                        T.C. Memo. 2009-144



                      UNITED STATES TAX COURT



                 NORMAN J. CYMAN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 22186-05L.              Filed June 22, 2009.



     Norman J. Cyman, pro se.

     Steven W. LaBounty, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


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

seeks review of respondent’s determination to sustain a notice of

Federal tax lien with respect to petitioner’s unpaid Federal


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

income tax liabilities for 1989-97.    The issues for decision are:

(1) Whether petitioner is precluded from contesting his

underlying Federal income tax liabilities for 1989-97; (2)

whether respondent abused his discretion in upholding the notice

of Federal tax lien; and (3) whether the Court should impose a

penalty under section 6673(a)(1).

                         FINDINGS OF FACT

     Some of the facts have been stipulated.   We incorporate the

stipulated facts into our findings by this reference.   Petitioner

resided in Missouri when his petition was filed.

I.   Petitioner’s Unpaid Federal Income Tax Liabilities for
     1989-97

     Petitioner failed to file his Federal income tax returns for

1989-97.   Respondent prepared substitutes for returns for

petitioner under section 6020(b).   In late December 1997

respondent notified petitioner by certified mail that petitioner

was the subject of a criminal investigation regarding his Federal

income tax liabilities for 1989-97.

     On September 14, 1998, petitioner submitted to respondent

“zero” Forms 1040, U.S. Individual Income Tax Return, for 1989-97

(zero returns).2   Petitioner signed each zero return with a

notation “Without prejudice UCC-1-207” and attached to each


     2
      Petitioner believed that he was under a criminal
investigation and that filing zero returns would preserve his
constitutional rights.
                              - 3 -

return a letter containing frivolous arguments, including:      (1)

No section of the Code made him liable for income tax, (2) the

Form 1040 instructions stated that filing Federal income tax

returns was voluntary, and (3) providing information to the

Government that could be used against him was inconsistent with

the Fifth Amendment to the U.S. Constitution.    Respondent did not

treat the zero returns as valid returns.    At some point in 1998

respondent began an examination for petitioner’s 1989-97 years.

     From 1991-2002 petitioner lived in Mount Vernon, Illinois.

During 1998 and 1999 petitioner leased P.O. Box 425 at the post

office in Mount Vernon, Illinois 62864.    He retrieved mail from

his post office box once every 1-2 weeks.

     Petitioner received correspondence from respondent’s

Criminal Division at his home address.    However, during the

examination of his 1989-97 returns, petitioner used the post

office box address on his correspondence with the examining

agent.

     On July 27, 1999, respondent mailed to petitioner by

certified mail in one envelope addressed to P.O. Box 425, Mount

Vernon, Illinois 62864, three separate notices of deficiency for

1989-91, 1992-94, and 1995-97.3   On July 29 and August 3, 1999,

     3
      After respondent prepared substitutes for returns for
petitioner under sec. 6020(b), petitioner requested a hearing
with the Appeals Office before respondent issued the notices of
deficiency. The Appeals Office reviewed the case and determined
                                                   (continued...)
                               - 4 -

the U.S. Postal Service (USPS) placed USPS Forms 3849 in

petitioner’s post office box notifying him that he needed to pick

up certified mail.   Petitioner did not claim the certified mail,

and on August 13, 1999, the USPS returned the envelope with the

notices of deficiency to respondent as unclaimed.   Petitioner did

not file a petition with the Court disputing respondent’s

determinations in the notices of deficiency.

      On February 7, 2000, respondent assessed petitioner’s

Federal income tax liabilities, interest, and additions to tax

under section 6651(a)(1) and (f) for fraudulent failure to file

returns for 1989-97, section 6651(a)(2) for failure to pay the

tax for 1996 and 1997, and section 6654 for failure to pay

estimated taxes for 1989-97.

II.   Respondent’s Collection Actions

      On July 13, 2004, petitioner sent a letter to respondent’s

service center in Holtsville, New York.   The letter stated that

petitioner believed he had no Federal income tax liabilities and

that he relied on U.S. Supreme Court decisions, congressional

testimony, respondent’s statements, and a legal opinion.4     On

      3
      (...continued)
that petitioner had failed to raise any nonfrivolous issues in
his request for an appeal. The case was then referred to the
Examination Division for issuance of the notices of deficiency.
      4
      Petitioner enclosed various documents, including a letter
dated Apr. 1, 1996, from Attorney Gary Peel in which Gary Peel
concluded that no section of the Code made a human being liable
                                                   (continued...)
                               - 5 -

July 14, 2004, respondent prepared a notice of Federal tax lien

with respect to petitioner’s unpaid Federal income tax

liabilities for 1989-97.   On July 16, 2004, respondent mailed a

Notice of Federal Tax Lien Filing and Your Right to a Hearing

Under IRC 6320 (notice of lien).5   On July 27, 2004, respondent

filed the notice of lien in the county recorder’s office for

Stone County, Missouri, with respect to petitioner’s unpaid

Federal income tax liabilities for 1989-97.

     On August 25, 2004, respondent received petitioner’s Form

12153, Request for a Collection Due Process Hearing, concerning

the notice of lien.   In a letter attached to his Form 12153,

petitioner repeated his contention expressed in the July 13,

2004, letter, that on the basis of advice from “tax expert

sources” he believed he had no Federal income tax liabilities.

Petitioner also enclosed a copy of his July 13, 2004, letter.

     Petitioner’s case was assigned to Settlement Officer Keith

R. Cummings (Mr. Cummings).   On March 9, 2005, Mr. Cummings sent

petitioner a letter scheduling a hearing for April 4, 2005.     In

the letter Mr. Cummings advised petitioner that during the


     4
      (...continued)
for an income tax, required the filing of a Form 1040, or defined
income.
     5
      The notice of lien states incorrect assessment dates, but
that error does not invalidate the notice of Federal tax lien.
See United States v. Hanson, 96 AFTR 2d 2005-7174, at 2005-7176,
2006-2 USTC par. 50,557, at 85,691 (D. Minn. 2005).
                               - 6 -

hearing he could consider whether petitioner owed the amount due,

but only if petitioner had not had an opportunity to dispute it

with the Appeals Office.   Mr. Cummings also advised petitioner

that if he wanted Mr. Cummings to consider alternative collection

methods, he should submit a completed Form 433-A, Collection

Information Statement for Wage Earners and Self-Employed

Individuals, and/or Form 433-B, Collection Information Statement

for Businesses, and file all Federal income tax returns due.   Mr.

Cummings mailed petitioner Form 433-A and Form 433-B.

     On March 31 and April 1, 2005, petitioner called Mr.

Cummings to request a face-to-face hearing at the St. Louis,

Missouri, Appeals Office and an additional 30 days to prepare for

the hearing.   Mr. Cummings and petitioner agreed that Mr.

Cummings would hold a face-to-face hearing at respondent’s Kansas

City, Missouri, office on May 3, 2005.   Mr. Cummings then mailed

petitioner another set of Forms 433-A and 433-B, which petitioner

had agreed to complete and return to Mr. Cummings before the

hearing.   Petitioner did not complete the Form 433-A and/or

Form 433-B.

     On April 28, 2005, Mr. Cummings received from petitioner a

fax in which petitioner asked Mr. Cummings to “remove any liens

and zero out any purported liability”, demanded that Mr. Cummings

explain in writing what sections of the Code made petitioner

liable for tax, and asserted other tax-protester arguments.    On
                               - 7 -

May 2, 2005, petitioner called Mr. Cummings and advised him that

he would not attend the face-to-face hearing but instead would

call Mr. Cummings on May 3, 2005.

     On May 3, 2005, Mr. Cummings held a telephone hearing with

petitioner.   During the hearing petitioner again asserted that he

did not owe the underlying tax and that respondent had never

explained to him what laws made him liable for Federal income tax

or responsible for filing Federal income tax returns.6

Petitioner offered to resolve his unpaid Federal income tax

liabilities with one $500 payment or $100 payments for the

following 12 months.7   Because petitioner had failed to submit a

Form 433-A and/or a Form 433-B, Mr. Cummings told him that he

could not consider collection alternatives.

     After the hearing Mr. Cummings mailed petitioner copies of

the provisions they had discussed.     Mr. Cummings also sent

petitioner a Form 656, Offer in Compromise, but petitioner did

not submit a completed Form 656 to Mr. Cummings.

     On October 21, 2005, respondent sent petitioner a Notice of

Determination Concerning Collection Action(s) Under Section 6320


     6
      The record indicates that the Appeals Office considered
petitioner’s tax liabilities for the periods at issue before the
notices of deficiency were issued. The record contains no
indication that petitioner asserted at the sec. 6320/6330 hearing
that he did not receive the notices of deficiency.
     7
      Petitioner did not fill out any forms for his offer-in-
compromise.
                               - 8 -

and/or 6330 sustaining the notice of Federal tax lien.     In the

notice of determination respondent stated that petitioner had

failed to raise any nonfrivolous issues or offer a reasonable

collection alternative.   Accordingly, the Appeals Office upheld

the filing of the notice of lien.

     With respect to Mr. Cummings’s refusal to consider

petitioner’s underlying tax liabilities, in the attachment to the

notice of determination, the Appeals Office stated:     “The

deficiency notice was mailed by certified mail to the taxpayer’s

last known address.   Delivery was attempted by the post office on

two separate occasions.   Each time the taxpayer refused to claim

the certified mailing, according to the envelope returned by the

postal service.”

     Petitioner filed a timely petition contesting the notice of

determination.   Respondent filed two motions for summary judgment

and to impose a penalty under section 6673.     The Court denied

both motions because a relevant fact, whether petitioner had

received the notices of deficiency, was in dispute.

Subsequently, the Court conducted a trial at which petitioner

testified.   During the trial petitioner, who had been warned on

several occasions about making frivolous arguments, stated his

intention to end his tax-protester behavior.8


     8
      Petitioner testified that he had been filing his Federal
income tax returns since 2000.
                                - 9 -

                              OPINION

I.   Collection Hearing Procedure

     Section 6321 imposes a lien in favor of the United States on

all property and property rights of a taxpayer liable for taxes

after a demand for the payment of the taxes has been made and the

taxpayer fails to pay those taxes.      The lien arises when the

assessment is made.   Sec. 6322.    Section 6323 generally requires

the Secretary to file a notice of Federal tax lien with the

appropriate State office for the lien to be valid against certain

third parties.   Section 6320(a) requires the Secretary to send

written notice to the taxpayer of the filing of a notice of lien

and of the taxpayer’s right to an administrative hearing on the

matter.   Section 6320(b) affords the taxpayer the right to a fair

hearing before an impartial officer.      Section 6320(c) requires

that the administrative hearing be conducted pursuant to section

6330(c), (d) (other than paragraph (2)(B) thereof), and (e).

     At the hearing a taxpayer may raise any relevant issue,

including appropriate spousal defenses, challenges to the

appropriateness of the collection action, and possible collection

alternatives.    Sec. 6330(c)(2)(A).    A taxpayer may contest the

validity of the underlying tax liability, but only if the

taxpayer did not receive a notice of deficiency or otherwise have

an opportunity to dispute the tax liability.      See sec.

6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000).
                                 - 10 -

The phrase “underlying tax liability” includes the tax

deficiency, additions to tax, and statutory interest.        Katz v.

Commissioner, 115 T.C. 329, 339 (2000).

     Following a hearing, the Appeals Office must issue a notice

of determination regarding the validity of the filed Federal tax

lien.   In making the determination the Appeals Office is required

to take into consideration:   (1) Verification presented by the

Secretary that the requirements of applicable law and

administrative procedure have been met; (2) relevant issues

raised by the taxpayer; and (3) whether the proposed collection

action appropriately balances the need for efficient collection

of taxes with a taxpayer’s concerns regarding the intrusiveness

of the proposed collection action.        Sec. 6330(c)(3).

     If the taxpayer disagrees with the Appeals Office’s

determination, the taxpayer may seek judicial review by appealing

to this Court.   Sec. 6330(d).    Where the validity of the

underlying tax liability is properly at issue, the Court reviews

the determination regarding the underlying tax liability de novo.

Sego v. Commissioner, supra at 610; Goza v. Commissioner, 114

T.C. 176, 181-182 (2000).   Where the validity of the underlying

tax liability is not properly at issue, the Court reviews the

determination of the Appeals Office for abuse of discretion.

Sego v. Commissioner, supra at 610; Goza v. Commissioner, supra

at 182.
                              - 11 -

II.   Whether Petitioner May Challenge the Underlying Tax
      Liabilities

      The parties did not raise the issue of the burden of proof.

However, our resolution of the issues is based on the

preponderance of the evidence and not on any the allocation of

the burden of proof.   See Knudsen v. Commissioner, 131 T.C. __

(2008), supplementing T.C. Memo. 2007-340.

      Respondent contends that section 6330(c)(2)(B) precludes

petitioner from challenging the existence or the amount of his

underlying tax liabilities for 1989-97, because petitioner had

deliberately failed to pick up the notices of deficiency for the

years at issue.9   Petitioner denies receiving the notices of

deficiency or the USPS Forms 3849.     He testified that he checked

his post office box once every 1-2 weeks and that because he was

“programmed” to pick up certified mail, he would have picked up

the mail if he had received a USPS Form 3849.

      Section 6330(c)(2)(B) contemplates actual receipt of a

notice of deficiency by the taxpayer, Tatum v. Commissioner, T.C.

Memo. 2003-115, although a taxpayer may not avoid actual receipt


      9
      In an order denying respondent’s first motion for summary
judgment, another Judge of this Court stated that respondent did
not establish that petitioner had received the notices of
deficiency. However, that statement was made in connection with
a summary judgment motion which can be granted only if no
relevant fact is in dispute. See Rule 121. We explained to
petitioner at trial that we construe the order to mean that
whether petitioner received the notices of deficiency was in
dispute and, therefore, summary judgment was inappropriate.
                                - 12 -

by deliberately refusing delivery, Sego v. Commissioner, supra at

610-611.   The Commissioner has generally prevailed in foreclosing

challenges to the underlying liability under section

6330(c)(2)(B) where he establishes that a notice of deficiency

was mailed to the taxpayer’s last known address and no factors

are present that rebut the presumption of official regularity and

of delivery.     See, e.g., Sego v. Commissioner, supra at 610-611;

Clark v. Commissioner, T.C. Memo. 2008-155.

     The record contains copies of three notices of deficiency,

each dated July 27, 1999, for 1989-91, 1992-94, and 1995-97.

Each notice of deficiency bears petitioner’s name and post office

box address.10    The record also contains a copy of a certified

mailing list, USPS Form 3877.    USPS Form 3877 lists petitioner’s

name and post office box address and bears a postmark date of

July 27, 1999.11    Respondent also offered into evidence a copy of

the envelope in which respondent mailed the notices of

deficiency.




     10
      Petitioner does not dispute that the post office box
address was his last known address.
     11
      The Commissioner’s employee prepares a USPS Form 3877; the
USPS Form 3877 includes the article number for the certified
mailing, the description of the document mailed, and the
addressee’s name and address. The employee then writes the
article number of the particular mailing on the envelope in which
the document is mailed. The USPS stamps a postmark date on the
USPS Form 3877.
                               - 13 -

     At trial Cynthia A. Schaefer (Ms. Schaefer), who worked as a

postmaster of the Mount Vernon, Illinois, Post Office during July

and August 1999, credibly testified about procedures employed at

that post office when it received a piece of certified mail

addressed to a post office box.   A postal employee stamped the

envelope with the date it arrived at the Mount Vernon, Illinois,

Post Office and completed a USPS Form 3849 and placed it in the

addressee’s post office box.   The USPS Form 3849 notified the

addressee that he needed to claim a piece of certified mail.     If

the addressee did not claim the piece of certified mail, 5 days

later the postal service employees placed another USPS Form 3849

in the addressee’s post office box.     If the addressee again

failed to claim the piece of certified mail, after 10 days the

postal employees stamped the envelope “Returned to sender” and

returned it to the sender.   Ms. Schaefer also credibly testified

that if the addressee’s mailbox were filled with mail, a postal

employee pulled out all mail and placed in the post office box a

card informing the addressee that he had overflow mail.     In such

case the postal employee pulled out USPS Form 3849 along with

other overflow mail.

     Ms. Schaefer also corroborated various postal stamps and

marks on the envelope in the record.     The envelope bears a stamp

establishing that on July 29 and August 3, 1999, the USPS placed

USPS Forms 3849 in petitioner’s post office box.     The same stamp
                              - 14 -

establishes that petitioner did not pick up the envelope after

postal employees placed two USPS Forms 3849 in his postal box,

and on August 13, 1999, the post office returned the envelope to

the sender.   Another stamp on the envelope reads “Returned to

sender” and has “unclaimed” checked off as the reason for

returning the certified mailing to respondent.   Petitioner knew

that his 1989-97 returns were under examination because he

stipulated that he had sent correspondence to the examining

agent, but nevertheless he failed to claim the certified mail

after the post office placed two USPS Forms 3849 in his post

office box over a 2-week period.

     The record contains no credible evidence to rebut the

presumption of official regularity.    Petitioner’s speculation at

trial that the USPS Forms 3849 might have gotten lost in the

large volume of mail he was receiving or because of possible

mishandling by a postal employee is not compelling or convincing

evidence of any irregularity occurring in the delivery of the

notices of deficiency and the USPS Forms 3849 to his post office

box or of nonreceipt of the notices of deficiency and USPS Forms

3849.   The post office placed two USPS Forms 3849 in petitioner’s

post office box over 15 days, and it is unlikely that petitioner

overlooked both USPS Forms 3849 or that both USPS Forms 3849 were
                               - 15 -

lost.12   On the preponderance of the evidence we find that

petitioner refused delivery of the notices of deficiency for the

years at issue and therefore is deemed to have received them.

Accordingly, petitioner could not challenge the underlying tax

liability at the section 6330 hearing, see Sego v. Commissioner,

114 T.C. at 611; Clark v. Commissioner, supra, and petitioner’s

underlying tax liabilities are not properly before the Court, see

Sego v. Commissioner, supra at 611; Goza v. Commissioner, 114

T.C. at 182.

III. Review of the Notice of Determination for Abuse of
     Discretion

     Because the validity of the underlying tax liability is not

properly at issue, we review the notice of determination for

abuse of discretion.   Sego v. Commissioner, supra at 610; Goza v.

Commissioner, supra at 182.   In reviewing for abuse of discretion

under section 6330(d)(1), generally we consider only arguments,

issues, and other matters that were raised at the section 6330

hearing or otherwise brought to the attention of the Appeals

Office.   Magana v. Commissioner, 118 T.C. 488, 493 (2002); see

also sec. 301.6330-1(f)(2), Q&A-F5, Proced. & Admin. Regs.    The

Appeals Office abuses its discretion if its “discretion has been




     12
      During this period petitioner was taking positions with
respect to his tax filing and payment obligations that were
frivolous and shopworn protester positions.
                                  - 16 -

exercised arbitrarily, capriciously, or without sound basis in

fact.”      Mailman v. Commissioner, 91 T.C. 1079, 1084 (1988).

      Petitioner has not advanced any argument or presented any

evidence that would allow us to conclude that the determination

to sustain the lien was arbitrary, capricious, or without

foundation in fact, or otherwise an abuse of discretion.        See,

e.g., Giamelli v. Commissioner, 129 T.C. 107, 112, 115 (2007).

Petitioner has not submitted Form 433-A and/or Form 433-B or

offered a reasonable collection alternative.        Mr. Cummings

verified that all requirements of applicable law and

administrative procedure were met.         Mr. Cummings concluded that

the filing of the notice of Federal tax lien balanced the need

for efficient collection of taxes with concerns that the

collection action be no more intrusive than necessary.

Accordingly, we conclude that respondent did not abuse his

discretion in sustaining the notice of Federal tax lien.

IV.   Exhibits 29-P Through 34-P

      At trial petitioner sought to introduce into evidence

Exhibits 29-P through 34-P.      The proffered exhibits are

petitioner’s Forms 1040 for 1992-9713 with accompanying

attachments; the attachments purport to substantiate petitioner’s

business deductions.      Respondent objected to the admission of the

exhibits on several grounds, including that petitioner failed to

      13
           Petitioner did not offer his Forms 1040 for 1989-91.
                              - 17 -

timely provide respondent with the documents, that he failed to

submit the documents to Mr. Cummings and accordingly the

documents were not part of the administrative record, and that

the records were outside the scope of the pleadings.     We reserved

our ruling on the admission of the exhibits.

     Because we hold that petitioner is precluded from

challenging his underlying tax liabilities for 1989-97, any issue

regarding the amount of such liabilities is not properly before

us in this proceeding, and we review the notice of determination

under the abuse of discretion standard.    See Sego v.

Commissioner, supra at 611.   Accordingly, petitioner’s Forms 1040

and the accompanying attachments are not relevant to the question

of whether Mr. Cummings abused his discretion in upholding the

lien filing, see Fed. R. Evid. 401, and we sustain respondent’s

objections.

V.   Penalty Under Section 6673(a)(1)

     Respondent filed two motions for summary judgment and to

impose a penalty under section 6673.    We denied both motions

before trial.   However, because petitioner repeatedly asserted

frivolous arguments during his section 6320/6330 hearing and

before this Court, we shall decide whether to impose a penalty

under section 6673.

     Section 6673(a)(1) authorizes the Court to require a

taxpayer to pay to the United States a penalty in an amount not
                               - 18 -

to exceed $25,000 whenever the taxpayer’s position is frivolous

or groundless or the taxpayer has instituted or pursued the

proceeding primarily for delay.   Section 6673(a)(1) applies to

proceedings under section 6330.     Pierson v. Commissioner, 115

T.C. 576, 581 (2000).   In proceedings under section 6330, we have

imposed a penalty on taxpayers who have raised frivolous and

groundless arguments with respect to the legality of the Federal

tax laws.    See, e.g., Roberts v. Commissioner, 118 T.C. 365, 372-

373 (2002), affd. 329 F.3d 1224 (11th Cir. 2003); Eiselstein v.

Commissioner, T.C. Memo. 2003-22.

     During the hearing and in telephone conferences and

correspondence with Mr. Cummings petitioner repeatedly questioned

what laws made him liable for Federal income tax, claimed that

respondent had violated his rights by failing to answer his

question in writing, and asserted that the Code has not been

enacted into positive law.   In his petition he stated that

respondent applied “prima facia [sic] statutes erroneously to

create ficticious [sic] tax liabilities.”

     Mr. Cummings warned petitioner about taking frivolous

positions.   In the notice of determination respondent’s Appeals

Office warned petitioner that if he persisted in making frivolous

arguments before the courts, he might be sanctioned under section

6673.   In our order dated May 10, 2007, and during trial, we also
                                - 19 -

cautioned petitioner not to continue asserting meritless

contentions before the Court.

     We note, however, that petitioner heeded respondent’s and

the Court’s continued warnings and generally refrained from

asserting frivolous arguments at trial.    We also take into

consideration petitioner’s testimony that he has filed Federal

income tax returns since 2000.    As he stated during trial:   “The

tax protest deal and the-–it’s just old, and it’s a chapter of my

life that I want to close.”   Finally, we consider that petitioner

presented a legitimate, nonfrivolous issue at trial.    Although we

have resolved that issue against petitioner, we cannot fault him

for raising it.   After taking all of these matters into account

and in the exercise of our discretion, we decline to impose any

penalty under section 6673.

     We have considered the remaining arguments the parties made

and to the extent not discussed above, conclude those arguments

are irrelevant, moot, or without merit.    We sustain respondent’s

determination that the filing of a notice of Federal tax lien was

appropriate.

     To reflect the foregoing,


                                      Decision will be entered for

                                 respondent.
