                             T.C. Memo. 2013-268



                        UNITED STATES TAX COURT



            WILLIAM B. MEYER, Petitioner v. COMMISSIONER
                 OF INTERNAL REVENUE, Respondent



      Docket No. 25013-06L.                     Filed November 25, 2013.



      William B. Meyer, pro se.

      Paul C. Feinberg and Wesley J. Wong, for respondent.



                          MEMORANDUM OPINION


      HOLMES, Judge: William Meyer failed to file a return or pay his 2000

taxes. The Commissioner figured out how much he owed and wants to collect by

levying on his property. Meyer got a collection due process (CDP) hearing, but

the Appeals officer upheld the Commissioner’s decision to levy. Meyer argues
                                          -2-

[*2] that the Appeals officer abused his discretion by not properly verifying that

the Commissioner followed applicable law or administrative procedure. The heart

of Meyer’s case is that the Commissioner either never created a notice of

deficiency or never mailed it. If Meyer is right, the Commissioner has no right to

collect the unpaid tax.

                                     Background

      Meyer has a history of run-ins with the Commissioner owing to his

reluctance to follow the Internal Revenue Code when it comes time to file his

annual return. See Meyer v. Commissioner, T.C. Memo. 2005-82, 2005 WL

826815, at *3 ($15,000 penalty for filing a 1996 return showing zero income),

aff’d, 200 Fed. Appx. 676 (9th Cir. 2006); Meyer v. Commissioner, T.C. Memo.

2005-81, 2005 WL 826676, at *4 ($15,000 penalty for filing a 1997 return

showing zero income). But for his 2000 tax year, Meyer decided not to file a

return at all. Meyer told us at trial that he would not file a 2000 tax return unless

he had a notice of deficiency and accompanying papers “to work from,” because

his records were “chaotic at best.” The Commissioner believes Meyer earned

more than more than $1 million in taxable income for 2000. The Commissioner
                                          -3-

[*3] prepared a substitute for return (SFR) under section 60201 and determined

Meyer owed more than $450,000, plus interest and penalties.

      This is common enough--preparing an SFR often prompts delinquent

taxpayers to file a return on their own. An SFR is not a comprehensive return; the

Commissioner uses only one of two filing statuses--single or married filing

separately--and he allows only one personal exemption and no business expenses

or itemized deductions. See Internal Revenue Manual (IRM) pt. 5.19.2.6.4.5.1(3)

(Apr. 19, 2001). Because an SFR is usually stingy with deductions, a taxpayer

who gets the resulting notice of deficiency will often respond by filing a petition

with us and then preparing a return that reflects the much more complete

information he has about himself--especially about greater deductions he is

entitled to claim, the willingness of his wife to accept married-filing-jointly status,

and whether he has children or other dependents.

      This case may have wandered off the usual path right after the IRS prepared

the SFR. What the IRS usually does next is draft a notice of deficiency for the

unreported taxes and then mail that notice (which usually includes the SFR) to the


      1
        Unless otherwise indicated, all section references are to the Internal
Revenue Code for the year at issue; all Rule references are to the Tax Court Rules
of Practice and Procedure.
                                        -4-

[*4] taxpayer. The Commissioner generally has to do this before he can begin

trying to collect. And, in this case, that’s what the Commissioner says he did--he

claims that he sent Meyer a notice of deficiency, but Meyer never responded. That

would have allowed the Commissioner to record the liability--“assessing the

deficiency” to use tax jargon--and to begin to collect the unpaid bill from Meyer.

I.    The CDP Hearing

      The Commissioner did send Meyer a final notice of his intent to levy. This

notice told Meyer that he had the right to a hearing, which Meyer promptly

demanded.

      Even before that hearing, the Appeals officer requested a Form 4340,

Certificate of Assessments, Payments, and Other Specified Matters, to verify that

the Commissioner had properly assessed the tax. The Form 4340 had an entry

which indicated that a $465,390 tax had been “assessed by examination” and that

there was an “audit deficiency per default of 90 day letter.” Although that form

apparently satisfied the Appeals Officer that a notice of deficiency existed, he was

unable to find a copy of the notice before the CDP hearing.

      During the CDP hearing, the Appeals officer asked Meyer to point out any

irregularities in the making of the assessment for 2000. Meyer’s primary
                                         -5-

[*5] contention was that he had not received a notice of deficiency.2 Meyer

indicated that he had repeatedly asked the IRS for a copy of the notice of

deficiency, even filing a request under the Freedom of Information Act, but all to

no avail. Because the Appeals officer still had not found the notice at the time of

the hearing, he allowed Meyer to dispute his underlying tax liability.3

      The CDP hearing, however, didn’t resolve the notice-of-deficiency issue.

The Appeals officer was clearly aware that if he did not get verification that the

Commissioner properly mailed a notice of deficiency to Meyer’s last known

address, the assessment would be invalid; he wrote in his case activity record, “it

is potentially possible that account will have to be abated & a new SNOD issued.”




      2
        Meyer also argued that the Commissioner violated his privacy under
section 6103 because entries in the IRS records suggested his file had been sent to
Baltimore for a Tax Court trial that both parties later agreed never occurred.
Meyer believes the Commissioner violated his privacy by circulating his file
throughout the IRS. We see no problem. See sec. 6103(h) (allowing for
inspection or disclosure of tax records to Treasury officials, the Department of
Justice, and for judicial and administrative proceedings for purposes of tax
administration). Meyer had no evidence that the Commissioner released his file to
people outside the IRS or used the file for nontax purposes in violation of section
6103.
      3
         He seems to have had in mind section 6330(c)(2)(B), which allows a
taxpayer who has not received a notice of deficiency to dispute the underlying
liability at the CDP hearing.
                                         -6-

[*6] To obtain this verification, the Appeals officer requested a copy of the

certified mailing list (U.S. Postal Service Form 3877).

      The Form 3877 in this case reads “statutory notices of deficiency for the

year(s) indicated have been sent to the following taxpayers,” and lists Meyer’s

name and address, followed by an article number and the phrase “postage fees paid

by IRS 2000.”4 The address listed on the Form 3877 was (and remains) Meyer’s

correct address. At the bottom right of the Form 3877, there are two separate

items that contemplate completion of additional information: One is a space for

the USPS receiving employee to sign his name and the date; another is a space

labeled “notices listed hereon were issued by:”. The only mark near those two

items is a rectangular stamp which reads “IRS OGDEN UT USPS 84201” at the

top, shows an illegible signature at the bottom, and the date April 2, 2003 in the

middle.5 Additionally, although the Form 3877 indicates that the IRS was sending

12 pieces of certified mail, the space in which the USPS should have marked the

number of pieces it received is blank.



      4
         Although the form is titled “Substitute USPS Form 3877” and is not a
certified copy, we will refer to the document as the Form 3877.
      5
       In the Commissioner’s briefs, he refers to this stamp as a “postmark”. As
we discuss later, we make no determination whether this was in fact an official
USPS postmark.
                                         -7-

[*7] After reviewing the Form 3877, the Appeals officer was apparently

confident that he now had verified that a notice of deficiency existed and had been

properly sent to Meyer; he wrote in his case activity record that the form

“show[ed] the * * * [statutory notice of deficiency] went out on 4/2/03 to correct

last known address.” Even after the hearing, however, the Appeals officer never

received a copy of the notice of deficiency. So far as the record shows, nobody at

the IRS has ever found it.

II.   Notice of Determination

      With the notice of deficiency issue seemingly resolved, the Appeals officer

issued a notice of determination. He determined that “[t]he Secretary has provided

sufficient verification that the requirements of all applicable laws and

administrative procedures have been met.” He noted that he “reviewed computer

transcripts” to “verify[] the assessments.” And he specifically determined that the

“assessment for the tax period of 2000 [was] valid”--because he found that the IRS

had properly issued the deficiency notice and sent it to Meyer, “as shown on the

United States Postal Service Form 3877, certified mail list, stamped by the United

States Postal Service.” Because the requirements of all applicable laws or

administrative procedures had been met--and because of Meyer’s lack of
                                         -8-

[*8] cooperation6--the Appeals officer determined that the levy balanced “the need

for efficient collection with the taxpayer’s concern that any collection action be no

more intrusive than necessary.”

      Meyer, a resident of Nevada when he filed his petition, argues that this

determination was an abuse of discretion, because the Appeals officer did not meet

his obligation to verify that the IRS properly issued and mailed a notice of

deficiency to him.

                                     Discussion

I.    Liabilities, Deficiencies, and Assessments

      We begin with some vocabulary: liability, deficiency, and assessment.

      A tax liability is the tax imposed by the Code for a tax year. Sec. 26(b)(1).

For an individual who correctly reports his taxes, the tax liability is the amount of

tax shown on his return. For Meyer, who did not file a return, the liability is the

amount that would have been shown on a correctly completed tax return.

Individuals must pay their tax liability regardless of whether the Commissioner

requests payment. Sec. 6151(a).


      6
         The Appeals officer noted that Meyer refused to discuss collection
alternatives that the Appeals officer had raised. And, somewhat redundantly, he
also noted that Meyer wasn’t eligible for any such alternatives because he hadn’t
filed his tax returns for later years.
                                          -9-

[*9] A deficiency is generally the difference between the amount of a taxpayer’s

liability and the amount shown on his return--and when the Commissioner

determines a deficiency, it means that he thinks a taxpayer owes more than was

reported on the return. Sec. 6211. Section 6212 authorizes the Commissioner to

send a notice of deficiency alerting a taxpayer that the Commissioner believes he

owes more than he has reported. A taxpayer has 90 days from the date that notice

was mailed to file a petition with this Court. Sec. 6213(a). Subject to exceptions

not relevant here, the Commissioner may not assess, levy, or take other collection

activity until 90 days after the notice of deficiency is mailed; if the taxpayer files a

Tax Court petition, the Commissioner may not take action until our decision

becomes final. Id.

      An assessment is the recording of a tax liability in the Commissioner’s

books. Sec. 6203. Though nowadays it’s just a computer entry, the act of

assessment is immensely important because once a liability is assessed, the IRS

can begin trying to collect it by means not usually available to ordinary creditors--

such as seizing a taxpayer’s property without first going to court. See Bull v.

United States, 295 U.S. 247, 260 (1935).

      Within 60 days after making an assessment, the Commissioner must send a

“notice and demand” for payment of tax under section 6303. A taxpayer’s failure
                                        -10-

[*10] to respond to a notice and demand creates a tax lien in favor of the

Commissioner, allowing the Commissioner to levy. Sec. 6321. Before seizing a

taxpayer’s property, however, the Commissioner has to offer the taxpayer an

opportunity for a CDP hearing with the IRS Appeals Office.7 See sec. 6330(b),

(e)(1). The Appeals officer provides a fresh set of eyes--he cannot have had any

prior involvement with respect to the unpaid tax liability. See sec. 6330(b)(3).

Meyer requested such a hearing.

      As part of the CDP hearing, the Appeals officer must obtain verification that

the requirements of any applicable law or administrative procedure have been met.

See sec. 6330(c)(1). During the hearing, a taxpayer can try to forestall the

unhappy outcome of having his property seized by arranging for alternatives like

an offer-in-compromise or an installment agreement. See sec. 6330(c)(2)(A).8 In


      7
        In 1998, Congress enacted section 6330 to give taxpayers this opportunity
to seek additional protections from unreasonable tax collection. See Internal
Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, sec.
3401, 112 Stat. at 746; Davis v. Commissioner, 115 T.C. 35, 37 (2000).
      8
        Section 6330(c)(2)(B) also says that a taxpayer may challenge the
underlying liability if he has not received a notice of deficiency, and we do review
such a challenge de novo and not for abuse of discretion. Goza v. Commissioner,
114 T.C. 176, 181-82 (2000). This is undoubtedly the section that the Appeals
officer had in mind when he invited Meyer to challenge the liability by filing his
missing return. But this would have been an improper use of section
6330(c)(2)(B) if Meyer should have gotten a notice of deficiency and it turned out
                                                                        (continued...)
                                         -11-

[*11] summary, the IRS holds a CDP hearing only after the Commissioner has

assessed a tax liability and tried to get the taxpayer to pay voluntarily.

      Following a CDP hearing, the Appeals officer must determine whether to

sustain the filing of the lien and whether proceeding with the proposed levy action

is appropriate. In making that determination, the Appeals officer is required to

consider three things:

      •      the verification from the Commissioner that he met all of the
             requirements of applicable law and administrative procedure,

      •      any relevant issues raised by the taxpayer, and

      •      whether the proposed collection action balances the need for efficient
             collection of taxes with the taxpayer’s legitimate concern regarding
             the intrusiveness of the proposed collection action.

Sec. 6330(c)(3).

II.   Jurisdiction and Standard of Review

      Section 6330(d)(1) gives us jurisdiction to review the determination made

by the Appeals officer in connection with a CDP hearing. Where the validity of

the underlying tax liability is not at issue, we review the Appeals officer’s

      8
       (...continued)
that one wasn’t properly issued--the correct action then would have been to find
the levy improper, see Freije v. Commissioner, 125 T.C. 14, 35-36 (2005); and if
Meyer did get a notice of deficiency, then his underlying liability would not have
been properly before the Appeals officer and we could not review that part of the
determination at all.
                                        -12-

[*12] determination--including the verification that “the requirements of any

applicable law or administrative procedure have been met”--for abuse of

discretion. See Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v.

Commissioner, 114 T.C. 176, 182 (2000). We review not only those issues that

were considered by the Appeals officer but also issues that should have been

considered by him in arriving at his determination--without regard to whether

Meyer raised them at the hearing. See Hoyle v. Commissioner, 131 T.C. 197, 202-

03 (2008) (Hoyle I). Because this case would ordinarily be appealable to the

Ninth Circuit, we base our decision on the administrative record relied on by the

Appeals officer during the CDP hearing.9 See Keller v. Commissioner, 568 F.3d

710, 718 (9th Cir. 2009), aff’g T.C. Memo. 2006-166, and aff’g in part, vacating

in part on another ground decisions in related cases.




      9
        This rule has a few narrow exceptions “to identify and plug holes in the
administrative record.” Lands Council v. Powell, 395 F.3d 1019, 1030 (9th Cir.
2005). We can supplement the administrative record (1) to determine whether the
agency has considered all relevant factors and explained its decision; (2) “the
agency has relied on documents not in the record; (3) when necessary to explain
technical terms or complex subject matter; or (4) when there is a showing of
agency bad faith. Tri-Valley CAREs v. U.S. DOE, 671 F.3d 1113, 1130 (9th Cir.
2012); Lands Council, 395 F.3d at 1030. We use the trial record in this case only
to determine how the Appeals officer arrived at his decision and whether he
considered all relevant factors.
                                         -13-

[*13] An Appeals officer abuses his discretion if his determination was grounded

on an error of law or rested on a clearly erroneous assessment of the facts, or if he

applied the correct law to facts that weren’t clearly erroneous but ruled in an

irrational manner. See Fargo v. Commissioner, 447 F.3d 706, 709 (9th Cir. 2006),

aff’g T.C. Memo. 2004-13; United States v. Sherburne, 249 F.3d 1121, 1125-26

(9th Cir. 2001). “‘[A] finding is ‘clearly erroneous’ when although there is

evidence to support it, the reviewing court on the entire evidence is left with the

definite and firm conviction that a mistake has been committed.’” Anderson v.

Bessemer City, N.C., 470 U.S. 564, 573 (1985) (quoting United States v. United

States Gypsum Co., 333 U.S. 364, 395 (1948)).

III.   Forms in the Administrative Record

       As part of his obligation under section 6330(c)(1), an Appeals officer must

verify, among other requirements, that a notice of deficiency was properly issued

to a taxpayer. Section 6330(c)(1) doesn’t require any particular document or set of

documents to satisfy this verification requirement. See Roberts v. Commissioner,

118 T.C. 365, 371 n.10 (2002), aff’d, 329 F.3d 1224 (11th Cir. 2003); Kubon v.

Commissioner, T.C. Memo. 2005-71, 2005 WL 752558, at *4. When the

existence of the notice of deficiency is in dispute, the Appeals officer must verify

both that it exists and that it was properly mailed.
                                         -14-

[*14] We turn to each of the two documents on which the Commissioner relies.

      A.      Form 4340

      We start with the Form 4340. A Form 4340 provides a “detailed explana-

tion of the taxpayer’s account.” IRM pt. 5.4.2.15(3) (May 31, 2000). An IRS

employee compiles a Form 4340 from existing entries in the Commissioner’s

computer system, and enters “only valid assessments and adjustments, payments,

or applied credits.” Id. pt. 5.4.2.15(3)(c)(1). The Form 4340 should also reflect

the first and last notice date as well as the certified mailing date of the deficiency

notice. Id.

      A Form 4340 constitutes presumptive evidence that a tax has been validly

assessed pursuant to section 6203. Davis v. Commissioner, 115 T.C. 35, 40

(2000); Tucker v. Commissioner, T.C. Memo. 2012-30, 2012 WL 280357, at *3,

aff’d, 506 Fed. Appx. 166 (3d Cir. 2012). It is the taxpayer’s burden to identify

any irregularity. Jordan v. Commissioner, T.C. Memo. 2011-243, 2011 WL

4596002, at *3 (citing Nestor v. Commissioner, 118 T.C. 162, 167 (2002)),

supplementing 134 T.C. 1 (2010). And, unless he does so, a Form 4340 that shows

that the tax liability was assessed and remains unpaid is sufficient verification.

Davis, 115 T.C. at 40-41; Tucker, 2012 WL 280357, at *3.
                                         -15-

[*15] Here, however, Meyer plainly did identify an irregularity in the assessment

procedure--he argued that he never received the notice of deficiency.10 See Hoyle

v. Commissioner, 131 T.C. at 205 n.7 (“[W]here a taxpayer alleges no notice of

deficiency was mailed he has * * * ‘[identified] an irregularity’, thereby requiring

the Appeals officer to do more than consult the computerized records” (quoting

Chief Counsel Notice CC-2006-19 (Aug. 18, 2006))). Thus, the Appeals officer

could not rely on “computerized records” like the Form 4340. Instead, we have

said that “[t]he Appeals officer may be required ‘to examine underlying documents


      10
         The Commissioner argues that Meyer disputed only his receipt of the
notice of deficiency, and not its existence, during the CDP hearing. Thus, says the
Commissioner, since the challenge to the existence of the notice is not part of the
administrative record, it was never in dispute before the Appeals officer and we
should not consider it. We think that’s splitting hairs a bit too fine--especially in a
pro se setting. As an initial matter, we think Meyer did put the existence of the
notice at issue at the CDP hearing. The declaration he gave to the Appeals officer
at the CDP hearing says not only that he didn’t receive a notice of deficiency, but
also that he had been unable to obtain a copy from the IRS after several requests.
And that was on top of the fact that the Appeals officer himself was unable to find
a copy of it. Even if Meyer’s declaration didn’t say the magic word “existence”,
we have indicated that challenging receipt is also a challenge to a notice’s
existence. See Clayton v. Commissioner, T.C. Memo. 2009-114, 2009 WL
1456471, at *7 (citing Butti v. Commissioner, T.C. Memo. 2008-82, 2008 WL
898822, for the proposition that when “the taxpayer state[s] that he had never
received a notice of deficiency for the year at issue * * * the taxpayer affirmatively
challenge[s] the existence of the notice”); see also Internal Revenue Manual
(IRM) pt. 8.22.2.2.4.7.1(4) (officer “must review” preassessment document,
including, if possible, both notice of deficiency and certified mailing list when
taxpayer denies receipt).
                                         -16-

[*16] in addition to the tax transcripts, such as the taxpayer’s return, a copy of the

notice of deficiency, and the certified mailing list.’” Id. (quoting Chief Counsel

Notice CC-2006-19). Therefore, the Appeals officer had a duty to dig deeper; at

the very least, he had to examine other evidence to verify that the notice was

properly mailed.11

      B.     Form 3877

      And the Appeals officer did begin to dig deeper when he requested the

Form 3877 and reviewed it. The notice of determination indicates that the

Appeals officer relied on that form alone to verify that the Commissioner had

followed proper procedures in sending the notice of deficiency to Meyer. That

finding formed the cornerstone of the Appeals officer’s ultimate determination that

the assessment was valid.




      11
          Because Meyer put the existence of the notice of deficiency at issue, the
Appeals officer also had a duty to verify that there really was a notice. It’s unclear
whether the Appeals officer relied on the Form 4340 to do this. It’s also unclear
whether an Appeals officer can rely on a Form 4340 to verify a notice’s existence
without actually finding other corroborating evidence. Cf. Butti, 2008 WL
898822, at *2-*4 (existence of notice in dispute). We think reliance on a Form
4340 may be even more suspect when it contains irregularities, as it did here. See
infra note 15. But, as we conclude below (as we discuss later, we are remanding),
it’s not a question we have to answer here. On remand here, it might be helpful
for an Appeals officer to clearly explain in the notice of determination what
evidence he relied on to verify proper issuance.
                                         -17-

[*17] The Form 3877 is central to this case. Although the Appeals officer did not

review any evidence concerning how the Commissioner’s personnel prepared and

mailed notices of deficiency in this case, our caselaw has explained the general

procedures. IRS employees who mail notices of deficiency are supposed to

prepare a postal service Form 3877 (a certified mailing list) that lists all of the

notices of deficiency mailed on a particular date. See Coleman v. Commissioner,

94 T.C. 82, 88 (1990). The IRS worker then is supposed to hand deliver the form

and sealed envelopes containing the notices to the post office. See id. The postal

worker is then supposed to enter the number of envelopes on the bottom of the

form, initial the form, and stamp it with a postmark. See id.

      In this case, Meyer challenges the Form 3877 on both procedural and

substantive grounds. First, he contends that we should exclude it from the record.

But even if we don’t, he argues that the Appeals officer abused his discretion by

relying on that form alone to verify that the notice of deficiency was properly

mailed to him because he alleges that, like the Form 4340, it too contains

numerous irregularities.

      We look at each of those contentions.
                                         -18-

[*18]         i.    Evidentiary Objections

        Before turning to Meyer’s substantive challenge, we begin with his eviden-

tiary objections. He asks us to exclude the Form 3877 because it is hearsay not

falling within any exception and because it is not authenticated.12

        Hearsay is a statement, other than one made by the declarant while testify-

ing at the trial or hearing, offered in evidence to prove the truth of the matter

asserted. Fed. R. Evid. 801(c). Because we base our decision on the administra-

tive record relied on by the Appeals officer during the hearing, see Keller, 568

F.3d at 718, the Commissioner is offering the administrative record--and

specifically the Form 3877--to demonstrate what documents the Appeals officer

relied on, not to prove that the items in those documents are true, see Hoyle v.

Commissioner, 136 T.C. 463, 468-69 (2011) (Hoyle II) (citing Fed. R. Evid. 105);

Bowman v. Commissioner, T.C. Memo. 2007-114, 2007 WL 1296775, at *6 n.6.

The Form 3877 was presented as part of the administrative record; the fax

information on the Form 3877 shows that the Appeals officer received the form

before he made his determination. And the case activity record--as well as the

        12
          Meyer also asks us to exclude the Form 3877 because it is not complete
and because it does not satisfy the Commissioner’s burden of proof. These two
objections, however, go to the credibility and sufficiency of the evidence, rather
than its admissibility, and therefore are not grounds for exclusion. Fed. R. Evid.
402.
                                         -19-

[*19] notice of determination itself--indicate that he relied on it to make that

determination. Subject to authentication, we find that it is admissible for the

purpose of proving that it was part of the administrative record. See Hoyle II, 136

T.C. at 468-69.

      Even if admissible for that purpose, the Form 3877 still must be authentica-

ted before we admit it into evidence. See Fed. R. Evid. 901. “[E]vidence sufficient

to support a finding that the item is what the proponent claims” will authenticate

an item presented as evidence. Id. 901(a). An item may be authenticated by a

witness with knowledge who testifies that the item is what it is claimed to be. Id.

(b)(1). When we are reviewing a notice of determination in a CDP case, the

Commissioner presents the administrative record to show what items the Appeals

officer relied on in making his determination. Therefore, the Appeals officer’s

testimony at trial that he relied on the Form 3877 presented in this case is

sufficient to authenticate it as part of the administrative record.

      The fundamental problem underlying Meyer’s evidentiary arguments is that

he presumes each piece of the administrative record must be admissible at trial

independent of its role as part of the administrative record; i.e., he seems to argue

that the Form 3877 must satisfy evidentiary rules in this case in the same way it

would have to satisfy evidentiary rules in a deficiency case or any other federal
                                        -20-

[*20] litigation, where it would be a stand-alone document to prove only that a

notice of deficiency had been mailed. The Court of Federal Claims dispatched a

similar argument in a challenge to more formal charitable-exemption-denial

hearings, saying:

      Of course, if plaintiff is right, the IRS would be obliged to apply * * *
      evidence rules derivatively, lest this court strike materials that it
      relied upon in denying an exemption. * * * But, contrary to plaintiff’s
      importunings, courts generally have refused to consider collateral
      attacks upon the materials in administrative records based upon the
      post hoc application of evidence rules. * * *

New Dynamics Found. v. United States, 70 Fed. Cl. 782, 797 (2006). We

ourselves have indicated that items in an administrative record need not be

independently admissible. See Hoyle II, 136 T.C. at 468-69. If they needed to be

independently admissible, then the Appeals officer would abuse his discretion if

he relied on any document that would not be admissible in a deficiency case. This

would effectively merge deficiency law and CDP law, a result that we reject.

            ii.     Use of Form 3877 to Verify Mailing

      That brings us to the meat of Meyer’s case--did the IRS properly mail the

notice of deficiency before assessing his 2000 tax liability? If not, Meyer wins,

because we have definitively held that the Commissioner may not use a CDP

hearing to “cure” his failure to properly assess a tax. Freije v. Commissioner, 125
                                        -21-

[*21] T.C. 14, 35 (2005). The Commissioner had to mail a notice of deficiency to

Meyer’s last known address 90 days before he assessed Meyer’s debt, or that

assessment would be invalid. Sec. 6213(a).

       In deficiency cases, we have held the Commissioner has the initial burden

of proving by competent and persuasive evidence that a notice of deficiency was

properly mailed to a taxpayer. Clough v. Commissioner, 119 T.C. 183, 187

(2002); Cataldo v. Commissioner, 60 T.C. 522, 524 (1973), aff’d per curiam, 499

F.2d 550 (2d Cir. 1974). We have also required the Commissioner in deficiency

cases to show that the notice of deficiency was properly delivered to the USPS for

mailing. Clough, 119 T.C. at 187; Coleman, 94 T.C. at 90. In those cases, we

have said that the act of mailing may be proven by evidence of the

Commissioner’s mailing process corroborated by direct testimony or documentary

evidence. Clough, 119 T.C. at 187; Coleman, 94 T.C. at 90. When the existence

of a notice of deficiency is not disputed, we have ruled that a properly completed

Form 3877 by itself is sufficient--absent evidence to the contrary--to establish that

the notice of deficiency was properly mailed to the taxpayer. Coleman, 94 T.C. at

91. (More specifically, we have held that “exact compliance” with Form 3877

mailing procedures raises a presumption of official regularity in favor of the
                                        -22-

[*22] Commissioner. Clough, 119 T.C. at 188, Coleman, 94 T.C. at 90, 91; see

also United States v. Zolla, 724 F.2d 808, 810 (9th Cir. 1984).)

      Although this is not a deficiency case, we have applied these same

principles in a CDP setting. See Butti v. Commissioner, T.C. Memo. 2008-82,

2008 WL 898822, at *3 (burden on Commissioner) (citing to Coleman, 94 T.C. at

90--without discussing different standard of review in CDP cases--for proposition

that the Commissioner “bears burden of proving by competent and persuasive

evidence that the notice of deficiency was properly mailed”); Hoyle I, 131 T.C. at

203 (need for exact compliance) (noting that “[w]e have held that exact

compliance with Postal Service Form 3877 mailing procedures raises a

presumption of official regularity in favor of the Commissioner and is sufficient,

absent evidence to the contrary, to establish that the notice was properly mailed”).

In Hoyle I, 131 T.C. at 203--where the existence of a notice of deficiency was not

in dispute--we said that “it may be true that an Appeals officer could rely on a

properly completed Postal Service Form 3877 to meet his verification obligation

under section 6330(c)(1).” Hoyle I, 131 T.C. at 203.

      When the existence of a notice is not in dispute, an Appeals officer may rely

on a properly completed Form 3877 to meet section 6330(c)(1)’s requirement that

he verify proper mailing. See id. And here, unlike Hoyle I, we know that the
                                         -23-

[*23] Appeals officer did rely on the Form 3877 to do so.13 Before relying on it,

though, an Appeals officer must assure himself that the form is “properly

completed.” Thus, we look at whether the Form 3877 here was indeed “properly

completed,” see Hoyle I, 131 T.C. at 203; or in other words, whether there was

“exact compliance” with the certified-mail-list procedures, see Clough, 119 T.C. at

188, Coleman, 94 T.C. at 91.

      We’re far from confident that the IRS properly completed the Form 3877 in

this case. The first issue that jumps out at us--specifically on the bottom right-

hand side of the form--is the rectangular stamp that reads “IRS OGDEN UT USPS

84201” which purportedly is an official USPS postmark, and includes an illegible

signature. Although it is generally well known that a USPS hand-stamped

postmark is round and doesn’t have an IRS identification, see, e.g., USPS Postal

Operations Manual, at ex. 231.5 (July 2002), available at

http://www.nalc.org/depart/cau/pdf/manuals/POM/POM_9--12_08.pdf (listing


      13
          Because the administrative record in Hoyle I didn’t contain a Form 3877,
we determined that “the Appeals officer could not have based his verification on
that form.” Hoyle I, 131 T.C. at 203. And since it was unclear what the Appeals
officer used to verify that the assessment of the taxpayer’s liability was preceded
by a duly mailed notice of deficiency, we remanded the case to the Appeals Office
“for it to clarify the record as to what the Appeals officer relied upon in
determining that the notice of deficiency was properly sent to” the taxpayer. Id. at
204-05.
                                          -24-

[*24] hand-stamped postmarks); International Mail Manual, at 311.1, available at

http://pe.usps.com/text/imm/immc3_001.htm (specifying USPS postmarks are

round), our caselaw is not so sure, compare Coleman, 94 T.C. at 85 (distinguishing

between round postal service stamp and IRS dating stamp on a Form 3877) with

Clough, 119 T.C. at 185-86 (finding rectangular “postmark” with “IRS OGDEN

UT USPS-84201” was valid USPS postmark based on declaration of USPS mail

processing clerk). Unlike what the Commissioner did in Clough, the Appeals

officer here didn’t bother to obtain a declaration from anyone regarding the

validity of the only stamp on the form.

      Even assuming that this stamp is an official USPS postmark and includes a

signature of the postal employee who received the notices, other red flags are

fluttering. The Form 3877 also requires a signature of the person who issued the

notices. Assuming the signature was that of the postal office employee who

received the notices, no separate signature from the person who issued the notices

was present here. Additionally, even though the Form 3877 indicated that the IRS

was sending 12 pieces of certified mail, the space in which the USPS should have

marked the number of pieces it received to confirm that fact is blank. See, e.g.,

USPS Registered Mail Handbook DM-901, at 3-4.2.1 (Sept. 2004), available at

http://www.nalc.org/depart/cau/pdf/manuals/dm901.pdf (instructing USPS
                                         -25-

[*25] employee to enter total pieces received to properly complete a Form 3877);

see also IRM pt. 4.14.1.9.3(2) (July 21, 2000) (USPS employee will verify number

of notices before completing Form 3877). The Appeals officer did find that the

Form 3877 was “stamped by the Postal Service,” but did not discuss any of the

other missing items. By relying only on the Form 3877 to verify that the IRS

properly mailed the notice of deficiency, the Appeals officer implicitly found that

it was properly completed. And that finding borders on being clearly erroneous.

We don’t think that the Appeals officer could have relied on that form alone to

verify that the notice of deficiency was properly sent. See Coleman, 94 T.C. at 91

(“[A] defective Form 3877 corroborated by other documentary evidence does not

entitle respondent to the presumption of official regularity”).

      That’s not necessarily the end of the story. In deficiency cases, we have

acknowledged that a failure to precisely comply with the Form 3877 mailing

procedures may not be fatal if the Commissioner can come forward with other

evidence that the mailing procedures were followed. See Clough, 119 T.C. at 188;

Coleman, 94 T.C. at 91-92. Likewise, in a CDP case we want to stress that an

Appeals Officer’s reliance on a defective Form 3877 to verify that the IRS had

fulfilled its requirements to mail out a notice of deficiency is not an abuse of

discretion per se--if the administrative record shows that he relied on other
                                          -26-

[*26] evidence that corrects or explains the defects, he could meet his verification

obligation regarding the mailing issue.

      That’s not what happened here, though. The administrative record in this

case does not show that the Appeals officer relied on anything else to verify proper

mailing. After Meyer argued at the CDP hearing that he didn’t receive a notice of

deficiency--with the Appeals officer’s acknowledging that “it is potentially

possible that” the lack of a notice of deficiency would result in the abatement of

the assessment--the Form 3877 is the only piece of evidence in the administrative

record that the Appeals officer relied on to verify that the notice of deficiency was

properly mailed.14 The Appeals officer could’ve sought a declaration or some

other kind of verification from an IRS employee involved in preparing the Form


      14
          At trial, Meyer pointed out that the Appeals officer couldn’t also rely on
the Form 4340 to verify proper mailing because it contained no entry for the
certified mailing date of the notice of deficiency. And it’s true that his Form 4340
didn’t contain such a date--as it should have. See IRM pt. 5.4.2.15(3)(c)(1) (May
31, 2000) (directing that the Form 4340 must “[c]learly show the first and last
notice date and the certified mailing date of the deficiency notice”). However,
nothing in the administrative record indicates that the Appeals officer actually
relied on the Form 4340 to verify that the notice of deficiency was properly
mailed. Before the CDP hearing--before he knew that the mailing of the notice of
deficiency might be an issue--the Appeals officer requested the Form 4340 to see
if that form could help him verify that the assessment was proper. Once he
realized there might be a problem with the mailing, there’s no evidence in the
administrative record that he relied on that form to verify that the notice of
deficiency was, in fact, properly mailed.
                                         -27-

[*27] 3877 (or, if there was one, the USPS employee signing off on that form),

e.g., Clough, 119 T.C. at 186, or obtained other habit or documentary evidence,

e.g., Coleman, 94 T.C. at 92, to verify proper mailing. The administrative record,

however, doesn’t indicate he sought any of these alternatives. And, under the

Chenery doctrine, we “must judge the propriety of * * * [an administrative

agency] action solely by the grounds invoked by the agency.” SEC v. Chenery

Corp., 332 U.S. 194, 196 (1947) (describing its holding in SEC v. Chenery Corp.,

318 U.S. 80 (1943)); see also Jones v. Commissioner, T.C. Memo. 2012-274, at

*15 (applying Chenery doctrine to CDP case); Salahuddin v. Commissioner, T.C.

Memo. 2012-141, 2012 WL 1758628, at *7 (same).

      So, that leads us to the ultimate question: Should we determine that the

Appeals officer abused his discretion or remand to the Appeals Office to allow the

officer to clarify the evidence that he did rely on--or even supplement the

administrative record to meet his verification obligation? In other words, should

we hold that the Appeals officer’s determination rested on a clearly erroneous

finding of fact, or remand to the Appeals office to allow the officer to clarify the

evidence that he did rely on--or even supplement the administrative record to meet

his verification obligation?
                                        -28-

[*28] Generally speaking, we remand a case to the Appeals Office when a

taxpayer did not receive a proper hearing and the new hearing is necessary or will

be productive. Kelby v. Commissioner, 130 T.C. 79, 86 n. 4 (2008) (citing

Lunsford v. Commissioner, 117 T.C. 183, 189 (2001), Lites v. Commissioner, T.C.

Memo. 2005-206, 2005 WL 2082796, at *8, and Day v. Commissioner, T.C.

Memo. 2004-30, 2004 WL 213726, at *3). The resulting section 6330 hearing on

remand is not a new hearing, but rather “‘provides the parties with the opportunity

to complete the initial section 6330 hearing while preserving the taxpayer’s right

to receive judicial review of the ultimate administrative determination.’” Id. at 86

(quoting Drake v. Commissioner, T.C. Memo. 2006-151, aff’d, 511 F.3d 65 (1st

Cir. 2007). As noted earlier, we have remanded a case to the Appeals Office to

clarify the record regarding an officer’s determination that a notice of deficiency

was properly mailed. See Hoyle I, 131 T.C. at 205.

      Although a close call, we decide that the most productive course here would

be to remand to the Appeals Office. We acknowledge that the administrative

record does not show that the Appeals officer pursued additional evidence to

verify that the notice was properly mailed. We also must recognize, however,

that--at the time of his decision--the Appeals officer here did not have the benefit

of several decisions from this Court that could have affected his understanding of
                                        -29-

[*29] the verification obligation. For instance, he may not have known that when

a taxpayer challenges receipt of a notice of deficiency, that should also be

construed as a challenge to a notice’s existence, see Clayton v. Commissioner,

T.C. Memo. 2009-114, 2009 WL 1456471, at *7, and therefore the Appeals officer

might have thought it proper to rely solely on the Form 4340 to verify a notice’s

issuance (and possibly even rely on it in conjunction with a Form 3877 to verify

proper mailing). The Appeals officer also didn’t have the benefit of Hoyle I, 131

T.C. at 202-03, so he might not have known that we can review all issues that he

should have considered, without regard to whether a taxpayer raised them at the

hearing.15 Furthermore, the Appeals officer did not know for sure that the burden

of proof for mailing that had been espoused in deficiency cases would also apply

equally in CDP cases despite the differing standards of review. See Butti, 2008

WL 898822, at *3 (burden on Commissioner to prove by competent and

persuasive evidence that notice of deficiency was properly mailed).

      We have remanded cases where the law changed between the CDP hearing

and the Tax Court trial if that may have affected presentation of a case. See


      15
         Hoyle I, 131 T.C. at 205 n.7, also made it clear--albeit in a footnote-- that
a taxpayer identifies an irregularity in the assessment procedure by simply alleging
that no notice of deficiency was mailed to him. And that requires an Appeals
officer to do more than consult the computerized records. Id.
                                        -30-

[*30] Harrell v. Commissioner, T.C. Memo. 2003-271, 2003 WL 22137919, at *9.

And we will do so again here--we will remand to the Appeals Office to clarify the

record as to whether a notice of deficiency was both properly issued and mailed to

Meyer in light of the intervening caselaw. The Appeals Office is not limited to

what the officer considered during the first administrative hearing but rather

should independently verify that a notice of deficiency was properly issued and

mailed, Jordan, 2011 WL 4596002, at *4 (citing Hoyle II, 136 T.C. at 468), under

the standards we have more fully described in later cases.

      To reflect the foregoing,



                                               An appropriate order will be issued.
