T.C. Memo. 2015-69
UNITED STATES TAX COURT
BARRY KNUDSEN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 5145-12L. Filed April 7, 2015.
Barry Knudsen, pro se.
Joline M. Wang, for respondent.
MEMORANDUM OPINION
SWIFT, Judge: This proceeding was commenced in response to a notice of
determination concerning a proposed levy under section 6330 with respect to
assessed Federal income tax for 2004 and 2006. Pending before the Court is
respondent’s motion for summary judgment.
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[*2] Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect at all relevant times, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
Background
At the time of the filing of the petition, petitioner resided in Branson,
Missouri.
Petitioner failed to file his 2004 and 2006 Federal income tax returns.
Under authority of section 6020(b), respondent prepared for petitioner substitutes
for returns reflecting Federal income tax liabilities of $9,204 and $8,375,
respectively.
On the basis of the substitutes for returns, on September 7, 2010, and on
November 2, 2009, respondent issued notices of deficiency relating to petitioner’s
2004 and 2006 Federal income tax liabilities.
Respondent alleges that on September 7, 2010, he mailed the notice of
deficiency for 2004 to petitioner’s last known address by certified mail with article
No. 7105 5678 7185 3291 7286.
Respondent alleges that on October 28, 2009, he mailed the notice of
deficiency for 2006 to petitioner’s last known address by certified mail with article
No. 7161 7618 3631 1671 9237.
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[*3] Respondent’s records reflect no receipt of a U.S. Postal Service notice of
nondelivery to petitioner for either of the above notices of deficiency.
Petitioner did not file a petition with the Tax Court to challenge either of the
notices of deficiency.
On April 5, 2010, for 2006, and on January 10, 2011, for 2004, respondent
assessed Federal income tax against petitioner.
On April 18, 2011, respondent sent to petitioner a notice of proposed levy
regarding the assessed tax for 2004 and 2006 plus interest and penalties--by then a
total of $18,683 and $15,265, respectively.
On or about May 10, 2011, petitioner submitted to respondent a Form
12153, Request for a Collection Due Process or Equivalent Hearing, concerning
respondent’s effort to collect by levy the above assessed Federal income tax and
related interest and penalties. Therein petitioner:
(1) requested a face-to-face hearing;
(2) requested respondent to verify all of respondent’s required procedures
were followed in connection with the assessments;
(3) challenged as improper the underlying tax liabilities and penalties on the
ground respondent never mailed and he never received the above two notices of
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[*4] deficiency and requested an opportunity to challenge the underlying tax
liabilities; and
(4) raised collection alternatives.
By letter dated October 4, 2011, respondent’s settlement officer (SO) informed
petitioner that petitioner’s request for a face-to-face hearing was denied because of
petitioner’s failure to file his 2007, 2009, and 2010 Federal income tax returns.
The letter asked petitioner to provide the SO, by October 25, 2011, his delinquent
individual Federal income tax returns for 2004, 2006, 2007, 2009, and 2010 and a
collection information financial statement.
On November 9, 2011, petitioner sent the SO a letter in which he again:
(1) asserted his entitlement to a face-to-face hearing;
(2) asked respondent for copies of all of respondent’s rules and regulations
relating to a face-to-face hearing;
(3) disputed the underlying tax liabilities and penalties on the ground
respondent never mailed to him and he never received the related notices of
deficiency; and
(4) requested collection alternatives be considered if the tax liabilities are
sustained.
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[*5] In response to petitioner’s letter, in late November 2011 the SO, among
other things:
(1) obtained copies of the notices of deficiencies addressed to petitioner;
and
(2) entered each of the certified mail numbers shown on respondent’s copies
of the notices of deficiency into the U.S. Postal Service’s “Track and Confirm”
Internet search site.
The SO’s Track and Confirm search indicated only that respondent’s notice
of deficiency relating to petitioner’s 2004 tax was delivered on September 11,
2010, “in Branson, MO 65616”. No further description of the delivery address in
Branson, MO, is described.
The SO’s “Track and Confirm” search produced no information relating to
respondent’s mailing of the notice of deficiency to petitioner for 2006 because the
U.S. Postal Service’s Track and Confirm site went back only two years and
respondent’s notice of deficiency to petitioner for 2006 was dated November 2,
2009, slightly more than two years before the search date.
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[*6] The SO also obtained:
(1) a copy of a “substitute” U.S. Postal Service Form 3877 (PS Form 3877)
pertaining to respondent’s mailing to petitioner of the notice of deficiency to
petitioner for 2004; and
(2) a copy of a PS Form 3877 pertaining to respondent’s mailing to
petitioner of the notice of deficiency for 2006.
However, the copies of the PS Forms 3877 obtained by the SO that
respondent provided to the Court with his motion for summary judgment as proof
of respondent’s mailing to petitioner of the notices of deficiency are not complete
and do not provide certain information specifically called for on the forms, as
follows:
The PS Form 3877 for 2004:
(1) lists 12 pieces of mail but does not indicate how many pieces of mail the
U.S. Postal Service actually received from respondent; and
(2) is stamped signed but is not signed manually by the individual U.S.
Postal Service employee, as is called for on the PS Form 3877.
The PS Form 3877 for 2006:
(1) lists 21 pieces of mail but does not indicate how many pieces of mail the
U.S. Postal Service actually received from respondent;
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[*7] (2) is not signed either with a stamp or manually by the individual U.S.
Postal Service employee;
(3) does not identify the listed items as notices of deficiency; and
(4) does not state the year to which the listed items relate.
In a letter to petitioner dated November 18, 2011, the SO again asked
petitioner to file his 2004 and 2006 Federal income tax returns and made it clear
that if he would file his delinquent tax returns and provide a completed collection
information statement, the SO would compare them with the tax returns
respondent had prepared for him and reconsider his correct tax liabilities for each
year. The SO’s letter further stated that, if petitioner wanted to continue with the
collection due process (CDP) hearing, he should send whatever relevant
information and documents he had to the SO by December 2, 2011. The letter
cautioned petitioner that if the SO did not hear from him by December 2, 2011,
respondent would issue a final notice of determination.
By December 2, 2011, petitioner had not provided any further information
and had not telephoned the SO. On January 19, 2012, respondent issued a final
adverse notice of determination sustaining the proposed levy relating to the tax
deficiencies, interest, and penalties that had been assessed against petitioner for
2004 and 2006.
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[*8] On February 24, 2012, petitioner filed in this Court his letter petition
challenging respondent’s notice of determination.
On April 18, 2012, petitioner filed an amended petition and claimed:
(1) respondent improperly denied him a face-to-face CDP hearing;
(2) respondent improperly did not allow him to challenge his underlying tax
liabilities;
(3) respondent’s proof as to the mailing and as to his receipt of the notices
of deficiency was defective;
(4) he never received the notices of deficiency;
(5) respondent never provided requested documents; and
(6) respondent did not give him a fair hearing.
On May 29, 2012, respondent filed his answer to the amended petition and
therein alleged that, because petitioner had never submitted his 2004 and 2006
Federal income tax returns, petitioner properly was not allowed to challenge his
underlying tax liabilities.
On December 28, 2012, respondent filed a motion for summary judgment.
On February 11, 2013, petitioner filed his objection to respondent’s motion
for summary judgment. Therein petitioner asserted he had not been given a
meaningful CDP hearing, he had not been allowed to challenge the underlying tax
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[*9] liabilities, and respondent had the burden to prove the notices of deficiency
were mailed properly to and received by him.
On the basis of factual issues relating to petitioner’s receipt of the notices of
deficiency and whether he should be allowed to challenge his underlying Federal
income tax liabilities for 2004 and 2006 as determined by respondent, on March
13, 2013, the Court denied respondent’s motion for summary judgment.
On October 18, 2013, respondent filed a motion to remand this case to the
Internal Revenue Service Appeals Office to reconsider petitioner’s underlying tax
liabilities. Without objection from petitioner, on November 5, 2013, the Court
granted respondent’s motion.
On remand, on November 19, 2013, the SO sent petitioner a letter
scheduling a supplemental CDP telephone hearing for December 18, 2013. The
SO’s letter asked petitioner to explain why he believed respondent’s notices of
deficiency reflected incorrect amounts for his 2004 and 2006 Federal income tax
liabilities.
Petitioner did not provide the SO any information about his underlying tax
liabilities, and on December 18, 2013, the SO sent him a letter stating that since he
had provided no further information, respondent’s notice of determination to
collect the assessed taxes by levy would be sustained. The SO’s December 18,
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[*10] 2013, letter, however, also gave petitioner an additional 14 days to provide
information regarding his underlying tax liabilities.
On December 19, 2013, petitioner sent a letter to the SO and:
(1) alleged respondent never mailed to him the notices of deficiency for
2004 and 2006 and asked respondent for proof of mailing;
(2) alleged that absent proof of mailing from respondent, respondent should
be treated as never having mailed to him the notices of deficiency in question and
the Court should conclude petitioner owes no tax--in essence that respondent has
the burden of proof as to mailing of the notices of deficiency and has not satisfied
that burden; and
(3) acknowledged he knew respondent on remand was willing to reconsider
his underlying 2004 and 2006 Federal income tax liabilities.
On January 14, 2014, the SO sent a letter to petitioner in which he again
reiterated his willingness, because of petitioner’s allegations as to nonreceipt of
the notices of deficiency, to reconsider petitioner’s underlying Federal income tax
liabilities for 2004 and 2006.
On January 17, 2014, petitioner sent the SO another letter and again alleged
that he had never received the notices of deficiency and again requested
respondent to provide information as to how respondent determined the amounts
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[*11] of his tax liabilities. The SO did not respond to petitioner’s January 17,
2014, letter, and on February 10, 2014, respondent issued a supplemental notice of
determination sustaining respondent’s proposed levy on the ground petitioner on
remand had not provided any relevant additional information relating to his
underlying tax liabilities and had not otherwise cooperated.
On February 27, 2014, respondent filed with the Court a status report
detailing petitioner’s communications with the SO.
On March 4, 2014, petitioner filed a status report with the Court in which he
provided no substantive information about his underlying tax liabilities but in
which he:
(1) again asserted he never received respondent’s notices of deficiency for
2004 and 2006 and asked respondent to provide proof of mailing;
(2) asserted the burden of proof should be on respondent to prove the
notices of deficiency were actually mailed to and received by him;
(3) claimed that absent additional proof by respondent of the mailing of the
notices of deficiency respondent should be treated as never having mailed the
notices and the Court should treat respondent’s assessments against petitioner for
2004 and 2006 as invalid.
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[*12] On July 28, 2014, respondent filed a second motion for summary judgment.
Respondent’s second summary judgment motion is based on an alleged lack of any
further genuine dispute of material fact and respondent’s entitlement to judgment
as a matter of law.
Discussion
The purpose of summary judgment is to expedite litigation and avoid
unnecessary and time-consuming trials. Fla. Peach Corp. v. Commissioner, 90
T.C. 678, 681 (1988). The Court may grant summary judgment when there is no
genuine dispute as to a material fact and a decision may be rendered as a matter of
law. Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d
965 (7th Cir. 1994). The burden of proving no genuine dispute of material fact is
on the moving party. See Naftel v. Commissioner, 85 T.C. 527, 529 (1985). A
party objecting to a motion for summary judgment “may not rest upon the mere
allegations or denials of such party’s pleading” but must set forth specific facts, by
affidavit or otherwise, showing that there is a genuine dispute for trial. Rule
121(d).
On remand respondent clearly gave petitioner an opportunity to challenge
the amounts of his underlying tax liabilities as respondent had determined them.
Petitioner repeatedly chose not to provide respondent with any income or expense
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[*13] information and not to submit to respondent tax returns for 2004 and 2006.
If that were the question before us now, we would not hesitate to grant summary
judgment in respondent’s favor.
However, the key issue before us at this stage, which has been repeatedly
raised by petitioner, is whether respondent ever mailed to petitioner the notices of
deficiency on which respondent’s tax assessments and proposed levy are based.
This is a question that involves not the amounts of petitioner’s underlying tax
liabilities but rather the legality of the assessments made against him. As
explained, this issue has been repeatedly raised by petitioner and is inherent in the
verification requirement of section 6330(c)(1); i.e., it is an issue raised by statute
in every CDP case. See Hoyle v. Commissioner, 131 T.C. 197, 200 (2008).
In Hoyle, we explained that in a collection due process hearing section
6330(c)(1) provides the Commissioner is to “obtain verification from the Secretary
that the requirements of any applicable law or administrative procedure have been
met.” This provision places a burden on respondent and requires respondent to
take the initiative and verify that a notice of deficiency was properly mailed to the
taxpayer. See Lee v. Commissioner, 144 T.C. ___, ___ (slip op. at 16-17) (Jan.
21, 2015).
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[*14] In deficiency cases, the Commissioner bears the initial burden of proving by
competent and persuasive evidence that a notice of deficiency was properly mailed
to a taxpayer. Clough v. Commissioner, 119 T.C. 183, 187 (2002); Cataldo v.
Commissioner, 60 T.C. 522, 524 (1973), aff’d per curiam, 499 F.2d 550 (2d Cir.
1974). The Commissioner’s act of mailing may be proven by evidence of his
mailing practices corroborated by direct testimony and documentary evidence.
Coleman v. Commissioner, 94 T.C. 82, 90 (1990). The Commissioner’s and the
U.S. Postal Service’s compliance with established mailing procedures may raise a
presumption of official regularity in favor of the Commissioner and may be
sufficient, absent evidence to the contrary, to establish proper mailing of a notice
of deficiency. See Hoyle v. Commissioner, 131 T.C. at 203. If this presumption is
not rebutted, the burden of going forward would shift to the taxpayer. Coleman v.
Commissioner, 94 T.C. at 91. However, a defective Form 3877 does not trigger a
presumption of regularity. See id.
These same standards apply in CDP cases. See Hoyle v. Commissioner, 131
T.C. at 203; Meyer v. Commissioner, T.C. Memo. 2013-268; Butti v.
Commissioner, T.C. Memo. 2008-82, slip op. at 8-9.
Petitioner consistently has claimed the PS Forms 3877 in the record in this
case are defective in that they contain no indication of the number of items
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[*15] respondent delivered to the U.S. Postal Service and no required signatures of
the U.S. Postal Service employees who received from respondent the items to
mail.1
Additionally, contrary to respondent’s mailing requirements, the PS Form
3877 in the record relating to the notice of deficiency for 2006 does not identify
the listed items as notices of deficiency or the years to which the documents relate.
See Internal Revenue Manual pt. 4.8.9.9.3(2)(1), (3) (Dec. 1, 2006).
Petitioner’s contention that respondent never mailed the notices of
deficiency to him, if true, would be fatal to respondent’s proposed levy. If
respondent’s assessments of petitioner’s 2004 and 2006 tax liabilities were not
preceded by the mailing of notices of deficiency to petitioner as required by
section 6213(a), the assessments would be invalid. See Hoyle v. Commissioner,
131 T.C. at 205. Without valid assessments the instant proposed levy would be
illegal, see id., and the “opportunity * * * to dispute the underlying tax liability
does not cure an assessment made in derogation of * * * [a taxpayer’s] right under
1
The U.S. Postal Service’s mailing procedures require postal employees to
enter on the Form 3877 the total number of items received and to sign and
postmark the form. USPS Registered Mail Handbook DM-901, at 3-4.2.1 (April
2010), available at http://www.apwu.org/sites/apwu/files/resource-files/DM-
901%20Registered%20Mail%204-10%20%281.77%20MB%29.pdf.
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[*16] section 6213(a) to a deficiency proceeding”, Freije v. Commissioner, 125
T.C. 14, 36 (2005).2
The U.S. Court of Appeals for the Second Circuit has held that a failure to
indicate the number of pieces of mail received by the U.S. Postal Service and the
absence of a signature by the receiving U.S. Postal Service post office employee,
both of which defects are present in this case, render a PS Form 3877 improperly
completed. See O’Rourke v. United States, 587 F.3d 537, 541 (2d Cir. 2009).
This holding is consistent with this Court’s holdings in similar instances. See,
e.g., Coleman v. Commissioner, 94 T.C. at 92; Massie v. Commissioner, T.C.
Memo. 1995-173, aff’d without published opinion, 82 F.3d 423 (9th Cir. 1996);
Wheat v. Commissioner, T.C. Memo. 1992-268.
Petitioner has raised a factual issue concerning respondent’s mailing to him
of the notices of deficiency, and respondent has failed adequately to address this
issue. Summary judgment is not a substitute for a trial and is not to be used to
2
As stated in Hoyle v. Commissioner, 131 T.C. 197, 205 n.7 (2008), Chief
Counsel Notice CC-2006-19 (Aug. 18, 2006) explains that an Appeals officer
“‘may rely on a Form 4340 to verify the validity of an assessment, unless the
taxpayer can identify an irregularity in the assessment procedure’ (emphasis
added) and acknowledges that, where it is alleged that a notice of deficiency was
not mailed, the Appeals officer may be required ‘to examine underlying
documents in addition to the tax transcripts, such as the taxpayer’s return, a copy
of the notice of deficiency, and the certified mailing list’”.
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[*17] resolve disputes over factual issues. See Espinoza v. Commissioner, 78 T.C.
412, 416 (1982).
Viewing the alleged facts in the light most favorable to petitioner, we
conclude respondent has not sufficiently established that summary judgment is
warranted. A trial will be necessary concerning respondent’s alleged mailing of
the notices of deficiency to petitioner.
As noted in our recent opinion in Portwine v. Commissioner, T.C. Memo.
2015-29, at trial the defects in the PS Forms 3877 do not necessarily preclude a
decision in favor of respondent with respect to the proper mailing of the notices of
deficiency. Our ultimate decision on this issue will depend on the credibility and
persuasiveness of what petitioner and respondent offer into evidence at trial.
To reflect the foregoing,
An appropriate order will be issued.