                    T.C. Summary Opinion 2010-69



                      UNITED STATES TAX COURT



                 NORMAN C. JOHNSON, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 19860-06S.             Filed June 7, 2010.



     Norman C. Johnson, pro se.

     Jack T. Anagnostis, for respondent.



     CHABOT, Judge:   This case was heard pursuant to section

7463.1   The decision to be entered is not reviewable by any other




     1
      Unless indicated otherwise, all section references are to
sections of the Internal Revenue Code of 1986 as in effect for
proceedings commenced on the date the petition in the instant
case was filed, except that the section references in the
footnotes to tables 2 and 4 are to sections of the Internal
Revenue Code of 1986 as in effect for the years in issue.
                                   - 2 -

court, and this opinion shall not be treated as a precedent for

any other case.    Sec. 7463(b).

     This case was commenced in response to a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330.    The issues for decision are as follows:

          (1) Whether petitioner’s tax liabilities for 1996,

     1997, 1999, 2000, and 2001 (hereinafter sometimes

     collectively referred to as the years in issue)2 were

     discharged in bankruptcy;

          (2) whether petitioner had a prior opportunity to

     dispute the underlying tax liabilities for any of the

     years in issue; and

          (3) whether petitioner’s rights in this collection

     matter are affected by any of certain miscellaneous

     matters.

                             Background

     The stipulations and the stipulated exhibits are

incorporated herein by this reference.

     When the petition was filed in the instant case, petitioner

resided in Pennsylvania.

The First Bankruptcy Case

     On November 4, 1996, petitioner filed a bankruptcy petition

under chapter 13 of the U.S. Bankruptcy Code in the U.S.


     2
      The parties do not explain what is different about 1998.
                               - 3 -

Bankruptcy Court for the Eastern District of Pennsylvania; the

resulting proceeding is hereinafter sometimes referred to as

petitioner’s first bankruptcy case.     In 1997 the Internal Revenue

Service (IRS) filed proofs of claim for petitioner’s income taxes

for 1988-90 and 1992-95 in petitioner’s first bankruptcy case.3

The bankruptcy court ordered petitioner’s employer to deduct $122

from petitioner’s wages every 2 weeks and pay these amounts to

the bankruptcy trustee, who in turn was to pay these amounts to

the IRS.   The amounts were paid and, on January 4, 2002, the

Bankruptcy Court discharged petitioner from all debts under the

plan in petitioner’s first bankruptcy case.

The Years in Issue

     On September 9, 1998, petitioner filed income tax returns

for 1996 and 1997, showing the amounts set forth in table 1.

                              Table 1

                                                    Amount
                Item                        1996             1997

     Adjusted gross income                $34,781        $29,059
     Taxable income                        28,231         22,259
     Tax                                    4,783          3,341
     Withholding                            3,177            576




     3
      The record does not indicate what happened to 1991. There
is no indication in the record that the facts as to 1991 play any
role in the substance of the instant case or the perceptions of
any party in the instant case.
                               - 4 -

     These tax returns were prepared for petitioner by a

“representative” of respondent at an office of respondent in

Philadelphia, Pennsylvania.

     On November 30, 1998, respondent assessed the amounts shown

in table 2.

                              Table 2

                                                   Amount
               Item1                        1996            1997

     Tax                                   $4,783.00     $3,341.00
     Estimated tax “penalty”                   67.00        146.00
     Late filing “penalty”                    361.35        124.42
     Failure to pay tax “penalty”             160.60        110.60
     Interest                                 282.79        145.25

          The estimated tax “penalty” is presumably a sec.
          1

     6654 addition to tax, the late filing “penalty” is
     presumably a sec. 6651(a)(1) addition to tax, and the
     failure to pay tax “penalty” is presumably a sec.
     6651(a)(2) addition to tax. See, e.g., discussion in
     Burke v. Commissioner, T.C. Memo. 2009-282.

     On October 7, 2002, petitioner filed tax returns for 1999,

2000, and 2001, showing the amounts set forth in table 3.

                              Table 3

                                                Amount
               Item                 1999         2000         2001

     Adjusted gross income      $30,483        $31,842      $32,806
     Taxable income              23,433         24,642       25,356
     Tax                          3,514          3,694        3,506
     Withholding                    700            869          906

     On November 11, 2002, respondent assessed the amounts shown

in table 4.
                               - 5 -

                              Table 4

                                             Amount
               Item   1
                                 1999         2000        2001

     Tax                      $3,514.00   $3,694.00   $3,506.00
     Late filing “penalty”       703.50      706.25      260.00
     Interest                    724.10      385.91       95.10

          The late filing “penalty” is presumably a sec.
          1

     6651(a)(1) addition to tax.

     For each of the years in issue, petitioner failed to pay all

of the liabilities reported on his income tax returns.4

The Second Bankruptcy Case

     On September 18, 2002, petitioner filed a bankruptcy

petition under chapter 13 in the U.S. Bankruptcy Court for the

Eastern District of Pennsylvania; the resulting proceeding is

hereinafter sometimes referred to as petitioner’s second

bankruptcy case.   On December 9, 2002, the IRS filed a proof of

claim for petitioner’s income taxes for the years in issue in

petitioner’s second bankruptcy case.    Petitioner’s only debt in

his second bankruptcy case was to the IRS.   On March 28, 2003,

petitioner moved to voluntarily dismiss his second bankruptcy

case, stating that he was in the process of filing an offer-in-

compromise with the IRS to “pay all past due taxes.”    The


     4
      So stipulated. We assume that the parties mean in their
stipulation that petitioner failed to pay the balances due; i.e.,
the liabilities less the withholdings, shown in tables 1 and 3.
For the years in issue, the balances due on the tax returns
aggregate about two-thirds of the liabilities reported on the tax
returns.
                                          - 6 -

Bankruptcy Court granted petitioner’s motion on April 2, 2003,

“in order for Debtor to file an Offer in Compromise with the

Internal Revenue Service.”

Later Proceedings

     On June 1, 2003, petitioner submitted to the IRS an offer-

in-compromise for the years in issue;5 the IRS rejected it on

July 22, 2003.       On September 16, 2003, petitioner entered into an

installment agreement with the IRS for the years in issue.                                 The

record in the instant case does not include a copy of the

agreement.

     On or about September 6, 2004, respondent notified

petitioner as follows as to his 2002 income tax account:
                          WE APPLIED YOUR PAYMENT TO YOUR ACCOUNT

             THANK YOU FOR YOUR INQUIRY. WE LOCATED AND APPLIED YOUR PAYMENT(S)
     TOTALING $100.00 TO THE ACCOUNT SHOWN ABOVE. THE PAYMENT(S) WE APPLIED ARE SHOWN
     AT THE END OF THIS NOTICE.

             WE MADE A CHANGE TO YOUR ACCOUNT THAT RESULTED IN A VERY SMALL BALANCE DUE.
     WE WANT YOU TO KNOW ABOUT THE CHANGE, BUT NO PAYMENT IS DUE. OUR POLICY IS TO
     KEEP YOU INFORMED, BUT WE DON’T WANT TO BURDEN YOU BY ASKING YOU TO PAY THIS
     AMOUNT. AGAIN, PLEASE DON’T SEND A PAYMENT.

            YOUR ACCOUNT NOW:

                   AMOUNT YOU PREVIOUSLY OWED...........................$61.46
                   LESS YOUR PAYMENT(S).................................100.00
                   REMAINING BALANCE OWED................................38.54
                   FAILURE TO PAY PENALTY................................27.25
                   INTEREST FIGURED TO SEP. 6, 2004......................13.62
                   *UNDERPAYMENT CREDIT..................................$2.33-



     5
      The parties stipulated that the IRS received petitioner’s
offer in compromise for the years in issue on June 1, 2003. The
stipulated Form 4340, Certificate of Assessments, Payments, and
Other Specified Matters, for each of the years in issue shows
June 17, 2003, as “Offer in Compromise Pending” and does not show
any entry for June 1, 2003. We have not found anything in the
record explaining the significance of the June 17, 2003, date on
each Form 4340. Where the Forms 4340 are not contradicted by the
parties’ stipulations or other evidence in the record we have
accepted the statements on the Forms 4340 as being accurate.
                                          - 7 -
                   AMOUNT YOU NOW OWE.....................................NONE

            *THE SMALL BALANCE THAT YOU OWED HAS BEEN CREDITED TO YOUR ACCOUNT.
     YOUR ACCOUNT BALANCE IS NOW ZERO.

     On December 13, 2004, respondent sent to petitioner a notice

of intent to levy with the caption “You Defaulted On Your

Installment Agreement”.           That notice of intent to levy explained

that petitioner defaulted because he failed to make his payments

as agreed.

Collection Proceedings

     On September 24, 2005, respondent sent to petitioner a Final

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

Hearing.    In response, on October 20, 2005, petitioner submitted

a Form 12153, Request for a Collection Due Process Hearing

(hereinafter sometimes referred to as the hearing request).                       In

the hearing request, petitioner stated:                   “I was under the

protection of the bankruptcy court until bill was paid.”

Petitioner believed that his payments under the plan in his first

bankruptcy case satisfied his tax liabilities for the years in

issue.6




     6
      Respondent’s proposed finding of fact (to which petitioner
does not object) refers to payments “distributed to respondent
during the period from 11/04/1996 to 01/10/2005”. The relevant
exhibit shows that payments under the plan in petitioner’s first
bankruptcy case were made as late as October 2001, and that on
Jan. 4, 2002, the Bankruptcy Court discharged petitioner from all
debts under the plan in petitioner’s first bankruptcy case. We
do not understand what were the payments received after the
discharge from petitioner’s first bankruptcy case “to
01/10/2005”.
                               - 8 -

     Petitioner and respondent’s settlement officer, Ronald Kroll

(hereinafter sometimes referred to as Kroll), met for a face-to-

face administrative collection hearing on June 21, 2006.   At the

administrative collection hearing petitioner (1) argued that his

tax liabilities for the years in issue were satisfied by his

payments under his chapter 13 plan in his first bankruptcy case,

(2) stated that his employer did not withhold sufficient amounts

to pay his taxes for the years in issue, and (3) declined to

complete a Form 433-A, Collection Information Statement for Wage

Earners and Self-Employed Individuals, relevant to a collection

alternative.   Petitioner contends that he offered a collection

alternative--“that respondent discontinue collection action,

consistent with its prior statement that no tax was due on his

account.”   Respondent’s evaluation is that petitioner “declined

to provide” a collection alternative.

     On July 12, 2006, respondent issued to petitioner a Notice

of Determination Concerning Collection Action(s) Under Section

6320 and/or 6330, which (1) determined that “the periods covered

by this hearing [the administrative collection hearing] represent

post-petition tax years and were not included in your bankruptcy

action”; (2) determined that “the issuance of the Notice of

Intent to Levy is appropriate”; and (3) informed petitioner of

his right to petition the Tax Court within 30 days.   Petitioner

timely petitioned this Court, contending that during the years in
                               - 9 -

issue, his “finances were under the supervision of the bankruptcy

court in the Eastern District of Pennsylvania.      The bankruptcy

was discharged effective 1/4/02.   At that time all outstanding

debts were satisfied after completion of the repayment plan,

including the tax liabilities for the * * * [years in issue].”

                            Discussion

1.   In General--The Collection Framework

      In general, section 6321 imposes a lien in favor of the

United States on all property and rights to property of a person

liable for tax when a demand for the payment of the person’s tax

has been made and the person fails to pay the tax.      Such a lien

arises when an assessment is made.     Sec. 6322.

      Sections 6320 (relating to liens) and 6330 (relating to

levies) generally provide protections for taxpayers in tax

collection matters.   In general, sections 6320 and 6330 provide

for notice and the right to an administrative collection hearing

and judicial review when the Commissioner files a Federal tax

lien or proposes to collect unpaid taxes by levy.      Inv. Research

Associates, Inc. v. Commissioner, 126 T.C. 183, 185-186 (2006).

     Section 6320(b) affords taxpayers the right to a hearing

before an impartial officer or employee of the Appeals Office.

Pursuant to section 6320(b)(2), a taxpayer is entitled to only

one hearing regarding the tax period relating to the amount of

unpaid tax.
                              - 10 -

     Section 6320(c) provides that the hearing generally shall be

conducted consistent with the procedures set forth in section

6330(c), (d) (other than paragraph (2)(B) thereof), (e), and (g).

     Section 6330(c)(1) requires the Appeals officer to obtain

verification that the requirements of any applicable law or

administrative procedure have been met.   Section 6330(c)(2)(A)

provides that the taxpayer may raise at the hearing “any relevant

issue relating to the unpaid tax or the proposed levy” including

spousal defenses, challenges to the appropriateness of collection

actions, and collection alternatives.

     Section 6330(c)(3) provides that a determination of the

Appeals officer shall take into consideration the verification

under section 6330(c)(1), the issues raised by the taxpayer, and

whether the proposed collection action balances the need for the

efficient collection of taxes with the legitimate concern of the

taxpayer that any collection action not be any more intrusive

than necessary.

     Section 6330(c)(2)(B) provides, in general, that a taxpayer

may dispute the underlying tax liability at the administrative

collection hearing if both of two requirements have been

satisfied:   (1) The taxpayer did not receive a notice of

deficiency for that tax liability and (2) the taxpayer did not

otherwise have an opportunity to dispute that tax liability.    See

Hoyle v. Commissioner, 131 T.C. 197, 199 (2008).   If either one
                              - 11 -

of these requirements is not satisfied (i.e., if the taxpayer

received a notice of deficiency or the taxpayer had another

opportunity to dispute the tax liability), then section

6330(c)(2)(B) does not provide authority for the taxpayer to

dispute that tax liability at the administrative collection

hearing.   See Kuykendall v. Commissioner, 129 T.C. 77, 80 (2007)

(as to notice of deficiency); Lewis v. Commissioner, 128 T.C. 48

(2007) (as to other opportunity to dispute).    However, the

taxpayer may dispute certain matters under section 6330(c)(2)(A),

including (as here relevant) whether a liability was discharged

in bankruptcy, without regard to the restrictions described in

section 6330(c)(2)(B).   See Swanson v. Commissioner, 121 T.C.

111, 118-119 (2003).

     When the Appeals Office issues a notice of determination to

a taxpayer following an administrative collection hearing

regarding a lien or levy action, sections 6320(c) (by way of

cross-reference) and 6330(d)(1) provide that the taxpayer will

have 30 days following the issuance of a notice of determination

to seek judicial review.   If the underlying tax liability is

properly in issue, then the Court will review the determination

by the Appeals Office de novo.   Sego v. Commissioner, 114 T.C.

604, 610 (2000).   If, instead, the underlying tax liability is

not in issue, then the Court will review the determination of the

Appeals Office for abuse of discretion.   Id.
                              - 12 -

      We proceed to consider the contentions presented in the

instant case.

2.   Discharge in First Bankruptcy Case

      In his petition, petitioner contends as follows:

      During the time period in question [i.e., the years in
      issue], my finances were under the supervision of the
      bankruptcy court in the Eastern District of
      Pennsylvania. The bankruptcy was discharged effective
      1/4/02. At that time, all outstanding debts were
      satisfied after completion of the repayment plan,
      including the tax liabilities for the above periods.

      We have jurisdiction to review respondent’s determination

that petitioner’s tax liabilities for the years in issue were not

discharged in the first bankruptcy case; petitioner’s contention

that they were so discharged amounts to a challenge of the

appropriateness of the collection action under section

6330(c)(2)(A).   See Bussell v. Commissioner, 130 T.C. 222, 236

(2008).   We consider such a contention without the restrictions

of the “challenges to * * * the underlying tax liability” rules

of section 6330(c)(2)(B).   See Swanson v. Commissioner, 121 T.C.

at 118-119.

      Debtors filing for chapter 13 bankruptcy are required to

submit a plan for repayment of creditors.   11 U.S.C. secs. 1321

and 1322 (2006).   Generally, debts provided for by the plan in a

chapter 13 bankruptcy are discharged upon completion of that

plan.   11 U.S.C. sec. 1328 (2006); In re Lilley, 91 F.3d 491,

494-495 (3d Cir. 1996).   But debts incurred after commencement of
                                - 13 -

the bankruptcy case and not provided for by the plan generally

are not discharged.   8 Collier on Bankruptcy, par. 1328.02[l], at

1328-20 (16th ed. 2010).    Post-bankruptcy-petition tax

liabilities generally are included among those debts that are not

discharged.   See In re Woods, 316 Bankr. 522, 524-525 (Bankr.

N.D. Ill. 2004).

     Petitioner’s plan in his first bankruptcy case included tax

liabilities for 1988-90 and 1992-95, and the IRS filed proofs of

claim for those years.     But petitioner’s tax liability for 1996,

the earliest of the years in issue, did not become payable until

after he filed his bankruptcy petition in his first bankruptcy

case.   Moreover, the IRS did not file a proof of claim for

petitioner’s tax liabilities for the years in issue in

petitioner’s first bankruptcy case.      Although the plan in

petitioner’s first bankruptcy case was carried out during the

years in issue, none of the tax liabilities for the years in

issue were included in that plan.

     Thus, because all of his tax liabilities for the years in

issue became payable after the first bankruptcy petition was

filed, and because the IRS did not file a proof of claim with

respect to those liabilities, petitioner’s tax liabilities for

the years in issue were not discharged in his first bankruptcy

case.
                              - 14 -

     We hold, for respondent, that none of petitioner’s tax

liabilities for the years in issue were discharged in the first

bankruptcy case.

3.   Petitioner’s Prior Opportunity To Dispute His Underlying Tax
     Liabilities for the Years in Issue

     Petitioner maintains that he has not had a prior opportunity

to dispute his underlying liabilities for the years in issue.7

He also maintains that his attorney prevented him from attending

the hearing in his second bankruptcy case, so he asked her to

withdraw from that bankruptcy case and to move to dismiss his

bankruptcy petition.   Respondent maintains that petitioner had an

opportunity to dispute his underlying tax liabilities for the

years in issue during his second bankruptcy case.

     As we explained in Kendricks v. Commissioner, 124 T.C. 69,

77-79 (2005), if the IRS submits a proof of claim for unpaid

Federal tax liabilities for the years in issue in a taxpayer’s

bankruptcy action, then, for purposes of section 6330(c)(2)(B),

the taxpayer has had the opportunity to dispute the underlying




     7
      Respondent does not contend that petitioner received a
notice of deficiency for any of the years in issue. Petitioner
does not contend that a notice of deficiency should have been
issued. See sec. 6201(a)(1). The record before us does not
clearly fill in the gaps in the story. We leave the parties
where we find them as to the notice of deficiency implications,
and we focus on the other opportunity-to-dispute prong of sec.
6330(c)(2)(B).
                                 - 15 -

tax liabilities.    This is so even where the taxpayer voluntarily

moves to dismiss his bankruptcy case before a hearing on the

underlying liabilities.    Id.

     Petitioner filed his second bankruptcy case on September 18,

2002, and the IRS filed a proof of claim for the years in issue

in petitioner’s second bankruptcy case on December 9, 2002.

Thus, petitioner could have contested his underlying tax

liabilities during his second bankruptcy case.    See Kendricks v.

Commissioner, 124 T.C. at 77.

     The parties have stipulated, and we have found, that on

March 28, 2003, petitioner moved to voluntarily dismiss his

second bankruptcy case, stating that he was in the process of

filing an offer-in-compromise with the IRS.    On April 2, 2003,

the Bankruptcy Court granted this motion “in order for Debtor

[petitioner] to file an Offer in Compromise with the Internal

Revenue Service.”    Two months later petitioner submitted an

offer-in-compromise.

     As we held in Kendricks, this voluntary dismissal does not

change the conclusion that petitioner had an opportunity to

dispute his underlying tax liabilities.

     Petitioner contends as follows:

     2. Petitioner had filed the Chapter 13 bankruptcy action
        on the advice of the attorney, Stephanie Rosof,
        appointed to him by his employee union. However, on
        the date of his bankruptcy hearing, Ms. Rosof prevented
        him from attending the bankruptcy proceeding.
        Petitioner did not believe Ms. Rosof was effectively
                               - 16 -

        representing his interests so asked her to withdraw her
        representation and directed her to dismiss his
        bankruptcy petition. Therefore, petitioner did not
        have a meaningful opportunity to dispute the tax
        liabilities for 1996 through 2001 in the bankruptcy
        action he filed on September 18, 2002.

     The parties filed stipulations, and petitioner testified at

the evidentiary hearing.    On the basis of that evidence, we have

found that (1) petitioner filed his second bankruptcy case, (2)

almost 3 months later the IRS filed a proof of claim for

petitioner’s taxes for the years in issue, (3) almost 4 months

after that petitioner moved to dismiss his second bankruptcy

case, stating that he was in the process of filing an offer-in-

compromise, (4) a few days later the bankruptcy court granted the

dismissal motion in order for petitioner to file an offer-in-

compromise, and (5) about 2 months after that petitioner

submitted an offer-in-compromise.   It is evident that he took the

actions even though he now tells us he fired his bankruptcy

counsel because he “did not believe Ms. Rosof was effectively

representing his interests”.    This concern was not mentioned in

petitioner’s testimony.    Also absent from petitioner’s testimony

is any indication that in any way “Ms. Rosof prevented him from

attending the bankruptcy proceeding.”   Petitioner may now regret

having followed Ms. Rosof’s advice, but the evidence of record

(testimony, stipulations) makes it clear that the actions

petitioner took brought him into the ambit of having had another

opportunity to dispute his tax liabilities.
                              - 17 -

      We hold, for respondent, that petitioner had an opportunity

to dispute his underlying liability for each of the years in

issue, within the meaning of section 6330(c)(2)(B); thus,

petitioner is not permitted to dispute his underlying tax

liability for any of the years in issue in this collection

proceeding.8

4.   The “Stop Sending Payments” Letter

      Petitioner contends that respondent’s settlement officer

abused his discretion because respondent had previously accepted

an installment agreement covering the years in issue and also

2002, and in connection with that installment agreement,

respondent told petitioner “to stop sending payments because no

further payments were due.”   Respondent maintains that petitioner

was mistaken because the evidence petitioner relied on applied

only to 2002 and not to any of the years in issue.

      Petitioner has the burden of proof in the instant case.     See

Rule 142(a).9   The letter that petitioner produced, telling him

to stop making payments and that his “account balance is now

zero”, clearly refers only to 2002.    As respondent notes, the



      8
      Although he did not have to, Kroll apparently considered
petitioner’s underlying tax liabilities at the collection
hearing. But that did not waive the restrictions of sec.
6330(c)(2)(B). See Behling v. Commissioner, 118 T.C. 572, 579
(2002).
      9
      Unless indicated otherwise, all Rule references are to the
Tax Court Rule of Practice and Procedure.
                                - 18 -

account transcripts for the years in issue include references to

“installment agreement” but the account transcript for 2002 does

not refer to any installment agreement.

      The parties have not furnished us with a copy of the

installment agreement or a relevant summary that would show that

the installment agreement covered the years in issue and also

2002.     On brief, petitioner states that “he wrote on the checks

that he sent to apply the installment payments to tax year 2002.”

Petitioner may have become confused.      However, we are satisfied

that there is no evidence in the record that respondent told

petitioner to stop making payments with respect to the years in

issue.

      We hold, for respondent, that the “stop payment” letter does

not show that respondent’s settlement officer abused his

discretion.

5.   Income Tax Withholding

        Petitioner also contends that his employer failed to

properly withhold amounts sufficient to satisfy his income tax

liabilities for the years in issue.      On brief, he argued as

follows:

        Petitioner reasonably believed, pursuant to the January
        29, 1997, order of the United States Bankruptcy Judge
        Diane Sigmund, that his employer was making the proper
        withholdings from his wages for the remittances to his
        sole creditor, the Internal Revenue Service. (Exhibit
        17-J). As his wages were under the “supervision and
        control of the Court,” petitioner reasonably expected
        his employer to report accurate wages and proper
        federal tax withholdings from his earnings during the
        years, 1997 through 2001. Petitioner’s bankruptcy
                              - 19 -

     attorney, David Offen, never advised that the payments
     would not cover any new tax liabilities that might be
     incurred during those years. For each tax year at
     issue, petitioner filed for an extension for filing as
     he believed was required of him.

     In September 1998, after his returns for tax years 1996
     and 1997 were prepared by one representative of
     respondent at its 7th and Arch Street office in
     Philadelphia, petitioner was sent to speak with William
     Johnson, another representative of respondent at that
     office. Johnson advised petitioner that petitioner did
     not have to pay any taxes because he was “under
     legalities.”

     Petitioner again references the letter discussed supra.     The

“Stop Sending Payments” letter states that he had “believed that

respondent had come around to agree with petitioner’s position

that no taxes were owed for the years in dispute” and concludes

that respondent abused respondent’s discretion by determining to

proceed in the instant collection dispute.

     As here relevant, section 31(a)(1) provides to petitioner a

credit for the amounts of income taxes his employer withheld from

his wages.   Amounts so withheld are credited even if the employer

failed to pay them over to the IRS; amounts not so withheld are

not credited even if they should have been withheld.   Edwards v.

Commissioner, 39 T.C. 78, 83-84 (1962), affd. on this issue 323

F.2d 751, 752 (9th Cir. 1963); sec. 1.31-1(a), Income Tax Regs.

     There is no contention that petitioner’s section 31 credit

for each of the years in issue was different from what his

employer actually withheld.   We do not have information that

would enable us to decide whether, as petitioner contends, his
                               - 20 -

employer should have withheld more, but that would not affect

petitioner’s section 31 credit even if petitioner were correct.

We do note that, if petitioner was correct, and if his employer

had withheld a greater amount, then petitioner would have

received less take-home pay.

      As to the effect of the stop-sending-payments letter, we

reaffirm our conclusion that this letter does not persuade us

that respondent has abused respondent’s discretion.

      Neither side has raised the question of whether a challenge

to the amount of a section 31 credit is a challenge as to the

underlying tax liability (section 6330(c)(2)(B)) or a challenge

to the appropriateness of the collection action (section

6330(c)(2)(A)(ii)); petitioner loses on this issue in any event.

      We hold, for respondent, that petitioner is not entitled to

any section 31 credit in excess of what has been allowed.

6.   Collection Alternative

      Petitioner states that at the administration hearing he

offered a proposed collection alternative--“respondent told him

he does not owe and it should not recant that statement.”

      We hold that respondent did not abuse respondent’s

discretion by rejecting that “collection alternative”.

7.   Conclusion

      At the hearing, respondent’s counsel indicated on the record

that respondent may be willing to reduce some items that have
                              - 21 -

been assessed.   Accordingly, even though we have ruled for

respondent on every disputed matter, we will provide a short

period of time for exploration of modifications in the interest

of justice.


                                         An appropriate order

                                    will be issued.
