                        T.C. Memo. 2007-155



                      UNITED STATES TAX COURT



       THEODORE C. AND DENISE M. SCHWARTZ, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2914-06L.            Filed June 18, 2007.



     Theodore C. and Denise M. Schwartz, pro sese.

     Michele E. Craythorn, for respondent.



                        MEMORANDUM OPINION


     RUWE, Judge:   Petitioners filed a petition in response to a

notice of determination concerning collection action(s) under

section 6320 and/or 6330, in which respondent determined that a

proposed levy should proceed to collect petitioners’ unpaid tax
                                - 2 -

liabilities for 1997 through 2003 (years at issue).1    Pursuant to

section 6330(d), petitioners seek review of respondent’s

determination.2    The issue for decision is whether the Appeals

officer abused her discretion in determining not to consider

petitioners’ collection alternative.

                             Background

     The stipulation of facts and the attached exhibits are

incorporated herein by this reference.    When the petition was

filed, petitioners resided in San Rafael, California.

     Petitioner Theodore C. Schwartz is a self-employed dentist.

Petitioners received two Final Notices of Intent to Levy and

Notice of Your Right to a Hearing (Final Notices), each issued on

June 7, 2005, regarding petitioners’ unpaid Federal income taxes,

including penalties and interest, as follows:

                  Year                     Unpaid tax
                  1997                     $2,052.96
                  1998                     12,861.03
                  1999                     27,040.65



     1
       Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
     2
       Petitioners originally sought to have this case conducted
under the small tax case procedures of sec. 7463(f)(2). However,
because petitioners’ total unpaid tax exceeds $50,000, this Court
removed the small tax case designation and discontinued
proceeding under the small tax case procedures of sec. 7463. See
Schwartz v. Commissioner, 128 T.C. 6 (2007).
                               - 3 -

               2000                       20,154.68
               2001                       37,315.70
               2002                       30,729.60
               2003                       23,566.81
                 Total                   153,721.43

On July 5, 2005, petitioners, through their authorized

representative, executed and submitted a Form 12153, Request for

a Collection Due Process Hearing.   Attached was a letter, which

stated in relevant part:

     Levies placed on bank accounts would cause undue
     hardship. The taxpayer has made Estimated Tax Deposits
     for 2005. The taxpayer is completing Financial Form
     433-A. This will assist in determining repayment
     ability. It would also result in the inability to
     pursue all avenues to resolve this liability and
     prevent the repayment of the outstanding liability owed
     to the Internal Revenue Service.

     In light of the taxpayer’s current situation, it is
     requested that no enforcement action take place against
     Theodore and Denise Schwartz. The taxpayer is
     interested in resolving this liability as quickly and
     efficiently as possible.

     On September 15, 2005, respondent sent petitioners a letter

acknowledging receipt of petitioners’ case in respondent’s San

Jose Appeals Office.   On September 23, 2005, Appeals Officer

Colleen Cahill (Ms. Cahill) sent petitioners a letter inviting

them to contact her to schedule a section 6330 hearing and to

request that petitioners provide a completed Form 433-A,

Collection Information Statement for Wage Earners and Self-

Employed Individuals, a signed 2004 tax return, and proof of
                              - 4 -

estimated tax payments for 2004 and 2005.3    On October 19, 2005,

Ms. Cahill sent petitioners a second letter providing petitioners

with a second opportunity to contact her to schedule a section

6330 hearing and to submit the requested documentation.4

     Petitioners’ authorized representative, Dwayne Riggs, II

(Mr. Riggs), held a section 6330 hearing by telephone on December

2, 2005, for the years at issue with Ms. Cahill, who had no prior

involvement with respect to the unpaid tax.    On the same day, Mr.

Riggs faxed to Ms. Cahill a letter offering a collection

alternative in the form of an installment agreement.5

     Petitioners were not current with their 2005 estimated tax

payments at the time of their section 6330 hearing, and Mr. Riggs

did not raise any issues regarding the validity or the amount of

the liability or any other issues during the section 6330



     3
       Also on Sept. 23, 2005, Ms. Cahill made a real property
ownership search to verify petitioners’ residence address and to
determine that petitioners have sufficient equity in their home
to satisfy their tax liabilities.
     4
       On or about May 23, 2005, petitioners submitted to
respondent via fax Forms 433-A, Collection Information Statement
for Wage Earners and Self-Employed Individuals, and 433-B,
Collection Information Statement for Businesses. The record is
unclear as to why Ms. Cahill requested that petitioners submit
Form 433-A 4 months after they already submitted it.
     5
       Mr. Riggs’s letter explained that petitioners intended to
sell their residence in order to pay their tax liabilities, but
requested that petitioners “be granted a stay of enforcement
along with a minimal monthly payment plan until the sale of the
residence.” The letter did not suggest a monthly payment amount,
but requested that the parties work together to arrive at an
appropriate amount.
                                - 5 -

hearing.   The Appeals Office issued a notice of determination

concerning collection action(s) under section 6320 and/or 6330

for the years at issue on January 3, 2006.     The Appeals Office

determined that it could not consider petitioners’ proposal for a

collection alternative because petitioners were not current with

estimated tax payments, that enforced collection action was not

more intrusive than necessary, and that the IRS should proceed

with the collection action.    Petitioners timely filed a petition

to the Tax Court challenging respondent’s determination.

                              Discussion

     A taxpayer is entitled to a notice before levy and notice of

the right to a fair hearing before an impartial officer of the

Internal Revenue Service Office of Appeals.     Secs. 6330(a) and

(b), 6331(d).    If the taxpayer requests a hearing, he may raise

in that 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,

which may include the posting of a bond, the substitution of

other assets, an installment agreement, or an offer-in-

compromise.”    Sec. 6330(c)(2)(A).   The taxpayer cannot raise

issues relating to the underlying tax liability if the taxpayer

received a notice of deficiency or the taxpayer otherwise had an

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

determination shall be made which shall take into consideration
                                 - 6 -

those issues, and “whether any proposed collection action

balances the need for the efficient collection of taxes with the

legitimate concern of the person that any collection action be no

more intrusive than necessary.”    Sec. 6330(c)(3).

     Petitioners raise only the issue of whether a collection

action is appropriate and argue that the collection action is

more intrusive than necessary.    A petition filed under section

6330 must contain “Clear and concise lettered statements of the

facts on which the petitioner bases each assignment of error.”

Rule 331(b)(5).   We generally consider “only arguments, issues,

and other matter that were raised at the collection hearing or

otherwise brought to the attention of the Appeals Office.”

Magana v. Commissioner, 118 T.C. 488, 493 (2002); sec. 301.6330-

1(f)(2), Q&A-F5, Proced. & Admin. Regs.    Because petitioners do

not dispute the existence or amount of their underlying tax

liabilities, we review the determination for an abuse of

discretion.   Lunsford v. Commissioner, 117 T.C. 183, 185 (2001);

Nicklaus v. Commissioner, 117 T.C. 117, 120 (2001).

     The Appeals officer’s consideration and rejection of

petitioners’ collection alternative, an installment agreement,

was reasonable and not an abuse of discretion.    Her determination

not to consider petitioners’ proposed installment agreement was

based on applicable procedures contained in respondent’s Internal
                               - 7 -

Revenue Manual.6   According to these procedures, in determining

whether a taxpayer is eligible for an installment agreement, an

Appeals officer must:

     Analyze the current year’s anticipated tax liability.
     If it appears a taxpayer will have a balance due at the
     end of the current year, the accrued liability may be
     included in an agreement. Compliance with filing,
     paying estimated taxes, and federal tax deposits must
     be current from the date the installment agreement
     begins. * * *

Internal Revenue Manual sec. 5.14.1.5.1(19).

     The parties have stipulated that petitioners were not

current with their 2005 estimated tax payments at the time of

their section 6330 hearing.   The Appeals officer informed

petitioners that she could not consider an installment agreement

if petitioners were not current with their estimated tax

payments.   The Appeals officer also found that all applicable law

and procedural requirements were met.   Petitioners conceded they

owe the sums demanded.   Their only relevant argument is that

respondent should have accepted their proposed installment

agreement, and that a levy is more intrusive than necessary and

would cause undue hardship.




     6
       The Internal Revenue Manual provides procedures for
proposed installment agreements. See Internal Revenue Manual
sec. 5.14.1.1 to 5.14.1.6. Those procedures contain compliance
checks, which are conducted to determine a taxpayer’s eligibility
for an installment agreement, after a taxpayer requests such an
agreement. Id. sec. 5.14.1.5.1.
                                 - 8 -

     Estimated payments, intended to ensure that current taxes

are paid, are a significant component of the Federal tax system,

and the Appeals officer was entitled to rely on their absence in

reaching her conclusions.     Cox v. Commissioner, 126 T.C. 237, 258

(2006).   In fact, petitioners' circumstances illustrate one of

the reasons for requiring current compliance before granting

collection alternatives such as an offer-in-compromise or an

installment agreement; namely, the risk of pyramiding tax

liability.7   Id.; see also Orum v. Commissioner, 412 F.3d 819,

821 (7th Cir. 2005), affg. 123 T.C. 1 (2004).

     We generally consider “only arguments, issues, and other

matter that were raised at the collection hearing or otherwise

brought to the attention of the Appeals Office.”     Magana v.

Commissioner, supra at 493.    The Appeals officer’s exercise of

discretion, therefore, must be examined in light of the facts as

they existed at the time the determination was made.8

Accordingly, we hold that the Appeals officer did not abuse her


     7
       In addition to petitioners’ noncompliance with regard to
their individual income taxes, petitioners own and operate a
dental practice which is currently being levied upon by
respondent for unpaid employment taxes.
     8
       At trial, petitioner Theodore C. Schwartz testified and
presented evidence that he hoped would show petitioners were
current with their estimated tax payments at the time of trial.
The Court suggested that if this were true, and was the only
obstacle to considering an installment agreement, the parties
might be able to resolve their differences. In a posttrial
status report, respondent stated that petitioners had not
satisfied their estimated tax liabilities for 2005 or 2006.
                                 - 9 -

discretion, and respondent may proceed with the proposed levy

action.

     To reflect the foregoing,

                                              Decision will be entered

                                         for respondent.
