                        T.C. Memo. 2008-58



                      UNITED STATES TAX COURT



                  JAN L. ASHLOCK, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8778-06L.              Filed March 10, 2008.



     Gerald W. Douglas, for petitioners.

     John D. Davis, Thomas J. Travers, and Robin Ferguson, for

respondent.



                        MEMORANDUM OPINION

     SWIFT, Judge:   Under section 6320, petitioner challenges

respondent’s notice of determination rejecting petitioner’s

$2,400 offer-in-compromise (OIC) and sustaining respondent’s

notice of Federal tax lien relating to petitioner’s outstanding
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Federal income tax liabilities for 1996, 2000, 2001, 2002, and

2003, representing a cumulative total of $44,383.1

     Unless otherwise indicated, all section references are to

the sections of the Internal Revenue Code applicable to this

collection action, and all Rule references are to the Tax Court

Rules of Practice and Procedure.


                            Background

     The facts of this case have been submitted fully stipulated

under Rule 122 and are so found.

     Petitioner is a resident of Oregon.   Petitioner has been

employed as a nurse for many years.

     In 2001, petitioner was divorced from her husband of

8 years.

     As part of the divorce from her husband and separation of

their marital property, in 2001 petitioner was to receive assets

with a value of $26,480, including an interest in real property

located at 400 Lake Street, Berrien Springs, Michigan (the

Michigan property).   The interest had a value of $25,000 to

petitioner, as specified by the divorce court.

     The June 6, 2001, judgment in dissolution of petitioner’s

marriage expressly awarded to petitioner “all the parties’



     1
       Petitioner’s OIC also related to additional outstanding
Federal income tax liabilities petitioner owed for 1995 but which
are not otherwise involved in this case.
                                - 3 -
interest in the Michigan property.”     Also per the 2001 judgment

in dissolution of marriage, petitioner had monthly income of

$6,755.

     Eight years earlier, in December 1992, the Michigan property

had been the subject of sale and purchase documentation between

petitioner as seller and a relative of petitioner as purchaser.

The stated purchase price for this purported sale of the Michigan

property was approximately $136,000.

     In 2003, the Michigan property was sold to a third party.

The title closing documents do not indicate that petitioner had

an ownership interest in the Michigan property and do not

indicate that petitioner was entitled to any of the sales

proceeds.

     On January 1, 2004, a chapter 7 bankruptcy order was issued

in petitioner’s behalf discharging petitioner’s liability on

various debts.   Petitioner’s bankruptcy proceeding was treated as

a no-asset bankruptcy.

     In 2004, petitioner married Mike Beenken, to whom petitioner

is still married and with whom petitioner’s financial situation

over the recent years has significantly improved.

     On May 26, 2004, in an attempt to ward off respondent’s

proposed tax lien filing, petitioner submitted to respondent the

OIC that is in issue.    Petitioner offered to pay to respondent,

in monthly installments of $100, a total of $2,400 in compromise
                               - 4 -
of her cumulative total $44,383 outstanding Federal income tax

liabilities for 1996, 2000, 2001, 2002, and 2003.   With her OIC

petitioner submitted to respondent a Form 433-A, Collection

Information Statement for Wage Earners and Self-Employed

Individuals, and a Form 433-B, Collection Information Statement

for Businesses.   Petitioner did not include any information about

several assets––specifically, she submitted no information about

the Michigan property.

     On August 21, 2004, petitioner sold a 1996 Pontiac Firebird

to a third party for $5,250.

     On February 22, 2005, respondent filed with Washington

County, Oregon, a notice of Federal tax lien relating to

petitioner’s outstanding 1996, 2000, 2001, 2002, and 2003 Federal

income tax liabilities.

     On March 3, 2005, respondent mailed to petitioner a notice

of Federal tax lien filing in which petitioner’s appeal rights

under section 6320 were explained.

     On April 3, 2005, petitioner filed with respondent a

Form 12153, Request for a Collection Due Process Hearing.

     During the Appeals Office collection hearing that ensued

under section 6320 among petitioner, petitioner’s

representatives, and respondent’s Appeals officer, respondent’s

Appeals officer reviewed additional documentation which was

submitted relating to petitioner’s financial condition.
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Respondent’s Appeals officer specifically requested additional

information to establish whether petitioner had received an

ownership interest in the Michigan property under the 2001

divorce decree.   Respondent’s Appeals officer considered

documents submitted on petitioner’s behalf, including financial

information, made an extensive analysis of petitioner’s finances

and provided a copy thereof to petitioner.

     At the conclusion of the Appeals Office collection hearing,

respondent’s Appeals officer determined that petitioner had the

ability to pay in full her total cumulative $44,383 outstanding

1996, 2000, 2001, 2002, and 2003 Federal income tax liabilities

within the balance of the 10-year collection period of

limitations.   In particular, respondent’s Appeals officer

concluded that petitioner in her 2001 divorce proceeding had

received an ownership interest in the Michigan property with a

value of $25,000.    This interest constituted, for purposes of

respondent’s consideration of petitioner’s OIC, a dissipated

asset that should have been included in the financial information

submitted to respondent on petitioner’s behalf in connection with

petitioner’s OIC.    Accordingly, respondent’s Appeals officer

concluded that a minimally acceptable OIC from petitioner would

have to include the $25,000 value of petitioner’s interest in the

Michigan property.
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     On April 7, 2006, respondent’s Appeals Office issued its

notice of determination sustaining respondent’s notice of tax

lien filing and rejecting petitioner’s OIC.


                             Discussion

     Section 6330(c)(2)(A)(iii) permits a taxpayer to propose

collection alternatives to the filing of a Federal tax lien.

Rev. Proc. 2003-71, sec. 4.02(2), 2003-2 C.B. 517, 517, provides

that an OIC based on doubt as to collectibility will be treated

as an acceptable collection alternative only where the OIC

reflects the reasonable collection potential from the taxpayer.

     Where a taxpayer has dissipated assets in disregard of the

taxpayer’s outstanding Federal income taxes, the dissipated

assets may be included in the calculation of the minimum amount

that is to be paid under an acceptable OIC.   Internal Revenue

Manual (IRM) 5.8.5.4(5).

     A dissipated asset is defined as any asset (liquid or not

liquid) that has been sold, transferred, or spent on nonpriority

items and/or debts and is no longer available to pay the tax

liability.    Samuel v. Commissioner, T.C. Memo. 2007-312; IRM

5.8.5.4(1).

     Our review of respondent’s adverse determination relating to

petitioner’s proposed OIC focuses on whether respondent abused

his discretion in rejecting petitioner’s OIC.    Sego v.

Commissioner, 114 T.C. 604, 610 (2000).
                               - 7 -
     The evidence herein is conflicting as to ownership of the

Michigan property, and petitioner never provided to respondent’s

Appeals Office an adequate explanation as to why, in the 2001

divorce proceeding, petitioner claimed and was awarded an

interest in the Michigan property with a stated value of $25,000.

In spite of the 1992 sale of the Michigan property to a relative,

clearly petitioner must have retained some interest therein

through the time of her 2001 divorce proceeding.   Petitioner

failed to explain to respondent’s Appeals officer what happened

to this interest.   Further, the 2004 sale of the Michigan

property to a third party without any acknowledgment, in the

related closing documents, of petitioner’s interest therein does

not explain adequately what happened to petitioner’s $25,000

interest.

     At a May 7, 2007, hearing in this case, petitioner’s counsel

acknowledged that petitioner’s current financial condition has

improved significantly, but petitioner’s counsel declined on

petitioner’s behalf to have this matter remanded to respondent’s

Appeals Office for consideration of petitioner’s OIC in light of

petitioner’s current financial condition.

     On the basis of the inconsistent and inconclusive evidence

presented, respondent’s Appeals officer properly concluded that

the $25,000 that was awarded to petitioner in the 2001 divorce

proceeding relating to the Michigan property constituted a
                                - 8 -
dissipated asset that should have been included in petitioner’s

OIC.

       We sustain respondent’s determination rejecting petitioner’s

$2,400 OIC.


                                             An appropriate decision

                                        will be entered.
