                        T.C. Memo. 2003-346



                      UNITED STATES TAX COURT



            RANDALL G. VAN VLAENDEREN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 15164-02L.             Filed December 29, 2003.



     Randall G. Van Vlaenderen, pro se.

     Monica J. Miller, for respondent.



                        MEMORANDUM OPINION

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

Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330.    The notice of determination sustained

a proposed levy with respect to petitioner’s unpaid taxes for

1986, 1990, 1991, 1992, 1993, 1994, 1995, 1997, and 1999.   The

issue for decision is whether the Appeals officer’s rejection of
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petitioner’s Form 656, Offer in Compromise, was an abuse of

discretion.   Unless otherwise indicated, all section references

are to the Internal Revenue Code in effect for the years in

issue.

                             Background

     Most of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.

Petitioner resided in Florida at the time that his petition was

filed.

     Petitioner is self-employed and works in the real estate

business.   He filed Federal income tax returns for 1986, 1990,

1991, 1992, 1993, 1994, 1995, 1997, and 1999, reflecting unpaid

balances due.   The balances were duly assessed, and, with

penalties and accrued interest, the total unpaid liabilities

exceed $78,000.   Petitioner did not submit a timely Federal

income tax return for 1998 and did not file any return for that

year prior to May 2002.   Petitioner’s Federal income tax returns

for 2001 and 2002 were filed during the pendency of this dispute.

     On March 15, 2001, two forms of Final Notice - Notice of

Intent to Levy and Notice of Your Right to a Hearing were sent to

petitioner.   One notice related to his liability for 1990, 1991,

and 1992 in the total amount of $27,066.28, and a second notice

related to his liability for 1986, 1993, 1994, 1995, 1997, and

1999, totaling $40,524.01.   Petitioner submitted a Request for a
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Collection Due Process Hearing in which he asserted that an

installment agreement had been inappropriately terminated, that

his prior spouse might be partially liable, and that he had

requested an offer in compromise.

     By letter dated February 6, 2002, Appeals Officer Beverly A.

Henry (Appeals Officer Henry) notified petitioner that she had

scheduled a conference for March 5, 2002, and that the hearing

that he had requested could be conducted by telephone or

correspondence.   On March 5, 2002, Appeals Officer Henry

conducted a telephone conference in which petitioner indicated

his intention to submit an offer in compromise.   On March 29,

2002, petitioner submitted an offer in compromise relating to the

above liabilities, proposing that the sum of $3,763 be paid in

more than 90 days but within 24 months from written notice of

acceptance of the offer.

     On April 9, 2002, Appeals Officer Henry sent a letter to

petitioner in which she stated:

     You have requested consideration of certain issues that
     require the expertise of the investigative functions of
     the Service.

     While the Office of Appeals will maintain jurisdiction
     of your case, we have requested further assistance to
     research and verify the information you have provided.

     It may be necessary for a Revenue Officer to contact
     you for information necessary to expedite this review.
     The Revenue Officer may need to contact third parties
     to verify some of this information. The information we
     have requested is needed to help us reach a resolution
     of your appeal.
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     If you have any questions, please contact me at the
     telephone number shown above.

     The Appeals officer transmitted the documents for an offer

in compromise investigation to IRS Collections (Group 4100).     On

April 17, 2002, the offer in compromise was returned to the

Appeals officer with the statement that the Form 433-A,

Collection Information Statement for Wage Earners and Self-

Employed Individuals, financial information was not verified;

petitioner had not filed his return for 1998; and that the total

unpaid liability was over $78,000.    On April 17, 2002, the

Appeals officer notified petitioner that the offer in compromise

could not be considered because petitioner had not complied with

the filing requirements with respect to his 1998 return.    On

May 2, 2002, the Appeals officer again wrote to petitioner as

follows:

     This is to follow-up on your Offer in Compromise
     submitted for consideration.

     Our records indicate that this 1998 tax return has not
     been processed. I need an original signature in order
     to process. Please sign the return and return to me by
     May 13, 2002.

     The law requires you to be in compliance with all
     filing requirements. This includes filing all federal
     tax returns and making estimated tax payments if
     required. The record indicates that you have filed an
     extension for the year 2001 tax return, and you are not
     making estimated tax payments.

     Based on the above, an Offer in Compromise cannot be
     considered at this time because you are not in
     compliance with the filing requirements. Please
     contact me so that we can discuss this further.
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     Petitioner subsequently submitted the documentation

requested by the Appeals officer, and, in a memorandum dated

May 30, 2002, the Appeals officer concluded that petitioner was

then in compliance with the filing requirements.    Thus, the

revenue officer proceeded to consider petitioner’s offer in

compromise.

     The revenue officer to whom petitioner’s offer in compromise

was referred by the Appeals officer considered the financial

information that petitioner had submitted, including bank

records.    The information submitted by petitioner claimed that

his total monthly income was $1,812 and that his total monthly

living expenses were $2,059, reflecting a monthly financial

deficit.    The revenue officer concluded that the income shown by

petitioner was not consistent with the bank deposits reflected on

his monthly statements and that the net business income reported

by petitioner was not reliable because the claimed business

expenses were commingled in the bank account with personal

expenses.    The revenue officer calculated petitioner’s ability to

pay based on the value of his vehicle and his average monthly

bank deposits, less necessary living expenses, and concluded that

the amount of $59,676 was the reasonable collection potential

“based on cash offer” shown by the information petitioner had

submitted.
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     On July 30, 2002, the Appeals officer again wrote to

petitioner as follows:

     The Revenue Officer has completed the investigation of
     your Offer in Compromise submitted as a collection
     alternative.

     The investigation reveals that your offer in the amount
     of $3,763 is not adequate. The financial analysis
     indicates that your offer should be increased to at
     least $59,676. I have attached copies of the
     Asset/Equity Table (AET) and Income/Expense Table (IET)
     to support this determination.

     I have also enclosed Form 656 [Offer in Compromise] for
     you to submit an “amended offer” for $59,676 if this is
     acceptable to you.

     If you have any questions or wish to discuss further,
     please contact me at the telephone number shown above.

     If I do not receive a response from you, I will assume
     that you no longer wish to pursue this matter. I will
     issue my determination based on the available
     information in your case file.

     Petitioner did not contact the Appeals officer by telephone,

as she had suggested.    By letter dated August 14, 2002, mailed

August 19, 2002, and received by the Appeals Office on August 20,

2002, petitioner submitted an amended offer in compromise in the

amount of $9,756.   Petitioner’s transmittal letter indicated that

he believed that his options were to appeal within 30 days to the

Office of Appeals or to submit another offer, based on

instructions in the Form 656 package.    Petitioner also suggested

that the revenue officer’s method of calculating income did not

consider the expenses of running his business, as reflected on

his tax returns for 1999, 2000, and 2001.
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       On April 19, 2002, Appeals Officer Henry signed a memorandum

in which she recommended that the Notice of Intent to Levy should

not be withdrawn.    The memorandum was approved by the Appeals

Office team manager on August 21, 2002.    The attachment to the

Appeals Office memorandum concluded that the levy was no more

intrusive than necessary, the taxpayer’s offer was not adequate,

and:

       There is no evidence to indicate that the taxpayer
       would voluntarily pay the liability if the Notice of
       Intent to Levy were removed. The proposed levy action
       balances the need for efficient collection of taxes
       with the taxpayer’s legitimate concern that any
       collection action be no more intrusive than necessary.

On August 28, 2002, Appeals Officer Henry notified petitioner

that the Appeals Office had issued a determination letter.      She

enclosed another Form 656 package to be completed and sent to

“the appropriate office for your area.”

                             Discussion

       Neither the amount of petitioner’s liability nor the

procedural facts in this case are in dispute.    Petitioner

contends that there was an abuse of discretion because he was not

provided information on how to appeal Appeals Officer Henry’s

determination that the levy proposed in March 2001 would not be

withdrawn and because the Appeals officer relied on erroneous

calculations by the revenue officer with respect to petitioner’s

monthly income.
                                - 8 -

     Respondent argues that, because the matter was already being

considered by the Office of Appeals pursuant to petitioner’s

request for a section 6330 hearing, the Form 656 instructions

concerning appeals from rejections of offers in compromise do not

apply to this case.   Respondent also argues that there is no

requirement that the Appeals Office wait a particular period of

time after requesting an amended offer.   In any event, respondent

argues that petitioner’s amended offer was inadequate and would

not have changed the Appeals officer’s determination.     Finally,

respondent contends that, because the Appeals officer relied on a

financial analysis and articulated reasons for her determination,

there was no abuse of discretion.

     Section 7122(a) authorizes compromise of a taxpayer’s

Federal income tax liability.   Grounds for compromise include

doubt as to liability, doubt as to collectibility, or 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).   The record reflects that doubt as to

collectibility exists, but there is disagreement as to the

collectible amount.   There is no indication in the record that

collection of the full liability would create economic hardship

or affect voluntary compliance by taxpayers.   See sec. 301.7122-

1T(b)(4), Temporary Proced. & Admin. Regs., supra.
                                - 9 -

     We approach the dispute in this case in the context of

review of a hearing conducted under section 6330.    Under section

6330, a taxpayer is entitled to one hearing in which he may

propose alternatives to collection, such as the levy action

proposed by respondent on March 15, 2001.    See sec. 6330(b), (c),

and (d).   Where, as here, liability is not an issue, the Appeals

officer’s determination is reviewed for abuse of discretion.

Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).    Generally,

we consider only issues raised at the hearing before the Appeals

Office.    Magana v. Commissioner, 118 T.C. 488, 493 (2002).     Thus,

we do not conduct an independent review of what would be an

acceptable offer in compromise.   We review only whether the

Appeals officer’s refusal to accept the offer in compromise made

by petitioner was arbitrary, capricious, or without sound basis

in fact or law.   See Woodral v. Commissioner, 112 T.C. 19, 23

(1999).

     It is possible, as petitioner contends, that the revenue

officer’s financial analysis, based on the information that

petitioner had provided, was flawed.    We cannot, however,

conclude that the information that petitioner provided was

reliable or that consideration of his amended offer in compromise

of $9,756 would have changed the determination.    The Appeals

officer’s determination was based on analysis of the information

that petitioner submitted.   The Appeals officer adopted the
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revenue officer’s conclusion that petitioner could pay $59,676 in

compromise of unpaid liabilities for 9 years exceeding $78,000.

The determination also indicated that the proposed levy was

necessary to induce payment, which was not an unreasonable

conclusion in view of petitioner’s long history of delinquency.

Based on the information considered by the Appeals officer, we

cannot conclude that rejection of petitioner’s initial offer was

an abuse of discretion or that rejection of petitioner’s amended

offer would be an abuse of discretion.   See Crisan v.

Commissioner, T.C. Memo. 2003-318; Willis v. Commissioner, T.C.

Memo. 2003-302; O’Brien v. Commisioner, T.C. Memo. 2003-290;

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

     To reflect the foregoing,


                                         Decision will be entered

                                   for respondent.
