T.C. Memo. 2006-277
UNITED STATES TAX COURT
WILLIAM M. LEGGETT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15167-04L. Filed December 28, 2006.
P filed a petition for judicial review pursuant to
sec. 6330, I.R.C., in response to a determination by R
that levy action is appropriate.
Held: R’s determination to proceed with
collection by levy is sustained;
Held, further, a penalty pursuant to sec. 6673,
I.R.C., is due from P and awarded to the United States
in the amount of $2,500.
William M. Leggett, pro se.
Monica J. Miller, for respondent.
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MEMORANDUM FINDINGS OF FACT AND OPINION
WHERRY, Judge: This case is before the Court on a petition
for judicial review of a Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330. The issues
for decision are: (1) Whether respondent may proceed with
collection by levy of petitioner’s tax liabilities for the 1994,
1995, and 1996 taxable years; and (2) whether the Court should
impose a penalty pursuant to section 6673(a).1
FINDINGS OF FACT
At the time the petition was filed, petitioner resided in
Sorrento, Florida.
Petitioner failed to file Federal income tax returns for his
1994, 1995, and 1996 taxable years. On July 26, 2000, respondent
mailed to petitioner a notice of deficiency for those taxable
years. Petitioner timely petitioned this Court, and a trial was
held on October 15, 2001 (2001 trial). At trial, petitioner
argued that the exchange of his personal physical services for
Federal Reserve Notes did not constitute taxable income. The
Court issued an Oral Findings of Fact and Opinion which sustained
the deficiencies and additions to tax determined by respondent
and admonished petitioner for failing to file his returns and
raising frivolous tax-protester arguments.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code (Code) of 1986, as amended.
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Thereafter, on March 1, 2004, respondent issued to
petitioner a Final Notice - Notice of Intent to Levy and Notice
of Your Right to a Hearing with respect to the years in issue.
In response, petitioner timely submitted to respondent a Form
12153, Request for Collection Due Process Hearing, which stated
that his disagreement with the levy was as follows: “ASSESSMENT
INVALID”. The Appeals Office settlement officer assigned to
petitioner’s case, J. Feist (Mr. Feist), wrote to petitioner on
June 15, 2004, to notify him of his assignment, conference
procedural practices, and the scheduled hearing date of July 2,
2004. Petitioner subsequently sent to Mr. Feist a letter dated
June 27, 2004, that requested the hearing date be rescheduled for
the middle of July and provided notice of his intention to audio
record the hearing.
The hearing was conducted via telephone on July 12, 2004.
Shortly after the hearing began, petitioner informed Mr. Feist
that he was recording the hearing. Mr. Feist explained to
petitioner that only face-to-face hearings may be recorded. He
also advised that petitioner did not qualify for a face-to-face
hearing as petitioner had only raised frivolous arguments. Mr.
Feist ended the hearing when petitioner refused to cease
recording and failed to raise any nonfrivolous relevant issues.
Respondent then issued to petitioner the above-mentioned
Notice of Determination Concerning Collection Action(s) Under
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Section 6320 and/or 6330 for the years in issue on July 15, 2004.
The attachment to the notice stated that the levy was
“appropriate and reasonable under the circumstances thereby
balancing the need for efficient collection of the taxes while
not being any more intrusive than necessary.” It also indicated
that petitioner’s unpaid tax liabilities for 1994, 1995, and
1996, were $77,311.19, $16,470.89, and $23,277.75, respectively,
as calculated through July 15, 2004.
Petitioner timely petitioned this Court for review of the
collection action. Petitioner argued in the petition that “the
IRS violated petitioner’s right to procedural due process by
refusing allow [sic] him to make an administrative record by
recording the telephone conference on July 12, 2004.” Petitioner
also contended that “the IRS failed to comply with the provisions
of 26 U.S.C. Section 6321/31", that “the assessments for the tax
period [sic] 1994, 1995, and 1996 are invalid”, and that “the IRS
lost its administrative collection powers by failing to comply
with the notice requirements of 26 U.S.C. Section 6303.”
In addition, petitioner filed a posttrial brief which stated
he did “not and has not engaged in an activity that produces
‘TAXABLE INCOME’, but only an exchange of intellectual and
physical property for an agreed upon perceived value in the only
medium of exchange of the day i.e. FRN’s [Federal Reserve
Notes]”. Petitioner’s brief also stated that petitioner is “a
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‘native born American national’, not to be mistaken as a ‘U.S.
CITIZEN’”.
OPINION
I. Collection Action
A. General Rules
Pursuant to section 6331(a), if a taxpayer liable to pay
taxes fails to do so within 10 days after notice and demand for
payment, the Secretary is authorized to collect such tax by levy
upon the taxpayer’s property. The Secretary is obliged to
provide the taxpayer with 30 days’ advance notice of levy
collection and of the administrative appeals available to the
taxpayer. Sec. 6331(d). Upon a timely request a taxpayer is
entitled to a collection hearing before the IRS Office of
Appeals. Sec. 6330(b)(1).
At the collection hearing, the taxpayer may raise “any
relevant issue relating to the unpaid tax or the proposed levy,
including” appropriate spousal defenses, challenges to the
appropriateness of collection actions, and offers of collection
alternatives. Sec. 6330(c)(2)(A). The taxpayer may not contest
the validity of the underlying tax liability unless the taxpayer
did not receive a notice of deficiency for such tax liability or
did not otherwise have an opportunity to dispute such tax
liability. Sec. 6330(c)(2)(B). In rendering a determination,
the Appeals officer must take into consideration verification
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that “requirements of any applicable law or administrative
procedure have been met”, relevant issues relating to the unpaid
tax or proposed levy, and “whether any proposed collection action
balances the need for the efficient collection of taxes with the
legitimate concern of the person that any collection action be no
more intrusive than necessary.” Sec. 6330(c)(3).
The taxpayer is entitled to appeal the determination of the
Appeals Office made on or before October 16, 2006, to the Tax
Court or a U.S. District Court, depending on the type of tax at
issue. Sec. 6330(d).2 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, 181-182 (2000). The Court reviews
any other administrative determination regarding the proposed
levy action for an abuse of discretion. Sego v. Commissioner,
supra at 610; Goza v. Commissioner, supra at 182.
B. Appeals Hearing
Petitioner alleges that his right to procedural due process
was violated because Mr. Feist did not allow him to record his
telephonic hearing. Section 7521(a)(1) provides that
Any officer or employee of the Internal Revenue Service
in connection with any in-person interview with any
taxpayer relating to the determination or collection of
2
Determinations made after Oct. 16, 2006, are appealable
only to the Tax Court. See Pension Protection Act of 2006, Pub.
L. 109-280, sec. 855, 120 Stat. 1019.
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any tax shall, upon advance request of such taxpayer,
allow the taxpayer to make an audio recording of such
interview at the taxpayer’s own expense and with the
taxpayer’s own equipment.
This Court has held that section 7521 applies to section 6330
face-to-face hearings and a taxpayer providing the IRS with
advance notice is allowed to record his face-to-face hearing.
Keene v. Commissioner, 121 T.C. 8, 19 (2003). Notably, this
Court has held that section 7521 is not applicable to telephonic
hearings and a taxpayer is not entitled to record his telephonic
hearing. Calafati v. Commissioner, 127 T.C. ___ (2006).
Absent a situation controlled by section 7521, as in the
instant case, regulations promulgated under section 6330 provide
that “A transcript or recording of any face-to-face meeting or
conversation between an Appeals officer or employee and the
taxpayer or the taxpayer’s representative is not required.” Sec.
301.6330-1(d)(2), Q&A-D6, Proced. & Admin. Regs. “[T]he
applicable statutes and regulations do not confer any right to
record a telephone conference conducted as part of a collection
due process hearing.” Little v. United States, 97 AFTR 2d 2006-
1466 (M.D.N.C. 2005), affd. 178 Fed. Appx. 230 (4th Cir. 2006).
This Court does not remand cases to the Commissioner’s
Appeals Office merely on account of the lack of a recording when
to do so is not necessary and would not be productive. Lunsford
v. Commissioner, 117 T.C. 183, 189 (2001); Frey v. Commissioner,
T.C. Memo. 2004-87. “A principal scenario falling short of the
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necessary or productive standard exists where the taxpayers rely
on frivolous or groundless arguments consistently rejected by
this and other courts.” Carrillo v. Commissioner, T.C. Memo.
2005-290; see also Lunsford v. Commissioner, supra; Frey v.
Commissioner, supra; Durrenberger v. Commissioner, T.C. Memo.
2004-44; Brashear v. Commissioner, T.C. Memo. 2003-196; Kemper v.
Commissioner, T.C. Memo. 2003-195. The Court does not find it
necessary or productive to remand petitioner’s case for a second
hearing as petitioner did not raise any relevant issues relating
to his unpaid tax liabilities at his Appeals Office conference or
at trial. Petitioner has instead espoused only frivolous and
groundless arguments that the Court specifically rejected in
petitioner’s 2001 trial and again in a 2005 trial regarding a
deficiency and additions to tax for petitioner’s 2001 taxable
year. See Leggett v. Commissioner, T.C. Memo. 2005-185.
C. Abuse of Discretion
The existence or amounts of petitioner’s underlying tax
liabilities are not properly at issue because petitioner received
a notice of deficiency for the years in issue and had the
opportunity to dispute such liabilities at his 2001 trial.
Accordingly, the Court will review the administrative record of
the levy for an abuse of discretion. An abuse of discretion has
occurred if the “Commissioner exercised * * * [his] discretion
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arbitrarily, capriciously, or without sound basis in fact or
law.” Woodral v. Commissioner, 112 T.C. 19, 23 (1999).
Petitioner frivolously alleges without any evidentiary
support that respondent did not comply with the notice
requirements of section 6303. Section 6303(a) provides that “the
Secretary shall, as soon as practicable, and within 60 days,
after the making of an assessment of a tax pursuant to section
6203, give notice to each person liable for the unpaid tax,
stating the amount and demanding payment thereof.” If the notice
is mailed, it shall be sent to the taxpayer’s last known address.
Sec. 6303(a). A notice of balance due constitutes a notice and
demand for payment for purposes of section 6303(a). Craig v.
Commissioner, 119 T.C. 252, 262-263 (2002). The record reflects
that respondent sent petitioner a notice of balance due for the
years in issue on May 12, 2003.
Petitioner alleges broadly that respondent did not comply
with sections 6321 and/or 6331. Section 6321 is not relevant to
petitioner’s case as it pertains to liens. Section 6331 governs
levy actions and thus is applicable. The record reflects that
respondent complied with section 6331 as respondent provided
petitioner with the requisite notice, a Final Notice - Notice of
Intent to Levy and Notice of Your Right to a Hearing, on March 1,
2004, which petitioner apparently received, as he requested a
collection hearing.
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Petitioner also contends that respondent’s assessments are
invalid. Petitioner did not show, or even allege, that there was
any irregularity in the assessment procedure that would raise a
question about the validity of the assessments. Respondent noted
verification in the notice of determination that all requirements
of applicable law and administrative procedure had been met and
that respondent had properly balanced the need for efficient
collection against any legitimate concerns of intrusiveness
raised by petitioner. Petitioner has not presented any evidence
or persuasive arguments that respondent erred or abused his
discretion but instead has raised frivolous and groundless
arguments. Hence, the Court concludes that respondent’s
determination to proceed with collection of petitioner’s tax
liabilities was not in error or an abuse of discretion, and
respondent may proceed with the proposed collection.
II. Section 6673 Penalty
Section 6673(a)(1) authorizes the Tax Court to impose a
penalty not in excess of $25,000 on a taxpayer for proceedings
instituted primarily for delay or in which the taxpayer’s
position is frivolous or groundless. “A petition to the Tax
Court, or a tax return, is frivolous if 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).
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Respondent, on brief, asserts that the Court should impose a
penalty pursuant to section 6673(a)(1). Petitioner is no
stranger to the Court or to the section 6673 penalty. Petitioner
raised frivolous arguments in his first trial which involved the
taxable years in issue here of 1994, 1995, and 1996. Petitioner
made similar arguments in a 2005 trial, regarding a deficiency
and additions to tax for his 2001 taxable year, and was ordered
to pay $5,000 to respondent for again asserting frivolous
arguments. Leggett v. Commissioner, supra. Despite repeated
warnings by the Court in petitioner’s two previous trials and the
imposition of a section 6673 penalty, petitioner repeated the
same frivolous arguments in this current case although he did not
dwell on them at trial. The Court is convinced that petitioner’s
positions are frivolous and made at least in part for delay.
Therefore, the Court concludes that a penalty of $2,500 should be
imposed on petitioner.
The Court has considered all of petitioner’s contentions,
arguments, requests, and statements. To the extent not discussed
herein, we conclude that they are meritless, moot, or irrelevant.
To reflect the foregoing,
An appropriate decision
will be entered.