                             T.C. Summary Opinion 2018-4



                            UNITED STATES TAX COURT



           MICHAEL ROYCE PRESTON, Petitioner v. COMMISSIONER
                   OF INTERNAL REVENUE, Respondent



      Docket No. 844-16S L.                            Filed January 29, 2018.



      Michael Royce Preston, pro se.

      Connor J. Moran, for respondent.



                                 SUMMARY OPINION


      GERBER, Judge: This collection due process (CDP) case is before the

Court on respondent’s motion for summary judgment (motion) pursuant to Rule

121.1 Respondent contends that no genuine dispute exists as to any material fact


      1
          Unless otherwise indicated, all section references are to the Internal
                                                                           (continued...)
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and that the determination to collect by levy petitioner’s unpaid trust fund

recovery penalties under section 6672 for taxable quarters ending December 31,

2012, and March 31, 2013, should be sustained. Petitioner in response to the

motion contends that there was an abuse of discretion because respondent has

incorrectly computed petitioner’s ability to pay and/or refused to accept

petitioner’s offer-in-compromise and that a levy would be a hardship on him.

                                     Background

      Petitioner does not deny that he owes unpaid trust fund recovery penalties

under section 6672 for taxable quarters ending December 31, 2012, and March 31,

2013. On January 28, 2015, respondent notified petitioner of his intent to levy,

and on February 25, 2015, petitioner timely sought a CDP hearing and submitted

an offer-in-compromise along with the appropriate supporting materials.

      During a telephone hearing on September 25, 2015, it was explained to

petitioner that his offer was not a viable collection alternative. Instead, petitioner

was offered an installment agreement which he declined. On October 29, 2015,

petitioner provided additional financial information and asked that his offer be

reconsidered. After review of petitioner’s information, his offer was rejected

      1
      (...continued)
Revenue Code in effect for all relevant times, and all Rule references are to the
Tax Court Rules of Practice and Procedure.
                                        -3-

because it was again determined that he could pay the liabilities in full within the

time allowed by law according to the financial statement and supporting

documentation he provided.

      On December 3, 2015, respondent sent a notice of determination, and on

January 11, 2016, petitioner timely petitioned this Court alleging that the Office of

Appeals’ (Appeals) settlement officer failed to account for his monthly payment to

the Washington State Department of Revenue when determining his ability to pay

his tax liabilities. The case was set for trial during March 2017, and on February

23, 2017, respondent sought a continuance, alleging that petitioner’s $750

monthly payments to the Washington State Department of Revenue were not

considered during the CDP hearing. The case was continued, and on May 5, 2017,

petitioner was informed that his financial information had been reviewed and that

it was determined that he could make payments of $2,111.35 per month.

Petitioner disagreed and again requested an offer-in-compromise for the

outstanding liabilities.

      The case was returned to Appeals and on June 21, 2017, was assigned for a

supplemental CDP hearing. On July 11, 2017, petitioner again requested an offer-

in-compromise and provided a pay statement reflecting year-to-date income

through June 30, 2017. A telephone hearing was held on July 20, 2017. Petitioner
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was again advised that his offer could not be accepted because he was financially

able to pay the tax liabilities by means of an installment agreement. The

Settlement Officer explained to petitioner how his ability to pay was calculated

using the information that he had provided to respondent.

      Although petitioner was to provide additional information by August 8,

2017, he did not and was called by the settlement officer on August 9, 2017, at

which time petitioner advised that he wanted to go to court. On August 15, 2017,

a supplemental determination to proceed with the levy was sent to petitioner.

                                     Discussion

      Summary judgment is intended to expedite litigation and to avoid

unnecessary and expensive trials. Shiosaki v. Commissioner, 61 T.C. 861, 862

(1974). Summary judgment may be granted where the pleadings and other

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

decision may be rendered as a matter of law. See Rule 121(b); see also Schlosser

v. Commissioner, T.C. Memo. 2007-298, 2007 Tax Ct. Memo LEXIS 300, at *6,

aff’d, 287 F. App’x 169 (3d Cir. 2008). The burden is on the moving party to

demonstrate that no genuine dispute as to any material fact remains and that he is

entitled to judgment as a matter of law. FPL Grp., Inc. & Subs. v. Commissioner,

116 T.C. 73, 74-75 (2001). In all cases, the evidence is viewed in the light most
                                         -5-

favorable to the nonmoving party. Bond v. Commissioner, 100 T.C. 32, 36

(1993). However, the nonmoving party is required to designate specific facts

showing that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S.

317, 324 (1986); see also Rauenhorst v. Commissioner, 119 T.C. 157, 175 (2002);

FPL Grp., Inc. & Subs. v. Commissioner, 115 T.C. 554, 559 (2000).

      If a taxpayer requests a CDP hearing in response to a notice of intent to

levy, he may raise at that hearing any relevant issue relating to the unpaid tax,

proposed levy, or lien. Sec. 6330(c)(2). Relevant issues include possible

alternative means of collection such as an installment agreement. Sec.

6330(c)(2)(A)(iii). If a taxpayer’s underlying liability is properly at issue, the

Court reviews any determination regarding the underlying liability de novo. Goza

v. Commissioner, 114 T.C. 176, 181-182 (2000). Petitioner has the burden of

proof regarding his underlying liability. See Rule 142(a). A taxpayer is precluded

from disputing the underlying liability if it was not properly raised in the CDP

hearing. See Giamelli v. Commissioner, 129 T.C. 107, 114 (2007).

      Petitioner did not raise his underlying tax liabilities in his request for a CDP

hearing. In his petition he made no specific allegations or arguments regarding

their correctness. Consequently, petitioner’s underlying tax liabilities are not

properly before the Court.
                                         -6-

      The Court reviews for abuse of discretion administrative determinations by

Appeals regarding nonliability issues. Hoyle v. Commissioner, 131 T.C. 197, 200

(2008); Goza v. Commissioner, 114 T.C. at 182. Appeals’ determination must

take into consideration: (1) the verification that the requirements of applicable

law and administrative procedure have been met; (2) issues raised by the taxpayer;

and (3) whether any proposed collection action balances the need for the efficient

collection of taxes with the legitimate concern of the person that any collection be

no more intrusive than necessary. Sec. 6330(c)(3); see also Lunsford v.

Commissioner, 117 T.C. 183, 184 (2001). We note that the settlement officer

properly based the determination on the factors required by section 6330(c)(3).

      In the petition and throughout the administrative proceeding, petitioner

requested that the proposed levy be withdrawn and that respondent enter into an

offer-in-compromise with him. Respondent contends that the settlement officer

did not abuse her discretion by denying petitioner’s requests for an offer-in-

compromise because the financial information petitioner provided, calculated

under prescribed standards, revealed that petitioner was financially able to pay the

liabilities in installments. Petitioner contends that there was an abuse of discretion

because respondent’s calculation of his ability to pay results in a financial

hardship to him. He further contends that respondent has used gross income
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figures and that the net amounts he and his wife received are less. Respondent

contends that Appeals has used a standardized method which is used in the

consideration of all offers-in-compromise and installment agreements. In all other

respects respondent has followed the underlying requirements preliminary to the

issuance of a notice of intent to levy, and petitioner has not shown otherwise.

      The Commissioner uses standardized guidelines to determine the reasonable

collection potential which will establish the taxpayer’s ability to pay the tax.

Respondent explained that national standards were used to determine petitioner’s

food, clothing, health care, personal care, and miscellaneous expenses and that

local standards were used to determine housing, utilities, and transportation

expenses. See Internal Revenue Manual pt. 5.15.1.8 and 5.15.1.9 (Nov. 17, 2014).

We note that this Court has accepted the Commissioner’s use of national and local

allowances as guidelines for basic living expenses in considering the adequacy of

installment agreements and offers-in-compromise. Walker v. Commissioner, T.C.

Memo. 2016-75.

      This Court does not independently review whether an offer-in-compromise

or other collection alternative is acceptable. Our review is limited to whether the

Appeals officer’s rejection of the offer was arbitrary, capricious, or without sound

basis in fact or law. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d,
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469 F.3d 27 (1st Cir. 2006). Here, the Appeals officer has followed the

Commissioner’s guidelines to ascertain petitioner’s reasonable collection potential

and rejected his collection alternative on that basis. Accordingly we do not find

an abuse of discretion. See McClanahan v. Commissioner, T.C. Memo. 2008-161.

      Additionally, petitioner has the burden of providing information to

respondent to justify a departure from local or national standards. Petitioner did

not present such evidence to respondent or the Court, and, accordingly,

respondent’s refusal to accept petitioner’s offer-in-compromise and the amount of

the proposed installment agreement offered to petitioner did not result in an abuse

of discretion. See Gregg v. Commissioner, T.C. Memo. 2009-19.

      Finally, petitioner contends that a levy would cause undue hardship. To that

argument, respondent counters with the following explanation:

      [T]he IRS will accept an offer of less than the reasonable collection
      potential if there are special circumstances warranting such accept-
      ance. Special circumstances are: (1) Circumstances demonstrating
      that the taxpayer would suffer economic hardship if the IRS were to
      collect from him an amount equal to the reasonable collection poten-
      tial; or (2) circumstances justifying acceptance of an amount less than
      the reasonable collection potential based on considerations of public
      policy or equity. Murphy v. Commissioner, 125 T.C. 301, 320-21
      (2005).

      Internal Revenue Code regulations provide that a levy creates an
      economic hardship if satisfaction of the levy in whole or in part will
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      cause an individual taxpayer to be unable to pay his or her reasonable
      basic living expenses. See Treas. Reg. § 301.6343-1(b)(4).

      Economic hardship occurs when a taxpayer is unable to pay his or her
      reasonable basic living expenses. Section 301.712201[sic](c)(3)(iii).

      Here, petitioner has a gross monthly income of $9,161. The total
      allowable expenses computation is $6,985. This difference is equal
      to $2,176 in discretionary income per month. Petitioner has twice
      been offered a minimum monthly payment amount of $545 per
      month, but has rejected it both times.

      After collection of the above amount, the petitioner will be left with
      more than adequate means to provide for basic living expenses for
      both him and his wife.

      Under these circumstances, we find and hold that there was no abuse of

discretion in the refusal to accept petitioner’s offer-in-compromise and that the

installment agreement proposed to and rejected on several occasions by petitioner

did not result in an abuse of discretion.

      We hold that the determination to proceed with collection by levy was not

an abuse of discretion, and the proposed collection action is sustained.

      To reflect the foregoing,


                                                  An appropriate order will be issued

                                        granting respondent’s motion, and decision

                                        will be entered for respondent.
