T.C. Memo. 2004-237

UNITED STATES TAX COURT

THEODORE W. BANIS, JR., Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 13155-02L. Filed October 14, 2004.

P timely petitioned this Court to review R’s

determination to proceed with collection of assessments

against P for 1993-96. After concessions by both

parties, only 1996 remains in issue. P alleges that

his liability for 1996 was paid by the trustee in his

bankruptcy proceeding and that respondent specifically

acknowledges the satisfaction of his 1996 liability in

a “closing letter”. R alleges (1) the trustee’s

payments to R were applied, in their entirety, to 1990-

94, (2) the “closing letter” concerns a proposed

additional amount of tax and related adjustments, which

were dropped on the basis of information provided by P,

and (3) the assessments relating to P’s self-determined

tax liability for 1996 remain unpaid.

Held: On the basis of the evidence, the

determination by R’s Appeals officer to proceed with

collection of the assessments against P for 1996 is

sustained.
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Theodore W. Banis, Jr., pro se.

Ann M. Welhaf, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

HALPERN, Judge: Pursuant to section 6330(d), petitioner

seeks review of respondent’s determination to proceed with

collection of income taxes and additions to tax for calendar

years 1993 through 1996. During the trial, the parties made

concessions with respect to 1993-95. Respondent conceded that

collection is improper for 1993. Petitioner conceded, and

respondent agreed, that collection for 1994 is proper after

application by respondent of two credits to petitioner’s 1994

account in the amounts of $600 and $157.38. Petitioner also

conceded that collection is proper for 1995. The only issue

remaining in dispute is respondent’s determination to proceed

with collection for 1996.

Unless otherwise indicated, all section references are to

the Internal Revenue Code as amended, and all Rule references are

to the Tax Court Rules of Practice and Procedure. All dollar

amounts have been rounded to the nearest dollar.

FINDINGS OF FACT

Some facts are stipulated and are so found. The stipulation

and the supplemental stipulation of facts, with accompanying

exhibits, are incorporated herein by this reference.
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At the time the petition was filed, petitioner resided in

Accokeek, Maryland.

On May 29, 2001, respondent mailed to petitioner a Final

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

Hearing (notice of levy) covering 1994-96. On June 25, 2001,

petitioner timely filed a Form 12153, Request for a Collection

Due Process Hearing (request for hearing), for 1994-96. On July

1, 2002, a face-to-face hearing was held involving petitioner and

Jacqueline Sansbury, an Internal Revenue Service (IRS) Appeals

officer with the IRS Appeals Office in Baltimore, Maryland

(Appeals Officer Sansbury). On July 25, 2002, respondent mailed

to petitioner a Notice of Determination Concerning Collection

Action(s) under Section 6320 and/or 6330 (the notice of

determination) sustaining the proposed collection action against

petitioner for all years. Petitioner’s petition and amended

petition challenging respondent’s determination were filed August

12 and October 15, 2002, respectively.

Facts Pertaining to 1996

On August 11, 1997, petitioner filed his 1996 individual

income tax return, Form 1040A, U.S. Individual Income Tax Return,

showing total tax due of $12,245, total tax withheld of $2,726,

and a balance due of $9,519, which petitioner failed to remit
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1 Each of the transcripts in evidence is derived from

current account information in respondent’s master file. In

general, transcripts are obtained by entering various command

codes (e.g., MFTRA, TXMODA) into respondent’s integrated data

retrieval system (IDRS) in order to obtain a particular

transcript. IDRS is essentially the interface between

respondent’s employees and respondent’s various computer systems. 

See Crow v. Commissioner, T.C. Memo. 2002-149 n.6.

with his return. Transcripts1 of petitioner’s account for 1996

show that, on August 11, 1997, respondent assessed a tax

liability of $12,245, gave a credit for the $2,726 of withheld

taxes, assessed an addition to tax for failure to pay of $190,

and assessed interest of $281. The total assessment of $9,990

was listed as the “Assessed Balance” for 1996 in the notice of

levy covering that year. 

In a notice of proposed changes (Form CP 2000) dated March

11, 1998, (the CP 2000 letter), respondent’s Philadelphia Service

Center advised petitioner of proposed changes to petitioner’s

1996 return that would result in additional tax, penalty, and

interest due in the sum of $11,482. The proposed changes

consisted of (1) a $24,912 net increase in taxable income:

$25,496 of “nonemployee compensation” reported on Form 1099-MISC,

Miscellaneous Income, ($25,336 reported by Nationwide Life

Insurance Co. (Nationwide) and $160 by Ford Motor Credit) less a

$584 deduction for 50 percent of a proposed self-employment tax,

(2) self-employment tax, (3) an accuracy related penalty, and (4)

interest from April 15, 1997 to March 26, 1998. 
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On March 13, 1998, petitioner faxed to respondent (1) a copy

of a 1994 order of a United States Bankruptcy Court (the

bankruptcy court order), which, in effect, required that payments

due from Nationwide to petitioner be made directly to the trustee

in bankruptcy of petitioner and Mrs. Banis (the trustee) and (2)

a letter dated March 14, 1997, from the trustee to the

Philadelphia Service Center explaining that an earlier proposal

to assess a negligence penalty against petitioner based upon a

Form 1099-MISC was in error because petitioner did not receive

the payment, which, pursuant to the 1994 order, was made directly

to the trustee for disbursement to creditors. 

On April 3, 1998, the Philadelphia Service Center sent a

“closing letter” (Form CP 2005) to petitioner pertaining to 1996

(the closing letter), which provides, in pertinent part, as

follows:

CLOSING LETTER

Thank you for giving us more information about the

income we recently wrote to you about. We are pleased

to tell you that, with your help, we were able to clear

up the differences between your records and your

payers’ records. If you sent us a payment based on our

proposed changes, we will refund it to you if you owe

no other taxes or have no other debts the law requires

us to collect.

If you have already received a notice of

deficiency, you may disregard it. You won’t need to

file a petition with the United States Tax Court to

reconsider the tax you owe. If you have already filed

a petition, the Office of the District Counsel will

contact you on the final closing of this case.
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In her notice of determination sustaining the proposed

collection action for 1996, Appeals Officer Sansbury stated, in

pertinent part, as follows:

For tax year ending 12/31/96, I reviewed IDRS

transcripts and reviewed the taxpayer’s

original return and determined Mr. Banis owes

the tax due. I explained to Mr. Banis the

closing letter he received from the Internal

Revenue Service for * * * [1996] was in

response to him providing documentation that

the income reported was incorrect. However,

the tax that is due for * * * [1996] is

correct.

OPINION

I. Introduction

If any person liable for Federal tax liability neglects or

refuses to make payment within 10 days of notice and demand, the

Secretary is authorized to collect the tax by levy on that

person’s property. Sec. 6331(a). As a general rule, at least 30

days before taking such action, the Secretary must provide the

person with a written final notice of intent to levy that

describes, among other things, the administrative appeals

available to the person. Sec. 6331(d). Upon request, the person

is entitled to an administrative review hearing before

respondent’s Appeals Office (Appeals Office hearing). Sec.

6330(b)(1). If dissatisfied with the Appeals Office

determination, the person may seek judicial review in the Tax

Court or a Federal District Court, as appropriate. Sec.

6330(d)(1).
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Section 6330(c)(1) requires that the Appeals officer, at the

Appeals Office hearing, obtain verification “that the

requirements of any applicable law or administrative procedure

have been met.” Section 6330(c)(2)(A) prescribes the relevant

matters that a person may raise at an Appeals Office hearing,

including spousal defenses, the appropriateness of respondent’s

proposed collection action, and possible alternative means of

collection. A taxpayer may contest the existence or amount of

the underlying tax liability at an Appeals Office hearing only if

the taxpayer did not receive a statutory notice of deficiency

with respect to the underlying tax liability or did not otherwise

have an opportunity to dispute that liability. Sec.

6330(c)(2)(B). An Appeals Office determination under section

6330(c)(2)(A) is reviewed for abuse of discretion whereas a

determination regarding the underlying tax liability under

section 6330(c)(2)(B) is subject to de novo review. See Sego v.

Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114

T.C. 176, 181-182 (2000).

At issue in this case is respondent’s right to collect

petitioner’s self-determined tax liability for 1996 (i.e., the

amount set forth as petitioner’s tax liability on his 1996

return) plus related interest and an addition to tax. In

Montgomery v. Commissioner, 122 T.C. 1 (2004), we held that a

taxpayer’s challenge to his self-determined tax liability at an
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Appeals Office hearing constitutes a permissible challenge to the

underlying tax liability under section 6330(c)(2)(B). Unlike the

taxpayer in Montgomery, however, petitioner is not disputing the

accuracy of his self-determined tax liability. Rather, he

alleges that the liability has been paid by the trustee. We have

not specifically decided whether such a claim involves (1) a

determination under section 6330(c)(2)(B) relating to the

existence or amount of the underlying tax liability entitled to

de novo review by this Court, or (2) a section 6330(c)(2)(A)

determination relating to an “unpaid tax” subject to review for

abuse of discretion. In Washington v. Commissioner, 120 T.C. 114

(2003), we considered an analogous issue (whether the Appeals

officer was correct in determining that the taxpayer’s selfdetermined tax liabilities had not been discharged in

bankruptcy), but in sustaining the Appeals officer’s

determination to proceed with collection in Washington we did not

specifically address the appropriate standard of review. 

In this case, all of the evidence contained in the trial

record (including copies of IRS transcripts covering petitioner’s

1990-96 taxable years, which were introduced into evidence during

the trial) was available to Appeals Officer Sansbury in making

her determination. For the reasons discussed in Section II,

infra, our review of that evidence causes us to sustain Appeals

Officer Sansbury’s determination to proceed with collection
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whether we apply an abuse of discretion or a de novo standard of

review. Therefore, as in Washington v. Commissioner, supra, we

decline to explicitly adopt a standard of review. Cf. Swanson v.

Commissioner, 121 T.C. 111, 119 (2003) (in sustaining the Appeals

officer’s determination that unpaid tax liabilities were not

discharged in bankruptcy and that collection should proceed, we

applied an abuse of discretion standard of review under

circumstances in which the petitioner had received a notice of

deficiency thereby precluding him from challenging the existence

or amount of the underlying tax liability under section

6330(c)(2)(B)).

II. The Trustee Did Not Discharge Petitioner’s 1996 Liabilities

Petitioner objects to Appeals Officer Sansbury’s

determination solely on the basis that (1) his tax and taxrelated (i.e., interest and addition-to-tax) liabilities for 1996

were discharged out of the payments made by the trustee to the

IRS and (2) respondent specifically acknowledges the discharge of

those liabilities in the closing letter. Petitioner’s position

is set forth in his request for hearing, in pertinent part, as

follows:

I do not agree that I owe the taxes identified on

the Notice of Intent to Levy for tax year * * * 1996. 

The adjustments made to my tax return * * * [for 1996

are] incorrect. The non-employee compensation

identified by IRS for * * * [1996] was not paid to me. 

The money was paid to the trustee of my Chapter 11

Bankruptcy (case #93-5-5237-JS). The money was part of

over $170,000 collected by the trustee from money owed
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me by Nationwide Insurance Company. Pursuant to a

court order dated May 9, 1994, Nationwide Insurance

Company was directed to pay directly to the trustee all

money owed me from my Agents’ Security Compensation

Plan and Deferred Incentive Credits Plan [.] Monthly

payments from Nationwide went directly to the trustee

from 1994 through 1998 for disbursement by the trustee

under the bankruptcy. All taxes owed should have been

paid by the Trustee. The trustee’s final report shows

that $69,336.26 was paid to the IRS for taxes. Thus,

the amounts you are showing as overdue should be a part

of this $69,336.26.

I have attempted to correct this matter many times

in the past few years. I have received a “Closing

Letter” dated April 3, 1998, indicating that all l996

taxes have been paid (copy enclosed) and do not

understand why I continue to receive notices that I

still owe unpaid taxes for that year. 

Appeals Officer Sansbury reviewed IDRS transcripts of

petitioner’s account for 1990-96 and determined that $69,234 had

been credited to petitioner’s account for 1990-94. The 1990-94

transcripts confirm the payment of $69,234 under the transaction

code 670, accompanied, in all but one case, by the description

“subsequent payment undesignated bankruptcy” and accompanied, in

that one case, by the description “subsequent payment”. No

payments by the trustee are reflected in the transcript of

petitioner’s account for 1996. In fact, the only payment

reflected in the transcript for 1996 is $2,726 for withheld

taxes. The Form 4340, Certificate of Assessments and Payments,

for 1996 also reflects that there was no payment for that year

other than a credit for $2,726 of withheld taxes.
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2 There is no explanation in the record of the discrepancy

between the $69,234 credited by respondent to petitioner’s

account for 1990-94 and the $69,336 alleged by petitioner (on the

basis of the trustee’s final report, which is not in evidence) to

have been “paid to the IRS for taxes.” The $102 difference is

inconsequential, and if that additional amount was paid to the

IRS for a year other than 1990-94, it was not 1996, the year in

issue.

We have repeatedly held that a Form 4340 or a computer

printout of a taxpayer’s transcript of account, absent a showing

of irregularity, provides sufficient verification of the

taxpayer’s outstanding liability (and that a valid assessment has

been made) to satisfy the requirements of section 6330(c)(1). 

See, e.g., Davis v. Commissioner, 115 T.C. 35, 40-41 (2000);

Roberts v. Commissioner, T.C. Memo. 2004-100; Tornichio v.

Commissioner, T.C. Memo. 2002-291; Howard v. Commissioner, T.C.

Memo. 2002-81. In light of petitioner’s failure to demonstrate

any irregularity in the preparation of the transcripts of

petitioner’s account for 1990-1996, we find that those

transcripts accurately reflect the assessed liabilities and

payments thereof for those years. See Davis v. Commissioner,

supra at 41; Tornichio v. Commissioner, supra.

2

We also agree with Appeals Officer Sansbury that the closing

letter concerns the proposed additions to income and related

adjustments for 1996, not the assessments based upon petitioner’s

self-determined tax liability for that year. The close proximity

in time between (1) petitioner’s March 13, 1998, fax of the
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bankruptcy court order and of the trustee’s letter explaining

that amounts paid by Nationwide directly to the trustee were

erroneously included on a Form 1099-MISC issued to petitioner and

(2) the closing letter, which begins “[t]hank you for giving us

more information about the income we recently wrote to you

about”, indicates that the latter was written in response to the

former. Moreover, it is clear that petitioner’s March 13, 1998,

fax was prompted by the CP 2000 letter from respondent’s

Philadelphia Service Center to petitioner, which proposed to

increase petitioner’s 1996 income by amounts reported on 1099-

MISCs as paid to petitioner by Nationwide and Ford Motor Credit

during that year. A further indication that the closing letter

concerns the proposed additional tax (not petitioner’s selfdetermined, unpaid tax) is provided by the following sentence

contained therein: “If you have already received a notice of

deficiency, you may disregard it.” A notice of deficiency is

issued in connection with an additional amount of tax, not with

respect to a self-determined, unpaid tax, which is immediately

assessed pursuant to section 6201(a)(1). Lastly, Appeals Officer

Sansbury provided unchallenged testimony that a closing letter

(CP 2005) is customarily issued in connection with a notice of

proposed changes (CP-2000). 
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III. Conclusion

Appeals Officer Sansbury’s determination affirming the

proposed levy action against petitioner for 1996 is sustained.

To reflect concessions and the foregoing,

Decision will be entered

under Rule 155.