HACK v. COMMISSIONER

T.C. Memo. 2002-244

UNITED STATES TAX COURT

CLYDE E. HACK AND CAROLE J. HACK, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 11322-01L. Filed September 25, 2002.

Clyde E. Hack and Carole J. Hack, pro sese.

Rachael J. Zepeda, for respondent.

MEMORANDUM OPINION

LARO, Judge: Petitioners, while residing in Mesa, Arizona,

petitioned the Court under section 6330(d) to review respondent’s

determination as to his proposed levy upon their property.

Respondent proposed the levy to collect a 1998 Federal income tax

liability (including an accuracy-related penalty and interest) of
 -2-

approximately $15,042.55.1 Currently, the case is before the

Court on respondent’s motion for summary judgment under Rule 121

and to impose a penalty under section 6673. Petitioners

responded to respondent’s motion by way of a general objection.

We shall grant respondent’s motion for summary judgment and

shall impose a $2,000 penalty against petitioners. Unless

otherwise noted, section references are to the applicable

versions of the Internal Revenue Code. Rule references are to

the Tax Court Rules of Practice and Procedure.

Background

On April 15, 1999, petitioners filed a joint 1998 Federal

income tax return in which they reported no wages, other income,

or tax liability. They entered zeros on every line of the

return, but for the lines related to “Federal income tax withheld

from Forms W-2 and 1099." Petitioners claimed on the return a

refund of $1,969.80 for withheld taxes. They attached to the

return a declaration stating in part that “this return is not

being filed voluntarily,” that petitioners “had ‘zero’ income

according to the Supreme Court’s definition of income”, and that

petitioners “can only swear to having ‘zero’ income in 1998.”

Petitioners included with their return two 1998 Forms W-2,

Wage and Tax Statement, and one 1998 Form 1099-R, Distributions

1
We use the term “approximately” because this amount was
computed before the present proceeding and has since increased on
account of interest.
 -3-

from Pensions, Annuities, Retirement or Profit Sharing Plans,

IRAs, Insurance Contracts, etc. The Form 1099-R was from

Fidelity Investments and reported that it had made a $5,292.66

taxable distribution to Carole Hack and withheld from that

distribution Federal income tax of $1,058.53. The first Form W-2

was from Systems & Computer Tech and reported that it had paid to

Carole Hack $28,488.81 in wages and withheld from those wages

Federal income tax of $764.14. The second Form W-2 was from

Pilot Corporation and reported that it had paid to Clyde Hack

$34,307.50 in wages and withheld from those wages Federal income

tax of $147.13.

On February 18, 2000, respondent issued a notice of

deficiency to petitioners. The notice determined that

petitioners were liable for a $10,599.20 deficiency in their 1998

income tax and a $2,119.84 accuracy-related penalty under section

6662(a). Petitioners did not petition the Court with respect to

the notice. Instead, on March 4, 2000, petitioners sent to

respondent a letter entitled “Your Deficiency Notice dated

February 18, 2000.” Petitioners stated in this letter that the

notice of deficiency was invalid because it was not sent by the

Secretary and lacked a proper delegation of authority to the

signatory; i.e., the director of the Ogden Service Center. On

July 31, 2000, respondent assessed petitioners’ tax liability for

1998 as per the notice of deficiency.
 -4-

On December 7, 2000, respondent mailed to petitioners a

“Final Notice - Notice of Intent to Levy and Notice of Your Right

to a Hearing” (final notice). The final notice informed

petitioners of (1) respondent’s intention to levy under section

6331 and (2) petitioners’ right under section 6330 to a hearing

with respondent’s Office of Appeals (Appeals). Enclosed with the

final notice was a copy of Form 12153, Request for a Collection

Due Process Hearing.

On December 11, 2000, petitioners sent to respondent the

Form 12153 requesting the referenced hearing. Petitioners

attached to the Form a request that the hearing officer have at

the hearing “the specific Code Section making me [petitioners]

‘liable to pay’ the taxes at issue,” “verification that the

requirements of any applicable law or administrative procedure

have been met,” and “Delegation Order from the Secretary

delegating to that person [director of the service center] the

authority to prepare such a verification.”

On June 28, 2001, Appeals Officer Wayne McClellan held with

petitioners a hearing under section 6330. At the hearing, the

Appeals officer provided petitioners with a Form 4340,

Certificate of Assessments, Payments and Other Specified Matters.

The Form 4340 was dated May 16, 2001, and was for 1998.

On August 16, 2001, respondent issued to petitioners

duplicate Notices of Determination Concerning Collection
 -5-

Action(s) Under Section 6320 and/or 6330 for 1998. These notices

reflected the determination of Appeals to sustain the proposed

levy.

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 may 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 must 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. Davis v. Commissioner, 115 T.C. 35, 37 (2000);

Goza v. Commissioner, 114 T.C. 176, 179 (2000). In the case of

such judicial review, the Court will review a taxpayer’s

liability under the de novo standard where the validity of the

underlying tax liability is at issue. The Court will review the

Commissioner’s administrative determination for abuse of

discretion where the validity of the underlying liability is not
 -6-

properly at issue. Sego v. Commissioner, 114 T.C. 604, 610

(2000).

Here, respondent notified petitioners that he was proposing

to levy upon their property in order to collect their Federal

income tax debt for 1998. Petitioners requested the hearing

referenced in section 6330, which was later held with Appeals.

Following the determination by Appeals that respondent’s proposed

levy was proper, petitioners sought relief in this Court.

Petitioners argue that the notices of determination were in error

because, they allege: (1) The assessment was not valid; (2) the

Appeals officer never received verification that the requirements

of applicable law and procedure had been met; (3) they never

received a “valid” notice of deficiency; and (4) they never

received a notice and demand for payment.

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
 -7-

(7th Cir. 1994). The moving party bears the burden of proving

that there is no genuine issue of material fact, and factual

inferences are drawn 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).

Petitioners have raised no genuine issue as to any material

fact. Accordingly, we conclude that this case is ripe for

summary judgment.

Petitioners argue that respondent failed to make a valid

assessment of their tax liability because he did not issue to

them a Form 23C, Summary Record of Assessment. They assert that

an assessment could not have been made on the basis of their tax

return because it “shows no income taxes due and owing” for 1998.

We disagree with this argument. Federal tax assessments are

formally recorded on a record of assessment. Sec. 6203. The

summary record must “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. The Form 4340 received by petitioners at

the Appeals Office hearing contained all this information.

Petitioners have not demonstrated in this proceeding any

irregularity in the assessment procedure that would raise a

question about the validity of the assessment or the information
 -8-

contained in the transcripts of account. See Mann v.

Commissioner, T.C. Memo. 2002-48. We hold that the assessment

made by respondent is valid. See Kuglin v. Commissioner, T.C.

Memo. 2002-51; see also Duffield v. Commissioner, T.C. Memo.

2002-53.

Petitioners next argue 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). We disagree. Section 6330(c)(1)

does not require the Commissioner to rely upon a particular

document (e.g., the summary record itself rather than transcripts

of account) to satisfy this verification requirement. Kuglin v.

Commissioner, supra; see also Weishan v. Commissioner, T.C. Memo.

2002-88. Petitioners received the Form 4340. The use of this

form is a valid verification that the requirements of any

applicable law or administrative procedure have been met. E.g.,

Roberts v. Commissioner, 118 T.C. 365 (2002). We hold that the

Appeals officer satisfied the verification requirement of section

6330(c)(1). Yacksyzn v. Commissioner, T.C. Memo. 2002-99; cf.

Nicklaus v. Commissioner, 117 T.C. 117, 120-121 (2001).

Petitioners argue that the notice of deficiency issued to

them was invalid because, they assert, it lacked a valid

signature. We consider this argument frivolous. The Secretary

or his delegate is authorized by statute to issue notices of

deficiency, secs. 6212(a), 7701(a)(11)(B) and (12)(A)(i), and it
 -9-

is well established that the director of an Internal Revenue

service center is an authorized delegate, e.g., Hughes v. United

States, 953 F.2d 531, 536 (9th Cir. 1992); Nestor v.

Commissioner, 118 T.C. 162 (2002); Weishan v. Commissioner,

supra. Moreover, petitioners had an opportunity to petition this

Court to dispute the liability reflected in the notice of

deficiency but chose not to do so.

Petitioners argue further that they did not receive notice

and demand for payment. We disagree. Petitioners received

numerous notices, including the final notice, and a Form 4340.

These notices and that form satisfied requirements of section

6303(a) by informing petitioners of the amount owed and by

requesting payment. Hughes v. United States, supra at 531;

Schaper v. Commissioner, T.C. Memo. 2002-203.

For the foregoing reasons, we sustain respondent’s

determination as to the proposed levy as a permissible exercise

of discretion. We now turn to the requested penalty under

section 6673.

Section 6673(a)(1) authorizes the 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. We have indicated our willingness to impose such

penalties in collection review cases. Roberts v. Commissioner,
 -10-

supra; Pierson v. Commissioner, 115 T.C. 576 (2000); Hoffman v.

Commissioner, T.C. Memo. 2000-198. Moreover, we have imposed

penalties when the underlying tax liability was not at issue and

the taxpayer raised frivolous and groundless arguments as to the

legality of the Federal tax laws. Yacksyzn v. Commissioner,

supra; Watson v. Commissioner, T.C. Memo. 2001-213; Davis v.

Commissioner, T.C. Memo. 2001-87. We do the same here.

Petitioners’ arguments in this Court are mainly groundless and

frivolous, and it appears to us that petitioners instituted and

maintained this proceeding primarily for delay.2 Pursuant to

section 6673, we require petitioners to pay to the United States

a penalty of $2,000.

We have considered all arguments made by the parties and

have found those arguments not discussed herein to be irrelevant

and/or without merit. To reflect the foregoing,

An appropriate order and

decision will be entered for

respondent.

2
At and after the Appeals Office hearing, petitioners were
made aware of our opinions in Pierson v. Commissioner, 115 T.C.
576 (2000), and Davis v. Commissioner, 115 T.C. 35 (2000). In
Pierson, taxpayers advancing frivolous and groundless claims and
instituting the underlying proceedings for the purposes of delay
were warned that the Court would impose penalties. This warning
went unheeded by petitioners.