Steven and Davina Sego v. Commissioner

114 T.C. No. 37UNITED STATES TAX COURT
STEVEN AND DAVINA SEGO, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 12313-99L. Filed June 30, 2000.
Ps commenced a proceeding in response to two
Notices of Determination Concerning Collection
Action(s) Under Section 6320 and/or 6330. P husband
had received a notice of deficiency but returned it to
the IRS with frivolous language written on it; he did
not file a petition in response to the notice of
deficiency. Attempts to deliver the notice of
deficiency to P wife were made at Ps’ residence, but
the notice was returned unclaimed. Ps seek in this
action to challenge the underlying merits of
respondent’s determination in the statutory notices of
deficiency rather than challenging the appropriateness
of the intended method of collection, offering an
alternative means of collection, or raising spousal
defenses to collection. Held, there was no abuse of
discretion by respondent in allowing collection to
proceed.
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Steven Sego and Davina Sego, pro se.
Thomas N. Tomashek, for respondent.
OPINION
COHEN, Judge: The petition in this case was filed in
response to two Notices of Determination Concerning Collection
Action(s) Under Section 6320 and/or 6330. Unless otherwise
indicated, all section references are to the Internal Revenue
Code in effect for the years in issue. The notice of
determination sent to Steven Sego set forth the following:
Summary of Determination
The Service should proceed with the proposed levy
action.
Matters Considered at your Appeals hearing
• The requirements of various applicable law or
administrative procedures have been met based upon
the best information available.
• No spousal defenses were raised.
• No offers of collection alternatives were made.
• Challenges to the existence or amount of liability
were raised including additional challenges as to
the appropriateness of the collection actions on
the basis of moral, religious, political,
constitutional, conscientious, or similar grounds.
• On August 13, 1997, the Service issued a notice of
deficiency to you for taxable years ending
December 31, 1993, 1994, and 1995. The notice of
deficiency was mailed to your last known address.
You failed to petition the Tax Court for
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redetermination and thus, the notice of deficiency
was defaulted and the proposed deficiencies were
assessed. The liability as reflected in the
notice of deficiency was based upon the community
property laws of the State of Idaho and your
proportionate share of the community income.
• The assessments are deemed correct because you
have failed to present any credible evidence to
overcome the Commissioner’s presumption of
correctness. You have continued to procrastinate
with regards to providing additional information
or evidence to support your position. You have
made numerous arguments based upon moral,
religious, political, constitutional,
conscientious, or similar grounds which Appeals
believes are without merit.
• Appeals believes the proposed enforcement action
balances the need for the efficient collection of
taxes with your concerns as to the intrusiveness
of the action to be taken.
The notice of determination sent to Davina Sego set forth the
following:
Summary of Determination
The Service should proceed with the proposed levy action.
Matters Considered at your Appeals hearing
• The requirements of various applicable law or
administrative procedures have been met based upon
the best information available.
• No return was filed and thus, the spousal defense
is not applicable.
• No challenges were raised to the appropriateness
of the collection actions.
• No offers of collection alternatives were made.
• You believe the liability is invalid because you
either (1) had no sources of income, or (2) had no
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filing requirements, or (3) did not receive a
notice of deficiency.
• On August 13, 1997, the Service issued a notice of
deficiency to you for taxable years ending
December 31, 1993, 1994, and 1995. The notice of
deficiency was mailed to your last known address.
You failed to accept delivery of said notice of
deficiency and you subsequently failed to timely
petition the Tax Court for redetermination of the
proposed liability. The liability as reflected in
the notice of deficiency was based upon the
community property laws of the State of Idaho and
your proportionate share of the community income.
• Appeals believes the proposed enforcement action
balances the need for the efficient collection of
taxes with your concerns as to the intrusiveness
of the action to be taken.
In the petition, it is alleged that, after a conference
conducted with an Internal Revenue Service Appeals officer,
petitioners received additional documents relating to disputed
gains on sales transactions and that petitioners “found that the
IRS had created income to Petitioners based on statistics, and
this was unknown to Petitioners until after the conference”. The
petition also contains various accusations concerning the
credibility of the statements in the above-quoted notices of
determination.
Respondent contends that section 6330(c)(2)(B) precludes
petitioners from challenging the existence or amount of their
income tax liability for 1993, 1994, and 1995, because
petitioners had received statutory notices of deficiency for that
liability.
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Background
Statutory notices with respect to 1993, 1994, and 1995 were
sent to each petitioner on August 13, 1997. Duplicate originals
were sent to Steven Sego; one of those was sent by certified mail
to an address in Spirit Lake, Idaho, and one was sent by regular
mail to the address in Rathdrum, Idaho, that is the address used
on the petition in this case. The statutory notice sent to
Steven Sego in Spirit Lake, Idaho, was returned undelivered by
the Postal Service. The statutory notice sent to Steven Sego by
regular mail was returned to respondent on October 10, 1997.
Handwritten across the first page of the returned statutory
notice were the words “This presentment Dishonored at UCC 1-207".
At the time the notice was returned to respondent by Steven Sego,
there remained 31 days for Steven Sego to petition the Tax Court.
He did not do so.
With respect to Davina Sego, respondent asserts that a
statutory notice of deficiency was sent to her for 1993, 1994,
and 1995 at the Rathdrum, Idaho, address, as shown by the
postmark stamped on the executed Application for Registration or
Certification, U.S. Postal Service Form 3877, a copy of which is
in the record. Respondent contends that, after leaving two
notices of certified mail in petitioners’ mailbox on August 18,
1997, and on August 25, 1997, the notice of deficiency was
returned to respondent by the Postal Service.
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The record contains other documents that respondent asserts
are indicative of Steven Sego’s “deliberate practice of refusing
to accept mail sent by respondent, including (a) the ‘Refusal to
Accept Service of Form 668-(Y)(c)’ stated in a document entitled
‘Final Declaration - Form 668(Y)(c) Refused for Cause without
Dishonor & Notice of Default’ dated July 12, 1998". Respondent
further alleges:
A document entitled “Witnessed Notice & Refusal” dated
July 12, 1998, confirms that petitioner Davina Sego
shared in her husband’s views and practices with regard
to the refusal to accept mail from respondent. In that
document Davina Sego referred to her husband’s “Final
Declaration - Form 668(Y)(c) Refused for Cause without
Dishonor & Notice of Default” of the same date, and
requested that it “be deemed as if I had stated it.”
* * *
Respondent’s position is that “The foregoing evidence leads to
the conclusion that petitioner Davina Sego deliberately refused
to claim the statutory notice of deficiency mailed to her on
August 13, 1997.”
The Postal Service employee responsible for the postal route
that includes petitioners’ address testified that she attempted
delivery of certified mail to Davina Sego on August 18, 1997, and
left a second notice of attempted delivery on August 25, 1997.
By reference to exhibits, she identified the certified mail as
the August 13, 1997, statutory notice of deficiency.1
1
Petitioners sought to reopen the record by reference to
subsequent events allegedly reflecting on the credibility of the
(continued...)
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Davina Sego testified that “I do not recall ever getting any
yellow slips for--and I did not receive a statutory notice.” Her
position is: “It’s all--that has all been fabricated. My notice
of deficiency, these certificates that the post office was
supposed to try to mail me, everything has been fabricated.
Because if I had received the certificates, it would have been
replied to as we replied to [Steven Sego’s notice].”
Discussion
The statutory background of proceedings such as this one is
set forth in Goza v. Commissioner, 114 T.C. 176 (2000). For
completeness and because of its direct relevance, we repeat here
that portion of the discussion.
Section 6331(a) provides that, if any person liable to pay
any tax neglects or refuses to pay such tax within 10 days after
notice and demand for payment, the Secretary is authorized to
collect such tax by levy upon property belonging to the taxpayer.
Section 6331(d) provides that the Secretary is obliged to provide
the taxpayer with notice, including notice of the administrative
appeals available to the taxpayer, before proceeding with
collection by levy on the taxpayer's property.
1
(...continued)
Postal Service witness. Petitioners’ proffered evidence and
arguments in this regard, however, do not undermine the testimony
of the witness as corroborated by the physical exhibits in this
case.
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In the Internal Revenue Service Restructuring and Reform Act
of 1998 (RRA 1998), Pub. L. 105-206, sec. 3401, 112 Stat. 685,
746, Congress enacted new sections 6320 (pertaining to liens) and
6330 (pertaining to levies) to provide due process protections
for taxpayers in tax collection matters. Section 6330 generally
provides that the Commissioner cannot proceed with the collection
of taxes by way of a levy on a taxpayer's property until the
taxpayer has been given notice of and the opportunity for an
administrative review of the matter (in the form of an Appeals
Office due process hearing) and, if dissatisfied, with judicial
review of the administrative determination. Section 6330(e)
generally provides for the suspension of the period of
limitations on collection during the period that administrative
and judicial proceedings are pending and for 90 days thereafter.
Section 6330 is effective with respect to collection actions
initiated more than 180 days after July 22, 1998 (January 19,
1999). See RRA 1998 sec. 3401(d), 112 Stat. 750.
Section 6330(c) prescribes the matters that may be raised by
a taxpayer at an Appeals Office due process hearing in pertinent
part as follows:
SEC. 6330(c). Matters Considered at Hearing.--In
the case of any hearing conducted under this section–-
(1) Requirement of investigation.-–The
appeals officer shall at the hearing obtain
verification from the Secretary that the
requirements of any applicable law or
administrative procedure have been met.
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(2) Issues at hearing.--
(A) In general.-–The person may raise at
the hearing any relevant issue relating to
the unpaid tax or the proposed levy,
including–-
(i) appropriate spousal defenses;
(ii) challenges to the
appropriateness of collection actions;
and
(iii) offers of collection
alternatives, which may include the
posting of a bond, the substitution of
other assets, an installment agreement,
or an offer-in-compromise.
(B) Underlying liability.-–The person
may also raise at the hearing challenges to
the existence or amount of the underlying tax
liability for any tax period if the person
did not receive any statutory notice of
deficiency for such tax liability or did not
otherwise have an opportunity to dispute such
tax liability.
(3) Basis for the determination.-–The
determination by an appeals officer under this
subsection shall take into consideration–-
(A) the verification presented under
paragraph (1);
(B) the issues raised under paragraph
(2); and
(C) whether any proposed collection
action balances the need for the efficient
collection of taxes with the legitimate
concern of the person that any collection
action be no more intrusive than necessary.
In sum, section 6330(c) provides for an Appeals Office due
process hearing to address collection issues such as spousal
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defenses, the appropriateness of the Commissioner's intended
collection action, and possible alternative means of collection.
Section 6330(c)(2)(B) provides that the existence and amount of
the underlying tax liability can be contested at an Appeals
Office due process hearing only if the taxpayer did not receive a
notice of deficiency for the taxes in question or did not
otherwise have an earlier opportunity to dispute such tax
liability.
Section 6330(d) provides for judicial review of respondent’s
determination. Although section 6330 does not prescribe the
standard of review that the Court is to apply in reviewing the
Commissioner's administrative determinations, the subject is
addressed in detail in the legislative history of the provision.
In particular, H. Conf. Rept. 105-599, at 266 (1998), states in
pertinent part:
Judicial review
The conferees expect the appeals officer will
prepare a written determination addressing the issues
presented by the taxpayer and considered at the
hearing. * * * Where the validity of the tax liability
was properly at issue in the hearing, and where the
determination with regard to the tax liability is part
of the appeal, no levy may take place during the
pendency of the appeal. The amount of the tax
liability will in such cases be reviewed by the
appropriate court on a de novo basis. Where the
validity of the tax liability is not properly part of
the appeal, the taxpayer may challenge the
determination of the appeals officer for abuse of
discretion. * * *
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Accordingly, where the validity of the underlying tax liability
is properly at issue, the Court will review the matter on a
de novo basis. However, where the validity of the underlying tax
liability is not properly at issue, the Court will review the
Commissioner's administrative determination for abuse of
discretion.
In Goza v. Commissioner, 114 T.C. 176 (2000), we concluded
that the taxpayer had failed to raise a valid challenge to
respondent’s proposed levy before the Appeals Office and had
continued to assert frivolous constitutional claims in his
petition for review filed with this Court. Insofar as the
petition seeks relief with respect to Steven Sego, the reasoning
of Goza is applicable. Steven Sego received the statutory notice
of deficiency in time to file a petition but repudiated that
right by returning to respondent the statutory notice with
frivolous language on it. He did not file a petition, and the
express language of section 6330(c)(2)(B) precludes de novo
review of his tax liability in this proceeding.
Davina Sego did not actually receive a statutory notice of
deficiency. She contends that the statutory notice and the
notices of attempted delivery of certified mail are “fabricated”,
but she also asserts that she would have responded to them in the
same manner as her husband. Thus, she has aligned herself with
the pattern reflected in the record of rejecting mail from the
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Internal Revenue Service, accusing supposed adversaries of false
statements and fabrication of documents, and belatedly raising
new issues.
The record in this case contains a copy of a notice of
deficiency dated August 13, 1997, addressed to Davina Sego; a
Form 3877 indicating that the notice was sent on the date it
bears; corroborating Postal Service forms and testimony
indicating attempted delivery of the statutory notice to Davina
Sego at the address acknowledged by petitioners to be their
residence; and evidence that Davina Sego would not have
petitioned the Court in response to the statutory notice of
deficiency if she had actually received it. In the absence of
clear evidence to the contrary, the presumptions of official
regularity and of delivery justify the conclusion that the
statutory notice was sent and that attempts to deliver were made
in the manner contended by respondent. See United States v.
Zolla, 724 F.2d 808 (9th Cir. 1984); United States v. Ahrens, 530
F.2d 781 (8th Cir. 1976).
Davina Sego testified that she “did not recall” receiving
the Postal Service notices and asserted that the statutory notice
was “fabricated”. Her alleged subjective belief is not evidence,
and there is no evidence of irregularity in this case. See also
Pietanza v. Commissioner, 92 T.C. 729 (1989), affd. 935 F.2d 1282(3d Cir. 1991). Based on the Court’s observation of petitioners,
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their claims are at best misguided and, in any event, unreliable
and improbable. On the preponderance of the evidence, we
conclude that the statutory notice of deficiency was sent to
Davina Sego and that the notices of attempted delivery of
certified mail were left at petitioners’ residence as testified
by the Postal Service employee. Further, we conclude that each
petitioner had an earlier opportunity to dispute in this Court
his or her tax liability for 1993, 1994, and 1995 and
deliberately declined to do so. See sec. 6330(c)(2)(B).
The applicable legal principles with respect to Davina Sego
are set forth in Erhard v. Commissioner, 87 F.3d 273 (9th Cir.
1996), affg. T.C. Memo. 1994-344, and Patmon & Young Professional
Corp. v. Commissioner, 55 F.3d 216, 218 (6th Cir. 1995), affg.
T.C. Memo. 1993-143, which held that taxpayers cannot defeat
actual notice by deliberately refusing delivery of statutory
notices of deficiency. Petitioners’ conduct in this case
constituted deliberate refusal of delivery and repudiation of
their opportunity to contest the notices of deficiency in this
Court, which provides the prepayment option for disputing tax
liability. (They still have the option, however, of paying the
tax and instituting suits for refund.) The provisions in section
6330(c)(2)(B) limiting in collection due process cases their
right to contest the underlying tax liability are clearly
intended to prevent the creation of a belated prepayment remedy
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in cases such as this one. The validity of the underlying tax
liability is not properly before the Court.
As indicated above, petitioners’ claims in part are based on
events occurring after the Appeals Office hearing. Matters
raised after a hearing do not reflect on whether the
determinations that are the basis of this petition were an abuse
of discretion. Attacks on the use of statistics to determine
Steven Sego’s income relate to the underlying liability and
cannot be considered for the reasons set forth above. There is
no explanation or challenge in the petition to the
appropriateness or inappropriateness of the intended method of
collection, no offer of an alternative means of collection, and
no spousal defenses. The petition does not assert and there is
no basis in the record for the Court to conclude that respondent
abused his discretion with respect to any of these matters.
The decision in this case will indicate that we sustain
respondent’s administrative determination to proceed with
collection against petitioners. Our decision does not serve as a
review of respondent’s determination as to petitioners’
underlying tax liability for 1993, 1994, or 1995.
To reflect the foregoing,
Decision will be entered
for respondent.