T.C. Memo. 2004-44
UNITED STATES TAX COURT
CHARLES P. DURRENBERGER JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10712-02L. Filed February 26, 2004.
Charles P. Durrenberger, Jr., pro se.
John D. Faucher, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
COLVIN, Judge: On May 23, 2002, respondent sent petitioner
a Notice of Determination Concerning Collection Action(s) Under
Section 6320 and/or 6330, in which respondent determined that the
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filing of a tax lien relating to petitioner’s 1998 tax liability
was appropriate.1
The sole issue for decision is whether respondent’s
determination that the filing of a tax lien relating to
petitioner’s 1998 tax liability was appropriate was an abuse of
discretion. We hold that it was not.
FINDINGS OF FACT
A. Petitioner and His 1998 Income Tax Return
Petitioner resided in Houston, Texas, when he filed the
petition in this case.
Petitioner reported on his 1998 income tax return that he
had no wages, other income, or tax liability, and that he had
taxes withheld of $2,935.30. He claimed a refund of $2,935.30.
Petitioner attached a letter to his 1998 return in which he
contended that: Wages are not income; petitioner is not required
by law to file a return or pay income tax; and respondent failed
to provide petitioner with a copy of the law requiring him to pay
income tax.
B. Notice of Deficiency and Bankruptcy
On September 8, 1999, respondent sent a notice of deficiency
for 1998 to petitioner at the address shown on petitioner’s 1998
return. In it, respondent determined a deficiency in
1
Unless otherwise indicated, section references are to the
Internal Revenue Code as amended.
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petitioner’s 1998 tax of $7,754 and an accuracy-related penalty
under section 6662 of $963.80. The notice of deficiency was
returned to respondent marked “not deliverable as addressed,
unable to forward”. Petitioner had moved and left no forwarding
address, and so he did not receive the notice of deficiency.
Petitioner did not file a petition for redetermination of the
deficiency for 1998.
Petitioner filed a petition in the U.S. Bankruptcy Court for
the Southern District of Texas on April 6, 2000. The bankruptcy
court discharged petitioner’s debts on July 24, 2000.
C. Notice of Federal Tax Lien and Notice of Intent To Levy
On December 17, 2001, respondent issued to petitioner a
Notice of Intent to Levy and Notice of Your Right to a Hearing
relating to his 1998 tax liability. The notice was returned to
respondent marked “unclaimed”. Petitioner did not request a
hearing under section 6330(b) in response to respondent’s notice
of proposed levy. On February 1, 2002, respondent issued to
petitioner a Notice of Federal Tax Lien Filing and Your Right to
a Hearing Under IRC 6320 relating to petitioner’s unpaid taxes
for 1998.2
2
The notice of Federal tax lien also relates to a sec.
6702 frivolous return penalty assessed for 1999.
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D. Hearing Request Relating to the Lien
On February 22, 2002, petitioner filed a Form 12153, Request
for a Collection Due Process Hearing, with respect to the notice
of Federal tax lien for tax year 1998. In the request,
petitioner contended that the notice of Federal tax lien was
invalid because the Secretary had not delegated authority to the
person who issued the notice. Petitioner attached to his request
for a hearing documents containing numerous frivolous arguments.
E. The Levy
Respondent levied upon petitioner’s wages from February 19
to April 4, 2002, to collect an amount equal to what respondent
had determined was petitioner’s 1998 tax liability. Petitioner’s
employer made the following payments: $993.33 on February 19,
2002; $1,712.16 on March 8, 2002; $1,013.10 on March 21, 2002;
and $8,095.54 on April 4, 2002. Respondent now concedes that
petitioner is entitled to a refund with respect to tax year 1998.
F. Hearing Relating to the Lien
On a date not specified in the record, respondent’s Appeals
officer conducted a hearing relating to petitioner’s lien for tax
year 1998. Petitioner asked to make an audio recording of the
hearing. Respondent denied that request. Petitioner attended
the hearing but did not record it. On May 23, 2002, respondent
issued to petitioner a Notice of Determination Concerning
Collection Action(s) in which respondent determined that the
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filing of the tax lien was appropriate. On June 25, 2002,
petitioner filed a petition for lien or levy action under section
6320(c) or 6330(d) in which he contended: (1) There had been no
valid assessment of taxes; (2) he had not received a statutory
notice and demand for payment of the taxes at issue; (3) he had
not received a notice of deficiency; (4) respondent incorrectly
determined his underlying tax liability; and (5) respondent
improperly refused to permit him to record the section 6330(b)
hearing.
OPINION
1. Whether Respondent’s Determination That the Filing of a Tax
Lien Relating to Petitioner’s 1998 Tax Liability Was
Appropriate Was an Abuse of Discretion
Petitioner contends that respondent’s determination that the
filing of a tax lien relating to his 1998 tax liability was
appropriate was an abuse of discretion. We disagree.
Petitioner may challenge the existence or amount of his
underlying tax liability because he did not receive the notice of
deficiency. Sec. 6330(c)(2)(B). Since he had moved after filing
his latest tax return, his failure to receive the notice of
deficiency was not deliberate. See Tatum v. Commissioner, T.C.
Memo. 2003-115 (the taxpayers should have been allowed to
challenge their underlying tax liabilities at section 6330(b)
hearing because their failure to claim the notice of deficiency
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from the U.S. Postal Service was not a deliberate avoidance of
delivery); cf. Sego v. Commissioner, 114 T.C. 604, 611 (2000).
Petitioner contends that, because his wages are exempt from
garnishment under Texas law, respondent may not levy on them.3
We disagree; Federal tax collection statutes supersede State-
created exemptions to tax collection. United States v. Rodgers,
461 U.S. 677, 700-702 (1983).
Petitioner contends that garnishment of his wages was
improper because the Fair Debt Collection Procedures Act (FDCPA),
Pub. L. 95-109, 91 Stat. 874 (1977), 15 U.S.C. sec. 1692 (2000),
prohibits garnishment without a signed court order. Petitioner
fails to explain where or how the FDCPA so provides, and we find
no such prohibition in that act.
Petitioner contends that section 334.24 of the Internal
Revenue Manual (IRM) does not require employers to honor notices
of levies. We disagree. The IRM provides that any person in
possession of property upon which a levy has been made shall,
upon demand, surrender such property unless the property is not
the property of the taxpayer, or the property is subject to prior
judicial attachment or execution. The IRM also provides that a
3
Petitioner incorrectly cited Tex. Prop. Code Ann. sec.
63.004. It appears that Tex. Prop. Code Ann. sec. 42.001(b)(1)
(Vernon 2000) is the correct citation.
4
Sec. 334.2 of the Internal Revenue Manual has been
superseded by 2 Administration, Internal Revenue Manual (CCH),
sec. 5.17.3.3.3.1, at 17,918, effective Oct. 31, 2000.
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suit for failure to honor the levy is appropriate when a party
fails to respond or refuses to comply with a levy.
Petitioner contends that respondent improperly garnished
more than 25 percent of his wages. We disagree. Section 6332(a)
allows garnishment of all nonexempt wages; wages are exempt to
the extent of the amount of the taxpayer’s standard deduction
plus personal exemptions, divided by the number of pay periods in
the year. Sec. 6334(a)(9), (d)(2) and (3).
Petitioner points out that the notice of Federal tax lien he
received was different from the notice of levy sent to his
employer, but petitioner does not explain how that fact suggests
that respondent’s determination that the filing of the tax lien
was appropriate was an abuse of discretion. We conclude that the
fact that the notice of the lien differed from the notice of the
levy does not detract from the appropriateness of the lien.
Petitioner also contends: (1) The filing of the tax lien
was not appropriate because he is not liable for Federal income
taxes; (2) wages are not income; (3) levies apply only to Federal
employees; (4) sections 6320-6333 are unenforceable because there
are no implementing regulations; (5) respondent’s agents are not
authorized to make changes to petitioner’s return; and (6)
petitioner was not granted a jury trial. These arguments are
frivolous, and we therefore perceive no need to further refute
them with somber reasoning and copious citation of precedent; to
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do so might suggest that these arguments have some colorable
merit. See Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir.
1984).
2. Whether Respondent’s Collection Actions Violated the
Automatic Bankruptcy Stay
Petitioner contends that respondent violated the automatic
stay provisions of the Bankruptcy Code, 11 U.S.C. section
362(a)(8), but does not specify how respondent did so. We
disagree. Once a taxpayer files a petition in bankruptcy, the
commencement or continuation of proceedings against that taxpayer
in the Tax Court is automatically stayed. 11 U.S.C. sec.
362(a)(8) (2000). The stay began on April 6, 2000, when
petitioner filed his bankruptcy petition.
The stay is lifted upon the earlier of the closing of the
case, the dismissal of the case, or the granting or denial of a
discharge. 11 U.S.C. sec. 362(c)(2) (2000); see Guerra v.
Commissioner, 110 T.C. 271, 275 (1998). Thus, the stay was
lifted on July 24, 2000, when the bankruptcy court discharged
petitioner’s debts. Respondent did not attempt to collect from
petitioner from April 6 to July 24, 2000. Collection actions
began in December 2001 when respondent issued to petitioner a
notice of intent to levy relating to his 1998 tax liability.
Thus, the stay was lifted before respondent began collection
activities.
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Petitioner contends that his 1998 tax liability was
discharged in bankruptcy.5 We disagree. Income taxes are debts
not dischargeable in bankruptcy for taxable years for which
returns are due within 3 years before the filing of a petition in
bankruptcy. 11 U.S.C. secs. 523(a)(1)(A), 507(a)(8)(A)(i)
(2000). Petitioner filed his bankruptcy petition on April 6,
2000, which is within 3 years of the time his 1998 return was
due. Thus, petitioner’s 1998 tax liability is not dischargeable
in bankruptcy. See id.
3. Audio Recording
A taxpayer has the right under section 7521(a)(1) to make an
audio recording of a section 6320 hearing with the Appeals Office
if the taxpayer makes an advance request and makes the recording
at the taxpayer’s expense with the taxpayer’s equipment. Sec.
7521(a)(1); Keene v. Commissioner, 121 T.C. 8, 16, 19 (2003).
However, it is not necessary or productive to remand a case to
Appeals merely to provide the taxpayer a recorded hearing where
(1) the taxpayer previously attended and participated in an
Appeals Office hearing, and (2) we can properly decide all of the
issues pleaded by the taxpayer. Keene v. Commissioner, supra at
5
We have jurisdiction in lien proceedings under sec. 6320
to decide whether income tax liabilities have been discharged in
bankruptcy. Washington v. Commissioner, 120 T.C. 114, 121,
(2003).
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19; Kemper v. Commissioner, T.C. Memo. 2003-195; see also
Lunsford v. Commissioner, 117 T.C. 183, 189 (2001).
4. Procedural Issues Relating to the Levy
Petitioner contends that the levy was improper. Petitioner
argues that section 6330(e), which provides for suspension of
levies when levy cases are pending under section 6330, also
applies by cross-reference to lien cases under section 6320.
Sec. 6320(c).
Respondent collected by levy more than petitioner owed for
tax year 1998 and concedes petitioner is entitled to a refund
(with interest, see sec. 6621(a)(1)) for 1998.6 Having addressed
that point, we need not address petitioner’s procedural objection
to the levy because, even if he prevailed on this point, the net
effect on his tax payments would be nil. We rejected
petitioner’s arguments relating to his underlying tax liability
above. Thus, his liability is now established. We see no reason
to order a refund of levied funds (with interest) and then to
require petitioner to repay amounts he owes (plus interest). See
Lunsford v. Commissioner, supra at 189.
6
Respondent filed a motion to dismiss this case for
mootness because, as a result of the levy, respondent collected
more than respondent had determined petitioner owed for 1998.
We will deny respondent’s motion because petitioner is entitled
to a refund with respect to 1998.
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5. Conclusion
We conclude that respondent’s determination that the filing
of the tax lien was appropriate was not an abuse of discretion.
Accordingly,
An appropriate order
will be issued.