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petitioners asserted: “All tax liability was paid on August 15,
1978 by means of levy against Metropolitan Metals, Inc. and an
Agreement to pay levy. Claim for total tax liability was made in
Bankruptcy Case 79-318, Middle District of Pennsylvania in 1981.”
On March 8, 2000, the bankruptcy trustee sent respondent a
check for $149,312.40 for claims 134 and 175. The check was
endorsed “For deposit only” by the U.S. Department of Justice and
paid on March 21, 2000.
On March 17, 2000, respondent received payment of
$149,312.40 for petitioners’ 1971 tax liability; $34,382.77 of
the payment was used to satisfy the remaining 1971 tax liability,
and the additional $114,929.63 was used to pay part of the
accrued interest.
On August 14, 2001, respondent issued petitioners the notice
of determination for their 1971 tax year. The Appeals Officer
determined:
It is determined that the liability was the result of
an examination of your personal income tax returns for
the period. You executed an agreement at the
Examination level agreeing to the liability. Under
Section 6330 of the Internal Revenue Code the
underlying liability may be challenged only if you did
not receive a Statutory Notice of Deficiency or had no
other opportunity to Appeal the liability. As part of
the examination process, you were explained your appeal
rights. You chose to execute an agreement with the
Examination Division. Accordingly, the underlying
liability may not be argued at the Collection Due
Process Hearing.
* * * The facts indicate that after the Service levied
the receivable with MMI you continued to negotiate with
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