                               T.C. Memo. 2016-97


                         UNITED STATES TAX COURT



            JOHN O. DREW AND TOYA M. DREW, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 30204-14L.                        Filed May 12, 2016.



      Charles Zagara, for petitioners.

      Karen Lynne Baker, for respondent.



                           MEMORANDUM OPINION


      LAUBER, Judge: In this collection due process (CDP) case, petitioners

seek review, pursuant to sections 6320(c) and 6330(d)(1),1 of the determinations

by the Internal Revenue Service (IRS or respondent) to uphold notices of Federal


      1
       All statutory references are to the Internal Revenue Code in effect at all
relevant times, and all Rule references are to the Tax Court Rules of Practice and
Procedure. We round all dollar amounts to the nearest dollar.
                                         -2-

[*2] tax lien (NFTL) filing and notices of intent to levy. Respondent has moved

for summary judgment under Rule 121, contending that there are no disputed

issues of material fact and that his determination to sustain the proposed collection

actions was proper as a matter of law. We agree and accordingly will grant the

motion.

                                     Background

      The following facts are based on the parties’ pleadings and respondent’s

motion, including the attached affidavits and exhibits. See Rule 121(b). Petition-

ers resided in Texas when they filed their petition.

      Petitioners filed joint Federal income tax returns for 2008, 2010, and 2011

but did not pay the tax shown as due. The IRS properly assessed the tax shown as

due on those returns, plus applicable additions to tax and interest, as follows:

      Year       Tax      Sec. 6654(a) Sec. 6651(a)(2) Interest

      2008   $58,664          $1,151           $2,347       $1,399
      2010    86,881             399            3,075        1,764
      2011    34,927             588              319          113
       Total 180,472           2,138            5,741        3,276

      In an effort to collect these outstanding liabilities, the IRS sent petitioners,

in mid-2013, final notices of intent to levy for all three years and an NFTL filing

for 2010 and 2011. Petitioners timely requested CDP hearings, seeking an offer-
                                        -3-

[*3] in-compromise (OIC) and withdrawal of the lien; they did not challenge their

underlying tax liability for any year in issue. Their requests were assigned to a

settlement officer (SO1).

      Upon receiving petitioners’ case, SO1 reviewed the administrative file and

confirmed that petitioners’ tax liabilities for 2008, 2010, and 2011 had been

properly assessed and that all other requirements of applicable law and adminis-

trative procedure had been met. Petitioners submitted a Form 656, Offer in

Compromise, offering to discharge their aggregate tax liabilities for $7,200, and a

Form 433-A, Collection Statement for Wage Earners and Self-Employed

Individuals. The Form 433-A listed assets including real property in Cypress,

Texas, a vehicle, and two bank accounts.

      Telephone CDP hearings were held on December 10, 2013, concerning the

notices of intent to levy, and on September 9, 2014, concerning the NFTL filing.

During the latter call SO1 discussed with petitioners’ representative various

discrepancies regarding items listed on their Form 433-A. He explained that

another settlement officer, SO2, had been assigned to review their OIC.

      SO2 wrote petitioners’ representative on September 23, 2014, requesting

additional information to verify items on the Form 433-A. Petitioners’ represen-

tative did not respond to that letter. On October 21, 2014, SO2 called petitioners’
                                          -4-

[*4] representative to remind him of the need to submit this information. He

promised to send the information by October 31, 2014, but did not do so. Having

received none of the additional information requested, SO2 recommended that

petitioners’ OIC be denied on the basis of the information she had.

      On November 18, 2014, the IRS issued petitioners a notice of determination

sustaining the NFTL filing for 2010 and 2011 and the notices of intent to levy for

all three years. In an attachment to this notice SO1 noted that petitioners’ total

outstanding tax liabilities as of November 6, 2014, were $251,492. He noted

SO2’s determination that petitioners’ reasonable collection potential (RCP) was

$90,150, consisting of $33,630 of equity in assets and $56,520 of future income.

Because petitioners’ OIC of $7,200 was substantially below their RCP, their offer

was found to be unacceptable. SO1 found no support for petitioners’ assertion

that withdrawal of the lien would facilitate collection of their tax liabilities, and he

accordingly sustained the proposed collection actions.

      On December 19, 2014, petitioners timely petitioned this Court for review

of the notice of determination. Their petition alleges that “withdrawal of the lien

will facilitate collection of the tax liability,” that an OIC “is an appropriate collec-

tion alternative,” and that the IRS “miscalculated taxpayers’ reasonable collection
                                        -5-

[*5] potential.” The petition raises no challenge to petitioners’ underlying tax

liability for 2008, 2010, or 2011.

      On January 21, 2016, respondent filed a motion for summary judgment. By

order dated January 27, 2016, we ordered petitioners to respond to the IRS motion

by February 29, 2016. This order explained in plain English what petitioners

needed to do by way of response and warned them that, “under Tax Court Rule

121(d), judgment may be entered against a party who fails to respond to a Motion

for Summary Judgment.” Petitioners did not respond to this Court’s order and

have not otherwise responded to respondent’s motion for summary judgment.

                                     Discussion

      The purpose of summary judgment is to expedite litigation and avoid costly,

time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90

T.C. 678, 681 (1988). Under Rule 121(b) the Court may grant summary judgment

when there is no genuine dispute as to any material fact and a decision may be

rendered as a matter of law. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520

(1992), aff’d, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary

judgment, we construe factual materials and inferences drawn from them in the

light most favorable to the nonmoving party. Ibid. However, the nonmoving

party “may not rest upon the mere allegations or denials” in his pleadings but
                                        -6-

[*6] instead “must set forth specific facts showing that there is a genuine dispute

for trial.” Rule 121(d); see Sundstrand Corp., 98 T.C. at 520.

      Because petitioners failed to respond to the motion for summary judgment,

the Court could enter a decision against them for that reason alone. See Rule

121(d). We will nevertheless consider the motion on its merits. We conclude that

there are no material facts in dispute and that this case is appropriate for summary

adjudication.

      Where (as here) there is no challenge to the amount of a taxpayer’s under-

lying tax liability, we review the IRS determination for abuse of discretion. Goza

v. Commissioner, 114 T.C. 176, 181-182 (2000). Abuse of discretion exists when

a determination is arbitrary, capricious, or without sound basis in fact or law. See

Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir.

2006).

      In deciding whether SO1 and SO2 abused their discretion in sustaining the

collection actions we consider whether they: (1) properly verified that the

requirements of any applicable law or administrative procedure have been met;

(2) considered any relevant issues petitioners raised; and (3) considered whether

“any proposed collection action balances the need for the efficient collection of

taxes with the legitimate concern of * * * [petitioners] that any collection action
                                          -7-

[*7] be no more intrusive than necessary.” Sec. 6330(c)(3). Our review of the

record establishes that SO1 analyzed the transcript of petitioners’ account, deter-

mined that the tax liabilities at issue were properly assessed, and determined that

all other requirements of applicable law and administrative procedure were fol-

lowed. The main issue petitioners raised concerns their entitlement to a collection

alternative.

      Section 7122(a) authorizes the IRS to compromise an outstanding tax lia-

bility. The regulations set forth three grounds for such compromise: (1) doubt as

to liability; (2) doubt as to collectibility; or (3) promotion of effective tax adminis-

tration. Sec. 301.7122-1(b), Proced. & Admin. Regs. The Secretary may compro-

mise a tax liability based on doubt as to collectibility--the ground petitioners ad-

vanced in their OIC--where the taxpayer’s assets and income render full collection

unlikely. Id. subpara. (2). Conversely, the IRS may reject an OIC where the tax-

payer’s RCP is greater than the amount he proposes to pay. See Johnson v. Com-

missioner, 136 T.C. 475, 486 (2011), aff’d, 502 F. App’x 1 (D.C. Cir. 2013). Ap-

peals officers are generally directed to reject offers substantially below the tax-

payer’s RCP where the offer is premised, as it was here, on doubt as to collecti-

bility. See Rev. Proc. 2003-71, 2003-2 C.B. 517.
                                         -8-

[*8] This Court does not independently review the reasonableness of the tax-

payer’s proposed collection alternative. Our review is limited to ascertaining whe-

ther the SO’s decision to reject that offer was arbitrary, capricious, or without

sound basis in law or fact. Murphy, 125 T.C. at 320. We do not substitute our

judgment for that of the settlement officer as to the acceptability of a particular

offer. See, e.g., Johnson, 136 T.C. at 488.

      SO2 determined that petitioners’ RCP was $90,150, consisting of $33,630

of equity in assets and $56,520 of future income. Because petitioners offered to

pay only $7,200, she did not abuse her discretion in rejecting their offer. Although

petitioners assert that SO2 “miscalculated” their RCP, they have adduced no facts

suggesting that she abused her discretion in making that calculation. Moreover,

petitioners repeatedly failed to supply SO2 with the additional financial informa-

tion she had requested. A settlement officer does not abuse her discretion by re-

jecting a collection alternative where the taxpayer has failed, after being given suf-

ficient opportunities, to supply the requisite financial information. See Hawkins v.

Commissioner, T.C. Memo. 2015-245, at *9; Maselli v. Commissioner, T.C.

Memo. 2010-19, 99 T.C.M. (CCH) 1089, 1092; Roman v. Commissioner, T.C.

Memo. 2004-20, 87 T.C.M. (CCH) 835, 838.
                                          -9-

[*9] Petitioners also assert that SO1 abused his discretion by refusing to

withdraw the NFTL filing. The IRS’ decision whether to withdraw an NFTL is

discretionary: “If the * * * [IRS] determines conditions for withdrawal are

present, the * * * [IRS] may (but is not required to) authorize the withdrawal.”

Sec. 301.6323(j)-1(c), Proced. & Admin. Regs. Even where the IRS accepts a

collection alternative, withdrawal of an NFTL filing is not automatic. See

Blackman v. Commissioner, T.C. Memo. 2013-194, at *4. Petitioners have set

forth no facts to demonstrate that the withdrawal of the NFTL would facilitate

collection of their tax liabilities; speculation along these lines is insufficient to

show that SO1 abused his discretion. See Cunningham v. Commissioner, T.C.

Memo. 2014-200, at *23. Finding no abuse of discretion in any respect, we will

grant summary judgment for respondent and sustain the proposed collection

actions.

      To reflect the foregoing,


                                                An appropriate order and decision

                                        will be entered.
