T.C. Summary Opinion 2009-176



                     UNITED STATES TAX COURT



                  DAVID W. BROWN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 4887-08S.               Filed November 25, 2009.



     David W. Brown, pro se.

     Marshall R. Jones, for respondent.



     MORRISON, Judge:   This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code, as in

effect when the petition was filed.1   Under section 7463(b), the

decision to be entered is not reviewable by any other court, and




     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code (Code).
                               - 2 -

this opinion shall not be treated as precedent for any other

case.

     Petitioner David W. Brown (Brown) seeks review under section

6330(d) of the IRS’s determination rejecting Brown’s proposal to

pay his unpaid tax liabilities for the tax years 2001 through

2004 in installments of $250 per month.   The issue for decision

is whether the IRS abused its discretion by refusing to consider

Brown’s child-support obligation for one of his children in

evaluating Brown’s proposal.

                            Background

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated in this opinion by this reference.   Brown resided in

Alabama at the time he filed his petition.

     Brown and his wife (the Browns) divorced in 1999.   They had

two children.   The divorce decree was entered by the circuit

court of Morgan County, Alabama, as part of a settlement between

Brown and his wife.   The settlement consisted not only of the

Browns’ consent to the divorce decree but also of a divorce

agreement.   This agreement contained the following child-support

provision, requiring Brown to pay child support of $51.93 per

child per week (which is equal to $225 per child per month) until

“any child’s arrival at the age of majority”:

     Subject to the approval of the Court, Husband shall pay
     to Wife through the Office of the Register of the
                               - 3 -

     Circuit Court, Morgan County, Alabama, for support and
     maintenance of the minor children the sum of Fifty-One
     Dollars and Ninety Three Cents ($51.93) per child per
     week, until the first to occur of any of the following
     events: (1) death of any child or Husband; (2)
     marriage of any child; (3) any child’s becoming self-
     supporting; or (4) any child’s arrival at the age of
     majority.

The dates of birth of Brown’s children are listed in the

agreement.   From these dates we conclude that the two children

were aged 8 and 13 at the time of the divorce agreement.    We can

also conclude that Brown’s younger child turned 19 on February

17, 2009, and his older child turned 19 on July 6, 2004.    The age

of majority in Alabama is 19, as discussed below.

     As part of the divorce decree, the state court entered an

order requiring Brown’s employers to withhold child-support

payments from his wages and transmit the withholdings to the

Alabama Child Support Payment Center for payment of child

support.   This withholding order was not immediately effective.

Instead, the decree provided that the order “shall not be served

on the employer of * * * [Brown] and shall not take effect until

* * * [Brown] shall become delinquent in a dollar amount equal to

one month of child support payments”.

     The IRS alleges that Brown failed to file timely tax returns

for 2001 through 2004.2   Apparently, Brown made child-support

     2
      The IRS requested in its brief that this Court find as a
fact that Brown failed to file timely tax returns for 2001
through 2004. However, we are not able to confirm from the
                                                    (continued...)
                                - 4 -

payments of $450 per month ($225 per child) until his older son’s

19th birthday in 2004.    Even after his son turned 19, Brown

continued to make the full $450 payment each month.    These $450

payments continued until at least until January 2008.

     On July 25, 2007, the IRS filed a notice of Federal tax lien

against Brown regarding his unpaid tax liabilities for the tax

years 2001 through 2004.3   On July 26, 2007, the IRS sent Brown a

letter notifying him that the IRS had filed the lien and advising

him that he had a right to a collection hearing under section

6320.    Brown requested such a hearing.   Brown’s case was assigned

to Darlene Caputo, an Appeals officer (the Appeals officer) at

the IRS Branch Office in Memphis, Tennessee.




     2
        (...continued)
Exhibit 5-J referenced in the brief that the statement is true.
Thus, we do not find the statement above as a fact as we do the
other facts contained in the background section of this opinion.
     3
      The notice of Federal tax lien alleges that Brown owed
$8,278.51 for 2001, $9,267.27 for 2002, $8,528.57 for 2003, and
$8,034.42 for 2004, or $34,108.77 in total. These amounts
include interest on Brown’s unpaid tax liabilities, as well as
the failure-to-pay penalty. This failure-to-pay penalty accrues
every month at the rate of 0.5 percent of the underpayment per
month. Sec. 6651(a)(2). The penalty will accrue every month for
50 months if the tax remains unpaid. After the filing of the
notice of Federal tax lien, the underpayment interest and the
failure-to-pay penalty continued to accrue. On the basis of
other parts of the record, we can discern the amounts of
underpayment interest and the failure-to-pay penalty which
accrued from the date of the notice until Jan. 17, 2008. These
amounts are $1,220.55 for 2001, $1,724.20 for 2002, $1,957.27 for
2003, and $2,428.80 for 2004, resulting in a total additional
liability of $7,330.82.
                                 - 5 -

     Brown mailed various documents containing evidence of his

income and expenses to Caputo.    These documents included IRS Form

433-A, Collection Information Statement for Wage Earners and

Self-Employed Individuals.

     On January 8, 2008, a telephone conversation took place

between Brown and the Appeals officer.    The Appeals officer

generally explained two of the collection alternatives described

in section 6330:   (1) an installment agreement, by which the

taxpayer pays the entire tax liability over time by making

monthly payments, and (2) an offer-in-compromise, under which the

IRS forgives a portion of the tax debt.    See sec.

6330(c)(2)(A)(iii).   According to the case activity record

written by the Appeals officer, the only collection alternative

she and Brown discussed in detail was the possibility of an

installment agreement covering the tax years 2001-04.    Brown did

not dispute the underlying tax liabilities nor did he dispute

that the notice of Federal tax Lien was filed or whether it

should have been filed.   His sole contention was that he could

afford an installment payment of only $250 per month because of

his monthly expenses, expenses that he claimed included $450 per

month in child-support payments for his two children.    By

contrast, the Appeals officer told Brown he could afford $700 per

month because she determined that Brown no longer had any legal

obligation to make child-support payments for his two children.
                                 - 6 -

The record does not reflect whether either party’s respective

proposal at the hearing ever detailed the duration of a proposed

installment plan or how many monthly payments Brown was to make.4

     After the January 8 telephone conversation, Brown submitted

to the Appeals officer a letter signed by his ex-wife stating

that Brown “is at this time, January [9, 2008,] current with

child support payments in the amount of $450 dollars per month.”5

He had told the Appeals officer that he paid some of the child-

support payments by check to his wife and that the other part he

paid by cash directly to his children.     Brown also sent to the

Appeals officer a copy of the final divorce decree, attached to

which was the divorce agreement.

         After the January 8 telephone conversation, the Appeals

officer conducted research on the Web site Google.com and

concluded that the age of “majority for child support is 18 yrs

[sic] of age.”     Therefore she would “not allow for child support,

which [would] increase monthly disposable income to $700.00 a



     4
      However, it is clear that because Brown’s assessed and
accrued tax liability exceeds $40,000, see supra note 3, the
installment plan had to stretch over several years. The Appeals
officer also mentioned in the case activity record that Brown
“would have to make at least $600.00 a month payments to full pay
bal due [sic].”
     5
      It should be noted that Brown had a legal obligation to
make child-support payments only for his younger child when his
ex-wife wrote the letter in January 2008. This is true whether
the age of majority for Brown’s younger child was 18 or 19, as he
turned 19 over a year later on Feb. 17, 2009.
                                - 7 -

month.”    According to the case activity record, the Appeals

officer decided on January 18, 2008, to sustain the notice of tax

lien.    She sent a written determination to Brown on January 25, a

determination that we describe further below.    At trial Brown

claimed that he was in fact able to speak with the Appeals

officer at some point during January 2008 when, he says, the

Appeals officer purportedly called him with news of the final

determination.6   During the call, he allegedly explained to her

that the age of majority in the state of Alabama was 19, not 18.

According to Brown, neither party to this subsequent conversation

discussed a monthly installment payment amount greater than the

$250 Brown initially proposed but less than the $700 figure the

Appeals officer had arrived at.

     On January 25, 2008, the IRS sent Brown a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330.    The notice stated that the IRS was correct to

assess tax against Brown and to file a tax lien against him and

that he could make full monthly installment payments.    The notice

asserted that the “monthly child support payment for $450.00 was

disallowed because of the ages of your children.”    It noted:

“You sent the court documents, which show that you are no longer

required to make child support payments for the older child, age


     6
      The Appeals officer states in her notes that she spoke with
Brown only at the CDP hearing on Jan. 8, 2008, and was not able
to reach him after that.
                                - 8 -

23, and the younger child, age 18 as of February of 2008.”      This

was an apparent reference to the requirement in the divorce

agreement of February 11, 1999, that Brown pay child support

until his children reached the age of majority.

       Brown timely filed a petition with this Court on February

26, 2008, challenging the Appeals officer’s determination.      In

his petition, he claims that “I am still paying child support and

will continue to pay child support until Feb. 2009.”    He also

stated:    “I am willing to pay a monthly payment but can not

afford $700.00/month.”

       At trial in Birmingham, Alabama, on October 14, 2008, Brown

submitted into evidence an order from the Circuit Court of Morgan

County, Alabama, that ordered Brown to change the way in which he

was to make child-support payments.     Attached to this September

22, 2008 order was a separate document entitled “Responsibilities

of Individuals Under Child Support Orders”.    The document stated

that

       You must continue to make all payments until the court
       order is changed. If your child’s status changes
       (turns 19, marries, moves in with a different relative,
       obtains a full-time job, etc.), you must continue to
       make the same payments until the court changes the
       amount you must pay.

It is unclear who wrote the document; it is not signed.    The IRS

objected to admission of the document into evidence because:

       it’s a document dated more than eight months after the
       date of the hearing. Therefore, it could not possibly
       have been part of the administrative record when
                                - 9 -

     Darlene Caputo considered * * * [Brown’s] case, and
     under the statutory scheme and the case law, it’s not
     relevant, and it may not be admissible.

The court took the IRS’s objection under advisement.    The IRS did

not elaborate further on the issue in its post-trial brief.

     Brown’s testimony at trial focused on the IRS’s failure to

consider his child-support payments in determining how much he

could pay to the IRS in monthly installments; he submitted no

brief.    He conceded that he was liable for all taxes, interest,

and penalties due and stated that the sole issue in dispute was

the dollar amount of his monthly payment under an installment

plan.    He implicitly conceded that he has no child-support

obligation for his older child by discussing only his younger

child at trial, but he did not directly address the issue of

support for his older child at trial.    He stated that his

obligation to his younger child would terminate on February 17,

2009, when the child would turn 19.

     In its post-trial brief, the IRS conceded that the Appeals

officer should have taken into account the amount of child

support attributable to Brown’s younger child.    It agreed with

Brown that the age of majority in Alabama was in fact 19.      The

IRS minimized the significance of the error, asserting that the

child support of $225 per month should have been subtracted from

the monthly amount that Brown could pay to the IRS only until the

younger child turned 19 in February 2009, when Brown could pay
                               - 10 -

the full $700 per month the Appeals officer had determined.    The

IRS argued that Brown’s offer of $250 per month, reflecting

support for both children, was too low.   Despite its concession

that the Appeals officer miscalculated the amount Brown could

pay, the IRS nevertheless contended that Appeals officer’s

failure to offer $475 per month, an amount consistent with a

correct subtraction for one child’s support, was not an abuse of

discretion.    The IRS claimed that no abuse of discretion occurred

because even if the Appeals officer had offered $475 per month,

Brown never indicated he would agree to pay that amount.7    The

IRS noted that in the event this Court finds that an abuse of

discretion occurred, it did not object to remand of this case to

the Appeals Office.   Finally, the IRS argued that the notice of

tax lien should not be withdrawn because Brown had not requested

it be withdrawn and none of the conditions in section 6323(j) for

withdrawing the notice of tax lien were satisfied.

                             Discussion

     When the IRS makes an assessment that a taxpayer owes tax,

the amount of unpaid tax becomes a lien in favor of the United

States against all property belonging to that person.   Sec.

6321.    The IRS can solidify its rights to the property by filing



     7
      As Brown does not argue that he ever offered $475 per month
before the issuance of the notice of determination, we find as a
factual matter that he never increased his offer from the $250
per month he originally offered at the hearing.
                              - 11 -

a notice of Federal tax lien with the local government in which

the property is located.   Sec. 6323(f).   The effect of the filing

is that the lien has priority over subsequent buyers of the

property, holders of security interests in the property,

judgment-lien creditors, and mechanics lienholders.    Sec.

6323(a).   Once the IRS has filed a notice of Federal tax lien

with the local government, it is required to notify the taxpayer.

Sec. 6320(a)(1).   Within 30 days after the expiration of the 5-

business-day period for sending the notification, the taxpayer is

permitted by section 6320(a)(3)(B) to request an administrative

hearing.

     There is no entirely independent set of rules that governs

how the IRS and the taxpayer are to handle these lien hearings.

Rather, section 6320(c) imports the rules that govern similar

hearings that the IRS must hold before it can issue a levy.8

Thus, section 6320(c) provides that “For the purposes of this

section, subsections (c), (d) (other than paragraph (2)(B)

thereof), (e), and (g) of section 6330 shall apply.”    Section

6330(c)(2) sets forth what issues can be raised by the taxpayer



     8
      “The levy enables the Service to gain custody of taxpayer’s
property whether in the possession of the taxpayer or third
parties.” Elliott, Federal Tax Collections, Liens and Levies,
par. 13.01, at 13-6 (2d ed. 2008). “The * * * levy does not
determine whether the government’s rights to the seized property
are superior to those of other claimants; the levy does, however,
protect the government against diversion or loss while such
claims are being resolved.”

a levy hearing and therefore, by operation of section 6320(c),

it also governs what issues can be raised by the taxpayer at a

lien hearing.   Section 6330(c)(2) provides:

     (2)   Issues at Hearing.--

           (A) In general.--The person may raise at the
           hearing any relevant issue relating to the
           unpaid tax or the proposed levy, including--

                (i) appropriate spousal defenses;

                (ii) challenges to the appropriateness
                of collection actions; and

                (iii) offers of collection alternatives,
                which may including the posting of a
                bond, the substitution of other assets,
                an installment agreement, or an offer-
                in-compromise.

           (B) Underlying liability.--The person may
           also raise at the hearing challenges to the
           existence or amount of the underlying tax
           liability for any tax period if the person
           did not receive any statutory notice of
           deficiency for such tax liability or did not
           otherwise have an opportunity to dispute such
           tax liability.

The duties of the Appeals officer in a levy hearing (and

therefore also a lien hearing) are set forth in section

6330(c)(3).   That provision requires the Appeals officer to make

a “determination”, and in making the determination the Appeals
                                - 13 -

officer must “take into consideration * * * the issues raised

under [section 6330(c)(2)].”9

     Once the Appeals officer has made the determination

described above, the Tax Court can review the determination.

Sec. 6330(d)(1).    In cases involving taxpayers who are not

disputing the underlying tax liability, the Court will review the

determination of the Appeals officer for abuse of discretion.

Lunsford v. Commissioner, 

, 185 (2001); Nicklaus v.

Commissioner, 

, 120 (2001); Sego v. Commissioner, 

, 610 (2000); Goza v. Commissioner, 

, 182

(2000).    The inquiry hinges on whether the IRS’s application of

its discretion was “arbitrary, capricious, or without sound basis

in fact or law.”    Giamelli v. Commissioner, 

, 111

(2007); Woodral v. Commissioner, 

, 23 (1999).

     Here we consider the only issue raised by Brown at his lien

hearing.    Brown argued only that his payment of child support for

his two children--at a total rate of $450 per month--should be



     9
      A “hearing” for purposes of sec. 6320 includes
conversations between the IRS and a taxpayer (and exchanges of
documents between them) that occurred from the date that the
taxpayer requests a hearing until the final determination by the
Appeals officer. TTK Mgmt. v. United States, 87 AFTR 2d 2000-
350, 2001-1 USTC par. 50,185 (C.D. Cal. 2000); sec. 301.6320-
1(d)(2), Q&A-D6, Proced. & Admin. Regs. Therefore, the “hearing”
for the purpose of this case includes the conversations between
Brown and the Appeals officer (and the documents exchanged
between Brown and the Appeals officer) between (1) the date of
Brown’s request for a hearing, and (2) the date that the Appeals
officer made a final determination.
                               - 14 -

considered a necessary expense that reduces the $700 per month

that the Appeals officer determined Brown otherwise had the

ability to pay under an installment agreement.     Brown conceded

that he was liable for all taxes, interest, and penalties

assessed against him.   He did not challenge the filing of the

notice of tax lien itself, and thus he cannot challenge the

notice before the Court.   Sec. 301.6320-1(f)(2), Q&A-F3, Proced.

& Admin. Regs.   Furthermore, Brown does not appear to have any

grounds for challenging the filing of the notice of tax lien.

The law does not bar the filing of a notice of tax lien as it

does the conduct of a levy while an installment agreement is

under consideration.    Secs. 6321, 6331(k)(2); Hult v.

Commissioner, T.C. Memo. 2007-302.      Section 6323(j)(1) permits

the Secretary to withdraw the filing of a tax lien under certain

circumstances, one of which is where the taxpayer has already

entered into an installment agreement.     But Brown has not yet

entered into an installment agreement.     None of the other

circumstances listed in 6323(j)(1) applies that would allow the

IRS to withdraw the filing of the lien.10     No other statutory

     10
      Sec. 6323(j)(1) provides in part:

     (j) Withdrawal of Notice in Certain Circumstances.--

          (1) In general.--The Secretary may withdraw a notice of
     a lien filed under this section and this chapter shall be
     applied as if the withdrawn notice had not been filed, if
     the Secretary determines that--

                                                      (continued...)
                             - 15 -

grounds exist in this case to defeat the filing of the tax lien.

Therefore, the IRS did not abuse its discretion solely by failing

to withdraw the filing of the tax lien.

     We now turn to Brown’s sole contention, that the Appeals

officer should have considered his child-support obligations in

calculating his monthly installment payments.   Brown’s 1999

divorce agreement required him to pay child support for his two

children of $225 per month per child.   Brown claimed at the

hearing that he was still required to make payments for both

children (at a total of $450 per month), leaving him with only

$250 per month to pay to the IRS.   The Appeals officer determined

that Brown was no longer required to make child-support payments

for either child, and therefore he could afford to pay the IRS

$700 per month.


     10
      (...continued)
               (A) the filing of such notice was premature
          or otherwise not in accordance with administrative
          procedures of the Secretary,

               (B) the taxpayer has entered into an
          agreement under section 6159 to satisfy the tax
          liability for which the lien was imposed by means
          of installment payments, unless such agreement
          provides otherwise,

               (C) the withdrawal of such notice will
          facilitate the collection of the tax liability, or

               (D) with the consent of the taxpayer or the
          National Taxpayer Advocate, the withdrawal of such
          notice would be in the best interests of the
          taxpayer (as determined by the National Taxpayer
          Advocate) and the United States.
                               - 16 -

     The Internal Revenue Manual (IRM or Manual) contains the

IRS’s extensive guidelines and procedures for its employees to

observe in evaluating proposed installment agreements.    2

Administration, IRM (CCH), pt. 5.15.1.1 to 5.15.1.4, at 17,653-

17,658 (May 9, 2008).    These procedures do not require the IRS to

enter into an installment agreement but merely to consider any

proposals of installment payments made by taxpayers.    The Manual

directs that for the IRS to enter into an installment agreement,

“the taxpayer must agree to the maximum monthly payment based

upon the taxpayer’s ability to pay.”

17,524 (Sept. 26, 2008).    The taxpayer’s ability to pay is

determined by comparing monthly income to “allowable” expenses.

5.15.1.36, at 17,653-17,687 (May 9,

2008).    Thus, the excess of monthly income over “allowable”

expenses is the minimum monthly payment an Appeals officer should

accept.    See Lites v. Commissioner, T.C. Memo. 2005-206.     In

determining what is an “allowable” expense, the Manual directs

the IRS to include those expenses are “necessary” (more about

what is a “necessary” expense below) and also to include some

“conditional” expenses, none of which are relevant here.11      2

     11
      “Conditional” expenses are those expenses that do not meet
the necessary expense test, but which may be allowable if the tax
liability, including projected accruals, can be fully paid within
5 years. Schulman v. Commissioner, T.C. Memo. 2002-129; 2
Administration, IRM (CCH), pt. 5.15.1.7(7), at 17,663 (May 9,
2008). Brown is arguing that his child-support payments for his
                                                    (continued...)
                                - 17 -

Administration, IRM (CCH), pt. 5.15.1.7(1), (7), at 17,662,

17,633 (May 9, 2008).     “[N]ecessary” expenses are defined by the

Manual as those reasonable expenses “that are necessary to

provide for a taxpayer’s and his or her family’s health and

welfare and/or the production of income.”

17,662 (May 9, 2008).     Child-support payments are a

“necessary” expense to be considered, but only if they are (1)

court-ordered, (2) reasonable in amount, and (3) actually being

paid.

17,667 (May 9, 2008).   Recall that

     •A 1999 divorce decree required Brown to pay child-support
     of $225 per child per month until the “child’s arrival at
     the age of majority”;

     •the age of majority was 19;

     •on the date of the hearing (January 8, 2008), one of
     Brown’s children was 23 years old, which is far older than
     the age of majority. The other child was 18 years old (and
     would turn 19 on February 17, 2009);

     •Brown was current on his child-support payments on the
     hearing date (according to his wife);

     •the Appeals officer found that Brown was not required by
     court order to make the child-support payments to either
     child.




     11
        (...continued)
younger child until the child reached age 19 are a necessary
expense. He fails to argue that they could be a conditional
expense, and thus we deem Brown to have conceded that they are
not.
                              - 18 -

     The IRS now concedes that the Appeals officer violated the

Manual by failing to reduce her estimate of Brown’s ability to

make monthly payments by his obligation to make $52 weekly

payments for the support of his younger son.12   Being 18 years

old at the time of hearing, the son was still a minor.   See Ala.

Code sec. 26-1-1(a) (LexisNexis 1992).13   The 1999 agreement

required Brown to make payments until, in the words of the

agreement, the child’s “arrival at the age of majority.”   On the

basis of this language, one might expect that Brown’s obligation

to support his younger son was discharged on the day of his son’s

19th birthday, which was February 17, 2009.   In his brief, Brown

conceded that his obligation to pay child support ended on the

day of his son’s 19th birthday.   We accept this concession.14


     12
      The IRS concedes this issue in its brief when it states
that “the settlement officer should have allowed the disputed
$225 per month in calculating the required installment agreement
monthly amount for the period ending on the child’s 19th
birthday.”
     13
      Alabama is one of a few states that defines the age of
majority as 19, not 18.
     14
      Our preliminary reading of Alabama child-support law
suggests that Brown was no longer required to make child-support
payments after his younger son’s 19th birthday. The 1999 divorce
agreement required Brown to pay for his “minor children * * *
the sum of * * * $51.93 * * * per child per week * * * until * *
* any child’s arrival at the age of majority.” This provision
seems to say that Brown had no obligation to make child-support
payments after the younger child reached 19, “the age of
majority.” This theory is supported by some dicta in Alred v.
Ala. ex rel. Hill, 

(Ala. Civ. App. 1992). Alred
concerned a child-support order that required a father to pay $50
                                                   (continued...)
                             - 19 -

     A conclusion that the Appeals officer violated the Internal



     14
      (...continued)
per week “‘for the support and maintenance of the minor children
of the parties’”.

The father contended that the
use of the adjective “minor” in the phrase “minor children”
suggested that child-support payments were to be automatically
discontinued when the children (presumably both children) reached
the age of majority.

The Alabama court rejected
the father’s argument, holding that “‘the becoming of age of a
child’” is not an event that “‘automatically modifies a child
support judgment.’”

Phillips, 

659, 661 (Ala. Civ. App. 1986)). However, the court took
pains to state that in a case “in which an order designates that
a specific dollar amount of child support be paid for each of the
parties’ minor children”, i.e., an order like Brown’s, the result
would be different.

For an order that specifies a
dollar amount for each child, the “‘becoming of age of any one of
the children’ would be such an event which would entitle a parent
to terminate support for such child pursuant to such order.”

Alred supports the idea that Brown’s obligation to
support his younger child automatically terminated when that
child turned 19.

     At trial, however, Brown introduced into evidence a document
that, on its face, seems to indicate that his child-support
obligations do not automatically terminate. The document was an
unsigned attachment to a 2008 court order that directed Brown to
make future child-support payments to the Alabama Child Support
Payment Center in Montgomery, Alabama. The unsigned document was
entitled “Responsibilities of Individuals Under Child Support
Orders.” This document stated: “You must continue to make all
payments until the court order is changed.” It stated further:
“If your child’s status changes (turns 19, marries, moved in with
a different relative, obtains a full-time job, etc.), you must
continue to make the same payments until the court changes the
amount you must pay.” This unsigned document seems to indicate
that Brown was not entitled to automatically stop making payments
upon his son turning 19 years old. It is unclear what weight, if
any, we should accord to the views of the unnamed authors of this
document. But because Brown has conceded that his child-support
obligation ceased upon his younger son’s 19th birthday, we need
not consider the weight to be placed on this document. For the
same reason, we need not rule on the IRS’s objection to admission
of the 2008 court order and the unsigned document (which was that
it was not reviewed by the Appeals officer).
                              - 20 -

Revenue Manual would not end this matter.    The duty of the

Appeals officer was to consider the issues raised by Brown,

including “offers of collection alternatives, which may include

* * * an installment agreement”.   See sec. 6330(c)(2)(A).     Brown

offered to make monthly installments of $250 per month.    This was

the “offer” of a “collection alternative”.    The Appeals officer

rejected this offer because she thought Brown could pay $700 per

month.

     Although the Appeals officer made an error, the error did

not change the result of the hearing.   Even if the Appeals

officer had determined that Brown could pay $475 per month, it

would not have been an abuse of discretion for the Appeals

officer to reject Brown’s offer as insufficient.15   In

considering other such harmless errors, this Court has declined

to remand the case to the Appeals officer.

     For example, in Lindley v. Commissioner, T.C. Memo. 2006-

229, affd. sub nom. Keller v. Commissioner, 

(9th

Cir. 2009), the taxpayers submitted an offer-in-compromise of

$150,000.   The Appeals officer determined that the taxpayers



     15
      For example, in Joseph v. Commissioner, T.C. Memo. 2006-
20, the taxpayer proposed to be allowed to pay his tax liability
in monthly installments of $700. The taxpayer submitted a
collection statement showing that he had almost $1,400 of monthly
income available to pay his tax liabilities. The Appeals officer
rejected the taxpayer’s $700 proposal, and we affirmed this
decision.
                               - 21 -

could pay $426,000, which would have been sufficient to pay the

tax liability in full.   The Tax Court disagreed with the Appeals

officer’s determination that the taxpayers could pay

approximately $426,000 and determined that the actual amount the

taxpayers could pay was about $176,000.    This was still more than

the $150,000 that the taxpayers offered.   The Court held:

“Because their reasonable collection potential is greater than

their offer amount, we find that [Appeals officer] Mr. Owens’s

rejection of petitioners’ offer-in-compromise based on doubt as

to collectibility was not arbitrary or capricious.”

Appeals for the Ninth Circuit, in affirming Lindley

(consolidated with other cases), similarly observed that “those

relying on miscalculations [by the IRS] fail to demonstrate that,

allowing for the errors, their offers do not remain below their

ability to pay.”   Keller v. 

at 718.

     In Carter v. Commissioner, T.C. Memo. 2007-25, affd. in part

and vacated in part sub nom. Keller v. 

, the

taxpayers made an offer-in-compromise of approximately

$100,000.16   The Appeals officer determined, after considering

     16
      The Court of Appeals for the Ninth Circuit upheld this
Court’s decision in Carter v. Commissioner, T.C. Memo. 2007-25,
insofar as relevant here but vacated it insofar as it dismissed
the IRS’s claim for former sec. 6621(c) increased interest for
lack of jurisdiction. Keller v. Commissioner, 

, 725
(9th Cir. 2009), affg. T.C. Memo. 2006-166, Lindley v.
Commissioner, T.C. Memo. 2006-229, McDonough v. Commissioner,
T.C. Memo. 2006-234, and Hansen v. Commissioner, T.C. Memo. 2007-
                                                    (continued...)
                               - 22 -

their assets and 86 months of income, that the taxpayers had an

ability to pay about $381,000.    The Appeals officer rejected the

offer.    At trial the IRS acknowledged that the Appeals officer

had erred in computing the amount the taxpayers could pay.

Although the Manual directed the officer to consider only 48

months of future income, she used 86 months.    The recomputed

amount that the taxpayers could pay was approximately $305,000.

The court held that the error did not amount to an abuse of

discretion because even using the recomputed number, the amount

the IRS could collect was greater than the taxpayer’s offer.       The

opinion states:

     Ms. Cochran [the Appeals officer] recomputed
     petitioners’ reasonable collection potential using 48
     months and determined that it was $304,782, instead of
     $380,706, as reflected in the notice of determination.
     Ms. Cochran testified that the change would not have
     had an effect on her final determination because, using
     either calculation, petitioners’ reasonable collection
     potential was greater than their offer amount
     ($99,851). We find that Ms. Cochran’s error did not
     amount to an abuse of discretion because, even when the
     error is corrected, petitioners’ reasonable collection
     potential of $304,782 far exceeds their offer amount of
     $99,851.


     16
         (...continued)
56, and affg. in part and vacating in part Barnes v.
Commissioner, T.C. Memo. 2006-150, Clayton v. Commissioner, T.C.
Memo. 2006-188, Blondheim v. Commissioner, T.C. Memo. 2006-216,
Ertz v. Commissioner, T.C. Memo. 2007-15, Abelein v.
Commissioner, T.C. Memo. 2007-24, Carter v. Commissioner, T.C.
Memo. 2007-25, Hubbart v. Commissioner, T.C. Memo. 2007-26,
Freeman v. Commissioner, T.C. Memo. 2007-28, Johnson v.
Commissioner, T.C. Memo. 2007-29, Estate of Andrews, T.C. Memo.
2007-30, Catlow v. Commissioner, T.C. Memo. 2007-47, and Smith v.
Commissioner, T.C. Memo. 2007-73.
                                - 23 -

Commissioner, T.C. Memo. 2008-15, the taxpayer

made an offer-in-compromise of about $140,000.      The Appeals

officer rejected the offer.     The taxpayer challenged the Appeals

officer’s estimate of the amount the IRS could collect.     The

taxpayer argued that his future income should have been

calculated by using average income from the 7-year period from

1998 through 2004 rather than the 3-year period from 2002 through

2004 used by the Appeals officer.     The Court recalculated the

amount using the taxpayer’s proposed 7-year method and determined

that the recalculated amount would be about $937,000.      The Court

held that the Appeals officer committed no abuse of discretion in

rejecting the offer.

that the Internal

Revenue Manual required that an offer equal or exceed the amount

the IRS can collect from the taxpayer in order to be accepted.

rejecting the offer complied with

the standards in the Manual.

      In McClanahan v. Commissioner, T.C. Memo. 2008-61, the

taxpayer made an offer-in-compromise of about $29,000.      The

Appeals officer rejected the offer.      The taxpayer argued that the

Appeals officer overestimated the amount that the IRS could

collect.   In particular, the taxpayer believed that the officer

erred in concluding that (1) the taxpayer had realizable equity

of about $3,600 in retirement accounts, (2) the taxpayer had
                                - 24 -

realizable equity of $40,000 in his residence, and (3) the

taxpayer could pay $22,000 out of future income.    The Tax Court

held that it was unnecessary to consider these challenges because

even accepting the taxpayers’s arguments, the offer fell short of

the revised amount that could be collected.   The Court said:

     We find it unnecessary to decide whether the settlement
     officer’s determination of these amounts was
     appropriate because, even if all of the foregoing
     sources were disregarded, petitioner’s reasonable
     collection potential would be $33,026.50; that is, the
     net realizable equity in his whole life insurance
     policies and cash. Petitioner’s highest offer-in-
     compromise was $29,030, an amount less than his
     reasonable collection potential computed without regard
     to his future income or any other assets. * * * We do
     not conduct an independent review of what would be an
     acceptable offer-in-compromise or substitute our
     judgment for that of the Appeals Office. Rather, the
     Appeals employee’s decision to reject the offers-in-
     compromise will not be disturbed unless it is
     arbitrary, capricious, or without sound basis in fact
     or law.

refs. omitted).

     In Atchison v. Commissioner, T.C. Memo. 2009-8, the taxpayer

offered to compromise his tax liability for about $9,000.       This

was below the amount of the IRS’s estimate of what it could

reasonably collect, which was approximately $91,000.    The IRS

therefore rejected the offer.    The taxpayers challenged the

amount that the IRS estimated it could reasonably collect,

arguing that the amount should have been $70,311.    The Tax Court

held that the IRS did not abuse its discretion in rejecting the
                                - 25 -

offer, for two reasons.   First, the Court held that the IRS’s

estimate was “reasonable”.     Second, the Court held that any error

in the estimate was harmless because the amount of the taxpayer’s

offer was less than the IRS’s estimate of collection potential.

point, the Court cited as authority Lloyd v.

, and Carter v. 

.

      We apply the reasoning of Lindley, Carter, Lloyd,

McClanahan, and Atchison to this case.    The Appeals officer

rejected Brown’s offer to make installment payments of $250 per

month, a decision that was based upon the officer’s incorrect

estimate that Brown could afford payments of $700.     Brown argues

now that the amount he could pay was $475 per month.     This

appears to be a correct estimate, at least for the period before

his younger son turned 19.17    Even so, the Appeals officer did

not abuse her discretion in rejecting Brown’s offer.     To have his

offer considered, the Internal Revenue Manual required Brown to

offer to pay as much as he was able to pay in order to qualify

for an installment agreement.    He did not do so.   Neither the

Manual nor the Code would have required the Appeals officer to

make a counteroffer, or to suggest that Brown increase his offer,

in the installment payment context.




      17
      After his younger son turned 19, the amount Brown could
pay would go up to $700.
                              - 26 -

     The cases discussed above, which hold that the IRS has no

duty to make a counteroffer after rejecting an inadequate offer,

involved offers-in-compromise rather than installment payments.

In the offer-in-compromise setting, the Internal Revenue Manual

requires that the IRS advise the taxpayer to increase the offer

to the “acceptable amount” if it is too low.   Samuel v.

Commissioner, T.C. Memo. 2007-312; 1 Administration, Internal

Revenue Manual (CCH), pt. 5.8.4.6, at 16,336 (Sept. 23, 2008).

There is no such provision requiring the IRS to advise the

taxpayer to increase an installment-payment offer.   Thus, the IRS

has less of a duty to make counteroffers in the context of

installment agreements.

     In one case, the IRS was required to make a counteroffer

after rejecting an inadequate offer.   In Samuel v. 

, the taxpayer offered to compromise his tax liabilities for

$30,000 on account of his inability to pay.    The Appeals officer

sent Samuel a preliminary determination letter indicating that

the offer would need to be increased to approximately $163,000.

The officer stated that this was not the “final amount determined

to be an acceptable offer.”   The taxpayer never increased his

offer.   The Appeals officer made a determination to proceed with

collection on the grounds that the IRS could collect more than
                               - 27 -

the $30,000 offer.18   This Court found that the amount the IRS

could in fact collect was $107,094.      Noting that the Manual

states that an Appeals officer who finds that an offer is

insufficient should contact the taxpayer to advise the taxpayer

to amend the offer to an acceptable amount, the Court held that

the Appeals officer’s failure to advise him that an acceptable

amount was $107,094 was an abuse of discretion.

some tension between Samuel and the Lindley line of

cases discussed before.   We need not resolve this tension, as we

consider Samuel distinguishable from our case.     The Court in

Samuel expressly cited the existence of a Manual provision

requiring the Appeals officer to do more than merely reject an

inadequate offer-in-compromise.   No such provision exists with

respect to installment agreements.      Therefore, Samuel does not

apply here.

     Holding that the Appeals officer did not abuse her

discretion,



                                      Decision will be entered for

                               respondent.




     18
      The Appeals officer apparently determined an estimate of
the reasonable collection potential. Samuel v. Commissioner,
T.C. Memo. 2007-312. The opinion does not relate what this
estimate was.