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ACCOUNTING METHODS-Continued
301.9100–3, since petitioner had acted reasonably and in good faith
and interests of Government were not prejudiced by allowing late
election; and (2) petitioner was entitled to benefits of sec. 475(f) for
taxable year 2000 as if petitioner had timely filed election. Vines
v. Commissioner

279

ASSESSMENT

See COLLECTION MATTERS.

CAPITAL GAINS AND LOSSES

Employee's Exercise of Incentive Stock Option-Capital Loss Limitations of Secs. 1211 and 1212 and Calculation of Alternative Minimum Taxable Income-Attempted Carryback of Realized Loss.- Where on income tax return for 2000, petitioner reported alternative minimum tax (AMT) liability attributable to Dec. 21, 2000, exercise of incentive stock option to acquire employer's stock; petitioner calculated excess alternative minimum taxable income (AMTI) by using only spread between exercise price and fair market value (f.m.v.) of stock on Apr. 15, 2001; in 2000 return, petitioner did not report alternate net operating loss (ATNOL); in 2001, acquired shares became worthless when employer filed for bankruptcy, and petitioner consequently realized capital loss under sec. 165(g)(1) in 2001 for AMT purposes that petitioner contended could be carried back to reduce AMTI in 2000; and, on Nov. 13, 2003, Commissioner sent notice of deficiency determining AMTI by using spread between exercise price and f.m.v. on Dec. 21, 2000, and denying carryback of ATNOL deduction under sec. 56(d), Court determined (1) under secs. 55(b)(2), 56(b)(3), and 83(a), petitioner was required to apply capital loss limitations of secs. 1211 and 1212 for purposes of calculating AMTI; and (2) capital losses realized in 2001 did not create ATNOL that could be carried back to reduce petitioner's AMTI in 2000. Merlo v. Commissioner

205

COLLECTION MATTERS

Challenge to Proposed Collection Action Commissioner's Assessment of Taxes Without Issuing Deficiency NoticeEffect of Closing Agreement Covering Specific Matters.Where parties had executed closing agreement covering certain non-TEFRA partnership items on petitioners' 1988–89 joint income tax returns; Commissioner subsequently assessed taxes without issuing statutory deficiency notice and then commenced collection action; petitioners sought sec. 6330(d) review of Commissioner's determination to proceed with proposed levy, contending Commissioner could not proceed with collection because of failure to issue deficiency notice before assessment; and Commissioner argued deficiency notice was unnecessary because changes to petitioners' returns resulted solely from computational adjustments attributable

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COLLECTION MATTERS-Continued
to specific closing agreement matters, Court determined Commis-
sioner could not proceed with collection, since Commissioner had
failed to issue deficiency notice before assessment, and requirement
to issue deficiency notice was not altered by closing agreement
covering treatment of certain items. Manko v. Commissioner ....... 195

Jurisdiction-1999 Overpayment Applied to Offset 1992
Liability-Effect on Refund Claim in Sec. 6330 Collection
Review Proceeding.-Where in 2001 petitioner filed petition
seeking review of Appeals Office determination sustaining proposed
collection action regarding 1992 income tax liability; petitioner dis-
puted interest and penalties, requested credit or refund for claimed
overpayment, and contended she had not received adequate sec.
6330 hearing; pursuant to sec. 6402(a), Commissioner offset
petitioner's 1999 income tax overpayment against 1992 income tax
liability, resulting in full payment of 1992 liability; and petitioner
amended petition to seek increased refund, Court determined (1)
challenge to Commissioner's levy was moot, since Commissioner
agreed there was no unpaid 1992 tax liability to be collected and
that no further collection action should be taken; and (2) no juris-
diction existed in collection review proceeding under sec. 6330 to
determine overpayment or to order refund or credit of taxes; and
Court dismissed case as moot. Greene-Thapedi v. Com sioner 1

Motion To Dismiss for Lack of Jurisdiction-Failure To
Request Hearing After First Sec. 6320 Lien Filing-Timeli-
ness of Hearing Request and Validity of Reg. 301.6320–1(b)(1)
and (2). - Where petitioner had not submitted request to Commis-
sioner for sec. 6320 administrative hearing on tax lien filed in Flor-
ida for unpaid taxes for 1980, 1982, 1984–89, and 1997 tax years
but sought hearing after subsequent lien was filed in Illinois for
same years; Commissioner determined request was untimely under
reg. 301.6320–1(b)(1) and (2) because of earlier Florida filing but
conducted so-called equivalent hearing that was followed by deci-
sion letter; and petitioner challenged decision letter in petition,
Court determined (1) reg. 301.6320–1(b)(1) and (2) was reasonable
interpretation of sec. 6320 and was valid and controlling; (2)
Appeals Office was not required to conduct sec. 6320 administrative
hearing, since petitioner had failed to make timely request for hear-
ing after first lien filing; and (3) Court granted Commissioner's
motion to dismiss for lack of jurisdiction, since disputed decision
letter did not constitute notice of determination sufficient to invoke
Court's jurisdiction under sec. 6320. Inv. Research Associates,
Inc. v. Commissioner

183

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Petition for Judicial Review-Sufficiency of Administra-
tive Record and Notice of Determination-Alleged Prior
Involvement and Partiality of Appeals Officer Conducting
Collection Hearings.- Where for petitioners' 1999 and 2000 tax
years Appeals Officer A had conducted sec. 6330 hearing in which

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COLLECTION MATTERS-Continued
primary focus was collection alternatives, and Appeals Office sus-
tained proposed collection activity in November 2003; for 2001 and
2002, A also conducted hearing, in which collection alternatives
were primary issue, and Appeals Office sustained proposed levy
action in July 2004; and, as to collection actions regarding 2000,
2001, and 2002 liabilities, petitioners filed for judicial review of
notices of determination, contending inter alia that procedural
defects precluded judicial review of administrative proceedings,
Court determined (1) administrative record and notices of deter-
mination sufficed to support judicial review; (2) A was not disquali-
fied within meaning of sec. 6330(b)(3) from conducting collection
hearing for 2001 and 2002 on account of prior involvement in 2000
collection hearing, nor did record otherwise impugn A's impartial-
ity; and (3) record showed no abuse of discretion by Commissioner.
Cox v. Commissioner

237

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Petitioners' Right To Request Sale of Seized Property
Within 60 Days-Specific Relief for Commissioner's Failure
To Comply With Request-Relief Not Precluded by Sec. 7433
Civil Damage Remedy.-Where Zapara v. Commissioner, 124
T.C. 223, had held petitioners were entitled to credit for value of
seized stock that Commissioner had failed to liquidate within 60
days after written request under sec. 6335(f); and Commissioner
moved for reconsideration, contending citation of sec. 6335(f) in
petitioners' reply brief was untimely new matter and sec. 7433 was
exclusive remedy for violation of sec. 6335(f), Court determined (1)
citation of sec. 6335(f) in reply brief did not raise new issue but
appealed to correct application of law; (2) request to sell stock com-
plied with sec. 6335(f); (3) relief ordered by Court was not damages
but specific relief to provide petitioners with credit they would have
received if Commissioner had complied with request to liquidate; (4)
Commissioner should be treated as assuming risk of loss regarding
seized stock, since failure to follow sec. 6335(f) frustrated petition-
ers' ability to use stock to defray tax liabilities and increased
petitioners' risk of loss; and (5) civil damage remedy of sec. 7433 did
not preclude specific relief ordered by Court, since Congress did not
intend sec. 7433 to displace equitable remedies for violations of sec.
6335(f). Zapara v. Commissioner

215

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Request for Collection Due Process Hearing-Restriction
on Contesting Underlying Tax Liability-Prior Oppor-
tunity.- Where petitioner had failed to file 1997 income tax return,
Commissioner mailed deficiency notice on Sept. 14, 2000, that was
not received; on Apr. 27, 2002, Commissioner sent notice of intent
to levy to collect 1997 tax liability, and petitioner filed timely
request for collection due process hearing; in letters relating to
scheduled hearing, Commissioner reiterated that underlying tax
liability could not be challenged at hearing because of earlier oppor-
tunity to dispute liability; after petitioner failed to appear at hear-

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COLLECTION MATTERS-Continued
ing, Commissioner mailed notice of determination for 1997 on June
9, 2003, which petitioner did not dispute; on Sept. 8, 2004, Commis-
sioner mailed notice of lien filing, and petitioner filed timely
request for collection due process hearing that was eventually con-
ducted by telephone in March 2005, with petitioner precluded from
disputing 1997 liability; and on May 3, 2005, Commissioner sent
notice of determination that provoked petitioner's June 7 petition
for review of determination, Court denied Commissioner's motion
for summary judgment and determined under sec. 6330(c)(2)(B)
first notice of determination presented opportunity to dispute 1997
liability; thus Commissioner did not abuse discretion, and petitioner
was precluded from challenging underlying liability. Bellv.
Commissioner

356

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CONTRIBUTIONS

Charitable-Bona Fides of Claimed Conservation Ease-
ment-Accuracy-Related Penalty.–Where in 1999 joint income
tax return petitioner H real estate developer claimed $342,781
charitable contribution deduction for sec. 170(h)(1) qualified con-
servation easement granted to local government on 29.3-acre parcel;
easement, recorded Dec. 7, 1999, limited number of building lots to
30; contribution was valued using appraisal that erroneously
assumed entire tract could have been developed into 62 residential
lots; parcel, of which 15.04 acres were in designated 100-year flood-
plain, was in restrictive "historic overlay district” and zoned R-2
residential, and maximum permissible development under current
zoning was 30 residences; and Commissioner determined petitioners
were not entitled to deduction and were liable for sec. 6662
accuracy-related penalty, Court determined petitioners were not
entitled to sec. 170(h) deduction for qualified conservation easement
as attempted grant failed to satisfy sec. 170(h)(4)(A) conservation
purposes, since recorded easement did not preserve open space,
historically important land area, or certified historical structure,
and petitioners were liable for sec. 6662 negligence penalty. Turner
v. Commissioner

299

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CORPORATIONS

See also FOREIGN CORPORATIONS.

Capacity To Litigate-Powers, Rights, and Privileges Sus-
pended in State of Organization-Effect on Commissioner's
Sec. 7491 Burden of Production as to Penalties and Addi-
tions to Tax.- Where, on Feb. 14, 2005, corporation X petitioned
Court to redetermine income tax deficiencies, sec. 6651(a)(1) addi-
tions to tax, and sec. 6662(a) accuracy-related penalties for taxable
years ending Oct. 31, 1998 and 1999; on Aug. 1, 2005, California,
State where X had been organized, suspended X's corporate powers,
rights, and privileges for failure to pay State income tax; and
Commissioner moved Court to dismiss case for lack of prosecution

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CORPORATIONS-Continued
as to deficiencies and to find X liable, without trial, for additions
to tax and penalties, asserting that X's suspension precluded X from
prosecuting case as to deficiencies and that Commissioner had
satisfied sec. 7491 burden of proof as to additions and penalties,
Court dismissed case under Rules 60(c) and 123(b), since X lacked
capacity under California law to produce credible evidence under
sec. 7491(a) to prosecute case or defend against motion to dismiss
as to factual matters relevant to deficiencies, and sec. 7491(c) bur-
den-shifting provisions as to penalties and additions to tax applied
only to individuals. NT, Inc. d.b.a. Natures Touch v. Commis-
sioner

191

EVIDENCE

See CORPORATIONS.

FOREIGN CORPORATIONS

Deductions for Expenses Associated With U.S. Land-
holdings-Untimely Return-Validity of Regulation Barring
Deduction.- Where petitioner foreign corporation whose only
substantial asset was unimproved land in United States filed for-
eign corporation income tax returns for TYE May 31, 1994–96,
deducting expenses (rent, option income, taxes, and licenses) related
to income treated as effectively connected to conduct of trade or
business in United States for purposes of sec. 882; each return was
filed after due date but before any contact from Commissioner; and
in notice of deficiency, Commissioner determined sec. 882(c)(2) pre-
cluded petitioner from deducting expenses since returns were not
filed before 18-month deadline of reg. 1.882–4, Court determined
timely filing requirement in reg. 1.882–4 was invalid since it was
unreasonable under plain reading of sec. 882(c)(2) and consider-
ations set forth in Natl. Muffler Dealers Association v. United
States, 440 U.S. 472 (1979). Swallows Holding, Ltd. v. Commis-
sioner

96

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GAIN OR LOSS

Nonrecognition-Exchange in Kind-Gold Mines for Coal
Mines Burdened With Coal Supply Contracts. - Where in 1993
partnership transferred assets of gold mining business to unrelated
corporation in exchange for assets of corporation's coal mining busi-
ness that included coal supply contracts; contracts obligated mine
owner to provide electric utilities with coal and were governed by
New Mexico law; partnership treated transaction as tax free sec.
1031 like-kind exchange; and Commissioner determined contracts
were not real property and constituted boot such that value of con-
tracts was taxable in year of exchange, Court determined, under
New Mexico law, coal supply contracts were contracts for sale of
goods and created servitudes constituting real property interests;
consequently contracts were “like-kind” property for sec. 1031 pur-

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