Oman v. Comm'r

T.C. Memo. 2010-276

UNITED STATES TAX COURT

BENGT EDVARD OMAN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket Nos. 18413-08, 18421-08L. Filed December 15, 2010.

Bengt Edvard Oman, pro se.

Fred E. Green, Jr., for respondent.

MEMORANDUM OPINION

MARVEL, Judge: These cases were consolidated for purposes

of trial, briefing, and opinion. On April 25, 2008, respondent

issued a notice of deficiency in which he determined a deficiency

of $5,024 in petitioner’s Federal income tax for 2005 and

additions to tax of (1) $1,130 for failure to file a return
 - 2 -

timely under section 6651(a)(1),1 (2) $578 for failure to pay tax

timely under section 6651(a)(2), and (3) $202 for failure to pay

estimated tax under section 6654(a). After concessions,2 the

issue for decision in docket No. 18413-08 is whether petitioner

is liable for the income tax deficiency and additions to tax

respondent determined for 2005. In reaching our decision we must

also decide whether respondent properly treated petitioner’s 2005

Form 1040, U.S. Individual Income Tax Return, as unprocessable

and invalid.

On June 24, 2008, respondent issued a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 for 2004 (notice of determination). Pursuant to

section 6330(d), petitioner seeks review of respondent’s

determination to proceed with the collection of petitioner’s 2004

Federal income tax liability. The issue for decision in docket

No. 18421-08L is whether respondent abused his discretion in

sustaining the collection action with respect to petitioner’s

2004 Federal income tax liability.

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.
Monetary amounts are rounded to the nearest dollar.
2
Respondent concedes that petitioner’s distribution from
pensions was $1,480 rather than $14,800 as he had determined in
the notice of deficiency.
 - 3 -

Background

Some of the facts have been stipulated. We incorporate the

stipulated facts into our findings by this reference. Petitioner

resided in Nevada when he filed his petitions.

We find facts with respect to each year at issue as follows.

I. 2004

Petitioner and his wife, Johnette R. Oman (Mrs. Oman),

timely filed their 2004 Form 1040A, U.S. Individual Income Tax

Return. They claimed the filing status of “Married filing

jointly”. Petitioner and Mrs. Oman reported wages of $52,431,

withholding of Federal income tax of $5,177, and an overpayment

of Federal income tax of $413. Attached to the 2004 Form 1040A

was a “Notice” in which petitioner and Mrs. Oman stated that they

signed the 2004 return under duress.3 Respondent issued a refund

but later determined an $837 deficiency in petitioner and Mrs.

Oman’s 2004 Federal income tax. On October 10, 2006, respondent

mailed petitioner and Mrs. Oman a notice of deficiency.

Petitioner and Mrs. Oman did not file a petition in response

to the notice of deficiency. Instead, on October 19, 2006, they

mailed respondent a letter demanding that respondent define

income, explain his “Delegated Constitutional and Legislated

Lawful authority”, and identify Code sections imposing Federal

3
Petitioner and Mrs. Oman attached a similar notice to their
2005 return. The notice accompanying their 2005 return is
reproduced infra p. 10.
 - 4 -

income tax on certain income. On November 28, 2006, respondent

replied by a letter informing petitioner and Mrs. Oman that he

“will contact you again within 60 days to let you know what

action we are taking. You don’t need to send us anything further

or take any other action now on this matter.” On December 29,

2006, petitioner mailed respondent another letter that was

similar to the October 19, 2006, letter. On January 30, 2007,

respondent replied again advising petitioner and Mrs. Oman that

he would contact them within 60 days to inform them of the action

taken. Respondent’s January 30, 2007, letter again stated that

petitioner and Mrs. Oman did not need to do anything regarding

the matter.4 On February 5 and March 12, 2007, respondent sent

petitioner notices of balance due.

On October 22, 2007, respondent sent petitioner a Final

Notice of Intent To Levy and Notice of Your Right to a Hearing

(final notice) for 2004.5 On or about November 18, 2007,

petitioner sent respondent a 22-page letter containing rhetoric

similar to that used in the October 19, 2006, letter. Petitioner

asserted that respondent had repeatedly refused to provide him

4
The parties subsequently exchanged similar correspondence.
On Mar. 3, 2007, petitioner and Mrs. Oman sent respondent another
letter similar to the Oct. 19, 2006, letter. On May 16, 2007,
respondent wrote that he would contact petitioner and Mrs. Oman
within 60 days.
5
Respondent sent a separate final notice for 2004 to Mrs.
Oman.
 - 5 -

with various information that petitioner had demanded, for

example, the Code sections establishing respondent’s “Delegated

Constitutional and Legislated Lawful authority” to make

assessments.

On November 19, 2007, petitioner timely submitted a Form

12153, Request for a Collection Due Process or Equivalent

Hearing. In response to the question on the Form 12153 about

petitioner’s daytime telephone number and the best time to call,

petitioner wrote: “Please contact me in writing”. Petitioner

did not provide his phone number or the best time to call.

On March 26, 2008, Valerie Chavez (Ms. Chavez), a settlement

officer assigned to petitioner’s case, sent petitioner a letter

acknowledging his Form 12153. Ms. Chavez stated that petitioner

had requested to be contacted in writing and that she scheduled

petitioner’s hearing by correspondence for May 6, 2008. Ms.

Chavez requested that by May 6, 2008, petitioner submit

information that he would like considered in the hearing, such as

a collection alternative and a completed Form 433-A, Collection

Information Statement for Wage Earners and Self-Employed

Individuals. Ms. Chavez also stated that if petitioner wished to

propose any alternative collection methods, he would need to

complete a Form 433-A within 14 days and submit signed Forms 1040

for 2002, 2005, and 2006. Ms. Chavez informed petitioner that he
 - 6 -

would not be able to dispute the underlying liability because he

had received a notice of deficiency.

By letter dated April 4, 2008, petitioner replied to Ms.

Chavez’ March 26, 2008, letter. Petitioner stated that he did

not recall requesting to be contacted in writing and asked Ms.

Chavez to provide him a copy of his correspondence. He also

requested a face-to-face hearing at the Internal Revenue Service

(IRS) Appeals Office closest to Reno, Nevada, and stated that he

would record such hearing. Petitioner stated that the Form 433-A

did not pertain to him because he was neither a wage earner nor a

taxpayer and “IRS has provided no information saying otherwise”.

However, he stated that he would complete and sign the Form 433-A

if Ms. Chavez attested in writing that petitioner’s signature

would not validate or create the underlying liability or “grant

any jurisdiction” over petitioner. Petitioner did not submit his

Federal income tax returns for 2002, 2005, and 2006.

On April 11, 2008, Ms. Chavez acknowledged receipt of

petitioner’s April 4, 2008, letter. She enclosed a copy of

petitioner’s Form 12153 in which he requested to be contacted in

writing. Ms. Chavez explained that generally the Appeals Office

did not provide face-to-face conferences to taxpayers making only

groundless or frivolous arguments. Ms. Chavez also stated that

petitioner was not eligible for a face-to-face conference because
 - 7 -

he had not filed his 2005 and 2006 returns6 and, for that reason,

could not submit a collection alternative, such as an installment

agreement or offer-in-compromise. Ms. Chavez explained that

because petitioner had previously had an opportunity to challenge

his liability, he could not raise it in the section 6330 hearing.

Ms. Chavez suggested that he might be able to do so through the

audit reconsideration process.

On April 30, 2008, petitioner sent Ms. Chavez another

letter, containing mostly statements similar to those in his

previous correspondence. Petitioner also stated that the box on

the Form 12153 that asked for his phone number and the best time

to call did not indicate that it would be used to determine the

hearing format. Petitioner again requested a face-to-face

hearing. Petitioner enclosed with the letter copies of his 2005

and 2006 Forms 1040. The 2005 Form 1040 reported an IRA

distribution of $1,419 and zero income on all other lines.7 On

the 2006 Form 1040 petitioner and Mrs. Oman reported zero income,

but because of the standard deductions, exemptions, and Federal

income tax withheld that they reported on the return, they

claimed an overpayment of tax.

6
Ms. Chavez stated: “It is not necessary to provide a copy
of your 2002 tax return.”
7
It appears that petitioner did not include in his Apr. 30,
2008, letter to Ms. Chavez the notice that accompanied the
originally filed 2005 return.
 - 8 -

On June 24, 2008, respondent’s Appeals Office issued a

notice of determination sustaining the proposed levy. In the

attached memorandum the Appeals Office stated that petitioner

failed to provide requested financial information and delinquent

tax returns, that the issues he raised were frivolous, and that

petitioner did not propose a collection alternative. The Appeals

Office also explained that petitioner was not able to raise the

underlying liability at the hearing because he had received a

notice of deficiency. The Appeals Office also stated that the

2005 and 2006 Forms 1040 were zero returns and that claiming a

refund of any tax withheld by filing a zero return was frivolous.

The Appeals Office concluded that the notice of levy was issued

in accordance with all statutory and procedural requirements and

appropriately balanced the need for efficient collection of taxes

with petitioner’s concern that the collection action be no more

intrusive than necessary.

II. 2005

During 2005 petitioner worked for two companies as a

machinist. He worked for and received wages from Dillen

Products, Inc., which was a part of Myers Industries, Inc. From

time to time during 2005 petitioner also worked for Paramount

Custom Cycles, L.L.C. (Paramount). Petitioner also received

unemployment compensation from the State of Nevada. At some

point before 2005 petitioner worked for B&J Machine and Tool,
 - 9 -

Inc., and participated in the company’s section 401(k) employee

stock ownership plan. In 2005 petitioner received a distribution

from the plan.

On April 14, 2006, petitioner and Mrs. Oman filed their Form

1040 for 2005. They filled in their names, address, and Social

Security numbers in the relevant boxes on the Form 1040. They

checked “Married filing jointly” as their filing status and

claimed two exemptions. Petitioner and Mrs. Oman reported a

$1,419 IRA distribution on line 15b but wrote zeros in all other

lines of the income portion of the Form 1040. Because petitioner

and Mrs. Oman claimed a $10,000 standard deduction and dependency

exemption deductions of $6,400, they reported zero tax liability

and sought a $6,055 refund. Petitioner and Mrs. Oman signed the

Form 1040 leaving no marks on the return or the jurat.8 They

attached a 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., on which they reported zero wages from Paramount

and Social Security and Medicare taxes withheld. Petitioner

explained on the Form 4852 that he had requested that Paramount

correct its records but it “refuses to do so out of fear of IRS

8
The jurat portion of the Form 1040 reads: “Under penalties
of perjury, I declare that I have examined this return and
accompanying schedules and statements, and to the best of my
knowledge and belief, they are true, correct, and complete.”
 - 10 -

retaliation.” Petitioner and Mrs. Oman also attached another

Form 4852 showing zero wages from Dillen Products, Inc., and

Social Security and Medicare taxes withheld. Petitioner wrote

that he had been unable to address the issue of incorrect

statements out of fear of losing his job.

Transmitted with the Form 1040 was a cover letter (notice)

that read as follows:

NOTICE

Certified Mail # 7005 1820 0001 7990 3789

We the undersign [sic] do hereby affirm that the 1040
tax return for year 2005 included in this letter is not
being filed and signed voluntarily. We are compelled
to file and sign out of fear of unlawful retaliation
from IRS and/or DOJ. The 1040 tax return for year 2005
was signed Under Duress.

Any 1040 tax returns from previous years that we have
filed were not filed voluntarily and were signed Under
Duress.

The reason for this notice to our 1040 tax return for
year 2005 is the fact that IRS and/or DOJ use 1040 tax
returns as evidence in tax and non-tax litigation, see
attachment A.

The only way these return(s) can be used as evidence
lawfully against the person(s) who filed and signed
said return(s) is if the return(s) was filed
voluntarily and sign [sic] voluntarily.

An American can not be compelled to be a witness
against him/her self, see the Constitutions [sic] 5th
amendment below.

The notice concluded with the recitation of the Fifth Amendment

to the Constitution. Above the signature line the notice read:

“With reservation of all our rights, immunities and privileges we
 - 11 -

remain.” Attachment A referenced and included with the notice

was an excerpt from a 1998 article from United States Attorneys’

Bulletin titled “Follow That Lead! Obtaining and Using Tax

Information in a Non-Tax Case”.

Respondent did not treat the 2005 Form 1040 as a valid and

processable return. Using information return data from third-

party payors, respondent prepared a substitute for return under

section 6020(b). Respondent included in petitioner’s income the

following items: (1) Distributions from pensions of $1,480

(erroneously shown in the notice of deficiency as $14,800), (2)

nonemployee compensation of $826, (3) unemployment compensation

of $2,748, and (4) wages of $22,237.9 Respondent also issued a

notice of deficiency in which he determined that petitioner had

income as set forth above and that petitioner was liable for an

income tax deficiency of $5,024 and additions to tax under

sections 6651(a)(1) and (2) and 6654.

Petitioner timely filed a petition to contest the notice of

deficiency. Petitioner contends that he filed a valid 2005

return. Petitioner also argues that because his return is valid,

respondent’s notice of deficiency is invalid. Petitioner

9
On the Form 1040 petitioner and Mrs. Oman claimed a filing
status of “Married filing jointly”. In preparing the substitute
for return, respondent used a filing status of “single”. The
parties have not indicated whether they agree that petitioner may
use the filing status “Married filing jointly” in Rule 155
computations.
 - 12 -

enclosed with his petition a 26-page attachment citing numerous

authorities, including cases and Code sections, out of context.

Discussion

I. Deficiency Proceeding With Respect to 2005

A. Burden of Proof and Unreported Income Issues

Generally, the Commissioner’s determination of a taxpayer’s

liability for an income tax deficiency is presumed correct, and

the taxpayer bears the burden of proving it incorrect. See Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). The U.S.

Court of Appeals for the Ninth Circuit, to which an appeal would

lie absent a stipulation to the contrary, see sec. 7482(b)(1)(A),

has held that for the presumption of correctness to attach to the

notice of deficiency in unreported income cases, the Commissioner

must establish “some evidentiary foundation” connecting the

taxpayer with the income-producing activity, see Weimerskirch v.

Commissioner, 596 F.2d 358, 361-362 (9th Cir. 1979), revg. 67

T.C. 672 (1977), or demonstrating that the taxpayer actually

received unreported income, Edwards v. Commissioner, 680 F.2d

1268, 1270-1271 (9th Cir. 1982). If the Commissioner introduces

some evidence that the taxpayer received unreported income, the

burden of production shifts to the taxpayer, who must establish

by a preponderance of the evidence that the deficiency was

arbitrary or erroneous. See Hardy v. Commissioner, 181 F.3d

1002, 1004 (9th Cir. 1999), affg. T.C. Memo. 1997-97.
 - 13 -

Respondent introduced into evidence a Form W-2, Wage and Tax

Statement, for 2005 showing that petitioner received wages from

Myers Industries, Inc. Respondent also introduced into evidence

a certified print of the Information Returns Processing

Transcript for 2005 showing, on the basis of third-party

information returns, that petitioner received wages from Myers

Industries, Inc., and Paramount; unemployment compensation; and a

distribution from a section 401(k) plan. Petitioner testified

that in 2005 he worked for a company that was part of Myers

Industries, Inc., and acknowledged that he possibly worked for

Paramount. He also testified that it was possible that he

received unemployment compensation from the State of Nevada and a

distribution from an employee stock ownership plan. Because

respondent connected petitioner with income-producing activities,

the burden of production shifted to petitioner and the

presumption of correctness attached to respondent’s income

adjustments. See Weimerskirch v. Commissioner, supra at 361-362.

Petitioner does not argue that section 7491(a), which

shifts the burden of proof to the Commissioner in certain

circumstances, applies, nor does the record permit us to conclude

that the requirements of section 7491(a)(2) are met.

Consequently, petitioner bears the burden of proof with respect

to all adjustments. See Rule 142(a).
 - 14 -

Petitioner denies that he received wages from Paramount and

Myers Industries, Inc. Petitioner contends that he attached the

Forms 4852 to his 2005 return because the payors, Paramount and

Dillen Products, Inc., erroneously withheld the Social Security

and Medicare taxes. Petitioner presented no credible evidence to

show that Paramount and Dillen Products, Inc., incorrectly

reported wages they paid petitioner on the third-party

information returns. To the contrary, petitioner testified that

in 2005 he worked for Dillen Products, Inc., and it was “very

possible” that he worked for Paramount. At trial petitioner

recalled receiving the Forms W-2 but testified that he did not

report the amounts because in his opinion they did not meet the

definition of wages and instead he engaged in an exchange of

property for property. This meritless argument is reminiscent of

the equal exchange theory, which we have previously rejected as

frivolous. See Beard v. Commissioner, 82 T.C. 766, 767, 773

(1984), affd. 793 F.2d 139 (6th Cir. 1986). Accordingly, we

sustain respondent’s determination with respect to petitioner’s

income.

B. The Validity of the 2005 Form 1040

We now turn to the issue whether petitioner’s 2005 Form 1040

was a valid return. We must first decide whether petitioner had

an obligation to file a 2005 return, and then we must decide

whether he did so.
 - 15 -

1. Obligation To File a Return

Under section 6012(a)(1)(A)(iv), an individual who is

entitled to make a joint return and whose gross income, when

combined with the gross income of his spouse, exceeds the sum of

twice the exemption amount and the basic standard deduction

applicable to a joint return, must file a Federal income tax

return. As discussed above, we sustain respondent’s

determination regarding petitioner’s income for 2005 as modified

by respondent’s concession. Petitioner’s income for 2005

exceeded the described threshold, and consequently, petitioner

had an obligation to file a return for 2005.

Petitioner contends that he had no obligation to file a

return because respondent’s records show no such obligation.

Petitioner relies on respondent’s letter dated July 2, 2008.

Respondent’s July 2, 2008, letter is a response to petitioner’s

request for release of records under the Freedom of Information

Act. Petitioner contends that the records produced in response

to his request show code “01” as petitioner’s filing requirement

code, which petitioner asserts means “Return not required to be

mailed or filed”. We reject petitioner’s argument. It is the

Internal Revenue Code that establishes a taxpayer’s filing

requirement. See sec. 6012. Moreover, petitioner has failed to

show that the Individual Master File records on which he relies
 - 16 -

are related to his 2005 taxable year.10 Accordingly, we conclude

petitioner has failed to prove that he was not required to file a

return for 2005.

2. Validity of a Return in General

Generally, pursuant to section 6011(a) taxpayers must file

returns that conform to the forms and regulations prescribed by

the Secretary. See sec. 1.6011-1(a), Income Tax Regs. The Form

1040 is the form prescribed by the Secretary for use by

individual taxpayers in filing returns. Williams v.

Commissioner, 114 T.C. 136, 139 (2000). Section 6065 requires a

return to be verified by a written declaration that it is made

under the penalties of perjury. See id. The preprinted jurat on

the Form 1040 satisfies the verification requirement of section

6065. See id.

The Code does not define the word “return”. See Mendes v.

Commissioner, 121 T.C. 308, 329 (2003) (Vasquez, J., concurring);

Swanson v. Commissioner, 121 T.C. 111, 122-123 (2003). On the

basis of the Supreme Court’s opinions in Zellerbach Paper Co. v.

Helvering, 293 U.S. 172, 180 (1934), and Florsheim Bros. Drygoods

Co. v. United States, 280 U.S. 453, 464 (1930), in Beard v.

Commissioner, supra at 777, we applied a four-part test (Beard

10
Petitioner contends the “01” code means that the taxpayer
has no filing obligation. However, one printout in Exhibit 37-P
appears to refer to Mrs. Oman’s 2005 year, and the other printout
appears to relate to petitioner’s 2003 taxable year.
 - 17 -

test) for determining whether a taxpayer’s document constitutes a

valid return. To be a valid return, we said the document must

meet the following requirements:

First, there must be sufficient data to calculate [the]
tax liability; second, the document must purport to be
a return; third, there must be an honest and reasonable
attempt to satisfy the requirements of the tax law; and
fourth, the taxpayer must execute the return under
penalties of perjury. [Id.]

We have applied the Beard test in various contexts, including for

purposes of sections 6651(a)(1), 6662(a), and 6011, among others.

Mendes v. Commissioner, supra at 329-330 (Vasquez, J.,

concurring).

Applying the Beard test, this Court has generally held that

a Form 1040 with zeros on every income line is devoid of

financial data and is not a valid return. See, e.g., Turner v.

Commissioner, T.C. Memo. 2004-251; Halcott v. Commissioner, T.C.

Memo. 2004-214. We also applied the Beard test when the taxpayer

reported income on one line of the Form 1040 but wrote zeros on

all other lines of income under circumstances that indicated no

intent to file a valid return. See, e.g., Watson v.

Commissioner, T.C. Memo. 2007-146 (concluding that a return that

reported income on one line and zeros on other lines and that was

accompanied by an attachment negating the jurat was invalid as it

did not constitute a reasonable attempt to comply with the

requirements of the tax law), affd. 277 Fed. Appx. 450 (5th Cir.

2008). The Beard test has been adopted and used by several U.S.
 - 18 -

Courts of Appeals, often in the context of a bankruptcy case

appeal, to decide whether a particular document is a return filed

by a taxpayer. See, e.g., Colsen v. United States, 446 F.3d 836

(8th Cir. 2006) (whether purported returns filed by a debtor-

taxpayer after the IRS had prepared substitutes for returns and

assessed tax liabilities were returns within the meaning of 11

U.S.C. sec. 523(a)(1)(B)(i)); Moroney v. United States, 352 F.3d

902 (4th Cir. 2003); United States v. Hindenlang, 164 F.3d 1029

(6th Cir. 1999) (whether a substitute for return was a return for

purposes of 11 U.S.C. sec. 523(a)(1)(B)(i)); Bergstrom v. United

States, 949 F.2d 341 (10th Cir. 1991) (same).

Under Golsen v. Commissioner, 54 T.C. 742, 757 (1970), affd.

445 F.2d 985 (10th Cir. 1971), we follow any decisions of the

Court of Appeals to which appeal lies that are squarely on point.

In United States v. Long, 618 F.2d 74, 75-76 (9th Cir. 1980),11

the Court of Appeals for the Ninth Circuit held that in the

context of a criminal prosecution under section 7203,12 a

11
The position of the Court of Appeals for the Ninth Circuit
that a return containing all zeros constitutes a valid return for
purposes of a sec. 7203 prosecution is contrary to the positions
of several other Courts of Appeals that have considered the
issue. See United States v. Mosel, 738 F.2d 157 (6th Cir. 1984)
(zero income return); United States v. Rickman, 638 F.2d 182
(10th Cir. 1980) (zero income return); United States v. Smith,
618 F.2d 280 (5th Cir. 1980) (zero on every line of the return).
12
Sec. 7203 establishes criminal liability for willful
failure to file returns.
 - 19 -

Form 1040 that contained only zeros in every space for entering

exemptions, income, tax, and tax withheld was a valid return.

In Long, the Court of Appeals reversed the taxpayer’s

conviction for willful failure to file a return on a record that

showed the following: (1) The Government had no record of the

taxpayer’s having filed any returns for the years at issue; (2)

during the years at issue the IRS did not keep copies of

documents that it considered to be invalid returns, including

forms showing only zeros, nor did the IRS keep records of

receiving such documents; (3) the taxpayer, defending against the

prosecution’s position of no return, introduced facsimile copies

of the documents he purportedly filed as returns; (4) the trial

court, sitting as the trier of fact in a nonjury trial, accepted

as a fact that the taxpayer had filed the documents; and (5) the

taxpayer “had inserted zeros in the spaces reserved for entering

exemptions, income, tax, and tax withheld” on the Forms 1040 he

had filed and had attached to the Forms 1040 copies of “a tax

protest tract”. See id. at 75. The Court of Appeals started

with the trial court’s factual finding that the taxpayer “filed

tax forms resembling the facsimiles introduced at trial”, which

the court concluded was not clearly erroneous, and then turned to

the issue of whether, by filing the Forms 1040, the taxpayer

“made a return” for purposes of section 7203. See id. It

decided the issue by applying the principle articulated in United
 - 20 -

States v. Porth, 426 F.2d 519, 523 (10th Cir. 1970), and adopted

by the Court of Appeals for the Ninth Circuit in United States v.

Klee, 494 F.2d 394, 397 (9th Cir. 1974)--a tax form that does not

contain any information relating to the taxpayer’s income from

which the tax may be computed is not a valid return under section

7203. See United States v. Long, supra at 75. The Court of

Appeals held that the prosecution did not prove that the taxpayer

was guilty of willfully failing to file a return within the

meaning of section 7203, and it explained its reasoning13 as

follows:

The zeros entered on Long’s tax forms constitute
“information relating to the taxpayer’s income from
which the tax can be computed.” The I.R.S. could
calculate assessments from Long’s strings of zeros,
just as it could if Long had entered other numbers.
The resulting assessments might not reflect Long’s
actual tax liability, but some computation was
possible. In this respect, the circumstances here
differ from those in Porth and similar cases in which
defendants failed to complete tax forms or left them

13
In a footnote, the court distinguished cases in which a
court has held that a purported return stating only a name,
address, occupation, and signature and asserting that the tax law
is unconstitutional, e.g., United States v. Daly, 481 F.2d 28
(8th Cir. 1973), or stating a name, address, an entry claiming a
refund, and a constitutional objection, e.g., United States v.
Irwin, 561 F.2d 198, 201 (10th Cir. 1977), was not a tax return
under the Code. See United States v. Long, 618 F.2d 74, 76 n.3
(9th Cir. 1980). In another footnote, the Court acknowledged
that applying the principle from United States v. Porth, 426 F.2d
519, 523 (10th Cir. 1970), may “leave open the possibility that
certain papers, although conveying information, might
nevertheless not constitute tax returns.” United States v. Long,
supra at 76 n.4.
 - 21 -

blank. Nothing can be calculated from a blank, but a
zero, like other figures, has significance. A return
containing false or misleading figures is still a
return. False figures convey false information, but
they convey information. [Id. at 75-76; fn. refs.
omitted.]

In Conforte v. Commissioner, 692 F.2d 587 (9th Cir. 1982),

affg. in part, revg. in part and remanding 74 T.C. 1160 (1980),

the Court of Appeals for the Ninth Circuit again addressed what

constitutes a “return”, but this time the issue arose under

section 6211, which defines a deficiency, former section 6653(b),

which imposed a 50-percent fraud penalty on any part of an

underpayment due to fraud, and former section 6653(c), which

defined “underpayment” to mean “deficiency” as defined in section

6211. One of the taxpayers argued that she was entitled to a

reduction in the fraud penalties determined by the Commissioner

for amounts that she and her husband had reported on filed Forms

1040. See id. at 590. The Forms 1040 reflected only the

taxpayers’ names, addresses, Social Security numbers, filing

status, exemptions, amounts designated as taxable income, and

computations of income and self-employment tax. Id. at 588. The

taxpayers did not include specific amounts or descriptions for

gross income or deductions on the Forms 1040. Id. at 588-589.

Instead they attached to each form a statement that they were

under investigation by the Government and that they were

asserting their Fifth Amendment privilege against self-
 - 22 -

incrimination with respect to the details of their income and

expenses. See id. at 589.

Before this Court, the taxpayer in Conforte had argued that

the tax shown on the Forms 1040 qualified as an “‘amount shown as

the tax by the taxpayer upon his return’” within the meaning of

section 6211(a)(1)(A). Id. at 590 (quoting section

6211(a)(1)(A)). Alternatively she had argued that the amount of

tax shown on her Forms 1040 represented an amount previously

assessed or collected without assessment within the meaning of

section 6211(a)(1)(B). Conforte v. Commissioner, supra at 590-

591. Relying on Sanders v. Commissioner, 21 T.C. 1012, 1018

(1954), affd. 225 F.2d 629 (10th Cir. 1955), this Court rejected

both arguments, concluding that none of the Forms 1040 qualified

as returns because the documents did not state specifically the

amounts of gross income or the deductions and credits taken into

account in computing taxable income. See Conforte v.

Commissioner, supra at 591. The Commissioner, relying on United

States v. Long, 618 F.2d 74 (9th Cir. 1980), argued that for a

Form 1040 to be recognized as a return for tax purposes, it must

set forth sufficient information relating to the taxpayer’s

income from which the tax can be computed. See Conforte v.

Commissioner, supra at 591.

The Court of Appeals in Conforte distinguished Long because

Long decided whether the taxpayer had made a return for purposes
 - 23 -

of section 7203. See id. It rejected the idea that the term

“return” has the same meaning under all sections of the Code,

acknowledging instead “the possibility that the same word could

have a different meaning in different parts of the code.” Id.

It concluded that “where, as here, a word could well have a

different meaning in different statutory contexts, a purpose-

oriented approach should be used when interpreting the meaning of

the word as it is used in different sections of the Code.” Id.

Applying the described approach, the Court of Appeals held that

the Forms 1040 were returns for purposes of the calculations

required by section 6211 and former section 6653(b) and (c). See

id. at 592.

The approach of the Court of Appeals for the Ninth Circuit

regarding what constitutes a “return”, as reflected in United

States v. Long, supra, and clarified in Conforte v. Commissioner,

supra, requires us to examine the purpose behind the relevant

Code section under which the issue arises. In this case, the

issue arises under section 6651(a)(1), which authorizes an

addition to tax when a taxpayer fails to file a timely return.

We can discern from a simple reading of section 6651(a)(1) that

Congress clearly intended to impose the addition to tax whenever

a taxpayer fails to satisfy the taxpayer’s obligation to file a

proper return by its due date. We can also discern that a

provision like section 6651(a)(1) was designed to facilitate the
 - 24 -

orderly administration of Federal tax law by the Commissioner. A

Form 1040 on which a taxpayer fails to make an honest and

reasonable attempt to comply with the tax law, such as the

claiming of withholding without any reported wages or taxable

distributions, is not a document that is worthy of being

processed as a return, and the IRS routinely takes the position

that such a Form 1040 is not a return for purposes of section

6651(a)(1). It is this scenario that respondent contends is

presented here. In a case like this one, we apply the Beard test

in deciding whether a document qualifies as a return for purposes

of section 6651(a)(1). See, e.g., Cabirac v. Commissioner, 120

T.C. 163, 168-170 (2003); Janpol v. Commissioner, 102 T.C. 499,

503, 505 (1994).

We note that the Court of Appeals has applied the Beard test

under different circumstances to decide whether a document

qualified as a return and has described the Beard test as

providing “a sound approach under both the Bankruptcy Code and

the [Code].” United States v. Hatton, 220 F.3d 1057, 1060-1061

(9th Cir. 2000). Consequently, we conclude that the Beard test

is not inconsistent with the purpose-oriented approach of

Conforte, and we shall apply it here.14

14
In Coulton v. Commissioner, T.C. Memo. 2005-199, a
deficiency case in which the taxpayer filed a return containing
zeros on each line regarding income and tax, we distinguished
United States v. Long, 618 F.2d 74 (9th Cir. 1980), on the ground
(continued...)
 - 25 -

3. The Application of the Beard Test

Respondent contends that the Form 1040 fails the first and

third parts of the Beard test because it does not contain

sufficient information to calculate tax liability and it is not

an honest and reasonable attempt to satisfy the requirements of

the tax law. We agree and explain our reasoning below.

Part one of the Beard test considers whether the purported

return contains sufficient data to calculate the tax liability.

See Beard v. Commissioner, 82 T.C. at 777. Although an incorrect

return is not necessarily an invalid return, see Zellerbach Paper

Co. v. Helvering, 293 U.S. at 180 (“Perfect accuracy or

completeness is not necessary to rescue a return from nullity, if

it purports to be a return, is sworn to as such * * *, and

evinces an honest and genuine endeavor to satisfy the law.”), we

have held that returns containing zero entries on every line

regarding income are devoid of financial data and therefore are

14
(...continued)
that it involved a criminal statute, sec. 7203. We concluded
that Long was not squarely on point, and we applied the Beard
test to decide whether the taxpayer’s purported return was a
valid return. See Coulton v. Commissioner, supra; see also
Golsen v. Commissioner, 54 T.C. 742, 757 (1970), affd. 445 F.2d
985 (10th Cir. 1971). As in Coulton, we are not faced with a
prosecution under sec. 7203. Instead we are considering the
validity of a purported return in the context of a civil tax
deficiency proceeding in which one of the issues is whether
petitioner is liable for the sec. 6651(a)(1) addition to tax for
failing to file a timely return.
 - 26 -

invalid, see, e.g., Turner v. Commissioner, T.C. Memo. 2004-251;

Halcott v. Commissioner, T.C. Memo. 2004-214.

At first glance, it appears that petitioner’s purported

return is not a zero income return because petitioner reported a

$1,419 IRA distribution. In addition, petitioner and Mrs. Oman

claimed joint return filing status, dependency exemption

deductions, and the standard deduction, and they inserted their

Social Security numbers. Nevertheless, petitioner’s return on

its face lacks information sufficient to apprise respondent of

his and Mrs. Oman’s Federal income tax liability because it shows

$6,055 tax withheld but contains no information as to income from

which such tax was purportedly withheld. Specifically, the

return shows zeros for wages, pension distributions, or dividends

from which the $6,055 tax could have been withheld and reports no

Federal income tax liability despite the one income entry.

Accordingly, we conclude petitioner’s 2005 Form 1040, on its

face, does not contain sufficient data to calculate petitioner’s

tax liability and fails part one of the Beard test.

Part three of the Beard test considers whether the taxpayer

made an honest and reasonable attempt to satisfy the requirements

of the tax law. See Beard v. Commissioner, supra at 777.

Respondent contends that the Form 1040 fails part three of the

Beard test because of the “assertion of the Fifth Amendment as

protecting him from having the government use the forms he
 - 27 -

submitted as evidence against him”. For reasons set forth below,

we do not limit our analysis to petitioner’s asserted Fifth

Amendment position.

This Court and the Court of Appeals for the Ninth Circuit

have examined the taxpayer’s intent and the facts and

circumstances surrounding the filing of the document purporting

to be the taxpayer’s return in deciding whether a taxpayer has

satisfied part three of the Beard test. See United States v.

Hatton, supra at 1060-1061 (considering as part of the third part

of the Beard test the fact that the taxpayer filed the return

only after the Commissioner contacted him); Dunham v.

Commissioner, T.C. Memo. 1998-52 (considering the taxpayer’s

background and intent under the third part of the Beard test).

In applying part three of the Beard test, we consider that

petitioner received wages during 2005, he failed to report those

wages, and he claimed he had no obligation to report his earned

income on a return.15 As discussed above, we have previously

rejected similar arguments as frivolous. See Beard v.

Commissioner, supra at 767, 773; see also Rowlee v. Commissioner,

80 T.C. 1111, 1120-1121 (1983).

Our conclusion regarding petitioner’s intent with respect to

his purported 2005 return is also supported by petitioner’s

15
At trial petitioner argued the amounts he received in
exchange for services did not meet the definition of “wages”
because he received property in exchange for property.
 - 28 -

behavior after he filed the purported return. On July 31, 2006,

less than 4 months after filing the 2005 return, petitioner

mailed to respondent a letter requesting an explanation of

respondent’s authority to issue notices and to make assessments

and legal determinations against petitioner and giving respondent

30 days to reply.16 Petitioner also asked respondent what Code

section requires him to enclose documentation to support the

entries on the return and what Code section defines income.

Petitioner then instructed respondent to mail the answer to his

address in “Nevada Republic [no ZIP Code]”. The letter

concluded: “If [the response] is addressed any other way than

exactly as above I will know that the letter is intended for a

fiction and you are trying to trick Me into abandoning my common

law jurisdiction to enter your commercial, admirality [sic],

color of law jurisdiction.”

The rhetoric of petitioner’s July 31, 2006, letter, which

was nearly contemporaneous with the time of filing the 2005

return, raises serious doubts that the notice, while not a

blanket Fifth Amendment claim, was drafted and attached to the

2005 return in good faith. The July 31, 2006, letter is one of

11 similar letters in the record that petitioner mailed to

respondent from July 31, 2006, through October 12, 2008. We find

that the notice and the purported return to which it was attached

16
Petitioner continues this line of argument on brief.
 - 29 -

were part of a pattern of communications of meritless content

that petitioner mailed to respondent evincing an intent on

petitioner’s part not to comply with his tax obligations. We

further find that petitioner’s purported 2005 return was not an

honest and reasonable attempt to satisfy the requirements of the

tax law, and we conclude that it fails part three of the Beard

test. Because petitioner’s purported 2005 return fails the first

and third parts of the Beard test, we conclude it was not a valid

return, and we sustain respondent’s determination to disregard

it.

C. Additions to Tax

1. Burden of Production

Section 7491(c) provides that the Commissioner bears the

burden of production in any court proceeding with respect to the

liability of any individual for any penalty, addition to tax, or

additional amount. The Commissioner’s burden of production under

section 7491(c) is to produce evidence that imposing the relevant

penalty or addition to tax is appropriate. Swain v.

Commissioner, 118 T.C. 358, 363 (2002). The taxpayer bears the

burden of introducing evidence regarding reasonable cause or a

similar defense. Higbee v. Commissioner, 116 T.C. 438, 446

(2001).
 - 30 -

2. Section 6651(a)(1)

Section 6651(a)(1) imposes an addition to tax for failure to

file a return timely in the amount of 5 percent of the tax

required to be shown on the return for each month during which

such failure continues, not to exceed 25 percent in the

aggregate, unless it is shown that such failure is due to

reasonable cause and not due to willful neglect.

Respondent satisfied his burden of production under section

7491(c) by introducing an excerpt from petitioner’s transcript

that contained third-party information returns data relating to

petitioner’s income and a copy of the 2005 return that respondent

determined was unprocessable. Accordingly, petitioner was

required to introduce evidence to prove that his failure to file

a valid return was due to reasonable cause and not due to willful

neglect. See sec. 6651(a)(1); Rule 142(a). Petitioner did not

argue that his failure to file a valid return was due to

reasonable cause, and he presented no credible evidence on the

issue. Accordingly, we hold that petitioner is liable for the

addition to tax under section 6651(a)(1).

3. Section 6651(a)(2)

Section 6651(a)(2) imposes an addition to tax for failure to

pay timely the amount of tax shown on a return. The section

6651(a)(2) addition to tax applies only when an amount of tax is

shown on a return. Cabirac v. Commissioner, 120 T.C. at 170.
 - 31 -

Petitioner did not file a valid 2005 return. However, respondent

prepared a substitute for return under section 6020(b) for 2005.

A return made by the Secretary under section 6020(b) is treated

as the return filed by the taxpayer for purposes of determining

whether the section 6651(a)(2) addition to tax applies. Sec.

6651(g)(2); Wheeler v. Commissioner, 127 T.C. 200, 208-209

(2006), affd. 521 F.3d 1289 (10th Cir. 2008).

Where the taxpayer did not file a valid return, to satisfy

his burden of production for the section 6651(a)(2) addition to

tax the Commissioner must introduce evidence that he prepared a

substitute for return satisfying the requirements under section

6020(b). Wheeler v. Commissioner, supra at 209. Respondent

satisfied this burden by introducing into evidence an IRC Section

6020(b) Certification. Consequently, petitioner had the burden

of introducing evidence to show that his failure to pay was due

to reasonable cause. He did not do so. Petitioner did not

advance any argument regarding the section 6651(a)(2) addition to

tax and introduced no credible evidence to show reasonable cause

for his failure to pay tax shown on the return. Accordingly, we

sustain respondent’s determination with respect to the addition

to tax under section 6651(a)(2).

4. Section 6654

Section 6654 imposes an addition to tax for underpayment of

a required installment of estimated tax. Each required
 - 32 -

installment of estimated tax is equal to 25 percent of the

“required annual payment”, which in turn is equal to the lesser

of (1) 90 percent of the tax shown on the taxpayer’s return for

that year (or, if no return is filed, 90 percent of his or her

tax for such year), or (2) if the taxpayer filed a return for the

immediately preceding taxable year, 100 percent of the tax shown

on that return. Sec. 6654(d)(1)(A) and (B).

Respondent introduced evidence that petitioner was required

to file a Federal income tax return for 2005 and that the return

he filed was invalid. Despite petitioner’s claim on the 2005

return that tax of $6,055 was withheld, respondent’s records show

no such withholding. Petitioner made no other payments for 2005.

Respondent also introduced into evidence petitioner’s return for

2004 showing a $4,764 tax liability. This satisfies respondent’s

burden of production under section 7491(c) by showing that

petitioner had a required annual payment of estimated tax for

2005. We also find that petitioner does not qualify for any of

the exceptions of section 6654(e). Petitioner presented no

argument with respect to section 6654. Therefore, we sustain

respondent’s determination that petitioner is liable for the

addition to tax under section 6654(a).

II. Collection Proceeding Regarding Petitioner’s 2004 Tax
Liability

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

property or right to property of any person unless the Secretary
 - 33 -

has notified such person in writing of the right to a hearing

before the levy is made. If the person requests a hearing, a

hearing shall be held before an impartial officer or employee of

the IRS Appeals Office. Sec. 6330(b)(1), (3). At the hearing a

taxpayer may raise any relevant issue, including appropriate

spousal defenses, challenges to the appropriateness of the

collection action, and collection alternatives. Sec.

6330(c)(2)(A). A taxpayer may contest the existence or amount of

the underlying tax liability at the hearing if the taxpayer did

not receive a notice of deficiency for the tax liability or did

not otherwise have an earlier opportunity to dispute the tax

liability. Sec. 6330(c)(2)(B); see also Sego v. Commissioner,

114 T.C. 604, 609 (2000).

Following a hearing, the Appeals Office must determine

whether the proposed levy may proceed. The Appeals Office is

required to take into consideration: (1) Verification presented

by the Secretary that the requirements of applicable law and

administrative procedure have been met, (2) relevant issues

raised by the taxpayer, and (3) whether the proposed levy action

appropriately balances the need for efficient collection of taxes

with a taxpayer’s concerns regarding the intrusiveness of the

proposed levy action. Sec. 6330(c)(3).

Section 6330(d)(1) grants this Court jurisdiction to review

the determination made by the Appeals Office in connection with
 - 34 -

the section 6330 hearing. Where the validity of the underlying

liability is properly at issue, the Court reviews the matter on a

de novo basis. Sego v. Commissioner, supra at 610; Goza v.

Commissioner, 114 T.C. 176, 181-182 (2000). Where the underlying

tax liability is not in dispute, the Court reviews the Appeals

Office’s determination for abuse of discretion. Sego v.

Commissioner, supra at 610; Goza v. Commissioner, supra at 182.

An abuse of discretion occurs if the Appeals Office exercises its

discretion “arbitrarily, capriciously, or without sound basis in

fact or law.” Woodral v. Commissioner, 112 T.C. 19, 23 (1999).

Petitioner contends that respondent misled him by

instructing him not to take further action when he contacted

respondent after receiving the notice of deficiency for 2005.

However, petitioner stipulated the notice of deficiency and does

not deny that he received it. The notice of deficiency states:

“The time in which you must file a petition with the court (90

days or 150 days as the case may be) is fixed by law and the

Court cannot consider your case if the petition is filed late.”

Petitioner testified that he read the notice of deficiency upon

receipt and remembered the language regarding the time for filing

a petition. Petitioner may not now hide behind respondent’s form

letters because the notice of deficiency contained clear

instructions on what petitioner had to do to contest the 2004

liability. Because petitioner failed to dispute the underlying
 - 35 -

liability by filing a timely petition, section 6330(c)(2)(B)

precludes him from contesting the validity of the underlying tax

liability during the section 6330 hearing and in this proceeding.

Accordingly, we review respondent’s determination for abuse of

discretion.

In his petition petitioner does not raise any meritorious

arguments. During trial petitioner contended that although he

requested a face-to-face hearing, he did not receive any hearing.

Petitioner contends that respondent improperly interpreted the

phrase “Please contact me in writing” on the Form 12153 as

petitioner’s request for a hearing by correspondence.

Petitioner’s claimed misunderstanding of the Form 12153 is

understandable. Line 3 of the Form 12153 asks for a taxpayer’s

phone number and the best time to call. It does not indicate

that it is intended to be the means by which a taxpayer selects a

hearing format, nor does it indicate that by providing a phone

number the taxpayer is requesting a telephone hearing or that, in

petitioner’s case, by requesting a contact in writing, he selects

a hearing by correspondence. The Form 12153 in fact has no box

to check or area to write in to indicate the preferred format of

a requested hearing. Nevertheless, even if petitioner

unknowingly requested a hearing by correspondence and later

clarified he wanted a face-to-face hearing, we conclude that

respondent did not abuse his discretion in denying petitioner a
 - 36 -

face-to-face hearing and that petitioner received a proper

section 6330 hearing.

Generally, because a hearing under section 6330 is an

informal proceeding, a face-to-face hearing is not mandatory.

See Katz v. Commissioner, 115 T.C. 329, 337 (2000); Davis v.

Commissioner, 115 T.C. 35, 41 (2000); Clough v. Commissioner,

T.C. Memo. 2007-106. While a section 6330 hearing may be held

face-to-face, a proper hearing may be conducted by telephone or

correspondence in certain circumstances. Katz v. Commissioner,

supra at 337-338; see also Clough v. Commissioner, supra. A

hearing by correspondence consists of one or more written or oral

communications between an Appeals officer or employee and the

taxpayer. Sec. 301.6330-1(d)(2), Q&A-D6, Proced. & Admin. Regs.

All communications between the taxpayer and the Appeals officer

from the time of the hearing request up to the time of the

issuance of the notice of determination constitute part of the

section 6330 hearing. See Turner v. Commissioner, T.C. Memo.

2010-44; Middleton v. Commissioner, T.C. Memo. 2007-120.

The record establishes that petitioner submitted his Form

12153 on November 19, 2007. Petitioner did not request a face-

to-face hearing on his Form 12153 but did so by letter dated

April 4, 2008. In the April 4, 2008, letter petitioner stated

that respondent had repeatedly refused to answer his questions

regarding Code sections that define income and property received
 - 37 -

as income and establish respondent’s “Delegated Constitutional

and Legislated Lawful authority”. The letter contained

meaningless language, for example: “I do hereby give you notice

that you, and all you are, are Fired from any and all

representation of my private affairs without recourse”. Other

than stating that his inability to discuss the underlying

liability at the hearing is unfair, petitioner did not describe

in his request for a face-to-face hearing what he intended to

discuss at the hearing, nor did he offer collection alternatives.

Ms. Chavez informed petitioner by letter dated April 11, 2008,

that his request for a face-to-face hearing was denied.

On April 30, 2008, petitioner sent another letter to Ms.

Chavez that was similar to the April 4, 2008, letter. Petitioner

pointed out that the Form 12153 was confusing because it did not

state that by selecting the method of contact, he was actually

selecting the format of the section 6330 hearing. Petitioner

included the 2005 and 2006 Forms 1040. As discussed above, the

2005 Form 1040 was an invalid return and the 2006 Form 1040 was a

zero income return. Again, petitioner did not identify any

issues he would discuss at the hearing, nor did he propose

collection alternatives or submit a completed Form 433-A, as Ms.

Chavez had requested. We conclude that respondent did not err in

refusing to grant petitioner a face-to-face hearing and that the
 - 38 -

correspondence between petitioner and Ms. Chavez constituted a

proper section 6330 hearing.

In his petition and at trial petitioner did not pursue any

meritorious argument, nor did he introduce any credible evidence

that would allow us to conclude that the determination to sustain

the levy was arbitrary, capricious, without foundation in fact or

law, or otherwise an abuse of discretion. See, e.g., Giamelli v.

Commissioner, 129 T.C. 107, 112, 115-116 (2007). The Appeals

Office verified that all requirements of applicable law or

administrative procedure were met. It balanced the need for

efficient collection of taxes with petitioner’s concerns that the

collection action be no more intrusive than necessary.

Accordingly, we conclude that respondent did not abuse his

discretion in sustaining the collection action.

We have considered all of the arguments raised by either

party, and to the extent not discussed above, we find them to be

irrelevant or without merit.17

17
Sec. 6673(a)(1) provides that this Court may require the
taxpayer to pay a penalty not in excess of $25,000 whenever it
appears to this Court that: (a) The proceedings were instituted
or maintained by the taxpayer primarily for delay, (b) the
taxpayer’s position is frivolous or groundless, or (c) the
taxpayer unreasonably failed to pursue available administrative
remedies. Respondent did not request that we impose a penalty
pursuant to sec. 6673, and in the exercise of our discretion we
will not impose a sec. 6673 penalty on petitioner. However, we
warn petitioner that if in the future he maintains groundless
positions in this Court, he runs the risk that he will be
sanctioned in accordance with sec. 6673(a)(1).
 - 39 -

To reflect the foregoing,

Decision will be entered under

Rule 155 in docket No. 18413-08.

Decision will be entered for

respondent in docket No. 18421-08L.