                       T.C. Memo. 2006-104



                     UNITED STATES TAX COURT



                 KENNETH A. SAPP, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5759-02L.             Filed May 15, 2006.


     Kenneth A. Sapp, pro se.

     Veena Luthra, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     GALE, Judge: Pursuant to section1 6330(d)(1), petitioner

seeks review of respondent's determination to proceed with a levy

to collect petitioner's Federal income tax liabilities for




     1
       Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as in effect for the taxable
years in issue.
                                - 2 -

taxable years 1990, 1991, 1992, 1993, and 1996.    We hold that

respondent may proceed with collection.

                          FINDINGS OF FACT

      At the time he filed the petition, petitioner resided in

Powhatan, Virginia.

     Petitioner filed a Federal income tax return for 1990,

received by respondent on August 21, 1991, that reported tax due

of $2,988.   Respondent assessed the reported tax, as well as

additions to tax under sections 6651(a)(1), 6651(a)(2), and 6654,

and interest (collectively, the 1990 liability).    The 1990

liability was unpaid at the time of trial.

     Petitioner filed a Federal income tax return for 1991,

received by respondent on June 7, 1993, that reported tax due of

$12,142.   Respondent assessed the reported tax, as well as

additions to tax under sections 6651(a)(1), 6651(a)(2), and 6654,

and interest (collectively, the 1991 liability).    The 1991

liability was unpaid at the time of trial.

     On August 2, 1993, petitioner filed a Chapter 7 bankruptcy

petition, and was granted a discharge on November 15, 1993.

     Petitioner filed a Federal income tax return for 1992,

received by respondent on June 10, 1994, that reported tax due of

$6,071.    Petitioner had received an extension to file this return

until August 15, 1993.   Respondent assessed the reported tax, as

well as additions to tax under sections 6651(a)(1), 6651(a)(2),
                                 - 3 -

and 6654, and interest (collectively, the 1992 liability).       Aside

from a withholding credit of $42 and a payment of $800, the 1992

liability was unpaid at the time of trial.

     Petitioner filed a Federal income tax return for 1993,

received by respondent on June 10, 1994, that reported tax due of

$9,142.   Respondent assessed the reported tax, as well as

additions to tax under sections 6651(a)(1), 6651(a)(2), and 6654,

and interest (collectively, the 1993 liability).     The 1993

liability was unpaid at the time of trial.

     On March 5, 1997, respondent received from petitioner a Form

1040, U.S. Individual Income Tax Return, for 1996 with zeros in

all entries and an attached statement containing frivolous tax

protester arguments.2    Respondent treated the Form 1040 as a

frivolous return and assessed a frivolous return penalty under

section 6702 on June 29, 1998.

     On March 31, 1997, respondent received a Form 1040X, Amended

U.S. Individual Income Tax Return, from petitioner for 1993 with

zeros in all entries in the "Correct amount" column and an

attached statement substantially identical to the one attached to

the 1996 Form 1040.     On April 1, 1997, respondent received

similar Forms 1040X from petitioner for 1990 and 1991.



     2
       The arguments included, e.g., "no Code section makes me
'liable' for income taxes" and "'income' * * * can only be a
derivative of corporate activity", as well as out-of-context
quotations from case law, statutes, and regulations.
                               - 4 -

     Respondent treated the Forms 1040X for 1990 and 1991 as

claims for refund which he formally disallowed as untimely by

letter on April 25, 1997.   Respondent treated the Form 1040X for

1993 as a frivolous return and assessed a frivolous return

penalty under section 6702 on October 27, 1997.

     Respondent issued a notice of deficiency to petitioner for

1996 on June 5, 1998, determining a deficiency in income tax of

$7,405, as well as additions to tax under sections 6651(a)(1) and

6654.   No petition was filed in response to the notice of

deficiency, and respondent assessed the amounts determined in the

notice, as well as interest (collectively, the 1996 liability),

on November 9, 1998.   The 1996 liability was unpaid at the time

of trial.

     On March 7, 2001, a Letter 1058, Final Notice - Notice of

Intent to Levy and Notice of Your Right to a Hearing, was mailed

to petitioner concerning the 1990, 1991, 1992, 1993, and 1996

liabilities.   Petitioner timely filed a Form 12153, Request for a

Collection Due Process Hearing, for all of the aforementioned

liabilities.   Petitioner's Form 12153 also requested a hearing

with respect to notices of Federal tax lien filing regarding the

foregoing liabilities.

     By letter dated July 9, 2001, the Office of Appeals

(Appeals) notified petitioner that his request had been assigned

to Appeals officer Lawrence Ford (AO Ford) and requested that
                               - 5 -

petitioner submit completed Forms 433-A, Collection Information

Statement for Wage Earners and Self-Employed Individuals, and

433-B, Collection Information Statement for Businesses, as well

as completed Federal income tax returns for 1996 through 2000, by

August 3, 2001.   When petitioner had not responded by September

13, 2001, AO Ford sent him a letter on that date scheduling a

conference for October 9, 2001, to which petitioner was requested

to bring the foregoing materials.

     Petitioner did not appear at the scheduled conference or

otherwise respond.   On February 5, 2002, Appeals issued a Notice

of Determination Concerning Collection Action(s) Under Section

6320 and/or 6330 (notice of determination) to petitioner, in

which it was determined that the levy should proceed because

petitioner had failed to attend the scheduled conference or

otherwise respond to contacts by the Appeals officer.   The notice

of determination further observed that the 1990, 1991, 1992, and

1993 liabilities were based on returns filed for those years, and

the 1996 liability was based on information respondent had on

file.

     Petitioner timely petitioned this Court for review, alleging

the following errors: (i) The notice of determination did not

state that AO Ford had no prior involvement with respect to the

tax periods at issue; (ii) the notice of determination did not

contain a verification that the requirements of applicable laws
                              - 6 -

and administrative procedures had been met; (iii) no notice and

demand for payment was received for any of the liabilities at

issue; (iv) petitioner had not received a notice of deficiency

for any of the years at issue; (v) AO Ford abused his discretion

in failing to hold a hearing before making the determination; and

(vi) AO Ford did not analyze whether the proposed collection

activity balanced the need for the efficient collection of taxes

with petitioner's legitimate concern that any collection activity

be no more intrusive than necessary.

     In response to the petition, respondent's Office of Chief

Counsel referred petitioner's case back to Appeals on July 24,

2002, in order to address the allegations in the petition and to

prepare a supplemental notice of determination.   The attorney in

respondent's Office of Chief Counsel who was assigned to

petitioner's case collaborated with Appeals employees to develop

the supplemental notice of determination.   The first contact

between Appeals and Chief Counsel occurred on July 24, 2002,

after petitioner's case had been docketed in this court.   On May

1, 2003, Appeals issued to petitioner a Supplemental Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 (2003 supplemental determination).3


     3
       After receiving the 2003 supplemental determination,
petitioner filed a motion to dismiss for lack of jurisdiction on
the grounds that the notice of determination was invalid, as
evidenced by respondent's effort to augment it with the 2003
                                                   (continued...)
                               - 7 -

     On July 2, 2003, respondent filed a motion for summary

judgment.   On August 29, 2003, however, respondent, conceding

that genuine issues of material fact remained in the case, sought

leave to withdraw the motion and, conceding that issuance of the

2003 supplemental determination was improper once this Court had

obtained jurisdiction, also requested that the Court remand the

case to Appeals in order to hold a hearing with petitioner and

issue a "proper" supplemental notice of determination.   On

September 2, 2003, we granted respondent's motion to withdraw his

motion for summary judgment and remanded the case to Appeals for

the purpose of affording petitioner a hearing under section 6330.

     Petitioner's case was assigned to a new Appeals employee,

K.C. Waters (Settlement Officer Waters), who contacted petitioner

by letter on several occasions in an effort to schedule a

conference.   In two of the letters, Settlement Officer Waters

also requested that petitioner submit a collection information

statement and returns for those years in which petitioner had not

filed.   After petitioner repeatedly failed to appear for

scheduled conferences (citing, inter alia, his desire to submit a

Freedom of Information Act request and to obtain counsel), this



     3
      (...continued)
supplemental determination. This Court denied the motion, Sapp
v. Commissioner, T.C. Memo. 2003-207, holding that the notice of
determination embodied a determination to proceed with the
collection of the taxes in issue and was therefore sufficient for
purposes of our jurisdiction.
                              - 8 -

Court by order set a deadline of January 30, 2004, for completion

of the hearing, which was subsequently extended to March 1, 2004.

A conference was thereupon scheduled for March 1, 2004.   Prior to

the conference, Settlement Officer Waters advised petitioner

that, notwithstanding respondent's previous unwillingness to

consider challenges to the underlying liabilities that had been

self-assessed, such challenges would now be considered in light

of Montgomery v. Commissioner, 122 T.C. 1 (2004).4   Petitioner

did not appear for the conference, sending instead a letter to

Settlement Officer Waters which stated that it should constitute

petitioner's appearance (absentee letter).

     In the absentee letter, petitioner: (i) Objected to the

participation of a second Appeals officer in a previous

conference,5 on the grounds that the second Appeals officer would

improperly influence the determination; (ii) contended that he

did not receive any notice of deficiency for 1996 and was

consequently entitled to dispute his underlying tax liability for

that year; (iii) expressed a desire to dispute his underlying



     4
       Although respondent's records indicated that petitioner
had filed a return for 1992 on June 10, 1994, Appeals was
initially unable to locate the return. However, on Oct. 23,
2003, petitioner's 1992 return was obtained by Appeals, and a
copy was forwarded to petitioner on Oct. 27, 2003, along with the
entire contents of his administrative file.
     5
       Petitioner had attended a meeting with Appeals personnel
in December 2003 that was suspended when petitioner insisted that
he be permitted to obtain counsel before proceeding further.
                              - 9 -

liabilities for 1990, 1991, and 1993, acknowledged the Appeals

officer's willingness to let him do so but stated it would

nonetheless be futile, and addressed the liabilities only by

contending that he owed "but a small fraction" of the amounts

sought to be collected; (iv) contended that he had not filed a

return for 1992 and consequently was entitled to receive a notice

of deficiency before the underlying liability for that year could

be assessed or collected; (v) raised questions concerning

collection alternatives; (vi) contended that the notice of

determination was invalid and the 2003 supplemental notice was

improper; (vii) contended that improper ex parte contacts

occurred between respondent's Office of Chief Counsel and Appeals

after his case was remanded by this Court for a hearing; and

(viii) contended that Appeals failed to take steps to have

references to petitioner as a "tax protester" expunged from

respondent's files.

     On March 3, 2004, Settlement Officer Waters issued a

supplemental notice of determination (2004 supplemental

determination) that (i) contained a verification that all

applicable laws and administrative procedures had been met, (ii)

considered the issues raised by petitioner, (iii) found that a

balancing of the need for efficient tax collection with

legitimate concerns that the collection action be no more

intrusive than necessary indicated the proposed levy was
                              - 10 -

appropriate, and (iv) concluded that the proposed levy should be

sustained.   While considering petitioner's case during 2003 and

2004, Settlement Officer Waters communicated with the Chief

Counsel attorney assigned thereto on numerous occasions.

     A trial was conducted at which petitioner testified and

agreed to the introduction of various documents from his

administrative file.

                              OPINION

Background

     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 6331(d) provides that the levy

authorized in section 6331(a) may be made with respect to any

unpaid tax only if the Secretary has given written notice to the

taxpayer 30 days before the levy.   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 an officer or employee of the Commissioner's Office

of Appeals who has had no prior involvement with respect to the

unpaid taxes at issue before the hearing.   Sec. 6330(b)(1), (3).

The Appeals officer or employee shall at the hearing obtain
                              - 11 -

verification that the requirements of any applicable law or

administrative procedure have been met.   Sec. 6330(c)(2).    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 at a hearing if the taxpayer did not

receive a statutory notice of deficiency with respect to the

underlying tax liability or did not otherwise have an opportunity

to dispute that liability.   Sec. 6330(c)(2)(B).   The underlying

tax liability that may be challenged includes amounts reported as

due on a return.   Montgomery v. Commissioner, supra at 1.

     At the conclusion of the hearing, the Appeals officer or

employee 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) 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).

     We have jurisdiction to review the Appeals officer's

determination where we have jurisdiction over the type of tax
                               - 12 -

involved in the case.   Sec. 6330(d)(1)(A); see Iannone v.

Commissioner, 122 T.C. 287, 290 (2004).    Generally, we may

consider only those issues that the taxpayer raised during the

section 6330 hearing.   See sec. 301.6330-1(f)(2), Q&A-F5, Proced.

& Admin. Regs.; see also Magana v. Commissioner, 118 T.C. 488,

493 (2002).   Where the underlying tax liability is properly at

issue, we review the determination de novo.    E.g., Goza v.

Commissioner, 114 T.C. 176, 181-182 (2000).    Where the underlying

tax liability is not at issue, we review the determination for

abuse of discretion.    Id. at 182.   Whether an abuse of discretion

has occurred depends upon whether the exercise of discretion is

without sound basis in fact or law.     See Freije v. Commissioner,

125 T.C. 14, 23 (2005); Ansley-Sheppard-Burgess Co. v.

Commissioner, 104 T.C. 367, 371 (1995).

2004 Supplemental Determination

     In the petition, petitioner alleged certain infirmities in

the initial notice of determination, including respondent's

failure to: (i) Provide a hearing; (ii) verify satisfaction of

the requirements of applicable laws or administrative procedures;

(iii) state that the Appeals employee making the determination

had no prior involvement with the liabilities at issue; and (iv)

balance the needs of efficient collection against petitioner's

legitimate concerns that the collection action be no more

intrusive than necessary.   We conclude that these issues are now
                              - 13 -

moot, in that this case was remanded to Appeals subsequent to the

petition's filing, at respondent's request, for the purpose of

affording petitioner a hearing, and the resulting 2004

supplemental determination contained the verification, no prior

involvement, and balancing findings required by section

6330(b)(3), (c)(3)(A) and (C).   Nonetheless, in his statement

offered at trial petitioner persists in arguing that respondent's

issuance of the initial notice of determination was an abuse of

discretion entitling petitioner to a decision in his favor.    As

petitioner puts it, respondent's position in this case amounts to

a cry of "Mulligan!" and seeks an "impermissible 'do over'".

     We disagree.   In appropriate circumstances we may remand a

case to the Appeals office to provide a hearing under section

6330(b).   See Lunsford v. Commissioner, 117 T.C. 183, 189 (2001);

Butti v. Commissioner, T.C. Memo. 2006-66; Harrell v.

Commissioner, T.C. Memo. 2003-271.     Since, as more fully

discussed below, petitioner has been accorded all prelevy rights

to which he is entitled under section 6330, his effort to exploit
                              - 14 -

possible infirmities6 in the initial notice of determination is

unavailing in the circumstances of this case.

Challenges to Underlying Liabilities

     With respect to the 1990-1993 liabilities, petitioner

claimed in his hearing request that the "numbers are completely

wrong".   Respondent conceded prior to the March 1, 2004,

conference offered petitioner that petitioner was entitled to

dispute the underlying liabilities even though reported on

returns filed for those years.7   See Montgomery v. Commissioner,

122 T.C. at 1.   In the absentee letter, petitioner contended that

he owed only a small fraction of the amounts respondent sought to

collect, but he offered no specific grounds of dispute.     The 2004

supplemental determination considered both the returns and the


     6
       Since respondent sought a remand in order to offer
petitioner a hearing subsequent to the petition's filing, we
express no opinion whether sec. 6330 required respondent to do so
in this case, given petitioner's failure to respond to Appeals
Officer Ford's Sept. 13, 2001, letter offering a hearing. Cf.,
e.g., Taylor v. Commissioner, T.C. Memo. 2004-25 (hearing
requirement satisfied where taxpayer fails to avail herself of
reasonable opportunity for hearing), affd. 130 Fed. Appx. 934
(9th Cir. 2005).
     7
       Petitioner also complains that he did not receive a notice
of deficiency with respect to these liabilities. However, as the
taxes were reported as due on petitioner's returns, no notice of
deficiency was necessary to assess them. See sec. 6201(a)(1).
     Petitioner at various times claimed that he had not filed a
return for 1992. Respondent was initially unable to locate
petitioner's 1992 return, but eventually did so and provided a
copy to petitioner prior to the conference scheduled for Mar. 1,
2004. See supra note 4. We are satisfied on the basis of the
record that petitioner filed a return for 1992 in which he
reported as due the tax assessed by respondent.
                                - 15 -

amended returns filed by petitioner for 1990-1993, concluding

that the amended returns were frivolous and that petitioner had

shown no basis for modifying the tax shown as due on the

originally submitted returns.    At trial, petitioner was evasive

regarding the source of his income and claimed that his income

was not in any event taxable because he had merely received money

in exchange for labor.

     Petitioner has advanced only unspecified or frivolous

challenges to his underlying tax liabilities (including the

additions to tax) for 1990 through 1993.   We accordingly conclude

that the underlying liabilities are correct.

     With respect to the underlying liability for 1996, at trial

and in his request for a hearing, petition, and absentee letter,

petitioner maintained that he did not receive a notice of

deficiency for 1996 and sought to contest the underlying

liability for that year.    Respondent maintains that petitioner is

precluded from challenging the underlying liability for 1996

under section 6330(c)(2)(B) because he received a notice of

deficiency for that year.

     To counter petitioner's denial that he received the notice

of deficiency for 1996, respondent points to the fact that the

notice was addressed to petitioner at his current address, an

address where petitioner indisputably received other IRS

correspondence, because that correspondence was responded to by
                                - 16 -

petitioner.    Respondent argues that the foregoing constitutes

"evidence that respondent sent petitioner a notice of deficiency

for * * * 1996" and "evidence that petitioner likely received

it."

       Section 6330(c)(2)(B) contemplates actual receipt of the

notice of deficiency by the taxpayer, Tatum v. Commissioner, T.C.

Memo. 2003-115, although a taxpayer cannot defeat actual receipt

by deliberately refusing delivery, Sego v. Commissioner, 114 T.C.

604, 610-611 (2000).    The Commissioner has generally prevailed in

foreclosing challenges to the underlying liability pursuant to

section 6330(c)(2)(B) where there is evidence that a notice of

deficiency was mailed to the taxpayer and no factors are present

that rebut the presumption of official regularity and of

delivery.     See, e.g., id.; Figler v. Commissioner, T.C. Memo.

2005-230; Kubon v. Commissioner, T.C. Memo. 2005-71; Sciola v.

Commissioner, T.C. Memo. 2003-334; Moore v. Commissioner, T.C.

Memo. 2001-285.    However, where the taxpayer denies receipt and

the Commissioner proffers only a notice of deficiency addressed

to the taxpayer and no evidence of its actual mailing, receipt

for purposes of section 6330(c)(2)(B) has not been presumed.

Calderone v. Commissioner, T.C. Memo. 2004-240.     We believe the

present circumstances are indistinguishable from Calderone v.

Commissioner, supra, and accordingly conclude that receipt of the

notice of deficiency for 1996 has not been shown.    Consequently,
                              - 17 -

Settlement Officer Waters erred in refusing to consider

challenges to the underlying liability for that year.

     The error was harmless in this case, however.    As part of

the pretrial process, respondent's counsel undertook extensive

efforts through formal discovery to have petitioner reveal the

nature of his dispute over the underlying liability for 1996, to

no avail.   When questioned at trial about the determination in

the notice of deficiency that he had income for 1996, petitioner

was evasive and offered no specific challenge to it.     The

challenge petitioner offered at trial to the underlying

liabilities for 1990-93 was that he had no tax liability for

those years because the income he received was not taxable

because it was received in exchange for labor.   In these

circumstances, we do not believe it is either necessary or

productive to remand the case to Appeals for a further hearing on

any challenge to the underlying liability for 1996.    See Lunsford

v. Commissioner, 117 T.C. at 189.   Petitioner has had ample

opportunity to obtain de novo review in this proceeding of any

legitimate challenge to the underlying liability for 1996.

Appeals Employees' Impartiality

     In the absentee letter, petitioner also complained that a

second Appeals employee participated in the terminated conference

between petitioner and Settlement Officer Waters in December

2003.   Petitioner argues that Settlement Officer Waters was
                              - 18 -

thereby improperly influenced, in violation of petitioner's right

to an impartial Appeals employee under section 6330(b)(3) and

section 301.6330-1(d)(1), Proced. & Admin. Regs.   Settlement

Officer Waters addressed this issue in the 2004 supplemental

determination, observing that petitioner himself had a witness at

the conference and insisted that it be audio recorded.

Petitioner has not disputed this assertion.   The 2004

supplemental determination further observes that it is Appeals'

practice to have a second employee present when conferences are

audio recorded.

     For purposes of section 6330(b)(3), an Appeals employee is

considered to be "impartial" if he or she had "no prior

involvement with respect to the unpaid tax" at issue.    The 2004

supplemental determination states that the settlement officer

making it had no prior involvement with the liabilities at issue,

and petitioner has offered no evidence that either Settlement

Officer Waters, or the second Appeals employee participating in

the December 2003 conference, had any prior involvement.

Moreover, nothing in the record of this case suggests that any

Appeals employee involved in petitioner's hearing was

demonstrably biased.   See Cox v. Commissioner, 126 T.C. No. 13

(2006); Criner v. Commissioner, T.C. Memo. 2003-328.

Accordingly, petitioner has shown no failure to comply with

section 6330(b)(3).
                             - 19 -

Ex Parte Contacts

     In the absentee letter, and in a statement submitted at

trial, petitioner contends that there were impermissible ex parte

contacts between respondent's Office of Appeals and Office of

Chief Counsel in connection with his hearing.    The Appeals Office

records document that the Appeals employees handling petitioner's

hearing request communicated on numerous occasions with the Chief

Counsel attorney assigned to petitioner's case.    The first

recorded contact occurred on July 24, 2002, and communications

between the two Offices continued throughout 2003 and 2004.

     Section 1001(a) of the Internal Revenue Service

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

112 Stat. 689, provides:

     The Commissioner of Internal Revenue shall develop and
     implement a plan to reorganize the Internal Revenue
     Service. The plan shall * * *
                          * * * * * * *
     (4) ensure an independent appeals function within the
     Internal Revenue Service, including the prohibition in
     the plan of ex parte communications between appeals
     officers and other Internal Revenue Service employees
     to the extent that such communications appear to
     compromise the independence of the appeals officers.


     In Rev. Proc. 2000-43, 2000-2 C.B. 404, respondent issued

guidance concerning ex parte communications by Appeals to comply

with the foregoing statutory directive.   See generally Drake v.

Commissioner, 125 T.C. 201, 208-209 (2005).     Rev. Proc. 2000-43,

supra, reaffirms that the Office of Chief Counsel is the legal
                                  - 20 -

adviser to all of respondent's employees, including Appeals

employees, on all matters pertaining to the interpretation,

administration, and enforcement of the internal revenue laws and

related statutes.       Id. sec. 2, Q&A-11, 2000-2 C.B. at 406.   Rev.

Proc. 2000-43, supra, contemplates that Appeals may obtain legal

advice from the Office of Chief Counsel, subject to certain

limitations, including that the advice should not be provided by

the same Chief Counsel field attorneys who advised the Internal

Revenue Service employee who made the determination that Appeals

is reviewing.     Id.   Appeals employees are further cautioned that,

while they may obtain legal advice from the Office of Chief

Counsel, they remain responsible for independently evaluating the

strengths and weaknesses of the specific issues presented by the

cases assigned to them and for making independent judgments

concerning the overall strengths and weaknesses of the cases.

Id.       The limitations of Rev. Proc. 2000-43, supra, do not apply,

however, where a case has been docketed in this Court.8

      Giving due consideration to the principles espoused in RRA

1998 section 1001(a) and Rev. Proc. 2000-43, supra, we are not

persuaded, in the context of the entire record in this case, that

there is reason to suspect that the independence of the Appeals

Office employees assigned to it was compromised by contacts with


      8
       Rev. Proc. 2000-43, sec. 2, Q&A-11, 2000-2 C.B. at 406,
further provides that cases docketed in this Court should instead
be handled in accordance with Rev. Proc. 87-24, 1987-1 C.B. 720.
                               - 21 -

attorneys in the Office of Chief Counsel.   We note first that the

contacts here occurred after this case was docketed, putting them

outside the purview of Rev. Proc. 2000-43, supra.    Even if the

proscriptions of Rev. Proc. 2000-43, supra, were applied, there

is no evidence or reason to suspect that the Chief Counsel

attorney assigned to petitioner's case advised the IRS employee

who made the decision to issue the Final Notice of Intent to Levy

to petitioner.

     We are also mindful that petitioner at no point raised an

issue with the Appeals employees that required the exercise of

significant judgment.   Prior to trial, petitioner never

identified the nature of any challenge he wished to make with

respect the underlying liabilities, even though advised by

Appeals that he was entitled to do so with respect to 1990

through 1993.    He offered no specific collection alternative (or,

as a single filer, any spousal defenses).   Rather, he presented a

myriad of procedural challenges, the resolution of which, in our

view, did not require the exercise of significant independent

judgment.   To the extent the Forms 1040X submitted by petitioner,

which were reviewed by the Appeals employees, might be considered

evidence of the nature of his challenge to the underlying

liabilities, they contained tax protester arguments that do not

warrant serious consideration.
                              - 22 -

     In these circumstances, we conclude that any ex parte

contacts did not prejudice petitioner and should not give rise to

a remand for yet another hearing opportunity before a different

Appeals officer.

Bankruptcy Discharge

     In his request for a hearing, petitioner claimed that the

liabilities at issue had been discharged in bankruptcy.   The 2004

supplemental determination concluded that the liabilities had not

been discharged.

     We have jurisdiction, when reviewing under section 6330(d) a

determination to proceed with a levy, to decide whether income

tax liabilities have been discharged in bankruptcy.   Swanson v.

Commissioner, 121 T.C. 111, 116-117 (2003).

     We are satisfied that the 2004 supplemental determination

correctly concluded that petitioner's 1990-93 and 1996

liabilities were not discharged as a result of his 1993

bankruptcy discharge.   The 1990 and 1991 liabilities were not

dischargeable because they were from years for which returns were

due within 3 years before the August 2, 1993, filing of the

petition in bankruptcy.   See 11 U.S.C. secs. 507(a)(8)(A)(i),

523(a)(1)(A) (2000); Durrenberger v. Commissioner, T.C. Memo.

2004-44.   The 1992 liability was not dischargeable because

petitioner's 1992 return was filed on June 10, 1994, which was

after its extended due date (August 15, 1993), and after 2 years
                                - 23 -

before the August 2, 1993, filing of his bankruptcy petition.

See 11 U.S.C. sec. 523(a)(1)(B)(ii) (2000); Ramsdell v.

Commissioner, T.C. Memo. 2003-317.       The 1993 liability was not a

prepetition debt that could have been discharged because

petitioner did not make an election under section 1398(d)(2) to

end his taxable year as of the filing of the bankruptcy petition

during 1993.   See, e.g., In re Smith, 210 Bankr. 689, 692 (Bank.

D. Md. 1997) (citing In re Johnson, 190 Bankr. 724, 726-727

(Bank. D. Mass. 1995)); In re Mirman, 98 Bankr. 742, 744-745

(Bank. E.D.Va. 1989); see also S. Rept. 96-1035, 25, 26 (1980),

1980-2 C.B. 620, 632-633 ("If the debtor does not make the

election, no part of the debtor's tax liability for the year in

which the bankruptcy case commences is collectible from the

estate, but is collectible directly from the individual debtor").

Likewise, the 1996 liability was obviously not a debt incurred

before the filing of the bankruptcy petition and thus could not

have been discharged therein.    See 11 U.S.C. sec. 727(b) (2000);

Swanson v. Commissioner, supra at 120.       Consequently, the 2004

supplemental determination's conclusion that the liabilities at

issue were not discharged was not an abuse of discretion.

Notice and Demand

     In the petition, petitioner claimed that he had not received

notice and demand for payment for any of the liabilities at

issue, as is required by section 6303.      The 2003 supplemental
                               - 24 -

determination concluded that the computerized transcripts of

petitioner's account showed that notice and demand for each

liability had been sent on the date it was assessed.     Although

this issue is not specifically addressed in the 2004 supplemental

determination, Settlement Officer Waters's case notes state that

records from respondent's IDRS (integrated data retrieval system)

confirm that "notice and demand [were] made on all years".

     We are persuaded that notice and demand pursuant to section

6303 was given to petitioner and that Settlement Officer Waters

properly so verified.9    Petitioner's claims regarding notice and

demand are meritless.

Collection Alternatives

     In the absentee letter, petitioner raised questions

concerning collection alternatives.     The 2004 supplemental

determination did not consider collection alternatives on the

grounds, inter alia, that petitioner had not responded to

Appeals' request that he submit a collection information

statement.    The record establishes that Appeals requested

collection information statements from petitioner on at least two

occasions, and we are satisfied that petitioner ignored these

requests.    Thus, it was not an abuse of discretion for the


     9
       The notice of intent to levy in this case would in any
event likely satisfy the requirements of sec. 6303. See Hughes
v. United States, 953 F.2d 531, 536 (9th Cir. 1992); Perez v.
Commissioner, T.C. Memo. 2002-274; Standifird v. Commissioner,
T.C. Memo. 2002-245, affd. 72 Fed. Appx. 729 (9th Cir. 2003).
                                   - 25 -

settlement officer to fail to consider collection alternatives.

See, e.g., Picchiottino v. Commissioner, T.C. Memo. 2004-231;

Newstat v. Commissioner, T.C. Memo. 2004-208; Moorhous v.

Commissioner, T.C. Memo. 2003-183.

"Tax Protester" References

     In the absentee letter, petitioner complained that Appeals

was aware that respondent maintained records designating

petitioner as a "tax protester" and had taken no action to have

this designation expunged, in violation of section 3707 of the

RRA 1998, 112 Stat. 778.       The 2004 supplemental determination

concedes that certain IRS documents so identified petitioner but

treats the matter as of no consequence because the documents

"were from an earlier period".

     Section 3707(a) of the RRA 1998 provides that officers and

employees of the IRS shall not designate taxpayers as "illegal

tax protesters (or any similar designation)" and in the case of

any such designation made before the enactment of the RRA 1998:

     Sec. 3707.       Illegal Tax Protester Designation.

                  *      *    *      *      *    *     *

          (A) shall remove such designation from the individual
          master file; and
          (B) shall disregard any such designation not
          located in the individual master file.

     None of the documents that identified petitioner as a tax

protester are in evidence.        While the designation apparently

appears in some of respondent's documents concerning petitioner,

section 3707(a) specifically contemplates that preexisting tax
                                - 26 -

protester designations may remain in materials other than the

individual master file and merely directs respondent's employees

to disregard them.    On this record, we conclude that petitioner

has not shown that there is any designation of him as a tax

protester in a document created after enactment of the RRA 1998,

nor is there any evidence that would suggest the designation is

contained in petitioner's individual master file.10    Accordingly,

the 2004 supplemental determination's treatment of this issue as

inconsequential was not an abuse of discretion.11

Liens for 1990, 1991, 1992, 1993, and 1996 Liabilities

     In his request for a hearing, petitioner also sought review

of various notices of Federal tax lien.    The 2004 supplemental

determination found that the only notices of Federal tax lien

that had been filed with respect to petitioner were filed before

199912 and were thus not subject to section 6320 hearing and

review rights.    As there is no evidence of a lien filing in 1999



     10
        The Internal Revenue Manual, sec. 3.12.166.2.2 (34)(July
7, 2005), defines the individual master file as "A magnetic tape
file maintained at Martinsburg Computing Center (MCC) containing
information about taxpayers filing Individual returns and related
documents."
     11
       Petitioner in any event points to no provision which
suggests that a violation of sec. 3707(a) of the RRA 1998 would
bar collection of validly assessed income taxes. Cf. Davis v.
Rucker, 90 AFTR2d 2004-6394, 2002-2 USTC par. 50,669 (M.D. Fla.
2002).
     12
          The notices concerned liens for all years at issue except
1996.
                               - 27 -

or thereafter, there is no abuse of discretion in the conclusion

reached in the 2004 supplemental determination.   See RRA 1998

sec. 3401(d), 112 Stat. 750; Parker v. Commissioner, 117 T.C. 63

(2001); Parker v. Commissioner, T.C. Memo. 2005-294.

Section 6673 Penalty

     In both his withdrawn and denied motions for summary

judgment, respondent sought imposition on petitioner of a penalty

under section 6673(a).    Section 6673(a)(1) authorizes this Court

to impose a penalty of up to $25,000 upon the taxpayer whenever

it appears that proceedings have been instituted or maintained by

him primarily for delay or his position is frivolous or

groundless.   Respondent having raised the issue, the Court

considers it.

     A substantial portion of the contentions raised by

petitioner are classic, shopworn tax protester arguments.     At

trial, petitioner maintained that he had no income tax liability

for 1990 through 1993 because he received income in exchange for

his labor.    The Forms 1040X petitioner submitted for 1990, 1991,

and 1993 to dispute his previously reported tax liabilities all

contained such arguments as "no Code section makes me 'liable'

for income taxes", and "'income' * * * can only be a derivative

of corporate activity."   Advancing such arguments in this Court,
                                - 28 -

including section 6330 cases,13 is well established grounds for

the imposition of section 6673 penalties.      However, in light of

the fact that petitioner also sought review of a notice of

determination and a supplemental notice of determination for

which respondent himself eventually conceded a remand was

appropriate, we shall exercise our discretion under section

6673(a)(1) and not impose a penalty in this case.     Petitioner is

hereby warned, however, that should he advance these or similar

arguments in this Court in the future, he may be subject to

penalties under section 6673(a)(1).

Conclusion

     Since we have found the underlying liabilities for 1990,

1991, 1992, 1993, and 1996 are correct and that there was no

abuse of discretion in the 2004 supplemental determination, we

conclude that respondent may proceed with the levy that was the

subject of the notice in this case.

     To reflect the foregoing,



                                      An apppropriate order and

                                 decision will be entered for

                                 respondent.




     13
          See Pierson v. Commissioner, 115 T.C. 576, 581 (2000).
