T.C. Memo. 2019-21



                           UNITED STATES TAX COURT



   JON ROBERT LUDLAM AND MARIA LOUISA LUDLAM, Petitioners v.
        COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 24739-16L.                           Filed March 25, 2019.



      Jon Robert Ludlam and Maria Louisa Ludlam, pro se.

      Randall B. Childs and A. Gary Begun, for respondent.



                             MEMORANDUM OPINION


      URDA, Judge: In this collection due process (CDP) case, Jon Robert

Ludlam and his wife Maria Louisa Ludlam seek review, pursuant to section

6320(c) and 6330(d)(1),1 of the determination by the Internal Revenue Service


      1
          All section references are to the Internal Revenue Code in effect at all
                                                                         (continued...)
                                           -2-

[*2] (IRS) Office of Appeals to uphold the filing of a notice of Federal tax lien

(NFTL) and a notice of intent to levy relating to petitioners’ 2011 Federal income

tax liability. Petitioners also challenged an NFTL filing related to their 2010 tax

liability, but that claim became moot after a remand to the Office of Appeals

resulted in the abatement of the 2010 liability and the withdrawal of the NFTL.

         Respondent has moved for summary judgment under Rule 121, contending

that no disputed issues of material fact remain and that the determination to sustain

the proposed collection actions for 2011 was proper as a matter of law. We agree

and accordingly will grant the motion.

                                      Background

         Petitioners are a married couple who lived in Florida when the petition was

filed.

A.       Petitioners’ 2010 and 2011 Tax Liabilities

         Petitioners failed to timely file their 2010 and 2011 Federal income tax

returns.2 After some spurring by the IRS, petitioners filed a belated 2010 return in



         1
       (...continued)
relevant times, and all Rule references are to the Tax Court Rules of Practice and
Procedure. We round all dollar amounts to the nearest dollar.
         2
        Although petitioners’ 2010 tax year is no longer at issue, we nonetheless
set forth the facts relating to it to provide context for the live disputes.
                                          -3-

[*3] January 2013. The IRS accepted this return and assessed the amount shown

on it. The IRS later made an adjustment to petitioners’ tax liability on the basis of

their failure to report and pay the alternative minimum tax that the IRS believed to

be due. The IRS, however, did not issue a notice of deficiency relating to this

adjustment or otherwise give petitioners an opportunity to dispute it.

      Petitioners took a different tack as to their 2011 tax year, choosing not to

file a belated return as they had for 2010. On September 25, 2013, the IRS

prepared a substitute for return pursuant to its authority under section 6020(b). On

the basis of that substitute for return, the IRS sent to petitioners a notice of

deficiency dated May 12, 2014, which determined an income tax deficiency for

2011 of $11,369 and additions to tax of $4,091. Petitioners did not petition this

Court to redetermine their liability for 2011. The IRS thereafter assessed the

amounts set forth in the notice, as well as statutory interest.

B.    Collection Activities and Initial CDP Hearing

      The IRS took several actions in 2016 to collect petitioners’ outstanding

liabilities. Specifically, it issued a notice of NFTL filing for 2010, as well as a

notice of NFTL filing and a final notice of intent to levy for 2011. Petitioners

timely requested a CDP hearing for both years, asserting, among other things, that

the IRS’ unilateral adjustment of their 2010 liability had been wrong in procedure
                                         -4-

[*4] and in substance. On the latter point petitioners claimed that they had a

substantial net operating loss for 2010 that could be deducted for later years.

Petitioners also indicated that they would not file returns for later years (including

2011) until the 2010 dispute was resolved, because of concerns about the potential

risks of filing an inaccurate return.

      On August 17, 2016, an IRS settlement officer sent petitioners two letters--

one for 2010, another for 2011--scheduling a telephone CDP hearing for

September 7, 2016, and requesting certain financial documentation and tax returns

from petitioners. Hearing nothing in response, the settlement officer called

petitioners as planned. Mr. Ludlam, who answered the call, told the settlement

officer that petitioners had not received the scheduling letters. According to

petitioners, Mr. Ludlam requested a delay until October 11, 2016, to gather and

organize supporting documentation.

      The CDP hearing continued after this request, but the parties did not get

very far. Mr. Ludlam largely reiterated the positions set forth in petitioners’ CDP

hearing requests, asserting that the IRS had improperly adjusted the 2010 liability

without giving petitioners a chance to respond, and, as a consequence, had ignored

a large net operating loss for that year. The settlement officer responded that

petitioners were precluded from challenging their 2010 and 2011 liabilities
                                          -5-

[*5] because they had had prior opportunities to do so. No other issues were

discussed in light of Mr. Ludlam’s representation that petitioners would not file

tax returns for later years (including 2011), or discuss alternatives to collection,

until the 2010 liability was resolved.

       Before ending the call, the settlement officer told Mr. Ludlam that she

would send petitioners copies of the August letters scheduling the CDP hearing.

She also offered petitioners the opportunity for a followup hearing on any day

from September 12 through September 16. Finally, she gave petitioners until

September 14, 2016, to provide the financial information and tax returns requested

in the letters.

       Petitioners did not provide any additional information and did not request a

followup hearing. Instead, on September 16, 2016, and then again on October 11,

2016, petitioners requested extensions of time. The settlement officer rejected the

second request after petitioners declined to provide financial information or tax

returns until the dispute over 2010 was resolved.

C.     Notice of Determination

       On October 20, 2016, the IRS issued a notice of determination upholding

the 2010 collection action. A notice upholding the 2011 collection actions

followed the next day. Both notices stated that petitioners only raised liability
                                          -6-

[*6] challenges, which were deemed to be precluded on the ground that petitioners

had been given prior opportunities to challenge adjustments for each year. The

notices also reflected that petitioners refused to propose alternatives to collection

or to provide financial information.

D.    Tax Court Proceedings and Supplemental Notice of Determination

      Petitioners filed a timely petition in this Court challenging both notices.

Respondent thereafter sought a remand to the IRS Office of Appeals relating to

2010, which culminated in the issuance of a supplemental notice of determination

by a different settlement officer. The supplemental notice explained that

petitioners had not had an opportunity to dispute the IRS’ adjustment to their 2010

tax liability and that the original settlement officer had therefore erred in telling

them their liability challenge for that year was precluded. The IRS subsequently

abated the 2010 liability and withdrew the NFTL for that year. We, in turn,

dismissed the petition’s claims relating to 2010 as moot. Respondent has now

moved for summary judgment as to the remaining claims in the petition, which

relate to 2011.
                                          -7-

[*7]                                  Discussion

A.     Summary Judgment

       The purpose of summary judgment is to expedite litigation and avoid costly,

time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 

, 681 (1988). Under Rule 121(b) the Court may grant summary judgment

when there is no genuine dispute as to any material fact and a decision may be

rendered as a matter of law. Sundstrand Corp. v. Commissioner, 

, 520

(1992), aff’d, 

(7th Cir. 1994). In deciding whether to grant summary

judgment, we construe factual materials and inferences drawn from them in the

light most favorable to the nonmoving party. 

nonmoving party

may not rest upon the mere allegations or denials of its pleadings but instead must

set forth specific facts showing that there is a genuine dispute for trial.

Rule 121(d); see Celotex Corp. v. Catrett, 

, 324 (1986).

B.     Standard of Review

       We have jurisdiction to review the Office of Appeals’ determination

pursuant to sections 6320(c) and 6330(d)(1). See Murphy v. Commissioner, 

, 308 (2005), aff’d, 

(1st Cir. 2006). Where the validity of the

underlying tax liability is properly at issue, we review the determination regarding

the underlying tax liability de novo. Sego v. Commissioner, 

, 610
                                          -8-

[*8] (2000); Goza v. Commissioner, 

, 181-182 (2000). We review all

other determinations for abuse of discretion. Sego v. Commissioner, 

; Goza v. Commissioner, 

. In reviewing for abuse of

discretion, we must uphold the Office of Appeals’ determination unless it is

arbitrary, capricious, or without sound basis in fact or law. See, e.g., Murphy v.

Commissioner, 

; Taylor v. Commissioner, T.C. Memo. 2009-27, 

, 1116 (2009).

C.    Underlying Liability

      A taxpayer may raise a CDP challenge to the existence or amount of his

underlying tax liability only if he did not receive a statutory notice of deficiency

for the tax year at issue or otherwise have an opportunity to dispute it. See

sec. 6330(c)(2)(B). Petitioners do not dispute that they received a notice of

deficiency for 2011. Consistent with section 6330(c)(2)(B), they were precluded

from contesting their 2011 liability before the Office of Appeals or before us. See

Goza v. Commissioner, 

-183.

      In their opposition to the motion for summary judgment and their

supplement to that opposition, petitioners argue that they were unable to file tax

returns for 2011 and later years because of their dispute with the IRS over 2010.

This argument misses the point. The pertinent question for purposes of section
                                          -9-

[*9] 6330(c)(2)(B) is whether petitioners received a statutory notice of deficiency

for 2011. Such a notice--often described as a ticket to the Tax Court--gives a

taxpayer the opportunity to challenge in this Court the deficiency determined by

the IRS. See sec. 6213(a). The notice is not contingent on the filing of a return.

Petitioners here received a statutory notice for their 2011 liability but chose not to

take advantage of their chance to contest that liability in this Court. That choice

comes with consequences dictated by Congress: Petitioners cannot take a belated

bite at liability during these CDP proceedings. See sec. 6330(c)(2)(B).3

      We accordingly will review the IRS’ determination for abuse of discretion

only. See Goza v. Commissioner, 

-183.

D.    Abuse of Discretion

      The only remaining question is whether the settlement officer abused her

discretion in sustaining the actions to collect petitioners’ unpaid 2011 tax liability.

Unpacking this general question, we review the record to determine whether the

settlement officer: (1) properly verified that the requirements of applicable law or


      3
        Although petitioners cannot challenge their 2011 liability in this case, we
note that our ruling does not preclude petitioners from (i) seeking audit
reconsideration with the IRS (although such reconsideration is not subject to
judicial review) or (ii) paying the liability and claiming a refund and, if the refund
is disallowed, litigating that claim in the Court of Federal Claims or the
appropriate Federal District Court.
                                         -10-

[*10] administrative procedure have been met; (2) considered any relevant issues

petitioners raised; and (3) considered whether “any proposed collection action

balances the need for the efficient collection of taxes with the legitimate concern

of * * * [petitioners] that any collection action be no more intrusive than

necessary.” See sec. 6330(c)(3). Our review of the record establishes that the

settlement officer satisfied all of these requirements.

      1.     Verification

      This Court has authority to review satisfaction of the verification

requirement regardless of whether the taxpayer raised that issue at the CDP

hearing. See Hoyle v. Commissioner, 

, 200-203 (2008),

supplemented by 

(2011). Petitioners did not allege in their petition

that the settlement officer failed to satisfy this requirement and have set forth no

specific facts showing that there is a genuine dispute for trial. See Rules 121(d),

331(b)(4). And our review of the record shows that the settlement officer

conducted a thorough review of the transcripts of petitioners’ account and verified

that all requirements were met.4




      4
        The approval requirement of sec. 6751(b)(1) does not apply to the additions
to tax at issue because they were additions to tax under secs. 6651 and 6654. See
sec. 6751(b)(2)(A).
                                         -11-

[*11] 2.     Collection Alternatives

      The petition does not address the issue of collection alternatives, and we

could therefore treat that matter as conceded. See Rule 331(b)(4). Even if

petitioners had properly raised the issue, we would find no abuse of discretion by

the Office of Appeals.

      First and foremost, petitioners never proposed a collection alternative. This

ends the matter. It is not an abuse of discretion for a settlement officer to not

consider any collection alternatives where a taxpayer has proposed none. See

Kendricks v. Commissioner, 

, 79 (2005).

      Even had petitioners proposed a collection alternative, their failure to

submit the requested tax returns and financial documentation--expressly

referenced in the notice of determination--would justify the settlement officer in

declining to consider a collection alternative. A taxpayer in a CDP proceeding has

the right to request a collection alternative. See sec. 6330(c)(2)(A)(iii). This right,

however, comes with strings attached. The regulations specify that “[t]axpayers

will be expected to provide all relevant information requested by * * * [the

settlement officer], including financial statements”. Sec. 301.6330-1(e)(1),

Proced. & Admin. Regs.; see also sec. 301.6320-1(e)(1), Proced. & Admin. Regs.

Such information is necessary for a settlement officer to evaluate a taxpayer’s
                                         -12-

[*12] ability to pay and to weigh the appropriateness of any collection alternative.

We have often observed that a settlement officer does not abuse her discretion in

declining to consider a collection alternative in the absence of such information.

See, e.g., Scholz v. Commissioner, T.C. Memo. 2015-2, at *7. A taxpayer also

must be in full compliance with his Federal tax filing obligations to be eligible for

a collection alternative. See, e.g., Giamelli v. Commissioner, 

, 111-

112 (2007).

      The notice of determination makes plain (in the “Issues You Raised”

section) that petitioners offered “no response” to the settlement officer’s repeated

requests for unfiled tax returns and financial information. Petitioners’ failure on

this score thus would render them ineligible for any collection alternative, even

had they proposed one.5


      5
        Petitioners assert that they could not file their tax returns for 2011 and later
years because they were in a dispute with the IRS over their 2010 liability and
feared perjury charges. Our precedent makes clear that “a dispute concerning a
taxpayer’s liability for a prior taxable year does not constitute reasonable cause for
failing to timely file a return for the current taxable year.” Hairston v. Commis-
sioner, T.C. Memo. 1995-566, 

, 1445 (1995); see also
Robertson v. Commissioner, T.C. Memo. 2000-100, 

, 1729
(2000), aff’d, 15 F. App’x 467 (9th Cir. 2001). And a taxpayer “cannot assert a
Fifth Amendment privilege against compulsory self-incrimination to justify the
failure to file any tax return at all.” Stubbs v. Commissioner, 

, 938
(11th Cir. 1986); see also United States v. Sullivan, 

, 264 (1927);
Thompson v. Commissioner, 

, 563 (1982).
                                         -13-

[*13] 3.     Remaining Issues

      Petitioners raise two other issues. First, petitioners contend that the

settlement officer abused her discretion by not giving them a face-to-face CDP

hearing. “We have repeatedly held that the IRS is not required to afford a taxpayer

a face-to-face hearing and that a hearing conducted by telephone, correspondence,

or document review will suffice.” Mack v. Commissioner, T.C. Memo. 2018-54,

at *12; see sec. 301.6320-1(d)(2), Q&A-D6, Proced. & Admin. Regs.; sec.

301.6330-1(d)(2), Q&A-D6, Proced. & Admin. Regs.; see also Williams v.

Commissioner, 

, 92-93 (2d Cir. 2013). In fact, the applicable

regulations provide that a face-to-face hearing regarding underlying liability will

not be granted where, as here, a taxpayer seeks to raise “irrelevant or frivolous

issues”. Sec. 301.6320-1(d)(2), Q&A-D8, Proced. & Admin. Regs.; sec.

301.6330-1(d)(2), Q&A-D8, Proced. & Admin. Regs.6 The same regulations

further state that a face-to-face hearing regarding a collection alternative will not

be granted where, as here, a taxpayer has not “filed required returns”.




      6
        Petitioners similarly criticize the supplemental CDP hearing because it did
not include a face-to-face hearing. As explained above, a face-to-face hearing is
not required. Moreover, the supplemental hearing revisited the determination
sustaining the NFTL filing for 2010, and petitioners’ claims relating to that
collection action are moot.
                                        -14-

[*14] Petitioners also argue that the settlement officer abused her discretion by

refusing to grant additional time to prepare for the CDP hearing. The

reasonableness of an extension request, and the reasonableness of a denial of such

a request, depend on the particular facts of the case. See Dinino v. Commissioner,

T.C. Memo. 2009-284, 

, 565 (2009); see also Coleman v.

Commissioner, T.C. Memo. 2010-51, 

, 1215-1216 (2010),

aff’d, 420 F. App’x 663 (8th Cir. 2011); Shanley v. Commissioner, T.C. Memo.

2009-17, 

, 1065-1066 (2009). Looking at the facts of this

case, we cannot say that the settlement officer abused her discretion.

      As an initial matter, the settlement officer acted consistently with IRS

guidelines as to the scheduling of the hearing and the submission of information.

See Dinino v. 

. “There is no

requirement that the Commissioner wait a certain amount of time before making a

determination as to a proposed * * * [collection procedure].” Gazi v.

Commissioner, T.C. Memo. 2007-342, 

, 479 (2007).

“Appeals will, however, attempt to conduct a CDP hearing and issue a Notice of

Determination as expeditiously as possible under the circumstances.” Sec.

301.6330-1(e)(3), Q&A-E9, Proced. & Admin. Regs.; see also sec. 301.6320-

1(e)(3), Q&A-E9, Proced. & Admin. Regs.
                                        -15-

[*15] The settlement officer stayed within the broad discretion granted to her.

Her August 17, 2016, letter scheduled a CDP hearing approximately three weeks

later, on September 7, 2016. Receiving no response from petitioners, she

proceeded with the CDP hearing, in which Mr. Ludlam fully participated. This

did not mean that she was insensitive to petitioners’ representation that they had

not received the August letter. To the contrary, she gave them an additional week

(until September 14) to submit supporting documentation and held open the

entirety of the next week (until September 16) for a followup CDP hearing at

petitioners’ convenience.

      In addition to this explicit extension of time, petitioners received a further

de facto extension until October 11, 2016, which was the full amount of time they

had initially requested. Petitioners requested more time on October 11, a request

which the settlement officer rejected given petitioners’ “adamant” refusal to

supply the requested tax returns and financial information. Even so, the notice of

determination did not issue until October 21, 2016, which gave petitioners another

10 days to submit financial information and tax returns to the Office of Appeals,

pursuant to that office’s established policies. See Dinino v. 

; see also Internal Revenue Manual pt. 8.22.9.10 (Nov.

13, 2013).
                                          -16-

[*16] Although petitioners were given approximately six weeks after their CDP

hearing, they presented no additional information to the settlement officer. Nor

have petitioners identified to this Court (or to the Office of Appeals during the

remand) any material that they were unable to introduce during the first go-round

because of the lack of a (further) extension. Given that petitioners were foreclosed

from challenging their 2011 underlying liability and refused to submit their

financial information or tax returns for 2011 and subsequent years while their

2010 liability remained in dispute, nothing in the record suggests that granting

petitioners additional time would have served any purpose.

      On these facts, the settlement officer did not abuse her discretion by

declining to give petitioners additional time.

      Finding no abuse of discretion in any respect, we will grant summary

judgment for respondent and affirm the IRS’ determination to sustain the NFTL

filing and the final notice of intent to levy relating to petitioners’ 2011 tax year.

      To reflect the foregoing,


                                                 An appropriate order and decision

                                        will be entered.