T.C. Memo. 2005-105
UNITED STATES TAX COURT
KENNETH P. KRUEGER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 11938-04L. Filed May 11, 2005.
Kenneth P. Krueger, pro se.
Travis Vance III, for respondent.
MEMORANDUM OPINION
HAINES, Judge: This matter is before us on respondent’s
motion for summary judgment filed pursuant to Rule 121 and to
impose a penalty pursuant to section 6673.1
1
Unless otherwise indicated, all Rule references are to
the Tax Court Rules of Practice and Procedure and all section
references are to the Internal Revenue Code of 1986, as amended.
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Background
At the time this petition was filed, petitioner resided in
Warner Robins, Georgia.
On August 22, 2001, petitioner and his wife, Sandra C.
Krueger, filed a joint Federal income tax return for 2000 (2000
tax return), i.e., Form 1040, U.S. Individual Income Tax Return,
reporting a total income of zero. Petitioner and his wife
attached to their 2000 tax return a two-page letter that asserted
basic tax-protester arguments. Petitioner and his wife claimed
the Federal income tax shown as withheld on Forms W-2, Wage and
Tax Statement, totaling $3,965,2 as a refund on the 2000 tax
return.
The 2000 tax return was received by the Examination Division
of the Internal Revenue Service on September 4, 2001, and on
January 24, 2002, Form 4549, Income Tax Examination Changes, was
sent to petitioner and his wife. Petitioner responded to the
Form 4549 by a letter dated February 27, 2002, in which he
stated:
ONLY I can make a “self-assessment” concerning what my
income tax liability might be for 2000. Since I
concluded that my 2000 income tax liability is “zero”
for that year, I did not “self-assess” myself with any
income tax liability for that year; therefore, no
income tax liability is shown on my 2000. * * *
Therefore, you have no legal authority to “change” my
return, nor to assess any amount other than what is
2
Amounts are rounded to the nearest dollar.
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shown on my return - and if any IRS employee attempts
to do otherwise, they will do so at their own criminal
and/or civil peril.
* * * * * * *
I am requesting an office audit/meeting at which time you
should have available:
1. The “text of any written determination and
any background file documents relating to
(the) determination” that my “zero” return
was not correct as provided in 26 USC 6610.
2. Since Sections 6001 and 6011 (as referred to
in the Privacy Act Notice that is contained
in the 1040 booklet) only direct me to comply
with Treasury regulations, I will expect you
to have the Treasury regulation that imposes
upon me a legal obligation to treat seriously
the “changes” you have proposed in my 2000
return.
3. The statute and implementing regulation that
allowed you to “change” my 2000 return, and
4. Your Delegation Order from the Secretary of
Treasury authorizing you to act in his
behalf.
On May 1, 2002, respondent mailed to petitioner and his wife
a notice of deficiency for 2000, in which respondent determined
that petitioner and his wife owed a deficiency of $4,574 and a
$915 accuracy-related penalty under section 6662(a) based upon
reported wages received from Southeastern Telephone Systems,
Inc., and the U.S. Air Force of $24,812 and $23,005,
respectively, and miscellaneous income received from Nutrition
for Life International, Inc., of $657.
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Petitioner and his wife did not file a petition with the
Court to redetermine the deficiency. Instead, petitioner mailed
a letter dated July 25, 2002, to the contact person named in the
notice of deficiency with copies to the Secretary of the
Treasury, the Commissioner of Internal Revenue, Senator Baucus,
Chairman of the Senate Finance Committee, Senator Conrad,
Chairman of the Tax and IRS Oversight Sub-Committee, and
Congressman Thomas, Chairman of the House Ways and Means
Committee, stating that he would not file a petition with the Tax
Court until it was established that respondent had the legal
authority to send the notice of deficiency in the first place.
Respondent assessed the tax, penalty, and interest on
November 18, 2002. On March 4, 2003, respondent mailed to
petitioner a Final Notice--Notice of Intent to Levy and Notice of
Your Right to a Hearing. The final notice was not addressed to
petitioner’s wife, Sandra C. Krueger. On April 2, 2003,
petitioner timely filed a Form 12153, Request for a Collection
Due Process Hearing. Petitioner’s wife did not sign the Form
12153 and was not involved in the subsequent section 6330 hearing
or in the proceedings herein.
On April 8, 2004, respondent sent a letter to petitioner
advising him that a face-to-face conference would not be allowed
if petitioner continued making frivolous and groundless
arguments. The letter further stated: “If you wish to have a
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face-to-face conference, please write me within 15 days from the
date of this letter and describe the legitimate issues you will
discuss.” In the same letter respondent proposed that a
telephone conference be held on April 28, 2004. Petitioner
acquiesced to the telephone conference and subsequently
rescheduled it for May 11, 2004.
During the May 11, 2004, telephone conference, the
settlement officer advised petitioner of the appeals process and
his rights as a taxpayer. Petitioner raised only frivolous
arguments consistent with those found in the attachments appended
to the 2000 tax return and incorporated in prior correspondence.
During the morning of the conference, petitioner faxed to
respondent’s settlement officer a copy of an offer in compromise
he intended to file. Petitioner did not pay the $150 processing
fee at the time of filing, and it was not processed.
Petitioner’s offer was based on “Doubt as to Liability” and was
accompanied by an attachment reciting that wages are not income
and that no section of the Internal Revenue Code establishes an
income tax liability.
In the June 4, 2004, Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330 for 2000
(notice of determination) sent to petitioner, the Appeals officer
determined:
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During Appeals consideration of your case, you did
not raise any non-frivolous collection alternatives or
any non-frivolous issues.
Appeals has obtained verification from the
Secretary that the requirements of any applicable law
or administrative procedure have been met, considered
any relevant issues relating to the unpaid tax raised
at the hearing, and taken into consideration whether
the proposed collection action balances the need for
the efficient collection of taxes with the legitimate
concern of the person that any collection action be no
more intrusive than necessary. Therefore, it is the
determination in this case the issuance of the Notice
of Intent to Levy is sustained.
On July 8, 2004, petitioner filed a petition with the Court
for judicial review of respondent’s notice of determination. In
his petition, petitioner contends that he did not receive a
hearing as required by section 6330 because: (1) He was not
allowed to have a face-to-face conference; (2) the hearing officer
had no authority to limit what was to be discussed during a
telephone conference; and (3) he was not allowed to challenge the
existence of the underlying tax liability.
On March 9, 2005, respondent filed a motion for summary
judgment seeking a decision that collection can proceed and to
impose a penalty pursuant to section 6673. By order dated March
10, 2005, petitioner was given until April 11, 2005, to file a
response to the motion for summary judgment. Petitioner filed a
response on April 11, 2005, which stated in part:
Petitioner was denied a face-to-face hearing unless
petitioner discussed only issues allowed by the
settlement officer. By letter dated April 8, 2004,
petitioner was advised that Appeals does not hold face-
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to-face hearings if only items subject to discussion
include items that are frivolous such as those
attributed to moral, religious, political,
constitutional, conscientious, or similar grounds.
Petitioner never raised any of these issues, the issue
raised by petitioner is tax liability. Nowhere in the
“THE TRUTH ABOUT FRIVILOUS [sic] TAX ARGUMENTS” is tax
liability listed. * * *
Discussion
A decision granting summary judgment may be rendered if the
pleadings and other materials in the record show that there is no
genuine issue as to any material fact and that a decision may be
rendered as a matter of law. Rule 121(b); Sundstrand Corp. v.
Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir.
1994). We have considered the pleadings and other materials in
the record and conclude that there is no genuine issue of any
material fact and that a decision may be rendered as a matter of
law.
Petitioner argues that respondent erred by not allowing
petitioner to challenge the merits of the underlying tax
liability, by not conducting a face-to-face hearing, and by
limiting the subject matter that could be discussed during the
hearing.
When petitioner received a notice of deficiency, he did not
follow the specific instructions contained in the notice which
allowed him to petition this Court if he disagreed. Instead,
petitioner sent a letter to respondent, the Secretary of the
Treasury, the Chairman of the Senate Finance Committee, the
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Chairman of the Tax and IRS Oversight Sub-Committee, and the
Chairman of the House Ways and Means Committee, stating that he
would not file a petition with the Tax Court until it was
established that the Government had the legal authority to send
the notice of deficiency in the first place. We have held in
numerous cases that the approach taken by petitioner is without
merit. See, e.g., Nestor v. Commissioner, 118 T.C. 162, 165
(2002); Rewerts v. Commissioner, T.C. Memo. 2004-248; Israel v.
Commissioner, T.C. Memo. 2003-338; Bethea v. Commissioner, T.C.
Memo. 2003-278; Fink v. Commissioner, T.C. Memo. 2003-61; Koenig
v. Commissioner, T.C. Memo. 2003-40. By taking this approach,
petitioner closed the door on his ability to contest the
underlying tax liability. See sec. 6330(c)(2)(B).
Where the underlying tax liability is not at issue, we review
the Commissioner’s determination to proceed with collection for
abuse of discretion. Sego v. Commissioner, 114 T.C. 604, 610
(2000). An abuse of discretion may be defined as an action that,
taking into account all the facts and circumstances, is
unreasonable, arbitrary or capricious, clearly unlawful, or
lacking sound basis in law. See, e.g., Ewing v. Commissioner, 122
T.C. 32, 39-40 (2004); Swanson v. Commissioner, 121 T.C. 111, 119
(2003).
The May 11, 2004, telephone conference between petitioner and
respondent’s Appeals officer was agreed to by petitioner and
constituted an appropriate hearing for purposes of section
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6330(b)(1). See Burbridge v. Commissioner, T.C. Memo. 2004-88;
Day v. Commissioner, T.C. Memo. 2004-30. At the section 6330
hearing, the matters petitioner could raise were limited by
section 6330(c)(2) to include appropriate spousal defenses,
challenges to the appropriateness of collection actions, and
offers of collection alternatives.
During the May 11, 2004, telephone hearing petitioner
asserted only tax-protester arguments. Although an offer-in-
compromise was faxed to the Appeals officer, the premise of “Doubt
as to Liability” was based on the assertions that wages are not
income and no section of the Internal Revenue Code requires the
payment of tax, both tax-protester arguments.
Respondent properly verified that the requirements of
applicable law and administrative procedures were met and
balanced the need for efficient collection of taxes with the
legitimate concern that the collection action be no more intrusive
than necessary. See sec. 6330(c)(3). Respondent did not abuse
his discretion in sustaining the notice of intent to levy as to
petitioner.
Respondent, in his motion for summary judgment, has asked the
Court to impose a penalty under section 6673(a) against
petitioner. Section 6673(a)(1) authorizes the Court to require a
taxpayer to pay the United States a penalty in an amount not to
exceed $25,000 whenever it appears to the Court the taxpayer’s
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position in a proceeding is frivolous or groundless. Sec.
6673(a)(1)(B).
Petitioner has continuously asserted throughout these
proceedings only tax-protester arguments in an effort to avoid
paying any income tax at all. Courts have held in previous cases
that these arguments are without merit. See, e.g., United States
v. Connor, 898 F.2d 942, 943 (3d Cir. 1990); Coleman v.
Commissioner, 791 F.2d 68, 70 (7th Cir. 1986); Sauers v.
Commissioner, 771 F.2d 64, 66 (3d Cir. 1985) (as to petitioner’s
claim that wages and salaries are not taxable income), affg. T.C.
Memo. 1984-367; Nestor v. Commissioner, supra at 167 (as to the
argument that a tax return reporting zero taxable income cannot be
changed to reflect income received); Dashiell v. Commissioner,
T.C. Memo. 2004-210 (as to petitioner’s claim that no Internal
Revenue Code section makes him liable). We reject petitioner’s
boilerplate tax-protester arguments as frivolous and without
merit.
Petitioner attached as Exhibit A to his response to the
motion for summary judgment the index to the publication “The
Truth about Frivolous Tax Arguments”, issued by the Internal
Revenue Service, and claimed that “Nowhere * * * is tax liability
listed”. Nevertheless, the publication covers every tax-protester
argument that he has made in these proceedings. Because we find
petitioner’s arguments to be frivolous and groundless, we shall
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grant respondent’s motion and impose a penalty on petitioner
pursuant to section 6673(a)(1) in the amount of $1,500.
In reaching our holding herein, we have considered all
arguments made by petitioner, and, to the extent not mentioned
above, we conclude that they are irrelevant and without merit.
To reflect the foregoing,
An appropriate order and
decision will be entered.