T.C. Summary Opinion 2007-148
UNITED STATES TAX COURT
NORMAN P. SCHIFF, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 6781-05S, 11265-05S. Filed August 27, 2007.
Norman P. Schiff, pro se.
Orsolya Kun, for respondent.
NIMS, Judge: These cases were heard pursuant to the
provisions of section 7463 of the Internal Revenue Code in effect
when the petitions were filed. Pursuant to section 7463(b), the
decisions to be entered are not reviewable by any other court,
and this opinion shall not be treated as precedent for any other
case. Unless otherwise indicated, all section references are to
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the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
In these consolidated cases, petitioner requests
redetermination of deficiencies in the amounts of $24,548 and
$17,985 determined by respondent for taxable years 2002 and 2003,
respectively. Respondent has conceded that petitioner received
compensation as an employee during the taxable years in issue and
that he is not liable for self-employment tax. Petitioner has
conceded that he is liable for income tax. The issues remaining
for decision are: (1) Whether petitioner is entitled to the
benefit of joint filing status and deductions for his wife and
children for 2002 and 2003; (2) whether petitioner is liable for
additions to tax for failure to file returns pursuant to section
6651(a)(1) for 2002 and 2003; and (3) whether petitioner is
liable for additions to tax for failure to pay estimated tax
pursuant to section 6654 for 2002 and 2003.
Background
Some of the facts have been stipulated and are so found.
The stipulation of facts and related exhibits are incorporated
herein by this reference.
At the time he filed the petitions, petitioner resided in
Ridgewood, New York.
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During taxable years 2002 and 2003, the years in issue,
petitioner worked for Stull, Stull, & Brody, Attorneys at Law.
During 2002, petitioner received compensation in the amount of
$74,808.96, which Stull, Stull, & Brody reported on a Form 1099-
MISC, Miscellaneous Income. During 2003, petitioner received
compensation from Stull, Stull, & Brody in the amount of
$61,888.05. This amount was also reported on a Form 1099-MISC.
Petitioner never supplied Stull, Stull, & Brody with a
completed Form W-4, Employee’s Withholding Allowance Certificate.
Petitioner was aware that the firm was not withholding any
amounts from his paychecks.
For each year in issue petitioner submitted to respondent a
Form 1040, U.S. Individual Income Tax Return. These returns
indicated the names of petitioner and his wife, listed their
address and Social Security numbers, indicated joint filing
status, contained petitioner’s and his wife’s signatures, and
included no financial information. The Forms 1040 had the words
“not liable” written on the heading and other parts of the
returns.
Respondent treated petitioner as a nonfiler and prepared
substitutes for returns for 2002 and 2003. On January 3, 2005,
respondent issued a statutory notice of deficiency for
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petitioner’s taxable year 2003. On March 16, 2005, respondent
issued a statutory notice of deficiency for petitioner’s taxable
year 2002.
Discussion
Income Tax Liabilities
Petitioner has abandoned his position that he is not liable
for income taxes, for fear of imposition of frivolous argument
penalties. He has conceded his liability for income taxes for
the years in issue. Petitioner does, however, dispute the tax
due as calculated in the notices of deficiency.
The Commissioner’s determination in a notice of deficiency
is generally presumed correct, and the taxpayer has the burden of
proving that the determination is erroneous. See Rule 142(a);
Welch v. Helvering, 290 U.S. 111, 115 (1933). Under certain
circumstances, the burden of proof with respect to relevant
factual issues may shift to the Commissioner under section
7491(a). Petitioner has neither alleged that section 7491(a)
applies nor established his compliance with the requirements of
section 7491(a)(2)(A) and (B) to substantiate items, maintain
records, and cooperate fully with respondent’s reasonable
requests. Therefore, the burden of proof does not shift to
respondent.
Petitioner alleges error in respondent’s use of married
filing separately as his filing status for calculation of his
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income tax liabilities for 2002 and 2003. Petitioner believes
that respondent should have used rates applicable to married
taxpayers filing joint returns.
To receive the benefit of joint return rates, taxpayers must
file a valid joint return pursuant to section 6013. Sec.
1(a)(1); see Thompson v. Commissioner, 78 T.C. 558 (1982). The
returns petitioner submitted for 2002 and 2003 were not valid
income tax returns. (See discussion below.) Petitioner did not
file any valid returns electing joint filing status before these
cases were submitted for decision. Cf. Millsap v. Commissioner,
91 T.C. 926 (1988); Phillips v. Commissioner, 86 T.C. 433, 441
(1986), affd. in part and revd. in part 851 F.2d 1492 (D.C. Cir.
1988). Furthermore, petitioner does not make a claim that he was
not legally required to file U.S. income tax returns, which would
first have to be rejected for the need or opportunity to elect
joint filing status to arise. Cf. Vazquez v. Commissioner, T.C.
Memo. 1993-368. Petitioner has also failed to present any
evidence regarding his eligibility for joint filing status.
Thus, petitioner is not entitled to claim joint filing status,
and respondent correctly calculated petitioner’s tax liability
using married filing separately rates. See sec. 1(d).
Petitioner also claims that he is entitled to deductions for
his wife and children, which respondent did not allow in the
calculation of petitioner’s tax liabilities. Since petitioner
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offered no evidence concerning any eligible dependents at trial,
he is not entitled to any deductions other than those allowed by
respondent. See sec. 151(b) and (c).
We therefore sustain the 2002 and 2003 deficiencies in tax
as calculated by respondent.
Additions to Tax
For both taxable years in issue, respondent also seeks
additions to tax for failure to file a return under section
6651(a)(1) and for failure to pay estimated tax under section
6654(a). Petitioner argues that he should not be held liable for
the additions to tax. Pursuant to section 7491(c), the
Commissioner has the burden of production as to whether a
taxpayer is liable for an addition to tax. To meet this burden
of production, the Commissioner must produce sufficient evidence
showing that imposition of the addition to tax is appropriate in
the particular case. Higbee v. Commissioner, 116 T.C. 438, 446
(2001). Once this burden of production is met, the taxpayer has
the burden of proof regarding reasonable cause. Id.
The parties stipulated that petitioner filed what he alleged
were valid returns containing only petitioner’s and his wife’s
names, address, Social Security numbers, and signatures and
indicating joint filing status. These purported returns did not
include any financial information and had the words “not liable”
written on them. Frivolous returns such as these are not valid
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returns. See Cabirac v. Commissioner, 120 T.C. 163, 168-170
(2003); Beard v. Commissioner, 82 T.C. 766, 777 (1984), affd. 793
F.2d 139 (6th Cir. 1986). Respondent has met the burden of
production for the addition to tax for failure to file a return
pursuant to section 6651(a)(1) for each year in issue.
Petitioner’s argument that he had reasonable cause for
failing to file returns because of his sincere belief in various
tax-protester arguments is without merit. Reliance on such
arguments does not constitute reasonable cause for failing to
file a return. See Arnett v. Commissioner, T.C. Memo. 2006-134,
affd. without published opinion 99 AFTR 2d 2007-3418 (10th Cir.
2007); Coulton v. Commissioner, T.C. Memo. 2005-199. Petitioner
is liable for the additions to tax for failure to file returns
for 2002 and 2003.
Section 6654 provides for an addition to tax for failure to
make estimated tax payments. To meet the burden of production
for this addition to tax, respondent must show that petitioner
had a “required annual payment” as set forth in section 6654(d).
Wheeler v. Commissioner, 127 T.C. 200, 211 (2006). The required
annual payment equals the lesser of (1) 90 percent of the tax
shown on the return for the taxable year (or 90 percent of the
tax for such year if no return is filed), or (2) 100 percent of
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the tax shown on the individual’s return for the preceding
taxable year (if the individual filed a return for that preceding
year). Sec. 6654(d)(1)(B).
Respondent has not met the burden of production for the
addition to tax for failure to make estimated tax payments for
2002. Respondent’s Form 4340, Certificate of Assessments,
Payments, and Other Specified Matters, indicates that a return
was filed for 2001. Respondent, however, did not introduce any
evidence regarding the amount of tax shown on the 2001 return.
Consequently, we cannot determine whether petitioner had a
required annual payment for 2002.
Respondent has met the burden of production for the addition
to tax for failure to make estimated tax payments for 2003.
Since petitioner did not file a return for 2002, petitioner’s
required annual payment for 2003 was 90 percent of the tax for
2003, which was greater than zero. Petitioner had no withholding
for 2003, and respondent’s records show that he made no other
payments for 2003. Therefore, respondent has met the burden of
production for the section 6654 addition to tax for 2003.
Petitioner argues that he had reasonable cause for failing
to make estimated tax payments because he was not self-employed
and therefore was not obligated to make estimated tax payments.
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Section 6654 makes no such distinction. Petitioner is liable for
the addition to tax for failure to make estimated tax payments
for 2003.
Decisions will be entered
under Rule 155.