Michael A. Zapara and Gina A. Zapara v. Commissioner

124 T.C. No. 14

UNITED STATES TAX COURT

MICHAEL A. ZAPARA AND GINA A. ZAPARA, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 9480-02L. Filed May 17, 2005.

In a prior District Court criminal proceeding, Ps
pleaded guilty to various tax-related offenses with respect
to tax years 1993-95. Ps signed a Form 4549-CG, Income Tax
Examination Changes, in which they waived the right to
contest their tax liability in Tax Court and consented to
the immediate assessment and collection of their 1993-95
taxes. Subsequently, H’s plea agreement was found to
contain erroneous calculations as to the amount of the
Government’s tax loss; the District Court found that H had
received ineffective assistance of counsel in this regard
and reduced his sentence using the correct calculation.

In order to collect Ps’ 1993-95 tax liabilities as
shown on the Form 4549-CG, as well as Ps’ reported but
unpaid tax liabilities for tax years 1997 and 1998, R
made a jeopardy levy with respect to certain stock
accounts held on petitioners’ behalf. Ps requested an
Appeals Office hearing pursuant to sec. 6330(f), I.R.C.
During the Appeals Office case, Ps challenged their
underlying tax liabilities for 1993-95, alleging that
 - 2 -

they had signed the Form 4549-CG under duress or
coercion and that the Form 4549-CG overstated their
true tax liability. Pursuant to sec. 6335(f), I.R.C.,
Ps also requested R to sell the stock in the seized
stock accounts and apply the proceeds to their
outstanding tax liabilities.

R neither sold the stock in the seized accounts
nor made a determination that selling the stock would
not be in the best interests of the United States. R
sent Ps a notice of determination concluding that Ps
were precluded from challenging their underlying 1993-
95 tax liabilities and that the jeopardy levy would not
be withdrawn. Ps petitioned this Court to review R’s
determination. Ps claim that the value of the seized
stock accounts has declined significantly since they
requested R to liquidate them.

1. Held, Ps have not shown that they signed the
Form 4549-CG under duress or coercion, or that it
includes erroneous loss calculations; Ps may not
contest their underlying tax liabilities for 1993-95.

2. Held, further, R has complied with the notice
requirements of sec. 6331(a) and (d), I.R.C.

3. Held, further, Ps are entitled to a credit for
the value of the seized stock accounts as of the date
by which the stock should have been sold under sec.
6335(f), I.R.C.; i.e., 60 days from the date Ps
requested R to sell the stock and apply the proceeds to
their outstanding tax liabilities.

Michael A. Zapara and Gina A. Zapara, pro sese.

Lorraine Y. Wu, for respondent.
 - 3 -

THORNTON, Judge: Pursuant to section 6330(d), petitioners

seek review of an Appeals Office determination sustaining a

jeopardy levy.1

FINDINGS OF FACT

The parties have stipulated some facts, which we incorporate

herein. When they filed their petition, petitioners resided in

Kilauea, Hawaii.

Criminal Proceedings

On February 25, 1999, Mr. Zapara signed a plea agreement,

pleading guilty to tax evasion and bank fraud. In the plea

agreement, Mr. Zapara admitted that he evaded his taxes for tax

years 1993, 1994, and 1995, and that he should have reported

$465,943.62 in income he received as a result of bank fraud and

other fraudulent schemes. Also, on February 25, 1999, Mrs.

Zapara signed a plea agreement, pleading guilty to subscribing to

a false tax return and admitting that she signed a tax return

that omitted income derived from the fraudulent activities of Mr.

Zapara. Attorney Nicholas G. Spirtos (Mr. Spirtos) represented

petitioners during their criminal prosecutions and in negotiating

the plea agreements. On February 26, 2001, a Federal District

Court sentenced Mr. Zapara. James D. Henderson (Mr. Henderson)

represented Mr. Zapara in the sentencing phase of his criminal

case.

1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended.
 - 4 -

At some point after sentencing, Mr. Zapara filed a “Notice

of Motion and Motion to Vacate, Set Aside, or Correct Defendant’s

Sentence”. In his motion, Mr. Zapara alleged that he was denied

effective assistance of counsel, that his attorney, Mr. Spirtos,

had an irreconcilable conflict between his own interests and Mr.

Zapara’s interests, and that the plea agreement erroneously

computed the Government’s tax loss for purposes of sentencing.

In its opposition to Mr. Zapara’s motion, the Government conceded

that because of “a mathematical or typographical error in the

plea agreement, the tax loss was mistakenly calculated as being

over $200,000” and that the “correct tax loss is over $120,000”.

On February 28, 2002, the District Court filed an order

granting in part and denying in part Mr. Zapara’s motion. On the

basis of the Government’s concession, the District Court found

that Mr. Spirtos provided ineffective assistance of counsel in

negotiating a plea agreement containing a computational error and

that Mr. Henderson provided ineffective assistance of counsel in

failing to recognize the mistake and allowing Mr. Zapara to be

sentenced using the improper calculation. The District Court

corrected Mr. Zapara’s sentence using the proper calculation.
 - 5 -

Income Tax Examination and Form 4549-CG

On February 29, 2000, petitioners signed a Form 4549-CG,

Income Tax Examination Changes, for taxable years 1993, 1994, and

1995. The unreported income adjustments on the Form 4549-CG

total $361,559 for 1993, $23,894 for 1994, and $80,489 for 1995.2

The Form 4549-CG shows balances due, exclusive of interest and

penalties, of $122,463 for 1993, $3,695 for 1994, and $17,312 for

1995. After adding section 6663 fraud penalties and interest,

the Form 4549-CG shows balances due of $344,498 for 1993, $9,560

for 1994, and $40,657 for 1995.

Petitioners’ 1997 and 1998 Income Tax Liabilities

On May 15, 2000, petitioners filed their 1997 and 1998

income tax returns showing taxes due. On May 15, 2000, on the

basis of those returns, respondent made assessments of $30,744.60

for 1997 and $31,529.80 for 1998, as well as interest, penalties,

and additions to tax.

Jeopardy Levy

On June 1, 2000, respondent provided petitioners with

“Notice of Jeopardy Levy and Right of Appeal” for the following

unpaid tax amounts:

2
The adjustments for 1993 include (in addition to the
$361,559 unreported income adjustments) a $14,100 adjustment for
exemptions.
 - 6 -

Taxable
Period Tax Penalty Interest

1993 $122,463 $91,847 $157,408
1994 3,695 2,771 4,221
1995 17,312 12,984 15,085
1997 42,049 4,245 7,453
1998 38,264 2,167 4,060

On June 1, 2000, respondent issued Forms 668-A(c)(DO),

Notice of Levy, to Travis Morgan Securities, Inc., with respect

to certain nominee stock accounts held on petitioners’ behalf.

Respondent’s collection division took the position that these

stock accounts had a value of approximately $1 million--more than

enough to pay off fully petitioners’ then-outstanding tax

liabilities of about $500,000.

By letter dated June 21, 2000, petitioners requested a

section 6330 Appeals hearing with respect to the jeopardy levy.

In November 2000, Appeals Officer Janice Rich was assigned to

consider petitioners’ request for an Appeals hearing. In the

initial stages of the proceedings in the Appeals Office,

petitioners were represented by Mr. Spirtos; however, on

April 30, 2001, respondent received a Form 2848, Power of

Attorney and Declaration of Representative, for Steven R. Mather

(Mr. Mather). From that point on, Mr. Mather represented

petitioners in the Appeals Office.

In their Appeals Office case, petitioners raised the

following issues: (1) That they were not liable for the amounts

of tax asserted in the Form 4549-CG because they signed that form
 - 7 -

under duress; (2) that they believed the amounts asserted in the

Form 4549-CG were too high because it was their belief that the

amount of the liability in their criminal tax evasion proceeding

was less than the amount asserted in the Form 4549-CG signed by

petitioners; (3) that they wished to sell stock in the possession

of a revenue officer and apply the proceeds to their outstanding

tax liabilities; and (4) that they intended to submit an offer in

compromise or installment agreement. Petitioners did not submit

an offer in compromise or installment agreement for consideration

by the Appeals officer and did not raise any challenges to their

underlying tax liabilities for 1997 and 1998.

With respect to the sale of stock, on August 23, 2001, Mr.

Mather sent a fax to Appeals Officer Janice Rich asking her for a

“letter to say okay to release stock for sale.” On September 7,

2001, the Appeals officer called Mr. Mather regarding the

requested stock sale. Respondent’s case activity records reflect

that the Appeals officer indicated to Mr. Mather: “I would like

him to put his request in writing and send to me w/cc to RO

[revenue officer] since he is still working with RO. He said he

will do.” According to these same records, the Appeals officer

also told Mr. Mather: “I was going to talk to RO about stock

sale-he was okay with me doing that-rep [Mr. Mather] already

talked to him about too. RO told him he wanted approval from me

first.” On September 13, 2001, the Appeals officer informed Mr.
 - 8 -

Mather that he needed to submit information regarding the stock,

such as the fair market value, in writing and that a revenue

officer would make a determination regarding the sale of the

stock. Petitioners did not submit the required information

regarding the fair market value of the stock. Respondent did not

sell the stock accounts and made no determination regarding

petitioners’ request.

On May 8, 2002, the Appeals officer issued to petitioners a

Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330 (the notice of determination). In the

notice of determination, the Appeals Office determined that

petitioners were precluded from challenging their underlying tax

liabilities for 1993, 1994, and 1995, and that respondent’s

jeopardy levy would not be withdrawn.

OPINION

I. Introduction

If a person neglects or refuses to make payment of any

assessed Federal tax liability within 10 days of notice and

demand, the Secretary is authorized to collect the assessed tax

by levy on the person’s property. Sec. 6331(a). Section 6330(a)

provides, however, that no levy may be made on any property or

right to property of any person unless the Secretary has notified

such person in writing of the right to a fair hearing before

levy.
 - 9 -

Under section 6330(f), if the Secretary has made a finding

that the collection of tax is in jeopardy, the requirement of

notice and opportunity for hearing before levy under section 6330

shall not apply. Nonetheless, the taxpayer shall be given the

opportunity for the hearing described in section 6330 within a

reasonable period of time after the levy. Sec. 6330(f) (flush

language). We have jurisdiction under section 6330(d) to review

jeopardy levy determinations. Dorn v. Commissioner, 119 T.C. 356

(2002). Where the validity of the underlying tax liability is

properly at issue, we review the matter de novo; otherwise, we

review the Commissioner’s determination for an abuse of

discretion. Sego v. Commissioner, 114 T.C. 604, 610 (2000).

In this proceeding, petitioners raise challenges to their

underlying tax liabilities for 1993, 1994, and 1995, and the

Appeals Office’s determination not to withdraw respondent’s

jeopardy levy for 1993, 1994, 1995, 1997, and 1998.3

II. Underlying Tax Liabilities

At an Appeals Office hearing, the taxpayer may raise “any

relevant issue relating to the unpaid tax or the proposed levy”.

Sec. 6330(c)(2)(A). The taxpayer may challenge the existence or

amount of the underlying tax liability for any tax period if the

taxpayer received no statutory notice of deficiency for the tax

3
Petitioners make no argument that sec. 7491(a) applies in
this case and have not established that they satisfied the
requirements of sec. 7491(a)(2).
 - 10 -

liability or otherwise had no opportunity to dispute the tax

liability. Sec. 6330(c)(2)(B).

A. Form 4549-CG

Petitioners signed a Form 4549-CG, Income Tax Examination

Changes, waiving restrictions on assessment with respect to their

underlying tax liabilities for 1993, 1994, and 1995. We have

recently held that for purposes of section 6330(c)(2)(B), a

taxpayer who has signed a Form 4549-CG waiving his right to

challenge the proposed assessments should be deemed to have had

an opportunity to dispute his tax liabilities and is thereby

precluded from challenging those tax liabilities. Horn v.

Commissioner, T.C. Memo. 2002-207; see Aguirre v. Commissioner,

117 T.C. 324, 327 (2001). Petitioners argue, however, that they

signed their Form 4549-CG under duress. If a taxpayer signs a

Form 4549-CG under duress or coercion, the Form 4549-CG waiver is

invalid. Shireman v. Commissioner, T.C. Memo. 2004-155. This

Court has defined duress as actions by one party which deprive

another of his or her freedom of will to do or not to do a

specific act. Diescher v. Commissioner, 18 B.T.A. 353, 358

(1929); Price v. Commissioner, T.C. Memo. 1981-693, affd. without

published opinion 742 F.2d 1460 (7th Cir. 1984).

1. Duress or Coercion by Respondent

Petitioners allege that they signed the Form 4549-CG only as

a result of respondent’s continuous pattern of duress, coercion,

and intimidation against them. Petitioners’ allegation is
 - 11 -

unfounded and misplaced. It stems from the Government’s efforts

to prosecute them for admittedly criminal conduct and to collect

taxes and penalties. No doubt, given the circumstances, these

efforts were zealous and disadvantageous to petitioners; however,

petitioners have presented no evidence that these efforts went

beyond what the law prescribes and, indeed, requires. Insofar as

the Government’s actions leading up to petitioners’ signing of

the Form 4549-CG were authorized by law, those actions do not

give rise to duress or coercion. Shireman v. Commissioner,

supra; Ballard v. Commissioner, T.C. Memo. 1987-471, affd. 851

F.2d 359 (5th Cir. 1988).

On occasion, this Court has held that the Commissioner’s

threats to take otherwise lawful action against the taxpayer

constituted duress or coercion. See Diescher v. Commissioner,

supra (holding that the Commissioner’s threat to impose fraud

penalties if taxpayer did not sign waiver constituted duress);

Robertson v. Commissioner, T.C. Memo. 1973-205 (holding that the

taxpayers consented to extending the limitations period under the

Commissioner’s duress). Petitioners allege that respondent’s

agents (as well as their attorney) pressured them to sign the

Form 4549-CG as a precondition to their plea agreement.

Petitioners allege that they were informed the plea agreement

would be voided if they did not sign the Form 4549-CG before

their sentencing date.
 - 12 -

Petitioners have provided no factual support for their

allegations. The evidence indicates that petitioners were

informed that their signing of the Form 4549-CG was a

precondition to an offer in compromise, rather than a

precondition to the acceptance of their plea agreement.

Petitioners have not established any duress or coercion by

respondent.

2. Duress or Coercion by Petitioners’ Attorney

Petitioners allege that Mr. Spirtos was ineffective counsel

and argue that the lack of effective counsel invalidates the Form

4549-CG. In support of this argument, petitioners rely on a

transcript of a District Court hearing wherein the District Court

judge expressed general concern regarding Mr. Spirtos’s

effectiveness as an attorney and his handling of Mr. Zapara’s

criminal case.

We are not persuaded that ineffectiveness of counsel

constitutes duress or coercion or otherwise invalidates a Form

4549-CG. In any event, the District Court’s conclusions do not

establish that Mr. Spirtos was ineffective in representing

petitioners with respect to their signing the Form 4549-CG. The

District Court’s order, filed February 28, 2002, concluded that

Mr. Spirtos rendered ineffective assistance of counsel in

negotiating a plea agreement that contained an erroneous loss

calculation. The District Court’s order granted petitioners

relief to the “limited extent” of revising the loss calculation
 - 13 -

and reducing the sentence. The District Court concluded that

petitioners otherwise “suffered no prejudice” from Mr. Spirtos’s

representation of them. The District Court did not throw out the

plea agreement or otherwise vacate Mr. Zapara’s sentence. As

explained in more detail infra, the erroneous loss calculation is

not reflected in the Form 4549-CG. Accordingly, we are not

persuaded that any ineffective assistance of counsel on Mr.

Spirtos’s part prejudiced petitioners, much less amounted to

duress or coercion, with respect to their signing the Form 4549-

CG.

Petitioners also allege that, at the time they signed the

Form 4549-CG, Mr. Spirtos’s “conduct was self serving, he had an

irreconcilable conflict between his own interests and the

interests of his client * * * as he was under investigation from

the Internal Revenue [Service] and the United States Attorney’s

Office at the time he was representing the Petitioners”. In

support of this allegation, petitioners rely on the declaration

of Mr. Mather, which is attached to Mr. Zapara’s motion to

vacate, set aside, or correct his sentence, filed in the District

Court in September 2001. In that declaration, Mr. Mather

declared: “Mr. Scharf [petitioners’ attorney] asked [Mr. Spirtos

and Mrs. Spirtos] if, during their dealings with the government

on behalf of Mr. and Mrs. Zapara, there was an investigation by

the same agent and prosecutor concerning Mr. and Mrs. Spirtos.

Mrs. Spirtos agreed that there was.” Petitioners also rely on
 - 14 -

Mr. Zapara’s declaration attached to that same motion. In his

declaration, Mr. Zapara declares that following a June 2000

meeting with the U.S. Attorney’s Office, special agents asked

petitioners to leave and asked Mr. and Mrs. Spirtos to remain and

that “Mr. and Mrs. Spirtos informed us that they were being

investigated and the agents wanted to question them about that

investigation.”

We do not rely on Mr. Mather’s and Mr. Zapara’s declarations

for the truth of the matters asserted therein. Petitioners

provided no independent evidence to establish their allegations.

Mr. Zapara did not testify, petitioners did not call Mrs. Spirtos

as a witness, and although Mrs. Zapara testified, she did not

testify regarding Mr. Spirtos’s alleged conflict. In addition,

even if we were to assume that the declarations are true and that

Mr. Spirtos was under investigation by the Government,

petitioners introduced no evidence as to how this purported

circumstance influenced Mr. Spirtos’s representation of

petitioners, and prejudiced them, in their signing the Form 4549-

CG. We also point out that the District Court, which presumably

reviewed these declarations in issuing its February 28, 2002,

order, found Mr. Zapara’s arguments (other than his argument

regarding the loss calculation) to be “without merit”.

3. Conclusion

Petitioners have not shown that they signed the Form 4549-CG

under duress or coercion. Consequently, petitioners are
 - 15 -

precluded from challenging their underlying tax liabilities for

1993, 1994, and 1995.

B. Does the Form 4549-CG Include Erroneous Loss
Calculations?

As just discussed, in the criminal proceedings in Federal

District Court, Mr. Zapara challenged his sentence, arguing,

among other things, that the tax loss to the Government was

erroneously computed in his plea agreement. On the basis of this

argument, the District Court granted, in part, Mr. Zapara’s

motion to vacate, set aside, or correct sentence and revised Mr.

Zapara’s sentence using the correct tax loss figure. Petitioners

contend that their tax liabilities in the Form 4549-CG contain

these same erroneous calculations.

We need not decide whether petitioners’ signing the Form

4549-CG precludes them from arguing that the Form 4549-CG

contains errors, because petitioners have failed to show that the

Form 4549-CG contains the same erroneous calculations as Mr.

Zapara’s plea agreement. In calculating the Government’s tax

loss for 1993, 1994, and 1995, the plea agreement erroneously

included in income 100 percent (instead of 20 percent) of a

certain “Toya check” in 1994 and $250,000 (instead of $75,000) of

a certain “Booz check” in 1995. Using these erroneous figures,

the plea agreement computed the Government’s tax loss as being

more than $200,000, whereas the correct tax loss figure was

$128,390.29. At trial, Revenue Agent Barry Johnson, who prepared
 - 16 -

the Form 4549-CG, testified credibly, and without contradiction,

that the figures in the Form 4549-CG were correct and did not

contain the same errors as the plea agreement.4 Our own review of

the Form 4549-CG also indicates that the correct amounts of the

Toya and Booz checks were included in petitioners’ income as

reflected on that form.

C. Taxable Years 1997 and 1998

Petitioners’ unpaid tax liabilities for 1997 and 1998 arise

from self-assessed amounts reported on their Federal income tax

returns. Petitioners would not have been precluded from

challenging these liabilities under section 6330(c)(2)(B). See

Montgomery v. Commissioner, 122 T.C. 1 (2004). Nonetheless,

petitioners have raised no challenges to their unpaid tax

liabilities for 1997 and 1998.

III. Notice and Demand

In their pretrial memorandum and at trial, petitioners

argued that they did not receive proper notice and demand for

payment as required under section 6331(a). On brief, however,

petitioners make no argument regarding respondent’s compliance

with the requirement of notice and demand in section 6331(a). We

4
On the Form 4549-CG, the total amount of tax due for 1993,
1994, and 1995 is shown to be $143,470, whereas in petitioners’
criminal proceeding the Government indicated that the corrected
tax loss was $128,390.29. Revenue Agent Johnson explained that
this difference is attributable to the Government’s use of a flat
28-percent tax rate in criminal tax evasion cases.
 - 17 -

conclude that petitioners have abandoned this argument. See

Nicklaus v. Commissioner, 117 T.C. 117, 120 n.4 (2001)

(concluding that taxpayers abandoned arguments and contentions

asserted prior to the filing of their brief where they failed to

advance those arguments and contentions on brief). Even if we

had not concluded that petitioners have abandoned this argument,

however, we would reject such an argument for the reasons

described below.

As a general rule, if the Commissioner wishes to collect a

tax liability by levy, he must provide 10 days’ advance notice

and demand to the person who owes the tax. Sec. 6331(a). If the

Commissioner makes a finding that the collection of tax is in

jeopardy, however, he may make notice and demand for immediate

payment. Id. If the person who owes the tax then fails or

refuses to pay it, the Commissioner may collect without regard to

the usual 10-day notice and demand period. Id.

Generally, notice and demand for payment of tax shall be

left at the dwelling or usual place of business of the taxpayer,

or shall be sent by mail to the taxpayer’s last known address.

See sec. 6303(a). Generally, the taxpayer’s last known address

is the address shown on the taxpayer’s most recently filed

return, absent clear and concise notice of a change of address.

Abeles v. Commissioner, 91 T.C. 1019, 1035 (1988). The taxpayer

bears the burden of proving that notice was not sent to his or
 - 18 -

her last known address. See Yusko v. Commissioner, 89 T.C. 806,

808 (1987).

In connection with petitioners’ request for an Appeals

hearing, Appeals Officer Janice Rich prepared an Appeals case

memo, which is in evidence pursuant to the parties’ joint

stipulation. According to the Appeals case memo, the Appeals

officer verified that petitioners were sent proper notice and

demand for payment of their 1993, 1994, and 1995, tax

liabilities. Specifically, the Appeals officer verified that, on

May 2, 2000, these notices were accepted by taxpayer’s

housekeeper at 25 South Clancy Lane, Rancho Mirage, California,

which was petitioners’ last known address on respondent’s

computer database.5 The Appeals officer also verified that on the

same date (May 2, 2000), these notices were also mailed via

regular mail individually, and certified mail individually, to

the same address.

Petitioners have not challenged this verification, except in

these two respects: First, petitioners claim that on May 2,

2000, their legal residence was P.O. Box 1405, Rancho Mirage,

California. Petitioners presented no evidence, however, that

respondent was given notice of that address on or before May 2,

5
The Appeals officer also verified that petitioners were
given notice for their 1997 and 1998 tax years on May 15, 2000,
the date their 1997 and 1998 Federal income tax returns were
processed. Petitioners raised no challenge to that verification.
 - 19 -

2000, or that it was their last known address. Second,

petitioners contend that their housekeeper did not speak English,

had no authority to accept any letters or paperwork for

petitioners, and did not give any of the notices to petitioners.

We need not linger long over this latter contention, however, for

as previously discussed, the Appeals officer verified (and

petitioners have not refuted) that the notices were also mailed

to petitioners, by both regular and certified mail, on the same

date. Petitioners have failed to refute the Appeals officer’s

verification that respondent made notice and demand for payment

of petitioners’ tax liabilities as required by section 6331(a).6

IV. Notice of Intent To Levy

On brief, petitioners argue that they were not given proper

notice of intent to levy under section 6331(d). Section

6331(d)(1) and (2) provides that at least 30 days before taking

levy action, the Commissioner must provide the taxpayer with a

written notice of intent to levy. The notice requirement of

section 6331(d), however, does not apply to a levy if the

Commissioner has made a finding that collection of tax is in

6
At trial, respondent introduced into evidence Forms 3552,
Notice of Tax Due on Federal Tax Return, dated June 1, 2000 (the
same date the jeopardy levy was made), that are addressed to P.O.
Box 1405, Rancho Mirage, California 92270. Petitioners do not
deny receiving these notices. Inasmuch as we have upheld the
Appeals officer’s verification that respondent made proper notice
and demand on May 2, 2000, we need not and do not decide whether
these Forms 3552 satisfied the sec. 6331(a) notice and demand
requirements for the jeopardy levy.
 - 20 -

jeopardy. Sec. 6331(d)(3). Because respondent made a jeopardy

finding in this case, we conclude that respondent has complied

with section 6331(d) and that the 30-day period described in that

section is inapplicable.

V. Failure To Sell Stock Accounts

Respondent served a notice of levy, dated June 1, 2000, on

Travis Morgan Securities, Inc., which held a number of stock

accounts that Mr. Zapara owned. Petitioners allege that, at the

time of the levy, the stock accounts had a value of approximately

$1 million. Petitioners contend that they requested respondent

to liquidate the stock accounts, but that respondent failed to

honor their request. Petitioners claim the stocks have since

suffered a significant decline in value. Petitioners argue that

they should be given full credit of $1 million for the stock

accounts.

A. Seizure and Sale of Property

The Code defines the term “levy” to include seizure by any

means. Sec. 6331(b). Levy may be made by serving a notice of

levy on any person in possession of, or obligated with respect

to, property or rights to property subject to levy, including

receivables, bank accounts, evidences of debt, securities, and

salaries, wages, commissions, or other compensation. Sec.

301.6331-1(a)(1), Proced. & Admin. Regs. A levy is effective
 - 21 -

upon service of the notice of levy. Resolution Trust Corporation

v. Gill, 960 F.2d 336, 340 (3d Cir. 1992).7

Service of a notice of levy constitutes a seizure of

property, see sec. 6331(b) (equating levy and seizure); Phelps v.

United States, 421 U.S. 330, 337 (1975) (stating that “notice of

levy and demand are equivalent to seizure”); however, it does not

transfer ownership of property to the Internal Revenue Service

(IRS). “Ownership of the property is transferred only when the

property is sold to a bona fide purchaser at a tax sale.” United

States v. Whiting Pools, Inc., 462 U.S. 198, 211 (1983).

Instead, a notice of levy gives the Commissioner the right to all

property levied upon and creates a custodial relationship between

the third party and the IRS so that the property comes into the

constructive possession of the Government. United States v.

Natl. Bank of Commerce, 472 U.S. 713, 720 (1985). For these

7
Under sec. 6332(a), any person in possession of (or
obligated with respect to) property or rights to property subject
to levy upon which a levy has been made shall, upon demand of the
Secretary, surrender such property or rights (or discharge such
obligation) to the Secretary. If the third party honors the
levy, he or she is discharged from any obligation or liability to
the delinquent taxpayer (or any other person) with respect to
such property or rights to property arising from such surrender
or payment. Sec. 6332(e). If, on the other hand, the third
party refuses to honor a levy, he or she becomes personally
liable to the Government. Sec. 6332(d)(1) and (2); see United
States v. Natl. Bank of Commerce, 472 U.S. 713, 721 (1985).
 - 22 -

reasons, a taxpayer generally is not entitled to a credit for

seized property until it is sold. See sec. 6342.8

B. Dominion and Control of Seized Property

Some courts have held that a taxpayer is entitled to credit

for seized property where the Commissioner has exercised dominion

and control over the property to the taxpayer’s exclusion. See

United States v. Barlow’s, Inc., 767 F.2d 1098 (4th Cir. 1985),

affg. 53 Bankr. 986 (E.D. Va. 1984); United States v. Pittman,

449 F.2d 623 (7th Cir. 1971). Petitioners rely upon these cases

in arguing that they are entitled to a credit for the value of

their stock accounts.

In each of the cited cases, the Commissioner went well

beyond mere service of a notice of levy on the property,

exercising powers over the property essentially consistent with

ownership. For example, in United States v. Barlow’s, Inc.,

supra, the Commissioner served a notice of levy on a third-party

debtor with respect to an account receivable that the taxpayer

owned. The Commissioner did not sell the account receivable but

8
Sec. 6342(a) provides that any money realized by
proceedings under the seizure of property provisions (whether
realized by seizure, by surrender, or by sale of seized
property), or by sale of property redeemed by the United States
shall be applied: (1) First, against the expenses of the
proceedings; (2) then against any specific tax liability on the
seized property; and (3) then against the liability in respect of
which the levy was made or the sale was conducted. The
Commissioner must credit or refund to the taxpayer any surplus
proceeds. Sec. 6342(b).
 - 23 -

instead entered into an installment payment agreement with the

debtor. The third-party debtor made some payments pursuant to

this agreement but ultimately defaulted on it. The Commissioner

failed to take any further action to collect on the account

receivable or the installment payment agreement.

In United States v. Pittman, supra, the Commissioner served

notice of levy on a third-party nominee that held legal title to

the taxpayer’s real property. The nominee thereafter quitclaimed

this property to the Commissioner, who recorded the deed,

maintained insurance on the property, and rented the property.

These cases are factually distinguishable from the instant

case, and petitioners’ reliance upon them is misplaced.

Petitioners have failed to allege facts that would support a

finding that respondent exercised dominion and control over their

seized property. Petitioners have alleged no action by

respondent with respect to their stock accounts, other than

levying upon them. Petitioners’ lack of control over the

accounts and their inability to sell the stocks does not

establish conduct on respondent’s part analogous to the

Commissioner’s conduct in United States v. Barlow’s, Inc., supra,

or United States v. Pittman, supra. Cf. Murphy v. United States,

45 F.3d 520 (1st Cir. 1995); Enos v. Commissioner, 123 T.C. 284,

298 (2004). Petitioners have failed to show that respondent

exercised dominion and control over the stock accounts.
 - 24 -

C. Duty To Sell Seized Property

Petitioners argue that respondent had an obligation under

the seizure and sale provisions of the Code to sell the stock in

the nominee accounts. Petitioners contend that respondent’s

failure to sell the stock entitles them to a credit equal to the

value of the stock at the time it should have been sold.

In any case in which the Commissioner may levy upon property

or rights to property, he may seize and sell such property or

rights to property (whether real or personal, tangible or

intangible). Sec. 6331(b). As soon as practicable after seizure

of property, the Commissioner shall give notice of seizure and

sale to the owner of the property (or, in the case of personal

property, the possessor thereof), and shall give public notice of

the time, place, manner and conditions of sale. Sec. 6335(a) and

(b). The time of sale shall not be less than 10 days nor more

than 40 days from the time of giving public notice of sale. Sec.

6335(d).

Section 6335(b) does not say exactly how long the

Commissioner has between seizing property and publishing notice

of sale; it just says “as soon as practicable”. See Anderson v.

United States, 44 F.3d 795, 800 (9th Cir. 1995). Nonetheless, if

the owner believes that the Commissioner is taking longer than

necessary to sell seized property, the owner has the right to

request sale under section 6335(f). Id. “The request provision
 - 25 -

of * * * [section 6335(f)] gives the owner a remedy if the IRS

has seized the property, a long time has passed, yet the IRS has

not given notice of when the sale will be held.” Id. In this

sense, section 6335(f) effectively “regulates the time period

between seizure and sale”. Id. Because section 6335(f) provides

an adequate remedy for any delays in selling property and in the

absence of a definite statutory time period for providing notice

of public sale, we decline to impose on respondent a general duty

to timely sell seized property pursuant to section 6335(b).9 Cf.

Cash v. United States, 961 F.2d 562, 567 (5th Cir. 1992)

(rejecting taxpayers’ contention that section 6335(b) requires

the Commissioner to sell all property it seizes: “We read that

section as merely setting forth the procedures the Service must

follow when it does sell such property.”).

D. Request To Sell Seized Property Pursuant to Section
6335(f)

Under section 6335(f), the owner of any property seized by

levy may request the Commissioner to sell the seized property

within 60 days after the request (or within any longer period

9
We note that sec. 6336 authorizes the Commissioner to sell
any seized property that is liable to perish or become greatly
reduced in price or value by keeping. Except in hindsight,
petitioners do not allege facts that might have authorized an
immediate sale of their stock under sec. 6336. See Galusha v.
Commissioner, 95 T.C. 218 (1990); Williams v. Commissioner, 92
T.C. 920 (1989). We do not decide whether the Commissioner has a
general duty to sell property of the type described in that
section.
 - 26 -

that the owner specifies). The Commissioner must comply with the

request unless the Commissioner determines (and notifies the

owner within such period) that compliance would not be in the

best interests of the United States. Sec. 6335(f).

The applicable regulation requires that any request under

section 6335(f) be made in writing to the group manager of the

revenue officer whose signature is on the notice of levy. Sec.

301.6335-1(d)(2)(i), Proced. & Admin. Regs.10 The regulation

provides that the request to sell seized property should include

the following information:

(A) The name, current address, current home and
work telephone numbers and any convenient times to be
contacted, and taxpayer identification number of the
owner making the request;

(B) A description of the seized property that is
the subject of the request;

(C) A copy of the notice of seizure, if available;

(D) The period within which the owner is
requesting that the property be sold; and

(E) The signature of the owner or duly authorized
representative. * * * [Sec. 301.6335-1(d)(2)(ii),
Proced. & Admin. Regs.]

The group manager must respond in writing to a request for sale

of seized property as soon as practicable after receipt of such

request and in no event later than 60 days after receipt of the

10
If the owner does not know the group manager’s name or
address, the owner may send the request to the revenue officer,
marked for the attention of his or her group manager. Sec.
301.6335-1(d)(2)(i), Proced. & Admin. Regs.
 - 27 -

request (or, if later, the date specified by the owner for the

sale). Sec. 301.6335-1(d)(3), Proced. & Admin. Regs.

Petitioners contend that their counsel requested respondent

to sell the stocks in the seized accounts. On the basis of all

the evidence, we believe that such a request was made. Indeed,

the Appeals officer’s case memo states: “The request to sell the

stock was made during consideration of this case.” The question

is when was the request made. The evidence is skimpy.

Petitioners rely upon a letter to Mr. Spirtos from Revenue

Officer F. Stevens, dated November 2, 2000. This letter states:

“The funds under levy at Travis Morgan Securities, Inc. have not

been liquidated to date because of your request for a Collection

Due Process hearing, otherwise the funds would have been

forwarded to the IRS within 45 days of the date the levy was

served.” On the basis of this letter, petitioners claim that

they must have made a request before November 2, 2000. In the

absence of additional evidence, however, we cannot infer that

this statement was made in response to any request from

petitioners to sell their stock.11

The Appeals officer’s case activity record contains this

entry, dated March 20, 2001: “TC [telephone call] from manager

of RO [Revenue Officer] group-wanted to know if we had resolved

11
This letter appears to have been made in response to a
payment plan proposal from petitioners.
 - 28 -

case since he was worried about not getting money under the levy

issued. Told him he could not do anything until we resolved cdp

[collection due process] case.” There is no indication, however,

that the group manager’s concern arose from any request by

petitioners to sell the stock; instead, this entry appears to

reflect an internal deliberation.

Another entry in the Appeals officer’s case activity record

indicates that on August 23, 2001, Mr. Mather sent a fax to the

Appeals officer “asking me for [a] letter to say okay to release

stock for sale.” The Appeals officer treated this request as a

request to sell the seized stock accounts. Although the request

is directed to the Appeals officer, rather than the revenue

officer group manager, it is clear from the case activity record

that the Appeals officer assumed effective authority over the

disposition of the seized stock accounts as early as March 20,

2001. Under the circumstances of this case, we treat the

August 23, 2001, fax from Mr. Mather as a request for sale of the

seized stock pursuant to section 6335(f).12

12
The parties did not stipulate the complete administrative
record or offer into evidence the Aug. 23, 2001, fax from Mr.
Mather. Consequently, we are unable to determine whether the fax
contained all the information specified in sec. 301.6335-
1(d)(2)(ii), Proced. & Admin. Regs., and whether it was signed by
petitioners or their duly authorized representative. Considering
the Appeals officer’s subsequent response, we believe that the
fax was sufficient for purposes of sec. 6335(f).
 - 29 -

Under section 6335(f), after petitioners’ request,

respondent had 60 days to sell the stock accounts or to make a

determination that a sale would not be in the best interests of

the United States. Respondent did not sell the stock accounts

and made no such determination. Instead, the Appeals officer

took the position that petitioners first had to establish the

fair market value of the stocks in the accounts. Respondent

cites no authority for conditioning sale on submission of this

information. Neither section 6335(f) nor the regulation requires

the taxpayer to submit information regarding the fair market

value of the seized property.13 Instead, section 6335(f) is clear

that upon request, respondent must sell the seized property or

make a determination why a sale is not in the best interests of

the United States.

E. Did Section 6330(e)(1) Preclude Respondent From Selling
the Stock?

Respondent argues that under section 6330(e)(1), he was

precluded from taking any action to collect pursuant to the levy,

including selling the stock.

13
Cf. sec. 6343(a)(1) (authorizing the Commissioner to
release a levy under certain specified conditions, including
where the fair market value of the property exceeds the
taxpayer’s liability and release of the levy on a part of the
property could be made without hindering the collection of the
liability); sec. 301.6343-1(b)(5), Example, Proced. & Admin.
Regs. (providing for release of seized property where taxpayer
establishes that fair market value exceeds tax liability). There
is no indication that Mr. Mather’s Aug. 23, 2001, request was
treated as a request for release of levy.
 - 30 -

Section 6330(e)(1) provides in relevant part: “if a hearing

is requested under * * * [section 6330(a)(3)(B)], the levy

actions which are the subject of the requested hearing * * *

shall be suspended for the period during which such hearing, and

appeals therein, are pending.” In the instant case, however, the

levy action that is the subject of the section 6330 hearing had

already occurred--under section 6331(a), respondent had made a

finding that the collection of tax was in jeopardy and had levied

on the stock accounts. Under section 6330(f)(1), if the

Commissioner has made a finding that the collection of tax is in

jeopardy, section 6330 shall not apply, except that the taxpayer

shall be given the opportunity for a section 6330 hearing within

a reasonable period of time after the levy. By reason of section

6330(f)(1), section 6330(e)(1) did not suspend the levy action

that had already occurred and did not otherwise preclude

respondent from selling the stock under section 6335.14

F. Did the Internal Revenue Manual Preclude Respondent From
Selling the Stock?

Respondent also argues that a sale of the seized stock

accounts would have been improper under Internal Revenue Manual,

14
On Jan. 18, 2002, the Secretary issued final regulations
under sec. 6330, which are consonant with our reading of sec.
6330(e)(1). The applicable regulation asks: “What, if any,
enforcement actions can the IRS take during the suspension
period?” and answers: “the provisions in section 6330 do not
apply when the IRS * * * determines that collection of the tax is
in jeopardy.” Sec. 301.6330-1(g)(2), Q&A-G3, Proced. & Admin.
Regs.
 - 31 -

sec. 5.10.4.1.1(2), which provides that the sale of seized

property will generally be suspended during the administrative

review process provided in section 7429.

Within 5 days after a jeopardy assessment is made under

section 6861 or a jeopardy levy is made under section 6331(a),

the Commissioner must provide the taxpayer a written statement of

the information upon which the Commissioner relied in making the

assessment or levy. Sec. 7429(a)(1)(B). Within 30 days after

the taxpayer is furnished this written statement, or within 30

days after the last day of the period within which such statement

is required to be furnished, the taxpayer may request the

Commissioner to review the action taken. Sec. 7429(a)(2). After

a request for review is made, the Commissioner must make a

determination whether the jeopardy assessment or jeopardy levy is

reasonable under the circumstances and whether the amount

assessed is appropriate. Sec. 7429(a)(3).

On June 1, 2000, respondent issued to petitioners a notice

of jeopardy levy and right of appeal under section 7429(a)(1).

Petitioners then had 30 days within which to make a request for

administrative review under section 7429(a)(2). They made no

such request. Instead, petitioners submitted a Form 12153,

Request for a Collection Due Process Hearing, under section 6330.

Under these circumstances, a sale of the seized stock accounts

was stayed by section 6863(c) only for the 30-day period that
 - 32 -

petitioners could have requested administrative review under

section 7429; i.e., until 30 days after June 1, 2000.

Consequently, the Internal Revenue Manual section that respondent

points to does not preclude respondent’s sale of the stock

accounts under section 6335(f).

G. Conclusion

On August 23, 2001, petitioners requested that respondent

sell their stock and apply the proceeds to their outstanding tax

liabilities. Respondent neither sold the stock nor made a

determination that sale of the stock would not be in the best

interests of the United States. We hold that petitioners are

entitled to a credit for the value of the stock accounts as of

the date by which the stocks should have been sold under section

6335(f); i.e., 60 days from August 23, 2001.15 We also hold that

respondent cannot claim any interest or accrue penalties on this

credited amount after such date. See United States v. Barlows,

Inc., 53 Bankr. 986 (E.D. Va. 1984). Under the circumstances, we

believe it appropriate to remand this case to the Appeals Office

for purposes of establishing the value of the stock accounts as

of 60 days after August 23, 2001, and determining whether

petitioners’ tax liabilities for 1993, 1994, 1995, 1997, and 1998

15
If, however, the value of the stock presently exceeds its
value as of 60 days from Aug. 23, 2001, then respondent shall
sell the stock and give petitioners appropriate credit.
 - 33 -

remain unpaid, after crediting their accounts in accordance with

this Opinion.

VI. Whether the Appeals Officer Abused Her Discretion

A. Installment Agreement

At some point before Appeals Officer Janice Rich was

assigned to petitioners’ section 6330 case, petitioners proposed

to pay $4,000 each month or $12,000 each quarter towards their

1997 and 1998 unpaid income tax liabilities. In a letter dated

November 2, 2000, Revenue Officer F. Stevens informed petitioners

that respondent could not accept their proposal, partly because

they were not current in filing Federal tax returns.

Petitioners argue that respondent’s failure to accept their

payment proposal was an abuse of discretion. Petitioners allege

that respondent’s own actions precluded petitioners from filing

returns in subsequent tax years. Petitioners fail to explain,

however, how respondent’s actions precluded them from filing tax

returns. On the record before us, we find petitioners’

allegation implausible. In any event, respondent cited numerous

reasons for rejecting petitioners’ payment proposal, including

their ability to make full or significant payment of all taxes

due, their failure to submit collection information statements,

and their failure to include all outstanding tax years. Finally,

there is no indication in the record that petitioners proposed

their payment plan in the Appeals hearing. Generally, this Court
 - 34 -

does not consider issues or collection alternatives that are not

raised in the Appeals hearing. Magana v. Commissioner, 118 T.C.

488, 493 (2002).

B. Offer in Compromise

At some point during the Appeals hearing, Mr. Mather

indicated that petitioners intended to submit an offer in

compromise. Nevertheless, petitioners failed to submit an offer

in compromise. It appears that petitioners were not in full tax

compliance at the time of the Appeals hearing because they had

not filed their 1999 or 2000 Federal income tax return.

C. Other Challenges

Petitioners raise no spousal defenses, other collection

alternatives, or other challenges to the jeopardy levy. Those

issues are deemed conceded. See Rule 331(b)(4).

VII. Conclusion

Under section 6330(c)(2)(B), petitioners are precluded from

challenging their underlying tax liabilities for 1993, 1994, and

1995. Petitioners raised no challenges to their underlying tax

liabilities for 1997 and 1998 and, therefore, have conceded those

issues. We remand this case to Appeals for purposes of
 - 35 -

determining the value of the seized stock accounts as of the date

which is 60 days after August 23, 2001.

An appropriate order will

be issued.