T.C. Memo. 2003-35
UNITED STATES TAX COURT
JOHN R. RIVERA, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 2401-01L. Filed February 14, 2003.
John R. Rivera, pro se.
Lisa M. Oshiro, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
FOLEY, Judge: The issues for decision are whether
respondent correctly determined the amounts of petitioner’s tax
liabilities and whether respondent abused his discretion in
proceeding with collection.
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FINDINGS OF FACT
Respondent assessed petitioner’s Federal income tax
liability relating to 1977 through 1992, 1994, and 1997 as
follows:
Tax Year Tax Liability Assessment Date
1977-84 $121,359 Oct. 2, 1995
1985 5,741 Oct. 10, 1994
1986 4,201 Oct. 17, 1994
1987 4,061 Oct. 24, 1994
1988 4,414 Oct. 31, 1994
1989-90 13,092 Nov. 7, 1994
1991 5,558 Sept. 26, 1994
1992 1,324 Sept. 19, 1994
1994 10,106 Oct. 23, 1995
1997 4,663 Aug. 30, 1999
Respondent also assessed interest, various penalties, and
additions to tax relating to the years in issue.
On February 1, 2000, respondent sent petitioner Notices of
Federal Tax Lien Filing and Your Right to a Hearing Under IRC
6320 relating to 1977 through 1992, 1994, and 1997. On February
21, 2000, petitioner filed a Form 12153, Request for a Collection
Due Process Hearing.
On December 11, 2000, petitioner attended the Collection Due
Process Hearing (the hearing), during which petitioner and
respondent discussed the assessments, various collection
alternatives, and whether petitioner would submit so called
“corrected returns” relating to 1977 through 1984 (i.e., the tax
years for which respondent prepared substitute returns). In
addition, respondent asked petitioner to submit a financial
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statement so that an offer in compromise might be considered and
told petitioner to select, prior to January 2, 2001, one of the
collection alternatives discussed during the hearing. Petitioner
did not select a collection alternative or submit any additional
evidence relating to his tax liability. On January 22, 2001,
respondent issued a Notice of Determination Concerning Collection
Action(s) Under Sections 6320 and 6330 (the determination)
denying petitioner’s appeal.
On February 21, 2001, petitioner, while residing in
Silverdale, Washington, filed his petition for review of the
determination. On October 9, 2001, respondent served upon
petitioner Forms 4340, Certificates of Assessments, Payments, and
Other Specified Matters (Forms 4340) for all years in issue and a
request for admissions. Petitioner did not respond to the
request for admissions.
On January 28, 2002, respondent filed with the Court a trial
memorandum. In the trial memorandum, respondent stated: (1)
Petitioner did not file tax returns relating to 19781 through
1984 but did file returns relating to 1985 through 1992, 1994,
and 1997; (2) “quick assessments” made on October 2, 1995,
relating to 1978 through 1984 indicated that petitioner was the
subject of a jeopardy assessment; (3) notices of deficiency dated
1
Respondent did not include 1977, one of the tax years at
issue.
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October 9, 1995, were issued to petitioner relating to 1978
through 1984, and, as a result, petitioner was not entitled to
challenge the underlying tax liability; and (4) for 1985 through
1992, 1994, and 1997, notices of deficiency were not issued to
petitioner, and, as a result, petitioner was entitled to
challenge the underlying tax liability.
In respondent’s supplement to his trial memorandum, filed on
January 28, 2002, respondent stated: (1) He failed, in his trial
memorandum, to reference petitioner’s 1977 tax liability; (2) he
misread the transcripts of accounts; the “quick assessments”
noted on Forms 4340 indicated that petitioner had signed
unspecified “agreements”; and petitioner was not the subject of
jeopardy assessments relating to 1977 through 1984; (3) the tax
liabilities assessed relating to 1977 through 1984 were either
based on delinquent returns filed by petitioner or upon consent
agreements signed by petitioner; and (4) as a result of the
delinquent returns filed by petitioner or agreements signed by
petitioner, respondent did not issue notices of deficiency to
petitioner relating to 1977 through 1984 and cannot assert with
certainty that petitioner is precluded from challenging the
underlying tax liability; and (5) for 1985 through 1988,
petitioner could not challenge the underlying tax liability
because the assessments of the estimated tax and civil fraud
penalties were based on agreements signed by petitioner.
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At trial, the primary focus was on petitioner’s challenge to
the underlying tax liability relating to 1977 through 1984.
Petitioner stated that respondent failed to “[provide] any
evidence of how [he] came up with * * * [the] 4340s” and that the
figures in Forms 4340 were “mostly dreamt up by [respondent].”
Respondent’s counsel stated that the deficiencies were based
“either upon delinquent returns filed by the petitioner or by
consent to the assessments.” Respondent’s counsel further stated
that petitioner was invited to submit “corrected returns”
relating to 1977 through 1984, but she “[did not] know * * *
[whether] there was any discussion beyond that.” The Court asked
respondent’s counsel why Appeals did not hold another section
6330 hearing in order to allow petitioner an opportunity to raise
the underlying tax liability with regard to those tax years.
She stated that she “believed” petitioner was allowed to present
evidence relating to the underlying tax liability for those tax
years. Petitioner stated that he “[did not] believe
[respondent]” placed any restrictions on the hearing. The Court
then asked respondent’s counsel whether Forms 4340 were used for
verification purposes at the hearing. Respondent’s counsel
stated that she “[did not] know * * * [if] the appeals officer
had the 4340s”, but the deficiencies were determined based on
petitioner’s self-assessment of tax liabilities for all years in
issue. Respondent’s counsel then informed the Court that the
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administrative files relating to 1977 through 1984 had been
destroyed. Respondent’s counsel did not submit returns relating
to 1977 through 1988 or consent agreements (e.g., Form 870 or
Form 4549) relating to 1977 through 1983.
On March 11, 2002, respondent filed a motion to reopen
record to introduce a certified copy of Form 870, Waiver of
Restrictions on Assessment and Collection of Deficiency in Tax
and Acceptance of Overassessment (Form 870). Form 870, signed by
petitioner on August 25, 1995, related to tax liabilities for
1984 and 1985 and estimated tax and civil fraud penalties
relating to 1984 through 1988. The Court, on April 12, 2002,
granted respondent’s motion to reopen record, and received the
Form 870 into evidence.
On November 7, 2002, the Court held a telephone conference
with petitioner and respondent’s counsel and noted that there was
no evidence in the record indicating whether petitioner had filed
returns relating to 1977 through 1988. On December 6, 2002,
respondent’s counsel, who had previously informed the Court that
the administrative files relating to 1977 through 1984 had been
destroyed, filed a status report stating that she was waiting to
receive the administrative files relating to 1977 through 1984
from respondent’s Service Center in Ogden, Utah. In the status
report, respondent’s counsel also stated that, after trial, she
had observed revenue agent’s reports signed by petitioner in the
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administrative files relating to 1977 through 1984. Respondent
submitted with the status report unsigned copies of the revenue
agent’s reports relating to 1977 through 1984.
OPINION
I. Jurisdiction
Section 63302 generally provides that respondent cannot
proceed with collection by levy until the taxpayer has been given
notice and the opportunity for an administrative review of the
matter (in the form of a hearing before Appeals) 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). If the validity
of the underlying tax liability is at issue, the Court will
review a taxpayer’s liability de novo. The Court reviews other
administrative determinations for an abuse of discretion. Sego
v. Commissioner, 114 T.C. 604, 610 (2000).
II. Tax Years 1977 Through 1983
Respondent concedes that he did not send a notice of
deficiency to petitioner, and that petitioner did not otherwise
have an opportunity to dispute his tax liability relating to 1977
through 1983. Thus, petitioner may challenge the existence or
2
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect at relevant times.
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amount of the underlying tax liability. Sec. 6330(c)(2)(B);
Downing v. Commissioner, 118 T.C. 22, 28 (2002).
Petitioner challenges the validity of the record of
assessment and the underlying tax liability relating to 1977
through 1983. Generally, courts have held that Form 4340
provides at least presumptive evidence that a tax has been
validly assessed under section 6203. Farr v. United States, 990
F.2d 451, 454 (9th Cir. 1993); Davis v. Commissioner, supra at
41. The record does not, however, indicate whether respondent
based his assessment on delinquent returns filed by petitioner or
on signed agreements to the assessments (i.e., Form 870).
Respondent did not present any evidence regarding how he
determined petitioner’s tax liability. Assessments relating to
1977 through 1983 were not made until October of 1995. See sec.
6501(a). If it is determined that petitioner timely filed
returns relating to those years, respondent may have assessed a
deficiency after the period of limitations for assessment
expired. If petitioner did not file returns, respondent's
determination that petitioner received unreported income relating
to those years may not be valid because respondent did not
present any evidence linking petitioner to the alleged
income-producing activity.3 Because petitioner's filing of, or
3
The application of the holding in Weimerskirch v.
(continued...)
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failure to file, tax returns raises questions about the validity
of respondent's determination (i.e., timeliness of the assessment
and lack of evidence linking petitioner to an income-producing
activity), we conclude that petitioner has raised an irregularity
in the assessment procedure. See Nestor v. Commissioner, 118
T.C. 162, 167 (2002). Accordingly, with respect to 1977 through
1983, we remand this case for further proceedings. Our decision
to do so is amply supported by the documentary record coupled
with respondent’s trial memorandum, motions, assertions in Court
and in conference calls, and respondent’s general state of
confusion relating to this matter.
III. Tax Years 1984 Through 1992, 1994, and 1997
A. Amount of Petitioner’s Tax Liability
Respondent concedes that he did not send a notice of
deficiency to petitioner, and petitioner did not otherwise have
an opportunity to dispute his tax liability relating to 1989
through 1992, 1994, and 1997. With respect to the tax
deficiencies relating to 1984 and 1985 and the estimated tax and
civil fraud penalties assessed relating to 1984 through 1988,
petitioner signed a consent to assessment (i.e., Form 870). By
signing Form 870, petitioner waived his right to a notice of
3
(...continued)
Commissioner, 596 F.2d 358 (9th Cir. 1979), revg. 67 T.C. 672
(1977), in a sec. 6330 context would be an issue of first
impression.
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deficiency and exhausted his opportunity to contest the tax
liability. Aguirre v. Commissioner, 117 T.C. 324 (2001). Thus,
petitioner may not challenge the tax deficiencies relating to
1984 and 1985 and the estimated tax and civil fraud penalties
relating to 1984 through 1988. Sec. 6330(c)(2)(B); Aguirre v.
Commissioner, supra.
Petitioner self-assessed his tax liability relating to 1986
through 1992, 1994, and 1997. Moreover, he did not present any
evidence or credible testimony disputing the amount of the
underlying tax liabilities.4 Accordingly, we sustain
respondent’s determination relating to 1986 through 1992, 1994,
and 1997.
B. Administrative Determination
Prior to trial, respondent provided petitioner with Forms
4340 relating to 1984 through 1992, 1994, and 1997, and
petitioner did not show any irregularity in the assessment
procedure that would raise a question about the validity of these
assessments. Nestor v. Commissioner, supra. Accordingly, we
conclude that respondent did not abuse his discretion in
determining to proceed with collection with respect to 1984
through 1992, 1994, and 1997.
4
Sec. 7491 is not applicable to this case because the
examination began before the statute's effective date. Thus,
petitioner had the burden of proof. Welch v. Helvering, 290 U.S.
111, 115 (1933).
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Contentions we have not addressed are irrelevant, moot, or
meritless.
To reflect the foregoing,
An appropriate order will
be issued.