T.C. Memo. 2018-73



                        UNITED STATES TAX COURT



                  DAVID J. JARRETT, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 29025-15L.                       Filed May 31, 2018.



      Charles R. Markham, for petitioner.

      Andrea M. Faldermeyer, for respondent.



                          MEMORANDUM OPINION


      CHIECHI, Judge: This case arises from a petition filed in response to a

notice of determination concerning collection action(s) under section 6320 and/or

6330 of the Internal Revenue Code (notice of determination). We must decide
                                         -2-

[*2] whether to sustain the determinations in the notice of determination.1 We

hold that we will sustain those determinations.

                                     Background

      The facts in this case, which the parties submitted under Rule 122,2 have

been stipulated by the parties and are so found.

      At all relevant times, including at the time he filed the petition in this case,

petitioner resided at a certain address in West Hollywood, California (West Holly-

wood address).

      At all relevant times, petitioner was a member of the board of directors of

Hollywood Arts (Hollywood Arts’ board), a tax-exempt organization formed in

2006 that provided arts-based education and development to at-risk, runaway, and

homeless youths in Hollywood, California. The Hollywood Arts’ board was

responsible for the overall policy and direction of Hollywood Arts. The


      1
         When referring herein to the determinations in the notice of determination,
we are not referring to the determination in that notice that petitioner did not have
the right to challenge the underlying tax liabilities. The parties agreed before this
case was submitted that petitioner has the right to challenge the underlying tax
liabilities. However, petitioner concedes those liabilities on brief and advances
only certain other reasons in support of his position that respondent is precluded
from collecting those liabilities.
      2
       All Rule references are to the Tax Court Rules of Practice and Procedure.
All section, subtitle, and chapter references are to the Internal Revenue Code
(Code) in effect at all relevant times.
                                         -3-

[*3] Hollywood Arts’ board had final approval authority over the organization’s

annual budget. None of the members of the Hollywood Arts’ board received any

compensation.

      From January 25, 2010, until January 2012, petitioner was treasurer of the

Hollywood Arts’ board, which was an uncompensated and voluntary, but not

honorary, position. As Hollywood Arts’ treasurer, petitioner had access to Holly-

wood Arts’ accounting books and records. Petitioner’s duties in that position

included (1) assisting in the preparation of Hollywood Arts’ budget, (2) making

Hollywood Arts’ financial information available to board members and the public,

(3) filing each calendar quarter Form 941, Employer’s Quarterly Federal Tax Return

(Form 941), (4) collecting and paying over to the Internal Revenue Service (IRS)

taxes under chapter 21, Federal Insurance Contributions Act, and chapter 24,

Collection of Income Tax at Source on Wages, of subtitle C, Employment Taxes,3

(5) giving a report at each meeting of the Hollywood Arts’ board, and (6) chairing

Hollywood Arts’ finance committee.4

      3
       We shall refer to the taxes imposed by chapter 21 as Social Security taxes
and Medicare taxes. We shall refer to the taxes withheld under chapter 24 as taxes
withheld on wages. We shall sometimes refer collectively to Social Security taxes
and Medicare taxes under chapter 21 and taxes withheld on wages under chapter
24 of subtitle C as employment taxes or trust fund taxes.
      4
          Hollywood Arts’ finance committee was responsible for (1) developing and
                                                                      (continued...)
                                          -4-

[*4] In January 2012, petitioner was elected chairman of the Hollywood Arts’

board.

         For each of the following taxable periods (sometimes, quarters at issue),

Hollywood Arts filed with the IRS Form 941 on the dates indicated, in which it

showed the following liability for employment taxes:

                  Quarter Ended        Date Filed     Liability Shown
                     3/31/2010          4/30/2010        $7,939.25
                     6/30/2010          10/5/2010          7,487.04
                     9/30/2010        10/31/2010           9,413.18
                     3/31/2012          4/10/2013          5,560.24
                     6/30/2012          4/10/2013          4,080.72
                    12/31/2012          4/10/2013            903.03

Except for $1,342.46 with respect to the quarter ended on March 31, 2010, and

$4,352.64 with respect to the quarter ended on March 31, 2012, Hollywood Arts

did not pay the employment tax liability shown in Form 941 for any of the quarters

at issue before or with the filing of Form 941 for each of those quarters.



         4
       (...continued)
reviewing the organization’s fiscal procedures, (2) developing, reviewing, and
submitting for approval to the Hollywood Arts’ board the organization’s annual
budget, and (3) reviewing and submitting each quarter to the Hollywood Arts’
board a report showing the organization’s income and expenses for each such
quarter.
                                        -5-

[*5] On March 5, 2011, respondent assigned a revenue officer (first revenue

officer) to (1) collect the employment tax liability which Hollywood Arts had

shown in Form 941 that it had filed for each of the quarters ended on March 31,

June 30, and September 30, 2010 (sometimes, quarters at issue in 2010) and which

it had not paid and (2) investigate why Hollywood Arts did not file Form 941 for

the quarter ended on December 31, 2010 (first revenue officer’s original

assignment). In performing that assignment, the first revenue officer determined

that not only had Hollywood Arts not paid its employment tax liability for each of

the quarters ended on March 31, June 30, and September 30, 2010, which it had

shown in Form 941 that it had filed for each of those quarters, it also had not paid

its employment tax liability for each of the quarters ended on March 31, June 30,

and December 31, 2012 (sometimes, quarters at issue in 2012), which it had

shown in Form 941 that it had filed for each of those quarters. Consequently, the

first revenue officer expanded the first revenue officer’s original assignment to

include the quarters at issue in 2012. (We shall sometimes refer to the IRS’

examination of Hollywood Arts’ employment tax liability for each of the quarters

at issue in 2010 and each of the quarters at issue in 2012 as Hollywood Arts’

employment tax examination.)
                                         -6-

[*6] As part of Hollywood Arts’ employment tax examination, the first revenue

officer made entries in a so-called integrated collection services history transcript

maintained with respect to Hollywood Arts. Those entries described the first

revenue officer’s activities during that examination and included notes that that

officer had made describing communications held, results of the first revenue

officer’s investigation, comments on any progress made, actions taken, and the

next actions or steps to be taken.

      In August 2013, respondent assigned a different revenue officer (second

revenue officer) to Hollywood Arts’ employment tax examination. As part of

Hollywood Arts’ employment tax examination, the second revenue officer made

entries in the integrated collection services history transcript maintained with

respect to Hollywood Arts. Those entries described the second revenue officer’s

activities during that examination and included notes that that officer had made

describing communications held, results of the second revenue officer’s investi-

gation, comments on any progress made, actions taken, and the next actions or

steps to be taken.

      The second revenue officer concluded during the fall of 2013 that it would

be virtually impossible to collect from Hollywood Arts any unpaid employment

taxes for the quarters at issue. On December 10, 2013, the second revenue officer
                                         -7-

[*7] began an investigation into assessing the so-called trust fund recovery penalty

under section 6672 (section 6672 penalty) with respect to those unpaid taxes,

which he determined totaled $17,609.81 as of that date. On December 10, 2013,

the second revenue officer identified certain officers of Hollywood Arts, including

petitioner, as potentially liable for the section 6672 penalty.

      On December 10, 2013, the second revenue officer also issued summonses

to Bank of America requiring it to produce bank signature cards, corporate

resolutions, bank statements, and canceled checks for all of Hollywood Arts’ bank

accounts for the period January 1 through September 30, 2010 (Bank of America

summonses for 2010).

      On December 12, 2013, the second revenue officer contacted petitioner by

telephone (December 12, 2013 call) and advised him that he would be receiving

notice of the Bank of America summonses for 2010. He also explained to

petitioner the section 6672 penalty. When the second revenue officer attempted to

interview petitioner during the December 12, 2013 call, petitioner declined and

indicated that he wanted to “consult outside counsel” and to reschedule the

interview for early 2014.

      Thereafter through early February 2014, the second revenue officer contin-

ued his investigation as part of the Hollywood Arts’ employment tax examination,
                                        -8-

[*8] which included his review in January 2014 of the documents that he had

received that month pursuant to the Bank of America summonses for 2010. The

second revenue officer concluded on the basis of his investigation that petitioner

and Rachel Romanski (Ms. Romanski), Hollywood Arts’ executive director, were

the only officers of Hollywood Arts on whom the IRS should consider imposing

the section 6672 penalty for each of the quarters at issue.

      The second revenue officer determined as he continued his investigation in

early 2014 to issue additional summonses to Bank of America requiring it to

produce bank signature cards, corporate resolutions, bank statements, and

canceled checks for all of Hollywood Arts’ bank accounts for each of the quarters

ended on March 31, June 30, and December 31, 2012 (Bank of America

summonses for 2012). On January 28, 2014, the second revenue officer prepared

for mailing the Bank of America summonses for 2012 and notices of those

summonses addressed to Hollywood Arts, petitioner, and Ms. Romanski,

respectively.

      As of January 28, 2014, the second revenue officer had concluded that it

was proper to issue Letter number 1153, a so-called trust fund recovery penalty

letter (Letter 1153), to each of petitioner and Ms. Romanski.
                                        -9-

[*9] On February 3, 2014, an IRS acting group manager, T. Nichter (group

manager Nichter), of the group in which the second revenue officer worked

conducted a so-called assessment statute expiration date (ASED) review of the

progress of the Hollywood Arts’ employment tax examination.

      On February 3, 2014, the second revenue officer prepared and submitted for

approval to group manager Nichter Form 4183, Recommendation re: Trust Fund

Recovery Penalty Assessment (Form 4183), with respect to each of the quarters at

issue (sometimes, February 3, 2014 Form 4183 or February 3, 2014 section 6672

penalty recommendation form).5 The February 3, 2014 section 6672 penalty

recommendation form showed petitioner’s name and Ms. Romanski’s name under

the heading on that form, “Persons against whom the trust fund recovery penalty is

being considered”. On the same date on which group manager Nichter received

the February 3, 2014 Form 4183, he approved it.

      On February 4, 2014, Letter 1153, which was addressed to petitioner’s last

known address (petitioner’s Letter 1153), was mailed to him by certified mail.

Specifically, the second revenue officer mailed to petitioner by certified mail in a

      5
        The February 3, 2014 Form 4183 also pertained to Hollywood Arts’ quarter
ended on December 31, 2010. As discussed below, the second revenue officer did
not include that quarter in an attachment, Form 2751, Proposed Assessment of
Trust Fund Recovery Penalty (sometimes, Form 2751), to petitioner’s Letter 1153
that he mailed to petitioner.
                                       - 10 -

[*10] window envelope6 petitioner’s Letter 1153, which was addressed to him at

his West Hollywood address.7 As of February 4, 2014, petitioner’s West

Hollywood address was his last known address for Federal tax purposes.8

      Attached to the window envelope in which the second revenue officer

mailed to petitioner by certified mail petitioner’s Letter 1153 was U.S. Postal

Service (USPS) Form 3800, Certified Mail Receipt, on which the certified mail

tracking number appeared and on which “David J. Jarrett” was handwritten after

the following preprinted words on that form: “Sent To”. Also attached to the



      6
        Because the second revenue officer mailed petitioner’s Letter 1153 to
petitioner in a window envelope, that window envelope did not bear an address
label. If petitioner’s Letter 1153 had been folded and placed in the window
envelope correctly, the West Hollywood address of petitioner printed on that letter
that the second revenue officer addressed to him at that address would have been
visible through the window in the window envelope.
      7
        On February 4, 2014, the second revenue officer mailed by certified mail a
separate Letter 1153 to Ms. Romanski. As discussed below, the second revenue
officer thereafter determined that Ms. Romanski should not be liable for the
section 6672 penalty.
      8
      Petitioner’s Letter 1153 mailed to petitioner at his West Hollywood address
showed on the first page, a few inches to the right and down from petitioner’s
name and West Hollywood address, the following“Business Name and Address”:

                          HOLLYWOOD ARTS
                          c/o DAVID JARRETT
                          5939 HOLLYWOOD BOULEVARD 3RD FLOOR
                          HOLLYWOOD, CA 90028-5409-391
                                        - 11 -

[*11] window envelope in which the second revenue officer mailed to petitioner

by certified mail petitioner’s Letter 1153 was USPS Form 3811, Domestic Return

Receipt, on which petitioner’s West Hollywood address was handwritten. Above

petitioner’s handwritten West Hollywood address on that USPS form “Hollywood

Arts” was handwritten, and below that West Hollywood address “David Jarrett”

was handwritten.

      Petitioner’s Letter 1153 stated in pertinent part:

      Our efforts to collect the federal employment or excise taxes due from
      the business named above have not resulted in full payment of the
      liability. We therefore propose to assess a penalty against you as a
      person required to collect, account for, and pay over withheld taxes
      for the above business.

      Under the provisions of Internal Revenue Code section 6672,
      individuals who were required to collect, account for, and pay over
      these taxes for the business may be personally liable for a penalty if
      the business doesn’t pay the taxes. These taxes, described in the
      enclosed Form 2751, consist of employment taxes you withheld (or
      should have withheld) from the employees’ wages (and didn’t pay) or
      excise taxes you collected (or should have collected) from patrons
      (and didn’t pay), and are commonly referred to as “trust fund taxes.”

      The penalty we propose to assess against you is a personal liability
      called the Trust Fund Recovery Penalty. It is equal to the unpaid trust
      fund taxes which the business still owes the government. If you agree
      with this penalty for each tax period shown, please sign Part 1 of the
      enclosed Form 2751 and return it to us in the enclosed envelope.

      If you don’t agree, have additional information to support your case,
      and wish to try to resolve the matter informally, contact the person
                                        - 12 -

[*12] named at the top of this letter [the second revenue officer] within ten
      days from the date of this letter.

      You also have the right to appeal or protest this action. To preserve
      your appeal rights you need to mail us your written appeal within 60
      days from the date of this letter (75 days if this letter is addressed to
      you outside the United States). The instructions below explain how
      to make the request.

      *           *           *          *           *           *           *

      You may appeal your case to the local Appeals Office. * * *

      The second revenue officer attached Form 2751 to petitioner’s Letter 1153.

In that form, respondent proposed, inter alia, to assess against petitioner, as a

“person responsible”, the following section 6672 penalty liability with respect to

each of Hollywood Arts’ quarters at issue:9




      9
        The section 6672 penalty liability for each of Hollywood Arts’ quarters at
issue that the second revenue officer proposed to assess against petitioner reflec-
ted payments made after Form 941 for each of those quarters had been filed.
                                        - 13 -

[*13]                  Quarter Ended      Section 6672 Penalty
                          3/31/2010              $1,617.10
                          6/30/2010               5,056.02
                          9/30/2010               6,279.09
                          3/31/2012               1,207.60
                          6/30/2012               2,843.03
                         12/31/2012                606.97
                          Total                  17,609.81

        On March 17, 2014, the USPS returned to the IRS the window envelope

containing petitioner’s Letter 1153 that the second revenue officer had mailed to

petitioner on February 4, 2014, by certified mail to his West Hollywood address.

The USPS had stamped the following on that envelope: “UNCLAIMED” “NIXIE

-- RETURN TO SENDER -- ATTEMPTED -- NOT KNOWN -- UNABLE TO

FORWARD”.

        Petitioner did not receive petitioner’s Letter 1153. Consequently, he did not

have a prior opportunity to contest whether he is liable for the section 6672

penalty for each of Hollywood Arts’ quarters at issue.10


        10
        As discussed below, petitioner concedes on brief that he is a responsible
person and that he acted willfully within the meaning of sec. 6672(a). However,
as also discussed below, he disputes for other reasons whether he should be
required to pay any unpaid employment tax liability for each of the quarters at
                                                                       (continued...)
                                        - 14 -

[*14] On February 12 and March 26, 2014, the second revenue officer inter-

viewed Ms. Romanski with respect to her liability for the section 6672 penalty for

each of Hollywood Arts’ quarters at issue. That revenue officer concluded on the

basis of those interviews and noted on March 26, 2014, in the integrated collection

services history transcript maintained with respect to Hollywood Arts that Ms.

Romanski did not meet what he characterized in that transcript as “the responsi-

bility and willfulness test” of section 6672(a). Consequently, he changed his

original conclusion as to Ms. Romanski, but not as to petitioner, which appeared

in the February 3, 2014 section 6672 penalty recommendation form with respect to

each of Hollywood Arts’ quarters at issue (i.e., the February 3, 2014 Form 4183),

that he had prepared and submitted to group manager Nichter for approval on

February 3, 2014, and which group manager Nichter approved on the same date.

      On March 31, 2014, the second revenue officer noted in the integrated

collection services history transcript maintained with respect to Hollywood Arts

that the period of limitations for assessing the section 6672 penalty for each of

Hollywood Arts’ quarters at issue in 2010 was to expire on May 5, 2014. That

was because he had sent petitioner’s Letter 1153 to petitioner on February 4, 2014.


      10
        (...continued)
issue in 2010.
                                       - 15 -

[*15] On the same date, the second revenue officer also noted the following in that

transcript: “RO [revenue officer] may need to do a quick assessment because the

ASED [i.e., the assessment statute expiration date] will expire within 30 days of

4/5/14.”

      On April 3, 2014, the second revenue officer consulted Internal Revenue

Manual (IRM) pt. 5.7.4.7.2 (Aug. 5, 2013), titled “Rescission of Proposed

Assessment”, because he had changed his conclusion as to Ms. Romanski that

appeared in the February 3, 2014 Form 4183. Also on April 3, 2014, the second

revenue officer submitted a request to group manager Nichter for his approval

(1) to amend the February 3, 2014 Form 4183 as to Ms. Romanski only by pre-

paring another Form 4183 in which he would indicate that Ms. Romanski is not

liable for the section 6672 penalty for each of Hollywood Arts’ quarters at issue

and (2) to prepare and issue to Ms. Romanski Letter 1153W, Proposed Trust Fund

Recovery Penalty Rescission Notification (Letter 1153W), the letter that the IRS

used to rescind any Letter 1153 that it had previously issued.

      On April 3, 2014, the date on which group manager Nichter received the

second revenue officer’s request for approval to amend the February 3, 2014 Form

4183 as to Ms. Romanski only and to prepare and issue to her Letter 1153W (Ms.

Romanski’s Letter 1153W), that group manager approved that request. On the
                                       - 16 -

[*16] same date on which group manager Nichter approved the second revenue

officer’s request, that revenue officer prepared an amended Form 4183 which was

amended only insofar as it pertained to Ms. Romanski.11 Although the second

revenue officer showed in the amended Form 4183 under the heading “Persons

against whom the trust fund recovery penalty is being considered” petitioner’s

name and Ms. Romanski’s name, he also showed under Ms. Romanski’s name the

following pertinent language: “Ms. Romanski is not liable for the TFRP [trust

fund recovery penalty].”

      On April 4, 2014, the second revenue officer signed and submitted Form

4183 amended as to Ms. Romanski only to group manager Nichter for his

approval. On the same date, that group manager approved that amended Form

4183 (April 4, 2014 amended Form 4183).

      On April 8, 2014, the second revenue officer mailed Ms. Romanski’s Letter

1153W to Ms. Romanski.

      On April 8, 2014, the second revenue officer requested a quick assessment

of the section 6672 penalty against petitioner for Hollywood Arts’ quarters at

      11
        As was of true of the February 3, 2014 Form 4183, the amended Form
4183 pertained not only to the quarters at issue but also to Hollywood Arts’
quarter ended on December 31, 2010. As discussed above, the second revenue
officer did not include that quarter in Form 2751 attached to petitioner’s Letter
1153.
                                        - 17 -

[*17] issue. In doing so, the second revenue officer prepared and signed on that

date Form 2749, Request for Trust Fund Recovery Penalty Assessment, pertaining

to all six of Hollywood Arts’ quarters at issue and a separate Form 2859, Request

for Quick or Prompt Assessment (Form 2859), pertaining to each of those six

quarters. Group manager Nichter signed each Form 2859 on April 8, 2014.

      On April 16, 2014, respondent assessed the following section 6672 penalty

against petitioner for each of Hollywood Arts’ quarters at issue:12

                       Quarter Ended      Section 6672 Penalty
                         3/31/2010               $1,620.56
                         6/30/2010                5,066.84
                         9/30/2010                6,292.52
                         3/31/2012                1,210.18
                         6/30/2012                2,849.11
                        12/31/2012                 608.27
                         Total                   17,647.48

      Also on April 16, 2014, respondent mailed Form 3552, Notice of Tax Due

on Federal Tax Return, to petitioner at his last known address (i.e., petitioner’s

West Hollywood address) for each of Hollywood Arts’ quarters at issue.


      12
        The section 6672 penalty for each of Hollywood Arts’ quarters at issue
that respondent assessed against petitioner on April 16, 2014, included interest as
provided by law.
                                          - 18 -

[*18] On June 5, 2014, respondent issued to petitioner a final notice of intent to

levy and notice of your right to a hearing (notice of levy) with respect to the

respective section 6672 penalties for Hollywood Arts’ quarters at issue.

         On June 24, 2014, respondent issued to petitioner a notice of Federal tax

lien filing and your right to a hearing under IRC section 6320 (notice of lien) with

respect to the respective section 6672 penalties for Hollywood Arts’ quarters at

issue.

         On June 29, 2014, petitioner submitted Form 12153, Request for Collection

Due Process or Equivalent Hearing (Form 12153), with respect to the notice of

levy and the notice of lien that he had received. Respondent assigned a settlement

officer to petitioner’s Form 12153.

         On June 3, 2015, the settlement officer sent petitioner and his authorized

representative a letter informing them that respondent’s Appeals Office in Los

Angeles (Appeals Office) had received petitioner’s Form 12153. On the same

date, the settlement officer sent another letter to petitioner and his authorized

representative, in which he described the hearing process under sections 6320 and

6330 (Appeals Office hearing) and scheduled a telephone Appeals Office hearing

on July 2, 2015. (We shall refer to the Appeals Office hearing with respect to

petitioner’s Form 12153 as petitioner’s Appeals hearing.)
                                         - 19 -

[*19] On June 18, 2015, petitioner’s authorized representative sent a letter (June

18, 2015 letter) to the settlement officer, in which he requested that petitioner’s

Appeals hearing be conducted through correspondence. That representative also

proposed in his letter that petitioner mail a check to the settlement officer in an

amount that would pay all of the respective unpaid employment tax liabilities for

Hollywood Arts’ quarters ended on March 31, June 30, and December 31, 2012.

Petitioner’s representative further stated in his June 18, 2015 letter to the

settlement officer that petitioner did not intend to offer any other collection

alternatives during petitioner’s Appeals hearing.

       On July 29, 2015, the settlement officer responded by letter (July 29, 2015

letter) to petitioner’s authorized representative’s June 18, 2015 letter. In the July

29, 2015 letter, the settlement officer provided petitioner and his authorized

representative instructions for petitioner’s payment of the respective unpaid

employment tax liabilities for Hollywood Arts’ quarters ended on March 31, June

30, and December 31, 2012, as well as for its quarter ended on March 31, 2010,

because only a very small amount was unpaid for that quarter. The settlement

officer also included with his July 29, 2015 letter the paperwork for petitioner to

complete in order to request a partial release of the lien that respondent had filed,

as set forth in the notice of lien.
                                         - 20 -

[*20] In addition to the matters that petitioner’s authorized representative

identified in his June 18, 2015 letter to the settlement officer, petitioner raised the

following issues during petitioner’s Appeals hearing: his underlying liability for

the respective section 6672 penalties for the quarters at issue, the validity of the

IRS’ assessment of those penalties, withdrawal of the lien, and the appropriateness

of the proposed collection actions.13

      As part of his consideration of petitioner’s Form 12153 and the arguments

advanced during petitioner’s Appeals hearing, the settlement officer reviewed

petitioner’s Letter 1153 and its mailing envelope. He also reviewed IRS tran-

scripts and verified that the address on petitioner’s Letter 1153 was petitioner’s

last known address as of February 4, 2014. The settlement officer verified that the

IRS mailed petitioner’s Letter 1153 to petitioner’s last known address via certified

mail on February 4, 2014, and that the USPS had marked that letter “unclaimed”

and had returned it to the IRS on March 17, 2014.

      As part of his consideration of petitioner’s Form 12153 and the arguments

advanced during petitioner’s Appeals hearing, the settlement officer considered

      13
        At no point during the Appeals Office hearing did petitioner’s authorized
representative argue that the second revenue officer failed to exercise due
diligence by not taking additional steps to notify petitioner of the proposed
assessment of the section 6672 penalties for the quarters at issue after the USPS
returned to the IRS as unclaimed petitioner’s Letter 1153.
                                        - 21 -

[*21] Mason v. Commissioner, 

 (2009), and concluded that pursuant

to that case the assessments that the IRS had made for all of the quarters at issue

were valid regardless of whether petitioner received petitioner’s Letter 1153.

      The settlement officer also considered as part of his consideration of peti-

tioner’s Form 12153 and the arguments advanced during petitioner’s Appeals

hearing petitioner’s arguments (1) that petitioner was not a willful or responsible

person subject to the section 6672 penalty and (2) that he satisfied the exception

under section 6672(e) (section 6672(e) exception) from that penalty for members

of the board of directors of tax-exempt organizations who are volunteers.

      As part of his consideration of petitioner’s Form 12153 and the arguments

advanced during petitioner’s Appeals hearing, the settlement officer reviewed the

documents in the IRS’ administrative record relating to Hollywood Arts’

employment tax examination, including its canceled checks and bank statements

and notes of interviews with certain employees of Hollywood Arts.

      After his consideration of petitioner’s arguments and his review of pertinent

law and certain information that petitioner had provided, the settlement officer

determined that petitioner was not permitted to dispute his underlying liability for

the respective section 6672 penalties for the quarters at issue. That was because,

according to the settlement officer, petitioner had had a prior opportunity to
                                          - 22 -

[*22] dispute that underlying liability when the IRS had mailed him petitioner’s

Letter 1153.

      The settlement officer also determined after his consideration of petitioner’s

arguments and his review of the IRS’ administrative record pertaining to petition-

er’s liability for the respective section 6672 penalties for the quarters at issue and

pertinent law that the period of limitations for the IRS’ assessment of the respec-

tive section 6672 penalties for the quarters at issue in 2010 was extended to May

5, 2014, because the IRS had mailed petitioner’s Letter 1153 to him on February 4,

2014. Consequently, according to the second revenue officer, the IRS’ assessment

on April 16, 2014, of those penalties for the quarters at issue in 2010 was timely.

      In addition, the settlement officer determined as a result of his consideration

of petitioner’s arguments and his review of pertinent law and certain information

that petitioner had provided that petitioner (1) did not qualify for the section

6672(e) exception and (2) did not provide any information to support withdrawal

of the notice of lien filed as set forth in the notice of lien and did not satisfy the

criteria prescribed in section 6323(j) for withdrawal of a notice of lien.

      On October 22, 2015, the Appeals Office issued to petitioner the notice of

determination sustaining the filing of the lien and the proposed levy with respect
                                        - 23 -

[*23] to the respective unpaid section 6672 penalties for the quarters at issue.14

The notice of determination stated in pertinent part:

      Summary of Determination
      You had a prior opportunity to appeal the proposed assessment of the
      Trust Fund Recovery Penalty. Therefore we are unable to consider it
      again per Internal Revenue Code section 6330. You also declined to
      offer any collection alternatives stating that you weren’t liable.
      Therefore we are unable to offer any to you. The filing of the Notice
      of Federal Tax Lien is sustained as is the proposed levy by
      Collection.

      An attachment to the notice of determination stated in pertinent part:

                   SUMMARY AND RECOMMENDATION

      You filed a request for a Collection Due Process (CDP) hearing under
      Internal Revenue Code (IRC) § 6320 and § 6330 following the receipt
      of Letter 3172, Notice of Federal Tax Lien Filing and Your Right to a
      Hearing Under IRC 6320. The letter was issued by the Field
      Collection Office in Los Angeles, CA, which issued the notice on
      June 24, 2014 with a deadline to file a request for the CDP hearing of
      July 31, 2014. You also received a Letter 1058, Final Notice - Notice
      of Intent to Levy and Your Notice of Your Right to a Hearing, from
      the same Santa Barbara Field Collection Office. The Letter 1058 was
      dated June 5, 2014 and by law, you had until July 4, 2014 to file a
      request for a CDP hearing. Your Form 12153 requesting a CDP
      hearing was received July 1, 2014. Therefore, it was a timely request
      since it was submitted by the due date stated on the Letter 3172 and
      within the deadline of the L-1058.




      14
        As of the date on which respondent issued the notice of determination,
petitioner had not entered into an installment agreement to satisfy the respective
unpaid section 6672 liabilities for the quarters at issue.
                                       - 24 -

[*24] On your request for a CDP hearing, you specifically stated that you
      are not proposing any collection alternatives. A conference was held
      at your request via correspondence. You[r] final communication
      stated that you are not raising any collection alternatives because you
      disagreed with the liability issue for the periods ending June 30, 2010
      and September 30, 2010. However, you did state that you would be
      paying the other two periods in full within 60 days. You requested a
      statement as to the balance due on these liabilities. A check of our
      internal computer systems indicates that the periods that you intend
      on paying have the following balances due as of October 30, 2015[.]

      You did not propose any collection alternatives because you stated
      that you were not liable for the Trust Fund Recovery Penalty. A
      review of the administrative file indicates that you had a prior
      opportunity to claim appeal [sic] the proposed assessment, but you
      failed to do so. In addition, you [sic] a review of the file clearly
      indicates that you are a responsible person and that you willfully
      failed to pay over the trust fund taxes. The details of my findings are
      outlined below. Therefore the proposed levy action by collection is
      sustained and as is [sic] the filing of the Notice of Federal Tax Lien
      (NFTL).

                            BRIEF BACKGROUND

      The tax liability resulted when you were assessed the Trust Fund
      Recovery Penalty (TFRP) [sic] a Non-Profit Organization called
      Hollywood Arts. Hollywood Arts was engaged in arts education, job
      readiness programs, and industry internships to homeless individuals.
      You served as the Chairman of the organization. Hollywood Arts has
      now closed its doors.

      Originally, your case was assigned to another Settlement Officer.
      Upon the reassignment of the Settlement Officer, your case was
      subsequently transferred to me.

      On June 3, 2015, I mailed a substantial contact letter to you and your
      representative. On July 1, 2015, I received a voice mail message
                                      - 25 -

[*25] from your representative stating that he wanted to have a conference
      by correspondence. After numerous exchanges of faxes and letters,
      that process has now ended. Based upon the facts below, I find that
      you are liable for the TFRP and since you have declined to submit
      any collection alternatives, I am therefore required to sustain the
      filing of the NFTL and the proposed levy action by Collection.

                        DISCUSSION AND ANALYSIS

      1. Verification of Legal and Procedural Requirements

      The requirements of applicable law or administrative procedures have
      been met and the actions taken or proposed were appropriate under
      the circumstances.

      •     I have verified through transcript analysis that the assessment
            was properly made per IRC § 6201 for each tax and period
            listed on the CDP notice.

      •     The notice and demand for payment letter was mailed to your
            last known address, within 60 days of the assessment, as
            required by IRC § 6303.

      •     The Notice of Federal Tax Lien (NFTL) was filed on June 20,
            2014 and as required by IRC § 6320, you were mailed a copy
            of the NFTL and a letter advising you of your right to file a
            request for a CDP hearing.

      •     I have verified the collection period allowed by statute to
            collect the tax has been suspended by the appropriate computer
            code for the tax periods at issue.

      •     There is no office [sic] in compromise or installment agreement
            pending or currently in effect. There is also no pending
            innocent spouse request.
                                      - 26 -

[*26] •     There is no pending bankruptcy case, nor did you have a
            pending bankruptcy case at the time of the CDP notice.

      I have had no prior involvement with you concerning the applicable
      tax periods before this CDP case. Collection followed all legal and
      procedural requirements and the actions taken or proposed were
      appropriate under the circumstances.

      2. Issues Raised by You

      A. Challenges to the Existence of Amount of Liability:

      You challenged the liability in a number of ways:

      (1)   Assessment not within the Statutory Period - You stated that
            the assessments were [sic] made on April 16, 2014 were illegal
            because that [sic] authority for making the assessments expired
            on April 15, 2014 per Internal Revenue Code * * * § 6672.
            However, IRC § 6672(b)(3) clearly states that the statute for
            making the assessments won’t expire until at least 90 days after
            the mailing of the Letter-1153 proposing the assessment. In
            this instance, the Letter-1153 was not mailed until February 4,
            2014. Therefore, the Assessment Statute expiration Date
            (ASED) would not have expired until May 5, 2014. The
            assessments were lawfully and timely made.

      (2)   You also claimed that you did not receive proper notification of
            the proposed assessments. A review of our internal records
            indicated that the Letter 1153 was mailed to your last known
            address on February 4, 2014. This is the address of * * * That
            was you[r] official address of record at the time the letter was
            and it has been your official Last Known Address in 2011. It
            still is you[r] current address of record. The Letter-1153 was
            mailed via certified mail # 7008-1300-0000-6719-8394. The
            physical envelope is clearly marked “UNCLAIMED” and it
            was returned to the IRS on March 17, 2014.
                                       - 27 -

[*27] (3)   With regard to the non-receipt of the Letter-1153, you stated
            that since you didn’t receive the letter that it wasn’t valid.
            However, the very court case that you cite, Mason v.
            Commissioner, 132 TC 14 [sic] stated, “Our finding that
            petitioner (Mason) did not receive the Letter 1153 did not
            invalidate the trust fund penalty assessment.”

      (4)   You have stated that the IRS shouldn’t have assessed the TFRP
            against you because you were an unpaid, volunteer member of
            a board of a non-profit organization, Policy Statement 5-14. A
            key condition of this statement is that the volunteer did not
            participate in the day-to-day or financial operations of the
            organization. However, a review of the financial documents
            indicated that you were not only involved in the day-to-day
            operations, but you were one of the key decision makers. In
            fact, your representative stated that they had a rubber stamp
            made of your signature just in case you weren’t in the office.
            Clearly, you were involved in a day-to-day operation of the
            business.

      (4)   Even though there was ample evidence to decline to consider
            your liability in this matter, I still reviewed the TFRP file. You
            took the position that you were merely an unpaid volunteer
            who was not involved in the day-to-day operation of the
            business. However, a review of the file indicated that you held
            the title of Chairman. The record also reflects that you signed
            checks on behalf of the corporation during the unpaid quarters
            in question. Furthermore, the bank statements indicate that
            sufficient funds were in place had you elected to pay the
            delinquent tax liabilities.

      (5)   There are statements from other employees in the file
            indicating that you had the control over the money, finance[s],
            and the hiring and firing of employees.

      (6)   Your representative stated that there was a rubber stamp made
            of a signature what was used to sign a lot of the checks and tax
                                          - 28 -

[*28]         returns. Since you’ve indicated that you were just an unpaid
              volunteer of the charity, why would there have been a necessity
              to have a rubber stamp made of your signature?

        In view of the above facts, I came to the conclusion that you would
        have been deemed to be liable for the TFRP even if you could have
        raised the issue considering that you declined an early opportunity to
        do so.

        B. Collection Alternatives Offered by Taxpayer:

        Initially you stated that you weren’t interested in any collection
        alternatives since you didn’t owe the tax. While you still have taken
        the same position with regard to the two large unpaid liabilities, you
        have stated stated [sic] that the collection alternative is to full pay the
        smaller amounts owed within 14 days of September 28, 2015, the date
        of your last communication with this office. Since you had been
        advised in a letter/fax dated July 29, 2015, that any portion of the tax
        liability could be paid off at any time, no payment has been received
        by either this office or the Revenue Officer for these amounts.
        Therefore there is no need to delay any further the moving forward of
        this case. Per your request, the amounts that are currently owed are
        listed below.

                      Type of Tax                    Period     Balance Due
            Trust Fund Recovery Penalty        03/31/2010               $0.20
            Trust Fund Recovery Penalty        06/30/2010          $5,224.44
            Trust Fund Recovery Penalty        09/30/2010          $6,575.92
            Trust Fund Recovery Penalty        12/31/2010              $17.66
            Trust Fund Recovery Penalty        06/30/2012               $1.04
            Trust Fund Recovery Penalty        12/31/2012               $9.85
                                                   Total Due:     $11,829.11
                                        - 29 -

[*29] You have declined to consider any collection alternatives for the periods
      ending 06/30/2010 and 09/30/2010 because you stated that in your opinion
      you are not liable for these periods. You have also stated that the other four
      periods will be paid by your [sic] within 14 days. Therefore, there is no
      further action to be done by this office with regard to your requests.

      C. Lien Withdrawal

      I considered whether any of the criteria for allowing withdrawal of
      the lien existed in your case.

      IRC § 6323(j) allows the withdrawal of a filed NFTL without full
      payment and without prejudice under the following conditions:

      •      The filing of the NFTL was premature or otherwise not in
             accordance with administrative procedures of the Internal
             Revenue Service,

      •      The taxpayer had entered into an installment agreement under
             IRC § 6159 to satisfy the tax liability for which the lien was
             imposed by means of installment payments, unless such
             agreement provides otherwise,

      •      Withdrawal of the lien will facilitate collection of the tax
             liability, or

      •      With the consent of the taxpayer or the National Taxpayer
             Advocate (NTA), the withdrawal of such notice would be in
             the best interest of the taxpayer (determined by the NTA) and
             the United States.

      A NFTL may be withdrawn in connection with the taxpayer entering
      into an installment agreement but, as described above, you do not
      qualify for an installment agreement. Mo[r]eover, there is nothing
      else in the administrative file that indicates withdrawal of the filed
      lien should be considered and you have provided no additional
                                        - 30 -

[*30] information that indicates the withdrawal of the filed NFTL should be
      considered.

      E. Other issues that You Raised:

      You have requested that we have [sic] issue a partial lien release with
      regard to the NFTL that’s of record. As was explained to you in the
      letter/fax dated July 29, 2015, Appeals neither records nor releases
      NFTL’s. You were sent Publication 1450 on how to apply for a
      Certificate of Release along with Publication 4235 which advised you
      where such application should be sent.

      3. Balancing of need for efficient collection with taxpayer concern
      that the collection action be no more intrusive than necessary.

      I balanced the competing interest in finding the filing of the NFTL
      appropriate as well as the proposed levy. You have proposed
      payment in full of some of the liabilities, but payment has not been
      received yet. You have stated also that you are still of the opinion
      that you are not liable for the TFRP in spite of the evidence to the
      contrary. Retaining the NFTL balances the need for efficient
      collection against your concern that it be no more intrusive than
      necessary. The filing of the NFTL is sustained, as is the proposed
      levy.

                                     Discussion

      We start by summarizing applicable provisions of the Code and pertinent

caselaw that will be helpful in our consideration of the parties’ respective

positions with respect to the IRS’ assessment of the section 6672 penalties at

issue, which the Appeals Office determined in the notice of determination is valid.
                                         - 31 -

[*31] An employer is required to withhold or collect from an employee’s wages

and thereafter “pay over” to the Federal Government (Government) the employ-

ee’s share of (1) Social Security tax, see secs. 3101(a), 3102(a); (2) Medicare tax,

see secs. 3101(b)(1), 3102(a), and (3) Federal income tax, see secs. 3402(a)(1),

3403. Federal taxes that an employer withholds from an employee’s wages are

“held to be a special fund in trust for the United States.” Sec. 7501(a). Conse-

quently, they are known as “trust fund taxes”. See Pollock v. Commissioner, 

, 25 n.10 (2009).

      One of the means of ensuring that the employer collects and pays over to the

Government the trust fund taxes is section 6672. See Purcell v. United States,

, 936 (9th Cir. 1993). Section 6672(a) provides in pertinent part: “Any

person required to collect, truthfully account for, and pay over any tax * * * who

willfully fails to collect such tax, or truthfully account for, and pay over any tax

* * * shall * * * be liable to a penalty equal to the total amount of the tax * * * not

collected, or not accounted for and paid over.” As pertinent here, section 6671(a)

provides that the section 6672 penalty is to be paid upon notice and demand by the

Commissioner of Internal Revenue (Commissioner) and is to be assessed and

collected in the same manner as taxes.
                                         - 32 -

[*32] Liability for the section 6672 penalty may be imposed upon any “respon-

sible person” who “acted willfully in failing to collect or pay over * * * withheld

taxes.” Davis v. United States, 

, 869-870 (9th Cir. 1992). A “respon-

sible person” is one who has the “‘final word as to what bills should or should not

be paid, and when.’” Purcell, 1 F.3d at 936 (quoting Wilson v. United States, 

, 316 (9th Cir. 1958)). Failure to collect or pay over withheld taxes is

“willful” when it results from a “‘voluntary, conscious and intentional act to prefer

other creditors over the United States.’” Id. at 938 (quoting Davis, 961 F.2d at

871).

        The liability of a responsible person for the section 6672 penalty is separate

and distinct from the underlying trust fund tax liability of an employer. See

Duncan v. Commissioner, 

, 318 (9th Cir. 1995), aff’g on this point,

rev’g and remanding on other points T.C. Memo. 1993-370; Mason v. Commis-

sioner, 132 T.C. at 321; Solucorp, Ltd. v. Commissioner, T.C. Memo. 2013-118, at

*12. However, the IRS collects the total amount of the underlying trust fund tax

liability only once. See Weber v. Commissioner, 

, 358 (2012).

        To ensure that the total amount of the underlying trust fund tax liability is

collected only once, the IRS cross-references payments against the trust fund tax

liability of an employer and payments against the section 6672 penalty liability of
                                        - 33 -

[*33] a responsible person, see IRM pt. 5.19.14.3.5 (Jan. 13, 2016), and those

payments ultimately reduce the amount of the section 6672 penalty liability of

each responsible person, see Weber v. Commissioner, 138 T.C. at 358.

      Petitioner states on brief: “[T]he petitioner will only be raising the issues of

whether or not the petitioner is not liable due to an improper notice or other

procedural defect in the [section] 6672 assessment process * * *. The petitioner is

not going to be contesting liability on the basis of personal willfulness or respon-

sibility.” We conclude that petitioner concedes on brief (1) that he is a responsible

person and that he acted willfully within the meaning of section 6672(a)15 and

(2) that he is not contesting under section 6330(c)(2)(B) the existence or the

amount of the underlying liability for the respective section 6672 penalties for

(1) the quarters at issue in 2010, and (2) the quarters at issue in 2012.

      Petitioner also states on brief that the respective section 6672 penalties for

the quarters at issue in 2012 “have now been paid in full”, that he “considers them

moot and will raise no issues in regards to them with respect to either liability or

procedurally”, and that he “does not consider them to be at issue and will therefore

not address them further.” Petitioner added the following footnote to these

      15
         Petitioner does not take the position on brief, as he did during petitioner’s
Appeals hearing, that he qualifies for the section 6672(e) exception. We conclude
that petitioner has abandoned taking any such position here.
                                          - 34 -

[*34] statements: “This is not meant to preclude the court from addressing 2012

in any of its findings if it sees fit.”

       We are unwilling to allow petitioner to concede and abandon any argument

regarding the section 6672 penalties for the quarters at issue in 2012 and then in

the same breath, so to speak, to place those penalties at issue if the Court were to

decide to ignore petitioner’s concession of, and abandonment of any argument

with respect to, those penalties. We conclude that petitioner has conceded, and

abandoned advancing any argument with respect to, any of the respective section

6672 penalties for the quarters at issue in 2012. We shall not consider those

penalties or decide any questions that might remain with respect to them.

       On brief, petitioner sets forth the following issues for us to decide regarding

the respective section 6672 penalties for the quarters at issue in 2010:

       1.     Can respondent meet its burden of proof with the stipulated
              evidence that the 1153 (DO) notice was correctly mailed
              to the petitioner’s last known address on February 4th,
              2014?
       2.     Assuming arguendo that the 1153 (DO) notice can be shown to
              have been mailed to the last known address, does respondent’s
              Revenue Officer incur any additional responsibility to perform
              any additional actions as “reasonable diligence” when the
              certified mail was returned to him “unclaimed” on March 17,
              2014?
       3.     What is the consequence to the respondent when the Revenue
              Officer issues Letter 1153 (DO) BEFORE receiving approval
              from the group manager in apparent violation of IRC 6751(b)?
                                         - 35 -

[*35]         (Although managerial approval was received subsequent to the
              proposal)
        4.    Was the trust fund recovery assessment made on April 16, 2014
              valid with respect to the 2010 tax year?

        It is petitioner’s position that we should not sustain the determinations in

the notice of determination. That is because, according to petitioner, (1) the

second revenue officer did not mail petitioner’s Letter 1153 to his last known

address (petitioner’s last known address contention); (2) the second revenue

officer did not exercise due diligence by taking additional steps to notify petitioner

about the proposed assessment of the respective section 6672 penalties for the

quarters at issue in 2010 after the USPS returned to the IRS as unclaimed

petitioner’s Letter 1153 (petitioner’s due diligence contention); and (3) the period

of limitations prescribed by section 6672(b) had expired as of April 16, 2014, the

date on which the IRS assessed the respective section 6672 penalties for the

quarters at issue in 2010 (petitioner’s statute of limitations contention). In the

event that we were to agree with petitioner’s last known address contention,

petitioner’s due diligence contention, and/or petitioner’s statute of limitations

contention, petitioner maintains that the notice of determination and the IRS’

assessment of the respective section 6672 penalties for the quarters at issue in

2010 are invalid and that consequently we should reject the determinations in that
                                        - 36 -

[*36] notice to sustain the notice of lien and the notice of levy with respect to

those quarters.

      Petitioner also advances a fourth contention on brief that the IRS did not

comply with the requirements of section 6751(b)(1) (petitioner’s section

6751(b)(1) contention).16 In the event that we were to agree with petitioner’s

section 6751(b)(1) contention, petitioner does not offer his view as to the

consequence of the IRS’ failure to comply with section 6751(b)(1). Instead, he

states on brief: “Petitioner is clearly aware that this approval [required by section

6751(b)(1)] was obtained subsequent to the issuance [of the] proposed assessment

of the [section 6672] penalty and perhaps the technical violation of [section]

6751(b) if there is one at all is no more than a ‘foot fault’. However, petitioner

does wish to raise it.”

      We review for abuse of discretion petitioner’s contentions, none of which

places at issue the existence or the amount of the underlying liability for the

respective section 6672 penalties for the quarters at issue in 2010. See Lee v.

Commissioner, 

, 50 (2015); Sego v. Commissioner, 

, 610


      16
        We shall sometimes refer collectively to petitioner’s last known address
contention, petitioner’s due diligence contention, petitioner’s statute of limitations
contention, and petitioner’s section 6751(b)(1) contention as petitioner’s
contentions.
                                        - 37 -

[*37] (2000); Goza v. Commissioner, 

, 181-182 (2000). An abuse of

discretion occurs when a determination is arbitrary, capricious, or without sound

basis in fact or law. See Murphy v. Commissioner, 

, 320 (2005),

aff’d, 

 (1st Cir. 2006).

      We consider first petitioner’s last known address contention. In order to

impose a section 6672 penalty, section 6672(b)(1) requires the IRS to notify the

taxpayer in person or in writing by mail to an address as determined under section

6212(b) that the taxpayer will be subject to an assessment of that penalty. Pursu-

ant to section 6212(b)(1), a notice of deficiency mailed to a taxpayer’s “last known

address” is valid even if the taxpayer never receives that notice. See, e.g., Frieling

v. Commissioner, 

, 52 (1983).

      In cases like the present case involving the section 6672 penalty, the IRS

mails Letter 1153 to the taxpayer. See Mason v. Commissioner, 132 T.C. at 322.

Pursuant to section 6672(b)(1) which incorporates the mailing address require-

ments of section 6212(b)(1) and the caselaw thereunder, Letter 1153 mailed to a

taxpayer’s last known address is valid even if the taxpayer never receives that

letter. See Mason v. Commissioner, 132 T.C. at 322-323.

      The Commissioner bears the burden of showing the proper mailing of the

notice of deficiency, see Coleman v. Commissioner, 

, 90 (1990), and the
                                         - 38 -

[*38] Commissioner’s production of a properly completed USPS certified mail list

will result in the presumption of the proper mailing of that notice, see United

States v. Zolla, 

, 810 (9th Cir. 1984). However, the Commissioner is

not required to produce a USPS certified mail list if the Commissioner produces

evidence that is otherwise sufficient to establish proper mailing. See Coleman v.

Commissioner, 94 T.C. at 90. Where the existence of a notice of deficiency is not

in dispute, the Commissioner must show only the actual timely mailing of the

notice of deficiency. See id.

      We concluded in Mason v. Commissioner, 132 T.C. at 318, that “[w]hen a

Letter 1153 is mailed, the Commissioner must follow the same mailing procedures

that are provided for notices of deficiency in section 6212(b)” and that “the same

evidence that establishes that the Commissioner mailed a notice of deficiency to a

taxpayer’s last known address should be sufficient to establish that the Commis-

sioner properly sent a Letter 1153.”

      In the present case, the parties stipulated that on February 4, 2014, petition-

er’s Letter 1153 was mailed to petitioner’s last known address (parties’ last known

address stipulation). In total disregard of that stipulation, petitioner takes the
                                        - 39 -

[*39] position on brief that petitioner’s Letter 1153 was not mailed to petitioner’s

last known address.17

      Rule 91(e) provides that a stipulation is to be treated, to the extent of its

terms, as a conclusive admission by the parties to the stipulation unless we

otherwise permit or those parties otherwise agree. Rule 91(e) further provides that

we will not permit a party to a stipulation to qualify, change, or contradict a

stipulation in whole or in part, except that we may do so where justice requires.

      We have concluded that, “[w]ith ‘justice’ as our standard, we do have broad

discretion to determine [under Rule 91(e)] when it is appropriate to set aside a

stipulation.” Lovenguth v. Commissioner, T.C. Memo. 2007-70, 

, at *3. However, we have also concluded that our discretion in setting

aside a stipulation under Rule 91(e) “is tempered by the importance of making


      17
         In support of his contention on brief that petitioner’s Letter 1153 was not
mailed to petitioner’s last known address, not only does petitioner ignore the
parties’ last known address stipulation, he also advances certain arguments which
rely on certain alleged facts that are not established by the record and which
speculate about certain other alleged facts that also are not established by the
record. In addition, in support of petitioner’s last known address contention,
petitioner misstates on brief the requirements of sec. 6212(b) and misapplies
certain caselaw. Finally, petitioner argues on brief that respondent has not
satisfied respondent’s burden of showing that the second revenue officer mailed
petitioner’s Letter 1153 to his last known address. On the record before us, we
reject the arguments described in this footnote that petitioner makes in support of
petitioner’s last known address contention.
                                        - 40 -

[*40] stipulations stick--we enforce stipulations unless not just ‘injustice,’ but

‘manifest injustice’ would result.” Id. In exercising our discretion under Rule

91(e), we may “consider factors that might not be sufficient to upset a contract.”

Id. at *4. That is to say, “something less than a contractual defense is a

permissible ground for letting one party to a pretrial stipulation out of his

agreement.” Id.

      Based upon of our examination of the entire record before us, we find that

justice does not require us to set aside the parties’ last known address stipulation.

Our examination of that record did not disclose any evidence that contradicts that

stipulation, let alone clearly contradicts that stipulation, cf. Cal-Maine Foods, Inc.

v. Commissioner, 

, 195 (1989). To the contrary, we have found facts

on the basis of the record that are consistent with and that totally support the

parties’ last known address stipulation.

      On the record before us and pursuant to applicable sections of the Code and

apposite caselaw, we reject petitioner’s last known address contention.

      We turn next to petitioner’s due diligence contention. Petitioner maintains

that the second revenue officer should have taken additional steps to notify

petitioner about the proposed assessment of the section 6672 penalties for the

quarters at issue in 2010 after the USPS returned to the IRS as unclaimed petition-
                                           - 41 -

[*41] er’s Letter 1153.18 In advancing that argument, petitioner relies on Jones v.

Flowers, 

 (2006), Mulvania v. Commissioner, 

 (9th

Cir. 1985), aff’g T.C. Memo. 1984-98, and Wallin v. Commissioner, 

(9th Cir. 1984), rev’g T.C. Memo. 1983-52. We find those cases to be materially

distinguishable from the instant case and petitioner’s reliance on them to be

misplaced.

      Petitioner’s due diligence contention not only relies on inapposite caselaw,

it also fails to acknowledge and apply applicable caselaw that rejects that con-

tention. As discussed above, pursuant to section 6672(b)(1) which incorporates

the mailing address requirements of section 6212(b)(1) and the caselaw

thereunder, Letter 1153 mailed to a taxpayer’s last known address is valid even if

the taxpayer never receives that letter.

      As the Court of Appeals for the Ninth Circuit, the court to which an appeal

in this case would normally lie, concluded in King v. Commissioner, 

, 681 (9th Cir. 1988), aff’g on other grounds 

 (1987), involving a

notice of deficiency:

      18
        Respondent argues that petitioner did not raise petitioner’s due diligence
contention during petitioner’s Appeals hearing and that therefore respondent could
not have abused respondent’s discretion in failing to consider any such contention.
We agree. For the sake of completeness, we nonetheless address petitioner’s due
diligence contention.
                                        - 42 -

[*42] Under I.R.C. § 6212(b), validity of the notice turns on whether the
      IRS used the last known address when the notice was mailed.
      Nothing in the statute suggests that the IRS is obligated to take
      additional steps to effectuate delivery if the notice is returned; indeed,
      a notice mailed to the last known address is sufficient even if it is
      never received. Wallin, 744 F.2d at 676. Consequently, we do not
      believe that Cool Fuel[, Inc. v. Connett, 

 (9th Cir. 1982)]
      imposes a duty of reasonable diligence beyond the time that the
      notice is mailed. * * *

      We also rejected an argument similar to petitioner’s due diligence con-

tention in Hickey v. Commissioner, T.C. Memo. 2009-2, 

, at *4.

There, the taxpayer “argue[d] that the assessment of the trust fund recovery

penalty was improper because he did not receive the notice the IRS sent to him

and because the IRS made no further effort to notify him of the proposed

assessment after the USPS returned the unclaimed notice to the IRS.” Id. In

rejecting that argument, we relied on section 6672(b)(1) which incorporates the

mailing requirements of section 6212(b) and caselaw thereunder. See id. at *4-*5.

      On the record before us and pursuant to applicable sections of the Code and

apposite caselaw, we reject petitioner’s due diligence contention.

      We consider now petitioner’s statute of limitations contention. Petitioner

maintains that the period of limitations prescribed by section 6672(b) had expired

when the IRS assessed on April 16, 2014, the respective section 6672 penalties for

the quarters at issue in 2010. Although not altogether clear, it appears that peti-
                                         - 43 -

[*43] tioner’s support for that conclusion is his contention that the second revenue

officer did not mail petitioner’s Letter 1153 to petitioner’s last known address.

We have rejected petitioner’s last known address contention. A fortiori, we reject

petitioner’s statute of limitations contention.

      For the sake of completeness, we explain briefly why the period of limita-

tions for assessing the respective section 6672 penalties for the quarters at issue in

2010 had not expired as of April 16, 2014, the date on which the IRS assessed

those penalties. Pursuant to section 6672(b)(3), the period of limitations for

assessing the respective section 6672 penalties for the quarters at issue in 2010

generally is the three-year period prescribed by section 6501(a). Section

6672(b)(3) extends that three-year period if a notice described in section

6672(b)(1) is delivered in person or is mailed to a taxpayer’s last known address

before the period of limitations prescribed by section 6501 expires without regard

to section 6672(b)(3). In that event and as pertinent here, pursuant to section

6672(b)(3) the period of limitations prescribed by section 6501 will not expire

before the date 90 days after the date on which the notice described in section

6672(b)(1) was delivered in person or mailed to a taxpayer’s last known address.

      The period of limitations under section 6501(a) for assessing any tax

imposed by the Code begins running when the return required to be filed by the
                                       - 44 -

[*44] taxpayer is filed. As pertinent here, section 6501(b)(2) provides that where

a return for a period ending with or within a calendar year with respect to tax

under chapter 21, Federal Insurance Contributions Act, or chapter 24, Collection

of Income Tax at Source on Wages, of subtitle C is filed before April 15 of the

succeeding calendar year, that return will be considered filed on April 15 of that

succeeding calendar year.

      Hollywood Arts was obligated to report in Form 941 its respective employ-

ment taxes under chapters 21 and 24 of subtitle C for each of the quarters at issue

in 2010 (i.e., the quarters that ended on March 31, June 30, and September 30,

2010). Hollywood Arts was required to file Form 941 for each of those quarters

by no later than the end of the month following each such quarter. See secs.

6011(a), 6071(a); sec. 31.6011(a)-4T(a)(1), Temporary Employment Tax Regs., 73

Fed. Reg. 79358 (Dec. 29, 2008); sec. 31.6071(a)-1(a)(1), Employment Tax Regs.

      Hollywood Arts filed timely Form 941 for each of the quarters that ended on

March 30 and September 30, 2010. It filed late on October 5, 2010, Form 941 for

the quarter that ended on June 30, 2010. Pursuant to section 6501(b)(2), Form 941

that Hollywood Arts filed for each of the quarters ended on March 31, June 30,

and September 30, 2010, is a return that is deemed filed on April 15, 2011. We

conclude that the period of limitations prescribed by section 6501(a) for assessing
                                        - 45 -

[*45] Hollywood Arts’ employment taxes imposed by chapters 21 and 24 of the

Code would have expired on April 15, 2014. We further conclude that the period

of limitations for assessing the section 6672 penalties for the quarters at issue in

2010 also would have expired on April 15, 2014, without regard to section

6672(b)(3). See sec. 6671(a).

      We have found that on February 4, 2014, the second revenue officer mailed

to petitioner by certified mail petitioner’s Letter 1153 which was addressed to

petitioner’s last known address. We hold that pursuant to section 6672(b)(3) the

three-year period of limitations prescribed by section 6501(a) for assessing the

section 6672 penalties for the quarters at issue in 2010, which would have expired

on April 15, 2014, without regard to section 6672(b)(3), did not expire before May

5, 2014, the date which is 90 days after the date (i.e., February 4, 2014) on which

petitioner’s Letter 1153, the notice described in section 6672(b)(1), was mailed to

his last known address. Respondent assessed petitioner’s section 6672 penalties

for the quarters at issue in 2010 on April 16, 2014. We hold that the period of

limitations for assessing against petitioner the respective section 6672 penalties

for the quarters at issue in 2010 had not expired as of the date on which respon-

dent assessed those penalties.
                                         - 46 -

[*46] On the record before us and pursuant to applicable sections of the Code, we

reject petitioner’s statute of limitations contention.

      We consider finally petitioner’s section 6751(b)(1) contention. However,

we address initially respondent’s position regarding the application of that section

in this case. It is respondent’s position that in a section 6320 or 6330 matter

involving a section 6672 penalty it is not necessary under section 6330(c)(1) that

the Appeals officer verify that the IRS complied with section 6751(b)(1). That is

because, according to respondent, section 6751(b)(1) does not apply to a section

6672 penalty. Respondent further maintains that if we were to determine that

section 6751(b)(1) applies to a section 6672 penalty, the record establishes that the

IRS complied with section 6751(b)(1) before it assessed on April 16, 2014, the

respective section 6672 penalties for the quarters at issue in 2010.

      We need not determine whether respondent is correct that section

6751(b)(1) does not apply to a section 6672 penalty. That is because, as explained

below, we find on the record before us that the second revenue officer did not

abuse his discretion in concluding in the notice of determination that “[t]he

requirements of applicable law or administrative procedures have been met and the

actions taken or proposed were appropriate under the circumstances.” See
                                        - 47 -

[*47] Blackburn v. Commissioner, 150 T.C. __ (Apr. 5, 2018). Our discussion

below assumes that section 6751(b)(1) applies to a section 6672 penalty.

      We begin our explanation of our finding that the second revenue officer did

not abuse his discretion in concluding in the notice of determination that “[t]he

requirements of applicable law or administrative procedures have been met and the

actions taken or proposed were appropriate under the circumstances” by address-

ing petitioner’s section 6751(b)(1) contention. According to petitioner,

      the 1153(DO) [petitioner’s letter 1153] was dated and sent February
      4, 2014 while the approved Form 4183 that respondent includes as
      Exhibit 17-R was dated April 4th, 2014. * * * Petitioner is clearly
      aware that this approval was obtained subsequent to the issuance [of
      the] proposed assessment of the penalty [in petitioner’s Letter 1153]
      and perhaps the technical violation of [section] 6751(b)[(1)] if there is
      one at all is no more than a “foot fault”.[19]

      Section 6751(b)(1) provides that “[n]o penalty * * * shall be assessed unless

the initial determination of such assessment is personally approved (in writing) by

the immediate supervisor of the individual making such determination”. It is

apparent that petitioner’s section 6751(b)(1) contention is based on his assumption

      19
         Pursuant to the parties’ request, we ordered petitioner to file a seriatim
opening brief, respondent to file a seriatim answering brief, and petitioner to file a
seriatim reply brief. Petitioner and respondent filed a seriatim opening brief and a
seriatim answering brief, respectively. Petitioner filed a notice of intent not to file
a seriatim reply brief. Petitioner does not contend that under sec. 6751(b)(1)
group manager Nichter is not the immediate supervisor of the second revenue
officer. We conclude that petitioner has abandoned advancing any such argument.
                                       - 48 -

[*48] that under section 6751(b)(1) the so-called initial determination of the

assessment of a section 6672 penalty that requires approval by the immediate

supervisor of the individual making such determination is Letter 1153, the letter

that the IRS uses to propose the assessment of a section 6672 penalty against a

responsible person.

      Just as we concluded that we need not determine whether respondent is

correct that section 6751(b)(1) does not apply to a section 6672 penalty, we

conclude that we need not determine whether petitioner is correct that under

section 6751(b)(1) the initial determination of the assessment of a section 6672

penalty is Letter 1153. That is because we find on the record before us that the

supervisor’s approval that section 6751(b)(1) requires took place before the

second revenue officer mailed by certified mail on February 4, 2014, petitioner’s

Letter 1153 addressed to him at his last known address. Our discussion below

assumes not only that section 6751(b)(1) applies to a section 6672 penalty but also

that under section 6751(b)(1) the initial determination of the assessment of a

section 6672 penalty that requires approval by the immediate supervisor of the

individual making such determination is Letter 1153.
                                         - 49 -

[*49] In advancing petitioner’s section 6751(b)(1) contention, petitioner relies on

brief20 only on “Form 4183 that respondent includes as Exhibit 17-R [which] was

dated April 4th, 2014”. Petitioner ignores on brief the February 3, 2014 Form

4183 that we found the second revenue officer had prepared and that group

manager Nichter had approved on February 3, 2014, before that officer mailed by

certified mail on February 4, 2014, petitioner’s Letter 1153 which was addressed

to petitioner’s last known address. The February 3, 2014 Form 4183 showed

petitioner’s name and Ms. Romanski’s name under the heading on that form

“Persons against whom the trust fund recovery penalty is being considered”. The

second revenue officer attached Form 2751, Proposed Assessment of Trust Fund

Recovery Penalty, to petitioner’s Letter 1153. In that form, respondent proposed,

inter alia, to assess against petitioner, as a “person responsible”, the respective

section 6672 penalties with respect to the quarters at issue in 2010.

      It was not until March 26, 2014, that the second revenue officer concluded

that Ms. Romanski should not be subject to any section 6672 penalty and noted in

the integrated collection services history transcript maintained with respect to

Hollywood Arts that Ms. Romanski did not meet what he characterized in that

transcript as “the responsibility and willfulness test” of section 6672(a). Conse-

      20
           But see infra note 22.
                                        - 50 -

[*50] quently, he changed his original conclusion as to Ms. Romanski, but not as

to petitioner, which appeared in the February 3, 2014 Form 4183 with respect to

each of Hollywood Arts’ quarters ended on (1) March 31, June 30, and September

30, 2010, and (2) March 31, June 30, and December 31, 2012, that he had prepared

and submitted to group manager Nichter for approval on February 3, 2014, and

which group manager Nichter approved on the same date.

      On April 3, 2014, the second revenue officer consulted IRM pt. 5.7.4.7.2,

titled “Rescission of Proposed Assessment”, because he had changed his

conclusion as to Ms. Romanski that appeared in the February 3, 2014 Form 4183.

Also on April 3, 2014, the second revenue officer submitted a request to group

manager Nichter for his approval (1) to amend the February 3, 2014 Form 4183 as

to Ms. Romanski only by preparing another Form 4183 in which he would indicate

that Ms. Romanski is not liable for the section 6672 penalty for each of

Hollywood Arts’ quarters at issue and (2) to prepare and issue Letter 1153W, the

letter that the IRS used to rescind any Letter 1153 that it had previously issued to

Ms. Romanski.

      On April 3, 2014, the date on which group manager Nichter received the

second revenue officer’s request for approval to amend the February 3, 2014 Form

4183 as to Ms. Romanski only and to prepare and issue to her Letter 1153W, that
                                       - 51 -

[*51] group manager approved that request. On the same date on which group

manager Nichter approved the second revenue officer’s request, that revenue

officer prepared an amended Form 4183 which was amended only insofar as it

pertained to Ms. Romanski (i.e., the April 4, 2014 amended Form 4183).21

Although the second revenue officer showed in the April 4, 2014 amended Form

4183 under the heading “Persons against whom the trust fund recovery penalty is

being considered” petitioner’s name and Ms. Romanski’s name, he also showed

under Ms. Romanski’s name the following pertinent language: “Ms. Romanski is

not liable for the TFRP [trust fund recovery penalty].”

      On April 4, 2014, the second revenue officer signed and submitted the April

4, 2014 amended Form 4183, which was amended as to Ms. Romanski only, to

group manager Nichter for his approval. On the same date, that group manager

approved the April 4, 2014 amended Form 4183.

      On April 8, 2014, the second revenue officer mailed Ms. Romanski’s Letter

1153W to Ms. Romanski.




      21
        As was of true of the February 3, 2014 Form 4183, the amended Form
4183 pertained not only to the quarters at issue but also to Hollywood Arts’
quarter ended on December 31, 2010. As discussed above, the second revenue
officer did not include that quarter in Form 2751 attached to petitioner’s Letter
1153.
                                        - 52 -

[*52] On the record before us, we find that group manager Nichter approved on

February 3, 2014, petitioner’s Letter 1153 that the second revenue officer mailed

by certified mail on February 4, 2014, to petitioner at his last known address.22 On

that record, we further find that the IRS complied with the requirements of section

6751(b)(1).

      Based upon our examination of the entire record before us and petitioner’s

concessions, we find that the Appeals Office did not abuse discretion in making

the determinations in the notice of determination. On that record, we hold that we

will sustain the determinations in that notice.




      22
         By Order dated February 15, 2018 (February 15, 2018 Order), we gave the
parties the opportunity, by ordering them to file respective responses to that order,
to supplement their respective views on brief, in the light of Graev v. Commis-
sioner, 149 T.C. ___ (Dec. 20, 2017), supplementing and overruling in part 

 (2016), regarding petitioner’s contention on brief that sec. 6751(b)(1)
applies to the section 6672 penalty and that the IRS did not satisfy sec. 6751(b)(1)
in this case. On April 18 and April 19, 2018, respondent and petitioner,
respectively, filed their respective responses to our February 15, 2018 Order. In
his response to our February 15, 2018 Order, petitioner now acknowledges that
group manager Nichter signed on February 3, 2014, the original Form 4183 that
the second revenue officer had prepared, in which he showed both petitioner and
Ms. Romanski as “Persons against whom the trust fund recovery penalty is being
considered”. Petitioner further acknowledges in that response that group manager
Nichter thereby approved on February 3, 2014, petitioner’s Letter 1153 that the
second revenue officer mailed to petitioner on February 4, 2014.
                                         - 53 -

[*53] We have considered all of the contentions and arguments of the parties that

are not discussed herein, and we find them to be without merit, irrelevant, and/or

moot.

        To reflect the foregoing and the parties’ respective concessions,


                                                        An appropriate decision will

                                                  be entered.