T .C. Su m m ary Op i n io n 2 01 7 -4 0

UNITED STATES TAX COURT

ALFRED H. SHUM , Pet i ti o ner v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 1 4 2 20 -1 6 S L. Fi l edJ u n e 1 5 , 2 0 1 7
.

Al fredH. Sh um , p ro s e. Cat h eri n e Lee Cam

p b el l , fo r res po n d en t.

SUM M ARY OPINION GUY, Sp eci al Tri al J u d g e: Th i s cas e was h eardp u rs uan tt o th e p ro v i s i o n s
o f s ect i o n 7 4 63 i n effect wh en th e p et i ti o n was fi l ed
. 1 Pu rs u an tt o s ect i o n 7 4 6 3 (b ),

1 Un l es s o th erwi s e i nd i cat ed , al l s ect i o n referen ces are t o th e In t ern al Rev enu e Co de i n effect atal l rel ev an tt i m es . Al l m o n et ary am o u n t s are ro u n d edt o th e n eares td o l l ar.- 2
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th e d eci s i o n t o b e en t eredi s n o trev i ewab l e b y an y o th er co u rt , an dth i s o p in i o n
s h al l n o tb e t reat edas p reced en tfo r an y o th er cas e. Th i s cas e i s an ap peal fro m a n o t i ce o f d et erm i n at i o n i s su edb y the In t ern al Rev enu e Serv i ce (IRS) Offi ce o f Ap p eal s (Ap p eal s Offi ce) s u s t ai n i n g a p ro p o s ed l ev y act io n t o co l l ecti nco m e t ax fo r the t ax ab l e y ear 2 0 1 0
. Th e s o l e i s s u e
rem ai n i n g fo r d eci s i o n i s wh et her t h e Ap p eal s Offi ce ab u sedi t s d i s cret i o n i n d et erm i n i n g t o p ro ceed wi th th e p ro p o s edl ev y act i o n . Back gro u n d So m e o f t h e fact s h av e b een s ti p u lat ed an dare s o fo u n d. Pet it i o n er res i d ed i n the St at e o f W as h i n g to n atth e t i m e t h e p et i t i o n was fi l ed
. Pet i t i o ner fi l eda Fed eral i n co m e t ax retu rn fo r 2 0 1 0 o n Ap ri l 1 5, 2 0 1 1 , rep o rt i n g t o t al t ax o f $ 6 ,5 5 0 an dcl ai m i n g a refu n do n an o v erp aym en t o f $ 1 ,5 7 8
. Th e IRS s ub s equ en t l y

ex am i n edp et it i on er’ s t ax retu rn fo r 2 0 1 0 an do n Decem b er 2 1 , 2 0 12 , s en tp et i t io n er b y cert i fi edm ai l a n o t i ce o f d efi ci en cy d et erm i n i n g an i n co m e t ax d efi ci en cy o f $ 5 ,4 9 3 an dan accu racy -rel at edp en al t y
u n d er s ect i o n 6 6 6 2 (a) o f $ 1 ,0 9 9 . Pet i t i o n er ack n o wl ed gedattri al th ath e act u al l y recei v edth e afo rem en t i on edn o t i ce o f d efi ci en cy i n J an u ary

2 0 1 3 an db el i ev es th at h e s h aredi t wi th h i s at t o rn ey s h o rt l y th ereaft er.- 3
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OnM arch 5 , 2 01 3 , p et i t io n er ex ecu t eda Fo rm 2 8 4 8 , Po wer o f Att o rn ey an d Decl arat i o n o f Rep res en t at iv e, ap p o i n t i n g at t o rn ey J es si ca Yuas h i s at t o rn ey i n fact fo r t h e t ax ab l e y ear 2 01 0 . Pet i t io n er d i dn otfi l e a p et i t i o n fo r red et erm i n at i on wi th th e Co u rtch al l en g in g th e n o t i ce o f d efi ci en cy fo r 2 0 10 . On M ay 6 , 2 0 1 3 , aft er m ak i n g s o m e m i n o r ad ju st m en t s i n p et i t i o n er’ s fav o r, res p o nd en t as s es s ed t ax o f $ 4 ,0 7 5, an accu racy -rel at edp en al ty o f $ 1 ,0 1 5 , an ad d it i on t o t ax fo r fai l u re t o t im el y p ay t ax du e o f $ 1 1 5 , an di n t eres to f $ 4 1 8 . Al th o ug h res p o n d en ti s s u ed p et i t i o n er a n o t i ce o f b al an ce du e, p et i t i o n er fai l edt o rem i t p aym en t
. OnOct o b er 2 5 , 2 01 3 , th e IRS m ai l edp et i t i o n er a Fi n al No t i ce o f In ten tt o Lev y an d No t i ce o f Yo u r Ri g h tt o a Heari n g fo r 2 01 0 . Pet i t i o ner s ub s equ en t l y
s ub m i t t edt o th e Ap p eal s Offi ce a t i m el y Fo rm 1 2 1 5 3 , Requ es tfo r a Co l l ect i o n Du e Pro ces s o r Equ i v al en tHeari n g , i n di cat i ng th at h e b el iev edth e p ro p o s edl ev y act i on was u n warran ted . Pet i t i o n er’ s cas e was as si gn edwi th i n th e Ap p eal s Offi ce t o Set t lem en tOffi cer St ev e Lern er (SO Lern er). In th e m ean t i m e, o n Oct ob er 2 9, 2 0 1 3 , p et i t i o ner s ub m i t tedt o the IRS a Fo rm 1 0 4 0 X, Am en d edU.S. In d i vi du al In co m e Tax Retu rn , fo r 2 0 1 0. Pet i t i o n er rep o rt edo n the am en d edretu rn th at h e o wed ad di t i o n al t ax o f $ 5 2 6 . Th e IRS d id
n o tp ro ces s p et i ti o n er’ s am en d edretu rn .- 4
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OnJ u ne 3 0 , 2 01 4 , p et i t i o n er ex ecu teda Fo rm 2 8 4 8 ap p o i n ti n g at t o rn ey Deb orah Co ch ran as h is at t o rn ey -i n -fact fo r t h e t ax ab l e y ear 2 0 10
. OnJ an u ary

2 0 , 2 0 1 6 , fo ll o wi n g n um ero u s ex ch an g es wi th M s . Yuan dM s . Co ch ran , SO Lern er co n du ct edan ad m i n i s trat i v e h eari n g b y way o f a t el ep h o n e
co n feren ce wi th M s . Co ch ran . Al th o u gh p et i t i o n er b el i ev es th atM s. Co ch ran d i d
n o tu n ders t an dth at th e t el ep ho n e co n feren ce co n s t i tu t ed a h eari n g , M s . Co ch ran d i dn o t ap p ear at tri al t o t es t i fy . Inan y ev en t , p et it i on er m ai nt ai nedth at th e IRS
s h o u ldp ro ces s h i s am en d ed retu rn an dreduce h i s o u ts t an d i n g t ax l i ab il i ty
acco rd i n g l y . SO Lern er co ncl u d edth atp et i t i o ner h adrecei v edth e n o t i ce o f d efi ci en cy

fo r 2 0 1 0 (d es cri b edab o v e) an dth erefo re was p recl u d edfro m ch al l en g i n g th e ex i st en ce o r am o u n to f h i s u n d erl y in g t ax l i ab i li ty fo r 2 0 1 0 as p art
o f t h e Ap p eal s Offi ce ad m i n is trat i v e rev i ew p ro ces s . Becau s e p et i ti o n er fai l edt o
o ffer o r ag ree t o a co l l ect i o n al t ern at i v e, t h e Ap p eal s Offi ce i ss u ed p et i t io n er a
n o t i ce o f d et erm i n at i on s u s tai n i n g th e p ro p o s ed l ev y act i o n . Pet i t i o ner i n v o k ed th e Co u rt ’ s juri s d i ct io n b y fi l i n g a t i m el y p et i t io n fo r rev i ew o f t h e Ap p eal s Offi ce d et erm i n at i o n . Di s cu ss i o n If an y p ers o n l i ab l e t o p ay

an y t ax n eg l ect s o r refu s es t o p ay s u ch t ax wi t h i n 1 0 d ay s aft er n o t i ce an d d em an dfo r p aym en t , th e Co m m i s s i o ner i s au th o ri zedt o- 5
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co l l ects u ch t ax b y l ev y up o n th e p ers o n’ s p ro p ert y . Sec. 6 3 3 1(a). Atl eas t3 0 d ay s b efo re en fo rci n g co l lect i o n b y l ev y o n t h e p ers o n ’ s p ro p ert y , the Co m m i s s i o n er i s o b l i g edt o p ro v i d e a fi n al n o t i ce o f i n t en tt o l ev y , i ncl u d in g
n o t i ce o f av ai lab l e ad m i n i s trat iv e ap p eal s . Sec. 6 3 3 1(d ). Gen eral l y s p eak i n g , th e Co m m i s s i o n er can n o tp ro ceed wi th co l l ect i o n b y l ev y u n t i l (1 ) t h e p ers on h as b een g i v en n o t i ce an dthe o pp o rtu n i ty fo r an ad m in i s trat iv e rev i ew o f t h e m at t er (i n the fo rm o f an Ap p eal s Offi ce h eari n g ) an d , i f t h e p ers o n i s d i ss at i s fi ed , (2 ) ju d i ci al
rev i ew o f th e ad m i n is trat i v e d et erm i n at i o n i s fi n al
. Sec. 6 3 3 0 ; s ee Dav i s v . Co m m i s s i o n er, 1 1 5 T.C. 3 5 , 3 7 (2 0 0 0 ); Go za v . Co m m is si o n er, 1 1 4 T.C. 1 7 6 , 1 7 9 -1 8 0 (2 0 0 0 ). Th e Ap p eal s Offi ce i s res p o n s i bl e fo r co ndu ct i n g ad m i ni s trat i v e h eari n g s i n
co l l ect i o n m at t ers . Sec. 6 3 3 0 (b )(1 ). In p art i cu l ar, t h e Ap p eal s Offi ce m u s tv eri fy th atth e requ i rem en t s o f an y ap p l i cab l e l aw o r ad m i n i s trat i ve p ro cedure h av e b een
m eti n p ro ces s i n g th e cas e. Sec. 6 3 3 0 (c)(1 ), (3 )(A). Th e Ap p eal s Offi ce al s o m u s t
co n si d er an y

i s s u es rai s edb y

th e p ers o n rel at in g t o th e u np ai d t ax o r p ro p os ed l ev y , i ncl u d i n g o ffers o f co l l ect i o n al t ern at i v es , ap p ro p ri at e s p o us al d efen s es , an d ch al l en g es t o t h e ap p ro p ri at en es s o f t h e co l l ect i o n act i on . Sec. 6 33 0 (c)(2 )(A), (3 )(B). A p ers o n m ay ch al len g e t h e ex i s t en ce o r am o u n to f h i s u nd erl y i n g t ax l i ab i l i ty if t h e p ers on d i dn o trecei v e a n ot i ce o f d efi ci en cy o r d idn o to th erwi s e- 6
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h av e ano p po rtu ni ty to d i sp u te s u ch t ax l i ab il i ty . Sec. 6 33 0 (c)(2 )(B). Fi n al l y , th e Ap p eal s Offi ce m

u s t co ns i d er wh et h er t h e co l l ect i o n act i o n b al an ces th e n eedfo r effi ci en tco l lect i o n ag ai n s tth e p ers o n ’ s co ncern th atco l l ect i o n b e n o m o re i n tru si v e t h an n eces s ary . Sec. 6 3 3 0 (c)(3 )(C). Th e Tax Co u rt h as juri s di ct i o n t o rev i ew t h e ad m in is trat iv e d et erm in at i o n
m ad e b y th e Ap p eal s Offi ce. Sec. 6 3 3 0 (d )(1 ). If t h e t ax p ay er’ s u n d erl y in g t ax l i ab i l i ty is n o tp ro perl y

i n d i s p u t e, we rev i ew t h e Ap p eal s Offi ce’ s ad m i n i st rat i v e d eci s i o n fo r ab u se o f d i s cret i o n . Go za v . Co m m i s s i on er, 1 1 4 T.C. at1 8 1 -1 8 2 . An ab u se o f d i s cret i o n o ccu rs i f t h e Ap p eal s Offi ce ex erci s es i ts d is cret i o n

“ arb i trari l y , cap ri ci o u sl y , o r wi th o uts o un db as i s i n facto r l aw.” W o od ral v . Co m m i s s i o n er, 1 1 2 T.C. 1 9 , 2 3 (1 9 9 9 ). Pet i t i o ner m ai n t ai n s th atth e Co u rts h o u l d rev i ew h i s am en d edretu rn an d red et erm i n e (an dreduce) t he am o un to f h i s t ax l i ab i l i ty fo r t h e y ear i n i s s u e. In th e al t ern at i ve, h e as s ert s th atth e Ap p eal s Offi ce p rem atu rel y t erm in at edth e ad m i n is trat i v e rev i ew p ro ceed in g . Pet i t i o ner ack n o wl ed g edat tri al th ath e recei vedth e n o t i ce o f d efi ci en cy fo r 2 0 1 0 s h o rt l y

aft er i twas m ai ledt o h i m o n Decem

b er 2 1 , 2 0 1 2. He d i dn o t , h o wev er, fi l e a p et i t i o n fo r red et erm i n at io n wi th th e Co u rtp u rs uan t t o s ect i o n 6 2 1 3 (a). Un d er t h e ci rcu m s t an ces , th e Ap p eal s Offi ce co rrect l y d et erm i n edth at- 7
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p et i t i o n er was b arredfro m ch al l en g i n g th e am o un to f h i s u n d erl y i n g t ax l i ab i l i t y fo r 2 0 1 0 as p arto f t h e ad m i n i s trat i v e rev i ew p ro ces s . See s ec. 6 3 3 0(c)(2 )(B). 2 Co n traryt o p et i t i on er’ s as s ert i o n th atth e ad m i ni s trat i v e rev i ew p ro ces s was t erm i n at edp rem atu rel y , th e reco rdrefl ect s th atth e Ap p eal s Offi ce fu l fi ll edi t s
o b l i g at i o ns as p res cri b edi n s ect i o n 6 3 30 . Sp eci fi cal ly , th e Ap peal s Offi ce p ro p erl y v eri fi edth atth e requ irem en t s o f ap p l i cab l e l aw an dad m i n i st rat i v e p ro cedure were m eti n p ro ces s i n g p et it i o ner’ s cas e. See s ec. 6 33 0 (c)(1 ), (3 )(A). In ad d it i o n , p et i t i o n er co n ced edattri al th ath e d i dn o to ffer a co l l ect io n al t ern at i v e (s u ch as an o ffer-i n -co m

p ro m i se o r an i n st al lm en tag reem en t ) b ecau s e h e d i dn o t b el i ev e t h ath e o wed th e t ax , p en al ty , an di n t eres t th at th e IRS as ses s edfo r t h e y ear i n i s s u e. Un d er t h e ci rcu m s t an ces , wi th n o co l l ect io n al t ern at i ve t o co n s i d er, th e Ap p eal s Offi ce d i dn o tab u s e i t s d i scret io n i n co ncl u d i n g th e ad m in i s trat i v e p ro ces s b y

i s s ui ng th e n o ti ce o f d et erm i n at i o n u n d erl y i ng th i s act i o n. See s ec. 6 3 3 0 (c)(2 )(A), (3 )(B); s ee, e.g . , Po u g h v . Co m m i s si o n er, 1 3 5 T.C. 3 4 4 , 3 5 1

2 As n o t edab ov e, res p o n d en tm ad e m i n o r ad ju s t m en t s i n p et i t io n er’ s fav o r an d as ses s edt ax an dan accu racy -rel at edp en al ty i n am o u n t s th atwere l es s t h an th o s e d et erm i n edi n th e n o t i ce o f d efi ci en cy . Res p o n d en tal s o as s es sedan ad d it i o n t o t ax fo r fai l u re t o t i m el y p ay t ax due an di n t eres t . As i d e fro m the arg u m en tth atres po n d en t s ho u l dh av e ad ju s t edth e am o u n t o f t ax du e as rep o rt ed i n p et i ti o n er’ s am en d edretu rn (wh i ch wo u l dh av e req u i redco n fo rm in g ad ju s t m en t s t o ap pl i cab le p en al t i es an di n t eres t ), p et i ti o n er d i dn o to ffer an y ev i d en ce o r s p eci fi c arg um en tth atthe IRS h aderred i n as s es s i ng th e fai l ure t o p ay ad d it i o n t o t ax o r i n t eres t
.- 8
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(2 0 1 0). Fi n al l y , i n th e ab sen ce o f a v i ab l e co l l ect i o n al t ern at i v e, t h e Ap p eal s Offi ce d et erm in at i o n t o p ro ceed wi th t he p ro p o s edl ev y act i o n b al an ces th e n eed fo r effi ci en tco l l ect io n ag ai n s tp et i t i o n er’ s co n cern thatco l l ect io n b e n o m o re i n tru si v e t h an n eces s ary . See s ec. 6 33 0 (c)(3 )(C). In s u m , we h ol dth atp et it i o n er was b arred fro m ch al l en g in g th e am o u n to f h i s u n d erl y i n g t ax l i ab i l it y fo r 2 0 1 0 as p arto f th e ad m i n i st rat i v e rev i ew p ro ces s
an d th e Ap p eal s Offi ce d i dn otab u s e i t s d i s cret i o n i n d et erm i n i n g t o p ro ceed wi t h th e p ro p o s edl ev y

act i on . To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t ered fo r res p o n den t
.