T.C. Summary Opinion 2007-144

UNITED STATES TAX COURT

WARREN D. WARD, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 13066-05S. Filed August 20, 2007.

Warren D. Ward, pro se.

Gavin L. Greene, for respondent.

PANUTHOS, Chief Special Trial Judge: This case was heard

pursuant to the provisions of sections 6330(d) and 7463 of the

Internal Revenue Code in effect when the petition was filed. 

Pursuant to section 7463(b), the decision to be entered is not

reviewable by any other court, and this opinion shall not be

treated as precedent for any other case. Unless otherwise

indicated, subsequent section references are to the Internal 
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1 Respondent concedes unreported income of $13 and $14 for

1997 and 1999, respectively, and an addition to tax under sec.

6651(a)(2) for 1997. 

Revenue Code, and all Rule references are to the Tax Court Rules

of Practice and Procedure. 

This proceeding arises from a petition for judicial review

filed in response to a Notice of Determination Concerning

Collection Action(s) Under Section 6320 and/or 6330 (notice of

determination) issued to petitioner in June 2005 and supplemented

in October 2006. Pursuant to section 6330(d), petitioner seeks

review of respondent’s determination sustaining a proposed levy

for the taxable years 1997, 1998, and 1999. 

After concessions,1 the issues for decision are: (1)

Whether respondent correctly determined petitioner’s underlying

tax liability for the years at issue; and (2) whether respondent

abused his discretion by sustaining the proposed levy. The

parties filed cross-motions for summary judgment pursuant to Rule

121(a). For the reasons discussed below, we shall grant

respondent’s motion and deny petitioner’s motion.

Background

Petitioner resided in Whittier, California, when the

petition was filed. 

During the years at issue, petitioner worked for Viking

Freight, Inc. (Viking Freight), which was later acquired by

FedEx. Petitioner filed a Federal income tax return for 1997. 
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2 All dollar amounts are rounded to the nearest dollar.

3 The notice of intent to levy also included civil penalties

assessed under sec. 6702 for the taxable years 1993 through 1996. 

Although petitioner attached a Form W-2, Wage and Tax Statement,

showing that petitioner earned $20,2952 from Viking Freight, the

1997 return reports no income and no tax liability. Because

petitioner did not file a Federal income tax return for 1998 or

1999, respondent prepared substitutes for returns for those years

based on Forms W-2 and other third-party information documents. 

Respondent assessed a $500 civil penalty against petitioner

under section 6702 for filing a frivolous tax return for 1997. 

Respondent also determined a deficiency in income tax for each of

the years 1997, 1998, and 1999 and issued petitioner separate

notices of deficiency for each year. Petitioner did not petition

the Court in response to any of the notices. Respondent assessed

the tax reflected in the notices of deficiency and, on the same

dates as the assessments were made, issued petitioner statutory

notices of balance due. 

After petitioner failed to make payment, respondent issued a

notice of intent to levy.3 Petitioner timely submitted a Form

12153, Request for a Collection Due Process Hearing. 

Petitioner’s case was assigned to a settlement officer, who

conducted an administrative hearing with petitioner by

correspondence. The settlement officer considered both the civil
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4 Our jurisdiction to review the Commissioner’s collection

activity requires that we have jurisdiction over the underlying

type of tax involved, Andre v. Commissioner, 127 T.C. 68, 70

(2006), and historically we have not had jurisdiction to review

the sec. 6702 penalty, Van Es v. Commissioner, 115 T.C. 324,

328-329 (2000). On Aug. 17, 2006, Congress enacted the Pension

Protection Act of 2006 (the Act), Pub. L. 109-280, 120 Stat. 780. 

The Act amends sec. 6330(d)(1) to give the Tax Court jurisdiction

to review the Commissioner’s collection activity regardless of

the underlying type of tax involved. However, the amendment to

sec. 6330(d)(1) is effective only for determinations made after

Oct. 16, 2006. Act sec. 855, 120 Stat. 1019. Because the

determination in this case was made before that date, we lack

jurisdiction to review the sec. 6702 penalty. 

penalty and the income tax liabilities that had been assessed. 

The settlement officer ultimately concluded that the proposed

levy should be sustained. Respondent issued a notice of

determination with respect to the civil penalty and a separate

notice of determination for the income tax liabilities. 

Petitioner filed a timely petition with the Court. By Order

dated May 4, 2006, we dismissed this case for lack of

jurisdiction to the extent petitioner sought review of the notice

of determination concerning the civil penalty. The Order makes

clear that we have jurisdiction only with respect to the notice

of determination that addresses petitioner’s income tax

liabilities.4

After a hearing in June 2006, we remanded this case to

respondent’s Office of Appeals, and petitioner’s case was

assigned to a different settlement officer. The settlement

officer provided petitioner with several documents, including
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5 Respondent had filed an earlier motion for summary

judgment on Apr. 11, 2006, which we denied without prejudice. 

Forms 4340, Certificate of Assessments, Payments, and Other

Specified Matters, for the years at issue. The settlement

officer requested that petitioner submit, inter alia, tax returns

for 2004 and 2005 and a Form 433-A, Collection Information

Statement for Wage Earners and Self-Employed Individuals. 

Although the parties exchanged correspondence over the next

few months, petitioner did not provide the requested information. 

Respondent issued petitioner a Supplemental Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 (supplemental notice) on October 2, 2006. The

supplemental notice sustains the proposed levy and states that

applicable legal and administrative requirements were met. 

In February 2007, the parties filed cross-motions for

summary judgment.5 Respondent and petitioner each filed an

objection, and petitioner filed a reply to the objection. 

Discussion

Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials. Fla. Peach Corp. v.

Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be

granted with respect to all or any part of the legal issues in

controversy “if the pleadings, answers to interrogatories,

depositions, admissions, and any other acceptable materials,
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together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that a decision may be

rendered as a matter of law.” Rule 121(a) and (b); Sundstrand

Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965

(7th Cir. 1994); Naftel v. Commissioner, 85 T.C. 527, 529 (1985). 

The moving party bears the burden of proving that there is no

genuine issue of material fact, and factual inferences will be

read in a manner most favorable to the party opposing summary

judgment. Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985);

Jacklin v. Commissioner, 79 T.C. 340, 344 (1982). Because we

find there is no genuine issue of material fact, summary judgment

is appropriate. 

Section 6331(a) authorizes the Secretary to levy upon

property and property rights of a taxpayer liable for taxes who

fails to pay those taxes within 10 days after a notice and demand

for payment is made. Section 6331(d) provides that the levy may

be made only if the Secretary has given written notice to the

taxpayer 30 days before the levy. Section 6330(a) requires the

Secretary to send a written notice to the taxpayer of the amount

of the unpaid tax and of the taxpayer’s right to a section 6330

hearing at least 30 days before the levy is begun. 

If a section 6330 hearing is requested, the hearing is to be

conducted by the Office of Appeals, and the Appeals officer

conducting it must verify that the requirements of any applicable
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6 While copies of the notices of deficiency were attached to

respondent’s pleadings, respondent was unable to produce evidence

that petitioner received the notices. Accordingly, respondent

considered the underlying tax liability at the administrative

hearing and agrees that petitioner may raise the issue in this

proceeding. See sec. 6330(c)(2)(B).

law or administrative procedure have been met. Sec. 6330(b)(1)

and (c)(1). The taxpayer may raise at the hearing any relevant

issue relating to the unpaid tax or the proposed levy. Sec.

6330(c)(2)(A). The taxpayer also may raise challenges to the

existence or amount of the underlying tax liability at a hearing

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); Montgomery v. Commissioner, 122 T.C. 1 (2004). 

This Court has jurisdiction under section 6330 to review the

Commissioner’s administrative determinations. Sec. 6330(d);

Iannone v. Commissioner, 122 T.C. 287, 290 (2004). Where the

validity of the underlying tax liability is properly at issue, we

review the determination de novo. Where the underlying tax

liability is not at issue, we review for abuse of discretion. 

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

Commissioner, 114 T.C. 176, 182 (2000). 

I. The Underlying Tax Liability

Respondent concedes that the underlying tax liability is

properly at issue.6 In the notices of deficiency, respondent
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7 But for the provisions of sec. 7463(b), this case would be

appealable to the Court of Appeals for the Ninth Circuit (Court

of Appeals). See sec. 7482(b)(1)(A). We therefore follow the

law of that court. Golsen v. Commissioner, 54 T.C. 742, 757

(1970), affd. 445 F.2d 985 (10th Cir. 1971). In order for the

presumption of correctness to apply in a case involving

unreported income, the Court of Appeals has held that the

Commissioner “must show some minimal evidence linking the

taxpayer to the source of that income”. Palmer v. IRS, 116 F.3d

1309, 1312-1313 (9th Cir. 1997). Although it is unclear whether

(continued...)

determined that petitioner had unreported wage income for each of

the years at issue. For the taxable years 1998 and 1999,

respondent also determined additions to tax under sections

6651(a)(1) and 6654(a). 

A. Unreported Income

Gross income includes all income from whatever source

derived, including compensation for services. Sec. 61(a)(1). In

general, the Commissioner’s determinations set forth in a notice

of deficiency are presumed correct, and the taxpayer bears the

burden of showing that the determinations are in error. Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Under

certain circumstances, the burden of proof as to factual matters

shifts to the Commissioner. Sec. 7491(a). However, petitioner

has neither alleged that section 7491(a) applies nor established

his compliance with the requirements of section 7491(a)(2)(A) and

(B) to substantiate items, maintain records, and cooperate fully

with respondent’s reasonable requests. Petitioner therefore

bears the burden of proof.7
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7(...continued)

this rule applies in the context of sec. 6330, see Aston v.

Commissioner, T.C. Memo. 2003-128 n.2, respondent has connected

petitioner with the source of the wage income through the Forms

W-2, as well as payroll records. Thus, respondent’s

determination is entitled to the presumption of correctness.

Petitioner does not deny that he worked for Viking Freight

during the years at issue or that he received compensation for

his services. In fact, petitioner attached a Form W-2 from

Viking Freight to his 1997 tax return. Petitioner’s payroll

records for 1998 and 1999 likewise indicate that petitioner

received wage income in the amounts shown in the notices of

deficiency. Respondent’s determination on this issue is

sustained. 

B. Addition to Tax Under Section 6651(a)(1)

If a Federal income tax return is not timely filed, an

addition to tax will be assessed “unless it is shown that such

failure is due to reasonable cause and not due to willful

neglect”. Sec. 6651(a)(1). The Commissioner has the burden of

production with respect to the liability of any individual for an

addition to tax under section 6651(a)(1). Sec. 7491(c). The

burden of showing reasonable cause under section 6651(a) remains

on petitioner. Higbee v. Commissioner, 116 T.C. 438, 446-448

(2001).

Respondent has met his burden of production. Petitioner

does not deny that he failed to file a tax return for 1998 or
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1999. Petitioner introduced no evidence establishing reasonable

cause. Respondent’s determination on this issue is sustained. 

C. Addition to Tax Under Section 6654(a)

Section 6654(a) provides for an addition to tax “in the case

of any underpayment of estimated tax by an individual”. This

addition to tax is mandatory unless one of the statutorily

provided exceptions applies. See sec. 6654(e); Grosshandler v.

Commissioner, 75 T.C. 1, 20-21 (1980). There is no exception for

reasonable cause or lack of willful neglect. Estate of Ruben v.

Commissioner, 33 T.C. 1071, 1072 (1960). 

Respondent bears the burden of production with respect to

the addition to tax under section 6654(a). Davis v.

Commissioner, T.C. Memo. 2005-160. To meet this burden,

respondent must show that petitioner had a “required annual

payment”. Wheeler v. Commissioner, 127 T.C. 200, 210-212 (2006). 

The required annual payment equals the lesser of (1) 90 percent

of the tax shown on the return for the taxable year (or 90

percent of the tax for such year if no return is filed), or (2)

100 percent of the tax shown on the individual’s return for the

preceding taxable year (if the individual filed a return for that

preceding year). Sec. 6654(d)(1)(B).

Because petitioner had a tax liability for each of the years

at issue, he had an obligation to make estimated tax payments for

1998 and 1999. See Wheeler v. Commissioner, supra at 211. The
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Forms 4340 do not indicate, nor does petitioner contend, that he

made any such payments for 1998 or 1999. Respondent therefore

has met his burden of production. As petitioner has not shown

that any of the statutory exceptions are applicable, respondent’s

determination on this issue is sustained.

II. The Proposed Levy

Petitioner asserts that respondent failed to satisfy the

requirements of section 6330. Specifically, petitioner contends

that he was not given notice and demand for payment of tax as

required by section 6303(a). 

In general, section 6303(a) provides that the Secretary

shall give notice and demand for payment to the taxpayer within

60 days of making an assessment of tax. A settlement officer may

rely on Form 4340 to verify that a notice and demand for payment

was sent to the taxpayer. See Hansen v. United States, 7 F.3d

137, 138 (9th Cir. 1993); Clough v. Commissioner, T.C. Memo.

2007-106 n.6.

The Forms 4340 for 1997, 1998, and 1999 show that respondent

issued petitioner timely notices of balance due, which constitute

notice and demand for payment within the meaning of section

6303(a). Clough v. Commissioner, supra n.7; Standifird v.

Commissioner, T.C. Memo. 2002-245, affd. 72 Fed. Appx. 729 (9th

Cir. 2003). Petitioner has failed to present any credible

evidence that notice and demand was not issued as indicated on
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the Forms 4340. We therefore conclude that notices and demands

were properly issued. Because the record indicates that

respondent also satisfied the remaining requirements of section

6330(c)(1), we sustain respondent’s determination to proceed with

the levy, except to the extent of respondent’s concessions. See

supra note 1; see also Burke v. Commissioner, 124 T.C. 189,

195-196 (2005) (holding that a Form 4340 satisfies the

verification requirements of section 6330(c)(1)). 

To reflect the foregoing,

An appropriate order and

decision will be entered.