                        T.C. Memo. 2010-57



                      UNITED STATES TAX COURT



               RICHARD GEORGE BARRY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 28733-08L.               Filed March 24, 2010.



     Richard George Barry, pro se.

     Louise R. Forbes, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     GOEKE, Judge:   The issue for decision is whether respondent

may proceed to collect section 66721 trust fund recovery

penalties (TFRP) by lien for the following periods:



     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code.
                                 - 2 -

                                 Assessed      Penalty
     Tax Period                  Amount Due    Assessed

     Mar. 31, 1997               $3,271.23     $1,552.53
     Sept. 30, 1997               2,083.90         24.62
     June 30, 1998               34,620.43     15,980.28
     Sept. 30, 1998              38,293.14     17,050.59
     Dec. 31, 1998               24,921.06     11,350.82
       Total                                   45,958.84

For the reasons stated herein, we sustain respondent’s

determination to proceed with the collection action.

                          FINDINGS OF FACT

     Petitioner resided in Massachusetts at the time he filed his

petition.

     Petitioner operated Barry Moving & Storage Services, Inc.

(Barry Moving), beginning as early as 1995 and was responsible

for overseeing the company’s quarterly deposits for employee

withholding taxes.    Petitioner filed for bankruptcy under chapter

7 of the Bankruptcy Code, 11 U.S.C. sec. 727, on July 13, 1999,

in response to a lawsuit filed against Barry Moving.      The

bankruptcy court issued a discharge order on January 4, 2000.

     On December 8, 1999, while petitioner’s bankruptcy case was

still pending, respondent sent petitioner by certified mail a

Letter 1153, Trust Funds Recovery Penalty Letter, proposing to

assess against petitioner the TFRP of $45,9592 attributable to

unpaid liabilities pursuant to section 6672 for the tax periods



     2
      Total amount rounded up.
                                - 3 -

listed above.   The Letter 1153 was sent to petitioner’s last

known address and informed him that he had the right to appeal or

protest the proposed assessment and that he had to mail a written

appeal within 60 days of the date of the letter to preserve his

right to appeal.   Petitioner did not appeal.

     On March 20, 2000, the TFRP were assessed against petitioner

as a responsible party for the tax liabilities of Barry Moving.

Respondent assessed further TFRP against petitioner for the

unpaid employment taxes of Barry Relocation Services, a business

operated by petitioner’s ex-wife.3

     On February 5, 2008, respondent recorded a notice of Federal

tax lien (NFTL).    The amount of the recorded lien was $40,851.

On February 7, 2008, respondent issued to petitioner a Notice of

Federal Tax Lien Filing and Your Right to a Hearing Under IRC

6320.    In response, petitioner timely submitted a Form 12153,

Request for a Collection Due Process or Equivalent Hearing (CDP

hearing).    The sole issue petitioner raised in his CDP hearing

request was his underlying liability for the TFRP.

     On July 23, 2008, petitioner’s CDP hearing was held by

telephone.    During the hearing petitioner argued that he was not



     3
      Before trial respondent’s counsel conceded the assessments
related to Barry Relocation Services and stated that those
amounts would be abated. Accordingly, assessments related to
Barry Relocation Services are moot and will not be discussed in
this opinion.
                               - 4 -

liable for the TFRP because they had been paid by Barry Moving.

The settlement officer explained to petitioner that he could

raise the underlying liability if he had not otherwise had an

opportunity to do so.   The settlement officer concluded the CDP

hearing by telling petitioner he would review the information

provided and inform petitioner of his final determination.

     Following the CDP hearing the settlement officer sent

petitioner a letter informing him that he was precluded from

raising the underlying liability since he received a Letter 1153

pertaining to all tax periods at issue.   However, the settlement

officer gave petitioner a final opportunity to submit previously

requested information to assist in respondent’s final

determination.

     On October 23, 2008, respondent issued to petitioner a

Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330 sustaining the proposed lien.    On

November 26, 2008, petitioner timely filed a petition in this

Court challenging respondent’s determination.

                              OPINION

     Section 6672(a) imposes a penalty on any person required to

collect, truthfully account for, and pay over tax who willfully

fails to do so or who willfully attempts to evade or defeat any

such tax.   Section 6672(b)(1) and (2) provides:   (1) That no

penalty may be imposed unless the Secretary notifies the taxpayer
                                - 5 -

in person or in writing by mail to an address as determined under

section 6212(b) that the taxpayer shall be subject to assessment

for such penalty; and (2) that in-person delivery or mailing of

the notice must precede any notice and demand for payment of the

section 6672 penalty by at least 60 days.

     Petitioner argues respondent abused his discretion in

sustaining the proposed lien.   Section 6321 imposes a lien in

favor of the United States on all property and property rights of

a taxpayer liable for taxes after a demand for the payment of the

taxes has been made and the taxpayer fails to pay.     Section

6320(a) requires the Secretary to send written notice to the

taxpayer of the filing of a notice of lien and of the taxpayer’s

right to an administrative hearing on the matter.    At the hearing

a taxpayer may raise any relevant issue, including challenges to

the appropriateness of the collection action and possible

collection alternatives such as an offer-in-compromise.     Sec.

6330(c)(2)(A).   A taxpayer may contest the validity of the

underlying tax liability, but only if the taxpayer did not

receive a statutory notice of deficiency or otherwise have an

opportunity to dispute the tax liability.   See sec.

6330(c)(2)(B); see also Hoyle v. Commissioner, 131 T.C. 197, 199

(2008).
                               - 6 -

     Following the CDP hearing the Appeals officer must make a

determination whether the lien filing was appropriate and is

required to consider:   (1) Whether the Secretary has met the

requirements of applicable law and administrative procedure; (2)

the relevant issues raised by the taxpayer; and (3) whether the

proposed collection action appropriately balances the need for

efficient collection of taxes with a taxpayer’s concerns that the

collection action be no more intrusive than is necessary.    Sec.

6330(c)(3).

     Petitioner argues that the Appeals officer abused his

discretion by denying petitioner an opportunity to challenge the

underlying liability at his CDP hearing.   Respondent argues that

petitioner was not entitled to raise his underlying liability for

the TFRP because petitioner received the Letter 1153.   Petitioner

testified at trial that he did not receive the Letter 1153

respondent issued.

     A taxpayer is precluded from contesting the existence or

amount of the underlying tax liability at the hearing unless the

taxpayer did not receive a notice of deficiency for the tax in

question or did not otherwise have an opportunity to dispute the

tax liability.   Sec. 6330(c)(2)(B); see also Sego v.

Commissioner, 114 T.C. 604, 609 (2000).    We find petitioner’s

testimony that he did not actually receive the Letter 1153 to be

credible.   Accordingly, we will apply a de novo standard for our
                                 - 7 -

review of the collection action.    See Davis v. Commissioner, 115

T.C. 35, 39 (2000).

     At trial petitioner did not contend that he was not liable

for the TFRP.   Rather, petitioner argues that the collection

action is improper because Barry Moving paid the taxes due.

Petitioner testified that quarterly filings and deposits for

employee withholding taxes had been consistent and timely since

Barry Moving began operations.    However, at trial petitioner was

unable to produce bank records or any other documentation

supporting his claim that Barry Moving paid the taxes at issue

and thus has failed to substantiate that Barry Moving paid them.

     Further, petitioner’s liability for the TFRP was not

discharged in bankruptcy because it is not a dischargeable debt.

Although petitioner received a discharge pursuant to chapter 7 of

the Bankruptcy Code, not all Federal tax debts are dischargeable.

See 11 U.S.C. sec. 523 (2006); Washington v. Commissioner, 120

T.C. 114, 121 (2003).   Section 6672 TFRP are not a dischargeable

debt.   The U.S. Supreme Court in United States v. Sotelo, 436

U.S. 268, 282 (1978), held that liability “under Internal Revenue

Code § 6672 must be held nondischargeable under Bankruptcy Act §

17(a)(1)(e).”   “Section 17(a)(1)(e) of the Bankruptcy Act * * *

was the statutory predecessor of § 523 of the Bankruptcy Code and

is essentially the same nondischargeable tax claim language.”

Clark v. United States, 64 Bankr. 437, 441 (Bankr. M.D. Fl.
                                 - 8 -

1986).   The Supreme Court also stated that despite the reference

to the liability as a section 6672 “penalty” the funds involved

were in substance “taxes”.   United States v. Sotelo, supra at

275; see also In re Spelts, 304 Bankr. 452, 456-457 (Bankr. D.

Colo. 2003).   Since Sotelo, Federal courts have held that

liability for a section 6672 TFRP is not a dischargeable debt.

See, e.g., Severance v. United States, 593 F.2d 4, 5 (5th Cir.

1979) (finding the section 6672 liability nondischargeable

whether or not the liability was levied within 3 years of filing

for bankruptcy).   Section 6672 TFRP are therefore

nondischargeable under 11 U.S.C. section 523.

     In conclusion, because petitioner failed to demonstrate that

he paid the amounts at issue and did not contest his trust fund

liability under section 6672, and because his liability for the

TFRP was not discharged by the Bankruptcy Court, respondent may

proceed with collection of the TFRP by lien.

     To reflect the foregoing,


                                              An appropriate order

                                         of dismissal and decision will

                                         be entered.
