Tax Court Holds Settlement Officer Did Not Abuse Discretion

D. Anthony Abernathy and Peter R. Hochman, for respondent.

The parties submitted this case to the Court fully stipulated for decision without trial under Rule 122. The issues before us are:

(1) whether respondent abused his discretion in denying petitioner's request for an installment agreement relating to the years at issue. We hold he did not; and

(2) whether respondent abused his discretion in denying petitioner's request for a face-to-face hearing. We hold he did not.

Petitioner was a resident of Hawaii when he petitioned this Court.

Following this Court's entry of decision in the deficiency case, on July 19, 2010, petitioner moved to waive the section 7485 bond requirement to stay assessment and collection pending appeal or to set the bond at the lowest amount possible. In an order dated August 9, 2010, we declined to waive the bond requirement, stating:

On or about February 28, 2011, petitioner submitted a Form 2848, Power of Attorney and Declaration of Representative, designating Jonathan H. Steiner, Alan E. Kobayashi, and Jon M. Yasuda as his representatives for taxable years 1998 through 2004.

On May 18, 2011, respondent sent petitioner a Letter 1058, Final Notice, Notice of Intent to Levy and Notice of Your Right to a Hearing, with respect to petitioner's income tax liabilities for the years at issue. The letter further informed [*6] petitioner of his right to request a CDP hearing under section 6330 within 30 days of the letter's date.

On June 14, 2011, petitioner submitted a Form 12153, Request for a Collection Due Process or Equivalent Hearing, with respect to his tax liabilities for the years at issue. On the form petitioner selected two checkboxes marked "Filed Notice of Federal Tax Lien" and "Proposed Levy or Actual Levy" as the basis for his hearing request. In an attachment to the Form 12153 petitioner stated his belief that a lien withdrawal was warranted because:

On or about May 26, 2011, petitioner submitted a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, in which he disclosed his monthly income and expenses as well as his personal assets. In [*7] this Form 433-A petitioner disclosed monthly wage income of $33,000, monthly rental income of $9,500, and monthly living expenses of $27,033.

On June 22, 2011, Revenue Officer Colin P. Kelly (RO Kelly) prepared a monthly income and expense analysis for petitioner. On the basis of petitioner's 2010 tax return, which disclosed monthly rental income of $13,673, RO Kelly increased petitioner's monthly rental income to $13,000, for a total monthly income of $46,000. In addition, RO Kelly determined that only $16,372 of petitioner's claimed monthly living expenses constituted allowable expenses. Accordingly, RO Kelly determined petitioner's monthly ability to pay to be $29,628. With regard to petitioner's equity in assets, RO Kelly noted that petitioner had a section 401(k) plan account with $990,000 of equity and life insurance policies (with policy numbers ending in 1286 and 2912) with cash value of $53,400.

On or around June 27, 2011, petitioner's case was transferred to respondent's Seattle Appeals Office. On or around August 1, 2011, petitioner's case was again transferred to respondent's Portland Appeals Office. In a letter dated August 19, 2011, respondent informed petitioner that his case had been received for consideration by the Portland Appeals Office.

On February 13, 2012, Settlement Officer Kimberly A. Martin (SO Martin) sent petitioner a letter informing him that a telephone conference had been [*8] scheduled for March 13, 2012, and that this conference would be his primary opportunity to discuss his reasons for disagreement with the collection action or to discuss collection alternatives. This letter further informed petitioner that his CDP hearing request regarding the proposed levy action was timely but his CDP hearing request regarding the NFTL was not. Nonetheless, SO Martin informed petitioner that she would offer him an equivalent hearing with respect to the NFTL but he could not challenge her equivalent hearing determination. In her letter SO Martin further informed petitioner:

On February 27, 2012, petitioner sent SO Martin a letter asking for a face-to-face hearing. On February 28, 2012, SO Martin replied to petitioner, stating:

On February 29, 2012, SO Martin informed petitioner that she had rescheduled the conference call to April 19, 2012, and that she had extended the [*10] due date for the requested financial documents to March 30, 2012. With regard to petitioner's face-to-face hearing request, she stated:

On the basis of various rental agreements SO Martin determined that petitioner owned a 60-year leasehold interest in 2864 Mokumoa St., Honolulu, Hawaii, for $17,000 a month, which he in turn subleased to HIE Holdings, Inc., for [*11] $32,533 a month. However, because petitioner paid real estate and general excise taxes for the rental property, SO Martin increased petitioner's monthly rental income to only $13,673, as disclosed in his 2010 return. Accordingly, SO Martin determined petitioner's total monthly income to be $46,673. Using local and national standards SO Martin further determined petitioner's allowable monthly expenses to be $17,341. SO Martin thus concluded that petitioner had the ability to pay $29,332 a month in an installment agreement.

On April 3, 2012, petitioner again requested a continuance of the telephone conference. Petitioner explained that on March 29, 2012, he had received an order from the Court of Appeals for the Ninth Circuit directing him to submit certain briefing by April 19, 2012. Petitioner requested that the conference call be rescheduled to April 26 or 27, 2012. On April 10, 2012, SO Martin replied to petitioner, agreeing to reschedule the conference to May 2, 2012.

On May 2, 2012, SO Martin conducted the telephone conference. During the conference petitioner stated that he might still request a face-to-face hearing. In response SO Martin explained that they would discuss petitioner's financial information first and then decide whether a face-to-face hearing was still necessary or desirable. With regard to an installment agreement, SO Martin stated that it could cover only the years at issue -- it could not cover tax years 2003 and 2004 [*12] because they were the subject of a pending Tax Court case, nor could it cover tax years 1989 through 1997 because the returns for those years were still under audit. SO Martin further informed petitioner that he had to be in full compliance with his current tax obligations to qualify for a collection alternative. Therefore, SO Martin advised petitioner that he needed to make his 2011 estimated tax payments before she would consider an installment agreement.

SO Martin also advised petitioner that he had to liquidate his equity in certain assets before she would consider an installment agreement. These assets included petitioner's section 401(k) plan account worth approximately $900,000, from which he could make withdrawals penalty free, and his life insurance policies worth approximately $52,437. Finally SO Martin informed petitioner that she had determined his ability to pay to be approximately $29,000 per month.

On May 18, 2012, petitioner sent SO Martin a letter proposing a $12,500-per-month installment agreement, which would cover tax years 1989, 1990, 1991, 1992, 2003, and 2004, in addition to the years at issue. With regard to the liquidation of assets, petitioner stated:

SO Martin concluded her letter as follows:

On July 30, 2012, SO Martin discussed the case with her Appeals team manager, who agreed that petitioner was not entitled to additional time to respond for the following reasons: (1) petitioner was not in full compliance; (2) petitioner was unwilling to liquidate his assets; and (3) petitioner was unwilling to enter into an installment agreement that reflected his ability to pay.

On August 7, 2012, SO Martin advised petitioner via telephone that she could not recommend accepting his proposed installment agreement because he was not in full compliance, he was unwilling to liquidate his assets, and he [*16] proposed to pay his unsecured corporate loan ahead of the IRS' secured debt. SO Martin further advised petitioner that a face-to-face meeting would serve no purpose since he did not qualify for an installment agreement. Finally, SO Martin informed petitioner of her decision to sustain the lien and levy filings.

On August 21, 2012, SO Martin issued a notice of determination which sustained the issuance of the notice of intent to levy and concluded that petitioner did not qualify for an installment agreement. In the notice of determination SO Martin verified that she had no prior involvement with petitioner's case, verified that all legal and procedural requirements had been met, and balanced the need for efficient collection with petitioner's legitimate concerns that the collection action be no more intrusive than necessary.

When the Commissioner pursues collection by lien or levy, he must notify the affected taxpayer in writing of his or her right to a hearing with an impartial Appeals officer. See secs. 6320(a) and (b) (relating to liens), 6330(a) and (b) (relating to levies). Where a hearing is requested, whether in response to an NFTL filing or a proposed levy, the presiding Appeals officer must satisfy the standards set forth in section 6330. See secs. 6320(b)(4), 6330(c).

As a preliminary matter we note that although the petition in this case is entitled "Petition for Redetermination of Lien or Levy Action under Code Section 6320 and/or 6330(d)", our jurisdiction is limited to the review of the levy action pursuant to section 6330(d). Petitioner failed to timely request a CDP hearing regarding the NFTL and was granted an equivalent hearing as provided for by section 301.6320-1(i), Proced. & Admin. Regs. In Kennedy v. Commissioner, 116 T.C. 255, 262-263 (2001), we held that where a taxpayer's request for a CDP hearing is untimely, the Commissioner's decision to conduct an equivalent hearing does not waive the time restrictions for requesting such a hearing, and the Court [*18] lacks jurisdiction to review the Commissioner's determination. See also Moorhous v. Commissioner, 116 T.C. 263, 269-271 (2001). Accordingly, we review only respondent's determination to sustain the notice of intent to levy.

As part of the CDP hearing, Appeals must take into consideration: (1) verification that the requirements of applicable law and administrative procedure have been met; (2) relevant issues raised by the taxpayer concerning the collection action; and (3) whether the proposed collection action balances the need for the efficient collection of tax with the taxpayer's legitimate concern that the collection action be no more intrusive than necessary. Sec. 6330(c)(3). Relevant issues may include appropriate spousal defenses, challenges to the appropriateness of the collection actions, and potential collection alternatives such as an installment agreement or an offer-in-compromise. Sec. 6330(c)(2)(A).

A taxpayer is precluded from challenging the existence or amount of the underlying tax liability unless the individual did not receive a notice of deficiency for the tax liability or was not otherwise provided with an opportunity to dispute the tax liability. Sec. 6330(c)(2)(B); see also Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, 114 T.C. 176, 182 (2000). Petitioner has had the opportunity to dispute his income tax liabilities for the years at issue in the [*19] deficiency case and is therefore precluded from challenging the existence or the amounts of his underlying liabilities in this case.

Where the validity of the underlying tax liability is not at issue, we review Appeals' determinations for abuse of discretion. Sego v. Commissioner, 114 T.C. at 610; Goza v. Commissioner, 114 T.C. at 182. Abuse of discretion exists where the Appeals officer's determinations are arbitrary, capricious, or without sound basis in fact or law. Giamelli v. Commissioner, 129 T.C. 107, 111 (2007). The Court of Appeals for the Ninth Circuit has held that judicial review of nonliability issues under section 6330(d) is limited to the administrative record (i.e., the administrative record rule). See Keller v. Commissioner, 568 F.3d 710, 718 (9th Cir. 2009), aff'g T.C. Memo. 2006-166.⁴

Petitioner argues that SO Martin abused her discretion when she rejected his proposed installment agreement. SO Martin rejected petitioner's proposed installment agreement for three reasons: (1) petitioner was not in full compliance with the tax laws; (2) petitioner refused to liquidate his assets to effect a partial payment; and (3) petitioner's proposed monthly payment did not reflect his ability to pay. We address each of these reasons in turn.

[*21] A. Full Compliance With Tax Laws

Petitioner argues that SO Martin abused her discretion and erred as a matter of law by requiring him to be current with his estimated tax payments before she would accept his proposed installment agreement. We disagree.

We have consistently held that an Appeals officer does not abuse his discretion in denying a taxpayer's request for an installment agreement when the taxpayer is not in compliance with his current tax obligations as of the date of the CDP hearing. See, e.g., Starkman v. Commissioner, T.C. Memo. 2012-236 (sustaining rejection where taxpayer failed to timely file his tax return or make estimated tax payments); Pavlica v. Commissioner, T.C. Memo. 2007-163 (sustaining rejection where the taxpayer had a history of tax noncompliance and failed to timely file his tax return); see also James G. Hood, D.D.S., M.S., P.S. v. United States, 329 Fed. Appx. 88 (9th Cir. 2008) (holding that the Appeals Officer did not abuse his discretion in rejecting the taxpayer's proposed installment agreement where the taxpayer was not current on its employment taxes).

Petitioner's argument is nearly identical to the taxpayer's argument in Lipson. In Lipson v. Commissioner, at *8, the taxpayer argued that while the Internal Revenue Manual (IRM) pt. 5.14.1.2(8)(F) (Sept. 26, 2008) states that "current returns for taxes must be filed and current deposits paid to qualify for an [*22] agreement", IRM pt. 5.14.1.4.1(19) (Sept. 26, 2008) goes on to state that "[i]f it appears a taxpayer will have a balance due at the end of the current year, the accrued liability may be included in an agreement."⁵ The taxpayer in Lipson v. Commissioner, at *8, argued that the settlement officer erred as a matter of law in determining that his lack of current compliance barred him from qualifying for an installment agreement. The Court accepted the taxpayer's argument that the settlement officer had discretion to approve the proposed installment agreement. Id. In addition, the Court found that the settlement officer did rely, in part, on the taxpayer's failure to pay current taxes in rejecting his proposed installment agreement. Id. at *9. However, the Court held that this reliance did not constitute an abuse of discretion because the settlement officer was not required to accept the proposed installment agreement. Id.

Similarly, we conclude that although SO Martin could accept an installment agreement that included petitioner's current estimated tax liabilities, she acted within her discretion in declining to do so. Moreover, contrary to petitioner's [*23] assertions, we find that SO Martin knew that she had that discretion. In her letter dated February 13, 2012, SO Martin correctly informed petitioner: "Delinquent estimated tax payments can be included in an installment agreement."

Petitioner's reliance on Lofgren Trucking Serv., Inc. v. United States, 508 F. Supp. 2d 734, 739 (D. Minn. 2007), is misplaced. In Lofgren the Appeals officer erroneously determined that 2006 first quarter employment taxes were "new" tax debts incurred while a proposal was pending, when in fact, the taxpayer had submitted its payment plan during the second quarter of 2006 and had paid its 2006 second quarter employment taxes. Id. at 737-739. Moreover, in Lofgren the Appeals officer summarily denied the taxpayer's requested payment plan solely upon the basis of his mistaken belief that accepting the plan was impossible under the Code and the regulations because of the debt incurred for the first quarter of 2006. Lofgren is therefore distinguishable because petitioner had not paid his 2012 estimated taxes as of May 2, 2012, the date of the CDP hearing, and because SO Martin gave actual and fair consideration to petitioner's proposed installment agreement, rejecting it for a number of reasons.

B. Liquidation of Assets

SO Martin further rejected petitioner's proposed installment agreement because he refused to liquidate his retirement account and his life insurance [*24] policies. IRM pt. 5.14.1.4(5) (June 1, 2010) states in relevant part: "Taxpayers do not qualify for installment agreements if balance due accounts can be fully or partially satisfied by liquidating assets, unless * * * factors such as advanced age, ill-health, or other special circumstances are determined to prevent the liquidation of the assets".

We have routinely held that an Appeals officer does not abuse his discretion when he rejects an installment agreement because a taxpayer refuses to liquidate assets to satisfy his tax liabilities. In Bibby v. Commissioner, T.C. Memo. 2013-281, we held that an Appeals officer did not abuse his discretion in rejecting an installment agreement where the Appeals officer made clear that an installment agreement depended upon the liquidation of three real properties and the taxpayer would not agree to that condition precedent. In O'Donnell v. Commissioner, T.C. Memo. 2013-247, we held that an Appeals officer did not abuse his discretion in rejecting an installment agreement where the taxpayer failed to fully disclose his liquid assets and did not offer to pay his liabilities with those assets. See also Lipson v. Commissioner, at *9 (holding that the settlement officer acted within her discretion in rejecting an installment agreement where the taxpayer owned investments totaling $406,805 and noting that taxpayers do not generally qualify [*25] for an installment agreement if balance due accounts can be fully or partially satisfied by liquidating assets).

In McCarthy v. Commissioner, T.C. Memo. 2013-214, at *4, the Appeals officer required the taxpayer to borrow against or liquidate his significant equity in various assets before she would consider his proposed installment agreement. Although the taxpayer did make attempts to borrow against his assets and had one loan request approved, the Appeals officer ultimately rejected his proposed installment agreement when he failed to borrow against or liquidate his assets. On review we held that the Appeals officer was not required to set a specific date by which the taxpayer must liquidate his assets and that she acted within her discretion in rejecting his proposed installment agreement. Id.

Petitioner argues that SO Martin abused her discretion because the pendency of an appeal of a decision imposing liability constitutes "special circumstances" warranting an exception to the general rule that assets must be liquidated to qualify for an installment agreement. We disagree.

Section 6213(a) bars the Commissioner from assessing a tax liability until our decision becomes final, and section 7481 makes our decisions final when opportunities for appeal have been exhausted. Section 7485(a)(1), however, supersedes section 6213(a) by providing that assessment or collection shall not be [*26] stayed during an appeal unless a taxpayer files a bond with the Tax Court on or before the time his notice of appeal is filed. See Burke v. Commissioner, 124 T.C. 189, 191 n.4 (2005); Kovacevich v. Commissioner, T.C. Memo. 2009-160 n.4; see also Dawn v. Richmond, 861 F.2d 268 (9th Cir. 1988) (unpublished table decision) (holding that the Commissioner's assessment of a deficiency and his collection activities during the pendency of an appeal did not violate any of the taxpayers' statutory or constitutional rights, where the taxpayers did not post a bond).⁶ To accept petitioner's argument that a pending appeal is a "special circumstance" necessitating departure from respondent's general collection policies would require us to blindly ignore the section 7485 bond requirement. This we can not do. Moreover, the Court of Appeals for the Ninth Circuit denied petitioner's motion to stay collection pending appeal. Therefore, respondent was free to pursue collection action against petitioner, in accordance with his established policies.

Petitioner argues, for the first time on brief, that "special circumstances" existed because of the unique nature of the assets that SO Martin asked him to liquidate. According to petitioner his section 401(k) plan account and life [*27] insurance policies could not be replaced once liquidated and thus requiring their liquidation when the potential for reversal still existed was "unnecessarily punitive".⁷ With regard to his retirement account, petitioner further argues that SO Martin should have applied the standards set forth in IRM pt. 5.11.6.2 (Dec. 2, 2011) (governing levy on retirement accounts)⁸ by analogy to determine whether to require the liquidation of his section 401(k) plan account as part of an installment agreement. On the basis of the administrative record, we find that petitioner did not argue below that the special nature of a retirement account or a life insurance policy constituted "special circumstances" under IRM pt. 5.14.1.4(5). We likewise find that petitioner did not argue below that the IRS' standards governing levy on [*28] retirement accounts should be extended by analogy to the consideration of his proposed installment agreement.

We may not consider issues or arguments that a taxpayer does not raise as part of his CDP hearing. Giamelli v. Commissioner, 129 T.C. at 112-113 ("The statute [section 6330] contemplates consideration of issues 'raised' by the taxpayer at the hearing. Thus, if an issue is never raised at the hearing, it cannot be a part of the Appeals officer's determination."); sec. 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs. ("In seeking Tax Court review of a Notice of Determination, the taxpayer can only ask the court to consider an issue, including a challenge to the underlying tax liability, that was properly raised in the taxpayer's CDP hearing.") Consequently, we may not consider these arguments.

Finally, petitioner argues that SO Martin abused her discretion by requiring him to liquidate his life insurance policies when respondent would "almost certainly" not receive any proceeds from that liquidation because they were "encumbered by First Interstate Bank as collateral at all relevant times". Petitioner's argument is at best confused and at worst disingenuous. SO Martin asked petitioner to liquidate the life insurance policies disclosed in his Form 433-A with cash value of $52,437 and policy numbers ending in 1286 and 2912. The life insurance policy assigned to First Interstate Bank had a policy number ending in [*29] 5184. Thus, SO Martin correctly concluded that there was "no evidence" supporting petitioner's contention that his life insurance policies ending in 1286 and 2912 were encumbered by First Interstate Bank.

C. Reflection of Ability To Pay

Finally, SO Martin rejected petitioner's proposed installment plan of $12,500 a month because it did not reflect his ability to pay, which she determined to be approximately $29,000 a month.⁹ IRM pt. 5.14.1.4(4) (June 1, 2010) provides: "Installment agreements must reflect taxpayers' ability to pay on a monthly basis throughout the duration of agreements." A taxpayer's ability to pay is determined by comparing his monthly income to allowable expenses. Friedman v. Commissioner, T.C. Memo. 2013-44, at *9. Therefore, a settlement officer may accept, at a minimum, a monthly payment equal to the excess of a taxpayer's monthly income over the taxpayer's allowable expenses. Id.

In reviewing for abuse of discretion the Court does not recalculate a taxpayer's ability to pay nor substitute its judgment for that of the settlement officer. O'Donnell v. Commissioner, at *15.

[*30] SO Martin determined petitioner's monthly income on the basis of his financial disclosures and determined his allowable expenses according to local and national standards. We have held that a settlement officer does not abuse his discretion by adhering to local and national standards even if adherence to those standards would force taxpayers to change their lifestyle. Friedman v. Commissioner, at *10; cf. Aldridge v. Commissioner, T.C. Memo. 2009-276 (sustaining the Commissioner's use of the IRS' published national and local allowances as guidelines for basic living expenses in evaluating the adequacy of proposed installment agreements and holding that taxpayers have the burden of providing information to Appeals to justify a departure from the local standards).

Petitioner argues that SO Martin abused her discretion by not negotiating the amount of the monthly payment. Petitioner continues: "Boulware never had to make the difficult determination of what he could afford to pay on a monthly basis"; and he asserts that the liquidation requirement "obviated Boulware's need to determine what he was able to pay in an installment agreement". We disagree. During the CDP hearing on May 2, 2012, SO Martin informed petitioner that, according to her calculations, he had the ability to pay approximately $29,000 per month. Yet after this hearing petitioner offered to pay a mere $12,500 a month and informed SO Martin that he intended to pay $13,673 a month towards his officer [*31] loan account. On the basis of petitioner's offer SO Martin understandably questioned the sincerity of his interest in paying his outstanding tax liabilities. Moreover, SO Martin was not required to "haggle" with petitioner over the monthly payment amount. In conclusion, we hold that SO Martin reasonably determined that the proposed monthly payment did not reflect petitioner's ability to pay.

Moreover, we have consistently held that a taxpayer is not automatically entitled to a face-to-face CDP hearing. See, e.g., Katz v. Commissioner, 115 T.C. 329 (2000) (holding that a combination of telephone calls and letters constituted a [*33] proper CDP hearing); Radeke v. Commissioner, T.C. Memo. 2012-319, at *9 ("An informal telephone conference which gives the taxpayer the opportunity to discuss the merits of her case, settlement alternatives, and other issues related to the proposed levy is a proper CDP hearing."); Rivas v. Commissioner, T.C. Memo. 2012-20 (holding that an Appeals officer does not abuse his discretion in denying a taxpayer's request for a face-to-face hearing where the taxpayer failed to identify the relevant issues he wanted to discuss); Busche v. Commissioner, T.C. Memo. 2011-285, 102 T.C.M. (CCH) 566, 572 ("[A] taxpayer does not have an absolute right to a face-to-face hearing."). Therefore, we conclude that SO Martin acted within her discretion in denying petitioner's face-to-face hearing request.

Finally, petitioner alleged in his petition a number of errors that he has failed to argue on brief. Accordingly, we consider these issues to be conceded. See Mendes v. Commissioner, 121 T.C. 308, 312-313 (2003) (holding that arguments not addressed in brief may be considered abandoned); Davis v. Commissioner, 119 T.C. 1 n.1 (2002).

Any arguments not discussed in this opinion are irrelevant, moot, or lacking in merit.

[*34] To reflect the foregoing,

Decision will be entered for respondent.

² Petitioner's deficiencies for the years at issue are $264,868 for 1998, $589,740 for 1999, $740,405 for 2001, and $395,755 for 2002.

³ At that time, petitioner's unpaid balances for the years at issue were $439,971.16 for 1998, $977,521.35 for 1999, $1,159,597.56 for 2001, and $605,653.35 for 2002.

⁴ Recently, the Court of Appeals for the District of Columbia Circuit held in Byers v. Commissioner, 740 F.3d 668, 675-677 (D.C. Cir. 2014), aff'g T.C. Memo. 2012-27, that under sec. 7482 the Court of Appeals for the District of Columbia Circuit is the proper appellate venue in collection cases under secs. 6320 and 6330 where the underlying liability is not at issue. However, the court in Byers further stated: "We have no occasion to decide in this case whether a taxpayer who is seeking review of a CDP decision on a collection method may file in a court of appeals other than the D.C. Circuit if the parties have not stipulated to venue in another circuit." Id. at 677. In the light of Byers, we are mindful of the uncertainty of appellate venue and the controlling law in this case. We further note, however, that we have not found a case wherein the Court of Appeals for the District of Columbia Circuit has either adopted or rejected the administrative record rule in a collection case under sec. 6320 or sec. 6330.

⁵ These standards have not materially changed in the version of the Internal Revenue Manual (IRM) that applies to this case: IRM pt. 5.14.1.2(8)(F) (June 1, 2010) states that "current returns for taxes must be filed and current deposits paid before an installment agreement can be approved" and IRM pt. 5.14.1.4.1(18) (Mar. 4, 2011) states that "[i]f it appears a taxpayer will have a balance due at the end of the current year, the accrued liability may be included in an agreement".

⁶ Petitioner cites sec. 6863(c)(1), providing that seized property may not be sold "if a civil action is commenced in accordance with section 7429(b)". However, sec. 6863(c)(1) is inapposite because this action was commenced under sec. 6330(d), not sec. 7429(b), which pertains to judicial review of jeopardy levies and jeopardy assessments.

⁷ Petitioner has not cited any case for the proposition that the nature of a retirement account or life insurance policy constitutes "special circumstances". But see McClanahan v. Commissioner, T.C. Memo. 2008-161 (holding that the settlement officer did not abuse his discretion in rejecting the taxpayer's proposed installment agreement when the taxpayer refused to make an initial payment corresponding to the realizable equity in his whole life insurance policies).

⁸ Pursuant to IRM pt. 5.11.6.2 (Dec. 2, 2011), the IRS is required to consider the following factors in determining whether to levy on a taxpayer's retirement account: (1) whether nonretirement assets exist that are available for collection; (2) whether the taxpayer has engaged in "flagrant conduct"; and (3) whether the taxpayer relies on the retirement account (or will in the near future) for necessary living expenses. Examples of "flagrant conduct" include, inter alia, contributing to a retirement account while unpaid taxes were accruing, being convicted of tax evasion or assessed with a fraud penalty, and accruing tax liability on illegal income. The existence of "flagrant conduct" is determined on a case-by-case basis.

⁹ We note that pursuant to an independent calculation of petitioner's monthly payment potential, RO Kelly determined that petitioner could pay $29,628 a month towards his outstanding tax liabilities.

¹⁰ Petitioner alleges that SO Martin refused to grant him a face-to-face hearing because he was a resident of Hawaii. Petitioner's assertion is belied by the record. SO Martin repeatedly stated that she would grant petitioner a face-to-face hearing if it became necessary. Although SO Martin was in Oregon, she told petitioner about various options for holding a face-to-face meeting -- e.g., she could travel to Hawaii to conduct the hearing or she could participate remotely via teleconference while an Appeals officer in Hawaii conduced the hearing. On the basis of the administrative record we find that SO Martin denied petitioner's request for a face-to-face hearing, not because he resided in Hawaii, but because he was not eligible for a collection alternative.