T.C. Memo. 2002-263
UNITED STATES TAX COURT
DANNEY R. LAND, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 185-02L. Filed October 10, 2002.
Danney R. Land, pro se.
Alan T. Tomsic and Stuart Murray, for respondent.
MEMORANDUM OPINION
ARMEN, 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 no
1
Unless otherwise indicated, all section references are to
(continued...)
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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 liability for 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)
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
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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
The record establishes and/or the parties do not dispute the
following:
A. Petitioner’s Form 1040 for 1998
On or about April 15, 1999, Danney R. Land (petitioner), a
resident of Boulder City, Nevada, submitted to respondent a Form
1040, U.S. Individual Income Tax Return, for the taxable year
1998. On the Form 1040, petitioner listed his occupation as
“slot tech”.
Petitioner entered zeros on applicable lines of the income
portion of the Form 1040, specifically including line 7 for
wages, line 21 for other income, line 22 for total income, line
33 for adjusted gross income, and line 39 for taxable income.
Petitioner made no entry on line 40 for tax, but he did enter a
zero on line 56 for total tax. Petitioner then claimed a refund
in the amount of $1,450.43, which was equal to the amount of
Federal income tax that had been withheld from his wages.
Petitioner attached to his Form 1040 a Form W-2, Wage and
Tax Statement, disclosing the payment of wages to him during the
taxable year in issue. The Form W-2 was from Lakeview Co.,
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d.b.a. Gold Strike Inn & Casino, of Boulder City, Nevada; it
disclosed the payment of wages to petitioner in the amount of
$17,401.20 and the withholding of Federal income tax in the
amount of $1,450.43.
Petitioner also attached to his Form 1040 a two-page
typewritten statement that stated, in part, as follows:
I, Danney Land, am submitting this as part of my 1998
income tax return, even though I 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” * * * ;
3) In addition to the above, I am filing even though
the “Privacy Act Notice” as contained in a 1040 booklet
clearly informs me that I am not required to file. It
does so in at least two places.
a) In one place, it states that I need only file a
return for “any tax” I may be “liable” for. Since no
Code Section makes me “liable” for income taxes, this
provision notifies me that I do not have to file an
income tax return;
* * * * * * *
5) Please note, that my 1998 return also constitutes a
claim for refund pursuant to Code Section 6402.
6) It should also be noted that I had “zero” income
according to the Supreme Court’s definition of income
* * * .
7) I am also putting the IRS on notice that my 1998 tax
return and claim for refund does not constitute a
“frivolous” return pursuant to Code Section 6702. * * *
* * * * * * *
10) In addition, don’t notify me that the IRS is
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“changing” my return, since there is no statute that
allows the IRS to do that. You might prepare a return
(pursuant to Code Section 6020(b)) where no return is
filed, but as in this case, a return has been filed, no
statute authorizes IRS personnel to “change” that
return.
* * * * * * *
* * * 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 August 11, 2000, respondent (acting through Deborah
Decker, Director of the Service Center in Ogden, Utah) issued a
notice of deficiency to petitioner for the taxable year 1998. In
the notice, respondent determined a deficiency in petitioner’s
Federal income tax in the amount of $36,178 and an accuracy-
related penalty under section 6662(a) and (b)(1) for negligence
or disregard of rules or regulations in the amount of $6,945.51.2
The deficiency in income tax was based on respondent’s
determination that petitioner failed to report income in the
aggregate amount of $139,183, determined as follows:
Income Amount
Wages (Lakeview Co.) $17,401
Unemployment compensation 6,708
Capital gain 115,000
Interest income 74
139,183
2
Insofar as his ultimate tax liability was concerned,
respondent gave petitioner credit for the amount withheld from
his wages. However, we note that the determination of a
statutory deficiency does not take such withheld amounts into
account. See sec. 6211(b)(1).
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By registered letter dated November 1, 2000, petitioner
wrote to the director of respondent’s Service Center in Ogden,
Utah, acknowledging receipt of the notice of deficiency dated
August 11, 2000, but challenging respondent’s authority “to send
me the Notice in the first place.” Petitioner sent copies of his
letter by registered mail to Lawrence H. Summers, Secretary of
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 February 26, 2001, 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 him that he had a
liability for 1998 and requesting that he pay it. Petitioner
failed to pay the amount owing.
3
In this regard, petitioner’s letter dated Nov. 1, 2000,
stated as follows:
According to your “Deficiency Notice” of above date
(cover sheet attached), there is an alleged deficiency
with respect to my 1998 income tax * * *, and if I
wanted to “contest this deficiency before making
payment, I must “file a petition with the United States
Tax Court.”
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C. Respondent’s Final Notice and Petitioner’s Response
On April 19, 2001, respondent mailed to petitioner a Final
Notice--Notice of Intent to Levy and Notice of Your Right to a
Hearing in respect of his outstanding tax liability for 1998.
On or about May 13, 2001, petitioner filed with respondent
Form 12153, Request for a Collection Due Process Hearing. The
request, which was accompanied by a lengthy, typewritten
statement, included, inter alia, a challenge to the existence of
the underlying tax liability, as well as allegations that
petitioner was never provided with a valid notice of deficiency
or notice and demand for payment. Petitioner also alleged:
I claim there is no statute requiring me “to pay” the
income taxes at issue. No law authorizes the IRS to
claim that I owe more in income taxes than the “zero” I
reported on my 1998 income tax return.
In addition, petitioner requested verification from the Secretary
that all applicable laws and administrative procedures were
followed with regard to the assessment and collection of the tax
liability in question.
D. The Appeals Office Hearing
On October 4, 2001, petitioner attended an administrative
hearing in Las Vegas, Nevada, conducted by Appeals Officer Tony
Aguiar (the Appeals officer). Prior to the hearing, the Appeals
officer obtained and reviewed Form 4340, Certificate of
Assessments, Payments, and Other Specified Matters, pertaining to
petitioner’s account for 1998. At the hearing, the Appeals
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officer provided petitioner with a copy of that document.
During the hearing, petitioner requested that the Appeals
officer provide verification from the Secretary of the Treasury
that all applicable laws and administrative procedures had been
followed in the assessment and collection process. Petitioner
was informed that Form 4340 was sufficient to satisfy the
verification requirement of section 6330(c)(1). Petitioner also
alleged that he never received “the statutory notice and demand
for payment” and challenged the Appeals officer to
show me the law that requires me to pay the tax. You
show me the law that makes me liable for the tax in the
Internal Revenue Code [placing Internal Revenue Code in
front of Appeals officer] it’s right here in front of
you, on the table. You point to the Code, and I
brought my checkbook with me, I will write you a check
today.
The Appeals officer terminated the hearing after petitioner
declined to discuss collection alternatives.
E. Respondent’s Notice of Determination
On October 16, 2001, respondent’s Appeals Office issued to
petitioner a Notice of Determination Concerning Collection
Action(s) Under Section 6320 and/or 6330 with regard to his tax
liability for 1998. In the notice, the Appeals Office concluded
that respondent’s determination to proceed with collection by way
of levy should be sustained.
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F. Petitioner’s Petition
On January 2, 2002, 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 officer 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) the Appeals officer failed to identify the
statutes making petitioner liable for Federal income tax; (3)
petitioner never received a “valid” notice of deficiency; i.e.,
“one signed by the Secretary or someone with delegated authority
from him”; (4) petitioner never received “the statutory ‘Notice
and Demand’ for payment”; and (5) petitioner was denied the
opportunity to challenge the existence or amount of his
underlying tax liability. Petitioner also alleged that because
he “did not show a tax due on any of his returns for the years in
issue, no ‘deficiency’ pursuant to the provisions of [section]
6211 for those years was legally possible.”5
4
Petitioner’s petition arrived at the Court in an envelope
bearing a U.S. Postal Service postmark date of November 7, 2001.
During the fall/winter of 2001-2002, the Court experienced
significant delays in the receipt of mail because of anthrax.
At the time that the petition was filed, petitioner resided
in Boulder City, Nevada.
5
Although petitioner speaks of his returns for the years
in issue, only the taxable year 1998 is involved in the present
(continued...)
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Petitioner attached to his petition several documents,
including copies of the cover page of the notice of deficiency
dated August 11, 2000, the notice of balance due dated February
26, 2001, and the Form 4340 that was furnished to him by the
Appeals officer at the administrative hearing on October 4, 2001.
G. Respondent’s Motion For Summary Judgment
As stated, respondent filed a Motion For Summary Judgment
And To Impose A Penalty Under I.R.C. Section 6673. Respondent
contends that petitioner is barred under section 6330(c)(2)(B)
from challenging the existence or amount of his underlying tax
liability in this collection review proceeding because petitioner
received a notice of deficiency for the tax in question.
Respondent also contends that the Appeals officer’s review of
Form 4340 for petitioner’s account for the taxable year 1998
satisfied the verification requirement of section 6330(c)(1).
Finally, respondent contends that petitioner’s behavior warrants
the imposition of a penalty under section 6673.
Petitioner filed an Objection to respondent’s motion,
alleging, inter alia, that “no statutory notice and demand was
sent” and that “no statute establishes a liability for the income
tax or requires the payment of the income tax”. Thereafter,
pursuant to notice, respondent’s motion was called for hearing at
5
(...continued)
proceeding.
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the Court's motions session in Washington, D.C. Petitioner did
not attend the hearing; however, he did file a written statement
pursuant to Rule 50(c), which incorporated by reference certain
of his prior filings.
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
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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 tax 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 the notice of deficiency dated August 11, 2000, is
invalid. However, the record conclusively shows that petitioner
received the notice 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) bars petitioner
from challenging the existence or amount of his underlying tax
liability in this collection review proceeding. See Nestor v.
Commissioner, 118 T.C. 162, 165-166 (2002).
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
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not properly authorized to issue notices of deficiency is
frivolous and groundless. See id. at 165; Goza v. Commissioner,
supra. Likewise, petitioner’s argument that no statute
establishes an individual’s liability for income tax or requires
the payment of income tax is frivolous and groundless. 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); see Tolotti v. Commissioner,
T.C. Memo. 2002-86. Suffice it to say:
(1) Petitioner is a taxpayer subject to the Federal income
tax, see secs. 1(c), 7701(a)(1), (14);
(2) 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);
(3) petitioner is required to file an income tax return,
sec. 6012(a)(1); and
(4) a taxpayer’s failure to report tax on a return does not
prevent the Commissioner from determining a deficiency in that
taxpayer’s income tax, secs. 6211(a), 6212(a); see Monaco v.
Commissioner, T.C. Memo. 1998-284.
We likewise reject petitioner’s argument that the Appeals
officer failed to obtain verification from the Secretary that the
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requirements of all applicable laws and administrative procedures
were met as required by section 6330(c)(1). The record shows
that prior to the administrative hearing on October 4, 2001, the
Appeals officer obtained and reviewed Form 4340 for petitioner’s
taxable year 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, supra;
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 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.
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Commissioner, supra; Kuglin v. Commissioner, supra.6
Petitioner has not alleged any irregularity in the
assessment procedure that would raise a question about the
validity of the assessment or the information contained in the
Form 4340. See Davis v. Commissioner, 115 T.C. 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. 117, 120-121
(2001).
Petitioner also contends that he never received a notice and
demand for payment of his tax liability for 1998. 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.
* * *
In particular, the Form 4340 on which the Appeals officer relied
6
To the extent that petitioner may still be arguing that
the Appeals officer failed to provide him with a copy of the
verification, we note that sec. 6330(c)(1) does not require that
the Appeals officer provide the taxpayer with a copy of the
verification at the administrative hearing. Nestor v.
Commissioner, 118 T.C. 162, 166 (2002). In any event, the
Appeals officer provided petitioner with a copy of Form 4340 for
the taxable year 1998. Indeed, petitioner attached a copy of
this form as an exhibit to his petition.
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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); Newman v.
Commissioner, T.C. Memo. 2002-135; Weishan v. Commissioner,
supra; see also Hansen v. United States, 7 F.3d 137, 138 (9th
Cir. 1993). Notably, petitioner attached a copy of the notice of
balance due dated February 26, 2001, as an exhibit to his
petition.
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.7
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 October 16, 2001.
7
Petitioner stated to the Appeals officer at the
administrative hearing on Oct. 4, 2001, that “I brought my
checkbook with me, I will write you a check today” if the Appeals
officer would only “show me the law that requires me to pay the
tax.” The statutory citations sought by petitioner are
identified supra p. 13 of this opinion.
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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 a number of such cases.8
8
E.g., Roberts v. Commissioner, 118 T.C. 365 (2002)
(imposing a penalty in the amount of $10,000); Davich v.
Commissioner, T.C. Memo. 2002-255 (imposing a penalty in the
amount of $5,000); Schmith v. Commissioner, T.C. Memo. 2002-252
(imposing a penalty in the amount of $1,000); Schroeder v.
Commissioner, T.C. Memo. 2002-190 (imposing sua sponte a penalty
in the amount of $1,000); Wagner v. Commissioner, T.C. Memo.
2002-180 (imposing a penalty in the amount of $4,000); 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); Williams v.
Commissioner, T.C. Memo. 2002-111 (imposing sua sponte 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).
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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 we regard as frivolous and groundless.
E.g., Tolotti v. Commissioner, T.C. Memo. 2002-86. 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 $5,000.
In order to give effect to the foregoing,
An appropriate order granting
respondent's motion, as
supplemented, and decision for
respondent will be entered.