Crow v. Commissioner

T.C. Memo. 1995-584

UNITED STATES TAX COURT

BRUCE M. CROW, Petitioner v
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 1855-95. Filed December 6, 1995.

Bruce M. Crow, pro se.

Stephen M. Friedberg, for respondent.

MEMORANDUM OPINION

DAWSON, Judge: This case was assigned to Special Trial

Judge Robert N. Armen, Jr., pursuant to the provisions of section

7443A(b)(4) and Rules 180, 181, and 183.1 The Court agrees with

1
Unless otherwise indicated, all section references are to
the Internal Revenue Code, in effect for the taxable years in
issue, and all Rule references are to the Tax Court Rules of
(continued...)
 - 2 -

and adopts the opinion of the Special Trial Judge, which is set

forth below.

OPINION OF THE SPECIAL TRIAL JUDGE

ARMEN, Special Trial Judge: This matter is before the Court

on respondent's Motion for Summary Judgment, filed May 22, 1995.

Respondent contends that she is entitled to summary judgment on

the ground that petitioner has failed to state a claim for

relief.

Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials. Florida Peach Corp. v.

Commissioner, 90 T.C. 678, 681 (1988). Summary judgment may be

granted with respect to all or any part of the legal issues in

controversy "if the pleadings, answers to interrogatories,

depositions, admissions, and any other acceptable materials,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that a decision may be

rendered as a matter of law." Rule 121(b); Sundstrand Corp. v.

Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th

Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753, 754 (1988);

Naftel v. Commissioner, 85 T.C. 527, 529 (1985). The moving

party bears the burden of proving that there is no genuine issue

of material fact, and factual inferences will be read in a manner

1
(...continued)
Practice and Procedure.
 - 3 -

most favorable to the party opposing summary judgment. Dahlstrom

v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v.

Commissioner, 79 T.C. 340, 344 (1982).

As explained in more detail below, we agree with respondent

that this case is ripe for summary adjudication.

Background

On November 16, 1994, respondent issued a statutory notice

of deficiency to petitioner determining deficiencies in, as well

as additions to and a penalty in respect of, his Federal income

taxes as follows:

Additions to Tax and Penalty
Sec. Sec. Sec.
Year Deficiency 6651(a)(1) 6654(a) 6662(a), (c)

1991 $18,122 --- --- $3,624.40
1992 35,893 $8,836.25 $1,538.92 ---

The deficiencies in income taxes are based on respondent's

determination that petitioner failed to report a number of items

of income for both 1991 and 1992, including nonemployee

compensation, unearned income, distributions from individual

retirement accounts, installment sale income, capital gains,

interest, and dividends. Respondent also determined that,

because petitioner's wife filed a separate return for 1991 in

which she reported itemized deductions, petitioner improperly

claimed the standard deduction for that year, and petitioner

failed to report wage income for 1992. Respondent's deficiency
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determinations for both 1991 and 1992 include adjustments for

self-employment tax under section 1401 and tax on premature

distributions from individual retirement accounts under section

72(t).

The penalty under section 6662(a) and (c) is based on

respondent's determination that the underpayment of tax on

petitioner's 1991 tax return is due to negligence or disregard or

rules or regulations. The addition to tax under section

6651(a)(1) is based on respondent's determination that

petitioner's failure to timely file an income tax return for 1992

was not due to reasonable cause. The addition to tax under

section 6654(a) is based on respondent's determination that

petitioner failed to pay the requisite amount of estimated income

taxes for 1992.

Petitioner filed an imperfect petition on January 30, 1995.2

Petitioner filed an amended petition on February 6, 1995, as

directed by an Order of the Court dated February 1, 1995. The

amended petition states in pertinent part:

Notice of Deficiency is fraudulent, as it is based on a
Virgin Islands, Non-taxable return, per transaction
code 150 and DLN posted to petitioner's IMF pursuant to
IRM3.

Respondent filed an answer to the amended petition on April 5,

1995. Petitioner then filed a reply to respondent's answer,

2
At the time the petition was filed, petitioner resided at
Richmond, Va.
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stating that he is not a taxpayer and is not engaged in a

"revenue taxable activity".

As indicated, respondent filed a Motion for Summary Judgment

on May 22, 1995. By Order dated May 24, 1995, this matter was

set for hearing in Washington, D.C. on July 12, 1995. On June 2,

1995, petitioner filed an Opposition to Summary Judgment, stating

that he filed his amended petition after being misled and

defrauded by a tax protester identified as Fred Class.

Petitioner's opposition included a request that respondent's

Motion for Summary Judgment be denied and that petitioner be

given the opportunity to file a petition stating a claim for

relief.

This case was called for hearing in Washington, D.C., on

July 12, 1995. Counsel for respondent appeared at the hearing

and presented argument in support of the pending motion.

Petitioner did not appear at the hearing. Nevertheless, in light

of the statements made by petitioner in his opposition to

respondent's motion, the Court decided to give petitioner a

further opportunity to file a proper amended petition. In this

regard, petitioner was directed by Order dated July 12, 1995, to

file a proper second amended petition by August 14, 1995. The

Order further indicated that, upon failure of petitioner to

comply therewith, the Court would be inclined to grant

respondent's Motion for Summary Judgment, enter a decision
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against petitioner in the amounts set forth in the notice of

deficiency, and consider imposing a penalty against petitioner

under section 6673. Respondent's Motion for Summary Judgment was

continued for further hearing to August 16, 1995, in Washington,

D.C.

On August 8, 1995, petitioner filed a second amended

petition which in large part repeats and expands upon the

arguments found in both his amended petition and his reply to

respondent's answer. Among his various contentions, petitioner

alleged that respondent erred in determining that petitioner

earned nonemployee compensation for the years in issue on the

ground that the compensation in question was paid in the form of

corporate stock subject to section 83. Petitioner also alleged

that respondent erred in determining that he failed to report

unearned income for the years in issue. In particular,

petitioner asserted that the notes and contracts of sale that are

the subject of this adjustment were not sold as respondent

determined but, rather, were the subject of a "like kind

exchange" with an individual identified as James Shinault.

This case was again called for hearing in Washington, D.C.,

on August 16, 1995. Counsel for respondent appeared at the

hearing and presented further argument in support of the pending

motion. Petitioner did not appear at the hearing.
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Upon review of petitioner's second amended petition, the

Court recognized that although the allegations discussed above

might possibly constitute assignments of error as required under

Rule 34(b)(4), petitioner nonetheless failed to adequately

articulate the facts supporting these assignments of error as

required under Rule 34(b)(5). In this regard, by Order dated

September 7, 1995, we directed petitioner to file an amendment to

his second amended petition, on or before September 29, 1995,

setting forth clear and concise statements of the facts on which

petitioner bases the assignments of error. More specifically, to

the extent that petitioner contends that he did not earn

nonemployee compensation during the years in issue, petitioner

was directed to identify any and all corporate stock that he

purportedly received as compensation for services rendered during

the years in issue by listing the issuer of such stock, date of

issuance, number of shares, and any and all restrictions imposed

upon petitioner in respect of such stock, i.e., any restrictions

limiting transfer of the stock or any limitation posing a

substantial risk of forfeiture of the stock. Sec. 1.83-3(b),

Income Tax Regs. In addition, petitioner was directed to state

the facts supporting his contention that he engaged in a like-

kind exchange with respect to the notes and contracts of sale

that respondent determined were sold during the years in issue.

Petitioner was directed to specifically identify: (1) Both the
 - 8 -

notes and contracts of sale in question, as well as any and all

property or property interests that petitioner received in

exchange for said items; (2) the dates that such items were

exchanged; and (3) the identity of the party engaging in such

like-kind exchange with petitioner.

Petitioner failed to properly respond to the Court's Order

dated September 7, 1995. In particular, on September 27, 1995,

petitioner filed a Motion to Reconsider with respect to said

order, which motion was denied on October 4, 1995. Despite the

inadequacy of petitioner's Motion for Reconsideration, it is now

evident that petitioner's primary theory in this case is that any

amounts paid to him in the form of a bank or payroll check

constitute corporate stock subject to section 83 and that an

exchange of his labor for property (such as a payroll check) does

not result in taxable income.

On October 18, 1995, petitioner filed a Motion to Dismiss

for Lack of Jurisdiction, which was frivolous. Petitioner's

motion was denied October 19, 1995.

Discussion

Rule 121 provides that either party may move for summary

adjudication upon all or any of the legal issues in dispute if

the moving party can establish that there is no genuine issue as

to any material fact, and a decision may be rendered as a matter

of law. Thus, respondent's Motion for Summary Judgment is to be
 - 9 -

granted only if, on the facts, she is entitled to a decision as a

matter of law. Zaentz v. Commissioner, 90 T.C. 753, 754 (1988).

On the other hand, respondent's determinations are presumed

correct; the burden of proof is on petitioner to show that

respondent's determinations are erroneous. Rule 142(a); Welch v.

Helvering, 290 U.S. 111 (1933); Beard v. Commissioner, 82 T.C.

766, 773 (1984), affd. 793 F.2d 139 (6th Cir. 1986). In

addition, any issue not raised in the pleadings is deemed to be

conceded. Rule 34(b); Jarvis v. Commissioner, 78 T.C. 646, 658

n.19 (1982); Gordon v. Commissioner, 73 T.C. 736, 739 (1980).

The amended petition and second amended petition filed

herein contain tax protester-type legal arguments with respect to

the deficiencies and additions to tax and penalty determined by

respondent. Petitioner does not dispute the facts underlying

respondent's determinations. Moreover, all of the arguments

raised by petitioner have been uniformly rejected by this and

other courts. Abrams v. Commissioner, 82 T.C. 403 (1984);

Rowlee v. Commissioner, 80 T.C. 1111 (1983); McCoy v.

Commissioner, 76 T.C. 1027 (1981), affd. 696 F.2d 1234 (9th Cir.

1983). Unfortunately, petitioner ignored the opportunities

presented to him to assign error and allege specific facts

concerning his liabilities for the taxable years in issue.

We see no need to catalog petitioner's contentions and

painstakingly address them. We have dealt with many of them
 - 10 -

before. E.g., Nieman v. Commissioner, T.C. Memo. 1993-533;

Solomon v. Commissioner, T.C. Memo. 1993-509, affd. without

published opinion 43 F.3d 1391 (7th Cir. 1994). Further, as the

Court of Appeals for the Fifth Circuit has remarked: "We

perceive no need to refute these arguments with somber reasoning

and copious citation of precedent; to do so might suggest that

these arguments have some colorable merit." Crain v.

Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984).

The absence in the pleadings filed by petitioner of specific

justiciable allegations of error and supporting facts is

sufficient to grant a motion for summary judgment. Based on the

record herein, respondent is entitled to judgment as a matter of

law, and we so hold. Beard v. Commissioner, 82 T.C. at 772-773;

Rowlee v. Commissioner, supra at 1117 n.3, and cases cited

therein.

We turn now to the question of whether we should impose a

penalty against petitioner under section 6673(a). As relevant

herein, section 6673(a)(1) authorizes the Tax Court to require a

taxpayer to pay to the United States a penalty not in excess of

$25,000 whenever it appears that proceedings have been instituted

or maintained by the taxpayer primarily for delay or that the

taxpayer's position in such proceeding is frivolous or

groundless.
 - 11 -

A petition to the Tax Court is frivolous "if it is contrary

to established law and unsupported by a reasoned, colorable

argument for change in the law." Coleman v. Commissioner, 791

F.2d 68, 71 (7th Cir. 1986). As previously indicated,

petitioner's position, as articulated in his amended petition and

second amended petition, consists solely of tax protester

rhetoric and legalistic gibberish. Based on well-established

law, petitioner's position is frivolous and groundless.

We are also satisfied that petitioner brought these

proceedings primarily for purposes of delay. Despite the request

made in petitioner's Opposition to Summary Judgment filed June 2,

1995, that he be given a further opportunity to file a proper

amended petition, petitioner filed a second amended petition, and

later a motion for reconsideration, filled with time-worn tax

protester arguments. Under the circumstances, it is evident that

petitioner regards this case as a vehicle to protest the tax laws

of this country and nothing more. It is equally clear that

petitioner filed his Opposition to Summary Judgment with the

willful intent to mislead the Court and protract these

proceedings. Having to deal with this matter wasted the Court's

time, as well as respondent's. Moreover, taxpayers with genuine

controversies were delayed.

Petitioner was warned that the Court would consider imposing

a penalty under section 6673(a)(1) in the event of his failure to
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comply with the Court's Order directing the filing of a proper

second amended petition. Considering all of the circumstances,

we will exercise our discretion under section 6673(a)(1) and

require petitioner to pay a penalty to the United States in the

amount of $2,500. Coleman v. Commissioner, supra at 71-72; Crain

v. Commissioner, supra at 1417-1418; Abrams v. Commissioner,

supra at 408-411.

To reflect the foregoing,

An order and decision will be

entered granting respondent's Motion

for Summary Judgment and imposing a

penalty upon petitioner pursuant to

section 6673(a)(1).