t c no united_states tax_court guillermo baez espinosa petitioner v commissioner of internal revenue respondent docket no filed date p a nonresident_alien_individual failed to file federal_income_tax returns for the years through r repeatedly notified p of his failure_to_file r prepared substitute returns for p and notified p that pursuant to sec_874 i r c no deductions were allowable p subsequently submitted returns claiming the benefit of deductions r then issued a notice_of_deficiency held p is not entitled to the benefit of deductions pursuant to sec_874 i r c held further p is liable for additions to tax pursuant to sec_6651 and sec_6654 i r c john p bender for petitioner joni d larson for respondent dawson judge this case was assigned to special_trial_judge carleton d powell pursuant to sec_7443a and rule sec_180 sec_181 and sec_182 the court agrees with and adopts the opinion of the special_trial_judge that is set forth below opinion of the special_trial_judge powell special_trial_judge respondent determined deficiencies in petitioner's federal income taxes and additions to tax as follows taxable_year deficiency additions to tax sec_6651 sec_6654 dollar_figure big_number big_number big_number big_number dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure dollar_figure at the time of filing the petition petitioner resided in mexico the issues are whether sec_874 prevents petitioner who submitted a return after respondent prepared substitute returns but before respondent issued a notice_of_deficiency from receiving the benefit of deductions otherwise allowable under subtitle a of the internal_revenue_code and whether petitioner is liable for additions to tax pursuant to sec_6651 and sec_6654 unless otherwise indicated section references are to the internal_revenue_code in effect for the years in issue and all rule references are to the tax_court rules_of_practice and procedure findings_of_fact the facts have been fully stipulated and they are summarized below guillermo baez espinosa petitioner was a nonresident_alien_individual during the taxable years through petitioner owned two rental properties located in austin texas the austin property and ruidoso new mexico the ruidoso property the properties produced gross rental income during the years in issue in the following amounts property austin ruidoso dollar_figure big_number dollar_figure dollar_figure dollar_figure dollar_figure big_number -0- when the expenses of producing the rental income including depreciation_deductions are taken into account each property produced an annual loss petitioner sold the ruidoso property on date for dollar_figure incurring a loss on the sale in the amount of dollar_figure petitioner was required to file a federal_income_tax return for each of the years in issue and does not contend otherwise sec_1_6012-1 income_tax regs for petitioner' sec_2 in the notice_of_deficiency respondent determined that petitioner was liable for income_tax on the dollar_figure received from the sale of the ruidoso property with no offset of basis respondent concedes that sec_874 allows petitioner to use the basis in the property to determine the amount of the gain_or_loss sec_874 does however deny a deduction for a loss under sec_165 taxable years through his federal_income_tax returns were due on june of the year following the close of the taxable_year sec_6072 as of date petitioner had not filed any federal_income_tax returns for the years in issue on that date respondent mailed a letter to petitioner asking him if he had filed returns and if he had not instructing him to file returns or otherwise respond that letter also stated that if petitioner did not respond by date respondent would file substitute returns for him petitioner did not respond and on date respondent again wrote petitioner with the same request adding that if there was no response within days your tax_liability will be determined based on the information we have again petitioner did not respond on date respondent notified petitioner that respondent had filed substitute returns for the taxable years through on date respondent informed petitioner that the substituted returns were computed without the benefit of any deductions on date petitioner submitted federal_income_tax returns for all the years in issue the returns reflected the net losses from the rental properties described above each return contained an election pursuant to sec_871 to treat the rental income as if it was effectively connected with a trade_or_business_within_the_united_states on date respondent issued a notice_of_deficiency to petitioner for the taxable years through in the notice_of_deficiency respondent determined that petitioner was liable for deficiencies and additions to tax in the above listed amounts respondent treated petitioner's income as effectively connected with a u s trade_or_business but determined that petitioner was not entitled to the benefit of any deductions pursuant to sec_874 for each year in issue respondent further determined that petitioner is liable for additions to tax for failure_to_file tax returns pursuant to sec_6651 and for failure to pay estimated_tax pursuant to sec_6654 sec_874 opinion in order to understand the primary issue it is useful to briefly explore the taxation of rental income of nonresident_alien individuals under the internal_revenue_code under sec_871 the amount from rents received by a nonresident_alien_individual that is not effectively connected with the conduct_of_a_trade_or_business within the united_states is taxed at a 30-percent rate this 30-percent rate is imposed on gross rental income see sec_1_871-7 income_tax regs a nonresident_alien_individual engaged_in_a_trade_or_business_within_the_united_states is taxed on the taxable_income effectively connected with that trade_or_business at the graduated rates of tax graduated rates applicable to u s residents enumerated in sec_1 sec_871 taxable_income means gross_income reduced by allowable deductions sec_3 a in determining taxable_income generally deductions shall be allowed only if and to the extent that they are connected with income which is effectively connected with the conduct_of_a_trade_or_business within the united_states sec_873 thus there may be a dramatic difference in the tax treatment of rental income depending on whether the income is effectively connected with a trade_or_business if the income is effectively connected with a trade_or_business deductions are allowed unless barred by sec_874 as discussed infra and the graduated_tax rates in sec_1 apply if the income is not effectively connected with a trade_or_business no deductions are allowed and the gross rental income is taxed at a 30-percent rate because of the uncertainties in determining whether a rental_activity constitutes a trade_or_business congress has provided an election under sec_871 see s rept 89th cong 2d sess 1966_2_cb_1055 sec_871 provides that a nonresident_alien_individual who derives any income from real_property located in the united_states may elect to treat all such income as though it were effectively connected with a trade_or_business_within_the_united_states under the regulations an election under sec_871 is made by filing with the income_tax return required under sec_6012 and the regulations thereunder a statement to the effect that the election is being made sec_1_871-10 income_tax regs respondent has treated petitioner's rental income as effectively connected with a trade_or_business_within_the_united_states and there is no question before the court as to whether petitioner's election is valid with these provisions in mind we now turn to sec_874 which in pertinent part provides return prerequisite to allowance --a nonresident_alien_individual shall receive the benefit of the deductions and credits allowed to him in this subtitle only by filing or causing to be filed with the secretary a true and accurate return in the manner prescribed in subtitle f sec_6001 and following relating to procedure and administration including therein all the information which the secretary may deem necessary for the calculation of such deductions and credits thus in dealing with rental income there are three possible computations of tax_liability facing a nonresident_alien_individual if the rental income is not effectively connected with a trade_or_business_within_the_united_states and no election is made under sec_871 then the tax is computed at the 30-percent rate on gross rental income under sec_871 if the income is effectively connected with a trade_or_business_within_the_united_states or if an election is made to treat the income as effectively connected the tax is computed pursuant to sec_871 on net rental income at the graduated rates prescribed by sec_1 provided that the taxpayer has filed a return as required by sec_874 and where the income is effectively connected and the taxpayer fails to file a tax_return as required by sec_874 the tax is computed on gross rental income at the graduated rates prescribed in sec_1 petitioner while recognizing that sec_874 disallows deductions if no return is filed asserts that he did file returns for the years in question the issue therefore is whether the returns submitted on date after respondent notified petitioner that he had not filed returns and after respondent prepared returns for petitioner but before the notice_of_deficiency was issued satisfy the requirements of sec_874 on its face sec_874 contains no time limit within which a nonresident_alien must file an income_tax return for taxable years ending after date the regulations explicitly create a timely filing requirement sec_1_874-1 income_tax regs as amended by t d 1990_2_cb_172 provides inter alia that b filing deadline for return-- general_rule if no return for the taxable_year immediately preceding the current taxable_year has been filed the required return for the current taxable_year other than the first taxable_year of the nonresident_alien_individual for which a return is required to be filed must have been filed no later than the earlier of the date which is months after the due_date as set forth in sec_6072 for filing the return for the current taxable_year or the date the internal_revenue_service mails a notice to the nonresident_alien_individual advising the nonresident_alien_individual that the current_year return has not been filed and that no deductions or credits may be claimed by the nonresident_alien_individual on date respondent sent petitioner a so-called doomsday letter3 notifying petitioner that returns had been filed by respondent and that deductions and certain credits could no longer be claimed petitioner's returns were not submitted until date accordingly petitioner does not satisfy the conditions of the regulation for either the or taxable_year petitioner however contends that this regulation is invalid for various reasons we will address this argument later prior to the regulations under sec_874 only addressed the problem by implication sec_1_874-1 income wright h schickli coined the term doomsday letter to refer to the internal_revenue_service notice described in sec_1_874-1 income_tax regs that cuts off or restricts a nonresident_alien individual's ability to claim deductions schickli new house rules for foreign taxpayers that play the u s audit_lottery tax lawyer tax regs t d 1957_2_cb_368 old sec_1_874-1 income_tax regs provided that if no return was filed the district_director or if applicable the director of international operations shall cause a return of income to be made include therein the income described in sec_1_871-7 of that individual without allowance for deductions therefore for petitioner's taxable years and we must decide whether sec_874 implicitly created a timely filing requirement furthermore since the validity of the new regulation is called into question this analysis will also be relevant for the taxable years and sec_874 has its genesis revenue act of ch sec_217 40_stat_1057 sec_217 was reenacted throughout the years when carried forward into the internal_revenue_code of as sec_874 sec_874 was identical in substance with sec_215 and sec_216 code h rept 83d cong 2d sess a245 a parallel provision dealing with foreign_corporations was enacted as section of the revenue act of ch 45_stat_849 this provision old sec_1_874-1 income_tax regs had its origins in regs art promulgated under the revenue act of ch 40_stat_1057 that section was repromulgated throughout the years see eg regs art regs art regs art regs art sec_39 regs see eg revenue act of ch sec_217 43_stat_275 revenue act of ch sec_217 44_stat_32 revenue act of ch sec_215 45_stat_848 revenue act of ch sec_215 47_stat_229 internal_revenue_code_of_1939 ch sec_215 53_stat_77 was reenacted throughout the years and carried into current sec_882 sec_874 and sec_882 are draconian provisions designed to induce foreign_corporations and nonresident_alien individuals to file tax returns in 125_f2d_906 4th cir affg 42_bta_1248 the court_of_appeals for the fourth circuit explained indeed unless a foreign_corporation is induced voluntarily to advise the commissioner of all of its income attributable to sources within the united_states and of the exact nature of all deductions from such income the commissioner may never learn even of the corporation's existence and in any event the commissioner will probably be unable to determine the correct amount of its taxable_income the situation is pregnant with possibilities of tax_evasion in express recognition of this fertile danger to the orderly administration of the income_tax as applied to foreign_corporations congress conditioned its grant of deductions upon the timely filing of true proper and complete returns while both sec_874 and sec_882 are venerable there are few cases dealing with these provisions in fact there are no cases dealing squarely with the application of sec of the revenue act of 47_stat_230 provided that a foreign_corporation shall receive the benefit of the deductions and credits allowed to it in this title only by filing or causing to be filed with the collector a true and accurate return in the manner prescribed in this title the language of sec_882 is virtually identical to the language of sec_874 except that sec_882 uses the words foreign_corporation in place of the words nonresident_alien_individual sec_874 or its predecessors in the context of an untimely submitted return however more than half a century ago the board_of_tax_appeals wrestled with the issue in a series of cases that arose under the predecessor to sec_882 because of the similarity of sec_874 and sec_882 in both language and the intent of the provisions we interpret them in_pari_materia in 38_bta_711 a revenue_agent prepared overdue returns for a foreign_corporation without notifying the corporation days before the corporation filed its own returns apparently the returns prepared by the revenue_agent were never submitted to or accepted by the commissioner nevertheless the commissioner determined that the corporation was not entitled to any deductions because the returns were not filed timely the board_of_tax_appeals the predecessor of this court sometimes herein referred to as the board held that section of the revenue act of ch 45_stat_849 and revenue act of ch 47_stat_230 did not include a requirement that the returns see however 66_tc_373 affd per curiam 598_f2d_1375 5th cir inverworld inc v commissioner tcmemo_1996_301 44_bta_1 vacated and remanded per stipulation ustc par 4th cir 38_bta_567 affd 115_f2d_39 d c cir 19_bta_471 in these cases no returns were filed and the question whether returns were timely was not at issue be filed timely within the meaning of section currently sec_6072 therefore the foreign_corporation was entitled to the benefit of deductions even though its returns were not filed timely id pincite in mills spence co v commissioner a memorandum opinion of this court dated date the board_of_tax_appeals followed its decision in anglo-american direct tea trading co v commissioner supra on date the commissioner sent a letter to a foreign_corporation advising the corporation that its returns had not been filed for the taxable years through in date after several rounds of correspondence attorneys filed the corporation's income_tax returns thereafter the commissioner disallowed the deductions claimed on those returns and issued a notice_of_deficiency the board held the corporation was entitled to the deductions stating it is unnecessary to assign any reason for such conclusion other than to say that our decision on this point is clearly controlled by the holding of the board in anglo-american mills spence co v commissioner supra the board_of_tax_appeals next addressed the issue in 40_bta_696 in taylor sec a foreign_corporation filed its returns after the commissioner had filed substitute returns and issued a notice_of_deficiency the board held that the foreign_corporation was not entitled to the claimed deductions the board distinguished anglo-american direct tea trading co v commissioner supra on the grounds that in anglo-american the returns prepared by the revenue_agent were never accepted by the commissioner the taxpayer's delinquent returns were audited not the returns prepared by the revenue_agent and the returns were filed by the taxpayer before the notice_of_deficiency was issued taylor sec inc v commissioner supra pincite a year later in 42_bta_1248 affd 125_f2d_906 4th cir the board followed taylor sec inc v commissioner supra where a foreign_corporation filed a timely personal_holding_company return form 1120h for the taxable_year but failed to file a corporate_income_tax return form_1120 the only income shown on the form 1120h consisted of dividends received from domestic corporations the commissioner notified the corporation that a form_1120 had not been filed on its behalf and requested that it be filed the secretary of the corporation ignored these requests because he believed the form 1120h contained all the information required to compute the corporation's tax_liability in addition he believed the corporation was not required to file a form_1120 since at that time dividends received from a domestic_corporation were not subject_to federal_income_tax the commissioner subsequently prepared a return for the corporation and issued a notice_of_deficiency thereafter the corporation's secretary filed a form_1120 for the year in question the board held that the filing of form 1120h did not satisfy the requirements of section of the revenue acts of and because the personal_holding_company surtax was a separate and distinct tax from the corporate_income_tax the board went on to distinguish its holding in anglo-american direct tea trading co v commissioner supra noting that undoubtedly a taxpayer may litigate a determination of respondent on the basis of a return made by respondent but a return filed by a taxpayer after such a return has been prepared and filed for him by respondent under the circumstances existing here is a nullity and does not comply with section supra the taxpayer can not thus take advantage from an alleged return submitted by the taxpayer not only after respondent's filing of its return but also after the issuance of a notice_of_deficiency blenheim co v commissioner b t a pincite the court_of_appeals for the fourth circuit affirmed the board_of_tax_appeals however rather than simply relying on taylor sec inc v commissioner supra the court_of_appeals for the fourth circuit placed emphasis on the fact that the taxpayer filed a return after the commissioner had prepared a substitute return for the taxpayer the court stated the conclusion that the preparation of a return by the commissioner a reasonable_time after the date it was due terminates the period in which the taxpayer may enjoy the privilege of receiving deductions by filing its own return is consistent not only with the intention of congress but also with considerations of sound administrative procedure and the generally accepted rule concerning the number of returns which may be filed without prescribing an absolute and rigid rule that whenever the commissioner files a return for a foreign_corporation the taxpayer is completely and automatically denied the benefit of deductions or credits we yet hold that the facts of the instant case justify a disallowance of deductions which petitioner might otherwise have been entitled to claim had it filed a timely return in compliance with the statutory requirement 125_f2d_906 4th cir affg 42_bta_1248 in 126_f2d_384 4th cir affg a memorandum opinion of the board_of_tax_appeals dated date a companion case to blenheim co v commissioner supra the board denied deductions under section of the revenue acts of and the court_of_appeals for the fourth circuit affirmed on the basis of blenheim noting that the case for the disallowance was even stronger because the taxpayer did not attempt to file a return until after a petition had been filed with the board one other case deserves some discussion in 41_bta_910 modified and remanded 120_f2d_424 4th cir the taxpayer a foreign_corporation proffered income_tax returns to a revenue_agent prior to the date the commissioner prepared returns and issued a notice_of_deficiency the revenue_agent refused to accept the returns because they were required to be filed with the collector of internal revenue at baltimore maryland however in refusing to accept the returns the revenue_agent failed to instruct the taxpayer how to properly file them he simply stated that the returns were improperly executed the board sustained the commissioner's disallowance of deductions the court_of_appeals for the fourth circuit reversed however the same court_of_appeals later noted in blenheim co v commissioner f 2d pincite that ardbern was distinguishable a substantially different factual situation is presented in the case before us here the commissioner prepared a return only after he had unsuccessfully made repeated requests to the taxpayer to do so and only after the taxpayer had flouted all of these requests from these cases we make the following observations first although sec_874 contains no express time limit at some point there exists a terminal date after which a taxpayer can no longer claim the benefit of deductions by filing a return 42_bta_1248 40_bta_696 second while a terminal date does exist the timely filing_requirements of sec_6072 are not determinative as to whether a taxpayer is entitled to the benefit of deductions 38_bta_711 third absent some compelling equitable considerations such as those existing in ardbern co v commissioner supra a taxpayer cannot claim the benefit of deductions by filing a return after the commissioner has prepared a substitute return and issued a notice_of_deficiency blenheim co v commissioner supra taylor sec inc v commissioner supra in this case we decide whether a nonresident_alien_individual may avoid the sanctions of sec_874 by filing returns after the commissioner has prepared substitute returns for him but before the notice_of_deficiency is issued petitioner first argues that since there is no explicit terminal date in the statute a taxpayer may file delinquent returns at any time and avoid the proscription of sec_874 in the alternative petitioner contends that if there is a terminal date that date should be the issuance of the notice_of_deficiency and not the filing of the return prepared by the commissioner where as here the commissioner has notified the taxpayer that he has not filed a return and has given the taxpayer a reasonable_time within which to file a return we disagree with both arguments as we have already discussed while sec_874 and sec_882 contain no explicit time limit the policy behind these provisions as applied by the case law dictates that there is a cut-off point or terminal date after which it is too late to submit a tax_return and claim the benefit of deductions if no cut-off point existed taxpayers would have an indefinite time to file a return and these provisions would be rendered meaningless to hold otherwise would render the entire provisions of the statute a nullity 35_bta_764 the prior case law established the terminal date as a mechanism designed to ensure that sec_874 and sec_882 would have the in_terrorem effect that congress intended the court_of_appeals for the fourth circuit explained this terminal date which the board_of_tax_appeals first adopted in 40_bta_696 is directed against those foreign_corporations which instead of being induced voluntarily to advise the commissioner of their domestic operations might find their interests best served by filing no return whatever and then waiting until such time if any as the commissioner discovers their existence and acquires sufficient information about their income on which to base a return unless they are precluded from then obtaining the deductions and credits under such circumstances such foreign_corporation can if detected come in for the first time after the commissioner has made a return and suffer no economic loss other than the general late filing penalty which applies to domestic as well as foreign_corporations blenheim co v commissioner f 2d pincite the second aspect of petitioner's argument is that a taxpayer may avoid sec_874 by submitting returns prior to the issuance of the notice_of_deficiency we do not believe however that the congressional intent in enacting sec_874 would be furthered by a rule that always lets a taxpayer wait and see what information the commissioner puts on a substitute return before the taxpayer has to file a return of his own the facts in this case point out our concerns when respondent first contacted petitioner concerning his failure_to_file petitioner had filed no federal_income_tax returns for years only after a second warning and the expiration of more months during which time petitioner failed to respond did respondent prepare substitute returns for petitioner eight more months passed before petitioner submitted his own returns we see no reason to reward such tactics with respect to the taxable years and petitioner essentially contends that sec_1_874-1 income_tax regs is invalid given the posture of this case however there is no reason to delve into the validity of this new regulation under the factual circumstances here the regulation confers no additional rights on petitioner and even if we were to hold some portion of this regulation invalid petitioner would not prevail under our analysis of the provisions of sec_874 and the relevant case law there is one area of the new regulation however that deserves some mention for the taxable_year petitioner submitted his return before the 16-month time limit set forth in b income_tax regs had expired but well after respondent had sent petitioner the so-called doomsday letter notifying him that he was not entitled to claim any deductions for that year as stated however respondent repeatedly notified petitioner of his failure_to_file returns prior to sending a doomsday letter we hold in the circumstances of this case that the submission of returns by petitioner after substitute returns had been prepared by respondent and after petitioner had been notified that no deductions are allowable but prior to the issuance of the notice_of_deficiency is insufficient to avoid the sanction of sec_874 we recognize that the application of sec_874 in this case may appear draconian that result however flows from the nature of the statute as we have suggested were we to hold otherwise we essentially would reward petitioner for ignoring the repeated requests that he comply with the filing_requirements of the code by the same token we as did the court_of_appeals for the fourth circuit in 125_f2d_906 4th cir affg 42_bta_1248 decline at this time to adopt an absolute and rigid rule for all cases petitioner also contends that respondent acted unreasonably in failing to grant a waiver of the filing deadlines set forth in sec_1_874-1 income_tax regs as permitted by sec_1_874-1 income_tax regs sec_1_874-1 income_tax regs provides that the deadlines may be waived in rare and unusual circumstances if good cause for such waiver based on the facts and circumstances is established by the nonresident_alien_individual as a preliminary matter however petitioner must establish that he requested a waiver cf sisson v commissioner t c memo petitioner has not shown that such a request was made furthermore petitioner has not offered any reasons as to why if the request had been made it should have been granted assuming but not deciding that we may have jurisdiction to review the disposition of such a request we have no basis upon which to make a determination that respondent's action constituted an abuse_of_discretion compare 91_tc_1079 lastly petitioner contends that because sec_1_874-1 income_tax regs imposes a timely filing requirement on residents of foreign countries including mexico as a prerequisite to receiving the benefit of deductions and no such requirement is imposed on u s residents the regulation violates the nondiscrimination_clause in article of the income_tax treaty between mexico and the united_states united states-mexico income_tax treaty date tax_treaties cch par petitioner's argument is not well taken while we question whether there is a conflict between sec_874 and the provisions of the treaty the treaty is effective for taxable in the petition petitioner alleged that he requested a waiver respondent denied the allegation in the answer this case was submitted fully stipulated and there is nothing in that stipulation establishing that petitioner requested a waiver or if requested the grounds for a waiver years beginning after and therefore does not apply to the taxable years in issue id at par dollar_figure additions to tax respondent determined that petitioner is liable for additions to tax for failure_to_file tax returns pursuant to sec_6651 and for failure to pay estimated_tax pursuant to sec_6654 sec_6651 provides that in the case of failure-- to file any return required under authority of subchapter_a unless it is shown that such failure is due to reasonable_cause and not due to willful neglect there shall be added to the amount_required_to_be_shown_as_tax on such return percent of the amount of such tax if the failure is for not more than month with an additional percent for each additional month or fraction thereof during which such failure continues not exceeding percent in the aggregate the tax_return of a nonresident_alien_individual is not due until the 15th day of the 6th month following the close of the taxable_year sec_6072 petitioner does not dispute that the returns he submitted were untimely sec_6654 imposes an addition_to_tax on individuals for failure to pay estimated income_tax the amount of the addition is determined by applying-- in passing we note that sec_6114 and sec_301_6114-1 proced admin regs provide that a taxpayer who asserts that a treaty provision overrides any internal revenue law must disclose that position on the return for such tax the underpayment rate established under sec_6621 to the amount of the underpayment for the period of the underpayment sec_6654 unlike sec_6651 the liability for the addition_to_tax under sec_6654 does not depend on a lack of reasonable_cause or the presence of willful neglect petitioner has the burden of establishing that the additions to tax should not apply rule a petitioner essentially contends that since respondent erroneously applied sec_874 to disallow the deductions there is neither an amount of tax required to be shown sec_6651 nor an underpayment of estimated_tax sec_6654 we have rejected that argument applying sec_874 statutory predicates for the additions to tax are present furthermore petitioner has not attempted to establish that he satisfied the reasonable_cause or lack of willful neglect exceptions contained in sec_6651 accordingly respondent's determinations as to the additions to tax under sec_6651 and sec_6654 are sustained to reflect respondent's concession concerning the basis of the property sold decision will be entered under rule


t c summary opinion united_states tax_court john a seavey petitioner v commissioner of internal revenue respondent docket no 14217-03s filed date john a seavey pro_se carina j campobasso for respondent dean special_trial_judge this case was heard pursuant to the provisions of sec_6330 and sec_7463 of the internal_revenue_code in effect at the time that the petition was filed unless otherwise indicated subsequent section references are to the internal_revenue_code as in effect during the years at issue the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority this proceeding arises from a petition for judicial review filed in response to a notice_of_determination concerning collection action s under sec_6320 and or notice_of_determination sent to petitioner pursuant to sec_6320 and sec_6330 petitioner seeks review of respondent's determination to proceed with collection of his income_tax liabilities of dollar_figure for dollar_figure for and dollar_figure for the issue for decision is whether the settlement officer abused her discretion in sustaining as an appropriate collection measure the filing of a notice_of_federal_tax_lien on petitioner's property and rights to property the stipulation of facts and the exhibits received into evidence are incorporated herein by reference petitioner resided in southwest harbour maine at the time the petition was filed background petitioner filed a form_1040 u s individual_income_tax_return dated date for reflecting a tax_liability of dollar_figure in date respondent assessed additions to tax for late filing and failure_to_pay_tax of dollar_figure and dollar_figure respectively including interest petitioner's outstanding tax_liability for is dollar_figure as of the date of the filing of the notice_of_federal_tax_lien as interest is still accruing the amount due has increased petitioner has not made any payments toward his liability for petitioner timely filed a form 1040ez income_tax return for single and joint filers with no dependents for reflecting a tax of dollar_figure with a balance due of dollar_figure respondent credited petitioner's tax account for federal tax withholdings and excess fica of dollar_figure on date in date respondent assessed an addition_to_tax for failure_to_pay_tax of dollar_figure including interest petitioner's outstanding tax_liability for is dollar_figure at the time of filing of the notice_of_federal_tax_lien petitioner has not made any other_payments toward his liability for petitioner timely filed a form 1040a u s individual_income_tax_return for reflecting a tax of dollar_figure with a balance due of dollar_figure respondent credited petitioner's tax account for federal tax withholdings and excess fica of dollar_figure on date respondent also credited dollar_figure to petitioner's account for the immediate tax relief credit on date including interest petitioner's outstanding tax_liability for is dollar_figure at time of filing of the notice_of_federal_tax_lien petitioner has not made any other_payments toward his liability for respondent mailed to petitioner a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 for and reflecting a balance due of dollar_figure petitioner replied by returning to respondent a form request for a collection_due_process_hearing petitioner's hearing in his request for a hearing petitioner alleged that he had attempted unsuccessfully to enter into a payment agreement to satisfy his outstanding liability the appeals_office sent him form 433-a collection information statement for wage earners and self-employed individuals to ascertain the feasibility of collection alternatives petitioner submitted some financial information and settlement officer jean frazier ms frazier held a telephone conference with petitioner during the conference petitioner informed ms frazier that he wanted to submit an offer_in_compromise ms frazier provided petitioner with form_656 offer_in_compromise oic and requested some additional information and documentation as well as an estimated_tax payment petitioner provided the information and documentation requested but failed to sign the oic and did not submit an estimated_tax payment ms frazier nevertheless reviewed the information petitioner provided and concluded that he had the ability to pay his tax_liability in full at this point petitioner began to dispute the underlying tax_liability ms frazier explained to petitioner that the tax_liability was based on returns petitioner had filed she gave petitioner transcripts of his tax accounts these transcripts reflected the tax_liabilities petitioner reported on his returns plus additions to tax interest and collection costs the parties were unable to resolve the matter and ms frazier issued a notice_of_determination sustaining respondent's notice_of_federal_tax_lien as the appropriate means of collecting petitioner's unpaid liabilities for and the petition the petition petitioner filed with this court covered tax years and because the notice_of_determination addressed only and respondent's motion to dismiss for lack of jurisdiction and to strike as to the remaining years was granted in his petition petitioner states i dispute the amounts i am being billed for some years are correct others the irs claim sic to be self-reported income taxes but which start out with a balance due of dollar_figure this has yet to be verified but accrues interest and penalties during certain years i was financially eligible for an offer_in_compromise but could not get my case reviewed i disagree with the determination discussion sec_6320 entitles a taxpayer to notice of the taxpayer's right to request a hearing after a notice of lien is filed by the commissioner in furtherance of the collection from the taxpayer of unpaid federal taxes the taxpayer requesting the hearing may raise any relevant issue with regard to the commissioner's intended collection activities including spousal defenses challenges to the appropriateness of the commissioner's intended collection action and alternative means of collection sec_6320 c c see 114_tc_604 114_tc_176 the taxpayer may raise challenges to the existence or amount of the underlying tax_liability however only if he did not receive any statutory_notice_of_deficiency for such tax_liability or did not otherwise have an opportunity to dispute such tax_liability sec_6330 pursuant to sec_6320 and sec_6330 petitioner was entitled to challenge the existence or amount of the underlying tax_liabilities for and at his appeals_office hearing if the validity of those underlying tax_liabilities is properly at issue the court reviews the matter de novo 122_tc_280 sego v commissioner supra pincite petitioner has failed to aver or prove facts sufficient to show error in the assessments indeed petitioner testified that he does not disagree with the amount of tax respondent determined he owes he disputes the fines and penalties assessed on the outstanding tax_liabilities sec_6651 imposes an addition_to_tax for failure_to_file a federal_income_tax return by its due_date determined with regard to any extension of time for filing previously granted the addition_to_tax equal sec_5 percent for each month that the return is late not to exceed percent sec_6651 sec_6651 provides for an addition_to_tax for failure to pay taxes shown on a return on or before the payment due_date the addition_to_tax is one-half percent of the amount shown as tax on a return for each month or fraction thereof during which the failure to pay continues not exceeding percent in the aggregate sec_6651 the additions to tax under sec_6651 and do not apply however if the failure is due to reasonable_cause and not due to willful neglect 469_us_241 864_f2d_1521 10th cir affg 86_tc_492 92_tc_899 reasonable_cause requires the taxpayer to demonstrate that he exercised ordinary business care and prudence united_states v boyle supra pincite willful neglect is defined as a conscious intentional failure or reckless indifference id pincite petitioner agrees that his return for was not filed timely and that he has not fully paid his tax_liabilities shown as due on the returns for the subject years petitioner has not produced any evidence that he had reasonable_cause or a lack of willful neglect in failing to timely file his return and failing to pay the taxes shown on his and returns petitioner has not alleged or proven that the settlement officer abused her discretion in finding that he had the ability to pay his tax_liabilities in full because petitioner has failed to present grounds on which this court could find that the settlement officer abused her discretion in sustaining the notice_of_federal_tax_lien on petitioner's property the court sustains respondent's administrative determination to proceed with collection against petitioner reviewed and adopted as the report of the small_tax_case division to reflect the foregoing a decision will be entered for respondent