Court upholds levy after taxpayer fails to prove financial hardship
Frederick Whigham v. Commissioner. United States Tax Court. No. 24068-22No. 24077-22. 2026
To qualify for currently not collectible status, a taxpayer must give full financial records, such as details on rental income and property equity. If not, Appeals can move forward with a levy without overstepping its authority.
Holding
The Tax Court ruled in favor of the IRS and agreed with Appeals’ decision to let the IRS collect Frederick Whigham’s unpaid federal income taxes for 2011, 2014, 2015, and 2017 through a levy.
Why It Matters
This is a routine application of settled collection due process rules, not a new legal standard.
The decision reinforces that inability to pay requires proof, not general claims of financial distress.
Real estate equity can defeat a request for currently not collectible status, even when the taxpayer reports a limited monthly cash flow.
Appeals may close the record after giving the taxpayer a reasonable opportunity to provide documents.
Taxpayers who omit sources of income or bank accounts weaken hardship claims. The system, astonishingly, still expects numbers to match reality.
Key Facts
Frederick Whigham owed federal income tax liabilities for 2011, 2014, 2015, and 2017. The IRS prepared substitutes for returns for 2011, 2014, and 2015 after he failed to file his returns on time. A substitute for return is an IRS-prepared return used to assess tax when a taxpayer does not file.
The IRS issued a Notice CP90, Notice of Intent to Seize Your Assets and of Your Right to a Hearing, dated August 30, 2021. The notice showed a total balance due of $157,682.18 for the four tax years.
Whigham requested a collection due process hearing. His Form 12153 checked “I Cannot Pay Balance” and did not request a specific collection alternative. He stated that he had financial hardship, that his wife had suffered a brain aneurysm, that her Social Security income would be used for nursing home care, that his residence had been foreclosed, and that he lacked money to pay the IRS notice.
Appeals requested financial information, including Form 433-A, bank statements, documentation for income sources, rental income information, and tax returns for 2020 and 2021.
Whigham submitted Form 433-F instead of Form 433-A. He reported one bank account, four real properties with a combined reported value of $257,691, a monthly income of $1,991, and monthly expenses of $2,257. He reported liens on the properties but provided incomplete documentation.
His 2020 return reported $24,632 in rent received and $2,830 in net rental income from four properties. His 2021 return reported $87,223 in rent received and $8,669 in net rental income from the same properties.
During the CDP hearing, Whigham acknowledged that he received rental income from at least one property that he had not disclosed on Form 433-F. Appeals asked for verification of rental income and statements for all open bank accounts. Whigham did not timely provide the requested records.
Collection later reported that IRS records showed more than $61,000 of rental income in 2021, including $51,000 from the Missouri Housing Development Commission. The collection also calculated at least $197,023 in equity in two properties, excluding the other two.
Whigham later submitted Form 433-A showing $625 of monthly net rental income and a total monthly income of $2,725. He still had not provided bank statements for the account into which the rental income was deposited.
Appeals determined that Whigham could pay the liabilities through property equity and monthly payments. Appeals sustained the proposed levy.
Statutory or Regulatory Framework
Section 6330 gives taxpayers the right to a collection due process hearing before levy action proceeds. Appeals must verify legal and procedural compliance, consider relevant issues raised by the taxpayer, and balance efficient tax collection against the taxpayer’s interest in avoiding unnecessarily intrusive collection action.
Currently not collectible status may apply when a taxpayer cannot pay because income and assets are insufficient to cover tax liabilities while meeting reasonable basic living expenses. A taxpayer generally must provide complete financial information demonstrating a lack of income, a lack of equity in assets, and hardship.
When the taxpayer does not challenge the underlying liability during the CDP hearing, the Tax Court reviews the Appeals’ determination for abuse of discretion. Abuse of discretion means the decision was arbitrary, capricious, or lacked a sound factual or legal basis.
Arguments
Taxpayer argued:
He lacked the money to pay the tax liabilities.
His properties required substantial repairs before they could be habitable or sold.
H&R Block had prepared his prior returns.
Appeals should have treated him as unable to pay.
Government argued:
Appeals properly verified all legal and procedural requirements.
Whigham did not dispute the underlying liabilities during the CDP hearing.
Whigham failed to provide complete financial documentation.
His rental income and real estate equity showed an ability to pay.
Appeals did not abuse its discretion by sustaining the levy.
Court’s Reasoning
Whigham did not respond to the IRS motion for summary judgment, but the Court still reviewed the merits.
The Court treated the underlying liabilities as outside the case because Whigham did not properly raise them during the CDP hearing.
Appeals verified that required assessments, notices, and procedures were properly completed.
Whigham raised only one issue during the CDP hearing: inability to pay.
Appeals reasonably requested financial records, including income verification, bank statements, and property information.
Whigham did not provide complete records for rental income or all bank accounts, even after multiple requests.
Appeals reasonably relied on Collection’s rental income analysis because it matched information reported on Whigham’s own tax return.
Whigham’s own financial disclosures showed that he could cover basic living expenses, especially when rental income was included.
His reported real estate values and mortgage information showed substantial property equity. The Court calculated $225,478 of equity based on his own reporting and noted that Collection identified $197,023 of equity even without including two properties.
Whigham provided no evidence that he could not borrow against or sell the properties.
Appeals gave Whigham enough time to provide additional records. The settlement officer did not abuse discretion by refusing to reopen the issue after months of incomplete submissions.
Appeals properly balanced collection needs against intrusiveness because Whigham did not offer or agree to an alternative collection method.
Result
The Tax Court granted the IRS's motion for summary judgment and sustained the levy for Whigham’s 2011, 2014, 2015, and 2017 liabilities.
The Takeaway
This decision matters most for practitioners handling CDP cases where the taxpayer claims hardship but owns real estate or receives rental income. Appeals can reject the currently not collectible status when the taxpayer fails to document income and asset equity, and when the taxpayer is unable to access property value.
List of Citations
§6330: Governs collection due process hearings before levy action.
§6020(b): Authorizes the IRS to prepare substitutes for returns when taxpayers fail to file.
§6651(a)(1): Imposes additions to tax for failure to file.
§6651(a)(2): Imposes additions to tax for failure to pay.
§6654: Imposes additions to tax for failure to pay estimated tax.
Tax Court Rule 121: Governs summary judgment.
Goza v. Commissioner, 114 T.C. 176: Establishes abuse-of-discretion review when the underlying liability is not at issue.
Thompson v. Commissioner, 140 T.C. 173: Holds that a taxpayer must raise the underlying liability at the CDP hearing to place it before the Court.
Giamelli v. Commissioner, 129 T.C. 107: Bars issues not properly raised during the CDP hearing.
Murphy v. Commissioner, 125 T.C. 301: Defines abuse of discretion in CDP review.
Hoyle v. Commissioner, 131 T.C. 197: Requires the Court to review verification compliance.
Pough v. Commissioner, 135 T.C. 344: Allows Appeals to proceed when the taxpayer fails to submit requested records after an adequate time.
Orum v. Commissioner, 123 T.C. 1: Supports rejection of collection alternatives when the taxpayer fails to provide financial information.
Mackland v. Commissioner, T.C. Memo. 2025-69: Supports denial of relief where the taxpayer provides no evidence of inability to access real estate equity.
Margolis-Sellers v. Commissioner, T.C. Memo. 2019-165: Supports denial of currently not collectible status when the taxpayer can make some payment.
IRM 5.16.1.2.9: Describes the currently not collectible status based on hardship and inability to pay.
IRM 5.15.1.18: Addresses financial analysis concepts relevant to collection potential.