                        T.C. Memo. 2011-290



                      UNITED STATES TAX COURT



               RICHARD LOREN MORGAN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8441-10L.          Filed December 19, 2011.




     Richard Loren Morgan, pro se.

     Alicia E. Elliott for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     HAINES, Judge:   This case arises from a petition for

judicial review filed in response to a Notice of Determination

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

(notice of determination) issued to petitioner.1   The issues for


     1
      Unless otherwise indicated, all section references are to
                                                   (continued...)
                                 - 2 -

decision are:   (1) Whether petitioner may challenge the existence

or amount of the underlying tax liability; and (2) whether

respondent abused his discretion in determining to proceed with

the collection of the section 6672 trust fund recovery penalties

(TFRPs) assessed against petitioner as a responsible person for

failing to collect and pay over employment taxes of OrderPro

Logistics, Inc. (OrderPro), for quarterly periods ending (QE)

September 30 and December 31, 2003, and March 31, 2004.

                         FINDINGS OF FACT

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

The stipulation of facts, together with the attached exhibits, is

incorporated herein by this reference.   Petitioner was previously

known as Richard L. Windorski.    He legally changed his last name

to Morgan in 2006.   At the time petitioner filed his petition, he

lived in Arizona.

     Petitioner was the founder and CEO of OrderPro.   On May 1,

2004, petitioner resigned as CEO of OrderPro.   When he resigned,

he also sent a letter to the board of directors instructing

OrderPro to deposit a $105,000 check from him and informing them

that additional funds of $95,000 would be paid by May 10, 2004.

Petitioner’s letter did not state why such funds were paid or due




     1
      (...continued)
the Internal Revenue Code, as amended.
                                 - 3 -

to be paid to OrderPro, nor did the letter direct that such funds

be used for a specific purpose.

     OrderPro failed to pay its employment tax liabilities for

several quarters while petitioner was CEO.    On December 5, 2006,

the Internal Revenue Service (IRS) sent to petitioner Letter

1153, Trust Funds Recovery Penalty Letter, proposing an

assessment of TFRPs against petitioner under section 6672 as a

person required to collect, account for, and pay over employment

taxes related to OrderPro, for the QEs September 30 and December

31, 2003, and March 31, 2004.2    The IRS’ proposed assessment

provided for TFRPs due from petitioner of $891 for QE September

30, 2003, $51,302 for QE December 31, 2003, and $57,111 for QE

March 31, 2004.   Between 2004 and 2008 petitioner sent the IRS

numerous letters providing information regarding funds belonging

to OrderPro that he believed were available for payment to

satisfy OrderPro’s employment tax obligations.    The IRS did not

act on any of petitioner’s letters.

     On February 1, 2007, petitioner filed a protest letter,

contesting the assessments of TFRPs proposed in the Letter 1153

that he received from respondent.    The Appeals officer determined

that petitioner was liable for the TFRPs and on March 4, 2008,



     2
      Letter 1153 proposed additional TFRPs against petitioner
for QE Mar. 31, 2003, and QE June 30, 2004. These additional
TFRPs are no longer at issue in this case.
                                - 4 -

sent petitioner a determination letter.    On March 11, 2008, the

TFRPs were assessed against petitioner.

     On May 27, 2008, respondent sent petitioner a Letter 1058,

Final Notice - Notice of Intent to Levy and Notice of Your Right

to a Hearing (notice of intent to levy), with respect to the

TFRPs.   On June 16, 2008, respondent received petitioner’s Form

12153, Request for a Collection Due Process or Equivalent

Hearing.    Settlement Officer James Wood (Wood) was assigned to

petitioner’s appeal.

     Wood held a telephone conference with petitioner on November

25, 2008.    During this conference Wood requested that petitioner

file his 2006 and 2007 Federal income tax returns and provide a

completed Form 433-A, Collection Information Statement for Wage

Earners and Self-Employed Individuals.    On January 6, 2009, Wood

received petitioner’s 2006 and 2007 income tax returns, and on

January 26, 2009, Wood received petitioner’s completed Form 433-

A.

     Petitioner’s Form 433-A reported monthly income of $1,800

and monthly expenses of $7,450.    Because of the large

discrepancy, Wood requested additional information regarding any

additional sources of income, including the income of

petitioner’s spouse, and an explanation as to how petitioner was

able to pay his expenses.    On March 10, 2010, petitioner sent

Wood a letter stating that he used credit cards and other loans
                                 - 5 -

to pay his expenses.    Petitioner did not provide any other

evidence or documentation to substantiate his claims.

     Wood determined that the information petitioner provided was

insufficient to support any collection alternative and sustained

the levy.    On March 18, 2010, respondent issued a notice of

determination to petitioner.    Petitioner timely filed his

petition.

                               OPINION

     The underlying liabilities in this case were assessed under

section 6672(a), which imposes TFRPs for failure to collect,

account for, and pay over income and employment taxes of

employees.    The penalties are assessed and collected in the same

manner as taxes against a person who is “an officer or employee

of a corporation * * * who as such officer, employee, or member

is under a duty to perform” the duties referred to in section

6672.   Sec. 6671(b).    Petitioner was the CEO of OrderPro until

May 1, 2004, when he resigned.    He was, therefore, a person

responsible to collect, account for, and pay over employment

taxes for all tax periods at issue in this case.

     To impose the TFRPs, section 6672(b)(1) required respondent

to notify petitioner that he was subject to the penalties.      The

Letter 1153 petitioner received from respondent provided such

notice and informed petitioner of his right to protest the

proposed TFRPs administratively with the Commissioner.    See Mason
                                 - 6 -

v. Commissioner, 132 T.C. 301, 318 (2009); see also Orian v.

Commissioner, T.C. Memo. 2010-234; McClure v. Commissioner, T.C.

Memo. 2008-136.     Petitioner filed a protest to the proposed

TFRPs, arguing that respondent had failed to collect the unpaid

employment taxes from OrderPro despite petitioner’s efforts to

inform respondent of funds available for payment, including the

$200,000 he paid to OrderPro.

         The liability of a responsible person under section 6672 is

independent of the employer corporation’s duty to pay trust fund

taxes.3    See Cash v. United States, 961 F.2d 562, 565 (5th Cir.

1992).    This is well-established law in the Ninth Circuit, the

circuit in which an appeal in this case would be heard, where

section 6672 “operates as a penalty by creating an obligation,

separate and distinct from the underlying tax obligation”.

Duncan v. Commissioner, 68 F.3d 315, 318 (9th Cir. 1995), affg.

in part, revg. in part and remanding T.C. Memo. 1993-370; see

also J.J. Re-Bar Corp. v. United States (In re J.J. Re-Bar

Corp.), 644 F.3d 952, 957 (9th Cir. 2011); Balzer v. United

States, 22 Fed. Appx. 942 (9th Cir. 2002) (there is no

requirement that the IRS pursue collection of employment taxes

from the corporation before assessing the penalty against the

responsible person).     The Government’s diligence, or lack

     3
      A right of contribution against other responsible persons
exists but must be claimed separate and apart from proceedings to
collect the penalty brought by the United States. Sec. 6672(d).
                               - 7 -

thereof, in its collection efforts against the corporation is

irrelevant.   See Howard v. United States, 711 F.2d 729, 736 (5th

Cir. 1983) (rejecting the taxpayer’s contention that the IRS’

failure promptly to collect the taxes from the corporation for

which he had been a corporate officer absolved him of liability

under section 6672); see also Calderone v. United States, 799

F.2d 254, 257 (6th Cir. 1986); Cooper v. United States, 539 F.

Supp. 117, 121 (E.D. Va. 1982) (explaining that section 6672

“does not include any requirement that the government exercise

‘due diligence’ in its collection efforts against the employer

corporation”), affd. 705 F.2d 442 (4th Cir. 1983).

     The Appeals officer determined that petitioner was liable

for the TFRPs, sent petitioner a determination letter to that

effect, and assessed the TFRPs pursuant to section 6672.    Shortly

thereafter respondent sent petitioner a notice of intent to levy

to collect the TFRPs.

     Petitioner requested and received a collection due process

hearing pursuant to section 6330 (CDP hearing).   At the CDP

hearing a taxpayer may challenge the existence and amount of the

underlying tax liability only if he or she received no notice of

deficiency or did not otherwise have an opportunity to dispute

such tax liability.   Sec. 6330(c)(2)(B).

     Petitioner did not receive a notice of deficiency.    However,

he was given an opportunity to dispute his underlying tax
                               - 8 -

liability when he received the Letter 1153, a section 6672(b)(1)

notice, which he contested.   An opportunity to dispute an

underlying tax liability includes an opportunity for an Appeals

conference either before or after the assessment of the

liability.   Lewis v. Commissioner, 128 T.C. 48 (2007) (holding

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

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

held that the receipt of a Letter 1153 constitutes an opportunity

to dispute the taxpayer’s liability.   McClure v. Commissioner,

T.C. Memo. 2008-136.4   Thus, we conclude that petitioner is not

entitled to dispute in this Court his status as a responsible

person and the consequent liabilities for the underlying TFRPs.

     Where the underlying tax liability is not at issue, we

review the notice of determination for abuse of discretion.

Nicklaus v. Commissioner, 117 T.C. 117, 120 (2001).     This Court

will find an abuse of discretion has occurred in collection due

process cases where the exercise of discretion was arbitrary,

capricious, or without foundation in fact or law.   See e.g.,

Giamelli v. Commissioner, 129 T.C. 107, 111-112 (2007).      We are

satisfied that respondent’s actions in sustaining the levy were

appropriate and not an abuse of discretion.


     4
      Cf. Mason v. Commissioner, 132 T.C. 301, 318 (2009) (“a
section 6672(b)(1) notice that was not received, but not
deliberately refused, by a taxpayer does not constitute an
opportunity to dispute that taxpayer’s liability”).
                                 - 9 -

     A taxpayer may raise in a CDP hearing any relevant issue,

including challenges to “the appropriateness of collection

actions”, and may make “offers of collection alternatives, which

may include the posting of a bond, the substitution of other

assets, an installment agreement or an offer-in-compromise.”

Sec. 6330(c)(2)(A).   We have already addressed the

appropriateness of the collection action.       With respect to

collection alternatives,   petitioner provided limited financial

data to Wood, but when asked for more details, he did not provide

the requested documentation.   Further, he did not propose an

installment agreement or an offer-in-compromise.       On the evidence

before us, the determination to proceed with collection was not

arbitrary, capricious, or without foundation in fact or law.

     The Court, in reaching its holdings, has considered all

arguments made, and, to the extent not mentioned, concludes that

they are moot, irrelevant, or without merit.

     To reflect the foregoing,


                                             Decision will be entered

                                         for respondent.
