T.C. Memo. 2006-277



                UNITED STATES TAX COURT



           WILLIAM M. LEGGETT, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 15167-04L.               Filed December 28, 2006.




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

     Held: R’s determination to proceed with
collection by levy is sustained;

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



William M. Leggett, pro se.

Monica J. Miller, for respondent.
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              MEMORANDUM FINDINGS OF FACT AND OPINION


     WHERRY, Judge:    This case is before the Court on a petition

for judicial review of a Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330.    The issues

for decision are:    (1) Whether respondent may proceed with

collection by levy of petitioner’s tax liabilities for the 1994,

1995, and 1996 taxable years; and (2) whether the Court should

impose a penalty pursuant to section 6673(a).1

                          FINDINGS OF FACT

     At the time the petition was filed, petitioner resided in

Sorrento, Florida.

     Petitioner failed to file Federal income tax returns for his

1994, 1995, and 1996 taxable years.     On July 26, 2000, respondent

mailed to petitioner a notice of deficiency for those taxable

years.   Petitioner timely petitioned this Court, and a trial was

held on October 15, 2001 (2001 trial).    At trial, petitioner

argued that the exchange of his personal physical services for

Federal Reserve Notes did not constitute taxable income.    The

Court issued an Oral Findings of Fact and Opinion which sustained

the deficiencies and additions to tax determined by respondent

and admonished petitioner for failing to file his returns and

raising frivolous tax-protester arguments.



     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code (Code) of 1986, as amended.
                               - 3 -

     Thereafter, on March 1, 2004, respondent issued to

petitioner a Final Notice - Notice of Intent to Levy and Notice

of Your Right to a Hearing with respect to the years in issue.

In response, petitioner timely submitted to respondent a Form

12153, Request for Collection Due Process Hearing, which stated

that his disagreement with the levy was as follows:     “ASSESSMENT

INVALID”.   The Appeals Office settlement officer assigned to

petitioner’s case, J. Feist (Mr. Feist), wrote to petitioner on

June 15, 2004, to notify him of his assignment, conference

procedural practices, and the scheduled hearing date of July 2,

2004.   Petitioner subsequently sent to Mr. Feist a letter dated

June 27, 2004, that requested the hearing date be rescheduled for

the middle of July and provided notice of his intention to audio

record the hearing.

     The hearing was conducted via telephone on July 12, 2004.

Shortly after the hearing began, petitioner informed Mr. Feist

that he was recording the hearing.     Mr. Feist explained to

petitioner that only face-to-face hearings may be recorded.     He

also advised that petitioner did not qualify for a face-to-face

hearing as petitioner had only raised frivolous arguments.      Mr.

Feist ended the hearing when petitioner refused to cease

recording and failed to raise any nonfrivolous relevant issues.

     Respondent then issued to petitioner the above-mentioned

Notice of Determination Concerning Collection Action(s) Under
                               - 4 -

Section 6320 and/or 6330 for the years in issue on July 15, 2004.

The attachment to the notice stated that the levy was

“appropriate and reasonable under the circumstances thereby

balancing the need for efficient collection of the taxes while

not being any more intrusive than necessary.”   It also indicated

that petitioner’s unpaid tax liabilities for 1994, 1995, and

1996, were $77,311.19, $16,470.89, and $23,277.75, respectively,

as calculated through July 15, 2004.

     Petitioner timely petitioned this Court for review of the

collection action.   Petitioner argued in the petition that “the

IRS violated petitioner’s right to procedural due process by

refusing allow [sic] him to make an administrative record by

recording the telephone conference on July 12, 2004.”   Petitioner

also contended that “the IRS failed to comply with the provisions

of 26 U.S.C. Section 6321/31", that “the assessments for the tax

period [sic] 1994, 1995, and 1996 are invalid”, and that “the IRS

lost its administrative collection powers by failing to comply

with the notice requirements of 26 U.S.C. Section 6303.”

     In addition, petitioner filed a posttrial brief which stated

he did “not and has not engaged in an activity that produces

‘TAXABLE INCOME’, but only an exchange of intellectual and

physical property for an agreed upon perceived value in the only

medium of exchange of the day i.e. FRN’s [Federal Reserve

Notes]”.   Petitioner’s brief also stated that petitioner is “a
                                 - 5 -

‘native born American national’, not to be mistaken as a ‘U.S.

CITIZEN’”.

                                OPINION

I.   Collection Action

     A. General Rules

     Pursuant to section 6331(a), if a taxpayer liable to pay

taxes fails to do so within 10 days after notice and demand for

payment, the Secretary is authorized to collect such tax by levy

upon the taxpayer’s property.     The Secretary is obliged to

provide the taxpayer with 30 days’ advance notice of levy

collection and of the administrative appeals available to the

taxpayer.    Sec. 6331(d).   Upon a timely request a taxpayer is

entitled to a collection hearing before the IRS Office of

Appeals.    Sec. 6330(b)(1).

     At the collection hearing, the taxpayer may raise “any

relevant issue relating to the unpaid tax or the proposed levy,

including” appropriate spousal defenses, challenges to the

appropriateness of collection actions, and offers of collection

alternatives.    Sec. 6330(c)(2)(A).     The taxpayer may not contest

the validity of the underlying tax liability unless the taxpayer

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

did not otherwise have an opportunity to dispute such tax

liability.    Sec. 6330(c)(2)(B).   In rendering a determination,

the Appeals officer must take into consideration verification
                                  - 6 -

that “requirements of any applicable law or administrative

procedure have been met”, relevant issues relating to the unpaid

tax or proposed levy, and “whether any proposed collection action

balances the need for the efficient collection of taxes with the

legitimate concern of the person that any collection action be no

more intrusive than necessary.”      Sec. 6330(c)(3).

     The taxpayer is entitled to appeal the determination of the

Appeals Office made on or before October 16, 2006, to the Tax

Court or a U.S. District Court, depending on the type of tax at

issue.     Sec. 6330(d).2   Where the validity of the underlying tax

liability is properly at issue, the Court will review the matter

de novo.     Sego v. Commissioner, 

, 610 (2000); Goza v.

Commissioner, 

, 181-182 (2000).      The Court reviews

any other administrative determination regarding the proposed

levy action for an abuse of discretion.      Sego v. 

at 610; Goza v. 

at 182.

     B. Appeals Hearing

     Petitioner alleges that his right to procedural due process

was violated because Mr. Feist did not allow him to record his

telephonic hearing.     Section 7521(a)(1) provides that

     Any officer or employee of the Internal Revenue Service
     in connection with any in-person interview with any
     taxpayer relating to the determination or collection of


     2
      Determinations made after Oct. 16, 2006, are appealable
only to the Tax Court. See Pension Protection Act of 2006, Pub.
L. 109-280, sec. 855, 120 Stat. 1019.
                               - 7 -

     any tax shall, upon advance request of such taxpayer,
     allow the taxpayer to make an audio recording of such
     interview at the taxpayer’s own expense and with the
     taxpayer’s own equipment.

This Court has held that section 7521 applies to section 6330

face-to-face hearings and a taxpayer providing the IRS with

advance notice is allowed to record his face-to-face hearing.

Keene v. Commissioner, 

, 19 (2003).   Notably, this

Court has held that section 7521 is not applicable to telephonic

hearings and a taxpayer is not entitled to record his telephonic

hearing.   Calafati v. Commissioner, 127 T.C. ___ (2006).

     Absent a situation controlled by section 7521, as in the

instant case, regulations promulgated under section 6330 provide

that “A transcript or recording of any face-to-face meeting or

conversation between an Appeals officer or employee and the

taxpayer or the taxpayer’s representative is not required.”     Sec.

301.6330-1(d)(2), Q&A-D6, Proced. & Admin. Regs.   “[T]he

applicable statutes and regulations do not confer any right to

record a telephone conference conducted as part of a collection

due process hearing.”   Little v. United States, 97 AFTR 2d 2006-

1466 (M.D.N.C. 2005), affd. 

(4th Cir. 2006).

     This Court does not remand cases to the Commissioner’s

Appeals Office merely on account of the lack of a recording when

to do so is not necessary and would not be productive.      Lunsford

v. Commissioner, 

, 189 (2001); Frey v. Commissioner,

T.C. Memo. 2004-87.   “A principal scenario falling short of the
                               - 8 -

necessary or productive standard exists where the taxpayers rely

on frivolous or groundless arguments consistently rejected by

this and other courts.”   Carrillo v. Commissioner, T.C. Memo.

2005-290; see also Lunsford v. 

; Frey v.

; Durrenberger v. Commissioner, T.C. Memo.

2004-44; Brashear v. Commissioner, T.C. Memo. 2003-196; Kemper v.

Commissioner, T.C. Memo. 2003-195.     The Court does not find it

necessary or productive to remand petitioner’s case for a second

hearing as petitioner did not raise any relevant issues relating

to his unpaid tax liabilities at his Appeals Office conference or

at trial.   Petitioner has instead espoused only frivolous and

groundless arguments that the Court specifically rejected in

petitioner’s 2001 trial and again in a 2005 trial regarding a

deficiency and additions to tax for petitioner’s 2001 taxable

year.   See Leggett v. Commissioner, T.C. Memo. 2005-185.

     C. Abuse of Discretion

     The existence or amounts of petitioner’s underlying tax

liabilities are not properly at issue because petitioner received

a notice of deficiency for the years in issue and had the

opportunity to dispute such liabilities at his 2001 trial.

Accordingly, the Court will review the administrative record of

the levy for an abuse of discretion.    An abuse of discretion has

occurred if the “Commissioner exercised * * * [his] discretion
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arbitrarily, capriciously, or without sound basis in fact or

law.”   Woodral v. Commissioner, 

, 23 (1999).

     Petitioner frivolously alleges without any evidentiary

support that respondent did not comply with the notice

requirements of section 6303.   Section 6303(a) provides that “the

Secretary shall, as soon as practicable, and within 60 days,

after the making of an assessment of a tax pursuant to section

6203, give notice to each person liable for the unpaid tax,

stating the amount and demanding payment thereof.”    If the notice

is mailed, it shall be sent to the taxpayer’s last known address.

Sec. 6303(a).   A notice of balance due constitutes a notice and

demand for payment for purposes of section 6303(a).    Craig v.

Commissioner, 

, 262-263 (2002).    The record reflects

that respondent sent petitioner a notice of balance due for the

years in issue on May 12, 2003.

     Petitioner alleges broadly that respondent did not comply

with sections 6321 and/or 6331.   Section 6321 is not relevant to

petitioner’s case as it pertains to liens.    Section 6331 governs

levy actions and thus is applicable.    The record reflects that

respondent complied with section 6331 as respondent provided

petitioner with the requisite notice, a Final Notice - Notice of

Intent to Levy and Notice of Your Right to a Hearing, on March 1,

2004, which petitioner apparently received, as he requested a

collection hearing.
                                 - 10 -

      Petitioner also contends that respondent’s assessments are

invalid.   Petitioner did not show, or even allege, that there was

any irregularity in the assessment procedure that would raise a

question about the validity of the assessments.      Respondent noted

verification in the notice of determination that all requirements

of applicable law and administrative procedure had been met and

that respondent had properly balanced the need for efficient

collection against any legitimate concerns of intrusiveness

raised by petitioner.   Petitioner has not presented any evidence

or persuasive arguments that respondent erred or abused his

discretion but instead has raised frivolous and groundless

arguments.   Hence, the Court concludes that respondent’s

determination to proceed with collection of petitioner’s tax

liabilities was not in error or an abuse of discretion, and

respondent may proceed with the proposed collection.

II.   Section 6673 Penalty

      Section 6673(a)(1) authorizes the Tax Court to impose a

penalty not in excess of $25,000 on a taxpayer for proceedings

instituted primarily for delay or in which the taxpayer’s

position is frivolous or groundless.      “A petition to the Tax

Court, or a tax return, is frivolous if it is contrary to

established law and unsupported by a reasoned, colorable argument

for change in the law.”      Coleman v. Commissioner, 

, 71

(7th Cir. 1986).
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     Respondent, on brief, asserts that the Court should impose a

penalty pursuant to section 6673(a)(1).   Petitioner is no

stranger to the Court or to the section 6673 penalty.   Petitioner

raised frivolous arguments in his first trial which involved the

taxable years in issue here of 1994, 1995, and 1996.    Petitioner

made similar arguments in a 2005 trial, regarding a deficiency

and additions to tax for his 2001 taxable year, and was ordered

to pay $5,000 to respondent for again asserting frivolous

arguments.   Leggett v. 

.   Despite repeated

warnings by the Court in petitioner’s two previous trials and the

imposition of a section 6673 penalty, petitioner repeated the

same frivolous arguments in this current case although he did not

dwell on them at trial.   The Court is convinced that petitioner’s

positions are frivolous and made at least in part for delay.

Therefore, the Court concludes that a penalty of $2,500 should be

imposed on petitioner.

     The Court has considered all of petitioner’s contentions,

arguments, requests, and statements.   To the extent not discussed

herein, we conclude that they are meritless, moot, or irrelevant.

     To reflect the foregoing,


                                          An appropriate decision

                                    will be entered.