T.C. Memo. 2002-159
UNITED STATES TAX COURT
LOUIS S. AND LAURA L. SCHNITZLER, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13244-01L. Filed June 24, 2002.
Louis S. and Laura L. Schnitzler, pro sese.
Laurence K. Williams and Thomas R. Mackinson, for
respondent.
MEMORANDUM OPINION
PANUTHOS, Chief Special Trial Judge: This matter is before
the Court on respondent’s motion for summary judgment, as
supplemented, filed pursuant to Rule 121.1 Respondent contends
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
(continued...)
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that there is no dispute as to any material fact with respect to
this levy action, and that respondent’s determination to proceed
with collection of petitioners’ outstanding tax liabilities for
1996 and 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
1
(...continued)
are to the Tax Court Rules of Practice and Procedure.
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of law. Accordingly, we shall grant respondent’s motion for
summary judgment, as supplemented.
Background
On May 9, 1997, and June 18, 1998, petitioners submitted to
respondent joint Forms 1040, U.S. Individual Income Tax Return,
for 1996 and 1997, respectively. Petitioners entered zeros on
every line of the income sections of the Forms 1040, specifically
including line 7 for wages and line 22 for total income.
On August 6, 1999, respondent issued a joint notice of
deficiency to petitioners determining a deficiency of $27,771 in
their Federal income tax for 1996 and an accuracy-related penalty
under section 6662(a) of $5,551.40. The deficiency was based on
respondent’s determination that petitioners failed to report
nonemployee compensation, interest income, and a distribution
from a retirement account as reported to respondent by third-
party payors on Forms 1099.
On August 6, 1999, respondent issued a joint notice of
deficiency to petitioners determining a deficiency of $30,147 in
their Federal income tax for 1997 and an accuracy-related penalty
under section 6662(a) of $6,028.60. The deficiency was based on
respondent’s determination that petitioners failed to report
nonemployee compensation, interest income, and a distribution
from a retirement account as reported to respondent by third-
party payors on Forms 1099.
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By letter dated October 5, 1999, petitioners wrote to the
Director of respondent’s Service Center in Ogden, Utah,
acknowledging that they received the notice of deficiency for
1996, but challenging the Director’s authority to issue such
notices. On October 20, 1999, petitioners wrote a similar letter
to the Director with regard to the notice of deficiency for 1997.
Petitioners knew that they had the right to contest
respondent’s deficiency determinations by filing a petition for
redetermination with this Court. However, petitioners chose not
to do so.
On January 3, 2000, respondent entered assessments against
petitioners for the deficiency and accuracy-related penalty
determined in the notice of deficiency for 1997 described above.
Respondent also entered an assessment against petitioners for
statutory interest. On January 3, 2000, respondent issued to
petitioners a notice of balance due informing petitioners that
they owed tax for 1997 and requesting that they pay that amount.
Petitioners failed to pay the amount owing.
On February 7, 2000, respondent entered assessments against
petitioners for the deficiency and accuracy-related penalty
determined in the notice of deficiency for 1996 described above.
Respondent also entered an assessment against petitioners for
statutory interest. On February 7, 2000, respondent issued to
petitioners a notice of balance due informing petitioners that
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they owed tax for 1996 and requesting that they pay that amount.
Petitioners failed to pay the amount owing.
On October 1, 2000, respondent mailed to petitioners a Final
Notice-–Notice of Intent to Levy and Notice of Your Right to a
Hearing with regard to their tax liabilities for 1996 and 1997.
On October 10, 2000, petitioners filed with respondent a Form
12153, Request for a Collection Due Process Hearing.
Petitioners’ request included a challenge to the validity of the
assessments and assertions that respondent failed to serve
petitioners with valid notices and demand for payment or valid
notices of deficiency.
By letter dated May 17, 2001, Appeals Officer Joe Gurnaby
provided petitioners with transcripts of their accounts for 1996
and 1997 reflecting the assessments described above. On August
31, 2001, Appeals Officer Gurnaby conducted an Appeals Office
hearing in this matter that petitioner Laura Schnitzler attended.
On October 4, 2001, respondent issued petitioners a Notice
of Determination Concerning Collection Action(s) Under Section
6320 and/or 6330. The notice stated that the Appeals Office
determined that it was appropriate to proceed with the collection
of petitioners’ outstanding tax liabilities for 1996 and 1997.
On November 2, 2001, petitioners filed with the Court a joint
petition for lien or levy action seeking review of respondent’s
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notice of determination.2
As indicated, respondent filed a motion for summary judgment
asserting that there is no dispute as to a material fact and that
respondent is entitled to judgment as a matter of law. In
particular, respondent contends that, because petitioners
acknowledge that they received the notices of deficiency for 1996
and 1997, they cannot challenge the existence or amounts of their
underlying tax liabilities for those years in this proceeding.
Respondent further asserts that the Appeals officer’s review of
transcripts of account for 1996 and 1997 satisfied the
verification requirement imposed under section 6330(c)(1) and
demonstrates that petitioners were issued a notice and demand for
payment.
Petitioners filed an objection to respondent’s motion
repeating the various challenges first raised in their request
for an administrative hearing. Thereafter, pursuant to notice,
respondent’s motion was called for hearing at the Court’s motions
session in Washington, D.C.
Following the hearing, the Court directed respondent to file
a supplement to his motion for summary judgment providing the
Court with Forms 4340, Certificate of Assessments, Payments, and
Other Specified Matters, with regard to petitioners’ accounts for
1996 and 1997. Respondent complied with the Court’s order.
2
At the time that the petition was filed, petitioners
resided in Willits, California.
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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
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
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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.
Petitioners challenge the assessments entered against them
on the ground that the notices of deficiency for 1996 and 1997
are invalid. However, the record shows that petitioners received
the notices of deficiency and disregarded the opportunity to file
a petition for redetermination with the Court. It follows that
section 6330(c)(2)(B) bars petitioners from challenging the
existence or amount of their underlying tax liabilities for 1996
and 1997 in this collection review proceeding.
Even if petitioners were permitted to challenge the validity
of the notices of deficiency, petitioners’ argument that the
notices are 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 (2002); Smeton v. Commissioner, T.C. Memo. 2002-140; Coleman
v. Commissioner, T.C. Memo. 2002-132. 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
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of precedent; to do so might suggest that these arguments have
some colorable merit.” Crain v. Commissioner, 737 F.2d 1417,
1417 (5th Cir. 1984).
We likewise reject petitioners’ 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 petitioners’ taxable years 1996 and 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. 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
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Weishan v. Commissioner, supra; Lindsey v. Commissioner, supra;
Tolotti v.Commissioner, supra; Duffield v. Commissioner, supra;
Kuglin v. Commissioner, supra.
Petitioners also contend that they never received a notice
and demand for payment for 1996 or 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
6203, give notice to each person liable for the unpaid
tax, stating the amount and demanding payment thereof.
* * *
The Forms 4340 that respondent provided to the Court show that
notices of balance due were issued to petitioners on the same
dates that respondent entered assessments against petitioners for
the taxes and accuracy-related penalties set forth in the notices
of deficiency for 1996 and 1997. We hold that 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.
Petitioners have not alleged any irregularity in the
assessment procedure that would raise a question about the
validity of the assessments or the information contained in the
transcripts of account or Forms 4340. See Nestor v.
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Commissioner, supra at 167; 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).
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). Under the
circumstances, we conclude that respondent is entitled to
judgment as a matter of law sustaining the notice of
determination dated October 4, 2001.
As a final matter, we mention section 6673(a)(1), which
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 will not impose a penalty on petitioners pursuant to
section 6673(a)(1) in the present case, we admonish petitioners
that the Court will consider imposing such a penalty should they
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return to the Court in the future and advance frivolous or
groundless arguments.
To reflect the foregoing,
An order and decision will
be entered granting respondent’s
motion for summary judgment,
as supplemented.