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dispute the liability, as contemplated by Congress in section
6330(c)(2)(B).
In the bankruptcy case, petitioners did in fact file an
objection to the IRS’s proof of claim, as well as a motion to
determine the secured status of the IRS’s claim. They were
accorded discovery against the IRS for a period of approximately
11 months. Before the hearing scheduled to hear the objection
was held, however, petitioners stipulated to the dismissal
without prejudice of the objection to the IRS’s proof of claim
and the motion to determine secured status of the IRS’s claim.
Clearly, petitioners had the opportunity to dispute the
underlying liabilities.5 Petitioners’ argument that they did not
5 Since the bankruptcy court did not allow the IRS’s proof
of claim, the doctrine of res judicata does not apply to the
underlying liabilities. Where a bankruptcy court has allowed a
tax claim, the doctrine of res judicata bars relitigation of the
underlying tax liability in this court. Fla. Peach Corp. v.
Commissioner, 90 T.C. 678 (1988) (dismissal of bankruptcy
proceeding did not vacate judgment allowing tax claims; effect of
judgment was res judicata); Strong v. Commissioner, T.C. Memo.
2001-103 (allowance of tax claim by bankruptcy court was res
judicata). Sec. 6330(c)(2)(B), while overlapping the doctrine of
res judicata, see Wooten v. Commissioner, T.C. Memo. 2003-113, is
a broader prohibition because, for one thing, it prohibits a
taxpayer from raising in a collection due process hearing (and in
any resulting court review under sec. 6330(d)(1)) her underlying
tax liability if she failed to file a deficiency suit in response
to a timely received notice of deficiency. A taxpayer who so
defaults is no more prevented by res judicata from suing for a
tax refund than are petitioners on account of the bankruptcy
case’s being dismissed without any adjudication of the IRS proof
of claim. It may well be that the policy behind sec.
6330(c)(2)(B) is to consign to a refund suit a taxpayer who
forgoes a prepayment forum, be it the Tax Court (in a deficiency
(continued...)
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