                        T.C. Memo. 2003-35



                      UNITED STATES TAX COURT



                  JOHN R. RIVERA, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2401-01L.              Filed February 14, 2003.



     John R. Rivera, pro se.

     Lisa M. Oshiro, for respondent.


             MEMORANDUM FINDINGS OF FACT AND OPINION

     FOLEY, Judge:   The issues for decision are whether

respondent correctly determined the amounts of petitioner’s tax

liabilities and whether respondent abused his discretion in

proceeding with collection.
                                  - 2 -

                           FINDINGS OF FACT

     Respondent assessed petitioner’s Federal income tax

liability relating to 1977 through 1992, 1994, and 1997 as

follows:

     Tax Year          Tax Liability      Assessment Date

     1977-84           $121,359           Oct. 2, 1995
     1985                 5,741           Oct. 10, 1994
     1986                 4,201           Oct. 17, 1994
     1987                 4,061           Oct. 24, 1994
     1988                 4,414           Oct. 31, 1994
     1989-90             13,092           Nov. 7, 1994
     1991                 5,558           Sept. 26, 1994
     1992                 1,324           Sept. 19, 1994
     1994                10,106           Oct. 23, 1995
     1997                 4,663           Aug. 30, 1999

Respondent also assessed interest, various penalties, and

additions to tax relating to the years in issue.

     On February 1, 2000, respondent sent petitioner Notices of

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

6320 relating to 1977 through 1992, 1994, and 1997.   On February

21, 2000, petitioner filed a Form 12153, Request for a Collection

Due Process Hearing.

     On December 11, 2000, petitioner attended the Collection Due

Process Hearing (the hearing), during which petitioner and

respondent discussed the assessments, various collection

alternatives, and whether petitioner would submit so called

“corrected returns” relating to 1977 through 1984 (i.e., the tax

years for which respondent prepared substitute returns).    In

addition, respondent asked petitioner to submit a financial
                               - 3 -

statement so that an offer in compromise might be considered and

told petitioner to select, prior to January 2, 2001, one of the

collection alternatives discussed during the hearing.   Petitioner

did not select a collection alternative or submit any additional

evidence relating to his tax liability.   On January 22, 2001,

respondent issued a Notice of Determination Concerning Collection

Action(s) Under Sections 6320 and 6330 (the determination)

denying petitioner’s appeal.

     On February 21, 2001, petitioner, while residing in

Silverdale, Washington, filed his petition for review of the

determination.   On October 9, 2001, respondent served upon

petitioner Forms 4340, Certificates of Assessments, Payments, and

Other Specified Matters (Forms 4340) for all years in issue and a

request for admissions.   Petitioner did not respond to the

request for admissions.

     On January 28, 2002, respondent filed with the Court a trial

memorandum.   In the trial memorandum, respondent stated:   (1)

Petitioner did not file tax returns relating to 19781 through

1984 but did file returns relating to 1985 through 1992, 1994,

and 1997; (2) “quick assessments” made on October 2, 1995,

relating to 1978 through 1984 indicated that petitioner was the

subject of a jeopardy assessment; (3) notices of deficiency dated



     1
         Respondent did not include 1977, one of the tax years at
issue.
                              - 4 -

October 9, 1995, were issued to petitioner relating to 1978

through 1984, and, as a result, petitioner was not entitled to

challenge the underlying tax liability; and (4) for 1985 through

1992, 1994, and 1997, notices of deficiency were not issued to

petitioner, and, as a result, petitioner was entitled to

challenge the underlying tax liability.

     In respondent’s supplement to his trial memorandum, filed on

January 28, 2002, respondent stated:   (1) He failed, in his trial

memorandum, to reference petitioner’s 1977 tax liability; (2) he

misread the transcripts of accounts; the “quick assessments”

noted on Forms 4340 indicated that petitioner had signed

unspecified “agreements”; and petitioner was not the subject of

jeopardy assessments relating to 1977 through 1984; (3) the tax

liabilities assessed relating to 1977 through 1984 were either

based on delinquent returns filed by petitioner or upon consent

agreements signed by petitioner; and (4) as a result of the

delinquent returns filed by petitioner or agreements signed by

petitioner, respondent did not issue notices of deficiency to

petitioner relating to 1977 through 1984 and cannot assert with

certainty that petitioner is precluded from challenging the

underlying tax liability; and (5) for 1985 through 1988,

petitioner could not challenge the underlying tax liability

because the assessments of the estimated tax and civil fraud

penalties were based on agreements signed by petitioner.
                               - 5 -

     At trial, the primary focus was on petitioner’s challenge to

the underlying tax liability relating to 1977 through 1984.

Petitioner stated that respondent failed to “[provide] any

evidence of how [he] came up with * * * [the] 4340s” and that the

figures in Forms 4340 were “mostly dreamt up by [respondent].”

Respondent’s counsel stated that the deficiencies were based

“either upon delinquent returns filed by the petitioner or by

consent to the assessments.”   Respondent’s counsel further stated

that petitioner was invited to submit “corrected returns”

relating to 1977 through 1984, but she “[did not] know * * *

[whether] there was any discussion beyond that.”   The Court asked

respondent’s counsel why Appeals did not hold another section

6330 hearing in order to allow petitioner an opportunity to raise

the underlying tax liability with regard to those tax years.

She stated that she “believed” petitioner was allowed to present

evidence relating to the underlying tax liability for those tax

years.   Petitioner stated that he “[did not] believe

[respondent]” placed any restrictions on the hearing.   The Court

then asked respondent’s counsel whether Forms 4340 were used for

verification purposes at the hearing.   Respondent’s counsel

stated that she “[did not] know * * * [if] the appeals officer

had the 4340s”, but the deficiencies were determined based on

petitioner’s self-assessment of tax liabilities for all years in

issue.   Respondent’s counsel then informed the Court that the
                                 - 6 -

administrative files relating to 1977 through 1984 had been

destroyed.   Respondent’s counsel did not submit returns relating

to 1977 through 1988 or consent agreements (e.g., Form 870 or

Form 4549) relating to 1977 through 1983.

     On March 11, 2002, respondent filed a motion to reopen

record to introduce a certified copy of Form 870, Waiver of

Restrictions on Assessment and Collection of Deficiency in Tax

and Acceptance of Overassessment (Form 870).    Form 870, signed by

petitioner on August 25, 1995, related to tax liabilities for

1984 and 1985 and estimated tax and civil fraud penalties

relating to 1984 through 1988.    The Court, on April 12, 2002,

granted respondent’s motion to reopen record, and received the

Form 870 into evidence.

     On November 7, 2002, the Court held a telephone conference

with petitioner and respondent’s counsel and noted that there was

no evidence in the record indicating whether petitioner had filed

returns relating to 1977 through 1988.    On December 6, 2002,

respondent’s counsel, who had previously informed the Court that

the administrative files relating to 1977 through 1984 had been

destroyed, filed a status report stating that she was waiting to

receive the administrative files relating to 1977 through 1984

from respondent’s Service Center in Ogden, Utah.    In the status

report, respondent’s counsel also stated that, after trial, she

had observed revenue agent’s reports signed by petitioner in the
                                - 7 -

administrative files relating to 1977 through 1984.    Respondent

submitted with the status report unsigned copies of the revenue

agent’s reports relating to 1977 through 1984.

                               OPINION

I.    Jurisdiction

      Section 63302 generally provides that respondent cannot

proceed with collection by levy until the taxpayer has been given

notice and the opportunity for an administrative review of the

matter (in the form of a hearing before Appeals) and, if

dissatisfied, with judicial review of the administrative

determination.    Davis v. Commissioner, 115 T.C. 35, 37 (2000);

Goza v. Commissioner, 114 T.C. 176, 179 (2000).    If the validity

of the underlying tax liability is at issue, the Court will

review a taxpayer’s liability de novo.    The Court reviews other

administrative determinations for an abuse of discretion.     Sego

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

II.   Tax Years 1977 Through 1983

      Respondent concedes that he did not send a notice of

deficiency to petitioner, and that petitioner did not otherwise

have an opportunity to dispute his tax liability relating to 1977

through 1983.    Thus, petitioner may challenge the existence or




      2
        Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect at relevant times.
                                - 8 -

amount of the underlying tax liability.    Sec. 6330(c)(2)(B);

Downing v. Commissioner, 118 T.C. 22, 28 (2002).

      Petitioner challenges the validity of the record of

assessment and the underlying tax liability relating to 1977

through 1983.    Generally, courts have held that Form 4340

provides at least presumptive evidence that a tax has been

validly assessed under section 6203.     Farr v. United States, 990

F.2d 451, 454 (9th Cir. 1993); Davis v. Commissioner, supra at

41.   The record does not, however, indicate whether respondent

based his assessment on delinquent returns filed by petitioner or

on signed agreements to the assessments (i.e., Form 870).

Respondent did not present any evidence regarding how he

determined petitioner’s tax liability.    Assessments relating to

1977 through 1983 were not made until October of 1995.    See sec.

6501(a).    If it is determined that petitioner timely filed

returns relating to those years, respondent may have assessed a

deficiency after the period of limitations for assessment

expired.    If petitioner did not file returns, respondent's

determination that petitioner received unreported income relating

to those years may not be valid because respondent did not

present any evidence linking petitioner to the alleged

income-producing activity.3   Because petitioner's filing of, or


      3
          The application of the holding in Weimerskirch v.
                                                     (continued...)
                                - 9 -

failure to file, tax returns raises questions about the validity

of respondent's determination (i.e., timeliness of the assessment

and lack of evidence linking petitioner to an income-producing

activity), we conclude that petitioner has raised an irregularity

in the assessment procedure.    See Nestor v. Commissioner, 118

T.C. 162, 167 (2002).    Accordingly, with respect to 1977 through

1983, we remand this case for further proceedings.    Our decision

to do so is amply supported by the documentary record coupled

with respondent’s trial memorandum, motions, assertions in Court

and in conference calls, and respondent’s general state of

confusion relating to this matter.

III.        Tax Years 1984 Through 1992, 1994, and 1997

       A.   Amount of Petitioner’s Tax Liability

       Respondent concedes that he did not send a notice of

deficiency to petitioner, and petitioner did not otherwise have

an opportunity to dispute his tax liability relating to 1989

through 1992, 1994, and 1997.    With respect to the tax

deficiencies relating to 1984 and 1985 and the estimated tax and

civil fraud penalties assessed relating to 1984 through 1988,

petitioner signed a consent to assessment (i.e., Form 870).    By

signing Form 870, petitioner waived his right to a notice of


       3
      (...continued)
Commissioner, 596 F.2d 358 (9th Cir. 1979), revg. 67 T.C. 672
(1977), in a sec. 6330 context would be an issue of first
impression.
                                - 10 -

deficiency and exhausted his opportunity to contest the tax

liability.     Aguirre v. Commissioner, 117 T.C. 324 (2001).   Thus,

petitioner may not challenge the tax deficiencies relating to

1984 and 1985 and the estimated tax and civil fraud penalties

relating to 1984 through 1988.    Sec. 6330(c)(2)(B); Aguirre v.

Commissioner, supra.

     Petitioner self-assessed his tax liability relating to 1986

through 1992, 1994, and 1997.    Moreover, he did not present any

evidence or credible testimony disputing the amount of the

underlying tax liabilities.4    Accordingly, we sustain

respondent’s determination relating to 1986 through 1992, 1994,

and 1997.

     B.      Administrative Determination

     Prior to trial, respondent provided petitioner with Forms

4340 relating to 1984 through 1992, 1994, and 1997, and

petitioner did not show any irregularity in the assessment

procedure that would raise a question about the validity of these
assessments.     Nestor v. Commissioner, supra.   Accordingly, we

conclude that respondent did not abuse his discretion in

determining to proceed with collection with respect to 1984

through 1992, 1994, and 1997.




     4
        Sec. 7491 is not applicable to this case because the
examination began before the statute's effective date. Thus,
petitioner had the burden of proof. Welch v. Helvering, 290 U.S.
111, 115 (1933).
                             - 11 -

     Contentions we have not addressed are irrelevant, moot, or

meritless.

     To reflect the foregoing,

                                        An appropriate order will

                                   be issued.
