T.C. Mem o. 2 01 3- 29 1

UNITED STAT ES TAX COURT

CHRIS TOPHER V. POHL, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 23 06 1- 12 L. File d Dec em be r 23 , 20 13 . Ch ris to ph er V. Po hl , pro se. Kath le enK. Raup , forres po nd en t.

MEMORANDUM OPINION LAUBER, Ju dg e: In thi s co ll ect io n due pro ces s (C DP) cas e, pe ti ti on er se ek s re vi ew pu rs ua ntto sec ti on 63 30 (d )(1 ) of th e d et erm in at io n b y

th e In te rn al-2 -

[* 2] Rev enue Serv ic e (IR S o r res po nd en t) t o uph ol d ano ti ce o f in te ntto lev y . 1 Afte r co nc es si on s, the so le is su e fo r de ci si on is whet he r th e IRS erre d i n su st ai ni ng th e n ot ic e o f in te ntto lev y an d d et erm in in g t o p ro ceedwith c ol le ct io n of fri vo lo us return p en al ti es , inth e ag gr eg at e am ou ntof $ 30 ,00 0, as se ss edag ai ns t pe ti ti on er fo r ta x years 2 00 5- 10 . The IR S h as m ov edforsu m m ary jud gm en t 2 un de r Ru le 12 1, co nt en di ng th atth ere a re n o d is pu te d i ss ue s o f m at eri al factan d th atit s ac ti on insu st ai ni ng th e le vy was p ro pe r as a m at te r of law. We agre e an d acco rd in gl y

wil l g ran t the m ot io n. Bac kg ro un d Pet it io ne r earne d wag es an d o th er co m pe ns at io n fr om

vario us bu si ne ss act iv it ie s dur in g 2 00 5- 10 . He work edforsev eral bu si ne ss es an d ra n h is own win do w wash in g c om

pa ny, buthi s p rimary

so ur ce o f in co m e was fro m hi s em pl oym en t atBo rg at a Hot el Cas in o & Sp a in Atl an ti c Ci ty, New Je rs ey . His in co m e fro m

Bo rg at a b eg anin20 05 , gre w in20 06 , andav erag edab ou t $ 50 ,00 0 i n ta x years 2 00 7- 10 , when itbe cam e h is m ai n s ou rce o f in co m e. Fo r al l s ix tax All st atut ory

refe ren ces are t o t he Int ern al Rev enue Co de (Co de ) ineffe ctat 1 al l re le va ntti m es , andall Ru le refe ren ces are t o t he Tax C ourt Rul es of P ract ic e an d P ro cedur e. Res po nd en t h as co nc ed edanerro ne ou s as se ss m en t o f $2 ,52 9 i n t ax an d 2 pe na lty for 20 04 an d dup li cat e as se ss m en ts of f riv ol ou s re tu rnpe na lt ie s fo r 20 05 - 10 . All o f th os e as se ss m en ts are i n t he pro ces s o f be in g aba te d.-3 -

[* 3] y ears at i ss ue , pet it io ne r an d t he IRS re cei ve d t hi rd -p arty in fo rm at io n re tu rn s --i .e., Form s W-2, Wage an d Tax Sta te m en t, an d F orm s 1 09 9- MIS C, Mi sc el lane ou s In co m e--r ep orti ng th e wag es an d n on em pl oyee co m

pe ns at io n t ha t pe ti ti on er re cei ve d. Th e Fo rm s W-2 s ho weda sm al l am ou ntof F ed eral in co m e ta x withh ol di ng fortwo of t he y ears at i ss ue an d n o F ed eral in co m e ta x wi th ho ld in g fo r th e o th er y ears . The Fo rm s W-2 re fle ct edwithh ol di ng of s om e em pl oym en t ta x fo r eac h year. Pet it io ne r di d n otfil e Fed eral in co m e ta x re tu rn s fo r an y of t he y ears at is su e. Afte r co m

m en ci ng anex am in at io n i n S ep te m be r 20 10 , res po nd en t l earn ed th ro ug h the su m

m on s p ro ces s tha t p et it io ne r ha d a ss ert edto at l eas t o ne em pl oyer th athe was “ ta x e xe m

pt .” Thi s ap pe aredto ex pl ai n wh y pe ti ti on er’s em

pl oyers ha d wi th he ldve ry

li tt le tax fro m

hi s p ay ch eck s. On Ap ril 7, 2 01 1, an IRS re ve nu e ag en t (RA) ha d aface -to -fac e m eet in g with p et it io ne r atres po nd en t’s Ma y ’s Land in g, N.J ., offi ce. At the m eet in g pe ti ti on er h an d d el iv eredpurp orte d “ ta x re tu rn s” for20 05 -1 0, ea chpre pa redon Fo rm 10 40 EZ, Inco m e Tax Return fo r Si ng le an d J oi ntFil ers W ith No Dep en de nt s. Oneach of t he se do cu m en ts pe ti ti on er l is te d h is oc cupa ti on as “ no nfed eral work er”; rep orte d h is in co m e fro m wage s as zero ; s ou gh t re fundof a ll ta xe s (i nc lu di ng em

pl oym en t t ax es ) withh el d dur in g e ach y ear; an d a tt ach ed-4 -

[* 4] al le ge dl y

“ co rrec te d” Fo rm s 1 09 9- MIS C. On the se form s p et it io ne r co ve red th e wag es rep orte d b y

hi s emplo y ers with c orrect io n fl ui d a ndrep la cedth os e am ount s wi th zero . On Ap ril 11 , 20 11 , th e RA s en t p et it io ne r co pi es of r el ev an t Co de pro vi si on s an d ju di ci al op in io ns ad dr es si ng fri vo lo us tax returns . On May 13 , 20 11 , th e RA fo rward edpe ti ti on er’s p ur po rte d “ ta x re tu rn s” for20 05 -1 0 t o the IRS Fri vo lo us Return P ro gr am (FRP) inOgd en , Utah . On Aug us t 1 0, 2 01 1, an FRP st aff m em be r m ai le d p et it io ne r a l et te r warn in g h im of t he po te nt ia l co ns eque nc es of tak in g fr iv ol ou s re tu rnpo si ti on s. Th e le tt er cl earl y ou tl in edres po nd en t’s co nc lu si on th atpe ti ti on er h adtak enfri vo lo us po si ti on s o n h is 20 05 -1 0 “ returns ” an d warne d p et it io ne r th atth e IRS wou ldass es s a $ 5,0 00 pe na lty for each y ear f

or whi chhe fil eda fri vo lo us return. Th e le tt er al ert edpe ti ti on er t o h is st atut ory rig ht to withd raw h is “ returns ” an d fi le no nf riv ol ou s re tu rn s wi th in 30 day s. If h e d id so , pet it io ne r wou ldav oi d the $5 ,00 0 p en al ty im po se d b y sec ti on 67 02 up on an y pe rs on who fil es “ wha t p ur po rts to be a return o f ta x” bu t “ do es no t co nt ai n in fo rm at io n o n wh ic h the subs tant ia l co rrec tn es s o f th e se lf- as se ss m en t m ay be jud ge d” an d i s “ ba se d o n apo si ti on whi chth e Sec ret ary ha s i de nt ifi edas fri vo lo us .”-5 -

[* 5] On Se pt em

be r 14 , 20 11 , pet it io ne r rep li edby reit erat in g h is po si ti on th athe is ex em ptfro m tax at io n b ecau se , as apri va te sec to r worke r, he is no t an

“ em pl oyee” und er s ect io n 3 40 1 andth eref or e can no t re cei ve “ wag es .” He ag ai n de m an de d arefu ndof wi th he ldtax es an d att ach edco pi es of t he pu rp orte d “ ta x returns ” th atth e IRS ha d a lre ady de te rm in edto be fri vo lo us . On No ve m

be r 21 , 20 11 , res po nd en t as se ss eda $5 ,00 0 fr iv ol ou s re turn pe na lty un de r se ct io n 6 70 2 fo r eac h o f th e si x t ax y ears at i ss ue an d s en t p et it io ne r a n ot ic e o f ba lanc e due for20 05 -1 0. Hav in g re cei ve d n o p aym en t, re sp on de nton Apr il 2, 2 01 2, i ss ue d p et it io ne r a Fi na l No ti ce o f In te ntto Levy andNot ic e o f You r Ri gh t t o aHeari ng un de r Sec ti on 63 30 . By let te r da te d M ay

1, 2 01 2, pe ti ti on er re qu es te d aCDP h eari ng . By let te r da te d J un e 1 , 20 12 , a se tt le m en t of fic er (SO) fro m

res po nd en t’s Ap pe al s Off ic e ackno wled ge d p et it io ne r’s he ari ng reque stan d s ch edul eda te le ph on e CDP h eari ng forJu ly 5, 20 12 , to di sc us s an y no nf riv ol ou s i ss ue s tha t p et it io ne r wis he d t o ra is e. Inad di ti on , th e SO n ot edin he r cas e act iv ity

reco rdforpe ti ti on er o n J un e 1 he r ve rif ic at io n t ha t re sp on de nt ha d m ad e v al idass es sm en ts of t he fri vo lo us return p en al ti es . By let te r da te d J un e 2 9, 2 01 2, p et it io ne r se ntth e SO m or e co pi es of t he

“ returns ” h e h adsubm it te d p rev io us ly. He rei te rat edhi s co nt en ti on s tha t h e is ex em ptfro m tax an d tha t the IRS ca nn otrel y up on Fo rm s W-2 an d F orm s 1 09 9--6 -

[* 6] MIS C to est ab li shth e wag es an d n on em pl oyee in co m e th athe rece iv ed . Pet it io ne r al te rn at iv el y

arg ue d tha t h e is no t a “ pe rs on ” wit hi n t he m ean in g o f se ct io n 6 04 1( a) an d h en ce tha t Fo rm 10 99 -MI SC re po rti ng do es no t ap pl y to hi m . Dur in g the CDP h eari ng on Ju ly 5, 20 13 , pet it io ne r di d n otsupp ly any ne w in fo rm at io n o r se eka co ll ect io n a lt ern at iv e. Res po nd en t d es cri be d t he subs tanc e of th e cal l i n the no ti ce o f de te rm in at io n: “ Afte r 45 m inut es of g oi ng aro un d i n ci rcl es with the tax pa y er as ki ng to de fin e wor ds * * * , the Set tl em en t Offi cer t ol d th e ta xp ay er tha t af

te r a rev ie w of the in fo rm at io n * * * a de te rm in at io n l et te r wil l be is su ed .” On Au gu st9, 2 01 2, the IRS i ss ue d ano ti ce o f de te rm in at io n su st ai ni ng th e p ro po se d l ev y . Peti ti on er t im el y so ug htrev ie w inth is Co urt. Dis cu ss io n A. Summ ary Ju dg m en t The pu rp os e o f su m

m ary jud gm en t i s t o e xp ed it e li ti ga ti on an d a vo idco st ly, ti m e-co ns um in g, an d u nn eces sa ry tri al s. Fl a. Peac h C or

p. v . Comm is si on er, 9 0 T.C. 67 8, 6 81 (19 88 ). W e m ay gra ntsu m

m ary jud gm en t wh enth ere i s n o g enui ne di sp ut e as to an y

m at eri al factan d ade ci si on m ay be ren de redas am at te r of law. Ru le 12 1( b) ; 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, 17 F.3d96 5 (7 th Cir . 19 94 ). In d eci di ng whet he r to gra ntsu m m ary jud gm en t, we-7 -

[* 7] co ns tru e fac tu al m at eri al s an d i nf eren ces dra wn fr om

th em inth e li gh t m os t fav or ab le to th e n on m ov in g p arty . Sun ds tra ndCo rp ., 98 T.C. at 5 20 . Howev er, th e n on m ov in g p arty

“ m ay no t re stup on m ere a ll eg at io ns or d en ia ls ” b utin st ead

“ m us t s etforthsp eci fic fact s s ho win g t he re i s a g enui ne di sp ut e.” Ru le 12 1( d) ; se e Su nd st ran d C or

p., 9 8 T.C. at52 0. We con cl ud e th atth ere are n o m at eri al fact s in di sp ut e an d tha t thi s ca se is ap pr op ria te forsu m m ary ad jud ic at io n. B. Sta nd ardof R ev ie w Sect io n 6 33 0( d) (1 ) do es no t p res cri be th e st an da rdof r ev ie w th atth is Co urt sh al l ap pl y

inrev ie win g a n IR S adm in is tra ti ve de te rm in at io n i n aCDP cas e. The ge ne ral pa ram et ers forsu chrev ie w are m ark edou t b y ou r pr eced en ts . W

he re the va li di ty of th e und erl y in g t ax li ab il ity is at i ss ue , th e Co urt wi ll rev ie w th e Co m m is si on er’s d et erm in at io n d e n ov o. Go za v . Comm is si on er, 1 14 T.C. 17 6, 1 81 - 18 2 (2 00 0) . Whe re the re i s n o d is pu te co nc ern in g t he un de rlyin g t ax li ab il ity , th e Co urt re vi ews th e IRS de ci si on forab us e o f di sc ret io n. Id . at 1 82 . The sec ti on67 02 fri vo lo us return p en al ty, as anass es sabl e p en al ty, is no t subjec t t o the de fic ie nc y

pro cedur es ou tl in edinsec ti on s 6 21 1- 62 16 . See s ec. 67 03 (b ). Becaus e a t ax pa y er wi ll no t h av e rec ei ve d ano ti ce o f de fic ie nc y be fo re as se ss m en t o f th is pe na lty , he c andi sp ut e h is li ab il ity forth e p en al ty at a CDP he ari ng an d o n re vi ew of th e CDP d et erm in at io n i n t hi s C ou rt, i n t he ab se nc e o f-8 -

[* 8] an y othe r op po rtu ni ty to co nt es t i t. See Cal lahan v . Comm is si on er, 1 30 T.C. 44 , 49 -5 0 (2 00 8) . In thi s s et ti ng , th e fri vo lo us return p en al ty is the “un de rlyin g ta x l iabi li ty,” andth e ta xp ay er i s en ti tl edto de no vo rev ie w of thi s l iabi li ty if he ha s ra is eda m ean in gf

ul ch al le ng e to th e p en al ty at hi s C DP he ari ng . See i d.; Goza v. Co m m is io ne r, 11 4 T.C. at18 2. Howev er, d e n ov o re vi ew of fri vo lo us return p en al ti es is no t au to m at ic . To rece iv e d e n ov o re vi ew, th e ta xp ay er atth e CDP h eari ng m us t m ak e a m ean in gf

ul ch al le ng e to th e p en al ty its el f--e .g., b y pl au si bl y co nt en di ng th athi s re tu rnco nta in s s uf fic ie nt“ in fo rm at io n o n wh ic h t he subs tant ia l co rrec tn es s o f th e se lfas se ss m en t m ay

be jud ge d,” sec . 67 02 (a)( 1) (A), orth athi s p os it io n i s n oton e

“ whi chth e Sec ret ary ha s i de nt ifi edas f riv ol ou s,” s ec. 6 70 2( a)(2 )(A). If the tax pa y er athi s C DP he ari ng adva nc es no rat io na l ar gu m en t ab ou t wh y th e p en al ty do es no t ap pl y

bu t i ns te adin si st s o n m ai nt ai ni ng fri vo lo us arg um en ts th athi s wag es are n ot“ in co m e,” h e h as no t m ad e a m ean in gf ul ch al le ng e to hi s l iabi li ty fo r th e p en al ty. See Bu ck ard t v . Comm is si on er, T.C. Mem o. 2 01 2- 17 0, 1 03 T.C.M. (CC H) 19 09 , 19 12 . The reg ul at io ns expl ic it ly pro vi de th atanis su e is no t pr op erl y rai se d b efo re thi s C ou rt i f a t ax pa y er fa il s t o p res en t the IRS Ap pe al s Offi ce wi th an y

ev id en ce re la ti ng to th e is su e aft er b ei ng affo rd edanop po rtu ni ty to do so . Sec. 3 01 .63 30 -1 (f)(2 ), Q&A-F3 , Pro ced . & Adm in . Reg s.-9 -

[* 9] The reco rdbe fo re u s cl earl y sh ows th atpe ti ti on er m ad e n o m ean in gf ul ch al le ng e to th e fri vo lo us return p en al ti es at h is CDP h eari ng . The o nl y di sc ern ib le arg um en t h e adva nc edat t he he ari ng was tha t h is wage s ar e ex em ptfro m tax be cau se he is a no n- Fed eral work er, anarg um en t i de nt ifi edas f riv ol ou s b y

th e Secr et ary in Not ic e 2 00 7- 30 , 20 07 -1 C.B. 8 83 . Becau se we fin d t ha t p et it io ne r di d no t m ean in gf

ul ly chal le ng e h is un de rlyin g l iabi li ty for the pe na lty at t he CDP he ari ng , we wil l ap pl y

anab us e o f di sc ret io n s tand ardto our rev ie w of the SO’s de te rm in at io n. C. Anal y si s Becaus e p et it io ne r’s un de rlyin g l iabi li ty is n otat i ss ue , th e o nl y qu es ti on we co ns id er i s wh ethe r res po nd en t p ro pe rly su st ai ne d alev y to co ll ectth is li ab il ity . W e rev ie w th e rec or d t o d et erm in e whe th er the App eal s o ffi cer ( 1) ve rif ie d tha t the requi rem en ts of app li cab le law an d a dm in is tra ti ve pro cedur e h av e be enm et ; (2 ) co ns id eredwhet he r th e is su es pe ti ti on er ra is edha ve m eri t; an d (3 ) co ns id eredwhet he r “ an y

pro po se d c ol le ct io n a ct io n b al an ces th e n eedforth e effi ci en t co ll ect io n o f ta xe s wi th th e le gi ti m at e co nc ernof t he pe rs on th atan y co ll ect io n a ct io n b e n o m or e in tru si ve th anne ces sa ry .” Sec. 6 33 0( c)(3 ). At th e CDP h eari ng , th e ta xp ay er m ay rai se an y rel ev an t i ss ue rel at in g t o t he unpa idtax-1 0-

[* 10 ] or l ev y , in cl ud in g “ ch al le ng es to th e ap pr op ria te ne ss of c ol le ct io n a ct io ns ” an d “ of fers of c ol le ct io n a lt ern at iv es .” Sec. 6 33 0( c)(2 )(A)(i i) a nd(ii i). Pet it io ne r atth e CDP h eari ng rai se d n o c ol or ab le is su es ab ou t the pe na lt ie s orth e le vy, andhe off

eredno co ll ect io n a lt ern at iv e. Rathe r, hi s as se rti on s atbo th th e adm in is tra ti ve an d l it ig at io n s ta ge s o f th is cas e h av e co ns is te d e nt ire ly of fri vo lo us arg um en ts . A sam pl in g o f hi s ar gu m en ts in cl ud es th e as se rti on s tha t h e ha s n o “ wag es ” b ecau se he is no t an em pl oyee of th e Fed eral Gov ern m en t; th at Fo rm s 1 09 9- MIS C an d W-2 m ay no t b e u se d fo r pr iv at e se ct orwork ers ; the IRS m ay no t re ly on i nf

orm at io n re tu rn s re cei ve d fr om th irdpa rti es ; an d t ha t the IRS la ck s au th or ity

to lev y onth e p ro pe rty of p riv at e se ct orwork ers . 3 It i s cl ear f

ro m ou r rev ie w of the reco rdth atth e App eal s o ffi cer v eri fie d tha t th e requi rem en ts of a ny app li cab le law an d a dm in is tra ti ve pro cedur e were fo ll owe d; th atpe ti ti on er’s cl ai m s l ackm eri t; an d t ha t i n s us ta in in g t he lev y th e App eal s o ffi cer p ro pe rly bal an ced“ th e n eedforth e eff ic ie ntco ll ect io n o f ta xe s with the leg it im at e co nc ernof * * * [pe ti ti on er] th atan y co ll ect io n a ct io n b e n o Am on g the m any

fri vo lo us arg um en ts pe ti ti on er ad va nc es is th e as se rti on 3 th athe is en ti tl edto a refu ndof a ll Fed eral tax withh el d fo r th e y ears at i ss ue . Thi s C ou rt i s a c ou rt o f li m it edjuri sd ic ti on ; i n o urrev ie w of thi s C DP cas e, we can no t co ns id er a cl ai m

forrefu nd . See Gree ne -Thape di v. Co m m is si on er, 1 26 T.C. 1 (2 00 6) .-1 1-

[* 11 ] m or e in tru si ve th anne ces sa ry .” Sec. 6 33 0( c)(3 ). Pet it io ne r co nt en ds th at th e IRS di d n otm ak e a “ lawfu l as se ss m en t” of t he fri vo lo us return p en al ti es be cau se itass ert ed ly fail edto sat is fy th e p ro cedur al requi rem en ts of s ect io n 67 51 (b ). W e rejectth is co nt en ti on . Sect io n 6 33 0( c)(1 ) requi res th e App eal s of fic er t o “ 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 .” A det erm in at io n o f lawfu l as se ss m en t i s a c om po ne ntof t hi s v eri fic at io n re qu ire m en t. See Ro n Lyki ns , Inc . v. Co m

m is si on er, 1 33 T.C. 87 , 96 -9 7 (2 00 9) . The ad m in is tra ti ve reco rdin cl ud es m

ul ti pl e en tri es by the SO co nf irming th atsh e v eri fie d t ha t v al id as se ss m en ts of t he fri vo lo us return p en al ti es ha d b eenm ad e. Fin di ng no ab us e o f di sc ret io n i n a ny of th es e res pe ct s, we wi ll gra ntsu m m ary jud gm en t fo r res po nd en t an d a ffi rm

th e p ro po se d c ol le ct io n a ct io n. D. Sanc ti on s Thi s C ou rt n ow co ns id ers su a sp on te whet he r to im po se san ct io ns on pe ti ti on er u nd er s ect io n 6 67 3( a)(1 ). Thi s s ect io n aut ho riz es th e im po si ti on of a pe na lty no t i n e xc es s o f $2 5,0 00 when a ta xp ay er h as in st itut edor m ai nt ai ne d Tax Co urt p ro ceed in gs pri m ari ly for d el ay or h as tak ena fri vo lo us or g ro un dl es s po si ti oninth is Co urt.-1 2-

[* 12 ] The po si ti on s p et it io ne r m ai nt ai ns are unque st io nabl y fri vo lo us , andth is Co urt wo ul d the refo re b e jus ti fie d i n i m po si ng ad di ti on al san ct io ns . Howev er, be cau se th is ap pe ars to be pe ti ti on er’s fi rs t fo ray in to th is Co urt, we i ns te adoff er a wor d o f cau ti on . Peti ti on er i s adm on is he d t o re frai n fr om adva nc in g fr iv ol ou s arg um en ts inan y

futur e fi li ng s h e m ay

m ak e in th is Co urt, b ecau se th e Co urt n ex t ti m e is un li ke ly to s ho w len ie nc y . Fail ur e to he edth is warn in g m ay lea d t o t he im po si ti on of asubs tant ia l m on et ary pe na lty un de r se ct io n 6 67 3( a)(1 ). An ap pr op ria te ord er an d d eci si on wil l b e en te red .