                         T.C. Memo. 2003-198



                       UNITED STATES TAX COURT



                  ISAIAH ISRAEL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 14482-01L.            Filed July 9, 2003.



     Isaiah Israel, pro se.

     Gregory J. Stull, for respondent.



                         MEMORANDUM OPINION


     CHIECHI, Judge:    Petitioner filed the petition in this case

in response to a notice of determination concerning collection

action(s) under section 6320 and/or 6330 (notice of determina-

tion).

     We must decide whether respondent abused respondent’s

discretion in determining to proceed with the collection action
                               - 2 -

as determined in the notice of determination with respect to

petitioner’s taxable years 1994, 1995, and 1996.    We hold that

respondent did abuse respondent’s discretion with respect to

petitioner’s taxable year 1994 and that respondent did not abuse

respondent’s discretion with respect to petitioner’s taxable

years 1995 and 1996.

                         FINDINGS OF FACT

     Most of the facts have been stipulated by the parties and

are so found except as noted below.

     Petitioner resided in Chicago, Illinois, at the time he

filed the petition in this case.

     On March 29, 1999, respondent prepared a substitute for

return with respect to each of petitioner’s taxable years 1994,

1995, and 1996.

     On or about April 5, 1999, respondent mailed to petitioner a

so-called 30-day letter, Letter 2566 (30-day letter), for each of

his taxable years 1994, 1995, and 1996.     In those respective 30-

day letters, respondent advised petitioner that respondent had no

record of having received Federal income tax (tax) returns for

those years and proposed assessments for those years based upon

information returns that respondent had received from third-party

payers.   In the respective 30-day letters pertaining to peti-

tioner’s taxable years 1994, 1995, and 1996, respondent also

requested petitioner to file a tax return for each of those
                              - 3 -

years.

     On or about May 24, 1999, in response to the respective 30-

day letters pertaining to petitioner’s taxable years 1994, 1995,

and 1996, petitioner mailed to respondent a tax return (return)

for each of those years and enclosed with each such return a copy

of the 30-day letter, or a portion thereof, pertaining to each

such year, all of which respondent received on May 28, 1999.

Petitioner attempted to file each such return as a joint return

by signing his then spouse’s name as well as his own name on each

such return.

     In the respective returns for 1994, 1995, and 1996 that

petitioner mailed to respondent, petitioner reported the follow-

ing amounts of (1) total income consisting solely of wages from

his employer, the U.S. Postal Service, (2) total tax, (3) tax

withheld by the U.S. Postal Service from petitioner’s wages, and

(4) tax owed:

   Year   Total Income1   Total Tax    Tax Withheld1   Tax Owed
   1994      $47,712        $3,956        $1,098        $2,999
   1995       37,845         3,566           515         3,214
   1996       41,168         4,024           182         3,842
     1
      The amounts of total income and tax withheld reported in
the respective returns that petitioner mailed to respondent for
the years 1994, 1995, and 1996 were rounded by petitioner to the
nearest dollar. The parties stipulated that petitioner received
wages of $41,161.77 from the U.S. Postal Service during 1996. We
are not bound by that stipulation of facts which is clearly
contrary to the record in this case. Form W2, Wage and Tax
Statement, that the U.S. Postal Service issued to petitioner
showed wages of $41,167.71 paid to him during 1996. See Cal-
Maine Foods, Inc. v. Commissioner, 93 T.C. 181, 195 (1989).
                                - 4 -


     Although petitioner showed in the return for each of the

years 1994, 1995, and 1996 that there was tax owed for each such

year, he did not remit any payment of such tax owed with each

such return.

     On June 1, 1999, respondent received Form 1040X, Amended

U.S. Individual Income Tax Return, for petitioner and his then

spouse with respect to their taxable year 1994 (1994 amended

return).    Petitioner’s return preparer signed petitioner’s name

and the name of petitioner’s then spouse on the 1994 amended

return.    The 1994 amended return showed total tax of $5,104 and

tax owed of $4,006.   That is because the 1994 amended return

reduced the amount of itemized deductions or standard deduction

claimed for that year to $6,350 from the $14,001 of itemized

deductions claimed in the 1994 return that petitioner mailed to

respondent on or about May 24, 1999.

     Respondent did not accept and process as filed the return

for 1994 (petitioner’s 1994 unfiled return) that petitioner

mailed to respondent on or about May 24, 1999.   Nor did respon-

dent accept and process as filed the 1994 amended return (peti-

tioner’s 1994 unfiled amended return) that respondent received on

June 1, 1999.   Respondent did not issue a notice of deficiency to

petitioner with respect to his taxable year 1994.    Nonetheless,

on April 3, 2000, respondent assessed the tax of $11,540 that

respondent had proposed to assess in the 30-day letter pertaining
                               - 5 -

to petitioner’s taxable year 1994, as well as additions under

sections 6651(a)(1) and (2) and 6654(a)1 to that assessed tax of

$2,349.45, $2,610.50, and $531.74, respectively, and interest as

provided by law.   (We shall refer to any such assessed amounts,

as well as interest as provided by law accrued after April 3,

2000, as respondent’s assessed amounts for petitioner’s taxable

year 1994.)

     On or about May 1, 2000, respondent sent to petitioner a

notice of balance due with respect to respondent’s assessed

amounts for petitioner’s taxable year 1994.

     Respondent accepted and processed as filed the respective

returns for 1995 (petitioner’s 1995 filed return) and 1996

(petitioner’s 1996 filed return) that petitioner mailed to

respondent on or about May 24, 1999.

     On February 7, 2000, respondent assessed the total tax of

$3,566 that petitioner reported in petitioner’s 1995 filed

return, as well as additions under sections 6651(a)(1) and

(2) and 6654(a) to petitioner’s tax for 1995 of $686.47, $686.48,

and $163.41, respectively, and interest as provided by law.   (We

shall refer to any such unpaid assessed amounts, as well as

interest as provided by law accrued after February 7, 2000, as

petitioner’s unpaid liability for 1995.)


     1
      All section references are to the Internal Revenue Code in
effect for the years at issue. All Rule references are to the
Tax Court Rules of Practice and Procedure.
                              - 6 -

     On March 6, 2000, respondent assessed the total tax of

$4,024 that petitioner reported in petitioner’s 1996 filed

return, as well as additions under sections 6651(a)(1) and

(2) and 6654(a) to petitioner’s tax for 1996 of $864.45, $672.35,

and $203.38, respectively, and interest as provided by law.    (We

shall refer to any such unpaid assessed amounts, as well as

interest as provided by law accrued after March 6, 2000, as

petitioner’s unpaid liability for 1996.)

     Except for the notice of deficiency for 1996 (discussed

below) that respondent issued to petitioner and that does not

pertain to petitioner’s unpaid liability for 1996, respondent did

not issue to petitioner a notice of deficiency for 1995 or 1996.

     On March 6, 2000, respondent sent to petitioner a notice of

balance due with respect to petitioner’s unpaid liability for

1996.

     On or about March 13, 2000, respondent sent to petitioner a

notice of balance due with respect to petitioner’s unpaid liabil-

ity for 1995.

     On or about April 26, 2000, petitioner submitted to respon-

dent a second amended return for his taxable year 1994 and an

amended return for each of his taxable years 1995 and 1996.    In

each of those amended returns, petitioner reported zero income

and claimed a refund of the tax withheld for each taxable year to

which the amended return related.   Petitioner attached a document
                              - 7 -

to each of those amended returns (collectively, petitioner’s

attachments to his amended returns for 1994, 1995, and 1996) that

contained statements, contentions, arguments, and requests that

the Court finds to be frivolous and/or groundless.2

     On or about May 10, 2000, respondent issued to petitioner a

final notice of intent to levy and notice of your right to a

hearing (notice of intent to levy) with respect to respondent’s

assessed amounts for petitioner’s taxable year 1994 and peti-

tioner’s unpaid liability for 1995.   On or about the same date,

respondent issued to petitioner a separate notice of intent to

levy with respect to petitioner’s unpaid liability for 1996.

     On May 14, 2000, in response to the notices of intent to

levy, petitioner filed Form 12153, Request for a Collection Due

Process Hearing (Form 12153), and requested a hearing with

respondent’s Appeals Office (Appeals Office).   Petitioner at-

tached a document to Form 12153 (petitioner’s attachment to Form

12153) that contained statements, contentions, arguments, and

requests that the Court finds to be frivolous and/or groundless.3


     2
      Petitioner’s attachments to his amended returns for 1994,
1995, and 1996 contained statements, contentions, arguments, and
requests that are very similar to the statements, contentions,
arguments, and requests contained in the attachments to Forms
1040 filed with the Internal Revenue Service by certain other
taxpayers with cases in the Court. See, e.g., Copeland v.
Commissioner, T.C. Memo. 2003-46; Smith v. Commissioner, T.C.
Memo. 2003-45.
     3
      Petitioner’s attachment to Form 12153 contained statements,
                                                   (continued...)
                              - 8 -

     On August 8, 2000, respondent’s Appeals officer (Appeals

officer) sent petitioner a letter (August 8, 2000 letter) indi-

cating that respondent had received Form 12153 from petitioner

and requesting that petitioner provide the Appeals officer with

the following on or before August 28, 2000:

     it is necessary to determine the facts of your case so
     that you have an opportunity to provide arguments
     regarding those facts.

     The focus of your arguments should be other than moral,
     religious, political or constitutional issues.

     Please provide your objections to the factual issues of
     this case so that full consideration of your request
     can be conducted.

On August 25, 2000, in response to the Appeals officer’s August

8, 2000 letter, respondent received from petitioner a copy of

petitioner’s attachment to Form 12153.

     On August 8, 2001, the Appeals officer offered petitioner a

face-to-face Appeals Office hearing and provided him with a

literal transcript of his accounts with respect to each of his

taxable years 1994, 1995, and 1996.   On August 23, 2001, the

Appeals officer held an Appeals Office hearing with petitioner.

At that hearing, petitioner made the same statements and requests



     3
      (...continued)
contentions, arguments, and requests that are similar to the
statements, contentions, arguments, and requests contained in the
attachments to Forms 12153 filed with the Internal Revenue
Service by certain other taxpayers with cases in the Court. See,
e.g., Copeland v. Commissioner, T.C. Memo. 2003-46; Smith v.
Commissioner, T.C. Memo. 2003-45.
                              - 9 -

and advanced the same contentions and arguments that petitioner

set forth in petitioner’s attachment to Form 12153.

     On November 28, 2001, the Appeals Office mailed to peti-

tioner a notice of determination.       An attachment to the notice of

determination stated in pertinent part:

     Legal and Procedural Requirements:

     With the best information available, the requirements
     of various applicable law or administrative procedures
     have been met.

     IRC § 6321 provides a statutory lien when a taxpayer
     neglects or refuses to pay a tax liability after notice
     and demand. Computer records indicate the Service
     Center issued these notices; the obligation remains
     unpaid.

     IRC § 6331(d) requires that IRS must notify a taxpayer
     at least 30 days before a notice of levy may be issued.
     The revenue officer issued L-1058 [notices of intent to
     levy] for all periods considered at this hearing.

         *       *       *          *        *       *      *

     The taxpayer was given the opportunity to raise any
     relevant issue relating to the unpaid tax or the pro-
     posed levy at the hearing in accordance with IRC
     § 6330(c).

     This Appeals Officer has had no prior involvement with
     respect to these liabilities.

     Relevant issues presented by the taxpayer

     The issues you raised on Form 12153 dated May 10, 2001
     [sic], are of a kind not considered in Appeals, nor
     contemplated by the due process provisions. * * * You
     filed Form 1040s on May 28, 1999, June 1, 1999 and May
     28, 1999, for tax years 1994, 1995 and [1996], respec-
     tively, reflecting what you voluntarily determined to
     be your tax liability. The 1995 and 1996 returns were
     accepted as filed. You were advised to file another
     Form 1040 for 1994 to change your filing status to
                             - 10 -

     married-separate because your spouse had previously
     filed a separate return and the three-year period for
     changing a separate return to a joint return had ex-
     pired. You responded by filing Form 1040X for correc-
     tions to the 1994 return due to a math error discovered
     on Schedule A. No subsequent response was received
     from you and assessment was made as previously proposed
     in the report [30-day letter pertaining to petitioner’s
     taxable year 1994] dated April 5, 1999. During the
     Appeals hearing, you indicated that you currently
     believe that you have no requirement to file any income
     tax returns.

     You raised no other relevant issues relating to the
     unpaid taxes and made no proposals regarding collection
     alternatives.

     Balancing efficient collection and intrusiveness

     IRC § 6330 requires that the Appeals Officer consider
     whether any collection action balances the need for
     efficient collection of taxes with the legitimate
     concern that any collection action be no more intrusive
     than necessary. You have not made payments toward
     these outstanding liabilities [and] dispute having
     income that could be used to do so. Significant re-
     sources continue to be used to collect what you owe.
     You have not provided any arguments but those the
     Courts have consistently determined to be frivolous,
     and have not presented any alternatives to the proposed
     levy. Therefore, Appeals has determined the levy is
     necessary for the efficient collection of the income
     tax liability.

     On December 31, 2001, petitioner filed a petition with the

Court for review of respondent’s notice of determination.   The

petition contains statements, contentions, arguments, and re-

quests that the Court finds to be frivolous and/or groundless.

     On March 28, 2002, respondent issued to petitioner a notice

of deficiency with respect to his taxable years 1996 and 1997.

As it pertains to petitioner’s taxable year 1996, that notice
                             - 11 -

determined, inter alia, that the total tax of $4,024 reported in

petitioner’s 1996 filed return was understated and that peti-

tioner has a deficiency of $2,617 for that year.     On June 26,

2002, petitioner filed a petition with respect to the notice of

deficiency relating to petitioner’s taxable years 1996 and 1997,

and on September 16, 2002, petitioner filed an amended petition

in that case (docket No. 10753-02).

     On March 10, 2003, petitioner submitted a document to the

Court entitled “Trial Memorandum for Petitioner” that the Court

had filed (petitioner’s trial memorandum).     Petitioner’s trial

memorandum contained questions, statements, contentions, and

arguments that the Court found in an Order dated March 17, 2003

(March 17, 2003 Order) to be frivolous and/or groundless.     In the

Court’s March 17, 2003 Order, the Court reminded petitioner about

section 6673(a)(1) and informed him that if he continued to

advance frivolous and/or groundless questions, statements,

contentions, and/or arguments, the Court would be inclined to

impose a penalty on him under section 6673(a)(1).

                             OPINION

     A taxpayer may raise challenges to the existence or the

amount of the taxpayer’s underlying tax liability if the taxpayer

did not receive a notice of deficiency or did not otherwise have

an opportunity to dispute the tax liability.    Sec. 6330(c)(2)(B).

Where the validity of the underlying tax liability is properly
                              - 12 -

placed at issue, the Court will review the matter on a de novo

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

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

     We turn first to petitioner’s taxable year 1994.   Respondent

did not accept and process as filed the return for his taxable

year 1994 that petitioner mailed to respondent on or about May

24, 1999.   Nor did respondent process and accept as filed the

amended return for his taxable year 1994 that respondent received

on June 1, 1999.4   According to respondent’s trial memorandum

that the Court had filed on March 11, 2003, that is because

petitioner’s then spouse had previously filed a separate return

for 1994 and had received a refund of an earned income credit for

that year, and nonetheless both petitioner’s 1994 unfiled return

and petitioner’s 1994 unfiled amended return purported to be

joint returns on behalf of petitioner and his then spouse.

Moreover, the record establishes that respondent did not issue a

notice of deficiency to petitioner with respect to his taxable

year 1994, in which respondent determined that petitioner had a

deficiency based upon the substitute for return that respondent

prepared on March 29, 1999, and the 30-day letter that respondent

mailed to petitioner on or about April 5, 1999, with respect to



     4
      Nor did respondent accept and process as filed petitioner’s
second amended return for 1994 (or his respective amended returns
for 1995 and 1996) which showed zero income and claimed a refund
of the tax withheld.
                              - 13 -

that year.   On the record before us, we conclude that respondent

improperly assessed the tax shown in that substitute for return

and proposed in that 30-day letter.    On that record, we further

conclude that respondent abused respondent’s discretion in

determining to proceed with the collection action as determined

in the notice of determination regarding respondent’s assessed

amounts with respect to petitioner’s taxable year 1994.

     We now address petitioner’s taxable years 1995 and 1996.

The record establishes that respondent did not issue a notice of

deficiency with respect to 1995 or 1996 (except for the notice of

deficiency for 1996 and 1997 discussed above).   However, respon-

dent accepted and processed as filed the return that petitioner

mailed on or about May 24, 1999, to respondent for each of his

taxable years 1995 and 1996, in which he showed total tax of

$3,566 and $4,024, respectively, and total tax owed of $3,214 and

$3,842, respectively.   Moreover, respondent assessed such respec-

tive total tax reported in petitioner’s 1995 filed return and

petitioner’s 1996 filed return.   Finally, although petitioner did

not receive a notice of deficiency with respect to petitioner’s

unpaid liability for 1995 or 1996, the Court finds the conten-

tions and arguments which petitioner advanced at his Appeals

Office hearing, in his petition, and in petitioner’s trial

memorandum and which challenge the existence or the amount of

each such unpaid liability to be frivolous and/or groundless.
                              - 14 -

     We turn next to the remaining issues that petitioner raised

with respect to his unpaid liabilities for 1995 and 1996 at his

Appeals Office hearing, in his petition, and in petitioner’s

trial memorandum, which we shall review for abuse of discretion.

Sego v. Commissioner, supra; Goza v. Commissioner, supra.     We

find all those remaining issues to be frivolous and/or ground-

less.   On the record before us, we find that respondent did not

abuse respondent’s discretion in determining to proceed with the

collection action as determined in the notice of determination

with respect to petitioner’s unpaid liabilities for 1995 and

1996.

     Although respondent does not ask the Court to impose a

penalty on petitioner under section 6673(a)(1), the Court will

sua sponte determine whether to impose such a penalty.   Section

6673(a)(1) authorizes the Court to require a taxpayer to pay to

the United States a penalty in an amount not to exceed $25,000

whenever it appears to the Court, inter alia, that a proceeding

before it was instituted or maintained primarily for delay, sec.

6673(a)(1)(A), or that the taxpayer’s position in such a proceed-

ing is frivolous or groundless, sec. 6673(a)(1)(B).

     In Pierson v. Commissioner, 115 T.C. 576, 581 (2000), we

issued an unequivocal warning to taxpayers concerning the imposi-

tion of a penalty under section 6673(a)(1) on those taxpayers who

abuse the protections afforded by sections 6320 and 6330 by
                              - 15 -

instituting or maintaining actions under those sections primarily

for delay or by taking frivolous or groundless positions in such

actions.   In the Court’s Order dated March 17, 2003, and at

trial, the Court reminded petitioner about section 6673(a)(1) and

indicated that, in the event that petitioner continued to make

statements, advance contentions and arguments, and/or raise

questions that the Court finds to be frivolous and/or groundless,

the Court would be inclined to impose a penalty under that

section.   Nonetheless, petitioner continued to adhere to those

statements, contentions, and arguments.

     In the instant case, starting around April 26, 2000, when

petitioner submitted to respondent amended returns for his

taxable years 1995 and 1996, through the trial in this case,

petitioner has advanced, we believe primarily for delay, frivo-

lous and/or groundless contentions, arguments, and requests with

respect to petitioner’s unpaid liabilities for 1995 and 1996,

thereby causing the Court to waste its limited resources in

addressing such matters.   As a result of petitioner’s position

and actions in the instant case with respect to petitioner’s

unpaid liabilities for 1995 and 1996, we shall impose a penalty

on petitioner pursuant to section 6673(a)(1) in the amount of

$1,500.

     We have considered all of petitioner’s contentions, argu-

ments, and requests that are not discussed herein, and we find
                             - 16 -

them to be without merit and/or irrelevant.

     To reflect the foregoing,


                                        An appropriate decision

                                   will be entered.
