month, future income value was eliminated as unre-
     alistic for the taxpayer’s situation. * * *

     The examiner’s findings were shared and discussed with
     the taxpayer’s representative, who advised that he had
     related to the taxpayer that the offer would not be
     acceptable due to his equity position in real property.
     Based on the taxpayer’s lack of a meaningful response
     to these findings, I anticipate that he would be disin-
     clined to withdraw the offer.

                             CONCLUSION

     I recommend that the proposed rejection be sustained.
     [Reproduced literally.]

     On April 17, 2006, respondent issued to petitioner a notice

of determination with respect to petitioner’s unpaid 2001 income

tax liability and petitioner’s unpaid 2002 income tax liability.

That notice stated in pertinent part:

     Summary of Determination

     You submitted a timely Collection Due Process Hearing
     and a conference was held to discuss alternatives to
     the filed Notice of Federal Tax Lien. As a result of
     that conference, you submitted an Offer-in-Compromise,
     which was investigated, but could not be recommended
     for acceptance because you demonstrated ability to pay
                                 - 24 -

        the balance due in full from equity in assets.[8]

     Since the offer could not be recommended for accep-
     tance, and you did not propose any other means to
     protect the government’s interest, the lien cannot be
     released. Your case will be returned to Collection for
     whatever actions they deem appropriate to collect the
     tax, unless you exercise you right to judicial review
     of our determination. [Reproduced literally.]

An attachment to the notice of determination stated in pertinent

part:

                           BRIEF BACKGROUND

        Notice of filing of the Notice of Federal Tax Lien was
        sent October 8, 2004, while your Collection Due Process
        Hearing request was received November 8, 2004, within
        the thirty-day timeframe set forth in Internal Revenue
        Code Section 6320 for a timely hearing request.

        A Collection Due Process Hearing was scheduled for
        April 14, 2005 by letter dated March 1, 2005. The
        letter advised you that you had to be up to date with
        depositing, filing and paying all income taxes before
        collection alternatives could be considered. It also
        requested that you submit a Collection Information
        Statement to assist in determining the proper course of
        action.

        Due to scheduling conflicts, the conference was re-
        scheduled to May 3, 2005. Following the conference,
        after you filed all delinquent returns and brought
        required payments up to date, you submitted an Offer-
        in-Compromise for consideration.



        8
      Although the notice of determination related only to peti-
tioner’s unpaid 2001 income tax liability and petitioner’s unpaid
2002 income tax liability, in making the determination to reject
petitioner’s June 28, 2005 offer-in-compromise, that notice took
into account not only petitioner’s unpaid 2001 income tax liabil-
ity and petitioner’s unpaid 2002 income tax liability but also
other outstanding Federal tax liabilities of petitioner for his
taxable years 2001 and 2002 and certain other taxable years. See
supra notes 6 and 7.
                        - 25 -

The offer was investigated, but found not to be accept-
able, since you have sufficient equity in real property
and other assets to pay the amount due in full. You
and your representative were advised of the findings
and given opportunity to provide additional information
concerning the value of the assets, but did not do so.
Therefore, your offer cannot be recommended for accep-
tance. No other collection alternatives were proposed
to resolve your tax obligations or secure the govern-
ment’s interest in lieu of the Notice of Federal Tax
Lien.

                DISCUSSION AND ANALYSIS

Transcripts and the case history verify that:

     1)   the taxes at issue were assessed in accor-
          dance with IRC Section 6201, and that notice
          and demand for payment was mailed to your
          last known address timely in accordance with
          IRC Section 6303.

     2)   there were balances due when the Collection
          Due Process notice was issued, as required by
          IRC Section 6322 and 6331(a), and that a levy
          source had been identified.

     3)   IRC 6320(a)(2) requires that taxpayers be
          notified of filing of a Notice of Federal Tax
          Lien within five days of the date it is
          filed. The record shows that this notice was
          issued timely in accordance with the law.

     4)   Collection Due Process Notice was sent by
          certified mail, return receipt requested, to
          your last known address, which is the same as
          that on your request for hearing.

     5)   The Automated Collection staff attempted to
          resolve your case, but was unable to do so.
          Therefore, your file was forwarded to Appeals
          promptly upon receipt of your hearing re-
          quest.

     6)   internal account transaction codes were en-
          tered to place your accounts in suspended
          status pending the outcome of the due process
          hearing.
                        - 26 -


     7)   The Settlement Officer in your case has had
          no prior involvement with you concerning the
          tax periods at issue in this due process
          hearing, pursuant to requirements of Internal
          Revenue Code Section 6330.

             ISSUES RAISED BY THE TAXPAYER

     1) that you should be given opportunity to work
     out a fair payment plan or settlement, since you
     were unable to pay the taxes in full.

     Finding: Collection alternatives were considered,
     including an Installment Agreement and an Offer-
     in-Compromise. Your current limited income does
     not allow you to fund an acceptable Installment
     Agreement. Your Offer-in-Compromise could not be
     accepted because you have more equity in assets
     than the amount of the tax due.

     2) No other substantive issues were raised.

BALANCING THE NEED FOR EFFECTIVE COLLECTION OF THE TAX
WITH LEGITIMATE TAXPAYER CONCERN THAT COLLECTION AC-
TIONS BE NO MORE INTRUSIVE THAN NECESSARY

Filing of the Notice of Federal Tax Lien was clearly
intrusive, and has far-reaching adverse financial
consequences, since it puts other creditors on notice
of your federal tax debt, and creates difficulties with
borrowing funds that may be necessary to provide for
basic health and welfare of the family, or production
of income.

Therefore, it is the policy of the Internal Revenue
Service to provide taxpayers ample opportunity to
resolve their tax matters before a Notice of Federal
Tax Lien is filed, although a lien may be filed at any
time it is deemed necessary to protect the government’s
interest.

The case file reveals that Internal Revenue Service had
multiple personal contacts with you concerning your
delinquent taxes, but that such efforts did not result
in a mutually agreeable resolution to your tax problem.
Therefore, lien filing was deemed necessary.
                                - 27 -

     Appeals has determined that filing of the Notice of
     Federal Tax Lien was appropriate in your case, consid-
     ering that you were not able to offer other means to
     protect the government’s interest in your assets.
     Therefore, lien filing is considered to be the most
     efficient method to facilitate collection of the tax.
     [Reproduced literally.]

The notice of determination made no determination with respect to

the notice of intent to levy issued with respect to petitioner’s

taxable year 2001.   See supra note 3.   In petitioner’s amended

petition, petitioner alleged:    “I would like to work out a

payment plan.   I cannot raise enough capital to cover the entire

amount.   I have worked with you and need a reasonable settle-

ment!”

                            Discussion

     The Court may grant summary judgment where there is no

genuine issue of 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), affd. 17 F.3d 965 (7th Cir. 1994).    We

conclude that there are no genuine issues of material fact

regarding the questions raised in respondent’s motion.

     Petitioner does not dispute the existence or the amount of

petitioner’s unpaid 2001 income tax liability or petitioner’s

unpaid 2002 income tax liability in the pleadings that he filed

in this case or in his response to respondent’s motion.    Although

not altogether clear, petitioner appears to argue that respondent

abused respondent’s discretion in determining in the notice of
                                - 28 -

determination to reject petitioner’s June 28, 2005 offer-in-

compromise.9   As discussed above, in that offer-in-compromise,

petitioner offered $10,000 to compromise Federal tax liabilities

totaling between $32,449 and $48,183.10.    See supra note 7.

     Where, as is the case here, the validity of the underlying

tax liability is not properly placed at issue, the Court will

review the determination of the Commissioner of Internal Revenue

for abuse of discretion.   See Sego v. Commissioner, 114 T.C. 604,

610 (2000); Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).

     Section 7122(a) authorizes the Secretary of the Treasury

(Secretary) to compromise, inter alia, any civil case arising

under the internal revenue laws.    Section 7122(c) authorizes the

Secretary to prescribe guidelines for the officers and the

employees of the IRS to determine whether an offer-in-compromise

is adequate and should be accepted to resolve a dispute.    The

regulations promulgated under section 7122 set forth three

grounds for the compromise of a liability:    (1) Doubt as to

liability, (2) doubt as to collectibility, and (3) to promote

effective tax administration.    Sec. 301.7122-1(b), Proced. &

Admin. Regs.   The only ground that petitioner raised in peti-

tioner’s June 28, 2005 offer-in-compromise was doubt as to

collectibility.


     9
      As discussed above, during the June 22, 2005 conference,
petitioner’s authorized representative acknowledged that peti-
tioner was unable to fund an installment agreement.
                              - 29 -

     Doubt as to collectibility exists in any case where the

taxpayer’s assets and income are less than the full amount of the

taxpayer’s assessed liability.   Sec. 301.7122-1(b)(2), Proced. &

Admin. Regs.   Respondent has prescribed procedures that are to be

used to determine doubt as to collectibility in the regulations

promulgated under section 7122, the IRM, and Rev. Proc. 2003-71,

2003-2 C.B. 517 (Revenue Procedure 2003-71).

     Section 301.7122-1(c)(2)(i), Proced. & Admin. Regs., pro-

vides:

     (i) Allowable Expenses.--A determination of doubt as to
     collectibility will include a determination of ability
     to pay. In determining ability to pay, the Secretary
     will permit taxpayers to retain sufficient funds to pay
     basic living expenses. The determination of the amount
     of such basic living expenses will be founded upon an
     evaluation of the individual facts and circumstances
     presented by the taxpayer’s case. * * *

     Part 5.8.1.1.3 of the IRM provides:

          5.8.1.1.3 Policy (09-01-2005)

          (1) Policy Statement P-5-100 states:

     The Service will accept an offer in compromise when it
     is unlikely that the tax liability can be collected in
     full and the amount offered reasonably reflects collec-
     tion potential. An offer in compromise is a legitimate
     alternative to declaring a case currently not collect-
     ible or to a protracted installment agreement. The
     goal is to achieve collection of what is potentially
     collectible at the earliest possible time and at the
     least cost to the Government.

     In cases where an offer in compromise appears to be a
     viable solution to a tax delinquency, the Service
     employee assigned the case will discuss the compromise
     alternative with the taxpayer and, when necessary,
     assist in preparing the required forms. The taxpayer
                             - 30 -

    will be responsible for initiating the first specific
    proposal for compromise.

    The success of the offer in compromise program will be
    assured only if taxpayers make adequate compromise
    proposals consistent with their ability to pay and the
    Service makes prompt and reasonable decisions. Taxpay-
    ers are expected to provide reasonable documentation to
    verify their ability to pay. The ultimate goal is a
    compromise which is in the best interest of both the
    taxpayer and the government. Acceptance of an adequate
    offer will also result in creating for the taxpayer an
    expectation of a fresh start toward compliance with all
    future filing and payment requirements.

         (2) Offers will not be accepted if it is believed
    that the liability can be paid in full as a lump sum or
    through installment payments extending through the
    remaining statutory period for collection (CSED),
    unless special circumstances exist. See IRM 5.14,
    Installment Agreements.

         (3) Absent special circumstances, a Doubt as to
    Collectibility (DATC) offer amount must equal or exceed
    a taxpayers [sic] reasonable collection potential (RCP)
    in order to be considered for acceptance. The excep-
    tion is that if special circumstances[10] exist as de


    10
      The special circumstances referred to in part 5.8.1.1.3 of
the IRM and sec. 4.02(2) of Revenue Procedure 2003-71 (discussed
below) are

    (1) circumstances demonstrating that the taxpayer would
    suffer economic hardship if the IRS were to collect
    from him an amount equal to the reasonable collection
    potential of the case or (2) if no demonstration of
    such suffering can be made, circumstances justifying
    acceptance of an amount less than the reasonable col-
    lection potential of the case based on public policy or
    equity considerations. IRM pt. 5.8.4.3.4 (Sept. 1,
    2005) (Effective Tax Administration and Doubt as to
    Collectibility with Special Circumstances). To demon-
    strate that compelling public policy or equity consid-
    erations justify a compromise, the taxpayer must be
    able to demonstrate that, due to exceptional circum-
    stances, collection of the full liability would under-
                                                  (continued...)
                             - 31 -

     fined in IRM 5.8.4.3, Effective Tax Administration and
     Doubt as to Collectibility with Special Circumstance,
     or IRM 5.8.11, Effective Tax Administration, the offer
     may be accepted on the basis of hardship or Effective
     Tax Administration (ETA).

     Section 4.02(2) of Revenue Procedure 2003-71 provides in

pertinent part:

     An offer to compromise based on doubt as to col-
     lectibility generally will be considered acceptable if
     it is unlikely that the tax can be collected in full
     and the offer reasonably reflects the amount the Ser-
     vice could collect through other means, including
     administrative and judicial collection remedies. See
     Policy Statement P-5-100. This amount is the reason-
     able collection potential of a case. In determining
     the reasonable collection potential of a case, the
     Service will take into account the taxpayer's reason-
     able basic living expenses. In some cases, the Service
     may accept an offer of less than the total reasonable
     collection potential of a case if there are special
     circumstances.

     On the record before us, we find that the settlement officer

followed all of the guidelines that respondent has prescribed to

determine whether an offer-in-compromise is adequate and should

be accepted to resolve a dispute.   In the settlement officer’s

March 1, 2005 letter, the settlement officer suggested to peti-

tioner the possibility of an offer-in-compromise and outlined the

filing and payment requirements that petitioner would be required


     10
      (...continued)
     mine public confidence that the tax laws are being
     administered in a fair and equitable manner. Sec.
     301.7122-1(b)(3)(ii), Proced. & Admin. Regs.

Murphy v. Commissioner, 125 T.C. 301, 309 (2005), affd. 469 F.3d
27 (1st Cir. 2006); see also IRM 5.8.11 (Effective Tax Adminis-
tration).
                                - 32 -

to meet before that or any other collection alternative could be

considered.     During the May 3, 2005 conference, the settlement

officer and petitioner’s authorized representative discussed

collection alternatives, including the possibility of an offer-

in-compromise.

     Upon receiving petitioner’s June 28, 2005 offer-in-compro-

mise, the settlement officer forwarded it to an offer examiner

for investigation.     The settlement officer gave petitioner the

opportunity to respond to the recommendation of the offer exam-

iner and reviewed petitioner’s response to that recommendation.

While petitioner advanced certain contentions in petitioner’s

March 29, 2006 letter,11 petitioner did not provide any documents

or other information corroborating those contentions.     The

settlement officer concluded that petitioner’s June 28, 2005

offer-in-compromise of $10,000 should be rejected because peti-

tioner had demonstrated ability to pay in full from his equity in

assets his Federal tax liabilities totaling between $32,449 and

$48,183.10.12    See supra note 7.



     11
      As discussed above, the contentions that petitioner ad-
vanced in petitioner’s March 29, 2006 letter were that peti-
tioner’s brother paid for the real properties and that peti-
tioner’s inventory was “very dated”.
     12
      As discussed above, petitioner offered $10,000 to compro-
mise not only petitioner’s unpaid 2001 income tax liability and
petitioner’s unpaid 2002 income tax liability but also certain
other outstanding Federal tax liabilities. See supra note 6 and
accompanying text and note 7.
                             - 33 -

     Based upon our examination of the entire record before us,

we find that respondent did not abuse respondent’s discretion in

making the determinations in the notice of determination with

respect to petitioner’s unpaid 2001 income tax liability and

petitioner’s unpaid 2002 income tax liability.      On that record,

we sustain those determinations.

     We have considered all of the contentions and arguments of

petitioner that are not discussed herein, and we find them to be

without merit, irrelevant, and/or moot.

     On the record before us, we shall grant respondent’s motion.

     To reflect the foregoing,



                                      An order granting respondent’s

                                 motion and decision for respondent

                                 will be entered.
