DAVIDSON v. COMMISSIONER

T.C. Memo. 2002-194

UNITED STATES TAX COURT

WILLIE R. DAVIDSON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 13540-01L. Filed August 7, 2002.

Willie R. Davidson, pro se.

Wendy S. Harris and Scott Hovey, for respondent.

MEMORANDUM OPINION

PANUTHOS, Chief 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

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 -

any material fact with respect to this lien and 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).
 - 3 -

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.

Background

A. Petitioner’s Form 1040 for 1997

On or about April 23, 1998, Willie R. Davidson (petitioner)

and his wife, Dawn F. Davidson, submitted to respondent a Form

1040, U.S. Individual Income Tax Return, for the taxable year

1997. On the Form 1040, the Davidsons listed their filing status

as “married filing joint return” and described their occupations

as “Tel Com. Employee”.

The Davidsons entered zeros on applicable lines of the

income portion of their Form 1040, specifically including line 7

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

adjusted gross income. The Davidsons also entered a zero on line

53 for total tax.

The Davidsons attached to their Form 1040 two Forms W-2,

Wage and Tax Statement, issued to them by Sprint/Central

Telephone-Nevada, and a Form 1099-R, Distributions from Pensions,

Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance

Contracts, etc., issued to petitioner by Northern Trust Co. The

Form W-2 issued to petitioner discloses that petitioner was paid

wages in the amount of $48,701.01 and that there was no
 - 4 -

withholding of Federal income tax. The Form 1099-R discloses

that petitioner received a gross distribution in the amount of

$20,806.69 from the Centel ESOP Plan.

The Davidsons also attached to their Form 1040 a 2-page

typewritten statement that stated, in part, as follows:

We are submitting this statement as part of our 1997
income tax return.

Even though we know that no section of the Internal Revenue
Code:

1. establishes an income tax “liability” * * * ;

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

In addition to the above, we are filing even though:

3. The “Privacy Act Notice” that the face of this
return directs us to, states that we need only file for
“any tax” we may be “liable” for, and since no Code
section makes us “liable” for income taxes, this Notice
notifies us that we do not have to file an income tax
return.

* * * * * * *

It should also be noted that we had “zero” income
according to the Supreme Court’s definition of income
* * * .

We would like the IRS to note that our 1997 tax return
does not constitute a “frivolous” return pursuant to
Code Section 6702.

* * * * * * *

In addition, do not notify us, that the IRS is
“changing” our return, since there is no statute that
allows the IRS to do so. You might prepare a return
(pursuant to Code Section 6020(b), where no return is
filed, but where, as in this case, a return has been
 - 5 -

filed, no statute authorizes IRS personnel to “change”
that return.

* * * * * * *

NOTE: 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 December 3, 1999, respondent issued a joint notice of

deficiency to the Davidsons. In the notice, respondent

determined a deficiency in the amount of $32,278 in the

Davidsons’ Federal income tax for 1997 and an accuracy-related

penalty under section 6662(a) for negligence or disregard of

rules or regulations in the amount of $6,448.66. The deficiency

was based on respondent’s determination that the Davidsons failed

to report: (1) Wage income (as set forth in the Forms W-2

mentioned above), and (2) a distribution from an ESOP (as

reported to respondent by Northern Trust Co. on Form 1099-R).

By registered letter dated January 26, 2000, petitioner

wrote to the Director of respondent’s Service Center in Ogden,

Utah, acknowledging receipt of the notice of deficiency dated

December 3, 1999, but challenging the Director’s authority “to

send me the Notice in the first place.”2 Petitioner sent copies

of this letter by registered mail to Robert Rubin, Secretary of

2
Petitioner’s letter dated Jan. 26, 2000, stated in part:
“This letter is being submitted on my behalf only and exclusive
of my now ex-wife Dawn F. Davidson.”
 - 6 -

the Treasury, and Charles O. Rossotti, Commissioner of Internal

Revenue.

Petitioner knew that he had the right to contest

respondent’s deficiency determination by filing a petition for

redetermination with this Court.3 However, petitioner chose not

to do so. Accordingly, on May 8, 2000, respondent assessed the

determined deficiency and accuracy-related penalty, as well as

statutory interest. On that same day, respondent sent petitioner

a notice of balance due, informing petitioner that he had a

liability for 1997 and requesting that he pay it. Petitioner

failed to do so.

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

One year later, on May 8, 2001, 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 tax liability for 1997. On

May 15, 2001, respondent sent petitioner a Notice of Federal Tax

Lien Filing and Your Right to a Hearing Under IRC 6320 in respect

of his outstanding liability for 1997.

3
In this regard, petitioner’s letter dated Jan. 26, 2000,
stated in pertinent part:

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

On May 25, 2001, petitioner submitted to respondent a Form

12153, Request for a Collection Due Process Hearing.

Petitioner’s request stated that he was challenging the validity

of the assessments for 1997 on the grounds there is no statute

imposing tax liability upon him and he was not served with a

valid notice and demand for payment.

D. The Appeals Office Hearing

On October 9, 2001, Appeals Officers Tony Aguiar and Julie

Peterson (the Appeals officers) conducted an Appeals Office

hearing that petitioner attended. According to a purported

transcript of the hearing prepared by petitioner, the Appeals

officers provided petitioner with a Form 4340, Certificate of

Assessments, Payments, and Other Specified Matters, with regard

to petitioner’s taxable year 1997. A copy of the Form 4340,

dated September 6, 2001, is attached to respondent’s Motion for

Summary Judgment, which was served on petitioner. During the

hearing, petitioner declined to discuss collection alternatives.

Rather, petitioner stated that he wished to challenge his

underlying tax liability, and he requested that the Appeals

officers provide verification that all applicable laws and

administrative procedures were followed in the assessment and

collection process. During the hearing, the Appeals officers

warned petitioner that his arguments were frivolous, and they
 - 8 -

provided petitioner with a copy of the Court’s opinion in Pierson

v. Commissioner, 115 T.C. 576 (2000).

E. Respondent’s Notice of Determination

On October 31, 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

determined that it was appropriate for respondent to proceed with

the collection of petitioner’s outstanding tax liability for

1997.

F. Petitioner’s Petition

On December 3, 2001, petitioner filed with the Court a

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

notice of determination.4 The petition includes allegations

that: (1) The Appeals officers failed to obtain verification

from the Secretary that the requirements of any applicable law or

administrative procedure were met as required under section

6330(c)(1); (2) petitioner never received a notice and demand for

payment or valid notice of deficiency; and (3) petitioner was

denied the opportunity to raise “relevant issues”.

G. Respondent’s Motion for Summary Judgment

As indicated, respondent filed a Motion For Summary Judgment

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

4
At the time that the petition was filed, petitioner
resided in Las Vegas, Nevada.
 - 9 -

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 3, 1999, he cannot challenge the

existence or amount of his underlying tax liability for 1997 in

this proceeding. Respondent further contends that the Appeals

officers’ review of Form 4340 with regard to petitioner’s account

for 1997 satisfied the verification requirement imposed under

section 6330(c)(1) and demonstrates that petitioner was issued a

notice and demand for payment. 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.

Discussion

Section 6321 imposes a lien in favor of the United States on

all property and rights to property of a person when a demand for

the payment of the person’s liability for taxes has been made and

the person fails to pay those taxes. Such a lien arises when an

assessment is made. Sec. 6322. Section 6323(a) requires the

Secretary to file notice of Federal tax lien if such lien is to

be valid against any purchaser, holder of a security interest,
 - 10 -

mechanic’s lienor, or judgment lien creditor. Lindsay v.

Commissioner, T.C. Memo. 2001-285.

Section 6320 provides that the Secretary shall furnish the

person described in section 6321 with written notice of the

filing of a notice of lien under section 6323. The notice

required by section 6320 must be provided not more than 5

business days after the day of the filing of the notice of lien.

Sec. 6320(a)(2). Section 6320 further provides that the person

may request administrative review of the matter (in the form of

an Appeals Office hearing) within 30 days beginning on the day

after the 5-day period. Section 6320(c) provides that the

Appeals Office hearing generally shall be conducted consistent

with the procedures set forth in section 6330(c), (d), and (e).

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
 - 11 -

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.

A. Summary Judgment

Petitioner challenges the assessments made against him on

the ground that the notice of deficiency dated December 3, 1999,

is invalid. However, the record shows that petitioner received

the notice of deficiency and disregarded the opportunity to file
 - 12 -

a petition for redetermination with this Court. See sec.

6213(a). It follows that section 6330(c)(2)(B) generally 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, 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, 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

officers 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
 - 13 -

record shows that the Appeals officers obtained and reviewed a

transcript of account (Form 4340) 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. 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 Form 4340 on which the Appeals officers 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
 - 14 -

Form 4340. See Davis v. Commissioner, supra at 41; Mann v.

Commissioner, T.C. Memo. 2002-48. Accordingly, we hold that the

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

The Form 4340 that the Appeals officers relied on 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 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).
 - 15 -

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). Under the

circumstances, we conclude that respondent is entitled to

judgment as a matter of law sustaining the notice of

determination dated October 31, 2001.

B. Imposition of a Penalty Under Section 6673

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

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,

supra (imposing a penalty in the amount of $10,000); 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
 - 16 -

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. During the administrative

hearing, petitioner was provided with a copy of the Court’s

opinion in Pierson v. Commissioner, supra, and was warned that

his arguments were frivolous. In this regard, it is clear that

petitioner instituted and maintained 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 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 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 $4,000.

In order to give effect to the foregoing,

An appropriate order granting

respondent's motion and decision

for respondent will be entered.