                      T.C. Summary Opinion 2004-45



                      UNITED STATES TAX COURT



                  DAVID A. BROWN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 11482-02S.              Filed April 6, 2004.


     David A. Brown, pro se.

     Marc L. Caine, for respondent.



     WOLFE, Special Trial Judge: This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time that the petition was filed.      Unless otherwise

indicated, all subsequent section references are to the Internal

Revenue Code as amended.   The decision to be entered is not

reviewable by any other court, and this opinion should not be

cited as authority.
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     This case arises from a petition for judicial review under

section 6330(d) with respect to respondent’s decision to proceed

with collection of petitioner’s Federal income tax liabilities

for 1995 and 1996.    Respondent has filed a Motion to Dismiss the

1995 Taxable Year on Grounds of Mootness (motion to dismiss for

mootness).

      Most of the facts have been stipulated.    We incorporate by

this reference the parties’ stipulation of facts and the

accompanying exhibits.   Respondent has provided a Form 4340,

Certificate of Assessments, Payments, and Other Specified

Matters, for both the 1995 and the 1996 taxable years.

Petitioner David Brown (petitioner) resided in Glen Head, New

York, at the time he filed his petition.

     On May 20, 1998, petitioner and his wife (taxpayers) filed a

joint return, Form 1040, U.S. Individual Income Tax Return, for

the 1995 taxable year (1995 return).    The 1995 return showed

Federal income tax withholdings of $14,651.14, which resulted in

an overpayment credit of $290.14.   Taxpayers elected to apply the

$290.14 credit to their 1996 tax.   On June 18, 1999, respondent

issued to taxpayers a Notice of Deficiency (notice of deficiency)

for income tax for the 1995 taxable year in the amount of $1,841,

an addition to tax under section 6651(a)(1) in the amount of

$118, and an accuracy-related penalty under section 6662(a) in

the amount of $368.   Taxpayers did not petition this Court for a
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redetermination of the deficiency, addition to tax, and penalty.

On October 25, 1999, respondent assessed the deficiency, addition

to tax, penalty, and additional interest of $787.13, in the total

amount of $3,114.13.

     On March 18, 1999, the taxpayers filed a joint income tax

return for the 1996 taxable year (1996 return).   The 1996 return

showed a tax liability of $25,269, Federal income tax

withholdings of $16,148, and an amount owed of $9,121.

Respondent did not issue a notice of deficiency for the 1996

taxable year.

     On September 17, 1999, petitioner made an inquiry with the

Problem Resolution Program (PRP) of the Problem Solving Office

(PSO) of the Internal Revenue Service (IRS) regarding the status

of the 1996 account.   On September 20, 1999, the PSO responded

with an acknowledgment letter that either someone from the PSO

would contact the petitioner, or petitioner could contact the PRP

caseworker, Mrs. C. Ogle (Ms. Ogle).   Thereafter, petitioner

spoke with Ms. Ogle, and taxpayers made payments in the amount of

$14,171.83 (tax payments) toward their tax obligations.   These

payments are reflected on Form 4340 for both 1995 and 1996 as

miscellaneous payments.

     On November 23, 1999, respondent applied $2,746.13 of the

tax payments to the taxpayers’ 1995 account.   As reflected on

Form 4340 with respect to the taxpayers’ 1995 taxable year, this
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miscellaneous payment, combined with a $391.23 overpayment credit

relating to the taxpayers’ 1998 taxable year, satisfied the

taxpayers’ liability for the 1995 taxable year.1    On November 23,

1999, taxpayers had an overpayment credit balance of $15.63.

     On November 29, 1999, respondent assessed tax of $25,269, an

addition to tax for late filing of $2,207.72, and interest of

$2,594.84 relating to the 1996 taxable year.    On December 29,

1999, respondent applied $11,425.70 of the tax payments to the

taxpayers’ 1996 account.   As reflected on Form 4340 with respect

to the taxpayers’ 1996 taxable year, the taxpayers’ account for

the 1996 taxable year received the following credits:    $290.14

overpayment credit from the 1995 taxable year that the taxpayers

elected to apply to 1996; $15.63 overpayment credit balance from

the 1995 taxable year as described above; and $455.77 overpayment

credit from the 1998 taxable year.     As of January 24, 2003, the

taxpayers’ balance due for the 1996 taxable year was $1,736.32.

     On July 18, 2001, respondent mailed to the taxpayers a Final

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

Hearing (final notice) for the 1995 and 1996 taxable years.    The

final notice informed the taxpayers of respondent’s intention to

levy under section 6331 and of the taxpayers’ right to Appeals

Office consideration.   The final notice also included a copy of


     1
        From October 25 to November 23, 1999, an increased
addition to tax and interest accrued in the amount of $7.60.
                                 - 5 -

Form 12153, Request for a Collection Due Process (CDP) hearing,

to request a hearing with the Appeals Office.

     On August 20, 2001, respondent received a timely request for

a CDP hearing from petitioner.    Petitioner’s wife did not sign

the request.   On November 8, 2001, respondent sent petitioner a

letter acknowledging petitioner’s request for Appeals Office

consideration and stating that a conference would be scheduled.

On February 15, 2002, respondent sent petitioner a letter setting

the date and time of the Appeals conference for March 28, 2002.

The designated Appeals officer was Elissa Sharp (Ms. Sharp).      The

CDP hearing never took place.    On June 10, 2002, respondent

issued a Notice of Determination to petitioner for the 1995 and

1996 taxable years.

     On July 10, 2002, petitioner filed a petition with this

Court.   Petitioner states in his petition that the “interest

penalties were excessive beyond what the law provides” and that

the IRS “contributed to the time delays yet continued to assess

late penalties for periods during its delays.”     On February 20,

2003, respondent submitted a motion to dismiss for mootness with

respect to the portion of the petition concerning 1995.

     If any person liable to pay any tax neglects or refuses to

pay that tax within 10 days after notice and demand for payment,

the Secretary is authorized to collect the tax by levy upon the

person's property.    Sec. 6331(a).   At least 30 days prior to
                               - 6 -

proceeding with enforced collection by way of a levy on a

person's property, the Secretary must notify that person in

writing of the Secretary's intent to levy and must provide notice

of the administrative appeals available to the taxpayer with

respect to the proposed levy and sale and the procedures relating

to such appeals.   Sec. 6331(d).

     Generally, section 6330 provides that “the Commissioner

cannot proceed with enforced collection by way of levy 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, the taxpayer may seek

judicial review of the administrative determination”.   Moorhous

v. Commissioner, 116 T.C. 263, 268 (2001).   Section 6330(b)

describes the administrative review process, providing that a

taxpayer can request an Appeals hearing with regard to a levy

notice.   At the Appeals hearing, the taxpayer may raise certain

matters set forth in section 6330(c)(2).

     Section 6330(c)(2)(A) 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.   Sego v. Commissioner, 114 T.C.

604, 609 (2000).   Section 6330(c)(2)(B) provides that the

existence and amount of the underlying tax liability can be

contested at an Appeals Office hearing only if the taxpayer did
                                 - 7 -

not receive a notice of deficiency for the taxes in question or

did not otherwise have an earlier opportunity to dispute the tax

liability.    Goza v. Commissioner, 114 T.C. 176, 180-181 (2000).

The term “underlying tax liability” includes additions to tax and

statutory interest that are the subject of the Commissioner’s

collection activities.     Katz v. Commissioner, 115 T.C. 329, 339

(2000).   To the extent that the underlying tax liability is at

issue, we review the taxpayer’s liability de novo.     The Court

reviews other administrative determinations for an abuse of

discretion.   Sego v. Commissioner, supra at 610.

1995 Taxable Year

     We begin with the 1995 taxable year and respondent’s motion

to dismiss for mootness.    Mootness is a jurisdictional question

since Article III, Section 2 of the Constitution limits the

jurisdiction of the Federal judicial system to “cases” and

“controversies”.     Hefti v. Commissioner, 97 T.C. 180, 191 (1991),

affd. 983 F.2d 868 (8th Cir. 1993).      Accordingly, “If a dispute

in litigation turns on the performance of a specific act, * * *

the litigation loses all substance and becomes moot when that act

is performed.”     Id. at 191-192.   Without a case or controversy,

this Court has no jurisdiction.

     At the time of the issuance of the final notice on July 18,

2001, respondent’s account summary showed a balance due for 1995

of $368 plus statutory additions of $90.37.     Thereafter,
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respondent’s records were updated.       According to Form 4340 for

the 1995 taxable year, the taxpayers’ updated 1995 account

reflected not only the tax payments made on November 23, 1999,

but also the $391.23 credit from the overpayment of taxpayers’

1998 tax.   Pursuant to the authority conferred by section

6402(a),2 respondent credited the $391.23 of the overpayment of

the taxpayers’ 1998 tax against their assessed, uncontested, and

unpaid tax liability for 1995.    The result was a $15.63

overpayment credit rather than a balance due.

     The taxpayers received a notice of deficiency for the 1995

taxable year but did not seek a redetermination of the tax

deficiency, addition to tax, and penalty.       Petitioner, therefore,

is not entitled to dispute the existence or amount of the

underlying tax liabilities for 1995 at a CDP hearing.       See sec.

6330(c)(2)(B).   Since petitioner no longer can challenge the

underlying tax liability for the 1995 taxable year, and the

taxpayers’ liability for the 1995 taxable year is satisfied,

there is no case or controversy for this Court to decide for the

1995 taxable year.   Accordingly, respondent’s motion to dismiss

for mootness will be granted.




     2
        Sec. 6402(a) expressly authorizes the Commissioner to
credit the amount of an overpayment against any tax liability of
the taxpayer.
                                 - 9 -

1996 Taxable Year

     As noted above, respondent did not issue a notice of

deficiency for the 1996 taxable year.    Petitioner does not

dispute the tax deficiency portion of the underlying tax

liability.   Rather, through his testimony and as stated on his

petition, petitioner is seeking to avoid the addition to tax and

the interest that has accrued.

     Petitioner contends that the addition to tax assessed must

be eliminated because his failure to file was due to reasonable

cause.   Petitioner does not offer any convincing explanation that

his failure to file was due to reasonable cause and not willful

neglect.   The taxpayers obtained an extension of time to file

their return to August 15, 1997, but they did not file their

return until 19 months later.    Petitioner testified that in 1995,

he had “an incident of Bells Palsy which caused a paralysis of

the right side of the face, which did not resume to near normal

until about two and a half years later.”    Yet, petitioner offers

no substantiating evidence of such illness and, more importantly,

has not provided any showing that such illness prevented either

the petitioner or his wife from filing the return on time.

Moreover, a review of the 1996 tax return shows that despite

petitioner’s illness, petitioner earned $88,701.79 in wages as a

banker working for Citicorp and that he and his wife received an

additional $18,967 in capital gains from their stock transactions
                               - 10 -

for the year.   Petitioner seemingly was able to earn significant

wages and conduct transactions resulting in capital gains, but he

was unable to file his tax return on time.3   Under the

circumstances presented in this case, we hold that petitioner has

not established reasonable cause for the late filing of his tax

return, and we sustain the imposition of the addition to tax for

late filing.

     Petitioner also contends that the interest assessed must be

abated because of communications he had with the PSO.     He argues

that he worked with Ms. Ogle, the PRP caseworker with the PSO, in

late 1999 to arrive at the tax payments made toward his tax

obligations.    Petitioner’s claim is that he made the payment as a

payout in accordance with his discussion with Ms. Ogle.

Respondent’s Appeals officer, Ms. Sharp, did not testify about

this matter, but respondent presented her affidavit with

attachments as evidence.   Neither Ms. Sharp nor Ms. Ogle was

present at the hearing to testify or be cross-examined.    The

record does not clearly show whether petitioner received “an

amount due” from an IRS employee and then paid that amount, and

the only testimony on the issue is petitioner’s claim that he


     3
        Petitioner states that his medical issues started in 1995
and extended through 1998, but he and his wife do not list any
medical expenses on their Schedule A. Although this may be the
result of an adjusted gross income of $176,344, resulting in 7.5
percent floor for medical expenses of $13,225.80, there is no
indication of any medical expenses on the return.
                              - 11 -

made the required payments for a payout.   Cf. Douponce v.

Commissioner, T.C. Memo. 1999-398 (holding that when a taxpayer

receives “an amount due” from an employee of respondent and then

promptly pays that amount, respondent’s failure to abate interest

thereafter is an abuse of discretion).

     Petitioner completed a Form 12153 to request a CDP hearing,

but the record reflects a breakdown of communication between the

petitioner and Ms. Sharp with respect to both the scheduling and

purpose of the hearing.   The original date of the hearing was

March 28, 2002.   Ms. Sharp’s affidavit and case activity record

indicate that the date was later changed to April 11, 2002.

Petitioner testified that he never received notice of either

hearing date and that there never was a hearing scheduled.    In

addition, petitioner contends that he was told by Ms. Sharp not

to bother attending any hearing if his intent was to dispute the

underlying tax liability, and Ms. Sharp’s affidavit does not

clearly contradict this testimony.

     In our view, petitioner’s failure to appear at a hearing in

the present case was at least partly the result of Ms. Sharp’s

misleading him.   The record does not show clearly that petitioner

ever had an opportunity to present his claim that he was notified

of “an amount due” to resolve his tax and made the payment.    If

the Appeals officer had reviewed this matter and denied

petitioner an abatement of interest, we could properly review
                              - 12 -

that determination.   On the present record we believe petitioner

has raised an irregularity in the assessment procedure.   Under

these circumstances we consider it appropriate to remand this

case for further proceedings as to 1996 concerning the issue of

an abatement of interest and particularly whether petitioner made

a payment of the amount due in accordance with instructions from

respondent’s representative (Ms. Ogle).   See Nestor v.

Commissioner, 118 T.C. 162, 167 (2002); see also Rivera v.

Commissioner, T.C. Memo. 2003-35.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,



                                          An appropriate order

                                    will be issued.
