                                 T.C. Memo. 2012-170



                          UNITED STATES TAX COURT



                  ELMER JON BUCKARDT, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 29924-09L.                            Filed June 18, 2012.



      Elmer Jon Buckardt, pro se.

      Lisa M. Oshiro, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


      MARVEL, Judge: Petitioner petitioned the Court to review determinations of

the Internal Revenue Service’s (IRS) Office of Appeals (Appeals Office) sustaining

(1) the filing of a notice of Federal tax lien relating to petitioner’s unpaid Federal
                                          -2-

income taxes for 2001 and 2002 and section 67021 civil penalty for 2000,2 (2) the

filing of a notice of Federal tax lien relating to petitioner’s unpaid Federal income

tax for 2000 and section 6702 penalties for 2001 and 2002, and (3) a proposed levy

to collect petitioner’s Federal income taxes and section 6702 penalties for 2000-02.

Pursuant to section 6330(d), petitioner timely filed a petition seeking review of

respondent’s determinations. Respondent filed a motion to permit levy pursuant to

section 6330(e)(2) and a motion to impose a penalty under section 6673(a). As

discussed below, we shall sustain the notices of determination and grant

respondent’s motion to permit levy but shall not impose a penalty under section

6673(a) at this time.




      1
       Unless otherwise indicated, section references are to the Internal Revenue
Code of 1986 (Code), as amended, and Rule references are to the Tax Court Rules
of Practice and Procedure.
      2
       Although respondent assessed and is attempting to collect the sec. 6702
penalty, the Notice of Federal Tax Lien Filing and Your Right to a Hearing Under
IRC 6320 (first lien notice) and the related notice of determination showed a sec.
6672 penalty and not a sec. 6702 penalty. However, the activity record of
Settlement Officer L. Silva who was assigned to the case and other parts of the
attachment to the notice of determination show that Settlement Officer Silva
addressed the correct penalty. We therefore treat the references to the sec. 6672
penalty as typographical errors.
                                           -3-

                                 FINDINGS OF FACT

      Some facts have been stipulated and are so found. We incorporate the

stipulated facts into our findings by this reference. Petitioner resided in Washington

when he filed his petition.

      Petitioner failed to file his Federal income tax returns for 2000-02.

Respondent prepared substitutes for returns for petitioner under section 6020(b).

On dates that do not appear in the record respondent mailed petitioner, and

petitioner received, a notice of deficiency for 2000. On May 19, 2003, respondent

assessed petitioner’s Federal income tax liability, interest, and an addition to tax

under section 6651(a)(1) for failure to timely file a return for 2000.

      At some point in 2004 respondent mailed petitioner, and petitioner received,

separate notices of deficiency for 2001 and 2002. Petitioner filed petitions in

response to the notices of deficiency for 2001 and 2002, but this Court dismissed

both cases for failure to state a claim.

      On March 7, 2005, respondent assessed petitioner’s Federal income tax

liability, interest, and additions to tax under section 6651(a)(1) for failure to timely

file a return and section 6654(a) for failure to pay estimated tax for 2001. On May

30, 2005, respondent assessed petitioner’s Federal income tax liability, interest, and

additions to tax under section 6651(a)(1) for failure to timely file a return and
                                           -4-

section 6654(a) for failure to pay estimated tax for 2002.3 Respondent issued

petitioner notices of balance due for each year, but petitioner failed to remit to

respondent the amounts due.

      At some point before June 2008 petitioner filed what respondent determined

to be frivolous returns for 2000-02. On or about May 5, 2008, petitioner mailed a

letter to the IRS in which petitioner asked 16 questions, such as which information

he submitted to the IRS was frivolous, what was the meaning of “frivolous”,

“position”, and “arguments advanced”, as well as a number of questions regarding

the section 6702 penalty for frivolous tax returns and submissions. In his letter

petitioner stated that he expected a meaningful clarification of the reasons for the

IRS’ “‘frivolous’ allegation” within 30 days. In conclusion petitioner stated that he

preferred all correspondence in writing.

      On June 23 and September 1 and 8, 2008, respondent assessed petitioner

section 6702 penalties for filing frivolous Federal income tax returns for 2000, 2001,

and 2002, respectively. On the same dates respondent issued petitioner notices of

balance due.


      3
        On November 14, 2005, respondent also assessed petitioner an addition to
tax under sec. 6651(a)(2) for failure to timely pay tax for 2000. On September 3,
2007, respondent assessed petitioner additions to tax under sec. 6651(a)(2) for
failure to timely pay taxes for 2001 and 2002.
                                           -5-

      On November 12, 2008, respondent mailed petitioner the first lien notice

informing him that a notice of Federal tax lien had been filed with respect to his

unpaid Federal income tax liabilities for 2001 and 2002 and for the unpaid section

6702 penalty assessed for 2000.4 On November 29, 2008, respondent mailed

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

(final notice) with respect to his liability for the unpaid Federal income tax liabilities

and section 6702 penalties for 2000-02. On December 9, 2008, respondent mailed

petitioner a lien notice informing him that a notice of Federal tax lien had been filed

with respect to his unpaid Federal income tax liability for 2000 and the unpaid

section 6702 penalties assessed for 2001 and 2002 (second lien notice). On

December 23, 2008, petitioner mailed respondent a letter asserting that the IRS had

violated his due process rights. In the December 23, 2008, letter, petitioner referred

to the notices of deficiency for 2000-02.

      Petitioner timely submitted three letters requesting a hearing. In each letter he

stated that he disagreed with respondent’s collection actions for the following

reason:

      A procedurally proper assessment is the instrument that establishes
      liability, whether it be a tax itself, the interest or penalties. No

      4
       As discussed above, see supra note 2, the first lien notice contained a
typographical error and referred to the sec. 6672 penalty.
                                          -6-

      assessment is on the record. I request that a procedurally proper
      assessment be provided to me within 30 days of this request. I do not
      want a Form 4340, which is merely presumptive evidence of an
      assessment.

In the letter requesting a hearing with respect to the final notice, petitioner also

stated that he had “no receipts from a federally connected activity.”

      Petitioner’s cases were assigned to Settlement Officer Silva. On April 28,

2009, Settlement Officer Silva mailed petitioner three letters acknowledging the

receipt of his correspondence and scheduling a telephone hearing for May 26, 2009.

The letters informed petitioner that he would not be able to raise the issue of the

underlying liabilities during the hearing because he had had prior opportunities to

dispute the balances owed. Settlement Officer Silva also stated that the Appeals

Office would not consider the frivolous issues that petitioner had raised in his

request for a section 6330 hearing. Settlement Officer Silva enclosed transcripts of

petitioner’s tax accounts and requested that he provide a completed Form 433-A,

Collection Information Statement for Wage Earners and Self-Employed Individuals.

      On or about May 19, 2009, Settlement Officer Silva mailed petitioner a letter

stating that per petitioner’s request received May 8, 2009, the section 6330 hearing

would be conducted through correspondence and that the May 19, 2009, letter was
                                         -7-

petitioner’s section 6330 hearing. In the May 19, 2009, letter, Settlement Officer

Silva wrote that petitioner’s position was intended to delay or impede Federal tax

administration or was a “specified frivolous position”. Settlement Officer Silva

allowed petitioner additional time to amend his hearing request and raise legitimate

issues, such as collection alternatives, challenges to the appropriateness of

collection action, or spousal defenses, if applicable. Settlement Officer Silva again

requested petitioner to provide a completed Form 433-A.

      In the May 19, 2009, letter, Settlement Officer Silva also stated that if

petitioner failed to withdraw frivolous issues from his requests for a hearing or

withdraw those hearing requests, section 6702(b) authorized the IRS to impose a

$5,000 penalty. Settlement Officer Silva acknowledged petitioner’s entitlement to

challenge the underlying liabilities because the IRS did not issue a notice of

deficiency with respect to the section 6702 penalties. On May 26, 2009, Settlement

Officer Silva mailed petitioner two letters similar to the May 19, 2009, letter, which

constituted petitioner’s section 6330 hearings with respect to the second lien notice

and the levy notice. By the May 26, 2009, letters, Settlement Officer Silva gave

petitioner the opportunity to amend his hearing requests and submit the Forms 433-

A by June 9, 2009.
                                         -8-

      On June 1, 2009, petitioner mailed a letter demanding that Settlement Officer

Silva accept his returns as filed and withdraw the notice of lien within 10 days,

reiterating his demand for a record of assessment, and stating that under the Code

the domestic income of most Americans is not taxable. Petitioner also demanded

that his case be assigned to an Appeals officer rather than a settlement officer.

Instead of enclosing a completed Form 433-A, petitioner attached a statement

claiming, among other things, that information sought in the Form 433-A was

protected by the Fourth and Fifth Amendments to the U.S. Constitution.

      On November 19, 2009, respondent sent petitioner three Notices of

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

sustaining the two notices of lien and the final notice. According to the attachments

to the notices of determination, the Appeals Office concluded that (1) all legal and

administrative requirements had been met, (2) petitioner failed to raise any

nonfrivolous issues or suggest collection alternatives, and (3) the liens and the levy

properly balanced the need for efficient collection of taxes with the concerns

regarding the intrusiveness of the collection actions. Petitioner timely petitioned this

Court, challenging respondent’s determinations. In the petition, petitioner

challenged respondent’s authority to make a substitute for return, demanded a

record of assessment other than a Form 4340, Certificate of Assessments, Payments,
                                          -9-

and Other Specified Matters, and asserted he owed no taxes for 2000-02 because

his “income derived from a domestic statutory grouping (source), which did not

appear in any operative section”.

                                       OPINION

I.    The Collection Actions

      A.     In General

      Section 6321 imposes a lien in favor of the United States on all property and

property rights of a taxpayer liable for taxes after a demand for the payment of the

taxes has been made and the taxpayer fails to pay those taxes. The lien arises when

the assessment is made. Sec. 6322. Section 6320(a) requires the Secretary5 to

notify the taxpayer in writing of the filing of a notice of Federal tax lien and of the

taxpayer’s right to an administrative hearing on the matter. Similarly, before

proceeding with a levy, the Secretary must notify the taxpayer in writing of the right

to a hearing. Sec. 6330(a) and (b)(1). During the hearing a taxpayer may raise any

relevant issue, including challenges to the appropriateness of the collection action

and possible collection alternatives. Sec. 6330(c)(2)(A). A taxpayer is precluded




      5
       The term “Secretary” means the Secretary of the Treasury or his delegate.
Sec. 7701(a)(11)(B).
                                         - 10 -

from contesting the existence or amount of the underlying tax liability unless the

taxpayer did not receive a notice of deficiency for the tax liability in question

or did not otherwise have an opportunity to dispute the tax liability. See sec.

6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000).

      Following a hearing, the Appeals Office must issue a notice of determination

regarding the validity of the filed Federal tax lien and/or whether the proposed levy

action may proceed. The Appeals Office is required to take into consideration: (1)

verification presented by the Secretary that the requirements of applicable law and

administrative procedure have been met, (2) relevant issues raised by the taxpayer,

and (3) whether the proposed collection action appropriately balances the need for

efficient collection of taxes with a taxpayer’s concerns regarding the intrusiveness of

the proposed collection action. Sec. 6330(c)(3).

      If the taxpayer disagrees with the Appeals Office’s determination, the

taxpayer may seek judicial review by appealing to this Court. Sec. 6330(d). We

have jurisdiction to review the Commissioner’s determination when the underlying

tax liability consists of frivolous return penalties. Callahan v. Commissioner, 130

T.C. 44, 48-49 (2008). Where the validity of the underlying tax liability is properly

at issue, the Court reviews the determination regarding such liability de novo.
                                        - 11 -

Sego v. Commissioner, 114 T.C. at 610; Goza v. Commissioner, 114 T.C. 176, 181-

182 (2000). Where the validity of the underlying tax liability is not properly at

issue, the Court reviews the determination of the Appeals Office for abuse of

discretion. Sego v. Commissioner, 114 T.C. at 610; Goza v. Commissioner, 114

T.C. at 182. An abuse of discretion occurs if the Appeals Office exercises its

discretion “arbitrarily, capriciously, or without sound basis in fact or law.” Woodral

v. Commissioner, 112 T.C. 19, 23 (1999); see also Murphy v. Commissioner, 125

T.C. 301, 320 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006).

      B.     Review of Respondent’s Determinations

      Petitioner acknowledges that he received the notices of deficiency for 2000-

02. Accordingly, he may not challenge in this proceeding the existence or the

amount of his Federal income tax liabilities for the years at issue. See sec.

6330(c)(2)(B). Petitioner did not receive a notice of deficiency with respect to the

section 6702 penalties because the deficiency procedures of sections 6211-6216 do

not apply to frivolous return penalties under section 6702. Sec. 6703(b). Petitioner

also did not have an opportunity to dispute those penalties. Accordingly, petitioner

was entitled to challenge the section 6702 penalties during the section 6330 hearing.

See Callahan v. Commissioner, 130 T.C. at 50; see also Grunsted v. Commissioner,

136 T.C. 455, 458 (2011).
                                         - 12 -

      Although petitioner was entitled to challenge the section 6702 penalties

during the section 6330 hearing, in his correspondence with the Appeals Office he

did not present evidence or argument regarding why he was not liable for them.

Instead, he stated that there was no assessment on the record and that he should

have been provided with a procedurally proper assessment rather than a Form 4340.

In subsequent correspondence he demanded definitions of the words “frivolous” and

“position” and asserted other similar arguments, but he did not argue that he should

not be liable for the section 6702 penalties. Generally, we may consider only those

issues that the taxpayer raised during the section 6330 hearing. See Giamelli v.

Commissioner, 129 T.C. 107, 115 (2007); Magana v. Commissioner, 118 T.C. 488,

493 (2002); sec. 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs. Petitioner

did not properly raise the issue of his liability for the section 6702 penalties during

the section 6330 hearing, and we therefore shall not consider it in this proceeding.6

See Giamelli v. Commissioner, 129 T.C. at 115; Granger v. Commissioner, T.C.



      6
        In addition, we deem petitioner to have conceded the issue of whether he is
liable for the sec. 6702 penalties because his petition contains no specific allegations
or supporting facts regarding them. See Rule 34(b)(4). Petitioner’s frivolous and
groundless arguments at trial also do not raise any legitimate issue regarding these
penalties. Accordingly, respondent has no burden of production under sec. 7491(c)
with respect to the sec. 6702 penalties. See Funk v. Commissioner, 123 T.C. 213,
217-218 (2004); Swain v. Commissioner, 118 T.C. 358, 363-365 (2002).
                                         - 13 -

Memo. 2009-258; Stockton v. Commissioner, T.C. Memo. 2009-186; sec.

301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs. Because the issue of

petitioner’s underlying liabilities is not properly before us, we review for

abuse of discretion the Appeals Office’s conclusion to proceed with the

collection actions.

      In his requests for a section 6330 hearing and in the petition, petitioner stated

that he disagreed with the collection actions because the Form 4340 was merely

“presumptive evidence of an assessment.” We previously have held that no specific

form of verification of an assessment is required, that no particular document need

be provided to a taxpayer at a section 6330 hearing, and that a Form 4340 satisfies

the verification requirements of section 6330(c)(1). See Burke v. Commissioner,

124 T.C. 189, 195 (2005); Lunsford v. Commissioner, 117 T.C. 183 (2001). The

Forms 4340 in the record show that respondent assessed the tax liabilities that he

now intends to collect from petitioner and that respondent sent petitioner notices of

balance due. Petitioner has not alleged any irregularity in the assessment procedure

that would raise a question about the validity of the assessments or the information
                                         - 14 -

contained in the Forms 4340. Petitioner failed to raise any other issue during his

section 6330 hearing.7

      We reject the other arguments petitioner raised in his petition and at trial.

Petitioner asserts that respondent lacked the authority to prepare substitutes for

returns for petitioner. Petitioner is mistaken. Under section 6020(b)(1), the

Secretary has the authority to execute a return “[i]f any person fails to make any

return required by any internal revenue law or regulation made thereunder at the

time prescribed therefor, or makes, willfully or otherwise, a false or fraudulent

return”.

      In his petition, petitioner also contended that he did not owe any tax because

“all income derived from a domestic statutory grouping (source), which did not

appear in any operative section and therefore could not be included in gross

income”. We reject petitioner’s argument because the Code imposes an income tax

on income from sources within and without the United States. See sec. 1.1-1(b),

Income Tax Regs.




      7
       The notices of determination with respect to the lien notices refer to a
taxpayer that appears to be unrelated to petitioner and are poorly written and edited.
However, these lien notices show that Settlement Officer Silva fully addressed the
merits of petitioner’s case.
                                         - 15 -

       The record reflects that the Appeals Office properly verified that the

requirements of all applicable laws and administrative procedures were met.

Accordingly, we hold that the Appeals Office did not abuse its discretion in

determining to proceed with collection against petitioner.

       C.    Respondent’s Motion To Permit Levy

       Generally, section 6330(e)(1) provides that the Secretary may not proceed

with collection by levy if the taxpayer timely requests a section 6330 hearing and

while any appeals from such a hearing are pending. Section 6330(e)(2) provides an

exception to the suspension of the levy imposed under section 6330(e)(1) if the

taxpayer’s underlying tax liability is not at issue and the Court determines that good

cause is shown not to suspend the levy. We have jurisdiction to consider

respondent’s motion to permit levy. See Burke v. Commissioner, 124 T.C. at 196.

We have held that good cause exists when the taxpayer fails to assert any

meritorious arguments as to why the collection action may not proceed. Id. at 196-

197.

       Respondent requests us to permit levy only with respect to the Federal

income tax liabilities for 2000-02 and not with respect to the section 6702

penalties. As discussed supra p. 11, petitioner is barred from challenging the

existence or amount of his underlying tax liabilities for 2000-02 in this
                                        - 16 -

proceeding. See sec. 6330(c)(2)(B). In addition, petitioner failed to advance any

nonfrivolous argument or offer a collection alternative. Throughout this proceeding

petitioner has failed to raise any meritorious argument. We shall grant respondent’s

motion to permit levy.

II.   Section 6673 Penalty

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

the United States a penalty not in excess of $25,000 when it appears that

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

or that the taxpayer’s position in such proceeding is frivolous or groundless. See

also Burke v. Commissioner, 124 T.C. at 189. We have imposed the section

6673(a) penalty when taxpayers abused the procedural protections afforded by

sections 6320 and 6330. See id.; Pierson v. Commissioner, 115 T.C. 576, 581

(2000).

      Petitioner is no stranger in this Court: He has filed four petitions for

redetermination of deficiencies. In Buckardt v. Commissioner, T.C. Memo. 2010-

145, we sustained the Commissioner’s determination of deficiencies and additions

to tax under sections 6651(a)(1) and (2) and 6654(a) for 2003-05 but declined to

impose the section 6673(a)(1) penalty. However, we warned petitioner that we

would do so in the future if he continued to make frivolous arguments or instituted
                                        - 17 -

or maintained proceedings primarily for delay. See id. In Buckardt v.

Commissioner, T.C. Dkt. No. 22131-10 (Sept. 15, 2011) (bench opinion), which we

decided after the trial in this case, we sustained the Commissioner’s determination

of the deficiency and accuracy-related penalty under section 6662(a) for 2008 and

required Mr. Buckardt to pay a $25,000 penalty pursuant to section 6673(a)(1).8

      Petitioner’s statements in the petition and the reply and at trial demonstrate

that he has not fully abandoned arguments that we typically describe as frivolous.

However, this is petitioner’s first collection review proceeding in this Court. He

cooperated in the stipulation process and did not raise his income grouping

argument at trial. In the exercise of our discretion, we shall not impose a section

6673 penalty at this time, but we warn petitioner that we may impose this penalty if

he returns to this Court and makes similar arguments in the future.




      8
       As discussed above, see supra p. 3, petitioner also filed petitions in this
Court in 2004 in response to the notices for deficiencies for 2001-02. Both of those
cases were dismissed for failure to state a claim upon which relief can be granted.
                                       - 18 -

      We have considered all of the arguments raised by either party, and to the

extent not discussed above, we find them to be irrelevant or without merit.

      To reflect the foregoing,


                                                An order will be entered granting

                                       respondent’s motion to permit levy and

                                       denying respondent’s motion to impose the

                                       section 6673 penalty, and decision will be

                                       entered for respondent.
