SCHROEDER v. COMMISSIONER

T.C. Memo. 2002-190

UNITED STATES TAX COURT

JOHN W. SCHROEDER, JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 8820-01L. Filed August 5, 2002.

John W. Schroeder, Jr., pro se.

Rollin G. Thorley and Karen Baker, for respondent.

MEMORANDUM OPINION

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

on respondent’s Motion For Summary Judgment, filed pursuant to

Rule 121.1 Respondent contends that there is no dispute as to

any material fact with respect to this levy action and that

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

respondent’s determination to proceed with collection of

petitioner’s outstanding tax liabilities for 1992 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

summary judgment.
 - 3 -

Background

The record establishes and/or the parties do not dispute the

following.

A. Petitioner’s Failure To File

Petitioner has a history of failing to file Federal income

tax returns. Specifically, petitioner failed to file a Federal

income tax return for 1992.

B. Respondent’s Notice of Deficiency

On December 28, 1994, respondent issued a notice of

deficiency to petitioner. In the notice, respondent determined,

in pertinent part, a deficiency in petitioner’s Federal income

tax for 1992 in the amount of $15,402, an addition to tax under

section 6651(a)(1) for failure to timely file a tax return in the

amount of $4,544.60, and an addition to tax under section 6654(a)

for failure to pay estimated tax in the amount of $635.78.2 The

deficiency was based principally on respondent’s determination

that petitioner failed to report: (1) Wage income in the amount

of $16,936 (as reported to respondent on Form W-2 by Granite

Construction Co.); (2) nonemployee compensation in the amount of

$43,624; and (3) unemployment compensation in the amount of

$6,095 (as reported to respondent on Form 1099-G).

2
Although the notice of deficiency also sets forth
respondent’s determination of deficiencies in petitioner’s
Federal income taxes for 1990 and 1991, we are concerned in this
proceeding only with petitioner’s liability for 1992.
 - 4 -

Respondent’s records reflect that the notice of deficiency

was not returned undelivered to respondent by the Postal Service.

Petitioner has not denied that he received the notice of

deficiency.

C. Assessment of Petitioner’s Liability

Petitioner did not file a petition for redetermination with

the Court challenging the notice of deficiency. Accordingly, on

May 22, 1995, respondent assessed the determined deficiency and

additions to tax, as well as statutory interest. On that same

day, respondent sent petitioner a notice and demand for payment,

informing petitioner that he had a liability for 1992 and

requesting that he pay it. Petitioner failed to do so.

On October 9, 2000, respondent sent petitioner a second

collection notice for 1992. Once again, petitioner failed to pay

the amount owing.

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

On November 10, 2000, respondent sent petitioner a Final

Notice-–Notice of Intent to Levy and Notice of Your Right to a

Hearing (the Final Notice). The Final Notice was issued in

respect of petitioner’s outstanding liability for 1992.

On November 29, 2000, petitioner submitted to respondent a

Form 12153, Request for a Collection Due Process Hearing.

Petitioner’s request stated that the period of limitations had

expired with respect to the assessment of petitioner’s tax
 - 5 -

liability for 1992.

E. Respondent’s Efforts To Schedule a Hearing

On January 30, 2001, and May 1, 2001, Appeals Officer Joe

Gurnaby issued letters to petitioner requesting that he contact

the Appeals Office to arrange an administrative hearing at a

mutually convenient time. Petitioner did not contact the Appeals

Office with regard to either letter.

F. Respondent’s Notice of Determination

On June 4, 2001, Appeals Officer Gurnaby prepared an Appeals

Office transmittal memorandum. The memorandum stated that the

Appeals officer reviewed an Internal Revenue Service TXMODA

transcript of account dated December 21, 2000, and determined

that respondent had complied with all applicable legal

requirements with regard to the assessment of petitioner’s tax

liability for 1992.3 A copy of the transcript of account was

attached as an exhibit to the Declaration that accompanied

respondent’s Motion for Summary Judgment.

On June 8, 2001, respondent sent petitioner a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330. The notice stated that the Appeals Office had

3
A TXMODA transcript contains current account information
obtained from respondent’s master file. “TXMODA” is the command
code (CC) that is entered into respondent’s integrated data
retrieval system (IDRS) to obtain the transcript. IDRS is
essentially the interface between respondent’s employees and
respondent’s various computer systems.
 - 6 -

determined that it was appropriate for respondent to proceed with

the collection of petitioner’s outstanding tax liability for

1992.

G. Petitioner’s Petition

On July 12, 2001, petitioner filed with the Court a petition

for lien or levy action seeking review of respondent’s notice of

determination.4 The following allegations reflect the crux of

the petition:

For Americans, including the self-employed, the
only tax authorized under the sections referred to
above [sections 1, 6001, 6011, and 6012] is Form 2555,
titled “Foreign Earned Income,” not Form 1040, as
Americans have been led to believe.

The only code sections that establish liability
for the income tax or the withholding of it refer to
nonresident aliens, foreign corporations, and their
withholding agents, who are required to file a 1040
return (26 USC sections 7701, 1441, 1442, 1443, and
1461).

Internal revenue employees were instructed long
ago by the Treasury Secretary that Form 1040 was for
the above purpose; it was never intended by law to be
used for U.S. citizens who earn their income within the
50 states and whose income is not by law subject to the
income tax.

Wages of most citizens have never been intended by
law to be subject to the income tax.

* * * * * * *

Wages of most Americans are not, by law, subject
to the income tax. Although wages are income, they do
not meet the formal legal definition for inclusion as

4
At the time that the petition was filed, petitioner
resided in Citrus Heights, California.
 - 7 -

“Gross Income” from which the tax is calculated.

* * * * * * *

IRS revenue officers are authorized by law to
conduct only civil enforcement under Subtitle E
(pertaining to alcohol, tobacco and firearms taxes),
not under Subtitle A (income taxes.) * * *

The petition also includes allegations that petitioner never

received a notice and demand for payment and that petitioner was

confused by “the various amounts sought in numerous conflicting

notices”. Finally, petitioner attached to the petition several

exhibits, including a copy of the Appeals officer’s January 30,

2001, letter attempting to schedule an administrative hearing.

H. Respondent’s Motion For Summary Judgment

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 petitioner received

the notice of deficiency dated December 28, 1994, petitioner

cannot challenge the existence or amount of his underlying tax

liability for 1992 in this proceeding. Respondent further

contends that the Appeals officer’s review of the transcript of

account with regard to petitioner’s account for 1992 satisfied

the verification requirement imposed under section 6330(c)(1) and

demonstrates that petitioner was issued a notice and demand for

payment.
 - 8 -

Petitioner filed an Opposition to respondent’s motion. In

his Opposition, petitioner repeats many of the allegations made

in the petition. Thus, for example, the Opposition includes the

following allegations:

Petitioner disagrees with respondent’s decision because
I am not required to file a 1040 return and claim my
wages as gross taxable income as claimed by the
respondent. I have never had a filing requirement
therefore respondent has no authority to collect any
tax or require petitioner to file, or waste a bunch of
time communicating with them over nonsense. This is an
infringement on the petitioner’s freedom. * * *
Petitioner and the courts can assume the respondent had
no authority for sending the notices of proposed
assessment or the final notices, and demand for payment
to the petitioner. The respondent has no authority to
collect a tax from the petitioner because the
petitioner has No Filing Requirement! And the only
sections that authorize an income tax and the
respondent to send these notices are sections which
apply to non-resident aliens, foreign corporations and
their withholding agents who are required to file a
1040 under 26 USC sections 7701, 1441, 1442, 1443 and
1461!

In his Opposition, petitioner also alleges that he was not

offered an administrative hearing.

Pursuant to notice, respondent’s motion was called for

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

Counsel for respondent appeared at the hearing and presented

argument in support of the pending motion. In contrast, there

was no appearance by or on behalf of petitioner, nor did

petitioner file a statement pursuant to Rule 50(c), the

provisions of which were mentioned by the Court in its Order

calendaring respondent’s motion for hearing.
 - 9 -

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
 - 10 -

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.

A. Summary Judgment

Petitioner challenges the assessment made against him on the

ground that he is not subject to the Federal income tax. The

record implies that petitioner received the notice of deficiency

for 1992 and disregarded the opportunity to file a petition for

redetermination with this Court. See sec. 6213(a). Under such

circumstances, section 6330(c)(2)(B) would bar petitioner from

challenging the existence or amount of his underlying tax

liability in this collection review proceeding.

Even if petitioner is permitted to challenge the amount of

his underlying liability, petitioner’s arguments are frivolous

and groundless. See 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, 1417 (5th Cir. 1984). Suffice it to
 - 11 -

say that: Petitioner is a taxpayer subject to the Federal income

tax, see secs. 1, 7701(a)(1), (14); sec. 1.1-1(a)(1) and (b),

Income Tax Regs.; compensation for labor or services rendered

constitutes income subject to the Federal income tax, sec.

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

1981); gross income derived from business and unemployment

compensation is also subject to the Federal income tax, secs.

61(a)(2), 85(a); and in case of failure to file a return, tax may

be assessed at any time, see sec. 6501(c)(3). See also Madge v.

Commissioner, T.C. Memo. 2000-370 (rejecting as frivolous the

contention that only foreign income is subject to Federal income

tax), affd. 23 Fed. Appx. 604 (8th Cir. 2001); cf. Corcoran v.

Commissioner, T.C. Memo. 2002-18 (rejecting as frivolous the

contention that income earned by U.S. citizens from sources

within the United States is excluded from U.S. taxation under the

source rules of the Internal Revenue Code).

We likewise conclude that the Appeals officer obtained

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 a TXMODA transcript of

account with regard to petitioner’s taxable year 1992.

Federal tax assessments are formally recorded on a record of

assessment. Sec. 6203. “The summary record, through supporting
 - 12 -

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. 365, 371 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 TXMODA transcript of account on which the

Appeals officer relied contained all the information prescribed

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

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

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

Commissioner, supra.

Petitioner has 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

transcript of account. See Davis v. Commissioner, supra at 41;

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.
 - 13 -

117, 120-121 (2001).

Petitioner also contends that he never received a notice and

demand for payment for 1992. 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 transcript of account on which the Appeals officer

relied during the administrative process shows that respondent

sent petitioner a notice and demand for payment on the same date

that respondent made assessments against petitioner for the tax

and additions to tax determined in the notice of deficiency.

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).

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 June 8, 2001.
 - 14 -

B. Imposition of a Penalty 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. 365 (2002) (imposing a penalty in the amount of

$10,000); Perry v. Commissioner, T.C. Memo. 2002-165 (imposing a

penalty in the amount of $2,500); Crow v. Commissioner, T.C.

Memo. 2002-149 (imposing a penalty in the amount of $1,500);

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).

In the present case, respondent has not specifically

requested imposition of a penalty under section 6673(a)(1).
 - 15 -

However, in a collection review case, the Court may impose such a

penalty on its own motion. See Williams v. Commissioner, T.C.

Memo. 2002-111 (imposing sua sponte a penalty in the amount of

$1,000).

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 are frivolous and groundless. In 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.

Under the circumstances, we shall, on our own motion, impose

a penalty on petitioner pursuant to section 6673(a)(1) in the

amount of $1,000.

C. Conclusion

We have considered all of petitioner’s arguments that are

not discussed herein, and we find them to be without merit and/or

irrelevant.5

5
For example, petitioner’s allegation that he was not
offered an administrative hearing is belied by the Appeals
officer’s letters dated Jan. 30, 2001, and May 1, 2001, the first
of which was specifically referenced in the petition and a copy
attached as an exhibit. Moreover, petitioner’s allegation that
he was confused by “the various amounts sought” is explained, in
part, by the fact that petitioner’s liability changed with the
accrual of statutory interest (and the compounding thereof). See
(continued...)
 - 16 -

In order to give effect to the foregoing,

An order granting respondent's

motion and decision for respondent,

including a penalty on petitioner

under section 6673(a)(1), will be

entered.

5
(...continued)
secs. 6601(a), (e)(2), 6622. Further, petitioner’s allegation
regarding not receiving notice and demand is belied by the TXMODA
transcript of account, as well as the Nov. 10, 2000, final notice
(a copy of which was attached to petitioner’s Request for a
Collection Due Process Hearing), and the collection notice dated
Oct. 9, 2000 (see supra “C”). See, e.g., Hughes v. United
States, 953 F.2d 531, 536 (9th Cir. 1992); Weishan v.
Commissioner, T.C. Memo. 2002-88; see also Hansen v. United
States, 7 F.3d 137, 138 (9th Cir. 1993).