WILSON v. COMMISSIONER

T.C. Memo. 2002-242

UNITED STATES TAX COURT

WILLIAM WILSON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 14224-01L. Filed September 25, 2002.

William Wilson, pro se.

Alan J. Tomsic and Robin M. Ferguson, 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, as supplemented,

filed pursuant to Rule 121.1 Respondent contends that there is

1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
(continued...)
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no dispute as to any material fact with respect to this levy

action, and that respondent’s determination to proceed with

collection of petitioner’s outstanding tax liabilities for 1996

and 1998 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); see

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
(...continued)
are to the Tax Court Rules of Practice and Procedure.
 - 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, as supplemented.

Background

A. Petitioner’s Forms 1040 for 1996 and 1998

On or about March 27, 1997, William Wilson (petitioner)

submitted to respondent a Form 1040, U.S. Individual Income Tax

Return, for the taxable year 1996. On the Form 1040, petitioner

listed his filing status as “Married filing separate return” and

described his occupation as “Coach Operator”.

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, and line 31 for adjusted gross

income. Petitioner also entered a zero on line 51 for total tax

and claimed a refund in the amount of $1,426 reflecting Federal

income tax withholding.

On or about April 5, 1999, petitioner submitted to

respondent a Form 1040, U.S. Individual Income Tax Return, for

the taxable year 1998. On the Form 1040, petitioner listed his

filing status as “Married filing separate return” and described

his occupation as “Coach Operator”.

Petitioner entered zeros on applicable lines of the income

portion of the Form 1040, specifically including line 7 for
 - 4 -

wages, line 22 for total income, and line 33 for adjusted gross

income. Petitioner also entered a zero on line 56 for total tax

and claimed a refund in the amount of $198.93 reflecting Federal

income tax withholding.

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

On February 5, 1999, respondent issued a notice of

deficiency to petitioner. In the notice, respondent determined a

deficiency in the amount of $1,924 in petitioner’s Federal income

tax for 1996 and an accuracy-related penalty under section

6662(a) for negligence or disregard of rules or regulations in

the amount of $100. The deficiency was based on respondent’s

determination that petitioner failed to report wage income (as

reported to respondent by third-party payors on Forms W-2, Wage

and Tax Statement).

By letter dated April 3, 1999, petitioner wrote to the

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

acknowledging receipt of the notice of deficiency dated February

5, 1999, but challenging the Director’s authority to issue such

notices.

On March 24, 2000, respondent issued a notice of deficiency

to petitioner. In the notice, respondent determined a deficiency

in the amount of $2,441 in petitioner’s Federal income tax for

1998 and an accuracy-related penalty under section 6662(a) for

negligence or disregard of rules or regulations in the amount of
 - 5 -

$448.41. The deficiency was based on respondent’s determination

that petitioner failed to report wage income (as reported to

respondent by a third-party payor on Form W-2).

By letter dated May 29, 2000, petitioner wrote to the

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

acknowledging receipt of the notice of deficiency dated March 24,

2000, but challenging the Director’s authority to issue such

notices.

Petitioner knew that he had the right to contest

respondent’s deficiency determinations by filing a petition for

redetermination with this Court.2 However, petitioner chose not

to do so. Accordingly, on August 9, 1999, and August 14, 2000,

respondent assessed the determined deficiencies and accuracy-

related penalties, as well as statutory interest, for the taxable

years 1996 and 1998, respectively. On August 9, 1999, respondent

sent petitioner a notice of balance due, informing petitioner

that he had a liability for 1996 and requesting that he pay it.

Petitioner failed to do so. On August 14, 2000, respondent sent

petitioner a notice of balance due, informing petitioner that he

had a liability for 1998 and requesting that he pay it.

Petitioner failed to do so.

2
Petitioner acknowledged his right to file a petition with
this Court in his letters dated Apr. 3, 1999, and May 29, 2000.
 - 6 -

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

On March 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, issued in

respect of petitioner’s outstanding tax liabilities for 1996 and

1998, was signed by Scott Kilpatrick, identified as the Chief of

the Automated Collection Branch in Ogden, Utah. On March 16,

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 1996 and 1998 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 Forms 4340, Certificate of

Assessments, Payments, and Other Specified Matters, with regard

to petitioner’s accounts for the years 1996 and 1998. Copies of

the Forms 4340, dated September 4, 2001, are attached to the

petition that petitioner filed with the Court. During the

hearing, petitioner declined to discuss collection alternatives.
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Rather, petitioner stated that he wished to challenge his

underlying tax liabilities, and he requested that the Appeals

officers provide verification that all applicable laws and

administrative procedures were followed in the assessment and

collection process.

E. Respondent’s Notice of Determination

On December 6, 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 liabilities for

1996 and 1998.

F. Petitioner’s Petition

On December 26, 2001, petitioner filed with the Court a

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

notice of determination.3 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) the Final

3
At the time that the petition was filed, petitioner
resided in Las Vegas, Nevada.
 - 8 -

Notice-–Notice of Intent to Levy is invalid because it was not

signed by the Secretary.

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

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 notices

of deficiency dated February 5, 1999, and March 24, 2000, he

cannot challenge the existence or amount of his underlying tax

liabilities for 1996 and 1998 in this proceeding. Respondent

further contends that the Appeals officers’ review of Forms 4340

with regard to petitioner’s accounts for 1996 and 1998 satisfied

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

demonstrates that petitioner was issued a notice and demand for

payment for both of the years in question. 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.

After the hearing, respondent filed a supplement to his motion

for summary judgment addressing petitioner’s challenge to the

validity of the Final Notice-–Notice of Intent to Levy.
 - 9 -

Petitioner filed a reply to the supplement to motion for summary

judgment.

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
 - 10 -

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 notices of deficiency issued to him are

invalid. However, the record shows that petitioner received the

notices 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) generally bars petitioner

from challenging the existence or amount of his underlying tax

liabilities in this collection review proceeding.

Even if petitioner were permitted to challenge the validity

of the notices of deficiency, petitioner’s 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, 165 (2002); Goza v. Commissioner, supra. Further, as the
 - 11 -

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).

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

record shows that the Appeals officers obtained and reviewed

Forms 4340 with regard to petitioner’s accounts for taxable years

1996 and 1998.

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;
 - 12 -

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

observe that the Forms 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

Forms 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 valid

notice and demand for payment of the taxes in question. 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 the Appeals officers relied on during the
 - 13 -

administrative process show that respondent sent petitioner

notices of balance due on the same dates that respondent made

assessments against petitioner for the taxes and accuracy-related

penalties determined in the notices 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).

Petitioner also challenges the validity of the Final

Notice on the ground that it was not signed by the Secretary. As

previously mentioned, the Final Notice was signed by Scott

Kilpatrick, identified as the Chief of the Automated Collection

Branch Ogden, Utah.

Respondent contends that petitioner did not challenge the

validity of the Final Notice during the administrative process,

and the Court should not permit petitioner to argue the point

now. See Magana v. Commissioner, 118 T.C. 488 (2002). In the

alternative, respondent contends that the Chief of the Automated

Collection Branch was duly authorized to execute and issue the

Final Notice.

There is no indication in the record that petitioner

challenged the validity of the Final Notice during the

administrative process. However, even assuming arguendo that the
 - 14 -

issue was properly raised, the record shows that the Final Notice

is valid. The Secretary or his delegate (including the

Commissioner) may issue a final notice of intent to levy. Secs.

6330(a), 7701(a)(11)(B) and (12)(A)(i), 7803(a)(2). Section

301.6330-1(a)(1), Proced. and Admin. Regs., 67 Fed. Reg. 2551

(Jan. 18, 2002), provides in pertinent part:

(a) Notification–(1) In general. Except as
specified in paragraph (a)(2) of this section, the
Commissioner, or his or her delegate (the
Commissioner), will prescribe procedures to provide
persons upon whose property or rights to property the
IRS intends to levy * * * on or after January 19, 1999,
notice of that intention and to give them the right to,
and the opportunity for, a pre-levy Collection Due
Process (CDP) hearing with the Internal Revenue Service
(IRS) Office of Appeals (Appeals). * * *

The Commissioner’s authority to levy on property or rights to

property was delegated to Automated Collection Branch Chiefs

pursuant to Delegation Order No. 191 (Rev. 2), effective October

1, 1999. Internal Revenue Manual, sec. 1.2.104, 102 (Nov. 24,

1999). Consistent with this delegation of authority, the Final

Notice in this case, which was executed by Chief of the Automated

Collection Branch in Ogden, Utah, is valid.

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
 - 15 -

judgment as a matter of law sustaining the notice of

determination dated December 6, 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).

We shall deny that part of respondent’s motion that requests

the imposition of a penalty pursuant to section 6673(a)(1).

Nevertheless, we shall take this opportunity to admonish

petitioner that the Court will seriously consider imposing such a

penalty should he return to the Court and advance similar

arguments in the future.

In order to give effect to the foregoing,

An appropriate order granting

respondent’s motion in part and

denying respondent’s motion in

part and decision for respondent

will be entered.