T.C. Summary Opinion 2009-143



                     UNITED STATES TAX COURT



             PERRY LAMONT CROUCH III, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 25255-07S.              Filed September 16, 2009.



     Perry Lamont Crouch III, pro se.

     Cindy Park, for respondent.



     PANUTHOS, Chief Special Trial Judge:    This case was heard

pursuant to the provisions of section 7463 of the Internal

Revenue Code in effect at the time the petition was filed.

Pursuant to section 7463(b), the decision to be entered is not

reviewable by any other court, and this opinion shall not be

treated as precedent for any other case.    Unless otherwise
                                 - 2 -

indicated, subsequent section references are to the Internal

Revenue Code as amended.

     Petitioner seeks judicial review of respondent’s

determination to proceed with collection by levy of a tax

liability for taxable year 2001.    The issue for decision is

whether respondent abused his discretion in sustaining the notice

of intent to levy.1

                            Background

     Some of the facts have been stipulated, and we incorporate

the stipulation and the accompanying exhibits by this reference.

Petitioner lived in California when he filed the petition.

     Petitioner worked as an “expert gang intervention

specialist”.   He mediated gang disputes, attempting to resolve

problems between rival gangs and between gangs and the residents

of various California neighborhoods and communities.    In 2001

petitioner was called to Moreno Valley after gang members took

over a senior citizen complex.    Petitioner helped to resolve the

gang activity at that complex.    He stayed in Moreno Valley during




     1
      Respondent filed a motion for summary judgment. Summary
judgment is a procedure designed to expedite litigation and avoid
unnecessary, time-consuming, and expensive trials. Fla. Peach
Corp. v. Commissioner, 

, 681 (1988). The Court
scheduled the motion for hearing during the trial session. The
Court concluded that holding a hearing on the motion would not
expedite the resolution of this case. Thus, the case was
submitted after petitioner testified and introduced evidence.
Respondent’s motion will be denied.
                                 - 3 -

the resolution and received reimbursement for his expenses.    He

then returned to his home in Los Angeles.

     Petitioner did not timely file a tax return for taxable year

2001.    In 2003 respondent prepared a substitute for return for

2001.    On April 13, 2004, respondent mailed a notice of

deficiency to petitioner, determining a $3,024 deficiency for

taxable year 2001, but the U.S. Postal Service (USPS) returned

the notice marked “forwarding order expired”.    Respondent closed

this notice of deficiency and did not assess the amount

determined therein.2

     On April 15, 2004, petitioner filed an amended return for

2001, and on August 17, 2004, he filed a second amended return

for 2001.3

     On September 22, 2005, respondent mailed a notice of

deficiency for 2001 by certified mail to petitioner’s last known

address.     The address on this notice of deficiency is the same as

the address petitioner listed on his petition.    The USPS did not

return the September 22, 2005 notice of deficiency (hereinafter

notice of deficiency) to respondent.     In the notice of deficiency



     2
      From respondent’s failure to assess the $3,024 deficiency,
we presume that respondent concluded that the returned notice of
deficiency was insufficient to support a valid assessment under
secs. 6201(a) and 6212(a) and (b).
     3
      The parties referred to the returns petitioner filed after
the substitute return as amended returns. For convenience, we
will use their designation for these filings.
                               - 4 -

respondent explained that he denied petitioner’s claimed business

travel deduction because petitioner did not respond to

respondent’s request for supporting documentation.   Respondent

determined a $2,358 deficiency for taxable year 2001, together

with a $352 addition to tax for petitioner’s failure to timely

file a 2001 Federal income tax return.4   Petitioner did not

petition this Court for redetermination of the deficiency, and

respondent assessed the deficiency, together with interest and

the late-filing addition to tax, on March 6, 2006.   Respondent

also issued a notice and demand for payment on March 6, 2006.

     On a date not apparent from the record, petitioner requested

audit reconsideration of the deficiency determination for taxable

year 2001.5   Respondent provided his final response to

petitioner’s request in a letter dated December 6, 2006, sent by

certified mail, and stating in part:   “We have disallowed your

request for reconsideration, because you did not submit all the

required documentation.”   The letter specifically stated that

respondent requested a police or fire department report

describing the fire petitioner claimed destroyed his 2001 tax



     4
      The record includes a copy of this notice of deficiency.
     5
      While the date of petitioner’s request for audit
reconsideration is unclear, a letter dated Aug. 28, 2006, from
respondent to petitioner seeks information in addition to
documents petitioner submitted on June 12, 2006. Thus,
petitioner must have requested reconsideration on or before June
12, 2006.
                               - 5 -

records, but petitioner did not provide those documents.   The IRS

employee who signed the reconsideration denial letter held the

position “Operations Manager, Examination”.   Petitioner did not

claim this letter, and the USPS returned it, marked “unclaimed”,

to respondent.

     Respondent issued a Notice of Intent to Levy and Notice of

Your Right to a Hearing to petitioner, and petitioner timely

requested a collection hearing.   In his hearing request

petitioner explained that his original receipts had been

destroyed and that he provided the IRS with “the requested

information” in 2006.

     At the collection hearing petitioner challenged the

underlying tax liability for 2001 and declined to discuss any

collection alternatives.   The settlement officer (SO) refused to

address the underlying tax liability.

     Respondent issued a notice of determination that recited:

(1) The SO’s verification that applicable legal and

administrative procedures had been followed; (2) that respondent

sent petitioner a notice of deficiency which the USPS did not

return, which petitioner neither confirmed nor denied receiving,

and from which petitioner did not file a petition for

redetermination; (3) that petitioner’s previous request for audit

reconsideration was a prior opportunity to dispute the tax for

2001 and precluded his challenging the underlying liability in
                               - 6 -

the collection hearing; (4) that petitioner did not want to

discuss or consider any collection alternatives; and (5) that

collection by levy properly balances the need for efficient

collection with petitioner’s concern that the collection action

be no more intrusive than necessary.     Respondent sustained the

notice of intent to levy.

     In his petition seeking judicial review of respondent’s

determination to sustain the levy action, petitioner raised only

challenges to the underlying tax liability.

     At trial respondent’s counsel stated that if the Court

should decide that petitioner is eligible to challenge the

underlying tax liability, then respondent would ask the Court to

remand the case for Appeals Office consideration of the

liability.   As a result of this request, the trial focused on the

section 6330 hearing and the notice of determination and did not

address the existence or amount of the 2001 tax liability.

                            Discussion

     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.

Section 6330(a) requires the Secretary at least 30 days before

beginning any levy 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.
                                - 7 -

     If the taxpayer requests a section 6330 hearing, a

settlement officer or Appeals officer in the IRS’s Appeals Office

who has had no prior involvement with the unpaid taxes at issue

conducts the hearing.    Sec. 6330(b)(1), (3).   At the hearing the

officer shall obtain verification that the requirements of any

applicable law or administrative procedure have been met.       Sec.

6330(c)(1).   The taxpayer may raise any issue relevant to the

unpaid tax or the proposed levy.    Sec. 6330(c)(2)(A).   The

taxpayer may also challenge the existence or amount of the

underlying tax liability, but only if he did not receive a

statutory notice of deficiency or did not otherwise have an

opportunity to dispute that liability.    Sec. 6330(c)(2)(B);

Montgomery v. Commissioner, 

(2004).     An opportunity to

dispute the underlying liability that precludes a taxpayer from

challenging the liability at the hearing includes a prior

opportunity for a conference with the Appeals Office when the

taxpayer availed himself of that opportunity.     Perkins v.

Commissioner, 

, 63 (2007); Lewis v. Commissioner, 

, 61 (2007); see also sec. 301.6330-1(e)(3), Q&A-E2,

Proced. & Admin. Regs.

     After the hearing the officer must determine whether and how

to proceed with collection and shall consider:    (1) The

administrative and procedural verification; (2) the relevant

issues raised by the taxpayer; (3) where permitted, challenges to
                               - 8 -

the underlying tax liability; and (4) whether any proposed

collection action properly balances the need for efficient

collection of taxes with the taxpayer’s legitimate concern that

the collection action be no more intrusive than necessary.    Sec.

6330(c)(3).

     In reviewing a notice of determination sustaining a

collection action, where the validity of the underlying tax

liability is properly at issue, the Court reviews the

determination of the underlying tax liability de novo.     Sego v.

Commissioner, 

, 610 (2000); Goza v. Commissioner, 

, 181-182 (2000).   If the Court finds that a taxpayer is

liable for deficiencies, additions to tax, and/or penalties, then

the administrative determination sustaining the collection action

will be reviewed for abuse of discretion.   See Downing v.

Commissioner, 

, 31 (2002); Godwin v. Commissioner,

T.C. Memo. 2003-289, affd. 

(11th Cir. 2005).

If the liability is not properly at issue, the Court reviews the

administrative determination for abuse of discretion.    Sego v.

Commissioner, supra at 610; Goza v. Commissioner, supra at 182.

An abuse of discretion occurs when the exercise of discretion is

without sound basis in fact or law.    Murphy v. Commissioner, 

, 308 (2005), affd. 

(1st Cir. 2006).

     Section 6330(c)(4) expressly provides that a taxpayer, at a

collection hearing before the Appeals Office, may not raise
                                 - 9 -

issues that he previously raised and that were considered in a

previous collection proceeding or in any other administrative or

judicial proceeding in which he meaningfully participated.

Magana v. Commissioner, 

, 492 (2002); see also sec.

301.6330-1(e)(1), Proced. & Admin. Regs.    Section 6330(c)(4) in

effect codifies the legal doctrines of res judicata and

collateral estoppel in their application to collection

proceedings.     Wooten v. Commissioner, T.C. Memo. 2003-113.

     “Respondent has previously stated that ‘Because section

6330(c)(2)(B) explicitly applies to challenges to tax liability,

section 6330(c)(4) with its more stringent requirement of

meaningful participation applies to non-liability issues.’”

Lewis v. Commissioner, supra at 52 n.4 (quoting Office of Chief

Counsel Notice CC-2003-016 at 20 (May 29, 2003) and noting that

the Commissioner restated this position in Office of Chief

Counsel Notice CC-2006-019 at 33 (Aug. 18, 2006)).    Moreover,

respondent has not argued section 6330(c)(4) as grounds to

preclude petitioner’s challenge to the underlying liability.

Accordingly, we decide this issue solely with respect to section

6330(c)(2)(B).    See

to consider petitioner’s challenge to the

underlying tax liability on two grounds:    (1) Respondent sent

petitioner a notice of deficiency, and (2) petitioner’s challenge

to the liability was considered when he requested audit
                                - 10 -

reconsideration.   Respondent argues that petitioner’s receipt of

the notice of deficiency and participation in the audit

reconsideration procedure each independently satisfy section

6330(c)(2)(B) and precludes petitioner’s challenging the

underlying tax liability during the section 6330 hearing.

     There is no dispute that respondent mailed the notice of

deficiency to petitioner’s last known address or that the USPS

did not return the notice to respondent.   Likewise, there is no

dispute that petitioner meaningfully participated in the audit

reconsideration he requested.    However, petitioner alleges that

he did not actually receive the notice of deficiency, and he

asserts that the decision made by a manager in an IRS examination

function to reject his audit reconsideration request should not

prevent him from having a fair opportunity for an impartial

review of his underlying tax liability.

     Although petitioner testified that his wife and stepdaughter

were authorized to sign for his deliveries when he was away from

home and trusted neighbors were authorized to sign for deliveries

when the family was away, the record does not contain any

evidence that anyone signed for the notice of deficiency.

Petitioner claims he did not receive the notice of deficiency

until the Taxpayer Advocate’s office provided him with a copy in

January 2008.   He testified credibly about consistently

responding to mailings from the IRS (and the record supports his
                              - 11 -

diligence), and he explained that if he had received the notice

of deficiency he surely would have timely responded.

     Respondent demonstrated and the parties stipulated that

respondent mailed the notice of deficiency to petitioner’s last

known address by certified mail.   However, respondent did not

provide any evidence of delivery or actual receipt.     Respondent

relies on the presumption of official regularity and argues that

because the notice was properly addressed and deposited with the

USPS as certified mail, it must have been delivered to

petitioner.

     The Commissioner is authorized to issue a notice of

deficiency by mailing it using certified or registered mail to

the taxpayer’s last known address.     Sec. 6212(a) and (b).   The

notice of deficiency is valid independent of receipt by the

taxpayer.   See Pietanza v. Commissioner, 

, 736 (1989),

affd. without published opinion 

(3d Cir. 1991).

The parties’ stipulation satisfies the requirements of sections

6212 and 6213(a).   Thus, the notice of deficiency and the

subsequent assessment are valid.

     In contrast, under the plain language of section

6330(c)(2)(B) only actual receipt of the notice of deficiency

will preclude a challenge to the underlying tax liability in a

section 6330 hearing on the ground that a taxpayer had the chance
                               - 12 -

to petition this Court following his receipt of the notice of

deficiency but failed to file the petition.

     This is a close case.   Respondent has no record of any

returned receipt for the delivery of the notice of deficiency,

and petitioner admits he authorized certain others to sign for

his deliveries.   Respondent did not present any direct evidence

of receipt by petitioner or anyone who may have been authorized

to receive his mail.    Under the circumstances, specifically

petitioner’s credible testimony and his history of promptly

responding to tax-related notices, we are not convinced that

petitioner received the notice of deficiency.    See Butti v.

Commissioner, T.C. Memo. 2006-66.    Petitioner has rebutted the

presumption of delivery, and we hold that in the absence of any

proof of actual delivery, the mailing of the notice of deficiency

was not sufficient grounds for the SO to refuse to consider

petitioner’s challenge to the underlying tax liability during the

section 6330 hearing.

     Section 6330(c)(2)(B) is stated in the disjunctive; either

receipt of a notice of deficiency or a prior opportunity to

dispute the underlying liability will prevent a taxpayer’s

disputing the liability again during the section 6330 hearing.

Thus, we must also consider whether petitioner had such an

opportunity independent of the notice of deficiency.
                              - 13 -

     It is unclear precisely when petitioner sought audit

reconsideration or what triggered his request.   See supra note 5.

As indicated, respondent mailed the notice of deficiency on

September 22, 2005, followed by a statutory notice of balance due

and assessment on March 6, 2006.   Sometime presumably in 2005 or

2006 petitioner requested audit reconsideration.   Petitioner

submitted some documentation on June 12, 2006, and respondent

requested additional information regarding petitioner’s allegedly

destroyed records on August 28, 2006.   Finally, an Examination

operations manager denied petitioner’s request for

reconsideration on December 6, 2006, on the grounds that

petitioner had not provided all the required information.

     Respondent argues that the audit reconsideration petitioner

requested was a prior opportunity to dispute his 2001 tax

liability.   There are two problems with this argument:   (1) The

audit reconsideration was not an independent review of

petitioner’s liability because the centralized reconsideration

unit in the IRS Examination function and not the IRS Appeals

Office handled the request for reconsideration; and (2) the

letter respondent sent to petitioner at the end of the process

indicates that respondent disallowed the request for

reconsideration, not that he reviewed and affirmed the audit

results.   We presume, arguendo, that respondent denied

petitioner’s request because the documents he provided were
                              - 14 -

insufficient to change the deficiency determined in the notice of

deficiency and that respondent provided petitioner an adequate

opportunity to present his case for audit reconsideration.

     However, we still must decide whether audit reconsideration

by employees in the same operational unit (Examination Division)

that prepared the substitute for return, examined petitioner’s

amended returns, and determined the deficiency for 2001 suffices

as a prior opportunity to dispute the 2001 tax liability under

section 6330(c)(2)(B).

     Section 301.6330-1(e)(3), Q&A-E2, Proced. & Admin. Regs., is

applicable for requests for section 6330 hearings made on or

after November 16, 2006, and provides as follows:

     An opportunity to dispute the underlying liability includes
     a prior opportunity for a conference with Appeals that was
     offered either before or after the assessment of the
     liability. An opportunity for a conference with Appeals
     prior to the assessment of a tax subject to deficiency
     procedures is not a prior opportunity for this purpose.

     It is apparent from the record that the IRS’s centralized

reconsideration unit, represented by an operations manager in the

IRS Examinations function, handled petitioner’s audit

reconsideration request.   Thus, we are satisfied that audit

reconsideration did not provide petitioner with an opportunity

for either an Appeals Office conference or Appeals Office

consideration of his liability.

     We concluded in Lewis v. Commissioner, 

(2007),

that the legislative history of the Internal Revenue Service
                              - 15 -

Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3401,

112 Stat. 746, indicates that Congress intended to preclude

taxpayers who were previously afforded a conference with the

Appeals Office from raising their underlying liability again in a

section 6330 hearing and before this Court.   We upheld section

301.6330-1(e)(3), Q&A-E2, Proced. & Admin. Regs., because the

regulation implements the congressional mandate in a reasonable

manner, and we stated that “we read sec. 6330(c)(2)(B) to allow a

taxpayer who has had neither a conference with Appeals nor an

opportunity for a conference with Appeals to raise the underlying

liability in a collection review proceeding before Appeals and

this Court.”

n.9; see also Montgomery v. Commissioner,

(taxpayers permitted to challenge their underlying

tax liability where they did not receive a notice of deficiency

or have an opportunity for Appeals Office consideration of their

underlying tax liability).

     Petitioner did not have an Appeals conference or an

opportunity for an Appeals conference before the section 6330

hearing.   The audit reconsideration was not performed by the

Appeals Office, and the SO did not permit petitioner to challenge

the underlying tax liability during the section 6330 hearing.

     Under the circumstances (nonreceipt of the notice of

deficiency and no prior opportunity for Appeals Office

consideration of the underlying tax liability), it was an abuse
                             - 16 -

of discretion for the SO to uphold the levy action without

considering petitioner’s challenge to his 2001 tax liability.

     In appropriate circumstances we may remand a case to the

Appeals Office to provide a hearing under section 6330(b).    See

Lunsford v. Commissioner, 

, 189 (2001); Harrell v.

Commissioner, T.C. Memo. 2003-271.    We will remand this case with

instructions to respondent to offer petitioner an Appeals Office

conference during which he may challenge the underlying tax

liability for taxable year 2001.


                                     An appropriate order will be

                              issued.