United States Tax Court Decision for the Week – You be the Judge

A recent Tax Court decision was reported that may be of interest to individuals potentially dealing with tax litigation. J. Frank Best, Certified Public Accountant and United States Tax Court Practitioner, works to stay current on all IRS decisions concerning tax litigation to ensure we are fully informed and prepared for our clients.

The United States Tax Court held that the IRS didn’t abuse its discretion by refusing to rescind a notice of intent to levy to collect trust fund recovery penalties while an individual’s installment agreement request was pending; the court remanded the case to the Appeals Office to clarify its basis for a down payment as a condition of the installment agreement.

Renald Eichler sent the IRS a proposed partial-payment installment agreement for trust fund recovery penalties the IRS assessed against him. However, before the IRS addressed the proposed installment agreement, it sent him a notice of intent to levy regarding the penalties. Eichler requested a collection due process hearing and also asked that the IRS rescind the notice of levy because the installment agreement was pending. The IRS proceeded with the CDP hearing and proposed an installment agreement that required a down payment. When Eichler rejected the agreement because of economic hardship, the IRS sustained the proposed levy. Eichler petitioned the Tax Court for review, arguing that the IRS was precluded by section 6331(k)(2) from issuing the notice of levy while the installment agreement was pending.

Tax Court Judge Michael B. Thornton wrote that section 6331(k)(2), which prohibits the IRS from making a levy while an offer for an installment agreement is pending, didn’t preclude issuance of the notice. Thornton found support for the court’s conclusion in reg. section 301.6331-4(b)(1), which provides that the IRS may take action other than a levy to protect the government’s interest. The court held that there was no abuse of discretion in the IRS’s refusal to rescind the notice of intent to levy.

However, Thornton remanded the case to the IRS Appeals Office to clarify the appeals officer’s basis for requiring a down payment as a condition of the installment agreement. The court found that there was no indication in the record that the appeals officer considered issues regarding Eichler’s and his wife’s ages and their limited financial resources or the claim that funds in a bank account had been loaned to them. The court stated that any new collection alternatives should be considered on remand.


 143 T.C. No. 2