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BASIS-Continued

COLLECTION MATTERS

See also RETURNS.

Collection by Levy of Unpaid Tax Liabilities-Tax Lien on

Sec. 401(k) Retirement Account-Effect of Bankruptcy Dis-

charge.-Where petitioner filed for bankruptcy on June 16, 1997,

after Commissioner had sent notice and demand for payment in

1991, 1993, and 1994; at time of filing bankruptcy petition, there

was valid Federal tax lien on petitioner's sec. 401(k) retirement

account; on Sept. 29, 1997, petitioner was granted ch. 7 bankruptcy

discharge; in July 2002, petitioner had sec. 6330 Appeals Office

collection due process hearing in which Appeals officer assumed

petitioner's 1989 and 1991 tax liabilities were discharged in bank-

ruptcy; on Oct. 8, 2002, Commissioner issued notice of determina-

tion to proceed with collection of assessed tax liabilities for 1987,

1989, and 1991 (1987 was later dismissed); and petitioner then filed

petition for sec. 6330(d)(1)(A) review, Court determined (1) case

would not be remanded to Appeals Office for clearer articulation of

Appeals officer's determination relating to bankruptcy discharge,

since hearing had focused solely on whether discharge prevented

collection of 1989 and 1991 tax liabilities by levy; (2) applying secs.

6321 and 6323, for purposes of collection proceeding Federal tax

lien on petitioner's property was not extinguished by bankruptcy

discharge; and (3) collection by levy was appropriate and could pro-

ceed, since Federal tax liens are not extinguished by personal dis-

charge in bankruptcy and no State law exemption applies. Iannone

v. Commissioner

Notices of Determination as to Liability for Unpaid Income
Taxes and for Unpaid Sec. 6682 Civil Penalty-Courtesy Cop-
ies of Notices-Timeliness of Petition.-Where on Dec. 19,
2002, Commissioner sent by certified mail two notices of determina-
tion concerning collection actions, one regarding unpaid income
taxes for 1992-95 and one regarding unpaid sec. 6682 civil penalty;
income tax notice was returned unclaimed; on Aug. 4, 2003,
Commissioner sent petitioner courtesy copies of previously mailed
determination notices; on Sept. 4, 2003, petitioner filed petition for
lien or levy action under sec. 6330(d); and Commissioner moved to
dismiss petition for lack of jurisdiction on ground of untimely filing,
which petitioner opposed, Court determined (1) Dec. 19, 2002,
income tax notice sent by certified mail to petitioner's last known

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COLLECTION MATTERS-Continued

address was sufficient notwithstanding petitioner's failure to

receive it; (2) Aug. 4, 2003, courtesy copy of income tax notice was

not notice of determination under sec. 6320 or sec. 6330 and send-

ing of courtesy copy did not revive statutory filing period; (3) Court

lacked jurisdiction to review determination to proceed with collec-

tion of unpaid income taxes because petition was untimely filed;

and (4) Court lacked jurisdiction to review determination to proceed

with collection of sec. 6682 civil penalty because Court lacked juris-

diction over underlying liability. Weber v. Commissioner

Petition for Review of Notice of Determination-Challenge

to Amount of Unpaid Tax Shown on Return-Motion for

Summary Judgment.-Where on 1994 and 1996 income tax

returns petitioner reported tax owed but did not remit amounts

shown; after assessment and years of continued nonpayment,

Commissioner issued notice of intent to levy, and petitioner

requested hearing pursuant to sec. 6330; at hearing, petitioner chal-

lenged correctness of tax shown on 1994 and 1996 returns without

saying whether correct income was higher or lower than reported

amounts; Commissioner subsequently issued notice of determina-

tion sustaining proposed collection action, and petitioner timely

petitioned for review under sec. 6330(d)(1); and Commissioner

moved for summary judgment, contending (1) Appeals officer had

properly refused to consider accuracy of assessments of unpaid

taxes petitioner reported on returns, and (2) even if Appeals officer

had erred in refusing to consider accuracy of assessments, peti-

tioner failed to show error in assessments or aver facts showing any

other error, Court determined petitioner was not precluded at sec.

6330 hearing from challenging accuracy of amount of tax on

reported on return, Montgomery v. Commissioner, 122 T.C. 1, fol-

lowed, and Court granted summary judgment, since petitioner

averred no facts sufficient to show error in assessments or in deter-

mination notice. Poindexter v. Commissioner

Petitioners Challenging Underlying Tax Liability-"Under-
lying
Tax Liability" Encompassing "Self-Assessed"
Amounts-Opportunity To Dispute Liability.-Where petition-
ers filed joint 2000 income tax return, reporting but not remitting
tax due; Commissioner accepted return as filed and assessed
reported tax before issuing final notice of intent to levy; petitioners
requested sec. 6330 collection due process hearing and told Appeals
officer in July 22, 2002, telephone conversation they intended to
seek refund for 2000 in amended return; on Sept. 26, 2002,
Commissioner issued final notice determining petitioners were not
entitled to challenge amount of tax liability in administrative
proceeding; on Oct. 11, 2002, petitioners filed amended 2000 return;
on Oct. 28, 2002, petitioners filed petition for review challenging
amount of underlying tax liability for 2000; and Commissioner
moved for summary judgment, contending petitioners were barred

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CONSOLIDATED RETURNS

See FOREIGN CORPORATIONS.

DEDUCTIONS

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EMPLOYEES' TRUSTS

See INCOME.

EXEMPT ORGANIZATIONS

See BASIS.

Monthly Service Fees Paid to Retirement Care Commu-

nity-Actuarial or Percentage Method To Calculate Alloca-
ble Portion-Burden of Proof.-Where in 1997 and 1998 income
tax returns, petitioners claimed sec. 213(a) deductions for expendi-
tures for medical care using percentage method to calculate amount
of monthly service fees paid under lifetime residence agreement
with retirement care community; after review of facility's calcula-

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EXPENSES-MEDICAL-Continued

tions by ad hoc committee of residents, petitioners increased portion
of monthly service fees attributable to medical care and included
deductions for use of pool, spa, and exercise facilities; after audit,
Commissioner issued deficiency notice determining deficiencies
using facility's calculations and disallowing deductions for use of
pool, spa, and exercise facilities; and Commissioner subsequently
contended deductible portions of monthly service fees should be cal-
culated by actuarial method instead of percentage method, Court
determined (1) under sec. 7491(a), Commissioner bore burden of
proof for factual issue of portions of monthly service fees allocable
to medical care, since Commissioner conceded petitioners had
submitted credible evidence for purposes of sec. 7491(a)(1), but
Commissioner did not have burden of proof as to deductions for use
of pool, spa, and exercise facilities, since petitioners did not submit
credible evidence; and (2) petitioners were not required to use
actuarial method to determine portions of monthly service fees
allocable to medical care, since Commissioner's longstanding prac-
tice sanctioned use of percentage method, but petitioners were not
entitled to additional deductions for use of pool, spa, and exercise
facilities. Baker v. Commissioner.

EXPENSES-TRADE OR BUSINESS

S Corporation-Per Diem Allowances Paid by Trucking

Company to Drivers-Evidence of Estimated, Nonmeal

Travel Expenses Incurred by Drivers.-Where on 1995-97 S

corporation income tax returns common carrier trucking company X

deducted 80% of actual per diem allowance paid to drivers, who

were paid 25 to 32 cents per mile and received per diem allowance

of 9 cents per mile; to arrive at 80% claimed deduction, X applied

sec. 274(n) 50% limitation on "food or beverage expense" to 40% of

total per diem amounts paid during tax years and deducted remain-

ing 60% in full; after applying test of Rev. Proc. 96-64, sec. 4.02 as

to whether X paid per diem allowance only for meal and incidental

expenses (M&IE) or for lodging and M&IE, Commissioner contended

50% limitation of Rev. Proc. 96-64, sec. 6.05 applied to full amount

of per diem allowances paid to drivers; and, as evidence, X's drivers

testified at trial as to average amount of per diem allowance spent

on such items as lodging, truck parking, showers, laundry, and Fed-

eral Express charges, Court determined (1) despite evidence pre-

sented of estimated nonmeal travel expenses incurred by X's driv-

ers, petitioners (shareholders of X) did not establish basis for

deducting 80% of per diem allowance paid to drivers (Beech Truck-

ing Co. v. Commissioner, 118 T.C. 428, where petitioners were

shareholders, followed); (2) under Rev. Proc. 94-77, Rev. Proc. 96-

28, and Rev. Proc. 96-64, petitioners could deduct only 50% of per

diem allowance paid to drivers; (3) sec. 4.02(5) of relevant revenue

procedures was not invalid; (4) actual travel expenses incurred by

drivers were not substantiated, since estimates and averages were

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