- 13 - account petitioner’s claims pertaining to the 2004 tax year, even though petitioner’s arguments were clearly relevant in evaluating the permissibility of the levy action in relation to the 1999 tax. We hold that respondent’s application of petitioner’s tax refund amount from 2005 to the year 2004, in the absence of respondent’s establishing that there was any tax liability for 2004, even though petitioner repeatedly asserted, and his 2004 return showed, that there was no such liability, was an error of law.5 The Appeals officer’s verification that the requirements of applicable law had been met was incorrect. Accordingly, levy to collect the 1999 assessment may not proceed. We shall remand the determination for 1999 to respondent’s Office of Appeals for reconsideration of petitioner’s claim that he owed no taxes for 2004 and thus the amount of the refund due him for tax year 2005 should have been applied entirely to tax year 1999. 5As explained supra note 3, we do not review respondent’s imposition of an addition to tax under sec. 6651(a)(2) and (3) for failure to pay income tax when it is due. In the light of our holding that respondent erred as a matter of law in pursuing the levy action, the standard of review that we would employ in evaluating the issue of petitioner’s liability for the addition to tax makes no difference. See Kendricks v. Commissioner, 124 T.C. 69, 75 (2005). On remand, respondent should determine whether he should have applied petitioner’s entire 2005 refund to tax year 1999 and whether doing so would have reduced or extinguished the 1999 liability and the corresponding addition to tax which was assessed in 2006.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 NextLast modified: November 10, 2007