                        T.C. Memo. 2003-183



                      UNITED STATES TAX COURT



                 DOROTHY MOORHOUS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 10761-00L.              Filed June 24, 2003.



     John Franklin Rodgers, for petitioner.

     Jeffery E. Gold, for respondent.


                        MEMORANDUM OPINION


     COLVIN, Judge:   On October 6, 2000, respondent sent

petitioner a Notice of Determination Concerning Collection

Action(s) Under Section 6320 and/or 6330 (the lien or levy

determination), in which respondent determined that collection

from petitioner of her unpaid tax, additions to tax, and interest

for 1989-92 would proceed.

     The sole issue for decision is whether respondent’s refusal

to consider petitioner’s offer in compromise because petitioner
                                - 2 -

did not provide current financial information was an abuse of

discretion.    We hold that it was not.

       Section references are to the Internal Revenue Code in

effect for the applicable years.    Rule references are to the Tax

Court Rules of Practice and Procedure.

                             Background

       The parties submitted this case fully stipulated under Rule

122.

A.     Petitioner

       Petitioner resided in Springfield, Virginia, when she filed

the petition in this case.    In 1997, she was a budget analyst for

the U.S. Department of Commerce, and her husband, Mr. Moorhous,

was a retired U.S. Department of Defense employee.    Petitioner

and Mr. Moorhous filed joint income tax returns for 1989-92.1

       Petitioner and Mr. Moorhous filed separate bankruptcy

petitions on dates not stated in the record.    Petitioner’s income

tax liability for 1987 and 1988 was discharged in bankruptcy, but

Mr. Moorhous’s liability for those years was not discharged.




       1
        Mr. Moorhous is not a party to this case. He received a
Notice of Determination Concerning Collection Action(s) Under
Sec. 6320 and/or 6330, but he filed his request for a hearing
late. Thus, he is not entitled to judicial review under sec.
6320 or sec. 6330. Moorhous v. Commissioner, 116 T.C. 263, 270
(2001); Kennedy v. Commissioner, 116 T.C. 255, 262-263 (2001).
                               - 3 -

B.   Petitioner’s Offer in Compromise

     In January 1997, petitioner and Mr. Moorhous submitted Form

656, Offer in Compromise, in which they offered $3,618 to

compromise his 1987-92 and 1997 tax liability and her 1989-92 tax

liability.   At least $86,000 was due from petitioner and Mr.

Moorhous at that time for those years.

     On or about March 3, 1997, respondent’s examiner, Ms. Vines

(Vines), asked petitioner and Mr. Moorhous to provide additional

financial information by March 28, 1997.    Vines had received no

response from petitioner and Mr. Moorhous by April 8, 1997, and

she closed the case on that date.   Respondent issued a written

rejection letter which stated that petitioner and Mr. Moorhous

have no administrative appeal rights.    Petitioner and Mr.

Moorhous then submitted additional financial information, and

Vines agreed to reconsider their offer in compromise.    Vines

again recommended that the offer in compromise be rejected based

on her estimate that the net realizable equity2 in petitioner and

Mr. Moorhous’s assets was at least $125,000 greater than the

amount they offered in compromise and considerably greater than

the $86,388 then due from petitioner and Mr. Moorhous.    She told


     2
        Internal Revenue Manual sec. 5.8.5.3.1 (Feb. 4, 2000)
defines net realizable equity for purposes of an offer in
compromise as an estimate (usually about 80 percent of fair
market value) of the price a seller could get for the asset where
financial pressures motivate the seller to sell in a short period
of time (usually 90 days or less) less amounts owed to secured
lien holders with priority over the Federal tax lien.
                               - 4 -

petitioner and Mr. Moorhous that their offer in compromise would

be rejected with the right to seek reconsideration by

respondent’s Appeals office.   Respondent did not send a written

rejection letter or notice of right to appeal to petitioner.     At

that time, respondent had a policy of generally not accepting

offers in compromise from Federal employees.    However, respondent

did not apply that policy to petitioner.3    Respondent

discontinued the policy effective July 18, 1997.    IRS Litig.

Bull. 445 (October 1997).

     On April 27, 1999, respondent sent to petitioner a Notice of

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

petitioner’s tax liability for 1989-92.     The notice of intent to

levy stated that petitioner owed tax, penalty, and interest of

$17,909.98 for 1989, $10,266.83 for 1990, $9,980.32 for 1991, and

$19,400.89 for 1992, for a total of $57,558.02.    On May 10, 1999,

petitioner requested a section 6330(b) hearing for tax years

1987-92.   At the hearing, petitioner submitted her 1997 offer in

compromise and accompanying 1997 financial information.    At the

hearing, the hearing officer stated that respondent erred in not

issuing a written rejection letter that advised petitioner of her

right to appeal the rejection of her 1997 offer in compromise to

respondent’s Office of Appeals.   The hearing officer agreed to



     3
        Petitioner contends that respondent applied the policy to
petitioner in 1997. We decide this issue in the opinion.
                                - 5 -

consider petitioner’s offer in compromise if petitioner would

provide current financial information.     Petitioner provided only

some of her current financial information, and so the hearing

officer did not consider the offer in compromise.

     On October 6, 2000, respondent issued a notice of

determination in which respondent determined to proceed with

collection from petitioner of her taxes owing for 1989-92.

                              Discussion

     Petitioner contends that respondent’s refusal to consider

her offer in compromise for 1989-92 because she did not provide

current financial information was an abuse of discretion.4    We

disagree.   Section 7122(c)(1) provides that the Secretary shall

prescribe guidelines for the Internal Revenue Service to use in

determining whether to accept an offer in compromise.

     Treasury regulations provide that the Commissioner will not

process an offer in compromise that lacks sufficient information

to permit the Commissioner to evaluate its acceptability.    Sec.

301.7122-1T(c)(2), Temporary Proced. & Admin. Regs., 64 Fed. Reg.

39020 (July 21, 1999).   The Commissioner will not process an

offer in compromise if the financial information submitted with

it is older than 12 months.    2 Administration, Internal Revenue

Manual (CCH), ch. 5.1(1) (Feb. 4, 2000).    The hearing officer


     4
       At the hearing, petitioner told the hearing officer that
she did not want her offer in compromise to be considered based
on current financial information.
                               - 6 -

followed those guidelines by requiring that petitioner provide

current financial information to evaluate whether her offer in

compromise was adequate and should be accepted.   The decision not

to process petitioner’s offer in compromise on account of her

failure to submit current financial information was consistent

with prescribed guidelines and was a reasonable exercise of the

Commissioner’s discretion.

     Respondent erred in not sending petitioner a written notice

that respondent had rejected her 1997 offer in compromise.   See

former sec. 301.7122-1(d)(4), Proced. & Admin. Regs. (taxpayer

must be given prompt notice in writing of rejection of offer in

compromise).   Petitioner contends that, because of that error, we

should remand this case to respondent’s Office of Appeals for

consideration of her offer in compromise based on her 1997

financial information.   We disagree.

     In 1997, respondent twice considered and rejected

petitioner’s $3,618 offer to compromise a tax liability of about

$86,000.   Respondent concluded that the net realizable equity in

petitioner and Mr. Moorhous’s assets was at least $125,000

greater than the $3,618 amount offered in compromise.    We have no

reason to believe that result would change if respondent again

considered petitioner’s offer in compromise based on her

financial information for 1997.
                                 - 7 -

     Respondent’s failure to send petitioner a written rejection

of her 1997 offer in compromise did not deprive her of any

administrative appeal rights.    The hearing officer for

petitioner’s section 6330 hearing stated that respondent erred in

not issuing a written rejection letter that advised petitioner of

the right to administratively appeal that rejection.    Respondent

contends on brief that that statement by the hearing officer was

wrong because, in 1997, taxpayers had no appeal rights concerning

rejected offers in compromise.    Petitioner does not dispute

respondent’s statement in this regard and offers no contrary

authority.   We conclude that petitioner was not prejudiced by the

hearing officer’s failure to consider her offer in compromise

based on 1997 financial information or by respondent’s failure to

give her written notice in 1997 that her 1997 offer in compromise

had been rejected.   See Rodriguez v. Commissioner, T.C. Memo.

2003-153.

     Petitioner contends that respondent’s refusal to consider

her offer in compromise in 1997 was based on respondent’s policy

then in effect of generally not accepting offers in compromise

from Federal employees.   We disagree.   There is no evidence to

support her contention, and there is credible evidence showing

that respondent did not apply that policy to her.
                              - 8 -

     We conclude that respondent’s determination to proceed with

collection as to petitioner’s 1989-92 tax liabilities was not an

abuse of discretion.

                                             Decision will be

                                        entered for respondent.
