Johnson v. Commissioner

T.C. Memo. 1999-312

UNITED STATES TAX COURT

JAMES ANTHONY JOHNSON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 1390-98. Filed September 22, 1999.

James Anthony Johnson, pro se.

Rick V. Hosler, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

COLVIN, Judge: Respondent determined a deficiency in

petitioner's 1994 Federal income tax of $59,914 and an addition

to tax of $14,979 under section 6651(a)(1) for failure to file a

timely income tax return for 1994.

After concessions, the issues for decision are:
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1. Whether petitioner had a capital gain of $71,001 on the

sale of his personal residence in 1994. We hold that he did.

2. Whether petitioner had unreported dividend income of

$796 from Kemper Clearing Corp. in 1994. We hold that he did.

3. Whether petitioner is liable for an addition to tax

under section 6651(a)(1) for failure to file a timely income tax

return for 1994. We hold that he is.

4. Whether petitioner is the taxpayer named in the notice

of deficiency. We hold that he is.

5. Whether petitioner's constitutional arguments have

merit. We hold that they do not.

Section references are to the Internal Revenue Code in

effect during the year in issue. Unless otherwise indicated,

Rule references are to the Tax Court Rules of Practice and

Procedure.

FINDINGS OF FACT

A. Petitioner

Petitioner lived in Arizona when he filed the petition and

amended petition in this case.

1. Sale of Petitioner's Residence

Petitioner and Barbara A. Ploe (Ploe) bought 4 acres of land

at 3545 Sierra Lane in Yavapai County, Arizona, the deed for

which was recorded on January 31, 1985. He and Ploe were not

married at that time. Petitioner personally built a 4,000
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square-foot home on the lot and improved the land. He resided in

the house. On September 22, 1994, petitioner and Ploe sold the

3545 Sierra Lane property for a net sale price of $208,387.31.

On October 14, 1994, petitioner and Ploe bought other land

for $36,292.15.

2. Petitioner's Dividend Income

Petitioner received dividends of $796 from Kemper Clearing

Corp. in 1994.

3. Petitioner's Form 1040 for 1994

Petitioner sent to respondent an unsigned U.S. Individual

Income Tax Return, Form 1040, for 1994. On it, he placed his

IRS-generated return address label and left blank the lines for

income, adjustments, tax, credits, and other taxes. He attached

to it a document stating that he was a nonresident alien residing

in the United States and that he was "no longer going to

voluntarily comply to your private tax collection filing system *

* *". Petitioner did not send any other Form 1040 to respondent

for 1994. Respondent prepared a substitute return for petitioner

on April 15, 1995.

B. Notice of Deficiency

Respondent sent a notice of deficiency to petitioner on

October 17, 1997. In it, respondent determined that petitioner

had a capital gain of $208,387 on the sale of his personal

residence and dividend income of $796 from Kemper Clearing Corp.
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in 1994. Respondent determined that petitioner's gain on the

sale of his residence was equal to the net sale price of the

property.

C. Petition

Petitioner sent a letter to the Court which was filed as an

imperfect petition because it did not comply with our Rules as to

the form and content of a petition. The Court ordered petitioner

to file an amended petition. In the amended petition, petitioner

contended that respondent erred in: (1) Determining that all of

the proceeds from the sale of petitioner's residence were capital

gain, and (2) imposing a direct tax or an indirect tax on

petitioner's income.

At a time not stated in the record after petitioner filed

the amended petition, and before trial, respondent conceded that

petitioner had an adjusted basis in the residence of $137,386,

instead of zero, as determined in the notice of deficiency.

D. Pretrial Memorandum

Petitioner submitted a pretrial memorandum in which he

listed as issues for trial: (1) Whether respondent violated

petitioner's rights of due process of law and equal protection

under the law; and (2) whether respondent deprived, took, denied,

or disparaged "petitioner of rights with mere 'policy', 'custom',

'regulation' and 'color of law', lacking enactment or enabling

clause or an appropriate court under Art. III, sec. 2."
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OPINION

A. Whether Petitioner Had a $71,001 Gain on the Sale of His
Residence

Petitioner and Ploe owned1 petitioner's residence and sold

it for $208,387. Respondent concedes that petitioner had a basis

in his residence of $137,386 (instead of zero as determined in

the notice of deficiency)2 and contends that petitioner had a

capital gain of $71,001 on the sale of his residence in 1994.

Petitioner contends that he did not receive all of the proceeds

from its sale, but he does not say specifically who got how much

of the proceeds. Petitioner argues that he received only half of

the proceeds from the sale of his residence. We disagree. There

is no testimony or other evidence in the record to support

petitioner's assertion.

At trial, petitioner offered into evidence a Transamerica

Title Insurance Co. document dated September 21, 1994, that

states an escrow account number, an amount ($208,387.31), and the

names James A. Johnson and Barbara A. Ploe to J. Michael Jones

and Deborah Lynn Jones, 3545 Sierra Lane, and that it was for

sales proceeds. Petitioner contends that the document shows that

he and Ploe were jointly paid the proceeds from the sale of the

1
The record is silent as to the ownership interests that
petitioner and Ploe held in the land.
2
The record is silent as to whether Ploe contributed to the
construction of the home and its landscaping.
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residence. Petitioner did not testify at trial or call any other

witness to identify the Transamerica document. To authenticate a

document, the proponent must offer evidence sufficient to support

a finding that the matter in question is what its proponent

claims. See Fed. R. Evid. 901(a). Petitioner could not

authenticate the document because he refused to testify, and so

it was not admissible. Also, petitioner did not exchange the

document 15 days before trial as required by our standing

pretrial order served on him on May 13, 1998. Materials not

provided in compliance with our standing pretrial order may be

excluded from evidence. See Rules 104(c)(2), 132(b); Moretti v.

Commissioner, 77 F.3d 637, 644 (2d Cir. 1996). Even if we had

admitted the document, it would not have establish how or that

petitioner and Ploe split the proceeds. Petitioner offered no

evidence that the proceeds of the sale of the residence were

divided between petitioner and Ploe, or showing that he had less

gain than asserted by respondent. We conclude that petitioner

had a capital gain of $71,001 from the sale of the residence.

See secs. 1001(a), (c), 1221(1).

If a taxpayer sells his or her principal residence, and

within 2 years of the date of the sale buys and uses another

principal residence, gain from the sale is recognized only to the

extent that the taxpayer's adjusted sale price for the old

residence exceeds the cost of the new residence. Sec. 1034(a).
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Petitioner contends that he may defer recognition of gain under

section 1034 because he timely bought a replacement residence.

We disagree.

The adjusted sale price of petitioner's old residence

($208,387) exceeded the cost of his new residence ($36,292) by

$172,095. Petitioner may not defer recognition of any of the

gain because the gain on the sale of his old residence ($71,001)

is less than the difference between the adjusted sale price of

the old residence and the cost of the new residence.

Petitioner contends that he had a cost basis in the

residence at 3545 Sierra Lane equal to its net sale price because

he used his own labor to build it and improve the property and

his labor was worth $208,387, and he contends that respondent

bears the burden of proving that petitioner's assertions are

incorrect.

We disagree. Petitioner's basis in his labor is zero. See

sec. 1012. Petitioner bears the burden of proving that

respondent's deficiency determination is in error. See Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).

B. Dividend Income

Gross income includes dividends. See sec. 61(a)(7).

Petitioner offered no evidence to dispute respondent's

determination that he received, but did not report, dividends of
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$796 from Kemper Clearing Corp. in 1994. Thus, we sustain

respondent's determination.

C. Whether Petitioner Is Liable for the Addition to Tax Under
Section 6651(a)(1) for Failure To File Timely

Section 6651(a)(1) provides for an addition to tax of up to

25 percent for failure to timely file Federal income tax returns

unless the taxpayer shows that such failure was due to reasonable

cause and not willful neglect. The burden of proof is on

petitioner to show that the failure is due to reasonable cause

and not willful neglect. United States v. Boyle, 469 U.S. 241,

245 (1985); Baldwin v. Commissioner, 84 T.C. 859, 870 (1985);

Davis v. Commissioner, 81 T.C. 806, 820 (1983), affd. without

published opinion 767 F.2d 931 (9th Cir. 1985).

Petitioner filed an unsigned Form 1040 on which he reported

no dollar amounts. Petitioner's Form 1040 is not a valid return

for purposes of section 6651. See Edwards v. Commissioner, 680

F.2d 1268, 1269-1270 (9th Cir. 1982); United States v. Porth, 426

F.2d 519, 522-523 (10th Cir. 1970) (name and address on a form is

insufficient to make it a valid return because it lacks

information from which the taxpayer's tax liability can be

computed); Cupp v. Commissioner, 65 T.C. 68, 78 (1975) (return

must be signed under penalty of perjury to be a valid return),

affd. without opinion 559 F.2d 1207 (3d Cir. 1977). Petitioner

offered no evidence that his failure to file a proper return was

due to reasonable cause and not willful neglect.
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We sustain respondent's determination that petitioner is

liable for the addition to tax for failure to file a return under

section 6651(a) for 1994.

D. Petitioner's Frivolous Arguments

Petitioner contends that he was not the taxpayer named in

the notice of deficiency because the name on the deficiency

notice was spelled in capital letters, and that corporations, not

individuals, spell their names with capital letters. Petitioner

offered his birth certificate into evidence to prove that he was

a live citizen. We did not admit it into evidence because

petitioner's contention relating to the spelling of his name was

frivolous. Petitioner also alleged (without explanation) that he

did not receive due process, that the tax system is voluntary so

that he cannot be forced to comply, and that respondent has the

burden of proof. At trial, the Court advised petitioner that he

had the burden of proof and reminded him that he had presented no

evidence to meet that burden.

Petitioner's arguments are frivolous and have been

repeatedly rejected by this Court and others, including the U.S.

Court of Appeals for the Ninth Circuit (the court to which an

appeal would lie in this case). See, e.g., Wilcox v.

Commissioner, 848 F.2d 1007, 1008 (9th Cir. 1988) (placing the

burden of proof on the taxpayer does not violate due process),

affg. T.C. Memo. 1987-225; McCoy v. Commissioner, 696 F.2d 1234,
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1236 (9th Cir. 1983) (same), affg. 76 T.C. 1027 (1981); Rowlee v.

Commissioner, 80 T.C. 1111 (1983); Boyce v. Commissioner, T.C.

Memo. 1996-439 (taxpayers raised only frivolous protester

arguments, including objecting to the spelling of their names in

capital letters), affd. without published opinion 122 F.3d 1069

(9th Cir. 1997). We see no need to repeat these discussions

here.

To reflect the foregoing,

Decision will be entered

under Rule 155.