Lindberg v. Comm'r

T.C. Memo. 2010-67

UNITED STATES TAX COURT

KENNETH R. LINDBERG, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 5421-08L. Filed April 6, 2010.

Kenneth R. Lindberg, pro se.

Michael A. Pesavento, for respondent.

MEMORANDUM OPINION

MORRISON, Judge: This case is before this Court on

respondent Internal Revenue Service’s (IRS) motion for summary

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

is whether to sustain the IRS’s determination to collect by means
 - 2 -

of a proposed levy a frivolous-return penalty for petitioner’s

2004 tax return under section 6702.1

Background

Petitioner Kenneth R. Lindberg earned and was paid wages of

$43,156.03 in 2004. That he earned and was paid those wages was

reflected on the Form W-2, Wage and Tax Statement, that was sent

to the IRS by his employer, Accraply, Inc. (Accraply), and was

later confirmed by Accraply in writing in a signed questionnaire

and earnings statement requested by the IRS pursuant to an

examination request dated January 30, 2007.

Lindberg submitted to the IRS a signed 2004 income-tax

return that was dated February 14, 2005. He wrote the number

zero in all of the boxes for reporting items of gross income

(including the box for wages), except that he entered $7 of

taxable interest. Because Lindberg reported only $7 of gross

income, and because he claimed a standard deduction of $4,850 and

a personal exemption of $3,100, Lindberg reported taxable income

of negative $7,643 on his tax return. He reported that his

employer had withheld $5,315.56 of Federal income tax.2 He

1
Unless otherwise indicated, all section references are to
the Internal Revenue Code (Code), and all Rule references are to
the Tax Court Rules of Practice and Procedure. Lindbergh resided
in the State of Minnesota at the time he filed his petition and
thus this case is appealable to the Court of Appeals for the
Eighth Circuit. See sec. 7482(b)(1).
2
Actually, $5,315.56 was the total amount withheld for three
(continued...)
 - 3 -

requested a full refund of that amount ($5,315.56) in the

appropriate box.

Lindberg did not attach a Form W-2 to his return. Instead,

he attached IRS Form 4852, Substitute for Form W-2, Wage and Tax

Statement, or Form 1099-R, Distributions From Pensions,

Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance

Contracts, etc.3 In item 7 of the Form 4852, he listed $1,945.51

as Federal income tax withheld, $861.04 as State tax withheld,

$2,731.28 as Social Security tax withheld, and $638.77 as

Medicare tax withheld (for a total of $6,176.60). Those amounts

were consistent with the amounts reported on the actual Form W-2

and other documents his employer submitted to the IRS. He

reported zero in total wages, zero in wages subject to Social

Security tax, and zero in wages subject to Medicare tax in item

7. Lindberg answered two questions as follows:

8. How did you determine the amounts in item 7 above?

2
(...continued)
types of Federal taxes: The income tax, the Social Security tax,
and the Medicare tax.
3
According to the instructions for Form 4852, the form
serves as a substitute for Forms W-2 and 1099-R and is to be
completed by taxpayers when (a) their employer or payer does not
give them a Form W-2 or Form 1099-R, or (b) when an employer or
payer has issued an incorrect Form W-2 or Form 1099-R.

We surmise from Lindberg’s answer to question 9 that
Lindberg did receive a Form W-2 from his employer, but he
believes it was incorrect because it failed to report “wages as
defined in 3401(a) and 3121(a).”
 - 4 -

Company provided records and the statutory
language behind IRC sections 3401 and 3121 and others

9. Explain your efforts to obtain Form W-2, 1099-R,
or W-2c, Statement of Corrected Income and Tax Amounts.

Requested, but the company refuses to issue forms
correctly listing payments “wages as defined in 3401(a)
and 3121(a)” for fear of IRS retaliation. The amounts
listed as withheld on the w-2 it submitted are correct,
however.

The IRS assessed a frivolous-return penalty under section

6702(a) against Lindberg on February 19, 2007. The IRS sent

Lindberg a Final Notice of Intent to Levy and Notice of Your

Right to a Hearing on July 11, 2007, to initiate the process of

collecting the penalty, and the interest on the penalty, by levy.

In response, Lindberg submitted Form 12153, Request for a

Collection Due Process or Equivalent Hearing, dated August 6,

2007, to the IRS. Attached to the form was a long list of

requests and claims. Lindberg requested “collection alternatives

including Offer in Compromise (OIC), payment schedule, CNC

(Currently Not Collectible), hardship, etc.,” but he did not make

a specific offer in the request or at any later point. He also

requested a face-to-face hearing, claiming he would bring

appropriate forms and that he had “relevant information to be

considered for collection alternatives.” He argued that neither

a notice of deficiency nor a notice and demand for payment of the
 - 5 -

penalty was sent to his last known address.4 He stated that no

assessment had been made. He requested (i) proof that the IRS

had verified that the requirements of all applicable law and

procedure had been met, (ii) proof that a notice of deficiency

and notice and demand for payment of the penalty had been sent,

and (iii) “assessment documentation,” including a Form 4340,

Certificate of Assessments, Payments, and Other Specified

Matters. He stated that he challenged the existence and amount

of the frivolous-return penalty in his collection due process

(CDP) hearing under section 6330(c)(2)(B) because he did not

receive a notice of deficiency and thus had not yet had an

opportunity to make such a challenge. He demanded to know why

the IRS considered his return to be frivolous. He denied that

the requirements for imposing a frivolous-return penalty had been

met. He also suggested that

I may withdraw any Constitutional, moral, political,
religious or conscientious arguments that I have
heretofore made, if any. Further, I also may withdraw
any legal positions which are classified and published
by the IRS as “frivolous or groundless,” if any. This
includes any arguments that the courts have determined
are frivolous or groundless, or published on the IRS
website.

He argued that the proposed collection action (i.e., the levy)

“does not balance with the needs for the Service to collect the

tax and, considering the circumstances, it is an intrusive action

4
As discussed below, a notice of deficiency is not required
before the IRS can assess a sec. 6702 penalty. Sec. 6703(b).
 - 6 -

and more intrusive than necessary”. He alleged that the

collection action was “inappropriate” as “the administrative

record [was] invalid and incomplete.” The remainder of the

document contains material that is irrelevant or nonsensical.

For example, he requested that a notice of tax lien be withdrawn,

even though none was issued to him.

On August 22, 2007, the IRS sent Lindberg a letter stating

that the IRS was forwarding his CDP hearing request to the

Appeals Office in Fresno, California.5 On October 25, 2007, the

Fresno Appeals Office sent Lindberg a letter proposing to hold

his CDP hearing by telephone on November 21, 2007. The letter

stated that the IRS considered the arguments in his request for a

hearing to be frivolous. It offered a face-to-face hearing on

any nonfrivolous issue Lindberg could identify in writing by

November 9, 2007, and warned him that this Court could impose

sanctions on him under section 6673 if he raised frivolous issues

before the Court to delay resolution of the case.6

5
The record does not explain why the IRS chose to forward
his request to its Fresno office instead of its St. Paul office,
the latter of which was closer to Lindberg’s residence.
6
The Fresno office conditioned a face-to-face hearing on
Lindberg raising a nonfrivolous issue. This condition is
consistent with sec. 301.6330-1(d)(1), Q&A-D8, Proced. & Admin.
Regs., which states that a face-to-face hearing “will not be
granted if the request for a hearing or other taxpayer
communication indicates that the taxpayer wishes only to raise
irrelevant or frivolous issues”. See infra note 9 regarding
requests for a face-to-face hearing when the taxpayer requests
(continued...)
 - 7 -

Lindberg responded on November 6, 2007, with a letter

rejecting the invitation to a telephone hearing and requesting

instead a face-to-face hearing in Greenville, South Carolina, or

the “nearest big city” to him.7 He denied that he was raising

frivolous arguments and stated that he withdrew any such

arguments. He claimed that at a face-to-face hearing he wished

to discuss “procedural irregularities, liability for penalties,

etc., plus collection alternatives” and requested “the necessary

forms to effect this, including the financial statement form.”

The IRS transferred his case from Fresno, California, to St.

Paul, Minnesota, a city near Lindberg’s residence, on November

19, 2007. The Appeals officer assigned to the case in St. Paul

sent Lindberg a letter on December 20, 2007, to schedule a CDP

hearing by telephone on January 16, 2008. The Appeals officer

explained that the Appeals Office does not offer face-to-face

hearings to those advancing only frivolous arguments or to those

requesting collection alternatives for which they do not qualify.

He requested that Lindberg submit copies of all of his unfiled

returns from 1999 to 2006 and provide financial information on

Form 433-A, Collection Information Statement for Wage Earners and

6
(...continued)
collection alternatives for which he or she does not qualify.
7
Lindberg does not explain nor does the record explain why
he requested Greenville, South Carolina, as a possible location
for a face-to-face hearing.
 - 8 -

Self-Employed Individuals, so that collection alternatives could

be considered.8 The Appeals officer offered Lindberg a face-to-

face hearing provided that he file all of his past-due returns

but explained that he could not grant one until the returns were

filed.9 The Appeals officer wrote that the penalty could be

abated if a taxpayer “ignore[s] the bad advice [he has] received,

file[s] and agree[s] to pay [his] taxes.”

Lindberg responded with a letter dated January 2, 2008, in

which he once again demanded a face-to-face hearing and also

requested “all relevant administrative records relating to this

collection procedure.” He claimed again to withdraw any

frivolous positions. He declined to file his returns because the

Appeals officer had not cited the Code section requiring him to

do so:

Further to your request that I “file the delinquent tax
returns from 1999 [2000] to 2006 (1999 is filed) and
complete Form 433-A” enclosed in your letter. I
respectfully decline to comply with this request for
two reasons: (1) you failed to state the relevant law
that would require me to file and/or complete such

8
Lindberg did not file tax returns for the tax years 1999-
2003 and 2005-2006.
9
Thus, the St. Paul office identified an impediment to a
face-to-face hearing that the Fresno office had not: it told
Lindberg that even a request for a collection alternative could
not be discussed face-to-face unless Lindberg submitted past-due
tax returns and financial information. See sec. 301.6330-
1(d)(2), Q&A-D8, (e)(1), Proced. & Admin. Regs. The St. Paul
office gave Lindberg an opportunity to file the returns and
submit the documents. Only after Lindberg failed to do so did
the Appeals officer refuse a face-to-face meeting.
 - 9 -

returns and forms, and (2) this appears to be an ex
parte request for private and personal information.

The Appeals officer sent a response dated January 4, 2008,

in which he explained:

I’ve read and considered your letter dated 01/02/2008.
In short, you are not entitled to a face to face
hearing because you decline to take the steps necessary
to qualify for one. You decline to file your
delinquent 1040 tax returns or complete a form 433-A.
Without compliance and financial disclosure, you don’t
qualify for the alternatives to collection action that
you raised.[10] Appeals doesn’t grant a face to face
hearing to taxpayers who don’t qualify for the relief
they request. * * *

Furthermore, your statement [that you withdraw
your legal positions classified as frivolous] does not
constitute you actually abandoning your frivolous tax
arguments. The first step to withdrawing from a
frivolous position against filing and paying Federal
taxes would be to file your delinquent tax returns.
The second step, assuming that you couldn’t full pay
the balances due on your 1999-2006 delinquent returns,
would be to submit the form 433-A financial I
requested.

The Appeals officer also asserted that he was not required to

provide copies of each document he used to verify that the

requirements of any applicable law or administrative procedure

were met. He stated that he would mail Lindberg a transcript of

account11 once it was available, and he mentioned that Lindberg

10
Lindberg had not raised any collection alternatives in his
prior correspondence but claimed in his letter of Jan. 2, 2008,
that he would do so if offered a face-to-face hearing.
11
A transcript of account is an IRS record for a particular
taxpayer which reveals certain data, including whether the
taxpayer filed a return for a given year, and if so, on what
(continued...)
 - 10 -

could file a Freedom of Information Act request to obtain the

other documents he sought. The Appeals officer mailed the

transcript of account to Lindberg on January 7, 2008.

Lindberg demanded a face-to-face hearing again by letter

dated January 14, 2008. He refused to call in for the telephone

CDP hearing scheduled for January 16, 2008. As no face-to-face

hearing or telephone hearing took place, the Appeals officer made

a determination based solely on the documents in Lindberg’s case

file, a procedure permitted by section 301.6330-1(d)(2), Q&A-D7,

Proced. & Admin. Regs. The Appeals officer noted in the case

activity record that “As to his claim on the liability issue, I

have looked at the correspondence, * * * and all other supporting

documents. The balance due is legally due and owing.” The

Appeals officer subsequently issued a Notice of Determination

Concerning Collection Action(s)Under Section 6320 and/or 6330 on

February 6, 2008. In the notice, the Appeals officer stated that

he had reviewed the IRS’s transcript of Lindberg’s account and

verified that the requirements of all applicable law or

11
(...continued)
date. Canzano v. Commissioner, T.C. Memo. 1983-320. The Form
4340 is a computer-generated list of assessments, payments, and
other activity on a taxpayer’s account that appears in the
official records of the IRS with respect to that taxpayer as of
the date the form is printed. Oropeza v. Commissioner, T.C.
Memo. 2009-244; Armstrong v. Commissioner, T.C. Memo. 2002-224.
The information contained on a transcript of account is not as
readily comprehensible as that on the actual return or on the
Form 4340 because the transcript contains abbreviations and
computer codes.
 - 11 -

administrative procedure had been met pursuant to section

6330(c)(1). He also stated that he had determined that the

proposed collection action (i.e., levy) appropriately balanced

the efficient collection of taxes with Lindberg’s legitimate

concern that the collection action be no more intrusive than

necessary pursuant to section 6330(c)(3)(C). He reiterated why

he could not grant a face-to-face hearing and noted that Lindberg

had failed to participate in the January 16, 2008, telephone

hearing or to reschedule it. He therefore sustained the proposed

levy action.

On March 3, 2008, Lindberg timely petitioned this Court. In

his petition, he stated that he was not required to “[fill] out

forms12 and [submit] a payment schedule” to the IRS and that he

had a right to a face-to-face hearing under the Code and the

regulations. He requested no specific relief. The IRS filed a

motion for summary judgment and to impose a section-6673 penalty

on January 1, 2009. On February 9, 2009, Lindberg filed an

objection to the motion for summary judgment and to impose the

penalty.

In its motion the IRS argues that Lindberg’s return, which

contained zeros in all gross income boxes except for one item of

taxable interest, is an essentially “zero income return which on

12
Lindberg did not clarify whether the forms he referred to
included past-due income tax returns or Form 433-A, the
collection information statement, or both.
 - 12 -

its face makes the frivolous argument that wages are not

taxable”. The IRS interprets his comments in box 9 of Form 4852

to constitute an argument that sections 3401(a) and 3121(a)

exclude his wages from taxation and that a correct Form W-2 would

have disclosed wages of zero.13 The IRS asserts that Lindberg’s

13
The IRS’s summary judgment motion says: “According to
petitioner, the statutory language behind I.R.C. §§ 3401 and 3121
excludes his wages from taxation.” On the same page, the IRS
accuses Lindberg of making “the frivolous argument that wages are
not taxable.” We believe the IRS meant that Lindberg took the
position that the payments he received were not wages as defined
in secs. 3401 and 3121 and that therefore the payments were
exempt from taxation. Thus, the IRS would place Lindberg in the
same category as the taxpayers in United States v. Hendrickson,
99 AFTR 2d 2007-1470 (E.D. Mich. 2007), and Herriman v. United
States, 104 AFTR 2d 2009-7581, 2009-2 USTC par. 50,784 (M.D. Fla.
2009). Peter Eric Hendrickson, author of the book Cracking the
Code: The Fascinating Truth About Taxation in America, filed
joint returns on which he reported zero wages. United States v.
Hendrickson, supra at 2007-1471. Like Lindberg, he attached a
Form 4852 and answered item 7 as follows: “Request, but the
company refuses to issue forms correctly listing payments of
‘wages as defined in 3401(a) and 3121(a)’ for fear of IRS
retaliation. The amounts listed as withheld on the W-2 it
submitted are correct, however.” Id. Defending his return in a
criminal case related to the same tax years, Hendrickson claimed
that his return was justified because “an individual whose
activities are merely those of common right, such as those
working for remuneration in the private sector * * * was not an
‘employee’ and the remuneration he earned was not ‘wages’, as
those terms of art are defined in the tax laws.” United States
v. Hendrickson, 664 F. Supp. 2d 793, 796 (E.D. Mich. 2009).

Robert Herriman filled out substitute Forms W-2, and, like
Lindberg, declared wages of zero because of “company provided
records and the statutory language behind IRC sections 3401 and
3121 and others.” Herriman v. United States, supra at 2009-7582,
2009-2 USTC par. 50,784, at 90,527. Herriman’s position, as he
described it in court, also was that private-sector employees are
not employees within the meaning of sec. 3401(c). Id.

(continued...)
 - 13 -

reporting of the $7 of taxable interest does not mitigate the

frivolous nature of his return. The IRS argues that (i)

taxpayers who raise frivolous arguments in their request for a

hearing are not entitled to face-to-face collection hearings and

that (ii) taxpayers who do not file past-due returns and submit

financial information do not qualify for consideration of

collection alternatives. Regarding Lindberg’s demand for

documents, the IRS argues that a taxpayer has no right to conduct

discovery during a CDP hearing. The IRS argues that sanctions

under section 6673 are appropriate because it maintains that

Lindberg argued, both in documents submitted during the Appeals

process, and in his petition, that he is not obligated to file a

return.

In his objection to the motion for summary judgment,

Lindberg states that he disagrees with “all of the notice of

determination.” He asserts that he has a right to all pertinent

documents from the IRS so that he can confirm they are accurate

13
(...continued)
We discuss Hendrickson and Herriman in order to distinguish
these theories from the theory that wages are not income. A
proponent of the latter theory concedes to have earned wages but
argues that the wages are not taxable because there is supposedly
no gain from receiving compensation for the “loss” of one’s
labor. See Casper v. Commissioner, 805 F.2d 902, 904-905 (10th
Cir. 1986), affg. T.C. Memo. 1985-154; Stelly v. Commissioner,
761 F.2d 1113, 1115 (5th Cir. 1985), affg. an unpublished
decision of this Court; Rev. Rul. 2007-19, 2007-1 C.B. 843, 844;
Rev. Rul. 2004-29, 2004-1 C.B. 627, 627.
 - 14 -

and determine whether there were any procedural irregularities.

Specifically, he claims that

Settlement Officer, Marty Luhman, may have failed to
properly verify that the requirements of any applicable
law or administrative procedure have been met. * * *
Petitioner also challenges that proper procedures in
the assessment were followed. Denying a request to see
the assessment under 26USC 6203 (see 26CFR 301.6203-1)
and the determination with supervisor approval under
26USC sec. 6751 are just two examples of procedural
irregularities.

He again asserts that he was improperly denied a face-to-face

hearing under the Code and the regulations. He argues that his

return is not frivolous, citing two internal memoranda written by

attorneys in the IRS Office of Chief Counsel, and claims that he

withdrew any frivolous positions that he had previously adopted.

Thus he concludes that he also should not be liable for any

sanction under section 6673.

Discussion

We are asked to decide whether summary judgment and

sanctions under section 6673 are appropriate. We shall first

address the issue of summary judgment.

I. Summary Judgment

Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials. FPL Group, Inc. & Subs.

v. Commissioner, 116 T.C. 73, 74 (2001). A motion for summary

judgment will be granted if the pleadings, answers to

interrogatories, depositions, admissions, and other acceptable
 - 15 -

materials, together with any affidavits, 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); Elec. Arts, Inc. v.

Commissioner, 118 T.C. 226, 238 (2002). A partial summary

adjudication may be made which does not dispose of all the issues

in the case. Rule 121(b); Tracinda Corp. v. Commissioner, 111

T.C. 315, 323-324 (1998). The moving party, here the IRS, has

the burden of proving that no genuine issue of material fact

exists and that it is entitled to judgment as a matter of law.

Rauenhorst v. Commissioner, 119 T.C. 157, 162 (2002).

A. Matters That Must Be Considered at the Section 6330
Hearing

The IRS is authorized to collect a tax by levy. Sec.

6331(a). A “tax” includes the liability for the section 6702

frivolous return penalty. Sec. 6665(a)(2). Section 6330(a)(1)

and (b)(1) provides that before the IRS may impose a levy, it

must notify the taxpayer that the taxpayer has a right to an

administrative hearing, and it must conduct such a hearing if one

is requested.

Certain issues must be considered by the Appeals officer,

even if the taxpayer did not raise them. The Appeals officer is

required to verify that “the requirements of any applicable law

or administrative procedure have been met.” Sec. 6330(c)(1); see

also sec. 6330(c)(3)(A). The Appeals officer is also required to

take into consideration whether the proposed collection action
 - 16 -

“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)(C).

Section 6330(c)(2)(A) prescribes the matters that a taxpayer

may raise at a hearing. Those matters include spousal defenses,

the appropriateness of the IRS’s intended collection action, and

possible collection alternatives. Section 6330(c)(2)(B) provides

that the existence and amount of the underlying tax liability can

also be contested at an Appeals Office hearing, but only if the

person did not receive a notice of deficiency for the tax in

question or did not otherwise have an opportunity to dispute the

tax liability. The Appeals officer must take into consideration

the issues the taxpayer raises under section 6330(c)(2)(A) and

any challenge to the underlying tax liability if it is permitted

by section 6330(c)(2)(B). Sec. 6330(c)(3)(B). At the end of the

hearing, the Appeals officer issues a notice of determination

containing his or her decision to sustain or suspend the levy.

B. Standard of Judicial Review of a Section 6330
Determination

Section 6330(d)(1) provides a person with the right to

obtain Tax-Court review of the administrative determination.14

14
Before 2006, the Tax Court had no jurisdiction to hear a
challenge to the collection of a frivolous-return penalty because
the Tax Court would not have had jurisdiction to determine the
amount of the liability for the penalty. Former sec. 6330(d)(1),
as in effect before Oct. 16, 2006 (the Tax Court has jurisdiction
(continued...)
 - 17 -

Where the validity of the underlying tax liability is properly at

issue, the Court will review the determination de novo. Davis v.

Commissioner, 115 T.C. 35, 39 (2000). We review the balance of

the IRS’s determination for abuse of discretion. Sego v.

Commissioner, 114 T.C. 604, 610 (2000). Generally we consider

only those arguments, issues, and other matters that the taxpayer

raised at the collection hearing or otherwise brought to the

attention of Appeals. Magana v. Commissioner, 118 T.C. 488, 493

(2002); see also sec. 301.6330-1(f)(2), Q&A-F3, Proced. & Admin.

Regs. Whether an abuse of discretion has occurred depends upon

whether the exercise of discretion is without sound basis in fact

or law. Freije v. Commissioner, 125 T.C. 14, 23 (2005).

Lindberg did not receive a notice of deficiency with respect

to the frivolous-return penalty because no such notice is

required under the Code. See sec. 6703(b). The IRS was entitled

to assess the penalty immediately, and it did so. As Lindberg

14
(...continued)
to review an IRS collection determination only if the Tax Court
would have had jurisdiction over the amount of the underlying
liability that is the subject of the collection hearing);
Callahan v. Commissioner, 130 T.C. 44, 47-48 (2008). The Pension
Protection Act of 2006, Pub. L. 109-280, sec. 855, 120 Stat. 780,
1019, gave this Court jurisdiction to review an appeal from a
notice of a collection determination issued after Oct. 16, 2006,
regardless of the type of underlying liability involved. See
Callahan v. Commissioner, supra at 48-49. The IRS issued the
notice of determination in this case on Feb. 6, 2008, which is
after the effective date of the Pension Protection Act of 2006.
Thus, we have jurisdiction to review it.
 - 18 -

did not receive a notice of deficiency or otherwise have an

opportunity to be heard, he was entitled to contest the penalty

at his section 6330 hearing. See sec. 6330(c)(2)(B).15

Accordingly, as the underlying tax liability is properly at

issue, we review liability for the penalty de novo and the

balance of the IRS’s determination for abuse of discretion. See

Rice v. Commissioner, T.C. Memo. 2009-169.

C. Whether IRS Is Entitled to Summary Judgment

A taxpayer is liable for a frivolous-return penalty under

section 6702 if three requirements are met.16 First, the

15
Although Lindberg could have contested the penalty by
paying the penalty and suing for a refund in District Court, this
Court has implicitly held that the option of paying the penalty
and filing a refund suit is not an opportunity to dispute
liability for the penalty within the meaning of sec.
6330(c)(2)(B). See Stockton v. Commissioner, T.C. Memo. 2009-
186; Rice v. Commissioner, T.C. Memo. 2009-169.
16
Sec. 6702 as in effect when Lindberg submitted his return
provides in relevant part:

SEC. 6702. FRIVOLOUS INCOME TAX RETURN.

(a) Civil Penalty.--If--

(1) any individual files what purports to be
a return of the tax imposed by subtitle A but
which--

(A) does not contain information on which the
substantial correctness of the self-assessment may
be judged, or

(B) contains information that on its face
indicates that the self-assessment is
substantially incorrect; and
(continued...)
 - 19 -

taxpayer must file a document that purports to be an income tax

return. Sec. 6702(a)(1). Second, the purported return must

suffer from one of the following defects: it either (a) lacks

the information needed to judge the substantial correctness of

the self-assessment17 or (b) contains information indicating the

self-assessment on the purported return is substantially

incorrect. Id. Third, the defect must be due to a position (a)

that is frivolous or (b) demonstrates a desire to delay or impede

the administration of Federal income tax law (a desire that is

evidenced on the purported return). Sec. 6702(a)(2).

With regard to the first element of the frivolous-return

penalty, Lindberg’s Form 1040, U.S. Individual Income Tax Return,

16
(...continued)

(2) the conduct referred to in paragraph (1) is
due to--

(A) a position which is frivolous, or

(B) a desire (which appears on the purported
return) to delay or impede the administration of
Federal income tax laws,

then such individual shall pay a penalty of $500.

For submissions to the IRS before Mar. 15, 2007, as in this case,
the amendments to section 6702(a) effected by the Tax Relief and
Health Care Act of 2006, Pub. L. 109-432, sec. 407(a), 120 Stat.
2960, are not applicable. Id., sec. 407(f), 120 Stat. 2962.
17
Only the IRS may assess tax liability under the Code, see
sec. 6201(a), but the term “self-assessment” is nevertheless used
in sec. 6702 to describe a taxpayer’s self-reporting of his tax
liability on a return.
 - 20 -

purported to be an income tax return for 2004. It reported a

small amount of interest income. It stated the amount of Federal

income tax withheld (even though the reported amount was

incorrect). Lindberg attached Form 4852 to his Form 1040. Thus,

the first element of the penalty is met.

The second element of the frivolous-return penalty is also

satisfied. A return showing that the taxpayer earned zero in

gross income and also reporting that substantial tax was withheld

does not contain information on which the substantial correctness

of the self-assessment can be judged. See Cabirac v.

Commissioner, 120 T.C. 163, 169 (2003) (“it is now well

established that tax forms that do not contain financial

information upon which a taxpayer’s tax liability can be

determined do not constitute returns within the meaning of the

Internal Revenue Code.” (quoting United States v. Edelson, 604

F.2d 232, 234 (3d Cir. 1979))); Granger v. Commissioner, T.C.

Memo. 2009-258 (“‘The majority of courts, including this Court,

have held that, generally, a return that contains only zeros is

not a valid return’” (quoting Cabirac v. Commissioner, supra, at

169)); Schultz v. United States, 95 AFTR 2d 2005-1977, 2005-1

USTC par. 50,325 (W.D. Mich. 2005) (return deemed substantially

incorrect because income tax withholding was internally

inconsistent with zero income-tax amounts reported); Gregory v.

United States, 91 AFTR 2d 2003-871, 2003-1 USTC par. 50,256 (N.D.
 - 21 -

Ga. 2003). Lindberg’s reporting of a mere $7 of interest does

not render his return substantially correct. See United States

v. Farber, 630 F.2d 569, 571 n.2 (8th Cir. 1980) (only $95 of

taxable income reported); Rice v. Commissioner, supra (only $17

of taxable income reported).

Regarding the third element of the frivolous-return penalty,

the IRS contends that the defects in Lindberg’s return were due

to a frivolous position. See sec. 6702(a)(2). We need only

concern ourselves with the IRS’s argument that the return was

based on a frivolous position, see sec. 6702(a)(2)(A), because it

did not argue that the return was intended to delay or impede the

administration of tax laws, see sec. 6702(a)(2)(B).

The burden of demonstrating at the summary judgment stage

that no material dispute of fact exists rests with the moving

party, here the IRS. Adickes v. S.H. Kress & Co., 398 U.S. 144,

157 (1970) (“the moving party * * * [has] the burden of showing

the absence of a genuine issue as to any material fact, and for

these purposes the material it lodged must be viewed in the light

most favorable to the opposing party”); Brosi v. Commissioner,

120 T.C. 5, 7 (2003); Dahlstrom v. Commissioner, 85 T.C. 812, 821

(1985); Jacklin v. Commissioner, 79 T.C. 340, 344 (1982). But

Rule 121(d) requires that a party adverse to a summary judgment

motion “may not rest upon the mere allegations or denials of such

party’s pleading, but such party’s response, by affidavits or as
 - 22 -

otherwise provided in this Rule, must set forth specific facts

showing that there is a genuine issue for trial.”

We consider why Lindberg’s return was filed the way it was.

One possibility was that Lindberg had no legitimate reason for

filing his return that way. On its face, the return is

consistent with this possibility. The return reported zero in

wages even though we know from the summary-judgment record that

Lindberg earned wages during the 2004 tax year. Although there

might be reasons why a taxpayer who received wages might

nonetheless in good faith report zero in wages, none of these

reasons is consistent with the summary-judgment record in this

case.

For example, consider the possibility that Lindberg’s return

reflected his position that he was an independent contractor

rather than an employee. Lindberg’s Form 4852 said that his

employer’s Form W-2 was incorrect because it did not correctly

apply the definition of wages. An independent contractor might

make the same statement. Payments to an independent contractor

are not wages, and therefore such payments should not be reported

on a Form W-2. Lindberg’s return is not consistent with a good-

faith belief that he was as an independent contractor. An

independent contractor’s fees are income. See sec. 61(a)(1)

(compensation for services). But Lindberg’s return said that he

had zero income. Furthermore, even if Lindberg’s reporting of
 - 23 -

income were consistent with that of an independent contractor, he

established no facts indicating that he is an independent

contractor. The IRS presented evidence that he was an employee

of Accraply. Lindberg failed to rebut this evidence. See Rule

121(d).

We need not consider any further possible legitimate reasons

for Lindberg’s reporting. We can end our inquiry here for two

reasons. First, Lindberg failed to give a legitimate explanation

for his tax return in his objection to the IRS’s motion for

summary judgment. He merely denied that his return was frivolous

without providing any relevant support for his statement (the

Chief Counsel memoranda that he cited were irrelevant). Second,

Lindberg has a history of propounding frivolous theories. He

sent a letter to the IRS in which he purported to subject the IRS

to a nonsensical “International Commercial Claim Administrative

Remedy”. Then Lindberg attempted to pay his 2004 tax liability

by issuing a “Private Offset Bond” to the IRS. The peculiar

language of the “bond” asserted that it had a face value of $50

million and demanded that Secretary of the Treasury Henry Paulson

wipe out Lindberg’s debt to the Federal Government “by end of

business on the day of presentment.”

The third element of the penalty is also met. We hold that

the IRS correctly assessed the section 6702 penalty.
 - 24 -

For the sake of completeness, we shall address Lindberg’s

remaining arguments. First, Lindberg did not have a right to a

face-to-face hearing under the relevant Code sections and

regulations. Lindberg failed to (1) identify nonfrivolous issues

to be discussed, (2) provide financial statements, and (3) file

past-due returns. The regulations state that “A CDP hearing may,

but is not required to, consist of a face-to-face meeting, one or

more written or oral communications between an Appeals officer or

employee and the taxpayer or the taxpayer’s representative, or

some combination thereof.” Sec. 301.6330-1(d)(2), Q&A-D6,

Proced. & Admin. Regs. The regulations further explain that “a

taxpayer who presents in the CDP hearing request relevant, non-

frivolous reasons for disagreement with the proposed levy will

ordinarily be offered an opportunity for a face-to-face

conference at the Appeals office closest to taxpayer’s

residence.” Sec. 301.6330-1(d)(2), Q&A-D7, Proced. & Admin.

Regs. The regulations also explain that a face-to-face hearing

“will not be granted if the request for a hearing or other

taxpayer communication indicates that the taxpayer wishes only to

raise irrelevant or frivolous issues”. Sec. 301.6330-1(d)(2),

Q&A-D8, Proced. & Admin. Regs.; see also Lunsford v.

Commissioner, 117 T.C. 183, 189 (2001); Oropeza v. Commissioner,

T.C. Memo. 2009-244; Ho v. Commissioner, T.C. Memo. 2006-41.

Finally, a face-to-face hearing to consider a collection
 - 25 -

alternative, such as an installment agreement or an offer-in-

compromise, will not be granted unless the taxpayer has filed

past-due returns and submitted financial statements. See

Giamelli v. Commissioner, 129 T.C. 107, 111-112 (2007); Nelson v.

Commissioner, T.C. Memo. 2009-108; Keenan v. Commissioner, T.C.

Memo. 2006-260, affd. 308 Fed. Appx. 91 (9th Cir. 2009);

Rodriguez v. Commissioner, T.C. Memo. 2003-153; sec. 301.6330-

1(d)(2), Q&A-D8, (e)(1), Proced. & Admin. Regs.18

Lindberg’s initial request for a hearing consisted solely of

(1) frivolous arguments and (2) requests to discuss collection

alternatives for which he did not qualify because he did not file

past-due tax returns or submit financial statements. The Appeals

officer in Fresno offered Lindberg an opportunity for a face-to-

face hearing, provided that Lindberg could identify nonfrivolous

arguments against the proposed levy by November 9, 2007, but

Lindberg did not identify any nonfrivolous arguments in

subsequent correspondence other than to repeat his request to

discuss collection alternatives. The Appeals officer in St. Paul

then offered Lindberg a face-to-face hearing if he would take

steps to qualify for consideration of collection alternatives by

submitting his financial statements and file all past-due

18
The requirement that the taxpayer file past-due returns is
repeated in the Internal Revenue Manual (IRM). 1 Administration,
IRM (CCH), pt. 5.8.3.13(1), at 16,313-16,314 (Sept. 23, 2008); 2
Administration, IRM (CCH), pt. 5.14.1.2(8)(f), at 17,505 (Sept.
26, 2008).
 - 26 -

returns. Lindberg refused to submit financial statements and

file his tax returns. There is no abuse of discretion in the

IRS’s refusal to provide a face-to-face hearing when the taxpayer

refuses to present nonfrivolous arguments, file past-due returns,

and submit financial statements. See Rice v. Commissioner, T.C.

Memo. 2009-169; Moline v. Commissioner, T.C. Memo. 2009-110,

affd. 105 AFTR 2d 2010-843, 2010-1 USTC par. 50,204 (10th Cir.

2010); Summers v. Commissioner, T.C. Memo. 2006-219.

Second, the Appeals officer verified that the IRS had

complied with all legal and administrative procedural

requirements pertaining to the proposed levy. See sec.

6330(c)(3)(A). In questioning this conclusion, Lindberg implies

in his objection that the transcript of account furnished to him

is insufficient to show that the Appeals officer verified that

the IRS complied with all legal and procedural requirements, and

that he had a right at his hearing to obtain additional documents

related to his case to perform the verification himself. He also

argues that the Appeals officer denied him his right to examine a

record of the assessment and a copy of an IRS supervisor’s

approval of the penalty determination. As legal support for this

latter proposition, he cites section 6203, which requires the IRS

to furnish a taxpayer with a record of assessment, and section

6751, which requires the supervisor of the official determining
 - 27 -

certain penalties to approve the initial determination in

writing.

Lindberg is incorrect on each point. Regarding Lindberg’s

section 6203 argument, this Court has held that the transcript of

account of the kind sent to Lindberg satisfies the requirements

of section 6203. See Wagner v. Commissioner, T.C. Memo. 2002-

180; Weishan v. Commissioner, T.C. Memo. 2002-88; Lindsey v.

Commissioner, T.C. Memo. 2002-87. Thus, he received a record of

assessment.

Regarding Lindberg’s section 6751 argument, section 6751 by

its terms does not require supervisory approval of penalties

“automatically calculated through electronic means.”19 Sec.

19
Sec. 6751 provides:

SEC. 6751. PROCEDURAL REQUIREMENTS.

(a) Computation of Penalty Included in Notice.--
The Secretary shall include with each notice of penalty
under this title information with respect to the name
of the penalty, the section of this title under which
the penalty is imposed, and a computation of the penalty.

(b) Approval of Assessment.--

(1) In general.--No penalty under this title shall
be assessed unless the initial determination of such
assessment is personally approved (in writing) by the
immediate supervisor of the individual making such
determination or such higher level official as the
Secretary may designate.

(2) Exceptions.--Paragraph (1) shall not apply to--

(continued...)
 - 28 -

6751(b)(2)(B). The section 6702 frivolous-return penalty is such

a penalty, and thus the approval of a supervisor was not

required. See Borchardt v. Commissioner, 338 F. Supp. 2d 1040,

1044 (D. Minn. 2004); Cole v. United States, 90 AFTR 2d 2002-

6987, 2002-2 USTC par. 50,804 (W.D. Mich. 2002).

An Appeals officer may rely on the transcript of account to

satisfy the verification requirement of section 6330(c)(1) unless

the taxpayer alleges that a specific irregularity transpired

during the assessment process or the taxpayer provides evidence

of such an irregularity. Roberts v. Commissioner, 118 T.C. 365,

371-372 n.10 (2002) (it is “not an abuse of discretion for the

Appeals officer to have relied on certain computer-generated

transcripts for purposes of complying with sec. 6330(c)(1). * * *

Sec. 6330(c)(1) does not require the Commissioner to rely on a

particular document to satisfy the verification requirement

imposed by that section.”), affd. 329 F.3d 1224 (11th Cir. 2003).

Aside from Lindberg’s two meritless arguments based on sections

6203 and 6751 discussed above, he did not specify any

19
(...continued)
(A) any addition to tax under section 6651,
6654, or 6655; or

(B) any other penalty automatically
calculated through electronic means.

(c) Penalties.--For purposes of this section, the term
“penalty” includes any addition to tax or any additional
amount.
 - 29 -

irregularity in the assessment procedure that would raise a

question about the validity of the assessments or the information

in the transcript of account sent to him. See Lunsford v.

Commissioner, supra at 188; Pomerantz v. Commissioner, T.C. Memo.

2005-295; Kubon v. Commissioner, T.C. Memo. 2005-71; Schroeder v.

Commissioner, T.C. Memo. 2002-190. Thus, we conclude that the

Appeals officer properly verified IRS compliance with applicable

law.

The Appeals officer did not abuse his discretion in refusing

to produce all of the documents Lindberg requested for the

hearing. The IRS is correct that a taxpayer has no right to

subpoena documents and conduct general discovery during an

informal proceeding such as a CDP hearing. See Davis v.

Commissioner, 115 T.C. at 41-42; Watson v. Commissioner, T.C.

Memo. 2001-213; Wylie v. Commissioner, T.C. Memo. 2001-65.20

20
Sec. 6330(c)(1) by its terms does not even require the
Appeals officer to provide the taxpayer with a copy of a document
verifying that the requirements of any applicable law or
administrative procedure have been met. Nestor v. Commissioner,
118 T.C. 162, 166 (2002); Davis v. Commissioner, T.C. Memo. 2007-
160; Scott v. Commissioner, T.C. Memo. 2007-91, affd. 262 Fed.
Appx. 597 (5th Cir. 2008). Sec. 6330(c)(1) and sec. 301.6330-
1(e)(3), Q&A-E8, Proced. & Admin. Regs., require that the Appeals
officer perform the verification and memorialize it in the notice
of determination. While the taxpayer has no right at the CDP
hearing to a copy of a document stating that the Appeals officer
has performed the verification, this Court may require that such
a document (and any underlying relevant documents the Appeals
officer examined while performing the verification) be produced
during the process of judicial review.
 - 30 -

Finally, the Appeals officer found that the proposed

collection action balanced “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)(C). Lindberg challenged the appropriateness of the

intended method of collection (a levy) by stating in his request

for a hearing that it “does not balance with the needs for the

Service to collect the tax and, considering the circumstances, it

is an intrusive action and more intrusive than necessary”. As he

did not raise this argument before this Court, we deem him to

have waived it. See 3K Inv. Partners v. Commissioner, 133 T.C.

__, __ n.9 (2009) (slip op. at 15-16); Bemidji Distrib. Co. v.

Commissioner, T.C. Memo. 2001-260, affd. sub. nom. Langdon v.

Commissioner, 59 Fed. Appx. 168 (8th Cir. 2003); Hesse v.

Commissioner, T.C. Memo. 1989-515.

Lindberg did not offer a specific collection alternative to

be considered by the Appeals officer, nor did he raise any other

appropriate defenses to collection. See sec. 6330(c)(3)(B).

As the Appeals officer was correct in his findings and

actions regarding all substantive and procedural issues, he did

not abuse his discretion in making the determination in the

notice. Accordingly, we will grant summary judgment to the IRS

on the issue of Lindberg’s liability for the section 6702

frivolous return penalty for the tax year 2004.
 - 31 -

II. Section 6673 Sanctions

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

taxpayer to pay to the United States a penalty not to exceed

$25,000 if the taxpayer took frivolous or groundless positions in

the Tax Court proceedings or instituted the proceedings primarily

for delay. A position maintained by the taxpayer is frivolous

where 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). In Pierson v.

Commissioner, 115 T.C. 576, 581 (2000), we warned that a penalty

under section 6673(a) could be imposed on those taxpayers who

abuse the protections afforded by sections 6320 and 6330 by

instituting or maintaining actions under those sections primarily

for delay or by taking frivolous or groundless positions in

actions under these sections.

We believe that Lindberg advanced frivolous and/or

groundless contentions, arguments, statements, and requests

primarily for delay, thereby causing this Court to waste its

limited resources. See Schmith v. Commissioner, T.C. Memo. 2002-

252. We will require Lindberg pursuant to section 6673(a)(1) to

pay to the United States a penalty of $1,000. We admonish

Lindberg that the Court will consider imposing a higher penalty
 - 32 -

should he return to the Court in the future with frivolous

arguments.21

In reaching our holding, we have considered all arguments

made, and to the extent not mentioned, we conclude that they are

moot, irrelevant, or without merit.

To reflect the foregoing,

An appropriate order and

decision will be entered.

21
Lindberg petitioned this Court to redetermine deficiencies
and various penalties, including fraudulent failure-to-file
penalties, for the tax years 2001, 2002, 2004, 2005, and 2006.
Lindberg v. Commissioner, docket No. 31188-08. He filed a motion
to dismiss his case and the Court entered a decision in favor of
the IRS. Lindberg also petitioned this Court to redetermine a
deficiency and various penalties for the tax year 2007. Lindberg
v. Commissioner, docket No. 11499-09. The Court entered a
stipulated decision on March 3, 2010, in which Lindberg conceded
liability for all amounts at issue.