T.C. Memo. 1999-361
UNITED STATES TAX COURT
DOUGLAS J. CRAWFORD, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 14736-97. Filed October 29, 1999.
Douglas J. Crawford, pro se.
Gretchen A. Kindel, for respondent.
MEMORANDUM OPINION
WOLFE, Special Trial Judge: Respondent determined
deficiencies in petitioner's Federal income tax for the taxable
years 1991 and 1993 and additions to tax for failure to file
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timely Federal income tax returns pursuant to section 6651(a)(1)1
as follows:
Additions to Tax
Year Deficiency Sec. 6651(a)(1)
1991 $3,074 $106.50
1993 2,156 539.00
Following concessions by respondent,2 the issues for
decision are: (1) Whether the Tax Court has jurisdiction to
consider petitioner's constitutional objections; (2) whether
assignment of a case to a Special Trial Judge pursuant to section
7443A(b)(3) violates petitioner's constitutional rights; (3)
whether unemployment compensation received by petitioner in 1991
should be included in petitioner's 1991 gross income; (4) whether
petitioner is liable for an addition to tax pursuant to section
6651 for failing to file a Federal income tax return for 1991;
and (5) whether petitioner is liable for a penalty under section
6673(a).
The evidence in this case consists of a stipulation of facts
with the attached exhibits (incorporated herein by reference) and
1
All section references are to the Internal Revenue Code in
effect for the tax years in issue, unless otherwise indicated.
All Rule references are to the Tax Court Rules of Practice and
Procedure.
2
Respondent has conceded that petitioner is not liable for
any deficiency in income tax or addition to tax for the taxable
year 1993. Respondent also conceded that petitioner used the
standard deduction in computing his 1990 Federal income tax and
that petitioner's refund of State income taxes is not includable
in petitioner's 1991 income.
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oral testimony and exhibits admitted at trial. When the petition
was filed, petitioner lived in San Diego, California.
Background
Petitioner failed to file an income tax return for the year
1991. Respondent determined a deficiency in petitioner's 1991
Federal income tax of $3,074 using information provided by third
parties. In the notice of deficiency, respondent determined that
petitioner failed to report wages, interest, and dividends of
$23,714 and taxable unemployment compensation of $2,280.
Petitioner claims that $570 of the unemployment compensation he
received in 1991 relates to the 1990 taxable year and should not
be included in his 1991 gross income. Petitioner also objects to
the assignment of this case to a Special Trial Judge for hearing
and decision and asserts that the assignment violates his
constitutional rights. Petitioner further asserts that the Tax
Court is jurisdictionally barred from deciding constitutional
questions.
Discussion
1. Constitutional Arguments
Petitioner's constitutional arguments are wholly frivolous.
Petitioner asserts that the Tax Court is unconstitutional
because it was established pursuant to the provisions of Article
I of the U.S. Constitution rather than Article III. This
argument is wholly without merit. It is well established that
functions such as those performed by the Tax Court can be
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entrusted to Article I courts. See Freytag v. Commissioner, 501
U.S. 868 (1991); Redhouse v. Commissioner, 728 F.2d 1249 (9th
Cir. 1984), affg. 79 T.C. 355 (1982); Nash Miami Motors, Inc. v.
Commissioner, 358 F.2d 636 (5th Cir. 1966), affg. T.C. Memo.
1964-230; Rowlee v. Commissioner, 80 T.C. 1111 (1983).
Additionally, the Court of Appeals for the Ninth Circuit, to
which an appeal in this case would normally lie, has stated: "we
have often upheld Tax Court decisions which were based on a
constitutional inquiry." Rager v. Commissioner, 775 F.2d 1081,
1083 (9th Cir. 1985), affg. T.C. Memo. 1984-563.
Petitioner further argues that he is denied due process of
law and equal protection by being required to pay the deficiency
as a precondition to litigating in the U.S. District Court. A
taxpayer has alternative avenues of judicial review available to
contest the Commissioner's determination of a deficiency in tax.
The taxpayer may either pay the deficiency and sue for a refund
in the District Court or the Claims Court, or the taxpayer may
withhold payment and petition the Tax Court. In either case, a
decision of the trial court may be reviewed in the Court of
Appeals and ultimately in the Supreme Court. These procedures
satisfy due process. See Redhouse v. Commissioner, supra;
Stonecipher v. Bray, 653 F.2d 398 (9th Cir. 1981); Willmut Gas &
Oil Co. v. Fly, 322 F.2d 301 (5th Cir. 1963).
Petitioner has voluntarily chosen to have his dispute
resolved in this Court. This Court operates pursuant to statute,
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and petitioner is subject to the statutory rules, including the
Special Trial Judges' authority to hear and decide cases under
section 7443A(b)(1), (2), and (3). See Freytag v. Commissioner,
supra at 882.
2. Determination of Deficiency
Petitioner failed to file an income tax return for 1991. In
determining petitioner's deficiency, respondent reconstructed
petitioner's income using information provided by third parties,
e.g., Form W-2, Form 1099-INT, and Form 1099-UC. Petitioner does
not dispute the source or amount of income set forth in the
notice of deficiency. Petitioner has stipulated to receiving the
amounts of income set forth in respondent's notice of deficiency.
Petitioner's contention is that $570 of the unemployment
compensation he received in 1991 relates to the year 1990 and
should not be included in his 1991 gross income.
In reconstructing petitioner's 1991 income, respondent used
the cash receipts and disbursement method. If no method of
accounting has been regularly used by the taxpayer, the
computation of taxable income shall be made under such method as,
in the opinion of the Secretary, clearly reflects income. See
sec. 446(b). Where a taxpayer keeps no established books or any
regular system of accounting, his income is to be recomputed on
the cash receipts and disbursement method. See Kotmair v.
Commissioner, 86 T.C. 1253, 1258 (1986). Under the cash receipts
and disbursement method, all items which constitute gross income
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are included for the taxable year in which they are actually or
constructively received. See sec. 1.446-1(c)(1)(i), Income Tax
Regs. Accordingly, unemployment compensation received by
petitioner in 1991 is properly includable in petitioner's 1991
gross income.
3. Section 6651 Addition to Tax
Section 6651(a) imposes an addition to tax for a taxpayer's
failure to file a required return on or before the specified
filing date, including extensions. The addition to tax is
inapplicable, however, if the taxpayer shows that the failure to
file the return was due to reasonable cause and not willful
neglect. See sec. 6651(a)(1). To prove "reasonable cause",
taxpayers must show they exercised ordinary business care and
prudence and were still unable to file the return within the
statutorily prescribed time. See Crocker v. Commissioner, 92
T.C. 899, 913 (1989). Petitioner has not contradicted
respondent's assertion that he failed to file an income tax
return, nor has petitioner claimed that he had reasonable cause
for failing to file an income tax return. Petitioner has not
provided this Court with any legal or factual justification for
not filing an income tax return for 1991. We, therefore, hold
that petitioner is liable for the addition to tax for delinquent
filing as determined by respondent.
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4. Section 6673(a)(1) Penalty
Section 6673(a)(1) authorizes this Court to award a penalty
not in excess of $25,000 when proceedings have been instituted or
maintained primarily for delay, or where the taxpayer's position
is frivolous or groundless; i.e., it is contrary to established
law and unsupported by a reasoned, colorable argument for a
change in the law. See Coleman v. Commissioner, 791 F.2d 68, 71
(7th Cir. 1986); Talmage v. Commissioner, T.C. Memo. 1996-114,
affd. without published opinion 101 F.3d 695 (4th Cir. 1996). In
our view, under all the circumstances here, including the
concessions by respondent, a penalty in this case is not
appropriate.
To reflect concessions,
Decision will be entered
under Rule 155.