T.C. Summary Opinion 2008-70



                     UNITED STATES TAX COURT



                 MORTEIL WILLIAMS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13284-05S.               Filed June 19, 2008.



     Morteil Williams, pro se.

     Roger W. Bracken, for respondent.



     PANUTHOS, Chief Special Trial Judge:    This case was heard

pursuant to the provisions of section 7463 of the Internal

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

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

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

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

indicated, subsequent section references are to the Internal

Revenue Code, as amended.

     This case is before the Court on petitioner’s request for

review of respondent’s determination sustaining respondent’s

intent to levy and the filing of a Federal tax lien with respect

to petitioner’s 1998 through 2002 income tax liabilities.    The

issues before the Court are:    (1) Whether payments petitioner

received in the years in issue are includable in income as

pension or annuity payments or whether the payments may be

classified as disability payments, and (2) whether respondent

abused his discretion in sustaining the lien and levy actions

with respect to petitioner’s income tax liabilities for taxable

years 1998 through 2002.

                             Background

     Petitioner resided in the District of Columbia when she

filed the petition.   The parties filed a stipulation of facts,

with attached exhibits.    We find those facts and incorporate the

stipulation by this reference.

     Petitioner worked as a teacher for the District of Columbia

Public School System (DCPSS).    During her employment she filed a

disability claim with DCPSS on account of her deteriorating

eyesight.   In 1996 petitioner retired and began receiving monthly

retirement pension annuity payments from DCPSS.    These payments

continued throughout the years in issue.
                                - 3 -

     Beginning sometime in 1997 or 1998, and in response to

notices from respondent, petitioner attempted to have DCPSS

recharacterize her retirement annuity payments as disability

payments.    She was unsuccessful, with the result that DCPSS

continued to treat and report her annuity payments as taxable

retirement benefits.1

     Petitioner filed Federal income tax returns for tax years

1998, 1999, 2000, and 2001 on December 6, 2002, and for tax year

2002 on October 17, 2003.2   Each return reported the retirement

annuity as income and reflected a tax owed, but petitioner

included no payments with these returns.

     Respondent assessed the taxes petitioner reported as owing,

plus additions to tax for failure to file timely, failure to pay

taxes shown on the returns, and failure to make estimated tax

payments.3




     1
       Petitioner brought legal action against DCPSS, seeking to
force the reclassification of her annuity payments as disability
and not retirement. The lawsuit in the Superior Court of the
District of Columbia was dismissed.
     2
       Petitioner filed her delinquent Federal income tax returns
when she was told by an Internal Revenue Service settlement
officer that he could not consider an offer-in-compromise (OIC)
to resolve her tax liabilities unless she was compliant with her
tax return filing obligations. This occurred during a separate
collection due process hearing for tax years 1996 and 1997. The
notice of determination from that hearing and tax years 1996 and
1997 are not part of this case.
     3
        Respondent did not assess an addition to tax under sec.
6654 for tax year 2002.
                                - 4 -

     On February 11, 2004, respondent filed a notice of Federal

tax lien for petitioner’s unpaid income taxes for tax years 1998

through 2002.   On February 13, 2004, respondent sent petitioner a

Notice of Intent to Levy and Notice of Your Right to a Hearing

for tax years 1998 through 2002.    On February 17, 2004,

respondent sent petitioner a Notice of Federal Tax Lien Filing

and Your Right to a Hearing Under IRC 6320 for tax years 1998

through 2002.   The Federal tax lien reflected the following

unpaid balances:

          Tax Year                      Unpaid Balance

            1998                          $4,701.22
            1999                           4,788.89
            2000                           8,652.40
            2001                           3,836.26
            2002                           5,636.28
              Total                       27,615.05

     Petitioner submitted a timely Form 12153, Request for a

Collection Due Process Hearing.    Petitioner stated that she

disagreed with both the notice of Federal tax lien and the notice

of intent to levy.    Petitioner asserted that DCPSS forced her to

retire and did not give her a disability pension.        Petitioner

listed taxable periods 1996 through 2002 in her request.

Respondent’s Appeals Office notified petitioner that, because

respondent had provided petitioner a previous collection hearing
                                - 5 -

regarding tax years 1996 and 1997, only tax years 1998 through

2002 could be considered.4

     Respondent’s settlement officer reviewed petitioner’s file,

verified that petitioner was in compliance with the filing of her

tax returns, and conducted a telephone hearing with petitioner on

March 29, 2005.   During the hearing, petitioner requested that

respondent reclassify her retirement pension annuity payments as

nontaxable disability payments and informed the settlement

officer that she had sought reclassification from DCPSS but had

so far been unsuccessful.    Petitioner expressed interest in

filing an offer-in-compromise (OIC).    The settlement officer sent

her the required forms and set April 15, 2005, as the deadline

for petitioner to submit an OIC.    Petitioner did not submit any

further information regarding reclassification of her income or

the required forms to request an OIC or suggest a collection

alternative.

     On April 26, 2005, the settlement officer verified that he

had not received a response from petitioner and concluded that

respondent could not reclassify petitioner’s income as she had


     4
       Petitioner’s request also mentioned that she had submitted
an OIC to resolve all of her pending tax liabilities. The record
reflects that petitioner submitted an OIC as part of the earlier
collection proceedings (for tax years 1996 and 1997) during which
she prepared and filed her delinquent Federal income tax returns.
See supra note 2. The record also reflects that this OIC, dated
Nov. 1, 2003, was returned to petitioner on Feb. 12, 2004. Thus,
as of the date of petitioner’s request for a collection hearing,
Feb. 19, 2004, respondent was not considering a pending OIC.
                               - 6 -

requested.   The Appeals officer recommended that the case be

closed with the issuance of a notice of determination sustaining

the collection actions.

     Respondent issued a Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330 dated June

17, 2005, which:   (1) Verified that the requirements of all

applicable laws and regulations had been met, (2) recited

petitioner’s unsuccessful challenge to the underlying tax

liabilities, (3) determined that the proposed collection actions

properly balanced the intrusion on petitioner against the need

for efficient collection, and (4) sustained both the filing of

the notice of Federal tax lien and the issuance of the notice of

intent to levy.5

                            Discussion

     In reviewing the Commissioner’s decision to sustain

collection actions, where the validity of the underlying tax

liability is properly at issue, the Court reviews the

Commissioner’s determination of the underlying tax liability de


     5
       After an initial hearing on Oct. 10, 2006, this case was
continued to allow petitioner to consult with counsel and submit
a new OIC. The record reflects that petitioner did so consult
and did submit an OIC and that respondent considered it.
Respondent determined that some of petitioner’s claimed expenses
were not allowable and that petitioner could pay more than she
offered. Petitioner rejected this increased payment before
trial. At trial, held Feb. 27, 2008, the Court invited the
parties to inform it of any settlement reached after trial. As
of the date of this opinion, it appears that the parties remain
unable to reach a compromise.
                                 - 7 -

novo.   Sego v. Commissioner, 

, 610 (2000); Goza v.

Commissioner, 

, 181-182 (2000).   The Court reviews

any other administrative determination regarding proposed

collection actions for an abuse of discretion.    Sego v.

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

If the Court finds that a taxpayer is liable for deficiencies and

additions to tax, then the Commissioner’s administrative

determination sustaining the collection action will be reviewed

for an abuse of discretion.   See Downing v. Commissioner, 

, 31 (2002); Godwin v. Commissioner, T.C. Memo. 2003-289,

affd. 

(11th Cir. 2005).

     Historically, the Tax Court has been a court of limited

jurisdiction, and we may exercise our jurisdiction only to the

extent authorized by Congress.    Sec. 7442; Henry Randolph

Consulting v. Commissioner, 

, 4 (1999); Naftel v.

Commissioner, 

, 529 (1985).   Our jurisdiction in this

case is predicated upon section 6330(d)(1)(A), which gives the

Tax Court jurisdiction “with respect to such matter” as is

covered by the final determination in a requested hearing before

the Appeals Office.   See Davis v. Commissioner, 

, 37

(2000).   “Thus, our jurisdiction is defined by the scope of the

determination” that the Appeals officer is required to make.

Freije v. Commissioner, 

, 25 (2005).
                               - 8 -

     At the hearing the Appeals officer is required to verify

that “the requirements of any applicable law or administrative

procedure have been met.”   Sec. 6330(c)(1); see also sec.

6330(c)(3)(A). The Appeals officer is also required to address

whether the proposed collection action balances the need for

efficient tax collection with the legitimate concern that any

collection action be no more intrusive than necessary.     Sec.

6330(c)(3)(C).   The taxpayer may raise “any relevant issue

relating to the unpaid tax or the proposed levy”.   Sec.

6330(c)(2)(A).   The taxpayer is also entitled to challenge “the

existence or amount of the underlying tax liability” if she “did

not receive any statutory notice of deficiency for such tax

liability or did not otherwise have an opportunity to dispute

such tax liability.”   Sec. 6330(c)(2)(B).

     Petitioner did not receive a notice of deficiency or

otherwise have an opportunity to dispute the underlying tax

liabilities before the March 29, 2005, telephone hearing.6    Thus,

she may challenge the existence or amount of her underlying tax

liabilities for tax years 1998 through 2002.   See Montgomery v.

     6
       The record indicates that respondent assessed the tax
liabilities petitioner reported on her tax returns and did not
send her notices of deficiency. Although the notice of
determination references earlier petitions filed by petitioner
with the Court, it appears that those cases were dismissed for
lack of jurisdiction because the petitions filed were not based
upon either notices of deficiency or notices of determination.
Petitioner has not had the opportunity to challenge the tax
liabilities for 1998 through 2002 in court.
                               - 9 -

Commissioner, 

, 7-9 (2004).   In both her request for a

collection hearing and at the hearing itself, petitioner raised

the issue of whether her pension annuity income is taxable.

Accordingly, we review respondent’s determination as to the

underlying tax liabilities de novo.

     The only challenge petitioner raised to the underlying tax

liabilities at the Appeals hearing and at trial is that her

retirement annuity payments should be reclassified as disability

payments.   Pension and annuity payments are includable in income.

Secs. 61(a)(9), (11), 72(a).   Generally, however, section 72 does

not apply to any amount received as an accident or health

benefit, sec. 1.72-15(b), Income Tax Regs., and certain

disability payments are excludable from income under section 104.

For this reason, petitioner seeks disability classification for

the payments from DCPSS.

     Petitioner failed to convince DCPSS to reclassify the

payments.   Respondent determined that the payments constitute

retirement annuity payments and are includable in income.

Respondent explained to petitioner that he is not authorized to

recharacterize the payments.   This was the only challenge

petitioner posed to the underlying tax liabilities.

     Petitioner asks this Court to recharacterize the payments as

disability payments.   As discussed, we are a court with powers

and jurisdiction strictly limited by statute.   We have found no
                              - 10 -

statute that would empower either respondent or the Court to

convert petitioner’s annuity payments from taxable retirement

income to potentially nontaxable disability payments.    The record

indicates that petitioner retired from DCPSS in 1996, accepted

retirement benefits paid by DCPSS, and reported those payments as

retirement income on her 1998 through 2002 Federal income tax

returns.7   Petitioner indicated that she had a disability claim

against DCPSS when she retired, but the fact remains that she did

retire and DCPSS did make retirement annuity payments to her

throughout the years in issue.

     Petitioner has not demonstrated that the annuity payments

she received were actually nontaxable disability payments rather

than taxable retirement annuity payments.   The Court may not

change the character of these payments.   Accordingly,

petitioner’s challenge to the underlying tax liabilities must

fail.

     Although provided the opportunity, petitioner did not submit

an OIC or raise any other collection alternatives with the

settlement officer in the time provided after the collection

hearing and before respondent issued the notice of determination



     7
       Statements made on a tax return signed by the taxpayer
have long been considered admissions, and such admissions are
binding on the taxpayer, absent cogent evidence indicating that
those statements are wrong. Pratt v. Commissioner, T.C. Memo.
2002-279.
                              - 11 -

for the years in issue.8   We find that the settlement officer

verified that the legal and administrative requirements had been

met and considered whether the proposed collection actions

properly balanced the need for efficient collection against

petitioner’s legitimate concern that the collection action be no

more intrusive than necessary.

     On the basis of the record, we conclude that respondent

satisfied the requirements of section 6330(c) and did not abuse

his discretion in sustaining the notice of Federal tax lien and

the notice of intent to levy for tax years 1998 through 2002.

Respondent’s determination, therefore, is sustained.

     To reflect the foregoing,

                                         Decision will be entered

                                    for respondent.




     8
       As discussed, see supra note 5, after respondent issued
the notice of determination and petitioner filed her petition,
petitioner submitted an OIC. Respondent rejected it and made a
counteroffer. Petitioner rejected the counteroffer before trial.