                        T.C. Memo. 2009-266



                      UNITED STATES TAX COURT



                  JOEL I. BEELER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 20892-07L.              Filed November 24, 2009.



     Richard S. Kestenbaum and Bernard S. Mark, for petitioner.

     Marc L. Caine, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     GOEKE, Judge:   The issue for decision is whether

respondent’s Appeals officer abused his discretion in sustaining

respondent’s proposed levy action against petitioner to collect

100 percent of quarterly trust fund recovery penalties (TFRP) for

1981 and 1982.   Petitioner argues that respondent’s filing of

Form 668 (Z), Certificate of Release of Federal Tax Lien, for a
                               - 2 -

related tax lien requires a finding that petitioner’s liability

for the trust fund tax liabilities has been satisfied.    For the

reasons stated herein, we find that respondent did not abuse his

discretion in sustaining the proposed levy action.

                         FINDINGS OF FACT

     Some of the facts are stipulated and are so found.   The

stipulation of facts and the attached exhibits are incorporated

herein by reference.   At the time the petition was filed,

petitioner resided in New York.

     Petitioner’s tax liability for the TFRP accrued during the

last three quarters of 1981 and the first quarter of 1982 with

respect to withheld income and Social Security taxes of a

corporation of which petitioner was an officer and director.     The

liability was assessed March 26, 1985, under section 6672.1

After assessment respondent filed a notice of Federal tax lien

(NFTL) in New York, New York, and Sarasota, Florida.

     On November 17, 1986, petitioner commenced an action in the

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

seeking a refund of payments made towards the assessed amount.

Beeler v. United States, 894 F. Supp. 761 (S.D.N.Y. 1995).      On

March 9, 1987, the United States counterclaimed against

petitioner seeking payment for the unpaid portion of the TFRP and


     1
      Unless otherwise indicated, all section references are to
the Internal Revenue Code.
                                 - 3 -

filed third-party actions against the other two directors and

officers of the corporation, Robert Liebmann and Stuart Ross.

The Government sought to hold each of them liable for the TFRP.

     The District Court ordered judgment in favor of the

Government on the counterclaim against petitioner and the

complaints against Mr. Liebmann and Mr. Ross, finding that they

were “responsible persons” who “willfully” failed to pay over

withholding taxes.     Beeler v. United States, supra at 777.   On or

about September 1, 1995, the District Court entered an order

against petitioner for the TFRP of $154,032.05, plus interest and

statutory additions.

     Judgments were also entered against Mr. Liebmann and Mr.

Ross.   Account transcripts for Mr. Liebmann and Mr. Ross on or

about November 11, 2007, and May 27, 2002, respectively, contain

entries which read:    “Statute Expired-Clear to zero and

Uncollectable Amount Owed.”    Account balances for both taxpayers

reflect the corresponding computation of the described

transactions.   Mr. Liebmann and Mr. Ross are not parties to this

dispute.

     On February 29, 2000, the Internal Revenue Service (IRS)

filed a Form 668 (Z), dated February 29, 2000, concerning the New

York lien.   The IRS also filed a Form 668(Z), dated February 22,

2001, concerning the Sarasota, Florida, lien.    Respondent asserts

these certificates of release were erroneously filed.
                                - 4 -

     On September 25, 2006, respondent issued petitioner a Letter

1058, Final Notice--Notice of Intent to Levy and Notice of Your

Right to a Hearing.   Petitioner timely filed a Form 12153,

Request for a Collection Due Process Hearing on October 24, 2006.

On January 30, 2007, the Appeals officer conducted a collection

due process (CDP) hearing with petitioner’s representative and

discussed three issues:   (1) Liability for filing penalties; (2)

whether petitioner was liable for TFRP and whether the other two

responsible persons made any payments; and (3) whether a release

of NFTL meant that the underlying TFRP was satisfied.   Petitioner

now concedes issues (1) and (2), and focuses on issue (3);

specifically, his argument that respondent’s release of the NFTL

requires a finding that the underlying TFRP was satisfied in

full.

     On August 17, 2007, respondent issued to petitioner a Notice

of Determination Concerning Collection Action(s) Under Section

6320 and/or 6330 (notice of determination) sustaining the

proposed levy.   On September 14, 2007, petitioner timely filed

his petition in this Court challenging respondent’s

determination.

                               OPINION

     This collection review proceeding was filed pursuant to

section 6330.    Section 6330(a) provides that no levy may be made

on any property or right to property of any person unless the
                                - 5 -

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

hearing before the levy is made.    Section 6330(b)(1) and (3)

provide that if a person requests a hearing, that hearing shall

be held before an impartial officer or employee of the IRS Office

of Appeals.    At the hearing a taxpayer may raise any relevant

issue, including challenges to the appropriateness of the

collection action.    Sec. 6330(c)(2)(A).   A taxpayer is precluded

from contesting the existence or amount of the underlying tax

liability at the hearing unless the taxpayer failed to receive a

notice of deficiency for the tax in question or did not otherwise

have an opportunity to dispute the tax liability.    Sec.

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

(2000).

     Following a hearing, the Appeals officer must make a

determination whether the levy action may proceed and is required

to consider:    (1) Whether the Secretary has met the requirements

of applicable law and administrative procedure; (2) the 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 that the levy

action be no more intrusive than is necessary.    Sec. 6330(c)(3).

     Section 6330(d) grants the Court jurisdiction to review the

determination by the Appeals officer to proceed with collection

action via the levy after the CDP hearing.    Where the validity of
                              - 6 -

the underlying tax liability is at issue in a collection review

proceeding, the Court will review the matter de novo.       Davis v.

Commissioner, 115 T.C. 35, 39 (2000).   Where the underlying tax

liability is not at issue, however, the Court will review the

determination of the Appeals officer for abuse of discretion.

Goza v. Commissioner, 114 T.C. 176, 182 (2000).

     Because petitioner had an opportunity before the CDP hearing

to contest his 1982 tax liability in the District Court action,

the underlying liability is not properly at issue in this case,

and we review respondent’s determination for abuse of discretion.

Abuse of discretion is proven by showing that the Commissioner

exercised his discretion arbitrarily, capriciously, or without

sound basis in fact or law.   Woodral v. Commissioner, 112 T.C.

19, 23 (1999).

     Pursuant to the Pension Protection Act of 2006, Pub. L. 109-

280, sec. 855, 120 Stat. 1019, this Court has exclusive

jurisdiction to review determinations under section 6330,

effective for determinations made after October 16, 2006.

Generally, as described under section 6330(c)(2), failure of the

taxpayer to raise an issue during the section 6330 hearing will

preclude our consideration of that issue.     Giamelli v.

Commissioner, 129 T.C. 107, 112-113 (2007); Magana v.

Commissioner, 118 T.C. 488, 493 (2002).     However, the Appeals

officer’s mandated verification under section 6330(c)(1) that the
                                   - 7 -

requirements of any applicable law or administrative procedure

have been met is subject to review without regard to a challenge

by the taxpayer at the hearing.         Hoyle v. Commissioner, 131 T.C.

     ,       (2008) (slip op. at 11).

         Petitioner argues that:   (1) The statute of limitations bars

collection, and (2) the tax liability is satisfied.        These issues

are within those requiring verification by the Appeals officer

under section 6330(c)(1) and therefore are subject to our review.

See id.

A.    Statute of Limitations

         Section 6502(a) prescribes the period during which any tax

may be collected following assessment.        At the time of the

initial assessment in this case, section 6502 provided a 6-year

period for collection by levy.      Congress amended section 6502

twice.      In 1988 Congress amended section 6502 so that a court

proceeding filed by the United States during the 6-year period

extended the collection period until any liability was satisfied.

Technical and Miscellaneous Revenue Act of 1988 (TAMRA), Pub. L.

100-647, sec. 1015(u), 102 Stat. 3373.        The purpose of the 1988

amendment was to conform liens and levies.        Before the amendment,

a judicial proceeding would not toll the limitations period for

levies, but would for liens.       See United States v. Wodtke, 627 F.

Supp. 1034, 1041 (N.D. Iowa 1985), affd. without published

opinion 871 F.2d 1092 (8th Cir. 1988).        The legislative history
                               - 8 -

of TAMRA states that the 1988 amendment was to conform section

6502 so that a court proceeding filed during the 6-year period

would keep the collection period open.     H. Conf. Rept. 100-1104

(Vol. II), at 5-6 (1988), 1988-3 C.B. 473, 495-496.     In 1990

Congress amended section 6502 to extend the 6-year period for

collection to 10 years.   Omnibus Budget Reconciliation Act of

1990, Pub. L. 101-508, sec. 11317(a), (c), 104 Stat. 1388-458.

The 1988 amendment is effective for all levies issued after

November 10, 1988, and the 1990 amendment applies to taxes

assessed after November 5, 1990, and taxes assessed on or before

November 5, 1990, if the period specified in section 6502 for

collection of such taxes has not expired.

     Section 6502 currently provides that an assessed tax may be

collected by levy or by a proceeding in court if the levy is made

or the proceeding began within 10 years after date of assessment.

Sec. 6502(a)(1).   If a timely proceeding is commenced in court,

the period during which such tax may be collected by levy shall

not expire until the liability for the tax is satisfied.     Sec.

6502(a).

     This collection action originates from respondent’s March

26, 1985, section 6672 assessment.     Respondent’s assessment of

the TFRP penalty was timely and is undisputed.     Respondent issued

the Letter 1058 to collect petitioner’s liability by levy on

September 25, 2006; i.e., more than 10 years after the date of
                                 - 9 -

assessment.   However, respondent filed a counterclaim in Beeler

v. United States, 894 F. Supp. 761 (S.D.N.Y. 1995), on March 9,

1987, within the then-existing 6-year period of limitations on

assessment.   Because the 1988 amendment of section 6502 is

applicable to the assessment at issue, respondent’s commencement

of this proceeding within the requisite 6-year period under

section 6502(a)(1) served to extend the period for collection

until petitioner’s liability is satisfied; petitioner has not

satisfied his liability.    Thus respondent is entitled to collect

by levy.

B.   Satisfaction of Liability

      Petitioner argues that respondent’s levy is inappropriate

because respondent filed two Forms 668 (Z) releasing the New

York, New York, and Sarasota, Florida, liens.   Petitioner

contends that respondent’s filing of the Forms 668 (Z) proves

that petitioner’s liability has been satisfied.   Respondent

concedes that two releases were filed and a third release was

prepared but never filed.   Respondent argues that the Forms 668

(Z) do not prove that petitioner has satisfied his liability.

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

all property and rights to property of a taxpayer liable for

taxes when a demand for payment of the taxes has been made and

the taxpayer has failed to pay those taxes.   The lien arises by

operation of law when the IRS assesses the amount of unpaid tax.
                              - 10 -

Sec. 6322.   However, the lien imposed by section 6321 shall not

be valid against any purchaser, holder of a security interest,

mechanic’s lienor, or judgment lien creditor until notice of

meeting the requirements of section 6323(f) has been filed by the

Secretary.   Section 6323(f) provides the rules that govern when

and where a notice under section 6323(a) must be filed.     The IRS

files an NFTL to preserve priority and put other creditors on

notice.   See sec. 6323.

     The NFTLs filed in New York, New York, and Sarasota,

Florida, were the notices required by section 6323(a) and (f).

The Forms 668 (Z) that respondent concedes were filed

extinguished these NFTLs.   However, the issue here is whether the

Forms 668 (Z) extinguish the tax liability.

     Petitioner’s contention that the Forms 668 (Z) indicate that

his liability has been satisfied is incorrect.   The underlying

tax liability is not extinguished when an NFTL filed pursuant to

section 6323 is released.   Commissioner v. Angier Corp., 50 F.2d

887, 892 (1st Cir. 1931), affg. in part and vacating in part 17

B.T.A. 1376 (1929); Baker v. Commissioner, 24 T.C. 1021, 1025

(1955); Miller v. Commissioner, 23 T.C. 565, 569 (1954), affd.

231 F.2d 8 (5th Cir. 1956); Boyer v. Commissioner, T.C. Memo.

2003-322; Hohenstein v. Commissioner, T.C. Memo. 1997-56; sec.

301.6325-1(a)(1), Proced. & Admin. Regs.   The underlying tax

liability remains outstanding until the tax is paid in full or
                               - 11 -

the statutory period for collection expires.    Sec. 301.6325-

1(a)(1), Proced. & Admin. Regs.   Petitioner remains liable for

his underlying liability even though respondent released the

NFTLs filed pursuant to section 6325.     Commissioner v. Angier

Corp., supra; Baker v. Commissioner, supra; Miller v.

Commissioner, supra.

C.   Duty of Consistency

      Petitioner next argues that section 6672 imposes a duty of

consistency on respondent and that respondent must release him

from his liability because his colleagues were released.

Petitioner argues that the District Court’s finding in Beeler v.

United States, supra at 771, that the parties are “jointly and

severally liable for the one hundred percent penalty sought by

the government pursuant to § 6672(a)”, requires the Commissioner

to treat all three parties identically.    This argument was first

raised on brief and is not properly before us.    See Giamelli v.

Commissioner, 129 T.C. 107 (2007).

      Even if this argument were properly before us, however, it

would not be valid.    A finding of joint and several liability

does not require the IRS to collect the penalty proportionally

among such parties or require the IRS to offer petitioner the

same favorable treatment offered to another responsible party.

Section 6672 allows the Government to collect from any

responsible party as long as it does not collect more than the
                               - 12 -

amount of the liability.    Sec. 6672(a), (d); see also McClure v.

Commissioner, T.C. Memo. 2008-136.      There is no duty of

consistency under section 6672 or 6502 that prevents respondent

from collecting from petitioner despite releasing the other

responsible parties.

D.     Conclusion

       We conclude that the statutory period for collection remains

open, and petitioner’s liability was not extinguished by the

filing of the Forms 668 (Z).    Accordingly, we hold that

respondent satisfied the requirements of section 6330 and did not

abuse his discretion in sustaining the NFTL filed against

petitioner and may proceed by levy to collect petitioner’s unpaid

tax.

       To reflect the foregoing,


                                            Decision will be entered

                                     for respondent.
