                                  T.C. Memo. 2014-53



                            UNITED STATES TAX COURT



                         LEE ANG, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 13309-12L.                           Filed March 31, 2014.



      Ronald Jay Cohen, for petitioner.

      Marissa J. Savit, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


      LARO, Judge: This case involves a nominee and jeopardy levy issued with

respect to petitioner’s unpaid tax liabilities for 1998, 1999, 2000, and 2001 (years

at issue).1 Petitioner petitioned the Court under section 6330(d)(1)2 to review the


      1
          In his petition, petitioner also raised his 2002 and 2006 tax years. Pursuant
                                                                           (continued...)
                                         -2-

[*2] determination of the Internal Revenue Service (IRS) Office of Appeals

(Appeals) sustaining the nominee and jeopardy levy.

                               FINDINGS OF FACT

      Petitioner is a securities trader residing illegally in the United States.3 In or

around 1995, shortly after he received a master of business degree from New York

University, petitioner began trading equity stocks using a proprietary method

involving heavy leverage. Through trading pursuant to his proprietary method,

petitioner grew $11,000 that his uncle lent him into more than $20 million over a


      1
       (...continued)
to our order dated March 25, 2013, petitioner’s 2002 and 2006 tax years were
dismissed for lack of jurisdiction.
      2
       All section 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.
      3
        Petitioner disputes that he resides in the United States illegally. On
November 4, 2013, the Court ordered each party to file a memorandum of law
setting forth petitioner’s immigration status. On November 15, 2013, the parties
submitted briefs addressing petitioner’s immigration history. On December 20,
1987, petitioner entered the United States on a B-2 visitor visa. Afterward,
petitioner remained in the United States, first on an F-1 student visa and later on
an H-1B professional worker visa. On March 15, 2000, petitioner filed a form
I-485 application for permanent residence status with the U.S. Immigration and
Naturalization Service. Petitioner’s form I-485 application was denied on
September 21, 2004. Since September 21, 2004, petitioner has remained in the
United States with no valid immigration status. At trial petitioner claimed that he
chose to abandon his permanent resident application because of the negative tax
consequences of becoming a permanent resident of the United States.
                                         -3-

[*3] number of years. Petitioner claims that in or around 1995 he and his uncle

entered into an agreement whereby petitioner’s trading profits would be split, 93%

to his uncle and 7% to petitioner, in return for his uncle’s forgiveness of the

$11,000 loan. This purported profit-sharing agreement had no end date. In

addition, petitioner’s uncle had no involvement in petitioner’s trading activities.

1.    Tax Returns for 1998 Through 2001

      Petitioner failed to timely file his tax returns for the years at issue to report

his trading income. Petitioner’s 1998, 1999, and 2000 returns were filed on July

21, 2003, and his 2001 return was filed on July 24, 2003. In April 2006, before

the expiration of the periods of limitation on assessment, the parties executed

Forms 872, Consent to Extend the Time to Assess Tax, extending the periods of

limitation on assessment for each of the years at issue until December 31, 2007. In

March 2007 the parties executed an additional Form 872 to extend the periods of

limitation on assessment until December 31, 2008. Each Form 872 was signed by

petitioner’s attorney Joe B. Cox.4

      4
        Petitioner argues that these Forms 872 were not properly executed and thus
were invalid. The record does not support petitioner’s assertion. Petitioner
executed a Form 2848, Power of Attorney and Declaration of Representative,
authorizing Joe B. Cox to be his representative, and Mr. Cox signed the Forms 872
to extend the periods of limitation on assessment. Each of these Forms 872 was
also signed by a representative of the IRS. We therefore find that the periods of
                                                                       (continued...)
                                        -4-

[*4] 2.      Prior Tax Court Proceeding

      On September 17, 2007, respondent issued a notice of deficiency with

respect to the years at issue. On December 5, 2007, petitioner filed a petition with

this Court at docket No. 28143-07. Shortly before trial was to commence on

January 11, 2010, the parties entered into a stipulation of settlement which

detailed the facts of the deficiency case. Among the facts petitioner acknowledged

was that he had received income from accounts that were held in his relatives’

names.

      On February 25, 2010, the parties entered into a decision document which

set forth the following deficiencies in income tax and additions to tax:

                                              Additions to tax
          Year      Deficiency       Sec. 6651(a)(1)        Sec. 6654

          1998        $59,423            $201,919                -0-
          1999      3,962,411           1,209,681                -0-
          2000      3,922,839             984,710                -0-
          2001      1,475,791             369,939                $629




      4
        (...continued)
limitation on assessment were validly extended.
                                            -5-

[*5] The decision document further stipulated that interest would be assessed as

provided by law on the deficiencies and additions to tax. On April 13, 2010,

respondent assessed that interest in the following amounts:

                            Year              Interest

                            1998            $646,697.42
                            1999            5,005,919.65
                            2000            3,549,283.01
                            2001            1,111,380.12

      In total, petitioner’s unpaid tax liabilities for the years at issue were

approximately $22 million in 2010.

3.    Jeopardy Levy

      On April 13, 2010, respondent assessed all underlying tax deficiencies and

additions to tax for the years at issue.5

      In a detailed 13-page Office of Chief Counsel memorandum dated June 10,

2011, IRS attorney Justin Campolieta recommended that a notice of jeopardy levy




      5
        The decision of this Court became final on February 25, 2010, and the
periods of limitation on assessment remained suspended for 60 days, i.e., until
April 26, 2010. See sec. 6503(a)(1). Therefore, respondent assessed all
underlying tax deficiencies and additions to tax for the years at issue before the
limitation periods had expired.
                                        -6-

[*6] be served. Mr. Campolieta summarized the background of petitioner’s case

as follows:

             Lee Ang, a joint citizen of Singapore and Belize, is a very
      successful securities trader living illegally in the United States.
      During the tax years 1998 through 2001, Mr. Ang earned millions of
      dollars in trading profits * * * [b]ut he did not immediately file
      income tax returns reporting this income. It wasn’t until after the
      Service opened a substitute-for-return examination of Mr. Ang’s
      taxable year 1998 that he submitted delinquent returns for the taxable
      years 1998 through 2002, during July of 2003.

             Each of the returns, with the exception of the return for the
      taxable year 2002, reported a significant amount of gross income, but
      Mr. Ang took the position that 93% of that income was allocable to
      his uncle, a foreign national, under a verbal agreement to split profits,
      which Mr. Ang claimed he negotiated with his uncle shortly after
      graduating from N.Y.U. business school in 1995. By taking this
      position, Mr. Ang drastically reduced his taxable income and reported
      relatively insignificant income tax liabilities for the taxable years
      1998 through 2001. [Emphasis added.]

      The memorandum also detailed the findings of an investigation conducted

by the IRS Office of Chief Counsel during petitioner’s deficiency case. These

findings were based on a significant number of discovery requests served on

petitioner, dozens of third-party contacts, witness interviews, and numerous

subpoenas. The IRS Office of Chief Counsel’s investigation uncovered that

            Mr. Ang placed significant assets, including marketable and
      closely-held securities and real property, in the names of close family
      members. In particular, he placed cash in his mother’s HSBC account
      in order to purchase a valuable piece of property in Queens that was
                                         -7-

      [*7] ultimately deeded to his uncle.[6] Mr. Ang also placed millions
      of dollars of personal funds in his mother’s and uncle’s Schwab
      trading account. He traded with these funds and earned a significant
      amount of profits but failed to report these profits or disclose these
      accounts to the Service. Millions of dollars of funds in his mother’s
      trading account wire [sic] wired off-shore.[7] Most recently, a large
      wire transfer was made from his mother’s account to satisfy a
      mortgage on a piece of property held in the name of 1916 Ocean Ave,
      LLC.[8] Mr. Ang also purchased a significant amount of stock in two
      closely-held corporations (USA Teleport, Inc. and C-Spectra, Inc.)
      and placed the majority of this stock in the names of family members,


      6
       At trial petitioner admitted that a house was purchased in Queens in his
uncle’s name, but claimed that it was a distribution to his uncle under their profit-
sharing agreement. Petitioner, however, admits that his uncle cannot travel to the
United States because of health problems. In addition, the Office of Chief
Counsel’s investigation revealed that the property was originally purchased in the
name of petitioner’s mother, Ngaw Chee Ang, and was later transferred to his
uncle. The investigation further revealed that petitioner consistently supplied the
address of the Queens property as his home address on documents submitted to
banks and other financial institutions.
      7
        For example, according to Revenue Officer Mark Skinner’s case notes from
April 26, 2011, IRS investigations revealed that $1 million from the IB account
had been transferred to a Charles Schwab account in Ms. Ang’s name, and several
wire transfers had been made from the Charles Schwab accounts to foreign bank
accounts. At trial petitioner testified that although he routinely transferred money
between accounts to clear trades, pay real estate development costs, and pay
household expenses, he had not transferred any money abroad in the past nine
years, aside from a $50,000 transfer to his father and uncle. However, we found
petitioner’s testimony to be self-serving, evasive, and improbable, and we decline
to accept such uncorroborated testimony as true. See Tokarski v. Commissioner,
87 T.C. 74, 77 (1986).
      8
       1916 Ocean Ave., LLC, owns three real estate properties in Brooklyn, New
York, one of which is a real estate project currently under development at 1916
Ocean Avenue.
                                          -8-

      [*8] including his mother, Ngaw Chee Ang [(sometimes referred to as
      Ms. Ang)], and uncle, Yong Sai Ang.[9]

      The investigation further revealed that petitioner had no assets in his name10

and that all of his assets (cash, securities, real property, etc.) were held in the

names of family members and nominee entities.

      One of the financial accounts that the Office of Chief Counsel discovered

during its investigation was an online Interactive Brokers (IB) trading account that

petitioner had opened in his mother’s name. The IB account was funded with wire

transfers from accounts held in his uncle’s name and from Global Aggressive

Speculative Fund, an entity petitioner organized and funded to conduct personal

trading activities. With regard to the IB account, the Office of Chief Counsel

concluded that

      At various times from 2006 through the present, funds have been
      wired into and out of the IB account from numerous sources,
      including domestic and offshore bank accounts held in the names of
      Mr. Ang’s family members.[11]


      9
        At trial petitioner admitted that he had registered various investment shares
in his uncle’s name with the Securities and Exchange Commission.
      10
        At trial petitioner admitted that he has no bank accounts in his name
within the United States.
      11
       The investigation uncovered that in one of these transfers, $250,000 had
been wired into the IB account from an account which had been opened using his
                                                                     (continued...)
                                         -9-

      [*9] Although the IB account is held, in name, by Mr. Ang’s
      mother, Mr. Ang is in control of the account, and as explained above,
      uses the funds in the account for his own personal investment
      purposes. A number of checks and recent wire transfers were paid to
      Mr. Ang and to entities * * * controlled by Mr. Ang. Moreover, it is
      clear that Mr. Ang has control over the funds in the IB account.
      While Ngaw Chee Ang lives in Singapore, the IP addresses used to
      log into the IB account indicate that all online activity has taken place
      in and around the greater New York City area where Mr. Ang lives.[12]

             As of February 2011, there was roughly $3.4 million in equity
      (cash and securities positions) in the IB account. Given Mr. Ang’s
      knowledge of the Service’s collection activity, coupled with the ease
      and frequency with which he moves money in and out of this account
      (including offshore), it is highly unlikely that these funds will remain
      in this account for an extended period of time.

      On the basis of these facts, Mr. Campolieta recommended that the IRS take

immediate action to collect from petitioner’s numerous nominees, including the IB

account held in his mother’s name. On August 18, 2011, respondent served a

jeopardy levy on the IB account.13


      11
        (...continued)
uncle’s passport and funded with a $250,000 check. Both the signature on the
passport and the signature on the check, however, had been forged.
      12
         At trial petitioner admitted that he has full control over the IB account, and
that his mother, who does not speak English or know how to use a computer, is not
involved with the management of the account.
      13
       The administrative record is ambiguous as to whether the jeopardy levy
was served on August 17, 2011, or August 18, 2011. However, Mark Skinner, the
revenue officer who had served the jeopardy levy on petitioner’s IB account,
                                                                     (continued...)
                                       - 10 -

[*10] On August 23, 2011, respondent issued a Letter 2439, Notice of Jeopardy

Levy and Right of Appeal, to petitioner. The Letter 2439 notified petitioner that

respondent had levied upon the IB account because respondent had determined

that petitioner was moving assets out of the Government’s reach.14

4.    Collection Due Process Proceedings

      On September 20, 2011, petitioner sent a self-made document entitled

“Request for Administrative Review of Jeopardy Levy” to respondent, in which

petitioner stated that he was in the process of negotiating an installment payment

schedule to meet his Federal tax payment obligations when the jeopardy levy was

served.15 On September 22, 2011, petitioner mailed a Form 12153, Request for a

Collection Due Process or Equivalent Hearing, to respondent. Petitioner proposed




      13
         (...continued)
credibly testified at trial that it had been dated August 17, 2011, because jeopardy
levies required prior approval from a group manager, but that it was not mailed
until August 18, 2011. Mr. Skinner’s testimony is further corroborated by his
notes in the Integrated Collection System history transcript.
      14
        Contrary to petitioner’s assertions, the Letter 2439 was signed by a
representative of the IRS, Mr. Skinner, and included his contact telephone number.
      15
         In a memorandum of law dated December 9, 2013, respondent conceded
that petitioner’s letter was a proper request for administrative review under sec.
7429(a)(2).
                                        - 11 -

[*11] an offer-in-compromise as a collection alternative and objected to the

jeopardy levy.

      a.     Petitioner’s Offer-in-Compromise

      On October 6, 2011, petitioner’s then attorney, Stephen B. Kass, faxed a

message to respondent requesting withdrawal of the levy. On October 20, 2011,

petitioner mailed to respondent a Form 656, Offer in Compromise, offering to

compromise his unpaid tax liabilities for $8,877,900 based on doubt as to

collectibility. The unpaid tax liabilities were to be paid in 101 monthly

installments of $87,900. Attached was a Form 433-A, Collection Information

Statement for Wage Earners and Self-Employed Individuals, and financial

documents which purported to show petitioner’s net worth to be $8,882,411.

Petitioner based his offer on the following assets:

      (1) $1,411 cash from his bank accounts;

      (2) sundry assets he valued at $12,000;

      (3) a Spyder race car valued for tax purposes at $48,000;

      (4) an interest in 1916 Ocean Ave., LLC, which he valued at $3,272,000;

and

      (5) investment accounts (no detailed listing provided) totaling $5,549,000.
                                       - 12 -


[*12] On October 30, 2011, respondent sent petitioner a letter stating that he

would be contacted regarding his offer-in-compromise by January 28, 2012. The

letter informed him that he was required to make the proposed $87,900 monthly

payments while respondent evaluated his offer-in-compromise. The letter further

stated that “[f]ailure to make the payments may result in returning your offer

without further consideration.” Petitioner never made any of the proposed

payments.

      The case was assigned to Settlement Officer Joyce Pechera (Settlement

Officer Pechera) on November 28, 2011. On November 28 and December 19,

2011, respondent mailed letters to petitioner informing him that his request for a

collection due process (CDP) hearing had been received and that Settlement

Officer Pechera would be his point of contact.

      On December 6, 2011, petitioner called Settlement Officer Pechera, who

informed him that although a notice of levy had been served, the money would be

“on hold” until she made a decision on the offer-in-compromise, unless collection

became jeopardized. That same day, Settlement Officer Pechera advised Mr. Kass

that petitioner was required to make his proposed monthly payments and that if

they were not made, she would return the offer-in-compromise.
                                       - 13 -

[*13] Upon review of petitioner’s offer-in-compromise, Settlement Officer

Pechera noted that while petitioner provided a list of his bank accounts and

balances, he did not include the underlying bank statements. On January 9, 2012,

Settlement Officer Pechera sent to petitioner a letter entitled “Appeals Received

Your Request for a Collection Due Process Hearing”, in which she informed him

that an in-person CDP hearing had been scheduled for February 9, 2012. She

further informed petitioner that he needed to provide specific financial documents

within 14 days of the issuance of the letter and that he needed to immediately

begin paying the proposed monthly installments of $87,900.

      At petitioner’s request the deadline to submit the financial documents was

extended to February 23, 2012, and the CDP hearing was rescheduled for March 8,

2012. Settlement Officer Pechera received additional documentation from

petitioner and reviewed it on March 7, 2012. On the basis of a preliminary

analysis of the documentation, Settlement Officer Pechera determined that

petitioner had dissipated $4 million from the IB account, $27,752.71 from an

Apple Bank account, and $27,000 of sales proceeds for a Ferrari.

      The additional documentation, however, did not enable Settlement Officer

Pechera to independently verify petitioner’s financial situation for a number of

reasons. First, the information petitioner provided was the same material that was
                                        - 14 -

[*14] presented with the offer-in-compromise. Her notes state that “I’m unable to

use this information as TP [i.e., petitioner] did not provide details on source of

income and liabilities. TP created an excel sheet on a yearly basis which I have no

way of verifying the information provided.” Second, while petitioner submitted

Internet printouts of his lending accounts, he did not provide information showing

the total investments in the accounts. Third, petitioner failed to provide

documentation to verify that he held $2 million in assets in three offshore bank

accounts at Bank of Luxembourg, Credit Suisse, and Pictet Securities. Fourth,

petitioner asserted that he held a 5% interest in an entity called “Polmero Trust”

and that his uncle held the remaining 95%, but provided no documentation to

substantiate the claim.16 Finally, petitioner failed to provide documentation to

establish the value of three real estate properties owned by 1916 Ocean Ave.,

LLC.

       b.    CDP Hearing

       On March 8, 2012, Settlement Officer Pechera held the CDP hearing with

petitioner and Mr. Kass. Settlement Officer Pechera explained that because of the

amount at issue, acceptance of petitioner’s offer-in-compromise would require

       16
        This purported 95/5% ownership arrangement is in conflict with
petitioner’s testimony throughout trial of a purported 93/7% ownership
arrangement with his uncle.
                                        - 15 -

[*15] approval by IRS headquarters and the Department of Justice (DOJ). The

entire approval process would take at least six months. Petitioner asked

Settlement Officer Pechera to expedite the processing of his offer-in-compromise.

      In discussing the offer-in-compromise, petitioner disclosed that most of his

assets were held in the names of relatives, various LLCs, and trusts. Petitioner

explained that Ang & Ang, LLC, was a holding company which owned numerous

assets, including the offshore bank accounts, 95% of Ocean Ave., LLC, and the

levied IB account, which petitioner stated was held in his mother’s name.

Petitioner also asserted that he held a 7% interest in Ang & Ang, LLC, with his

uncle owning the balance. However, petitioner stated for purposes of the offer-in-

compromise, he and his uncle agreed to consider the assets as 100% owned by

petitioner.

      With respect to his financial situation, petitioner explained that he had no

income. Instead, he paid his $9,000 per month living expenses by taking funds

from Ang & Ang, LLC. Specifically, he stated that the money came from the IB

account as well as other investment accounts. Settlement Officer Pechera replied

that if Ang & Ang, LLC, was a partnership, the money he received was a

“distribution or a draw”. Petitioner replied: “But it’s all in one umbrella”.
                                         - 16 -

[*16] Petitioner failed to bring documentation to the CDP hearing to substantiate

his ownership claims or his asset valuations. Settlement Officer Pechera granted

petitioner additional time to provide the documentation she needed in order to

properly evaluate petitioner’s assets and his collection potential. The parties

agreed to a due date of March 30, 2012. Settlement Officer Pechera told petitioner

to call her for an extension if he could not make that deadline.

      During this meeting the parties never discussed the nominee and jeopardy

levy determination. Although Settlement Officer Pechera was aware of

petitioner’s request for administrative review of the jeopardy levy, petitioner’s

request was not acted upon.

      c.     Settlement Officer Pechera’s Rejection of Petitioner’s
             Offer-in-Compromise

      Petitioner did not provide the requested documentation by the March 30,

2012, deadline, nor did he request additional time to do so.17 As a result,

Settlement Officer Pechera was unable to evaluate his collection potential and

rejected his offer-in-compromise. On April 17, 2012, Settlement Officer Pechera

closed the case.




      17
         At trial Mr. Kass testified that petitioner did not order an appraisal for the
real estate development at 1916 Ocean Avenue until December 2012.
                                        - 17 -

[*17] On the basis of the Office of Chief Counsel memorandum, the CDP hearing,

and her own investigation, Settlement Officer Pechera determined that the

jeopardy levy was reasonable. Pursuant to her own investigation, Settlement

Officer Pechera discovered that the building at 1916 Ocean Avenue had been

listed for sale--a fact that petitioner had not disclosed during the CDP conference

on March 8, 2011. After closing the case, Settlement Officer Pechera requested

approval to sustain the jeopardy levy action, stating: “Review of the facts

presented shows TP is placing his assets beyond the reach of the Government by

transferring it to nominees and alter ego entities, thus jeopardy levy is warranted”.

      Settlement Officer Pechera issued a notice of determination on April 25,

2012. In the notice, Settlement Officer Pechera verified that notice and demand

had been issued and that notice of petitioner’s right to a CDP review had been

timely issued pursuant to section 6330(f). However, Settlement Officer Pechera

stated erroneously that petitioner’s request for administrative review of the

jeopardy levy, dated September 20, 2011, was untimely. With respect to

petitioner’s offer-in-compromise, Settlement Officer Pechera stated: “We are

unable to properly evaluate your offer in compromise without the information we

requested. Therefore your Offer in Compromise is rejected.” With respect to the

jeopardy levy, she stated: “The facts presented and information contained in your
                                       - 18 -

[*18] administrative file met our criteria under which a jeopardy levy can be

issued. Therefore, the issuance of the Notice of Jeopardy Levy was reasonable in

your case.”

5.    Ms. Ang’s Bankruptcy Proceedings

      While his offer-in-compromise was pending, petitioner sought to prevent

collection on another front. On October 7, 2011, shortly after respondent had

levied upon the IB account, petitioner’s mother filed for bankruptcy protection

under chapter 11 of the Bankruptcy Code to prevent the IRS from seizing the

money in the account. At the end of July 2012, Ms. Ang’s bankruptcy case was

dismissed and Interactive Brokers released $1.9 million to the IRS. Immediately

thereafter, and before the IRS could collect the funds, Ms. Ang again filed for

bankruptcy relief, this time under chapter 13 of the Bankruptcy Code.

      Although petitioner and his mother had separate attorneys representing

them, petitioner made all the decisions in her bankruptcy proceedings. Moreover,

petitioner’s attorneys rather than Ms. Ang’s attorneys dealt extensively with the

Department of Justice in connection with Ms. Ang’s bankruptcy case. Finally,

both petitioner’s and his mother’s attorneys were paid from the same “whole

family umbrella”.
                                         - 19 -

[*19]                                 OPINION

        This case involves a review of respondent’s determination to proceed with

the collection of petitioner’s unpaid tax liabilities for 1998 through 2001.

I.      CDP Review of Jeopardy Levy

        Collection is in jeopardy when at least one of the following conditions

exists: (1) “‘The taxpayer is or appears to be designing quickly to depart from the

United States or to conceal himself or herself’”; (2) “‘The taxpayer is or appears to

be designing quickly to place his, or her, or its property beyond the reach of the

Government either by removing it from the United States, by concealing it, by

dissipating it, or by transferring it to other persons’”; or (3) “‘The taxpayer’s

financial solvency is or appears to be imperiled.’” Prince v. Commissioner, 133

T.C. 270, 276-277 (2009) (quoting section 1.6851-1(a)(1), Income Tax Regs.).

        When the Commissioner determines that the collection of tax is in jeopardy,

the taxpayer is not afforded a prior opportunity for a hearing pursuant to section

6330 to challenge the appropriateness of the levy before it is issued. See sec.

6330(f)(1). However, section 6330(f)(4) provides that the taxpayer against whom

a jeopardy levy is issued shall be given the opportunity for the hearing described

in section 6330 within a reasonable time after the levy. Thus subsections (d) and

(f) of section 6330 confer upon a taxpayer against whom a jeopardy levy has been
                                       - 20 -

[*20] issued an unqualified right to a postlevy hearing (if timely requested) and

judicial review by this Court. Bussell v. Commissioner, 130 T.C. 222, 236-237

(2008). As part of the hearing, the Commissioner must verify “that the

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

Sec. 6330(c)(1).18

      If the Secretary makes a finding that the collection of tax is in jeopardy,

notice and demand for immediate payment of the tax may be made. Sec. 6331(a).

Pursuant to section 7429(a)(2), a taxpayer may seek administrative review of a

jeopardy levy made under section 6331(a) within 30 days of receiving written

notice of the levy. When such a request for review is timely made, the Secretary

shall determine whether the jeopardy levy “is reasonable under the

circumstances”. Sec. 7429(a)(3). Reasonableness is something more than “‘not

arbitrary or capricious’” and something less than “‘substantial evidence’.”

McWilliams v. Commissioner, 103 T.C. 416, 422 (1994) (quoting Davis v. United

States, 511 F. Supp. 193, 197 (D. Kan. 1981)). The Commissioner bears the


      18
         Because an Appeals officer must consider compliance with applicable law
in a sec. 6330 determination regardless of whether it is raised by the person
challenging the collection action at the Appeals hearing, this Court will review the
Appeals officer’s verification under sec. 6330(c)(1) without regard to whether the
taxpayer raised it at the Appeals hearing. Hoyle v. Commissioner, 131 T.C. 197,
202-203 (2008).
                                         - 21 -

[*21] burden of proving that the levy was “reasonable under the circumstances”.

Sec. 7429(g).

      In the notice of determination Settlement Officer Pechera erroneously

determined that petitioner’s request for administrative review of the jeopardy levy,

dated September 20, 2011, was untimely. Petitioner, however, was not prejudiced

thereby for several reasons discussed below. Furthermore, for these same reasons,

we do not believe that a remand instructing respondent to conduct a review of the

jeopardy levy pursuant to section 7429 would be productive.19

      First, in requesting administrative review of a jeopardy levy, a taxpayer is

required to submit evidence that the levy is unreasonable. Sec. 301.7429-2,

Proced. & Admin. Regs. (“[A request for the review of a jeopardy levy under

section 7429(a)(2)] shall be in writing, shall state fully the reasons for the request,

and shall be supported by such evidence as will enable the district director to make

the redetermination described in section 7429(a)(3).”). Petitioner’s request for

administrative review did not include any supporting evidence and contained only

his summary denial that he was moving assets out of the Government’s reach.


      19
         In our discretion, we may remand a collection case to the Appeals Office
for further administrative review. Marlow v. Commissioner, T.C. Memo.
2010-113, 99 T.C.M. (CCH) 1462, 1466-1467 (2010) (citing Hoyle v.
Commissioner, 131 T.C. 197 (2008)). We decline to do so here.
                                        - 22 -

[*22] Second, during his CDP hearing, petitioner could have, but did not,

challenge the appropriateness of the jeopardy levy. See sec. 6330(c)(2)(A)

(providing that during a CDP hearing, a taxpayer may raise any relevant issue with

regard to the collection activities, including challenges to the appropriateness of

collection actions). While petitioner argued in his CDP hearing request that the

jeopardy levy was inappropriate, during his CDP hearing, he abandoned the issue

and chose to focus exclusively on his offer-in-compromise.20

      Third, as part of the CDP review, Settlement Officer Pechera independently

concluded that the jeopardy levy was reasonable. We review Settlement Officer

Pechera’s determination for abuse of discretion.21 See Sego v. Commissioner, 114


      20
        On brief petitioner challenges the jeopardy levy on the basis that it would
cause him economic hardship. See sec. 301.6343-1(b)(4), Proced. & Admin.
Regs. Petitioner, however, did not raise the issue of economic hardship at his
CDP hearing nor as a basis for his offer-in-compromise. Therefore, petitioner may
not raise this issue for the first time before this Court. See Giamelli v.
Commissioner, 129 T.C. 107, 115 (2007).
      21
         Respondent argues sec. 7429(b)(2)(A) precludes this Court from
reviewing the reasonableness of a jeopardy levy. We disagree. Sec.
7429(b)(2)(A) provides that, as a general matter, the District Courts of the United
States have exclusive jurisdiction over any civil action brought under sec. 7429(b).
In this case, we derive our jurisdiction to review respondent’s actions, including
the reasonableness of the jeopardy levy, under sec. 6330(d). See Bussell v.
Commissioner, 130 T.C. 222, 236-237 (2008) (holding that sec. 6330(d) confers
upon a taxpayer an unqualified right to a postlevy hearing and judicial review by
this Court of, inter alia, whether the Commissioner improperly levied upon the
                                                                       (continued...)
                                       - 23 -

[*23] T.C. 604, 610 (2000). An abuse of discretion is defined as any action that is

unreasonable, arbitrary or capricious, clearly unlawful, or lacking in sound basis in

fact or law. See Thor Power Tool Co. v. Commissioner, 439 U.S. 522, 532-533

(1979); Woodral v. Commissioner, 112 T.C. 19, 23 (1999); see also Dalton v.

Commissioner, 682 F.3d 149, 156 (1st Cir. 2012) (holding that a reviewing court

considers “whether the factual and legal conclusions reached at a CDP hearing are

reasonable, not whether they are correct”), rev’g 135 T.C. 393 (2010) and T.C.

Memo. 2011-136.

      On the basis of the administrative record, we hold that Settlement Officer

Pechera did not abuse her discretion in concluding that the jeopardy levy was

reasonable. Settlement Officer Pechera based her determination on the results of a

detailed and comprehensive investigation by the Office of Chief Counsel, her own

investigation, and the CDP hearing. First, on the basis of a preliminary analysis of

the financial documentation that petitioner provided with his offer-in-compromise,

Settlement Officer Pechera determined that petitioner had dissipated $4 million

from the IB account, $27,752.71 from an Apple Bank account, and $27,000 of sale

proceeds from a Ferrari. Second, after conducting the CDP hearing and reviewing


      21
       (...continued)
taxpayer’s assets.); Dorn v. Commissioner, 119 T.C. 356, 359 (2002).
                                        - 24 -

[*24] the Office of Chief Counsel memorandum, Settlement Officer Pechera

determined that petitioner was concealing assets from the Government by placing

assets in his relatives’ names and in various LLCs and trusts. In addition, pursuant

to her own investigation, Settlement Officer Pechera discovered that the building

at 1916 Ocean Avenue had been listed for sale--a fact that petitioner had not

disclosed. On the basis of these facts, we conclude that Settlement Officer

Pechera did not abuse her discretion in concluding that the jeopardy levy was

reasonable under the circumstances. See Drake v. Commissioner, 511 F.3d 65, 70

(1st Cir. 2007) (holding that jeopardy levy was reasonable where the taxpayer

transferred sale proceeds to his sons and those proceeds were thereafter held in

brokerage accounts in the sons’ names), aff’g T.C. Memo. 2006-151 and 125 T.C.

201 (2005); Bibby v. Commissioner, T.C. Memo. 2013-281, at *8 (holding that

jeopardy levy was reasonable where the taxpayer was dissipating funds and

transferring funds to third parties).

      At trial petitioner vigorously denied that he was concealing assets from the

Government or that any risk existed of assets’ being transferred or dissipated.

However, the evidence petitioner introduced at trial buttresses, rather than refutes,

respondent’s jeopardy levy determination.
                                        - 25 -

[*25] First, petitioner testified that he has resided in the United States for over 20

years. Yet petitioner admits that while he has made over $20 million by trading

securities, he has no assets in his name within the United States. Instead, all of the

assets in the “whole family umbrella” are held in the name of his mother or his

uncle, neither of whom speaks English and neither of whom lives in the United

States. Petitioner has not provided a satisfactory explanation for why all his U.S.-

based assets are held in his relatives’ names. This fact is probative evidence that

petitioner engaged in a scheme to conceal his assets from the IRS.

      Second, petitioner attempted to avoid taxation of the approximately $20

million that he earned trading securities by claiming a purported 93/7 profit-

sharing agreement with his uncle, a foreign national who is exempt from U.S.

taxation. On the same basis, petitioner seeks to avoid collection of his unpaid tax

liabilities by claiming ownership of merely 7% of various assets in the “whole

family umbrella”. According to petitioner, this purported arrangement was

consideration for his uncle’s forgiveness of an $11,000 debt. However, the

purported 93/7 profit-sharing agreement is wholly devoid of rational economic

basis. A transfer’s economic reality prevails over its form, and a finding of

economic reality turns on whether the transfer would have followed the same form

had it been between the transferee and an independent lender. Estate of Rosen v.
                                       - 26 -

[*26] Commissioner, T.C. Memo. 2006-115, 91 T.C.M. (CCH) 1220, 1236 (2006).

Transfers between related parties are examined with special scrutiny. Id. Courts

may disregard a transaction that as a whole does not have a rational economic

basis compelled by business realities, separate and apart from the resulting tax

benefits. Buyuk LLC v. Commissioner, T.C. Memo. 2013-253, at *73 (citing

Frank Lyon Co. v. United States, 435 U.S. 561, 583-584 (1978)). Petitioner’s

purported profit-sharing agreement with his uncle is inconsistent with economic

and business realities. We are convinced that no economically rational actor

dealing at arm’s length would assign 93% of his substantial trading profits to

another person, without any termination conditions, in exchange for the

forgiveness of an $11,000 debt. We are equally convinced that no economically

rational actor, unmotivated by tax considerations, would have stayed in such an

arrangement as his profits soared to approximately $20 million. Accordingly, we

conclude that the purported profit-sharing agreement was devised as part of a plan

by petitioner to avoid paying income tax to the IRS and to impede the IRS’

collection efforts.

      Third, petitioner claimed that his mother owned $1 million in the IB

account. However, although petitioner claimed that he gave his mother $500,000

in 2004 and $500,000 in 2005, he did not file gift tax returns disclosing such gifts
                                        - 27 -

[*27] until 2010, after his tax troubles had begun. Furthermore, petitioner

admitted that he chose the $1 million amount because his research led him to

conclude that any gift up to $1 million would be exempt from gift tax. Finally,

petitioner admitted that he does not remember where the money came from, other

than that it was from the “whole family umbrella”. In the light of these facts, we

are convinced that this so-called gift is no more than a story concocted by

petitioner to delay respondent’s collection efforts.22

      Fourth, petitioner admitted that the purpose of his mother’s two bankruptcy

filings was to stall respondent’s collection efforts. Gabrielle Hirz, the DOJ

attorney assigned to Ms. Ang’s bankruptcy cases, testified credibly that petitioner,

not his mother, made the decisions in the bankruptcy proceedings. In other words,




      22
         We note that petitioner did not argue at his CDP hearing that the IB
account was wrongfully levied upon because of Ms. Ang’s ownership. We further
note that even if some of the funds in the IB account did belong to Ms. Ang,
petitioner does not have standing to assert her claim of ownership. This Court
considers the doctrine of standing to be “‘inherently applicable to our
proceedings.’” Prince v. Commissioner, 133 T.C. 270, 274 (2009) (quoting
Anthony v. Commissioner, 66 T.C. 367, 373 (1976), aff’d, 566 F.2d 1168 (3d Cir.
1977)) (“Petitioner does not have standing in this proceeding to seek the return of
money or property that does not belong to him.”). Under this doctrine, a plaintiff
generally must assert his own legal rights and interests and cannot rest his claim to
relief on the legal rights of third parties. Id. Moreover, sec. 7426(a)(1) provides
that a person, other than the taxpayer, who is subject to a wrongful levy may bring
an action in a District Court. No such action was ever brought by Ms. Ang.
                                         - 28 -

[*28] petitioner abused the protections offered by the U.S. bankruptcy system to

delay respondent’s collection efforts.

      Finally, petitioner exercised full control over the IB account and could

transfer money from the account without restriction. At trial petitioner admitted

his mother neither manages nor has access to the IB account and that he has full

control over it. In addition, petitioner admitted that he withdrew $5 million from

the IB account to pay the mortgage for the 1916 Ocean Avenue building, a

property in which Ms. Ang has no ownership interest and which he valued at

merely $3.272 million in his offer-in-compromise. Finally, Brian Hanley of IBG,

LLC, the parent company of IB, credibly testified that as an enrollee of IB’s

secured transaction processing program, petitioner could transfer unlimited

amounts from his IB account at any time.

      For these reasons, the evidence petitioner introduced at trial bolsters

respondent’s jeopardy levy determination.

II.   Offer-in-Compromise

      Petitioner also asserts that Settlement Officer Pechera improperly rejected

his offer-in-compromise. Where the validity of the underlying liabilities is not
                                        - 29 -

[*29] properly at issue,23 we review the determination of the settlement officer for

abuse of discretion. Sego v. Commissioner, 114 T.C. at 610; Goza v.

Commissioner, 114 T.C. 176, 182 (2000).

        At the CDP hearing, the taxpayer may raise any relevant issue with regard to

the collection activities, including alternative means of collection such as an offer-

in-compromise. Sec. 6330(c)(2)(A); see also Sego v. Commissioner, 114 T.C. at

609. Taxpayers are expected to provide all relevant information requested by the

settlement officer, including financial statements, for his consideration of the facts

and issues involved in the hearing. Sec. 301.6330-1(e)(1), Proced. & Admin.

Regs.

        Section 7122(a) authorizes the Secretary to compromise a taxpayer’s

income tax liability. In general, the decision to accept or reject an offer as well as

the terms and conditions agreed to are left to the discretion of the Commissioner.

        23
         A taxpayer is precluded from contesting the existence or amount of the
underlying tax liability at the CDP hearing unless the taxpayer did not receive a
statutory notice of deficiency or did not otherwise have an opportunity to dispute
the underlying tax liability. Sec. 6330(c)(2)(B). Petitioner received a notice of
deficiency, filed a petition in this Court, and settled his case. Consequently, his
tax liabilities are not properly at issue in this matter. See Deutsch v.
Commissioner, 478 F.3d 450, 451-452 (2d Cir. 2007) (holding that a taxpayer was
precluded from later challenging his underlying tax liability where his attorney
consented to the tax assessment, thereby waiving his right to contest liability),
aff’g T.C. Memo. 2006-27.
                                          - 30 -

[*30] Sec. 301.7122-1(a)(1), (c)(1), Proced. & Admin. Regs. The grounds for the

compromise of a tax liability are doubt as to liability, doubt as to collectibility, and

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

Admin. Regs. Petitioner based his offer-in-compromise on doubt as to

collectibility, which “exists in any case where the taxpayer’s assets and income are

less than the full amount of the liability.” Sec. 301.7122-1(b)(2), Proced. &

Admin. Regs.

      The Commissioner will generally compromise a liability on the basis of

doubt as to collectibility only if the liability exceeds the taxpayer’s reasonable

collection potential, “i.e., that amount, less than the full liability, that the IRS

could collect through means such as administrative and judicial collection

remedies”. Murphy v. Commissioner, 125 T.C. 301, 309 (2005), aff’d, 469 F.3d

27 (1st Cir. 2006); Salazar v. Commissioner, T.C. Memo. 2008-38, 95 T.C.M.

(CCH) 1149, 1154 (2008), aff’d, 338 Fed. Appx. 75 (2d Cir. 2009).

      Petitioner argues that Settlement Officer Pechera abused her discretion

when she “suddenly and arbitrarily closed the case” and that she did not conduct a

valid and legitimate study of his reasonable collection potential. We disagree.

      Petitioner based his offer-in-compromise on his own calculation of his

reasonable collection potential, and he submitted some documents regarding his
                                        - 31 -

[*31] assets. In order for a settlement officer to calculate a taxpayer’s reasonable

collection potential, the taxpayer must provide all relevant financial information.

See sec. 301.6330-1(e)(1), Proced. & Admin. Regs. It is well settled that a

settlement officer properly exercises her discretion in rejecting a collection

alternative such as an offer-in-compromise on the ground that the taxpayer failed

to provide all financial information necessary to fully evaluate the taxpayer’s

ability to pay. Ramdas v. Commissioner, T.C. Memo. 2013-104, at *24; see Orum

v. Commissioner, 123 T.C. 1, 13 (2004), aff’d, 412 F.3d 819 (7th Cir. 2005);

Kansky v. Commissioner, T.C. Memo. 2007-40, 93 T.C.M. (CCH) 921, 925

(2007).

      Settlement Officer Pechera requested that petitioner provide financial

documentation to verify his reasonable collection potential calculation. Although

she originally gave him 14 days to comply, at his request she extended the

deadline by a month. When she received petitioner’s submission, Settlement

Officer Pechera noted that it consisted of the same documents previously

submitted with his offer-in-compromise and thus did not verify his claims. At the

CDP hearing, Settlement Officer Pechera instructed petitioner to provide her with

the requested documentation by March 30, 2012, to allow her to verify his

reasonable collection potential calculation. When the deadline came and went,
                                       - 32 -

[*32] Settlement Officer Pechera determined that she was unable to properly

evaluate petitioner’s offer-in-compromise. Consequently, she rejected it.

Petitioner admits that he did not timely provide the requested documentation nor

request an extension of time. While setting unreasonable deadlines can constitute

an abuse of discretion, see Shanley v. Commissioner, T.C. Memo. 2009-17, 97

T.C.M. (CCH) 1062, 1065 (2009) (stating that an Appeals officer’s unreasonable

denial of a request for more time to submit that evidence would be an abuse of

discretion), Settlement Officer Pechera extended deadlines on multiple occasions

and even offered another extension upon request. We therefore find that

Settlement Officer Pechera did not abuse her discretion in rejecting petitioner’s

offer-in-compromise.

      At trial petitioner admitted that he did not disclose a number of bank

accounts in his offer-in-compromise but claims that those accounts were

“irrelevant” because they each contained less than $10,000. Where an offer-in-

compromise is based on a taxpayer’s ability to pay, a taxpayer may not pick and

choose which assets to disclose to the Commissioner. See sec. 301.6330-1(e)(1),

Proced. & Admin. Regs. (“Taxpayers will be expected to provide all relevant

information requested by Appeals, including financial statements, for its

consideration of the facts and issues involved in the hearing.” (Emphasis added.)).
                                        - 33 -

[*33] Moreover, in relation to the $1,411 cash from bank accounts that petitioner

did disclose, these accounts were highly relevant. Settlement Officer Pechera

would have been within her discretion to reject petitioner’s offer-in-compromise

on this basis alone.

         Furthermore, petitioner never made any of the monthly $87,900 payments

he proposed as part of his offer-in-compromise. Therefore, Settlement Officer

Pechera would have been within her discretion to reject petitioner’s offer-in-

compromise on this basis as well. See sec. 7122(c)(1)(B), (d)(3)(C); cf. Nasir v.

Commissioner, T.C. Memo. 2011-283, 102 T.C.M. (CCH) 558, 563 (2011)

(holding that a taxpayer’s failure to make proposed payments enabled the IRS to

treat his offer-in-compromise as withdrawn).

         In reaching our holdings, we have considered all arguments made, and, to

the extent not mentioned above, we conclude they are moot, irrelevant, or without

merit.

         To reflect the foregoing,


                                                 Decision will be entered for

                                        respondent.
