Guthrie v. Comm'r

T.C. Memo. 2005-196

UNITED STATES TAX COURT

KENNETH W. GUTHRIE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 5061-04. Filed August 11, 2005.

Kenneth W. Guthrie, pro se.

James E. Archie, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

VASQUEZ, Judge: Respondent determined the following

deficiencies in and additions to petitioner’s Federal income

tax:1

1
Although the front pages of the notices of deficiency for
2000 and 2001 list sec. 6651(a)(1) additions to tax in the
amounts of $4,720.09 and $6,498.84 for 2000 and 2001,
respectively, and no sec. 6651(a)(2) additions to tax, the Forms
(continued...)
 - 2 -

Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6651(a)(2) Sec. 6654(a)

2000 $21,101.00 $2,870.33 $1,849.77 $762.35
2001 21,652.00 4,716.90 1,781.94 856.83

All section references are to the applicable Internal Revenue

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

of Practice and Procedure.

After concessions,2 the issues for decision are: (1)

Whether wages, interest, and dividends received by petitioner and

his wife are taxable income in 2000 and 2001, (2) whether

petitioner is liable for the addition to tax pursuant to section

1
(...continued)
4549, Income Tax Examination Changes, attached to the notices of
deficiency list sec. 6651(a)(1) additions to tax in the amounts
of $2,870.33 and $4,716.90 for 2000 and 2001, respectively, and
sec. 6651(a)(2) additions to tax in the amounts of $1,849.77 and
$1,781.94 for 2000 and 2001, respectively. The last pages
attached to the notices of deficiency, entitled “Explanation of
the Delinquency Penalty”, list a “failure to file penalty” in the
amounts of $2,870.33 and $4,716.90 for 2000 and 2001,
respectively, and a “failure to pay penalty” in the amounts of
$1,849.77 and $1,781.94 for 2000 and 2001, respectively.
Accordingly, we find that respondent determined additions to tax
pursuant to sec. 6651(a)(1) in the amounts of $2,870.33 and
$4,716.90, and not $4,720.09 and $6,498.84, for 2000 and 2001,
respectively.
2
Respondent conceded 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) a stock sale of $4,741 in 2001 is
not income to petitioner, (5) petitioner incurred net losses on
his stock transactions for 2000 and 2001, (6) no additions to tax
pursuant to sec. 6651(a)(2) are due from petitioner for 2000 and
2001, and (7) no addition to tax pursuant to sec. 6654(a) is due
from petitioner for 2000.
 - 3 -

6651(a)(1) for 2000 and 2001, (3) whether petitioner is liable

for the addition to tax pursuant to section 6654(a) for 2001, and

(4) whether to impose a penalty pursuant to section 6673.

FINDINGS OF FACT

None of the facts have been stipulated with the exception

that at trial petitioner stipulated at the time he filed his

petition he resided in Lakewood Village, Texas.3

I. 1998 and 1999

Petitioner and his wife, Laurie G. Guthrie, filed joint

Federal income tax returns for 1998 and 1999. On their 1998

return, petitioner and his wife reported, among other things,

wages of $132,330, taxable interest of $655, ordinary dividends

of $220, a loss from rental real estate of $8,398, adjusted gross

income of $124,807, taxable income of $95,153, tax of $21,144,

total tax of $20,938, Federal income tax withheld of $15,410, and

an amount owed of $5,528. Attached to their 1998 return were

Forms W-2, Wage and Tax Statement, for petitioner and his wife

from Electronic Data Systems (EDS) listing wages of $84,203.68

and $48,125.93 for petitioner and his wife, respectively.

Petitioner and his wife signed their 1998 return on April 14,

1999. On the 1998 return, petitioners stated it was “self-

3
The Court admonished petitioner that certain facts and
documents should not be in issue, such as whether he filed
returns and where he lived when he filed the petition.
Petitioner, however, asserted a Fifth Amendment claim as the
basis of his refusal to stipulate facts.
 - 4 -

prepared”, and petitioner’s signature was on the line for

preparer’s signature.

On their 1999 return, submitted in “1040PC FORMAT”,

petitioner and his wife reported, among other things, wages (line

7) of $130,283, taxable interest (line 8A) of $477, ordinary

dividends (line 9) of $256, total income (line 22) of $118,382,

total tax (line 56) of $17,638, total payments (line 64) of

$16,173, and an amount owed (line 68) of $1,465. Petitioner and

his wife signed their 1999 return on April 16, 2000. On the 1999

return, petitioners stated it was “self-prepared”, and

petitioner’s signature was next to the words “self-prepared”.

Attached to the 1999 return was a Form 1040-V, Payment Voucher,

with $1,465 handwritten next to “amount of payment”.

II. 2000 and 2001

During 2000 and 2001, petitioner and his wife were married

to each other and lived together in Texas. Neither petitioner

nor his wife filed Federal income tax returns for 2000 and 2001.

During 2000 and 2001, EDS paid petitioner wages in the

amounts of $91,777.19 and $90,762.44, respectively, and paid

petitioner’s wife wages in the amounts of $45,878.70 and

$1,093.05, respectively. During 2001, EDS withheld $688.27 in

Federal income tax from petitioner’s wages and $306.05 in Federal

income tax from petitioner’s wife’s wages. Petitioner made no

estimated tax payments for 2000 or 2001.
 - 5 -

During 2000 and 2001, petitioner received ordinary dividends

totaling $50 and $21, respectively. During 2000 and 2001,

petitioner received interest totaling $587 and $434,

respectively.

Respondent mailed petitioner separate notices of deficiency

determining deficiencies and additions to tax for 2000 and 2001.

Petitioner received these notices of deficiency.

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

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.
 - 6 -

At trial, petitioner conceded that the Forms W-2 from EDS

for 2000 and 2001 and the exhibits listing the dividends and

interest for 2000 and 2001 are accurate and that he was paid the

wages listed in the Forms W-2 by EDS. Petitioner, however,

disputed that the aforementioned amounts are income.

Accordingly, since 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, interest, and dividends are

not income. His arguments are characteristic of tax-protester

rhetoric that has been universally rejected by this and other

courts. See 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).
 - 7 -

Accordingly, with the exception of the amounts conceded by

respondent, we sustain respondent’s deficiency determinations for

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

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
 - 8 -

establish that such failure is due to reasonable cause and not

due to willful neglect.

Petitioner admitted that he did not file returns for 2000

and 2001. 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). Accordingly, respondent has met his burden

of production on this issue.

Petitioner claimed he did not “believe” he was required to

file returns. Petitioner claimed he “believed” that he did not

owe the deficiencies or additions to tax for the years in issue.

Petitioner’s alleged basis for these claims was: (1) The filing

of income tax returns is voluntary and not mandatory, (2) no part

of the Code provides a requirement to file returns or pay income

tax, (3) requiring individuals to file tax returns forces them to

waive their Fifth Amendment rights, (4) the 16th Amendment was

never legally ratified, and (5) petitioner sought the advice of

alleged experts and purportedly relied on their advice for his

beliefs.

Petitioner relies on his own testimony. The Court is not

required to accept petitioner’s unsubstantiated testimony. See

Wood v. Commissioner, 338 F.2d 602, 605 (9th Cir. 1964), affg. 41

T.C. 593 (1964). The Court need not accept at face value a

witness’s testimony that is self-interested or otherwise

questionable. See Archer v. Commissioner, 227 F.2d 270, 273 (5th
 - 9 -

Cir. 1955), affg. a Memorandum Opinion of this Court; Weiss v.

Commissioner, 221 F.2d 152, 156 (8th Cir. 1955), affg. T.C. Memo.

1954-51; Schroeder v. Commissioner, T.C. Memo. 1986-467. This is

so even when the testimony is uncontroverted if it is improbable,

unreasonable, or questionable. Archer v. Commissioner, supra;

Weiss v. Commissioner, supra; see Quock Ting v. United States,

140 U.S. 417 (1891). We found petitioner’s testimony to be

conclusory and/or questionable in certain material respects.

Under the circumstances presented here, we are not required to,

and generally do not, rely on petitioner’s testimony. 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, 689-

690 (9th Cir. 1971), affg. per curiam T.C. Memo. 1969-159;

Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).

We further note that petitioner did not call the “alleged

experts” he allegedly relied upon as witnesses. We infer that

their testimony would not have been favorable to petitioner or

that no such experts exist. Wichita Terminal Elevator Co. v.

Commissioner, 6 T.C. 1158, 1165 (1946), affd. 162 F.2d 513 (10th

Cir. 1947).

As noted supra, petitioner advanced shopworn arguments

characteristic of tax-protester rhetoric that has been

universally rejected by this and other courts regarding why the

wages, interest, and dividends are not income. Whatever “advice”
 - 10 -

petitioner may have received, a minimal amount of research would

have demonstrated the frivolousness of his arguments and that

these arguments repeatedly have been rejected by the courts.

See, e.g., Brunner v. Commissioner, T.C. Memo. 2004-187, affd.

per curiam __ Fed. Appx. __ (3d Cir., July 21, 2005).

Furthermore, petitioner admitted that the joint returns for the

prior years 1998 and 1999 were accurate and correct. This

admission conflicts with his alleged “beliefs” as to filing

returns for 2000 and 2001.

At trial, the Court advised and admonished petitioner that

the Court, the U.S. Court of Appeals for the Fifth Circuit, and

the other U.S. Courts of Appeals previously and repeatedly had

rejected the arguments espoused by petitioner and had ruled that

his arguments were frivolous. Petitioner stated that he was

aware that some of the arguments that he raised had been ruled on

and rejected by the courts.

Having had the opportunity to observe petitioner, we find

petitioner’s claims that he did not “believe” he was required to

file returns, that he did not owe the deficiencies or additions

to tax, and that he relied on “experts” for the years in issue

not credible. Petitioner’s failure to file was not due to

reasonable cause; his failure to file was due to willful neglect.

Accordingly, we sustain respondent’s determinations that
 - 11 -

petitioner is liable for the additions to tax pursuant to section

6651(a)(1) for 2000 and 2001.

B. Section 6654(a)

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

any underpayment of estimated tax by an individual.” The amount

of the underpayment is the excess of the “required installment”

over the amount (if any) of the installment paid on or before the

due date of the installment. Sec. 6654(b)(1). The amount of the

required installment is 25 percent of the required annual

payment. Sec. 6654(d)(1)(A). Since petitioner filed no return

for 2000, the “required annual payment” for 2001 is 90 percent of

the tax for 2001. Sec. 6654(d)(1)(B).

Petitioner and his wife had total withholding in the amount

of $994 and made no estimated tax payments for 2001. Respondent

conceded that petitioner’s corrected income for 2001 is $46,155.

After allowing the standard deduction ($4,550) and exemptions

($2,900) contained in the notice of deficiency, petitioner’s

total “corrected taxable income” for 2001 equals $38,705.

According to the 2001 tax table, available on the Internal

Revenue Service’s Web site, the tax due for an individual with

$38,705 of taxable income and married filing separately status is

$7,824. See Fed. R. Evid. 201 (regarding judicial notice).

Petitioner’s total withholding, even before reducing it by one-

half pursuant to section 1.31-1(a), Income Tax Regs., and
 - 12 -

estimated tax payments are less than 90 percent of petitioner’s

tax for 2001 ($7,042). Accordingly, respondent met his burden of

production.

Petitioner offered no credible evidence related to this

issue. No section 6654(e) exception applies. Accordingly, we

sustain respondent’s determination that petitioner is liable for

the addition to tax pursuant to section 6654(a) for 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.”
 - 13 -

The Court repeatedly warned petitioner that his arguments

repeatedly had been rejected as frivolous by this Court and the

U.S. Court of Appeals for the Fifth Circuit and that this Court

and U.S. Courts of Appeals have been imposing penalties against

taxpayers who pursue these frivolous arguments. Furthermore,

petitioner admitted that he was aware that some of the arguments

that he raised had been ruled on and rejected by the courts and

that the Fifth Amendment “is not really pertinent to my case”.

Despite warning petitioner numerous times at trial that his

arguments were frivolous and groundless and that pursuing such

arguments might result in the imposition of penalties against

him, petitioner persisted in making those arguments (including

the Fifth Amendment argument) at trial and on brief.4

We conclude that petitioner’s position was frivolous and

groundless and that petitioner instituted and maintained this

proceeding primarily for delay. Accordingly, pursuant to section

6673(a), we hold that petitioner is liable for a $15,000 penalty.

To reflect the foregoing,

Decision will be entered

under Rule 155.

4
Petitioner’s brief is 65 pages and basically reiterates
the frivolous and groundless arguments he raised at trial.