                   T.C. Summary Opinion 2009-142



                      UNITED STATES TAX COURT



                  MARK RUPERT KNOP, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5472-08S.             Filed September 15, 2009.



     Mark Rupert Knop, pro se.

     Melissa C. Quale, for respondent.



     DEAN, Special Trial Judge:   This case was heard under the

provisions of section 7463 of the Internal Revenue Code as in

effect when the petition was filed.   Pursuant to section 7463(b),

the decision to be entered is not reviewable by any other court,

and this opinion should not be treated as precedent for any other

case.   Unless otherwise indicated, subsequent section references

are to the Internal Revenue Code of 1986, as amended.
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     The petition was filed in response to a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 (notice of determination).    Pursuant to section

6330(d), petitioner seeks review of respondent’s proposed levy

action with respect to his income tax liability for 1983.    The

issues for decision are whether:    (a) Petitioner may challenge

the existence or amount of the underlying tax liability, (b)

petitioner is entitled to an abatement of interest on his tax

liability, and (c) respondent’s determination to proceed with

collection action was an abuse of discretion.

                             Background

     The stipulation of facts, the first and second supplemental

stipulation of facts, and the exhibits received into evidence are

incorporated herein by reference.    When the petition was filed,

petitioner resided in California.

Petitioner’s Tax Liability

     In 1983 petitioner, a limited partner, held a 2.857-percent

interest in the Contra Costa Jojoba Research Partners Partnership

(partnership).   Respondent and the partnership timely executed

Form 872-O, Special Consent to Extend the Time to Assess Tax

Attributable to Items of a Partnership, for 1983.1   Respondent




     1
      Paul Vallely, Tax Matters Partner, signed the Form 872-O
for the partnership.
                               - 3 -

sent the partnership notification of the commencement of an

examination in care of Paul Vallely on August 12, 1985.

     Petitioner filed his Federal income tax return for 1986 in

August 1987.   The address on the return was his post office box

in Alameda, California.

     On April 12, 1989, respondent sent the partnership, in care

of Paul Vallely, Tax Matters Partner (TMP), a notice of final

partnership administrative adjustment (FPAA).2    A copy of the

FPAA was sent by certified mail to petitioner at his post office

box in Alameda, California, on May 30, 1989.     The partnership,

through a partner other than the TMP, timely filed a petition

with the Court to dispute the proposed adjustments.     See sec.

6226(b)(1).

     In 1994 the partnership entered into a stipulation to be

bound by the outcome of docket No. 7619-90.    In January 1998 the

Court in Utah Jojoba I Research v. Commissioner, T.C. Memo. 1998-

6, sustained the Commissioner’s adjustments in that case.

Although the Court provided an opportunity for each partner in

the partnership to object to entry of decision, none who

responded was willing to prosecute the partnership-level


     2
      The partnership proceeding was governed by the procedural
rules of the Tax Equity and Fiscal Responsibility Act of 1982,
Pub. L. 97-248, sec. 402(a), 96 Stat. 648, codified as secs.
6221-6233. Under sec. 6221, the tax treatment of partnership
items is determined at the partnership level.
                               - 4 -

proceeding.   In April 2005 the Court ordered that the partnership

item adjustments as set forth in the FPAA issued to the

partnership be sustained.   In its order and decision, the Court,

citing section 6230(f), noted that “While it appears that the tax

matters partner, who is also the petitioner, may have failed to

fulfill his duties and obligations as tax matters partner, such

failure” would not invalidate the partnership-level proceeding.

     On April 10, 2006, respondent sent petitioner a notice of

deficiency determining additions to tax for negligence under

section 6653(a)(1) for 1983 for affected items related to the

partnership adjustment.   See secs. 6230(a)(2), 6231(a)(5).    The

assessment of the affected items is not at issue here.

     On May 1, 2006, respondent assessed the additional tax that

petitioner owed as a result of the tax determined at the

partnership level.   Petitioner received in May 2006 Notice CP22E,

explaining the increase in his 1983 tax liability due to his

partnership proceeding as well as the interest accrued as a

result of the unpaid tax.

Respondent’s Collection Activity

     Respondent sent petitioner a Final Notice, Notice of Intent

to Levy, and Notice of Your Right to a Hearing in September 2006

with respect to his 1983 tax liability.   Petitioner filed a

timely Form 12153, Request for a Collection Due Process Hearing.

On his Form 12153 petitioner stated that he had “never received
                                 - 5 -

any notice from the IRS regarding this issue” until he received

the May 2006 Notice CP22E.   Petitioner further alleged that “I

have lived at 1895 Geneva Street in San Jose, California from May

of 1990 to June 19th of 2006.”    Petitioner added that 2 years

before living at the above address he lived in Fremont,

California.    Petitioner requested that the levy not be enforced

“due to the amount of time that has passed” without his being

informed and that “all late fees” be waived.

     Petitioner, a mortgage broker, supplied the Appeals officer

who conducted his section 6330 hearing with both Form 433-A,

Collection Information Statement for Wage Earners and Self-

Employed Individuals, and Form 433-B, Collection Information

Statement for Businesses, as well as additional financial

information.

                           Discussion

Section 6330

     Section 6330 generally provides that the Commissioner cannot

proceed with collection by way of a 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, judicial review of the administrative

determination.   See Davis v. Commissioner, 115 T.C. 35, 37

(2000); Goza v. Commissioner, 114 T.C. 176, 179 (2000).     The

taxpayer requesting the hearing may raise any relevant issue with
                               - 6 -

regard to the Commissioner’s intended collection activities,

including spousal defenses, challenges to the appropriateness of

the collection action, and offers of collection alternatives.

Sec. 6330(c); Sego v. Commissioner, 114 T.C. 604, 609 (2000);

Goza v. Commissioner, supra at 180.

     Where the validity of the tax liability is not properly part

of the appeal, the taxpayer may challenge the determination of

the Appeals officer for abuse of discretion.   Sego v.

Commissioner, supra at 609-610; Goza v. Commissioner, supra at

181-182.   The taxpayer may raise challenges “to the existence or

amount of the underlying tax liability”, however, only if he “did

not receive any statutory notice of deficiency for such tax

liability or did not otherwise have an opportunity to dispute

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

     Petitioner argues that it is unfair for respondent to

attempt collection of interest and “late fees” on the tax that he

admittedly owes for 1983.3   According to petitioner, it is, in

part, unfair because he does not recall being notified by

respondent that the partnership was to be examined or that he was

to be assessed additional tax as a result of the partnership

adjustment.   It is also unfair, he argues, because paying his

     3
      Except with reference to deficiency procedures, under sec.
6601(e)(1), Interest treated as tax, references to underpaid tax
include interest on the tax. The term “tax” also includes
additions to the tax, additional amounts, and penalties. Sec.
6662(a)(2).
                                 - 7 -

liability would require withdrawing money from his retirement

account or selling his interest in his home.

The Partnership Liability

     Mailing of the FPAA

     Section 6223(a) and (d)(2) requires that the Secretary mail

a copy of the FPAA to each partner entitled to notice within 60

days of the mailing of the FPAA to the TMP.     Petitioner suggests

that he never received a copy of the FPAA because it was not sent

to his proper address.     The FPAA was sent to petitioner at his

post office box in Alameda, California, on May 30, 1989.

Petitioner’s 1986 Federal income tax return was filed in August

1987, indicating the post office box as his address.      Petitioner

alleges that he lived in Fremont, California, starting in 1988.

     Generally, a taxpayer’s last known address is the address

that appears on the taxpayer’s most recently filed and properly

processed return “unless the Internal Revenue Service (IRS) is

given clear and concise notification of a different address.”

Sec. 301.6212-2(a), Proced. & Admin. Regs.     At trial, however,

petitioner admitted that in 1989 “I still had the PO box.        I

don’t know if the PO box was effective at that time.”       When

asked by the Court whether he had notified the Internal Revenue

Service in 1988 or 1989 that the post office box was no longer

his proper address, he replied:     “No, I did not.”   Neither
                                   - 8 -

petitioner nor respondent produced a copy of petitioner’s 1987 or

1988 Federal income tax return.

       The last known address doctrine is derived from section

6212(b)(1), which provides that a notice of deficiency is

sufficient if it is mailed to the taxpayer at his last known

address.       Under section 6230(a), however, the normal deficiency

procedures do not apply to the unified partnership audit and

litigation procedures, except under circumstances not relevant

here.       Notices related to partnership proceedings are issued

under section 6223.       Section 6223, unlike section 6212, does not

use the term “last known address”.         For purposes of issuing the

notices specified in section 6223(a), including an FPAA, the

Commissioner is required to use names, addresses, and profits

interests as shown on the partnership return for the year at

issue as modified by additional information furnished by the tax

matters partner or any other person in accordance with

regulations prescribed by the Secretary.        Sec. 6223(c)(1) and

(2).       The procedure for furnishing additional information

regarding partners for the year at issue was found at sec.

301.6223(c)-1T, Temporary Proced. & Admin. Regs., 52 Fed. Reg.

6784 (Mar. 5, 1987).4      Under the regulation:

       In addition to the information on the partnership return and
       that supplied on statements filed under this section, the

       4
      The temporary regulations have been replaced by permanent
regulations. See sec. 301.6223(c)-1, Proced. & Admin. Regs.
                                 - 9 -

     Service may use other information in its possession (for
     example, a change in address reflected on a partner's
     return) in administering subchapter C of chapter 63 of the
     Code. However, the Service is not obligated to search its
     records for information not expressly furnished under this
     section. [301.6223(c)-1T(f), Temporary Proced. & Admin.
     Regs., 52 Fed. Reg. 6784 (Mar. 5, 1987).]


The statute places on the partnership the burden of informing the

Commissioner of changes in the addresses of the partners and the

partnership.   Sec. 6230(e); Utah Bioresearch 1984, Ltd. v.

Commissioner, T.C. Memo. 1989-612.       Petitioner has produced no

evidence to show that respondent did not comply with the

requirements of the statute and the regulations issued

thereunder.

     Petitioner is held to have received the FPAA.      He will be

treated as having been a party to the action filed in this Court

and able to have participated in the litigation.      See sec.

6226(c).   Because petitioner had an opportunity to dispute his

tax liability during the partnership litigation, he was

prohibited from challenging the liability at the section 6330

hearing and at trial.   Sec. 6330(c)(2)(B); Giamelli v.

Commissioner, 129 T.C. 107, 113 (2007); sec. 301.6330-1(f)(2),

Q&A-F5, Proced. & Admin. Regs.

     Interest on the Liability

     For tax years beginning before July 31, 1996, the

Commissioner may abate interest assessed on any deficiency or

payment of tax to the extent that any error or delay in payment
                               - 10 -

of the tax is attributable to the erroneous or dilatory

performance of a ministerial act by an officer or employee of the

Commissioner and the taxpayer caused no significant aspect of the

delay.   Sec. 6404(e)(1).   A ministerial act is a procedural or

mechanical act that does not involve the exercise of judgment or

discretion by the Commissioner.    Sec. 301.6404-2T(b)(1),

Temporary Proced. & Admin. Regs., 52 Fed. Reg. 30163 (Aug. 13,

1987).

     In 1996 Congress amended section 6404(e)(1) to permit

abatement of interest that accrues as a result of an

“unreasonable” error or delay in performing a ministerial or

“managerial” act.   Taxpayer Bill of Rights 2, Pub. L. 104-168,

sec. 301(a), 110 Stat. 1457 (1996).     The 1996 amendment applies

to deficiencies or payments for tax years beginning after July

30, 1996.   Id. sec. 301(c), 110 Stat. 1457.    A decision

concerning the application of Federal or State law is not a

managerial act.   Sec. 301.6404-2(b)(1), Proced. & Admin. Regs.

     Petitioner has failed to show that there was an erroneous or

dilatory performance of a ministerial act or an unreasonable

error or delay by respondent in performing a ministerial or

managerial act.

Collection Alternatives

     The Appeals officer stated in the notice of determination

that she examined all collection alternatives.    Petitioner’s
                              - 11 -

collection alternatives are limited because he has assets that

are more than sufficient to fully pay his outstanding tax

liability.   The parties agree, however, that petitioner’s current

living expenses exceed his income, making an installment

agreement inappropriate.

     A taxpayer may request that his Federal income tax liability

be designated as currently not collectible where, on the basis of

the taxpayer’s assets, equity, income, and expenses, he has no

apparent ability to make payments on the outstanding tax

liability.   Foley v. Commissioner, T.C. Memo. 2007-242.    Although

petitioner’s income was not sufficient to meet his stated monthly

living expenses, he has funds in an individual retirement account

and equity in his personal residence that are worth a multiple of

his tax liability.   His account cannot, therefore, be considered

currently not collectible.

     If the liability of a taxpayer can be collected in full but

would create an economic hardship, the Commissioner can consider

an offer-in-compromise (OIC) to promote effective tax

administration.   Sec. 301.7122-1(b)(3), Proced. & Admin. Regs.;

Internal Revenue Manual (IRM) pt. 5.8.11.2.1(1) (Sept. 1, 2005).

Among the factors to be considered in making an economic hardship

determination are whether the taxpayer is incapable of earning a

living and whether he is unable to borrow against equity in his

assets.   Id. pt. 5.8.11.2.1(6).   The existence of economic
                              - 12 -

hardship, however, does not require that an OIC be accepted.     Id.

pt. 5.8.11.2.1(10).   Further, tax liabilities associated with

abusive tax avoidance transactions will not generally be

compromised under effective tax administrative procedures.     Id.

pt. 5.8.11.2.2.

     Petitioner has presented no other possible alternatives.

Abuse of Discretion

     The issue for the Court to decide is whether respondent

abused his discretion in determining to pursue the intended

collection action.

     An abuse of discretion is a decision based on an erroneous

conclusion of law or where the record contains no evidence on

which a decision could rationally have been based.    Premium Serv.

Corp. v. Sperry & Hutchinson Co., 511 F.2d 225, 229 (9th Cir.

1975).   Because petitioner did not present viable alternatives to

collection, the Court finds that respondent’s determination to

pursue the intended collection action was not an abuse of

discretion.

     To reflect the foregoing,


                                         Decision will be entered

                                    for respondent.
