T.C. Memo. 2002-146
UNITED STATES TAX COURT
LEIGH GILL, f.k.a. TAMORY L. GILL, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8401-00. Filed June 11, 2002.
Leigh Gill, pro se.
Stephen P. Baker, for respondent.
MEMORANDUM OPINION
VASQUEZ, Judge: This case is before the Court on
respondent’s motion to dismiss for lack of prosecution pursuant
to Rule 123(b)1 and motion for sanctions under section
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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6673(a)(1). By notice of deficiency, respondent determined a
deficiency of $7,149 and an accuracy-related penalty of $813 with
respect to petitioner’s 1997 Federal income tax.
Background
In the notice of deficiency, respondent determined, on the
basis of income reported by third-party payers, that petitioner
failed to report wage income of $32,939 from Empire Hospital,
nonemployee compensation of $7,532 from Douglas GR, and interest
income of $29 from United Health for 1997. Respondent also
determined self-employment tax adjustments and an accuracy-
related penalty.
On August 21, 2000, petitioner invoked the jurisdiction of
this Court by timely filing an imperfect petition.
On September 1, 2000, respondent filed a motion to dismiss
for failure to state a claim and to impose sanctions pursuant to
section 6673 (respondent’s first motion).
On September 5, 2000, the Court ordered petitioner to file
an amended petition in order to comply with the Rules of the
Court as to the form and content of a proper petition and
calendared respondent’s first motion for a hearing on October 4,
2000, in Washington, D.C.
On October 2, 2000, petitioner filed an amended petition
virtually identical to the original petition. At the time she
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filed the amended petition, petitioner resided in Vancouver,
British Columbia, Canada.
In the petitions, petitioner averred, among other things,
that “The Self-assessment form (1040) on file for the year 1997
for Account #XXX-XX-XXXX was submitted in error by Petitioner,”
“The amount of compensation received by this Petitioner was not
‘gross income’ within the meaning of the Internal Revenue Code,”
“this Petitioner received compensation for her labors errantly
listed on her employer’s 1099, which has never been defined as
income in the IRC,” “The lawful-authority of assessing an
ACCURACY RELATED PENALTY is in question,” “Petitioner’s amount of
self-assessed taxes were not from gross income as defined within
the meaning of the IRC,” and “Petitioner disagrees with the
Authority of the IRS and the lawfulness of filing requirements.”
On October 4, 2000, this case was called from the calendar
for the motions session of the Court at Washington, D.C.
Petitioner failed to appear at the hearing. The Court noted that
we had received “a slew” of documents from petitioner. These
documents, however, contained various defects and were returned
to petitioner unfiled. The Court received into the record a Form
1040, U.S. Individual Income Tax Return, that respondent had
accepted as petitioner’s Federal income tax return for 1997. At
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this time, via a written order, the Court denied respondent’s
first motion and advised petitioner of the provisions of section
6673.
On her 1997 tax return, petitioner reported zero wages, zero
interest, zero total income, zero adjusted gross income, zero
total tax, and claimed a $4,2902 refund based on Federal income
tax withholdings. Petitioner attached to her Form 1040 a three-
page letter reciting tax protester type arguments, a Form W-2,
Wage and Tax Statement, from Empire Hospital Service listing
$33,540 in wages, and a Form W-2 from Group Health Northwest
listing $4,312 in wages.3
In the answer, respondent denied the assignments of error
alleged by petitioner. Additionally, respondent affirmatively
alleged: (1) Petitioner disclosed on an attachment to her 1997
return, but did not report as income, wages of $33,540 from
Empire Hospital Service and $4,312 from Group Health Northwest;
(2) during 1997 petitioner received taxable income of $844 from
TIAA, $2,910 from CREF, $29 from United Health, and $7,532 from
Douglas GR; (3) petitioner’s correct taxable income for 1997 was
$41,234; and (4) the correct amount of the deficiency for 1997
was $8,339 instead of $7,149 (i.e., respondent increased the
2
For convenience, figures are rounded to the nearest
dollar.
3
The Form 1040 and Forms W-2 listed petitioner’s address
as 10801 E. Boone Ave., Spokane, WA 99206.
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deficiency by $1,190).4 Respondent attached the notice of
deficiency and petitioner’s 1997 return, which included the
three-page letter from petitioner and the two Forms W-2, to the
answer.
By notice dated January 18, 2001, the Court set this case
for trial at the Court’s Anchorage, Alaska, session beginning
June 18, 2001. This notice specifically stated: “YOUR FAILURE
TO APPEAR MAY RESULT IN DISMISSAL OF THE CASE AND ENTRY OF
DECISION AGAINST YOU.”
On February 12, 2001, respondent filed a motion for entry of
order that undenied allegations in answer be deemed admitted
(respondent’s second motion). That same day, the Court ordered
petitioner to file a reply, as required by Rule 37(a) and (b), on
or before February 26, 2001. The Court advised petitioner that
if she did not file a reply, as directed, the Court would grant
respondent’s second motion and would deem admitted the
affirmative allegations in the answer.
On March 13, 2001, after having received no response from
petitioner, the Court granted respondent’s second motion and
ordered that the undenied allegations set forth in the answer be
deemed admitted.
By notice dated June 7, 2001, the Court notified the parties
4
Respondent did not allege an increase in the accuracy-
related penalty.
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of a change of courtroom and address for trial at the Court’s
Anchorage, Alaska, session beginning June 18, 2001.
On June 18, 2001, this case was called from the calendar for
the trial session of the Court at Anchorage, Alaska. Petitioner
failed to appear at the calendar call. At that time, respondent
orally moved to dismiss for lack of prosecution. The Court set
this case for recall on June 25, 2001.
On June 20, 2001, the Court received and filed a motion to
continue from petitioner.5
On June 25, 2001, this case was recalled from the calendar
for the trial session of the Court at Anchorage, Alaska.
Petitioner again failed to appear. At this time, respondent
filed a written motion to dismiss for lack of prosecution (motion
to dismiss) and a motion for sanctions under section 6673(a)(1)
(motion for sanctions). Attached to the motion to dismiss is a
Form 1099 for 1997 reporting $7,532 in nonemployee compensation
to petitioner. Attached to the motion for sanctions are: (1)
Several documents reciting tax protester type arguments submitted
by petitioner to the Internal Revenue Service (IRS), (2) a March
26, 2001, letter from respondent inviting petitioner to a meeting
to discuss the case pursuant to Branerton Corp. v. Commissioner,
61 T.C. 691 (1974), and (3) a June 8, 2001, letter from
respondent reminding petitioner of the date and time of the
5
The motion to continue was dated June 13, 2001.
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calendar call for the Alaska trial session and enclosing a
proposed stipulation of facts.
On this same date, via a written order, the Court denied
petitioner’s motion to continue, took respondent’s motion to
dismiss and motion for sanctions under advisement, and ordered
petitioner to reply to respondent’s aforementioned motions on or
before July 25, 2001. The Court has not received any reply from
petitioner.
Discussion
I. Rule 123(b). Dismissal
The Court may dismiss a case and enter a decision against a
taxpayer for his failure properly to prosecute or to comply with
the Rules of this Court. Rule 123(b). Rule 123(b) generally
applies in situations where the taxpayer bears the burden of
proof. Respondent, in the motion to dismiss, represented that he
has the burden of production regarding the penalty and the burden
of proof only with respect to the request for an increased
deficiency. Sec. 7491(a), (c); rule 142(a).
A. The Deficiencies
As a general rule, the taxpayer bears the burden of proving
the Commissioner's deficiency determinations incorrect. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Section
7491(a), however, provides that if a taxpayer introduces credible
evidence and meets certain other prerequisites, the Commissioner
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shall bear the burden of proof with respect to factual issues
relating to the liability of the taxpayer for a tax imposed under
subtitle A or B of the Code.
Petitioner failed to appear and did not introduce any
evidence. Therefore, we conclude that the burden of proof
regarding the deficiency determined in the statutory notice of
deficiency is not placed on respondent pursuant to section
7491(a). Accordingly, we sustain respondent’s deficiency
determination contained in the statutory notice of deficiency.
Pursuant to Rule 142(a), respondent bears the burden of
proof with respect to the request for an increased deficiency.
Respondent submitted, and the Court received as evidence, Forms
W-2 and 1099 issued to petitioner. Additionally, as noted supra,
petitioner is deemed to have admitted certain facts supporting an
increased deficiency affirmatively alleged by respondent in the
answer. On the basis of the evidence, we sustain the increased
deficiency.
B. Section 6662(a)
Pursuant to section 6662(a), a taxpayer may be liable for a
penalty of 20 percent on the portion of an underpayment of tax
due to a substantial understatement of income tax. Sec. 6662(b).
An “understatement” is the difference between the amount of tax
required to be shown on the return and the amount of tax actually
shown on the return. Sec. 6662(d)(2)(A). A “substantial
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understatement” exists if the understatement exceeds the greater
of (1) 10 percent of the tax required to be shown on the return
for a taxable year, or (2) $5,000. Sec. 6662(d)(1). The
understatement is reduced to the extent that the taxpayer (1) has
adequately disclosed facts affecting the tax treatment of an item
and there is a reasonable basis for such treatment, or (2) has
substantial authority for the tax treatment of an item. Sec.
6662(d)(2)(B).
Section 6664(c)(1) provides that no accuracy-related penalty
shall be imposed with respect to any portion of an underpayment
if it is shown that there was reasonable cause for such portion
and that the taxpayer acted in good faith with respect to such
portion. The decision as to whether the taxpayer acted with
reasonable cause and in good faith depends upon all the pertinent
facts and circumstances. Sec. 1.6664-4(b)(1), Income Tax Regs.
Section 7491(c) provides that the Commissioner shall bear
the burden of production with respect to the liability of any
individual for penalties. “The Commissioner’s burden of
production under section 7491(c) is to produce evidence that it
is appropriate to impose the relevant penalty”.6 Swain v.
Commissioner, 118 T.C. ___, ___ (2002) (slip op. at 9); see also
Higbee v. Commissioner, 116 T.C. 438, 446 (2001). If a taxpayer
6
We do not decide herein whether respondent would have met
his burden of production if he had not produced any evidence when
the taxpayer failed to appear for trial.
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files a petition alleging some error in the determination of the
penalty, the taxpayer’s challenge generally will succeed unless
the Commissioner produces evidence that the penalty is
appropriate. Swain v. Commissioner, supra at ___ (slip op. at
12). The Commissioner, however, does not have the obligation to
introduce evidence regarding reasonable cause or substantial
authority. Higbee v. Commissioner, supra at 446-447.
Respondent submitted, and the Court received as evidence,
petitioner’s 1997 tax return, Forms W-2 and 1099 issued to
petitioner, and several documents petitioner submitted to the
IRS. Furthermore, as noted supra, petitioner is deemed to have
admitted certain facts. On the basis of the evidence, we find
that petitioner had a substantial understatement of income tax.7
Petitioner did not present any evidence indicating reasonable
cause or substantial authority. Id. Accordingly, on this issue,
we sustain respondent’s determination.
C. Conclusion
We have sustained all of respondent's determinations.
Therefore, we shall enter a decision for respondent.
III. Section 6673(a)(1)
Section 6673(a) authorizes this Court to penalize up to
7
Petitioner was required to show $8,339 of tax on her 1997
return; however, she reported zero. Petitioner’s understatement
exceeds both 10 percent of the tax required to be shown on her
return ($834) and $5,000.
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$25,000 a taxpayer who institutes or maintains a proceeding
primarily for delay or pursues a position in this Court which is
frivolous or groundless. Petitioner’s conduct in this case has
convinced us that she maintained this proceeding primarily for
delay. Petitioner’s actions have resulted in a waste of limited
judicial and administrative resources that could have been
devoted to resolving bona fide claims of other taxpayers. Cook
v. Spillman, 806 F.2d 948 (9th Cir. 1986). Petitioner’s
insistence on making frivolous protester type arguments indicates
an unwillingness to respect the tax laws of the United States.
Accordingly, we shall grant respondent’s motion for sanctions and
require petitioner to pay a penalty to the United States pursuant
to section 6673 in the amount of $7,500.
To reflect the foregoing,
An appropriate order and
order of dismissal and
decision will be entered.