                         T.C. Memo. 2011-160



                       UNITED STATES TAX COURT



                PAUL R. VENEZIANO, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7962-09L.                Filed July 6, 2011.



     Paul R. Veneziano, pro se.

     Erika B. Cormier, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     HALPERN, Judge:    This case is before us to review a Notice

of Determination Concerning Collection Action(s) under Section

6320 and/or 6330 (the notice) issued by respondent’s Appeals

Office (Appeals).   Unless otherwise indicated, all section

references are to the Internal Revenue Code of 1986, as amended,

and all Rule references are to the Tax Court Rules of Practice
                                 - 2 -

and Procedure.     The notice concerns petitioner’s 2001, 2002, and

2004 Federal income tax liabilities, and it sustains Settlement

Officer Lisa Boudreau’s (Ms. Boudreau) determination that a

notice of Federal tax lien and a notice of intent to levy for

those years should stand.1    We review the notice pursuant to

sections 6320(c) and 6330(d)(1).

     Although petitioner’s 2002 Federal income tax liability is

addressed in the notice, that liability has since been paid in

full, and the issues regarding that liability are therefore moot.

We concern ourselves with the notice only as it addresses

petitioner’s 2001 and 2004 liabilities.

     At the outset, we note that, at the conclusion of the trial,

the Court set a schedule for opening and answering briefs.

Respondent complied with that schedule.    Petitioner, however,

submitted to the Court two letters, the first dated 4 days before

the due date for the opening briefs and the second dated 4 days

before the due date for the answering briefs.    We filed the first

letter as petitioner’s opening brief and the second as his

answering brief.    Respondent objects to petitioner’s opening



     1
      The notice is signed by Matthew N. McLaughlin, appeals team
manager. The notice itself contains only a “Summary of
Determination”, but it encloses an attachment that appears to be
Ms. Boudreau’s memorandum supplying the detail behind the summary
determination. Moreover, in her declaration, Ms. Boudreau
declares that she made the determination to proceed with
collection. We shall, therefore, speak in terms of Ms.
Boudreau’s determination to proceed with collection.
                               - 3 -

brief on the ground that it is testimonial and a party may not

supplement the record with additional testimony unless the Court

has granted a motion to reopen the record.   Respondent further

objects to petitioner’s opening brief on the ground that it does

not conform to the requirements of Rule 151(e), governing the

form and content of briefs.   Among his objections is that

petitioner’s opening brief does not contain concise statements of

essential facts, as required by Rule 151(e)(3).

     At the commencement of the trial, we advised petitioner that

the trial was his “opportunity to either call any witnesses,

testify * * * [himself,] or ask the Court to consider any

documents that are not part of the stipulation.”    Petitioner

appeared to understand.   Although he had no witnesses to call, he

offered two unstipulated documents and testified.    While we

should accord some leeway to pro se plaintiffs in conforming to

technical rules in pleading or in briefing their cases, see,

e.g., Haines v. Kerner, 404 U.S. 519, 520 (1972) (pro se’s

pleading held “to less stringent standards than formal pleadings

drafted by lawyers”), respondent would be at a significant

disadvantage if we were to consider testimony outside of the

record, which he had no opportunity to rebut.   We shall therefore
                               - 4 -

disregard, in reading petitioner’s briefs, testimonial statements

that we cannot readily source to the record.2

     Finally, Rule 151(e)(3) also requires that a party, in his

answering brief, “set forth any objections, together with the

reasons therefor, to any proposed findings of any other party”.

In his answering brief, petitioner fails to set forth objections

to proposed findings of fact contained in respondent’s opening

brief.   Accordingly, we must conclude that petitioner has

conceded that respondent’s proposed findings of fact are correct

except to the extent that those findings are clearly inconsistent

with evidence in the record.   See, e.g., Jonson v. Commissioner,

118 T.C. 106, 108 n.4 (2002), affd. 353 F.3d 1181 (10th Cir.

2003).

                         FINDINGS OF FACT

Residence

     At the time he filed the petition, petitioner resided in

Massachusetts.




     2
      We note that petitioner has hobbled us in determining what
factual statements in his briefs are supported by the record
since he has to no degree complied with the requirement of Rule
151(e)(3) to provide references to the pages of the transcript,
exhibits, or other sources relied on to support statements in a
brief. While the transcript is relatively short, 30 pages, the
stipulated exhibits constitute more than 429 pages.
                                - 5 -

Returns and Assessments

     Petitioner did not file his 2001 Federal income tax return

until sometime in 2007.    He also failed to timely file his 2002

and 2004 returns, and respondent prepared substitutes for returns

on account thereof.

     Petitioner’s 2001 and 2004 Federal income tax liabilities

were assessed on October 15 and 22, 2007, respectively.

Notice of Lien and Notice of Intent To Levy

     In March 2008, respondent notified petitioner both that he

had filed a notice of Federal tax lien and that he intended to

levy to collect petitioner’s unpaid Federal income taxes of

$4,583,3 $1,446, and $245,657, for 2001, 2002, and 2004,

respectively.

Request for Hearing

     In response, petitioner timely requested a collection due

process hearing.   In that request, petitioner proposed two

collection alternatives:   An installment agreement and an offer

in compromise (OIC).   He did not challenge the existence or

amount of his underlying tax liabilities.

The Hearing

     Respondent granted petitioner’s request for a hearing, and

Ms. Boudreau conducted that hearing (the hearing).   In May 2008,

she conferred by telephone with petitioner’s representative,


     3
      We round all dollar amounts to the nearest dollar.
                                        - 6 -

Timothy J. Burke (Mr. Burke).           Neither during that conference nor

at any other time during the hearing did Mr. Burke or petitioner

challenge the existence or amount of petitioner’s underlying

2001, 2002, or 2004 tax liability or propose an installment

payment agreement.

     In July 2008, petitioner submitted to Ms. Boudreau an OIC,

accompanied by a collection information statement, offering to

compromise all of his 2001, 2002, 2004, and 2007 (although that

year is not at issue here) Federal income tax liabilities for

$3,100 on the basis of (1) doubt as to collectibility and (2)

effective tax administration.

     On the basis of information petitioner submitted, Ms.

Boudreau determined that petitioner’s reasonable collection

potential (sometimes, RCP) was $115,217.              The following schedule

summarizes her financial analysis leading to her conclusion that

petitioner’s RCP was $115,217.

                          Fair Market    Quick Sale   Encumbrance     Net
                             Value          Value       Amount      Equity
Cash on hand                    $20          --           --            $20
Fidelity IRA                     23          --              $8          15
Toyota vehicle               13,000        $10,400        1,720       8,680
Boat                            100             80        --             80
Stock                           689          --           --            689
2004 IRA distribution
(dissipated asset)         364,985          --          359,191       5,794
Real property              270,300        216,240       116,301      99,939
  Reasonable collection
    potential                                                       115,217

     Ms. Boudreau did not include any future earnings potential

in calculating petitioner’s RCP.
                               - 7 -

     With respect to the real property listed on the schedule:

In April 2004, petitioner purchased Lot 112, Tower Hill,

Plymouth, Massachusetts, unimproved real estate (the property)

for $285,000.   He used funds from the 2004 IRA distribution to

make the purchase.   In June 2004, petitioner encumbered the

property with a mortgage of $100,000.    In December 2007,

petitioner created the Veneziano Children Irrevocable Trust (the

trust), Mara Veneziano (petitioner’s sister) trustee, and

conveyed the property to the trust.    Pursuant to the indenture

creating the trust, petitioner retained “the right to use and

occupy any real estate owned by the trust, rent free, for life.”

Petitioner continues to make mortgage payments of $955 a month.

     During Ms. Boudreau’s consideration of petitioner’s case,

Mr. Burke stated to her that petitioner had conveyed the property

to the trust pursuant to a court order, citing a separation

agreement, dated August 6, 2003 (the separation agreement),

between petitioner and his ex-wife.    In relevant part, the

separation agreement includes the following handwritten

provision:   “Husband and wife shall execute irrevocable trusts

naming the other as trustee for the children until each child

reaches 30 years old[.]   The corpus shall be used for each childs

[sic] health, maintenance, support[,] education for [sic] equally

for each child[.]”   The separation agreement does not require

that petitioner transfer the property to the trust.    Petitioner
                               - 8 -

entered into the separation agreement more than 8 months before

he acquired the property and more than 4 years before he created

the trust.   Ms. Boudreau determined that, despite the trust’s

title to the property, respondent could collect petitioner’s

unpaid tax from the proceeds of a sale of the property by

asserting a transferee liability or false conveyance theory.

     Taking into account the 2009 assessed value of the property,

the outstanding balance of the mortgage encumbering the property,

and a Massachusetts State tax lien encumbering the property, Ms.

Boudreau determined the net equity value of the property to be

$99,939.

The Notice

     Ms. Boudreau rejected petitioner’s OIC, determining that his

RCP of $115,217 was significantly more than the $3,100 he had

offered and, therefore, he did not qualify for an OIC based on

doubt as to collectibility.   She further determined that, because

he had not provided an explanation of special circumstances that

would justify acceptance of a less-than-RCP OIC, he did not

qualify for an OIC based on the grounds of either (1) effective

tax administration or (2) doubt as to collectibility with special

circumstances.   Finally, she determined that the lien would not

be released.   Ms. Boudreau’s memorandum accompanying the notice

states:

     You have not proposed a viable alternative to the lien
     notice * * * . You own land with significant equity
                                 - 9 -

      and have not taken steps to either borrow against it or
      liquidate it. There is equity in the property that
      would allow you to pay a significant portion of the
      outstanding liability. This analysis indicates that
      the Notice of Federal Tax Lien and the proposed
      collection action are necessary to provide for the
      efficient collection of the taxes despite the potential
      intrusiveness of enforced collection.

The Petition

      Petitioner assigned error to the notice, addressing only

Appeals’ determination with respect to the notice of Federal tax

lien but, we assume, also intending to address respondent’s

intent to levy.     He claimed that Appeals had erred because he was

still under “financial, emotional, psychological and physical

hardship”; Ms. Boudreau did not consider, “misrepresented, or

overlooked” information and facts, which led to an unfair,

unjust, and inappropriately informed decision; and “[t]he only

asset of any value I am associated with is a parcel of

undeveloped land that is in an irrevocable trust for my

children.”

                                OPINION

I.   Introduction

      Because petitioner did not raise a challenge to his

underlying 2001 and 2004 tax liabilities in his request for a

collection due process hearing or during the hearing, he may not

dispute those liabilities in this proceeding.    See Giamelli v.

Commissioner, 129 T.C. 107, 115 (2007).    In that request,

petitioner proposed only an installment agreement and an OIC.
                                 - 10 -

       We review Appeals’ determination concerning those two

proposals for abuse of discretion.        See Goza v. Commissioner, 114

T.C. 176, 181-182 (2000).      An Appeals officer abuses her

discretion when she “takes action that is arbitrary or

capricious, lacks sound basis in law, or is not justifiable in

light of the facts and circumstances.”        Willis v. Commissioner,

T.C. Memo. 2003-302 (citing Mailman v. Commissioner, 91 T.C.

1079, 1084 (1988)).

II.    Installment Agreement

       Ms. Boudreau did not abuse her discretion in failing to

consider an installment agreement since petitioner did not

propose any terms for an installment agreement during the

hearing.    See Swanton v. Commissioner, T.C. Memo. 2010-140

(citing Kendricks v. Commissioner, 124 T.C. 69, 79 (2005)).

III.    OIC Based on Doubt as to Collectibility

       Nor did she abuse her discretion in rejecting petitioner’s

OIC of $3,100.    Generally, an Appeals officer does not abuse her

discretion in determining to reject an OIC following guidelines

in the Internal Revenue Manual (IRM).       E.g., Atchison v.

Commissioner, T.C. Memo. 2009-8.      The Commissioner may accept an

OIC based on doubt as to collectibility if the offer reflects the

taxpayer’s reasonable collection potential.       IRM pt. 5.8.4.4(2)

(Sept. 23, 2008).    Ms. Boudreau determined petitioner’s

reasonable collection potential to be $115,217, and petitioner
                              - 11 -

has failed to show that she erred in doing so.    His only

discernible challenge to her determination appears to be to her

inclusion of the property in his RCP.    He does not challenge her

determination of the property’s net equity value of $99,939 but

only her assumption that the property was still his; i.e., that

it was available to satisfy his unpaid taxes.

     A Federal tax lien arises when unpaid taxes are assessed and

continues until the resulting liability is either satisfied or

becomes unenforceable because of the running of the period of

limitations.   Secs. 6321 and 6322; sec. 301.6321-1, Proced. &

Admin. Regs.   The lien attaches to all property and rights to

property the taxpayer then holds or subsequently acquires.      Sec.

6321; sec. 301.6321-1, Proced. & Admin. Regs.    Where assets

subject to the Federal tax lien are transferred to another party,

the lien remains on those assets.   United States v. Bess, 357

U.S. 51, 57 (1958) (“The transfer of property subsequent to the

attachment of the lien does not affect the lien, for ‘it is the

very nature and essence of a lien, that no matter into whose

hands the property goes, it passes cum onere’”).    Petitioner’s

2001 and 2004 Federal income tax liabilities were assessed on

October 15 and 22, 2007, respectively.   Petitioner conveyed the

property to the trust on December 3, 2007.   Therefore, the

Federal tax lien had already attached to the property before its
                               - 12 -

conveyance to the trust.4   Ms. Boudreau did not err in

determining that, by asserting a transferee liability or false

conveyance theory, the Commissioner could collect petitioner’s

unpaid tax from the proceeds of a sale of the property.

IV.   Effective Tax Administration and Doubt as to Collectibility
      With Special Circumstances

      The Commissioner may accept an OIC based on effective tax

administration if the taxpayer’s RCP is greater than the amount

owed but the Commissioner determines that a lesser amount should

be accepted on the grounds of economic hardship, public policy,

or equity.   IRM pt. 5.8.11.1 (Sept. 23, 2008).   The effective-

tax-administration grounds of economic hardship, public policy,

or equity may also be applied to a taxpayer whose RCP is less

than the amount of tax owed.    In that case, the Commissioner may

accept an offer that is less than the taxpayer’s RCP as an OIC

based on doubt as to collectibility with special circumstances.

Id. pt. 5.8.11.2(2)(B).

      For purposes of making the relevant determinations, economic

hardship is defined as the inability to pay reasonable, basic

living expenses.   Id. pt. 5.8.11.2.1(2).   “Basic living expenses

are those expenses that provide for health, welfare, and

production of income of the taxpayer and the taxpayer’s family.”

Id. pt. 5.8.11.2.1(4).    The public policy or equity grounds are


      4
      Moreover, for reasons discussed infra, the trust did not
constitute the trust mentioned by the separation agreement.
                              - 13 -

satisfied where, “due to exceptional circumstances, collection in

full would undermine public confidence that the tax laws are

being administered in a fair and equitable manner.”    Id. pt.

5.8.11.2.2(2).   Compromise on those grounds is very rare.    Id.

Except where the ground is hardship, the offer should also meet

the following requirements:

          • The taxpayer has remained in compliance since
     incurring the liability and overall their compliance
     history does not weigh against compromise;

          • The taxpayer must have acted reasonably and
     responsibly in the situation giving rise to the
     liabilities; and

          • The circumstances of the case must be such that
     other taxpayers would view the compromise as a fair and
     equitable result. For example, it should not appear to
     other taxpayers that the result of the compromise
     places the taxpayer in a better position than they
     would occupy had they timely and fully met their
     obligations.

Id. pt. 5.8.11.2.2(4).

     Ms. Boudreau did not err in following IRM guidelines and

determining that petitioner did not, on the grounds of economic

hardship, public policy, or equity, qualify for an OIC based on

either effective tax administration or doubt as to collectibility

with special circumstances.   With respect to economic hardship,

there is no evidence that petitioner submitted to Ms. Boudreau

that shows he could not pay his own living expenses.   Indeed, he

continues to make the $955 monthly payments on the mortgage

encumbering the property.
                              - 14 -

      Additionally, petitioner did not act reasonably and

responsibly in the situation giving rise to his income tax

liabilities.   Petitioner was delinquent in filing his returns for

the taxable years 2001, 2002, and 2004.     Petitioner received an

IRA distribution of $364,985 in 2004 and, rather than pay or

provide for his income tax liabilities, he used a significant

portion to purchase the property.     Under those circumstances, we

agree with respondent that less than full collection of

petitioner’s liabilities would undermine public confidence that

the tax laws are being administered in a fair and equitable

manner.

      Ms. Boudreau did not abuse her discretion in denying

petitioner an OIC on the grounds of either effective tax

administration or doubt as to collectibility with special

circumstances.

V.   The Trust Is Not a Judgment Lien Creditor

      Petitioner appears to argue that the Federal tax lien at

issue here is not valid against the property because the trustee

(who now owns the property) is a judgment lien creditor who

obtained her interest before the notice of Federal tax lien was

properly filed.   See sec. 6323(a).    “The term ‘judgment lien

creditor’ means a person who has obtained a valid judgment, in a

court of record and of competent jurisdiction, for the recovery
                                - 15 -

of specifically designated property or for a certain sum of

money.”   Sec. 301.6323(h)-l(g), Proced. & Admin. Regs.

     In support of his argument that the trustee is a judgment

lien creditor, petitioner points to the separation agreement’s

handwritten provision:   “Husband and wife shall execute

irrevocable trusts naming the other as trustee for the children

until each child reaches 30 years old[.]     The corpus shall be

used for each childs [sic] health, maintenance, support[,]

education for [sic] equally for each child[.]”

     The separation agreement, however, does not require that

petitioner transfer the property to the trust.     In fact, the

separation agreement is dated August 6, 2003, more than 8 months

before petitioner acquired the property and more than 4 years

before petitioner created the trust.     Further, the separation

agreement describes a trust for which petitioner’s ex-wife is the

trustee, but the trustee of the trust is Mara Veneziano,

petitioner’s sister.   The trust simply does not meet the

description of the trust found in the separation agreement.

     The property was not conveyed to the trustee in connection

with any judgment of a court of record and competent

jurisdiction.   Further, the separation agreement does not

specifically designate the property or any certain sum of money

and creates no judgment lien.    Accordingly, the trustee is not a
                                - 16 -

judgment lien creditor for purposes of invalidating the Federal

tax lien.

VI. Ms. Boudreau Complied With All Other Requirements of Section
    6330

       Pursuant to section 6330(c)(3), Appeals’s 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.    As

stated in Ms. Boudreau’s memorandum attached to the notice, she

considered all three of those matters.

VII.    Conclusion

       Ms. Boudreau complied with the requirements of section

6330(c)(3) and did not abuse her discretion in determining that

respondent could proceed with collection.    Her determination to

proceed with collection is sustained.    The notice of Federal tax

lien is sustained, and respondent may proceed by levy to collect

petitioner’s unpaid 2001 and 2004 Federal income tax liabilities.


                                          An appropriate order and

                                     decision will be entered for

                                     respondent.
