T.C. Memo. 2008-29
UNITED STATES TAX COURT
NICHOLAS MACK, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
NICOLAS MACK, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 446-06, 26301-06. Filed February 13, 2008.
Nicholas Mack, pro se.
Mark J. Miller, for respondent.
MEMORANDUM OPINION
GERBER, Judge: By order dated May 21, 2007, these
deficiency cases were scheduled for trial on September 24, 2007,
at Milwaukee, Wisconsin. In each case, respondent moved at trial
for a dismissal for failure to properly prosecute and for the
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imposition of penalties under section 6673.1 We must decide
whether the cases should be dismissed for lack of prosecution and
whether penalties should be imposed.
Background
Docket No. 446-06
Respondent determined a $554 income tax deficiency for
petitioner’s 2003 tax year solely attributable to the 10-percent
additional tax under section 72(t) on early distributions from
qualified retirement plans. The petition was filed on January 6,
2006, and respondent’s answer was filed on March 10, 2006. After
filing his petition, petitioner immediately began requesting
documents from respondent, and on April 3, 2006, respondent moved
for a protective order, which the Court granted April 24, 2006.
Approximately 1 year later respondent moved to have this
case calendared, petitioner objected, and the Court calendared
this case for trial, along with docket No. 26301-06, on the
Court’s September 24, 2007, Milwaukee, Wisconsin, session. On
May 29, 2007, petitioner moved for summary judgment on the basis
that respondent’s counsel and certain unnamed clerks of the Tax
Court “have engaged in serious misconduct” and the “presiding
judge has failed and failed again to show any semblance of
impartiality”. Petitioner did not seek summary judgment with
1
All section references are to the Internal Revenue Code as
amended and in effect for the periods under consideration. Rule
references are to the Tax Court Rules of Practice and Procedure.
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respect to the underlying merits of respondent’s determination.
In effect, petitioner was seeking a dismissal of this case as a
sanction against respondent. After considering the parties’
written positions, the Court denied petitioner’s motion for
summary judgment by a June 25, 2007, order.
Petitioner also served respondent with a request for
admissions, and respondent responded. At about the same time,
respondent’s motion to show cause why proposed facts in evidence
should not be accepted as established under Rule 91(f) was filed
on June 1, 2007, and on June 5, 2007, the Court issued an order
to show cause why said facts should not be deemed stipulated
under Rule 91(f). Petitioner failed to respond, and the order to
show cause was made absolute by order dated July 25, 2007. The
facts deemed stipulated support respondent’s position that his
determination is not in error.
Respondent’s attorney and Appeals officer made numerous
attempts to contact petitioner for purposes of normal pretrial
preparation and/or settlement of the case. Petitioner was
recalcitrant and refused to speak with respondent’s employees.
Petitioner sent respondent a final offer to resolve the case and
thereafter, on July 10, 2007, the Court received and filed
“PETITIONER’S NOTICE OF REFUSAL TO ACCEPT SERVICE OF COURT’S
DOCUMENTS”. Attached to petitioner’s notice was a letter to the
Clerk of the Tax Court dated July 5, 2007, returning “unopened
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and unread” certified mail the Court had sent to petitioner.
Petitioner’s letter also stated that his “Settlement Offer * * *
[was his] final involvement * * * [with the] Court.”
Docket No. 26301-06
Respondent determined that petitioner was liable for a
deficiency in self-employment tax for his 2004 tax year.
Petitioner reported gross receipts of $43,933 from “General
Rentals” and an $8,078.68 net profit from his “General Rentals,
Quality Homes” business on Schedule C, Profit or Loss from
Business, attached to his 2004 return. On the basis of
petitioner’s reported items, respondent determined that
petitioner was liable for a deficiency of $1,142 in self-
employment tax for his 2004 tax year.
Petitioner had received a Form 1099-MISC, Miscellaneous
Income, for $35,983 from SSI Independent Living Center, Inc.
(SSI), and petitioner contends he included this amount in the
gross receipts he reported on his Schedule C. Petitioner
contends that SSI is a nonprofit corporation of which
petitioner’s father is a director and an officer. Respondent
reports that according to SSI’s Web site, petitioner is
permanently paralyzed and during 2004, under a contract with SSI,
was paid $35,983 to provide himself with a home and with
transportation.
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The petition in docket No. 26301-06 was filed December 20,
2006, and respondent’s answer was filed February 6, 2007.
Initially, petitioner had designated Milwaukee, Wisconsin, as the
place of trial, but in March he sought to strike Milwaukee as the
place of trial because he considered respondent’s determination
to be “fraudulent” and he believed the case would “never properly
proceed to trial.” Around the same time, petitioner moved to
have the case dismissed with prejudice on the ground that
respondent’s determination was “frivolous” and without merit.
Petitioner’s motions were denied, and over the next few months
petitioner sought reconsideration of the denial of his motions.
Subsequently, petitioner served requests for admission which
respondent answered. Petitioner filed a motion for summary
judgment that was denied. Petitioner also sent a final offer to
resolve docket No. 26301-06 and subsequently filed a “NOTICE OF
REFUSAL TO ACCEPT SERVICE OF COURT’S DOCUMENTS” as he had in
docket No. 446-06.
Other than an ultimatum of settlement on his terms,
petitioner has not provided respondent with any reason or
argument that would show that respondent’s determinations for
2003 and 2004 were in error. Instead, petitioner has attempted
to collaterally attack respondent’s determinations by means of
broadly stated assertions that respondent’s determinations are
“fraudulent” or “frivolous” and that respondent’s employees are
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involved in some type of conspiracy with Court employees.
Petitioner has not shown or specifically identified any
particular act that would be considered fraudulent.
Discussion
Our consideration of respondent’s motions to dismiss for
lack of prosecution is a relatively simple matter. Petitioner
filed petitions in these cases generally alleging error in
respondent’s determinations for his 2003 and 2004 tax years. No
penalties or matters upon which respondent would bear a burden of
proof or production were determined against or identified by
petitioner. There was some pretrial activity, including
petitioner’s failed motion for summary judgment. Petitioner then
made ultimatums of settlement on his terms followed by his
refusal to further discuss these cases with respondent or to
receive any correspondence from the Court. He failed to appear
for trial or respond to respondent’s motions or Court orders, and
it is clear that his cases should be dismissed for his failure to
prosecute. Petitioner delayed these cases, his conduct has been
contumacious, and he was given ample opportunity to pursue the
merits of his tax dispute but failed to do so. Accordingly, we
will grant respondent’s motions to dismiss for failure to
properly prosecute.
Respondent’s motions to impose sanctions under I.R.C.
section 6673 are also presented for our consideration. In
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support of his motions, respondent contends that initial attempts
to communicate with petitioner were met with “abject hostility,
including accusations of fraud and misconduct.” Respondent also
points out that petitioner refused to meet with respondent’s
employees or to discuss his cases by telephone. In addition,
petitioner’s correspondence to respondent and the Court contained
“insulting and false accusations of ‘unethical misconduct’ and
‘bad faith’”.
Respondent contends that petitioner filed numerous frivolous
motions or documents, such as: “Petitioner’s Motion to Strike
Designation of Place of Trial, Petitioner’s Motion to Dismiss and
For Costs, Petitioner’s Motion for Reconsideration, Petitioner’s
Request for Admissions, Petitioner’s Motion for Summary Judgment,
Petitioner’s Request for Stipulations, Petitioner’s Notice of
Refusal to Accept Service of Court’s Documents.” Petitioner’s
motions were denied and did not address the underlying merits of
respondent’s determinations. In most instances they were
collateral attacks on respondent’s or the Court’s employees.
Respondent contends, that petitioner has filed, in another
court, a “false and frivolous law suit against respondent’s
counsel * * * [and Judges] of this Court.” Respondent contends
that “Petitioner is using * * * [that] law suit as a basis for
this Court to ‘stay’ this proceeding.” It is for those reasons
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that respondent moves the Court to impose a penalty upon
petitioner under section 6673.
Section 6673(a)(1) provides that
Whenever it appears to the Tax Court that–-
(A) proceedings before it have been instituted or
maintained by the taxpayer primarily for delay,
(B) the taxpayer's position in such proceeding is
frivolous or groundless, or
(C) the taxpayer unreasonably failed to pursue
available administrative remedies,
the Tax Court, in its decision, may require the taxpayer to
pay to the United States a penalty not in excess of $25,000.
Respondent argues that penalties should be imposed because
petitioner instituted and/or is maintaining these proceedings
primarily for delay and because petitioner’s positions in these
proceedings are frivolous. In particular, respondent contends
that petitioner did not advance meaningful positions regarding
his 2003 or 2004 tax years and that the documents he filed were
frivolous and contained insulting and false accusations against
respondent’s employees, Court employees, and Judges of the Court.
The Court of Appeals for the Third Circuit has observed that
“the legislative history of §6673 supports the view that it is a
penalty statute designed to deter taxpayers from bringing
frivolous or dilatory suits, and not a damage provision enacted
to compensate the IRS.” Sauers v. Commissioner, 771 F.2d 64, 68
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(3d Cir. 1985), affg. T.C. Memo. 1984-367; see also Coleman v.
Commissioner, 791 F.2d 68 (7th Cir. 1986).
The Court of Appeals for the Fifth Circuit has recently
approved and imposed a sanction where a taxpayer insulted the
Court of Appeals, the Tax Court, and the opposing party.
Stearman v. Commissioner, 436 F.3d 533, 540 (5th Cir. 2006),
affg. T.C. Memo. 2005-39. In approving the imposition of
penalties against the taxpayer, the Court of Appeals observed
that
it is difficult to imagine a lesser sanction that would
vindicate the integrity of the court proceedings and
deter * * * [taxpayers] from similar misconduct.
Wasteful and dilatory appeals unjustifiably consume the
limited resources of the judicial system: “While
judges, staff and support personnel have expended
energy to dispose of this meritless appeal, justice has
been delayed for truly deserving litigants.” Foret v.
S. Farm Bureau Life Ins. Co., 918 F.2d 534, 539 (5th
Cir. 1990). [Id.; fn. ref. omitted.]
In deciding whether to sanction petitioner’s conduct by
imposing penalties under section 6673, we note that we will
dismiss petitioner’s cases with prejudice for failure to
prosecute because there was a record of delay and contumacious
conduct, and petitioner had been given ample opportunity to
pursue the merits of his tax dispute. A lesser sanction than
dismissal would, under the circumstances, be futile. See Tello
v. Commissioner, 410 F.3d 743, 744 (5th Cir. 2005).
Understanding that a dismissal with prejudice, in itself, is
a form of sanction, we consider whether the same actions should
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also be sanctioned by means of a penalty imposed under section
6673. Initially we note that petitioner’s conduct meets the
letter and intent of section 6673 in that his personal attacks on
respondent’s and the Court’s employees are frivolous. Petitioner
has not advanced any particular reasons for his broad-based
claims of fraud and misconduct. In addition, he has failed to
present any meaningful basis to support his generalized claim
that respondent’s determinations are in error. Finally, after
instituting these proceedings, petitioner has sought to engineer
a delay of them. He has made unreasonable ultimatums, refused to
cooperate or follow the Court’s Rules, and most significantly,
intentionally refused to accept, read, or follow the Court’s
correspondence, some of which contains Court orders requiring a
specific action.
Petitioner’s income tax deficiencies are modest ($554 for
2003 and $1,142 for 2004), but his belligerence and actions
require that, in addition to the dismissal of his cases, he be
sanctioned by the imposition of penalties under section 6673 of
$1,000 for 2003 and $1,000 for 2004. Petitioner’s attempts to
delay and his belligerence must be sanctioned to vindicate the
integrity of this Court’s proceedings and to deter petitioner
from similar misconduct in the future. Accordingly, we will
grant respondent’s motions to impose sanctions under I.R.C.
section 6673.
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To reflect the foregoing,
Orders of dismissal and
decision will be entered for
respondent.