                        T.C. Memo. 2003-178



                     UNITED STATES TAX COURT



         DALE L. OYER, TRANSFEREE, ET AL.,1 Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 11887-02L, 11888-02L,    Filed June 17, 2003.
                 11889-02L, 11893-02L.


     John Harley Trader, for petitioners.

     Robert M. Fowler, for respondent.



                        MEMORANDUM OPINION


     THORNTON, Judge:   This matter is before the Court on

respondent’s motions for summary judgment in these consolidated



     1
       Due to an identity of issues, the following cases have
been consolidated herewith for the purpose of this opinion: Acme
Leasing Trust, Transferee, docket No. 11888-02L; ABC Seamless
Trust, Transferee, docket No. 11889-02L; and Shirley J. Oyer,
Transferee, docket No. 11893-02L.
                               - 2 -

cases.   The issue for decision is whether respondent may proceed

with collection of petitioners’ transferee tax liabilities.

     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 where there is no genuine issue of any material fact and

a decision may be rendered as a matter of law.   Rule 121(a) and

(b);2 see 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).    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).   When a motion for summary judgment is

made and properly supported, the adverse party may not rest upon

mere allegations or denials of the pleadings but must set forth

specific facts showing that there is a genuine issue for trial.

Rule 121(d).

     As discussed below, on the basis of our review of the

record, we conclude that there is no dispute as to a material




     2
       Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code, as amended.
                               - 3 -

fact and that respondent is entitled to summary judgment as a

matter of law.

                             Background

     The record establishes or the parties do not dispute the

following:

A.   The Corporation’s Tax Deficiency

     On September 15, 1999, respondent timely mailed to ABC

Seamless Siding & Guttering, Inc. (the corporation), a notice of

deficiency.   In the notice, respondent determined that for its

taxable year ending December 31, 1995, the corporation had an

income tax deficiency and related penalties totaling $75,767.50.

In response, the corporation timely petitioned this Court at

docket No. 18699-99 (the corporation’s deficiency case).

     On February 15, 2001, this Court entered a stipulated

decision in the corporation’s deficiency case, determining that

there was a $41,873 deficiency in the corporation’s income tax

for the taxable year 1995.   The stipulated decision was signed

for the corporation by the same counsel who represents

petitioners in the instant cases.

B.   Statutory Notices of Transferee Liability

     On October 11, 2000, respondent mailed to petitioners

substantially identical statutory notices of liability,

determining that each petitioner was liable as a transferee of

the corporation for its income taxes and penalties in the amount
                               - 4 -

of $94,738.85 for the taxable year ending December 31, 1995.3    In

response, petitioners filed substantially identical petitions

with this Court in the following cases (the transferee liability

cases):   Dale L. Oyer, docket No. 673-01; Acme Leasing Trust,

docket No. 674-01; Shirley J. Oyer, docket No. 675-01; and ABC

Seamless Trust, docket No. 676-01.

C.   Stipulated Decisions in Petitioners’ Transferee Liability
     Cases

     On March 2, 2001, before respondent had filed an answer in

any of the transferee liability cases, this Court entered

stipulated decisions in those cases, determining that each

petitioner was liable as a transferee of assets of the

corporation in the amount of $58,008 plus interest as provided by

law from March 15, 1996, to the date of payment.4   Each

stipulated decision was signed for the petitioner by the same

counsel who represents petitioners in the instant cases.




     3
       This amount represents the corporation’s $75,767.50
deficiency and related penalties, as determined in the
corporation’s notice of deficiency, plus an additional $16,135
attributable to the corporation’s reported but unpaid tax
liability and a $2,836.35 penalty with respect thereto.
     4
       Ostensibly, this amount represents the sum of the
corporation’s $41,873 deficiency, as determined in the stipulated
decision entered in the corporation’s deficiency case, and the
corporation’s $16,135 reported but unpaid tax liability, as
referenced in the preceding note.
                               - 5 -

D.   Notices of Federal Tax Liens

     On May 11, 2001, respondent filed notices of Federal tax

lien with respect to each petitioner’s transferee liability,

showing an $89,079.25 unpaid balance of assessment with respect

to each petitioner.   In separate letters dated May 16, 2001,

respondent notified each petitioner of this action and of the

right to a hearing under section 6320.

E.   Petitioners’ Requests for Hearings

     Each petitioner timely submitted a Form 12153, Request for a

Collection Due Process Hearing.    Attached to these Forms 12153

were substantially identical memoranda, asserting that each

asserted tax lien was defective, erroneous, and improper because:

(1) The stipulated decision in the corporation’s deficiency case

was jurisdictionally defective because the underlying notice of

deficiency was invalid in that it determined a deficiency for the

corporation’s taxable year ending December 31, 1995, rather than

for the corporation’s final taxable period ending August 31,

1995; and (2) alternatively, each transferee’s liability should

be limited to $19,041, which petitioners seemed to suggest was

the maximum value of assets that any of them actually received

from the corporation.

F.   The Appeals Office Hearings

     On July 25, 2001, an Appeals officer held a telephone

hearing with respect to the collection proceedings against
                                - 6 -

petitioners ABC Seamless Trust and Acme Leasing Trust.    On August

14, 2001, the Appeals officer held an in-person hearing with

respect to the collection proceedings against petitioners Dale

Oyer and Shirley Oyer.

     On or about November 12, 2001, each petitioner submitted to

the Appeals officer an offer in compromise based on doubt as to

liability.    In these offers in compromise, each petitioner

offered to pay $50 to compromise the unpaid balance of assessment

of transferee tax liability.

     In addition, each petitioner submitted to respondent

substantially identical documents dated November 15, 2001, and

captioned “Amendment to Request for a Collection Due Process

Hearing”.    In these documents, petitioners alleged that in

determining their transferee liabilities, respondent had failed

to take into consideration certain “additional liabilities” of

the corporation that petitioners contended would more than offset

the value of any assets that the corporation transferred to them.

G.   Respondent’s Notices of Determination

     On June 13, 2002, respondent issued to each petitioner a

Notice of Determination Concerning Collection Action(s) Under

Sections 6320 and/or 6330 (the notices).    In the notices,

respondent determined that petitioners could not challenge their

underlying tax liabilities in these collection proceedings

because these liabilities had been determined in prior judicial
                               - 7 -

actions.   In the notices, respondent also determined that

petitioners’ offers in compromise based on doubt as to liability

were unacceptable because each petitioner’s underlying tax

liability was based on a Tax Court decision and because each

petitioner was noncompliant with income tax filing requirements.

In the notices, respondent determined that all applicable legal

and administrative procedures had been met and that collection

actions could proceed against petitioners.

H.   The Petitions

     On July 18, 2002, petitioners filed with the Court

substantially identical petitions challenging the notices.5    In

the petitions, petitioners challenge their transferee tax

liabilities and also challenge the Appeals officer’s rejection of

their offers in compromise.

I.   Respondent’s Motions for Summary Judgment

     On January 31, 2003, respondent filed substantially

identical motions for summary judgment in each petitioner’s case.

On February 13, 2003, petitioners filed substantially identical

responses opposing respondent’s motions for summary judgment in

each case.   On February 24, 2003, the Court held a hearing in




     5
       When these petitions were filed,   Dale Oyer resided in
Kansas City, Missouri, and Shirley Oyer   resided in Shawnee,
Kansas. The petitions for Acme Leasing    Trust and ABC Seamless
Trust each listed the same Kansas City,   Missouri, mailing
address.
                                  - 8 -

Kansas City, Missouri, on respondent’s motions for summary

judgment.

                              Discussion

A.   Statutory Framework

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

all property and property rights of a person who is liable for

and fails to pay taxes after demand for payment has been made.

The lien arises when assessment is made and continues until the

assessed liability is paid.      Sec. 6322.   For the lien to be valid

against certain third parties, the Secretary must file a notice

of Federal tax lien and, within 5 business days thereafter,

provide written notice to the taxpayer.       Secs. 6320(a), 6323(a).

The taxpayer may then request an administrative hearing before an

Appeals officer.    Sec. 6320.    Once the Appeals officer issues a

determination, the taxpayer may seek judicial review in the Tax

Court or a District Court, as appropriate.      Sec. 6330(d).

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

raise at an Appeals Office hearing, including spousal defenses,

the appropriateness of the Commissioner’s intended collection

action, and possible alternative means of collection.      Of

particular significance here is section 6330(c)(2)(B), which

provides:

                 (B) Underlying liability.--The person
            may also raise at the hearing challenges to
            the existence or amount of the underlying tax
            liability for any tax period if the person
                               - 9 -

           did not receive any statutory notice of
           deficiency for such tax liability or did not
           otherwise have an opportunity to dispute such
           tax liability.

Moreover, except in certain limited circumstances, a person is

generally precluded from raising at the Appeals Office hearing

any issue raised and considered in any previous administrative or

judicial proceeding.   Sec. 6330(c)(4).

B.   Petitioners’ Challenges to Their Underlying Tax Liabilities

     In this collection proceeding, petitioners challenge their

underlying tax liabilities as transferees of the corporation for

its 1995 tax liability.   More particularly, having previously

agreed to this Court’s stipulated decisions in the transferee

liability cases, petitioners now seek in this collection

proceeding to repudiate those stipulated decisions on various

grounds.   They argue, among other things, that respondent’s

notice of deficiency to the corporation was invalid and that

consequently this Court’s stipulated decisions in the

corporation’s deficiency case and in the transferee liability

cases were jurisdictionally defective.    Petitioners also contend

that the stipulated decisions in the transferee liability cases

failed to take into account certain of the corporation’s

liabilities (apparently because petitioners failed to assert them

in the transferee liability cases), which, if considered, would

more than offset the value of any assets the corporation
                              - 10 -

transferred to them, thereby reducing their transferee

liabilities to zero.

     1.   Res Judicata

     Under the general rule of res judicata, “when a court of

competent jurisdiction has entered a final judgment on the merits

of a cause of action, the parties to the suit and their privies

are thereafter bound ‘not only as to every matter which was

offered and received to sustain or defeat the claim or demand,

but as to any other admissible matter which might have been

offered for that purpose.’”   Commissioner v. Sunnen, 333 U.S.

591, 597 (1948) (quoting Cromwell v. County of Sac, 94 U.S. 351,

352 (1876)).

     The stipulated decision that this Court entered in each

petitioner’s transferee liability case was res judicata for

purposes of determining each petitioner’s transferee liability.

See Baptiste v. Commissioner, 29 F.3d 433, 436-437 (8th Cir.

1994), affg. in part and revg. in part 100 T.C. 252 (1993);

Krueger v. Commissioner, 48 T.C. 824 (1967).   These stipulated

decisions preclude petitioners from relitigating their transferee

liabilities in this collection proceeding.   See Katz v.

Commissioner, 115 T.C. 329, 340 n.16 (2000); Gunderson v.

Commissioner, T.C. Memo. 2002-26.

     Petitioners argue that res judicata is inapplicable here

because the stipulated decisions in the transferee liability
                              - 11 -

cases were entered before respondent filed answers therein.

Petitioners’ argument is without merit.   A stipulated decision

reflects the compromise and settlement of a tax case, which is

governed by general principles of contract law.   Robbins Tire &

Rubber Co. v. Commissioner, 52 T.C. 420, 435-436, supplemented by

53 T.C. 275 (1969).   The decision in a stipulated case is deemed

rendered on the date the Court enters it.   See sec. 7459(c).

Neither the ability of the parties to enter into a stipulated

settlement nor the ability of the Court to enter a decision

reflecting the stipulated settlement depends upon the

Commissioner’s filing an answer.

     Petitioners also argue that res judicata is inapplicable

here because this Court lacked jurisdiction in the transferee

liability cases in that the corporation’s notice of deficiency

was invalid.   Petitioners argue that the corporation’s notice of

deficiency was invalid because it was based on the taxable year

ending December 31, 1995, whereas the corporation’s final tax

period ended August 31, 1995, just before it was liquidated.

     Petitioners are mistaken in their premises as to the

prerequisites of this Court’s jurisdiction in a transferee

liability case.   The Tax Court has jurisdiction in a case

commenced by respondent’s issuance to a transferee of a notice of

liability.   See sec. 6901; Rule 13(a); Groetzinger v.

Commissioner, 69 T.C. 309 (1977).   The validity of a notice of
                                  - 12 -

transferee liability does not depend upon the issuance to the

transferor of a valid notice of deficiency.      See Kuckenberg v.

Commissioner, 35 T.C. 473, 483 (1960), affd. on this issue 309

F.2d 202 (9th Cir. 1962); Cleveland v. Commissioner, 28 B.T.A.

578 (1933), affd. sub nom. Flynn v. Commissioner, 77 F.2d 180

(5th Cir. 1935); Espinosa v. Commissioner, T.C. Memo. 2000-66,

affd. 24 Fed. Appx. 825 (9th Cir. 2001).       Consequently, the

alleged defect in the corporation’s notice of deficiency would

not, in and of itself, impair this Court’s jurisdiction in the

transferee liability cases.6

     In any event, the notice of deficiency to the corporation

would not be invalid merely because it covered the entire 1995

year.       See Burford v. Commissioner, 76 T.C. 96, 100 (1981), affd.

without published opinion 786 F.2d 1151 (4th Cir. 1986);

Sanderling, Inc. v. Commissioner, 66 T.C. 743, 749 (1976) (“where

the notice [of deficiency] is based on the taxpayer’s final tax

period and covers the entire period of the taxpayer’s operations,

it is a valid determination for that period”), supplemented by

67 T.C. 176 (1976), affd. 571 F.2d 174 (3d Cir. 1978).



        6
       Moreover, we note that petitioners’ transferee liabilities
are not predicated entirely on the corporation’s deficiency as
determined in the notice of deficiency. Rather, as previously
noted, petitioners’ transferee liabilities, as determined in the
notices of transferee liability, also include $16,135
attributable to the corporation’s reported but unpaid 1995 tax
liability. This $16,135 amount was not subject to deficiency
procedures.
                               - 13 -

     2.   Section 6330(c)(2)(B)

     In addition to principles of res judicata, the provisions of

section 6330(c)(2)(B) prevent petitioners from challenging in

this collection proceeding the existence and amount of their

transferee tax liabilities.

     In an effort to avoid this result, petitioners urge upon us

a novel interpretation of section 6330(c)(2)(B).   They contend

that section 6330(c)(2)(B) authorizes a person to challenge the

amount or existence of tax liability in a collection proceeding

if the person meets either of two purportedly disjunctive

criteria:    (1) If the person did not receive any statutory notice

of deficiency; or (2) if the person did not otherwise have an

opportunity to dispute the tax liability.   Petitioners contend

they meet the former criterion because they received no statutory

notices of deficiency but only statutory notices of transferee

liability.   Thus, petitioners conclude, the literal language of

section 6330(c)(2)(B) permits them to challenge their underlying

tax liabilities.

     We are unaware that any court has explicitly addressed the

merits of the highly literal construction of section

6330(c)(2)(B) that petitioners urge upon us.   In numerous cases,

however, this Court and other courts have implicitly rejected

petitioners’ reading of section 6330(c)(2)(B).   See, e.g.,

Aguirre v. Commissioner, 117 T.C. 324 (2001) (taxpayers who
                              - 14 -

signed a Form 4549 waiver, consenting to the immediate assessment

and collection of taxes, and consequently received no statutory

notice of deficiency, were barred from challenging their

underlying tax liability in the collection proceeding); Sego v.

Commissioner, 114 T.C. 604 (2000) (taxpayers who deliberately

refused to accept delivery of deficiency notices repudiated their

opportunity to contest the notices of deficiency); Dami v. IRS,

89 AFTR 2d 2002-1368, 2002-1 USTC par. 50,433 (W.D. Pa. 2002)

(taxpayer who received a “Recovery Letter” with respect to a

trust fund recovery penalty was barred from challenging the

underlying tax liability in his collection proceeding); Konkel v.

Commissioner, 86 AFTR 2d 2000-6939, 2001-2 USTC par. 50,520 (M.D.

Fla. 2000) (similar to Dami v. IRS, supra).   Close analysis of

petitioners’ statutory interpretation exposes its error and

confirms the essential soundness of this line of judicial

precedents.

     In the first instance, we are unpersuaded that petitioners

received no “notice of deficiency” within the meaning of section

6330(c)(2)(B).   For present purposes, the notices of transferee

liability that petitioners received were the equivalents of

notices of deficiency.7


     7
       Sec. 6901(a) provides that transferee liability for the
transferor’s income taxes must be “assessed, paid, and collected
in the same manner and subject to the same provisions and
limitations” as the transferor’s tax liability. Consequently, to
                                                   (continued...)
                              - 15 -

     But even if we were to assume, arguendo, that petitioners’

notices of transferee liability were not notices of deficiency

within the meaning of section 6330(c)(2)(B), we still must reject

their strained and illogical argument that the statute sets forth

two alternative criteria authorizing challenges to underlying tax

liability in collection proceedings.   Section 6330(c)(2)(B)

plainly sets forth a single operative criterion, in the form of a

stricture:   the person seeking to challenge the underlying tax

liability in a collection proceeding must not have had another

opportunity to raise the challenge.    Presumably for the sake of

clarity and emphasis, the statute refers particularly to persons

who have not received notices of deficiency while referring more

generally to persons who “otherwise” lacked opportunities to

dispute their tax liabilities.   Contrary to petitioners’

argument, however, these references do not denote separate

criteria; they merely circumscribe the two categories of persons



     7
      (...continued)
proceed against a transferee to assess and collect under sec.
6901 the transferor’s income tax deficiency, the Commissioner
must use the same deficiency procedures that would apply in
assessing and collecting the deficiency from the transferor.
Those deficiency procedures include mailing a notice of
deficiency as required by sec. 6212. See Dillman v.
Commissioner, 64 T.C. 797, 800 (1975). Sec. 6901(f) explicitly
equates the mailing of the requisite notice of transferee
liability with the mailing of a notice of deficiency, by
referring to the “mailing to the transferee * * * of the notice
provided for in section 6212”.
                                  - 16 -

that, taken together, make up the complete class of persons who

satisfy the single operative criterion.

       Moreover, petitioners’ argument founders again in failing to

appreciate that what it mischaracterizes as separate criteria are

expressed as negations (i.e., persons who did not receive

deficiency notices or persons who did not otherwise have an

opportunity to dispute the tax liability).      Rather than

signifying alternative circumstances in which a person will be

qualified to challenge the underlying tax liability (as

petitioners contend), these negations denote, in essence,

circumstances in which a person may be disqualified from doing

so.8

           In sum, the sense of section 6330(c)(2)(B) is that a person

may challenge the tax liability in a collection proceeding if

that person lacked another opportunity to raise the challenge, by


       8
       The flaws in petitioners’ logic might be made more evident
with a homely example: a child is told that she may have dessert
if she did not eat a cookie on the schoolbus or did not otherwise
have sweets after school. This ingenious child--petitioners’
figurative progeny--confesses that she ate sweets all afternoon
but argues that she is still entitled to dessert because she ate
no cookie on the bus. Result: no dessert.

     If the child is not only ingenious but persistent as well,
she might protest that this result effectively transforms
disjunctive criteria (not eat a cookie or not otherwise have
sweets) into conjunctive criteria (not eat a cookie and not
otherwise have sweets). She might be answered that there never
were two criteria to be either disjoined or conjoined, but only
the one operative criterion that she not eat sweets after school,
the business about the cookie being a prime example of the
stricture.
                                - 17 -

virtue of not having received a notice of deficiency or

otherwise.   Because petitioners had (and availed themselves of)

previous opportunities to dispute their underlying transferee tax

liabilities, section 6330(c)(2)(B) bars them from challenging

those liabilities in this collection proceeding.

     In conclusion, principles of res judicata apply here and

operate, along with section 6330(c)(2)(B), to prevent petitioners

from challenging in this collection proceeding the existence and

amount of their transferee tax liabilities.9

C.   Petitioners’ Offers in Compromise

     In their various offers in compromise on the basis of doubt

as to liability, each petitioner proposed to pay $50 in

satisfaction of the unpaid balance of assessments of transferee

liability.   Respondent rejected these offers in compromise on

grounds that the transferee liabilities had been determined in

the transferee liability cases and that petitioners were not in

compliance with income tax filing requirements.    We review

respondent’s action for abuse of discretion, on the basis of the

arguments and information available to the Appeals officer when

the discretion was exercised.    See Sego v. Commissioner, 114 T.C.

at 610.




     9
       Respondent has not raised and we do not reach any issue as
to whether petitioners are also precluded from challenging their
underlying tax liabilities by sec. 6330(c)(4).
                                - 18 -

Given that each petitioner had previously entered into a

stipulated decision agreeing to transferee liability of $58,008

plus interest (an amount that by May 11, 2001, had grown to

$89,079.25), we do not believe the Appeals officer abused his

discretion in rejecting each petitioner’s offer to compromise

that transferee liability for $50.       Regulations promulgated under

section 7122(c) provide that the Secretary may compromise a

liability on various grounds, including doubt as to liability,

but state:   “Doubt as to liability does not exist where the

liability has been established by a final court decision or

judgment concerning the existence or amount of the liability.”

Sec. 301.7122-1T(b)(2), Temporary Proced. & Admin. Regs, 64 Fed.

Reg. 39020 (July 12, 1999).   As previously discussed, the

stipulated decisions in petitioners’ transferee liability cases

constitute final decisions on the merits.      See Baptiste v.

Commissioner, 29 F.3d at 436.    Respondent’s decision to reject

petitioners’ offers in compromise based on doubt as to liability

was a reasonable exercise of discretion given that there was no

doubt as to petitioners’ liabilities, within the meaning of the

applicable regulations or otherwise.10




     10
       In light of this holding, we need not address
petitioners’ argument that respondent erred in determining that
they were noncompliant with income tax filing requirements.
                             - 19 -

     We have considered all contentions the parties have raised.

To the extent not addressed herein, these contentions are without

merit or unnecessary to reach.

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

motions.

     To reflect the foregoing,


                                      Orders granting respondent’s

                                 motions and appropriate decisions

                                 will be entered.
