                       115 T.C. No. 39



                UNITED STATES TAX COURT



          TERRY HIRAM PIERSON, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 8650-00L.                     Filed December 14, 2000.


     R issued a notice of deficiency to P for the
taxable year 1988, but P did not file a petition for
redetermination with the Court. R subsequently issued
a notice of intent to levy. P requested and received
an administrative review of the proposed collection
action. R issued a notice of determination to P
stating that all applicable laws and administrative
procedures had been met and that collection would
proceed; R further advised P that a challenge to the
underlying liability would not be considered because P
had received a notice of deficiency. P filed an
imperfect petition with the Court for review of
respondent’s determination to proceed with collection.
However, the petition did not contain any specific
allegations. R moved to dismiss for failure to state a
claim. The Court then directed P to file a proper
amended petition, but P failed to do so. Rather, P
filed a statement asserting that he is not liable for
the underlying liability based on frivolous and
groundless arguments.
                               - 2 -

          Held, P’s petition for review of R’s
     administrative determination to proceed with collection
     fails to state a claim upon which relief can be
     granted. See Goza v. Commissioner, 114 T.C. 176
     (2000). Held, further, the Court may in a Lien and
     Levy Action, either upon the Commissioner’s motion or
     sua sponte, require a taxpayer to pay to the United
     States a penalty not in excess of $25,000 whenever it
     appears that such action has been instituted or
     maintained by a taxpayer primarily for delay or that
     the taxpayer’s position in such action is frivolous or
     groundless.   See sec. 6673(a)(1), I.R.C.

     Terry Hiram Pierson, pro se.

     Kerry Bryan and John A. Weeda, for respondent.

                              OPINION

     WELLS, Chief Judge:   This case was assigned to Special Trial

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

7443A(b)(5) 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.

               OPINION OF THE SPECIAL TRIAL JUDGE

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

on respondent’s Motion To Dismiss For Failure To State A Claim

Upon Which Relief Can Be Granted.   As discussed in detail below,

we shall grant respondent’s motion.




     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 -

                             Background

     On October 6, 1995, respondent issued a notice of deficiency

to petitioner determining a deficiency of $5,944 in his Federal

income tax for 1988, as well as an addition to tax pursuant to

section 6651(a)(1) in the amount of $736 and an addition to tax

pursuant to section 6654(a) in the amount of $166.    Petitioner

did not file a petition with the Court contesting the notice of

deficiency within the 90-day period prescribed in section

6213(a).

     The notice of deficiency for 1988 was mailed to petitioner

at 7690 Knox Court, Westminster, Colorado 80030, the same address

that petitioner used in filing the petition herein.    Petitioner

does not allege that he did not receive the notice of deficiency,

and respondent has no record that the notice was returned by the

U.S. Postal Service to respondent as undelivered.

     On January 24, 2000, respondent mailed a final notice of

intent to levy to petitioner.   See sec. 6331.   The notice stated

that petitioner owed tax and additional amounts totaling

$8,309.06 for the taxable year 1988 and that respondent was

preparing to collect this amount.   The notice also stated that

petitioner would be given 30 days to request an Appeals Office

hearing.

     Petitioner requested a hearing with respondent's Appeals

Office.    On July 12, 2000, the Appeals Office issued a Notice of
                                - 4 -

Determination Concerning Collection Actions to petitioner stating

in pertinent part as follows:

     Your request for a hearing with Appeals was made under
     IRC §6330 to prevent appropriate collection action.
     You state in your request that you did not have income
     for 1988 that is subject to tax. Tax was assessed for
     the year 1988 under IRC §6020(b) because you failed to
     voluntarily file an income tax return. You were
     provided an opportunity to dispute the assessment but
     you defaulted on the statutory notice of deficiency of
     October 6, 1995.

     A hearing with Appeals to discuss alternative
     collection resolutions was held with you on June 12,
     2000. IRC §6330(c)(2)(B) precludes you from raising
     the 1988 liability as an issue. You responded by
     stating that you had no income that is subject to tax
     for 1988 and requested a Determination Letter be issued
     so that you may pursue your case through the Tax Court.

     On August 10, 2000, petitioner submitted to the Court a

document that the Court filed as an imperfect petition for review

of respondent's determination to proceed with collection.2    The

petition does not contain any specific allegations.

     In response to the petition, respondent filed a Motion To

Dismiss For Failure To State A Claim Upon Which Relief Can Be

Granted.   Respondent asserts that, because petitioner received a

notice of deficiency for the year in issue (and therefore was

presented with an earlier opportunity to contest his tax

liability in this Court), petitioner is precluded by statute from

contesting his tax liability in this proceeding.   By Order dated



     2
        At the time that the petition was filed, petitioner
resided in Westminster, Colo.
                               - 5 -

October 4, 2000, petitioner was directed to file a proper amended

petition.   Petitioner failed to file a proper amended petition.

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

session held in Washington, D.C., on November 8, 2000.   Counsel

for respondent appeared at the hearing and offered argument and

evidence in support of respondent's motion to dismiss.   No

appearance was made by or on behalf of petitioner at the hearing.

Rather, petitioner responded to the notice of hearing by filing a

Rule 50(c) statement in which he asserted that he is not liable

for the underlying taxes based on frivolous and groundless

arguments, including the following:

     According to 6331(a) and the fact I am not an elected
     official, or an employee of the United States of
     America or one of its possessions, and not receiving an
     income from the government, (upon whom a levy or notice
     of levy could be served) the “Notice of intent to levy”
     should not be allowed to be used on the citizens and
     general public.

     The word income is not defined in the I.R.C., * * *
     but, can only be a derivative of corporate activity.

     [I]ncome taxes applied on individuals is [sic] illegal.

     [T]axes are filed voluntarily and * * * Assessment of
     taxes on individuals is also voluntary and self
     assessment [sic].


                            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, then the Secretary is authorized
                               - 6 -

to collect such tax by levy upon property belonging to the

taxpayer.   Section 6331(d) provides that the Secretary is obliged

to provide the taxpayer with notice before proceeding with

collection by levy on the taxpayer's property, including notice

of the administrative appeals available to the taxpayer.

     In the Internal Revenue Service Restructuring and Reform Act

of 1998 (RRA 1998), Pub. L. 105-206, sec. 3401, 112 Stat. 685,

746, Congress enacted new sections 6320 (pertaining to liens) and

6330 (pertaining to levies) to provide due process protections

for taxpayers in tax collection matters.   Section 6330 generally

provides that the Commissioner cannot proceed with the collection

of taxes by way of a levy on a taxpayer's property until the

taxpayer has been given notice of 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 in either the Tax Court or Federal

District Court.

     In Goza v. Commissioner, 114 T.C. 176 (2000), we explained

that section 6330(c) provides for an Appeals Office hearing to

address collection issues such as spousal defenses, the

appropriateness of the Commissioner's intended collection action,

and possible alternative means of collection.   Under section

6330(c)(2)(B), neither the existence nor the amount of the

underlying tax liability can be contested at an Appeals Office
                                - 7 -

hearing unless the taxpayer did not receive a notice of

deficiency for the taxes in question or did not otherwise have an

earlier opportunity to dispute such tax liability.     The taxpayer

in Goza had received a notice of deficiency, yet failed to file a

petition for redetermination with the Court.     When the taxpayer

subsequently attempted to use the Court's collection review

procedure as a forum to assert frivolous and groundless

constitutional arguments against the Federal income tax, the

Court dismissed the petition for failure to state a claim upon

which relief can be granted.

     As was the case in Goza v. Commissioner, supra, we are

satisfied that petitioner received a notice of deficiency, failed

to file a petition for redetermination with the Court, and has

attempted to contest his liability in this collection review

proceeding by raising frivolous and groundless arguments that he

is not liable for Federal income tax.     Under the circumstances,

section 6330(c)(2)(B) clearly provides that petitioner was barred

from contesting the existence or amount of his tax liability

before the Appeals Office.    Petitioner failed to raise a spousal

defense or challenge respondent's proposed levy by offering a

less intrusive means for collecting his tax liability in either

the Appeals Office hearing or in his petition for review filed

with the Court.    See sec. 6330(c)(2)(A).   These issues are now

deemed conceded.    See Rule 331(b)(4).   In the absence of a
                                - 8 -

justiciable issue for review, we conclude that the petition fails

to state a claim for relief.3

     As a final matter, we feel compelled to make mention of

section 6673(a)(1).   That section provides in relevant part as

follows:

     SEC. 6673. SANCTIONS AND COSTS AWARDED BY COURTS.

     (a) Tax Court Proceedings.--

          (1) Procedures Instituted Primarily for Delay,
     Etc.--Whenever it appears to the Tax Court that--

                (A) proceedings before it have been
           instituted or maintained by the taxpayer primarily
           for delay,

               (B) the taxpayer’s position in such
          proceeding is frivolous or groundless, * * *
     the Tax Court, in its decision, may require the
     taxpayer to pay to the United States a penalty not in
     excess of $25,000.

See Wilkinson v. Commissioner, 71 T.C. 633 (1979), for a

discussion of the history of legislative efforts to discourage

frivolous appeals to this Court.

     In the context of a deficiency action that we decided some

23 years ago, we stated as follows:

          In recent times, this Court has been faced with
     numerous cases, such as this one, which have been
     commenced without any legal justification but solely
     for the purpose of protesting the Federal tax laws.


     3
        The decision in this case will indicate that we sustain
respondent's administrative determination to proceed with
collection against petitioner. Our decision does not serve as a
review of respondent's determination as to petitioner's
underlying tax liability for 1988.
                               - 9 -

     This Court has before it a large number of cases which
     deserve careful consideration as speedily as possible,
     and cases of this sort needlessly disrupt our
     consideration of those genuine controversies.
     Moreover, by filing cases of this type, the protesters
     add to the caseload of the Court * * * and such cases
     increase the expenses of conducting this Court and the
     operations of the IRS, which expenses must eventually
     be borne by all of us.

Hatfield v. Commissioner, 68 T.C. 895, 899 (1977).   Although we

did not require the taxpayer in that case to pay a penalty, we

stated that “if tax protestors continue to bring such frivolous

cases, serious consideration should be given to imposing such

damages.”   Id. at 900.

     We are convinced that petitioner instituted or maintained

the present case primarily, if not exclusively, as a protest

against the Federal income tax.   Further, it is readily apparent

that petitioner’s position is frivolous and groundless.   See,

e.g., Smith v. Commissioner, T.C. Memo. 2000-290.    Thus, we would

be fully justified in requiring petitioner to pay a penalty

pursuant to section 6673.   On the other hand, this Court’s

jurisdiction over lien and levy actions is barely 2 years old,

see RRA 1998 sec. 3401, and we have not previously required a

taxpayer who abused the protections afforded by sections 6320 and

6330 to pay a penalty pursuant to section 6673.   Nor have we

previously provided unequivocal warning to such taxpayers that we

may require them to pay such a penalty.   Accordingly, we have

decided not to require petitioner to pay a penalty in this case.
                              - 10 -

However, we regard this case as fair warning to those taxpayers

who, in the future, institute or maintain a lien or levy action

primarily for delay or whose position in such a proceeding is

frivolous or groundless.   See White v. Commissioner, 72 T.C.

1126, 1135-1136 (1979) (providing fair warning to taxpayers in

deficiency actions who bring frivolous case merely for purposes

of delay).

     To reflect the foregoing,



                                   An order of dismissal and

                              decision will be entered.
