McQuatters v. Commissioner

T.C. Memo. 2000-34

UNITED STATES TAX COURT

JOSEPH T. MCQUATTERS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 16871-98. Filed February 3, 2000.

Joseph T. McQuatters, pro se.

Edwina L. Charlemagne, for respondent.

MEMORANDUM OPINION

VASQUEZ, Judge: Respondent determined the following

deficiencies in and additions to petitioner’s Federal income

taxes:
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Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654
1990 $63,547 $15,887 $4,185
1991 65,221 16,305 3,749
1992 25,949 6,487 1,133
1993 22,724 5,681 952
1994 12,113 3,028 623
1995 10,065 2,516 550

After concessions,1 the sole issue for our decision is whether we

should grant respondent’s motion to impose a penalty pursuant to

section 6673.2 We combine our findings of fact with our opinion.

Background

At the time the petition was filed, petitioner resided in

Columbia, South Carolina.

Petitioner failed to file tax returns for 1990 through 1995.

On July 30, 1998, respondent issued a notice of deficiency (the

notice) for these years. The deficiency was principally

attributable to unreported income from petitioner’s sole

proprietorship known as Interstate Safety. Respondent based his

determination of gross receipts on State sales tax returns filed

by petitioner and computed petitioner’s cost of goods sold based

on information obtained from petitioner’s primary supplier.

1
After the majority of the petition and the entire amended
petition were stricken, see discussion infra, the only issue
raised in the petition was whether petitioner had a capital gain
of $6,971 in 1994. In his trial memorandum and at trial,
respondent conceded that petitioner did not have any capital
gains in 1994.
2
All section references are to the Internal Revenue Code
in effect for the taxable years in issue.
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On October 19, 1998, petitioner filed a petition protesting

the validity of the notice on numerous grounds, such as that the

notice was addressed to “Dear Taxpayer”, was fraudulent, and was

not signed by hand or under penalties of perjury. Petitioner

also argued, among other things, that (1) section 61 does not

define taxable income; (2) he is not liable for the addition to

tax under section 6651(a)(1) because he has not engaged in the

collection of taxes on alcohol, tobacco, and/or firearms; and (3)

he is not liable for the addition to tax under section 6654

because he had no knowledge that he qualified as a “person”

subject to pay estimated taxes.

On December 4, 1998, respondent filed a motion to dismiss

for failure to state a claim and to impose a penalty under

section 6673 (the motion to dismiss). On December 8, 1998, in

response to the motion to dismiss, this Court ordered petitioner

to file an amended petition on or before January 8, 1999, setting

forth with specificity each error petitioner alleged respondent

made in the notice of deficiency and separate statements of every

fact upon which petitioner based his assignment of each error.

The Court calendared the motion to dismiss for a hearing on

February 8, 1999.

On January 11, 1999, petitioner filed an amended petition.

In the amended petition, petitioner accused this Court of acting

prematurely in issuing the order on December 8, 1998, petitioner
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“reiterate[d] and reaffirm[ed] each and every statement of Claim,

Fact, Law, Case Law, and Regulation contained in the original

PETITION,” and he contended that his arguments and statements of

fact/law were entitled to a presumption of correctness.

On February 10, 1999, a hearing was held on the motion to

dismiss. Pursuant to the hearing and by an order dated February

18, 1999, this Court denied the motion to dismiss. The Court

struck the amended petition in its entirety and struck all

statements and allegations set forth in the petition except for

paragraphs 1, 2, 3, and 19. The stricken portions contained tax-

protester rhetoric. Taking into account the nonstricken portions

of the petition, only one issue remained–-whether petitioner had

any long-term capital gains in 1994.

At the hearing, petitioner was warned that if he continued

at trial to advance tax-protester arguments this Court would

impose a penalty under section 6673 for a sum substantially

higher than the $1,000 penalty we awarded against petitioner in

McQuatters v. Commissioner, T.C. Memo. 1998-88 (McQuatters I).3

On May 11, 1999, and June 3, 1999, respectively, petitioner

served a request for admissions and written interrogatories on

respondent. Petitioner’s requests related to his arguments that

3
Petitioner was before this Court with regard to his 1988
taxable year in McQuatters I. In McQuatters I, petitioner
asserted typical tax-protester arguments, and this Court
penalized him $1,000 pursuant to sec. 6673.
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were already stricken from the petition and the amended petition.

Respondent filed motions for a protective order, and this Court

granted the motions on June 16, 1999.

On December 6, 1999, respondent filed his trial memorandum

wherein respondent conceded that petitioner had no capital gains

in 1994. Respondent based his concession on information received

pursuant to a subpoena duces tecum establishing petitioner’s

basis in the property sold.

Although there were no remaining issues in the case,

petitioner refused to sign a decision document. On December 6,

1999, at the calendar call of this case, petitioner failed to

make an appearance. Respondent filed a motion for entry of

decision and a motion to impose a penalty under section 6673.

Discussion

After the amended petition in its entirety and the majority

of the petition were stricken, the only issue remaining was

whether petitioner had a long-term capital gain of $6,971 in

1994. In his trial memorandum and at the calendar call,

respondent conceded that issue. Accordingly, we shall grant

respondent’s motion for entry of decision.

Pursuant to section 6673, this Court may impose a penalty

not in excess of $25,000 whenever it appears to the Court that

the taxpayer has instituted or maintained the proceedings

primarily for delay or the taxpayer’s position in such
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proceedings are frivolous or groundless. A position maintained

by the taxpayer is “frivolous” where it is “contrary to

established law and unsupported by a reasoned, colorable argument

for change in the law.” Coleman v. Commissioner, 791 F.2d 68, 71

(7th Cir. 1986).

The petition and amended petition contained shopworn tax-

protester rhetoric that has been universally rejected by this and

other Courts. After the majority of the petition and the entire

amended petition were stricken, petitioner served requests for

admissions and interrogatories on respondent relating to the tax-

protester arguments contained in the stricken portions.

Petitioner also refused to sign a decision document even though

there were no longer any issues in the case and did not make an

appearance at the calendar call to explain his refusal to sign

the decision documents.

In McQuatters I, petitioner made frivolous tax-protester

arguments akin to those advanced in the petition and amended

petition in the instant case, and this Court penalized petitioner

$1,000 pursuant to section 6673. At the hearing on the motion to

dismiss, petitioner was warned that if he continued to advance

these arguments and further delay the resolution of this case he

would be penalized again. Petitioner has failed to heed our

warnings. Accordingly, we shall grant respondent’s motion and

impose a penalty of $5,000 pursuant to section 6673.
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To reflect the foregoing,

An appropriate order and

decision will be entered for

respondent.