                              T.C. Memo. 2019-58



                        UNITED STATES TAX COURT



     EDWARD F. SADJADI AND CYNTHIA M. SADJADI, Petitioners v.
        COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 6351-18L.                        Filed May 29, 2019.



      Edward F. Sadjadi and Cynthia M. Sadjadi, pro sese.

      Donald Priver, Jeffrey D. Heiderscheit, and Brock E. Whalen, for

respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


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

determination concerning collection action under section 6330. The notice

sustained a proposed levy for the balances of Federal income tax owed by

petitioners for 2008, 2009, 2010, 2011, and 2015. The issue for decision is
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[*2] whether it was an abuse of discretion to uphold a levy to collect balances due

from petitioners for 2008 and 2009 after they defaulted on an offer-in-compromise

agreement for those years by failing to pay tax due for 2015. All section

references are to the Internal Revenue Code in effect for the years in issue.

                                FINDINGS OF FACT

       Most of the facts have been stipulated, and the stipulated facts are

incorporated in our findings by this reference. Petitioners resided in Texas when

they filed their petition.

       Petitioners timely filed their tax return for each of the tax years 2008, 2009,

2010, 2011, and 2015. On their return for tax year 2008 they reported tax owed of

$3,251. On their return for tax year 2009 they reported tax owed of $1,047. They

did not enclose payments with their tax returns for tax years 2008 and 2009.

Respondent examined petitioners’ tax returns for tax years 2008, 2009, 2010, and

2011. During the examination for tax year 2008 petitioners agreed to an

additional assessment of tax of $10,953 and an accuracy-related penalty of

$2,190.60; those amounts were assessed on May 23, 2011. During the

examination for tax year 2009 petitioners agreed to an additional assessment of tax

of $18,393 and an accuracy-related penalty of $3,759; those amounts were

assessed on May 23, 2011. Petitioners and respondent entered into an installment
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[*3] agreement on November 13, 2010, for tax year 2009. On February 9, 2011,

petitioners made a $100 payment toward their installment agreement for tax year

2009. Petitioners and respondent entered into an offer-in-compromise on April

18, 2013, for tax years 2008 and 2009. The offer-in-compromise petitioners

signed could not be found for trial, but the standard form for such offers was used.

      The standard form for an offer-in-compromise, Form 656, Offer in

Compromise, in effect on April 18, 2013, contained, among other things, “Offer

Terms” in section 8. The left-hand column, in bold print, contains this statement:

“I must comply with my future tax obligations and understand I remain liable for

the full amount of my tax debt until all terms and conditions of this offer have

been met.” Opposite that text appear paragraphs as follows:

      I will file tax returns and pay required taxes for the five year period
      beginning with the date of acceptance of this offer. If this is an offer
      being submitted for joint tax debt, and one of us does not comply with
      future obligations, only the non-compliant taxpayer will be in default
      of this agreement.

      The IRS will not remove the original amount of my tax debt from its
      records until I have met all the terms and conditions of this offer.
      Penalty and interest will continue to accrue until all payment terms of
      the offer have been met. If I file for bankruptcy before the terms are
      fully met, any claim the IRS files in the bankruptcy proceedings will
      be a tax claim.

      Once the IRS accepts my offer in writing, I have no right to contest,
      in court or otherwise, the amount of the tax debt.
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[*4] Also in the left-hand column, in bold print, is this statement: “I understand

what will happen if I fail to meet the terms of my offer (e.g., default).” Opposite

that text appears the following paragraph:

      If I fail to meet any of the terms of this offer, the IRS may levy or sue
      me to collect any amount ranging from the unpaid balance of the offer
      to the original amount of the tax debt without further notice of any
      kind. The IRS will continue to add interest, as Section 6601 of the
      Internal Revenue Code requires, on the amount the IRS determines is
      due after default. The IRS will add interest from the date I default
      until I completely satisfy the amount owed.

      Between December 17, 2012, and October 1, 2016, petitioners made

payments toward their offer-in-compromise for tax year 2008 totaling $10,650.

Petitioners filed their 2015 tax return on October 19, 2016, but did not pay the tax

for 2015 reported as due. On June 19, 2017, respondent issued to petitioners a

Notice of Intent to Levy and Notice of Your Right to a Hearing for tax years 2008,

2009, 2010, 2011, and 2015. Petitioners timely filed a request for a collection due

process hearing. Settlement Officer Pugh (SO Pugh) held the collection due

process hearing with petitioners by telephone on October 3, 2017. Petitioners

proposed an installment agreement of $350 per month. SO Pugh determined from

petitioners’ Form 433-A, Collection Information for Wage Earners and Self-

Employed Individuals, that they had disposable monthly income of $6,466.33.
                                         -5-

[*5]                                  OPINION

       Section 6330 provides for notice and opportunity for a hearing before the

Internal Revenue Service may levy upon the property of any person. Petitioners

requested and were granted a hearing. Section 6330(c) specifies the matters to be

considered at the hearing, including, for purposes of this case, verification that the

requirements of any applicable law or administrative procedure have been met,

challenges to the appropriateness of collection actions, and offers of collection

alternatives. Under section 6330(c)(3), the determination to proceed with a

collection action “shall take into consideration * * * whether any proposed

collection action balances the need for the efficient collection of tax with the

legitimate concern of the person that any collection action be no more intrusive

than necessary.”

       The parties have now agreed on the amounts owed for 2010, 2011, 2012,

and 2015. The underlying liabilities were reported, assessed, or abated by

agreement between the parties, so they are no longer in issue. Thus we analyze

this case by applying an abuse of discretion standard. See Sego v. Commissioner,

114 T.C. 604, 609-610 (2000). Petitioners contend that the Appeals settlement

officer failed to recognize that their liabilities for 2008 and 2009 were paid
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[*6] pursuant to the offer-in-compromise for those years. Petitioners’ contention,

as stated by petitioner Edward Sadjadi during trial, is that Form 656

      does not explicitly and clearly identify the taxpayers’ obligations with
      reference to what happens after the amount of OIC that was agreed
      upon is paid in full. In this particular case, that amount was $21,515,
      when agreed, through September of 2016, payments in excess of that
      amount were paid to the IRS. And at that point we considered the
      OIC complete--we being the petitioners. And when we filed the 2015
      taxes in October of 2016, we asked for an installment agreement and
      did not pay the full amount at the time of filing, again, under the
      assumption that the OIC was paid in full, and therefore there were no
      other obligations remaining, based on the commonly practiced debt
      agreements that we know of as average people.

However, petitioners’ contention is contradicted by the evidence.

      Petitioners stipulated that the standard form was in use at the time they

signed their offer-in-compromise and have not suggested that the agreement that

they signed was any different. The standard form, as quoted in our findings,

explicitly emphasizes, in bold print and by detailed provisions to which petitioners

agreed, the necessity of complying with future tax obligations and “what will

happen if I fail to meet the terms of my offer (e.g., default)”. If they failed to read

the agreement or forgot the explicit terms, they were still bound to “pay required

tax for the five year period beginning with the date of acceptance of this offer”,

which was April 18, 2013. The settlement officer considered their argument and
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[*7] documented their default, to wit, failure to pay the tax shown on their 2015

return filed October 19, 2016.

      Abuse of discretion may be found if action is arbitrary, capricious, or

without sound basis in fact or law. Giamelli v. Commissioner, 129 T.C. 107, 111

(2007); Woodral v. Commissioner, 112 T.C. 19, 23 (1999). None of those

characteristics apply here.


                                              Decision will be entered for

                                      respondent.
