                   118 T.C. No. 36



                UNITED STATES TAX COURT



           HAROLD F. BEHLING, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 4242-01L.              Filed June 17, 2002.



     R disallowed a loss claimed by P on his Federal
income tax return and issued a notice of deficiency. P
received the deficiency notice and corresponded with R
regarding the loss. R advised P that R would not
change R’s determination. R also advised P of the
deadline for filing a petition for redetermination with
this Court. P, however, did not file a petition, and R
assessed the deficiency.

     Subsequently, R filed a notice of Federal tax lien
and provided P with notice of such filing. P filed a
request for an administrative hearing. During the
course of the hearing, R’s Appeals officer considered
the merits of the loss. In the notice of
determination, R informed P that the notice of Federal
tax lien would not be withdrawn because P had failed to
demonstrate that he was entitled to the loss.
                               - 2 -

          P filed a Petition for Lien or Levy Action that
     was limited to allegations challenging R’s disallowance
     of the loss. Subsequently, R filed a motion for
     summary judgment.

          Held: Because P received the deficiency notice
     and had an opportunity to dispute R’s determination, P
     is statutorily barred from challenging the existence or
     amount of his liability in this proceeding. Sec.
     6330(c)(2)(B), I.R.C. The fact that R’s Appeals
     officer considered the merits of the loss at the
     administrative hearing and the further fact that the
     notice of determination addressed those merits do not
     constitute a waiver of the statutory bar.

          Held, further, sec. 301.6320-1(e)(3), Q&A-E11, Proced.
     & Admin. Regs., is reasonable and consistent with sec.
     6330(c)(2)(B), I.R.C., and its validity is sustained.



     Harold F. Behling, pro se.

     Pamela J. Sewell, Sheara L. Gelman, and Alan Levine for

respondent.



                              OPINION


     DAWSON, Judge:   This case was assigned to Special Trial

Judge Robert N. Armen, Jr., pursuant to the provisions of section

7443A(b)(4) and Rules 180, 181, and 183.1   The Court agrees with

and adopts the opinion of the Special Trial Judge, which is set

forth below.




     1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code, as amended, and all Rule references
are to the Tax Court Rules of Practice and Procedure.
                                - 3 -

                OPINION OF THE SPECIAL TRIAL JUDGE

     ARMEN, Special Trial Judge:    This matter is before the Court

on respondent’s Motion for Summary Judgment, filed pursuant to

Rule 121(a).   Respondent contends that there is no genuine issue

as to any material fact and that the notice of determination

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).

     We are satisfied that there is no genuine issue as to any
                                - 4 -

material fact and that a decision may be rendered as a matter of

law.    As explained below, we shall grant respondent’s Motion for

Summary Judgment.

                             Background

       On March 17, 1997, respondent issued a joint notice of

deficiency to Harold F. Behling (petitioner) and his wife.      In

the notice, respondent determined a deficiency of $5,179 in their

Federal income tax for the taxable year 1993.    The deficiency was

based on respondent’s disallowance of a flow-through loss claimed

by petitioner in respect of Behling Automotive, Inc., an S

corporation (hereinafter the S corporation).    In this regard,

respondent determined that petitioner had previously exhausted

his basis in the S corporation.

       On March 24, 1997, petitioner wrote a letter to respondent

referencing the notice of deficiency.     In the letter, petitioner

stated that he wished to file an amended return for 1993 and

requested a further explanation of the determined deficiency.        On

May 2, 1997, respondent wrote to petitioner informing him that

his proposed amended return would not change respondent’s

determination in the notice of deficiency and that the time for

filing a petition for redetermination with the Tax Court would

expire on June 17, 1997.    Petitioner did not file a petition with

the Court challenging the notice of deficiency.    Accordingly, on

August 1, 1997, respondent assessed the deficiency (and statutory
                                - 5 -

interest) against petitioner.

     On August 28, 2000, respondent filed with the Emery County

Recorder in Castledale, Utah, a Form 668(Y)(c), Notice of Federal

Tax Lien, which disclosed that petitioner had an outstanding

Federal income tax liability of $6,937.87 for 1993.    Respondent

timely issued to petitioner a Notice of Federal Tax Lien Filing

and Your Right to a Hearing Under IRC 6320.   On September 14,

2000, petitioner filed with respondent a Request for a Collection

Due Process Hearing, Form 12153, that included allegations

challenging the existence and amount of his tax liability for

1993.

     On January 17, 2001, the Internal Revenue Service Office of

Appeals in Salt Lake City conducted an administrative hearing

that petitioner attended.   On January 22, 2001, Appeals Officer

Robert White wrote a letter to petitioner stating, in part, that

he would recommend that the assessment made against petitioner

for 1993 be abated.   However, the Appeals officer’s

recommendation to abate the assessment was ultimately rejected by

his supervisor.

     By notice of determination dated March 15, 2001, respondent

informed petitioner that the notice of lien filed against him

would not be withdrawn because petitioner failed to show that he

had sufficient basis in the S corporation to cover the loss

claimed on his 1993 return.
                                - 6 -

     Petitioner filed with the Court an imperfect Petition for

Lien or Levy Action Under Section 6320(c) or 6330(d),2      and,

later, an amended petition.    The amended petition is limited to

allegations challenging the existence and amount of petitioner’s

tax liability for 1993.

     After respondent filed an answer to the petition, respondent

filed a Motion for Summary Judgment.       In short, respondent

contends that petitioner’s challenge to the existence and/or

amount of his tax liability for 1993 is not properly before the

Court in this proceeding, and petitioner otherwise failed to

raise a valid issue for judicial review.       Petitioner filed an

objection to respondent’s motion.    Petitioner maintains that he

has proven that he had sufficient basis in the S corporation to

cover the loss claimed on his 1993 tax return.

     This matter was called for hearing at the Court's motions

sessions held in Washington, D.C.    Petitioner and counsel for

respondent appeared at the hearing and presented arguments in

respect of respondent's motion.

                              Discussion

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

all property and rights to property of a person when demand for

payment of that person’s liability for taxes has been made and


     2
        At the time that the petition was filed, petitioner
resided in Ferron, Utah.
                               - 7 -

the person fails to pay those taxes.    The lien arises when the

assessment is made.   Sec. 6322.   Section 6323(a) requires the

Secretary to file notice of Federal tax lien if such lien is to

be valid against any purchaser, holder of a security interest,

mechanic’s lienor, or judgment lien creditor.    Lindsay v.

Commissioner, T.C. Memo. 2001-285.

     Section 6320 provides that the Secretary shall furnish the

person described in section 6321 with written notice of the

filing of a notice of lien under section 6323.    The notice

required by section 6320 must be provided not more than 5

business days after the day the notice of lien is filed.      Sec.

6320(a)(2).   Section 6320 further provides that the person may

request administrative review of the matter (in the form of an

Appeals Office hearing) within the 30-day period beginning on the

day after the 5-day period described above.    Section 6320(c)

provides that the Appeals Office hearing generally shall be

conducted consistent with the procedures set forth in section

6330(c), (d), and (e).

     Section 6330(c) provides for review with respect to

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 or the amount of the underlying tax liability

can be contested at an Appeals Office hearing if the person did
                               - 8 -

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

earlier opportunity to dispute such tax liability.     Goza v.

Commissioner, 114 T.C. 176, 180-181 (2000); see Sego v.

Commissioner, 114 T.C. 604, 609 (2000).   Section 6330(d) provides

for judicial review of the administrative determination in the

Tax Court or Federal District Court.

     Respondent asserts that there is no dispute as to a material

fact and respondent is entitled to judgment as a matter of law

because section 6330(c)(2)(B) bars petitioner from challenging

the existence or amount of his underlying tax liability for 1993

in this proceeding.   Respondent further asserts that petitioner

has not raised a valid issue for review; i.e., a spousal defense,

a challenge to the appropriateness of the collection action, or

an alternative means of collection.

     The record in this proceeding shows that respondent issued a

notice of deficiency to petitioner for 1993 disallowing the flow-

through loss claimed by him in respect of the S corporation.      The

record also shows that although petitioner promptly received the

notice of deficiency, he did not file a petition for

redetermination with the Court challenging the notice.    Under

such circumstances, section 6330(c)(2)(B) plainly states that

petitioner is barred from challenging the existence or amount of

his tax liability for 1993 in this proceeding.   See Goza v.

Commissioner, supra at 182-183; see also Sego v. Commissioner,
                                - 9 -

supra at 610.

     We observe that the facts here differ in one respect from

the facts in Goza v. Commissioner, supra.     Specifically, the

taxpayer in Goza was not permitted to challenge the existence or

amount of his underlying tax liability during the administrative

hearing.    By contrast, the Appeals officer in the instant case

did permit petitioner to present information regarding the amount

of his tax liability during the administrative hearing.    In this

regard, the notice of determination issued to petitioner makes

specific reference to petitioner’s failure to provide

substantiation of his basis in the S corporation.

       In Sego v. Commissioner, supra, the taxpayers may have

been permitted to challenge the existence or amount of their

underlying tax liability during the administrative hearing.       In

this regard, we note that the notice of determination that the

Appeals Office issued to the taxpayer-husband in that case

stated, in part, as follows:

      Challenges to the existence or amount of liability
     were raised * * * .

        *         *       *       *       *       *       *

      The assessments are deemed correct because you have
     failed to present any credible evidence to overcome the
     Commissioner’s presumption of correctness. You have
     continued to procrastinate with regards to providing
     additional information or evidence to support your
     position.

Nevertheless, in Sego v. Commissioner, supra, this Court held,
                             - 10 -

inter alia, that section 6330(c)(2)(B) barred the taxpayers from

challenging the existence or amount of their underlying tax

liability in the judicial proceeding.

     Respondent maintains that section 6330(c)(2)(B) remains a

bar to petitioner’s attempt in the present proceeding to

challenge the amount of his underlying liability for 1993.

Specifically, respondent cites and relies on section 301.6320-

1(e)(3), Q&A-E11, Proced. & Admin. Regs.3   The regulation states

as follows:

          Q-E11. If an Appeals officer considers the merits
     of a taxpayer’s liability in a CDP hearing when the
     taxpayer had previously received a statutory notice of
     deficiency or otherwise had an opportunity to dispute
     the liability prior to the NFTL [notice of Federal tax
     lien], will the Appeals officer’s determination
     regarding those liability issues be considered part of
     the Notice of Determination?

          A-E11. No. An Appeals officer may consider the
     existence and amount of the underlying tax liability as
     a part of the CDP hearing only if the taxpayer did not
     receive a statutory notice of deficiency for the tax
     liability in question or otherwise have a prior
     opportunity to dispute the tax liability. Similarly,
     an Appeals officer may not consider any other issue if
     the issue was raised and considered at a previous


     3
        The regulation applies to any notice of Federal tax lien
that is filed on or after Jan. 19, 1999. Sec. 301.6320-1(j),
Proced. & Admin. Regs. The lien in the present case was filed on
Aug. 28, 2000.
     We note that the final regulation added Q&A-E11 to sec.
301.6320-1(e)(3), Proced. & Admin. Regs., which Q&A had not
previously been part of the temporary regulation. See sec.
301.6320-1T(e)(3), Temporary Proced. & Admin. Regs., 64 Fed. Reg.
3403 (Jan. 22, 1999); see also T.D. 8979, 2002-6 I.R.B. 466,
468(discussing the addition of Q&A-E11 to the final regulation).
                                - 11 -

     hearing under section 6330 or in any other previous
     administrative or judicial proceeding in which the
     person seeking to raise the issue meaningfully
     participated. In the Appeals officer’s sole
     discretion, however, the Appeals officer may consider
     the existence or amount of the underlying tax
     liability, or such other precluded issues, at the same
     time as the CDP hearing. Any determination, however,
     made by the Appeals officer with respect to such a
     precluded issue shall not be treated as part of the
     Notice of Determination issued by the Appeals officer
     and will not be subject to any judicial review.
     Because any decisions made by the Appeals officer with
     respect to such precluded issues are not properly a
     part of the CDP hearing, such decisions are not
     required to appear in the Notice of Determination
     issued following the hearing. Even if a decision
     concerning such precluded issues is referred to in the
     Notice of Determination, it is not reviewable by a
     district court or the Tax Court because the precluded
     issue is not properly part of the CDP hearing.

     The regulations under section 6330 are interpretative

regulations.     They must be upheld “unless unreasonable and

plainly inconsistent with the revenue statutes”.     Commissioner v.

South Tex. Lumber Co., 333 U.S. 496, 501 (1948).

     Applying the above-referenced standard to section 301.6320-

1(e)(3), Q&A-E11, Proced. & Admin. Regs., we hold that the

regulation is not unreasonable or plainly inconsistent with

section 6330.4    To the contrary, the regulation is consistent


     4
        Although the regulation provides guidance to taxpayers
that accurately describes the procedures the Internal Revenue
Service may follow, it is for this Court rather than the
Commissioner to decide the scope of our jurisdiction with respect
to applicable statutes enacted by Congress. See sec. 7442.
Therefore, we interpret the regulation’s references to “judicial
review” as signifying that the Commissioner does not intend, when
he considers a taxpayer’s underlying tax liability in a sec. 6330
hearing involving facts similar to those herein, to waive the
                                                   (continued...)
                               - 12 -

with the plain language of section 6330(c)(2)(B), which states

that neither the existence nor the amount of the underlying tax

liability can be challenged during the collection review process

unless the person did not receive a notice of deficiency or did

not otherwise have an earlier opportunity to dispute such tax

liability.    From the Court’s perspective, section 301.6320-

1(e)(3), Q&A-E11, Proced. & Admin. Regs., presents a reasonable

and “taxpayer-friendly” approach to the collection review process

reflecting “respondent’s good-faith effort to further a

fundamental policy underlying section 6330; i.e., to provide a

taxpayer with a final opportunity for administrative review” of

his or her tax liability.    Kennedy v. Commissioner, 116 T.C. 255,

262 (2001).    As in Kennedy, in which we held that the

Commissioner’s decision to grant the taxpayer a so-called

“equivalent hearing” did not result in a waiver by the

Commissioner of the 30-day time limit within which the taxpayer

was required to request an Appeals Office hearing, we hold in

this case that respondent’s decision to permit petitioner to

offer information at the Appeals Office hearing relevant to the

existence or amount of his underlying tax liability did not

result in a waiver by respondent of the restriction set forth in

section 6330(c)(2)(B).



     4
      (...continued)
limitations imposed by sec. 6330(c)(2)(B) or sec. 6330(c)(4).
                              - 13 -

     In sum, petitioner is statutorily barred from challenging

the existence or amount of his income tax liability for 1993 in

this proceeding.   Petitioner has 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).   Accordingly, in the absence of a valid issue for

review, we conclude that respondent is entitled to judgment as a

matter of law sustaining the notice of determination dated March

15, 2001.

     To order to give effect to the foregoing,



                                    An order granting respondent’s

                               Motion For Summary Judgment and

                               decision for respondent will be

                               entered.
