T.C. Memo. 1997-264
UNITED STATES TAX COURT
LOLA COWAN, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 265-95. Filed June 12, 1997.
Lola Cowan, pro se.
Julie L. Payne, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
JACOBS, Judge: Respondent determined a deficiency in
petitioner's 1990 Federal income tax in the amount of $22,750 and
additions to tax pursuant to sections 6651(a) and 6654(a) in the
respective amounts of $5,553 and $1,491.
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The issues for decision are:
(1) Whether petitioner had unreported income for the year
1990, as determined by respondent. We hold she did.
(2) Whether petitioner is liable for a section 6651(a)
addition to tax for failure to file a 1990 Federal income tax
return. We hold she is.
(3) Whether petitioner is liable for a section 6654(a)
addition to tax for failure to make estimated tax payments for
1990. We hold she is.
(4) Whether petitioner should be required to pay a penalty to
the United States under section 6673(a)(1). We hold she should, in
the amount of $2,500.
All section references are to the Internal Revenue Code in
effect for the year 1990. All Rule references are to the Tax Court
Rules of Practice and Procedure.
FINDINGS OF FACT
Despite the Court's request, no stipulation of facts was
filed. Petitioner called no witnesses. Rather, petitioner relied
on her trial memorandum, which contains nothing more than tax
protester rhetoric and legalistic gibberish. Petitioner did,
however, testify. She did so as respondent's sole witness. For
the most part, petitioner's testimony was in connection with
respondent's request for a penalty pursuant to section 6673(a)(1).
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Notwithstanding the scant record, based primarily on deemed
admissions, we find the following:
Petitioner resided in Issaquah, Washington, at the time she
filed her petition. She did not file a Federal income tax return
for 1990.
During 1990, petitioner received the following amounts of
income:
Wages from Issaquah School District No. 411. $9,189
Savren Service Corp., arising from the sale of 76,750
property located at 27605 SE 196th Pl., Issaquah,
Washington. (We are unable to ascertain from the
record petitioner's basis in the property.)
Dividend income from Nynex American Transtech. 1 8
Dividend income from American Telephone 25
Telegraph Co.
Dividend income from Southwestern Bell Corp. 16
Dividend income from Pacific Telesis Group. 1 5
Dividend income from Bell Atlantic American 18
Transtech Co.
Dividend income from Bellsouth American 23
Transtech Co.
Dividend income from Ameritech American 18
Transtech Co.
Dividend income from Ameritech American 15
Transtech Co.
Petitioner made no estimated tax payments during 1990, as
required by section 6654.
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Petitioner's failure to timely file a Federal income tax
return was not attributable to reasonable cause within the meaning
of section 6651(a).
OPINION
Issue 1. Unreported Income
Respondent's determinations as to petitioner's tax liability
are presumed correct. Petitioner bears the burden of proving the
contrary. See Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S.
79, 84 (1992); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Petitioner chose not to call any witnesses or present any
meaningful evidence. She admitted, when questioned by the Court,
that during 1990 she worked as a teacher's assistant at Echo Glen,
a prison for youngsters, and received wages from Issaquah School
District. She further admitted not filing a tax return for 1990
and justified her failure to file by stating: "I don't believe that
a person that's working as hard [as I] for as small a wage as I
should have to pay tax."
Section 61 defines gross income as all income from whatever
source derived. Included within the definition of gross income are
"Compensation for services", "Gains derived from dealings in
property", and "Dividends". Sec. 61(a)(1), (3), (7).
The largest amount of unreported income involves petitioner's
sale of property located at 27605 SE 196th Pl., Issaquah,
Washington (196th Pl. property). Section 1001(c) requires
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recognition of gain or loss on the sale or exchange of property.
The amount of gain recognized is the excess of the amount realized
over the property's adjusted basis. Sec. 1001(a). Due to
petitioner's failure to present any evidence, we are unable to
determine her basis in the 196th Pl. property. Petitioner must
bear the consequences flowing from her decision not to properly
prosecute her case. Accordingly, the amount of gain recognized
from the sale of the 196th Pl. property is the entire amount
realized; that is, the $76,750 sale proceeds. (While we recognize
that Washington is a community property State, the record does not
reflect whether the 196th Pl. property is petitioner's separate
property or community property or whether the $76,750 is
petitioner's share of community property or the entire amount of
the sale proceeds.)
We hold that petitioner received taxable wages, dividends, and
gains derived from dealings in property in 1990 as determined by
respondent. Accordingly, we sustain respondent's deficiency
determination.
Issue 2. Section 6651(a) Addition to Tax
Respondent determined an addition to tax pursuant to section
6651(a) for petitioner's 1990 taxable year. Petitioner can avoid
this addition to tax by proving that her failure to file was: (1)
Due to reasonable cause, and (2) not due to willful neglect. Sec.
6651(a); Rule 142(a); United States v. Boyle, 469 U.S. 241, 245-246
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(1985); United States v. Nordbrock, 38 F.3d 440 (9th Cir. 1994).
"Reasonable cause" requires a taxpayer to demonstrate that she
exercised ordinary business care and prudence and was nevertheless
unable to file a return within the prescribed time. United States
v. Boyle, supra at 246; sec. 301.6651-1(c)(1), Proced. & Admin.
Regs. Willful neglect means a conscious, intentional failure to
file or reckless indifference. United States v. Boyle, supra at
245.
Petitioner was required to file a Federal income tax return
for 1990. Sec. 6012. She failed to do so. When asked by the
Court whether she had filed tax returns in prior years, petitioner
replied:
MS. COWAN: Years and years ago I did.
THE COURT: And what made you change your
mind?
MS. COWAN: I believe the things that have
happened in this country and the way the
Government is running things, I just don't
agree with it all.
* * * * * * *
THE COURT: * * * And because you don't
agree with what the Government does, you feel
you don't have to pay taxes on anything you
earn?
MS. COWAN: I don't really want to assist
them in doing the wrong things in the world.
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Petitioner's failure to file was due to willful neglect.
Accordingly, respondent's determination of the section 6651(a)
addition to tax is sustained.
Issue 3. Section 6654(a) Addition to Tax
Respondent also determined an addition to tax pursuant to
section 6654(a) for 1990, asserting that petitioner failed to pay
estimated tax. 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 section 6654 addition to tax
is mandatory, unless the taxpayer shows that one of several
statutory exceptions applies. Sec. 6654; Niedringhaus v.
Commissioner, 99 T.C. 202, 222 (1992); Recklitis v. Commissioner,
91 T.C. 874, 913 (1988); Grosshandler v. Commissioner, 75 T.C. 1,
20-21 (1980). Petitioner bears the burden of proving qualification
for such an exception. See Habersham-Bey v. Commissioner, 78 T.C.
304, 319-320 (1982).
Although certain amounts were withheld from petitioner's
wages, petitioner did not make any estimated tax payments for 1990
and introduced no evidence on this issue. Accordingly, we sustain
respondent's determination pursuant to section 6654(a) for
petitioner's 1990 taxable year.
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Issue 4. Section 6673(a)(1) Penalty
Prior to trial, respondent cautioned petitioner of the
possibility of the Court's imposing a penalty if she pursued her
baseless claims and provided petitioner with an opportunity to
avoid the section 6673(a)(1) penalty. Petitioner failed to heed
respondent's warning. Accordingly, at trial, respondent requested
the Court to impose a penalty against petitioner pursuant to
section 6673(a)(1).
In relevant part, section 6673(a)(1) provides:
SEC. 6673(a). Tax Court Proceedings.--
(1) Procedures Instituted Primarily For
Delay, etc.--Whenever it appears to the Tax
Court that--
(A) proceedings before it have
been instituted or maintained by the
taxpayer primarily for delay,
(B) the taxpayer's position in
such proceeding is frivolous or
groundless, or
* * * * * * *
the Tax Court, in its decision, may require the taxpayer
to pay to the United States a penalty not in excess of
$25,000.
Respondent asserts that petitioner's position is frivolous and
groundless, and that petitioner instituted this lawsuit primarily
for delay. We agree with respondent that petitioner is liable for
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a penalty under section 6673(a)(1), and we require her to pay a
penalty to the United States in the amount of $2,500. Petitioner's
conduct throughout this proceeding has convinced us that she
instituted and maintained this proceeding primarily for delay.
Moreover, her position in this proceeding is groundless and
frivolous. See Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir.
1986); see also Neitzke v. Williams, 490 U.S. 319 (1989) (defining
legal frivolousness). Petitioner's insistence on pursuing her
fruitless argument has consumed time and effort of this Court (and
of respondent) that could have otherwise been devoted to resolving
bona fide claims of other taxpayers. See Cook v. Spillman, 806
F.2d 948 (9th Cir. 1986).
We have considered all arguments made by petitioner in this
proceeding. We perceive no need to refute petitioner's protester
arguments with somber reasoning; to do so might suggest they have
colorable merit. Crain v. Commissioner, 737 F.2d 1417 (5th Cir.
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1984). Suffice it to say, all of them are without merit.
To reflect the
foregoing,
An appropriate order will
be issued and a decision will be
entered for respondent.
.