T.C. Memo. 2010-90



                       UNITED STATES TAX COURT



           JOHN J. AND DEBRA M. CANEY, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 21691-08L.               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 Section

6320 and/or 6330 (the notice of determination) issued by

respondent’s Appeals Office (Appeals).    That notice concerns

petitioners’ 2004 and 2005 Federal income tax liabilities, and it

sustains an Appeals officer’s determination that a notice of
                               - 2 -

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 other

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).   In

pertinent part, Rule 121(d) provides:    “When a motion for summary

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 in

respondent’s administrative file from petitioners’ collection due

process hearing.   Respondent has moved for summary judgment, and

so we infer facts in a manner most favorable to petitioners.


     1
      Unless otherwise stated, section references are to the
Internal Revenue Code, and Rule references are to the Tax Court
Rules of Practice and Procedure.
                                - 3 -

See, e.g., Anonymous v. Commissioner, 

___, ___ (2010)

(slip op. at 3-4) (citing Dahlstrom v. Commissioner, 

,

821 (1985)).

                            Background

     Petitioners filed joint Federal income tax returns for their

taxable (calendar) years 2004 and 2005.   Both returns showed

amounts due to respondent that remain unpaid.2   In October 2007,

respondent issued petitioners the levy notice.   In December 2007,

respondent issued petitioners the lien notice.   Petitioners

timely requested collection due process hearings regarding both

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 agreement.3   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 telephone



     2
      Although 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.
     3
      Petitioners did not pursue the installment agreement
because they judged the installment payments to be too great.
     4
      We discuss the lien hearing in sec. IV. of this report.
                                 - 4 -

conference would be sufficient and that petitioners no longer

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 liabilities through an installment 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.

                              Discussion

I.   Introduction

      Petitioners raise several objections to the motion.

Nonetheless, petitioners fail to show that there is any genuine

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 her

discretion when she rejected petitioners’ offer-in-compromise and

determined that the levy notice and the lien notice should stand.

See, e.g., Sego v. Commissioner, 

, 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, 

, 111 (2007).    We find that

Ms. Boudreau did not abuse her discretion.    We address

petitioners’ arguments to the contrary below.

II.   The Timeliness of the Motion

      Petitioners argue that the motion “is premature because

formal discovery is still ongoing”.    Petitioners cite Rule

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 material

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 the

affidavits of the party opposing the motion for summary judgment
                                - 6 -

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, T.C. Memo.

2008-3.    Thus, summary judgment is not inappropriate simply

because discovery is ongoing.

III.    The Rejection of the Offer-in-Compromise

       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 of 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. 1, 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 to

ascertain a taxpayer’s reasonable collection potential and has
                                - 7 -

rejected the taxpayer’s offer-in-compromise on that ground, we

generally have found 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 Potential

     Petitioners argue that Ms. Boudreau, in calculating their

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.5   We find that Ms.

Boudreau did not abuse her discretion in calculating either

petitioners’ income or petitioners’ expenses.   Either of those

findings is sufficient to justify a rejection of petitioners’

offer-in-compromise.   The two findings are in the alternative.6




     5
      Specifically, 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).
     6
      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 we
use petitioners’ numbers to estimate their future income,
petitioners would nonetheless have enough additional income to
pay their liabilities in full.
                                 - 8 -

            1.   Petitioners’ Total Income

     Petitioners argue that Ms. Boudreau abused her discretion by

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, 2005).

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).7       Petitioners argue that,

in the light of the downturn in the real estate market, Ms.

Boudreau abused her discretion by using Mrs. Caney’s income from

2005 and “the halcyon days of 2006”.     Petitioners argue that Ms.

Boudreau herself was uncertain whether averaging 2005, 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, petitioners show that

Ms. Boudreau recognized that she faced a difficult decision, one

that required her to exercise discretion.       Petitioners, however,

fail to allege any facts that show that for her to use 2005,




     7
      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.
                                  - 9 -

2006, 2007, and the first 6 months of 2008 was arbitrary,

capricious, or without sound basis in fact or law.

           2.    Petitioners’ Necessary Living Expenses

                  a.   The Commissioner’s Administrative Guidelines

     Although they do not dispute that Ms. Boudreau correctly

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 require 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 living

expenses”.   See sec. 301.7122-1(c)(2)(i), Proced. & Admin. Regs.

     What petitioners assert is true, but what they conclude is

false.   They have failed to show that any provision of the

Commissioner’s administrative guidelines is contrary to the plain

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 Appeals officer has

followed the Commissioner’s administrative guidelines to

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 of discretion.     See McClanahan v.

Commissioner, T.C. Memo. 2008-161; Lemann v. Commissioner, T.C.

Memo. 2006-37.

                  b.   The Local Standards for Housing and Utilities

     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”.



     8
      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.
     9
      We presume that petitioners make that seemingly superfluous
concession because, in Dean v. Commissioner, T.C. Memo. 2009-269,
petitioners’ counsel questioned exactly that authority. The
Court quickly rejected that argument. Id.
                                 - 11 -

       Petitioners are wrong.   The national and local standards do

not constitute an expert opinion.     Respondent does not use them

to prove any fact (i.e., that a certain allowance for monthly

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 basic monthly living expenses in evaluating the

adequacy of proposed installment agreements and offers-in-

compromise.    See, e.g., Speltz v. Commissioner, 

, 179

(2005), affd. 

 (8th Cir. 2006); Fernandez v.

Commissioner, T.C. Memo. 2008-210.        Generally, we have found no

abuse of discretion when an Appeals officer has used the local

standard allowances for housing and utilities rather than the

taxpayer’s actual expenses.     See, e.g., McDonough v.

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

Commissioner, 

 (9th Cir. 2009).       In any event, we are

not convinced that the derivation of the standard 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.
                               - 12 -

2008-226.   Petitioners show only their actual living expenses.

They fail to allege any facts showing that their basic living

expenses exceed what Ms. Boudreau allowed them.

     Petitioners make a final argument almost identical to an

argument that petitioners’ counsel made in Dean v. Commissioner,

T.C. Memo. 2009-269.    Petitioners assert that respondent has

violated their “fundamental constitutional rights of procedural

due process” and that we must require him to present expert

testimony about the derivation of the local standard allowances.

Cf. id.   As we stated in Dean, petitioners’ right to a

precollection hearing and right to compromise their undisputed

tax liability are privileges created by Congress, subject to

conditions established by Congress.     Their right to precollection

procedures is statutory, and they have no constitutional right to

avoid payment of their admitted tax liabilities.    Their attempt

to raise the dispute to constitutional levels is unconvincing.

Cf. id.

            3.   Conclusion

     We find that Ms. Boudreau did not abuse her discretion by

averaging Mrs. Caney’s income over 2005, 2006, 2007, and the

first 6 months of 2008 to calculate her expected income.    In the

alternative, we find that Ms. Boudreau did not abuse her

discretion in calculating petitioners’ necessary living expenses.
                              - 13 -

Thus, we find that Ms. Boudreau did not abuse her discretion in

calculating petitioners’ reasonable collection potential.

      B.   Conclusion

      Petitioners have 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 by rejecting petitioners’ offer-in-compromise.

IV.   The Lien Hearing

      Petitioners assert that they never received a hearing with

respect to the lien notice.   Petitioners, however, fail to allege

any harm they suffered as a result.    First, they do not suggest

that they would have raised any new arguments.   Second, they do

not argue that they have satisfied the statutory requirements for

the release of the lien.   Section 6325(a) lists the two

circumstances in which the Secretary will release a lien; that

is, (1) when the liability is satisfied or has become

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 is satisfied or unenforceable

and do not allege that they have even offered to post a bond.

Petitioners have failed to allege facts showing that a lien
                              - 14 -

hearing would have resulted in the release of the lien.

Petitioners thus have not alleged that a lien hearing would have

made any difference with respect to either Ms. Boudreau’s

rejection of their offer-in-compromise or the lien itself.

V.   The Appeals Office Impartiality Requirement

      Petitioners assert that Mr. McLaughlin, the Appeals team

manager who signed the notice of determination, was not

impartial.   That allegation springs from Dean v. Commissioner,

supra.   In that case, Mr. Hood, as counsel for the taxpayers, had

sent a letter to the Appeals officer during their negotiations.

That letter, which we described in Dean as “intemperate and * * *

reasonably perceived as possibly threatening”, prompted Mr.

McLaughlin, also the Appeals team manager in that case, to refer

Mr. Hood to the Internal Revenue Service Office of Professional

Responsibility.   In response, Mr. Hood referred Mr. McLaughlin

and the Appeals officer to the Treasury Inspector General for Tax

Administration less than a month before the notice of

determination was issued in this case.

      Petitioners argue, as did the taxpayers in Dean, that Mr.

McLaughlin’s involvement in their case was “inherently

prejudicial”.   (Petitioners fail, however, to allege that a new

hearing with a different Appeals officer and Appeals team manager

would yield a different result.)   For purposes of section

6330(b)(3), an “impartial” officer is one “who has had no prior
                               - 15 -

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.

VI.   Conclusion

      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 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.