                               T.C. Memo. 2020-36



                         UNITED STATES TAX COURT



                   VALERIE R. BISHOP, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 23283-18L.                        Filed March 17, 2020.



      Thaddeus V. Day, for petitioner.

      Molly H. Donohue and Nina P. Ching, for respondent.



                           MEMORANDUM OPINION


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

review pursuant to section 6330(d)(1)1 of a determination by the Internal Revenue



      1
       All statutory references are to the Internal Revenue Code in effect at all
relevant times, and all Rule references are to the Tax Court Rules of Practice and
Procedure. We round all monetary amounts to the nearest dollar.
                                         -2-

[*2] Service (IRS or respondent) to sustain a collection action. The questions for

decision are: (1) whether petitioner may challenge her underlying tax liabilities in

this proceeding and (2) whether the settlement officer (SO) abused her discretion

in upholding a proposed levy. Respondent has moved for summary judgment

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

that the SO’s determination to sustain the collection action was proper as a matter

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

                                     Background

      The following facts are based on the parties’ pleadings and motion papers,

including the attached declarations, affidavits, and exhibits. Petitioner resided in

Maine when she filed her petition.

      Petitioner filed delinquent Federal income tax returns for 2013 and 2014 re-

porting self-employment income. (Petitioner’s income tax liabilities were joint

liabilities with her spouse, who is not a party to this case.) For each year she

failed to pay, through estimated tax payments or otherwise, the tax shown as due

on her return. The IRS assessed the tax shown as due and additions to tax for

failure to timely file, failure to pay, and failure to make estimated tax payments.

See secs. 6654, 6651(a)(1) and (2). As of March 2018 petitioner’s outstanding

liabilities for these years (including interest) were $30,744.
                                         -3-

[*3] In an effort to collect these unpaid liabilities the IRS sent petitioner a notice

of intent to levy, and her representative timely requested a CDP hearing. On April

25, 2018, a revenue agent (RA) called petitioner’s representative and asked him to

submit a Form 2848, Power of Attorney and Declaration of Representative, and to

specify the collection alternative (if any) that petitioner was seeking. On June 1,

2018, petitioner’s representative called the RA and expressed the belief that peti-

tioner had an existing installment agreement (IA). But IRS records showed that

petitioner’s IA had been terminated in January 2018 because of her failure to file

returns and make required estimated tax payments.

      On June 6, 2018, the RA sent transcripts of petitioner’s account to her repre-

sentative (as he had requested) and explained that the case was being transferred to

the IRS Appeals Office for a CDP hearing. The case was assigned to an SO in

Philadelphia, Pennsylvania. The SO verified that the tax liabilities had been prop-

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

procedure had been met. On July 3, 2018, the SO sent petitioner and her represen-

tative a letter scheduling a telephone CDP hearing for August 8, 2018. The letter

informed petitioner that, in order for the SO to consider a collection alternative,

petitioner needed to provide a completed Form 433-A, Collection Information

Statement for Wage Earners and Self-Employed Individuals, and signed copies of
                                        -4-

[*4] tax returns for 2015-2017. The SO asked that petitioner submit these

documents before the hearing, but she did not do so.

      A telephone hearing was held as scheduled. Petitioner’s representative re-

quested additional time to submit a Form 433-A and tax returns for 2015-2017.

The SO granted a 14-day extension. After submitting nothing by August 23, 2018,

petitioner’s representative called the SO to request additional time. The SO

agreed to extend the deadline to August 31.

      Having received nothing by September 10, 2018, the SO called the repre-

sentative and left a message stating that the documents needed to be submitted im-

mediately. Petitioner’s representative called the SO the next day and asked for an-

other week. The SO permitted this third extension but advised the representative

that if the returns were not filed by September 18, 2018, she would close the case.

      On September 18, 2018, the SO received faxed copies of returns for 2015-

2017 reporting tax liabilities of $10,105, $7,772, and $9,700, respectively. On the

basis of the 2017 return the SO determined that petitioner would need to make an

estimated payment of $7,275 for 2018 in order to be eligible for a collection alter-

native. On September 20, 2018, she informed the representative of that fact.

      Petitioner’s representative called the SO a week later and said that petitioner

was unable to make the estimated tax payment. The SO advised that if petitioner
                                         -5-

[*5] had the ability to make the estimated tax payment but declined to do so, then

she would not be eligible for an IA. The SO requested a completed Form 433-A in

order to evaluate petitioner’s ability to pay.

      On October 3, 2018, the SO received a Form 433-A showing monthly in-

come of $3,278 and monthly expenses of $2,716. The SO noted that, while ver-

ification would be needed with respect to the reported expenses, petitioner would

have to make a monthly payment of at least $562 under an IA. The SO called pe-

titioner’s representative and asked that he call her back.

      On October 15, 2018, having received no estimated tax payments, no pro-

posed IA, and no further communication from petitioner’s representative, the SO

decided to close the case. On October 19, 2018, the IRS issued a notice of deter-

mination sustaining the proposed levy. Petitioner timely petitioned this Court and,

on September 23, 2019, respondent filed a motion for summary judgment. Peti-

tioner opposed the motion, contending that her underlying liabilities were properly

before the SO and that the SO abused her discretion in declining to consider a

collection alternative.
                                         -6-

[*6]                                 Discussion

A.     Summary Judgment Standard

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

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

T.C. 678, 681 (1988). Under Rule 121(b) we may grant summary judgment when

there is no genuine dispute as to any material fact and a decision may be rendered

as a matter of law. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992),

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

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

most favorable to the nonmoving party. Ibid. The nonmoving party, however,

may not rest upon the mere allegations or denials in his pleadings, but must set

forth specific facts, by affidavit or otherwise, showing that there is a genuine

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

B.     Standard of Review

       Section 6330(d)(1) does not prescribe the standard of review that we should

apply in reviewing an IRS administrative determination in a CDP case. The gen-

eral parameters for such review are marked out by our precedents. Where the va-

lidity or amount of the taxpayer’s underlying tax liability is at issue, we review the

Commissioner’s determination de novo. Goza v. Commissioner, 114 T.C. 176,
                                          -7-

[*7] 181-182 (2000). Where the taxpayer’s underlying tax liability is not properly

before us, we review the IRS action for abuse of discretion. Id. at 182. An abuse

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

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

(2005), aff’d, 469 F.3d 27 (1st Cir. 2006).

C.    Underlying Tax Liabilities

      A taxpayer may challenge the existence or amount of her underlying liabili-

ties in a CDP proceeding only if she “did not receive any statutory notice of

deficiency for such tax liabilit[ies] or did not otherwise have an opportunity to dis-

pute * * * [them].” Sec. 6330(c)(2)(B). Petitioner was entitled at the CDP hearing

to dispute the tax liabilities as reported on her 2013 and 2014 returns because she

did not have a prior opportunity to do so. See ibid.; Montgomery v. Commission-

er, 122 T.C. 1, 8-9 (2004) (noting that a taxpayer may dispute his underlying liabi-

lity for a tax reported on his return).

      That said, a taxpayer must properly present an underlying liability challenge

to the SO in order to preserve the challenge for judicial review. See Thompson v.

Commissioner, 140 T.C. 173, 178 (2013) (“A taxpayer is precluded from disputing

the underlying liability if it was not properly raised in the CDP hearing.”); Giamel-

li v. Commissioner, 129 T.C 107, 113-114 (2007); sec. 301.6330-1(f)(2),
                                         -8-

[*8] Q&A-F3, Proced. & Admin. Regs. “‘An issue is not properly raised if the

taxpayer fails * * * to present * * * any evidence with respect to that issue after

being given a reasonable opportunity’ to do so.” Moriarty v. Commissioner, T.C.

Memo. 2017-204, 114 T.C.M. (CCH) 441, 443 (quoting section 301.6330-1(f)(2),

Q&A-F3, Proced. & Admin. Regs.), aff’d, 2018 WL 4924349 (6th Cir. Sept. 19,

2018); see Obeirne v. Commissioner, T.C. Memo. 2018-210, at *9.

      Petitioner contends that she implicitly challenged her underlying tax liabili-

ties during the hearing by describing the financial hardships that she faced, such as

the cost of her husband’s medical care. But while financial hardship may be rele-

vant to consideration of collection alternatives, it has no bearing on whether a tax-

payer owes the tax as reported on his or her return. See Baptiste v. Commissioner,

T.C. Memo. 2016-4, 111 T.C.M. (CCH) 1014, 1016. There is no evidence that

petitioner advanced during the CDP hearing a challenge either to the tax deficien-

cy or to the additions to tax for 2013 or 2014. Because she did not properly chal-

lenge those liabilities before the SO, she is precluded from challenging them here.

See Thompson, 140 T.C. at 178. We thus review the SO’s action for abuse of

discretion only. See Goza, 114 T.C. at 182.
                                         -9-

[*9] D.      Abuse of Discretion

      In deciding whether the SO abused her discretion in sustaining the collec-

tion action, we consider whether she: (1) properly verified that the requirements

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

relevant issues petitioner raised, and (3) considered “whether any proposed collec-

tion action balances the need for the efficient collection of taxes with the legiti-

mate concern of * * * [petitioner] that any collection action be no more intrusive

than necessary.” Sec. 6330(c)(3). Our review of the record establishes that the SO

properly discharged all of her responsibilities under section 6330(c).

      A taxpayer at a CDP hearing may propose a collection alternative, such as

an offer-in-compromise or an IA. But petitioner made no concrete proposal, and

the SO was not obligated to make one for her. See Gentile v. Commissioner, T.C.

Memo. 2013-175, 106 T.C.M. (CCH) 75, 77, aff’d, 592 F. App’x 824 (11th Cir.

2014); Veneziano v. Commissioner, T.C. Memo. 2011-160, 102 T.C.M. (CCH)

22, 24. The SO noted that the required minimum monthly payment under an IA

would likely be at least $562 and called petitioner’s representative. But neither

petitioner nor her representative ever responded to that communication.

      Moreover, we have consistently held that an SO does not abuse her discre-

tion when she declines to consider collection alternatives for a taxpayer who has
                                        - 10 -

[*10] failed to comply with current estimated tax obligations. See Giamelli, 129

T.C. at 111-112; Starkman v. Commissioner, T.C. Memo. 2012-236. “Compliance

with filing * * * [and] paying estimated taxes * * * must be current from the date

the installment agreement begins.” Internal Revenue Manual pt. 5.14.1.4.2(19)

(July 16, 2018).

      The SO informed petitioner that an estimated tax payment of $7,275 would

be required for 2018 as a condition of executing an IA. Although petitioner’s rep-

resentative stated that petitioner was unable to make this payment, he supplied in-

sufficient documentation to establish that fact. In any event, although the SO

“could accept an installment agreement that included petitioner’s current estimated

tax liabilities, she acted within her discretion in declining to do so.” Boulware v.

Commissioner, T.C. Memo. 2014-80, 107 T.C.M. (CCH) 1419, 1425, aff’d, 816

F.3d 133 (D.C. Cir. 2016). The requirement of current compliance as a condition

of executing an IA “ensures that current taxes are paid and avoids ‘the risk of

pyramiding tax liability.’” Hull v. Commissioner, T.C. Memo. 2015-86, 109

T.C.M. (CCH) 1438, 1441 (quoting Schwartz v. Commissioner, T.C. Memo.

2007-155, slip op. at 8); see Orum v. Commissioner, 412 F.3d 819 (7th Cir. 2005),

aff’g 123 T.C. 1 (2004).
                                       - 11 -

[*11] Finding no abuse of discretion in any respect, we will grant summary judg-

ment for respondent and sustain the collection action. We note that petitioner is

free to submit to the IRS at any time, for its consideration and possible acceptance,

a collection alternative in the form of an offer-in-compromise or an IA, supported

by the necessary financial information.

      To reflect the foregoing,


                                                An appropriate order and decision

                                       will be entered.
