                   T.C. Memo. 2007-181



                 UNITED STATES TAX COURT



            JACK A. UPCHURCH, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No.   19730-04L.           Filed July 9, 2007.



     R mailed a statutory notice of deficiency to P,
which, although it asserted a deficiency and contained
figures and adjustments to P’s gift tax liability for
1996, referenced only 1995. P did not petition this
Court for redetermination. Only in his request for a
hearing after R had issued a notice of intent to levy
and notice of Federal tax lien filing did P raise the
question of the validity of the notice of deficiency.
After the hearing, R’s Appeals officer held the notice
of deficiency to be valid, and, since P raised no other
issue regarding the propriety of the proposed
collection actions, made the determination that the
collection action should proceed.
                                - 2 -

          Held: The issuance by R of the notice of
     determination sustaining the lien and levy notices was
     not an abuse of discretion, and R may proceed with
     collection.



     Bradley S. Waterman, for petitioner.

     Karen Lynne Baker, for respondent.



                          MEMORANDUM OPINION


     NIMS, Judge:   This case arises from a petition for judicial

review filed in response to a Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330 (notice of

determination).   The issues for decision are (1) Whether the

notice of deficiency petitioner received was valid for 1996 gift

tax although it made repeated references to 1995; and (2) if so,

whether there was an abuse of discretion in sustaining the

proposed collection action.

     Unless otherwise indicated, all section references are to

sections of the Internal Revenue Code in effect for the year in

issue, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

     This matter is before the Court on the parties’ cross-

motions for summary judgment pursuant to Rule 121.   Rule 121(a)

provides that either party may move for summary judgment upon all

or any part of the legal issues in controversy.   Full or partial
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summary judgment may be granted only if it is demonstrated that

no genuine issue exists as to any material fact, and a decision

may be entered as a matter of law.      Rule 121(b); Sundstrand Corp.

v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th

Cir. 1994).

       We conclude that there is no genuine issue as to any

material fact and that a decision may be rendered as a matter of

law.

                             Background

       Some of the facts have been stipulated and are so found.

The stipulation of facts and related exhibits are incorporated

herein by this reference.

       At the time he filed the petition, petitioner resided in

Maryland.

       During 1996, petitioner owned an interest in a partnership

known as the Upchurch Family Limited Partnership.     This

partnership was to contribute a parcel of real estate to another

partnership, which would then use that parcel and an adjacent

parcel for a large scale mixed-use development project.      On

December 26, 1996, petitioner made gifts to his daughter, Jill,

of a 29-percent interest in the Upchurch Family Limited

Partnership and $10,000 cash.    On the same date, petitioner also

made gifts of a 31-percent interest in the Upchurch Family

Limited Partnership to his son, Jack, and a 31-percent interest
                                - 4 -

in the Upchurch Family Limited Partnership to his son, Barc.

Petitioner reported these gifts on a timely filed 1996 Form 709,

United States Gift (and Generation-Skipping Transfer) Tax Return

(gift tax return).    This gift tax return reflected the total

value of the gifts as $641,267.    After application of the annual

exclusions and the unified credit available under the Federal

gift tax regime, the return showed a gift tax liability in the

amount of $4,169, which petitioner timely paid.

     Respondent reviewed petitioner’s 1996 gift tax return,

requesting additional information on the transferred partnership

interests.    Petitioner responded with a valuation report

indicating that in valuing the transferred interests in the

Upchurch Family Limited Partnership, petitioner applied a total

of 62.5 percent in discounts (20 percent for lack of control, 20

percent for lack of marketability/liquidity, 15 percent for

developmental risks, and 7.5 percent for rights of first

refusal).    Respondent’s examiner disagreed with the valuation,

and on May 4, 1999, respondent sent to petitioner a so-called 30-

day letter proposing a $367,623 increase in petitioner’s gift tax

liability for the calendar year 1996 (30-day letter).    Attached

to the 30-day letter was the examiner’s report showing the

corrected total value of the gifts as $1,549,538 (allowing no

cost of sale deduction for partnership assets and applying only a

15-percent discount to the transferred partnership interests).
                                - 5 -

After application of the annual exclusions and unified credit,

these adjustments resulted in a total proposed 1996 gift tax

liability of $371,792.    Petitioner filed a written protest to the

proposed changes, acknowledging that they pertained to his gift

tax liability for 1996.

     Because further correspondence failed to yield any agreement

between petitioner and respondent on the valuation issues, on

March 20, 2000, respondent mailed to petitioner at his last known

address a statutory notice of deficiency.    The deficiency notice

indicated that it was for tax year ending December 31, 1995, and

asserted a gift tax deficiency for 1995 in the amount of

$367,623, the same amount stated in the 30-day letter for 1996

that was previously sent to petitioner.    Petitioner received the

deficiency notice on March 22, 2000.    Attached to the cover page

of the deficiency notice was a Form 4089-c, Notice of

Deficiency--Waiver, a Form 3615-A, Explanation of Tax Changes,

and an additional schedule detailing the revisions to the values

of the transferred partnership interests.    The Form 4089-c and

the Form 3615-A both referred to a tax year ending December 31,

1995.   The Form 3615-A contained figures corresponding to the

1996 gift tax return filed by petitioner as well as the

examiner’s report for 1996 gift tax.    The additional schedule

contained no reference to the taxable period, but it detailed the

gift transactions made by petitioner on December 26, 1996, and
                               - 6 -

reported by petitioner on his 1996 gift tax return.    As in the

examiner’s report, this schedule revalued the gifts based on

disallowance of the cost of sale deduction for the value of

partnership assets and a reduction in the fractional partnership

interest discount from 62.5 percent to 15 percent.    Even though

the deficiency notice informed petitioner of his entitlement to

file a petition for redetermination of the deficiency with this

Court, he did not do so.

     On July 31, 2000, respondent assessed the gift tax

deficiency of $367,623 and interest in the amount of $115,948

with respect to calendar year 1996.    Notice and demand for

payment was sent to petitioner.

     On April 25, 2002, respondent sent to petitioner a Final

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

Hearing.   On April 25, 2002, respondent also sent to petitioner a

Notice of Federal Tax Lien Filing and Your Right to a Hearing

Under IRC 6320.

     Petitioner timely requested a hearing by submitting a Form

12153, Request for a Collection Due Process Hearing.    In his

request, petitioner explained in detail his contentions that the

deficiency notice issued on March 20, 2000, pertained to 1995,

that a deficiency notice was never issued for 1996, and that

therefore the assessment should be abated.    A conference was

scheduled, and petitioner’s representative sent respondent’s
                               - 7 -

Appeals officer a written statement of petitioner’s position

before the scheduled conference.   On July 24, 2002, respondent’s

Appeals officer and petitioner’s representative met for the

conference.

     On September 16, 2004, respondent sent petitioner a Notice

of Determination Concerning Collection Action(s) Under Section

6320 and/or 6330.   The notice of determination stated that

respondent had determined that the notice of deficiency regarding

petitioner’s 1996 gift tax return was valid.   Since the validity

of the notice of deficiency was the only issue raised at his

hearing and petitioner did not suggest any collection

alternatives, respondent determined that the lien and levy

actions “[balanced] the need for the efficient collection action

to be no more intrusive than necessary.”

     On October 15, 2004, petitioner timely filed a petition

appealing respondent’s determination.   In his petition, the only

issue petitioner raised with respect to the notice of

determination was that respondent’s Appeals officer erred in

determining that the notice of deficiency was valid for 1996.

     Petitioner’s claim is essentially that the proposed

collection action was based on an invalid assessment because

petitioner was not afforded the requisite notice of deficiency.

In petitioner’s view, the notice of deficiency he received on

March 22, 2000, was invalid because it referenced tax year 1995
                                 - 8 -

and not 1996, the tax year for which he had any gift tax

liability.   Respondent, on the other hand, maintains that the

notice of deficiency was valid for tax year 1996 despite the

error.

                            Discussion

     Before a levy may be made on any property or right to

property, a taxpayer is entitled to notice of the Commissioner’s

intent to levy and notice of the right to a fair hearing before

an impartial officer of the Internal Revenue Service (IRS)

Appeals Office.   Secs. 6330(a) and (b), 6331(d).   Section 6320

provides that after the filing of a Federal tax lien under

section 6323, the Secretary shall furnish written notice.    This

notice must advise the taxpayer of the opportunity for

administrative review in the form of a hearing, which is

generally conducted consistent with the procedures set forth in

section 6330(c), (d), and (e).    Sec. 6320(c).

     At the hearing, taxpayers may raise challenges to “the

appropriateness of collection actions” and may make “offers of

collection alternatives, which may include the posting of a bond,

the substitution of other assets, an installment agreement, or an

offer-in-compromise.”   Sec. 6330(c)(2)(A).   The Appeals officer

must consider those issues, verify that the requirements of

applicable law and administrative procedures have been met, and

consider “whether any proposed collection action balances the
                                  - 9 -

need for the efficient collection of taxes with the legitimate

concern of the person [involved] that any collection action be no

more intrusive than necessary.”     Sec. 6330(c)(3)(C).

       After the IRS Appeals hearing process, section 6330 gives us

jurisdiction to review the Appeals officer’s determination.       In

an appeal to this Court pursuant to section 6330(d), a taxpayer

may raise in his petition any issues that he raised at the

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

Admin. Regs.    Where the underlying tax liability is properly at

issue, we review de novo the Appeals officer’s determination with

respect to the existence and amount of tax liability.       Sego v.

Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114

T.C. 176, 181-182 (2000).    When the underlying tax liability is

not properly at issue, we review the Appeals officer’s

determination using an abuse of discretion standard.      Sego v.

Commissioner, supra at 610; Goza v. Commissioner, supra at 181-

182.

       The IRS is generally prohibited from assessing and

proceeding with collection of a deficiency in tax until a notice

of deficiency is issued and either: (1) The period during which

the taxpayer may request judicial redetermination of the

deficiency expires; or (2) if a petition is filed with the Tax

Court, a decision of the Tax Court redetermining the deficiency

becomes final.    Sec. 6213(a).   Petitioner is challenging the
                               - 10 -

proposed collection actions because he claims that the notice of

deficiency and the subsequent assessment were invalid for his

gift tax liability for 1996.

     The case before us presents the unique situation in this

Court where the taxpayer challenging the validity of the notice

of deficiency completely disregarded it and waited to break his

silence until the IRS proceeded with collection action almost 2

years after the date of said notice.    Because of the unusual

context, the parties have spent a considerable amount of effort

arguing which standard of review, de novo or abuse of discretion,

applies to the issue of the validity of the notice of deficiency.

     We have held that a determination to proceed with collection

of an assessment made without following proper deficiency

procedures is an error as a matter of law, and accordingly, an

abuse of discretion.   Swanson v. Commissioner, 121 T.C. 111, 119

(2003); see also Freije v. Commissioner, 125 T.C. 14, 36 (2005).

In holding that respondent could not proceed with collection in

Freije v. Commissioner, supra at 36, we said that “The Appeals

officer’s verification that the requirements of applicable law

had been met was incorrect.”   We therefore analyze the validity

of the notice of deficiency within this framework.
                                - 11 -

Validity of Notice of Deficiency

     Section 6213 does not specify the form or the content of a

notice of deficiency.    “[T]he notice is only to advise the person

who is to pay the deficiency that the Commissioner means to

assess him; anything that does this unequivocally is good

enough.”   Olsen v. Helvering, 88 F.2d 650, 651 (2d Cir. 1937).

     An error in a notice of deficiency does not necessarily

invalidate the notice.     Anderten v. Commissioner, T.C. Memo.

1993-2.    In cases where the error involves the taxable year shown

on the notice of deficiency, a deficiency notice must indicate

the taxable period involved or provide sufficient information

such that the taxpayer reasonably could not be misled as to the

taxable period involved.     Commissioner v. Forest Glen Creamery

Co., 98 F.2d 968, 971 (7th Cir. 1938), revg. and remanding 33

B.T.A. 564 (1935); Peoplefeeders, Inc. & Subs. v. Commissioner,

T.C. Memo. 1999-36; Fernandez v. Commissioner, T.C. Memo.

1979-476; Smith v. Commissioner, T.C. Memo. 1979-16; see also

Anderten v. Commissioner, supra; Erickson v. Commissioner, T.C.

Memo. 1991-97.

     In determining whether the notice of deficiency is valid

despite the error, we look at the notice of deficiency, with

attachments, as well as the circumstances surrounding its

issuance and receipt.     Erickson v. Commissioner, supra; Smith v.

Commissioner, supra.     So, taking the entire document into
                                - 12 -

consideration along with the surrounding circumstances, we must

decide in this case whether petitioner could have been reasonably

confused or misled as to the taxable year involved.

     The facts and circumstances in this case lead us to conclude

that the notice of deficiency is valid because it contained

enough information such that petitioner could not reasonably be

deceived as to the taxable period involved (calendar year 1996).

Both the explanation of changes and the additional attached

schedule contain figures that are directly traceable to

petitioner’s 1996 gift tax return, including the value of the

gifts as shown on the return and the amount of tax previously

paid.   The additional schedule, though it does not indicate any

dates for the taxable period involved, details the three gifts

that petitioner made in 1996.    This schedule lists each donee of

the 1996 gifts, the percentage of the Upchurch Family Limited

Partnership given to each donee, the value of the gifts as

reflected on petitioner’s 1996 gift tax return, and the corrected

values of each gift, which also match the examiner’s report for

1996.   The cover page of the notice and attachments asserted the

exact same amount of deficiency as was proposed in the previously

sent 30-day letter for calendar year 1996.   The adjustments and

computations in the attached explanation of tax changes are also

identical to those in the examiner’s report for calendar year

1996.
                               - 13 -

     The circumstances surrounding the issuance of the deficiency

notice lend further support for our conclusion that petitioner

could not have been misled as to the taxable year involved.

Petitioner knew that his 1996 gift tax return was under

examination and participated in its examination.    Petitioner’s

representative spent a considerable amount of effort trying to

justify the valuation of the gifts petitioner made in 1996 that

gave rise to the 1996 gift tax deficiency.    Petitioner

acknowledged the potential deficiency for 1996 gift tax in his

written protest of the 30-day letter proposing the deficiency and

explaining the adjustments.    Petitioner thereafter participated

in Appeals office review of the examination officer’s findings.

     Petitioner could not reasonably have been misled by the

references to the 1995 taxable year when he received the notice

of deficiency after 3 years of review and correspondence relating

to his 1996 gift tax return and when the notice and attached

schedules exclusively contained figures, explanations, and

adjustments corresponding to his 1996 gift tax return.

     Petitioner has not convinced us that any other reasoning

should apply to this case.    Petitioner selected the three main

cases where this Court has held the notices of deficiency

invalid.   These cases that petitioner relies upon are

distinguishable:   Century Data Sys. Inc. v. Commissioner, 80 T.C.

529 (1983), Atlas Oil & Ref. Corp. v. Commissioner, 17 T.C. 733
                              - 14 -

(1951), and Columbia River Orchards, Inc. v. Commissioner, 15

T.C. 253 (1950), involved situations where the Commissioner

actually determined deficiencies for the wrong taxable years.    In

Century Data Sys. Inc. and Atlas Oil, the Commissioner used

fiscal years instead of the appropriate calendar years to

calculate the deficiency.   Similarly, in Columbia River Orchards,

the deficiency was calculated and asserted for a short calendar

year because the Commissioner had incorrectly believed the

corporate taxpayer had liquidated.     In these cases, the

deficiency calculations “necessarily omitted items of income and

deduction of the correct taxable year and * * *[or had] included

other items which properly belong in another taxable year.”

Century Data Sys. Inc. v. Commissioner, supra at 534-535.

     In the case before us, respondent made calculations and

determined a deficiency for the correct taxable year, calendar

year 1996.   The distinguishable facts in Century Data Sys. Inc.,

Atlas Oil, and Columbia River Orchards do not require us to reach

the same result we reached in those cases as petitioner would

like.

     We are likewise not persuaded by petitioner’s reliance on

comments made in Burford v. Commissioner, 76 T.C. 96 (1981),

affd. without published opinion 786 F.2d 1151 (4th Cir. 1986),

and Sanderling, Inc. v. Commissioner, 571 F.2d 174 (3d Cir.
                                - 15 -

1978), affg. in part 66 T.C. 743 (1976) and 67 T.C. 176 (1976).

In both Sanderling and Burford, the Commissioner issued a notice

of deficiency covering an incorrect taxable period longer than

was appropriate.   In Burford, the notice covered the calendar

year instead of a calendar quarter.      In Sanderling, the

Commissioner issued the notice based on a liquidation date that

was later than the corporation’s actual liquidation date.     Both

courts noted in their analysis that the incorrect taxable period

stated in the notice of deficiency fully encompassed the proper

period.   Sanderling, Inc. v. Commissioner, supra at 176; Burford

v. Commissioner, supra at 99.

     We decline petitioner’s invitation to hold that the

foregoing scenario presents the only situation where a notice of

deficiency bearing an incorrect year would constitute a valid

notice.   Deriving such a meaning from Sanderling and Burford

disregards additional observations by the courts.     As part of

their reasoning, both Burford and Sanderling also look at whether

the taxpayer could be misled by the error in the notice.

Sanderling, Inc. v. Commissioner, supra at 176; Burford v.

Commissioner, supra at 99;

     Petitioner’s interpretation of Sanderling and Burford also

ignores our most recent caselaw (cited above) involving

typographical errors in notices of deficiency.     The particular
                             - 16 -

situations confronted in Sanderling and Burford are merely a

subset of situations where a notice of deficiency containing

error may nonetheless be valid.

     Finally, contrary to petitioner’s assertion, this is not a

case where we must “look behind” the notice of deficiency.     We

are not called upon to review respondent’s procedures in order to

determine the validity of the notice of deficiency.    Cf. Riland

v. Commissioner, 79 T.C. 185 (1982); Estate of Brimm v.

Commissioner, 70 T.C. 15 (1978); Greenberg’s Express, Inc. v.

Commissioner, 62 T.C. 324 (1974).

     Since we hold that the notice of deficiency was valid for

tax year 1996, the resulting assessment of deficiency for

petitioner’s 1996 gift tax liability was also valid.   The Appeals

officer’s verification that the requirements of applicable law

had been met was correct.

     Petitioner raised no other issues at his Appeals hearing and

did not propose any collection alternatives.   Accordingly, we

hold that issuing the notice of determination sustaining the lien

and levy notices was not an abuse of discretion.   Respondent may

proceed with collection.


                                    An appropriate order and

                              decision will be entered.
