department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division sep u i l xxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxx legend taxpayer a ira x xxxxxxxxxxxxx xxxxxxxxxxxxx fray xxxxxxxxxxxxx bank b bank c amount d individual m date date date date xxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxx xxxxxxxxxxxxx dear xxxxxxxxxx this letter is in response to your request dated date as supplemented by correspondence dated date submitted on your behalf by your authorized representative in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code the following facts and representations have been submitted under penalty of perjury in support of the ruling requested on date taxpayer a received a distribution of amount d from ira x with the intent to rollover amount d into a rollover ira taxpayer a asserts that his failure to accomplish a rollover of amount d within the 60-day period prescribed by sec_408 of the code was due to an error committed by individual m of bank b ira x was invested in a certificate of deposit cd which matured on date prior to date taxpayer a was contacted via telephone by individual m of bank band told that he could receive a better interest rate on ira x and his savings accounts on date taxpayer a met with individual mat bank band was told that he could obtain a higher interest rate by rolling over ira x into an ira cd individual m executed withdrawal forms which taxpayer a signed instead of rolling over funds in ira x individual m transferred amount d into a non-ira account taxpayer a believed the new account was an ira taxpayer a first became aware that amount d was not rolled over into another ira cd account as he intended when he went to his tax preparer for the preparation of his income_tax return for year taxpayer a immediately contacted bank b to correct the form 1099-r that he received but bank b refused to do so on date taxpayer a withdrew amount d from bank b and deposited amount d into his savings account with bank c taxpayer a represents that upon the advice of his tax preparer on date he withdrew amount d from bank c and rolled it over into ira y in a letter from bank b it acknowledged its error and stated that taxpayer a never intended to cause a taxable_distribution of funds that he did not touch based on the foregoing facts and representations you request that the internal_revenue_service service waive the 60-day rollover requirement contained in sec_408 of the code with respect to amount d sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if- i ii the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the 60th day after the day on which the individual received the payment or distribution or the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the 60t day after the date on which the payment or distribution is received except that the maximum amount which may be paid into such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not included in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 i r b provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the information presented and documentation submitted by taxpayer a is consistent with his assertion that the failure to accomplish a timely rollover was due to an error committed by bank b therefore pursuant to sec_408 of the code the service hereby waives the 60-day rollover requirement with respect to the distribution of amount d from ira x provided all other requirements of code sec_408 except the 60-day requirement are met with respect to such contribution the contribution of amount d into ira y will be considered a rollover_contribution within the meaning of sec_408 of the code this ruling does not authorize the rollover of amounts that are required to be distributed by sec_408 of the code no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto a copy of this letter is being sent to your authorized representative pursuant to a power_of_attorney on file in this office this letter is directed only to the taxpayer who requested it sec_611 o k of the code provides that it may not be used or cited as precedent 2'01548027 if you have any questions concerning this ruling please contact xxxxxxxxxxx at xxxxxxxxxxxxxxxxxxxxxxxx all correspondence should be addressed to se t ep ra t2 sincerely yours sherri m edelman manager employee_plans technical group enclosures deleted copy of letter_ruling notice of intention to disclose cc xxxxxxxxxxxxxx


department of the treasury internal_revenue_service washington d c date number release date cc ebeo br wta-n-115870-99 uilc internal_revenue_service national_office field_service_advice memorandum for diane erickson revenue_agent eg from jerry e holmes chief branch cc ebeo subject underreported tips-statute of limitations this field_service_advice responds to your memorandum dated date requesting our advice on the proper form to use to extend the limitations_period on fica tax more specifically you ask the following questions is the form ss-10 or the proper form to use to extend the limitations_period on fica tax with respect to underreported tips if form ss-10 is the proper form to use with respect to a married couple that filed a joint_return assuming only one of the spouses is liable for fica tax on underreported tips must the service obtain a form ss-10 only from the tipped spouse or must it obtain a form ss-10 each spouse conclusions form ss-10 is the proper form to use to extend the statute_of_limitations with respect to fica tax on underreported tips however form_872 may be used if it specifies that it relates to fica_taxes the service need only obtain a signed form ss-10 from the tipped spouse law and analysis sec_3102 requires employers to deduct and pay over the employee portion of the fica tax however sec_3102 provides a special rule applicable to tips it states in general that the withholding requirement of subsection a is applicable only to such tips as are included in a written_statement wta-n-115870-99 furnished to the employer pursuant to sec_6053 and only to the extent that collection can be made by the employer by deducting the amount of the tax from wages paid to the employee excluding tips sec_3102 provides in relevant part that if the tax imposed by sec_3101 with respect to tips which constitute wages exceeds the portion of the tax which can be collected by the employer from the wages of the employee pursuant to paragraph of this section such excess shall be paid_by the employee sec_31_6011_a_-1 of the employment_tax regulations provides that if an employee is paid wages in the form of tips and any portion of the tax under sec_3101 cannot be collected by the employer from the employee’s wages such as in the case of underreported tips the employee shall make a return for the calendar_year in respect of the employee tax not collected by the employer and the return shall be made on form_1040 sec_6501 of the code provides that except as otherwise provided in this section the amount of any_tax imposed by this title shall be assessed within three years after the return was filed sec_6501 provides that in the case of failure_to_file a return the tax may be assessed at any time sec_6501 of the code provides that where before the expiration of the time prescribed in this section for the assessment of any_tax imposed by this title except the estate_tax provided in chapter both the secretary and the taxpayer have consented in writing to its assessment after such time the tax may be assessed at any time prior to the expiration of the period agreed upon if a taxpayer fails to file a return reporting fica tax on underreported tip_income the running of the three-year assessment_period for fica tax on tip_income will not start form_1040 is not a return for fica tax form_4137 which is attached to the employee’s form_1040 must be used by the employee to report fica tax on underreported tip_income revrul_95_7 1995_1_cb_185 q a form_4137 and not form_1040 is the return which starts the running of the three-year assessment_period for fica tax on tip_income revrul_79_39 1979_1_cb_435 we note that if a taxpayer in good_faith uses an incorrect form but supplies all the information to the service that would have been supplied had the taxpayer used the correct form the assessment_period may begin to run see 44_f2d_648 10th cir and police association of massachusetts v commissioner tcmemo_1996_407 see also 309_us_304 form_872 is the form which is normally used to extend the period of limitations on assessment for the taxpayer’s federal_income_tax however form_72 may be used for other types of tax if so specified thus if a taxpayer uses form_872 to extend the period of limitations for fica tax the form will be valid as long as wta-n-115870-99 paragraph in the form specifies fica tax as the kind of tax involved the instructions to form_872 state that if this consent is for income_tax self- employment_tax or fica tax on tips and is made for any year s for which a joint_return was filed both husband and wife must sign the original and copy of this form although form_872 can be used to extend the statute_of_limitations for both income and fica_taxes if the form_872 so specifies the use of form ss-10 to extend the statute for employment_taxes is preferred form ss-10 is specially designed for employment_taxes see irm which states that form ss- is used to obtain the taxpayer’s consent to extend the statutory period within which assessment may be made of taxes under the fica and certain other employment_taxes also fica is a separate and distinct tax from the income_tax and there are a number of instances when it is more convenient for the field to deal with fica in a separate manner from the income_tax you ask whether in the case of a joint income_tax return both spouses must sign the form ss-10 sec_6013 provides that a husband and wife may make a joint_return for income taxes under subtitle a income taxes under sec_6013 a husband and wife are jointly liable only for the income taxes reported on their joint_return the tax imposed under sec_3101 is an employment_tax imposed under subtitle c thus it is not a tax with respect to which the service may impose joint liability on a husband and wife see revrul_82_185 1982_2_cb_395 s ocial security tax on unreported tip_income is separate and distinct from the individual income_tax even though both taxes may be reported on the same form because only the spouse who receives the tip_income is liable for the fica_taxes with respect to the tip_income the field may prepare the form ss-10 solely for that spouse if you have any further questions or need additional assistance please contact my office at sincerely jerry e holmes chief branch associate chief_counsel employee_benefits and exempt_organizations


internal_revenue_service department of the treasury number release date index number washington dc person to contact telephone number refer reply to cc psi - plr-112590-00 date date x a d1 year dear this letter responds to your letter dated date and subsequent correspondence requesting a ruling under sec_1362 of the internal_revenue_code the information submitted states that x was incorporated on d1 in year a as the president of x represents that x was intended to be an s_corporation effective d1 year x’s form ss-4 application_for employer_identification_number evidences this intent however a completed form_2553 election by a small_business_corporation was not timely filed for x sec_1362 of the code provides that if -- a an election under sec_1362 is made for any taxable_year after the date prescribed by sec_1362 for making such election for such taxable_year or no such election is made for any taxable_year and b the secretary determines that there was reasonable_cause for the failure to timely make such election the secretary may treat such an election as timely made for such taxable_year based solely on the facts and the representations submitted we conclude that x has established reasonable_cause for failing to make a timely election to be an s_corporation effective year accordingly provided that x makes an election to be an s_corporation by filing a completed form_2553 with the appropriate service_center effective for d1 year within days following the date of this letter then such election will be treated as timely made for x's year taxable_year a copy of this letter should be attached to the form_2553 except as specifically set forth above no opinion is expressed concerning the federal tax consequences of the facts described above under any other provision of the code including whether x was or is a small_business_corporation under sec_1361 of the code this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to x’s authorized representative sincerely yours branch jeanne m sullivan assistant to the chief office of the associate chief_counsel passthroughs and special industries enclosures copy of this letter copy for sec_6110 purposes


department of the treasury internal_revenue_service washington d c tax_exempt_and_government_entities_division dec uniform issue list tep dat legend taxpayer a ira b financial_institution c account d financial_institution e individual f amount dear this is in response to your request for a ruling dated date as supplemented by correspondence dated may june august and date in which you request a waiver of the 60-day rollover requirement contained in sec_408 of the internal_revenue_code the code’ the following facts and representations have been submitted under penalty of perjury in support of the ruling requested taxpayer a represents that she received a distribution from ira b totaling amount taxpayer a asserts that her failure to accomplish a rollover of amount within the 60-day period prescribed by sec_408 was due page to confusion over whether ira b was an ira annuity taxpayer a further represents that amount has not been used for any purpose in taxpayer a established ira b an individual_retirement_annuity ira under sec_408 of the code with financial_institution c taxpayer a last made contributions to ira b in in taxpayer a discussed ira b with individual f her husband during their discussion taxpayer a referred to ira b as an annuity and failed to identify it as an ira the annuity was due for renewal and individual f questioned whether it continued to be a good investment individual f recommended that ira b be closed and the funds transferred to an investment account with financial_institution e on date taxpayer a requested that ira b be closed and amount be distributed to her on date individual f deposited amount into account d a non ira account with financial_institution e taxpayer a represents that she had not made any contributions to the ira annuity since and had neglected to inform individual f that the annuity was an ira several years ago she had handled a non-ira annuity for her mother and believed her annuity could be handled in the same manner taxpayer a did not seek any financial advice concerning the distribution based on the facts and representations you request a ruling that the internal_revenue_service the service waive the 60-day rollover requirement contained in sec_408 of the code with respect to the distribution of amount sec_408 of the code provides that except as otherwise provided in sec_408 any amount_paid or distributed out of an ira shall be included in gross_income by the payee or distributee as the case may be in the manner provided under sec_72 of the code sec_408 of the code defines and provides the rules applicable to ira_rollovers sec_408 of the code provides that sec_408 of the code does not apply to any amount_paid or distributed out of an ira to the individual for whose benefit the ira is maintained if - i the entire amount received including money and any other_property is paid into an ira for the benefit of such individual not later than the day after the day on which the individual receives the payment or distribution or ii the entire amount received including money and any other_property is paid into an eligible_retirement_plan other than an ira for the benefit of such individual not later than the day after the date on which the payment or distribution is received except that the maximum amount which may be paid into page such plan may not exceed the portion of the amount received which is includible in gross_income determined without regard to sec_408 sec_408 of the code provides that sec_408 does not apply to any amount described in sec_408 received by an individual from an ira if at any time during the 1-year period ending on the day of such receipt such individual received any other amount described in sec_408 from an ira which was not includible in gross_income because of the application of sec_408 sec_408 of the code provides a similar 60-day rollover period for partial rollovers sec_408 of the code provides that the rollover provisions of sec_408 do not apply to any amount required to be distributed under sec_408 sec_408 of the code provides that the secretary may waive the day requirement under sec_408 and sec_408 of the code where the failure to waive such requirement would be against equity or good conscience including casualty disaster or other events beyond the reasonable control of the individual subject_to such requirement only distributions that occurred after date are eligible for the waiver under sec_408 of the code revproc_2003_16 2003_4_irb_359 date provides that in determining whether to grant a waiver of the 60-day rollover requirement pursuant to sec_408 the service will consider all relevant facts and circumstances including errors committed by a financial_institution inability to complete a rollover due to death disability hospitalization incarceration restrictions imposed by a foreign_country or postal error the use of the amount distributed for example in the case of payment by check whether the check was cashed and the time elapsed since the distribution occurred the service has the authority to waive the 60-day rollover requirement for a distribution from a qualified_retirement_plan where the individual failed to complete a rollover to another qualified_plan or ira within the 60-day rollover period but was prevented from doing so because of one of the factors enumerated above in revproc_2003_16 in this instance however the service finds that the documentation and materials provided by taxpayer a do not demonstrate how any of these factors resulted in her failure to accomplish a timely rollover of amount taxpayer a represented that her inability to complete a rollover of amount was caused by her failure to identify the distribution of amount as being from an ira annuity page therefore the service declines to waive the 60-day rollover requirement with respect to the distribution of amount from ira b no opinion is expressed as to the tax treatment of the transaction described herein under the provisions of any other section of either the code or regulations which may be applicable thereto this letter is directed only to the taxpayer who requested it sec_61 k of the code provides that it may not be used or cited as precedent if you wish to inquire about this ruling please contact at sincerely yours mbt a wats manager employee_plans technical group enclosures deleted copy of this letter notice of intention to disclose notice


internal_revenue_service number release date index number ------------------------------------------------------ ------------------------- ------------------------------------ department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------------ id no ------------------ ---------------------------------------------------- telephone number --------------------- refer reply to cc ita b04 plr-120138-09 date date legend taxpayer a taxpayer b corporation w corporation x corporation y corporation z services year year date date date date dollar_figurea dollar_figureb dollar_figurec dollar_figured dollar_figuree dollar_figuref dollar_figureg dollar_figureh dollar_figurei dollar_figurej dollar_figurek state ---------------------------- -------------------------- ----------------------------------------------------- ---------------------------- ------------------------------------ ------------------------------ ------------------------------- ------- ------- ----------------------- ------------------- -------------------- ----------------------- --------------- ------------- --------------- --------------- --------------- ---------------- --------------- ------------- --------------- --------------- ----------- -------------- plr-120138-09 dear ----------------------------- this letter responds to your request for a ruling that the amount that is not required to be paid on the notes should be treated as investment_income for purposes of sec_163 of the internal_revenue_code code facts taxpayer a and taxpayer b are married and file a joint federal_income_tax return using the calendar_year and cash_receipts_and_disbursements_method of accounting taxpayer a is the president and sole shareholder of corporation w and corporation x corporation w and corporation x are c corporations that provide services any dividends_paid by corporation w and corporation x to taxpayer a would not be derived in the ordinary course of a trade_or_business because taxpayer a is not a dealer or a trader in stock_or_securities taxpayers represent that taxpayer a is the debtor on three notes corporation y holds two of the notes and corporation z a wholly owned subsidiary of corporation y holds one of the notes the notes originated in year and year to acquire the stock of corporation w note to make a capital_contribution to corporation w at the time of acquisition note and to make a capital_contribution to corporation x at the time of its formation note the notes were issued with more than a de_minimis amount of original_issue_discount oid note dated date is in the principal_amount of dollar_figurea it was issued in satisfaction of a prior note with an original principal_amount of dollar_figureb note is non-recourse and the payment of the principal and interest is secured_by a pledge of corporation w stock but subordinate to the pledge for note the lender of note is corporation y note dated date is in the principal_amount of dollar_figurec note is non-recourse and the payment of the principal and interest is secured_by a pledge of corporation w stock the lender of note was the predecessor of corporation z note dated date is in the principal_amount of dollar_figured it was issued in satisfaction of a prior note with a principal_amount of dollar_figuree note is non-recourse and the payment of the principal and interest is secured_by a pledge of corporation x stock the lender is corporation y because of state regulatory restrictions the lenders could not own directly or indirectly the stock of corporation w or corporation x as an accommodation taxpayer a acquired and held the stock of corporation w and corporation x plr-120138-09 on date after state eliminated the restrictions on the lenders owning the stock of corporation w and corporation x taxpayer a entered into contracts to sell the stock of corporation w and corporation x to corporation z the contract for the sale of the corporation w stock provides that corporation z will pay taxpayer a either dollar_figuref or dollar_figureg depending on whether certain events occur the contract allocates dollar_figureh to a covenant_not_to_compete similarly the contract for the sale of the corporation x stock provides that corporation z will pay taxpayer a either dollar_figurei or dollar_figurej depending on the whether certain events occur the contract allocates dollar_figurek to a covenant_not_to_compete additionally on date taxpayer a entered into debt payoff agreements with corporation y for note and note and corporation z for note the debt payoff agreements provide that taxpayer a will pay the principal amounts owed of dollar_figurea on note dollar_figurec on note and dollar_figured on note the contracts for sale of the stock of corporation w and corporation x provide that the principal amounts owed on note note and note will offset the amounts that corporation z will pay to taxpayer a for the sale of the stock under the debt payoff agreements taxpayer a will not be required to pay the accrued interest owed from date on note and note similarly taxpayer a will not be required to pay any interest on note taxpayers state that all accrued interest owed that is not required to be paid is cancellation_of_indebtedness_income under sec_61 law and analysis sec_61 of the code provides that gross_income includes all income from whatever source derived including income_from_discharge_of_indebtedness see also sec_1_61-12 of the income_tax regulations regulations sec_163 of the code provides the general_rule that a taxpayer can deduct all interest_paid or accrued within the taxable_year on indebtedness sec_163 limits the amount of investment_interest that a taxpayer other than a corporation may deduct for any taxable_year to the amount of the taxpayer's net_investment_income for the taxable_year sec_163 provides that an amount not deducted by reason of sec_163 shall be treated as investment_interest paid_or_accrued by the taxpayer in the succeeding taxable_year sec_163 of the code defines net_investment_income as the excess of investment_income over investment_expenses sec_163 defines investment_expenses as the deductions allowed under chapter other than for interest that are directly connected with the production of investment_income sec_163 defines investment_income as the sum of-- i gross_income from property_held_for_investment other than any gain taken into account under clause ii i ii the excess if any of-- plr-120138-09 i the net gain attributable to the disposition of property_held_for_investment over ii the net_capital_gain determined by only taking into account gains and losses from dispositions of property_held_for_investment plus iii so much of the net_capital_gain referred to in clause ii ii or if lesser the net gain referred to in clause ii i as the taxpayer elects to take into account under this clause investment_income includes qualified_dividend_income only to the extent the taxpayer elects to treat such income as investment_income sec_163 of the code provides that the term property_held_for_investment includes i any property that produces income of a type described in sec_469 and ii any interest held by a taxpayer in an activity involving the conduct_of_a_trade_or_business i that is not a passive_activity and ii with respect to which the taxpayer does not materially participate the type of income described in sec_469 includes gross_income from interest dividends annuities or royalties not derived in the ordinary course of a trade_or_business because stock generally produces dividend income it is property_held_for_investment within the meaning of sec_163 and sec_469 unless the dividends are derived in the ordinary course of a trade_or_business revrul_93_68 1993_2_cb_72 russon v commissioner 107_tc_263 sec_1001 of the code provides that the gain from the sale_or_other_disposition of property shall be the excess of the amount_realized therefrom over the adjusted_basis provided in ' for determining gain sec_1001 provides that the amount_realized from the sale_or_other_disposition of property shall be the sum of any money received plus the fair_market_value of the property other than money received under ' c except as otherwise provided in subtitle a the entire amount of gain_or_loss determined under ' on the sale_or_exchange of property shall be recognized sec_1_1001-2 of the regulations provides that the amount_realized on the sale_or_other_disposition of property includes the amount of liabilities from which the transferor is discharged as a result of the sale or disposition conclusion based on the facts presented and the representations made we conclude that if the amount that is not required to be paid under the debt payoff agreements is properly characterized as accrued unpaid interest and treated as income_from_discharge_of_indebtedness under sec_61 then the income should be treated as investment_income for purposes of sec_163 we further conclude that if the amount owed that is not required to be paid under the debt payoff agreements is properly characterized as an additional_amount realized upon sale of the stock under sec_1001 and the regulations then any additional gain is gain attributable to the disposition of property_held_for_investment and is covered by the provisions of sec_163 and iii if the amount plr-120138-09 that is not required to be paid under the debt payoff agreements is properly characterized as income other than income_from_discharge_of_indebtedness or an additional_amount realized upon sale of the stock we express no opinion concerning its treatment for purposes of sec_163 except as expressly provided we express or imply no opinion concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter specifically we express no opinion as to whether the amount owed that is not required to be paid is principal and therefore an additional_amount realized under sec_1001 and the regulations or accrued unpaid interest further we express no opinion as to whether any accrued interest owed that is not required to be paid should be characterized as income_from_discharge_of_indebtedness under sec_61 or as a medium of payment of an additional_amount realized on the sale of the stock under sec_1001 or other type of income this ruling is directed only to the taxpayer requesting it sec_6110 of the code provides that it may not be used or cited as precedent in accordance with the power_of_attorney on file with this office a copy of this letter is being sent to your authorized representative a copy of this letter must be attached to any income_tax return to which it is relevant alternatively taxpayers filing their returns electronically may satisfy this requirement by attaching a statement to their return that provides the date and control number of the letter_ruling the rulings contained in this letter are based upon information and representations submitted by the taxpayer and accompanied by a penalty of perjury statement executed by an appropriate party while this office has not verified any of the material submitted in support of the request for rulings it is subject_to verification on examination sincerely donna welsh senior technician reviewer branch office of associate chief_counsel income_tax accounting


t c memo united_states tax_court bengt edvard oman petitioner v commissioner of internal revenue respondent docket nos 18421-08l filed date bengt edvard oman pro_se fred e green jr for respondent memorandum opinion marvel judge these cases were consolidated for purposes of trial briefing and opinion on date respondent issued a notice_of_deficiency in which he determined a deficiency of dollar_figure in petitioner’s federal_income_tax for and additions to tax of dollar_figure for failure_to_file a return timely under sec_6651 dollar_figure for failure_to_pay_tax timely under sec_6651 and dollar_figure for failure to pay estimated_tax under sec_6654 after concessions the issue for decision in docket no is whether petitioner is liable for the income_tax deficiency and additions to tax respondent determined for in reaching our decision we must also decide whether respondent properly treated petitioner’s form_1040 u s individual_income_tax_return as unprocessable and invalid on date respondent issued a notice_of_determination concerning collection action s under sec_6320 and or for notice_of_determination pursuant to sec_6330 petitioner seeks review of respondent’s determination to proceed with the collection of petitioner’s federal_income_tax liability the issue for decision in docket no 18421-08l is whether respondent abused his discretion in sustaining the collection action with respect to petitioner’s federal_income_tax liability 1unless otherwise indicated all section references are to the internal_revenue_code code as amended and all rule references are to the tax_court rules_of_practice and procedure monetary amounts are rounded to the nearest dollar 2respondent concedes that petitioner’s distribution from pensions was dollar_figure rather than dollar_figure as he had determined in the notice_of_deficiency background some of the facts have been stipulated we incorporate the stipulated facts into our findings by this reference petitioner resided in nevada when he filed his petitions we find facts with respect to each year at issue as follows i petitioner and his wife johnette r oman mrs oman timely filed their form 1040a u s individual_income_tax_return they claimed the filing_status of married_filing_jointly petitioner and mrs oman reported wages of dollar_figure withholding of federal_income_tax of dollar_figure and an overpayment of federal_income_tax of dollar_figure attached to the form 1040a was a notice in which petitioner and mrs oman stated that they signed the return under duress respondent issued a refund but later determined an dollar_figure deficiency in petitioner and mrs oman’s federal_income_tax on date respondent mailed petitioner and mrs oman a notice_of_deficiency petitioner and mrs oman did not file a petition in response to the notice_of_deficiency instead on date they mailed respondent a letter demanding that respondent define income explain his delegated constitutional and legislated lawful authority and identify code sections imposing federal 3petitioner and mrs oman attached a similar notice to their return the notice accompanying their return is reproduced infra p income_tax on certain income on date respondent replied by a letter informing petitioner and mrs oman that he will contact you again within days to let you know what action we are taking you don’t need to send us anything further or take any other action now on this matter on date petitioner mailed respondent another letter that was similar to the date letter on date respondent replied again advising petitioner and mrs oman that he would contact them within days to inform them of the action taken respondent’s date letter again stated that petitioner and mrs oman did not need to do anything regarding the matter on february and date respondent sent petitioner notices of balance due on date respondent sent petitioner a final notice_of_intent_to_levy and notice of your right to a hearing final notice for on or about date petitioner sent respondent a 22-page letter containing rhetoric similar to that used in the date letter petitioner asserted that respondent had repeatedly refused to provide him 4the parties subsequently exchanged similar correspondence on date petitioner and mrs oman sent respondent another letter similar to the date letter on date respondent wrote that he would contact petitioner and mrs oman within days 5respondent sent a separate final notice for to mrs oman with various information that petitioner had demanded for example the code sections establishing respondent’s delegated constitutional and legislated lawful authority to make assessments on date petitioner timely submitted a form request for a collection_due_process or equivalent_hearing in response to the question on the form about petitioner’s daytime telephone number and the best time to call petitioner wrote please contact me in writing petitioner did not provide his phone number or the best time to call on date valerie chavez ms chavez a settlement officer assigned to petitioner’s case sent petitioner a letter acknowledging his form ms chavez stated that petitioner had requested to be contacted in writing and that she scheduled petitioner’s hearing by correspondence for date ms chavez requested that by date petitioner submit information that he would like considered in the hearing such as a collection alternative and a completed form 433-a collection information statement for wage earners and self-employed individuals ms chavez also stated that if petitioner wished to propose any alternative collection methods he would need to complete a form 433-a within days and submit signed form sec_1040 for and ms chavez informed petitioner that he would not be able to dispute the underlying liability because he had received a notice_of_deficiency by letter dated date petitioner replied to ms chavez’ date letter petitioner stated that he did not recall requesting to be contacted in writing and asked ms chavez to provide him a copy of his correspondence he also requested a face-to-face hearing at the internal_revenue_service irs appeals_office closest to reno nevada and stated that he would record such hearing petitioner stated that the form 433-a did not pertain to him because he was neither a wage earner nor a taxpayer and irs has provided no information saying otherwise however he stated that he would complete and sign the form 433-a if ms chavez attested in writing that petitioner’s signature would not validate or create the underlying liability or grant any jurisdiction over petitioner petitioner did not submit his federal_income_tax returns for and on date ms chavez acknowledged receipt of petitioner’s date letter she enclosed a copy of petitioner’s form in which he requested to be contacted in writing ms chavez explained that generally the appeals_office did not provide face-to-face conferences to taxpayers making only groundless or frivolous arguments ms chavez also stated that petitioner was not eligible for a face-to-face conference because he had not filed his and returns6 and for that reason could not submit a collection alternative such as an installment_agreement or offer-in-compromise ms chavez explained that because petitioner had previously had an opportunity to challenge his liability he could not raise it in the sec_6330 hearing ms chavez suggested that he might be able to do so through the audit_reconsideration process on date petitioner sent ms chavez another letter containing mostly statements similar to those in his previous correspondence petitioner also stated that the box on the form that asked for his phone number and the best time to call did not indicate that it would be used to determine the hearing format petitioner again requested a face-to-face hearing petitioner enclosed with the letter copies of his and form sec_1040 the form_1040 reported an ira distribution of dollar_figure and zero income on all other lines on the form_1040 petitioner and mrs oman reported zero income but because of the standard deductions exemptions and federal_income_tax withheld that they reported on the return they claimed an overpayment_of_tax 6ms chavez stated it is not necessary to provide a copy of your tax_return 7it appears that petitioner did not include in his date letter to ms chavez the notice that accompanied the originally filed return on date respondent’s appeals_office issued a notice_of_determination sustaining the proposed levy in the attached memorandum the appeals_office stated that petitioner failed to provide requested financial information and delinquent tax returns that the issues he raised were frivolous and that petitioner did not propose a collection alternative the appeals_office also explained that petitioner was not able to raise the underlying liability at the hearing because he had received a notice_of_deficiency the appeals_office also stated that the and form sec_1040 were zero returns and that claiming a refund of any_tax withheld by filing a zero return was frivolous the appeals_office concluded that the notice_of_levy was issued in accordance with all statutory and procedural requirements and appropriately balanced the need for efficient collection_of_taxes with petitioner’s concern that the collection action be no more intrusive than necessary ii during petitioner worked for two companies as a machinist he worked for and received wages from dillen products inc which was a part of myers industries inc from time to time during petitioner also worked for paramount custom cycles l l c paramount petitioner also received unemployment_compensation from the state of nevada at some point before petitioner worked for b j machine and tool inc and participated in the company’s sec_401 employee_stock_ownership_plan in petitioner received a distribution from the plan on date petitioner and mrs oman filed their form_1040 for they filled in their names address and social_security numbers in the relevant boxes on the form_1040 they checked married_filing_jointly as their filing_status and claimed two exemptions petitioner and mrs oman reported a dollar_figure ira distribution on line 15b but wrote zeros in all other lines of the income portion of the form_1040 because petitioner and mrs oman claimed a dollar_figure standard_deduction and dependency_exemption deductions of dollar_figure they reported zero tax_liability and sought a dollar_figure refund petitioner and mrs oman signed the form_1040 leaving no marks on the return or the jurat they attached a form_4852 substitute for form_w-2 wage and tax statement or form 1099-r distributions from pensions annuities retirement or profit-sharing_plans iras insurance contracts etc on which they reported zero wages from paramount and social_security and medicare taxes withheld petitioner explained on the form_4852 that he had requested that paramount correct its records but it refuses to do so out of fear of irs 8the jurat portion of the form_1040 reads under penalties of perjury i declare that i have examined this return and accompanying schedules and statements and to the best of my knowledge and belief they are true correct and complete retaliation petitioner and mrs oman also attached another form_4852 showing zero wages from dillen products inc and social_security and medicare taxes withheld petitioner wrote that he had been unable to address the issue of incorrect statements out of fear of losing his job transmitted with the form_1040 was a cover letter notice that read as follows notice certified mail we the undersign sic do hereby affirm that the tax_return for year included in this letter is not being filed and signed voluntarily we are compelled to file and sign out of fear of unlawful retaliation from irs and or doj the tax_return for year was signed under duress any tax returns from previous years that we have filed were not filed voluntarily and were signed under duress the reason for this notice to our tax_return for year is the fact that irs and or doj use tax returns as evidence in tax and non-tax litigation see attachment a the only way these return s can be used as evidence lawfully against the person s who filed and signed said return s is if the return s was filed voluntarily and sign sic voluntarily an american can not be compelled to be a witness against him her self see the constitutions sic 5th amendment below the notice concluded with the recitation of the fifth_amendment to the constitution above the signature line the notice read with reservation of all our rights immunities and privileges we remain attachment a referenced and included with the notice was an excerpt from a article from united_states attorneys’ bulletin titled follow that lead obtaining and using tax information in a non-tax case respondent did not treat the form_1040 as a valid and processable return using information_return data from third- party payors respondent prepared a substitute for return under sec_6020 respondent included in petitioner’s income the following items distributions from pensions of dollar_figure erroneously shown in the notice_of_deficiency as dollar_figure nonemployee compensation of dollar_figure unemployment_compensation of dollar_figure and wages of dollar_figure respondent also issued a notice_of_deficiency in which he determined that petitioner had income as set forth above and that petitioner was liable for an income_tax deficiency of dollar_figure and additions to tax under sec_6651 and and petitioner timely filed a petition to contest the notice_of_deficiency petitioner contends that he filed a valid return petitioner also argues that because his return is valid respondent’s notice_of_deficiency is invalid petitioner 9on the form_1040 petitioner and mrs oman claimed a filing_status of married_filing_jointly in preparing the substitute for return respondent used a filing_status of single the parties have not indicated whether they agree that petitioner may use the filing_status married_filing_jointly in rule_155_computations enclosed with his petition a 26-page attachment citing numerous authorities including cases and code sections out of context discussion i deficiency proceeding with respect to a burden_of_proof and unreported income issues generally the commissioner’s determination of a taxpayer’s liability for an income_tax deficiency is presumed correct and the taxpayer bears the burden of proving it incorrect see rule a 290_us_111 the u s court_of_appeals for the ninth circuit to which an appeal would lie absent a stipulation to the contrary see sec_7482 has held that for the presumption of correctness to attach to the notice_of_deficiency in unreported income cases the commissioner must establish some evidentiary foundation connecting the taxpayer with the income-producing activity see 596_f2d_358 9th cir revg 67_tc_672 or demonstrating that the taxpayer actually received unreported income 680_f2d_1268 9th cir if the commissioner introduces some evidence that the taxpayer received unreported income the burden of production shifts to the taxpayer who must establish by a preponderance_of_the_evidence that the deficiency was arbitrary or erroneous see 181_f3d_1002 9th cir affg tcmemo_1997_97 respondent introduced into evidence a form_w-2 wage and tax statement for showing that petitioner received wages from myers industries inc respondent also introduced into evidence a certified print of the information returns processing transcript for showing on the basis of third-party information returns that petitioner received wages from myers industries inc and paramount unemployment_compensation and a distribution from a sec_401 plan petitioner testified that in he worked for a company that was part of myers industries inc and acknowledged that he possibly worked for paramount he also testified that it was possible that he received unemployment_compensation from the state of nevada and a distribution from an employee_stock_ownership_plan because respondent connected petitioner with income-producing activities the burden of production shifted to petitioner and the presumption of correctness attached to respondent’s income adjustments see weimerskirch v commissioner supra pincite petitioner does not argue that sec_7491 which shifts the burden_of_proof to the commissioner in certain circumstances applies nor does the record permit us to conclude that the requirements of sec_7491 are met consequently petitioner bears the burden_of_proof with respect to all adjustments see rule a petitioner denies that he received wages from paramount and myers industries inc petitioner contends that he attached the forms to his return because the payors paramount and dillen products inc erroneously withheld the social_security and medicare taxes petitioner presented no credible_evidence to show that paramount and dillen products inc incorrectly reported wages they paid petitioner on the third-party information returns to the contrary petitioner testified that in he worked for dillen products inc and it was very possible that he worked for paramount at trial petitioner recalled receiving the forms w-2 but testified that he did not report the amounts because in his opinion they did not meet the definition of wages and instead he engaged in an exchange of property for property this meritless argument is reminiscent of the equal exchange theory which we have previously rejected as frivolous see 82_tc_766 affd 793_f2d_139 6th cir accordingly we sustain respondent’s determination with respect to petitioner’s income b the validity of the form_1040 we now turn to the issue whether petitioner’s form_1040 was a valid_return we must first decide whether petitioner had an obligation to file a return and then we must decide whether he did so obligation to file a return under sec_6012 an individual who is entitled to make a joint_return and whose gross_income when combined with the gross_income of his spouse exceeds the sum of twice the exemption_amount and the basic_standard_deduction applicable to a joint_return must file a federal_income_tax return as discussed above we sustain respondent’s determination regarding petitioner’s income for as modified by respondent’s concession petitioner’s income for exceeded the described threshold and consequently petitioner had an obligation to file a return for petitioner contends that he had no obligation to file a return because respondent’s records show no such obligation petitioner relies on respondent’s letter dated date respondent’s date letter is a response to petitioner’s request for release of records under the freedom_of_information_act petitioner contends that the records produced in response to his request show code as petitioner’s filing requirement code which petitioner asserts means return not required to be mailed or filed we reject petitioner’s argument it is the internal_revenue_code that establishes a taxpayer’s filing requirement see sec_6012 moreover petitioner has failed to show that the individual_master_file records on which he relies are related to his taxable yeardollar_figure accordingly we conclude petitioner has failed to prove that he was not required to file a return for validity of a return in general generally pursuant to sec_6011 taxpayers must file returns that conform to the forms and regulations prescribed by the secretary see sec_1_6011-1 income_tax regs the form_1040 is the form prescribed by the secretary for use by individual taxpayers in filing returns 114_tc_136 sec_6065 requires a return to be verified by a written declaration that it is made under the penalties of perjury see id the preprinted jurat on the form_1040 satisfies the verification requirement of sec_6065 see id the code does not define the word return see 121_tc_308 vasquez j concurring 121_tc_111 on the basis of the supreme court’s opinions in 293_us_172 and 280_us_453 in beard v commissioner supra pincite we applied a four-part test beard 10petitioner contends the code means that the taxpayer has no filing obligation however one printout in exhibit 37-p appears to refer to mrs oman’s year and the other printout appears to relate to petitioner’s taxable_year test for determining whether a taxpayer’s document constitutes a valid_return to be a valid_return we said the document must meet the following requirements first there must be sufficient data to calculate the tax_liability second the document must purport to be a return third there must be an honest and reasonable attempt to satisfy the requirements of the tax law and fourth the taxpayer must execute the return under penalties of perjury id we have applied the beard test in various contexts including for purposes of sec_6651 sec_6662 and sec_6011 among others mendes v commissioner supra pincite vasquez j concurring applying the beard test this court has generally held that a form_1040 with zeros on every income line is devoid of financial data and is not a valid_return see eg turner v commissioner tcmemo_2004_251 halcott v commissioner tcmemo_2004_214 we also applied the beard test when the taxpayer reported income on one line of the form_1040 but wrote zeros on all other lines of income under circumstances that indicated no intent to file a valid_return see eg watson v commissioner tcmemo_2007_146 concluding that a return that reported income on one line and zeros on other lines and that was accompanied by an attachment negating the jurat was invalid as it did not constitute a reasonable attempt to comply with the requirements of the tax law affd 277_fedappx_450 5th cir the beard test has been adopted and used by several u s courts of appeals often in the context of a bankruptcy case appeal to decide whether a particular document is a return filed by a taxpayer see eg 446_f3d_836 8th cir whether purported returns filed by a debtor- taxpayer after the irs had prepared substitutes for returns and assessed tax_liabilities were returns within the meaning of u s c sec a b i 352_f3d_902 4th cir 164_f3d_1029 6th cir whether a substitute for return was a return for purposes of u s c sec a b i 949_f2d_341 10th cir same under 54_tc_742 affd 445_f2d_985 10th cir we follow any decisions of the court_of_appeals to which appeal lies that are squarely on point in 618_f2d_74 9th cir the court_of_appeals for the ninth circuit held that in the context of a criminal prosecution under sec_7203 a 11the position of the court_of_appeals for the ninth circuit that a return containing all zeros constitutes a valid_return for purposes of a sec_7203 prosecution is contrary to the positions of several other courts of appeals that have considered the issue see 738_f2d_157 6th cir zero income return 638_f2d_182 10th cir zero income return 618_f2d_280 5th cir zero on every line of the return sec_7203 establishes criminal liability for willful failure_to_file returns form_1040 that contained only zeros in every space for entering exemptions income_tax and tax withheld was a valid_return in long the court_of_appeals reversed the taxpayer’s conviction for willful failure_to_file a return on a record that showed the following the government had no record of the taxpayer’s having filed any returns for the years at issue during the years at issue the irs did not keep copies of documents that it considered to be invalid returns including forms showing only zeros nor did the irs keep records of receiving such documents the taxpayer defending against the prosecution’s position of no return introduced facsimile copies of the documents he purportedly filed as returns the trial_court sitting as the trier of fact in a nonjury trial accepted as a fact that the taxpayer had filed the documents and the taxpayer had inserted zeros in the spaces reserved for entering exemptions income_tax and tax withheld on the form sec_1040 he had filed and had attached to the form sec_1040 copies of a tax protest tract see id pincite the court_of_appeals started with the trial court’s factual finding that the taxpayer filed tax forms resembling the facsimiles introduced at trial which the court concluded was not clearly erroneous and then turned to the issue of whether by filing the form sec_1040 the taxpayer made a return for purposes of sec_7203 see id it decided the issue by applying the principle articulated in 426_f2d_519 10th cir and adopted by the court_of_appeals for the ninth circuit in 494_f2d_394 9th cir --a tax form that does not contain any information relating to the taxpayer’s income from which the tax may be computed is not a valid_return under sec_7203 see united_states v long supra pincite the court_of_appeals held that the prosecution did not prove that the taxpayer was guilty of willfully failing to file a return within the meaning of sec_7203 and it explained its reasoning13 as follows the zeros entered on long’s tax forms constitute information relating to the taxpayer’s income from which the tax can be computed the i r s could calculate assessments from long’s strings of zeros just as it could if long had entered other numbers the resulting assessments might not reflect long’s actual tax_liability but some computation was possible in this respect the circumstances here differ from those in porth and similar cases in which defendants failed to complete tax forms or left them 13in a footnote the court distinguished cases in which a court has held that a purported return stating only a name address occupation and signature and asserting that the tax law is unconstitutional eg 481_f2d_28 8th cir or stating a name address an entry claiming a refund and a constitutional objection eg 561_f2d_198 10th cir was not a tax_return under the code see 618_f2d_74 n 9th cir in another footnote the court acknowledged that applying the principle from 426_f2d_519 10th cir may leave open the possibility that certain papers although conveying information might nevertheless not constitute tax returns united_states v long supra pincite n blank nothing can be calculated from a blank but a zero like other figures has significance a return containing false or misleading figures is still a return false figures convey false information but they convey information id pincite fn refs omitted in 692_f2d_587 9th cir affg in part revg in part and remanding 74_tc_1160 the court_of_appeals for the ninth circuit again addressed what constitutes a return but this time the issue arose under sec_6211 which defines a deficiency former sec_6653 which imposed a 50-percent fraud_penalty on any part of an underpayment due to fraud and former sec_6653 which defined underpayment to mean deficiency as defined in sec_6211 one of the taxpayers argued that she was entitled to a reduction in the fraud penalties determined by the commissioner for amounts that she and her husband had reported on filed form sec_1040 see id pincite the form sec_1040 reflected only the taxpayers’ names addresses social_security numbers filing_status exemptions amounts designated as taxable_income and computations of income and self-employment_tax id pincite the taxpayers did not include specific amounts or descriptions for gross_income or deductions on the form sec_1040 id pincite instead they attached to each form a statement that they were under investigation by the government and that they were asserting their fifth_amendment privilege_against self- incrimination with respect to the details of their income and expenses see id pincite before this court the taxpayer in conforte had argued that the tax shown on the form sec_1040 qualified as an ‘amount shown as the tax by the taxpayer upon his return’ within the meaning of sec_6211 id pincite quoting sec_6211 alternatively she had argued that the amount of tax shown on her form sec_1040 represented an amount previously assessed or collected without assessment within the meaning of sec_6211 conforte v commissioner supra pincite- relying on 21_tc_1012 affd 225_f2d_629 10th cir this court rejected both arguments concluding that none of the form sec_1040 qualified as returns because the documents did not state specifically the amounts of gross_income or the deductions and credits taken into account in computing taxable_income see conforte v commissioner supra pincite the commissioner relying on 618_f2d_74 9th cir argued that for a form_1040 to be recognized as a return for tax purposes it must set forth sufficient information relating to the taxpayer’s income from which the tax can be computed see conforte v commissioner supra pincite the court_of_appeals in conforte distinguished long because long decided whether the taxpayer had made a return for purposes of sec_7203 see id it rejected the idea that the term return has the same meaning under all sections of the code acknowledging instead the possibility that the same word could have a different meaning in different parts of the code id it concluded that where as here a word could well have a different meaning in different statutory contexts a purpose- oriented approach should be used when interpreting the meaning of the word as it is used in different sections of the code id applying the described approach the court_of_appeals held that the form sec_1040 were returns for purposes of the calculations required by sec_6211 and former sec_6653 and c see id pincite the approach of the court_of_appeals for the ninth circuit regarding what constitutes a return as reflected in united_states v long supra and clarified in conforte v commissioner supra requires us to examine the purpose behind the relevant code section under which the issue arises in this case the issue arises under sec_6651 which authorizes an addition_to_tax when a taxpayer fails to file a timely return we can discern from a simple reading of sec_6651 that congress clearly intended to impose the addition_to_tax whenever a taxpayer fails to satisfy the taxpayer’s obligation to file a proper return by its due_date we can also discern that a provision like sec_6651 was designed to facilitate the orderly administration of federal tax law by the commissioner a form_1040 on which a taxpayer fails to make an honest and reasonable attempt to comply with the tax law such as the claiming of withholding without any reported wages or taxable_distributions is not a document that is worthy of being processed as a return and the irs routinely takes the position that such a form_1040 is not a return for purposes of sec_6651 it is this scenario that respondent contends is presented here in a case like this one we apply the beard test in deciding whether a document qualifies as a return for purposes of sec_6651 see eg 120_tc_163 102_tc_499 we note that the court_of_appeals has applied the beard test under different circumstances to decide whether a document qualified as a return and has described the beard test as providing a sound approach under both the bankruptcy code and the code 220_f3d_1057 9th cir consequently we conclude that the beard test is not inconsistent with the purpose-oriented approach of conforte and we shall apply it heredollar_figure 14in coulton v commissioner tcmemo_2005_199 a deficiency case in which the taxpayer filed a return containing zeros on each line regarding income and tax we distinguished 618_f2d_74 9th cir on the ground continued the application of the beard test respondent contends that the form_1040 fails the first and third parts of the beard test because it does not contain sufficient information to calculate tax_liability and it is not an honest and reasonable attempt to satisfy the requirements of the tax law we agree and explain our reasoning below part one of the beard test considers whether the purported return contains sufficient data to calculate the tax_liability see beard v commissioner t c pincite although an incorrect return is not necessarily an invalid return see zellerbach paper co v helvering u s pincite perfect accuracy or completeness is not necessary to rescue a return from nullity if it purports to be a return is sworn to as such and evinces an honest and genuine endeavor to satisfy the law we have held that returns containing zero entries on every line regarding income are devoid of financial data and therefore are continued that it involved a criminal statute sec_7203 we concluded that long was not squarely on point and we applied the beard test to decide whether the taxpayer’s purported return was a valid_return see coulton v commissioner supra see also 54_tc_742 affd 445_f2d_985 10th cir as in coulton we are not faced with a prosecution under sec_7203 instead we are considering the validity of a purported return in the context of a civil tax_deficiency proceeding in which one of the issues is whether petitioner is liable for the sec_6651 addition_to_tax for failing to file a timely return invalid see eg turner v commissioner tcmemo_2004_251 halcott v commissioner tcmemo_2004_214 at first glance it appears that petitioner’s purported return is not a zero income return because petitioner reported a dollar_figure ira distribution in addition petitioner and mrs oman claimed joint_return filing_status dependency_exemption deductions and the standard_deduction and they inserted their social_security numbers nevertheless petitioner’s return on its face lacks information sufficient to apprise respondent of his and mrs oman’s federal_income_tax liability because it shows dollar_figure tax withheld but contains no information as to income from which such tax was purportedly withheld specifically the return shows zeros for wages pension distributions or dividends from which the dollar_figure tax could have been withheld and reports no federal_income_tax liability despite the one income entry accordingly we conclude petitioner’s form_1040 on its face does not contain sufficient data to calculate petitioner’s tax_liability and fails part one of the beard test part three of the beard test considers whether the taxpayer made an honest and reasonable attempt to satisfy the requirements of the tax law see beard v commissioner supra pincite respondent contends that the form_1040 fails part three of the beard test because of the assertion of the fifth_amendment as protecting him from having the government_use the forms he submitted as evidence against him for reasons set forth below we do not limit our analysis to petitioner’s asserted fifth_amendment position this court and the court_of_appeals for the ninth circuit have examined the taxpayer’s intent and the facts and circumstances surrounding the filing of the document purporting to be the taxpayer’s return in deciding whether a taxpayer has satisfied part three of the beard test see united_states v hatton supra pincite1 considering as part of the third part of the beard test the fact that the taxpayer filed the return only after the commissioner contacted him dunham v commissioner tcmemo_1998_52 considering the taxpayer’s background and intent under the third part of the beard test in applying part three of the beard test we consider that petitioner received wages during he failed to report those wages and he claimed he had no obligation to report his earned_income on a returndollar_figure as discussed above we have previously rejected similar arguments as frivolous see beard v commissioner supra pincite see also 80_tc_1111 our conclusion regarding petitioner’s intent with respect to his purported return is also supported by petitioner’ sec_15at trial petitioner argued the amounts he received in exchange for services did not meet the definition of wages because he received property in exchange for property behavior after he filed the purported return on date less than months after filing the return petitioner mailed to respondent a letter requesting an explanation of respondent’s authority to issue notices and to make assessments and legal determinations against petitioner and giving respondent days to replydollar_figure petitioner also asked respondent what code section requires him to enclose documentation to support the entries on the return and what code section defines income petitioner then instructed respondent to mail the answer to his address in nevada republic no zip code the letter concluded if the response is addressed any other way than exactly as above i will know that the letter is intended for a fiction and you are trying to trick me into abandoning my common_law jurisdiction to enter your commercial admirality sic color of law jurisdiction the rhetoric of petitioner’s date letter which was nearly contemporaneous with the time of filing the return raises serious doubts that the notice while not a blanket fifth_amendment claim was drafted and attached to the return in good_faith the date letter is one of similar letters in the record that petitioner mailed to respondent from date through date we find that the notice and the purported return to which it was attached 16petitioner continues this line of argument on brief were part of a pattern of communications of meritless content that petitioner mailed to respondent evincing an intent on petitioner’s part not to comply with his tax obligations we further find that petitioner’s purported return was not an honest and reasonable attempt to satisfy the requirements of the tax law and we conclude that it fails part three of the beard test because petitioner’s purported return fails the first and third parts of the beard test we conclude it was not a valid_return and we sustain respondent’s determination to disregard it c additions to tax burden of production sec_7491 provides that the commissioner bears the burden of production in any court_proceeding with respect to the liability of any individual for any penalty addition_to_tax or additional_amount the commissioner’s burden of production under sec_7491 is to produce evidence that imposing the relevant penalty or addition_to_tax is appropriate 118_tc_358 the taxpayer bears the burden of introducing evidence regarding reasonable_cause or a similar defense 116_tc_438 sec_6651 sec_6651 imposes an addition_to_tax for failure_to_file a return timely in the amount of percent of the tax required to be shown on the return for each month during which such failure continues not to exceed percent in the aggregate unless it is shown that such failure is due to reasonable_cause and not due to willful neglect respondent satisfied his burden of production under sec_7491 by introducing an excerpt from petitioner’s transcript that contained third-party information returns data relating to petitioner’s income and a copy of the return that respondent determined was unprocessable accordingly petitioner was required to introduce evidence to prove that his failure_to_file a valid_return was due to reasonable_cause and not due to willful neglect see sec_6651 rule a petitioner did not argue that his failure_to_file a valid_return was due to reasonable_cause and he presented no credible_evidence on the issue accordingly we hold that petitioner is liable for the addition_to_tax under sec_6651 sec_6651 sec_6651 imposes an addition_to_tax for failure to pay timely the amount of tax shown on a return the sec_6651 addition_to_tax applies only when an amount of tax is shown on a return cabirac v commissioner t c pincite petitioner did not file a valid return however respondent prepared a substitute for return under sec_6020 for a return made by the secretary under sec_6020 is treated as the return filed by the taxpayer for purposes of determining whether the sec_6651 addition_to_tax applies sec_6651 127_tc_200 affd 521_f3d_1289 10th cir where the taxpayer did not file a valid_return to satisfy his burden of production for the sec_6651 addition_to_tax the commissioner must introduce evidence that he prepared a substitute for return satisfying the requirements under sec_6020 wheeler v commissioner supra pincite respondent satisfied this burden by introducing into evidence an sec_6020 certification consequently petitioner had the burden of introducing evidence to show that his failure to pay was due to reasonable_cause he did not do so petitioner did not advance any argument regarding the sec_6651 addition_to_tax and introduced no credible_evidence to show reasonable_cause for his failure_to_pay_tax shown on the return accordingly we sustain respondent’s determination with respect to the addition_to_tax under sec_6651 sec_6654 sec_6654 imposes an addition_to_tax for underpayment of a required_installment of estimated_tax each required_installment of estimated_tax is equal to percent of the required_annual_payment which in turn is equal to the lesser_of percent of the tax shown on the taxpayer’s return for that year or if no return is filed percent of his or her tax for such year or if the taxpayer filed a return for the immediately preceding_taxable_year percent of the tax shown on that return sec_6654 and b respondent introduced evidence that petitioner was required to file a federal_income_tax return for and that the return he filed was invalid despite petitioner’s claim on the return that tax of dollar_figure was withheld respondent’s records show no such withholding petitioner made no other_payments for respondent also introduced into evidence petitioner’s return for showing a dollar_figure tax_liability this satisfies respondent’s burden of production under sec_7491 by showing that petitioner had a required_annual_payment of estimated_tax for we also find that petitioner does not qualify for any of the exceptions of sec_6654 petitioner presented no argument with respect to sec_6654 therefore we sustain respondent’s determination that petitioner is liable for the addition_to_tax under sec_6654 ii collection proceeding regarding petitioner’s tax_liability sec_6330 provides that no levy may be made on any property or right to property of any person unless the secretary has notified such person in writing of the right to a hearing before the levy is made if the person requests a hearing a hearing shall be held before an impartial officer_or_employee of the irs appeals_office sec_6330 at the hearing a taxpayer may raise any relevant issue including appropriate spousal defenses challenges to the appropriateness of the collection action and collection alternatives sec_6330 a taxpayer may contest the existence or amount of the underlying tax_liability at the hearing if the taxpayer did not receive a notice_of_deficiency for the tax_liability or did not otherwise have an earlier opportunity to dispute the tax_liability sec_6330 see also 114_tc_604 following a hearing the appeals_office must determine whether the proposed levy may proceed the appeals_office is required to take into consideration verification presented by the secretary that the requirements of applicable law and administrative procedure have been met relevant issues raised by the taxpayer and whether the proposed levy action appropriately balances the need for efficient collection_of_taxes with a taxpayer’s concerns regarding the intrusiveness of the proposed levy action sec_6330 sec_6330 grants this court jurisdiction to review the determination made by the appeals_office in connection with the sec_6330 hearing where the validity of the underlying liability is properly at issue the court reviews the matter on a de novo basis sego v commissioner supra pincite 114_tc_176 where the underlying tax_liability is not in dispute the court reviews the appeals office’s determination for abuse_of_discretion sego v commissioner supra pincite goza v commissioner supra pincite an abuse_of_discretion occurs if the appeals_office exercises its discretion arbitrarily capriciously or without sound basis in fact or law 112_tc_19 petitioner contends that respondent misled him by instructing him not to take further action when he contacted respondent after receiving the notice_of_deficiency for however petitioner stipulated the notice_of_deficiency and does not deny that he received it the notice_of_deficiency states the time in which you must file a petition with the court days or days as the case may be is fixed by law and the court cannot consider your case if the petition is filed late petitioner testified that he read the notice_of_deficiency upon receipt and remembered the language regarding the time for filing a petition petitioner may not now hide behind respondent’s form letters because the notice_of_deficiency contained clear instructions on what petitioner had to do to contest the liability because petitioner failed to dispute the underlying liability by filing a timely petition sec_6330 precludes him from contesting the validity of the underlying tax_liability during the sec_6330 hearing and in this proceeding accordingly we review respondent’s determination for abuse_of_discretion in his petition petitioner does not raise any meritorious arguments during trial petitioner contended that although he requested a face-to-face hearing he did not receive any hearing petitioner contends that respondent improperly interpreted the phrase please contact me in writing on the form as petitioner’s request for a hearing by correspondence petitioner’s claimed misunderstanding of the form is understandable line of the form asks for a taxpayer’s phone number and the best time to call it does not indicate that it is intended to be the means by which a taxpayer selects a hearing format nor does it indicate that by providing a phone number the taxpayer is requesting a telephone hearing or that in petitioner’s case by requesting a contact in writing he selects a hearing by correspondence the form in fact has no box to check or area to write in to indicate the preferred format of a requested hearing nevertheless even if petitioner unknowingly requested a hearing by correspondence and later clarified he wanted a face-to-face hearing we conclude that respondent did not abuse his discretion in denying petitioner a face-to-face hearing and that petitioner received a proper sec_6330 hearing generally because a hearing under sec_6330 is an informal proceeding a face-to-face hearing is not mandatory see 115_tc_329 115_tc_35 clough v commissioner tcmemo_2007_106 while a sec_6330 hearing may be held face-to-face a proper hearing may be conducted by telephone or correspondence in certain circumstances katz v commissioner supra pincite see also clough v commissioner supra a hearing by correspondence consists of one or more written or oral communications between an appeals officer_or_employee and the taxpayer sec_301_6330-1 q a-d6 proced admin regs all communications between the taxpayer and the appeals officer from the time of the hearing request up to the time of the issuance of the notice_of_determination constitute part of the sec_6330 hearing see turner v commissioner tcmemo_2010_44 middleton v commissioner tcmemo_2007_120 the record establishes that petitioner submitted his form on date petitioner did not request a face- to-face hearing on his form but did so by letter dated date in the date letter petitioner stated that respondent had repeatedly refused to answer his questions regarding code sections that define income and property received as income and establish respondent’s delegated constitutional and legislated lawful authority the letter contained meaningless language for example i do hereby give you notice that you and all you are are fired from any and all representation of my private affairs without_recourse other than stating that his inability to discuss the underlying liability at the hearing is unfair petitioner did not describe in his request for a face-to-face hearing what he intended to discuss at the hearing nor did he offer collection alternatives ms chavez informed petitioner by letter dated date that his request for a face-to-face hearing was denied on date petitioner sent another letter to ms chavez that was similar to the date letter petitioner pointed out that the form was confusing because it did not state that by selecting the method of contact he was actually selecting the format of the sec_6330 hearing petitioner included the and form sec_1040 as discussed above the form_1040 was an invalid return and the form_1040 was a zero income return again petitioner did not identify any issues he would discuss at the hearing nor did he propose collection alternatives or submit a completed form 433-a as ms chavez had requested we conclude that respondent did not err in refusing to grant petitioner a face-to-face hearing and that the correspondence between petitioner and ms chavez constituted a proper sec_6330 hearing in his petition and at trial petitioner did not pursue any meritorious argument nor did he introduce any credible_evidence that would allow us to conclude that the determination to sustain the levy was arbitrary capricious without foundation in fact or law or otherwise an abuse_of_discretion see eg 129_tc_107 the appeals_office verified that all requirements of applicable law or administrative procedure were met it balanced the need for efficient collection_of_taxes with petitioner’s concerns that the collection action be no more intrusive than necessary accordingly we conclude that respondent did not abuse his discretion in sustaining the collection action we have considered all of the arguments raised by either party and to the extent not discussed above we find them to be irrelevant or without meritdollar_figure sec_6673 provides that this court may require the taxpayer to pay a penalty not in excess of dollar_figure whenever it appears to this court that a the proceedings were instituted or maintained by the taxpayer primarily for delay b the taxpayer’s position is frivolous or groundless or c the taxpayer unreasonably failed to pursue available administrative remedies respondent did not request that we impose a penalty pursuant to sec_6673 and in the exercise of our discretion we will not impose a sec_6673 penalty on petitioner however we warn petitioner that if in the future he maintains groundless positions in this court he runs the risk that he will be sanctioned in accordance with sec_6673 to reflect the foregoing decision will be entered under rule in docket no decision will be entered for respondent in docket no 18421-08l


t c memo united_states tax_court kathie j smee f k a kathie j zavitz petitioner v commissioner of internal revenue respondent docket no filed date julie p gasper for respondent memorandum opinion goldberg special_trial_judge this case was heard pursuant to sec_7443a and rule sec_180 sec_181 and sec_182 this matter is before the court on the motion to stay proceedings filed by petitioner kathy j smee f k a kathie j zavitz and unless otherwise indicated all 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 respondent's motion for entry of decision by notice_of_deficiency dated date respondent determined deficiencies in federal income taxes additions to tax and additional interest as to petitioner and her former husband keith a zavitz as follows additions to tax additional interest sec sec sec sec sec year deficiency a a a c dollar_figure dollar_figure n a n a -0- n a big_number n a n a dollar_figure big_number n a dollar_figure percent of the interest due on the deficiency percent of the interest accruing after date under sec_6601 with respect to any substantial_underpayment attributable to tax- motivated transactions the underlying issue in this case arose from investment_tax_credit carrybacks claimed by petitioner and mr zavitz related to their investment in the cpg record partnership cpg record partnership leased a master recording from encore leasing corp respondent mailed a notice_of_deficiency to them on date petitioner and mr zavitz mailed a petition for redetermination on date which was filed with the tax_court on date to begin a case at docket no at the time their petition was filed they resided in california by order dated date the court severed petitioner from that case for purposes of considering respondent’s motion for entry of decision petitioner signed a stipulation of settlement for tax_shelter adjustments of petitioners the stipulation filed with the court on date in the stipulation petitioner agreed that all adjustments in the notice_of_deficiency related to the encore leasing tax_shelter and petitioner agreed to have all issues in her case resolved as if petitioner were the same as the taxpayer in the controlling case wolf v commissioner docket no the stipulation provided that a decision would be submitted in her case when the decision in the controlling case became final keith a zavitz signed an identical stipulation an opinion was entered in wolf v commissioner on date tcmemo_1991_212 this decision was affirmed 4_f3d_709 9th cir no signed decision document has been submitted petitioner and mr zavitz are no longer married it is not clear from the record when they separated or divorced on date petitioner filed a petition with the u s bankruptcy court for the eastern district of california under chapter of the bankruptcy code title u s c on date petitioner was granted a discharge_in_bankruptcy the order provided that petitioner was released from all dischargeable debts the order further provided any judgment heretofore or hereafter obtained in any court other than this court is null and void as a determination of the personal liability of the debtor with respect to any of the following a debts dischargeable under u s c sec b unless heretofore or hereafter determined by order of this court to be nondischargeable debts alleged to be excepted from discharge under clauses and of u s c sec a c debts determined by this court to be discharged under u s c sec d all creditors whose debts are discharged by this order and all creditors whose judgments are declared null and void by paragraph above are enjoined from commencing continuing or employing any_action process or act to collect recover or offset any such debt as a personal liability of the debtor whether or not discharge of such debt is waived in date mr zavitz filed a petition in bankruptcy under chapter he was granted a discharge on date mr zavitz filed a complaint to determine tax_liability with the u s bankruptcy court for the northern district of texas the complaint included the tax years at issue herein the case at docket no was calendared for trial on date in dallas texas respondent's counsel moved for entry of decision at that time no appearance was entered on behalf of petitioner and mr zavitz although petitioner filed a trial memorandum the court took respondent's motion for entry of decision under advisement and ordered respondent's counsel to file a legal memorandum on the issue of whether the court could enter a decision while mr zavitz’ complaint filed in the bankruptcy court was pending no memorandum was filed because in a notice filed date respondent notified the court that on date mr zavitz filed a petition under chapter of the bankruptcy code with the u s bankruptcy court for the northern district of texas the proceedings at docket no were automatically stayed as to mr zavitz the court ordered the parties to file a written report showing cause why the proceedings should not be stayed as to petitioner as well on date petitioner filed a request to stay the proceedings at docket no on date respondent filed a notice of objection to that request by order dated date the court granted petitioner's request to stay proceedings in addition respondent's motion for entry of decision filed date was denied on date mr zavitz filed a status report notifying the court that his bankruptcy proceedings were ongoing on date respondent filed a status report notifying the court that by order dated date the bankruptcy court dismissed mr zavitz’ case respondent also notified the court that on date mr zavitz filed a chapter petition by status report filed with the court on date respondent notified the court that this case was dismissed on date the court issued an order dated date lifting the stay in the proceedings at docket no and restoring the case to the general docket for trial or other_disposition however by notice filed with the court on date respondent notified the court that mr zavitz filed a petition with the u s bankruptcy court for the northern district of texas on date and all proceedings were automatically stayed pursuant to the provisions of u s c sec_362 petitioner filed a status report with the court on date requesting that the proceedings be stayed as to her as well pursuant to u s c sec_362 by order dated date the court ordered respondent to file any objection to petitioner's request on date petitioner filed a motion to stay proceedings which was identical to her status report filed earlier respondent filed an objection to petitioner's request to stay proceedings a hearing on the motion was calendared for date in dallas texas petitioner made no appearance at the hearing originally petitioner and mr zavitz were represented by counsel william j ruhe jr william j ruhe jr subsequently was withdrawn as counsel of record for kathy j smee f k a kathie j zavitz on date respondent filed a motion for entry of decision as to petitioner which the court took under advisement subsequently as previously stated the court severed petitioner from the case at docket no for purposes of considering respondent’s motion in her motion petitioner argues that rulings of the bankruptcy court are binding on the tax_court petitioner further contends that by order of the u s bankruptcy court for the eastern district of california she was released from all dischargeable debts respondent does not dispute that an order of the bankruptcy court is binding respondent argues however that petitioner has not alleged that the bankruptcy court made a determination with respect to her tax_liability for the years in issue respondent argues that the deficiencies in issue are not dischargeable citing u s c sections and a moreover respondent argues that this court is without jurisdiction to determine whether petitioner's tax_liability was discharged finally respondent argues that the proceedings should not be stayed as to petitioner because she is a separate taxpayer from mr zavitz generally the filing of a petition in bankruptcy acts as an automatic_stay against inter alia the continuation of a proceeding before the tax_court concerning the debtor u s c sec_362 an automatic_stay continues until the case is closed the case is dismissed or a discharge is granted whichever is earliest u s c sec_362 after the automatic_stay has been removed there is no bar to this court's accepting jurisdiction or continuing a proceeding that had been petitioned prior to the automatic_stay 94_tc_1 where taxpayers file a joint petition the filing of a petition in bankruptcy by one taxpayer individually does not affect the jurisdiction of the tax_court to redetermine the deficiency with respect to the other taxpayer see 76_tc_754 71_tc_1028 the tax_court is a court of limited jurisdiction conferred by statute see sec_7442 neilson v commissioner supra pincite generally the court's jurisdiction is dependent upon a notice_of_deficiency and a timely filed petition sec_6212 and sec_6213 the court does not have jurisdiction to determine whether a deficiency was discharged in a bankruptcy proceeding see neilson v commissioner supra 75_tc_389 tortu v commissioner tcmemo_1994_243 petitioner received a discharge_in_bankruptcy on date thus we are not barred from continuing these proceedings as to petitioner furthermore we do not believe that there is any reason to stay these proceedings with respect to petitioner as a result of the automatic_stay imposed with respect to mr zavitz finally we are without subject matter jurisdiction to determine whether the deficiencies involved herein were discharged by the bankruptcy court on the basis of the foregoing petitioner’s motion to stay proceedings filed date will be denied and respondent’s motion for entry of decision filed on date will be granted to reflect the foregoing and the stipulation an appropriate order and decision will be entered


acknowledged significant advice may be disseminated office_of_chief_counsel internal_revenue_service memorandum date date tl-n-7607-97 sca released to associate district_counsel kentucky-tennessee district cc ser kty lou from subject assistant chief_counsel field service cc dom fs significant service_center advice this responds to your request for significant advice received date in connection with a question posed by the examination function of the memphis service_center disclosure statement unless specifically marked acknowledged significant advice may be disseminated above this memorandum is not to be circulated or disseminated except as provided in ccdm d and e this document may contain confidential information subject_to the attorney-client and deliberative_process privileges therefore this document shall not be disclosed beyond the office or individual s who originated the question discussed herein and are working the matter with the requisite need to know in no event shall it be disclosed to taxpayers or their representatives issue s whether information provided in a form_8300 currency transaction report ctr provides an adequate basis for issuing a notice_of_deficiency for unreported income conclusion for the reasons given below we think that a form_8300 currency transaction report is insufficient evidence of unreported income and does not provide an adequate basis for issuing a notice_of_deficiency without additional investigation facts a currency transaction report form_8300 is required to be filed by a party who has received in excess of dollar_figure in cash in the course of his or her trade_or_business from another party see sec_6050i the form_8300 must be filed within days of the transaction and the recipient of the cash must provide the payor of the cash with a statement summarizing all such transactions at the end of the calendar_year the examination_division at your local service_center has suggested that if a form_8300 shows that a taxpayer paid dollar_figure in cash for an automobile the form_8300 should be matched to his or her return if the taxpayer’s return does not reflect that income the service_center would issue a cp or other proposed_adjustment letter requesting that the taxpayer explain the apparent discrepancy if the taxpayer failed to respond or the response was unsatisfactory the service_center would issue a statutory_notice_of_deficiency asserting unreported income in the amount of the cash transaction discussion underlying the proposed procedures is the presumption that a cash transaction always represents taxable_income in the year of the transaction in fact the source of a large amount of cash reported by a payee on a form_8300 may be nontaxable a payments reported on an information_return form_w-2 or a form_1099 is on its face usually taxable to the individual and can serve as the basis of a statutory_notice_of_deficiency if the requirements of sec_6201 are met the presumption of correctness would attach to such a notice in contrast to other information returns ctrs do not indicate the timing source or circumstances of the receipt of the cash by the taxpayer a taxpayer may have access to a large sum of money from a nontaxable source such as a legacy or a personal injury award such a taxpayer may spend a large sum of cash thereby generating a form_8300 report although most taxpayers use checks to account for their expenditures the fact that a taxpayer uses cash rather than some other form of payment is not prima facie evidence of a taxable source for the cash moreover the fact that the taxpayer was in possession of more than dollar_figure in cash at the time of the reported currency transaction does not mean that all or any part of that amount was accumulated in whatever fashion during the year it was spent proving the nonexistence of a relatively small cash horde is extremely difficult particularly if the taxpayer has reported earned_income over a number of years if the service were to issue a statutory_notice_of_deficiency based solely on the form_8300 and the taxpayer’s failure to respond to the cp the service would still need to produce evidence to refute a taxpayer’s claim that the source of the cash was tax free when the taxpayer files a petition in tax_court the need for this additional evidence exists without regard to the allocation of the burden_of_proof the tax court’s restrictions on discovery will make additional investigation to develop the record more difficult with 1099s and w-2s the payor is available to help establish that the taxpayer received income with a form_8300 the preparer of the information_return can only testify as to the receipt of cash from the taxpayer not as to how the taxpayer in turn acquired the cash thus the development required is more extensive than with most other information returns given that larger than average sums of money are involved and that in some cases criminal activity may be uncovered we think the wisest course in all cases involving a form_8300 mismatch would be to refer the form to a district_office examination function for further investigation prior to the issuance of any statutory notice a more complete examination will also allow the service to consider whether a criminal_referral is appropriate in addition to the preceding practical problems in defending a notice based almost entirely on a form_8300 we share your concern that issuing such notices of deficiency is not sound policy over the last several years congress has shown that it is concerned that the service fully develop cases before issuing notices of deficiency using a summary method to determine unreported income from a form_8300 without further investigation is similar to service procedures that led congress to enact sec_6201 requiring under certain circumstances the service to produce additional supporting information when a taxpayer contests an adjustment based on an information_return in our view the form_8300 information is an invaluable tool that may lead to fruitful targets for examination it is not a substitute for that examination once the field_office conducts an examination the service should be on firm ground to defend any statutory notice resulting from the investigation deborah a butler s