T.C. Summary Opinion 2005-124
UNITED STATES TAX COURT
MICHAEL T. CROW, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 1611-04S, 6123-04S. Filed August 15, 2005.
Michael T. Crow, pro se.
Thomas M. Newman, for respondent.
COUVILLION, Special Trial Judge: These consolidated cases
were heard pursuant to section 7463 in effect at the time the
petition was filed.1 The decisions to be entered are not
reviewable by any other court, and this opinion should not be
cited as authority.
1
Unless otherwise indicated, subsequent section references
are to the Internal Revenue Code in effect for the years at
issue. All Rule references are to the Tax Court Rules of
Practice and Procedure.
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In separate notices of deficiency, respondent determined the
following deficiencies and additions to tax for petitioner’s 2001
and 2002 tax years:
Year Deficiency Sec. 6651(a)(1) Sec. 6654
2001 $13,060.70 $ 636.18 $ 55.01
2002 9,988.00 1,925.25 248.80
At trial, respondent filed written motions for imposition of the
penalty under section 6673(a).
The issues for decision are: (1) Whether petitioner is
liable for Federal income taxes for the 2 years in question on
compensation he received from his employer for services he
performed as an employee, for State income tax refunds, and, for
the year 2001, on distributions received from a qualified pension
plan; (2) whether petitioner is liable for the additions to tax
under sections 6651(a)(1) and 6654 for the 2 years in question;
and (3) whether petitioner is liable for the section 6673(a)
penalty for the 2 years before the Court.
At trial, respondent conceded an income adjustment for the
2002 tax year for a State income tax refund of $3,186.
Respondent agreed that petitioner did not claim an itemized
deduction for State income taxes on his 2001 Federal income tax
return; therefore, the refund of $3,186 to him during the year
2002 did not constitute income.
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Some of the facts were stipulated, and those facts, with the
annexed exhibits, are so found and are incorporated herein by
reference. At the time the petitions were filed, petitioner was
a legal resident of Manteca, California.
During the years in question, petitioner was employed as a
mechanic by a trucking company, Martin-Brower. He received wages
of $58,037 and $55,021, respectively, for the 2 years at issue.
There was no testimony at trial by petitioner of the $7,167
distribution he received during the year 2001 from First Trust
Corp., administrator of a qualified pension plan. That
adjustment, therefore, is deemed conceded.
On his Federal income tax return for each of the 2 years at
issue, petitioner claimed single filing status, a personal
exemption for himself, and the standard deduction. All other
lines on the returns are listed as “-0-”, except for the Federal
income taxes withheld, all of which were listed and claimed as
overpayments, which were to be refunded to him. The withholdings
shown on the returns are $10,516 and $2,287.74, respectively, for
2001 and 2002. The 2001 return is stamped received by the IRS on
April 30, 2002, and the 2002 return is stamped May 1, 2003. Both
returns also bear a stamp “Frivolous Return Program, Internal
Revenue Service, Fresno, CA”. Petitioner attached to each return
a two-page signed typewritten statement containing classic tax
protester statements such as that no section of the Internal
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Revenue Code establishes an income tax liability; that his return
was not being filed voluntarily but was being filed in order to
avoid prosecution for failure to file a return; that, in the
Ninth Circuit of the Federal Appellate Court system, a tax return
(Form 1040) with all zeros on the return constitutes a valid
return; and that he had zero income because there is no reference
in the Internal Revenue Code for the taxation of wages, salaries,
or compensation for personal services, along with several other
arguments of this nature. Petitioner also attached to his
returns the Forms W-2, Wage and Tax Statement, that had been
issued by his employer.
Petitioner filed identical petitions in response to each
notice of deficiency, alleging:
Income tax is based on voluntary compliance and self-
assessment income is not defined in the IRC. “Income” is
defined by the Supreme Court as “Gains and profits derived
from corporate activities”. I never received a “Statutory”
Notice Demand for payment. I am not “Statutorily Liable”
for “Income” tax. I was never granted an administrative
hearing as per due process. No IRS agent ever produced a
“Delegation of Authority” to change my 1040 or assess any
deficiency.
The Court rejects entirely petitioner’s allegations and the
same arguments he made at trial. Section 61(a)(1) defines gross
income to include all income from whatever source derived,
including, but not limited to, compensation for services
rendered, whether such services are for a corporation, an
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individual, or in a self-employed activity. Petitioner’s
protester arguments have been heard on numerous occasions by this
Court, as well as other courts, and have been consistently
rejected. The Court sees no need to further respond to
petitioner’s arguments with somber reasoning and copious
citations of precedent, as to do so might suggest that his
argument possesses some degree of colorable merit. See Crain v.
Commissioner, 737 F.2d 1417 (5th Cir. 1984). In short,
petitioner is a taxpayer subject to the income tax laws, and he
is liable for income tax on the compensation and other income
paid to him during the years in question, none of which was
questioned or denied. His arguments are rejected.
Although not addressed by petitioner at trial, his gross
income for 2001 includes the distribution to him of proceeds of a
qualified pension plan. Sec. 72. Petitioner did not deny that
he received the distribution, and he presented no argument
relating thereto. As noted earlier, the Court considers that
income adjustment as conceded.
With respect to the second issue, section 6651(a)(1)
provides for an addition to tax in the event a taxpayer fails to
file a timely return (determined with regard to any extension of
time for filing), unless it is shown that such failure is due to
reasonable cause and not due to willful neglect. Petitioner’s
2001 return was received by respondent on April 30, 2002. His
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2002 return was received by respondent on May 1, 2003. United
States citizens must file income tax returns on or before the
15th day of the fourth month following the end of their taxable
years. Sec. 1.6072-1(a), Income Tax Regs. That date, for a
calendar year taxpayer is April 15th. Petitioner’s returns,
therefore, for the years 2001 and 2002 were required to be filed
on or before, respectively, April 15, 2002, and April 15, 2003.
They were not received by respondent until April 30, 2002, and
May 1, 2002, respectively. Respondent, therefore, is sustained
on this issue.2
Respondent determined that petitioner was liable for the
addition to tax under section 6654(a) for failure to pay
estimated tax. This addition to tax is applicable where there is
an underpayment of estimated tax, subject to exceptions or
waivers that are not applicable here. Sec. 6654(e). In general,
estimated income tax payments are used to provide for payment of
income taxes not collected through withholding. Section 6654(c)
provides for four quarterly installments. Income taxes withheld
from salaries or wages apply toward the amount of each required
quarterly installment; however, to the extent withholdings do not
satisfy the required quarterly installments, the taxpayer is
2
The Court notes that, even though the tax returns of
petitioner contained primarily zeroes, respondent treated the
returns as returns and did not impose a failure to file addition
to tax against petitioner. Sec. 7203.
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required to make supplemental quarterly payments of estimated
taxes. Sec. 6654(f). Under section 6654(d), the amount of the
four quarterly installments (including taxes withheld) generally
must equal 90 percent of the tax for the year, or 100 percent of
the tax for the preceding taxable year, whichever is less. Where
there is an underpayment of estimated tax, there is no
exonerating provision, such as reasonable cause or lack of
willful neglect. Estate of Ruben v. Commissioner, 33 T.C. 1071
(1960).
As noted earlier, taxes were withheld from petitioner’s
earnings for each of the years in question; therefore,
petitioner’s liability for the section 6654 addition to tax will
depend on whether, after these prepayments are credited and a
further credit is allowed in the Rule 155 computation, because of
respondent’s concession that the $3,186 State income tax refund
received by petitioner during 2002 did not constitute gross
income as determined in the notice of deficiency, the balances
due are within or without the 90-percent rule of section 6654(d).
To that extent, respondent is sustained on this issue.
Respondent filed a motion for imposition of the penalty
under section 6673. Section 6673(a)(1) authorizes this Court to
require a taxpayer to pay a penalty to the United States, in an
amount not to exceed $25,000, whenever it appears that
proceedings have been instituted or maintained by such taxpayer
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primarily for delay, or that the taxpayer's position in a
proceeding is frivolous or groundless. A petition in the Tax
Court is frivolous "if 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).
Prior to the trial, petitioner was advised by letter from the IRS
that his positions were frivolous and could lead to sanctions
against him if he persisted with such arguments. At trial,
respondent filed motions for imposition of the section 6673
penalty. Throughout his testimony, petitioner dwelt solely on
his protester arguments. Those arguments are considered
frivolous, and respondent’s motion will be granted. The Court
will require petitioner to pay a penalty of $1,000 in each docket
number.
Reviewed and adopted as the report of the Small Tax Case
Division.
An Order and Decision will be entered
for respondent in docket No. 1611-04S.
An Order and Decision will be entered
under Rule 155 in docket No. 6123-04S.