                               T.C. Memo. 2019-72



                         UNITED STATES TAX COURT



      GREGORY L. MURPHY AND MONICA J. MURPHY, Petitioners v.
         COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 12489-18L.                        Filed June 11, 2019.



      Gregory L. Murphy and Monica J. Murphy, pro sese.

      Ryan Z. Sarazin and Bartholomew Cirenza, for respondent.



                           MEMORANDUM OPINION


      LAUBER, Judge: In this collection due process (CDP) case, petitioners

seek review pursuant to section 6330(d)(1)1 of the determination by the Internal



      1
       All statutory references are to the Internal Revenue Code in effect at all
relevant times, and all Rule references are to the Tax Court Rules of Practice and
Procedure. We round all monetary amounts to the nearest dollar.
                                         -2-

[*2] Revenue Service (IRS or respondent) to uphold a notice of intent to levy. The

IRS initiated the collection action with respect to petitioners’ Federal income tax

liability for 2015. Respondent has moved for summary judgment under Rule 121,

contending that there are no disputed issues of material fact and that his deter-

mination to sustain the proposed collection action was proper as a matter of law.

      Petitioners urge that the settlement officer (SO) erred in declining to offset,

against their 2015 tax liability, a credit that would exist in their 2011 account if the

IRS had not denied their claim for refund for 2011. Concluding as we do that we

lack jurisdiction to decide a disputed refund claim for a year not before us, we will

grant respondent’s motion and sustain the collection action for 2015.

                                     Background

      The following facts are based on the parties’ pleadings and motion papers,

including the attached declarations and exhibits. See Rule 121(b). Petitioners re-

sided in Virginia when they filed their petition.

      Petitioners filed a return for 2015 but failed to pay in full the tax shown as

due. The IRS assessed the resulting liability, which petitioners did not pay upon

notice and demand for payment. On August 28, 2017, in an effort to collect this

unpaid liability, the IRS issued them a Letter 11, Notice of Intent to Levy and
                                         -3-

[*3] Notice of Your Right to a Hearing. As of the date of that notice, petitioners’

outstanding liability for 2015 was $14,602.2

      The levy notice informed petitioners that, if they wished to request a CDP

hearing, they needed to complete and submit, on or before September 27, 2017, a

Form 12153, Request for a Collection Due Process or Equivalent Hearing. Peti-

tioners completed Form 12153 and sent it to the IRS accompanied by a cover

letter. The Form 12153 and cover letter were not marked as received by the IRS

until January 19, 2018, but the cover letter bore a certified mail receipt and a Sep-

tember 27, 2017, postmark affixed by the U.S. Postal Service. Respondent con-

cedes that petitioners’ hearing request was timely mailed and thus timely filed.

See sec. 7502; sec. 301.6330-1(c)(2), Q&A-C1, C3, C4, Proced. & Admin. Regs.

      In their hearing request petitioners alleged no inability to pay and expressed

no interest in a collection alternative. Nor did they dispute that their 2015 return

showed an underpayment of tax. Rather, they asserted that they were entitled to a

      2
       Petitioners attached to their response to the summary judgment motion a
copy of a November 2018 letter to the IRS stating that they had enclosed a check
for $10,657 to cover their 2015 liability. Petitioners have not supplied a copy of
the check or otherwise shown that an actual payment was made. In any event a
check in that amount would not have covered their balance due for 2015, which
was $14,602 when the levy notice was issued. Petitioners have not moved to dis-
miss this case on mootness grounds, as would be possible if their 2015 liability
had actually been paid in full. See Greene-Thapedi v. Commissioner, 126 T.C. 1,
7 (2006).
                                         -4-

[*4] refund for 2011 and that such a refund, if credited to their 2011 account,

could be carried to 2015 to offset their 2015 tax liability.

      After receiving petitioner’s case an SO from the Holtsville, New York,

Appeals Office confirmed that the 2015 liability had been properly assessed and

that all other requirements of applicable law and administrative procedure had

been met. The SO believed that petitioners’ hearing request was untimely and

hence that they were not entitled to a CDP hearing. The SO therefore offered them

an “equivalent hearing.”3

      The SO sent petitioners a letter acknowledging receipt of their hearing re-

quest and scheduling a telephone conference. At their request the hearing was

rescheduled and held on April 9, 2018. During the conference petitioners again

stated that they wished to address their alleged entitlement to a refund for 2011.

      For 2011 petitioners had failed to file a return. The IRS had accordingly

prepared a substitute for return (SFR) on the basis of third-party information re-

ports. See sec. 6020(b). On May 26, 2014, the IRS issued to petitioners a notice


      3
       An equivalent hearing resembles a CDP hearing in that it is held with the
IRS Appeals Office, the SO considers the same issues that would have been con-
sidered at a CDP hearing, and the SO generally follows the same procedures. See
Craig v. Commissioner, 119 T.C. 252, 258 (2002). The chief difference is that the
SO’s decision following an equivalent hearing is embodied in a “decision letter”
as opposed to a “notice of determination.” Ibid.
                                          -5-

[*5] of deficiency for 2011 based on the SFR. They did not seek review in this

Court, so the IRS assessed the tax as determined in the notice of deficiency.

      In preparing the SFR for 2011 the IRS had relied in part on a Form 1099-R,

Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs,

Insurance Contracts, etc., issued to petitioners by MetLife. Petitioners believe that

this Form 1099-R was erroneous. In April 2015, in an effort to rectify this sup-

posed error, they submitted to the IRS an SFR reconsideration request, which the

IRS denied. On May 7, 2016, they submitted an amended return for 2011, which

the IRS treated as a claim for refund and likewise denied.

      During the April 9, 2018, hearing the SO explained that petitioners’ liability

for 2011 was not the subject of the levy notice and that she lacked jurisdiction to

address their disputed refund claim. She expressed willingness to consider a col-

lection alternative, but petitioners declined that invitation.

      On May 21, 2018, the IRS issued petitioners a decision letter sustaining the

levy, and they timely petitioned this Court for review. Petitioners contend that:

(1) their CDP hearing request was timely, (2) the SO erred in determining that they

did not dispute their underlying liability for 2015, and (3) the SO abused her dis-

cretion in failing to consider the impact on their 2015 liability of their 2011 claim
                                        -6-

[*6] for refund. On February 14, 2019, respondent filed a motion for summary

judgment, to which petitioners timely responded.

                                     Discussion

A.    Jurisdiction

      The Tax Court is a court of limited jurisdiction, and we must first ascertain

whether the case before us is one that Congress has authorized us to consider.

Sec. 7442; Estate of Young v. Commissioner, 81 T.C. 879, 881 (1983). In a CDP

case such as this, our jurisdiction depends on the issuance of a notice of determi-

nation following a timely request for a CDP hearing and the filing of a timely peti-

tion for review. Sec. 6330(d)(1); Orum v. Commissioner, 123 T.C. 1, 8, 11-12

(2004), aff’d, 412 F.3d 819 (7th Cir. 2005).

      A decision letter ordinarily does not constitute a “determination” within the

meaning of section 6330(d), and we normally lack jurisdiction to consider a tax-

payer’s challenge to the outcome of an equivalent hearing. See Kennedy v. Com-

missioner, 116 T.C. 255, 263 (2001). However, if the taxpayer has made a timely

request for a CDP hearing, and if the Appeals Office incorrectly offers the taxpay-

er an equivalent hearing instead, we have jurisdiction to consider a timely request

for review. Craig v. Commissioner, 119 T.C. 252, 259 (2002). In such circum-
                                          -7-

[*7] stances, we treat “the ‘decision’ reflected in the decision letter * * * [as] a

‘determination’ for purposes of section 6330(d)(1).” Ibid.

      Respondent does not dispute the timeliness of petitioners’ request for a CDP

hearing. We conclude that the SO’s decision to sustain the collection action re-

flected in the decision letter is a “determination” for purposes of section 6330(d)

and that we have jurisdiction to adjudicate this case. See Craig, 119 T.C. at 259.

B.    Summary Judgment Standard

      The purpose of summary judgment is to expedite litigation and avoid costly,

time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90

T.C. 678, 681 (1988). Under Rule 121(b), we may grant summary judgment when

there is no genuine dispute as to any material fact and a decision may be rendered

as a matter of law. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992),

aff’d, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judg-

ment, we construe factual materials and inferences drawn from them in the light

most favorable to the nonmoving party. Ibid. However, the nonmoving party may

not rest upon the mere allegations or denials in his pleadings but instead must set

forth specific facts showing that there is a genuine dispute for trial. Rule 121(d);

see Sundstrand Corp., 98 T.C. at 520. Finding no material facts to be in dispute,

we conclude that this case may be adjudicated summarily.
                                         -8-

[*8] C.      Standard of Review

      Where the validity of the taxpayer’s underlying tax liability is properly at is-

sue, we review the IRS’ determination de novo. Goza v. Commissioner, 114 T.C.

176, 181-182 (2000). Where the taxpayer’s underlying liability is not before us,

we review the IRS determination for abuse of discretion only. Id. at 182. Abuse

of discretion exists when a determination is arbitrary, capricious, or without sound

basis in fact or law. See Murphy v. Commissioner, 125 T.C. 301, 320 (2005),

aff’d, 469 F.3d 27 (1st Cir. 2006).

      Petitioners did not dispute, during the hearing or in their petition, the tax lia-

bility that the IRS determined for their taxable year 2015. Rather, they contend

that the SO erred in refusing to apply, against that 2015 liability, a supposed credit

balance that they believe should be available for carryforward from 2011. There is

some uncertainty in our precedents as to whether a de novo or an abuse-of-discre-

tion standard of review applies in a situation such as this.4 As we explain below,

      4
        In Landry v. Commissioner, 116 T.C. 60 (2001), we applied a de novo
standard of review where the taxpayer challenged the IRS’ failure to apply an
overpayment credit from another year. We concluded that this was a challenge to
the taxpayer’s underlying tax liability, i.e., “the amount unpaid after application of
credits to which * * * [the taxpayer was] entitled.” Id. at 62. On the other hand,
we have applied abuse-of-discretion review when considering challenges to the
IRS’ application of a check or other tax payment. See Melasky v. Commissioner,
151 T.C. __ (Oct. 10, 2018) (Holmes, J.) (holding that a dispute as to whether a
                                                                         (continued...)
                                         -9-

[*9] we conclude that the SO answered correctly the credit carryforward question

that petitioners raise. Because we would sustain her resolution of this issue under

either standard of review, we need not decide which applies. See Dixon v.

Commissioner, 141 T.C. 173, 184 & n.6 (2013); Estate of Adell v. Commissioner,

T.C. Memo. 2014-89, 107 T.C.M. (CCH) 1463, 1466; Golub v. Commissioner,

T.C. Memo. 2013-196, 106 T.C.M. (CCH) 173, 174-175. With regard to matters

other than application of the claim for an overpayment credit from 2011, we will

review the SO’s action for abuse of discretion.

D.    Analysis

      1.     Overpayment Credit from 2011

      Our jurisdiction in CDP cases generally does not permit us to consider mat-

ters involved for nondetermination years, that is, for tax years that are not a subject

of the collection action before us. But we may consider facts and issues from

other years to the extent they “are relevant in evaluating a claim that an unpaid tax

has been paid.” Freije v. Commissioner, 125 T.C. 14, 27 (2005). An available

credit from another year is a fact that may affect the taxpayer’s correct liability for

      4
       (...continued)
payment was properly credited to the taxpayer’s account for a particular tax year is
not a challenge to his underlying tax liability); see also Orian v. Commissioner,
T.C. Memo. 2010-234, 100 T.C.M. (CCH) 356, 359; Kovacevich v. Commission-
er, T.C. Memo. 2009-160, 98 T.C.M. (CCH) 1, 4 & n.10.
                                         - 10 -

[*10] the year that is the subject of the collection action. Weber v. Commissioner,

138 T.C. 348, 371-372 (2012). But a credit must actually exist in order to

constitute an “available credit.” A mere claim for a credit “is not an ‘available

credit,’” and such a claim “need not be resolved before the IRS can proceed with

collection of the liability at issue.” Id. at 372; see Del-Co W. v. Commissioner,

T.C. Memo. 2015-142, 110 T.C.M. (CCH) 119, 120-121.

      At the time of petitioners’ hearing, the IRS had already denied the refund

claim embodied in their amended 2011 return. Thus, far from having an “avail-

able credit” for 2011, petitioners had nothing more than a disagreement concern-

ing the denial of that claim. The SO was not required to consider the merits of the

position taken on petitioners’ 2011 amended return when determining whether to

sustain the proposed collection action for 2015. See Precision Prosthetic v. Com-

missioner, T.C. Memo. 2013-110; Everett Assocs., Inc. v. Commissioner, T.C.

Memo. 2012-143.

      We likewise lack jurisdiction to address that question. We may consider

“whether a credit available from another tax year should be applied to the taxpay-

er’s liability for the year before the Court” only if that other credit “indisputably

exists.” Del-Co W., 110 T.C.M. (CCH) at 120. Petitioners do not have an “avail-

able credit” from 2011, and we lack jurisdiction to decide their disputed claim for
                                         - 11 -

[*11] refund for a year that is not before us. See Weber, 138 T.C. at 366.

Whether we review the SO’s action under a de novo or an abuse-of-discretion

standard, we sustain her determination that petitioners did not advance a proper

challenge to their underlying tax liability for 2015 because their challenge was

based on a credit that does not exist.

      2.     Other Issues

      In deciding whether the SO abused her discretion in any other respect, we

consider whether she: (1) properly verified that the requirements of any applicable

law or administrative procedure had been met, (2) considered any relevant issues

petitioners raised, and (3) considered “whether any proposed collection action bal-

ances the need for the efficient collection of taxes with the legitimate concern of

* * * [petitioners] that any collection action be no more intrusive than necessary.”

See sec. 6330(c)(3).

      Our review of the record establishes that the SO properly discharged all of

her responsibilities under section 6330(c). She verified that petitioners’ tax liabil-

ity for 2015 had been properly assessed, and she correctly determined that they

had no “available credit” to offset against that liability. Petitioners had the oppor-

tunity to submit a collection alternative in the form of an installment agreement or

offer-in-compromise, but they did not avail themselves of that opportunity. See
                                        - 12 -

[*12] Cavazos v. Commissioner, T.C. Memo. 2008-257, 96 T.C.M. (CCH) 341,

344 (“It is not an abuse of discretion for an appeals officer to sustain a levy and

not consider any collection alternatives when the taxpayer has proposed none.”).

      The gist of petitioners’ position in this case is that the IRS erred in denying

their claim for refund for 2011. The remedy for that supposed wrong was not to

urge carryforward of a nonexisting credit in the CDP proceeding involving their

2015 tax year. The proper remedy would have been to file, in the appropriate U.S.

District Court or the U.S. Court of Federal Claims, a refund suit seeking recovery

of the allegedly overpaid 2011 tax. See sec. 7422 (governing civil actions for

refund). Finding no abuse of discretion in the SO’s handling of this issue, we will

grant summary judgment for respondent and sustain the proposed collection

action.

      To implement the foregoing,


                                                 An appropriate order and decision

                                        will be entered for respondent.
