                        T.C. Memo. 2005-179



                      UNITED STATES TAX COURT



                 DONALD A. RAMIREZ, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 22323-03L.              Filed July 21, 2005.



     Donald A. Ramirez, pro se.

     Rebecca Duewer-Grenville, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     HAINES, Judge:   The petition in this case was filed in

response to the Notices of Determination Concerning Collection

Action Under Section 6320 (notices of determination) for 1996,

1997, and 1998.1   Pursuant to section 6330(d), petitioner seeks


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

review of respondent’s determination sustaining a Federal tax

lien.     After concessions,2 the issues for decision are:   (1)

Whether petitioner is liable for additions to tax under section

6651(a)(1) and (a)(2) for 1998; and (2) whether respondent abused

his discretion in sustaining the Federal tax lien.

                           FINDINGS OF FACT

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.     At the time the petition

was filed, petitioner resided in San Bruno, California.

Petitioner is a practicing attorney.

     Petitioner had his gall bladder removed in 1996 and was off

work for 4 months.     After his recovery, petitioner was able to

continue his legal practice, pay business expenses, manage two

rental properties, and take care of two minor children.

     On April 8, 2001, petitioner filed a Form 1040, U.S.

Individual Income Tax Return, for 1998, showing a tax due of

$8,122.     Petitioner made no payments at the time of filing.


     1
      (...continued)
Internal Revenue Code in effect for the years in issue.
     2
        The parties disagreed over petitioner’s Schedule A,
Itemized Deductions, for 1996, but respondent now concedes that
petitioner is entitled to the deduction. The parties have also
stipulated that, subsequent to his filing with this Court,
petitioner fully paid his 1996 and 1997 tax liabilities,
including additions to tax pertaining to those years. Upon
payment, the Federal tax liens for 1996 and 1997 were released.
Only 1998 remains at issue.
                               - 3 -

     Upon receipt of the 1998 income tax return, respondent

assessed the tax due of $8,122, an addition to tax for failure to

timely file a return under section 6651(a)(1) of $1,827, an

addition to tax for failure to timely pay the tax under section

6651(a)(2) of $1,015, and an addition to tax for failure to pay

estimated tax under section 6654 of $257 against petitioner.

Respondent did not issue a notice of deficiency to petitioner.

     On April 9, 2003, respondent sent petitioner a Notice of

Federal Tax Lien and Your Right to a Hearing Under IRC 6320 for

1998.

     On May 5, 2003, respondent received petitioner’s request for

a section 6330 hearing.   Theresa M. Amper (Ms. Amper), Appeals

Collection Specialist, sent confirmation of receipt on July 31,

2003, and requested that petitioner complete a Form 433-A,

Collection Information Statement for Individuals.   Petitioner did

not respond.

     Ms. Amper sent a second letter on August 25, 2003,

requesting petitioner complete a Form 433-A, and stating that if

she did not hear from petitioner by September 9, 2003, his

section 6330 hearing would consist of an administrative review of

his file.   Petitioner did not respond.

     On September 24, 2003, Appeals Officer Gerry Melick (Ms.

Melick) sent petitioner a letter requesting that petitioner

contact her by phone to discuss petitioner’s section 6330 hearing
                               - 4 -

request.   Petitioner did not respond.   Ms. Melick sent a second

letter on October 8, 2003, requesting that petitioner respond

within 15 days.   Petitioner did not respond.

     Respondent conducted an administrative review of

petitioner’s file.   On November 25, 2003, respondent sent

petitioner notice of determination sustaining the filing of the

Federal tax lien for 1998.

     On December 23, 2003, petitioner timely filed a petition

with the Court.   Upon order of the Court, petitioner filed an

amended petition on February 24, 2004, seeking review of the

underlying tax liability and relief from the lien collection

action under section 6320.

     The parties have stipulated that, subsequent to petitioner’s

filing with this Court, an installment agreement has been entered

into for petitioner’s outstanding tax liability, and that any

overpayments resulting from the allowance of petitioner’s

schedule A expense deduction for 1996 will be applied to the

outstanding tax liability for 1998.

     At trial, petitioner raised a reasonable cause defense to

the section 6651 additions to tax, citing his 1996 surgery.

                              OPINION

     Pursuant to section 6330(d)(1), within 30 days of the

issuance of the notice of determination, the taxpayer may appeal

the determination to this Court if we have jurisdiction over the
                                - 5 -

underlying tax liability.    Van Es v. Commissioner, 115 T.C. 324,

328-329 (2000).    This Court has interpreted “underlying tax

liability” in section 6330(d)(1) to include any amounts owed by

the taxpayer pursuant to the tax laws, including additions to

tax.    Katz v. Commissioner, 115 T.C. 329, 339 (2000).   Petitioner

timely filed his petition with this Court pursuant to section

6330(d)(1), and, because he was not issued a notice of deficiency

and did not otherwise have the opportunity to dispute the

underlying tax liability, petitioner may challenge the additions

to tax.    See id.; sec. 6330(c)(2)(B); Montgomery v. Commissioner,

122 T.C. 1, 8-10 (2004).

       Where the validity of the underlying tax liability is

properly at issue, the Court will review the matter de novo.

Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v.

Commissioner, 114 T.C. 176, 181 (2000).    Where the validity of

the underlying tax liability is not properly at issue, however,

the Court will review the Commissioner’s administrative

determination for abuse of discretion.    Sego v. Commissioner,

supra; Goza v. Commissioner, supra.

       We shall review de novo whether petitioner is liable for the

additions to tax under section 6651.    See Downing v.

Commissioner, 118 T.C. 22, 29 (2002); Goodwin v. Commissioner;

T.C. Memo. 2003-289; Joye v. Commissioner, T.C. Memo. 2002-14.

If we find that petitioner is liable for the additions to tax, we
                               - 6 -

shall review respondent’s administrative determination sustaining

the Federal tax lien for abuse of discretion.    See Downing v.

Commissioner, supra; Goodwin v. Commissioner, supra; Joye v.

Commissioner, supra.

Issue 1: De Novo Review of Section 6651 Additions to Tax

     Respondent determined that petitioner is liable for

additions to tax pursuant to section 6651(a)(1) and (2) for 1998.

Section 6651(a)(1) imposes an addition to tax for failure to file

a return by the date prescribed (determined with regard to any

extension for time for filing).   Section 6651(a)(2) imposes an

addition to tax for failure to pay the amount shown as tax on a

return by the date prescribed (determined with regard to any

extension for time for filing).   If petitioner establishes that

the failure to timely file or pay is due to reasonable cause and

not due to willful neglect, he can avoid the additions to tax.

Sec. 6651(a)(1) and (2).

     Section 7491(c) requires respondent to carry the burden of

production with respect to any addition to tax for failure to

file or pay.   Higbee v. Commissioner, 116 T.C. 438, 446-447

(2001).   To meet his burden of production, respondent must come

forward with sufficient evidence indicating that it is

appropriate to impose the additions to tax.     Id.   Once respondent

meets this burden, petitioner must come forward with evidence

sufficient to persuade the Court that respondent’s determination
                                - 7 -

is incorrect.    Id.

     The parties stipulate that petitioner filed his 1998 tax

return 2 years late.    In addition, the parties stipulate that

petitioner has not fully paid his 1998 tax liability.    We find

that, on these facts, respondent met his burden of production

under section 7491(c).    As a result, petitioner must come forward

with evidence sufficient to persuade the Court that respondent’s

determination that petitioner is liable for the section

6651(a)(1) and (a)(2) additions to tax is incorrect.

     A showing of reasonable cause requires the petitioner to

demonstrate that he exercised ordinary business care and

prudence, but nevertheless was unable to file or pay the tax

within the prescribed time.    Sec. 301.6651-1(c)(1), Proced. &

Admin. Regs.    For illness to constitute reasonable cause for

failure to file, petitioner must show that it incapacitated him

to such a degree that he could not file his returns.    Williams v.

Commissioner, 16 T.C. 893, 905-906 (1951); see, e.g., Joseph v.

Commissioner, T.C. Memo. 2003-19 (“Illness or incapacity may

constitute reasonable cause if the taxpayer establishes that he

was so ill he was unable to file.”); Black v. Commissioner, T.C.

Memo. 2002-307 (“[W]e are unpersuaded that illness is the cause

of petitioners’ continuing delinquency.”), affd. 94 Fed. Appx.

968 (3d Cir. 2004); Watts v. Commissioner, T.C. Memo. 1999-416

(“[A] taxpayer’s selective inability to perform his or her tax
                              - 8 -

obligations, while performing their regular business, does not

excuse failure to file.”); Wright v. Commissioner, T.C. Memo.

1998-224 (“[T]he duration of the incapacity must approximate that

of the failure to file.”), affd. 173 F.3d 848 (2d Cir. 1999).

     Petitioner’s argument that the delay in filing and payment

was due to reasonable cause was based solely on his 1996 surgery,

the accompanying illness, and his inability to work for 4 months.

However, after his recovery, petitioner was able to continue his

legal practice, pay business expenses, manage two rental

properties, and take care of two minor children.   Petitioner’s

health problems in 1996 do not explain his failure to timely file

or pay for 1998, nor his repeated failures to contact

respondent’s Appeals Office in 2003.   On the basis of the facts

presented, we conclude that petitioner did not have reasonable

cause for his delay in filing and paying taxes.

Issue 2: Abuse of Discretion Review of Respondent’s Determination

     Because petitioner is liable for the additions to tax, we

shall review respondent’s administrative determination sustaining

the Federal tax lien for abuse of discretion.   Section 6321

imposes a Federal tax lien in favor of the United States on all

property and rights to property of any person when a demand for

payment of an outstanding tax liability has been made and the

person fails to pay those taxes.

     Petitioner has offered no evidence indicating that
                                 - 9 -

respondent abused his discretion in sustaining the Federal tax

lien.   Petitioner has yet to pay his outstanding tax liability

for 1998.   While an installment agreement has been entered into

for petitioner’s outstanding tax liability, that agreement does

not preclude respondent from maintaining a lien while taxes are

still outstanding.    Secs. 6322 and 6323(j); cf. sec. 301.6323(j)-

1, Proced. & Admin. Regs. (Commissioner may withdraw a notice of

Federal tax lien under certain conditions).         On the basis of the

facts presented, we hold that respondent did not abuse his

discretion in upholding the Federal tax lien.

     We have considered all of petitioner’s contentions,

arguments, and requests, and to the extent that they are not

discussed herein, we conclude them to be moot, irrelevant, or

without merit.

     To reflect the foregoing,

                                              An appropriate order of

                                         dismissal and decision will be

                                         entered.




[Reporter’s Note: This report was amended by order dated August 3, 2005.]
