T.C. Memo. 2006-233
UNITED STATES TAX COURT
JAMES S. ZIGMONT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 9758-04. Filed October 31, 2006.
P failed to file Federal income tax returns for
2000 and 2001. R determined deficiencies and additions
to tax pursuant to secs. 6651(a)(1) and 6654, I.R.C. P
contested the determinations based on tax-protester
rhetoric.
Held: P is liable for the deficiencies determined
by R and additions to tax pursuant to secs. 6651(a)(1)
and 6654, I.R.C.
Philip A. Putman, for petitioner.
Frank W. Louis, for respondent.
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MEMORANDUM OPINION
WHERRY, Judge: This case is before the Court on petitioner’s
motion to withdraw deemed admissions pursuant to Rule 90(f) and
respondent’s motion for summary judgment pursuant to Rule
121(a).1 Respondent determined the following deficiencies and
additions to tax with respect to petitioner’s Federal income
taxes for the 2000 and 2001 taxable years:
Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654
2000 $186,109 $46,210.00 $9,865.68
2001 87,905 21,976.25 3,513.00
Background
Petitioner submitted to the Internal Revenue Service (IRS) a
Form 1040, U.S. Individual Income Tax Return, for the 2000
taxable year claiming a refund of $1,269.18 for wages withheld
and containing zeros on all other filled out lines between line 6
and line 58 of the tax return. Petitioner similarly submitted a
Form 1040 for the 2001 taxable year that contained zeros on all
filled out lines from line 7 through line 70 of the tax return.
Petitioner also enclosed with his 2000 and 2001 returns a typed
statement challenging his duty to file returns and pay taxes.
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code (Code) in effect for the years in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
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Respondent issued notices of deficiency on February 27 and March
3, 2004, for the 2000 and 2001 taxable years, respectively,
determining the deficiencies and additions to tax set forth
above.
Petitioner filed an imperfect petition with the Tax Court on
June 3, 2004. Thereafter, the case so instituted was dismissed
twice for lack of jurisdiction on account of petitioner’s failure
to comply with the Court’s order regarding the filing of a proper
amended petition. Each time the dismissal was subsequently
vacated after belated action on petitioner’s part. Petitioner
eventually submitted an amended petition, which was filed on
January 19, 2005.2 A notice setting the case for trial in
October of 2005 and attaching the Court’s standing pretrial order
was issued to petitioner on May 19, 2005.
On August 11, 2005, respondent filed with the Court requests
for admission, which requests had been served on petitioner the
previous day. Petitioner failed to respond, and pursuant to Rule
90(c) each matter set forth in the requests for admission was
deemed admitted 30 days after the date of service. As a result,
the following items are deemed admitted as material facts:
2
The petition and amended petition filed in this case each
listed an address for petitioner in Rochester, New Hampshire.
Shortly before the hearing on respondent’s motion, petitioner
submitted documents to the Court which listed an address for
petitioner of Clarksburg, West Virginia, and indicated that the
New Hampshire address was that of petitioner’s nephew.
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(1) Petitioner received Social Security payments of $10,758
and $12,180 in 2000 and 2001, respectively;
(2) petitioner received the proceeds of stock and bond sales
totaling $490,268 and $234,728 in 2000 and 2001, respectively;
(3) petitioner did not submit to respondent information
regarding the cost of the stocks and bonds sold in 2000 and 2001;
(4) petitioner received payments from an IRA or other
retirement plan of $13,933 in 2000 and 2001;
(5) petitioner received dividends on stock of $188 and $29
in 2000 and 2001, respectively;
(6) petitioner earned interest of $17,228 and $28,296 in
2000 and 2001, respectively;
(7) petitioner failed to file Federal income tax returns for
2000 and 2001; and
(8) petitioner did not make the required payments of
estimated taxes for 2000 or 2001, through withheld taxes or
otherwise.
Respondent then filed a motion for summary judgment on
September 26, 2005. Petitioner did not file timely a response to
respondent’s motion. However, on October 25, 2005, petitioner
filed a motion to withdraw deemed admissions, lodged petitioner’s
responses to respondent’s requests for admission, and filed a
Rule 50(c) statement in response to respondent’s motion for
summary judgment. Petitioner’s motion to withdraw deemed
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admissions stated that petitioner was in the process of
relocating to Los Angeles and had used his nephew’s mailing
address in New Hampshire and “Regrettably, petitioner’s nephew
was not as dependable in forwarding mail to petitioner, or
alerting petitioner that certain mail existed, as petitioner had
hoped.” Petitioner’s proposed late response to respondent’s
request for admissions denied “that petitioner sold any stocks or
bonds or had any information relating thereto to submit to the
Internal Revenue Service.” Petitioner’s Rule 50(c) statement in
response to respondent’s motion for summary judgment conceded
that “Should the Court deny petitioner’s motion to withdraw the
deemed admissions, petitioner confesses that the deemed
admissions alone are enough to cause the Court to award
respondent summary judgment.”
A hearing was held on respondent’s motion on October 27,
2005, at which time respondent also filed an objection to
petitioner’s motion to withdraw deemed admissions. Respondent’s
objection included as exhibits thereto copies of petitioner’s
2000 and 2001 Forms 1040, and third-party Forms 1099 for 2000 and
2001 reflecting significant unreported gross income of
petitioner. At the close of the hearing by order, the Court
afforded petitioner an opportunity to submit a written response
to respondent’s objection. Petitioner did not file a response.
After reviewing the record of this case, the Court by order dated
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September 13, 2006, afforded petitioner a final opportunity to
respond to respondent’s objection to petitioner’s motion to
withdraw deemed admissions. An untimely response from petitioner
failed to set forth any sufficient substantive basis for relief
from the deemed admissions, although it was filed for the record.
Discussion
I. Petitioner’s Motion for Relief From Deemed Admissions
Rule 90(a) permits a party to serve a written request for
admission of relevant and unprivileged matter upon the other
party. Each matter contained in such request is deemed admitted
unless the served party responds within 30 days after service or
within such shorter or longer time as the Court may allow. Rule
90(c). Any fact deemed admitted under Rule 90(c) is conclusively
established. Rule 90(f). The Court may permit withdrawal or
modification of an admission if the “presentation of the merits
of the case will be subserved thereby,” and such withdrawal or
modification will not prejudice the party who obtained the
admission. Rule 90(f).
A party will be prejudiced by the withdrawal of deemed
admissions if “he has relied on them and will suffer delay, added
expense, and additional effort because of the withdrawal.”
Morrison v. Commissioner, 81 T.C. 644, 649 (1983). Furthermore,
the Court should not “lightly weigh the burdens of establishing
admissions” on parties that properly use Rule 90 to “advance
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litigation initiated by the opposing party.” Id. at 648.
Respondent properly used Rule 90 to expedite litigation.
Considering carefully the facts at issue in the deemed admissions
and the surrounding circumstances as described in the motion and
respondent’s objection, the Court concludes that permitting
petitioner to withdraw or modify the deemed admissions would
prejudice respondent and would not serve presentation of the
merits of the case. Petitioner’s failure timely to respond to
respondent’s request for admissions is indicative of his behavior
in this case. Petitioner has repeatedly filed documents late or
not at all, as well as failed to comply with the Court’s orders.
Therefore, petitioner’s motion to withdraw deemed admissions
shall be denied.
II. Respondent’s Motion for Summary Judgment
A. General Rules
Rule 121(a) allows a party to move “for a summary
adjudication in the moving party’s favor upon all or any part of
the legal issues in controversy.” Rule 121(b) directs that a
decision on such motion shall be “rendered if the pleadings,
answers to interrogatories, depositions, admissions, and any
other acceptable materials, together with the affidavits, if any,
show that there is no genuine issue as to any material fact and
that a decision may be rendered as a matter of law.” Admissions
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referenced in Rule 121(b) include deemed admissions pursuant to
Rule 90(c). Marshall v. Commissioner, 85 T.C. 267, 272 (1985).
The moving party bears the burden of proving that no genuine
issue of material fact exists and that he or she is entitled to
judgment as a matter of law. Sundstrand Corp. v. Commissioner,
98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994).
Facts and inferences drawn from the record are viewed in the
light most favorable to the nonmoving party. Id. Where the
moving party properly makes and supports a motion for summary
judgment, the nonmoving party “may not rest upon the mere
allegations or denials of such party’s pleading,” but must, by
affidavits or otherwise, set forth “specific facts showing that
there is a genuine issue for trial.” Rule 121(d).
B. Deficiency
Based on the documents filed with the Court, including the
deemed admissions, supra, the Court concludes that respondent has
satisfied his burden of proving that no genuine issue of material
fact exists as to respondent’s deficiency determinations and that
respondent is entitled to judgment as a matter of law.
C. Additions to Tax
The Commissioner bears the burden of production in any court
proceeding with respect to an individual’s liability for
penalties or additions to tax. Sec. 7491(c). To meet this
burden, the Commissioner must present “sufficient evidence
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indicating that it is appropriate to impose the relevant penalty”
or addition to tax. Higbee v. Commissioner, 116 T.C. 438, 446
(2001). In instances where an exception to the penalty or
addition to tax is afforded upon a showing of substantial
authority, reasonable cause, or similar provisions, the taxpayer
bears the burden of raising and prevailing on these issues. Id.
at 446-447.
1. Section 6651
Section 6651(a)(1) imposes a 5-percent addition to tax for
each month or portion thereof a required return is filed after
the prescribed due date, not to exceed 25 percent in the
aggregate, unless such failure to file timely is due to
reasonable cause and not due to willful neglect. Although not
defined in the Code, “reasonable cause” is described by the
applicable regulations as the exercise of “ordinary business care
and prudence”. Sec. 301.6651-1(c)(1), Proced. & Admin. Regs; see
also United States v. Boyle, 469 U.S. 241, 246 (1985).
“[W]illful neglect” is interpreted as “a conscious, intentional
failure or reckless indifference.” United States v. Boyle, supra
at 245.
Respondent produced evidence that petitioner failed to file
a Federal income tax return for 2000 and 2001. A Federal income
tax return that contains only zeros and is accompanied by tax-
protester rhetoric is generally not considered a valid return.
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Cabirac v. Commissioner, 120 T.C. 163, 169 (2003) (and cases
cited thereat).3 As the Court of Appeals for the Seventh Circuit
has noted: “it is not enough for a form to contain some income
information; there must also be an honest and reasonable intent
to supply the information required by the tax code.” United
States v. Moore, 627 F.2d 830, 835 (7th Cir. 1980). Furthermore,
pursuant to the deemed admissions, supra, petitioner did not file
a Federal income tax return for either the 2000 or 2001 taxable
year. Petitioner has not presented any evidence that his failure
to file was due to reasonable cause. The Court concludes that
respondent has satisfied his burden of proving that no genuine
issue of material fact exists as to respondent’s addition to tax
determinations, and respondent is entitled to judgment as a
matter of law. Therefore, the Court sustains the imposition of
additions to tax pursuant to section 6651(a)(1).
3
The Court of Appeals for the Ninth Circuit recognizes a
limited exception to this rule, see United States v. Long, 618
F.2d 74 (9th Cir. 1980), a minority view. Absent a stipulation
to the contrary, appeal in the instant case would appear to be to
the Court of Appeals for either the First or Fourth Circuit. See
supra note 2. Neither of these courts has expressed a position.
We therefore adhere to our view and that of the majority. See
Cabirac v. Commissioner, 120 T.C. 163 (2003); see also Golsen v.
Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir.
1971).
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2. Section 6654
Section 6654(a) imposes an addition to tax for failure to
pay estimated income tax where there has been an underpayment of
estimated tax by the taxpayer. Pursuant to the deemed
admissions, supra, “petitioner did not make the required payments
of estimated taxes for 2000 or 2001, through withheld taxes or
otherwise". This admission satisfies any burden of production on
the part of respondent. Furthermore, petitioner conceded, supra,
that “Should the Court deny petitioner’s motion to withdraw the
deemed admissions, petitioner confesses that the deemed
admissions alone are enough to cause the Court to award
respondent summary judgment.”
The Court concludes that respondent has satisfied his burden
of proving that no genuine issue of material fact exists as to
respondent’s addition to tax determinations, and respondent is
entitled to judgment as a matter of law. Therefore, the Court
sustains the imposition of additions to tax pursuant to section
6654. Respondent’s motion for summary judgment shall be granted.
III. Section 6673 Penalty
Section 6673(a)(1) authorizes the Tax Court to impose a
penalty not in excess of $25,000 on a taxpayer for proceedings
instituted primarily for delay or in which the taxpayer’s
position is frivolous or groundless. “A petition to the Tax
Court, or a tax return, is frivolous if it is contrary to
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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).
Respondent has not asked the Court to impose a penalty under
section 6673(a)(1), and the Court declines to impose such a
penalty. At the hearing the Court warned petitioner that he
would be subject to a section 6673(a)(1) penalty if he continued
to raise frivolous arguments and cause further delays.
Petitioner heeded the Court’s warning. The Court, therefore,
concludes that it is not appropriate to impose a penalty in the
instant case, but the Court explicitly admonishes petitioner that
he may, in the future, be subject to a penalty under section 6673
for any proceedings instituted or maintained primarily for delay
or for any proceedings which are frivolous or groundless.
The Court has considered all of petitioner’s contentions,
arguments, requests, and statements. To the extent not discussed
herein, we conclude that they are meritless, moot, or irrelevant.
To reflect the foregoing,
An appropriate order and
decision will be entered.