T.C. Mem o. 2 01 4- 14 5

UNITED STAT ES TAX COURT

KEITH LE E KAYE, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 88 2- 13 L. Fi le d J ul y 23 , 20 14
.
Keit h Lee Kay e, pr o s e. Pet er T. McC ary, forres po nd en t.

MEMORANDUM OPINION VASQUEZ, Ju dg e: Thi s ca se was c omm en cedinres po ns e to a Not ic e o f Dete rm in at io n C on cern in g C ol le ct io n Act io ns Und er Se ct io n 6 32 0 and/o r 63 30 (n ot ic e o f de te rm in at io n)
. The i ss ue forde ci si onis whet he r res po nd en t m ay 1
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 (co nt in ue d...)- 2 -

[* 2] pr oc eedwith c ol le ct io n o f pe ti ti on er’s unp ai d F ed eral in co m e ta x l iabi li ty for 20 05 by lev y . The m at te r is be fo re the Co urt o n re sp on de nt ’s m ot io n fo r su m m ary jud gm en t fi le d p ur su an t t o R ul e 1 21 , to whi chpe ti ti on er o bjec ts . W e co nc lu de th atth ere i s n o g enui ne di sp ut e as to an y m at eri al fact , andres po nd en t i s en ti tl ed to su m m ary jud gm en t as a m at te r of law. Bac kg ro un d Pet it io ne r di d n otfil e a Fed eral in co m e ta x re tu rnfor20 05 . Res po nd en t pr ep areda subs ti tu te forreturn fo r 20 05 purs ua ntto sec ti on 60 20 (b ). On Jul y 11 , 20 11 , res po nd en t m ai le d t o p et it io ne r a n ot ic e o f de fic ie nc y for20 05 , whi chwas ad dr es se d t o h is las t kno wn an d c urren t ad dr es s. Pet it io ne r di d n otfil e a p et it io n 2
co nt es ti ng th e d efi ci en cy de te rm in at io n o r pa y

th e ta x l iabi li ty tha t was lat er
as se ss ed
. On Au gu st6, 2 01 2, re sp on de ntsen t p et it io ne r a Fi na l No ti ce, No ti ce o f In te ntto Levy andNot ic e o f You r Ri gh t t o aHeari ng . Peti ti on er s ub m itte d a ti m el y Fo 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 Hearin g.
(...co nt inue d) 1 Rev enue Co de ineffe ctat a ll rel ev an t t im es , andall Ru le refe ren ces are t o the Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e. The U.S. Po st al Serv ic e tr ackan d s hi p c on firm servi ce i nd ic at es th atth e 2 no ti ce o f de fic ie nc y

was d el iv eredonJu ly 15, 2 01 1.- 3 -

[* 3] Ina le tt er atta ch edto hi s Fo rm 12 15 3, p et it io ne r cl ai m edth at“ [t]he lev y /l ie n
orco ll ect io n o f [the ] sa m e wou ldcau se * * * [h im ] eco no m ic harm .” Pet it io ne r di d n otsubm itan y

do cu m en ts insupp ort o f hi s cl ai m or o ffera co ll ect io n al te rn at iv e. On Se pt em

be r 13 , 20 12 , pet it io ne r se nta le tt er t o re sp on de ntm ak in g fri vo lo us an d g ro un dl es s ar gu m en ts . He enc lo se d wi th th e le tt er s ev eral do cu m en ts , in cl ud in g a“ Bi rthCert ifi cat e Bo nd ” p ur po rti ng to be anin st ru m en t with an a ss ig ne d v al ue of $ 10 0 m il li on pay ab le to th e In te rn al Rev enue Serv ic e (IRS ) in ful l d is ch arg e o f hi s d eb t. Set tl em en t Offi cer Dar le ne C. Cap ut o o f th e IRS Offic e o f App eal s (Ap pe al s) was a ss ig ne d t o p et it io ne r’s cas e. Ina le tt er d at edOcto be r 16 , 20 12 , pe ti ti on er co nt in ue d t o c la im th athi s d eb t h adbe endi sc ha rg ed . Peti ti on er al so reque st eda face -to -fac e co ll ect io n due pro ces s (C DP) h eari ng . In a l et te r da te d Octo be r 23 , 20 12 , Settl em en t Offi cer C ap ut o a ckno wled ge d re cei ptof p et it io ne r’s Fo rm 12 15 3 and(1) in fo rm edpe ti ti on er tha t the arg um en ts he adva nc edwere fri vo lo us or g ro un dl es s o r arg um en ts th atApp eal s emplo y ees m ay no t co ns id er; (2 ) reque st edth atpe ti ti on er s ub m itrel ev an t, n on fri vo lo us in fo rm at io n (s uc h a s h is si gn edtax return fo r 20 05 , cha ll en ge s t o the ap pr op ria te ne ss of t he co ll ect io n act io n, an d/ orpro po se d c ol le ct io n a lt ern at iv es ); ( 3) reque st edth atpe ti ti on er
subm ita co m

pl et edFo rm

43 3- A, Col le ct io n In fo rm at io n S ta te m en t fo r W ag e- 4 -

[* 4] Earn ers an d S el f-Em pl oyed In di vi du al s; (4) de ni edpe ti ti on er a fa ce-t o- face he ari ng un le ss he withdrew al l fr iv ol ou s cl ai m s; an d (5 ) sc he du le d atel ep ho ne
co nf eren ce wi th pe ti ti on er fo r Nov em be r 28 , 20 12
. Pet it io ne r di d n otfil e any of t he reque st eddo cu m en ts or wi th dr aw hi s fri vo lo us arg um en ts . Ins te ad , pet it io ne r se ntres po nd en t ad di ti on al m at eri al s
co nt ai ni ng fri vo lo us arg um en ts , qu es ti on s, an d s ta te m en ts . In a l et te r da te d Nov em be r 5, 2 01 2, p et it io ne r reque st edth atth e sc he du le d t el ep ho ne CDP h eari ng be can cel ed . Peti ti on er al so reque st edth atth e rem ai nd er o f hi s C DP he ari ng be
co nduc te d thr ou gh co rres po nd en ce. Inan ot he r le tt er d at edNov em be r 14 , 20 12 , pe ti ti on er co nt in ue d t o a ss ertth athi s 2 00 5 t ax li ab il ity ha d b eendi sc ha rg ed , and al so cla im ed , forth e fi rs t t im e, th athe ha d n otrece iv eda no ti ce o f de fic ie nc y for 20 05
. On Dece m

be r 13 , 20 12 , res po nd en t i ss ue d p et it io ne r th e n ot ic e o f de te rm in at io n wi th res pe ctto hi s i nc om e ta x l iabi li ty for 2 00 5. Inth e n ot ic e o f de te rm in at io n, re sp on de ntde te rm in edth atth e p ro po se d l ev y sh ou ldbe su st ai ne d. On J anua ry

9, 2 01 3, p et it io ne r, res id in g i n F lo rid a, ti m el y fil eda pe ti ti on with the Co urt ch al le ng in g the no ti ce o f de te rm in at io n.- 5 -

[* 5] Dis cu ss io n I. Su m

m ary Ju dg m en t Ru le 12 1( a) p ro vi de s tha t ei th er p arty m ay m ov e fo r su m

m ary jud gm en t up on all or a ny partof t he leg al is su es inco nt ro ve rs y . Summ ary jud gm en t m ay be gr an te d i f itis de m on strat edth atno ge nu in e d is pu te ex is ts as t o any m at eri al fact
an d ade ci si on m ay

be ren de redas am atte r of law. Ru le 12 1( b) ; Sund st ran d C or p. v. Co m m is si on er, 9 8 T.C. 5 18 , 52 0 (1 99 2) , aff’d, 1 7 F .3d96 5 (7 thCir . 19 94 ). W e
co nc lu de th atth ere i s n o d is pu te as t o any m at eri al factan d tha t a d eci si on m ay be
ren de redas am at te r of

law. II. Dete rm in at io n To Su st ai n P ro po se d Lev y Acti on 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 t he 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 ).- 6 -

[* 6] 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 ta x, an d s ta tu to ry

in te res t. Kat z v . Comm is si on er, 1 15 T.C. 32 9, 3 39 (20 00 ). 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 t he 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 App eal s’ de te rm in at io n 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 un de rlyin g ta x l iabi li ty is p ro pe rly at is su e, we rev ie w th e ta xp ay er’s l iabi li ty de n ov o. Se e Goz a v . Comm is si on er, 1 14 T.C. 17 6, 1 81 -1 82 (20 00 ). W e rev ie w all othe r de te rm in at io ns forab us e o f di sc ret io n. Luns fo rdv. Co m m is si on er, 1 17 T.C. 18 3, 18 5 (2 00 1) ; Se go v. Co m mis 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 ; s ee al so Tin ne rm anv. IR S, 15 6 F ed . App x. 1 11 , 11 2 (1 1t h C ir. 2 00 5) (“ IRS Ap pe al s Off

ic e d et erm in at io ns are re vi ewedforanab us e o f di sc ret io n.” ).- 7 -

[* 7] A. Pet it io ne r’s Ch al le ng e to th e Und erl y in g Tax Liab il ity Pet it io ne r di sp ut es th e und erl y in g t ax li ab il ity for 20 05 . Sect io n 63 30 (c)( 2) (B) p recl ud es pe ti ti on er fro m ch al le ng in g the ex is te nc e o r am ountof th e li ab il ity

un le ss he di d n otrece iv e a s ta tu to ry no ti ce o f de fic ie nc y

for th e li ab il ity an d d idno t o th erwi se ha ve anop po rtu ni ty to d is pu te th e li ab il ity . A pro pe rly com

pl et edU.S. Pos ta l Se rv ic e Fo rm 38 77 (Fo rm

38 77 ) refl ect in g the ti m el y

m ai li ng of ano ti ce o f de fic ie nc y to a ta xp ay er atth e ta xp ay er’s l as t kno wn ad dr es s b y cert ifi edm ai l, ab se ntev id en ce t o the co nt rary,
es tabl is he s tha t the no ti ce was pro pe rly m ai le d t o the tax pa y er. Uni te d S tate s v . Ahr en s, 5 30 F.2d78 1, 7 84 (8t h C ir. 1 97 6) (“ The form [38 77 ] is co ns id eredhi gh ly pr ob at iv e ev id en ce tha t the no ti ce o f de fic ie nc y was s en t t o the ad dr es se s sp eci fie d.” ); C ol em anv. Co m m is si on er, 9 4 T.C. 8 2, 9 0- 91 (19 90 ). Furth erm or e,
co m pl ianc e with F orm

38 77 m ai li ng pro cedur es rai se s a p res um pt io n o f of

fic ia l reg ul ari ty in favo r of

th e Co m mis si on er. See Co le m anv. Co m m is si on er, 9 4 T.C. at91 . If th e p res um

pt io n i s ra is edan d the tax pa y er d oe s n otreb utth e pr es um pt io n, the Co urt m ay

fin d tha t the tax pa y er re cei ve d the no ti ce o f de fic ie nc y , th us pre cl ud in g c ha ll en ge s t o the un de rlyin g l iabi li ty und er s ect io n 63 30 (c)( 2) (B). See , e.g., Seg o v . Comm is si on er, 1 14 T.C. at 6 11 ; Cl arkv. Co m m is si on er, T.C. Mem o. 2 00 8- 15 5.- 8 -

[* 8] Res po nd en t at ta ch eda Fo rm 38 77 to hi s m ot io n fo r su m m ary jud gm en t sh owi ng th atart ic le No. 7 16 1 7 61 8 3 63 3 4 36 8 6 75 3 was m ai le d t o p et it io ne r’s la st kn ownad dr es s. Re sp on de ntin tro du cedin to ev id en ce the no ti ce o f de fic ie nc y for 20 05 , whi chbe ars at the to p thi s s am e art ic le nu m be r. Thi s cr eat es a pr es um pt io n th atth e n ot ic e o f de fic ie nc y was m ai le d andde li ve redto pe ti ti on er’s l as t kno wn ad dr es s. Th e rec or d c on ta in s n o e vi de nc e to reb utth e p res um pt io n. Al th ou gh pe ti ti on er d is pu te s re cei vi ng th e n ot ic e o f de fic ie nc y , he d idno t s etforth an y fact s to supp ort h is cla im

th athe di d n otrece iv e th e n ot ic e o f de fic ie nc y . See, e.g ., Ru le 12 1( d) ; Ko pr ows ki v. Co m m is si on er, 1 38 T.C. 54 , 57 -5 8 (2 01 2) (Co urt is su edanord er ad vi si ng th e ta xp ay er t o s up pl em en t h is pl ead in gs with d oc um en ts
an d p res en t s pe ci fic fact s s ho win g age nu in e is su e fo r tr ia l). We fin d tha t pe ti ti on er i s p recl ud edfro m ch al le ng in g the un de rlyin g t ax li ab il ity . See s ec. 63 30 (c)( 2) (B); Seg o v . Comm is si on er, 1 14 T.C. at 6 10 -6 11 ; Go za v . Co m m is si on er, 1 14 T.C. at 1 82 -1 83 ; s ee al so D’ Arcy v. Co m m is si on er, T.C. Mem o. 2 01 1- 21 3. B. Abu se of Di sc ret io n Whe re, as he re, a t ax pa y er’s und erl y in g t ax li ab il ity is no t p ro pe rly at is su e,
we rev ie w th e Co m

m is si on er’s d et erm in at io n fo r ab us e o f di sc ret io n. Se tt le m en t Offi cer C ap ut o a ffo rd edpe ti ti on er anop po rtu ni ty to b e h eardat the CDP h eari ng- 9 -

[* 9] be fo re i ss ui ng a no ti ce o f de te rm in at io n. A te le ph on e h eari ng was s ch edul ed fo r Nov em

be r 28 , 20 12 ; h owe ve r, pe ti ti on er re qu es te d tha t the tel ep ho ne he ari ng be can cel edan d tha t h is CDP h eari ng be co nduc te d b y co rres po nd en ce. Pet it io ne r
no w arg ue s tha t Se tt le m en t Offi cer C ap ut o abu se d h er d is cret io n b y de nyin g h is reque stfora face -to -fac e CDP h eari ng . This Co urt h as he ldth ata face -to -fac e he ari ng is no t re qu ire d u nd er s ect io n 6 33 0. Kat z v . Comm is si on er, 1 15 T.C. at 33 7- 33 8; W il li am so n v . Comm is si on er, T.C. Mem o. 2 00 9- 18 8; Sto ckto n v . Co m m is si on er, T.C. Mem o. 2 00 9- 18 6; Lein eweb er v . Commis si on er, T.C. Mem o. 20 04 -1 7. We hav e al so he ldth atanApp eal s o ffi cer’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 wh ere atax pay er fa il s t o p res en t
no nf riv ol ou s ar gu m 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. See Zas tro w v. Co m

m is si on er, T.C. Mem o. 2 01 0- 21 5; Mo li ne v. Co m mis si on er, T.C. Mem o. 2 00 9- 11 0, af f’d, 36 3 F ed . App x. 6 75 (10 th Cir . 20 10 ); S umm ers v. Co m m is si on er, T.C. Mem o. 2 00 6- 21 9. The Co urt o f App eal s fo r th e Ele ve nth C irc ui t s ta te d tha t “ [b ]ecaus e pr oc eed in gs be fo re anap pe al s o ffi cer are i nf orm al , tax reg ul at io ns pro vi de th ata CDP h eari ng m ay , bu t i s n otrequi redto , con si stof aface -to -fac e m eet in g.” Deem s v . Comm is si on er, 4 26 Fed . App x. 8 39 , 84 1- 84 2 (1 1t h C ir. 2 01 1)
.- 10 -

[* 10 ] Pet it io ne r m ad e o nl y fri vo lo us arg um en ts an d d idno t s ub m ita Fo rm 43 3- A
orth e supp orti ng do cum en ta ti onth atSet tl em en t Offi cer C ap ut o re qu es te d. Acco rd in gl y , we fin d tha t Se tt le m en t Offi cer C ap ut o d idno t ab us e h er d is cret io n inde te rm in in g p et it io ne r was no t en ti tl edto a face -to -fac e h eari ng an d c on du ct in g th e CDP h eari ng by corre sp on de nc e, es pe ci al ly becau se pe ti ti on er re qu es te d a he ari ng by corre sp on de nc e. III. Co nc lu si on Pet it io ne r ha s n otsh ownth atApp eal s’ det erm in at io n t o s us ta inth e pr op os edlev y

act io n was arb itrary, capri ci ou s, o r witho utso un d b as is infactor law. See Woodral v. Co m m is si on er, 1 12 T.C. 19 , 23 (19 99 ). Thro ug ho utth e CDP he ari ng , pet it io ne r adva nc edarg um en ts ch arac te ris ti c o f ta x- pr ot es te r rh et or ic th at ha ve be enun iv ers al ly rejectedby thi s an d o th er co urts . See Wilco x v . Co m m is si on er, 8 48 F.2d10 07 (9t h C ir. 1 98 8) , aff’g T.C. Mem o. 1 98 7- 22 5; Cart er v. Co m m is si on er, 7 84 F.2d10 06 , 10 09 (9t h C ir. 1 98 6) ; Ch arcz ukv. Co m m is si on er, 7 71 F.2d47 1 (1 0t h C ir. 1 98 5) , aff’g T.C. Mem o. 1 98 3- 43 3; Mi ch ael v. Co m

m is si on er, T.C. Mem o. 2 00 3- 26 ; Kn el m anv. Co m m is si on er, T.C. Mem o. 2 00 0- 26 8, af

f’d, 33 Fed . App x. 3 46 (9t h C ir. 2 00 2) . Peti ti on er co nt in ue d adva nc in g h is tax -p ro te st er rh et or ic be fo re thi s C ou rt. We will no t p ai ns taki ng ly ad dr es s p et it io ne r’s as se rti on s “ with s om be r rea so ni ng an d c op io us cit at io n o f- 11 -

[* 11 ] pr eced en t; to do so m ig htsu gg es t tha t the se arg um en ts have so m e co lo rab le
m eri t.” Cr ai n v . Comm is si on er, 7 37 F.2d14 17 , 14 17 (5t h C ir. 1 98 4) (pe r cu ria m);
se e al so Wnu ckv. Co m

m is si on er, 1 36 T.C. 49 8, 5 01 -5 13 (20 11 ). Pet it io ne r is no t en ti tl edto ch al le ng e h is un de rlyin g t ax li ab il ity . W e fi nd th atres 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 for 20 05 . W e n ow co ns id er s uasp on te whet he r to im po se san ct io ns onpe ti ti on er
un de r se ct io n 6 67 3( a)(1 ). See Pi ers on v. Co m m is si on er, 1 15 T.C. 57 6, 5 81 (2 00 0) . This sec ti on au th or iz es th is Co urt t o re qu ire a ta xp ay er t o p ay to th e Uni te d S tate s a p en al ty notto ex ceed$2 5,0 00 if the tax pa y er t oo k fr iv ol ou s po si ti on s i n the pro ceed in gs or i ns ti tu te d the pro ceed in gs pri m ari ly for d el ay . A po si ti onm ai nt ai ne d b y

th e ta xp ay er i s “ fri vo lo us ” if itis “ co nt rary to es tabl is he d law andun supp orte d b y

a reas on ed , col or ab le arg um en t fo r ch an ge inth e la w.” Co le m anv. Co m

m is si on er, 7 91 F.2d68 , 71 (7t h C ir. 1 98 6) . The p os it io ns pe ti ti on er m ai nt ai ns are u nque st io nabl y fri vo lo us , andth is Co urt wo ul d the refo re be jus ti fie d i n i m

po si ng ad di ti on al san ct io ns ; we i ns te adoff er a wo rdof c au ti on . Pet it io ne r is adm on is he d t o re frai n fr om adva nc in g fr iv ol ou s ar gu m en ts inan y fu tu re fi li ng s h e m ay

m ak e inth is Co urt b ecau se th e Co urt n ex t t im e is un li ke ly to sh ow l en ie nc y .- 12 -

[* 12 ] In re ach in g o urho ld in gs , we hav e co ns id eredall arg um en ts m ad e, an d t o th e 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 refl ectth e fo reg oi ng , An ap pr op ria te ord er
an d d eci si on wil l b e en te red fo r res po nd en t.