T.C. Mem o. 2 01 4- 22 0 UNITED STAT ES TAX COURT
C. LYNN MOSES, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 17 10 -1 2L. Fi le d Oct ob er 2 0, 2 01 4.
C. Lynn Mo se s, p ro se. Kim be rly L. Cla rk , for

res po nd en t.

MEMORANDUM FINDINGS OF FACT AND OPINION VASQUEZ, Ju dg e: Pur su an t t o s ect io n 6 33 0( d) (1 ), pe ti ti on er s eek s re vi ew 1 of res po nd en t’s d et erm in at io n t o p ro ceedwith c ol le ct io n b y lev y of h is unpa id

Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o the Int ern al 1 Rev enue Co de (Co de ) in effe ctat a ll rel ev an t t im es , andall Ru le refe ren ces are t o th e Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e.-2
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[* 2] Fed eral in co m e ta x fo r 19 99 -2 00 2. Th e is su es forde ci si onas t o the y ears in is su e are : (1 ) whe th er p et it io ne r fai le d t o re po rt g ro ss in co m e; (2) whet he r pe ti ti on er i s l iabl e fo r ad di ti on s t o t ax un de r se ct io ns 66 51 (a)( 1) an d (2 ) an d 66 54 (a); an d (3 ) whe th er re sp on de ntab us edhi s d is cret io n i n s us ta in in g the pr op os edlev y

act io n. FINDINGS OF FACT I. Bac kg ro un d Pet it io ne r di d n otfil e Fed eral in co m e ta x re tu rn s fo r 19 99 -2 00 2. Co ns eque nt ly, th e In te rn al Rev enue Serv ic e (IR S) p rep areda subs ti tu te forreturn (SFR ) fo r eac h year ba se d o n abankde po si t an al y si s o f anacco un t p et it io ne r m ai nt ai ne d a t Key Bankdu rin g the y ears at i ss ue . A reve nu e ag en t o bt ai ne d the 2
acco un t’s re co rd s thr ou gh a th ird -p arty su m m on s an d d et erm in edonth e b as is of th os e rec or ds th atpe ti ti on er was en ga ge d i n areal est at e tr ad e o r bu si ne ss an d tha t pe ti ti on er h adfai le d t o re po rt i nc om e fro m hi s b us in es s fo r th e y ears at i ss ue . The
rev enue ag en t al so de te rm in edth atpe ti ti on er h adfai le d t o re po rt h is sh ares of h is wife ’s comm

un ity in co m e. Befo re tria l, a re ve nu e ag en t m etwith p et it io ne r to rev ie w res po nd en t’s 2 ba nkde po si t an al y se s. As a res ul t o f th is di sc us si on , res po nd en t co nc ed edat tria l an d o n b rie f th atth e d efi ci en ci es sh ou ldbe reduc edby $3,3 74 , $2 38 , and$1 38 for 19 99 , 20 00 , and20 01 , res pe ct iv el y . Res po nd en t al so co nc ed edth atpe ti ti on er i s no t l iabl e fo r anad di ti onto tax un de r se c. 66 54 for 19 99
.-3
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[* 3] On Au gu st8, 2 00 5, re sp on de ntm ai le d c op ie s o f a n ot ic e o f de fic ie nc y for th e y ears at i ss ue to each of thr ee ad dr es se s tha t the IRS h adonfil e fo r pe ti ti on er. One of the ad dr es se s was pe ti ti on er’s l as t kno wn ad dr es s. Ho wev er, al l thr ee no ti ces were re tu rn edto res po nd en t as “un cl ai m ed ”. Pet it io ne r di d n otfil e a pe ti ti on with the Co urt co nt es ti ng th e d efi ci en cy de te rm in at io ns , andonNov em be r 23 , 20 05 , th e IRS ass es se d p et it io ne r’s ta x l iabi li ti es forth e y ears at i ss ue . On Nov em be r 23 , 20 05 , andonJan ua ry 2, 2 00 6, the IRS al so ass es se d a dd it io ns to tax fo r th e y ears at i ss ue . II. Pet it io ne r’s Co ll ect io n Du e Pro ces s Ap pe al Pet it io ne r fai le d t o p ay

th e as se ss edtax li ab il it ie s, an d o n J ul y 14 , 20 11 , th e IRS s en t p et it io ne r Lett er 1 05 8, Fi na l No ti ce-- Not ic e o f In te ntto Levy andNot ic e of You r Ri gh t t o aHeari ng . On Aug us t 1 0, 2 01 1, the IRS re cei ve d p et it io ne r’s ti m el y fil edFo rm

12 15 3, Re qu es t fo r a Co ll ect io n Du e Pro ces s o r Equ iv al en t Heari ng . On tha t Fo rm

12 15 3 p et it io ne r reque st eda face -to -fac e h eari ng an d 3 st at edhi s i nt en t t o aud io reco rdth e h eari ng . Peti ti on er al so st at edth athe pl an ne d to : (1 ) ve rif

y th atth e IRS ha d fo ll owe d p ro pe r pr oc edur es ; (2 ) ch al le ng e th e ta x li ab il it ie s an d a ccru edpe na lt ie s; an d (3 ) di sc us s co ll ect io n a lt ern at iv es if i t co ul d
Pet it io ne r reque st eda co ll ect io n due pro ces s (C DP) h eari ng with re sp ect 3 to hi s u np ai d t ax li ab il it ie s fo r 19 99 -2 00 2.-4
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[* 4] be pro ve n tha t p et it io ne r owe d the tax . On Oct ob er 6 , 20 11 , th e IRS ’ Offi ce of App eal s (Ap pe al s) m ai le d p et it io ne r a l et te r in fo rm in g h im th athi s ca se ha d be enrece iv edforco ns id erat io n. Set tl em en t Offi cer Eri c D. Edward s (S ettl em en t Offi cer Edward s) was as si gn edpe ti ti on er’s cas e. On Oct ob er 1 2, 2 01 1, Se tt le m en t Offi cer Edward s m ai le d p et it io ne r a l et te r sc he du li ng a te le ph on e CDP h eari ng forNov em be r 15 , 20 11 . In the let te r, Settl em en t Offi cer Edward s i ns tru ct edpe ti ti on er t o s ub m ita co m pl et edFo rm

43 3- A, Col le ct io n In fo rm at io n S tate m en t fo r W ag e Earn ers an d Sel f-Em pl oyed In di vi du al s, an d s ig ne d t ax returns fortax y ears 20 03 -1 0 b y Nov em be r 10 , 20 11 . Peti ti on er fa il edto subm itth e reque st eddo cu m en ta ti on by th e d ead li ne . On Nov em be r 15 , 20 11 , Set tl em en t Offi cer Edward s at te m pt edto cal l p et it io ne r fo r th e sc he du le d C DP he ari ng , bu t p et it io ne r’s te le ph on e num be r ha d b eendi sc on ne ct ed . IRS rec or ds sh owe d n o o th er kno wn t el ep ho ne nu m be r fo r pe ti ti on er. The same day , Set tl em en t Offi cer Edward s m ai le d p et it io ne r a l et te r of feri ng hi m an ot he r op po rtuni ty for a t el ep ho ne CDP h eari ng . Sett le m en t Offi cer Edwar ds in stru ct edpe ti ti on er t o s ub m itby N ov em be r 30 , 20 11 , a co m

pl et edFo rm 43 3- A, cop ie s o f pe rs on al bankst at em en ts , si gn edtax returns fortax y ears 19 99
- 20 10 , andpro of

th atest im at edtax paym en ts ha d b eenpa idinful l. Set tl em en t-5
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[* 5] Offi cer Edward s al so in fo rm edpe ti ti on er tha t Ap pe al s wo ul d n oten te rta in fri vo lo us is su es an d tha t au di o re co rd in gs are al lo wedon ly in fa ce-t o- face he ari ng s. Pet it io ne r di d n otcal l the nu m be r pr ov id edby Sett le m en t Offi cer Edwar ds an d fa il edto subm itth e reque st eddo cu m en ta ti on by the de ad li ne . In st ead , pet it io ne r m ai le d S et tl em en t Offi cer Edward s a l et te r da te d Dec em be r 1, 20 11 , reque st in g aco py of th e ru le s tha t g ov ernCDP h eari ng s an d i ns is ti ng ona face -to -fac e h eari ng . In the let te r, pe ti ti on er que st io ne d wh y Set tl em en t Offi cer Edwar ds ha d re qu es te d t ax returns for tax y ears 19 99 -2 01 0, as pe ti ti on er d idno t

“ wan t t o g iv e up i nf

orm at io n tha t i s n otne ces sary or r equi redby the law.” Du rin g th e co ur se of the CDP h eari ng , pet it io ne r di d n otpro po se an y co ll ect io n al te rn at iv e. On Dec em

be r 14 , 20 11 , th e IRS is su edpe ti ti on er a No ti ce o f Det erm in at io n Co nc ern in g C ol le ct io n Act io n( s) Und er Se ct io n 6 32 0 and/o r 63 30 (no ti ce o f de te rm in at io n) su st ai ni ng th e p ro po se d l ev y . Pet it io ne r, whi le res id in g i n Id ah o, 4 ti m el y pe ti ti on edth is Co urt fo r rev ie w of the no ti ce o f de te rm in at io n.

Befo re the no ti ce o f de te rm in at io n was is su ed , Set tl em en t Offi cer Edward s 4 ve rif ie d tha t al l l eg al an d a dm in is tra ti ve requi rem en ts for co ll ect io n h adbe enm et .-6
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[* 6] OPINION I. St atut ory

Fram ewo rk Sect io n 6 33 1( a) au th or iz es th e Sec ret ary to lev y up onpro pe rty andpro pe rty rig ht s o f a t ax pa y er l iabl e fo r ta x i f th e ta xp ay er fa il s t o p ay th e ta x wi th in10 day s aft er n ot ic e an d d em an d fo r paym en t i s m ad e. Sect io n 6 33 0( a) p ro vi de s tha t n o le vy m ay be m ad e o n any pro pe rty or ri gh t t o p ro pe rty of an y pe rs on un le ss th e Secr et ary ha s n ot ifi edsu chpe rs on inwrit in g o f th e ri gh t t o ahe ari ng be fo re the le vy is m ad e. If a t ax pa y er re qu es ts a he ari ng inres po ns e to a no ti ce o f le vy purs ua ntto se ct io n 6 33 0, a h eari ng sh al l b e h el d b efo re anim pa rti al off

ic er o r em

pl oyee of App eal s. Sec . 63 30 (b )(1 ), (3 ). At th e h eari ng th e ta xp ay er m ay rai se an y rel ev an t is su e, in cl ud in g app ro pr ia te sp ou sa l d efen se s, ch al le ng es to th e ap pr op ria te ne ss of th e co ll ect io n a ct io n, an d c ol le ct io n a lt ern at iv es . Sec. 6 33 0( c)(2 )(A). A tax pa y er is pre cl ud edfro m

co nt es ti ng th e ex is te nc e o r am ou ntof the un de rlyin g t ax li ab il ity un le ss th e ta xp ay er d idno t re cei ve a no ti ce o f de fic ie nc y forth e li ab il ity

in qu es ti on or d idno t o th erwi se ha ve anearl ie r op po rtu ni ty to d is pu te th e li ab il ity . Sec. 6 33 0( c)(2 )(B) ; s ee al so Seg o v . Comm is si on er, 1 14 T.C. 60 4, 6 09 (20 00 ). The ph ras e “un de rlyin g t ax li ab il ity ” in cl ud es th e ta x d efi ci en cy , add it io ns to tax , an d s tatu to ry

in te res t. Kat z v . Comm is si on er, 1 15 T.C. 32 9, 3 39 (20 00 ).-7
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[* 7] Fo ll owi ng a he ari ng App eal s m us t d et erm in e whe th er p ro ceed in g wi th th e pr op os edlev y

act io n i s ap pr op ria te . In m ak in g tha t d et erm in at io n Ap pe al s i s requi redto tak e in to co ns id erat io n: (1) ve rif ic at io n p res en te d b y

th e Sec ret ary du rin g the he ari ng pro ces s tha t the requi rem en ts of app li cab le law an d adm in is tra ti ve pro cedur e h av e b eenm et , (2) rel ev an t i ss ue s ra is edby the tax pa y er, an d (3 ) whe th er the pro po se d l ev y act io n app ro pr ia te ly bal an ces th e n eedfor effi ci en t co ll ect io n o f ta xe s wi th th e ta xp ay er’s co nc ern s re ga rd in g the in tru si ve ne ss of the pro po se d c ol le ct io n a ct io n. Se c. 63 30 (c)( 3)
. Sect io n 6 33 0( d) (1 ) gr an ts th is Co urt juris di ct io n t o re vi ew th e d et erm in at io n m ad e b y App eal s i n c on ne ct io n wi th th e se ct io n 6 33 0 h eari ng . Whe re the va li di ty of th e und erl y in g t ax li ab il ity is pro pe rly at is su e, we rev ie w th e ta xp ay er’s li ab il ity de no vo . See Seg o v . Comm is si on er, 1 14 T.C. at 6 10 ; Go za v . Co m m is si on er, 1 14 T.C. 17 6, 1 82 (20 00 ). Pet it io ne r be ars th e b ur de n o f pr oo f reg ard in g h is un de rlyin g t ax li ab il it ie s. See Ru le 14 2( a). Whe re the un de rlyin g ta x l iabi li ty is n otpro pe rly at is su e, we rev ie w th e d et erm in at io n fo r ab us e o f di sc ret io n. Se go v. Co m

m is si on er, 1 14 T.C. at 6 10 ; Go za v . Comm is si on er, 1 14 T.C. at 1 82
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[* 8] II. Pet it io ne r’s Ch al le ng e to His Und erl y in g Tax Liab il it ie s A. Pet it io ne r’s Ri gh t t o C ha ll en ge Und erl y in g Li ab il it ie s Sect io n 6 33 0( c)(2 )(A) p erm it s a t ax pa y er t o ra is e an y rel ev an t i ss ue rel at in g to th e unp ai d t ax or t he pro po se d c ol le ct io n m etho d. If the tax pa y er s eek s Tax Co urt re vi ew of

th e n ot ic e o f de te rm in at io n, the Co urt ca n c on si de r on ly an is su e th atwas p ro pe rly rais edinth e CDP h eari ng . Sec. 3 01 .63 30 -1 (f)(2 ), Q&A-F3 , Pro ced . & Adm in . Reg s. Anis su e wil l n otbe co ns id eredpro pe rly rais edif the ta xp ay er fa il s t o re qu es t co ns id erat io n o f th e is su e o r reque st s co ns id erat io n b ut do es no t p res en t ev id en ce t o Ap pe al s af te r be in g g iv ena reas on ab le op po rtu ni ty to do so . Id. OnFo rm

12 15 3, p et it io ne r di sp ut edth e und erl y in g l iabi li ti es . Howev er, the re i s n ot hi ng inth e rec or d t o s ho w th atpe ti ti on er p ro vi de d any ev id en ce t o S et tl em en t Offi cer Edward s t o d is pu te th e li ab il it ie s. Ev enth ou gh pe ti ti on er h as no rig htto ha ve th is is su e co ns id eredinth is pro ceed in g, we ch oo se to do so he re fo r th e sa ke of c om pl et en es s. B. Vali di ty of th e Und erl y in g Li ab il it ie s 1. Defi ci en cy As a g en eral rul e, th e Co m m is si on er’s d et erm in at io n o f a t ax pa y er’s l iabi li ty ina no ti ce o f de fic ie nc y

is pre su m edco rrec t, an d the tax pay er b ears th e b ur de n o f pr ov in g tha t the de te rm in at io n i s i m pr op er. See Ru le 14 2( a); W el chv. Hel ve rin g,-9
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[* 9] 29 0 U.S. 1 11 , 11 5 (1 93 3) . In the Co urt o f App eal s fo r th e Nin th Cir cu it , to whi chanap pe al of t hi s ca se pre su m ab ly w ou ldli e ab se nta st ip ul at io n t o the
co nt rary, see s ec. 7 48 2( b) (1 )(A), (2 ), th e p res um pt io n o f co rrec tn es s d oe s n ot at ta chincas es in vo lv in g unr ep orte d i nc om e unl es s the Co m m is si on er fi rs t es tabl is he s an ev id en ti ary fo un da ti on li nk in g the tax pa y er t o the all eg edin co m epr oduc in g a ct iv ity , see W ei m ers ki rch v. Co m mis si on er, 5 96 F.2d35 8, 3 61 -3 62 (9 th Cir . 19 79 ), rev ’g 67 T.C. 67 2 (1 97 7) . The requi si te ev id en ti ary fo un da ti on is
m in im al an d n eedno t i nc lu de di rectev id en ce. See Ban is te r v. C omm is si on er, T.C. Mem o. 2 00 8- 20 1, af f’d, 41 8 F ed . App x. 6 37 (9t h C ir. 2 01 1)
. Onc e th e Co m

m is si on er p ro du ces ev id en ce l in ki ng th e ta xp ay er t o an in co m e-p ro du ci ng act iv ity , th e b ur de n s hi fts to th e ta xp ay er “ to reb utth e pr es um pt io n o f co rrec tn es s o f * * * [the Co m mis si on er’s] defi ci en cy de te rm in at io n b y

est ab li sh in g b y

a pr ep on de ran ce o f th e ev id en ce tha t the de fic ie nc y

de te rm in at io n i s arbi tra ry or e rro ne ou s.” Pe tz ol dtv. Co m m is si on er, 9 2 T.C. 66 1, 6 89 (19 89 ); s ee al so Hardy v. Co m m is si on er, 1 81 F.3d10 02 , 10 04 (9t h Ci r. 19 99 ), aff’g T.C. Me m o. 1 99 7- 97
. Fo r eac h o f th e y ears at i ss ue , res po nd en t re co ns tru ct edpe ti ti on er’s i nc om e us in g the bankde po si t m etho d. “ The us e o f th e b an k d ep os itm etho d fo r co m pu ti ng in co m e h as lo ng be ensan ct io ne d b y th e co urts .” Est at e o f Mas on v.-1 0-

[* 10 ] Co m

m is si on er, 6 4 T.C. 6 51 , 65 6 (1 97 5) , aff’d, 5 66 F.2d2 (6 thCir .19 77 ).

“ A ban k d ep os itis pri m a fac ie ev id en ce o f in co m e an d * * * [th e Co m mis si on er]
ne edno t p ro ve a li ke ly sou rce o f th atin co m e.” Tok ars ki v. Co m m is si on er, 8 7 T.C. 74 , 77 (19 86 ) (ci ti ng Est at e o f Mas on v. Co m m is si on er, 6 4 T.C. at65 6- 65 7)
. Res po nd en t h as est ab li sh edth e requi si te m in im al ev id en ti ary fo un da ti on li nk in g p et it io ne r with an i nc om e-p ro du ci ng act iv ity by intro du ci ng ev id en ce tha t he was e ng ag edina real est at e tr ad e o r bu si ne ss an d e arn edin co m e fro m hi s bu si ne ss du rin g the y ears at i ss ue . There fo re, p et it io ne r be ars th e b ur de n o f pr ov in g tha t re sp on de nt ’s def ic ie nc y de te rm in at io ns are arbi tra ry or e rro ne ou s. Pet it io ne r was gi ve n am

pl e o pp ortu ni ty to p ro vi de ev id en ce b ot h b efo re an d a t tri al . Peti ti on er, h owe ve r, of fere d n o t es ti m on y

or o th er ev id en ce. At tria l pe ti ti on er n ei th er s ho wedno r cl ai m edth atth e b an k d ep os it s wer e n on ta xabl e. Co ns eque nt ly, pe ti ti on er h as fai le d t o re bu t the pre su m pt io n tha t re sp on de nt ’s de te rm in at io ns are co rrec t. Acco rd in gl y , we su st ai n re sp on de nt ’s det erm in at io ns as to pe ti ti on er’s und erl y in g t ax li ab il it ie s fo r 19 99 -2 00 2 e xc ep t fo r th os e am ou nt s res po nd en t co nc ed ed
.-1 1-

[* 11 ] 2. Add it io ns to Tax

a. Burd enof P ro of

an d P ro du ct io n Sect io n 7 49 1( c) p ro vi de s tha t the Co m m is si on er b ears th e b ur de n o f pr oduc ti on with re sp ectto th e li ab il ity of a ny ind iv idua l fo r ad di ti on s t o t ax . “ The Co m m is si on er’s b ur de n o f pr oduc ti on un de r se ct io n 7 49 1( c) i s t o p ro du ce ev id en ce tha t i t i s ap pr op ria te to im po se th e rel ev an t p en al ty, ad di ti on to tax , or ad di ti on al am ou nt ”. Swai n v . Comm is si on er, 1 18 T.C. 35 8, 3 63 (20 02 ); s ee al so Hig be e v . Comm is si on er, 1 16 T.C. 43 8, 4 46 (20 01 ). If a t axpa y er fi le s a p et it io n al le gi ng so m e err or

inth e d et erm in at io n o f anad di ti on to tax or p en al ty, th e ta xp ay er’s ch al le ng e g en eral ly w il l s uc ceedun le ss th e Co m m is si on er p ro du ces ev id en ce tha t the ad di ti on to tax or p en al ty is ap pr op ria te . Swainv. Co m m is si on er, 1 18 T.C. at 3 64 -3 65 . The Co m m is si on er, h owe ve r, do es no t h av e th e o bl ig at io n t o i nt ro du ce ev id en ce re ga rd in g re as on ab le cau se . Hig be e v . Co m m is si on er, 1 16 T.C. at 4 46 -4 47
.

b. Sect io n 6 65 1( a)(1 ) Sect io n 6 65 1( a)(1 ) im

po se s an ad di ti on to tax forfai lure t o fi le a return o n th e d at e p res cri be d (d et erm in edwith re ga rdto an y ex te ns io n o f ti m e fo r fi li ng ),
un le ss th e ta xp ay er can e st ab li sh th atsu chfai lu re i s due to reas on ab le cau se an d
no t wi ll fu l n eg le ct . Peti ti on er d idno t fi le a ta x re tu rnfor an y of the y ears at i ss ue .-1 2-

[* 12 ] Pet it io ne r ha s n otarg ue d tha t h is fai lu re t o fi le was due to reas on ab le cau se an d n otdu e to wil lfu l n eg le ct . W e th eref or e h ol d tha t p et it io ne r is li ab le for
se ct io n 6 65 1( a)(1 ) ad di ti on s t o t ax for19 99 -2 00 2.

c. Sect io n 6 65 1( a)(2 ) Sect io n 6 65 1( a)(2 ) im

po se s an ad di ti on to tax forfai lure t o t im el y pay th e am ountsh ownas t ax ona return, u nl es s the tax pa y er can e st ab li sh th atsu ch fai lu re i s due to reas on ab le cau se an d n otwil lfu l n eg le ct . The Co m m is si on er’s bu rd enof p ro du ct io n re qu ire s h im to in tro du ce ev id en ce tha t the tax was s ho wn o n a Fed eral in co m e ta x re tu rn . Cab ira c v . Comm is si on er, 1 20 T.C. 16 3 (2 00 3)
. Whe n atax pa y er h as no t fi le d areturn, the sec ti on 66 51 (a)( 2) ad di ti onto tax m ay no t b e im po se d u nl es s the Secr et ary ha s p rep aredanSFR tha t m eet s the requi rem en ts of s ect io n 6 02 0( b) . Whe el er v . Comm is si on er, 1 27 T.C. 20 0, 2 08
- 20 9 (2 00 6) , aff’d, 5 21 F.3d12 89 (10 th Cir . 20 08 ). Pet it io ne r fai le d t o t im el y pay hi s t ax li ab il it ie s fo r th e y ears at i ss ue . Res po nd en t i nt ro du cedin to ev id en ce the SFRs he pre pa redforth e y ears at i ss ue , th ereb y sat is fy in g h is bu rd enof p ro du ct io n. Pe ti ti on er h as off eredno ev id en ce in di cat in g tha t h is fai lu res to pay were due to reas on ab le cau se an d n otwil lfu l
ne gl ect . W e th eref

or e h ol d tha t p et it io ne r is li ab le forsec ti on66 51 (a)( 2) ad di ti on s to tax for19 99 -2 00 2.-1 3-

[* 13 ] d. Sect io n 6 65 4( a) Sect io n 6 65 4( a) i m

po se s an ad di ti on to tax “ inth e cas e o f an y un de rp aym en t o f es ti m at edtax by an in di vi du al ”. A tax pa y er h as anob li ga ti on to pa y est im at edtax for

a pa rti cu lar y ear o nl y

if h e h as a “requi redan nu al paym en t” fo r th aty ear. Se c. 66 54 (d ). A requ ire d ann ua l p aym en t g en eral ly is equa l t o the le ss er o f (1 ) 90 % of the tax sh ownonth e return fo r th e ta xabl e y ear ( or , if n o return i s fi le d, 9 0% o f th e ta x fo r su chy ear) or ( 2) if the in di vi du al fil eda return fo r th e imm ed ia te ly prece di ng tax ab le y ear, 1 00 % of the tax sh ownonth atreturn. Sec. 6 65 4( d) (1 )(B) ; Wheel er v . Comm is si on er, 1 27 T.C. at 2 10 -2 11 ; Hee rs v. Co m m is si on er, T.C. Mem o. 2 00 7- 10 . Res po nd en t co nc ed edth atpe ti ti on er i s n ot li ab le foranad di ti on to tax un de r se ct io n 6 65 4( a) fo r 19 99 . Thu s, re sp on de nt ’s bu rd enof p ro du ct io n u nd er s ect io n 7 49 1( c) re qu ire s h im to pro du ce ev id en ce tha t pe ti ti on er h adrequi redan nu al paym en ts for 20 00 -2 00 2 und er s ect io n 6 65 4( d)
. Pet it io ne r m ad e n o p aym en ts of e st im at edtax foran y of the y ears at i ss ue . Res po nd en t es tabl is he d tha t p et it io ne r ha d arequi redan nu al paym en t fo r eac h o f th e y ears 20 00 -2 00 2. Pe ti ti on er d idno t fi le Fed eral in co m e ta x re tu rn s fo r th e y ears at i ss ue . There fo re, p et it io ne r’s requi redan nu al paym en ts for20 00 -2 00 2 were equa l t o 9 0% o f th e ta x fo r th os e y ears .-1 4-

[* 14 ] Pet it io ne r ha s n otarg ue d tha t an y of the ex cep ti on s t o the sec ti on 66 54 (a) ad di ti on to tax ap pl ie s. We th eref or e h ol d tha t p et it io ne r is li ab le forsec ti on 66 54 (a) a dd it io ns to tax for20 00 -2 00 2. III. Dete rm in at io n To Su st ai n the Pro po se d Lev y Acti on W e n ow turn t o re sp on de nt ’s det erm in at io n t o p ro ceedwith c ol le ct io n, whi chwe rev ie w un de r anab us e o f di sc ret io n s tand ard . App eal s ab us es it s di sc ret io n i f itact s “ arb itrari ly, cap ric io us ly, orwitho utso un d b as is infactor law.” W oo dr al v. Co m

mis si on er, 1 12 T.C. 19 , 23 (19 99 ). Acti ng witho uta so un d ba si s i n fa ctor l aw m ean s tha t an ag en cy su chas the IRS “ m ak es anerro r of law * * * o r res ts it s d et erm in at io n o n acle arl y erro ne ou s fi nd in g o f fac t * * * [or ] ap pl ie s the co rrec t l aw to fact s wh ic h are n otcle arl y erro ne ou s b utrul es inan irr at io na l m an ne r.” Un it edSta te s v . She rb urne , 24 9 F .3d11 21 , 11 25 -1 12 6 (9 th Ci r. 20 01 ) (ci ta ti on s o mitte d) ; s ee al so Co ot er & Gel l v . Hartm arx Co rp ., 49 6 U.S. 38 4, 4 02 -4 03 (19 90 ). Pet it io ne r co nt en ds th atSet tl em en t Offi cer Edward s ab us edhi s d is cret io n i n refu si ng to co nduc t a f

ace- to -fac e CDP h eari ng . W e d is ag ree. Th is Co urt h as he ld th ata face -to -fac e h eari ng is no t re qu ire d u nd er s ect io n 6 33 0. Kat z v . Co m m is si on er, 1 15 T.C. at 3 37 -3 38 ; Will ia m so n v . Comm is si on er, T.C. Mem o. 20 09 -1 88 ; St oc kt on v. Co m m is si on er, T.C. Mem o. 2 00 9- 18 6; Lein eweb er v .-1 5-

[* 15 ] Co m

m is si on er, T.C. Mem o. 2 00 4- 17 . W e h av e al so he ldth atanApp eal s of fic er’s d en ia l o f a fac e-t o- face he ari ng do es no t co ns ti tu te anab us e o f di sc ret io n whe re a t ax pa y er fa il s t o p res en t n on fri vo lo us arg um en ts an d re fu se s t o p ro vi de reque st edfin an ci al in fo rm at io n. Se e Zas tro w v. Co m m is si on er, T.C. Mem o. 20 10 -2 15 ; M ol in e v . Comm is si on er, T.C. Mem o. 2 00 9- 11 0, af f’d, 36 3 F ed . App x. 67 5 (1 0th C ir. 2 01 0) ; Su m m ers v. Co m

m is si on er, T.C. Mem o. 2 00 6- 21 9. Th e reg ul at io ns furth er p ro vi de th atif aface -to -fac e h eari ng is no t h el d, a h eari ng co nduc te d b y

tel ep ho ne , by co rres po nd en ce, o r by revi ew of do cu m en ts wil l
su ffi ce fo r pu rp os es of s ect io n 6 33 0( b) . See s ec. 3 01 .63 30 -1 (d )(2 ), Q&A-D7 , Pro ced . & Adm in . Reg s. The reco rdde m on strat es th ata face -to -fac e h eari ng wou ldno t h av e b een pr oduc ti ve . Peti ti on er was gi ve n an o pp ortu ni ty to p art ic ip at e in a te le ph on e CDP he ari ng ontwo sep arat e o ccas io ns bu t fa il edto tak e adva nt ag e ei th er t im e. Out si de of p et it io ne r’s arg um en t tha t h e h adno t re cei ve d ano ti ce o f de fic ie nc y for th e y ears at i ss ue , he p res en te d o nl y fri vo lo us an d g ro un dl es s ar gu m en ts th ro ug ho uthi s d eal in gs with re sp on de nt . Add it io na ll y , pet it io ne r, al th ou gh reque st edto do so onsev eral oc cas io ns , fai le d t o s ub m itreque st edfin an ci al do cu m en ta ti on (i.e ., Form 43 3- A) an d fi le pa st -due returns . Thu s, Se tt le m en t-1 6-

[* 16 ] Offic er Edward s d idno t ab us e h is di sc ret io n i n d et erm in in g p et it io ne r was no t en ti tl edto a face -to -fac e h eari ng . Set tl em en t Offi cer Edward s co ns id eredall othe r is su es pe ti ti on er ra is ed
. Pet it io ne r di d n otoff

er a co ll ect io n a lt ern at iv e to be co ns id ered . Howev er, ev enif he ha d, p et it io ne r fai le d t o p ro vi de fin an ci al do cu m en ta ti on , ren de rin g S et tl em en t Offi cer Edward s u nabl e to ev al ua te co ll ect io n a lt ern at iv es . See Ro m anv. Co m m is si on er, T.C. Mem o. 2 00 4- 20 ; Ro dr ig ue z v . Commis si on er, T.C. Mem o. 20 03 -1 53 . Furt he rm or e, Set tl em en t Offi cer Edward s d et erm in edth atth e requi rem en ts of app li cab le law an d a dm in is tra ti ve pro cedur e were m et . Fin al ly, at tri al , pet it io ne r of

fere d n o e vi de nc e th atres po nd en t’s d eci si on to su st ai n the pr op os edlev y

act io n c on st itut edanab us e o f di sc ret io n. Acco rd in gl y , we ho ldth at res po nd en t d idno t ab us e h is di sc ret io n i n s us ta in in g the pro po se d l ev y . Inreac hi ng ou r ho ld in g, we h av e co ns id eredall arg um en ts m ad e, an d t o the
ex te ntno t m en ti on ed , we con si de r th em irr el ev an t, m oo t, o r witho utm eri t. To re fle ctth e fo reg oi ng , Deci si on wil l b e en te red
un de r Ru le 15 5.