                               T.C. Memo. 2018-123



                         UNITED STATES TAX COURT



              MARILYN LETITIA RANDALL, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 5081-17L.                          Filed August 6, 2018.



      Marilyn Letitia Randall, pro se.

      Ryan Z. Sarazin, for respondent.



                           MEMORANDUM OPINION


      COHEN, Judge: This case was commenced in response to a notice of

determination concerning collection action under section 6330 sustaining a

proposed levy to collect petitioner’s unpaid Federal income tax liabilities for 2002,

2003, 2004, and 2005 (years in issue). The issue for decision is whether there was

an abuse of discretion by the Internal Revenue Service (IRS) Office of Appeals
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[*2] (Appeals Office) settlement officer (SO) in sustaining the proposed levy.

Unless otherwise indicated, 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.

                                     Background

      This case was submitted fully stipulated under Rule 122, and the stipulated

facts are incorporated in our findings by this reference. Petitioner resided in

Washington, D.C., when she filed her petition. Petitioner filed Federal income tax

returns for the years in issue but did not pay the balances owed as reported on

those returns.

      On July 20, 2015, the IRS issued petitioner a notice with respect to her

unpaid income tax liabilities for the years in issue notifying petitioner of the IRS’

intent to seize her assets by levy and her right to a hearing. The notice listed the

deficiencies and interest owed for the years in issue, which totaled $33,487.60.

      On or about August 11, 2015, petitioner submitted a Form 12153, Request

for a Collection Due Process or Equivalent Hearing (CDP hearing request), in

which she stated her intent to submit an offer-in-compromise (OIC) as a collection

alternative. In the CDP hearing request she did not challenge her underlying tax

liabilities. On December 14, 2015, the SO assigned to petitioner’s CDP hearing
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[*3] request conducted a telephone conference with petitioner, during which

petitioner again indicated her intention to submit an OIC. At no time did

petitioner dispute her underlying liabilities.

      On or about December 31, 2015, petitioner submitted a Form 656, Offer in

Compromise, offering a total of $5,232. A check for $454 was included with the

Form 656 as payment for the first month’s installment, the application fee, and a

deposit. On or about January 14, 2016, petitioner submitted a Form 433-A,

Collection Information Statement for Wage Earners and Self-Employed

Individuals.

      Petitioner’s OIC was processed initially by the IRS’ Centralized Offer in

Compromise unit in Holtsville, New York (COIC). On September 28, 2016, an

offer examiner at COIC sent petitioner a letter notifying her of the preliminary

determination to reject her OIC. The SO subsequently obtained petitioner’s case

file from COIC, from which he determined that petitioner’s reasonable collection

potential (RCP) was $119,713.60 and she had available monthly income of $862.

By letter dated October 27, 2016, the SO notified petitioner again that a

preliminary determination had been made to reject her offer because it had been

determined that “you have the ability to full pay your liability within the time

provided by law and your special circumstances did not warrant a hardship.” The
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[*4] letter advised petitioner that before the Appeals Office made a final

determination she had an opportunity to submit a statement indicating the issues

she disputed and to provide additional information not previously considered.

      On November 30, 2016, the SO held another telephone conference to afford

petitioner an opportunity to submit additional financial information. During this

conference the SO offered petitioner an installment agreement under which she

would pay the amount determined to be her available monthly income, i.e., $862

per month. This amount was based on a determination of petitioner’s gross

monthly income less her total monthly expenses. Petitioner did not accept the

SO’s offer, contending that the monthly amount had been calculated incorrectly.

She stated that she would submit documentation to prove additional monthly

expenses that had been previously disallowed. On November 30, 2016, the SO

prepared and sent a follow up letter to petitioner, restating his offer and notifying

her that she should contact him within seven days if she agreed to the proposed

installment agreement.

      After the conference held on November 30, 2016, petitioner sent the SO

additional documents, which were intended to establish that she should be allowed

additional monthly expenses of $1,000 for legal services related to a probate

proceeding and $315 for payment of a personal loan obligation. The SO evaluated
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[*5] the new information but determined not to allow these additional monthly

expenses on the ground that they did not meet the necessary expense test per the

Internal Revenue Manual (IRM).

      On January 27, 2017, the SO closed petitioner’s case, and the Appeals

Office on January 31, 2017, issued petitioner the notice of determination

sustaining the proposed levy action. On March 2, 2017, petitioner timely

petitioned this Court for review of the notice of determination.

      The case was submitted fully stipulated on January 22, 2018, and the Court

ordered seriatim briefs, with opening briefs due April 30, 2018. Respondent’s

brief was timely filed. Despite receiving two extensions and asserting that she

holds a law degree from a “top ten” institution, petitioner failed to file a brief.

                                      Discussion

      Under section 6330 a taxpayer is entitled to one hearing in which he or she

may propose alternatives to collection actions, such as the levy action that

respondent proposed in the notice dated July 20, 2015. See sec. 6330(b), (c), and

(d). Where, as here, the underlying liability is not at issue, the SO’s determination

is reviewed for abuse of discretion. Goza v. Commissioner, 114 T.C. 176, 181-

182 (2000).
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[*6] In deciding whether the SO abused his discretion in sustaining the proposed

levy we review the record to determine whether he (1) properly verified that the

requirements of applicable law or administrative procedure had been met, (2)

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

proposed collection action balances the need for the efficient collection of taxes

with the legitimate concern of * * * [petitioner] that any collection action be no

more intrusive than necessary.” See sec. 6330(c)(3)(C). Abuse of discretion

exists when a determination is arbitrary, capricious, or without sound basis in fact

or law. See Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d

27 (1st Cir. 2006). Petitioner does not dispute those principles.

      Petitioner first asserts that the SO abused his discretion by not including her

$1,000 monthly legal services expense and her $315 monthly personal loan

obligation in the calculation of the proposed installment agreement. We disagree.

      Section 6159(a) gives the Secretary discretionary authority to enter into

installment agreements to satisfy tax liabilities when it is determined that doing so

will facilitate full or partial collection. Generally, we have held that it is not an

abuse of discretion for purposes of section 6320 or 6330 when an Appeals Office

employee relies on guidelines published in the IRM to evaluate a proposed

installment agreement. See, e.g., Orum v. Commissioner, 123 T.C. 1, 13 (2004),
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[*7] aff’d, 412 F.3d 819 (7th Cir. 2005); Etkin v. Commissioner, T.C. Memo.

2005-245.

      Eligibility for an installment agreement is based on the taxpayer’s current

financial condition. See IRM pt. 5.14.1.4 (Sept. 19, 2014). According to the IRM,

the installment agreement payment amount should be equal to a taxpayer’s

monthly disposable income, which is the taxpayer’s monthly gross income less

allowable expenses. See id. para. (4); IRM pt. 5.15.1.2(1) (Nov. 17, 2014).

      Allowable expenses include those expenses that meet the necessary expense

test. IRM pt. 5.15.1.7 (Oct. 2, 2012). Necessary expenses are those expenses

necessary to provide for the production of income and/or for the health and

welfare of the taxpayer and his or her family. Id. The sum of the necessary

expenses establishes the minimum amount that the taxpayer needs to live. Id.

      Petitioner asserts that the monthly legal services expense she paid for the

probate proceeding “absolutely does provide for the health and welfare of me and

family” because it concerns the house her late mother left her. Petitioner provides

no evidence that the legal expenses are part of the minimum amount she needs to

live. She provides no legal authority to support her general assertion that the

phrase “health and welfare” in the IRM encompasses ownership of her mother’s

house. Accordingly, we hold that it was not an abuse of the SO’s discretion to
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[*8] determine that petitioner’s monthly legal services expense for the probate

proceeding is not a necessary expense under the IRM.

      Petitioner also asserts that her $315 monthly personal loan obligation

constitutes a necessary expense. To substantiate this expense, she provided the

SO with several canceled checks paid to an individual named Welton Doby.

When filing her petition, she provided the Court with an unsigned copy of a loan

agreement between her and Doby. She has not shown the purpose of the loan or

the use of the proceeds except for her vague and self-serving assertion that the

loan “was critical at that time” because of her financial distress. Petitioner failed

to provide any evidence that the SO could consider to determine whether the

alleged monthly personal loan obligation is necessary for petitioner’s health and

welfare. The SO did not abuse his discretion in disallowing this expense.

      Petitioner next contends that the SO should not have closed her case

because she did not reject the installment agreement but “sought only to appeal the

amount.” Petitioner had twice rejected the installment agreement offered by the

SO and argued (and is still arguing) that the total amount should be lower.

Petitioner’s OIC of $5,232 was substantially below her RCP of $119,713.60. An

SO is not obligated to negotiate indefinitely or wait any specific time before

issuing a determination. See Kuretski v. Commissioner, T.C. Memo. 2012-262, at
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[*9] *11, aff’d, 755 F.3d 929 (D.C. Cir. 2014). Thus, the SO did not abuse his

discretion when he rejected petitioner’s offer and closed the case after petitioner

failed to accept the $862 per month installment agreement. See Clifford v.

Commissioner, T.C. Memo. 2014-248, at *8-*9 (“Absent a showing of special

circumstances, Appeals officers are directed to reject offers substantially below

the taxpayer’s RCP where the OIC is premised on doubt as to collectibility.”). We

only decide whether there was an abuse of discretion and do not recalculate a

different amount for an acceptable installment agreement or OIC. Murphy v.

Commissioner, 125 T.C. at 320; Speltz v. Commissioner, 124 T.C. 165, 179-180

(2005), aff’d, 454 F.3d 782 (8th Cir. 2006). Petitioner has expressed her intention

to pursue relief outside of the section 6330 proceedings, and she is free to do so.

      For the foregoing reasons, the notice of determination will be sustained and


                                                 Decision will be entered for

                                          respondent.
