T.C. Memo. 2005-228
UNITED STATES TAX COURT
JOHN R. FORREST, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 10270-03L. Filed September 29, 2005.
John R. Forrest, pro se.
Mary Ann Waters, for respondent.
MEMORANDUM OPINION
GALE, Judge: This case is before us on respondent's motion
for summary judgment on the question of whether he may proceed
with a levy to collect petitioner's outstanding liabilities for
income taxes for the taxable years 1991, 1992, 1993, and 1994,
and whether a penalty should be imposed on petitioner pursuant to
2
section 6673(a)(1).1 Petitioner filed a response to respondent's
motion, and a hearing was held thereon. Although petitioner's
response initially disputed whether respondent had correctly
computed interest and penalties for the years at issue,
petitioner conceded at the hearing that the computations were
correct.
Summary judgment is intended to expedite litigation and
avoid unnecessary and expensive trials. Fla. Peach Corp. v.
Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be
granted with respect to all or part of the legal issues in
controversy "if the pleadings, answers to interrogatories, * * *
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". Rule 121(a) and (b); Sundstrand
Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965
(7th Cir. 1994). The moving party bears the burden of proving
that there is no genuine issue of material fact, and factual
inferences are drawn in a manner most favorable to the party
opposing summary judgment. Dahlstrom v. Commissioner, 85 T.C.
812, 821 (1985); Jacklin v. Commissioner, 79 T.C. 340, 344
(1982).
1
Unless otherwise noted, 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.
3
Background
The parties have stipulated or otherwise do not dispute the
following.
At the time of filing the petition in the instant case,
petitioner resided in Grimstead, Virginia. Petitioner is a
college graduate.
On November 15, 1996, respondent sent petitioner a notice of
deficiency, determining Federal income tax deficiencies for the
taxable years 1991, 1992, 1993, and 1994. Petitioner received
the notice of deficiency.
On February 7, 1997, petitioner timely filed a petition with
this Court for a redetermination of the deficiency.
On October 9, 1998, this Court issued an opinion in
petitioner's case, see Forrest v. Commissioner, T.C. Memo. 1998-
369, followed by entry of decision on October 30, 1998,
sustaining the 1991-94 deficiencies in full and imposing a $500
penalty under section 6673(a)(1) upon petitioner for making
frivolous arguments.
Respondent issued a Notice of Balance Due for each of the
years 1991 through 1994 on April 26, 1999.
On May 27, 2002, respondent sent petitioner a Letter 1058,
Final Notice--Intent to Levy and Notice of Your Right to a
Hearing, advising petitioner that respondent intended to levy and
collect unpaid income tax liabilities for 1991, 1992, 1993, and
4
1994. Petitioner timely submitted to respondent a Form 12153,
Request for a Collection Due Process Hearing, covering the
foregoing years. On the Form 12153, petitioner alleged that the
proposed levy was invalid for the following reasons:
The United States of America has no valid Constitutional
authority to levy any income tax, or self-employment tax, or
interest or penalties on those taxes. The 16th Amendment,
which appears to grant such authority, is contrary and
repugnant to the 10th amendment which allocated 100 percent
of all possible rights and powers at the time of its
adoption. Any increase in Federal power at the expense
of either individual rights or states rights is a
violation of the 10th amendment.
On May 20, 2003, a face-to-face meeting with petitioner was
held by an Appeals officer.
On May 29, 2003, respondent issued a Notice of Determination
Concerning Collection Action(s) Under Section 6320 and/or 6330,
with respect to petitioner's unpaid liabilities for 1991, 1992,
1993, and 1994. The notice of determination noted that
petitioner offered no collection alternatives and presented
arguments concerning the underlying tax liabilities that could
not be considered, given that petitioner had received a statutory
notice of deficiency with respect to the liabilities. The notice
concluded that the proposed levy properly balanced the efficient
collection of the liabilities with any concerns regarding the
intrusiveness of the action and that respondent could proceed
with collection. The notice also advised petitioner of the Tax
Court's authority to impose a penalty under section 6673 where
5
litigants advance frivolous or groundless positions and of the
Appeals officer's view that the positions petitioner had taken in
his hearing request and at the hearing were groundless.
On June 30, 2003, petitioner filed a petition with this
Court seeking review of the Appeals officer's determination.
Discussion
Section 6331(a) authorizes the Secretary to levy upon
property and property rights of a taxpayer liable for taxes who
fails to pay those taxes within 10 days after notice and demand
for payment is made. Section 6331(d) provides that the levy
authorized in section 6331(a) may be made with respect to any
unpaid tax only if the Secretary has given written notice to the
taxpayer 30 days before the levy. Section 6330(a) requires the
Secretary to send a written notice to the taxpayer of the amount
of the unpaid tax and of the taxpayer's right to a section 6330
hearing at least 30 days before any levy is begun.
If a section 6330 hearing is requested, the hearing is to be
conducted by Appeals, and, at the hearing, the Appeals officer
conducting it must verify that the requirements of any applicable
law or administrative procedure have been met. Sec. 6330(b)(1)
and (c)(2). The taxpayer may raise at the hearing "any relevant
issue relating to the unpaid tax or the proposed levy". Sec.
6330(c)(2)(A). The taxpayer may also raise challenges to the
existence or amount of the underlying tax liability at the
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hearing, but only if the taxpayer did not receive a statutory
notice of deficiency with respect to the underlying tax liability
or did not otherwise have an opportunity to dispute that
liability. Sec. 6330(c)(2)(B).
At the conclusion of the hearing, the Appeals officer must
determine whether and how to proceed with collection and shall
take into account (i) the verification that the requirements of
any applicable law or administrative procedure have been met,
(ii) the relevant issues raised by the taxpayer, (iii) challenges
to the underlying tax liability by the taxpayer, where permitted,
and (iv) whether any proposed collection action balances the need
for the efficient collection of taxes with the legitimate concern
of the taxpayer that the collection action be no more intrusive
than necessary. Sec. 6330(c)(3).
We have jurisdiction to review the Appeals officer's
determination where we have jurisdiction over the type of tax
involved in the case. Sec. 6330(d)(1)(A); see Iannone v.
Commissioner, 122 T.C. 287, 290 (2004). Generally, we may
consider only those issues that the taxpayer raised during the
section 6330 hearing. See sec. 301.6330-1(f)(2), Q&A-F5, Proced.
& Admin. Regs.; see also Magana v. Commissioner, 118 T.C. 488,
493 (2002). Where the underlying tax liability is properly at
issue, we review the determination de novo. E.g., Goza v.
Commissioner, 114 T.C. 176, 181-182 (2000). Where the underlying
7
tax liability is not at issue, we review the determination for
abuse of discretion. Id. at 182. Whether an abuse of discretion
has occurred depends upon whether the exercise of discretion is
without sound basis in fact or law. See Ansley-Sheppard-Burgess
Co. v. Commissioner, 104 T.C. 367, 371 (1995).
In the instant case, it is undisputed that petitioner
received a notice of deficiency with respect to the outstanding
liabilities for 1991, 1992, 1993, and 1994. Petitioner timely
petitioned this Court for a redetermination of the asserted
deficiencies, and an opinion and decision ensued which sustained
the 1991-94 deficiencies in full and imposed a section 6673
penalty on petitioner. See Forrest v. Commissioner, T.C. Memo.
1998-369. Consequently, petitioner was precluded from disputing
the underlying tax liabilities for 1991-94 at his hearing and
herein, see sec. 6330(c)(2)(B), and our earlier decision would in
any event be res judicata.
The only argument petitioner maintains in opposition to
respondent's motion is his contention, raised in his hearing and
in the petition, that the liabilities at issue may not be
collected because the Federal income tax is unconstitutional.2
2
Petitioner also argued in his petition that he did not
receive notice of the assessment of the liabilities at issue, but
did not renew that argument in his opposition to respondent's
motion. Assuming arguendo the argument has not been abandoned,
this claim is unavailing. The notice of intent to levy, receipt
of which by petitioner is undisputed, was sufficient to satisfy
(continued...)
8
More specifically, petitioner contends that the 16th Amendment
authorizing a direct tax on income is itself unconstitutional
because it violates the 10th Amendment. Even if petitioner's
argument contained a scintilla of merit (which it does not), it
would be unavailing in this proceeding because petitioner is
precluded at this point from disputing the underlying tax
liabilities. Sec. 6330(c)(2)(B).
The foregoing being petitioner's only argument, and there
being no genuine issue as to any material fact, see Rule 121(a)
and (b), we conclude that respondent is entitled to summary
judgment in his favor on the issue of whether he may proceed with
the proposed levy.
In his motion, respondent also seeks imposition on
petitioner of a penalty under section 6673(a)(1). We have
previously warned taxpayers that penalties under section 6673 may
be imposed in lien and levy actions where frivolous or groundless
positions are taken. See, e.g., Roberts v. Commissioner, 118
2
(...continued)
the notice requirements of sec. 6303(a). Hughes v. United
States, 953 F.2d 531, 536 (9th Cir. 1992); Standifird v.
Commissioner, T.C. Memo. 2002-245, affd. 72 Fed. Appx. 729 (9th
Cir. 2003).
Finally, petitioner argued, for the first time at the
hearing on respondent's motion, that sec. 6330 did not apply to
this case because the statute was enacted after the deficiencies
for 1991-94 had been determined and assessed. Even if petitioner
were permitted to raise the issue at this point, it is devoid of
merit. Sec. 6330 applies to collection actions commenced 180
days after its July 22, 1998, enactment, or Jan. 18, 1999. The
collection action in this case commenced on May 27, 2002.
9
T.C. 365, 372-373 (2002), affd. 329 F.3d 1224 (11th Cir. 2003);
Pierson v. Commissioner, 115 T.C. 576, 581 (2000). Petitioner's
argument that the Federal income tax is unconstitutional because
the 16th Amendment violates the 10th amendment is patently
frivolous,3 and all other arguments he raised at various points
in the proceeding are similarly groundless. He was expressly
warned in the notice of determination that his constitutional
argument was groundless and might result in a penalty under
section 6673 in any Tax Court proceeding. He persisted with the
argument throughout this proceeding, even after respondent's
counsel provided him with authority holding the argument
groundless. Moreover, petitioner previously received a $500
penalty under section 6673(a)(1) for making groundless arguments
in the deficiency proceeding covering the liabilities at issue
herein.
Petitioner's groundless arguments and contumacious conduct
have wasted the time and resources of respondent and this Court.
While a more substantial penalty may be warranted, we shall
impose a penalty pursuant to section 6673(a)(1) of $2,500, in
light of the relatively modest size of the liabilities at issue.
Petitioner is hereby warned, however, that should he advance
frivolous or groundless arguments in this Court in the future,
3
See, e.g., Harrell v. Commissioner, 191 F.3d 456 (7th Cir.
1999), affg. without published opinion T.C. Memo. 1998-207.
10
more severe penalties may be imposed. To reflect the foregoing,
An appropriate order and
decision will be entered
for respondent.