HACK v. COMMISSIONER

T.C. Memo. 2002-243

UNITED STATES TAX COURT

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

Docket No. 6846-01L. 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 1997 Federal income tax

liability (including an accuracy-related penalty and interest) of
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approximately $630.77.1 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, 1998, petitioners filed a joint 1997 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 $13,681.74 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 1997.”

Petitioners included with their return three 1997 Forms W-2,

Wage and Tax Statement. The first Form W-2 was from TEXMO Oil

1
We use the term “approximately” because this amount was
computed before the present proceeding and has since increased on
account of interest.
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Company Jobbers Inc. and reported that it had paid to Clyde Hack

$432 in wages and withheld from those wages Federal income tax of

$2.89. The second Form W-2 was from Systems & Computer Tech and

reported that it had paid to Carole Hack $35,438.46 in wages and

withheld from those wages Federal income tax of $6,374.45. The

third Form W-2 was from Pilot Corporation and reported that it

had paid to Clyde Hack $39,731.09 in wages and withheld from

those wages Federal income tax of $7,304.20.

On July 16, 1999, respondent issued a notice of deficiency

to petitioners. The notice determined that petitioners were

liable for a $15,404.30 deficiency in their 1997 income tax and a

$79.31 accuracy-related penalty under section 6662(a).

Petitioners did not petition the Court with respect to the

notice. Instead, on September 23, 1999, petitioners sent to

respondent a letter entitled “Your Deficiency Notice dated July

16, 1999.” 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 February 28,

2000, respondent assessed petitioners’ tax liability for 1997 as

per the notice of deficiency.

On August 3, 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
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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 August 5, 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’ for

the income tax at issue, along with Form 23C” and “The delegation

of authority from the Secretary authorizing such persons [IRS

employees] to impose a ‘frivolous’ penalty.” On January

10, 2001, respondent sent to petitioners a letter stating that

petitioners were precluded by section 6330(c)(2)(B) from raising

liability as an issue and that all other issues raised by

petitioners were without merit. Respondent enclosed with that

letter a transcript of petitioners’ account.

On January 30, 2001, Appeals Officer Wiley Davis held with

petitioners a hearing under section 6330. On May 8, 2001,

respondent issued to petitioners duplicate Notices of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 for 1997. These notices reflected the determination

of Appeals to sustain the proposed levy.
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On November 13, 2001, respondent sent to petitioners a Form

4340, Certificate of Assessments, Payments and Other Specified

Matters. The Form 4340 was dated October 18, 2001, and related

to 1997.

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
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discretion where the validity of the underlying liability is not

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 1997. 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) the underlying

tax liability was incorrect; (4) they never received a “valid”

notice of deficiency; (5) they never received a notice and demand

for payment; and (6) a frivolous return penalty under section

6702 was incorrect.

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
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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). 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 1997.”

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 transcript of account received by

petitioners before the Appeals Office hearing contained all this
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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 contained in the transcript 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 a transcript of their account, and

the Appeals officer reviewed the transcript at the hearing. The

use of computer-generated transcripts of account is a valid

verification that the requirements of any applicable law or

administrative procedure have been met. Roberts v. Commissioner,

118 T.C. 365 (2002); Mudd v. Commissioner, T.C. Memo. 2002-204;

Howard v. Commissioner, T.C. Memo. 2002-81; Mann v. Commissioner,

supra. We hold that the Appeals officer satisfied the
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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 further that their underlying tax

liability is incorrect. We dismiss this argument as raised

inappropriately. Given that petitioners received a notice of

deficiency for the subject year, they are not allowed to contest

either the validity or the amount of their tax liability. Sec.

6330(c)(2)(B) (individuals such as petitioners may only challenge

the existence and amount of an underlying tax liability if they

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 also Sego v. Commissioner, supra at 609; Goza

v. Commissioner, 114 T.C. 176 (2000).

Petitioners attempt to avoid the prohibition of section

6330(c)(2)(B) by arguing 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

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,
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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. These notices

satisfied requirements of section 6303(a) by informing

petitioners of the amount owed and by requesting payment. Hughes

v. United States, supra at 531.

Petitioners argue lastly that respondent assessed a section

6702 frivolous penalty for 1997. Petitioners are mistaken. The

only penalty assessed by respondent is an accuracy-related

penalty under section 6662(a).

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,
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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. 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.