T.C. Memo. 2002-74
UNITED STATES TAX COURT
RICHARDS ASSET MANAGEMENT TRUST, ET AL.,1 Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 10764-00, 10765-00, Filed March 27, 2002.
10766-00, 10767-00.
John M. Tkacik, Jr., for respondent.
MEMORANDUM OPINION
CHIECHI, Judge: These consolidated cases are before us on
respondent’s motion to hold petitioner in default in the case at
docket No. 10764-00 (respondent’s motion in the case at docket
1
Cases of the following petitioners are consolidated here-
with: Everett D. Richards, docket No. 10765-00; Everett D.
Richards, docket No. 10766-00; and Richards Charitable Trust,
docket No. 10767-00.
- 2 -
No. 10764-00), respondent’s motion to dismiss for lack of prose-
cution and to impose sanctions under section 66732 in the case at
docket No. 10765-00 (respondent’s motion in the case at docket
No. 10765-00), respondent’s motion to dismiss for lack of prose-
cution and to impose sanctions under section 6673 in the case at
docket No. 10766-00 (respondent’s motion in the case at docket
No. 10766-00), and respondent’s motion to hold petitioner in
default in the case at docket No. 10767-00 (respondent’s motion
in the case at docket No. 10767-00). (We shall refer collec-
tively to those four motions as respondent’s motions.) At the
request of respondent, on October 15, 2001, the Court held a
trial in order to enable respondent to present evidence to
satisfy the burden of production under section 7491(c) that
respondent maintains respondent has with respect to: (1) The
accuracy-related penalty under section 6662(a) that respondent
determined for each of the taxable years 1996 and 1997 in the
notice of deficiency (notice) issued to Richards Asset Management
Trust (Richards Management Trust)3 in the case at docket No.
10764-00; (2) the accuracy-related penalty under section 6662(a)
2
All section references are to the Internal Revenue Code
(Code) in effect at all relevant times. All Rule references are
to the Tax Court Rules of Practice and Procedure.
3
When referring in this Opinion to Richards Asset Management
Trust and Richards Management Trust, our use of the word “Trust”
and any similar words is for convenience only and is not intended
to convey any meaning or have any significance for Federal tax
purposes.
- 3 -
that respondent determined for the taxable year 1996 in the
notice issued to Everett D. Richards (Mr. Richards)4 in the case
at docket No. 10765-00; (3) the accuracy-related penalty under
section 6662(a) for the taxable year 1997 that respondent deter-
mined in the notice issued to Mr. Richards in the case at docket
No. 10766-00; and (4) the addition to tax under section
6651(a)(1) for each of the taxable years 1996 and 1997 that
respondent determined in the notice issued to Richards Charitable
Trust5 in the case at docket No. 10767-00.
Background
The record establishes and/or the parties do not dispute the
following:
At the time the respective petitions in these cases were
filed, Richards Management Trust, Mr. Richards, and Richards
Charitable Trust listed in those petitions the same address in
Canton, Ohio.
Richards Management Trust filed Form 1041, U.S. Income Tax
4
In the case at docket No. 10765-00, respondent issued the
notice to Mr. Richards and Joy A. Richards, deceased. Although
the petition in that case was filed in the name of Mr. Richards
and Joy A. Richards, deceased, on Oct. 12, 2001, the Court
dismissed the case for lack of jurisdiction as to Joy A. Rich-
ards, deceased. For convenience, we shall refer hereinafter to
the notice issued with respect to the case at docket No. 10765-00
as the notice issued to Mr. Richards.
5
When referring in this Opinion to Richards Charitable
Trust, our use of the word “Trust” and any similar words are for
convenience only and is not intended to convey any meaning or
have any significance for Federal tax purposes.
- 4 -
Return for Estates and Trusts (trust return), for each of the
taxable years 1996 and 1997. In separate Schedules K-1, Benefi-
ciary’s Share of Income, Deductions, Credits, etc., that Richards
Management Trust included with each of its 1996 and 1997 trust
returns, Richards Management Trust showed Mr. Richards and
Richards Charitable Trust as beneficiaries and Mr. Richards as
the fiduciary of Richards Management Trust.
In each of its 1996 and 1997 trust returns, Richards Manage-
ment Trust deducted depreciation with respect to certain personal
assets of Mr. Richards, including Mr. Richards’ personal resi-
dence that he had transferred to Richards Management Trust at a
time that is not disclosed by the record. Richards Management
Trust also deducted other amounts in its 1996 and 1997 trust
returns with respect to personal expenses of Mr. Richards.
During respondent’s examination of Richards Management
Trust’s 1996 and 1997 trust returns and thereafter, no books,
records, or other information was provided to respondent estab-
lishing (1) the jurisdiction under the laws of which Richards
Management Trust was purportedly organized, (2) the person who is
authorized to act on behalf of Richards Management Trust, and
(3) that Richards Management Trust was at all relevant times a
trust cognizable for Federal tax purposes. Nor did Richards
Management Trust at any time provide any books, records, or other
information to respondent establishing the income reported and
- 5 -
the expense deductions claimed in Richards Management Trust’s
1996 and 1997 trust returns.
In the notice issued to Richards Management Trust, respon-
dent determined, inter alia, that Richards Management Trust is
liable for each of the taxable years 1996 and 1997 for the
accuracy-related penalty under section 6662(a).
Respondent has no record of Richards Charitable Trust’s
having filed with respondent Form 990-PF, Return of Private
Foundation (Form 990-PF), for either of the taxable years 1996
and 1997. Nor does respondent have a record of any other Federal
tax returns having been filed by Richards Charitable Trust for
those years.
In response to a request by respondent for information with
respect to Richards Charitable Trust, respondent was provided
with a copy of Form 990-PF for the taxable year 1997 that showed
Richards Charitable Trust as the organization to which such form
pertained. However, as discussed above, respondent has no record
that Richards Charitable Trust filed with respondent Form 990-PF
for the taxable year 1997.
During respondent’s examination of Richards Charitable
Trust’s taxable years 1996 and 1997 and thereafter, no books,
records, or other information was provided to respondent estab-
lishing (1) the jurisdiction under the laws of which Richards
Charitable Trust was purportedly organized, (2) the person who is
- 6 -
authorized to act on behalf of Richards Charitable Trust, and
(3) that Richards Charitable Trust was at all relevant times a
trust cognizable for Federal tax purposes. Nor did Richards
Charitable Trust at any time provide any books, records, or other
information to respondent establishing the income shown and the
expense deductions claimed in the copy of Form 990-PF for the
taxable year 1997 that was provided to respondent during respon-
dent’s examination of Richards Charitable Trust in response to
respondent’s request for information with respect to Richards
Charitable Trust and that showed Richards Charitable Trust as the
organization to which such form pertained.
In the notice issued to Richards Charitable Trust, respon-
dent determined, inter alia, that Richards Charitable Trust is
liable for each of the taxable years 1996 and 1997 for the
addition to tax under section 6651(a)(1).
Joy A. Richards and Mr. Richards jointly filed Form 1040,
U.S. Individual Income Tax Return (return), for the taxable year
1996, and Mr. Richards filed a return for 1997. During respon-
dent’s examination of those 1996 and 1997 returns and thereafter,
no books, records, or other information was provided to respon-
dent establishing the income reported and the expense deductions
claimed in those returns.
In the notice issued to Mr. Richards with respect to the
taxable year 1996, respondent determined, inter alia, that he is
- 7 -
liable for that taxable year for the accuracy-related penalty
under section 6662(a). In the notice issued to Mr. Richards with
respect to the taxable year 1997, respondent determined, inter
alia, that he is liable for that taxable year for the accuracy-
related penalty under section 6662(a).
James Binge (Mr. Binge) was the return preparer for each of
Richards Management Trust’s 1996 and 1997 trust returns, Mr.
Richards and Joy A. Richards’ 1996 return, and Mr. Richards’ 1997
return. Mr. Binge was also listed as the return preparer for
Richards Charitable Trust’s Form 990-PF for the taxable year 1997
that was provided to respondent during respondent’s examination
of Richards Charitable Trust but that respondent has no record of
having been filed with respondent. Respondent has identified Mr.
Binge as an individual involved with purported trusts used for
tax avoidance purposes.
On August 31, 2001, respondent filed separate motions to
compel answers to interrogatories and to compel production of
documents in each of the cases at docket Nos. 10765-00 and 10766-
00. On September 19, 2001, the Court granted each of those
motions. Mr. Richards did not answer respondent’s interrogato-
ries or produce the documents requested by respondent, as ordered
by the Court on September 19, 2001.
On October 2, 2001, Richards Management Trust, Mr. Richards,
and Richards Charitable Trust filed a joint motion to continue
- 8 -
the trial in these cases, which the Court denied on October 2,
2001.
On October 15, 2001, these cases were called from the
Court’s trial calendar at the Court’s trial session in Cleveland,
Ohio (Cleveland trial session). At that calendar call, there was
no appearance by or on behalf of Richards Management Trust, Mr.
Richards, and Richards Charitable Trust. At that time, respon-
dent orally moved to dismiss each of these cases for failure to
prosecute, and respondent requested, and the Court held, a trial
because, according to respondent, respondent has the burden of
production pursuant to section 7491(c) with respect to (1) the
accuracy-related penalties under section 6662(a) for 1996 and
1997 that respondent determined against Richards Management
Trust, (2) the respective accuracy-related penalties under
section 6662(a) for 1996 and 1997 that respondent determined
against Mr. Richards, and (3) the additions to tax under section
6651(a)(1) for 1996 and 1997 that respondent determined against
Richards Charitable Trust. At the trial in these cases on
October 15, 2001, there was no appearance by or on behalf of
Richards Management Trust, Mr. Richards, and Richards Charitable
Trust.
On November 13, 2001, respondent filed a written motion to
hold petitioner in default in each of the cases at docket Nos.
10764-00 and 10767-00 and a written motion to dismiss for lack of
- 9 -
prosecution and to impose sanctions under section 6673 in each of
the cases at docket Nos. 10765-00 and 10766-00.
On December 3, 2001, the Court sua sponte issued separate
Orders (December 3, 2001 Show Cause Orders) directing each party
in the case at docket No. 10764-00 in which Richards Asset
Management Trust is named as petitioner and in the case at docket
No. 10767-00 in which Richards Charitable Trust is named as
petitioner to
show cause in writing why the Court has jurisdiction
over this case, including the identity of any purported
fiduciary of petitioner and a detailed analysis of why
such purported fiduciary has the capacity to litigate
in the Court on behalf of petitioner.
On December 19, 2001, respondent filed separate written
responses to the December 3, 2001 Show Cause Orders in the cases
at docket Nos. 10764-00 and 10767-00 in which respondent con-
tended, inter alia, that Richards Management Trust and Richards
Charitable Trust, respectively,
11. * * * failed to establish that a trustee, if
authorized, acted on its behalf when the purported
petition was filed with the Court on October 16, 2000.
12. * * * failed to file a proper petition with
this Court in that the petition was not brought by and
with the full descriptive name of the fiduciary enti-
tled to institute a case on its behalf.
Respondent further argued in those separate responses to the
December 3, 2001 Show Cause Orders in the cases at docket Nos.
10764-00 and 10767-00 that
Since the petition in this case was not brought by a
- 10 -
party with proper capacity as required by the Tax Court
Rules of Practice and Procedure, the Court lacks juris-
diction * * *.
On December 20, 2001, Richards Management Trust and Richards
Charitable Trust filed separate written responses to the December
3, 2001 Show Cause Orders in the cases at docket Nos. 10764-00
and 10767-00 (Richards Management Trust’s response to the Decem-
ber 3, 2001 Show Cause Order and Richards Charitable Trust’s
response to the December 3, 2001 Show Cause Order, respectively),
each of which was signed by Terrence A. Bentivegna (Mr.
Bentivegna) who identified himself in each such response as
“Trustee”. Each such response asserted that “Petitioner does not
believe that this Court has jurisdiction.” In support of that
position, Richards Management Trust’s response to the December 3,
2001 Show Cause Order and Richards Charitable Trust’s response to
the December 3, 2001 Show Cause Order set forth statements and
contentions that the Court finds to be frivolous and/or ground-
less.6
6
Each such response to the December 3, 2001 Show Cause Order
stated in pertinent part:
1. Petitioner petitioned this Court after having
received false and misleading information from the
respondent and attorneys David Wise and his asso-
ciate Carol Jackson. The respondent has failed to
properly assess any taxes in accordance with their
required administrative procedures, and yet ad-
vised the petitioner that the only method of dis-
agreeing with the purported tax liability was to
petition this Court.
(continued...)
- 11 -
On January 16, 2002, Richards Management Trust filed a
response to respondent’s motion to hold petitioner in default in
the case at docket No. 10764-00, and Mr. Richards filed a re-
6
(...continued)
2. This Courts’ [sic] order states “. . . petitioner
purports to be a trust . . .” Petitioner is a
trust, and the respondent has never been able to
prove otherwise. Nor does the respondent have the
right or ability to set aside a contract.
* * * * * * *
4. Petitioner does not want this false tax claim to
be litigated in court, and has petitioned this
Court to have this case removed from the docket as
having been petitioned in error due to the errone-
ous instructions given by the respondent.
WHEREFORE it is prayed that:
1. This Court dismiss this case at petitioner’s re-
quest as the original petition was issued in error
due to false directions given to petitioner by
respondent. Petitioner believes that he has the
right to correct his mistake and withdraw the
original petition.
2. This Court and the respondent recognize the peti-
tioner as a Trust and cease attempting to set
aside a contract in direct opposition to the Con-
stitution of the United States of America.
3. This court sanction the respondent for using this
Court for illegal purposes. Respondent has no
legal tax claim as petitioner has noted to respon-
dent and this Court on numerous occasions. With-
out a legal claim, respondent fraudulently in-
structed petitioner to use this Court to legiti-
mize his illegal attempt to deprive petitioner of
his assets.
4. This Court instruct the respondent to cease, now
and forever, harassment of petitioner.
- 12 -
sponse to respondent’s motion to dismiss for lack of prosecution
and to impose sanctions under section 6673 in the case at docket
No. 10766-00.7 Each of those respective responses contained
arguments and contentions that the Court found in an Order dated
January 18, 2002 (January 18, 2002 Order) in the cases at docket
Nos. 10764-00 and 10766-00 to be frivolous and/or groundless. In
the January 18, 2002 Order, the Court reminded each petitioner
about section 6673(a)(1).8
7
On Feb. 19, 2002, Richards Charitable Trust filed a re-
sponse to respondent’s motion to hold petitioner in default in
the case at docket No. 10767-00. Although the Court did not
receive and have that response filed until Feb. 19, 2002, it
appears to have been mailed to the Court around Nov. 20, 2001.
Presumably because of the delays in mail delivery that the Court
has been experiencing since mid-October 2001, the Court’s receipt
of that response was delayed.
8
Sec. 6673(a)(1) states:
SEC. 6673. SANCTIONS AND COSTS AWARDED BY COURTS.
(a) Tax Court Proceedings.--
(1) Procedures instituted primarily for de-
lay, 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
(C) the taxpayer unreasonably failed to
pursue available administrative remedies,
the Tax Court, in its decision, may require the
(continued...)
- 13 -
On February 15, 2002, Richards Management Trust, Mr. Rich-
ards, and Richards Charitable Trust filed a joint brief in these
cases. That brief sets forth statements, contentions, and
arguments that the Court finds to be frivolous and/or ground-
less.9
8
(...continued)
taxpayer to pay to the United States a penalty not
in excess of $25,000.
9
Petitioners’ joint brief in these cases states in pertinent
part:
This is a proceeding to determine if the Internal
Revenue Service can ignore the strict limitations
imposed on it by Congress, via the Code of Federal
Regulations, and its’ [sic] own required administrative
procedures to extort assets from unsuspecting inhabit-
ants of one of the fifty (50) states of the United
States of America, to wit: Everett D. Richards, et al.
* * * * * * *
U.S.C. Title 26 Section 7602 is the I.R.S.’s authority
to examine books and records regarding “internal reve-
nue tax”--not income tax. This is corroborated by the
fact that the implementing regulation for Section 7602
is located in C.F.R. Title 27, parts 70, 170 and 296.
* * * * * * *
In accordance with C.F.R. 1.861-8(f) petitioners, et
al, do not receive any “income” or receipts from a
“taxable source”.
* * * * * * *
Petitioners, et al, have never been legally assessed
any tax as required by U.S.C. Title 26 Section 6203 and
C.F.R. regulation 301.6203-1 and corroborated in Bull
v. U.S., 295 US 247 * * *.
Petitioners, et al, determinations are based on Supreme
Court decisions, Treasury Orders, U.S.C. Title 26
(continued...)
- 14 -
Discussion
Richards Management Trust and Richards Charitable Trust
On December 3, 2001, the Court sua sponte issued the respec-
tive December 3, 2001 Show Cause Orders regarding the Court’s
9
(...continued)
codes, and implementing (or lack of implementing)
C.F.R. Title 26 regulations and various other refer-
ences, and as such cannot be considered frivolous or
“. . . a hodgepodge of unsupported assertions, irrele-
vant platitudes and legalistic gibberish.”
* * * * * * *
Everett D. Richards, et al, petitioners in the cases at
Docket Nos. 10764-00, 10765-00, 10766-00 and 10767-00
are not liable for any income tax, penalties and/or
interest pursuant to any U.S.C. Title 26 code sections.
Petitioners, et al, have at all times rebutted and
refuted respondents prima facie allegations; thus, the
burden of proof is on the respondent.
Treasury Order 120-01 dated June 6, 1972 establishes
the Bureau of Alcohol, Tobacco and Firearms and trans-
fers U.S.C. Title 26 Section 61 through 80, inclusive,
to U.S.C. Title 27 and the Bureau of Alcohol, Tobacco
and Firearms. Petitioners, et al, are not now and
never have been involved in the manufacture, distribu-
tion or sale of alcohol, tobacco or firearms, or been
involved in any other excise taxable activity. This is
corroborated by the Code of Federal Regulations Table
of Authority and Rules.
A review of the Department of the Treasury organization
chart reveals that the Internal Revenue Service is not
administered by any of the organizations with enforce-
ment authority. This is corroborated by the fact that
there are no Title 26 implementing regulation under
Title 26 C.F.R.
The established trusts bear no burden of proof as their
records are not subject to review. Boyd vs. U.S. 116
U.S. 618; Silver Thorne Lumber Co. vs U.S. 1251 US.
385.
- 15 -
jurisdiction over the cases at docket Nos. 10764-00 and 10767-00.
Rule 60 provides in pertinent part:
(a) Petitioner: (1) Deficiency or Liability
Actions: A case shall be brought by and in the name of
the person against whom the Commissioner determined the
deficiency (in the case of a notice of deficiency)
* * * or by and with the full descriptive name of the
fiduciary entitled to institute a case on behalf of
such person. See Rule 23(a)(1). A case timely brought
shall not be dismissed on the ground that it is not
properly brought on behalf of a party until a reason-
able time has been allowed after objection for ratifi-
cation by such party of the bringing of the case; and
such ratification shall have the same effect as if the
case had been properly brought by such party. * * *
* * * * * * *
(c) Capacity: * * * The capacity of a fiduciary
or other representative to litigate in the Court shall
be determined in accordance with the law of the juris-
diction from which such person’s authority is derived.
The record does not establish where Richards Management
Trust and Richards Charitable Trust were organized. The respec-
tive petitions in the cases at docket Nos. 10764-00 and 10767-00
listed an address for Richards Management Trust and Richards
Charitable Trust in Canton, Ohio,10 which is also the service
address used by the Court in those cases. Assuming arguendo that
Richards Management Trust and Richards Charitable Trust were
trusts organized under the laws of the State of Ohio, the admin-
istration of each of which is subject to the laws of that State,
10
The Ohio address listed in the respective petitions in the
cases at docket Nos. 10764-00 and 10767-00 is the same address
listed by Mr. Richards in the respective cases at docket Nos.
10765-00 and 10766-00.
- 16 -
under Ohio law, see Rule 60(c), a trustee generally is the proper
party authorized to act on behalf of a trust. Firestone v.
Galbreath, 976 F.2d 279, 284 (6th Cir. 1992); Saxton v.
Seiberling, 48 Ohio St. 554, 29 N.E. 179 (1891); see Ohio R. Civ.
P. 17(A).11
In the cases at docket Nos. 10764-00 and 10767-00, Richards
Management Trust and Richards Charitable Trust, respectively,
have the burden of proving that this Court has jurisdiction, see
Fehrs v. Commissioner, 65 T.C. 346, 348 (1975); Natl. Comm. to
Secure Justice in the Rosenberg Case v. Commissioner, 27 T.C.
837, 839 (1957), by establishing affirmatively all facts giving
rise to our jurisdiction, see Wheeler’s Peachtree Pharmacy, Inc.
v. Commissioner, 35 T.C. 177, 180 (1960); Consol. Cos. v. Commis-
sioner, 15 B.T.A. 645, 651 (1929). In order to meet that burden,
Richards Management Trust in the case at docket No. 10764-00 and
Richards Charitable Trust in the case at docket No. 10767-00 must
11
Ohio R. Civ. P. 17(A) provides in pertinent part:
RULE 17. Parties plaintiff and defendant; capacity
(A) Real party in interest. Every action shall be
prosecuted in the name of the real party in interest.
An executor, administrator, guardian, bailee, trustee
of an express trust, a party with whom or in whose name
a contract has been made for the benefit of another, or
a party authorized by statute may sue in his name as
such representative without joining with him the party
for whose benefit the action is brought. * * * [Empha-
sis added.]
- 17 -
provide evidence establishing who has the authority to act on its
behalf in each such proceeding. See Natl. Comm. to Secure
Justice in the Rosenberg Case v. Commissioner, supra at 839-840;
Coca-Cola Bottling Co. v. Commissioner, 22 B.T.A. 686, 700
(1931).
On the instant record, we find that Richards Management
Trust in the case at docket No. 10764-00 and Richards Charitable
Trust in the case at docket No. 10767-00 have failed to establish
who has the authority to act on their behalf in those respective
proceedings. We further find on that record that neither of the
cases at docket Nos. 10764-00 and 10767-00 was brought by and
with the full descriptive name of the fiduciary entitled to
institute each such case on behalf of Richards Management Trust
or Richards Charitable Trust, as the case may be, as required by
Rule 60(a)(1). On the record before us, we conclude that we do
not have jurisdiction over the cases at docket Nos. 10764-00 and
10767-00. Accordingly, we shall dismiss those cases for lack of
jurisdiction.12
Mr. Richards
Neither Mr. Richards nor any authorized representative of
Mr. Richards appeared at the Court’s Cleveland trial session on
12
Because we shall dismiss the cases at docket Nos. 10764-00
and 10767-00 for lack of jurisdiction, we shall deny respondent’s
motion in the case at docket No. 10764-00 and respondent’s motion
in the case at docket No. 10767-00.
- 18 -
October 15, 2001, at the call of these consolidated cases from
the Court’s trial calendar.
At the trial held by the Court in the cases at docket Nos.
10765-00 and 10766-00, neither Mr. Richards nor any authorized
representative of Mr. Richards appeared.
The written response by Mr. Richards to respondent’s motion
to dismiss for lack of prosecution and to impose sanctions under
section 6673 in the case at docket No. 10766-00 does not contain
any valid reason why that case should not be dismissed for lack
of prosecution.13 That response contained contentions and argu-
ments that the Court found in the Court’s January 18, 2002 Order
to be frivolous and/or groundless. The joint brief filed by Mr.
Richards (and Richards Management Trust and Richards Charitable
Trust) also contains statements, contentions, and arguments that
the Court finds to be frivolous and/or groundless and do not set
forth any valid reason why the cases at docket Nos. 10765-00 and
10766-00 should not be dismissed for lack of prosecution.
Section 7491(c) provides in pertinent part:
SEC. 7491. BURDEN OF PROOF.
(c) Penalties.–-Notwithstanding any other provi-
sion of this title, the Secretary shall have the burden
of production in any court proceeding with respect to
the liability of any individual for any penalty * * *.
13
Mr. Richards did not file a response to respondent’s
motion to dismiss for lack of prosecution and to impose sanctions
under sec. 6673 in the case at docket No. 10765-00.
- 19 -
Section 6662(a) imposes an accuracy-related penalty equal to
20 percent of the underpayment of tax resulting from, inter alia,
negligence or disregard of rules or regulations, sec. 6662(b)(1),
or a substantial understatement of income tax, sec. 6662(b)(2).
For purposes of section 6662(a), an understatement is equal to
the excess of the amount of tax required to be shown in the tax
return over the amount of tax shown in the tax return, sec.
6662(d)(2)(A), and is substantial in the case of an individual if
it exceeds the greater of 10 percent of the tax required to be
shown in the return or $5,000, sec. 6662(d)(1)(A). For purposes
of section 6662(a), the term “negligence” includes any failure to
make a reasonable attempt to comply with the Code, and the term
“disregard” includes any careless, reckless, or intentional
disregard. Sec. 6662(c). Negligence has also been defined as a
lack of due care or failure to do what a reasonable person would
do under the circumstances. Leuhsler v. Commissioner, 963 F.2d
907, 910 (6th Cir. 1992), affg. T.C. Memo. 1991-179; Antonides v.
Commissioner, 91 T.C. 686, 699 (1988), affd. 893 F.2d 656 (4th
Cir. 1990).
The accuracy-related penalty under section 6662(a) does not
apply to any portion of an underpayment if it is shown that there
was reasonable cause for, and that the taxpayer acted in good
faith with respect to, such portion. Sec. 6664(c)(1). The
determination of whether the taxpayer acted with reasonable cause
- 20 -
and in good faith depends on the pertinent facts and circum-
stances, including the taxpayer’s efforts to assess his or her
proper tax liability, the knowledge and experience of the tax-
payer, and the reliance on the advice of a professional, such as
an accountant. Sec. 1.6664-4(b)(1), Income Tax Regs. Reliance
on the advice of a professional, such as an accountant, does not
necessarily demonstrate reasonable cause and good faith unless,
under all the circumstances, such reliance was reasonable and the
taxpayer acted in good faith. Id. In the case of claimed
reliance on the accountant who prepared the taxpayer’s tax
return, the taxpayer must establish that correct information was
provided to the accountant and that the item incorrectly omitted,
claimed, or reported in the return was the result of the accoun-
tant’s error. Ma-Tran Corp. v. Commissioner, 70 T.C. 158, 173
(1978).
On the record before us, we find that respondent has satis-
fied the burden of production that respondent maintains respon-
dent has with respect to the respective accuracy-related penal-
ties under section 6662(a) that respondent determined to impose
on Mr. Richards for the taxable years 1996 and 1997.14
Based on our examination of the entire record before us, we
14
We are not deciding in the cases at docket Nos. 10765-00
and 10766-00 whether the Commissioner of Internal Revenue has the
burden of production in cases subject to sec. 7491(c) when a
taxpayer fails to appear for trial.
- 21 -
shall grant respondent’s motion in the case at docket No. 10765-
00 and respondent’s motion in the case at docket No. 10766-00 in
that we shall dismiss each of those cases for failure by peti-
tioner in each such case to prosecute such case, and we shall
enter a decision in each of those cases sustaining the determina-
tions that respondent made in the notice to which each such case
pertains but in the reduced amounts which respondent concedes are
appropriate in order to reflect the duplication of certain income
determinations in the respective notices issued to Mr. Rich-
ards.15
In respondent’s motions in the cases at docket Nos. 10765-00
and 10766-00, respondent also asks the Court to impose a penalty
15
As explained in respondent’s respective motions in the
cases at docket Nos. 10765-00 and 10766-00, respondent attributed
the income reported for the taxable year 1996 by Richards Manage-
ment Trust 100 percent to Joy A. Richards, deceased, Mr. Rich-
ards, and Richards Charitable Trust, and respondent attributed
the income reported for the taxable year 1997 by Richards Manage-
ment Trust 100 percent to Mr. Richards and Richards Charitable
Trust. The amounts of such income attributed to Richards Chari-
table Trust for 1996 were reattributed for that year to Mr.
Richards, and the amounts of such income attributed to Richards
Charitable Trust for 1997 were reattributed to Mr. Richards,
which resulted in a duplication of said amounts of income in the
respective notices issued to Mr. Richards with respect to the
taxable year 1996 and to Mr. Richards with respect to the taxable
year 1997. As set forth in respondent’s respective motions in
the cases at docket Nos. 10765-00 and 10766-00 and in the respec-
tive exhibits attached to those motions, the revised deficiencies
for Mr. Richards for the taxable years 1996 and 1997 are $33,451
and $75,934, respectively. Consistently, the revised accuracy-
related penalties under sec. 6662(a) imposed on Mr. Richards for
the taxable years 1996 and 1997 are $6,690.20 and $15,186.80,
respectively.
- 22 -
under section 6673(a)(1) on Mr. Richards in each of those cases.
As grounds therefor, respondent contends that Mr. Richards
(1) instituted proceedings in the Court primarily for delay,
(2) advanced frivolous and groundless positions in such proceed-
ings, and (3) unreasonably failed to pursue administrative
remedies.
On the record before us, we find that Mr. Richards insti-
tuted the proceedings in the cases at docket Nos. 10765-00 and
10766-00 primarily for delay. We also find on that record that
Mr. Richards’ position in the cases at docket Nos. 10765-00 and
10766-00 is frivolous and/or groundless. On the record before
us, we shall impose a penalty in those cases on Mr. Richards
pursuant to section 6673(a)(1) in the amounts of $8,000 and
$18,000, respectively.
To reflect the foregoing,
An appropriate order of dis-
missal for lack of jurisdiction and
denying respondent’s motion will be
entered in each of the cases at
docket Nos. 10764-00 and 10767-00,
and an appropriate order granting
respondent’s motion and decision
will be entered in each of the
cases at docket Nos. 10765-00 and
- 23 -
10766-00 sustaining respondent’s
determinations in reduced amounts
and imposing a penalty under sec-
tion 6673(a)(1) in each of those
two cases.