After the District Court enjoined the Gardners from further promotion of their corporation sole plan, the IRS, led by Mr. Kuxhausen, opened an income tax examination of the Gardners' 2002, 2003, and 2004 tax years. As was noted supra p. 6, petitioners ceased filing Federal income tax returns after 1992. Relying on BAM's bank records, Mr. Kuxhausen conducted a bank deposits analysis and created substitutes for returns under the authority granted the IRS by section 6020(b). Thereafter the IRS mailed Mr. and Mrs. Gardner separate notices of deficiency for 2002 and 2003 on2015 U.S. Tax Ct. LEXIS 36">*48 March 21, 2006, and the IRS mailed Mr. and Mrs. Gardner separate notices of deficiency for 2004 on March 30, 2007.

The Gardners timely filed petitions in this Court seeking redetermination of the IRS' income tax determinations. In Gardner v. Commissioner, T.C. Memo. 2013-67, we upheld respondent's determinations with respect to the Gardners' income tax deficiencies, as well as certain additions to tax, for years 2002, 2003, and 2004. The Gardners argued that the money deposited into the BAM bank account did not constitute taxable income to them because (1) the deposits were gifts/donations to a legitimate church, (2) they had taken vows of poverty, and (3) they acted as agents of BAM. We rejected all of these arguments. We stated that the deposits were not "donations" in that donations are transfers resulting from a detached and disinterested generosity. We held that the Gardners had received moneys from customers in consideration for organizing corporations sole, LLCs, and trusts. We also rejected the Gardners' arguments that they were agents of BAM and did not benefit from the income because they took vows of poverty. In this regard, we found that the Gardners had exercised dominion and control over BAM's bank account and2015 U.S. Tax Ct. LEXIS 36">*49 held that all taxable deposits into 145 T.C. 161">*170 that account were includible in their gross income. Gardner v. Commissioner, at *16-*17.⁴

Concurrent with the income tax examination, Mr. Kuxhausen opened a section 6700 penalty investigation. He identified approximately 300 corporations sole organized by the Gardners. He was able to identify 200 purchasers of the corporation sole plan through examination of BAM's bank records. Mr. Kuxhausen gave these names to a "list keeper"⁵ in the IRS' abusive transactions program who took the list to find tax returns for more than 100 of the listed individuals. Mr. Kuxhausen and a technical analyst then conducted a classification of tax returns for examination by reviewing each of the returns for potential income and/or deduction issues, such as deductions that could not be justified with the income reported on a return. All returns having a discrepancy were flagged for examination. Mr. Kuxhausen found potential discrepancies with respect to income, deduction, and/or credit issues on 47 of the returns of purchasers of the Gardners' corporation sole plan and classified2015 U.S. Tax Ct. LEXIS 36">*50 them for examination.

After Mr. Kuxhausen completed his investigation, the Gardners provided the IRS with the customer list, as required by the District Court. The list contained the names of 189 individuals and their church ministries that matched those on Mr. Kuxhausen's list. Mrs. Gardner informed Mr. Kuxhausen that the Gardners had organized 57 corporations sole for their customers in 2003.

The IRS entered the $47,000 section 6700 penalty assessments against Mr. and Mrs. Gardner on September 19, 2011. Each assessment was designated for year 2003. That year was selected because the investigation commenced in 2003; the year 2003 was used merely to track the investigation.

145 T.C. 161">*171 Also on September 19, 2011, respondent sent the Gardners notice2015 U.S. Tax Ct. LEXIS 36">*51 and demand letters. Mrs. Gardner acknowledged that she had received the notice and demand letter addressed to her on September 23, 2011. Mr. Gardner asserted he had never received a notice and demand letter addressed to him. Neither Mr. nor Mrs. Gardner paid the section 6700 penalty.

The IRS mailed Mr. Gardner a Final Notice--Notice of Intent to Levy and Notice of Your Right to a Hearing on August 27, 2012, at his last known address, via certified mail. The notice was returned as undeliverable, presumably because the Gardners had moved since the last time they had filed an income tax return. The IRS ascertained the Gardners' correct address and thereafter sent Mr. Gardner, via certified mail, a second levy notice, which Mr. Gardner acknowledged receiving. The IRS mailed Mr. Gardner a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320, via certified mail, on September 11, 2012, and filed a notice of lien against his property on the same date. Mr. Gardner acknowledged receiving the lien notice on September 13, 2012.

Mr. Gardner filed a Form 12153, Request for a Collection Due Process or Equivalent Hearing, on September 10, 2012, requesting a hearing (referred to as a section 6330 hearing), 2015 U.S. Tax Ct. LEXIS 36">*52 see infra pp. 21-22, as to both the lien and the IRS' intent to levy. Mr. Gardner objected to these collection actions claiming: "Do not owe. Don't know what is for." Settlement Officer Michael Freitag was assigned to Mr. Gardner's case. Before commencing work, he confirmed that he had no prior involvement with Mr. Gardner. Settlement Officer Freitag then scheduled a telephone conference for November 27, 2012. He informed Mr. Gardner that he could request collection alternatives but that in order to do so, Mr. Gardner had to file income tax returns for 2003 through 2011 and submit to the IRS a completed Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals, and Form 433-B, Collection Information Statement for Businesses. Mr. and Mrs. Gardner both participated in the section 6330 hearing on November 27. They declined to discuss collection alternatives but instead focused solely on the underlying $47,000 penalty. Settlement Officer Freitag declined to discuss the underlying liability, stating that Mr. Gardner had had a prior opportunity to dispute it but he had 145 T.C. 161">*172 not done so and therefore was not permitted to raise the issue at the section 6330 hearing.

The IRS mailed Mrs. Gardner a notice2015 U.S. Tax Ct. LEXIS 36">*53 of intent to levy on February 27, 2012, which Mrs. Gardner acknowledged receiving on March 3, 2012. She mailed a Form 12153 to the IRS on March 22, 2012. Her objection to the proposed collection activity was identical to that of her husband: "Do not owe. Don't know what is for."⁶ Settlement Officer Bernice Mason was assigned Mrs. Gardner's case. Before commencing work, she confirmed that she had no prior involvement with Mrs. Gardner. Settlement Officer Mason then scheduled a telephone conference call for November 26, 2013. Settlement Officer Mason informed Mrs. Gardner that she could request collection alternatives but that in order to do so Mrs. Gardner would need to (1) file income tax returns for 2006 through 2012, (2) provide proof that she had made estimated tax payments for 2013, and (3) complete a Form 433-A. At the section 6330 hearing before Settlement Officer Mason, both Mr. and Mrs. Gardner were present. Mrs. Gardner declined to discuss collection alternatives. Rather, Mrs. Gardner wanted to discuss only the section 6700 penalty assessment. Settlement Officer Mason concluded that Mrs. Gardner had had a prior opportunity to litigate the underlying liability and refused to allow her to raise that2015 U.S. Tax Ct. LEXIS 36">*54 issue.

The IRS issued a notice of determination to Mr. Gardner on May 31, 2013, and to Mrs. Gardner on January 24, 2014. The Gardners timely filed separate petitions with the Court, and their cases were consolidated for trial, which was held in Phoenix, Arizona, on February 3, 2015.

These cases involve a review of respondent's determination to proceed with collection of section 6700 penalties against Mr. Gardner via lien and levy actions and Mrs. Gardner via levy action. 145 T.C. 161">*173 The relevant portion of the statute provides:

SEC. 6700. PROMOTING ABUSIVE TAX SHELTERS, ETC.

(a) Imposition of Penalty.--Any person who--

(1)(A) organizes (or assists in the organization of)--

(i) a partnership or other entity,

(ii) any investment plan or arrangement, or

(iii) any other plan or arrangement, or

(B) participates (directly or indirectly) in the sale of any interest in an entity or plan or arrangement referred to in subparagraph (A), and

(2) makes or furnishes or causes another person to make or furnish (in connection with such organization or sale)--

(A) a2015 U.S. Tax Ct. LEXIS 36">*55 statement with respect to the allowability of any deduction or credit, the excludability of any income, or the securing of any other tax benefit by reason of holding an interest in the entity or participating in the plan or arrangement which the person knows or has reason to know is false or fraudulent as to any material matter, or

(B) a gross valuation overstatement as to any material matter,

shall pay, with respect to each activity described in paragraph (1), a penalty equal to the $1,000 or, if the person establishes that it is lesser, 100 percent of the gross income derived (or to be derived) by such person from such activity. For purposes of the preceding sentence, activities described in paragraph (1)(A) with respect to each entity or arrangement shall be treated as a separate activity and participation in each sale described in paragraph (1)(B) shall be so treated. * * *

The section 6700 penalty is governed by the procedural rules of section 6703, which, in general, removes section 6700 penalty assessments from the deficiency jurisdiction of this Court.⁷ However, section 6330(d)(1) provides this Court with jurisdiction to review an appeal from the Commissioner's determination to proceed with collection activity regardless of the type2015 U.S. Tax Ct. LEXIS 36">*56 of underlying tax involved. And we have held that our jurisdiction includes reviewing the Commissioner's lien and levy activities regarding penalties governed by the procedural rules of section 6703, including section 6700. Williams v. Commissioner, 131 T.C. 54">131 T.C. 54, 131 T.C. 54">58 n.4 (2008); Harry v. Commissioner, T.C. Memo. 2009-206; see Callahan v. 145 T.C. 161">*174 Commissioner, 130 T.C. 44">130 T.C. 44 (2008). Thus, we have jurisdiction to review the notices of determination issued to petitioners.

Section 6320(a) provides that written notice of the filing of a notice of Federal tax lien must be furnished by the Secretary to the taxpayer whose property is subject to the lien. Section 6320(b) provides that a taxpayer may thereafter request a hearing regarding the filing of the tax lien, and section 6320(c) provides that the hearing must be conducted pursuant to the rules of section 6330 (thus the hearing regarding the filing of a notice of Federal tax lien is referred to as a "section 6330 hearing").

Section 6330(a)2015 U.S. Tax Ct. LEXIS 36">*57 provides that no levy may be made on any property or right to property of any person unless the Secretary has notified that person in writing of the right to a hearing before the levy is made (the section 6330 hearing). Section 6330(b)(3) provides that if a person requests a section 6330 hearing, that hearing shall be held before an impartial officer or employee of the IRS. During the hearing the taxpayer may raise any relevant issue, including appropriate spousal defenses, challenges to the appropriateness of the collection action, and collection alternatives, including offers-in-compromise. Sec. 6330(c)(2)(A).

A taxpayer is precluded from contesting the existence or amount of the underlying tax liability at the section 6330 hearing unless the taxpayer did not receive a notice of deficiency for the tax in question or did not otherwise have an opportunity to dispute the underlying tax liability. Sec. 6330(c)(2)(B); see also Sego v. Commissioner, 114 T.C. 604">114 T.C. 604, 114 T.C. 604">609 (2000).⁸ In the instant cases, the underlying liabilities are the section 6700 penalties imposed on petitioners.

The IRS concedes that (1) petitioners did not have a prior opportunity to contest the section 6700 penalties; (2) petitioners may challenge the existence and/or amounts of the underlying liabilities (i.e., the section 6700 penalties), and (3) the Court should use a de novo standard of review.^{92015 U.S. Tax Ct. LEXIS 36">*58} We 145 T.C. 161">*175 accept these concessions, and on that basis we conclude we have jurisdiction to consider the existence and amounts of the section 6700 penalties assessed against petitioners.

To prevail, respondent must prove: (1) that petitioners are liable for the section 6700 penalties and (2) the amounts of the penalties.

Section 6703(a) provides that the IRS bears the burden of proving that any person is liable for a penalty pursuant to section 6700.¹⁰ Respondent argues that he has met his burden by (1) establishing by the defense of collateral estoppel that the Gardners engaged in conduct which makes them liable for the section 6700 penalties, and (2) presenting evidence at trial which establishes that each petitioner engaged in conduct making himself/herself liable for the section 6700 penalty no fewer than 47 times.

If respondent proves that violations of section 6700 have occurred, a penalty of $1,000 applies to each violation unless petitioners establish that the amount of gross income derived from the prohibited activity was less. Seesec. 6700(a) (flush language). Petitioners bear the burden of proving that the amount derived from each prohibited activity was less than $1,000. See id.

In applying section 6700, courts have identified four elements the Government must establish: (1) organization of or participation in the sale of certain investment plans or arrangements; (2) statements regarding the allowability of deductions or tax credits, the excludability of income, or the securing of other tax benefits; (3) knowledge or reason to know the statements are false; and (4) that the statements pertain to a material matter. United States v. Stover, 650 F.3d 1099">650 F.3d 1099, 650 F.3d 1099">1107145 T.C. 161">*176 (8th Cir. 2011); United States v. Estate Pres. Servs., 202 F.3d 1093">202 F.3d 1093, 202 F.3d 1093">1098 (9th Cir. 2000).

Section 6700 makes no mention of whether a participant must rely on the promoter's statements or underreport his/her tax as a result of participation in the promotion. However, the legislative history of the section states that the actions of the plan participants are not relevant to the application of the section. "There need not be reliance by the purchasing taxpayer or actual under-reporting of tax. These elements have not been included because they would substantially impair the effectiveness of this penalty. Thus, a penalty can be imposed based upon the offering materials of the arrangement without an audit of any purchaser of interests." S. Rept. No. 97-494 (Vol. 1), at 267 (1982), 1982 U.S.C.C.A.N. 781, 1015.

Respondent2015 U.S. Tax Ct. LEXIS 36">*60 posits that he has established the Gardners' liability through the judicial doctrine of collateral estoppel. Respondent states in his brief that "[a]fter applying collateral estoppel, the only issue for the Court to decide is if petitioners' false statements were made in connection with at least 47 of the corporation sole arrangements."

Collateral estoppel^{112015 U.S. Tax Ct. LEXIS 36">*61} is an affirmative defense barring a party from relitigating an issue determined against that party in an earlier action, even if the second action differs significantly from the first one. Black's Law Dictionary 256.¹² The collateral estoppel doctrine is also known as issue preclusion. Once an issue of fact or law is "actually and necessarily determined by a court of competent jurisdiction, that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation." Montana v. United States, 440 U.S. 147">440 U.S. 147, 440 U.S. 147">153, 99 S. Ct. 970">99 S. Ct. 970, 59 L. Ed. 2d 210">59 L. Ed. 2d 210 (1979) (citing Parklane Hosiery Co. v. Shore, 439 U.S. 322">439 U.S. 322, 439 U.S. 322">326 n.5, 99 S. Ct. 645">99 S. Ct. 645, 58 L. Ed. 2d 552">58 L. Ed. 2d 552 (1979)). Thus, if an issue has been resolved by a court, the 145 T.C. 161">*177 issue will not be taken up again by a subsequent court. The Commissioner may assert the doctrine of collateral estoppel as an affirmative defense even though the Commissioner was not a party to the prior proceeding. See Brotman v. Commissioner, 105 T.C. 141">105 T.C. 141, 105 T.C. 141">148 (1995).

Collateral estoppel applies in a factual dispute if the following conditions are satisfied: (1) the issue in the second suit is identical in all respects with the one decided in the first action; (2) there is a final judgment rendered by a court of competent jurisdiction; (3) the party against which collateral estoppel is asserted is either a party to the prior judgment or the privy of a party to the prior judgment; (4) the parties actually litigated the issues and the resolution of these issues was essential to the prior decision; and (5) the controlling facts and applicable legal rules remain unchanged from those in the prior litigation. Peck v. Commissioner, 90 T.C. 162">90 T.C. 162, 90 T.C. 162">166-167 (1988), aff'd, 904 F.2d 525">904 F.2d 525 (9th Cir. 1990).

We agree with respondent that all five90 T.C. 162">Peck elements are present in these cases. With respect2015 U.S. Tax Ct. LEXIS 36">*62 to the first element, the issues in both the District Court case and these cases are identical. Section 7408(a) empowers a court to enjoin any person from further engaging in "specified conduct". Specified conduct is defined in section 7408(c) and includes any action or failure to take action which is subject to penalty under section 6700. Sec. 7408(c)(1). To enjoin the Gardners from engaging in promoting and selling of an abusive tax shelter plan or arrangement, the District Court necessarily determined that they engaged in conduct subject to the section 6700 penalty. As the District Court stated in its order:

Section 7408 * * * authorizes a court to enjoin persons who have engaged in conduct subject to penalty under Code § 6700 from engaging in further such conduct or any other conduct subject to penalty under the Code if the Court finds that injunctive relief is appropriate to prevent recurrence of the conduct. * * * Based on the evidence presented by the parties, the Court finds that the defendants are engaging in conduct in violation of Code § 6700.

With respect to the second element, the District Court's order, upheld on appeal by the Court of Appeals for the Ninth Circuit, is a final judgment by a court of competent jurisdiction. With respect to the third element, petitioners2015 U.S. Tax Ct. LEXIS 36">*63 and the Government were both parties to the prior case (and the IRS may claim collateral estoppel even if a different 145 T.C. 161">*178 Government agency participated in the prior case). See supra p. 26. With respect to the fourth element, the record makes it clear that petitioners fully disputed and the parties fully litigated all issues with respect to the injunction. With respect to the fifth element, there has been no modification to section 6700 or the regulations promulgated thereunder since the prior litigation. The facts of these cases have not changed since the end of the prior litigation. As respondent points out in his brief: "The § 6700 penalty naturally flows from the injunction granted by the District Court. The District Court determined that the Gardners violated § 6700. Section 6700 provides that any person who violates § 6700 'shall pay' a penalty."

Petitioners reply that collateral estoppel is inapplicable in these cases. "It is clear there are no abusive transactions to give rise to the penalty. Respondent did not prove the abusive transaction. What the respondent is passing off as proof is the District Court said that the Gardners engaged in conduct that violates IRC § 6700." Petitioners then argue that the corporation sole plan was not2015 U.S. Tax Ct. LEXIS 36">*64 an abusive tax shelter. However, petitioners' position is precisely what the doctrine of collateral estoppel was intended to avoid: relitigating closed questions. Petitioners repeated in this Court the same argument that they made in the District Court as well as the same false statements made to their customers that led the District Court to enjoin them.^{132015 U.S. Tax Ct. LEXIS 36">*65} We thus hold that the doctrine of collateral estoppel applies in the instant situation and that the District Court's determination is conclusive. Consequently, respondent has met his burden of establishing that the Gardners are liable for the section 6700 penalties.

A taxpayer is liable for a $1,000 penalty for each violation of section 6700 unless the taxpayer can establish that the amount of gross income derived from the activity was less than $1,000. Sec. 6700(a). The District Court did not address the penalty amount for which the Gardners would be liable although it did find that the Gardners had organized more than 300 corporations sole for their customers.

To impose a $47,000 penalty against each petitioner, respondent is obligated to establish that each petitioner committed 47 acts which made him/her liable for the section 6700 penalty. At trial Mr. Kuxhausen did just that. He explained in detail how he and his colleagues examined BAM's bank accounts, customers' canceled checks, and customers' tax returns and how he and his colleagues were able to identify 47 corporations sole organized by petitioners and correlate payments made by the customers. Mr. Kuxhausen classified only 47 income tax returns because they had the most potential for examination adjustments (i.e., most likely to have issues with income, deductions, and/or credits).

The Gardners maintain that the IRS did not establish that any of the individuals who purchased the corporation sole2015 U.S. Tax Ct. LEXIS 36">*66 plan used the plan to avoid Federal income tax. The Gardners allege that the purchasers were legitimate ordained bishops, pastors, elders, etc. who had purchased the plan for the governance of their respective churches and/or ministries. In this regard, four of the individuals that Mr. Kuxhausen identified testified on petitioners' behalf. Each individual credibly testified that he did not use his respective corporation sole to avoid taxes, but rather each individual used his corporation sole to administer his ministry in furtherance of what are unquestionably good works. The IRS audited the returns of all four individuals. None had any corporation sole-related adjustments made to his tax return. Indeed, one witness received a tax refund after his audit.

The focus of section 6700, however, is not on the recipient; it is on the promoter of the abusive tax shelter. As the legislative history of the statute makes clear, a promoter is liable for the section 6700 penalty even if the IRS does not audit the return of the purchaser. Indeed, even if the purchaser makes no use of the tax shelter and does not underreport his/her 145 T.C. 161">*180 tax, the promoter is still liable for the section 6700 penalty.¹⁴See S. Rept. No. 97-494 (Vol. 1), supra2015 U.S. Tax Ct. LEXIS 36">*67 at 267, 1982 U.S.C.C.A.N. at 1015.

Section 6700(a)(2)(B) provides that if a tax shelter promoter establishes that he/she derived less than $1,000 with respect to each promotional action, the section 6700 penalty shall be that lesser amount. The Gardners have not done so.

The District Court determined that the Gardners' corporation sole plan violated section 6700, and we so hold. The IRS established that the Gardners sold the corporation sole plan to those 47 individuals, and we hold the Gardners sold the corporation sole plan to at least 47 individuals.

The notices of determination sent to the Gardners state that the year involved is 2003. At trial we inquired how the IRS selected 2003 when the Gardners sold their corporation sole plan in 2002, 2003, and 2004. In his brief, respondent replied that the IRS investigation commenced in 2003 and for administrative reasons the IRS tracked the Gardners'section 6700 penalties in tax modules designated year 2003.¹⁵ Respondent posits that section 6700 penalties are not assessed for discrete taxable years but2015 U.S. Tax Ct. LEXIS 36">*68 rather for conduct and transactions that may occur over one or more taxable years.

Courts have examined the period for a section 6700 penalty assessment before. In Planned Invs., Inc. v. United States, 881 F.2d 340">881 F.2d 340 (6th Cir. 1989), the Court of Appeals for the Sixth Circuit was faced with a notice and demand regarding a section 6700 penalty assessment which did not specify the period involved. Subsection (a) of section 6671, which governs the assessment of all penalties provided in subchapter B of chapter 68, including those of section 6700, 145 T.C. 161">*181 provides that such penalties shall be paid upon notice and demand and shall be collected as taxes. Chapter 63 of the Code, specifically sections 6201 through 6245, governs assessment of taxes; consequently, that chapter of the Code controls how the penalty is assessed.¹⁶ Similarly, chapter 64, which sets forth the rules for the collection of taxes, governs the collection of the section 6700 penalty. Specifically, section 6303(a) of chapter 64 provides: "After the making of an assessment2015 U.S. Tax Ct. LEXIS 36">*69 of a tax pursuant to section 6203, [the IRS shall] give notice to each person liable for the unpaid tax, stating the amount and demanding [the] payment thereof." The Court of Appeals in Planned Invs., Inc., 881 F.2d 340">881 F.2d at 344, concluded: "Section 6303 does not prescribe any particular form of notice. Treasury Regulations promulgated under the authority of § 6303 merely parrot the statutory language that the notice shall state the amount of the tax and demand payment thereof. 26 CFR § 301.6303-1(a)." The Court of Appeals held:

Construing the plain language of the statutes and regulations outlined above, it becomes evident that the form of notice of assessment of a § 6700 penalty requires only a statement of the amount of the penalty and a demand for payment. It is also clear that the notice sent to the plaintiff in this case complied with these requirements as the notice identified the amount assessed and demanded payment.

The rationale of Planned Invs., Inc. was followed by several other Courts of Appeals. See In re MDL-731 Tax Refund Litig. of Organizers & Promoters of Inv. Plans Involving Book 145 T.C. 161">*182 Props. Leasing, 989 F.2d 1290">989 F.2d 1290, 989 F.2d 1290">1301 (2d Cir. 1993) ("The Internal Revenue Code thus does not obligate the IRS to assess Section 6700 penalties only on income actually earned during discrete taxable periods."); Sage, 908 F.2d 18">908 F.2d 18 (finding the Court of Appeals for the Sixth Circuit's reasoning in Planned Invs., Inc. persuasive); Gates v. United States, 874 F.2d 584">874 F.2d 584, 874 F.2d 584">588 (8th Cir. 1989) ("Indeed, it does not appear that section 6671 dictates any particular assessment period for section 6700 penalties, which do not relate to any specific tax."). We are cognizant that the Court of Appeals for the Ninth Circuit, to which appeal in this matter would normally lie, has taken a position that may appear contrary to this precedent. In Bond v. United States, 872 F.2d 898">872 F.2d 898, 872 F.2d 898">901 (9th Cir. 1989) (issued before Planned Invs., Inc. or the other cases cited supra), the Court of Appeals for the Ninth Circuit suggested that2015 U.S. Tax Ct. LEXIS 36">*71 section 6700 penalties should be assessed on an annualized basis. The court ruled that the section 6700 penalty was properly calculated as a percentage of the gross income derived from the sales made during the year or years involved.

The language of section 6700 on which the Court of Appeals opined in872 F.2d 898">Bond has been superseded by an amendment to section 6700. In 1989 Congress added the flush language to section 6700(a), to clarify that

activities described in paragraph (1)(A) [referring to organization of a partnership or other entity, any investment plan or arrangement, or any other plan or arrangement] with respect to each entity or arrangement shall be treated as a separate activity and participation in each sale described in paragraph (1)(B) [participation in the sale of any interest in an entity or plan or arrangement referred to in section 6700(a)(1)(A)] shall be so treated.

We believe it proper to follow herein the analysis in881 F.2d 340">Planned Invs., Inc. and the other Courts of Appeals opinions that have followed it. In these cases, the notices of determination identified the amounts assessed and made it clear that payment was required. Although the tax year included in the notice of determination was not relevant to petitioners'2015 U.S. Tax Ct. LEXIS 36">*72 cases, the IRS provided a cogent administrative reason why a year was identified (i.e., administrative requirements) and the Gardners were both knowledgeable as to all relevant facts and arguments of the IRS and had a full opportunity 145 T.C. 161">*183 to contest the $47,000 penalties at trial before us. In sum, we find the notices of determination to proceed with lien and levy actions that were provided to the Gardners with respect to the section 6700 penalties were adequate.¹⁷

The remainder of these cases requires our review of the actions of the IRS' Appeals Office. When the Court conducts a de novo review of the underlying liability, we review all determinations not involving the underlying liability for abuse of discretion. Craig v. Commissioner, 119 T.C. 252">119 T.C. 252, 119 T.C. 252">260 (2002). An action constitutes an abuse of discretion if it is arbitrary, capricious, or without sound basis in fact or law. Giamelli v. Commissioner, 129 T.C. 107">129 T.C. 107, 129 T.C. 107">111 (2007). The Court of Appeals for the Ninth Circuit has specifically held that for section 6330 cases the scope2015 U.S. Tax Ct. LEXIS 36">*73 of review is limited to the administrative record where the standard of review is abuse of discretion. See Keller v. Commissioner, 568 F.3d 710">568 F.3d 710, 568 F.3d 710">718 (9th Cir. 2009), aff'gT.C. Memo. 2006-166, and aff'g and vacating decisions in related cases.

In deciding whether the IRS settlement officers abused their discretion in sustaining the collection actions, we consider whether they: (1) properly verified that the requirements of any applicable law or administrative procedure have been met; (2) considered any relevant issues the taxpayer raised; and (3) determined whether "any proposed collection action balances the need for the efficient collection of taxes with the legitimate concerns of the person that any collection action be no more intrusive than necessary." Seesec. 6330(c)(3).

Mr. Gardner asserts that he did not receive notice and demand for payment of his section 6700 penalty. However, Settlement Officer Freitag reviewed the Form 4340, Certificate of Assessments, Payments, and Other Specified Matters, included in Mr. Gardner's administrative file. It states that a statutory notice of balance due (i.e., notice and demand) was mailed to Mr. Gardner on September 19, 2011. A settlement 145 T.C. 161">*184 officer may rely on a Form 4340 to verify that a valid assessment was made and that notice and demand2015 U.S. Tax Ct. LEXIS 36">*74 was sent to the taxpayer in accordance with section 6303. Nestor v. Commissioner, 118 T.C. 162">118 T.C. 162, 118 T.C. 162">166 (2002). Absent a showing of irregularity, a transcript with this information is sufficient to establish that the procedural requirements of section 6330 have been met. 118 T.C. 162">Id. at 167. The Gardners raised no other verification issues, and at trial the IRS settlement officers each testified that they reviewed each petitioner's administrative file and verified that the requirements of applicable law and administrative procedure had been met. The settlement officers also confirmed at trial that the lien and proposed levy collection actions each balanced the need for efficient collection of taxes with the Gardners' concerns that the collection actions be no more intrusive than necessary.

After considering the merits of petitioners' arguments, we hold that petitioners are each liable for a $47,000 section 6700 penalty. Because we find no abuse of discretion in the settlement officers' determinations, we sustain the IRS' lien against Mr. Gardner and hold that the IRS' proposed levy actions against both Gardners may proceed.

We have considered all of petitioners' arguments, and to the extent not discussed herein, we find them to be without merit and/or irrelevant.

To reflect2015 U.S. Tax Ct. LEXIS 36">*75 the foregoing,

Decisions will be entered for respondent.