                         T.C. Memo. 2008-127



                       UNITED STATES TAX COURT



    WILLIAM R. KOHLER AND PATRICIA M. KOHLER, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 18103-06L.              Filed May 5, 2008.



     William R. Kohler, pro se.

     William C. Bogardus, for respondent.



                         MEMORANDUM OPINION


     JACOBS, Judge:1   The petition in this case was filed in

response to a Notice of Determination Concerning Collection

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




     1
      This case was submitted to Judge Joseph H. Gale on Sept.
10, 2007. The Chief Judge reassigned this case to Judge Julian
I. Jacobs on Mar. 11, 2008.
                                   - 2 -

determination).2      Pursuant to section 6330(d), petitioners seek

our review of respondent’s determination upholding the proposed

levy to collect petitioners’ income tax liability for tax year

1995.       The issue for decision is whether respondent’s proposed

levy action may proceed.

                                Background

       This case was submitted fully stipulated pursuant to Rule

122.       The stipulation of facts and the attached exhibits are

incorporated herein by this reference.         Petitioners resided in

the State of New York at the time they filed their petition.

       Petitioners prepared a joint Form 1040, U.S. Individual

Income Tax Return, for 1995 in which they reported $93,623 of

adjusted gross income, $24,658 of tax, and $2,727 of withheld

amounts, resulting in $21,931 of tax owed.         The return, which was

prepared with the assistance of a certified public accountant

(C.P.A.), showed that William R. Kohler is an attorney and

Patricia M. Kohler is a teacher.       Petitioners’ C.P.A. signed and

dated the return September 27, 1997.         The due date for

petitioners’ 1995 return, after extensions, was October 15, 1996.

       In 2002 respondent advised petitioners that respondent had

not received any tax return for tax year 1995 from them. In

response, petitioners, on or about July 11, 2002, provided


       2
      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.
                                - 3 -

respondent with a copy of their 1995 return.    Respondent assessed

the tax shown on petitioners’ 1995 return on December 9, 2002,

and on the same day sent petitioners a letter advising them that

they owed $51,275.86 in tax, additions to tax, and interest.

       In their ensuing correspondence with respondent, petitioners

did not explicitly state whether they had filed their 1995 return

before July 11, 2002, and, if so, the date on which the return

was filed.    Instead, they pointed out that the 1995 return they

submitted in 2002 was a copy and requested that respondent advise

them as to whether respondent had found their “original” return.

       The parties stipulated that petitioners do not contest the

balance due as shown on the 1995 return (i.e., $21,931) but

rather assert that the balance due accompanied the return.

Petitioners did not submit any evidence (such as a canceled check

or bank record) to corroborate their claim that they filed their

1995 return before July 11, 2002, or paid the $21,931 balance

due.    In this respect, petitioners repeatedly asserted in several

letters to respondent:    “It should be noted that tax payments

were made from an account which does not provide copies of

cancelled checks to the customer.    Federal Regulation E does not

require the retention for this long a period.”    Petitioners did

not aver that they did not have their own bank records from the

relevant period, nor did petitioners submit any documentation
                              - 4 -

(such as correspondence with their bank) showing that they

attempted to obtain their bank records.

     In support of their claim that they paid their 1995 tax,

petitioners informed respondent that they had contacted the State

of New York Department of Taxation and Finance, evidently in

2002, and had been advised that their 1995 State of New York

income tax return had been received by that office together with

payment of the tax due to the State of New York.   Petitioners

averred (but offered no corroboration) that their 1995 Federal

income tax return was attached to their 1995 State of New York

income tax return.

     Respondent’s written communications to petitioners include:

(1) Requests for clarification with respect to specific items on

the return; (2) notification, on January 22, 2003, that

respondent had removed the additions to tax for failure to file a

timely return and failure to timely pay the tax “based solely on

the fact that this was the first time you were required to file a

return”; (3) notices and demands for payment; (4) a statement of

account; and (5) assurance, on March 24, 2003, that respondent

did not have any record of having received petitioners’ 1995

return before 2002 and had no record of payment with respect to

tax year 1995.

     Petitioners, on March 23 and April 9, 2003, reiterated their

claims and requested a conference with respondent’s
                               - 5 -

representative.   No further action was taken until November 2004

when respondent resumed his solicitations for payment.

Petitioners, in a letter dated December 2, 2004, reiterated their

claims including their request for a conference with respondent.

No further action or correspondence took place between the

parties until November 2005 when respondent again solicited

payment of petitioners’ 1995 tax.   Petitioners, on December 7,

2005, once again reiterated their claims and requested a

conference with respondent.   No further action or correspondence

took place between the parties until February 20, 2006, when

respondent issued a Letter 1058, Final Notice of Intent to Levy

and Notice of Your Right to a Hearing (final notice of intent to

levy).   In response to respondent’s letter, petitioners requested

a hearing with respondent’s Office of Appeals.   Pursuant to

petitioners’ request, a face-to-face hearing pursuant to section

6330 was held on July 12, 2006.

     At their section 6330 hearing, petitioners reiterated all of

the claims they had made in their correspondence and asserted

that their 1995 return was timely filed and that their 1995 tax

timely paid.   Petitioners did not explain how their 1995 return

dated September 27, 1997, could have been timely.    According to

petitioners, respondent’s delay until 2002 in notifying them that

respondent had not received their 1995 return resulted in their

being unable to produce supporting bank records.    When
                                 - 6 -

petitioners were asked how they could have failed to notice that

the check they submitted in payment of Federal income tax had

never been cashed, petitioners responded that they had not

noticed the discrepancy “due to the fact that the account was

linked to a securities account and that market fluctuations as

well as debits determined net asset value balances.”    Petitioners

did not formally propose any collection alternative, nor did they

request abatement of interest.    According to the notes of the

hearing compiled by respondent’s Appeals officer, petitioners

indicated that they would petition this Court upon receipt of a

notice of determination and would thereafter attempt to negotiate

a settlement with respondent’s Area Counsel.

     On August 11, 2006, respondent issued a notice of

determination sustaining the proposed levy.    The notice of

determination states that petitioners provided no evidence that

they filed a return for 1995 before submitting a copy of the 1995

return to respondent on July 11, 2002, and notes that petitioners

did not file returns for any tax year from 1996 through 2002.

      On September 6, 2006, petitioners timely petitioned this

Court for review of respondent’s determination, asserting that

they never received a formal notice of assessment and that

respondent unjustifiably failed to consider their alternative

collection proposals.   Petitioners posit that the doctrine of

laches prevents respondent from asserting his claim.
                               - 7 -

     The parties stipulated that petitioners offered to

compromise their dispute for $21,931 (the amount of tax shown as

owed on the return but not the interest that respondent seeks to

collect) in a letter to respondent’s counsel dated July 12, 2007.

                            Discussion

     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.   Section 6331(d) provides that the levy authorized

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

only after the Secretary has notified the person in writing of

his intention to make the levy at least 30 days before any levy

action is begun.   Section 6330 elaborates on section 6331 and

provides that upon a timely request a taxpayer is entitled to a

collection hearing before the IRS Office of Appeals.   Sec.

6330(a)(3)(B), (b)(1).   A request for a collection hearing must

be made within the 30-day period commencing on the day after the

date of the section 6330 notice.   Sec. 6330(a)(3)(B); sec.

301.6330-1(b)(1), Proced. & Admin. Regs.

     If a section 6330 hearing is requested, the hearing is to be

conducted by the Office of Appeals, and, at the hearing, the

Appeals officer conducting it must verify that the requirements

of any applicable law or administrative procedure have been met.

Sec. 6330(b)(1), (c)(1).   The taxpayer may raise at the hearing
                               - 8 -

“any relevant issue relating to the unpaid tax or the proposed

levy”.   Sec. 6330(c)(2)(A).

     Section 6330(c)(2)(B) provides that a person may challenge

“the existence or amount of the underlying tax liability for any

tax period if the person did not receive any statutory notice of

deficiency for such tax liability or did not otherwise have an

opportunity to dispute such tax liability.”   Petitioners did not

receive a notice of deficiency for 1995 or otherwise have an

opportunity to dispute their liability.   Therefore, petitioners

are entitled to challenge the existence or amount of the 1995 tax

liability.   See Landry v. Commissioner, 116 T.C. 60, 62 (2001).

     At the conclusion of the hearing, the Appeals officer must

determine whether and how to proceed with collection and take

into account:   (i) The relevant issues raised by the taxpayer,

(ii) challenges to the underlying tax liability by the taxpayer,

where permitted, and (iii) 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).

     Within 30 days after the Office of Appeals issues a notice

of determination, the taxpayer may appeal the determination to

the Tax Court if we have jurisdiction over the underlying tax
                                - 9 -

liability, sec. 6330(d)(1), as we do in the instant case.3      We

review de novo respondent’s determinations insofar as the

existence or amount of the underlying liability is properly at

issue.    See Davis v. Commissioner, 115 T.C. 35, 39 (2000); Goza

v. Commissioner, 114 T.C. 176, 181 (2000).

     Petitioners insist that they timely filed their 1995 return

and that payment of their 1995 tax accompanied their return.4

Petitioners bear the burden of proving these claims.    See Rule

142(a).    They have failed to do so.

     The copy of petitioners’ 1995 return that was stipulated

into evidence indicates that it was prepared by petitioners’

C.P.A. on September 27, 1997, which is after the date the return

was due.    Therefore, it is difficult to understand how this

return could have been filed timely.

     Respondent’s records indicate that the 1995 return was filed

on July 11, 2002 (after respondent notified petitioners that

respondent had not received their 1995 return).    The record is

devoid of any evidence that would permit us to conclude that


     3
      We note that the Pension Protection Act of 2006, Pub. L.
109-280, sec. 855, 120 Stat. 1019, amended sec. 6330(d)(1) to
provide that for determinations made after Oct. 16, 2006, the Tax
Court has jurisdiction to review the Commissioner’s collection
activity regardless of the type of underlying tax involved.
     4
      Because respondent abated the failure to timely file and
failure to pay additions to tax, the timing of the filing of the
return is relevant only insofar as it tends to establish whether
and when payment of the tax was made and the point at which
interest, if any, stopped accumulating.
                               - 10 -

respondent received but lost petitioners’ return and alleged tax

payment.   We need not, and do not, accept petitioners’ claim that

they filed their 1995 return earlier than July 11, 2002.

Further, without substantiation, we cannot accept petitioners’

assertion that they paid the $21,913 balance of tax owed for

1995.5

     We interpret petitioners’ complaint that they did not

receive a formal notice of assessment as a claim that

respondent’s Appeals officer, in sustaining the proposed levy

action, did not verify that the requirements of any applicable

law or administrative procedure were met as required by section

6330(c)(1).

     Section 6201(a)(1) requires the Secretary to assess all

taxes determined by the taxpayer as shown on the taxpayer’s

return.    Section 6203 provides that such assessment shall be made

by recording the liability of the taxpayer in the office of the

Secretary in accordance with rules or regulations prescribed by

the Secretary and that upon request of the taxpayer the Secretary


     5
      In their posttrial brief petitioners stated that they, “by
contesting the underlying tax liability, ipso facto contested
that any interest was due thereon.” Because we find that
petitioners have not shown that they paid their 1995 tax, it
follows that they are liable for interest on their underpayment
as provided in sec. 6601(a). Even if we construe petitioners’
claim as one for abatement of interest under sec. 6404(h)(1), we
do not have jurisdiction to consider it because petitioners did
not make a claim to the Appeals officer that interest be abated
or otherwise redetermined. See Giamelli v. Commissioner, 129
T.C. 107, 113 (2007).
                               - 11 -

shall furnish the taxpayer a copy of the record of the

assessment.6   Section 6501(a) requires the tax to be assessed

within 3 years after the return is filed.    We have found that

petitioners failed to carry their burden of showing that their

1995 return was filed before July 11, 2002.    The parties

stipulated into evidence respondent’s Form 4340, Certificate of

Assessments, Payments, and Other Specified Matters, which shows

that respondent received petitioners’ 1995 return for the first

time in July 2002 and that assessment of the tax shown on the

return was made on December 9, 2002.    We and other courts have

held that Form 4340 constitutes presumptive proof of a valid

assessment.    Davis v. Commissioner, supra at 40 (and cases cited

thereat).

     Petitioners have cited no irregularities that would cast

doubt on the reliability of the information recorded on Form 4340

with respect to their 1995 tax.   Therefore, we find that

petitioners’ 1995 tax was validly assessed.

     In their petition, petitioners contend that respondent

unjustifiably failed to consider their alternative collection



     6
      Respondent assessed petitioners’ 1995 tax on Dec. 9, 2002,
and sent petitioners a notice and demand for payment on the same
day. Petitioners do not contend and the record does not show
that they requested a copy of the record of the assessment of the
1995 tax which respondent failed to provide, nor do they cite any
statutory authority for their claim that they were entitled to a
“formal notice of assessment” beyond that provided for in sec.
6203.
                              - 12 -

proposals.   The parties stipulated that at the hearing

petitioners offered to pay $5,000 (or $10,000, according to the

Appeals officer’s notes) in satisfaction of their 1995 tax

liability.   They further stipulated that petitioners offered to

settle their dispute for $21,931 (the amount of the tax shown as

owed on the return but not the interest that respondent seeks to

collect) in a letter to respondent’s counsel dated July 12, 2007,

but that no formal offer-in-compromise was submitted.

     Section 7122(a) permits the Secretary to compromise any

civil case arising under the internal revenue laws.    Section

7122(c) requires the Secretary to prescribe guidelines for

officers and employees of the IRS to determine whether an offer-

in-compromise is adequate and should be accepted to resolve a

dispute.   Compromises may be made on three grounds:   (1) Doubt as

to liability; (2) doubt as to collectibility; and (3) promotion

of effective tax administration.   This third ground is further

divided between cases in which collection of the full liability

would cause the taxpayer economic hardship and cases in which it

would not.   Sec. 301.7122-1(b), Proced. & Admin. Regs.

     Petitioners do not articulate what might be the grounds upon

which respondent would be permitted to compromise their

liability, and they admit that they did not submit an offer-in-

compromise as required by the applicable guidelines.    On this

sparse record, which is devoid of evidence concerning
                                - 13 -

petitioners’ collection potential, we have no basis on which to

find that any offer petitioners made was an acceptable amount.

Therefore, we cannot find that respondent abused his discretion

when he declined to accept petitioners’ oral offer to extinguish

their tax liability for $5,000 (or $10,000).   In addition, we

cannot find (insofar as the matter may be before us for review)

that respondent abused his discretion by refusing petitioners’

offer, contained in a letter to respondent’s counsel following

submission of their case, to pay $21,931 in satisfaction of their

liability which, at the date of the notice of intent to levy,

amounted to $44,537.91.   Thus, we sustain respondent’s

determination in this regard.

     Finally, we consider petitioners’ claim that respondent is

barred by laches from collecting their 1995 tax.   Laches is an

equitable doctrine which “prohibits a party from asserting a

claim following an unreasonable delay by such party when there

has been a change in circumstances during such delay which would

result in severe prejudice against an opposing party should the

claim be permitted.”   Tregre v. Commissioner, T.C. Memo. 1996-

243, affd. without published opinion 129 F.3d 609 (5th Cir.

1997).   It is well settled that the United States is generally

not subject to the doctrine of laches in enforcing its rights.

United States v. Summerlin, 310 U.S. 414, 416 (1940); Guaranty

Trust Co. v. United States, 304 U.S. 126 (1938).   Instead, the
                              - 14 -

“timeliness of government claims is governed by the statute of

limitations enacted by Congress.”   Fein v. United States, 22 F.3d

631, 634 (5th Cir. 1994).7   Moreover, statutes of limitation are

strictly construed in favor of the Government where limitation is

sought to bar the rights of the Government.   Allnutt v.

Commissioner, __ F.3d __ (4th Cir., April 23, 2008), affg. T.C.

Memo. 2002-311.

     Section 6502(a)(1) provides that where the tax has been

timely assessed, it may be collected by levy if the levy is made

within 10 years after the assessment.   Respondent timely assessed

petitioners’ 1995 tax on December 9, 2002, and issued his final

notice of intent to levy on February 20, 2006, well within the

10-year period of section 6502(a)(1).   Therefore, the periods of

limitations of sections 6501 and 6502 did not operate to prevent

respondent from pursuing a levy action against petitioners.

     Respondent’s determination that the Federal tax levy was

appropriate is sustained.

     To reflect the foregoing,


                                         Decision will be entered

                                    for respondent.




     7
      While it is the IRS’s policy to notify taxpayers when they
have not timely filed returns, the IRS has no statutory
obligation to do so. Grandelli v. Commissioner, T.C. Memo. 2008-
55.
