Larry R. Johnston - Page 4

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          statement setting forth frivolous arguments; e.g., “There is no             
          statute requiring me ‘to pay’ the income taxes at issue.”3                  
               Settlement Officer Thomas L. Tracy (Mr. Tracy), of the IRS             
          Office of Appeals in Phoenix, Arizona, sent petitioner a letter             
          dated November 19, 2002, scheduling a hearing for December 10,              
          2002.  The letter briefly outlined the hearing process, advised             
          that audio or stenographic recording of hearings was not allowed,           
          and explained the circumstances in which challenges to the                  
          underlying liability would be barred by section 6330(c)(2)(B).              
          The letter also warned petitioner with respect to frivolous                 
          arguments and sanctions therefor, citing pertinent cases and                
          administrative materials.  Mr. Tracy enclosed with the letter               
          copies of, among other things, transcripts of petitioner’s                  
          accounts, financial forms for petitioner’s completion, and                  
          Pierson v. Commissioner, 115 T.C. 576 (2000) (discussing the                
          potential application of penalties where tax protesters persist             
          in bringing frivolous cases to this Court).                                 
          The hearing was subsequently rescheduled for January 7, 2003,               
          and a face-to-face conference between petitioner and Mr. Tracy              
          was held on that date.  Following the hearing, respondent on                
          January 23, 2003, issued to petitioner the aforementioned Notice            
          of Determination Concerning Collection Action(s) Under Section              



               3 See supra note 2.                                                    





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