T.C. Summary Opinion 2007-67

UNITED STATES TAX COURT

ROBERT LINDLEY COWLEY, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 24013-05S. Filed April 26, 2007.

Robert Lindley Cowley, pro se.

Jonathan J. Ono, for respondent.

HAINES, Judge: This case was heard pursuant to the

provisions of section 7463 of the Internal Revenue Code in effect

when the petition was filed. Pursuant to section 7463(b), the

decision to be entered is not reviewable by any other court, and

this opinion shall not be treated as precedent for any other

case.
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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. Amounts

are rounded to the nearest dollar.

Petitioner filed a petition with this Court in response to a

Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330 (notice of determination) for 1990,

1997, 1999 (years at issue).1 Pursuant to section 6330(d),

petitioner seeks review of respondent’s determination. The issue

for decision is whether petitioner is entitled to any relief from

respondent’s determination that collection may proceed. 

The parties’ stipulation of facts and the attached exhibits

are incorporated herein by this reference. Petitioner resided in

Honolulu, Hawaii, when he filed his petition.

Petitioner did not file a Federal income tax return for 1990

and did not make estimated tax payments for 1990. Respondent

filed a substitute for return on June 7, 1993. Respondent mailed

petitioner notices of deficiency for 1990 on June 25 and November

9, 1993, to two separate addresses, determining that petitioner

owed a deficiency of $2,598, as well as additions to tax under

sections 6651(a) and 6654(a) of $650 and $171, respectively. 

Petitioner did not file a petition with the Court to redetermine

the deficiency. On August 15, 1994, respondent assessed the tax

liability including penalties and interest for 1990.
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2 The Internal Revenue Service determined the return for

1998 was not filed within 2 years from the time the tax was paid.

Petitioner’s credit from withheld taxes and excess FICA for 1998

was paid on April 15, 1999, and his 1998 Federal income tax

return was filed on May 5, 2003.

On March 13, 2003, petitioner submitted a Form 656, Offer in

Compromise (first offer-in-compromise), with completed Form 433-

A, Collection Information Statement for Wage Earners and SelfEmployed Individuals, offering $600 to compromise his outstanding

tax liabilities for 1990 through 2002. 

On March 31, 2003, petitioner filed Form 1040, U.S.

Individual Income Tax Return, for 1999, reporting a tax liability

of $3,059 and payments of $2,752 and $1,292, which represented

tax withheld from 1999 and an overpayment credit from 1998,

respectively. Respondent disallowed the $1,292 overpayment

credit pursuant to section 6511.2 

On April 28, 2003, the first offer-in-compromise was

returned because petitioner failed to file a Form 1040 for 1997. 

On May 19, 2003, respondent assessed tax liabilities along

with penalties and interest for 1999. 

On June 25, 2003, petitioner submitted a second Form 656

with a completed Form 433-A (second offer-in-compromise),

offering $200 to compromise his tax liabilities for 1980 through

2002.
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3 Petitioner was mailed his last rejection letter on Dec.

22, 2004, which gave him 30 days to respond and/or appeal. He

failed to timely file an appeal, and his offer-in-compromise was

closed Jan. 21, 2005. 

On June 27, 2003, respondent received petitioner’s Form 1040 

for 1997, reporting a tax liability of $2,069. He did not make

any estimated payments for 1997. 

On July 28, 2003, the second offer-in-compromise was

returned because petitioner failed to file a Form 1040 for 1997. 

Although respondent received the Form 1040 for 1997 on June 27,

2003, it was not processed until August 18, 2003. On August 18,

2003, respondent assessed the tax liability including penalties

and interest for 1997. 

On November 25, 2003, petitioner submitted a third Form 656

with a completed Form 433-A (third offer-in-compromise). The

third offer-in-compromise was rejected because the amount offered

was less than the reasonable collection potential.3 

On October 13, 2004, respondent mailed petitioner a Notice

of Federal Tax Lien Filing and Notice of Your Right to a Hearing

Under IRC 6320 (notice of Federal tax lien) for the years at

issue. The notice of Federal tax lien advised petitioner he was

entitled to request a hearing to appeal the collection action and

to discuss optional payment methods. On November 15, 2004,

petitioner submitted Form 12153, Request for a Collection Due

Process Hearing. In his request, petitioner asserted he earned
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4 The transcripts indicated overpayment credits of $300 and

$678 were transferred from 2000 and 2001, respectively, and

applied to petitioner’s 1989 tax liability. The transcripts also

indicated overpayment credits of $1,309 and $677 were transferred

from 2002 and 2003, respectively, and applied to petitioner’s

1990 tax liability. 

insufficient income to generate a tax liability in 1990, and he

did not have tax liabilities for 1997 and 1999 because he had

sufficient overpayment credits from subsequent tax years to

satisfy any outstanding tax liability. On June 1, 2005,

petitioner mailed a Form 433-A to respondent’s Appeals Office,

where his hearing request was being considered. 

On October 17, 2005, Settlement Officer Kathleen Derrick

mailed petitioner a letter scheduling a telephonic hearing. The

letter informed petitioner he could not contest the underlying

income tax liability for 1990 because he had received a statutory

notice of deficiency for that year and had not filed a petition

in Tax Court. The letter also included literal transcripts for

1990 and 1997 through 2003 reflecting the balances due and the

payments that were applied to those years.4 The letter indicated

that if there were any “payments for which you believe you have

not been credited, please provide copies of cancelled checks for

these payments”. 

On November 3, 2005, a telephonic hearing was held between

Ms. Derrick and petitioner, during which petitioner asserted he

did not owe any of the income tax liabilities for the years at
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5 Ms. Derrick’s determination did not indicate petitioner’s

overpayment credits were also used to offset his outstanding

liability in 1989. See supra note 4. 

6 See supra note 2. Petitioner did not raise this issue at

trial.

issue because he earned insufficient income in 1990 and had

sufficient overpayments from subsequent tax years to satisfy any

tax liabilities for 1997 and 1999. Petitioner also informed Ms.

Derrick that he was unsure whether he received the notice of

deficiency for 1990 because he was transient at that time. 

On November 21, 2005, respondent’s Appeals Office issued

petitioner a notice of determination sustaining the filing of the

notice of Federal tax lien. In the notice of determination, Ms.

Derrick found that the 1990 notice of deficiency was mailed to

the correct address, and as a result petitioner could not dispute

the underlying liability for such year. She also found that

petitioner’s overpayment credits did not satisfy his outstanding

tax liabilities for 1997 and 1999 because the credits were used

to offset petitioner’s 1990 tax liability.5 Additionally, Ms.

Derrick explained that petitioner was barred from using the

$1,292 credit from 1998 to offset his outstanding tax liabilities

because the 1998 return was filed more than 2 years from the time

the tax was paid.6 Petitioner refused to discuss any collection

alternatives during the hearing.
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7 The term “underlying tax liability” under sec.

6330(c)(2)(B) includes amounts self-assessed under sec. 6201(a),

together with penalties and interest. Sec. 6201(a)(1);

Montgomery v. Commissioner, 122 T.C. 1, 9 (2004); sec.

301.6201-1, Proced. & Admin. Regs. 

In response to the notice of determination, petitioner filed

his petition with this Court on August 25, 2005.

I. Standard of Review

Where the validity of the underlying tax liability is

properly at issue, the Court will review the matter de novo. 

Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v.

Commissioner, 114 T.C. 176, 181 (2000).7 The underlying tax

liability is properly at issue if the taxpayer did not receive a

statutory notice of deficiency or otherwise have an opportunity

to dispute the tax liability. Sec. 6330(c)(2)(B); see Behling v.

Commissioner, 118 T.C. 572, 576-577 (2002).

Where the validity of the underlying tax liability is not

properly at issue the Court will review the Commissioner’s

determination for abuse of discretion. Sego v. Commissioner,

supra at 610; Goza v. Commissioner, supra at 181. The abuse of

discretion standard requires the Court to decide whether the

Commissioner’s determination was arbitrary, capricious, or

without sound basis in fact or law. Woodral v. Commissioner, 112

T.C. 19, 23 (1999); Keller v. Commissioner, T.C. Memo. 2006-166;

Fowler v. Commissioner, T.C. Memo. 2004-163. 

 
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II. Tax Year 1990

Respondent mailed petitioner two notices of deficiency for

1990. On cross-examination by respondent’s counsel, petitioner

admitted receiving the notice of deficiency for 1990. Therefore,

petitioner’s underlying income tax liability for 1990 is not

properly at issue, and this Court will review respondent’s

determination for 1990 for abuse of discretion. 

At the hearing, petitioner did not challenge the

appropriateness of the intended method of collection, discuss

collection alternatives, or raise a spousal defense. See sec.

6330(c)(2)(A). Petitioner raised only arguments he was precluded

from contesting; i.e., that he does not owe the underlying income

tax liability because he did not earn enough income to be taxed.

Therefore, this Court concludes respondent’s determination

to proceed with collection of the tax liability assessed against

petitioner for 1990 was not an abuse of discretion.

III. Tax Years 1997 and 1999

Petitioner was not issued a notice of deficiency for tax

years 1997 or 1999, and he did not otherwise have a prior

opportunity to dispute the tax liabilities. Therefore,

petitioner’s underlying tax liabilities for 1997 and 1999 are at

issue, and this Court will review respondent’s determination for

1997 and 1999 de novo. 
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During the hearing and at trial, petitioner contended he did

not owe Federal income tax liabilities for 1997 and 1999 because

he had sufficient overpayment credits from subsequent tax years

to satisfy any liability for such years. The taxpayer bears the

burden of proving the Commissioner’s determinations are

incorrect. See Rule 142(a). 

The parties stipulated respondent’s literal transcripts of

account for petitioner’s 1990 and 1997 through 2003 tax years. 

The transcripts reflected, inter alia, all payments received by

respondent for petitioner’s tax liabilities. The balances that

remained were consistent with the amounts respondent is

attempting to collect. 

Petitioner did not produce any evidence supporting

unreported payments to offset his outstanding tax liabilities. 

At trial, he merely testified that he did not owe a tax

liabilities for 1997 or 1999. This Court cannot assume

petitioner previously paid the tax liabilities respondent is

attempting to collect without credible evidence showing

petitioner made greater payments to respondent than those

reflected in the transcripts. 

At trial petitioner also claimed he filed two tax returns

for 1999. He testified the first was timely filed by him and the

second untimely return filed on March 31, 2003, was filed by his

attorney. Petitioner did not produce any documentation to
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support that his 1999 return was filed timely. Thus, petitioner

did not meet his burden of proof. 

Accordingly, this Court finds that respondent correctly

determined that collection could proceed for 1997 and 1999. See

Boyd v. Commissioner, 117 T.C. 127, 131-132 (2001). 

In reaching these holdings, the Court has considered all

arguments made and, to the extent not mentioned, concludes that

they are moot, irrelevant, or without merit.

To reflect the foregoing,

Decision will be

entered for respondent.