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Because the decision in petitioners’ deficiency case was not
appealed and has since become final, res judicata precludes
petitioners from now disputing the validity of the underlying
liability in this collection action.
The Court concludes that the circumstances of this case meet
the prerequisites for application of res judicata and that
petitioners are precluded under the doctrine from challenging
their underlying liability in this proceeding. See Newstat v.
Commissioner, T.C. Memo. 2004-208.
Statutory Preclusion Under Section 6330
Res judicata is not the only rule of law precluding
petitioners from contesting their deficiency here. Section
6330(c)(2)(B) also precludes them from relitigating the
underlying tax liability in this case. A taxpayer may present at
a section 6330 hearing challenges to the existence or amount of
the underlying tax liability “if the person did not receive any
statutory notice of deficiency for such tax liability”. Sec.
6330(c)(2)(B).
That petitioners received a notice of deficiency for 1995 is
not in dispute. Because petitioners received the notice and
contested the deficiency before the Court, they cannot challenge
the underlying liability in this section 6330 proceeding and are
therefore, as a matter of law, precluded from raising the issue.
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Last modified: May 25, 2011