                               T.C. Memo. 2015-225



                         UNITED STATES TAX COURT



                FRANK D. MATHEWS, JR., Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 16899-14L.                         Filed November 23, 2015.


      John L. Lentell, for petitioner.

      Shaina E. Boatwright, for respondent.



                           MEMORANDUM OPINION


      CHIECHI, Judge: This case is before us on respondent’s motion for partial

summary judgment that we have recharacterized as respondent’s motion for

summary judgment (respondent’s motion).1 We shall grant respondent’s motion.


      1
       All Rule references are to the Tax Court Rules of Practice and Procedure.
All section references are to the Internal Revenue Code in effect at all relevant
                                                                        (continued...)
                                           -2-

[*2]                                   Background

         The record establishes and/or the parties do not dispute the following.

         Petitioner resided in Missouri at the time he filed the petition.

         Petitioner filed late a Federal income tax (tax) return for each of his taxable

years 2000, 2004, 2005, 2006, 2007, 2008, 2009, and 2011. Petitioner did not pay

the tax shown due in each of those returns.

         Respondent assessed on various dates tax and certain additions to tax, as

well as interest as provided by law, for each of petitioner’s taxable years 2000,

2004, 2005, 2006, 2007, 2008, 2009 and 2011. (We shall refer to the respective

amounts of unpaid tax, additions to tax, and interest that respondent assessed for

each of petitioner’s taxable years 2000, 2004, 2005, 2006, 2007, 2008, 2009, and




         1
             (...continued)
times.
       In respondent’s motion, respondent states that “respondent’s notice of
determination does not address the validity of petitioner’s Notice of Intent to
Levy. Upon disposition of this motion, respondent intends to file a motion to
remand for a hearing on the levy.” The notice of determination concerning
collection action(s) under section 6320 and/or 6330 of the Internal Revenue Code
(notice of determination) which respondent issued to petitioner and upon which
this case is based addresses only the “notice of Federal tax lien filing and your
right to a hearing under IRC 6320” that respondent issued to petitioner with
respect to his taxable years 2000, 2004, 2005, 2006, 2007, 2008, 2009, and 2011
(notice of tax lien). As a result, the notice of tax lien is the only matter that we
have the authority to, and that we shall, consider in this case.
                                          -3-

[*3] 2011, as well as interest as provided by law accrued after the respective dates

of assessment, as unpaid liabilities at issue.)

      On April 2, 2013, respondent issued to petitioner the notice of tax lien.

      On May 9, 2013, petitioner’s representative submitted to respondent Form

12153, Request for a Collection Due Process or Equivalent Hearing (May 9, 2013

Form 12153).2 In that form, petitioner’s representative indicated that petitioner

disagreed with the notice of tax lien.3 In support of that disagreement, petitioner’s

representative indicated in the May 9, 2013 Form 12153 that petitioner (1) wanted




      2
       On May 9, 2013, petitioner’s representative sent to respondent’s Appeals
Office (Appeals Office) Form 2848, Power of Attorney and Declaration of
Representative, authorizing him to represent petitioner with respect to petitioner’s
taxable years 2000, 2004, 2005, 2006, 2007, 2008, 2009, and 2011.
      3
        In the May 9, 2013 Form 12153, petitioner’s representative indicated
petitioner’s disagreement with not only the notice of tax lien that respondent
issued to petitioner but also a “Proposed Levy or Actual Levy”. Petitioner’s
representative filed the May 9, 2013 Form 12153 before respondent issued to
petitioner on May 20, 2013, a notice of intent to levy and notice of your right to a
hearing with respect to petitioner’s taxable years 2004, 2005, 2006, 2007, 2008,
2009, and 2011 (notice of intent to levy). On June 19, 2013, petitioner filed
another Form 12153, Request for a Collection Due Process or Equivalent Hearing,
in which petitioner’s representative indicated petitioner’s disagreement with not
only the notice of tax lien that respondent issued to petitioner but also a “Proposed
Levy or Actual Levy”. The notice of determination on which this case is based
does not address the notice of intent to levy. It addresses only the notice of tax
lien. See supra note 1.
                                        -4-

[*4] an offer-in-compromise, (2) was unable to pay his unpaid liabilities at issue,

(3) wanted a “withdrawal” of the lien, (4) claimed that the “[l]ien applied to

property that * * * [he] did not own”, (5) claimed that “[r]easonable expenses

exceed income * * * [and that] [i]ncome earned is from social security and

disability that should not be apportioned as income”, and (6) wanted “to propose

an alternative method of payment.”

      In a letter dated June 4, 2013, a representative of respondent acknowledged

receipt of the May 9, 2013 Form 12153 and requested petitioner to complete and

submit to respondent by June 19, 2013, Form 433-A, Collection Information

Statement for Wage Earners and Self-Employed Individuals (Form 433-A).

Petitioner did not comply with that request.

      In a letter dated August 7, 2013, a representative of the Appeals Office (first

settlement officer) requested that petitioner complete and submit to the Appeals

Office Form 433-A. Petitioner did not comply with that request.

      On November 26, 2013, the first settlement officer held a telephonic hearing

with petitioner’s representative. During that hearing, petitioner’s representative

indicated that most of petitioner’s income consisted of monthly payments that the
                                         -5-

[*5] U.S. Department of Veterans Affairs made to him.4 (We shall refer to the

monthly payments that the U.S. Department of Veterans Affairs made to petitioner

as petitioner’s monthly veteran disability benefits.)

      On February 13, 2014, petitioner’s representative sent by facsimile to the

Appeals Office a statement (petitioner’s financial statement) that contained the

following information regarding the amounts that petitioner received each month:

                    Receipt                             Amount
                                                        1
          Social Security disability                        $228.75
          IBEW disability2                                   700.00
          NEBF pension3                                      400.00
           Total4                                       1,328.75

      1
         Petitioner’s financial statement indicated that “Mr. Mathews receives a
monthly payment of $1,525.00 in Social Security Disability benefits. The $228.75
listed above represents the 15% levy.”
       2
         The record does not explain what “IBEW” is.
       3
         The record does not explain what “NEBF” is.
      4
       Petitioner’s financial statement indicated that “Mr. Mathews also receives
$3,309.00 in VA Disability payments, but these are not included in the above and
are not subject to levy under 26 USC § 6334.”

      Petitioner’s financial statement contained the following information

regarding the expenditures that petitioner made each month:


      4
        The U.S. Department of Veterans Affairs made monthly payments to
petitioner as a result of a finding by that Department that petitioner suffered from
an illness relating to his service in the U.S. Armed Forces.
                                          -6-

          [*6] Expenditure                              Amount
          Food, clothing, misc.                         $697.00
          Housing and utilities1                         791.08
          Transportation2                                770.00
          Health care3                                   551.00
          Taxes                                          200.00
           Total                                       3,009.08

      1
       Petitioner’s financial statement indicated that “Housing” expenditures were
for “Wells Fargo Mortgage” and that “Utilities” expenditures were for “Johnson
County Wastewater”, “Kansas Gas Service”, “Trash Service”, “Phone”, “Kansas
City Power & Light”, “Water One”, and “Cable”.
      2
      Petitioner’s financial statement indicated that “Transportation”
expenditures were for “Transportation Operating” and “Car #1 Additional”.
      3
       Petitioner’s financial statement indicated that “Health Care” expenditures
were for “Health Insurance” and “Other Health Care”.

      On February 18, 2014, the first settlement officer determined that

petitioner’s monthly income was $5,934 and that his monthly allowable expenses

were $2,691. As a result, the first settlement officer determined that petitioner had

the ability to pay each month to the Internal Revenue Service (IRS) the difference

between his monthly income and his monthly allowable expenses, or $3,243, with

respect to the unpaid liabilities at issue.

      On February 28, 2014, the Appeals Office assigned a different settlement

officer (second settlement officer) to consider petitioner’s May 9, 2013 Form
                                          -7-

[*7] 12153. On March 14, 2014, the second settlement officer determined, as had

the first settlement officer, that petitioner’s monthly income was $5,934.

However, unlike the first settlement officer, who had determined that petitioner’s

monthly allowable expenses were $2,691, the second settlement officer

determined that petitioner’s monthly allowable expenses were $4,540. As a result,

the second settlement officer determined that petitioner had the ability to pay each

month to the IRS the difference between his monthly income and his monthly

allowable expenses, or $1,397,5 with respect to the unpaid liabilities at issue.

      On March 19, 2014, the second settlement officer mailed petitioner’s

representative a letter that stated in pertinent part:

      I have reviewed the financial information you provided to the prior
      [first] Settlement Officer and find you have the ability to pay of [sic]
      $1,397 a month. However, you qualify for an installment agreement
      under the Fresh Start program at $1,232. If you are interested in an
      installment agreement at that amount please contact me prior to the
      scheduled hearing date and I will send you agreement documents to
      sign.




      5
       The second settlement officer apparently made a mathematical error when
he subtracted petitioner’s monthly allowable expenses of $4,540 from his monthly
income of $5,934. That settlement officer arrived at an erroneous balance of
$1,397, instead of the correct balance of $1,394. For convenience and to avoid
confusion, we refer herein to the erroneous balance of $1,397, since many of the
documents in the record refer to that erroneous balance.
                                           -8-

[*8] On April 17, 2014, the second settlement officer telephoned petitioner’s

representative and conducted a hearing during which they discussed the second

settlement officer’s determination that petitioner had the ability to pay each month

to the IRS $1,397 with respect to the unpaid liabilities at issue. During that

telephonic hearing, petitioner’s representative told the second settlement officer

that he believed the second settlement officer had improperly included petitioner’s

monthly veteran disability benefits in his determination of the amount that

petitioner had the ability to pay each month to the IRS with respect to the unpaid

liabilities at issue.

       On May 5, 2014, petitioner’s representative sent by facsimile to the second

settlement officer a letter that stated in pertinent part:

       As part of the agreed upon follow-up from our telephone conference
       of April 17, I am transmitting to you the following information:

              1.        IRS general publication of Information for Veterans with
                        Disabilities,
              2.        Appeals Settlement Guidelines - Military Disability
                        Retirement Benefits, and
              3.        38 U.S. Code § 5301.

       From our perspective, two very important points are highlighted in
       these publications: 1) the veteran’s disability benefits received by Mr.
       Mathews are non-taxable and should not be included in gross income,
       and 2) this exclusion extends to the calculation of household income
       for purposes of income available for any claimed collection
       procedures.
                                         -9-

[*9] On May 9, 2014, the second settlement officer began to research the

information provided by petitioner’s representative. He made the following

pertinent entries in his “Case Activity Records”:

      Research 38 US Code 5301. Search IRM 5.15 for veterans benefits,
      household income, non-taxable income. I was unable to find
      anything that specifically states the income should be reported on the
      F 433-A.

      *           *           *          *           *           *           *

      * * * Email to Mark Miller IRS area counsel. I told him what I
      researched and asked if he could refer me to something that says the
      income should be reported on the F 433-A.

      *           *           *          *           *           *           *

      Call from Mark Miller. He told me he was not able to find anything
      that specifically states a taxpayer must include on his Form 433-A
      Collection Information Statement exempt income. However, it is his
      opinion exempt income must be included in any calculation of a
      taxpayer’s ability to pay. The taxpayer has the income to live on. I
      said I would like to tell the representative that I spoke to IRS Area
      Counsel and they confirmed exempt income must be included on the
      Form 433-A Collection Information Statement. He said I can
      mention his opinion because he is confident it will stand up in court.

      On May 21, 2014, the second settlement officer telephoned petitioner’s

representative, who was not available. In a voice mail message that the second

settlement officer left for petitioner’s representative, the second settlement officer

indicated that he had correctly included petitioner’s monthly veteran disability
                                        - 10 -

[*10] benefits in his determination of the amount that petitioner would be able to

pay each month to the IRS with respect to the unpaid liabilities at issue. In that

voice mail message, the second settlement officer also recommended that

petitioner enter into an installment agreement.

      By letter dated June 16, 2014, the second settlement officer informed

petitioner of his conclusions and enclosed with that letter certain forms, including

Form 433-D, Installment Agreement (Form 433-D).6 That letter stated:

      I am writing regarding your collection due process hearing with
      Appeals. My last contact with your representative was on May 21,
      2014, when I left him a voicemail.

      In the message I explained to your representative that tax-exempt
      veteran’s benefits must be included in income reported on your Form
      433-A Collection Information Statement to determine your ability to
      pay the IRS. Your representative provided a copy of 38 Code 5301 to
      show why he believes tax-exempt veterans benefits should not be
      included with income reported on your Form 433-A Collection
      Information Statement. I also researched IRM 5.15. I have shared
      this information with IRS counsel and they have responded. While
      counsel was not able to find anything in writing that specifically
      states tax exempt income should be included in the calculation to
      determine the taxpayer’s ability to pay, they concur with me that it
      should be. I had asked your representative to contact me by May 22,
      2014, and let me know if you’re willing to enter into an installment
      agreement.


      6
        The second settlement officer sent to petitioner’s representative a copy of
his letter dated June 18, 2014, and copies of the enclosures that he had sent to
petitioner with that letter.
                                        - 11 -

[*11] I recommend you enter into an installment agreement to prevent
      enforced collection action. Your collection information as provided
      shows you have an ability to pay of $1,397. However, when the
      allowable expense amounts are adjusted to reflect allowable national
      standards you show an ability to pay of $3,243.

      You qualify for a Fresh Start installment agreement at $1,750 a
      month, the smallest payment to pay by the collection statute.

      I have enclosed a Form 433-D Installment Agreement for you to sign
      and date. I have also enclosed a Form 12257 Waiver of Right to
      Judicial Review. Be sure to sign and date, then, return them in the
      enclosed envelope. Please return by June 27, 2014. If you do not
      return the Form 433-D by June 27, 2014, I will assume you are not
      willing to enter into an Installment Agreement.

      Petitioner did not complete and submit Form 433-D to the Appeals Office,

as the second settlement officer had requested in his letter to petitioner dated June

16, 2014.

      On July 14, 2014, the Appeals Office issued to petitioner the notice of

determination. The notice of determination stated in pertinent part: “The Notice

of Federal Tax Lien is sustained. A proposed installment agreement was reached,

and a signed Form 433-D Installment Agreement was requested. A signed

agreement was required to confirm the taxpayer willing to accept the proposed

terms. The installment agreement was never returned.” An attachment to the

notice of determination stated in pertinent part:
                                        - 12 -

[*12]                  SUMMARY AND RECOMMENDATION

        The taxpayer submitted a “Request for a Collection Due Process
        Hearing” in response to a Notice of Federal Tax Lien dated on April
        2, 2013, by the Automated Collection System (ACS). The notice
        reflects an unpaid personal income tax liability for the years listed
        above [2000, 2004 through 2009, and 2011]. Taxpayer’s [May 9,
        2013] Form 12153, Request for Collection Due Process Hearing, was
        received May 9, 2014 [sic]. The appeal request was timely.

        The Notice of Federal Tax Lien is sustained. Taxpayer has failed to
        pursue a viable collection alternative. A proposed installment
        agreement was reached, and a signed Form 433-D Installment
        Agreement was requested. A signed agreement to be submitted by
        June 27, 2014, was required to confirm the taxpayer willing to accept
        the proposed terms. The installment agreement was never returned
        and no payments have been made, therefore no agreement exists.

        *          *          *          *           *          *          *

                          DISCUSSION AND ANALYSIS

        Verification of legal and procedural requirements:
        Appeals has obtained verification from the IRS office collecting the
        tax that the requirements of any applicable law, regulation or
        administrative procedure with respect to the proposed levy or NFTL
        filing have been met. Computer records indicate that the notice and
        demand, notice of intent to levy and/or notice of federal tax lien
        filing, and notice of a right to a Collection Due Process hearing were
        issued.

        Assessment was properly made per IRC § 6201 for each tax and
        period listed on the CDP notice.

        The notice and demand for payment letter was mailed to the
        taxpayer’s last known address, within 60 days of the assessment, as
        required by IRC § 6303.
                                       - 13 -

[*13] There was a balance due when the CDP levy notice was issued or
      when the NFTL filing was requested.

      Prior involvement:
      The assigned settlement officers have had no prior involvement with
      respect to the specific tax periods either in Appeals or Compliance.

      Collection statute verification:
      The collection statute has been suspended; the collection period
      allowed by statute to collect these taxes has been suspended by the
      appropriate computer codes for the tax periods at issue.

      Collection followed all legal and procedural requirements and the
      actions taken or proposed were appropriate under the circumstances.

                          Issues raised by the taxpayer

      Taxpayer requested the NFTL be withdrawn
      Taxpayer requested the NFTL be withdrawn by checking the
      appropriate box on Form 12153. Appeals considered whether any of
      the criteria for allowing withdrawal of the lien existed in your case:

      IRC § 6323(j) allows the withdrawal of a filed notice of lien without
      full payment and without prejudice under the following conditions:

      * The filing of the notice of lien was premature or otherwise not in
      accordance with administrative procedures of the Internal Revenue
      Service;
      * The taxpayer had entered into an agreement under IRC § 6159 to
      satisfy the tax liability for which the lien was imposed by means of
      installment payments, unless such agreement provides otherwise;
      * Withdrawal of the lien will facilitate collection of the tax liability;
      or
      * Withdrawal of the lien would be in the best interests of the taxpayer
      (as determined by the National Taxpayer Advocate) and the United
      States. Similar to the above provision, each set of circumstances
      should be analyzed to determine if this condition exists.
                                        - 14 -

[*14] Collection Alternatives Offered by Taxpayer
      Taxpayer requested the collection alternative of an Installment
      Agreement or an Offer in Compromise by checking the appropriate
      boxes on the Form 12153.

      Challenges to the Existence of Amount of Liability
      Taxpayer did not dispute his liability.

      Taxpayer raised no other issues.

             Balancing of need for efficient collection with taxpayer
             concern that the collection action be no more intrusive
                                 than necessary.

      Appeals considered whether the collection action balances the need
      for the efficient collection of the taxes with legitimate concerns
      taxpayer may have that any collection action is no more intrusive than
      necessary. As taxpayer did agree to the proposed collection
      alternative, and no other alternative was pursued within the hearing
      process, Appeals determined that the Notice of Federal Tax Lien is
      not more intrusive than necessary.

                                     Discussion

      We may grant summary judgment where there is no genuine dispute of

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

Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965

(7th Cir. 1994). We conclude that there is no genuine dispute as to any material

fact regarding the issue raised in respondent’s motion.

      Petitioner does not dispute the existence or the amount of petitioner’s

unpaid liabilities at issue. Where, as is the case here, the validity of the underlying
                                         - 15 -

[*15] tax liability is not placed at issue, we review the determination of the

Commissioner of Internal Revenue for abuse of discretion. See Sego v.

Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176,

182 (2000).

      Petitioner refused to enter into an installment agreement with respondent

because he believed, and still maintains here, that the second settlement officer

incorrectly determined the amount that he would be able to pay each month to the

IRS with respect to the unpaid liabilities at issue.

      Section 6159(a) authorizes respondent to enter into an installment

agreement with a taxpayer if “such agreement will facilitate full or partial

collection” of a liability. Installment agreements “must reflect taxpayers’ ability to

pay on a monthly basis throughout the duration of agreements.” Internal Revenue

Manual (IRM) pt. 5.14.1.4(4) (June 1, 2010).7 In determining a taxpayer’s ability

to pay, a settlement officer must “[a]nalyze the income and expenses to determine

the amount of disposable income (gross income less all allowable expenses)

available to apply to the tax liability.” Id. pt. 5.15.1.2(1) (Oct. 2, 2012).

      7
       All IRM references are to the version of the IRM that was in effect on April
17, 2014, the date on which the second settlement officer had a telephonic hearing
with petitioner’s representative. Although there were changes to the IRM that
became effective after that hearing and before respondent issued the notice of
determination to petitioner, none of those changes is applicable here.
                                        - 16 -

[*16] IRM pt. 5.15.1.11 (Oct. 2, 2012) states in pertinent part:

      5.15.1.11 - Determining Individual Income

             (1) Generally all household income will be used to determine
      the taxpayer’s ability to pay. * * *

             (2) Income consists of the following:

                   (a.) Wages. Wages include salary, tips, meal allowance,
             parking allowance or any other money or compensation
             received by the taxpayer as an employee for services rendered.
             This includes the taxpayer and the taxpayer’s spouse.

            *          *          *          *         *           *          *

                    (e.) Pensions. Includes Social Security, IRA, profit
             sharing plans, etc. Pensions could be used as an asset or as part
             of the income stream. * * *

                    (f.) Child Support. Include the actual amount received in
             addition to other debts or bills the non-custodial parent is
             paying pursuant to a child support order. For example, the
             court order assigns $200 a week for support but also requires
             all medical bills to be paid. The child support income would
             include the $200.00 plus any additive support payments
             received for medical bills.

                   (g.) Alimony. Include the assigned payments made by
             the non-resident spouse. However, consider if other bills are
             being paid, such as the mortgage, and adjust the allowable
             expenses accordingly.

                   (h.) Other. This could include payments from a trust
             account, royalties, renting a room, gambling winnings, sale of
             property, rent or oil subsidies, etc. Tax return information
             could include various sources of income.
                                        - 17 -

[*17] It is petitioner’s position that, in proposing an installment agreement under

which petitioner would pay $1,750 each month to the IRS with respect to the

unpaid liabilities at issue, the second settlement officer erred. That is because,

according to petitioner, the second settlement officer included petitioner’s monthly

veteran disability benefits in determining the amount that petitioner would be able

to pay each month to the IRS with respect to the unpaid liabilities at issue. In

support of his position, petitioner advances two arguments. First, according to

petitioner, petitioner’s monthly veteran disability benefits “fall squarely within

I.R.C. Section 104(a)(4) and as such are properly excluded from any income or

ability to pay calculation”. Second, according to petitioner, petitioner’s monthly

veteran disability benefits “qualify as service-connected disability payments under

26 U.S. Code Section 6334(a)(10) and should * * * not be included in any ability

to pay calculation.”

      We reject petitioner’s position that, in proposing an installment agreement

under which petitioner would pay each month to the IRS $1,750 with respect to

the unpaid liabilities at issue, the second settlement officer erred because he

included petitioner’s monthly veteran disability benefits in determining that

petitioner would be able to pay that amount each month. Petitioner’s position

completely ignores that installment agreements “must reflect taxpayers’ ability to
                                         - 18 -

[*18] pay on a monthly basis throughout the duration of agreements”, IRM pt.

5.14.1.4(4) (emphasis added), and that petitioner’s monthly veteran disability

benefits increased his “ability to pay on a monthly basis”.

      We turn now to petitioner’s first argument in support of his position that the

second settlement officer erred in including petitioner’s monthly veteran disability

benefits in determining the amount that he would be able to pay each month to the

IRS with respect to the unpaid liabilities at issue. Petitioner’s first argument is

that petitioner’s monthly veteran disability benefits “fall squarely within I.R.C.

Section 104(a)(4) and as such are properly excluded from any income or ability to

pay calculation.” Respondent concedes solely for purposes of respondent’s

motion that petitioner’s monthly veteran disability benefits are excludible from

gross income and exempt from tax. Respondent maintains that petitioner’s

monthly veteran disability benefits are nonetheless properly included in

determining the amount that petitioner would be able to pay each month to the IRS

with respect to the unpaid liabilities at issue. Petitioner counters that the Internal

Revenue Manual and Form 433-A use the label “income” to refer to various

receipts that are required to be included in determining the amount that a taxpayer

would be able to pay each month to the IRS with respect to an unpaid tax liability.
                                       - 19 -

[*19] We understand, and are sympathetic to, the confusion that has resulted from

the use of the label “income” in the Internal Revenue Manual and Form 433-A.

However unfortunate the use of that label may be, it does not require us to

conclude that it was an abuse of discretion for the second settlement officer to

have included petitioner’s monthly veteran disability benefits in determining the

amount that petitioner would be able to pay each month to the IRS with respect to

the unpaid liabilities at issue. Indeed, the Internal Revenue Manual identifies

certain payments that a taxpayer receives which are required to be included in

determining the amount that a taxpayer would be able to pay each month to the

IRS with respect to an unpaid tax liability, even though those payments are

excludible from gross income. By way of illustration, IRM pt. 5.15.1.11(2)(f)

requires certain child support payments that a taxpayer receives to be included in

determining the amount that a taxpayer would be able to pay each month to the

IRS with respect to an unpaid tax liability, even though the taxpayer may exclude

from gross income under section 71(c) child support payments described in that

section.

      We point out that, consistent with the requirement in the Internal Revenue

Manual that amounts which a taxpayer receives and which are not includible in

gross income be nonetheless included in determining the amount that a taxpayer
                                        - 20 -

[*20] would be able to pay each month to the IRS with respect to an unpaid tax

liability, the Internal Revenue Manual requires certain personal expenditures to be

included in that determination, even though those personal expenditures are not

deductible for tax purposes. Indeed, petitioner reflected in petitioner’s financial

statement, and the second settlement officer allowed, certain nondeductible

monthly expenditures of petitioner (e.g., “Trash Service”, “Phone”, and “Cable”)

to be included in determining the amount that petitioner would be able to pay each

month to the IRS with respect to the unpaid liabilities at issue.8

      We turn now to petitioner’s second argument in support of his position that

the second settlement officer erred in including petitioner’s monthly veteran

disability benefits in determining the amount that he was able to pay each month

to the IRS with respect to the unpaid liabilities at issue. Petitioner’s second

argument is that petitioner’s monthly veteran disability benefits “qualify as

service-connected disability payments under 26 U.S. Code Section 6334(a)(10)

and should * * * not be included in any ability to pay calculation.” We recently


      8
       Petitioner offers no explanation for the inconsistency in his position
regarding the determination of the amount that he would be able to pay each
month to the IRS with respect to the unpaid liabilities at issue between his
proposed treatment of certain amounts that he received which are excludible from
gross income and his treatment of certain amounts that he paid which are not
deductible for tax purposes.
                                         - 21 -

[*21] held in Ligman v. Commissioner, T.C. Memo. 2015-79, at *10, that it was

not an abuse of discretion where a settlement officer included certain Railroad

Retirement Board benefits that the taxpayer involved there had received in

determining the amount that the taxpayer would be able to pay each month to the

IRS with respect to an unpaid tax liability, even though those benefits were in part

not subject to levy under sections 6334(a)(6) and 6331(h).

        On the record before us, we find that the second settlement officer did not

abuse his discretion in including petitioner’s monthly veteran disability benefits in

determining the amount that petitioner would be able to pay each month to the IRS

with respect to the unpaid liabilities at issue.

        We have considered all of the arguments and contentions of the parties that

are not discussed herein, and we find them to be without merit, irrelevant, and/or

moot.

        On the record before us, we shall grant respondent’s motion.

        To reflect the foregoing,


                                                   An order granting respondent’s

                                         motion and decision for respondent will be

                                         entered.
