John J. & Debra M. Caney, Petitioner

T .C . Memo . 2010-9 0 JOHN J . AND DEBRA M . CANEY, Petitioners v . COMMISSIONER OF INTERNAL REVENUE,- Responden t Docket No . 21.691-08L .- Filed ' April'' 27, 2010 .

Ronald F . Hood , for petitioners .

Daniel P . Ryan ,'for respondent .

MEMORANDUM OPINION '

-HALPERN, Judge : This case is before us to-review a Notice of Determination Concerning Collection Action(s) Under Sectio n 6320 and/or 6330 (the notice of determination) issued by respondent's Appeals Office (Appeals) . That notice concern s petitioners' . 2004 and 2005, Federal income tax liabilities, and i t sustains an Appeals officer's determination that a notice of intent to levy (the levy notice) and a notice of Federal tax lien (the lien notice) for those years should stand . We review the notice of determination under sections 6320(c) and 6330(d)(1) .1 Respondent has moved for summary judgment (the motion) .

Petitioners object (the response) . We shall grant the motion .

We may grant summary judgment "if the pleadings, answers to interrogatories, depositions, admissions, and any othe r acceptable materials, together with the affidavits, if any, . show that there is no genuine issue as to any material fact and that a decision may be rendered as a . matter of law ." Rule 121(b) . I n pertinent part, Rule 121(d) . provides : "When .a .motion for summar y judgment is made and supported,* * *, an adverse party may not .rest upon'the mere allegations or denials of such party' s pleading, but such party's response * '* * must set forth specific facts showing that there is a genuine'issue for trial . ."

In support of the motion, respondent relies on the pleadings, the declaration-of Appeals Officer Lisa S . Boudreau, the Appeals official assigned to petitioners' appeal under sections 6320 and 6330, and the relevant documents i n respondent ' s administrative file from petitioners ' coll ection du e process hearing . Respondent has moved for summary , judgment, and , so we infer facts in a manner most favorable to petitioners .

'Unless otherwise stated, section references are to the Internal Revenue Code, and-Rule references are to the Tax Court Rules of Practice and Procedure .

See, e .g ., Anonymous v .' Commissioner , 134 ;T .C . , (2010) (slip op . at 3-4 .) (citing Dahlstrom v . Commissioner , 85 T .C(cid:127)812, 821 (1985)) . Backgroun d Petitioners filed joint` Federal . income tax returns for thei r taxable (calendar) `years 2004 and 20,05 . Both returns showed amounts due to .respondent :-that remain~unpaid .2 In October. 2007, ' respondent issued petitioners the levy notice . 'InDecember 2007 , respondent issued-petitioners the lien notice . =Petitioners timely requested .coilection due process hearings regarding bot h the levy notice'and the lien notice,' and ; they indicated .`that- they intended to propose'-collection alternatives in the-form of an offer-in-compromise"and, in response'to the levy notice, an .

installment agreemeht .3 -(cid:127) Petitioners also requested that respondent-withdraw the lien . Petitioners,timely requested face- to-face hearings instead of telephone conferences .` Petitioners' levy hearing was assigned to Ms . Boudreau .4 In April 2008, Ms .

Boudreau had ,a telephone-conference with petitioners' counsel, Ronald F . Hood, during which Mr . Hood verified that the telephon e 2Although petitioners concede that fact, the levy notice .'- seems to contradict it . For 2005, the levy notice lists an assessed balance,"accrued interest, and a-late payment penalty, but, for 2004, it lists only a late payment penalty .

3Petitioners did not pursue the installment agreement because they judged'the installment payments to be too'great :

'We discuss the lien hearing in sec . IV . of this report .

conference would be sufficient and that petitioners no longe r requested a face-to-face hearing .

Soon thereafter, petitioners filed . an offer-in-compromise of $27,000 (offering that amount in compromise of total liabilities, .determined from respondent's Offer In Compromise Financial , Analysis Report ., of $96,693),-which respondent ultimately rejected on the ground that, because of expected future income, they could pay-.their liabilities . in . .full . After that, .Appeals issued the-notice of determination'sustaining both the levy notice and the lien-notice . The notice of determination was, signed by Appeals Team Manager Matthew N .-McLaughlin .but is based on Ms . Boudreau's determination to sustain the collection .

'actions . Ms . Boudreau ., made that determination because ., she believed that, petitioners had the ability :to pay fully their outstanding(cid:127)liabilities through aninstallment agreement' or the combination of an installment agreement and the liquidation of- assets ., In response to the notice of determination, .,petitioners timely filed the petition . When they, filed the petition, petitioners lived in Massachusetts .

Discussio n I .

Introductio n Petitioners . raise . several objections to .the, motion . .

.

Nonetheless, petitioners fail to show that there is any genuin e issue as to any material fact . See Rule 121(b) .

.

5 - Petitioners do not challenge their underlying liabilities .

Accordingly, we must'decide only whether Ms . Boudreau abused he r discretion when she rejected petitioners'-offer-in-compromise an d determined that the levy notice and the lien notice should-stand .

See, e .g .,' Sego v .>Commissioner , 114 T .C . 604,"610 (2000) . That is, we must decide whether her determination was arbitrary, .capricious, or without sound basis in fact-or law . See, e .g . , Giamelli v . Commissioner, ' 129' T .C ._ 107, 11 .1 .(2007) . We find tha t Ms . Boudreau did not abuse her discretion . We addres s petitioners' arguments to the contrary below .

II .

The-Time'liness of the Motio n Petitioners argue that the motion " is premature becaus e formal discovery is still ongoing Petitioners cite .Rule`t 121(b), which-states that we may grant summary judgment "if the pleadings,answers'to interrogatories ; depositions, ' admissions, .

and any other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any,mateiial fact And that a decision may°be rendered as a matter of law ."

Petitioners assert that, while formal discovery is ongoing, we cannot determine "'whether there-are-additional genuine issues of material facts" .

Petitioners, however, have failed to read Rule 121 in its entirety . In pertinent part, Rule 121(e) provides that,-if .th e affidavits of the party opposing the motion for summary judgment show that the party . cannot present facts essential to justify that party's opposition, then the Court may deny the motion .

Petitioners, however, fail to show that further discovery would likely yield , any fact essential to their opposition to the, motion . See Countryside Ltd . Pship . :v . Commissioner , TI .C . Memo .

2008-3 .

Thus, summary judgment is not . inappropriate simply, because discovery is ongoing .

III . .

The Rejection bf4the Offer-in-Compromis e Section 7122(a) authorizes the Secretary to , compromise, a taxpayer's Federal income tax liability . The grounds, .for :

compromise of a tax liability include doubt as to collectibility .

Sec . 301 .7122-1(b)(2), Proced . . & Admin . Regs .= Doubt, as to collectibility ;exists_in any case in which the taxpayer's assets .

and income are less than the full- amount f. the liability .

Id .

Generally, under the Commissioner's administrative guidelines, Appeals will accept an offer-in-compromise because of doubt as to .

collectibility only if>the .offer reflects the reasonable collection potential ; that is, the amount the Commissioner could reasonably collect through other means, including administrative and judicial collection remedies . See Internal Revenue Manual (IRM) pt . 5 .8 .4 .4(2) (Sept . l ; 2005) ; see also Rev . .Proc . 2003- 71, sec . 4 .02(2), 2003-2 C .B . 517, .517 .. When .the Appeals officer has followed the Commissioner's administrative guidelines t o ascertain a taxpayer's reasonable collection potential and°'has rejected the taxpayer ' s offer - in-compromise on; that ground, we generally have found (cid:127) no abuse of discretion .

See McClanahan .v .

Commissioner , T .C . .Memo .

. 2008-161 ; Lemann ° v .=` Commissioner , T .C .

Memo ., 2006-37 .

A .

Petitioners' Reasonable Collection Potentia l Petitioners argue that Ms . Boudreau, in calculating thei r reasonable collection potential, abused her discretion by incorrectly calculating,their income,,their living- expenses, and their assets . For purposes of deciding the motion, we shall use petitioners' . . valuations of their` assets .s We find -that'Ms .

Boudreaudid not abuse her discretion .in calculating'either petitioners' income or petitioners', expenses . Either .,of those findings is sufficient to justifya rejection of petitioners' off'er-in-compromise ; .' The two findingsare in the alternative .- 6 SSpecifically, we assume that petitioners''net realizable equity in assets is not $50,185, but is $29,965 . We note that petitioners have thus conceded'that their assets : are` worth more than their offer-in-compromise ($27,000) .

'The reason is that, if we, find that Ms . Boudreau appropriately calculated petitioners' income, then, even°if we allow petitioners all their claimed expenses, petitioners would nonetheless have enough additional income : to pay .their liabilities in full . Likewise, if we find that Ms . Boudreau appropriately calculated petitioners' expenses, then, even if w e use petitioners' numbers to'est'imate their future income, petitioners would nonetheless have enough additional income to pay their liabilities in full .

Petitioners 'iTotal Incom e APetitioners arguethat Ms . ;Boudreau abused her discretion b y inappropriately calculating, Mrs . Caney's 'income . Mrs . Caney is a commissioned real estate agent whose income varies from year to year . According to the Commissioner's administrative guidelines, an Appeals officer may average the income .of a commissioned sales person to calculate income .- IRM .pt .-5 .8 .5 .5(6)~ .(Sept . 1, 2 .005) .

Ms . Boudreau thus calculated Mrs . Caney's income by .averaging-her income from 2005 ($99, .669), 2006 ($121,749),2007 ($36,083) ., and the first 6 months of 2008 .($21,,216) .' :Petitioners argue-that, in the light of the . downturn in the real estate market, Ms .

Boudreau„abused . her . discretion by using Mrs . (cid:127)Caney's income from 2005 and "the halcyon days of 2006" .

Petitioners argue that Ms .

Boudreau herself was uncertain . whether averaging . 200 .5, 2006, and,° 2007 was "appropriate given the market" .and that .she acknowledged that averaging all .3 years would be "bad" for petitioners . (At petitioners' request, Ms . Boudreau included the first 6 months of 2008 in her final calculation .) At most,,peti.tioners show tha t Ms . .Boudreau recognized`'that she faced^a difficult decision, on e that required her to exercise discretion . 'Petitioners, however , fail to allege any facts that show that for her to use 2005 , 'Those ;amounts yield an average . monthly income of $6,636 .

Not surprisingly, . petitioners do not argue that $6,452, the' . average monthly income Ms . Boudreau calculated, is incorrect .

2 .006,,2007, and the=first 6-,.months of 2008 was arbitrary, capricious, or without sound basis in fact' or° law .

2 .

Petitioners' Necessary Living Expense s a .

The Commissioner's Administrative Guidelines Although they do not dispute that Ms . Boudreau correctl y applied the Commissioner's administrative guidelines to determine .

their necessary living expenses,,petitioners argue that those guidelines are„contrary, :to the "literal and plain meaning" of the statute, sec . 7122, and the regulations, sec . .301 .7122-1, . .Proced .

& Admin .Regs . Petitioners assert-that the statute and the regulations requi're"respondent to permit them :"to retain sufficient funds to-pay basic living expenses" and that' respondent must evaluate petitioners' "individual facts and circumstances" to determine the " .amount of such basic livin g expenses " .

See sec . 301 .7122-1(c)(2)( ) , Proced . & Admin . Regs .

What peti .tioners .assert is .true, but what,,theY conclude is false . They have failed to show that : any provision of th e Commissioner's administrative guidelines is contrary to the plai n and literal meaning of the statute or regulations . Petitioners cite no authority that every documented expense is, for that reason alone, a "basic living expense" under the-statute and` regulations . Petitioners have failed to show any conflict between the Commissioner's administrative guidelines and-the .

10_ statute or the regulations, .8. Again, when an :AppealsroffilcerLha s' followed the Commissioner's administrative .guidelines t o ascertain a taxpayer's .reasonable,collection potential and has .

rejected the taxpayer's offer-in-compromise on that,ground, we generally have found .no abuse, ofdiscretion . See McClanahan'v .

Commissioner , Tr .C . Memo . 2008 .-161 ; Lemann v . Commissioner , T .C` Memo . 2006-37 .

The :'Local Standards for Housing and Utilitie s .,Although petitioners accept"the authority of the . Secretary to issue national and local guidelines" "by .county for each, state",9 petitioners argue that 'those standards constitute an expert opinion . For that reason, petitioners demand'that .respondent .provide`the "underlying ; data", which petitioners accuse respondent of "manipulating" .

, 'In particular, petitioners assert that neither the statute nor any regulation . states that a taxpayer's monthly payment for loans taken . to finance'a'child's college education is not' a -necessary and basic living expense . See generally IRM pt . 5 .8 .5 .5 .3(6) (Sept . 1, 2005) (allowing education expenses only for the taxpayer and only if required as a condition of`present employment) . Petitioners''are correct, yet their point is irrelevant . The question is whether the administrative guideline is a reasonable interpretation of-the silent statute and . regulations . Petitioners have failed to offer any argument to that effect . Ms .' Boudreau>thus did not abuse her discretion .by disallowing their monthly payments with respect to their child's .student loans :

` 9We'presume that petitioners make that seemingly- superfluous concession because, in Dean v . Commissioner , T .C . Memo . 2009-269, petitioners' counsel questioned exactly'that authority . Th e Court quickly rejected that argument .

Id .

Petitioners are wrong . The'national .and local'standards d o not constitute an expert opinion . Respondent-does not use`them_ to prove any fact .(i .e ., that a certain allowance formonthly housing and utilities expenses is correct) See . Fed . R . Evid .

702 . _Rather,, the standard allowances are guidelines :designed to protect taxpayers, see sec . 7122(d)(2)(A), and from which an Appeals . officer may deviate, ; see sec .- 7122 (d) (2) (B) We 'have sustained' the : use- of the '.national and local' allowances as guidelines for(cid:127)basicmonthly living expenses inevaluating th e adequacy of proposed installment agreements and"offers-in- compromise . See, e .g ., Speltz v . Commissioner , -124 .=T .C . 165, 179 .

(2005), affd . 434 F .3d 782 (8th-Cir . 2006) ; Fernandez v .` Commissioner , T .C . Memo . 2008-210 . Generally, we have found n o abuse of discretion when an Appeals officer has used'the local " standard-allowances for housing, and utilities rathera .than the taxpayer's,actual expenses See, e . g . , McDonough-v .

Commissioner , T .C . Memo . 2006-234, affd . sub nom . Keller v .

.

Commissioner , 568 F°.3d 710 (9th Cir . 2009) .`=In any event, we are not convinced that the derivation of thestandard allowances is relevant in the-absence of any assertion of specific facts showing that applying the standard allowance would leave petitioners without the resources to meet basic living expenses-- facts within their knowledge and as to which .they need no' discovery from respondent . See Marks v . Commissioner ,T .C . Memo .

Petitioners show only-,their actual, liv;ing expe n to allege" any, facts , showing that their⁴ basi c expenses , exceed what , Ms, . Boudreau alaowed~them .

Petitioners4make a final argument-almos t argument , that petitioners ' T .C . Memo . 2009-269 Pet i tioners a ssert, that violatedn,their``fundamental~ constitutional-rights of,procedural .

" process",and that :we must require- him,4to-present,exper t estimony about th e As we .'statedyin Dean ,_.petitioners',right to a > :preco'llection hearing-rand 'right :to compromise their undispute d tax liability are > privileges created ; by ; Congress subject ' t conditions,-established,by Congress,- `Their right to,precollecti-on- .:. _ .._~ . :

...

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'procedures is statutory,,,_and they, have no constitutional right, t o avoid payment ,of their ;admitted tax liabilities . -Their attempt ; - ,,,fnd,that Ms ., Boudreau did , not, abuse her discretion,:by , averaging Mrs : Caney ' s ;income - over 2005, 2006 , . 2007 , 'ar d, th e first 6 months of 200.8 -to,calculate ,her expected income . , .;'Irn alternative, we find that Ms . ',Boudreau did not(cid:127)=abuse her .

discretion in calculating,petitioner.s'_ necessary living Thus, we find . that Ms . .Boudreau did not abuse her'discretion in .calculating-petitioners"reasonable collection potential .

B .

Conclusio n Petitionershave-failed to allege facts suggesting that Ms .

Boudreau did not properly apply the provisions of~ .the Internal" Revenue Code, the regulations, . or the-Commissioner' s administrative guidelines-in calculating petitioners reasonable' ,' collection„ .potential,_ . : which exceeds-their offer-in=compromise and their total-liabilities`. Thus, Ms . Boudreau `did not abuse her .. , discretion . byrejecting petitioners' affer-in-compromi se .

IV .

TheLien Hearing = Petitioners assert that they never received (cid:127)a hearing with-, respect to the lien notice . Petitioners ., however, fail to-allege .

any harm they suffered as a result . - First, theydo hot suggest that they would have raised-any hew-Arguments . Second, they do not argue that .they,have satisfied the statutory requirements for .the release of, the lien . Section 6325(a) lists the tw o circumstances in which the Secretary will release a lien that is, (1)'when the liability is'satisfied or has becom e .unenforceable, or (2),-when the Secretary has accepted a bond that is conditioned upon payment of the amount assessed . Petitioners do .not allege,that-the liability islsatisfied,or unenforceable' and do not allege thatthey have'feven offered to post a bond .

Petitioners have-failed toallegefacts showing that alien hearing 'would ; have( resulted in, the, release of, the=,lien .

not alleged that a :°li'en« hearing woul d made any difference with respect to either Ms . Boudreau;s # rejection of ;,theiroffer-in-compromise or- thelien itsel f Petitioners as that Mr . McLaughlin ,"- .the, .Appeals, team'{ .

manager who signed .:the.rnotice of, determination , ,was-not.

:

impartial, .,;,Tha t That allegation springs, ,.; from+' Dean "v . . Commi'ssione r sent a letter' tothe, :Appeals,officer°,during,;-their : negotiations .

That, letter", which ; we described in Dean a s reasonably perceived~as ;possibly threatening," : : prompted, M r McLaughlin,,'al-so the .Appeals :team manager in that ."case !t o Hood to the Internal Revenue Service Offic e Responsibility, In re sponse ; Mr . .Hood referred Mr .

Treasury Inspector, General for Tax k before the notice of* did the taxpayers i(cid:127)n= Dean , that . M :prejudicial" . (Petitioners ;,fail, :however, to allege tha t a different Appeals officer and Appeal s yield a . different,-,result . .),, For .purposes of 1 5 involvement with respect to the unpaid tax specified in subsection (a)(3)(A) before the first hearing under this section or section 6320 ." See Perez . v . Commissioner , T .C . Memo .

2002-274 . Petitioners have not alleged that either Ms . Boudreau or Mr . McLaughlin was involved in their case before their levy hearing . We conclude that the section 6330(b)(3) impartiality requirement was satisfied . Cf . Dean v . Commissioner , supra .

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VI .

-Conclusio n We find that Ms . Boudreau did not abuse her discretion by rejecting petitioners' offer-in-compromise and in sustaining the levy notice and the . lien notice . Petitioners have alleged no facts showing that she failed to follow applicable procedures or that(cid:127)her rejection of the offer-in-compromise . was arbitrary, capricious, . or without . sound basis in fact or law . Summary judgment is therefore appropriate .

An appropriate order and decision will be entered for respondent .