T.C. Memo. 2004-87

UNITED STATES TAX COURT

GERALD L. AND JESSICA P. FREY, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 2703-03L. Filed March 26, 2004.

Gerald L. and Jessica P. Frey, pro sese.

Veena Luthra, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

CHIECHI, Judge: Petitioners filed the petition in this case

in response to a notice of determination concerning collection

action(s) under section 6320 and/or 6330 (notice of

determination).

We must decide whether respondent abused respondent’s

discretion in determining to proceed with the collection action
- 2 -

as determined in the notice of determination with respect to

petitioners’ taxable years 1996, 1997, and 1999. We hold that

respondent did not abuse respondent’s discretion.

FINDINGS OF FACT

Many of the facts have been stipulated and are so found.

Petitioners resided in Newport News, Virginia, at the time

they filed the petition in this case. 

During 1996, petitioner Gerald L. Frey (Mr. Frey) received

wages of $37,849.88 from Blackhawk Industries, Inc. (Blackhawk

Industries), and petitioner Jessica P. Frey (Ms. Frey) received

wages totaling $20,799.48 from Smithfield Apartments Corp.

(Smithfield Apartments) and Bailey Enterprises, Inc. (Bailey

Enterprises). During 1997, Mr. Frey received wages of $45,961

from Blackhawk Industries, and Ms. Frey received wages totaling

$21,998 from Smithfield Apartments and Bailey Enterprises. 

During 1999, Mr. Frey received wages totaling $35,630.92 from the

Virginia Department of Transportation (Virginia Transportation

Department), Employment Services, Inc. (ESI), and ECPI College of

Technology (ECPI College) and unemployment compensation of

$1,596. 

Although Mr. Frey received wages during the years at issue

as well as unemployment compensation during 1999 and Ms. Frey

received wages during 1996 and 1997, petitioners did not report

such wages and unemployment compensation in any Federal income
- 3 -

1All section references are to the Internal Revenue Code in

effect at all relevant times. 

tax return (return) that they submitted to the Internal Revenue

Service (IRS).

On or about August 17, 1998, respondent prepared a

substitute for return for petitioners’ taxable year 1996. 

On October 30, 1998, respondent issued a notice of

deficiency to petitioners with respect to their taxable year

1996. In that notice, respondent determined that for 1996

petitioners had a deficiency of $6,332, an addition to Federal

income tax (tax) under section 6651(a)(1)1 of $729.22, an

addition to tax under section 6651(a)(1) and (2) of $421.33, and

an addition to tax under section 6654 of $156. Petitioners did

not file a petition in the Court with respect to the notice of

deficiency relating to their taxable year 1996. 

On June 7, 1999, respondent assessed petitioners’ tax of

$6,332, as well as additions to tax under sections 6651(a)(1) and

(2) and 6654 totaling $1,306.55 and interest as provided by law

of $751.08, for their taxable year 1996. (We shall refer to

those assessed amounts, as well as any interest as provided by

law accrued after June 7, 1999, as petitioners’ unpaid liability

for 1996.) 

On June 7, 1999, respondent issued to petitioners a notice

of balance due with respect to petitioners’ unpaid liability for
- 4 -

1996. 

On November 22, 1999, respondent received from petitioners

Form 1040, U.S. Individual Income Tax Return, for their taxable

year 1996 (1996 Form 1040). The 1996 Form 1040 that petitioners

submitted to the IRS did not contain petitioners’ original

signatures but contained copies of petitioners’ signatures dated

November 1, 1999. In their 1996 Form 1040, petitioners reported

total income of $0, total tax of $0, and claimed a refund of

$3,839.28 of tax withheld. Petitioners attached to their 1996

Form 1040 respective Forms W-2, Wage and Tax Statements (Forms W2), issued by Blackhawk Industries, Smithfield Apartments, and

Bailey Enterprises showing wages, tips, and other compensation

totaling $58,649.36. Petitioners also attached to their 1996

Form 1040 a document (petitioners’ attachment to their 1996 Form

1040), which stated in pertinent part:

I, Gerald L and Jessica P Frey, am submitting this as

part of my 1996 income tax return, even though I know

that no section of the Internal Revenue Code: 

1) Establishes an income tax “liability” as, for

example, Code Sections 4401, 5005, and 5703 due

with respect to wagering, alcohol, and tobacco

taxes;

2) Provides that income taxes “have to be paid on the

basis of a return” - as, for example, Code

Sections 4374, 4401(c), 5061(a) and 5703(b) do

with respect to other taxes; I am filing anyway

because I know the government has prosecuted

others for failing to file income tax returns by

(erroneously) invoking Code Sections 7201 and

7203. Therefore, this return is not being filed

voluntarily but is being filed out of fear that if
- 5 -

I did not file this return I could also be

(illegally) prosecuted for failure to file an

income return for the year 1996.

3) In addition to the above, I am filing even though

the “Privacy Act Notice” as contained in a 1040

booklet clearly informs me that I am not required

to file. It does so in at least two places.

a) In one place, it states that I need only file

a return for “any tax” I may be “liable” for. 

Since no Code Section makes me “liable” for

income taxes, this provision notifies me that

I do not have to file an income tax return.

b) In another place, it directs me to Code

Section 6001. This section provides, in

relevant part, that “Whenever in the judgment

of the Secretary it is necessary, he may

require any person by notice served on such

person; or by regulations, to make such

returns, render such statements, or keep such

records, as the Secretary deems sufficient to

show whether or not such person is liable for

the tax under this title.” Since the

Secretary of the Treasury did not “serve” me

with any such “notice” and since no

legislative regulation exists requiring

anyone to file an income tax return, I am

again informed by the “Privacy Act Notice”

that I am not required to file an income tax

return.

4) With respect to the information I included in my

return, I wish to point out that the courts have

ruled that: “A (1040) form with ‘zeros’ inserted

in the space provided...qualified as a return.” 

See U.S. v. Long, 618 F 2d 74 (9th Cir. 1980),

U.S. v. Kimball, 896 F.2d 1218 (9th Cir. 1990)

U.S. v. Moore, 627 F.2d 830 (7th Cir. 1980), and a

Las Vegas bankruptcy court held that “Zeroes

entered on a Form 1040 constitutes a return.” 

Cross v. U.S., 91-2 USTC p. 50,318, Banker. L. Rep

p. 7404.

5) Please note that my 1996 return also constitutes a

claim for refund pursuant to Code Section 6402.
- 6 -

6) It should also be noted that I had “zero” income

according to the Supreme Court’s definition of

income (See Note #1) * * * since I had no earnings

in 1996, that would have been taxable as “income”

under the Corporation Excise Tax Act of 1909, I

can only swear to having “zero” income in 1996. 

Obviously, since I know the legal definition of

“income”, if I were to swear to having received

any other amount of “income,” I would be

committing perjury under both 18 U.S.C. 1621 and

U.S.C. 7206. Therefore, not wishing to commit

perjury under either statute, I can only swear to

have “zero” income for 1996.

7) I am also putting the IRS on notice that my 1996

tax return and claim for refund can not be

considered “frivolous” on any basis - pursuant to

Code Section 6702. For one thing, there is no

statute that requires me to make a “selfassessment.” Therefore, how can I be charged with

a penalty for not doing something - allegedly

incorrectly - that no statute requires me do at

all? * * *

* * * * * * *

11) Should the Service disagree with the figures and

amounts shown on my tax return and claim for

refund, then I demand an office or field audit to

discuss these differences * * *. In addition, if

any “determination” is made that changes in my

return are warranted, I demand to be notified as

to where and when I may “inspect” the “text of any

written determination and any background file

documents relating to such a determination” as

provided by 26 USC 6110.

* * * * * * *

*Note #1: The word “income is not defined in the

Internal Revenue Code. U.S. v. Ballard, 535

F.2d 400, 404. But, as stated above, it can

only be a derivative of corporate activity. 

The Supreme Court has held this numerous

times. * * * [Reproduced literally.]

Respondent did not process and file petitioners’ 1996 Form
- 7 -

1040 as a tax return. That was because respondent determined

that that document was frivolous. 

On or about November 13, 2000, respondent prepared a

substitute for return for petitioners’ taxable year 1997. 

On a date not disclosed by the record, respondent issued a

notice of deficiency to petitioners with respect to their taxable

year 1997. Petitioners did not file a petition in the Court with

respect to that notice. 

On June 5, 2001, respondent received from petitioners Form

1040A, U.S. Individual Income Tax Return, for their taxable year

1997 (1997 Form 1040A). The 1997 Form 1040A that petitioners

submitted to the IRS contained petitioners’ original signatures

dated May 30, 2001, and copies of petitioners’ signatures dated

November 1, 1999. In their 1997 Form 1040A, petitioners reported

total income of $0, total tax of $0, and claimed a refund of

$5,122.83 of tax withheld. Petitioners did not attach to their

1997 Form 1040A any Forms W-2. Petitioners attached to their

1997 Form 1040A a document (petitioners’ attachment to their 1997

Form 1040A), which was identical to petitioners’ attachment to

their 1996 Form 1040 except that petitioners’ attachment to their

1997 Form 1040A made references to their taxable year 1997 while

petitioners’ attachment to their 1996 Form 1040 made references

to their taxable year 1996.

Respondent did not process and file petitioners’ 1997 Form
- 8 -

1040A as a tax return. That was because respondent determined

that that document was frivolous. 

On August 13, 2001, respondent assessed petitioners’ tax of

$8,035, as well as additions to tax under sections 6651(a)(1) and

(2) and 6654 totaling $1,509.43 and interest as provided by law

of $1,117.83, for their taxable year 1997. (We shall refer to

those assessed amounts, as well as any interest as provided by

law accrued after August 13, 2001, as petitioners’ unpaid

liability for 1997.)

On August 13, 2001, respondent issued to petitioners a

notice of balance due with respect to petitioners’ unpaid

liability for 1997. 

On or about April 15, 2000, respondent received from

petitioners Form 1040 for their taxable year 1999 (1999 Form

1040). In their 1999 Form 1040, petitioners reported total

income of $0 and total tax of $0. Petitioners attached to their

1999 Form 1040 (1) respective Forms W-2 issued by the Virginia

Transportation Department, ESI, and ECPI College showing wages,

tips, and other compensation paid to Mr. Frey totaling $35,630.92

and (2) Form 1099-G, Statement for Recipients of Certain

Government Payments, showing unemployment compensation paid to

him of $1,596. Respondent processed and filed petitioners’ 1999

Form 1040 as a tax return. 

On June 15, 2001, respondent issued a notice of deficiency
- 9 -

to petitioners with respect to their taxable year 1999. In that

notice, respondent determined that for 1999 petitioners had a

deficiency of $3,356. Petitioners did not file a petition in the

Court with respect to the notice of deficiency relating to their

taxable year 1999. 

Instead, on September 1, 2001, in response to that notice,

petitioners sent a letter to Gwen A. Krauss, Director, IRS

Service Center. That letter stated in pertinent part:

Your Deficiency Notice dated 6/15/01

According to your “Deficiency Notice” of above date

(Attachment 1), there is an alleged deficiency with

respect to my 1999 income tax of $3,356.00, and if I

wanted to “contest this deficiency before making

payment,” I must “file a petition with the United

States Tax Court.” Before I file, pay, or do anything

with respect to your “Notice,” I must first establish

whether or not it was sent pursuant to law, whether or

not it has the “force and effect of law,” and whether

you had any authority to send me the notice in the

first place. 

* * * * * * *

Let me further point out that IR Code Sections 6001 and

6011 (as identified in the 1040 Privacy Act) notify me

that I need only “comply with regulations.” Nothing in

the Privacy Act Notice or in the above statutes informs

me that I have to “comply” with, or pay attention to,

letters and/or alleged “determinations” sent to me by

various and sundry employees of the IRS. 

Please note that Section 6212 states that “If the

Secretary determines that there is a deficiency in

respect of any tax...he is authorized to send notice of

such deficiency, etc., etc., etc.” However, the

“Notice” I received was not sent by the Secretary, but

by Gwen A Krauss, who is identified as being the

Director of the IRS Service Center in Chamblee,

Georgia, and I have no way of knowing whether she has
- 10 -

been delegated by the Secretary to send out such

notices on the Secretary’s behalf. So before I do

anything at all with respect to your “Notice,” I would

have to see a Delegation Order from the Secretary of

the Treasury delegating to Gwen A Krauss the authority

to send out Deficiency Notices. 

In addition, I would also like you to send me (or

identify for me) the legislative regulations that you

claim implement Code Sections 6212 and 6213. I have

also attached an excerpt from the IRS Procedures Manual

(MT 1218-196, and page P-6-40), which points out that

the IRS is required to “make available to all taxpayers

comprehensive, accurate, and timely information on the

requirements of tax law and regulations.” So, pursuant

to this provision from your Procedures Manual, I am

asking that you identify (“make available”) for me the

legislative regulations that you claim implement both

Code Sections 6212 and 6213, since I have not been able

to locate them.

Without your furnishing me with these documents and

information, I will be unable to “ascertain” (pursuant

to the Federal Crop decision) whether the individual

who sent me the Deficiency Notice was authorized to do

so, and whether I am legally required to take any

notice of it. I am obviously unwilling to “take the

risk” referred to by the Supreme Court in the above

cited case. [Reproduced literally.] 

On February 4, 2002, respondent assessed petitioners’ tax of

$3,356, as well as interest as provided by law of $520.25, for

their taxable year 1999. (We shall refer to those assessed

amounts, as well as interest as provided by law accrued after

February 4, 2002, as petitioners’ unpaid liability for 1999.) 

On February 4, 2002, respondent issued to petitioners a

notice of balance due with respect to petitioners’ unpaid

liability for 1999. 

On June 21, 2002, respondent issued to petitioners a final
- 11 -

notice of intent to levy and notice of your right to a hearing

(notice of intent to levy) with respect to their taxable year

1996 and a separate notice of intent to levy with respect to

their taxable years 1997 and 1999. 

On or about July 20, 2002, in response to the notice of

intent to levy with respect to their taxable year 1996,

petitioners filed Form 12153, Request for a Collection Due

Process Hearing (Form 12153), and requested a hearing with

respondent’s Appeals Office (Appeals Office). On the same date,

in response to the notice of intent to levy with respect to their

taxable years 1997 and 1999, petitioners filed Form 12153 and

requested a hearing with the Appeals Office. Petitioners

attached, inter alia, a document to their Form 12153 with respect

to their taxable year 1996 (petitioners’ attachment to their 1996

Form 12153) and a document to their Form 12153 with respect to

their taxable years 1997 and 1999 (petitioners’ attachment to

their 1997 and 1999 Form 12153). Petitioners’ attachment to

their 1996 Form 12153 and petitioners’ attachment to their 1997

and 1999 Form 12153 were identical and set forth, inter alia, the

same types of statements, contentions, arguments, requests, and

questions that petitioners set forth in petitioners’ attachment

to their 1996 Form 1040 and petitioners’ attachment to their 1997

Form 1040A. In addition, petitioners’ attachment to their 1996

Form 12153 and petitioners’ attachment to their 1997 and 1999
- 12 -

Form 12153 stated in pertinent part:

1) * * * at my CDP hearing I demand that

the appeals officer have at the hearing

the delegation order from the Secretary

of the Treasury delegating to the

Operations Manager, Automated Collection

System the authority to notify me to my

right for a CDP hearing * * *.

* * * * * * *

b) * * * I am requesting that you have at

the CDP hearing * * * a “delegation”

order, emitting directly from the

Secretary, authorizing the IRS employee

who signed for him (them), the authority

to impose and file such notices of liens

against us.

c) In lieu of having such a “delegation

order,” I am requesting that you have

the job description of IRS employee(s)

and the individual who signed the notice

at issue for him to see if any such

authority is included in their job

description.

* * * * * * *

2) The document also says that “We have

made a demand for payment of this

liability.” (Emphasis added)

a) Please note (as explained in paragraph 4

herein), we claim we never received such

a “demand” for payment.

1) If you claim otherwise, than I

demand that you have at the

CDP hearing the Form Number of

the document that you claim

was sent to us as constituting

the “demand” referred to in

paragraph 2) above.

2) Since the Code Section

establishing the “liability”
- 13 -

referred to above is also not

identified, I am requesting

that you specifically identify

the Code Section establishing

* * *

3) VERIFICATION FROM THE SECRETARY

I also expect you to have at the CDP hearing

“verification from the Secretary that the

requirements of any applicable law or

administrative procedure have been met.” That is

the specific statement from the Secretary (or his

delegate) that THE LAW requires you to have. 

PLEASE BE ADVISED THAT SECTION 6330(c)(3)(A)

REQUIRES THAT THIS VERIFICATION BE “PRESENTED” TO

US. Please don’t tell us at the CDP hearing that

in lieu of having that specific document from the

Secretary as required by law to be “presented” to

us, that you have some unsigned, IRS transcript. 

* * * I will not accept any claim of yours that

“the courts have held that an unsigned, computer

printout satisfies the legal requirements of Code

Sections 6320 & 6330,” in lieu of “presenting” us

with “verification (from the Secretary)...that the

requirements of any applicable law or

administrative procedure have been met,” stated in

the law. * * *

4) Also, pursuant to Code Section 6201(1),

before I can owe any income taxes there has

to be an assessment based on a “return or

list.” I filed a return showing no taxes

due. Therefore, I don’t see how the IRS

could have made a lawful assessment from a

return showing no income taxes due and owing,

unless the IRS prepared another 1040 showing

a different amount due. Therefore, at my CDP

hearing, I am demanding that the following

items be produced and made available to us:

a) Proof of assessment.

* * * Please have a form 4340 at my CDP

hearing certifying that such an

assessment has been made.

* * * * * * *

6) We claim there is no underlying,
- 14 -

statutory liability in connection with

the income taxes at issue.

a) In addition, we are challenging the

“existence” of the underlying tax

liability as the law (Sec.

6330(c)(2)(B)) and regulation (301.6330-

1T-(e)) specifically permit us to do. 

If the appeals officer believes

otherwise, he need only identify for us

the Code Section that establishes such a

liability * * *. The * * * IR Code * *

* that we will bring to the CDP hearing

lists some 40 taxes under the caption

“Liability for tax”; however, I cannot

find an entry for “income taxes.” * * *

* * * * * * *

b) The issue of the “existence” of the

“underlying tax liability” is certainly

relevant as to whether or not we owe the

income taxes at issue. Since the legal

“existence” of an income tax liability

is such an easy thing to establish * * *

why wouldn’t the appeals officer simply

identify such a Code section if it

exists? The only possible reason for

him not doing so, is if that no such

Code section does exist.

c) One (nonsensical) excuse the appeals

officer might offer * * * is to claim

that he is not going to get into this

issue because we allegedly got a notice

of deficiency and so we had an

“opportunity to dispute such a tax

liability” as mentioned in Section

6330(c)(2)(B). However, we never had

such an opportunity. Attached, as

Exhibit D, is a copy of the “deficiency

notice” [1999] we received. It was

prepared and sent out by Gwen Krauss who

is identified as Director of the

Customer Service Center, Chamblee

Georgia. However, Code Section 6212

provides that it is “the Secretary” who

“determines that there is a deficiency”
- 15 -

and that “he is authorized to send such

notice.” * * * Therefore, after

receiving those Deficiency Notices from

Gwen Krauss * * * we wrote her * * *

asking her to supply us with her

delegation of authority from the

Secretary to send out such Notices

(pursuant to Code Sections 7701(11)(B) &

7701(12)(A)(i)), and she never answered

our letter. We have since received

proof that Gwen Krauss has no such

delegation of authority. Therefore, the

Deficiency Notices we received from her

were invalid - and we are barred from

petitioning Tax Court from invalid

Deficiency Notices. Beside, we are not

challenging the “amount” of the alleged

“deficiency”: we are challenging its

“existence,” as a matter of law. 

However, since Tax Court is not a court

of law (See Freytag v. C.I.R., 11 S. Ct.

2631 * * * the Tax Court would have no

jurisdiction to consider the legal

question of whether or not the Internal

Revenue Code establishes an income tax

“liability” as a matter of law.

* * * * * * *

7) We claim there is no statute requiring

us “to pay” the income taxes at issue.

Another relevant issue is “Whether or not there is

a statute requiring us ‘to pay’ the income taxes at

issue?” Code Section 6321 provides that only when one

fails “to pay any tax” can there be “a lien in favor of

the United States.” Therefore, before there can be a

“lien in favor of the United States” there must be a

statutory requirement “to pay” the income taxes at

issue. The Index of the Code we will bring to our CDP

hearing contains a Section entitled “Payment of tax.” 

(Attached as Exhibit H) It contains over 60 entries. 

* * * however, there is no entry we can find for

“income taxes.” It is therefore our belief that there

is no law requiring us “to pay” income taxes, and this

certainly is a “relevant issue” that is appropriately

raised at a CDP hearing - since, if the appeals officer

can not identify any statute that requires us “to pay”
- 16 -

income taxes, how can he approve an IRS lien on our

property in connection with a tax the payment for which

he can not find shown in any law?

* * * * * * *

8) We maintain that there is no law that

authorizes the IRS to claim that we owe more

in income taxes * * * than the “zeros” we

reported on our income tax returns for those

years [1996, 1997, and 1999].

* * * Section 6201(a)(2)(A) further provides that

with respect to taxes “payable by stamp,” the Secretary

is authorized “to estimate the amount of tax which has

been omitted to be paid” by stamp. However, we cannot

find any provision in Code Section 6201 or any other

Code Section that authorizes the Secretary (let alone

the IRS) to similarly “estimate the amount of tax”

which we allegedly omitted from our 1996[, 1997, and

1999] tax returns. Therefore it is our contention that

no law authorizes the Secretary (let alone any IRS

agent) to determine that we owe more in income taxes

than the “zeros” we reported on our 1996[, 1997, and

1999] income tax returns. * * *

* * * * * * *

This is also to remind you that I will be tape

recording the CDP hearing and I will have a court

reporter present. I will also have a witness present. 

[Reproduced literally; fn. refs. omitted.] 

On October 21, 2002, the settlement officer sent a letter to

petitioners with respect to their taxable years 1996, 1997, and

1999. That letter stated in pertinent part:

Your Collection Due process appeal request has been

assigned to me for consideration. 

I will contact you as soon as I am able to review your

file and determine if we can resolve your case by

correspondence or phone in lieu of a personal

conference. If a personal conference is needed, I will

schedule a meeting with you or your representative.
- 17 -

* * * * * * *

In order for your appeal to be considered, you must be

in [sic] current in filing tax returns. If you have

not done so, please file the delinquent return(s)

immediately. * * *

On October 23, 2002, the settlement officer sent a letter to

petitioners with respect to their taxable years 1996, 1997, and

1999. That letter stated in pertinent part:

HEARING IN PERSON OR BY TELEPHONE

 • IN PERSON should you prefer to discuss the

case in person, I have scheduled a conference

for November 6, 2002 at 10:00 AM * * *

 • TELEPHONE HEARING If you prefer a telephone

hearing, please call me at * * *

 • CONFIRM WITHIN 7 DAYS please call me within

7 days of the date of this letter to confirm

whether you will appear. If the date is not

convenient, I will be happy to reschedule the

hearing.

* * * * * * *

Please see the tax transcripts and important

information enclosed concerning your hearing. 

On October 31, 2002, the settlement officer sent a letter to

petitioners with respect to their taxable years 1996, 1997, and

1999. That letter stated in pertinent part:

This letter is to confirm that your hearing date is

changed to November 20 at 10:00 AM. per your request.

* * * Our records also indicate that you have not

filed your 1998 and 2001 income tax returns. If you

have filed them, please provide your copy of the

returns.

On November 13, 2002, petitioners sent the settlement
- 18 -

officer a letter. That letter stated in pertinent part:

We have requested a Collection Due Process Hearing

as provided for in Code sections 6320 & 6330 * * *,

which is scheduled for November 20, 2002. We are

writing to make clear our position as relates to the

harassment, threats of seizures and liens by the IRS.

Based on these omissions we are contacting the

Taxpayer Advocate for resolution of these options.

Further, we are requesting an impartial officer,

for the up coming Due Process Hearing. This request in

based on the partiality of the current officer in

indicating that we must be current in filing tax

returns for our appeal to be considered. This is

blatantly false. * * *

We intend to record the hearing and have a witness

in attendance.

* * * * * * *

It is clear that before any appeals officer can

recommend the seizure of any property pursuant to Code

Section 6331 certain elements have to be present. For

one thing (pursuant to that statute) that person has to

be statutorily “liable to pay” the taxes at issue, and

only after he “neglects or refuses to pay the same

within 10 days after notice and demand,” can his

property be subject to seizure. Therefore, apart from

the appeals officer having to identify the statute that

makes me “liable to pay” the taxes at issue, he needs

to have a copy of the statutory “notice and demand”

which I “neglected” and “refused” to pay. In addition,

we can’t be “liable” to pay an income tax, if the tax

in question has never been assessed against me as

required by Code Sections 6201 and 6203. So we will

need to see a copy of the record of our assessments. 

And since (as provided by Code Section 6201(a)(1) and

IRS Transaction Code 150) all assessments have to be

based on filed returns, I will have to see a copy of

the return from which any claimed assessment is based.

In lieu of producing these specific documents

“verification from the Secretary (of the Treasury) that

the requirements of any applicable law or

administrative procedure have been met,” will be

acceptable. But the appeals officer better have either
- 19 -

the specific documents as identified above, or

“verification from the Secretary.” If the appeals

officer cannot produce neither document, than no Due

Process Hearing should be scheduled until he has those

documents in hand. If the appeals officer recommends

“enforcement of collection action including levy,”

without having produced these specific documents, then

it will be obvious that the appeals officer is simply

attempting to thwart and circumvent the Code Section

6330 in order to enable the IRS to continue its

practice of making the illegal seizures uncovered by

the Senate Finance Committee * * * which THE “DUE

PROCESS HEARING” was designed to eliminate.

Summarizing: We requested a “Due Process Hearing”

as outlined in Form 12153. We are “challenging the

appropriateness of (the) collection action” as

specified in 6330(c)(2)(A)(ii) since the IRS denied all

of our requests for the initial “examinations” and

“interviews” as provided for in Publications 1 & 5. In

addition, no lien for taxes pursuant to Code Sections

6321 and 6322 is possible because no valid, underlying

assessment was ever made. In addition, we never

received the statutory “notice and demand” for payment

of the taxes at issue as required by Code Sections

6203, 6321, and 6331. If the appeals officer is going

to claim that a particular document sent to me by the

IRS was a “Notice and Demand” for payment, then I am

requesting that he also provide me with a T.D. or

Treas. Reg. which identifies that specific document as

being the official, statutory “Notice and Demand” for

payment.

In addition, we are “challenging the existence of

the underlying tax liability” as we are authorized to

do in Code Section 6330(c)(2)(B). In addition, we did

not receive a (valid) notice of deficiency in

connection with any of the years at issue. We are also

requesting that the appeals officer have at the “Due

Process Hearing” a copy of the “Summary Record of

Assessment” (Form 22 C) together with the “pertinent

parts of the assessment which set forth the name of the

taxpayer, the date of the assessment, the character of

the liability assessed, the taxable period, and the

amount assessed” as provided for in Treas. Reg.

301.6203-1. 

Also you are reminded that the Section 6330(c)(1)
- 20 -

REQUIRES you to have “verification from the Secretary

(or someone with delegated authority from him) that the

requirements of any applicable law or administrative

procedures have been met.” So unless you have, at the

very least, that document, you should not even schedule

a Due Process Hearing. * * * [Reproduced literally;

fn. ref. omitted.]

On November 16, 2002, petitioners sent a letter to “Internal

Revenue Service Appeals Office Supervisor”. In that letter,

petitioners stated in pertinent part:

This is to indicate irregularities in our requested Due

Process Hearing. According to title 26 sections 6320

and 6330 only a single year is at issue for each

hearing/appeal. Yet we are confronted with a partial

(prejudiced) appeals officer for the following reasons:

1. Multiple years of [sic] combined into a

single session, we are only allotted one

hearing/appeal per year in question.

2. The hearing/appeals officer is making demands

outside of sections 6320 and 6330 regarding

“filings must be current”. Which is

blatantly incorrect and harassing.

On November 20, 2002, respondent’s settlement officer held

an Appeals Office hearing with petitioners regarding the

respective notices of intent to levy with respect to their

taxable year 1996 and their taxable years 1997 and 1999. James

Cain accompanied petitioners to the Appeals Office hearing. The

settlement officer did not allow petitioners to make an audio

recording of the Appeals Office hearing. 

On November 26, 2002, the settlement officer sent a letter

to petitioners (settlement officer’s November 26, 2002 letter)

with respect to their taxable years 1996, 1997, and 1999. That
- 21 -

letter stated in pertinent part:

This letter is pertaining to your letter dated 11-13-

2002 and the hearing on 11-20-2002. I will attempt

here to address the points raised in your appeals

request and also discuss those matters that can be

considered under this process.

Section 601.106(b) of the Regulations and Internal

Revenue Manual Section 8122.5 provide that the Appeals

Division of the Internal Revenue Service cannot

consider arguments based on moral, religious,

political, constitutional, conscientious or similar

grounds. Formal appeal procedures do not extend to

these types of arguments.

On the issue of impartiality, the statute defines

impartiality as “prior involvement with respect to the

same unpaid tax.” You have not alledged [sic], and I,

the Settlement Officer have had no such prior

involvement with your unpaid tax liability. With

regards to your request of the delegation authority of

an IRS official, please see the attachment listing

court cases showing the courts presume that the IRS

official(s) have properly discharged their official

duties if there is no clear evidence to the contrary. 

The burden of proof is upon you to prove that I am not

an impartial officer.

Your 1996 and 1997 taxes have not been discharged by

the Bankruptcy Court. You can contact your bankruptcy

attorney for more information.

Your request for appeal on form 12153 is a Collection

Due Process (CDP) Appeals. The three key points that

Appeals can consider in a CDP hearing involve items

such as those listed below:

1. Applicable administrative procedures

2. Relevant issues such as innocent spouse,

collection alternatives and underlying

liability.

3. Efficient collection measures versus

intrusiveness.

Based upon a review of your case file, I find no error
- 22 -

in the part of the Service in sending you the proper

notices of an outstanding liability. The records

indicated that notices were issued for all of the years

reflecting a balance due and asking you either pay in

full or call the IRS to discuss payment arrangements. 

To date, no agreement has been instituted.

The underlying liability appears to be correct. The

assessments were based on your income and withholdings. 

You have not pointed to any errors and you have been

unwilling to discuss collection alternatives which

include full payment, monthly payment, offer in

compromise etc.

Please respond within 2 weeks of the date of this

letter if you have valid issues or want to propose a

payment resolution. If I do not receive a timely

response, I will proceed with the issuance of a

decision letter that will sustain the levy action. 

On November 27, 2002, the IRS Team Manager for Area 2,

General Appeals, wrote a letter to petitioners. That letter

stated in pertinent part:

This is in response to your letter dated November 16,

2002 that was addressed to this office. I apologize

for not responding earlier but I have been away from

the office.

In your letter you are concerned about the fact that

the Settlement Officer who met with you considered more

than one year (return) at the meeting and that she

asked about subsequent filings of Federal tax returns. 

You also ask that this matter be reassigned. There is

nothing wrong with the Settlement Officer’s handling of

either of these items. I, therefore, will not reassign

this matter to another Appeals or Settlement Officer.

There is nothing wrong with the Settlement Officer

considering all of the tax periods before Appeals at

one hearing. In addition, taxpayers must be current in

the filing of their Federal tax returns before we can

offer collection alternatives to help them. Thus, the

Settlement Officer was merely asking about subsequent

filings to see if she could offer collection

alternatives to you for the amounts owed in the periods
- 23 -

under our jurisdiction. Both actions are appropriate.

In addition, I would urge you to “step back and look at

the course of action” you are taking. The returns you

have filed showing nothing but zeros, and the arguments

you have made, have no merit whatsoever. The arguments

you are making are frivolous and make no sense. In

fact, if you pursue these arguments in the courts, the

Court will, in all probability, and should, assert it’s

own penalty for filing a frivolous lawsuit. The court

cases clearly support the Service’s position on the

issues you raise and indicate that the courts are tired

of these types of illogical issues.

I strongly urge you to move away from the destructive

path you are following, file proper tax returns as

required by law, and make arrangements to pay the taxes

you owe for the schools you attend, the roads you ride

on, the military that defends you, the courts that

protect your legitimate rights, and the freedoms you

enjoy. Please look at the arguments you are making and

ask yourself if they make any sense. Read the court

cases cited by the Settlement Officer in the attachment

(copy attached) to her letter to you dated November 26,

2002 and evaluate the merits of the arguments you are

making. If you do not take steps to correct the

situation, it will become more and more burdensome with

larger, unpaid liabilities increased by interest and

penalties.

I cannot recommend that you seek the advice of an

expert. However, if you go to any reputable Attorney

or Certified Public Accountant in your area, I am

confident that they will tell you that your arguments

are not correct and they will recommend that you

quickly take corrective action. Neither the IRS, nor

the Courts, nor the Congress, nor any reputable

professional will support the arguments you are making.

My comments are not intended to offend you in any way. 

They are made out of my concern for individuals and

intended to provide you with assistance. I hope this

addresses the concerns contained in your letter dated

November 16, 2002.

Finally, I have enclosed a copy of a relatively new

court case (Steven R. Smith, United States District

Court of Nevada, 2002 TNT 223-17) in which the taxpayer
- 24 -

makes arguments similar to those you have made about

Delegation Orders, etc. As you can see, the Court

decides the case in favor of the Government. 

On December 10, 2002, in response to the settlement

officer’s November 26, 2002 letter to petitioners, petitioners

sent a letter to the settlement officer (petitioners’ December

10, 2002 letter). Petitioners’ December 10, 2002 letter stated

in pertinent part:

In response to your letter of November 26, 2002, and

based upon your invitation to do so, we raise these

valid issues in regard to your statements and exhibits:

1. We did not raise any arguments based on

moral, religious, political, constitutional,

conscientious or similar grounds, so we will

not help you to pretend that we did.

2. On the issue of impartiality, your letter of

November 26th proves that you are NOT

impartial to the proposed collection action:

a.) We did not raise any arguments

whatsoever. We asked for the

documents that the laws describe,

which must be present before a

determination can be made by you to

proceed with collection by

distraint.

We cite as a valid issue: The Statute, IR

Code 6330(c)(3) entitled “Basis for the

determination. The determination by an appeals

officer under this subsection shall take into

consideration-A.) the verification presented under

paragraph (1),; B.) the issues raised under

paragraph (2), which is “any relevant issue

relating to the unpaid tax or proposed levy”...

b.) You state * * * “Based upon a

review of your case file, I find no

error in the part of the Service in

sending you the proper notices of
- 25 -

an outstanding liability”, yet, you

do not name by what Statute we are

made liable and you do not present

for us the documents which support

the assessments with the authority

of the Service employees that were

involved in making such

assessments. You state that

notices of balance due were

issued... Well, IR Code Section

6331 cannot apply to us until we

have neglected or refused to pay 10

days following the Notice and

Demand for Payment. Seven Statutes

and various IRS Publications refer

to the requirement for the Notice

and demand for payment. We find no

authority referring to a “notice of

balance due”. We did not receive a

statutory Notice and Demand for

payment.

c.) You state in your letter * * * “The

underlying liability appears to be

correct. The assessments were

based on your income and

withholdings.” The underlying

liability is based upon what

statute? Where did you find a

liability for the income tax in the

Internal Revenue Code? * * * we are

contesting not only the existence

and the amount of the underlying

liability for the taxes and

penalties at issue, but, also the

authority of the Revenue Officers

who changed our returns and who

sent out the Final Notice giving

rise to our opportunity to a

Collection Due Process Hearing -

our right to a fair and impartial

hearing conducted by an impartial

appeals officer who has fulfilled

the requirement of the

investigation as provided for in IR

Code Section 6330(c)(1). If you

did indeed conduct that impartial

investigation, you should be able
- 26 -

to provide us with the documents

you inspected to verify the

validity and accuracy of the

assessments. * * * We have

requested the documentation that

the law provides that we may see.

d.) Further, the exhibits attached to

your letter are totally irrelevant

to our case. They, too, point to

your bias toward the government. 

First of all, the definition of

Gross Income does not make one

liable for the tax. The issue of

the Sixteenth Amendment of the

Constitution is not a relevant

issue to be raised when all we are

asking for is proof that the

verification from the Secretary

requirement has been fulfilled;

that the Notice and Demand for

payment requirement as been met;

that the assessments are valid and

accurately determined and recorded

pursuant to some statute by

authorized Internal Revenue Service

personnel; and, that you have

personally acquired verification

from somebody other than yourself

that all of the administrative

procedures and applicable laws have

been met. Verification means, a

formal written statement. * * * We

are in the dark as to what happened

on our case, as all of the notices

came without reference to any

delegation orders or other legal

basis for their issuance. Many of

them were not even signed! Why

wouldn’t you want us to see the

authority for these notices if

indeed they are “Statutory”, as you

claim them to be?

3. Finally, you stated in your letter that we

have not pointed to any errors and that we

have been unwilling to discuss collection

alternatives...and, then you threatened to
- 27 -

proceed with an issuance of a letter that

will sustain the levy action. We cannot

fathom what premise you found to base those

statements on. It is absurd! You have not

provided one document required of you by the

law, and, until you do, you have nothing more

than a wish for our property. Here are the

errors you have ignored thus far that we have

clearly outlined in previous correspondences

and at our “Collection Due Process Hearing”:

A.) The FINAL NOTICE we received was not

sent out by the Secretary or his

delegate. * * *

B.) We did not receive the Statutory Notice

and demand for the unpaid tax from the

Secretary or his delegate. * * *

C.) The assessments were not made by

authorized IRS personnel. We know this

because no where in the Code is there

any mention of IRS agents having the

authority to make a return for income

taxes, and no where in the Internal

Revenue Manual does it speak of the

authority of IRS agents to make 1040

Forms or to do anything with respect to

returns of income tax. * * *

D.) Another very relevant issue we have

raised and that goes to prove the fact

that you have not been impartial to the

proceedings thus far is that we have

asked for you to cite the Statute in the

Internal Revenue Code that provides for

the payment of the income tax. Now,

whether or not there is a law that

requires the payment of the income tax

cannot be deemed frivolous or merit

less. * * * [Reproduced literally.] 

On November 5, 2002, John W. Raymond (Mr. Raymond), an

attorney, sent a letter (Mr. Raymond’s November 5, 2002 letter)

to the settlement officer with respect to petitioners’ chapter 7
- 28 -

bankruptcy case. That letter stated in pertinent part:

Reference the attached letter dated October 21,

2002 which you sent to Gerald and Jessica Frey. Be

advised that Gerald and Jessica Frey filed a Chapter 7

Bankruptcy, Case No. 02-51961-DHA, in the United States

Bankruptcy Court, Eastern District of Virginia, Newport

News Division, on July 3, 2002. Internal Revenue

Service was a listed creditor and was sent Notice of

the bankruptcy filing by the bankruptcy court.

Debtors received their bankruptcy Discharge on

October 10 [sic], 2002. (copy of Order attached) 

Their liability for tax debts for calendar year 1996

and 1997 were discharged in the bankruptcy. 

The “bankruptcy discharge” referred to in Mr. Raymond’s November

5, 2002 letter is an order dated October 12, 2002 (U.S.

Bankruptcy Court’s October 12, 2002 order) of the United States

Bankruptcy Court, Eastern District of Virginia (U.S. Bankruptcy

Court). That order stated as follows:

It appearing that the debtor(s) is/are entitled to

a discharge,

IT IS ORDERED:

The debtor(s) is/are granted a discharge under

section 727 of title 11, United States Code * * *.

The U.S. Bankruptcy Court’s October 12, 2002 order further

stated: “SEE BACK SIDE OF THIS ORDER FOR IMPORTANT INFORMATION”. 

The back side of that order stated in pertinent part:

Debts that are Not Discharged

Some of the common types of debts which are not

discharged in a chapter 7 bankruptcy case are:

a. Debts for most taxes; 

On December 9, 2002, Mr. Raymond sent a letter to an IRS
- 29 -

bankruptcy specialist (Mr. Raymond’s December 9, 2002 letter). 

That letter stated in pertinent part:

You and I discussed the above matter on November

19, 2002. You informed me that the 1996 and 1997 taxes

had not been discharged in the Freys’ bankruptcy as a

substitute return had been filed by the IRS for the

Freys and the Freys did not file the returns until

November 13, 2000. The Freys state that they filed the

returns prior to November 2000.

The Freys inform me that they received the 09-20-

1999 Notice Number CP 504 on September 30, 1999. The

Notice had been mailed to a prior address so the Freys

did not get it for ten days. Mr. Frey called Mrs. Lee

(as noted on page two of exhibit A) of the IRS and was

informed by Mrs. Lee that the IRS had no returns for

1996 and 1997. Mrs. Lee advised the Freys to mail the

returns to IRS, Attn: ASFR, Philadelphia, PA 19255.

The Freys had previously filed the returns but

complied with Mrs. Lee’s directions. The returns were

still packed with their household goods because of the

Freys’ move. The Freys found the returns (copies

attached) dated them 11-1-99 and mailed the returns to

the ASFR address given by Mrs. Lee.

The Freys received nothing further from the IRS

until 2001 when the Freys were advised that the IRS had

not received the 1997 return. The Freys dated the 1997

returns 5-30-01 and mailed them to the IRS.

It appears to me that the taxes should have been

discharged in the bankruptcy based on the 1999 filing

date. 

On January 14, 2003, the IRS bankruptcy specialist to whom

Mr. Raymond had sent Mr. Raymond’s December 9, 2002 letter sent a

letter to Mr. Raymond. That letter stated in pertinent part: 

This is in regards to correspondence we received

on December 11, 2002. In your correspondence you

provided copies of tax returns for years 1996 and 1997. 

I have reviewed the information you have provided and

have made these determinations base[d] on the
- 30 -

information. Tax year 1996 will be processed as the

original filed return and if excepted [sic] as filed,

there will not be any balance due. The tax return 1996

that you provided shows and [sic] overpayment of

$3,839.28. The Refund Expiration Date for 1996 is

April 15, 2000, therefore, the above-mentioned debtor’s

will not receive the overpayment. The information

provided for tax year 1997, I could find no evidence

that the return was filed or received prior to the date

that Internal Revenue Service made the assessment of

August 13, 2001. Tax year 1997 still remains to be

nondischargeable as we had determined at discharge. 

On January 23, 2003, the Appeals Office issued to

petitioners a notice of determination with respect to their

taxable years 1996, 1997, and 1999. That notice of determination

stated in pertinent part:

Summary of Determination

The determination of the Appeals Office is to sustain

the decision to issue the Final Notice of Intent To

Levy/Seizure. The assessment is valid and the actions

were appropriate.

You did not respond to this office’s request for

information and made no proposals to resolve the

delinquent liability. The case is being returned to

the Compliance Office for appropriate collection

actions. 

An attachment to the notice of determination stated in pertinent

part:

Summary of the issues and brief back ground:

* * * You filed a timely request for a hearing with

Appeals under the provisions of IRC 6630 concerning the

appropriateness of propsong a levy action to secure

payment for the above listed tax liabilities [with

respect to petitioners’ taxable years 1996, 1997, and

1999]. You claimed your gross income was not taxable

and your tax assessments were illegal and not valid. A

hearing was held with you on 11-20-2002. The hearing
- 31 -

was terminated when you claimed the Settlement Officer

had no authority to conduct the hearing. The issues

you raised were later responded by correspondence from

the Settlement Officer and the Appeals Team Manager

Verification of Applicable Law and Administrative

Procedures

With the best information available, the requirements

of various applicable law or administrative procedures

have been met. 

Internal Revenue Code (IRC) Section 6331(d) requires

that the Internal Revenue Service (IRS) notify a

taxpayer at least 30 days before a Notice of Levy can

be issued. The tax transcript shows that this notice

was mailed to you * * *

* * * * * * *

You were given the opportunity to raise any relevant

issue related to the unpaid tax of the proposed levy at

the hearing * * *

This Settlement Officer has had no prior involvement

with respect to this tax liability.

Relevant Issues Presented by the Taxpayer

Records show you filed the 1996, 1997 and 1999 tax

returns claiming zero income even though you attached

forms W-2 with the returns showing your gross income *

* *. The tax assessments were made based on these

incomes. The Final Notice pertaining to the unpaid

balance of these tax periods was sent to you on 06-20-

2002. You were also advised by the Settlement Officer

that the 1996 and 1997 tax liabilities were not

discharged by the bankruptcy court. You made frivolous

claims such as the IRS agents had no authority to make

income tax assessments, the gross income were not

taxable and the assessments were illegal.

You were provided with the tax transcripts

demonstrating the fact of assessment. The transcripts

show the same essential information found on a Form

4340, Certificate of Assessments and Payments. * * *

* * * * * * *
- 32 -

Under Section 6330(c)(2)(B), neither the existence nor

the amount of the underlying tax liability can be

contested at an Appeals Office hearing unless the

taxpayer did not receive a notice of deficiency for the

tax in question or did not otherwise have an earlier

opportunity to dispute such tax liability. Records

indicated the notices of deficiency were mailed to you

* * *. You received a notice of deficiency, but yet

failed to file a petition for redetermination with the

Court. Therefore, your issue of the underlying tax

liability cannot be considered by the Appeals Office

under the CDP appeal.

Balancing Efficient Tax Collection with Concern

Regarding Intrusiveness

Appeals has verified, or received verification, that

applicable laws and administrative procedures have been

met; has considered the issues raised; and has balanced

the proposed collection with legitimate concern that

such action be no more intrusive than necessary by IRC

Section 6330(c)(3).

Collection alternatives include full payment,

installment agreement, offer in compromise and

currently uncollectible due to financial hardship. At

the hearing and subsequent correspondence, you did not

raise a spousal defense or challenge the Compliance’s

proposed levy action by offering a less instrusive

collection alternative. As of this date, you have not

provided the information for us to determine your

ability to pay and submitted no resolution to your tax

liability. 

The Appeals Office believes that the Compliance

Office’s decision to issue the Final Notice was

appropriate and sustains the action in full. The case

is being returned to Compliance for appropriate

collection actions. [Reproduced literally.] 

On February 20, 2003, petitioners filed with the Court a

petition for review of the notice of determination with respect

to their taxable years 1996, 1997, and 1999 and attached to the

petition certain exhibits. The petition and most of those
- 33 -

exhibits contained the same types of statements, contentions,

arguments, and questions that petitioners set forth in

petitioners’ attachment to their 1996 Form 1040, petitioners’

attachment to their 1997 Form 1040A, petitioners’ attachment to

their 1996 Form 12153, petitioners’ attachment to their 1997 and

1999 Form 12153, and the various letters described above that

petitioners sent to the IRS with respect to their taxable years

1996, 1997, and 1999. 

On May 29, 2003, the Court issued an Order (Court’s May 29,

2003 Order) in which, inter alia, the Court indicated that it had

reviewed the petition and the exhibits attached thereto and found

the petition and certain of those exhibits to contain statements,

contentions, arguments, and questions that the Court found to be

frivolous and/or groundless. In that Order, the Court reminded

petitioners about section 6673(a)(1). 

OPINION

A taxpayer may raise challenges to the existence or the

amount of a taxpayer’s underlying tax liability if the taxpayer

did not receive a notice of deficiency or did not otherwise have

an opportunity to dispute the tax liability. Sec. 6330(c)(2)(B). 

Where the validity of the underlying tax liability is properly

placed at issue, the Court will review the matter on a de novo

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

Commissioner, 114 T.C. 176, 181-182 (2000).
- 34 -

2With respect to petitioners’ taxable year 1996, the

transcripts of account that a representative of respondent

prepared relating to that year reflected that respondent issued a

notice of deficiency to petitioners with respect to their taxable

year 1996. With respect to petitioners’ taxable year 1997, the

transcripts of account that a representative of respondent

prepared relating to that year did not reflect that respondent

issued a notice of deficiency to petitioners with respect to

their taxable year 1997. However, the revenue agent who

testified on behalf of respondent at the trial in this case

indicated that transcripts of account do not necessarily reflect

such information. Indeed, although the record in the instant

case contains a copy of the notice of deficiency that respondent

issued with respect to petitioners’ taxable year 1999, the

transcripts of account that a representative of respondent

prepared relating to that year did not reflect that respondent

issued such a notice to petitioners. The notice of determination

with respect to petitioners’ taxable years 1996, 1997, and 1999,

as well as the settlement officer’s history sheet or case

activity records relating to those years, reflected that

respondent issued respective notices of deficiency with respect

to those years. In this connection, it is noteworthy that, in

petitioners’ attachment to petitioners’ 1996 Form 12153 and

petitioners’ attachment to petitioners’ 1997 and 1999 Form 12153,

as well as in various letters described above that petitioners

sent to the IRS with respect to their taxable years 1996, 1997,

and 1999, petitioners did not complain that they did not receive

notices of deficiency with respect to 1996, 1997, and 1999. 

Instead, they argued in those documents that they did not receive

valid notices of deficiency for any of those years because the

notices of deficiency that they received were not signed by the

Commissioner of Internal Revenue (Commissioner) or a properly

authorized delegate of the Commissioner. Finally, we note that

we did not find credible Mr. Frey’s testimony that he did not

receive notices of deficiency with respect to 1996, 1997, and

1999. Such testimony is inconsistent with other testimony of Mr.

Frey that he may have received such notices and is contrary to

other evidence in the record. 

The record establishes that respondent issued to petitioners

respective notices of deficiency relating to their taxable years

1996, 1997, and 19992 and that they did not file a petition with

the Court with respect to any of such notices. On the instant
- 35 -

3We also find petitioners’ attachment to their 1996 Form

1040 and petitioners’ attachment to their 1997 Form 1040A to be

(continued...)

record, we find that petitioners may not challenge the existence

or the amount of petitioners’ unpaid liability for 1996,

petitioners’ unpaid liability for 1997, and petitioners’ unpaid

liability for 1999. See sec. 6330(c)(2)(B); Sego v.

Commissioner, supra; Goza v. Commissioner, supra. 

Where, as is the case here, the validity of the underlying

tax liability for each of the years 1996, 1997, and 1999 is not

properly placed at issue, the Court will review the determination

of the Commissioner for abuse of discretion. Sego v.

Commissioner, supra; Goza v. Commissioner, supra. 

We turn to the issues that petitioners raised in

petitioners’ attachment to their 1996 Form 12153, in petitioners’

attachment to their 1997 and 1999 Form 12153, in the letters that

petitioners sent to the IRS with respect to their taxable years

1996, 1997, and 1999, at their Appeals Office hearing, and in the

petition and the exhibits attached to the petition, which we

shall review for abuse of discretion. We find petitioners’

attachment to their 1996 Form 12153, petitioners’ attachment to

their 1997 and 1999 Form 12153, the various letters that

petitioners sent to the IRS with respect to their taxable years

1996, 1997, and 1999, and the matters that petitioners raised at

their Appeals Office hearing to be frivolous and/or groundless.3
- 36 -

3(...continued)

frivolous and/or groundless. 

In the Court’s May 29, 2003 Order, we found that petitioners’

petition and certain exhibits attached thereto contained

statements, contentions, arguments, and questions that were

frivolous and/or groundless. We conclude that the following

allegations in petitioners’ petition raise valid issues that we

shall address: Petitioners’ allegation that the Appeals Office

improperly refused to allow them to make an audio recording of

their Appeals Office hearing, as required by section 7521(a)(1),

and petitioners’ allegation that petitioners’ unpaid liability

for 1996 and petitioners’ unpaid liability for 1997 were

discharged in petitioners’ bankruptcy proceeding.

We consider first petitioners’ position that the refusal by

the Appeals Office to permit them to make an audio recording of

the Appeals Office hearing held on November 20, 2002, was

improper under section 7521(a)(1). Throughout the period

commencing with petitioners’ sending to the IRS their 1996 Form

1040 reporting total income of $0 and total tax of $0 and ending

with their filing briefs with the Court, petitioners have made

statements, contentions, arguments, and requests and raised

questions that the Court finds to be frivolous and/or groundless. 

Consequently, even though we held in Keene v. Commissioner, 121

T.C. 8 (2003), that section 7521(a)(1) requires the Appeals
- 37 -

4See Kemper v. Commissioner, T.C. Memo. 2003-195.

5Petitioners did not argue at their Appeals Office hearing

that the U.S. Bankruptcy Court discharged petitioners’ unpaid

liability for 1999.

Office to allow a taxpayer to make an audio recording of an

Appeals Office hearing held pursuant to section 6330(b), we

conclude that (1) it is not necessary and will not be productive

to remand this case to the Appeals Office for another hearing

under section 6330(b) in order to allow petitioners to make such

an audio recording, see Lunsford v. Commissioner, 117 T.C. 183,

189 (2001), and (2) it is not necessary or appropriate to reject

respondent’s determination to proceed with the collection action

as determined in the notice of determination with respect to

petitioners’ taxable years 1996, 1997, and 1999, see id.4 

We next consider petitioners’ position that the U.S.

Bankruptcy Court discharged petitioners’ unpaid liability for

1996 and petitioners’ unpaid liability for 1997.5 An individual

debtor is not to be discharged in a bankruptcy proceeding from

certain specified categories of debt. 11 U.S.C. sec. 523(a)

(2000). The first such category is described in pertinent part

in 11 U.S.C. sec. 523(a)(1) as follows:

§ 523. Exceptions to discharge

(a) A discharge under section 727, 1141, 1228(a),

1228(b), or 1328(b) of this title [title 11] does not

discharge an individual debtor from any debt--

(1) for a tax * * *--
- 38 -

6We have recently observed: “The majority of courts,

including this Court, have held that, generally, a return that

contains only zeros is not a valid return.” Cabirac v.

Commissioner, 120 T.C. 163, 169 (2003).

* * * * * * *

(B) with respect to which a return, if

required--

(i) was not filed; * * *

In the instant case, respondent did not process and file as

tax returns the 1996 Form 1040 and the 1997 Form 1040A which

respondent received from petitioners and in which petitioners

reported total income of $0 and total tax of $0. That was

because respondent determined that those documents were

frivolous.6 An individual debtor is not discharged in a

bankruptcy proceeding from a debt for tax with respect to which a

return is not filed. 11 U.S.C. sec. 523(a)(1)(B)(i). On the

record before us, we find that pursuant to 11 U.S.C. sec.

523(a)(1)(B)(i) the U.S. Bankruptcy Court did not discharge

petitioners from their unpaid liability for 1996 and petitioners’

unpaid liability for 1997. 

Based upon our examination of the entire record before us,

we find that respondent did not abuse respondent’s discretion in

determining to proceed with the collection action as determined

in the notice of determination with respect to petitioners’

taxable years 1996, 1997, and 1999. 

Although respondent does not ask the Court to impose a
- 39 -

penalty on petitioners under section 6673(a)(1), the Court will

sua sponte determine whether to impose such a penalty. Section

6673(a)(1) authorizes the Court to require a taxpayer to pay to

the United States a penalty in an amount not to exceed $25,000

whenever it appears to the Court, inter alia, that a proceeding

before it was instituted or maintained primarily for delay, sec.

6673(a)(1)(A), or that the taxpayers’ position in such a

proceeding is frivolous or groundless, sec. 6673(a)(1)(B).

In Pierson v. Commissioner, 115 T.C. 576, 581 (2000), we

issued an unequivocal warning to taxpayers concerning the

imposition of a penalty under section 6673(a)(1) on those

taxpayers who abuse the protections afforded by sections 6320 and

6330 by instituting or maintaining actions under those sections

primarily for delay or by taking frivolous or groundless

positions in such actions. The Court’s May 29, 2003 Order

reminded petitioners about section 6673(a)(1). Before the trial

in this case began, the Court again reminded petitioners about

section 6673(a)(1) and indicated that if petitioners advanced

frivolous and/or groundless arguments at trial, the Court would

impose a penalty on them under that section. During the trial,

upon questioning by the Court, Mr. Frey indicated that

petitioners continue to adhere to the statements, contentions,

arguments, requests, and questions set forth in petitioners’

attachment to petitioners’ 1996 Form 1040 and petitioners
- 40 -

attachment to petitioners’ 1997 Form 1040A. 

On the record before us, we find that petitioners have

advanced, we believe primarily for delay, frivolous and/or

groundless statements, contentions, arguments, requests, and

questions with respect to their taxable years 1996, 1997, and

1999, thereby causing the Court to waste its limited resources in

addressing such matters. As a result of petitioners’ position

and actions in the instant case with respect to those taxable

years, we shall impose a penalty on them pursuant to section

6673(a)(1) in the amount of $4,000.

We have considered all of petitioners’ statements,

contentions, arguments, requests, and questions that are not

discussed herein, and we find them to be without merit and/or

irrelevant.

To reflect the foregoing, 

Decision will be entered for

respondent.