T.C. Memo. 2016-191
UNITED STATES TAX COURT
ROBERT TALBOT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 26598-14L. Filed October 17, 2016.
Robert Talbot, pro se.
Gregory M. Hahn, Lisa M. Oshiro, and William D. Richard, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
KERRIGAN, Judge: This case was commenced in response to two Notices
of Determination Concerning Collection Action(s) under section 6320 and/or 6330
(notice of determination). The first notice of determination sustained the filing of
a notice of Federal tax lien (NFTL) and proposed levies to collect petitioner’s
2001 and 2003-2005 income tax liabilities. The second notice of determination
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[*2] sustained the filing of an NFTL regarding petitioner’s 2007-2009 income tax
liabilities.
Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect at all relevant times. All monetary amounts are rounded to
the nearest dollar.
The issues for consideration are: (1) whether petitioner may challenge his
underlying tax liabilities for the years at issue and (2) whether respondent’s
determination to proceed with the collection actions regarding petitioner’s unpaid
income tax liabilities and penalties for the years at issue was proper.
FINDINGS OF FACT
Some of the facts are stipulated and are so found. We incorporate by
reference the stipulation of facts and the attached exhibits. Petitioner did not file
Federal individual income tax returns for tax years 2001, 2003-2005, and 2007-
2009. Pursuant to section 6020(b) the Internal Revenue Service (IRS) prepared
substitutes for returns for tax years 2001, 2003-2005, and 2007-2009. Petitioner
resided in Alaska when he timely filed his petition.
Petitioner’s Mailing Addresses
Petitioner resided at three different addresses within the same ZIP Code in
Wasilla, Alaska. From 2001 to October 2011 petitioner resided on Wanamingo
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[*3] Drive. On October 3, 2011, the IRS received a letter from petitioner
indicating that his new address was on Nelson Avenue. On January 19, 2012, the
IRS received another letter from petitioner indicating that his new mailing address
was 452 Knik Goose Bay Road (Goose Bay Road). Since January 2012 petitioner
has used the Goose Bay Road address as his mailing address.
Notices of Deficiency
Tax Years 2001, 2003-2005
On January 12, 2009, respondent sent petitioner a notice of deficiency for
tax year 2003, a notice of deficiency for tax year 2004, and a notice of deficiency
for tax year 2005. On November 6, 2009,1 respondent sent petitioner a notice of
deficiency for tax year 2001. Respondent addressed each notice of deficiency to
petitioner at the mailing address maintained on the date that the notice was mailed.
These notices were all mailed to the Wanamingo Drive address.
For the notice of deficiency related to petitioner’s 2001 tax year, respondent
completed a PS Form 3877, which shows that the notice was mailed by certified
mail to petitioner’s Wanamingo Drive address. The PS Form 3877 bears a stamp
from the Denver, Colorado, U.S. Postal Service (USPS) office and the signature of
1
The copy of the notice of deficiency for 2001 does not show a date of
mailing. Respondent produced a properly completed PS Form 3877 showing that
the notice was mailed on November 6, 2009.
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[*4] the USPS Postmaster and lists the number of pieces of mail received at the
USPS office.
For the notices of deficiency related to petitioner’s 2003-2005 tax years,
respondent prepared a Substitute USPS Form 3877 (IRS certified mailing list).
The IRS certified mailing list shows that the notices were mailed by certified mail
to petitioner’s Wanamingo Drive address. It bears a stamp and signature from the
IRS office in Ogden, Utah, and the same date and tracking number as the
corresponding notices of deficiency.
Tax Years 2007-2009
On March 20, 2012, respondent issued to petitioner a notice of deficiency
for tax years 2007-2009. Respondent addressed the notice to petitioner’s Goose
Bay Road address, the address petitioner maintained on the date the notice was
mailed.
For the notice of deficiency related to petitioner’s 2007-2009 tax years,
respondent filled out an IRS certified mailing list, which shows that the notice of
deficiency was mailed by certified mail to 425 Knik Goose Bay Road. The IRS
certified mailing list bears a stamp from the Seattle, Washington, USPS office and
the signature of the USPS Postmaster and lists the numbers of pieces of mail
received by the USPS office.
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[*5] The IRS case activity report also shows that respondent sent a notice of
deficiency related to petitioner’s 2007-2009 tax years to 425 Knik Goose Bay
Road. An IRS field internal revenue agent group manager for Alaska and Tacoma,
Washington, testified that the IRS generally issues notices in windowed envelopes
so that the address on a notice of deficiency is the address where the USPS would
attempt to deliver the notice. She testified that the “window on the envelope is
designed to fit where the address comes out on specific letters or on specific
reports so that nobody has to retype an envelope.”
None of the notices of deficiency was returned to the sender. Petitioner
denies receiving any notices of deficiency for the years at issue. Petitioner did not
file a petition with this Court in response to any of the notices of deficiency.
Petitioner’s CDP Hearing Requests
On June 25, 2012, respondent sent petitioner a Letter 1058, Final Notice of
Intent to Levy and Notice of Your Right to a Hearing, regarding tax years 2003-
2005. The Letter 1058 informed petitioner that he had to request a collection due
process (CDP) hearing by July 25, 2012. On July 11, 2012, respondent sent a
second Letter 1058 regarding petitioner’s 2001 tax year. The second Letter 1058
informed petitioner that he had to request a CDP hearing by August 10, 2012.
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[*6] On July 19, 2012, respondent sent petitioner two Letters 3172, Notice of
Federal Tax Lien Filing and Your Right to a Hearing under IRC 6320, for tax
years 2001 and 2003-2005. The Letters 3172 informed petitioner that respondent
had filed an NFTL with respect to 2001 and 2003-2005. The Letters 3172 further
informed petitioner that he had to request a CDP hearing by August 27, 2012. On
September 27, 2012, respondent sent petitioner an additional Letter 3172 for tax
years 2007-2009. This Letter 3172 informed petitioner that respondent had filed
an NFTL for 2007-2009 and that petitioner had until November 5, 2012, to request
a CDP hearing.
Petitioner timely filed three Forms 12153, Request for a Collection Due
Process or Equivalent Hearing (CDP hearing request). On July 25, 2012,
petitioner filed his first CDP hearing request in response to respondent’s notice of
intent to levy to collect his 2003-2005 income tax liabilities. On August 9, 2012,
petitioner filed his second CDP hearing request in response to the notice of intent
to levy to collect petitioner’s 2001 income tax liabilities and the filed 2001 and
2003-2005 NFTL. On November 5, 2012, petitioner filed his third CDP hearing
request in response to the filed 2007-2009 NFTL.
In all three CDP hearing requests petitioner requested a face-to-face hearing
at the Appeals Office closest to his residence and stated that he wished to address
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[*7] the following issues: (1) whether the IRS followed all proper procedures; (2)
whether he was liable for the assessed tax; (3) whether he should be held liable for
the penalties accrued; and (4) whether collection alternatives were available to
him. Petitioner further stated that he wished to address the underlying liabilities,
which he asserted he had not had a prior chance to contest.
Petitioner’s CDP Hearings
First CDP Hearing
Respondent first responded to petitioner’s third CDP hearing request. On
May 20, 2013, respondent’s settlement officer sent petitioner a letter scheduling a
telephone CDP hearing for July 1, 2013. The letter explained that petitioner did
not qualify for a face-to-face CDP hearing because he had not filed Federal
income tax returns for 2007-2009 and had not provided requisite financial
documentation for consideration of collection alternatives.
The letter further informed petitioner that he could not dispute his
underlying tax liabilities because respondent had previously sent him a notice of
deficiency for tax years 2007-2009. Since in his CDP hearing request petitioner
alleged that he had not received a notice of deficiency, the letter requested that
petitioner submit correct Federal income tax returns for 2007-2009 along with
supporting documentation.
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[*8] The letter also requested that petitioner provide a completed Form 433-A,
Collection Information Statement for Wage Earners and Self-Employed
Individuals, and the following documentation: (1) proof of latest payroll stubs and
income for 2013; (2) bank statements for all accounts for the past six months; (3)
asset and liability listings; (4) unfiled Forms 1040, U.S. Individual Income Tax
Return, for 2006, 2010, 2012, and 2013;2 and (5) proof of estimated tax payments
for tax year 2013. Petitioner was asked to provide the requested documents, make
the requested payments, and file the missing tax returns by June 22, 2013.
On June 28 and July 31, 2013, petitioner sent correspondence to the
settlement officer stating that he would be unable to participate in the telephone
CDP hearing at the date and time chosen. He reiterated his request for a face-to-
face hearing. He further stated that he had not received a notice of deficiency for
2007-2009.
On November 7, 2013, the settlement officer informed petitioner that he had
not provided any documentation previously requested and that he had an
additional 14 days to provide the requisite information for the settlement officer’s
2
The letter might have mistakenly requested a signed tax return for 2013,
because the letter was sent in May 2013. Nevertheless, our analysis remains
unaltered.
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[*9] consideration. Petitioner failed to provide the settlement officer with any of
the requested information.
On March 5, 2014, respondent issued a notice of determination, sustaining
the filed NFTL for tax years 2007-2009. In the notice of determination the
settlement officer stated that he or she had verified that all requirements of
applicable law and administrative procedure had been met. Specifically, the
settlement officer noted that “Appeals has review[ed] the Certified mail listing to
confirm [that] the Statutory Notice of Deficiency was sent by certified mail to you
for your 2007, 2008, and 2009 audit assessments.” The settlement officer did not
review any other documentation or information to verify the validity of the
assessments.
Second CDP Hearing
On November 7, 2013, respondent’s settlement officer sent petitioner two
letters scheduling a telephone CDP hearing for December 4, 2013. The letters
mirrored the settlement officer’s correspondence for the first CDP hearing. The
letters informed petitioner that he did not qualify for a face-to-face CDP hearing
because he had not filed income tax returns for 2001 and 2003-2005 and denied
his request to dispute his underlying tax liabilities because respondent had
previously mailed him notices of deficiency for tax years 2001 and 2003-2005.
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[*10] Petitioner was asked to file his missing tax returns, provide requested
financial documents, and make requested payment by December 2, 2013.
On December 9, 2013, petitioner faxed a letter to the settlement officer,
stating that he would be unable to participate in the telephone CDP hearing. He
reiterated his request for a face-to-face hearing. He further stated that he had not
received a notice of deficiency for 2001 or 2003-2005.
On December 11, 2013, the settlement officer informed petitioner that he
had not provided any documentation previously requested and that he had an
additional 14 days to provide the information for the settlement officer’s
consideration. Petitioner failed to provide the settlement officer with any of the
requested information.
On March 5, 2014, respondent issued a notice of determination, sustaining
the filed NFTL and the proposed levies to collect petitioner’s 2001 and 2003-2005
income tax liabilities. In the notice of determination the settlement officer verified
that all requirements of applicable law and administrative procedure had been met.
Specifically, the settlement officer noted that she had reviewed the certified
mailing lists and copies of the notices of deficiency to verify that the notices of
deficiency were properly mailed.
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[*11] Petitioner’s Amended Petitions
On April 7, August 13, September 25, and December 4, 2014, petitioner
filed with this Court a petition and three amended petitions, respectively.
Petitioner’s third amended petition contends that: (1) because he did not receive
any notices of deficiency for the years at issue, respondent erred by not allowing
him to challenge the underlying tax liabilities; (2) respondent erroneously denied
him face-to-face CDP hearings; (3) respondent erroneously denied him the
opportunity to audio record the CDP hearings; (4) respondent failed to provide
him “with any admissible evidence that would support respondent’s claims to the
alleged tax”; (5) he did not receive fair and impartial CDP hearings; and (6)
respondent failed to meet all applicable requirements.
OPINION
I. Jurisdiction
Section 6331(a) authorizes the Secretary to levy upon the property and
property rights of a taxpayer who fails to pay a tax within 10 days after notice and
demand. Before the Secretary may levy upon the taxpayer’s property, the
Secretary must first notify the taxpayer of the Secretary’s intent to levy. Sec.
6331(d)(1). The Secretary must also notify the taxpayer of his or her right to a
CDP hearing. Sec. 6330(a)(1).
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[*12] Section 6320(a)(1) requires the Secretary to provide written notice to a
taxpayer when the Secretary has filed an NFTL against the taxpayer’s property and
property rights. See also sec. 6321. Additionally, the Secretary must notify the
taxpayer of his or her right to a CDP hearing. Sec. 6320(a)(3)(B) and (C).
If the taxpayer requests a CDP hearing, the hearing is conducted by the
Appeals Office. Sec. 6330(b)(1). At the hearing the taxpayer may raise any
relevant issue relating to the unpaid tax or the proposed collection action. Sec.
6330(c)(2)(A). Once the settlement officer makes a determination, the taxpayer
may appeal to this Court for review. Sec. 6330(d)(1).
II. Petitioner’s Underlying Tax Liabilities
Where the validity of the underlying tax liability is properly at issue, we
review that matter de novo. Sego v. Commissioner, 114 T.C. 604, 610 (2000);
Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). A taxpayer may challenge
the underlying tax liability during a CDP hearing if he or she did not receive a
statutory notice of deficiency for such liability or did not otherwise have the
opportunity to dispute such liability. Sec. 6330(c)(2)(B); see also Montgomery v.
Commissioner, 122 T.C. 1, 9-10 (2004). The Court will consider an underlying
tax liability on review only if the taxpayer properly raised the issue during the
CDP hearing. Giamelli v. Commissioner, 129 T.C. 107, 115 (2007); see also sec.
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[*13] 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs. A taxpayer did not
properly raise an underlying tax liability if the taxpayer failed to present the
settlement officer with any evidence regarding the liability after being given
reasonable time. See sec. 301.6320-1(f)(2), Q&A-F3, Proced. & Admin. Regs.
Petitioner is not entitled to challenge his underlying tax liabilities for the
years at issue because he did not properly raise the underlying liabilities during his
CDP hearings. Petitioner failed to present any evidence regarding the liabilities
after being given reasonable time. For both his first and second CDP hearings,
petitioner had one month to file his missing tax returns, provide the requested
financial documentation, and make the requested payments. After he missed the
initial deadlines, the settlement officer allowed petitioner an additional 14 days to
submit the requested information. Petitioner failed to provide the settlement
officer with any of the requested information. Petitioner did not meaningfully
challenge the underlying tax liabilities during his CDP hearings. Id.
Consequently, petitioner’s underlying tax liabilities are not before the Court.
III. Respondent’s Administrative Determinations
Where the validity of the underlying tax liability is not properly at issue, we
review determinations by the Commissioner’s Appeals Office for abuse of
discretion. Sego v. Commissioner, 114 T.C. at 610; Goza v. Commissioner, 114
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[*14] T.C. 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). The Court does not conduct
an independent review and substitute its judgment for that of the settlement
officer. Murphy v. Commissioner, 125 T.C. 301, 320 (2005), aff’d, 469 F.3d 27
(1st Cir. 2006). If the settlement officer follows all statutory and administrative
guidelines and provides a reasoned, balanced decision, the Court will not reweigh
the equities. Link v. Commissioner, T.C. Memo. 2013-53, at *12.
A. First Notice of Determination
The first notice of determination sustained the filed NFTL and the proposed
levies to collect petitioner’s 2001 and 2003-2005 income tax liabilities. Petitioner
contends that respondent did not meet the applicable requirements during his CDP
hearings. Petitioner further contends that the settlement officer did not properly
verify that the notices of deficiency were duly mailed before the assessment of tax.
Following a CDP hearing the settlement officer must determine whether to
sustain the filing of the NFTL or the proposed levy. In making that determination,
section 6330(c)(3) requires the settlement officer to consider: (1) whether the
requirements of any applicable law or administrative procedure have been met; (2)
any issues appropriately raised by the taxpayer; and (3) whether the collection
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[*15] actions balance the need for the efficient collection of taxes and the
legitimate concern of the taxpayer that any collection action be no more intrusive
than necessary. See sec. 6320(c); see also Lunsford v. Commissioner, 117 T.C.
183, 184 (2001); Diamond v. Commissioner, T.C. Memo. 2012-90, slip op. at 6-7.
As part of the duty to verify that the requirements of any applicable law or
administrative procedure have been met, the settlement officer must verify that the
IRS made a valid assessment. See secs. 6320(c), 6330(c)(1); Hoyle v.
Commissioner, 131 T.C. 197, 202-203 (2008). An assessment is not valid unless
it is duly preceded by the mailing of a notice of deficiency to the taxpayer’s last
known address. Sec. 6213(a). The validity of an assessment turns only on the
mailing of a notice of a deficiency. United States v. Zolla, 724 F.2d 808, 810 (9th
Cir. 1984).
Respondent asserts that respondent may rely on a presumption of official
regularity to verify that a notice of deficiency was duly mailed to petitioner’s last
known address before assessment. We have held that exact compliance with PS
Form 3877 or equivalent mailing procedures raises a presumption of official
regularity in favor of the Commissioner and is sufficient, absent evidence to the
contrary, to establish that a notice of deficiency was properly mailed. Coleman v.
Commissioner, 94 T.C. 82, 91 (1990); see also Zolla, 724 F.2d at 810.
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[*16] For tax years 2001 and 2003-2005 petitioner received mail at his
Wanamingo Drive address. The settlement officer reviewed the IRS certified
mailing lists and copies of the notices of deficiency to determine that the notices
were correctly mailed to petitioner’s last known address. The certified mailing
lists showed that the notices were mailed by certified mail to petitioner’s
Wanamingo Drive address. The certified mailing lists bear a stamp and signature
from the IRS office in Ogden, Utah, and the same date and tracking number as the
corresponding notices of deficiency. The copies of the notices of deficiency also
show petitioner’s correct address. Respondent is entitled to a presumption of
mailing absent evidence to the contrary. See Campbell v. Commissioner, T.C.
Memo. 2013-57; Crain v. Commissioner, T.C. Memo. 2012-97.
Petitioner has not offered any evidence that the addresses to which the
notices of deficiency were mailed were incorrect. Petitioner has offered only his
own self-serving testimony that he did not receive the notices. See Campbell v.
Commissioner, at *9 (“A taxpayer’s self-serving testimony that he did not receive
the notice of deficiency, standing alone, is generally insufficient to rebut the
presumption.”). For tax years 2001 and 2003-2005 we find that the settlement
officer did not abuse her discretion by determining that the notices of deficiency
were duly mailed to petitioner’s last known address.
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[*17] Petitioner contends that the settlement officer abused her discretion because
she did not provide him with a face-to-face meeting. CDP hearings are informal
and do not require a face-to-face meeting. Katz v. Commissioner, 115 T.C. 329,
337 (2000); see also sec. 301.6330-1(d)(2), Q&A-D6, Proced. & Admin. Regs. If
no face-to-face hearing, telephone conference, or any other oral communication
takes place, review of the documents in the case file will constitute the CDP
hearing for purposes of section 6330(b). Rivas v. Commissioner, T.C. Memo.
2012-20; sec. 301.6330-1(d)(2), Q&A-D7, Proced. & Admin. Regs.
The record confirms that petitioner and the settlement officer exchanged a
number of letters concerning petitioner’s tax matters. The settlement officer
informed petitioner that he did not qualify for a face-to-face CDP hearing because
he had not filed income tax returns for 2001 and 2003-2005 and had not provided
the requisite financial documentation for consideration of collection alternatives.
After petitioner failed to file his returns, submit any of the requested documents,
or call the settlement officer for a telephone CDP hearing, the settlement officer
reviewed his file and determined that the filed NFTL and the proposed levies
should be sustained. We find that petitioner was provided a CDP hearing which
complied with all applicable requirements and that it was not an abuse of
discretion for the settlement officer to deny his request for a face-to-face hearing.
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[*18] Petitioner argues that his CDP hearings were not fair and impartial. Section
6330(b)(3) provides that “[t]he hearing under this subsection shall be conducted
by an officer or employee who has had no prior involvement with respect to the
unpaid tax specified in subsection (a)(3)(A) before the first hearing under this
section or section 6320.” The settlement officer who conducted the first and
second CDP hearings had no prior involvement in petitioner’s tax matters for the
tax years in issue. She also complied with the requirements of section 6330(c)(3).
We find that petitioner received a fair and impartial CDP hearing.
Petitioner asserts that the settlement officer did not provide petitioner with
any admissible evidence to support her determination. Section 6330(c)(1) does
not require the settlement officer to rely on any particular document in satisfying
the verification requirement and does not require that the Appeals officer actually
give the taxpayer a copy of the verification upon which she relied. Craig v.
Commissioner, 119 T.C. 252, 262 (2002).
Petitioner has failed to establish that the settlement officer did not properly
determine that the requirements of any applicable law or administrative procedure
had been met. We find that the settlement officer properly based her
determination on the required factors. The settlement officer (1) verified that all
legal and procedural requirements had been met, (2) considered the issues
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[*19] petitioner raised, and (3) determined that the proposed collection action
appropriately balanced the need for the efficient collection of taxes with the
legitimate concern of petitioner that the collection be no more intrusive than
necessary. The settlement officer’s determination to allow collection of
petitioner’s income tax liabilities for tax years 2001 and 2003-2005 to proceed
was not an abuse of discretion. We sustain the filed NFTL and respondent’s
proposed levy on petitioner’s property.
B. Second Notice of Determination
Respondent’s second notice of determination sustained the filing of an
NFTL regarding petitioner’s 2007-2009 income tax liabilities. Petitioner argues
that the settlement officer did not properly verify that the notices of deficiency
were duly mailed before the assessments of tax. Specifically, petitioner asserts
that the settlement officer abused her discretion because the address on the IRS
certified mailing list that he reviewed is wrong.
On March 20, 2012, respondent purportedly mailed to petitioner a notice of
deficiency for tax years 2007-2009 at his Goose Bay Road address. In the notice
of determination the settlement officer noted that “Appeals has review[ed] the
[IRS] [c]ertified mailing list to confirm” that the notice of deficiency for tax years
2007-2009 was sent by certified mail to petitioner’s last known address. The IRS
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[*20] certified mailing list incorrectly lists petitioner’s address as 425 Knik Goose
Bay Road. The defective IRS certified mailing list does not therefore entitle
respondent to a presumption of mailing. See Crain v. Commissioner, slip op. at
13.
Respondent argues that a typographical error should not invalidate the
assessment. Respondent contends that the IRS generally issues notices in
windowed envelopes so that the address on a notice of deficiency is the address
where the USPS would attempt to deliver the notice. Specifically, an IRS field
internal revenue agent group manager for Alaska and Tacoma, Washington,
testified that “the window on the envelope is designed to fit where the address
comes out on specific letters or on specific reports so that nobody has to retype an
envelope.”
At a CDP hearing, however, the settlement officer “shall” verify that the
requirements of all applicable law and administrative procedure have been
followed. Sec. 6330(c)(1). One requirement of applicable law is the mandate of
section 6213(a) that a notice of deficiency be duly mailed to the taxpayer’s last
known address before a deficiency may be assessed. If the Commissioner has not
mailed a notice of deficiency, no collection of an assessment of the deficiency may
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[*21] proceed. Hoyle v. Commissioner, 131 T.C. at 199 (citing Freije v.
Commissioner, 125 T.C. 14, 36-37 (2005)).
The settlement officer relied solely on the IRS certified mailing list to
determine whether the notice was sent to petitioner’s last known address. There is
no evidence that the settlement officer reviewed any other documentation or
information to verify the validity of the assessments. The address on the certified
mailing list is wrong. It is therefore unclear whether a notice was sent to
petitioner’s Goose Bay Road address. The incorrect address was also included in
the IRS case activity report and several other places in the record, including the
notices of determination. If the settlement officer had reviewed a copy of the
notice of deficiency, she might have noticed the address discrepancy. The
settlement officer incorrectly determined that a notice of deficiency for tax years
2007-2009 was sent to petitioner’s last known address before the assessment. The
settlement officer’s determination to proceed with the collection of petitioner’s tax
liabilities for those years therefore was an abuse of discretion. The filed NFTL for
2007-2009 is not sustained.
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[*22] Any contention we have not addressed is irrelevant, moot, or meritless.
To reflect the foregoing,
An appropriate decision will be
entered.