                  T.C. Summary Opinion 2003-87



                     UNITED STATES TAX COURT



CHARLES WENDELL HARKEY, SR. AND BARBARA ANNE HARKEY, Petitioners
                               v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 18187-02S.              Filed July 1, 2003.


     Charles Wendell Harkey, Sr., pro se.

     Nancy E. Hooten, for respondent.


     ARMEN, Special Trial Judge:   This case was heard pursuant to

the provisions of sections 6330(d) and 7463 of the Internal

Revenue Code in effect at the time that the petition was filed.1

The decision to be entered is not reviewable by any other court,

and this opinion should not be cited as authority.



     1
        Unless otherwise indicated, subsequent references to
sections other than sections 6330 and 6320 are to the Internal
Revenue Code of 1986 as amended or in effect for 1992 and 1993.
                                - 2 -

     Respondent issued to petitioners a Notice Of Determination

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

for unpaid Federal income taxes and related liabilities for the

taxable years 1992 and 1993 in the amounts (per collection

notices dated March 4, 2002) of $9,214.97 and $4,042.66,

respectively.

     The issues for decision are:

     (1) Whether petitioners are liable for the unpaid Federal

income taxes reported on their 1992 and 1993 delinquent income

tax returns.    We hold that they are.

     (2) Whether petitioners are liable for (a) additions to tax

under section 6651(a)(1) for failure to timely file their 1992

and 1993 income tax returns; (b) additions to tax under section

6651(a)(2) for failure to timely pay the unpaid tax reported on

their 1992 and 1993 income tax returns; (c) an addition to tax

under section 6654(a) for failure to pay estimated tax in 1993;

and (d) interest in respect of their unpaid income tax and

related liabilities for the taxable years 1992 and 1993.   We hold

that they are.

     (3) Whether respondent abused his discretion in determining

that the levy action against petitioners may proceed.   We hold

that he did not.
                                - 3 -

Background

     Some of the facts have been stipulated, and they are so

found.    Petitioners resided in Atlanta, Georgia, at the time that

their petition was filed with the Court.

     A.   Petitioners’ Liability for 1992

     On or before April 15, 1993, petitioners filed Form 4868,

Extension of Time To File U.S. Individual Income Tax Return, and

were granted an automatic 4-month extension of time to file their

Federal income tax return for 1992.     However, petitioners did not

file their 1992 Form 1040, U.S. Individual Income Tax Return,

until June 17, 1994, some 10 months after the due date as

extended.    See secs. 6072(a); 6081(a).

     On their 1992 income tax return, petitioners reported total

tax of $3,458, total payments of $0, and amount owed of $3,458.

Petitioners did not enclose payment with their return of any part

of the liability reported thereon.

     On July 25, 1994, respondent assessed against petitioners

income tax in the amount of $3,458, an addition to tax under

section 6651(a)(1) for failure to timely file in the amount of

$778.05, an addition to tax under section 6651(a)(2) for failure

to timely pay in the amount of $276.64, and interest in the

amount of $379.45.    On that same day, respondent sent petitioners

a notice of balance due, informing them that they had a liability

for 1992 and requesting that they pay it.    Petitioners failed to
                                 - 4 -

do so, other than as mentioned in the following paragraph.

     On June 3, 1997, and July 7, 1997, respondent applied

overpayment credits from petitioners’ account for the taxable

year 1990 in the amounts of $63.25 and $200, respectively, to

petitioners’ outstanding liability for 1992.    Subsequently, on

August 12, 1997, respondent posted another $200 payment to

petitioners’ account for 1992.    Other than the foregoing, no

credits or payments have been made to petitioners’ account for

1992.

     B.    Petitioners’ Liability for 1993

     On June 17, 1994, petitioners filed Form 1040 for 1993, some

2 months after its due date.    See sec. 6072(a).

     On their 1993 income tax return, petitioners reported total

tax of $1,586, total payments of $0, and amount owed of $1,652.2

Petitioners did not enclose payment with their return of any part

of the liability reported thereon.

     On July 25, 1994, respondent assessed against petitioners

income tax in the amount of $1,586, an addition to tax under

section 6654(a) for failure to pay estimated tax in the amount of

$66, an addition to tax under section 6651(a)(1) for failure to

timely file in the amount of $214.11, an addition to tax under

section 6651(a)(2) for failure to timely pay in the amount of

$31.72, and interest in the amount of $36.46.    Also on July 25,


     2
          The amount owed included $66 for “estimated tax penalty”.
                               - 5 -

1994, respondent sent petitioners a notice of balance due,

informing them that they had a liability for 1993 and requesting

that they pay it.   Petitioners have made no payments to their

account for 1993.

     C.   Collection-related Matters at the Administrative Level

     On December 17, 2001, respondent sent petitioners a Final

Notice/Notice Of Intent To Levy And Notice Of Your Right To A

Hearing in respect of their outstanding tax liabilities for 1992

and 1993.

     On January 10, 2002, petitioners filed with respondent Form

12153, Request for a Collection Due Process Hearing.   The request

stated only that “I have never recieved [sic] notice of this

tax”.

     On July 10, 2002, an administrative hearing was conducted by

respondent’s Appeals Office in Atlanta, Georgia.   At the

administrative hearing, petitioners repeated their assertion that

they had not received any notice that there was tax due for

either 1992 or 1993.   Petitioners also stated that they did not

have any income tax liability for either of those years.

     Also discussed at the administrative hearing was an

installment agreement.   Such collection alternative did not prove

to be feasible, however, because (as explained by the Appeals

officer in his Case Memo) petitioners “[reserved] the right to

dispute the tax for the 1992 and 1993 tax year[s].”
                                  - 6 -

     On October 24, 2002, respondent sent petitioners a Notice Of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 (notice of determination) with regard to their tax

liabilities for 1992 and 1993.     In the notice of determination,

the Appeals Office stated that respondent’s determination to

proceed with collection by way of levy should be sustained.

     D.   Petitioners’ Petition

     On November 22, 2002, petitioners filed a Petition for Lien

or Levy Action Under Code Section 6320(c) or 6330(d) (the

petition).   In the petition, petitioners allege as follows:

     We claim we do not owe these taxes. Upon several
     requests to the Internal Revenue Service they were
     unable to support their claim to Notice of Deficiency
     with any documentation (other than a transcript). My
     accountant has disposed of these records as well as
     Barbara and myself, the Petitioners.

     E.   Pretrial Developments

     After this case had been calendared for trial, respondent

filed a Motion For Summary Judgment (the motion).    In the motion,

respondent alleged that “The sole issue presented in this case is

whether petitioners are precluded from challenging the liability

they asserted on their originally filed returns in a Collection

Due Process hearing.”   Relying on section 6330(c)(2)(B),

respondent took the position that petitioners were precluded, as

a matter of law, from challenging the liabilities reported by

them on their 1992 and 1993 returns.

     Respondent attached to his motion, inter alia, copies of
                               - 7 -

petitioners’ Federal income tax returns for 1992 and 1993 and a

Form 4340, Certificate of Assessments, Payments, And Other

Specified Matters, for each of the years in issue.

     Shortly before trial, petitioners filed a response to

respondent’s motion.   In their response, petitioner Charles

Wendell Harkey alleged, in part, as follows:

          I do not owe these taxes but have no supporting
     documents. The IRS has not presented me with any
     documents from the last ten years showing me that they
     have tried to collect which translates into I don’t owe
     these taxes and that this is harassment. I have
     appealed this collection on that basis and will present
     this as my case on my court date of May 12, 2003.

     When this case was called from the calendar at the trial

session, the Court advised the parties that, under the

circumstances then extant, the Court was not inclined to rule on

respondent’s motion and that the case would therefore proceed to

trial.   The following day, when this case was called for trial,

the parties tendered, and the Court filed, a stipulation of

facts, attached to which were the same exhibits that accompanied

respondent’s motion.

Discussion

     At trial, petitioners raised issues that arguably went

beyond the scope of the issues defined in the petition.     Cf. Rule

331(b)(4).3   However, respondent did not object.   Accordingly, we



     3
        All Rule references are to the Tax Court Rules of
Practice and Procedure.
                                - 8 -

regard such issues as having been tried by consent, and they

shall be treated as if they had been raised in the petition.   See

Rule 41(b).

     A.   Petitioners’ Liability for Unpaid Taxes

     For the sake of convenience, we shall assume without

prejudice that petitioners may challenge the existence or amount

of their underlying tax liability for each of the years in issue.

Petitioners’ challenge, however, is to no avail because, at

trial, petitioners failed to introduce any evidence whatsoever

that their tax liabilities were other than what they themselves

reported on their 1992 and 1993 Federal income tax returns.

     In addition, the fact that petitioners or their accountant

may have disposed of all of their records for 1992 and 1993 does

not in any way absolve petitioners from liability for the income

taxes that they themselves reported on their 1992 and 1993

Federal income tax returns.   If petitioners disposed of all of

their records before their liabilities were satisfied, then

petitioners have no one to blame but themselves; if it was their

accountant who did so, then petitioners should look to him.

     It is also no excuse to profess that “I have never recieved

[sic] notice of this tax”.    After all, the liabilities at issue

are nothing other than the liabilities reported by petitioners

themselves on their 1992 and 1993 delinquent income tax returns.

     Finally, we observe that the period of limitations on
                                - 9 -

collection of petitioners’ outstanding liabilities for 1992 and

1993 has not expired.    Sec. 6502(a).   Accordingly, the fact that

respondent may not have taken collection action against

petitioners immediately after assessment of the liabilities in

issue is of no moment.

     B.   Petitioners’ Liability for Additions to Tax and Interest

     We turn now to what we understand to be petitioners’

contention that the Court should review respondent’s failure to

abate additions to tax (“penalties”) and interest with respect to

1992 and 1993.

     Initially, it should be recalled that petitioners filed

their 1992 income tax return some 10 months late and did not

enclose payment with their return of any part of the liability

reported thereon; consequently, respondent assessed against

petitioners an addition to tax under section 6651(a)(1) for

failure to timely file and an addition to tax under section

6651(1)(2) for failure to timely pay.    Similarly, petitioners

filed their 1993 income tax return some 2 months late, did not

enclose payment with their return of any part of the liability

reported thereon, and reported liability for an “estimated tax

penalty”; consequently, respondent assessed against petitioners

an addition to tax under section 6651(a)(1) for failure to timely

file, an addition to tax under section 6651(1)(2) for failure to

timely pay, and an addition to tax under section 6654(a) for
                              - 10 -

failure to pay estimated tax.4

     The record does not demonstrate that petitioners raised at

the administrative hearing an issue concerning respondent’s

failure to abate additions to tax.     We do not, therefore,

consider any such issue.   See Washington v. Commissioner, 120

T.C. 114, 124 (2003).   Assuming without prejudice that

petitioners did raise such an issue, this Court lacks

jurisdiction to review petitioners’ request that we review any

such failure.   Id. at 124 n.15.

     Insofar as interest is concerned, the record does not

demonstrate that petitioners raised at the administrative hearing

an issue concerning respondent’s failure to abate interest.       We

do not, therefore, consider any such issue.     Id. at 123-124.

Assuming without prejudice that (1) petitioners did raise such an

issue and that (2) we have jurisdiction to consider it, see id.

at 123 n.12, we conclude that petitioners have failed to prove

that respondent abused his discretion in failing to abate

interest.   Indeed, petitioners failed to establish any error or

delay attributable to one of respondent’s officers’ or employees’

being erroneous or dilatory in performing a ministerial act


     4
        At trial, petitioners made no effort to show that their
failure to timely file or that their failure to timely pay was
attributable to reasonable cause and not willful neglect, nor did
petitioners make any effort to show that their failure to pay
estimated tax was statutorily excused. Similarly, petitioners
raised no issue regarding the computation of any of the additions
to tax.
                                 - 11 -

requiring the abatement of interest with respect to the taxable

year 1992 or 1993.    See sec. 6404(e).   The fact that respondent

assigned another DLN (document locator number) to each of

petitioners’ returns a few months after those returns were filed

in 1994 (apparently because they were “balance-due returns”) does

not, by any stretch of the imagination, satisfy petitioners’

burden of proof.

     C.    Did Respondent Abuse His Discretion?

     At the administrative hearing, there was discussion

concerning a possible installment payment agreement.

Petitioners, however, were not willing to enter into such an

agreement because they continued to dispute their underlying

liabilities for 1992 and 1993.     For that same reason, respondent

was not willing to offer an installment payment agreement as a

collection alternative.

     In Rodriguez v. Commissioner, T.C. Memo. 2003-153, we held

that it was not an abuse of discretion for the Commissioner to

decline to accept an offer in compromise as a collection

alternative if the taxpayer had not filed all required income tax

returns.    Indeed, we stated:

     The decision not to accept the offer in compromise submitted
     by petitioner on account of her failure to file all required
     returns was an entirely reasonable exercise of the
     Commissioner’s discretion in administering the offer in
     compromise program. [Id.]
                              - 12 -

     Although the present case involves a potential installment

payment agreement and not an offer in compromise, we think the

deference shown in Rodriguez v. Commissioner, supra, to the

Commissioner’s collection procedures applies equally to the

present case.   Specifically, we do not think it is an abuse of

discretion for the Commissioner to decline to offer an

installment payment agreement to a taxpayer if the taxpayer

continues to dispute the underlying liability.5   After all, an

installment payment agreement contemplates payment of an amount

acknowledged as owed.   See Internal Revenue Manual 5.19.1.5.4.1;

Form 433-D, Installment Agreement; see also sec. 6159; sec.

301.6159-1, Proced. & Admin. Regs.

     In sum, petitioners have failed to demonstrate that the

proposed levy action is inappropriate, that another collection

alternative is more appropriate, or that some other relevant

issue adversely affects respondent’s proposed collection action.

Respondent’s determination to proceed by levy with the collection

of petitioners’ outstanding liabilities for 1992 and 1993 was not

an abuse of discretion.




     5
        Indeed, it is hard to imagine that a taxpayer would even
want to enter into an installment payment agreement if the
taxpayer not only disputed the underlying liability but wished to
take that dispute to court.
                             - 13 -

     D.   Conclusion

     For the reasons discussed above, respondent’s determination

to proceed by levy with the collection of petitioners’

outstanding liabilities for 1992 and 1993 should be sustained,

and we so hold.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To give effect to the foregoing,



                                   Respondent’s Motion For

                              Summary Judgment will be denied as

                              moot, and decision will be entered

                              for respondent.
