T.C. Memo. 2006-143
UNITED STATES TAX COURT
KENT E. HOVIND, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11894-05L. Filed July 6, 2006.
Peter Gibbons, for petitioner.
Karen Nicholson Sommers, for respondent.
MEMORANDUM OPINION
SWIFT, Judge: This matter is before us under Rule 121 on
the parties’ cross-motions for summary judgment. The underlying
issue in this so-called collection “due process” case involves
the appropriateness of respondent’s proposed levy action against
petitioner’s property arising from jeopardy assessments
respondent made against petitioner.
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Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
For purposes of the instant cross-motions for summary
judgment, and the respective objections thereto, the record
consists primarily of documents set forth in respondent’s
administrative file, the pleadings filed herein, and the parties’
cross-motions for summary judgment and attachments thereto.
Background
Respondent seeks to levy on petitioner’s property in
connection with assessed and outstanding 1995, 1996, and 1997
Federal income taxes and additions to tax and interest in the
cumulative total amount of $520,099.
Petitioner apparently has a college degree from the
Midwestern Baptist College located in Pontiac, Michigan, with a
major in religious education. Petitioner has established a
purported religious ministry under the name of Creation Science
Evangelism, based in Pensacola, Florida.
Allegedly as part of his ministry, petitioner produces and
sells books and recordings and travels extensively throughout the
United States and occasionally in other countries giving
speeches. Petitioner also hosts a daily radio talk show and has
established Dinosaur Adventure Land, which is described as a
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theme park, science center, and museum located in Pensacola,
Florida.
The organizational structure petitioner established for the
above activities, including petitioner’s purported religious
ministry and theme park, apparently was based on various
questionable trust documents purchased from Glenn Stoll, a known
promoter of tax avoidance schemes.1
Among other things, the trust documents petitioner utilized
provide as follows:
[a] gathering of two or more believers, in agreement
with your calling, forms a lawfully established
unincorporated association of pure trust. Upon a grant
of value, the trust must assign beneficial interest &
appoint a trustee. This trust agreement, when reduced
to writing, becomes written evidence of a Ministerial
Trust under which you may manage your personal ministry
for the church.
Petitioner has not filed individual Federal income tax
returns for 1995, 1996, and 1997.
During an audit and a criminal tax investigation that began
in the early spring of 2004, respondent concluded (1) that
petitioner appeared to be using the referred-to trust documents
as well as various nominees and sham entities for the purpose of
concealing ownership and control of his activities and
1
Aspects of Glenn Stoll’s tax avoidance schemes are
described in United States v. Stoll, 96 AFTR 2d 2005-5044, 2005-2
USTC par. 50,459 (W.D. Wash. 2005), and United States v. Stoll,
96 AFTR 2d 2005-5052, 2005-2 UTSC par. 50,460 (W.D. Wash. 2005).
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properties, and (2) that substantial revenue from the various
activities with which petitioner was involved appeared to
constitute income to petitioner personally.
Respondent also concluded that petitioner appeared to be
planning to transfer property into the name of a nominee entity
(a so-called “corporation sole”) and that this planned transfer,
among other things, indicated a “willful and deliberate attempt
[by petitioner] to conceal the receipt of taxable income and to
evade federal income taxes.”2
Based on respondent’s conclusion, on June 1, 2004,
respondent made jeopardy assessments under section 6861 against
petitioner of income tax, of additions to tax under section
6651(f) for civil fraud and under section 6654 for underpayment
of estimated tax, and of interest, relating to 1995, 1996, and
1997, as follows:
Additions to Tax
Year Tax Sec. 6651(f) Sec. 6654 Interest
1995 $44,898 $33,674 $2,434 $66,985
1996 39,747 29,810 2,116 48,268
1997 98,941 74,206 5,293 94,585
On June 3, 2004, respondent’s agent hand delivered to
petitioner at petitioner’s then current residence (viz,
29 Cummings Road, Pensacola, Florida 32503) a notice of the above
2
The use by tax protesters of abusive “corporations sole”
is well documented. See, e.g., United States v. Harkins, 355 F.
Supp. 2d 1175 (D. Or. 2004); Rev. Rul. 2004-27, 2004-1 C.B. 625.
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jeopardy assessments and of petitioner’s right of appeal under
section 7429. Upon being handed the notice, petitioner refused
to accept it, whereupon respondent’s agent left the notice of the
jeopardy assessments on petitioner’s doorstep. A copy of
respondent’s notice of jeopardy assessments was also delivered by
respondent to petitioner via certified mail to the same address.
Also on June 3, 2004, based on the jeopardy assessments and
a search warrant, respondent seized $42,817 in cash from
petitioner’s office, and respondent applied the $42,817 to
petitioner’s Federal income tax for 1995, as assessed on June 1,
2004.
Petitioner requested neither administrative nor judicial
review of respondent’s jeopardy assessments.
On June 4, 2004, respondent mailed to petitioner at the
above address of petitioner a notice of Federal tax lien filing
and right to a hearing under section 6320 (Lien Notice), which
lien related to the above jeopardy assessments and which notice
explained petitioner’s right to a section 6320 hearing with
regard to the filed Federal tax lien.
Petitioner did not request a hearing with regard to the
above Lien Notice.
On July 29, 2004, respondent mailed to petitioner at
petitioner’s address a notice of deficiency with respect to
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petitioner’s Federal income taxes for 1995, 1996, and 1997, in
amounts identical to the above jeopardy assessments.
Respondent’s Postal Service Form 3877 certified mailing list
indicates that respondent’s notice of deficiency was delivered by
respondent to the U.S. Postal Service for mailing to petitioner.
A U.S. Postal Service track & confirm record indicates that
the above notice of deficiency was delivered to petitioner via
certified mail on August 2, 2004.
Petitioner did not file a petition with this Court with
respect to respondent’s notice of deficiency.
On August 13, 2004, petitioner mailed back to respondent an
envelope containing respondent’s June 4, 2004, notice to
petitioner of the tax lien filing with the words stamped on the
first page “REFUSED FOR FRAUD”. Also included in petitioner’s
envelope mailed to respondent was a letter making various bizarre
arguments, some of which constitute tax protester arguments
involving excise taxes and the alleged “100% voluntary” nature of
the income tax.
On February 25, 2005, respondent mailed to petitioner a
final notice of intent to levy and notice of right to a hearing
(Levy Notice) with regard to the balances petitioner owed on the
above assessments for 1995, 1996, and 1997 and explaining
petitioner’s right to a section 6330 hearing with regard to the
proposed levy. Petitioner received this notice, and on March 8,
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2005, petitioner requested of respondent in writing a hearing
with regard thereto.
A telephone hearing with an Appeals officer located in
Birmingham, Alabama, was scheduled for April 20, 2005, but was
later rescheduled for May 17, 2005. On May 4, 2005, petitioner
requested that the hearing be rescheduled and be relocated to
respondent’s Riverside, California, office, near petitioner’s
attorney’s law office. This request was denied by respondent.
Petitioner did not participate in the May 17, 2005,
telephone hearing, but petitioner did submit to respondent’s
Appeals Office written correspondence in which petitioner made a
number of arguments relating to the amount of petitioner’s
underlying Federal income taxes.
In connection with the hearing, respondent’s Appeals officer
reviewed a transcript of account Form 4340, Certificate of
Assessments, Payments, and Other Specified Matters, relating to
petitioner’s Federal income taxes for the years in issue,
verified that respondent’s assessments were made against
petitioner for the years 1995, 1996, and 1997, and concluded that
respondent’s proposed levy action was appropriate and not
unnecessarily intrusive.
On May 25, 2005, respondent’s Appeals Office issued to
petitioner a notice of determination under section 6330
sustaining respondent’s proposed levy action.
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Petitioner timely filed a petition for review of
respondent’s determination.
Discussion
Summary judgment is proper “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.” Beery v.
Commissioner, 122 T.C. 184, 187 (2004).
A party opposing a motion for summary judgment “may not rest
upon the mere allegations or denials of such party's pleading,”
but the objecting party's response “must set forth specific facts
showing that there is a genuine issue for trial.” Rule 121(d);
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
The burden of establishing the nonexistence of a genuine
issue of fact is on the party moving for summary judgment.
Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970).
Section 6331(a) provides generally that if a taxpayer liable
to pay any tax neglects or refuses to pay the same within 10 days
after notice and demand it shall be lawful for respondent to
collect such tax by levy upon all property and rights to property
belonging to the taxpayer.
Section 6331(d)(1) requires that respondent give written
notice to a taxpayer prior to making a levy on the taxpayer’s
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property. Also, under section 6330(a)(1) respondent must notify
a taxpayer in writing of the right to a hearing before the levy
is made.3
In such a hearing, respondent is required to verify whether
the requirements of all applicable laws and administrative
procedures have been met and to consider other issues raised by a
taxpayer including appropriate spousal defenses, collection
alternatives, and challenges to the appropriateness of the
collection actions. Sec. 6330(c).
Under section 6330(c)(3), respondent also is required to
consider whether any collection action balances the need for
efficient collection of taxes with the taxpayer's legitimate
concern that any collection action be no more intrusive than
necessary.
Under section 6330(c)(2)(B), if a taxpayer received a notice
of deficiency for a year in question and does not file a petition
for redetermination of the deficiency with the Tax Court, in a
collection hearing a taxpayer may not contest the existence or
amount of his or her underlying tax liabilities. Nestor v.
Commissioner, 118 T.C. 162, 165-166 (2002). Rather, to contest
the underlying tax liabilities in such a situation, the taxpayer
3
Even though respondent’s assessment herein was made as a
jeopardy assessment under section 6861, apparently respondent’s
proposed levy was not made as a jeopardy levy. See last sentence
of sec. 6331(a).
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would be required to pay the taxes assessed by respondent and to
pursue a refund claim and a refund suit in Federal District
Court. Secs. 6511, 7422.
Also, if a taxpayer receives a notice of tax lien filing
under section 6320 and does not request a hearing with regard
thereto, the taxpayer may not in a subsequent hearing under
section 6330 relating to a proposed levy contest the underlying
tax liabilities. Sec. 301.6330-1(e)(3), Q&A-E7, Proced. & Admin.
Regs.
If respondent properly mails a notice of deficiency to a
taxpayer, a presumption arises that the notice was delivered to
the taxpayer in the normal course of the mail. Zenco Engg. Corp.
v. Commissioner, 75 T.C. 318, 323 (1980), affd. without published
opinion 673 F.2d 1332 (7th Cir. 1981).
The act of mailing may be proven by evidence of respondent's
mailing practices corroborated by direct testimony or documentary
evidence of mailing. Fed. R. Evid. 406; Magazine v.
Commissioner, 89 T.C. 321, 326 (1987); Cataldo v. Commissioner,
60 T.C. 522, 524 (1973), affd. per curiam 499 F.2d 550 (2d Cir.
1974); August v. Commissioner, 54 T.C. 1535, 1536-1537 (1970).
Respondent bears the burden of proving proper mailing of a
notice of deficiency. Coleman v. Commissioner, 94 T.C. 82, 90
(1990); Cataldo v. Commissioner, supra; August v. Commissioner,
supra.
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A U.S. Postal Service Form 3877 certified mailing list
reflecting delivery of a document by respondent to the Postal
Service represents direct evidence of the date and fact of
mailing. Magazine v. Commissioner, supra.
Generally, courts have held that a Form 4340 transcript of
account provides at least presumptive evidence that a tax has
been validly assessed under section 6203, unless irregularities
are evident that raise a question as to the accuracy of the
Form 4340. Davis v. Commissioner, 115 T.C. 35, 41 (2000).
Where the validity of the underlying tax liability is not
properly at issue, a court under section 6330 will review the
administrative determination of the Appeals officer only for an
abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610
(2000).
Petitioner argues that respondent’s proposed levy action is
inappropriate because his correct tax liability for each of 1995,
1996, and 1997 is zero. Petitioner argues that he received
neither respondent’s notice of jeopardy assessments nor the
notice of deficiency relating to his 1995, 1996, and 1997 Federal
income taxes, and petitioner therefore argues that he has not had
an opportunity to challenge the existence and amount of the
underlying tax deficiencies determined by respondent. Petitioner
seeks to do so in this proceeding.
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Respondent argues that petitioner received both respondent’s
Lien Notice and respondent’s notice of deficiency and that
petitioner could have filed an appeal or a Tax Court petition
with regard to either of those documents, and therefore that
petitioner may not now, in the instant proceeding involving
respondent’s levy notice, dispute the existence or amount of his
1995, 1996, and 1997 Federal income tax liabilities.
Sec. 6330(c)(2)(B).
We agree with respondent. The evidence adequately
establishes that petitioner received the July 29, 2004, notice of
deficiency.
The Postal Service receipt of delivery and the Form 3877
constitute strong evidence in support of the mailing by
respondent and the receipt by petitioner of the notice of
deficiency.
Petitioner actually had two opportunities (upon receipt of
the Lien Notice -- which receipt petitioner does not dispute --
and upon receipt of the notice of deficiency) to challenge the
existence and amount of his 1995, 1996, and 1997 Federal income
tax liabilities. Under section 6330(c)(2)(B) petitioner may not
now, in this proceeding involving respondent’s proposed levy
action, dispute the amounts of his underlying Federal income
taxes and additions to tax for 1995, 1996, and 1997.
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Petitioner argues that because the notice of deficiency was
not sent with a return receipt requested respondent’s mailing
thereof was inadequate. Section 6212(a), however, does not
require mailing of notices of deficiency with a return receipt
requested. Eisenberg v. Commissioner, T.C. Memo. 1983-767, affd.
without published opinion 753 F.2d 1078 (7th Cir. 1985).
Petitioner cites Brafman v. United States, 384 F.2d 863, 865
(5th Cir. 1967), and petitioner argues that because respondent’s
transcript of account was not signed by a proper official the tax
assessments against petitioner are invalid and the proposed levy
action is not appropriate. We disagree. Forms 4340 are not
required to be signed. Nestor v. Commissioner, 118 T.C. 162
(2002); Nicklaus v. Commissioner, 117 T.C. 117, 121 (2001);
sec. 301.6203-1, Proced. & Admin. Regs. The Forms 4340
reflecting petitioner's income tax liabilities for the years in
issue indicate that those tax liabilities were assessed and
remain largely unpaid.
Petitioner has not demonstrated any credible irregularity in
the assessment procedures that would raise a question about the
validity of the assessments.
Respondent’s Appeals officer verified that the assessments
of tax were proper and obtained verification that the
requirements of applicable laws and administrative procedures
were met.
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Petitioner did not raise spousal defenses, nor did he offer
collection alternatives. We are satisfied that respondent’s
proposed collection action balances the need for the efficient
collection of taxes with the concern that the collection action
be no more intrusive than necessary.
Petitioner makes various other arguments which we have
considered and which we conclude are without merit and are
rejected.
For the reasons stated, petitioner’s motion for summary
judgment will be denied, and respondent's motion for summary
judgment will be granted.
An appropriate order and
decision will be entered.