T.C. Memo. 2006-141
UNITED STATES TAX COURT
AARON T. AND LINDA K. BALL, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 17212-04L. Filed July 5, 2006.
Aaron T. and Linda K. Ball, pro sese.
Wesley J. Wong, for respondent.
MEMORANDUM OPINION
VASQUEZ, Judge: This case was commenced in response to a
Notice of Determination Concerning Collection Action(s) Under
Section 63201 and/or 6330. The issues for decision are: (1)
Whether respondent may proceed with collection of petitioners’
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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1997 income tax liability; and (2) whether petitioners are liable
for a penalty pursuant to section 6673.
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time the petition
was filed, petitioners resided in Las Vegas, Nevada.
In 1997, petitioner Aaron Ball was employed as a tile
installer by Carrara Marble Co. of America. His employer issued
a Form W-2, Wage and Tax Statement, reporting wages of $54,438.27
and Federal income tax withheld of $7,701.17. A copy of this
Form W-2 was attached to petitioners’ 1997 tax return.
In 1997, petitioner Linda Ball was employed as a registered
nurse. She was issued a Form W-2 from CHC Payroll Agent, Inc.,
Sunrise Mt. View 2270, reporting wages of $23,287.96 and Federal
income tax withheld of $3,503.67. She was also issued a Form W-2
from CHC Payroll Agent, Inc., Sunrise Hsp & M/C 1541, reporting
wages of $17,926.18 and Federal income tax withheld of $3,349.53.
Copies of these forms were also attached to petitioners’ 1997 tax
return.
Petitioners do not dispute that they received this income in
1997, yet they filed a Form 1040, U.S. Individual Income Tax
Return, listing zero as the amount of taxable income, tax due,
and total tax. Petitioners requested a refund of $14,554.37,
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which was the total amount of Federal income tax withheld.
Petitioners also attached a typewritten statement to the Form
1040 reciting contentions and arguments that this Court has found
to be frivolous and/or groundless.
Respondent determined a deficiency and an accuracy-related
penalty in petitioners’ 1997 Federal income tax and issued a
notice of deficiency to petitioners on July 21, 2000.
Petitioners received the notice of deficiency but did not file a
petition for redetermination of a deficiency with this Court for
taxable year 1997.
Respondent issued to each petitioner a Letter 1058, Final
Notice of Intent to Levy and Notice of Your Right to a Hearing,
on October 9, 2003, for taxable year 1997. Petitioners sent
respondent a letter dated November 5, 2003, requesting a section
6330 hearing. Throughout their correspondence with respondent,
petitioners continued to make contentions and arguments that this
Court has found to be frivolous and/or groundless.
In letters dated July 6 and July 22, 2004, respondent’s
settlement officer attempted to schedule an administrative
hearing with petitioners. Respondent informed petitioners that a
face-to-face hearing would not be available if the only items
raised by petitioners are arguments or contentions that courts
have determined to be frivolous and/or groundless.
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On July 26, 2004, petitioners sent a letter to the
settlement officer requesting a face-to-face conference in Las
Vegas, Nevada. In that letter, petitioners continued to assert
frivolous and/or groundless arguments for why they are not liable
for income taxes. Respondent did not allow petitioners a face-
to-face meeting.
On August 6, 2004, respondent issued petitioners a Notice of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330, in which the settlement officer sustained the
proposed levy to collect petitioners’ unpaid 1997 tax liability.
Petitioners filed a petition for lien and levy action on
September 13, 2004. Petitioners alleged that they were not
provided with a hearing under section 6330.
At trial, petitioners continued to make frivolous and/or
groundless arguments that they are not liable for Federal income
tax. Respondent sought sanctions under section 6673.
Discussion
I. Determination To Proceed With Collection
Section 6331(a) provides that, if any person liable to pay
any tax neglects or refuses to do so within 10 days after notice
and demand, the Secretary can collect such tax by levy upon
property belonging to such person. Pursuant to section 6331(d),
the Secretary is required to give the taxpayer notice of his
intent to levy and within that notice must describe the
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administrative review available to the taxpayer, before
proceeding with the levy. See also sec. 6330(a).
Section 6330(b) describes the administrative review process,
providing that a taxpayer can request an Appeals hearing with
regard to a levy notice. At the Appeals hearing, the taxpayer
may raise certain matters set forth in section 6330(c)(2), which
provides:
SEC. 6330(c). Matters Considered at Hearing.--In
the case of any hearing conducted under this section--
* * * * * * *
(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.
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Pursuant to section 6330(d)(1), within 30 days of the
issuance of the notice of determination, the taxpayer may appeal
that determination to this Court if we have jurisdiction over the
underlying tax liability. Van Es v. Commissioner, 115 T.C. 324,
328 (2000).
Although section 6330 does not prescribe the standard of
review that the Court is to apply in reviewing the Commissioner’s
administrative determinations, we have stated that, where the
validity of the underlying tax liability is properly at issue,
the Court will review the matter de novo. Sego v. Commissioner,
114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181
(2000). Where the validity of the underlying tax liability is
not properly at issue, however, the Court will review the
Commissioner’s administrative determination for abuse of
discretion. Sego v. Commissioner, supra; Goza v. Commissioner,
supra.
Petitioners received the notice of deficiency for the 1997
tax year. Accordingly, they cannot challenge their underlying
liability. See sec. 6330(c)(2)(B); Sego v. Commissioner, supra
at 610-611; Goza v. Commissioner, supra at 182-183. Therefore,
we review respondent’s determination for an abuse of discretion.
See Sego v. Commissioner, supra at 610.
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Petitioners state in their petition that they were denied
their right to a face-to-face hearing as provided in section
6330. We have held that it would be unproductive and thus
unnecessary to remand a case for a face-to-face hearing if
petitioners merely want to advance frivolous arguments. See
Lunsford v. Commissioner, 117 T.C. 183, 189 (2001); Stephens v.
Commissioner, T.C. Memo. 2005-183; Balice v. Commissioner, T.C.
Memo. 2005-161.
In numerous letters to respondent, in their petition, and at
trial, petitioners argued that they had no income and were not
liable for income taxes. Petitioners also argued that they
received no valid notice of deficiency because the notice that
they received was not signed by the Secretary of the Treasury.
These arguments are characteristic of tax-protester rhetoric that
has been universally rejected by this and other courts.2 Michael
v. Commissioner, T.C. Memo. 2003-26; Knelman v. Commissioner,
T.C. Memo. 2000-268, affd. 33 Fed. Appx. 346 (9th Cir. 2002).
Because petitioners insisted upon making only these frivolous
arguments, we decline to remand this case to respondent so that
petitioners may have a face-to-face hearing.3
2
Petitioners made these arguments in filings and at trial
even though the underlying tax liability was not properly an
issue in this case.
3
Respondent offered petitioners a face-to-face hearing if
petitioners raised any meaningful issue regarding the proposed
(continued...)
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Petitioners have failed to raise a spousal defense, make a
valid challenge to the appropriateness of respondent’s intended
collection action, or offer alternative means of collection.
These issues are now deemed conceded. See Rule 331(b)(4).
Accordingly, we sustain respondent’s determination to proceed
with collection.
II. Section 6673 Penalty
Section 6673(a)(1) authorizes this Court to require a
taxpayer to pay to the United States a penalty not to exceed
$25,000 if the taxpayer took frivolous positions in proceedings
or instituted the proceedings primarily for delay. In Pierson v.
Commissioner, 115 T.C. 576, 581 (2000), we issued an unequivocal
warning to taxpayers concerning the imposition of a penalty
pursuant to section 6673(a) on those taxpayers who abuse the
protections afforded by sections 6320 and 6330 by instituting or
maintaining actions under those sections primarily for delay or
by taking frivolous and/or groundless positions in such actions.
A position maintained by the taxpayer is “frivolous” where it is
“contrary to established law and unsupported by a reasoned,
colorable argument for change in the law.” Coleman v.
Commissioner, 791 F.2d 68, 71 (7th Cir. 1986); see also Hansen v.
Commissioner, 820 F.2d 1464, 1470 (9th Cir. 1987) (section 6673
3
(...continued)
levy. Petitioners, however, continued to make only frivolous
and/or groundless tax-protester arguments.
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penalty upheld because taxpayer should have known claim was
frivolous).
Furthermore, we have warned these petitioners of the
possible consequences of advancing frivolous arguments in this
Court. In a previous appearance before this Court, petitioners
made similar frivolous tax-protester arguments. They were warned
that if they brought the arguments to this Court again, a penalty
would be imposed.4
In the petition and at trial, petitioners raised frivolous
arguments and contentions that we have previously rejected and
which we conclude were interposed primarily for delay. This has
caused the Court to waste limited resources. Accordingly, we
shall impose a penalty of $5,000 pursuant to section 6673.
To reflect the foregoing,
An appropriate order and
decision will be entered.
4
Petitioners were previously before this court making the
same frivolous arguments regarding their 1998 income tax
liability. Ball v. Commissioner, docket No. 1066-04L.