Hiland v. Comm'r

T.C. Memo. 2004-225

UNITED STATES TAX COURT

TRAVIS D. HILAND, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 3106-04L. Filed October 6, 2004.

P filed a petition for judicial review pursuant to
sec. 6330, I.R.C., in response to a determination by R
that levy action was appropriate.

Held: Because P has advanced solely groundless
complaints in dispute of the notice of intent to levy,
R’s determination to proceed with collection action is
sustained.

Held, further, damages under sec. 6673, I.R.C.,
are due from P and are awarded to the United States in
the amount of $1,000.

Travis D. Hiland, pro se.

Cameron M. McKesson, for respondent.
 - 2 -

MEMORANDUM OPINION

WHERRY, Judge: This case is before the Court on

respondent’s motion for summary judgment pursuant to Rule 121.1

The instant proceeding arises from a petition for judicial review

filed in response to a Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330. The issues

for decision are: (1) Whether respondent may proceed with

collection action as so determined, and (2) whether the Court,

sua sponte, should impose a penalty under section 6673.

Background

Petitioner filed with his spouse2 a joint Form 1040, U.S.

Individual Income Tax Return, for the 2000 taxable year on or

about April 15, 2001. On this return, petitioner reported $0 on

all pertinent lines, including $0 of total income and $0 of total

tax. Petitioner attached to the return a statement contending,

inter alia, that no law established his liability for income

taxes or required him to file a return.

Respondent issued to petitioner a statutory notice of

deficiency for 2000 on June 12, 2002. Respondent determined a

1
Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as amended, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
2
Petitioner’s wife, RuthAnne Hiland, was not involved in
the collection proceedings before respondent and is not a party
in this case. For simplicity, we hereafter refer only to
petitioner in our discussion of relevant events.
 - 3 -

deficiency of $16,843 and an accuracy-related penalty under

section 6662(a) in the amount of $3,368.60. Petitioner responded

to the notice with a letter dated June 14, 2002, acknowledging

his receipt of the notice and his right to file a petition with

the Tax Court but stating, inter alia: “Before I file, pay, or

do anything with respect to your ‘Notice,’ I must first establish

whether or not it was sent pursuant to law, whether or not it has

the ‘force and effect of law,’ and whether you had any authority

to send me the notice in this first place.”

Petitioner at no time petitioned this Court for

redetermination of the deficiency and penalty reflected in the

notice. Respondent assessed tax, penalty, and interest amounts

due for 2000 on November 18, 2002, and sent a notice of balance

due on that date. An additional notice of balance due was sent

on December 23, 2002.

On February 27, 2003, respondent issued to petitioner a

Final Notice of Intent To Levy and Notice of Your Right To a

Hearing with respect to his unpaid liabilities for 2000.3

Petitioner timely submitted to respondent a Form 12153, Request

for a Collection Due Process Hearing, with multiple attachments

3
A second Final Notice of Intent To Levy and Notice of Your
Right to a Hearing was also issued on Feb. 27, 2003, with respect
to a civil penalty under sec. 6702 for the filing of a frivolous
return for the 1999 taxable year. This Court lacks jurisdiction
to review any issues related to this penalty. Van Es v.
Commissioner, 115 T.C. 324, 328-329 (2000).
 - 4 -

setting forth his disagreement with the proposed levy. He

challenged the validity of, and requested that the Appeals

officer have at the hearing copies of documents pertaining to,

among other things, the underlying tax liability, the notice and

demand for payment, and the authority of various Internal Revenue

Service (IRS) personnel.

Settlement Officer Thomas L. Tracy (Mr. Tracy), of the IRS

Office of Appeals in Phoenix, Arizona, sent petitioner a letter

dated November 10, 2003, scheduling a hearing for December 5,

2003, and briefly outlining the hearing process. On December 3,

2003, petitioner telephoned Mr. Tracy and asked to delay the

hearing, on grounds that he needed to attend to his father who

had suffered a stroke. Mr. Tracy offered either a telephone

hearing or a face-to-face meeting the week of December 15.

Petitioner instead asked for a hearing by correspondence, and the

parties mutually agreed upon a deadline of December 17, 2003, for

Mr. Tracy’s receipt of petitioner’s submission. During the

conversation, Mr. Tracy advised petitioner that the issues thus

far presented by petitioner would be considered frivolous and not

relevant. Following the conversation, Mr. Tracy then sent a

letter dated December 3, 2003, expressly confirming the terms of

the agreement reached and expanding on the point made about

frivolous arguments and penalties therefor under section 6673.

The letter concluded with a warning that if Mr. Tracy did not
 - 5 -

receive petitioner’s correspondence by December 17, 2003, he

would make his determination from information in the file.

Mr. Tracy also enclosed with the letter copies of Forms 4340,

Certificate of Assessments, Payments and Other Specified Matters,

and of pertinent cases such as Pierson v. Commissioner, 115 T.C.

576 (2000).

On December 17, 2003, petitioner called Mr. Tracy and left a

message acknowledging the deadline and indicating that he had

questions ready for Mr. Tracy.4 The message further stated that

petitioner was in Mesa visiting his ill father, that he had a

flat tire, and that he was unsure whether he could get his

correspondence package to Mr. Tracy. On that note, petitioner

inquired whether he could deliver the package the next day or

could send it by facsimile. He also requested a return call.

Mr. Tracy called back within minutes, but petitioner was

unavailable. Mr. Tracy left his phone and fax number. When he

did not hear from petitioner, Mr. Tracy called again on December

19, 2003. The individual who answered the telephone stated that

petitioner was not answering the line, so Mr. Tracy left another

message for petitioner to return the call.

4
Petitioner may also have attempted to send a facsimile on
or about Dec. 16, 2003, indicating that he would need to
reschedule the Dec. 17, 2003, correspondence hearing date, but
there exists no indication that Mr. Tracy received any such
transmission.
 - 6 -

When petitioner failed to call or to send any documents by

facsimile or otherwise, Mr. Tracy closed the case on December 29,

2003. Respondent on January 8, 2004, issued to petitioner the

aforementioned Notice of Determination Concerning Collection

Action(s) Under Section 6320 and/or 6330, sustaining the proposed

levy action. An attachment to the notice addressed the

verification of legal and procedural requirements, the issues

raised by the taxpayer, and the balancing of efficient collection

and intrusiveness. According to the attachment, petitioner

“presented only frivolous arguments and no relevant issues.”

Petitioner’s petition disputing the notice of determination

was filed with the Court on February 13, 2004, and reflected an

address in Prescott, Arizona. In general, petitioner asks that

the Court declare invalid the notice of determination.

Petitioner’s complaints with respect to the administrative

proceedings include the following: No legitimate hearing under

section 6330 ever took place; petitioner was denied the

opportunity to raise issues he deemed “relevant” (e.g., the

“existence” of the underlying tax liability); and cited

documentation had not been produced and/or addressed (e.g.,

record of the assessments, statutory notice and demand for

payment, any “valid notice of deficiency”, and verification from

the Secretary that all applicable requirements were met).

Petitioner prays that this Court declare invalid the January 8,
 - 7 -

2004, determination; order the IRS to hold the statutorily

mandated “Collection Due Process Hearing”; order the IRS to have

at the hearing all documents requested by petitioner; and order

the Government to reimburse petitioner for all costs incurred in

submitting the instant petition.5

Also on February 13, 2004, petitioner reiterated his request

that this Court declare invalid the determination at issue by

means of a document and supporting memorandum filed as a motion

to dismiss for lack of jurisdiction. Respondent filed a notice

of objection on March 15, 2004, and the Court denied petitioner’s

motion on April 15, 2004.

After the pleadings were closed in this case, respondent

filed the subject motion for summary judgment. Petitioner was

directed to file any response to respondent’s motion on or before

September 17, 2004. No such response was received by the Court.

Discussion

Rule 121(a) allows a party to move “for a summary

adjudication in the moving party’s favor upon all or any part of

the legal issues in controversy.” Summary judgment is intended

to expedite litigation and to avoid unnecessary trials. Fla.

Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Rule

5
The Court notes that to the extent that the petition seeks
reasonable administrative and/or litigation costs pursuant to
sec. 7430, any such claim is premature and will not be further
addressed. See Rule 231.
 - 8 -

121(b) directs that a decision on such a motion shall be rendered

“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.”

The moving party bears the burden of demonstrating that no

genuine issue of material fact exists and that he or she is

entitled to judgment as a matter of law. Sundstrand Corp. v.

Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th

Cir. 1994). Facts are viewed in the light most favorable to the

nonmoving party. Id. However, where a motion for summary

judgment has been properly made and supported by the moving

party, the opposing party may not rest upon mere allegations or

denials contained in that party’s pleadings but must by

affidavits or otherwise set forth specific facts showing that

there is a genuine issue for trial. Rule 121(d).

I. Collection Actions

A. General Rules

Section 6331(a) authorizes the Commissioner to levy upon all

property and rights to property of a taxpayer where there exists

a failure to pay any tax liability within 10 days after notice

and demand for payment. Sections 6331(d) and 6330 then set forth

procedures generally applicable to afford protections for
 - 9 -

taxpayers in such levy situations. Section 6331(d) establishes

the requirement that a person be provided with at least 30 days’

prior written notice of the Commissioner’s intent to levy before

collection may proceed. Section 6331(d) also indicates that this

notification should include a statement of available

administrative appeals. Section 6330(a) expands in several

respects upon the premise of section 6331(d), forbidding

collection by levy until the taxpayer has received notice of the

opportunity for administrative review of the matter in the form

of a hearing before the IRS Office of Appeals. Section 6330(b)

grants a taxpayer who so requests the right to a fair hearing

before an impartial Appeals officer.

Section 6330(c) addresses the matters to be considered at

the hearing:

SEC. 6330(c). Matters Considered at Hearing.--In
the case of any hearing conducted under this section--

(1) Requirement of investigation.--The
appeals officer shall at the hearing obtain
verification from the Secretary that the
requirements of any applicable law or
administrative procedure have been met.

(2) Issues at hearing.--

(A) In general.--The person may raise at
the hearing any relevant issue relating to
the unpaid tax or the proposed levy,
including--

(i) appropriate spousal defenses;
 - 10 -

(ii) challenges to the
appropriateness of collection actions;
and

(iii) offers of collection
alternatives, which may include the
posting of a bond, the substitution of
other assets, an installment agreement,
or an offer-in-compromise.

(B) Underlying liability.--The person
may also raise at the hearing challenges to
the existence or amount of the underlying tax
liability for any tax period if the person
did not receive any statutory notice of
deficiency for such tax liability or did not
otherwise have an opportunity to dispute such
tax liability.

Once the Appeals officer has issued a determination

regarding the disputed collection action, section 6330(d) allows

the taxpayer to seek judicial review in the Tax Court or a

District Court, depending upon the type of tax. In considering

whether taxpayers are entitled to any relief from the

Commissioner’s determination, this Court has established the

following standard of review:

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).]

B. Analysis

1. Appeals Hearing

The petition (as well as the previously denied motion to

dismiss for lack of jurisdiction) emphasizes petitioner’s claim
 - 11 -

that he was denied the collection hearing to which he was

entitled and apparently seeks a remand to Appeals in order to

allow a conference to be held. Relevant caselaw precedent and

regulatory authority, however, indicate that the circumstances

here are not such as to render remand appropriate.

Hearings conducted under section 6330 are informal

proceedings, not formal adjudications. Katz v. Commmissioner,

115 T.C. 329, 337 (2000); Davis v. Commissioner, 115 T.C. 35, 41

(2000). There exists no right to subpoena witnesses or documents

in connection with section 6330 hearings. Roberts v.

Commissioner, 118 T.C. 365, 372 (2002), affd. 329 F.3d 1224 (11th

Cir. 2003); Nestor v. Commissioner, 118 T.C. 162, 166-167 (2002);

Davis v. Commissioner, supra at 41-42. Taxpayers are entitled to

be offered a face-to-face hearing at the Appeals Office nearest

their residence. Where the taxpayer declines to participate in a

proffered face-to-face hearing, hearings may also be conducted

telephonically or by correspondence. Katz v. Commissioner, supra

at 337-338; Dorra v. Commissioner, T.C. Memo. 2004-16; sec.

301.6330-1(d)(2), Q&A-D6 and D7, Proced. & Admin. Regs.

Furthermore, once a taxpayer has been given a reasonable

opportunity for a hearing but has failed to avail himself or

herself of that opportunity, we have approved the making of a

determination to proceed with collection based on the Appeals

officer’s review of the case file. See, e.g., Taylor v.
 - 12 -

Commissioner, T.C. Memo. 2004-25; Leineweber v. Commissioner,

T.C. Memo. 2004-17; Armstrong v. Commissioner, T.C. Memo. 2002-

224; Gougler v. Commissioner, T.C. Memo. 2002-185; Mann v.

Commissioner, T.C. Memo. 2002-48. Thus, a face-to-face meeting

is not invariably required.

Regulations promulgated under section 6330 likewise

incorporate many of the foregoing concepts, as follows:

Q-D6. How are CDP hearings conducted?

A-D6. * * * CDP hearings * * * are informal in
nature and do not require the Appeals officer or
employee and the taxpayer, or the taxpayer’s
representative, to hold a face-to-face meeting. A CDP
hearing may, but is not required to, consist of a face-
to-face meeting, one or more written or oral
communications between an Appeals officer or employee
and the taxpayer or the taxpayer’s representative, or
some combination thereof. * * *

Q-D7. If a taxpayer wants a face-to-face CDP
hearing, where will it be held?

A-D7. The taxpayer must be offered an opportunity
for a hearing at the Appeals office closest to
taxpayer’s residence or, in the case of a business
taxpayer, the taxpayer’s principal place of business.
If that is not satisfactory to the taxpayer, the
taxpayer will be given an opportunity for a hearing by
correspondence or by telephone. If that is not
satisfactory to the taxpayer, the Appeals officer or
employee will review the taxpayer’s request for a CDP
hearing, the case file, any other written
communications from the taxpayer (including written
communications, if any, submitted in connection with
the CDP hearing), and any notes of any oral
communications with the taxpayer or the taxpayer’s
representative. Under such circumstances, review of
those documents will constitute the CDP hearing for the
purposes of section 6330(b). [Sec. 301.6330-1(d)(2),
Q&A-D6 and D7, Proced. & Admin. Regs.]
 - 13 -

This Court has cited the above regulatory provisions with

approval. See, e.g., Taylor v. Commissioner, supra; Leineweber

v. Commissioner, supra; Dorra v. Commissioner, supra; Gougler v.

Commissioner, supra.

With respect to the instant matter, the record reflects that

petitioner was initially offered a face-to-face hearing to be

held on December 5, 2003. When, 2 days before the scheduled

date, petitioner informed Mr. Tracy that he could not attend the

conference, Mr. Tracy offered to reschedule the in-person meeting

for the week of December 15, 2003. However, petitioner himself

elected to proceed by correspondence and agreed on a December 17,

2003, submission deadline. He then failed to provide any

information or materials, although Mr. Tracy continued to wait

for a call or facsimile for more than a week beyond the deadline.

In these circumstances, petitioner cannot now be permitted

to complain that he was improperly deprived of a sufficient

conference. He was given a reasonable opportunity for a hearing

and failed to avail himself thereof. Accordingly, a

determination made on the basis of the existing record, which

reflected only frivolous arguments on the part of petitioner, was

appropriate here. Respondent’s actions were consistent with the

requirements reflected in section 6330 and the attendant

regulations and do not provide basis for a remand.
 - 14 -

2. Review of Underlying Liabilities

A statutory notice of deficiency for 2000 was issued to

petitioner, and communications from petitioner referencing the

notice make clear that this document was received. To the extent

that petitioner has argued that he should nonetheless be entitled

to challenge his underlying liabilities on grounds that the

notice was invalid, due to the lack of a delegation of authority

from the Secretary to the individual at the Ogden Service Center

who signed the notice, this contention is without merit.

The Secretary or his delegate may issue notices of

deficiency. Secs. 6212(a), 7701(a)(11)(B) and (12)(A)(i). The

Secretary’s authority in this matter has been delegated to

District Directors and Directors of Service Centers, and may in

turn be redelegated to officers or employees under the

supervision of such persons. Secs. 301.6212-1(a), 301.7701-9(b)

and (c), Proced. & Admin. Regs.; see also Nestor v. Commissioner,

118 T.C. at 165.

Hence, because petitioner received a valid notice of

deficiency and did not timely petition for redetermination, he is

precluded under section 6330(c)(2)(B) from disputing his

underlying tax liabilities in this proceeding. His remaining

contentions generally challenging the “existence” of any statute

imposing or requiring him to pay income tax warrant no further

comment. See Crain v. Commissioner, 737 F.2d 1417, 1417 (5th
 - 15 -

Cir. 1984) (“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.”).

3. Review for Abuse of Discretion

Petitioner has also made various arguments relating to

aspects of the assessment and collection procedures that we

review for abuse of discretion. Action constitutes an abuse of

discretion under this standard where arbitrary, capricious, or

without sound basis in fact or law. Woodral v. Commissioner, 112

T.C. 19, 23 (1999).

Federal tax assessments are formally recorded on a record of

assessment in accordance with section 6203. The Commissioner is

not required to use Form 23C in making an assessment. Roberts v.

Commissioner, 118 T.C. at 369-371. Furthermore, section

6330(c)(1) mandates neither that the Appeals officer rely on a

particular document in satisfying the verification requirement

nor that the Appeals officer actually give the taxpayer a copy of

the verification upon which he or she relied. Craig v.

Commissioner, 119 T.C. 252, 262 (2002); Nestor v. Commissioner,

118 T.C. at 166.

A Form 4340, for instance, constitutes presumptive evidence

that a tax has been validly assessed pursuant to section 6203.

Davis v. Commissioner, 115 T.C. at 40 (and cases cited thereat).

Consequently, absent a showing by the taxpayer of some
 - 16 -

irregularity in the assessment procedure that would raise a

question about the validity of the assessments, a Form 4340

reflecting that tax liabilities were assessed and remain unpaid

is sufficient to support collection action under section 6330.

Id. at 40-41. We have specifically held that it is not an abuse

of discretion for an Appeals officer to rely on Form 4340, Nestor

v. Commissioner, supra at 166; Davis v. Commissioner, supra at

41, or a computer transcript of account, Schroeder v.

Commissioner, T.C. Memo. 2002-190; Mann v. Commissioner, T.C.

Memo. 2002-48, to comply with section 6330(c)(1).

Here, the record contains a Form 4340 for 2000, dated August

11, 2003, indicating that assessments were made for the year and

that taxes remain unpaid. Petitioner has cited no irregularities

that would cast doubt on the information recorded thereon.

In addition to the specific dictates of section 6330, the

Secretary, upon request, is directed to furnish to the taxpayer a

copy of pertinent parts of the record of assessment setting forth

the taxpayer’s name, the date of assessment, the character of the

liability assessed, the taxable period, if applicable, and the

amounts assessed. Sec. 6203; sec. 301.6203-1, Proced. & Admin.

Regs. A taxpayer receiving a copy of Form 4340 has been provided

with all the documentation to which he or she is entitled under

section 6203 and section 301.6203-1, Proced. & Admin. Regs.

Roberts v. Commissioner, supra at 370 n.7. This Court likewise
 - 17 -

has upheld collection action where taxpayers were provided with

literal transcripts of account (so-called MFTRAX). See, e.g.,

Frank v. Commissioner, T.C. Memo. 2003-88; Swann v. Commissioner,

T.C. Memo. 2003-70. The December 3, 2003, letter to petitioner

from Mr. Tracy enclosed a copy of Form 4340.

Furthermore, arguments similar to petitioner’s statements

concerning copies of the tax returns from which assessments were

made have been summarily rejected. See, e.g., Bethea v.

Commissioner, T.C. Memo. 2003-278; Fink v. Commissioner, T.C.

Memo. 2003-61. The Court concludes that petitioner’s complaints

regarding the assessments and verification are meritless.

Petitioner has denied receiving the notice and demand for

payment that section 6303(a) establishes should be given within

60 days of the making of an assessment. However, a notice of

balance due constitutes a notice and demand for payment within

the meaning of section 6303(a). Craig v. Commissioner, supra at

262-263. The Form 4340 indicates that petitioner was sent

notices of balance due for the 2000 tax year.

Thus, with respect to those issues enumerated in section

6330(c)(2)(A) and subject to review in collection proceedings for

abuse of discretion, petitioner has not raised any spousal

defenses, valid challenges to the appropriateness of the

collection action, or collection alternatives. As this Court has

noted in earlier cases, Rule 331(b)(4) states that a petition for
 - 18 -

review of a collection action shall contain clear and concise

assignments of each and every error alleged to have been

committed in the notice of determination; any issue not raised in

the assignments of error shall be deemed conceded. See Lunsford

v. Commissioner, 117 T.C. 183, 185-186 (2001); Goza v.

Commissioner, 114 T.C. 176, 183 (2000). For completeness, we

have addressed various points advanced by petitioner during the

administrative process, but the items listed in section

6330(c)(2)(A) were not pursued even during those proceedings.

Accordingly, the Court concludes that respondent’s determination

to proceed with collection of petitioner’s tax liabilities was

not an abuse of discretion.

II. Section 6673 Penalty

Section 6673(a)(1) authorizes the Court to require the

taxpayer to pay a penalty not in excess of $25,000 when it

appears to the Court that, inter alia, 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. In Pierson v. Commissioner, 115 T.C. at 581, we

warned that taxpayers abusing the protections afforded by

sections 6320 and 6330 through the bringing of dilatory or

frivolous lien or levy actions will face sanctions under section

6673. We have since repeatedly disposed of cases premised on

arguments akin to those raised herein summarily and with
 - 19 -

imposition of the section 6673 penalty. See, e.g., Craig v.

Commissioner, 119 T.C. at 264-265 (and cases cited thereat).

With respect to the instant matter, we are convinced that

petitioner instituted this proceeding primarily for delay.

Throughout the administrative and pretrial process, petitioner

advanced contentions and demands previously and consistently

rejected by this and other courts. He submitted lengthy

communications quoting, citing, using out of context, and

otherwise misapplying portions of the Internal Revenue Code,

regulations, court decisions, and other authorities. Moreover,

petitioner was explicitly alerted to Pierson v. Commissioner,

supra, and the use of sanctions in analogous situations.

Hence, petitioner received fair warning but has persisted in

frivolously disputing respondent’s determination. The Court sua

sponte concludes that a penalty of $1,000 should be awarded to

the United States in this case. To reflect the foregoing,

An appropriate order

granting respondent’s motion

and decision for respondent

will be entered.