T.C. Memo. 1998-253
UNITED STATES TAX COURT
KENNETH LEE ANDERSON AND CAROL JANE ANDERSON, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6825-97. Filed July 8, 1998.
Kenneth Lee Anderson and Carol Jane Anderson, pro sese.
Christine V. Olsen, for respondent.
MEMORANDUM OPINION
CHIECHI, Judge: This case is before the Court on
respondent’s motion for a partial summary adjudication pursuant
to Rule 1211 of those issues in this case relating to unreported
compensation, unreported income from the sale of certain real
1
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.
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property, and the addition to tax under section 6651(a)(1)
(respondent’s motion).2
Background
Petitioners resided in Temecula, California, at the time
they filed the petition.
On December 5, 1997, respondent filed a request for
admissions with the Court, a copy of which respondent had served
on petitioners on December 2, 1997. On January 7, 1998,
petitioners filed a response to respondent’s request for
admissions, a copy of which petitioners had served on respondent
on January 2, 1998. That response stated, inter alia:
Admissions OF WHAT?
I request your (DOA) or (TDO) DELEGATION OF
AUTHORITY Order from the Secretary of the Treasury.
* * * * * * *
On Feb. 27, 1986 the Federal Register (51 Fed. Reg.
95711) published the following Treasury Department
Order No. 150-01:
“The Commissioner shall, to the extent of
authority otherwise vested in him, provide for the
administration of the United States internal revenue
laws in the U.S. Territories and insular possessions
and other authorized areas of the world.” [These areas
include countries with which the U.S. has Tax Treaties
in force and DO NOT include the 50 Republic States.]
2
Issues not covered by respondent's motion are whether
petitioners (1) have $3,480 of unemployment compensation for
1992, (2) are entitled to any deductions for 1992, 1993, 1994,
and 1995 (the years at issue), (3) are subject to self-employment
tax for 1992 and 1993, and (4) are liable for the years at issue
for the accuracy-related penalty under sec. 6662(a).
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On February 2, 1998, respondent filed a second request for
admissions with the Court, a copy of which respondent had served
on petitioners on January 26, 1998. On March 5, 1998,
petitioners filed a response to respondent’s second request for
admissions, a copy of which petitioners had served on respondent
on February 26 and 27, 1998. That response stated, inter alia:
I/we do not deny, nor have I/we ever denied Articles
[paragraphs] 1 through 5 [of respondent’s second
request for admissions]. Taxes were withheld and paid
for the named years. What we are declaring is we
received an exchange/compensation for labor and the use
of our truck, for services rendered to the below named
Companies * * *.
In petitioners’ response to respondent’s second request for
admissions, petitioners acknowledged having received during 1992
and 1993 “compensation for labor” in the amounts and from the
companies listed in that request. However, in that response,
petitioners did not admit that such compensation was “nonemployee
compensation" as described in respondent’s second request for
admissions, and they denied that they owed self-employment tax.
In an Order dated May 4, 1998, the Court, inter alia, found
petitioners’ response to respondent’s request for admissions to
be evasive and totally inadequate, and, consequently, the Court
treated that response as a failure to answer or respond to
respondent’s request for admissions pursuant to Rule 104(d).
However, the Court allowed petitioners an opportunity to
supplement on or before May 26, 1998, their response to
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respondent’s request for admissions in such a manner so as to
comply with Rule 90(c). No such supplement was received by the
Court from petitioners. The Court concludes that each matter set
forth in respondent’s request for admissions is deemed admitted.
Rule 90(c); Marshall v. Commissioner, 85 T.C. 267, 272 (1985).
Petitioners have admitted, or are deemed to have admitted
pursuant to Rule 90(c), the following facts. On April 10, 1996,
petitioners filed with the Internal Revenue Service a Federal
income tax return (return) for each of the years 1992 through
1994. On a date not disclosed by the record, petitioners timely
filed a return for 1995. The returns for the years 1992 through
1995 listed the occupations of (1) petitioner Kenneth Lee
Anderson (Mr. Anderson) as “truck driver” during 1992, 1993, and
1994 and “driver” during 1995 and (2) petitioner Carol Jane
Anderson (Ms. Anderson) as “housewife” during 1992 and “clerk”
during 1993, 1994, and 1995. Attached to the returns for the
years at issue were Forms W-2 (Wage and Tax Statements) which
showed certain amounts of wages as having been paid to
petitioners during those years. The return filed by petitioners
for each of the years at issue showed, inter alia, zero amounts
of income and claimed refunds of Federal income tax withheld.
During 1992, Mr. Anderson received compensation in the
following amounts from the payors indicated:
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Compensation Received by
Payor Mr. Anderson During 1992
Universal Construction
Corp. $200
Valley Welding 8,109
Rancho Trucking, Inc. 22,326
American Containers Trans. 15,012
On September 17, 1992, Mr. Anderson sold real property for
$275,000.
During 1993, Ms. Anderson received compensation from
Temecula Valley Unified Schools of Riverside County and Dedicated
Retail Services in the amounts of $1,020.54 and $357.69,
respectively. During that year, Mr. Anderson received
compensation in the following amounts from the payors indicated:
Compensation Received by
Payor Mr. Anderson During 1993
Zip Truck Lines, Inc. $1,625
American Container Trans. 29,298
American Container Trans. 32,935
American Pacific Forwarders, Inc. 2,590
Envirospectrum, Inc. 3,330
EMC Production Management, Inc. 630
During 1994, Ms. Anderson received compensation from
Murrieta Valley Unified Schools of Riverside County and Temecula
Valley Unified Schools of Riverside County in the amounts of
$19.97 and $9,595.55, respectively. During that year, Mr.
Anderson received compensation in the following amounts from the
payors indicated:
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Compensation Received by
Payor Mr. Anderson During 1994
Petrolane Incorporated $22,559.07
Transport Drivers, Inc. 7,749.00
T.B.M. Chemical Transport, Inc. 2,070.00
Envirospectrum, Inc. 2,160.00
During 1995, Ms. Anderson received compensation in the
amount of $7,352.76 from Temecula Valley Unified Schools of
Riverside County. During that year, Mr. Anderson received
compensation in the amount of $38,590.13 from Amerigas Propane,
Inc.
Discussion
Rule 121(b) provides that a partial summary adjudication may
be made that does not dispose of all the issues in a case if,
inter alia, the pleadings and admissions show that there is no
genuine issue of material fact as to those issues on which
partial summary adjudication is sought. The moving party, in
this case respondent, bears the burden of proving that there is
no such genuine issue of material fact. Marshall v.
Commissioner, supra at 271.
The facts admitted and deemed admitted in this case
establish that petitioners received compensation during the years
1992, 1993, 1994, and 1995 in the amounts of $45,647, $71,786.23,
$44,153.59, and $45,942.89, respectively, none of which was
reported in the respective returns for those years. We find that
all of that compensation is income to petitioners for those
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years. Respondent determined that all of that compensation is
wage income except (1) $37,338 that Mr. Anderson received during
1992 from Rancho Trucking, Inc. and American Containers Trans.
and (2) $66,448 that he received during 1993 from Zip Truck
Lines, Inc., America Container Trans., and America Pacific
Forwarders, Inc., which respondent determined to be nonemployee
compensation income subject to self-employment tax. We sustain
respondent's determinations regarding petitioner's wage income
for the years 1992 through 1995. However, petitioners denied
that they owe any self-employment tax. Consequently, the self-
employment tax issue for 1992 and 1993 relating to the
compensation that respondent determined to be nonemployee
compensation income remains for adjudication, and respondent
agrees.
While the facts admitted or deemed admitted in this case
establish that during 1992 Mr. Anderson sold real estate for
$275,000, they do not show whether or not he had any basis in
that real estate and/or paid any commissions or other expenses
relating to that sale. Consequently, the issue relating to the
gain, if any, for 1992 from that sale remains for adjudication.
The record in this case also shows that petitioners filed
their return for each of the years 1992, 1993, and 1994 after the
due date for each such return. It does not establish any facts
relating to whether such failure to file timely was due to
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reasonable cause and not due to willful neglect. Nonetheless, it
is clear from petitioners' response to respondent's motion that
petitioners contend that they were not required, as a matter of
law, to file returns for the years at issue. Such a contention
and the reasons therefor which are stated in that response are
frivolous and groundless.3 We find that petitioners are liable
for each of the years 1992, 1993, and 1994 for the addition to
tax under section 6651(a)(1).
From the time petitioners filed the petition herein through
the filing of their response to respondent’s motion, they have
3
In petitioners’ response to respondent’s motion,
petitioners assert, inter alia:
Only an “individual” is required to file a tax
return (26 USC 6012) and then only under certain
circumstances. In looking at Section 7701(a)(30), I/we
understand that a “United States Person” as meaning a
“citizen of the United States,” “resident of the United
States.” “domestic corporation,” “domestic partnership”
and a “domestic trust or estate.” There is no
INDIVIDUAL defined under 7701(a)(30) and therefore I/we
cannot be an “individual” within the meaning of
7701(a)(1) and/or 26 USC 6012. Also, the Supreme
Court, in the case of Wills vs Michigan State Police,
105 L.Ed.2d 45 (1989) made it perfectly clear that
I/we, the sovereigns, cannot be named in any statute as
merely a “person,” or “any person.” I/we are members
of the “sovereignty” as defined in Yick Wo vs Hopkins,
118 U.S. 356 and the Dred Scott case, 60 U.S. 393.
Therefore I/we want you to know we have filed 1040's
with “0’s” knowing we are exempt. Therefore, and until
you can prove otherwise, I/we are not a “taxpayer,” nor
an “individual” that is required to file a tax return.
Please forward me/us a letter stating that I/we are not
liable for any future tax returns, or produce the
documentation that requires me/us to file. * * *
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persisted in advancing contentions that the Court finds to be
frivolous and/or groundless. In its Order dated January 9, 1998,
denying petitioners’ motion to dismiss this case, the Court
cautioned petitioners that if they “continue to advance frivolous
and/or groundless contentions, the Court will be inclined to
impose a penalty not in excess of $25,000 on petitioners under
section 6673.” Pursuant to section 6673, we will impose a
penalty on petitioners in the amount of $10,000.4
To reflect the foregoing,
An appropriate order
will be issued.
4
In the event that petitioners continue to advance
groundless and/or frivolous contentions and/or maintain this
proceeding primarily for delay, the Court will be inclined to
impose an additional penalty under sec. 6673 up to an aggregate
amount of $25,000.