                        T.C. Memo. 2010-36



                     UNITED STATES TAX COURT



         PERRY B. AND GLADYS M. WESTCOTT, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 22690-07L.             Filed February 23, 2010.



     Perry B. Westcott and Gladys M. Westcott, pro se.

     Marty J. Dama, for respondent.



                        MEMORANDUM OPINION


     MORRISON, Judge:   This case arises from a petition filed by

Perry and Gladys Westcott in response to the IRS’s “Notice of

Determination Concerning Collection Actions(s) Under Section 6320
                                 - 2 -

and/or Section 6330.”1   We decide that the IRS did not abuse its

discretion in making the determinations reflected in the notice.

                            Background

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

The stipulation of facts and the attached exhibits are

incorporated in this opinion by this reference.    At the time they

filed the petition, the Westcotts resided in Texas.

I.   Levy Proceeding

     The Westcotts jointly filed their 1998 income tax return on

July 2, 2001.   The return had a blank for the Westcotts to fill

in their tax liability and a blank for the amounts they had

already paid towards that liability, but the record does not

reveal how the Westcotts reported these amounts on their 1998

return.   On the return, the Westcotts reported that they owed

$46,721.87, i.e., $46,721.87 was their tax liability minus the

amounts they had already paid.    The Westcotts did not pay the

$46,721.87 owed.   They used the money with which they could have

paid the amount owed to buy a business.    On March 4, 2002, the

IRS assessed the tax liability shown on the 1998 return, assessed

some penalties (the nature of which was not disclosed by the

record), and assessed underpayment interest.




     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code (Code), and all Rule references are to
the Tax Court Rules of Practice and Procedure.
                               - 3 -

     On August 17, 2002, the IRS sent the Westcotts a “Final

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

Hearing.”   On August 20, 2002, Mr. Westcott alone filed Form

12153, “Request for a Collection Due Process Hearing,” in which

he claimed that “Taxes owed from 1998 are offset by losses in

1999 & 2000.   Cannot find anyone, including IRS, to complete tax

return & we cannot do it ourselves & cannot afford CPA.”    The

Westcotts subsequently filed their 1999 return.   The exact date

that the 1999 return was filed is not revealed by the record--

except that the date was before February 24, 2003.    The return

showed a business loss of $82,592 (reported on Schedule C, Profit

or Loss From Business), gross income of negative $80,090, and

adjusted gross income of negative $80,090.   By letter dated

February 24, 2003, the Appeals officer notified Mr. Westcott that

the IRS had accepted the 1999 return and that he had accordingly

reduced the Westcotts’ unpaid 1998 tax liability to

“approximately” $29,000 by carrying back the 1999 business loss

as a net operating loss.2   He warned Mr. Westcott that he could

not entertain any collection alternatives (i.e., alternatives to

levying) because the Westcotts had not filed their 2000 and 2001




     2
      The Code generally permits a net operating loss to be
carried back to each of the 2 years preceding the year of the
loss and then carried forward to each of the 20 years following
the loss year. Sec. 172(a) and (b)(1)(A).
                                 - 4 -

returns.3    The Appeals officer referred them to low-income tax

preparation services in their area to assist them in preparing

their unfiled returns.     But on March 7, 2003, he issued a notice

of determination to Mr. Westcott for the 1998 taxable year

sustaining the proposed levy.     The notice acknowledged that only

the reduced 1998 tax liability of “about” $29,000 would be

subject to levy.

     In June 2005, more than 2 years after the issuance of the

notice of determination, the Westcotts filed an income-tax return

for the 2000 tax year.     They reported a business loss of $36,514

on Schedule C, negative $17,299 of total gross income, and

negative $17,299 of adjusted gross income.     Sometime after March

7, 2003, the Westcotts filed income-tax returns for the tax years

2001 through 2004.

         Mr. Westcott alone filed a petition with the Tax Court

challenging the IRS’s 2003 notice of determination regarding the

levy for the 1998 tax year.     The Court issued a Memorandum

Opinion on November 9, 2006.     See Westcott v. Commissioner, T.C.

Memo. 2006-245.     The Court held that Mr. Westcott did not

introduce “any reliable evidence” to substantiate the 2000 loss.

Thus the Court did not reduce his unpaid 1998 tax liability by


     3
      The regulations support the Appeals officer’s statement:
“the IRS does not consider offers to compromise from taxpayers
who have not filed required returns”. Sec. 301.6330-1(d)(2),
Q&A-D8, Proced. & Admin. Regs.
                                - 5 -

carrying back the 2000 loss to the 1998 year.   The Court also

rejected two arguments Mr. Westcott advanced in support of his

position that the Court should have invalidated the notice of

determination because the IRS failed to assist him in preparing

his 2000 tax return.    Mr. Westcott’s first argument was, in the

words of the Court, that “section 6404(d) relating to the

abatement of tax implicitly required the IRS to prepare, or to

assist him in preparing, his tax return for his taxable year

2000.”4   Id.   The Court responded:

      Neither section 6404(d) nor any other provision in the
      Internal Revenue Code requires the IRS to prepare, or
      to assist in the preparation of, a tax return for any
      taxpayer. See United States v. Barnett, 945 F.2d 1296,
      1300 (5th Cir. 1991). We reject petitioner’s argument
      that the IRS had a legal duty to prepare, or to assist
      him in preparing, a tax return for his taxable year
      2000 (or any other taxable year).

Id.   Second, Mr. Westcott argued that the IRS violated his equal

protection rights by failing to assist him in preparing his Form


      4
       Sec. 6404(d) provides:

           SEC. 6404(d). Assessments Attributable to Certain
      Mathematical Errors by Internal Revenue Service.--In
      the case of an assessment of any tax imposed by chapter
      1 attributable in whole or in part to a mathematical
      error described in section 6213(g)(2)(A), if the return
      was prepared by an officer or employee of the Internal
      Revenue Service acting in his official capacity to
      provide assistance to taxpayers in the preparation of
      income tax returns, the Secretary is authorized to
      abate the assessment of all or any part of any interest
      on such deficiency for any period ending on or before
      the 30th day following the date of notice and demand by
      the Secretary for payment of the deficiency.
                                  - 6 -

1040 (the income tax return for individuals) and Schedule C for

the 2000 tax year.      The Court held that Mr. Westcott did not meet

his burden of establishing that the IRS’s failure to assist him

was premised on an impermissible basis such as race, religion, or

a desire to prevent the exercise of his constitutional rights.

Westcott v. Commissioner, supra.      The Court therefore sustained

the notice of determination.

II.   Lien Proceeding

      On March 23, 2007, the IRS filed a notice of tax lien

against the Westcotts in the amount of $22,589.28 for their

unpaid 1998 tax liability.5     On April 3, 2007, ths IRS mailed to

the Westcotts a “Notice of Federal Tax Lien Filing and Your Right

to a Hearing Under IRC 6320.”     On April 15, 2007, the IRS timely

received Form 12153, “Request for a Collection Due Process

Hearing,” from both Mr. and Mrs. Westcott.     The Appeals officer

held a hearing with Mr. Westcott on August 16, 2007.     At the

hearing, Mr. Westcott requested an abatement of tax and penalties

for the 1998 tax year because the IRS would not help him prepare

the couple’s tax returns for the taxable years 1998 through 2000.


      5
      It is unclear from the record how much of the $22,589.28
outstanding is attributable to tax due on the 1998 return, the
failure-to-pay penalty indicated in the record, and/or
underpayment interest. It is also unclear from the record why
the amount in the notice of tax lien is less than the
approximately $29,000 the Appeals officer determined was the
Westcotts’ 1998 tax liability after carrying back their 1999 net
loss.
                               - 7 -

In the words of the Appeals officer, Mr. Westcott felt “he could

never find anyone to help him file his returns and therefore

should not be penalized for the length of time it took to file

his returns.”   He asserted that section 6020(a) required the IRS

to assist him in preparing his return.   But he said that IRS

employees at a walk-in center refused to help him because they

thought that his return was too complicated and beyond their

level of training.   Mr. Westcott did not challenge the collection

method, i.e., the filing of the notice of tax lien.   He did not

offer an alternative means of collection, or raise a spousal

defense to collection.   Nevertheless, he expressed an interest in

having an opportunity to go to court to resolve his tax dispute.

     On August 29, 2007, the IRS issued a notice of determination

in which it sustained the filing of the tax lien.   The notice

stated that the Westcotts had not disputed their unpaid tax

liability in the second hearing, had not offered any collection

alternative on their own accord, and had failed to provide a

financial information statement and supporting documents required

for the Appeals officer to consider collection alternatives.

     Mr. Westcott filed a one-page letter with this Court on

October 2, 2007 stating his “intention to appeal a ‘Letter of

Determination’ decision of the [IRS].”   He requested that

appropriate forms be sent to him so that he could file a

petition.   This Court considered his one-page letter to be a
                                 - 8 -

petition and issued an order requiring that the Westcotts file an

amended petition.    Together, the Westcotts timely filed an

amended petition on November 13, 2007, in which they stated:

     Title 26, Section 6020a of the Tax Code requires
     (dozens of case law define “may” as meaning “must” in
     statutes or constitutional provisions). I.R.S. errs in
     refusing taxpayer one-on-one assistance in preparing
     tax return. Since 1999 taxpayer has requested
     assistance and has been refused. The attached
     determination notice does not address this issue.
     However, taxpayer appealed the determination notice
     solely on 6020a grounds. Appeals ignored taxpayer
     position. Taxpayer requests all taxes - penalties +
     interest be abated for years 1998 thru 2004.6 [sic]

The IRS filed its answer to the amended petition on January 16,

2008.    In the answer, the IRS did not argue that the new case was

barred by collateral estoppel.      (Collateral estoppel, explained

in greater detail below, is a doctrine that prevents parties from

relitigating an issue heard and decided by a court.)     At a

pretrial hearing in Dallas on December 2, 2008, Mr. Westcott

appeared before the Court and admitted that the only argument he

was asserting was that section 6020(a) of the Internal Revenue

Code requires the IRS to assist taxpayers individually in

preparing their returns.    The pretrial hearing continued on the

next day.    Mr. Westcott stated:



     6
      The IRS filed a Motion to Dismiss for Lack of Jurisdiction
and to Strike as to the Taxable Years 1999, 2000, 2001, 2002,
2003, and 2004 on Nov. 29, 2007. The Court granted the motion on
Jan. 8, 2008 because the IRS had not issued notices of
determination for the tax years 1999 through 2004.
                                - 9 -

            Respondent’s position that the previous case I had
       in Tax Court settled the issue that I’m bringing is
       actually incorrect.

            The issue at that time of filing that case, I had
       no idea that 6020(a) existed. I was filing on a
       constitutional basis because I felt it was just grossly
       unfair to assist one group of taxpayers and not assist
       others.

            I had no empirical evidence of that other than
       just an instinctive sense of fairness that that doesn’t
       seem to be right, so that’s why I brought that case.
       It didn’t have anything to do with 6020(a).

At the pretrial hearing, Mr. Westcott executed a stipulation of

facts and agreed to submit the case without a trial under Rule

122.    Mrs. Westcott subsequently ratified the stipulation of

facts and consented to submit the case under Rule 122 on October

12, 2009.

       The Westcotts’ short opening brief reiterates, in cryptic

language, the argument made more clearly at the pretrial hearing,

that section 6020(a) requires the IRS to assist them in preparing

their return.    It states that “[w]hen any entity promulgates a

required form, inherent in the promulgation process is the

obligation to provide whatever assistance the user needs to

complete the form.”    It also declares that “Issues to be decided

include whether or not Rules of Abatement apply.    Or any other

statute.    And how much tax, interest, and penalties would be owed

if assistance had been provided when requested. [sic]”    In its

answering brief, the IRS argues that the Westcotts “are

collaterally estopped from raising the issue that the Internal
                                - 10 -

Revenue Service is required to prepare their 1998 or any other

income tax return.”   The IRS asserts that the issue the Westcotts

raised in the lien hearing was the same issue raised in the levy

hearing even though they relied on a different Code section for

their argument (i.e., section 6020(a) instead of 6404(d)).       The

IRS also claims that section 6330(c)(2)(B) prohibits the

Westcotts from challenging the merits of their 1998 tax liability

by demanding an abatement of taxes, penalties, and underpayment

interest because they had a prior opportunity to be heard before

this Court in the levy proceeding.       The IRS concludes that the

Appeals officer did not abuse her discretion and that the

collection action was appropriate.

                              Discussion

     Before the IRS can forcibly collect tax from a taxpayer, it

must first assess the tax.    If the taxpayer refuses to pay the

assessment, the IRS can then seize the property of the taxpayer

through its power of levy.7    Before the IRS can levy on property,

it must first offer the taxpayer a section 6330 hearing.




     7
      “The levy enables the Service to gain custody of taxpayer’s
property whether in the possession of the taxpayer or third
parties.” Elliott, Federal Tax Collections, Liens and Levies,
par. 13.01, at 13-6 (2d ed. 2008). “The * * * levy does not
determine whether the government’s rights to the seized property
are superior to those of other claimants; the levy does, however,
protect the government against diversion or loss while such
claims are being resolved.” Id.
                               - 11 -

     Levy is not the only means of collecting an unpaid tax.       The

assessment by the IRS automatically creates a Government property

interest, called a lien, in all property owned by the taxpayer,

and even in property later acquired by the taxpayer.        Sec. 6321.

The tax lien is not effective against four important classes of

third parties until the IRS files a notice of lien with the

appropriate state or local government in which the property is

located.    Sec. 6323(a) and (f).   The IRS is required to notify

the taxpayer within 5 business days after it files a notice of

lien.    Sec. 6320(a)(1) and (2).   Within 30 days after the

expiration of the 5-business-day period for sending the

notification, the taxpayer is permitted under section

6320(a)(3)(B) to request a hearing with the IRS Appeals Office.

     Thus, hearings concerning IRS levies are provided for in

section 6330, and hearings concerning the filing of a notice of

tax lien are provided for in section 6320.     The rules that govern

the scope of a lien hearing are borrowed from the statutory

provisions that govern a levy hearing.     Sec. 6320(c).8    Section

6330(c)(2) sets forth what issues can be raised by the taxpayer

at a levy hearing, and, by operation of section 6320(c), it also

governs what issues can be raised by the taxpayer at a lien

hearing.    Section 6330(c)(2) provides:


     8
      Sec. 6320(c) provides that “For the purposes of this
section subsections (c), (d) (other than paragraph (2)(B)
thereof), (e), and (g) of section 6330 shall apply.”
                               - 12 -

     (2)   Issues at hearing.--

          (A) In general.--The person may raise at the
     hearing any relevant issue relating to the unpaid tax
     or the proposed levy, including--

                (i) appropriate spousal defenses;

                (ii) challenges to the appropriateness of
           collection actions; and

                (iii) offers of collection alternatives,
           which may including the posting of a bond, the
           substitution of other assets, an installment
           agreement, or an offer-in-compromise.

          (B) Underlying liability.--The person may also
     raise at the hearing challenges to 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.

The duties of the hearing officer in a levy hearing (and

therefore also a lien hearing) are set forth in section

6330(c)(3).   That provision requires the hearing officer to make

a “determination”, and in making the determination the hearing

officer must “take into consideration * * * the issues raised

under [section 6330(c)(2)]”.

     Once the hearing officer has made the determination

described above, the Tax Court can review the determination.

Sec. 6330(d)(1).   Where the existence or amount of the underlying

tax liability is properly at issue, the Court will review the

determination de novo.   In cases involving taxpayers who do not

dispute the existence or amount of their underlying tax liability
                              - 13 -

(or who are not permitted to do so because they had a prior

opportunity to dispute it), the Court will review the

determination of the Appeals officer for abuse of discretion.

Lunsford v. Commissioner, 117 T.C. 183, 185 (2001); Goza v.

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

hinges on whether the IRS’s application of its discretion was

“arbitrary, capricious, or without sound basis in fact or law.”

Giamelli v. Commissioner, 129 T.C. 107, 111 (2007); Woodral v.

Commissioner, 112 T.C. 19, 23 (1999).   As explained below, the

Westcotts may not contest their underlying tax liability, and

thus we review the determination for abuse of discretion.

     We consider the only issue the Westcotts raised at their

lien hearing, which is whether section 6020(a) required the IRS

to prepare their income tax returns for 1999 through 2000, and

whether the IRS’s failure to do so entitles the Westcotts to be

relieved of their tax liability and penalties.   Section

6330(c)(2)(B) permits taxpayers to contest their “underlying tax

liability” in collection due process hearings only if they did

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

opportunity to be heard.   The phrase “underlying tax liability”

in this context includes the liability of the Westcotts for both

tax and penalties.   Vence v. Commissioner, 297 Fed. Appx. 827,

829 (11th Cir. 2008), affg. a Summary Judgment Order and Decision

of this Court dated Jan. 9, 2008; Montgomery v. Commissioner, 122
                              - 14 -

T.C. 1, 7 (2004); Fransen v. Commissioner, T.C. Memo. 2007-237.

Mr. Westcott was barred from contesting the tax liability and

penalties because he had a prior opportunity to dispute them

during his levy hearing, an opportunity he pursued.9   Sec.

6330(c)(2)(B); Spain v. Commissioner, T.C. Memo. 2009-82; Newsome

v. Commissioner, T.C. Memo. 2007-111; see also Bell v.

Commissioner, 126 T.C. 356, 358-359 (2006); sec. 301.6320-

1(e)(3), Q&A-E7, Proced. & Admin. Regs.   In the lien hearing for

the same tax year, he was therefore limited to making appropriate

spousal defenses, challenging the appropriateness of collection

actions, and proposing collection alternatives.    See sec.

6330(c)(2)(A).   Mr. Westcott did not pursue any of these avenues,

and the IRS properly followed all procedures.   Therefore, the IRS

did not abuse its discretion in sustaining the filing of the

notice of tax lien with respect to Mr. Westcott.

     Mrs. Westcott was not a party to the levy hearing.    However,

her failure to participate was her choice.   She was listed as an

addressee on the Final Notice of Intent to Levy and a Notice of

Your Right to a Hearing, but she did not request a hearing

     9
      It should be noted that Mr. Westcott was not prohibited
from contesting the underlying tax liability in his levy case
even though it was self-reported and summarily assessed. This
Court has held “that section 6330(c)(2)(B) permits petitioners to
challenge the existence or amount of the tax liability reported
on their original income tax return [if] * * * they have not
received a notice of deficiency * * * and they have not otherwise
had an opportunity to dispute the tax liability in question.”
Montgomery v. Commissioner, 122 T.C. 1, 9 (2004).
                                - 15 -

(either separately or jointly with her husband).    Her failure to

request a hearing in response to the notice is dispositive.    The

regulations state that

     The existence or amount of the underlying liability for
     any tax period specified in the CDP Notice may be
     challenged only if the taxpayer did not have a prior
     opportunity to dispute the tax liability. If the
     taxpayer previously received a CDP Notice under section
     6330 with respect to the same tax and tax period and
     did not request a CDP hearing with respect to that
     earlier CDP Notice, the taxpayer already had an
     opportunity to dispute the existence or amount of the
     underlying tax liability.

Sec. 301.6320-1(e)(3), Q&A-E7, Proced. & Admin. Regs.    Thus, just

as the receipt of a notice of deficiency constitutes an

opportunity to dispute the underlying tax liability, see sec.

6330(c)(2)(B), so does the receipt of a notice of intent to levy.

Miller v. Commissioner, T.C. Memo. 2007-35.     Because she had an

opportunity to dispute the underlying tax liabilities in response

to the levy notices, and, if necessary, to file a petition with

the Tax Court to challenge an adverse administrative decision,

Mrs. Westcott is precluded from contesting the underlying tax

liability in this case.    See Bell v. Commissioner, supra at 358-

359; Nelson v. Commissioner, T.C. Memo. 2009-108; Tufft v.

Commissioner, T.C. Memo. 2009-59; Awlachew v. Commissioner, T.C.

Memo. 2007-365, affd. 312 Fed. Appx. 348 (1st Cir. 2009);

Castleman v. Commissioner, T.C. Memo. 2007-143; Miller v.

Commissioner, supra.     She did not make any appropriate spousal

defenses, challenge the appropriateness of collection actions, or
                             - 16 -

propose any collection alternatives.   See sec. 6330(c)(2)(A).   We

therefore sustain the lien against Mrs. Westcott as well.10


     10
      The IRS also argues that the doctrine of collateral
estoppel precludes the Westcotts from relitigating the issue of
whether the IRS has an obligation to assist them with preparation
of their income tax returns. Collateral estoppel, or issue
preclusion, “forecloses relitigation of issues actually litigated
and necessarily decided in a prior suit.” Johnston v.
Commissioner, 119 T.C. 27, 42 (2002) (citing Parklane Hosiery Co.
v. Shore, 439 U.S. 322, 326 n.5 (1979)); see also Montana v.
United States, 440 U.S. 147, 153 (1979) (“[O]nce an issue is
actually and necessarily determined by a court of competent
jurisdiction, that determination is conclusive in subsequent
suits based on a different cause of action involving a party to
the prior litigation.”) (citing Parklane Hosiery Co. v. Shore,
supra at 326 n.5); Commissioner v. Sunnen, 333 U.S. 591, 598-599
(1948); 1 Restatement, Judgments 2d, sec. 27 (1982). Collateral
estoppel serves “the dual purpose of protecting litigants from
the burden of relitigating an identical issue and of promoting
judicial economy by preventing unnecessary or redundant
litigation.” Meier v. Commissioner, 91 T.C. 273, 282 (1988); see
also Raju v. Rhodes, 7 F.3d 1210, 1214 (5th Cir. 1993). The
requirements for applying collateral estoppel are:

          (1) The issue in the second suit must be identical
     in all respects with the one decided in the first suit.

          (2) There must be a final judgment rendered by a
     court of competent jurisdiction.

          (3) Collateral estoppel may be invoked against
     parties and their privies to the prior judgment.

          (4) The parties must actually have litigated the
     issues and the resolution of these issues must have
     been essential to the prior decision.

          (5) The controlling facts and applicable legal
     rules must remain unchanged from those in the prior
     litigation.

Mitchell v. Commissioner, 131 T.C. __, __ (2008) (slip op. at 19-
20) (citing Peck v. Commissioner, 90 T.C. 162, 166-167 (1988),
affd. 904 F.2d 525 (9th Cir. 1990)); Affiliated Foods, Inc. v.
                                                   (continued...)
                             - 17 -

     In reaching our holding, we have considered all arguments

made, and to the extent not mentioned, we conclude that they are

moot, irrelevant, or without merit.

     To reflect the foregoing,


                                      Decision will be entered for

                                 respondent.




     10
      (...continued)
Commissioner, 128 T.C. 62, 71-72 (2007) (citing Peck v.
Commissioner, supra at 166-167). The consequence of collateral
estoppel is that “once an issue is raised and determined, it is
the entire issue that is precluded, not just the particular
arguments raised in support of it in the first case.” Yamaha
Corp. of Am. v. United States, 961 F.2d 245, 254 (D.C. Cir.
1992); Weiner v. United States, 255 F. Supp. 2d 624, 643 (S.D.
Tex. 2002) (citing Yamaha Corp. of Am. v. United States, supra at
254). The IRS asserts that for purposes of the applicability of
collateral estoppel, the Westcotts’ interpretation of sec.
6020(a) is merely a new argument in support of the larger,
already-litigated issue of whether the IRS has an obligation to
prepare their income tax returns. In light of our holding under
sec. 6330(c)(2)(B), we need not decide whether collateral
estoppel precludes the Westcotts from raising their sec. 6020(a)
argument.
