T.C. Memo. 2008-157



                      UNITED STATES TAX COURT



          ERICH S. AND LINDA A. YESSE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 21745-05L.               Filed June 23, 2008.



     Elliott K. Braverman, for petitioners.

     Kristina L. Rico, for respondent.



                        MEMORANDUM OPINION


     GALE, Judge:   This is a section 63301 proceeding for review

of respondent90 T.C. 678
, 681 (1988).     Summary judgment may be

granted where there is no genuine issue of material fact and a

decision may be rendered as a matter of law.    Rule 121(a) and

(b).    The moving party bears the burden of proving that there is

no genuine issue of material fact, and factual inferences are

viewed in a light most favorable to the nonmoving party.       Craig

v. Commissioner, 
119 T.C. 252
, 260 (2002); Dahlstrom v.

Commissioner, 
85 T.C. 812
, 821 (1985); Jacklin v. Commissioner,

79 T.C. 340
, 344 (1982).    The party opposing summary judgment

must set forth specific facts which show that a genuine question

of material fact exists and may not rely merely on allegations or

denials in the pleadings.    Grant Creek Water Works, Ltd. v.

Commissioner, 
91 T.C. 322
, 325 (1988); Casanova Co. v.

Commissioner, 
87 T.C. 214
, 217 (1986).
                               - 5 -

     Section 6331(a) authorizes the Secretary to levy upon

property and property rights of a taxpayer liable for taxes who

fails to pay those taxes within 10 days after notice and demand

for payment is made.   Section 6330(a) requires the Secretary to

send a written notice to the taxpayer of the amount of the unpaid

tax and of the taxpayer’s right to a section 6330 hearing at

least 30 days before any levy is begun.

     If a section 6330 hearing is requested, the hearing is to be

conducted by the Commissioner’s Office of Appeals, and at the

hearing the Appeals officer or employee conducting it must verify

that the requirements of any applicable law or administrative

procedure have been met.   Sec. 6330(b)(1), (c)(1).   The taxpayer

may raise at the hearing “any relevant issue” relating to the

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

taxpayer may also raise challenges to the existence or amount of

the underlying tax liability if the taxpayer did not receive any

statutory notice of deficiency with respect thereto or did not

otherwise have an opportunity to dispute the liability.    Sec.

6330(c)(2)(B).

     At the conclusion of the hearing, the Appeals officer must

determine whether and how to proceed with collection and shall

take into account:   (i) The verification that the requirements of

any applicable law or administrative procedure have been met,

(ii) the relevant issues raised by the taxpayer, (iii) the
                              - 6 -

challenges to the underlying tax liability by the taxpayer, where

permitted, and (iv) whether any proposed collection action

balances the need for the efficient collection of taxes with the

legitimate concern of the taxpayer that the collection action be

no more intrusive than necessary.   Sec. 6330(c)(3).

     In the case of the determination at issue, which pertains to

the income tax, we have jurisdiction to review the Appeals

officer’s determination by virtue of section 6330(d)(1)(A),

before its amendment in the Pension Protection Act of 2006, Pub.

L. 109-280, sec. 855(a), 120 Stat. 1019.6   See Iannone v.

Commissioner, 
122 T.C. 287
, 290 (2004).

     Respondent contends that he is entitled to summary judgment

because the only issues petitioners raised in connection with

their hearing were challenges to the underlying tax liabilities

which were precluded under section 6330(c)(2)(B) because

petitioners received a notice of deficiency with respect to the

underlying liabilities.

     Petitioners contend that respondent’s Appeals officer abused

her discretion by refusing to consider during the hearing an

offer-in-compromise based upon doubt as to liability.   Respondent



     6
      Sec. 6330(d)(1) has been amended to give this Court
jurisdiction to review all determinations under sec. 6330,
effective for determinations made after 60 days after Aug. 17,
2006. Pension Protection Act of 2006, Pub. L. 109-280, sec.
855(a), 120 Stat. 1019. The determination in this case was made
on Oct. 21, 2005.
                              - 7 -

argues that petitioners never submitted an offer-in-compromise

and that, in any event, an offer-in-compromise based on doubt as

to liability would constitute an impermissible challenge to the

underlying liability.

     Petitioners argue that there was an abuse of discretion in

the failure to consider their offer-in-compromise7 because there

was substantial doubt as to their liability for the 1985

deficiency and the 1985 and 1986 fraud additions.   In

petitioners’ view, there is substantial doubt because the notice

of deficiency for their 1985 and 1986 taxable years was mailed

more than 3 years after their returns for those years were filed

and consequently after the period of limitations on assessment

had expired, see sec. 6501(a), and because respondent may rely

upon the unlimited assessment period provided in section

6501(c)(1) only upon a showing by clear and convincing evidence


     7
      Although petitioners concede that they did not actually
submit a specific offer-in-compromise based on doubt as to
liability to the Appeals officer conducting their sec. 6330
hearing they argue that the Appeals officer’s stated
unwillingness to consider any such offer-in-compromise was the
cause of their failure. Since, as discussed hereinafter, any
consideration at the sec. 6330 hearing of an offer-in-compromise
based on doubt as to liability would have been precluded under
sec. 6330(c)(2)(B), it is immaterial whether petitioners’ failure
to submit an actual offer-in-compromise was attributable to the
Appeals officer129

T.C. 178
, 183 (2007), we held that a challenge to the amount of

the tax liability made in the form of an offer-in-compromise

based on doubt as to liability by a taxpayer who has received a

notice of deficiency is a challenge to the underlying liability

precluded by section 6330(c)(2)(B).      We conclude that under

Baltic it was not an abuse of discretion for the Appeals officer

to refuse to consider at the section 6330 hearing an offer-in-

compromise by petitioners premised on Mr. Yesse’s asserted

doubtful liability for the fraud additions, because such an

offer-in-compromise would constitute a challenge to the

underlying tax liability.   Although not defined in the statute or

the legislative history, the term “underlying tax liability” as
                               - 9 -

used in section 6330 is “a reference to the amounts that the

Commissioner assessed for a particular tax period * * * [and] may

encompass an amount assessed following the issuance of a notice

of deficiency under section 6213(a)”.   Montgomery v.

Commissioner, 
122 T.C. 1
, 7-8 (2004).   For the years at issue,

the punishment for fraud was an addition to tax, see sec. 6653,

and such additions to tax, as well as penalties, “shall be

assessed, collected, and paid in the same manner as taxes”, and

any reference to “tax” imposed by the Internal Revenue Code

“shall be deemed also to refer to the additions to the tax” and

penalties, sec. 6662(a).8   Petitioners admit that they received

the notice of deficiency that determined fraud additions against

Mr. Yesse for 1985 and 1986 and decided against petitioning the

Tax Court on the basis of “apparent improper legal advice”.

Consequently, petitioners’ opportunity to dispute the fraud

additions (and the 1985 deficiency9) in the Tax Court before




     8
      In 1989 sec. 6662(a) was recodified as sec. 6665(a), and as
previously noted, sec. 6653(b) was in substantial form recodified
as sec. 6663 with fraud redesignated as a “penalty” rather than
“addition to tax”, effective for returns due after Dec. 31, 1989.
See OBRA sec. 7721.
     9
      The fraud addition for 1985 determined and assessed against
Mr. Yesse suspends the period of limitations on assessment for
the 1985 deficiency with respect to both petitioners. See
Ballard v. Commissioner, 
740 F.2d 659
, 663 (8th Cir. 1984), affg.
in part and revg. in part T.C. Memo. 1982-466; Vannaman v.
Commissioner, 
54 T.C. 1011
, 1018 (1970).
                              - 10 -

paying them10 ended with the expiration of the 90-day period in

which they could have petitioned the Tax Court with respect to

the notice of deficiency.   Under Baltic they may not resurrect

that opportunity by raising an offer-in-compromise based on doubt

as to liability in a section 6330 proceeding.   The Appeals

officer’s refusal to consider their offer-in-compromise was

therefore no abuse of discretion.

     Finally, as recorded in the notice of determination, the

Appeals officer verified that the requirements of applicable law

and administrative procedure had been met and took into account

whether any proposed collection action balanced the need for the

efficient collection of taxes with the legitimate concern of

petitioners that the collection action be no more intrusive than

necessary.   See sec. 6330(c)(3).   Petitioners have identified no

specific infirmities in the foregoing not heretofore addressed.

                            Conclusion

     Since we have found that the Appeals officer