                        T.C. Memo. 2010-235



                      UNITED STATES TAX COURT



                 GARY LEE COLVIN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 17167-09L.            Filed October 26, 2010.



     Gary Lee Colvin, pro se.

     Chris Sheldon, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     JACOBS, Judge:   The dispute between the parties concerns an

administrative determination by respondent’s settlement officer

to sustain the proposed imposition of a levy to collect

petitioner’s unpaid Federal income taxes for 2000.   The issue

involved is whether, following a collection due process hearing
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pursuant to the requirements of section 6330(c), the settlement

officer’s determination constituted an abuse of discretion.

     Unless otherwise indicated, all section references are to

the Internal Revenue Code, as amended.

                          FINDINGS OF FACT

     At the time petitioner filed his petition, he resided in

Texas.

     Petitioner previously petitioned this Court with respect to

the underlying deficiency for 2000 in Colvin v. Commissioner,

docket No. 16557-04.    A trial in that matter was held on January

10, 2006, and the last posttrial brief was submitted on June 6,

2006.

     Before the Court issued an opinion, petitioner filed a

petition in bankruptcy dated September 5, 2006, under chapter 7

of the Bankruptcy Code with the U.S. Bankruptcy Court for the

District of Arizona.    Petitioner listed the Internal Revenue

Service (IRS) as a creditor holding an unsecured nonpriority

claim with respect to his liability for unpaid 1999 income taxes

totaling $2,258.53.    No liability for Federal income taxes for

2000 was listed.

     Respondent did not file a proof of claim or otherwise

participate in the bankruptcy proceeding.    Neither respondent nor

petitioner notified this Court of petitioner’s bankruptcy filing.
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     On January 19, 2007, the bankruptcy court issued a discharge

order.   Attached to that order was an “EXPLANATION OF BANKRUPTCY

DISCHARGE IN A CHAPTER 7 CASE”.   Listed among “Debts that are Not

Discharged” were “Debts for most taxes”.

     The docket sheet in docket No. 16557-04 does not indicate

that any action was taken by the Court between June 6, 2006, and

June 19, 2007.   We filed our opinion in docket No. 16557-04 on

June 19, 2007.   See Colvin v. Commissioner, T.C. Memo. 2007-157,

affd. 285 Fed. Appx. 157 (5th Cir. 2008).      On September 14, 2007,

we entered a decision that petitioner had a $10,346 tax

deficiency for the year 2000.

     On February 4, 2008, respondent assessed petitioner’s 2000

income tax.   On July 7, 2008, respondent mailed petitioner a

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

Hearing for his unpaid 2000 income tax liability.      In response to

that notice, on August 11, 2008, petitioner filed a Form 12153,

Request for a Collection Due Process or Equivalent Hearing

(section 6330 hearing).   On line 7 of Form 12153, which requires

the reason the taxpayer disagrees with the proposed collection

action, petitioner checked the “Other” box, listed his reason for

challenging the proposed levy as “Bankruptcy”, and noted:      “This

debt was discharge [sic] pursuant to a chpt 7 bankruptcy

discharge dated January 19, 2007”.      Petitioner raised no other

reason, such as collection alternatives.
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     Respondent forwarded petitioner’s request for a section 6330

hearing to several Appeals Offices in States which were

considerable distances from petitioner’s residence.    Thereafter,

petitioner and respondent exchanged a series of letters regarding

where the requested section 6330 hearing would be held, and

ultimately petitioner’s case was assigned to an Appeals Office in

Arizona, a location which petitioner found agreeable.

Respondent’s Appeals Office mailed correspondence to petitioner’s

Arizona residence, but petitioner was unaware of the

correspondence because he then resided in Texas.   Eventually, the

problem was resolved, and respondent’s settlement officer and

petitioner held a section 6330 hearing on May 14, 2009.

     At petitioner’s section 6330 hearing the sole argument

petitioner raised was that his 2000 tax debt was discharged in

bankruptcy.   Petitioner maintained that the IRS had been listed

as a creditor in his bankruptcy petition but it had not submitted

a proof of claim.   Thus, according to petitioner, the IRS lost

its opportunity to collect his unpaid 2000 taxes, and further, it

was in contempt of court.   The settlement officer rejected

petitioner’s arguments.

     The settlement officer raised collection alternatives with

petitioner.   The settlement officer stated that petitioner did

not qualify for an offer-in-compromise because he had not filed

his Federal income tax return for 2006.   As an alternative to
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submitting an offer-in-compromise, the settlement officer offered

petitioner an opportunity to enter into an installment agreement.

Petitioner declined this offer.

     On June 18, 2009, a manager in respondent’s Appeals Office

sent petitioner a Notice of Determination Concerning Collection

Action(s) Under Section 6320 and/or 6330 regarding the proposed

levy action for 2000.   Attached to that notice was a copy of the

settlement officer’s determination letter which stated that (1)

the settlement officer verified that all legal and procedural

requirements with respect to the proposed levy were met, (2)

petitioner’s argument that his 2000 tax debt was discharged in

bankruptcy was rejected, and (3) the settlement officer

determined that the levy balanced the Government’s need for

efficient tax collection with petitioner’s expectation that the

collection action be no more intrusive than necessary.    In

rejecting petitioner’s argument that his 2000 tax debt was

discharged in bankruptcy, the settlement officer noted that 11

U.S.C. sec. 507 (2006) provides that, except for certain

inapplicable exceptions, unassessed but assessable taxes are not

dischargeable in bankruptcy.

     On July 16, 2009, petitioner filed a petition in this Court

requesting that we review respondent’s collection determination.
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                               OPINION

A.   Standard of Review

      This case involves a review of respondent’s determination to

proceed with collection of petitioner’s unpaid tax liabilities

for 2000 via levy.   Section 6330 hearings concerning levies are

conducted in accordance with section 6330(c).    At the section

6330 hearing a taxpayer may raise any relevant issues relating to

the unpaid tax, including spousal defenses, challenges to the

appropriateness of the collection action, and offers of

collection alternatives.    A taxpayer may challenge the existence

or amount of the underlying tax liability, but only if he did not

receive a notice of deficiency or otherwise have an opportunity

to dispute the liability.   Sec. 6330(c)(2)(B); sec. 301.6330-

1(e)(3), Q&A-E2, Proced. & Admin. Regs.   Petitioner not only

received a notice of deficiency but litigated the deficiency in

this Court; hence, he is precluded from raising the underlying

tax liability during his section 6330 hearing.

      In making a determination following a collection hearing,

the Commissioner must consider:   (1) Whether the requirements of

any applicable law or administrative procedure have been met, (2)

any relevant issues raised by the taxpayer, and (3) whether the

proposed collection action balances the need for efficient

collection of taxes with the legitimate concern that the
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collection action be no more intrusive than necessary.   Sec.

6330(c)(3).

      After the Commissioner issues a notice of determination

following the section 6330 hearing, a taxpayer has the right to

petition this Court for judicial review of the determination.

Sec. 6330(d)(1).   Our review of the Commissioner’s determination

is subject to the provisions of section 6330.

      The judicial review that we are required to conduct in

section 6330 cases focuses on the Commissioner’s determination.

Unless the tax liability of the taxpayer that is the subject of

the proceeding is properly at issue, we review the Commissioner’s

determination for abuse of discretion.    Sego v. Commissioner, 114

T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176 (2000).

      The existence and amount of petitioner’s tax liability for

2000 was previously decided by this Court.   We therefore review

respondent’s determinations for abuse of discretion.   An abuse of

discretion is defined as any action that is unreasonable,

arbitrary or capricious, clearly unlawful, or lacking sound basis

in fact or law.    Thor Power Tool Co. v. Commissioner, 439 U.S.

522, 532-533 (1979); Woodral v. Commissioner, 112 T.C. 19, 23

(1999).

B.   Whether Petitioner’s Deficiency for 2000 Was Discharged in
     Bankruptcy

      Petitioner’s principal argument is that his 2000 tax

obligation was discharged in bankruptcy, with the result that the
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obligation is not collectible.    We have jurisdiction to decide

whether a tax liability for which collection is at issue was

discharged in bankruptcy.   Washington v. Commissioner, 120 T.C.

114, 121 (2003); Thomas v. Commissioner, T.C. Memo. 2003-231.

     Petitioner argues that 11 U.S.C. sec. 524(a)(1) (2006)

provides that a chapter 7 bankruptcy discharge “voids any

judgment at any time obtained, to the extent that such judgment

is a determination of the personal liability of the debtor with

respect to any debt discharged under section 727 * * * of this

title, whether or not discharge of such debt is waived”.    He

further posits that 11 U.S.C. sec. 524(a)(2) (2006) enjoins

respondent from taking any action to recover the discharged debt

whether or not the discharge of the debt is waived.

     A debtor under chapter 7 of the Bankruptcy Code is generally

granted a discharge of all debts that arose before the filing of

the bankruptcy petition “‘[e]xcept as provided in section 523 of

this title.’”   Hosack v. IRS, 282 Fed. Appx. 309, 313 (5th Cir.

2008) (quoting 11 U.S.C. sec. 727(b) (2000)).    Concomitantly, 11

U.S.C. sec. 524(a) provides that such a discharge:

          (1) voids any judgment at any time obtained, to the
     extent that such judgment is a determination of the personal
     liability of the debtor with respect to any debt discharged
     under section 727, 944, 1141, 1228, or 1328 of this title,
     whether or not discharge of such debt is waived;

          (2) operates as an injunction against the commencement
     or continuation of an action * * * to collect, recover or
     offset any such debt as a personal liability of the debtor,
     whether or not discharge of such debt is waived; and
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          (3) operates as an injunction against the commencement
     or continuation of an action * * * except a community claim
     that is exempted from discharge under section 523 * * *.

     Thus, while 11 U.S.C. sec. 727(b) (2006) generally

discharges a bankrupt debtor’s debt, and 11 U.S.C. sec. 524(a)

generally voids any judgment and enjoins the collection of the

debts of a bankrupt debtor, both sections provide that they do

not so operate if 11 U.S.C. sec. 523 (2006) applies.

     Title 11 U.S.C. sec. 523(a)(1)(A) provides, in relevant

part, that a “discharge under section 727 * * * of this title

does not discharge an individual debtor from any debt * * * for a

tax * * * of the kind and for the periods specified in section

507(a)(3) or 507(a)(8) of this title, whether or not a claim for

such tax was filed or allowed”.

     Title 11 U.S.C. sec. 507(a)(8) grants priority status for

unsecured income or gross receipts tax claims of governmental

units in certain circumstances.   Title 11 U.S.C. sec.

507(a)(8)(A)(iii) gives priority status for taxes “other than a

tax of a kind specified in 11 U.S.C. section 523(a)(1)(B) or

523(a)(1)(C), not assessed before, but assessable, under the

applicable law or by agreement, after the commencement of the

case”.

     Petitioner’s 2000 tax liability involves a tax described in

11 U.S.C. sec. 507(a)(8)(A)(iii); consequently, petitioner’s 2000

tax liability is not dischargeable pursuant to 11 U.S.C. sec.
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523(a).1   Petitioner’s tax deficiency for 2000 was not assessed

before the commencement of his bankruptcy case because his

liability had not as yet been determined by this Court.    However,

petitioner’s 2000 tax obligation remained assessable because the

period of limitations for assessment was tolled by respondent’s

mailing of the notice of deficiency and by petitioner’s filing a

petition in this Court.   See sec. 6503(a)(1).   A tax that is

unassessed but still assessable at the time one files for

bankruptcy is not discharged in a chapter 7 bankruptcy.    In

Hosack v. IRS, supra at 313, the Court of Appeals for the Fifth

Circuit stated:

     Thus, pertinent to this matter, a Chapter 7 discharge does
     not serve to discharge a debtor from liability for
     delinquent income tax that was unassessed at the time the
     debtor filed for bankruptcy but still assessable by law,
     regardless of whether the IRS filed a claim in the debtor’s
     bankruptcy case.

See Martinez v. United States, 323 Bankr. 650, 652 (Bankr. E.D.

La. 2005) (“A tax that is assessable, but not assessed, before

the bankruptcy petition is filed will not be discharged.”), affd.

96 AFTR 2d 2005-5473, 2005-2 USTC par. 50,524 (E.D. La. 2005).

     That respondent did not file a proof of claim does not

affect this conclusion.   A nondischargeable tax debt is not

affected by the failure to file a proof of claim.    See Queen v.

IRS, 148 Bankr. 256, 258 (S.D. W. Va. 1992) (“The fact that the


     1
      Petitioner’s tax deficiency does not fall into any of the
exceptions specified in 11 U.S.C. sec. 523(a)(1)(B) or (C).
                              - 11 -

government did not file a claim in the plaintiff-debtor’s

bankruptcy proceeding is irrelevant; the penalty assessment is

not discharged and the IRS may seek to recover from the debtor

post-discharge.”), affd. per curiam 16 F.3d 411 (4th Cir. 1994);

Kinney v. IRS, 123 Bankr. 889, 891 (Bankr. D. Nev. 1991) (in

chapter 11 proceeding, “The IRS’s failure to file timely a proof

of claim would, at most, result in a loss of the right to payment

under the plan.   However, a creditor with a nondischargeable debt

can collect outside the plan as well as under the plan.”).

     Petitioner’s tax liability for 2000 therefore falls squarely

within the bankruptcy discharge exception of 11 U.S.C. sec.

523(a)(1)(A).   In summation, (1) petitioner’s 2000 tax liability

was not discharged, and (2) respondent is not enjoined from

commencing a collection action with respect to that liability.

     Petitioner also contends that (1) respondent violated the

automatic stay provision of 11 U.S.C. sec. 362(a)(8) (2006) as a

consequence of not notifying the Court of petitioner’s bankruptcy

proceeding, and (2) that failure invalidated the deficiency

proceeding.   We do not agree with petitioner’s contention.

Regardless of whether notification was provided to the Court, we

took no action in petitioner’s case while petitioner’s bankruptcy

proceeding was in progress.   Thus, petitioner was not harmed.
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C.   Whether Petitioner Was Entitled To Raise His Underlying Tax
     Liability at His Section 6330 Hearing

      Petitioner further maintains that respondent abused his

discretion by not allowing petitioner to dispute his underlying

tax liability for 2000 at the section 6330 hearing.      The

underlying tax liability for 2000 that respondent seeks to

collect was the subject of a notice of deficiency that petitioner

received and was resolved in a matter before this Court.       As

noted supra p. 6, pursuant to section 6330(c)(2)(B), petitioner

is precluded from challenging the existence or amount of the

underlying tax liability for 2000 in this proceeding.

      Petitioner cites Montgomery v. Commissioner, 122 T.C. 1

(2004), in support of his position.      That case is inapplicable in

that it involved a section 6330 hearing for a taxpayer who had

not had a previous opportunity to contest the underlying

deficiency.

D.   Timeliness of Respondent’s Assessment

      Petitioner asserts that “the tax court decision did not

become final until September 17, 2008”, after the Court of

Appeals upheld our decision.   Therefore, according to petitioner,

respondent’s assessment of petitioner’s income tax on February 4,

2008, was premature and thus an abuse of discretion.

      The record does not indicate that petitioner raised this

issue at his section 6330 hearing.      Regardless, petitioner is

incorrect in his analysis.   Section 6213(a) bars the Commissioner
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from assessing a tax liability until our decision becomes final,

and section 7481 makes our decisions final only when all

opportunities for appeal have been exhausted.    But section 7485

trumps this by providing that assessment shall be stayed during

an appeal only if the taxpayer posts a bond.    There is no

evidence that petitioner posted a bond.   See Kovacevich v.

Commissioner, T.C. Memo. 2009-160 n.4.    Therefore, respondent was

permitted to assess petitioner’s income tax when we entered a

decision in docket No. 16557-04 on September 14, 2007.

E.   Other Matters Considered at the Section 6330 Hearing

      Section 6330(c)(1) and (3) provides that the settlement

officer must (1) verify that the requirements of applicable law

and administrative procedure have been met, and (2) consider

whether the proposed collection action balances the need for the

efficient collection of taxes with the legitimate concern of the

taxpayer that any collection be no more intrusive than necessary.

The notice of determination states that the settlement officer

verified that the requirements of all applicable law and

administrative procedure were met and determined that the levy

appropriately balanced the need for efficient collection of taxes

with petitioner’s concern that the collection action be no more

intrusive than necessary.   We are satisfied that the mandates of

section 6330(c)(1) and (3) have been met.
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     We have considered all of petitioner’s arguments, and to the

extent not discussed herein, we find them to be without merit

and/or irrelevant.

     To reflect the foregoing,


                                        Decision will be entered

                                   for respondent.
