Bixler v. Commissioner

T.C. Memo. 1996-329

UNITED STATES TAX COURT

KENNETH E. BIXLER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 13372-95. Filed July 23, 1996.

Kenneth E. Bixler, pro se.

Timothy A. Lohrstorfer, 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 and chapter
references are to the Internal Revenue Code in effect for the
taxable year in issue, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
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 case is before the Court

on (1) Respondent's Motion To Dismiss For Failure To Properly

Prosecute; (2) respondent's Motion To Impose Sanctions For

Petitioner's Failure To Comply With Order Directing Production Of

Documents; (3) respondent's Motion To Impose Sanctions Pursuant

To I.R.C. § 6673; and (4) petitioner's Motion To Dismiss, as

supplemented.

Petitioner resided in Warsaw, Indiana, at the time that the

petition was filed in this case.

We begin by setting forth the background necessary to an

understanding of the parties' four motions.

Respondent's Notice of Deficiency

Respondent issued a notice of deficiency to petitioner dated

April 19, 1995, that determined the following deficiency in

petitioner's Federal income tax and additions to tax:

Additions to tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654(a)

1992 $9,474 $1,251.25 $196.36

The deficiency in income tax, which includes self-employment

tax in the amount of $216, is based on respondent's determination

that petitioner failed to report the following items of income:
 - 3 -

Income Payor Amount

Wages1 R.R. Donnelley & Sons Co. $45,063
Dividends Donnelley
(Stock Ownership Plan) 142
Nonemployee
2
compensation Primerica Life Ins. Co. 1,532
Interest Lake City Bank 18
" First National Bank 13
46,768
1
Respondent has given petitioner credit for amounts withheld
from his taxes insofar as his ultimate tax liability is
concerned. However, the determination of a statutory deficiency
does not take such amounts into account. See sec. 6211(b)(1).
2
In computing the amount of self-employment tax under sec.
1401, respondent reduced the amount of income received from
Primerica Life Insurance Co. by 7.65%. Such reduction is
required by sec. 1402(a)(12). In computing the amount of regular
income tax under sec. 1, respondent allowed as a deduction from
gross income one-half of the self-employment tax ($108) pursuant
to sec. 164(f).

In computing the deficiency in income tax, respondent

allowed petitioner one personal exemption and a standard

deduction in the amount of $3,000.

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 the taxable year in issue was not

due to reasonable cause. Finally, the addition to tax under

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

petitioner failed to pay the requisite amount of estimated tax

for the taxable year in issue.

Petitioner's Petition
 - 4 -

Petitioner filed his petition on July 18, 1995. The

petition contains a number of claims and allegations that are not

justiciable but rather exemplify assertions commonly found in

petitions filed by tax protesters. For example, the petition

alleges that respondent erred:

in determining that the Petitioner's gross receipts
were taxable.

in determining that, or acting as if, the Petitioner
was subject to the administrative jurisdiction of the
Internal Revenue Service.

in determining that, or in acting as if, the Petitioner
was either a 'taxpayer' as defined at 26 USC
7701(a)(14)[2]; or that the Petitioner was a 'person' as
defined in 26 USC Section 7343.[3]

in failing to allow the Petitioner's basis in his
property pursuant to IRC Sections 1012, 1014 and 1015.

The petition alleges, inter alia, as the facts upon which

petitioner relies as a basis for his case:

The Petitioner's gross receipts were not
includable in his taxable income because they were not
of the types upon which a tax is imposed in Subtitle A
of Title 26.

The gross receipts of the Petitioner consisted
entirely of compensation received for actions which
were the common law rights of the Petitioner. There

2
The term "taxpayer" is defined by sec. 7701(a)(14) to mean
"any person subject to any internal revenue tax."
3
The definition of the term "person" in sec. 7343 applies
only to ch. 75, which deals with crimes, other offenses, and
forfeitures. On the other hand, the definition of the term
"person" in sec. 7701(a)(1), which definition includes an
individual, applies generally to the entire I.R.C.
 - 5 -

was no compensation, no profit and no gain realized
from any activity subjected to an excise tax. [4]

The Petitioner is a natural person engaged in an
occupation of common law right. He holds no license or
privilege subject to an excise and he is not one of the
entities made liable for an income tax pursuant to
Subtitle A.

The Petitioner is not a taxpayer.

Petitioner does allege, in the alternative to the foregoing

and similar tax protester-type arguments, that if his

compensation for services rendered "were arguably determined to

be income", then he is entitled to deduct "all money spent in

order to earn money pursuant to IRC Section 162", as well as "a

number of itemized deductions".

In her answer, respondent denied virtually all of

petitioner's allegations.

Pre-trial Developments

On January 17, 1996, the Court served on the parties a

Notice setting this case for trial at the Indianapolis, Indiana

trial session scheduled to commence on March 25, 1996. The

Notice advised, inter alia, as follows:

YOUR FAILURE TO APPEAR MAY RESULT IN DISMISSAL OF THE
CASE AND ENTRY OF DECISION AGAINST YOU.

YOUR FAILURE TO COOPERATE MAY ALSO RESULT IN DISMISSAL
OF THE CASE AND ENTRY OF DECISION AGAINST YOU.

4
Earlier in the petition, petitioner alleges that "The
Deficiencies as determined by the Commissioner are in taxes
imposed by Subtitle A of Title 26 which the Petitioner believes
to be in the nature of excise taxes". Contrary to petitioner's
"belief", subtitle A of Title 26 deals with income taxes.
 - 6 -

A Standing Pre-Trial Order was attached to the trial notice. The

Standing Pre-Trial Order directed the parties, inter alia, to

stipulate facts and documents to the maximum extent possible

consistent with the dictates of Rule 91; to prepare and submit to

the Court a trial memorandum in prescribed form not later than 15

days before the first day of the trial session; and to be

prepared for trial at any time during the term of the trial

session.

Prior to trial, respondent served on petitioner a Request

for Admissions, to which petitioner filed a timely Response.

Petitioner admitted, inter alia, (1) he did not file an income

tax return for 1992; (2) he received compensation in the form of

wages from R.R. Donnelley & Sons Co. during 1992 in the amount of

$45,063; (3) he received interest income from Lake City Bank and

First National Bank during 1992 in the amounts of $18 and $13,

respectively; (4) he received dividend income from Donnelley Tax

Redemption Stock Ownership Plan during 1992 in the amount of

$142; (5) he received nonemployee compensation from Primerica

Life Insurance Co. during 1992 in the amount of $1,532; (6) he

was entitled to only one personal exemption for 1992; and (7) he

is entitled to a standard deduction of $3,000 for 1992.

Petitioner denied, inter alia, (1) his wages from R.R. Donnelley

& Sons Co. and his nonemployee compensation from Primerica Life

Insurance Co. were taxable; (2) he was unable to substantiate
 - 7 -

expenses that might offset gross income; and (3) he is liable for

self-employment tax.

Also prior to trial, respondent filed a Motion to Compel

Production of Documents. The motion was based on a Request for

Production of Documents previously served on petitioner and with

which petitioner had not complied.5 The Court granted

respondent's motion to compel and ordered petitioner to produce,

by a date certain, those documents requested in respondent's

request for production. The Court also advised petitioner as

follows:

in the event petitioner does not fully comply with the
provisions of this Order, the Court will be inclined to
impose sanctions pursuant to Rule 104, Tax Court Rules
of Practice and Procedure, which may include dismissal
of this case and entry of a decision against
petitioner.

The Court also reminded petitioner of the applicability of the

Court's Standing Pre-trial Order that had previously been served

on him.

Petitioner did not comply with the Court's aforementioned

Order.

Developments at Trial

5
Before serving formal discovery on petitioner, respondent
had attempted to schedule a Branerton conference with petitioner
as required by Rule 70(a)(1). See Branerton v. Commissioner, 61
T.C. 691 (1974). At that time, respondent identified arguments
made in the petition that were frivolous, advised petitioner of
the provisions of sec. 6673, and enclosed copies of two recent
cases in which the Court had imposed a penalty against the
taxpayers pursuant to that section. Petitioner declined
respondent's invitation to participate in a Branerton conference.
 - 8 -

When this case was called from the calendar of the Trial

Session at Indianapolis, Indiana, on March 25, 1996, counsel for

respondent appeared and announced that respondent was ready for

trial. There was no appearance by or on behalf of petitioner.

However, an individual who refused to identify himself other than

as a "friend" of petitioner came forward and "served" on the

Court a document entitled "Non-Statutory Abatement", which the

Court filed as petitioner's Motion to Dismiss.6 Because

respondent's counsel indicated that he wished to file certain

motions of his own, the Court stated that this case would be

recalled immediately after calendar call in order to address such

motions.

When this case was recalled later in the morning of March

25, 1996, respondent's counsel appeared and filed a Motion To

Dismiss For Failure To Properly Prosecute, a Motion To Impose

6
The "INTRODUCTION" of the document filed as petitioner's
Motion to Dismiss provides, in part, as follows:

This is a Non-Statutory Abatement issued pursuant
to common law rules applicable to such cases, against
the DEPARTMENT OF THE TREASURY, INTERNAL REVENUE
SERVICE, an acting Alien Enemy agency of a statutorily
created, foreign de facto corporation, known as the
UNITED STATES OF AMERICA. Said agency is imposing a
suretyship, by attaching an illegally presumed persona
designata, nom de guerre, created by them as Kenneth E.
Bixler, upon This private Christian, Kenneth Edward:
Bixler, suae potestate esse. This imposition is
without authority, is counter to public morals, being
in the Nature of a Praemunire which is outlawed by the
General custom in this state and, thus, is in violation
of the 1851 Indiana Constitution, the lex non scripta,
which is the jus publicum in this state:
 - 9 -

Sanctions For Petitioner's Failure To Comply With Order Directing

Production Of Documents, and a Motion To Impose Sanctions

Pursuant To I.R.C. § 6673. As before, there was no appearance by

or on behalf of petitioner.

Respondent's Motion To Dismiss For Failure To Properly

Prosecute is premised on petitioner's failure to appear at trial,

as well as petitioner's failure to cooperate in preparing this

case for trial, specifically including petitioner's failure to

stipulate, as required by the Court's Rules of Practice and

Procedure and the Court's Standing Pre-trial Order.

Respondent's Motion To Impose Sanctions For Petitioner's

Failure To Comply With Order Directing Production Of Documents is

premised on petitioner's failure to comply with the Court's Order

granting respondent's motion to compel and ordering petitioner to

produce, by a date certain, those documents requested in

respondent's request for production.

Respondent's Motion To Impose Sanctions Pursuant To I.R.C. §

6673 is premised on the grounds that petitioner instituted or

maintained this proceeding primarily for delay, and that his

position herein is frivolous or groundless.

Post-trial Developments

Several weeks after trial, petitioner filed a supplement to

his motion to dismiss. Petitioner's motion, as well as the

supplement thereto, is premised on petitioner's belief that he

may abdicate his responsibilities as a Federal taxpayer by the
 - 10 -

simple expedient of declaring himself to be a Private Christian

who is not subject to the jurisdiction of the Government of the

United States.

Discussion

We begin with respondent's Motion To Dismiss For Failure To

Properly Prosecute.

Our Rules provide that the failure of a party to appear at

trial or to properly prosecute may result in entry of decision

against that party. Specifically, Rule 123, which is entitled

"Default and Dismissal", provides in pertinent part as follows:

(b) Dismissal: For failure of a petitioner
properly to prosecute or to comply with these
Rules or any order of the Court or for other cause
which the Court deems sufficient, the Court may
dismiss a case at any time and enter a decision
against the petitioner. The Court may, for
similar reasons, decide against any party any
issue as to which such party has the burden of
proof * * * .

Additionally, Rule 149, which is entitled "Failure to Appeal or

to Adduce Evidence", provides in pertinent part as follows:

(a) Attendance at Trials: The unexcused absence
of a party * * * when a case is called for trial will
not be ground for delay. The case may be dismissed for
failure properly to prosecute, or the trial may proceed
and the case be regarded as submitted on the part of
the absent party or parties.
(b) Failure of Proof: Failure to produce
evidence, in support of an issue of fact as to which a
party has the burden of proof and which has not been
conceded by such party's adversary, may be ground for
dismissal or for determination of the affected issue
against that party.
 - 11 -

Dismissal of a case is a sanction that rests with the

discretion of the Court. Harper v. Commissioner, 99 T.C. 533,

540 (1992); Levy v. Commissioner, 87 T.C. 794, 803 (1986). In

addition--

Dismissal may properly be granted where the party's
failure to comply with Rules and orders of the Court is
due to "willfulness, bad faith or any fault", as
contrasted with mere inadvertence or inability.
Societe Internationale v. Rogers, 357 U.S. 197, 212
(1958) (Fed. R. Civ. P. 37(b)(2)); Dusha v.
Commissioner, 82 T.C. 592, 599 (1984) (Rule 104(c)). A
case may be dismissed for failure properly to prosecute
when petitioner * * * fails to appear at trial and does
not otherwise participate in the resolution of
petitioner's claim. Basic Bible Church v.
Commissioner, 86 T.C. 110, 114 (1986).

Harper v. Commissioner, supra at 540; see Ritchie v.

Commissioner, 72 T.C. 126, 128-129 (1979).

As guidance for dismissals under Rule 123(b), we look to the

legal standards for dismissals under Rule 41(b) of the Federal

Rules of Civil Procedure. Basic Bible Church of America v.

Commissioner, 86 T.C. 110, 113 (1986). The Court of Appeals for

the Seventh Circuit, to which the dismissal of this case would be

appealable, has held that dismissal under Fed. R. Civ. P. 41(b),

for failure to prosecute is appropriate "when there is 'a clear

record of delay or contumacious behavior,' or when other

sanctions have proved unavailing." 3 Penny Theater Corp. v.

Plitt Theatres, Inc., 812 F.2d 337, 339 (7th Cir. 1987) (quoting

Zaddack v. A.B. Dick Co., 773 F.2d 147, 150 (7th Cir. 1985), and

Webber v. Eye Corp., 721 F.2d 1067, 1069 (7th Cir. 1983)).
 - 12 -

For the following reasons, we think the applicable standard

is clearly satisfied in this case.

First, petitioner failed to appear at trial, either in

person or by counsel, despite the warning set forth in the

Court's Notice setting this case for trial. Rather, a "friend"

of petitioner came forward and "served" on the Court petitioner's

Motion to Dismiss.

Second, petitioner failed to cooperate in preparing this

case for trial, despite the warning set forth in the Court's

Notice setting this case for trial.

Third, petitioner failed to comply with the Court's Order

granting respondent's Motion to Compel Production of Documents,

despite the warning set forth in such order.

Fourth, petitioner failed to comply with the Court's

Standing Pre-trial Order, despite the admonitions therein and

despite the reminder concerning the applicability of such order

that was set forth in the Court's Order granting respondent's

aforementioned motion to compel production.

Fifth, petitioner's Motion to Dismiss itself demonstrates

petitioner's lack of interest in pursuing whatever justiciable

issues may exist in this case.

In view of the foregoing, we conclude that dismissal is

warranted as a sanction. Accordingly, we will grant respondent's

Motion To Dismiss For Failure To Properly Prosecute.
 - 13 -

We turn next to respondent's Motion To Impose Sanctions For

Petitioner's Failure To Comply With Order Directing Production Of

Documents. In view of the action that we will take in respect of

respondent's motion to dismiss, this motion will be denied as

moot.

We now consider respondent's Motion To Impose Sanctions

Pursuant To I.R.C. section 6673.

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.

The record in this case convinces us that petitioner was not

interested in disputing the merits of either the deficiency in

income tax or the penalties determined by respondent in the

notice of deficiency. Rather, the record demonstrates that

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

of this country and espouse his own misguided views.

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). Petitioner's position, as set forth

in the petition, consists of tax protester rhetoric and
 - 14 -

legalistic gibberish. Based on well established law,

petitioner's position is frivolous and groundless.

We recognize that petitioner did include in his petition

allegations alternative to his tax protester arguments, namely,

that if his compensation for services rendered "were arguably

determined to be income", then he is entitled to deduct "all

money spent in order to earn money pursuant to IRC Section 162",

as well as "a number of itemized deductions". Such allegations,

however, are clearly secondary to the tax-protester arguments;

moreover, they were never pursued by petitioner. We think that

such allegations were, at best, a mere decoy, designed to avoid a

pretrial motion to dismiss for failure to state a claim under

Rule 40.

We are also convinced that petitioner instituted and

maintained this proceeding primarily, if not exclusively, for

purposes of delay. Having to deal with this matter wasted the

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

genuine controversies were delayed. See Voss v. Commissioner,

T.C. Memo. 1989-238 (taxpayers instituted proceedings in this

Court primarily for delay where they "exhibited total disinterest

in presenting or proving the merits, if any, of their cases.").

Finally, we note that respondent provided petitioner, well

in advance of trial, with copies of two recent cases of this

Court in which we discussed the provisions of section 6673 and
 - 15 -

imposed a penalty thereunder. Petitioner was well aware that he

faced the possibility of a penalty under that section.

In view of the foregoing, we will exercise our discretion

under section 6673(a)(1), grant respondent's motion to impose

sanctions, and require petitioner to pay a penalty to the United

States in the amount of $2,500. See Granzow v. Commissioner, 739

F.2d 265, 268 (7th Cir. 1984) (imposition of a penalty under

section 6673 was warranted where taxpayer had no reasonable basis

to believe that wages were not properly subject to income tax

"given the universal and longstanding rejection of this

argument.").

With respect to petitioner's Motion to Dismiss, as

supplemented, it should be apparent that we will deny such

motion. It contains only Latinized gobbledygook and represents

nothing other than a means by which petitioner has pursued his

tax protest agenda.

To reflect the foregoing,

An appropriate order and order

of dismissal and decision will be

entered.