Rhodes v. Comm'r

T.C. Memo. 2005-184

UNITED STATES TAX COURT

ROBERT E. RHODES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 6291-04. Filed July 26, 2005.

Robert E. Rhodes, pro se.

Tanya S. Wang, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

VASQUEZ, Judge: Respondent determined the following

deficiencies in and additions to petitioner’s Federal income tax:

Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654(a)

1999 $9,606.50 $2,690.72 $333.90
2000 8,509.00 3,148.33 457.64
2001 8,794.00 2,726.14 348.00
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All section references are to the applicable Internal Revenue

Code, and all Rule references are to the Tax Court Rules of

Practice and Procedure.

After concessions,1 the issues for decision are: (1)

Whether petitioner is liable for the deficiencies determined by

respondent for 1999, 2000, and 2001 in excess of the amounts he

conceded; (2) whether petitioner is liable for the addition to

tax pursuant to section 6651(a)(1) for 1999, 2000, and 2001; (3)

whether petitioner is liable for the addition to tax pursuant to

section 6654(a) for 2000 and 2001; and (4) whether to impose a

penalty pursuant to section 6673.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference. At the time he filed his

petition, petitioner resided in Arlington, Texas.

I. Notices of Deficiency and Forms 1040

On January 14, 2004, respondent issued petitioner separate

notices of deficiency for 1999, 2000, and 2001. After receiving

the notices of deficiency for 1999, 2000, and 2001, on January

1
Respondent concedes that (1) Texas community property
laws are applicable to petitioner, (2) petitioner’s income listed
in the notice of deficiency must be reduced in accordance with
Texas community property laws, (3) petitioner’s filing status is
married filing separately, (4) no addition to tax pursuant to
sec. 6654(a) is due from petitioner for 1999, and (5) petitioner
incurred net losses on his stock transactions for 2000 and 2001.
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28, 2004, January 30, 2004, and January 30, 2004, respectively,

petitioner signed Forms 1040, U.S. Individual Income Tax Return,

for 1999, 2000, and 2001. On February 8, 2004, the Internal

Revenue Service received petitioner’s Forms 1040 for 1999, 2000,

and 2001. The Forms 1040 for 1999, 2000, and 2001 listed zeros

for, among other things, the amount of petitioner’s income,

adjusted gross income, taxable income, tax, total tax, and

payments and the amount petitioner overpaid, wanted refunded, and

owed.

II. 1999

During 1999, petitioner worked for Allstate Insurance Co.

(AIC). AIC issued petitioner a Form W-2, Wage and Tax Statement,

for 1999 reflecting wages of $45,414.84 and Federal income tax

withholding of $2,512.77. During 1999, petitioner also worked

for Practice Practice, Inc. (PPI). PPI issued petitioner a Form

W-2 for 1999 reflecting wages of $2,648 and Federal income tax

withholding of $60.

In 1999, petitioner received a taxable distribution from the

AIC Savings and Profit Sharing Plan. Petitioner received a Form

1099-R, Distributions from Pensions, Annuities, Retirement or

Profit-Sharing Plans, IRAs, Insurance Contracts, etc., from AIC

for 1999 listing a gross distribution in the amount of $4,700, a

taxable distribution in the amount of $3,885, and Federal income

tax withholding in the amount of $777.
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III. 2000

During 2000, petitioner worked for AIC. AIC issued

petitioner a Form W-2 for 2000 reflecting wages of $46,754.84 and

zero Federal income tax withheld. Petitioner received $13 of

interest in 2000. Arlington Federal Credit Union (AFCU) issued

petitioner a Form 1099-INT, Interest Income, for 2000 reflecting

this interest.

IV. 2001

During 2001, petitioner worked for AIC. AIC issued

petitioner a Form W-2 for 2001 reflecting wages of $46,465 and

zero Federal income tax was withheld. Petitioner received a $4

ordinary dividend in 2001. Datek Online Holdings Corp. issued

petitioner a Form 1099-DIV, Dividends and Distribution, for 2001

reflecting this dividend. Petitioner received $11 of interest in

2001. AFCU issued petitioner a Form 1099-INT for 2001 reflecting

this interest.

OPINION

I. The Deficiency

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

shall bear the burden of proof with respect to factual issues
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relating to the liability of the taxpayer for a tax imposed under

subtitle A or B of the Code. Additionally, section 6201(d)

provides that if a taxpayer asserts a reasonable dispute with

respect to any item of income reported on an information return

filed with the Secretary by a third party and the taxpayer has

fully cooperated with the Secretary, the Secretary shall have the

burden of producing reasonable and probative information

concerning such deficiency in addition to such information

return.

At trial, petitioner testified and stipulated he received

the wages, pension distribution, interest, and dividend set forth

in the notices of deficiency. Petitioner, however, disputed that

the aforementioned amounts are income. Accordingly, as

petitioner does not dispute the facts, failed to introduce

credible evidence, and has not asserted a reasonable dispute

regarding the items listed on the information returns, sections

6201(d) and 7491(a) are inapplicable. Parker v. Commissioner,

117 F.3d 785, 786 (5th Cir. 1997); Tanner v. Commissioner, 117

T.C. 237, 241 (2001), affd. 65 Fed. Appx. 508 (5th Cir. 2003).

At trial and on brief, petitioner advanced shopworn

arguments regarding why the wages, pension distribution,

interest, and dividend are not income. His arguments are

characteristic of tax-protester rhetoric that has been

universally rejected by this and other courts. See Wilcox v.
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Commissioner, 848 F.2d 1007 (9th Cir. 1988), affg. T.C. Memo.

1987-225; Carter v. Commissioner, 748 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, with the exception of the amounts conceded by

respondent, we sustain respondent’s deficiency determinations for

1999, 2000, and 2001.

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)

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 the taxpayer can

establish that such failure is due to reasonable cause and not

due to willful neglect.

Petitioner stipulated that he filed his Forms 1040 for 1999,

2000, and 2001 on February 8, 2004. Individuals are required to

file a Federal income tax return on or before April 15, following

the close of the calendar year. Sec. 6072(a). Even assuming

arguendo that the Forms 1040 are valid returns for purposes of

section 6651(a)(1), see infra, petitioner’s Forms 1040 for 1999,

2000, and 2001 are late by more than 3 years and 9 months, 2

years and 9 months, and 1 year and 9 months, respectively.

Accordingly, respondent has met his burden of production on this

issue.

Petitioner offered no credible evidence to show that the

failure to file on the date prescribed was due to reasonable

cause and not due to willful neglect. Accordingly, we sustain

respondent’s determinations that petitioner is liable for the

additions to tax pursuant to section 6651(a)(1) for 1999, 2000,

and 2001.
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B. Section 6654(a)

Section 6654(a) imposes an addition to tax “in the case of

any underpayment of estimated tax by an individual”.

Petitioner had zero withholding for 2000 and 2001.

Petitioner’s Forms 1040 for 1999, 2000, and 2001 were not signed

or filed prior to his receipt of the notices of deficiency for

1999, 2000, and 2001. Additionally, the Forms 1040 for 1999,

2000, and 2001 listed zeros for, among other things, the amount

of income, of adjusted gross income, of taxable income, of tax,

of total tax, of payments, overpaid, petitioner wanted refunded,

and amount he owed. Accordingly, the Forms 1040 for 1999, 2000,

and 2001 are not considered valid returns for purposes of section

6654. Mendes v. Commissioner, 121 T.C. 308, 322-329 (2003);

Cabirac v. Commissioner, 120 T.C. 163, 168-170 (2003); Beard v.

Commissioner, 82 T.C. 766, 777 (1984), affd. per curiam 793 F.2d

139 (6th Cir. 1986). Accordingly, respondent met his burden of

production.

Petitioner offered no credible evidence related to this

issue and failed to address it on brief. See Petzoldt v.

Commissioner, 92 T.C. 661, 683 (1989) (failure to address an

adjustment in the notice of deficiency on brief constitutes

abandonment of that issue); Money v. Commissioner, 89 T.C. 46, 48

(1987) (uncontested items deemed conceded). Accordingly, we

sustain respondent’s determinations that petitioner is liable for
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the additions to tax pursuant to section 6654(a) for 2000 and

2001.

III. Section 6673(a)(1)

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 positions in the

proceeding 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). In Parker v.

Commissioner, 724 F.2d 469, 472 (5th Cir. 1984), affg. T.C. Memo.

1983-75, the U.S. Court of Appeals for the Fifth Circuit, the

court which is the likely venue for appeal, gave a “cautionary

note to those who would persistently raise arguments against the

income tax which have been put to rest for years. The full range

of sanctions in Rule 38 hereafter shall be summoned in response

to a totally frivolous appeal.”

Prior to trial, petitioner filed several documents

containing frivolous and groundless arguments with the Court.

The Court specifically warned petitioner that we may penalize

petitioner up to $25,000 pursuant to section 6673 for pursuing

arguments that the Court advised him had been rejected as

frivolous by the Court, the U.S. Court of Appeals for the Fifth
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Circuit, and the Supreme Court of the United States. Despite

warning petitioner at least six times at trial that his arguments

were frivolous and groundless, petitioner persisted in making

those arguments at trial and on brief.

We conclude that petitioner’s position was frivolous and

groundless and that petitioner instituted and maintained these

proceedings primarily for delay. Accordingly, pursuant to

section 6673(a) we hold petitioner is liable for a $5,000

penalty.

To reflect the foregoing,

Decision will be entered

under Rule 155.