-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.Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 NextLast modified: March 27, 2008