                          T.C. Memo. 2010-35



                        UNITED STATES TAX COURT



           JOE REY AND LINDA GONZALES, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13438-07L.               Filed February 23, 2010.



     Joe Rey Gonzales and Linda Gonzales, pro sese.

     Jeffrey D. Heiderscheit, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


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

notice of determination concerning collection action that

sustained a lien filing with respect to petitioners’ unpaid

Federal income taxes.    The issue for decision is whether the

determination was an abuse of discretion.      All section references

are to the Internal Revenue Code (IRC).
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                         FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.

Petitioners resided in Texas at the time their petition was

filed.

     On August 9, 2004, petitioners agreed in writing to income

tax examination changes by which deficiencies were determined for

2001 and 2002, primarily because of the disallowance of business

expenses claimed on their returns for those years.   Petitioners

entered into an installment agreement to pay the 2001 and 2002

liabilities, but the last installment payment that they made was

on September 6, 2006.   Refunds due petitioners for 2005 and 2007

were applied toward the liability for 2001.

     On April 13, 2006, the Internal Revenue Service (IRS) sent

to petitioners a Notice of Federal Tax Lien Filing and Your Right

to a Hearing Under IRC 6320.   The notice indicated that

petitioners had unpaid liabilities of $26,374.65 for 2001 and

$3,241 for 2002.   Petitioners requested a hearing under section

6320, asserting that “the tax liability will be reduced below the

limitation amount designated as the amount for automatic lien

levied [sic].   Furthermore, payments to reduce tax liability have

been timely, as required.”
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     Petitioner Joe Rey Gonzales (petitioner) participated in a

hearing on November 7, 2006.   Petitioners did not contest the

amounts of their tax liabilities and presented no collection

alternatives.   Their position was that they had made required

payments and that the balances had been reduced to an amount

that, according to petitioner, was “near or below the $25,000

threshold amount which would automatically trigger tax liens

securing the government’s interest.”   He argued that the lien

“has and will reduce our credit rating adversely and financial

hardship has already developed”.

     On May 18, 2007, a Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330 was sent to

each petitioner.   The assessed balances were then shown as

$17,878.65 for 2001 and $4,143.97 for 2002, for a total of

$22,022.62.   The notices concluded:

          After review, the proposed collection action, lien
     is appropriate based on the following: 1) review of the
     subsequent tax assessments per the taxpayers’ consent
     are correct and remain owing 2) the taxpayers
     previously agreed to a long term installment
     arrangement of which all payments have not been made;
     3)the taxpayers subsequently have not provided
     collection alternatives. As a result, the Notice of
     Federal Tax Lien filing by Compliance is being
     sustained. This account will be returned to Automated
     Collection for review and applicable collection action.

     After the petition was filed, petitioners requested a second

hearing and the opportunity to submit an offer-in-compromise.

Respondent agreed to allow petitioners to present their case to a
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second Appeals officer.    The second Appeals officer contacted

petitioners and requested financial information and completion of

a Form 656, Offer in Compromise.    Petitioners   did not submit an

offer-in-compromise and did not offer any other collection

alternatives.   They did not contest the underlying liabilities.

     On June 16, 2009, supplemental notices of determination were

sent to each petitioner.    The notice explained that the lien was

filed in accordance with all applicable laws, policies, and

procedures.   After petitioners’ ability to pay the outstanding

liabilities was determined, again the lien was sustained.

                               OPINION

     Section 6321 imposes a lien in favor of the United States on

all property and property rights of a taxpayer liable for taxes

after a demand for the payment of the taxes has been made and the

taxpayer fails to pay.    The lien arises when the assessment is

made.   See sec. 6322.   The IRS files a notice of Federal tax lien

to preserve priority and put other creditors on notice.    See sec.

6323.   Section 6320(a) requires the Secretary to send written

notice to the taxpayer of the filing of a notice of lien and of

the taxpayer’s right to an administrative hearing on the matter.

     The hearing generally shall be conducted consistent with

procedures set forth in section 6330(c), (d), (e), and (g).    See

sec. 6320(c).   At the hearing a taxpayer may raise any relevant

issue, including challenges to the appropriateness of the
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collection action and possible collection alternatives.    See sec.

6330(c)(2)(A).   A taxpayer may contest the validity of the

underlying tax liability, see sec. 6330(c)(2)(B), but petitioners

have not done so here.   They must, therefore, establish that the

issuance of a notice of determination sustaining the lien filing

was an abuse of discretion.   See Sego v. Commissioner, 114 T.C.

604, 609-610 (2000).   An abuse of discretion is shown only if the

action of the Appeals officer was arbitrary, capricious, or

without sound basis in fact or law.

See Giamelli v. Commissioner, 129 T.C. 107, 111 (2007).

     Respondent moved for summary judgment, but petitioners

raised material issues of fact and suggested that the

administrative record was incomplete; the motion for summary

judgment was denied.

     Petitioner testified at trial.    Petitioner contends that

there was an abuse of discretion in that the collection officer

who set up his payment plan and the two officers who conducted

the hearings he requested did not properly weigh the facts and

consider the financial hardship that the lien would bring about.

In other words, he argues that the lien is more intrusive than

necessary.

     Petitioner admits that he cannot cite any specific financial

hardship but claims that he is concerned about his job security

and other potential adverse effects on his credit ratings.    He
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argues, but has not shown, that the conclusion that petitioners

have the ability to pay the outstanding liabilities is erroneous,

which is a less rigorous standard than arbitrary and capricious.

He argues that the determination that petitioners have the

ability to pay the balances owed is inconsistent with the need

for a lien to secure the Government’s interest, but that argument

has no merit.   Petitioners’ failure to make voluntary payments

since September 2006 supports the need for a lien.

     Petitioners have not cited, and we have not found, any

authority that would support their positions.   We cannot conclude

that sustaining the lien was an abuse of discretion.   By reason

of the foregoing,


                                   Decision will be entered

                              for respondent.
