                         T.C. Memo. 2003-197



                       UNITED STATES TAX COURT



        ALBERT HORTON AND RAMONA OSBORNE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13145-02L.                Filed July 9, 2003.



     Albert Horton and Ramona Osborne, pro sese.

     Rollin G. Thorley, for respondent.



                         MEMORANDUM OPINION


     CHIECHI, Judge:    This case is before the Court on respon-

dent’s motion for summary judgment and to impose a penalty under
                                - 2 -

section 66731 (respondent’s motion).2    We shall grant respon-

dent’s motion.

                            Background

     The record establishes and/or the parties do not dispute the

following.

     Petitioners resided in Las Vegas, Nevada, at the time they

filed the petition in this case.

     On or about April 13, 1998, petitioners jointly filed a

Federal income tax (tax) return for their taxable year 1997 (1997

joint return).    In their 1997 joint return, petitioners reported

total income of $81,895, total tax of $11,677, and tax due of

$3,478.   When petitioners filed their 1997 joint return, they did

not pay the tax due shown in that return.

     On or about April 13, 1999, petitioners jointly filed a tax

return for their taxable year 1998 (1998 joint return).    In their

1998 joint return, petitioners reported total income of $78,585,

total tax of $10,426, and tax due of $2,651.    When petitioners

filed their 1998 joint return, they did not pay the tax due shown

in that return.

     On May 18, 1998, respondent assessed petitioners’ tax, as

     1
      All section references are to the Internal Revenue Code in
effect at all relevant times. All Rule references are to the Tax
Court Rules of Practice and Procedure.
     2
      Although the Court ordered petitioners to file a response
to respondent’s motion, petitioners failed to do so.
                                 - 3 -

well as an addition to tax and interest as provided by law, for

their taxable year 1997.3    (We shall refer to any such unpaid

assessed amounts, as well as interest as provided by law accrued

after May 18, 1998, as petitioners’ unpaid liability for 1997.)

     On May 31, 1999, respondent assessed petitioners’ tax, as

well as additions to tax and interest as provided by law, for

their taxable year 1998.     (We shall refer to those assessed

amounts, as well as interest as provided by law accrued after May

31, 1999, as petitioners’ unpaid liability for 1998.)

     On May 18, 1998, and May 31, 1999, respectively, respondent

issued to petitioners notices of balance due with respect to

petitioners’ unpaid liability for 1997 and petitioners’ unpaid

liability for 1998.

     On or about July 17, 2000, petitioners jointly filed an

amended tax return for each of their taxable years 1997 (amended

1997 joint return) and 1998 (amended 1998 joint return).

     In their amended 1997 joint return, petitioners reported

total income of $0 and total tax of $0 and claimed a refund of

$8,199 of tax withheld.     In Part II, Explanation of Changes to

Income, Deductions, and Credits, of their amended 1997 joint

return, petitioners’ explanation for amending that return (peti-

tioners’ explanation for their amended 1997 joint return) con-



     3
      On Sept. 15, 1999, respondent applied a payment of $150 to
petitioners’ account with respect to their taxable year 1997.
                               - 4 -

tained statements, contentions, and arguments that the Court

finds to be frivolous and/or groundless.4

     In their amended 1998 joint return, petitioners reported

total income of $0 and total tax of $0 and claimed a refund of

$7,852 of tax withheld.   In Part II, Explanation of Changes to

Income, Deductions, and Credits, of their amended 1998 joint

return, petitioners’ explanation for amending that return

(petitioners’ explanation for their amended 1998 joint return)

contained statements, contentions, and arguments that the Court

finds to be frivolous and/or groundless.5

     The Internal Revenue Service (IRS) determined that petition-

ers’ amended 1997 joint return and amended 1998 joint return were

frivolous and denied the refund claimed in each such amended

return.

     On June 26, 2001, respondent issued to petitioners a notice

of Federal tax lien filing and your right to a hearing (notice of



     4
      Petitioners’ explanation for amending their 1997 joint
return contained statements, contentions, and arguments that are
similar to the types of statements, contentions, and arguments
contained in the documents that certain other taxpayers with
cases in the Court attached to their tax returns. See, e.g.,
Copeland v. Commissioner, T.C. Memo. 2003-46; Smith v. Commiss-
ioner, T.C. Memo. 2003-45.
     5
      Petitioners’ explanation for amending their 1998 joint
return contained statements, contentions, and arguments that are
similar to the types of statements, contentions, and arguments
contained in the documents that certain other taxpayers with
cases in the Court attached to their tax returns. See, e.g.,
Copeland v. Commissioner, supra; Smith v. Commissioner, supra.
                               - 5 -

tax lien) with respect to petitioners’ unpaid liabilities for

1997 and 1998.   On or about July 9, 2001, in response to the

notice of tax lien, petitioners filed Form 12153, Request for a

Collection Due Process Hearing (Form 12153), and requested a

hearing with respondent’s Appeals Office (Appeals Office).

Petitioners did not notify the Appeals Office in that form that

they intended to make an audio recording of their Appeals Office

hearing.   Petitioners attached a document to their Form 12153

(petitioners’ attachment to Form 12153) that contained state-

ments, contentions, arguments, and requests that the Court finds

to be frivolous and/or groundless.6

     On or about May 3, 2002, a settlement officer with the

Appeals Office (settlement officer) contacted petitioners by

telephone and informed them that, pursuant to a directive issued

on May 2, 2002, audio and stenographic recordings of Appeals

Office hearings would no longer be permitted.7


     6
      Petitioners’ attachment to Form 12153 contained statements,
contentions, arguments, and requests that are similar to the
statements, contentions, arguments, and requests contained in the
attachments to Forms 12153 filed with the Internal Revenue
Service by certain other taxpayers with cases in the Court. See,
e.g., Copeland v. Commissioner, supra; Smith v. Commissioner,
supra.
     7
      From 1989 until May 2, 2002, IRS Appeals had permitted
audio recordings of hearings before it. See Notice 89-51, 1989-1
C.B. 691; Litigation Guideline Memorandum GL-17. On May 2, 2002,
IRS Appeals, in an unpublished internal memorandum to all IRS
Appeals Area Directors, ended the audio recording of conferences
or hearings before it that it had previously allowed, and the
                                                   (continued...)
                               - 6 -

     On May 6, 2002, the settlement officer held an Appeals

Office hearing with petitioners with respect to the notice of tax

lien relating to petitioners’ taxable years 1997 and 1998.

Petitioners secretly made an audio recording of part of their

Appeals Office hearing.   When the settlement officer discovered

that petitioners were secretly recording their Appeals Office

hearing, she asked them to stop recording the hearing and indi-

cated that if they did not, the hearing would be terminated.

Thereafter, the hearing was terminated.   Prior to the Appeals

Office hearing, the settlement officer gave petitioners Form

4340, Certificate of Assessments, Payments, and Other Specified

Matters, with respect to each of their taxable years 1997 and

1998.

     On July 16, 2002, the Appeals Office issued a notice of

determination concerning collection action(s) under section 6320

and/or 6330 (notice of determination) to petitioner Albert Horton

and a separate notice of determination to petitioner Ramona

Osborne.   (We shall refer collectively to those two notices as

petitioners’ notices of determination).   An attachment to each

such notice of determination stated in pertinent part:




     7
      (...continued)
settlement officer assigned to conduct a hearing regarding the
notice of tax lien with respect to petitioners’ unpaid
liabilities for 1997 and 1998 promptly notified petitioners about
that change.
                         - 7 -

Verification of Legal and Procedural Requirements

The Secretary has provided sufficient verification that
the requirements of any applicable law or administra-
tive procedure have been met.

Certified transcripts, Forms 4340, were requested and
reviewed in addition to the tax return files for 1997
and 1998. * * *

   *       *       *       *       *       *         *

The notice and demand letters were issued by regular
mail on May 18, 1998 for 1997 and on May 31, 1999 for
1998 to the taxpayer’s last known address as required
under IRC §6303. Letter 3172, meeting the notice
condition imposed by IRC §6320, was dated June 26,
2001 and sent to the taxpayer’s last known address by
certified mail. The taxpayers responded timely with a
Request for a Collection Due Process Hearing, Form
12153, received on July 13, 2001.

   *       *       *       *       *       *         *

Issues Raised by the Taxpayer

   *       *       *       *       *       *         *

Forms 2866, Certificate of Official Record, and   Forms
4340, Certificate of Assessments, Payments, and   Other
Specified Matters, were provided by mail to the   taxpay-
ers in my hearing letter dated April 9, 2002. *   * *

On May 6, 2002 when the taxpayers appeared for the
hearing, Mr. Horton, brought into the hearing a hand
held tape recorder. He was advised that the audio
recording would not be allowed per our prior telephone
conversation * * *. Mr. Horton, however, did record
our initial conversation and when this was discovered
he was asked to stop recording or the hearing would be
terminated. The taxpayers chose to terminate the
hearing and Mrs. Horton stated that they wished for
this brief meeting to be their due process hearing.
The hearing was concluded. Based on this, no issues
were raised by the taxpayers other than the lack of
opportunity to audio record the hearing and no collec-
tion alternatives were discussed at this meeting.
                              - 8 -

     The taxpayers have made only one payment on these taxes
     since they were assessed. That payment was for $150.00
     dated September 15, 1999. The taxpayers have made no
     further attempt to resolve this liability. When con-
     tacted by the Automated Collection Site (ACS) they
     refused to cooperate or discuss collection alterna-
     tives. This prompted the filing of the NFTL by ACS who
     was assigned this case.

     The records of the Service indicate that the taxpayers
     continue this pattern of filing zero income, zero tax
     due returns. * * *

     The taxpayers raised no other non-frivolous issues.

     Balancing the Need for Efficient Collection with Tax-
     payer Concerns

     The requirements of all applicable laws and administra-
     tive procedures have been met. The courts have previ-
     ously addressed the taxpayers’ arguments, and Appeals
     does not have the authority for reconsideration of the
     matters.

        *       *       *       *       *       *       *

     The taxpayers received their required notices and the
     filing of the NFTL was done in accordance with legal
     and procedural guidelines and is not subject to with-
     drawal or release. The taxpayers have made no attempt
     to resolve these liabilities since they were assessed.
     The filing of the NFTL was appropriate to protect the
     Government’s interest. The taxpayers chose to conclude
     the due process hearing prior to any discussion of the
     facts of the case or of collection alternatives.

     Lacking the taxpayer’s cooperation and based on their
     history of non-compliance, the proposed collection
     action balances the need for efficient collection of
     taxes with the taxpayer’s legitimate concern that any
     collection action be no more intrusive than necessary.
     [Reproduced literally.]

     On August 14, 2002, petitioners filed a petition with the

Court for review of petitioners’ notices of determination with

respect to petitioners’ unpaid liabilities for 1997 and 1998.
                               - 9 -

Although not altogether clear, petitioners may be alleging in

their petition that the Appeals Office’s refusal to allow them to

continue making an audio recording of their Appeals Office

hearing held on May 6, 2002, was improper under section

7521(a)(1).   Except for that possible argument under section

7521(a)(1), the petition contains statements, contentions,

arguments, and requests that the Court finds to be frivolous

and/or groundless.8

                            Discussion

     The Court may grant summary judgment where there is no

genuine issue of material fact and a decision may be rendered as

a matter of law.   Rule 121(b); Sundstrand Corp. v. Commissioner,

98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994).     We

conclude that there are no genuine issues of material fact

regarding the questions raised in respondent’s motion.

     A taxpayer may raise challenges to the existence or the

amount of the taxpayer’s underlying tax liability if the taxpayer

did not receive a notice of deficiency or did not otherwise have

an opportunity to dispute the tax liability.   Sec. 6330(c)(2)(B).

Where the validity of the underlying tax liability is properly


     8
      The frivolous and/or groundless statements, contentions,
arguments, and requests in petitioners’ petition are very similar
to the frivolous and/or groundless statements, contentions,
arguments, and requests in petitions filed by certain other
taxpayers with cases in the Court. See, e.g., Copeland v.
Commissioner, T.C. Memo. 2003-46; Smith v. Commissioner, T.C.
Memo. 2003-45.
                               - 10 -

placed at issue, the Court will review the matter on a de novo

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

Commissioner, 114 T.C. 176, 181-182 (2000).   Although petitioners

did not receive a notice of deficiency with respect to their

taxable years 1997 and 1998, the Court finds the contentions and

arguments which petitioners advanced in their petition and which

challenge the existence or the amount of petitioners’ unpaid

liabilities for 1997 and 1998 to be frivolous and/or groundless.

     We now turn to the remaining issues that petitioners raised

at their Appeals Office hearing and in the petition with respect

to petitioners’ notices of determination, which we shall

review for abuse of discretion.   Sego v. Commissioner, supra;

Goza v. Commissioner, supra.   As was true of petitioners’ attach-

ment to Form 12153, petitioners’ explanation for their amended

1997 joint return, and petitioners’ explanation for their amended

1998 joint return, petitioners’ petition, except for a possible

argument under section 7521(a)(1), contains statements, conten-

tions, arguments, and requests that the Court finds to be frivo-

lous and/or groundless.

     We turn to petitioners’ possible argument under section

7521(a)(1) that the refusal by the Appeals Office to permit

petitioners to continue to make an audio recording of the Appeals
                                 - 11 -

Office hearing held on May 6, 2002, was improper.9     Throughout

the period commencing with petitioners’ filing their 1997 joint

return with respondent and ending with their filing the petition

with the Court, petitioners have made statements and requests and

advanced contentions and arguments that the Court has found to be

frivolous and/or groundless.     Consequently, even though we

recently held in Keene v. Commissioner, 121 T.C. __ (2003), that

section 7521(a)(1) requires the Appeals Office to allow a tax-

payer to make an audio recording of an Appeals Office hearing

held pursuant to section 6330(b), we conclude that (1) it is not

necessary and will not be productive to remand this case to the

Appeals Office for another hearing under section 6320(b) in order

to allow petitioners to make such an audio recording, see

Lunsford v. Commissioner, 117 T.C. 183, 189 (2001), and (2) it is

not necessary or appropriate to reject respondent’s determination

to proceed with the collection action as determined in petition-

ers’ notices of determination with respect to petitioners’ unpaid

liabilities for 1997 and 1998, see id.10

     Based upon our examination of the entire record before us,

we find that respondent did not abuse respondent’s discretion in



     9
      We note that the record does not establish that petitioners
complied with the requirement of sec. 7521(a)(1) that they
present respondent with their request to make an audio recording
of their Appeals Office hearing in advance of that hearing.
     10
          See Kemper v. Commissioner, T.C. Memo. 2003-195.
                              - 12 -

determining to proceed with the collection action as determined

in petitioners’ notices of determination with respect to peti-

tioners’ unpaid liabilities for 1997 and 1998.

     In respondent’s motion, respondent requests that the Court

require petitioners to pay a penalty to the United States pursu-

ant to section 6673(a)(1).   Section 6673(a)(1) authorizes the

Court to require a taxpayer to pay to the United States a penalty

in an amount not to exceed $25,000 whenever it appears to the

Court, inter alia, that a proceeding before it was instituted or

maintained primarily for delay, sec. 6673(a)(1)(A), or that the

taxpayer’s position in such a proceeding is frivolous or ground-

less, sec. 6673(a)(1)(B).

     In Pierson v. Commissioner, 115 T.C. 576, 581 (2000), we

issued an unequivocal warning to taxpayers concerning the imposi-

tion of a penalty under section 6673(a) on those taxpayers who

abuse the protections afforded by sections 6320 and 6330 by

instituting or maintaining actions under those sections primarily

for delay or by taking frivolous or groundless positions in such

actions.

     In the instant case, petitioners advance, we believe primar-

ily for delay, frivolous and/or groundless contentions, argu-

ments, and requests, thereby causing the Court to waste its

limited resources.   We shall impose a penalty on petitioners

pursuant to section 6673(a)(1) in the amount of $4,400.
                        - 13 -

On the record before us, we shall grant respondent’s motion.

To reflect the foregoing,

                                 An order granting respondent’s

                            motion and decision will be entered

                            for respondent.
