                        T.C. Memo. 2011-162



                      UNITED STATES TAX COURT



                 TREE-TECH, INC., Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11781-09L.            Filed July 11, 2011.



     Julie Moon (an officer) and William P. Moon III (specially

recognized), for petitioner.

     Matthew S. Reddington, for respondent.



                        MEMORANDUM OPINION


     WELLS, Judge:   This case is before the Court on respondent’s

motion for summary judgment pursuant to Rule 121.1   Respondent


     1
      Unless otherwise indicated, section references are to the
Internal Revenue Code of 1986, as amended, and Rule references
are to the Tax Court Rules of Practice and Procedure.
                                -2-

issued to petitioner a notice of determination concerning

collection action.   We must decide:   (1) Whether petitioner may

challenge its underlying employment tax liability despite having

signed a closing agreement; (2) whether petitioner may raise its

claim for section 530 relief2 before this Court; and (3) whether

respondent’s determination to proceed with collection was an

abuse of discretion.

                            Background

     The facts set forth below are based upon examination of the

pleadings, moving papers, responses, and attachments filed in the

instant case.

     Petitioner’s principal place of business is in Hurt,

Virginia.   Petitioner’s sole officer and director is Julie Moon

(Mrs. Moon), but for the most part the business is run by Mrs.

Moon’s husband, William Moon (Mr. Moon), who also serves as its

attorney-in-fact pursuant to a power of attorney.

     On February 1, 2007, respondent sent a letter notifying

petitioner that respondent was conducting an employment tax

examination for petitioner’s 2004, 2005, and 2006 tax years.

Initially, respondent’s examination focused on petitioner’s

failure to report officer’s compensation as wages, but after his

first meeting with Mr. and Mrs. Moon, respondent’s examiner,


     2
      Sec. 530 relief refers to the “safe harbor” relief
available under the Revenue Act of 1978, Pub. L. 95-600, sec.
530, 92 Stat. 2885, as amended.
                                -3-

William Cookenour (Mr. Cookenour), expanded his examination to

include petitioner’s classification of its workers.

     Mr. Cookenour first met with Mr. and Mrs. Moon on February

16, 2007, regarding the examination of petitioner’s returns for

its 2004, 2005, and 2006 tax years.    At that meeting Mr.

Cookenour discussed only the officer compensation issue and did

not mention worker classification.    After the meeting Mr.

Cookenour apparently did further research on worker

classification and determined that there was a reclassification

issue.   Petitioner had classified its workers as independent

contractors, but Mr. Cookenour determined that they should have

been classified as employees.

     During the following months Mr. Cookenour had several more

conversations with Mr. Moon during which they discussed whether

petitioner was entitled to section 530 relief.    Mr. Moon

contended that petitioner was entitled to such relief, but after

some research Mr. Cookenour determined that it was not.      On July

6, 2007, after making his determination regarding section 530

relief, Mr. Cookenour again met with petitioner’s representatives

and offered to discuss settlement under the Classification

Settlement Program.

     On October 10, 2007, Mr. Cookenour met with Mr. and Mrs.

Moon to explain the terms of respondent’s offer under the

Classification Settlement Program.    Petitioner contends that at
                                 -4-

the meeting Mr. Cookenour presented Mr. and Mrs. Moon with two

different calculations of petitioner’s liabilities and told them

that if they did not accept the offer to settle for the lower

amount, the Internal Revenue Service (IRS) would assess the

higher amount.    Petitioner contends that Mr. Cookenour told Mr.

and Mrs. Moon that they could appeal the assessment but that they

would not win on appeal.   Mrs. Moon accepted the settlement offer

at that meeting by signing a closing agreement titled “Closing

Agreement on Final Determination Covering Specific Matters

Regarding Worker Classification” (closing agreement).   In the

closing agreement, petitioner agreed to pay the amount shown on

the agreement in full satisfaction of its liability stemming from

its worker classification, and it agreed to begin treating its

workers as employees.   The closing agreement reclassified

petitioner’s workers only for 2004, leaving its classification of

workers for 2005 and 2006 untouched, and it granted petitioner

relief of 75 percent of its liability relating to worker

classification for 2004.

     Petitioner concurrently signed a Form 2504, Agreement to

Assessment and Collection of Additional Tax and Acceptance of

Overassessment.   The Form 2504 covered not only petitioner’s

liability with regard to worker classification but also

petitioner’s liability for its failure to report officer’s

compensation.
                                 -5-

     Respondent has not agreed to petitioner’s account of the

meeting on October 10, 2007.    Nevertheless, respondent contends

that even if the facts are as petitioner alleges, respondent is

still entitled to summary judgment because petitioner has not

alleged facts that amount to duress.

     The closing agreement signed by Mrs. Moon contained an

incorrect Employer Identification Number (EIN) in the document

heading.   Petitioner’s correct EIN ends with a 7, but the EIN

listed in the document heading of the closing agreement

substituted a 9 for the 7.    However, the closing agreement did

contain the correct EIN in the first paragraph and it identified

petitioner by name as “Tree Tech Incorporated”.

     On September 18, 2008, respondent mailed petitioner a Final

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

(notice of intent to levy).    Petitioner timely filed Form 12153,

Request for a Collection Due Process or Equivalent Hearing.

Throughout its correspondence with respondent’s Appeals Office,

petitioner did not raise any collection alternatives but

contended that the closing agreement contained the incorrect EIN

and was therefore invalid and that Mr. Cookenour had coerced Mrs.

Moon into signing the closing agreement.    Petitioner contested

its underlying liability, arguing that it was entitled to section

530 relief on the worker classification issue.    The Appeals

Office determined that petitioner could not raise its underlying
                                 -6-

tax liability during the collection due process hearing because

the assessments were made in accordance with the closing

agreement signed by Mrs. Moon.   On April 21, 2009, respondent’s

Appeals Office issued petitioner the Notice of Determination

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

sustaining the notice of intent to levy.

     Petitioner timely filed its petition.3   On its petition,

petitioner checked the boxes indicating that it was disputing

respondent’s notice of determination concerning collection action

and respondent’s notice of determination concerning worker

classification.   However, petitioner was never issued a notice of

determination concerning worker classification.

                            Discussion

     Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials and may be granted where

there is no genuine issue of material fact and a decision may be

rendered as a matter of law.   Rule 121(a) and (b); Fla. Peach

Corp. v. Commissioner, 90 T.C. 678, 681 (1988).   The moving party

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



     3
      The original petition was signed only by Mr. Moon, but
because Mr. Moon is not an officer of petitioner, it is unclear
whether Mr. Moon had the capacity to sign on behalf of
petitioner. See Rules 24(b), 60(c). However, Mrs. Moon has
since ratified the petition. Such a ratification relates back to
the date of the original petition. See Mont. Sapphire
Associates, Ltd. v. Commissioner, 95 T.C. 477, 482-484 (1990);
Carstenson v. Commissioner, 57 T.C. 542, 545-546 (1972).
                                 -7-

material fact, and factual inferences are viewed in a light most

favorable to the nonmoving party.      Sundstrand Corp. v.

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

Cir. 1994).   However, the party opposing summary judgment must

set forth specific facts that show a genuine issue of material

fact exists and may not rely merely on allegations or denials in

the pleadings.    Rule 121(d).

     The Commissioner may collect a tax by levy upon the property

of the taxpayer liable therefor if the taxpayer neglects or

refuses to pay the tax liability within 10 days after notice and

demand for payment.    Sec. 6331(a).   The Commissioner generally

must provide the taxpayer written notice of the right to a

hearing before the levy is made.    Sec. 6330(a).   Upon a timely

request, the taxpayer is entitled to an administrative hearing

before an impartial officer or employee of the Appeals Office.

Sec. 6330(b).    Following the hearing, the Appeals officer must

determine whether the collection action is to proceed, taking

into account the verification the Appeals officer has made, the

issues raised by the taxpayer at the hearing, and whether the

collection action balances the need for the efficient collection

of taxes with the legitimate concern of the taxpayer that any

collection action be no more intrusive than necessary.       Sec.

6330(c)(3).   We have jurisdiction to review the determination if

we have jurisdiction over the type of tax involved in the case.
                                 -8-

Sec. 6330(d)(1); Iannone v. Commissioner, 122 T.C. 287, 290

(2004).

     Where the validity of the underlying tax liability is

properly in issue, we review the matter on a de novo basis.        Sego

v. Commissioner, 114 T.C. 604, 610 (2000).    However, where the

validity of the underlying liability is not properly in issue, we

review the determination of the Appeals Office for abuse of

discretion.   Goza v. Commissioner, 114 T.C. 176, 182 (2000).

     The taxpayer may challenge the existence or amount of the

underlying tax liability only if the taxpayer did not receive a

notice of deficiency or did not otherwise have an opportunity to

challenge the underlying liability.    Sec. 6330(c)(2)(B).   The

taxpayer may waive the right to challenge the underlying

liability by consenting to the assessment of a proposed

liability.    See Aguirre v. Commissioner, 117 T.C. 324, 327

(2001); A-Z Optics, Inc. v. Commissioner, T.C. Memo. 2007-27;

Deutsch v. Commissioner, T.C. Memo. 2006-27, affd. 478 F.3d 450

(2d Cir. 2007).   Section 7121 authorizes the Commissioner to

enter into a written “closing agreement” with a taxpayer relating

to the liability of such person for any taxable period; it

provides that if such agreement is approved by the Commissioner

or his delegate, it will be final and conclusive.    Hudock v.

Commissioner, 65 T.C. 351, 362 (1975).    Closing agreements may be

reopened only in exceptional circumstances such as fraud,
                                  -9-

malfeasance, or the misrepresentation of a material fact.    Sec.

7121(b).    The party seeking to set aside the closing agreement

bears the burden of proving fraud, malfeasance, or

misrepresentation.    Brinkman v. Commissioner, T.C. Memo.

1989-217.    Some closing agreements constitute a final

determination of the taxpayer’s liability for the years in issue,

but others decide only specific issues and bind the parties only

as to those issues.    Manko v. Commissioner, 126 T.C. 195, 201-202

(2006); Estate of Magarian v. Commissioner, 97 T.C. 1, 5 (1991);

Zaentz v. Commissioner, 90 T.C. 753, 760-761 (1988).

     Petitioner attempts to contest its underlying liability with

regard to worker classification before this Court, asserting that

it is eligible for section 530 relief.    Because petitioner did

not receive a notice of deficiency or otherwise have the

opportunity to dispute its tax liability, it would generally be

permitted to challenge its underlying liability as part of the

collection due process hearing.    See sec. 6330(c)(2)(B).

However, a taxpayer may also waive its opportunity to challenge

its underlying tax liability if it enters into a binding closing

agreement with the Commissioner that covers that issue or

consents to the liability’s immediate assessment and collection.

See Aguirre v. Commissioner, supra at 327.

     Respondent contends that petitioner waived its right to

challenge its underlying liability, including the issue of
                              -10-

whether it is entitled to section 530 relief, because it signed a

closing agreement consenting to respondent’s determination

regarding worker classification.   Petitioner contends that the

closing agreement was invalid and should be set aside because

Mrs. Moon signed it under duress and because it contains the

incorrect EIN.

     We will first consider whether the closing agreement is

valid or whether it should be set aside.    Section 301.7121-1(d),

Proced. & Admin. Regs., establishes the procedure to be used with

respect to closing agreements, and it provides that all closing

agreements shall be executed on forms prescribed by the IRS.      See

Hudock v. Commissioner, supra at 362.    The closing agreement

signed by Mrs. Moon complies with the procedures established and

is executed on the form prescribed.   See Internal Revenue Manual

(IRM) pt. 4.23.6.14.3 (Mar. 1, 2003).    The closing agreement

signed by Mrs. Moon states in bold letters:    “This agreement is

final and conclusive except” in the event of fraud, malfeasance,

or misrepresentation of material fact.    The closing agreement

settles the worker classification issue, providing that

petitioner will pay the amount shown in full discharge of its

employment tax liability relating to worker classification and

that it will begin treating its workers as employees.

     Petitioner contends that the closing agreement is invalid

and should be set aside because Mrs. Moon was coerced into
                               -11-

signing it and because it shows an incorrect EIN in the document

heading.   Petitioner’s support for its coercion argument consists

of its contention that Mr. Cookenour offered Mrs. Moon two

different calculations of liabilities and proposed that the IRS

would assess the lower one if she accepted the closing agreement.

Yet Mr. Cookenour’s offer is precisely the kind of arrangement

contemplated under respondent’s Classification Settlement

Program.   See id. pt. 4.23.6.13.1.   Indeed, the very nature of a

settlement is that one party offers the other party a concession

to induce that party to agree to a matter.   Respondent agreed to

assess only a portion of the taxes due under the reclassification

in exchange for petitioner’s agreement to settle the matter.

     Section 7121(b) provides that a closing agreement shall be

final “except upon a showing of fraud or malfeasance, or

misrepresentation of a material fact”.   We understand petitioner

to be contending that duress would be the kind of “malfeasance”

that would require the closing agreement to be set aside under

section 7121(b).   However, the facts petitioner has alleged do

not amount to duress.   Petitioner has not set forth any specific

facts that would create a genuine issue for trial as to fraud,

malfeasance, or misrepresentation of a material fact.

Accordingly, we conclude as a matter of law that there was no

fraud, malfeasance, or misrepresentation of a material fact.
                                -12-

     Petitioner also contends that the closing agreement should

be invalid because of a minor error in the EIN.   While it is

uncontested that the EIN listed in the heading of the closing

agreement is off by one digit, petitioner was in no way

prejudiced or confused by the minor error.4   Accordingly, we hold

that the closing agreement is valid despite the incorrect EIN in

the document heading.

     We therefore hold that the closing agreement shall not be

set aside.   Respondent contends that if we conclude the closing

agreement is valid, petitioner is precluded from raising its

claim for section 530 relief.   However, respondent’s contention

appears inconsistent with the position taken by the Commissioner

in Rev. Proc. 85-18, 1985-1 C.B. 518, which states:

     Relief under section 530(a)(1) of the Act is available to
     taxpayers who are under audit by the Service or who are
     involved in administrative (including Appellate) or judicial
     processes with respect to assessments based on employment
     status reclassifications. Relief also is extended to any
     claim for a refund or credit of any overpayment of an
     employment tax resulting from the termination of liability
     under section 530(a)(1), provided the claim is not barred on
     the date of enactment of this provision (November 6, 1978)
     by any law or rule of law.



     4
      We have repeatedly held that minor errors will not
invalidate notices of deficiency where taxpayers were not
prejudiced. See, e.g., Estate of McElroy v. Commissioner, 82
T.C. 509, 514 n.4 (1984) (misspelling of street name and
incorrect digit in ZIP Code did not invalidate notice of
deficiency where it did not prejudicially delay receipt);
Clodfelter v. Commissioner, 57 T.C. 102, 107 (1971) (incorrect
street number did not invalidate notice of deficiency actually
received by taxpayer), affd. 527 F.2d 754 (9th Cir. 1975).
                                  -13-

     Taxpayers who have entered into final closing agreements
     under section 7121 of the Code or compromises under section
     7122 with respect to employment status controversies are
     ineligible for relief under the Act, unless they have not
     completely paid their liability. Thus, for example, a
     taxpayer who has agreed to or compromised a liability for an
     amount which is to be paid in installments, but who still
     has one or more installments to pay, is relieved of
     liability for such outstanding installments.

Pursuant to that revenue ruling, which is taken almost verbatim

from the legislative history of section 530,5 it would appear

that a taxpayer who has entered into a final closing agreement

with the Commissioner pursuant to section 7121 may nonetheless be

entitled to section 530 relief as long as the taxpayer has not

completely paid off its tax liability.

     However, we need not decide whether Rev. Rul. 85-18, supra,

entitles petitioner to relief under section 530 because we

conclude that we lack jurisdiction to consider petitioner’s claim

for section 530 relief.   The Tax Court is a court of limited

jurisdiction and may exercise jurisdiction only to the extent

authorized by Congress.   Sec. 7442; Naftel v. Commissioner, 85



     5
      See H. Rept. 95-1748, at 6 (1978), 1978-3 C.B. (Vol. 1)
629, 634, which states:

          Taxpayers who have entered into final closing
     agreements under Code section 7121 or compromises under
     section 7122 with respect to employment status controversies
     are ineligible for relief under the bill, unless they have
     not completely paid their liability. Thus, for example, a
     taxpayer who has agreed or compromised a liability for an
     amount which is to be paid in installments, but who still
     has one or more installments to pay, is relieved of
     liability for such outstanding installments. * * *
                                -14-

T.C. 527, 529 (1985).    We have jurisdiction under section 7436(a)

to decide whether a taxpayer is entitled to section 530 relief.

Charlotte’s Office Boutique, Inc. v. Commissioner, 121 T.C. 89,

103 (2003), affd. 425 F.3d 1203 (9th Cir. 2005).     However, our

jurisdiction under section 7436(a) is dependent upon the

Commissioner’s issuance of a notice of determination concerning

worker classification.    Id.; Neely v. Commissioner, 115 T.C. 287,

290 (2000).

     Petitioner indicated in its petition that it was contesting

respondent’s notice of determination concerning collection action

and notice of determination concerning worker classification.

However, because petitioner signed a closing agreement,

respondent never issued petitioner a notice of determination

concerning worker classification.      By signing the closing

agreement, petitioner chose not to receive such a notice and

therefore waived its opportunity to challenge its underlying

liability regarding worker classification before this Court.          See

Aguirre v. Commissioner, 117 T.C. at 327 (holding that where a

taxpayer signed a Form 4549, Income Tax Examination Changes,

consenting to an immediate assessment and collection of tax, the

taxpayer chose not to receive a notice of deficiency and thereby

waived the taxpayer’s right to challenge its underlying liability

in this Court).   Accordingly, we hold that we lack jurisdiction

to consider petitioner’s request for section 530 relief.        See
                                -15-

Charlotte’s Office Boutique, Inc. v. Commissioner, supra at 103;

Aguirre v. Commissioner, supra at 327.

       Consequently, because, as a matter of law, petitioner has

not alleged facts that would allow the closing agreement to be

set aside and because we otherwise lack jurisdiction to consider

petitioner’s claim for section 530 relief, petitioner may not

challenge its underlying liability regarding worker

classification before this Court.

       Finally, we consider whether respondent’s Appeals Office

abused its discretion by sustaining the collection action.

Because petitioner’s underlying tax liability is not properly in

issue, we review the determination of respondent’s Appeals Office

for abuse of discretion.    See Sego v. Commissioner, 114 T.C. at

610.    The settlement officer considered all of petitioner’s

contentions, verified compliance by the IRS with all applicable

laws and regulations, and considered whether the proposed

collection actions balanced the need for efficient tax collection

with petitioner’s concern that they be no more intrusive than

necessary.    On the basis of the record before us, we hold that

the settlement officer did not abuse her discretion in sustaining

the notice of intent to levy.

       We conclude that respondent is entitled to summary judgment

on the issues of whether the closing agreement should be set

aside to allow petitioner to challenge its underlying employment
                                 -16-

tax liability and whether respondent’s Appeals Office abused its

discretion in determining that respondent may proceed with

collection.   We shall therefore grant respondent summary judgment

on those issues.   Additionally, we conclude that we lack

jurisdiction to consider petitioner’s claim that it is entitled

to section 530 relief, and we shall therefore dismiss

petitioner’s case with respect to that claim.

     In reaching these holdings, we have considered all the

parties’ arguments, and, to the extent not addressed herein, we

conclude that they are moot, irrelevant, or without merit.

     To reflect the foregoing,


                                             An appropriate order and

                                        decision will be entered for

                                        respondent.
