                        T.C. Memo. 2007-28



                      UNITED STATES TAX COURT



             GORDON AND ILENE FREEMAN, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 24215-04L.            Filed February 7, 2007.



     Terri A. Merriam, for petitioners.

     Gregory M. Hahn and Thomas N. Tomashek, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     HAINES, Judge:   Petitioners filed a petition with this Court

in response to a Notice of Determination Concerning Collection

Action(s) Under Section 6330 (notice of determination) for 1980

through 1985, 1989, and 1990.1   Pursuant to section 6330(d),


     1
         Unless otherwise indicated, all section references are to
                                                    (continued...)
                              - 2 -

petitioners seek review of respondent’s determination.   The issue

for decision is whether respondent abused his discretion in

sustaining the proposed collection action.2

                        FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The first, second, third, fourth, and fifth stipulations of fact

and the attached exhibits are incorporated herein by this

reference.3



     1
      (...continued)
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure. Amounts
are rounded to the nearest dollar.
     2
        Petitioners also dispute respondent’s determination that
they are liable for the increased rate of interest on tax-
motivated transactions under sec. 6621(c). As to this dispute,
the parties filed a stipulation to be bound by the Court’s
determination in Ertz v. Commissioner, T.C. Memo. 2007-15, which
involves a similar issue.
     3
        Respondent reserved relevancy objections to many of the
exhibits attached to the stipulations of fact. Fed. R. Evid. 402
provides the general rule that all relevant evidence is
admissible, while evidence which is not relevant is not
admissible. Fed. R. Evid. 401 defines relevant evidence as
“evidence having any tendency to make the existence of any fact
that is of consequence to the determination of the action more
probable or less probable than it would be without the evidence.”
While the relevance of some exhibits is certainly limited, we
find that the exhibits meet the threshold definition of relevant
evidence and are admissible. The Court will give the exhibits
only such consideration as is warranted by their pertinence to
the Court’s analysis of petitioners’ case.

     Respondent also objected to many of the exhibits on the
basis of hearsay. Even if we were to receive those exhibits into
evidence, they would have no impact on our findings of fact or on
the outcome of this case.
                               - 3 -

     Petitioners resided in Richland, Washington, when they filed

their petition.   Petitioners have been married for 46 years.

Petitioner Gordon Freeman (Mr. Freeman) is an electrical

engineer, and petitioner Ilene Freeman (Mrs. Freeman) has a

bachelor of science degree in home economics education.    At the

time of trial, Mr. Freeman was 69 years old.   Mrs. Freeman’s age

is not in the record.

     In 1983, petitioners became partners in Durham Genetic

Engineering, Ltd. 1983-3 (DGE 83-3), a cattle breeding

partnership organized and operated by Walter J. Hoyt III (Hoyt).4

     From about 1971 through 1998, Hoyt organized, promoted, and

operated more than 100 cattle breeding partnerships.   Hoyt also

organized, promoted, and operated sheep breeding partnerships.

From 1983 to his subsequent removal by the Tax Court in 2000

through 2003, Hoyt was the tax matters partner of each Hoyt

partnership.   From approximately 1980 through 1997, Hoyt was a

licensed enrolled agent, and as such, he represented many of the

Hoyt partners before the Internal Revenue Service (IRS).   In




     4
        Petitioners were also partners in other Hoyt-related
partnerships identified as Timeshare Breeding Services 1987-2
J.V., Timeshare Breeding Syndicate J.V., and Timeshare Breeding
Services 1989-2 J.V. The details of these partnerships are not
in the record. Though unclear, it appears that all adjustments
made to petitioners’ income tax liability for 1980-85 were
attributable to their involvement in DGE 83-3 only, while the
adjustments pertaining to 1989 and 1990 were attributable to the
other partnerships.
                                - 4 -

1998, Hoyt’s enrolled agent status was revoked.    Hoyt was

convicted of various criminal charges in 2000.5

     Beginning in 1983 until at least 1990, petitioners claimed

losses and credits on their Federal income tax returns arising

from their involvement in the Hoyt partnerships.    Petitioners

also carried back unused investment credits to 1980, 1981, and

1982.    As a result of these losses and credits, petitioners

reported overpayments of tax for 1980 through 1985, 1989, and

1990 and received refunds in the amounts claimed.




     5
        Petitioners ask the Court to take judicial notice of
certain “facts” in other Hoyt-related cases and apply judicial
estoppel to “facts respondent has asserted in previous [Hoyt-
related] litigation”. We do neither.

     A judicially noticeable fact is one not subject to
reasonable dispute in that it is either (1) generally known
within the territorial jurisdiction of the trial court or (2)
capable of accurate and ready determination by resort to sources
whose accuracy cannot reasonably be questioned. Fed. R. Evid.
201(b). Petitioners are not asking the Court to take judicial
notice of facts that are not subject to reasonable dispute.
Instead, petitioners are asking the Court to take judicial notice
of the truth of assertions made by taxpayers and the Commissioner
in other Hoyt-related cases. Such assertions are not the proper
subject of judicial notice.

     The doctrine of judicial estoppel prevents a party from
asserting in a legal proceeding a claim that is inconsistent with
a position successfully taken by that party in a previous
proceeding. New Hampshire v. Maine, 532 U.S. 742, 749 (2001).
Among the requirements for judicial estoppel to be invoked, a
party’s current litigating position must be “clearly
inconsistent” with a prior litigating position. Id. at 750-751.
Petitioners have failed to identify any clear inconsistencies
between respondent’s current position and his position in any
previous litigation.
                                 - 5 -

        Respondent issued notices of final partnership

administrative adjustments (FPAAs) to DGE 83-3 for its 1983

through 1985 taxable years.6    After completion of the

partnership-level proceedings, respondent determined deficiencies

in petitioners’ income tax for their 1980 through 1985 tax

years.7

     On February 6, 2003, respondent issued petitioners a Final

Notice--Notice of Intent to Levy and Notice of Your Right to a

Hearing (final notice).     The final notice included petitioners’

outstanding tax liabilities for 1980 through 1985, 1989, and

1990.

     On February 21, 2003, petitioners submitted a Form 12153,

Request for a Collection Due Process Hearing.     Petitioners argued

that the proposed levies were inappropriate, that an offer-in-

compromise should be accepted, and that Mrs. Freeman was entitled

to innocent spouse relief under section 6015.

     On November 14, 2003, petitioners’ case was assigned to

Settlement Officer Linda Cochran (Ms. Cochran).     Ms. Cochran

scheduled a telephone section 6330 hearing for March 31, 2004.

Petitioners’ representative, Terri A. Merriam (Ms. Merriam),



        6
        The FPAAs and other information specific to DGE 83-3’s
partnership-level proceedings are not in the record.
        7
        The details regarding the adjustments made to
petitioners’ tax liability for 1989 and 1990 are not in the
record.
                                - 6 -

requested that petitioners be given more time to submit

information to be considered.   Ms. Cochran extended petitioners’

deadline for submitting information to be considered to May 14,

2004.

     Petitioners’ section 6330 hearing was conducted by telephone

on March 31, 2004.   On May 14, 2004, petitioners submitted to Ms.

Cochran a Form 656, Offer in Compromise, a Form 433-A, Collection

Information Statement for Wage Earners and Self-Employed

Individuals, one letter explaining the offer amount, and three

letters setting out in detail petitioners’ position regarding the

offer-in-compromise.   Petitioners’ letters included several

exhibits.

     The Form 656 indicated that petitioners were seeking an

offer-in-compromise based on effective tax administration.

Petitioners offered to pay $346,258 to compromise their

outstanding tax liabilities for 1980 through 1996.8   At the

time of the section 6330 hearing, $750,740 had been assessed

against petitioners with respect to their 1980 through 1996

tax years.

     On the Form 433-A, petitioners reported assets worth

$832,866 and outstanding liabilities of $56,359.




     8
        The details of petitioners’ 1986-88 and 1991-96 taxable
years are not in the record.
                            - 7 -

Petitioners also reported gross monthly income of $9,307 and

monthly living expenses of $6,238.

     In the letter explaining the offer amount, petitioners

stated that they were offering to pay $346,258 “for all Hoyt

related years to be paid in one lump sum payment.    The

amount accounts for all the tax liability for 1980 through

1998, and regular interest through April 15, 1993.    This

offer assumes that no Tax Motivated Transaction (TMT)

interest is imposed”.   Petitioners also noted that Mrs.

Freeman had an innocent spouse case pending before the Tax

Court at docket No. 18985-02 for her 1980 through 1986 and

1994 tax years.

     In the remaining three letters, petitioners alleged

that they were victims of Hoyt’s fraud and asserted various

arguments regarding the appropriateness of an offer-in-

compromise.

     On May 21, 2004, petitioners submitted another letter

to Ms. Cochran, which included 42 exhibits not provided with

the previous letters.

     On November 23, 2004, respondent issued petitioners a

notice of determination.   Respondent determined that

petitioners had:   (1) Total net realizable equity in their

assets of $917,913; (2) an amount collectible from future
                           - 8 -

income of $369,639;9 and (3) a reasonable collection

potential of $1,287,552.

     Because petitioners had “the ability to pay all

assessed amounts and still have assets and an income stream

remaining worth over $536,000”, respondent determined that

they were not entitled to an effective tax administration

offer-in-compromise based on economic hardship.10

Respondent also determined that petitioners were not

entitled to an effective tax administration offer-in-

compromise based on public policy or equity ground because

the case “fails to meet the criteria for such

consideration”.

     Respondent determined that petitioners did not offer an

acceptable collection alternative and that all requirements

of law and administrative procedure had been met.

Respondent concluded that the proposed collection action

could proceed, but that the final notice should be partially

rescinded as it related to Mrs. Freeman’s 1980 through 1985

tax years because of her pending innocent spouse case.




     9
        Respondent determined that petitioners had monthly
disposable income of $5,517 and multiplied that amount by 67, the
number of months remaining on the collection statute.
     10
        Petitioners do not argue that their effective tax
administration offer-in-compromise should have been accepted on
the ground of economic hardship. See infra note 12.
                            - 9 -

     In response to the notice of determination, petitioners

filed a petition with this Court on December 20, 2004.

                                OPINION

     Section 7122(a) provides that “The Secretary may compromise

any civil * * * case arising under the internal revenue laws”.

Whether to accept an offer-in-compromise is left to the

Secretary’s discretion.   Fargo v. Commissioner, 447 F.3d 706, 712

(9th Cir. 2006), affg. T.C. Memo. 2004-13; sec. 301.7122-1(c)(1),

Proced. & Admin. Regs.

     The regulations under section 7122(a) set forth three

grounds for the compromise of a tax liability:    (1) Doubt as to

liability; (2) doubt as to collectibility; or (3) promotion of

effective tax administration.    Sec. 301.7122-1(b), Proced. &

Admin. Regs.   Doubt as to liability and doubt as to

collectibility are not at issue in this case.11

     As pertinent here, the Secretary may compromise a tax

liability on the ground of effective tax administration when:

(1) Exceptional circumstances exist such that collection of the

full liability would undermine public confidence that the tax

laws are being administered in a fair and equitable manner; and

(2) compromise of the liability would not undermine compliance by




     11
        While petitioners contest their liability for sec.
6621(c) interest, see supra note 2, they did not raise doubt as
to liability as a basis for their offer-in-compromise.
                                 - 10 -

taxpayers with the tax laws.12    Sec. 301.7122-1(b)(3), Proced. &

Admin. Regs.

     Petitioners proposed an offer-in-compromise based on

effective tax administration.     Petitioners offered to pay

$346,258 to compromise their outstanding tax liabilities for 1980

through 1996, which totaled $750,740 at the time of the section

6330 hearing.13   Petitioners argued that exceptional

circumstances existed such that collection of the full liability

would undermine public confidence that the tax laws are being

administered in a fair and equitable manner.    Respondent

determined that petitioners’ reasonable collection potential was

$1,287,552 and that their offer-in-compromise did not meet the

criteria for an effective tax administration offer-in-compromise.




     12
        The regulations also provide that the Secretary may
compromise a liability on the ground of effective tax
administration when collection of the full liability will create
economic hardship. See sec. 301.7122-1(b), Proced. & Admin.
Regs. Respondent determined that petitioners were not entitled
to an offer-in-compromise based on economic hardship. While
petitioners dispute Ms. Cochran’s determination of their
reasonable collection potential, they do not argue that
collection of the full liability would create economic hardship.
     13
        The proposed collection action related to petitioners’
outstanding tax liability for 1980-85, 1989, and 1990 only.
Petitioners estimated that their outstanding tax liability for
those periods was $474,655. However, petitioners sought to
compromise their outstanding tax liability for not only those
periods, but also for 1986-88 and 1991-96. To accurately compare
their offer amount to their outstanding tax liability, we must
therefore consider the total assessed amount for 1980-96, and not
for only 1980-85, 1989 and 1990.
                              - 11 -

     Because the underlying tax liability is not at issue, our

review under section 6330 is for abuse of discretion.   See Sego

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

114 T.C. 176, 182 (2000).   This standard does not ask us to

decide whether in our own opinion petitioners’ offer-in-

compromise should have been accepted, but whether respondent’s

rejection of the offer-in-compromise was arbitrary, capricious,

or without sound basis in fact or law.   Woodral v. Commissioner,

112 T.C. 19, 23 (1999); Keller v. Commissioner, T.C. Memo. 2006-

166; Fowler v. Commissioner, T.C. Memo. 2004-163.

A.   Exceptional Circumstances

     Petitioners assert that “There are so many unique and

equitable facts in this case that this case is an exceptional

circumstance” and respondent abused his discretion by not

accepting those facts as grounds for an offer-in-compromise.    In

support of their assertion, petitioners argue:   (1) The

longstanding nature of this case justifies acceptance of the

offer-in-compromise; (2) respondent’s reliance on an example in

the Internal Revenue Manual (IRM) was improper; and (3)

respondent failed to consider petitioners’ other “equitable

facts”.

     1.   Longstanding Case

     Petitioners assert that the legislative history requires

respondent to resolve “longstanding” cases by forgiving penalties
                                - 12 -

and interest which would otherwise apply.      Petitioners argue

that, because this is a longstanding case, respondent abused his

discretion by failing to accept their offer-in-compromise.

     Petitioners’ argument is essentially the same considered and

rejected by the Court of Appeals for the Ninth Circuit in Fargo

v. Commissioner, supra at 711-712.       See also Keller v.

Commissioner, T.C. Memo. 2006-166; Barnes v. Commissioner, supra.

We reject petitioners’ argument for the same reasons stated by

the Court of Appeals.   We add that petitioners’ counsel

participated in the appeal in Fargo as counsel for the amici.        On

brief, petitioners suggest that the Court of Appeals knowingly

wrote its opinion in Fargo in such a way as to distinguish that

case from the cases of counsel’s similarly situated clients

(e.g., petitioners), and to otherwise allow those clients’

liabilities for penalties and interest to be forgiven.        We do not

read the opinion of the Court of Appeals in Fargo to support that

conclusion.   See Keller v. Commissioner, supra; Barnes v.

Commissioner, supra.

     Respondent’s rejection of petitioners’ longstanding case

argument was not arbitrary or capricious.

     2.   The IRM Example

     Petitioners argue that respondent erred when he determined

that they were not entitled to relief based on the second example

in IRM section 5.8.11.2.2(3).    Petitioners assert that many of
                             - 13 -

the facts in this case were not present in the example, and,

therefore, any reliance on the example was misplaced.

Petitioners’ argument is not persuasive.

     IRM section 5.8.11.2.2(3) discusses effective tax

administration offers-in-compromise based on equity and public

policy grounds and states in the second example:

     In 1983, the taxpayer invested in a nationally marketed
     partnership which promised the taxpayer tax benefits
     far exceeding the amount of the investment.
     Immediately upon investing, the taxpayer claimed
     investment tax credits that significantly reduced or
     eliminated the tax liabilities for the years 1981
     through 1983. In 1984, the IRS opened an audit of the
     partnership under the provisions of the Tax Equity and
     Fiscal Responsibility Act of 1982 (TEFRA). After
     issuance of the Final Partnership Administrative
     Adjustment (FPAA), but prior to any proceedings in Tax
     Court, the IRS made a global settlement offer in which
     it offered to concede a substantial portion of the
     interest and penalties that could be expected to be
     assessed if the IRS’s determinations were upheld by the
     court. The taxpayer rejected the settlement offer.
     After several years of litigation, the partnership
     level proceeding eventually ended in Tax Court
     decisions upholding the vast majority of the
     deficiencies asserted in the FPAA on the grounds that
     the partnership’s activities lacked economic substance.
     The taxpayer has now offered to compromise all the
     penalties and interest on terms more favorable than
     those contained in the prior settlement offer, arguing
     that TEFRA is unfair and that the liabilities accrued
     in large part due to the actions of the Tax Matters
     Partner (TMP) during the audit and litigation. Neither
     the operation of the TEFRA rules nor the TMP’s actions
     on behalf of the taxpayer provide grounds to compromise
     under the equity provision of paragraph (b)(4)(i)(B) of
     this section. Compromise on those grounds would
     undermine the purpose of both the penalty and interest
     provisions at issue and the consistent settlement
     principles of TEFRA. * * *

1 Administration, Internal Revenue Manual (CCH), sec.
                              - 14 -

5.8.11.2.2(3), at 16,378.   We agree with respondent that the

example presents circumstances similar to those in petitioners’

case, including:   Petitioners invested in TEFRA partnerships in

the early 1980s; petitioners’ outstanding tax liability is

related to their investment in the partnerships; FPAAs were

issued to the partnerships; respondent proposed a settlement

offer which petitioners rejected;14 after several years of

litigation, Tax Court decisions upheld the vast majority of the

deficiencies asserted in the FPAAs; and petitioners argue that

interest has accumulated as the result of delays by and other

actions of the tax matters partner.

     Petitioners are also correct in asserting that not all the

facts in their case are present in the example.   However, it is

unreasonable to expect that facts in an example be identical to

facts of a particular case before the example can be relied upon.

The IRM example was only one of many factors respondent

considered.   Given the similarities to petitioners’ case,

respondent’s reliance on that example was not arbitrary or

capricious.

     3.   Petitioners’ Other “Equitable Facts”

     Petitioners argue that respondent abused his discretion by

failing to consider the other “equitable facts” of this case.


     14
        Mr. Freeman testified that he received a settlement
offer, but the details of the settlement offer are not in the
record.
                                - 15 -

Petitioners’ “equitable facts” include reference to:       (1)

Petitioners’ reliance on Bales v. Commissioner, T.C. Memo. 1989-

568;15 (2) petitioners’ reliance on Hoyt’s enrolled agent status;

(3) Hoyt’s criminal conviction; (4) Hoyt’s fraud on petitioners;

and (5) other letters and cases.     The basic thrust of

petitioners’ argument is that they were defrauded by Hoyt and

that, if they were held responsible for penalties and interest

incurred as a result of their investment in a tax shelter, it

would be inequitable and against public policy.     Petitioners’

argument is not persuasive.

     While the regulations do not set forth a specific standard

for evaluating an offer-in-compromise based on claims of public

policy or equity, the regulations contain two examples.       See sec.

301.7122-1(c)(3)(iv), Examples (1) and (2), Proced. & Admin.

Regs.     The first example describes a taxpayer who is seriously

ill and unable to file income tax returns for several years.       The



     15
        Bales v. Commissioner, T.C. Memo. 1989-568, involved
deficiencies determined against various investors in several Hoyt
partnerships. This Court found in favor of the investors on
several issues, stating that “the transaction in issue should be
respected for Federal income tax purposes.” Taxpayers in many
Hoyt-related cases have used Bales as the basis for a reasonable
cause defense to accuracy-related penalties. This argument has
been uniformly rejected by this Court and by the Courts of
Appeals for the Sixth, Ninth, and Tenth Circuits. See, e.g.,
Hansen v. Commissioner, 471 F.3d 1021 (9th Cir. 2006), affg. T.C.
Memo. 2004-269; Mortensen v. Commissioner, 440 F.3d 375, 390-391
(6th Cir. 2006), affg. T.C. Memo. 2004-279; Van Scoten v.
Commissioner, 439 F.3d 1243, 1254-1256 (10th Cir. 2006), affg.
T.C. Memo. 2004-275.
                              - 16 -

second example describes a taxpayer who received erroneous advice

from the Commissioner as to the tax effect of the taxpayer’s

actions.   Neither example bears any resemblance to this case.

Unlike the exceptional circumstances exemplified in the

regulations, petitioners’ situation is neither unique nor

exceptional in that their situation mirrors those of numerous

other taxpayers who claimed tax shelter deductions in the 1980s

and 1990s.   See Keller v. Commissioner, T.C. Memo. 2006-166;

Barnes v. Commissioner, T.C. Memo. 2006-150.

     Of course, the examples in the regulations are not meant to

be exhaustive, and petitioners have a more sympathetic case than

the taxpayers in Fargo v. Commissioner, 447 F.3d at 714, for whom

the Court of Appeals for the Ninth Circuit noted that “no

evidence was presented to suggest that Taxpayers were the subject

of fraud or deception”.   Such considerations, however, have not

kept this Court from finding investors in the Hoyt tax shelters

to be liable for penalties and interest, nor have they prevented

the Courts of Appeals for the Sixth, Ninth, and Tenth Circuits

from affirming our decisions to that effect.   See Hansen v.

Commissioner, 471 F.3d 1021 (9th Cir. 2006), affg. T.C. Memo.

2004-269; Mortensen v. Commissioner, 440 F.3d 375 (6th Cir.

2006), affg. T.C. Memo. 2004-279; Van Scoten v. Commissioner, 439

F.3d 1243 (10th Cir. 2006), affg. T.C. Memo. 2004-275.
                              - 17 -

     Ms. Cochran testified that she considered all of Ms.

Merriam’s and petitioners’ assertions, including the numerous

letters and exhibits.   Nevertheless, Ms. Cochran determined that

petitioners did not qualify for an offer-in-compromise.

     The mere fact that petitioners’ “equitable facts” did not

persuade respondent to accept their offer-in-compromise does not

mean that those assertions were not considered.    The notice of

determination and Ms. Cochran’s testimony demonstrate

respondent’s clear understanding and careful consideration of the

facts and circumstances of petitioners’ case.    We find that

respondent’s determination that the “equitable facts” did not

justify acceptance of petitioners’ offer-in-compromise was not

arbitrary or capricious, and thus it was not an abuse of

discretion.

     We also find that compromising petitioners’ case on grounds

of public policy or equity would not enhance voluntary compliance

by other taxpayers.   A compromise on that basis would place the

Government in the unenviable role of an insurer against poor

business decisions by taxpayers, reducing the incentive for

taxpayers to investigate thoroughly the consequences of

transactions into which they enter.    It would be particularly

inappropriate for the Government to play that role here, where

the transaction at issue is participation in a tax shelter.

Reducing the risks of participating in tax shelters would
                              - 18 -

encourage more taxpayers to run those risks, thus undermining

rather than enhancing compliance with the tax laws.   See Barnes

v. Commissioner, supra.

B.   Petitioners’ Other Arguments

     1.   Compromise of Penalties and Interest in an Effective
          Tax Administration Offer-in-Compromise

     Petitioners advance a number of arguments focusing on their

assertion that respondent determined that penalties and interest

could not be compromised in an effective tax administration

offer-in-compromise.   Petitioners argue that such a determination

is contrary to legislative history and is therefore an abuse of

discretion.   These arguments are not persuasive.

     The regulations under section 7122 provide that “If the

Secretary determines that there are grounds for compromise under

this section, the Secretary may, at the Secretary’s discretion,

compromise any civil * * * liability arising under the internal

revenue laws”.   Sec. 301.7122-1(a)(1), Proced. & Admin. Regs.   In

other words, the Secretary may compromise a taxpayer’s tax

liability if he determines that grounds for a compromise exist.

If the Secretary determines that grounds do not exist, the amount

offered (or the way in which the offer is calculated) need not be

considered.
                              - 19 -

     Petitioners’ arguments regarding the compromise of penalties

and interest do not relate to whether there are grounds for a

compromise.   Instead, these arguments go to whether the amount

petitioners offered to compromise their tax liability was

acceptable.   As addressed above, respondent’s determination that

the facts and circumstances of petitioners’ case did not warrant

acceptance of their offer-in-compromise was not arbitrary or

capricious and was thus not an abuse of discretion.   Because no

grounds for compromise exist, we need not address whether

respondent can or should compromise penalties and interest in an

effective tax administration offer-in-compromise.   See Keller v.

Commissioner, supra.

     2.   Information Sufficient for the Court To Review
          Respondent’s Determination

     Petitioners argue that respondent failed to provide the

Court with sufficient information “so that this Court can conduct

a thorough, probing, and in-depth review of respondent’s

determinations.”   Petitioners’ argument is without merit.

     Generally, a taxpayer bears the burden of proving the

Commissioner’s determinations incorrect.    Rule 142(a)(1); Welch

v. Helvering, 290 U.S. 111, 115 (1933).16   The burden was on


     16
        While sec. 7491 shifts the burden of proof and/or the
burden of production to the Commissioner in certain
circumstances, this section is not applicable in this case
because respondent’s examination of petitioners’ returns did not
commence after July 22, 1998. See Internal Revenue Service
                                                    (continued...)
                              - 20 -

petitioners to show that respondent abused his discretion.    The

burden was not on respondent to provide enough information to

show that he did not abuse his discretion.    Nevertheless, we find

that we had more than sufficient information to review

respondent’s determination.

     3.   Deadline for Submission of Information

     Petitioners argue that Ms. Cochran abused her discretion by

not allowing their counsel additional time to submit information

to be considered.   Petitioners’ argument is not supported by the

record.

     Petitioners assert that they were “initially only given four

weeks” to provide all information.     However, they ignore the fact

that Ms. Cochran granted their requested extension and allowed

them until May 14, 2004, to submit information.    Additionally,

petitioners have not identified any documents or other

information that they believe Ms. Cochran should have considered

but that they were unable to produce because of the deadline for

submission.   Given the thoroughness and the amount of information

submitted, it is unclear why petitioners needed additional time.

We do not believe that Ms. Cochran abused her discretion by

establishing a deadline for the submission of information.




     16
      (...continued)
Restructuring and Reform Act of 1998, Pub. L. 105-206, sec.
3001(c), 112 Stat. 727.
                                - 21 -

     4.     Mrs. Freeman’s Pending Innocent Spouse Claim

     At the time of the section 6330 hearing, Mrs. Freeman had an

innocent spouse case pending before the Tax Court at docket No.

18985-02 for her 1980 through 1986 and 1994 tax years.     In their

petition, petitioners argued that, because of Mrs. Freeman’s

pending innocent spouse case:     (1) Respondent abused his

discretion by considering the assets of both spouses; and (2) the

notice of intent to levy was invalid against Mrs. Freeman.

     Petitioners did not argue on brief that respondent abused

his discretion by considering the assets of both spouses.

Therefore, we conclude that petitioners have abandoned this

argument.     Even so, we do not find that Ms. Cochran’s

consideration of the assets of both spouses was arbitrary or

capricious.     In the final notice, respondent proposed to levy

against petitioners’ assets to collect their outstanding tax

liabilities for 1980 through 1985, 1989, and 1990.     Because her

innocent spouse case did not include 1989 and 1990, Mrs.

Freeman’s assets were exposed to collection of her outstanding

tax liabilities for those years.

     Petitioners continued to argue on brief that the notice of

intent to levy was invalid against Mrs. Freeman.     This issue is

moot.     Section 6015(e)(1)(B)(i) provides:

     no levy * * * shall be made, begun, or prosecuted
     against the individual making an election under
     subsection (b) or (c) [relating to innocent spouse
     relief] for collection of any assessment to which such
                                - 22 -

       election relates * * * if a petition has been filed
       with the Tax Court * * * until the decision of the Tax
       Court has become final.

Accordingly, respondent determined that the final notice would be

rescinded as it related to Mrs. Freeman’s 1980 through 1985 tax

years.

       5.    Efficient Collection Versus Intrusiveness

       Petitioners argue that respondent failed to balance the need

for efficient collection of taxes with the legitimate concern

that the collection action be no more intrusive than necessary.

See sec. 6330(c)(3)(C).     Petitioners’ argument is not supported

by the record.

       Petitioners have an outstanding tax liability.    In their

section 6330 hearing, petitioners proposed only an offer-in-

compromise.     Because no other collection alternatives were

proposed, there were not less intrusive means for respondent to

consider.     We find that respondent balanced the need for

efficient collection of taxes with petitioners’ legitimate

concern that collection be no more intrusive than necessary.

C.     Conclusion

       Petitioners have not shown that respondent’s determination

was arbitrary or capricious, or without sound basis in fact or

law.     For all of the above reasons, we hold that respondent’s

determination was not an abuse of discretion, and respondent may
                             - 23 -

proceed with the proposed collection action as determined in the

notice of deficiency.

     In reaching our holdings herein, we have considered all

arguments made, and, to the extent not mentioned above, we find

them to be moot, irrelevant, or without merit.

     To reflect the foregoing,


                                             Decision will be

                                        entered for respondent.
