                         T.C. Memo. 2007-233



                       UNITED STATES TAX COURT



                   DON MAHONEY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 15324-05L.              Filed August 16, 2007.



     William D. Hartsock, for petitioner.

     Karen Nicholson Sommers, for respondent.



                         MEMORANDUM OPINION


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

seeks review of respondent’s determination to proceed with

collection of his unpaid 1994, 1995, 1996, 1998, and 1999 income



     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                                 - 2 -

tax liabilities.    The sole issue for decision is whether

respondent may proceed with collection of the above-mentioned

unpaid income tax liabilities.

                             Background

     The parties submitted this case fully stipulated pursuant to

Rule 122.   The stipulation of facts and the attached exhibits are

incorporated herein by this reference.    At the time he filed the

petition, petitioner resided in California.

Petitioner’s Chapter 7 Bankruptcy Case

     On September 30, 1993, petitioner and his wife filed a

petition under chapter 13 of the Bankruptcy Code in the U.S.

Bankruptcy Court for the Southern District of California (1993

bankruptcy case).    On March 18, 1998, petitioner’s 1993

bankruptcy case was converted to a chapter 7 case.    On July 12,

1998, the Bankruptcy Court entered a discharge order in

petitioner’s 1993 bankruptcy case.

Petitioner’s 1994, 1995, and 1996 Income Tax Returns

     On February 15, 1998, petitioner and his wife filed

delinquent joint income tax returns for 1994, 1995, and 1996,

reporting $5,908.36, $7,416, and $2,171 of tax due, respectively.

Petitioner and his wife did not make any payments with the

returns, and the returns did not claim any prepayment credits.2



     2
        Petitioner and his wife claimed, and respondent allowed,
an earned income credit of $1,726 for 1996.
                               - 3 -

During March 1998, respondent assessed the taxes reported on, and

the interest and additions to tax related to, the 1994, 1995, and

1996 returns.

Petitioner’s 1998 Income Tax Return

     Petitioner and his wife timely filed a joint income tax

return for 1998, reporting tax due of $14,768 and withholding

credits of $1,764.   Petitioner and his wife did not make any

payment with the return.   On May 31, 1999, respondent assessed

the tax reported on, and the interest and additions to tax

related to, the 1998 return.

Petitioner’s 1999 Income Tax Return

     On February 25, 2001, petitioner and his wife filed a

delinquent joint income tax return for 1999, reporting $16,965 of

tax due and withholding credits of $3,032.3   On March 26, 2001,

respondent assessed the tax reported on, and the interest and

penalties related to, the 1999 return.

Petitioner’s Subsequent Payments

     Beginning on June 4, 1999, and ending on May 4, 2001,

petitioner and his wife paid $750 per month toward their

outstanding income tax liabilities.    Respondent applied $6,000 of

those payments to petitioner’s outstanding 1985 liability,




     3
        On Apr. 15, 2000, petitioner and his wife filed a request
for an extension of time to file, which respondent granted. A
payment of $3,500 accompanied that request.
                                - 4 -

$10,500 toward petitioner’s then-outstanding 1997 liability, and

$750 toward petitioner’s 1998 liability.

Petitioner’s Section 6330 Hearing

     On January 12, 2004, respondent issued to petitioner a Final

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

Hearing with respect to petitioner’s unpaid income tax

liabilities for 1994, 1995, 1996, 1998, and 1999 (the years at

issue).    On February 10, 2004, petitioner sent to respondent a

Form 12153, Request for a Collection Due Process Hearing.    In the

Form 12153, petitioner stated that he “does not agree with the

notice of intent to levy in this case for the simple reason that

the taxpayer does not owe the tax stated in the notice.”

     Petitioner’s section 6330 hearing was assigned to Settlement

Officer Greg Clark (Settlement Officer Clark).    Petitioner’s

section 6330 hearing consisted of telephone calls and

correspondence between Settlement Officer Clark and petitioner’s

representative and attorney herein, William D. Hartsock.

     Petitioner raised three issues during the section 6330

hearing.    First, petitioner argued that respondent erroneously

applied payments petitioner made pursuant to an alleged

installment agreement to petitioner’s 1985 tax liability because

the alleged installment agreement required that respondent apply

petitioner’s payments to the years at issue.    Second, petitioner

claimed that respondent should have applied alleged overpayments
                               - 5 -

from year(s) prior to 1994,4 which petitioner contended resulted

from a discharge of these liabilities in a separate bankruptcy

case (i.e., a case other than petitioner’s 1993 bankruptcy case),

to reduce petitioner’s liabilities for the years in issue.

Third, petitioner expressed his intent to submit an offer-in-

compromise with regard to his outstanding tax liabilities for the

years in issue; however, he did not submit an offer-in-compromise

as part of his section 6330 hearing.

     On July 13, 2005, after reviewing the correspondence and

documents that petitioner submitted, respondent issued to

petitioner a Notice of Determination Concerning Collection

Action(s) Under Section 6320 and/or 6330.   Settlement Officer

Clark determined respondent did not erroneously apply installment

agreement payments to petitioner’s outstanding 1985 tax liability

because, among other reasons, respondent was not required by an

installment agreement, or otherwise, to apply petitioner’s

payments solely to his outstanding liabilities for the years in

issue.   Furthermore, Settlement Officer Clark was unable to find

any record of a separate bankruptcy case (i.e., a case other than

petitioner’s 1993 bankruptcy case).




     4
        At various times during his sec. 6330 hearing, petitioner
identified the prior year(s) as (1) 1985 through 1988, (2) 1987
through 1988, or (3) 1984 (on brief, however, petitioner referred
only to 1984).
                               - 6 -

                             Discussion

     Section 6331(a) provides that, if any person liable to pay

any tax neglects or refuses to do so within 10 days after notice

and demand, the Secretary generally can collect such tax by levy

upon all property and rights to property belonging to such

person.   Pursuant to section 6331(d), the Secretary is required

to give the taxpayer notice of his intent to levy and within that

notice must describe the administrative review available to the

taxpayer before proceeding with the levy.     See also sec. 6330(a).

     Section 6330(b) describes the administrative review process,

providing that a taxpayer can request an Appeals hearing (section

6330 hearing) with regard to a levy notice.     Pursuant to section

6330(c)(2)(A), a taxpayer may raise at the section 6330 hearing

any relevant issue with regard to the Commissioner’s collection

activities, including spousal defenses, challenges to the

appropriateness of the Commissioner’s intended collection action,

and alternative means of collection.      Sego v. Commissioner, 114

T.C. 604, 609 (2000); Goza v. Commissioner, 114 T.C. 176, 180

(2000).

     When the Commissioner issues a determination regarding a

disputed collection action, section 6330(d) permits a taxpayer to

seek review in this Court.   If the underlying tax liability is

properly at issue, we review that issue de novo.     Sego v.

Commissioner, supra at 610; Goza v. Commissioner, supra at 181.
                               - 7 -

If the validity of the underlying tax liability is not at issue,

we review the Commissioner’s determination for abuse of

discretion.   Sego v. Commissioner, supra at 610.

     We have previously held that this Court has jurisdiction in

a levy proceeding instituted pursuant to section 6330(d)(1) to

determine whether a taxpayer’s unpaid tax liabilities were

discharged in bankruptcy.   Swanson v. Commissioner, 121 T.C. 111,

120-121 (2003); Washington v. Commissioner, 120 T.C. 114, 120-121

(2003).   In Washington, we did not specifically address the

appropriate standard of review to apply when determining whether

a taxpayer’s tax liabilities were discharged in bankruptcy where,

as in the matter before us, the taxpayer has not received a

notice of deficiency.5   For the reasons discussed infra, our

review of the evidence causes us to sustain Settlement Officer

Clark’s determination to proceed with collection regardless of

whether we apply an abuse of discretion or a de novo standard of

review.   Petitioner bears the burden of proof.   See Rule 142(a).

     Petitioner argued that respondent erred in applying payments

petitioner made pursuant to an alleged installment agreement to

petitioner’s 1985 tax liability because the alleged installment

agreement required that respondent apply petitioner’s payments to


     5
        The record does not reveal whether, in petitioner’s 1993
bankruptcy case, respondent submitted any proofs of claims for
the liabilities in issue. Accordingly, Kendricks v.
Commissioner, 124 T.C. 69 (2005), does not apply to the matter
before us.
                                 - 8 -

the years at issue.    We have jurisdiction to consider whether a

payment that should have been applied to reduce the outstanding

liability for a year at issue was wrongly applied to a liability

for another year.     Freije v. Commissioner, 125 T.C. 14 (2005).

        Petitioner failed to introduce any evidence regarding the

alleged installment agreement or its terms.    If a party fails to

introduce evidence within that party’s possession, we may presume

that, if produced, the evidence would be unfavorable to that

party.    Wichita Terminal Elevator Co. v. Commissioner, 6 T.C.

1158, 1165 (1946), affd. 162 F.2d 513 (10th Cir. 1947).    This is

true where the party which does not produce the evidence has the

burden of proof or the other party has established a prima facie

case.    Id.   As noted supra, petitioner bears the burden of proof

in the matter before us.    Accordingly, we conclude that the

evidence does not establish that respondent was required to apply

petitioner’s $750 per month payments to his liabilities for the

years at issue before applying them to his liabilities for other

years.

     Petitioner also argued that respondent erred by failing to

apply alleged overpayments for years prior to the years in issue

to reduce petitioner’s liabilities for the years in issue.      See

Landry v. Commissioner, 116 T.C. 60 (2001).    Petitioner, however,

failed to make a timely claim for credit or refund with regard to

the alleged overpayments.    See sec. 6511; Landry v. Commissioner,
                                 - 9 -

supra.   Therefore, we conclude that respondent did not err in

denying petitioner a credit for the alleged overpayments.       See

Landry v. Commissioner, supra.

     Petitioner has failed to raise a spousal defense, make a

valid challenge to the appropriateness of respondent’s intended

collection action, or offer alternative means of collection.

     We therefore sustain respondent’s determination to proceed

with collection of petitioner’s 1994, 1995, 1996, 1998, and 1999

income tax liabilities.

     In reaching all of our holdings herein, we have considered

all the parties’ arguments, and, to the extent not herein

discussed, we find them to be irrelevant or without merit.

     To reflect the foregoing,


                                              Decision will be entered

                                         for respondent.
