United States Tax Court
ESTATE OF ANTHONY K. WASHINGTON, DECEASED, LENDA WASHINGTON, PERSONAL REPRESENTATIVE, Petitioner v .
COMMISSIONER OF INTERNAL REVENUE, Respondent ————— Docket N o. 20410-19L . Filed February 2, 2022.
————— Charles A. Ray, Jr. , for petitioner.
Jacob Russin and Jeffrey E. Gold , for respondent.
MEMORANDUM OPINION
TORO , Judge : This is a collection due process (CDP) case. The estate of Anthony K. Washington, d eceased, Lenda Washington, p ersonal r epresentative (Estate), seeks review pursuant to section 6330(d)(1)1
of a determination by the Internal Revenue Service (IRS) Independent Office of Appeals (IRS Appeals), dated October 18, 2019, as supplemented on June 17, 2021. That determination, as supplemented, sustained a notice of intent to levy to collect Mr. Washington’s unpaid income tax liabilities for the taxable years 2008 to 2010, 2014, and 2015 (Relevant Tax Years) and rejected the Estate’s offers- in-compromise. The Commissioner of Internal Revenue has moved for summary judgment under Rule 121, contending that no [*2] material facts remain in dispute and that IRS Appeals’ determination was proper as a matter of law. We agree and will therefore grant the Commissioner’s motion.
Background
The following facts are based on the parties’ pleadings and motion papers, including the declarations and exhibits attached thereto. See Rule 121(b). The facts are stated solely for the purpose of ruling on the Commissioner’s motion and not as findings of fact in this case. See Whistleblower 769-16W v. Commissioner, 152 T.C. 172, 173 (2019). Ms. Washington resided in Washington, D.C., w hen the petition in this case was filed.2
I. Mr. and Ms. Washington’s Marriage and Divorce
The decedent, Mr. Washington, whose income tax liabilities for the Relevant Tax Years are the subject of this case, married Ms. Washington in 1981. The couple had one son. In 2006, Mr. and Ms. Washington were divorced.
A. The Divorce Decree
The divorce was finalized by the Superior Court of the District of Columbia, which issued its Findings of Fact, Conclusions of Law and Judgment of Absolute Divorce (Divorce Decree) on June 6, 2006.
[*3] Two provisions of the Divorce Decree are relevant to this case. The first is the Judgment entered by the court , and the second is a Finding of Fact with respect to a Marital Settlement Agreement (MSA) entered into by the parti es as of June 2, 2006.
The Judgment section of the Divorce Decree provided as follows: JUDGMENT WHEREFORE, it is by the Court, this 6th day of June, 2006, ORDERED, ADJUDGED AND DECREED, that the Plaintiff, Lenda P. Washington, be and hereby is, awarded an absolute divorce from the Defendant, Anthony Washington, on the ground that the parties have lived separate and apart, without cohabitation and without interruption, for at least one year next preceding the filing of the Complaint for Absolute D ivorce.
PROVIDED, HOWEVER, that pursuant to D.C. Code
Section 16-920 (Suppl., 2004) this Judgment shall become effective to dissolve the bonds of matrimony thirty (30)
days after the docketing of this Judgment unless either party applies for a Stay with th e Superior Court or the Court of Appeals of the District of Columbia, and FURTHER PROVIDED, that the Court reserves jurisdiction for the entry of the appropriate retirement order.
[ 3 ]
Paragraph 7 of the Findings of Fact of the Divorce Decree explained:
The parties entered into a comprehensive Marital
Settlement Agreement dated June 2, 2006 . . . , which resolved all issues between the parties. There are no issues remaining to be resolv ed by the Court, other than the granting of the divorce and entry of the Order with respect to Defendant’s retirement plan.
[*8] Compromise (COIC) unit. Following communications from the C OIC unit, the Estate provided additional documentation to assist in the evaluation of its offer-in-compromise. Ultimately, the COIC unit notified the Estate that it had reached a preliminary decision to reject the Estate’s $10,000 offer because it calculated the Estate’s reasonable collection potential as far exceeding its offer. The determination was largely based on the balance of Mr. Washington’s section 401(k) account at the time of his death (approximately $148,000) and the fact that the allowable ex penses determined by the COIC unit (that is, the expenses with priority over the federal tax liability) did not reduce the reasonable collection potential to the amount the Estate offered. The case was returned to Settlement Officer Macauley.
After furth er communication between the Estate’s counsel and Settlement Officer Macaulay, the Estate’s CDP case was transferred from Settlement Officer Macaulay to Settlement Officer Steven A. Lerner. On October 2, 2019, Settlement Officer Lerner held the Estate’s C DP hearing. The Estate offered arguments in support of its position but declined to increase its offer.
Shortly thereafter, Settlement Officer Lerner issued a n otice of d etermination sustaining the notice of intent to levy and the rejection of the Estate ’s offer. Settlement Officer Lerner noted that the Estate had not challenged either the amount or the existence of the underlying tax liability, and that the Estate’s counsel had proposed no collection alternatives except for the $10,000 offer. Like the COIC unit, Settlement Officer Lerner relied on the large balance of the section 401(k) account at the time of Mr. Washington’s death and the expenses he thought allowable, and found the Estate’s offer inadequate. IV. Tax Court Proceeding s and Remand to IRS Appeals On November 15, 2019, the Estate timely petitioned our Court for review of IRS Appeals’ determination. In its petition, the Estate alleged that the $10,000 offer was erroneously rejected because, in its view, the disbursements that IRS Appeals considered nonpriority expenses in fact had priority over the Estate’s unpaid federal tax liability. The Estate also cited “other reasons” that were not specified.
A. The Commissioner’s First Motion for Summary Judgment and the Estate’s Revised Offer-in - Compromise On November 19, 2020, the Commissioner moved for summary judgment. The Estate opposed the motion. In its opposition the Estate [*9] argued, among other things, that IRS Appeals had overstated the Estate’s reasonable collection potential by double- counting the balance of the section 401(k) account. Discussions between the parties ensued. On February 25, 2021, the Estate sent a letter to the Commissioner’s counsel referencing a conference call in which the parties had discussed remanding the case to IRS Appeals for further consideration if the Estate would provide additional information regarding its offer. Attached to that letter was, as the Estate put it, a “resubmi[ssion]” of the Estate’s offer, including revised F orms 433- A (OIC) and 656 and certain additional documentation.
The Estate’s revised Form 433- A (OIC) indicated that the Estate’s assets consisted of a Bank of America account with a value of $24,990. The Estate increased its offer-in-compromise amount fr om $10,000 to $23,990, reflecting the value of the bank account less $1,000. As in the initial Form 656, the Estate indicated the reason for the offer was “Doubt as to Collectibility —I do not have enough assets and income to pay the full amount.” But, unlike the initial form, the revised form also stated in the “Explanation of Circumstances” section : “Doubt as to Collectibility with Special Circumstances / Statement of Special Circumstances with Exhibits Follows This Page.”
Attached to the Estate’s Form 656 was a “Supplemental
Statement of Special Circumstances” that purported to show why the Estate’s $23,990 offer should be accepted. In general, the Supplemental Statement of Special Circumstances asserted that there were claims and expenses of $230,768 having priority over the Estate’s unpaid federal tax liability, including an “Unsatisfied Judgment debt” of $100,000 the Estate owed to Ms. Washington. The Supplemental Statement of Special Circumstances stated that because the amount of priority claims ( i.e., $230,768) exceeded the total assets of the Estate available for distribution (i.e., $203,802), the $23,990 offer was reasonable. To support the position set forth in the Supplemental Statement of Special Circumstances, the Estate provided an informa l accounting of its expenses, copies of the supplemental information originally provided to Settlement Officer Macaulay, a copy of the Divorce Decree, excerpts from the MSA, and other supporting materials.
B. Remand to IRS Appeals
The Commissioner’s couns el forwarded to IRS Appeals the
Estate’s revised Forms 433- A (OIC) and 656, including the
[*10] Supplemental Statement of Special Circumstances and other supporting documentation.
The Commissioner then moved the Court to remand the Estate’s case to IRS App eals for a supplemental administrative hearing for the purpose of reviewing the additional information and potentially negotiating an offer-in-compromise. The Court issued an order granting the Commissioner’s motion and remanding the case to IRS Appeals on March 18, 2021.
C. Supplemental Determination on Remand and the
Commissioner’s New Motion for Summary Judgment
On remand, the Estate’s case was assigned to Appeals Officer
Charles E. Duff. Appeals Officer Duff held a hearing with the Estate’s counsel o n March 31, 2021. After reviewing the supplemental materials forwarded to IRS Appeals, Appeals Officer Duff determined that the beginning value of the Estate was $212,267.6
He also determined that only a portion of the Estate’s expenses ($91,355) was va lid and senior to its unpaid f ederal tax liability.7
These two determinations resulted in a reasonable collection potential of $120,912. Appeals Officer Duff noted that he would not decrease the Estate’s reasonable collection potential by the value of the purported judgment debt and also declined to deduc t from the Estate’s reasonable collection potential several other smaller expenses that the Estate argued were senior to the unpaid tax liability. The Estate provided Appeals Officer Duff with additional documentation after the March 31 hearing, including informal estate [*11] accountings, bank statements, and other records. On April 29, 2021, the Estate’s counsel faxed to Appeals Officer Duff explanations of the Estate’s arguments regarding special circumstances warranting acceptance of the Estate’s offer-in-compromise . The special circumstances consisted of the purported $100,000 debt to Ms. Washington (which the Estate argued was supported by a judgment lien) and the Estate’s payment of a loan on an automobile that was transferred to Mr. and Ms. Washing ton’s son after Mr. Washington’s death. Appeals Officer Duff continued the hearing in a separate conference on May 10, in which he and counsel for the Estate discussed the arguments presented in the April 29 facsimile. Appeals Officer Duff determined tha t those arguments did not support finding “special circumstances” that would warrant acceptance of the Estate’s offer-in -compromise .
On June 17, 2021, Appeals Officer Duff issued a s upplemental n otice of d etermination rejecting the Estate’s $23,990 offer and sustaining the notice of intent to levy. In the supplemental notice, Appeals Officer Duff found that (1) the requirements of any applicable law or administrative procedure were met and that IRS records confirmed the proper issuance of the notice and demand, notice of intent to levy, and notice of a right to a CDP hearing; (2) an assessment was properly made for each tax and period listed on the CDP notice and that notice and demand for payment was mailed to the Estate’s last known address; (3) there wa s a balance due when the notice of intent to levy was issued; (4) Appeals Officer Duff had no prior involvement with respect to the Relevant Tax Years; and (5) the IRS followed all legal and procedural requirements, and the actions taken or proposed were a ppropriate under the circumstances.
Following the issuance of the supplemental notice, we denied the Commissioner’s first motion for summary judgment without prejudice to his right to renew the motion based on the supplemental notice. On September 9, 202 1, the Commissioner filed the motion for summary judgment now before us. The Estate filed a response opposing the motion (Opposition), and the Commissioner filed a reply. We held a remote hearing on the Commissioner’s motion on November 16, 2021, at whic h both parties appeared and were heard.
We turn now to discussing the merits of the Commissioner’s motion.
[*12] Discussion I. Summary Judgment 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). The Court 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. Rule 121(b); 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 judgment, we construe factual materials and inferences drawn from them in the light most favorable to the nonmoving party (here, the Estate). Sundstrand Corp. , 98 T.C. at 520.
The Estate argued in its Opposition that material facts remain in dispute in this case. At the hearing, however, both pa rties agreed that all remaining disputes are with respect to questions of law rather than questions of fact. Accordingly, the parties agree that we may properly resolve this case through summary adjudication.
II. CDP Issues
A. The CDP Process
Pursuant to section 6321, the Federal Government obtains a lien against “all property and rights to property, whether real or personal” of any person liable for f ederal tax upon demand for payment and failure to pay. See Iannone v. Commissioner, 122 T.C. 287, 293 (2004). The lien arises when tax is assessed. See I.R.C . § 6322.
The Code also authorizes the IRS to levy on (i.e., to seize) property or property rights of any person who is liable for any tax and has failed to pay that tax after proper notice and demand. I.R.C . §§ 6331, 7701(a)(11)(B), (12)(A)(i); see also Ramey v. Commissioner, 156 T.C. 1 , 2 – 3 (2021). Because the power to levy is a strong remedy for collecting unpaid tax, the Code, in section 6330, gives taxpayers the right to a hearing with IRS Appea ls (a CDP hearing). I.R.C . § 6330(b)(1); Ramey , 156 T.C. at 2 .
At the CDP hearing, IRS Appeals must verify that the requirements of any applicable law or administrative procedure have been met. I.R.C . § 6330(c)(1). Additionally, IRS Appeals generally must consider any issues raised by the taxpayer. I.R.C . § 6330(c)(3)(B). This [*13] includes offers of collection alternatives, such as offers- in -compromise . I.R.C . § 6330(c)(2)(A)(iii). Finally, IRS App eals must consider “whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the person [involved] that any collection action be no more intrusive than necessary.” I.R.C . § 6330(c)(3)(C). See generally Byers v. Commissioner, 740 F.3d 668, 672 (D.C. Cir. 2014), aff’g T.C. Memo. 2012-27; Moosally v. Commissioner , 142 T.C. 183, 187 (2014); Weber v. Commissioner, 138 T.C. 348, 354 (2012).
B. Offers-in - Compromise
In general terms, an offer-in-compromise is an agreement between the Government and a taxpayer to settle a tax liability for less than the full amount owed. See I.R.C. § 7122(a); Treas. Reg. § 301.71221(a); Internal Revenue Manual (IRM) 8.23.1.1.1(1) (Aug. 23, 2021).8 O ffer s-in-compromise are authorized by section 7122(a), which provides that the Secretary may compromise any civil or criminal case arising under the internal revenue laws. The decision whether to accept or reject an offer-in-compromise is left to the Secretary’s discretion. Fargo v. Commissioner , 447 F.3d 706, 712 (9th Cir. 2006), aff’g T.C. Memo. 2004- 13; see also Treas . Reg. § 301.7122-1(c)(1).
The Secretary may accept an offer-in-compromise on three grounds: (1) doubt as to liability, (2) doubt as to collectibility, and (3) the promotion of effective tax administration. See Treas. Reg. § 301.7122-1(b). Doubt as to liability is not at issue in this case. 1. Doubt as to Collectibility The Secretary may accept an offer- in-compromise on a “doubt as to c ollectibility” basis when the taxpayer’s assets and income render full collection unlikely. Id. subpara. (2). Conversely, the Secretary may reject an offer-in-compromise when the taxpayer’s reasonable collection potential exceeds the amount it proposed t o pay. See Johnson v.
[*14] Commissioner, 136 T.C. 475, 486 (2011), aff’d , 502 F. App’x 1 (D.C. Cir. 2013).
In general, any offer substantially below the taxpayer’s reasonable collection potential is rejected unless special circumstances justify acceptance of the offer. See Gu s tashaw v. Commissioner, T.C. Memo. 2018-215, at * 1 5 – 1 6; Mack v. Commissioner, T.C. Memo. 2018 -54, at *10; Rev. Proc. 2003-71, § 4.02(2), 2003- 2 C.B. 517, 517. Special circumstances include :
(1) circumstances demonstrating that the taxpayer would suffer economic hardship if the IRS were to collect from him an amount equal to the reasonable collection potential of the case or (2) if no demonstration of such suffering can be made, circumstances justifying acceptance of an amount less than the reasonable collection potential of the case based on public policy or equity considerations.
Murphy v. Commissioner, 125 T.C. 301, 309 (2005), aff’d , 469 F.3d 27 (1st Cir. 2006); see also IRM 5.8.4.2 (May 10, 2013). Compelling public policy or equity considerations exist when, because of 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); see also Murphy , 125 T.C. at 309; IRM 5.8.4.2(4).
2. Promotion of Effective Tax Administration
When a taxpayer’s reasonable collection potential exceeds the taxpayer’s liability — i.e., when the Secretary determines that the taxpayer is able to pay the liability in full —doubt as to collectibility is not a ground for compromise. But the Secretary may still enter into a compromis e on effective tax administration grounds if (1) collection of the full liability would cause the taxpayer economic hardship or (2) exceptional circumstances exist so that collection of the full liability would undermine public confidence that the tax laws are being administered in a fair and equitable manner. Treas. Reg. § 301.712 2 -1(b)(3)(i) and (ii ) . No compromise is permitted for effective tax administration reasons if compromise of the liability would undermine compliance by taxpayers with the tax la ws. Id. subdiv. (iii).
[*16] Because the underlying tax liability is not at issue in this case, we review Appeals Offic er Duff’s supplemental determination for abuse of discretion.9
III. Application of CDP Principles to the Estate’s Case
The Commissioner argues that Appeals Officer Duff was correct when he rejected the Estate’s offer s-in-compromise and sustained the notice of intent to levy. The Estate argues that Appeals Officer Duff’s determination was an abuse of discretion. For the reasons described below, we agree with the Commissioner. We address each of the Estate’s arguments in turn.
A. Failure to Satisfy V erification Requirements
The Estate first claims that Appeals Officer Duff abused his discretion by failing to satisfy the verification requirements of section 6330(c)(1). That provision states that “[t]he appeals officer shall at the hearing obtain veri fication from the Secretary that the requirements of any applicable law or administrative procedure have been met.” I . R.C. § 6330(c)(1).
The Estate argues that Appeals Officer Duff failed to satisfy this requirement because provisions of the IRM required that the Estate’s offers-in-compromise be forwarded to a specialized unit in Austin, Texas (Austin Office), for consideration.10
In the Estate’s view, Appeals Officer
Duff’s (and the other Appeals officers’) failure to forward the Estate’s offers to the Austin Office constituted an abuse of discretion. We disagree.
The IRM provisions the Estate cite s establish that the Austin Office considers only offers-in-compromise based on effective tax [*17] administration. See, e.g. , IRM 5.8.11.3.2(1) (Aug. 5, 2015), 5.8.11.5.1.11
Moreover, the Austin Office investigates only a specific subset of effective tax administration offers referred to as “non-economic hardship effective tax administration” offers. These are effective tax administration cases in which the taxpayer’s liabi lity could be collected in full without economic hardship, but the taxpayer can nonetheless demonstrate that a compelling public policy or equity issue provides a sufficient basis for compromise.12
See id. 5.8.11.3.2(1) and (2); see also id. 8.23.3.4.1(2) , Ex. 8 (noting that IRS Appeals should contact the Austin Office if “the taxpayer raises issues involving [Effective Tax Administration] P ublic P olicy”).
Neither of the Estate’s offers qualified for consideration as an offer-in-compromise based on effective tax administration. Such consideration is available only when the taxpayer is able to pay the balance in full. Murphy , 125 T.C. at 320 ( Treasury Regul ation § 301.7122-1(b)(3)(ii) “ makes the ability to make full payment a precondition to any offer in compromise based on effective tax administration.”); see also IRM 5.8.11.5(2) (Oct. 4, 2019) (“[U]nless [the taxpayer] ha[s] the ability to full[y] pay the liability, the offer would not meet the legal standard for [ effective t ax a dministration] consideration.”). Here, Appeals Officer Duff determined that the Estate could not pay the outstanding liability in full. And the Estate conceded as much at the hear ing. Accordingly, under the regulations and the IRM provisions on which the Estate relies, the Estate’s offer did not qualify for effective tax administration consideration and referral to the Austin Office would not have been appropriate.13
collection personnel, as the Commissioner contends. Moreover, in light of our conclusion, we need not address whether section 6330(c)(1) in fact requires an IRS Appeals officer to verify that the officer’s own actions at a CDP hearing (as opposed to actions undertaken by IRS personnel outside of IRS Appeals before the hearing) comply with the “requirements of any applicable law or administrative procedure.” But consider section 6330(c)(1) (requiring that an IRS Appeals officer obtain verif ication “from the Secretary,” not from IRS Appeals) and Treasury Regulation § 301.6330-1(e)(1) (“Prior to issuance of a determination, Appeals is required to obtain verification from the IRS office collecting the tax that the requirements of any applicable law or administrative procedure with respect to the proposed levy have been met . ” (emphasis added)) .
[*18] [*19] jurisdiction, (3) for the recovery of specifically designated property or a certain sum of money. See Treas . Reg. § 301.6323(h)-1(g).14 There is no dispute here that the Divorce Decree contains a valid Judgment and that the Superior Court of the District of Columbia is a court of record that had jurisdiction to enter the Judgment. But the parties dispute whether the Judgment provide s for Ms. Washington to recover specifically designated property or a certain sum of money. The Estate maintains that it does. We conclude that the Estate’s position lacks merit.
a. Text of t he Judgment To begin with, the Judgment states simply that Ms. Washington is awarded a divorce and that the superior court retains jurisdiction for the entry of an appropriate retirement order. The Judgment does not refer to any specific property or sum of money owed to Ms. Washington. Nor does it incorporate by reference any other document addressing such rights. In short, the Judgment on its face offers no support for the Estate’s argument that Ms. Washington is a judgment lien creditor. See Travelers Indem. Co. v. Bailey , 557 U.S. 137, 150 – 51 (2009) (stating that a court should enforce a court order “according to its unambiguous terms”).
Despite the Judgment’s silence with respect to any property rights or any mone tar y award for Ms. Washington, the Estate argues that the Judgment is ambiguous and that arrangements outside the four [*20] corners of a divorce judgment can sometimes be made part of the judgment through the doctrines of merger15 and incorporation.16
In particular, the Estate contends that Ms. Washington obtained a judgment lien for $100,000—the amount of life insurance proceeds to which, according to the Estate, Ms. Washington was entitled under the MSA —because the MSA was incorporated into the Divorce Decree. The Estate’s arguments raise significant threshold questions, including (1) whether the text of the Judgment is unambiguous and therefore forecloses reliance on documents outside the Judgment, and (2) if the text of the Judgment is ambiguous ( thereby permitting review of the record of the divorce proceedings and the MSA), whether the prerequisites for incorporation have in fact been satisfied. But we need not resolve these questions here, because even assuming they should be resolved in favor of the Estate, the Estate still would not prevail. b. Lack of Substantive Support for the Estate’s Position As already noted, Ms. Washington’s claim rests on section 5.1 of the MSA, addressing life insurance. That section states:
The parties’ son is currently named as the beneficiary of the Husband’s life insurance through his employment with a face amount of $100,000. The Husband agrees to irrevocably elect the Wife as the beneficiary of this coverage on his life for so long as he is employed, and f urther agrees not to borrow against or otherwise encumber such life insurance proceeds. The Husband [*22] First, the text of section 5.1 of the MSA makes plain that Ms. Washington’s opportunity to obtain $100,000 was entirely contingent, not a judgment for a certain sum of money collectible immediately. See, e.g. , Don King Prods . , Inc. v. Th omas, 945 F.2d 529, 534 (2d Cir. 1991) ( “ [ T ] he assignment of a right to receive income contingent upon the occurrence of a future event . . . does not convey a present interest to the assignee. ”); Carrillo v. Coors, 901 P.2d 214, 217 (N.M. Ct. App. 1995) ( surveying the applicable law and concluding that, absent a contrary statutory provision, “financial obligations in a divorce decree do not give rise to a judgment lien unless they are for a fixed sum which is collectible immediately”). For Ms. Washington to be entitled to recover under the policy, Mr. Washington would have had to die while employed by Radio One, his employer when he executed the MSA, and Radio One would have had to retain in force the insurance coverage from the date of the Divorce Decree to the date of Mr. Washington’s death. But the Divorce Decree left Mr. Washington free to stop working for Radio One or to stop working altogether. And, of course, the Divorce Decree could not prevent Radio One from discontinuing the life insurance arran gement. So, as of the date of the Judgment, Ms. Washington did not have, and could not seek execution based on, a judgment for a certain sum of money.17
Second , the Estate argues that if Mr. Washington lost his job, or if Radio One decided to terminate the life insurance coverage, the MSA would require Mr. Washington to obtain alternative coverage or otherwise act to replace the lost benefit to Ms. Washington. We question the Estate’s reading of the MSA. But, even if the Estate were correct in its reading, the argument goes to show that any rights Ms. Washington obtained under section 5.1 of the MSA represented at best a commitment by Mr. Washington to undertake one or more specific actions other than the payment of money.18
An obligation to take such actions is not a judgment for a sum of money.
[*23] Finally , the regulations specifically provide that “[i]n the case of a judgment for the recovery of a certain sum of money, a judgment lien creditor is a person who has perfected a lien under the judgmen t on the property involved.” Treas . Reg. § 301.6323(h)-1(g). In determining whether a lien is perfected, “we look first to the local law setting forth the lien procedure and its legal consequences.” Don King Prods. , Inc. , 945 F.2d at 533 (quoting Hartfo rd Provision Co. v. United States, 579 F.2d 7, 9 (2d Cir. 1978)); see also Johnson v. Commissioner, T.C. Memo. 1999- 284 , 1999 WL 667281, at *3 n.6 (noting that the regulations require a judgment lien creditor to comply with local law for creating and perfe cting a judgment). Under the law of the District of Columbia, for a money judgment to create a lien, the judgment or decree generally must be “filed and recorded in the office of the Recorder of Deeds of the District of Columbia.” See D.C. Code §§ 15- 101 (a), 15-102(a) (2021). The Estate offered no evidence either before IRS Appeals or in this Court that it recorded the Judgment as contemplated by D.C. law. Nor does the Estate argue that Ms. Washington perfected a lien by any other means, such as by foll owing the procedures described in D.C. Code § 15- 301 – 323. The Estate argues that no recording is required under the facts in this case. Opposition at 19. The Estate offers no authority for this proposition, and the only potentially relevant rule we have found —D.C. Code § 46- 204(b)19
—does not help the Estate, as the MSA makes no provision for the payment of alimony or maintenance.20 In short, based on the foregoing, even assuming the MSA should be viewed as incorporated into the Judgment, Appeals Officer Duff did Husband agrees that his notarized signature on page [13] of this Agreement constitutes his irrevocable designation.” Thus, Mr. Washington arguably fulfilled his obligation under the MSA simp ly by signing the MSA. From that point, any party, including Ms. Washington, could have presented the MSA to Radio One and requested the change. It is not clear to us why the Estate should be held responsible for the failure to change the beneficiary of the life insurance policy, nor why the United States should bear the financial burden of Ms. Washington’s failure to undertake a ministerial act on her own.19
D.C. Code § 46- 204(b) provides: “An award of alimony, child support, or maintenance is a money ju dgment that becomes absolute, vested, and upon which execution may be taken, when it becomes due.”20
We also note that D.C. Code § 15- 101(a) provides that a judgment or decree for the payment of money rendered in the Superior Court of the District of Colum bia ceases to have any operation or effect 12 years “from the date when an execution might first be issued thereon, or from the date of the last order of revival thereof.” The Divorce Decree at issue here was issued in 2006, and the record does not contai n any order of revival. See D.C. Code § 15- 103 (2021); see also Massey v. Massey , 210 A.3d 148, 151, 153– 54 ( D.C. 2019).
[*24] not err in refusing to treat Ms. Washington as a judgment lien creditor in his reasonable collection potential computa tion. 2. Inclusion of Proceeds from Section 401(k) Account in Reasonable Collection Potential The Estate also argues that a portion of the proceeds of Mr. Washington’s section 401(k) account should not be included in its reasonable collection potential because Ms. Washington, as personal representative, has the right to designate herself rather than the Estate as the account’s beneficiary.21
Accordingly, the Estate contends that it has no interest in that portion of the section 401(k) account proceeds u nless Ms. Washington acts to designate the Estate as beneficiary, and therefore that the United States’ tax lien cannot attach to the proceeds. In support, the Estate again argues that the terms of the MSA were incorporated in the Divorce Decree, “grant[i ng Ms. Washington] the right to designate a beneficiary of those plan proceeds when, as in this case, no beneficiary has been designated.” Opposition at 23 . And we once again disagree with the Estate’s interpretation of the MSA. The relevant section of the MSA is titled “Waiver of Pension and Retirement Rights” and provides as follows:
Except as otherwise set forth herein, each party hereby expressly waives any legal right he or she may have under any federal or state law as a spouse or former spouse, or person with an insurable interest, or otherwise, to participate as a “spouse” or “former spouse” or payee or alternate payee or beneficiary or otherwise under the other party’s . . . 401(k) . . . plan, . . . including, but not limited to, the right to receive any benefit whether in the form of a lump sum death benefit . . . .
The upshot is that, in signing the MSA, Ms. Washington disclaimed any right to Mr. Washington’s section 401(k) account, even if [*25] s he otherwise would have had rights to that account under federal or state law. To enforce this arrangement, the MSA goes on to provide: In an effort to comply with the intent of this article; (i) if a party is unable for any reason to change the beneficia ry or the death benefits of his or her . . . plan . . . , or, (ii) if a party files an election subsequent to the date of execution of this Agreement but such election is for any reason ineffective and the benefits are, in fact, paid to the surviving part y contrary to the intention of this paragraph, or, (iii) if a party fails to designate a beneficiary and the plan provides for payment to the “spouse” or “former spouse,” then in any of such events the surviving party shall . . . at the direction of and at the sole discretion of the decedent’s personal representative, either: (A) disclaim any entitlement to any benefits received or receivable; or (B) assign all rights to receive such benefits to the estate of the deceased party or the person designated by t he decedent or the decedent’s personal representative to receive such benefits; or (C) pay the next after-tax benefits over to the estate of the deceased party or to the person designated by the decedent or the decedent’s personal representative.
The text of the MSA shows that the personal representative’s authority to direct the assignment or payment of benefits is triggered by certain conditions. Namely, Mr. Washington must have failed to change his beneficiary successfully or to provide for a beneficia ry, with the result that Ms. Washington is paid benefits under the terms of the plan (contrary to the intent of the MSA). None of these conditions was triggered here. Mr. Washington’s section 401(k) plan did not make any payments to Ms. Washington as a f ormer spouse. Accordingly, the enforcement provisions of section 4.6(c) of the MSA remained dormant, and the personal representative simply had no occasion to exercise any rights under those provisions.
Moreover, as the Commissioner points out, the act ions of the plan and Ms. Washington herself belie any assertion that the MSA gave the personal representative a plenary right to change the beneficiary of Mr. Washington’s section 401(k) account after his death. The balance of Mr. Washington’s section 401 (k) account was always included as an asset of the Estate in reports Ms. Washington filed with the State of [*26] Maryland’s “orphan’s court.”22
And that balance was eventually deposited in the Estate’s bank account.
The Estate’s claim that the personal representative was entitled to change the beneficiary of the section 401(k) account after Mr. Washington’s death and before any distributions we re made (thus, defeating the United States’ lien on those proceeds) also flies in the face of the relevant regulations. Treasury Regulation § 1.401-1(b)(4) provides that a plan like the one in which Mr. Washington participated “is for the exclusive benefi t of employees or their beneficiaries.” The regulations go on to explain that “[t]he term ‘beneficiaries’ of an employee within the meaning of section 401 includes the estate of the employee, dependents of the employee, persons who are the natural objects of the employee’s bounty, and any persons designated by the employee to share in the benefits of the plan after the death of the employee.” Treas. Reg. § 1.401-1(b)(4) (emphasis added). A personal representative is not the employee, and if a plan were t o allow the personal representative to direct proceeds of the plan at will following the employee’s death, that plan would not comply with section 401. See id .
Based on the foregoing, we conclude that Appeals Officer Duff did not abuse his discretion in determining that the section 401(k) proceeds were properly includible in the Estate’s reasonable collection potential. 3. Other Alleged Reasonable Collection Potential Calculation Errors The Estate further contends that certain other expenses were erroneously excluded from the Estate’s reasonable collection potential and that Appeals Officer Duff “double-counted” items in calculating reasonable collection potential.23
But we have consistently held that errors in reasonable collection potential calculation s are harmless, even when considering offers-in-compromise made on a “doubt as to collectibility with special circumstances” basis, when the correct, or allegedly correct, reasonable collection potential is still greater than a [*27] taxpayer’s offer. See, e.g. , Gu s tashaw , T.C. Memo. 2018-215, at *23 – 24 & n.33 (citing Estate of Duncan v. Commissioner, T.C. Memo. 2016- 204, at *22 n.5, aff’d , 890 F.3d 192 (5th Cir. 2018)) ( finding that in evaluating the taxpayers’ revised offer-in-compromise submitted on a “doubt as to collectibility with special circumstances” basis, the settlement officer made errors in calculating the taxpayers’ reasonable collection potential; however, the error s w ere harmless because the taxpayers’ rea sonable collection potential, even when adjusted for the settlement officer’s errors, far exceeded the offer-in-compromise amount); see also Tucker v. Commissioner , 676 F.3d at 1136 – 37 (holding that this Court is not barred from upholding a settlement offi cer’s rejection of an offer-in-compromise even when the settlement officer made errors in calculating the taxpayer’s reasonable collection potential).24
Aside from the Estate’s arguments relating to the life insurance and section 401(k) account proceeds, which we have addressed above, none of the remaining errors alleged by the Estate is significant enough—either alone or combined with others —to reduce the Estate’s reasonable collection potential below the amount of its revised offer-in -compromise . Theref ore, even if the Estate’s assertions were correct, the mistakes would constitute harmless error and would not amount to an abuse of discretion. See Estate of Duncan , T.C. Memo. 2016-204, at *22 n.5 (“Determination of [ the taxpayer’s ] exact [ reasonable collection potential ] would be a meaningless exercise where (as here) the taxpayers admitted that their reasonable collection potential exceeded their offer . . . .”); see also Tucker v. Commissioner, 676 F.3d at 1137 (“If the agency’s mistake d id not affect the outcome, if it did not prejudice the petitioner, it would be senseless to vacate and remand for reconsideration.” ( quoting PDK Labs. Inc. v. DEA, 362 F.3d 786, 799 (D.C. Cir. 2004) ) ).
[*29] that were not presented to him. See Giamelli , 129 T.C. at 115; see also Boulware v. Commissioner, 816 F.3d 133, 136 (D.C. Cir. 2016), aff’g T.C. Memo. 2014-80.
Even assuming that these arguments were properly before IRS
Appeals, we would not find their rejection to be an abuse of discretion on the facts of this case. When boiled down to their essence, the Estate’s arguments amount to a plea (1) that Mr. and Ms. Washington’s son be permitted to retain $100,000 in life insurance proceeds paid to him under the policy maintained by Mr. Washington’s employer, (2) that Ms. Washington (who, under the MSA, was supposed to have received the life insurance proceeds) be permitted to recover instead $100,000 from a retiremen t account to which she had disclaimed all rights, and (3) that the United States be required to compromise its claim for tax due on the substantial income that Mr. Washington earned during the Relevant Tax Years. We do not see how effective tax administra tion could possibly support such a result. See Treas . Reg. § 301.712 2 -1(b)(3)(iii ) .
IV. Conclusion
For the reasons set out above, the Commissioner is entitled to judgment as a matter of law.
T o reflect the foregoing, An appropriate order and decision will be entered.