                  T.C. Summary Opinion 2006-112



                      UNITED STATES TAX COURT



             ROBERT CONDÉ DEL’GIUDICE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 14713-05S.               Filed July 17, 2006.


     Robert Condé del’Giudice, pro se.

     Kim-Khanh Thi Nguyen, for respondent.



     DEAN, Special Trial Judge:     This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.    Unless otherwise

indicated, subsequent section references are to the Internal

Revenue Code of 1986, as amended.   The decision to be entered is

not reviewable by any other court, and this opinion should not be

cited as authority.
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     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).   Pursuant to sections

6320(c) and 6330(d), petitioner seeks review of respondent’s

determination to proceed with collection of his tax liability for

1999.   The issue for decision is whether the Appeals officer

abused his discretion in sustaining a proposed levy to collect

petitioner’s unpaid 1999 tax liability.

                            Background

     The stipulation of facts and the exhibits received into

evidence are incorporated herein by reference.   At the time the

petition in this case was filed, petitioner resided in Buena

Park, California.

     Petitioner, a former software system engineer, is a teacher

of mathematics and computer technology in the Los Angeles public

school system.   In April of 2002 he married his second wife.

Petitioner did not pay Federal withholding taxes on his income

for 1999.   He did not file his Federal income tax return for 1999

until February 23, 2004.

     On May 22, 2004, respondent issued to petitioner a notice of

intent to levy regarding his unpaid tax liability for 1999.

Petitioner filed a Form 12153, Request for a Collection Due

Process Hearing, dated June 12, 2004, as to 1999, 2000, and 2001.

Respondent had sent to petitioner a notice of Federal tax lien
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filing (NFTLF) with respect to 1999 and 2001 on April 28, 2004.

As petitioner’s request for a hearing was not timely filed as to

the NFTLF for 1999 and 2001, he received only an equivalent

hearing on those issues.   Petitioner has accumulated tax

liabilities of more than $24,000 for 1999, 2000, 2001 and 2003.

The record does not reflect any activity by respondent relative

to 2003.

     On the same date that petitioner filed his Form 12153,

respondent received from petitioner a letter stating that he had

submitted a Form 656, Offer-in-Compromise (OIC), on account of

doubt as to collectibility, for 1999, 2000, and 2001.    The OIC,

received on January 12, 2004, was returned.   Petitioner

resubmitted his OIC along with a Form 433-A, Collection

Information Statement for Wage Earners and Self-Employed

Individuals, both dated May 29, 2004.   Petitioner later

supplemented his OIC with additional information attached to an

“Amended/Revised” OIC signed and dated July 6, 2004.    The

amended/revised OIC included 2003 as well as 1999, 2000, and

2001.   In November of 2004, petitioner sent to respondent a

letter enclosing an “updated” Form 433-A with attachments.

     All of petitioner’s OICs requested a “Short-Term Deferred

Payment Offer”, which must be paid more than 90 days, but within

24 months, from acceptance.   Petitioner offered to pay $2,500 on

his outstanding tax liabilities in all three versions of his OIC.
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     The Appeals officer accepted, as presented on the “updated”

Form 433-A, petitioner’s total joint monthly income amount of

$3,832.   He accepted as necessary joint monthly “living expenses”

the amounts claimed or substantiated by petitioner for “Food,

Clothing and Miscellaneous, Housing and Utilities,

Transportation, Health Care, Taxes, and Court Ordered Payments”

to his former wife.   The Appeals officer did not accept as

necessary living expenses, unverified “other” expenses of $200,

and he allowed only $160 of claimed credit card expenses of $200.

The allowed monthly joint necessary living expenses amounted to

$3,440, or $392 less than monthly income.

     The Appeals officer reviewing the case informed petitioner

that he was going to recommend that the levy action be sustained

because petitioner was able to pay more toward his tax

liabilities than he had offered.   Petitioner was invited to

submit a new OIC if his financial conditions were to change, and

he was admonished to file with remittance a Federal income tax

return for 2004, which at that time remained unfiled.    The

Appeals team manager, in a separate letter, informed petitioner

that his OIC was rejected because “an amount larger than the OIC

appears to be collectible.   We do not have authority to accept an

OIC in these circumstances.”
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                            Discussion

Offer-in-Compromise

     Petitioner’s only argument is that it was an abuse of

discretion for respondent to decline to accept his OIC predicated

on doubt as to collectibility.

     Under section 7122, the Secretary is authorized to

compromise civil or criminal tax liabilities.   Doubt as to

collectibility exists where the taxpayer’s assets and income are

less than the full amount of the tax liability.   Sec. 301.7122-

1(b)(2), Proced. & Admin. Regs.    In determining ability to pay,

taxpayers are allowed to retain sufficient funds to pay “basic

living expenses” determined under the individual’s facts and

circumstances.   Sec. 301.7122-1(c)(2), Proced & Admin. Regs.

Guidelines published by the Secretary on national and local

living expense standards are to be taken into account. Id.

     Section 7122 provides for administrative but not judicial

review of a rejection of a proposed OIC.   Sec. 7122(d); sec.

301.7122-1(f)(5), Proced & Admin. Regs.; see also Olsen v. United

States, 326 F. Supp. 2d 184, 188 (D. Mass.   2004), affd. 414 F.3d

144, 156-157 (1st Cir. 2005).

Section 6330

     Section 6330 generally provides that the Commissioner cannot

proceed with collection by way of a levy until the taxpayer has

been given notice and the opportunity for an administrative
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review of the matter (in the form of an Appeals Office hearing),

and, if dissatisfied, the person may obtain judicial review of

the administrative determination.   See Davis v. Commissioner, 115

T.C. 35, 37 (2000); Goza v. Commissioner, 114 T.C. 176, 179

(2000).

     Section 6330(c) prescribes the matters that a person may

raise at an Appeals Office hearing.    A taxpayer may raise any

relevant issue pertaining to the unpaid tax or the proposed levy

including collection issues such as spousal defenses, the

appropriateness of the Commissioner’s intended collection action,

and possible alternative means of collection, such as an OIC.

     Section 6330(c)(2)(B) provides that the existence and amount

of the underlying tax liability can be contested at an Appeals

Office hearing only if the taxpayer did not receive a notice of

deficiency for the taxes in question or did not otherwise have an

earlier opportunity to dispute the tax liability.    See Sego v.

Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner,

supra at 180-181.

     Where the validity of the tax liability is not properly part

of the appeal, the taxpayer may challenge the determination of

the Appeals officer for abuse of discretion.    Sego v.

Commissioner, supra at 609-610; Goza v. Commissioner, supra at

181-182.   As the underlying tax liability is not here in dispute,

the Court reviews the determination for abuse of discretion.
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     Petitioner objects to the appropriateness of the proposed

collection action.   Questions about the appropriateness of the

collection action include whether it is proper for the

Commissioner to proceed with the collection action as determined

in the notice of determination, and whether the type and/or

method of collection chosen by the Commissioner is appropriate.

See, e.g., Swanson v. Commissioner, 121 T.C. 111, 119 (2003)

(challenge to appropriateness of collection reviewed for abuse of

discretion).

     In order for petitioner to prevail under the abuse of

discretion standard, it is not enough for the Court to conclude

that the Court would not have authorized collection; the Court

must conclude that, in authorizing collection, the Appeals

officer has exercised discretion arbitrarily, capriciously, or

without sound basis in fact.   Estate of Jung v. Commissioner, 101

T.C. 412, 452 (1993); accord Mailman v. Commissioner, 91 T.C.

1079, 1084 (1988).   It has been held that an agency can abuse its

discretion by neglecting a significant relevant factor, by giving

weight to an irrelevant factor, or by considering only the proper

factors but nevertheless making a clear error in judging their

weight.   Henry v. INS, 74 F.3d 1, 4 (1st Cir. 1996).

     Petitioner argues that he cannot pay any amount toward his

tax liabilities greater than his OIC.   The Appeals officer

reviewed the financial information that petitioner submitted and
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determined that the OIC was not appropriate on the basis of doubt

as to collectibility because petitioner can pay more of his tax

liability over the collection period.       The Court, having reviewed

as exhibits the financial information submitted to the Appeals

officer, concludes that the Appeals officer could have reasonably

determined that petitioner’s OIC was insufficient.         See Kun v.

Commissioner, T.C. Memo. 2004-209, affd. 157 Fed. Appx. 971 (9th

Cir. 2005); Crisan v. Commissioner, T.C. Memo. 2003-318.

                           Conclusion

     Respondent’s determination to proceed with collection action

was not an abuse of discretion.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                              Decision will be entered

                                         for respondent.
