                        T.C. Memo. 2011-270



                      UNITED STATES TAX COURT



                 DAVID C. WARING, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1599-10L.             Filed November 15, 2011.



     David C. Waring, pro se.

     James R. Bamberg, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     PARIS, Judge:   On December 14, 2009, respondent mailed to

petitioner a Notice of Determination Concerning Collection

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

determination) which sustained the filing of a notice of intent

to levy for taxable years 2005 and 2006.   In response to that
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notice and pursuant to section 6330(d),1 petitioner timely

petitioned this Court for review of respondent’s refusal to

consider the underlying tax liabilities and denial of

petitioner’s offer-in-compromise (OIC) in a collection due

process (CDP) hearing.

     The issues for decision are (1) whether petitioner was

provided the opportunity to challenge the underlying tax

liabilities for taxable years 2005 and 2006, and (2) whether

respondent’s determination to sustain the collection by levy was

an abuse of discretion.

                          FINDINGS OF FACT

     Some of the facts and exhibits have been stipulated and are

incorporated herein by reference.   At the time the petition was

filed, petitioner resided in Florida.

     Petitioner timely filed his taxable year 2005 and 2006

Federal income tax returns.   On February 21, 2008, respondent

mailed to petitioner a notice of deficiency determining income

tax deficiencies for taxable years 2005 and 2006 and accuracy-

related penalties under section 6662.   Petitioner received the




     1
      All section references are to the Internal Revenue Code as
amended, and all Rule references are to the Tax Court Rules of
Practice and Procedure, unless otherwise indicated.
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notice of deficiency but failed to contest or pay the outstanding

tax liabilities.2

     On May 25, 2009, respondent sent to petitioner a Notice of

Intent to Levy and Notice of Your Right to a Hearing for the

unpaid income tax and penalties for taxable years 2005 and 2006.

On June 15, 2009, petitioner submitted a Form 12153, Request for

a Collection Due Process or Equivalent Hearing, with respect to

the proposed collection by levy.   In his request, petitioner

requested an OIC and disagreed with the levy because of economic

hardship.

     On October 13, 2009, Settlement Officer (SO) LaTorre sent to

petitioner a letter which scheduled a November 18, 2009, CDP

hearing.    The letter further advised petitioner that in order for

an OIC to be considered, he had to provide SO LaTorre within 14

days of the letter with the following:   (1) Signed Federal tax

returns for taxable periods ended December 31, 2007 and 2008, (2)

a completed Form 433-A, Collection Information Statement for Wage

Earners and Self-Employed Individuals, and (3) a proposal for

repayment.




     2
      Some time after the 90-day window to file a petition with
the Court, petitioner did prepare and submit a Form 1040X,
Amended U.S. Individual Income Tax Return, and contact
respondent’s audit reconsideration unit. Unfortunately,
petitioner did not simultaneously file a timely petition with the
Court, therefore documents and arguments related to this are not
relevant.
                                - 4 -

     On October 27, 2009, petitioner contacted SO LaTorre and

requested a face-to-face CDP hearing, which SO LaTorre denied as

petitioner was not in compliance with filing requirements.     On

November 16, 2009, respondent agreed to petitioner’s request to

reschedule the CDP hearing until November 20, 2009, to allow

petitioner further time to collect documentation.

     On November 20, 2009, SO LaTorre held a telephone CDP

hearing with petitioner.    Petitioner challenged the underlying

tax liabilities for the periods at issue and challenged the levy

as inappropriate because of petitioner’s financial hardship.

     On December 14, 2009, respondent mailed to petitioner a

notice of determination upholding the levy action, denying

petitioner’s OIC.   As petitioner had had a previous opportunity

to contest the underlying liabilities, he was not able to contest

them at the CDP hearing.3   Further, while petitioner orally

mentioned an OIC, petitioner never filed documentation supporting

the offer.    In response, petitioner timely filed a petition with

this Court.

                               OPINION

     Where the validity of the underlying tax liability is

properly at issue, the Court will review the matter de novo.


     3
      The outstanding tax liabilities for both taxable years stem
from petitioner’s attempt to form a sec. 501(c)(3) charitable
organization. Unfortunately, petitioner did not file the
application for tax-free status until Apr. 13, 2007, after the
taxable years at issue.
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Davis v. Commissioner, 115 T.C. 35, 39 (2000).     Where the

underlying tax liability is not properly at issue, the Court will

review the Commissioner’s administrative determination for abuse

of discretion.   Sego v. Commissioner, 114 T.C. 604, 610 (2000);

Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).

     Petitioner may prove abuse of discretion by showing that

respondent exercised his discretion arbitrarily, capriciously, or

without sound basis in fact or law.    See Giamelli v.

Commissioner, 129 T.C. 107, 111 (2007).

Underlying Liability

     Generally, section 6330 provides protections for taxpayers

in tax collection matters.   Under section 6330, a taxpayer is

given notice of the Government’s intent to levy and the right to

an administrative collection hearing and judicial review of that

proposed levy.   Goza v. Commissioner, supra at 179.     A taxpayer

may dispute the underlying tax liability at the administrative

hearing if two requirements have been satisfied:    (1) The

taxpayer did not receive a notice of deficiency for that tax

liability and (2) the taxpayer did not otherwise have an

opportunity to dispute that tax.   See Hoyle v. Commissioner, 131

T.C. 197, 199 (2008).

     Petitioner was sent a notice of deficiency on February 21,

2008, which informed him that he had until May 21, 2008, to file

a petition with the Court.   Petitioner failed to file a petition
                                - 6 -

with the Court before the period to file expired.    Therefore,

petitioner had an opportunity to dispute the tax, and the

standard of review for the denial of his OIC is abuse of

discretion.

Abuse of Discretion

     Petitioner contends that respondent’s refusal to consider a

collection alternative because he had not filed a formal OIC was

an abuse of discretion.    Taxpayers who wish to propose an OIC

must submit a Form 656, Offer in Compromise.    See Goodwin v.

Commissioner, T.C. Memo. 2003-289, affd. 132 Fed. Appx. 785 (11th

Cir. 2005).    The Court has held that there is no abuse of

discretion when Appeals fails to consider an OIC when a Form 656

was not filed with Appeals.    See Pough v. Commissioner, 135 T.C.

344, 352 (2010); Kendricks v. Commissioner, 124 T.C. 69, 79

(2005); cf. Vinatieri v. Commissioner, 133 T.C. 392 (2009).

Petitioner did not submit a Form 656 or propose defined

settlement terms.    The Court finds that SO LaTorre did not abuse

her discretion in rejecting petitioner’s proposed collection

alternative.

Balancing Test Under Section 6330(c)(3)(C)

     An SO’s review of a taxpayer’s OIC must include:    (1)

Verification that the requirements of any applicable law or

administrative procedure have been met; (2) consideration of any

allowance issues raised by the taxpayer; and (3) review of
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whether the proposed collection action balances the need for the

efficient collection of taxes with the legitimate concern that

any collection action be no more intrusive than necessary.      Sec.

6330(c)(3).

     SO LaTorre met all of these requirements.       She reviewed the

Internal Revenue Service’s transcripts and computer records of

petitioner’s account to determine that the requirements of

applicable law and administrative procedure had been met.      See

Hill v. Commissioner, T.C. Memo. 2002-272.       SO LaTorre considered

the issues petitioner raised but determined that he could not

contest the validity or amount of his underlying tax liabilities

because he had had a prior opportunity to do so.       SO LaTorre also

rejected petitioner’s OIC, as he failed to file a Form 656.      SO

LaTorre performed the balancing test, finding that the levy

balanced the need for collection with the concerns of petitioner.

     To reflect the foregoing,


                                              Decision will be entered

                                         for respondent.
