                          T.C. Memo. 2003-115



                        UNITED STATES TAX COURT



     CARTER B. TATUM, JR. AND BARBARA B. TATUM, Petitioners v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 1126-01L.                Filed April 22, 2003.


      David L. Miller, for petitioners.

      Nina P. Ching, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


      JACOBS, Judge:    This case arises from petitioners’ request

for our review (pursuant to section 63301) of respondent’s decision

to   proceed   with   collection   by   levy   with   respect   to   their

outstanding 1990 and 1991 tax liabilities.             The issue to be



      1
          All section references are to the Internal Revenue Code
in effect for the years in issue.
                               - 2 -

resolved is whether such decision by respondent constitutes an

abuse of discretion.

                          FINDINGS OF FACT

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

stipulation of facts and the exhibits submitted therewith are

incorporated herein by this reference.

     At the time the petition was filed in this case, petitioners

resided in Atlanta, Georgia.

     By letter dated March 4, 1994, the Internal Revenue Service

(IRS) notified petitioners that their 1990 and 1991 joint Federal

income tax returns had been selected for examination.   On November

7, 1994, the IRS sent petitioners a copy of the examination report,

which contained adjustments increasing petitioners’ tax obligation

for 1990 and 1991.     By letter dated November 22, 1994, the IRS

informed petitioners that they had 15 days to request that their

case be transferred to an IRS Appeals Officer.     By letter dated

December 2, 1994, instead of requesting that their case be so

transferred, petitioners requested a meeting with an examiner and

stated that they did not agree with the examination report.     On

January 9, 1995, petitioners executed Form 872, Consent to Extend

the Time to Assess Tax, extending the period for assessing taxes

for both 1990 and 1991 to April 15, 1996.

     On April 12, 1995, respondent, by certified mail, sent a

statutory notice of deficiency to petitioners at their last known
                                     - 3 -

address,    80     North   Star   Trail,     Atlanta,   Georgia    30331-7862

(hereinafter referred to as the 80 North Star Trail address).              That

notice detailed respondent’s determinations regarding income tax

deficiencies, additions to tax, and penalties for 1990 and 1991, as

follows:

                                  Addition to Tax             Penalty
     Year     Deficiency          Sec. 6651(a)(1)           Sec. 6662(a)

     1990        $19,680               $5,455                $3,936
     1991         23,616                 ---                  4,723

     The    U.S.    Postal   Service   (USPS)    returned    the   notice   of

deficiency to the IRS on April 27, 1995.         The envelope in which the

notice of deficiency was mailed indicates that the USPS made but

one delivery attempt before returning the envelope and its contents

to the IRS as “unclaimed”.

     Petitioners did not claim the certified letter containing the

notice of deficiency from the USPS because they did not receive

from the USPS notice of the existence of such letter.               Had they

received a notice of certified mail, they would have gone to the

post office to pick up the letter.

     Petitioners did not contest respondent’s determinations as set

forth in the notice of deficiency by filing a petition with this

Court.     Had petitioners received the notice of deficiency, they

would have petitioned this Court for a redetermination of the tax

liabilities asserted in the notice of deficiency.
                                          - 4 -

       On September 11, 1995, respondent assessed the amounts shown

in the notice of deficiency, together with statutory interest, and

thereafter began collection procedures against petitioners.

       On November 25, 1999, respondent issued to petitioners a Final

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

Hearing, Letter 1058, pursuant to sections 6330(a) and 6331(d)(2),

pertaining to petitioners’ 1990, 1991, and 1995-98 Federal income

tax liabilities.2 Respondent mailed this notice to petitioners’ 80

North Star Trail address.

       On December 22, 1999, respondent received a timely filed Form

12153, Request for a Collection Due Process Hearing, submitted on

behalf of petitioners.             Petitioners’ return address on the Form

12153 was         the 80 North Star Trail address.          Petitioners, in the

Form       12153,     provided      the   following      explanation       of   their

disagreement with the notice of levy:               “The assessment of the tax

was    in    error;    want   the    opportunity    to    dispute    the    assessed

liability and then, to the extent owed, discuss payment options.”

       On October 17, 2000, Appeals Officer C.S. Sheppard spoke by

telephone with petitioners’ representative, David R. Miller, with

respect      to     petitioners’    request   for   a    hearing.3     During     the


       2
          In their petition, as well as at trial, petitioners
contested only their 1990 and 1991 income tax liabilities;
therefore, the years 1995-98 are not before us.
       3
          At trial, Mr. Miller did not contest that this telephone
conference served as the required statutory hearing. However, Mr.
Miller asserts that the “hearing did not go far enough” in that
                                                    (continued...)
                                      - 5 -

telephone conference, Appeals Officer Sheppard advised Mr. Miller

that petitioners could not challenge the underlying tax liability

for the 1990 and 1991 tax years since petitioners had received a

statutory notice of deficiency dated April 12, 1995, covering those

years.      In   addition,   during    the    October   17,    2000,    telephone

conference, Appeals Officer Sheppard informed Mr. Miller that

petitioners had agreed to the 1996 adjustment, that the 1995 and

1997 deficiencies were based on the returns as filed, and that

those returns could be amended by the petitioners.                  Mr. Miller did

not propose any collection alternatives.

     On January 11, 2001, respondent issued to petitioners a

“Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330” (notice of determination), notifying

petitioners of the determination to proceed with collection of the

1990,    1991,    1995,   1996,   and    1997    income       tax    liabilities.

Petitioners filed a petition with this Court under section 6330(d)

disputing respondent’s notice of determination.

                                  OPINION

        In general, section 6330 prohibits the Commissioner from

proceeding with collection by levy until the taxpayer has been

given notice and an opportunity for an administrative review of the

matter (in the form of a hearing before the IRS’s Office of



     3
      (...continued)
Appeals Officer Sheppard refused to consider the underlying tax
liability for the 1990 and 1991 tax years.
                                 - 6 -

Appeals). If the Commissioner issues a determination letter to the

taxpayer following an administrative hearing, section 6330(d)(1)

allows the taxpayer to file a petition for judicial review of the

administrative determination.    Davis v. Commissioner, 115 T.C. 35,

37 (2000); Goza v. Commissioner, 114 T.C. 176, 179 (2000).       We have

jurisdiction over this matter because petitioners filed a timely

petition for review of respondent’s determination to proceed with

collection by levy. Sec. 6330(d)(1); Lunsford v. Commissioner, 117

T.C. 159 (2001); Sarrell v. Commissioner, 117 T.C. 122 (2001); Sego

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

114 T.C. 492, 498 (2000).

     A taxpayer may raise the issue of the underlying tax liability

if he/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).     For purposes of

section 6330(c)(2)(B), receipt of a statutory notice of deficiency

means receipt in time to petition this Court for redetermination of

the deficiency asserted in such notice.       Sec. 301.6330-1(e)(3),

Q&A-E2, Proced. & Admin. Regs.    It is therefore clear that section

6330(c)(2)(B)   contemplates    actual   receipt   of   the   notice   of

deficiency by the taxpayer.4


     4
          By contrast, for purposes of assessing a deficiency in
tax, respondent is authorized to send a notice of deficiency to the
taxpayer. For that purpose, mailing a notice of deficiency to the
taxpayer at the taxpayer’s last known address is sufficient
regardless of receipt or nonreceipt. Sec. 6212(b); Pietanza v.
                                                     (continued...)
                              - 7 -

     Here, the envelope with its contents, i.e., the notice of

deficiency for 1990 and 1991, was returned unclaimed to respondent.

Thus, there is no dispute that petitioners did not actually receive

the notice of deficiency.

     In the context of a section 6330 proceeding, we have held that

taxpayers cannot defeat actual receipt by deliberately refusing

delivery of a notice of deficiency.   Sego v. Commissioner, supra;

accord Ashley v. Commissioner, T.C. Memo. 2002-286; Carey v.

Commissioner, T.C. Memo. 2002-209; Hochschild v. Commissioner, T.C.

Memo. 2002-195; Baxter v. Commissioner, T.C. Memo. 2001-300.    In

this case, respondent mailed, by certified mail, a notice of

deficiency to petitioners at their last known address, the 80 North

Star Trail address.     Petitioners did not actually receive the

notice because it was returned to the IRS     after one attempted

delivery by the USPS.

     In Sego v. Commissioner, supra, we held that the taxpayer was

precluded from challenging her underlying tax liability under

section 6330 even though she did not actually receive a notice of

deficiency.   We did so on the basis of Erhard v. Commissioner, 87

F.3d 273 (9th Cir. 1996), affg. T.C. Memo. 1994-344, and Patmon &

Young Profl. Corp. v. Commissioner, 55 F.3d 216, 218 (6th Cir.

1995), affg. T.C. Memo. 1993-143, wherein we held that the conduct


     4
      (...continued)
Commissioner, 92 T.C. 729, 735-736 (1989), affd. without published
opinion 935 F.2d 1282 (3d Cir. 1991); Shelton v. Commissioner, 63
T.C. 193 (1974).
                                     - 8 -

of the taxpayers “constituted deliberate refusal of delivery and

repudiation    of    their   opportunity      to   contest     the    notices   of

deficiency in this Court”.          Sego v. Commissioner, supra at 611;

accord Baxter v. Commissioner, T.C. Memo. 2001-300.

     Relying    on    Sego   v.    Commissioner,     supra,     and    Baxter   v.

Commissioner, supra, respondent herein contends that petitioners’

failure to claim the certified letter cannot support any claim they

may have that they did not receive the notice.                 Those cases are

distinguishable from the case now before us.             In those cases, it

was demonstrated that the USPS made multiple attempts to deliver

the notices of deficiency and the taxpayers intentionally refused

delivery.     See also Ashley v. Commissioner, T.C. Memo. 2002-286;

Carey   v.    Commissioner,       T.C.   Memo.     2002-209;    Hochschild      v.

Commissioner, T.C. Memo. 2002-195.           By contrast, in this case, the

USPS made only one attempt at delivery before returning the notice

as unclaimed.        On the basis of our observation of petitioners

during their testimony, we are satisfied that petitioners did not

deliberately refuse delivery of the notice.

     Absent clear evidence to the contrary, employees of the USPS

are presumed to properly discharge their official duties.                 United

States v. Chem. Found., Inc., 272 U.S. 1, 14-15 (1926) (“The

presumption of regularity supports the official acts of public

officers and, in the absence of clear evidence to the contrary,

courts presume that they have properly discharged their official
                                     - 9 -

duties.”). At trial, both petitioners credibly testified that they

did not receive a notice of attempted delivery from the USPS and

that they did not know that the USPS was attempting to deliver a

certified letter to them.

      An individual’s claim that he/she did not receive notice of

attempted delivery of a certified letter may lack credibility when

the USPS makes more than one attempt to deliver the certified

letter and leaves separate notices of each attempt at the address

on the envelope.       Under those circumstances, it may be unlikely

that the individual did not receive at least one of the notices;

instead, it may be apparent that the individual chose to ignore the

notices.     In such event, the individual’s conduct constitutes

deliberate refusal of delivery and repudiation of the opportunity

to contest the notices of deficiency in this Court.

      In the case herein, petitioners failed to claim the notice of

deficiency because they did not receive the USPS’s notice of

attempted delivery of a certified letter. Petitioners did not

deliberately avoid delivery of the certified letter.              They did not

receive the notice of deficiency, and the avoidance exception to

actual receipt is not applicable in this case.

      To   conclude,   we    find   that,    under    section   6330(c)(2)(B),

petitioners should have been allowed to challenge their underlying

tax liabilities for 1990 and 1991 at the hearing.               In cases where

the   taxpayer   did   not    receive   a    notice    of   deficiency   for   a
                               - 10 -

particular year and did not have an opportunity to challenge the

underlying tax liability, we have remanded the matter to the

Commissioner’s Office of Appeals for a hearing pursuant to which

the taxpayer has an opportunity to dispute his/her Federal income

tax liability for that year.     See, e.g., Rivera v. Commissioner,

T.C. Memo. 2003-35; Nestor v. Commissioner, T.C. Memo. 2002-251.

We shall similarly do so in this case.5

     To reflect the foregoing,



                                          An appropriate order will

                                     be issued.




     5
          To date, petitioners’ litigation position in this case
indicates that they will use the hearing to raise bona fide issues
relating to their underlying tax liability for 1990 and 1991. If,
however, they use the hearing only for purposes of delay or to
raise frivolous issues, we will consider an appropriate dispositive
motion made by respondent and the imposition of a penalty of up to
$25,000 under sec. 6673. See Nestor v. Commissioner, T.C. Memo.
2002-251.
