CROW v. COMMISSIONER

T.C. Memo. 2002-149

UNITED STATES TAX COURT

MALCOLM CROW, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 7275-01L. Filed June 12, 2002.

Malcolm Crow, pro se.

Wendy S. Harris and Karen Lynne Baker, for respondent.

MEMORANDUM OPINION

ARMEN, Special Trial Judge: This matter is before the Court

on respondent’s Motion For Summary Judgment And To Impose A

Penalty Under I.R.C. Section 6673, filed pursuant to Rule 121.1

Respondent contends that there is no dispute as to any material

1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
 - 2 -

fact with respect to this levy action and that respondent’s

determination to proceed with collection of petitioner’s

outstanding tax liability for 1997 should be sustained as a

matter of law.

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).

As explained in detail below, there is no genuine issue as

to any material fact, and a decision may be rendered as a matter

of law. Accordingly, we shall grant respondent’s motion for
 - 3 -

summary judgment.

Background

A. Petitioner’s Form 1040 for 1997

On or about April 29, 1998, Malcolm Crow (petitioner) and

his wife Carey Crow2 submitted to respondent a joint Form 1040,

U.S. Individual Income Tax Return, for the taxable year 1997. On

the Form 1040, petitioner listed his occupation as “estimator”.

Petitioner entered zeros on applicable lines of the income

portion of the Form 1040, specifically including line 7 for

wages, line 22 for total income, lines 32 and 33 for adjusted

gross income, and line 38 for taxable income. Petitioner also

entered zeros on line 39 for tax and on line 53 for total tax.

Petitioner then claimed a refund equal to the amount of Federal

income tax that had been withheld from wages.

Petitioner attached to the Form 1040 three Forms W-2, Wage

and Tax Statements, disclosing the payment of wages during the

taxable year in issue. The first Form W-2 was from Lynx

Construction of Henderson, Nevada; it disclosed the payment of

wages to petitioner in the amount of $27,666.30 and the

withholding of Federal income tax in the amount of $1,609. The

second Form W-2 was also from Lynx Construction of Henderson

Nevada; it disclosed the payment of wages to petitioner’s wife in

2
Carey Crow is not a party to the present proceeding,
having failed to file with the Court a petition for lien or levy
action. See infra “F”.
 - 4 -

the amount of $1,587.50 and the withholding of Federal income tax

in the amount of $19. The third Form W-2 was from Allied

Underground, Inc. of Las Vegas, Nevada; it disclosed the payment

of wages to petitioner in the amount of $5,600 and the

withholding of Federal income tax in the amount of $403.99.

Petitioner also attached to the Form 1040 a two-page

typewritten statement that stated, in part, as follows:

I, Malcolm Crow, am submitting this as part of my 1997
income tax return, even though I know that no section
of the Internal Revenue Code:

1) Establishes and [sic] income tax “liability”
* * * ;

2) Provides that income taxes “have to be paid on
the basis of a return” * * * .

3) In addition to the above, I am filing even though
the “Privacy Act Notice” as contained in 1040 booklet
clearly informs me that I am not required to file. It
does so in at least two places:

a) In one place, it states that I need only file a
return for “any tax” I may be “liable” for. Since
no Code Section makes me “liable” for income
taxes, this provision notifies me that I do not
have to file an income tax return.

* * * * * * *

6) Please note, that my 1997 return also constitutes a
claim for refund pursuant to Code Section 6402.

7) It should also be noted that I had “zero” income
ACCORDING TO THE SUPREME COURT’S DEFINITION OF INCOME
* * * .

8) With this statement, I am also putting the IRS on
notice that my 1997 tax return and claim for refund
does not constitute a “frivolous” return pursuant to
Code Section 6702. * * *
 - 5 -

* * * * * * *

10) In addition, don’t notify me that the IRS is
“changing” my return, since there is no statute that
allows the IRS to do that. You might prepare a return
(pursuant to Code Section 6020(b)), where no return is
filed, but as in this case, where a return has been
filed, no statute authorizes IRS personnel to “change”
such a return.

* * * * * * *

The word “income” is not defined in the Internal
Revenue Code. * * * But, as stated above, it can only
be a derivative of corporate activity. * * *

B. Respondent’s Deficiency Notice and Petitioner’s Response

On August 20, 1999, respondent issued a joint notice of

deficiency to petitioner and his wife for the taxable year 1997.

In the notice, respondent determined a deficiency in Federal

income tax in the amount of $4,031, an addition to tax under

section 6651(a)(1) for failure to timely file in the amount of

$72.40, and an accuracy-related penalty under section 6662(a) and

(b)(1) for negligence or disregard of rules or regulations in the

amount of $289.60.3 The deficiency in income tax was based on

respondent’s determination that petitioner and his wife failed to

report their wage income.

By letter dated September 29, 1999, petitioner wrote to the

Director of respondent’s Service Center in Ogden, Utah,

3
Insofar as their ultimate tax liability was concerned,
respondent gave petitioner and his wife credit for the amounts
withheld from their wages. However, we note that the
determination of a statutory deficiency does not take such
withheld amounts into account. See sec. 6211(b)(1).
 - 6 -

acknowledging receipt of the notice of deficiency dated August

20, 1999, but challenging the Director’s authority “to send me

the Notice in the first place.”

Petitioner knew that he had the right to contest

respondent’s deficiency determination by filing a petition for

redetermination with this Court.4 However, petitioner chose not

to do so. Accordingly, on February 7, 2000, respondent assessed

the determined deficiency, addition to tax, and accuracy-related

penalty, as well as statutory interest. On that same day,

respondent sent petitioner and his wife a notice of balance due,

informing them that they had a liability for 1997 and requesting

that they pay it. By letter dated March 4, 2000, petitioner

acknowledged receipt of this notice, but failed to pay the amount

owing.

On March 13, 2000, respondent sent petitioner and Carey Crow

a second notice of balance due for 1997. By letter dated March

17, 2000, petitioner acknowledged receipt of this second notice,

but failed to pay the amount owing.

4
In this regard, the first sentence of petitioner’s letter
dated Sept. 29, 1999, stated as follows:

According to your “Deficiency Notice” of 8-20-99
(attached), there is an alleged deficiency with respect
to my 1997 income tax of $4,031.00, and if I wanted to
“contest this deficiency before making payment,” I must
“file a petition with the United States Tax Court.”
 - 7 -

C. Respondent’s Final Notice and Petitioner’s Response

On August 10, 2000, respondent mailed to petitioner and his

wife a Final Notice--Notice of Intent to Levy and Notice of Your

Right to a Hearing in respect of their outstanding tax liability

for 1997.

On August 24, 2000, petitioner and his wife filed with

respondent Form 12153, Request for a Collection Due Process

Hearing. The request included, inter alia, a challenge to the

existence of the underlying tax liability for 1997, as well as

allegations that petitioner was never provided with a valid

notice of deficiency or notice and demand for payment and that

the Appeals officer had failed “to identify the statute that

makes me ‘liable to pay’ the taxes at issue”. Petitioner also

requested verification from the Secretary that all applicable

laws and administrative procedures were followed with regard to

the assessment and collection of the tax liability in question.

D. The Appeals Office Hearing

On April 11, 2001, petitioner attended an administrative

hearing in Las Vegas, Nevada conducted by Appeals Officer Lavada

Harmon (the Appeals officer). At the hearing, the Appeals

officer provided petitioner with a literal “plain English”

transcript of petitioner’s account for the taxable year 1997.

During the hearing, petitioner requested that the Appeals

officer identify the statutory provisions establishing
 - 8 -

petitioner’s liability for Federal income tax and provide

verification that all applicable laws and administrative

procedures were followed in the assessment and collection

process. Petitioner was informed that the literal transcript, as

well as the more technical IMF (individual master file)

transcript, were sufficient to satisfy the verification

requirement of section 6330(c)(1). The Appeals officer

terminated the hearing after petitioner declined to discuss

collection alternatives and instead persisted on attempting to

challenge the underlying tax liability.

E. Respondent’s Notice of Determination

On May 9, 2001, respondent’s Appeals Office issued to

petitioner and his wife a Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330 with regard

to their tax liability for 1997. In the notice, the Appeals

Office concluded that respondent’s determination to proceed with

collection by way of levy should be sustained.

F. Petitioner’s Petition and Motion To Dismiss

On June 7, 2001, petitioner filed with the Court a Petition

for Lien or Levy Action seeking review of respondent’s notice of

determination.5 The petition includes the following allegations:

(1) The Appeals officer failed to obtain verification from the

5
At the time that the petition was filed, petitioner
resided in Las Vegas, Nevada.
 - 9 -

Secretary that the requirements of any applicable law or

administrative procedure were met as required under section

6330(c)(1); (2) the Appeals officer failed to identify the

statutes making petitioner liable for Federal income tax; and (3)

petitioner was denied the opportunity to challenge (a) the

appropriateness of the collection action and (b) the existence or

amount of his underlying tax liability.

Concurrently with the filing of his petition, petitioner

filed a Motion to Dismiss for Lack of Jurisdiction in which he

asked the Court to “declare invalid the ‘Determination’ at issue,

since the appeals officer issued the ‘Determination’ without

having established due process as required by law.” Petitioner

attached to his motion a Memorandum of Law in which he repeated

many of the allegations in the petition. Petitioner also alleged

in the memorandum:

there is no Code Section that authorizes IRS employees
to attribute to petitioner more taxes than he reported
on his 1997 tax return. Since income taxes are based
on “self-assessment,” petitioner can only owe in taxes,
the amount reported on his 1997 tax return, which, in
this case, correctly reports “zero” * * * .

Petitioner attached to his petition and/or motion to dismiss

several documents, including (1) a copy of the aforementioned

literal transcript that had been furnished to him at the

administrative hearing on April 11, 2001, and (2) a copy of Davis

v. Commissioner, T.C. Memo. 2001-87. In Davis, this Court

sustained the Commissioner’s determination to proceed with
 - 10 -

collection and imposed a $4,000 penalty under section 6673(a)

against the taxpayer.

Petitioner’s motion to dismiss was called for hearing in Las

Vegas, Nevada. Petitioner and counsel for respondent appeared

and were heard. Thereafter, by Order dated December 20, 2001,

the Court denied petitioner’s motion. Notably, the last

paragraph of that order stated as follows:

Petitioner is admonished that the Court can, and
may, impose a penalty against him under section 6673 in
an amount up to $25,000, if the Court concludes that he
instituted and/or maintained this proceeding primarily
for purposes of delay or if the Court deems
petitioner’s position in this proceeding to be
frivolous and/or groundless. See Pierson v.
Commissioner, 115 T.C. 576, 581 (2000).

G. Respondent’s Motion for Summary Judgment

As stated, respondent filed a Motion For Summary Judgment

And To Impose A Penalty Under I.R.C. Section 6673. Respondent

contends that petitioner is barred under section 6330(c)(2)(B)

from challenging the existence or amount of his underlying tax

liability in this proceeding because petitioner received a notice

of deficiency for the tax in question. Respondent also contends

that the Appeals officer’s review of transcripts from

respondent’s computer systems, including the literal transcript

that was provided to petitioner during the Appeals Office hearing

on April 11, 2001, satisfied the verification requirement of
 - 11 -

section 6330(c)(1).6 Finally, respondent contends that

petitioner’s behavior warrants the imposition of a penalty under

section 6673.

Petitioner filed an Objection to respondent’s motion.

Thereafter, pursuant to notice, respondent’s motion was called

for hearing at the Court's motions session in Washington, D.C.

Although petitioner did not attend the hearing, he filed a

written statement pursuant to Rule 50(c).

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 on the person’s property. Section

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

collection by levy on the person's property, the Secretary is

obliged to provide the person with a final notice of intent to

6
Respondent attached as an exhibit to the Declaration that
accompanied his motion a third transcript, a TXMODA transcript
dated June 26, 2001, that contained essentially the same
information as the other two transcripts. See Kaeckell v.
Commissioner, T.C. Memo. 2002-114 n.2 (regarding TXMODA
transcripts.) All three transcripts were derived from current
account information in respondent’s master file. In general,
transcripts are obtained by entering various command codes (such
as TXMODA or MFTRA) into respondent’s integrated data retrieval
system (IDRS) to obtain the particular transcript. (IDRS is
essentially the interface between respondent’s employees and
respondent’s various computer systems.)
 - 12 -

levy, including notice of the administrative appeals available to

the person.

Section 6330 generally provides that the Commissioner cannot

proceed with collection by levy 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, with judicial review of the administrative

determination. See Davis v. Commissioner, 115 T.C. 35, 37

(2000); Goza v. Commissioner, 114 T.C. 176, 179 (2000).

Section 6330(c) prescribes the matters that 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 the Tax

Court or a Federal District Court, as may be appropriate.
 - 13 -

A. Summary Judgment

Petitioner challenges the assessment made against him on the

ground that the notice of deficiency dated August 20, 1999, is

invalid. However, the record shows that petitioner received the

notice of deficiency and disregarded the opportunity to file a

petition for redetermination with this Court. See sec. 6213(a).

It follows that section 6330(c)(2)(B) bars petitioner from

challenging the existence or amount of his underlying tax

liability in this collection review proceeding.

Even if petitioner were permitted to challenge the validity

of the notice of deficiency, petitioner’s argument that the

notice is invalid because respondent’s Service Center director is

not properly authorized to issue notices of deficiency is

frivolous and groundless. See Nestor v. Commissioner, 118 T.C.

162, 165 (2002); Goza v. Commissioner, supra. Further, as the

Court of Appeals for the Fifth Circuit has remarked: "We perceive

no need to refute these arguments with somber reasoning and

copious citation of precedent; to do so might suggest that these

arguments have some colorable merit." Crain v. Commissioner, 737

F.2d 1417 (5th Cir. 1984). Suffice it to say that petitioner is

a taxpayer subject to the Federal income tax, see secs. 1(a)(1),

7701(a)(1), (14), and that compensation for labor or services

rendered constitutes income subject to the Federal income tax,
 - 14 -

sec. 61(a)(1); United States v. Romero, 640 F.2d 1014, 1016 (9th

Cir. 1981).

We likewise reject petitioner’s argument 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 by section 6330(c)(1). The record shows

that the Appeals officer obtained and reviewed transcripts of

account with regard to petitioner’s taxable year 1997.

Federal tax assessments are formally recorded on a record of

assessment. Sec. 6203. “The summary record, through supporting

records, shall 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

on a particular document to satisfy the verification requirement

imposed therein. Roberts v. Commissioner, 118 T.C. n.10

(2002); Weishan v. Commissioner, T.C. Memo. 2002-88; Lindsey v.

Commissioner, T.C. Memo. 2002-87; Tolotti v. Commissioner, T.C.

Memo. 2002-86; Duffield v. Commissioner, T.C. Memo. 2002-53;

Kuglin v. Commissioner, T.C. Memo. 2002-51. In this regard, we

observe that the transcripts of account on which the Appeals

officer relied contained all the information prescribed in

section 301.6203-1, Proced. & Admin. Regs. See Weishan v.
 - 15 -

Commissioner, supra; Lindsey v. Commissioner, supra; Tolotti v.

Commissioner, supra; Duffield v. Commissioner, supra; Kuglin v.

Commissioner, supra.7

Petitioner has not alleged any irregularity in the

assessment procedure that would raise a question about the

validity of the assessment or the information contained in the

transcript. See Davis v. Commissioner, 115 T.C. 35, 41 (2000);

Mann v. Commissioner, T.C. Memo. 2002-48. 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).

Petitioner also contends that he never received a notice and

demand for payment of his tax liability for 1997. The

requirement that the Secretary issue a notice and demand for

payment is set forth in section 6303(a), which provides in

pertinent part:

SEC. 6303(a). General Rule.-–Where it is not
otherwise provided by this title, the Secretary shall,
as soon as practicable, and within 60 days, after the
making of an assessment of a tax pursuant to section

7
To the extent that petitioner may still be arguing that
the Appeals officer failed to provide him with a copy of the
verification, we note that sec. 6330(c)(1) does not require that
the Appeals officer provide the taxpayer with a copy of the
verification at the administrative hearing. Nestor v.
Commissioner, 118 T.C. 162, 166 (2002). In any event, the
Appeals officer provided petitioner with a literal transcript for
the taxable year 1997. Indeed, petitioner attached a copy of
this transcript as an exhibit to his petition and/or motion to
dismiss.
 - 16 -

6203, give notice to each person liable for the unpaid
tax, stating the amount and demanding payment thereof
* * *.

In particular, the IMF transcript on which the Appeals officer

relied during the administrative process shows that respondent

sent petitioner a notice of balance due on the same date that

respondent made assessments against petitioner for the tax,

addition to tax, and accuracy-related penalty determined in the

notice of deficiency. A notice of balance due constitutes a

notice and demand for payment within the meaning of section

6303(a). See, e.g., Hughes v. United States, 953 F.2d 531, 536

(9th Cir. 1992); Weishan v. Commissioner, supra; see also Hansen

v. United States, 7 F.3d 137, 138 (9th Cir. 1993). Indeed,

petitioner even attached a copy of the February 7, 2000, notice

and demand to his letter dated March 4, 2000, acknowledging

receipt of such document.

Petitioner has 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, we conclude that respondent

is entitled to judgment as a matter of law sustaining the notice

of determination dated May 9, 2001.

B. Imposition of a Penalty Under Section 6673

We turn now to that part of respondent’s motion that moves
 - 17 -

for the imposition of a penalty on petitioner under section 6673.

As relevant herein, 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 penalty in lien and levy cases, Pierson v.

Commissioner, 115 T.C. 576, 580-581 (2000), and has in fact

imposed a penalty in several such cases, Roberts v. Commissioner,

118 T.C. (2002) (imposing a penalty in the amount of

$10,000); Smeton v. Commissioner, T.C. Memo. 2002-140 (imposing a

penalty in the amount of $1,000); Newman v. Commissioner, T.C.

Memo. 2002-135 (imposing a penalty in the amount of $1,000);

Yacksyzn v. Commissioner, T.C. Memo. 2002-99 (imposing a penalty

in the amount of $1,000); Watson v. Commissioner, T.C. Memo.

2001-213 (imposing a penalty in the amount of $1,500); Davis v.

Commissioner, T.C. Memo. 2001-87 (imposing a penalty in the

amount of $4,000).

We are convinced that petitioner instituted the present

proceeding primarily for delay. In this regard, it is clear that

petitioner regards this proceeding as nothing but a vehicle to

protest the tax laws of this country and to espouse his own

misguided views, which we regard as frivolous and groundless. In
 - 18 -

short, having to deal with this matter wasted the Court's time,

as well as respondent's, and taxpayers with genuine controversies

may have been delayed.

Also relevant is the fact that petitioner is well aware of

the provisions of section 6673. After all, petitioner attached

to his petition and/or motion to dismiss a copy of Davis v.

Commissioner, T.C. Memo. 2001-87, in which this Court sustained

the Commissioner’s determination to proceed with collection and

imposed a $4,000 penalty under section 6673(a) against the

taxpayer. Moreover, in its Order dated December 20, 2001,

denying his motion to dismiss, the Court expressly warned

petitioner about the possibility of imposing a penalty under

section 6673.

Under the circumstances, we shall grant that part of

respondent’s motion that moves for the imposition of a penalty in

that we shall impose a penalty on petitioner pursuant to section

6673(a)(1) in the amount of $1,500.

In order to give effect to the foregoing,

An appropriate order granting

respondent's motion and decision

for respondent will be entered.