                    120 T.C. No. 8



                UNITED STATES TAX COURT



    HOWARD AND EVERLINA WASHINGTON, Petitioners v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 11152-01L.           Filed March 6, 2003.



     Held: The Court has jurisdiction to determine
whether the U.S. Bankruptcy Court discharged petition-
ers from their respective unpaid Federal income tax
(tax) liabilities for their taxable years 1994 and
1995. Held, further, The U.S. Bankruptcy Court did
not discharge petitioners from such liabilities.

     Held, further, Respondent’s application of peti-
tioners’ overpayment for their taxable year 1997 as a
credit against their unpaid tax liability for their
taxable year 1990, and not 1998, was proper. See sec.
6402(a), I.R.C.

     Held, further, Respondent may proceed with the
collection action as determined in the notice of deter-
mination with respect to each of petitioners’ taxable
years 1994, 1995, and 1998.
                                - 2 -

     Howard Washington and Everlina Washington, pro sese.

     Marie E. Small, for respondent.



     CHIECHI, Judge:    The petition in this case was filed in

response to a notice of determination concerning collection

action(s) under section 6320 and/or 63301 (notice of determina-

tion).

                          FINDINGS OF FACT

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

     At the time petitioners filed the petition in this case,

they resided in New York, New York.

     On December 12, 1996, petitioners jointly filed late Form

1040, U.S. Individual Income Tax Return (Form 1040), for each of

their taxable years 1994 (1994 return) and 1995 (1995 return).2

In their 1994 return, petitioners reported that they owed $6,680

in tax.   In their 1995 return, petitioners reported that they

owed $8,874 in tax.    When petitioners filed Forms 1040 for their

taxable years 1994 and 1995, they did not pay the respective

amounts of tax that they owed for those years.


     1
      All section references are to the Internal Revenue Code in
effect at all relevant times. All Rule references are to the Tax
Court Rules of Practice and Procedure.
     2
      Petitioners’ 1995 return was due on Apr. 15, 1996. The
record does not establish when petitioners’ 1994 return was due.
However, the maximum extension of time that respondent could have
granted for the filing of petitioners’ 1994 return was 6 months.
Sec. 6081(a).
                               - 3 -

     On February 3, 1997, respondent assessed petitioners’ tax,

as well as any penalties and interest as provided by law, for

each of their taxable years 1994 and 1995.

     In April 1998, petitioners jointly filed Form 1040 for their

taxable year 1997 (1997 return).   In their 1997 return, petition-

ers claimed a refund of $1,741 (petitioners’ 1997 overpayment).

     On April 15, 1998, when petitioners’ 1997 return was due,

petitioners’ unpaid tax liability for 1990 (petitioners’ unpaid

1990 liability) exceeded $1,741, the amount of petitioners’ 1997

overpayment.   On a date after April 15, 1998, and before June 8,

1998, that is not disclosed by the record, respondent applied

petitioners’ 1997 overpayment as a credit against petitioners’

unpaid 1990 liability; i.e., respondent used that overpayment to

offset part of that liability.3

     On May 18, 1998,4 petitioners filed a petition (bankruptcy


     3
      In a notice dated June 8, 1998 (June 8, 1998 notice) relat-
ing to petitioners’ taxable year 1997, respondent informed
petitioners that respondent had applied petitioners’ 1997 over-
payment to “OTHER FEDERAL TAXES” and that petitioners were not
entitled to any refund for their taxable year 1997. Only the
first page of the June 8, 1998 notice is part of the instant
record. The portion of that notice which showed, inter alia, the
“OTHER FEDERAL TAXES” to which respondent applied petitioners’
1997 overpayment is not part of the record in this case. How-
ever, the parties stipulated that respondent applied the 1997
overpayment as a credit against petitioners’ unpaid 1990 liabil-
ity.
     4
      The parties stipulated that petitioners filed their bank-
ruptcy petition on May 8, 1998. That stipulation is clearly
contrary to the date of May 18, 1998, that the U.S. Bankruptcy
                                                   (continued...)
                               - 4 -

petition) in the U.S. Bankruptcy Court for the Southern District

of New York, thereby commencing a bankruptcy proceeding under

Chapter 7 of Title 11 of the United States Code.   Attached to

petitioners’ bankruptcy petition was a document entitled “Sched-

ule E - Creditors Holding Unsecured Priority Claims” (petition-

ers’ bankruptcy Schedule E).   Petitioners’ bankruptcy Schedule E

listed the Internal Revenue Service as a creditor with respect to

a claim totaling $20,000 relating to petitioners’ “TAXES FOR

1991, 1992, 1993, 1994, 1995, & 1996.”5

     On September 25, 1998, the U.S. Bankruptcy Court for the

Southern District of New York entered a “DISCHARGE OF DEBTOR,

ORDER OF FINAL DECREE” (September 25, 1998 discharge order).     The

September 25, 1998 discharge order provided in pertinent part:

     IT IS ORDERED THAT:

     1.   The Debtor is released from all dischargeable
          debts.

     2.   Any judgment not obtained in this court is null and
          void as to the personal liability of the Debtor(s)
          regarding the following:



     4
      (...continued)
Court for the Southern District of New York stamped on that
petition, and we shall disregard that stipulation. See Cal-Maine
Foods, Inc. v. Commissioner, 93 T.C. 181, 195 (1989). The record
establishes, and we have found, that petitioners filed their
bankruptcy petition on May 18, 1998.
     5
      The only other creditor listed in petitioners’ bankruptcy
Schedule E was the New York State Department of Taxation and
Finance with respect to a claim totaling $7,000 relating to
petitioners’ “TAXES FOR 1991, 1992, 1993, 1994, 1995 & 1996.”
                                - 5 -

         (a) debts dischargeable under 11 U.S.C. § 523(a);

         (b) debts alleged to be excepted from discharge
             under 11 U.S.C. § 523(a)(2),(4),(6) or (15)
             unless determined by this court to be
             nondischargeable;

         (c) debts determined by this court to be
             discharged.

     On April 15, 1999, petitioners jointly filed Form 1040 for

their taxable year 1998 (1998 return).    In their 1998 return,

petitioners (1) reported a total tax of $3,390.24, (2) reduced

that amount by (a) $399.96, which represented tax previously

withheld, and (b) $1,741, which represented petitioners’ 1997

overpayment,6 and (3) reported that they owed $1,249.28 in tax

for their taxable year 1998.    When petitioners filed Form 1040

for their taxable year 1998, they did not pay the amount of tax

that they owed for that year.

     On June 21, 1999, respondent assessed petitioners’ tax, as

well as any penalties and interest as provided by law, for their

taxable year 1998.

     On January 26, 2001, respondent filed a notice of Federal

tax lien in New York County, New York, with respect to petition-

ers’ taxable years 1994, 1995, and 1998.    That notice showed in

pertinent part:


     6
      Respondent did not apply petitioners’ 1997 overpayment as a
credit against the total tax reported in petitioners’ 1998
return. That is because, as we found above, respondent had
previously applied that overpayment as a credit against
petitioners’ unpaid 1990 liability.
                              - 6 -

         Taxable Year     Unpaid Balance of Assessment
             1994                   $ 9,850.51
             1995                    11,938.14
             1998                     1,568.62

(We shall refer to the foregoing unpaid balance of assessment for

each of petitioners’ taxable years 1994, 1995, and 1998, as well

as any accrued interest thereon not yet assessed, as petitioners’

unpaid liability for each of those years.)

     On January 31, 2001, respondent mailed to petitioners a

notice informing them that respondent had filed a Federal tax

lien with respect to petitioners’ unpaid liability for each of

their taxable years 1994, 1995, and 1998 and that they had a

right to a hearing (Appeals Office hearing) with respect to that

lien.

     On February 8, 2001, petitioners filed Form 12153, Request

for a Collection Due Process Hearing (Form 12153).   In an attach-

ment to Form 12153, petitioners stated in pertinent part:

     First, may we state for the record that your intent to
     enact a lien against any assets, jobs, or personal
     property or finances that we may have is a grave error.
     We insist that you cease from any impending actions to
     avert any embarrassment or possible legal consequences,
     which can thus be avoided. We trust that you will fax
     us a statement immediately of your intent to suspend
     action as outlined in your (collection appeals rights).

     Second, we are eager to finally put closure to this
     outstanding tax matter for the years indicated, and we
     trust that you will work fairly and cooperatively with
     us in reaching a mutual resolution. We feel our posi-
     tion of not owing the outstanding balance for which
     payment is being requested is based on the bankruptcy
     court decree under case number (98-43339) AJG, dated
                          - 7 -

September 25, 1998.   (see attached copy).

The tax years 1994 and 1995 were part of this charge
off through bankruptcy and were granted along with
other years that have already been resolved. The IRS
was well informed of our intent to charge off the
aforementioned years, and had ample time to question,
refute, or object to our intent to charge off said
years. A period of 4 months passed without objection
either in writing or in person prior to the final
decree being rendered on 9/25/98 by the Honorable Judge
Arthur J. Gonzalez. Therefore, once the charge off was
finalized, we were under the complete understanding
that these tax years were no longer an issue and that
the entire matter had been acceptably resolved.

On June 17, 1999, a hand written communiqué was sent to
our attention by a customer service representative
* * * instructing us to send you a copy of our dis-
charge papers to the IRS * * *. We were left with the
understanding that once we complied with this request,
the necessary adjustment to our accounts would be made
and this matter would no longer be an issue.

Well, we complied with this request and to no avail; we
are still dealing with this matter almost two years
later. So, let me make our position very clear, we do
not wish to battle with you over what seems to be a
major misunderstanding. If in fact the amounts in
question have been legally charged off for the years
1994 and 1995, then a letter of acknowledgement indi-
cating that the charge is acceptable will satisfy our
request for resolution. If in fact you do not agree
with the charge off and you wish to discuss this with
us in person, we will comply with a prearranged visit
in order to reach an amicable resolve that both sides
can live with. However, it must be understood upon
receipt of this letter that all actions to implement a
lien, garnishment of income, seizure of assets or any
other punitive actions are immediately suspended with-
out prejudice, and a notice acknowledging such will be
forthcoming to abate any undue concern.

With regard to tax year 1998, this year was not part of
the bankruptcy charge off, however, the amount in
question arises from a deduction taken from a refund
due us that was used to pay for taxes for one of the
years that was charged off. When we filed our taxes
                                - 8 -

     for 1998, the refund due us from 1997 that was applied
     to a year charged off, was reclaimed as a deduction in
     1998. Evidently your account specialist did not agree
     with our accountant’s reclaiming that refund, so arose
     the outstanding tax debt. [Reproduced literally.]

     On May 14, 2001, respondent held a telephonic Appeals Office

hearing with petitioners.   On August 9, 2001, the Appeals Office

mailed to petitioners a notice of determination regarding the

Federal tax lien that respondent had filed with respect to

petitioners’ unpaid liability for each of their taxable years

1994, 1995, and 1998.   That notice stated in pertinent part:

     Summary of Determination

     You protested the filing of the Notice of Federal Tax
     Lien (NFTL) because you believed 1994 and 1995 tax
     years had been discharged in a bankruptcy proceeding.
     The 1998 tax liability is also in dispute.

     You are incorrect in your assumption that 1994 and 1995
     were discharged in bankruptcy. They did not qualify as
     dischargeable debts and survived the bankruptcy. The
     liability for 1998 arose from a disallowed deduction
     and is considered a valid liability.

       *       *        *       *       *       *       *

     Relevant Issues Presented by the Taxpayer:

     You believe the 1994 and 1995 liabilities were dis-
     charged under the bankruptcy proceeding docketed as 98-
     43339. The bankruptcy petition was filed on 05/08/1998
     and listed these and prior years. The discharge was
     dated 09/28/1998. Thus, the lien for these two years
     would be erroneous.

     You further believe that a refund due to you for tax
     year 1997 was improperly applied to the liability for
     1990, a year that was discharged. When you filed your
     1998 return you claimed the amount of the refund as a
     deduction. This claim was disallowed and the liability
     arose. It is your contention that the refund is due to
                              - 9 -

     you and there should be no liability for 1998 and
     therefore, no reason to file the lien.

     Balancing Efficient Collection and Intrusiveness:

     It is necessary to balance the need to efficiently
     collect the outstanding liability against the taxpay-
     ers’ legitimate concerns that collection activity is
     not overly intrusive.

     In this case, you are mistaken in your belief that the
     1994 and 1995 liabilities were discharged. Under
     bankruptcy law 11 USC Sec. 523(a)(1)(B)(ii), the debt
     in respect to a tax is not discharged if the return was
     filed after two years before the date of the filing of
     the petition. The returns for 1994 and 1995 were filed
     02/03/1997. To be dischargeable they had to be filed
     no later than 05/08/1996. Therefore, by statute, they
     were not dischargeable.

     The refund you expected for 1997 became part of the
     bankruptcy estate when you filed the petition for
     Chapter 7. This is a liquidation of assets and pro-
     vides the mechanism for taking control of the property
     of the debtor. You no longer had an interest in the
     property of the bankruptcy estate therefore you lack
     standing to challenge the treatment of the refund. See
     In re Gucci, 126 F.3d 380, 388 (2d Cir. 1997). The
     disallowance of the deduction of the amount of the
     refund was the correct action and the liability created
     by the disallowance is due and owing.

     All legal and procedural guidelines were met prior to
     the filing of the NFTL. The years in question are
     based on valid assessments. The lien is considered to
     be the least intrusive method of protecting the Govern-
     ment’s interest in the collection of the debt.

     The determination * * * to file the lien is sustained.

                             OPINION

     In support of their position that respondent may not proceed

with collection with respect to their taxable years 1994 and

1995, petitioners contend that the U.S. Bankruptcy Court for the
                              - 10 -

Southern District of New York discharged them from their respec-

tive unpaid liabilities for such years.   Respondent does not

dispute that if we find that that court discharged petitioners

from such unpaid liabilities, respondent may not proceed with the

collection action as determined in the notice of determination

with respect to petitioners’ taxable years 1994 and 1995.

However, respondent disagrees with petitioners’ contention that

the U.S. Bankruptcy Court for the Southern District of New York

discharged petitioners from their respective unpaid liabilities

for those years.   We must first determine whether we have juris-

diction to resolve the parties’ dispute over whether that court

discharged petitioners from such unpaid liabilities.7   It is the

position of the parties that the Court has that jurisdiction.

     Where the Court has jurisdiction over the underlying tax

liability, the Court has jurisdiction to review a determination

by the Appeals Office to proceed by lien with respect to any such




     7
      Shortly after having received the parties’ respective trial
memoranda in this case, the Court advised the parties during a
telephonic conference, inter alia, that an issue exists as to
whether the Court has jurisdiction to resolve the dispute that
they discussed in such memoranda over whether the U.S. Bankruptcy
Court for the Southern District of New York discharged petition-
ers from their respective unpaid liabilities for their taxable
years 1994 and 1995. At the beginning of the trial in this case,
the Court reminded the parties about that jurisdictional issue.
After that trial, the Court directed the parties to address in
the posttrial briefs the jurisdictional issue that the Court had
raised.
                               - 11 -

unpaid liability.   See sec. 6330(d)(1).8   In the instant case,

the Appeals Office determined in the notice of determination,

inter alia, that the U.S. Bankruptcy Court for the Southern

District of New York did not discharge petitioners from their

respective unpaid liabilities for their taxable years 1994 and

1995 and that respondent may proceed by lien with respect to such

liabilities.

     We have held in deficiency proceedings commenced in the

Court under section 6213 that we do not have jurisdiction to

determine whether a U.S. Bankruptcy Court has discharged a

taxpayer from an unpaid tax liability in a bankruptcy proceeding

instituted by such taxpayer.   Neilson v. Commissioner, 94 T.C. 1,

9 (1990); Graham v. Commissioner, 75 T.C. 389, 399 (1980).     In so

holding, we relied on Swanson v. Commissioner, 65 T.C. 1180, 1184

(1976), in which we observed that an action brought for

redetermination of a deficiency “has nothing to do with collec-

tion of the tax nor any similarity to an action for collection of

a debt”.

     In contrast to a deficiency proceeding, a lien proceeding

commenced in the Court under section 6330(d)(1), such as the

instant lien proceeding, is closely related to and has everything



     8
      The instant case deals with a lien, which is subject to
sec. 6320. Sec. 6320(c) provides that “subsections (c), (d)
(other than paragraph (2)(B) thereof), and (e) of section 6330
[relating to proposed levies] shall apply.”
                              - 12 -

to do with collection of a taxpayer’s unpaid liability for a

taxable year.   We must determine in the instant lien proceeding

whether respondent may proceed with the collection action as

determined in the notice of determination with respect to, inter

alia, petitioners’ taxable years 1994 and 1995.   Whether the U.S.

Bankruptcy Court for the Southern District of New York discharged

petitioners from their respective unpaid liabilities for those

years is an issue that has a direct bearing on whether respondent

may proceed with the lien at issue.9   We hold that in the instant

lien proceeding commenced under section 6330(d)(1) the Court has

jurisdiction to determine whether the U.S. Bankruptcy Court for

the Southern District of New York discharged petitioners from

such unpaid liabilities.

     Having held that we have jurisdiction to resolve the dispute

between the parties over whether the U.S. Bankruptcy Court for

the Southern District of New York discharged petitioners from

their respective unpaid liabilities for their taxable years 1994

and 1995, we now address that dispute.


     9
      Sec. 6330(c)(2) allowed petitioners to raise at their
Appeals Office hearing any relevant issue with respect to their
respective unpaid liabilities for their taxable years 1994, 1995,
and 1998, including “(ii) challenges to the appropriateness of
collection actions”. Sec. 6330(c)(2)(A). Respondent does not
dispute that petitioners’ claim at their Appeals Office hearing
that the U.S. Bankruptcy Court for the Southern District of New
York discharged them from their respective unpaid liabilities for
their taxable years 1994 and 1995, which are the subject of a
lien, raised a relevant issue that challenges the appropriateness
of such lien.
                               - 13 -

     An individual debtor is not to be discharged in a bankruptcy

proceeding from certain specified categories of debts.   11 U.S.C.

sec. 523(a) (2000).   The first such category is described in

pertinent part in 11 U.S.C. sec. 523(a)(1) as follows:

     § 523.   Exceptions to discharge

          (a) A discharge under section 727, 1141, 1228(a),
     1228(b), or 1328(b) of this title [title 11] does not
     discharge an individual debtor from any debt–-

                (1) for a tax or a customs duty–

                     (A) of the kind and for the periods
                specified in section 507(a)(2) or 507(a)(8)
                of this title, whether or not a claim for
                such tax was filed or allowed;

                     (B) with respect to which a return, if
                required–

                           (i) was not filed; or

                           (ii) was filed after the date on
                      which such return was last due, under
                      applicable law or under any extension,
                      and after two years before the date of
                      the filing of the petition; * * *

     Petitioners argue that their respective unpaid liabilities

for their taxable years 1994 and 1995 do not fit within the

exception to discharge set forth in 11 U.S.C. sec.

523(a)(1)(B)(ii).   According to petitioners,

     only if the taxes were filed after 2 years before the
     date of filing of the petition would the years in
     question be non dischargeable [sic]. The tax years in
     question were filed 17 months before the date of the
     petition and not after 2 years before the date of the
     petition.

     The above-quoted argument of petitioners misconstrues and
                                - 14 -

misapplies 11 U.S.C. sec. 523(a)(1)(B)(ii).       An individual debtor

is not discharged in a bankruptcy proceeding from a debt for tax

with respect to which a return is filed after the date on which

such return was last due and after 2 years before the date of the

filing of the bankruptcy petition.       11 U.S.C. sec.

523(a)(1)(B)(ii).     In other words, an individual debtor is not

discharged in a bankruptcy proceeding from a debt for tax with

respect to which a return is filed late and within the 2-year

period immediately preceding the filing of the bankruptcy peti-

tion.     E.g., Young v. United States, 535 U.S. 43, 48-49 (2002).

        The September 25, 1998 discharge order of the U.S. Bank-

ruptcy Court for the Southern District of New York provided in

pertinent part that petitioners were “released from all

dischargeable debts.”     In the instant case, petitioners’ 1994

return and petitioners’ 1995 return both were filed late on

December 12, 1996.     Petitioners filed their bankruptcy petition

on May 18, 1998.     On the record before us, we find that petition-

ers filed their 1994 return and their 1995 return after the

respective dates on which such returns were last due and after 2

years before the date on which they filed their bankruptcy

petition.     See 11 U.S.C. sec. 523(a)(1)(B)(ii); see also Young v.

United States, supra.     We further find on that record that

pursuant to 11 U.S.C. sec. 523(a)(1)(B)(ii) the U.S. Bankruptcy

Court for the Southern District of New York did not discharge
                               - 15 -

petitioners from their respective unpaid liabilities for their

taxable years 1994 and 1995.

     We now consider petitioners’ unpaid liability for 1998.     It

is petitioners’ position that respondent should have applied

petitioners’ 1997 overpayment to offset part of their unpaid

liability for 1998, and not their unpaid liability for 1990.

Respondent argues that pursuant to section 6402(a) respondent’s

application of petitioners’ 1997 overpayment as a credit against

petitioners’ unpaid 1990 liability was proper.     Petitioners do

not address that argument.10

     Section 6402(a) provides in pertinent part:



     10
      Instead, for the first time on brief, petitioners contend
that respondent violated the automatic stay imposed by 11 U.S.C.
sec. 362(a) (2000) when respondent applied petitioners’ 1997
overpayment as a credit against their unpaid 1990 liability. We
shall not consider that contention. The record does not estab-
lish that petitioners raised that contention at their Appeals
Office hearing, see Magana v. Commissioner, 118 T.C. 488, 493-494
(2002); Miller v. Commissioner, 115 T.C. 582, 589 n.2 (2000); see
also sec. 301.6320-1(f)(2), Q&A-F5, Proced. & Admin. Regs., or at
trial, see Elrod v. Commissioner, 87 T.C. 1046, 1070 (1986);
Robertson v. Commissioner, 55 T.C. 862, 865 (1971). In any
event, we note that, as pertinent here, the automatic stay
imposed by 11 U.S.C. sec. 362(a) was effective on May 18, 1998,
the date on which petitioners filed their bankruptcy petition in
the U.S. Bankruptcy Court for the Southern District of New York.
See 11 U.S.C. sec. 362(a). In April 1998, petitioners filed
their 1997 return which showed petitioners’ 1997 overpayment.
The notice informing petitioners that respondent had applied
petitioners’ 1997 overpayment as a credit against another tax
liability of petitioners was dated June 8, 1998. We find that
the record does not establish that respondent applied petition-
ers’ 1997 overpayment as a credit against petitioners’ unpaid
1990 liability on or after May 18, 1998, the date on which
petitioners filed their bankruptcy petition.
                                 - 16 -

          In the case of any overpayment, the Secretary
     * * * may credit the amount of such overpayment * * *
     against any liability in respect of an internal revenue
     tax on the part of the person who made the overpayment
     * * *.

     When petitioners filed their 1997 return in April 1998, they

had an unpaid liability with respect to their taxable year 1990

that exceeded the amount of petitioners’ 1997 overpayment shown

in that return.     We hold that section 6402(a) authorized respon-

dent to credit petitioners’ 1997 overpayment against their unpaid

1990 liability.

     We now address what we understand to be petitioners’ posi-

tion that the Court should review respondent’s failure to abate

any penalties and interest under section 6404 with respect to

their taxable years 1994, 1995, and 1998 and should abate any

such penalties and interest.     We turn first to petitioners’

position regarding respondent’s failure to abate interest under

section 6404.     The record does not establish that petitioners

raised at their Appeals Office hearing respondent’s failure to

abate interest under section 6404.11      Consequently, we shall not

consider that matter.12     See Magana v. Commissioner, 118 T.C.


     11
      In support of their contention that they raised at their
Appeals Office hearing respondent’s failure to abate interest
under sec. 6404, petitioners rely on a document that they at-
tached to their answering brief and that is not part of the
instant record. The Court has disregarded that document. See
Rule 143(b).
     12
          Assuming arguendo (1) that the record before us had estab-
                                                       (continued...)
                              - 17 -

488, 493-494 (2002); Miller v. Commissioner, 115 T.C. 582, 589

n.2 (2000); see also sec. 301.6320-1(f)(2), Q&A-F5, Proced. &

Admin. Regs.

     We turn next to petitioners’ position regarding respondent’s

failure to abate penalties under section 6404.13   The record does

not establish that petitioners raised at their Appeals Office

hearing respondent’s failure to abate penalties under section




     12
      (...continued)
lished that petitioners raised at their Appeals Office hearing
respondent’s failure to abate interest under sec. 6404 with
respect to their taxable years 1994, 1995, and 1998 and (2) that
we concluded that we have jurisdiction under sec. 6404 to con-
sider petitioners’ request that we review such failure, see Katz
v. Commissioner, 115 T.C. 329, 340-341 (2000), on the instant
record, we find that petitioners have not shown that respondent
abused respondent’s discretion in failing to abate interest under
sec. 6404 for any of their taxable years 1994, 1995, and 1998.
See sec. 6404(h). In fact, we find on that record that petition-
ers have failed to establish any error or delay attributable to
an officer or employee of respondent being erroneous or dilatory
in performing (1) a ministerial act within the meaning of sec.
6404(e) requiring an abatement of interest with respect to their
taxable years 1994 and 1995 and (2) a ministerial or managerial
act within the meaning of sec. 6404(e) requiring an abatement of
interest with respect to their taxable year 1998. See Katz v.
Commissioner, supra at 341. In this connection, at trial peti-
tioner Howard Washington (Mr. Washington) testified about several
alleged acts of certain employees of the Internal Revenue Ser-
vice, which petitioners contend require abatement of interest
under sec. 6404. We find that none of the alleged acts about
which Mr. Washington testified qualifies as a ministerial act or
a managerial act within the meaning of sec. 6404(e). See sec.
301.6404-2(b)(1) and (2), Proced. & Admin. Regs.
     13
      The record does not disclose the nature of the penalties
for which respondent contends petitioners are liable.
                               - 18 -

6404.14   Consequently, we shall not consider that matter.15   See

Magana v. Commissioner, supra; Miller v. Commissioner, supra; see

also sec. 301.6320-1(f)(2), Q&A-F5, Proced. & Admin. Regs.

     Based upon our examination of the entire record before us,

we find that respondent may proceed with the collection action as

determined in the notice of determination with respect to each of

petitioners’ taxable years 1994, 1995, and 1998.

     We have considered all of petitioners’ arguments and conten-

tions that are not discussed herein, and we find them to be

without merit and/or irrelevant.

     To reflect the foregoing,

                                      Decision will be entered for

                                 respondent.



     Reviewed by the Court.

     COHEN, SWIFT, COLVIN, BEGHE, FOLEY, THORNTON, and MARVEL,
JJ., agree with this majority opinion.


     14
      In support of their contention that they raised at their
Appeals Office hearing respondent’s failure to abate penalties
under sec. 6404, petitioners rely on a document that they at-
tached to their answering brief and that is not part of the
instant record. The Court has disregarded that document. See
Rule 143(b).
     15
      Assuming arguendo that the record before us had estab-
lished that petitioners raised at their Appeals Office hearing
respondent’s failure to abate any penalties under sec. 6404 with
respect to their taxable years 1994, 1995, and 1998, we hold that
the Court does not have jurisdiction to review petitioners’
request that we review any such failure. See sec. 6404(h); see
also Woodral v. Commissioner, 112 T.C. 19, 21 n.4 (1999).
                                - 19 -

     WELLS, C.J., concurring:    I respectfully concur in this

Court's decision to exercise jurisdiction in the instant case to

decide whether a tax liability has been discharged in bankruptcy.

I write to note, however, that our opinion does not necessarily

preclude taxpayers from seeking review in an appropriate Bank-

ruptcy Court after they have petitioned this Court.    Although the

issue to be decided in the instant case is relatively straight-

forward, it is possible that taxpayers will present this Court

with more difficult questions that may be better suited for

consideration by a Bankruptcy Court.     Under such circumstances,

this Court may defer to a Bankruptcy Court to decide the matter.

Such deference would not be premised upon any concerns that we

lack jurisdictional capacity to consider the issue.    Rather, it

would be based upon considerations of comity and judicial effi-

ciency, combined with our recognition that this Court does not

deal with bankruptcy matters with the expertise that a Bankruptcy

Court possesses.   See Kluger v. Commissioner, 83 T.C. 309, 320

(1984).

     GERBER, BEGHE, and FOLEY, JJ., agree with this concurring
opinion.
                                 - 20 -

      HALPERN, J., concurring:

I.    Introduction

       I concur with the conclusion of the majority that respondent

may proceed with the collection action as determined in the

notice of determination with respect to each of petitioner’s

taxable years 1994, 1995, and 1998.       I write separately princi-

pally to add some observations concerning what we have character-

ized as the “standard of review” (described infra) applicable to

our jurisdiction under section 6330(d)(1) to review a section

6330 determination.

II.    Section 6330

       Section 6330 entitles a taxpayer to notice and an opportu-

nity for a hearing before certain lien and levy actions are taken

by the Commissioner in furtherance of the collection from the

taxpayer of unpaid Federal taxes.     At such required hearing (the

section 6330 hearing), the Appeals officer conducting the hearing

must verify that the requirements of any applicable law or

administrative procedure have been met.      Sec. 6330(c)(1).   The

taxpayer requesting the section 6330 hearing may raise “any

relevant issue relating to the unpaid tax or the proposed levy”.

Sec. 6330(c)(2)(A).    The taxpayer may also raise challenges to

the existence or amount of the underlying tax liability “if the

person did not receive any statutory notice of deficiency for

such tax liability or did not otherwise have an opportunity to
                               - 21 -

dispute such tax liability.”    Sec. 6330(c)(2)(B).    Following the

section 6330 hearing, the Appeals officer must determine whether

the collection action is to proceed, taking into account the

verification the Appeals officer has made, the issues raised by

the person requesting the hearing, and “whether any proposed

collection action balances the need for the efficient collection

of taxes with the legitimate concern of the person that any

collection action be no more intrusive than necessary.”      Sec.

6330(c)(3).    We have jurisdiction to review such determinations

where we have jurisdiction of the underlying tax liability.      Sec.

6330(d)(1)(A).

III.   The Nature of the Hearing Before Us

       In Sego v. Commissioner, 114 T.C. 604, 610 (2000), we

discussed the standard of review that a court is to apply in

reviewing a section 6330 determination.      After reviewing a

portion of the legislative history relevant to the enactment of

section 6330, we stated:

       [W]here the validity of the underlying tax liability is
       properly at issue, the Court will review the matter on
       a de novo basis. However, where the validity of the
       underlying tax liability is not properly at issue, the
       Court will review the Commissioner’s administrative
       determination for abuse of discretion.


See also Goza v. Commissioner, 114 T.C. 176, 181-183 (2000) (the

same).    Perhaps a more instructive way to describe the process

involved when we review a section 6330 determination would be to
                               - 22 -

distinguish between situations in which the taxpayer must rely on

the record made before the Appeals officer and situations in

which he is entitled to make a new record.   In reviewing adminis-

trative determinations, a court ordinarily is limited to consid-

eration of the decision of the agency involved and of the evi-

dence on which it was based.   United States v. Bianchi & Co., 373

U.S. 709, 714-715 (1963).   Nevertheless, we have concluded that,

in section 6330, Congress intended an exception to that general

rule in situations where the existence or amount of the underly-

ing tax liability was properly before the Appeals officer under

section 6330(c)(2)(B) and the Appeals officer’s determination in

that respect is presented to a court for review.   In such situa-

tions, the court must accord the taxpayer a hearing de novo on

the existence or amount of the underlying tax liability.   The

taxpayer may make a new record, and he is not restricted to

arguing from the record made before the Appeals officer.

IV.   Determining the Applicability of Section 6330(c)(2)(B)

      In order to determine which matters are properly raised by a

taxpayer under section 6330(c)(2)(B) (i.e., those matters with

respect to which the reviewing court must accord the taxpayer a

hearing de novo), it is necessary to review some basic provisions

of Chapters 63 (Assessment) and 64 (Collection) of the Internal

Revenue Code.   Section 6201(a) provides that the Secretary “is

authorized and required to make * * * assessments of all taxes
                                - 23 -

* * * imposed by this title”.    Such authority extends to “all

taxes determined by the taxpayer or by the Secretary” for which a

return is required.    Sec. 6201(a)(1).   A preliminary step is

required, however, in the case of income, estate, gift, and

certain excise taxes.    With respect to those types of taxes, if

the tax imposed exceeds the amount shown (if any) as the tax by

the taxpayer on the required return, the Commissioner (acting for

the Secretary) generally may not assess such deficiency without

first issuing a notice of deficiency to the taxpayer and allowing

the taxpayer to petition this Court for a redetermination of such

deficiency.    Secs. 6201(e), 6211(a), 6212, 6213(a), 6214(a), and

6215(a).    On the collection side, section 6303(a) provides

generally that the Secretary “shall * * * after the making of an

assessment of a tax * * * give notice to each person liable for

the unpaid tax, stating the amount and demanding payment

thereof.”

     When section 6330(c)(2) is read against the backdrop of the

statutory provisions discussed in the preceding paragraph, it

becomes apparent that the term “underlying tax liability”, as

used in section 6330(c)(2)(B), means the tax (which may or may

not be the correct tax) on which the Commissioner based his

assessment (whether such tax is the tax shown on the taxpayer’s

return or the tax determined as a result of an examination by the

Commissioner), whereas the term “unpaid tax”, as used in section
                               - 24 -

6330(c)(2)(A), refers to the unpaid portion of the assessed tax

(a fixed amount) that is the subject of the notice of lien or

proposed levy that is part of the Commissioner’s collection

function.   That interpretation is consistent with the proviso in

section 6330(c)(2)(B) that a petitioner may challenge “the

existence or amount of the underlying tax liability” only if the

taxpayer “did not receive any statutory notice of deficiency for

such tax liability or did not otherwise have an opportunity to

dispute such tax liability.”   That is, a taxpayer may dispute the

determination of the tax that formed the basis of the Commis-

sioner’s assessment only if he did not have such an opportunity

prior to assessment.

     To summarize, the only issues that a taxpayer may properly

raise under section 6330(c)(2)(B), and therefore the only issues

with respect to which the reviewing court must accord the tax-

payer a hearing de novo, are issues relating to a redetermination

of the tax on which the Commissioner based his assessment,

provided that the petitioner did not have an opportunity to seek

such a redetermination prior to assessment.   All other challenges

to the proposed collection action are properly raised under

section 6330(c)(2)(A), and a taxpayer seeking judicial review of

the Appeals officer’s disposition of any such challenge is

restricted to arguing from the record made before the Appeals

officer.
                               - 25 -

V.    The Discharge in Bankruptcy Issue

       Petitioners’ claim that the U.S. Bankruptcy Court for the

Southern District of New York (the Bankruptcy Court) discharged

them from their respective unpaid liabilities for 1994 and 1995

is not a challenge to the preassessment determination of the tax

but, rather, is in the nature of an affirmative defense that

petitioners could raise in any postassessment action to collect

the unpaid portion of the assessed tax from them.    See, e.g.,

First Natl. Bank v. Haymes, 268 N.Y.S.2d 820, 827 (City Civ. Ct.

1996), stating:    “[W]here the bankrupt is sued upon a debt[,] a

discharge in bankruptcy is a defense which must be affirmatively

pleaded by him.”    Such a defense is relevant to collection of the

unpaid portion of the assessed tax and, thus, is appropriately

raised under section 6330(c)(2)(A) (but not under section

6330(c)(2)(B)).

VI.    Standard of Review

       Where, upon appeal from a section 6330 determination, a

challenge to the existence or amount of the taxpayer’s underlying

tax liability (i.e., a challenge to the determination of the tax

on which the Commissioner based his assessment) is properly

before us, the taxpayer is entitled to a hearing de novo and may

make a record, and we should decide that challenge in the same

manner as we would redetermine a deficiency pursuant to section

6214.    In most other instances where we are asked to review a
                              - 26 -

section 6330 determination, the taxpayer will be asking us to

review some exercise of discretion by the Appeals officer, such

as his determination that the proposed collection action balances

the need for efficient collection against the intrusiveness of

the collection action.   Such a review of discretionary action

necessarily involves a question of what was before the Appeals

officer, and we determine whether the Appeals officer abused his

discretion by considering the record before him.   The standard of

review in such instances may, thus, be characterized as an “abuse

of discretion” standard.   Of course, we may be asked to review

whether the Appeals officer correctly applied the law, e.g.,

whether he correctly interpreted some provision of section 6015,

which provides relief from joint and several liability on joint

returns.   Whether characterized as a review for abuse of discre-

tion or as a consideration “de novo” (of a question of law), we

must reject erroneous views of the law.   See Cooter & Gell v.

Hartmarx Corp., 496 U.S. 384, 405 (1990).1   Finally, if we are

asked to review whether the Appeals officer satisfied his obliga-

tion under section 6330(c)(1) to obtain verification that all

legal and administrative requirements have been met, we are not


     1
        As put by the Court of Appeals for the Second Circuit in
the context of reviewing a discretionary action taken by the
District Court for the Southern District of New York: “It is not
inconsistent with the discretion standard for an appellate court
to decline to honor a purported exercise of discretion which was
infected by an error of law.” Abrams v. Interco, Inc., 719 F.2d
23, 28 (2d Cir. 1983).
                               - 27 -

presented with a matter of discretion.    At the two extremes, we

are presented either with a purely factual question (whether the

Appeals officer did it) or a purely legal question (whether his

actions were legally sufficient).

VII.   Conclusion

       In the case before us, the Appeals officer had before him

the Bankruptcy Court’s discharge order (the discharge order),

which, in pertinent part, provided that “the Debtor is released

from all dischargeable debts.”    The Appeals officer examined the

pertinent provisions of the bankruptcy law (in particular, 11

U.S.C. sec. 523(a)(1)(2000)) and determined that petitioners’

1994 and 1995 Federal income tax liabilities had not been dis-

charged.    The Appeals officer did not abuse his discretion in

determining that the discharge order did not discharge petition-

ers’ 1994 and 1995 tax liabilities.

     GERBER, BEGHE, and GALE, JJ., agree with this concurring
opinion.
                              - 28 -

     BEGHE, J., concurring:   I write separately to address

concerns expressed by Judge Vasquez and other concerns, and to

attempt to provide explanations of matters left to implication by

the majority opinion.

     On the initial question of the Court’s jurisdiction to

address the bankruptcy discharge issue, I would flesh out the

majority opinion’s conclusion that the Tax Court has jurisdiction

to address the issue under its statutory mandate, to observe that

the Bankruptcy Act, 28 U.S.C. section 1334(a) and (b) (2000),

does not deprive the Tax Court of jurisdiction.1   Although sub-

section (a) provides that “the district courts shall have origi-

nal and exclusive jurisdiction of all cases under title 11”, the

case at hand appears to be a situation described in subsection

(b) “arising under title 11, or arising in or related to cases

under title 11” in which the district courts have original but

not exclusive jurisdiction.   The corollary proposition is that

the case at hand is one in which other courts, including the Tax



     1
      28 U.S.C. sec. 1334(a) and (b) provides as follows:

     (a) Except as provided in subsection (b) of this
     section, the district courts shall have original and
     exclusive jurisdiction of all cases under title 11.

     (b) Notwithstanding any Act of Congress that confers
     exclusive jurisdiction on a court or courts other than
     the district courts, the district courts shall have
     original but not exclusive jurisdiction of all civil
     proceedings arising under title 11, or arising in or
     related to cases under title 11.
                               - 29 -

Court, have concurrent jurisdiction with the district courts to

decide various bankruptcy discharge issues.2

     The second paragraph of Judge Vasquez’s concurring opinion

indicates some uncertainty about what aspect of respondent’s

determination with respect to 1994 and 1995 we are reviewing.

The Court is reviewing (1) respondent’s ultimate determination

that “The determination * * * to file the lien is sustained” and

(2) the determination in support of that ultimate determination

that the Bankruptcy Court did not discharge petitioners from

their unpaid tax liabilities for the taxable years 1994 and 1995.

     Judge Vasquez states in his third paragraph that a challenge

to the appropriateness of collection action under section

6330(c)(2)(A)(ii) appears to him to be more about the type and/or

method of collection chosen by the IRS rather than being about

whether petitioners’ taxes were discharged in bankruptcy.    In my

view, a question about the appropriateness of the collection

action includes whether it is proper for the IRS to proceed with

the collection action as determined in the notice of determina-

tion.    I would conclude, and the parties agree, that if the

Bankruptcy Court discharged petitioners from their unpaid tax

liabilities for 1994 and 1995, any collection action for those


     2
      See text infra at notes 3 and 4 and authorities cited for
the proposition that other courts have concurrent jurisdiction
with the district courts sitting in bankruptcy (and bankruptcy
courts under 28 U.S.C. sec. 157(a)) over all but certain
specified bankruptcy discharge issues.
                              - 30 -

years would be inappropriate, and therefore respondent could not

proceed.   In any event, a challenge to the appropriateness of

collection action under section 6330(c)(2)(A)(ii) is illustrative

of the type of “any relevant issue relating to the unpaid tax”

the taxpayer may raise under section 6330(c)(2)(A).

     Judge Vasquez goes on to state in his fourth paragraph that

“Whether petitioners’ taxes have been discharged in bankruptcy

appears to be a challenge to the existence or amount of their

underlying tax liability under section 6330(c)(2)(B).”

     Preliminarily, I note that whether there is an issue under

section 6330(c)(2)(B) is not crucial to resolving (1) whether we

have jurisdiction to decide whether petitioners were discharged

from their unpaid tax liabilities for 1994 and 1995 and (2) if we

do have such jurisdiction, whether they were so discharged.

Whether there is an issue under section 6330(c)(2)(B) is relevant

only for the purpose of determining whether we are deciding this

case under a de novo standard of review or an abuse-of-discretion

standard of review.

     This leads to Judge Vasquez’s comments regarding the stan-

dard of review.   Judge Vasquez indicates that, assuming we have

jurisdiction, it is unclear what standard of review to apply in

resolving the bankruptcy discharge issue.   Although, the majority

opinion does not explicitly state what that standard is, the

opinion clearly and properly applies a de novo standard and holds
                              - 31 -

that the Bankruptcy Court did not discharge petitioners from

their unpaid tax liabilities for 1994 and 1995.   A fortiori,

respondent did not abuse respondent’s discretion in determining

to sustain the lien with respect to 1994 and 1995 on the ground

that the Bankruptcy Court did not discharge petitioners from

those liabilities.   Regardless of the standard of review, peti-

tioners have not satisfied that standard.   In other words,

resolution of the bankruptcy discharge issue does not depend on

the standard of review.   I therefore see no harm in the majority

opinion’s not explicitly stating the standard of review.

     I now return to Judge Vasquez’s statement that “Whether

petitioners’ taxes have been discharged in bankruptcy appears to

be a challenge to the existence or amount of their underlying tax

liability under section 6330(c)(2)(B).”   While that is not an

unreasonable position, I believe the better view is that the

bankruptcy discharge issue in the case at hand does not relate to

the existence or amount of the underlying tax liability.   That is

because the so-called discharge in bankruptcy does not discharge

a tax debt; it discharges the individual debtor from the tax

debt.   As pertinent here, 11 U.S.C. section 523(a)(1)(B) provides

that a discharge under section 727, 1141, 1228(a), 1228(b), or

1328(b) of title 11 does not “discharge an individual debtor from

any debt” for a tax with respect to which a return was filed late

and within the two-year period immediately preceding the date of
                                - 32 -

the filing of the bankruptcy petition.   In my view, a discharge

in bankruptcy of a tax debt does not vitiate the existence or the

amount of that debt.   Rather, the discharge discharges the

individual debtor from paying the tax debt that exists.

     The question might be asked, if the Bankruptcy Court should

have expressly determined that a taxpayer was discharged from a

tax debt, whether we would be at liberty to reach a different

result, and vice versa.   Judge Vasquez answered that question for

the Court in Katz v. Commissioner, 115 T.C. 329, 340 (2000).       In

Katz, the Court held, because the Bankruptcy Court had considered

and rejected the taxpayer’s claim that he was discharged from a

tax liability for the year in question, we would not address that

question.   That was the correct result under the rule of res

judicata or claim preclusion.    Similarly, if the Tax Court were

to hold that a taxpayer was or was not discharged from a particu-

lar tax debt, the Bankruptcy Court would be bound by our holding.

See Erspan v. Badgett, 647 F.2d 550, 556 (5th Cir. 1981).     In

this connection, Rule 4007(a) of the Federal Rules of Bankruptcy

Procedure provides that either a debtor or a creditor may file a

complaint in the Bankruptcy Court to obtain a determination

whether a debtor was discharged from a particular debt.   However,

the Bankruptcy Court’s jurisdiction to resolve

the dischargeability issue involving most debts, including tax
                               - 33 -

debts, is not exclusive,3 but is concurrent with other courts.4

     There may be concern whether, as a matter of comity and

discretion, we should refrain from deciding the discharge issue

and instead remit petitioners to the Bankruptcy Court, which has

expertise and authority to construe and apply its own order of

discharge.   Of course, this Court has decided myriad cases in

which, in order to resolve the tax issues, we decided issues of

law, both Federal and State, outside our primary expertise.    We

have not hesitated to do so before, and we properly do so in the

case at hand.

     It should be noted that if we declined to resolve the

bankruptcy dischargeability issue, we could not force petitioners

to return to the Bankruptcy Court to have that court resolve that

question.    What would we do if petitioners should refuse to go to

the Bankruptcy Court and insist that we decide the bankruptcy


     3
      Bankruptcy Courts have exclusive jurisdiction only with
respect to debts enumerated in 11 U.S.C. sec. 523(a)(2), (4),
(6), and (15). See 11 U.S.C. sec. 523(c).
     4
      See, e.g., In re Zitzman, 46 F. Supp. 314, 315 (E.D.N.Y.
1942); In re Crawford, 183 Bankr. 103, 105 (Bankr. W.D. Va.
1995); In re Galbreath, 83 Bankr. 549, 551 (Bankr. S.D. Ill.
1988); Fed. R. Bankr. Proced. 4007 Advisory Committee’s Note
(1983) (“Jurisdiction over this issue on these debts is held
concurrently by the Bankruptcy Court and any appropriate
nonbankruptcy forum.”); 4 Collier on Bankruptcy, par. 523.03, at
523-17 (15th ed. rev. 1996). Jurisdiction to determine
bankruptcy dischargeability issues may be exercised by the
Bankruptcy Court as well as other courts with respect to all
debts enumerated in 11 U.S.C. sec. 523(a), including 11 U.S.C.
sec. 523(a)(1) relating to tax debts, except 11 U.S.C. sec.
523(a)(2), (4), (6), and (15).
                                - 34 -

dischargeability issue?    We would have an obligation and a

responsibility to enter a decision sustaining or rejecting in

whole or in part the collection action set forth in the notice of

determination.    We would not be fulfilling that obligation and

that responsibility if we were to request the taxpayer to ask the

Bankruptcy Court to resolve a question over which we have concur-

rent jurisdiction.

     Our request to that effect would be inconsistent with the

goals of judicial and party economy embodied in the slogan “one-

stop shopping”.    If we have jurisdiction to resolve the bank-

ruptcy dischargeability issue, we should not ask the taxpayer who

raises that issue at an Appeals Office hearing and in this Court

to go to another court to resolve that issue and then return to

this Court so we can decide, at the end of what will by then have

become a very long figurative day, whether respondent may proceed

with the collection action as determined in the notice of deter-

mination.

     Even if the taxpayer were willing to go back to the Bank-

ruptcy Court, it would be a waste of time and money to try to

force or allow them to do so.    The money would consist not only

of additional legal fees but also of additional interest accruing

while the liability remains unpaid.      And if the taxpayers are

willing, for purposes of delay, to take these extra steps and to

incur the additional costs, the IRS should not be impeded further
                              - 35 -

in the collection of tax debts that are due and owing if they

have not been discharged in bankruptcy.

     Having decided we have jurisdiction, there is only one

question we must address in the lien proceeding at hand in order

to decide whether to sustain or reject in whole or in part the

collection action in respondent’s notice of determination.    That

one question is whether petitioners were discharged under 11

U.S.C. section 523(a)(1)(B)(ii) from their unpaid tax liabilities

for the taxable years 1994 and 1995.   This Court, not the Bank-

ruptcy Court, should resolve that question in the lien proceeding

at hand, and the Court has properly done so.

     A final note:   The bankruptcy discharge issue in the case at

hand is a slam dunk for respondent.    Petitioners’ argument on the

merits of this issue borders on being frivolous.    The majority

opinion properly shows no hesitation in deciding the issue.

Nothing the Court does today will prevent us from revisiting, in

subsequent collection cases in which other bankruptcy discharge

issues are raised, whether, as a matter of comity and discretion,

we should defer to the Bankruptcy Court’s expertise and authority

to construe and apply its own order of discharge.

     GERBER, J., agrees with this concurring opinion.
                                - 36 -

     VASQUEZ, J., concurring:    I concur with the majority that we

have jurisdiction to review respondent’s determination in this

case.   I write separately, however, because the majority opinion

fails to address what standard of review we should apply.

     Section 6330(c)(3) provides that the Commissioner’s determi-

nation shall take into consideration:      The verification presented

under section 6330(c)(1), the issues raised under section

6330(c)(2), and whether the proposed collection action balances

the need for efficient collection with the collection action’s

being no more intrusive than necessary.      Section 6330(c)(2)

provides that at the section 6330 hearing a taxpayer may raise

any relevant issue relating to the unpaid tax or proposed levy

including appropriate spousal defenses, challenges to the appro-

priateness of the collection actions, and offers of collection

alternatives.   Sec. 6330(c)(2)(A).      In appropriate circumstances,

a taxpayer may also raise challenges to the existence or amount

of the underlying tax liability.    Sec. 6330(c)(2)(B).

     Although the majority interprets petitioners’ bankruptcy

discharge argument as a challenge to the appropriateness of

collection action under section 6330(c)(2)(A)(ii), majority op.

p. 12 note 9, it is unclear to me how a challenge to the appro-

priateness of the collection action includes whether the bank-

ruptcy court discharged the tax liability.      A challenge to the

appropriateness of the collection action appears to me to be more
                               - 37 -

about the type and/or method of collection action chosen by the

IRS.

       Whether petitioners’ taxes have been discharged in bank-

ruptcy appears to be a challenge to the existence or amount of

their underlying tax liability under section 6330(c)(2)(B).       By

claiming that the bankruptcy court discharged their tax liabili-

ties, petitioners are claiming either that (1) as a result of the

discharge their tax liability no longer exists or (2) regardless

of the continuing existence of the debt, as a result of the

discharge the amount of tax they are liable for is zero.

       Whether a taxpayer is challenging the existence or amount of

the underlying tax liability is relevant because it determines

the standard of review we apply.    If the validity of the underly-

ing tax liability is properly at issue, the Court reviews the

matter on a de novo basis; however, if the validity of the

underlying tax liability is not properly at issue, the Court

reviews the Commissioner’s administrative determination for an

abuse of discretion.    Sego v. Commissioner, 114 T.C. 604, 610

(2000); Goza v. Commissioner, 114 T.C. 176, 181-182 (2000).       We

adopted these standards of review based on the legislative

history of section 6330:

       Where the validity of the tax liability was properly at
       issue in the hearing, and where the determination with
       regard to the tax liability is part of the appeal, no
       levy may take place during the pendency of the appeal.
       The amount of the tax liability will in such cases be
       reviewed by the appropriate court on a de novo basis.
                              - 38 -

     Where the validity of the tax liability is not properly
     part of the appeal, the taxpayer may challenge the
     determination of the appeals officer for abuse of
     discretion. * * *

H. Conf. Rept. 105-599, at 266 (1998), 1998-3 C.B. 747, 1020;

Sego v. Commissioner, supra at 609-610; Goza v. Commissioner,

supra at 181.   I see no reason to depart from our established

case law.

     The majority opinion does not explicitly state what standard

of review it applies.   After concluding that we have jurisdiction

to determine whether the bankruptcy court discharged petitioners

from their unpaid tax liabilities, the majority opinion analyzes

the discharge order of the bankruptcy court, the bankruptcy code,

and existing precedent and concludes that the bankruptcy court

did not discharge petitioners from their unpaid tax liabilities.

Majority op. pp. 12-15.   This analysis appears to be a review of

respondent’s determination on a de novo basis.   If we are not

reviewing the existence or amount of the underlying tax liability

a de novo review would be inappropriate.1   Sego v. Commissioner,

supra at 610; Goza v. Commissioner, supra at 181-182.

     The resolution of this case may not depend on what standard

of review we apply; even so, we should apply the correct standard




     1
        It is my opinion, however, that we should be applying a
de novo standard of review in this case because I believe
petitioners are challenging the existence or amount of the
underlying tax liability.
                             - 39 -

of review in this and future cases.2

     LARO, J., agrees with this concurring opinion.




     2
        Furthermore, applying a de novo standard of review where
the validity of the underlying tax liability is not in issue
raises questions about our holdings Sego v. Commissioner, 114
T.C. 604 (2000), and Goza v. Commissioner, 114 T.C. 176 (2000).
