                       T.C. Memo. 2002-180



                     UNITED STATES TAX COURT


          RAINER B. AND SONJA D. WAGNER, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket No. 13046-01L.           Filed July 31, 2002.


     Rainer B. and Sonja D. Wagner, pro sese.

     Wendy S. Harris and Scott Hovey, for respondent.


                       MEMORANDUM OPINION

     POWELL, Special Trial Judge:   This matter is before the

Court on respondent’s Motion For Summary Judgment And To Impose A

Penalty Under I.R.C. Section 6673, filed pursuant to Rule 121.1

Respondent contends that there is no dispute as to any material

fact with respect to this levy action, and that respondent’s

determination to proceed with collection of petitioners’


     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
                                - 2 -

outstanding tax liabilities for 1997 should be sustained as a

matter of law.

     Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials.    Fla. Peach Corp. v.

Commissioner, 90 T.C. 678, 681 (1988).    Summary judgment may be

granted with respect to all or any part of the legal issues in

controversy "if the pleadings, answers to interrogatories,

depositions, admissions, and any other acceptable materials,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that a decision may be

rendered as a matter of law."   Rule 121(a) and (b); Sundstrand

Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965

(7th Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988);

Naftel v. Commissioner, 85 T.C. 527, 529 (1985).    The moving

party bears the burden of proving that there is no genuine issue

of material fact, and factual inferences will be read in a manner

most favorable to the party opposing summary judgment.    Dahlstrom

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

Commissioner, 79 T.C. 340, 344 (1982).

     As explained in detail below, there is no genuine issue as

to any material fact, and a decision may be rendered as a matter

of law.   Accordingly, we shall grant respondent’s motion for

summary judgment.
                               - 3 -

                            Background

A.   Petitioners’ Income Tax Return for 1997

      On or about May 7, 1998, petitioners Rainer B. and Sonja D.

Wagner (petitioners) submitted to respondent a Form 1040, U.S.

Individual Income Tax Return, for the taxable year 1997.     On

their Form 1040, petitioners listed their filing status as

“married filing joint return” and described their occupations as

“TST 2” and “Clerk”, respectively.

      Petitioners entered zeros on applicable lines of the income

portion of their Form 1040, specifically including line 7 for

wages, line 22 for total income, and lines 32 and 33 for adjusted

gross income.   Petitioners also entered a zero on line 53 for

total tax.   Petitioners then claimed a refund in the amount of

$16,149.18, which amount was equal to the Federal income tax that

purportedly had been withheld from their wages.

      Petitioners attached to their Form 1040 a two-page

typewritten statement that stated, in part, as follows:

      I * * * am submitting this as part of my 1997 income
      tax return even though I know that no section of the
      Internal Revenue Code:

      1) Establishes an income tax “liability” * * *;

      2) Provides that income taxes “have to be paid on the
      basis of a return” * * *.

      3) In addition to the above, I am filing even though
      the “Privacy Act Notice” as contained in a 1040 booklet
      clearly informs me that I am not required to file. It
      does so in at least two places.
           a) In one place, it states that I need only file a
                                 - 4 -

      return for “any tax” I may be “liable” for. Since no Code
      Section makes me “liable” for income taxes, this provision
      notifies me that I do not have to file an income tax return.

                     *   *   *    *      *   *   *

      7) Please note, that my 1997 return also constitutes a
      claim for refund pursuant to Code Section 6402.

      8) It should also be noted that I had “zero” income
      according to the Supreme Court’s definition of income
      * * *.

      9) I am also putting the IRS on notice that my 1997 tax
      return and claim for refund does not constitute a
      “frivolous” return pursuant to Code Section 6702.

                     *   *   *    *      *   *   *

      11) In addition, don’t notify me, that the IRS is
      “changing” my return, since there is no statute that
      allows the IRS to do that. You might prepare a return
      (pursuant to Code Section 6020b), where no return is
      filed, but where, as in this case, a return has been
      filed, no statute authorises (sic) IRS personnel [sic]
      to “change” that return.

                     *   *   *    *      *   *   *

      *NOTE #1: The word “income” is not defined in the
      Internal Revenue Code * * * but, as stated above, it
      can only be a derivative of corporate activity. * * *

B.   Respondent’s Deficiency Notice and Petitioners’ Response

      On October 8, 1999, respondent issued a joint notice of

deficiency to petitioners.   In the notice, respondent determined

a deficiency of $17,765 in petitioners’ 1997 Federal income tax

and an accuracy-related penalty under section 6662(a) for

negligence or disregard of rules or regulations of $323.16.     The

deficiency was based principally on respondent’s determination

that petitioners failed to report (1) wage income of $94,701 (as
                               - 5 -

reported to respondent on Forms W-2, Wage and Tax Statement), (2)

dividend income of $32, and (3) interest income of $36.

     By letter dated January 2, 2000, petitioners wrote to the

Director of respondent’s Service Center in Ogden, Utah,

acknowledging receipt of the notice of deficiency dated October

8, 1999, but challenging the Director’s authority to send such a

notice.   Petitioners sent a similar letter to Charles O.

Rossotti, Commissioner of Internal Revenue.

     Petitioners knew that they had the right to contest

respondent’s deficiency determination by filing a petition for

redetermination with this Court.2   However, petitioners chose not

to do so.   Accordingly, on March 27, 2000, respondent assessed

the determined deficiency and accuracy-related penalty, as well

as statutory interest.

     On March 27, 2000, respondent sent petitioners a notice

stating that changes were made to their account, informing

petitioners that they had a tax liability for 1997, and

requesting that they pay it.   Petitioners failed to do so.    On

May 1, 2000, and September 4, 2000, respondent sent petitioners


     2
        In this regard, the first sentence of petitioners’ letter
dated Jan. 2, 2000, stated as follows:

     According to your “Deficiency Notice” of above date
     (cover sheet attached), there is an alleged deficiency
     with respect to my 1997 income tax of $1,615.82, [sic]
     and if I wanted to “contest this deficiency before
     making payment,” I must “file a petition with the
     United States Tax Court.”
                                  - 6 -

additional notices requesting that they pay the balance due for

1997.   Although petitioners wrote to respondent acknowledging

receipt of each of the above-described notices, petitioners

failed to pay the amount owing.

C.   Respondent’s Final Notice and Petitioners’ Response

      On October 12, 2000, respondent sent petitioners a Final

Notice-–Notice of Intent to Levy and Notice of Your Right to a

Hearing (the Final Notice).   The Final Notice was issued in

respect of petitioners’ outstanding tax liability for 1997.

      On November 9, 2000, petitioners submitted to respondent a

Form 12153, Request for a Collection Due Process Hearing.

Petitioners requested that the Appeals Office demonstrate that

petitioners are required to pay Federal income taxes.

Petitioners also asserted that they were challenging the amount

of tax listed as due in the Final Notice on the grounds that they

did not receive a valid notice and demand for payment or a valid

notice of deficiency for 1997.

D.   The Appeals Office Hearing

      Prior to an Appeals Office hearing, Appeals Officer Richard

J. Sigler (the Appeals officer) provided petitioners with a

transcript of their account for 1997.     The record in this case
                                  - 7 -

includes an IMF MCC3 transcript of account, dated December 18,

2000, regarding petitioners’ 1997 taxable year.

      On July 30, 2001, the Appeals officer conducted an Appeals

Office hearing that petitioner Rainer Wagner attended.        According

to a purported transcript of the hearing prepared by petitioners,

petitioner Rainer Wagner offered to pay the amount due for 1997

only if the Appeals officer would show him the Internal Revenue

Code provisions making petitioners liable for Federal income

taxes.      The Appeals officer terminated the hearing when

petitioner failed to raise any valid issue.

E.   Respondent’s Notice of Determination

          On September 21, 2001, respondent sent petitioners a Notice

of Determination Concerning Collection Action(s) Under Section

6320 and/or 6330.      The notice stated that the Appeals Office had

determined that it was appropriate for respondent to proceed with

the collection of petitioners’ outstanding tax liability for

1997.

F.   Petitioners’ Petition

      On October 17, 2001, petitioners filed with the Court a

petition for lien or levy action seeking review of respondent’s

notice of determination.4     The petition includes allegations


      3
        IMF MCC stands for “Individual Master File-Martinsburg
Computing Center”.
      4
           At the time the petition was filed, petitioners resided
                                                      (continued...)
                                   - 8 -

that:       (1) The Appeals officer failed to obtain verification from

the Secretary that the requirements of any applicable law or

administrative procedure were met as required under section

6330(c)(1); (2) petitioners never received a notice and demand

for payment; and (3) petitioners were denied the opportunity to

challenge (a) the appropriateness of the collection action, and

(b) the existence or amount of their underlying tax liability.

G.   Respondent’s Motion for Summary Judgment

       After filing an answer to the petition, respondent filed a

Motion For Summary Judgment And To Impose A Penalty Under I.R.C.

Section 6673 asserting that there is no dispute as to a material

fact and that respondent is entitled to judgment as a matter of

law.       In particular, respondent contends that:   (1) Because

petitioners received the notice of deficiency dated October 8,

1999, they cannot challenge the existence or amount of their

underlying tax liability for 1997 in this proceeding; (2) the

Appeals officer’s review of the IMF MCC transcript of account

with regard to petitioners’ account for 1997 satisfied the

verification requirement imposed under section 6330(c)(1); (3)

the record shows that petitioners were issued a notice and demand

for payment; and (4) petitioners’ behavior warrants the

imposition of a penalty under section 6673.



       4
      (...continued)
in Las Vegas, Nev.
                               - 9 -

     Petitioners filed an objection to respondent’s motion.

Thereafter, pursuant to notice, respondent’s motion was called

for hearing at the Court's Motions Session in Washington, D.C.

                            Discussion

     Section 6331(a) provides that if any person liable to pay

any tax neglects or refuses to pay such tax within 10 days after

notice and demand for payment, the Secretary is authorized to

collect such tax by levy on the person’s property.    Section

6331(d) provides that at least 30 days before enforcing

collection by levy on the person's property, the Secretary is

obliged to provide the person with a final notice of intent to

levy, including notice of the administrative appeals available to

the person.

     Section 6330 generally provides that the Commissioner cannot

proceed with collection by levy until the taxpayer has been given

notice and the opportunity for an administrative review of the

matter (in the form of an Appeals Office hearing) and, if

dissatisfied, with judicial review of the administrative

determination.   Davis v. Commissioner, 115 T.C. 35, 37 (2000);

Goza v. Commissioner, 114 T.C. 176, 179-180 (2000).

     Section 6330(c) provides that a person may raise collection

issues such as spousal defenses, the appropriateness of the

Commissioner's intended collection actions, and possible

alternative means of collection.   Section 6330(c)(2)(B) provides
                               - 10 -

that the existence and amount of the underlying tax liability can

be contested at an Appeals Office hearing only if the person did

not receive a notice of deficiency for the taxes in question or

did not otherwise have an earlier opportunity to dispute the tax

liability.    Sego v. Commissioner, 114 T.C. 604, 609 (2000);     Goza

v. Commissioner, supra at 180.     Section 6330(d) provides for

judicial review of the administrative determination in the Tax

Court or a Federal District Court, as may be appropriate.

A.   Summary Judgment

      Petitioners challenge the assessments made against them on

the ground that the notice of deficiency dated October 8, 1999,

is invalid.   The record, however, establishes that petitioners

received the notice of deficiency and did not file a petition for

redetermination with this Court.    See sec. 6213(a).   It follows

that under section 6330(c)(2)(B) petitioners are barred from

challenging the existence or amount of their underlying tax

liability in this collection review proceeding.

      Even if petitioners were permitted to challenge the validity

of the notice of deficiency, petitioners’ argument that the

notice is invalid because respondent’s Service Center director is

not properly authorized to issue notices of deficiency is

frivolous and groundless.   See Nestor v. Commissioner, 118 T.C.

162, 165 (2002); Goza v. Commissioner, supra at 182-183.

Further, as the Court of Appeals for the Fifth Circuit has
                               - 11 -

remarked:   "We perceive no need to refute these arguments with

somber reasoning and copious citation of precedent; to do so

might suggest that these arguments have some colorable merit."

Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984).

Suffice it to say that petitioners are taxpayers subject to

Federal income tax, see secs. 1(a)(1), 7701(a)(1), (14), and that

compensation for labor or services rendered constitutes income

subject to Federal income tax under section 61(a)(1), see United

States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981).

     We likewise reject petitioners’ argument that the Appeals

officer failed to obtain verification from the Secretary that the

requirements of all applicable laws and administrative procedures

were met as required by section 6330(c)(1).   The record shows

that the Appeals officer obtained and reviewed a transcript of

account with regard to petitioners’ tax liability for 1997.

     Federal tax assessments are formally recorded on a record of

assessment.   Sec. 6203.   “The summary record, through supporting

records, shall provide identification of the taxpayer, the

character of the liability assessed, the taxable period, if

applicable, and the amount of the assessment.”   Sec. 301.6203-1,

Proced. & Admin. Regs.

     Section 6330(c)(1) does not require the Commissioner to rely

on a particular document to satisfy the verification requirement

imposed therein.   See Roberts v. Commissioner, 118 T.C. 365, 371
                              - 12 -

n.10 (2002); Weishan v. Commissioner, T.C. Memo. 2002-88; Lindsey

v. Commissioner, T.C. Memo. 2002-87; Tolotti v. Commissioner,

T.C. Memo. 2002-86; Duffield v. Commissioner, T.C. Memo. 2002-53;

Kuglin v. Commissioner, T.C. Memo. 2002-51.    In this regard, we

observe that the transcript of account on which the Appeals

officer relied contained all the information prescribed in

section 301.6203-1, Proced. & Admin. Regs.    See Weishan v.

Commissioner, supra; Lindsey v. Commissioner, supra; Tolotti v.

Commissioner, supra; Duffield v. Commissioner, supra; Kuglin v.

Commissioner, supra.5

     Petitioners have not alleged any irregularity in the

assessment procedure that would raise a question about the

validity of the assessments or the information contained in the

transcript of account.   See Davis v. Commissioner, supra at 41;

Mann v. Commissioner, T.C. Memo. 2002-48.    Accordingly, we hold

that the Appeals officer satisfied the verification requirement

of section 6330(c)(1).   Cf. Nicklaus v. Commissioner, 117 T.C.

117, 120-121 (2001).

     Petitioners also contend that they never received a notice



     5
        To the extent that petitioners may still be arguing that
the Appeals officer failed to provide them with a copy of the
verification, we note that sec. 6330(c)(1) does not require that
the Appeals officer provide the taxpayer with a copy of the
verification at the administrative hearing. Nestor v.
Commissioner, 118 T.C. 162, 166 (2002). In any event, the record
shows that the Appeals officer provided petitioners with a
transcript of account prior to the Appeals Office hearing.
                              - 13 -

and demand for payment for 1997.   The requirement that the

Secretary issue a notice and demand for payment is set forth in

section 6303(a), which provides in pertinent part:

          SEC. 6303.   NOTICE AND DEMAND FOR TAX.

          (a) General Rule.-–Where it is not otherwise provided
     by this title, the Secretary shall, as soon as practicable,
     and within 60 days, after the making of an assessment of a
     tax pursuant to section 6203, give notice to each person
     liable for the unpaid tax, stating the amount and demanding
     payment thereof. * * *

The record shows that respondent sent petitioners a notice of

change to their account on the same date that respondent made

assessments against petitioners for the tax and accuracy-related

penalty determined in the notice of deficiency, as well as two

subsequent collection notices.   We hold that these notices

constituted notice and demand for payment within the meaning of

section 6303(a).   See, e.g., Hughes v. United States, 953 F.2d

531, 536 (9th Cir. 1992); Weishan v. Commissioner, supra; see

also Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993).

     Petitioners have failed to raise a spousal defense, make a

valid challenge to the appropriateness of respondent’s intended

collection action, or offer alternative means of collection.

These issues are now deemed conceded.   Rule 331(b)(4).   In the

absence of a valid issue for review, we conclude that respondent

is entitled to judgment as a matter of law sustaining the notice

of determination dated September 21, 2001.
                              - 14 -

B.   Imposition of a Penalty Under Section 6673

      We turn now to that part of respondent’s motion that moves

for the imposition of a penalty on petitioners under section

6673.

      As relevant herein, section 6673(a)(1) authorizes the Tax

Court to require a taxpayer to pay to the United States a penalty

not in excess of $25,000 whenever it appears that proceedings

have been instituted or maintained by the taxpayer primarily for

delay or that the taxpayer's position in such proceeding is

frivolous or groundless.   The Court has indicated its willingness

to impose such penalty in lien and levy cases, Pierson v.

Commissioner, 115 T.C. 576, 580-581 (2000), and has in fact

imposed a penalty in several such cases, Roberts v. Commissioner,

supra (imposing a penalty in the amount of $10,000); Newman v.

Commissioner, T.C. Memo. 2002-135 (imposing a penalty in the

amount of $1,000); Yacksyzn v. Commissioner, T.C. Memo. 2002-99

(imposing a penalty in the amount of $1,000); Watson v.

Commissioner, T.C. Memo. 2001-213 (imposing a penalty in the

amount of $1,500); Davis v. Commissioner, T.C. Memo. 2001-87

(imposing a penalty in the amount of $4,000).

      We are convinced that petitioners instituted the present

proceeding primarily for delay.   In this regard, it is clear that

petitioners regard this proceeding as nothing but a vehicle to

protest the tax laws of this country and to espouse their own
                             - 15 -

misguided views, which we regard as frivolous and groundless.   In

short, having to deal with this matter wasted the Court's time,

as well as respondent's, and taxpayers with genuine controversies

may have been delayed.

     Under the circumstances, we shall grant that part of

respondent’s motion that moves for the imposition of a penalty in

that we shall impose a penalty of $4,000 on petitioners pursuant

to section 6673(a)(1).

     In order to give effect to the foregoing,



                                   An appropriate order and

                              decision will be entered.
