T.C. Memo. 2014-17
UNITED STATES TAX COURT
PHILIP A. DUGGAN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3771-12. Filed January 27, 2014.
Philip A. Duggan, pro se.
Alicia H. Eyler, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
GERBER, Judge: Respondent determined a $3,495 income tax deficiency
for petitioner’s 2008 year and additions to tax under sections 6651(a)(1)1 and 6654
1
Section references are to the Internal Revenue Code in effect for the year in
issue, and Rule references are to the Tax Court Rules of Practice and Procedure.
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[*2] of $786.38 and $112.31, respectively. Respondent also determined that an
addition to tax under section 6651(a)(2) should apply in an amount to be
determined according to the statutory formula. The issues for our consideration
are: (1) whether petitioner failed to file a return and is liable for additions to tax;
(2) whether petitioner had taxable income from three sources during 2008; (3)
whether petitioner failed to make estimated payments of tax for 2008; and (4)
whether the Court should impose a penalty under section 6673.
FINDINGS OF FACT
At the time his petition was filed, petitioner resided in the State of
Washington. During 2008 petitioner was retired and received retirement income
of $30,574.49, of which $29,956.61 was taxable. Also during 2008 petitioner
received a $4,800 taxable distribution from his IRA of which TD Ameritrade was
the custodian. Petitioner maintained a bank account with Bank of America and
received $157 of interest income during 2008.
Petitioner failed to file a Federal income tax return for 2008. Respondent,
on November 7, 2011, issued a notice of deficiency, and on February 8, 2012,
petitioner’s petition, in which he disagreed with respondent’s determinations, was
filed with this Court. Attached to his petition was a 17-page document setting
forth various statements and arguments. On April 25, 2013, petitioner’s motion
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[*3] for leave to amend the petition was filed with the Court. Lodged along with
his motion was petitioner’s proposed amended petition, which had a 13-page
attachment, also containing various statements and arguments. In his objection to
petitioner’s motion, filed May 15, 2013, respondent indicated that petitioner did
not make factual claims of error, but “instead, he merely supplements the frivolous
legal arguments advanced in his Petition.” Petitioner, in his reply to respondent’s
objection, filed May 21, 2013, reiterated the statements and arguments advanced
in his petition and proposed amended petition.
In an order dated May 31, 2013, the Court granted petitioner’s motion to
amend but struck various arguments in petitioner’s documents which the Court
found to be “frivolous” within the meaning of section 6673. In the May 31 order
the Court admonished petitioner “that if he continues to advance arguments that
are deemed frivolous or groundless, he may be held liable for a penalty under
I.R.C. section 6673 * * * not in excess of $25,000”.
OPINION
Petitioner did not file a 2008 tax return, and respondent determined an
income tax deficiency using third-party information that was part of respondent’s
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[*4] records. At trial petitioner did not offer testimony2 and instead insisted that
respondent had to prove that the deficiency determination was correct. Petitioner
also refused to stipulate the records from which respondent was able to determine
the deficiency. Respondent called petitioner as a witness and questioned him
concerning the 2008 tax year. Initially, petitioner refused to answer the questions
respondent’s counsel posed. When petitioner began answering counsel’s
questions, his answers were equivocal and intentionally vague. Petitioner
exhibited an obstructive pattern of behavior throughout the trial, and the Court
occasionally had to order him to answer questions.
Burden of Proof
The taxpayer bears the burden of showing that the Commissioner’s
determination is in error. Rule 142. The Commissioner bears the burden of
production “for any penalty, addition to tax, or additional amount imposed”. Sec.
7491(c). Petitioner offered no testimony or other evidence showing that
2
Petitioner did attempt to offer a flash drive which he claimed contained a
vast number (possibly thousands of pages) of Government Accounting Office
reports or documents that he believed would show that the Court should not trust
respondent’s computers. The flash drives were not received in the record.
Petitioner offered no other evidence or testimony specifically addressing
respondent’s determinations.
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[*5] respondent’s determination is in error.3 The evidence respondent offered
satisfied his burden of production by showing petitioner’s sources of income and
that no income tax return was filed for 2008. Respondent also showed that
petitioner’s 2007 return reflected income, requiring the payment of estimated tax
for the 2008 tax year.
Accordingly, respondent’s determination must be sustained.
Section 6651(a)(1)
Section 6651(a)(1) provides for an addition to tax where a taxpayer fails to
timely file a return and where the taxpayer has not shown that the failure was due
to reasonable cause and not due to willful neglect. Respondent has shown that
petitioner was required to file a return for 2008 and that no return was filed.
Petitioner provided no evidence to show either that a return was filed or that his
failure to file was due to reasonable cause and not due to willful neglect. Further,
petitioner did not show that respondent’s determination of a deficiency was in
error. Wherefore, petitioner is liable for an addition to tax under section
6651(a)(1).
3
Instead, petitioner obstructed the conduct of the trial by making blanket
objections to the evidence respondent offered and by refusing to answer questions
or rendering evasive responses to questions.
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[*6] Section 6654
Section 6654 provides for an addition to tax for an underpayment of
estimated tax. The addition applies unless one of the exceptions in section
6654(e) applies. Petitioner presented no evidence of either the payment of
estimated tax or withholding or that one of the exceptions applies. Wherefore,
petitioner is liable for the section 6654 addition to tax.
Section 6673
At the conclusion of the trial, respondent moved that the Court impose a
penalty of $25,000 against petitioner under section 6673. Respondent cites, as the
dominant reason for the penalty, that petitioner instituted and maintained this case
for the purpose of delay and, secondly, that petitioner’s position in this case is
frivolous and groundless. Petitioner in his defense contended that he did not
reiterate the positions that the Court had labeled frivolous in the May 31, 2013,
order. He also argued that a $25,000 penalty would be onerous, as it would
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[*7] represent about three-fourths of his annual income.4 Petitioner also filed a
reply to respondent’s motion to impose penalty on November 14, 2013.5
In his original petition, petitioner disagreed with respondent’s determination
for the following reasons: improper assessments, lack of substantive regulations
(having the force and effect of law), statutes and codes precluding proper lawful
filing of tax return, and failure to answer question or to provide a source for
resolution. Although petitioner did not, during trial, reiterate the specific
arguments that this Court labeled as frivolous, he continued to advance convoluted
and groundless arguments instead of showing that respondent’s determinations
were in error.
4
It is noted that in making his plea, petitioner made an admission against his
interest that he had annual income of approximately $31,250, an amount that is
close to the amount of income determined in respondent’s notice of deficiency for
2008. Accordingly, even though petitioner strenuously resisted respondent’s
attempt to show why he had unreported income, for the purpose of lessening his
financial burden, he admitted that his annual income was approximately the
amount that respondent had determined.
5
Petitioner in his reply attempted to introduce facts to counter respondent’s
arguments in the motion to impose a sec. 6673 penalty. Petitioner, however, failed
to testify on his own behalf or to introduce any admissible evidence that supported
the contention in his reply. Accordingly, the evidence he offers in support of his
contentions cannot be accepted as fact. Even if petitioner’s arguments in his reply
could be accepted as fact, they do not change or affect the rationale upon which
our holding is founded.
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[*8] Respondent alleged that petitioner throughout the pretrial process refused to
discuss the specific income items set forth in the notice or the correctness of the
documentation in respondent’s files. According to respondent, petitioner merely
posed legal-sounding arguments that respondent found to be frivolous or
groundless.
At trial petitioner obstructed the conduct of the trial and expressed his intent
not to testify. However, after being called by respondent as a witness, petitioner
did not testify with candor. To the extent that petitioner did respond to questions,
his answers were evasive and vague. Petitioner presented no direct evidence
addressing the seminal question of whether respondent’s determinations were in
error. At best he impeded the trial and attempted to thwart the Court’s attempt to
conduct an orderly trial.
Because petitioner did not advance any evidence to show that his position
has merit but merely attempted to obstruct the judicial and administrative process,
we conclude that petitioner’s sole purpose in instituting and conducting this case
was for the purpose of delay. Additionally, although petitioner did make some
appropriate objections to respondent’s evidence at trial, for the most part he made
wholesale references to the Federal Rules of Evidence with the purpose of
impeding respondent’s counsel’s attempt to represent her client.
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[*9] Under these circumstances and because petitioner has been provided with
ample warning, we will require petitioner to pay a $5,000 penalty under section
6673.
To reflect the foregoing,
An appropriate order and decision
will be entered.