T.C. M em o . 2 0 1 8 -2 0 0

UNITED STATES TAX COURT

M EHDY NAM AKIAN, Pet i t i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 1 4 8 42 -1 6 L. Fi l edDecem b er 6 , 2 0 18
.

M eh dy Nam ak i an , p ro s e. Nat h an C. J o h n st o n, fo r res p o n d en t
.

M EM ORANDUM FINDINGS OF FACT AND OPINION THORNTON, Jud g e: Inth i s co ll ect i o ndu e p ro ces s (CDP) cas e, p et i t i o n er
s eek s rev i ew p u rs u an tt o s ect i o n s 6 3 2 0 (c) an d6 3 3 0(d )(1 ) o f res p on d en t ’ s d et erm i n at i o n t o up h o l dth e fi l i n g o f a n o t i ce o f Fed eral t ax l ien (NFTL) rel at i n g t o p et i ti o n er’ s u np ai dFed eral i n co m e t ax l i ab i l i t i es fo r 2 0 07 , 2 0 0 8 , 2 0 1 1, 2 0 1 2 ,- 2
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[* 2 ] an d 2 0 1 3. 1 Th e i s s u es fo r d eci s i o n are wh et h er p et i t i o n er i s l i ab l e fo r ad d it i o n s t o t ax u n d er s ect i on s 6 6 51 (a)(1 ) an d (2 ) an d6 65 4 fo r cert ai no f t h es e y ears an dwh et h er res p o n d en t ab u s ed h i s d i s cret i o ni n s u s tai n in g th e NFTL. FINDINGS OF FACT Wh en p et i t i o n er fi l edh i s p et i t i o n , h e res i d edi nCal i fo rn i a. At al l rel ev an t t i m es h e h as wo rk edi n th e fi n an ci al i n du s try . He o n ce earn edo v er $ 4 0 0 , 0 0 0 p er y ear, b u tb eg in n i n g i n 2 00 7 h i s i n co m e d ecl i n ed . Itco n t in u ed t o l ag i ns ubs equ en t y ears ; h e rep o rt ed ad

ju s t edg ro s s i n co m e o f $ 1 1 9 ,7 08 fo r 2 0 1 1 , $ 2 1 1 ,9 1 9 fo r 2 0 1 2 , an d$ 1 4 9 ,9 1 2 fo r 2 01 3
. Th i s d ecl in e i n p et i t i on er’ s i n co m e cau sedh i m s tres s an d an x i et y , wh i ch
were ex acerb at edb y

o th er m is fo rtu n es . Hi s m o th er-i n -l aw p as s edaway i n Feb ru ary 2 0 1 1 aft er a l o ng b at t l e wi th can cer; du ri n g th i s t i m e h i s wi fe was p reo ccupi edat t en di n g t o h er m o th er. In 2 0 1 4 h i s fat h er-i n -l aw p as s ed away . In Feb ru ary

2 0 1 3 p et i t io n er was d i ag n o s ed wi th s tres s -i n du ced an x i et y an d d ep res s i o n ; h i s s ym

p t o m s i n cl u d edi n s o m

n i a an dan i n ab i l i ty

t o ret ai nfo cu s . Acco rd in g t o a d o ct o r’ s l et ter t h atp et i t i o n er i n tro du ced i n t o ev i d en ce, h e m ad e a fu l l reco veryaft er a y ear o f m ed i cal i n t erv en t io n .

1 Al l s ect i o n referen ces are t o th e In tern al Rev en u e Co d e i neffect atal l rel ev an t t i m es .- 3
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[* 3 ] Pet i t i o ner fai l edt o t i m el y fi l e h i s Fed eral i n co m e t ax retu rn s an d t o m ak e
es t i m at edt ax p aym en t s fo r t ax y ears 2 0 0 5 t h ro u gh 2 0 1 3. 2 He h as o u t s t an di n g Fed eral i nco m e t ax l i ab i l i ti es fo r h i s 2 0 0 7 , 2 0 0 8 , 2 0 1 1 , 2 0 12 , an d 2 0 1 3 t ax y ears . Hi s 2 00 7 an d2 00 8 l i ab i l i t i es , wh i ch i ncl u d e s ect i on 6 6 5 1 (a)(1 ) ad d i t i o n s t o t ax fo r l at e fi l in g , were d et erm i nedb y s t i p u l at edd eci s i o n s en t eredi n cas es b efo re t h i s Co u rt
. 3 Hi s 2 0 1 1 as s es s edl i ab i l i ty ($ 10 ,2 7 1 , i n cl ud i n g ad d i ti o n s t o t ax fo r l at e fi li n g an dl at e p aym en t p u rs u an tt o s ect i o n 6 6 5 1 (a)(1 ) an d(2 ), b u tn o ti n cl u d i n g i n t eres t ) was b as ed p art l y o n h i s l at e-fi l edretu rn s an dp art l y o n an ag reedau d i t
as s es s m en tm ad e o n Au gu s t1 9 , 2 0 1 3 . Hi s 2 0 1 2 an d2 0 1 3 as s es s ed l i ab i li t i es ($ 3 2 , 94 5 an d$ 2 ,6 5 8, res p ect iv el y , i n cl u d in g ad d i t io n s t o t ax fo r l at e fi l i ng an d l at e p aym en tp u rs u an tt o s ect i o n 6 6 5 1 (a)(1 ) an d (2 ), an dad d i t i o n s t o t ax fo r fai l u re t o m ak e es t i m at edt ax p aym en t s p u rs uan t t o s ect i o n6 6 5 4 , b u tn o ti n cl u d in g i n t eres t ) were b as edo n h i s l at e-fi l edretu rn s.

2 Th e ex ten d ed du e d at e o f p et i t i o ner’ s 2 0 1 1 ret urn was Oct o b er 1 5 , 2 0 1 2 , b u th e d idn otfi l e i tu n t i l J u n e 2 4 , 2 0 1 3. Th e ex t en d eddu e d at e o f h i s 2 0 12 retu rn was Oct o b er 1 5 , 2 0 1 3, b u th e d i dn o tfi l e i tu n ti l M ay 5 , 2 0 1 4 . Hi s 2 0 1 3 retu rn was due Ap ri l 1 5, 2 0 1 4 , b u th e d i dn o tfi l e i tu nt i l Sep t em b er 9 , 2 0 14
. 3 Th e d eci s i on i n th e cas e co ncern i n g t ax y ear 2 0 0 7 was en t eredAp ri l 1 , 2 0 1 4 , an dth e d eci s io n i n t h e cas e co n cern i n g t ax y ear 2 0 0 8 was en t eredAu g u s t 2 7 , 2 0 1 3 . Th e p ri m ary

i ss u e fo r b o th 2 0 0 7 an d 2 0 0 8 was wh et h er, wi th res p ectt o p et i t i o n er’ s s t o ck s al es , h e s h o u l db e t reat edas an i n v es t o r o r a trad er fo r i nco m e t ax p u rp o s es .- 4
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[* 4 ] OnNo vem

b er 1 7, 2 0 1 5 , res p o n d en ti s s u edp et i t i o n er a n ot i ce o f NFTL fi li n g wi th res p ectt o h is 2 0 0 7 , 2 0 0 8 , 2 0 1 1, 2 0 1 2 , an d2 0 1 3 t ax l i ab i l i t i es , wh i ch t o t al edab o u t$ 8 5 ,0 0 0
. 4 OnDecem b er 1 0 , 2 0 1 5 , p et i t i o n er m ai l edt o res p o n d en t Fo rm 1 2 1 5 3 , Requ es tfo r a Co ll ect i o nDu e Pro ces s o r Equi v al en tHeari n g . Onth e Fo rm 1 2 1 5 3 h e ch eck edth e b o x es fo r “ In s t al l m en tAg reem en t ” an d “ Offer i n Co m p ro m i s e”. He s en tth e Fo rm 1 2 1 5 3 t o an i n co rrectad dres s , fo l l o wi ng
erro neo u s i n s tru ct i o n s fro m an IRS em

p l o y ee. Co n s equ en t l y , res p o n d en ti n i t i al l y treat ed p et i t io n er’ s h eari n g req u es tas u n t i m el y an d o nJ u n e 1 3 , 2 0 1 6, i ss u eda d eci s i o n l et t er, s u s t ai n i n g th e co l l ect i o nact i o n , i n s t eado f a n o t i ce o f d et erm i n at i o n . Pet it i o n er t im el y p et i t i o n edth i s Co u rt , an dres p o n d en tfi l eda
m o ti o n t o d i s m i s s fo r l acko f ju ri s d i ct i o n fo r wan t o f a n o t ice o f d et erm i n at i o n . Aft er a h eari n g o n th e m at t er, h o wev er, res p o n den tco n ced edth atp et i t i o ner’ s Fo rm 1 2 1 5 3 s h o u ldh av e b een treat edas t i m el y fi l ed . OnDecem

b er 8 , 2 0 1 7 , th e Co u rtrem an d ed th e cas e t o res p o n d en t ’ s Ap p eal s Offi ce. By m em o ran du m

d at edJ an uary2 , 2 0 1 8 , res po n d en t ’ s co un s el ad v i s edth e Ap p eal s t eam m an ag er t hatthe cas e was b ei n g rem an d edp u rs u an tt o th e Co u rt ’ s

4 Th e n o ti ce o f NFTL ex pl ai n ed thatth e In t ern al Rev en u e Serv i ce (IRS) wo u l di s s u e a cert i fi cat e o f rel eas e o f t h e Fed eral t ax l i en wi th i n3 0 d ay s o f o n e o f th es e ev en t s : (1 ) p aym en to f t he fu l l am o un to f th e d eb t , (2 ) accep t an ce b y th e IRS o f a b o n dg u aran t eei n g p aym en to f t h e am o u n t o wed , o r (3 ) a d eci s i o nt o ad ju s tth e t ax p ay er’ s acco u n t, as i nan Ap p eal s Offi ce h eari n g .- 5
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[* 5 ] o rd er fo r v ari o u s p u rp o s es , i n cl u d in g t o p ro v i d e p et i t io n er an o p p o rtu n i ty t o p res en tev i d en ce as t o h i s l iab i l i ty fo r s ect i o n6 65 1 (a)(1 ) an d(2 ) an ds ect i o n6 6 5 4 ad d it i o n s t o t ax fo r h i s t ax y ears 2 0 11 , 2 0 1 2 , an d2 0 1 3 . OnJ an u ary 1 2 , 2 0 1 8 , res p o n d en t’ s s et t l em en to ffi cer (SO) s en tp et it i o n er a l et t er, ad vi s i n g th ath e h ad b een as s ig n ed th e cas e o n rem an dan dth at“ I was i n s tru ct edt o al l o wy o ut o ch al l en g e t h e u n d erl y i ng l i ab i l i t i es o f t ax y ears 2 0 1 1 , 2 0 1 2 an d 2 0 1 3 .” Th e SO’ s l et t er wen to n t o ex p l ai n th ati f p et i t i o n er wi s h ed t o p ro p o s e a co l l ect i o n al t ern at i v e, h e n eed edt o s ubm i ta co m p l et edFo rm

4 3 3 -A, Co l l ect i o n In fo rm at i o n St at em en tfo r W ag e Earn ers an dSel f-Em pl oy edIn d iv i dual s , wi th v eri fi cat i o no f i n co m e an d ex pen s es . Pet i t i o n er d i dn o ts ub m i tan y o f t h e req u es t ed i n fo rm at i o n . OnFeb ru ary 8 , 2 0 1 8 , th e SO h el d a face-t o -face h eari n g wi th p et i t i o n er, wh o m ad e es s en t i al l y

th ree arg u m en t s : (1 ) t h atth e IRS h adag reedt o wai v e an y l at e-fi l i n g o r p aym en tad d i t i o n s t o t ax as so ci at edwi th h is 2 0 1 1 , 2 0 1 2 , an d2 0 1 3 t ax return s as p arto f t h e s et t lem en to f h i s Tax Co u rtcas e rel at i ng t o h i s 2 0 0 7 t ax y ear; (2 ) t h ath e was u nab l e t o t i m el y fi l e h i s return s fo r t h e y ears ati s s u e b ecau s e h e was u n d er s tres s fro m hi s fi nan ci al s etb ack s an d fro m th e d eat h o f h i s fat h er-i n l aw; an d (3 ) t h atth e IRS s h o u ldwi th draw t h e NFTL b ecau s e i th adcau sedh i m t o l o s e b u s i n es s an dad v ers el y affect edh i s l i fe. Th e SO d i s cu ss edp et i t i o n er’ s fai l u re t o p ro v i d e t h e req ues tedfi n an ci al i n fo rm at i o nan dal s o d is cu s s edth e req u i rem en t s- 6
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[* 6 ] fo r an o ffer-i n -co m

p ro m i s e. Pet i t i o n er i n d i cat edt o th e SO t h ath e h adab o u t $ 7 0 0 ,0 0 0 equ i ty

i n h i s h ou s e; th e SO o b s erv edthats i n ce t h i s equ i ty ex ceed ed p et i t i o n er’ s t o tal t ax l i ab i l i ty , an o ffer-i n -co m pro m i s e was u n l i k el y

t o b e accep t ed
. Th ey d i s cu s s edth e p o s s i bi li ty o f a d i rect d ep o s i t i n s t al l m en tag reem en tas a m ean s fo r p et i t i o n er t o o b t ai n a wi th drawal o f t h e NFTL. Th e SO ex p l ai n ed , h o wev er, th atwi th drawal o f t h e NFTL was n o tau t om at i c; p et i t i o n er wo u l dn eedt o ap p l y fo r i t
. At the co n cl us i on o f t h e h eari n g p et i t io n er i n d i cat edth ath e wan t edt o co n s u l t h i s t ax at t o rn ey

an dt o co ns i d er g et t i n g a l o ant o p ay h i s t ax . Th e SO req u es t ed th atp et i t i o n er cal l h i m

b ackth e n ex td ay

t o l eth i m

kn o w h o w h e wi s h edt o p ro ceed
. Pet i t i o ner fai l edt o cal l b ack , an do n Feb ru ary 2 1 , 2 01 8 , th e SO cal l edh i m . Pet i t io n er requ es t edan o th er 9 0 d ay s t o co m e up wi th fu n d s t o m ak e a p aym en t ; h e al s o req u es t edthatth e NFTL b e wi th drawnan d t h e ad di t i o n s t o t ax fo r 2 0 1 1 -1 3 b e ab at ed . Th e SO req u es tedp et it i o n er t o p u th i s req u es t i nwri t i n g b y Feb ru ary 2 8 , 2 0 1 8 . OnM arch 2 , 2 0 18 , th e SO recei v edfro m p et i t i o n er a l et ter p ro po s in g th at i n 9 0 d ay s h e wo u l dp ay

$ 7 3 ,9 1 5 (ap p aren t ly

rep res en t i n g th e am o u ntthath e b el i ev edt o b e h i s t ax l i ab i l i ty ex cl u si v e o f an y

ad d it i on s t o t ax ) o nth e co n d i t i o n th atres p o n d en t ab at e al l ad d it i o n s t o t ax an d i n t eres t
.- 7
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[* 7 ] In a p h o n e co n v ers at io n o n M arch 1 6 , 2 0 1 8 , th e SO ad v i s edp et it i on er t h at
o n th e b as i s o f t h e fact s p res en t edan dt ak i n g i n t o acco u n tp et i t i o n er’ s ch ro n i c fai l u re t o fi l e ret u rn s an dm ak e es t i m at ed t ax p aym en t s , h e was n o t g o i n g t o
reco m m en dab at em en t o f t h e ad d i ti o n s t o t ax . Becau s e th e SO d ecl i nedt o ab at e th e ad d i t i o n s t o t ax , p et it i on er m ad e n o ad d i t i o n al p ro p o s al fo r a co l l ect i o n al t ern at i v e. OnAu gu s t8 , 2 0 1 8 , res p o n d en ti s su eda Supp l em en tal No t ice o f Det erm i n at i on Co n cern i n g Co ll ect i o nAct i o n (s ) Un d er Sect i o n 6 3 2 0 an d/ o r 6 3 3 0 , s u s t ai n i n g t h e fi li ng o f t he NFTL. Its t at edth atth ere was n o b as i s t o wi th draw t h e NFTL, th atp et i ti o n er d i d n o t m eetth e reas on ab le cau s e cri t eri a fo r ab at em en to f p en al t i es , an dth ats i n ce p et i t i o n er h adp ro p o s edt o p ay th e b al an ce o f h i s t ax l i ab i l i t i es o n l y

i f the IRS ag reedt o rem o v e th e ad di t i o n s t o t ax , n o co l l ect io n al t ern at i v e was ag reedo n . Th e n o t i ce al s o i nd i cat ed th atth e SO h adrev i ewedth e ad m i n is trat i v e fi l e, v eri fi edthatp et i t i o n er’ s 2 0 0 7 , 2 0 0 8 , an d 2 0 1 1 -1 3 t ax l i ab i l i t i es h adb een p ro p erl y as s es s ed , an dv eri fi edthatal l o th er req u i rem en t s o f l aw an dad m i n i s trat i v e p ro cedu re h adb een s at i s fi ed
.- 8
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[* 8 ] OPINION I. St an d ardo f Rev iew Sect io n 6 3 2 1 i m

p os es a l i en i nfav or o f t he Un i t edSt at es o n al l p ro pert y an d p ro p erty ri g h t s o f a p ers on wh o i s l i ab l e fo r an dfai l s t o p ay t ax aft er d em an dfo r p aym en t h as b een m ad e. Th e l i en ari s es wh en as s es s m en ti s m ad e an dco nt i n u es
u n t i l th e as s es s edl i ab i l it y i s p ai do r b eco m es u n en fo rceab l e. Sec. 6 3 2 2
. Fo r t h e l i ent o b e v al i dag ai n s tcert ai n th i rd p art i es , th e Secret ary m u s tfi le an NFTL. Sec. 6 3 2 3 (a). He m

u s tth en p ro v i d e wri t t en n o t i ce t o th e t ax p ay er, wh o m ay th en req u es tan ad m i n i s trat i v e h eari n g b efo re t h e Ap p eal s Offi ce. Sec. 6 32 0 (a) an d (b )(1 ). In s u ch a h eari n g a p ers o n m ay rai s e s p o u s al d efen s es , ch al l en g es t o t h e ap p ro p ri at en es s o f t h e Co m m i s s i o n er’ s i n ten d edco l l ect i o n act i o n , an dp o ss i b l e al t ern at i v e m ean s o f co l l ect i on . Secs . 6 3 2 0 (c), 6 3 3 0(c)(2 ). In ad d i t i o nt o
co n si d eri n g i s s u es rai s edb y th e t ax p ay er u n der s ect io n6 3 3 0 (c)(2 ), th e Ap p eal s
o ffi cer m u stv eri fy th atth e req u i rem en t s o f an y ap p l icab l e l aw o r ad m in is trat i v e p ro cedure h av e b een m et . Sec. 6 3 3 0 (c)(1 ), (3 ). Th e p ers o nm ay ch al l en g e t h e
ex i s t en ce o r am o u n to f h i s o r h er u n d erl y i n g t ax l i ab i l it y i ns u ch a h eari n g o n l y

i f h e o r s h e d i dn o t recei v e a s t atut o ry n o t ice o f d efi ci en cy

fo r t h e t ax l i ab i l it y

o r d i d
n o to th erwi s e h av e an o p p o rtun i ty t o d i s p u t e t h e un d erl y i n g l i ab i l it y . Sec.- 9
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[* 9 ] 6 3 3 0 (c)(2 )(B). Th e t erm “ u n derl y i n g t ax l iab i l i ty ” i n cl u d es am o un t s rep o rt ed du e o n a t ax pay er’ s retu rnas wel l as s t atu t o ry i n t eres t , ad d it i on s t o t ax , an d p en al t i es . See M o n t go m ery v . Co m m i s s i o n er, 1 2 2 T.C. 1 , 7 -8 (2 00 4 ); Kat z v . Co m m i s s i o n er, 1 1 5 T.C. 3 2 9 , 3 3 9 (2 0 0 0); W i l s o n v . Co m m i s s i o ner, T.C. M em o . 2 0 1 2 -2 2 9
. On ce t h e Ap p eal s o ffi cer i s s u es a n ot i ce o f d et erm i n at io n , th e t ax p ay er m ay
s eekju d i ci al rev i ew i n th i s Co urt . Secs . 6 3 2 0 (c), 6 3 3 0(d )(1 ). If t h e v al i d i ty o f t h e
u n d erl y i n g t ax l iab i l i ty

i s p ro p erl y

ati s s u e, we rev i ew t h ati s s u e d e n ov o . See W ad l ei gh v . Co m

m i s s i o n er, 1 3 4 T.C. 2 80 , 2 88 (2 0 1 0 ); Seg o v . Co m m i ss i on er, 1 1 4 T.C. 6 0 4 , 6 1 0 (2 0 0 0 ). W h ere t h e u n d erl y i n g t ax l i ab i l i ty i s n o tp ro perl y ati s s u e, th e Co u rtrev i ews th e IRS d et erm i n at i o no n l y fo r ab us e o f d i s cret i o n . Go za v . Co m m i s s i o n er, 1 1 4 T.C. 1 7 6 , 1 8 2 (2 0 0 0). Ab us e o f d i s cret i o nex i st s wh en a d et erm i n at i o n i s arb i trary , cap ri ci o u s , o r wi th o u t s ou n db as i s i n fact o r l aw. See M u rp h y v . Co m m i s s i o n er, 1 2 5 T.C. 3 0 1 , 3 2 0 (2 0 05 ), aff’ d , 4 6 9 F.3 d2 7 (1 s tCi r. 2 0 0 6 ); s ee al so Kel l er v . Co m m i s si o n er, 5 6 8 F.3 d7 1 0 , 7 16 (9 th Ci r. 2 00 9 ), aff’ g i n p art T.C. M em o. 2 00 6 -1 6 6
. II. Ch al l en g e t o Un d erl y i ng Li ab i l i t i es Pet i t i o ner ch al len g es res p o nd en t ’ s d et erm i n at i on n o tt o ab at e t h e ad d i t i o n s t o t ax u n d er s ect i on 6 6 5 1 (a)(1 ) an d(2 ) fo r 2 0 1 1 , 2 0 12 , an d 2 0 1 3 an d u n d er s ect i o n- 1 0 -

[* 1 0 ] 6 6 5 4 fo r 2 0 12 an d2 0 1 3
. 5 W e rev iew t h is i s su e d e n ov o . See Go za v . Co m m i s s i o n er, 1 1 4 T.C. at1 8 1-1 8 2
. Res p o n d en tb ears th e b u rd en o f p ro du ct i o nwi th res p ectt o ad d i t i o n s t o t ax . See s ec. 7 4 9 1 (c); Hi g b ee v . Co m m i ss i o n er, 1 1 6 T.C. 4 3 8 , 4 4 6 -4 4 7 (2 0 0 1 ). To
m eeth i s b u rd en , res p o n den tm u s t p ro du ce s u ffi ci en t ev i d en ce es t ab li s hi n g th ati t i s ap p ro p ri at e t o i m

p o se an ad d i t i o nt o t ax . See Hi g bee v . Co m m is s i o n er, 1 1 6 T.C. at4 4 6 . Th e b urd en o f es t ab l i s h i ng reas o n ab l e cau s e rem ai ns wi th p et i t i o n er. See i d . at4 4 6 -4 4 7
. A. Sect i o n 6 6 51 (a)(1 ) Lat e Fi l i n g Ad d i t i o n t o Tax Sect io n 6 6 5 1 (a)(1 ) i m

p o s es an ad d i t io nt o t ax fo r fai lu re t o t i m el y fi l e a retu rn . Res p on d en th as m eth i s b urd en o f p ro du ct i o nb y s h o wi n g thatp et it i o n er
was req u ired t o fi l e a ret u rnfo r each y ear an d p ro du ci ng Fo rm s 4 3 4 0, Cert i fi cat e
o f As ses sm en t s , Paym en t s , an dOth er Sp eci fi edM at t ers , s h o wi n g th atp et i t i o n er

5 In h i s p ret ri al m em o ran du m , fi l ed tw o week s b efo re t ri al , res p o nd en t ’ s co u ns el s t at ed , co ns i st en t wi th th e i ns tru ct i o n s t h ath e h ad p ro v i d edres p o n d en t ’ s Ap p eal s Offi ce i n h i s J an u ary 2 , 2 0 1 8 , tran sm i t tal m em o ran du m , th atp et i ti o n er’ s u n d erl y i n g l iab il i ti es fo r t h e ad d i t i o n s t o t ax fo r 2 01 1 , 2 0 1 2, an d2 01 3 were al l at i s su e. Attri al res p on d en t ’ s co u n s el arg u ed fo r t he fi rs t t i m e t h atp et i t i o n er was p recl u d edfro m

ch al l en g i n g h i s 2 0 1 1 u n derl y i n g l iab i l i ty b ecau s e t h aty ear’ s l i ab i l i ty w as b as edp art l y o n an ag reed au d i tas s es sm en t . Becau s e we co n cl u d e th atp et i t i o n er i s n o ten t it l edt o ab at em en to f t h e 2 0 1 1 ad d i t i o n s t o t ax i n an y ev en t, we n eedn o tan dd o n o tad dres s wh et h er i nthes e ci rcu m s t an ces p et i t i o n er i s p recl u d edfro m

ch al l en g i n g h i s 2 0 1 1 u n derl y i n g l iab i l i ty fo r t h e ad di t i o n s t o t ax i n qu es ti o n . Cf. s ec. 3 0 1 .6 3 30 -1 (e)(3 ), Q&A-E1 1, Pro ced . & Adm in . Reg s .- 1 1 -

[* 1 1 ] d i dn o t t i m el y

fi l e h is retu rn s. See M cLai n e v . Co m m i ss i o n er, 1 3 8 T.C. 2 2 8 , 2 4 4 -2 4 5 (2 0 1 2 ). A t ax p ay er wi l l n o t b e l i ab l e fo r an ad d i ti o nt o t ax u nd er s ect i o n6 6 5 1 (a)(1 ) i f t h e t ax p ay er can s h o w thatthe fai l u re t o fi l e was due t o reas on ab l e cau s e an dn ot wi l l fu l n eg l ect
. See Un i t edSt at es v . Bo y le, 4 6 9 U.S. 2 4 1, 2 4 5 -2 4 6 (1 98 5 ). Reas o n ab l e cau se ex i s ts wh en a t ax pay er ex erci ses o rd i n ary b u s in es s care an d p ru d en ce an d i s n on et h el es s u n ab l e t o fi l e h is retu rn b y th e d at e p res cri b edb y l aw. Sec. 3 0 1.6 6 5 1 -1 (c)(1 ), Pro ced . & Adm i n . Reg s. Pet i t i o ner as s ert s th ath e h adreas o n ab l e cau s e fo r fai l i n g t o t i m el y fi l e h i s retu rn s fo r t h e y ears ati s s u e b ecau s e o f s tres s h e faced fro m h i s fi n an ci al s etb ack s
an d th e d eat h s o f h i s m o ther-i n -l aw an d fat h er-i n -l aw. He al s o as s ert s th atth e
u n cert ai nt y

ab o ut th e o u t co m e o f h i s Tax Co u rtcas es rel at i n g t o h i s 2 00 7 an d 2 0 0 8 t ax y ears co n tri b u t edt o h i s fai l u re t o t i m el y fi l e h i s t ax retu rn s fo r 2 0 1 1 , 2 0 1 2 , an d2 0 1 3
. Reas o n ab l e cau se m ay

ex i s ti f t h e t ax p ay er’ s o r a fam il y m em b er’ s i l l n es s o r i n cap aci ty

p rev en t s th e t ax p ay er fro m fi l in g h is o r h er t ax retu rn , b utn o t i f t h e t ax p ay er i s ab l e t o co n t i n u e h i s o r h er b us i n es s affai rs d es p i t e t h e i l l n es s o r i n cap aci ty . See 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 00 (an dcas es ci t ed th erei n ). Al tho u g h i n co m p et en ce, m en t al i l l n es s , al co h o l i s m , o r o th er i n cap aci ty- 1 2 -

[* 1 2 ] m ay

ex cu s e a t ax p ay er fro m

th e l at e fi l in g ad d i t i o n t o t ax , a t ax p ay er’ s
s el ect i v e i n ab i l i ty t o m eeth i s t ax o b l i g at i o n s wh en h e can co n du ctn o rm al b u s i n es s act i v i t i es d o es n o tex cu s e h i s l at e fi l in g o r fai l ure t o fi l e. Kem m erer v . Co m m i s s i o n er, T.C. M em o . 1 9 9 3 -3 9 4 . Fu rt h er, fi n an ci al d iffi cu l t i es g en eral l y d o
n o tco ns t i tu t e reas o n ab l e cau s e fo r fai l u re t o fi l e a return . Barb er v . Co m m i s s i o n er, T.C. M em o . 1 9 9 7 -2 0 6
. Th e ev i d en ce i n th e reco rdd o es n o ts u g g es t th at p et it io n er was i n cap ab l e o f carry i n g o n h i s n o rm al b u s in es s act i v i t i es du ri ng th e p eri o ds i n ques t i o n . To th e
co n trary , h e earn ed s ig n i fi can t i n co m e du ri n g th es e p eri o d s. Co n s equ en t ly , wh i l e
we em p at h ize wi th p et i ti o ner’ s ci rcu m st an ces , we are n o t p ers uad edth ath i s fi nan ci al s etb ack(wh i ch h adb een o n g oi n g s i n ce atl eas t2 0 0 7 ), th e d eat h s o f h i s
m o th er-i n -l aw an dfat h er-i n -l aw, o r h i s an x i et y an dd ep res si o nco ns t i tu ted
reas on ab l e cau s e fo r fai l i n g t o fi l e h i s 2 0 1 1 , 2 0 1 2 , an d2 0 1 3 ret u rn s o nt i m e. M o reo v er, t h e p en d en cy

o f l i t i g at i o n , ev en wh ere t h e d eci s i o nfo r anearl i er y ear m ay affect th e d et erm i n at io no f a t ax p ay er’ s l i ab i l i ty fo r a l at er y ear, i s n o t
reas on ab l e cau s e fo r fai l u re t o t i m el y fi le. See Th o m as v . Co m m i s s i o n er, T.C. M em o. 2 0 0 1 -2 2 5 (h o l d i n g t h atp en d i n g l i t i g at io n, ev en i f t h e o u t co m e affect s an
es t at e’ s fi n al t ax l i ab il i ty , i s n otreas o n ab l e cau s e fo r fai l i n g t o t i m el y fi l e an es t at e t ax return ). W e are s k ep t i cal th atth e p en d i ng Tax Co u rtl i t i gat i o nh adan yth i n g t o- 1 3 -

[* 1 3 ] d o wi th pet i t i o ner’ s l at e fi l i n g o f h is 2 0 13 retu rn s i n ce t h e s ti p u l at ed d eci s i o n i n h i s 2 0 08 cas e was en t eredAu g u s t2 7 , 2 0 1 3, l on g b efo re t h e fi l i n g d ead li n e fo r h i s 2 0 1 3 retu rn . Bu tev en i f th e p en d i n g Tax Co u rt l i t i g at i o nl eft p et i t i o n er i n d o ub tas t o h i s p ro p er rep o rt i n g p o s i t i o no nh i s 2 0 11 an d2 0 12 retu rn s , th e reas o n ab le an d p ru d en tco u rs e o f act i o n wo u l dh av e b een t o fi l e t h es e retu rn s o n t i m e wi th t h e b es ti nfo rm at i on av ai l ab l e, d i s cl o s in g i nth es e retu rn s th at a d i s p u t e ex i s t edas t o wh et her h e s ho u l dp ro p erl y b e t reat edas an i n ves t o r o r trad er wi th res pect t o h i s s t o ck s al es . See i d
. 6 Fi n al l y , p et i t i o n er’ s p at t ern o f ch ro n i c n o nco m p li an ce--g o i n g b ackt o at l eas t 20 0 5 --i n fai l i n g t o fi l e h i s retu rn s o nt im e wei g h s ag ai n s t a fi n d i n g o f
reas on ab l e cau s e. See, e.g ., Ju d g e v . Co m m i s s i on er, 8 8 T.C. 1 1 7 5 , 1 18 9 -1 1 9 1 (1 9 8 7). B. Sect i o n 6 6 5 1 (a)(2 ) Lat e Paym en tAd d i t i o nt o Tax Sect io n 6 6 5 1 (a)(2 ) i m

p o s es an ad d i t io nt o t ax fo r fai lu re t o t i m el y p ay th e
am ou n to f t ax s h o wno n a retu rn u n l es s th e fai l u re i s du e t o reas o nab l e cau s e an d
n o tdu e t o wi l l fu l n eg l ect . Res p o n d en t p ro du ced Fo rm s 4 3 40 es t ab li s hi n g th at

6 In th e CDP h eari ng p et i t i o n er co n t en ded th atres p o n d en th ad ag reedt o wai v e ad di t i on s t o t ax fo r 2 01 1 , 2 0 12 , an d 2 0 1 3 i nco n n ect i o nwi th th e s et t l em en t o f h i s Tax Co u rtl i t ig at i o n fo r h i s 2 0 0 7 t ax y ear. Pet i t i o n er h as n o trai s edth i s i s su e i n t h i s p ro ceed i n g , an d we d eem h i m t o h av e wai v edi t
. Inan y ev en t , n o th i n g i n th e reco rds up po rt s a fi n d i n g t h atth ere was an y s u ch ag reem en t
.- 1 4 -

[* 1 4 ] p et i t i o n er d i dn o tp ay th e fu l l am ou n t s o f t ax s h o wno nh i s 2 0 1 1, 2 0 1 2 , an d 2 0 1 3 retu rn s . Th erefo re, res p o n d en th as m et h i s b u rd en o f p ro du ct i o n , an d p et i t i o n er b ears th e b urd en o f p ro v i n g reas o n ab le cau se. See s ec. 6 65 1 (a)(2 ); Hi g bee v . Co m

m i ss i o n er, 1 1 6 T.C. at4 4 7
. Pet i t i o ner arg u es th ath e s h o u l dn o tb e l i ab l e fo r t h e s ect i o n6 6 5 1 (a)(2 ) fai l u re t o t im el y

p ay ad d i t i o n t o t ax b ecau s e h e h adreas o nab l e cau s e o nacco u n to f h i s fi n an ci al s etback s du ri n g th e y ears i nqu es t io n . Th e reg u l at i o n s p ro v i de t h ata t ax p ay er h as reas on ab l e cau s e fo r fai lu re t o t i m el y p ay a t ax i f “ th e t ax p ay er h as
m ad e a s at i s fact o ry s ho wi n g th ath e ex erci sedo rd i n ary b us i n es s care an d p ru d en ce i n p ro v i d i n g fo r p aym en to f h i s t ax l i ab i l i ty an dwas n ev ert h el es s ei th er u n ab l e t o p ay th e t ax o r wo u l d s uffer an u n du e h ard s h i p * * * i f h e p ai do n the du e d at e.” Sec. 3 0 1.6 6 5 1 -1 (c)(1 ), Pro ced . & Adm i n . Reg s.; s ee al s o Val en M fg
. Co . v . Un i ted St at es , 9 0 F.3 d1 1 90 , 1 1 9 3 (6 th Ci r. 1 9 96 ). Th e reg u l at i o n s al s o s t at e: In d et erm in i n g wh et h er t h e t ax p ay er was u n ab l e t o p ay th e t ax i ns p it e o f t h e ex erci s e o f o rd i n ary b u s i n es s care an d p ru d en ce i np ro v i d i n g fo r p aym en to f h i s t ax l i ab i l it y , co n s id erat i o nwi l l b e g i v ent o al l th e fact s an dci rcu m s t an ces o f t h e t ax p ay er’ s fi nan ci al s i tu at i o n , i n cl u d i n g th e am o u n tan dn atu re o f t h e t ax p ay er’ s ex pen d itu res i n l i gh t o f t h e i n co m e (o r o th er am o u n t s ) h e co u l d , atth e t i m e o f s u ch ex p en d itu res , reas o nab l y

ex p ectt o recei v e p ri or t o t h e d at e p res cri b ed fo r t h e p aym en to f th e t ax . Sec. 3 0 1.6 6 5 1 -1 (c)(1 ), Pro ced . & Adm i n . Reg s.- 1 5 -

[* 1 5 ] Pet i t i o ner h as n ots h o wnth atp ay in g h is t ax l iab i li t ies wh en du e wo u l dh av e
res u l ted i n u n du e h ard s h i p o r th ath e was o th erwi s e unab l e t o p ay th es e t ax l i ab i l i t i es o n t i m e. See Sh aw v . Co m m is s i o n er, T.C. M em o . 2 0 1 0-2 1 0 , 2 0 10 Tax Ct . M em o LEXIS 2 4 6 , at* 18 (“ Pet it i on ers h av e p ro v id edo n ly l i m i t ed ev i den ce reg ard i n g th ei r ab i l i ty

t o p ay as o f t h e d at e p aym en t was actu al l y du e, an d we are
u n ab le t o p res u m e t h atan y s u ch ev i den ce wo u l db e fav o rab l e t o p et i t i o ners .”); Tay l o r v . Co m

m i s s i o n er, T.C. M em o . 2 0 0 9 -2 7 (h o l d i n g t ax p ay er l i ab le fo r s ect i o n 6 6 5 1 (a)(2 ) ad d i t i o n t o t ax wh ere t ax p ay er fai l edt o s ho w h ow h er i n v es tm en t ’ s fai l u re affect edh er ab i l i ty t o p ay h er t ax es ). Pet it i o n er rep ort edad ju s t edg ro s s i n co m e o f $ 11 9 ,7 0 8 fo r 2 01 1 , $ 2 1 1 , 9 1 9 fo r 2 0 1 2 , an d$ 1 4 9 ,9 1 2 fo r 2 0 13 . Ev en i f th es e i nco m e l ev el s rep res en teda d ecl i ne fro m earl i er y ears , th e l im i t edev i d en ce i n the reco rdd o es n o ts u g g es t th atp et i t i on er was i n cap ab l e o f p ay in g h is t ax l i ab i l i t i es fo r t h es e y ears . Pet i t i o n er h as fai l ed t o s h o w reas o nab l e cau se an dl ack
o f wi l l fu l n eg lect . Co ns equ en t l y , h e i s l i ab l e fo r th e s ect i o n6 6 5 1 (a)(2 ) ad d i t i o n s t o t ax . C. Sect i o n 6 6 5 4 Ad d i t i o n fo r Fai l u re To Pay Es t i m at edIn co m e 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 fo r an u nd erp aym en to f
es t i m at edt ax es . Th i s ad d it i o n t o t ax i s m an d at o ry u n l es s th e t ax p ay er p ro v es th at
an ex cep ti o n ap p l i es . See s ec. 6 6 5 4 (e); Lu k o vs ky v . Co m m i s s i o ner, T.C. M em o .- 1 6 -

[* 1 6 ] 2 0 1 0 -1 1 7 . A t ax p ay er m u s tp ay es t im at edi n co m e t ax fo r a p art i cu l ar y ear
o n l y i f th atp ers o n h as a “ req u i redan n u al p aym en t ” fo r t h aty ear. See Wh eel er v . Co m m i s s i o n er, 1 2 7 T.C. 2 0 0 , 2 1 1 (2 0 0 6), aff’ d, 5 2 1 F.3 d1 2 8 9 (1 0 th Ci r. 2 0 0 8 ). A “ req u iredan n u al p aym en t ” i s th e l es s er o f: (1 ) 9 0 % o f t h e t ax s ho wno nth e retu rn fo r t he t ax ab l e y ear (o r i f n o retu rn i s fi l ed9 0 % o f th e t ax fo r t h aty ear) o r (2 ) 1 0 0 % o f t h e t ax s h o wno n th e i n d i v i du al ’ s retu rn fo r t h e p reced in g t ax ab l e y ear. Sec. 6 6 5 4 (d )(1 )(B). Un l i k e s ect i o n 6 6 5 1 (a)(1 ) an d(2 ), s ect i o n 6 6 5 4
co n tai n s n o p ro v i s i o n rel at i n g t o reas o nab l e cau s e an dl acko f wi l lfu l n eg l ect . See M cLai n e v . Co m

m is s i o n er, 1 3 8 T.C. at2 4 9 . Sect io n6 6 5 4 d o es co n t ai ncert ai n
ex cep t i o n s , h o wev er, an d th e b u rd en o f p ro o f i s o n t ax p ay ers t o s ho w th ey are
co v ered by

o n e o f t h e rel i ef p ro v i s i o n s. Id .; s ee s ec. 6 6 5 4(e). Res p o n d en ti n tro du cedi n t o ev id en ce Fo rm s 4 3 4 0 fo r p et i t i o ner’ s 2 0 1 1 , 2 0 1 2 , an d2 0 1 3 t ax y ears . To g et h er, t h es e fo rm s i n d i cat e t hatp et i t i o n er h ad Fed eral i nco m e t ax l i ab i l i ti es fo r 2 0 1 2 an d 2 0 1 3 , th ath e m ad e n o es t i m at ed i n co m e t ax p aym en t s fo r 2 0 1 2 an d2 0 1 3, an d th ath e fi l ed2 0 1 1 an d2 0 1 2 t ax retu rn s th ats ho wedt ax due fo r t h os e y ears . See Harri s v . Co m m i s s i o ner, T.C. M em o. 2 0 1 2 -3 1 2
. Pet it i o n er h as fai l edt o d em o n s trat e t hatan y ex cep t i o n p u rs u an t t o s ect io n 6 6 5 4 (e) ap pl i es . Acco rd i n g l y , we s u st ai n res po n den t ’ s d et erm i n at i o n o f th e ad d i t i o n t o t ax u n d er s ect i o n 6 6 5 4 (a) fo r p et i t i o ner’ s 2 0 1 2 an d 2 0 1 3 t ax y ears .- 1 7 -

[* 1 7 ] III. Ch al l en g e t o Ap p ro p ri at en es s o f No t ice o f Li en Fi l i n g Pet i t i o ner ch al len g es res p o nd en t ’ s d et erm i n at i on i n th e s up p l em en t al n o t i ce
o f d et erm i nat i o n d ecl i n i n g t o wi th draw t h e NFTL. 7 He arg u es th atth e NFTL
s h o u ldb e wi th drawn b ecau s e i th as cau s ed h im eco n o m i c h ard s h i p . Sect io n 6 3 2 3 (j) p erm i t s th e Secret ary t o wi th draw a n o t i ce o f Fed eral t ax l i eni f h e d et erm i n es , am o n g o th er t h i n g s, thatth e “ wi th drawal o f s u ch n o t ice wi l l faci li t at e t h e co l lect i o n o f t h e t ax l i ab i l i ty ” o r “ th e wi thd rawal o f s u ch n o t i ce
wo u l db e i n t h e b es ti n t eres ts o f t h e t ax p ay er * * * an d t h e Un i t edSt at es .” Sect io n 6 3 2 3 (j) u s es d i s cret i o n ary , n o tm an d at ory , l an g uag e, an d res p on d en ti s n o t req u i redt o wi th draw t h e l i en ev en fo r o n e o f th e reas o n s s t at edi ns ect i o n 6 3 2 3 (j). See Tag g artv . Co m

m i s s i on er, T.C. M em o . 2 01 3 -1 1 3 ; s ee al s o s ec. 3 0 1 .6 3 2 3 (j)- 1 (c), Pro ced . & Adm in . Reg s . Pet i t i o n er fai l edt o t ak e th e n eces s ary s tep s t o ap p l y

7 Atv ari ou s p o i n t s i n t h e ad m i n i s trat i ve p ro ceed in g s an d b efo re t hi s Co u rt p et i t i o n er h as fram edh i s req u es ti nt erm s o f rel eas i ng th e l i enrat h er th an i nt erm s o f wi th drawi ng th e NFTL, p erh ap s u n aware o f t h e d i fferen ce b et ween th es e t wo rem ed ies . Fo r t he s ak e o f co m p l et en es s , we n ot e t h atth e reco rd d o es n o ts u g g es t an y ab u se o f d i s cret i o n b y

res p o n d en ti n n o t rel eas i n g th e l ien . Th e IRS m u s t rel eas e a l i enwi th i n 3 0 day s aft er t h e u n d erl y i n g l i ab i l i ty ei th er h as b een fu l l y s at i s fi edth ro u gh fu l l p aym en to f t h e t ax o r h as b eco m e l eg al l y u n en fo rceab l e, s ec. 6 3 2 5 (a), o r i f th e NFTL was erro n eo u s l y fi l ed , s ec. 6 32 6 (b ); s ee s ec. 3 01 .6 3 2 6
- 1 (b ), Pro ced . & Adm in . Reg s . (ex p l ai n i n g ci rcu m s t an ces wh ere NFTL i s co n si d erederro n eo u sl y

fi led ). Th e reco rdd o es n o ts u g ges tth atan y o f t h es e ci rcu m s t an ces p ert ai n i n thi s cas e o r t h at an y o f t h e o th er co n d it i on s fo r i s s u i n g a cert ifi cat e o f rel eas e o f l i en , as s etfo rt h i n th e n o t i ce o f NFTL, h av e b een m et
.- 1 8 -

[* 1 8 ] fo r wi th drawal o f t h e NFTL an dt o p ro v id e requ es t edfi n an ci al i n fo rm at i o n du ri n g th e CDP h eari n g . Res p o n d en td i d n otab u s e h i s d i s cret i o n i n d ecl i n i n g t o wi th draw t h e NFTL. See Green v . Co m m i s s i o n er, T.C. M em o . 2 0 1 4 -1 8 0
. Ou r rev i ew o f t h e reco rds at i s fi es u s t hatth e SO p ro p erl y d i s ch arg edal l o f h i s res po n s i b i li t ies u n d er s ect i o n6 3 3 0 (c). Fi n di n g p et i t io n er l i ab l e fo r t he ad d it i o n s t o t ax i n qu es t io n fo r h i s 2 0 1 1, 2 0 1 2 , an d2 0 1 3 t ax y ears an dfi n d i n g n o ab u se o f d i s cret i o n i n an y res p ect , we s u s t ai nth e p ro p os edco l lect i o n act io n . 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
.