                  T.C. Memo. 2010-71



                UNITED STATES TAX COURT



          JAMES HOWARD SCHROPP, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 24031-07L.            Filed April 13, 2010.



     The IRS issued to P a notice of filing of Federal
tax lien for 2005, and P timely requested a CDP hearing
before the IRS’s Office of Appeals under I.R.C. sec.
6320. During the hearing P asked Appeals to reconsider
its rejection of an offer-in-compromise (OIC) P had
submitted to compromise $2.7 million in tax owed for
8 tax years, including 2005. Appeals did not
reconsider the rejection in the CDP hearing but
affirmed the rejection outside the CDP hearing. We
remanded to Appeals to consider the appeal of the
rejected OIC as part of the CDP hearing for 2005.
Appeals collected more information, held another CDP
hearing, and then sustained the rejection of the OIC
again. R moved for summary judgment, and P opposed R’s
motion but submitted no evidence.

     Held: Appeals did not abuse its discretion in
sustaining the filing of a Federal tax lien when P
failed to provide information regarding what happened
to $2 million in income he earned during the years
                               - 2 -

     covered by the OIC, failed to explain his current
     income sources, and failed to respond to concerns that
     his asset disclosure was intentionally incomplete. R’s
     determination to sustain the filing of the Federal tax
     lien is sustained.



     James Howard Schropp, pro se.

     Nancy M. Gilmore, for respondent.



                         MEMORANDUM OPINION


     GUSTAFSON, Judge:   This case is an appeal by petitioner

James Howard Schropp, pursuant to section 6330(d),1 in which he

asks this Court to review the notice of determination issued by

the Internal Revenue Service (IRS) sustaining the filing of a

notice of Federal tax lien to collect Mr. Schropp’s unpaid

Federal income tax of $26,085 for tax year 2005.      On his petition

Mr. Schropp gave a Maryland address.   The case is currently

before the Court on respondent’s motion for summary judgment

filed December 31, 2009, and Mr. Schropp’s cross-motion for

summary judgment filed January 21, 2010.      For the reasons

explained below, we will deny Mr. Schropp’s motion and grant

respondent’s motion.




     1
      Except as otherwise noted, all section references are to
the Internal Revenue Code (26 U.S.C.), and all Rule references
are to the Tax Court Rules of Practice and Procedure.
                                - 3 -

                            Background

     The following facts are based on the declaration of Mary E.

Craca, made under penalty of perjury pursuant to 28 U.S.C.

section 1746,2 in lieu of an affidavit.     Ms. Craca is a

settlement officer in the IRS’s Office of Appeals, and her

declaration incorporates documents in the record of Mr. Schropp’s

collection due process (CDP) hearing held before the Office of

Appeals pursuant to section 6320(b) and (c).     Mr. Schropp, who is

an attorney and represents himself in this case, opposes

respondent’s motion and moves for summary judgment in his own

favor.   However, his supporting “Statement” is not an affidavit


     2
      Title 28 U.S.C. section 1746 provides in part as follows:

          Wherever, under any law of the United States or
     under any rule * * * made pursuant to law [i.e.,
     including Rule 121], any matter is required or
     permitted to be supported, evidenced, established, or
     proved by the sworn * * * affidavit, in writing of the
     person making the same * * *, such matter may, with
     like force and effect, be supported, evidenced,
     established, or proved by the unsworn declaration
     * * *, in writing of such person which is subscribed by
     him, as true under penalty of perjury, and dated, in
     substantially the following form:

                  *    *    *    *      *    *    *

          (2) If executed within the United States, its
     territories, possessions, or commonwealths: “I declare
     (or certify, verify, or state) under penalty of perjury
     that the foregoing is true and correct. Executed on
     (date). (Signature)”.

Consistent with that provision, Ms. Craca’s declaration
concludes, “Pursuant to 28 U.S.C. § 1746, I declare under penalty
of perjury that the foregoing declaration is true and correct.”
                               - 4 -

(because it is not sworn),3 and it is not an unsworn statement in

lieu of affidavit made under penalty of perjury;4 and as is

discussed below in parts I.A and II.B, it makes only summary

assertions that do not raise any genuine issue of material fact.

Mr. Schropp’s income tax liabilities

     For some or all of the years 1994 through 2007, Mr. Schropp

was a partner at the law firm Fried, Frank, Harris, Shriver &

Jacobson.   For the 8 years 1994, 1995, 1996, 1997, 1998, 1999,

2004, and 2005, Mr. Schropp had unpaid income tax liabilities

totaling more than $2.7 million.   His liability for 2005--the


     3
      See Elder-Keep v. Aksamit, 460 F.3d 979, 984 (8th Cir.
2006) (“an affidavit, by definition, is ‘a statement reduced to
writing and the truth of which is sworn to before someone who is
authorized to administer an oath.’ Pfeil v. Rogers, 757 F.2d 850,
859 (7th Cir. 1985) (emphasis added)”); see also Black’s Law
Dictionary 62 (8th ed. 2004) (defining “affidavit” as “A
voluntary declaration of facts written down and sworn to by the
declarant before an officer authorized to administer oaths, such
as a notary public”).
     4
      Title 28 U.S.C. section 1746 (see supra note 2) permits an
unsworn statement to be used in lieu of an affidavit only if the
unsworn statement is made “under penalty of perjury”.
Mr. Schropp’s statement begins, “Petitioner, James H. Schropp, in
support of his Motion for Summary Judgment, filed herewith, and
in opposition to the Petitioner’s [sic] Motion for Summary
Judgment, respectfully states as follows”; and it ends,
“Respectfully submitted, James H. Schropp.” The statement thus
fails to comply with 28 U.S.C. section 1746 because it is not
made “under penalty of perjury”. Mr. Schropp attached to his
statement two exhibits (a March 2009 bank statement showing a
payment of levy proceeds to the U.S. Treasury, and a
February 2009 notice from the IRS of the application of an
overpayment); and although these are not properly authenticated,
we assume them to be authentic. They do not, however, affect the
outcome of this case, for the reasons explained below in
part I.B.
                               - 5 -

year in issue--was $26,085, i.e., less than 1 percent of the

8-year total.   Mr. Schropp does not dispute these liabilities,

which consist of tax liabilities that he reported but did not

pay, plus interest and penalties.   Our record shows that before

June 2006 the IRS was engaged in activity to collect those

liabilities, but that activity is not shown in detail and is not

necessary to our opinion.

The June 2006 agreement

     On June 13, 2006, an IRS revenue officer sent to

Mr. Schropp’s representative a letter that stated--

     the outline and key elements of the proposal to resolve
     your client’s Federal tax liabilities is/are [sic] as
     follows:

     1)   Mr. Schropp will withdraw and remit sufficient
          funds from his IRA accounts to full pay the
          balances due for his 2004 assessed and 2005
          estimated income tax liabilities by June 30, 2006.

     2)   Mr. Schropp will withdraw and remit sufficient
          funds from his IRA accounts to cover the estimated
          capital gains due from 1) above by June 30, 2006.

     3)   Mr. Schropp will withdraw and remit sufficient
          funds from his IRA accounts to cover his accrued
          estimated income tax liability through 6/15/2006
          by June 30, 2006[.]

     4)   Mr. Schropp will withdraw the remainder of the
          funds in his IRA accounts by June 30, 2006 and
          place them on deposit in the escrow account of his
          representative, Richard H. Gins.

     5)   Once items 1) through 4) above have been
          satisfactorily completed we will release the levy
          on Mr. Schropp’s income only;
                               - 6 -

           A)   Our levy on Mr. Schropp’s partnership capital
                account will remain in effect pending the
                outcome of the Offer process. (I have
                discussed this with Fried Frank and they are
                amenable to same[.])

     6)    Mr. Schropp will tender an Offer in Compromise to
           this office by August 30, 2006 the amount of which
           will reasonably reflect his ability to pay
           including but not limited to the value of his
           partnership capital accounting and net disposable
           income. The offer will be fully supported and
           documented.

           A)   The escrowed IRA net proceeds in 4) above
                will be remitted with the Offer as a
                refundable deposit.

     7)    Myself and * * * [a superior] will review the
           Offer and make an initial determination as to its
           sufficiency and processibility. If the Offer
           meets both requirements we will withhold further
           action pending the outcome of the Offer process.

     Please send us your response in writing not later than
     June 25, 2006, if you have any further questions
     regarding this matter please call me promptly at the
     phone number below. [Emphasis added.]

Our record does not include any response in writing to the IRS’s

proposal, but we assume (in Mr. Schropp’s favor) that he accepted

the proposal.   He did submit an offer-in-compromise (OIC) on

August 1, 2006, in which he proposed to pay $705,000 to

compromise his unpaid liabilities (i.e., 26 percent of the 8-year

total).5   We assume (again in Mr. Schropp’s favor) that the

revenue officer and his superior did make an initial

determination that the offer was “sufficien[t] and


     5
      The record does not include Mr. Schropp’s OIC, but the
parties agree that he submitted one.
                                - 7 -

processib[le]”, and that Mr. Schropp complied with paragraphs 1

through 4 of the June 2006 proposal.    Consistent with that

assumption, the revenue officer did forward the offer to the

IRS’s “OIC group” for consideration.6

The December 2006 Notice of Federal Tax Lien

     On December 21, 2006, while the IRS was still considering

Mr. Schropp’s OIC, the IRS filed a notice of Federal tax lien

(NFTL) against Mr. Schropp, with regard to Mr. Schropp’s unpaid

2005 income tax of $26,085.    On December 28, 2006, the IRS sent

to Mr. Schropp a Notice of Federal Tax Lien Filing and Your Right

to a Hearing under IRC 6320.   The contact person listed on the

NFTL was the offer specialist in the IRS OIC group assigned to

process Mr. Schropp’s OIC.    The notice advised Mr. Schropp of his

right to a CDP hearing.

The initial CDP hearing

     On January 29, 2007, Mr. Schropp timely submitted to the IRS

on Form 12153, Request for a Collection Due Process Hearing, his

request for a CDP hearing before the IRS Office of Appeals.    The




     6
      The IRS Centralized Offer in Compromise Unit determines
whether an OIC is processable, builds the OIC case, and forwards
processable OICs to offer examiners. If the offer examiner
approves an OIC, the taxpayer is notified and the executed OIC is
transferred to an IRS compliance campus, which monitors the
taxpayer’s compliance with the terms of the agreement. Internal
Revenue Manual pt. 1.4.17.6.2 (Mar. 1, 2006). A taxpayer may
appeal a rejected OIC to the Office of Appeals. Sec. 7122(e)(2);
sec. 301.7122-1(f)(5), Proced. & Admin. Regs.
                                 - 8 -

CDP hearing took place in August 2007 before an appeals officer.7

By that time, the offer specialist had denied Mr. Schropp’s OIC,

Mr. Schropp had made an intra-agency appeal, and that appeal was

still pending before the Office of Appeals.    Mr. Schropp

requested that the appeals officer handling his CDP hearing

review his OIC appeal as well.    Although the appeals officer

determined that the OIC appeal had not been assigned to an

appeals officer, she concluded that the OIC appeal was outside

the scope of the CDP hearing, and she declined to review it as

part of the CDP process.   On September 14, 2007, the appeals

officer issued a notice of determination upholding the notice of

lien.

     Outside the CDP context, the appeals officer separately

considered Mr. Schropp’s OIC.    The offer specialist had

determined that, of the income that Mr. Schropp had earned during

the years 2001 through 2006 (when he earned more than $750,000

per year), about $2 million could not be accounted for, and the

IRS treated this as a probable source of funds that should be

included in Mr. Schropp’s reasonable collection potential,


     7
      Section 6320(b)(3) provides that the CDP hearing shall be
held before “an officer or employee” of the Office of Appeals.
Thereafter, the statute refers to this officer or employee as the
“appeals officer”. See sec. 6330(c)(1) and (3). In the IRS
Office of Appeals, hearings are held before persons with the
title Appeals Officer and Settlement Officer. In this instance,
the “officer or employee” who conducted the hearing had the title
“Settlement Officer”, but we refer to her by the statutory term
“appeals officer”.
                               - 9 -

rendering his offer inadequate.   The appeals officer sustained

the IRS’s rejection of Mr. Schropp’s OIC on January 2, 2008.

Tax Court review of the initial notice of determination

     On October 18, 2007, Mr. Schropp filed his petition in the

instant case, appealing the adverse notice of determination

issued in September.

     The parties cross-moved for summary judgment; and at a

hearing on the motions, the Court and respondent discussed the

appeals officer’s declining to review the OIC in the CDP context.

The Court denied the cross-motions, and respondent moved the

Court to remand the case for a supplemental CDP hearing, during

which the appeals officer would consider the OIC.     The Court

granted that motion by its order dated August 5, 2008.

The supplemental CDP hearing on remand

     The supplemental CDP hearing took place by way of a face-to-

face meeting on November 25, 2008.     Before that hearing

Mr. Schropp provided the appeals officer with an unsigned copy of

his 2007 tax return and a completed Form 433-A, Collection

Information Statement for Wage Earners and Self-Employed

Individuals, for her use in reconsidering the OIC in the CDP

context.   On November 14, 2008, the appeals officer sent Mr.

Schropp’s representative a letter that explained her concerns and

asked for more information.   The letter raised, among other

things, the question that the offer specialist had previously
                               - 10 -

raised about the undisclosed whereabouts of Mr. Schropp’s

earnings, “especially in tax years 2006 and 2007”.   The appeals

officer’s November 14 letter concluded as follows:

     To summarize, I am concerned that full financial
     disclosure; disclosure of all individual and jointly
     owned assets, has NOT been made to date. I am
     concerned with the level of income that Mr. Schropp
     earned during the 2002-2006 time period, yet failed to
     make any voluntary payments towards his outstanding
     taxes. Without evidence of the extraordinary expenses,
     I am not convinced that some sort of dissipated income
     calculation should NOT be included in the reasonable
     collection potential on this account.

To the letter the appeals officer attached an “Asset Equity

Table”, listing Mr. Schropp’s acknowledged assets--i.e., cash;

three IRA accounts; a capital account at Fried, Frank; a

residence; and a car.   This table listed for each asset the fair

market (“FM”) value, quick sale (“QS”) value, and encumbrances

against the asset, and it reflected that from those assets alone

Mr. Schropp had available equity totaling $1,654,908, which

obviously far exceeded the $705,000 amount he had offered to pay.

     Mr. Schropp, his representative, and the appeals officer

discussed the appeals officer’s letter and its concerns at the

November 25 hearing.    After the hearing the appeals officer sent

a fax to Mr. Schropp’s representative, confirming her requests

for additional information and stating:

     If I am able to determine that Mr. Schropp has fully
     disclosed how he handles his money on a monthly basis,
     I am confident that I will be able to arrive at an
     offer amount that the Service would accept. The
                              - 11 -

     question would then become, can Mr. Schropp actually
     FUND that offer.

Mr. Schropp did provide some additional information on

December 22, 2008, but the appeals officer’s concerns were not

allayed.   She found, in a November 2008 Suntrust Bank statement

that Mr. Schropp provided in December 2008, further evidence that

he had other undisclosed sources of income.    Specifically, she

noted in a letter to Mr. Schropp’s representative that

Mr. Schropp’s wife had had only nominal income for the past 13

years, but Mr. Schropp had not explained how her checking account

had had a balance sufficient to make a $76,598 payment in October

2008 for Mr. Schropp’s 2007 taxes.     Second, she noted a $13,190

deposit for which Mr. Schropp had never accounted.    Third, she

recalled the previous determination by the offer specialist that

$2 million of Mr. Schropp’s income from 2001 through 2006 had

never been accounted for and should be included in his reasonable

collection potential (RCP).   She explained:

     Your protest indicated that the dissipated income
     calculation was unfair because Mr. Schropp had
     extraordinary expenses during 2002-2005 relating to the
     care and maintenance of his mother. You were
     repeatedly asked to document these expenses in an
     effort to eliminate the inclusion of a dissipated
     Income analysis from the RCP. To date, no information
     has been provided to document these expenses * * *.

Supplemental Notice of Determination

     Consequently, the appeals officer prepared, and the Office

of Appeals issued on January 16, 2009, a Supplemental Notice of
                               - 12 -

Determination Concerning Collection Action(s) under Section 6320

and/or 6330.   The Office of Appeals once again sustained the

notice of lien regarding Mr. Schropp’s 2005 income tax liability.

It held that the filing of the notice of lien was not barred by

Mr. Schropp’s June 2006 agreement with the revenue officer and

that Mr. Schropp’s OIC was properly rejected because the

information he had provided was “insufficient to determine a

reasonable collection potential on your account due to the

apparent existence of undisclosed assets” and because the assets

and income he had disclosed showed available equity of

$1,654,908.    This analysis was given on an “Asset Equity Table”

materially identical to the one that the appeals officer had

previously set out in her letter of November 14, 2008.

Subsequent proceedings in this Court

     On March 4, 2009, respondent filed a status report, advising

the Court of the supplemental determination.   The case was then

put on a trial calendar scheduled to begin February 1, 2010, in

Baltimore, Maryland; but the parties filed their cross-motions

for summary judgment.   Mr. Schropp’s motion makes unsubstantiated

complaints about IRS actions that are outside the scope of this

lawsuit8 and that we do not address, and makes other complaints



     8
      Our jurisdiction extends only to the review of the notice
of lien for Mr. Schropp’s 2005 income tax liability; and since he
included his 2005 income tax in an OIC for 8 years, we review the
IRS’s consideration of that OIC.
                               - 13 -

about the IRS’s conduct of the CDP hearing and of prior

proceedings in this litigation, which were already addressed by

the Court’s remand order requiring that Mr. Schropp be given a

supplemental CDP hearing.    His pertinent remaining contentions

are:

       •    that the notice of lien was improperly filed in
            violation of the June 2006 agreement;

       •    that the Office of Appeals abused its discretion in
            rejecting his OIC because--

            "    its conclusion that Mr. Schropp had failed to
                 disclose all his assets was a “pretext”; and

            "    its analysis of Mr. Schropp’s disclosed assets was
                 unexplained, and he “was not afforded any
                 opportunity to rebut it”; and

       •    that the Office of Appeals, having rejected
            Mr. Schropp’s OIC, abused its discretion in sustaining
            the notice of lien rather than making a counter-offer.

We discuss each of these contentions below.

                             Discussion

I.     Applicable legal principles

       A.   Summary judgment standards

       Where the pertinent facts are not in dispute, a party may

move for summary judgment to expedite the litigation and avoid an

unnecessary (and potentially expensive) trial.     Fla. Peach Corp.

v. Commissioner, 90 T.C. 678, 681 (1988).     Summary judgment may

be granted where there is no genuine issue as to any material

fact, and a decision may be rendered as a matter of law.

Rule 121(a) and (b); see Sundstrand Corp. v. Commissioner, 98
                              - 14 -

T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994); Zaentz

v. Commissioner, 90 T.C. 753, 754 (1988).

     The party moving for summary judgment bears the burden of

showing that there is no genuine issue as to any material fact,

and factual inferences will be drawn in the manner most favorable

to the party opposing summary judgment.     Dahlstrom v.

Commissioner, 85 T.C. 812, 821 (1985); Jacklin v. Commissioner,

79 T.C. 340, 344 (1982).   Respondent’s motion carries that burden

and is fully supported by the appeals officer’s declaration under

penalty of perjury, whereas Mr. Schropp submitted no equivalent

statement, so that his motion is easily denied.    We will

therefore hereafter treat respondent as the party moving for

summary judgment and Mr. Schropp as the party opposing it.    That

is, inferences will be drawn in the manner most favorable to

Mr. Schropp.   However, Rule 121(d) provides,

     When a motion for summary judgment is made and
     supported as provided in this Rule, an adverse party
     [such as Mr. Schropp] may not rest upon the mere
     allegations or denials of such party’s pleading, but
     such party’s response, by affidavits or as otherwise
     provided in this Rule, must set forth specific facts
     showing that there is a genuine issue for trial. * * *

In compliance with Rule 121, respondent made and supported a

showing of the facts of the case; but Mr. Schropp’s only response

is his opposition without any affidavit.    Except where it relies

on the documents that respondent previously submitted,

Mr. Schropp’s submission is not supported in compliance with
                                 - 15 -

Rule 121.    We therefore must disregard his assertions of fact

except to the extent they are supported by respondent’s evidence.

     B.     Collection review principles

            1.    Basic statutory structure

     When a taxpayer fails to pay any Federal income tax

liability after demand, section 6321 imposes a lien in favor of

the United States on all the property of the delinquent taxpayer,

and section 6323 authorizes the IRS to file notice of that lien.

However, within 5 business days after filing a notice of tax

lien, the IRS must provide written notice of that filing to the

taxpayer.    Sec. 6320(a).   After receiving such a notice, the

taxpayer may, within 30 days, request an administrative hearing

before the Office of Appeals.     Sec. 6320(a)(3)(B) and (b)(1).

Administrative review is carried out by way of a hearing before

the Office of Appeals pursuant to section 6320(b) and (c) (which

references section 6330(b) and (c)); and, if the taxpayer is

dissatisfied with the outcome there, he can appeal that

determination to the Tax Court within 30 days under

sections 6320(c) and 6330(d).

            2.    Jurisdiction

     This Court has only the limited jurisdiction conferred on it

by Congress.     Our jurisdiction to review IRS collection actions

is delimited by section 6330(d)(1) to instances in which the IRS

has issued a “determination”, which it can do only if a taxpayer
                               - 16 -

timely requests a hearing, which he can do only if he received a

notice of lien or proposed levy.    Orum v. Commissioner, 123 T.C.

1, 11-12 (2004), affd. 412 F.3d 819 (7th Cir. 2005); Lunsford v.

Commissioner, 117 T.C. 159, 161 (2001).    Thus, to invoke our

jurisdiction under the statutory structure described above, the

taxpayer must show:    (i) that he received a notice of lien or

proposed levy, (ii) that within 30 days he requested a hearing,

(iii) that he was issued a determination, and (iv) that he filed

his petition within 30 days.

     Mr. Schropp has satisfied the four prerequisites to invoke

our jurisdiction to hear his appeal as to the notice of lien for

his 2005 income tax:    He received a notice of lien filing, he

timely requested a hearing, he received a determination, and he

timely filed his appeal in this Court.    However, the IRS is

attempting to collect tax from Mr. Schropp for many years other

than 2005, and his motion complains of IRS collection action for

which he has not shown that we have review jurisdiction:    a

March 2009 levy of a joint brokerage account, the proceeds of

which the IRS applied to his liability for one or more of the

years 1994 through 1999; the application of a 2007 income tax

overpayment to his 1995 liability; and “plac[ing] liens against

and seiz[ing] assets whenever possible”.    Mr. Schropp cannot use

this 2005 lien case as a general forum for halting IRS collection
                                 - 17 -

of his taxes for all years and subjecting that collection to

review that Congress has not authorized.

     The notice of determination that confers jurisdiction in

this case did not address Mr. Schropp’s OIC, but we review the

supplemental notice of determination, see Kelby v. Commissioner,

130 T.C. 79, 86 (2008), and that supplemental notice did address

the offer that Mr. Schropp made to compromise his liability for

the year 2005 and 7 additional years.     As a result, we have

jurisdiction to review the Office of Appeals’ consideration of

that 8-year proposal.     However, our jurisdiction in this case is

limited to reviewing only the decision to sustain the NFTL as to

2005.9

             3.   Hearing procedures

     In the case of a notice of lien, section 6320(c) provides

that the procedures for the agency-level CDP hearing before the

Office of Appeals are set forth in section 6330(c):

     First, the IRS appeals officer must “obtain verification

from the Secretary that the requirements of any applicable law or

administrative procedure have been met.”     Sec. 6330(c)(1).10   The


     9
      See Sullivan v. Commissioner, T.C. Memo. 2009-4, 97 TCM
(CCH) 1010, 1015 (2009) (“We therefore proceed to evaluate the
appeals officer’s exercise of discretion in rejecting the OICs,
taking into account all the liabilities that were proposed to be
compromised, even though we do not have jurisdiction to review
the collection of all those liabilities”).
     10
          In the case of the lien filed against Mr. Schropp, the
                                                       (continued...)
                               - 18 -

notice of determination and the supplemental notice both set

forth the IRS’s compliance with these requirements; and because

Mr. Schropp made no challenge as to verification in his petition

(or in his recent filing), no verification issues under

section 6330(c)(1) are at issue.

     Second, the taxpayer may “raise at the hearing any relevant

issue relating to the unpaid tax or the proposed levy, including”

challenges to the appropriateness of the collection action and

offers of collection alternatives.      Sec. 6330(c)(2)(A).

Mr. Schropp’s contentions pertain to that second set of issues,

which we will discuss below.

     Additionally, the taxpayer may contest the existence and

amount of the underlying tax liability, but only if he did not

receive a notice of deficiency or otherwise have a prior

opportunity to dispute the tax liability.      Sec. 6330(c)(2)(B).

Neither in his petition nor in his recent filing did Mr. Schropp

dispute the underlying liabilities (which arise from the returns

that he filed), so those liabilities are not at issue.

     Finally, the appeals officer must determine “whether any

proposed collection action balances the need for the efficient



     10
      (...continued)
basic requirements, see sec. 6320, for which the appeals officer
was to obtain verification are: assessment of the liability,
secs. 6201(a)(1), 6501(a); notice and demand for payment of the
liability, sec. 6303; and notice of the filing of the lien and of
the taxpayer’s right to a CDP hearing, sec. 6320(a) and (b).
                               - 19 -

collection of taxes with the legitimate concern of the person

that any collection action be no more intrusive than necessary”.

The supplemental notice of determination undertook such a

balancing, found that the lien filing “was appropriate and is

sustained”, and stated that the lien notice, in the absence of an

acceptable offer or other agreement, protects the Government’s

interest in Mr. Schropp’s assets if he should try to sell or

encumber his property.

          4.     Tax Court review

     When the Office of Appeals issues its determination, the

taxpayer may “appeal such determination to the Tax Court”,

pursuant to section 6330(d)(1), as Mr. Schropp has done.    In such

an appeal (where the underlying liability is not at issue), we

review the determination of the Office of Appeals for abuse of

discretion.    That is, we decide whether the determination was

arbitrary, capricious, or without sound basis in fact or law.

See Murphy v. Commissioner, 125 T.C. 301, 320 (2005), affd. 469

F.3d 27 (1st Cir. 2006).

     The abuse-of-discretion standard obviously gives an

advantage to the Commissioner as he defends the Office of

Appeals’ determination.    However, when a case is before us on the

Commissioner’s motion for summary judgment, the advantage may

tilt back to the taxpayer, because every inference is drawn in

favor of the taxpayer and the issue we decide is simply whether
                                - 20 -

the taxpayer has presented evidence that raises a genuine issue

of material fact on the question whether there was abuse of

discretion.

II.   Respondent’s entitlement to summary judgment

      We find that Mr. Schropp has not raised any issue of

material fact that would justify denial of summary judgment in

favor of respondent.

      A.    The notice of lien did not violate any agreement
            between Mr. Schropp and the IRS.

      In June 2006 a revenue officer stated in writing that if

Mr. Schropp would make an OIC that met certain standards, then

“we will withhold further action pending the outcome of the Offer

process”.   (Emphasis added.)   Mr. Schropp construes this as a

promise “that the Service ‘will withhold further [collection]

pending the outcome of the Offer process’”, Schropp Statement,

par. 10 (bracketed word in original).    That is, Mr. Schropp

equates “action” with “collection”, and understands “collection”

to include the filing of a notice of lien.    Since Mr. Schropp did

thereafter submit an OIC (which we assume met the standards

required in the letter), and since the notice of lien at issue

here was filed during “the Offer process” (i.e., while

Mr. Schropp’s offer was still being considered), he contends that

the notice of lien violated the agreement, and that it was
                                 - 21 -

therefore an abuse of discretion for the Office of Appeals to

sustain the lien despite a contrary agreement.11

     Mr. Schropp’s interpretation of the June 2006 letter

is unwarranted.     The letter calls for certain payments by

Mr. Schropp and the release of levy by the IRS.     In that context,

the IRS’s withholding of “action” would be to forgo further

levies.     More important, Mr. Schropp’s proposed interpretation

(that “action” to be withheld included mere filing of notices of

lien) would have rendered the letter self-contradictory:       The

letter explicitly solicited from Mr. Schropp an “Offer in

Compromise”.     An OIC is made on Form 656, Offer in Compromise,

which in 2006 included the following term--12


     11
      Mr. Schropp contends that respondent has conceded and this
Court has already held (in its order of April 28, 2008) that the
notice of lien violated the June 2006 agreement. Schropp
Statement, par. 13 (referring to “this Court's prior holding, and
the Service’s prior concession, that such collection action
[i.e., the notice of lien], outside the ‘context’ of the
Service’s consideration of a pending Offer, in Compromise, was
not appropriate”). This contention is far off the mark. This
Court’s order dated April 24, 2008, noted respondent’s concession
that “the Internal Revenue Manual instructs respondent to include
petitioner's offer-in-compromise in the proceedings under I.R.C.
sections 6320 and 6330 and that respondent did not do so”. That
is, the OIC had to be considered in the CDP hearing context (so
that the Court could review the IRS’s action on that offer). The
order includes no mention whatsoever of the June 2006 agreement,
and makes no suggestion that the IRS’s filing of a notice of lien
must await its consideration of the OIC. On the contrary, the
order denied Mr. Schropp’s prior motion for summary judgment
(filed April 21, 2008), which had argued that the June 2006
agreement precluded any further collection action.
     12
          Substantially the same language appears in paragraph (m)
                                                       (continued...)
                              - 22 -

     (o) The IRS generally files a Notice of Federal Tax
     Lien to protect the Government’s interest on deferred
     payment offers. Also, the IRS may file a Notice of
     Federal Tax Lien during the offer investigation. This
     tax lien will be released when the payment terms of the
     offer agreement have been satisfied. [Emphasis added.]

--and the following language above the taxpayer’s signature:

     If I/we submit this offer on a substitute form, I/we
     affirm that this form is a verbatim duplicate of the
     official Form 656, and I/we agree to be bound by all
     the terms and conditions set forth in the official Form
     656. [Emphasis added.]

As is noted above, Mr. Schropp’s OIC is not in the record, but we

take judicial notice of the terms of Form 656 and assume (in his

favor) that his OIC was proper and therefore did include the

prescribed terms.   If his OIC had not included the prescribed

terms, then it would not have been a valid OIC, Mr. Schropp would

have failed to comply with the revenue officer’s proposal, and

there would have been no agreement at all in June 2006.   See

Baltic v. Commissioner, 129 T.C. 178, 180 n.4 (2007) (affirming

the IRS’s sustaining a lien notice while it considered the

taxpayer’s OIC, and stating that section 6331(k)(1) “generally

blocks the IRS from collecting taxes by levy (though not by lien)

while an OIC is pending”).

     Thus, a notice of lien may properly be filed while an OIC is

under consideration or after it is accepted.   Even where the IRS

has decided not to proceed with aggressive collection action


     12
      (...continued)
of the current (March 2009) Form 656.
                              - 23 -

(e.g., where it decides to accept an installment agreement, or to

temporarily recognize a taxpayer as noncollectible), the IRS may

file its notice of lien to retain its place in the line of a

taxpayer’s creditors.   For example, Mr. Schropp has a residence

worth $1.75 million; and the IRS could well intend that if he

were to attempt to sell that residence, the IRS should receive

those proceeds (to satisfy Mr. Schropp’s old and enormous

liabilities) rather than letting Mr. Schropp or one of his other

creditors receive them.   If so, then the filing of the notice of

lien was critical to the protection of the Government’s interest.

Without a lien, the property might be sold and the proceeds paid

to other creditors, hidden, or dissipated.   The presence of the

lien during the IRS’s consideration of an OIC may be critical;

without the filing of a notice of lien, the Government’s interest

is at risk, and the IRS could ill afford to take much time to

consider an OIC.   But with the lien perfected, the IRS can take

the time necessary to give appropriate consideration to a

proposed collection alternative.

     Mr. Schropp has presented no evidence to suggest that the

June 2006 letter forfeited the IRS’s important rights and offered

to Mr. Schropp an immunity that other taxpayers do not obtain.
                               - 24 -

       B.   The Office of Appeals did not abuse its discretion in
            determining that Mr. Schropp’s RCP exceeded the amount
            of his Offer-in-Compromise.

       It is within the responsibility and discretion of the Office

of Appeals to evaluate a taxpayer’s RCP and to make judgments, in

light of that RCP, about the reasonableness of the taxpayer’s

OIC.    When we review the decisions of the Office of Appeals, “We

do not substitute our own judgment for that of Appeals, and we do

not prescribe the amount we believe would be an acceptable offer-

in-compromise” but instead correct only abuses of discretion.

Bartl v. Commissioner, T.C. Memo. 2010-43; see also Murphy v.

Commissioner, 125 T.C. at 320.    In deciding an abuse-of-

discretion issue in the context of the Commissioner’s motion

under Rule 121, we draw every inference in favor of the taxpayer;

but if the Commissioner’s motion is supported as required by the

Rule (i.e., when he makes a showing, supported by affidavit or

other evidence, that the determination was reasonable), then the

taxpayer is still required to come forward with evidence, in

compliance with Rule 121(d), raising a genuine issue as to

whether the determination reflects an abuse of discretion.

            1.   The Office of Appeals did not abuse its discretion
                 in determining that Mr. Schropp had not disclosed
                 all his assets.

       When the Office of Appeals accepts an OIC on the basis of

doubt as to collectibility, it agrees to accept from the taxpayer

less than full payment of an undisputed liability because it has
                               - 25 -

determined that, in view of the taxpayer’s financial

circumstances, full payment may not be possible.    It is entirely

reasonable that the Office of Appeals, before making such an

agreement, should insist on knowing all of the taxpayer’s assets

in order to determine his RCP.    See Internal Revenue Manual (IRM)

pt. 5.15.1.3 (May 9, 2008).    It could hardly be otherwise.   That

being the case, the Office of Appeals cannot reasonably accept an

OIC unless and until it is satisfied that all the taxpayer’s

assets have been disclosed.    If Appeals determines that some

assets have not been disclosed, then it may reject an OIC; and if

its determination is reasonable, then the Court must not overturn

its exercise of discretion.

     After the latest information submitted by Mr. Schropp, the

appeals officer was left with unanswered questions about possible

undisclosed assets:   She found an unexplained substantial balance

in a bank account of Mrs. Schropp, who was said to have had only

nominal income for years; she found an unexplained deposit of

$13,190 to that same account; and Mr. Schropp had never accounted

for $2 million of his income from 2001 through 2006--about which

the appeals officer asked in writing, before the supplemental CDP

hearing, “If the money was not spent, where is it?”

     Mr. Schropp has never answered those questions, either in

the CDP agency-level hearing or in his opposition to respondent’s

motion for summary judgment.    At some point he alleged that he
                                - 26 -

had spent substantial amounts on medical expenses, but the record

does not show any substantiation of such expenditures.    His

opposition characterizes the appeals officer’s conclusion about

undisclosed assets as “inexplicable and unsupportable”, but he

offers no data to answer her questions or dispute her conclusion.

Even if his statement had been either an unsworn statement made

under penalty of perjury or a sworn affidavit and therefore could

otherwise be considered, it fails to “set forth such facts as

would be admissible in evidence,” as Rule 121(d) requires.      The

Rule also provides that “an adverse party may not rest upon the

mere allegations or denials of such party’s pleading, but * * *

must set forth specific facts showing that there is a genuine

issue for trial.”   Mr. Schropp’s statement contains conclusory

denials, but no specific facts that would bring into question the

appeals officer’s conclusions that he had not fully disclosed his

assets.

          2.   The Office of Appeals did not abuse its discretion
               in determining that Mr. Schropp’s equity in his
               disclosed assets exceeded the amount of his OIC.

     The IRS may generally compromise a tax liability on the

basis of doubt as to collectibility where the taxpayer’s assets

and projected future income are less than the full liability.

See sec. 301.7122-1(b)(2), Proced. & Admin. Regs.; see also IRM

pt. 5.8.4.4 (Sept. 23, 2008).    Income and assets in excess of

those needed for necessary living expenses are treated as
                             - 27 -

available to satisfy Federal income tax liabilities.   See sec.

301.7122-1(c)(2), Proced. & Admin. Regs.   If a taxpayer has

equity in assets, then as a general rule his reasonable

collection potential is no less than the amount that could be

realized by selling the assets or borrowing against that equity,

and the IRS will have little doubt that it can collect at least

that amount from this taxpayer.   If a compromise with that

taxpayer is to be based on doubt as to collectibility, then the

IRS may reject an OIC that offers a lesser amount.   The appeals

officer concluded that, even looking only at the assets that

Mr. Schropp had disclosed (and ignoring the income stream from

his pension), his equity in those assets--over $1.6 million--

exceeded the $705,000 amount of his offer, and she determined

that his offer should be rejected for that reason as well.

Before the supplemental CDP hearing, she presented to Mr. Schropp

her “Asset Equity Table” that calculated his $1.6 million equity.

At the hearing he presented no information that changed her

calculation, and consequently the supplemental determination

replicated the same table and drew the same conclusion.

     In his opposition, Mr. Schropp makes two criticisms of this

calculation:

     No explanation of this purported ‘analysis’ was
     provided, and Petitioner was not afforded any
     opportunity to rebut it. * * * The determination
     failed to correct the admittedly erroneous calculation
     of Petitioner’s assets which purported to support the
                              - 28 -

     rejection, and which the settlement officer herself had
     indicated she did not agree with.

The first of these criticisms is manifestly incorrect.    The

analysis in the Asset Equity Table is quite clear.    The values

reflected thereon might have been incorrect, but Mr. Schropp

certainly was given an opportunity to rebut them.    He did not do

so in the CDP context, and he did not do so in his opposition to

respondent’s motion for summary judgment.

     Mr. Schropp’s second criticism of the asset analysis is that

it is “admittedly erroneous” and that “the settlement officer

herself had indicated she did not agree with” it.    Mr. Schropp

does not explain or substantiate this criticism, but elsewhere in

his statement, he makes an apparently related comment, seeming to

imply that the appeals officer admitted that his assets must be

lower than the IRS had reckoned:

     Petitioner specifically objected [during the initial
     CDP hearing] to inaccurate calculations of his assets
     which had provided the basis for the rejection of his
     Offer by the “Offer specialist” who had initially
     rejected it, which the Respondent's settlement officer
     had specifically acknowledged, in writing, that she did
     not “entirely agree with.” See letter from M. Craca,
     August 23, 2007, to Petitioner’s counsel.

The letter to which he refers is apparently not in the record,

and his statement is not adequate to support its assertions.

However, even if his assertions are taken at face value, they are

beside the point.   The supplemental notice of determination

acknowledges that the offer specialist’s analysis had yielded a
                               - 29 -

different amount of assets--i.e., $1,319,604, a lower amount.       If

it is true that the appeals officer did not “entirely agree with”

this analysis, it seems that she came up with not a lower amount

but a higher amount--$1.6 million--when she performed her re-

analysis.

     In any event, it was incumbent on Mr. Schropp to show any

error in the IRS’s analysis.   He did not do so, either in the CDP

hearing or in this suit.   He has raised no genuine issue as to

the reasonableness of the appeals officer’s equity analysis.

     C.     The Office of Appeals did not abuse its discretion by
            failing to make a counter-offer.

     Section 6330(c)(2)(A) refers to “offers of collection

alternatives” as a matter that a taxpayer “may raise at the [CDP]

hearing”.   That is, the statute presumes that collection

alternatives are proposed by the taxpayer.   However, Mr. Schropp

reads the appeals officer’s fax of November 25, 2008, as if it

promised him a counter-offer in the event his OIC was to be

rejected.   What the appeals officer’s fax actually said was this:

     If I am able to determine that Mr. Schropp has fully
     disclosed how he handles his money on a monthly basis,
     I am confident that I will be able to arrive at an
     offer amount that the Service would accept. [Emphasis
     added.]

Mr. Schropp should and must have known that this was a big “If”.

In his first CDP hearing, and in the non-CDP consideration of his

OIC, and in the supplemental CDP hearing, one of the IRS’s

recurring complaints was that Mr. Schropp had not shown where his
                                - 30 -

money was coming from (and therefore had not allayed the concern

that he had undisclosed sources of money).     The appeals officer

reminded Mr. Schropp of this concern in the letter she sent

immediately before the supplemental hearing and in the fax that

she sent after the hearing.    The appeals officer thought that she

could “arrive at an offer amount that the Service would accept”--

but only “If I am able to determine” (emphasis added) full

disclosure by Mr. Schropp.    She was unable to do so, for serious

and specific reasons that she articulated and that Mr. Schropp

has never answered.   See supra part II.B.1.    Mr. Schropp never

satisfied the condition she had expressed (“If I am able to

determine”), and she therefore never became able to propose an

offer amount.

     In the absence of Mr. Schropp’s full disclosure of his

assets, the appeals officer did not abuse her discretion by

failing to propose an amount of an OIC based on doubt as to

collectibility.   Rather, Mr. Schropp’s nondisclosures had made

that doubt unquantifiable.

                              Conclusion

     The record shows that the decision of the Office of Appeals

to sustain the filing of the Federal tax lien was not arbitrary,

capricious, or without sound basis in fact or law, and

Mr. Schropp has not raised any genuine issue as to that fact.       As

a result, we conclude that the Office of Appeals did not abuse
                               - 31 -

its discretion, and we hold that respondent is entitled to the

entry of a decision sustaining the determination as a matter of

law.

       To reflect the foregoing,


                                        An order denying petitioner’s

                                   motion for summary judgment and

                                   granting respondent’s motion for

                                   summary judgment and a decision

                                   sustaining the filing of the notice

                                   of Federal tax lien will be

                                   entered.
