                        T.C. Memo. 2005-241



                      UNITED STATES TAX COURT



             GARRETT LAWRENCE BAILEY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 6164-04L.            Filed October 13, 2005.


     Garrett Lawrence Bailey, pro se.

     Aely K. Ullrich, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     MARVEL, Judge:   Pursuant to section 6330(d),1 petitioner

seeks review of respondent’s determination to proceed with the

collection of petitioner’s 1995, 1996, and 1999 Federal income

tax liabilities.


     1
      All section references are to the Internal Revenue Code in
effect at all relevant times.
                                - 2 -

                         FINDINGS OF FACT

     Some of the facts have been stipulated.   We incorporate the

stipulated facts into our findings by this reference.   Petitioner

resided in Pasadena, California, when his petition in this case

was filed.   Petitioner is a lawyer authorized to practice law in

the State of California who, during the years at issue, was

employed as an associate in a law firm.

1995 and 1996 Tax Liabilities

     Petitioner filed Form 1040, U.S. Individual Income Tax

Return, for 1995 and 1996.   On each return, petitioner reported

his filing status as married filing separate and claimed three

personal exemptions:   One for himself, one for his wife, and one

for his dependent son.   Petitioner also claimed Schedule C,

Profit or Loss From Business or Profession (Sole Proprietorship),

business expenses of more than $50,000 on each of his 1995 and

1996 returns.

     In December 1997, respondent notified petitioner of changes

to petitioner’s 1995 return as a result of an examination.     The

changes included the disallowance of two of three personal

exemptions and all of the Schedule C business expenses claimed on

petitioner’s 1995 return for lack of substantiation.

     In January 1998, petitioner sent letters to respondent

requesting audit reconsideration and/or an Appeals conference
                                - 3 -

regarding the 1995 examination changes.2   Petitioner’s case was

assigned to Examiner L. Valenzuela (Ms. Valenzuela).   After Ms.

Valenzuela reviewed documentation furnished by petitioner, she

prepared a revised examination report for 1995 and mailed it to

petitioner with a letter dated June 12, 1998, offering petitioner

an appointment to present any additional information he wished to

submit.

     By letter dated June 16, 1998, petitioner advised respondent

that he did not agree with the adjustments in the revised

examination report and requested a hearing with respondent’s

Appeals Office.   By letter dated June 26, 1998, respondent

informed petitioner that an appointment had been scheduled for

July 30, 1998.    Petitioner did not appear for the appointment and

did not contact respondent to explain his failure to appear.

     On August 5, 1998, respondent issued, and served on

petitioner, a summons requiring petitioner to appear on August

27, 1998, and to produce various documents pertaining to

petitioner’s 1995 return.   Petitioner did not appear on August

27, 1998, and he did not produce the requested documentation.




     2
      Petitioner also requested reconsideration of 1996
examination changes, but the 1996 examination report was not
issued until September 1998.
                               - 4 -

     By letter dated September 16, 1998, respondent advised

petitioner that changes had been made to his 1996 return as

described in a report of income tax examination changes enclosed

with the letter.

     On April 15, 1999, respondent mailed, by certified mail, a

notice of deficiency with respect to petitioner’s 1995 and 1996

taxable years to petitioner’s last known address at 768 Florecita

Lane, Altadena, CA 91001.   Petitioner did not file a petition in

this Court to contest the notice of deficiency.     On August 9,

1999, respondent assessed the income tax deficiencies, additions

to tax, and penalties set forth in the notice of deficiency, and

statutory interest.

     On a date that does not appear in the record, petitioner

again asked respondent to reconsider petitioner’s 1995 and 1996

tax liabilities.   By letter dated June 21, 2000, respondent

advised petitioner that he would need to provide respondent with

documentation before respondent could grant an audit

reconsideration for 1995 and 1996.     Respondent requested that

petitioner provide the documentation by July 13, 2000.

Petitioner did not provide the requested documentation, so

petitioner’s request was denied.   By letter dated December 27,

2000, respondent explained to petitioner why a conference had not

been granted as requested by petitioner.
                               - 5 -

     Petitioner subsequently sent to respondent copies of one

registration form and one check, with no explanation of the

nature or business purpose of the expenses reflected in the

documents.   By letter dated March 6, 2001, respondent notified

petitioner that he had completed the audit reconsideration of

petitioner’s 1995 tax liability with no change.   In the letter,

respondent stated that “The information you have furnished to

date, including to the district office does not establish that

any of the claimed expenses were ordinary and necessary and

incurred in the course of a trade or business.”   Respondent also

notified petitioner that he could request an Appeals conference

if he disagreed with respondent’s decision.

     By letter dated April 1, 2001, petitioner appealed

respondent’s findings.   Petitioner’s appeal was assigned to

Appeals Officer Willard A. Stone (Mr. Stone).   By letter dated

June 25, 2002, Mr. Stone advised petitioner that he had scheduled

a conference for July 25, 2002, and that petitioner should bring

certain enumerated documents to the conference.   At petitioner’s

request, the conference was rescheduled for August 23, 2002.

Petitioner did not attend the August 23, 2002, conference and did

not supply the requested documentation.   By letter dated

September 13, 2002, Mr. Stone notified petitioner that petitioner

had not established his entitlement to any of the deductions

disallowed in the notice of deficiency, that petitioner’s case
                               - 6 -

would be returned to the service center for further processing,

and that collection activity would recommence.3

1999 Tax Liabilities

     Petitioner filed his 1999 Federal income tax return on May

17, 2001.   Petitioner reported an income tax liability of $9,417

and withheld income tax of $9,450.43 and claimed an overpayment.4

However, because the 1999 return was filed late, respondent

assessed interest and a late filing addition to tax on September

10, 2001.   The 1999 tax liability at issue in this case consists



     3
      Various collection notices, including a notice of intention
to levy, had been sent to petitioner with respect to his 1995 and
1996 tax liabilities before petitioner filed his appeal in April
2001.
     4
      On his 1999 return, petitioner claimed total tax payments
for 1999 of $12,400.56, consisting of withholding credits of
$9,450.43 and estimated tax payments and/or an amount applied
from his 1998 return of $2,950.13, a total tax liability of
$9,417, and an overpayment of $2,983.56. Although respondent
credited the withheld income tax of $9,450.43 against
petitioner’s reported tax liability of $9,417 for 1999,
respondent did not credit any estimated tax payments or any
overpayment from 1998 against petitioner’s 1999 tax liability.
Because the parties did not include a copy of petitioner’s 1998
return in the record, we cannot ascertain whether petitioner
claimed an overpayment for 1998. We note, however, that the Form
4340, Certificate of Assessments, Payments, and Other Specified
Matters, for 1995 that was admitted into evidence by stipulation
shows an overpayment credit of $2,609.30 from 1998 that was
applied to reduce petitioner’s 1995 tax liability on Apr. 15,
1999. We assume, therefore, that petitioner claimed an
overpayment on his 1998 return that was allowed, at least in
part, as a credit against his 1995 tax liability. Petitioner
does not assert that respondent failed to give him credit for his
1998 overpayment, nor did he introduce any evidence to prove that
respondent incorrectly applied petitioner’s tax payments.
                                - 7 -

primarily of the assessed interest and addition to tax resulting

from the late filing of petitioner’s 1999 return.5

     On December 12, 2002, respondent issued petitioner a Final

Notice of Intent to Levy with respect to petitioner’s 1995, 1996,

and 1999 tax liabilities.

Petitioner’s Health Problems During 1998-2000

     In late 1998 and throughout 1999, petitioner suffered from a

liver ailment.    In June 1999, petitioner’s doctor recommended

that petitioner obtain a liver transplant consultation.    In

December 1999, petitioner was placed on the UCLA liver transplant

list.    During 2000, petitioner underwent several surgeries,

including a liver transplant.

     Although petitioner experienced pain and some loss of

function from his liver condition during the period of his

illness, he continued to work at the law firm and to make court

appearances, except for a 6-month period in connection with his

surgeries.

Section 6330 Hearing

     On January 9, 2003, petitioner timely filed a Request for a

Collection Due Process Hearing (section 6330 hearing) for 1995,

     5
      Form 4340 for 1999 reveals that respondent assessed an
income tax liability of $9,627 in connection with the filing of
petitioner’s 1999 return. The record does not explain why the
assessed income tax liability of $9,627 is higher than
petitioner’s reported income tax liability of $9,417. However,
petitioner offered no evidence at trial that the assessment was
incorrect.
                                 - 8 -

1996, and 1999.   The request stated that petitioner disagreed

with the amounts of the assessed deficiencies and that he wished

to submit an offer-in-compromise because he was unable to satisfy

the tax liability due to his health and financial conditions.

On May 20, 2003, respondent sent petitioner an offer-in-

compromise package to fill out and bring to his section 6330

hearing.

     By letter dated January 15, 2004, Appeals Officer Zane

Janish (Mr. Janish) contacted petitioner regarding his section

6330 hearing request.     Mr. Janish stated that petitioner needed

to complete and submit the enclosed Form 433-A, Collection

Information Statement For Individuals, and his delinquent 2001

and 2002 Federal income tax returns by February 17, 2004, in

order for petitioner’s offer-in-compromise to be considered.     Mr.

Janish also warned petitioner that if petitioner did not submit

the requested documents by February 17, 2004, petitioner’s

section 6330 hearing “will consist of a review of the information

in [petitioner’s] * * * request and case file.”    Petitioner

failed to submit the Form 433-A and his 2001 and 2002 tax

returns6 to Mr. Janish.




     6
      Petitioner did not file his 2001 and 2002 tax returns until
Mar. 17, 2004.
                                 - 9 -

Notice of Determination and Tax Court Petition

     On March 10, 2004, respondent sent petitioner a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 (notice of determination) for tax years 1995, 1996,

and 1999.   In the notice of determination, respondent determined

the following:

     1.   All legal and procedural requirements for proceeding

with collection have been met;

     2.   Petitioner was properly precluded from submitting an

offer-in-compromise because he did not submit Form 433-A and his

delinquent 2001 and 2002 tax returns as required and because

petitioner was not current with his filing obligations;

     3.   Petitioner was properly precluded from challenging his

1995 and 1996 income tax liabilities because respondent had

issued a notice of deficiency for 1995 and 1996, and petitioner

had not provided any evidence to prove that petitioner did not

receive the notice of deficiency;

     4.   Petitioner failed to submit any evidence to substantiate

that the income tax liability reported on his 1999 return was

incorrect; and

     5.   Petitioner failed to submit any evidence to establish

that the proposed levy does not balance the need for efficient

collection of taxes with the legitimate concern that any

collection action be no more intrusive than necessary.
                               - 10 -

     Petitioner filed a timely petition contesting respondent’s

determination.   Petitioner disputes the validity of the

deficiencies and alleges that the proposed collection action is

more intrusive than necessary.

                               OPINION

     Section 6330(a) provides that no levy may be made on any

property or right to property of any person unless the Secretary

has notified such person in writing of the right to a hearing

before the levy is made.    If the person makes a timely request

for a hearing, a hearing shall be held by the Internal Revenue

Service Office of Appeals.    Sec. 6330(b)(1).

     The administrative hearing must be conducted pursuant to

section 6330(c), (d), and (e).    The taxpayer may raise any

relevant issue to the collection action at the hearing, including

spousal defenses, challenges to the appropriateness of the

collection action, and offers of collection alternatives (such as

offers-in-compromise).    Sec. 6330(c)(2)(A).    Additionally, the

taxpayer may contest the validity of the underlying tax

liability, but only if he did not receive a notice of deficiency

or otherwise have an opportunity to dispute the tax liability.

Sec. 6330(c)(2)(B).   The phrase “underlying tax liability”

includes the tax deficiency, any penalties and additions to tax,

and statutory interest.    Katz v. Commissioner, 115 T.C. 329, 339

(2000).
                               - 11 -

     Following a hearing, the Appeals Office must determine

whether the proposed levy action may proceed.    Sec. 6330(c)(3).

In so doing, the Appeals Office is required to take into

consideration the verification presented by the Secretary, the

issues raised by the taxpayer, and whether the proposed

collection action appropriately balances the need for efficient

collection of taxes with concerns regarding the intrusiveness of

the proposed collection action.    Id.   The taxpayer may petition

the Tax Court or, in limited cases, a Federal District Court for

judicial review of the Appeals Office’s determination.    Sec.

6330(d).

      If the taxpayer files a timely petition for judicial review,

the applicable standard of review depends on whether the

underlying tax liability is properly at issue.    Where the

underlying tax liability is properly at issue, the Court reviews

any determination regarding the underlying tax liability de novo.

Sego v. Commissioner, 114 T.C. 604, 610 (2000).    The Court

reviews any other administrative determination regarding the

proposed collection action for abuse of discretion.     Id.

I.   Petitioner’s Challenge to the Underlying Tax Liabilities

      A.   Mailing and Delivery of Notice of Deficiency--1995 and
           1996 Tax Liabilities

      Petitioner argues that because he did not receive the notice

of deficiency that respondent issued for 1995 and 1996, he

should not have been precluded from challenging the validity of
                              - 12 -

his 1995 and 1996 tax liabilities.     Petitioner stipulated that a

notice of deficiency for 1995 and 1996, “issued by the Office of

the Internal Revenue Service at Los Angeles, California, was

mailed to the Petitioner on April 15, 1999.”    Petitioner also

stipulated that his address at the time the notice of deficiency

was mailed was the same address used to mail the notice of

deficiency and that the notice of deficiency was not returned as

undeliverable.

     “There is a strong presumption in the law that a properly

addressed letter will be delivered, or offered for delivery, to

the addressee.”   Zenco Engg. Corp. v. Commissioner, 75 T.C. 318,

323 (1980), affd. without published opinion 673 F.2d 1332 (7th

Cir. 1981); see also Sego v. Commissioner, supra at 611 (“In the

absence of clear evidence to the contrary, the presumptions of

official regularity and of delivery justify the conclusion that

the statutory notice was sent and that attempts to deliver were

made in the manner contended by respondent.”).    Proper mailing of

the notice of deficiency places the risk of nondelivery on the

taxpayer.   Figler v. Commissioner, T.C. Memo. 2005-230; Barrash

v. Commissioner, T.C. Memo. 1987-592, affd. without published

opinion 862 F.2d 872 (5th Cir. 1988).

     Petitioner does not dispute that the notice of deficiency

was mailed to his last known address, and he does not

unequivocally deny that he received it.    The only evidence

petitioner has produced to rebut the presumption of delivery is
                              - 13 -

his testimony that he “[didn’t] * * * recall receiving it” and he

“did not document the receipt of it.”   Petitioner admits that

respondent mailed the notice of deficiency to the proper address,

and petitioner received several other items of correspondence

mailed by respondent to the same address both before and after

the notice of deficiency was issued.    Because petitioner has not

produced any convincing evidence to rebut the presumption of

delivery, we find that petitioner received the notice of

deficiency.

     B.   Other Opportunity To Dispute 1995 and 1996 Tax
          Liabilities

     Petitioner also argues that he did not have an opportunity

to dispute his 1995 and 1996 tax liabilities because he was

suffering from severe health problems that began in late 1998 and

continued through 2000.

     Section 6330(c)(2)(B) provides that a taxpayer may dispute

the existence or amount of unpaid tax liability if he did not

receive a notice of deficiency or otherwise have an opportunity

to dispute such tax liability.   The “opportunity to dispute such

tax liability” includes a conference with the Appeals Office,

either before or after the tax liability is assessed.   Sec.

301.6330-1(e)(3), Q&A-E2, Proced. & Admin. Regs.

     Even if we assume that petitioner did not receive the notice

of deficiency mailed by respondent on April 15, 1999, the record

establishes that petitioner had several opportunities between
                               - 14 -

April 15, 1999, and September 13, 2002, to dispute his 1995 and

1996 tax liabilities administratively.7   For example, in 2002,

when petitioner was “feeling normal and up to par health wise”,

Mr. Stone scheduled and then rescheduled a conference with

petitioner to discuss respondent’s decision upholding the

disallowance of petitioner’s exemptions and Schedule C expenses.

Petitioner did not attend the conference or submit any of the

requested documentation.

     Because petitioner failed to prove that he did not receive

the statutory notice of deficiency that was mailed to him on

April 15, 1999, with respect to his 1995 and 1996 tax liabilities

and because petitioner otherwise had an opportunity over a 3-year

period to dispute his 1995 and 1996 tax liabilities, we hold that

petitioner was properly precluded under section 6330(c)(2)(B)

from challenging the existence and amount of his 1995 and 1996

tax liabilities in his section 6330 proceeding.

     C.   1999 Tax Liability

     Respondent concedes that no notice of deficiency was sent to

petitioner for the 1999 tax year and that petitioner was not

precluded from challenging his 1999 tax liability at his section

6330 hearing.   However, although petitioner made a blanket


     7
      Petitioner does not argue that the “opportunity to dispute”
language in sec. 6330(c) refers to an opportunity to dispute a
tax liability in court nor does he challenge respondent’s
interpretation of sec. 6330(c) in sec. 301.6330-1(e)(3), Q&A-E2,
Proced. & Admin. Regs.
                              - 15 -

statement in his petition that he was contesting the validity of

all the tax liabilities at issue in this case, petitioner did not

argue at trial or in his posttrial briefs that respondent’s

determination for 1999 was incorrect.   Petitioner also failed to

introduce any evidence at trial regarding his 1999 tax liability.

Accordingly, we conclude that petitioner has abandoned his

challenge to his 1999 tax liability.    See, e.g., Bradley v.

Commissioner, 100 T.C. 367, 370 (1993); Rybak v. Commissioner, 91

T.C. 524, 566 n.19 (1988).

II.   Petitioner’s Challenge to Respondent’s Determination To
      Proceed With the Collection Action

      In addition to his argument that respondent’s proposed

collection action is overly intrusive because the assessments of

petitioner’s tax liabilities are incorrect, petitioner argues

that he should have been allowed to submit an offer-in-

compromise.8   We review respondent’s determination to proceed

with collection for abuse of discretion.    Sego v. Commissioner,

114 T.C . at 610.

      8
      Even if we had concluded that petitioner could challenge
the validity of his 1995 and 1996 tax liabilities in this
proceeding, petitioner would still not have prevailed. The
documentation in the record upon which petitioner relied to
substantiate his Schedule C expenses was not sufficient to prove
that the expenses were deductible. Petitioner paid most of the
expenses in connection with his efforts to start several new
businesses during 1995 and 1996. Startup expenses resulting in
an active trade or business generally are not deductible for a
year earlier than the one in which such business begins. Sec.
195. Petitioner’s car expenses also were not deductible because
petitioner failed to satisfy the substantiation requirement of
sec. 274(d).
                               - 16 -

     The Commissioner will not process an offer-in-compromise

where the information provided is insufficient to allow the

Commissioner to evaluate its acceptability.    Sec. 301.7122-

1(d)(2), Proced. & Admin. Regs.    The Commissioner will not

process an offer-in-compromise if the taxpayer has not filed all

required tax returns or completed the required forms.    1

Administration, Internal Revenue Manual (CCH), sec.

5.8.3.4.1(1)(a), (d), at 16,274.

     Mr. Janish provided petitioner with a list of required

paperwork that petitioner needed to submit in order for an offer-

in-compromise to be processed, and he sent petitioner a blank

Form 433-A.   Petitioner did not submit any of the required forms

for an offer-in-compromise, including Form 433-A, or file his

2001 and 2002 tax returns by the deadline set by Mr. Janish.      He

did not request an extension of the deadline or otherwise

communicate with Mr. Janish.    Petitioner did not provide Mr.

Janish with any evidence of his alleged inability to pay.

     At trial, petitioner did not offer any credible evidence to

support his position that Mr. Janish did not properly evaluate

his collection information.    In fact, the record demonstrates

that the determination by Mr. Janish was entirely appropriate.

Mr. Janish verified from the information available to him that

all legal and procedural requirements had been met.    Mr. Janish

also gave petitioner the opportunity to submit the necessary
                               - 17 -

documents to make an offer-in-compromise.    Petitioner did not

submit the necessary paperwork or any other information that

might have influenced Mr. Janish’s determination.       Because of

petitioner’s consistent failure to communicate with Mr. Janish,

Mr. Janish committed no abuse of discretion sustaining the

proposed levy as an appropriate collection action under the

circumstances.

III.   Conclusion

       We hold that the Appeals Office did not abuse its discretion

in determining that respondent may proceed with the proposed

collection action.    We have considered the remaining arguments of

both parties for results contrary to those discussed herein and,

to the extent not discussed above, conclude those arguments are

irrelevant, moot, or without merit.

       To reflect the foregoing,


                                           Decision will be entered

                                      for respondent.
