                        T.C. Memo. 2003-322



                      UNITED STATES TAX COURT



                 RONALD E. BOYER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8241-02L.            Filed November 20, 2003.


     Ronald E. Boyer, pro se.

     Jason W. Anderson, for respondent.



                        MEMORANDUM OPINION


     KROUPA, Judge:   Petitioner filed his petition under section

6330(d)1 seeking review of respondent’s determination to proceed

with a proposed levy to collect petitioner’s 1986 and 1987


     1
       Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect at all relevant times, all
Rule references are to the Tax Court Rules of Practice and
Procedure, and all dollar amounts are rounded to the nearest
dollar.
                                - 2 -

Federal income tax liabilities.    The sole issue for decision is

whether respondent’s determination to proceed with the proposed

collection activity is an abuse of discretion.    We hold it is

not.

       This case was submitted fully stipulated pursuant to Rule

122, and the facts are so found.    The stipulation of facts, the

supplemental stipulation of facts, and the accompanying exhibits

are incorporated herein by this reference.    Petitioner resided in

Watseka, Illinois, at the time he filed the petition in this

case.

                             Background

       Petitioner and his wife, Tilda Boyer2 (collectively, the

Boyers), filed an untimely joint Federal income tax return for

1986 on November 16, 1987 (the 1986 return).    On the basis of the

1986 return, respondent assessed $18,020 in income tax, $356 as

an addition to tax for failure to pay estimated tax under section

6654, $4,029 as an addition to tax for failure to file the 1986

return timely under section 6651(a)(1), $537 as an addition to

tax for failure to pay timely the amount shown as tax on the

return under section 6651(a)(2), plus interest (the 1986 tax

liability).    On May 3, 1988, respondent filed a Notice of Federal

Tax Lien (Tax Lien Notice) regarding the 1986 tax liability.



       2
       Tilda Boyer did not join with her husband in filing the
petition and, therefore, is not a petitioner in this case.
                                 - 3 -

On or about January 25, 1991, the Boyers entered into an

installment agreement to pay the 1986 tax liability (the 1986

installment agreement).   The Boyers made payments pursuant to the

1986 installment agreement for almost 8 years.      The Boyers

stopped making payments, in default of the 1986 installment

agreement, on October 5, 1998.

     The Boyers filed an untimely joint Federal income tax return

for 1987 on June 6, 1988 (the 1987 return).      On the basis of the

1987 return, respondent assessed $8,444 in income tax, $456 as an

addition to tax for failure to pay estimated tax under section

6654, $84 as an addition to tax for failure to pay timely the

amount shown as tax on the return under section 6651(a)(2), plus

interest (the 1987 tax liability).       Respondent filed a Tax Lien

Notice regarding the 1987 tax liability on August 8, 1989, and

almost 5 years thereafter, the Boyers entered into an installment

agreement to pay the 1987 tax liability (the 1987 installment

agreement).   The Boyers made payments pursuant to the 1987

installment agreement for 4 years but stopped making payment, in

default of the 1987 installment agreement, on February 2, 1998.

Respondent failed to refile a tax lien notice as required by

section 6323(g) regarding the 1987 liability.

     On November 7, 1997, the Boyers signed a Form 900, Tax

Collection Waiver, relating to the 1986 and 1987 tax liabilities.
                               - 4 -

The waiver extended the statutory period to collect the Boyers’

tax liabilities for both years until December 31, 2005.3

     On November 24, 1997, respondent inadvertently and

erroneously released the Federal tax lien relating to the 1986

tax liability.   Respondent released the lien by filing a Form

668(Z), Certificate of Release of Federal Tax Lien (RFTL), with

the Office of the County Clerk and Recorder, Iroquois County,

Watseka, Illinois.   The RFTL stated in part:

     that * * * the requirements of section 6325(a) * * *
     have been satisfied for the taxes * * * and for all
     statutory additions. Therefore, the lien provided by
     Code section 6321 for these taxes and additions has
     been released. * * *

     After the RFTL was filed, the Boyers continued to make

payments under the 1986 installment agreement.    Specifically, the

Boyers made installment payments on May 26 and October 5, 1998.

The Boyers also made installment payments under the 1987

installment agreement after the RFTL was filed.




     3
        Given that the waiver was signed before Dec. 31, 1999,
the Internal Revenue Service Restructuring and Reform Act of
1998, Pub. L. 105-206, sec. 3461(c)(2), 112 Stat. 764, provides
that the expiration of the statutory period, unless suspended,
would occur on Dec. 31, 2002, rather than Dec. 31, 2005.
Nevertheless, because the Boyers timely requested a sec. 6330
hearing before Dec. 31, 2002, the statutory period for collection
of the Boyers’ 1986 and 1987 tax liabilities has been suspended
until the final resolution of these collection issues. See sec.
6330(e). In any event, while the Boyers raised the expiration of
the collection period in the sec. 6330 hearing, petitioner did
not raise it in any pleadings filed with this Court.
Accordingly, it is deemed conceded. See Rule 331(b)(4).
                                 - 5 -

     On August 31, 2001, respondent sent the Boyers a Notice of

Intent to Levy under Section 6331(d) relating to their unpaid

1986 and 1987 tax liabilities.    The Boyers timely filed Form

12153, Request for a Collection Due Process Hearing.    In their

request, the Boyers raised two issues.    First, the Boyers

contended that they had no outstanding tax liability for 1986 or

1987 because the RFTL showed that their outstanding tax liability

was either paid or made unenforceable.    Second, the Boyers

contended that the statutory period for collection had expired

for both the 1986 and 1987 tax liabilities.    The Boyers did not

raise any spousal defenses or offer collection alternatives.

     An Appeals officer wrote a letter to the Boyers dated

March 7, 2002, and explained that, although the transcripts of

their account showed that the lien for 1986 was released as

reflected by the RFTL, the lien for 1986 was released

prematurely.   The Appeals officer further explained that the 1986

liability remained due and owing because the Boyers failed to

make all required payments under the 1986 installment agreement.

The Appeals officer also noted that the RFTL related solely to

the 1986 liability, not the 1987 liability.    As with the 1986

liability, the balance of the 1987 liability remained due and

owing.

     Regarding the Boyers’ argument that the collection period

had expired, the Appeals officer reminded the Boyers that they
                                 - 6 -

had extended the statutory collection period until December 31,

2005, by signing the Form 900.    Therefore, the Appeals officer

explained, the statutory period had not expired.

     The Appeals officer informed the Boyers by mail on two

occasions that they had to contact her if they wished to

continue with the appeal process.    Neither of the Boyers

responded to the Appeals officer’s two letters or contacted the

Appeals officer.   Consequently, on April 12, 2002, respondent

sent the Boyers a Notice of Determination Concerning Collection

Action(s) under Section 6320 and/or 6330 (Determination Notice).

The Determination Notice informed the Boyers that, after

considering the facts of their case and their contentions, the

Appeals officer recommended that the proposed levy action be

pursued to collect their 1986 and 1987 tax liabilities.      The

Determination Notice also informed the Boyers of their right to

judicial review of the administrative determination.    Petitioner

timely filed his petition with this Court.

                            Discussion

     The Court in collection actions will review a taxpayer’s

liability de novo where the underlying tax liability is at issue.

A taxpayer’s underlying tax liability may be at issue if he or

she “did not receive any statutory notice of deficiency for such

tax liability or did not otherwise have an opportunity to dispute

such tax liability.”   Sec. 6330(c)(2)(B).   The Court will review
                                 - 7 -

the Commissioner’s administrative determination for abuse of

discretion with respect to all other issues.     Sego v.

Commissioner, 114 T.C. 604, 610 (2000).

     Petitioner does not dispute the existence or the amount of

the underlying tax liability.4    Accordingly, the proper standard

for review is whether the Appeals officer abused her discretion

in determining that respondent could proceed with the proposed

levy action.

     Petitioner contends that respondent may not proceed with the

proposed collection activity because the RFTL is tantamount to an

admission by respondent that the underlying tax liability has

been fully paid or is unenforceable.     Petitioner also asserts

that respondent is equitably estopped from collecting both the

1986 and 1987 tax liabilities.    For the reasons explained, we

disagree with petitioner and sustain respondent’s determination

to proceed with the proposed levy action.

A. Effect of Filing Tax Lien Release Certificate

     We first address petitioner’s argument that he has no

liability for 1986 or 1987 because the RFTL showed that the tax

lien was extinguished.   Section 6325(a) requires the Commissioner

to issue a certificate of release of any lien when the

Commissioner finds that the liability for the amount assessed,



     4
       The assessments were based upon the 1986 return and 1987
return.
                                 - 8 -

together with all interest, is fully satisfied or legally

unenforceable.    Section 6325(f)(1)5 provides, with certain

exceptions, that a certificate of tax lien release is conclusive

that the lien upon the property referred to in the certificate is

extinguished.

     Respondent argues that neither section 6325 nor the caselaw

provides that the filing of a certificate of release of lien

extinguishes the underlying liability.       We agree.

     It is well settled that although a certificate of tax lien

release is conclusive that the lien is extinguished, it is not

conclusive that the tax liability is extinguished.       See, e.g.,

Angier Corp. v. Commissioner, 50 F.2d 887, 892 (1st Cir. 1931),


     5
         Sec. 6325(f) in pertinent part provides:

     SEC. 6325(f).    Effect of Certificate.--

          (1) Conclusiveness.--Except as provided in paragraphs
     (2) and (3), if a certificate is issued pursuant to this
     section by the Secretary and is filed in the same office as
     the notice of lien to which it relates (if such notice of
     lien has been filed) such certificate shall have the
     following effect:

                 (A) in the case of a certificate of release, such
            certificate shall be conclusive that the lien referred
            to in such certificate is extinguished;

                     *   *   *    *      *   *   *

          (2) Revocation of certificate of release or
     nonattachment.–-If the Secretary determines that a
     certificate of release or nonattachement of a lien imposed
     by section 6321 was issued erroneously or improvidently
     * * * the Secretary may revoke such certificate and
     reinstate the lien–
                                - 9 -

affg. in part and vacating in part 17 B.T.A. 1376 (1926);6 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);7 Foulds v. Commissioner, T.C. Memo. 1989-29; Urwyler v.

United States, 77 AFTR 2d 96-794, 96-1 USTC par. 50,052 (E.D.

Cal. 1996).   The plain language of section 6325(f)(1)(A) and of

the RFTL itself clearly shows that the release extinguishes the

tax lien, not the tax liability.      Baker v. Commissioner, supra;

Miller v. Commissioner, supra.      The underlying tax liability is

not extinguished when a lien is released.     The underlying tax

liability remains until the tax is paid in full or the statutory



     6
       In Angier Corp. v. Commissioner, 50 F.2d 887 (1st Cir.
1931), affg. in part and vacating in part 17 B.T.A. 1376 (1926),
the applicable statute was sec. 613(d), I.R.C. 1928, which
provided:

     SEC. 613.    LIEN FOR TAXES.

          (d) A certificate of release or of partial discharge
     issued under this section shall be held conclusive that the
     lien upon the property covered by the certificate is
     extinguished.
     7
       In Baker v. Commissioner, 24 T.C. 1021 (1955), and Miller
v. Commissioner, 23 T.C. 565 (1954), affd. 231 F.2d 8 (5th Cir.
1956), the applicable statute was sec. 3675, I.R.C. 1939, which
provided:

     SEC. 3675.   EFFECT OF CERTIFICATES OF RELEASE OR PARTIAL
                  DISCHARGE.

          A certificate of release or of partial discharge
     issued under this subchapter shall be held conclusive
     that the lien upon the property covered by the
     certificate is extinguished.
                              - 10 -

period for collection expires.   Sec. 301.6325-1(a)(1), Proced. &

Admin. Regs.   Because the tax was not paid in full, nor did the

statutory period for collection expire, petitioner’s 1986 and

1987 tax liabilities were not extinguished.

     We also note that section 6325(f)(2), by its terms, allows

the Commissioner to revoke a certificate of tax lien release

where, as in this case, it was issued “erroneously or

improvidently” and to reinstate the lien.   This provision, which

allows respondent to reinstate the lien, belies petitioner’s

argument that the erroneously issued certificate in this case

extinguished his liability once and for all.

B. Equitable Estoppel Argument

     Petitioner next contends that even if the RFTL did not

extinguish the tax liability, respondent is otherwise equitably

estopped from collecting his 1986 and 1987 tax liabilities.

Petitioner argues that respondent’s conduct over an extended

period of time led petitioner to believe that respondent had

stopped collection action and therefore petitioner no longer had

any tax liability for 1986 or 1987.

     Equitable estoppel is a judicial doctrine that requires a

finding that the taxpayer relied on the Government’s

representations and suffered a detriment because of that

reliance.   Estoppel precludes a party from denying its own

representations if those representations induced another to act
                              - 11 -

to his or her detriment.   Hofstetter v. Commissioner, 98 T.C.

695, 700 (1992).   The Court has recognized that estoppel is

applied against the Commissioner “with utmost caution and

restraint.”   Id.; Kronish v. Commissioner, 90 T.C. 684, 695

(1988); Boulez v. Commissioner, 76 T.C. 209, 214-215 (1981),

affd. 810 F.2d 209 (D.C. Cir. 1987); Estate of Emerson v.

Commissioner, 67 T.C. 612, 617 (1977).

     The taxpayer must establish the following elements before

equitable estoppel will be applied against the Commissioner:

(1) The Commissioner knew the facts; (2) the Commissioner

intended that his conduct be acted upon, or must have acted so

that the taxpayer asserting estoppel had a right to believe it

was so intended; (3) the taxpayer must have been ignorant of the

facts; and (4) the taxpayer must have reasonably relied on the

Commissioner’s conduct to the taxpayer’s substantial injury.

Edgewater Hosp., Inc. v. Bowen, 857 F.2d 1123, 1137 (7th Cir.

1988).   The party claiming estoppel has the burden of

demonstrating the elements.   See Lyng v. Payne, 476 U.S. 926, 935

(1986); United States v. Asmar, 827 F.2d 907, 912 (3d Cir. 1987).

     The Court of Appeals for the Seventh Circuit, to which this

case is appealable, requires a fifth element for equitable

estoppel to apply against the Commissioner.   The fifth element

requires the taxpayer asserting estoppel to demonstrate that the

Commissioner has engaged in “affirmative misconduct.”    See Gibson
                               - 12 -

v. West, 201 F.3d 990, 994 (7th Cir. 2000) (citing Edgewater

Hosp., Inc. v. Bowen, supra at 1138-1139).    Affirmative

misconduct is more than mere negligence.    It requires an

affirmative act to misrepresent or mislead.    See Mendrala v.

Crown Mortgage Co., 955 F.2d 1132, 1141-1142 (7th Cir. 1992).

     Petitioner argues that, on the basis of respondent’s

conduct, respondent should be equitably estopped from collecting

the unpaid 1986 and 1987 tax liabilities.    Petitioner cites the

following conduct:    (1) Respondent filed the RFTL to release the

Federal tax lien relating to the 1986 tax liability,

(2) respondent failed to refile the Federal tax lien notice

relating to the 1987 tax liability, and (3) respondent failed to

take any collection action for over 3 years after the RFTL was

filed.    Petitioner asserts that this conduct caused petitioner to

believe that he no longer had any tax liability for 1986 and

1987.    Believing that he had no tax liability gave petitioner a

false sense of security and caused him to incur more debt than he

otherwise would have incurred.

     Petitioner’s equitable estoppel argument fails for several

reasons.    First, petitioner contends that he mistakenly thought

that the RFTL extinguished not only the tax lien but the tax

liability as well.    Petitioner misunderstood the effect of the

RFTL.    This mistake was not induced by respondent.   See Miller v.

Commissioner, 23 T.C. 565, 569 (1954) (if the taxpayers in fact
                              - 13 -

relied upon such certificates as a discharge of their total tax

liability, they did so because of a mistake on their part as to

the effect of a predecessor of section 6325), affd. 231 F.2d (5th

Cir. 1956).   The Commissioner is not estopped from acting by a

mistake of law of the taxpayer.   See id.

     Furthermore, we do not find that petitioner could have

reasonably relied upon respondent’s conduct to conclude that the

Boyers no longer had any tax liability for either 1986 or 1987.

Respondent assessed the liabilities, gave notice and made demand

for payment, entered into agreements with the Boyers for payment

of the liabilities, and requested the Boyers to extend the

statutory period for collection for both 1986 and 1987.    None of

these actions is either individually or collectively consistent

with respondent releasing the Boyers from their liabilities.

     Moreover, the RFTL relating to the 1986 tax liability was

filed only 17 days after the Boyers agreed to extend the

collection period for that liability.   Given this short

timeframe, a prudent person most likely would have contacted

respondent to ask why the RFTL had been filed and what effect, if

any, filing the RFTL had on the underlying tax liabilities.

Without asking for an explanation or contacting respondent, it

was unreasonable for the Boyers to think that respondent would

simply extinguish their tax liabilities a mere 17 days after the

Boyers agreed to extend the statutory period.
                              - 14 -

     In addition, the record is void of any persuasive evidence

that respondent induced petitioner to take any action adverse to

himself.   Petitioner’s only allegation of “detriment”--that he

suffered a false sense of security that caused him to incur

additional debt--is uncorroborated.

     Finally, we do not find that respondent’s conduct in this

case constitutes affirmative misconduct.    Respondent’s only

affirmative act was filing the RFTL, which petitioner has not

shown is anything but an inadvertent error.    Further,

respondent’s failure to refile the tax lien notice regarding the

1987 tax liability and dilatoriness in pursuing collection

actions do not rise to the level of affirmative misconduct.     We

conclude that respondent is not estopped from collecting the

Boyers’ 1986 and 1987 tax liabilities.

     We hold that respondent did not abuse respondent’s

discretion in determining to proceed with the collection action

of the Boyers’ 1986 and 1987 tax liabilities.    We have considered

all of petitioner’s contentions, arguments, and requests.    To the

extent that they are not mentioned herein, we find them to be

moot, irrelevant, or without merit.

     To reflect the foregoing,


                                           Decision will be entered

                                      for respondent.
