                              T.C. Memo. 2013-188



                         UNITED STATES TAX COURT



                   JOANNE L. OSBAND, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 1366-11L.                         Filed August 19, 2013.



      Joanne L. Osband, pro se.

      Lisa M. Oshiro, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      VASQUEZ, Judge: Pursuant to sections 6320(c) and 6330(d)(1),1 petitioner

seeks review of respondent’s determination to proceed with collection. The issues


      1
       Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect at all relevant times, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                                         -2-

[*2] for decision are: (1) whether petitioner is liable for a frivolous return penalty

of $5,000 under section 6702(a) for 2005, 2006, and 2007 and (2) whether

respondent abused his discretion in sustaining a proposed levy and a notice of

Federal tax lien for 2005, 2006, and 2007.

                               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 she filed the petition, petitioner resided in the State of Washington.

I.    Petitioner’s Tax Returns

      Petitioner filed Federal income tax returns for 2005, 2006, and 2007 on

Forms 1040, U.S. Individual Income Tax Return. On her 2005 return she reported

wages of $548, taxable interest of $190, a business loss of $13,239, zero tax due,

and $15 of Federal income tax withholding. She claimed a refund for the $15 of

withholding. Gregory J. Schmitt, a certified public accountant (C.P.A.) based in

Chehalis, Washington, prepared her return.

      Petitioner subsequently moved from Chehalis to Olympia, Washington.

There she met Teresa Marty, a C.P.A. and enrolled agent based in Placerville,

California, through a friend of a friend. Ms. Marty prepared petitioner’s Federal

income tax returns for 2006 and 2007. On her 2006 return petitioner reported
                                         -3-

[*3] taxable interest of $227, a business loss of $4,462, a capital loss of $3,000,2 a

taxable pension and annuity distribution of $14,235, total tax due of $1,424, a

credit for Federal telephone excise tax paid of $30, and zero Federal income tax

withholding. On her 2007 return she reported taxable interest of $115, a business

loss of $513, a capital loss of $3,000, zero tax due, and zero Federal income tax

withholding.

      On September 13, 2008, petitioner filed amended Federal income tax

returns for 2005, 2006, and 2007 on Forms 1040X, Amended U.S. Individual

Income Tax Return (amended tax return), reporting fictitious interest and

withholding of $20,800, $16,500, and $21,100, respectively. Underneath the

preprinted heading “Explanation of Changes” she wrote that the changes were due

to “additional infromation [sic] not previously available”. She claimed refunds of

$20,800, $14,616, and $20,372 for 2005, 2006, and 2007, respectively. Ms. Marty

had prepared the amended tax returns.

      On October 6, 2008, the IRS mailed petitioner a letter requesting “Forms W-

2 or 1099 for the change in withholding” that she claimed. On November 3, 2008,

the IRS erroneously issued her a refund of $24,828.64, consisting of the $20,800

      2
        Petitioner reported a capital loss of $13,500 on Schedule D, Capital Gains
and Losses, but she was limited to recognizing $3,000 of the loss pursuant to sec.
1211(b).
                                        -4-

[*4] she claimed on the amended tax return for 2005 and interest of $4,028.64. On

November 6, 2008, she mailed the IRS falsified Forms 1099-OID, Original Issue

Discount (OID forms), purporting to be from State Farm Bank, American Express,

Chase, Citibank, and other financial institutions. Ms. Marty had also prepared the

OID forms.

      On January 16, 2009, the IRS mailed petitioner a letter informing her that

the IRS had determined that her amended tax return for 2006 was frivolous

(frivolous submission letter). The frivolous submission letter warned her that

section 6702 imposes a $5,000 penalty for the filing of a frivolous tax return or

purported tax return and provided her with an opportunity to correct her

submission within 30 days. Underneath the heading “What You Need To Do”, the

frivolous submission letter stated:

             Send us corrected return(s) for the taxable period(s) within 30
      days of the date of this letter. If you send us corrected return(s), we
      will disregard the previous document(s) filed and not assess the
      frivolous tax submissions penalty to each correct return filed.

             Please attach this letter to your corrected return(s) and mail to
      the address shown at the top of this letter. We have enclosed a copy
      of this letter for your records and an envelope for your convenience.
                                       -5-

[*5] On February 3, 2009, and April 3, 2009, the IRS mailed petitioner frivolous

submission letters relating to her amended tax returns for 2007 and 2005,

respectively.

      Petitioner did not take advantage of the opportunity that the IRS provided

her in the frivolous submission letters. On February 10, 2009, she mailed the IRS

a letter in which she stated:

            I am sending copies of the letters you sent me: January 16,
      2009 and February 3, 2009 regarding 1040X for tax years 2006 &
      2007. I also sent copies to my tax accountant, Teresa Marty.

            I do not want to be charged a penalty, but I want you to know
      that my tax accountant will be taking care of answering your
      questions. I expect this will fall into the window of the 30 days in
      which to respond. That is why I am writing.

            Would you please make a note that I have responded. I have
      not done anything wrong and hope that we get this resolved soon. I
      would like to know exactly what makes the tax considered frivolous.

On April 13, 2009, she mailed the IRS a very similar letter regarding her amended

tax return for 2005.

II.   Frivolous Communications

      On April 6, 2009, the IRS made a “quick assessment” against petitioner of

$20,800 (the amount of the erroneous refund) in tax and $4,593.43 of interest with
                                        -6-

[*6] respect to 2005. On June 8, 2009, the IRS mailed her a collection notice to

remind her of her balance due of $25,777.35 with respect to 2005.

      Thereafter, petitioner mailed the IRS a series of patently frivolous

communications. On July 13, 2009, she mailed the IRS a “Registered Bonded

Promissory Note” for $10 million. On July 31, 2009, she mailed the IRS a letter

stating:

            I am in receipt of your notice of penalty and although you have
      charged me with frivolous tax returns, you have yet to identify what is
      incorrect in the filing of my taxes.

             You have provided me with IRS documentation that discusses
      frivolous tax return, however, you have not sent certified proof of
      your laws to prove your claim as it pertains to my tax return.

            Additionally, I have reviewed this information with my tax
      accountant and have been advised that you need to prove your claim.
      Please identify the information that is incorrect.

            Again, I am enclosing our copies of the original letter dated,
      7/13/2009. Until you can you prove your claim, you are instructed to
      remove this penalty as soon as possible. I request a response of this
      documentation within 30 days.

On August 11, 2009, she mailed the IRS a second “Registered Bonded Promissory

Note” for $10 million. On or about December 12 and 22, 2009, she mailed the

IRS documents entitled “Administrative Affidavit of Specific Negative Averment,

Opportunity to Cure and Counterclaim”. On or about January 27, 2010, she
                                       -7-

[*7] mailed the IRS a document entitled “First Notice of Fault and Demand for

Payment”, in which she demanded $24 million in damages plus interest, penalties,

and fees. On or about February 3 and 11, 2010, she mailed the IRS documents

entitled “Second Notice of Fault and Demand for Payment” and “Final Notice of

Fault and Demand for Payment”, respectively.

III.   Collection Due Process

       On December 7, 2009, the IRS assessed the frivolous return penalties for

2006 and 2007. On December 21, 2009, the IRS assessed the frivolous return

penalty for 2005. On April 5, 2010, the IRS mailed petitioner Letter 1058, Final

Notice of Intent to Levy and Notice of Your Right to a Hearing (notice of levy),

with respect to the frivolous return penalties for 2005, 2006, and 2007.3 On April

16, 2010, the IRS received petitioner’s timely filed Form 12153, Request for a

Collection Due Process or Equivalent Hearing (CDP hearing request), with respect

to the notice of levy. In the CDP hearing request she checked the box marked




       3
         On August 17, 2009, the IRS mailed petitioner a notice of levy with
respect to her 2005 Federal income tax liability (resulting from the erroneous
refund). Petitioner requested and received a collection due process (CDP) hearing
in which she challenged the 2005 liability. On January 19, 2010, respondent
mailed petitioner a notice of determination sustaining the proposed levy.
Petitioner did not file a petition with the Court for review of that determination.
                                         -8-

[*8] “other” and wrote “this debt is in the process of being setoff--paid in full.

Please confirm and verify payment.” She did not request any collection

alternatives.

      On May 25, 2010, the IRS mailed petitioner Letter 3172, Notice of Federal

Tax Lien Filing and Your Right to a Hearing Under IRC 6320 (NFTL), with

respect to her Federal income tax liability for 2005 and the frivolous return

penalties for 2005, 2006, and 2007. On June 11, 2010, the IRS received

petitioner’s timely filed CDP hearing request with respect to the NFTL. In the

CDP hearing request she neither requested a collection alternative nor provided

any explanation as to why she disagreed with the NFTL.

      On August 11, 2010, petitioner mailed the IRS a letter stating that she was

amending her Federal income tax returns for 2005, 2006, and 2007 to remove the

fictitious interest and withholding. She stated in the letter:

             It is demanded that you release the Notice of levy/Civil Penalty
      that are attached. The release of the Civil Penalty is based on the IRS
      not responding to the validly [sic] of the 1099-OID as defined in
      Publication 1212 and the lack of tax administration as requested by
      me and never answered under Publication 1.

She enclosed with the letter a Form 1040X for 2005 and a Form 9465, Installment

Agreement Request, proposing an installment agreement with a payment of $25
                                        -9-

[*9] per month. The letter was signed by petitioner and her new C.P.A., Willie

Hughes.

      On October 27, 2010, Settlement Officer Maria N. Aguirre (SO Aguirre) of

the IRS Office of Appeals (Appeals) mailed petitioner a letter scheduling a

telephone CDP hearing for November 18, 2010. In the letter SO Aguirre

explained to petitioner that her account transcripts indicated that she had an

outstanding tax liability of $46,302. SO Aguirre further explained that if

petitioner wanted Appeals to consider a collection alternative, she needed to file

all missing tax returns and provide a completed Form 433-A, Collection

Information Statement for Wage Earners and Self-Employed Individuals. SO

Aguirre requested that petitioner call her for more information. On November 17,

2010, Mr. Hughes faxed SO Aguirre the first page of petitioner’s letter dated

August 11, 2010, along with another Form 9465 proposing an installment

agreement with a payment of $25 per month and Forms 1040X for 2005, 2006,

and 2007 removing the fictitious interest and withholding.

      On November 18, 2010, SO Aguirre held the telephone CDP hearing with

petitioner and Mr. Hughes. At the CDP hearing petitioner stated that the frivolous

return penalties were assessed in error and requested that they be abated pursuant

to section 6343, lack of tax administration, IRS Publication 1, Your Rights as a
                                        - 10 -

[*10] Taxpayer, and IRS Publication 1212, Guide to Original Issue Discount

(OID) Instruments. She also requested an installment agreement with a payment

of $25 per month. SO Aguirre incorrectly determined that Appeals did not have

jurisdiction to abate the frivolous return penalties. SO Aguirre further determined

that petitioner (1) had not filed her 2009 Federal income tax return, (2) had failed

to provide a completed Form 433-A, and (3) could afford to pay more than $25 per

month. On December 27, 2010, Appeals mailed petitioner a Notice of

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

sustaining the proposed levy and the NFTL. Petitioner filed a timely petition with

this Court.

      On February 27, 2012, the Court granted respondent’s motion to remand the

case to Appeals to consider petitioner’s challenge to the frivolous return penalties.

On April 26, 2012, Appeals Settlement Officer Kimberly Lewis (SO Lewis) held a

supplemental CDP hearing with petitioner and Mr. Hughes. Petitioner raised two

issues at the supplemental CDP hearing: (1) the frivolous return penalties were

assessed before the date that she filed the amended tax returns; (2) within 30 days

of the dates of the frivolous submission letters, she had mailed the IRS letters

inquiring why the amended tax returns were considered frivolous. SO Lewis

determined that petitioner had filed the amended tax returns in 2008 and that the
                                         - 11 -

[*11] frivolous return penalties were not assessed until 2009. SO Lewis further

determined that petitioner had failed to submit corrected returns to the IRS within

30 days as requested in the frivolous submission letters. SO Lewis examined the

amended tax returns and concluded that the imposition of the frivolous return

penalties was warranted. On May 9, 2012, Appeals mailed petitioner a

Supplemental Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330 sustaining the proposed levy and the NFTL.

                                       OPINION

I.    Statutory Framework

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

rights to property of a taxpayer liable for tax when a demand for payment of the

tax has been made and the taxpayer fails to pay the tax. Section 6320(a)

provides that the Secretary shall furnish the taxpayer with an NFTL within five

business days after the notice of lien is filed.

      Section 6331(a) authorizes the Secretary to levy upon property and property

rights of a taxpayer liable for tax if the taxpayer fails to pay the tax within 10 days

after notice and demand for payment is made. See sec. 6671(a); see also Blaga v.

Commissioner, T.C. Memo. 2010-170, slip op. at 11. Section 6330(a) provides

that no levy may be made on any property or right to property of any person unless
                                        - 12 -

[*12] the Secretary has notified such person in writing of the right to a hearing

before the levy is made.

      If a taxpayer requests a hearing in response to an NFTL or a notice of levy

pursuant to section 6320 or 6330, a hearing shall be held before an impartial

officer or employee of Appeals. Secs. 6320(b)(1), (3), 6330(b)(1), (3). The

hearing under section 6320 generally shall be conducted in a manner consistent

with the procedures set forth in section 6330(c), (d), and (e). Sec. 6320(c). At the

hearing the taxpayer may raise any relevant issue, including appropriate spousal

defenses, challenges to the appropriateness of the collection action, and collection

alternatives. Sec. 6330(c)(2)(A). A taxpayer is precluded from contesting the

existence or amount of the underlying tax liability, unless the taxpayer did not

receive a notice of deficiency for the liability in question or did not otherwise have

an earlier opportunity to dispute the liability. Sec. 6330(c)(2)(B); see also Sego v.

Commissioner, 114 T.C. 604, 609 (2000). The phrase “underlying tax liability”

includes a tax deficiency, additions to tax, and statutory interest, see Katz v.

Commissioner, 115 T.C. 329, 339 (2000), and frivolous return penalties under

section 6702, see Callahan v. Commissioner, 130 T.C. 44, 49 (2008).

      Following a hearing Appeals must determine whether to sustain the filing of

the lien and whether proceeding with the proposed levy is appropriate. In making
                                         - 13 -

[*13] that determination Appeals is required to take into consideration: (1)

verification presented by the Secretary during the hearing process that the

requirements of applicable law and administrative procedure have been met, (2)

relevant issues raised by the taxpayer, and (3) whether the proposed lien or levy

action appropriately balances the need for efficient collection of taxes with the

taxpayer’s concerns regarding the intrusiveness of the proposed collection action.

Sec. 6330(c)(3).

      Section 6330(d)(1) grants this Court jurisdiction to review Appeals’

determination in connection with a section 6330 hearing. Where the underlying

tax liability is properly at issue, we review the taxpayer’s liability de novo. See

Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). We review all other

determinations for abuse of discretion. Lunsford v. Commissioner, 117 T.C. 183,

185 (2001); Sego v. Commissioner, 114 T.C. at 610; Goza v. Commissioner, 114

T.C. at 182. Appeals abuses its discretion if it acts “arbitrarily, capriciously, or

without sound basis in fact or law.” Woodral v. Commissioner, 112 T.C. 19, 23

(1999). The Court of Appeals for the Ninth Circuit, to which an appeal of this

case would lie absent a stipulation to the contrary, see sec. 7482(b)(1)(A), (2), has

stated that “[a]buse of discretion occurs when a decision is based ‘on an erroneous

view of the law or a clearly erroneous assessment of the facts’”, Fargo v.
                                        - 14 -

[*14] Commissioner, 447 F.3d 706, 709 (9th Cir. 2006) (quoting United States v.

Morales, 108 F.3d 1031, 1035 (9th Cir. 1997)), aff’g T.C. Memo. 2004-13.

II.   Section 6702(a) Penalty

      A.     Background

      As part of a comprehensive plan to combat the proliferation of abusive tax

shelters, in 1982 Congress enacted three new assessable penalties, which were

codified in sections 6700-6702; and section 6703, which sets forth rules applicable

to those penalties. See S. Rept. No. 97-494 (Vol. 1), at 266-267, 270-271,

275-279 (1982), 1982 U.S.C.C.A.N. 781, 1014-1026. Section 6700 provides for

the imposition of a penalty on any person who promotes an abusive tax shelter.

Section 6701 provides for the imposition of a penalty on any person who aids and

abets another person in understating his or her tax liability. Section 6702 provides

for the imposition of a penalty on any person who files a document purporting to

be a tax return that contains a frivolous position or was intended to delay or

impede the administration of Federal income tax laws.

      Section 6702, the penalty statute at issue here, remained largely unchanged

until 2006. See Tax Relief and Health Care Act of 2006, Pub. L. No. 109-432,

div. A, sec. 407(a), 120 Stat. at 2960. In 2006 Congress amended section 6702,

increasing the penalty from $500 to $5,000 and broadening its reach to include
                                       - 15 -

[*15] other types of frivolous tax submissions. Id.; see also Alexander v.

Commissioner, T.C. Memo. 2012-75, slip op. at 6-7. The amendment was

effective for submissions made and issues raised after the date the Secretary first

prescribed a list of frivolous positions pursuant to section 6702(c). The Secretary

first prescribed a list of frivolous positions on March 16, 2007, in Notice 2007-30,

2007-1 C.B. 883. Petitioner filed her amended tax returns on September 13, 2008.

Therefore, section 6702, as amended, applies in this case. See also Callahan v.

Commissioner, 130 T.C. at 51 n.7.

      B.     Application of Section 6702

      Section 6702, as amended, provides as follows:

      SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

            (a) Civil Penalty for Frivolous Tax Returns.--A person shall
      pay a penalty of $5,000 if--

                  (1) such person files what purports to be a return of a tax
             imposed by this title but which--

                         (A) does not contain information on which the
                   substantial correctness of the self-assessment may be
                   judged, or

                          (B) contains information that on its face indicates
                   that the self-assessment is substantially incorrect, and

                   (2) the conduct referred to in paragraph (1)--
                                        - 16 -

[*16]                      (A) is based on a position which the Secretary has
                    identified as frivolous under subsection (c), or

                         (B) reflects a desire to delay or impede the
                    administration of Federal tax laws.

              (b) Civil Penalty for Specified Frivolous Submissions.--

                    *       *       *       *       *      *     *

               (c) Listing of Frivolous Positions.--The Secretary shall
        prescribe (and periodically revise) a list of positions which the
        Secretary has identified as being frivolous for purposes of this
        subsection. The Secretary shall not include in such list any position
        that the Secretary determines meets the requirement of section
        6662(d)(2)(B)(ii)(II).

              (d) Reduction of Penalty.--The Secretary may reduce the
        amount of any penalty imposed under this section if the Secretary
        determines that such reduction would promote compliance with and
        administration of the Federal tax laws.

              (e) Penalties in Addition to Other Penalties.--The penalties
        imposed by this section shall be in addition to any other penalty
        provided by law.

The Commissioner bears the burden of proving that a taxpayer is liable for

the section 6702 penalty. Sec. 6703(a). The deficiency procedures codified in

subchapter B of chapter 63, i.e., sections 6211-6216, do not apply to the

assessment or collection of the section 6702 penalty. Sec. 6703(b).
                                        - 17 -

[*17] C.     Petitioner’s Liability for the Section 6702(a) Penalty

      Respondent asserts that petitioner is liable for the frivolous return penalty

under section 6702(a) for 2005, 2006, and 2007. To satisfy his burden of proof

with respect to the section 6702(a) penalty, respondent must establish three

elements by a preponderance of the evidence: (1) petitioner filed a document

purporting to be a tax return, (2) the purported return lacked information on which

the substantial correctness of the self-assessment may be judged or contained

information that, on its face, indicates that the self-assessment was substantially

incorrect, and (3) petitioner’s conduct in filing the purported return was based on a

position that the Secretary has identified as frivolous or reflected a desire to delay

or impede the administration of Federal tax laws. See secs. 6702(a), 6703(a);

O’Brien v. Commissioner, T.C. Memo. 2012-326, at *13. We address each of the

elements in turn.

             1.     First Element: Purported Tax Return

      Petitioner filed amended tax returns for 2005, 2006, and 2007 asserting

claims for refund. Section 6702 applies to all tax returns, including amended

returns. Colton v. Gibbs, 902 F.2d 1462, 1464 (9th Cir. 1990). Thus, respondent

has established the first element.
                                         - 18 -

[*18]         2.     Second Element: Substantially Incorrect Self-Assessment

        Petitioner’s amended tax returns for 2005, 2006, and 2007 reported

fictitious interest and withholding that, on the face of the returns, indicated that

her self-assessment was substantially incorrect. Petitioner reported fictitious

taxable interest of $20,800, $16,500, and $21,100 and fictitious Federal income

tax withholding in exactly the same amounts on her amended tax returns for 2005,

2006, and 2007, respectively. She did not attach any documentation to

substantiate the fictitious interest or withholding. She provided only a cursory and

implausible explanation that the changes were due to “additional infromation [sic]

not previously available”. When the IRS mailed her a letter requesting

verification of the changes, she submitted falsified OID forms purporting to be

from legitimate financial institutions. Petitioner neither received the fictitious

interest that she reported nor was subject to the fictitious withholding. Thus,

respondent has established the second element.

              3.     Third Element: Desire To Delay or Impede Tax Administration

        As to the third element, respondent argues that petitioner’s conduct reflected

a desire to delay or impede the administration of Federal tax laws.4 Petitioner

        4
        In Notice 2010-33, 2010-17 I.R.B. 609, 611 the IRS (acting for the
Secretary) identified as frivolous positions that
                                                                    (continued...)
                                        - 19 -

[*19] avers that she had no such intention and argues that she acted on the advice

of a professional (Ms. Marty) in good faith. We agree with respondent.

      Petitioner testified at trial that she claimed refunds on her amended tax

returns in order to pay off her credit card debt. She further testified that Ms. Marty

came up with the idea of using the OID forms and that she did not question it. She

admitted at trial that Ms. Marty’s advice was “very confusing” and that she “just

went along with what * * * [Ms. Marty] said.” She did not receive any materials

from Ms. Marty, nor did she ask for a second opinion.


      4
       (...continued)
      (21) A taxpayer may use a Form 1099-OID, Original Issue
      Discount, (or another Form 1099 Series information return) as a
      financial or other instrument to obtain or redeem (under a theory of
      “redemption” or “commercial redemption”) a monetary payment out
      of the United States Treasury or for a refund of tax, such as by
      drawing on a “straw man” or similar financial account maintained by
      the government in the taxpayer’s name * * *

      (22) A taxpayer may claim on an income tax return or purported
      return an amount of withheld income tax or other tax that is obviously
      false because it exceeds the taxpayer’s income as reported on the
      return or is disproportionately high in comparison with the income
      reported on the return or information on supporting documents filed
      with the return (such as Form 1099 Series, Form W-2, or Form 2439,
      Notice to Shareholder of Undistributed Long-Term Capital Gains).

However, Notice 2010-33, supra, is effective only for submissions made after
April 7, 2010. Thus, it was not effective at the time petitioner filed her amended
tax returns.
                                       - 20 -

[*20] At the time she filed her amended tax returns, petitioner knew or had reason

to know that Ms. Marty’s advice was too good to be true and that she was not

entitled to the refunds that she claimed. She reported taxable interest of $190,

$227, and $115, and Federal income tax withholding of $15, zero, and zero, on her

Federal income tax returns for 2005, 2006, and 2007, respectively. Yet on her

amended tax returns she reported over $16,000 of fictitious interest and

withholding for each year. She reported adjusted gross income (AGI) of $7,000

on her Federal income tax return for 2006 and negative AGI on her Federal

income tax returns for 2005 and 2007. Yet on her amended tax returns she

claimed refunds in excess of $14,000 for each year.

      Petitioner did not express a genuine intention to correct her amended tax

returns in her letters to the IRS dated February 10 and April 13, 2009. In those

letters petitioner wrote that she had “not done anything wrong” and that Ms. Marty

would “be taking care of answering your questions”. Subsequently, petitioner

mailed the IRS a series of patently frivolous communications, including two

“Registered Bonded Promissory Note[s]” each for $10 million, two

“Administrative Affidavit[s] of Specific Negative Averment, Opportunity to Cure

and Counterclaim”, and three “Notice[s] of Fault and Demand for Payment”. See

supra pp. 6-7.
                                        - 21 -

[*21] We find that petitioner’s conduct in filing her amended tax returns reflects a

desire to delay or impede the administration of the Federal tax laws. Respondent

has thus established the third element, and accordingly, he has met his burden in

proving that petitioner is liable for the frivolous return penalty under section

6702(a) for 2005, 2006, and 2007.5

III.   Supplemental Notice of Determination

       A taxpayer is entitled to a single hearing under sections 6320 and 6330 with

respect to the taxable period to which the unpaid liability relates. Secs.

6320(b)(2), 6330(b)(2); Freije v. Commissioner, 131 T.C. 1, 5 (2008), aff’d, 325

Fed. Appx. 448 (7th Cir. 2009); Kelby v. Commissioner, 130 T.C. 79, 86 (2008).

When this Court remands a case to Appeals, the hearing on remand is a

supplement to the taxpayer’s original hearing. Kelby v. Commissioner, 130 T.C.

at 86; see also Olsen v. United States, 414 F.3d 144, 155 (1st Cir. 2005) (“In the

event the administrative record is found inadequate for judicial review, ‘the proper


       5
         On brief it appears that petitioner abandoned her argument that the
frivolous return penalties were assessed before the date that she filed her amended
tax returns. See Mendes v. Commissioner, 121 T.C. 308, 312-313 (2003) (noting
that arguments not advanced on brief may be considered abandoned). In any
event, that argument is erroneous in that she filed her amended tax returns on
September 13, 2008, and the IRS assessed the frivolous return penalties for 2006
and 2007 on December 7, 2009, and the frivolous return penalty for 2005 on
December 21, 2009.
                                        - 22 -

[*22] course, except in rare circumstances, is to remand to the agency for

additional investigation or explanation.’” (quoting Fla. Power & Light Co. v.

Lorion, 470 U.S. 729, 744 (1985))). The hearing on remand provides the parties

with the opportunity to complete the initial hearing while preserving the

taxpayer’s right to receive judicial review of the ultimate administrative

determination. Wadleigh v. Commissioner, 134 T.C. 280, 299 (2010); Kelby v.

Commissioner, 130 T.C. at 86. A corollary to the fact that the taxpayer may

receive only one hearing is that Appeals makes a single determination. Kelby v.

Commissioner, 130 T.C. at 86. When this Court remands a case to Appeals and it

comes back to us after a supplemental determination is issued, we review the

supplemental determination. Id.

      Petitioner has not advanced any argument nor introduced any evidence that

would allow us to conclude that Appeals’ decision to sustain the NFTL and the

proposed levy was based on an erroneous view of the law or a clearly erroneous

assessment of the facts or that Appeals acted arbitrarily, capriciously, or without

sound basis in fact or law. At the supplemental CDP hearing petitioner did not

raise any challenges to her income tax liability for 2005, nor would she have been
                                        - 23 -

[*23] entitled to because she had disputed that liability at a prior CDP hearing.6

See sec. 301.6320-1(e)(3), A-E7, Proced. & Admin. Regs.; see also Bell v.

Commissioner, 126 T.C. 356, 358-359 (2006) (finding that a prior opportunity to

dispute the underlying tax liability includes a prior hearing pursuant to section

6330).

      It was not an abuse of discretion to deny petitioner an installment agreement

or another collection alternative because she did not provide a completed Form

433-A and the accompanying financial documentation. See McLaine v.

Commissioner, 138 T.C. 228, 242-243 (2012); Orum v. Commissioner, 123 T.C.

1, 13 (2004), aff’d, 412 F.3d 819 (7th Cir. 2005). Appeals determined that the

requirements of applicable law and administrative procedure were met and

concluded that sustaining the NFTL and the proposed levy action appropriately

balanced the need for efficient collection of taxes with petitioner’s concerns

regarding the intrusiveness of the collection action.

      Accordingly, we hold that respondent did not abuse his discretion in

sustaining the NFTL and the proposed levy. In reaching our holdings, we have




      6
        Moreover, petitioner conceded at trial that she was not entitled to the
refund she received for 2005 and that she owes the resulting tax for 2005.
                                       - 24 -

[*24] considered all arguments made, and to the extent not mentioned, we

consider them irrelevant, moot, or without merit.

      To reflect the foregoing,


                                                      Decision will be entered for

                                                respondent.
