                        T.C. Memo. 2003-318



                      UNITED STATES TAX COURT



     JAMES J. CRISAN AND VERONICA L. CRISAN, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11953-02L.            Filed November 17, 2003.


     James J. Crisan and Veronica L. Crisan, pro sese.

     Michelle M. Lippert, for respondent.



                        MEMORANDUM OPINION


     HAINES, Judge:   Respondent sent petitioner James Crisan (Mr.

Crisan) and petitioner Veronica Crisan (Mrs. Crisan),

collectively petitioners, a Notice of Determination Concerning

Collection Action(s) under Section 6320 and/or 6330 (notice of
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determination).1   The issue for decision is whether there was an

abuse of discretion in the determination that collection action

could proceed for 1998 and 1999 (years in issue).

                             Background

     All of the facts have been stipulated.    The stipulated facts

and the attached exhibits are incorporated herein by this

reference.

     Petitioners resided in Warren, Ohio, at the time they filed

the petition.    As of May 15, 2003, petitioners owed tax

liabilities of $25,398 and $6,683 for 1998 and 1999,

respectively, including additions to tax and interest.

     The tax liabilities for the years in issue resulted from

petitioners’ failure to make sufficient quarterly payments of

estimated taxes to cover the taxes that resulted from bonuses

received by Mr. Crisan.    Petitioners proposed an installment

agreement with monthly payments of $100.    Respondent rejected

this proposal as “unrealistic and unreasonable” given the size of

the tax liabilities.

     When no installment payment amount could be agreed to by the

parties, respondent issued each petitioner a Final Notice of

Intent to Levy and Notice of Your Right to a Hearing on January

25, 2001.    On February 20, 2001, petitioners sent respondent a


     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue.
Amounts are rounded to the nearest dollar.
                               - 3 -

Form 12153, Request for a Collection Due Process Hearing,

stating:

          We are financially unable to pay this tax in full. It
     would work a substantial financial hardship on us if the IRS
     would levy on any of our income or few assets. We would
     like to be considered for an offer in compromise or payment
     arrangements.

After petitioners failed to attend the first scheduled meeting on

March 28, 2002, the section 6330 hearing (the hearing) was

rescheduled and held on April 17, 2002.   In the letter scheduling

the meeting, the Appeals officer included a Form 433-A,

Collection Information Statement for Individuals, which

petitioners were asked to complete and bring to the hearing.

     At the hearing, the Appeals officer preliminarily computed

that petitioners had the ability to pay at least $1,200 per month

on the basis of Mr. Crisan’s income and expenses listed on the

Form 433-A.   The Appeals officer also noted that Mr. Crisan might

be able to settle the tax liabilities from his section 401(k)

plan, but was unsure of the amount in the account.   The Appeals

officer then requested that petitioners finish completing the

Form 433-A, indicate the amount they are able to pay each month,

and consider taking money out of Mr. Crisan’s section 401(k) plan

to fully pay the tax liabilities.    The requested information was

due to respondent by May 20, 2002.

     Petitioners submitted an updated Form 433-A, dated April 25,

2002.   On the Form 433-A, petitioners reported that Mr. Crisan is
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an attorney and attached Mr. Crisan’s Form W-2, Wage and Tax

Statement, for 2001, which reported $119,120 of wages, tips, and

other compensation.

     During a telephone conversation on April 29, 2002, the

Appeals officer requested again that petitioners provide an offer

of a monthly installment amount to pay off the tax liabilities.

On May 13, 2002, Mr. Crisan sent the Appeals officer a letter

requesting a 2-week extension of time, stating that he was unable

to commit to a monthly payment amount because he wanted to review

his pension plan policies.   Other than the proposed installment

payment amount of $100 per month, petitioners never made a formal

offer of an installment agreement and sent no further information

or correspondence to respondent.

     On June 12, 2002, respondent sent petitioners a notice of

determination for the years in issue.    Respondent sustained the

levy action, stating:

          We have determined that no relief is to be granted in
     this case. You have requested that the liability at issue
     be resolved via an offer in compromise. However, your
     financial data indicate that you can satisfy the liability
     by liquidating assets or with an installment agreement.
     Your request for additional time to consider your options is
     unrealistic and is denied. Appeals believes that the need
     for efficient collection of taxes has been balanced with
     your concern for the intrusiveness of the proposed
     assessment.

Further, respondent explained:

          An offer in compromise, doubt as to collectibility is
     not appropriate as the taxpayers have the assets to
     immediately full [sic] pay the tax liability. In addition,
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     the taxpayers have excess monthly income that would allow
     them to full [sic] pay the tax liability in full. As such
     an offer in compromise is inappropriate.

          The file indicates that the Service has been attempting
     to resolve this matter with the taxpayers since July 2000.
     It is now almost 2 years later and still the taxpayers need
     more time. I do not feel that additional time is
     appropriate.

As a result of the notice of determination, petitioners filed the

instant petition.

     The calendar call for the Cleveland, Ohio, trial session was

held on June 2, 2003.   Mrs. Crisan did not appear at the calendar

call, and her default was entered.     Petitioners’ motion for

continuance, filed May 27, 2003, and renewed at the trial, was

denied as untimely.   The Court noted the “continuous delays”

caused by petitioners throughout the proceedings.     Mr. Crisan

requested that he submit a trial memorandum and that the case be

submitted fully stipulated.   The Court suggested that a trial be

held later that afternoon in order for Mr. Crisan to place

evidence, such as testimony, on the record.     Mr. Crisan refused

the offer from the Court.   Mr. Crisan stated that he chose to

forgo the trial by not testifying or submitting further evidence,

relying solely upon the stipulations and trial memoranda.     The

Court granted Mr. Crisan’s request but warned Mr. Crisan that he

would be unable to submit any further evidence.
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                             Discussion

     Petitioners make three arguments regarding the notice of

determination:   (1) Petitioners lack sufficient assets to satisfy

the tax liabilities; (2) petitioners’ offer to enter into an

installment agreement was improperly rejected by respondent; and

(3) respondent did not give petitioners the opportunity to make

an offer in compromise.

     Before a levy may be made on any property or right to

property, a taxpayer is entitled to notice of intent to levy and

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

of the Appeals Office.    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).   A determination is then made which takes into

consideration those issues, the verification that the

requirements of applicable law and administrative procedures have

been met, 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)(C).
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     Petitioners raise issues only as to collection alternatives,

in that they dispute respondent’s rejection of their proposed

installment agreement and rejection of an offer in compromise.

We review the determination for an abuse of discretion because

the underlying tax liability is not at issue.    Lunsford v.

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

117 T.C. 117, 120 (2001).

     Respondent’s rejection of petitioners’ proposed installment

agreement was not an abuse of discretion.   Installment agreements

are based upon the taxpayers’ current financial condition.     See 2

Administration, Internal Revenue Manual (CCH), sec. 5.19.1.5.4.1,

at 18,299-50.   Respondent’s determination was based on the

information provided to the Appeals officer by petitioners.

Schulman v. Commissioner, T.C. Memo. 2002-129.   At the hearing,

respondent preliminarily computed a monthly payment amount of

$1,200.   The Appeals officer gave petitioners the opportunity to

resubmit a monthly installment payment amount, to which

petitioners failed to timely respond.   We find that the Appeals

officer could have reasonably determined that petitioners’

proposed installment payment of $100 per month should be rejected

on the basis of petitioners’ submitted income and expense

information.

     Additionally, respondent’s determination not to enter into

an offer in compromise agreement with petitioners was not an
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abuse of discretion.   Section 7122(a) authorizes the Secretary to

compromise any civil case arising under the internal revenue

laws.   The regulations set forth three grounds for the compromise

of a liability:   (1) Doubt as to liability; (2) doubt as to

collectibility; or (3) promotion of effective tax administration.

Sec. 301.7122-1T(b), Temporary Proced. & Admin. Regs., 64 Fed.

Reg. 39024 (July 21, 1999); see sec. 7122(c)(1).   Doubt as to

liability is not at issue in the instant case.

     The Secretary may compromise a liability on the ground of

doubt as to collectibility when “the taxpayer’s assets and income

are less than the full amount of the assessed liability”.   Sec.

301.7122-1T(b)(3)(i), Temporary Proced. & Admin. Regs., supra.

Additionally, the Secretary may compromise a liability on the

ground of “effective tax administration” when:   (1) Collection of

the full liability will create economic hardship; or (2)

exceptional circumstances exist such that collection of the full

liability will be detrimental to voluntary compliance by

taxpayers; and (3) compromise of the liability will not undermine

compliance by taxpayers with tax laws.   Sec. 301.7122-1T(b)(4),

Temporary Proced. & Admin. Regs., supra; see 2 Administration,

Internal Revenue Service (CCH), sec. 5.8.11.2, at 16,385-15

(taxpayer’s liability may be eligible for compromise to promote

effective tax administration if not eligible for compromise based
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on doubt as to liability or doubt as to collectibility, and

taxpayer has exceptional circumstances to merit the offer).

     Petitioners argue that they lack sufficient assets to

satisfy the tax liabilities.   The Appeals officer reviewed

petitioners’ submitted financial information at the hearing and

determined that an offer in compromise was not appropriate.    We

received as exhibits the financial information presented to the

Appeals officer and find that the Appeals officer could have

reasonably concluded that there are sufficient income and assets

to satisfy the tax liabilities.    On the basis of respondent’s

consideration of petitioners’ information, we conclude that

respondent’s refusal to enter into an offer in compromise was not

an abuse of discretion.

     As a result, we hold that the issuance of the notice of

determination was not an abuse of respondent’s discretion, and

respondent may proceed with collection.

     In reaching our holding herein, we have considered all

arguments made, and, to the extent not mentioned above, we

conclude that they are moot, irrelevant, or without merit.

     To reflect the foregoing,

                                               Decision will be

                                          entered for respondent.
