                  T.C. Summary Opinion 2005-46



                     UNITED STATES TAX COURT



    JOHNNY AND M. SUZAN BLACK, Petitioners v. COMMISSIONER OF
                   INTERNAL REVENUE, Respondent



     Docket No. 16246-04S.             Filed April 18, 2005.


     Johnny Black and M. Suzan Black, pro sese.

     Erin K. Huss, for respondent.



     PANUTHOS, Chief Special Trial Judge:   This case was heard

pursuant to the provisions of sections 6330(d) and 7463.1   The

decision to be entered is not reviewable by any other court, and

this opinion should not be cited as authority.




     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended.
                                  -2-

     Respondent issued petitioners a Notice of Determination

Concerning Collection Action(s) Under Section 6320 and/or 6330

(notice of determination), in which respondent sustained the

filing of a Federal tax lien with respect to petitioners’ tax

liabilities for 1996, 1997, 1999, 2000, 2001, and 2002.

Respondent rejected petitioners’ offer of $5,000 to compromise

their total unpaid tax liability of $26,655.07.

     The issue for decision is whether respondent abused his

discretion by rejecting petitioners’ offer in compromise (OIC)

and by sustaining the filing of the Federal tax lien.

Background

     Some of the facts have been stipulated, and they are so

found.   The stipulation of facts and attached exhibits are

incorporated by this reference.    Petitioners resided in

Riverside, California, at the time the petition was filed.

     Petitioners filed Federal income tax returns for 1996, 1997,

1999, 2000, 2001, and 2002.   There was some withholding with

respect to these years, but the withholding was less than the

respective tax liabilities reported.    There were no payments

remitted with any of the returns filed.2   Sometime in 1999,

petitioners began making monthly payments of $250 per month with




     2
        It appears that at some point petitioners paid $1.00 for
the taxable year 2000.
                                 -3-

respect to the 1996 tax liability.     These payments continued

until July 2002.

A.   Petitioners’ OIC

      On November 16, 2002, petitioners submitted an OIC to the

Internal Revenue Service (IRS) in which they offered to pay a

total of $5,000 over a period of 24 months.     The OIC related to

the 1996, 1997, 1999, 2000, and 2001 tax years.     The offer was

submitted on the basis of doubt as to collectibility.     Petitioner

Johnny Black (petitioner) explained in a written statement

attached to the OIC that he was formerly an insurance agent with

Allstate Ins. Co.    As a result of expending personal funds to

support his agency, and decreases in company benefits, petitioner

left Allstate in 1999 with unpaid debts.     At the time of trial,

petitioner drove a bus for senior citizens and earned $9 per

hour.

      Petitioner M. Suzan Black has been permanently disabled

since 1982.   She suffers from diabetes, had heart bypass surgery

in 1995, and has other serious medical issues.     She is unable to

work.

      By letter dated January 23, 2004, the IRS rejected

petitioners’ OIC.    The basis for the rejection was that the

amount offered was less than petitioners’ reasonable collection

potential.    The Asset/Equity Table, attached to the rejection

letter, reflected that petitioners’ assets included their house
                                  -4-

with a net realizable equity totaling $170,000.     Including other

assets, petitioners’ net realizable equity was reflected by the

IRS as $239,567.     The IRS determined that petitioners could pay

their tax liabilities in full.

B. Notice of Federal Tax Lien

     A notice of Federal tax lien was filed on October 21, 2003.

On October 24, 2003, respondent issued to petitioners a Notice of

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

6320.   Petitioners timely requested a hearing on Form 12153,

Request for Collection Due Process Hearing (Form 12153).

Petitioners explained in the Form 12153 that “Prior to submitting

an offer in compromise, we were making scheduled payments for

several years.   If there are no other options we would like to

continue making payments without the lien being placed on the

house.”

     Petitioners had a hearing with the IRS Office of Appeals.

After some correspondence between petitioners and the Office of

Appeals, the notice of determination was issued on August 6,

2004.   The Appeals officer indicated:

     Appeals considered the $5,000 rejected offer to
     compromise approximately $27,000 of liabilities. While
     your net spendable income was about $1,700 per month it
     was the equity in your personal residence that kept the
     offer from being accepted.

                 *     *    *    *      *   *   *

     It is not clearly known what your position is although
     based upon conversations it appeared they * * *
                                  -5-

     believed they could obtain a “better deal” in Tax Court
     and wanted to leave it up to them for a final
     determination. You have not shown you are entitled to
     any reduction on your tax liabilities via the Offer in
     Compromise.

     Petitioners do not dispute that their net equity in

available assets exceeded the amount offered in compromise, and

in fact exceeded the total tax liability in issue.

Discussion

     Section 6320 provides that a taxpayer shall be notified in

writing by the Secretary of the filing of a Federal tax lien and

provided with an opportunity for an administrative hearing.     Sec.

6320(b).   A hearing under section 6320 is conducted in accordance

with the procedural requirements set forth in section 6330.     Sec.

6320(c).   At the administrative hearing, a taxpayer is entitled

to raise any relevant issue relating to the unpaid tax, including

collection alternatives such as an offer in compromise or an

installment agreement.3   Sec. 6330(b) and (c)(2); sec. 301.6320-

1(e)(1), Proced. & Admin. Regs.

     This Court has jurisdiction under section 6330 to review the

Commissioner’s administrative determinations.   Sec. 6330(d).

Where, as here, the validity of the underlying tax liability is

not at issue, we review the determination for abuse of

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



     3
        Sec. 7122(d)(2) allows a taxpayer to appeal any rejection
of an offer or agreement to the IRS Office of Appeals.
                                  -6-

v. Commissioner, 114 T.C. 176, 183 (2000).   In so doing, we do

not conduct an independent review of what would be an acceptable

offer in compromise.   Van Vlaenderen v. Commissioner, T.C. Memo.

2003-346.   We review only whether the Appeals officer’s refusal

to accept petitioners’ OIC was arbitrary, capricious, or without

sound basis in fact or law.   See Woodral v. Commissioner, 112

T.C. 19, 23 (1999).

     On the basis of the information considered by the Appeals

officer, we cannot conclude that rejection of petitioners’ OIC

was an abuse of discretion.   See, e.g., Van Vlaenderen v.

Commissioner, supra; Crisan v. Commissioner, T.C. Memo. 2003-318;

Willis v. Commissioner, T.C. Memo. 2003-302; O’Brien v.

Commissioner, T.C. Memo. 2003-290; Schulman v. Commissioner, T.C.

Memo. 2002-129.   Petitioners’ OIC of $5,000 was not based on any

analysis.   In contrast, in response to the OIC, the IRS provided

a detailed analysis computing petitioners’ net realizable equity.4

Furthermore, while petitioners made a general assertion that they

should be entitled to make installment payments, they did not

present any details as to this.    Further, even if an installment

agreement were in effect pursuant to section 6159, such agreement

would not prevent the filing of a notice of Federal tax lien.

Sec. 301.6159-1(d)(3), Proced. & Admin. Regs.



     4
        See Speltz v. Commissioner, 124 T.C. __ (2005) for a
detailed discussion of the regulations relating to OICs.
                               -7-

     We are satisfied that respondent did not abuse his

discretion in making his determination.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To give effect to the foregoing,


                                     An appropriate decision will

                              be entered for respondent.
