T.C. Memo. 2006-134
UNITED STATES TAX COURT
DONALD P. ARNETT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 18296-04. Filed June 27, 2006.
Donald P. Arnett, pro se.
David W. Sorensen, for respondent.
MEMORANDUM OPINION
VASQUEZ, Judge: This case is before the Court on
respondent’s motion for summary judgment and to impose a penalty
under section 6673.1
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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Respondent determined a deficiency of $4,387 in petitioner’s
2002 Federal income tax, a section 6654 addition to tax of
$146.61, and a section 6651(a)(1) addition to tax of $1,096.75.
The issues for decision are: (1) Whether petitioner is liable
for the deficiency determined by respondent; (2) whether
petitioner is liable for an addition to tax pursuant to section
6654; (3) whether petitioner is liable for an addition to tax for
failure to file a Federal income tax return pursuant to section
6651(a)(1); and (4) whether petitioner is liable for a penalty
for making frivolous arguments or instituting a proceeding
primarily for delay pursuant to section 6673(a)(1).
Background
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 the petition
was filed in this case, petitioner resided in New Harmony, Utah.
Respondent received information from third parties regarding
various payments made to petitioner for the 2002 tax year.
Petitioner does not dispute the receipt of these payments.
Petitioner submitted a Form 1040, U.S. Individual Income Tax
Return, for 2002 to respondent. Petitioner listed zero as the
amount of his wages, total income, adjusted gross income, taxable
income, and total tax. Petitioner attached a typewritten
statement to the Form 1040 reciting contentions and arguments
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that this Court has found to be frivolous and/or groundless.
Petitioner did not pay any estimated income taxes for the 2002
tax year.
Discussion
I. Motion for Summary Judgment
Rule 121(a) provides that either party may move for summary
judgment upon all or any part of the legal issues in controversy.
Summary judgment may be granted if it is demonstrated that no
genuine issue exists as to any material fact and 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). As the party that moved for summary judgment,
respondent has the burden of showing there is no genuine issue as
to any material fact and that he is entitled to judgment as a
matter of law. Nis Family Trust v. Commissioner, 115 T.C. 523,
536, 537-538 (2000).
We conclude that there is no genuine issue as to any
material fact and that a decision may be rendered as a matter of
law.
II. The Deficiency
Section 61 defines gross income as all income from whatever
source derived. Gross income includes, among other things,
compensation for services, interest, and pensions. Sec. 61(a).
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Petitioner stipulated that he received the income listed on
the notice of deficiency.2 Petitioner contends, inter alia, that
the earnings he received are not income, and therefore he is not
liable for taxes. Petitioner also argues that the statutory
notice of deficiency he received is invalid because it was not
signed by the Secretary of the Treasury or an agent designated by
the Secretary. Petitioner advanced these and other arguments in
filings and at the hearing. These arguments are characteristic
of tax-protester rhetoric that has been universally rejected by
this and other courts. Casper v. Commissioner, 805 F.2d 902
(10th Cir. 1986), affg. T.C. Memo. 1985-154; Charczuk v.
Commissioner, 771 F.2d 471 (10th Cir. 1985), affg. T.C. Memo.
1983-433; Michael v. Commissioner, T.C. Memo. 2003-26; Knelman v.
Commissioner, T.C. Memo. 2000-268, affd. without published
opinion 33 Fed. Appx. 346 (9th Cir. 2002). 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 conclude that petitioner is liable for the
deficiency determined by respondent.
2
Petitioner received payments totaling $35,873 from
various sources including wages, unemployment compensation,
income from self-employment, and IRA distributions.
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III. Additions to Tax
A. Section 6654
Respondent determined that petitioner was liable for an
addition to tax for his failure to pay estimated Federal income
tax under section 6654(a). This addition to tax is mandatory in
the absence of a statutory exception. See Grosshandler v.
Commissioner, 75 T.C. 1, 20-21 (1980). It is undisputed that no
statutory exception applies in this case. Accordingly, we
sustain respondent's determination.
B. Section 6651(a)(1)
Respondent determined that petitioner is liable for an
addition to tax pursuant to 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 such failure is due to
reasonable cause and not due to willful neglect.
Petitioner challenges respondent’s determination because he
filed a Form 1040 for 2002. That tax return, however, contained
zeros for every line. It has been held that a return that
contains only zeros is not a valid return for the purpose of
section 6651(a)(1). United States v. Rickman, 638 F.2d 182, 184
(10th Cir. 1980); Cabirac v. Commissioner, 120 T.C. 163, 169
(2003).
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In order to determine whether a tax return is valid, we
follow the test enunciated in Beard v. Commissioner, 82 T.C. 766,
777 (1984), affd. 793 F.2d 139 (6th Cir. 1986):
First, there must be sufficient data to calculate tax
liability; second, the document must purport to be a
return; third, there must be an honest and reasonable
attempt to satisfy the requirements of the tax law; and
fourth, the taxpayer must execute the return under
penalties of perjury.
The requirement that petitioner has made “an honest and
reasonable attempt” to satisfy the tax law is not met in the
current case. Petitioner’s attachment to the Form 1040 contained
tax-protester arguments that have been consistently rejected by
this and other courts. Additionally, the Form 1040 filed by
petitioner did not contain sufficient information to constitute a
valid return. Despite petitioner’s admission of the receipt of
various payments from third parties, he filed a zero tax return.
The section 6651(a)(1) addition to tax applies in the case
of a failure to file a Federal income tax return unless it is
shown that such failure is due to reasonable cause and not to
willful neglect. Higbee v. Commissioner, 116 T.C. 438, 447
(2001). It must be shown that the taxpayer exercised business
care and prudence but nevertheless was unable to file the return
within the specified time. See United States v. Boyle, 469 U.S.
241, 245 (1985); sec. 301.6651-1(c)(1), Proced. & Admin. Regs.
Willful neglect means a conscious, intentional failure, or
reckless indifference. United States v. Boyle, supra at 245.
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Petitioner did not act in good faith. Petitioner relied on
frivolous tax-protester arguments in deciding not to file an
adequate return. Petitioner’s reliance on these materials does
not constitute reasonable cause for failing to file a return.
See Coulton v. Commissioner, T.C. Memo. 2005-199. Accordingly,
we sustain respondent’s determination.
IV. Penalty
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). The U.S. Court of
Appeals for the Tenth Circuit, the court which is the likely
venue for appeal of this case, has upheld sanctions against
taxpayers making arguments similar to petitioner’s. See Casper
v. Commissioner, supra at 905; Charczuk v. Commissioner, supra at
475.
Petitioner’s protester rhetoric is manifestly frivolous and
groundless. He has caused this Court to waste limited resources
by his persistence in advancing views of the tax law which are
known to be completely without merit. Petitioner was duly warned
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that his arguments are frivolous and groundless, and of the
potential consequences of his actions. Accordingly, pursuant to
section 6673(a), we hold petitioner is liable for a $1,000
penalty.
To reflect the foregoing,
An appropriate order
and decision will be entered.