                                T.C. Memo. 2012-76



                         UNITED STATES TAX COURT



                  KAREN LEE CARLSON, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 10633-10L.                         Filed March 20, 2012.



      Karen Lee Carlson, pro se.

      Amy B. Ulmer, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      THORNTON, Judge: Pursuant to sections 6320(c) and 6330(d), petitioner

seeks review of respondent’s determinations sustaining the filing of a Federal tax
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lien with respect to petitioner’s Federal income tax liabilities for 2001, 2002, 2003,

and 2004 and sustaining a proposed levy to collect these taxes.1

                                FINDINGS OF FACT

      Petitioner resided in Oregon when she filed her petition. For the tax years

2001 through 2004 she received income, as reported by third-party payers to the

Internal Revenue Service (IRS), in these aggregate amounts:

                               Year             Amount

                              2001             $148,639
                              2002              155,475
                              2003              155,064
                              2004              103,382

      Petitioner failed to file Federal income tax returns for these years. After

preparing substitutes for returns on petitioner’s behalf, respondent mailed her

separate notices of deficiency for each of the years 2001 through 2004. These

notices were returned to respondent as “not deliverable as addressed, unable to

forward.”

      On February 21, 2005, respondent assessed petitioner’s 2002 income

tax plus additions to tax and accrued interest. On April 23, 2007, he assessed


      1
       Unless otherwise indicated, all section references are to the Internal Revenue
Code, and all Rule references are to the Tax Court Rules of Practice and Procedure.
All monetary amounts are rounded to the nearest dollar.
                                          -3-

petitioner’s income taxes for 2001, 2003, and 2004, plus additions to tax and

accrued interest.2 Petitioner failed to pay the assessed amounts.

      On September 9, 2009, respondent mailed to petitioner a Letter 1058, Final

Notice of Intent to Levy and Notice of Your Right to a Hearing. On September

17, 2009, respondent filed a notice of Federal tax lien (NFTL) with respect to

petitioner’s liabilities for taxable years 2001 through 2004. On September 17,




      2
       Petitioner’s underlying tax liabilities, exclusive of additions to tax and
accrued interest, for tax years 2001 through 2004 are as follows:

                            Year                 Deficiency

                            2001                 $40,582
                            2002                  41,668
                            2003                  38,742
                            2004                  23,663

      The additions to tax assessed against petitioner were as follows:

                              Sec.                 Sec.                 Sec.
      Year                 6651(a)(1)           6651(a)(2)             6654

      2001                  $9,131               $10,146              $1,622
      2002                   9,375                 4,792               1,392
      2003                   8,717                 6,005               1,014
      2004                   5,324                 2,248                 687
                                          -4-

2009, respondent mailed to petitioner a Letter 3172, Notice of Federal Tax Lien

Filing and Your Right to a Hearing Under IRC 6320.

      On October 8, 2009, petitioner timely submitted two Forms 12153, Request

for a Collection Due Process or Equivalent Hearing, regarding the NFTL and the

notice of intent to levy. On these Forms 12153 the only stated reason for

disagreeing with the proposed collection actions was “income figures inaccurate”.

On these Forms 12153 petitioner did not indicate a desire to raise collection

alternatives or a spousal defense.

      By letter to petitioner dated February 26, 2010, respondent’s settlement

officer scheduled a telephone hearing for March 31, 2010, and requested that

petitioner mail any documents that she wanted to have considered at least 14 days

before the conference. This letter also requested that petitioner provide income tax

returns for the tax years 2001 through 2004. The letter explained that for the

settlement officer to consider collection alternatives, petitioner had to provide tax

returns for 2005, 2007, and 2008; proof of estimated tax payments for tax year

2009; and a completed Form 433-A, Collection Information Statement for Wage

Earners and Self-Employed Individuals, with supporting documentation. Petitioner

provided no documents to the settlement officer in response to this letter.
                                         -5-

      During the telephone conference on March, 31, 2010, petitioner’s

representative (who is also petitioner’s husband), Charles Allen Harman, spoke on

behalf of petitioner, who did not participate in the call. According to the settlement

officer’s log, Mr. Harman initially asserted that the information returns submitted by

third-party payers with respect to petitioner were invalid. After the settlement

officer advised him that petitioner should provide corrected information statements,

Mr. Harman raised frivolous arguments that petitioner was not a “taxpayer” and that

her reported income was not, in fact, “income”. After advising Mr. Harman that she

was unable to help because petitioner had not provided the requested documents

and was not in compliance with filing requirements, the settlement officer

terminated the telephone call.

      On April 5, 2010, the settlement officer issued a Notice of Determination

Concerning Collection Action(s) Under Section 6320 and/or 6330 (notice)

sustaining the notice of Federal tax lien filing and proposed levy action. The

notice indicates that although petitioner had challenged her underlying liability,

she had failed to provide requested information to show the correct amount of her

income. The notice states that the settlement officer verified that: (1) all

applicable laws, regulations, and administrative procedures had been followed in

connection with the assessments and proposed collection of the taxes at issue; (2)
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on balance, the proposed collection by NFTL and levy was no more intrusive than

necessary; (3) petitioner had not raised any valid challenge to the collection action

contemplated; (4) petitioner had not suggested any collection alternative; and (5) the

settlement officer had not had any prior involvement with respect to petitioner’s

income tax liabilities for the years at issue.

       Petitioner timely petitioned this Court, seeking review of the determination to

proceed with the proposed collection actions. The petition disputes that Mr.

Harman raised frivolous arguments during the telephone conference and asserts that

the settlement officer failed to provide adequate information about what

documentation was needed to correct the third-party payer information reports and

prematurely terminated the telephone conference without giving Mr. Harman

adequate opportunity to respond to the settlement officer’s concerns. In particular,

according to the petition, the premature termination of the telephone conference

denied Mr. Harman the opportunity to reply that “the figures assessed as taxes owed

appeared to be the total of all monies or other compensation received by Ms.

Carlson as private sector receipts for the periods in question”. The petition also

asserts that the IRS followed improper procedures by making an actual levy eight

days after issuing the notice of intent to levy. The petition asserts no error with

respect to the additions to tax for failure to timely file, failure to timely pay, and
                                          -7-

failure to pay estimated tax under section 6651(a)(1) and (2) and section 6654 for

the years at issue.

                                       OPINION

      Respondent concedes that because petitioner had no prior opportunity to

dispute her underlying liabilities, she is entitled to do so in this proceeding. See

Callahan v. Commissioner, 130 T.C. 44, 50 (2008). We review petitioner’s

underlying liabilities de novo. See Sego v. Commissioner, 114 T.C. 604, 610

(2000). Other issues we review for abuse of discretion. See id. at 609-610. The

burden of proof is upon petitioner to show error in respondent’s determination as to

her underlying liabilities. See Rule 142(a).3

      In challenging her underlying liabilities in this proceeding, as in the

administrative proceedings below, petitioner has raised only frivolous and

groundless arguments. Prominent among these frivolous arguments is that because

she resided in Washington or Oregon during the years at issue, she did not live in

the United States and so is not subject to U.S. taxation. See United States v.

Cooper, 170 F.3d 691 (7th Cir. 1999) (imposing a sanction for filing a frivolous

appeal that asserted that only residents of Washington, D.C., and other Federal


      3
       Petitioner does not contend and the record does not suggest that the burden
of proof as to any factual issue should shift to respondent pursuant to sec. 7491(a).
                                         -8-

enclaves are citizens of the United States subject to Federal tax laws). Similarly

lacking even colorable merit are petitioner’s remaining arguments, including her

argument that only gain from the sale of capital assets and property described under

section 1231(b) constitutes taxable income, that her income is not taxable because

she is not incorporated, and that her wages are not taxable because the third-party

information returns did not correctly apply the definition of wages and employment

as defined in section 3121(a) and (b). See Lindberg v. Commissioner, T.C. Memo.

2010-67 (sustaining section 6702 frivolous-return penalty for reporting zero wages

on basis that Form W-2, Wage and Tax Statement, did not correctly apply definition

of wages under sections 3401 and 3121).

      Section 6201(d) provides that if, in any court proceeding, a taxpayer fully

cooperates with the Commissioner and raises a reasonable dispute with respect to

an information return, the Commissioner has the burden of producing reasonable

and probative evidence to verify the information return. Although some of

petitioner’s assertions might be construed as attacking the validity of the third-

party information returns on which respondent predicated his assessments, she has

not raised a reasonable dispute regarding the information returns. She has not

disputed any specific item of income determined by respondent, nor has she
                                         -9-

denied receiving compensation during the years at issue. To the contrary, her

petition acknowledges receiving “monies or other compensation * * * as private

sector receipts for the periods in question”. And in her pretrial memorandum she

states that she “worked for private company and received private sector receipts”.

Petitioner has not asserted or shown that the correct amounts of her taxable income

differ from the amounts shown on the third-party information returns upon which

respondent’s determinations are predicated.

      The petition contains no specific allegations or supporting facts regarding the

section 6651(a)(1) and (2) and 6654 additions to tax. Petitioner’s frivolous and

groundless arguments at trial and on brief similarly do not raise any legitimate issue

or defense regarding these additions to tax. We deem petitioner to have conceded

the section 6651(a)(1) and (2) and 6654 additions to tax and hold that respondent

has no burden of production under section 7491(c) with respect to them. See Funk

v. Commissioner, 123 T.C. 213, 217-218 (2004); Swain v. Commissioner, 118 T.C.

358, 363-365 (2002).

      Petitioner suggests that the settlement officer abused her discretion by

terminating the telephone conference prematurely. The administrative record

reflects that the settlement officer terminated the telephone conference after Mr.

Harman persisted in making only frivolous arguments. We are not persuaded that
                                         - 10 -

the settlement officer abused her discretion in this regard. In any event, because

petitioner has raised no colorable claim in this proceeding, we do not believe it is

necessary, productive, or appropriate to remand this case to respondent’s Appeals

Office for any additional hearing. See Lunsford v. Commissioner, 117 T.C. 183,

189 (2001).

      Petitioner has asserted that respondent prematurely levied upon her property

eight or nine days after issuing the notice of intent to levy. But respondent’s

records show that respondent has not yet made any levy upon petitioner’s

property.4

      Petitioner has offered no collection alternatives and asserted no spousal

defenses. From our review of the record we are satisfied that respondent has

satisfied the requirements of sections 6320 and 6330. Consequently, we shall

sustain respondent’s determinations.

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

the United States a penalty of up to $25,000 whenever it appears that proceedings

have been instituted or maintained by the taxpayer primarily for delay or that the

taxpayer’s position in the proceedings is frivolous or groundless. Respondent has


      4
        It appears that petitioner has confused the Letter 3172, issued eight days
after the notice of intent to levy, with notice of an actual levy.
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not asked that we impose a section 6673 penalty. We strongly warn petitioner that

she may be subject to a section 6673 penalty, even upon the Court’s own motion,

if she persists in maintaining proceedings in this Court primarily for delay or

continues to press frivolous arguments.

      To reflect the foregoing,


                                                         Decision will be entered

                                                   for respondent.
