Wright v. Comm'r

T.C. Memo. 2005-291

UNITED STATES TAX COURT

GARY WRIGHT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 4311-04L. Filed December 20, 2005.

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 groundless
complaints in dispute of the notice of intent to levy,
R’s determination to proceed with collection action is
sustained.

Held, further, a penalty under sec. 6673, I.R.C.,
is due from P and is awarded to the United States in
the amount of $2,500.

Gary Wright, pro se.

Alan J. Tomsic, for respondent.
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MEMORANDUM FINDINGS OF FACT AND OPINION

WHERRY, Judge: This case arises from a petition for

judicial review filed in response to a Notice of Determination

Concerning Collection Action(s) Under Section 6320 and/or 6330.1

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.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found.

The stipulations of the parties are incorporated herein by this

reference.

This case involves petitioner’s 1993 and 1994 income tax

liabilities. Petitioner did not file a Federal income tax return

for either the 1993 or the 1994 taxable year. On June 9, 1997,

respondent issued to petitioner a separate statutory notice of

deficiency for each of these years. The notices were returned

undelivered, rather than received by petitioner, and petitioner

did not file a petition with this Court in response thereto.

Respondent assessed the determined deficiencies, additions to

tax, and interest for 1993 and 1994 on October 13, 1997. Notices

1
Unless otherwise indicated, section references are to the
Internal Revenue Code of 1986, as amended, and Rule references
are to the Tax Court Rules of Practice and Procedure.
 - 3 -

of balance due were sent to petitioner with respect to each year

on that date and on November 17, 1997.

On May 7, 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 1993 and 1994.

Petitioner timely submitted to respondent a Form 12153, Request

for a Collection Due Process Hearing, with attachments, setting

forth his disagreement with the proposed levy. He stated on the

Form 12153: “Don’t owe any money”, and listed on the attached

sheets enumerated documents (pertaining to, among other things,

underlying tax liability, assessment, notice and demand for

payment, and verification from the Secretary that the

requirements of any applicable law or procedure had been met)

that he requested be provided at the hearing before he would be

“persuaded that I am legally obligated to pay the taxes at

issue.” He also asserted that he would be recording the hearing

pursuant to section 7521(a)(1).

By a letter dated October 8, 2003, Michael A. Freitag, the

settlement officer to whom petitioner’s case had been assigned,

explained that the Internal Revenue Service (IRS) Office of

Appeals did not provide face-to-face hearings where the only

items for discussion raised by the taxpayer were those deemed by

the courts to be frivolous or groundless. Accordingly, Mr.

Freitag scheduled a telephone conference for November 4, 2003,
 - 4 -

but afforded petitioner an opportunity within 15 days to submit

relevant issues justifying an in-person interview. Petitioner

did not respond with legitimate issues but apparently spoke with

Mr. Freitag on November 4, 2003, continuing to insist on his

right to a face-to-face hearing. He was not afforded such an in-

person interview; instead, a series of letters resulted in what

was essentially a hearing by correspondence.

Petitioner sent a letter dated November 10, 2003,

reiterating and expanding upon his demands for a face-to-face

hearing and extensive documentation. He further tendered various

arguments about not having any “Income” in the “Constitutional

sense” and not being taxable under the provisions of section 861.

Mr. Freitag then sent two followup letters, dated November 19

and 21, 2003, respectively.

In the first, Mr. Freitag discussed at length the substance

of his review of petitioner’s case. Mr. Freitag again emphasized

the need to raise relevant issues and petitioner’s failure to do

so, and he warned about the possibility of sanctions. Concerning

liability, the letter noted: “As you did not have a prior

opportunity to dispute the assessments, you were allowed to

challenge the amount or existence of the underlying liability at

a CDP hearing however [sic] you have neglected to point [sic] any

irregularities in the making of the assessment. Instead you have
 - 5 -

continued with your non-filer arguments.”2 The letter similarly

observed that because petitioner was “not in filing compliance”

for 1995 through 2002, collection alternatives were unavailable.

Mr. Freitag enclosed with the letter copies of Forms 4340,

Certificate of Assessments, Payments, and Other Specified

Matters; copies of the cases Pierson v. Commissioner, 115 T.C.

576 (2000), and Nestor v. Commissioner, 118 T.C. 162 (2002); and

copies of various Internal Revenue Code sections and IRS

publications addressing tax liability and frivolous arguments.

In the second letter, Mr. Freitag dealt specifically with a

statement in petitioner’s November 10, 2003, letter that

referenced referral of his case to the IRS National Office for

“technical advice”. To the extent that petitioner’s statement

was construed as a request for such a referral, Mr. Freitag

denied the request on grounds that no issue of sufficient

complexity to meet the standards for National Office review had

been presented. Petitioner was given 10 days to respond with

further information that might justify referral.

On February 2, 2004, respondent issued to petitioner the

aforementioned Notice of Determination Concerning Collection

2
In contrast, an explanatory attachment to the subsequent
Feb. 2, 2004, notice of determination recites that petitioner had
a prior opportunity to dispute assessment and could not challenge
the underlying liability. The earlier correspondence quoted
above, corroborated by the testimony of Mr. Freitag at trial,
reflects that petitioner was not precluded from challenging his
underlying liability during the collection hearing process.
 - 6 -

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

“raised no non-frivolous issues.”

A document received by the Court from petitioner was filed

as a timely mailed petition disputing the notice of determination

on March 5, 2004, and an amended petition was filed on May 27,

2004. Both documents reflected an address in Las Vegas, Nevada.

In a statement attached to the amended petition, petitioner

complained principally about the failure of the IRS to provide a

face-to-face hearing and requested documentation. He espoused a

position that he was not liable for any taxes and prayed, inter

alia, that we order the IRS “to stop all illegal attempts to

extort money” from him.

This case was called from the calendar of the trial session

of the Court in Las Vegas, Nevada, on December 6, 2004, and a

trial was held on December 8, 2004. At the trial, petitioner

filed two motions identical in substance, one of which was titled

a motion to restrain assessment or collection and the other of

which was titled a motion to dismiss. In these motions,

petitioner essentially rehashed his arguments regarding lack of a

hearing and insufficient documentation. The Court took the
 - 7 -

motions under advisement and proceeded to hear petitioner’s

case.3

At the outset, the Court explained to petitioner as follows:

This is your chance to raise any issues that you
wanted to raise had you gotten a face to face hearing
with Appeals. * * *

* * * * * * *

If you want to raise any issues, you need to raise
them here today in this court, and based on the
evidence introduced and my review of any briefs, and
subject to whatever action I might take on your
motions, and then I will decide whether you have been
treated unfairly.

And if so, what the appropriate remedy is. But
you need to bring out whatever issues you want to bring
out today, because I think that it is your last chance
unless I take some other action.

Petitioner’s comments during the ensuing trial, however, failed

to raise any points not previously pressed or to identify any

specific colorable issues for remand. At the conclusion of the

trial, the parties were afforded an opportunity to submit

posttrial briefs. Only respondent did so.

3
For all the reasons set forth infra in text, petitioner’s
above-referenced motions shall be denied in conjunction with
issuance of this opinion, without need for further separate
discussion.
 - 8 -

OPINION

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

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--
 - 9 -

(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;

(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 U.S.

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:
 - 10 -

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

Hearings conducted under section 6330 are informal

proceedings, not formal adjudications. Katz v. Commissioner, 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. at 166-167; 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 by

telephone or 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
 - 11 -

file. See, e.g., Taylor v. Commissioner, T.C. Memo. 2004-25,

affd. 130 Fed. Appx. 934 (9th Cir. 2005); 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
 - 12 -

purposes of section 6330(b). [Sec. 301.6330-1(d)(2),
Q&A-D6 and D7, Proced. & Admin. Regs.]

This Court has cited the above regulatory provisions, and

corresponding promulgations under section 6320, 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 not afforded an opportunity for a face-to-face

hearing when all of the issues he raised were deemed frivolous or

groundless. He had, however, stated an intent to record the

collection hearing he requested in his Form 12153. In Keene v.

Commissioner, 121 T.C. 8, 19 (2003), this Court held that

taxpayers are entitled, pursuant to section 7521(a)(1), to audio

record a face-to-face section 6330 hearing. The taxpayer in that

case had refused to proceed when denied the opportunity to

record, and we remanded the case to allow a recorded Appeals

hearing. Id.

In contrast, we have distinguished, and declined to remand,

cases where the taxpayer had participated in an Appeals Office

hearing, albeit unrecorded, and where all issues raised by the

taxpayer could be properly decided from the existing record.

E.g., id. at 19-20; Frey v. Commissioner, T.C. Memo. 2004-87;

Durrenberger v. Commissioner, T.C. Memo. 2004-44; Brashear v.

Commissioner, T.C. Memo. 2003-196; Kemper v. Commissioner, T.C.
 - 13 -

Memo. 2003-195. Stated otherwise, cases will not be remanded to

Appeals, nor determinations otherwise invalidated, merely on

account of the lack of a recorded face-to-face hearing when to do

so is not necessary and would not be productive.4 See, e.g.,

Frey v. Commissioner, supra; Durrenberger v. Commissioner, supra;

Brashear v. Commissioner, supra; Kemper v. Commissioner, supra;

see also Lunsford v. Commissioner, 117 T.C. 183, 189 (2001). A

principal scenario falling short of the necessary or productive

standard exists where the taxpayers rely on frivolous or

groundless arguments consistently rejected by this and other

courts. See, e.g., Frey v. Commissioner, supra; Brashear v.

Commissioner, supra; Kemper v. Commissioner, supra.

Here, although extensive correspondence had passed between

petitioner and the Appeals Office, petitioner had continued

throughout the process to insist on his right to an in-person

interview. Accordingly, because he viewed himself as never

having been afforded the hearing he requested, the record did not

foreclose the possibility that petitioner might have raised valid

4
This standard has been consistently applied at the
judicial level in determining whether remand is warranted. At
the administrative level, existing regulations on their face
would seem generally to require that a face-to-face hearing be
offered to all requesting taxpayers. See sec. 301.6330-1(d)(2),
Q&A-D7, Proced. & Admin. Regs. The courts have not viewed
failure to so offer a hearing as grounds for remand where only
frivolous contentions are advanced by the taxpayer. Proposed
regulations parallel the judicial approach. See sec. 301.6330-
1(d)(2), Q&A-D7 and D8, Proposed Proced. & Admin. Regs., 70 Fed.
Reg. 54687 (Sept. 16, 2005).
 - 14 -

arguments. Accordingly, we provided petitioner an opportunity

before the Court at the trial session in Las Vegas to identify

any legitimate issues he wished to raise that could warrant

further consideration of the merits of his case by the Appeals

Office or this Court. Petitioner, however, merely continued to

focus on the denial of a hearing and offered no substantive

issues of merit.

Hence, despite repeated warnings and opportunities, the only

contentions other than the face-to-face hearing advanced by

petitioner are, as will be further discussed below, of a nature

previously rejected by this and other courts. The record

therefore does not indicate that any purpose would be served by

remand or additional proceedings. The Court concludes that all

pertinent issues relating to the propriety of the collection

determination can be decided through review of the materials

before it.

2. Review of Underlying Liabilities

Statutory notices of deficiency for 1993 and 1994 were

issued to petitioner. However, the parties stipulated that

petitioner did not receive those notices, and respondent has

agreed that petitioner was entitled to challenge his underlying

liability under section 6330(c)(2)(B). Yet petitioner has at no

time offered even a scintilla of evidence that would show error

in respondent’s determinations. His only contentions bearing on
 - 15 -

liability, generally challenging the income tax laws, have been

of a patently frivolous nature and warrant no further comment.

See Crain v. Commissioner, 737 F.2d 1417, 1417 (5th 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.
 - 16 -

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

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 Forms 4340 for 1993 and 1994,

indicating that assessments were made for each of these years 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.
 - 17 -

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

has upheld collection actions 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 November 19, 2003, letter to petitioner

from Mr. Freitag enclosed copies of Forms 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 also raised 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

Forms 4340 indicate that petitioner was sent notices of balance

due for each of the tax years involved.

Thus, with respect to those issues enumerated in section

6330(c)(2)(A) and subject to review in collection proceedings for
 - 18 -

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

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 and that any issue not

raised in the assignments of error shall be deemed conceded. See

Lunsford v. Commissioner, 117 T.C. at 185-186; Goza v.

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

have addressed various points advanced by petitioner during the

administrative process and this litigation, but the items listed

in section 6330(c)(2)(A) were not pursued in any 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
 - 19 -

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

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 trial process, petitioner

advanced contentions and demands previously and consistently

rejected by this and other courts. He submitted communications

quoting, citing, using out of context, and otherwise misapplying

portions of the Internal Revenue Code, regulations, Supreme Court

decisions, and other authorities. He ignored the Court’s

explicit warning that any further proceedings would be justified

only in the face of relevant and nonfrivolous issues.

Moreover, petitioner was, on multiple occasions, expressly

alerted to the potential use of sanctions in his case. Even at

the calendar call the Court specifically warned petitioner about

section 6673. Yet he appeared at the trial 2 days later without

any legitimate evidence or argument in support of his position.

He instead continued to espouse those views that had been

explicitly addressed and rejected in other cases previously

decided by the Court. The Court sua sponte concludes that a
 - 20 -

penalty of $2,500 should be awarded to the United States in this

case. To reflect the foregoing,

An appropriate order and

decision will be entered.