                  T.C. Memo. 2010-210



                UNITED STATES TAX COURT



         DAN K. AND PAULA SHAW, Petitioners v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 1642-08L.             Filed September 27, 2010.


     Ps filed a petition for judicial review pursuant
to sec. 6320, I.R.C., in response to a determination by
R that lien action was appropriate.

     Held: Ps are liable for the addition to tax for
failure to pay their tax liability in a timely manner.
R’s filing of the lien to protect the Government’s
interest and denial of an installment agreement do not
constitute an abuse of discretion. R’s determination
to proceed with collection action is sustained.



Robert E. McKenzie and Kathleen M. Lach, for petitioners.

Gorica B. Djuraskovic, for respondent.
                                 - 2 -

                MEMORANDUM FINDINGS OF FACT AND OPINION


     WHERRY, Judge:     This case is before the Court on a petition

for judicial review of a Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330.1     The issues

for decision are (1) whether petitioners are liable for the

failure to pay addition to tax imposed by section 6651(a)(2); (2)

whether respondent abused his discretion in not agreeing to an

installment payment agreement or offer-in-compromise; and (3)

whether respondent may proceed with collection by means of a

filed tax lien with respect to petitioners’ Federal income tax

liability for the 2005 tax year.

                           FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts and the accompanying exhibits are hereby incorporated by

reference into our findings.    Petitioners resided in Nevada when

they filed their petition.

     Dan Shaw is a real estate developer in Las Vegas, Nevada,

and has owned his own real estate development business since

1990.    Early in this decade he was involved with the Castaways

hotel and casino, which closed in 2004 because of financial

difficulties.    Ms. Shaw is still involved in expensive litigation

concerning union dues and health benefits which arose as the


     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code (Code) of 1986, as amended.
                                - 3 -

result of the Castaways’ closure.   Other real property

investments or investment entities in which Mr. Shaw was involved

have suffered foreclosures or deeds in lieu of foreclosures.    In

2006 these events resulted in approximately $2.8 million of

taxable income, a portion of which was so-called phantom income

from relief of indebtedness reported on Schedule E, Supplemental

Income and Loss, of petitioners’ Form 1040, U.S. Individual

Income Tax Return.

     In 2006 Mr. Shaw began providing consulting services to

banks to supplement his income from his real estate business,

which was suffering because of poor real estate and economic

conditions.

     Petitioners presumably filed their 2005 Federal income tax

return by October 15, 2006, its extended due date.   It was

received by respondent on October 20, 2006, showing tax due which

was not paid with the return.   On December 4, 2006, the tax shown

on the return was assessed, together with a $34,201.96 addition

to tax under section 6651(a)(2) for failure to timely pay the

Federal income tax liability, a $2,351.71 addition to tax under

section 6654(a) for failure to make estimated tax payments, and

statutory interest.2   On December 20, 2006, petitioners submitted



     2
      Respondent assessed $37,376.43 of additional income tax, a
$25,658.13 addition to tax under sec. 6651(a)(2), and $24,557.90
of additional statutory interest on Mar. 19, 2007, and abated
$144,285 of previously assessed 2005 tax on Dec. 31, 2007.
                               - 4 -

to respondent a Form 433-A, Collection Information Statement for

Wage Earners and Self-Employed Individuals.

     Thereafter, on April 10, 2007, respondent filed a Notice of

Federal Tax Lien with respect to petitioners’ unpaid tax

liability for 2005.3   Respondent sent petitioners a Notice of

Federal Tax Lien Filing and Your Right to a Hearing Under IRC

6320 for 2005 on April 19, 2007.   On May 16, 2007, petitioners

responded with a timely Form 12153, Request for a Collection Due

Process Hearing, in which they (1) asserted that “The filing of a

federal tax lien at this time will hinder the taxpayers’ ability

to liquidate assets and/or secure financing in order to pay the

liability in full”; (2) claimed entitlement to an offer-in-

compromise or an installment agreement; and (3) disagreed with

the amount of their tax liability and argued that they had

reasonable cause for failing to pay their tax liability.   A




     3
      The notice of Federal tax lien indicates that it was
“prepared and signed” on Apr. 10, 2007. Although the parties
have stipulated that it was also filed on that date, a copy of
the certified literal transcript for petitioners’ 2005 tax year
appears to indicate that it was actually filed on Apr. 13, 2007.
The apparent discrepancy is not an issue in this case because
petitioners do not argue that respondent failed to send them a
notification letter within 5 business days of filing the notice
as required by sec. 6320(a). Moreover, even if the notification
letter was untimely, it does not give rise to an abuse of
discretion. Petitioners nevertheless timely requested a hearing
within the 30-day period beginning on the day after the fifth
business day following the filing of the notice of Federal tax
lien. See Bruce v. Commissioner, T.C. Memo. 2007-161.
                                 - 5 -

collection due process hearing was scheduled for July 31, 2007,

at 10 a.m.

     On July 25, 2007, petitioners sent respondent additional

financial information for consideration.    Thereafter, on August

17, 2007, petitioners sent respondent’s settlement officer,

Michael A. Freitag, a request for an installment agreement to

address their unpaid 2003 and 2005 Federal income tax

liabilities.

     In order to pay off the 2005 tax liability of over $1

million, petitioners proposed the following payment plan:    (1) A

lump-sum downpayment of $100,000 within 10 days of acceptance of

the agreement, (2) monthly payments of $1,200 beginning 30 days

after the lump-sum downpayment and continuing for 53 months,

except as provided in (3) below, (3) a lump sum payment of

$300,000 in lieu of the 24th payment of the installment

agreement, and (4) a balloon payment of the balance due in the

54th month.    Petitioners indicated that Dan Shaw’s “income at any

given month is unpredictable”.    He “does not receive a regular

ongoing salary” but rather “receives sporadic distributions from

his various partnership interests generally related to real

estate activity, which at the moment is in a downturn.”

     In a September 7, 2007, response Mr. Freitag listed several

problems with the proposal, including that (1) “the monthly

income on the current 433-A submitted shows as $57,000+ per month
                               - 6 -

and not the $26,000+ per the W-2’s”; (2) “the expenses claimed

are excessive and exceed the national standards”; and (3) “it

appears that the taxpayer can liquidate assets and business

interests and pay the liability in full.”

     On September 21, 2007, petitioners sent Mr. Freitag a letter

in which they offered to make additional annual lump sum payments

and disagreed with Mr. Freitag’s “strict adherence to the use of

IRS national standards for expenses, without consideration of the

taxpayers’ unique facts and circumstances”.    The letter also

explained that Mr. Shaw’s partial interests in real estate

projects were not “readily liquid” because they were often small

minority ownership positions and market conditions were

depressed.   On October 15, 2007, petitioners sent Mr. Freitag an

unsigned copy of their 2006 tax return.    On October 23 and 25,

2007, petitioners sent Mr. Freitag updated financial information.

     On December 20, 2007, respondent sent petitioners two

separate Notices of Determination Concerning Collection Action(s)

Under Section 6320 and/or 6330 for 2005.    Attachments to the

notices of determination stated that petitioners “are not

requesting release or withdrawal of the Notice of Federal Tax

Lien, and there is no indication they meet the conditions for

withdrawal or release.”   The attachments further indicated that

petitioners did not raise the issue of reasonable cause at their

hearing.
                               - 7 -

     The attachments also call into question petitioners’ claims

of receiving only sporadic income.     In that regard, the

attachments state that respondent

     is currently receiving approximately $13,000.00 a month
     from a levy for periods that are not subject to this
     CDP [collection due process] hearing. In addition, the
     Revenue Officer’s history indicated that the
     representative stated on three separate occasions
     during 2007 that the levied year would be full paid
     within a few weeks.

     The attachments indicated that Mr. Freitag had determined

that petitioners’ income was approximately $58,000 per month4 and

that their claimed expenses were “excessive and exceeded national

standards.”   Finally, the attachments stated that respondent took

proper action in filing a notice of Federal tax lien.

     Petitioners filed their timely petition with this Court on

January 18, 2008.   Petitioners assert in the petition that at the

hearing and in the determination letter respondent abused his

discretion by (1) denying their request for a reasonable

installment agreement, (2) failing to consider abatement of

penalties for reasonable cause, and (3) sustaining the lien

against petitioners.

     Petitioners assert respondent erred in sustaining the lien

because he ignored facts concerning petitioners’ legal and

accounting expenses, other secured debt, and “fluctuating


     4
      Any discrepancy between this $58,000 amount and the
“$57,000 +” amount referenced by Mr. Freitag in his Sept. 7,
2007, letter is not explained by the record.
                               - 8 -

income”.   Petitioners also assert that respondent prematurely

issued the notices of determination without a final courtesy call

or counteroffer and failed to determine whether petitioners had

reasonable cause for not paying their 2005 taxes.

     More specifically, petitioners claim that the $58,000 was an

average monthly figure and that they did not receive this amount

on a regular monthly basis.   They acknowledge that their expenses

were greater than respondent’s national standards but cite

respondent’s ability to deviate from the standards.    In their

view, reasonable cause for failing to timely pay taxes existed in

the light of their financial circumstances, which were beyond

their control.

     Respondent disagrees that petitioners provided sufficient

evidence to entitle them to an abatement of penalties for

reasonable cause.   He contends Mr. Freitag considered

petitioners’ sporadic income but nevertheless acted within his

discretion in rejecting the installment agreement.    Respondent

argues, therefore, that the conditions for withdrawing a notice

of Federal tax lien under section 6323(j) were not met and a

Federal tax lien is appropriate and one of the least intrusive

methods of collection.
                               - 9 -

                              OPINION

I.   Collection Actions--General Rules

      Section 6321 imposes a lien in favor of the United States

upon all property and rights to property of a taxpayer who fails

to pay any tax liability after demand for payment.     The lien

generally arises at the time assessment is made.     Sec. 6322.

Section 6323, however, provides that such lien shall not be valid

against any purchaser, holder of a security interest, mechanic’s

lienor, or judgment lien creditor until the Secretary files a

notice of lien with the appropriate public officials.     Section

6320 then sets forth procedures applicable to afford protections

for taxpayers in lien situations.

      Section 6320(a)(1) establishes the requirement that the

Secretary notify in writing the person described in section 6321

of the filing of a notice of lien under section 6323.     This

notice required by section 6320 must be sent not more than 5

business days after the notice of tax lien is filed and must

advise the taxpayer of the opportunity for administrative review

of the matter in the form of a hearing before the Internal

Revenue Service Office of Appeals.     Sec. 6320(a)(2) and (3).

Section 6320(b) and (c) grants a taxpayer who so requests the

right to a fair hearing before an impartial Appeals officer,

generally to be conducted in accordance with the procedures

described in section 6330(c), (d), and (e).
                             - 10 -

     Section 6330(c) addresses the matters to be considered at

the hearing:

          SEC. 6330(c). Matters Considered at Hearing.--In
     the case of any hearing conducted under this section--

               (1) Requirement of investigation.--The
          appeals officer shall at the hearing obtain
          verification from the Secretary that the
          requirements of any applicable law or
          administrative procedure have been met.

               (2) Issues at hearing.--

                    (A) In general.--The person may raise at
               the hearing any relevant issue relating to
               the unpaid tax or the proposed levy,
               including--

                         (i) appropriate spousal defenses;

                         (ii) challenges to the
                    appropriateness of collection actions;
                    and

                         (iii) offers of collection
                    alternatives, which may include the
                    posting of a bond, the substitution of
                    other assets, an installment agreement,
                    or an offer-in-compromise.

                    (B) Underlying liability.--The person
               may also raise at the hearing challenges to
               the existence or amount of the underlying tax
               liability for any tax period if the person
               did not receive any statutory notice of
               deficiency for such tax liability or did not
               otherwise have an opportunity to dispute such
               tax liability.

     Once the Appeals Office has issued a determination regarding

the disputed collection action, section 6330(d) allows the

taxpayer to seek judicial review in the Tax Court.   In

considering whether taxpayers are entitled to any relief from the
                                - 11 -

Commissioner’s determination, this Court has established the

following standard of review:

      where the validity of the underlying tax liability is
      properly at issue, the Court will review the matter on
      a de novo basis. However, where the validity of the
      underlying tax liability is not properly at issue, the
      Court will review the Commissioner’s administrative
      determination for abuse of discretion. [Sego v.
      Commissioner, 114 T.C. 604, 610 (2000).]

II.   Challenges to Underlying Liabilities

      Challenges to the underlying tax liability may be raised

only where the taxpayer did not receive a notice of deficiency or

otherwise have an opportunity to dispute such liability.     See

sec. 6330(c)(2)(B).

      Respondent assessed an addition to tax under section

6651(a)(2) with respect to petitioners’ 2005 tax year.

Petitioners challenged their liability for the addition to tax in

their May 16, 2007, hearing request, arguing that they had

reasonable cause for their failure to pay.   Although they did not

pursue the reasonable cause defense at their section 6330

hearing, they raise it anew in this proceeding.5


      5
      Petitioners claim that they did not have enough time to
raise their reasonable cause defense before Appeals because
respondent prematurely issued the notices of determination. We
note that there is no requirement that respondent’s Appeals
Office wait a certain amount of time before issuing a notice of
determination. See Clawson v. Commissioner, T.C. Memo. 2004-106.
To the contrary, the Appeals Office shall “attempt to conduct a
* * * [sec. 6330] hearing and issue a Notice of Determination as
expeditiously as possible under the circumstances.” Sec.
301.6320-1(e)(3), Q&A-E9, Proced. & Admin. Regs. The settlement
                                                   (continued...)
                               - 12 -

     Because petitioners did not receive a notice of deficiency

for their 2005 tax year and did not otherwise have an opportunity

to dispute their tax liability, they are permitted to challenge

their underlying tax liability for 2005, including their

liability for the addition to tax.      See sec. 6330(c)(2)(B); Katz

v. Commissioner, 115 T.C. 329, 339 (2000) (defining “underlying

tax liability” for section 6330 purposes to include additions to

tax).    Although respondent contends that we should review the

Appeals Office’s determination regarding the section 6651(a)(2)

addition to tax under an abuse of discretion standard, we will

instead review the matter de novo, as we would any other review

of an underlying tax liability.    See also Sego v. Commissioner,

supra at 610; Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).

     Section 6651(a)(2) imposes an addition to tax for failure to

timely pay the amount of tax shown on a return.     The addition is

equal to 0.5 percent of the amount shown as tax on the return for


     5
      (...continued)
officer in this case issued the notices of determination almost 6
months after the sec. 6330 hearing. In the interim, the
settlement officer corresponded with petitioners and considered
evidence and arguments they submitted. The record does not
reflect that respondent issued the notices of determination
prematurely.

     In any event, petitioners clearly raised their reasonable
cause defense in their hearing request, and we assume arguendo
that petitioners have preserved this right. See Meeh v.
Commissioner, T.C. Memo. 2008-282 (reviewing taxpayers’
underlying liability where the issue was raised only in a sec.
6330 hearing request and before the Court); see also sec.
301.6320-1(f)(2), Q&A-F3, Proced. & Admin. Regs.
                               - 13 -

each month, or fraction thereof, during which the failure to pay

continues, up to a maximum of 25 percent.    See id.   The date

prescribed for payment of income tax is the due date for filing

the return determined without regard to any extension of time for

filing.    See id.; sec. 6151(a).

     The Commissioner has the burden of production with respect

to a taxpayer’s liability for the addition to tax.     Sec. 7491(c).

To meet that burden, respondent must come forward with sufficient

evidence indicating that it is appropriate to impose the addition

to tax.    See Higbee v. Commissioner, 116 T.C. 438, 446 (2001).

Respondent has met that burden.     However, the section 6651(a)(2)

addition to tax is not imposed if the taxpayer proves that the

failure to pay is due to reasonable cause and not willful

neglect.    Reasonable cause for failing to pay is shown if the

taxpayer

     exercised ordinary business care and prudence in
     providing for payment of his tax liability and was
     nevertheless either unable to pay the tax or would
     suffer an undue hardship * * * if he paid on the due
     date. * * * [A] taxpayer who invests funds in
     speculative or illiquid assets has not exercised
     ordinary business care and prudence in providing for
     the payment of his tax liability unless, at the time of
     the investment, the remainder of the taxpayer's assets
     and estimated income will be sufficient to pay his tax
     or it can be reasonably foreseen that the speculative
     or illiquid investment made by the taxpayer can be
     utilized (by sale or as security for a loan) to realize
     sufficient funds to satisfy the tax liability. A
     taxpayer will be considered to have exercised ordinary
     business care and prudence if he made reasonable
     efforts to conserve sufficient assets in marketable
     form to satisfy his tax liability and nevertheless was
                              - 14 -

     unable to pay all or a portion of the tax when it
     became due.

Sec. 301.6651-1(c)(1), Proced. & Admin. Regs.

     Petitioners did not timely pay their 2005 tax liability.

They claim, however, that their failure to pay was due to

reasonable cause and that they are therefore not liable for a

section 6651(a)(2) addition to tax.    Petitioners attribute their

failure to pay to an economic downturn beginning in late 2006 and

to the aftermath of a failed investment.   They cite a reduction

in their wages and investment income, an increase in expenses due

to settlements and accounting and legal fees, and a tax liability

resulting largely from cancellation of indebtedness income.

     To support their argument, petitioners introduced a Form

433-A dated December 20, 2006.   It contains petitioners’

estimates of their monthly income and expenses as of December 20,

2006.   Mr. Shaw also testified about petitioners’ income and

expenses during the period August through October 2007.

     Given the record before us, we cannot conclude that

petitioners had reasonable cause for their failure to timely pay

their 2005 tax liability.   Although we do not doubt that

petitioners were negatively affected by the economic downturn in

late 2006, the focus of our analysis is earlier.   See generally

Godwin v. Commissioner, T.C. Memo. 2003-289 (rejecting taxpayer’s

argument that he could not pay his 1997 Federal income tax
                               - 15 -

liability because he did not receive enough income in subsequent

years), affd. 132 Fed. Appx. 785 (11th Cir. 2005).

     Petitioners’ 2005 tax was due on April 15, 2006.     See secs.

6072(a), 6151(a).    The evidence petitioners provided, however,

pertains only to their ability to pay in December 2006 and during

the period August to October 2007.      Petitioners have provided

only limited evidence regarding their ability to pay as of the

date payment was actually due, and we are unable to presume that

any such evidence would be favorable to petitioners.      See Wichita

Terminal Elevator Co. v. Commissioner, 6 T.C. 1158, 1165 (1946),

affd. 162 F.2d 513 (10th Cir. 1947).

     Indeed, to the extent petitioners’ failure to pay was caused

by an economic downturn in late 2006, it stands to reason that

petitioners had a greater ability to pay on April 15, 2006,

before the downturn.    Petitioners’ net worth was invested almost

entirely in leveraged real property.      While there was some

diversification of the real property investments, which included

a Houston, Texas, office building and some S corporation,

partnership, or LLC interests, the portfolio was not diversified

with more liquid stocks and bonds or money market investments and

was very illiquid.    The latter problem was aggravated by the fact

that the interests owned were in closely held S corporations,

partnerships, or LLCs and were by and large minority interests.
                             - 16 -

     Given the highly leveraged nature of petitioners’ business,

the lack of liquidity was not up to the prudent man standard.    We

have some sympathy for the “phantom income” problem, which often

arises in economic downturns because of depreciation on highly

leveraged debt-financed properties.6   Nevertheless, this is

foreseeable and was not the only income at issue here.   It is the

duty of taxpayers with those investments to provide reasonable

liquid reserves or a liquidity source to protect the fisc against

foreseeable economic downturns.   Petitioners have failed to meet

their burden of proving reasonable cause and are thus liable for

the section 6651(a)(2) addition to tax.7



     6
      The record does not permit an accurate determination of the
source of the Castaways and S corporation, partnership, or LLC
income, and the parties dispute how much was due to “phantom
income” and how much was rental income. For example, there was
apparently substantial rental income generated by El Capitan
Associates, LLC, in 2005.
     7
      Even if petitioners had proved that they were unable to pay
their 2005 Federal income tax liability when it was due without
suffering undue hardship, we are not convinced that they
exercised ordinary business care and prudence in providing for
payment of the liability. See sec. 301.6651-1(c)(1), Proced. &
Admin. Regs. As a real estate developer in Las Vegas with almost
two decades of experience, Mr. Shaw knew, or should have known,
that real estate investments in office buildings, hotels, and
casinos are often boom and bust. The failure of the Castaways--
hardly a remote possibility--resulted in petitioners’ being
liable for tax on some cancellation of indebtedness income.
Nevertheless, petitioners did not set aside money or marketable
assets that could have been used to pay that liability.
According to Mr. Shaw’s testimony, petitioners pledged most of
their assets to raise capital for the Castaways hotel and casino
and faced substantial lawsuits as the result of labor disputes
and unfunded liabilities resulting from the Castaways.
                               - 17 -

III.   Installment Agreement

       Section 6159(a) gives the Secretary discretionary authority

“to enter into written agreements with any taxpayer under which

such taxpayer is allowed to make payment on any tax in

installment payments if the Secretary determines that such

agreement will facilitate full or partial collection of such

liability.”    The Commissioner has the discretion to accept or

reject an installment agreement proposed by a taxpayer.     See sec.

301.6159-1(b)(1)(i), Proced. & Admin. Regs.     We review the

Commissioner’s rejection of an installment agreement for abuse of

discretion.    See Orum v. Commissioner, 123 T.C. 1, 12-13 (2004),

affd. 412 F.3d 819 (7th Cir. 2005).     We do not conduct an

independent review of what would be an acceptable collection

alternative, nor do we substitute our judgment for that of the

Appeals Office.    See Murphy v. Commissioner, 125 T.C. 301, 320

(2005), affd. 469 F.3d 27 (1st Cir. 2006); McCall v.

Commissioner, T.C. Memo. 2009-75.

       Because the amount due exceeds $10,000, petitioners are not

guaranteed an installment agreement by section 6159(c).

Petitioners are also not eligible for a so-called streamlined

installment agreement because their liability exceeds $25,000.

See IRM pt. 5.14.1.2(4), 5.14.5.2(1) (Sept. 26, 2008); IRS News

Release IR-2002-41 (Apr. 3, 2002).      Petitioners must, therefore,

qualify under the existing and proposed regulations section
                               - 18 -

301.6159-1, Proced. & Admin. Regs.8     In both instances, section

301.6159-1(a), Proced. & Admin. Regs., indicates that an

installment agreement is authorized if the Commissioner

“determines that such an installment agreement will facilitate

the collection of the tax liability” in whole or in part.

Likewise, the filing of a notice of tax lien as a condition of an

installment agreement or in conjunction with one is specifically

authorized by section 301.6159-1(d), Proced. & Admin. Regs., now

section 301.6159-1(c)(3)(iii)(B), Proced. & Admin. Regs.

(permitting the agreement to “contain terms that protect the

interests of the Government”).

     The settlement officer considered at least two versions of

petitioners’ proposed installment agreement providing for

$100,000 of upfront earnest money, monthly installments of $1,200

per month with certain specified annual balloon payments.     But he

rejected them as not facilitating collection or being in the best

interests of the Government.   His explanation noted that the

Internal Revenue Service was already collecting $13,000 a month

from a levy source with respect to other tax periods and his

analysis that, on average, petitioners could pay up to $58,000

per month against their tax liability.     He also believed


     8
      The proposed regulation was originally published in the
Fed. Reg. on Dec. 31, 1997, but was withdrawn on Mar. 5, 2007,
when a newer version of the proposed regulation was also
published in the Fed. Reg. That latter version was adopted by
Treas. Doc. 9473 (Nov. 24, 2009, effective Nov. 15, 2009).
                                 - 19 -

petitioners could liquidate assets or business interests

permitting payment in full in less time than the 4-1/2-year

period petitioners proposed.9     In the light of these facts, while

the Court might have reached a different conclusion we cannot say

that there was an abuse of discretion by the settlement officer

or respondent’s Appeals Office in rejecting petitioners’ request

for an installment agreement.

IV.   Offer-in-Compromise

      Petitioners, in their written Form 12153 indicated a desire

for an offer-in-compromise, but they never submitted the required

Form 656, Offer in Compromise, and supporting documents to

respondent.   Petitioners did not actively pursue this option at

their Appeals hearing.      They attribute that failure to the

alleged premature issuance of the determination letter.

Petitioners’ briefs in this case likewise do not specifically

address the offer-in-compromise collection alternative.      The

record does not indicate that, given these facts, respondent has

abused his discretion in not accepting an offer-in-compromise

from petitioners.   See generally sec. 7122(a); sec. 301.7122-1,

Proced. & Admin. Regs.      In any event, we deem petitioners to have




      9
      We note that the installment agreement was proposed in the
fall of 2007. Thus, petitioners have already enjoyed de facto 3
years of its proposed 4-1/2-year term; and if the proposed
payment terms had been complied with, the outstanding balance
would, today, be materially reduced.
                              - 20 -

abandoned this issue in view of their failure to specifically

address it at trial or on brief.

V.   Intrusiveness of Proposed Collection Action

      In rendering a determination with respect to a proposed

collection action an Appeals officer must consider issues raised

by the taxpayer, verify that the requirements of applicable law

and administrative procedures have been met, and consider

“whether any proposed collection action balances the need for the

efficient collection of taxes with the legitimate concern of the

person [involved] that any collection action be no more intrusive

than necessary.”   Sec. 6330(c)(3).

      Settlement Officer Freitag determined that “the proposed

collection action balances the need for efficient collection with

the taxpayer’s concern than any collection action be no more

intrusive than necessary.”   Petitioners argue that the settlement

officer abused his discretion by “sustaining the levy action

against Petitioners”, adding that “The most intrusive action the

Service can take against a taxpayer is enforced collection.”

      Petitioners are mistaken.   The collection action sustained

by the settlement officer was the filing of a notice of Federal

tax lien, not a levy against petitioners’ property.10


      10
      We note there is an important distinction between a lien
and a levy. A lien “is merely a security interest and does not
involve the immediate seizure of property. A lien enables the
taxpayer to maintain possession of protected property while
                                                   (continued...)
                               - 21 -

Petitioners have not explained why respondent’s filing of a

notice of Federal tax lien was overly intrusive and have not made

specific arguments why respondent should withdraw the notice of

Federal tax lien.11   In light of the record before us, respondent

did not abuse his discretion by sustaining the notice of Federal

tax lien.

     The Court has considered all of petitioners’ contentions,

arguments, requests, and statements.    To the extent not discussed

herein, we conclude that they are meritless, moot, or irrelevant.

     To reflect the foregoing,


                                          Decision will be entered

                                    for respondent.




     10
      (...continued)
allowing the government to preserve its claim should the status
of property later change.” United States v. Barbier, 896 F.2d
377, 379 (9th Cir. 1990).
     11
      Even if we had held that respondent abused his discretion
by rejecting petitioners’ proposed installment agreement, it
would not have followed that respondent must withdraw the notice
of Federal tax lien. Sec. 6323(j)(1) is discretionary. As noted
earlier above, the Commissioner “may” but is not required to
withdraw a Federal tax lien after an installment agreement has
become effective and may require a lien as a condition of an
installment agreement. See Crisan v. Commissioner, T.C. Memo.
2007-67.
