T.C. Memo. 2004-15
UNITED STATES TAX COURT
ROBERT HAROLD HATHAWAY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 136-02L. Filed January 23, 2004.
Robert Harold Hathaway, pro se.
Monica J. Miller, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
JACOBS, Judge: This case arises from petitioner’s request
for our review of respondent’s determination that the filing of a
Federal tax lien with respect to the collection of petitioner’s
unpaid taxes for 1996 and 1997 was appropriate. The issue to be
resolved is whether that determination by respondent constitutes
an abuse of discretion. Respondent raised the issue of whether
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petitioner should be required to pay a penalty to the United
States pursuant to section 6673 for instituting and/or
maintaining this proceeding, and if so the amount thereof.1
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the exhibits submitted therewith are
incorporated herein by this reference.
At the time the petition was filed, petitioner resided in
Ocala, Florida. He is a doctor of veterinary medicine.
Petitioner timely filed income tax returns for 1996 and
1997. On the 1996 tax return, the amount of tax due (exclusive
of the estimated tax penalty) was shown as $17,112. There were
no withholding credits or estimated tax payments. Nor was there
a payment submitted with the return.
The tax shown as due (exclusive of the estimated tax
penalty) on the 1997 return was $13,734. Other than one
estimated tax payment of $1,100, petitioner made no payments with
respect to his 1997 tax liability.
On February 13, 2001, petitioner filed amended income tax
returns on Forms 1040X, Amended Individual Income Tax Return, for
1996 and 1997. These returns, as well as amended returns for
1998 and 1999, were submitted “as a part” of petitioner’s 2000
income tax return. The amended returns reported that petitioner
1
All section references are to the Internal Revenue Code.
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had no gross or taxable income (and consequently no tax
liability) for the applicable periods. Attached to the amended
returns was a three-page document in which petitioner stated that
although no section of the Internal Revenue Code establishes an
income tax liability, in order to avoid criminal prosecution for
failure to file a tax return, he was filing a tax return for 2000
and amended tax returns (with zeros reported for amounts on all
lines) for 1996-99 and reassessing his 1996-99 income as zero.
Petitioner requested a refund of all taxes paid for 1996-99 as
well as for 2000. The amended returns were not accepted by the
Internal Revenue Service (IRS), and by letter dated January 31,
2002, respondent informed petitioner that his request for a tax
refund was disallowed.
Petitioner received notice that Revenue Officer Charles Gear
had filed a notice of Federal tax lien with the Clerk of the
Circuit Court, Marion County, Florida. Subsequently, petitioner
submitted to respondent a Form 12153, Request for a Collection
Due Process Hearing, dated June 11, 2001, challenging the
appropriateness of the filing of the Federal tax lien.
By letter dated September 17, 2001, Appeals Officer Charles
R. Kelly informed petitioner that he was scheduling a telephone
hearing with petitioner for October 4, 2001, at 9:30 a.m.
Appeals Officer Kelly enclosed Forms 4340, Certificate of
Assessments, Payments, and Other Specific Matters, for 1996 and
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1997 with his letter. In his letter, Appeals Officer Kelly
stated that the tax petitioner reported when he filed his tax
return is the tax owed and that the amended tax returns are not
valid.
A telephone hearing was held as scheduled. During that
hearing petitioner advanced tax-protester arguments regarding his
tax obligation and respondent’s filing of the Federal tax lien.
Petitioner did not raise any relevant issues relating to the
existence or amount of his unpaid taxes. Nor did petitioner make
any offers of collection alternatives.
On November 2, 2001, a Notice of Determination Concerning
Collection Action Under Section 6320 (Lien) of the Internal
Revenue Code was sent to petitioner. In that notice, respondent
determined that the filing of a Federal tax lien was an
appropriate collection action. Petitioner then filed a petition
with this Court under section 6330(d) disputing respondent’s
determination. See sec. 6320(c).
OPINION
Section 6321 imposes a lien in favor of the United States
upon all property and rights to property belonging to a person
liable for unpaid taxes after demand for payment. Within 5
business days after the day of filing the notice of lien, the
Secretary must notify in writing the person against whom the lien
is filed (the taxpayer) that a tax lien was filed and inform the
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taxpayer of his right to a hearing before an impartial Appeals
officer. Sec. 6320. Pursuant to section 6320(c) the hearing
is to be conducted pursuant to the rules provided in subsections
(c), (d) (other than paragraph (2)(B) thereof), and (e) of
section 6330. If the Commissioner issues a determination letter
adverse to the position of the taxpayer, the taxpayer may seek
judicial review of the determination. Sec. 6330(d).
This Court has established the following standards of review
in considering whether a taxpayer is entitled to relief from the
Commissioner’s determination:
where the validity of the underlying tax liability is
properly at issue, the Court will review the matter on
a de novo basis. However, where the validity of the
underlying tax liability is not properly at issue, the
Court will review the Commissioner’s administrative
determination for abuse of discretion.
Sego v. Commissioner, 114 T.C. 604, 610 (2000).
Petitioner essentially makes three arguments regarding his
unpaid tax liability and respondent’s collection actions (i.e.,
the filing of the tax lien). First, he posits that he
incorrectly reported income for 1996 and 1997 because he had no
“statutory income” to report. Second, petitioner claims that
unless and until respondent can produce a “statutory notice and
demand” and a signed assessment document, no valid section 6330
hearing can be conducted. And finally, petitioner maintains that
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he should be allowed to challenge the existence of the underlying
liabilities that he reported on tax returns he filed.
With regard to his tax liability (i.e., the unpaid tax)
petitioner (in his trial memorandum) argues:
1. There is no Legislative Regulation (LAW) that
requires me to pay a Federal Tax on my earnings, other
than through apportionment when I buy products
containing a Federal Sales Tax.
2. The 1040 IRS Personal Income Tax form is
fraudulent.
3. In April 1996 and 1997 respectively, I filled
out and signed 1040 U.S. Individual Income Tax Returns.
I signed and filed the above returns under extreme
duress. I was afraid that if I did not, I would go to
jail. I would lose my practice plus all of my
possessions.
4. Since that time I discovered that the 1040
form as provided by the IRS is fraudulent. The word
“INCOME” has been defined by the Supreme Court in no
less than 12 separate cases to mean “CORPORATE
PROFITS.” Yet the IRS fools the public into believing
that their earnings are INCOME and are therefore
taxable. I also discovered that there is no
Legislative Regulation requiring me to pay Federal
Taxes except through apportionment, Federal Sales
Taxes.
5. I reassessed my 1996 through 2000 taxes to
zero INCOME for those years using 1040X forms. Since I
am not incorporated, I have no corporate profits.
Therefore, I have no INCOME.
With regard to the filing of the Federal tax lien,
petitioner (in a letter attached to his Request for a Collection
Due Process Hearing) argues:
I also received a Notice of Federal Tax Lien
rubber stamped by Candace R. Donaldson for Charles
Gear. This lien was also filed with the Clerk of
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Circuit Court, Marion County, Ocala, FL 34478. Only
the Secretary of the Treasury has the authority to file
a Notice of Federal Tax Lien. The only exception to
that would be if you have a Delegation of Authority
signed by the Secretary of the Treasury authorizing
you, Revenue Agent Charles Gear, ID#59-05257, to file a
Notice of Federal Tax Lien. (See TITLE 26, Subtitle F,
CHAPTER 64, Subchapter D. Sec. 6331(a) “Levy and
distraint” and Subchapter C, Sec 6323(a) “Validity and
priority against certain persons.”)
If you do not possess a Delegation of Authority
signed by the Secretary of the Treasury authorizing
you, Revenue Agent Charles Gear, ID #59-05257, to file
a Notice of Federal Tax Lien against me, I highly
recommend that you send a release order to the Clerk of
Circuit Court, Marion County, Ocala, FL 34478. If not,
and this Notice of Federal Tax Lien causes me harm in
anyway, shape or form, I will sue you personally and
the IRS. I will also file a grievance against you with
the Director of the Internal Revenue Service. (See
TITLE 26, Subtitle F, CHAPTER 75, Subchapter A. Part I,
Sec. 7214(a)(1),(a)(2),(a)(7) and (a)(9) “Offenses by
officers and employees of the United States.”)
Respondent maintains that in a section 6330 proceeding a
taxpayer can challenge only those liabilities asserted by the
Commissioner that differ in amount from the taxpayer’s self-
determination. Thus, according to respondent, petitioner is
precluded from contesting the tax he reported on his 1996 and
1997 returns. This argument is similar to that which the
Commissioner advanced, and we rejected, in Montgomery v.
Commissioner, 122 T.C. ___ (2004).
Section 6330(c)(2) provides that a taxpayer may raise any
“relevant” issue at the collection hearing; it does not say that
the taxpayer may raise “any” issue. Petitioner raised only
groundless and frivolous issues, not relevant issues.
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Petitioner’s challenge to the existence of his tax liability
is meritless. During the years at issue, petitioner earned a
significant amount of income as a doctor of veterinary medicine.
He filed tax returns for 1996 and 1997 that reported Schedule C
self-employment income of $59,077 for 1996 and $53,289 for 1997.
The tax assessments generating the filing of the Federal tax lien
are based on the tax shown on returns petitioner filed under
penalties of perjury. See sec. 6201(a)(1).
Despite respondent’s claim that petitioner could not
challenge his underlying tax liabilities for 1996 and 1997 as
reported on petitioner’s tax returns for those years, petitioner,
in fact, questioned the validity of those liabilities during his
telephone hearing. Petitioner advanced frivolous arguments
during this telephone hearing. Petitioner continued to advance
his groundless arguments in his petition, his trial memorandum,
and his trial testimony. Despite petitioner’s assertions to the
contrary, there is no genuine issue as to the existence of his
1996 and 1997 unpaid tax. And because petitioner challenged only
the existence of a law requiring him to pay a Federal tax on his
earnings and did not challenge the correctness of the amounts of
income which he reported on his 1996 and 1997 tax returns, there
is no genuine issue as to the amounts of petitioner’s underlying
tax liability for 1996 and/or 1997.
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Appeals Officer Kelly verified that the assessments in
question were properly made. He was not required to give
petitioner a copy of the verification that the requirements of
any applicable law or administrative procedure have been met.
See Nestor v. Commissioner, 118 T.C. 162, 166 (2002).
Appeals Officer Kelly provided petitioner with Forms 4340
for 1996 and 1997. In this regard, see Lunsford v. Commissioner,
117 T.C. 183 (2001), and Davis v. Commissioner, 115 T.C. 35
(2000), wherein we held that a Form 4340 may be used to verify
that a valid assessment was made.
Petitioner implies that Revenue Officer Gear did not have
authority to file a notice of Federal tax lien with the Clerk of
the Circuit Court, Marion County, Florida. This assertion is not
valid. In this regard, see Everman v. Commissioner, T.C. Memo.
2003-137, wherein we noted that the Commissioner has authority to
file a notice of Federal tax lien and that authority has been
delegated to a host of IRS personnel, including various managers
responsible for collection matters and GS-9 and above revenue
officers pursuant to Delegation Order No. 196 (Rev. 4; Oct. 4,
2000).
Simply stated, during the section 6330 hearing petitioner
had an opportunity to raise all relevant issues relating to the
existence and/or amount of his unpaid tax liabilities for 1996
and 1997. He also had an opportunity to challenge the
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appropriateness of respondent’s tax lien. Petitioner failed to
take advantage of the opportunity. Rather, he chose to espouse
groundless and frivolous arguments. Consequently, there is no
basis for us to conclude that it was an abuse of discretion for
respondent to determine that the filing of a Federal tax lien in
the instant situation was appropriate.
We now turn to whether, pursuant to section 6673, we should
require petitioner to pay a penalty to the United States, and if
so the amount thereof. Section 6673 provides, in part, that
whenever it appears to the Tax Court that proceedings before it
have been instituted or maintained by the taxpayer primarily for
delay or the taxpayer’s position in such proceeding is frivolous
or groundless, the Tax Court, in its decision, may require the
taxpayer to pay the United States a penalty not in excess of
$25,000. Petitioner’s position in this case is frivolous as well
as groundless. Although petitioner was informed that his
position has been rejected consistently by the courts, he
nonetheless continued to advance it.
We have no doubt that petitioner, an educated individual,
maintained this proceeding primarily to delay the day the IRS
could collect taxes he owes for 1996 and 1997. Petitioner has
wasted the time of respondent’s agents and counsel as well as the
time of this Court. We therefore impose a penalty of $10,000 on
petitioner under section 6673.
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To reflect the foregoing,
Decision will be entered for
respondent.