Court Opinion

ID: 9925704
Source: CourtListenerOpinion
Date Created: 2024-01-22 20:02:12.288293+00
Date Added: 2024-06-11T09:21:27.550762
License: Public Domain

United States Tax Court

                                T.C. Memo. 2024-7

                                 SAUL BRADLEY,
                                    Petitioner

                                           v.

               COMMISSIONER OF INTERNAL REVENUE,
                           Respondent

                                     —————

Docket No. 24108-22L.                                      Filed January 22, 2024.

                                     —————

Saul Bradley, pro se.

Brian S. Jones, David A. Indek, Amanda K. Krugler, and Holly L.
Dennehy, for respondent.

                          MEMORANDUM OPINION

       GREAVES, Judge: In this collection due process (CDP) case,
petitioner seeks review pursuant to section 6330(d) of the determination
by the Internal Revenue Service (IRS or respondent) to uphold a notice
of intent to levy for tax years 2013 and 2014 (years at issue). 1
Respondent moved for summary judgment under Rule 121, contending
that there are no disputed issues of material fact and that his
determination to sustain the collection action was proper as a matter of
law. For the reasons set forth below, we will grant respondent’s motion.

       1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C. (Code), in effect at all relevant times, and Rule references are to
the Tax Court Rules of Practice and Procedure.

                                 Served 01/22/24
                                         2

[*2]                               Background

      The following facts are based on the parties’ pleadings and motion
papers, the attached declarations and exhibits, and the administrative
record. Petitioner resided in Pennsylvania when the petition was filed.

       Petitioner jointly filed income tax returns for the years at issue
with his now ex-wife. Respondent selected these returns for audit and
determined $7,924 and $2,922 in deficiencies, respectively. 2 Respondent
also determined accuracy-related penalties of $1,585 under section
6662(a) for tax year 2013. Respondent issued a notice of deficiency to
petitioner and his ex-wife on November 13, 2015. Petitioner did not file
a petition protesting the notice of deficiency within 90 days, and
respondent assessed the deficiencies along with the penalty.

       To collect these liabilities, respondent issued Notice CP90, Final
Notice–Notice of Intent to Levy and Notice of Your Right to a Collection
Due Process Hearing, on August 16, 2021. Petitioner timely submitted
Form 12153, Request for a Collection Due Process or Equivalent
Hearing. Petitioner failed to check any boxes indicating the relief he
sought. Petitioner attached a document to his Form 12153 asserting the
following challenges: (1) the IRS did not properly send the notice of
deficiency, (2) he was not responsible for the tax or penalties, and (3) he
would face hardship if he paid the deficiencies.

       The settlement officer reviewed petitioner’s file and initially
determined that he could not verify that the notice of deficiency was
issued to petitioner because it was not listed on petitioner’s account
transcripts. The settlement officer requested a copy of the notice of
deficiency and United States Postal Service (USPS) Form 3877, Firm
Mailing Book for Accountable Mail (Form 3877 or certified mailing list),
to verify that the notice of deficiency was sent. On February 15, 2022,
the settlement officer issued Letter 4837, Appeals Received Your
Request for a Collection Due Process Hearing, confirming receipt of the
CDP hearing request and scheduling a telephone hearing for March 17,
2022.

      On March 10, 2022, the settlement officer received a voicemail
from petitioner, requesting that the CDP hearing be rescheduled
because of deaths in his family. The settlement officer rescheduled the
CDP hearing for April 5, 2022. Before the rescheduled hearing, the

       2 All dollar amounts are rounded to the nearest dollar.
                                          3

[*3] settlement officer received a copy of the notice of deficiency and
Form 3877, which he used to verify that the notice of deficiency was
properly sent. The settlement officer also determined that petitioner
was not current on his filing obligations because he had not filed returns
for tax years 2016 through 2020.

       On April 5, 2022, petitioner called the settlement officer for the
CDP hearing. At the CDP hearing, the settlement officer explained
possible collection alternatives, and petitioner indicated he would be
interested in currently not collectible (CNC) status. The settlement
officer requested that petitioner submit financial information and his
unfiled returns for tax years 2016 through 2020 by April 26, 2022.

       On May 23, 2022, petitioner faxed a completed Form 433–A,
Collection Information Statement for Wage Earners and Self-Employed
Individuals, to the settlement officer. On Form 433–A petitioner listed
his current monthly income as $2,800. Petitioner listed the following
monthly expenses: $400 in food, clothing, and miscellaneous expenses
and $2,300 in housing and utility expenses. As a result, petitioner listed
the net difference between his income and expenses as $100.

       The settlement officer evaluated petitioner’s Form 433–A and
concluded that petitioner could afford payments of $518 per month. 3 In
performing that calculation, the settlement officer applied the IRS local
and national standards to determine petitioner’s allowable expenses:
increasing the food, clothing, and miscellaneous expenses to $785 and
reducing the housing and utilities expenses to $1,497. Thus, the
settlement officer determined that petitioner was not eligible for CNC
status. The settlement officer also determined that petitioner was not
eligible for penalty abatement because he was not current on his tax
obligations.

      The settlement officer issued a letter to petitioner stating these
conclusions. In this letter, the settlement officer granted petitioner an
extension of time until August 12, 2022, to provide additional
information as to why the settlement officer should deviate from the
national and local standards and to show compliance with current
return filing obligations. Petitioner did not respond to this request, and

        3 The settlement officer requested review of petitioner’s Form 433–A by the

Collection Division of the IRS. The Collection Division did not respond to the request,
and, consistent with Internal Revenue Manual (IRM) 8.22.7.4.1(2) (Aug. 26, 2020), the
settlement officer proceeded to evaluate petitioner’s CNC status request.
                                           4

[*4] on September 27, 2022, the settlement officer issued the notice of
determination, sustaining the proposed levy.

       Petitioner timely filed a petition with this Court for review.
Petitioner assigned error to the following issues: (1) he did not receive
the notice of deficiency underlying the levy notice, (2) the settlement
officer did not verify that evidence existed to show he owed the
underlying tax liabilities, (3) the settlement officer failed to verify
compliance with all applicable administrative rules and regulations, and
(4) the settlement officer abused his discretion by rejecting his request
for CNC status.

        On July 11, 2023, respondent filed a Motion for Summary
Judgment. On July 31, 2023, we ordered petitioner to file a response, if
any, by August 28, 2023. No objection was received by the Court within
that period. On September 6, 2023, we struck the case from the Court’s
September 11, 2023, Philadelphia, Pennsylvania, trial session. At this
trial session, petitioner nevertheless appeared and was heard regarding
his response to the Motion for Summary Judgment, which he alleged
that he mailed to the Court. On September 13, 2023, we ordered
petitioner to file a response to the Motion for Summary Judgment by
September 15, 2023. Petitioner mailed a letter to the Court setting forth
various frivolous arguments related to his underlying liabilities. 4 On
November 9, 2023, the Court received petitioner’s original objection,
dated August 18, 2023, which asserted the same arguments. 5

                                     Discussion

I.      Summary Judgment

      The purpose of summary judgment is to expedite litigation and
avoid costly, unnecessary, and time-consuming trials. See FPL Grp.,

        4 Petitioner asserted the following three arguments: (1) as a U.S. citizen he had

no obligation to file a federal tax return, (2) income does not include compensation for
services, and (3) federal reserve notes are debt instruments that are not taxable. We
have consistently rejected these and similar arguments as frivolous. See, e.g., Harvey
v. Commissioner, T.C. Memo. 2023-95, at *7; Hodges v. Commissioner, T.C. Memo.
2005-168, slip op. at 5–6; Lowman v. Commissioner, T.C. Memo. 1997-574, slip op. at 3.
In any event, these arguments constitute challenges to petitioner’s underlying
liabilities, and as we discuss below, petitioner may not challenge his underlying
liabilities. See § 6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 610 (2000).
       5 This delay in receipt appears to stem from petitioner mailing his objection to

the address of the courthouse which hosted the Court’s September 11, 2023,
Philadelphia, Pennsylvania, trial session.
                                   5

[*5] Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). We may grant
summary judgment where there is no genuine dispute of material fact
and a decision may be rendered as a matter of law. See Rule 121(a)(2);
Elec. Arts, Inc. v. Commissioner, 118 T.C. 226, 238 (2002). Furthermore,
we construe the facts and draw all inferences in the light most favorable
to the nonmoving party to decide whether summary judgment is
appropriate. See Bond v. Commissioner, 100 T.C. 32, 36 (1993). The
nonmoving party may not rest upon the mere allegations or denials of
his pleading but must set forth specific facts showing that there is a
genuine dispute for trial. See Rule 121(d); Bond, 100 T.C. at 36. We
conclude that no material facts are in dispute and that the case may be
adjudicated summarily.

II.    Standard of Review

       Section 6330(b) permits a taxpayer to challenge an IRS proposed
levy before the Independent Office of Appeals (Appeals Office), and
section 6330(d) provides for Tax Court review of an Appeals Office
determination. The Code does not prescribe the standard of review that
this Court should apply in reviewing an IRS administrative
determination in a CDP case; rather, we are guided by our precedents.
Where the validity of a taxpayer’s underlying liability is properly at
issue, we review the IRS determination de novo. See Goza v.
Commissioner, 114 T.C. 176, 181–82 (2000). Where a taxpayer’s
underlying liability is not properly at issue, we review the IRS
determination for abuse of discretion only. See id. at 182.

III.   Underlying Liability Challenge

       A taxpayer may dispute his underlying liability in a CDP hearing,
but only if he did not receive a valid notice of deficiency or otherwise
have a prior opportunity to contest his liability. See § 6330(c)(2)(B);
Sego, 114 T.C. at 610. For purposes of determining whether a taxpayer
may challenge the underlying liabilities, actual receipt of the notice of
deficiency must be determined. See Sego, 114 T.C. at 610. A notice of
deficiency is presumed to have been received by a taxpayer if it was
properly mailed to his last known address. See § 6212(b)(1); Sego, 114
T.C. at 611; Campbell v. Commissioner, T.C. Memo. 2013-57, at *9 (“The
Commissioner generally has prevailed in foreclosing challenges to the
underlying liability under section 6330(c)(2)(B) where he establishes
that a notice of deficiency was mailed to the taxpayer’s last known
address and no factors are present that rebut the presumption . . . of
delivery.”).
                                    6

[*6] Respondent bears the burden of proving, by competent and
persuasive evidence, the existence of the notice of deficiency and proper
mailing of the notice of deficiency. See Coleman v. Commissioner, 94
T.C. 82, 90 (1990). Generally, if the IRS establishes that the notice
existed and produces a properly completed Form 3877 showing that the
notice was sent to the taxpayer’s last known address, the IRS is entitled
to a presumption of proper mailing. See id. at 91. A properly completed
Form 3877 is one completed in compliance with the established IRS
procedure for mailing. See Keado v. United States, 853 F.2d 1209, 1213
(5th Cir. 1998); Lander v. Commissioner, 154 T.C. 104, 118 (2020). Even
without the presumption of proper mailing, the IRS can still prevail so
long as it provides “otherwise sufficient” evidence of mailing. See
Coleman, 94 T.C. at 91; Portwine v. Commissioner, T.C. Memo. 2015-29,
at *11, aff’d, 668 F. App’x 838 (10th Cir. 2016).

        The settlement officer declined to consider petitioner’s underlying
liability challenges, reasoning that petitioner received the notice of
deficiency. The settlement officer made this determination on the basis
of the copy of the notice of deficiency and Form 3877. There is no dispute
that the notice of deficiency exists because the administrative record
contains a signed and dated copy of the notice. The Form 3877 provided
to this Court bears the stamp of the USPS facility in Philadelphia,
Pennsylvania, confirms that the number of items received by USPS
equaled the number of items listed on Form 3877, and lists the same
date and mailing address as the copy of the notice of deficiency provided
to the settlement officer. However, two possible defects are apparent on
Form 3877.

       First, as redacted by respondent, we cannot discern whether
Form 3877 was signed by the USPS employee who accepted delivery of
the notice. A Form 3877 is not properly completed when a USPS
employee does not sign the form. See Bobbs v. Commissioner, T.C.
Memo. 2005-272, slip op. at 6–7; IRM 4.8.9.11.3 (Aug. 11, 2016). Thus,
because the Form 3877 does not contain a visible signature of a USPS
employee, it is not properly completed. We have previously held that
this omission, together with other omissions, renders the presumption
of proper mailing inapplicable. See Bobbs, T.C. Memo. 2005-272, slip op.
at 6–7.

       The other error on Form 3877 relates to the name stamp
appearing on the form. This stamp appears to be the name of the IRS
employee who issued the notice of deficiency. Form 3877 must be signed
or initialed by the IRS agent who issued the notice. See Kaebel v.
                                         7

[*7] Commissioner, T.C. Memo. 2017-37, at *14; IRM 4.8.9.11.3. We
previously held that a stamp signature from a receiving USPS employee
was a defect on Form 3877, sufficient when combined with other
omissions to prevent application of the presumption of proper mailing.
Knudsen v. Commissioner, T.C. Memo. 2015-69, at *6–7, *14–16.
Because both the IRS agent and the USPS employee are required by IRS
procedure to sign Form 3877, we see no reason why we should treat the
stamped signature of the IRS agent in this case differently from the
stamped signature of the USPS employee in Knudsen. Therefore, the
stamped signature of the IRS agent is a defect on Form 3877. These two
errors render the presumption of proper mailing inapplicable. See
Bobbs, T.C. Memo. 2005-272, slip op. at 6–7.

        While this evidence is not sufficient to create a presumption of
proper mailing, respondent may still satisfy his burden to show proper
mailing of the notice of deficiency if the evidence of mailing is otherwise
sufficient. See Portwine, T.C. Memo. 2015-29, at *11. An incomplete
certified mailing list may serve as evidence that the notice of deficiency
was properly mailed to a taxpayer. Id. Here, the possible defects in
Form 3877 are minor. Form 3877 bears the USPS stamp, specifies the
number of articles received, and lists petitioner’s name and address.
Respondent also introduced a copy of the notice of deficiency, which
bears the same mailing date and mailing address as the corresponding
Form 3877. 6 Petitioner does not contest that the address listed on Form
3877 and the copy of the notice of deficiency was not his last known
address. The preponderance of the evidence supports a finding that
respondent mailed the notice of deficiency to petitioner at his last known
address on November 13, 2015. See Bobbs, T.C. Memo. 2005-272, slip
op. at 7–8 (holding by a preponderance of the evidence that the
Commissioner properly mailed a notice of deficiency to the taxpayer
when he introduced a certified mailing list bearing the USPS stamp, the
address on the certified mailing list matched the address on the notice
of deficiency and the address the taxpayer used in communications with
the IRS, and the taxpayer did not argue that the address on the notice
was not his last known address).

      Where respondent presents sufficient evidence of proper mailing,
a rebuttable presumption arises that the notice of deficiency was

        6 The notice of deficiency does not bear the article number; however, we have

never held that the lack of an article number on the notice of deficiency negates the
presumption of official regularity. See Henderson v. Commissioner, T.C. Memo. 2018-
150, at *10.
                                            8

[*8] delivered. See Kasper v. Commissioner, 137 T.C. 37, 44 (2011).
Petitioner did not offer any evidence that delivery was not made. See
Campbell, T.C. Memo. 2013-57, at *9 (holding that a taxpayer’s self-
serving testimony that he did not receive a notice of deficiency was
insufficient to rebut the presumption of delivery). Therefore, petitioner
is presumed to have received the notice of deficiency.

        For these reasons, we find that the settlement officer correctly
determined that petitioner was not entitled to challenge the underlying
tax liabilities for the years at issue. Because petitioner’s underlying
liabilities are not properly at issue in this Court, we will review the
settlement officer’s actions for abuse of discretion only.

IV.     Abuse of Discretion

       In deciding whether the settlement officer abused his discretion
in sustaining the proposed levy, we consider whether he (1) properly
verified that the requirements of applicable law or administrative
procedure have been met, (2) considered any relevant issues petitioner
raised, and (3) considered “whether any proposed collection action
balances the need for the efficient collection of taxes with the legitimate
concern of [petitioner] that any collection action be no more intrusive
than necessary.” § 6330(c). Petitioner specifically alleges error in the
settlement officer’s verification of compliance with applicable law or
administrative procedure and the determination that he was not eligible
for CNC status. 7

        A.      Verification

       Section 6330(c)(1) requires a settlement officer to “obtain
verification from the Secretary that the requirements of any applicable
law or administrative procedure have been met.” Verification of
compliance with applicable law and administrative procedure is
reviewable by this Court without regard to whether the taxpayer raised
it at the CDP hearing. See Hoyle v. Commissioner, 131 T.C. 197, 202–
03 (2008), supplemented by 136 T.C. 463 (2011). The settlement officer’s

         7 Petitioner does not assign error to the settlement officer’s determination that

the proposed collection action balances the need for the efficient collection of taxes with
the legitimate concern of petitioner. Thus, he waives this argument. See Rule
331(b)(4); see also Seminole Nursing Home, Inc. v. Commissioner, T.C. Memo. 2017-
102, at *7 n.4, aff’d, 12 F.4th 1150 (10th Cir. 2021). Even if petitioner assigned error,
the settlement officer expressly concluded that the collection action balanced the need
for efficient tax collection with petitioner’s legitimate concerns about intrusiveness.
                                     9

[*9] verification has been accepted as adequate if there is supporting
documentation in the administrative record.           See Blackburn v.
Commissioner, 150 T.C. 218, 222 (2018). Where a taxpayer alleges that
a notice of deficiency was not properly mailed, the settlement officer
must consult the underlying documents rather than rely solely on IRS
transcripts. See Hoyle, 131 T.C. at 205 n.7. Petitioner alleges two
failures on the part of the settlement officer: the settlement officer did
not verify (1) that the notice of deficiency was properly mailed and
(2) that evidence existed to show he owed the underlying tax liabilities.
We reject both arguments.

       We reject petitioner’s first argument that the settlement officer
failed to verify that the notice of deficiency was properly mailed to his
last known address. Where, as in this case, a taxpayer raises the issue
of whether a notice of deficiency was properly mailed, the settlement
officer must examine underlying documents in addition to the tax
transcripts, such as the taxpayer’s return, a copy of the notice of
deficiency, and the certified mailing list. See id. This is exactly what
the settlement officer did. As discussed above, these documents are
sufficient for the Court to conclude that the IRS properly mailed the
notice of deficiency to petitioner’s last known address. Consequently,
we hold that the settlement officer properly verified that the notice of
deficiency was mailed to petitioner.

        Next, petitioner argues that the settlement officer failed to verify
that evidence existed to show that he owed the underlying tax liabilities.
The settlement officer was not required to review the underlying tax
liabilities. In fact, the settlement officer was precluded from considering
the underlying liabilities because petitioner received a notice of
deficiency. See § 6330(c)(2)(B); Sego, 114 T.C. at 609. Instead, the
settlement officer was merely required to verify that the liabilities were
not paid. See Ron Lykins, Inc. v. Commissioner, 133 T.C. 87, 97 (2009).
In his case-activity report, the settlement officer consulted petitioner’s
account transcripts, which stated amounts due for 2013 and 2014.
Therefore, the settlement officer satisfied his verification requirement
with respect to the amounts outstanding. Accordingly, the settlement
officer did not abuse his discretion in verifying that all applicable laws
and regulations were followed.

      B.     Petitioner’s Request for CNC Status

      A settlement officer is required to consider any relevant issue a
taxpayer raises during the CDP hearing, including collection
                                          10

[*10] alternatives offered by the taxpayer. § 6330(c)(2)(A)(iii). At his
CDP hearing, petitioner indicated to the settlement officer that he was
interested in CNC status. 8

       CNC status is a collection alternative that the taxpayer may
propose, and that if proposed, the settlement officer must consider. See
§ 6330(c)(2)(A)(iii); Norberg v. Commissioner, T.C. Memo. 2022-30, at *5.
The IRM states that a taxpayer’s account may be declared “currently not
collectible” in cases of “hardship.” IRM 1.2.1.6.14(4) (Nov. 19, 1980),
5.16.1.2.9(1) (Apr. 13, 2021). Hardship exists if, based on his assets,
equity, income, and expenses, the taxpayer “has no apparent ability to
make payments on the outstanding tax liability.” See Fangonilo v.
Commissioner, T.C. Memo. 2008-75, slip op. at 9. A taxpayer’s ability to
pay is determined by calculating the excess of income over necessary
living expenses. See Norberg, T.C. Memo. 2022-30, at *5; IRM
5.16.1.2.9. A settlement officer does not abuse his discretion by adhering
to such standards, even if doing so would force a taxpayer to change his
lifestyle. See Speltz v. Commissioner, 124 T.C. 165, 179 (2005), aff’d,
454 F.3d 782 (8th Cir. 2006); Friedman v. Commissioner, T.C. Memo.
2013-44, at *9–10 (noting that the burden is on the taxpayer to justify
departure from local standards).

       In determining petitioner’s ability to pay, the settlement officer
relied on petitioner’s Form 433–A. The settlement officer adjusted
petitioner’s expenses to conform with local and national standards.
After this adjustment, the revised Form 433–A showed a net difference
between his income and expenses of $518 per month. It was not an
abuse of discretion to modify petitioner’s claimed expenses to local and
national standards. See Norberg, T.C. Memo. 2022-30, at *5; Friedman,
T.C. Memo. 2013-44, at *9–10. The settlement officer requested
additional financial information that would permit him to deviate from
the national and local standards, but petitioner failed to do so. It was
not an abuse of discretion for the settlement officer to issue the
determination after petitioner failed to comply with the deadline to

        8 At his CDP hearing, petitioner requested consideration of first-time penalty

abatement. Petitioner did not allege error with the settlement officer’s rejection of the
penalty abatement in his petition, and therefore, this issue is deemed conceded. See
Rule 331(b)(4); see also Seminole Nursing Home, Inc., T.C. Memo. 2017-102, at *7 n.4.
Even if petitioner assigned error to this rejection, the settlement office rejected
petitioner’s request for first-time penalty abatement because petitioner was not
current on his filing obligations. This rejection is not an abuse of discretion. See
Dodson v. Commissioner, T.C. Memo. 2020-106, at *9; IRM 20.1.1.3.3.2.1 (Oct. 19,
2020).
                                  11

[*11] submit this information. See Pough v. Commissioner, 135 T.C.
344, 351 (2010). Even without the settlement officer’s adjustments,
Form 433–A as submitted by petitioner showed a net difference in his
income and expenses of $100. Because petitioner had the ability to make
payments on his outstanding tax liabilities, the settlement officer did
not abuse his discretion in denying petitioner’s request to place his
account in CNC status. See Fangonilo, T.C. Memo. 2008-75, slip op. at 9.

       We conclude that the settlement officer did not abuse his
discretion in sustaining the proposed levy. Accordingly, we will grant
respondent’s Motion for Summary Judgment under Rule 121.

      To reflect the foregoing,

      An appropriate order and decision will be entered.