                        T.C. Memo. 2009-28



                      UNITED STATES TAX COURT



                BRADFORD M. DANIEL, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 4968-07L.              Filed February 9, 2009.



     Martin J. Nash and Michael B. Axman, for petitioner.

     Nancy L. Karsh, for respondent.



                        MEMORANDUM OPINION


     SWIFT, Judge:   This matter is before us on respondent’s

motion for remand to respondent’s Appeals Office and on

petitioner’s motion for partial summary judgment.

     Because petitioner does not object to respondent’s motion

for remand, respondent’s motion for remand to respondent’s
                              - 2 -

Appeals Office (on the issue as to whether petitioner’s offer-in-

compromise (OIC) should be accepted on the ground of doubt as to

collectibility) will be granted.   We are left, however, with the

question raised in petitioner’s motion for partial summary

judgment to which respondent objects (whether on remand to

respondent’s Appeals Office petitioner’s OIC also should be

considered on the basis of doubt as to liability).

     Unless otherwise noted, all section references are to the

Internal Revenue Code.


                           Background

     Petitioner resided in Florida at the time the petition was

filed.

     On petitioner’s 1998 individual Federal income tax return,

petitioner reported the sale of a flower business and a $266,085

Federal income tax liability relating thereto.   With the filing

of the return, however, petitioner paid only $6,000.   Respondent

assessed the $266,085 reported tax liability; and after no

additional payments were received from petitioner, respondent

filed a Federal tax lien against petitioner relating to the

outstanding $260,085 balance in petitioner’s 1998 Federal income

taxes.

     On December 17, 2004, respondent notified petitioner of the

Federal tax lien filing and of his right to request a collection
                               - 3 -

Appeals Office hearing under section 6320.    Petitioner, however,

anxious for relief from respondent’s lien filing, on February 22,

2005, requested a withdrawal of respondent’s tax lien filing

under respondent’s general Collection Appeals Program (CAP) and

section 6323(j), not under the collection due process (CDP)

provisions of section 6320.

     Petitioner proceeded with the CAP appeal; and upon denial by

respondent’s Office of Compliance Services of the requested

withdrawal of respondent’s lien filing, petitioner appealed the

decision to respondent’s Office of Technical Services (Technical

Services).   Technical Services sustained the denial of the

requested lien withdrawal, and petitioner appealed that decision

under CAP to respondent’s Appeals Office.    After review,

respondent’s Appeals Office handling the CAP appeal sustained the

denial of the requested lien withdrawal.

     On April 28, 2005, respondent also issued to petitioner a

notice of proposed levy action relating to petitioner’s $260,085

outstanding 1998 Federal income taxes.    Petitioner challenged

respondent’s proposed levy by filing with respondent’s Appeals

Office a CDP appeal under section 6330.

     Also on April 28, 2005, petitioner separately submitted to

respondent’s OIC office an OIC relating to his $260,085
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outstanding 1998 Federal income taxes based on doubt as to both

liability and collectibility.1

     Upon learning of petitioner’s pending CDP appeal and without

acting on petitioner’s OIC, respondent’s OIC office forwarded

petitioner’s OIC to respondent’s Appeals Office for consideration

in connection with petitioner’s CDP appeal.

     On November 7, 2006, petitioner’s section 6330 CDP hearing

with respondent’s Appeals Office was held.    At the hearing

respondent’s Appeals officer refused to consider the correctness

of petitioner’s underlying 1998 Federal income tax liability on

the ground that petitioner already had two prior opportunities to

challenge that underlying tax liability (first, in a section 6320

CDP hearing relating to the tax lien filing and second, in the

CAP proceeding.)2   Also, in the section 6330 CDP hearing,

respondent’s Appeals officer did not consider petitioner’s OIC.

Petitioner’s OIC remains outstanding.

     On January 30, 2007, respondent’s Appeals Office issued a

notice of determination sustaining respondent’s proposed levy.

     On March 2, 2007, petitioner filed this action.




     1
      Under petitioner’s OIC, petitioner offered to pay
respondent a total of $55,000--$30,000 within 90 days, and $500
monthly thereafter for 50 months.
     2
      Respondent now acknowledges that petitioner’s CAP appeal
under sec. 6323(j) did not constitute a prior opportunity to
litigate the underlying tax liability for purposes of sec.
6330(c)(2)(B).
                                - 5 -

     On July 2, 2007, respondent filed the instant motion for

remand, and petitioner filed the instant motion for partial

summary judgment.

     The above motions were calendared for hearing on

February 13, 2008, in Tampa, Florida.     At the hearing the parties

agreed to put the motions on hold until after petitioner provided

to respondent for audit reconsideration documentation that might

substantiate petitioner’s entitlement to claimed net operating

loss carrybacks that might significantly reduce or eliminate

petitioner’s outstanding 1998 Federal income tax liability.    This

audit reconsideration was to take place separate and apart from

the instant CDP collection case and with the understanding that

the instant CDP case would be held in abeyance pending the

review.

     Over the course of the next 8 months the parties negotiated

and sought to settle this case, each making settlement offers but

without success.    Since early fall of 2008, in part because of an

illness of petitioner’s lead counsel no further progress has been

made in this case, and the parties now ask this Court to act on

the pending motions.


                             Discussion

     As indicated, petitioner does not object to respondent’s

motion for remand of this case to respondent’s Appeals Office for

purposes of considering petitioner’s OIC on the ground of doubt
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as to collectibility.   Respondent’s motion for remand will be

granted.

     Petitioner, however, moves for partial summary judgment,

seeking an order that respondent’s Appeals Office on remand

consider petitioner’s OIC on the basis of doubt as to liability.

     Petitioner focuses on section 6330(c)(4) and emphasizes that

under that section a taxpayer is precluded from raising an issue

in a section 6330 proceeding only if the same issue was raised in

a prior CDP proceeding or in some other administrative or

judicial proceeding in which the taxpayer materially

participated.   Because he did not file an appeal under section

6320 of respondent’s December 17, 2004, notice of Federal tax

lien filing, petitioner obviously did not materially participate

in any such proceeding; and petitioner contends that he now

should be allowed to challenge his $266,085 1998 underlying

Federal income tax liability in the instant section 6330 CDP

hearing.

     Petitioner also asks that section 301.6330-1(e)(3), Q&A-E7,

Proced. & Admin. Regs., be invalidated in that it supports

respondent’s reading of section 6330(c)(2)(B) and (4).

     On brief, petitioner states--


     All levies are preceded by an assessment and a notice
     of lien. An interpretation which would require a
     section 6320 * * * [CDP Appeal] to be filed in order to
     raise the issue of the underlying tax liability would
     render section 6330(c)(2)(B) superfluous as it applies
     to section 6330 and conflict with section 6330(c)(4).
                               - 7 -

     Petitioner’s statement is erroneous on a number of points.

First, not all tax assessments are followed by tax lien filings,

not all levies are preceded by filed tax liens, and respondent

may issue a notice of proposed levy without filing a notice of

tax lien.   A statutory lien arises upon assessment and subjects a

taxpayer’s property to the Federal tax lien.    Sec. 6322.   This

occurs before a notice of Federal tax lien is filed or a notice

of proposed levy is ever issued.   Sec. 6321.   Because the lien is

already in place, a notice of intent to levy may be issued before

a notice of tax lien is filed and regardless of whether a notice

of tax lien is ever filed.

     Second, the two statutory provisions in question address

different types of issues.   Section 6330(c)(2)(B) addresses only

the issue as to the underlying tax liability and is triggered

whenever a taxpayer had a prior opportunity to challenge same,

whether the taxpayer did so or not.    Section 6330(c)(4) addresses

any other issue that is raised in a section 6320 or 6330

proceeding and is triggered only when the issue was considered

and decided in a prior administrative or judicial proceeding and

when the taxpayer materially participated in the prior

proceeding.

     Respondent’s reading of section 6330(c)(2)(B) does not

render superfluous section 6330(c)(4), and respondent’s reading

and application of the language of section 6330(c)(2)(B) does not

conflict with the language of section 6330(c)(4).
                              - 8 -

     Section 301.6330-1(e)(3), Q&A-E7, Proced. & Admin. Regs.,

reflects the same interpretation and application that we adopt of

the statutory provisions before us.3   The regulation provides a

reasonable interpretation of the statute and is valid.   See Inv.

Research Associates, Inc. v. Commissioner, 126 T.C. 183 (2006);

see also Lewis v. Commissioner, 128 T.C. 48 (2007); Bell v.

Commissioner, 126 T.C. 356 (2006).

     As respondent on brief explains with regard to section

6330(c)(2)(B)--


     Requiring taxpayers to challenge an underlying
     liability with the first notice filed also promotes
     early, efficient, and complete resolution of legitimate
     disputes between the IRS and taxpayers concerning the
     validity of the federal tax lien. Such disputes are
     best resolved at the earliest stages of the collection


     3
      Sec. 301.6330-1(e)(3), Q&A-E7, Proced. & Admin. Regs.,
states as follows:

          Q-E7. What issues may a taxpayer raise in a CDP
     hearing under section 6330 if the taxpayer previously
     received a notice under section 6320 with respect to
     the same tax and tax period and did not request a CDP
     hearing with respect to that notice?

          A-E7. The taxpayer may raise appropriate spousal
     defenses, challenges to the appropriateness of the
     proposed collection action, and offers of collection
     alternatives. The existence or amount of the tax
     liability for the tax for the tax period specified in
     the CDP Notice may be challenged only if the taxpayer
     did not already have an opportunity to dispute that tax
     liability. Where the taxpayer previously received a
     CDP Notice under section 6320 with respect to the same
     tax and tax period and did not request a CDP hearing
     with respect to that earlier CDP Notice, the taxpayer
     already had an opportunity to dispute the existence or
     amount of the underlying tax liability.
                               - 9 -

     process, because the agency and taxpayer records upon
     which resolution of disputes turns will be most
     contemporaneous and complete at the time of the first
     issuance of a notice.


     Because petitioner could have filed an appeal of

respondent’s December 17, 2004, notice of tax lien filing and

therein challenged his underlying 1998 Federal income tax

liability, respondent’s Appeals Office properly refused to allow

petitioner to challenge his 1998 Federal income tax liability in

the subsequent CDP appeal relating to respondent’s notice of

proposed levy.   See Baltic v. Commissioner, 129 T.C. 178 (2007).


                                       Appropriate orders will be

                               issued.
