Stafford v. Commissioner

T.C. Memo. 1997-233

UNITED STATES TAX COURT

CHAROL L. STAFFORD, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

JAMES E. STAFFORD, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket Nos. 7275-96, 7292-96. Filed May 20, 1997.

Charol L. Stafford and James E. Stafford, pro sese.

William G. Bissell, for respondent.

MEMORANDUM OPINION

GALE, Judge: This matter is before the Court on respondent's

motion for summary judgment pursuant to Rule 1211 as to the

1
Unless otherwise indicated, all Rule references are to
the Tax Court Rules of Practice and Procedure. All section
references are to the Internal Revenue Code in effect for the
years at issue.
 - 2 -

deficiencies and additions to tax regarding both petitioners and

accuracy-related penalties regarding petitioner Charol L.

Stafford (Mrs. Stafford) as determined in the notices of

deficiency. These cases were consolidated for trial, briefing,

and opinion pursuant to the Court's order dated August 7, 1996.

Respondent determined the following Federal income tax

deficiencies, additions to tax, and penalties with respect to

Mrs. Stafford:

Additions to Tax and Penalties
Year Deficiency Sec. 6651(a)(1) Sec. 6662(a)
1989 $ 3,539 --- $ 708
1990 10,521 --- 1,490
1991 2,066 $104 ---
1992 3,700 642 ---
1993 1,524 --- ---

Respondent determined the following Federal income tax

deficiencies and additions to tax with respect to petitioner

James E. Stafford (Mr. Stafford):

Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654
1989 $ 3,539 $ 885 $239
1990 11,440 2,092 34
1991 2,066 104 ---
1992 3,700 240 ---
1993 1,721 100 ---

Background

The deficiencies in income taxes are based on respondent's

determinations that petitioners failed to report income in the

following respects: (1) Although Mrs. Stafford filed Federal

income tax returns for the tax years 1989, 1990, and 1993

reporting wage income earned in her individual capacity, she
 - 3 -

failed to report her 50-percent share of community property

income earned by Mr. Stafford in his individual capacity for

those years; (2) Mrs. Stafford failed to file Federal income tax

returns for 1991 and 1992 and thus failed to report her 50-

percent share of community property income earned by Mr. Stafford

in his individual capacity for those years; and (3) Mr. Stafford

failed to file Federal income tax returns for any year at issue

and thus failed to report his 50-percent share of community

property income earned by petitioners in their individual

capacities.

Respondent determined that Mrs. Stafford received the

following wage income:

Year Payor Amount
1989 North Forest Independent
School District $ 3,670
Molly Maid of Champions 421
1990 North Forest Independent
School District 10,875
1993 Tarkington Independent
School District 6,769

Respondent determined that Mr. Stafford received the

following wage and pension income:

Year Payor Amount
1989 BP Exploration $44,763
1990 BP Exploration 30,572
BP Exploration
(1099-R pension income) 39,073
Carlton Accountants 6,362
Texas Employment Comm'n 4,774
1991 Carlton Accountants 6,289
Accountants on Call 31,280
1992 Accountants on Call 53,600
1993 Accountants on Call 27,060
 - 4 -

Hence, respondent determined that petitioners' total

community property income for each year at issue is as follows:

1989 1990 1991 1992 1993

Wage income $48,854 $52,583 $37,569 $53,600 $33,829

Pension income 39,073

Respondent further determined that each petitioner's 50

percent share of the above-noted total community property income

is as follows:

1989 1990 1991 1992 1993

Wage income $24,427 $26,292 $18,785 $26,800 $16,914

Pension income 19,537

Respondent also determined that because Mrs. Stafford filed

Federal income tax returns for 1989, 1990, and 1993 reporting the

wage income she received in her individual capacity for those

years, her respective share of unreported community property

income is reduced by the amounts so reported; i.e., $4,090

(1989); $10,875 (1990); and $6,769 (1993). Thus, respondent

determined that Mrs. Stafford's unreported community property

income is as follows:

1989 1990 1991 1992 1993

Wage income $20,337 $15,416 $18,784 $26,800 $10,145

Pension income 19,537

When petitioners refused to stipulate any matter proposed by

respondent, an order to show cause why such matters should not be

deemed stipulated pursuant to Rule 91(f) was issued by the Court.
 - 5 -

Petitioners' response to the show cause order failed to address

any matter contained in the proposed stipulations. Consequently,

the show cause order was made absolute, and the matters set forth

in respondent's proposed stipulation of facts, together with the

exhibits attached thereto, were deemed stipulated for purposes of

these cases pursuant to Rule 91(f)(3). The matters deemed

stipulated may be summarized as follows.

Petitioners are currently married and were so during the

years at issue. They resided in Kingwood, Texas, at the time

their petitions were filed. Mrs. Stafford filed Federal income

tax returns for 1989, 1990, and 1993, electing married filing

separate status, and reporting the previously noted wage income

earned in her individual capacity. However, she failed to report

her share of community property income on these tax returns.

Mrs. Stafford did not file Federal income tax returns for 1991

and 1992, and her failure to do so for these 2 years was not due

to reasonable cause.

Mr. Stafford did not file Federal income tax returns for

1989, 1990, 1991, 1992, and 1993, and his failure to do so for

all years was not due to reasonable cause. Mr. Stafford received

an IRA distribution in 1990 which was an early distribution to

which a 10-percent penalty applies. The additions to tax

pursuant to section 6654 are due from Mr. Stafford for 1989 and

1990 because he underpaid his estimated tax for both years.
 - 6 -

Petitioners are further deemed to have stipulated to the

following documents that respondent proposed for stipulation:

(1) Copies of Forms W-2 documenting Mrs. Stafford's wage income,

as determined in the notice of deficiency, from North Forest

Independent School District in the amounts of $3,669.74 (1989)

and $10,875.25 (1990), from Molly Maid of Champions in the amount

of $420.68 (1989), and from Tarkington Independent School

District in the amount of $6,769.32 (1993); (2) copies of BP

Exploration Forms W-2 and employee earnings histories documenting

Mr. Stafford's wage income, as determined in the notice of

deficiency, in the amounts of $44,763.00 (1989) and $30,572.00

(1990); (3) a copy of the canceled check (front and back) and

bank deposit ticket with respect to the 1099-R distribution paid

to Mr. Stafford, as determined in the notice of deficiency, in

the amount of $39,072.53 from BP Exploration for the taxable year

1990; (4) copies of Accountants On Call Forms W-2 and detailed

payroll registers documenting Mr. Stafford's wage income, as

determined in the notice of deficiency, in the amounts of $31,280

(1991), $53,600 (1992), and $27,060 (1993); (5) copies of Forms

W-2 from Carlton Accountants documenting Mr. Stafford's wage

income, as determined in the notice of deficiency, in the amounts

of $6,361.88 (1990) and $6,288.75 (1991); and (6) copies of

canceled checks and claimant master file from the Texas

Employment Commission documenting Mr. Stafford's unemployment

compensation in the amount of $4,774 (1990) as determined in the
 - 7 -

notice of deficiency. Petitioners also stipulated to the Federal

income tax returns filed by Mrs. Stafford for 1989, 1990, and

1993 on which she reported income in the amounts of $4,090,

$10,875, and $6,769, respectively. The stipulated documents also

include Forms W-4 signed by Mrs. Stafford (1989, 1990, and 1993)

and by Mr. Stafford (1989). The above-listed documentary

evidence identifies Texas as petitioners' State of residence

during the tax years at issue. Texas is a community property

State. See Tex. Fam. Code Ann. secs. 5.01-5.62 (West 1993).

Discussion

Summary judgment is appropriate "if the pleadings, * * *

admissions, and any other acceptable materials * * * 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). The party seeking summary judgment

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

material fact. Espinoza v. Commissioner, 78 T.C. 412, 416

(1982).

However, the party opposing summary judgment may not rely

upon the mere allegations or denials in his pleadings, but "must

set forth specific facts showing that there is a genuine issue

for trial." Rule 121(d); Sundstrand Corp. v. Commissioner,

supra. Petitioners have been unwilling to come forward with any
 - 8 -

factual evidence or to dispute any facts in these cases.2

Instead, petitioners argue that the notices of deficiency issued

to them are invalid (and, therefore, respondent has fraudulently

induced them to file Tax Court petitions) because

(1) respondent's assessment and collection authority has been

transferred to the Bureau of Alcohol, Tobacco, and Firearms

(BATF); (2) there are no implementing regulations for

respondent's assessment and collection authority; and (3) title

26 of the U.S. Code has not been enacted into law.

Mr. Stafford raised identical arguments regarding the BATF

and a lack of implementing regulations in Stafford v.

Commissioner, T.C. Memo. 1997-50. These arguments were rejected

in that case, and Mr. Stafford was first advised of their lack of

merit in a pretrial order on May 24, 1996. As in the previous

case, these arguments provide no basis for denying summary

judgment. Moreover, petitioners' additional argument that title

26 of the U.S. Code has never been enacted into law is frivolous3

2
Mrs. Stafford's petition recites that she was unaware of
her obligation to report her share of community property income
although she did not raise this point in response to respondent's
motion for summary judgment or in any other filings with the
Court. In any event, it is well settled that, under the
circumstances here presented, one spouse is required to report as
income his or her share of the other spouse's earnings. See
Hopkins v. Bacon, 282 U.S. 122 (1930); Poe v. Seaborn, 282 U.S.
101 (1930).
3
The Internal Revenue Code of 1954 was enacted by the 83d
Congress on Aug. 16, 1954, ch. 736, 68A Stat. 3. The Internal
Revenue Code of 1954 as heretofore, hereby, or hereafter amended
(continued...)
 - 9 -

and provides no basis for denying respondent's motion for summary

judgment.

1. The Deficiencies

The deemed stipulations in these cases establish that

petitioners were married and residents of Texas, a community

property State, during the tax years at issue. Thus, on the

facts here presented, each petitioner is liable for the tax on

his or her respective share of community property income. See

Hopkins v. Bacon, 282 U.S. 122 (1930); Poe v. Seaborn, 282 U.S.

101 (1930). Petitioners have not asserted that the notices of

deficiency are arbitrary or erroneous and have failed to offer

any evidence disputing respondent's determinations as to the

deficiencies.

Moreover, every item of income that respondent determined

was received by each petitioner individually is supported by

documentation to which petitioners are deemed to have stipulated,

including the Federal income tax returns filed by Mrs. Stafford

reporting wage income earned in her individual capacity.

Statements in a tax return are admissions. Waring v.

Commissioner, 412 F.2d 800, 801 (3d Cir. 1969), affg. per curiam

T.C. Memo. 1968-126; Estate of Hall v. Commissioner, 92 T.C. 312,

337-338 (1989); Lare v. Commissioner, 62 T.C. 739, 750 (1974),

3
(...continued)
was redesignated as the Internal Revenue Code of 1986 by the 99th
Congress on Oct. 22, 1986, Pub. L. 99-514, sec. 2(a), 100 Stat.
2095.
 - 10 -

affd. without published opinion 521 F.2d 1399 (3d Cir. 1975)

("Statements made in a tax return signed by a taxpayer may be

treated as admissions."); Sirrine Bldg. No. 1 v. Commissioner,

T.C. Memo. 1995-185 ("As statements of a party opponent, the

returns are admissions under rule 801(d)(2) of the Federal Rules

of Evidence."); Estate of Ford v. Commissioner, T.C. Memo. 1993-

580, affd. 53 F.3d 924 (8th Cir. 1995); Estate of Kreis v.

Commissioner, T.C. Memo. 1954-139, affd. 227 F.2d 753 (6th Cir.

1955). Hence, Mrs. Stafford has admitted receiving wage income

in her individual capacity in the amounts as determined in the

notice of deficiency.

Mrs. Stafford is deemed to have stipulated that she failed

to report her share of community property income on her 1989,

1990, and 1993 Federal income tax returns and that she filed no

income tax returns in 1991 and 1992. Mr. Stafford is deemed to

have stipulated that he failed to file Federal income tax returns

for all years at issue. Consequently, the records in these cases

amply support respondent's determinations of the amounts of

income that petitioners received in their individual capacities,

the years of receipt, and petitioners' liabilities for their

respective shares of community property income.
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Finally, petitioners are deemed to have stipulated that the

IRA distribution Mr. Stafford received in 1990 was an early

distribution to which a 10-percent penalty applies.4

Accordingly, there is no genuine issue of material fact as

to the deficiencies, and a decision may be rendered as a matter

of law. Respondent's motion for summary judgment as to this

issue with respect to both Mr. and Mrs. Stafford will be granted.

2. The Additions to Tax and Accuracy-Related Penalties

Section 6651(a)(1)

Section 6651(a)(1) imposes an addition to tax for failure to

timely file a required return, unless the failure is due to

reasonable cause. Mrs. Stafford is deemed to have stipulated

that her failure to file returns for 1991 and 1992 was not due to

reasonable cause and that the section 6651(a)(1) additions to tax

are due from her for these 2 years. Similarly, Mr. Stafford is

deemed to have stipulated that his failure to file Federal income

tax returns for 1989, 1990, 1991, 1992, and 1993 was not due to

reasonable cause and that the section 6651(a)(1) additions to tax

are due from him for all years at issue.

Accordingly, no genuine issue of material fact remains

regarding the section 6651(a)(1) additions to tax, and

respondent's motion for summary judgment thereon with respect to

both petitioners will be granted.

4
See sec. 72(t)(1).
 - 12 -

Section 6654(a)

The section 6654 addition to tax for failure to pay

estimated tax is mandatory unless the taxpayer establishes that a

statutory exception applies. Grosshandler v. Commissioner, 75

T.C. 1, 20-21 (1980). Mr. Stafford is deemed to have stipulated

that additions to tax under section 6654(a) for 1989 and 1990 are

due from him because he underpaid his estimated tax for both

years. Accordingly, there is no genuine issue of material fact

as to this issue, and respondent's motion for summary judgment

thereon with respect to Mr. Stafford will be granted.

Section 6662(a)

Section 6662(a) imposes a 20-percent penalty on the portion

of an underpayment attributable to, inter alia, negligence or

disregard of rules or regulations.5 Mrs. Stafford is deemed to

have stipulated that the section 6662(a) penalties are due from

her for the underpayment of tax for 1989 and 1990. Accordingly,

there is no genuine issue of material fact regarding Mrs.

Stafford's liability for these penalties, and respondent's motion

for summary judgment thereon will be granted.

3. The Section 6673 Penalty

Petitioners are advised of the provisions of section 6673

giving this Court authority to impose a penalty of up to $25,000

5
Respondent determined in the notice of deficiency with
respect to Mrs. Stafford that all or part of the underpayment for
1990 and 1991 is due to negligence or intentional disregard of
rules or regulations.
 - 13 -

when the taxpayer has instituted proceedings primarily for delay,

the taxpayer's position is frivolous or groundless, or the

taxpayer unreasonably failed to pursue administrative remedies.

Respondent has not requested that the Court exercise its

authority, and the Court declines to do so sua sponte in the

instant proceedings. However, petitioners are cautioned that

this sanction is available to the Court and will be considered if

petitioners persist in pursuing frivolous arguments before this

Court.

An appropriate order will be

issued, and decisions will be

entered for respondent.