T.C. Memo. 2005-24
UNITED STATES TAX COURT
MEREDYTH E. KILGORE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7523-03L. Filed February 15, 2005.
Meredyth E. Kilgore, pro se.
Cynthia A. Berry, for respondent.
MEMORANDUM OPINION
WELLS, Judge: This matter is before the Court on
respondent’s motion for summary judgment, filed pursuant to Rule
121, and motion to impose a penalty under section 6673. All
section references are to the Internal Revenue Code, as amended,
and all Rule references are to the Tax Court Rules of Practice
and Procedure.
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Background
At the time of the filing of the petition, petitioner
resided in Millis, Massachusetts.
On October 4, 1999, respondent sent petitioner a Proposed
Individual Income Tax Assessment, notifying petitioner that
respondent had not received from petitioner a 1996 Form 1040,
U.S. Individual Income Tax Return (tax return), and advising
petitioner to file a tax return in order to receive credit for
any available exemptions, deductions, or credits.
Petitioner subsequently submitted a tax return, together
with a 1996 Form W-2, Wage and Tax Statement (W-2). The W-2
reported $853.86 in wages from the Town of Millis and $16.86 of
Federal income tax withheld. On the tax return, petitioner
entered zeros on all lines requesting information regarding
petitioner’s income and requested a refund of $16.86. Petitioner
attached to the tax return a document making the following
assertions: (1) No section of the Internal Revenue Code
establishes an income tax liability; (2) no section of the
Internal Revenue Code requires that income taxes have to be paid
on the basis of a return; (3) the “Privacy Act Notice” contained
in the Form 1040 booklet informed petitioner that she was not
required to file an income tax return; (4) courts have held that
a Form 1040 with zeros in all boxes for income qualified as a tax
return; (5) petitioner’s 1996 income tax return constitutes a
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claim for refund pursuant to section 6402; (6) petitioner had
zero income in 1996; (7) no statute requires petitioner to make a
self-assessment; (8) petitioner’s return is not frivolous and is
not designed to delay or impede the administration of Federal
income tax laws; (9) no Internal Revenue Service (IRS) employee
has any delegated authority to determine if a return is
“frivolous” or to impose a penalty; (10) section 6702 is benign
because there is no related legislative regulation implementing
the statute; (11) the IRS has no legal basis to hold the $16.86
withheld for petitioner’s 1996 income tax because no assessment
was made against her; (12) sections 31(a)(1) and 1462 provide
petitioner with a credit against income withheld under section
3402; and (13) no statute allows the IRS to prepare a return for
petitioner because petitioner has already filed a return.
In a letter dated April 24, 2000, respondent notified
petitioner that respondent considered the tax return to be
frivolous and her position to lack any basis in law. Respondent
encouraged petitioner to seek advice from competent tax counsel,
informed petitioner of the penalty pursuant to section 6702 for
the filing of a frivolous tax return, and offered petitioner the
opportunity to avoid the frivolous return penalty by submitting a
correct return. Petitioner responded that she disagreed with
respondent’s findings.
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Respondent prepared a substitute tax return1 for petitioner
based on the information reported to respondent by third parties.
The substitute tax return reported adjusted gross income of
$122,429, which included $853 in wages, $116,188 from the sale of
stocks and bonds, $5,129 in dividends, and $259 in interest.
On July 5, 2000, respondent issued a statutory notice of
deficiency for 1996 to petitioner’s last known address.
Respondent determined a deficiency of $31,089, a section
6651(a)(1) failure-to-file penalty of $6,991.42, a section
6651(a)(2) failure-to-pay penalty of $7,768.25, a section 6654(a)
estimated tax penalty of $1,653.79. Petitioner received the
notice of deficiency but did not petition the Tax Court for
redetermination, and respondent assessed a total tax liability of
$60,126.33.2
Respondent subsequently issued a Final Notice Notice of
Intent to Levy and Notice of Your Right to a Hearing. In the
notice, respondent informed petitioner of respondent’s intent to
levy and of petitioner’s right to a hearing before respondent’s
Appeals Office pursuant to section 6330. In response, petitioner
1
We are not called on to decide whether the return prepared
by respondent met the requirements of a substitute return under
sec. 6020(b). See Swanson v. Commissioner, 121 T.C. 111, 112 n.1
(2003).
2
The assessed tax liability included a deficiency of
$31,089, a sec. 6651(a)(1) penalty of $6,991.42, a sec.
6651(a)(2) penalty of $6,836.06, a sec. 6654(a) penalty of
$1,653.79, and $13,572.06 of interest.
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requested a hearing and again disputed that sections of the “IRS
Code” related to the payment of tax applied to her.
On March 13, 2003, petitioner and petitioner’s witness Scott
Cousland attended a section 6330 hearing with Settlement Officer
Henry Lawler, Settlement Officer Maria Russo, and Appeals Team
Manager Ed Arcaro. At the hearing, respondent informed
petitioner that the Appeals Office would not consider arguments
based on constitutional, moral, religious, political, or similar
grounds. Petitioner requested to be shown where it says that she
has to pay taxes, and respondent provided the applicable Code
sections. Petitioner questioned how her tax liability had risen
to more than $6 million, as reported on the Form 4340,
Certification of Assessments, Payments, and Other Specified
Matters (Form 4340), dated January 27, 2003. Respondent
acknowledged that the Form 4340 was in error and informed
petitioner that corrected transcripts would be sent to her.3
Petitioner declined to discuss collection alternatives such as an
offer-in-compromise or an installment agreement. On March 24,
2003, respondent issued a corrected Form 4340 to petitioner
showing an assessment of $60,126.33.
On April 16, 2003, respondent issued a Notice of
Determination Concerning Collection Actions(s) Under Section 6320
3
The transcript stated that the balance due was
$6,012,633.33. The actual assessed amount was $60,126.33.
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and/or 6330, determining that the proposed levy action was
appropriate. Petitioner timely filed a Petition for Lien or Levy
Action with this Court. The petition set forth the following
allegations:
1) Paying income tax No legal law statute/code
available for findings
2) frivolous filings & penalties not valid
3) Assessment cannot be made by IRS/self
assessment only
4) IRS Tax hearing determination/6320/6330 –-
5) Numerous issues pertaining to invalid
procedures/findings based on NO LAW to collect taxes.
Unconstitutional.
On September 25, 2003, respondent filed a Motion to Dismiss
for Lack of Jurisdiction and to Strike as to I.R.C. § 6702
Penalty for Tax Year 1996 on the ground that this Court lacks
jurisdiction over the section 6702 penalty. Petitioner did not
object, and we granted respondent’s motion to dismiss with
respect to any portion of the case purporting to be an appeal of
the section 6702 penalty and ordered that references to the
section 6702 penalty in the petition be stricken.
Respondent filed a Motion for Summary Judgment on December
17, 2004.
Discussion
The purpose of summary judgment is to expedite litigation
and avoid the expense of unnecessary trials. Fla. Peach Corp. v.
Commissioner, 90 T.C. 678, 681 (1988). A motion for summary
judgment may be granted where there is no dispute as to a
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material fact and a decision may be rendered as a matter of law.
See Rule 121(a) and (b).4 The moving party bears the burden of
proving that there is no genuine issue of material fact, and
factual inferences are viewed in a light most favorable to the
nonmoving party. Craig v. Commissioner, 119 T.C. 252, 260
(2002); Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985);
Jacklin v. Commissioner, 79 T.C. 340, 344 (1982). The party
opposing summary judgment must set forth specific facts which
show that a question of genuine material fact exists and may not
rely merely on allegations or denials in the pleadings. See
Grant Creek Water Works, Ltd. v. Commissioner, 91 T.C. 322, 325
(1988); Casanova Co. v. Commissioner, 87 T.C. 214, 217 (1986).
Section 6330 provides that no levy may be made on any
property or right to property of a person unless the Secretary
first notifies the person in writing of the right to a hearing
before the IRS Office of Appeals (Appeals Office).5 Section
4
Rule 121(b) provides:
A decision shall thereafter be rendered if the
pleadings, answers to interrogatories, depositions,
admissions, and any other acceptable materials,
together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that a
decision may be rendered as a matter of law.
5
SEC. 6330 NOTICE AND OPPORTUNITY FOR HEARING BEFORE LEVY.
(a) Requirement of Notice Before Levy.--
(1) In general.--No levy may be made on any
(continued...)
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6330(c)(1) provides that the Appeals officer must verify at the
hearing that applicable laws and administrative procedures have
been followed.6 Sec. 6330(c)(1). The Appeals officer may rely
on a Form 4340 for purposes of complying with section 6330(c)(1).
Nestor v. Commissioner, 118 T.C. 162, 166 (2002). At the
hearing, the person may raise any relevant issue relating to the
unpaid tax or the proposed levy, including appropriate spousal
defenses, challenges to the appropriateness of collection
actions, and collection alternatives. Sec. 6330(c)(2)(A). The
person may challenge the existence or amount of the underlying
tax liability, however, only if the person did not receive any
statutory notice of deficiency for such tax liability or did not
5
(...continued)
property or right to property of any person unless the
Secretary has notified such person in writing of their right
to a hearing under this section before such levy is made.
* * *
* * * * * * *
(b) Right to Fair Hearing.--
(1) In general.--If the person requests a hearing
* * *, such hearing shall be held by the Internal Revenue
Service Office of Appeals.
6
Sec. 6330(c)(1) provides:
Requirement of investigation.--The appeals officer shall at
the hearing obtain verification from the Secretary that the
requirements of any applicable law or administrative
procedure have been met.
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otherwise have an opportunity to dispute such tax liability.
Sec. 6330(c)(2)(B).7
In the instant case, the undisputed facts set forth in
respondent’s motion, declarations in support of the motion, and
attached exhibits establish that the Appeals Office properly
verified that all applicable laws and administrative procedures
were followed. Settlement Officer Lawler had had no prior
involvement with respect to the unpaid tax liabilities before the
section 6330 hearing. He verified that proper assessments were
made and that requisite notices had been sent to petitioner.
Settlement Officer Lawler informed petitioner that a corrected
Form 4340 would be issued, and respondent mailed the corrected
transcript to petitioner in a timely fashion.
Because petitioner had received a statutory notice of
deficiency, petitioner was precluded from challenging the
existence or amount of the underlying tax liability at the
hearing. Petitioner failed at the hearing and in her petition to
raise a spousal defense, make a valid challenge to the
appropriateness of respondent’s intended collection action, or
7
Sec. 6330(c)(2)(B) provides:
(b) Underlying liability.--The person may also raise at the
hearing challenges to the existence or amount of the underlying
tax liability for any tax period if the person did not receive
any statutory notice of deficiency for such tax liability or did
not otherwise have an opportunity to dispute such tax liability.
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offer an alternative means of collection. Consequently, the
aforementioned issues are deemed to be conceded. Rule 331(b)(4).
Petitioner has failed to set forth any grounds on which we
could find that the Appeals Office erred in its determination
that respondent could properly proceed with collection of
petitioner’s 1996 tax liabilities. Accordingly, respondent is
entitled to summary judgment.
Section 6673(a)(1) authorizes this Court to require a
taxpayer to pay a penalty not in excess of $25,000 whenever the
taxpayer’s position is frivolous or groundless or the taxpayer
has instituted or pursued the proceeding primarily for delay.
SEC. 6673. SANCTIONS AND COSTS AWARDED BY COURTS.
(a) Tax Court Proceedings.--
(1) Procedures instituted primarily for delay,
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
taxpayer to pay to the United States a penalty not
in excess of $25,000.
Petitioner appears to have instituted or maintained the
instant case primarily as a protest against the Federal income
tax. See, e.g. United States v. Studley, 783 F.2d 934, 937 (9th
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Cir. 1986)(taxpayer’s argument that he is not a taxpayer is
frivolous); Tolotti v. Commissioner, T.C. Memo. 2002-86
(taxpayer’s argument that Commissioner must identify
constitutional and statutory provisions that make taxpayer liable
for Federal income tax is frivolous), affd. 70 Fed. Appx. 971
(9th Cir. 2003). We shall not refute frivolous arguments with
copious citation and extended discussion. Williams v.
Commissioner, 114 T.C. 136, 138-139 (2000) (citing Crain v.
Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984)). Respondent
informed petitioner that petitioner risked monetary penalty by
making such arguments, but petitioner continued to waste the
limited resources of the Federal tax system. Consequently,
pursuant to section 6673(a)(1), we shall require petitioner to
pay to the United States a penalty of $10,000.
To reflect the foregoing,
An appropriate order and
decision will be entered.