T .C. Su m m ary Op i n io n 2 01 7 -1 2

UNITED STATES TAX COURT

W ILLIAM HENRY PAYNTER AND ELIZABETH A. PAYNTER, Pet it i o n ers v .

COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 2 1 0 21 -1 5 S L. Fi l edM arch 8 , 2 0 17
.

W i l l i am Hen ry Payn ter an dEl i zab et h A. Paynt er, p ro s es e. Ty s o n R. Sm i th , fo r res p o n d en t .

SUM M ARY OPINION PANUTHOS, Ch i ef Sp eci al Tri al J u d g e: Th i s cas e was h eardp u rs u an tt o th e p ro v i s i o n s o f s ect i o n 7 4 6 3 o f t h e In t ern al Rev en u e Co d e i n effect wh en th e p et i t i o n was fi l ed
. 1 Pu rs u an t t o s ect i o n 7 4 6 3(b ), th e d eci si on t o b e en t eredi s n o t

1 Un l es s o th erwi s e i nd i cat ed , s ub s equ en ts ect i on referen ces are t o t h e (co n ti n u ed ...)2

rev i ewab l e b y

an y o ther co u rt , an d t h i s o p i n i o n s h al l n o tb e t reat ed as p reced en t fo r an y o th er cas e. Th i s cas e i s b efo re t h e Co u rto n p et i t i o n ers ’ req ues tfo r rev i ew o f
res p o n d en t’ s d et erm i n at i o n t o s u s t ai n a n o t i ce o f i n ten tt o l ev y t o co l l ect p et i t i o n ers ’ 2 0 06 Fed eral i n co m e t ax l i ab i l i ty . Th e i s s u es fo r d eci s i o n are: (1 ) wh et h er p et i ti o n ers p ai dth e as s es s edt ax fo r 2 0 0 6 ; (2 ) wh et h er p et i t i o n ers are l i ab l e fo r t he s ect i o n 6 6 5 1 (a)(2 ) ad d i t i o n t o t ax fo r fai l u re t o t i m el y p ay thei r i n co m e t ax fo r 2 0 0 6; (3 ) wh et h er p et i t io n ers are l i ab l e fo r t h e s ect i on 6 6 5 4(a) ad d it i o n t o t ax fo r fai l u re t o p ay es t i m at ed i nco m e t ax fo r 2 0 06 ; an d(4 ) wh et h er
res p o n d en t i s es t o p pedfro m s u s t ai n i ng th e p ro p o sedl ev y . Back gro u n d So m e o f t h e fact s h av e b een s ti p u lat ed , an dwe i n co rp o rat e t h e s t i p u l at i o n o f fact s b y th i s referen ce. Pet it i o n ers res i d edi n Cal i fo rn i a wh enthe p et i t i o n was t i m el y fi l ed
. Pet i t i o ners W i l l i am Hen ry Payn t er (p et i t i o n er) an dEl i zab et h A. Payn t er
res i dedi n Cal i fo rn ia du ri n g 2 0 0 6 . Pet it i on er was s el f-em p lo y edas an at to rn ey .

1 (...co n t in u ed ) In t ern al Rev enu e Co d e i n effect atal l rel ev an tt i m es , an dal l Ru le referen ces are t o th e Tax Co u rt Ru l es o f Pract ice an dPro cedu re.3

Pet i t i o ners t i m el y

fi l edth ei r 2 0 0 6 Fo rm

1 0 40 , U.S. In d i v i du al In co m e Tax Retu rn , o n Oct o ber 1 5 , 2 0 0 7 , p u rs u an tt o an ex t en s i o n, rep o rt in g a t ax du e o f $ 1 5 ,9 8 9 . Pet i t i o n ers d i dn o t m ak e es ti m at edt ax p aym en t s fo r 2 0 0 6 an dd i d n o t
rem i tp aym en t wh en th ey fi ledth ei r retu rn . Wh en p et it i on ers ’ 2 0 06 retu rn was p ro ces s edo n No v em

ber 2 6 , 2 0 0 7 , th e In t ern al Rev en u e Serv ice (IRS o r
res p o n d en t) as ses s eda t ax o f $ 1 6 ,1 3 2, a s ect i o n 6 6 5 4 (a) ad d i t i o n t o t ax o f $ 7 5 7 , an d a s ect i on 6 6 5 1 (a)(2 ) ad d i t i o n t o t ax o f $ 6 40 . In cl ud i n g $ 8 1 5 i n i n t eres t , th e
as s es s edb al an ce as o f No v em b er 2 6 , 2 0 0 7 , was $ 1 8 ,3 44
. 2 A n o t i ce o f b al an ce du e fo r 2 0 0 6 was m ai l edt o p et i t i on ers i n 2 0 0 7
. 3 Fo r reas o n s n o tap paren t fro m th e reco rd , res p o n d en t d idn o t s en dan o th er
n o t i ce o f b al an ce du e fo r p et i t io n ers ’ 2 0 06 as s es s edb al an ce u n t i l Au g u s t2 7 , 2 0 1 4. Th e n ot i ce, s en tt o p et i t io n ers ’ l as tkn o wnad dres s , refl ect edan as s es s edb al an ce
o f $ 1 8,3 4 4 , an ad di t i o n t o t ax fo r l at e p aym en to f $ 3 ,3 9 3 , an daccru edi n t eres to f $ 5 ,5 6 0
.

2 $ 1 6 ,1 3 2 (as ses s edt ax ) % $ 7 57 (s ec. 6 6 5 4(a) ad d i t io n t o t ax ) % $ 64 0 (s ec. 6 6 5 1 (a)(2 ) ad d i t i o n t o t ax ) % $ 8 1 5 (i n t eres t ) ' $ 1 8 ,3 44 (as s es s edb al an ce).

3 Res p o n d en td i dn o tp ro v i d e a co p y o f t h i s n ot i ce. Res p o nd en t rel i edo n a cert ifi edco p y

o f p et i t i o n ers ’ 2 00 6 acco u n ttran s cri p t . Pet i t io n ers al so d i d n o t p ro v id e a co p y , b utth ey

ackn o wl ed g edth atth ey h adrecei v eda n o t i ce o f b al an ce du e fo r 2 0 0 6
.4

Res p o n d en ts en tp et i t i o n ers a Let t er 1 1 , No t i ce o f In t en t t o Lev y an dNo t i ce
o f Yo ur Ri g h t t o a Heari n g (n o t i ce o f i n t en tt o l ev y ), d at edM arch 6 , 2 01 5 , atth ei r l as tkn o wnad dres s . Th e n ot ice o f i n t en tt o l ev y refl ect edth e s am e as s es s ed b al an ce an dad d i ti o ns t o t ax as th e n o t i ce o f b al an ce du e s en ti n 2 0 1 4 p l u s accru ed i n t eres to f $ 5 ,9 9 0 . Inres p o n s e t o th e n o t i ce o f i n t en tt o l ev y , p et i t i o n ers t i m el y fi led a Fo rm 1 2 1 5 3 , Requ es t fo r a Co l l ect io n Du e Pro ces s o r Equ iv al en tHeari n g , wh i ch res p o nd en t recei vedo n Ap ri l 1 , 2 0 1 5 . Onth ei r Fo rm 1 2 1 5 3 p et i t i on ers
as s ert ed th atth ey

h adp ai dth e t ax fo r 2 0 06
. Up o n b ei ng as s i gn edt o p et i t i o n ers ’ cas e IRS Set t lem en tOffi cer Sm i th (SO Sm it h ) rev i ewedth e ad m i n is trat i v e fi l e an dp et i ti o n ers ’ acco u n ttran s cri p tan d
co n fi rm edth atth e t ax fo r 2 0 06 h adb een p ro p erl y as ses s ed . SO Sm i th al s o
v eri fi ed th atan y

req u i rem en t s o f ap p l i cab l e l aw an d ad m i n i s trat i v e p ro cedu re h ad b een m et . OnM ay 1 2 , 2 0 1 5 , SO Sm i th s en tp et i t i o ners a l et t er s ch edu l in g a t el ep h o ne
co l l ect i o n du e p ro ces s (CDP) h eari n g fo r J un e 2 3 , 2 0 1 5, an d req u es t edth at p et i t i o n ers p ro v i d e, am o n g o th er t h in g s, a Fo rm 1 04 0 fo r 2 0 1 4 wi thi n 2 1 d ay s . Th e l et t er i n d i cat edthatIRS reco rd s refl ect edth atth e 2 01 4 retu rnh adn o t b een fi led
. Th e d at e o f t h e t el eco n feren ce was res ch edu l edt o J u ne 2 9 , 2 01 5
.5

OnJ u ne 2 9 , 2 01 5 , SO Sm i th co n du ct eda t el ep h on e CDP h eari n g wi th p et i t i o n ers ’ rep res en t at i ve Ro b ertE. Su l l i van . Duri n g th e h eari n g SO Sm i th ad v is edM r. Su l l i v an th at th ere was a b al an ce du e fo r 2 0 0 6
. M r. Su l l iv an as s ert ed th atp et i t i o n ers h ad p ai dth e 2 0 0 6 t ax . SO Sm i th i n d i cat edth ath e co u l d n o tfi n da
reco rdo f p aym en tfo r 2 0 0 6 . Reg ard i n g p et i t i o n ers ’ as s ert ed p aym en t , SO Sm i t h i n fo rm edM r. Su l l i van thatacco u n ttran s cri p t s refl ect ed th atp et it i on ers h adm ad e th e fo l lo wi n g p aym en t s : (1 ) $ 2 1 ,8 8 3 , wh i ch was ap pl i edag ai n s tthei r 2 0 0 8 b al an ce du e o n Decem

b er 1 4 , 2 0 0 9 , an d(2 ) $ 2 0 ,8 1 1 , wh i ch was ap pl i edag ai n s t th ei r 2 01 3 b al an ce due o n No v em b er 2 4 , 2 0 1 4
. Du ri n g th e CDP h eari n g M r. Su l l i v anal so rai sedth e i s s u e t h atthe n o t i ce o f b al an ce du e fo r 2 0 0 6 was n o ts en tu n t i l 2 0 1 4 . M r. Su l li v an as s ert edth at p et i t i o n ers ’ reco rd s fo r 2 00 6 h adb een d es tro y edi n 2 0 1 3 i n acco rd an ce wi th th e IRS’ g u id an ce reg ard i n g reco rdret en t i o n . SO Sm i th d i d n otp ro v id e an
ex p lan at i o n fo r t h e d el ay b etw een th e i n i ti al n o t i ce o f b al an ce du e i n No v em b er 2 0 0 7 an dth e n o t i ce o f b al an ce du e s en ti n Au g u s t2 0 1 4
. SO Sm i th i n fo rm edM r. Su l l i van th atp et i t i o n ers h adan i n s t al l m en tag reem en twi th th e IRS fo r 2 0 0 5 i n effect atth e t i m e t h atthe t ax fo r 2 0 06 was as s es sedan d t h atthey l at er d efau l t edo n th e i n s t al l m en tag reem en t . SO Sm i th req u es t eda co p y o f p et i t i o ners ’ 2 0 0 66

Fed eral i nco m e t ax return , b u tM r. Su l l i v an as sert edth at thi s retu rn was d es tro y ed wi th th e o ther reco rd s fo r 2 0 0 6
. 4 SO Sm i th s en t p et i ti o n ers a No ti ce o f Det erm i n at i on Co n cern i n g Co l l ect i o n Act i o n (s ) Un d er Sect i o n 6 3 2 0 an d/ o r 6 3 3 0 (n o t i ce o f d et erm i n at i o n ) d at edJ u l y 2 7 , 2 0 1 5 . Th e n o ti ce o f d et erm i n at i o n s t at edth atth e l ev y was s u s t ai n edb ecau s e p et i t i o n ers “ co u l dn o trai s e t he u n d erl y in g l i ab i l i ty i n th e Co l l ect io n Du e Pro ces s Heari n g ” an dwere n o t i n co m p l i an ce wi th fi l i n g th ei r 2 0 1 4 Fed eral i nco m e t ax retu rn . OnAu gu s t1 8 , 2 0 1 5, p et i t i o n ers t i m el y fi l eda p et i t i o n d i s p ut i n g th e n o t i ce
o f d et erm i nat i o n . Pet i t i o n ers as s ert edi n th ei r p et it i on th atp et it i o n er h adp ai dth e 2 0 0 6 t ax i n p ers o n atth e IRS o ffi ce i n San t a Ro s a, Cal i fo rn i a, i n ei th er l at e 2 0 0 7
o r earl y 2 0 0 8 . Pet i t i o n ers d i dn o t h av e an y reco rd s o f p aym en t . Pet it i on ers al s o
as s ert ed th ati n Au g u s t2 0 1 0 thei r b an k , So n o m a Val l ey Ban k, was t ak en o v er b y th e Fed eral Dep o s i tIn s u ran ce Co rp o rat io n (FDIC). 5 Fu rt h er, p et i ti o n ers as s ert ed

4 It i s u ncl ear wh y SO Sm i th req u es t eda co p y o f p et i t i o ners ’ 2 0 0 6 Fed eral i n co m e t ax retu rn . Th e p art i es s t i pu l at eda co p y o f p et i t io n ers ’ 2 0 0 6 Fo rm 1 0 4 0 , p ro duced fro m

res p o n d en t ’ s reco rd s . 5 Th e Co urt n o t es th ato n Au g u s t1 0 , 2 01 0 , So n o m a Val l ey Ban k was cl o s ed b y th e Cal i fo rn i a Dep art m en to f Fi n an ci al In s ti tut i o n s an d th e FDIC was n am ed recei v er. Al l d ep os i t acco u n t s were t ran s ferred t o W es t am eri ca Ban k , th e acq u iri n g fi n an ci al i n s ti tu t i o n . (co n ti n u ed ...)7

th ati n 2 0 1 3 p et i t io ner p ai d t o h av e a n u m b er o f p ers on al an db u si n es s reco rd s
s h red d ed , i n cl u d i n g p et it i on ers ’ 2 0 0 6 Fed eral i n co m e t ax reco rd s an dth ei r p ro o f
o f p aym en to f t h ei r 2 0 0 6 tax . Res p o n d en tp ro v i d eda cert i fi ed co p y o f p et i t i o n ers ’ acco u n ttran s cri p tfo r 2 0 0 6 . Res p o n den tal s o p ro v i d eda d ecl arat i o n b y SO Sm i th an dco p i es o f al l th e d o cu m en t s co n t ai n edi n th e ad m i n i st rat i v e fi l e fo r p et i t i o n ers ’ co l lect i o n due p ro ces s h eari n g. Pet i t i o n ers ’ 2 0 0 6 acco u n ttran s cri ptd i d n o trefl ectan y p aym en t s
m ad e as o f J u ly

1 2 , 2 0 16
. Ad d it i on al l y , res p o n d en tp ro vi d edcert i fi edco p i es o f p et it i on ers ’ acco u n t tran s cri p t s fo r 2 0 0 4 , 2 00 5 , an d2 0 0 7 th ro ug h 2 0 15 . Th e co p y o f p et i t i o ners ’ 2 0 0 8
acco u n t tran scri p t refl ect s a p aym en t o f $ 2 1 ,8 8 3 o n Decem b er 1 4 , 2 0 0 9. Th e co p y
o f p et i ti o n ers ’ 2 01 3 acco u n t tran s cri p trefl ect s a p aym en to f $ 2 0 , 8 11 o n No v em b er

5 (...co n t in u ed ) h t tp s : //www.fd i c.g o v/ban k/ i nd i v i du al / fai l ed/ s on o m a.h t m l . Gen eral l y , u n der Fed
. R. Ev i d . 2 0 1 (b ), an ad

j u d icat i v e fact can b e ju d i ci al l y n o t icedo n l y

i f i t i s (1 ) g en eral l y kn o wnwi thi n the t ri al co u rt ’ s t erri t o ri al juri sd i ct i o n o r (2 ) cap ab l e o f accu rat e an dread y

d et erm i nat i o n b y

s o u rces wh o se accu racycan n o treas o nab l y b e qu es ti o n ed . See Es t at e o f Rei s v . Co m m i ss i o n er, 8 7 T.C. 1 0 1 6 , 1 0 2 6 -1 0 27 (1 9 8 6 ). W e m ay t ak e ju d i ci al n o t i ce o n o u r o wn , an dwe m ay d o s o atan y

s t ag e i n th e p ro ceed in g . See Fed . R. Ev i d . 2 0 1 (c) an d (d ).8

2 4 , 2 0 1 4 . Fo r 2 0 04 th ro u g h 2 0 1 4 p et i t i o n ers fi l edt i m el y Fed eral i n co m e t ax retu rn s wi th ou t rem i t t an ce an dl at er p ai dth ei r t ax as fo ll o w s : 6

Year Dat e n o t i ce

i s s u ed Paym en td at e 20 0 4
--- Dec. 3 0 , 2 00 5 20 0 5
--- J an . 1 2 , 2 0 0 7 20 0 6 No v. 6 , 2 0 0 7 ;

Au g . 2 7 , 2 0 1 4 No p aym en t

o n reco rd 20 0 7 No v. 2 4 , 2 0 0 8 Dec. 2 4 , 2 00 8 20 0 8 No v. 2 3 , 2 0 0 9 Dec. 1 4 , 2 00 9 20 0 9 No v. 2 2 , 2 0 1 0 Feb . 2 8, 2 0 11 20 1 0 No v. 1 4 , 2 0 1 1 J an . 3 , 2 0 1 2 20 1 1 No v. 2 6 , 2 0 1 2 Feb . 6 , 2 0 1 3 20 1 2 Dec. 9 , 2 0 13 J an . 2 1 , 2 0 1 4 20 1 3 No v. 1 7 , 2 0 1 4 No v. 2 4 , 2 0 1 4 20 1 4 No v. 3 0 , 2 0 1 5 Dec. 3 1 , 2 01 5

6 Pet i t i on ers t im el y fi l edreq u es t s fo r ex t en s i on s t o fi l e t h ei r retu rn s fo r 2 0 0 4 th ro u g h 2 0 1 4 . Res p o n d en td i dn oti m p o se ad d i t i o n s t o t ax fo r l at e fi l i n g fo r t h es e y ears . Pet i t i o n ers fi l eda req u es tfo r ex t en s i o n t o fi l e fo r 2 0 1 5 (m ak i n g th e ex t en d eddu e d at e Oct o b er 1 7, 2 0 1 6 ), an d h ad n o tfi l edth ei r retu rn o r m ad e p aym en t s as o f J u l y

2 0 , 2 01 6 . Ad d it i on al l y , p et i t i o n ers p ai dth ei r 2 0 05 t ax o n J an u ary 1 2 , 2 0 0 7, an dwere i ss u eda n o t i ce o n M ay 1 8 , 2 01 5 , t o p ay

i n t eres tan d ad d it i o n s t o t ax fo r 2 0 0 5
.9

Th e cert i fi ed co p y

o f p et i t i o n ers ’ acco u n ttran s cri p tal s o refl ect s t h atan i n s t al l m en tag reem en tfo r 2 0 05 was en t ered i n t o o n Decem b er 2 7 , 2 0 0 6. Th e ag reem en ten d edo n J an u ary 1 , 2 0 0 7
. Pet i t i o ners p ro vi d ed a co p y o f a ch eckth atthey

as s ertwas u s edt o p ay

fo r th e s h red d i n g o f t h ei r 2 0 0 6 Fed eral i nco m e t ax reco rd s i n 2 0 1 3 , i n cl u d in g th e
reco rdo f p aym en to f t he 2 0 0 6 t ax . Th e ch eck , fo r $ 1 ,0 9 3 , i s d at edOct o b er 8 , 2 0 1 3 , an di s p ay ab l e t o In t eg ri ty Sh red
. 7 Th e p art i es al s o s ti p u l at eda co p y o f an ad v i so ry

fro m th e IRS o n th e ret en t i o n o f t ax reco rd s . Th i s ad v i s o ry s t at es : “ T h e l en g th o f t i m e y o us h o u l d k eep a d o cu m en td ep en d s o n th e act i o n , ex p en s e, o r ev en twh i ch th e d o cu m en t
reco rd s ”. Th e ad vi s o ry

d i s cu s s es h o w l o n g a t ax p ay er s h o u l dret ai n reco rd s fo r i n co m e t ax retu rn s i n v ari o u s s i tu at io n s. Th i s ad v i s o ry al s o s t at es th ati f y o un o l o n g er n eedy o u r reco rd s fo r t ax p u rp os es , “ d o n o t d i s cardth em u n t i l y o uch eckt o
s ee i f y o uh av e t o k eep them l on g er fo r o th er p u rp o s es . Fo r ex am p l e, y o ur i n s u ran ce co m

p an y o r cred i t o rs m ay

req ui re y o ut o k eep them l on g er t h anth e IRS d o es . ”

7 Th e ch eckwas drawn o n th e ch eck i n g acco u ntfo r p et i t io n er’ s l aw o ffi ce (W il l i am H. Payn t er, Es q . At to rn ey atLaw). Th e m em o ran dum o n th e ch ecki s “ # 3 7 3 1 4”. Pet i t i o n ers as s ert th atth ei r 2 0 06 reco rd s , i n cl u di n g Fed eral i n co m e t ax reco rd s an dp ro o f o f p aym en t o f t h ei r t ax , were s h red d edwi th a n um b er o f o th er d o cu m en t s fro m

p et i ti o n er’ s l aw o ffi ce atth e en d o f 2 0 13
.10

Pet i t i o ners as s ertth atth ey al way s t im el y

fi le t h ei r i n co m e t ax retu rn s wi th o u trem i t t an ce an ds ub s equ en t l y p ay th ei r t ax aft er t h ey recei v e a n o t i ce o f b al an ce du e fo r each y ear. 8 Pet i t i on ers fu rt h er as s ertth atth ey s h red dedth ei r rel ev an t t ax reco rd s an d p ro o f o f p aym en tfo r 2 0 06 i n l at e 2 0 1 3 , wh i ch i s b ey o n d th e t h ree-y ear p eri o dreco m m en d ed b y

th e IRS fo r ret ai n i ng t ax retu rn s (ab s en t al l eg at i o n s o f frau d o r u n derrep o rt i n g o f i n co m e). Di s cu ss i o n I. Sect io n s 6 3 3 0 an d6 3 3 1 Th e Secret ary i s au th o ri zedt o co l lectt ax b y l ev y up o n a t ax p ay er’ s p ro p ert y i f an y t ax p ay er l i ab l e t o p ay

an y t ax n eg l ect s o r refu s es t o p ay s u ch t ax wi th i n 1 0 d ay s aft er n o t i ce an d d em an dfo r p aym en t . Sec. 6 3 3 1 (a). Befo re th e Secret ary
m ay l ev y up o n th e t ax pay er’ s p ro pert y , th e Secret ary m u s tfi rs t n ot i fy th e t ax p ay er
o f t h e Secret ary ’ s i n t en t t o l ev y . Id . s ub sec. (d )(1 ). Th e Secret ary m u s tal s o n o t i fy th e t ax p ay er o f h i s o r h er ri g h t t o a CDP h eari n g . Sec. 6 33 0 (a)(1 ). If t h e t ax p ay er m ak es a t i m el y req u es tfo r a h eari n g , th e h eari n g i s
co n du ct ed b y

th e Ap p eal s Offi ce. Id . s ub s ec. (b )(1 ). Atth e h eari n g the t ax p ay er

8 Pet i t i on er as s ert ed at tri al th atp et i t io n ers d o n o tp ay es t i m at edi n co m e t ax b ecau s e “ I n ev er h av e an dI d o n ’ tl i k e t he p ro ces s ”.11

m ay rai s e an y rel ev an ti s s ue rel at i n g t o the u np ai d t ax o r th e p ro p o s edco l l ect i o n act i on . Id . s ub s ec. (c)(2 )(A). Fo l l owi n g a CDP h eari n g th e s et t l em en to ffi cer m u std et erm in e wh et h er t o
s u s t ai n th e p ro p os edl ev y . Inm ak in g th atd et erm i n at i o n , s ect i o n 6 3 3 0 (c)(3 ) req u i res th e s et t l em en to ffi cer t o co n s i d er: (1 ) wh ether t h e req ui rem en t s o f an y ap p li cab l e l aw o r ad m i n i s trat i v e p ro cedu re h av e b een m et ; (2 ) an y i s s ues ap p ro p ri at el y

rai s edb y th e t ax p ay er; an d (3 ) wh ether t h e co ll ect i o n act i o n s b al an ce t h e n eedfo r t h e effi ci en t co l l ect i o n o f t ax es an dth e l eg i t i m at e co n cern o f th e t ax p ay er t h atan y

co ll ect i o n act i o n b e n o m o re i n tru s i v e t h an n eces s ary . See al s o Lu n s fo rdv . Co m

m i s s i on er, 1 1 7 T.C. 1 8 3 , 1 8 4 (2 0 0 1 ); Di am on d v . Co m m i s s i o n er, 2 0 1 2 W L 1 0 21 2 8 4, at* 2
. Th i s Co u rth as juri sd i ct io n u n d er s ect i o n 6 3 3 0 (d ) t o rev i ew t h e Co m m i s s i o n er’ s ad m i n i s trat i v e d et erm i nat i on s . Wh ere t he u n d erl y in g t ax l i ab i l i t y i s n o tat i s s u e we rev i ew th e d et erm i n at i o n fo r ab u s e o f d i scret i o n. Seg o v . Co m m i s s i o n er, 1 1 4 T.C. 6 0 4 , 6 1 0 (2 0 0 0); Go za v . Co m m i s s i o n er, 1 1 4 T.C. 1 7 6 , 1 8 1 -1 8 2 (2 0 0 0 ). Anab u se o f d i s cret i o n o ccu rs i f t h e Ap p eal s Offi ce ex erci s es i t s d i s cret i o n “ arb i trari l y , cap ri ci o u s l y , o r wi tho u ts o u n db as i s i n fact o r l aw.” W o o dral v . Co m

m i s s i o n er, 1 1 2 T.C. 1 9 , 2 3 (1 9 99 ).12

Wh ere t h e u n d erl y i n g t ax l i ab i l i ty i s p ro p erl y

at i s s ue we rev i ew th e d et erm i n at i o n d e n o v o . Seg o v . Co m m i s s i o n er, 1 1 4 T.C. at6 10 ; Go za v . Co m m i s s i o n er, 1 1 4 T.C. at1 8 1-1 8 2 . W e n eedn o t d eci de t h e s t an d ard o f rev i ew i n thi s cas e s i n ce we s us t ai n res p o n d en t’ s d et erm i n at i o n u n d er ei th er s t an d ardo f
rev i ew. 9 See Es t at e o f Ad el l v . Co m m i s s i o n er, T.C. M em o . 2 0 1 4 -8 9 , at * 1 1 ; Go l ub v . Co m

m i s s i o n er, T.C. M em o . 2 0 1 3-1 9 6 , at* 7
. II. Pet i t i o ners ’ 2 0 0 6 As s es s edTax Anas s es s edt ax m ay b e co l l ect edb y l ev y o r b y a p ro ceed i n g i n co u rti f t h e l ev y i s m ad e o r th e p ro ceed i n g b eg an wi th i n 1 0 y ears aft er t h e d at e o f as s es s m en t . Sec. 6 5 02 (a)(1 ). If a t i m el y p ro ceed i n g i s co m

m en cedi n co u rt , th e p eri o ddu ri n g wh i ch s u ch t ax m ay

b e co l l ect edb y

l ev y s h al l n o tex p i re u n t i l the l i ab i l i ty fo r t h e t ax i s s at i s fi edo r b eco m es u nen fo rceab l e. Id . s ub sec. (a). Pet i t i o n ers ’ 2 0 06 t ax

9 See Frei je v
. Co m m i s si o n er, 1 2 5 T.C. 1 4 , 2 3 , 2 6 -2 7 (2 0 0 5) (ap p l y i n g ab u s e o f d i s cret i o n s t an d ardwh ere t ax p ay er i n CDP cas e ch al l en g edIRS’ fai lu re t o cred i to v erp aym en t s ). Co m p are Lan dry

v . Co m m i s s i o n er, 1 16 T.C. 6 0 , 6 2 (2 0 0 1 ) (ap p l y i ng d e n ov o s t an d ard wh ere t ax p ay er ch al len g edap p l i cat i o n o f o v erp aym en t cred i t s , reas o n i n g th at“ th e v al i d i ty o f t h e u n d erl y i n g t ax l i ab i l it y , i .e., th e am o un t u np ai daft er ap p l i cat i o n o f cred i t s t o wh ich p et i t i o n er i s en t i t l ed* * * [was ] p ro p erl y ati s s u e”), wi th Ko v acev ich v . Co m m i ss i o ner, T.C. M em o. 2 0 0 9 -1 6 0 , 2 0 0 9 W L 1 9 1 6 3 5 1, at* 6 & n .1 0 (ap p l y i n g ab u s e o f d i scret i o n s t an d ardwh ere t ax p ay er ch al l en g edap p l i cat io n o f t ax p aym en t s , reas on i n g th at“ qu es ti o n s ab o u t wh et h er a p art icu l ar ch eckwas p ro p erl y cred i tedt o a p art i cu l ar t ax pay er’ s acco u n t fo r a p art i cu l ar t ax y ear are n o t ch al l en g es t o h i s u nd erl y i n g t ax l iab i l i ty ”), an d Ori an v . Co m

m i s si o n er, T.C. M em o . 2 0 1 0-2 3 4 , 2 0 1 0 W L 4 2 0 5 7 04 , at* 6 (s am e).13

was as s es s edo n No v em

b er 2 6 , 2 00 7 , an dth erefo re t he p eri o do f l i m i t at i o n s t o
co l l ectb y l ev y o r co u rtp ro ceed i n g h adn o tex p i redat th e t i m e o f t h e No t ice o f In t en tt o Lev y d at edM arch 6 , 2 0 1 5. Th u s , SO Sm i th’ s d eci s i o n t o s u s t ai n th e l ev y fo r 2 0 0 6 , wh ich was co m m en cedwi th i n the p res cri bedp eri o d , h ada s o u ndb as i s i n l aw. See i d.; s ee al s o W o o dral v . Co m m is si o n er, 1 1 2 T.C. at2 3. Res p o n d en tp ro v i d edco p i es o f t h e n o t i ce o f b al an ce du e fo r 2 0 06 an d p et i t i o n ers ’ acco u n ttran s cri p tfo r 2 0 06 . Bo th d o cu m en t s refl ectthatp et i t i o n ers h ad n o tm ad e an y p aym en t s fo r 2 0 0 6 . Pet i t i o ners as sertth atp et it i o n er p ai dth ei r 2 0 0 6 as s es s ed t ax i n p ers o n atth e San ta Ro s a o ffi ce i n ei th er l at e 2 0 0 7 o r 2 0 0 8 aft er t h ey recei v edth e n ot i ce o f b al an ce du e fo r 2 00 6 . Pet i ti o n ers d em o n s trat eda p at t ern o f fi l i n g th ei r Fed eral i n co m e t ax return s wi th ou trem i t tan ce an dl at er p ay i n g th ei r as s es s edt ax fo r 2 00 4 , 2 0 0 5 , an d2 0 0 7 th ro u g h 2 0 1 5 , u s u al l y aft er th ey h adrecei veda n o t i ce o f b al an ce du e. Bu t p et i ti o n ers d i d n o tp ro v i d e an y
ev i d en ce o f t h i s p aym en t(o u t s id e o f p et i t i o n er’ s t es t i m o n y ) t o refu t e res p o n d en t ’ s
reco rd s , s u ch as a recei p t o r a can cel edch eck . Becau s e p et i t i o n ers d i d n o t p ro v i d e
s u ffi ci en tev i d en ce t o s up p o rtth ei r as sert io n t h atth e 2 00 6 t ax was p ai d , an dth e IRS’ reco rd s refl ectth atth e t ax was n o t p ai d , SO Sm i th d idn o t m ak e a d eci s i o n arb i trari ly , cap ri ci o u s l y , o r wi th o u ts o u ndb as is i n facto r l aw. Thu s , s h e d i dn o t ab u se h er d i s cret io n. See W o o dral v . Co m m i ss i on er, 1 1 2 T.C. at2 3
.14

Fu rt her, SO Sm i th p ro p erl y v eri fi edth atth e req u i rem en t s o f al l ap p l i cab l e l aw an dad m i n i s trat i v e p ro cedu re were m et i n th e p ro ces s i n g o f p et i t i o n ers ’ cas e
an d th atth e p ro p o s edl ev y act i o n b al an ces th e Go v ern m en t ’ s i n t eres ti n th e effi ci en tco l lect i o n o f t ax wi th p et i t i o n ers ’ co ncern th atth e co l l ect i o n act i o n b e n o
m o re i n tru s i v e t h ann eces sary . See s ec. 6 3 3 0 (c)(3 ); s ee al s o Lu n s fo rdv . Co m m i s s i o n er, 1 1 7 T.C. at1 8 4; Di am on dv . Co m m i s s io n er, 2 0 1 2 W L 1 0 2 1 2 8 4 , at
* 2
. Ev en i f we were t o ap p l y th e d e n o v o s t an d ardo f rev i ew, we fi n d th at p et i t i o n ers d i d n o tp ro ve t h atth ey p ai dth ei r 2 0 0 6 t ax . Ing en eral , th e Co m m i s s i o n er’ s d et erm in at i o n i s p res u m edco rrect , an dth e t ax pay er b ears th e b u rd eno f p ro vi ng o therwi s e. Ru l e 1 4 2 (a); W el ch v . Hel v eri n g , 2 90 U.S. 1 1 1 , 1 1 5 (1 9 3 3). In th e ab s en ce o f co rro b o rat i n g ev i d en ce, t h e Co u rti s n o t req u i redt o accep ta t ax p ay er’ s s el f-s erv i n g t es t i m o n y . To k ars k i v . Co m m i s s io ner, 8 7 T.C. 7 4 , 7 7 (1 98 6 ). Pet i t i o ners h av e n o tp ro vi d eds u ffi ci en tev i den ce t h atth ey p ai d t h ei r 2 0 0 6 t ax . Pet i ti o n ers as s ert i n thei r p et i ti o n th atb ecau s e t h ei r b an k , So no m a Val l ey Ban k, was cl o s edb y

th e FDIC i n 2 0 1 0 , th ere are n o b an kreco rd s av ai l ab l e t o
s h o w th e 2 00 6 p aym en t . Ad di t i o n al l y , th e p art i es s t i p ul at eda co p y o f th e 2 0 1 315

ch eckp ay ab l e t o In teg ri ty Sh red , wh i ch p et i t i o n ers as s ertwas h iredt o h av e t h e
reco rdo f p aym en tfo r t h ei r 2 0 0 6 t ax s h red d ed
. 1 0 Pet i t i o ners d i dn o tp ro v id e d o cu m en t at io n o r o ther ev id en ce o ut si d e o f p et i t i o n er’ s t es t i m o n y . Fu rt h er, t h ere i s n o th i n g i n th e reco rds u g g es t i n g th at
res p o n d en t’ s reco rd s refl ect i n g n o p aym en tare i n co rrect . See i d
. Fo r t h es e
reas on s , we h o l d t h atp et it i on ers h av e n o tm et th ei r b u rd en o f p ro vi n g thatth ey p ai dth ei r as s es s edt ax fo r 2 0 0 6. See Ru l e 1 4 2 (a); W el ch v . Hel veri n g , 2 9 0 U.S. at 1 1 5 ; To k ars ki v . Co m

m i s s i on er, 8 7 T.C. at7 7
.

1 0 W e n o te t h at res p on d en td i dn o to b ject t o th e ad m i s s i o n o f ev i d en ce t h ati s n o ti n th e ad m i n i s trat i v e reco rd , b utwe d i s cu s s i t s co n s i d erat i o n fo r co m p l et en es s . Th ere i s a ci rcu i ts p l itas t o wh et h er rev i ew o f CDP cas es i s l i m i t edt o th e ev i d en ce i n the ad m i n i s trat i v e reco rd . Th e U.S. Co urto f Ap p eal s fo r t he Ei g h th Ci rcu i th as h el dth atth e t ri al co u rts h o u l dn o tco n s i d er ev i d en ce o u t s i de t he ad m i n i s trat i v e reco rdi n CDP cas es . Ro b i n et te v . Co m m i ss i o ner, 4 3 9 F.3 d4 5 5 , 4 6 2 (8 th Ci r. 2 0 0 6 ), rev ’ g 1 2 3 T.C. 8 5 (2 0 0 4 ). Th e Co urto f Ap p eal s fo r t he Ni n th an dFi rs t Ci rcu i t s ag ree. See Kel l er v . Co m m i s s i on er, 5 6 8 F.3 d 7 1 0 , 7 1 8 (9 th Ci r. 2 0 0 9 ), aff’ g i n p artas t o th i s i s s u e T.C. M em o . 2 0 0 6 -1 6 6; M urp h y v . Co m m i s s io n er, 4 69 F.3 d2 7 , 3 1 (1 s tCi r. 2 0 0 6 ), aff’ g 1 2 5 T.C. 3 01 (2 00 5 ). Th e Co urto f Ap p eal s fo r th e Sev en th an d Th i rdCi rcu i t s h av e d ecl i nedt o d eci d e t he i ss u e. See Gy o rg y v . Co m m i s s i o n er, 7 7 9 F.3 d4 6 6 , 4 7 3 n .5 (7 th Ci r. 2 01 5 ); Tu k a v . Co m m i ss i o n er, 3 2 4 F. Ap p ’ x 1 9 3 , 1 9 5 n .2 (3 dCi r. 2 0 06 ). Th e Co u rt o f Ap p eal s fo r t h e Ten th Ci rcu i t h as n ots p eci fi cal l y

ad dres s edth i s i s s ue. See J ewel l v . Co m m i s s i o ner, T.C. M em o. 2 0 1 6 -2 3 9 , at * 4 . W e ap p l y th e s co p e o f rev i ew m an d at edi n th e Ni n th Ci rcu i t , i n wh i ch an ap p eal i n th i s cas e wo ul dl i e b u tfo r s ec. 7 4 63 (b ). See Go l s en v . Co m m i s s i o n er, 5 4 T.C. 7 4 2, 7 5 7 (1 9 7 0 ), aff’ d , 4 4 5 F.2 d9 8 5 (1 0 th Ci r. 1 9 7 1 ). Ho wev er, ev en i f we were t o co n s i d er t h e ad d i t io n al ev i den ce s ub m i t t edan dn o t o b ject edt o b y res p on d en t, o ur co n cl u si o n thatp et i t i on ers fai l edi n th ei r b u rd en o f p ro o f wo u l d n o t d i ffer.16

III. Ad d it i on s t o Tax Si n ce we s u s t ai n res p o n den t ’ s d et erm i n at i o n u n d er ei th er s tan d ardo f
rev i ew, we wi ll al s o d is cu s s th e i m p o si t i o n o f ad d i ti o n s t o t ax u n d er t h e d e n o v o
s t an d ardo f rev i ew. A. Sect io n 6 6 5 1 (a)(2 ) Ad d i t i o n t o Tax Sect io n 6 6 5 1 (a)(2 ) i m

p o s es an ad d i t io n t o t ax fo r fai lu re t o p ay the am o u n t
s h o wnas t ax o n th e t ax p ay er’ s retu rno n o r b efo re t h e d at e p res cri b ed . Th e
s ect i on 6 6 5 1 (a)(2 ) ad d it i o n t o t ax ap p l i es o nl y wh en an am o un to f t ax i s s h o wno n a ret u rnfi l edb y

the t ax p ay er o r p rep aredb y th e Secret ary . Sec. 6 6 5 1(a)(2 ), (g )(2 ); Cab irac v . Co m

m is s i o n er, 1 2 0 T.C. 1 6 3 , 1 7 0 (2 0 0 3 ), aff’ dwi th o utp ub l i s h ed
o p i n i o n , 2 0 0 4 W L 7 31 8 9 6 0 (3 d Ci r. 2 0 0 4 ). Sect io n 7 4 9 1 (c) p ro v i d es th atth e Co m m i s s io n er h as th e b u rd en o f p ro duct i o n i n an y

co urtp ro ceed i n g wi th res p ect t o l i ab il i ty fo r an ad d i ti o n t o t ax . Th e Co m m i ss i o n er s at is fi es th i s b u rd en o f p ro du ct i o n b y co m i n g fo rwardwi th
s u ffi ci en tev i d en ce t h ati n d icat es th ati m p o s i n g the ad d i t i o n t o t ax i s ap p ro p ri at e. See Hi g b ee v . Co m

m i s s i o ner, 1 1 6 T.C. 4 3 8 , 4 4 6 (2 0 01 ). Th e Co m m i s s i on er
m eet s th e b u rd eno f p ro du ct i o n fo r an ad di t i o n t o t ax u n der s ect i o n 6 6 5 1 (a)(2 ) b y p ro v id i n g s u ffi ci en tev i d en ce th atth e t ax p ay er fi l eda retu rns h o wi n g h is t ax l i ab i l i ty fo r t h e y ear at i s s u e. Wh eel er v . Co m m i s s i o n er, 1 2 7 T.C. 2 0 0 , 2 1017

(2 0 0 6), aff’ d , 5 2 1 F.3 d1 2 8 9 (1 0 t h Ci r. 2 00 8 ); Gl o ver v . Co m m i s s io n er, T.C. M em o. 2 0 1 0 -2 2 8 , 2 0 10 W L 4 1 2 0 9 8 7 , at* 4 . Res p o nd en t m etth is b u rd en b y p ro v id i n g a co p y

o f p et i t i o n ers ’ 2 0 0 6 Fo rm 1 0 40 as fi l edrefl ect i n g a b al an ce du e. See s ec. 6 6 5 1 (a)(2 ); Wh eel er v . Co m m i s s i o n er, 1 2 7 T.C. at 2 1 0; Hi g b ee v . Co m m i s s i o n er, 1 1 6 T.C. at4 4 6; Gl o v er v . Co m m i ss i on er, 2 0 1 0 W L 4 1 20 9 8 7 , at
* 4
. Reas o n ab l e cau se an dth e ab s en ce o f “ wi ll fu l n eg l ect ” i s a d efen s e t o th e
s ect i on 6 6 5 1 (a)(1 ) an d (2 ) ad d i t i o n s t o t ax . “ [W ] i l l fu l n eg lect ” m ean s a

“ co n s ci o u s , i n t en ti o n al fai l ure o r reck l es s i n d ifferen ce.” Un it ed St at es v . Bo y l e, 4 6 9 U.S. 2 4 1 , 2 4 5 (1 9 8 5 ). “ T h e d et erm i n at i o n o f wh et h er reas o n ab l e cau se ex i s t s i s b as edo n al l the fact s an dci rcu m s t an ces .” Ru g g eri v . Co m m i s s i o n er, T.C. M em o. 2 0 0 8 -3 0 0 , 2 0 08 W L 5 4 1 1 9 1 9 , at* 2
. A t ax p ay er m eet s th e reas o n ab l e cau s e ex cep t i on i f h e d em o ns trat es th ath e

“ ex erci s edo rd i n ary

b u s i n es s care an dp ru d en ce” i n try i n g t o p ay h i s t ax an dei th er
co u ldn o tp ay

o r wo u l ds u ffer “ u n du e h ard s h ip ” i f h e p ai dh i s t ax wh endu e. Sec. 3 0 1 .6 6 5 1 -1 (c)(1 ), Pro ced . & Ad m i n . Reg s . Th i s d et erm i nat i o n i s fact u al , an dth e b u rd eno f p ro of i s o n th e t ax pay er. M erri am v . Co m m i s s i o n er, T.C. M em o . 1 9 9 5
- 4 3 2 , 1 9 9 5 W L 5 2 2 8 1 3 , at* 1 1, aff’ dwi th o u tp ub l i s h edo p i n i o n , 1 07 F.3 d 8 7 7 (9 t h Ci r. 1 9 97 ). “ Un du e h ard s h ip ” m u s t b e m o re th anan “ i n co n v en i en ce” t o t h e18

t ax p ay er; i treq u i res th ath e h adth e “ ri s ko f a s ubs t an ti al fi n an ci al l o ss res u l t i n g fro m m ak i n g th e t ax p aym en to n t i m e.” Id . 1 9 9 5 W L 5 22 8 1 3 , at* 1 3 ; s ec. 1 .6 1 6 1
- 1 (b ), In co m e Tax Reg s . Pet i t i o ners fi l eda Fo rm

1 0 4 0 fo r 2 0 06 refl ect i n g t ax du e an dad m i tth atth ey d i dn o t s en di n es t i m at edt ax p aym en t s , n o r d i dth ey rem i tp aym en twi th th ei r retu rn . Thu s , th e ad d i t i o n t o t ax wi l l b e uph el du n les s p et i t io n ers can s h o w
reas on ab l e cau s e fo r t h i s fai l u re t o t i m el y p ay th ei r 2 0 0 6 t ax . See s ec. 6 6 5 1 (a)(2 ), (g )(2 ); Cab i rac v . Co m

m i s s i o n er, 1 2 0 T.C. at1 7 0
. Pet i t i o ner as s ert edattri al th ath e d o es n o tm ak e es ti m at ed t ax p aym en t s b ecau s e o f h i s d i s li k e o f t h e p ro ces s , an dp et i t i o n ers u s u al l y d o n o t p ay th ei r t ax fo r a g i ven y ear u nt i l aft er t hey recei v e a n o ti ce o f b al an ce du e. Pet i t io n ers ’ fai l u re t o m ak e es t i m at edt ax p aym en t s b ecau se p et i ti o n er d i s l i k es th e p ro ces s i s
n o tan ex erci s e o f o rd i naryb us i n es s care an dp ru d en ce i n co m p l y i n g wi th th e req u i rem en tt o p ay th ei r t ax due o n o r b efo re th e du e d at e fo r th ei r retu rn ; i n s t ead th i s co n s ci o u s fai l u re i s wi l l fu l n eg l ect . See Bo y l e, 4 6 9 U.S. at2 4 6 . Fu rt h er, p et i t i o n ers h av e n o t as s ert edth at th ey co u l d n o tp ay

th ei r t ax o r wo u lds u ffer
u n du e h ard s h i p i f t h ey

p ai dth ei r i n co m e t ax at th e t i m e o f fi li n g th ei r 2 0 06 retu rn . See Ru g g eri v . Co m

m i s s i on er, 2 0 0 8 W L 5 4 11 9 1 9 , at* 2 ; M erri am v . Co m m i s s i o n er, 1 9 9 5 W L 5 2 28 1 3 , at* 1 1 ; s ec. 1 .6 1 6 1 -1 (b ), In co m e Tax Reg s .; s ec.19

3 0 1 .6 6 5 1 -1 (c)(1 ), Pro ced . & Ad m i n . Reg s . Thu s , p et i t i o ners h av e n ots h o wn
reas on ab l e cau s e an dd o n o th av e a v al i dd efen s e ag ai n s tthe s ect i o n 6 6 5 1 (a)(2 ) ad d it i o n t o t ax . B. Sect io n 6 6 5 4 (a) Ad d i t i o n t o Tax Sect io n 6 6 5 4 (a) i m

p o s es an ad d i t i o n t o t ax o n a t ax p ay er wh o u n d erp ay s h i s
es t i m at edi n co m e t ax u n l es s an ex cep t i o n ap p l i es . See s ec. 6 6 5 4 (e). Th e s ect i o n 6 6 5 4 (a) ad d it i on t o t ax i s d et erm i n edb y ap p l y i n g t h e u n d erp aym en trat e
es t ab l i s h edu n der s ect i o n 6 6 2 1 t o th e am o u nto f t h e u n d erp aym en t 1 1 fo r t h e p eri o d
o f t h e u n d erp aym en t . 1 2 If t h e t ax p ay er ch al len g es th e s ect i o n 6 6 5 4 (a) ad di t io n t o t ax , the Co m m i s s i o n er m

u s ti n tro du ce ev i d en ce t o p ro v e t h atth e t ax p ay er h adan
o b l i g at i o n t o m ak e es t i m at edt ax p aym en t s fo r t h e y ear at i s s u e, b y s h o wi n g wh et h er t h e t ax p ay er fi l eda retu rn fo r t h e p ri o r y ear an di f s o , th e am o u n t o f t ax
s h o wno n t h atretu rn . Secs . 6 6 5 4 (d )(1 )(B), 7 4 9 1 (c); Wh eel er v . Co m m is si o n er,

1 1 “ [A] m o u n to f t h e u n derp aym en t ” m ean s th e ex ces s o f t he req u i red i n s t al l m en to v er th e am o u n t , i f an y , o f t h e i ns t al l m en tp ai do n o r b efo re th e du e d at e fo r t h e i n s t al l m en t. Sec. 6 6 5 4 (b )(1 ).

1 2 Th e p eri o d o f t h e u n d erp aym en t ru n s fro m the du e d at e fo r th e i n s t al l m en t t o the earl i er o f t h e 1 5 th d ay o f t h e 4 th m on th fo l l owi n g t h e cl o s e o f t h e t ax ab l e y ear o r wi th res p ectt o an y p o rt i o n o f t h e u nd erp aym en t, th e d at e o n wh i ch s u ch p o rt i on i s p ai d . Sec. 6 6 5 4 (b )(2 ).20

1 2 7 T.C. at2 12 . Bu t i f t h e t ax p ay er d o es n o t ch al l en g e an ad d i t io n t o t ax b y
as s i g n i n g erro r t o i t , th e Co m m i s s i o n er n eedn o tp l eadth e ad d i t i o n t o t ax an dh as
n o o b l ig at i o n u n d er s ect i o n 7 4 91 (c) t o p ro du ce ev i d en ce t h atth e ad d i ti o n t o t ax i s ap p ro p ri at e. See Ru l e 3 4 (b )(4 ); Swai n v . Co m m is s io n er, 1 1 8 T.C. 3 5 8 , 3 6 5 (2 0 0 2). Pet i ti o n ers d i dn o tch al l en g e th e ad d i t i o n t o t ax an dad m i tth atth ey d i d
n o tm ak e es ti m at edt ax p aym en t s fo r 2 0 0 6 . Th erefo re, t he ad d i t io n t o t ax i s ap p ro p ri at e u n les s an ex cep t i o n ap p l i es . 1 3 See Ru l e 3 4 (b )(4 ); Swai n v . Co m m i s s i o n er, 1 1 8 T.C. at3 6 5. Th i s ad d i t i on t o t ax u n d er s ect i o n 6 6 5 4 i s m an dat o ry u n les s the t ax p ay er
can p lace h i m s el f u nd er o n e o f t h e co m p ut at i o n al ex cep t i o n s p ro v i dedi n th at
s ect i on . Gro ss h an dl er v . Co m m i s s i on er, 7 5 T.C. 1 , 2 1 (1 9 8 0 ); Es t at e o f Rub en v . Co m m i s s i o n er, 3 3 T.C. 1 07 1 , 1 0 7 2 (1 9 60 ). Sect i o n 6 6 5 4 (e) p ro v i d es two
m ech an i cal ex cep t i o n s t o t h e ap p l icab i l i ty o f t h e s ect i o n 6 6 5 4 ad d it i on t o t ax . 1 4 Fi rs t , th e ad d i t io n i s n o tap p l i cab l e i f t h e t ax s h o wno n the t ax p ay er’ s retu rnfo r

1 3 If p et i t i o n ers h adch al l en gedth e s ec. 6 6 5 4 (a) ad d it i o n t o t ax , res p o n d en t m etth e b u rd en o f p ro du ct i on b ecau s e h e p ro v i d eda cert i fi edco p y o f p et i t i o n ers ’ 2 0 0 5 acco u n ttran s cri p trefl ect i n g th atthey h adan o b l i g at i o n t o m ak e es t i m at ed t ax p aym en t s fo r 2 0 0 6
. See s ec. 6 6 5 4 (a), (d )(1 ); Wh eel er v . Co m m i s s i o n er, 1 2 7 T.C. 2 0 0 , 2 1 2 (2 0 0 6 ), aff’ d , 5 2 1 F.3 d 1 2 8 9 (1 0 th Ci r. 2 0 0 8 ).

1 4 Sec. 6 6 54 (e)(3 ) p ro v i d es fo r l i m i teds i tu at i o ns i n wh i ch the Secret ary can wai v e t h e ad d it i on t o t ax , n o ne o f wh i ch i s ap p l i cab le h ere.21

th e y ear i n qu es ti o n (o r, i f n o retu rn i s fi l ed , th e t ax p ay er’ s t ax fo r t h at y ear), redu ced by

an y al lo wab l e cred i tfo r wag e wi th ho l d i n g , i s l es s th an$ 1 ,0 0 0
. Sec. 6 6 5 4 (e)(1 ). Seco n d, the ad di t i o n t o t ax i s n o tap p l icab l e i f t h e t ax p ay er’ s t ax l i ab i l i ty fo r t h e p reced i n g t ax ab l e y ear was zero . Sec. 6 6 5 4(e)(2 ). Onth e b as is o f th e reco rd , n ei th er o f t h es e m ech an i cal ex cep t i o n s ap p l i es . Th u s, p et i t io n ers are l i ab l e fo r t h e s ect io n 6 6 5 4 ad d i ti o n t o t ax . See s ec. 6 6 5 4 (a), (e); Gro s sh an d l er v . Co m m i s s i o n er, 7 5 T.C. at2 1 ; Es t at e o f Rub en v . Co m m i s s i o n er, 3 3 T.C. at 1 0 7 2. IV. Es t o pp el Pet i t i o ners as s ertth atth e Co u rts h o u l dap p l y equ i t ab l e es t o p p el ag ai n s t
res p o n d en t b ecau s e o f t hei r rel i an ce o n th e IRS’ ad v i s ory reg ard i n g ret en t i o n o f t ax reco rd s an d res po n d en t ’ s d el ay i n at t em p t s t o co l l ect th e 2 0 0 6 l i ab i l i ty . Pet i t io n ers as s ertth atth ey rel iedo n th e IRS’ ad v i s o ry an dd es tro y edth ei r t ax an d p aym en t reco rd s fo r 2 0 0 6 an dth u s n o l o n g er h av e reco rd s t o p ro v e t h atth ey p ai d th e t ax . Equ i t ab l e es t o p p el i s a ju d i ci al d o ctri n e t h atreq u ires fi n d in g a p art y rel i ed
o n an o th er p art y ’ s rep res en t at i o n s an ds u ffereda d et ri m en t b ecau s e o f t h at rel i an ce. Ho fs t et t er v . Co m m is s i o n er, 9 8 T.C. 6 9 5 , 7 0 0 (1 9 9 2). Equ i t ab l e
es t o p p el i s ap p l i ed ag ai ns t th e Co m m i s s i o n er “ wi th u t m o s tcau t i o n an dres trai n t ”22

an d “ s u ch s i tu at i o n s m

us t n eces s ari l y

b e rare, fo r t h e p o l i cy

i n fav o r o f an effi ci en t
co l l ect i o n o f t h e p ub li c rev en u e o u twei gh s th e p o l i cy o f t h e es t o p p el d o ctri n e i n i t s
u s u al an dcu s t o m ary

co n t ex t . ” Sch u s t er v . Co m m i s s i o n er, 3 12 F.2 d 3 1 1 , 3 1 7 (9 t h Ci r. 1 9 62 ), aff’ g i n p art , rev ’ g i n p art3 2 T.C. 9 9 8 (1 9 59 ); s ee al s o Kro n i sh v . Co m m i s s i o n er, 9 0 T.C. 6 84 , 6 9 5 (1 9 8 8 ); Es t at e o f Em ers o n v . Co m m i ss i o n er, 6 7 T.C. 6 1 2 , 6 1 7 (1 9 7 7 ). In o rd er t o i n v ok e t he d oct ri n e o f eq u i t ab l e es t o p p el ag ai n s tth e Co m m i s s i o n er, a t ax p ay er m

u s ts at i s fy

al l th e t rad i t i o nal el em en t s o f an equ i t ab le
es t o p p el cl ai m : (1 ) t he Go v ern m en tkn ew the fact s o f th e t ax p ay er’ s s i tu at i o n ; (2 ) th e Go v ern m en t i n t en d edth ati t s co n du ct b e act edo n o r act eds o th atth e t ax p ay er h ad a ri g h t t o b el i ev e i twas s o i n t en d ed ; (3 ) t he t ax p ay er was i g n oran t o f t h e fact s ;
an d (4 ) th e t ax p ay er rel i edo n th e Go vern m en t’ s co n ductt o h i s i n j u ry . Baccei v . Un i ted St at es , 6 3 2 F.3 d1 14 0 , 1 1 4 7 (9 th Ci r. 2 01 1 ). In ad d i t i o n t o th e t rad i ti on al el em en t s o f eq u i t ab l e es t o p p el , th e Co u rto f Ap p eal s fo r t h e Ni n th Ci rcu i t req u i res th atth e p arty s eek i n g t o ap p ly

th e d oct ri ne ag ai n s tth e Go v ern m en t p ro v e affi rm at i v e m i s co n du ct . Id .; s ee al so Pu rcel l v . Un i ted St at es , 1 F.3 d9 3 2 , 9 3 9 (9 th Ci r. 1 9 93 ). Affi rm at iv e m is co n du ctb y th e Go v ern m en tm

u s tg o b ey o n dm ere n eg l i g en ce an dreq u i res an affi rm at i v e
m i s rep res en t at i o n o r affi rm at i v e co n ceal m en to f a m at eri al fact , s u ch as “ a23

d el i b erat e l i e o r a p at t ern o f fal s e p ro m i s es .” Baccei , 6 32 F.3 d at 1 1 4 7 ; Pu rcel l , 1 F.3 dat 9 39 . Affi rm at iv e m i s co n du cti s a t h res h o l di s s ue t o b e d eci d edb efo re d et erm i n i n g wh eth er t h e t rad i t i o n al el em en ts o f eq u i t ab l e es t o pp el are p res en t . Pu rcel l , 1 F.3 dat9 3 9. Pet i t i o ners as s ertth atth ey rel i edo n th e IRS’ ad v i s o ry reg ard i n g ret en t i o n o f t ax reco rd s wh en th ey d eci dedt o s h redth ei r p aym en treco rdfo r 2 0 0 6 . Pet i t i o n ers h av e n o tas s ert edn o r p ro vi d edev i d en ce t h atres p o n d en ten g ag edi n affi rm at i v e
m i s co n du ct , s u ch as d el i b erat e l i es o r m ak i ng fal s e p ro m i s es . See Baccei , 6 3 2 F.3 dat 1 14 7 ; Pu rcel l , 1 F.3 d at9 3 9 . Becau s e p et i t i o n ers d i dn o t es tab l i s h affi rm at i v e m i sco ndu ct , we d o n o tad dres s wh et h er t h e t rad i ti o n al el em en t s o f equ it ab l e es to p p el are p res en t . See Pu rcel l, 1 F.3 dat9 3 9 . Acco rd i ng l y , res p o n d en t i s n o tes t o p p edfro m s u s t ai ni n g the p ro p o s edl ev y ag ai ns tp et i t i o n ers . W e d o n o tco n d on e res p o n d en t ’ s fai l u re t o p u rs u e co l l ect i o n act io n b et ween No v em b er 2 0 07 an d Au g u s t2 01 4 . Co n g res s h as m ad e cl ear b y s t atu t e t h atth e IRS h as 1 0 y ears fro m

the d at e o f as s es s m en tt o co l l ecta t ax , an dthi s co l l ect i o n i s wi th i n th att i m efram e. Sec. 6 5 0 2 (a)(1 ). Ho wev er, res po n d en t d i d n o tp ro v i d e an y24

ex p lan at i o n fo r t h e fai l u re t o p u rs u e co ll ect i o n du ri ng th is i n t erv en i n g t i m e. W i th o u td o ub t th i s d el ay has creat edcert ai n h ard s h i p s fo r p et i t io n ers . 1 5 W e h av e co n s id eredal l o f t h e p art i es ’ arg u m en t s , an d , t o th e ex t en tn o t ad dres s edh erei n , we co ncl u d e t h atth ey are m o o t, i rrel ev an t , o r wi tho u tm eri t . To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t eredfo r
res p o nd en t .

1 5 W e fu rt h er n o te t h atp et i t i o n ers h av e n o ts o u g hto th er rem ed i es i n t h i s p ro ceed in g s u ch as ab at em en to f i n t eres t .