-10-
(2) Issues at hearing.--
* * * * * * *
(B) Underlying liability.-– The person may also
raise at the hearing challenges to the existence or
amount of the underlying tax liability for any tax
period if the person did not receive any statutory
notice of deficiency for such tax liability or did not
otherwise have an opportunity to dispute such tax
liability. [Emphasis added.]
We have interpreted the phrase “underlying tax liability” as
including any amounts a taxpayer owes pursuant to the tax laws
that are the subject of the Commissioner’s collection activities.
Katz v. Commissioner, 115 T.C. 329, 338-339 (2000); Van Es v.
Commissioner, supra. In Van Es, we determined that the
“underlying tax liability” was the frivolous return penalties.
Id. at 328; see also Wagenknecht v. United States, supra (section
6702 penalties are the “underlying tax liability”; Yuen v. United
States, supra at 1224 (the “underlying tax liability” as used in
section 6330(c)(2)(B) was the frivolous return penalties). The
frivolous return penalties in this case are owed by petitioners
pursuant to section 6702 and are the subject of respondent’s
collection activities. Therefore, petitioners may challenge the
existence or the amount of the frivolous return penalties at the
hearing if they did not receive a statutory notice of deficiency
or otherwise have an opportunity to dispute the liability. Lewis
v. Commissioner, 128 T.C. 48 (2007); sec. 301.6330-1(e)(3), Q&A-
E2, Proced. & Admin. Regs.
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