                        T.C. Memo. 2007-365



                      UNITED STATES TAX COURT



             HAILU YOHANNES AWLACHEW, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 23914-05L.            Filed December 11, 2007.



     Hailu Yohannes Awlachew, pro se.

     Michael R. Fiore, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     MARVEL, Judge:   Pursuant to section 6330(d),1 petitioner

seeks review of respondent’s determination sustaining the filing




     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect at all relevant times. Some
monetary amounts are rounded to the nearest dollar.
                                 - 2 -

of a notice of Federal tax lien with respect to petitioner’s

unpaid 2000 and 2001 Federal income tax liabilities.

                         FINDINGS OF FACT

     Some of the facts have been stipulated.    We incorporate the

stipulated facts into our findings by this reference.     Petitioner

resided in Cambridge, Massachusetts, when his petition in this

case was filed.

     Petitioner timely filed Forms 1040, U.S. Individual Income

Tax Return, for 2000 and 2001.    On his 2000 tax return,

petitioner reported a total tax liability of $105,934, which

included an alternative minimum tax (AMT) liability of $64,675

attributable to his exercise of incentive stock options during

that year.2   Petitioner reported tax due of $72,576 for 2000 and

sent a $10,000 payment with his 2000 return.    On his 2001 tax

return, petitioner reported a total tax liability of $77,579 and

a tax due of $70,258.   The ordinary income reported on

petitioner’s 2001 return included income from his disposition of

incentive stock options during 2001.3


     2
      Secs. 421 and 422 provide for deferred tax treatment of the
qualifying exercise of an incentive stock option. However, the
favorable tax treatment does not apply for AMT calculation
purposes. Sec. 56(b)(3).
     3
      Deferred tax treatment under secs. 421 and 422 is not
available on the exercise of an incentive stock option if the
taxpayer disposes of the share of stock received pursuant to the
option within 2 years of the grant of the option or within 1 year
of receipt of the share. Sec. 422(a)(1). Petitioner admits that
                                                   (continued...)
                                - 3 -

     On June 4, 2001, respondent assessed the tax reported on

petitioner’s 2000 tax return as well as statutory interest and a

section 6651(a)(2) addition to tax.     That same day, respondent

issued to petitioner a statutory notice of balance due.     On June

26, 2001, petitioner made another $10,000 payment toward his

unpaid 2000 tax liability.

     On July 20, 2001, petitioner entered into an installment

agreement with respondent.    The record does not disclose the

details of the agreement, but beginning on September 20, 2001,

petitioner began making monthly payments to respondent.     Between

September 20, 2001, and January 27, 2003, petitioner made

payments totaling $52,600 toward his unpaid 2000 tax liability.

Petitioner did not make any voluntary payments toward his 2000

tax liability after January 27, 2003.

     On October 18, 2002, respondent assessed the tax reported on

petitioner’s 2001 tax return, as well as statutory interest and

sections 6651(a)(2) and 6654 additions to tax.     The record does

not disclose whether petitioner made any payments toward his 2001

tax liability.

     On or around May 29, 2003, petitioner submitted an offer-in-

compromise to respondent.    The record does not disclose the




     3
      (...continued)
he disposed of shares received as a result of the exercise of his
incentive stock options before he had held them for 1 year.
                                 - 4 -

details of petitioner’s offer.    On July 29, 2003, respondent

rejected petitioner’s offer.

     On September 13, 2003, respondent issued to petitioner a

Final Notice, Notice of Intent to Levy and Notice of Your Right

to a Hearing (levy notice), in which respondent announced his

intention to levy to collect petitioner’s unpaid 2000 and 2001

tax liabilities.   The levy notice also advised petitioner of his

right to a hearing with respondent’s Appeals Office.    Petitioner

received the levy notice on or about September 22, 2003, but he

did not request a hearing with respondent.

     On or around September 17, 2003, petitioner submitted a

second offer-in-compromise.    The record does not disclose the

details of petitioner’s second offer.    On December 22, 2003,

respondent rejected petitioner’s second offer-in-compromise.

     On March 19, 2004, petitioner submitted a third offer-in-

compromise.   The record does not disclose the details of

petitioner’s third offer.

     On July 14, 2004, respondent issued to petitioner a Notice

of Federal Tax Lien Filing and Your Right to a Hearing Under IRC

6320 (lien notice).   The lien notice informed petitioner that he

had a right to request a hearing to appeal the collection action

and to discuss optional payment methods.    The lien notice also

advised petitioner how to request a hearing and how to obtain a

release of the Federal tax lien.
                                - 5 -

     On or about August 16, 2004, petitioner mailed to respondent

a Form 12153, Request for a Collection Due Process Hearing

(Request).   In his Request, petitioner stated that he had lost

all of the value of the stock from which his tax liability

originated and that the loss was beyond his control because it

resulted from a downturn in the economy.   Petitioner also claimed

that his job security was uncertain, that he was in debt, and

that he was a loyal taxpayer.   Petitioner asked respondent not to

place a lien on his property because of his precarious financial

condition.

     By letter dated November 10, 2004, respondent’s Appeals

Office informed petitioner that his Request had been received and

that a telephone hearing had been scheduled for December 9, 2004.

On November 24, 2004, respondent received a letter from

petitioner requesting a face-to-face hearing.   Petitioner

attached to his request a Form 433-A, Collection Information

Statement for Wage Earners and Self-Employed Individuals, and

documentation to substantiate the figures on his Form 433-A.    On

his Form 433-A, petitioner reported assets of $16,000 ($6,000 in

cash and $10,000 in investments), $18,500 in credit card debt,

and a monthly net income of $2,230.4




     4
      On his Form 433-A, petitioner reported monthly income from
salaries of $6,280 and monthly expenses of $4,050. Petitioner’s
monthly expenses included other expenses of $1,500.
                                - 6 -

     On December 14, 2004, petitioner participated in a face-to-

face hearing with a settlement officer.   Petitioner and the

settlement officer also communicated through correspondence.      By

letter dated January 25, 2005, the settlement officer informed

petitioner that she was sustaining the previous rejection of

petitioner’s most recent offer-in-compromise.5   The settlement

officer offered petitioner the opportunity to enter into an

installment agreement requiring a monthly payment of $1,215.

Petitioner rejected the settlement officer’s offer, complaining

that the amount was too high.   By letter dated February 10, 2005,

the settlement officer provided petitioner a copy of his

previously submitted Form 433-A and a blank Form 433-A and

informed petitioner that he had until February 25, 2005, to

submit any additional information to assist her in making her

determination.

     By letter dated February 24, 2005, petitioner again

requested relief from the additions to tax and interest that had

been assessed for 2000 and 2001 because of his precarious job and

financial situations.    Petitioner also submitted an updated Form

433-A showing $13,000 in assets ($2,000 in cash and $11,000 in

investments), $18,500 in credit card debt, and monthly net income

of approximately $355.



     5
      We assume that this was a rejection of petitioner’s third
offer-in-compromise (submitted in March 2004).
                                - 7 -

     By letter dated March 16, 2005, the settlement officer

informed petitioner that she had adjusted his monthly expenses to

meet the national standard for one person.6   As a result, the

settlement officer determined that petitioner was able to make

monthly payments of $1,475.    The settlement officer also denied

petitioner’s request for abatement of interest and for relief

from the additions to tax.    The settlement officer gave

petitioner until March 30, 2005, to accept the proposed

installment agreement.

     By letter dated March 27, 2005, petitioner rejected the

proposed installment agreement.    Petitioner disputed the

settlement officer’s adjustments to his monthly expenses as

reported on his updated Form 433-A, and he inquired whether any

of the AMT that he had paid could be used to offset his unpaid

tax liabilities.    By letter dated July 21, 2005, the settlement

officer offered petitioner a reduced installment agreement with

monthly payments of $1,250.    She gave petitioner until August 5,

2005, to respond.

     By letter dated August 3, 2005, petitioner rejected the

installment agreement and once again requested relief based on


     6
      Respondent informed petitioner that he could claim expenses
for only himself because he did not claim his spouse’s income.
Petitioner never argued that his spouse was unemployed or that he
was otherwise supporting his spouse. However, he did testify
that he was supporting two aging parents and an ill niece. The
record does not disclose any detail of petitioner’s support of
these individuals.
                               - 8 -

the poor economy, his lack of knowledge of the tax law, and his

fear of losing his job.   Petitioner requested guidance on

obtaining an abatement of interest and relief from the additions

to tax.   By letter dated August 9, 2005, the settlement officer

detailed the requirements for a request for relief from additions

to tax,7 informed petitioner that respondent was required by

statute to assess interest in his case and that the interest

could not be abated, and referred petitioner to the Internal

Revenue Manual for further information.   By letter dated August

29, 2005, petitioner once again requested the abatement of

interest and relief from the additions to tax because of the

downturn in the economy and his lack of knowledge regarding the

tax implications of employee stock options.

     On November 18, 2005, respondent issued to petitioner a

Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330 (notice of determination).   The notice

of determination stated that respondent had verified that all

statutory and administrative requirements had been met, that

respondent had addressed all of petitioner’s arguments raised at

the face-to-face hearing, and that respondent had determined that

the lien appropriately balanced the Government’s need for the

efficient collection of taxes and petitioner’s concern that the



     7
      The settlement officer used the term “penalties” in the
letter, but she was referring to additions to tax.
                                - 9 -

action not be more intrusive than necessary in light of

petitioner’s circumstances.

     On December 19, 2005, petitioner’s petition contesting

respondent’s determination was filed.     The case was scheduled for

trial, and a trial was held on October 23, 2006.

                               OPINION

     All property and rights to property of a taxpayer become

subject to a lien in favor of the United States on the date a tax

liability is assessed against the taxpayer, if the taxpayer fails

to meet the Commissioner’s demand for payment of the tax

liability.    Secs. 6321 and 6322.   Until a lien notice is filed, a

lien is without validity and priority against certain persons,

such as judgment lien creditors of the taxpayer.    Sec. 6323(a).

After the Secretary files the lien notice, the Secretary must

provide the taxpayer with written notice of the filing, informing

the taxpayer of the right to request an administrative hearing on

the matter.    Sec. 6320(a)(1), (3)(B).   Section 6320(c) requires

that the administrative hearing be conducted pursuant to section

6330(c), (d) (other than paragraph (2)(B) thereof), and (e).

     At the hearing, a taxpayer may raise any relevant issue,

including appropriate spousal defenses, challenges to the

appropriateness of the collection action, and collection

alternatives, such as an offer-in-compromise.    Sec.

6330(c)(2)(A).    Additionally, at a hearing, a taxpayer may
                              - 10 -

contest the existence and amount of the underlying tax liability

if the taxpayer did not receive a notice of deficiency for the

tax liability in question or did not otherwise have an

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

see also Sego v. Commissioner, 114 T.C. 604, 609 (2000).

     Following the hearing, the Appeals Office is required to

issue a notice of determination regarding the disputed lien

notice.   In so doing, the Appeals Office is required to take into

consideration the verification presented by the Secretary, the

issues raised by the taxpayer, and whether the proposed

collection action appropriately balances the need for efficient

collection of taxes with the taxpayer’s concerns regarding the

intrusiveness of the proposed collection action.   Sec.

6330(c)(3).   The taxpayer may petition the Tax Court for judicial

review of the Appeals Office’s determination.   Sec. 6330(d).

     If the taxpayer files a timely petition for judicial review,

the applicable standard of review depends on whether the

underlying tax liability is at issue.   The phrase “underlying tax

liability” includes the tax deficiency, any penalties and

additions to tax, and statutory interest.   Katz v. Commissioner,

115 T.C. 329, 339 (2000).   If the underlying tax liability is

properly at issue, the Court reviews any determination regarding

the underlying tax liability de novo.   Sego v. Commissioner,
                              - 11 -

supra at 610.   The Court reviews all other administrative

determinations for abuse of discretion.   Id.

I.   Petitioner’s Challenge to the Underlying Tax Liabilities

      Section 6330(c)(2)(B) provides that a taxpayer may dispute

the existence or amount of his unpaid tax liability if he did not

receive a notice of deficiency or otherwise have an opportunity

to dispute such tax liability.   The “opportunity to dispute such

tax liability” includes a conference with the Appeals Office that

was offered either before or after the tax liability was

assessed.   Sec. 301.6320-1(e)(3), Q&A-E2, Proced. & Admin. Regs.

      Most of petitioner’s arguments are directed to collection

alternatives and do not raise challenges to the underlying tax

liabilities for 2000 and 2001.   However, during the

administrative proceeding, petitioner inquired about the

possibility of offsetting his unpaid liabilities with the AMT

that he had paid.   The record contains no evidence that the

settlement officer specifically answered his inquiry.   In this

proceeding, petitioner has again raised the question of whether

he can reduce his unpaid tax liabilities by the amount of AMT he

paid.   Although his argument is very unclear, we interpret it as

an assertion that he is entitled to a credit under section 53.

      Section 53 authorizes a taxpayer to claim a credit for net

minimum tax paid in prior years, adjusted for specified items.

The minimum tax credit allowable under section 53 is the excess
                              - 12 -

if any of the adjusted net minimum tax imposed for all prior

taxable years beginning after 1986, over the amount allowable as

a credit under section 53(a) for such prior taxable years.     Sec.

53(b).   The section 53 credit, however, is limited to the amount

by which a taxpayer’s regular tax liability for the year the

credit is claimed, less allowable credits, exceeds his tentative

minimum tax for the year.   Sec. 53(c).

     Petitioner did not claim a section 53 credit on either his

2000 or 2001 income tax return, and he did not present any

information to the settlement officer that he was entitled to

claim such a credit.   His inquiry about the possibility of a

credit, which he made in one of his letters to the settlement

officer during his section 6320/6330 hearing, was insufficient to

demonstrate either that he was claiming a section 53 credit for

2000 and/or 2001 or that he was entitled to such a credit.

     In addition, even if we treat petitioner’s inquiry as a

claim for a section 53 credit, petitioner is precluded from

pursuing his claim by the fact that he had an earlier opportunity

to assert his claim and he did not do so.   Petitioner received

the September 13, 2003, levy notice, but he did not request a

hearing under section 6330 regarding the levy notice.

Petitioner’s failure to do so precludes him from asserting his

claim in this proceeding.   See sec. 301.6320-1(e)(3), Q&A-E7,
                                 - 13 -

Proced. & Admin. Regs.; see also Bell v. Commissioner, 126 T.C.

356 (2006); Castleman v. Commissioner, T.C. Memo. 2007-143.

      Because petitioner had an earlier opportunity to dispute his

underlying tax liability by asserting a claim for a credit under

section 53, his underlying tax liability was not properly at

issue before the settlement officer considering the lien, and it

is not properly before us now.8

II.   Petitioner’s Challenge to Respondent’s Determination To File
      a Lien

      Although petitioner’s arguments are not clear, petitioner

appears to argue that respondent erred by rejecting collection

alternatives he raised and by offering petitioner an installment

agreement requiring monthly payments of $1,215.      Petitioner

appears to argue that his financial condition is so dire that he

cannot afford to pay his 2000 and 2001 tax liabilities.

          Although section 6330(c) requires respondent to consider

relevant issues properly raised by petitioner, including a claim


      8
      In a posttrial conference call with this Court, petitioner
raised a question regarding whether the Tax Relief and Health
Care Act of 2006 (TRHCA), Pub. L. 109-432, 120 Stat. 2922,
authorizes petitioner to claim a refundable credit under sec. 53
(as amended by TRHCA) that he could then apply against his unpaid
tax liabilities for 2000 and 2001. By order, we gave the parties
time to explore the effect of TRHCA on this case and to file a
joint written status report summarizing their positions. In a
joint status report filed on June 1, 2007, respondent stated that
TRHCA has no impact on this case, and he explained why.
Petitioner simply asserted that he has an AMT credit that he has
never used and that he will use any refundable credit he may
receive under the new law to pay his 2000 and 2001 tax
liabilities.
                               - 14 -

that a collection alternative such as an installment agreement or

offer-in-compromise is more appropriate, respondent is not

required to offer petitioner a collection alternative acceptable

to petitioner before determining that a lien is an appropriate

collection tool.   In this case, petitioner had the burden of

demonstrating that a collection alternative was appropriate and

that respondent abused his discretion by rejecting the collection

alternative.

     On the record before us, we cannot conclude that the

settlement officer abused her discretion in determining that the

lien was appropriate to safeguard respondent’s collection of

petitioner’s unpaid taxes.   Petitioner did not argue at his

hearing or at trial that respondent should have accepted one or

more of his three offers-in-compromise, and he did not introduce

the offers into evidence at trial.      Petitioner made payments for

approximately a year and a half of about $1,000 per month.     After

2 full years of nonpayment, petitioner submitted several Forms

433-A showing net monthly income ranging from more than $2,000

per month to $355 per month.   The settlement officer finally

determined that petitioner could pay $1,250 per month.9


     9
      Although petitioner subsequently submitted a revised Form
433-A showing monthly net income of $355, we are satisfied that
the settlement officer did not abuse her discretion in concluding
that petitioner could pay $1,250 per month. Petitioner estimated
his expenses and did not apply the applicable national and local

                                                       (continued...)
                             - 15 -

Petitioner did not establish that the settlement officer’s

determination was an abuse of discretion.   We hold, therefore,

that the settlement officer did not abuse her discretion by

determining that the lien on petitioner’s property was

appropriately filed and would remain in effect until petitioner’s

2000 and 2001 tax liabilities were satisfied.

     To reflect the foregoing,


                                        Decision will be entered

                                   for respondent.




     9
      (...continued)
standards promulgated by respondent for use in calculating a
taxpayer’s allowable expenses.
