United States Tax Court
T.C. Memo. 2026-73
JAMES H. BALLENGEE AND A.C. HEYDE, Petitioners
v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
__________
Docket No. 8201-24L. Filed August 19, 2026.
__________
Sarah Ann Duckers, for petitioners.
Daniel Charles Brauweiler and Gordon P. Sanz, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
LANDY, Judge: In this collection due process (CDP) case, the Internal Revenue Service (IRS) issued a Final Notice, Notice of Intent to Levy (Levy Notice) and a notice of the filing of a Notice of Federal Tax Lien (NFTL) to collect unpaid income tax liabilities for taxable years 2016 through 2018 from petitioners, James H. Ballengee and A.C. Heyde. Petitioners seek review, pursuant to sections 6320 and 6330, of the IRS Independent Office of Appeals’ (Appeals Office) determination to sustain the Levy Notice and the filing of the NFTL. 1
1 Unless otherwise indicated, statutory references are to the Internal Revenue
Code, Title 26 U.S.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. All monetary amounts are rounded to the nearest dollar.
Served 08/19/26
[*2] After concessions, 2 the issues for decision are (1) whether the execution of Form 870–LT, Agreement for Partnership Items and Partnership Level Determinations as to Penalties, Additions to Tax, and Additional Amounts and Agreement for Affected Items, by petitioners precludes them from challenging their underlying tax liabilities for 2016 and 2017 (years at issue), and (2) whether the Commissioner abused his discretion in sustaining the Levy Notice and the filing of the NFTL.
For the reasons set forth below, we determine that petitioners are precluded from challenging their underlying tax liabilities, and that the Commissioner did not abuse his discretion in sustaining the Levy Notice and the filing of the NFTL.
FINDINGS OF FACT
I. Mr. Ballengee
Petitioner James H. Ballengee received a bachelor of science in accounting from Louisiana State University; and although he is not currently licensed, he practiced as a certified public accountant (CPA) for five years at KPMG. After leaving KPMG, Mr. Ballengee founded and sold multiple companies in the oil and gas industry. Because of the nature of his work, Mr. Ballengee reviewed legal documents and frequently consulted with professionals, such as lawyers or CPAs, before executing said documents, as needed.
II. Petitioners’ Income Tax Liabilities
During the years at issue Ballengee Interests, LLC (Ballengee Interests), was a partnership for federal tax purposes. 3 The partners of Ballengee Interests were petitioner James H. Ballengee and James Ballengee Alex Heyde Holdings, LLC (JBAH Holdings), also a partnership for federal tax purposes and of which Mr. Ballengee was the manager. For the years at issue Ballengee Interests claimed net operating loss (NOL) carryforwards for recourse debts of $18.7 million and $64.3 million, respectively.
2 For taxable year 2018 the Commissioner conceded that neither Mr. Ballengee
nor Ms. Heyde is liable for any amount due, and as a result the Levy Notice and the NFTL filing will not be sustained. No further issues related to 2018 will be discussed.
3 Before its repeal, the Tax Equity and Fiscal Responsibility Act of 1982
(TEFRA), Pub. L. No. 97-248, §§ 401–407, 96 Stat. 324, 648–71, governed the tax treatment and audit process for many partnerships, including Ballengee Interests. Any references to former sections 6221–6234 are references to the TEFRA provisions.
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[*3] A. Examination of Ballengee Interests’ Returns and Petitioners’ Returns for 2016 and 2017
In February 2019 the IRS notified petitioners that it was commencing an examination of their 2016 Form 1040, U.S. Individual Income Tax Return, and Ballengee Interests’ 2016 Form 1065, U.S. Return of Partnership Income. 4 On March 9, 2020, the IRS sent to JBAH Holdings Letter 1787–C, Notice of Beginning of Administrative Proceedings, stating that it was initiating an examination of Ballengee Interests’ 2017 Form 1065. Petitioners retained CPAs Kevin Trimble and Phil Haley as their representatives for these examinations. Revenue Agent (RA) Henderson conducted the examination of the partnership and individual tax returns for the years at issue and communicated with Mr. Haley and Mr. Trimble.
On May 12, 2020, RA Henderson sent to both Mr. Ballengee and Mr. Trimble an examination summary report regarding Ballengee Interests’ tax returns. This summary report included Form 4605–A, Examination Changes – Partnerships, Fiduciaries, S Corporations, and Interest Charge Domestic International Sales Corporations; a Partnership Balance Sheet Recourse Liabilities Lead Sheet for Ballengee Interests; Forms 870–LT, with an accompanying continuation page prepared for petitioners and JBAH Holdings, LLC; and a Notice of Waiver of Closing Conference.
On May 18, 2020, Mr. Haley spoke with RA Henderson to discuss the examination summary report. The summary report proposed a reclassification of Ballengee Interests’ reported debt from recourse to nonrecourse, resulting in the disallowance of the NOL carryforwards for the years at issue. During the conference call, Mr. Haley raised issues regarding the proposed adjustment, citing documents that he had previously sent to RA Henderson. After May 18, 2020, Mr. Haley did not speak with RA Henderson again.
4 Mr. Ballengee executed Form 872–P, Consent to Extend the Time to Assess
Tax Attributable to Partnership Items, dated December 17, 2019, to extend the period to assess any income tax attributable to partnership items for Ballengee Interests for taxable year 2016 until December 31, 2021.
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[*4] B. Execution of Form 870–LT
Petitioners received Form 870–LT 5 and executed it on June 2, 2020. Mr. Ballengee executed Form 870–LT, Part I, on behalf of JBAH Holdings as its manager, and separately, petitioners executed Form 870–LT, Part II, in their individual capacities. Part I of Form 870–LT was an offer of agreement to partnership items and partnership-level determinations which the manager of JBAH Holdings, Mr. Ballengee, could sign to bind Ballengee Interests to partnership-level adjustments. Part I contains a waiver of the assessment and collection restrictions provided by sections 6225(a) and 6213(a), and consent to assess and collect any resulting tax, penalties, additions to tax, and additional amounts relating to partnership items.
Form 870–LT contained only the names of the partnerships, the names of petitioners, the years at issue, and a statement in the remarks: “See attached 870–LT Continuation Page.”
The Continuation Page stated:
Accuracy related penalties under IRC section 6662 are determined to apply to the entire amount of any underpayment of tax attributable to the adjustments to the partnership items.
The accompanying Form 886–A, Explanation of Partnership Items and Partnership-Level Adjustments, is hereby incorporated by references.
Accompanying Form 886–As include At Risk (IRC § 465), Taxable Distributions, & Unsubstantiated [NOL] CF from FTE losses.
During the partnership unified proceeding, it was determined that components of the partners’ basis and/or at-risk result in limitations on some of the losses which each partner may deduct in this year.
5 Form 870–LT has three parts: Part I, Offer of Agreement to Partnership
Items and Partnership Level Determinations as to Penalties, Additions to Tax, and Additional Amounts & Waiver of Restrictions on Assessment for Partnership Items, Penalties, Additions to Tax, and Additional Amounts; Part II, Offer of Agreement for Affected Items and Waiver of Restrictions on Assessment; and a Schedule of Adjustments.
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[*5] Basis and/or at-risk limitations are considered affected items which are proposed to each partner upon the completion of the TEFRA unified proceedings.
Audit report includes the reclassification of recourse debt of Ballengee Interests LLC into non-recourse debt.
Part II of Form 870–LT pertained to partner-level adjustments (or affected items) to liabilities resulting from partnership-level adjustments. Part II provided that the undersigning taxpayers “agree to the determination of partner level determinations . . . as shown on the attached schedule of adjustments.” Moreover, by signing Part II, petitioners agreed to “waive the restrictions provided by IRC sections 6225(a) and 6213(a) and consent to the assessment and collection of any deficiency attributable to partner level determinations, as set forth in the attached Schedule of Adjustments.” Part II also notified petitioners that
the treatment under [Form 870–LT] of the specified affected items and the partner level determinations as to penalties, additions to tax, and additional amounts that relate to adjustments to partnership items will not be reopened in absence of fraud, malfeasance, or misrepresentation of fact.
Part II further provided: “The accompanying Form 886–A, Explanation of Partnership Items and Partnership-Level Adjustments, is hereby incorporated by references.” Like the May 18 Form 870–LT presented to Mr. Haley, the executed Form 870–LT did not contain any adjustments in the Schedule of Adjustments.
Mr. Ballengee signed Part I as manager of JBAH Holdings, and both petitioners signed Part II, of Form 870–LT without notifying or consulting Mr. Haley or Mr. Trimble before execution. Mr. Ballengee signed Form 870–LT believing that, because of the lack of adjustments on the Form itself, the IRS proposed no adjustments to partnership- or partner-level items. The IRS received Forms 870–LT for each partner on June 12, 2020, and the IRS Technical Services Passthrough Coordinator countersigned Forms 870–LT on October 22, 2020.
C. The No Change Letter
On March 1, 2021, eight months after petitioners signed Form 870–LT, they received a letter from the IRS stating that “[the IRS]
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[*6] completed the review of the examination of [petitioners’] tax [1040] return for [taxable year 2016]. [The IRS] made no changes to [their] reported tax.” The IRS further stated that petitioners would receive no further communication regarding 2016 “unless [the IRS] make[s] a change to a partnership . . . return in which you have an interest.” On November 4, 2021, the IRS sent to petitioners Letters 4735, Notice of Computational Adjustment (November 4 Notices), with attached Forms 4549–A, Report of Income Tax Examination Changes, for the years at issue. The November 4 Notices stated the additional amounts and penalties due for the years at issue and were issued by RA Ng, who replaced RA Henderson. Mr. Haley called RA Ng to inquire about the November 4 Notices and sent RA Ng a copy of the March 1 no change letter. RA Ng subsequently provided Mr. Haley the Form 886–A referenced on Form 870–LT, dated June 2, 2020, and executed by petitioners, which was the first time Mr. Haley saw the affected items adjustments.
III. The Collection Notices and the CDP Hearing Requests
On March 14, 2023, the IRS issued petitioners the Levy Notice for the years at issue. On March 23, 2023, the IRS received from petitioners a Form 12153, Request for a Collection Due Process or Equivalent Hearing (CDP Hearing Request), and an attached letter articulating their objections to the Levy Notice. In their CDP Hearing Request, petitioners indicated that they were not liable for any tax due. The attached letter also stated that petitioners had received a no change letter for the years at issue before receiving the November 4 Notices. In the attached letter petitioners further contended that the adjustments were partner-level adjustments, Form 870–LT signed by Mr. Ballengee contained no partnership-level adjustments, and the period of limitations for assessing these partner-level taxes had expired. Petitioners indicated no other reasons for which they requested a hearing and did not seek any collection alternatives to the Levy Notice.
On March 15, 2023, to collect the liabilities described above, the IRS prepared an NFTL with respect to the years at issue. On March 28, 2023, the IRS sent to petitioners Letter 3172, Final Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 (Lien Notice). Petitioners retained Sarah A. Duckers to represent them and, on April 3, 2023, submitted their second CDP Hearing Request contesting the Lien Notice for the years at issue. In their second CDP Hearing Request, petitioners maintained they were not liable for the tax due and sought withdrawal of the filed tax lien. The letter attached to
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[*7] their second CDP Hearing Request was similar to the March 23, 2023, CDP Hearing Request letter. Petitioners sought only lien withdrawal as a collection alternative.
IV. The CDP Hearing
Petitioners’ case was assigned to Settlement Officer (SO)
Figueroa, who verified that petitioners’ liabilities were properly assessed and that all requirements of applicable law and administrative procedure were met. On April 17, 2023, SO Figueroa sent petitioners a letter acknowledging receipt of their CDP Hearing Requests. SO Figueroa noted petitioners’ desire to challenge the underlying tax liabilities for the years at issue, and she requested that petitioners provide her with “all arguments and evidence supporting [their] challenge to the underlying [tax] liabilit[ies].”
SO Figueroa held a conference with Ms. Duckers on May 17, 2023, during which Ms. Duckers requested that the IRS rescind Form 870–LT because it did not contain any adjustments and petitioners had received the no change letter. Afterward, SO Figueroa submitted a special search request to obtain the documents from the examination, including Forms 870–LT and 886–A. SO Figueroa received the requested documents on November 2, 2023, a copy of which she faxed to Ms. Duckers on November 6, 2023. SO Figueroa advised Ms. Duckers that the Form 870–LT that Mr. Ballengee had signed stated that Form 886–A was attached. SO Figueroa further advised Ms. Duckers to propose any collection alternatives by November 8, 2023. Instead of proposing any collection alternatives, Ms. Duckers reasserted that petitioners did not receive Form 886–A with Form 870–LT. SO Figueroa asked Ms. Duckers to compose a timeline and explanation of the disagreement regarding the adjustments by November 22, 2023.
On December 1, 2023, petitioners provided SO Figueroa with the requested timeline and explanation. Petitioners requested that the IRS reopen the examination because Mr. Haley and Mr. Trimble did not receive either Form 870–LT or 886–A, petitioners did not receive Form 886–A, and in any event the tax calculations related to the adjustments were incorrect. SO Figueroa conferred with her manager on March 1, 2024, and they determined that the examination could not be reopened because petitioners voluntarily executed Form 870–LT. SO Figueroa left Ms. Duckers a voicemail that day asking whether petitioners desired to submit a collection alternative or receive a Notice of Determination Concerning Collection Actions under Sections 6320 or 6330 of the
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[*8] Internal Revenue Code (Notice of Determination). On March 15, 2024, Ms. Duckers requested that SO Figueroa issue a Notice of Determination.
On May 10, 2024, the IRS issued a Notice of Determination sustaining the Levy Notice and the filing of the NFTL. The IRS determined that petitioners were precluded from challenging the underlying tax liabilities for the years at issue because they executed Form 870–LT in its entirety. The IRS also determined that lien withdrawal was not appropriate because petitioners failed to provide any factual or legal support for withdrawal.
V. Proceedings Before This Court
On May 21, 2024, petitioners, while residing in Texas, timely petitioned this Court for review of the Notice of Determination. Absent stipulation to the contrary, an appeal of this case lies with the U.S. Court of Appeals for the Fifth Circuit. See § 7482(b)(1)(G)(i), (2). A trial was conducted on March 4, 2025, in Houston, Texas. At trial, Mr. Ballengee and Mr. Haley both testified regarding the sequence of events and whether Form 886–A was attached to Form 870–LT. Both maintained that there were no adjustments attached. Mr. Ballengee also testified that, if computational adjustments had been attached, he would have consulted Mr. Haley before petitioners signed Form 870–LT.
OPINION
I. Hearings Under Sections 6320 and 6330
Section 6321 imposes a lien in favor of the United States on all property and rights to property of taxpayers after a demand for payment of tax has been made and the taxpayers have failed to pay. The lien arises when the tax is assessed. § 6322. The Secretary generally must file an NFTL with certain state or local authorities where the taxpayers’ property is situated for the lien to be valid against certain categories of third parties. § 6323(a), (f); Behling v. Commissioner, 118 T.C. 572, 575 (2002). The Secretary is required to notify taxpayers in writing of the filing of an NFTL and of their right to a hearing. § 6320(a)(1), (3).
Section 6331(a) authorizes the Secretary to levy upon property and taxpayers’ rights to property if taxpayers are liable for taxes and fail to pay those taxes within ten days after notice and demand for payment. The Secretary is required to notify taxpayers in writing of their right to a hearing before a levy. § 6330(a)(1).
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[*9] II. Standard and Scope of Review
Sections 6320(b) and 6330(b) permit taxpayers to challenge the filing of the NFTL and the Levy Notice before the Appeals Office, and section 6330(d) (incorporated by section 6320(c)) provides for our review of an Appeals Office determination. Section 6330(d)(1) does not prescribe the standard of review we should apply in reviewing the IRS’s administrative determination in this case; thus we are guided by our caselaw. If the validity of the underlying tax liabilities is properly at issue, we review that determination de novo. See Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181–82 (2000). We review all other administrative determinations concerning the proposed collection actions for abuse of discretion. Jones v. Commissioner, 338 F.3d 463, 466 (5th Cir. 2003) (per curiam); Goza, 114 T.C. at 182. An abuse of discretion occurs if an Appeals officer issues a determination arbitrarily, capriciously, 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); Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
The Appeals Office is obliged to verify that the requirements of any applicable law or administrative procedure have been met. §§ 6320(c) (applying section 6330(c) to lien CDP cases), 6330(c)(1), (3)(A). Taxpayers may then raise “any relevant issue” such as a challenge to the appropriateness of the collection actions and the possibility of collection alternatives. § 6330(c)(2)(A). Taxpayers may also challenge the existence or amount of the underlying tax liabilities, but only if they did not receive a Notice of Deficiency with respect to the liabilities or did not otherwise have an opportunity to dispute them. § 6330(c)(2)(B). Finally, the Appeals Office must consider whether the collection actions balance the need for efficient collection against the taxpayers’ concern that collection be no more intrusive than necessary. § 6330(c)(3)(C).
III. Analysis
A. Challenge to the Underlying Tax Liabilities
Petitioners seek to challenge their underlying tax liabilities for the years at issue. Petitioners contend that their execution of Form 870–LT did not waive their right to challenge the liabilities alleged in the Form 886–A, that Form 870–LT contained no adjustments to partnership-level items, and that Form 870–LT is not binding because at the time they signed it—without consulting their representatives— Form 886–A was not attached. The Commissioner counters that the
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[*10] clause in Part II of Form 870–LT incorporating an accompanying Form 886–A sufficiently placed petitioners on notice that Form 870–LT contained adjustments resulting in tax liabilities, and, regardless, petitioners cannot challenge partner-level adjustments made pursuant to partnership-level determinations. We agree and determine that petitioners may not challenge their underlying tax liabilities.
Section 6221 provides that “the tax treatment of any partnership item (and the applicability of any penalty, addition to tax, or additional amount which relates to an adjustment to a partnership item) shall be determined at the partnership level.” “The Secretary shall mail to each partner whose name and address is furnished to the Secretary notice of—(1) the beginning of an administrative proceeding at the partnership level with respect to a partnership item, and (2) the final partnership administrative adjustment [FPAA] resulting from any such proceeding.” § 6223(a). “The determination of partnership items in a partnership- level proceeding (through either failure to respond to an FPAA or a final court decision) is conclusive.” Malone v. Commissioner, 148 T.C. 372, 375 (2017); accord § 6230(c)(4). Because this is a partner-level proceeding, petitioners are precluded from challenging the validity of Part I of the Form 870–LT. See, e.g., Davison v. Commissioner, 805 F. App’x 259, 260 (5th Cir. 2020), aff’g T.C. Memo. 2019-26; see also § 6230(c)(4); Moxon Corp. v. Commissioner, 165 T.C. 19, 25 (2025) (“Pursuant to TEFRA procedures, adjustments to partnership items and the applicability of penalties which relate to such adjustments are determined in a partnership-level proceeding and not in a partner-level proceeding.”).
“Once adjustments are made at the partnership level, the [IRS]
will make any necessary partner-level changes, including changes to ‘affected items.’” Malone, 148 T.C. at 375. Section 6231(a)(5) provides that “[t]he term ‘affected item’ means any item to the extent such item is affected by a partnership item.” Affected items are either computational affected items or factual affected items. See Bedrosian v. Commissioner, 144 T.C. 152, 158–59 (2015) (citing N.C.F. Energy Partners v. Commissioner, 89 T.C. 741, 744 (1987)). A computational affected item is mathematically determined. Id. (first citing § 6231(a)(6); and then citing White v. Commissioner, 95 T.C. 209, 211 (1990)). “A factual affected item is an affected item that requires further factual determinations at the partner level.” Malone, 148 T.C. at 376–77 (quoting Bedrosian, 144 T.C. at 158–59).
“If an adjustment to an affected item is merely computational and can be made without making additional partner-level determinations,
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[*11] the IRS can directly assess the tax due without having to follow the usual deficiency procedures.” Id. at 375–76 (first citing § 6230(a)(1); and then citing Treas. Reg. § 301.6231(a)(6)-1(a)(2)). To the contrary, “[i]f an adjustment to an affected item requires a partner-level factual determination, the IRS must follow deficiency procedures.” Id. at 376 (first citing § 6230(a)(2)(A)(i); and then citing Treas. Reg. § 301.6231(a)(6)-1(a)(3)). Penalties relating to adjustments to partnership items are exempt from deficiency procedures. § 6230(a)(2)(A)(i); Moxon Corp., 165 T.C. at 25–26.
“The extent to which [petitioners are] at risk for [their]
investment is an example of a factual affected item.” See Bedrosian, 144 T.C. at 159 (citing Hambrose Leasing 1984-5 Ltd. P’ship v. Commissioner, 99 T.C. 298, 310 (1992)); see also Roberts v. Commissioner, 94 T.C. 853, 861 (1990). The adjustments in the Form 886–A recharacterizing Ballengee Interests’ debt from recourse to nonrecourse are adjustments to factual affected items. Part II of Form 870–LT referred petitioners to the schedule of adjustments, the Form 870–LT Continuation Page, and Form 886–A. Both the Form 870–LT Continuation Page and Form 886–A describe the nature of the adjustments, and Form 886–A provides a thorough explanation of the proposed adjustments. Accordingly, petitioners were entitled to an Affected Items Notice of Deficiency. See § 6230(a)(2)(A)(i); Moxon Corp., 165 T.C. at 25. By contrast, for the penalties, which relate to the adjustments made to the partnership items in Part I of Form 870–LT, the Commissioner is not required to follow deficiency procedures but may proceed with direct assessment and collection. See § 6230(a)(2)(A)(i); Moxon Corp., 165 T.C. at 30.
For purposes of their CDP hearing, petitioners may challenge the underlying tax liabilities for the years at issue only if they did not receive a Notice of Deficiency for the factual affected items or did not otherwise have an opportunity to dispute the deficiencies. See § 6330(c)(2)(B). Likewise, petitioners could challenge the penalties only if they did not have a prior opportunity to do so. Diversified Grp. Inc. v. Commissioner, Nos. 17038-18L, et al., 166 T.C., slip op. at 11–12 (Feb. 23, 2026); see also McNeill v. Commissioner, 148 T.C. 481, 488–89 (2017) (holding that taxpayers may raise partner-level defenses to section 6662(a) penalties in a CDP case).
“The determinations of partnership items in partnership-level proceedings are binding on the partners and may not be challenged in subsequent partner-level proceedings.” See New Millennium Trading,
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[*12] L.L.C. v. Commissioner, 131 T.C. 275, 279 (2008). As a result, a “[t]ax liability stemming from an FPAA is not properly at issue in an individual’s CDP proceedings.” Davison v. Commissioner, 805 F. App’x at 261 (citing Hudspath v. Commissioner, T.C. Memo. 2005-83, 2005 WL 826677, at *10 (holding that a taxpayer could not use a CDP hearing to challenge a tax liability stemming from two FPAAs), aff’d, 177 F. App’x 326 (4th Cir. 2006)).
Likewise, section 6330(c)(2)(B) does not provide an opportunity to contest underlying tax liabilities when taxpayers sign a closing agreement waiving their right to receive a Notice of Deficiency or otherwise contest their tax liabilities before this Court. See Aguirre v. Commissioner, 117 T.C. 324, 327 (2001) (declining to permit taxpayers to contest underlying liability in CDP case when they signed a valid Form 4549). Section 7121(a) authorizes the Secretary to “enter into [a closing] agreement in writing with any person relating to the liability of such person . . . in respect of any internal revenue tax for any taxable period.” See also Smith v. Commissioner, 159 T.C. 33, 48 (2022). Section 7121(b) provides that a closing agreement “shall not be annulled, modified, set aside, or disregarded” “in any suit, action, or proceeding.” § 7121(b)(2). This treatment extends to the agreement itself and to “any determination, assessment, collection, payment, abatement, refund, or credit made in accordance” with the agreement. Id.
Section 7121(b) also provides that the finality accorded a closing agreement can be avoided only “upon a showing of fraud or malfeasance, or misrepresentation of a material fact.” A misrepresentation sufficient to set aside a closing agreement pursuant to section 7121(b) requires a showing that one party intentionally made incorrect or misleading representations regarding the express terms reflected in the proposed closing agreement and that such representations were relied upon by the other party to its detriment. See generally Smith, 159 T.C. at 70–71; see also Phoenix Ins. Co. v. Commissioner, 29 B.T.A. 291 (1933); Bennett v. Commissioner, T.C. Memo. 1988-557. Consequently, misrepresentation is more than just a “mere incorrect, erroneous, or mistaken statement.” Ingram v. Commissioner, 32 B.T.A. 1063, 1066 (1935), aff’d per curiam, 87 F.2d 915 (3d Cir. 1937).
Petitioners executed Form 870–LT, thereby waiving their right to contest the underlying liabilities, unless they can demonstrate misrepresentation of a material fact. Petitioners specifically contend that the Commissioner misrepresented a material fact because he failed to include Form 886–A with Form 870–LT, and they were unaware of
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[*13] the actual income tax adjustments made to Ballengee Interests’ tax liability. Petitioners did not allege fraud or malfeasance in this proceeding.
The Commissioner did not misrepresent a material fact when he incorporated by reference Form 886–A in Part II of Form 870–LT. Part II of Form 870–LT clearly states: “The accompanying Form 886–A . . . is hereby incorporated by references.” The Form 870–LT Continuation Page also references the incorporated Form 886–A, providing further notice of an additional document incorporated into Form 870–LT. Even without Mr. Ballengee’s experience and regular practice of reviewing legal documents, the two separate references to Form 886–A were sufficient to notify him of Form 886–A. Regardless of whether petitioners’ assertion that Form 886–A was not attached to Form 870–LT when they received and signed it is true, they have not shown that this was a deliberate or intentional attempt by the Commissioner to misrepresent any terms of the closing agreement. See Smith, 159 T.C. at 49. In addition, petitioners’ contention that there was a mutual mistake is insufficient to set aside the closing agreement because mutual mistake is not an enumerated ground for invalidating a closing agreement under section 7121(b). We determine that there is no misrepresentation of material fact and that petitioners executed a valid Form 870–LT waiver.
Because we cannot consider partnership-level adjustments during petitioners’ individual CDP proceedings, petitioners waived their right to receive an Affected Items Notice of Deficiency when they executed Part II of Form 870–LT, and petitioners chose to resolve any partnership-level adjustments, including penalties, by executing Part I of Form 870–LT, the underlying tax liabilities are not at issue. Accordingly, we determine that petitioners are precluded from challenging their underlying tax liabilities and are bound by the terms of Form 870–LT. Therefore, we review this case for abuse of discretion.
B. Abuse of Discretion
In deciding whether SO Figueroa abused her discretion, we consider whether she (1) properly verified that the requirements of applicable law or administrative procedure had been met; (2) considered 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 § 6330(c)(3); see also
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[*14] § 6320(c). Our review of the record establishes that SO Figueroa properly discharged all her required responsibilities.
1. Verification Requirement
Petitioners challenged whether SO Figueroa properly verified that the Commissioner satisfied all applicable laws and administrative procedures given that petitioners did not receive any Notices of Deficiency, a Notice of Final Partnership Administrative Adjustment, or other “opportunity for conference with the [Appeals Office] before assessment of the tax liabilit[ies] in this case.” Pet’r’s Op. Br. at 12. SO Figueroa and her manager properly concluded that Form 870–LT was binding on both petitioners. Thus, petitioners waived any such notice requirements. We determine that SO Figueroa satisfied the verification requirement.
2. Issue Raised by Petitioners
In their April 3, 2023, CDP Hearing Request in response to the Lien Notice, petitioners checked the box for lien withdrawal, the only collection alternative they raised. They did not provide specific grounds for lien withdrawal on the CDP Hearing Request or in their attached letter. Notwithstanding, petitioners contend that because they did not execute a valid waiver, SO Figueroa abused her discretion in declining to withdraw the NFTL. At trial, Mr. Ballengee testified that the lien has “killed [his] ability to acquire financing for [his] business,” including his ability to “refinance debt that [is] coming due.”
Section 6323(j) authorizes withdrawal if (1) “the filing of such notice was premature or otherwise not in accordance with administrative procedures,” (2) the taxpayer has entered into an installment agreement that renders the NFTL unnecessary, (3) withdrawal of the NFTL “will facilitate the collection of the tax liability,” or (4) withdrawal of the NFTL “would be in the best interests of the taxpayer (as determined by the National Taxpayer Advocate) and the United States.” § 6323(j)(1).
“To qualify [for lien withdrawal] the taxpayer must supply the settlement officer with evidence that the existence of the NFTL adversely affects his ability to pay the tax liabilities.” Kelly v. Commissioner, T.C. Memo. 2022-73, at *9 (citing Hughes v. Commissioner, T.C. Memo. 2011-294, 2011 WL 6440298, at *3). “[S]ection 6323(j)(1) is permissive, and nothing in [the statute] requires [the IRS] to withdraw the NFTL.” Gebman v. Commissioner, T.C. Memo.
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[*15] 2025-36, at *6–7 (quoting Berkery v. Commissioner, T.C. Memo. 2011-57, 2011 WL 820834, at *5); accord Treas. Reg. § 301.6323(j)-1(c) (“If the Commissioner determines conditions for withdrawal [of an NFTL] are present, the Commissioner may (but is not required to) authorize the withdrawal.”).
Other than arguments related to the validity of Form 870–LT, petitioners provided no factual or legal grounds during the CDP hearing to support lien withdrawal. Therefore, we conclude that SO Figueroa did not abuse her discretion in declining to withdraw the lien.
3. Balancing Obligations
Petitioners did not specifically allege in their Petition or at trial that SO Figueroa failed to consider “whether any proposed collection action balance[d] the need for the efficient collection of taxes with [their] legitimate concern . . . that any collection action be no more intrusive than necessary.” See §§ 6320(c), 6330(c)(3)(C). Petitioners have conceded this issue. See Rule 331(b)(4) (deeming conceded any issue not raised in the assignments of error); CreditGuard of Am., Inc. v. Commissioner, 149 T.C. 370, 379 (2017). We are satisfied that SO Figueroa properly considered the balancing obligations and did not abuse her discretion in sustaining the Levy Notice and the filing of the NFTL for the years at issue.
IV. Conclusion
Finding that petitioners are precluded from challenging their underlying tax liabilities and that SO Figueroa did not abuse her discretion, we sustain the Levy Notice and the filing of the NFTL for the years at issue.
Any contentions not addressed herein are irrelevant, meritless, or moot.
To reflect the foregoing,
An appropriate order and decision will be entered.