T.C. Memo. 2002-286

UNITED STATES TAX COURT

DUANE S. ASHLEY, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 5151-00L. Filed November 25, 2002.

Duane S. Ashley, pro se.

Steven M. Webster, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

CHIECHI, Judge: The petition in this case was filed in

response to a “NOTICE OF DETERMINATION CONCERNING COLLECTION

ACTION(S) UNDER SECTION 6320 and/or 6330" (notice of determination). 

We must consider whether respondent may proceed with collection with respect to petitioner’s taxable year 1989. We hold
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1All Rule references are to the Tax Court Rules of Practice

and Procedure. All section references are to the Internal

Revenue Code in effect at all relevant times. 

that respondent may. 

FINDINGS OF FACT

Virtually all of the facts have been deemed established

pursuant to the Court’s Order under Rule 91(f)1 dated September

5, 2002. 

Petitioner resided in Beaufort, South Carolina, on the date

he filed the petition in this case. 

Petitioner worked for the U.S. Government (Government) from

1973 until January or February 1987, when the Government discharged him. At the time of his discharge, petitioner was

working for the Parris Island Marine Corps Recruit Depot. After

his discharge in early 1987, petitioner made various claims

against the Government, which were not resolved to his satisfaction. In an effort to have such claims resolved by a Federal

court, petitioner decided not to, and did not, file a Federal

income tax return (return) for taxable year 1989 or any taxable

year thereafter. 

On August 12, October 7, November 18, and December 30, 1991,

respondent sent petitioner delinquency notices with respect to

his taxable year 1989. 

On April 28, 1992, respondent sent by certified mail to

petitioner’s last known address, i.e., Star Route 6, Box 2951⁄2A,
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2Petitioner resided in the property at the Route 6 mailing

address throughout 1992 and thereafter. Sometime after 1992, the

United States Postal Service (USPS) changed the mailing address

of that property from the Route 6 mailing address to 14 Woodbine

Avenue, Beaufort, South Carolina. 

Beaufort, South Carolina 29902 (Route 6 mailing address), a

notice of deficiency (notice) with respect to petitioner’s

taxable year 1989.2 The USPS notified petitioner on April 29,

1992, and again on May 5, 1992, about the certified mail from

respondent that it was attempting to deliver to him. On May 13,

1992, the USPS returned that certified mail to respondent as

“unclaimed”. 

In the notice that respondent issued to petitioner with

respect to taxable year 1989, respondent determined, inter alia,

that for that year petitioner had nonemployee compensation

totaling $31,302 and interest income totaling $63. In the

notice, respondent further determined for taxable year 1989 a

deficiency of $9,022 in Federal income tax (tax) and additions to

tax under sections 6651(a)(1) and 6654 of $2,256 and $608,

respectively. Petitioner did not petition the Court with respect

to the notice issued by respondent relating to his taxable year

1989. 

On September 28, 1992, respondent assessed tax of $9,022 and

additions to tax under sections 6651(a)(1) and 6654 of $2,256 and

$608, respectively, with respect to petitioner’s taxable year

1989, as determined in the notice. On September 28, 1992,
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3The Federal tax lien filed on Sept. 28, 1993, was not a

collection action subject to sec. 6320. See sec. 301.6320-

1(a)(1), (b)(2) Q&A-B2, Proced. & Admin. Regs.; see also Nicklaus

v. Commissioner, 117 T.C. 117, 118 n.3 (2001).

4The levy made on Jan. 10, 1997, was not subject to sec.

6330. See sec. 301.6330-1(a)(1), (3) Q&A-A4, (4) Example 1,

Proced. & Admin. Regs.; see also Nicklaus v. Commissioner, supra. 

respondent also assessed interest of $2,994.50 that had accrued

as of that date on such deficiency and such additions to tax. 

(We shall refer to such assessed tax, assessed additions to tax,

and assessed interest, as well as any interest thereon as provided by law which respondent has not assessed but which accrued

after September 28, 1992, as petitioner’s unpaid liability for

1989.) 

On September 28 and December 7, 1992, and January 11, 1993,

respondent sent petitioner notices of balance due with respect to

petitioner’s unpaid liability for 1989. On September 28, 1993,

respondent filed a notice of Federal tax lien with respect to

petitioner’s taxable year 1989.3 On January 10, 1997, a payment

of $192.55 was made by levy with respect to petitioner’s taxable

year 1989.4 On March 31, 1999, respondent issued a Final Notice,

Notice of Intent to Levy and Notice of Your Right to a Hearing

(notice of intent to levy) with respect to petitioner’s taxable

year 1989. 

On or before April 29, 1999, in response to the notice of

intent to levy, petitioner filed Form 12153, Request for a
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Collection Due Process Hearing (Form 12153). In Form 12153,

petitioner alleged:

Have been requesting hearing for almost 10 years now

from local and Atlanta agents and no response except

liens and seizure of bank account in excess of actual

amount in account, by local agent * * *. Not taking

into consideration or complying with your own instructions by field agents has led to this. I want my day

in Federal Court and am again requesting such 

On January 19, 2000, petitioner submitted to respondent’s

Appeals Office (Appeals Office) Form 433-A, Collection Information Statement for Individuals (Form 433-A). In that form,

petitioner indicated that he had two dependents--the mother of

his son and their son. Petitioner indicated in Form 433-A that

he owned: His home located in Beaufort, South Carolina, which he

valued at $77,000; four automobiles, two of which he did not

value, one of which he valued at $6,500, and one of which he

valued at $1,500; three boats which he did not value; and certain

tools of trade on which he placed a “current pawn value” of

$5,000 to $7,500 and a “replacement value” of $20,000 to $25,000. 

In Form 433-A, petitioner indicated that his monthly compensation

varied but that it was around $2,000 and that his monthly total

expenses were $1,300. In response to a question in Form 433-A

asking for “Additional information or comments”, petitioner

stated: “Dept of Navy owes me disability from Oct ‘86 thru

current”. 

According to the Appeals Office Case Memorandum relating to
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the notice of intent to levy with respect to petitioner’s taxable

year 1989, 

Mr. Ashley [petitioner] makes claims that he cannot pay

the amount due. He included another letter with his

protest alluding to a large government debt owed him

from another agency for disability payments which he

claims were improperly denied. He believes that the

Internal Revenue Service should help him in his cause

to recover what he believes are his benefits and then

share in those benefits to pay the taxes at hand.

* * * * * * *

In the instant case, Mr. Ashley in his protest claims

not that he doesn’t owe the tax, but that the liability

should be offset by the debt owed him by another federal government agency. It should be noted that the

assessment at hand was made under “substitute for

return” procedures and is not from a voluntarily filed

tax return. Therefore, Mr. Ashley may file an original

tax return to correct the amount of tax at any time

based upon relevant records he may have.

* * * * * * *

Mr. Ashley responded to a letter sent by the settlement

officer saying in a phone message that he would be

amenable to completing a financial statement to declare

his inability to pay. Such a financial statement was

sent to Mr. Ashley with instructions to complete as

fully as possible and return to the settlement officer

for evaluation. His overture at not being able to pay

should be treated as a collection alternative within

the meaning of the new Restructuring and Reform Act of

1998 as it applies here. 

* * * * * * *

A telephone conference was agreed upon and held with

Mr. Ashley. * * * 

Mr. Ashley went over his claim that the Internal Revenue Service should straighten out his problem with the

Department of the Navy, which he said denied his disability claim. * * * 
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Mr. Ashley was again advised that he could file an

original tax return for 1989. * * * 

* * * * * * *

The financial information submitted by Mr. Ashley

indicates that he has equity in property from which

some funds may be generated. Mr. Ashley houses not

only himself but his common law wife and their natural

son. Thus, there are three who are claimable as dependents for purposes of determining disposable income. 

Mr. Ashley indicated that his wife does not work and

that his income is the sole income of the household. 

An analysis of his monthly income over allowable expenses reveals the following:

Income Expense Type Expense Amount

$2,000 National Std. $ 781*

 Housing & Util. $ 350**

 Transportation $ 235***

 Total $1,366****

*3 people in household, source: BLS 10/99.

**as claimed but unsubstantiated, no housing purchase or rental expense is involved or included.

***as allowed for one car, no purchase expense is

involved or included.

****Mr. Ashley’s claim reflects monthly expenses

of $1,300.

Footnote: The home and autos are paid for. Mr.

Ashley claims that he lost his health and life

insurance because of the circumstances described

above.

Applying a present value to the excess income over

expenses yields a total of $25,994 [$634 per month x 41

months left on statute = $25,994].

According to the county valuation of Mr. Ashley’s

realty and the information on encumbrances, he has the

full equity of the home because he had satisfied the

mortgage. The county valuation is $75,353. There are

no available valuations for the vehicles or boats in

Mr. Ashley’s possession. However, it is unnecessary to

obtain that information because the addition of present

value to the equity in the realty substantially exceeds

what is owed by Mr. Ashley. Even reducing the value of
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the realty by 20% leaves equity of $60,282. Also,

eliminating present value in its entirety because of

the dischargeability of the taxes still leaves net

realizable equity substantially in excess of the amount

owed. 

Mr. Ashley might have been entitled to enter into an

installment agreement but for the fact that he is not

current in his filing obligations. [See IRM

5.14.1.4(4).] Mr. Ashley was given ample opportunity

to file the delinquent, and as he indicated to the

settlement officer, taxable returns (all since 1989)

but unfortunately, has not done so. He requested

assistance from the Internal Revenue Service in preparing the unfiled returns which, according to information

secured by the settlement officer, could not be offered. Therefore, an installment agreement isn’t an

option for Mr. Ashley.

The settlement officer considered an offer in compromise as an [sic] collection alternative. However,

there are several reasons why an offer is inappropriate. As indicated above, Mr. Ashley’s equity in assets

far exceeds the amount owed which precludes acceptance

based on “doubt as to collectibility”. Nor has he

claimed or demonstrated that there are any special

circumstances which would warrant consideration of an

“Effective Tax Administration” offer. In any event,

the Service policy with respect to individuals who

submit offers is that they be current in filing all due

returns before their offers can be processed. [See IRM

5.8.3.3(2).] As noted above Mr. Ashley was not in

compliance with his filing responsibilities at the time

of his appeal nor has he become compliant in filing

since. 

Mr. Ashley has not offered a viable collection alternative in his case. Nor has he availed himself to date

of the opportunity to file an original income tax

return for the subject year which he claims verbally

would reduce the amount of tax due. Further, Mr.

Ashley will not be available for a viable collection

alternative until such time that he becomes compliant

with his filing obligations. Therefore, the following

conclusions and determinations are made in this matter.

The sending of the Notice of Intent to Levy was proper

under the circumstances. Since no viable collection
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alternative has been offered, the intrusiveness of the

proposed levy is commensurate with the need to collect

the revenue efficiently and in such a manner. Mr.

Ashley was advised that the liability can be adjusted

at any time if an accurate return is filed and substantiated. The sending of the Notice of Intent to Levy

should thus be sustained. 

On March 29, 2000, pursuant to section 6330, the Appeals

Office issued to petitioner a notice of determination with

respect to petitioner’s taxable year 1989. That notice stated in

pertinent part: 

Summary of Determination:

The Service followed its procedural, administrative and

legal guidelines in sending the Notice of Intent to

Levy.

There were no viable collection alternatives advanced

by the taxpayer.

The intrusiveness of the proposed levy is commensurate

with the need to collect the revenue efficiently. 

Attached to the notice of determination was a document entitled

“Attachment - 3193". That document stated in pertinent part:

Matters Considered

Whether the Service followed its procedural, administrative and legal guidelines in issuing the Notice of

Intent to Levy.

As [sic] assessment of tax was made and notice and

demand for payment followed. Failure to pay the

amount occurred thereafter. Before levy can be

made a Notice of Intent to Levy must first be

issued. * * * The Service followed the required

procedures in issuing the Notice of Intent to

levy.

Whether any collection alternatives are advanced by the

taxpayer and the viability of such offers.
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5Petitioner did not petition the Court with respect to the

notice that respondent issued to him relating to his taxable year

1989. Moreover, although invited to do so by the Appeals Office,

petitioner did not prepare and file with the Appeals Office a

return for 1989. At trial, petitioner testified that he did not

know what he owed for his taxable year 1989. Assuming arguendo

that petitioner had properly placed at issue the validity of the

underlying tax liability at issue, on the record before us, we

find that petitioner has failed to establish that petitioner’s

unpaid liability for 1989 is not valid.

The taxpayer proposed the Service act on his behalf in seeking to recover damages the taxpayer

says are owed to him by another federal agency. 

There is no established debt at this time, and

therefore, no power of levy against the debt to

recover the taxes owed. The taxpayer was advised

that he could file an original income tax return

for the subject year but has yet to do so. The

taxpayer was asked to file delinquent tax returns

but has not done so. There were no other alternatives offered. 

Whether the proposed action would be unnecessarily

intrusive as against the need to collect the revenue

efficiently.

The intrusiveness of the proposed levy is commensurate with the need to collect the revenue efficiently and in such a manner. The failure to file

delinquent returns precludes the collection alternatives most often employed. 

OPINION

Where, as is the case here, the validity of the underlying

tax liability is not properly placed at issue, the Court will

review the administrative determination of the Appeals Office for

abuse of discretion.5 Sego v. Commissioner, 114 T.C. 604, 610

(2000); Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). 
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Petitioner asks the Court to grant him various remedies,

including full compensation for claimed disability benefits,

appropriate redress for his alleged wrongful discharge by the

Government, an investigation of various complaints against the

Internal Revenue Service, and relief from petitioner’s unpaid

liability for 1989 and for any unpaid liabilities for taxable

years thereafter. 

We do not have the authority to resolve any of the matters

raised by petitioner except the issue as to whether respondent

may proceed with collection with respect to petitioner’s taxable

year 1989. The record is devoid of any evidence establishing

that respondent abused respondent’s discretion in determining in

the notice of determination to proceed with collection with

respect to that year. On the record before us, we find that

respondent did not abuse respondent’s discretion in making that

determination.

We have considered all of petitioner’s arguments and contentions which are not discussed herein relating to whether respondent may proceed with collection with respect to petitioner’s

taxable year 1989, and we find them to be without merit and/or

irrelevant.

To reflect the foregoing,

Decision will be entered for

respondent.