Risner v. Commissioner

T.C. Memo. 1996-82

UNITED STATES TAX COURT

GREGG H. RISNER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 18494-95. Filed February 26, 1996.

Gregg S. Risner, pro se.

Blaise G. Dusenberry and James E. Archie, for respondent.

MEMORANDUM OPINION

PANUTHOS, Chief Special Trial Judge: This matter is before

the Court on petitioner's Motion to Shift Burden of Proof to

Respondent.1 As explained in greater detail below, we shall deny

petitioner's motion.

1
All section references are to the Internal Revenue Code
in effect for the tax years at issue. All Rule references are to
the Tax Court Rules of Practice and Procedure.
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Background

Gregg H. Risner (petitioner) operates a chiropractic

business near Dallas, Texas. Petitioner filed a Federal income

tax return for the taxable year 1991 in which he reported net

profit on Schedule C in the amount of $75,139, capital gains in

the amount of $2,646, and taxable income in the amount of

$62,187. Although petitioner filed a tax return for 1992, he

reported no taxable income and instead claimed a refund of

$11,900. Petitioner did not file tax returns for 1993 or 1994.

By letter dated January 18, 1995, Revenue Agent Robert D.

Southern notified petitioner that he was being audited by the

Internal Revenue Service (IRS) for the taxable years 1992 and

1993. Revenue Agent Southern requested that petitioner bring his

books and records to an appointment scheduled for February 15,

1995. Petitioner responded to the above-described letter by

sending Revenue Agent Southern a document entitled "Affidavit and

Constructive Notice" that states in pertinent part: (1)

petitioner returned his assigned Social Security number to its

proper owner; (2) petitioner, as a "belligerent claimant", was

claiming immunity and would refuse to produce his books and

records; and (3) Revenue Agent Southern should provide petitioner

with the Code sections and implementing regulations demonstrating

his authority to audit petitioner's records.

On February 15, 1995, petitioner was served with an IRS

summons (Form 2039) directing him to appear before Revenue Agent

Southern with his financial records as well as those of the
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Risner Chiropractic Clinic and the Risner Family Trust. Although

petitioner appeared before Revenue Agent Southern at the date and

time specified in the summons, he refused to produce his books

and records on the grounds that to do so would violate his rights

under the Fourth and Fifth Amendments to the U.S. Constitution.

By notice of deficiency dated June 21, 1995, respondent

determined deficiencies, additions to tax, and a penalty with

respect to petitioner's Federal income taxes for the years and in

the amounts as follows:

Additions to Tax Penalty
Year Deficiency Sec. 6651(a) Sec. 6654(a) Sec. 6662

1992 $44,306 $5,989 --- $8,861
1993 38,279 9,570 --- ---
1994 28,661 7,165 $1,487 ---

The explanation of adjustments portion of the notice of

deficiency states that respondent arrived at petitioner's taxable

income by (1) increasing petitioner's interest and dividend

income to account for third-party information reported to

respondent on Forms 1099-INT and 1099-DIV,2 and (2) computing

petitioner's net income from his chiropractic business using

petitioner's prior earnings experience in conjunction with the

applicable Consumer Price Index factors for the years 1992, 1993,

and 1994. Using $75,139 (the net profit figure reported by

petitioner on the Schedule C attached to his 1991 tax return) as

2
Respondent received third-party information (including
Forms 1099-INT and 1099-DIV) indicating that petitioner invested
substantial amounts in several different stock and bond mutual
fund accounts during 1992 and 1993.
 - 4 -

base year income, respondent determined that petitioner earned

net profits of $77,401, $79,718, and $81,759 from his

chiropractic business during the taxable years 1992, 1993, and

1994, respectively.

Petitioner invoked this Court's jurisdiction by filing a

timely petition for redetermination on September 18, 1995.3 The

petition states in pertinent part:

1. Petitioner specifically denies the receipt of the
taxable income shown in the "Notice of Deficiency" on
which the amount of the alleged deficiency was figured,
and, therefore, denies the deficiency and the penalties
because of the inaccuracies in that taxable income,
and,

2. Petitioner pleads that there is/are no implementing
regulations of the Code of Federal Regulations which
give any authority to the Internal Revenue Service, or
any of its officers or employees, to proceed in the
manner in which it has proceeded in the instant matter,
and, therefore, the actions taken by the Internal
Revenue Service in this matter falls outside of its
scope of authority granted to it by the code, and,

3. Petitioner pleads that, based upon Title 26 USC (The
Internal Revenue Code) and its implementing
regulations, Petitioner is engaged in no taxable
activities, and is therefore outside the jurisdiction
of the Internal Revenue Service, and,

4. Petitioner pleads that the burden of proving the
non-receipt of income is beyond the reasonable burden
which the Court should place on an individual, and

5. Petitioner pleads that the entire case by the
Government is based upon a "naked assertion", i.e. one
person's word against another's, and therefore is
insufficient to sustain a decision in the Government's
favor.

3
At the time he filed his petition, petitioner was
residing in Longview, Texas.
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On October 23, 1995, petitioner filed a Motion to Shift

Burden of Proof to Respondent. Relying on Portillo v.

Commissioner, 988 F.2d 27 (5th Cir. 1993), revg. and remanding

T.C. Memo. 1992-99, and Portillo v. Commissioner, 932 F.2d 1128

(5th Cir. 1991), affg. in part and revg. in part T.C. Memo.

1990-68, petitioner contends that respondent failed to provide a

factual foundation for her determination, and, therefore, the

notice of deficiency constitutes a "naked assertion". Based on

these arguments, petitioner concludes that the normal presumption

of correctness should not apply to respondent's deficiency

determination and that the burden of proof should shift to

respondent.

On November 13, 1995, respondent filed an answer to the

petition generally denying the allegations contained therein. On

the same date, respondent filed an objection to petitioner's

motion to shift the burden of proof. Respondent argues that

petitioner's motion should be denied on the ground that the

petition filed herein fails to state a justiciable claim for

relief and is based on nothing more than time-worn tax protester

arguments. In this regard, respondent maintains that, although

the petition includes an allegation that respondent erred in her

determinations, petitioner failed to allege any specific facts

regarding the correct amount of his tax liability. In the

alternative, respondent contends that petitioner's motion is

premature and that the question of the placement of the burden of

proof is a matter best resolved at trial.
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This matter was called for hearing in Washington, D.C.

Counsel for respondent appeared at the hearing and presented

argument in opposition to the pending motion. Although

petitioner did not appear at the hearing, he did file a written

statement with the Court pursuant to Rule 50(c), in response to

respondent's objection to his motion. In that statement,

petitioner asserts that the compensation that he receives in

exchange for his labor is not income as defined in the Internal

Revenue Code. Petitioner also contends that he is not subject to

the Federal income tax because he is a "Self-governing Free Born

Sovereign Citizen". Significantly, petitioner admits that he

receives compensation from the operation of a chiropractic

business. He asserts that any gains earned on his investments do

not constitute taxable income.

Discussion

We begin with the well-settled rule that determinations made

by the Commissioner in a notice of deficiency normally are

presumed to be correct, and the taxpayer bears the burden of

proving that those determinations are erroneous. Rule 142(a);

Welch v. Helvering, 290 U.S. 111, 115 (1933). In addition, this

Court ordinarily will not look behind a statutory notice of

deficiency to examine the evidence used or the propriety of

respondent's motives or conduct in determining the deficiency.

Riland v. Commissioner, 79 T.C. 185, 201 (1982); Greenberg's

Express, Inc. v. Commissioner, 62 T.C. 324, 327 (1974).
 - 7 -

There are exceptions to the general rule that the

Commissioner's determination is presumed to be correct. One such

exception arises in cases involving unreported income where the

taxpayer challenges the notice of deficiency on the ground that

it is arbitrary, and the Commissioner fails to substantiate her

determination with predicate evidence. Sealy Power, Ltd. v.

Commissioner, 46 F.3d 382, 386 (5th Cir. 1995), affg. in part,

revg. in part, and remanding in part T.C. Memo. 1992-168;

Portillo v. Commissioner, 932 F.2d at 1133.4

As indicated, petitioner moves to shift the burden of proof

in the instant case based on his assertion that the notice of

deficiency is arbitrary. Respondent counters that petitioner's

motion should be denied, and his petition fails to state a

justiciable claim for relief. We agree.

Rule 34(b)(4) requires that a petition filed in this Court

contain clear and concise assignments of each and every error

which the taxpayer alleges to have been committed by the

Commissioner in the determination of the deficiency and the

additions to tax in dispute. Rule 34(b)(5) further requires that

the petition contain clear and concise lettered statements of the

facts on which the taxpayer bases the assignments of error. See

Jarvis v. Commissioner, 78 T.C. 646, 658 (1982). Any issue not

raised in the pleadings is deemed to be conceded. Rule 34(b)(4);

Jarvis v. Commissioner, supra at 658 n.19; Gordon v.

4
An appeal in the instant case would lie in the Court of
Appeals for the Fifth Circuit.
 - 8 -

Commissioner, 73 T.C. 736, 739 (1980). Further, the failure of a

party to plead or otherwise proceed as provided in the Court's

Rules may be grounds for the Court to hold such party in default

either on the motion of another party or on the initiative of the

Court. Rule 123(a).

Based upon our review of the petition, petitioner's motion,

and Rule 50(c) statement, we conclude that petitioner has failed

to satisfy the requirements of Rule 34(b). Viewing the petition

in isolation, the best that can be said is that petitioner has

assigned error in respect of respondent's determinations.

However, the petition lacks any statement of the facts on which

petitioner bases the assignments of error. Petitioner's Motion

to Shift the Burden of Proof to Respondent adds nothing in this

regard. Petitioner's Rule 50(c) statement contains significant

admissions. Rather than denying that he was engaged in an

income-producing activity during the years in issue, petitioner

admits that he received compensation from operating a

chiropractic business. Petitioner also concedes that he

maintained income-producing investments during the period in

question. In conjunction with these statements, petitioner

asserts that respondent erred in determining deficiencies in this

case on the theories that (1) compensation received in exchange

for labor is not taxable income, and (2) as a sovereign citizen,

he is not subject to the Federal income tax.

Petitioner's arguments are nothing more than time-worn tax

protester arguments that have been long rejected by this and
 - 9 -

other Federal courts. E.g., Beard v. Commissioner, 793 F.2d 139

(6th Cir. 1986), affg. per curiam 82 T.C. 766 (1984); Coleman v.

Commissioner, 791 F.2d 68, 70 (7th Cir. 1986); Carter v.

Commissioner, 784 F.2d 1006, 1009 (9th Cir. 1986); Olson v.

United States, 760 F.2d 1003, 1005 (9th Cir. 1985); United States

v. Burton, 737 F.2d 439, 441 (5th Cir. 1984); Gattuso v.

Pecorella, 733 F.2d 709, 710 (9th Cir. 1984); Funk v.

Commissioner, 687 F.2d 264, 265 (8th Cir. 1982), affg. T.C. Memo.

1981-506; Lonsdale v. Commissioner, 661 F.2d 71, 72 (5th Cir.

1981), affg. T.C. Memo. 1981-122; United States v. Romero, 640

F.2d 1014, 1016 (9th Cir. 1981) ("Compensation for labor or

services, paid in the form of wages or salary, has been

universally, held by the courts of this republic to be income,

subject to the income tax laws currently applicable."); United

States v. Buras, 633 F.2d 1356, 1361 (9th Cir. 1980); Abrams v.

Commissioner, 82 T.C. 403 (1984); Rowlee v. Commissioner, 80 T.C.

1111 (1983); Reiff v. Commissioner, 77 T.C. 1169, 1173 (1981);

Reading v. Commissioner, 70 T.C. 730 (1978), affd. 614 F.2d 159

(8th Cir. 1980); McNeel v. Commissioner, T.C. Memo. 1995-211,

affd. ___ F.3d ___ (9th Cir., Jan. 30, 1996); Fischer v.

Commissioner, T.C. Memo. 1994-586; Zyglis v. Commissioner, T.C.

Memo. 1993-341, affd. without published opinion 29 F.3d 620 (2d

Cir. 1994); Fox v. Commissioner, T.C. Memo. 1993-277, affd.

without published opinion 69 F.3d 543 (9th Cir. 1995); Williams

v. Commissioner, T.C. Memo. 1988-368; Allen v. Commissioner, T.C.
 - 10 -

Memo. 1987-242; Hebrank v. Commissioner, T.C. Memo. 1982-496; see

sec. 61(a).

An allegation in an unreported income case that respondent's

determination is arbitrary might under some circumstances be

viewed as a valid assignment of error. However, it is evident as

discussed above that the petition in the instant case amounts to

nothing more than a frivolous protest of this country's tax laws.

As we see it, petitioner's Motion to Shift the Burden of Proof to

Respondent is simply a transparent attempt at furthering that

protest. Consequently, petitioner's motion will be denied.

As previously indicated, where a party fails to plead or

otherwise proceed as provided in the Court's Rules, the Court may

hold such party in default and enter a decision against the party

on its own initiative. Rule 123(a). Although the petition

clearly fails to conform with Rule 34(b), petitioner will be

given another opportunity to correct the defects in his petition.

Accordingly, we shall issue an Order allowing petitioner a

reasonable amount of time to file a proper amended petition.5

To reflect the foregoing,

An appropriate order

will be issued.

5
In an effort to encourage petitioner to file a proper
amended petition, we will take this opportunity to remind
petitioner that sec. 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.