T.C. Memo. 2009-82
UNITED STATES TAX COURT
RICKY L. SPAIN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15162-07L. Filed April 27, 2009.
Ricky L. Spain, pro se.
Heather D. Horton, for respondent.
MEMORANDUM OPINION
GERBER, Judge: This matter is before the Court on
respondent’s motion for summary judgment on the determination to
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file a notice of Federal tax lien (NFTL) and regarding whether a
section 66731 penalty should be imposed on petitioner.
Respondent seeks summary judgment on the question of whether
collection may proceed in accordance with a notice of
determination sent to petitioner. Respondent made the
determination to proceed to collect, by filing an NFTL covering
petitioner’s 1990, 1991, and 1992 unpaid tax liabilities.
Petitioner seeks review of that determination under sections
6320(c) and 6330(d).
The issues for consideration are: (1) Whether respondent’s
determination to proceed with collection was an abuse of
discretion and (2) whether a section 6673 penalty should be
imposed on petitioner.
Background
Petitioner failed to file Forms 1040, U.S. Individual Income
Tax Return, for the taxable years 1990, 1991, and 1992.
Respondent prepared and filed substitutes for returns under
section 6020(b). Respondent then mailed notices of deficiency
for those years to petitioner’s last known address. Petitioner
did not appeal to this Court from those notices, and respondent
assessed the income tax deficiencies.
1
Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code.
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When petitioner failed to pay the assessed deficiencies, he
was sent notice of respondent’s intent to levy. Petitioner
requested a hearing before Appeals but was not given one because
he insisted on tape-recording the hearing. Respondent issued a
notice of determination on July 30, 2002. On September 3, 2002,
petitioner filed a petition with the Court for review under
section 6330(d) in docket No. 14090-02L.
While that case was pending in this Court, petitioner, on
March 10, 2003, filed for bankruptcy under chapter 7 of the
Bankruptcy Code. The bankruptcy proceeding was adjudicated and
closed on June 19, 2003. Petitioner’s tax liabilities were not
discharged, because he failed to file tax returns for the years
in issue.
On March 29, 2004, respondent filed a motion to remand the
case at docket No. 14090-02L to respondent’s Appeals Office to
provide petitioner with a section 6330 administrative hearing
(section 6330 hearing) to discuss petitioner’s underlying tax
liabilities. Respondent’s motion was granted on April 5, 2004.
Petitioner was afforded a section 6330 hearing, and he was given
an opportunity to challenge his underlying tax liability.
Petitioner raised three issues: (1) The substitutes for returns
respondent prepared should have been considered tax returns by
the bankruptcy court; (2) the failure to file penalty should be
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limited to $100; and (3) the notice of deficiency was improperly
issued because it was sent to the wrong address.
Respondent advised petitioner that his arguments had been
rejected by the courts. Therefore, according to the relevant
authority, respondent concluded that petitioner’s unpaid tax
liability had not been discharged in the bankruptcy proceeding,
the failure to file penalty was appropriate, and the notice of
deficiency was properly issued because it was mailed to
petitioner’s last known address. On January 19, 2005, respondent
issued a supplemental notice of determination sustaining the
intent to levy.
This Court entered a decision in docket No. 14090-02L that
was agreed to by petitioner and respondent on March 25, 2005,
sustaining respondent’s determinations to proceed with the levy.
As of the date of the entry of decision, petitioner owed the
following amounts:
Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654(a)
1990 $1,951 $487.75 $128
1991 2,360 590.00 125
1992 2,383 595.75 104
On January 3, 2006, respondent mailed notice of the NFTL
filing (CDP notice) to petitioner’s last known address. The NFTL
indicated that petitioner owed $2,656.87, $7,998.88, and
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$7,484.19 for his 1990, 1991, and 1992 tax years, respectively.2
Petitioner made a timely request for a section 6320 hearing on
February 7, 2006, in which he stated that the lien was improper
because: (1) Taxes were not assessed in 1997; (2) the notices of
deficiency were mailed to the wrong address, if at all;
(3) petitioner did not receive the notices of deficiency; (4) the
amount of the alleged assessment was significantly different from
the amount determined on audit; (5) the penalties were
inappropriate because petitioner acted in good faith; (6) the
interest amounts were inappropriate because they were caused by
respondent’s errors and delays; (7) respondent did not notify
petitioner within 5 days after the NFTL was executed; and (8)
petitioner filed a bankruptcy petition before the NFTL was filed.
On May 3, 2006, Settlement Officer Irma Hernandez sent
petitioner a letter stating that petitioner qualified for a face-
to-face hearing with respondent’s Appeals Office. On April 10,
2007, Settlement Officer Beverly J. Prawl wrote to petitioner
requesting that he call her within 14 days to schedule the
section 6320 hearing. Her letter instructed petitioner to call
during her office hours of 8 a.m. to 4:30 p.m. and in the event
he reached her voicemail, to leave a phone number where he could
be reached during those hours. The letter also indicated that
2
The increased amounts over the deficiency determinations
are likely attributable to accrued interest.
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petitioner was eligible for a face-to-face hearing. Petitioner
was notified that he was precluded from disputing the underlying
tax liability because he had a prior opportunity to dispute the
liability, a decision had been entered in Tax Court, and a notice
of determination had been mailed by Appeals. Furthermore,
petitioner was informed that he could not propose collection
alternatives unless he submitted a collection information
statement, filed returns for tax years 1993 through 2005, and
made estimated tax payments for 2007.
On April 25, 2007, petitioner left Ms. Prawl a voicemail
message at 6:17 a.m. Petitioner reiterated his desire to resolve
his issues in person, and he stated that he was not available to
speak by phone and, instead, left a number for his voicemail. On
April 30, 2007, Ms. Prawl left a voicemail message for petitioner
apprising him that he was precluded from disputing the underlying
tax liability or proposing collection alternatives. She also
informed petitioner that he was not eligible for a face-to-face
hearing unless he presented an issue that was not precluded. She
asked him to call back the next day during office hours and again
requested that he leave his phone number if he reached her
voicemail.
Instead of calling during office hours, petitioner faxed a
letter to Ms. Prawl after normal office hours on May 1, 2007. In
the letter petitioner restated his preference for a face-to-face
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hearing but acquiesced to a correspondence hearing. In his
letter petitioner did not raise any issue that was not precluded.
The following day Ms. Prawl left a voicemail for petitioner
requesting that he send any correspondence regarding the hearing
by May 14, 2007. She warned petitioner that a determination
letter would otherwise be issued. On May 15, 2007, Ms. Prawl
received a letter from petitioner in which he refused to agree to
a correspondence hearing and again demanded a face-to-face
hearing.
On May 22, 2007, Ms. Prawl obtained a copy of petitioner’s
bankruptcy report. Ms. Prawl noted that the bankruptcy case had
been closed on June 19, 2003.
On May 31, 2007, respondent issued petitioner a notice of
determination finding the filing of the NFTL was appropriate.
The notice of determination also concluded that the CDP notice
was timely sent and that petitioner had no pending bankruptcy
case at that time or at the time the CDP notice was sent.
Petitioner’s remaining arguments were not considered because he
had a prior opportunity to dispute his tax liability and was
therefore precluded from raising those issues.
On July 3, 2007, petitioner filed a petition with this Court
seeking review of respondent’s determination sustaining the
filing of the NFTL. On March 3, 2008, respondent moved for
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summary judgment on the filing of the NFTL and for the imposition
of a section 6673 penalty upon petitioner.
Discussion
I. Motion for Summary Judgment
Summary judgment may be granted when there is no genuine
issue of material fact and a decision may be rendered as a matter
of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C.
518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994). The opposing
party cannot rest upon mere allegations or denials in his
pleadings and must “set forth specific facts showing that there
is a genuine issue for trial.” Rule 121(d). The moving party
bears the burden of proving there is no genuine issue of material
fact, and factual inferences will be read in a manner most
favorable to the party opposing summary judgment. Dahlstrom v.
Commissioner, 85 T.C. 812, 821 (1985); Jacklin v. Commissioner,
79 T.C. 340, 344 (1982).
If a taxpayer neglects or refuses to pay a tax owed after
demand for payment, the unpaid tax will be a lien in favor of the
United States upon all property and rights to property belonging
to that person. Sec. 6321. If the Commissioner files a notice
of that lien under section 6323, the taxpayer must be notified of
the filing in writing no more than 5 business days afterwards.
Sec. 6320(a).
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Upon request, the taxpayer is entitled to an administrative
review hearing before an impartial officer or employee of the
Appeals Office. Sec. 6320(b). The hearing is conducted
according to the procedures under section 6330(c), (d), and (e).
At the hearing, the taxpayer may raise any relevant issue
regarding the Commissioner’s collection activities. Sec.
6330(c)(2)(A). However, if a taxpayer received a statutory
notice of deficiency for the years in issue or otherwise had a
prior opportunity to dispute the underlying tax liability, the
taxpayer is precluded from challenging the existence or amount of
the underlying tax liability. Sec. 6330(c)(2)(B).
Following the hearing, the Appeals officer must determine
whether the collection action is to proceed, taking into account
the verification the Appeals officer has made, the issues the
taxpayer raised at the hearing, and whether the collection action
balances the need for the efficient collection of taxes with the
legitimate concern of the taxpayer that any collection action be
no more intrusive than necessary. Sec. 6330(c)(3).
We have jurisdiction to review the determination if we have
jurisdiction over the type of tax involved in the case.3 Sec.
6330(d)(1); Iannone v. Commissioner, 122 T.C. 287, 290 (2004).
3
For determinations made after Oct. 16, 2006, this Court
would have jurisdiction irrespective of the type of tax liability
involved. Pension Protection Act of 2006, Pub. L. 109-280, sec.
855, 120 Stat. 1019; Callahan v. Commissioner, 130 T.C. 44
(2008).
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We review under an abuse of discretion standard when the
underlying tax liability is not in issue. Goza v. Commissioner,
114 T.C. 176, 182 (2000).
Petitioner had a prior opportunity to dispute the underlying
tax liabilities at the section 6330 hearing. He was therefore
precluded from disputing his underlying tax liability at the
section 6320 hearing. Consequently, we do not consider that
issue. Id. at 182-183.
Under the abuse of discretion standard, petitioner is
required to show that respondent’s actions were arbitrary,
capricious, or without sound basis in fact. See Knorr v.
Commissioner, T.C. Memo. 2004-212.
In making the determination to sustain the NFTL filing,
respondent verified that there was compliance with all legal and
procedural requirements. Respondent determined that the CDP
notice was timely sent and that there was no pending bankruptcy
action that would have proscribed the filing of the NFTL.
Moreover, petitioner’s underlying tax liability was not
discharged in the bankruptcy proceeding because he had not filed
tax returns for the years in issue.
Petitioner raised no other issues which respondent could
have considered because petitioner was precluded from raising the
issue of his underlying tax liability. Petitioner did not
propose any collection alternatives.
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Respondent’s issuance of the notice of determination was not
arbitrary or capricious. The determination was made after
careful consideration of the issues properly raised by
petitioner. Accordingly, we hold that there was no abuse of
discretion in determining to proceed with collection, and
respondent’s motion for summary judgment will be granted.
II. Section 6673 Penalty
Section 6673(a)(1) authorizes this Court to impose a penalty
not to exceed $25,000 if a taxpayer took frivolous or groundless
positions in a proceeding or instituted a proceeding primarily
for delay. A taxpayer’s position 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); Sicalides v. Commissioner, T.C.
Memo. 1989-164. A taxpayer’s position is groundless when the
only evidence he tries to support it with is evidence that he
knows to be false. Bagby v. Commissioner, 102 T.C. 596, 615
(1994).
Petitioner claims that he is ready and willing to pay his
correct tax liability but that it was respondent who delayed
resolution of the matter by refusing to grant him a face-to-face
hearing. Petitioner stipulated this Court’s earlier decision
sustaining respondent’s determination to proceed with the levy.
At that point petitioner knew the correct amount of his tax
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liability. Petitioner’s actions since then confirm that he is
merely attempting to delay collection.
On brief, petitioner claims, for the first time, that he was
pressured into signing the decision document entered by this
Court and that he did not understand what he was agreeing to. We
are unconvinced by petitioner’s explanation. Petitioner did not
take any action to be relieved from the decision entered and did
nothing until respondent filed the NFTL.
In his request for an administrative hearing, petitioner
raised issues which he had already addressed in his previously
resolved section 6330 hearing and proceeding before this Court.
He had already unsuccessfully claimed that his bankruptcy case
prohibited respondent from taking collection action on his unpaid
tax liability and that he never received notices of deficiency
for the years in issue. Yet, he made exactly the same arguments
again in his current challenge to respondent’s collection action.
Petitioner also contended that the NFTL filing was not sent
timely because he received the notice on January 10, 2006.
Petitioner’s argument is frivolous and groundless because the
notice had been sent within the statutorily required 5-day
period.
Petitioner then deliberately impeded the scheduling of the
section 6320 hearing by contacting Ms. Prawl outside her normal
office hours.
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Petitioner also continued to demand a face-to-face hearing even
after being informed that he was ineligible for such a hearing.
In further pursuit of delay, petitioner filed a petition
with this Court after respondent issued a notice of
determination. In litigating his claim, petitioner has continued
the same pattern of presenting repetitive frivolous and
groundless arguments.
In his petition, petitioner asserted numerous affirmative
defenses. With the exception of his claim of discharge in
bankruptcy petitioner has not presented arguments or evidence
concerning any of the other allegations made either in his
pleadings or the administrative or Court proceedings.
Petitioner claims that he should not be liable for the
section 6673 penalty because he acted in good faith in that he
believed that there was an error in the underlying tax liability.
He distinguishes between income tax and self-employment tax,
claiming that the tax liability reflected in the stipulated
decision is entirely attributable to self-assessed self-
employment tax. He argues that his correct income tax was
therefore zero and the filing of the NFTL was thus inappropriate.
This position is also frivolous as there is no basis in law for
making such a distinction.
Petitioner has so far succeeded in delaying collection of
taxes he has owed for as long as 17 years. Despite stipulating
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a levy regarding his tax liability 4 years ago, petitioner has
attempted to forestall collection of that agreed liability using
the same failed arguments. We therefore hold petitioner is
liable for a $2,500 penalty under section 6673(a)(1).
To reflect the foregoing,
An appropriate order and
decision will be entered.