The opinion
T.C. Memo. 2020-140
UNITED STATES TAX COURT
FRANCIS I. SPAGNOLETTI, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10204-19L. Filed October 8, 2020.
Francis I. Spagnoletti, pro se.
William J. Gregg and Bartholomew Cirenza, for respondent.
MEMORANDUM OPINION
LAUBER, Judge: In this collection due process (CDP) case, petitioner
seeks review pursuant to section 6330(d)(1)1 of a determination by the Internal
1
All statutory references are to the Internal Revenue Code (Code) in effect at
all relevant times, and all Rule references are to the Tax Court Rules of Practice
and Procedure. We round all monetary amounts to the nearest dollar.
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[*2] Revenue Service (IRS or respondent) to uphold a notice of intent to levy.
Respondent has moved for summary judgment, contending that the settlement
officer (SO) did not abuse her discretion in sustaining the proposed levy. We
agree and will therefore grant the motion.
Background
The following facts are based on the parties’ pleadings and motion papers,
including the attached declarations and exhibits. See Rule 121(b). Petitioner re-
sided in Texas when he petitioned this Court.
Petitioner, an attorney, filed delinquent Federal income tax returns for 2015
and 2016 and did not pay the full amount of tax shown as due on either return.
The IRS assessed the tax shown as due plus additions to tax for failure to timely
file, failure to timely pay, and failure to pay estimated tax. See secs. 6651(a)(1)
and (2), 6654. As of May 2018, petitioner’s outstanding liabilities for the two
years (including interest) exceeded $1.2 million.
On May 25, 2018, in an effort to collect these unpaid liabilities, the IRS sent
petitioner a Notice of Intent to Levy and Notice of Your Rights to a Hearing (levy
notice). Petitioner timely requested a CDP hearing, indicating that he was interest-
ed in an installment agreement (IA). He stated that he had previously contacted
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[*3] the IRS to request an IA to pay his 2015 and 2016 liabilities but had not
received a call back. He raised no other issues in his hearing request.
The case was assigned to an SO in the IRS Appeals Office in Houston,
Texas. The SO reviewed the administrative file and confirmed that petitioner’s
2015 and 2016 liabilities had been properly assessed and that all other legal re-
quirements had been met. The SO noted that petitioner had made no estimated tax
payments for 2017 or 2018.
On August 28, 2018, the SO sent petitioner a letter scheduling a telephone
conference for October 25, 2018. The letter informed petitioner that, in order for
the SO to consider an IA, petitioner needed to (1) submit Form 433-A, Collection
Information Statement for Wage Earners and Self-Employed Individuals, and
(2) provide proof that he had made all required estimated tax payments. The SO
asked petitioner to submit these documents within two weeks, but he submitted
nothing by that deadline or subsequently.
The SO called petitioner for the scheduled conference on October 25, 2018,
but he was unavailable. When petitioner did not return the call or otherwise con-
tact her, the SO sent him a “last chance” letter. In that letter she noted that he had
missed the conference and invited him to send her by November 9, 2018, any in-
formation that he wished her to consider.
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[*4] On November 8 petitioner faxed the SO a letter stating that he wished to pay
his entire outstanding balance in four monthly installments starting at the end of
that month. He explained: “I realize that you normally request additional docu-
mentation to do an installment agreement * * * ; however, I am not requesting an
installment agreement but rather full payment in 120 days.” The SO reviewed his
account and noted that he had failed to pay his tax for 2017 as well, so that his
aggregate liability approached $1.9 million as of November 26, 2018.
In a subsequent phone call petitioner reiterated his proposal to pay his bal-
ance in four monthly installments. The SO explained that he was ineligible for an
IA because he had submitted no financial information and was not in compliance
with his estimated tax obligations. She stated that she would close the case but
noted that, if petitioner paid his balance within 120 days as he proposed, his ac-
count would likely be fully paid before any levy actually occurred.
The SO never received from petitioner a Form 433-A or proof that he had
paid estimated tax. And he made no payments toward his balance due. On May 8,
2019--more than five weeks after his proposed 120-day payment plan would have
been completed--the IRS issued him a notice of determination sustaining the pro-
posed levy.
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[*5] Petitioner timely petitioned this Court for review. On February 13, 2020,
respondent filed a motion for summary judgment, to which petitioner replied.
Discussion
A. Summary Judgment Standard and Standard of Review
The purpose of summary judgment is to expedite litigation and avoid costly,
time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90
T.C. 678, 681 (1988). Under Rule 121(b) we 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, 98 T.C. 518, 520 (1992),
aff’d, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant summary judg-
ment, we construe factual materials and inferences drawn from them in the light
most favorable to the nonmoving party. Ibid. The nonmoving party may not rest
upon the mere allegations or denials in his pleadings, but must set forth specific
facts showing that there is a genuine dispute for trial. Rule 121(d); see Sundstrand
Corp., 98 T.C. at 520.
Section 6330(d)(1) does not prescribe the standard of review that this Court
should apply in reviewing an IRS administrative determination in a CDP case.
The general parameters for such review are marked out by our precedents. Where
the validity of the taxpayer’s underlying liability is properly at issue, we review
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[*6] the SO’s determination of that issue de novo. Sego v. Commissioner, 114
T.C. 604, 610 (2000). Where there is no dispute as to the taxpayer’s underlying
liability we review the IRS decision for abuse of discretion. Jones v.
Commissioner, 338 F.3d 463, 466 (5th Cir. 2003); Goza v. Commissioner, 114
T.C. 176, 182 (2000). Abuse of discretion exists when a determination is
arbitrary, capricious, or without sound basis in fact or law. See Murphy v.
Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006).
B. Underlying Liabilities
Because the IRS did not issue petitioner a notice of deficiency for 2015 or
2016, he was permitted to challenge at the CDP hearing the existence or amount of
his underlying tax liability for each year. See sec. 6330(c)(2)(B); Montgomery v.
Commissioner, 122 T.C. 1, 8-9 (2004). The phrase “underlying tax liability” in-
cludes the tax due, any additions to tax or penalties, and statutory interest. Katz v.
Commissioner, 115 T.C. 329, 338-341 (2000). However, “we do not have author-
ity to consider * * * [underlying liability] issues that were not raised before the
Appeals Office.” Giamelli v. Commissioner, 129 T.C. 107, 115 (2007). More-
over, a taxpayer must properly raise an issue during the CDP hearing in order to
preserve it for this Court’s review. “The merits are not properly raised if the tax-
payer challenges the underlying tax liability but fails to present the Appeals Office
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[*7] with any evidence regarding that liability after being given a reasonable
opportunity to do so.” Gentile v. Commissioner, T.C. Memo. 2013-175, 106
T.C.M. (CCH) 75, 76, aff’d, 592 F. App’x 824 (11th Cir. 2014); see also sec.
301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs.
Petitioner admits that he “did not raise an issue as to the reported tax due
* * * for 2015 and 2016.” But he asserts that he did dispute his liability for addi-
tions to tax and interest. He qualifies this assertion, however, by saying that he
advanced such a challenge “to the best of his recollection.”
The record of the CDP hearing includes no evidence that petitioner chal-
lenged his liability for the additions to tax or sought abatement of interest. Neither
his Form 12153 nor the letter appended to it mentions additions to tax or interest;
both focus exclusively on his desire for a “120-day installment agreement.” His
November 8, 2018, letter to the SO stated that he wished to make “full payment in
120 days.” This statement conflicts with the notion that he was challenging his
liability for interest and additions to tax, which totaled $161,435 when the levy
notice was issued.
The SO’s case activity record contains no reference to any challenge by pe-
titioner to his liabilities for interest or additions to tax. Her summary of the No-
vember 13, 2018, telephone call describes petitioner’s position as being that “he
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[*8] just need[s] the 120 days and he will full pay what he owes.” The notice of
determination states that the underlying liabilities were “not raised as an issue for
the period(s) being considered in this hearing.” And in his petition to this Court
petitioner advanced no challenge to any portion of his underlying liability for 2015
or 2016.
In the light of this record evidence, petitioner’s assertion that he raised his
liabilities for additions to tax and interest “to the best of his recollection” is not
sufficient to create a genuine issue of material fact. Petitioner appears to contend
that he made this point inferentially by complaining that the IRS caused delay by
not returning his initial phone calls inquiring about a payment plan. That com-
plaint was not sufficient to raise a cognizable challenge to his underlying tax lia-
bilities.
In any event, even if petitioner were thought to have challenged his liabili-
ties for interest or additions to tax, he clearly did not present (and does not contend
that he presented) any evidence regarding those liabilities during the CDP hearing.
See Gentile, 106 T.C.M. (CCH) at 76. The Code specifies the evidence a taxpayer
must supply to qualify for abatement of interest and to defeat the additions to tax
for late filing and late payment. See sec. 6404(e)(1)(A) (requiring proof that a
deficiency was “attributable in whole or in part to any unreasonable error or delay
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[*9] by an [IRS] officer or employee * * * (acting in his official capacity) in
performing a ministerial or managerial act”); sec. 6651(a)(1) and (2) (requiring a
showing that the taxpayer’s failure was “due to reasonable cause and not due to
willful neglect”). Petitioner submitted no evidence to the SO on these points, and
he therefore failed to mount a proper challenge to his underlying liabilities at the
CDP hearing. That being so, he cannot maintain that challenge here. See
Giamelli, 129 T.C. at 115; Gentile, 106 T.C.M. (CCH) at 76.
C. Abuse of Discretion
In deciding whether the SO abused her discretion in sustaining the collec-
tion action, we consider whether she: (1) properly verified that the requirements
of applicable law or administrative procedure have been met, (2) considered any
relevant issues petitioner raised, and (3) considered “whether any proposed col-
lection action balances the need for the efficient collection of taxes with the legit-
imate concern of * * * [petitioner] that any collection action be no more intrusive
than necessary.” Sec. 6330(c)(3). Our review of the record establishes that the SO
properly discharged all of her responsibilities under section 6330(c).
Petitioner contends that the IRS erred in issuing the levy notice without first
issuing a notice of deficiency. The IRS was not required to issue a notice of defi-
ciency for 2015 or 2016 because it assessed the tax that petitioner himself had
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[*10] shown as due on his returns. See sec. 6211(a) (defining “deficiency” to
exclude tax reported on a return).
Petitioner next contends that the levy notice improperly combined two tax
years and that he was entitled to a separate hearing for each year. He cites no
authority for either proposition, and both are false. The IRS routinely includes
multiple tax years in a single notice of levy. And while taxpayers are limited to
one CDP hearing per tax period, see sec. 6330(b)(2), there is no impediment to
addressing multiple tax periods in one CDP proceeding, see, e.g., Cosio v. Com-
missioner, T.C. Memo. 2020-90; Nimmo v. Commissioner, T.C. Memo. 2020-72;
Kirkley v. Commissioner, T.C. Memo. 2020-57.
Finally, petitioner contends that the SO should have accepted his request to
pay his tax liabilities in four monthly installments. We have consistently held that
an SO does not abuse her discretion when she declines to consider a collection al-
ternative for a taxpayer, like petitioner, who has failed to make required estimated
tax payments. See Giamelli, 129 T.C. at 111-112. “Compliance with filing * * *
[and] paying estimated taxes * * * must be current from the date the installment
agreement begins.” Internal Revenue Manual pt. 5.14.1.4.2(19) (July 16, 2018).
Likewise, it is not an abuse of discretion for an SO to reject collection alternatives
where the taxpayer has declined, as petitioner did, to supply the requisite financial
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[*11] information. See, e.g., Solny v. Commissioner, T.C. Memo. 2018-71,
at *10; Gentile, 106 T.C.M. (CCH) at 77. In any event the SO effectively did
allow petitioner 120 days to make full payment by waiting almost six months
before closing the case and issuing the notice of determination.
Finding no abuse of discretion in any respect, we will grant summary judg-
ment for respondent and sustain the proposed collection action. Petitioner asserts
that he has now paid his 2017 tax liability and is willing to pay his liabilities for
2015 and 2016. He is free to do so at any time. And if his financial circumstances
have changed for the worse, he is free to submit to the IRS at any time, for its con-
sideration and possible acceptance, a collection alternative supported by the neces-
sary financial information.
To reflect the foregoing,
An appropriate order and decision
will be entered for respondent.