Henry M. Lloyd, Petitioner

T .C . Memo . 2008-15 UNITED STATES TAX COUR T ADM .

RECORDE D SERVE c1,; CP.I .^^ ..

._ i C FILE S HENRY M . LLOYD, Petitioner v COMMISSIONER OF INTERNAL REVENUE, R spondent Docket No . 4395-06L . Filed J nuary 29, 2008 .

Stephen P . Kauffman , for petitioner .

C . Teddy Li , for respondent .

MEMORANDUM OPINION

CHIECHI, Judge : This case is before the ourt on respon- dent's motion for summary judgment (respondent s motion) . W e shall grant respondent's motion .

Background The record establishes and/or the parties do not dispute th e following .

SERVED JAN 2 9 2008

Petitioner resided in Washington, D .C ., at the time he filed the petition in this case .

On April 15, 1991, petitioner filed a Federal income tax (tax) return (return) for his taxable year 1990 (1990 return) .

When petitioner filed his 1990 return, he paid the tax due shown in that return .

At a time not disclosed by the record after petitioner filed his 1990 return and before September 2, 1996, the Internal Revenue Service (IRS) conducted an examination with respect to petitioner's taxable year 1990 . During that examination, the IRS proposed an increase in petitioner's tax of $55,609 for that taxable year, to which petitioner agreed .

On September 2, 1996, respondent assessed the additional tax of $55,609 to which petitioner had agreed and interest as pro- vided by law for petitioner's taxable year 1990 .1 (We shall refer to any unpaid assessed amounts with respect to petitioner's taxable year 1990, as well as interest as provided by law accrued after September 2, 1996, as petitioner's unpaid 1990 liability .

) 'On Feb . 13, 1997, and Jan . 22, 1998, petitioner made pay- ments with respect to his taxable year 1990 of $3,000 and $6,000, respectively . In addition, respondent credited a refund of $859 due to petitioner for his taxable year 2001 against the liability for petitioner's taxable year 1990 .

Respondent issued to petitioner the notice and demand for payment required by section 6303(a)2 with respect to petitioner's unpaid 1990 liability .

On April 15, 1992, petitioner filed a return for his taxable year 1991 (1991 return) . In that return, petitioner showed no tax due .

At a time not disclosed by the record after petitioner filed his 1991 return and before August 26, 1996, the IRS conducted an examination with respect to petitioner's taxable year 1991 .

During that examination, the IRS proposed an increase in peti- tioner's tax of $13,380 for that taxable year, to which peti- tioner agreed .

On August 26, 1996, respondent assessed t e additional tax of $13,380 to which petitioner had agreed an d nterest as pro- vided by law for petitioner's taxable year 19 9 . (We shall refer to any unpaid assessed amounts with respect t o petitioner's taxable year 1991, as well as interest as pro v ded by law accrued after August 26, 1996, as petitioner's unpai d 991 liability .

) Respondent issued to petitioner the noti c and demand for payment required by section 6303(a) with resp e t to petitioner' s unpaid 1991 liability .

On July 12, 1993, petitioner filed a return for his taxabl e 2All section references are to the Intern 1 Revenue Code in effect at all relevant times . All Rule references are to the Tax Court Rules of Practice and Procedure .

year 1992 (1992 return) . When petitioner filed his 1992 return, he paid the tax due shown in that return . ' At a time not disclosed by the record after petitioner filed his 1992 return and before September 2, 1996, the IRS conducted an examination with respect to petitioner's taxable year 1992 .

During that examination, the IRS proposed an increase in peti- tioner's tax of $323 for that taxable year, to which petitioner agreed .

On September 2, 1996, respondent assessed the additional tax of $323 to which petitioner had agreed and interest as provided by law for petitioner's taxable year 1992 . (We shall refer to any unpaid assessed amounts with respect to petitioner's taxable year 1992, as well as interest as provided by law accrued after September 2, 1996, as petitioner's unpaid 1992 liability .) 4 Respondent issued to petitioner the notice and demand for payment required by section 6303(a) with respect to petitioner's unpaid 1992 liability .

On April 15, 1995, petitioner filed a return for his taxable year 1994 (1994 return) . When petitioner filed his 1994 return , 3On Aug . 16, 1993, respondent assessed an addition to tax under sec . 6651(a)(2) of $3 .27 and interest as provided by law . On Aug . 31, 1993, petitioner paid those assessed amounts .

4We shall refer collectively to petitioner's unpaid 1990 liability, petitioner's unpaid 1991 liability, and petitioner's unpaid 1992 liability as petitioner's unpaid liabilities for 1990, 1991, and 1992 .

he did not pay the tax due shown in that return (i .e ., $656) .

On May 29, 1995, respondent assessed the tax due of $65 6 shown in petitioner's 1994 return, an addition to tax under section 6651(a)(2) of $6 .56, and interest as provided by law for petitioner's taxable year 1994 . (We shall refer to any unpaid assessed amounts with respect to petitioner's taxable year 1994, as well as interest as provided by law accrued after May 29, 1995, as petitioner's unpaid 1994 liability .

) Respondent issued to petitioner the notic and demand for payment required by section 6303(a) with respect to petitioner's unpaid 1994 liability .

On October 10, 1997, petitioner filed a r turn for his taxable year 1996 (1996 return) . When petitioner filed his 1996 return, he did not pay the tax due shown in th t return (i .e ., $4,291) .

On November 10, 1997, respondent assessed the tax due of $4,291 shown in petitioner's 1996 return, addi ions to tax under sections 6651(a)(1) and (2) and 6654 of $386 .1), $133 .38, and $202, respectively, and interest as provided b law for peti- tioner's taxable year 1996 . On April 13, 1998 respondent abated $480 of the assessed tax and $43 .20 of the ass ssed addition to tax under section 6651(a)(1) . On the same dat , respondent also assessed an addition to tax under section 6651(a)(2) of $95 .28 6 - and interest as provided by law accrued after November 10, 1997 .5 (We shall refer to any unpaid and unabated assessed amounts with respect to petitioner's taxable year 1996, as well as interest as provided by law accrued after April .13, 1998, as petitioner' s unpaid 1996 liability . ) Respondent issued to petitioner the notice and demand for payment required by section 6303(a) with respect to petitioner's unpaid 1996 liability .

On September 10, 1998, petitioner filed a return for his taxable year 1997 (1997 return) . When petitioner filed his 1997 return, he did not pay the tax due shown in that return (i .e ., $12,530) .

On October 26, 1998, respondent assessed the tax due of $12,530 shown in petitioner's 1997 return, additions to tax under sections 6651(a)(1) and (2) and 6654 of $563 .85, $438 .55, and $228 .11, respectively, and interest as provided by law for petitioner's taxable year 1997 . (We shall refer to any unpaid assessed amounts with respect to petitioner's taxable year 1997, as well as interest as provided by law accrued after October 26, 1998, as petitioner's unpaid 1997 liability .

) Respondent issued to petitioner the notice and demand for payment required by section 6303(a) with respect to petitioner' s 5On Apr . 15, 1999, respondent credited a refund of $610 due to petitioner for his taxable year 1998 against the liability for petitioner's taxable year 1996 .

unpaid 1997 liability .

On April 15, 2003, petitioner filed a re urn for his taxable year 2002 (2002 return) . When petitioner filed his 2002 return, he paid $36,389 of the tax due shown in that eturn (i .e ., $37,248) .

On June 16, 2003, respondent assessed the tax due, including the $859 unpaid portion of that tax, shown in petitioner's 2002 return, an addition to tax under section 6651( )(2) of $12 .88, and interest as provided by law for petitioner's taxable year 2002 . On January 19, 2005, petitioner paid $1,095 .63 with respect to his taxable year 2002 .6 On February 14, 2005, respon- dent assessed a total of $216 .42 consisting of an additional amount of the addition to tax under section 6651(a)(2) of $150 .33 and interest as provided by law accrued after Tune 16, 2003, of $66 .09 for petitioner's taxable year 2002 . (W shall refer to any unpaid assessed amounts with respect to pe itioner's taxable year 2002,' as well as interest as provided by . law accrued after February 14, 2005, as petitioner's unpaid 2002 liability .) ' 6After petitioner's payment on Jan . 19, 2005, petitioner's account with respect to his taxable year 2002 howed a credit of $216 .42 with respect to that year .

'It does not appear from the record that here is any unpaid amount of liability with respect to petitioner's taxable year 2002 . However, neither party makes any argument that there is no unpaid amount of liability with respect to that year .

'We shall refer collectively to petitioner's unpaid liabili- . .)

(continued .

Respondent issued to petitioner the notice and demand for payment required by section 6303(a) with respect to petitioner's unpaid 2002 liability .

On November 20, 2002, Kenneth H . Silverberg (Mr .

Silverberg), petitioner's authorized representative, sent a letter (Mr . Silverberg's November 20, 2002 letter) to a manager in the IRS's offer-in-compromise unit (IRS offer-in-compromise unit) . In that letter, Mr . Silverberg stated in pertinent part :

RE : Henry M . Lloyd * * * Henry M . Lloyd PC * * * Attached Offers in Compromise * Pursuant to your letters of November 5, 2002, and on behalf of my clients identified above, I respect- fully submit copies of two Offers In Compromise, at- tached as completed Forms 656, along with supporting Forms 433-A and 433-B, and additional documentation which was provided by your Revenue Officer * * * [first revenue officer] .

We were advised by your Process Examiners that this OIC as previously submitted to you on October 28, 2002, was acceptable in form other than the fact . that certain previous-period returns were not on file with the IRS (see attached statement by the taxpayer ex- plaining why these returns were not required, and attaching copies of returns as recently filed) and also that an obsolete version of Form 433-A and 433-B was used (the obsolete forms have been replaced with appro- priate forms, revision date 5/2001) .

'( .

. .continued) ties for 1990, 1991, and 1992, petitioner's unpaid 1994 liabil- ity, petitioner's unpaid 1996 liability, petitioner's unpaid 1997 liability, and petitioner's unpaid 2002 liability as petitioner's unpaid liabilities for 1990, 1991, 1992, 1994, 1996, 1997, and 2002 .

The history of this OIC is set forth here a s follows :

I am advised by the taxpayer and his that a lengthy Collection Division invest negotiation process has been conducted b y first revenue officer] . In early 2002, * first revenue officer] and the taxpayers' reached agreement regarding the amount of would be satisfactory to the Service . * * revenue officer] had reviewed the taxpaye A and 433-B, and had prepared the Service the "Amount That Could Be Paid" by each t [the first revenue officer] asked for an amount of $19,200 from Mr . Lloyd's PC, an in the amount of $6,576 from Mr . Lloyd pe accountant was assured by * * * [the firs officer] that these OIC's would be accept Service . A copy of the "Amount That Coul analysis is also included for your refer e accountant gation and * * * [the * * [the accountant an OIC that * [the first s' Forms 433- s analysis of xpayer . * * * IC in th e for an OIC sonally . The revenu e d by the Be Paid " ce .

The OIC's were submitted on February the exact amounts requested and the taxpa no response to date from the Service in r these OIC's .

13, 2002 in er received spect o f We have been advised by your Revenue [second revenue officer] of the IRS Appea Baltimore that the PC was considered to b compliance" during the first quarter of 2 payment by the taxpayer of a Form 941 pay was timely but mistakenly mailed as an at the Form 941 return as opposed to being c deposited with a bank . Therefore, these not rejected, but rather "returned" and t abeyance and eligible for resubmission on ers were compliant for two consecutive ca ters from the first quarter of 2002 . Bot have been fully compliant for the second quarters of 2002, and these OIC's should ble for action .

U Officer * * * s Office i n "out o f 02, because a oll deposit achment to rrectl y wo OIC's were us held i n e the taxpay- endar quar- taxpayer s nd thir d hus be eligi- After familiarizing herself with the after consulting with the OIC Manager in more Office, * * * [the second revenue of structed us that, since the February 13 0 been "rejected" (only "returned"), the to now resubmit the OIC's directly to your o case, an d he IRS Balti- icer] in- C's had not payers may fice .

Accordingly, since the taxpayers have now been in compliance for the two calendar quarters ended June 30, 2002 and September 30, 2002-and since the taxpayers are currently in full compliance-I respectfully submit the attached OIC's .

Mr . Silverberg enclosed with Mr . Silverberg's November 20, 2002 letter, inter alia, (1) completed Form 656, Offer in Compro- mise (Form 656 or offer-in-compromise), that petitioner signed and that was dated November 27, 2002 (petitioner's November 27, 2002 offer-in-compromise) and (2) completed Form 433-A, Collec- tion Information Statement for Wage Earners and Self-Employed Individuals (Form 433-A), that petitioner signed and that was dated November 27, 2002 (petitioner's November 27, 2002 Form 433- A) .9 Respondent assigned an offer-in-compromise specialist (first offer specialist) with the IRS offer-in-compromise unit to investigate petitioner's November 27, 2002 offer-in-compromise .

On January 12, 2004,1° Mr . Silverberg sent a letter to the first offer specialist (Mr . Silverberg's January 12, 2004 let- ter) . In that letter, Mr . Silverberg stated in pertinent part :

'The record does not indicate how Mr . Silverberg could have enclosed with Mr . Silverberg's November 20, 2002 letter Form 656 and Form 433-A that petitioner signed and that were dated Nov . 27, 2002, which was after the date of that letter . We note that each of those documents was apparently signed by petitioner again on Jan . 9, 2003 .

"The record does not disclose what transpired with respect to petitioner's November 27, 2002 offer-in-compromise and peti- tioner's November 27, 2002 Form 433-A between the time respondent assigned them to the first offer specialist and Jan . 12, 2004 .

RE : Offer In Compromise -- Henry M .

Lloyd * * * and Henry M . Lloyd, P .C . * * * * This letter and its attachments cons Offers In Compromise (OIC) for the two to tified above .

itute revised payers iden- In our telephone discussion of Decem described certain things which needed to order for the Service to consider the rev This cover letter describes how everythin has been accomplished . The attached Form the actual OIC' s . 1111 er 22, you e done in sed offers . you sought 656 contai n * Court-Ordered Payment s You advised me that your computation Collection Potential, which indicates Mr . ability to pay monthly installments of $1 no consideration of the cost of supportin or providing for their education, because duced no evidence that he was required by to pay such amounts . I apologize if you court order and I neglected to supply it understand that such a request had been m of Reasonable Lloyd has the 304, include s his children we had pro- a court order sked for the I did not de .

The Marital Settlement Agreement bet and his ex-wife is attached for your use . number of financial obligations on Mr . Ll the provision of health insurance and edu of which Mr . Lloyd is currently paying fo these obligations to the other Necessary penses on your worksheet, you will see th tally eliminate Mr . Lloyd's ability to ma een Mr . Lloyd It imposes a yd, including ation, bot h . If you add iving Ex- t they to- e any in- "The record does not contain Forms 656 re Silverberg's January 12, 2004 letter . That is declaration by Mr . Silverberg filed in support response to respondent's motion indicates that locate such forms . (Petitioner filed a respon motion, a declaration by Mr . Silverberg in sup response, and a supplement to that response co declaration by petitioner . We shall refer col filings by petitioner as petitioner's response erred to in Mr . because th e of petitioner's he was unable to e to respondent's ort of tha t sisting of a ectively to those stallment payments in connection with this OIC .

He is required to pay for private school or col- lege undergraduate tuition for his two children, and his wife is only required to contribute in the event her income exceeds $75,000 per year (page 10 of agree- ment) . It does not . In this event, Mr . Lloyd's obli- gation is limited to the cost of providing the cost of undergraduate out-of-state education at the University of Virginia . I have attached information from the internet which indicates that the cost of tuition, required fees, room and board for an out-of-state student was $25, .036 per year during the 2002-2003 academic year .

Per child annual obligation 25,036 X 2 children 50,072 Per month 4,17 2 Since this additional obligation exceeds by more than threefold the amount you computed as a reasonable installment payment, I trust you will understand why the OIC cannot include any installment amount . * * * On September 6, 2004, the first offer specialist sent a letter to petitioner (first offer specialist's September 6, 2004 letter) . In that letter, the first offer specialist stated in pertinent part :

This letter is only being sent to you because your representative Mr . Silverberg, doesn't have coverage for the Excise tax assessed on Form 5330, Return of Initial Excise Taxes Related to Employee Benefit Plans for tax periods ending December 31, 1991 and December 31, 1992 . The payoff balance computed through October 15, 2004 is $5,875 .78 .

In order to perfect your offer we have enclosed an amended Form 656, Offer in Compromise that includes these tax periods and have adjusted the offer figure to $139,766 .001121 and this is based on the math error on your last amended F656 that you signed on September 29, 2004 .113' If agreed , sign , date and return to the ad- dress listed below .

Your timely response is requested by Octo er 15, 2004 or your current offer may be returned wit out any appeal rights .

If you have any questions or need more in ormation, please contact me at the address or the t lephone number listed below * * * On September 15, 2004, the first offer specialist sent another letter to petitioner (first offer spec alist's September 15, 2004 letter) . In that letter, the first offer specialist stated in pertinent part :

During an offer investigation an offer may be returned when the investigation reveals the taxpayer doesn't have sufficient income tax withheld or paid . Our records show you have an extension until October 15, 2004 for filing your year 2003 return . But only $68,499 .00 in tax payments was withheld . Based on our calculations for year 2003 and using a gross income figure of $351,223 .00 a total of $105,161,00 should have been paid on the income earned .

Enclosed is a copy of Form 1040-ES, Estimated Tax for Individuals for you to figure and pay you estimated tax due for year 2003 . Provide us with a copy of the completed worksheet and a check for the payment due, if any[,] should be mailed to the address listed below .

tember 6, 200 4 13The record does not indicate why the "la st amended F656 " referred to in the first offer specialist's Se ptember 6, 200 4 letter could have been signed by petitioner an dated Sept . 29, 2004, which was after the date of that letter . See infra note 15 .

Your timely response and receipt of this information are requested by September 29, 2004 or this offer may be returned[ .

] If you have any questions or need more information, please contact me at the address or the telephone numbers listed below * * * On September 17, 2004, Mr . Silverberg and the first offer specialist had a telephonic discussion with respect to the first offer specialist's September 15, 2004 letter (September 17, 2004 telephonic discussion) . During that discussion, the first offer specialist requested certain information from Mr . Silverberg .

Thereafter, on October 1, 2004, the first offer specialist left Mr . Silverberg a voice mail message (first offer specialist's October 1, 2004 voice mail) requesting certain additional infor- mation .

On October 1, 2004, in response to, inter alia, at least certain of the requests made by the first offer specialist during the September 17, 2004 telephonic discussion and the first offer specialist's October 1, 2004 voice mail,14 Mr . Silverberg sent a letter (Mr . Silverberg's October 1, 2004 letter) to the first offer specialist via facsimile . In that letter, Mr . Silverberg stated in pertinent part :

This responds to your voice mail message received this morning .

"The record does not indicate whether Mr . Silverberg re- sponded to all of the requests made by the first offer specialist during the September 17, 2004 telephonic discussion and the first offer specialist's October 1, 2004 voice mail .

You asked that I fax to you today a personal Form 656 Offer In Compromise whi reformatted to reflect the amount of $139 over the 84 month period in equal install is attached to this fax, and the signed o be hand-delivered to your office on Monda me know if there are any questions .

copy of the h has bee n ,797, payable ents . That iginal wil l Please le t In response to your other questions, accountant informs me that Mr . Lloyd is n paid nor under-withheld for 2003 and 2004 the tax which has been withheld via the a ($68,655) exceeds 100% of Mr . Lloyd's 200 ($36,389) . His 2003 return is extended u 15, and if there is any balance due for 2 stand he is "in compliance" by paying in date . For the P .C ., he has filed 941's a priate payments for the first two quarter The third quarter payment is not due unt i Mr . Lloyd's ither under- For 2003, ended 941's liabilit y til October 03 we under- ull on that d made appro- of 2004 . October 15 .

The following items are attached to l3ubstantiat e his compliance .

1 . Approval of the extension of th 2003 form 1040 .

2 . Copy of form 941 for the firs t uarter o f 2004 .

3 . Copy of cancelled check for p ent with the first quarter of 2004 .

4 . Copy of form 941 for the second quarter o f 2004 .

5 . Copy of bank receipt for deposi with th e second quarter of 2004 .

Please let me know if you have any q estions .

Mr . Silverberg enclosed with Mr . Silverberg's ctober 1, 2004 letter, inter alia, completed Form 656, that p titioner signed and that was dated September 29, 2004 (petiti o er's September 29 , 2004 offer-in-compromise) .15 In item 5 of peti tioner's Septembe r "The first offer specialist's September 6 referred to a "last amended F656", that petiti 29, 2004 offer-in-compromise, petitioner provided the responses indicated to the following questions :

Item 5 - To : Commissioner of Internal Revenue Servic e I/We * * * submit this offer to compromise the tax liabilities plus any interest, penalties, additions to tax, and additional amounts required by law (tax liability) for the tax type and period marked below : * * * 1040 / 1120 Income Tax - Year(s) 1990, 1991, 1992, 1994, 1996, 1997, 2002 * ® Trust Fund Recovery Penalty as a responsible person of (enter corporate name) Henry M . Lloyd PC, for failure to pay withholding and Federal Insurance Contributions Act Taxes (Social Security taxes), for period(s) ending 9703 .

Other Federal Tax(es ) [specify type(s) and period(s) ] In items 6 and 7 of petitioner's September 29, 2004 offer- in-compromise, petitioner provided the responses indicated to the following questions :

11( .

. .continued) that was dated Sept . 29, 2004 . We do not know whether Form 656 that petitioner signed and that was dated Sept . 29, 2004, and that Mr . Silverberg enclosed with Mr . Silverberg's October 1, 2004 letter was the "last amended F656" referred to in the first offer specialist's September 6, 2004 letter . See supra note 13 and accompanying text .

Item 6 - I/We submit this offer for the eason(s) checked below :

Doubt as to Liability - "I do not believe I owe this tax ." * * * ® Doubt as to Collectibility - "I have insufficient assets and income to pay the full amount ." You must include a complete Collection In ormation Statement, Form 433-A and/or Form 433-B . Effective Tax Administration - "I owe this amount and have sufficient assets to pay the full amount, but due to my exceptional circumstanc s, requiring full payment would cause an economic hardship or would be unfair and inequitable ." You must include a complete Collection Information Statement, Form 433-A and/or Form 433 * * * .

Item 7 I/We offer to pay $139,707 .00 ( must be m re than zero) . * * * Check only one of the following :

* Short-Term Deferred Payment Offer (Of ered amount paid in MORE than 90 days but within 4 months from written notice of acceptance of he offer .)

* ® Deferred Payment offer ( Offered amoun will be paid over the remaining life of the c llection statute . ) $1,664 within 90 days * * * from written notice of acceptance of the offer ; an d beginning in the first month after writt n notice of acceptance of the offer $1,664 on the is day of each month for a total of 83 months .

On November 3, 2004, respondent's collect .on division sent a letter to petitioner (respondent's November 3,2004 letter) and q q q sent a copy of that letter to Mr . Silverberg . That letter stated in pertinent part :

We are returning your Form 656, Offer in Compro- mise for the following reason(s) :

All tax periods with a balance due must be in- cluded in your offer in Compromise . Our records indi- cate the following period( s) was /were not included : Excise tax for 1991 and 1992 tax periods .

If a deposit was made with the offer, we will mail the refund separately in four to six weeks .

If you believe the return of your offer was made in error, or your failure to provide the information/ substantiation we requested was due to circumstances beyond your control (your serious illness, death or serious illness of your immediate family member, or disaster)[,] within 30 days from the date of this letter you may contact * * * [the first settlement officer] to request reconsideration of our decision to close your offer . You should be prepared to discuss specifics, provide verification of the circumstances beyond your control and provide the information previ- ously requested .

Enclosed with respondent's November 3, 2004 letter was peti- tioner's September 29, 2004 offer-in-compromise .16 At no time did respondent accept petitioner's September 29, 2004 offer-in- compromise by issuing a written notice of acceptance to peti- tioner as required by section 301 .7122-1(e)(1), Proced . & Admin .

Regs .

Around December 7, 2004, respondent issued to petitioner a notice of Federal tax lien filing and your right to a hearin g "The record does not establish that petitioner responded to respondent's November 3, 2004 letter .

(notice of tax lien) with respect to petitioner's taxable years 1990 through 1992, 1994, 1996, and 2002 .17 Petitioner did not file Form 12153, Request for a Collection Due Process Hearing (Form 12153), with respect to that notice of tax lien .

See infr a note 18 .

On February 7, 2005, respondent issued to petitioner a notice of intent to levy and notice of your right to a hearing with respect to each of petitioner's taxable years 1990 through 1992, 1994, 1996, 1997, and 2002 . (We shall refer collectively to those notices of intent to levy as the notices of intent to levy .)

On March 7, 2005, respondent received For 12153 that Mr .

Silverberg submitted on behalf of petitioner (petitioner's Form 12153) . In that form, Mr . Silverberg indicate petitioner's disagreement with the notices of intent to levy and requested a hearing with respondent's Appeals Office (Appeals Office) . 18 Mr .

Silverberg attached a letter to petitioner's Form 12153 . In tha t 17The record does n ot indicate w h of tax lien wi y respon d th respec en t did not issu e petitioner' s petitioner a notice to taxable year 1997 . As discussed belo w, the no :ice of determina - tion concerning collection action(s) under sec :ion 6320 and/o r 6330 (notice of determination) made no determi to the notice of tax lien with respect to peti years 1990 through 1992, 1994, 1996, and 2002 .

ation with respect Toner's taxabl e to 18In petitioner's Form 12153, Mr . Silverbe rg did not indi- cate disagreement with the notice of tax lien to petitioner's taxable years 1990 through 199 2002 . See supra note 17 and accompanying text iled with respect , 1994, 1996, and letter, Mr . Silverberg stated in pertinent part :

Mr . Lloyd has been dealing, through me as his representative, with the Collections Division in Fairfax, Virginia, and with your [first] Offer Special- ist * * * . Mr . Lloyd has submitted Form 656 proposing Offers in Compromise to settle these liabilities due to doubt as to collectibility . Throughout a period ex- ceeding one year, * * * [the first offer specialist] has evaluated Mr . Lloyd's Reasonable Collection Poten- tial (RCP) and has performed an extensive investigation of his assets, his income potential and his costs of living .

After conducting his investigation, * * * [the first offer specialist] and Mr . Lloyd reached an agree- ment in principle, whereby Mr . Lloyd submitted an Amended Form 656 in October, 2004, offering to pay $139,707 over an installment period of 84 months . This amount is 100 per cent of the RCP finally determined by * * * [the first offer specialist] . For reasons which Mr . Lloyd and I do not understand, this OIC was treated by the Service as withdrawn at the last minute, rather than accepted . We were given the explanation that some out-of-compliance situation had been identified, and that the OIC could not be considered until Mr . Lloyd was back in compliance . Upon investigation, it was determined he was not out-of-compliance . However, no action was taken on his OIC . Instead, you have issued notices indicating you intend to levy .

Mr . Lloyd is still willing to agree to the October 2004 OIC which is 100 per cent of his RCP . He believes that he and the IRS have an agreement . However, for reasons unknown to us the Collections Division was unwilling to indicate its acceptance by signing off on the OIC .

Too much time has been invested by Mr . Lloyd and by the Service to waste it by treating the OIC as withdrawn . The agreement should be signed and Mr . Lloyd should begin making the monthly installments which will put this matter to rest .

Mr . Lloyd and I hereby request an opportunity to appear in person to discuss this matter at a CDP hear- ing . Our hope is that an agreed OIC will result from that hearing . * * * On May 24, 2005, a settlement officer with the Appeals Office (settlement officer) sent a letter (settlement officer's May 24, 2005 letter) to petitioner with respec to petitioner's Form 12153 . In that letter, the settlement of icer stated in pertinent part :

I have received your Collection Due Proce s hearing request . The objective of a Collection Due process hearing is to determine whether an acceptance alterna- tive to the levy/lien exists, while balancing the Government's need to efficiently collect his tax liability . Options available to you for esolution of your lien/levy issue may include the foll wing :

(cid:127) Full paymen t (cid:127) Installment agreement (cid:127) Offer in Compromis e (cid:127) Surety bon d On your hearing request you indicated you offer was rejected because of non-compliance . A check of our records indicated you had an outstanding balance on your tax return for period ending 12/31/2003 . outstanding balance was paid after the offer was re- jected . You cannot accumulate new liabilities . Our records also indicate you have an outstanding liability for period ending 12/31/2004 . I have attached a tran- script for period ending 12/31/2003 .[19] If you wish to submit an offer, you must start the proce s again .

The If you feel that one of the above resolutions are possible, please respond back with your proposal by no later than June 15th 2005 . thing other than full payment, then I will need you to complete and return the enclosed Forms 433-A & B . If you do not own a business, then please di regard th e If your proposal is any- "The record does not contain the "transcr'pt for period ending 12/31/2003" referred to in the settleme t officer's May 24, 2005 letter .

Form 433-B .

* If you do not provide the information requested, I cannot consider certain collection alternatives . If I do not have a detailed response by June 15th 2005 I will make a determination based upon the evidence that I have in the case file . If I do that[,] I will sus- tain the District's position and issue a determination letter .

On June 7, 2005, Mr . Silverberg and the settlement officer had a telephonic discussion (June 7, 2005 telephonic discussion) .

The settlement officer made the following pertinent entries in her "Case Activity Records" with respect to that discussion :

Received a call from POA [Mr . Silverberg] and he wanted to know what did his client [petitioner] has to do to have the offer [petitioner's September 29, 2004 offer- in-compromise] accepted . I explained his client wasn't in full compliance and the offer [petitioner's Septem- ber 29, 2004 offer-in-compromise] was rejected . He must submit a new offer and fee of $150 .00 . He was also made aware the new offer will be investigated as a new offer and the rejected offer [petitioner's Septem- ber 29, 2004 offer-in-compromise] is not considered . [Reproduced literally .

] On June 21, 2005, the settlement officer sent a letter to petitioner . In that letter, the settlement officer stated in pertinent part :

I have reviewed your appeal and additional information was requested . The information was due in the office on or before June 15th 2005 and as of today we haven't received the information . If you wish to bring this information to the office and have a conference, please call to arrange an appointment .

Please submit the requested information or contact me to arrange a telephone conference on or before July 6th 2005 .

If you do not submit the information or call to sched- ule an appointment I will make a determination based upon the information in the case file . I I do that I will sustain the IRS position and issue a determination letter .

If you have any questions, please contact address or telephone number shown above .

me at th e On July 7, 2005, Mr . Silverberg sent a le ter to the settle- ment officer (Mr . Silverberg's July 7, 2005 le ter) . Mr .

Silverberg enclosed with that letter (1) compl ted Form 656, that petitioner signed and that was dated June 24, 005 (petitioner's June 24, 2005 offer-in-compromise), (2) comple ed Form 433-A , that petitioner signed and that was dated June 24, 2005 (peti- tioner's June 24, 2005 Form 433-A), and (3) va ious document s with respect to those forms .

In item 5 of petitioner's June 24, 2005 offfer-in-compromise , petitioner provided the responses indicated to the following questions :

Item 5 - To : Commissioner of Internal Revenue Servic e I/We * * * submit this offer to compromise the tax liabilities plus any interest, penalties, additions to tax, and additional amounts required by law (tax liability) for the tax type and period marked below : * * * 1040 /1120 Income Tax - Year(s) 1990, 1991, 1992, 1994, 1996, 1997, 2002 * ® Trust Fund Recovery Penalty as a responsible person of (enter corporate name) Henry M . Lloyd PC, for failure to pay withholding and Federal Insurance Contributions Act Taxes (Social Security taxes), for period(s) ending 9703 .

® Other Federal Tax(es ) [specify type(s) and period(s)] excise taxes (all) 1991 & 199 2 In items 6 and 7 of petitioner's June 24, 2005 offer-in- compromise, petitioner provided the responses indicated to the following questions :

Item 6 - I/We submit this offer for the reason(s) checked below :

Doubt as to Liability - "I do not believe I owe this tax ." You must include a detailed explanation of the reason(s) why you believe you do not owe the tax in Item 9 .

® Doubt as to Collectibility - "I have insufficient assets and income to pay the full amount ." You must include a complete Collection Information Statement, Form 433-A and/or Form 433-B .

Effective Tax Administration - "I owe this amount and have sufficient assets to pay the full amount, but due to my exceptional circumstances, requiring full payment would cause an economic hardship or would be unfair and inequitable ." You must include a complete Collection Information Statement, Form 433-A and/or Form 433B and complete Item 9 .

q q Item 7 I/We offer to pay $139 ,776 (must be more than zero) . Complete item 10 to explain where you will obtain the funds to make this offer .

Check only one of the following :

Cash Offer ( Offered amount will be pa d in 90 days or less . ) Short - Term Deferred Payment Offer !Offered amount paid in MORE than 90 days but within 4 months from written notice of acceptance of he offer .)

* ® Deferred Payment Offer ( Offered amoun will be paid over the remaining life of the c llection statute . ) $1,664 within 90 days * * * from written notice of acceptance of the offer ; an d beginning in the first month after writt n notice of acceptance of the offer $1,664 on the is day of each month for a total of 83 months .

In items 9 and 10 of petitioner's June 24, 2005 offer-in- compromise, petitioner provided the responses indicated to the following questions :

q Item 9 - Explanation of Circumstance s I am requesting an offer in compromise for the reason(s) listed below :

Note : If you are requesting compromise based on doubt as to liability , explain why you don't believe you owe the tax . If you believe you have special circumstances affecting your ability to fully pay the amount due , explain your situation . You may attach additional sheets if necessary . * * * Doubt as to collectibility . Taxpayer is a 70-year- old sole practitioner with significant tax debts and a declining law practice . This OIC accompanies another OIC being made by Mr . Lloyd's professional corporation for its tax debts . [201 Based on a detailed investigation just completed by the IRS, this offer is 100% of the Reasonable Collection Potential of Mr . Lloyd, and the P .C .'s offer is 100% of its Reasonable Collection Potential .

Item 10 - Source of Fund s I/We shall obtain the funds to make this offer from the following source(s) :

Liquidation of assets and borrowing .

Petitioner's June 24, 2005 Form 433-A contained several sections identified as sections 1 through 9 . In sections 1 and 2 of that form, petitioner provided the responses indicated to the following questions :

6 . List the dependents you can claim on your tax return : * * * 20Mr . Silverberg did not enclose with Mr . Silverberg's July 7, 2005 letter Form 656 with respect to petitioner's professional corporation .

First Name Relationship Age Does his person live ith you ?

Victoria Daughter 24 ® No q Yes Hunter Son q No ® Yes * * * * * * 7 . Are you or your spouse self-employed or operate a business? (Check "Yes" if either app ies ) q No ® Yes If yes, provide the fol owing 7a . Name of Business Henry M . Lloyd P .C .

information :

7e . Do you have accounts/notes receivable . ® No If yes, please complete Section 8 on page 5 .

* Yes In section 3 of petitioner's June 24, 200 Form 433-A, petitioner indicated that he did not have an employer other than Henry M . Lloyd, P .C .

In section 4 of petitioner's June 24, 200 Form 433-A, petitioner provided the response indicated to he following question :

10 . Do you receive income from sources o her than your own business or your employer? (Chec all that apply .

) ® Pension ® Social Security ® Other (sp cify, i .e .

child sup ort, alimony, rental) R nta l In section 5 of petitioner's June 24, 200 Form 433-A, petitioner indicated that he (1) maintained a hecking account that had a balance of $15,000, (2) owned a bra erage account with no current account balance, (3) had two credit cards with unspec- q ified balances, and (4) had $16,300 of credit available to him .

In sections 5 and 6 of petitioner's June 24, 2005 Form 433- A, petitioner provided the responses indicated to the following questions :

16 . LIFE INSURANCE . Do you have life insurance with a Ye s cash value? ® No 17a . Are there any garnishments against your wages?

® No Yes * * 17h . Are you a participant in a profit sharing plan?

In section 7 of petitioner's June 24, 2005 Form 433-A, petitioner indicated that he did not own or lease any automobiles and did not respond to the question asking whether he owned any personal assets (e .g ., furniture/personal effects) or business assets .

In section 9 of petitioner's June 24, 2005 Form 433-A, petitioner listed various income items and various living expense items . With respect to the income items listed in that section, petitioner indicated that he had total monthly income of $4,342 .33 consisting of $2,708 .33 of monthly income from wages and $1,634 of monthly income from his pension and/or Social Security benefits . With respect to the monthly expense items listed in section 9 of petitioner's June 24, 2005 Form 433-A, petitioner indicated that he had total monthly living expenses of $5,658 .94 consisting of $3,463 .94 of monthly expenses for housing and utilities and $2,195 of monthly expenses for court-ordered payments .

On August 2, 2005, the settlement officer sent a letter to petitioner . In that letter, the settlement officer stated in pertinent part :

I recently received the offer in compromise file to be associated with the CDP case file . I am making an Appeals Referral Investigation request to have the offer analyzed along with the supporting documentation that you provided . You will be contacted by an offer specialist in the near future . I will maintain juris- diction of the case and all final decisions regarding this matter will be rendered by appeals . If you have any further questions regarding this correspondence, do not hesitate to call me .

On August 2, 2005, the settlement officer forwarded peti- tioner's June 24, 2005 offer-in-compromise and petitioner's June 24, 2005 Form 433-A to the IRS offer-in-compromise unit .

Around August 4, 2005, respondent assigned an offer-in- compromise specialist other than the first offer specialist to investigate petitioner's June 24, 2005 offer-in-compromise and petitioner's June 24, 2005 Form 433-A .

On September 1, 2005, the offer-in-compromise specialist (second offer specialist) with the IRS offer-in-compromise unit assigned to investigate petitioner's June 24, 2005 offer-in- compromise and petitioner's June 24, 2005 Form 433-A made the following pertinent entries in the "integrated collection system history transcript" :

Initial Review : TP is making a DPO of $139,777 at $1,664 in 84 payments to compromise approx $264,457 sole liability, on the basis of DATC .

* - Special Circumstances : doubt as to collectibility, because TP is 70-yr-old and his law practice is declin- ing . - Funding for the offer : Liquidation of assets and borrowing .

* * * * * * * TP is unmarried 70-yr old practicing attorney , with no health issues and a household of 2 (18-yr old son) in Wash D .C . * * * Claims income of 4342 vs 5659 living expenses . However, TP reported A GI of 87,163 in 104 ; 345,165 in `03 ; 216,074 in 102 .

CONCLUSION : Does not appear to be valid offer on the basis of .DATC : not everything is on the table, and his income and residence seem extravagant . Next step : do preliminary investigation and if RCP exceed liability of 264,457, conclude investigation and report findings to Appeals .

* * * * Claims declining income, but no evidence provided and research indicates "fluctuating" inco e . [Repro- duced literally .

] On September 6, 2005, the second offer specialist sent petitioner a letter (second offer specialist's September 6, 2005 letter) . In that letter, the second offer specialist stated in pertinent part :

I have been assigned to investigate your offer in compromise dated 06/24/2005 . I have completed a pre- liminary analysis of your offer, after reviewing the information you provided . My analysis shows that you have the ability to pay your liability in full within the time provided by law, based on the following compu- tations :

Total net equity in assets :

$372,231 .00 Total future income value :

$60-7,296 .00 Total ability to pay :

$979,527 .00 Balance due (as of 08/15/2005) $26 ,457 .49 Amount you offered : $13 ,776 .0 0 Copies of my worksheets are enclosed for you[r] review . If you disagree, you may provide additional documenta- tion showing that the figures are incorrect . You may also provide any other information you be ieve I should consider in making my recommendation as t whether to accept your offer .

Please respond by September 19, 2005, or I will proceed with my recommendation that your offer not be accepted .

If you have any questions or need more information, please contact me at the address or the telephone number listed below :

* A copy of this letter with all enclosures is being provided to your Power of Attorney, Mr . Silverberg, and to the Appeals Officer controlling your case .

The second offer specialist enclosed with the second offer specialist's September 6, 2005 letter the following so-called Asset/Equity Table :

ASSET / EQUITY TABLE (AET ) (Rev . 10-2002 )

ASSETS

Fair Marke t Value Quick Sal e Reductio n percentage Quick Sal e Value Encumbrance s o r Exemptions Ne t Realizabl e Equit y 1 . Cash/Bank Accounts $1,517 .00 $1,517 .0 0 5 . Real Estate .'_ $995,714 .00 $995,714 .00 $625,000 .00 $370,714 .0 0 6 . Furniture/Persona l ?? ?

Effects 7 . Vehicle s 8 . Account s Receivable ?? ?

Business Interest ?? ?

* * * * * * * Future income value (see Income and Expense Table (IET) attached)

TOTAL MINIMUM VALUE

$607,296 .0 0 $979,527 .0 0 REMARKS : *** Encumbrances not documented -- subject to further valuation .

??? Information not disclosed -- subject to further valuatio n The second offer specialist also enclosed with the second offer specialist's September 6, 2005 letter the following so-called Income/Expense Table :

INCOME/EXPENSE TABLE (IET ) (Rev . 1-2001 ) The Internal Revenue Service uses established National and Local Stan ards for necessar y living expenses when considering Offers in Compromise . Only necessar living expenses wil l be allowed . Other expenses, such as charitable contributions, educat ion, credit cards, and voluntary retirement allotments are generally not considered as neces ary living expenses .

Total Income Necessary Livin Expense s Source Gross 31 . wages/Salaries (T/P) $16,903 .00 42 . National Standard Expense s Claimed Allowe d $0 .00 $1,280 .0 0 32 . Wages/Salaries (Spouse ) $0 .00 43 . Housing and Utilities $3,464 .00 $1,318 .0 0 33 . Interest $0 .00 44 . Transportation $0 .00 $0 .0 0 34 . Net Business Income (from Form 433-B ) $0 .00 45 . Health care $0 .00 $0 .0 0 35 . Rental Income $296 .00 46 . Taxes $0 .00 $1,450 .0 0 36 . Pension (Taxpayer) $145 .00 47 . Court ordered payments $2,195 .00 $2,195 .0 0

Net difference = $12,652 .00 Months 4 8 Amount that could be paid = $ 07,296 .0 0 a) If taxpayer is making a cash offer (offering to pay in 90 days or less) multiply th e amount in line 53 times 48 or the number of months remaining in the s tatute . b) If the taxpayer is making a short term deferred payment offer (off ering to pay within 2 years) multiply the amount in line 53 times 60 months or times the nu mber of months remaining in the statute, whichever is shorter . c) If the taxpayer is making a deferred payment offer (offering to pa statute), use the Deferred Payment Chart to determine the number of m onths .

over the life of the The total offer must equal the sum of the equity in assets and the am ount that could be pai d from future income unless special circumstance considerations have be en approved .

NOTES :

Line 42 National Standard expenses : Maximum allowable by IRS Nationa l Expense Standard fo r food, housekeeping supplies, apparel and services, and personal care products, based upo n gross monthly income and number of persons in the household .

Line 43 Housing & Utilities expenses : Housing and utility expenses S r limited to standard s established for the county of residence and the number of household m e bers .

Line 44 Transportation expenses : Transportation expenses are limited t the standards established for zero, one or two vehicles, and to a maximum allowable purchase of one or two vehicles .

mount for lease o r Line 31 Wages based on 3-yr average . Line 35 Rental income, after adjusting for depreciation expense claime on Schedule E Line 46 Taxes based on last record of Fed, State, FICA, Medicare paid r withheld . Line 47 Court ordered payments tentatively allowed, subject to itemiza ion and proof of payments .

Petitioner did not respond by September 19, 2005, to the second offer specialist's September 6, 2005 letter . On September 20, 2005, the second offer specialist returned petitioner's June 24, 2005 offer-in-compromise to the settlement officer an d recommended that it not be accepted .

On September 23, 2005, Mr . Silverberg sent a note by facsim- ile to the settlement officer and the second offer specialist .

In that note, Mr . Silverberg stated in pertinent part :

I am writing to request an extension of time until October 14 for Mr . Lloyd to respond to * * * [the second offer specialist's] letter of 9/6/05 . My sched- ule has been full and I have until now been unable to confer with him about providing additional information for you to consider . Thank you in advance for your consideration .

On September 27, 2005, Mr . Silverberg sent another note by facsimile to the settlement officer and the second offer special- ist . In that note, Mr . Silverberg stated in pertinent part :

Please grant Mr . Lloyd additional time to get back to you through * * *, his accountant . * * * [petitioner's accountant] will be sending you a new Power of Attorney to discuss both Henry M . Lloyd PC and Mr . Lloyd's individual accounts . If you have any questions before receiving the new Power, please contact me .

On November 9, 2005, the settlement officer sent a letter to petitioner . In that letter, the settlement officer stated in pertinent part :

I have scheduled a telephone conference call for you on December 6, 2005 at 10 :OOAM . This call will be your CDP hearing .

Please call me at * * * the date and time above .

indicate d Your offer in compromise will not be reco acceptance and we need to discuss other a [sic] means for payment such as full paym installment agreement .

mmended for lternatives ent or an On November 14, 2005, at 1 :02 p .m ., Steph en P . Kauffman (Mr .

Kauffman) sent a letter by facsimile to the se ttlement office r (Mr . Kauffman's first November 14, 2005 letter ) . In that letter , Mr . Kauffman stated in pertinent part :

Re : Henry M . Lloyd Henry M . Lloyd, P .C .

* * * * I have been retained to represent th enced taxpayers in matters pending before Revenue Service . Enclosed you will find -of-attorney, form 2848, pursuant to whic payers have authorized me to represent th understand that a Collection Due Process currently scheduled for December 6, 2005 to review levies that have been issued to personally, and that offers-in-compromise for both taxpayers . Earlier today, I sen of a CDP request I filed in connection wi issued to Henry M . Lloyd, PC .

above-refer- the Interna l two (2) powers these tax- [2 11 I em .

earing is at 10 :00 a .m .

Mr . Lloyd are pendin g you a copy h levie s * * * I am planning to contact * * * Offer Specialist assigned to determine th matters to discuss his calculations . * * the [second] RCP of thes e 21Only Form 2848, Power of Attorney and D e Representative (Form 2848), appointing Mr . Kau attorney-in-fact for petitioner is attached to Kauffman's first November 14, 2005 letter that Form 2848 appointing Mr . Kauffman as the attor Henry M . Lloyd, P .C ., is not attached to the c Kauffman's first November 14, 2005 letter that claration of fman as th e the copy of Mr . is in the record . ey-in-fact for py of Mr . is in the record .

Because I have just been retained, I have an open mind about this case, and will be happy to discuss with you any and all resolutions which you might consider appropriate, giving due consideration, of course, to Mr . Lloyd's advanced age and what I consider to be limited earning ability .

On November 14, 2005, at 4 :51 p .m ., Mr . Kauffman sent another letter by facsimile to the settlement officer . In tha t letter, Mr . Kauffman stated in pertinent part :

Re : Henry M . Lloyd * * * Henry M . Lloyd, P .C .

* * * * * * * I want to thank you for your prompt reply to the letter I sent you earlier this morning . This letter is written to confirm our conversations this afternoon . Because I have just been retained, let me summarize my understanding of the status of the above-referenced matters in the remainder of this letter . Please re- spond to this letter only if my summary is incorrect .

I understand that offers - in-compromise were sub- mitted for Henry M . Lloyd ("Mr . Lloyd") and Henry M . Lloyd, P .C . (the "PC") . After the PC's offer wa s formally rejected, it filed an appeal . August of this year, the PC's appeal was rejected, and the PC's delinquency is now back in collection .

Sometime in In contrast, Mr . Lloyd's offer has not yet been formally rejected ; however, I understand that you do intend to reject it, but not until after we speak on December 6th . When you reject Mr . Lloyd's offer, you will send a formal written notice of rejection and appeal rights . I also understand that * * * [the second offer specialist] is no longer working the case at this time .

On December 6th, we will discuss Mr . Lloyd's pending request for due process hearing, and potential alternative approaches to resolving the PC's and Mr . Lloyd's tax delinquencies .

On December 6, 2005, the settlement offic r held a tele- phonic conference with Mr . Kauffman . The sett lement officer made the following pertinent entries in her "Case ctivity Records " with respect to that conference :

Telephone conference with POA Mr .Kauffma cussed the OIC and I explained taxpayer 1 million dollars . He wanted to know if obtain the equity in his real property wo mend acceptance of the offer . This reque because it appears taxpayer can enter int ment agreement at a rate of $12,000 .00 a stated that the taxpayer is elder and his no longer at a high point . I explained working and in good health . We average years to determine his monthly income . the one-year rule in allowing expenses . copy of the 433A and the O/S worksheet co requested time to discuss with client an conference scheduled for 12/16/2005 @ 10 : mation faxed to POA . [Reproduced litera l We dis- CP is close to the taxpayer ld I recom- st was denied o an install- month . h e business is e is still is last three e discussed He requested a putation . He telephone OOAM . Infor- ly .

] On December 15, 2005, Mr . Kauffman sent a letter to the settlement officer via facsimile (Mr . Kauffman 's December 15, 2005 letter) . In that letter, Mr . Kauffman st ated in pertinen t part :

This letter is written as a follow- several telephone conversations, and in our telephone conference tentatively sche Friday afternoon . Up to this time, the f discussions has been on Mr . Lloyd's inco ically how to calculate his average month fair fashion . Enclosed with this letter come/expense table which you were kind e last week, and a spreadsheet analysis of income which I have prepared . Before ad enclosed spreadsheet analysis, a few obse Mr . Lloyd's income are in order .

p to our nticipation of duled for ocus of ou r e, and specif- ly income in a are the in- ough to fax me Ir . Lloyd's ressing the rvations abou t Mr . Lloyd, who is an attorney engage private practice of law, will be 71 this d in the March . The cases handles are virtually all contingent fee cases . This means he doesn't make a cent unless and until his client recovers, at which time he receives a percentage of the recovery . A contingent fee practice is very risky for an attorney, for a variety of reasons . Sometimes you lose, in which case you recover nothing . Sometimes you win, but much less than what you hoped for . Sometimes you win a big judgment against a defen- dant who doesn't have any money, in which case you recover nothing . Sometimes you win, but only after year and years of hard work, during which time you are spending your own money to advance your client's case .

In Mr . Lloyd's case, he is the only employee of Henry M . Lloyd, P .C ., a professional corporation which he owns . Each year the corporation pays all of its net income before salary to Mr . Lloyd as his salary . Consequently, each year, the corporation has no net income and all of the net income from Mr . Lloyd's law practice is reported by Mr . Lloyd on his personal income tax return .

The income/expense table was prepared on September 2, 2005, which means that it probably covered the three-year period September 1, 2002 through August 31, 2005 . These were the three best years Mr . Lloyd has had in the past twelve years . In contrast and as discussed below, my enclosed analysis looks at Mr . Lloyd's income for the previous 7 and 12 year periods .

As you can see, for the past 7 years, Mr . Lloyd earned nothing from his law practice for the years 1998, 1999, 2000, and 2001 . If his average income had been computed for that four year period, it would have been zero . As it stands, his average monthly income for the seven year period is only $2,548 .(22 1 Mr . Lloyd's income for the past 12 years is better, but only marginally so, and certainly nowhere near as good as the income reflected on the income/ expense table . In fact, for the 12 year period ending in 2004, Mr . Lloyd's average monthly is only $5,435,(221 which is less than 1/3 of the average monthly income reflected on the income/expense table .

22See infra note 32 .

is the type of ing to calcu- ears , becaus e As this analysis demonstrates, this case where it would be unfair and mislea late average monthly income over only 3 income which is essentially earned over a much longer period is bunched into one or two tax years . Further- more, nowhere in the Code, the Regulati o Internal Revenue Manual is a Revenue Offi yourself constrained to average income ov years . IRM 5 .8 .5 .5 identifies a number o which "may warrant placing a different va income than current or past income indica such situation is where "a taxpayer has a employment history or fluctuating income, case the revenue officer is directed to " ings over several prior years ." Although indicate this is " usually . . . the prior does not and should not indicate that thi the case, particularly in a situation suc where blind adherence to that rule would unfair .

s, or the cer such as er only three f situations lue on future tes ." On e sporadic verage earn- the IRM does 3 years," i t is always as this one e patentl y in which Mr . Kaufmann enclosed with Mr . Kauffman's December 15, 2005 letter a copy of the Income/Expense Table that the second offe r specialist enclosed with the second offer spec 'alist's September 6, 2005 letter and the following "Analysis of ross Income" of petitioner :

12 year analysi s Gross Cum . Tax .

Year Income Income Average Monthly Cum . Avg . Monthl y 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 55,000 52,000 110,100 85,000 98,000 200,000 329,151 55,000 107,000 217,100 302,100 400,100 400,100 400,100 400,100 400,100 600,100 929,251 71,842 1,001,093 4,583 4,333 9,175 7,083 8,167 16,667 27,429 5,987 4,58 3 4,45 8 6,03 1 6,29 4 6,66 8 5,55 7 4,76 3 4,16 8 3,70 5 5,00 1 7,04 0 6,95 2

year analysi s Year 2002 2003 2004 Gross Cum . Tax .

Income Income Aver a Mont h e Cum . Avg . y Monthl y 200,000 200,000 16, 6 67 16,667 329,151 529,151 27, 4 29 22,048 71,842 600,993 5, 9 87 16,69 4 3 year average monthl y [24] 18,47 0 On December 16, 2005, the settlement off' cer held a tele- phonic conference with Mr . Kauffman . The sett lement officer made the following pertinent entries in her "Case ctivity Records " with respect to that conference :

POA had faxed a chart requesting that we seven years to compute the income of the explained I would use the last three year these years truly reflect the high and 1 client's income . He stated he will talk and request the case be returned to compl determination letter will be issued * * * use the last taxpayer . I s becaus e w end of his to his client lance .

A On February 8, 2006, the Appeals Office i ssued to petitioner a notice of determination with respect to peti tioner's unpaid liabilities for 1990, 1991, 1992, 1994, 1996, 1997, and 2002 .

That notice stated in pertinent part :

Summ ary of Determinatio n Your offer in compromise was not recommen tance because our computation indicates y ability to full[y] pay . We discussed the of an installment agreement and you disag monthly payment amount . We did not discu alternatives for payment . Based on the e case file the District's decision to issu Notice-Notice of Intent to Levy and Notic Right to a hearing is sustained .

ed for accep- u have the possibility ee with th e ss any other idence in the the Final of you r

14 See infra note 32 .

An attachment to the notice of determination stated in pertinent part :

I . Verification of Legal and Procedural Requirement s With the best information available, the requirements of various applicable law or administrative procedures have been met .

IRC Section 6331(d) requires the taxpayer be notified at least 30 days before a notice of levy can be issued . The 30-day letter was sent on tax years ending 12/31/1990, 12/31/1991, 12/31/1992, 12/31/1994, 12/31/1996, 12/31/1997 and 12/31/2002 on February 7th 2005 .

IRC 6330(c) allows the taxpayer to raise any relevant issues relating to the unpaid tax or the proposed levy at the hearing .

This Settlement officer has had no prior involvement with respect to these liabilities .

II . Issues Raised by the Taxpayer Challenges to the Amount of the Liabilit y You did not challenge the amount of the liability .

III . Balancing Efficient Collection and Intrusivenes s IRC section 6330 require[s] that the Settlement Officer consider [whether] the collection action balances the need for efficient collection of taxes with the tax- payer's legitimate concern that any collection action be no more intrusive than necessary .

Collection alternatives include full payment, install- ment agreement, offer in compromise and temporary suspension of collection based on financial hardship . You submitted an offer in compromise and it was deter- mined you had the ability to pay the taxes and your offer was recommended for rejection . We also discussed an installment agreement but you were not in agreement with the monthly payment amount . No furth r alterna- tives were discussed .

The rejection of your offer was based on the following :

income :

Monthl y Wages : Rental Income : Pension : Social Security :

$16,903 .00- Based on 3 year averag e 296 .0 0 145 .0 0 1,551 .0 0 Total Monthly Income : $18,895 .0 0 Allowable Monthly Expenses : National Standards : $1280 .0 0 Housing/utilities : 1318 .0 0 Taxes : 1450 .0 0 Court-ordered payments : 2195 .0 0 Total Expenses :

6243 .00 Excess Monthly :

12,652 .0 0 Assets :

Estate : Market Value : $995,714 .0 0 Bank Accounts : Rea l Fai r Quick Encumbrances : Not documente d Equity :

Sale Value : 796,571 .20-80 % $ 1517 .0 0 796,571 .2 0 Total Net Realizable Equity :

$798,088 .2 0 Future Income : (12,652 x 48) 607,296 .0 0 Reasonable Collection Potential :

$1,405,384 .2 0 Based on the evidence in the case file the District's decision to issue the Final Notice-Notice of Intent to Levy and Notice of your Right to a Hearin is sus- tained .

The notice of determination made no determinat on with respect to the notice of Federal tax lien filed with respect to petitioner's taxable years 1990 through 1992, 1994, 1996, and 2002 . See supra note 17 and accompanying text and note 18 .

Discussion The Court may grant summary judgment where there is n o genuine issue of material fact and a decision may be rendered as a matter of law . Rule 121(b) ; Sundstrand Corp . v . Commissioner ,

A taxpayer may raise challenges to the existence or the amount of the taxpayer's underlying tax liability if the taxpayer did not receive a notice of deficiency or did not otherwise have an opportunity to dispute such liability . Sec . 6330(c)(2)(B) .

In petitioner's response, petitioner does not dispute the existence or the amount of petitioner's unpaid liabilities for 1990, 1991, 1992, 1994, 1996, 1997, and 2002 .25 Where, as is the case here, the validity of the underlying tax liability is not properly placed at issue, the Court will review the determination of the Commissioner of Internal Revenue (Commissioner) for abus e

of discretion . See Sego v . Commissioner , 114 T .C . 604, 610 (2000) ; Goza v . Commissioner , 114 T .C . 176, l El-182 (2000) .

In petitioner's response, petitioner advances three princi- pal arguments in support of his position that respondent abused respondent's discretion in making the determinations in the notice of determination . We turn to petitioner's first principal argument . In petitioner's response, petitioner argues in perti- nent part :

On September 6, 2004, an IRS Offer S [first offer specialist] determined that tioner's Reasonable Collection Potential only $139,707,[261 and the Petitioner proml an offer to compromise for this amount .

ecialist the Peti- ("RCP") was btly submitte d Thereafter, in violation of applicab of the Code, Regulations, and its own Ma n le provisions al, th e

r 6, 2004 letter, d adjusted peti- 'nter alia, as- nded Dec . 31, Manual (IRM) pt . ioner's Septembe r 'gated by the first ax in the liabili- that offer and 'se the liabilities fter the settle- telephonic discus- ew offer-in- une 24, 200 5 5 offer-in-compro- 'ties that that Federal excise tax 1992, in the bmitted that the Septembe r 005 offer-in- Service returned the offer in error (for an alleged underpayment of a small estimated tax penalty which the Petitioner disputed) and issued levies . The Petitioner then filed a CDP hearing request .

Upon receipt of the CDP hearing request, the Settlement Officer abused her discretion by requiring the Petitioner to submit a new offer, instead of rein- stating the existing offer as required by Regulation §301 .6330-1(e)(1) . On September 6, 2005, exactly one year after the first RCP determination * * * a second IRS Offer Specialist looking at the same financial information determined that the Petitioner's RCP was $979,527 .

Although not altogether clear, it appears that petitioner is arguing that the settlement officer abused the settlement offi- cer's discretion by (1) not accepting as petitioner's reasonable collection potential (RCP) the amount calculated by the first offer specialist in connection with petitioner's September 29, 2004 offer-in-compromise and (2)(a) instead requiring petitioner to submit a new, updated offer-in-compromise (i .e ., petitioner's June 24, 2005 offer-in-compromise) accompanied by a new, updated Form 433-A (i .e ., petitioner's June 24, 2005 Form 433-A) an d (b) determining as petitioner's RCP an amount different from the amount of petitioner's RCP that the first offer specialist determined .

In support of the foregoing argument, petitioner relies on section 301 .6330-1(e)(1), Proced . & Admin . Regs ., as in effect with respect to requests for Appeals Office hearings made before November 16, 2006 . That regulation provided :

(e) Matters considered at CDP hearin .--( 1) In The taxpayer Prior to issuance of a general . -- Appeals has the authority to determine the validity, sufficiency , and timeliness of any CDP Notic e given by the IRS and of any request for a CDP hearing that is made by a taxpayer . determination , the hearing officer is required to obtain verification from the IRS office collecting the tax that the requirements of any applicable law or administrative procedure have been met . may raise any relevant issue relating to the unpaid tax at the hearing, including appropriate spoisal defenses, challenges to the appropriateness of the proposed collection action , and offers of collection alterna- tives . The taxpayer also may raise chall nges to the existence or amount of the tax liability pecified on the CDP Notice for any tax period shown o the CDP Notice if the taxpayer did not receive a tatutory notice of deficiency for that tax liability or did not otherwise have an opportunity to dispute that tax liability . issue that was raised and considered at a previous CDP hearing under section 6320 or in any other previous administrative or judicial proceeding if he taxpayer participated meaningfully in such hearing or proceed- ing . Taxpayers will be expected to provide all rele- vant information requested by Appeals , in luding finan- cial statements , for its consideration of the facts and issues involved in the hearing .

Finally, the taxpayer may not raise an Petitioner's reliance on the above-quoted regulation is misplaced . We find (1) no requirement in that regulation that the Appeals Office use as a taxpayer's RCP an mount of RC P previously determined by respondent's collecti on division and (2) no prohibition in that regulation on the Appeals Office's requiring a taxpayer to submit a new, updated ffer-in-compromise accompanied by a new, updated Form 433-A .2 7 27Part 5 .8 .5 .2 .2 of the IRM (Nov . 15, 2004) requires any agent of the Commissioner who investigates an ffer-in-compromise to request updated financial information from ,he taxpayer if th e . .)

(continued .

In advancing his first principal argument, petitioner makes a related argument that respondent should not have returned to petitioner petitioner's September 29, 2004 offer-in-compromise .

In support of that related argument, petitioner relies on section 301 .7122-1(d)(2), Proced . & Admin . Regs .28 In the first offe r 27 ( .

. .continued ) information submitted with such an offer is older than 12 months or if there is any reason to believe the taxpayer's situation may have significantly changed . That part 5 .8 .5 .2 .2 of the IRM provides :

(1) Collection Information Statements (CIS) submitted with an offer in compromise should reflect infor- mation no older than the prior six months . if during the processing of the offer, the financial information becomes older than 12 months, contact should be made with the taxpayer to update the information . However, in certain situations in- formation may become outdated due to significant processing delays caused by the Service, through no fault of the taxpayer . In those cases, it may be appropriate to rely on the outdated information if there is no indication the taxpayer's overall situation has significantly changed . Judgment should be exercised to determine whether, and to what extent, updated information is necessary . If there is any reason to believe the taxpayer's situation may have significantly changed, secure a new CIS .

When petitioner submitted petitioner's September 29,' 2004 offer- in-compromise in early October 2004, his 2003 return and his 2004 return were not due to have been filed . When the settlemen t officer sent a letter to petitioner on May 24, 2005, with respect to petitioner's Form 12153, in which the settlement officer, inter alia, requested updated financial information from peti- tioner to be presented in a new Form 433-A, petitioner's 2003 return and his 2004 return were due to have been filed .

28Sec . 301 .7122-1(d)(2), Proced . & Admin . Regs ., provides i n pertinent part :

(continued .

. .)

specialist's September 6, 2004 letter, the first offer specialist informed petitioner that his offer-in-compromise had to be perfected to reflect Federal excise tax assessed for the tax periods ended December 31, 1991, and December 31, 1992 . In the first offer specialist's September 15, 2004 letter, the first offer specialist informed petitioner (1) that an offer-in- compromise may be returned where there is insufficient Federal income tax withheld or paid and (2) that respondent's records indicated that insufficient Federal income tax had been withheld with respect to petitioner's taxable year 2003 .

The first offer specialist and Mr . Silver erg had a tele- phonic discussion on September 17, 2004 . On O tober 1, 2004, the first offer specialist left a voice mail for Mr . Silverberg .

Thereafter, Mr . Silverberg sent Mr . Silverberg's October 1, 2004 letter to the first offer specialist and enclosed with tha t 28 ( .

. . continued ) If an offer accepted for processing does of contain sufficient information to permit the IRS to evaluate whether the offer should be accepted, the IRS will request that the taxpayer provide the nee led additional information . If the taxpayer does not su mit the additional information that the IRS has requested within a reasonable time period after suc a request, the IRS may return the offer to the taxpa er . The IRS may also return an offer to compromise a ax liability if it determines that the offer was submi ted solely to delay collection or was otherwise nonproc ssable . An offer returned following acceptance for processing is deemed pending only for the period betwee the date the offer is accepted for processing and the late the IRS returns the offer to the taxpayer . * * * letter petitioner's September 29, 2004 offer-in-compromise .29 That offer-in-compromise did not offer to compromise the Federal excise tax with respect to the tax periods ended December 31, 1991, and December 31, 1992, to which the first offer specialist referred in the first offer specialist's September 6, 2004 letter .30 On November 3, 2004, respondent's collection division sent a letter to petitioner in which respondent stated : "Our records indicate the following period(s) was/were not included :

Excise tax for 1991 and 1992 tax periods .

On the recor d 29The record does not indicate whether Mr . Silverberg re- sponded in Mr . Silverberg's October 1, 2004 letter to all of the requests that the first offer specialist made to Mr . Silverberg .

30In contrast, petitioner's June 24, 2005 offer-in- compromise offered to compromise not only petitioner's unpaid liabilities for 1990, 1991, 1992, 1994, 1996, 1997, and 2002 but also the Federal excise tax for the tax periods ended Dec . 31, 1991, and Dec . 31, 1992 .

31Respondent's November 3, 2004 letter further stated :

We are returning your Form 656, Offer in Compro- mise for the following reasons(s) :

All tax periods with a balance due must be in- cluded in your offer in Compromise . Our records indi- cate the following period( s) was /were not included : Excise tax for 1991 and 1992 tax periods .

If a deposit was made with the offer, we will mail the refund separately in four to six weeks .

If you believe the return of your offer was made in error, or your failure to provide the information/ substantiation we requested was due to circumstances beyond your control (your serious illness, death or serious illness of your immediate family member, o r (continued .

. .)

before us, we conclude that respondent complie d with section 301 .7122-1(d)(2), Proced . & Admin . Regs ., when respondent re- turned to petitioner petitioner's September 29 2004 offer-in- compromise .

On the record before us, we find that the settlement officer did not abuse the settlement officer's discret ion by (1) not accepting as petitioner's RCP the amount calcu lated by the first offer specialist in connection with petitioner 's September 29 , 2004 offer-in-compromise and (2)(a) instead re uiring petitioner to submit a new, updated offer-in-compromise i .e ., petitioner's June 24, 2005 offer-in-compromise) accompanied by a new, updated Form 433-A (i .e ., petitioner's June 24, 2005 F rm 433-A) an d (b) determining as petitioner's RCP an amount different from petitioner's RCP that the first offer special i st determined .

We address next petitioner's second princ ipal argument . I n petitioner's response, petitioner argues that he settlemen t officer abused the settlement officer's discre ion in calculating petitioner's RCP by using as the "future incom " component o f that calculation an average of petitioner's w a e income for th e .

. continued ) "( . disaster)[,] within 30 days from the date letter you may contact * * * [the first s officer] to request reconsideration of ou close your offer . You should be prepared specifics, provide verification of the ci beyond your control and provide the infor ously requested .

of this ttlement decision t o to discuss cumstances nation previ- three-year period 2002 through 2004, instead of using an average of petitioner's wage income for the seven-year period 1998 through 2004 or the twelve-year period 1993 through 2004 .32 I n 32In support of that argument, petitioner contends, and respondent does not dispute, that petitioner had the following wage income from his law practice for 1993 through 2004 :

Year 1993 Wage Incom e $55,00 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 52,00 0 110,10 0 85,00 0 98,00 0 200,00 0 329,15 1 71,84 2 Petitioner further contends that his average monthly wage income for the seven-year period 1998 through 2004 was $2,548 and that his average monthly wage income for the twelve-year period 1993 through 2004 was $5,435 . We disagree . On the instant record, we find that petitioner incorrectly calculated his average monthly wage income for each of those periods . The respective average monthly wage income amounts that petitioner claims for the period 1998 through 2004 and the period 1993 through 2004 (as well as for the three-year period 2002 through 2004) are averages of cumulative averages of petitioner's monthly wage income for each of the years included in calculating those respective average monthly wage income amounts . See supra text accompanying notes 23 and 24 . The use of those averages of cumulative averages for the seven-year period 1998 through 2004 and for the twelve-year period 1993 through 2004, which places significant emphasis on the years before 2002 that are included in the respective calculations, is improper . The correct amount of petitioner's average monthly wage income for 1998 through 2004 is $7,154 .68 . The correct amount of petitioner's average monthl y . .)

(continued .

I calculating the "future income" component of petitioner's RCP on the basis of the three-year period 2002 through 2004, the second offer specialist first determined petitioner's average monthly income to be $18,895, consisting of (1) $16,903 of average monthly wage income calculated by using an average of peti- tioner's wage income for the years 2002 through 200433 an d (2) other monthly income totaling $1,992 . The second offe r specialist then calculated petitioner' s "excess" monthly income (i .e ., $12,652) by subtracting allowed monthly necessary livin g expenses (i .e ., $6,243) from petitioner's ave age monthly income (i .e ., $18,895 ) . Finally, the second offer specialist multiplied petitioner's "excess" monthly income ($12,652) by 48 months t o determine the "future income" component of petitioner's RC P (i .e ., $607,296) .

The settlement officer reviewed the second offer special- ist's determination of petitioner's RCP and a ,reed with, inte r 32( .

.

. continued) wage income for 1993 through 2004 is $6,952 .0 3 33The record does not disclose the basis offer specialist's calculation of petitioner' wage income for 2002 through 2004 (i .e ., $16, average of the wage income that petitioner cl through 2004 is $16,694 .25 . The Court is una difference between the monthly average of pet income for 2002 through 2004 as calculated by specialist and the monthly average of the wag petitioner claims for 2002 through 2004 . How necessary to reconcile that difference in ord respondent's motion .

or the second average monthl y 03) . The monthly ims for 200 2 le to reconcile the tioner's wag e the second offer income that ver, it is not r to dispose of alia, that specialist's use of the three-year period 2002 through 2004 on which to calculate the "future income" component of such RCP . We believe that the second offer specialist's calculation of the "future income" component of petitioner's RCP on the basis of the three-year period 2002 through 2004, with which the settlement officer agreed, is supported by part 5 .8 .5 .5 of the IRM (Sept . 1, 2005), which provides :

5 .8 .5 .5 * * * Future Incom e (1) Future income is defined as an estimate of the taxpayers [sic] ability to pay based on an analy- sis of gross income, less necessary living ex- penses, for a specific number of months into the future . The number of months used depends on the payment terms of the offer .

a . For cash offers -- project for the next 48 months .

b . For short term deferred offers -- project for the next 60 months .

c . For deferred payment offers -- project for the number of months remaining on the statu- tory period for collection .

* (3) Consider the taxpayers [sic] overall general situ- ation including such facts as age, health, marital status, number and age of dependents, highes t education or occupational training, and work expe- rience .

(4) Retired Debts -- A taxpayers [sic] ability to pay in the future may change during the period it is being considered because necessary expenses may increase or decrease . Adjust the amount or number of payments to be included in the future income calculation, based on the expected change in nec- essary expenses .

Example :

The taxpayer may pay off an aut months from the date the offer This would increase the monthly by the amount of the loan payme support payments may stop befor income period is complete becau turns a certain age . It is exp these retired payments would in taxpayers [sic] ability to pay .

m loan 2 4 s accepted . future income t . Chil d the future e the child cted that rease th e Note : Inclusion of retired debt shoul automatically in the calculatio sonable collection potential (R Offer Investigator should use j determining whether inclusion o debt is appropriate based on th case ; such as special circumsta tive Tax Administration (ETA) s all instances, the case histori documented to support the inclu exclusion of the retired debt .

not be added of the rea- P) . The dgment in the retired facts of th e ce or Effec- tuations . In s should be ion and/o r (5) Some situations may warrant placing value on future income than current indicates :

different r past income If . .

.

Then .

.

.

A taxpayer has a sporadic employment history or fluctuating income A taxpayer is elderly, in poor health, or both and the ability to continue working is questionable This practice doe s Average earnings ove r several prior years . Usually this is the prio r 3 years . Note : not apply to wag e earners . Adjust the amount o r number of payments to th e expected earnings durin g the appropriate number o f months . Consider specia l circumstance situation s when making an y adjustments .

(6) Below are some examples on when it is and is not appropriate to income average . Judgment should be used in determining the appropriate time to apply income averaging on a case by case basis . All circumstances of the taxpayer should be considered when determining the appropriate application of income averaging, including special circumstance and Effective Tax Administration considerations .

a . The examples below are instances when income averaging may or may not be appropriate .

Example : A taxpayer is a commissioned sales person and the income varies year to year . It would be appropriate to income average in this case . * * * Even if it were arbitrary for the settlement officer to have agreed with and accepted the second offer specialist's calcula- tion of the "future income" component of petitioner's RCP by using petitioner's average monthly wage income for the three-year period 2002 through 2004, the settlement office did not abuse the settlement officer's discretion in agreeing with the second offer specialist that petitioner's June 24, 2005 offer-in- compromise should be rejected and in rejecting that offer . That is because part 5 .8 .1 .1 .3(3) of the IRM (Sept . 1, 2005) requires that generally "a Doubt as to Collectibility * * * offer amount must equal or exceed a taxpayers [sic] reasona le collection potential (RCP) in order to be considered for acceptance ." As explained below, even if the period 1998 throw h 2004 or the period 1993 through 2004 were used to determin petitioner's average monthly wage income and the "future income" component of petitioner's RCP, petitioner's RCP nonetheless would exceed the amount (i .e ., $139,776) that petitioner offered in petitioner's June 24, 2005 offer-in-compromise to compromise, inter alia, petitioner's unpaid liabilities for 1990, 1991, 1992, 1994, 1996, 1997, and 2002 .

Part 5 .8 .1 .1 .3 of the IRM (Sept . 1, 2005) provides :

5 .8 .1 .1 .3 * * * Polic y (1) Policy Statement P-5-100 states :

The Service will accept an offer in compromise when it is unlikely that the tax liability can b e collected in full and the amount off ably reflects collection potential . compromise is a legitimate alternati ing a case currently not collectible tracted installment agreement . The achieve collection of what is potent ible at the earliest possible time a least cost to the Government .

red reason- An offer in e to declar- or to a pro- oal is to ally collect- d at the In cases where an offer in compromise appears to be a viable solution to a tax delinquency, the Service employee assigned the case will discuss the compromise alternative with the taxpayer and, when necessary, assist in preparing the required forms . The taxpayer will be responsible for ini- tiating the first specific proposal for compro- mise .

The success of the offer in compromise program will be assured only if taxpayers make adequate compromise proposals consistent with their abilit y to pay and the Service makes prompt and reasonable decisions . Taxpayers are expected to provide reasonable documentation to verify their ability to pay . The ultimate goal is a compromise which is in the best interest of both the taxpayer and the government . Acceptance of an adequate offer will also result in creating for the taxpayer an expectation of a fresh start toward compliance with all future filing and payment requirements .

(2) Offers will not be accepted if it is believed that the liability can be paid in full as a lump sum or through installment payments extending through the remaining statutory period for collection (CSED), unless special circumstances exist . See IRM 5 .14, Installment Agreements .

(3) Absent special circumstances, a Doubt as to Collectibility (DATC) offer amount must equal or exceed a taxpayers [sic] reasonable collection potential (RCP) in order to be considered for acceptance .[ 341 The exception is that if specia l 34The only reason that petitioner gave in petitioner's June 24, 2005 offer-in-compromise for the IRS to accept petitioner's offer was "Doubt as to Collectibility" . Petitioner did not give as a reason "Doubt as to Collectibility with Special Circum- stance" or "Effective Tax Administration" . Consistent with the general rule of part 5 .8 .1 .1 .3(3) of the IRM (Nov . 15, 2004) for an offer-in-compromise based on "Doubt as to Collectibility", petitioner offered in petitioner's June 24, 2005 offer-in-compro- mise an amount ($139,776) that was greater than the amount of petitioner's RCP ($139,707) that petitioner claims the first offer specialist determined in September 2004 . Assuming arguend o . .)

(continued .

circumstances exist as defined in IR 5 .8 .4 .3, Effective Tax Administration and Dou t as to Collectibility with Special Circumstance, or IRM 5 .8 .11, Effective Tax Administration the offer may be accepted on the basis of hard hip or Effec- tive Tax Administration (ETA) .[3 5 1 Assuming arguendo, as petitioner argues, that the "future income" component of petitioner's RCP should have been calculated by using his average monthly wage income for the seven-yea r 34( . .continued ) that petitioner had based petitioner's June 24 2005 offer-in- compromise on "Doubt as to Collectibility with Special Circum- stance" or "Effective Tax Administration", on he record before us, we find that the settlement officer did no abuse the settle- ment officer's discretion in concluding that that offer-in- compromise should be rejected on those grounds Although peti- tioner was 70 years old in September 2005 when the settlement officer (and the second offer specialist) was considering peti- tioner's June 24, 2005 offer-in-compromise, petitioner was still practicing law and did not claim that he had a my health issues .

35See Murphy v . Commissioner , 125 T .C . 301 309 (2005), affd . 469 F .3d 27 (1st Cir . 2006), where we st ted :

Special circumstances are (1) circumstances demonstrat- ing that the taxpayer would suffer economic hardship if the IRS were to collect from him an amount' . equal to the reasonable collection potential of the case or (2) if no demonstration of such suffering can be made, circum- stances justifying acceptance of an amount less than the reasonable collection potential of th case based on public policy or equity considerations IRM pt . 5 .8 .4 .3 .4 (Sept . 1, 2005) (Effective Tax Administration and Doubt as to Collectibility with Special Circum- stances) . To demonstrate that compelling public policy or equity considerations justify a compromise, the taxpayer must be able to demonstrate that, due to exceptional circumstances, collection of he full liability would undermine public confidence that the tax laws are being administered in a fair and equitable manner . Sec . 301 .7122-1(b)(3)(ii), Proce . & Admin . Regs .

period 1998 through 2004 (i .e ., $7,154 .68), rather than his average monthly wage income for the three-year period 2002 through 2004, petitioner's RCP would be $937,464 .84 .36 Peti- tioner's RCP as so calculated exceeds the amount (i .e ., $139,776) in petitioner's June 24, 2005 offer-in-compromise that petitioner offered to compromise, inter alia, petitioner's unpaid liabili- ties for 1990, 1991, 1992, 1994, 1996, 1997, and 2002 . See IRM pt .

5 .8 .1 .1 .3(3) (Sept . 1, 2005) .

36The monthly average of petitioner's wage income for 1998 through 2004 is $7,154 .68 . See supra note 32 . Adding to that amount petitioner's other monthly income (i .e ., $1,992) and subtracting petitioner's allowed monthly necessary living ex- penses (i .e ., $6,243) results in "excess" monthly income of $2,903 .68 .` That amount of "excess" monthly income multiplied by 48 months results in "future income" of $139,376 .64 . That amount of "future income" plus the amount that the settlement officer calculated as the "net realizable equity" component of peti- tioner's RCP (i .e ., $798,088 .20), which "net realizable equity" component petitioner does not dispute in petitioner's response, results in a reasonable collection potential for petitioner of $937,464 .84 . In this connection, we note that on Sept . 6, 2005, the second offer specialist sent petitioner a letter and enclosed with that letter a so-called Asset/Equity Table which showed a fair market value of real estate owned by petitioner of $995,714, a quick sale value of that real estate of the same amount, encumbrances on that real estate of $625,000, and "net realizable equity" with respect to that real estate of $370,714 . However, in a footnote next to those amounts the second offer specialist indicated : "Encumbrances not documented - subject to further valuation ." The notice of determination that the Appeals Office issued to petitioner on Feb . 8, 2006, indicated, inter alia, that petitioner had real estate with a fair market value of $995,714, that that real estate had a quick sale value of $796,571 .20 (or 80 percent of that fair market value), that any encumbrances with respect to that real estate were "Not documented", and that petitioner's total "net realizable equity" was $798,088 .20 . In petitioner's response, petitioner does not dispute the determina- tion in the notice of determination of petitioner's "net realiz- able equity" of $798,088 .20 .

Assuming arguendo, as petitioner argues a ternatively, that the "future income" component of petitioner's RCP should have been calculated by using his average monthly w ge income for the twelve-year period 1993 through 2004, rather than his average monthly wage income for the three-year period 002 through 2004, petitioner's RCP would be $927,737 .64 .37 Petitioner's RCP as so calculated exceeds the amount ($139,776) in petitioner's June 24, 2005 offer-in-compromise that petitioner offered to compromise, inter alia, petitioner's unpaid liabilities for 1990, 1991, 1992, 1994, 1996, 1997, and 2002 . See IRM pt . 5 .8 .1 1 .3(3) (Sept . 1, 2005) .

On the record before us, we find that the settlement officer did not abuse the settlement officer's discretion in rejecting the offer of $139,776 in petitioner's June 24, 2005 offer-in- compromise .

The monthly average of petitioner's wage income for 1993 through 2004 is $6,952 .03 . See supra note 32 . Adding to that amount petitioner's other monthly income (i .e ., $1,992) and subtracting petitioner's allowed monthly necessary living ex- penses (i .e ., $6,243) results in "excess" mont ly income of $2,701 .03 . That amount of "excess" monthly income multiplied by 48 months results in "future income" of $129,649 .44 . That amount of "future income" plus the amount that the settlement officer calculated as the "net realizable equity" component of peti- tioner's reasonable collection potential (i .e ., $798,088 .20), which "net realizable equity" component petitioner does not dispute in petitioner's response, results in a reasonable collec- tion potential for petitioner of $927,737 .64 . See supra note 36 .

We turn finally to petitioner's third principal argument .

In petitioner's response, petitioner argues that the settlement officer "made no effort to balance the Service's needs for efficient collection of taxes against the taxpayers' legitimate concern that collection action be no more intrusive than neces- sary ."

We have found that, assuming arguendo that the settlement officer had calculated the "future income" component of peti- tioner's RCP by using petitioner's average monthly wage income for the seven-year period 1998 through 2004 or his average monthly wage income for the twelve-year period 1993 through 2004, petitioner's RCP nonetheless would have exceeded the amount (i .e ., $139,776) that petitioner offered in petitioner's June 24, 2005 offer-in-compromise . In the case of the use of such seven- year period, petitioner's RCP would have exceeded petitioner's offer by $797,688 .84 . In the case of the use of such twelve-year period, petitioner's RCP would have exceeded petitioner's offer by $787,961 .64 . As discussed above, in order to be considered for acceptance, an offer based on "Doubt as to Collectibility", the basis on which petitioner submitted petitioner's June 24, 2005 offer-in-compromise, generally must equal or exceed the taxpayer's RCP .

Id .

Regardless of whether the "future income" component of petitioner's RCP is calculated on one of the two bases urged by petitioner or on the basis used by the settlement officer, petitioner's offer of $139,776 in pet tioner's June 24, 2005 offer-in-compromise did not equal or exceed that RCP .

On the record before us, we find that the settlement officer took into consideration whether the proposed collection action with respect to petitioner's unpaid liabilities for 1990, 1991, 1992, 1994, 1996, 1997, and 2002 balanced the need for th e efficient collection of those liabilities with the legitimate concern of petitioner that that collection action be no more intrusive than necessary . See sec . 6330(c)(3) C) .

Based upon our examination of the entire record before us, we find that respondent did not abuse respondent's discretion in making the determinations in the notice of determination with respect to petitioner's unpaid liabilities for 1990, 1991, 1992, 1994, 1996, 1997, and 2002 . On that record, w sustain those determinations .

We have considered all of the contentions and arguments of petitioner that are not discussed herein, and we find them to be without merit, irrelevant, and/or moot .

On the record before us, we shall grant r spondent's motion .

To reflect the foregoing, An order qranting respondent's motion and decision for respondent will be entered .

0. No Yes * * 17b . Are there any judgments against you? ® No q Ye s * 17e . In the past 10 years did you transfer any assets out of your name for less than their actual value? 0 No Yes * 17f . Do you anticipate any increase in household income in the next two years? ® No Yes 17g . Are you a beneficiary of a trust or an estate?
12. The record does not contain the "amended Form 656" re - ferred to in the first settlement officer's S e letter .
21. In fact, petitioner does not advance in petitioner's response any arguments with respect to the existence or the amount of petitioner's unpaid liabilities for 1990, 1991, 1992 , 1994, 1996, 1997, and 2002 . Assuming arguendo that petitioner were disputing in petitioner's response the existence or the amount of petitioner's unpaid liabilities for those years, on the record before us, we find that petitioner may not challenge the existence or the amount of those liabilities . That is because petitioner did not do so at the Appeals office hearing . See Washington v . Commissioner , 120 T .C . 114, 123-124 (2003) .
37. Pension (Spouse) $0 .00 48 . Child/dependent care 38 . Child Support $0 .00 49 . Life Insurance $0 .00 $0 .00 $0 .00 $0 .0 0 $0 .0 0 $0 .0 0 39 . Alimony 40 . Other - Social Securit y $0 .00 50 . Secured or legally- perfected debts (specify ) $1,551 .00 51 . Other - $0 .00 $0 .0 0 41 . Total Income $18,895 .00 52 . Total Expenses $5,659 .00 $6,243 .0 0 (Line 41 minus Line 52) NET DIFFERENCE $12,652 .0 0 53 . Net difference times (a,b or c) = Amount that could be paid fro m future income :
98. T .C . 518, 520 (1992), affd . 17 F .3d 965 (7th Cir . 1994) . We conclude that there are no genuine issues of material fac t regarding the questions raised in respondent's motion .