Reynolds v. Comm'r

T.C. Memo. 2009-181

UNITED STATES TAX COURT

BYRON REYNOLDS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 9061-07L. Filed August 10, 2009.

Byron Reynolds, pro se.

Michael Thomas Garrett, for respondent.

MEMORANDUM OPINION

MARVEL, Judge: This case is before the Court on

respondent’s motion for summary judgment under Rule 1211 and to

impose penalties under section 6673. The petition was filed in

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

response to respondent’s Notice of Determination Concerning

Collection Action(s) Under Section 6330 (notice of determination)

with respect to petitioner’s income tax liabilities for 1998,

1999, 2001, 2002, and 2003.

Background

Petitioner, who resided in California when he filed his

petition, failed to file Federal income tax returns from 1998

through 2003.2

On September 5, 2003, respondent prepared substitutes for

returns (SFRs) for petitioner for taxable years 1998, 1999, and

2001 pursuant to section 6020(b). On January 21, 2004,

respondent mailed statutory notices of deficiency for 1998, 1999,

and 2001 to petitioner’s last known address in California. In

the notices respondent determined income tax deficiencies and

additions as follows:

Additions to tax
Year Deficiency Sec. 6651(a)(1) and (2) Sec. 6654(a)

1998 $14,297.40 $3,256.32 $345.72
1999 13,154.10 4,695.22 582.64
2001 27,818.00 8,623.58 1,100.84

On April 20, 2004, petitioner mailed a one-page handwritten

letter to the Court in which he specifically referred to the

notices and denied that he owed any Federal income tax liability

2
Petitioner is a habitual nonfiler who has not filed Federal
income tax returns for many years, continuing to at least as
recently as 2007.
 - 3 -

for any year. We accepted the letter as petitioner’s timely but

imperfect petition. We ordered petitioner to file an amended

petition and pay the $60 filing fee on or before June 17, 2004.3

Petitioner failed to respond to the order, and on

August 6, 2004, we dismissed the case for lack of jurisdiction.

On November 29, 2004, respondent assessed the income tax

deficiencies, additions to tax, and interest for 1998, 1999, and

2001.4

On December 2, 2004, respondent prepared an SFR for

petitioner for 2002 under section 6020(b). On March 8, 2005,

respondent mailed a statutory notice of deficiency to petitioner

at his last known address. Petitioner failed to petition this

Court, and on August 15, 2005, respondent assessed an income tax

deficiency of $18,620, additions to tax under section 6651(a)(1)

and (2) of $6,796.30, an addition to tax under section 6654(a) of

$622.22, and interest for 2002.

On March 18, 2005, respondent prepared an SFR for petitioner

for 2003 under section 6020(b). On June 21, 2005, respondent

mailed a statutory notice of deficiency to petitioner at his last

3
Petitioner’s petition stated, in its entirety: “I hereby
petition you about the IRS’s deficiency ‘determinations’ that I
owe income tax and penalties for the years 1998, 1999 and 2001.
I want to have a trial because I do not owe any amount to the IRS
for any year. The IRS is three times wrong.”
4
Respondent later assessed additional amounts for failure to
pay tax after Nov. 29, 2004.
 - 4 -

known address. Petitioner again failed to petition this Court,

and on January 9, 2006, respondent assessed an income tax

deficiency of $18,931, additions to tax under section 6651(a)(1)

and (2) of $6,247.23, an addition to tax under section 6654(a) of

$488.48, and interest for 2003.5

On June 14, 2006, respondent mailed petitioner a Final

Notice--Notice of Intent to Levy and Notice of Your Right to a

Hearing for 1998, 1999, 2001, 2002, and 2003. According to the

notice, petitioner’s total balance for 1998, 1999, 2001, 2002,

and 2003 was $151,547.19. Petitioner timely filed a Form 12153,

Request for a Collection Due Process Hearing (section 6330

hearing). Petitioner’s request stated, in its entirety:

I am requesting for a [sic] Face-to-Face Collection Due
Process Hearing in an Appeals office closest to my
place of residence. This is also to inform you that I
will be audio recording this hearing. One of the
issues we will address is if the IRS follows proper
procedure (sic). If the IRS has considered any of my
prior issues that I’ve raised in the past to be
frivolous, I hereby renounce them.

5
On Jan. 5, 2006, respondent mailed Letter 2800C, popularly
known as a “lock-in letter”, to petitioner’s employer, directing
the employer to disregard the marital status and withholding
allowances shown on petitioner’s Form W-4, Employee’s Withholding
Allowance Certificate, and instead withhold Federal income tax
from petitioner’s wages using a marital status of single and zero
withholding allowances. Petitioner filed a petition with this
Court at docket No. 6814-07 seeking to have respondent enjoined
from changing petitioner’s withholding allowances and ordered to
repay any wages withheld as a result of the changes. However,
this Court dismissed the petition for lack of subject matter
jurisdiction on the grounds that the lock-in letter was neither a
collection action nor a notice of determination within the
meaning of sec. 6320 or 6330.
 - 5 -

On September 1, 2006, respondent’s Appeals Office received

the case. On October 26, 2006, Settlement Officer Wendy J.

Clinger (Ms. Clinger) informed petitioner that the only issue

raised in his request for a section 6330 hearing--i.e., whether

the Internal Revenue Service (IRS) follows proper procedures--was

frivolous and would not be considered. Ms. Clinger also advised

petitioner that he could not dispute his underlying liabilities

because he had had an earlier opportunity to do so. Ms. Clinger

further advised petitioner he would not be allowed a face-to-face

conference with Appeals unless he could provide a nonfrivolous

issue in writing within 14 days from the date of the letter.6 Ms.

Clinger’s letter requested that petitioner provide certain

financial information, including a Form 433-A, Collection

Information Statement for Wage Earners and Self-Employed

Individuals, and file his 2004 and 2005 Federal income tax

returns. Ms. Clinger scheduled a telephone conference for 1:30

p.m. on November 21, 2006, to discuss the case with petitioner.

On November 8, 2006, petitioner mailed Ms. Clinger a letter

stating that he could not participate in the telephone conference

on November 21, 2006, and demanding a face-to-face conference.

Petitioner denied that the issue raised in his request for a

6
Ms. Clinger’s letter listed several examples of
nonfrivolous issues, including collection alternatives to levy,
challenges to the appropriateness of collection action, and
spousal defenses.
 - 6 -

section 6330 hearing was frivolous and asserted that he had no

intention of raising frivolous issues at the hearing, but he

failed to identify the issues he planned to discuss. Petitioner

also demanded to see all information respondent had used to

calculate his Federal income tax liability, denied he had had a

prior opportunity to challenge the liabilities, and accused

respondent of using a “canned letter” to “railroad” him.

Petitioner did not provide the requested financial information,

nor did he file his 2004 or 2005 Federal income tax return.

Over the next several months Ms. Clinger and petitioner

continued to exchange correspondence. Ms. Clinger offered

petitioner several telephone conferences and advised him that she

would allow him a face-to-face section 6330 hearing if he could

identify a nonfrivolous issue for her to consider. Ms. Clinger

maintained that petitioner could not use the section 6330 hearing

to challenge the underlying tax liabilities because petitioner

had already had an opportunity to contest them. Ms. Clinger

noted that petitioner had filed a petition with the Tax Court for

1998, 1999, and 2001 but his case was dismissed because of his

failure to timely file an amended petition and pay the filing

fee. Ms. Clinger also noted that according to Forms 4340,

Certificate of Assessments, Payments, and Other Specified

Matters, respondent had issued notices of deficiency to
 - 7 -

petitioner for 2002 and 2003, and petitioner had failed to timely

file a petition for either year.

Petitioner insisted his issues were not frivolous, and he

continued to demand a face-to-face hearing. However, petitioner

failed to articulate any particular issue he wished to discuss at

the section 6330 hearing. Petitioner denied that he had

previously filed a petition with respect to 1998, 1999, and 2001

and suggested respondent had mistaken him “for another Byron

Reynolds which may be active in your system.”7

Although petitioner was not allowed a face-to-face hearing

and declined to participate in any of the proposed telephone

conferences, Ms. Clinger regarded the exchange of letters as a

correspondence hearing. Accordingly, on March 27, 2007, the

Appeals Office mailed petitioner a notice of determination in

which the Appeals Office concluded that levy action under section

6330 was an appropriate collection action.8

On April 20, 2007, petitioner mailed a one-page letter to

this Court seeking “assistance regarding a Notice of

Determination I received from the Internal Revenue Service for

7
The petition in the earlier case included petitioner’s
name, home address, and Social Security number.
8
In the notice of determination respondent’s Appeals Office
concluded that even if petitioner had responded to Appeals’
request for financial information, no collection alternatives
could have been considered because of petitioner’s continuing
failure to file Federal income tax returns.
 - 8 -

the tax year [sic] 1998, 1999, 2001, 2002, and 2003.” We

accepted the letter as petitioner’s timely filed petition but

ordered petitioner to file a proper amended petition and pay the

$60 filing fee on or before June 11, 2007.

On June 18, 2007, this Court received petitioner’s amended

petition with attached “beliefs of entitlement”, in which he

argued that respondent’s SFR procedures under section 6020(b) are

invalid and that signing and filing respondent’s Form 1040, U.S.

Individual Income Tax Return, would require petitioner to commit

perjury.9 Accordingly, petitioner requested that we abate “all

assessed or imposed penalties, interest, taxes and Federal Tax

Lien(s)”. On August 11, 2007, petitioner mailed to respondent’s

Office of Chief Counsel a document titled “Consolidation of

Defenses in Motion” in which he moved that this Court dismiss the

instant case for lack of subject matter jurisdiction. As this

document was never filed with the Court, we declined to consider

it.

On August 11, 2008, respondent filed a motion for summary

judgment and to impose a penalty under section 6673. The Court

ordered petitioner to respond by September 5, 2008, but

petitioner failed to file a response.

9
It is unclear from the record when petitioner mailed the
amended petition. In any event, respondent has not challenged
the timeliness of petitioner’s amended petition.
 - 9 -

Discussion

I. Summary Judgment

The purpose of summary judgment is to expedite litigation

and avoid costly, time-consuming, and unnecessary trials. Fla.

Peach Corp. v. Commissioner, 90 T.C. 678, 681 (1988). Summary

judgment may be granted “if the pleadings, answers to

interrogatories, depositions, admissions, and any other

acceptable materials, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that 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); Zaentz v. Commissioner, 90 T.C. 753,

754 (1988).

The party moving for summary judgment bears the burden of

proving that there is no genuine issue of material fact, and all

facts are viewed in the light most favorable to the nonmoving

party. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985).

However, the nonmoving party may not rest on mere allegations or

denials of the moving party’s pleadings; rather, the nonmoving

party must set forth specific facts showing there is a genuine

issue for trial. Rule 121(d); Dahlstrom v. Commissioner, supra

at 820-821.
 - 10 -

II. Section 6330

Section 6330(a) provides that no levy may be made on any

property unless the Secretary has first notified the taxpayer in

writing of his right to a section 6330 hearing. If the taxpayer

properly requests a hearing under section 6330(a), the taxpayer

is entitled to a hearing before an impartial officer of the IRS’s

Appeals Office. Sec. 6330(b). At the hearing, the taxpayer may

raise any relevant issue related to the unpaid tax or proposed

levy, including spousal defenses, challenges to the

appropriateness of the collection action, and offers of

collection alternatives. Sec. 6330(c)(2)(A). The taxpayer may

also challenge the underlying tax liability, but only if the

taxpayer did not receive a statutory notice of deficiency or did

not otherwise have a prior opportunity to dispute the tax

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

Following the hearing, the hearing officer must determine

whether the proposed collection action should proceed. In making

the determination the hearing officer shall take into

consideration: (1) Whether the requirements of all applicable

laws and administrative procedures have been satisfied; (2) any

relevant issues raised by the taxpayer during the section 6330

hearing; and (3) whether the proposed collection action balances

the need for efficient collection of taxes with the taxpayer’s
 - 11 -

legitimate concern that any collection action be no more

intrusive than necessary. Sec. 6330(c)(3).

In determining whether all applicable laws and

administrative procedures have been followed, a hearing officer

is not required to rely on any particular document. Craig v.

Commissioner, 119 T.C. 252, 261-262 (2002). However, a Form 4340

is “a valid verification that the requirements of any applicable

law or administrative procedure have been met”. Id. at 262.

Stated differently, a Form 4340 is presumptive proof, absent any

showing of an irregularity, that a tax has been validly assessed

under section 6203. See, e.g., Schwersensky v. Commissioner,

T.C. Memo. 2006-178. We have held it is not an abuse of

discretion for an Appeals officer to rely on a Form 4340. Davis

v. Commissioner, 115 T.C. 35, 40-41 (2000).

In evaluating a taxpayer’s arguments, a hearing officer is

not required to consider irrelevant or frivolous arguments.

Thus, it is not an abuse of discretion for an Appeals officer to

deny a taxpayer’s request for a face-to-face section 6330 hearing

where the taxpayer has raised only frivolous or groundless

arguments. Moline v. Commissioner, T.C. Memo. 2009-110; Summers

v. Commissioner, T.C. Memo. 2006-219.

This Court has jurisdiction to review the Appeals officer’s

determination. Sec. 6330(d)(1). Where the taxpayer’s underlying

liability was not properly at issue in the hearing, we review the
 - 12 -

determination for an abuse of discretion. Sego v. Commissioner,

114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 182

(2000). An Appeals officer’s determination will not be an abuse

of discretion unless the determination is arbitrary, capricious,

or without sound basis in fact or law. Giamelli v. Commissioner,

129 T.C. 107, 111 (2007); Freije v. Commissioner, 125 T.C. 14, 23

(2005). In reviewing the Appeals officer’s determination, this

Court ordinarily considers only those issues that the taxpayer

raised at the hearing. Giamelli v. Commissioner, supra at 113.

Petitioner had a prior opportunity to challenge his

underlying liability for each of the taxable years at issue. For

1998, 1999, and 2001, petitioner filed a petition with the Court,

but his case was dismissed when he failed to file an amended

petition or pay the filing fee. For 2002 the record contains a

copy of petitioner’s Form 4340 showing that respondent issued a

notice of deficiency on March 8, 2005. Petitioner does not

assert any irregularity in the form. For 2003 the record

contains a copy of the notice of deficiency that was mailed to

petitioner on June 21, 2005. Although petitioner generally

states that he cannot recall receiving any of the notices of

deficiency, petitioner does not deny he received the notices; and

he has not asserted any argument or offered any documentation to

convince us that there is a genuine issue of material fact

regarding the validity or receipt of the notices for any of the
 - 13 -

years that would preclude us from granting respondent’s motion

for summary judgment.10 Accordingly, we hold that respondent

properly determined that petitioner was not entitled to challenge

his underlying tax liabilities during the section 6330 hearing,

and we will review respondent’s determination for abuse of

discretion. In doing so, we will limit our review to the issues

petitioner raised at the section 6330 hearing.

III. Abuse of Discretion Review

Ms. Clinger reviewed petitioner’s Forms 4340 for 1998, 1999,

2001, 2002, and 2003 and determined that all legal requirements

and administrative procedures had been satisfied. Ms. Clinger

also verified that a notice and demand for payment was mailed to

petitioner within 60 days of the assessment for each taxable

year, as required by section 6303(a).

The only argument petitioner raised throughout the hearing

process was that respondent did not follow proper procedures.

Given the general nature of petitioner’s argument, petitioner’s

failure to articulate which procedures respondent neglected to

follow, and petitioner’s status as a habitual nonfiler, Ms.

Clinger reasonably concluded that petitioner’s argument was

10
We would reach the same conclusion even if petitioner had
established that he did not actually receive one or more of the
notices of deficiency. This is because the validity of a notice
of deficiency does not depend on the taxpayer’s actual receipt of
notice. Rather, an otherwise sufficient notice of the deficiency
is valid so long as it is mailed to the taxpayer’s last known
address. Sec. 6212(b).
 - 14 -

frivolous and irrelevant. As discussed above, Ms. Clinger

diligently verified that respondent had in fact followed all

applicable laws and administrative procedures.

The record also establishes that, as required by section

6330(c), in making its determination the Appeals Office properly

balanced the need for the efficient collection of tax with

petitioner’s legitimate concern that collection be no more

intrusive than necessary. During the section 6330 hearing,

petitioner failed to provide requested financial information,

failed to file his 2004 or 2005 Federal income tax return, and

failed to identify any reason it would be unfair or intrusive to

proceed with the collection action. On this record, we can

identify no disputed material fact or legal reason that would

preclude us from granting respondent’s motion for summary

judgment.

IV. Petitioner’s Arguments

Petitioner failed to identify any nonfrivolous argument

despite requests that he do so. The only argument he appears to

have raised in his amended petition is a general assertion that

he owes no taxes. We need not consider petitioner’s assertion

that he owes no taxes and that interest should be abated because

he was precluded by section 6330(c)(2)(B) from contesting the

underlying liabilities at the section 6330 hearing, and he does

not assert that he made an interest abatement request during the
 - 15 -

hearing process. See sec. 6404(h); Giamelli v. Commissioner,

supra at 113.

V. Section 6673 Penalty

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

penalty, not to exceed $25,000, whenever the taxpayer’s position

is frivolous or groundless, the taxpayer unreasonably failed to

pursue administrative remedies, or it appears that proceedings

before this Court have been instituted primarily for delay. The

section 6673 penalty applies to proceedings filed under section

6330(d). See Pierson v. Commissioner, 115 T.C. 576, 581 (2000).

It is within our discretion whether to impose the section

6673 penalty. We have often imposed the penalty in cases where,

for example, taxpayers have presented arguments in administrative

and judicial proceedings despite being warned such arguments were

frivolous. See Burke v. Commissioner, 124 T.C. 189, 197 (2005);

Rodriguez v. Commissioner, T.C. Memo. 2009-92; Ioane v.

Commissioner, T.C. Memo. 2009-68 ($10,000 penalty imposed where

taxpayer was warned months before trial that his frivolous

arguments, lack of candor, and failure to cooperate in the

stipulation process could result in imposition of the section

6673 penalty). But see Lizalek v. Commissioner, T.C. Memo. 2009-

122 (declining to impose the section 6673 penalty where the

taxpayer raised frivolous arguments for the first time in Federal

court).
 - 16 -

Petitioner’s dealings with respondent’s Appeals Office were

characterized by a lack of cooperation and several frivolous and

groundless assertions. On the other hand, we recognize that

petitioner has encountered financial problems in recent years

that have made it difficult for him to pay his mortgage and meet

his child support obligations. We also recognize that

petitioner, by his own admission, is unsophisticated in tax

matters and may have unwisely relied on a paralegal to assist him

with his case. Perhaps most importantly, we note that petitioner

has expressed a desire to cooperate with respondent in the future

to resolve his tax problems. After taking all of this into

account, and in the exercise of our discretion, we decline to

impose any penalty under section 6673. We warn petitioner,

however, that the unsupported arguments he raised during his

correspondence hearing and before this Court are frivolous, and

this Court may impose a sanction of up to $25,000 if petitioner

continues to advance such arguments in subsequent proceedings

before this Court.

We conclude on the record before us that there is no genuine

issue of material fact requiring a trial, and respondent is

entitled to a decision as a matter of law. We sustain

respondent’s determination to proceed with collection of

petitioner’s 1998, 1999, 2001, 2002, and 2003 Federal income tax

liabilities.
 - 17 -

We have considered the parties’ remaining arguments and to

the extent not discussed above, consider those arguments to be

irrelevant, moot, or without merit.

To reflect the foregoing,

An appropriate order and

decision will be entered for

respondent.