HURFORD v. COMMISSIONER

T.C. Memo. 2002-94

UNITED STATES TAX COURT

ROBERT HURFORD AND CATHERINE SIMONE HALE, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 13278-01L. Filed April 8, 2002.

Robert Hurford and Catherine Simone Hale, pro sese.

Robin Ferguson, for respondent.

MEMORANDUM OPINION

PANUTHOS, Chief Special Trial Judge: This matter is before

the Court on: (1) Respondent’s oral motion to dismiss for lack

of jurisdiction and to strike all allegations in the second

amended petition pertaining to a Notice of Federal Tax Lien filed

October 8, 1998, pertaining to a frivolous return penalty imposed

against petitioners pursuant to section 6702; and (2) respondent’s
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motion to dismiss for failure to state a claim and to impose a

penalty under section 6673.1 Because respondent has presented

matters outside of the pleadings, we shall treat the motion to

dismiss as respondent’s motion for summary judgment pursuant to

Rule 121. See Rule 40.

Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials. Fla. Peach Corp. v.

Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be

granted with respect to all or any part of the legal issues in

controversy “if the pleadings, answers to interrogatories,

depositions, admissions, and any other acceptable materials,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that a decision may be

rendered as a matter of law.” Rule 121(a) and (b); Sundstrand

Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d

965 (7th Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754

(1988); Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The

moving party bears the burden of proving that there is no

genuine issue of material fact, and factual inferences will be

read in a manner most favorable to the party opposing summary

judgment. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985);

Jacklin v. Commissioner, 79 T.C. 340, 344 (1982).

1
Section references are to sections of the Internal
Revenue Code, as amended, and Rule references are to the Tax
Court Rules of Practice and Procedure.
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As explained in detail below, we shall grant respondent’s

oral motion to dismiss for lack of jurisdiction and to strike

and respondent’s motion for summary judgment. However, we shall

deny respondent’s request for the imposition of a penalty upon

petitioners pursuant to section 6673(a).

Background

On September 22, 1997, petitioners filed a joint Federal

income tax return for 1996 on which they reported $184,041.63 of

wage income, a tax liability of zero, and claimed a refund with

regard to $23,363.87 of withholding tax. On February 9, 1998,

respondent assessed a $500 frivolous return penalty against

petitioners pursuant to section 6702. On October 8, 1998,

respondent filed with the County Recorder in Fresno County,

California, a Notice of Federal Tax Lien listing the $500

penalty imposed under section 6702 as the amount due.

In the meantime, on May 19, 1998, respondent issued a

notice of deficiency to petitioners determining a deficiency of

$46,502 in their Federal income tax for 1996 and an addition to

tax under section 6651(a)(1) of $2,313.81. On May 27, 1998,

petitioners’ then attorney-in-fact, Thomas W. Roberts, wrote a

letter to respondent acknowledging that petitioners received the

notice of deficiency and challenging respondent’s authority to

enter an assessment against petitioners based on a so-called

substitute for return. Petitioners did not file a petition for
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redetermination with the Court contesting the notice of

deficiency.

On July 23, 2000, respondent mailed to petitioners a Final

Notice of Intent to Levy and Notice of Your Right to a Hearing

that stated petitioners owed taxes and statutory additions for

1996 totaling $37,614.14 and that respondent was preparing to

collect the amount due by levy. On August 16, 2000, petitioners

filed with respondent a Request for a Collection Due Process

Hearing that included a request that respondent provide

petitioners with a summary record of assessment, and

verification that all applicable laws and administrative

procedures were met with regard to the assessment and proposed

collection for 1996.

On July 10, 2001, Appeals Officer Eugene Chu conducted an

administrative hearing in petitioners’ case by way of a

telephone conference call with petitioner Robert Hale and his

representative, Brian Malatesta. Prior to the hearing, Appeals

Officer Chu provided petitioners with a Form 4340, Certificate

of Assessments, Payments, and Other Specified Matters, which

showed that, for 1996, respondent entered assessments against

petitioners for: (1) The amounts determined to be due in the

notice of deficiency dated May 19, 1998; and (2) statutory

interest. During the hearing, Mr. Malatesta challenged the

assessments entered against petitioners on the ground that a
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Form 4340 does not satisfy the verification requirement imposed

under section 6330(c)(1).

On October 5, 2001, the Appeals Office issued to

petitioners a Notice of Determination Concerning Collection

Action(s) Under Section 6320 and/or 6330 stating that respondent

would proceed with collection against petitioners for 1996.

Petitioners filed with the Court a Petition for Lien or Levy

Action Under Code Section 6320(c) or 6330(d) contesting

respondent’s notice of determination.2 Petitioners subsequently

filed an amended petition, and then a second amended petition

that included allegations pertaining to the lien notice filed

October 8, 1998, and the imposition of the frivolous return

penalty under section 6702. Petitioners’ primary contention

remains that the Appeals officer failed to obtain the

verification required under section 6330(c)(1).

Respondent filed a motion to dismiss for failure to state a

claim and to impose a penalty under section 6673. Petitioners

filed a response in opposition to respondent’s motion.

This matter was called for hearing at the Court’s motions

session held in Washington, D.C. Counsel for respondent

appeared at the hearing and presented argument in support of

respondent’s motion. No appearance was made by or on behalf of

2
At the time the petition was filed, petitioners resided
in Fairfield, Cal.
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petitioners at the hearing, nor did they file with the Court a

written statement pursuant to Rule 50(c). During the hearing,

respondent made an oral motion to dismiss for lack of

jurisdiction and to strike all allegations in the second amended

petition pertaining to the Notice of Federal Tax Lien filed

October 8, 1998, and the frivolous return penalty imposed under

section 6702.

Discussion

Section 6331(a) provides that, if any person liable to pay

any tax neglects or refuses to pay such tax within 10 days after

notice and demand for payment, the Secretary is authorized to

collect such tax by levy upon the person’s property. Section

6331(d) provides that, at least 30 days before enforcing

collection by way of a levy on the person’s property, the

Secretary is obliged to provide the person with a final notice

of intent to levy, including notice of the administrative

appeals available to the person.

Section 6330 generally provides that the Commissioner

cannot proceed with collection by way of a levy action until the

person has been given notice and the opportunity for an

administrative review of the matter (in the form of an Appeals

Office hearing), and if dissatisfied, the person has an

opportunity for judicial review of the administrative

determination. See Davis v. Commissioner, 115 T.C. 35, 37
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(2000); Goza v. Commissioner, 114 T.C. 176, 179 (2000). Section

6330 was enacted under the Internal Revenue Service

Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-

206, sec. 3401, 112 Stat. 685, 746, and is effective with

respect to collection actions initiated more than 180 days after

July 22, 1998, i.e., January 19, 1999. See RRA 1998 sec.

3401(d), 112 Stat. 750.

Section 6330(c) prescribes the matters a person may raise

at an Appeals Office hearing. In sum, section 6330(c) provides

that a person may raise collection issues such as spousal

defenses, the appropriateness of the Commissioner’s intended

collection action, and possible alternative means of collection.

Section 6330(c)(2)(B) provides that the existence and amount of

the underlying tax liability can be contested at an Appeals

Office hearing only if the person did not receive a notice of

deficiency for the taxes in question or did not otherwise have

an earlier opportunity to dispute the tax liability. See Sego

v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner,

supra. Section 6330(d) provides for judicial review of the

administrative determination in either the Tax Court or Federal

District Court.
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Respondent’s Oral Motion To Dismiss and To Strike

The Tax Court is a court of limited jurisdiction and we may

exercise our jurisdiction only to the extent authorized by

Congress. Sec. 7442; Judge v. Commissioner, 88 T.C. 1175, 1180-

1181 (1987); Naftel v. Commissioner, 85 T.C. 527, 529 (1985).

Respondent moves to dismiss for lack of jurisdiction and to

strike the allegations in the second amended petition pertaining

to the lien filed October 8, 1998, and the assessment and

collection of the frivolous return penalty imposed under section

6702. There is no dispute that the lien in question was filed

on October 8, 1998–-a date that precedes the effective date of

section 6330. It follows that the Court lacks jurisdiction to

review the lien action in this proceeding. Consequently, we

shall grant respondent’s oral motion to dismiss and to strike.

Respondent’s Motion for Summary Judgment

Petitioners contend that the Appeals officer failed to

obtain verification from the Secretary that the requirements of

all applicable laws and administrative procedures were met as

required under section 6330(c)(1). Respondent maintains that

there is no dispute as to a material fact on this point and that

respondent is entitled to judgment as a matter of law sustaining

the notice of determination dated October 5, 2001. We agree

with respondent.
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Federal tax assessments are formally recorded on a record

of assessment. Sec. 6203. The summary record of assessment,

through supporing records, must “provide identification of the

taxpayer, the character of the liability assessed, the taxable

period, if applicable, and the amount of the assessment.” Sec.

301.6203-1, Proced. & Admin. Regs.

Section 6330(c)(1) does not require the Commissioner to

rely upon a particular document to verify that the requirements

of any applicable law or administrative procedure have been met

in a collection matter. See Kuglin v. Commissioner, T.C. Memo.

2002-51. We have held that Forms 4340 are presumptive evidence

on which an Appeals officer may rely to verify that an

assessment was made against a person for purposes of sections

6320 and 6330. Davis v. Commissioner, 115 T.C. 35, 40-41

(2000); see Nestor v. Commissioner, 118 T.C. 162, 166-167

(2002).

The record shows that, prior to the Appeals Office hearing

in this matter, the Appeals officer reviewed Form 4340 with

regard to petitioners’ account for 1996, and provided

petitioners with a copy of the same. The Form 4340 is

presumptive evidence that all applicable laws and administrative

procedures were met as required under section 6330(c)(1).

Moreover, petitioners have not demonstrated any irregularity in

the assessment procedure that would raise a question about the
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validity of the assessments or the information contained in the

Form 4340. Davis v. Commissioner, supra at 41. Accordingly, we

hold that the Appeals officer satisfied the verification

requirement of section 6330(c)(1). Cf. Nicklaus v.

Commissioner, 117 T.C. 117, 120-121 (2001).

Petitioners have failed to raise a spousal defense, make a

valid challenge to the appropriateness of respondent’s intended

collection action, or offer alternative means of collection.

These issues are now deemed conceded. Rule 331(b)(4). In the

absence of a valid issue for review, and there being no dispute

as to a material fact, it follows that respondent is entitled to

judgment as a matter of law sustaining the notice of

determination dated October 5, 2001.

Respondent’s Request for the Imposition of a Penalty Under
Section 6673(a)

Section 6673(a)(1) authorizes the Tax Court to require a

taxpayer to pay to the United States a penalty not in excess of

$25,000 whenever it appears that proceedings have been

instituted or maintained by the taxpayer primarily for delay or

that the taxpayer’s position in such proceeding is frivolous or

groundless. The Court has indicated its willingness to impose

such penalties in collection review cases. Pierson v.

Commissioner, 115 T.C. 576 (2000). Although we shall not impose

a penalty upon petitioners pursuant to section 6673(a)(1), we

admonish petitioners that the Court will consider imposing such
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a penalty should they return to the Court and advance similar

arguments in the future.

To reflect the foregoing,

An order and decision will be

entered granting respondent’s oral

motion to dismiss for lack of

jurisdiction and to strike and

respondent’s motion for summary judgment

and denying respondent’s request for the

imposition of a penalty pursuant to

section 6673(a).