Timothy Burke, Petitioner

UNITED STATES TAX COURT

TIMOTHY BURKE, Petitioner v .

COMMISSIONER O F

Docket No 5100-08L .

Filed December 8, 2009 .

The IRS determined .a deficiency in P's income tax for 1998 . P petitioned the Tax Court,-which sustained the IRS's determination . OP did not file,an appeal bond but appealed to the . Court--of Appeals(cid:127) -for the -First` Circuit, which affirmed . The Supreme Court denied P's petition for 'ce'rtiorari . After the Tax Cour.t' s decision and .during P's,appeal, the IRS-assessed tax and interest for 1 .998' and issued a levy notice ." The IRS also imposed a failure-to-pay addition to tax unde r I .R .C . sec . 6651(a)(3) . P requested - a CDP hearing and' . challenged the addition to .tax onthe grounds that the IRS should not have assessed the addition while P pursued his appeals, that the assessment was improper because. neither the notice of deficiency nor the Tax Court determined any penalties , and that he reasonably relied on statements by IRS examining agents that no penalties would apply . P requested abatement = of the--- . I .R .C . sec . ., 6651-( a) (3), failure -to-pay . addition to tax . IRS Appeals denied , P's abatement request and sustained .

the levy notice . P appealed the notice of determination .

Held : P is liable for the I .R . C . sec . 6651(a)(3) failure-to-pay addition to tax .

Held , further , Appeals did not abuse its discretion in sustaining the collection action, and collection by levy may proceed .

Timothy Burke , pro se .

Michael R . Fiore , for respondent .

MEMORANDUM OPINIO N

GUSTAFSON, Judge : Petitioner Timothy Burke has appealed, pursuant to section 6330(a), the determination by the Internal Revenue Service (IRS) to uphold a proposed levy to collect an addition to tax under section 6651(a) (3) for tax year 1998 .1 The issues for decision are : (1) Whether Mr . Burke is liable for the failure-to-pay addition to tax under section 6651(a)(3) with respect to his unpaid income tax liability for tax year 1998 ; and (2) whether the. IRS abused its discretion in determining to proceed with collection by levy .

'Except as otherwise noted, all section references are to the Internal Revenue Code (26 U .S .C .), and all Rule references are to the Tax Court Rules of Practice and Procedure .

Backgroun d The parties= .submitted :- this , case ~ful1y stipulated pursuant,>t o Rule 122, reflecting their agreement that the relevant facts could be presented without a-trial . We incorporate by,thi s reference the . parties' stipulation of, . facts .and ;: supplemental stipulation of facts, both dated March 17, 2009, and the-exhibit s attached thereto .

'- Mr .'Burke worked for the MRS from 1978 to 1985, became, a certified public accountant in .1985'or 198.6,,, earned an LL .M i n taxation, in 1986,--and has pract=iced law,since 1987 .

He resided in Massachusetts when he filed the! petition .

1998 Federal Income TaxiReturn and Examinatio n . Mr .: .Burk.e filed . his - 1998 , Federal .income tax return„ i n December 1999 . With his return he-included' a-Form . 8082, . Notice of`-Inconsistent Treatmentor A dministrative Adjustment Request, .

to' disclose that, -he was reporting hi`s,- .distributive share- of , partnership income as _ zero even though the partnerships tax return filed by his partner reported that they each had' .a distributive, share for 11998 of $121,O⁰⁰ .- .~a The IRS determined that the $121,000 distributive?'share was-'taxable to Mr .. Burke in .1998 ,and also,-.

2Both of the` parties attached,to' their, post-trial briefs documents that they„apparentlyintended,as additional evidence . ; These documents were not included with'the`parties' stipulations of facts,, and neither party moved to reopen the record to admit these `additional documents . In this opinion we do .not `rely upon information . contained in documents which, are not in evidence .

1 .

disallowed certain business deductions . The IRS examining officer's activity record notes that the IRS did not determine an accuracy-related penalty or a fraud penalty for 1998 because of Mr . Burke's disclosure . The IRS issued a notice ofdeficiency determining a $41,338 deficiency in tax and no additions to tax or penalties .

1998 Deficiency Litigation On August 19, 2004, Mr . Burke filed a petition with this Court at docket No . 14904-04 seeking a redetermination of the deficiency . After Mr . Burke provided an analysis of the partnership's income during discovery, the IRS increased the deficiency to $53,077 . Mr . Burke contended, however, that the existence of a controversy between Mr . Burke and his partner rendered the amount of his partnership distributive share indefinite, that the partnership receipts were frozen in escrow during 1998 and thus unavailable to him, and that his lack of a right to the income required postponing the inclusion of his distributive share in income .

This Court granted the Government's motion for summary judgment .

Burke v . Commissioner , T .C . Memo . 2005-297, filed Dec .

27, 2005 ( Burke I ) . We held that the distributive share was taxable income to Mr . Burke in 1998, independent of any dispute between him and his partner and regardless of whether the share was distributed or held in escrow . We affirmed the Government's .calculation .of the distributive share--and sustained the disallowance of-claimed business deductions : because Mr . Burke .

failed'to-substantiate the expenses and"to .,establish their deductibility`. On January 18, 2006, we entered an order and , decision sustaining a $53,`077 deficiency for tax year,.1998 .

Mr Burke appealed our decision, .but,;he:did not .filea bond under` section' 7485 . to-stay assessment an&,,col,lection . The U .S . = Court `of `Appeals for-the First Circuit affirmed our decision i n May2007 Burke v . Commissioner ,-485 F'-.3d 171 .(1st Cir . 2007), and the U .S . Supreme Court denied Mr . Burke's petition for a wri t f certiorari in February 2008, Burke v . Commissioner ; 552 U .S .

1186 ( 2.0 .08 ) IRS Collection Action .

On July 21,' 2006 ',,rt, while Mr . Burke',s,appeal was pending, the IRS assessed . $85, 191 .16 ; consistirig, of the- $53,077-deficiency and $32,114 .16 of accrued interest ; and no later than September 19,, 2006, ..it issued .a notice and demand for payment .3 Mr . Burke di d 3Although .the parties did not--introduce into evidence a cop y of the notice and demand for . payment or a transcript, showing that one was issued, the notice of . determination states : "The Settlement Officer* _* *,,verified through ; transcript analysis that *-*` * the notice and demand for payment letter . was mailed- to * * * [Mr . Burke's] " last known address, within .60 .days of assessment,'-.as required by IRC section 6303" .,, (Emphasis added .) This was part of the verification that the Office of Appeals was required to obtain pursuant to section 6330(c)(1) . Mr . Burke has not ° alleged-that he' did not receive : the notice,. and demand ,'for payment, andshe did not-,challenge in his . pet ition ..or'otherwise the adequacy of. the section 6330(c)(1) verification . . Therefore , (continued . . ) not pay the amount demanded . Mr . Burke was able to pay the liability at the time it was demanded,4 but he did not make any payments toward this liability until more than a year later, in November 2007 .

On February 17, 2007, the IRS issued a Final Notice, Notice of Intent to Levy and Notice of Your Right to a Hearing t o Mr . Burke, advising him that the IRS intended to levy to collect his unpaid balance for tax year 1998 .5 By that time, it had been at least five months since the IRS had given notice and demand for payment to Mr . Burke .

CDP Hearin g Mr . Burke submitted to the IRS a Form 12153, Request for a Collection Due Process or Equivalent Hearing, dated March 6, 2007, timely requesting a collection due process (CDP) hearing .

Mr . Burke's CDP request stated that he disagreed with th e .( .

.

. continued ) . 3 we are satisfied that the IRS issued a notice and demand for payment to Mr . Burke as required by section 6303 . However, we presume--for Mr . Burke's benefit--the latest date (i .e . September 19, 2006, the sixtieth day) for the issuance of the notice and demand .

I 4In response to attempts by respondent to conduct discovery on the subject of Mr . Burke's finances, Mr . Burke affirmed that he does not contend that he was unable to pay the tax when it was due or that paying on the due date would have imposed an undue hardship . See Mar . 4, 2009, order at 2 .

5The record does not include a copy of the final notice of intent to levy . However, the parties agree that the IRS issued this notice on February 17, 2007, and that Mr . Burke timely requested a CDP hearing in response to that notice .

7 - proposed levy because " the filing of-a lien is i nappropriate .as the issue of the taxes allegedly owed is before the First Circuit Court of Appeal's on this date " . 6 Mr . Burke further indicated that he was interested in submitting an offer-in - compromise (OIC) .

On July 25 , 2007, the IRS's :Office of Appeals scheduled Mr . Burke's CDP hearing for September 7, 2007,,, and asked him to provide within 14 days a completed Form 433, Collection Information Statement for Wage Earners and Self - Employed Individuals , and a detailed proposal regarding any collection alternative he wanted considered during the CDP hearing .

Mr . Burke did not submit a completed Form 433 or a detailed OIC . A settlement officer conducted the CDP hearing through telephone conferences and correspondence exchanges with Mr .(cid:127)Burke between August 8, 2007,(cid:127)and January 7 , 2008 . Mr . Burke requeste d a stay in . the . CDP hearing during the pendency of his appeals .

The settlement officer concluded that there was no basis fo r delaying the CDP hearing . In September 2007 Mr . Burke requested a copy .of his account transcript and indicated that he intende d 'There is no indication-in the record that the IRS had filed a Federal tax lien .against Mr . Burke . We presume he intended his statement to refer to-the proposed levy ; i .e ., that the IR S should not levy on his property because his appeal was still pending .

to pay 99 percent of his tax liability, with the balance paid in installments . ' The settlement officer sent Mr . Burke a copy of his account transcript on September 24, 2007, and the summary section of the transcript listed the following amounts :

Account balance $85,191 .1 6 Accrued interest Accrued penalty 7,046 .48 As of : Jul . 16, 200 7 5,042 .31 As of : Jul . 16, 200 7 The "Account balance" of $85,191 .16 consisted of the tax and interest that had been assessed in July 2006, and the "Accrued" amounts were liabilities that had accrued after that time . Apart from the "Accrued penalty", the tax and interest alone (i .e ., the 7The settlement officer noted that Mr . Burke offered to pay "990 of the liability to allow him the opportunity to proceed with his appeal [of Burke I ] to U .S . Supreme Court on his partnership issue" . This explanation seems to reflect confusion either by Mr . Burke or by the settlement officer . When a case ceases to present a "live controversy of the kind that must exist if we are to avoid advisory opinions on .abstract propositions of Hall v . Beals , 396 U .S . 45, 48 (1969) . law", it has become moot . A taxpayer's appeal to the Tax Court under section 6330(d) from a notice of determination to proceed with collection may be rendered moot by his paying the liability and the IRS' s ceasing collection activity because there remains nothing to collect . See Greene -Thapedi v . Commissioner , 126 T .C . 1, 7-8 (2006) . However, Mr . Burke's appeal that was pending in September 2007 was his appeal of the deficiency determination in Burke I , not an appeal of a collection determination . A taxpayer's payment of a tax deficiency after the IRS mails a notice of deficiency does not deprive the Tax Court of jurisdiction over the deficiency,, sec . 6213 (b)(4), and in a deficiency case, the Tax Court has jurisdiction to determine an overpayment, see sec . 6512 (b)(1) . Thus, even if Mr . Burke had paid his entire liability (rather than 99 percent of it), he could still have pursued his appeal of Burke I to seek an overpayment .

tax 'and interest assessed -in 'July°..`2006(cid:127) . plus -additional' interes t accrued as of July ' 16', 2007) .amounted to $92,237 .`64 .

October 2007 Mr . `Burke left° a message :for the "settlemen t officer asking about the-penalty entry :on .the transcript, .. because neither the notice of deficiency :nor the . decision in Burke `I ,ha d included any penalty . :

The settlement-officer reviewe d Mr r ° Burke' s file and confirmed' that the IRS- had . not determined any penalties in the notice of deficiency nor asserted any penalties in the deficiency case :Hedetermined~.>that the amount in issue .was°°an_ "FTP penalty" (1- .' e' a"failure-to pay addition to tax under'section 6651(a)(3)) that began to accrue . . after the Tax Court had decided Burke I and the IRS .had-made the resulting , assessment of tax and interest .

,As of :September 2007, ' at : least year had passed,: since th e IRS had issued 'its hot ice . .. and demand . to Mr Burke The settlement officer prepared a- .proposed installment agreement calling for an -initial payment of(cid:127)$92,000 and&monthly .payments of $376 beginning'on January .l⁵,=2008 ., He .mailed the propose d 8The settlement .officer,'.the account-transcript, and bot h parties refer to the failure-to-pay addition under-section 6651(a),(3) as a ."penalty" . However, each of. the additions under sectionf 6651--for failure to , file "a return, sec . 6651(a)(1) ; for failure to pay .the amount-shown as tax"on a =re-turn, . sec . 6651(a)(2) and .for failure to pay'an amount not shown but required to be shown on a return within 21 days of notice and demand (within 10 daysif over $100 :,000), sec . 6651(a)(3)=-is an "addition to tax" and not a"penalty" . See infra pt . II .A . Notwithstanding the parties' use of the term "penalty we use the term "addition to tax" hereafter .

.

10 - agreement to Mr . Burke on October 30, 2007, asking him to sign and return the Form 433-D, Installment Agreement, within 15 days .

Mr . Burke did not sign and return the Form .433-D, but he made a $92,000 payment on November 15, 2007--designating his payment "solely to'pay tax and accrued interest ." The IRSapplied .the payment toward his 1998 liability, and the payment covered all of the tax, all of the assessed interest, and . some of the additional accrued interest .

As is noted above, the account transcript that the settlement officer provided to Mr . Burke reflected accrual of the section 6651(a)(3) addition to tax (referred to as ."Accrued penalty") in the amount of-$5,042 .31 as of July 16, 2007 .

Following discussions with the settlement officer, Mr . Burke submitted a request, dated December 17, 2007, for abatement of the section 6651(a)(3) addition to tax, and the settlement officer received the request on December 20, 2007 . Mr . Burke argued that abatement was appropriate because (1) "the Tax Court did not even suggest that penalties were to be applied", .and (2) "the dispute between the'Service and the taxpayer remains open until such time that the Supreme Court makes a determination on the issue of whether income is to be reported"--implying that no addition to tax should be imposed while he was appealing the underlying liability .

.

.The'-settlement officer '' considered Mr Burke's 'rguments'an d - li - concluded that , Mr Burke did not present any °reasonable basis=fo r abatement .

In a` telephone ' conference on January - 7 ...2008,"th e settlement officer informed Mr . Burke -of his decision .

Mr .~Burk e stated - that he disagreed with this'determination and suggested-a n installment agreement that did"(cid:127) not include the failure - to-pay )penalty . The `settlement officer considered Mr . Burke'sc suggestion butconcludedthat the IRS would ' not enter into a n installment agreement fors less " than all ' of a` taxpayer' s - liability . By'~letter ° dated ` January 23, 2008', - the . settlemen t officer again informed - Mr .Burke that he was'_ denying .the abatement request, and he included"a detailed explanation of ho w he reached this decision .

As indicated . supra note - 8, certain of the- documents in. _th e record ;refer to the ' section 6651 ( a) (3) addition , 'to -tax as a "penalty " .` In-addition , some "documents - appear to identify the Code section for`this addition ' inaccurately .,For example, the notice of~° 'determination ' twice' refers to the addition as an "IRC , 6751',( a) (3) penalty ", and . the* settlement officer's . -case activity .

notes occasionally refer to the addition as occurring under - section 6651 (a) (2) but usually' refer ' to section 6651(a)(3) . .- .

Other documents in`the - record but not admitted- ' into evidenc e Notwithstanding these clerical errors, it is obvious from the record that both Mr . Burke and the settlement officer clearly focused on the section 6651(a)(3) failure-to-pay addition to tax throughout the CDP hearing . For example, Mr . Burke' s December 17, 2007, letter requesting relief from the addition to tax specifically argued for abatement of the addition under section 6651(a)(3), and the settlement officer clearly notified Mr' . Burke--not only during the CDP hearing but also in the attachment to his January .23, 2008, letter denying the abatement request--that the additions were pursuant to section 6651(a)(3) .

We find that the IRS undeniably informed Mr . Burke which addition to tax it was imposing . These minor typographical errors are irrelevant to whether Mr . Burke is liable for the addition and to whether he had a hearing on that liability .

On January 25, 2008, the IRS issued to Mr . Burke a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 . In the notice of determination, the Office of Appeals recited that the settlement officer : (1) verified that applicable legal and procedural requirements were met ; (2) could not consider the OIC collection alternative indicated in the CD P request because Mr . Burke did not submit required documentation ; (3) considered the issues Mr . Burke raised (specifically, his challenge to the section 6651(a)(3) addition to tax) ; (4) could not agree to an installment agreement because Mr ., Burke refused to enter such an agreement-for the full amount of the liability and because he did not submit required documentation (th e collection information statement and a signed, .written request for an installment'agreement) ;and (5)°concluded that collectio n by levy properly balanced the need for efficient collection-wit h Mr . Burke's legitimate concern that the collection action be no more intrusive than necessary . The IRS ,sustained the propose d levy .

The Current Cas e Mr . Burke then filed his'petition with the=Tax Court, pursuant to section 6330(d), alleging the . following three errors :

(a) The Respondent abused its [sic] discretion i n failing to-enter into an instalment [sic] agreement for the amount of outstanding tax (if any) and interest thereon .

(b) The Respondent abused its discretion in failing to abate the penalty imposed by IRC § 6651(a)(3) .

(c) The Respondent's Determination, which was made subsequent to its representation that a Determination would not be issued without . contacting the Petitioner (to the recollection of the Petitioner) and immediately after its failure to include its rationale for concluding that thee subject penalty was not to be abated in a .letter to the Petitioner evidences that the Determination was in error, arbitrary, capricious and biased against the, Petitioner .

.

.

However, in Mr . Burke's brief he eventually articulated ,a single issue, (cid:127)i .e . .

- 14 .- Whether the Respondent abused its [sic] discretion in the assessment and failure to abate the penalty of IR C § 6651(a)(3) .

To the extent that the three-fold issues originally stated in his petition exceed the single issue eventually argued in his brief, Mr . Burke has abandoned those other issues,9 and we consider only his challenge to the section 6651(a)(3) addition to tax .

The parties jointly moved to submit the case under Rule 122, and the case is now before the Court for decision without trial .

Discussio n I .

Collection Due Process Principle s A .

Levy Procedure s If a taxpayer fails to pay any'Federal income tax liability after notice and demand, section 6331(a) authorizes the IRS to collect the tax by levy on the taxpayer's property . However, Congress has added provisions that must be complied with before the IRS can collect by levy . Before proceeding, the IRS mus t issue a final notice of intent to levy and notify the taxpayer of the right to an administrative hearing--a ".collection due process" or CDP hearing--before the office of Appeals .

Sec . 6330 (a) and (b) (1) .

9See Rule 151(e)(4) and (5) (requiring that a party's brief state the points on which he relies) ; Remuzzi v . Commissioner , T .C . Memo . 1988-8 (issue not addressed by the taxpayers on brief deemed conceded), affd . without published opinion 867 F .2d 609 (4th Cir .. 1989) .

B .` Issues Considered at the CDP Hearing- Section 6330(c) sets forth three pertinent procedures for the CDP hearing . First, the appeals officer¹⁰ must obtain verification from the Secretary that the requirements of any applicable law or administrative procedure-have been met . Sec .

6330(c)(1) . Mr . Burke does not allege any defect .in the required verification .

Second, section 6330(c)(2) addresses the issues considered at the hearing . The taxpayer may raise any,issues relevant to the proposed collection of tax . Pursuant .to'sectio n 6330(c)(2)(A) a taxpayer may raise collection issues (including collection alternatives, such as installment agreements and OICs) . In his CDP request Mr . ..Burke-checked the box for an OIC, and his-petition alleged error in the IRS's refusal to allow an installment agreement ; but as is noted supra p . 14, he has abandoned any challenge to the IRS's disallowance of any collection alternative .

Pursuant to section 6330(c)(2)(B) a taxpayer may challenge the underlying tax liability, but he may do so only if he "di d '°The record identifies .the person who conducted Mr . Burke's CDP hearing as a "settlement officer" . Section 6330(c)(1) and (c)(3) refers to the person who conducts the . CDP hearing as an "appeals officer" . However, section 6330(b)(3) provides that the CDP hearing'shall be conducted by an "officer or'employee " of the IRS Office of Appeals (emphasis added) . A settlement officer i s one type of employee in that office qualified to hold CDP hearings . See Reynolds v . Commissioner , T .C . Memo . 2006-192 . will use the statutory term "appeals officer" hereafter .

16 - not receive any statutory notice of deficiency for such tax liability or did not otherwise have an opportunity to dispute such tax liability ."

During his agency - level hearing, Mr . Burke disputed the addition to tax listed on the account transcript as a "penalty " .

Mr . Burke did not receive any notice of deficiency with respect to the section 6651 ( a)(3) failure-to-pay addition to tax . See infra pt . II .A . The record does not show tha t Mr . Burke had an opportunity to dispute the addition to tax before the CDP hearing . Thus, Mr . Burke was entitled to challenge this addition to tax during the CDP hearing, see Kimball v . Commissioner , T .C . Memo . 2008-78, and to litigate it here .

Third, from the information presented during the CDP hearing, the appeals officer must decide whether the proposed levy action may proceed, and section 6330(c) requires the appeals officer to consider : (1) "verification from the Secretary that the requirements of any applicable law or administrative procedure have been met", see sec . 6330(c)(3)(A) (cross- referencing sec . 6330(c)(1)) ; (2) relevant issues raised by the taxpayer, see sec . 6330(c)(3)(B) (cross-referencing sec .

6330(c)(2)) ; and (3) "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", see sec . 6330(c)(3)(C) . If the --17 Office of Appeals then issues a . notice of determination t o proceed with the proposed levy, the taxpayer may appeal th e determination to this Court within 30 days, as Mr . Burke ha s ,done, and we now "have jurisdiction with respect to such matter" .

Sec . 6330 (d) (1 ) C .

Standard of Revie w Where the validity df the underlying tax liability i s properly at issue in the appeal of a collection determination, the Tax Court reviews de novo the determination of the underlying tax liability .

Sego v . Commissioner , 114 T .C . 604, 610 (2000) ; Goza v . Commissioner , 114 T .C . 176, 181-182 (2000) . Insofar as issues other than the validity of the underlying tax liabilit y are presented, the Court reviews the administrative determinatio n for an abuse of discretion .

Downing v . Commissioner , 118 T .C .

22,~ 30-31 (2002) ; Sego v . Commissioner , supra at 610 ; Goza v .

Commissioner , supra at 182 ; Godwin v . Commissioner , T .C . Memo .

2003-289, affd . 132 Fed . Appx . 785 (11th Cir . 2005) . An abuse of discretion occurs when the exercise of discretion is without sound basis in fact or law .

Murphy .v . Commissioner , 125 T .C .

301, 308 (2005), aff⁶ . 469 F .3d 27 (1st Cir . 2006) .

Thus, we review de novo the appeals officer's conclusion that Mr . Burke is liable for the section 6651(a)(3) addition to tax, and we review for abuse of discretion other issues . affecting the subsequent determination to sustain the collection action .

II .

Mr . Burke Is Liable for the Section 6651(a)(3) Addition to Ta x A .

The Nature of the Section,6651(a)(3) Addition to Tax Chapter 68 of the Internal Revenue Code (sections 6651-6751 ) is entitled "Additions to the Tax, Additional Amounts, and Assessable Penalties" . As that title indicates, it provides for some liabilities that are called "additions to the tax" and other liabilities that are called "penalties" . Subchapter A (sections 6651-6665) is entitled "Additions to the Tax and Additional Amounts" and consists of three parts : Part I is "General Provisions" (sections 6651-6658) ; part II is "Accuracy- related and fraud penalties" (sections 6662-6664) ; and part III is "Applicable Rules" (section 6665) . Subchapter B is "Assessable Penalties" (sections 6671 through 6725) . Thus, some "penalties" are included in subchapter A, part II (i .e ., the "Accuracy-related and fraud penalties") and other penalties are included in subchapter B (i .e ., the "Assessable Penalties") .

However, part I of subchapter A includes not "penalties" but rather "Additions to the Tax and Additional Amounts" .

Within that portion of the Code--i .e ., within chapter 68, subchapter A, part I--is the liability at issue here .

Section 6651(a)(3) imposes an "addition to the tax" that the IRS proposes to collect from Mr . Burke . It provides as follows :

SEC 6651 .`FAILURE TO FILE TAX RETURN OR TO"PAY TAX .

{a)(cid:127)" Addition',to the Tax .-- In case of failure = " (3) to pay any amount=in respect of any . tax required to be shown on a return specified in paragraph (1) which is not so shown .* * * within 21 :calendar days `from .the date of notice and- demand therefo r unless it is shown that -such failure, is due to reasonable cause and not due to willful neglect, there shall Abe added to they amount :of- ,tax -stated in such notice and demand 0 .5 percent of the amount of such tax if ° the -failure is , for not more ;than '1 month, with an' -additional 0 .5 percent for each additional month or fraction thereof-during which such failure continues, not exceeding,25 percent . in the aggregate . [Emphasis added.. ] (cid:127)The "notice 'and demand referred" -to in section . 6651,(a) (3) is .

provided-for in section 6303 :

SEC',6303 . -NOTICE-AND DEMAND FOR TAX .

(a) "General Rule .--Where it' is not otherwis e .-,provided by this title, the Secretary shall, as soon as -practicable, and within 60 .days,, - after .the making of an - assessment of a tax pursuant to section 6203, give notice to each-person liable-for the unpaid- .tax , stating the amount and demanding payment thereof . "Such notice shall .be left°°at the,`dwelling"or usual place .-of - business of such person, or shall be sent by . mail t o such persons last known address .---[Emphasis added .]

.~"Notice and-demand" thus follows the making of,an assessment . Where the assessment is of an income-tax,deficienc y determined by the IRS, that assessment is deferred by the deficiency process : The IRS'issues an otice of deficiency pursuant to section 6212, and-section 6213 .gives the taxpaye r 90 ..days to file a petition with the,Tax Court . Section 6213(a) 20 - provides that "no assessment of a deficiency in respect . of" the income tax "shall be made * * * until the expiration of suc h 90-day * * * period * * * nor, if a petition has been filed wit h the Tax Court, until the decision of the Tax Court has become final ." (Emphasis added .

) The section 6651(a)(3) addition itself is not subject to the deficiency procedures applicable to tax . By its nature, the addition is not fixed but increases in amount (up to a total of 25 percent of the tax) . as time passes and the tax remains unpaid .

The IRS may assess the accrued addition from time to time, but it is not required to do so, and it may collect the addition without assessment .

See Reese v . Commissioner , T .C . Memo . 2006-21, affd .

201 Fed . Appx . 961 (4th Cir . 2006) . Section 6665(b) provides explicitly that the deficiency procedures "shall not apply to any addition to tax under section 6651" ; and the exception to that rule for "an addition * * * which is attributable to a deficiency in tax", sec . 6665 (b)(1) (emphasis added), does not apply to the section 6651(a)(3) addition, which by its nature is attributable not to a tax "deficiency" but rather to a failure to pay tax that has been assessed . . " "See Estate of Russo v . Commissioner , . T .C . Memo . 1991-310 .

Section 6211(a) defines a deficiency as the difference between (a) the taxpayer's actual tax .liability and (b) the tax a s originally reported by the taxpayer, plus "amounts previously assessed * * * as a deficiency" . That is, once the tax actually due has all been assessed , there is no more deficiency--whethe r (continued .

. .)

-`21 The result of these interlocking' provisions ma ,- circumstance like the one at issue in this-case .:is~as follows :

The'failure - to-pay addition ' does . not begin,to . accrue until . notice 'ad - demand i for payment of the tax, sec . 6651(a)(3) ; notice and .

demand for payment of-the tax .- cannot bemade until-assessment , sec . 6303 s and assessment of .the tax ` cannot be . made until the Tax Court " s"'decision' has,' .become final . : Consequently , - the order of events is- : (1)-, Tax Court ; decision , ( 2 .) assessment of tax., " (3) notice - and demand , ' and only - thereafter-- (4) - accrual of- the failure-,to-pay addition of `section''` 6651 ( a) (3),' with' . or without .

assessment': -.'Thus , the pendency of , -a,`Tax Court deficiency suit will, by'- forestalling assessment" of : the. - tax, , :°sec .

'6213 (a) , indirectly delay the accrual of the section :6651' ( a), (3) additio n tax . This case poses 'the ,question of how long that delay wil l B .

Mr . Burke" s` Contention s There is no question that Mr .--Burke owes .-the tax at-issue , that it was assessed ;` that not ice- and demand was made for paymen t of,it, andthat"Mr Burke did . not pay it ,within 21 days .

However, . Mr . Burke contends that collection-of,-th e 11( .

. .continued ) or not the tax due has been paid . The section .6651(a)-(3)' addition, on the . other hand, does not accrue until after the tax due has been assessed (and2demanded and left unpaid), . when by definition there is no .deficiency .s. .Thus, the(cid:127), section 6651 (a) (3) addition can never be "attributable to a deficiency", for purposes of section 6665(b)(1) .

.

:

22 - section 6651(a)(3) addition should not be sustained, for the four reasons we now consider .

1 .

Non-assertion Until the CDP Hearing As far as the evidence before us shows, the first explicit mention by the IRS that Mr . Burke owed an addition under section 6651(a)-(3) was during the CDP hearing . Mr . Burke argues that he does not owe the addition because it was not raised by the examining agent during the audit, nor included on the IRS's notice of deficiency, nor litigated in or redetermined by_the Tax Court . The argument is misguided . The section 6651(a)(3) addition could never be properly asserted during audit, nor in a notice of deficiency, nor in a Tax Court decision, since at the time of those events it remains to be seen whether the taxpayer will pay the tax on notice and demand (which, by definition, has not yet been made and cannot be made until the deficiency can be assessed) . If the taxpayer does timely pay upon demand, then there will never be a failure .to pay, and the failure-to-pay addition will never begin to accrue . The non-assertion of the section 6651(a)(3) addition until the CDP hearing has no effect on Mr . Burke's liability to pay it .

2 .

The Pendency of Mr . Burke's Appeal Mr . Burke cites the pendency of the appeal of his deficiency case as a reason that he should not be liable for th e section 6651(a)(3) failure-to-pay addition . We discuss below in part II .B .,3 his contention-that the appeal' constituted "reasonable cause" -for non-payment . . It appears, however, that . he also contends that,, asa matter of law, the addition should .not accrue ` until after : resolution. r oft the appeal If .so, the contention fail s As is explained above,'when a taxpayer.-,fi'les'-suit in the Tax Court,-the deficiency determined by the IRS .cannot- be~:assessed* (and therefore the addition does not begin to accrue) "until the decision of the Tax Court hasbecome ., final ." Sec'. '6213 (a) .

.

Section 7481 provides the `:Date when TaxCourt .decision become s final" ., and it is affected°,by .appeals .`" A taxpayer may appeal a n adverse decision-of''the-Tax Court pursuant=-to section 7483 ; and if he receives an adverse ` decision from the Court, of Appeals , then-pursuant to 28 U, .S C . section-1254, he may-petition_the U .S .

Supreme Court fora writ of,certiorari .In .an`instance like the one at issue- i .e ., where the taxpayer files a .ti m'ely notice o f appeal, .the Court . of : Appeals affirms, and the taxpayer files wit h the Supreme-Court a . timely.petition for certiorari--, 3 section 748-1(a) (2 ), (B) :provides - that j "the decision-of the ;Ta x Court shall(cid:127)-become fina l * [u] pon"the denial of -a petition for certiorari" .

If section 7481 were the . only provision pertinent to th e proper timing of the assessment , then'it would appear that denia l of certiorari' must happen before .there could be an assessment (and then notice and demand, and then the accrual of`the failure- to-pay addition) . Mr . Burke made his $92,000 payment in November 2007, and as far as the record shows, that payment covered all his assessed liabilities (though not all of the additional accrued interest) . The Supreme Court did not deny his petition for certiorari until February 2008 . If th e section 6651(a)(3) addition could not begin to accrue until certiorari was denied, then the addition in question under section 6651(a)(3) would not be owed .

However, an overriding provision appears in section 7485 :

SEC 7485 . BOND TO STAY ASSESSMENT AND COLLECTION .

(a) Upon Notice of Appeal .--Notwithstanding any provision of law imposing restrictions on the assessment and collection of deficiencies [e .g ., section 6213(a)], the review under section 7483 [i .e ., appeal of a Tax Court decision] shall not operate as a stay of assessment or collection of any portion of the amount of the deficiency determined by the Tax Court unless a notice of appeal in respect of such portion is duly,filed by the taxpayer, . and then only if the taxpayer-- (1) on or before the time his notice of appeal is filed has filed with the Tax Court a bond in a sum fixed by the Tax Court not exceeding double the amount of the portion of the deficiency in respect of which the notice of appeal is filed, and with surety approved by the Tax Court, conditioned upon the payment . of the deficiency as finally determined, together with any interest, additional amounts, or additions to the tax provided for by law * * * . [Emphasis added . ] That is, assessment and collection of a deficiency determined by the Tax Court are not stayed unless the taxpayer files a bond .

'9 Se'e Rule 1'92 ; 'Kevin-P .-Burke v ."Commi s'sioner ; 124 T .C . ; 189,- .191 .

n .4- (2005) ; Schroeder,=v : Commissioner , T' .C . ; Memo . 2005-48 .

} Mr . Burke did not file,*a bond with this Cour t Consequently, assessment and"<collection' were -no .t stayed-by -section 6211(a) : beyorid-'the (cid:127)ninetieth .day see' sec . 7483, afte r the Tax-Court's entry of decision in Mr . Burke's deficiency cas e on .January 18,"2006-. ., That is, the IRS`was entitled to° assess th e tax as .early as,-April-18, 2006 .._, .' As` a,''result , .

the- . IRS' s assessment 'of tax and . interest on July : ` 21', `2006, and it s subsequent `issuance of notice and demand . toy Mr . .Burke on or before September 19,- 2006,, were notpremature : .,, . Pursuant t o section 6651 ( a) .(3,) the''failure -to-pay addition began to accrue 21 days after that notice ;and'demand---i . e by'October l 0, 2006-- notwithstanding the pendency-of Mr . Burke-'s appeal- .

Mr . Burke Did Not-Have Reasonable Cause for Failing To Pay His' 1998 Tax ;Liabillity After Notic e and Deman d 'Mr . 'Burke 'did not pay(cid:127)- the assessed tax- and . interest withi n 21 days of notice and demand .

.. The mandatory .language'ofsection 6651 (a) (3)'- provides : "unless it is shown that such failure °is` , due to reasonable cause and not towillful neglect, there shal l be added" . "'the failure-to-pay addition to'tax ..,'(Emphasis added . ) Congress used identical language for the three additions .-t o :t is shown that : such failure is due to reasonable' case and not 26 - due to willful neglect ." Sec . 6651(a)(1), (2), and (3) . The Internal Revenue Code does not define either "willful neglect" or "reasonable cause" . In the context of the failure-to- file addition to tax under section 6651(a)(1), the Supreme Court explained : (i) that to escape an addition under section 6651, the taxpayer must prove "both (1) that the failure did not result from `willful neglect,' and (2) that the failure was `due to reasonable cause'", United States v . Boyle , 469 U .S . 241, 245 (1985) (quoting section 6651(a)(1)), ; and (ii) that "as used here, the term `willful neglect' may be read as meaning a conscious, intentional failure or reckless indifference", id .

As for reasonable cause for a failure to pay (relevant here), section 301 .6651-1(c)(1), Proced . & Admin . Regs ., provides, in relevant part :

A failure to pay will be considered to be due to reasonable cause to the extent that the taxpayer has made a satisfactory showing that he exercised ordinary business care and prudence in providing for payment of his tax liability and was nevertheless either unable to pay the tax or would suffer an undue hardship * * * if he paid on the due date . . [Emphasis added .

] That is, the regulation speaks only of reasonable cause arising from an inability to pay, but Mr . Burke does not contend that he was unable to pay the tax without suffering undue hardship .1 z "In correspondence with respondent's counsel, Mr . Burke variously stated that "Petitioner has maintained throughout[ :] the present dispute is not over his ability to pay the subject penalty" and "there is no dispute over the ability to pay" . In a . .)

(continued .

:27 - -Rather, Mr . Burke contends that the IRS erred by considering only his ability to pay the tax when(cid:127)it was demanded . He argues that section "301 .6651 of the Regulations does not purport to b e an exclusive list of situations in which a failure to pay is du e `reasonable cause" and not-'willful neglect", ( quoting East Wind Indus ., Inc . v ." United States , 196 F .3d 499, 514 n . l (3d Cir . 1999) (Stapleton, J ., dissenting)) . Respondent contends that, under the regulation, a taxpayer's financial ability, to pa y is the only' relevant factor in evaluating reasonable cause for a failure to pay, and respondent'argues that in East Wind the Cour t f Appeals adopted a facts-and-circumstances test that requires a finding of financial hardship as a predicate to findin g -reasonable cause -for a ,failure to-pay- We need not decide whether ability to pay is the exclusive ground for proving reasonable cause for failing to pay, because in any event the only alternative ground that Mr .. Burke proffer s cannot .support a finding of reasonable cause for his failure to pay . Mr . Burke contends that he had-reasonable cause not to pay because, when the IRS issued the notice and demand for payment- , he was appealing our-decision that he was liable for tax .

12( .

. . continued ) conference . call with the Court to resolve a discovery dispute, the, IRS withdrew its motion to show cause because Mr . Burk e affirmed that he'would not contend that he was unable to pay the tax when it was due or that paying on the due date would have imposed an undue hardship . See supra note 4 .

maintains .that because he was prosecuting a good-faith appeal of our adverse decision, as was his right, he should not be liable for the failure-to-pay addition .

However, as is discussed supra , the law is clear that assessment and collection are stayed during the appeal of a decision of this Court only if the taxpayer files a bond on o r before the date he files his appeal . Sec . 7485(a) ; Schroeder v .

Commissioner , supra . Mr . Burke did indeed have the right to , appeal ; but the IRS just as surely had the right to, collect if he failed to file a bond . The idea that his appeal somehow deprived the IRS of its right to assess and collect the liability--or somehow excused his obligation to pay--is mistaken as a matter of law, and it does not provide reasonable cause for his failure to pay . We need not decide whether, in some circumstances, ignorance of the law might excuse the ignorant and unwitting taxpayer from liability for the addition unde r section 6651(a)(3), since this case involves an experienced tax lawyer well able to determine his rights and obligations under section 7485(a) .

4 .

The Government Is Not Equitably Estopped From Imposing the Section 6651(a)(3) Addition to Tax Mr . Burke asserts that the IRS should not be allowed t o impose the section 6651(a)(3) addition to tax because the IRS decided not to impose any penalties during the examination or to 29 - --pursue -- penalties in-Burke I , andhe reiied .~ on statements -to =tha t effect . . His contention .cannot°besustained .

Equitable estoppel is a`judcal doctrine that precludes a party froth denying his own acts'=or representations(cid:127)which induced another to act to his detriment . -"Estoppel-is .applied . :against .

the Commissioner `with utmost caution and restraint . " Estate-} of=Emerson ° v . Commissioner , 67 T .C . .612, 617 (1977)) . . It is well-established that the un authorized acts of . its agents cahnot . estop,the(cid:127), .Government .=' Sanders v . Commissioner., . 225 F .'2d 629 ; 634 (10th Cir .

. 1955 ) , affg 2 ;lw T-.C 1012 ( 1954 )x; . ,: It,is~ equally- well settled that the IRS cannot , bel .estopped fro m correcting a mistake of .law, even where a .taxpayer may have relied to his- detriment on that mistake . Norfolk S . Cori p . v- .

Commissioner`, 104 T .C . 13, 59-60"'(1995), affd . ;140 F .3d 240 (4t h Cir-. 1998) An exception-exists only in_the rare case where a .-- taxpayer can prove he would = suffer .anr"unconscionable injury" because of that reliance . ,Id .,-at 60 .

A -taxpayer must-show the, following before equitable estoppe l applies =against the . Government : (1) ;,a false representation o r wrongful, misleading-, silence by the Government ;,(~ 2) an errorrby the Government in a' statement .. of fact=and .not`in an opinion o r statement of law ; (3)``the taxpayer's ignorance of the true facts ; '(4) .the taxpayer's reasonable-. reliance'on . the Government' s-acts or statements ; and (5) adverse effects suffered by the taxpayer resulting from the Government's acts or statements .

Wilkins v .

Commissioner , 120 T .C . 109, 112 (2003) . Thus, equitable estoppel requires a finding that the taxpayer suffered a detriment because of his reliance on the representations of the Government .

Id .

Mr . Burke asserts that statements in the examining officer's activity record from the examination of his 1998 return justify abating the failure-to-pay addition to tax . In an entry dated December 13, 2001, the examining agent's manager apparentl y noted : "Concur - no fraud penalty or section 6662 penalty due to F8082 disclosure . No penalties apply ." (Emphasis added .) The reason that the examination personnel of the IRS asserted against Mr . . Burke no fraud penalty under section 6663(a) and no accuracy- related penalty under section 6662 was stated in that entry-- i .e ., "F8082 disclosure"--and that reason does not apply to the failure-to-pay addition .

As the manager tersely noted, Mr . Burke had filed a Form 8082 to inform the IRS of the inconsistency between his reporting zero as his distributive share of partnership .income on his individual income tax return and the partnership's reporting $121,000 as his distributive share on its partnership return .

Mr . Burke's position in Burke I was that because the income reported on his Schedule K-1, Partner's Share of Income, Credits, Deductions, Etc ., was not actually,distributed to him but rather was held in escrow because of a'dispute between him and hi s partner, he was not . required to report his distributive share a s income . e We `h'eld that'he -was a'taxable on 'his distributive share , whether "distributed or"not,` and the Court of Appeals for .the , First' Circuit affirmed .' He was ultimately shownto be wrong o n that issue--but lie had clearly flagged-the 'i'ssue on his return , and for that reason he avoided any penalty on'his ' 'repbrting o f his income on"his 'return .

An accuracy- related penalty is imposed-on ` substantial , understatefnents of income tax, . pursuant to- :section, 6662=(a) an d (b) (2) . in= determining whether ari understatement is substantial , the amount `of .'the understatement'is reduced by any portio n attributable to an item i f (I)' the relevant 'facts `affecting the item's tax treatment-are adequately disclosed in the return or in a statement attached to-the return,-an d (II) there-is a'' reasonable basis for the tax treatment of such item by the taxpayer .

Sec .. 6662(d) (2) (B) (ii)- (emphasis added) ` Afraud penalty is imposed by section 6663 (a), whic h provides :

If any part . of any underpayment 1131 of tax required to be shown on a return is due-to fr"aud , tthere shall be`added to .

13Under section 6664(a), the difference between the' tax imposed by the Code and a lesser amount of tax that the taxpayer showson-his return,.is an "underpayment" . -Under this definition, it is the under- reporting of the liability that gives rise tot an "underpayment" .

the tax an amount equal to 75 percent of the portion of the underpayment which is attributable to fraud . [Emphasis added .

] Section 6664(c)(1) provides an exception to the penalties under sections 6662 and 6663 "if it is shown that there was reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion .

The IRS did not determine any penalty in the notice of deficiency and did not assert any penalty in Mr . Burke's prior deficiency case, apparently because the IRS concluded (i) that there was .a "substantial basis" for,Mr . Burke's inconsistent position, (ii) that his position was "adequately disclosed" on Form 8082, (iii) that Mr . Burke's underpayment was not "due to fraud", and/or (iv) that Mr . Burke had "reasonable cause" and "acted in good faith" when he under-reported his tax liability .

While for purposes of this case we assume that such conclusions were warranted, those conclusions do not provide a basis for Mr . Burke to avoid the failure-to-pay addition .

Mr . Burke now alleges that he relied upon : (1) the IRS examining agent's statement regarding the accuracy-related penalty ; (2) the IRS's decision not to determine such a penalty in the notice of deficiency or to pursue any penalties in his deficiency case ; (3) the Court's not imposing penalties in Burke I ; and (4) the IRS's failure to provide him notice that it was changing its position relative to penalties . He argues that - °3 3 the IRS should-be estopped from .imposing the failure-to-pay addition to tax, i .e . that the-IRS's~statements .and his reliance on them foreclosed, this- addition ,to tax .

The section ' 6651 (a) (3) ,addition to tax, however, :was, no t imposed and could not-have :bee-n :-imposed until after the decision in Burke I See Commissioner-v . `McCoy 4 .84 U .S .

..,3, 7 (1987) .,-1- , The IRS examining agent made his-note on~,.'December 13,- ..2001 ; we .

entered our decision in Burke, :-I on January 18 ; . :;2006 ands they IR S as tax and,interest on~July 21 ; 2006', and issu ed .the notice- .

and deinand - no . later than' September . ,19 ,'- 2 0 06 .

.The IRS examining- agent'sstatement in 2001=That the accuracy-related 'penalty,_would - not apply to Mr . Burke's 1998 deficiency was not a'fals e representation or an error in a statement of fact .;-,-it-was instead a correct statement that :was - borne out .in .the IRS' .s subsequent non-imposition-'of' such a penalty .'' ; Nor, was .-the agent's 200 1 statement-'a wrongful,misl-eading`silence . It was . an appropriat e silence, since the question whether a failure-to-pay addition would ever be due depended -entirely lion -future events . 14 141 f the : IRS examining ..,,agent had , informed Mr . Burke during the examination that he was somehow inoculated against all present and future penalties and .additions .to,tax for tax year . 1998 ., including the section 6651(a)(3) failure-to-pay addition to tax, such a statement would,,.have been an erroneous representation of law, not of fact . ' The IRS ordinarily will not beestopped - from retroactively correcting a mistake of law . v . Commissioner , 104 T .C . 13, 60-61 (1995) , affd ., 140 F . 3d 340' L(4th Cir . 1998) Norfolk S . Corp .

- 3 4 If Mr . Burke failed to pay the assessed tax and interest after notice and demand because the IRS had earlier told him that it would not penalize his reporting position, then he inferred a wild non sequitur . A taxpayer who understates his tax liability in complete innocence is nonetheless obliged to pay his actual tax liability ; and if he fails to do so after notice and demand, his failure to pay is not excused by the innocence of his prior mistake . If an IRS agent informs a taxpayer that he will not be held liable for a fraud penalty, the taxpayer has no reason to infer that he need not pay the tax subsequently assessed or that he will thereafter be-immune from failure-to-pay additions to tax .

But Mr . Burke may be making a contention slightly mor e subtle than that . He may be . contending that the "substantia l basis", "reasonable cause", and "good faith" conclusions implicit in the IRS agent's no-penalty decision laid the predicate for estoppel in the failure-to-pay context . Arguably, the IRS had implicitly ruled, for purposes of penalties, that Mr . Burke's reporting position had "reasonable cause" (unde r section 6664(c)) ; and Mr . Burke may be contending that he was thereafter entitled to rely on that ruling, so that the Government ought to be estopped from denying "reasonable cause" under section 6651(a)(3) for his non-payment of the tax .

If that - :is, his contention-,,-'then it fails .

`;Reasonabl e cause" for erroneously reporting one's tax liabil ity, in the firs t instance (for purposes of section 6664 (c)) ;,is a very' different - thing from "reasonable cause" for challenged, the tax has been assessed, and payment has been' ., demanded . Mr ."Burke's mistake on` his-,tax return might b e attributed to~reasonable cause ; but once the'deficiency in his .

tax resulting-from that- error was assessed,,--a continuing -refusa l to pay the .tax-cannot be excused by th e prior mistake . - Consequently, the-possibility . that his 'reporting : : error ha d reasonable cause did not give`him reason to delay . payment when payment was` required . A taxpayer may certainly challenge the',-, IRS' s'-audit position in this Court, ~,and' he may even be able to delay paying 'the liability--but only to the extent ,and in the manner the Code provides . When'Mr ., .Burke lost,before'the Tax_ Court but still". failed to pay (or to(cid:127) ''file an appeal bond) because he disagreed with the-IRS and the Tax CourtL..and wanted t o litigate his loss of that appeal mean t not only liability for the tax but also liability for the :

.

, addition 'to tax . for failures,to`pay .

Mr :_ Burke has not demonstrated any misconduct .: by the IRS .- He has not shown that any injury'(let alone an "unconscionable injury") resulted-from his reliance on representations- (let alone 36 - misrepresentations) made by IRS agents . See Norfolk S . Corp . v .

Commissioner , 104 T .C . at 61 (with no evidence of false representations by the IRS, actions of IRS examining agents who did not address the specific issue in suit could not have misled a reasonable . taxpayer) . Mr . Burke has not established the elements required to invoke equitable estoppel, and his liability for the addition to tax results from his failure to comply with the law . Consequently, we do not conclude that it is unfair for the IRS to impose the addition to tax required by the statute .

The section 6651(a)(3) addition to tax was properly imposed ; Mr . Burke has not shown that his failure to pay was due to reasonable cause and not to willful neglect ; and the Government is not estopped from determining this addition to tax .

Therefore, Mr . Burke is liable for the addition to tax under section 6651 (a) (3 ) III . The Office of Appeals Did Not Abuse Its Discretion The appeals officer verified that the IRS met the requirements of applicable law and administrative procedure i n assessing and demanding payment for Mr . Burke's 1998 liability, issuing the notice of intent to levy, and providing him with the CDP hearing . The appeals officer considered the issues Mr . Burke raised but was unable to consider any collection alternative because Mr . Burke did not make an actual offer or return a signed installment agreement and because he did not provide the financial=information=required to support any collectio n alternative¹⁵ 'The'appeals officer considered Mr . Burke' s challenge to the section 6651(a)(3)-addition-to tax,and J considered his abatementrequest . `" He determined that-Mr . Burk e did not qualify for abatement .- Finally,- he determined tha t collection by levy properly balanced -i ntrusiveness and efficiency--a matter'`to which Mr . Burke has never .raisedany ; dispute .

We conclude that'~the Office of Appeals :did,not . . abuse its disc .retion ° in -sustaining' the, notice-' of .-intent to levy, and we ;- hold that collection by levy- may proceed .

IV .

NoSection ' 6673 Penalty Will - Be Impose d Respondent ' has -moved `the Court to impose on .Mr. . Burke a penalty under -section 6673 '( a)'(1) which authorizes the Tax Court to require a,taxpayer to`pay to the United States_a ..penalty no t '5Mr . Burke and the . appeals officer discussed an installment agreement . The appeals officer prepared an agreement and'sent it .Burke,, who made the, $ .92,00 .0 initial , payment, . that it called to Mr for but did . not sign and return the agreement . Mr . Burk e expressed interest in an installment agreement only if it .did not include the section 6651(a) .(3) addition-to .-tax . The appeals officer concluded that the IRS,would not enter such an agreement for only a portion of the tax debt . Mr ., Burke refused to enter an-agreement that . includedthe addition- .to tax, and he did not submit a written installment ; agreement' or the financial information required,for .IRS consideration of such an agreement . We have consistently held that the office-of Appeals does not abuse-its discretion,by,not .considering a collection alternative the taxpayer does not submit or support with required` financial information . ;,See-Kendricks v . Commissioner ., 124 T .C . 69, 79 (2005) ; Cavazos v . . Commissioner , T .C . Me'mo .g2008-257 ; Prater v . Commissioner , T .C . Memo . 2007-241 .

in excess of $25,000 whenever it appears that proceedings have been instituted or maintained by the taxpayer primarily for dela y or that,the taxpayer's position in such proceeding is frivolou s or groundless . A taxpayer's position is frivolous or groundless if it is "`contrary to established law and unsupported by a reasoned, colorable argument for change in the law ."' Williams v . Commissioner , 114 T .C . 136, 144 (2000) (quoting Coleman v .

Commissioner , 791 F .2d 68, 71 (7th Cir . 1986)) .

However, the imposition of penalties under section 6673 is committed to the discretion of the Court . See Muhich v .

Commissioner , T .C . Memo . 1999-192,,affd . 238 F .3d 860 (7th Cir .

2001) . Although Mr . Burke's contentions as to the section 6651(a)(3) addition lack merit, we will not impose a penalty in this case . Mr . Burke disclosed very clearly on his 1998 return the item that gave rise to the tax liability underlying this case . During the audit Mr . Burke was cooperative with the IRS .

During the subsequent CDP process and before commencing this litigation, Mr . Burke made a $92,000 payment that almost completely covered .his liability for tax and interest, leaving unpaid only a small amount of accrued interest and th e section 6651(a)(3) addition that he wanted to challenge . His principal contention in that challenge--i .e ., that the pendency of his appeal should excuse his liability for the failure-to-pay addition--is very wrong, but we do not believe that, in view of all the circumstances, it ;:warrants . ;a penalty unde r section 6673(a) . Respondent's emotion will be denied .

To reflect the foregoing,, An appropriate order and decision will be entered .