                       T.C. Memo. 2008-132



                      UNITED STATES TAX COURT



STANLEY SHELDON KRADMAN AND LAURA SARAH KRADMAN, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3909-07L.                Filed May 15, 2008.



     Stanley Sheldon Kradman and Laura Sarah Kradman, pro se.

     Derek P. Richman, for respondent.



                        MEMORANDUM OPINION


     COHEN, Judge:   The petition in this case was filed in

response to a Notice of Determination Concerning Collection

Action(s) Under Section 6320 and/or 6330 (notice of

determination) with respect to petitioners’ income tax liability

for 2003 and 2004 and a Decision Letter Concerning Equivalent

Hearing Under Section 6320 and/or Section 6330 of the Internal
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Revenue Code (decision letter) for petitioners’ income tax

liabilities for 1994 through 2002.      The issues for decision are:

     (1) Whether the decision letter should be treated as a

notice of determination entitling petitioners to judicial review;

     (2) whether sustaining the filing of a Federal tax lien was

an abuse of discretion; and

     (3) whether penalties and/or interest on petitioners’

outstanding liabilities should be abated.

     Unless otherwise indicated, all section references are to

the Internal Revenue Code.

                              Background

     Petitioners resided in Florida at the time that they filed

their petition.

     After this case was set for trial, respondent filed a motion

to dismiss for lack of jurisdiction and to strike as to the

taxable years 1994 through 2002 (motion to dismiss).     In the

motion to dismiss respondent contended that petitioners did not

timely request a hearing under section 6320 and that, therefore,

they were properly issued a decision letter rather than a notice

of determination with regard to their tax years 1994 through

2002.    However, in a supplement to respondent’s motion to

dismiss, respondent contended that petitioners had made but

withdrawn a timely request for a hearing with respect to those

years.    A second request for the same years was not timely.
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Thus, according to respondent, petitioners were entitled only to

an equivalent hearing resulting in the issuance of a decision

letter with respect to those years.      Because the decision letter

is not a “determination” under section 6330, respondent argues,

the Court does not have jurisdiction and petitioners are not

entitled to judicial review under section 6320 or section 6330

with respect to 1994 through 2002.       See Kennedy v. Commissioner,

116 T.C. 255 (2001).

     Respondent also filed a motion for partial summary judgment

with respect to 2003 and 2004.    The motion to dismiss and the

motion for partial summary judgment were set for hearing at the

time previously set for trial.    Petitioner Stanley Sheldon

Kradman (petitioner) testified, as did the hearing officer.

Petitioner testified, among other things, that he had made a

timely request for a hearing for all years in dispute, that he

was later told by IRS personnel that, unless he withdrew that

request, he could not settle his liabilities or pursue an offer-

in-compromise (OIC); and that he either misunderstood or was

misled about the effect of withdrawing his request.      Respondent’s

counsel acknowledged that respondent was unable to find the

purported withdrawal or any information regarding the

circumstances under which it occurred.      In any event, a hearing

with respect to all years, 1994 through 2004, occurred at the

same time, involved the same issues, and requires the same
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analysis from the Court.   Because petitioner made a timely

request for a hearing and there is no reliable evidence of an

effective withdrawal, the motion to dismiss will be denied.     See

Craig v. Commissioner, 119 T.C. 252, 259 (2002).     Because the

motion for partial summary judgment presumed that the motion to

dismiss would be granted, and because testimony was taken as at

trial, the motion for partial summary judgment will be denied and

the case decided on the evidence presented at trial.

     The facts are essentially undisputed, though not stipulated.

Since 2003, petitioners have been attempting to resolve their

long-outstanding tax liabilities through OICs.    The OICs were

rejected on the ground that petitioners were not in compliance

with then-current tax obligations.     As a condition of processing

one of the later OICs, petitioners were requested to submit a

$150 fee.   Petitioner asserted that they could not pay the fee.

     On February 1, 2005, the Internal Revenue Service (IRS) sent

petitioners a Notice of Federal Tax Lien Filing and Your Right to

a Hearing under IRC 6320 for tax years 1994 through 2003.     On

February 28, 2005, petitioners requested a hearing.    On February

16, 2006, a Notice of Federal Tax Lien Filing and Your Right to a

Hearing Under IRC 6320 was sent to petitioners with respect to

tax years 2003 and 2004.   On March 19, 2006, petitioners
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requested a hearing.   A hearing was conducted by an Appeals

Settlement Officer (hearing officer) on October 16, 2006, and the

notices underlying this case were sent on January 18, 2007.

     At the time of the hearing conducted under section 6330, the

hearing officer explained that collection alternatives could not

be considered unless petitioners brought themselves into

compliance with then-current obligations.   The hearing officer

determined that petitioners were not in compliance with estimated

tax requirements for 2006 and had not filed their 2005 return.

Nonetheless, the hearing officer received and reviewed financial

data petitioners provided.   He advised petitioners that

collection alternatives could be considered, such as an

installment agreement for payments of approximately $1,700 per

month, if petitioners became compliant.   Petitioners declined to

pursue an installment agreement.

                             Discussion

     Petitioners have invoked our jurisdiction under section

6330(d) to review the determination of the hearing officer to

sustain the notice of filing a Federal tax lien.    They have not

challenged the amount of the underlying liability, although at

trial petitioner asserted that their inability to pay the

outstanding balances results from delays by the IRS that

increased the amount of penalties and interest.    Because the

matter of abatement of the penalties and interest was not raised
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before the Office of Appeals, we cannot consider it now.     See

Giamelli v. Commissioner, 129 T.C. 107, 113-114 (2007).      Because

the underlying liability is not properly at issue, we review the

determination only for abuse of discretion, which requires us to

decide whether the determination was arbitrary, capricious, or

without sound basis in fact or law.    See id. at 111.    Reliance on

a failure to pay current taxes in rejecting a collection

alternative does not constitute an abuse of discretion.      Id. at

111-112 (citing Orum v. Commissioner, 123 T.C. 1, 4, 13 (2004),

affd. 412 F.3d 819 (7th Cir. 2005)).

     Petitioners complain that misstatements were made as to

whether they had timely requested a hearing with respect to their

1994 through 2002 liabilities and that those misstatements and

other delays by the IRS increased penalties and interest beyond

petitioners’ ability to pay.   Petitioners’ tax history and the

testimony at trial suggest that the outstanding amounts would not

have been paid any earlier if the confusion about the timeliness

of their request for hearing had not occurred.   The essence of

their complaint is that their liabilities should have been

compromised in spite of their failure to maintain current

compliance.

     Petitioners have presented no persuasive evidence or

argument that an abuse of discretion occurred here.      Petitioners

have not shown that there was an error in determining that they
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were not compliant with their current tax obligations, and they

did not offer or agree to any collection alternatives.

     We conclude that it was not an abuse of discretion to

sustain the filing of a lien.


                                            An appropriate order

                                        and decision will be entered.
