                          T.C. Memo. 2005-284



                      UNITED STATES TAX COURT



ESTATE OF JERRY WEISS, DECEASED, NAOMI WEISS, EXECUTOR, AND NAOMI
                      WEISS, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 647-95.                Filed December 13, 2005.



     Robert E. Kolek, Thomas R. Wechter, and Theresa M. H. Marx,

for petitioners.

     James M. Klein, Mark J. Miller, and John Comeau, for

respondent.



                          MEMORANDUM OPINION


     GOEKE, Judge:   This matter is before the Court on the

estate’s motion to reallocate the burden of proof to respondent.

The sole issue is whether respondent’s refusal to transfer a case
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to the Appeals Office of the Internal Revenue Service (IRS)

(Appeals) is grounds for reallocating the burden of proof to

respondent.   We hold that it is not.1   As explained in greater

detail, we shall deny the estate’s motion.

     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the tax years at issue.

All Rule references are to the Tax Court Rules of Practice and

Procedure.

                            Discussion

I.   The Procedural Rules That Provide for Transfers of Cases to
     Appeals Do Not Afford the Estate a Substantive Right to IRS
     Appellate Review

     This case involves respondent’s deficiency determinations

for the taxable years 1989 and 1990.     The estate claims that

section 601.106(b), Statement of Procedural Rules, and Rev. Proc.

87-24, 1987-1 C.B. 720, afford a substantive right to an Appeals

hearing.   Section 601.106(b), Statement of Procedural Rules,

provides that “the taxpayer has the right * * * of administrative

appeal to the Appeals organization” where the District Director

has issued a 30-day letter and the taxpayer makes a proper

request for transfer to Appeals.   Rev. Proc. 87-24, section 2.01,



The parties also dispute the factual issue of whether certain
communications constituted the transfer of the estate’s case to
Appeals. However, we are not deciding this factual dispute;
rather, we are deciding the legal issue of shifting the burden of
proof based on the assumption that respondent failed to transfer
the estate’s case to Appeals.
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1987-1 C.B. 720, provides that cases docketed in the Tax Court

“will be referred by District Counsel * * * to the Appeals

Division * * * for consideration of settlement unless the

statutory notice of deficiency was issued by Appeals.”

     The flaw with the estate’s argument is that neither Rev.

Proc. 87-24, supra, nor section 601.106, Statement of Procedural

Rules, affords the estate a substantive right to take its case to

Appeals.   It is well established that “general statements of

policy and rules governing internal agency operations or

‘housekeeping’ matters, which do not have the force and effect of

law, are not binding on the agency issuing them and do not create

substantive rights in the public.”       Capitol Fed. Sav. & Loan

Association v. Commissioner, 96 T.C. 204, 216-217 (1991) (citing

United States v. Will, 671 F.2d 963, 967 (6th Cir. 1982)

(Internal Revenue Manual); Einhorn v. DeWitt, 618 F.2d 347,

349-350 (5th Cir. 1980) (Statement of Procedural Rules); Smith v.

United States, 478 F.2d 398 (5th Cir. 1973) (Statement of

Procedural Rules); Rosenberg v. Commissioner, 450 F.2d 529, 531

(10th Cir. 1971), affg. T.C. Memo. 1970-201 (Statement of

Procedural Rules); Luhring v. Glotzbach, 304 F.2d 560 (4th Cir.

1962) (Statement of Procedural Rules)).

     The estate relies on United States v. Heffner, 420 F.2d 809

(4th Cir. 1969).   Heffner involved a criminal prosecution of a

taxpayer for income tax fraud.    The IRS had issued and published
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in a “News Release” procedures governing agent conduct in

investigating tax fraud cases.     On initial contact the agent was

required to read a Miranda warning but failed to do so.     The

Court of Appeals for the Fourth Circuit held that the IRS was

bound by the stated procedures and that statements obtained in

violation thereof were inadmissible in the criminal proceedings.

The estate argues that this case, also involving the violation of

an internal administrative procedure, should follow the line of

reasoning in Heffner.     However, as the court noted in Rosenberg

v. Commissioner, supra at 529, the Heffner decision was grounded

in due process.    In Rosenberg, the taxpayer argued that the

denial of a hearing before Appeals denied her due process.      The

Court of Appeals for the Tenth Circuit, affirming the decision of

this Court, held that “Due process does not require a hearing at

the initial stage or at any particular point of an administrative

proceeding.”     Id. at 533.   Further, the court noted that the case

before it was not a criminal prosecution but rather a deficiency

determination.    Here, we are also not concerned with a criminal

proceeding.    Because the due process concerns in Heffner are not

present here, we conclude that Heffner does not apply.2


     2
      Respondent further notes that United States v. Heffner, 420
F.2d 809 (4th Cir. 1969), was decided before United States v.
Caceres, 440 U.S. 741 (1979). In Caceres, the Supreme Court
declined to exclude evidence of a conversation between an IRS
special agent and a defendant that was recorded in violation of
the Internal Revenue Manual. This Court has questioned Heffner’s
                                                   (continued...)
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     In a notice of supplemental authority, the estate directs

this Court’s attention to Drake v. Commissioner, 125 T.C. ____

(2005), a case decided recently by this Court.    Drake involved

judicial review of a determination under section 6330 by the IRS

to proceed with a levy.    However, prior to the section 6330

hearing, the Appeals settlement officer received a memorandum

from the IRS Insolvency Unit questioning the credibility and

motives of the taxpayer’s counsel in a prior court proceeding.

The taxpayer was not provided an opportunity to participate in

communications between the Appeals officer and the Insolvency

Unit.    This Court found that the memorandum violated the IRS’s

restrictions upon ex parte communications between its employees.

See Rev. Proc. 2000-43, 2000-2 C.B. 404.    Accordingly, this Court

remanded remanded the case to Appeals to hold a new section 6330

hearing with an independent Appeals officer who had not received

the communications.

     The estate’s reliance on Drake is misplaced.    This case

involves the redetermination of a deficiency under sections 6213

and 6214, while Drake involved judicial review of a notice of

determination under section 6330.    Under section 6330(b)(1), a

taxpayer who receives a prelevy notice under section 6330(a)(1)


     2
      (...continued)
reliability because of Caceres. See Riland v. Commissioner, 79
T.C. 185 (1982). In any event, we find Heffner to be
distinguishable; the subsequent authority, although worth noting,
is not significant.
                                 - 6 -

has the right to an Appeals hearing.     Under section 6330(b)(3),

the taxpayer also has the right to have the hearing conducted by

an impartial Appeals officer.    Therefore, Drake is

distinguishable from this case because there was a statutory

basis for the Court’s holding.    Here, we have no authority other

than the internal procedures the estate has cited, which, as

discussed, do not have a legally binding effect.3

      In addition, once a taxpayer’s case is docketed in the Tax

Court, there is no provision in the procedural rules for a

taxpayer to request an Appeals conference.     New Hope Servs. v.

United States, 285 F.3d 568, 572 (7th Cir. 2002); Swanson v.

Commissioner, 106 T.C. 76, 99-100 (1996).

II.   No Authority Supports Shifting the Burden of Proof for
      Violation of the Internal Procedure Relating to the Transfer
      of Cases to Appeals

      Generally, determinations made by the Commissioner in a

notice of deficiency are presumed to be correct, and the estate

bears the burden of proving that those determinations are

erroneous.   Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115

(1933).   Our Rules provide for several exceptions to the



      3
      In addition, Rev. Proc. 2000-43, 2000-2 C.B. 404, was
promulgated in direct response to a congressional mandate in the
Internal Revenue Service Restructuring and Reform Act of 1998,
Pub. L. 105-206, sec. 1001, 112 Stat. 689, that directed the
Commissioner to develop a plan to prohibit ex parte
communications between Appeals officers and other employees of
the Internal Revenue Service. See Drake v. Commissioner, 125
T.C. ___ (2005) (slip. op. at 13-14).
                                 - 7 -

delegation of the burden of proof to the taxpayer.   Under Rule

142(a)(1), the burden of proof is on the Commissioner with

respect to any new matter, increase in deficiency, or any

affirmative defenses.   None of these exceptions apply here.

     In 1998, Congress passed the Internal Revenue Service

Restructuring and Reform Act of 1998 (RRA 1998), Pub. L. 105-206,

112 Stat. 685.   Under RRA 1998, sec. 3001, 112 Stat. 726-727, the

burden of proof is reallocated to the IRS when the taxpayer meets

certain substantiation and record keeping requirements.   However,

section 7491 is effective only for court proceedings arising in

connection with examinations beginning after July 22, 1998.      RRA

1998 sec. 3001(a), 112 Stat. 726.    Therefore, section 7491 does

not apply to this proceeding.4

     The estate cites a line of authority where courts use common

law principles to shift the burden of proof in cases where the

Commissioner’s determination is arbitrary, lacks a factual basis,

or is without rational purpose.    See, e.g., United States v.

Janis, 428 U.S. 433, 440 (1976); Helvering v. Taylor, 293 U.S.

507, 514 (1935); Jackson v. Commissioner, 73 T.C. 394, 403-405

(1979).   However, none of those situations are present here.    The

estate is not challenging the substance of the determination or


     4
      The estate has cited legislative history from the enactment
of sec. 7491 to support its position; however, given that the
statute itself is not applicable, it follows that any legislative
history argument derived from it is equally inapplicable
authority.
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alleging that the determination is arbitrary or excessive.

Rather, the estate seeks to reallocate the burden of proof on

procedural grounds unrelated to the basis of the determination of

the deficiency.      Therefore, the cases on which the estate relies

do not support reallocating the burden of proof to respondent.

III.    Conclusion

       Even if, as the estate contends, respondent effectively

denied the estate an Appeals conference, there is no authority to

shift the burden of proof under these circumstances.     Therefore,

we must deny the estate’s motion seeking to reallocate the burden

of proof to respondent under Rule 142(a).

       To reflect the foregoing,

                                                 An appropriate order

                                            will be issued.
