T.C. Memo. 1996-309
UNITED STATES TAX COURT
JEFFREY PAUL SCHMIDT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 19264-94. Filed July 9, 1996.
Jeffrey Paul Schmidt, pro se.
Lavonne D. Lawson, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
PARR, Judge: Respondent determined deficiencies in and
additions to petitioner's Federal income taxes for taxable years
1989, 1990, and 1991, as follows:
Additions to Tax
Year Deficiency Sec. 6651(a) Sec. 6654(a)
1989 $58,895 $13,646 $3,658
1990 12,258 2,041 508
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1991 13,391 3,192 728
After concessions, the issues for decision are:1 (1) Whether
petitioner's motion to dismiss for lack of jurisdiction should be
granted. We hold that it should not. (2) Whether petitioner
received unreported income for taxable years 1989, 1990, and
1991. We hold that he did. (3) Whether petitioner is liable for
section 6651(a) additions to tax for failure to file a Federal
income tax return for each of the years in issue.2 We hold that
he is. (4) Whether petitioner is liable for section 6654(a)
additions to tax for failure to pay estimated taxes for each of
the years in issue. We hold that he is.
We find the following facts based upon the pleadings of this
case and the deemed admissions contained in respondent's request
for admissions.
FINDINGS OF FACT
At the time the petition was filed, petitioner resided in
Santa Clara, California.
The case was set for trial on December 4, 1995. Petitioner
was served with the Court's Standing Pre-Trial Order on June 29,
1
At trial, respondent conceded that petitioner's
deficiency for 1989 is $18,609, reduced from the original amount
of $58,895. Correspondingly, for 1989, the addition to tax
pursuant to sec. 6651(a) is $3,574, and the addition to tax
pursuant to sec. 6654(a) is $394. These concessions will be
given effect under Rule 155.
2
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 Practice and Procedure, unless
otherwise indicated.
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1995, advising the parties to begin discussion as soon as
practicable for purposes of settlement and/or preparation of a
stipulation of facts. No stipulations of fact were signed in
this case, and, consequently, respondent filed a request for
admissions pursuant to Rule 90 on September 18, 1995.3
The request advised petitioner that, pursuant to Rule 90, he
had 30 days to respond to the request; petitioner failed to make
a timely response. Thus, pursuant to Rule 90, all undenied
allegations were deemed admitted.4 However, at trial, the Court
permitted petitioner to take issue with those admissions relating
to petitioner's failure to file Federal income tax returns for
1989, 1990, and 1991.
In 1989, petitioner worked as an independent contractor for
Applied Materials, Inc. From this activity, petitioner received
3
Respondent simultaneously filed a request for
production of documents pursuant to Rule 72. When petitioner
failed to produce any documents requested, respondent filed a
motion to compel. The Court subsequently issued an order
directing compliance with respondent's request. Petitioner,
claiming that this Court lacks jurisdiction, again failed to
produce any documents, thus frustrating compliance with Rule 91.
Respondent then sought sanctions against petitioner precluding
petitioner from offering any evidence, including testimony, with
regard to those issues addressed in respondent's request for
production of documents. The Court subsequently issued an order
precluding petitioner from offering at trial any exhibits not
previously exchanged with respondent.
4
Under Rule 90(c), each matter in a request for
admissions is deemed admitted unless, within 30 days after
service (or within such shorter or longer time as the Court may
allow), the party to whom the request is directed admits or
denies the matter, or objects, stating the reasons for the
objection. See Freedson v. Commissioner, 65 T.C. 333 (1975),
affd. on another issue 565 F.2d 954 (5th Cir. 1978).
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$17,000 in nonemployee compensation. Also in 1989, petitioner
worked as an employee for Applied Materials, Inc. From this
employment, petitioner received wages in the amount of $34,134.
Petitioner also received wages in 1989 from Century Life of
America in the amount of $49, a refund from the Franchise Tax
Board of $17, and interest income of $1,131.
Petitioner sold his personal residence in 1989 for $145,000
and realized gain on that sale in the amount of $14,973.83.
Thereafter, petitioner did not purchase a principal residence
within 2 years of the above-referenced sale of his personal
residence.
In 1990, petitioner again worked as an employee for Applied
Materials, Inc. From this employment, petitioner received wages
of $52,159. Petitioner also received interest income in the 1990
tax year in the amount of $1,110, and deferred compensation of
$2,437.
In 1991, the last year in issue, petitioner again worked as
an employee for Applied Materials, Inc. From this employment,
petitioner received wages of $59,266, and interest income of $34.
On December 4, 1995, the date of trial, petitioner filed
what he called an "entry of jurisdictional challenge, declaration
and affidavit." The document was filed as petitioner's motion to
dismiss for lack of jurisdiction. In support of his motion,
petitioner asserted lengthy tax protester rhetoric challenging
the jurisdiction of the Tax Court and the Constitutional
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authority of the United States to tax his income. At trial, we
reserved our right to rule on that motion at a later time; we
proceeded under the assumption that this Court has jurisdiction.
OPINION
Issue 1. Motion to Dismiss for Lack of Jurisdiction
Petitioner asserts that this Court lacks jurisdiction to
hear his case. Respondent asserts that petitioner's arguments
are standard tax protester rhetoric and have long since been
rejected by this Court.
It suffices to say that petitioner chose this forum in which
to litigate his tax dispute. The Court acquired jurisdiction in
this case after a valid notice of deficiency was sent to
petitioner, and he in turn filed a timely petition. Secs.
6212(a) and (b), 6213(a); Minovich v. Commissioner, T.C. Memo.
1994-39. Once the Court's jurisdiction is invoked, it remains
unimpaired until we decide the controversy. Dorl v.
Commissioner, 57 T.C. 720, 722 (1972), affd. per curiam without
opinion 507 F.2d 406 (2d Cir. 1974). Accordingly, petitioner's
motion to dismiss for lack of jurisdiction is denied.
Issue 2. Unreported Income
Respondent determined deficiencies in petitioner's gross
income for the years at issue. Petitioner asserts that he is a
nonresident alien "without" the taxing authority of the United
States. Respondent asserts that petitioner is liable for tax on
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his taxable income, including gain realized on the sale of a
capital asset.
In general, the determinations made by the Commissioner in a
notice of deficiency are presumed to be correct, and the taxpayer
bears the burden of proving that those determinations are
erroneous. Rule 142(a); INDOPCO Inc., v. Commissioner, 503 U.S.
79, 84 (1992); Welch v. Helvering, 290 U.S. 111, 115 (1933).
There is no merit to petitioner's allegations that he is not
subject to Federal income taxes or to any other arguments offered
by petitioner. See, e.g., Rowlee v. Commissioner, 80 T.C. 1111
(1983); Carroll v. Commissioner, T.C. Memo. 1994-18; McDougall v.
Commissioner, T.C. Memo. 1992-683, affd. per curiam without
published opinion 15 F.3d 1087 (9th Cir. 1993). We see no need
to catalog and painstakingly address petitioner's contentions,
constitutional or otherwise. As the Court of Appeals for the
Fifth Circuit 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 (5th Cir.
1984).
The general rule of section 61(a) is that, except as
otherwise provided by law, gross income includes income from
whatever source derived, including, inter alia: (1) compensation
for services, section 61(a)(1); (2) gains derived from dealings
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in property, section 61(a)(3); and (3) interest income, section
61(a)(4).
The deemed admissions pursuant to Rule 90 establish that
petitioner received income for tax years 1989, 1990, and 1991.
Accordingly, we uphold respondent's deficiency determinations for
the taxable years in issue, as follows: (1) $18,609 for 1989;
(2) $12,258 for 1990; and (3) $13,391 for 1991.
Issue 3. Sec. 6651(a) Failure To File
Respondent determined that the addition to tax for failure
to timely file a tax return was applicable for each of the years
at issue. Petitioner asserts that he is a nonresident alien and
therefore not required to file.
An income tax return must be filed by all individuals
receiving gross income in excess of certain minimum amounts.
Sec. 6012; sec. 1.6012-1(a), Income Tax Regs. For 1989, 1990,
and 1991, petitioner's gross income, as defined in section 61(a),
was well in excess of the minimums in section 6012. Therefore,
petitioner was required to file Federal income tax returns for
1989, 1990, and 1991. Secs. 6011, 6012(a)(1)(A), 7701(a)(1);
sec. 1.6012-1, Income Tax Regs. That is, petitioner was required
to file returns and pay the tax imposed on every person filing
such returns, in accordance with section 1.
Section 6651(a) imposes an addition to tax for failure to
timely file a return, unless the taxpayer establishes: (1) the
failure did not result from willful neglect; and (2) the failure
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was due to reasonable cause. United States v. Boyle, 469 U.S.
241, 245-246 (1985). Petitioner bears the burden of proof on
this issue. Rule 142(a); Baldwin v. Commissioner, 84 T.C. 859,
870 (1985). Petitioner failed to prove reasonable cause for his
failure to file. Accordingly, the addition to tax for failure to
file returns under section 6651(a) is sustained.
Issue 4. Sec. 6654(a) Failure To Pay Estimated Tax
Respondent determined that petitioner was liable for the
addition to tax under section 6654(a) for failure to pay an
estimated tax for 1989, 1990, and 1991. Where payments of tax,
either through withholding or by making estimated quarterly tax
payments during the course of the year, do not equal the
percentage of total liability required under the statute,
imposition of the addition to tax under section 6654(a) is
automatic, unless petitioner shows that one of the statutory
exceptions applies. Niedringhaus v. Commissioner, 99 T.C. 202,
222 (1992); Grosshandler v. Commissioner, 75 T.C. 1, 20-21
(1980). Petitioner bears the burden of proving qualification for
such exception. Habersham-Bey v. Commissioner, 78 T.C. 304, 319-
320 (1982). Petitioner has not met this burden. We therefore
sustain respondent on this issue.
To reflect the foregoing,
An appropriate order will
be issued, and decision will
be entered under Rule 155.