                       T.C. Memo. 2002-159



                     UNITED STATES TAX COURT



         LOUIS S. AND LAURA L. SCHNITZLER, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13244-01L.              Filed June 24, 2002.



     Louis S. and Laura L. Schnitzler, pro sese.

     Laurence K. Williams and Thomas R. Mackinson, for

respondent.



                        MEMORANDUM OPINION


     PANUTHOS, Chief Special Trial Judge:    This matter is before

the Court on respondent’s motion for summary judgment, as

supplemented, filed pursuant to Rule 121.1   Respondent contends


     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
                                                   (continued...)
                                - 2 -

that there is no dispute as to any material fact with respect to

this levy action, and that respondent’s determination to proceed

with collection of petitioners’ outstanding tax liabilities for

1996 and 1997 should be sustained as a matter of law.

     Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials.    Fla. Peach Corp. v.

Commissioner, 90 T.C. 678, 681 (1988).    Summary judgment may be

granted with respect to all or any part of the legal issues in

controversy “if the pleadings, answers to interrogatories,

depositions, admissions, and any other acceptable materials,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that a decision may be

rendered as a matter of law.”   Rule 121(a) and (b); Sundstrand

Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965

(7th Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988);

Naftel v. Commissioner, 85 T.C. 527, 529 (1985).    The moving

party bears the burden of proving that there is no genuine issue

of material fact, and factual inferences will be read in a manner

most favorable to the party opposing summary judgment.    Dahlstrom

v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v.

Commissioner, 79 T.C. 340, 344 (1982).

     As explained in detail below, there is no genuine issue as

to any material fact and a decision may be rendered as a matter


     1
      (...continued)
are to the Tax Court Rules of Practice and Procedure.
                               - 3 -

of law.   Accordingly, we shall grant respondent’s motion for

summary judgment, as supplemented.

Background

     On May 9, 1997, and June 18, 1998, petitioners submitted to

respondent joint Forms 1040, U.S. Individual Income Tax Return,

for 1996 and 1997, respectively.   Petitioners entered zeros on

every line of the income sections of the Forms 1040, specifically

including line 7 for wages and line 22 for total income.

     On August 6, 1999, respondent issued a joint notice of

deficiency to petitioners determining a deficiency of $27,771 in

their Federal income tax for 1996 and an accuracy-related penalty

under section 6662(a) of $5,551.40.    The deficiency was based on

respondent’s determination that petitioners failed to report

nonemployee compensation, interest income, and a distribution

from a retirement account as reported to respondent by third-

party payors on Forms 1099.

     On August 6, 1999, respondent issued a joint notice of

deficiency to petitioners determining a deficiency of $30,147 in

their Federal income tax for 1997 and an accuracy-related penalty

under section 6662(a) of $6,028.60.    The deficiency was based on

respondent’s determination that petitioners failed to report

nonemployee compensation, interest income, and a distribution

from a retirement account as reported to respondent by third-

party payors on Forms 1099.
                                - 4 -

     By letter dated October 5, 1999, petitioners wrote to the

Director of respondent’s Service Center in Ogden, Utah,

acknowledging that they received the notice of deficiency for

1996, but challenging the Director’s authority to issue such

notices.    On October 20, 1999, petitioners wrote a similar letter

to the Director with regard to the notice of deficiency for 1997.

     Petitioners knew that they had the right to contest

respondent’s deficiency determinations by filing a petition for

redetermination with this Court.   However, petitioners chose not

to do so.

     On January 3, 2000, respondent entered assessments against

petitioners for the deficiency and accuracy-related penalty

determined in the notice of deficiency for 1997 described above.

Respondent also entered an assessment against petitioners for

statutory interest.   On January 3, 2000, respondent issued to

petitioners a notice of balance due informing petitioners that

they owed tax for 1997 and requesting that they pay that amount.

Petitioners failed to pay the amount owing.

     On February 7, 2000, respondent entered assessments against

petitioners for the deficiency and accuracy-related penalty

determined in the notice of deficiency for 1996 described above.

Respondent also entered an assessment against petitioners for

statutory interest.    On February 7, 2000, respondent issued to

petitioners a notice of balance due informing petitioners that
                               - 5 -

they owed tax for 1996 and requesting that they pay that amount.

Petitioners failed to pay the amount owing.

     On October 1, 2000, respondent mailed to petitioners a Final

Notice-–Notice of Intent to Levy and Notice of Your Right to a

Hearing with regard to their tax liabilities for 1996 and 1997.

On October 10, 2000, petitioners filed with respondent a Form

12153, Request for a Collection Due Process Hearing.

Petitioners’ request included a challenge to the validity of the

assessments and assertions that respondent failed to serve

petitioners with valid notices and demand for payment or valid

notices of deficiency.

     By letter dated May 17, 2001, Appeals Officer Joe Gurnaby

provided petitioners with transcripts of their accounts for 1996

and 1997 reflecting the assessments described above.   On August

31, 2001, Appeals Officer Gurnaby conducted an Appeals Office

hearing in this matter that petitioner Laura Schnitzler attended.

     On October 4, 2001, respondent issued petitioners a Notice

of Determination Concerning Collection Action(s) Under Section

6320 and/or 6330.   The notice stated that the Appeals Office

determined that it was appropriate to proceed with the collection

of petitioners’ outstanding tax liabilities for 1996 and 1997.

On November 2, 2001, petitioners filed with the Court a joint

petition for lien or levy action seeking review of respondent’s
                                 - 6 -

notice of determination.2

     As indicated, respondent filed a motion for summary judgment

asserting that there is no dispute as to a material fact and that

respondent is entitled to judgment as a matter of law.   In

particular, respondent contends that, because petitioners

acknowledge that they received the notices of deficiency for 1996

and 1997, they cannot challenge the existence or amounts of their

underlying tax liabilities for those years in this proceeding.

Respondent further asserts that the Appeals officer’s review of

transcripts of account for 1996 and 1997 satisfied the

verification requirement imposed under section 6330(c)(1) and

demonstrates that petitioners were issued a notice and demand for

payment.

     Petitioners filed an objection to respondent’s motion

repeating the various challenges first raised in their request

for an administrative hearing.    Thereafter, pursuant to notice,

respondent’s motion was called for hearing at the Court’s motions

session in Washington, D.C.

     Following the hearing, the Court directed respondent to file

a supplement to his motion for summary judgment providing the

Court with Forms 4340, Certificate of Assessments, Payments, and

Other Specified Matters, with regard to petitioners’ accounts for

1996 and 1997.   Respondent complied with the Court’s order.


     2
        At the time that the petition was filed, petitioners
resided in Willits, California.
                               - 7 -

Discussion

     Section 6331(a) provides that if any person liable to pay

any tax neglects or refuses to pay such tax within 10 days after

notice and demand for payment, the Secretary is authorized to

collect such tax by levy on the person’s property.   Section

6331(d) provides that at least 30 days before enforcing

collection by levy on the person’s property, the Secretary is

obliged to provide the person with a final notice of intent to

levy, including notice of the administrative appeals available to

the person.

     Section 6330 generally provides that the Commissioner cannot

proceed with collection by levy until the person has been given

notice and the opportunity for an administrative review of the

matter (in the form of an Appeals Office hearing) and, if

dissatisfied, with judicial review of the administrative

determination.   See Davis v. Commissioner, 115 T.C. 35, 37

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

     Section 6330(c) prescribes the matters that a person may

raise at an Appeals Office hearing.    In sum, section 6330(c)

provides that a person may raise collection issues such as

spousal defenses, the appropriateness of the Commissioner’s

intended collection action, and possible alternative means of

collection.   Section 6330(c)(2)(B) provides that the existence

and amount of the underlying tax liability can be contested at an
                                 - 8 -

Appeals Office hearing only if the person did not receive a

notice of deficiency for the taxes in question or did not

otherwise have an earlier opportunity to dispute the tax

liability.     See Sego v. Commissioner, 114 T.C. 604, 609 (2000);

Goza v. Commissioner, supra.     Section 6330(d) provides for

judicial review of the administrative determination in the Tax

Court or a Federal District Court, as may be appropriate.

     Petitioners challenge the assessments entered against them

on the ground that the notices of deficiency for 1996 and 1997

are invalid.    However, the record shows that petitioners received

the notices of deficiency and disregarded the opportunity to file

a petition for redetermination with the Court.      It follows that

section 6330(c)(2)(B) bars petitioners from challenging the

existence or amount of their underlying tax liabilities for 1996

and 1997 in this collection review proceeding.

     Even if petitioners were permitted to challenge the validity

of the notices of deficiency, petitioners’ argument that the

notices are invalid because respondent’s Service Center director

is not properly authorized to issue notices of deficiency is

frivolous and groundless.    See Nestor v. Commissioner, 118 T.C.

162 (2002); Smeton v. Commissioner, T.C. Memo. 2002-140; Coleman

v. Commissioner, T.C. Memo. 2002-132.      As the Court of Appeals

for the Fifth Circuit has remarked:      “We perceive no need to

refute these arguments with somber reasoning and copious citation
                                 - 9 -

of precedent; to do so might suggest that these arguments have

some colorable merit.”     Crain v. Commissioner, 737 F.2d 1417,

1417 (5th Cir. 1984).

     We likewise reject petitioners’ argument that the Appeals

officer failed to obtain verification from the Secretary that the

requirements of all applicable laws and administrative procedures

were met as required by section 6330(c)(1).    The record shows

that the Appeals officer obtained and reviewed transcripts of

account with regard to petitioners’ taxable years 1996 and 1997.

     Federal tax assessments are formally recorded on a record of

assessment.   Sec. 6203.   “The summary record, through supporting

records, shall provide identification of the taxpayer, the

character of the liability assessed, the taxable period, if

applicable, and the amount of the assessment.”    Sec. 301.6203-1,

Proced. & Admin. Regs.

     Section 6330(c)(1) does not require the Commissioner to rely

on a particular document to satisfy the verification requirement

imposed therein.   Weishan v. Commissioner, T.C. Memo. 2002-88;

Lindsey v. Commissioner, T.C. Memo. 2002-87; Tolotti v.

Commissioner, T.C. Memo. 2002-86; Duffield v. Commissioner, T.C.

Memo. 2002-53; Kuglin v. Commissioner, T.C. Memo. 2002-51.    In

this regard, we observe that the transcripts of account on which

the Appeals officer relied contained all the information

prescribed in section 301.6203-1, Proced. & Admin. Regs.    See
                             - 10 -

Weishan v. Commissioner, supra; Lindsey v. Commissioner, supra;

Tolotti v.Commissioner, supra; Duffield v. Commissioner, supra;

Kuglin v. Commissioner, supra.

     Petitioners also contend that they never received a notice

and demand for payment for 1996 or 1997.   The requirement that

the Secretary issue a notice and demand for payment is set forth

in section 6303(a), which provides in pertinent part:

           SEC. 6303(a). General Rule.-–Where it is not
     otherwise provided by this title, the Secretary shall,
     as soon as practicable, and within 60 days, after the
     making of an assessment of a tax pursuant to section
     6203, give notice to each person liable for the unpaid
     tax, stating the amount and demanding payment thereof.
     * * *

The Forms 4340 that respondent provided to the Court show that

notices of balance due were issued to petitioners on the same

dates that respondent entered assessments against petitioners for

the taxes and accuracy-related penalties set forth in the notices

of deficiency for 1996 and 1997.   We hold that a notice of

balance due constitutes a notice and demand for payment within

the meaning of section 6303(a).    See, e.g., Hughes v. United

States, 953 F.2d 531, 536 (9th Cir. 1992); Weishan v.

Commissioner, supra.

     Petitioners have not alleged any irregularity in the

assessment procedure that would raise a question about the

validity of the assessments or the information contained in the

transcripts of account or Forms 4340.   See Nestor v.
                              - 11 -

Commissioner, supra at 167; Mann v. Commissioner, T.C. Memo.

2002-48.   Accordingly, we hold that the Appeals officer satisfied

the verification requirement of section 6330(c)(1).    Cf. Nicklaus

v. Commissioner, 117 T.C. 117, 120-121 (2001).

     Petitioners have failed to raise a spousal defense, make a

valid challenge to the appropriateness of respondent’s intended

collection action, or offer alternative means of collection.

These issues are now deemed conceded.   Rule 331(b)(4).   Under the

circumstances, we conclude that respondent is entitled to

judgment as a matter of law sustaining the notice of

determination dated October 4, 2001.

     As a final matter, we mention section 6673(a)(1), which

authorizes the Tax Court to require a taxpayer to pay to the

United States a penalty not in excess of $25,000 whenever it

appears that proceedings have been instituted or maintained by

the taxpayer primarily for delay or that the taxpayer’s position

in such proceeding is frivolous or groundless.   The Court has

indicated its willingness to impose such penalties in collection

review cases.   Pierson v. Commissioner, 115 T.C. 576 (2000).

Although we will not impose a penalty on petitioners pursuant to

section 6673(a)(1) in the present case, we admonish petitioners

that the Court will consider imposing such a penalty should they
                             - 12 -

return to the Court in the future and advance frivolous or

groundless arguments.

     To reflect the foregoing,

                                      An order and decision will

                                 be entered granting respondent’s

                                 motion for summary judgment,

                                 as supplemented.
