Richard L. Brown & Camille C. Brown

United States Tax Court

T.C. Memo. 2025-17

RICHARD L. BROWN AND CAMILLE C. BROWN,

Petitioners

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

__________

Docket No. 160-24L. Filed February 18, 2025.

__________

Scott E. Scammahorn, for petitioners.

Christopher S. Kippes and Judy M. Tejeda-Gonzales, for respondent.

MEMORANDUM OPINION

JENKINS, Judge: Richard L. Brown and Camille C. Brown

(Petitioners) timely filed a Petition under sections 6320(c) 1 and

6330(d)(1), requesting that this Court review a Notice of Determination

Concerning Collection Actions Under IRS Sections 6320 or 6330 of the

Internal Revenue Code sustaining the filing of a Notice of Federal Tax

Lien (NFTL) for the 2017 tax year (Current NOD). 2 The Current NOD,

which rejected Petitioners’ offer-in-compromise (OIC), was issued to

Petitioners by Appeals Officer Maria Russo (AO Russo) of the Internal

Revenue Service (IRS) Independent Office of Appeals (Appeals).

Respondent filed a Motion for Summary Judgment (Motion) pursuant to

Rule 121, contending that there are no disputed issues of material fact

1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C. (I.R.C.), in effect at all relevant times, regulation references are

to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times,

and Rule references are to the Tax Court Rules of Practice and Procedure.

2 Petitioners resided in Texas when the Petition was filed.

Served 02/18/25

2

[*2] and that it was not an abuse of discretion for AO Russo to reject

Petitioners’ OIC and sustain the NFTL. Petitioners filed a Response to

Respondent’s Motion for Summary Judgment (Response), arguing that

disputed issues of material fact remain. This Court finds that there are

no disputed issues of material fact and that AO Russo did not abuse her

discretion in rejecting Petitioners’ OIC and issuing the Current NOD.

This Court will thus grant the Motion.

Background

The following facts are based on the parties’ pleadings and Motion

papers, including the Exhibits attached thereto, as well as the

Administrative Record. See Rules 93, 121(c). The facts are stated solely

for the purpose of ruling on the Motion and not as findings of fact in this

case. See Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992),

aff’d, 17 F.3d 965 (7th Cir. 1994).

I. Underlying Liability

Petitioner Camille C. Brown operated an early childhood

education facility. On May 30, 2017, the property out of which the

facility was operated was sold (Facility Sale), a replacement facility

having been acquired on January 25, 2017 (Facility Purchase).

Petitioners filed Form 1040, U.S. Individual Income Tax Return, for the

2017 tax year reporting the gain from the Facility Sale as a taxable

capital gain and reporting a tax liability of $605,597. The IRS assessed

the self-reported amount of tax, interest on the unpaid portion of the

tax, and additions to tax related to the late payment of tax and failure

to make estimated payments with respect to the tax. See I.R.C.

§ 6201(a)(1).

II. Prior Collection Due Process Hearing

The IRS had previously issued Petitioners a Letter 1058, Final

Notice of Intent to Levy and Notice of Your Right to a Hearing, for the

2017 tax year. Petitioners requested a collection due process (CDP)

hearing with Appeals and filed an OIC on the grounds that there was

doubt as to liability. Appeals rejected Petitioners’ argument that they

should not be required to recognize gain from the Facility Sale on the

basis that the Facility Sale and the Facility Purchase were intended to,

although they did not technically, comply with the like-kind exchange

rules of section 1031. Petitioners apparently did not specifically contest

the additions to tax assessed by the IRS. The OIC was rejected, and

3

[*3] Appeals issued a final determination sustaining the proposed levy

(Prior NOD).

III. Before CDP Hearing at Issue

The IRS subsequently issued Petitioners a Letter 3172, Notice of

Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320,

for the 2017 tax year. The IRS received from Petitioners a timely filed

Form 12153, Request for a Collection Due Process or Equivalent

Hearing, on which Petitioners checked the boxes for “Installment

Agreement” and “Offer in Compromise.” They did not check the box for

“I Cannot Pay Balance,” but they separately stated that “[a] lien would

cause the taxpayer a significant financial hardship.” On October 27,

2022, AO Russo issued a Letter 4837 scheduling a CDP hearing. The

letter also requested documents from Petitioners relating to their

payment ability to be considered in connection with the requested

alternative collection methods, including Form 433–A, Collection

Information Statement for Wage Earners and Self-Employed

Individuals.

Petitioners submitted Form 656, Offer in Compromise, Form

433–A, and Form 433–B, Collection Information Statement for

Businesses. On the Form 656, under Section 3, “Reason for Offer,”

Petitioners checked the boxes for “Effective Tax Administration” and for

“The amount offered is based on my exceptional circumstances other

than economic hardship.” They did not check the box for “Paying more

than the amount offered would create a financial hardship.” In a

schedule attached to and referred to on the Form 656, Petitioners

explained that the exceptional circumstances were that section 1031

should have applied because they “are educators . . . providing an

invaluable service for the community” and they undertook the Facility

Sale and Facility Purchase “in accordance with the spirit of the law.”

They also argued that “to penalize the taxpayers to the tune of nearly

$500,000.00 plus penalties and interest is inequitable and places the

taxpayers in a position of financial hardship.” Petitioners’ OIC proposed

to pay a total of $75,000 with respect to their $605,597 liability.

The CDP hearing was rescheduled to allow Petitioners to send

their OIC to the IRS’s Centralized Offer in Compromise Unit, and

AO Russo held Petitioners’ case in abeyance so that the OIC could be

considered. The Centralized Offer in Compromise Unit issued

Petitioners a preliminary determination rejecting Petitioners’ OIC. It

concluded that Petitioners’ ability to pay exceeded $5 million, such that

4

[*4] Petitioners had the ability to pay the liability in full, and there were

no special circumstances to warrant a compromise based on economic

hardship.

Thereafter, AO Russo had a conversation with Petitioners’

counsel about the preliminary OIC determination, in which she

informed him that it was her responsibility to make a final

determination on the OIC and requested feedback. Petitioners’ counsel

sent AO Russo a letter disagreeing with the preliminary determination’s

OIC rejection. The letter reiterated Petitioners’ argument concerning

their compliance with the “spirit of the law” of section 1031. It also

stated:

The taxpayers disagree with the findings by the offer

examiner as collectability is not at issue, nor is hardship,

the examiner’s stated reasons for rejecting the offer.

Instead, their argument for acceptance of an offer is equity,

which was not considered by the offer examiner.

IV. CDP Hearing at Issue

AO Russo then held a CDP hearing with Petitioners and their

counsel. In response to their arguments concerning section 1031, AO

Russo explained that the underlying liability could not be challenged

because of Petitioners’ prior opportunity for review of the underlying

liability in the prior CDP hearing, and that, in any event, section 1031

did not apply. Petitioners’ counsel separately raised a dispute with

respect to the additions to tax, which he referred to as penalties, in

response to which AO Russo reiterated that the underlying liability

could not be challenged. She also explained that she agreed with the

preliminary OIC determination. Petitioners did not present any other

collection alternatives for consideration.

At the CDP hearing, Petitioners’ counsel indicated that he did not

believe proper procedures were followed, because he believed the OIC

should have been sent to a special group in Austin, Texas, that handles

effective tax administration OICs. AO Russo mistakenly indicated that

the OIC had been processed by this special group that processes effective

tax administration OICs on grounds other than economic hardship

(ETA-NEH Group), even though it had not.

5

[*5] V. After CDP Hearing at Issue

After she subsequently discovered her mistake, AO Russo sent a

request for an evaluation of Petitioners’ OIC to the ETA-NEH Group on

October 12, 2023, requesting a response by November 27, 2023. She

explained that the OIC had originally not been referred under Internal

Revenue Manual (IRM) 5.8.11.3.2 (Aug. 5, 2015), but that it was being

forwarded for evaluation per IRM 8.22.7.4.2(2) (Aug. 26, 2020), because

petitioners filed it on the grounds of effective tax administration other

than economic hardship.

On October 18, 2023, an ETA-NEH Group offer specialist sent a

response to AO Russo rejecting referral of the OIC to the ETA-NEH

Group. The two-page memo explaining the rejection indicated that the

case did not meet criteria for effective tax administration on grounds

other than economic hardship. Consistent with the IRM, the memo

indicated that some of the grounds on which public policy offers are

considered involve criminal activity, IRS error or delay, and community

impact. The memo indicated that the ETA-NEH Group offer specialist

had considered impact to the community but had found that the

community in which Petitioners’ early childhood education facility

existed had numerous childcare and early childhood centers. The memo

also noted that the IRS will not compromise on issues because of a

taxpayer’s belief that a provision of the law is unfair, as indicated in

IRM 5.8.11.3.2.1(7) (Oct. 4, 2019). It concluded that because Petitioners

clearly owed the liability and there was “minimal (if any) impact to the

community,” transfer of the case would not be accepted, as the case did

not meet any of the criteria for consideration.

The memo also explained the requirements for a section 1031

exchange and how Petitioners failed to satisfy them. In his response to

AO Russo, the ETA-NEH Group offer specialist attached Fact Sheet

FS-2008-18, a publicly available IRS fact sheet about section 1031

exchanges that outlines the requirements for application of section 1031.

The IRS fact sheet makes clear that separate sales and purchases would

not qualify, but rather would constitute taxable transactions.

AO Russo forwarded the memo from the ETA-NEH Group offer

specialist and the fact sheet to Petitioners on October 19, 2023, and

requested feedback by November 20, 2023. No feedback was provided,

and on December 4, 2023, AO Russo issued the Current NOD.

6

[*6] VI. The Current NOD

The Current NOD sustained the filing of the NFTL for

Petitioners’ 2017 tax year. It explained that the liability was properly

assessed and is legally due and owing. It also explained that Petitioners

were precluded from challenging the underlying liability, given that

they had had a prior opportunity to do so upon receipt of the Letter 1058

and during the CDP hearing that led to the Prior NOD. In summary, the

Current NOD indicated that Petitioners submitted an OIC based on

effective tax administration grounds other than economic hardship,

which was rejected because compromise on public policy grounds is not

authorized if it is based solely on a taxpayer’s belief that a provision of

the tax law is unfair. It also indicated that Petitioners did not want to

submit any other collection alternatives for consideration, as they said

payment of the liability was not at issue. Therefore, the Current NOD

explained, no collection alternative could be agreed to.

In addition, the Current NOD (1) reviewed the Prior NOD and the

discussion of Petitioners’ prior contest of the underlying liability in the

CDP hearing that preceded it, before explaining why a challenge of the

underlying liability was precluded because of that contest; (2) described

the terms of the OIC submitted by Petitioners and the OIC unit’s

preliminary determination with respect to it; and (3) laid out the ETA-

NEH Group offer specialist’s analysis of Petitioners’ OIC. It also quoted

extensively from Petitioners’ submissions and set forth details of

discussions with Petitioners and their counsel.

VII. Parties’ Positions

In their Petition, Petitioners challenge the determination in the

Current NOD, arguing that AO Russo abused her discretion by denying

Petitioners their due process rights by failing to address the collection

alternative Petitioners raised in their CDP hearing before her. The

Petition quotes a letter from Petitioners’ counsel, as follows: “An offer in

compromise may be accepted based on effective tax administration when

(1) there is no doubt that the tax is legally owed and (2) the full amount

can be collected, but (3) requiring payment would either create an

economic hardship or would be unfair and inequitable.”

Petitioners posit that (1) the foregoing is a summary of the test

laid out by Treasury Regulation § 301.7122-1(b)(3)(ii); (2) the IRS failed

to address the third element of that test; and (3) that failure constitutes

a per se abuse of discretion. Petitioners focus on statements in the

7

[*7] Current NOD affirming their legal liability for the liability

underlying the NFTL and argue that such statements indicate that the

IRS did not consider whether requiring payment would create economic

hardship or be unfair and inequitable. Petitioners do not specifically

raise a challenge to the underlying liability in the Petition.

Respondent moved for summary judgment on all issues. In their

Response, Petitioners argue that summary judgment is precluded by a

genuine dispute of material fact. Petitioners reiterate their argument

that the IRS did not address a necessary element of the test in the

regulations and summarize: “However, Respondent asserts that the test

was followed. That is the disputed fact that defeats summary judgment.”

Discussion

I. Summary Judgment Standard

Summary judgment serves to “expedite litigation and avoid

unnecessary and expensive trials.” Fla. Peach Corp. v. Commissioner,

90 T.C. 678, 681 (1988). Either party may move for summary judgment

regarding all or any part of the legal issues in controversy. Rule

121(a)(1). Generally, summary judgment may be granted only if there is

no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law. Rule 121(a)(2). The party moving for

summary judgment bears the burden of demonstrating that there is no

genuine dispute as to any material fact. Sundstrand Corp., 98 T.C.

at 520; see also Rule 121(c)(1).

In deciding whether to grant summary judgment, the Court

considers factual materials and inferences drawn from them in the light

most favorable to the nonmoving party. Sundstrand Corp., 98 T.C.

at 520. The nonmoving party may not rest upon mere allegations or

denials in the pleadings and must set forth specific facts showing that

there is a genuine dispute for trial. Rule 121(d); see also Celotex Corp. v.

Catrett, 477 U.S. 317, 324 (1986).

Although Petitioners argue that there is a dispute of material

fact, they are “dressing up a legal challenge in fact clothing in an

attempt to sidestep summary judgment.” See Capitol Places II Owner,

LLC v. Commissioner, No. 16536-23, 164 T.C., slip op. at 9 (Jan. 2, 2025).

The dispute that Petitioners posit is with respect to the issue of whether

the IRS properly applied Treasury Regulation § 301.7122-3(b)(2). That

is a legal question that is at the heart of this Court’s review of the

Current NOD. Given that Petitioners have not raised any other disputed

8

[*8] facts, this Court finds, on the basis of the record before it, that this

case is appropriate for summary adjudication.

II. Standard for Review

If the underlying tax liability is not at issue, the Court reviews

the settlement officer’s determination for abuse of discretion. Sego v.

Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C.

176, 181–82 (2000). In reviewing for abuse of discretion, the Court does

not conduct an independent review of the collection alternatives and

does not substitute its judgment for that of the settlement officer; rather,

the Court’s review is limited to determining whether the settlement

officer’s decision was arbitrary, capricious, or without sound basis in fact

or law. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469

F.3d 27 (1st Cir. 2006). If the underlying tax liability was properly at

issue in the CDP hearing, the Court reviews the determination de novo.

Lunsford v. Commissioner, 117 T.C. 183, 185 (2001) (citing Goza, 114

T.C. at 181–82).

In a CDP hearing, a taxpayer may raise challenges to the

existence or amount of an underlying liability only if the taxpayer did

not receive a statutory notice of deficiency for the tax liability or did not

otherwise have an opportunity to dispute the tax liability. See I.R.C.

§§ 6320(c), 6330(c)(2)(B); Treas. Reg. § 301.6320-1(e)(1). These

challenges may include challenges to liabilities reported on a self-filed

return. Treas. Reg. § 301.6320-1(e)(1). The term “underlying liability”

includes any tax deficiency, additions to tax or penalties, and statutory

interest. See Montgomery v. Commissioner, 122 T.C. 1, 7–8 (2004); Katz

v. Commissioner, 115 T.C. 329, 338–39 (2000). An opportunity to dispute

the underlying liability includes a prior opportunity for a conference

with Appeals that was offered either before or after assessment of the

liability unless the opportunity was prior to the assessment of a tax

subject to deficiency procedures. See Treas. Reg. § 301.6320-1(e)(3),

Q&A-E2; see also Lewis v. Commissioner, 128 T.C. 48, 61–62 (2007).

In the course of their interaction with AO Russo, Petitioners

suggested disputes with their underlying liability for 2017, particularly

with respect to the additions to tax. However, as AO Russo explained in

the Current NOD, Petitioners had a chance to dispute their underlying

liability for 2017, including the additions to tax, during their CDP

hearing that led to the Prior NOD. See Treas. Reg. § 301.6320-1(e)(1),

(3), Q&A-E2. Therefore, even if they chose not to specifically dispute the

additions to tax in the prior hearing, they were precluded from disputing

9

[*9] the full amount of the underlying liability, including the additions

to tax, in the CDP hearing before AO Russo. Id.; see also McCullar v.

Commissioner, T.C. Memo. 2014-150, at *8. Accordingly, this Court

reviews AO Russo’s determination for abuse of discretion. Sego, 114 T.C.

at 610; Goza, 114 T.C. at 181–82.

In conducting this review, this Court looks to the reasons offered

in the Current NOD, as supplemented by other documents in the record,

such as the preliminary determination letter from the Centralized Offer

in Compromise Unit and the referral rejection letter from the ETA-NEH

Group, as well as AO Russo’s case activity notes and Form 14559,

Appeals Offer in Compromise Rejection Memorandum, dated November

29, 2023. See Serna v. Commissioner, T.C. Memo. 2022-66, at *8; see also

Melasky v. Commissioner, 151 T.C. 93, 106 (2018) (“[W]e will uphold a

notice of determination of less than ideal clarity if the basis for the

determination may reasonably be discerned . . . .”), aff’d, 803 F. App’x

732 (5th Cir. 2020); Kasper v. Commissioner, 150 T.C. 8, 24–25 (2018)

(“Although we may not accept any post hoc rationalizations for agency

action provided by the Commissioner’s counsel, we may consider any

‘contemporaneous explanation of the agency decision’ contained in the

record.”); cf. Antioco v. Commissioner, T.C. Memo. 2013-35, at *25

(“Applying Chenery in the CDP context means that we can’t uphold a

notice of determination on grounds other than those actually relied upon

by the Appeals officer.” (citing SEC v. Chenery Corp., 318 U.S. 80, 87–88

(1943))).

III. Framework for OIC Based on Effective Tax Administration

Section 7122(a) authorizes the Secretary to compromise an

outstanding tax liability. Treasury Regulation § 301.7122-1(b) lays out

potential grounds for compromise. The first potential ground for

compromise, doubt as to liability, see id. subpara. (1), was the basis for

Petitioners’ prior OIC that led to the Prior NOD. Compromise may also

be based on doubt as to collectibility. See id. subpara. (2). And finally,

compromise may be entered into to promote effective tax administration,

see id. subpara. (3), which was the stated ground for Petitioners’ OIC

that led to the Current NOD. Both doubt as to collectibility OICs and

effective tax administration OICs require an evaluation of taxpayers’

10

[*10] reasonable collection potential (RCP). See IRM 5.8.11.5.2(1)

and (2) (Aug. 5, 2015). 3

A compromise to promote effective tax administration may be

entered into when the IRS determines that, although collection in full is

possible, it would cause the taxpayer economic hardship. See Treas. Reg.

§ 301.7122-1(b)(3)(i). Economic hardship would arise if a taxpayer would

be unable to pay his or her reasonable basic living expenses. See Treas.

Reg. § 301.6343-1(b)(4); see also Treas. Reg. § 301.7122-1(b)(3); IRM

5.8.11.3.1(2) (Oct. 4, 2019).

If the economic hardship ground for effective tax administration

and other grounds do not apply, the IRS may compromise to promote

effective tax administration if compelling public policy or equity

considerations identified by the taxpayer provide a sufficient basis for

compromising the liability. See Treas. Reg. § 301.7122-1(b)(3)(ii). The

regulations provide that compromise is justified only if, due to

exceptional circumstances, collection of the full liability would

undermine public confidence that the tax laws are being administered

in a fair and equitable manner. Id. They further provide that no

compromise to promote effective tax administration may be entered into

if it would undermine compliance with the tax laws. Id. subdiv. (iii).

The IRM indicates that acceptance of an OIC based on

considerations of equity and public policy will generally be based on a

combination of facts and circumstances. See IRM 5.8.11.3.2(1). In

addition the IRM lists compelling factors to consider when examining a

public policy or an equity OIC. See id. 5.8.11.3.2.1. As relevant to this

case, according to the IRM, accepting a public policy or an equity OIC

may be appropriate where rejecting it would cause a significant negative

impact on the taxpayer’s community. Id. 5.8.11.3.2.1(5). A public policy

or an equity OIC is not appropriate unless the taxpayer’s argument is

based on more than a belief that a provision is unfair. Id. 5.8.11.3.2.1(7);

see also Gillette v. Commissioner, T.C. Memo. 2018-195, at *22 (citing

the IRM in a case concluding that the IRS did not abuse its discretion in

rejecting an OIC on effective tax administration grounds), aff’d, 801

F. App’x 398 (7th Cir. 2020).

3 Citations herein are to provisions of the IRM as in effect during AO Russo’s

consideration of Petitioners’ case.

11

[*11] IV. Evaluation of Appeals’ Determination

This Court considers whether AO Russo (1) properly verified that

the requirements of any applicable law or administrative procedure

were met; (2) considered any relevant issues Petitioners raised; and

(3) considered whether the proposed collection actions balance 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 I.R.C. §§ 6320(c), 6330(c).

A. 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, 131 T.C. 197, 202–03 (2008),

supplemented by 136 T.C. 463 (2011). However, because Petitioners

have not challenged verification, no issues with AO Russo’s review have

been raised. This Court concludes, from a review of the record, that

AO Russo conducted a thorough review of the record and verified that

all applicable requirements were met. Accordingly, this Court concludes

that there was no abuse of discretion with regard to the verification

requirement.

B. Issues Raised by Petitioners

Petitioners allege that AO Russo abused her discretion by failing

to address a requirement of Treasury Regulation § 301.7122-1(b)(3)(ii).

Specifically, in the Petition they argue that she failed to address

whether “requiring payment would either create an economic hardship

or would be unfair and inequitable.” As a preliminary matter, Treasury

Regulation § 301.7122-1(b)(3)(ii) provides for compromise on the basis of

compelling public policy or equity considerations, consistent with the

focus of Petitioners’ Response. Compromise on the basis of economic

hardship is separately addressed under Treasury Regulation

§ 301.7122-1(b)(3)(i). Given the lack of clarity in Petitioners’ arguments

before this Court, this Court will review AO Russo’s analysis under both

provisions. This is also consistent with the governing framework set

forth in both the regulations and the IRM, under which economic

hardship is to be considered before public policy and equity

considerations.

12

[*12] 1. Economic Hardship

Petitioners’ muddling of issues in their arguments before this

Court is consistent with their positions in filings before the issuance of

the Current NOD. Although the Form 656 indicated that it was being

submitted on effective tax administration grounds other than economic

hardship, and subsequent correspondence disclaimed economic

hardship, Petitioners made some statements about economic hardship

on their Form 656 and in an attachment thereto. Accordingly, and

consistent with IRM 5.8.11.5.2(1) and (2), the Centralized Offer in

Compromise Unit considered Petitioners’ RCP and whether paying their

liability would impose an economic hardship on them. AO Russo

appropriately considered the unit’s preliminary determination rejecting

Petitioners’ OIC.

Although economic hardship is not addressed in the brief

“Summary and Recommendation” portion of the Current NOD, the

Current NOD does both describe Petitioners’ OIC and the preliminary

determination that Petitioners had the ability to pay in full and that

their special circumstances did not present a hardship. The record

reflects that AO Russo (1) reviewed the underlying analysis performed

by the Centralized Offer in Compromise Unit, which indicated that

Petitioners’ ability to pay exceeded $5 million; (2) held a call with

Petitioners’ counsel to discuss the preliminary determination,

requesting Petitioners’ feedback; and (3) responded to that feedback

accordingly in proceeding with the analysis on grounds other than

economic hardship when Petitioners disclaimed economic hardship.

Accordingly, this Court finds that AO Russo did not abuse her discretion

in declining to accept Petitioners’ OIC on the basis of effective tax

administration economic hardship grounds.

2. Public Policy or Equity Considerations

The greater focus of the Current NOD on the potential bases for

an effective tax administration OIC other than economic hardship

makes sense given the foregoing background. AO Russo did not

originally seek review of Petitioners’ OIC by the ETA-NEH Group, as

suggested by the IRM. See IRM 5.8.11.3.2(1), 5.8.11.5.1(8) (Oct. 4, 2019),

8.22.7.4.2(2) (Aug. 26, 2020). However, although failure to do so would

not be dispositive, see Eichler v. Commissioner, 143 T.C. 30, 39 (2014)

(“[P]rovisions of the IRM do not carry the force and effect of law or confer

rights on taxpayers.”), the fact that she did promptly refer it once her

13

[*13] attention was called to that oversight is consistent with her

diligence throughout her handling of the case.

The memo that the ETA-NEH Group offer specialist prepared for

AO Russo summarizes the IRM’s requirements for compromise on the

basis of public policy and equity considerations and concludes that

Petitioners’ OIC does not satisfy them. In particular, the memo

demonstrates that the ETA-NEH Group offer specialist did consider the

particular facts and circumstances of Petitioners’ case, given that he

researched the state of early childhood education facilities in

Petitioners’ area in order to determine whether their OIC would have

any impact on their community, per IRM 5.8.11.3.2.1(5). The Current

NOD reiterates this analysis. In considering a taxpayer’s qualification

for a collection alternative, such as an OIC, it is not an abuse of

discretion to rely on guidelines set forth in the IRM. See, e.g., Siebert v.

Commissioner, T.C. Memo. 2021-34, at *18.

Furthermore, those guidelines and the ETA-NEH Group offer

specialist’s analysis are consistent with the regulatory indications that

(1) compromise is justified only if, due to exceptional circumstances,

collection of the full liability would undermine public confidence that the

tax laws are being administered in a fair and equitable manner, see

Treas. Reg. § 301.7122-1(b)(3)(ii), and (2) compromise may not be

entered into if it would undermine compliance by taxpayers with the tax

laws, see id. subdiv. (iii). As explained in the memo and the attached

Fact Sheet FS-2008-18, separate sales and exchanges do not qualify for

special tax treatment under section 1031, and taxpayers generally

undertake specific structuring to ensure qualification. Accordingly, it

was not an abuse of discretion for AO Russo to conclude that allowing

Petitioners to effectively obtain the tax benefits of section 1031 without

satisfying its requirements, through their minimal OIC, would

undermine taxpayer compliance. Furthermore, it was not an abuse of

discretion for her to conclude that instead of collection undermining

confidence in fair and equitable tax administration, entering into the

OIC would do so.

Consistent with this understanding, the Court has explained that

OICs are not intended to override substantive tax law. See Speltz v.

Commissioner, 124 T.C. 165, 177 (2005) (“We do not discern in section

7122 an intent of Congress to override application of specific provisions

of the tax laws in every instance in which the liability is perceived to be

unfair or inequitable. . . . A fortiori, individual revenue officers and

Appeals officers, carrying out their respective functions in the IRS

14

[*14] collection process, cannot be expected to engage in the type of

statutory interpretation urged on us by [the taxpayers] or to nullify

unfortunate consequences of the tax laws on a case-by-case basis.”),

aff’d, 454 F.3d 782 (8th Cir. 2006). Furthermore, the Court has rejected

the idea that a settlement officer’s refusal to effectively override

statutory provisions on effective tax administration grounds other than

economic hardship constitutes an abuse of discretion. See id. at 178–79

(“Accepting [the taxpayers’] position would result in nullification of a

portion of the statutory scheme by administrative or judicial action. We

cannot conclude that section 7122 gives the Court a license to make

adjustments to complex tax laws on a case-by-case basis. . . . Moreover,

we cannot conclude that it is an abuse of discretion for the Appeals

officer to decline to do so. In this case we conclude that the Appeals

officer correctly applied the provisions of the regulations and of the

Internal Revenue Manual, specifically those portions cautioning against

granting relief based on inequity where to do so would undermine

congressional intent.”). Consistent with this precedent, this Court finds

that AO Russo did not abuse her discretion in declining to accept

Petitioners’ OIC based on effective tax administration grounds other

than economic hardship.

C. Balancing Analysis

Petitioners do not allege that AO Russo failed to consider

“whether any proposed collection action balances the need for the

efficient collection of taxes with the legitimate concern of the person that

any collection action be no more intrusive than necessary.” See I.R.C.

§§ 6320(c), 6330(c)(3)(C). They thus have conceded this issue. See Rule

331(b)(4); see also Ansley v. Commissioner, T.C. Memo. 2019-46, at *19.

In any event AO Russo concluded in the Current NOD that the filing of

the NFTL balanced the need for efficient tax collection with Petitioners’

concern about intrusiveness because Petitioners provided neither a

valid justification to withdraw the lien nor a viable collection

alternative. This Court concludes that there was no abuse of discretion

in this determination.

V. Conclusion

There are no disputes of material fact, and judgment may be

rendered as a matter of law. Finding no abuse of discretion, this Court

will grant the Motion and sustain Appeals’ determination to sustain the

filing of the NFTL to collect Petitioners’ unpaid liability for tax year

2017. This Court has considered all arguments made by the parties and,

15

[*15] to the extent they are not addressed herein, deems them to be

moot, irrelevant, or without merit.

To reflect the foregoing,

An appropriate order and decision will be entered.