UNITED STATES TAX COURT

T.C. Memo. 2012-326

UNITED STATES TAX COURT

ELIZABETH O'BRIEN, Petitioner 570.

COMMISSIONER OF INTERNAL REVENUE,i Respondent

Docket No. 11736-10L.

Filed Noveinber 27, 2012.

Elizabeth O'Brien, pro se.

Timothy B. Heavner, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

MARVEL, Judge: Respondent issued to petitioner a Notice of

Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 1

1Unless otherwise indicated, all section references arel to the Internal

Revenue Code (Code), as amended.

SERVED Nov 27 2012

-2 [*2] (notice of determination) sustaining a proposed levy action to collect a

section 6702(a) penalty. Pursuant to section 6330(d), petitioner timely filed a

petition seeking review of respondent's determination. The issues for decision

are: (1) whether respondent properly and timely assessed the section 6702(a)

penalty against petitioner; (2) whether respondent abused his discretion in

upholding the proposed levy action; and (3) whether petitioner is liable for a

penalty under section 6673 for instituting proceedings primarily for delay or for

maintaining frivolous or groundless positions.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The stipulations of

fact are incorporated herein by this reference. Petitioner resided in Virginia when

she filed her petition.

During 2004 petitioner was employed by the City of Richmond Public

Schools (RPS). In 2004 she received payment of $29,579 from RPS. RPS issued

to petitioner a Form W-2, Wage and Tax Statement, on which RPS reported that

she received wages of $29,579 during 2004.

Petitioner and her husband, Daniel O'Brien, timely filed a joint Form 1040,

U.S. Individual Income Tax Return, for 2004. On the Form 1040 they reported

-3[*3] adjusted gross income of $84,579 and claimed a refund of $1,383. Petitioner

attached to the return the Form W-2 from RPS.2

On April 21, 2008, petitioner and Mr. O'Brien filed a Form 1040X,

Amended U.S. Individual Income Tax Return, for 2004. Oh the Form 1040X they

reported adjusted gross income of negative $3,063 and taxable income of zero and

claimed a refund of $18,328. Petitioner 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, Insur nce Contracts, etc., on

which she reported that she received taxable income of zero from RPS during

..

2004.3 On the Form 4852 petitioner stated that she calculatbd her income on the

basis of the definition of wages in section 3401(a).4

2Petitioner and Mr. O'Brien also attached to their 20Q4 return a Form W-2

for Mr. O'Brien, on which Metso Automation USA Inc. (Mþtso), reported that it

paid Mr. O'Brien wages of $58,872 during 2004.

3Petitioner and Mr. O'Brien also attached to their 20d4 amended return a

Form 4852 for Mr. O'Brien, on which he reported that he had received taxable

income of zero from Metso during 2004.

4Sec. 3401(a) defines wages as "all remuneration * * * for services

042

performed by an employee for his employer". This Court and other Federal courts

have held that taxpayer arguments similar to those made by ipetitioner are frivolous

and groundless. See Montero v. Commissioner, 354 Fed. Appx. 173 (5th Cir.

2009); Sullivan v. United States, 788 F.2d 813, 815 (1st Cir; 1986); Pabon v.

Commissioner, T.C. Memo. 1994-476.

-4 [*4]

Subsequently, on March 23, 2009, respondent assessed a section 6702(a)

penalty against petitioner.5 Respondent mailed to petitioner a notice advising her

that her 2004 Form 1040X was frivolous and that a $5,000 penalty under section

6702(a) had been assessed.

On August 10, 2009, respondent mailed to petitioner a Letter.1058, Final

Notice of Intent to Levy and Notice of Your Right to a Hearing. Petitioner timely

submitted a Form 12153, Request for a Collection Due Process or Equivalent

Hearing, requesting that respondent withdraw the levy. She did not request a

collection alternative. In an attached letter petitioner listed the following reasons a

levy was not appropriate:

1. This penalty was imposed by a computer generated form letter

which is unsigned.

2. Upon the information and belief that no valid assessment document

signed by an assessment officer exists.

-

5Respondent also assessed a sec. 6702(a) civil penalty against Mr. O'Brien

and filed a notice of intent to levy with respect to Mr. O'Brien's sec. 6702(a)

penalty. Mr. O'Brien untimely requested a sec. 6330 hearing. The Internal

Revenue Service (IRS) Office of Appeals (Appeals Office) conducted an

equivalent hearing and subsequently issued to Mr. O'Brien a Decision Letter

Concerning Equivalent Hearing Under Section 6320 and/or 6330. Petitioner and

Mr. O'Brien filed a petition with this Court contesting respondent's

determinations with respect to both the notice of determination issued to petitioner

and the decision letter issued to Mr. O'Brien. Respondent filed a motion to

dismiss for lack ofjurisdiction with respect to Mr. O'Brien. We granted

respondent's motion.

-5[*5]

3. To our knowledge neither of us is among the responsible "persons"

under a delegated "duty" for which the alleged appli ation of the

"Frivolous Return" penalties are statutorily defined to apply.

4. At no time has the IRS specified what is "frivolous".

5. There is no statute or regulation allowing two frivolous penalties

on the same return.

6. The assigned penalties do not [sic] state what retu is the basis for

the penalty.

7. We previously offered to correct any problems in esponse to the

3176SC letter. No response to our letter has been reòeived.

Petitioner wrote that if the issues could not be resolved administratively, she

would pursue a remedy under section 7214.6 She also requ sted that respondent

conduct the hearing through written correspondence.

By letter dated February 26, 2010, Settlement Officer Patty Jensen informed

petitioner that she had been assigned petitioner's case and explained the objective

of a section 6330 hearing. In the letter Settlement Officer Jensen scheduled a

telephone conference call for March 31, 2010. Settlement Officer Jensen also

requested that petitioner provide the following: (1) signed ax returns for 2006-08,

(2) a completed Form 433-A, Collection Information Statement for Wage Earners

and Self-Employed Individuals, (3) copies of all pages of pètitioner's personal

bank statements beginning September 1, 2009, (4) current v age statements for

Sec. 7214(a) provides that any officer or employee of the United States

who acts unlawfully in connection with any revenue law "shall be dismissed from

office or discharged from employment and, upon convictioi thereof, shall be fined

not more than $10,000, or imprisoned not more than 5 years, or both."

-6[*6] both petitioner and Mr. O'Brien, (5) a current mortgage statement, (6) current

copies of all investment statements, and (7) a Form 656, Offer in Compromise, if

petitioner wanted to propose an offer in compromise.

Petitioner did not provide the information that Settlement Officer Jensen

had requested. Instead, on March 11, 2010, she mailed to Settlement Officer

Jensen a letter requesting that the hearing be conducted by correspondence. On

March 24, 2010, she mailed to Settlement Officer Jensen a second letter stating

that the Appeals Office's February 26, 2010, letter was premature.7

On April 21, 2010, respondent's Appeals Office issued to petitioner the

notice of determination sustaining the proposed levy. Petitioner timely filed a

petition in this Court requesting review of the notice of determination. She then

filed a motion to dismiss for lack of subject matter jurisdiction on the ground that

respondent assessed the penalty after the period of limitations had expired. On

February 28, 2011, we called this case for trial and denied petitioner's motion.8

Before the trial began we warned petitioner that if she continued to take frivolous

7With respect to petitioner's letters of March 11 and 24, 2010, both

petitioner and Mr. O'Brien prepared and submitted the letters to Settlement

Officer Jensen.

8At that time we advised petitioner that the period of limitations issue was

not an appropriate matter for a motion to dismiss for lack ofjurisdiction and that

we would consider the period of limitations issue irideciding this case.

[*7] positions in her posttrial filings, we would consider m posmg a penalty under

section 6673.9

OPINION

I.

Statutory Framework

Section 6331(a) authorizes the Secretary1° to levy upon property and

property rights of a taxpayer liable for taxes if the taxpayer fails to pay those taxes

within 10 days after notice and demand for payment is mad . See sec. 6671(a);

see also Blaga v. Commissioner, T.C. Memo. 2010-170, slip op. at 11. Section

6330(a) provides that no levy may be made on any property or right to property of

any person unless the Secretary has notified such person m writing of the right to a

hearing before the levy is made. If a taxpayer requests a hearing, a hearing shall

be held before an impartial officer or employee of the Appeals Office. Sec.

9We asked respondent to discuss in his posttrial mem randum whether, and

to what extent, a sec. 6673 penalty is appropriate in this case. In the posttrial

memorandum respondent acknowledged that petitioner advánced frivolous and

groundless arguments throughout these proceedings but did not request that we

impose a sec. 6673 penalty against her.

1°The term "Secretary" means "the Secretary,0fthe T 541easury

or his

delegate", sec. 7701(a)(11)(B), and the term "or his delegate" means "any officer,

employee, or agency of the Treasury Department duly authorized by the Secretary

of the Treasury directly, or indirectly by one or more redelegations of authority, to

perform the function mentioned or described in the context", sec.

7701(a)(12)(A)(i).

-8[*8] 6330(b)(1), (3). During 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(c)(2)(A). A taxpayer is

precluded from contesting the existence or amount of the underlying tax liability

unless the taxpayer did not receive a notice of deficiency for the tax in question or

did not otherwise have an opportunity to dispute the tax liability. Sec.

6330(c)(2)(B); see also Sego v. Commissioner, 114 T.C. 604, 609 (2000).

, ,

Following a hearing, the Appeals Office must issue a notice of

determination regarding whether the proposed levy action may proceed. In so

doing, the Appeals Office is required to take into consideration: (1.) verification

presented by the Secretary that the requirements of applicable law and

administrative procedure have been met, (2) relevant issues raised by the taxpayer,

and (3) whether the proposed levy action appropriately balances the need for

efficient collection of taxes with the taxpayer's concerns regarding the

intrusiveness of the proposed levy action. Sec. 6330(c)(3).

If the taxpayer disagrees with the Appeals Office's determination, the

taxpayer may seek judicial review by appealing to this Court. Sec. 6330(d). We

have jurisdiction to review the Commissioner's determination when the underlying

-9[*9] tax liability consists of section 6702 penalties. See Callahan v.

Commissioner, 130 T.C. 44, 48-49 (2008).

If the underlying liability is properly at issue, we review de novo the

existence and amount of the taxpayer's liability. See Sego . Commissioner, 114

T.C. at 610; Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). We review all

other determinations of the Appeals Office for abuse of discretion. See Lunsford

v. Commissioner, 117 T.C. 183, 185 (2001); Sego v. Commissioner, 114 T.C. at

610; Goza v. Commissioner, 114 T.C. at 182. An abuse of iscretion occurs if the

Appeals Office exercises its discretion "arbitrarily, capriciously, or without sound

basis in fact or law." Woodral v. Commissioner, 112 T.C. 19, 23 (1999).

The parties stipulated that petitioner's underlying liability is properly at

issue in this case. Accordingly, we review de novo the question of whether

petitioner is liable for the section 6702(a) penalty. See Goza v. Commissioner,

114 T.C. at 182; see also Hoffman v. Commissioner, 119 T.C. 140, 145 (2002) (a

taxpayer's assertion that the period of limitations has expired constitutes a

challenge to the underlying liability). We review other aspects of respondent's

determination for abuse of discretion.

Petitioner has raised two issues with respect to her underlying liability for

the section 6702(a) penalty. First, petitioner contends that her Form 1040X, and

- 10 [*10] her conduct in filing the Form 1040X, does not justify the imposition of a

penalty under section 6702(a). Second, petitioner contends that respondent

assessed the section 6702(a) penalty after the period of limitations had expired,

specifically the period of limitations on assessment of tax established in section

6501(a). We address each of petitioner's arguments in turn. Finding that

petitioner is liable for the section 6702(a) penalty, the assessment of which is not

time barred, we then address whether respondent abused his discretion in

upholding the proposed levy action.

II.

Section 6702(a) Penalty

A.

Background

As part of a comprehensive plan to combat the proliferation of abusive tax

shelters, in 1982 Congress enacted three new assessable penalties, which were

codified in sections 6700-6702; and section 6703, which sets forth rules applicable

to those penalties. See S. Rept. No. 97-494 (Vol. 1), at 266-267, 270-271, 275279 (1982), 1982 U.S.C.C.A.N. 781, 1014-1026. Section 6700 provides for the

imposition of a penalty on any person who promotes an abusive tax shelter.

Section 6701 provides for the imposition of a penalty on any person who aids and

abets another person in understating his or her tax liability. Section 6702 provides

for the imposition of a penalty on any person who files a document purporting to

- 11 [*11] be a tax return that contains a frivolous position or wás intended to delay or

impede the administration of Federal income tax laws.

Section 6702, the penalty statute at issue here, remai ed largely unchanged

until 2006. See Tax Relief and Health Care Act of 2006, P b. L. No. 109-432,

div. A, sec. 407(a), 120 Stat. at 2960. In 2006 Congress an ended section 6702,

increasing the penalty from $500 to $5,000 and broadening its reach to include

other types of frivolous tax submissions. 21,; see also Alexander v. Commissioner,

T.C. Memo. 2012-75, slip op. at 6-7. The amendment was effective for

submissions made and issues raised after the date the Secretary first prescribed a

list of frivolous positions pursuant to section 6702(c). Because the Secretary first

prescribed a list of frivolous positions on March 15, 2007, in Notice 2007-30,

2007-1 C.B. 883, section 6702(a) as amended applies in this case. See also

Callahan v. Commissioner, 130 T.C. at 51 n.7.

B.

Application of Section 6702

Section 6702, as in effect for purposes of this case, provides as follows:

SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

(a) Civil Penalty for Frivolous Tax Returns.--A person shall

pay a penalty of $5,000 if-(1) such person files what purports to.be a return of a tax

imposed by this title but which--

- 12 [*12]

(A) does not contain information on which the

substantial correctness of the self-assessment may be

judged, or

(B) contains information that on its face indicates

that the self-assessment is substantially incorrect, and

(2) the conduct referred to in paragraph (1)-(A) is based on a position which the Secretary has

identified as frivolous under subsection (c), or

(B) reflects a desire to delay or impede the

administration of Federal tax laws.

(b) Civil Penalty for Specified Frivolous Submissions.--

(c) Listing of Frivolous Positions.--The Secretary shall

prescribe (and periodically revise) a list of positions which the

Secretary has identified as being frivolous for purposes of this

subsection. The Secretary shall not include in such list any position

that the Secretary determines meets the requirement of section

6662(d)(2)(B)(ii)(II).

(d) Reduction of Penalty.--The Secretary may reduce the

amount of any penalty imposed under this section if the Secretary

determines that such reduction would promote compliance with and

administration of the Federal tax laws.

(e) Penalties in Addition to Other Penalties.--The penalties

imposed by this section shall be in addition to any other penalty

provided by law.

- 13 [*13] The Commissioner bears the burden of proving that taxpayer is subject to

the section 6702 penalty. Sec. 6703(a). The deficiency procedures codified in

subchapter B of chapter 63, i.e., sections 6211-6216, do not apply to the

assessment or collection of the section 6702 penalty. Sec. 6703(b).

C.

Petitioner's Liability for the Section 6702(a) Penalty

To satisfy his burden of proof with respect to the see ion 6702(a) penalty,

respondent must prove by a preponderance of the evidence that (1) petitioner filed

a document purporting to be a tax return, (2) the purported eturn lacked

information on which the substantial correctness of the self assessment may be

judged or contained information that, on its face, indicates that the self-assessment

was substantially incorrect, and (3) her conduct in filing the purported return was

based on a position that the Secretary has identified as frivolous or reflected a

desire to delay or impede the administration of Federal tax laws . See secs.

6702(a), 6703(a). We address each requirement in turn.

Petitioner's 2004 Form 1040X purported to be an amended income tax

return that asserted a claim for refund of all Federal income tax withheld from her

and her husband's income. She therefore filed a document purporting to be an

- 14 [*14] income tax return." See Colton v. Gibbs, 902 F.2d 1462, 1464 (9th Cir.

1990); Branch v. IRS, 846 F.2d 36, 37 (8th Cir. 1988); Sisemore v. United States,

797 F.2d 268, 270 (6th Cir. 1986); Kelly v. United States, 789 F.2d 94, 97 (1st Cir.

1986); Olson v. United States, 760 F.2d 1003, 1005 (9th Cir. 1985) ("Because a

taxpayer may not obtain a refund without first filing a return, * * * [sec. 301.64023(a)(1), Proced. & Admin. Regs.], the form filed by * * * [the taxpayer] should be

construed to be a 'purported' return."); Davis v. United States, 742 F.2d 171, 173

(5th Cir. 1984); Callahan v. Commissioner, 130 T.C. at 53.

RPS reported on the original Form W-2 that it was petitioner's employer

and that it had withheld certain taxes on her wages. On her Form 1040X petitioner

claimed that she received no wages while admitting that income tax was withheld

from the amounts paid to her by RPS. By reason of the above, petitioner's Form

1040X was substantially incorrect on its face. Furthermore, the Form 1040X did

not contain information on which the substantial correctness of petitioner's

Respondent assessed a sec. 6702(a) penalty against both petitioner and Mr.

O'Brien. Because the case with respect to Mr. O'Brien has been dismissed, we

need not decide, in the case of a frivolous return document that is a purported joint

Federal income tax return, whether respondent is entitled to impose a sec. 6702(a)

penalty on both filers, or whether respondent is limited to imposing one sec.

6702(a) penalty per frivolous return document. However, we note that petitioner

and Mr. O'Brien each submitted for filing a frivolous Form 4852 and the Forms

4852 were attached to the frivolous Form 1040X.

- 15 [*15] reported tax liability could be evaluated. See, e.g., Grunsted v.

Commissioner, 136 T.C. 455, 460 (2011); Cabirac v. Cominissioner, 120 T.C. 163,

169 (2003); Blaga v. Commissioner, slip op. at 14.

On her Form 1040X petitioner reported taxable income of zero and an

income tax liability of zero. Petitioner's reporting position was based on the

premise that the salary paid to her by her employer was not income. The

Commissioner has identified as frivolous a position that wages or other

compensation received are not taxable income. See Thornberry v. Commissioner,

136 T.C. 356, 368 (2011); Notice 2008-14, 2008-1 C.B. 310; Notice 2007-30,

supra; see also Alexander v. Commissioner, slip op. at 10; McNeil v.

Commissioner, T.C. Memo. 2011-150, slip op. at 16. A return that reports taxable

income and tax of zero is frivolous in circumstances where à third-party payor has

reported on an information return that the taxpayer had income and that income

tax was withheld on that income. See Grunsted v. Commissioner, 136 T.C. at 460.

Petitioner testified that RPS paid her, and we infer the payment was in exchange

for services she provided. Accordingly, petitioner's purported return reflects a

frivolous position.

-16[*16] For the reasons set forth above, we conclude that respondent's determination

that petitioner is liable for the section 6702(a) penalty is correct if the penalty was

assessed timely. We turn now to the limitations issue.

D.

Whether Respondent's Assessment of the Section 6702(a) Penalty is

Barred by a Statute of Limitations

1.

Parties'Arguments

Petitioner contends that respondent failed to assess the section 6702(a)

penalty within the applicable period of limitations. She contends that the three-

year period of limitations in section 6501(a) applies for the assessment of a section

6702(a) penalty. She further contends that the period of limitations began to run

upon the filing of her 2004 Form 1040 and, therefore, respondent assessed the

section 6702(a) penalty after the expiration of the period of limitations."

Petitioner's argument assumes that the sec. 6702(a) penalty is a part of her

Federal income tax liability for 2004 and is subject to the same period of

limitations that governs the assessment of the 2004 liability. With respect to the

sec. 6700 penalty, the U.S. Court of Appeals for the Fifth Circuit has stated that

the penalty "applies to specific acts and transactions rather than to any discrete

time period. The harm targeted by Section 6700 is the conduct of the promoter

and is, therefore, immediately susceptible to assessment." Sage v. United States,

908 F.2d 18, 22 (5th Cir. 1990).

Neither party addressed the issue of whether petitioner's liability for the sed.

6702(a) penalty is properly considered to be a part of her Federal income tax

liability for 2004. Although the notice of determination shows that respondent

assessed the sec. 6702(a) penalty with respect to petitioner's 2004 tax period, the

(continued...)

- 17 [*17] Petitioner does not dispute that she submitted to respbndent a Form 1040X

on April 21, 2008; however, she contends that the Form 10 OX does nöt affect the

running of the section 6501(a) period of limitations with respect to her 2004 tax

liability.

Respondent argues that the Commissioner timely ass ssed the section

6702(a) penalty. Respondent contends that the section 650 (a) period of

limitations is applicable only to the assessment of "return-based" penalties.

According to respondent, a section 6702(a) penalty is retur base'd if sither the

purported return document was a valid return or the IRS processed the purported

return document as a valid return. Respondent further contánds that if the penalty

is not return based, the seátion 6501(a) period of limitations does not apply and

the IRS may assess the section 6702(a) penalty at any time.

Relying on the test

(...continued)

harm targeted by sec. 6'702(a) is the same as that targeted b sec. 6700, the

conduct of the taxpayer. Sec. 6702(a) specifically targets the conduct of a

taxpayer in filing a frivolous return document and, like the sec. 6700 penalty,

applies to specific acts and transactions and not to a specific time period.

13In the posttrial memorandum respondent relies on three cases to support

the argument that the application of the sec. 6501(a) period öf limitations depends

on whether the assessed penalty is return based: Capozzi v. United States, 980

F.2d 872 (2d Cir. 1992), Mullikin v. United States, 952 F.2d 920 (6th Cir. 1991),

and flage, 908 F.2d 18. In Capozzi, 980 F.2d at 875, the U.S. Court of Appeals for

the Second Circuit considered only whether the period of limitations in 28 U.S.C.

(continued...)

- 18 [*18] we articulated in Beard v. Commissioner, 82 T.C. 766, 777 (1984), aff'd,

793 F.2d 139 (6th Cir. 1986), respondent contends that petitioner's Form 1040X

was not a valid return. Consequently, respondent concludes that the IRS was

entitled to assess the section 6702(a) penalty against petitioner at any time.

"(...continued)

sec. 2462 applied for the assessment of sec. 6700 penalties. The Court of Appeals

did not consider the application of sec. 6501(a) and made no mention of the effect

of filing a tax return. Id. In Sage, 908 F.2d at 24-25, the U.S. Court of Appeals

for the Fifth Circuit acknowledged that the start of the period of limitations of sec.

6501(a) depended upon the filing of a tax return. The Court of Appeals quoted

Agbanc, Ltd. v. United States, 707 F. Supp. 423, 426-427 (D. Ariz. 1988), which

held that assessment of a sec. 6700 penalty does not depend upon the filing of a

return. S_a_ge, 908 F.2d at 25. In Mullikin, 952 F.2d at 926-929, the U.S. Court of

Appeals for the Sixth Circuit held that no period of limitations is applicable for the

assessment of penalties under sec. 6701; however, the Court of Appeals' decision

contains no discussion concerning return-based versus non-return-based penalties.

The Court of Appeals' decision contains only a brief acknowledgment that sec.

6501(a) depends on the filing of a return and even then, the acknowledgment

appears by virtue of a block quotation from Agbanc, Ltd., 707 F. Supp. 423, in a

footnote. Mullikin, 952 F.2d at 927 n.13.

The cases respondent cites do not support the argument that the application

of the sec. 6501(a) period of limitations depends on whether the sec. 6702(a)

penalty is return based. Furthermore, we can find no Federal case that

distinguishes between return-based and non-return-based penalties for period of

limitations purposes. Mullikin, 952 F.2d at 927 n.13, and Sage, 908 F.2d at 25,

merely confirm that the start of the period of limitations of sec. 6501(a) depends

upon the filing of a tax return that the IRS actually processes as a valid return.

Given our holding in this case, however, we need not reject respondent's argument

outright.

- 19 [*19] 2.

Analysis

This Court has not decided whether a statute of limit tions applies for the

assessment of a section 6702(a) penalty. In fact, it appears that no court has.

While it may be appropriate to decide this issue in the future, we need not do so in

order to resolve this case. We need examine only when a p riod of limitations,

assuming one is applicable for the assessment of the sectior 6702 penalty, would

begin to run under accepted limitations analysis.

Generally, in the absence of a clearly applicable statute of limitations, an

action on behalf of the Federal Government is subject to no time limitation. E. I.

Du Pont de Nemours & Co. v. Davis, 264 U.S. 456, 462 (1924); Mullikin v. .

United States, 952 F.2d 920, 926 (6th Cir. 1991). A statute of limitations

generally "runs against the United States only when they assent and upon the

conditions prescribed." Lucas v. Pilliod Lumber Co., 281 IJ.S. 245, 249 (1930);

see also Mullikin, 952 F.2d at 926; Agbanc, Ltd. v. United States, 707 F. Supp.

423, 426 (D. Ariz. 1988). Moreover, in analyzing the statute of limitations

applicable for tax assessments, the Supreme Court has emphasized the

longstanding principle that "'[s]tatutes of limitation sought to be applied to bar

rights of the Government, must receive a strict construction in favor of the

-20 [*20] Government.'" Badaracco v. Commissioner, 464 U.S. 386, 391 (1984)

(quoting E.I. Du Pont de Nemours & Co., 264 U.S. at 462).

Petitioner argues that the three-year period of limitations on assessment set

forth in section 6501(a) applies for the assessment of the section 6702(a) penalty.

Petitioner also argues that the period of limitations has expired because the Form

1040X she filed relates back to the date when she filed her original Form 1040,

which was more than three years before she filed the Form 1040X with the IRS

and respondent assessed the section 6702(a) penalty with respect to that filing. In

other words, petitioner contends that the period of limitations for assessing the

section 6702(a) frivolous return penalty expired before she even filed the frivolous

Form 1040X. Petitioner's argument is nonsensical and flies in the face of

traditional limitations jurisprudence.

A period of limitations sets the time within which an aggrieved party must

assert its claim. See, e.g., Anderson v. United States, 669 F.3d 161, 165 (4th Cir.

2011); Tidewater Fin. Co. v. Williams, 498 F.3d 249, 260 (4th Cir. 2007). The

time is measured from the date on which the claim accrues. The accrual date will

vary depending on the type of claini involved. In some instances the statute that .

creates the right of action may specify the accrual date, see, e.g., Civil Rights Act

of 1964, tit. VII, 42 U.S.C. sec. 2000e-5(e) (1988) (providing that a complainant

- 21 [*21] must file a charge with the EEOC within 180 days (300 days in a deferral

State)"after the alleged unlawful employment practice occurred"); Riesett v. W.

B. Doner & Co., 293 F.3d 164, 170 (4th Cir. 2002) (applying Mich. Comp. Laws

sec. 600.5827 (2002)); in some instances caselaw will determine when a given

cause of action arises, see, e.g., Ferguson v. Bayer Cropscience LP, 468 Fed.

Appx.·262, 263 (4th Cir. 2012) (applying West Virginia caselaw); Hatfill v. New

York Times Co., 416 F.3d 320, 335 (4th Cir. 2005) (applyiikg Virginia caselaw).

In other instances a Federal statute creating a Federal claim does not contain a

specific provision establishing a period of limitations for the assertion of the

claim. Reed v. United Transp. Union, 488 U.S. 319, 323 (1989); Board of Regents

v. Tomanio, 446 U.S. 478, 483 (1980).. In such instances the courts must decide

whether an existing period of limitations applies to the assertion of the claim, n

eg, Wilson v. Garcia, 471 U.S. 261, 268 (1985); DelCostello v. Int'l Bhd. of

Teamsters, 462 U.S. 151, 170-172 (1983), or whether Congress intended that no

period of limitations apply to the claim, see, e.g., Occidental Life Ins. Co. v.

EEOC, 432 U.S. 355, 366-372 (1977).

Assuming but not deciding that an existing period of limitations, such as

that in section 6501(a), applies for the assessment of the section 6702(a) penalty,

we first must examine when the limitations period for assessing the penalty would

-22[*22] start to run. In order to prevail on her limitations argument, petitioner would

have us conclude that the period of limitations for assessing the section 6702(a)

penalty expired before she even prepared and submitted the frivolous Form 1040X

to the IRS. An examination of section 6702(a) and a cursory review of its

legislative history confirms that petitioner's argument must fail.

The section 6702(a) frivolous return penalty may be assessed only after a

person "files what purports to be a return of tax" imposed by the Code. As a

general rule, a return is considered filed when it is received. See United States v.

Lombardo, 241 U.S. 73, 76 (1916); Trout v. Commissioner, 131 T.C. 239, 246

(2008). Any period of limitations that arguably applies for the assessment of the

section 6702(a) penalty cannot possibly begin to run until the frivolous return

document is submitted to and received by the IRS. This rather obvious conclusion

is consistent with the legislative history of section 6702(a), which states in

pertinent part as follows:

The committee is concerned with the rapid growth in deliberate

defiance of the tax laws by tax protestors. The Internal Revenue

Service had 13,600 illegal protest returns under examination as of

June 30, 1981. * * * The committee believes that an immediately

assessable penalty on the filing of protest returns will help deter the

filing of such returns, and will demonstrate the determination of the

Congress to maintain the integrity of the income tax system.

- 23 [*23] S. Rept. No. 97-494 (Vol. 1), supra at 277, 1982 U.S.C.C.A.N. at 1023 .

(emphasis added); see also Bradley v. United States, 817 F.2d-1400, 1404 (9th Cir.

1987); Clark v. United States, 630 F. Supp. 101, 104 (D.M . 1986). 042

A number of Federal courts have considered whethe the period of

limitations in section 6501(a) is applicable for the assessm nt of penalties under

sections 6700 and 6701. See Mullikin, 952 F.2d at 929 (holding that no period of

limitations governs the assessment of section 6701 penaltie ); Sage v. United

States, 908 F.2d 18, 25 (5th Cir. 1990) (holding that the period of limitations in

section 6501(a) does not apply for the assessment of sectioii 6700 penalties);

Kraye v. United States, 71 A.F.T.R.2d (RIA) 93-855, 1992

439753 (D.N.M.

1992) (holding that no period of limitations applies for the ssessment of section

6700 penalties); Emanuel v. United States, 705 F: Supp. 43 , 435-436 (N.D. Ill.

1989) (holding that the period of limitations in section 6501(a) does not apply for

the assessment of section 6700 or section 6701 penalties); Astbanc. Ltd., 707 F. Supp. at 426-427 (holding that the period of limitations in sëction 6501(a) does

not apply for the assessment of section 6700 penalties); Kuchan v. United States,

679 F. Supp. 764, 767-768 (N.D. Ill. ·1988) (holding that the period of limitations

in section 6501(a) does not apply for the assessment of section 6701 penalties).

While we could follo'w their lead and grapple with tough questions about

- 24 [*24] limitations jurisprudence as it relates to the Federal Government's attempt to

combat abusive tax behavior, we have refrained from deciding the section 6702(a)·

limitations issue in the past, see e.g., Crites v. Commissioner, T.C. Memo. 2012267, at *11-*13, and we continue that approach in this case. We therefore

conclude only.that the period of limitations on assessment in section 6501(a) does

not bar the assessment of the section 6702(a)14 penalty in this case.

III.

Notice of Determination

We now address whether respondent abused his discretion in sustaining the

proposed levy. Petitioner contends that it was an abuse of discretion for the

Appeals Office to sustain the proposed levy because the Appeals Office did not

consider the elements of the section 6702(a) penalty and because respondent failed

to properly assess the frivolous return penalty.

If a taxpayer requests a section 6330 hearing, section 6330(b) provides that

the hearing will be held with the Appeals Office. The section 6330 hearing may,

"but is not required to, consist of a face-to-face meeting, one or more written or

oral communications between an Appeals officer or employee and the taxpayer or

the taxpayer's representative, or some combination thereof." Sec. 301.6330-

14Petitioner does not argue that any other limitation provision of the Code

applies.

- 25 [*25] 1(d)(2), Q&A-D6, Proced. & Admin. Regs. Once a taxpayer is given a

reasonable opportunity for a hearing and fails to avail hims lf of that opportunity,

this Court may sustain the Commissioner's determination to proceed with

collection on the basis of an Appeals officer's review of the case file. See, e.g.,

Bean v. Commissioner, T.C. Memo. 2006-88, slip op. at 9; Ho v. Commissioner,

T.C. Memo. 2006-41, slip op. at 22; Leineweber v. Commissioner, T.C. Memo.

2004-17, slip op. at 9-10.

In the notice of determination Settlement Officer Jensen quoted section

6702(a) and determined that petitioner's Form 1040X satisfied the requirenients

for imposition of the frivolous return penalty. We agree. The Form 1040X that

petitioner submitted contained information that on its face indicated that the self-

assessment petitioner made on the purported return was substantially incorrect,

and petitioner's conduct in filing the Form 1040X was base 1 on a position that the

IRS has identified as frivolous under section 6702(c). See supra pp.13-16. We

conclude that respondent's Appeals Office did not err in coácluding that

petitioner's Form 1040X satisfied the requirements of section 6702(a) for

imposition of the frivolous return penalty.

Settlement Officer Jensen also determined that respondent made a proper

assessment against petitioner pursuant to section 6201. Respondent introduced

- 26 [*26] into evidence a Form 4340, Certificate of Assessments, Payments, and Other

Specified Matters, identifying petitioner, the type of liability assessed, the taxable

period, and the amount of the assessment.15 Petitioner has not identified any

irregularities in the assessment procedure used to assess the frivolous return

penalty. Therefore, we conclude that respondent made a valid assessment.

The Appeals Office properly conducted petitioner's section 6330 hearing

via written correspondence. In making the determination to sustain the proposed

levy, the Appeals Office considered the arguments petitioner raised in the letter

attached to her Form 12153. After reviewing the case file and petitioner's

arguments, the Appeals Office properly determined that the requirements of

applicable law and administrative procedure were met and concluded that

.

.

respondent's decision to collect petitioner's frivolous return penalty by levy

appropriately balanced the need for efficient collection of taxes with petitioner's

concerns regarding the intrusiveness of the levy. Petitioner has not advanced any

argument or set forth any specific facts that would allow us to conclude that the

determination to sustain respondent's decision to proceed with collection by levy

was arbitrary, capricious, or without sound basis in fact. Accordingly, we hold

isAppeals officers may rely on a Form 4340 to verify that a valid assessment

was made. See Nestor v. Commissioner, 118 T.C. 162, 166 (2002).

- 27 [*27] that the Appeals Office did not abuse its discretion in upholding

respondent's decision to collect petitioner's assessed frivolbus return penalty by

levy.

IV.

Section 6673 Penalty

Under section 6673(a)(1), this Court may require a taxpayer to pay a penalty

not in excess of $25,000 whenever it appears that (1) the ta payer has instituted or

maintained proceedings primarily for delay or (2) the taxpa er's position in such

proceedings is "frivolous or groundless". Section 6673(a)(1) applies to

proceedings under section 6330. See Pierson v. Commissioner, 115 T.C. 576, 581

(2000). Although respondent has not asked us to impose a penalty under section

6673(a)(1), we may impose such a penalty against a taxpayer on our own motion.

See id. at 580-581.

At trial we warned petitioner that if she continued to ádvance frivolous and

groundless arguments, we would consider imposing a penalty under section 6673.

In her posttrial memorandum petitioner continued to assert meritless arguments

regarding the validity of respondent's assessment and contir ued to assert that she

did not satisfy the statutory criteria for imposition of the frivolous return penalty

under section 6702(a).

- 28 [*28] We note, however, that petitioner heeded our warnings and generally

refrained from asserting frivolous arguments at trial. In her posttrial memorandum

petitioner also presented a legitimate, nonfrivolous issue concerning the period of

limitations for assessment of a section 6702(a) penalty. While we have resolved

this issue against petitioner, we cannot fault her for raising it. After taking these

matters into account and in the exercise of our discretion, we decline to impose

any penalty under section 6673. However, we admonish petitioner that in the

future, she may be subject to a penalty under section 6673 for instituting

proceedings primarily for delay or taking positions that are frivolous or

groundless.

We have considered the parties' remaining arguments, and to the extent not

discussed above, conclude those arguments are irrelevant, moot, or without merit.

To reflect the foregoing,

Decision will be entered for

respondent.