T.C. Memo. 2011-41
UNITED STATES TAX COURT
W. JAMES KUBON AND VALLY KUBON, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 18866-09L. Filed February 14, 2011.
W. James Kubon and Vally Kubon, pro sese.
John D. Feldhammer, for respondent.
MEMORANDUM OPINION
HAINES, Judge: This case is before the Court on
respondent’s motion for summary judgment filed pursuant to Rule
121 and respondent’s motion for sanctions pursuant to section
6673.1
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as amended, and all Rule
(continued...)
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The parties’ controversy poses the following issues for our
consideration: (1) Whether petitioners received a notice of
deficiency for 2004; (2) whether respondent’s determinations for
2004 were an abuse of discretion; and (3) whether petitioners are
liable for the penalty under section 6673.
Background
At the time of the filing of the petition, petitioners
resided in San Jose, California.
On their 2004 tax return petitioners reported zero income
and requested a full refund of all taxes withheld for 2004. On
January 18, 2008, respondent sent petitioners a notice of
deficiency for 2004 to 560 Hobie Lane, San Jose, California
95127-3531 (560 Hobie Lane).2 Petitioners used this address on
their petition and on all subsequent motions and responses filed
with the Court. Petitioners failed to petition the Court to
redetermine the deficiency.
In his notice of deficiency respondent determined
petitioners’ taxable income and tax liability for 2004 to be
$122,532 and $32,196, respectively. In the absence of adequate
records the examiner determined those amounts by reference to any
1
(...continued)
references are to the Tax Court Rules of Practice and Procedure.
2
Respondent actually issued two notices of deficiency, one
copy addressed to James and Vally Kubon and the other addressed
only to Vally Kubon. For purposes of this opinion, we refer to
the notices as a single notice of deficiency.
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relevant Forms W-2, Wage and Tax Statement, bank deposits, cash
payments, and personal and other nondeductible expenditures.
On June 25, 2008, respondent issued petitioners a Notice of
Intent to Levy and Notice of Your Right to a Hearing (notice of
levy). On July 8, 2008, respondent issued petitioners a Notice
of Federal Tax Lien Filing and Your Right to a Hearing Under IRC
6320 (notice of lien). In response, petitioners timely mailed
respondent two Forms 12153, Request for a Collection Due Process
or Equivalent Hearing, one in response to the notice of levy and
the other in response to the notice of lien. Petitioners
attached a page of arguments to each response, which: (1)
Disputed the validity of the notice; (2) questioned whether the
Internal Revenue Service (IRS) followed all proper procedures as
required by law; (3) claimed that petitioners are not liable for
the assessed tax because they never had a chance to challenge the
assessment; and (4) raised collection alternatives if the
liability was determined to be proper. Further, petitioners
argued that it was not their intention to discuss any issues
determined to be frivolous, stating: “[I]f you have considered
issues that * * * [we’ve] raised in the past to be frivolous, * *
* [we] hereby abandon them.”
On April 22, 2009, respondent sent petitioners a request to
complete Form 433-A, Collection Information Statement for Wage
Earners and Self-Employed Individuals, to assist in considering
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collection alternatives. Petitioners did not complete and return
Form 433-A.
Petitioners were next sent an appointment letter for a
telephone hearing scheduled for June 2, 2009. On June 3, 2009,
the day after the hearing was scheduled to take place,
petitioners faxed respondent a letter stating that they would not
participate in a telephone hearing and demanding a face-to-face
hearing. On June 4, 2009, a letter was sent to petitioners
outlining the IRS’ policies for a face-to-face hearing and
explaining why petitioners did not qualify. Petitioners were
given the opportunity to provide the information necessary to
qualify for a face-to-face hearing; however, they were informed
that if no such documentation was received by June 29, 2009, a
determination would be made based on the information available.
Petitioners did not provide any additional information.
Accordingly, on July 10, 2009, respondent issued petitioners a
Notice of Determination Concerning Collection Action(s) Under
Section 6320 and/or 6330 with regard to 2004.
On October 14, 2009, respondent moved to remand the case to
respondent’s Appeals Office for further consideration because it
was unclear how respondent determined that the notice of
deficiency had been mailed to petitioners. On October 19, 2009,
respondent’s motion for remand was granted, and the case was
remanded to Appeals for further consideration.
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On remand, Appeals used the U.S. Postal Service track and
confirm service to verify that the notice of deficiency was
mailed to petitioners on January 18, 2008, and delivered to
petitioners’ home on January 22, 2008. On December 7, 2009,
Appeals offered petitioners a supplemental face-to-face hearing
and scheduled the hearing for January 14, 2010. On January 12,
2010, petitioners sent respondent a letter stating that a hearing
was not necessary because the IRS had failed to provide proof
that the notice of deficiency was properly created.
As a result of petitioners’ failure to accept respondent’s
invitation for a face-to-face hearing, on February 3, 2010,
respondent issued petitioners a Supplemental Notice of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330 (supplemental notice of determination) that verified
that the proper procedures had been followed in issuing the
notice of deficiency. The supplemental notice of determination
stated:
Internal transcripts show a legal assessment was made,
notice and demand given, and that there was a subsequent
failure and/or refusal to pay. Both the filing of the
Notice of Federal Tax Lien and the issuance of the Notice of
Intent to Levy were legally and procedurally correct. Thus
the actions of compliance balance the need for efficient
collection action with your concern that any collection
action be no more intrusive than necessary.
On July 29, 2010, respondent filed a motion for summary
judgment and a motion to permit levy. Respondent’s motion for
summary judgment seeks summary adjudication in respondent’s favor
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for all of the legal issues in controversy. Respondent’s motion
to permit levy seeks removal of the suspension of the levy under
section 6330(e), alleging that the underlying tax liability is
not at issue and good cause exists for the removal. Along with
respondent’s motion for summary judgment and motion to permit
levy, respondent filed a declaration of Settlement Officer
Raymundo Jacquez, Jr. (Mr. Jacquez), which states that he
reviewed petitioners’ TXMOD-A transcript and INOLE-S transcript
for 2004, each dated November 19, 2009, as part of his
verification that all legal and administrative requirements for
the levy had been met and that petitioners have not filed
anything with the IRS with an address other than 560 Hobie Lane
since 1990.
On October 18, 2010, the Court filed respondent’s supplement
to respondent’s motion for summary judgment. This supplement
adds a copy of the certified mail list to respondent’s motion for
summary judgment, stating that the notice of deficiency was sent
by certified mail to petitioners at 560 Hobie Lane on January 18,
2008. Finally, on October 18, 2010, respondent filed a motion
for sanctions requesting that the Court impose a penalty pursuant
to section 6673 because petitioners instituted these proceedings
solely for the purpose of delay and advanced only frivolous
arguments.
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On September 7, 2010, the Court filed petitioners’ objection
to respondent’s motion to permit levy. On October 13, 2010, the
Court filed petitioners’ motion to remand. Finally, on October
18, 2010, the Court filed petitioners’ objection to respondent’s
motion for summary judgment.
Discussion
Summary judgment is intended to expedite litigation and
avoid unnecessary and expensive trials. Fla. Peach Corp. v.
Commissioner, 90 T.C. 678, 681 (1988). The Court may grant
summary judgment when there is no genuine issue of material fact
and a decision may be rendered as matter of law. Rule 121(b);
Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd.
17 F.3d 965 (7th Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753,
754 (1988). We conclude that there are no genuine issues of
material fact regarding the questions raised in respondent’s
motion for summary judgment and a decision may be rendered as a
matter of law.
Section 6331(a) provides that if any person liable to pay
any tax neglects or refuses to do so within 10 days after notice
and demand, the Secretary can collect such tax by levy upon
property belonging to such person. Pursuant to section 6331(d),
the Secretary is required to give the taxpayer notice of his
intent to levy and within that notice must describe the
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administrative review available to the taxpayer before proceeding
with the levy. See also sec. 6330(a).
Section 6330(b) describes the administrative review process,
providing that a taxpayer can request a hearing with the Appeals
Office with regard to a levy notice. At the section 6330 hearing
the taxpayer may raise certain matters set forth in section
6330(c)(2), including appropriate spousal defenses, challenges to
the appropriateness of collection actions, and offers of
collection alternatives. Further, a taxpayer may dispute the
underlying tax liability for any tax period if the taxpayer did
not receive a notice of deficiency for such tax liability or did
not otherwise have an opportunity to dispute such tax liability.
Sec. 6330(c)(2)(B).
Pursuant to section 6330(d)(1), within 30 days of the
issuance of the notice of determination, the taxpayer may appeal
that determination to this Court. Although section 6330 does not
prescribe the standard of review that the Court is to apply in
reviewing the Commissioner’s administrative determinations, we
have stated that, where the validity of the underlying tax
liability is properly at issue, the Court will review the matter
de novo. Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v.
Commissioner, 114 T.C. 176, 181-182 (2000). Where the validity
of the underlying tax liability is not properly at issue,
however, the Court will review the Commissioner’s administrative
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determination for abuse of discretion. Sego v. Commissioner,
supra at 610; Goza v. Commissioner, supra at 182.
Challenge to Validity of Notice of Deficiency
Petitioners present a challenge to the validity of the
notice of deficiency. On remand, Mr. Jacquez used the U.S.
Postal Service track and confirm service to verify that the
notice of deficiency was mailed to petitioners at their home at
560 Hobie Lane on January 18, 2008, and was delivered on January
22, 2008. Petitioners’ INOLE-S transcript for 2004, dated
November 19, 2009, shows that petitioners have not filed anything
with the IRS with an address other than 560 Hobie Lane since the
year 1990. Further, petitioners used the 560 Hobie Lane address
on their petition and all subsequent motions and responses filed
with the Court. Finally, respondent’s supplement to his motion
for summary judgment provides a certified mail list confirming
that the notice of deficiency was sent by certified mail to
petitioners at 560 Hobie Lane on January 18, 2008. Accordingly,
we conclude that petitioners received a notice of deficiency at
their last known address for 2004. See sec. 6212(a) and (b).
Because petitioners received a notice of deficiency for
2004, and did not file a petition for redetermination within 90
days, petitioners are precluded from challenging their underlying
tax liability for 2004 in this collection action and the validity
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of the underlying liability is not properly at issue.3 See sec.
6330(c)(2)(B).
Verification of Assessment Procedure
Federal tax assessments are formally recorded on a record of
assessment. Sec. 6203. “The summary record, through supporting
records, shall provide identification of the taxpayer, the
character of the liability assessed, the taxable period, if
applicable, and the amount of the assessment.” Sec. 301.6203-1,
Proced. & Admin. Regs. Section 6330(c)(1) does not require the
Commissioner to rely on a particular document to satisfy the
verification requirement. Roberts v. Commissioner, 118 T.C. 365,
371 n.10 (2002), affd. 329 F.3d 1224 (11th Cir. 2003); Kaeckell
v. Commissioner, T.C. Memo. 2002-114.
We conclude that Mr. Jacquez obtained verification from the
Secretary that the requirements of all applicable laws and
administrative procedures were met as required by section
3
Even if petitioners were entitled to challenge their
underlying tax liability, their only argument is that their wages
do not constitute taxable income. Their arguments are
indistinguishable from those that have been uniformly rejected,
and no further discussion of them is warranted. See United
States v. Connor, 898 F.2d 942, 943 (3d Cir. 1990); Coleman v.
Commissioner, 791 F.2d 68, 70 (7th Cir. 1986); Sauers v.
Commissioner, 771 F.2d 64, 66 (3d Cir. 1985), affg. T.C. Memo.
1984-367; Connor v. Commissioner, 770 F.2d 17, 20 (2d Cir. 1985);
Biermann v. Commissioner, 769 F.2d 707, 708 (11th Cir. 1985);
Waters v. Commissioner, 764 F.2d 1389, 1389 (11th Cir. 1985);
Perkins v. Commissioner, 746 F.2d 1187, 1188 (6th Cir. 1984),
affg. T.C. Memo. 1983-474; Knighten v. Commissioner, 702 F.2d 59,
60 (5th Cir. 1983); Funk v. Commissioner, 687 F.2d 264, 265 (8th
Cir. 1982), affg. T.C. Memo. 1981-506.
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6330(c)(1). Mr. Jacquez obtained and reviewed a TXMOD-A
transcript of account for petitioners’ 2004 taxable year before
the scheduled hearing. In this regard, the TXMOD-A transcript of
account on which Mr. Jacquez relied contained all of the
information prescribed in section 301.6203-1, Proced. & Admin.
Regs. See Hack v. Commissioner, T.C. Memo. 2002-243 (“The use of
computer-generated transcripts of account is a valid verification
that the requirements of any applicable law or administrative
procedure have been met.”); Schroeder v. Commissioner, T.C. Memo.
2002-190 (provides a description of such transcripts); Hauck v.
Commissioner, T.C. Memo 2002-184 (“We have repeatedly held that
the Commissioner may rely on transcripts of account to satisfy
the verification requirement of section 6330(c)(1).”), affd. 64
Fed. Appx. 492 (6th Cir. 2003).
Petitioners have not alleged any irregularity in the
assessment procedure that would raise a question about the
validity of the assessments or the information contained in the
transcript of account relied on by Mr. Jacquez. See Davis v.
Commissioner, 115 T.C. 35, 41 (2000); Mann v. Commissioner, T.C.
Memo. 2002-48. Accordingly, we conclude that there is no
question that the Appeals officer satisfied the verification
requirement of section 6330(c)(1).
Petitioners make no other arguments against the validity of
the notice of determination. In particular, petitioners fail to
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make a valid challenge to the appropriateness of respondent’s
intended collection action, raise a spousal defense, or offer
alternative means of collection. We conclude that respondent did
not abuse his discretion.
Section 6673 Penalty
Section 6673(a)(1) authorizes the Court to require a
taxpayer to pay to the United States a penalty in an amount not
to exceed $25,000 whenever it appears to the Court that the
taxpayer’s position in the proceeding is frivolous or groundless.
Sec. 6673(a)(1)(B). The section 6673 penalty applies to
proceedings filed under section 6330(d). See Pierson v.
Commissioner, 115 T.C. 576, 581 (2000).
It is within our discretion whether to impose the section
6673 penalty. We have often imposed the penalty in cases where,
for example, taxpayers have presented arguments in administrative
and judicial proceedings despite being warned those arguments
were frivolous. See Burke v. Commissioner, 124 T.C. 189, 197
(2005); Rodriguez v. Commissioner, T.C. Memo. 2009-92; Ioane v.
Commissioner, T.C. Memo. 2009-68 ($10,000 penalty imposed where
taxpayer was warned months before trial that his frivolous
arguments, lack of candor, and failure to cooperate in the
stipulation process could result in imposition of the section
6673 penalty). But see Lizalek v. Commissioner, T.C. Memo. 2009-
122 (declining to impose the section 6673 penalty where the
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taxpayer raised frivolous arguments for the first time in Federal
court).
In their August 15, 2008, Forms 12153, petitioners argued
that it is not their intention to discuss any issues determined
to be frivolous, stating: “[I]f you have considered issues that
* * * [we’ve] raised in the past to be frivolous, * * * [we]
hereby abandon them.” Nonetheless, petitioners’ dealings with
Appeals were characterized by a lack of cooperation and continued
frivolous and groundless assertions. Petitioners have
consistently refused to participate in collection due process
hearings. In fact, in their letter dated January 12, 2010,
petitioners declined Appeals’ invitation to a face-to-face
hearing, stating without any support that a hearing was not
necessary because the IRS had failed to provide proof that the
notice of deficiency was properly created. Further, in 2005
petitioner W. James Kubon was penalized $10,000 pursuant to
section 6673 for making nearly identical arguments. Kubon v.
Commissioner, T.C. Memo. 2005-71. Accordingly, petitioners were
aware that by continuing to pursue these arguments, they
subjected themselves to the possibility of a penalty pursuant to
section 6673.
Petitioners’ continuous insistence on presenting patently
frivolous arguments wastes both respondent’s and this Court’s
valuable time and resources. Under the circumstances, we shall
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grant respondent’s motion and impose a penalty pursuant to
section 6673(a)(1) of $20,000.
We have considered all of petitioners’ contentions,
arguments, and requests that are not discussed herein, and we
conclude that they are without merit or irrelevant.
To reflect the foregoing,
An appropriate order and
decision will be entered.