T.C. Memo. 2005-185
UNITED STATES TAX COURT
WILLIAM M. LEGGETT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13291-04. Filed July 26, 2005.
William M. Leggett, pro se.
Monica J. Miller, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
VASQUEZ, Judge: Respondent determined a $3,285 deficiency
in, an $821.25 addition to tax pursuant to section 6651(a)(1)1
on, and a $131.29 addition to tax pursuant to section 6654(a) on
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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petitioner’s 2001 Federal income tax. The issues for decision
are: (1) Whether income received by petitioner in 2001 is
taxable; (2) whether petitioner is liable for self-employment tax
for 2001; (3) whether petitioner is liable for an addition to tax
pursuant to section 6651(a)(1) for 2001; (4) whether petitioner
is liable for an addition to tax pursuant to section 6654(a) for
2001; and (5) whether to impose a penalty pursuant to section
6673.
FINDINGS OF FACT
Pursuant to Rule 91(f), some of the facts have been deemed
stipulated and are so found. The stipulation of facts and the
attached exhibits are incorporated herein by this reference. At
the time he filed the petition, petitioner resided in Florida.
Petitioner’s Prior Tax Court Case
In October 2001, petitioner participated in a trial before
this Court regarding his 1994, 1995, and 1996 tax years (2001
trial). The issues in the 2001 trial regarded unreported income
(deficiencies), delinquency additions to tax, and estimated tax
additions to tax for 1994, 1995, and 1996.
Petitioner did not dispute receiving the moneys listed in
the statutory notice of deficiency for 1994, 1995, and 1996; he
merely disputed that these amounts met the definition of income.
Before the 2001 trial, petitioner sent respondent a request
for admissions. Respondent responded to the request for
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admissions, but petitioner was not satisfied with respondent’s
answers. For example, petitioner asked respondent to “‘admit
that no statute contained in Title 26 of the U.S. Code--United
States Code, makes Petitioner liable for the tax in the instant
action with which--which made him a taxpayer.’” Respondent
responded: “‘Denies and alleges that Petitioner knows that he is
liable for federal income tax,’ based on the fact that in
previous years” petitioner filed tax returns.
During the 2001 trial, petitioner asked the Court to give
him a definition of income, and petitioner stated that he was
pursuing his case in an effort to find out what is taxable
income. The Court referred petitioner to section 61 and advised
petitioner that money and other goods received in exchange for
his personal services are taxable income.
After learning that petitioner had not filed Federal income
tax returns for 1997, 1998, 1999, and 2000, the Court admonished
petitioner that he needed to file his returns and that it was not
too late. The Court advised petitioner: “You have been duped,”
and petitioner responded: “I know.” The Court admonished
petitioner not to let this situation happen again.
At the 2001 trial, the Court rendered a bench opinion. We
sustained revised (lowered) deficiencies of $28,596 and $9,771
for 1994 and 1996, respectively. We sustained the $6,628
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deficiency for 1995 determined in the notice of deficiency. We
also sustained the additions to tax.
The Court based our holding on “the invalidity of the
taxpayer’s arguments with regard to the nontaxability of the
income received from * * * his air-conditioning and heating
business.” The Court further noted: “The evidence is also clear
and overwhelming that the taxpayer has somehow bought on to some
tax protester scheme.”
We concluded by stating: “hopefully, he [petitioner] will be
anxious to pay his full share of taxes in the years ahead, and
file his returns timely and avoid the situation he’s currently
in.”
Petitioner’s Current Tax Court Case
During 2001, petitioner was married to Martha Leggett.
Petitioner failed to file Federal income tax returns for 1997,
1998, 1999, 2000, and 2001.
In 2001, petitioner received Social Security benefits of
$14,208. In 2001, petitioner received $4,010 from Maronda Homes,
Inc. (Maronda), and $5,890 from Rain-Tile Roofing, Inc. (Rain-
Tile), in exchange for personal services rendered.
OPINION
I. Deficiencies
Generally, respondent’s deficiency determinations set forth
in the notices of deficiency are presumed correct, and petitioner
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bears the burden of showing the determination is in error. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Section
7491(a), however, shifts the burden of proof to the Commissioner
with respect to a factual issue affecting the tax liability of a
taxpayer who meets certain preliminary conditions. Petitioner
failed to cooperate with respondent and did not produce any
credible evidence with respect to any matter in this case. See
sec. 7491(a). Furthermore, petitioner did not claim that section
7491(a) applies. Accordingly, section 7491(a) does not apply in
this case.
A. Taxable Income
Pursuant to Rule 91(f), petitioner has admitted receiving
the income in issue. Petitioner, however, testified at trial
that he did not believe he received Social Security benefits of
$14,208 in 2001--the amount he is deemed to have stipulated to
pursuant to Rule 91(f). He testified that he thought his monthly
check in 2001 was for $1,057--which would total $12,684 for 2001.
Petitioner relies on his own testimony to establish this lower
amount. Petitioner’s testimony was conclusory and not credible.
Under the circumstances presented here, we are not required to,
and generally do not, rely on petitioner’s testimony to sustain
his burden of establishing error in respondent’s determinations.
See Lerch v. Commissioner, 877 F.2d 624, 631-632 (7th Cir. 1989),
affg. T.C. Memo. 1987-295; Geiger v. Commissioner, 440 F.2d 688,
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689-690 (9th Cir. 1971), affg. per curiam T.C. Memo. 1969-159;
Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).
Furthermore, petitioner did not introduce into evidence his
Social Security checks or any documents establishing the amount
of his Social Security checks. If a party fails to introduce
evidence within that party’s possession, we may presume the
evidence would be unfavorable to that party. Wichita Terminal
Elevator Co. v. Commissioner, 6 T.C. 1158, 1165 (1946), affd. 162
F.2d 513 (10th Cir. 1947).
Petitioner’s only argument regarding the taxability of the
income in issue is a shopworn argument characteristic of tax-
protester rhetoric that has been universally rejected by this and
other courts. Wilcox v. Commissioner, 848 F.2d 1007 (9th Cir.
1988), affg. T.C. Memo. 1987-225; Carter v. Commissioner, 784
F.2d 1006, 1009 (9th Cir. 1986). We shall not painstakingly
address petitioner’s assertions “with somber reasoning and
copious citation of precedent; to do so might suggest that these
arguments have some colorable merit.” Crain v. Commissioner, 737
F.2d 1417, 1417 (5th Cir. 1984).
Accordingly, we sustain respondent’s determination regarding
the amount of taxable income received by petitioner.
B. Self-Employment Tax
Section 1401 imposes self-employment tax on self-employment
income. Section 1402 defines net earnings from self-employment
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as the gross income derived by an individual from the carrying on
of any trade or business by such individual less allowable
deductions attributable to such trade or business.
Respondent determined that petitioner’s income from Maronda
and Rain-Tile is subject to self-employment tax. Petitioner’s
only argument is a shopworn argument characteristic of tax-
protester rhetoric that has been universally rejected by this and
other courts. Accordingly, we sustain respondent’s determination
regarding petitioner’s liability for self-employment tax.
II. Additions to Tax
Section 7491(c) provides that the Commissioner will bear the
burden of production with respect to the liability of any
individual for additions to tax. “The Commissioner’s burden of
production under section 7491(c) is to produce evidence that it
is appropriate to impose the relevant penalty, addition to tax,
or additional amount”. Swain v. Commissioner, 118 T.C. 358, 363
(2002); see also Higbee v. Commissioner, 116 T.C. 438, 446
(2001). If a taxpayer files a petition alleging some error in
the determination of an addition to tax or penalty, the
taxpayer’s challenge will succeed unless the Commissioner
produces evidence that the addition to tax or penalty is
appropriate. Swain v. Commissioner, supra at 363-365. The
Commissioner, however, does not have the obligation to introduce
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evidence regarding reasonable cause or substantial authority.
Higbee v. Commissioner, supra at 446-447.
A. Section 6651(a)(1)
Respondent determined that petitioner is liable for an
addition to tax pursuant to section 6651(a)(1) for 2001. Section
6651(a)(1) imposes an addition to tax for failure to file a
return on the date prescribed (determined with regard to any
extension of time for filing), unless such failure is due to
reasonable cause and not due to willful neglect.
Petitioner did not file a return for 2001. Accordingly,
respondent has met his burden of production for the section
6651(a)(1) addition to tax for 2001.
Petitioner has not established that his failure to timely
file for 2001 was due to reasonable cause. See Higbee v.
Commissioner, supra at 446-447. Accordingly, petitioner is
liable for the section 6651(a)(1) addition to tax for 2001.
B. Section 6654(a)
Section 6654 imposes an addition to tax for failure to pay
estimated income tax. Respondent submitted no evidence that
petitioner failed to pay estimated tax for 2001. Furthermore,
the stipulations do not establish that petitioner failed to pay
estimated tax for 2001. Accordingly, we conclude that respondent
has not satisfied his burden of production regarding this issue
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and petitioner is not liable for the addition to tax pursuant to
section 6654(a) for 2001.
III. Section 6673
Section 6673(a)(1) authorizes this Court to require a
taxpayer to pay to the United States a penalty not to exceed
$25,000 if the taxpayer took frivolous or groundless positions in
the proceedings or instituted the proceedings primarily for
delay. 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); see also Hansen v.
Commissioner, 820 F.2d 1464, 1470 (9th Cir. 1987) (section 6673
penalty upheld because taxpayer should have known claim was
frivolous).
Petitioner’s only argument in this case was that his income
was not taxable. Petitioner was advised at the 2001 trial and at
the trial of the instant case of the Code provisions regarding
the taxability of his income. We advised petitioner at the 2001
trial that his arguments were frivolous. We conclude petitioner
advanced frivolous and groundless positions in these proceedings.
We also are convinced that petitioner instituted the
proceedings primarily for delay. In addition to again advancing
an argument the Court advised him was frivolous at the 2001 trial
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and the instant trial, petitioner stated: “Well, I don’t have
enough information to refute anything at this point.”
We advised petitioner at the 2001 trial that his arguments
were frivolous, and we admonished him against advancing them
again. Our admonition at the 2001 trial was insufficient to
deter petitioner from returning to the Court and advancing the
same frivolous and groundless position in the instant case.
Furthermore, respondent advised petitioner by letter of the
provisions of section 6673, but it also was insufficient to deter
petitioner from returning to the Court and advancing a frivolous
and groundless position in the instant case.
Accordingly, in light of the fact that petitioner took
frivolous or groundless positions in this proceeding and
instituted this proceeding primarily for delay, pursuant to
section 6673(a) we hold petitioner is liable for a $5,000
penalty.
To reflect the foregoing,
Decision will be entered
for respondent.