To reflect the foregoing,

An appropriate order granting respondent's motion and decision will be entered for respondent.

¹ Respondent's records do not disclose when the IRS sent to petitioner as the tax matters partner of SCC a notice of beginning of administrative proceeding.

² The IRS mailed the SCC-FPAA to 5436 Main Street, Stephens City, Virginia 22655-2829, which is the address for petitioner listed in the petition in the instant case.

³ All section references are to the Internal Revenue Code in effect at all relevant times. All Rule references are to the Tax Court Rules of Practice and Procedure.

⁴ The overpayments were the result of increased deductions for interest expenses paid by Mr. Hudspath on behalf of SCC in 1996 and 1997.

⁵ On Apr. 2, 2001, the Court dismissed the partnership-level proceeding for lack of jurisdiction.

⁶ The notice of intent to levy did not include the respective deficiencies of $2,739 and $4,044 for petitioner's taxable years 1996 and 1997 that the Court sustained in petitioner's affected items proceeding. Hudspath v. Commissioner [Dec. 55,586(M)], T.C. Memo. 2004-75. Consequently, the assessments with respect to those respective deficiencies are not at issue in the instant case.

⁷ In addition to petitioner's position in petitioner's response that respondent misled him with respect to certain terms of the parties' stipulation in petitioner's non-TEFRA case at docket No. 7901-00, petitioner advanced in the petition in the instant case certain contentions and arguments that the Court finds to be frivolous and/or groundless.

[Dec. 56,052(M)]
Raymond and Cynthia Turner-Simmons v. Commissioner.

Dkt. No. 3151-03L , TC Memo. 2005-135, June 9, 2005 .

[Appealable, barring stipulation to the contrary, to CA-11]

[Code Sec. 6330]
Collection Due Process hearing: Judicial review: Evidence. --

A married couple's challenge to an Appeals determination to proceed with collection of their tax liability after a Collection Due Process (CDP) hearing was rejected. Although the taxpayers' alleged that they raised certain adjustments to their tax liability at their CDP hearing, the Appeal's officers record of the hearing indicated that the only issue raised was the amount they had paid toward that liability. The taxpayers had signed a Form 4549-CG, agreeing to immediate assessment and collection of a deficiency and interest for the year at issue. The taxpayers failed to convince the court that they had raised the validity of the Form 4549-CG adjustments at the CDP hearing or that the Form 4549-CG had been signed under duress. They also produced no evidence of any errors in the adjustments or in the crediting of payments to their account.

Raymond and Cynthia Turner-Simmons, pro sese; John W. Sheffield III, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

HALPERN, Judge: This case is before the Court to review a determination made by respondent's Appeals Office (Appeals) that respondent may proceed to collect by levy unpaid taxes with respect to petitioners' 1995 tax year (1995). We review that determination pursuant to section 6330(d)(1).

Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended, and all Rule references are to the Tax Court Rules of Practice and Procedure.

FINDINGS OF FACT

The parties have filed a stipulation of facts, which, with accompanying exhibits (except for 2-R and 4-J¹ ), is incorporated herein by this reference. Petitioners resided in Atlanta , Georgia , at the time the petition was filed.

Petitioners filed a joint Federal income tax return for 1995 (the 1995 return), showing a balance due of $2,478.83. Respondent examined the 1995 return and determined a deficiency in tax of $5,282 (the deficiency). The examination concluded with petitioners signing an Internal Revenue Service (IRS) Form 4549-CG, Income Tax Examination Changes (the Form 4549-GC). The Form 4549-CG recites only computational changes based on reported self-employment income and a reported pension distribution. By signing the Form 4549-CG, petitioners agreed to immediate assessment and collection of the deficiency and interest due to March 1, 1997 , and waived their appeal rights with the IRS and their right to contest the deficiency in the Tax Court. Petitioner wife wrote the following on the signature page of the Form 4549-CG:

Upon receipt of this letter, I spoke with Mrs. Dillard on January 31, 19 9[ ] [illegible]. She explained and was very helpful in pointing out the additional taxes. We do not dispute the amount and are presently in an installment agreement with the IRS and will continue to make monthly payments to pay off the amount in full. Thank you.

Respondent computes that petitioners have a remaining, unpaid income tax liability for 1995 of $2,995.07 (the remaining liability).² On December 20, 2001 , respondent issued to petitioners a notice of intent to levy and of petitioners' right to a hearing under section 6330. Petitioners requested a hearing under section 6330, and, pursuant to the request, petitioner wife met with Appeals Officer Murphy on January 6 and 14, 2003 (the section 6330 hearing). At the section 6330 hearing, petitioners did not raise as an issue or dispute the adjustments in the Form 4549-CG. The only issue raised by petitioners at the section 6330 hearing was that they claimed that they had already paid their 1995 income tax liability. Petitioners presented no evidence beyond petitioner wife's statements that they had paid that liability.

On January 24, 2003 , Appeals mailed to petitioners a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (the determination). The determination addresses the issues raised by petitioners in protesting the levy, states that the levy is necessary to ensure efficient collection of taxes, and confirms that respondent has met the requirements of the applicable laws and administrative procedures.

OPINION

I. Sections 6330 and 6331

Section 6331(a) authorizes the Secretary to levy against property and property rights where a taxpayer liable for taxes fails to pay those taxes within 10 days after notice and demand for payment is made. Section 6331(d) requires the Secretary to send written notice of an intent to levy to the taxpayer, and section 6330(a) requires the Secretary to send a written notice to the taxpayer of his right to a section 6330 hearing at least 30 days before any levy is begun.³

If a section 6330 hearing is requested, the hearing is to be conducted by Appeals, and, at the hearing, the Appeals officer conducting it must verify that the requirements of any applicable law or administrative procedure have been met. Sec. 6330(b)(1), (c)(2). The taxpayer may raise at the hearing any relevant issue relating to the unpaid tax or the proposed levy. Sec. 6330(c)(2)(A). The taxpayer may contest the existence or amount of the underlying tax liability at a hearing if the taxpayer did not receive a statutory notice of deficiency with respect to the underlying tax liability or did not otherwise have an opportunity to dispute that liability. Sec. 6330(c)(2)(B).

At the conclusion of the hearing, the Appeals officer must determine whether and how to proceed with collection, taking into account, among other things, collection alternatives proposed by the taxpayer and whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary. See sec. 6330(c)(3).

We have jurisdiction to review the Appeals officer's determination where we have jurisdiction over the type of tax involved in the case. Sec. 6330(d)(1)(A); see Iannone v. Commissioner [Dec. 55,618], 122 T.C. 287, 290 (2004). Generally, we may consider only those issues that the taxpayer raised during the section 6330 hearing. See sec. 301.6330-1(f)(2), Q&A-F5, Proced. & Admin. Regs.; see also Magana v. Commissioner [Dec. 54,765], 118 T.C. 488, 493. Where the underlying tax liability is properly at issue, we review the determination de novo. E.g., Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 181-182 (2000). Where the underlying tax liability is not at issue, we review the determination for abuse of discretion. Id. at 182. Whether an abuse of discretion has occurred depends upon whether the exercise of discretion is without sound basis in fact or law. See Ansley-Sheppard-Burgess Co. v. Commissioner [Dec. 50,547], 104 T.C. 367, 371 (1995).

II. Arguments of the Parties

Petitioners dispute the adjustments on the Form 4549-CG (the adjustments). They also argue that none of their 1995 income tax liability remains unpaid. Respondent argues that petitioners failed to raise the adjustments during the section 6330 hearing and that they did not either during that hearing or at trial provide any evidence showing any payments in excess of those credited to their account by respondent.

III. Discussion

While petitioners claim that they raised the adjustments at the section 6330 hearing, respondent's record of what occurred at the hearing states that the only issue petitioners raised was the amount petitioners had paid. Petitioners have failed to convince us that they raised the adjustments during the section 6330 hearing. Also, they have failed to convince us that, as they claimed at trial, they were coerced into signing the Form 4549-CG.⁴ At trial, petitioners produced no evidence that would show any error in the adjustments. They produced no evidence showing that respondent has made any error in crediting their account for all payments received from them with respect to their 1995 income tax liability, nor did they establish that the remaining liability is any less than respondent claims it to be. Whatever standard of review we apply to Appeals' determination to proceed with collection by levy of the remaining liability --and even assuming that petitioners raised the issue of the adjustments in the Form 4549-CG at the section 6330 hearing --petitioners have failed to prove that Appeals erred in determining to proceed with collection of that liability.

IV. Conclusion

We sustain the determination.

To reflect the foregoing,

Decision will be entered for respondent.

¹ Exhibit 2-R was admitted into evidence independent of the stipulation of facts. Exhibit 4-J was objected to by petitioner and not admitted at trial. On brief, respondent states that he no longer relies on Exhibit 4-J; therefore, we shall not receive it into evidence.

² That amount is respondent's computation of the remaining liability as of approximately the time of trial. Respondent computes that amount as follows:

  1995 Return                  Liability                    Payment               

  Return as filed              $4,901.00                     --                   

  Withholding                   --                          $2,422.17             

  Estimated tax penalty        120.63                        --                   

  Failure to pay penalty       12.39                         --                   

  Interest                     15.22                         --                   

  Form 4549-CG                 5,282.00                      --                   

  Payments                      --                          4,914.00              

                               $10,331.24                   $7,336.17             

  Remaining liability          $2,995.07                                          

³ A taxpayer receiving a notice of Federal tax lien has hearing rights similar to the hearing rights accorded a taxpayer receiving a notice of intent to levy. See sec. 6320(c).

⁴ If a taxpayer signs a Form 4549-CG under duress or coercion, the waivers contained therein of the taxpayer's rights to contest the deficiency are invalid. Zapara v. Commissioner [Dec. 56,023], 124 T.C. __, __ (2005) (slip op. at 10). In Zapara, we held: "[A] taxpayer who has signed a Form 4549-CG waiving his right to challenge the proposed assessments should be deemed to have had an opportunity to dispute his tax liabilities and is thereby precluded from challenging those liabilities." Id. Previously, in Aguirre v. Commissioner [Dec. 54,577], 117 T.C. 324, 327 (2001), we held that, by signing a Form 4549-CG, the taxpayers "expressly waived the opportunity to obtain prepayment judicial review of their tax liability for those years." As reported above, sec. 6330(c)(2)(B) provides that the taxpayer may contest the existence or amount of the underlying tax liability at a sec. 6330 hearing if the taxpayer did not receive a statutory notice of deficiency with respect to the underlying tax liability or did not otherwise have an opportunity to dispute that liability. It is unclear from the two cases whether a taxpayer who signs a Form 4549-CG following an examination of his return loses his right to raise the underlying tax liability in a subsequent sec. 6330 hearing because (1) he waived his right to administrative or judicial consideration of the underlying liability by choosing not to receive a statutory notice of deficiency or (2) the examination preceding execution of the Form 4549-CG constituted an opportunity to dispute the tax liability recited on the form. The former interpretation is suggested by Aquirre, in which we supported our holding by citing Sego v. Commissioner [Dec. 53,938], 114 T.C. 604, 611 (2000), for the proposition that a taxpayer who deliberately refuses to accept delivery of a notice of deficiency repudiates his opportunity to contest the notice at Appeals or in Tax Court. The distinction could be important in a case with facts different from those before us today. Consider, for example, a taxpayer who disagrees with an examiner's proposed increase in his tax liability and exercises his right to appeal within the IRS by protesting the proposed increase to Appeals. Suppose that Appeals rejects his protest, and the Commissioner sends to the taxpayer's last known address a notice of deficiency that conforms to the requirements of sec. 6212. Suppose further that the notice goes astray and is never delivered, and, therefore, the taxpayer loses his opportunity to petition the Tax Court for a redetermination of the deficiency. See sec. 6213(a). Is the taxpayer precluded from raising the underlying tax liability in a sec. 6330 hearing (and, if necessary, before the Tax Court) because he already had an opportunity to dispute the tax liability, or is he not precluded from raising the liability because he signed no Form 4549-CG and waived no rights to any administrative or judicial consideration? If he can raise the underlying tax liability in a sec. 6330 hearing and, if dissatisfied with the resolution of the hearing, before the Tax Court, then in effect the actual receipt rule of sec. 6330(c)(2)(B) replaces the last-known-address-is-adequate rule of sec. 6212 as a trigger for Tax Court jurisdiction, at least to the extent the taxpayer wishes to dispute the underlying tax liability.

[Dec. 56,060(M)] Julian W. Mandody v. Commissioner.

Dkt. No. 8822-03L , TC Memo. 2005-142, June 20, 2005 .

[Code Sec. 6330]
Procedure and administration: Notice of levy and right to hearing: Judicial review of appeals determinations: Summary judgment. --

The government's motion for summary judgment was denied where material issues --what arguments the taxpayer raised and what actually transpired at the Code Sec. 6330 hearing --were in dispute. Specifically in dispute was whether the taxpayer submitted requested documents or completed an offer in compromise, as well as what documents should be contained in the taxpayer's administrative record.

Julian W. Mandody, pro se; Francis C. Mucciolo, for respondent.

MEMORANDUM OPINION

VASQUEZ, Judge: This case is before the Court on respondent's motion for summary judgment.

Rule 121(a)¹ provides that either party may move for summary judgment upon all or any part of the legal issues in controversy. Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Fla. Peach Corp. v. Commissioner [Dec. 44,689], 90 T.C. 678, 681 (1988).

Full or partial summary judgment is appropriate "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law." Rule 121(b); Sundstrand Corp. v. Commissioner [Dec. 48,191], 98 T.C. 518, 520 (1992), affd. [94-1 USTC ¶50,092], 17 F.3d 965 (7th Cir. 1994). The moving party bears the burden of proving that there is no genuine issue of material fact, and factual inferences will be read in a manner most favorable to the party opposing summary judgment. Dahlstrom v. Commissioner [Dec. 42,486], 85 T.C. 812, 821 (1985); Jacklin v. Commissioner [Dec. 39,278], 79 T.C. 340, 344 (1982).

Upon consideration of the record, and viewing it in a light most favorable to petitioner, material issues of fact are in dispute. Accordingly, we shall deny respondent's motion for summary judgment.

Petitioner and respondent dispute what issues petitioner raised and what actually transpired at the section 6330 hearing.

Respondent contends that petitioner did not submit requested documents (e.g., a Form 433-A, Collection Information Statement for Individuals) or a completed offer in compromise (OIC) to the settlement officer. We note that respondent did not call the settlement officer as a witness.

Petitioner credibly testified that he submitted a copy of a completed OIC to the settlement officer and informed her that the OIC had been submitted to the Internal Revenue Service (IRS) in May 2001 before the section 6330 hearing. Petitioner also credibly testified that he raised the issue of reinstating an installment agreement that had been defaulted because of one late return, that he submitted (and resubmitted) a completed Form 433-A, and that he submitted other documents to the settlement officer. Petitioner also credibly testified that the settlement officer refused to consider, or would not reconsider, documents he submitted to the IRS before the section 6330 hearing. Petitioner also credibly testified that there were misunderstandings between him and the settlement officer regarding what years needed to be covered and what information needed to be submitted.

Respondent, at the hearing in our Court, noted that petitioner's testimony contradicted administrative records prepared by the settlement officer and submitted by respondent as an attachment to the motion for summary judgment. As stated supra, factual inferences will be read in a manner most favorable to the party opposing summary judgment. Dahlstrom v. Commissioner, supra at 821; Jacklin v. Commissioner, supra at 344.

We further note that respondent objected to the admission of four documents received at the Court hearing, on the grounds that they were not part of the administrative record. Petitioner credibly testified that all of these documents had been provided to the IRS at some point (possibly before the section 6330 hearing) and that at least some of these documents were submitted to the settlement officer as part of the section 6330 hearing. Accordingly, the issue of what documents should be contained in petitioner's administrative record also is in dispute.

Material facts remain in dispute. Accordingly, summary judgment is inappropriate at this juncture.

To reflect the foregoing,

An appropriate order will be issued.

¹ Unless otherwise indicated, all Rule references are to the Tax Court Rules of Practice and Procedure, and all section references are to the Internal Revenue Code.

[Dec. 55,801(M)]
Isabel Molina and Isaac Molina, Jr. v. Commissioner.

Dkt. No. 4026-03L , TC Memo. 2004-258, November 10, 2004 .

[Appealable, barring stipulation to the contrary, to CA-5]

[Code Sec. 72]
Retirement plans: Loans to participants.

Married taxpayers who received a loan from the husband's qualified employer plan in 1998 were not required under Code Sec. 72(p) to treat the outstanding balance of the loan as a taxable distribution in 2000, the year they reported the income on their return. The level amortization requirement was not satisfied after 1999 because the taxpayer stopped making payments in March, 1999 when the employer no longer required monthly installment payments on the loan after the husband's termination in 1999.

[Code Sec. 6330]
Collection Due Process: Taxes overstated on return.

Married taxpayers who alleged that they had overstated their tax liability on their tax return were entitled to challenge the existence or amount of the reported tax liability at a Collection Due Process (CDP) hearing. The taxpayers did not receive a statutory notice of deficiency and raised the issue of their underlying tax liability in a request for a Code Sec. 6330 hearing.

Isabel Molina & Isaac Molina, Jr., pro sese; Abbey B. Garber, Alvin A. Ohm, and Kathryn Patterson, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

VASQUEZ, Judge: Pursuant to section 6330(d),¹ petitioners seek review of respondent's determination to proceed with collection of their 2000 tax liability.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The stipulation of facts and the attached exhibits are incorporated herein by this reference. At the time they filed the petition, Isabel and Isaac Molina, Jr., resided in Dallas , Texas .

In 1998, Mr. Molina borrowed $20,000² (1998 loan) from his section 401(k) retirement savings plan (retirement plan) with the City of Dallas (the city). Shortly after he received the 1998 loan, Mr. Molina began making a series of equal monthly payments (as part of a repayment schedule) on the 1998 loan.

In March 1999, the city terminated Mr. Molina's employment. At the time of his termination, the balance on the 1998 loan was $19,619.74 and the remaining term was 2.33 years. Mr. and Mrs. Molina made no further monthly payments on the 1998 loan after Mr. Molina's termination because the city did not have a system for them to make monthly payments on the 1998 loan after Mr. Molina's employment was terminated. Additionally, after his termination the city offset the 1998 loan with funds from the retirement plan.

On Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., for 2000 the city reported $19,619.74 as a distribution to Mr. Molina.

In October 2001, Mr. and Mrs. Molina filed their 2000 joint Federal income tax return. Among other things, on their 2000 return Mr. and Mrs. Molina reported (1) a $19,620 distribution from the retirement plan, (2) $1,962 of tax on an early distribution from a qualified pension plan, (3) a total income tax liability of $12,801, and (4) a balance due of $5,777 after subtracting their withholding. They did not remit any payment with their 2000 return. Mr. and Mrs. Molina reported the $19,620 distribution on their 2000 return because they believed they were obligated to report this amount after receiving the Form 1099-R.

On May 13, 2002 , respondent received a Form 656, Offer in Compromise (OIC), from Mr. and Mrs. Molina. Mr. and Mrs. Molina attached a letter dated May 10, 2002 (May 2002 letter), to their OIC. The May 2002 letter explained that the city's reporting the $19,620 distribution as income in 2000 represented a "bureaucratic inconsistency" and there was doubt as to liability for their 2000 tax year. Respondent did not process the OIC because Mr. and Mrs. Molina left blank the space listing the amount offered.

On October 4, 2002 , respondent mailed Mr. and Mrs. Molina a letter asking them to fill in the blank for the amount offered. On October 16, 2002 , respondent received the OIC from Mr. and Mrs. Molina listing $2,107.42 as the amount offered.

After receiving a Notice of Intent to Levy and Notice of Your Right to a Hearing, Mr. and Mrs. Molina timely submitted a request for a section 6330 hearing (hearing request). As part of their hearing request, Mr. and Mrs. Molina attached the May 2002 letter to the Form 12153, Request for a Collection Due Process Hearing. The May 2002 letter raised the issue of the underlying liability for 2000, noted the city made an error reporting the $19,620 distribution in 2000, and proposed an OIC as a collection alternative.

Sometime before February 14, 2003 , Mr. and Mrs. Molina had a section 6330 hearing (hearing) with Appeals Officer Norman Becker. At the hearing, Mr. and Mrs. Molina raised the issue of whether they were liable for tax on the $19,620 distribution from the retirement plan. Appeals Officer Becker also considered Mr. and Mrs. Molina's eligibility for an OIC based on doubt as to liability and doubt as to collectibility.

On February 14, 2003 , respondent issued Mr. and Mrs. Molina a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330. Appeals Officer Becker determined that Mr. and Mrs. Molina properly reported the $19,620 distribution on their 2000 return and that they had sufficient income and assets to pay their 2000 tax liability in full. Respondent rejected the OIC, concluding there was no doubt as to liability or collectibility.

In the petition, under the statement of disagreement, Mr. and Mrs. Molina referenced the May 2002 letter, which they attached to the petition.

OPINION

Pursuant to section 6330(c)(2)(A), a taxpayer may raise at the section 6330 hearing any relevant issue with regard to the Commissioner's collection activities, including spousal defenses, challenges to the appropriateness of the Commissioner's intended collection action, and alternative means of collection. Sego v. Commissioner [Dec. 53,938], 114 T.C. 604, 609 (2000); Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 180 (2000). If a taxpayer received a statutory notice of deficiency for the years in issue or otherwise had the opportunity to dispute the underlying tax liability, the taxpayer is precluded from challenging the existence or amount of the underlying tax liability. Sec. 6330(c)(2)(B); Sego v. Commissioner, supra at 610-611; Goza v. Commissioner, supra at 182-183.

Petitioners did not receive a statutory notice of deficiency for 2000. Respondent assessed petitioners' 2000 tax on the basis of the 2000 return. Petitioners raised the issue of their underlying liability for 2000 in their hearing request, at the hearing, and in the petition. Accordingly, petitioners' underlying liability is properly before the Court, and we review that issue de novo. See Montgomery v. Commissioner [Dec. 55,501], 122 T.C. 1 (2004); Sego v. Commissioner, supra; Goza v. Commissioner, supra. We shall review the remainder of respondent's determination for an abuse of discretion. See Sego v. Commissioner, supra.

Section 402(a) provides generally that distributions from a qualified plan are taxable to the distributee, in the taxable year of the distributee in which distribution occurs, pursuant to section 72. Section 72(p)(1)(A) provides the general rule that proceeds of a loan from a qualified employer plan to a plan participant are treated as a taxable distribution to the participant in the year in which the loan proceeds are received. See Patrick v. Commissioner [Dec. 52,534(M)], T.C. Memo. 1998-30, affd. [99-1 USTC ¶50,532] 181 F.3d 103 (6th Cir. 1999). Section 72(p)(2), however, provides an exception to this general rule. Under this exception, a loan is not treated as a taxable distribution if: (1) The principal amount of the loan (when added to the outstanding balance of all other loans from the same plan) does not exceed a specified limit, sec. 72(p)(2)(A); (2) the loan, by its terms, must be repaid within 5 years from the date of its inception or is made to finance the acquisition of a home which is the principal residence of the participant, sec. 72(p)(2)(B); and (3) the loan must have substantially level amortization with quarterly or more frequent payments required over the term of the loan, sec. 72(p)(2)(C).

Petitioners contend that the $19,620 distribution was not taxable in 2000.³ Respondent argues that section 72(p) and the final regulation thereunder support the conclusion that Mr. Molina received the $19,620 distribution from the retirement plan in 2000.

Under the regulations, when a participant fails to make payments in accordance with the terms of a loan, the loan is treated as no longer meeting the section 72(p)(2)(C) requirement, thereby resulting in a deemed distribution. Sec. 1.72(p)-1, Q&A-4, Income Tax Regs. Such a deemed distribution occurs at the time the installment payment was due but not made and equals the entire outstanding balance of the loan at the time of such failure. Sec. 1.72(p)-1, Q&A-10, Income Tax Regs. The 1998 loan, however, was made before the effective date of this regulation. Sec. 1.72(p)-1, Q&A-22, Income Tax Regs. Accordingly, the final regulation is not applicable to the case at bar.

Before the promulgation of the final regulation, a proposed regulation had been issued containing these same provisions. Sec. 1.72(p)-1, Q & A-4, Q & A-10, Proposed Income Tax Regs., 60 Fed. Reg. 66235 , 66236 (Dec. 21, 1995). The proposed regulation, however, was to apply only to loans made after a certain period after the final regulation had been published. Sec. 1.72(p)-1, Q & A-19, Proposed Income Tax Regs., 60 Fed. Reg. 66237 (Dec. 21, 1995). Generally, proposed regulations are afforded no more weight than a position advanced by the Commissioner on brief. KTA-Tator, Inc. v. Commissioner [Dec. 51,931], 108 T.C. 100, 102-103 (1997); F.W. Woolworth Co. v. Commissioner [Dec. 30,169], 54 T.C. 1233, 1265-1266 (1970).

Nevertheless, we find that respondent's position in the proposed regulation makes more sense than respondent's litigating position that the distribution occurred in 2000. See Garcia v. Commissioner [Dec. 52,728(M)], T.C. Memo. 1998-203 (reaching this conclusion regarding another question and answer contained in the same proposed regulation), affd. without published opinion[99-2 USTC ¶50,762] 190 F.3d 538 (5th Cir. 1999). Additionally, the substantially level amortization requirement under section 72(p)(2)(C) has been interpreted as requiring that payment of principal and interest be made in substantially level amounts over the term of the loan. Plotkin v. Commissioner [Dec. 54,285(M)], T.C. Memo. 2001-71; Estate of Gray v. Commissioner [Dec. 50,868(M)], T.C. Memo. 1995-421.

Mr. Molina stopped making monthly payments on the 1998 loan in March 1999. Additionally, the city no longer required monthly installment payments on the 1998 loan, and had no provision for Mr. Molina to continue making monthly installment payments on the 1998 loan, after Mr. Molina's termination. Thus, after March 1999, the 1998 loan was no longer required to be repaid by means of level amortization. See sec. 72(p)(2)(C). Accordingly, pursuant to section 72(p), no distribution includable in Mr. Molina's gross income occurred in 2000.

It is unclear from the record, however, whether, after application of our holding that petitioners did not have to report the $19,620 deemed distribution in 2000, petitioners' tax liability for 2000 remains unpaid. Accordingly, we will direct the parties to submit computations showing the correct amount of petitioners' tax liability for 2000.

To reflect the foregoing,

An appropriate order will be issued.

¹ Unless otherwise indicated, all section references are to the Internal Revenue Code, and all Rule references are to the Tax Court Rules of Practice and Procedure.

² At trial and on brief, the parties consistently referred to the amount Mr. Molina borrowed in 1998 as being $20,000. Documents from the retirement plan for the period ending Dec. 31, 1998, list the amount Mr. Molina borrowed as $20,800. This discrepancy, however, does not affect the outcome of this case. For convenience, we shall refer to the amount borrowed as being $20,000.

³ In his reply brief, respondent argues that petitioners raised this argument for the first time on brief. Respondent's argument is without merit. Petitioners raised this argument in the May 2002 letter which they attached to their OIC, the hearing request, and the petition. Furthermore, at the calendar call, a colloquy between petitioners and the Court made it clear that petitioners contended that 2000 was the incorrect year for taxing the $19,620 distribution from the retirement plan. Petitioners stated that they had asserted this "from the beginning".

[Dec. 56,095] Joseph Paul Freije v. Commissioner.

Dkt. No. 932-02L , 125 TC --, No. 3, July 14, 2005 .

[Appealable, barring stipulation to the contrary, to CA-7]

[Code Sec. 6213]
Collection Due Process hearing: Opportunity to dispute underlying liability: Math errors. --

The IRS's disallowance as math errors of, among other items, deductions for legal fees and post office box expenses was inappropriate. At trial, the IRS conceded that those items were not appropriately correctable under the math error provision, but argued that the court should consider the validity of the deductions de novo, under Code Sec. 6330(c)(2)(B), since the taxpayer had not had any previous opportunity to dispute the underlying tax liability. The court declined, finding that the IRS could not use the review of an improper math error correction as a back door to raise an issue on which it had not issued a notice of deficiency. The taxpayer's right to dispute the underlying tax liability in a Code Sec. 6330 proceeding does not cure an assessment made in violation of the taxpayer's right to a deficiency proceeding.

[Code Sec. 6330]
Collection Due Process hearing: Judicial review: Tax Court jurisdiction: Collection alternative: Opportunity to dispute underlying liability: Application of payments: Math errors: Erroneous refunds. --

An IRS Appeals officer's determination to proceed with levies to collect unpaid liabilities was an abuse of discretion because of various infirmities in the proposed levies. The taxpayer's proposed collection alternative, an offer to pay twenty-five cents per year at issue was frivolous, and the Appeals officer's rejection of it was not an abuse of discretion. The court had jurisdiction to consider the taxpayer's liability and payments made for earlier years in determining the validity of the liens under challenge. Improper applications of payments to recover an erroneous refund made levies for subsequent years unsustainable, nor could a levy be approved for an item improperly disallowed as a math error and never considered in deficiency proceedings.

[Code Secs. 6532 and 7405]
Erroneous refunds: Recovery by application of payments: Necessity of assessment. --

An Appeals officer's determination to proceed with levies to collect unpaid taxes was an abuse of discretion because of various infirmities in the proposed levies. The IRS attempted to collect an erroneous refund without a new assessment by applying the taxpayer's subsequent payments to the refund year. This method of recovering an erroneous refund is prohibited under R.E. O'Bryant (CA-7, 95-1 USTC ¶50,143), and, therefore, the payments should have been applied to later assessments. The failure to so apply those payments resulted in the levies for those later years being unsustainable.

Joseph Paul Freije, pro se; Diane L. Worland, for respondent.

P timely petitioned for review under sec. 6330(d), I.R.C., of R's determination to proceed with levies to collect unpaid Federal income taxes for 1997, 1998, and 1999.

P claimed in his Appeals hearing and herein that the proposed levy for 1997 should not be sustained because a remittance he made in 1997 with respect to his Federal income tax liability for that year was instead applied improperly by R against a tax liability alleged by R to exist for 1995. Consequently, P contends, R is attempting to collect a tax that has been paid. R contends that this Court lacks jurisdiction to consider 1995, a year that was not the subject of a notice of determination, to ascertain whether a liability existed for that year, to which the 1997 remittance was applied.

Held: P's claim concerning the disposition of his 1997 remittance is a relevant issue relating to the unpaid tax for 1997, and we have jurisdiction to consider facts and issues arising in 1995, a year not the subject of the notice of determination, insofar as they are relevant to computing the unpaid tax for 1997.

Held, further, since P's Federal income tax return and payment for 1995 were untimely, resulting in the assessment of additions to tax for late filing and payment, R's application of P's 1997 remittance against the 1995 liability was proper.

In July 1998, P mailed a check to R for $1,776. R posted the check to P's 1997 account for the erroneous amount of $11,776. As $11,776 exceeded all unpaid assessments for 1997, R issued P a refund for 1997 of $5,513 in August 1998. After subsequently discovering his error, R applied four of P's 1999 remittances, totaling $6,500, to P's 1997 account. P claimed in his hearing request and herein that he had not received proper credit for all payments made with respect to 1999.

Held: R's application of P's 1999 remittances to P's 1997 account to recoup the erroneous nonrebate refund for 1997 contravenes O'Bryant v. United States [95-1 USTC ¶50,143], 49 F.3d 340, (7th Cir. 1995). These 1999 remittances should have been applied against unpaid taxes that are the subject of the instant levies. Consequently, the levies must be reconsidered by R on remand.

P claimed in his Appeals hearing and herein that the proposed levy for 1999 should not be sustained because R improperly changed the amounts shown as due on P's Federal income tax return for 1999. R concedes that he disallowed, pursuant to sec. 6213(b)(1), I.R.C., certain miscellaneous itemized deductions claimed on that return and made an assessment based thereon without issuing a notice of deficiency to P as required by sec. 6213(a), I.R.C. As a consequence, R contends, P is entitled in the instant proceeding to de novo review under sec. 6330(c)(2)(B), I.R.C., of his entitlement to these deductions, with any modifications resulting from the Court's review to be reflected in the amount of the assessment and levy.

Held: the 1999 levy, insofar as it is based on the disallowance of P's miscellaneous itemized deductions, may not proceed, as the assessment upon which it is based is invalid; de novo review pursuant to sec. 6330(c)(2)(B), I.R.C., may not cure an assessment that is invalid for failure to comply with sec. 6213(a), I.R.C. Consequently, the 1999 levy must be reconsidered by R on remand.

Held, further, other issues raised by respondent's determination to proceed with the levies for 1997, 1998, and 1999 determined.

GALE, Judge: Pursuant to section 6330(d),¹ petitioner seeks review of respondent's determination to proceed with collection by levy of income tax liabilities with respect to petitioner's 1997, 1998, and 1999 taxable years. The issue for decision is whether respondent may proceed with proposed levies for liabilities not conceded by him for 1998 and 1999.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The parties' stipulations and attached exhibits are incorporated herein by this reference.

Petitioner resided in Franklin , Indiana , when the petition in this case was filed.

Petitioner and his spouse (Mrs. Freije; collectively, the Freijes) obtained an automatic 4-month extension (until August 15, 1996 ) to file their joint Federal income tax return for the 1995 taxable year (1995 return).² The 1995 return, untimely filed on November 18, 1996 , reported tax due of $8,281.61 and was accompanied by a payment of $3,005.47 which, when added to the withholding credits listed of $5,276.14, satisfied the tax reported as due. Nonetheless, the untimely filing and payment triggered additions to tax for late filing and late payment, as well as interest, totaling $838.27, which was assessed on December 23, 1996 .

On June 3, 1997 , respondent received a $2,800 remittance from the Freijes. The record does not disclose whether this remittance was designated for any purpose. Respondent applied $869.46 of this remittance to the foregoing assessment for 1995 (plus an additional assessment of interest) and refunded the balance to the Freijes. The Freijes also made remittances to respondent of $2,300 on June 10, 1997 , and $1,500 on October 6, 1997 , that respondent treated as payments of estimated tax for 1997.

The Freijes timely filed a joint Federal income tax return for the 1997 taxable year (1997 return) reporting a tax due of $21,510, listing withholding credits of $4,134, and claiming estimated tax payments of $6,600.³ A payment of $4,000 was sent with the 1997 return. The $21,510 in tax reported as due on the 1997 return, as well as additions to tax for late payment and failure to pay estimated tax, plus interest, were assessed on June 8, 1998. Subsequent remittances of $2,000 each were credited against the Freijes' 1997 liability on May 3 and June 1, 1998. On or about July 6, 1998, petitioner mailed a check for $1,776 to respondent.⁴ This check was erroneously posted to the Freijes' 1997 account in the amount of $11,776 on July 8, 1998, which amount exceeded all assessments for 1997. As a consequence, respondent issued the Freijes a refund of $5,513 on August 3, 1998. At a time not disclosed in the record, respondent corrected the $10,000 error by reversing $10,000 of the $11,776 previously credited.⁵ Subsequent remittances made by the Freijes in 1999 without designation for any year, totaling $6,500, were posted to their 1997 account as follows: $1,800 on May 26, 1999; $2,400 on June 16, 1999; $1,200 on July 9, 1999; and $1,100 on July 26, 1999.

The Freijes timely filed a joint Federal income tax return for the 1998 taxable year (1998 return) reporting a tax due of $11,686 and no withholding credits or estimated tax payments. (The Freijes' actual withholding credits for 1998 were $4,094.) A payment of $3,000 was sent with the 1998 return. Subsequent remittances of $1,000 and $1,587 were credited against their 1998 liability on April 19 and October 27, 1999 , respectively.

The Freijes timely filed a joint Federal income tax return for the 1999 taxable year (1999 return) reporting a tax due of $12,507.05, listing withholding credits of $4,318.96, and claiming estimated tax payments of $15,616.⁶ On or about May 29, 2000 , respondent issued a notice to the Freijes, at the address they entered on the 1999 return, concerning the 1999 return and entitled "We Changed Your Estimated Tax Total --You Have An Amount Due". The notice indicated that the 1999 return had been changed as follows: (i) Taxable income had been increased from the $43,531 reported to $53,399, resulting in an increase in the tax shown as due on the return from $12,507.05 to $15,265; and (ii) estimated tax payments had been reduced from the $15,616 reported to $6,000. On the same date as the notice, respondent assessed the increased tax of $15,265, without issuing a statutory notice of deficiency to the Freijes.

On December 27, 2000 , respondent sent a letter to the Freijes with attached workpapers that explained in greater detail the foregoing changes made to the 1999 return. With respect to the reduction in the claimed estimated tax payments, the letter advised that the Freijes' 1999 account showed 1999 estimated tax payments of only $6,000, consisting of two payments of $3,000 on November 10 and December 17, 1999 .⁷ With respect to the increase in taxable income, the letter advised that the $9,868 increase in taxable income (from the reported $43,531 to $53,399) consisted of the following items:

(i) $1,000 increase in income as a result of a discrepancy in that amount between the figure entered for adjusted gross income at the bottom of the first page of the 1999 return ($73,273) and the figure entered for adjusted gross income at the top of the second page ($72,273);

(ii) a $320 increase in income resulting from the disallowance of a casualty or theft loss in that amount claimed on the 1999 return, on the grounds that the claimed loss did not consider the limitation of such losses to amounts in excess of 10 percent of adjusted gross income;

(iii) $20 increase in income resulting from the disallowance of a miscellaneous deduction for "P.O. Box" claimed on the 1999 return, explained in the letter as follows: "Misc Deductions: A post office box is not a deductible expense";

(iv) $8,528 increase in income resulting from the disallowance of a miscellaneous deduction for "Lawyers" claimed on the 1999 return, explained in the letter as follows: "Other Misc Deductions: Lawyers are not a deductible expense. They are deductible if the fees are paid to produce or collect taxable income or are in connection with the determination, collection, or refund of a tax."

On February 7, 2001 , respondent issued to the Freijes a Final Notice of Intent to Levy and Notice of Your Right to a Hearing for income tax, interest, and penalties for taxable years 1997, 1998, and 1999. On February 18, 2001 , respondent received a Form 12153, Request for a Collection Due Process Hearing, from petitioner (but not Mrs. Freije) regarding respondent's proposed collection action for the foregoing years. As grounds for disagreeing with the proposed collection action, petitioner wrote as follows, "I am scheduled for audit in Greenwood IN. You people have falsely accused me of writing a bad check for $10,000.00. You deny receiving over $13,000.00 in estimated taxes. * * * I have amended 1997, 1998, 1999. You owe me over $24,000.00."

On February 27, 2001, the Freijes filed an amended Federal income tax return for 1997, claiming an increase in itemized deductions of $14,940⁸ and a resulting refund of $6,395. On March 27, 2001, the Freijes filed amended Federal income tax returns for 1998 and 1999, claiming a $14,940⁹ reduction in previously reported adjusted gross income for each of those years and resulting refunds of $8,996.50 and $8,752.73, respectively.¹⁰

On or about April 30, 2001 , an Appeals officer of respondent sent petitioner a letter advising him that a conference would be scheduled in the future. In May 2001, petitioner advised the Appeals officer that he did not wish to appear in person in respondent's office to attend a face-to-face meeting in connection with a hearing.

On June 4, 2001 , petitioner and the Appeals officer discussed petitioner's request by telephone. During that conversation, petitioner advised the Appeals officer that he would be willing to "pay 25 cents per year for 1997, 1998, and 1999, call it even, and then start afresh with the year 2001." The Appeals officer advised petitioner that this proposed collection alternative to the levy was not acceptable. Later that day, petitioner left voice-mail messages for the Appeals officer seeking information concerning changes respondent made to his 1995, 1996, 1997, and 1998 returns that resulted in additional tax, additions to tax, and interest for those years as well as information concerning why payments intended for one year had been applied to other years. Petitioner further advised the Appeals officer that his problems began with his 1995 taxes. In addition, petitioner advised the Appeals officer of petitioner's claim that respondent had altered petitioner's check for $1,776 (intended as payment of his 1997 taxes) so that it was posted for $11,776, which, according to petitioner, resulted in his being falsely accused by respondent of writing a bad check for $10,000.

On November 26, 2001 , a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 was sent to petitioner. In the notice, the Appeals officer determined that all applicable laws and administrative procedures had been satisfied. With respect to petitioner's expressed concerns about his 1995 taxes, the Appeals officer explained that a remittance submitted by petitioner in 1997 and intended by him to be applied to that year's taxes was instead applied to 1995 taxes because the return and payment for 1995 had been received late, triggering an assessment of additions to tax and interest for that year to which the 1997 payment had been applied. With respect to 1997, the Appeals officer determined that, because respondent's incorrect posting of petitioner's $1,776 check as $11,776 had resulted in an erroneous refund with respect to 1997, the assessed failure to pay addition to tax would be abated. As for the remaining liabilities that were the subject of the levy, the Appeals officer determined: "The tax owed is from the original return for 1997, 1998 and 1999. Therefore, I recommend the government sustain the tax liability for * * * [those tax periods]." Concluding that the proposed levy represented an appropriate balancing of the need for efficient collection with the concern that the collection action be no more intrusive than necessary, the Appeals officer determined that the proposed levy could proceed.

On January 14, 2002 , petitioner filed a timely petition with this Court for review of the determination. The petition assigns a litany of errors to the determination, including (i) that respondent changed petitioner's 1995 through 1999 returns without notifying him; (ii) that respondent altered a check petitioner submitted in connection with the erroneous posting of his $1,776 payment as $11,776 for 1997; and (iii) that respondent denied receipt of certain payments petitioner made. Petitioner seeks as a remedy a refund of all Federal income taxes he paid for taxable years 1995 through 2001.

After the petition was filed, on March 11, 2002 , respondent issued a notice of deficiency to the Freijes with respect to their 1999 taxable year. In the notice of deficiency, respondent determined, inter alia, that the Freijes were not entitled to the $320 casualty loss claimed in the 1999 return but were entitled to miscellaneous deductions of $8,935 (subject to the 2-percent limitation of section 67(a)). On the same day that the notice of deficiency was issued, respondent issued a claim disallowance letter to the Freijes, denying their claims for refund in their amended returns filed for 1997, 1998, and 1999. No petition was filed in this Court with respect to the notice of deficiency for 1999.

At trial and in his posttrial brief, respondent conceded that collection of petitioner's outstanding liability for 1997, representing that portion of the erroneous refund for 1997 that had not been collected, was prohibited by section 6532(b).

OPINION

Section 6331(a) authorizes the Secretary to levy upon property and property rights of a taxpayer liable for taxes who fails to pay those taxes within 10 days after notice and demand for payment is made. Section 6331(d) provides that the levy authorized in section 6331(a) may be made with respect to any "unpaid tax" only if the Secretary has given written notice to the taxpayer 30 days before the levy. Section 6330(a) requires the Secretary to send a written notice to the taxpayer of the "amount of the unpaid tax" and of the taxpayer's right to a section 6330 hearing at least 30 days before any levy is begun. This notice need only be given once for "the taxable period to which the unpaid tax specified in * * * [the levy notice] relates." Sec. 6330(a)(1).

If a section 6330 hearing is requested, the hearing is to be conducted by Appeals, and, at the hearing, the Appeals officer conducting it must verify that the requirements of any applicable law or administrative procedure have been met. Sec. 6330(b)(1), (c)(2). The taxpayer is entitled to one hearing with respect to "the taxable period to which the unpaid tax specified in * * * [the levy notice] relates." Sec. 6330(b)(2). The taxpayer may raise at the hearing "any relevant issue relating to the unpaid tax or the proposed levy". Sec. 6330(c)(2)(A). The taxpayer may also raise challenges to the existence or amount of the underlying tax liability at a hearing if the taxpayer did not receive a statutory notice of deficiency with respect to the underlying tax liability or did not otherwise have an opportunity to dispute that liability. Sec. 6330(c)(2)(B). The underlying tax liability that may be challenged includes amounts reported as due on a return. Montgomery v. Commissioner [Dec. 55,501], 122 T.C. 1 (2004).

At the conclusion of the hearing, the Appeals officer must determine whether and how to proceed with collection and shall take into account (i) the verification that the requirements of any applicable law or administrative procedure have been met, (ii) the relevant issues raised by the taxpayer, (iii) challenges to the underlying tax liability by the taxpayer, where permitted, and (iv) whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary. Sec. 6330(c)(3).

We have jurisdiction to review the Appeals officer's determination where we have jurisdiction over the type of tax involved in the case. Sec. 6330(d)(1)(A); see Iannone v. Commissioner Dec. [Dec. 55,618], 122 T.C. 287, 290 (2004). Generally, we may consider only those issues that the taxpayer raised during the section 6330 hearing. See sec. 301.6330-1(f)(2), Q&A-F5, Proced. & Admin. Regs.; see also Magana v. Commissioner [Dec. 54,765], 118 T.C. 488, 493 (2002). Where the underlying tax liability is properly at issue, we review the determination de novo. E.g., Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 181-182 (2000). Where the underlying tax liability is not at issue, we review the determination for abuse of discretion. Id. at 182. Whether an abuse of discretion has occurred depends upon whether the exercise of discretion is without sound basis in fact or law. See Ansley-Sheppard-Burgess Co. v. Commissioner [Dec. 50,547], 104 T.C. 367, 371 (1995).

Petitioner, proceeding pro se, seeks a refund of all income taxes paid for taxable years 1995 through 2001. Our jurisdiction in this case is confined, however, to a review of the Appeals officer's determination approving a levy to collect unpaid tax liabilities for 1997, 1998, and 1999. We shall treat petitioner as contesting the Appeals officer's determination for all years, and consider his arguments to the extent they have any bearing thereon. In particular, we find that petitioner's communications with the Appeals officer may be fairly construed as proposing a collection alternative, and as raising the issue that payments he made with respect to the years in issue were not properly accounted for by respondent and that the tax reported as due on his returns for some or all of the years in issue was changed inappropriately by respondent.¹¹

Proposed Collection Alternative

We can readily dispose of petitioner's proposed collection alternative. His offer of 25 cents per year for 1997, 1998, and 1999 is frivolous, and the Appeals officer's rejection of it was not an abuse of discretion.

1997

Although respondent now concedes he may not collect the unpaid balance of petitioner's 1997 liability by levy, we nonetheless find it necessary to consider that year because, first, petitioner claims that payments that were intended to satisfy his 1997 liability were instead applied to 1995. If these payments were improperly applied to 1995, then respondent's computation (and assessment) of the additions to tax for late payment and failure to pay estimated tax for 1997 would be incorrect.¹² Second, respondent applied $6,500 of remittances made by the Freijes in 1999 to their 1997 liability, even though all assessments of the 1997 liability were extinguished by respondent's crediting of petitioner's $1,776 check as $11,776 on July 8, 1998 . Although neither party has addressed the issue, as discussed more fully below, respondent's application of the Freijes' 1999 remittances to their 1997 account contravenes O'Bryant v. United States [95-1 USTC ¶50,143], 49 F.3d 340 (7th Cir. 1995).

Claim of Payment

With respect to petitioner's contention that certain 1997 payments were improperly applied to 1995, respondent argues that we lack jurisdiction to consider 1995, citing Lister v. Commissioner [Dec. 55,020(M)], T.C. Memo. 2003-17. We disagree. We held in Lister, a Memorandum Opinion, that our jurisdiction under section 6330(d)(1) was confined to the years that were the subject of the notice of determination, where the taxpayer had attempted in the petition to put in issue all years subsequent to the 2 years covered by the notice. Here, petitioner's claim is that a payment intended for 1997, a year that was a subject of the notice of determination (determination year), was instead applied to a liability for 1995, a year that was not a subject of the notice of determination (nondetermination year).

We do not read Lister as precluding our consideration of facts and issues arising in nondetermination years where those facts and issues are relevant to a taxpayer's claim that the tax which is the subject of a collection action has been paid. As discussed below, we believe our jurisdiction extends in appropriate circumstances to years other than those in which the tax liability sought to be collected arises.

Our jurisdiction under section 6330 covers the "determination" of the Appeals officer who conducted the hearing requested under that section. See sec. 6330(d)(1)(A) ("the Tax Court shall have jurisdiction with respect to [the determination of an Appeals officer under section 6330]"). Section 6330(c)(3) prescribes the matters that the Appeals officer's determination "shall" take into consideration, which include "the issues raised under paragraph (2) [of section 6330(c)]". Paragraph (2) of section 6330(c) entitles the person upon whose property the Commissioner seeks to levy (the taxpayer) to raise at the hearing "any relevant issue relating to the unpaid tax or the proposed levy", par. (2)(A), and, if he did not receive any statutory notice of deficiency for, or otherwise have an opportunity to dispute, the underlying tax liability, he may also raise "challenges to the existence or amount of the underlying tax liability for any tax period", par. (2)(B).

Thus, our jurisdiction is defined by the scope of the determination, which must take into consideration, if raised by the taxpayer, "any relevant issue relating to the unpaid tax or the proposed levy" and, in certain circumstances, "challenges to the existence or amount of the underlying tax liability for any tax period".

There is no question that petitioner raised the issue of a remittance made in 1997 having been applied (improperly, in petitioner's view) to satisfy a 1995 liability, as the determination discusses his claim and traces the application of the remittance.¹³ The question is whether the propriety of applying the 1997 remittance to satisfy the 1995 liability is a "relevant issue relating to the unpaid tax or the proposed levy". If so, we have jurisdiction, as the statute required the determination to take into consideration the issue and our jurisdiction encompasses the determination. For the reasons discussed below, we conclude our jurisdiction is not confined to the year (or period) to which the unpaid tax relates, as respondent contends, but extends to facts and issues in nondetermination years where they are relevant to computing the unpaid tax.

In interpreting the scope of section 6330(c)(2), we note first that the legislative history indicates that Congress intended a broad construction of the issues that a taxpayer was entitled to raise under that section. "In general, any issue that is relevant to the appropriateness of the proposed collection against the taxpayer can be raised at the pre-levy hearing." H. Conf. Rept. 105-599, at 265 (1998), 1998-3 C.B. 747, 1019.

Second, considering the terms of the statute in their ordinary meaning, a "relevant issue relating to the unpaid tax or the proposed levy" surely includes a claim, such as the one here, that the "unpaid tax" has in fact been satisfied by a remittance that the Commissioner improperly applied elsewhere. Both section 6331, which empowers the Commissioner to impose a levy, and section 6330, which requires the Commissioner to afford a hearing before proceeding with a levy and provides our jurisdiction to review his determination to proceed with a levy, contemplate an "unpaid tax". Secs. 6330(a)(1), (3)(A), (b)(2) and (3), (c)(2)(A), 6331(d)(1) (emphasis added). Since an "unpaid tax" is the sine qua non of the Commissioner's authority to levy, we believe a claim directed at the status of the tax as "unpaid" is a "relevant issue relating to the unpaid tax or the proposed levy". Sec. 6330(c)(2)(A). Meaningful review of a claim that a tax sought to be collected by levy has been paid, by means of a remittance or an available credit, will typically require consideration of facts and issues in nondetermination years, as those years may constitute the years to which a remittance was applied or from which a credit originated.¹⁴

Finally, we note that, notwithstanding respondent's present position, the Appeals officer interpreted the statute to require her consideration of petitioner's claim that certain remittances intended for 1997 had been applied improperly to 1995. The determination specifically addresses this claim, and traces the application of the Freijes' June 3, 1997 , remittance to an outstanding liability for 1995 representing an assessment for failure to file and failure to pay additions to tax as well as interest.

For the foregoing reasons, we hold that our jurisdiction under section 6330(d)(1)(A) encompasses consideration of facts and issues in nondetermination years where the facts and issues are relevant in evaluating a claim that an unpaid tax has been paid.

In reaching this conclusion, we are mindful that in the case of our deficiency jurisdiction, section 6214(b) imposes limitations on our jurisdiction with respect to years other than the year for which a deficiency has been determined. Section 6214(b) provides that, in redetermining a deficiency of income tax for any taxable year, this Court "shall consider such facts with relation to the taxes for other years * * * as may be necessary correctly to redetermine the amount of such deficiency, but in so doing shall have no jurisdiction to determine whether or not the tax for any other year * * * has been overpaid or underpaid." In interpreting this provision --

We have distinguished our authority under section 6214(b) to compute a tax for a year not before the Court from our lack of authority under that same section to "determine" a tax for such year. In Lone Manor Farms, Inc. v. Commissioner [Dec. 32,403], 61 T.C. 436, 440 (1974), affd. without published opinion 510 F.2d 970 (3d Cir. 1975), we stated that section 6214(b) "does not prevent us from computing, as distinguished from `determining', the correct tax liability for a year not in issue when such a computation is necessary to a determination of the correct tax liability for a year that has been placed in issue." Hill v. Commissioner [Dec. 46,928], 95 T.C. 437, 439-440 (1990).]

Thus, section 6214(b) does not foreclose our authority (i) to consider facts and issues in a nondeficiency year and on the basis thereof compute the tax liability for that year (regardless of the tax liability reported by the taxpayer or assessed by the Commissioner), or (ii) to employ the recomputed tax liability in redetermining the tax liability for the year for which a deficiency was determined. The limiting conditions of section 6214(b) are that the computation of the other year's tax liability be necessary to the redetermination of the tax liability at issue and that our recomputation not constitute a determination of the other year's liability for any other purpose.

There is no statutory provision comparable to section 6214(b) that limits the jurisdiction granted by section 6330(d)(1)(A). Nonetheless, our holding conforms to the principles of section 6214(b). We conclude that our jurisdiction under section 6330(d)(1)(A) extends to the consideration of facts and issues in a nondetermination year only insofar as the tax liability for that year may affect the appropriateness of the collection action for the determination year. In exercising that jurisdiction, we do not determine whether any collection action with respect to the nondetermination year may proceed, but only whether collection action may proceed in the determination year.

Having decided our jurisdiction to consider facts and issues in 1995, we turn to consideration of petitioner's claim that his 1997 liability had been paid. In an effort to demonstrate that respondent had not properly credited him with payments he made to satisfy his 1997 liabilities, petitioner testified that he had timely filed his 1995 return. If the 1995 return had been timely filed, then the $3,005.47 payment submitted with that return, when added to withholding credits, would have fully satisfied the tax reported as due on the 1995 return, and no additions to tax for late filing or late payment would have been owed. As a consequence, it would not have been proper for respondent to apply (as he did) a portion of the $2,800 payment received from the Freijes on June 3, 1997 , against any 1995 liability, as there would have been none.

However, we have found that the 1995 return was untimely filed on November 18, 1996. We based that finding on an evaluation of the parties' respective evidence. Respondent offered from his records a certified copy of a completed Form 1040, U.S. Individual Income Tax Return, for 1995 bearing the Freijes' signatures, with a "received" stamp of November 18, 1996, and with a date of "11-16-96" entered next to the signatures. The Form 4340 for 1995 likewise indicates a filing date for the return of November 18, 1996. Petitioner offered a Form 1040 with a date of "1-16-96" entered next to the signatures. In addition, petitioner offered a copy of his check to the IRS, bearing a date of "1-16-96". This copy had no bank markings indicating it had been negotiated, which petitioner explained was due to the fact that it was a copy of the check made before mailing it to the IRS. Petitioner also produced a copy of the negotiated version of the same check, yet this copy bore a date of "11-16-96", consistent with a November 1996 filing.¹⁵ Moreover, petitioner produced a copy of a request for an automatic 4-month extension of time for filing the 1995 return, with the signatures thereon dated February 10, 1996. The Form 4340 for 1995 indicates that a 4-month extension was granted. Yet petitioner offers no convincing explanation why, if he filed a return for 1995 in January 1996 as he claims, he sought a filing extension in February 1996. Given the significant contradictory evidence, petitioner's self-serving claim that he filed a return for 1995 in January 1996¹⁶ is not credible.

Because petitioner's 1995 return and accompanying payment were untimely, respondent assessed additions to tax for late filing and late payment for that year. As a consequence, respondent was entitled to apply the June 2, 1997 , payment submitted by the Freijes, which it has not been shown was designated for any year, in satisfaction of his 1995 liability. See Rev. Rul. 73-305, 1973-2 C.B. 43. Therefore, respondent's assessment of the additions to tax for late payment and failure to pay estimated tax for 1997 was correct.

Respondent's Application of 1999 Remittances to 1997 Liabilities

On or about July 6, 1998 , petitioner mailed a check for $1,776 to respondent. This check was erroneously posted to the Freijes' 1997 account in the amount of $11,776 on July 8, 1998 . As this amount exceeded all unpaid assessments for 1997, respondent issued the Freijes a refund of $5,513 for that year on August 3, 1998 . Sometime after August 3, 1998 , respondent became aware of the $10,000 error and made reversing entries on the Freijes' 1997 account.¹⁷ However, no assessments were recorded subsequent to the August 3, 1998 , refund. Respondent thereafter applied four remittances made by the Freijes in 1999, totaling $6,500, to their 1997 account.

Respondent's application of these 1999 remittances to the Freijes' 1997 account in an effort to recover the erroneous refund contravenes O'Bryant v. United States, [95-1 USTC ¶50,143], 49 F.3d 340 (7th Cir. 1995). In O'Bryant, the Court of Appeals for the Seventh Circuit, to which an appeal in this case would ordinarily lie, held that the Commissioner may not use his postassessment collection powers to recover an erroneous nonrebate refund. In that case, the taxpayer made a payment that satisfied an outstanding assessment. The Commissioner mistakenly credited the payment to the taxpayer's account twice and consequently issued the taxpayer a refund in the amount of the payment plus interest. Upon discovering his mistake, the Commissioner recovered a portion of the refund by levy and by applying overpayments and remittances from other years to the taxpayer's account for the year of the refund, without having made another assessment. The Court of Appeals concluded that, since the assessment had been extinguished by the taxpayer's payment, the Commissioner could not employ his summary collection powers in the absence of an assessment, but instead had to recover the erroneous refund through an erroneous refund action under section 7405.¹⁸

Respondent has applied $6,500 in 1999 remittances to the Freijes' 1997 account in an effort to recover the erroneously refunded $5,513 (plus interest, presumably). Under O'Bryant, he may not do so. Instead, these 1999 undesignated remittances, under respondent's then-applicable procedures, see Rev. Rul. 73-305, supra, should have been applied to satisfy outstanding assessments for 1998. Had the 1998 assessments been thereby satisfied, presumably some portion of these 1999 remittances would have been available for application to the Freijes' 1999 account. Consequently, we conclude that the levies for 1998 and 1999 should not be sustained in their present form, as the unpaid tax for each year may be affected by the proper application of the $6,500 in 1999 remittances by the Freijes.

1998

Respondent has conceded that the Appeals officer's determination to proceed with the levy with respect to petitioner's 1998 liability failed to take into account $4,094 of withholding credits of Mrs. Freije that were not listed on the 1998 return.

The only specific dispute of his 1998 liability that we can identify as having been raised by petitioner arises by virtue of the Freijes' amended return for 1998.¹⁹ In the amended return, the Freijes claimed a reduction in 1998 adjusted gross income of $14,940, which was calculated as reducing the tax due from the $11,686 originally reported to $7,097.50.²⁰ While petitioner may dispute in this proceeding the amount reported as due on the 1998 return, see Montgomery v. Commissioner [Dec. 55,501], 122 T.C. 1 (2004), there is no merit to the grounds on which petitioner now disputes the amount reported as due on the 1998 return. Petitioner testified that he claimed a $14,940 reduction in adjusted gross income on the amended return for 1998 because this was an amount by which an agent of respondent, upon examination of the 1999 return, proposed to increase the Freijes' adjusted gross income for 1999. Without more, we see no merit in petitioner's challenge to the underlying liability for 1998.

The Appeals officer's determination to proceed with the levy has not taken into account, however, the $4,094 in withholding credits of Mrs. Freije to which respondent concedes the Freijes are entitled, or the $6,500 in 1999 remittances that were improperly applied to the Freijes' 1997 account. Given these infirmities, the determination that the levy for 1998 could proceed without modification was an abuse of discretion.

1999

The unpaid tax for 1999 that is sought to be collected by the levy at issue includes an assessment of tax of $15,265 (as well as an estimated tax addition to tax and interest) that respondent made on May 29, 2000 . For the reasons outlined below, we conclude that a portion of this assessment is invalid.

The Freijes reported a tax due of $12,507 on the 1999 return, timely filed on April 15, 2000 . However, on May 29, 2000 , pursuant to what respondent concedes was a so-called math error notice under section 6213(b)(1), respondent adjusted various items reported on the 1999 return, resulting in an increase in the reported tax to $15,265, which was assessed on the same date.

Section 6213(b)(1) in general allows the assessment of tax in excess of that shown on a return (i.e., without resort to the deficiency procedures of sections 6211-6216) in cases where the additional amount of tax is attributable to "a mathematical or clerical error appearing on the return". Section 6213(g)(2) defines "mathematical or clerical error" for this purpose generally as an error in addition, subtraction, multiplication, or division shown on a return; an incorrect use of an IRS table if apparent from the existence of other information on a return; an item entry on a return which is inconsistent with another entry of the same or another item on the return; an omission of information which is required to be supplied on a return to substantiate an entry; an entry on a return of a deduction in an amount which exceeds a statutory limit if the items entering into the computation of the limit appear on the return; and various other instances not pertinent here. See sec. 6213(g)(2)(A)-(M).

As noted in our findings of fact, respondent's "math error" adjustments to the 1999 return included a correction of inconsistent entries for adjusted gross income and of a casualty loss claimed without regard to the limitation of such losses to amounts exceeding 10 percent of adjusted gross income. We have no quarrel with these adjustments, as they fall squarely within the provisions of section 6213(b)(1).²¹ See sec. 6213(g)(2)(C), (E). However, respondent also purported to disallow, pursuant to section 6213(b)(1), an "other miscellaneous" deduction (i.e., a miscellaneous deduction not subject to the 2-percent limitation of section 67(a)) of $8,528 claimed on Schedule A, Itemized Deductions, of the return for "Lawyers" and a "miscellaneous" deduction (i.e., one subject to the 2-percent limitation) of $20 claimed on the Schedule A for a "P.O. Box".

In the instant proceeding, respondent does not attempt to defend the foregoing disallowances as a permissible application of section 6213(b)(1).²² Instead, respondent takes the position that, because the miscellaneous deductions were disallowed pursuant to a "math error" notice under section 6213(b)(1) without the issuance of a notice of deficiency, petitioner did not have any previous "opportunity to dispute" the underlying tax liability within the meaning of section 6330(c)(2)(B). Thus, respondent reasons, petitioner is entitled to dispute the underlying tax liability associated with the disallowed deductions in the present section 6330 proceeding, and we are urged to undertake de novo review under section 6330 of petitioner's entitlement to those deductions. In respondent's view, such de novo review should result in petitioner's 1999 liability's being adjusted to reflect an allowance of $7,701.25 of the claimed miscellaneous deduction for legal fees (the amount that respondent concedes petitioner has substantiated in this proceeding), reduced pursuant to section 67(a) by an amount equal to 2 percent of adjusted gross income.

Petitioner contends that he has substantiated the full $8,528 deduction claimed on the 1999 return and that, in connection with the examination of his 1999 return, respondent's agent allowed his claimed deduction for legal fees. The notice of deficiency for 1999, issued after the notice of intent to levy for that year, provides some corroboration for petitioner's claim, in that it allowed $8,935 in miscellaneous deductions (subject to the 2-percent limitation) without further specifying the basis for the allowance.²³ As to any possible discrepancy in respondent's treatment of the legal fees deduction in the instant proceeding and his treatment in the notice of deficiency (and any consequent inconsistency in the assessment that respondent became entitled to make when the Freijes defaulted with respect to the notice of deficiency²⁴ ), respondent takes the position on brief that we should undertake a de novo determination of petitioner's entitlement to the claimed deduction for legal fees pursuant to section 6330(c)(2)(B) and that any such determination will generally be binding on the parties in any subsequent litigation under the doctrine of collateral estoppel. Accordingly, respondent represents, respondent will "make any necessary adjustments" to the liability to conform to our decision.

We reject respondent's contention that we should undertake de novo review of petitioner's entitlement to the miscellaneous deductions claimed. The assessment of the 1999 liability made pursuant to the math error notice, which the levy at issue in this proceeding seeks to collect, is simply invalid insofar as it results from the disallowance of petitioner's miscellaneous deductions claimed on the 1999 return. That portion of the assessment violated section 6213(a), which generally prohibits the assessment of a deficiency without affording the taxpayer the opportunity to petition for redetermination of the deficiency in this Court.²⁵ Cf. Israel v. Commissioner [Dec. 55,217(M)], T.C. Memo. 2003-198, affd. [2004-1 USTC ¶50,198] 88 Fed. Appx. 941 (7th Cir. 2004). In our view, respondent's failure to show that the disallowance of the miscellaneous deductions fell within the "math error" exception, or some other exception, to the proscription of section 6213(a) on assessments without deficiency procedures is fatal to that portion of the math error assessment that is based on the disallowance of the miscellaneous deductions.

Respondent in effect seeks to cure the defect in the math error assessment by conceding petitioner the opportunity to dispute the disallowance in this proceeding. While it is true that section 6330(c)(2)(B) provides that a taxpayer whose property is the subject of a proposed levy may dispute the "underlying tax liability" if he "did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability", that provision should not be construed to allow respondent to employ it to perfect an assessment made in derogation of section 6213(a). We have previously construed the phrase "did not receive any statutory notice of deficiency" as used in section 6330(c)(2)(B) as encompassing the situation where a notice of deficiency, though mailed by the Commissioner, was not in fact received by the taxpayer. See Calderone v. Commissioner [Dec. 55,783(M)], T.C. Memo. 2004-240; Tatum v. Commissioner [Dec. 55,125(M)], T.C. Memo. 2003-115. Respondent would have us extend the meaning of that phrase to encompass the situation where a taxpayer did not receive any notice of deficiency because the Commissioner failed to issue one, in violation of section 6213(a).

We decline to do so. Such an interpretation would contravene the intent underlying section 6330, a measure intended to expand taxpayers' rights in collection actions. See S. Rept. 105-174, at 67 (1998), 1998-3 C.B. 537, 603. Under the interpretation of section 6330(c)(2)(B) urged by respondent, de novo review in a section 6330 proceeding could substitute for the taxpayer's right to a deficiency proceeding under sections 6211-6216. A taxpayer's rights in the former proceeding are more circumscribed than in the latter.²⁶ Moreover, such a construction would conflict with other provisions of section 6330. Section 6330(c)(1) and (3) requires, in connection with the hearing provided under section 6330, that the Appeals officer obtain verification "that the requirements of any applicable law or administrative procedure have been met" and that he take such verification into account in determining whether the levy should proceed. One requirement of applicable law is the mandate of section 6213 that, except in certain cases, including those involving termination or jeopardy assessments, an opportunity for preassessment judicial review precede the assessment or collection of any deficiency, generally defined to encompass income tax in excess of the amount reported on a return. Thus, the requirement of section 6330(c)(1) that the Appeals officer verify compliance with applicable law cannot be reconciled with an interpretation of section 6330(c)(2)(B) that allows the Commissioner to avoid compliance with section 6213(a).

We accordingly hold that petitioner's opportunity in a section 6330 proceeding to dispute the underlying tax liability does not cure an assessment made in derogation of his right under section 6213(a) to a deficiency proceeding.

As a consequence, the determination to proceed with collection of that portion of the math error assessment based on the disallowance of the Freijes' miscellaneous deductions was error as a matter of law and accordingly an abuse of discretion. The Appeals officer's verification that the requirements of applicable law had been met was incorrect. The statement in the notice of determination that the tax owed for 1999 "is from the original return" is wrong; it overlooks the adjustments to the return improperly claimed as math errors under section 6213(b)(1). Accordingly, the levy to collect the foregoing portion of the 1999 assessment may not proceed.

Conclusion

Respondent has conceded that the determination to proceed with the levy for 1997 should not be sustained, and that the determination to proceed with the levy for 1998 failed to take into account $4,094 in withholding credits. With respect to the levies for 1998 and 1999, we have found that $6,500 in remittances made by the Freijes in 1999 were unlawfully applied to their 1997 account and should have been available to satisfy liabilities for 1998 and/or 1999.²⁷ Thus, the unpaid tax for those years, upon which the levies are based, may not be correct. Further, we have found that a portion of the 1999 assessment on which the levy for 1999 is based is invalid.

Given the various infirmities in the proposed levies for 1998 and 1999, which demonstrate that the determination to proceed with the 1998 and 1999 levies in full was an abuse of discretion, we shall remand the determination for those years to the Office of Appeals for reconsideration.

To reflect the foregoing,

An appropriate order will be issued.

¹ Unless otherwise indicated, all section references are to the Internal Revenue Code of 1986, as amended.

² Our findings with respect to the Freijes' 1995 taxable year are based in part on Ex. 21-R, a certified copy of a Form 4340, Certificate of Assessments, Payments, and Other Specified Matters, covering the Freijes' individual income taxes for that year. At trial, we reserved ruling on the admissibility of the exhibit, because of uncertainty concerning whether respondent's counsel had identified and provided a copy of it to petitioner at least 14 days before trial, as required by the Court's standing pretrial order. We allowed petitioner to make a submission after trial with respect to the admissibility of Ex. 21-R. On the basis of petitioner's submission and the entire record in this case, we conclude that petitioner has failed to show prejudice from any failure to receive a copy of Ex. 21-R at least 14 days before trial. We accordingly hereby admit Ex. 21-R.

³ The figure of $6,600 in claimed estimated tax payments for 1997 apparently reflected the Freijes' understanding that the three remittances they submitted to respondent during 1997 (i.e., $2,800, $2,300, and $1,500, for a total of $6,600) constituted estimated tax payments for that year. However, as noted, respondent applied a portion of the initial $2,800 remittance to the Freijes' 1995 liability and refunded the balance. Consequently, the total 1997 estimated tax payments recorded in the Freijes' account when their 1997 return was filed equaled $3,800 (i.e., the total of the latter two 1997 remittances), not the $6,600 reported on the 1997 return.

⁴ If respondent had not applied a portion of the Freijes' 1997 remittance of $2,800 to their 1995 liability, the $1,776 remittance of July 6, 1998, would have resulted in total remittances for 1997 of $20,510, or $1,000 less than the tax reported as due on the 1997 return.

⁵ While this reversing entry is dated July 8, 1998, on the Freijes' Form 4340, Certificate of Assessments, Payments, and Other Specified Matters, for 1997, we conclude that it did not occur on that date, as the refund triggered by the erroneous posting of this amount was issued almost 1 month later. We are persuaded that respondent did not become aware of the error until sometime after this refund was issued to the Freijes.

⁶ According to the Forms 4340 in the record, the total remittances made by the Freijes during 1999, exclusive of the $3,000 payment submitted with the 1998 return, were $15,087. Insofar as the record discloses, these remittances were not designated by the Freijes for any taxable year.

⁷ As noted, the Forms 4340 in the record state that the Freijes made remittances during 1999 that totaled $15,087; however, respondent applied $6,500 and $2,587 against the Freijes' 1997 and 1998 liabilities, respectively.

⁸ This figure equaled the portion of an increase in the Freijes' income for 1999 that had been proposed in an examination of the 1999 return, with which petitioner disagreed.

⁹ These figures were likewise designed to offset the same proposed examination increase in the Freijes' income for 1999 with which petitioner disagreed. See supra note 8.

¹⁰ The 1998 and 1999 amended returns both claimed amounts for estimated tax payments that were different from the amounts claimed in the original returns for those years.

¹¹ We shall also assume, without deciding, that by mentioning his amended returns for 1998 and 1999 in his request for a hearing, petitioner thereby raised challenges at the hearing to the underlying tax liabilities as originally reported in the 1998 and 1999 returns. Regardless of whether these issues are treated as having been raised, there is no effect on the outcome because the challenges, as discussed infra, have no merit.

While petitioner also mentioned his amended return for 1997 in his hearing request, we conclude that any issue thereby raised is moot as a result of respondent's concession that the levy for 1997 should not proceed.

¹² Had the Freijes' June 3, 1997, remittance of $2,800 (which was undesignated insofar as the record discloses) not been applied in part against their 1995 liability, we assume respondent would have treated it as a payment of estimated tax for 1997, as he did with respect to the Freijes' $2,300 remittance made 1 week later on June 10, 1997, and their $1,500 remittance made on Oct. 6, 1997. There is evidence that the Freijes intended all of the foregoing remittances to be payments of estimated tax for 1997, in that they reported in the 1997 return the total of these three remittances ($6,600) as the amount of estimated tax paid.

On this record, given the Freijes' myriad remittances, we are unable to conclude that a change in the unpaid liability for 1997 would have had no impact on the computation of any additions to tax for untimely payment in 1998 and 1999.

¹³ There is also no dispute that the Freijes made the claimed remittance of $2,800 on or about June 3, 1997, as the Form 4340 for 1995 records a payment in that amount on that date.

¹⁴ Indeed, we have routinely considered facts and issues in nondetermination years in these circumstances. See, e.g., Landry v. Commissioner [Dec. 54,224], 116 T.C. 60 (2001) (untimely claim for application of overpayments from nondetermination years); Leineweber v. Commissioner [Dec. 55,518(M)], T.C. Memo. 2004-17 (claim that overpayment in determination year was applied to nondetermination year for which period of limitation on collection had expired); Tedokon v. Commissioner [Dec. 54,964(M)], T.C. Memo. 2002-308 (same as Landry); Lee v. Commissioner [Dec. 54,875(M)], T.C. Memo. 2002-233 (same as Landry), affd. [2003-2 USTC ¶50,623] 70 Fed. Appx. 471 (9th Cir. 2003); Kazunas v. Commissioner [Dec. 54,827(M)], T.C. Memo. 2002-188 (existence of overpayment in nondetermination year); Sponberg v. Commissioner [Dec. 54,816(M)], T.C. Memo. 2002-177 (claim that Commissioner had not accounted for all payments in nondetermination years, which if accounted for would result in overpayments available for application to determination years). Apparently no issue was raised in the foregoing cases concerning our jurisdiction to consider facts and issues arising in nondetermination years.

¹⁵ As to the discrepancy in the "1-16-96" and "11-16-96" dates on the two copies of the same check he wrote as payment of his 1995 taxes, petitioner testified that the check bore the "1-16-96" date when he mailed it to respondent, which implies that someone at the IRS altered the check by adding the numeral "1" to the month indicator in the date.

This claim arouses greater suspicion when considered in light of the fact that petitioner is also claiming that someone at the IRS altered the numeral "1" on another of his checks; namely, the check for $1,776 intended as payment towards his 1997 taxes that was erroneously posted by respondent as a payment of $11,776. That check is also in evidence and contains inconsistent entries designating its amount; namely, a numeric entry of "$1,1776.00" [sic] and a written entry of "One thousand seven hundred seventy six" dollars.

The recurrent manipulation of the numeral "1" on petitioner's checks undermines the credibility of both his claims that IRS personnel altered his checks. We need not resolve the dispute concerning the $1,776 check, however, given respondent's concession that his effort to recover the erroneous 1997 refund resulting from the incorrect posting of this check is barred by sec. 6532(b). Nonetheless, one is left with the singular sensation that petitioner's recurrent problems with the numeral "1" are too similar to be explained by malfeasance on the part of IRS employees.

¹⁶ Petitioner also claims that he filed a return for 1995 in July 1996 and offered into evidence a purported copy of that return, which respondent has no record of receiving. In light of the greater weight of the evidence, discussed above, that he filed the 1995 return in November 1996, we are likewise unpersuaded that petitioner filed in July 1996.

¹⁷ The reversing entries were dated as of the original erroneous posting (July 8, 1998). See supra note 5.

¹⁸ The Court of Appeals declined to decide whether, as the Commissioner contended, he had a further option of recovering the refund through a suit begun within the limitations period of sec. 6501, without regard to sec. 7405.

¹⁹ See supra note 11.

²⁰ Because the Freijes claimed, for the first time in the amended return for 1998, that they were entitled to 1998 credits for withholding and estimated taxes of $4,094 and $12,000, respectively, the refund claimed in the 1998 amended return was $8,996.50, an amount exceeding the difference between the tax reported as due on the original versus the amended return.

²¹ The "math error" notice also indicated that the Freijes' estimated tax payments for 1999 totaled $6,000 rather than the $15,616 claimed on the 1999 return. As previously noted, additional remittances totaling $6,500 and $2,587, made by the Freijes in 1999 but undesignated, were applied to their 1997 and 1998 liabilities, respectively.

²² The record does not disclose whether petitioner sought an abatement (under sec. 6213(b)(2)) of the assessment made by respondent pursuant to sec. 6213(b)(1).

²³ As noted, no petition was filed in response to the notice of deficiency for 1999.

²⁴ The record does not disclose whether an assessment was made after the Freijes failed to file a petition with respect to the notice of deficiency for 1999. The Form 4340 covering 1999 that is in the record was generated before the issuance of the notice of deficiency. However, respondent's counsel represents on brief that petitioner has a liability for 1999 that is based on the notice of deficiency, as distinguished from the liability based on the math error notice.

²⁵ Sec. 6213(a) provides in part:

Except as otherwise provided in * * * [the case of certain termination or jeopardy assessments] no assessment of a deficiency in respect of any tax imposed by subtitle A * * * and no levy or proceeding in court for its collection shall be made, begun, or prosecuted until * * * [a] notice [of deficiency] has been mailed to the taxpayer, nor until the expiration of such 90-day or 150-day period [in which the taxpayer may petition the Tax Court for redetermination of the deficiency] * * *.

²⁶ For example, a taxpayer must petition this Court for review within 30 days of a determination under sec. 6330, see sec. 6330(d)(1), whereas he has 90 days or, if outside the United States, 150 days to petition with respect to a notice of deficiency, see sec. 6213(a). See also Sarrell v. Commissioner [Dec. 54,494], 117 T.C. 122 (2001) (no expanded filing period under sec. 6330 for notices of determination addressed to persons outside the United States).

²⁷ If the $6,500 in 1999 remittances that was applied to the 1997 account is applied to the 1998 account, the result may be that the $2,587 in 1999 remittances that was applied to 1998 may be available to satisfy 1999 liabilities.

[Dec. 56,121(M)] Mehdi H. Hajiyani v. Commissioner.

Dkt. No. 4008-04L , TC Memo. 2005-198, August 16, 2005 .

[Appealable, barring stipulation to the contrary, to CA-4]

[Code Sec. 6330]
Liens and levies: Collection Due Process hearing: Issues raised at hearing: Liability for tax: Tax Court Rules . --

The IRS did not abuse its discretion in its determination to proceed with collection of an individual's unpaid tax liability. The taxpayer could not challenge the validity of the underlying tax liability because his entitlement to deductions in connection with his business had already been litigated in a prior Tax Court proceeding. The taxpayer, who had failed to submit a proposed Rule 155 computation, now argued that the final computation, which was based on the IRS's submitted computation, was erroneous. His claim that his attorney failed to file a proposed computation did not open the door for the taxpayer to again challenge his liability for the tax. Finally, there was no evidence that portions of the taxpayer's liability had been satisfied by offsets and other collection efforts by the IRS.

[Code Sec. 7122]
Liens and levies: Collection Due Process hearing: Issues raised at hearing: Offer in compromise.

The IRS did not abuse its discretion in determining to proceed with collection of an individual's unpaid tax liability. The IRS's failure to consider the taxpayer's offer to compromise his tax liability for a nominal amount was not an abuse of discretion. The taxpayer submitted the offer in compromise after the scheduled Collection Due Process hearing and final notice was issued. Accordingly, the IRS could not have considered the offer at the CDP hearing.

Mehdi H. Hajiyani, pro se; Roger W. Bracken, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

GERBER, Chief Judge: Petitioner, pursuant to section 6330(d),¹ seeks review of respondent's determination to proceed with collection (by means of levy) of petitioner's unpaid 1993 and 1994 Federal income tax liabilities. The issue for our consideration is whether respondent abused his discretion by determining to proceed with the proposed levy.

FINDINGS OF FACT²

At the time of the filing of the petition in this case, petitioner resided in Rockville , Maryland . On April 11, 2001 , petitioner was provided with the opportunity to contest his 1992, 1993, and 1994 income tax deficiencies in a trial before this Court. On December 12, 2001 , the Court held in a Summary Opinion, inter alia, that petitioner was engaged in a moneylending business for the years 1992 to 1994 and was allowed to deduct certain expenses associated with that business. See Hajiyani v. Commissioner, T.C. Summary Opinion 2001-183.

In the above-referenced deficiency proceeding, the parties were required to provide the Court with computations reflecting the holdings in T.C. Summary Opinion 2001-183 for purposes of entry of decision. See Rule 155. Respondent submitted a computation, but petitioner did not. After a time, respondent moved for an entry of decision in accord with his proposed computation, which was based on the Court's Summary Opinion.

On February 22, 2002 , petitioner, through his attorney, Kenneth Wall, filed an objection to the entry of decision, alleging that additional information for the year could alter the decision to be entered. On February 27, 2002 , this Court ordered petitioner to file an alternative computation by March 25, 2002 . Petitioner failed to file an alternative computation, and on April 26, 2002 , a decision was entered determining deficiencies in income tax for the taxable years 1993 and 1994 of $9,228 and $17,369, respectively.

On January 4, 2003 , respondent sent petitioner a Final Notice of Intent to Levy and Notice of Your Right to a Hearing (levy notice) for petitioner's 1993 and 1994 taxable years. The levy notice reflected an unpaid tax liability (including interest) of $10,109 for the 1993 taxable year and $33,195 for the 1994 taxable year.

On February 2, 2003 , respondent received petitioner's timely Form 12153, Request for a Collection Due Process Hearing (request), for taxable years 1992, 1993, and 1994. As a basis for his request, petitioner attached documents showing that he had objected to respondent's original decision. Petitioner's original section 6330 hearing was scheduled for November 19, 2003 , but it was rescheduled for a later date because of conflicts. Petitioner failed to appear for the rescheduled meeting. On February 4, 2004 , respondent mailed petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (final notice) determining that the proposed levy should be sustained. As of that date petitioner had not proposed any collection alternatives. The sole issue petitioner raised was whether he was liable for the unpaid 1993 and 1994 tax liabilities. On February 11, 2004 , petitioner sent an offer-in-compromise to respondent, offering to settle the 1992, 1993, and 1994 tax liabilities for $100 on the basis of doubt as to liability.

OPINION

Petitioner essentially makes three arguments in support of his position that respondent should not be allowed to proceed with collection. First, petitioner argues that the Rule 155 computations in the deficiency proceeding for the 1993 and 1994 tax years are incorrect because they did not account for petitioner's claimed loss relating to his money-lending business in 1992. Second, petitioner argues that his offer-in-compromise was not considered. Finally, petitioner contends that part of his tax liabilities was satisfied by offsets of tax refunds and attachment of his bank accounts.

Section 6331(a) authorizes the Commissioner to levy on property and property rights of a taxpayer who fails to pay a tax liability after notice and demand. Sections 6331(d) and 6330(a), however, require the Secretary, before proceeding with collection, to send written notice to the taxpayer of the intent to levy and of the taxpayer's right to a hearing.

Section 6330(c)(2)(A) provides that, at the hearing, the taxpayer may raise "any relevant issue relating to the unpaid tax or the proposed levy" including spousal defenses, challenges to the appropriateness of collection actions, and alternatives to collection. Section 6330(c)(1) requires that the Appeals officer obtain verification that the requirements of any applicable law or administrative procedure have been met.

When an Appeals officer issues a determination regarding a disputed collection action, a taxpayer may seek judicial review with the Tax Court or a District Court, as appropriate. Sec. 6330(d); see Davis v. Commissioner [Dec. 53,969], 115 T.C. 35, 37 (2000); Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 179 (2000) . The underlying tax liability may be questioned if the taxpayer "did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability." Sec. 6330(c)(2)(B). Where the validity of the underlying tax liability is properly at issue, the Court will review the matter de novo. Sego v. Commissioner [Dec. 53,938], 114 T.C. 604, 610 (2000). Where the validity of the underlying tax is not at issue, the Court will review the Commissioner's administrative determination for an abuse of discretion. Id. ; Goza v. Commissioner, supra at 181-182. Petitioner had the opportunity to dispute the underlying tax liabilities and did so in the deficiency proceeding. Therefore, the validity of the underlying tax liabilities may not be questioned, and we review respondent's determination under an abuse of discretion standard.

The main thrust of petitioner's challenge concerns the computations in the deficiency proceeding under Rule 155. However, as noted, petitioner is not entitled to question the underlying tax liabilities because he already has been provided the opportunity to challenge his liabilities. See sec. 6330(c)(2)(B). In that regard, petitioner was provided with the opportunity to submit a computation under Rule 155, but failed to timely do so. Petitioner contends that Mr. Wall, his attorney, did not submit a Rule 155 computation. Petitioner's contention with respect to his attorney's failure does not change the limitation upon petitioner or the Court with respect to addressing the underlying merits of his 1993 or 1994 tax liability. See sec. 6330(c)(2)(B).

With respect to petitioner's second argument, concerning his attempted offer-in-compromise, our review of the Commissioner's determination generally is limited to issues raised at the section 6330 hearing. Magana v. Commissioner [Dec. 54,765], 118 T.C. 488, 493 (2002). Petitioner's offer-in-compromise was submitted after the scheduled section 6330 hearing and the issuance of the final notice. Accordingly, the offer-in-compromise could not have been considered at the section 6330 hearing. There would, therefore, be no basis for the Court to hold that there was an abuse of discretion with respect to the offer-in-compromise.³

Petitioner's final argument is that a portion of his tax liabilities had been satisfied through offset and other collection by respondent. However, the specific amounts of petitioner's tax liabilities that remain unpaid have not been addressed by him, and there is no evidence that respondent is attempting to collect more than petitioner's unpaid balance.

In summary, before the scheduled section 6330 hearing, petitioner's sole defense to the proposed levy was his challenge to the underlying tax liability. Petitioner did not attend the scheduled hearing, and through the time of the final notice he did not offer spousal defenses, challenges to the appropriateness of the collection action, or collection alternatives.

We, accordingly, hold that respondent did not commit error or abuse his discretion in his determination to proceed with collection.

To reflect the foregoing,

Decision will be entered for respondent.

¹ Unless otherwise indicated, all section references are to the Internal Revenue Code, and all Rule references are to the Tax Court Rules of Practice and Procedure.

² The parties' stipulation of facts is incorporated by this reference.

³ It should be noted that petitioner's offer-in-compromise was with respect to doubt as to liability, which would address the merits of the underlying liability. Since petitioner is precluded from questioning the underlying liabilities, his offer would not provide him any relief in the setting of this proceeding.

[Dec. 56,012(M)]  Randal W. Howard v. Commissioner.

Dkt. No. 8719-03L , TC Memo. 2005-100, May 9, 2005 .

[Appealable, barring stipulation to the contrary, to CA-9]

[Code Sec. 6330]
Collection Due Process hearings: Standard of review: Abuse of discretion: Tax protestors.

An IRS Appeals officer did not abuse his discretion when he determined to proceed with collection against an individual who made groundless tax-protestor type arguments at his Collection Due Process (CDP) hearing. The Appeals officer properly verified that all applicable laws and administrative collection procedures were followed. In addition, the taxpayer had received notices of deficiency for all of the tax years at issue and had filed petitions for redetermination challenging those notices. Therefore, he was barred under Code Sec. 6330(c)(2)(B) from contesting his underlying tax liability at his CDP hearing and, since there was no just cause to delay the collection process, the IRS was permitted to proceed with its levy.
[Code Sec. 6673]
Penalties, civil: Tax protestors: Actions maintained primarily for delay: Delay penalty.

A taxpayer who maintained an action primarily to delay the collection of his unpaid tax liabilities was fined $10,000. The taxpayer's arguments were devoid of any merit and wasted judicial resources. Moreover, the taxpayer's conduct in his earlier deficiency cases, along with his actions in this case, demonstrated that the taxpayer used the CDP hearing procedures primarily for delay. Since this was the taxpayer's third case that resulted in a Code Sec. 6673 penalty, the penalty imposed against the taxpayer was increased to $10,000.

Randal W. Howard, pro se; Cameron M. McKesson and Robin M. Ferguson, for respondent.

P filed a petition for judicial review pursuant to sec. 6330, I.R.C., in response to a determination by R that levy action was appropriate.

Held: Because P has advanced groundless complaints in dispute of the notice of intent to levy, R's determination to proceed with collection action is sustained.

Held, further, because the underlying tax liability is not at issue and R has shown good cause, suspension on levy action is lifted pursuant to sec. 6330(e)(2), I.R.C.

Held, further, a penalty under sec. 6673, I.R.C., is due from P and is awarded to the United States in the amount of $10,000.

MEMORANDUM OPINION

WHERRY, Judge: Petitioner invoked the Court's jurisdiction under section 6330 in response to a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 regarding his unpaid Federal income taxes for 1983 and 1993 to 1995.¹ Respondent's Office of Appeals (Appeals Office) had determined that it was appropriate to collect petitioner's unpaid taxes pursuant to a proposed levy. After the case was docketed, respondent on September 20, 2004 , filed a motion for summary judgment, and petitioner filed a declaration in opposition to respondent's motion on October 18, 2004 . The Court held a hearing on the motion for summary judgment on October 18, 2004 , and took the matter under advisement. Thereafter, on March 10, 2005 , respondent filed a motion to permit levy pursuant to section 6330(e)(2).

Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Fla. Peach Corp. v. Commissioner [Dec. 44,689], 90 T.C. 678, 681 (1988) . Summary judgment may be granted with respect to all or any part of the legal issues in controversy "if the pleadings, answers to interrogatories, depositions, admissions, and any other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law." Rule 121(b); Sundstrand Corp. v. Commissioner [Dec. 48,191], 98 T.C. 518, 520 (1992), affd. [94-1 USTC ¶50,092] 17 F.3d 965 (7th Cir. 1994); Zaentz v. Commissioner [Dec. 44,714], 90 T.C. 753, 754 (1988); Naftel v. Commissioner [Dec. 42,414], 85 T.C. 527, 529 (1985). The moving party bears the burden of proving that there is no genuine issue of material fact, and factual inferences will be read in a manner most favorable to the party opposing summary judgment. Dahlstrom v. Commissioner [Dec. 42,486], 85 T.C. 812, 820-821 (1985); Jacklin v. Commissioner [Dec. 39,278], 79 T.C. 340, 344 (1982).

Based upon our review of the record, we conclude that there is no genuine issue as to any material fact and that respondent is entitled to judgment as a matter of law. As discussed in greater detail below, we shall grant respondent's motion for summary judgment, enter a decision sustaining the notice of determination upon which this case is based, and impose a penalty on petitioner pursuant to section 6673. In addition, respondent has shown good cause for lifting the suspension of the proposed levy, and we shall grant respondent's motion to permit levy.

Background²

Petitioner has filed several petitions for redetermination with the Court in a long-running protest against the Federal income tax.

Taxable Years 1983 and 1984

On January 2, 1990 , the Court dismissed petitioner's case at docket No. 27411-88 for lack of prosecution and entered a decision sustaining deficiencies and additions to tax (including additions to tax under section 6651(a)(1) for failure to file a tax return) that respondent determined against petitioner for the taxable years 1983 and 1984.

Taxable Years 1987 and 1988

On February 13, 1998 , the Court entered a decision at docket No. 20474-90 sustaining deficiencies and additions to tax that respondent determined against petitioner for the taxable years 1987 and 1988. The Court concluded that petitioner had raised nothing but "classic protester arguments". Howard v. Commissioner [Dec. 52,566(M)], T.C. Memo. 1998-57.³

Taxable Years 1993, 1994, and 1995

On October 24, 2000 , the Court entered a decision at docket No. 18627-97 sustaining deficiencies and additions to tax (including additions to tax under section 6651(a)(1) for failure to file a tax return) that respondent determined against petitioner for the taxable years 1993, 1994, and 1995. The Court's decision included an increased deficiency for 1993.⁴ The Court also imposed a penalty upon petitioner pursuant to section 6673(a) after concluding that petitioner "knowingly and repeatedly advocated frivolous and groundless positions." Howard v. Commissioner [Dec. 53,961(M)], T.C. Memo. 2000-222.

Taxable Year 1996

On April 5, 2002 , the Court entered a decision at docket No. 6546-00 sustaining the deficiency and additions to tax that respondent determined against petitioner for the taxable year 1996. Citing the Court's two earlier Memorandum Opinions (referred to above) and characterizing petitioner's arguments as "frivolous and wholly without merit", the Court imposed a penalty upon petitioner pursuant to section 6673(a). Howard v. Commissioner [Dec. 54,701(M)], T.C. Memo. 2002-85.

Petitioner did not file an appeal in respect of any of the Court's decisions cited above. Each of those decisions is now final. Sec. 7481(a).

Petitioner's Bankruptcy Proceedings

On June 14, 1991 , petitioner filed a bankruptcy petition under chapter 13 of the Bankruptcy Code with the U.S. Bankruptcy Court for the District of Arizona. On July 24, 1996 , the bankruptcy court issued an order dismissing petitioner's case. This order was affirmed on appeal to the U.S. District Court for the District of Arizona on September 9, 1997 .

On December 6, 1996 , petitioner filed a bankruptcy petition under chapter 7 of the Bankruptcy Code with the U.S. Bankruptcy Court for the District of Arizona. On April 7, 1997 , the bankruptcy court entered an order of discharge in petitioner's case.

On April 16, 1999 , petitioner filed a bankruptcy petition under chapter 13 of the Bankruptcy Code with the U.S. Bankruptcy Court for the District of Arizona. On April 20, 1999 , the bankruptcy court entered an order granting the Commissioner's motion for relief from the automatic stay, see 11 U.S.C. sec. 362(a) (2000), regarding petitioner's tax liabilities for 1993, 1994, and 1995. On April 27, 1999 , the bankruptcy court dismissed petitioner's case.

Assessments/Collection Actions for 1983 and 1993 to 1995

On May 10, 1990 , respondent entered assessments against petitioner for the income tax and additions to tax for the taxable year 1983 as set forth in the Court's decision at docket No. 27411-88, as well as statutory interest. On May 10, 1990 , and June 11, 1990 , respondent issued to petitioner notices of balance due for the year 1983.⁵ Petitioner failed to remit to respondent the amount due.

On April 30, 2001 , respondent entered assessments against petitioner for the income taxes and additions to tax for the years 1993, 1994, and 1995 as set forth in the Court's decision at docket No. 18627-97, as well as statutory interest. On April 30, 2001 , respondent issued to petitioner notices of balance due for the years 1993, 1994, and 1995. Petitioner failed to remit to respondent the amounts due.

On December 17, 2001 , respondent issued to petitioner a Final Notice of Intent to Levy and Notice of Your Right to a Hearing requesting that petitioner pay his outstanding income taxes for the years 1983 and 1993 to 1995. On January 9, 2002 , petitioner submitted to respondent a Form 12153, Request for Collection Due Process Hearing, challenging the validity of the assessments for the years in issue. With regard to the taxable year 1983, petitioner asserted that his liability for that year was either paid in full or discharged in bankruptcy.

On May 1, 2003 , petitioner appeared at respondent's Appeals Office for an administrative hearing under section 6330. The administrative hearing was aborted when petitioner was informed that he would not be permitted to make an audio recording of the hearing.

On May 6, 2003 , the Appeals Office issued to petitioner a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 which stated that the Appeals Office determined that the proposed levy action was appropriate. The notice of determination stated that the Appeals Office rejected petitioner's claim that his tax liability for 1983 was discharged in bankruptcy on the ground that such taxes were not subject to discharge because petitioner failed to file a valid tax return for 1983. The notice of determination further stated that petitioner was provided with transcripts of account for the years 1983 and 1993 to 1995, that petitioner's remaining arguments were frivolous, and that petitioner was not eligible to offer an alternative collection method because he was not current in filing his tax returns for later years.

Petitioner filed with the Court on June 9, 2003 , a timely petition for lien and levy action.⁶ In the petition, petitioner alleged that the notice of determination should be overturned on the grounds that (1) the Appeals Office failed to verify that all applicable laws and administrative procedures were satisfied, and (2) petitioner's tax liabilities for the years in issue were discharged in bankruptcy.

After filing an answer to the petition, respondent filed a motion for summary judgment. Respondent asserted that the Appeals Office properly verified that all applicable laws and administrative procedures were met with regard to the assessments and proposed collection actions in dispute. In support of this assertion, respondent attached to his motion Forms 4340, Certificate of Assessments, Payments, and Other Specified Matters, for the taxable years 1983 and 1993 to 1995. Respondent also asserted that petitioner's tax liabilities were not discharged by the bankruptcy court.

This case was called for Hearing at the Court's October 18, 2004 , trial session in Phoenix , Arizona . At the start of the hearing, petitioner filed a declaration in opposition to respondent's motion, which stated in pertinent part that petitioner was not permitted to make an audio recording of his administrative hearing (the recording issue). In response to petitioner's Declaration, counsel for respondent asserted that petitioner failed to inform the Appeals Office in advance of the administrative hearing that he intended to make an audio recording⁷ and that petitioner failed to raise the recording issue in his petition.

Petitioner countered that the Court's holding in Keene v. Commissioner [Dec. 55,213], 121 T.C. 8, 19-20 (2003), controls with regard to the recording issue and the matter should be remanded to the Appeals Office for further proceedings. Petitioner also asserted that the Court should reject respondent's argument that petitioner's tax liabilities were not discharged by the bankruptcy court on the ground that respondent failed to prove that petitioner did not file tax returns for the years in issue. At the close of the hearing, the Court took the motion under advisement and indicated to the parties that if the motion for summary judgment were not granted the case would be rescheduled for a later trial.

Following the hearing, on March 10, 2005 , respondent filed with the Court a motion to permit levy pursuant to section 6330(e)(2).

Discussion

I. Collection Actions

A. Lien and Levy

Sections 6320 (pertaining to Federal tax liens) and 6330 (pertaining to levies) establish procedures for administrative and judicial review of certain collection actions. As an initial matter, the Commissioner is required to provide a taxpayer with written notice that a Federal tax lien has been filed and/or that the Commissioner intends to levy; the Commissioner is also required to explain to the taxpayer that such collection actions may be challenged on various grounds at an administrative hearing. See Davis v. Commissioner [Dec. 53,969], 115 T.C. 35, 37 (2000); Goza v. Commissioner [Dec. 53,803], 114 T.C. 176, 179 (2000).

Section 6330(c)(1) imposes on the Appeals Office an obligation to obtain verification that "the requirements of any applicable law or administrative procedure have been met." Section 6330(c)(2) prescribes the matters that a person may raise at an administrative hearing. Section 6330(c)(2)(A) provides that a person may raise issues such as spousal defenses, the appropriateness of the Commissioner's intended collection action, and possible alternative means of collection. See Sego v. Commissioner [Dec. 53,938], 114 T.C. 604, 609 (2000); Goza v. Commissioner, supra. In addition, section 6330(c)(2)(B) establishes the circumstances under which a person may challenge the existence or amount of his or her underlying tax liability. Section 6330(c)(2)(B) provides:

Issues at hearing. --

* * *

(B) Underlying liability. The person may also raise at the hearing challenges to the existence or amount of the underlying tax liability for any tax period if the person did not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability.

When the Appeals Office issues a Notice Of Determination Concerning Collection Action(s) to a taxpayer following an administrative hearing, section 6330(d)(1) provides that the taxpayer has 30 days following the issuance of such notice to file a petition for review with the Tax Court or, if the Tax Court does not have jurisdiction over the underlying tax liability, with a Federal District Court. See Offiler v. Commissioner [Dec. 53,912], 114 T.C. 492, 497-498 (2000).

Petitioner received notices of deficiency for the taxable years 1983 and 1993 to 1995 and filed petitions for redetermination with the Court challenging those notices. It follows that petitioner is barred under section 6330(c)(2)(B) from challenging the existence or amount of his underlying tax liabilities for 1983 and 1993 to 1995 in this proceeding.⁸ See Goza v. Commissioner, supra at 180-181.

Petitioner's conduct in his earlier deficiency cases at docket Nos. 27411-88, 20474-90, 18627-97, and 6546-00, coupled with his actions in this proceeding, clearly demonstrates that petitioner exploited the collection review procedures primarily for the purpose of delay. As discussed below, petitioner's arguments have absolutely no merit.⁹

Petitioner contends that the Appeals Office failed to verify that all applicable laws and administrative procedures were met. However, the Forms 4340 attached to respondent's Motion for Summary Judgment show that respondent (1) properly assessed the tax liabilities that respondent intends to collect from petitioner, and (2) properly notified petitioner of those assessments by way of notices of balance due. See, e.g., Hughes v. United States [92-1 USTC ¶50,086], 953 F.2d 531, 535-536 (9th Cir. 1992).

Numerous cases establish that no particular form of verification of an assessment is required, that no particular document need be provided to a taxpayer at an administrative hearing conducted under section 6330, and that a Form 4340 (such as those included in this record) and other transcripts of account satisfy the verification requirements of section 6330(c)(1). See Roberts v. Commissioner [Dec. 54,733], 118 T.C. 365, 371 n.10 (2002), affd. [2003-1 USTC ¶50,359] 329 F.3d 1224 (11th Cir. 2003); Nestor v. Commissioner [Dec. 54,655], 118 T.C. 162, 166 (2002); Lunsford v. Commissioner [Dec. 54,553], 117 T.C. 183 (2001).

Petitioner also asserted that his tax liabilities for 1983 and 1993 to 1995 were discharged by the bankruptcy court. The Court has jurisdiction in a collection review proceeding to determine whether the unpaid tax liabilities in dispute were discharged in a bankruptcy proceeding. Washington v. Commissioner [Dec. 55,072], 120 T.C. 114, 120-121 (2003).

The record reflects that, on December 6, 1996 , petitioner voluntarily filed a bankruptcy petition under chapter 7 of the Bankruptcy Code. Although the bankruptcy court issued an order of discharge in that case, petitioner's unpaid tax liabilities for 1983 and 1993 to 1995 were not discharged because petitioner failed to file tax returns for those years. See 11 U.S.C. sec. 523(a)(1)(B)(i) (2000); Swanson v. Commissioner [Dec. 55,280], 121 T.C. 111, 124-125 (2003).

Petitioner's assertion that respondent's motion should be denied on the ground respondent failed to demonstrate that petitioner did not file tax returns for the years in issue is wholly misguided. In particular, at docket No. 27411-88, the Court entered a decision sustaining respondent's determination that petitioner was liable for the addition to tax under section 6651(a)(1) (failure to file a tax return) for 1983. In conjunction with the Court's decision at docket No. 27411-88, we observe that petitioner's Form 4340 for 1983 reflects that the notice of deficiency that respondent issued to petitioner for that year was predicated upon respondent's preparation of a substitute for return. We have held that a substitute for return does not constitute a return of the taxpayer for purposes of 11 U.S.C. sec. 523(a)(1)(B). See Swanson v. Commissioner, supra at 123-124.

In addition, at docket No. 18627-97, the Court entered a decision sustaining respondent's determination that petitioner was liable for additions to tax under section 6651(a)(1) (failure to file a tax return) for the taxable years 1993, 1994, and 1995. Specifically, we held that (1) the tax return that petitioner submitted to respondent for 1993 was invalid, and (2) petitioner failed to submit to respondent a tax return for 1994 or 1995. Howard v. Commissioner [Dec. 53,961(M)], T.C. Memo. 2000-222. Our decisions at docket Nos. 27411-88 and 18627-97 are final and may not be challenged in this proceeding. Sec. 7481(a).

Petitioner has 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 Forms 4340. Moreover, petitioner has failed to raise a spousal defense, make a valid challenge to the appropriateness of respondent's intended collection action, or offer alternative means of collection. These issues are now deemed conceded. Rule 331(b)(4).

The record reflects that the Appeals Office properly verified that all applicable laws and administrative procedures governing the assessment and collection of petitioner's unpaid tax liabilities were met. Accordingly, we hold that the Appeals Office did not abuse its discretion in determining to proceed with collection against petitioner.

B. Levy Upon Appeal

We turn now to respondent's Motion to Permit Levy. As recently discussed in Burke v. Commissioner [Dec. 55,994], 124 T.C. __, __ (2005) (slip op. at 11-13), section 6330(e)(1) sets forth the general rule that respondent may not proceed with collection by levy if an administrative hearing is timely requested under section 6330(a)(3)(B) and while any appeals from such administrative hearing are pending. Section 6330(e)(2) provides an exception to the suspension of the levy imposed under subsection (e)(1) if the person's underlying tax liability is not at issue in the appeal and the Court determines that good cause is shown not to suspend the levy.

We have already concluded that petitioner is barred under section 6330(c)(2)(B) from challenging the existence or amount of his underlying tax liabilities for 1983 and 1993 to 1995 in this proceeding. See Goza v. Commissioner [Dec. 53,803], 114 T.C. at 180. In addition, respondent has shown good cause why the levy should no longer be suspended. In short, as was the case in Burke v. Commissioner, supra, petitioner has used the collection review procedure primarily as a device to needlessly delay collection. Petitioner is no stranger to the Court. As outlined above, he abused the Court's procedures in the deficiency cases at docket Nos. 20474-90, 18627-97, and 6546-00. Petitioner's arguments in this case lacked any merit. Considering all the circumstances, we see no justification for further delaying the collection process. Accordingly, we shall grant respondent's Motion to Permit Levy.

II. Section 6673 Penalty

Section 6673(a)(1) authorizes the Tax Court to require a taxpayer to pay to the United States a penalty not in excess of $25,000 whenever it appears that proceedings have been instituted or maintained by the taxpayer primarily for delay or that the taxpayer's position in such proceeding is frivolous or groundless. We warned taxpayers in Pierson v. Commissioner [Dec. 54,152], 115 T.C. 576, 581 (2000), that abusing the procedural protections afforded by sections 6320 and 6330 by pursuing frivolous lien or levy actions for purposes of delaying the tax payment process would result in sanctions under section 6673(a). As previously mentioned, the Court has imposed penalties on petitioner under section 6673(a) in the prior deficiency proceedings.

As discussed above, petitioner prosecuted this case primarily to delay collection of his unpaid tax liabilities. Petitioner's arguments were devoid of any merit and caused a needless waste of judicial resources. Taxpayers who promptly pay their taxes should not have to bear the cost of Government and tax collection associated with citizens who are unwilling to obey the law or shoulder their assigned share of the Government's cost. This is the third case for this petitioner to result in a section 6673 penalty, the most recent of which, at docket No. 6546-00, imposed a penalty of $7,500. It is appropriate that the amount of such penalty increase where petitioner continues to abuse the judicial process. Accordingly, the Court concludes a section 6673 penalty of $10,000 shall be awarded to the United States in this case.

To reflect the foregoing,

An order and decision will be entered granting respondent's motion to permit levy and motion for summary judgment, and a decision will be entered for respondent which includes the imposition of a penalty under section 6673(a).

¹ Unless otherwise indicated, section references are to the Internal Revenue Code. Rule references are to the Tax Court Rules of Practice and Procedure.

² The record reflects and/or the parties do not dispute the following background facts.

³ With respect to the taxable years 1989, 1990, and 1991, a case filed by petitioner with this Court and assigned docket No. 18627-97 was dismissed because it was not timely filed. Howard v. Commissioner [Dec. 52,840(M)], T.C. Memo. 1998-300.

⁴ In Howard v. Commissioner [Dec. 53,961(M)], T.C. Memo. 2000-222, we held that a tax return that petitioner had submitted to respondent for 1993 was invalid because it was not properly executed. Although respondent conceded that he improperly entered an assessment of $2,696 against petitioner based upon such return, respondent proved at trial that petitioner was liable for a total deficiency of $5,832, including the $2,696 amount, and a total sec. 6651(a)(1) addition to tax of $1,458.

⁵ The record reflects that respondent subsequently abated all of the originally assessed additions to tax for 1983. The record also shows that in 1991 respondent collected a small portion of the amount due from petitioner for 1983 by levy.

⁶ At the time the petition was filed, petitioner resided in Tucson, Arizona.

⁷ See sec. 7521(a), which provides that an officer or employee of the Internal Revenue Service "shall, upon advance request of such taxpayer, allow the taxpayer to make an audio recording of * * * [an in-person] interview at the taxpayer's own expense and with the taxpayer's own equipment."

⁸ The Court further notes that res judicata would appear to provide an alternative basis for our holding on this point.

⁹ Under the circumstances, petitioner has given us no reason to believe that remanding this matter to respondent's Appeals Office would be productive or otherwise advance the policies underlying sec. 6330. Consistent with our reasoning in Keene v. Commissioner [Dec. 55,213], 121 T.C. 8, 19-20 (2003), and in Kemper v. Commissioner [Dec. 55,214(M)], T.C. Memo. 2003-195, we conclude that a remand is unwarranted.

[Dec. 56,001(M)] David A. Lehmann v. Commissioner.

Dkt. No. 3386-04L , TC Memo. 2005-90, April 25, 2005 .

[Appealable, barring stipulation to the contrary, to CA-9]

[Code Sec. 6303]
Collection proceedings: Notice and demand for payment.

Although an individual may not have received notice and demand for payment required under Code Sec. 6303, he did not deny receiving notices of balance due for the tax years at issue. These notices constituted notice and demand for payment within the meaning of Code Sec. 6303(a).

[Code Sec. 6330]
Collection proceedings: Abuse of discretion: Receipt of notice of deficiency: CDP hearings: Recording. --

The IRS's determination to proceed with collection of an individual's tax liabilities was not an abuse of discretion, since the individual did not raise any of the issues that are subject to review in collection proceedings. Although Code Sec. 6330(c)(2)(B) generally entitles taxpayers to raise the issue of an underlying liability if they did not receive a notice of deficiency or otherwise have an opportunity to dispute the liability, the individual here, who did not receive notices of deficiency, was not entitled to proactively prevent delivery of the notices by giving an old address and subsequently failing to inform the IRS of new addresses. Furthermore, although the Appeals officer had refused to allow a stenographer to record the Collection Due Process hearing, whereupon the individual refused to proceed, the Tax Court declined to remand the case. No purpose would be served by a remand or additional hearings; instead, the Tax Court reviewed issues related to the propriety of the collection determination by reviewing the materials before it.

[Code Sec. 6673]
Penalties, civil: Delay penalty: Repeated warnings. --

A $2,500 penalty for instituting and maintaining a proceeding primarily for delay was imposed on an individual. The individual appeared at trial with no legitimate evidence or argument in support of his position, despite having been warned that any further proceedings would be justified only in the face of relevant and nonfrivolous issues. He was also aware that sanctions could be applied.

David A. Lehmann, pro se; Jonae A. Harrison, for respondent.

P filed a petition for judicial review pursuant to sec. 6330, I.R.C., in response to a determination by R that levy action was appropriate.

Held: Because P has advanced groundless complaints in dispute of the notice of intent to levy, R's determination to proceed with collection action is sustained.

Held, further, a penalty under sec. 6673, I.R.C., is due from P and is awarded to the United States in the amount of $2,500.

MEMORANDUM FINDINGS OF FACT AND OPINION

WHERRY, Judge: This case arises from a petition for judicial review filed in response to a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330.¹ The issues for decision are: (1) Whether an oral motion by petitioner to dismiss should be granted, and if not, (2) whether respondent may proceed with collection action as so determined, and (3) whether the Court, sua sponte, should impose a penalty under section 6673.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The stipulations of the parties, with accompanying exhibits, are incorporated herein by this reference.

Petitioner did not file Federal income tax returns for the years 1993, 1994, 1995, 1996, and 1997. Petitioner was at all relevant times throughout this period and through the time of trial married to and residing with his wife, Barbara J. Lehmann (Ms. Lehmann). Ms. Lehmann likewise did not file Federal income tax returns for the 1993 through 1997 years. On January 26, 1999 , respondent received from petitioner a letter dated January 22, 1999 , in which petitioner stated: "From now on all letters will be sent to: c/o 2219 West Deer Valley Road #203, Phoenix, Arizona 85027-1919. This address will serve as my 'last known address' for all purposes unless and until I provide you with another address." The letter was sent in petitioner's name only and did not mention or identify his wife.

On October 12, 2000 , two notices of deficiency were issued to petitioner with respect to the years in issue, one for 1993 through 1995 and one for 1996 and 1997.² The notices were sent to the West Deer Valley address indicated in petitioner's letter, and duplicate originals were sent to an address on file with respondent at 3040 East McRae Way, Phoenix, Arizona 85027-4916.³ Both sets were returned as "undeliverable, forwarding order expired". Petitioner did not file a petition with this Court in response to the notices of deficiency, and respondent assessed the taxes, additions to tax, and interest for all 5 years on March 19, 2001 . Notices of balance due were sent to petitioner on that date, as well as on April 23, 2001 .

Subsequently, on September 16, 2002 , respondent issued to petitioner a Final Notice --Notice of Intent to Levy and Notice of Your Right to a Hearing, with regard to the 1993 through 1997 years. Respondent on October 22, 2002 , received from petitioner a Form 12153, Request for a Collection Due Process Hearing, setting forth his disagreement with the proposed collection action, as follows:

(1) There was a failure to determine a deficiency; (2) There was a failure to issue a Notice of Deficiency; (3) Any Notice of Deficiency was void as it included income subject to Final Partnership Administrative Adjustments under TEFRA; (4) There was a failure to generate an assessment list; (5) There was a failure of the Commissioner to certify and transmit the assessment list; (6) There was a failure to record the assessment; (7) failure to provide record of assessment; and, (8) failure to send Notice of Assessment.

By a letter dated January 29, 2003 , the settlement officer to whom petitioner's case had been assigned scheduled a hearing for February 19, 2003 , in Phoenix , Arizona . The letter enclosed copies of Forms 4340, Certificate of Assessments, Payments and Other Specified Matters, for each of the years in issue.

Petitioner appeared for the scheduled conference on February 19, 2003 , accompanied by a stenographer and James Chisholm, who was identified as a witness. The settlement officer advised petitioner that recording and stenography were no longer permitted at collection hearings. He further informed petitioner that they could either proceed without recordation or that a determination could be made based on the information in petitioner's file. Petitioner declined to proceed and instead submitted to the settlement officer a document entitled "Declaration of David Lehmann", which the settlement officer understood petitioner to say asserted the only issues he intended to present. The declaration contained the following five statements, the fourth of which duplicated the second:

1. I received the Notice of Intent to Levy and Notice of Right to a Hearing.

2. I did not receive the Notices of Deficiency for any of the years 1993 through 1997.

3. My wife Barbara Lehmann received Notices of Deficiency for the years 1993 through 1997, dated October 12, 2000 and petitioned Tax Court.

4. I did not receive the Notices of Deficiency for any of the years 1993 through 1997.

5. I did not receive any of the income attributed to my wife in the Notices of Deficiency sent to her.

Respondent, on March 11, 2003 , then issued to petitioner the aforementioned Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 sustaining the proposed levy action.

Petitioner's petition disputing the notice of determination was filed on February 25, 2004 , and reflected an address in New River, Arizona.⁴ In the petition, petitioner largely repeated contentions made in his Form 12153 and additionally assigned error on the grounds that he was prohibited from recording the collection hearing. Petitioner then prayed that this Court issue an order requiring respondent to show cause why the determination should not be vacated; find the determination arbitrary, capricious, not supported by the evidence, an abuse of discretion, and contrary to law; vacate the March 11, 2003 , determination; and award petitioner costs and fees incurred in the prosecution of this action.⁵

On September 20, 2004 , respondent filed a motion for summary judgment pursuant to Rule 121. Petitioner was directed to file any response to respondent's motion on or before October 1, 2004 . However, upon review of the record, the Court noted certain internal inconsistencies that rendered summary judgment inappropriate.⁶ By order dated September 30, 2004 , the Court denied the motion for summary judgment but warned petitioner as follows:

At the same time, the Court cautions petitioner that some, but not all, of the various issues advanced by petitioner during the administrative process have been repeatedly rejected by this and other courts or are refuted by the documentary record. Moreover, maintenance of similar frivolous arguments has served as grounds for imposition of penalties under section 6673. We admonish petitioner that if he persists in making frivolous and groundless tax protester arguments in any further proceedings with respect to this case, rather than raising relevant issues, as specified in section 6330(c)(2), the Court would be in a position to impose a penalty under section 6673(a)(1). * * *

Several days later, on October 8, 2004 , the Court received from petitioner his response to respondent's motion. Therein, petitioner principally reiterated his position that, on account of the refusal to permit recording of the collection hearing, the underlying notice of determination should be vacated and his case remanded. He asked that the Court deny respondent's motion for summary judgment. The response was filed for the record, and the case proceeded to trial.

The case was called from the calendar of the trial session of the Court in Phoenix , Arizona , on October 18, 2004 . Petitioner at that time submitted a pretrial memorandum that incorporated by reference the legal arguments stated in petitioner's earlier response to respondent's motion for summary judgment but offered no additional reasoning. Petitioner's pretrial memorandum was filed with the Court after respondent indicated no objection to late filing. The case was then heard on October 19, 2004 , and both petitioner and his wife testified.

At the close of trial, petitioner stated: "All I have to say is I move to have this case dismissed on the grounds that they weren't prepared." Presumably, the basis for this statement is that, as a predicate to the admission into evidence as business records of copies of the statutory notices of deficiency underlying the assessments, counsel for respondent requested a brief recess to procure the testimony of a revenue agent. This request was granted, and a revenue agent testified as to the manner in which the documents in petitioner's administrative file were maintained in the regular course of business.