T.C. Mem o. 2 01 3- 16 5

UNITED STAT ES TAX COURT
LARRY DAVID CAROTHERS, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 10 55 3- 07 L. Fil edJu ly 8, 20 13
. R p rep areda subs ti tu te for return fo r P’s 20 03 y ear, s ho win g in co m e ta x due . In re sp on se to P’s FOIA reque st , R ga ve hi m a tra ns cri ptth atsh owe d n o t ax ha d b eenass es se d. R l at er i ss ue d a no ti ce o f in te ntto lev y , andP ti m el y reque st eda he ari ng un de r I.R.C. se c. 63 30 . Duri ng th e h eari ng P co nt en de d t ha t n o a ss es sm en t h ad be enm ad e an d ra is edva rio us fri vo lo us arg um en ts . The IR S Offi ce o f App eal s o bt ai ne d a n up- to -d at e tr an sc rip t o f P’s acc ou ntto ve rif y , pu rs uantto I.R.C. s ec. 6 33 0( c)(1 ), th atth e ta x h adbe endu ly ass es se d an d i ss ue d t o P a fi na l n ot ic e o f de te rm in at io n t ha t i t wo ul d p ro ceed with alev y . P app eal edth atde te rm in at io n t o thi s C ou rt, a ss ert in g th at“ no leg al ass es sm en t i s o n re co rd ”. R m ov edfor su m m ary jud gm en t, fo r a p en al ty und er I.R.C . sec . 66 73 , andforth e le vy to pr oc eedun de r I.R.C. s ec. 6 33 0( e)(2 ). P op po se d, co nt en di ng th athi s 20 03 li ab il ity

ha d b eenset tl edinful l b y a “ Dem an d fo r Set -o ff o f Cl ai m ”. Held : Th e Offi ce o f App eal s d idno t ab us e it s d is cret io n i n co ns ul ti ng on ly a tran sc rip t o f P’s acc ou ntto ve rif y th e as se ss m en t,- 2 -

[* 2] no twi th st an di ng P’s rel ianc e o n apri or tra ns cri ptto di sp ut e th e factof t he ass es sm en t. P’s co nt en ti on ab ou t a “ Dem an d fo r Set -o ff o f Cl ai m ” la ck s an y

ba si s i n fa ctor i n l aw. R’s m ot io n fo r su m m ary jud gm en t wi ll be gra nt ed
. Held , furth er, P’s u se of f riv ol ou s ar gu m en ts th ro ug ho utth e co ll ect io n re vi ew pr oc eed in gs is m an ife st ly an at te m ptto de lay co ll ect io n wi th ou t ju st ifi cat io n. R’s m ot io n t o p erm itlev y wil l b e gr an te d. Held , furth er, R’s m ot io n fo r a p en al ty und er I.R.C . sec . 66 73 wil l b e d en ie d, an d P wil l n otbe requi redto pa y a pe na lty . Larry Dav idCaro th ers , forhi m se lf. Gary C. Bart on , forres po nd en t.

MEMORANDUM OPINION GUSTAFSON, Ju dg e: Thi s co ll ect io n re vi ew cas e is be fo re the Co urt o n two m ot io ns fil edby resp on de nt , th e Co m m is si on er o f th e In te rn al Rev enue Serv ic e (“ IRS” )--i .e., a “ Mo ti on to Perm itLevy”, anda “ Mo ti on for Su m m ary Ju dg m en t an d t o Impos e a Pen al ty und er Se ct io n 6 67 3” , bo th of wh ic h wer e fi le d 1
on Aug us t 7 , 20 08 . The i ss ue s fo r de ci si on are: (1) whet he r th e IRS Offic e o f

Exc ep t as othe rwis e n ot ed , all sec ti on refe ren ces are t o t he Int ern al 1 Rev enue Co de (26 U.S.C.), an d a ll Ru le refe ren ces are t o the Tax C ou rt Rul es of Prac ti ce an d P ro cedur e.- 3 -

[* 3] App eal s ab us edit s d is cret io n i n d et erm in in g t o p ro ceedwith t he co ll ect io n act io n wi th res pe ctto th e unp ai d 2 00 3 i nc om e ta x l iabi li ty of pe ti ti on er Larry Dav idCaro th ers ; (2 ) whe th er the Co m m is si on er h as sh own go odcau se to li ft
su sp en si on of t he lev y

pu rs ua ntto sec ti on 63 30 (e)( 2) ; an d (3 ) whe th er the Co urt sh ou ldim po se a pe na lty

inanap pr op ria te am ou nt , pu rs ua ntto sec ti on 66 73 , on th e g ro un d tha t M r. Caro th ers in st itut edth es e p ro ceed in gs pri m ari ly for d el ay . On Dec em

be r 9, 2 00 8, we i ss ue d a n o pi ni on ad dr es si ng th os e is su es ; b uton Decem be r 10 , 20 08 , th e Co m

m is si on er fi le d a“Not ic e o f Pro ceed in g i n Ban kr up tc y ”, no ti fy in g the Co urt tha t o n No ve m be r 13 , 20 08 --i .e., aft er Mr. Ca ro th ers ha d fi le d h is pe ti ti on inth is Co urt b utbe fo re we i ss ue d o ur op in io n- -Mr . Caro th ers ha d fi le d ape ti ti on with the U.S. Ban krup tc y Co urt fo r th e W es te rnDis tri ctof Ok laho m a und er 1 1 U.S.C. ch ap te r 13 . On Dece m be r 15 , 20 08 , we th eref

or e wit hd rew o urop in io n a ndord eredth atall pro ceed in gs inth is
cas e were aut om at ic al ly stayed p ur su an t t o s ect io n 3 62 (a)( 8) of t he Ban krup tc y Co de (11 U.S.C.). Mo re tha n fo ury ears pa ss ed . On Apr il 19 , 20 13 , th e Co m m is si on er ad vi se d the Co urt tha t M r. Caro th ers ’s ban krup tc y cas e h adbe en di sm is se d o n Au gu st15 , 20 12 , andha d b eenclo se d o n F eb ru ary 1, 2 01 3. By
or de r da te d Ap ril 24 , 20 13 , we th eref or e li fte d the st ay

of p ro ceed in gs inth is cas e;
an d b y ord er d at edMay 6, 20 13 , we di rect edth at“ each of t he pa rti es sh al l fi le a- 4 -

[* 4] st atus rep ort (o r ot he r ap pr op ria te m ot io n o r fi li ng ) th atsh al l i nc lu de : an up da te on th e st atus of t he cas e; anin di cat io n o f th e ex te nt , if an y , to whi chth e is su es ad dr es se d i n the Co urt’s o pi ni on is su edinDecem be r 20 08 ha ve be co m e
m oo t; an d the pa rty’ s re co m m en da ti on of asch edul e fo r furth er p ro ceed in gs inth is
cas e.” The pa rti es fil edth ei r rep orts , anditap pe ars th atno ne of t he is su es we pr ev io us ly addres se d h as be co m e m oo t. The refo re, as ex pl ai ne d b el ow, we wi ll (a) g ran t s umm ary jud gm en t i n the Co m m is si on er’s fav or , su st ai ni ng th e d et erm in at io n t o p ro ceedwith t he lev y act io n, (b ) pe rm itth e Co m m is si on er t o p ro ceedwith the lev y no twi th st an di ng th e pe nd en cy of M r. Caro th ers ’s app eal , and(c) i m po se on Mr. Car ot he rs no pe na lty un de r se ct io n 6 67 3. Bac kg ro un d The re i s n o d is pu te as t o the fol lo win g fa ct s: Fo r th e y ear 2 00 3, M r. Caro th ers di d n otti m el y fil e a Fed eral in co m e ta x return. As a res ul t, o n Ap ril 8, 2 00 5, the IRS p rep areda subs ti tu te forreturn fo r th aty ear s ho win g atax du e o f $1 9,2 22 .80 . Sho rtl y th erea fte r, on Apri l 1 5, 2 00 5, Mr. Ca ro th ers m ad e a Fre ed om of I nf orm at io n Act(“ FOIA”) re qu es t u nd er 5 U.S.C. s ec. 5 52 (20 12 ), inwhi chhe ask edth e IRS forin fo rm at io n abo uthi s 20 03 li ab il ity . The IR S res po nd edto hi s FOI A reque stwith alet te r da te d M ay 18 ,- 5 -

[* 5] 20 05 , adv is in g M r. Caro th ers th at“ no ass es sm en ts [ha d] be enm ad e to da te at th e Ogd enCam

pu s” an d i nc lu di ng a tr an sc rip t fo r hi s t ax acco un t fo r th e 2 00 3 y ear, wh ic h s ho wedth at , as o f May 6, 20 05 , no li ab il ity ha d b eenass es se d a ga in st hi m . On J un e 7 , 20 05 , th e IRS is su edto Mr. Car othe rs a st atut ory no ti ce o f de fic ie nc y

with re sp ectto 20 03 , pu rs ua ntto sec ti on 62 12 (a), wh ic h M r. Caro th ers adm it s h e rec ei ve d. Mr . Caro th ers di d n otfil e a p et it io n wi th th e Co urt wi th
res pe ctto th atno ti ce. Co ns eque nt ly, anIRS tran sc rip t s ho ws tha t o n Oct ob er 2 4, 20 05 , th e IRS en te redass es sm en ts ag ai ns t M r. Caro th ers forin co m e ta x, ad di ti on s to tax , andst atut ory

in te res t, an d i ss ue d t o h im a no ti ce o f ba lanc e due with
res pe ctto hi s u np ai d 2 00 3 l iabi li ty. Mr. Car othe rs fai le d t o re m itth e am ou ntdu e. On M ay 29 , 20 06 , th e IRS is su edto Mr. Car ot he rs a “ Fi na l No ti ce o f In te nt to Levy andNot ic e o f You r Ri gh t t o aHeari ng ”, in fo rm in g h im th atth e IRS in te nd edto lev y

to co ll ecthi s u np ai d t ax for20 03 an d i nf orm in g h im

of h is rig ht , un de r se ct io n 6 33 0( b) an d (c ), to a co ll ect io n due pro ces s h eari ng (CDP h eari ng ). Mr. Ca ro th ers ti m el y

reque st eda CDP h eari ng by sub m it ti ng to th e IRS , onJu ne 26 , 20 06 , a 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 Heari ng . On Mr. Ca ro th ers ’s Form 12 15 3, h e in di cat edhi s d is ag reem en t wi th th e
no ti ce o f in te ntto lev y

an d c ha ll en ge d t he va li di ty of th e as se ss m en t. OnJan ua ry- 6 -

[* 6] 23 , 20 07 , th e IRS Offic e o f App eal s s en t M r. Caro th ers a le tt er tha t ex pl ai ne d th e CDP h eari ng pro ces s, s ch edul edhi s t el ep ho ne CDP h eari ng forFeb ru ary 28 , 20 07 , andwarn edhi m

ab ou t the pe na lty

form ak in g fr iv ol ou s ar gu m en ts . Duri ng 2 th e CDP h eari ng pro ces s, M r. Caro th ers subm it te d alet te r da te d F eb ru ary 5, 2 00 7, in whi chhe reque st edth athi s C DP he ari ng be “ he ldby corre sp on de nc e” an d arg ue d, am on g o th er thi ng s, th at“ [t]he IRS’s o wn d oc um en ta ti on adm it te d t he re 3
was no leg al ass es sm en t re fere nc e si gn ed , dat ed , onIRS l et te rh eadDis cl os ur e Offi cer Let te rs ”. On M arch 23 , 20 07 , Mr. Car ot he rs sen t the IRS a l ette r st at in g

Mr. Ca ro th ers ha d i nc lu de d wi th hi s Fo rm 12 15 3 c ert ai n d oc um en ts th at 2 co nt ai ne d fr iv ol ou s co nt en ti on s (e .g., Fo rm 10 40 , U.S. Ind iv idua l In co m e Tax Return, “ IS A BOOT LEG AND OUTLAW FORM ”; th e IRS fai le d t o e st ab li sh th atit“ is anag en cy

of t he Fed eral go ve rn m en t uni te d S ta te s o f Am eri ca o r Fed eral go ve rn m en t u ni te d S tate s” (si c); th e IRS fai le d t o s ho w th atit“ ha s juris di ct io n i n an y of t he so ve rei gn st at es of t he Uni on ”; etc .). W e wil l n otad dr es s the se arg um en ts “ with s om

be r rea so ni ng an d c op io us cit at io n o f pr eced en t; to do so m ig htsu gg es t tha t the se arg um en ts ha ve so m e co lo rab le m eri t.” C rai n v . Co m m is si on er, 7 37 F.2d14 17 , 14 17 (5t h C ir. 1 98 4) ; s ee al so Wnu ckv. Co m m is si on er, 1 36 T.C. 49 8 (2 01 1) . In i ts let te r da te d J anua ry 23 , 20 07 , th e App eal s Off

ic e advi se d M r. Caro th ers th at“ [t]he is su es y ourai se iny our CDP Reque stare tho se th atCo urts ha ve de te rm in edare fr iv ol ou s o r App eal s d oe s n ot co ns id er.” (Un de rli ni ng an d i ta li cs om it te d.) M r. Caro th ers di d n otrep eatth es e co nt en ti on s i n h is res po ns e to th e Co m m is si on er’s m ot io n fo r su m m ary jud gm en t, an d we d eem

th es e co nt en ti on s t o h av e b eenab an do ne d. The othe r arg um en ts inMr. Car ot he rs ’ le tt er d at edFeb ru ary 5, 2 00 7 (e .g., 3 th atsec . 78 51 ren de rs hi m no t l iabl e), were no t ra is edinhi s re sp on se to th e m ot io n fo r su m

m ary jud gm en t, l ackan y

vi si bl e m eri t, an d are d eem edto ha ve be enab an do ne d.- 7 -

[* 7] th at“ I ha ve as o f to da y , Marc h 2 3, 2 00 7 wen t d own to th e lo cal IRS o ffi ce i n Okl ah om a Ci ty, Okl ah om a an d s ub m it te d a10 40 forYear 2 00 3 * * * . This sh ou ld
no w con cl ud e o ur

co m m un ic at io n o n t hi s m atte r.” On Ap ril 3, 2 00 7, the Offic e o f App eal s i ss ue d t o M r. Caro th ers a no ti ce o f de te rm in at io n s us ta in in g the pro po se d l ev y . An at ta ch m en t t o t he no ti ce s ta te s th atth e h eari ng off

ic er v eri fie d tha t “ al l ap pr op ria te requi rem en ts of l aw an d adm in is tra ti ve pro cedur es forth e p ro po se d c ol le ct io n a ct io n h av e b eenm et ”. To th ateffe ct , th e h eari ng reco rdin cl ud eda TXMODA trans cri ptda te d Dec em be r 4 15 , 20 06 . The tran sc rip t s ho weda “ T/C 3 00 ” en try dat edOcto be r 24 , 20 05 , 5 whi chco nf

irmed th e as se ss m en t o f ta x, an d an “ MF- STS 2 1” en try dat edOcto be r 6
A TXMODA tran sc rip t co nt ai ns curren t ac co un t i nf orm at io n o bt ai ne d fr om 4 th e IRS ’s m as te r fi le . “ TXMODA” is th e co m m an d c od e th atis en te redin to th e IRS’s i nt eg rat edda taretrie va l s y st em (IDRS) to ob ta in th e tr an sc rip t. IDRS is es se nt ia ll y

th e in te rfac e b etweenth e IRS ’s em pl oyees andit s v ari ou s co m pu te r syste m s. See Cro w v. Co m m is si on er, T.C. Mem o. 2 00 2- 14 9, 8 3 T.C.M . (CCH) 18 53 , 18 57 n.6 (20 02 ).

“ T/C 3 00 ” is th e co de in di cat in g t ha t the re was anad di ti on al tax 5 as se ss m en t m ad e b y

th e Exa m in at io n Di vi si on . See Tran sa ct io n P oc ke t Gu id e, IRS Do cu m en t 1 09 78 (Rev . 12 -9 9) ; In te rn al Rev enue Man ua l (I RM) pt . 5.1 .19 .3 (Feb . 15 , 20 05 ).

“ MF- STS 2 1” in di cat es th atth e IRS is su eda m as te r fi le set tl em en t n ot ic e 6 (al so kn own as the fir stno ti ce), m an da te d b y law. See IRM Ex h. 5 .19 .1-2 ; s ee al so Sch up p v . Uni te d S ta te s, 7 1 A.F.T.R. 2 d (R IA) 9 3- 91 7, at93 -9 17 , 93 -1 USTC pa r. 50 ,21 5, at87 ,81 5 (E.D. Tex . 19 93 ) (“ MF STAT-2 1 i s an IMF c om pu te r st atus (co nt in ue d...)- 8 -

[* 8] 24 , 20 05 , whi chco nf irmed th e is su an ce o f a n ot ic e an d d em an d fo r paym en t. The att ach m en t t o the no ti ce o f de te rm in at io n re po rte d t ha t the App eal s Off ic e h ad de te rm in edth atth e le vy was ap pr op ria te be cau se “ [t]he pro po se d l ev y is no t m or e in tru si ve th anne ces sa ry , bec au se y oudi d n otco op erat e wit h C ol le ct io ns reg ard in g th e unp ai d t ax ; an d h av e n otsubm it te d a ny inf orm at io n n eces sa ry

to co ns id er an y co ll ect io n a lt ern at iv es to th e p ro po se d l ev y .” The a tt ach m en t al so warn ed Mr. Ca ro th ers ab ou t the pe na lty form ak in g fr iv ol ou s ar gu m en ts inth e Tax Co urt. Mr. Ca ro th ers ti m el y

m ai le d t o thi s C ou rt, o n M ay 1, 2 00 7, a p et it io n ap pe al in g the IRS’s d et erm in at io n t o p ro ceedwith alev y . At th atti m e Mr. Ca ro th ers res id edinOkl ah om a. Inhi s p et it io n, M r. Caro th ers reque st edth at th e IRS “ [s ]top co ll ect io n p ro ces s” be cau se “ IRS d oc um en ts [fu rn is he d] to m e in fo rm m e th atno leg al ass es sm en t i s o n re co rd ”. 7 (...co nt inue d) 6 co de in di cat in g tha t a n ot ic e an d d em an d was pre pa redan d s en t” ), aff’d wi th ou t publ is he d o pi ni on , 58 F.3d63 6 (5 th Cir . 19 95 ). The pe ti ti on arg ue d, i n p art ic ul ar, tha t the re i s n o l eg al ass es sm en t i n t he 7 ab se nc e o f th e IRS ’s pro du ci ng th e Fo rm 23 -C, Ass es sm en t Ce rti fic at e--S umm ary Rec or d o f Ass es sm en ts , refl ect in g t he m ak in g o f th e as se ss m en t. Thi s p os it io n i s fri vo lo us , see , e.g., Ca in v. Co m m is si on er, T.C. Mem o. 2 00 6- 14 8, 9 2 T.C.M
. (CCH) 27 , 28 (20 07 ); R ev . Rul . 20 07 -2 1, 2 00 7- 1 C .B. 86 5; an d o n t he co nt rary, an App eal s o ffi cer d oe s n otab us e h is di sc ret io n wh en , to ob ta in th e v eri fic at io n requi redby sec. 6 33 0( c)(1 ), he rel ie s o n a n IR S tr an sc rip t, ra th er tha n p ro du ci ng or rel y in g upo n aFo rm

23 C. Nest orv. Co m

mis si on er, 1 18 T.C. 16 2, 1 66 -1 67 (co nt in ue d...)- 9 -

[* 9] On Au gu st7, 2 00 8, the Co m m is si on er m ov edforsu m m ary jud gm en t an d t o im po se pe na lt ie s u nd er s ect io n 6 67 3, ar gu in g t ha t al l o f Mr. Ca ro th ers ’s arg um en ts ha d b eenfri vo lo us an d/ orgro un dl es s, an d t ha t the re i s n o g enui ne is su e o f an y
m at eri al factfortri al , so ad jud ic at io n c anoc cu r as a m atte r of law. Th e Co m m is si on er al so fil eda “ Mo ti on to Perm itLevy”. On Se pt em

be r 11 , 20 08 , Mr. Car ot he rs fil eda vi rtu al ly ide nt ic al res po ns e to each of t he Co m

m is si on er’s two m ot io ns . In tho se res po ns es Mr. Car ot he rs m ad e
va rio us st at em en ts to th e eff ectth athe ha s re so lv edhi s 2 00 3 t ax di sp ut e b y a

“ se tt le m en t i n fu ll ”, acc om pl is he d (h e al le ge s) by a m ai li ng he m ad e to “ Hen ry Pau ls en , Secre tary

of the US Treas ury ; an d a dd it io na l re ci pi en ts Int ern al Rev enue Serv ic e Cri m in al Inv es ti ga ti on Div is io n a ndJ. Ru ss el l Geo rg e, Treas ury Ins pe ct or Gen eral forTax Adm in is tra ti on (TIGTA)”. Mr. Car othe rs see m s t o c on te ndth at he ha s m ai le d s om ethi ng to th e Sec ret ary of th e Treas ury

cal le d a“ Dem an d fo r (...co nt inue d) 7 (2 00 2) ; s ee al so Marc h v . IRS, 3 35 F.3d11 86 , 11 88 (10 th Cir . 20 03 ) (h ol di ng th at th e co m pu te r-g en erat edcert ifi cat e o f as se ss m en t s at is fie d t he reg ul at ory requi rem en ts ); C ox v. Co m m is si on er, 1 26 T.C. 23 7, 2 55 (20 06 ) (h ol di ng th e ve rif ic at io n re qu ire m en t t o b e m et“ whe re the App eal s o ffi cer h adsec ur edform al orin fo rm al tra ns cri pt s s ho win g b ot h t ha t the subjec t t ax es were p ro pe rly ass es se d an d tha t the tax pa y er h adbe enno ti fie d o f th os e as se ss m en ts th ro ug h i ss ua nc e o f no ti ces of b al an ce due ”), rev ’d onot he r gr ound s, 5 14 F.3d11 19 (10 th Cir . 20 08 ). W e d eem th atMr. Car ot he rs ha s ab an do ne d t hi s fr iv ol ou s ar gu m en t, b ecau se it was no t as se rte d i n h is res po ns e to th e Co m m is si on er’s m ot io n fo r su m m ary jud gm en t.- 10 -

[* 10 ] Set -o ff o f Cl ai m ”, an d/ ora “ Pri va te Bo ndforSet -Off”, an d/ oran“ In de m ni ty Bo nd ”. Mr. Caro th ers ap pa ren tl y m ai nt ai ns th athi s m ai li ng ha s b een“ ex cep te d” (p ro babl y m ean in g “ acce pt ed ”) b y

th e Sec ret ary of

th e Treas ury

be cau se th ere was

“ no return o r refu sa l b y

an y pa rty m en ti on edab ov e, m ak in g t hi s m at te r res ol ve d.” Mr. Ca ro th ers di d n otsubm itwith h is res po ns es an y co py of an y

“ Dem an d” or

“ Bo nd ”, no r an y

othe r affi da vi ts or e xh ib it s. Th e au th or it ie s h e ci te d are
se ct io ns 8-5 01 th ro ug h -5 11 of t he Uni fo rm Co m m erci al Co de an d s ect io n 6 86 3 o f th e In te rn al Rev enue Co de
. Afte r pr oc eed in gs inth is cas e were r ei ns ti tu te d i n Ap ril 20 13 , th e Co m m is si on er fi le d ast atus rep ort i nd ic at in g t ha t n on e o f th e is su es ha s b eco m e
m oo t an d c on firm in g tha t h e st il l s eek s the rel ie f reque st edinhi s m ot io ns . Mr. Ca ro th ers fil eda st atus rep ort al le gi ng su m m ari ly tha t h e is curren tl y in

“ fin an ci al di st res s” (fo r whi chall eg at io n h e p ro vi de d n o e vi de nc e) b utst at in g tha t he ha s “ le arn edfro m

pre vi ou s i ll -advi se d d eci si on s s ev eral y ears ag o” an d ackno wled gi ng hi s dut y

to fil e ta x re tu rn s.- 11 -

[* 11 ] Dis cu ss io n I. The Co m

m is si on er’s m ot io n fo r su m m ary jud gm en t A. Su m

m ary jud gm en t s tand ard s Whe re the pe rti ne ntfact s ar e n otindi sp ut e, a p arty m ay m ov e fo r su m

m ary jud gm en t t o e xp ed it e th e li ti ga ti on an d a vo idanun ne ces sa ry (an d p ot en ti al ly
ex pe ns iv e) tria l. Fl a. Peac h C or p. v . Comm is si on er, 9 0 T.C. 6 78 , 68 1 (1 98 8)
. Su m m ary jud gm en t m ay

be gra nt edwher e th ere i s n o g enui ne di sp ut e as to an y
m at eri al fact , anda de ci si onm ay be ren de redas am at te r of law. Ru le 12 1( a) an d (b ); s ee Sund st ran d C or

p. v . Comm is si on er, 9 8 T.C. 5 18 , 52 0 (1 99 2) , aff’d, 1 7 F.3 d 9 65 (7t h C ir. 1 99 4) ; Zae nt z v . Comm is si on er, 9 0 T.C. 7 53 , 75 4 (1 98 8) . The pa rty m ov in g fo r su m

m ary jud gm en t (h ere, the Co m m is si on er) b ears th e b ur de n o f sh owi ng th atth ere i s n o g enui ne di sp ut e as to an y m at eri al fact , andfactua l in fere nc es wil l b e drawninth e m an ne r m os t fa vo rab le to th e p arty op po si ng
su m m ary jud gm en t (h ere, M r. Caro th ers ). Dahl stro m v. Co m mis si on er, 8 5 T.C. 81 2, 8 21 (19 85 ); J ack li n v . Comm is si on er, 7 9 T.C. 3 40 , 34 4 (1 98 2) . This cas e can be res ol ve d o n the ba si s o f th e und is pu te d fa ct s. B. Co ll ect io n re vi ew pr oc edur e Sect io n 6 33 0 g en eral ly pro vi de s tha t t ax pa y ers are en ti tl edto adm in is tra ti ve
an d ju di ci al rev ie w bef

or e th e Co m

m is si on er m ay

co ll ectunpa idtax by w ay of a- 12 -

[* 12 ] lev y

on th e ta xp ay er’s p ro pe rty. A dm in is tra ti ve rev ie w is carr ie d o utby w ay of anApp eal s Off

ic e h eari ng an d, i f th e ta xp ay er i s d is sa ti sf ie d wi th th e o ut co m e th ere, an ap pe al of t ha t d et erm in at io n t o the Tax C ou rt. Se c. 63 30 (b ), (d ). The pe rti ne ntpro cedur es forth e adm in is tra ti ve CDP h eari ng are s etforth in
se ct io n 6 33 0( c). Fi rs t, the App eal s o ffi cer m us t o bt ai n v eri fic at io n fr om th e Secr et ary th atth e requi rem en ts of a ny app li cab le law o r admin is tra ti ve pro cedur e ha ve be enm et . Sec. 6 33 0( c)(1 ). Seco nd , th e ta xp ay er m ay rai se an y is su e 8 rel ev an t t o the unpa idtax or p ro po se d c ol le ct io n a ct io n a t the he ari ng , in cl ud in g ch al le ng es to th e ap pr op ria te ne ss of t he co ll ect io n a ct io n a ndoff ers of c ol le ct io n al te rn at iv es . Sec. 6 33 0( c)(2 )(A). Add it io na ll y , th e ta xp ay er m ay co nt es t the
ex is te nc e an d am ountof t he un de rlyin g t ax li ab il ity , bu t o nl y if h e d idno t re cei ve

Inth e cas e o f a l ev y

to co ll ectanin co m e ta x l iabi li ty, th e b as ic 8 requi rem en ts , see sec . 63 31 (a), (d ), fo r whi chth e App eal s o ffi cer o bt ai ns ve rif ic at io n are: th e is su an ce o f a n ot ic e o f de fic ie nc y , see sec . 62 12 (a); th e IRS ’s ti m el y ass es sm en t o f th e li ab il ity , sec s. 6 20 1( a)(1 ), 65 01 (a); th e g iv in g t o the ta xp ay er o f no ti ce an d d em an d fo r pa ym en t o f th e li ab il ity , sec . 63 03 ; an d t he gi vi ng to th e ta xp ay er o f no ti ce o f in te ntto lev y an d o f th e ta xp ay er’s ri gh t t o a he ari ng , sec s. 6 33 0( a), 6 33 1( d)
.- 13 -

[* 13 ] a no ti ce o f de fic ie nc y or o th erwi se ha ve anop po rtu ni ty to d is pu te th e ta x li ab il ity . Sec. 6 33 0( c)(2 )(B)
.

9 C. The Co m

m is si on er’s en ti tl em en t t o s umm ary jud gm en t The Co m m is si on er h as m ov edforsu m m ary jud gm en t, s ho win g t ha t Ap pe al s
co m pl ie d wi th th e requi rem en ts of s ect io n 6 33 0 a ndth atMr. Car ot he rs ha s n ot rai se d any no n- fri vo lo us reas on why th e IRS sh ou ldno t b e al lo wedto pro ceedto
co ll ecthi s 2 00 3 t ax li ab il ity . The Co m m is si on er’s m ot io n i s wel l fo un de d. Bec au se m os t o f Mr. Ca ro th ers ’s con te nt io ns are p at en tl y fri vo lo us an d h av e b een ab an do ne d, we d is cu ss on ly two o f hi s co nt en ti on s h ere:

1. The m ak in g o f th e as se ss m en t Inhi s p et it io n c omm en ci ng th is cas e, Mr. Caro th ers ass ert ed“ th atno leg al
as se ss m en t i s o n re co rd .” Thi s co ul d b e a co lo rab le arg um en t i f itwere fa ctua ll y 1 0
Mr. Ca ro th ers admit s h e rec ei ve d ano ti ce o f de fic ie nc y reg ard in g h is 20 03 9 in co m e ta x l iabi li ty, bu t h e d idno t p et it io n the Co urt wi thres pe ctto th atno ti ce. He th eref or e h adth e o pp ortu ni ty to ch al le ng e th e v al id ity of t he un de rlyin g t ax li ab il ity , bu t d ecl in edto do so , andacco rd in gl y is ba rredun de r se c. 63 30 (c)( 2) (B) fro m ch al le ng in g i n thi s p ro ceed in g t he ex is te nc e o r am ou ntof h is un de rlyin g t ax li ab il ity for tax y ear 2 00 3. Se e Goz a v . Comm is si on er, 1 14 T.C. 17 6 (2 00 0)
. Inhi s re sp on se to th e m ot io n fo r su m m ary jud gm en t, Mr . Caro th ers di d 1 0 no t re pe athi s d is pu te as t o the m ak in g o f th e as se ss m en t. Ho wev er, the ve rif ic at io n o f co m

pl ianc e wit h t he st atut ory requi rem en ts as t o t he ass es sm en t i s anis su e in ev ery cas e und er s ec. 6 33 0 b y vi rtu e o f th e ex pr es s p ro vi si on s o f se c. 63 30 (c)( 1) an d (3 )(A). Cl ou ghv. Co m m is si on er, T.C. Mem o. 2 00 7- 10 6, (co nt in ue d...)- 14 -

[* 14 ] well fou nd ed . Sect io n 6 33 0( c)(1 ) m an da te s tha t “ [t]he ap pe al s o ffi cer s ha ll atth e h eari ng ob ta in ve rif ic at io n fr om

th e Sec ret ary th atth e requi rem en ts of a ny ap pl ic ab le law o r adm in is tra ti ve pro cedur e h av e b eenm et .” Inth e cas e o f a l ev y to co ll ectanin co m e ta x l iabi li ty, th e requi rem en ts to be ve rif ie d i nc lu de th e IRS ’s ti m el y ass es sm en t o f th e li ab il ity . Secs . 62 01 (a)( 1) , 65 01 (a). Pu tt in g a si de hi s fr iv ol ou s co nt en ti on s ab ou t wh atth e Co m m is si on er m

us t sh ow t o e st ab li sh th e ex is te nc e o f anass es sm en t, s ee n ot e 7 ab ov e, wha t Mr. Ca ro th ers ha s s ho wn i s tha t h e rec ei ve d a n IR S le tt er an d t ran sc rip t i nd ic at in g th at , as o f th e d at e o f th e le tt er, the re was no ass es sm en t ag ai ns t h im for 20 03
. Howev er, h e is un ab le to supp ort h is co nt en ti onth atno ass es sm en t h as ev er b een
m ad e. The IRS d oc um en ts th atha d b eenfurni sh edto Mr. Car othe rs , whi chhe be li ev edsh owe d “ th atno leg al ass es sm en t i s o n re co rd ”, were the let te r an d tra ns cri ptfurni sh edinMay 200 5 i n re sp on se to hi s FOI A reque st , gi vi ng in fo rm at io n tha t was curren t as of t ha t t im e--i .e., as o f May 20 05 . Howev er, tha t in fo rm at io n i s i rrel ev an t. The IRS d idno t i ss ue it s n ot ic e o f de fic ie nc y (pu rs ua nt to sec ti on 62 12 ) un ti l J un e 2 00 5; an d t he ass es sm en t was infactno t m ad e unt il (...co nt in ue d) 1 0 93 T.C.M. (CCH) 1 17 0, 1 17 4 (2 00 7)
.- 15 -

[* 15 ] Octo be r 24 , 20 05
. A sta te m en t b y th e IRS “ th atno leg al ass es sm en t i s o n 1 1
reco rd ” as of M ay

20 05 is irr el ev an t fo r th e p ur po se of s ho win g wh ethe r an
as se ss m en t was lat er m ad e o n Oct ob er 2 4, 2 00 5. Th e tr an sc rip t g en erat edaft er th atlat er d at e d oe s i nd eedsh ow an ass es sm en t, an d the zero ba lanc es on th e earl ie r tr an sc rip t d o n otco ns ti tu te an y irr eg ul ari ty or a no m al y th atm ig htcal l tha t 1 2 la te r tr an sc rip t i nt o que st io n a ndm ig htpro m pta ne edforex tra or di na ry
ve rif ic at io n. 2. Mr. Ca ro th ers ’s all eg ed“bo nd ” o r “ de m an d” Inth e v irtua ll y

id en ti cal res po ns es th atMr. Car ot he rs fil edon Sep te m be r 11 , 20 08 , to th e Co m m is si on er’s two m ot io ns , Mr. Car ot he rs arg ue s th athe ha s re so lv edhi s 2 00 3 t ax di sp ut e b y subm it ti ng to th e Sec ret ary of th e Thi s p as sa ge of t im e b etweenth e is su an ce o f th e st atut ory no ti ce an d the 1 1 m ak in g o f th e as se ss m en t i s ac co un te d fo r by the factth atth e ag en cy was b arre d by sec. 6 21 3 fr om

m ak in g any ass es sm en t unt il Sep te m be r 20 05 at t he earl ie st . Cf. Ro be rts v. Co m

mis si on er, 1 18 T.C. 36 5, 3 71 n.1 0 (2 00 2) (ci ti ng Davi s 1 2 v. Co m m is si on er, 1 15 T.C. 35 , 40 -4 1 (2 00 0) (“ Pet it io ne r ha s n otde m on st rat ed an y irr eg ul ari ty in the ass es sm en t p ro cedur e th atwou ldrai se a qu es ti on ab ou t the va li di ty of th e as se ss m en ts ” (em ph as is ad de d) )), aff

’d, 32 9 F .3d12 24 (11 th Cir
. 20 03 ); Ne st orv. Co m

m is si on er, 1 18 T.C. at 1 67 ; Ch ie f Co un se l No ti ce CC -2 00 6- 01 9 (a n Ap pe al s o ffi cer “ m ay rel y on a Fo rm

43 40 to ve rif

y th e v al id ity

of an as se ss m en t, u nl es s the tax pa y er ca n i de nt ify an i rreg ul ari ty in the ass es sm en t pr oc edur e” (e m

ph as is ad de d) ; wh ere i t i s al le ge d t ha t a n ot ic e o f de fic ie nc y was no t m ai le d, the App eal s o ffi cer m ay be requi red“ to ex am in e und erl y in g do cu m en ts inad di ti on to th e ta x t ran sc rip ts , su chas t he tax pa y er’s return, a c op y of th e n ot ic e o f de fic ie nc y , andth e certi fie d m ai li ng li st ”).- 16 -

[* 16 ] Treas ury

an d o th ers a “ Dem an d fo r Set -o ff o f Cl ai m ”, an d/ ora “ Pri va te Bo ndforSet -Off”, an d/ or an“ In de m

ni ty Bon d” . Howev er, Mr . Caro th ers fai le d t o pr ov id e an y

ex pl an at io n o r subs tant iati onof t hi s cl ai m . Ru le 12 1( d) pro vi de s tha t wh ere t he m ov in g p arty (he re, the Co m

mis si on er) pr op erl y m ak es an d s up po rts a m ot io n fo r su m m ary jud gm en t, “ anadve rs e p arty [h ere, M r. Caro th ers ] m ay no t re stup on th e m ere a ll eg at io ns or d en ia ls of s uc h pa rty’ s p le ad in g, b utsu chpa rty’ s re sp on se , by affi da vi ts or d ecl arat io ns or a s ot he rwis e p ro vi de d i n thi s R ul e [i .e., “ in te rro ga to rie s, d ep os it io ns , furth er affi da vi ts or d ecl arat io ns , or o th er ac cep tabl e m at eri al s” ], m us t s etforth sp eci fic fact s s ho win g tha t the re i s a g enui ne di sp ut e fo r tr ia l.” Ru le 10 02 of t he Fed eral Ru le s o f Evi de nc e p ro vi de s tha t “ [a]n o rig in al writ in g * * * is requi redinord er t o pr ov e it s co nt en t” . Howev er, Mr . Caro th ers di d n otsubm itwith h is res po ns es to th e Co m m is si on er’s m ot io ns any

co py of an y

“ Dem an d” or “ Bo nd ”, no r ev enan y affi da vi t o r ot he r ex hi bi t i ll um in at in g h is co nt en ti on . Ins te ad , Mr. Car ot he rs ’s
res po ns e b eg in s an d e nd s wi thhi s t ers e an d c ry pt ic de sc rip ti on of h is all eg ed
subm is si on . Suc h u ne xp la in edan d u ns up po rte d a ll eg at io ns are s im pl y no t en ou gh to withs tanda m ot io n fo r su m m ary jud gm en t. See Ru le 12 1( d)
. Mo reo ve r, to m ak e th is arg um en t, Mr . Caro th ers cit es two au th or it ie s,
ne ithe r of whi chha s an y

co nn ect io n h ere: Firs t, Mr . Caro th ers ap pa ren tl y arg ue s- 17 -

[* 17 ] th athi s s ub mis si on of a“ Pri va te Bo ndforSetOff” co ns ti tu te s anacco rdan d
sa ti sf act io n u nd er the “ Uni fo rm Co m m erci al Co de (U.C.C.) d oc tri ne , U.C.C. 8- 50 1 thru 5 11 ” b ecau se th ere was “ no return o r refu sa l [o f th e d em an d fo r se to ff] by any pa rty m en ti on edab ov e, m ak in g t hi s m atte r res ol ve d.” Howev er, tho se
se ct io ns of t he U.C.C. (as en act edinOkl a. St at . Ann . ti t. 1 2A, art. 8 , pt . 5 (West 20 01 )) d o n otco nt ai n a ny of th e te rm s “ de m an d” , “ se t-o ff”, “ in de m ni ty”, or

“bo nd ”. Mo reo ve r, th e U.C.C. h as no be ari ng on th is qu es ti on of F ed eral tax law. See B ear v . Comm is si on er, T.C. Mem o. 1 99 2- 69 0, 6 4 T.C.M . (CCH) 1 43 0, 1 43 2 (1 99 2) (ci ti ng Burn etv. Harm el , 28 7 U.S. 1 03 , 11 0 (1 93 2) ), aff’d wi th ou t publ is he d o pi ni on , 19 F.3d26 (9t h C ir. 1 99 4) . No se tt le m en t was effe ct edby thi s
supp os ed“ Pri va te Bo ndforSetOff”. Seco nd , Mr. Car ot he rs ’s rel ianc e o n s ect io n 6 86 3 i s l ik ewis e m is pl aced
. Sect io n 6 86 3 (e nt it le d “ St ay of C ol le ct io n o f Je op ardy Ass es sm en ts ”) d oe s i nc lu de th e wor d “ bo nd ”, bu t i ts rel at io n t o M r. Caro th ers ’s arg um en t en ds th ere. Se ct io n 68 63 (a) p ro vi de s fo r a “ Bo ndto Sta y Co ll ect io n” inth e cas e o f te rm in at io n
as se ss m en ts an d jeo pa rdy ass es sm en ts “un de r se ct io n 6 85 1, 6 85 2, 6 86 1 o r 68 62 ”. Sect io n 6 86 3 a ll ows a ta xp ay er t o fi le a bo ndto st op th e IRS fro m

1 3 The se sec ti on s cr os s- refe ren cedinsec . 68 63 rel at e to “ Term in at io n 1 3 Ass es sm en ts of I nc om e Tax ”, se c. 68 51 , “ Term in at io n As se ss m en ts inCas e o f (co nt in ue d...)- 18 -

[* 18 ] co ll ect io n a ct iv ity

whi le th e ta xp ay er i s l it ig at in g t he va li di ty of th e
un de rlyin g a ss es sm en t an d s ei zu re. The ass es sm en t i n M r. Caro th ers ’s cas e is no t a jeop ardy

ass es sm en t b utis in st eada ga rd en -v ari ety ass es sm en t o f anin co m e ta x de fic ie nc y

un de r se ct io n 6 21 3. Se ct io n 6 86 3 i s thu s i rrel ev an t i n M r. Caro th ers ’s
cas e. W e co nc lu de th atth ere i s n o g enui ne is su e o f m at eri al factrequi rin g atri al , an d we h ol d tha t the Co m mis si on er i s en ti tl edto th e en try of a d eci si onsu st ai ni ng th e d et erm in at io n a ndpro po se d l ev y as am atte r of

law. II. The Co m

m is si on er’s “ Mo ti on to Perm itLevy” Sect io n 6 33 0( e)(1 ) se ts forth th e g en eral rul e th at , when anadm in is tra ti ve he ari ng is reque st edto rev ie w a pr op os edlev y , “ th e le vy acti on s * * * sh al l b e
su sp en de d” du rin g the adm in is tra ti ve he ari ng an d dur in g any j ud ic ia l ap pe al
. Howev er, s ect io n 6 33 0( e)(2 ), en ti tl ed“ Lev y up on ap pe al ”, pr ov id es anex cep ti on to th is ge ne ral rul e, whi chex cep ti on th e Co m mis si on er m ay

in vo ke if two
co nd it io ns are m et :
(...co nt in ue d) 1 3 Fl ag ran t Po li ti cal Exp en di tu res of S ect io n 5 01 (c)( 3) Orga ni zat io ns ”, se c. 68 52 , “ Je op ardy

Ass es sm en ts of I nc om e, Est at e, Gift , andCert ai n Ex ci se Taxe s” , sec . 68 61 , and“ Je op ardy

Ass es sm en t o f Tax es Oth er Th anInc om e, Est at e, Gift , and Cert ai n Ex ci se Taxe s” , sec . 68 62
.- 19 -

[* 19 ] Para gr ap h (1 ) sh al l n otap pl y to a le vy acti on whi le anap pe al is pe nd in g i f [A] the un de rlyin g t ax li ab il ity is no t atis su e in th e ap pe al an d [B ] th e co urt d et erm in es th atth e Sec ret ary ha s s ho wn g oo d c au se no t t o s us pe ndth e le vy. As d is cu ss edinno te 9 ab ov e, Mr. Ca ro th ers is ba rredun de r se ct io n 63 30 (c)( 2) (B) fr om

ch al le ng in g t he ex is te nc e o r am ountof h is un de rlyin g t ax li ab il ity for 20 03 inth is pro ceed in g. Acco rd in gl y , th e fi rs t co nd it io n tha t the Co m m is si on er m

us t m eetto pro ceedwith t he lev y un de r se ct io n 6 33 0( e)(2 ) (“ th e
un de rlyin g t ax li ab il ity

is no t atis su e”) i s s at is fie d. As t o the sec on d c on di ti on (whe th er the Co m mis si on er “ ha s s ho wn g oo d
cau se no t t o s us pe ndth e le vy”), sec ti on 63 30 do es no t i nc lu de a de fin it io n o f th e term “ go odcau se ”. W e h av e p rev io us ly hel d t ha t “ res po nd en t m ay sh ow g oo d
cau se th ata le vy sho ul d n otbe su sp en de d wh ere * * * th e ta xp ay er h as us edth e
co ll ect io n re vi ew pr oc edur e to esp ou se fri vo lo us an d g ro un dl es s ar gu m en ts an d ot he rwis e n eed le ss ly del ay co ll ect io n.” Burke v. Co m m is si on er, 1 24 T.C. 18 9, 19 6- 19 7 (2 00 5)
. Mr. Ca ro th ers ’s us e o f fri vo lo us an d g ro un dl es s ar gu m en ts th ro ug ho utth e
co ll ect io n re vi ew pr oc eed in gs , see no te s 2 , 3, an d 7 ab ov e, is m an ife st ly an at te m ptto de lay

co ll ect io n wi th ou t ju st ifi cat io n. Acco rd in gl y , we wil l g ran t the Co m m is si on er’s “ Mo ti on to Perm itLevy”.- 20 -

[* 20 ] III. Sect io n 6 67 3 p en al ty Sect io n 6 67 3( a) au th or iz es th e Tax Co urt t o i m po se a pe na lty

no t i n e xc es s of $2 5,0 00 when ev er i t ap pe ars th atpro ceed in gs ha ve be enin st itut edor
m ai nt ai ne d b y

th e ta xp ay er p rimaril y

forde lay or t ha t the tax pa y er’s p os it io n i n th e p ro ceed in g i s fr iv ol ou s o r gr ou nd le ss . The s ta tu te gra nt s the Co urt d is cret io n in de ci di ng whet he r to im po se th e p en al ty. See Neo na to lo gy Asso cs . P.A. v. Co m m is si on er, 1 15 T.C. 43 , 10 2 (2 00 0) , aff’d, 2 99 F.3d22 1 (3 d C ir. 2 00 2) . The Co m m is si on er p ro po se s tha t we i m po se su cha pe na lty

on Mr. Car othe rs . The “ Bo nd ” o r “ Dem an d” arg um en t tha t M r. Caro th ers ass ert edto op po se th e Co m m is si on er’s m ot io ns is cert ai nl y fri vo lo us , anditwas arti cu late d wi th so li tt le elabo rat io n a ndso li tt le supp ort o f an y ki ndth atitsee m s h e m

us t h av e kn own th atitha d n o p ro sp ectof s uc ces s. Ho wev er, i t ca n b e sa idinfav orof Mr. Ca ro th ers th athi s “ Bo nd ” o r Dem an d” arg um en t was fir stass ert edinres po ns e to th e Co m

m is si on er’s m ot io n fo r su m m ary jud gm en t, s o t ha t the Co m m is si on er
was no t ev er p utto th e tr oubl e o f an swe rin g i t. His cas e wil l b e res ol ve d wi th ou t requi rin g any tria l o r he ari ng . He aba nd on edth e o th er fri vo lo us arg um en ts he ha d
as se rte d at the ag en cy -le ve l h eari ng , see no te s 2 an d 3 ab ov e, an d i n h is pe ti ti on , se e n ot e 7 ab ov e. Anditis po ss ib le th athe was g enui ne ly con fu se d b y th e May 200 5 tran sc rip t an d tha t h e b el ie ve d (a lb ei t wro ng ly) tha t the tra ns cri pt- 21 -

[* 21 ] in di cat edth atno li ab il ity ha d b eenpro pe rly ass es se d a ga in sthi m for20 03
. Mo reo ve r, Mr. Ca ro th ers no w adm it s h is fri vo lo us po si ti on s wer e “ il l-a dv is ed ”,
an d h e und ert ak es to fil e ta x re tu rn s i n c om pl ianc e wit h t he law. W e wil l the refo re i m

po se no pe na lty , bu t we warn M r. Caro th ers th at , if h e were t o e ng ag e in fri vo lo us or d il at ory li ti ga ti on inth e fu tu re, h e sh ou ldno t ex pe ct le ni en cy fro m th is Co urt. To re fle ctth e fo reg oi ng , An ap pr op ria te ord er an d de ci si on wil l b e en te red
.