                      T.C. Summary Opinion 2006-7



                        UNITED STATES TAX COURT



                 LAYVONNE NEWELL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3292-04S.               Filed January 25, 2006.



     Layvonne Newell, pro se.

     John F. Driscoll, for respondent.



     WHERRY, Judge:    The petition in this case was filed pursuant

to the provisions of section 7463.1     The decision to be entered

is not reviewable by any other court, and this opinion should not

be cited as authority.    The instant proceeding arises from a

petition for judicial review filed in response to a Notice of



     1
       Unless otherwise indicated, section references are to the
Internal Revenue Code of 1986, as amended.
                                - 2 -

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330.    The issue for decision is whether respondent may

proceed with collection action as so determined.

                             Background

     On or about August 20, 2002, petitioner filed a Federal

income tax return for the year 2001.      She reported thereon wage

income of $45,794, a tax liability of $4,256, a withholding

credit of $2,846, and a remaining amount due of $1,451.     No

payment was submitted with the return.     At that time, petitioner

also had outstanding tax liabilities for the 1995, 1996, and 1997

taxable years, all stemming likewise from self-reported amounts

in conjunction with insufficient withholding or other payment.

     In August of 2002, petitioner entered into an installment

agreement with respondent to make appropriate payments to satisfy

her outstanding 1995, 1996, 1997, and 2001 liabilities.     However,

shortly thereafter petitioner was diagnosed with brain cancer and

apparently defaulted on the installment agreement after a single

payment.   She has since undergone brain surgery, chemotherapy,

and radiation treatments and has been unable to work.     Petitioner

was previously employed as a registered nurse.

     On or about September 23, 2002, respondent assessed the

reported 2001 liability, as well as statutory additions to tax

and interest.     Subsequently, during April of 2003, Internal

Revenue Service (IRS) representatives of the Kansas City,
                               - 3 -

Missouri, office communicated with petitioner regarding her then-

outstanding 1995, 1996, 1997, 2001, and 2002 liabilities.2

Petitioner apprised the representatives concerning her medical

situation, indicating that she had been out of work since her

surgery in September of 2002 and subsequent commencement of

chemotherapy and that she would continue to be out of work until

at least August of 2003.   The representatives advised petitioner

that she would need to provide relevant financial information

before she could be afforded any type of administrative relief.

These communications ended with an understanding that petitioner

would contact the representatives by August 1, 2003, to update

them as to her health and employment status.

     When petitioner failed to contact the IRS as agreed, a Final

Notice of Intent To Levy and Notice of Your Right to a Hearing

was issued to petitioner on September 1, 2003, with respect to

her 2001 income tax liabilities.   In response, petitioner

submitted a timely Form 12153, Request for a Collection Due

Process Hearing, setting forth her disagreement with the notice

of levy, as follows:   “I do not agree with this levy/seizure

because, now, I’m not working and I won’t be working until at

least next year.   My doctor still has me on chemotherapy.   I am

not able to pay this at this time.”


     2
       As was the situation with respect to 1995, 1996, 1997, and
2001, petitioner filed a Federal income tax return for 2002
reporting a balance due and insufficient withholding.
                               - 4 -

     On or about October 20, 2003, petitioner contacted the

Kansas City, Missouri, office and advised that she remained out

of work due to ongoing chemotherapy and was unable to pay her

outstanding tax liabilities.   Representatives indicated that they

would send to petitioner a Form 433-A, Collection Information

Statement for Wage Earners and Self-Employed Individuals,3 and

asked that she call them back with the requested financial

information by November 10, 2003.      On October 22, 2003, the

representatives tried to contact petitioner by telephone, but

when they were unsuccessful either in reaching her or in leaving

a message, they sent the previously discussed Form 433-A with a

letter asking that petitioner return the completed form by

November 5, 2003.

     On October 29, 2003, petitioner provided financial

information telephonically to representatives of the Kansas City,

Missouri, office.   After reviewing the information,

representatives determined that further substantiation was

needed.   They again tried to reach petitioner by telephone or to

leave a message but were unsuccessful.     At that juncture,

petitioner’s case was forwarded to the IRS Office of Appeals in

Jackson, Mississippi.



     3
       Respondent’s motion for summary judgment mistakenly refers
in several instances to a “Form 433-F”, rather than a “Form 433-
A”. The correct designation for the document is clear from the
record and is used throughout this opinion.
                              - 5 -

     By a letter dated December 11, 2003, Suzanne L. Magee, the

settlement officer to whom petitioner’s case had been assigned,

scheduled a hearing for January 7, 2004, in Jackson, Mississippi.

The letter also advised petitioner regarding collection

alternatives, stating:

     Under the Collection Due Process provisions I can
     consider payment alternatives. If you do not have the
     immediate ability to fully satisfy this tax debt, you
     may qualify for a monthly payment agreement or an
     Offer-in-Compromise based upon an inability to pay. If
     you would [sic] to explore payment arrangements, please
     complete the enclosed Form 433-A, Collection
     Information Statement. Copies of all monthly billings,
     including utilities and installment notes as well as
     bank statements must be provided as attachments to the
     statement in verifying the accuracy of the financial
     information provided on the statement. For variable
     monthly billing amounts and your banking statements,
     include at least 3 months worth so an average amount
     can be considered. Please provide the completed
     statements with the attachments to me by January 5,
     2004.

     On December 17, 2003, petitioner and Ms. Magee discussed the

status of petitioner’s collection hearing request by telephone.

During that conversation, petitioner informed Ms. Magee that she

had already completed and provided to the IRS a Form 433-A.4

Ms. Magee asked that petitioner provide her, before the scheduled

hearing, with a completed copy either of the previous Form 433-A

or of the 433-A enclosed with Ms. Magee’s December 11, 2003,

letter.


     4
       There is no evidence in the record that petitioner in fact
provided a written, completed Form 433-A during her
communications with the Kansas City, Mo., IRS office.
                                   - 6 -

     The collection hearing between petitioner and Ms. Magee was

held as scheduled on January 7, 2004.      The only position asserted

by petitioner at the hearing was that she was unable to pay her

outstanding liabilities.    In support thereof, she provided to Ms.

Magee a completed Form 433-A.      On the Form 433-A, petitioner

indicated that she and one dependent, a son of 13 years of age,

lived with her parents; that petitioner was on leave from her

occupation as a registered nurse; and that petitioner possessed

assets to the extent of $500 of furniture and personal effects

and a $5 balance in a savings account.      The Form 433-A then

reflected the following analysis of monthly income and living

expenses:

     Monthly income:

            Disability insurance            $2,600.00

     Monthly expenses:

            Food, clothing, and misc.           500.00
            Housing and utilities (parents)     300.00
            Transportation                      100.00
            Health care                         620.00
            Life insurance                       98.74
            Other expenses                      360.00

            Total                             1,980.005

The $360 in other expenses was for a contribution to petitioner’s

church.




     5
       The Court notes that petitioner apparently rounded the
total of $1,978.74 for the listed expenses.
                              - 7 -

     After analysis of the Form 433-A, Ms. Magee advised

petitioner that, assuming the expenses claimed on the Form 433-A

could be substantiated, petitioner would appear to qualify for an

installment agreement with monthly payments of $700.   In arriving

at her determination with respect to a $700 payment, Ms. Magee

took into account the following specific monthly amounts:    (1)

the $2,600 of claimed disability insurance income; (2) $782 for

food, clothing, and miscellaneous expenses pursuant to IRS

National Standards (although petitioner claimed only $500 on her

Form 433-A); (3) the $300 claimed for housing and utilities; (4)

the $100 claimed for transportation; (5) the $620 claimed for

health care; and (5) the $98 claimed for insurance.    The claimed

charitable contribution was not allowable under IRS procedures.

When petitioner objected to a $700 payment on grounds that it

would negatively impact her ability to make an appropriate tithe

to her church, Ms. Magee pointed out that disallowance of the

contribution amount was largely offset by allowance of an

additional $282 for food, clothing, and miscellaneous expenses.

The collection hearing concluded with an understanding that

petitioner would provide the remaining necessary substantiation

and would advise Ms. Magee by January 15, 2004, if she was

interested in accepting a $700 monthly installment agreement.

     Having received no further response from petitioner,

respondent on January 23, 2004, issued to petitioner the
                                - 8 -

aforementioned Notice of Determination Concerning Collection

Action(s) Under Section 6320 and/or 6330, sustaining the proposed

levy action.   Petitioner’s petition challenging this notice was

filed on February 24, 2004, and reflected an address in

Hazlehurst, Mississippi.    She therein expressed her request for

relief as follows:   “I am requesting to extend the period of

payment, due to the fact that I am currently on disability and

have medical payments, [illegible] medical insurance payment due.

I don’t know when I’ll be returning to work, but I do need an

extension on the payment period.”

     On October 5, 2004, John F. Driscoll, trial counsel for

respondent in this case, sent to petitioner a letter explaining

his intent to file a motion for summary judgment and inviting

petitioner instead to contact him within 10 days if she wished to

discuss any offer of payment to resolve the case or to provide

any additional relevant financial information.    Thereafter, on

October 18, 2004, Mr. Driscoll reached petitioner by telephone,

and during that conversation petitioner displayed some interest

in providing additional information in an attempt to reach a

settlement of her case.    The parties agreed that Mr. Driscoll

would provide petitioner with a new Form 433-A and that

petitioner in the near future would submit any additional

information or offer of settlement that she wished to be

considered in connection with this case.    Mr. Driscoll then sent
                               - 9 -

a followup letter dated October 20, 2004, enclosing a Form 433-A,

noting that a $700 monthly installment payment did not appear

unreasonable based on the financial information provided to date,

and encouraging petitioner to provide information that she felt

accurately described her current financial situation and a

specific alternative to the proposed $700 monthly payment.

     On October 21, 2004, respondent filed a motion for summary

judgment.   The Court issued an order directing petitioner to file

any response on or before December 3, 2004, and in the interim,

on November 22, 2004, held a conference call with the parties to

encourage them to work together in resolving this matter and to

impress upon petitioner the importance of current and accurate

financial data.   On December 2, 2004, a letter received from

petitioner was filed as her response to the motion for summary

judgment.   In that document petitioner stated, inter alia:

     I take full responsibility for not paying taxes in the
     90s and for not having enough withheld in the early
     2000s. Prior to this time, I always paid my tax
     obligations. I thought it would be easy for me to play
     ‘catch up’ and pay the taxes at a later date, but I
     didn’t factor in the penalties and interest the IRS
     would add to the tax bill. I did have a payment plan
     with the IRS and was making payments until I was
     diagnosed with a brain tumor and underwent brain
     surgery. Right now, I’m in the biggest fight of my
     life-the fight for my life-and I must be honest with
     you, my tax obligation has not been a priority. I know
     I’m still responsible for this liability and I am
     willing to resolve this matter, but I cannot afford
     $700 per month.
                              - 10 -

     In case you have not seen the financial statement I
     completed for the IRS, here’s a breakdown of my monthly
     income and expenses:

          Disability income, which started in 01/2003: $2,600

          Expenses

                 Health insurance: $500/mo

                 Hospital bills: $25,000 (100/mo)

                 Doctor’s bills: $1,600 (50/mo)

                 My medications: $120/mo

                 My son’s medications: $100/mo

                 My son’s school obligations:

                     Uniforms: $500/six mo

                     Lunch: $27/mo

                 Travel for doctor’s appointments: $240/mo

                 Household expenses: $700/mo

                 As of 2/2005 I’ll be responsible for
                 chemotherapy out of my pocket. Which will
                 be approx $3000-5000 per treatment (with
                 approx 6 treatments)

                 Food: $200/mo

                 Miscellaneous: $100-150/mo

Petitioner closed the financial information in her letter with:

“I can send them $75 per month, in light of my other more

pressing obligations.”

     Respondent’s motion was calendared for hearing on January

25, 2005, in Jackson, Mississippi.     Both parties appeared and

were given an opportunity to be heard.     Petitioner elected at
                                - 11 -

that time to be sworn in, to offer testimony, and to be subjected

to cross-examination.   She testified generally about her medical

and financial situation, and she confirmed that her expenses had

changed since she submitted the Form 433-A to Ms. Magee.     She did

not, however, provide an updated Form 433-A, nor did she offer

evidence substantiating any of the expenses reflected in the

above-quoted letter.    When questioned by the Court as to how she

determined “that $75 a month was the most that you could afford

to pay in your current situation?”, petitioner responded:     “Well,

I pay other things that before, when I went to talk with the IRS

agent, they didn’t allow.    So I still have to pay them.   So

usually, I just said well, I can afford $75 a month out of what I

have to pay.”   At the conclusion of the proceedings, the Court

took respondent’s motion for summary judgment under advisement.

However, because petitioner chose essentially to try her case on

the merits, we shall now deny respondent’s motion as moot and

shall decide the case on the full record presented.

                              Discussion

I.   Collection Actions--General Rules

      Section 6331(a) authorizes the Commissioner to levy upon all

property and rights to property of a taxpayer where there exists

a failure to pay any tax liability within 10 days after notice

and demand for payment.     Sections 6331(d) and 6330 then set forth

procedures generally applicable to afford protections for
                                - 12 -

taxpayers in such levy situations.       Section 6331(d) establishes

the requirement that a person be provided with at least 30 days’

prior written notice of the Commissioner’s intent to levy before

collection may proceed.   Section 6331(d) also indicates that this

notification should include a statement of available

administrative appeals.   Section 6330(a) expands in several

respects upon the premise of section 6331(d), forbidding

collection by levy until the taxpayer has received notice of the

opportunity for administrative review of the matter in the form

of a hearing before the IRS Office of Appeals.      Section 6330(b)

grants a taxpayer the right to a fair hearing before an impartial

Appeals officer upon request.

     Section 6330(c) addresses the matters to be considered at

the hearing:

          SEC. 6330(c). Matters Considered at Hearing.--In
     the case of any hearing conducted under this section--

                 (1) Requirement of investigation.--The
          appeals officer shall at the hearing obtain
          verification from the Secretary that the
          requirements of any applicable law or
          administrative procedure have been met.

                 (2) Issues at hearing.--

                    (A) In general.--The person may raise at
                 the hearing any relevant issue relating to
                 the unpaid tax or the proposed levy,
                 including--

                          (i) appropriate spousal defenses;
                                - 13 -

                          (ii) challenges to the
                     appropriateness of collection actions;
                     and

                          (iii) 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.

                     (B) Underlying liability.--The person
                  may also raise at the hearing challenges to
                  the existence or amount of the underlying
                  tax liability for any tax period if the
                  person did not receive any statutory notice
                  of deficiency for such tax liability or did
                  not otherwise have an opportunity to
                  dispute such tax liability.

      Once the Appeals officer has issued a determination

regarding the disputed collection action, section 6330(d) allows

the taxpayer to seek judicial review in the Tax Court or a

District Court, depending upon the type of tax.   In considering

whether taxpayers are entitled to any relief from the

Commissioner’s determination, this Court has established the

following standard of review:

      where the validity of the underlying tax liability is
      properly at issue, the Court will review the matter on
      a de novo basis. However, where the validity of the
      underlying tax liability is not properly at issue, the
      Court will review the Commissioner’s administrative
      determination for abuse of discretion. [Sego v.
      Commissioner, 114 T.C. 604, 610 (2000).]

II.   Analysis

      Nothing in the record indicates that petitioner has at any

time throughout the administrative or judicial proceedings

attempted to challenge her underlying tax liability.    In fact, in
                               - 14 -

her response to respondent’s motion, she writes:    “I know I’m

still responsible for this liability and I am willing to resolve

this matter, but I cannot afford $700 per month.”    She likewise

stated at the hearing that “this case has come about because I do

owe the Government money.”    Accordingly, we review respondent’s

determination to proceed with collection for abuse of discretion.

Action constitutes an abuse of discretion under this standard

where arbitrary, capricious, or without sound basis in fact or

law.   Woodral v. Commissioner, 112 T.C. 19, 23 (1999).

       In her petition, petitioner asks for “an extension on the

payment period”, and in her response to the motion for summary

judgment she expresses a willingness “to work out another payment

plan or an offer in compromise”.    Sections 6159 and 7122 govern

installment agreements and offers-in-compromise, respectively.

       Section 6159(a), as in effect at the time petitioner’s case

was before the IRS Office of Appeals, provided:    “The Secretary

is authorized to enter into written agreements with any taxpayer

under which such taxpayer is allowed to satisfy liability for

payment of any tax in installment payments if the Secretary

determines that such agreement will facilitate collection of such

liability.”    Regulations promulgated under section 6159 grant to

the IRS discretion to accept or reject any proposed installment

agreement.    Sec. 301.6159-1(b)(1)(i), Proced. & Admin. Regs.    The

IRS has set forth procedures in the Internal Revenue Manual (IRM)
                                - 15 -

for evaluating whether an installment agreement will facilitate

collection.    See 2 Administration, Internal Revenue Manual (CCH),

sec. 5.15.1 to 5.15.1.36.3, with exhibits, at 17,653-17,745.

These procedures operate through an analysis of the taxpayer’s

current financial system, comparing monthly income to allowable

expenses.   See id.   This Court has held that reliance on IRM

guidelines in evaluating an installment agreement does not

constitute an abuse of discretion in the context of collection

proceedings.    E.g., Orum v. Commissioner, 123 T.C. 1, 13 (2004),

affd. 412 F.3d 819 (7th Cir. 2005); Etkin v. Commissioner, T.C.

Memo. 2005-245; Castillo v. Commissioner, T.C. Memo. 2004-238;

Schulman v. Commissioner, T.C. Memo. 2002-129.

     Section 7122(a), as pertinent here, authorizes the Secretary

to compromise any civil case arising under the internal revenue

laws.   Regulations promulgated under section 7122 set forth three

grounds for compromise of a liability:    (1) Doubt as to

liability, (2) doubt as to collectibility, or (3) promotion of

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

Admin. Regs.    With respect to the third-listed ground, a

compromise may be entered into to promote effective tax

administration where:    (1)(a) Collection of the full liability

would cause economic hardship; or (b) exceptional circumstances

exist such that collection of the full liability would undermine

public confidence that the tax laws are being administered in a
                              - 16 -

fair and equitable manner; and (2) compromise will not undermine

compliance by taxpayers with the tax laws.    Sec. 301.7122-

1(b)(3), Proced. & Admin. Regs.   Economic hardship is defined as

an inability to meet reasonable basic living expenses.    Sec.

301.6343-1(b)(4)(i), Proced. & Admin. Regs.

     Turning to the case at bar, the Court certainly sympathizes

with the personal and medical difficulties endured by petitioner

in recent years.   However, the record lacks evidence that would

establish an abuse of discretion on the part of respondent in

evaluating petitioner’s circumstances.   The only Form 433-A in

evidence submitted by petitioner, despite repeated invitations to

provide updated documentation, does not, when analyzed in

accordance with the IRM, show that an installment agreement of

$700 would be unreasonable.   Nor does it establish an inability

to meet basic living expenses.

     The only other financial information offered by petitioner;

i.e., the figures set forth in her December 2, 2004, response to

the motion for summary judgment and testified to at trial, is

problematic on several fronts.    First and foremost, the amounts

are completely unsubstantiated.   There would also appear to be

rounding and estimation, the extent of which is unclear.    The

reference to an expense for chemotherapy, for instance, is broad,

generalized, and affords no meaningful way to arrive at a monthly

outlay.   Furthermore, the $75 monthly payment suggested by
                              - 17 -

petitioner seems to be a random number not derivable from or

bearing any particular relationship to the expenses upon which it

is purportedly premised.   As a result, the Court is unable to say

that respondent at any point arbitrarily or unreasonably failed

to take into account meaningful and pertinent information about

petitioner’s financial situation that would render the

determination to proceed with levy an abuse of discretion.     See

Orum v. Commissioner, supra; Etkin v. Commissioner, supra.

     As much as we would like to assist petitioner, in light of

her repeated failure to take advantage of opportunities to

provide adequate documentation of her apparently changed

financial circumstances, we simply do not have before us evidence

to show that a remand would be appropriate and productive.     The

Court will sustain respondent’s collection action.

     To reflect the foregoing,


                                         An appropriate order

                                    denying respondent’s motion

                                    for summary judgment and

                                    decision for respondent will

                                    be entered.
