                        T.C. Memo. 2007-242



                      UNITED STATES TAX COURT



        KEVIN F. FOLEY AND SHULA K. FOLEY, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11602-06L.               Filed August 23, 2007.



     Mark A Pridgeon, for petitioners.


     Trent D. Usitalo, for respondent.



                        MEMORANDUM OPINION

     SWIFT, Judge:   This matter is before us under Rule 121 on

the parties’ cross-motions for summary judgment.    The underlying

issue in this collection case is whether respondent’s Appeals

Office abused its discretion in sustaining respondent’s proposed

levy action against petitioners’ residence.
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     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the year in issue, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.


                            Background

     At the time of filing the petition, petitioners resided in

Afton, Minnesota.

     In 1999, petitioners earned $359,378 in short-term capital

gains.

     On September 7, 2000, petitioners purchased a new residence

for $140,000 with a $40,522 cash down payment and a contract for

deed for the balance with a balloon payment due on June 1, 2007.

     On or about February 21, 2005, petitioners filed late their

1999 joint Federal income tax return showing a tax liability of

$99,548.   Petitioners included no payment with the return, and in

1999 petitioners paid no withholding taxes and no estimated

taxes.

     On or about April 4, 2005, respondent assessed the above

$99,548 tax liability reported on petitioners’ 1999 Federal

income tax return, along with interest and penalties and mailed

to petitioners a notice and demand for payment.

     On or about October 10, 2005, respondent mailed to

petitioners a notice of intent to levy relating to petitioners’

1999 Federal income taxes, plus penalties and interest in the

total amount of $197,202.22.
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     On October 28, 2005, respondent filed a Federal tax lien in

Washington County, Minnesota, relating to petitioners’ 1999

outstanding Federal income taxes.

     On or about November 2, 2005, petitioners timely requested

an Appeals Office hearing, seeking to avoid or at least to

postpone respondent’s proposed levy.

     In their Appeals Office hearing, petitioners requested that

respondent designate their outstanding 1999 Federal income taxes

as currently not collectible.   Petitioners also represented that

because of the balloon payment due on their contract for deed in

June of 2007 they intended to sell or refinance their residence

and that funds therefrom would be used by petitioners to pay

their outstanding 1999 Federal income taxes.   Petitioners also

represented that they had several business deals that at some

point might provide funds to pay their 1999 Federal income taxes.

     In the Appeals Office hearing petitioners did not challenge

their underlying 1999 Federal income tax liability.   Per

respondent’s request, petitioners filed Form 433-A, indicating

that petitioners’ monthly living expenses exceeded their monthly

earned income and showing their residence as their only

significant asset.

     On or about April 26, 2006, respondent’s Appeals officer

advised petitioners’ representative that the proposed levy action
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was sustained and that petitioners should consider either

refinancing or selling their residence to pay their 1999 Federal

income taxes.

     The Appeals officer further determined that it was not

appropriate to levy on petitioners’ bank accounts because

petitioners had no funds in their bank accounts.1

     The Appeals officer on his own initiative considered other

collection alternatives.   In particular, the Appeals officer

determined that an installment agreement would not be appropriate

because petitioners’ monthly necessary living expenses exceeded

their monthly income.   The Appeals officer further determined

that an offer-in-compromise would not be appropriate because of

the amount of equity in petitioners’ residence.

     The Appeals officer determined that it was appropriate to

levy on petitioners’ residence because there was sufficient

equity in the residence to satisfy petitioners’ entire

outstanding tax liability.

     On or about May 11, 2006, respondent’s notice of

determination was mailed to petitioners, sustaining respondent’s

proposed levy.

     In the notice of determination, the Appeals officer

determined, and petitioners do not dispute, that as of May 2006,



     1
      The record does not explain what disposition petitioners
made of the $359,378 in short-term capital gains they realized in
1999.
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petitioners had a balance due on the contract for deed relating

to their residence of $67,836, and petitioners’ residence had a

fair market value of approximately $460,000.

     On June 19, 2006, petitioners timely filed a petition with

this Court.

     In their petition, petitioners alleged only the following

error:

          The Respondent erred in determining that a short-term
          extension of time to June 2007 for the petitioners to
          refinance or sell their home pursuant to a balloon
          payment on their Contract for Deed and thereby raise
          the funds to pay the liabilities was not an appropriate
          collection alternative * * *.


                            Discussion

     Summary judgment is appropriate where the pleadings, answers

to interrogatories, depositions, admissions, and other material

show there is no genuine issue as to any material fact and that a

decision may be rendered as a matter of law.   Rule 121(b); Beery

v. Commissioner, 122 T.C. 184, 187 (2004).

     Under section 6330(d)(1), where a taxpayer’s underlying tax

liability is not at issue, we generally review respondent’s

Appeals Office notice of determination for an abuse of

discretion.   Sego v. Commissioner, 114 T.C. 604, 609-610 (2000).

     In an Appeals Office hearing, generally respondent is

required to consider issues raised by a taxpayer including
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collection alternatives and challenges to the appropriateness of

the collection action.   Sec. 6330(c).

     A taxpayer may request that his Federal income tax liability

be designated as currently not collectible.   Such status may be

available where, based on the taxpayer’s assets, equity, income,

and expenses, the taxpayer has no apparent ability to make

payments on the outstanding tax liability.    2 Administration,

Internal Revenue Manual (CCH), sec. 5.16.1.2.9, at 17,810.    See

also Willis v. Commissioner, T.C. Memo. 2003-302.

     In a number of situations, courts have held that it will not

be regarded as an abuse of discretion where an Appeals officer

refuses to delay a proposed collection action to allow a taxpayer

to sell an asset.   See Castillo v. Commissioner, T.C. Memo. 2004-

238; Clawson v. Commissioner, T.C. Memo. 2004-106; Medlock v.

United States, 325 F. Supp. 2d 1064, 1077-1079 (C.D. Cal. 2003).

     Herein, the record establishes that respondent’s Appeals

officer did not abuse his discretion in sustaining the proposed

levy.   The Appeals officer considered petitioners’ request to

designate their liability as currently not collectible and

correctly determined that it was not merited because of the

equity in petitioners’ residence.    Further, the Appeals officer

did not abuse his discretion in rejecting petitioners’ request to

postpone the levy until after June 2007 to allow petitioners to

refinance or sell their residence.
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     We note that petitioners purchased a new residence with

$40,522 in cash at a time when they owed a substantial tax

liability.   See Steinberg v. Commissioner, T.C. Memo. 2006-217

(no abuse of discretion in rejecting an offer-in-compromise where

taxpayers spent $100,000 on a residence down payment).

     We are not aware of any reason why petitioners did not

attempt to refinance or to sell their residence before June 2007

as recommended by respondent’s Appeals officer to pay their

outstanding 1999 Federal income tax liability.   If respondent’s

tax lien inhibited petitioners from refinancing or selling their

residence, petitioners could have requested respondent to

subordinate the tax lien under section 6325(d) to facilitate the

refinancing or sale.   There is no indication that petitioners

made such a request.

     For the first time in their summary judgment motion,

petitioners allege that respondent’s Appeals officer abused his

discretion by failing to properly balance the need for efficient

collection of taxes with the concern that a collection action be

no more intrusive than necessary.   Petitioners’ argument fails.

As stated, petitioners never requested an installment agreement

nor did they make an offer-in-compromise, yet the Appeals officer

considered these collection alternatives and correctly concluded
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that a levy on petitioners’ residence was the only viable

alternative.2

     Petitioners contend that the filing of respondent’s tax lien

alone was sufficient to protect respondent’s interest.     The lien

itself, however, does not collect taxes owed but simply enhances

respondent’s priority position vis-a-vis other creditors.

     Regardless of our opinion, herein, petitioners effectively

obtained much of what they wanted--namely--a postponement of

respondent’s levy until 2007.     By requesting an appeal with

respondent’s Appeals Office and subsequently filing a petition

with this Court, respondent was temporarily stayed from levying

on petitioners’ residence.    Sec. 6330(e); Davis v. Commissioner,

115 T.C. 35, 37 (2000).

     We hold that respondent’s Appeals Office did not abuse its

discretion.     We will deny petitioners’ motion for summary

judgment, and we will grant respondent’s motion for summary

judgment.



     2
        Our opinion here does not necessarily mean that
respondent may in fact levy on petitioners’ residence. Pursuant
to sec. 6334(e), a taxpayer’s principal residence is exempt from
levy absent the written approval of a Federal district court
Judge or Magistrate. We note that, in connection with a proposed
levy on a taxpayer’s residence, our jurisdiction under sec.
6330(c)(2)(B) to consider whether an Appeals officer properly has
balanced the need for efficient collection of taxes with the
concern that a collection action be no more intrusive than
necessary would appear to be somewhat duplicative of the Federal
district courts’ jurisdiction under sec. 6334(e) also to review
and approve respondent’s levy on a taxpayer’s residence.
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To reflect the foregoing,


                                    An appropriate order and

                              decision will be entered for

                              respondent.
