T.C. M em o . 2 0 2 0 -9 7

UNITED STATES TAX COURT
DUY DUC NGUYEN, Pet i t i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 6 6 0 2-1 7L. Fi l edJ u n e 3 0 , 2 0 2 0
.

Du y Du c Ng uy en , p ro s e. Cam ero n W . Carr, fo r res p o n d en t
.

M EM ORANDUM FINDINGS OF FACT AND OPINION PUGH, Ju d g e: Th i s cas e was co m m en cedi n res p on s e t o a No t i ce o f Det erm i n at i on Co n cern i n g Co ll 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 1

1 Un l es s o th erwi s e i n d i cat ed , al l s ect i o n referen ces are t o th e In t ern al Rev enu e Co de o f 1 98 6 , as am en d edan di n effect fo r th e y ears i n i s s u e. Ru l e (co n ti n u ed ...)- 2
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[* 2 ] (n o t i ce o f d et erm in at i o n ) s u s t ai n in g a n o t i ce o f fed eral t ax l i en (NFTL) t h at th e In t ern al Rev en u e Serv i ce (IRS) fi l edt o s ecu re p et i t i 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 00 6, 2 0 0 7 , an d 2 00 8
. Aft er co n ces si o ns m ad e b y res p o n d en t attri al , 2 th e i ss u es fo r d eci s i o n are wh et h er: (1 ) p et i t i o n er m ay ch al l en g e h i s u n d erl y i n g t ax l i ab i l i t i es co n s i s t i n g o f th e i n co m e t ax an d a s ect io n 6 66 2 (a) p en al ty res p on d en tas s es s edfo r each y ear i n i s su e, (2 ) p et i t i o n er o wes an y o f t he u n d erl y i n g t ax l i ab i l i t i es (i f h e m ay ch al l en g e th em b efo re t h is Co u rt ), an d(3 ) t h e IRS Offi ce o f Ap p eal s (IRS Ap p eal s) ab u s ed i t s d i s cret i o n i n s us t ai n i n g th e NFTL fi li n g . Fo r t h e reas on s d i s cu s sedb el o w we
co n cl u d e th atp et i t i on er m ay n o tch al l en g e h i s u n derl y i n g t ax l i ab i l i t i es fo r t h e

1 (...co n t in u ed ) referen ces are t o th e Tax Co u rtRu l es o f Pract i ce an dPro cedu re.

2 Res p o n d en tco n ced eds ev eral i t em s attri al an di n h i s p o s t tri al b ri efs rel at ed t o p et i t i o n er’ s u n d erl y i ng t ax l i ab i li t ies fo r th e y ears i n i s su e. He co n ced ed th es e i tem s b ecau s e p et i t i o n er s ub s t an t i at edth em b efo re t ri al . Res p o n d en tl i m i t ed th es e co n ces s i o n s , h o wev er, o n th e b as i s o f wh et h er we wo ul dp erm i tp et i t i o n er t o ch al l en g e h i s u n derl y i n g t ax l i ab i li t ies . W e o b s erv edp rev i o u sl y i n M o n t g om ery v . Co m m i s s i o n er, 1 2 2 T.C. 1 , 1 0 (2 0 0 4 ), th at“ th e s ub st an t i v e an dp ro cedu ral p ro t ect i o n s co nt ai n edi n s ect io n s 6 3 2 0 an d6 3 3 0 refl ectco ng res s i o n al i n t en tth at th e Co m m i s s i o n er s h o u ldco ll ectthe co rrect am o u n to f t ax ”. (Em p h as i s ad d ed .) Acco rd in g ly , we ex p ectth atres p o nd en t ’ s co ll ect i o n effo rt s wi l l refl ecth i s co n ces si o n s fo r i t em s p et it i on er s ub s t an t i at edb efo re t ri al reg ard l es s o f wh et h er we p erm i tp et i t i on er t o ch al l en ge h i s u n d erl y i n g t ax l iab i li t ies
.- 3
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[* 3 ] y ears i n i s s ue an dIRS Ap p eal s d i d n o t ab us e i t s d i s cret i on i n s u s t ai n i n g th e NFTL fi l i n g . FINDINGS OF FACT So m e o f t h e fact s h av e b een s ti p u lat ed an dare s o fo u n d. Th e s t ip u l at ed fact s are i n co rp o rat edi n o u r fi nd i n g s b y th i s referen ce. Pet i t i o n er res i d edi n Cal i fo rn i a wh en h e t i m el y fi ledh i s p et i t io n . Pet i t i o ner u n t i m el y

fi l edFo rm s 1 0 4 0, U.S. In d i v i du al In co m e Tax Retu rn , fo r 2 0 0 6 , 2 0 07 , an d 2 0 0 8 o n J u n e 8 , 2 0 0 9, an d Feb ru ary 1 6 3 an d Feb ru ary

1 4 , 2 0 1 0 , res p ect i v el y . Fo r each retu rn p et i t io n er l i s t edth e s am e h o m e ad dres s i n Frem on t , Cal i fo rn i a (Frem o n tad dres s ). OnOct o b er 3 , 2 0 14 , th e IRS s en t , b y cert i fi edm ai l , a n ot i ce o f d efi ci en cy fo r t h e y ears i n i s su e t o p et i t i o n er ath i s Frem o n t ad dres s . Th e n o ti ce i n cl u d ed
s ect i on 6 6 6 2 (a) accu racy -rel at edp en al ti es . 4 AnIRS cert i fi edm ai l l i s t b ears a U.S. Po s tal Serv i ce (USPS) s t am p d at edOct o ber 3 , 2 0 1 4 , an d th e en v el o pe ad dres s ed

3 OnJ u l y 2 9, 2 0 0 9 , th e IRS p rep areda s ub s t itu t e fo r retu rn fo r p et i t i o n er’ s 2 0 0 7 t ax y ear.

4 Th e reco rdi n cl u des a Rev en u e Ag en tRep o rtd at ed J ul y 1 7 , 2 01 3 , an da Ci v il Pen al ty

Ap p ro v al Fo rm

th atl i s t s s ec. 6 66 2 (a) p en al t ies fo r t h e y ears i n i s s ue an d b ears the g ro up m an ag er’ s s i g natu re d at edJ u l y 1 7 , 2 0 1 3
.- 4
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[* 4 ] t o p et it i o n er’ s Frem o ntad dres s was s t am p edb y th e USPS t o s h o w thatth e i t em was u n cl ai m edan dthe USPS was u nab l e t o fo rwardi t
. Pet i t i o ner d i dn o tp et i t i on th e Co u rtwi th i n 9 0 d ay s o f t h e m ai l i n g o f t h e
n o t i ce o f d efi ci en cy . 5 OnM ay 1 8 , 2 0 1 5 , res p o n den tas s es s edth e d efi ci en ci es an d p en al t i es , al o n g wi th s t atu t o ry i n t eres t
. Res p o n d en tfi l edthe NFTL o n Au gu s t2 5 , 2 0 1 6 , an dm ai l edt o p et i t i o n er, ath i s Frem o n tad dres s , a No t i ce o f Fed eral Tax Li en Fi l i n g an dYo u r Ri g htt o a Heari n g Un d er IRC 6 3 2 0 o n Sep t em b er 6 , 2 0 1 6
. Res p o n d en tt i m el y recei v edfro m p et i t i o n er a Fo rm

1 2 1 53 , Reques tfo r a Co l lect i on Du e Pro ces s o r Equ i v al en tHeari n g , o n Sep t em b er 1 6 , 2 0 1 6 . Pet i t i o n er ch eck edth e b o x l ab el ed l i en “ W i th drawal ” as th e reas o n h e d i s ag reedwi th th e fi li n g o f t h e NFTL an dad dedth e fo l lo wi n g ex p l an at i o n : “ I d o n oto we t ax . Pl eas e fi ndex pl an at i o n b el ow & ex tra p ag e.” He al s o ch eck edth e b o x l ab el ed

“ Oth er” an d ad d edthat“ [a] ft er t h e au di tfo r 2 0 0 6 , 2 0 0 7 & 2 0 0 8 Pers o n al In co m e retu rn , I was ad v i sed t o s ub m i t ad d i ti o n al Am en d m en t s , wh i ch wo u l dp ro v i d e ad d it i o n al p ro o f t h atI d o n o to we t ax . I’ m i n th e p ro ces s & req u es tfo r ad d i t i o n al

5 OnFeb ru ary

9 , 2 0 1 5 , th e IRS s en t , b y cert i fi edm ai l , a n o t i ce o f d efi ci en cy fo r t ax y ears 2 0 09 an d 2 0 10 t o p et i t i o n er an dh i s wi fe ath i s Frem o n tad dres s . Th ey recei vedth atn o t i ce an dt i m el y fi l eda p et i t io n i n thi s Co urto n M ay 7 , 2 0 1 5, ch al l en g i n g res p o n d en t ’ s d et erm i n at i o ns i n th e n ot i ce, wh i ch was as s i g nedd o ck et No . 1 1 9 0 8 -1 5 . OnAp ri l 6 , 2 01 7 , th e Co u rt en tered a s t i p u l at edd eci s i o n th at refl ect edth e p art i es ’ ag reem en tthatp et i t i o n er was n otl i ab l e fo r an y d efi ci en cy o r p en al ty fo r 2 0 0 9 o r 2 0 1 0.- 5
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[* 5 ] t i m e t o co m

p l et e & g at h er ev i d en ce”. 6 In an at t ach m en t p et it i on er s t at edth at h e was s eek i n g g u i d an ce o n th e am en d m en t s an d th e l ien an dg at h eri n g s upp o rt i n g d o cu m en t s fo r t ax y ears 2 0 09 an d2 0 1 0 . OnOct ob er 2 7 , 2 0 1 6 , p et i t i on er
s ub m i t t edFo rm s 1 0 4 0 X, Am en d edU.S. In d i vi du al In co m e Tax Retu rn , fo r 2 0 0 7
an d 2 0 0 8 (i n i t i al am en d edretu rn s ) t o th e IRS o ffi ce i n Fres n o , Cal i fo rn ia (IRS Fres n o o ffi ce). IRS Ap p eal s Set t l em en t Offi cer Nat al i e Kru eg er (SO Kru eg er) was as s i g n ed th e cas e an drev iewedco m p u t eri zedcas e t ran scri pt s o n J an u ary 3 , 2 0 17
. 7 Sh e s en t p et i t i o n er a l et t er d at edJ an u ary 3 , 2 0 1 7 , s ch edu l i n g a t el ep h o ne h eari ng o n Feb ru ary 1 , 2 0 1 7 , an d req u es t i n g an y “ ad d i ti o n al i n fo rm at i o n * * * [p et i t i o n er] wi s h [ed ] t o b e co n s i d eredreg ard i n g * * * [h i s ] req u es tfo r a l i en wi th drawal .” Sh e g av e p et it i o n er a d ead l i n e o f J anu ary 3 0 , 2 0 17 , t o p ro v i d e t h e ad d i t i o n al

6 Th e IRS cas e h i st o ry

i n cl u d es a n o te d at edSep t em b er 9 , 2 0 16 , i n d i cat i ng th atp et i t i o n er’ s s p o u s e an drep res en tat i v e h ol d i ng h i s p o wer o f at t o rn ey , Ph u o n g L. Tran , wan tedt o kn ow wh y a l i en was fi l ed wh en p et i t i o n er was g iv en o n e y ear t o fi l e am en dedreturn s. Sh e was ad v i s edth ati th adb een o v er a y ear s i n ce th e au d it
. 7 Th e co m

p u t eri zedtran s cri p t s SO Kru eg er rev i ewedi n cl u d eda TXM ODA tran s cri p t , wh i ch co n t ai ns cu rren tacco u nti nfo rm at i o n fro m th e IRS m as t er fi l e. TXM ODA i s th e co m

m an dth atIRS em

pl o y ees en t er i n t o th e i n t eg rat edd at a ret ri ev al s y s t em (IDRS) t o o b t ai n a t ran s cri p t . See Cro w v . Co m m i ss i o n er, T.C. M em o. 2 0 0 2 -1 4 9 , 2 0 02 W L 1 2 9 8 7 4 3 , at* 4 n .6 . IDRS i s es s en t i al l y th e i n t erface b et ween IRS em

p l o y ees an di t s v ari o u s co m p u t er s y s t em s . Id
.- 6
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[* 6 ] i n fo rm at i o n an d i n fo rm edh i m th atad d i t i o n al t i m e t o p ro v id e i n fo rm at i o n
wo u l dn o tb e g ran t edaft er t h e h eari n g was h el d
. SO Kru eg er i n cl u deda co p y o f Pub l icat i o n 3 5 9 8 , WhatSh o u l dYo uKn o wAb o u tth e Au d i tReco n s i d erat i o n Pro ces s , wi th th e l et t er. Sh e d idn o t recei v e an y ad d i t i on al i n fo rm at i o n fro m p et i t i o n er b y

the d ead l i n e o r b efo re t h e h eari n g . SO Kru eg er cal l edp et i t i o n er o n Feb ru ary 1 , 2 0 1 7 , fo r t h e h eari n g . Duri ng th e h eari n g p et i ti o n er i n fo rm edh er t h ath e h adfi l edth e i n i t i al am en ded retu rn s , an d h e req u es t ed ad d i t i o n al t im e t o fi l e ad d i t i o nal am en d edretu rn s fo r au d i t
reco n s i d erat i on . SO Kru eg er res p o n dedth ats h e d idn o th av e acces s t o th e i n i t i al
am en d edretu rn s h e h ads ub m i t t edi n Oct ob er an dco u l d n o tco n si d er t h em b ecau s e p et i t i o n er d i dn o tp ro v i de t h em t o h er. 8 Sh e fu rt h er res p o n dedth ats h e h ad affo rd edh i m am

p l e t i m e t o p ro v i d e h er wi th ad d i ti o n al i n fo rm at i o n t o co n si d er. SO Kru eg er i n di cat edt o p et i t i o n er t h ath er d et erm i n at i o n was t o s u s tai n the NFTL fi li n g b ecau se i twas th e l eas ti n tru s iv e co l l ect i o n m et h odan dn o ne o f t he
co n di t i o n s fo r wi th drawal p u rs u an tt o s ect i o n 6 3 2 3 (j) ex i s t ed , an ds h e ad v i s edh i m

8 Th e TXM ODA tran s cri p t s fo r 2 0 0 7 an d 2 0 0 8 b ot h s h o w tran s act i o n co d es “ 9 7 1 -CD>0 1 0 ” an d“ 9 7 1-CD>0 1 3 ”. Th e fo rm er i n d i cat es th atan “ [a] m en d ed retu rn / cl ai m

[was ] fo rward edt o Acco u n t s M an ag em en t ”, wh i l e t he l at t er i n d i cat es th atan “ [a] m en d edretu rn/ cl ai m [was ] fo rward edt o Ex am i n at i on ”. See IRS Do cu m en t6 2 0 9 , ADP an dIDRS In fo rm at i o n , 8 C-3 7 (2 0 17 ). Th e t ran scri p td o es n o tco nt ai n tran sact i o n co d e “ 9 7 1 -CD>0 1 2 ”, wh i ch wo ul di n d i cat e t h atan “ [a] m en dedretu rn / cl ai m

[was ] fo rward edt o Co l l ect i o n ”. See i d
.- 7
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[* 7 ] t o s ub m i tthe ad di t i o n al am en d edretu rn s an dad d i t i o nal i n fo rm at io n t o th e Ex am i nat i o n Di v i s i o n fo r au d i treco n s i d erat i on as s o on as p os s i b l e. Pet i t i o n er d i d
n o tp ro v i d e SO Kru eg er an y ad d i t i o n al i nfo rm at i o n aft er t h e h eari n g. OnFeb ru ary 1 6 , 2 0 1 7, res p o n d en t i s s uedth e n o t i ce o f d et erm i n at io n t o p et i t i o n er ath i s Frem o n tad dres s . Pet i t io n er t i m el y p et i ti o n edth e Co u rto n M arch 2 0 , 2 0 1 7 , t o ch al l en g e th e n o t i ce o f d et erm i n at i o n . He th en s ub m it t edt o th e IRS Fres n o o ffi ce a s eco n dFo rm 1 0 4 0 Xfo r 2 0 07 o n Ap ri l 2 , 2 0 1 7 , an d a Fo rm 1 0 4 0 X fo r 2 0 0 8 an d a s eco n dFo rm 1 04 0 X fo r 2 0 0 6 o n Ap ri l 7 , 2 0 1 7 (co l l ect i v el y , ad d it i o n al am en dedretu rn s ). Aft er p et i t io n i n g the Co u rt , p et i t io n er fi l ed am en d ed p et i t i o n s , i n cl u d i n g o n e th e weekb efo re t ri al
. OPINION I. St an d ardo f Rev iew If u n d erl y in g t ax l i ab i l i t i es are p ro p erl y ati s su e, t h e Co urtrev iews an y d et erm i n at i o n reg ard i n g tho s e l i ab i l i t i es d e n o v o ; th e Co u rtrev i ews al l o th er ad m i n is trat i v e m at t ers fo r ab us e o f d i scret i o n . Dav i s v . Co m m i s si o n er, 1 1 5 T.C. 3 5 , 3 9 (2 0 0 0 ); Seg o v . Co m m i ss i o n er, 1 1 4 T.C. 6 0 4 , 6 10 (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). Th e p h ras e “ u n derl y i n g t ax l i ab i l i t i es ” i n cl u d es the t ax d efi ci en cy , an y p en al t i es an dad d i t i o n s t o t ax , an d
s t atu to ry i n t eres t . Kat z v . Co m

m i s s io n er, 1 1 5 T.C. 3 2 9 , 3 3 8 -3 4 1 (2 0 0 0 ). Ab u s e- 8
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[* 8 ] o f d i s cret i o n ex is t s wh en a d et erm i n at i o n i s “ arb i trary , cap ri ci ou s , o r wi th ou t
s o u n d b as i s i n facto r l aw.” M u rp h y v . Co m m i s s i o ner, 1 2 5 T.C. 3 0 1 , 3 2 0 (2 0 0 5 ), aff’ d , 4 6 9 F.3 d2 7 (1 s tCi r. 2 0 0 6 ); s ee al s o Kel l er v . Co m m i s s i o n er, 5 6 8 F.3 d7 1 0 , 7 1 6 (9 th Ci r. 2 0 09 ), aff’ g i n p artT.C. M em o . 2 0 0 6-1 6 6 , an daff’ g i n p art , v acat i ng i n p art d eci s i on s i n rel at edcas es . In Kel l er v . Co m

m i s s i on er, 5 6 8 F.3 dat7 1 8 , th e Co u rto f Ap peal s fo r t h e Ni n th Ci rcu i t , t o wh i ch th i s cas e i s ap p eal ab l e u n d er s ect i o n 7 4 82 (b )(1 )(A), h el d th atrev i ew o f an ad m i n i s trat i v e d et erm i n at i o n i s l i m i t edt o t h e ad m in i s trat i v e
reco rd . See al s o Go l s en v . Co m m i s s i on er, 5 4 T.C. 7 4 2 , 7 5 7 (1 9 7 0) (h ol di n g th at we g en eral l y “ fo l l o wa Co u rt o f Ap p eal s d eci s io n wh i ch i s s qu arel y i n p o i ntwh ere ap p eal fro m

o u r d eci s i o n l i es t o th e Co u rto f Ap p eal s an dt o th atco u rt al o n e”), aff’ d , 4 4 5 F.2 d9 8 5 (1 0 th Ci r. 1 9 7 1 ). Fo r t h es e p u rp o s es the ad m i n i s trat i v e reco rd i n cl u d es n o to n l y

m at eri al th at th e s et t l em en to ffi cer rev i ewed b u tal s o m at eri al th atwas av ai l ab l e fo r rev i ew. Em ery Cel l i Cu t i Bri n ck erh o ff & Ab ad y , P.C. v
. Co m m i s s i o n er, T.C. M em o . 2 0 1 8 -5 5 , at* 2 1 (ci t in g Th o m p s o n v . DOL, 8 8 5 F.2 d 5 5 1 , 5 5 3 -5 5 6 (9 th Ci r. 1 9 8 9 ); W es tv . Co m m i s s i on er, T.C. M em o . 2 0 1 0 -2 50 , 2 0 1 0 W L 4 7 8 0 3 2 3 , at * 4 n .1 1 ). Un d er a d e n o v o s t an d ardo f rev i ew, we m ay g o b ey o n dth e ad m i n is trat i v e
reco rdt o co n s i d er al l o f t h e rel ev an tev i den ce i n tro du cedattri al . See J o rd an v .- 9
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[* 9 ] Co m m i s s i o n er, 1 3 4 T.C. 1 , 9 (2 0 1 0 ) (“ [B] ecau s e s ect i o n 6 3 3 0 req u i res a d e
n o v o s t an d ard o f rev i ew wh en th e u n derl y i n g l i ab i l it y i s p ro p erl y i n i s s u e, t h e ad m i n is trat i v e reco rdru le i s n otap p l i cab l e t o s u ch a cas e.” (ci t i ng 5 U.S.C. s ec. 5 5 4 (a)(1 ) (2 00 6 ))), s up p l em en t edb y T.C. M em o . 2 01 1 -2 4 3
. W e p ro ceed edwi th tri al h ere t o d eci d e wh et h er p et i t i o ner was en t i t ledt o ch al l en g e h i s u n derl y i n g t ax l i ab i li t ies atth e ad m i n is trat i v e h eari n g b ecau s e h e cl ai m edth ath e d i d n o trecei v e t h e n o t i ce o f d efi ci en cy . To ev al u at e t hi s cl ai m we h ad t o co n si d er i n fo rm at i on o ut s i d e t h e ad m i n i s trat iv e reco rd , n am el y h is t es t i m o ny . Becau s e we co n cl u d e t h ath e d i dn o trecei v e th e n ot i ce o f d efi ci en cy , s ee i n fra Part II.A, we th en rev i ewedth e ad m i n is trat i v e reco rd t o d eci d e wh et h er h e p ro perl y

rai sedh i s u nd erl y i n g l i ab i l i t i es wi th th e s et t l em en to ffi cer. W e
co n cl u d e, as ex p l ai n edi n fra Part II.B, t h ath e d idn o t. W e t h enrev i ewedth e ad m i n is trat i v e reco rdt o d eci d e wh et h er SO Kru eg er ab u sedh er d i s cret i on i n
s u s t ai n i n g t h e p ro p o s edco l l ect i o n act i on . W e co n cl u d e i nfra Part III t h ats h e d i d
n o t
. II. Ch al l en g e t o Un d erl y i ng Tax Li ab i l i ti es A. Recei p to f No t i ce o f Defi ci en cy A t ax p ay er m ay

rai se ch al l en g es t o h i s u n derl y i ng t ax l i ab i l it i es atan ad m i n is trat i v e h eari n g i f h e d i dn o t recei v e an y s t atu t ory n o t i ce o f d efi ci en cy

o r- 1 0 -

[* 1 0 ] o th erwi s e h av e ano p p o rtu n i ty t o d i sp u te h is t ax l iab i li t ies . Sec. 6 3 3 0 (c)(2 )(B). If a n o t i ce o f d efi ci en cy i s p ro p erl y

m ai ledt o the t ax p ay er ath i s l as tkn o wnad dres s , th e n o t i ce m ay b e v al i dev en i f t h e t ax p ay er d idn o t recei v e i t
. See, e.g
. , Un i t edSt at es v . Zo l l a, 7 2 4 F.2 d8 0 8 , 8 1 0 (9 th Ci r. 1 9 8 4 ). So as p arto f th e s et tl em en to ffi cer’ s d et erm i n at i o n , s h e m u s tv eri fy thata v al i dn o t i ce o f d efi ci en cy

was i s su edt o th e t ax p ay er at h i s l as tkn o wn ad dres s . Sec. 6 3 3 0 (c)(1 ); J o rd an v . Co m

m i s s i o n er, 1 34 T.C. at1 2 ; Ho y l e v . Co m m i s s i o n er, 1 31 T.C. 1 9 7 , 2 0 0 (2 00 8 ), s upp l em en t edb y 1 3 6 T.C. 4 63 (2 0 1 1 ). Ev en i f t h e n o t i ce was p ro p erl y m ai l ed , th e t ax pay er m ay b e ab l e t o ch al l en g e t h e u n d erl y i n g t ax l i ab i l i t i es i f h e can es t ab l is h th atn o n ot i ce was recei ved . Ho y l e v . Co m m is s i o n er, 1 3 1 T.C. at1 99 ; Seg o v . Co m m i s s i o n er, 1 1 4 T.C. at 6 0 9 ; Sn o d g ras s v . Co m m i s s i o n er, T.C. M em o . 2 0 1 6 -2 3 5 , at* 1 4 -* 1 5 ; cf. Lan d er v . Co m m i s si o n er, 1 5 4 T.C. _

_ , _

_ (s l i p o p . at2 8-3 3 ) (M ar. 1 2 , 2 0 2 0 ) (h o ld i n g th ata t ax p ay er wh o d i dn o t recei v e a n o t i ce o f d efi ci en cy co ul dn o tch al l en g e h is u n derl y i n g t ax l i ab i l i t i es b efo re th i s Co u rtwh en h e h ada p ri or o p p o rtu n i ty t o d o s o i n an ad m i n is trat i v e h eari n g wi th IRS Ap p eal s ). Pet i t i o ner d o es n o td is p ut e t h atth e n o t i ce o f d efi ci en cy was ad dres s edt o h i s Frem on tad dres s o r t h atth i s ad dres s was u s edfo r o th er IRS n o t i ces th ath e d i d recei v e. Pet i t i o ner ad m i t t edth ath e h adn o ex p lan at io n fo r h i s n o n recei p to f t h e- 1 1 -

[* 1 1 ] n o t i ce o th er t h anh i s s p ecu l at i o n th atth e USPS n o t i ce o f at tem pt edd el i v ery
o f cert i fi edl et t er was m is d irect ed . Bu th e cred ib l y t es t ifi edth at h e d idn o trecei v e th e USPS n o t i ce o f at t em pt edd el i v ery

o f cert i fi edl et t er, an dh e h as a reco rdo f
res p o n d in g t o n o t i ces th ath e d i drecei v e. W e t h erefo re wi l l n ottreat h i m as h av in g recei vedth e n o t i ce o f d efi ci en cy fo r t h e y ears i n i s s u e. See, e.g ., Sm i th v . Co m m i s s i o n er, T.C. M em o . 2 0 0 8 -2 2 9 , 2 0 08 W L 4 5 0 0 3 00 , at* 3 (al l o wi n g a t ax p ay er t o rai s e h i s u n d erl y i n g t ax l i ab i l i t i es wh ere “ n o n recei p to f t h e n o t ice o f d efi ci en cy

i s n o tdu e t o * * * [h i s ] d el i b erat e refu s al o f d el i v ery o r s i m i lar
m i s co n du ct ”); s ee al s o M as o n v . Co m m i s si on er, 1 3 2 T.C. 3 0 1 , 3 1 8 -3 1 9 (2 0 0 9 ) (h o l d i n g th ata t ax p ay er d i d n o td el i b erat el y av o i dd el i v ery

o f a n o t i ce o f d efi ci en cy

wh en s h e h adrecei v edan dt o o kap p ro p ri at e act i o n i n res p o n se t o th e Co m m i s s i o n er’ s o th er m ai ledn o t i ces an dd o cu m en t s ); Tatu m v . Co m m i s si o n er, T.C. M em o . 2 00 3 -1 1 5 , 2 0 0 3 W L 1 9 1 8 9 14 , at* 3 -* 4 (h o l d i ng th at th e t ax p ay ers d i dn o t d el i b erat el y

av o i dd el i v ery o f a n ot i ce o f d efi ci en cy wh en th ey

cred i b l y t es t i fi edth atth ey

d i dn o trecei ve t he USPS n o t ice o f at t em p t edd el i veryo f cert ifi edl et t er). B. Adm i n i s trat i ve Heari n g W e n o wm

u s t d eci d e wh et h er p et i t i o n er p ro p erl y rai s edh i s u n d erl y i n g t ax l i ab i l i t i es atth e ad m i n i s trat i v e h eari n g . W e co n s id er a t ax p ay er’ s ch al l en ge t o h i s- 1 2 -

[* 1 2 ] u n d erl y i n g t ax l i ab i l i ti es i n a co l l ect io n act i on cas e o nl y i f h e p ro perl y

rai sed th e l i ab i l i t i es at an ad m i n i s trat i v e h eari n g. Gi am el l i v . Co m m i s s i o n er, 1 29 T.C. 1 0 7 , 1 1 4 -1 1 6 (2 0 07 ); s ee s ec. 3 0 1 .6 3 2 0 -1 (f)(2 ), Q&A-F3 , Pro ced . & Ad m i n . Reg s. Ani s s u e i s n o tp ro p erl y rai s ed atth e ad m i ni s trat i ve h eari ng i f t h e t ax p ay er fai l s t o req ues tco ns i derat i o n o f t h e i s s u e o r i f h e requ es t s co n s i d erat i o n b u tfai l s t o p res en tan y

ev i d en ce aft er b ei n g g i v en a reas o nab l e o p p o rtu n i ty t o d o s o . See Th o m p s o n v . Co m

m i s s i o n er, 1 4 0 T.C. 1 7 3 , 1 7 8 (2 01 3 ) (“ At ax p ay er i s p recl u d ed fro m d i s p u t i ng th e u n derl y i n g l i ab i l i ty i f i twas n o t p ro p erl y rai s edi n th e CDP h eari n g .”); Gi am el l i v . Co m m i s s i o n er, 1 2 9 T.C. at1 1 3-1 1 4 ; s ec. 3 0 1 .6 3 2 0 -1 (f)(2 ), Q&A-F3 , Pro ced . & Ad m i n . Reg s .; s ee al so M i l l env . Co m m i s s i o n er, T.C. M em o . 2 0 1 9 -6 0 , at* 1 1-* 12 (h o l di ng th atthe t ax p ay ers d i dn o tp ro p erl y ch al len g e t h ei r
u n d erl y i n g t ax l iab i l i t i es wh en th ey fai l edt o s ub m it am en d edt ax retu rn s du ri n g a CDP h eari n g s t at in g wh atth ey b el i ev edth ei r t ax l i ab i l i t i es t o b e), aff’ d , No . 1 9
- 1 6 4 6 , 2 0 1 9 W L 6 7 5 3 0 5 1 (6 th Ci r. No v . 1 9, 2 0 19 ); M cRae v . Co m m i s si on er, T.C. M em o. 2 0 1 5 -1 3 2 , at * 8 -* 9 (h o l d i n g th atth e t ax pay er fai ledex p l ici t l y t o co n t es t h i s u n d erl y i n g t ax l i ab i l it i es du ri n g th e ad m i n i s trat i v e h eari n g an dfai l edt o p ro v id e an y

ev i d en ce co n cern i n g h i s l i ab i l i t i es ); Zo o kv . Co m m is si o n er, T.C. M em o. 2 0 1 3 -1 2 8 , at * 6 -* 7 (h o l d i n g th atth e t ax pay er fai ledt o p ro perl y rai s e h er- 1 3 -

[* 1 3 ] u n d erl y i n g t ax l i ab i l i ti es wh en s he fai l edt o p ro v i d e an y d o cu m en t at i o n o f th e u n derl y i n g t ax l i ab i l i t i es ). Pet i t i o ner fai l edt o p ro v id e SO Kru eg er wi th an y d o cu m en t at i o n t o co n t es t h i s u n d erl y i n g t ax l i ab i l it i es . Wh i le h e p o i n t ed t o h i s o ri g i n al am en dedretu rn s , wh i ch h e as s u m edth at SO Kru eg er h ad , h e al s o ackn o wl ed gedth ath e t o ldSO Kru eg er atth e h eari n g th at h e n eed edad d i ti o n al t i m e t o fi l e ad d i t i o n al am en d ed retu rn s fo r au d i t reco n s i d erat i o n . 9 Onh i s Fo rm 1 2 1 5 3 an dat t ach m en t , wh ich
res p o n d en t recei v edo n Sep t em b er 1 4 , 2 0 1 6 , h e req u es ted“ ad d i ti o n al t i m e t o
co m p l et e & g at h er ev i d en ce.” He fai l ed t o p ro v i d e t o SO Kru eg er an y ev i d en ce
s up p ort i n g h i s p o si t i on i n res p on s e t o h er J an uary3 , 2 01 7 , l et t er. Her d ead l i n e g av e h i m u n t i l J anu ary

3 0 , 2 0 1 7 , wh i ch was m o re t h an fo u r m o n th s aft er h e h ad
s ub m i t t edh i s Fo rm

1 2 15 3 , an dth ree m o nt h s aft er h e h ads ubm i t t edh is i ni t i al
am en d edretu rn s t o t h e IRS Fres n o o ffi ce. Pet i ti o ner p ro m i s edad d i t i o nal ev i d en ce b u tn ev er p ro v i d ed i t
.

9 W e n o t e t hata “ g ran t o f au d i treco n s i d erat i o n i s d i s cret i o n ary an dan y au d iti s co ndu ct edo u t s i d e t h e CDP p ro ces s ”. Du rd a v . Co m m is s i o n er, T.C. M em o. 2 0 1 7 -8 9 , at* 8 n . 3 . AnIRS Ap p eal s o ffi cer d o es n o t“ ab u s e h is d i s cret i on b y d ecl i n i n g t o d el ay

h i s d et erm i n at i o n s t o awai t th e u n cert ai n o u t co m e o f * * * [a t ax p ay er’ s ] el ev en th-h ou r req u es tfo r au d itreco n s i d erat i o n ”. J o n es v . Co m m i s s i o n er, T.C. M em o . 2 0 0 7 -1 4 2 , 2 0 07 W L 1 6 1 0 1 32 , at* 2
.- 1 4 -

[* 1 4 ] M o reo v er, am en d edretu rn s b y them s el v es are n o t ev i d en ce s upp o rt i n g a cl ai m ; th ey

are “ m erel y

a s t at em en to f the * * * cl ai m ”. Ro b ert s v . Co m m i s s i o n er, 6 2 T.C. 8 3 4 , 8 3 7 (1 9 7 4 ). Ev en were we t o d et erm i n e th atSO Kru eg er erred i n n o t
co n si d eri n g th e i n i ti al am en d edretu rn s as ev id en ce, we wo u l dn o tfi n dth ats h e ab u sedh er d i s cret i on i n s us t ai ni n g th e NFTL fi l in g . Pet i t i on er t o l dh er atth e h eari n g th at h e i n t en dedt o fi l e ad d i t i o n al am en d edretu rn s fo r au d it
reco n s i d erat i on . Thu s , th e i n i t i al am en d edretu rn s were n o l o n g er cu rren t
s t at em en t s o f p et i ti on er’ s cl ai m s . He fai l ed t o ex p l ai n wh y SO Kru eg er s h o u l d h av e rev iewedth e am en d edretu rn s rat h er t h an wai tfo r t he cu rren t i n fo rm at i o n h e p ro m i s edt o p ro v id e h er b u tn ev er d i d . See Berg l u n d v . Co m m i ss i o n er, T.C. M em o. 2 0 1 5 -2 3 9 , at * 1 6 (ci t i n g Nes t o r v . Co m m is s i o n er, 1 1 8 T.C. 1 6 2, 1 6 7 (2 0 0 2)). Un d er t h es e ci rcu m s t an ces we co n cl u de t hatp et i t i o n er d idn o t p ro p erl y rai s e h i s u n d erl y i ng t ax l i ab i li t i es b efo re SO Kru eg er. Th erefo re, h e i s n o ten t i t l ed t o co n tes tth em

n o w. See LG Ken dri ck , LLC v . Co m m is s i o n er, 1 46 T.C. 1 7 , 3 9 (2 0 1 6), aff’ d , 6 8 4 F. Ap p ’ x 7 4 4 (1 0t h Ci r. 2 0 1 7 ); Po ug h v . Co m m is s io n er, 1 3 5 T.C. 3 4 4 , 3 4 9 (2 0 1 0 ). Becau s e p et i t i o n er’ s u nd erl y in g t ax l i ab i l i t i es are n o tp ro p erl y b efo re u s , we
rev i ew SO Kru eg er’ s d et erm i n at i o n fo r ab u s e o f d i s cret i on o n l y . See Go za v . Co m m i s s i o n er, 1 1 4 T.C. at1 8 2.- 1 5 -

[* 1 5 ] III. Ab u se o f Di s cret io n Sect io n 6 3 2 1 i m

p os es a l i en i n fav 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 t ax p ay er l i ab l e fo r t ax aft er a d em an d fo r t he p aym en to f t h e t ax h as b een m ad e an dth e t ax pay er fai l s t o p ay . Th e l i enari s es wh en th e
as s es s m en ti s m ad e. See s ec. 6 3 2 2. Th e IRS fi l es an NFTL t o p res erv e p ri o ri t y
an d p u to th er cred i t o rs o n n o t i ce. See s ec. 6 32 3
. Sect i o n 6 3 20 (a) req u i res th e Secret ary t o s en d wri t t enn ot i ce t o th e t ax p ay er o f t h e fi li n g o f t h e NFTL an do f th e t ax p ay er’ s ri g h tt o req u es t an ad m i n is trat i v e co l lect i o n du e p ro ces s h eari n g o n th e m at t er. Th e s et t l em en to ffi cer co n du ct i n g a co l l ect i o n du e p ro ces s h eari n g m u s t
v eri fy th atth e req u irem en t s o f ap p l i cab l e l aw an dad m i n i s trat iv e p ro cedu re were
m et . Secs . 6 3 20 (c), 6 3 3 0 (c)(1 ). 1 0 Sect i on 6 3 2 0(c) d o es n o t m an d at e t hatth e

1 0 Sec. 6 7 51 (b )(1 ) ap pl i es t o th e s ec. 6 6 6 2 (a) p en al t i es i n i s s u e an dreq u i res th e i n i ti al d et erm in at i o n o f t h o s e p en al t i es t o b e “ p ers o n al l y ap p ro v ed(i n wri t i n g ) b y th e i m m ed iat e s up erv i s o r o f t h e i n d i vi du al m ak i n g s uch d et erm i n at i o n .” See Graev v . Co m

m i s si o ner, 1 4 9 T.C. 4 8 5 , 4 9 2 -4 9 3 (2 0 1 7 ), s up p lem en t i ng an d o v erru l i ng i n p art1 4 7 T.C. 4 6 0 (2 0 1 6 ); s ee al s o Bel ai r W o o ds , LLC v
. Co m m i s s i o n er, 1 5 4 T.C. _

_ , _

_ (s l i p o p . at2 3 ) (J an . 6 , 2 0 2 0 ) (h o l d i n g th atth e i n i t i al d et erm i n at i o n o f t h e p en al ty as s es s m en t was em

b o d iedi n th e l et t er “ b y wh i ch th e IRS fo rm al l y

n ot i fi ed* * * [t h e t ax p ay er] thatth e Ex am i nat i o n Di v i s i o n h ad co m p l et edi t s wo rkan d* * * h adm ad e a d efi n i t e d eci s i o n t o as s ert p en al t i es ”); Cl ay

v . Co m m i s si o n er, 1 5 2 T.C. 2 2 3, 2 4 8 (2 0 1 9). In a co l lect i o n cas e, “ [w] h ere t h e s up erv is o ry ap p ro v al req u irem en t o f s ect i on 6 7 5 1 (b )(1 ) ap p l i es , the Ap p eal s o ffi cer s h o u l d o b t ai n v eri fi cat i on th ats u ch (co n ti n u ed ...)- 1 6 -

[* 1 6 ] s et t l em en to ffi cer “ rel y up o n a p art i cu l ar d o cu m en t(e.g
. , th e s u m m ary
reco rdi t sel f rat h er t h an tran s cri p t s o f acco u n t ) i n o rd er t o s at i sfy th is v eri fi cat i o n req u i rem en t .” See Crai g v . Co m m i s s i o n er, 1 1 9 T.C. 2 5 2 , 2 6 2 (2 0 0 2 ); s ee al s o Berg l u ndv . Co m

m i s si o n er, at * 1 3 . Sh e can rel y o n co m p u t eri zedtran scri p t s t o
s at i s fy th e v eri fi cat i o n req u i rem en t , b u t“ o nl y i f th e t ax pay er h as n o ts h o wns o m e i rreg ul ari ty

i n th e as s es s m en t p ro cedu res ” t hatwo u ldrai s e qu es t i o n s ab o u tth e
v al i d i ty o f t h e as s es s m en t s o r t h e i n fo rm at i o n co n t ai n edi n th e t ran s cri p t s . See Berg l u ndv . Co m

m i s si o n er, at * 1 4 ; s ee al s o Kubo n v . Co m m is s i o n er, T.C. M em o . 2 0 1 1 -4 1 , 2 0 1 1 W L 5 9 7 99 0 , at* 4 , aff’ d , 4 7 9 F. Ap p ’ x 7 5 9 (9 th Ci r. 2 0 1 2 ). Th e s et t l em en to ffi cer al s o m u s tco n s id er t h e i s s u es rai s edb y th e t ax p ay er
an d wh et h er t h e p ro p o s edco ll ect i o n act i on b al an ces the Go v ern m en t ’ s n eedfo r

1 0 (...co n t i nu ed ) ap p ro v al was o b t ai n ed ”. ATL & So n s Ho l d i n g s , In c. v . Co m m i s si on er, 1 5 2 T.C. 1 3 8 , 1 4 4 (2 0 1 9). Iti s u n cl ear wh et h er SO Kru eg er v eri fi edthatres p o n den t co m p l iedwi th t h i s req ui rem en t . Reg ard l es s , p et i t i o n er d i dn o tal l eg e i n h i s p et i t i o n o r i n h i s p o s tt ri al b ri efs th atSO Kru eg er fai ledt o v eri fy th atres p o n d en t co m p l iedwi th s ec. 6 7 5 1 (b )(1 ). Th ati s s ue t h erefo re i s d eem ed co nced ed
. See Ru l e 3 3 1 (b )(4 ) (“ An y

i s su e n o trai sedi n th e as s ig n m en ts o f erro r s h al l b e d eem ed t o b e co nced ed .”); Ll o y d v . Co m m i s s i o n er, T.C. M em o . 2 0 1 7 -6 0 , at* 7 n .3
. Fu rt herm o re, ev en if p et i t i o n er h adal l eg edth atSO Kru eg er fai l edt o v eri fy co m p l ian ce wi th s ec. 6 7 51 (b )(1 ), h er erro r wo u l d b e h arm l es s as th e reco rd i n cl u d es th e i n i t ial d et erm i nat i o n an dth e Ci vi l Pen al ty Ap p ro v al Fo rm

s h o wi n g th atres p o n d en t co m

pl iedwi th th e req u i rem en t . See Cl ay v . Co m m i ss i o ner, 1 5 2 T.C. at2 4 8 -2 5 0 ; Nes t o r v . Co m m i s s i o n er, 1 1 8 T.C. 1 62 , 1 7 3 (2 0 0 2 ) (h o l d in g th at “ th e rev iewi n g co urt s hal l d i s reg ardp ro cedu ral erro rs u n l es s th e co m p l ai n in g p art y was p reju d i cedth ereb y ”).- 1 7 -

[* 1 7 ] th e effi ci en tco l l ect i o n o f t ax es wi th the t ax p ay er’ s l eg i t i m at e co ncern th at
an y co l l ect i o n act io n b e n o m o re i n tru s i v e t h an n eces s ary . Sec. 6 3 3 0 (c)(3 ); Seg o
v . Co m m i s s i o n er, 1 1 4 T.C. at6 0 9 . Th e t ax p ay er b ears the b u rd en o f p ro v i n g th es e i t em s . See Seg o v . Co m

m i s s i o n er, 1 14 T.C. at6 1 0 ; W o o dral v . Co m m i s si o n er, 1 1 2 T.C. 1 9 , 2 3 (1 9 9 9 ). W e tu rn fi rs tt o p et i t io ner’ s req u es tfo r l i en wi thd rawal . Becau s e l i en wi th drawal i s a co l l ect i o n al t ern at i v e, s ee s ec. 3 0 1 .6 3 2 0 -1 (e)(3 ), Q&A-E6 , Pro ced
. & Ad m i n . Reg s ., a t ax p ay er i s req u i redt o p ro v i d e t h e s et t l em en to ffi cer wi th rel ev an t i n fo rm at i o n fo r h er t o co ns i d er i n d et erm in i n g wh et h er th e l i en s h ou l db e wi th drawn , s ee Ro u d ak o v v . Co m m i s s i o n er, T.C. M em o . 2 0 1 7 -1 2 1 , at * 1 1 -* 1 2 . A t ax p ay er’ s fai lu re t o p res en tth e s et t lem en to ffi cer wi th “ an y ev id en ce reg ard i n g
* * * [h i s] en t it l em en tt o th e wi th drawal o f t h e NFTL” m ean s h e d idn o t p ro p erl y rai s e th ati ss u e at th e ad m i n i st rat i v e h eari n g . LG Ken dri ck , LLC v
. Co m m i s s i o n er, 1 4 6 T.C. at3 9
. Pet i t i o n er fai l ed t o p res en tan y ev i d en ce t o SO Kru eg er t o s up p o rth is req u es tfo r l i en wi th drawal . Itth erefo re was n otan ab u s e
o f d i s cret i o n fo r SO Kru eg er t o rejecth i s req ues t
. W e n ex ttu rnt o SO Kru eg er’ s d eci s io n t o s u s t ai n th e NFTL fi l i ng . Our
rev i ew o f th e reco rdes t ab l is h es th ats h e p ro p erl y d i s ch arg edal l o f h er
res p o n s i b i l i t ies un d er s ect i on 6 3 2 0 (c). Pet i t i on er arg u ed attri al an di n h is p o s t t ri al- 1 8 -

[* 1 8 ] b ri efs th at SO Kru eg er d i dn o tactreas o n ab l y an d fai l edt o co n s i d er al l th e i s su es h e rai s ed b ecau s e s he d idn o t rev i ew th e i n i ti al am en d edretu rn s , b u th e d i d
n o tp ro v i d e h er wi th a co p y o f t h e ret u rn s o r an y

o th er ev i d en ce rel at edt o h i s
u n d erl y i n g t ax l iab i l i t i es o r wi th drawal o f t h e NFTL. A s et t l em en t o ffi cer i s n o t req u i redt o g iv e a t ax p ay er ad d i t i o n al t i m e t o s ub m i td ocu m en t s o r ad di t i o n al
am en d edretu rn s wh en ad equ at e t i m e h adb een p ro v id edb efo re th e h eari n g . See Gl o ss o p v . Co m

m i s s i o n er, T.C. M em o . 2 0 1 3 -2 08 , at* 1 7 . Acco rd i n g ly , SO Kru eg er act edreas o n ab l y an dd i dn o tab u se h er d i scret i o n wh en s h e s u st ai n edth e NFTL fi l i n g . IV. Co n cl u s i o n W e h o ldth atp et i t i o n er i s n o ten t i tl edt o ch al l en g e h i s u n d erl y in g t ax l i ab i l i t i es an dth atSO Kru eg er d i dn o tab u s e h er d i s cret i o n i n s u s tai n i n g th e NFTL fi li n g . An y

co nt en t i on s we h av e n o t ad dres s ed we d eem i rrel ev an t , m oo t , o r
m eri t l es s . To refl ectthe fo reg o i n g , Anap p ro p ri at e o rd er an dd eci s i o n wi l l b e en t ered
.