                               T.C. Memo. 2012-203



                         UNITED STATES TAX COURT



               MISS LARAS DOMINION INC., Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent


      Docket No. 28745-10L.                        Filed July 18, 2012.



      Stanley Dale Blyth, for petitioner.

      Paul Richard Zamolo and Tiffany Wu, for respondent.



                           MEMORANDUM OPINION


      KROUPA, Judge: This collection review matter is before the Court in

response to a Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 63301 (determination notice). The sole issue for decision is


      1
       All section references are to the Internal Revenue Code, and all Rule
references are to the Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
                                         -2-

whether respondent’s determination to proceed with the proposed collection action

was an abuse of discretion. We hold it was not.

                                     Background

       This case was submitted fully stipulated under Rule 122. The stipulation of

facts and the accompanying exhibits are incorporated by this reference. Petitioner is

a corporation, and its principal place of business was in Oakland, California, when it

filed the petition.

       Respondent sent petitioner a Letter 1058, Final Notice, Notice of Intent to

Levy and Notice of Your Right to a Hearing, concerning its employment tax

liabilities for the tax periods ending September 30, 2005, October 31 and December

31, 2007 and December 31, 2008 (tax periods at issue). Petitioner timely requested

a collection due process hearing (hearing), seeking an installment agreement or an

offer-in-compromise as a collection alternative.

       Settlement Officer Deborah Conley was assigned to conduct petitioner’s

hearing, which she scheduled with petitioner’s counsel. Petitioner’s counsel sent

SO Conley Form 433-B, Collection Information Statement for Businesses. The

Form 433-B indicates petitioner had monthly income of $25,216 and monthly

expenses of $28,093. The Form 433-B also indicates that petitioner expected its

income to decrease by 10% to 100% over the next three years.
                                          -3-

      SO Conley and petitioner’s counsel had a telephone hearing during which

petitioner’s counsel proposed an installment agreement. The proposed installment

agreement called for petitioner to make monthly payments of $1,000. Petitioner did

not raise any other issues during the hearing, including the underlying tax liability or

an offer-in-compromise as a collection alternative.

      SO Conley evaluated petitioner’s proposed installment agreement. She

determined that the financial information petitioner submitted did not demonstrate

that it could pay ongoing monthly expenses, pay current tax obligations and make

additional monthly payments of $1,000 under the proposed installment agreement.

Consequently, SO Conley sent petitioner the determination notice sustaining the

proposed collection action. Petitioner timely filed a petition.

                                      Discussion

      We are asked to decide whether SO Conley abused her discretion in

determining the proposed levy action was appropriate to collect petitioner’s unpaid

employment tax liabilities for the periods at issue. We begin with the general rules

that apply to collection actions.

      The Commissioner may collect a tax by levy upon the property of the

taxpayer liable if the taxpayer neglects or refuses to pay the tax liability within 10

days after notice and demand for payment. Sec. 6331(a). The Commissioner
                                          -4-

generally must provide the taxpayer written notice of the right to a hearing before

the levy is made. Sec. 6330(a). The taxpayer is entitled, upon request, to a hearing

before the Appeals Office. Sec. 6330(b)(1). The taxpayer may raise at that hearing

any relevant issues relating to the unpaid tax or the proposed collection action. Sec.

6330(c)(2). Relevant issues include any appropriate spousal defenses, challenges to

the appropriateness of collection actions and possible alternative means of collection

such as an installment agreement or an offer-in-compromise. Sec. 6330(c)(2)(A).

Taxpayers are expected to provide all relevant information requested by the

settlement officer for consideration of the facts and issues involved in the hearing.

Sec. 301.6330-1(e) (1), Proced. & Admin. Regs.

      After the hearing, the Appeals officer is required to make a determination that

addresses issues the taxpayer raised, verify that all requirements of applicable law

and administrative procedure have been met and balance the need for the efficient

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

action be no more intrusive than necessary. Sec. 6330(c)(3).

      We now turn to the standard of review. Where, as is the case here, the

validity of the underlying tax liability is not properly placed at issue, the Court will
                                           -5-

review the Commissioner’s determination for abuse of discretion.2 Goza v.

Commissioner, 114 T.C. 176, 182 (2000). We must consider whether the

Commissioner’s actions were arbitrary, capricious or without sound basis in fact or

law in reviewing an administrative determination for abuse of discretion. See

Woodral v. Commissioner, 112 T.C. 19, 23 (1999). The taxpayer bears the burden

of proving abuse of discretion. Rule 142(a); Titsworth v. Commissioner, T.C.

Memo. 2012-12.

       Petitioner asserts that SO Conley abused her discretition in rejecting the

proposed installment agreement as a collection alternative. We disagree. The

Secretary has discretionary authority to enter into installment agreements to satisfy

tax liabilities when it is determined that doing so will facilitate full or partial

collection. Sec. 6159(a). This Court has generally held that it is not an abuse of

discretion when an Appeals Office employee relies on guidelines published in the

Internal Revenue Manual (IRM) to evaluate a proposed installment agreement. See,

e.g., Orum v. Commissioner, 123 T.C. 1, 13 (2004), aff’d, 412 F.3d 819 (7th Cir.

2005); Aldridge v. Commissioner, T.C. Memo. 2009-276; Etkin v. Commissioner,

T.C. Memo. 2005-245. The IRM guidelines state that the procedures for processing

       2
         Petitioner did not contest the existence or amount of his underlying tax
liabilities at the hearing, so we need not consider that issue. See Giamelli v.
Commissioner, 129 T.C. 107 (2007).
                                         -6-

an installment agreement for a business are applicable only if taxpayers can pay

operating expenses as well as current and delinquent taxes. See IRM pt. 5.14.7.1

(Sept. 26, 2008).

      Here, SO Conley relied on the IRM guideline that a taxpayer must be able to

pay its operating expenses as well as current and delinquent taxes to qualify for an

installment agreement in evaluating petitioner’s proposed installment agreement.

She determined, relying on petitioner’s Form 433-B, that its monthly expenses

exceeded its monthly income and thus that it could not pay current operating

expenses and current taxes and make payments on delinquent taxes. Consequently,

she rejected petitioner’s proposed installment agreement.3

      Petitioner contends SO Conley disregarded information showing that it could

make the relevant payments under the proposed installment agreement. In

particular, petitioner claims SO Conley disregarded its assertion at the hearing that

changes in the economy had resulted in a temporary downturn in its revenues and

that going forward it could make the monthly payments under the proposed

      3
         We note that other than the proposed installment agreement, petitioner did
not raise any other collection alternatives at the hearing. In particular, petitioner
never requested that SO Conley suspend collection activity against it or indicated
that it could not pay the employment tax liabilities for the periods at issue. Indeed,
petitioner indicated that it was willing to pay $1,000 per month towards the
employment tax liabilities for the periods at issue. In addition, petitioner did not
propose an offer-in-compromise.
                                          -7-

installment agreement. The record does not reflect that petitioner ever made any

such assertion at the hearing or before the determination notice was issued. Nor

does the record reflect that petitioner provided any documentation supporting the

claimed assertion at the hearing. Moreover, the purported assertion directly

conflicts with information petitioner provided on Form 433-B that it expected its

income to decrease by 10% to 100% over the next three years. Finally, petitioner’s

claimed assertion is wholly insufficient to establish that it would be able to pay its

operating expenses along with its current and delinquent taxes. We have held that

when our review is limited to abuse of discretion, we will not recalculate a

taxpayer’s ability to pay and substitute our judgment for that of the settlement

officer. Aldridge v. Commissioner, T.C. Memo. 2009-276; see also Speltz v.

Commissioner, 124 T.C. 165, 179-180 (2005), aff’d, 454 F.3d 782 (8th Cir. 2006);

Bergevin v. Commissioner, T.C. Memo. 2008-6. We find that SO Conley’s

determination to reject petitioner’s proposed installment agreement was not

arbitrary, capricious or without sound basis in fact or law. It was therefore not an

abuse of discretion.

      Petitioner has not otherwise presented any evidence or persuasive

arguments to convince us that SO Conley abused her discretion. We therefore

conclude that SO Conley did not abuse her discretion in sustaining the proposed
                                         -8-

levy action to collect the outstanding employment tax liabilities for the tax periods at

issue.

         We have considered all arguments made in reaching our decision and, to the

extent not mentioned, we conclude that they are moot, irrelevant or without merit.

         To reflect the foregoing,


                                                      Decision will be entered for

                                               respondent.
