Schwersensky v. Comm'r

T.C. Memo. 2006-178

UNITED STATES TAX COURT

DWIGHT SCHWERSENSKY, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 17983-03L. Filed August 24, 2006.

Dwight Schwersensky, pro se.

Sylvia L. Shaughnessy, for respondent.

MEMORANDUM OPINION

GALE, Judge: This case is before the Court on respondent's

motion for summary judgment on the issue of whether he may

proceed by levy to collect unpaid income taxes for petitioner's

2000 tax year. Respondent's motion also seeks a penalty under
 - 2 -

section 6673.1 A hearing was held thereon. For the reasons set

forth below, we shall grant respondent's motion.

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 where there is no genuine issue of material fact and a

decision may be rendered as a matter of law. Rule 121(a) and

(b). The moving party bears the burden of proving that there is

no genuine issue of material fact, and factual inferences are

viewed in a light most favorable to the nonmoving party. Craig

v. Commissioner, 119 T.C. 252, 260 (2002); Dahlstrom v.

Commissioner, 85 T.C. 812, 821 (1985); Jacklin v. Commissioner,

79 T.C. 340, 344 (1982). The party opposing summary judgment

must set forth specific facts which show that a genuine question

of material fact exists and may not rely merely on allegations or

denials in the pleadings. Grant Creek Water Works, Ltd. v.

Commissioner, 91 T.C. 322, 325 (1988); Casanova Co. v.

Commissioner, 87 T.C. 214, 217 (1986).

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 -

Background2

At the time of filing the petition, petitioner resided in

Poway, California.

On April 15, 2001, petitioner and his wife (Mrs.

Schwersensky)3 jointly submitted a Form 1040, U.S. Individual

Income Tax Return, for 2000 on which they inserted zeros into

every line related to income and taxes and attached a two-page

statement of frivolous tax protester arguments.4 Petitioner and

Mrs. Schwersensky included with the Form 1040 two Forms W-2, Wage

and Tax Statement, for 2000, indicating that Qualcomm, Inc. paid

petitioner $551,779.60 in wages and withheld Federal income tax

of $144,201.31, and that Marantha Chapel paid Mrs. Schwersensky

$6,630.00 in wages and withheld $262.50 in Federal income tax.

The Form 1040 sought a refund of the couple's combined

withholdings of $144,463.81. On May 18, 2001, respondent advised

petitioner and Mrs. Schwersensky by letter that the Form 1040

they submitted for 2000 was frivolous and that the position taken

2
The facts hereinafter are established in the record and/or
undisputed.
3
Although petitioner's spouse, Maureen T. Schwersensky,
requested a sec. 6330 hearing jointly with petitioner and the
resulting notice of determination was issued to both, only
petitioner filed a petition in this case.
4
These contentions included, inter alia, that "no section
of the Internal Revenue Code * * * establishes an income tax
'liability'" and "'income' * * * can only be a derivative of
corporate activity."
 - 4 -

therein had no basis in law. The letter offered petitioner and

Mrs. Schwersensky an opportunity to correct the return within 30

days without penalty.

Petitioner subsequently sent only frivolous, tax protester

correspondence to respondent concerning 2000. Respondent

accordingly issued petitioner and Mrs. Schwersensky a notice of

deficiency with respect to 2000, determining that petitioner and

Mrs. Schwersensky had income in the amount of the wages reported

on their Forms W-2, income from the sale of securities of

$600,552, and other income, resulting in a deficiency of

$429,118, and taking into account amounts withheld, an

underpayment of tax of $284,654, plus a $56,931 penalty

determined under section 6662(a) (collectively, including

interest, the 2000 liability). Petitioner and Mrs. Schwersensky

received the notice of deficiency, as petitioner referred to it

in a subsequent letter to respondent challenging the authority of

the individual who issued it and containing additional frivolous

tax protester arguments. However, no petition was filed with

respect to the deficiency notice.

A certified copy of Form 4340, Certificate of Assessments

and Payments, covering petitioner's 2000 taxable year, records

that respondent assessed the 2000 liability on August 19, 2002,

and sent notices of balance due to petitioner on August 19, 2002,

and December 9, 2002.
 - 5 -

On February 21, 2003, respondent sent petitioner a Letter

1058, Final Notice of Intent to Levy and Notice of Your Right to

a Hearing, with respect to the 2000 liability. On March 15,

2003, petitioner made a timely request for a hearing, wherein he

raised numerous issues, including: (i) That he was challenging

the appropriateness of the collection action, (ii) that no valid

underlying assessment was ever made, (iii) that he had never

received the "statutory 'Notice and Demand' for payment of the

taxes at issue", and (iv) that he was "challenging the existence

of the underlying liability" under section 6330(c)(2)(B). In the

hearing request, petitioner also demanded that respondent produce

various documents at the section 6330 conference5 and stated his

intention to record the conference.6

In response to petitioner's request for a hearing, an

Appeals settlement officer sent petitioner a letter on July 29,

2003, scheduling a conference for August 13, 2003. The letter

5
For example, petitioner requested that respondent provide
copies of assessment certificates and all supporting records,
names and "IRS employee ID's" of the individuals who prepared and
signed the assessment certificates and the notice and demand for
payment, and a copy of the statute "that authorizes the Secretary
to 'estimate the amount of taxes which have been omitted to be
paid on the basis of my 2000 return'".
6
The hearing request also included voluminous amounts of
tax protester rhetoric, such as that "In order to deceive people,
IRS employees FALSELY claim that 26 USC Sections 1, 3, 61, 62, 63
or 861 makes a person liable for income tax and requires
(mandatory) the person to pay it. NONE of these Sections makes
anyone 'liable' for income tax NOR 'requires' (mandatory) anyone
to pay such tax."
 - 6 -

advised that no tape or stenographic recordings of the conference

would be allowed, and that petitioner would be precluded, under

section 6330(c)(2)(B), from challenging the underlying liability

for 2000 because he had received a notice of deficiency for 2000

but had not filed a petition in response thereto. The letter

included a copy of the Form 4340 for petitioner's 2000 taxable

year recording that notice and demand for payment had been made,

contrary to petitioner's earlier claim. The letter further

advised that if petitioner wished to consider alternatives to the

proposed levy action, such as an installment agreement, he should

bring with him a completed Form 433-A, Collection Information

Statement for Individuals, as well as completed income tax

returns for 2001 and 2002.

Petitioner appeared for the conference, rescheduled for

September 10, 2003, at his request, accompanied by a witness and

a court reporter. The settlement officer terminated the

conference rather than allow petitioner to record it.

On September 23, 2003, a Letter 3193, Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 (notice of determination) was issued to petitioner.

The settlement officer determined that the proposed levy action

should be sustained in light of petitioner's refusal to abide by

the procedures the Office of Appeals had established for

conducting section 6330 conferences, notably petitioner's refusal
 - 7 -

to forgo recording the conference. The notice of determination:

(i) Stated that Appeals had verified that all of the requirements

of applicable law and administrative procedures had been met,

including the making of a valid assessment; (ii) answered

petitioner's contention that he never received notice and demand

for payment by noting that the settlement officer had provided

petitioner a copy of his Form 4340 for 2000 documenting that

notice and demand for payment had been sent; (iii) answered

petitioner's challenge to the existence of the underlying tax

liability by advising that petitioner was precluded from pursuing

such a challenge because he had received a notice of deficiency

(as indicated by his correspondence referencing it); (iv) noted

that petitioner had failed to provide the requested financial

information regarding potential collection alternatives; and (v)

concluded that the proposed levy balanced the need for the

efficient collection of taxes with the legitimate concern that

the collection action be no more intrusive than necessary.

Petitioner timely filed a petition in response to the notice

of determination, wherein he alleged, inter alia, that he had

never received a notice of deficiency, that he had not received

any "taxable" income for 2000, and that respondent had violated

the law by denying petitioner his right to record his section

6330 conference pursuant to section 7521.
 - 8 -

In his response opposing respondent's motion for summary

judgment, petitioner in general raises the challenges noted

above, and further contends: (i) That no "valid" notice of

deficiency was issued to him for 2000, (ii) that respondent

failed to provide the requested documents or verification that

the requirements of any applicable law or administrative

procedure had been met, (iii) that the collection action had not

been authorized as required by section 7401, and (iv) that the

notice of petitioner's right to a hearing under section 6330 was

invalid because it was not issued by the Secretary, as required

by section 6330(a)(1), or the Secretary's duly authorized

delegate, as provided in section 7701(a)(11)(B) and

(a)(12)(A)(i).7

7
Consistent with his other submissions, petitioner's
response to the motion for summary judgment contained
approximately eight pages of tax protester rhetoric, including
such arguments as:

[T]here is no statute anywhere in * * * the Internal Revenue
Code which makes Dwight Schwersensky liable for the tax
imposed in 26 U.S.C. §1 or 26 U.S.C. §871.

* * * * * * *

[N]o international maritime contract (or other contract)
exists wherein Dwight Schwersensky is in privity with the
Internal Revenue Service. The IRS is acting as a third
party debt collector under some undisclosed contract for
some undisclosed third party. * * * Commissioner has Burden
of proof that a contract exists to compel me with a "duty"
and "obligation" to perform and if no contract is produced
must provide a "liability" statute to make me "liable" [in
order] to issue a Notice of Deficiency.
(continued...)
 - 9 -

Discussion

Introduction

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),

(c)(1). 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

7
(...continued)
* * * * * * *

Dwight Schwersensky is NOT a U.S. citizen but in fact is a
California National, a Member of the Republic.

We note that, notwithstanding the last assertion, petitioner
stated in his request for a hearing: "I am a U.S. citizen."
 - 10 -

existence or amount of the underlying tax liability if the

taxpayer did not receive a statutory notice of deficiency with

respect thereto or did not otherwise have an opportunity to

dispute that liability. Sec. 6330(c)(2)(B). However, if the

taxpayer received a notice of deficiency and failed to petition

the Tax Court, he may not challenge the underlying liability in

the section 6330 proceeding. Goza v. Commissioner, 114 T.C. 176,

183 (2000).

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).

Where the underlying tax liability is properly at issue, we

review the determination de novo. Goza v. Commissioner, supra at
 - 11 -

181-182. Where the underlying 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 Freije v. Commissioner, 125 T.C. 14, 23 (2005);

Ansley-Sheppard-Burgess Co. v. Commissioner, 104 T.C. 367, 371

(1995).

Standard of Review of Determination

At the hearing on respondent's motion, petitioner conceded

receiving the notice of deficiency for 2000 and failing to file a

petition for redetermination. He maintains that the notice of

deficiency was invalid. Having received the notice and failed to

file a petition with respect to it, petitioner may not challenge

it now or otherwise contest the underlying tax liability in this

proceeding.8 Goza v. Commissioner, supra at 183. As the

underlying liability is therefore not at issue, respondent's

determination is reviewed for abuse of discretion. Id. at 182;

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

Respondent's Determination

Petitioner repeatedly stated that he is challenging "the

appropriateness of the collection actions" as provided in section

6330(c)(2)(A)(ii). He has provided no specifics, however. In

8
The letter petitioner sent to the IRS Service Center that
disputed the notice of deficiency contained only frivolous tax
protester arguments.
 - 12 -

any event, he has not disputed the assertion in the notice of

determination that he failed to provide a collection information

statement as requested by the settlement officer. Consequently,

petitioner's claim is no bar to summary judgment, as it is not an

abuse of discretion for Appeals personnel to refuse to consider

collection alternatives where a taxpayer fails to submit

requested financial information. Sapp v. Commissioner, T.C.

Memo. 2006-104; Picchiottino v. Commissioner, T.C. Memo. 2004-

231; Newstat v. Commissioner, T.C. Memo. 2004-208.

Petitioner also contended throughout the hearing process and

contends now that there was never a valid assessment of the 2000

liability pursuant to section 6203 and that he never received

notice and demand for payment of it, as required by section 6303.

However, the certified Form 4340 for petitioner's 2000 taxable

year establishes otherwise on both counts. In the absence of any

showing of irregularity, Forms 4340 are presumptive evidence that

a tax has been validly assessed under section 6203. Davis v.

Commissioner, 115 T.C. 35, 40-41 (2000). Furthermore, a "notice

of balance due" (which was sent to him, as recorded on

petitioner's Form 4340) constitutes "notice and demand for

payment" for purposes of section 6303(a). Craig v. Commissioner,

119 T.C. at 262-263; Schaper v. Commissioner, T.C. Memo. 2002-

203. Petitioner has put forth no specific allegation, beyond his

general denials, that would tend to show an irregularity in the
 - 13 -

Form 4340, in the assessment or in the notice and demand for

payment. It is undisputed that petitioner received a notice of

deficiency and a notice of intent to levy with respect to 2000,

which are also both sufficient for purposes of section 6303(a).

Craig v. Commissioner, supra at 263. We therefore find no abuse

of discretion in the notice of determination's verification that

all applicable procedural requirements, including the foregoing,

were followed.

Petitioner's contention that the settlement officer failed

to provide him certain documents or the verification that the

requirements of any applicable administrative procedure had been

met is also unavailing, as respondent need not do so. Nestor v.

Commissioner, 118 T.C. 162, 166-167 (2002).9

Petitioner's contention that the instant collection action

has not been authorized as required by section 7401 is meritless.

Section 7401 applies to a "civil action". The levy at issue

(made pursuant to section 6331) is an administrative action that

does not necessitate the institution of a civil suit. See

Carrillo v. Commissioner, T.C. Memo. 2005-290; Williams v.

9
Petitioner also contends that the settlement officer
failed to verify that the requirements of any applicable law or
administrative procedure had been met, as required by sec.
6330(c)(1). Suffice to say that, as discussed above, all
specific challenges made by petitioner to the procedures followed
by respondent in maintaining this collection action are
meritless, and petitioner's general contrary allegation is
insufficient to bar summary judgment. See Hromiko v.
Commissioner, T.C. Memo. 2003-107.
 - 14 -

Commissioner, T.C. Memo. 2005-94; Yazzie v. Commissioner, T.C.

Memo. 2004-233, affd. 153 Fed. Appx. 456 (9th Cir. 2004); see

also United States v. Rodgers, 461 U.S. 677, 682-683 (1983).

Petitioner further claims, in opposition to summary

judgment, that he was not provided notice of his right to a

section 6330 hearing by the Secretary or his delegate, as

required by section 6330(a)(1). See also sec. 7701(a)(11)(B),

(12)(A)(i). This claim is also meritless, as the Secretary has

delegated the authority to issue notices of intent to levy to a

host of Internal Revenue Service employees. Delegation Order No.

191 (Rev. 3), effective June 11, 2001; see also Craig v.

Commissioner, supra at 263; Yazzie v. Commissioner, supra. We

note also that there is no requirement that a notice of intent to

levy be signed. Everman v. Commissioner, T.C. Memo. 2003-137.

Petitioner contends that his right to a hearing under

section 6330 was infringed as a result of the settlement

officer's decision to terminate the conference rather than allow

petitioner to record it. In Keene v. Commissioner, 121 T.C. 8

(2003), we held that section 7521(a)(1) entitles taxpayers to

audio record conferences held pursuant to sections 6320 and 6330.

However, in Kemper v. Commissioner, T.C. Memo. 2003-195, issued

on the same day as Keene, and also involving a failure to accord

the taxpayer the opportunity to audio record his section 6330

conference, we held that, because the only arguments the
 - 15 -

taxpayers had advanced were frivolous and groundless, it was not

necessary to remand the taxpayers' case to the Office of Appeals

so that a second conference airing the contentions could be audio

recorded.

Petitioner was questioned by the Court at the hearing on

respondent's motion for summary judgment concerning the issues he

wished to raise at a conference on remand. Petitioner stated

that the issues were the same as those listed in his request for

a hearing, as well as an innocent spouse claim on behalf of Mrs.

Schwersensky. As discussed above, the issues raised in

petitioner's hearing request are all frivolous and/or groundless.

As for the innocent spouse claim, Mrs. Schwersensky's entitlement

to relief under section 6015 is irrelevant to this case, which

concerns only whether respondent may proceed with his collection

action against petitioner.10 The remaining arguments raised by

petitioner are nothing more than tax protester rhetoric and

legalistic gibberish.11 We do not address such arguments with

somber reasoning and copious citations of precedent, as to do so

might suggest that they possess some colorable merit. See Crain

v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984).

10
Mrs. Schwersensky failed to petition this Court within 30
days of respondent's notice of determination as to her. See sec.
6330(d)(1); cf. Moorhous v. Commissioner, 116 T.C. 263, 271
(2001) (jointly filing spouses are not a single "person" for
purposes of sec. 6330).
11
See supra notes 4, 6, and 7.
 - 16 -

Because petitioner has admitted the issues he seeks to

raise, and they are all frivolous, groundless, or irrelevant, we

conclude that neither trial nor a remand to Appeals to allow a

recorded hearing is necessary. Respondent's failure to afford

petitioner an opportunity to record the section 6330 conference

was harmless error, and further proceedings in this case would

not be productive. See Holliday v. Commissioner, 97 AFTR2d 2006-

3045, 2006-2 USTC par. 50,430 (9th Cir. 2006), affg. T.C. Memo.

2005-132; Johnston v. Commissioner, 153 Fed. Appx. 451 (9th Cir.

2005), affg. T.C. Memo. 2004-224; Lunsford v. Commissioner, 117

T.C. 183, 189 (2001); Lee v. Commissioner, T.C. Memo. 2004-264.

We therefore conclude that there are no genuine issues of

material fact present in this case, and hold that respondent is

entitled to judgment as a matter of law regarding the proposed

collection activity. Accordingly, we shall grant respondent's

motion for summary judgment.

Section 6673 Penalty

Respondent has also moved for a penalty under section 6673.

Section 6673(a)(1) authorizes this Court to require a taxpayer

who has instituted or maintained a proceeding primarily for

delay, or whose position is frivolous or groundless, to pay a

penalty of up to $25,000 to the United States. See Williams v.

Commissioner, 119 T.C. 276, 280-281 (2002); Bagby v.
 - 17 -

Commissioner, 102 T.C. 596, 614 (1994); Stamos v. Commissioner,

95 T.C. 624, 638 (1990), affd. without published opinion 956 F.2d

1168 (9th Cir. 1992).

In Pierson v. Commissioner, 115 T.C. 576, 581 (2000), this

Court issued a stern warning to taxpayers concerning the

imposition of a penalty under section 6673(a) on those taxpayers

who abused the availability of the protections offered by

sections 6320 and 6330 by instituting actions merely for purposes

of delay or by taking frivolous or groundless positions in such

actions. See Kemper v. Commissioner, supra.

Petitioner's essential position in this case is that he owes

no Federal income taxes despite having received over a half a

million dollars in wages and, according to information returns

that have not been legitimately disputed, more than $600,000 in

proceeds from securities trading. Petitioner further invents

numerous groundless claims to defeat respondent's collection of

duly assessed taxes. Petitioner's position is patently

frivolous. His tax protester arguments persuade us that he

invoked the section 6330 protections in bad faith. Respondent's

motion for summary judgment and to impose a penalty put

petitioner on effective warning that section 6673 penalties might

be imposed. Petitioner nonetheless persisted in his course of

conduct, as evidenced by the tax protester rhetoric in his

response to respondent's motion. Petitioner has merely wasted
 - 18 -

the time and resources of respondent and this Court. We shall

therefore impose a substantial penalty on petitioner pursuant to

section 6673(a)(1), in the amount of $15,000.

To reflect the foregoing,

An appropriate order and

decision will be entered.