Maxton v. Comm'r

T.C. Memo. 2007-95

UNITED STATES TAX COURT

THOMAS OLAN MAXTON, JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 2599-05L. Filed April 23, 2007.

Thomas Olan Maxton, Jr., pro se.

Gordon P. Sanz, for respondent.

MEMORANDUM OPINION

JACOBS, Judge: This case was commenced in response to a

Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330 (notice of determination).1 The issue

for decision is whether respondent abused his discretion in

1
Unless otherwise indicated, all section references are to
the Internal Revenue Code (Code) as amended, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
 - 2 -

determining that a Federal tax lien was appropriately imposed on

petitioner’s property with respect to tax owed for tax years

1991, 1992, and 1993.

Background

At the time petitioner filed the petition, he resided in

Pasadena, Texas. Petitioner failed to file Federal income tax

returns for the tax years 1991, 1992, and 1993. Consequently,

respondent prepared a substitute for return for each of those

years. On May 6, 1997, respondent issued a notice of deficiency,

determining deficiencies of $14,823 for 1991, $33,329 for 1992,

and $25,502 for 1993. Respondent also determined that petitioner

was liable for additions to tax under sections 6651(a)(1) and

6654 of $2,508 for 1991, $8,279 for 1992, and $7,222 for 1993.

Petitioner did not judicially challenge these determinations.2

On October 29, 1997, respondent assessed tax and additions to tax

for tax years 1991, 1992, and 1993 as shown in the notice of

deficiency, as well as interest thereon. On January 14, 2004,3

respondent mailed petitioner a Final Notice of Intent to Levy and

2
Petitioner’s response to the notice of deficiency was to
retain an attorney, J. Hamilton McMenamy, who, acting on behalf
of petitioner, sent a letter to respondent dated July 11, 1997,
raising frivolous arguments in regard to the notice of
deficiency. For example, the letter demanded to know what Code
section imposes a tax on petitioner and the specific tax forms
petitioner was required to file to report his tax. The letter
suggested that petitioner had no duty to pay taxes.
3
It appears that petitioner may have filed for bankruptcy at
some point during the 1997-2004 interim.
 - 3 -

Notice of Your Right to a Hearing, and on May 4, 2004, respondent

filed a notice of Federal tax lien on petitioner’s property with

the County Clerk for Harris County. In his notice dated May 11,

2004, advising petitioner of the lien, respondent provided

petitioner with detailed information about the amounts of tax

that were owed, the related tax periods, and citations of the

Code sections that authorize the lien filing.

On June 14, 2004, petitioner requested a hearing under

section 6320 with respect to the lien, alleging that there were

erroneous dates of assessment and “amounts unjustifiably

entered.”4 The request for a hearing referenced a letter dated

February 4, 2004, that petitioner had written to respondent in

response to respondent’s final notice of intent to levy. In that

letter, petitioner advanced frivolous arguments as to why

respondent’s collection activities should not go forward.5

4
Petitioner’s request for a hearing did not include the
proposed levy action and would not have been timely with respect
to it. See secs. 6330 and 6331. It appears that respondent
agreed to an equivalent hearing with respect to the levy. While
it is not clear whether or when an equivalent hearing was held,
respondent did not issue a notice of determination with respect
to the levy action. Petitioner has not asked us to consider the
levy action here, and we would not have jurisdiction to do so.
See sec. 6330(d).
5
Petitioner, in his Feb. 4, 2004, letter, did not request a
hearing but alleged that the levy action interfered with his
right to due process because he had filed a civil action in the
U.S. District Court for the District of Columbia. (In his
pretrial memorandum, petitioner further describes the District
Court case as one involving a “Privacy Act Request”. We note
(continued...)
 - 4 -

Petitioner’s February 4, 2004, letter indicated that his

representative would be Wayne A. Paul, C.P.A. (Mr. Paul). Mr.

Paul’s address and telephone number were included in the letter.

On September 21, 2004, respondent’s settlement officer

advised petitioner by letter that a telephone hearing was

scheduled for October 19, 2004. In this letter, the settlement

officer cautioned petitioner that the Appeals Office would not

consider items that courts have determined are frivolous or

groundless. Moreover, attached to the September 21 letter was a

copy of this Court’s decision in Pierson v. Commissioner, 115

T.C. 576 (2000), IRS Publication 2105, “Why do I have to Pay

Taxes?”, and also transcripts showing assessments, penalties,

interest, and other items affecting petitioner’s account for the

tax periods involved in the collection action. The settlement

officer further advised petitioner that in order to qualify for a

collection alternative, petitioner had to be in compliance with

current tax obligations and that respondent’s records indicated

that petitioner had not filed a return for any year from 1994

through 2003. The settlement officer requested additional

information concerning petitioner’s financial situation and

5
(...continued)
that the case to which petitioner refers was dismissed by the
District Court on Dec. 27, 2000, and a subsequent appeal in that
case was dismissed on Aug. 5, 2005). Petitioner renewed his
demand that respondent “produce the legal evidence of the law
which gives you the statutory authority you rely upon.”
 - 5 -

solicited petitioner’s proposed collection alternative. Finally,

the settlement officer requested petitioner’s telephone number

for the purpose of holding the hearing. Petitioner responded to

this last request on October 14, 2004, leaving the settlement

officer a voice mail message with petitioner’s telephone number

and a request for a 5-day postponement of the hearing.

On October 18, 2004, petitioner sent a telefax to the

settlement officer, reiterating his request for a postponement of

the hearing scheduled for the next day, and then spoke with the

settlement officer by telephone that same day. In the telephone

conversation, petitioner informed the settlement officer that

petitioner’s representative, Mr. Paul, needed more time to

prepare for the hearing and that Mr. Paul would explain

petitioner’s position and why petitioner had not furnished

respondent with additional information that had been requested.

The settlement officer reiterated that respondent’s Appeals

Office would not consider matters that courts have determined are

frivolous or groundless and that the hearing would focus on

collection alternatives, petitioner’s compliance, and any

nonfrivolous arguments. The parties agreed that petitioner would

telephone the settlement officer by October 25, 2004, to

reschedule the hearing.

Neither petitioner nor Mr. Paul communicated with the

settlement officer by October 25, 2004. On October 27, 2004,
 - 6 -

petitioner sent a telefax to the settlement officer indicating

that Mr. Paul would be in touch with the settlement officer.

When there was no further communication from petitioner or Mr.

Paul by November 18, the settlement officer prepared and mailed a

letter scheduling a face-to-face hearing for December 14, 2004,

and reserved a conference room for that purpose.

On December 9, 2004, the settlement officer received a

telefax from petitioner in which petitioner indicated that he

would like to again reschedule the hearing because Mr. Paul would

be out of town on the scheduled hearing date (December 14, 2004)

and had not had time to prepare for the hearing. Petitioner

continued to raise frivolous arguments with respect to his tax

liability.6 The settlement officer then telephoned Mr. Paul and

advised Mr. Paul that respondent was not willing to schedule a

hearing for a third time, and that the arguments that petitioner

proposed to raise at the hearing were frivolous. The settlement

officer then left a voice mail message for petitioner that the

December 14, 2004, hearing would not be rescheduled.

On December 14, 2004, petitioner and Mr. Paul initiated a

telephone call to the settlement officer in which they stated

6
Petitioner challenged the signature of the IRS agent who
signed the notice of Federal tax lien on behalf of another agent.
Petitioner wrote that “I understand that Treasury Orders allow a
delegation of authority to only one agent and the agent given the
authority is not able to substitute that authority for someone
else.”
 - 7 -

that they would proceed with the hearing by telephone. The

settlement officer’s notes of the telephone conversation

indicate, among other things, that Mr. Paul stated that he was at

a disadvantage because he had not had enough time to prepare for

the hearing; that the settlement officer reminded Mr. Paul that a

substantial amount of time had already been afforded him for this

purpose; and that the settlement officer reiterated that

petitioner’s arguments were frivolous. Petitioner’s version of

the telephone call is that very shortly after the parties greeted

one another the settlement officer terminated the conversation.

Both parties agree that at some point in their telephone

conversation the settlement officer inquired whether petitioner

was making an audio recording of the hearing. Petitioner and his

representative confirmed that they were. The settlement officer

explained to petitioner and Mr. Paul that while section 7521

permits audio recordings, advance notice of the intent to make

such a recording must be given and that he had received none.

Petitioner offered to turn off the recorder, but the settlement

officer was not confident that he would be able to verify whether

the recorder was in fact turned off and therefore ended the

hearing.

Respondent’s Appeals Office sustained the lien and issued

the notice of determination on January 6, 2005. Petitioner filed
 - 8 -

his petition with this Court, seeking review of respondent’s

determination, on February 10, 2005. This case was submitted

fully stipulated pursuant to Rule 122 on December 14, 2005.7

Discussion

Section 6321 imposes a lien in favor of the United States on

all property and rights to property of a taxpayer liable for

taxes when a demand for payment of the taxes has been made and

the taxpayer fails to pay those taxes. Section 6320(a) provides

that the Secretary shall furnish the taxpayer with written notice

of a Federal tax lien within 5 business days after the notice of

lien is filed. Section 6320 further provides that the taxpayer

may request an Appeals hearing within 30 days beginning on the

day after the 5-day period described above. Sec. 6320(a)(3)(B)

and (b)(1). Section 6320(c) provides that the Appeals hearing

generally shall be conducted consistent with the procedures set

forth in section 6330.

Section 6330(c) provides for review with respect to

collection issues such as spousal defenses, the appropriateness

of the Commissioner’s proposed collection actions, and the

possibility of collection alternatives. Sec. 6330(c)(2)(A). The

taxpayer may also challenge the amount of the underlying tax

liability if the taxpayer did not receive a statutory notice of

7
This matter was submitted for disposition by order of the
Chief Judge to Judge Julian I. Jacobs on Feb. 13, 2007.
 - 9 -

deficiency or did not otherwise have an opportunity to dispute

the tax liability. Sec. 6330(c)(2)(B).

Pursuant to section 6330(d)(1), within 30 days of the

issuance of a notice of determination, the taxpayer may appeal

the determination to this Court if we have jurisdiction over the

underlying tax liability. 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, the Court will review the Commissioner’s determination for

an abuse of discretion. Sego v. Commissioner, supra at 610; Goza

v. Commissioner, supra at 181.

Petitioner received a statutory notice of deficiency for the

years in issue, and thus his underlying tax liability is not

properly at issue. Accordingly, we review respondent’s

determination for an abuse of discretion. See Sego v.

Commissioner, supra at 610; Goza v. Commissioner, supra at 181.

Petitioner argues that the settlement officer abused his

discretion by terminating the telephone conference of December

14, 2004. The termination of the telephone call effectively

negated the hearing, according to petitioner, so that he did not

receive the hearing required by section 6330. We disagree.
 - 10 -

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); Ho v. Commissioner, T.C. Memo. 2006-41. Taxpayers are

generally entitled to a face-to-face hearing at the Appeals

Office nearest their residence. Sec. 301.6320-1(d)(2), Q&A-D6

and D7, Proced. & Admin. Regs. Where the taxpayer declines to

participate in a proffered face-to-face hearing, hearings may be

conducted by telephone or correspondence. Katz v. Commissioner,

supra at 337-338; Ho v. Commissioner, supra; sec. 301.6320-

1(d)(2), Q&A-D6 and D7, Proced. & Admin. Regs. The Court of

Appeals for the Fifth Circuit, to which an appeal in this case

would lie, has held that a face-to-face hearing is not required

where the taxpayer’s proffered arguments are frivolous. Burnett

v. Commissioner, No. 06-60908 (5th Cir., Apr. 12, 2007).

Furthermore, once the taxpayer has been given reasonable

opportunity for a hearing but has failed to avail himself of that

opportunity, we have approved the making of a determination to

proceed with collection on the basis of the Commissioner’s review

of the case file; i.e, in the absence of any hearing. See, e.g.,

Ho v. Commissioner, supra; 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.
 - 11 -

Section 7521(a)(1) provides that a taxpayer, in connection

with an interview and upon advance request, will be allowed to

make an audio recording of the interview. See Notice 89-51,

1989-1 C.B. 691, for IRS guidelines requiring advance notice of

intent to record. Petitioner did not make an advance request to

record the hearing as required in section 7521(a)(1).

Furthermore, given that the hearing occurred, and that petitioner

does not assert that he raised collection alternatives that were

not considered by, or were not reflected in the case activity

records of, the settlement officer, we do not consider the issue

of recording decisive. Petitioner simply has not claimed or

shown prejudice in the failure to permit recording. See 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. Memo. 2003-195.

The record establishes that petitioner advanced only

frivolous, groundless arguments and assertions. Petitioner

failed to raise any relevant issues of merit. At no point in the

collection proceedings did petitioner offer any alternatives to

collection. Any possibility that petitioner might have had a

valid claim to make if the telephone hearing had continued was

dispelled at the trial of this case.8 At that time, the Court

8
Indeed, we denied respondent’s motion for summary judgment
on Dec. 8, 2005, in order that petitioner would have an
opportunity to present valid arguments.
 - 12 -

asked petitioner whether he wished to testify, to call witnesses,

or to introduce any other evidence. Petitioner declined to do

any of these things. After the trial, petitioner filed a brief

in which he admitted that he had not been prepared to introduce

any new matters at the hearing, and he persisted with his vague

assertion that this case involves “erroneous dates of assessment

and amounts unjustifiably entered.”

In the light of the above and considering petitioner’s

frivolous assertions and arguments, a further hearing in this

case (recorded or not) would not have been, nor would it be,

productive. See Lunsford v. Commissioner, 117 T.C. 183, 189

(2001); Bean v. Commissioner, T.C. Memo. 2006-88. Moreover,

under the circumstances, petitioner has given us no reason to

believe that remanding this matter to the Appeals Office would in

any way advance the policies underlying section 6330. Thus, we

conclude that a remand is unwarranted.

The record reflects that the Appeals Office properly

verified that all applicable laws and administrative procedures

governing the assessment and collection of petitioner’s unpaid

tax liabilities were met. On the basis of this record, we

conclude as a matter of law that respondent did not abuse his

discretion. Respondent’s determination that the filing of a

notice of Federal tax lien was appropriate is sustained.

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

taxpayer to pay the United States a penalty in an amount not to
 - 13 -

exceed $25,000 whenever it appears to the Court the taxpayer’s

position is frivolous or groundless. Sec. 6673(a)(1)(B).

Respondent has asked us to impose a penalty against petitioner

under section 6673(a). We have imposed a penalty under section

6673 on taxpayers who have raised arguments similar to those

petitioner has raised. See, e.g., Roberts v. Commissioner, 118

T.C. 365 (2002), affd. per curiam 329 F.3d 1224 (11th Cir. 2003);

Pierson v. Commissioner, 115 T.C. 576 (2000). We will not impose

a penalty here, but we caution petitioner that in the future

should he bring similar arguments before this Court, the Court is

likely to impose such a penalty.

To reflect the foregoing,

Decision will be entered

for respondent.