T.C. Summary Opinion 2008-59
UNITED STATES TAX COURT
RICHARD KEITH MCFARLAND, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15358-06S. Filed May 22, 2008.
Richard K. McFarland, pro se.
Elizabeth R. Proctor, for respondent.
LARO, Judge: This case was heard pursuant to the
provisions of section 7463 of the Internal Revenue Code in effect
when the petition was filed.1 Pursuant to section 7463(b), the
decision to be entered is not reviewable by any other court, and
1
Unless otherwise indicated, section references are to the
applicable versions of the Internal Revenue Code, and Rule
references are to the Tax Court Rules of Practice and Procedure.
Some dollar amounts have been rounded.
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this opinion shall not be treated as precedent for any other
case.
This case was commenced in response to a Notice of
Determination Concerning Collection Action(s) Under Section 6320
and/or 6330 (notice of determination). The issue for decision is
whether respondent may proceed with collection of petitioner’s
2001 income tax liability. We hold that he may. We also decide
on our own motion whether petitioner is liable for a penalty
pursuant to section 6673. We hold that he is and impose a
penalty of $3,500.
Background
Some of the facts have been deemed stipulated pursuant to
Rule 91(f).2 The stipulation of facts, with accompanying
exhibits, is incorporated herein by this reference. When he
petitioned this Court, petitioner resided in Michigan.
2
In a meeting on Oct. 9, 2007, petitioner informed
respondent that petitioner objected to all of the facts stated in
respondent’s proposed stipulation of facts. On Oct. 12, 2007,
respondent filed a motion to show cause why proposed facts in
evidence should not be accepted as established pursuant to Rule
91(f) to which was attached respondent’s proposed stipulation of
facts. In an order dated Oct. 18, 2007, the Court granted
respondent’s motion and ordered petitioner to file a response
showing why the matters set forth in respondent’s motion should
not be deemed admitted. Petitioner failed to comply with the
Court’s order. In an order dated Oct. 31, 2007, the Court made
absolute its order to show cause and deemed established the facts
and evidence set forth in respondent’s proposed stipulation of
facts and accompanying exhibits.
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Petitioner mailed to respondent a 2001 Form 1040, U.S.
Individual Income Tax Return. Petitioner did not enter on the
form any financial information for the taxable year but entered
zeros on every line regarding income and reported his total
income for 2001 as zero. Petitioner’s 2001 filing status was
marked as single, but he did not claim the standard deduction on
the basis of his filing status. Petitioner claimed a personal
exemption for himself.
Petitioner attached two typewritten pages to his Form 1040,
which contain frivolous tax-protester arguments.3 On April 16,
2004, respondent sent a letter to petitioner informing petitioner
that petitioner’s return appeared to be frivolous and that if he
failed to respond within 30 days, a notice of deficiency would be
issued.
On September 20, 2004, respondent issued a notice of
deficiency to petitioner with respect to his 2001 taxable year.
Respondent computed petitioner’s 2001 income using third-party
information returns. The adjustments to petitioner’s income
included:
3
The attached pages appear to be a generic tax protester
document that contains blanks in which to enter the name of the
person completing the document, the taxable year to which the
document relates, and the amount (if any) of taxes withheld.
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Standard deduction ($4,550)
Exemptions (2,900)
Wages--W2--Employee Management Concepts 25,913
Wages--W2--Elite Leasing Group LLC
Unemployment compensation - Michigan 8,274
Empl Sec Comm 1,800
Total 28,537
The notice of deficiency also determined additions to tax under
section 6651(a)(1) of $1,040.75, and under section 6654 of
$166.37. The notice of deficiency indicated that the last date
on which petitioner could petition this Court was December 20,
2004. On December 13, 2004, petitioner contacted respondent and
stated that he received the notice of deficiency. Petitioner
failed to petition this Court.
On February 25, 2006, respondent issued to petitioner a
final notice of intent to levy and of the right to a hearing. On
March 23, 2006, petitioner timely filed with respondent a
“Request for a Collection Due Process Hearing” to which several
documents were attached, including a document entitled “Request
For A Collection Due Process Hearing As Provided For In Code
Sections 6320 & 6330” and “page 73 of Senator Roth’s book ‘The
Power to Destroy’”. In the hearing requests, petitioner made
numerous frivolous or irrelevant information requests typical of
tax-protesters and demanded that respondent provide at the
hearing such information as “the official job description(s) of
those IRS employees who imposed the ‘frivolous’ penalty.”
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On May 10, 2006, respondent’s Office of Appeals (Appeals)
mailed to petitioner a letter notifying him, in part, that
Appeals had received petitioner’s request for a collection due
process hearing and had scheduled a telephone conference call for
petitioner on June 19, 2006. That letter notified petitioner
that he would be allowed a face-to-face conference if any
relevant, nonfrivolous issue was raised in writing or via
telephone. The letter also warned petitioner that this Court is
empowered to impose sanctions of up to $25,000 on petitioner for
instituting or maintaining an action primarily for delay or for
taking a position that is frivolous or groundless. On June 19,
2006, Appeals called petitioner and made the following notes
pursuant to the call:
Called taxpayer at 10:00am CST and introduced myself along
with giving him my ID number. I explained to him that I am
conducting a hearing that he requested * * * I informed him
that the IRS has followed all applicable law and
administrative procedures. I informed him that we are to
discuss the levy issues for tax years 2001 and 2004. He
stated that he requested a face-to-face. He start [sic]
reading the IRS Supreme Court Ruling about filing taxes
under penalty under [sic] perjury. He asked me if I knew
what a “PRA” meant. I asked him to state only relevant
issues relating to the tax liability * * * He began to read
some more quotes and IRC’s. I stated that if he did not
have any relevant issues such as collection alternatives or
challenges to the existence or amount of the underlying
liability, the call will be terminated. The taxpayer stated
that he had relevant issues and began to read more quotes
and IRC’s. I then terminated the call.
On July 7, 2006, respondent mailed the notice of
determination to petitioner. The notice of determination stated
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that Appeals had verified or received verification that all
applicable laws and administrative procedures had been followed
and had balanced the proposed collection action with the concern
that such action be no more intrusive than necessary.
On August 2, 2006, petitioner petitioned this Court
requesting the following relief:4
No satutory notice and demand for payment was sent persuant
to IRC section (6331)(A) via Form 17 A. No collection due
process hearing was held pesuant to IRC section
(6230)(A)(3)(B) No valid assessmant by the IRS exhists
persuant to IRC section (6201)(A)(1) The IRS violated IRC
section (6020)(B) via the return that they created and did
not sine or swear to under penalty of perjury. I also
believe that the form 1040 in this case has no valid office
of management and budget control number. Also the 1040
regulation is found at: 5 (CFR)(1320.9) wich states that it
is a preposal. Relief sought, have the record exponged
Petitioner’s case was set for trial on November 26, 2007.
During the trial petitioner asserted that he believed he was a
tax-protester, stating: “I’m a member of the We the People
Foundation lawsuit against the United States Government before
the Supreme Court right now.” The Court warned petitioner that
protesting tax through frivolous arguments could subject
petitioner to monetary penalties.
4
We note the various misspelled words and grammatical
errors but do not point them out repeatedly.
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Discussion
1. Section 6330 Levy
Section 6330 provides for notice and opportunity for a
hearing before the Commissioner may levy upon the property of any
person. At the hearing the person may raise any relevant issue
relating to the unpaid tax or proposed levy, including challenges
to the appropriateness of the collection action and offers of
collection alternatives. The person may challenge the existence
or amount of the underlying tax liability for any period only if
the person did not receive a notice of deficiency or did not
otherwise have an opportunity to dispute the liability. Sec.
6330(c)(2)(B); Sego v. Commissioner, 114 T.C. 604, 609 (2000).
Once Appeals issues a notice of determination, the person may
seek judicial review in this Court. Sec. 6330(d)(1). Unless the
validity of the underlying tax liability is properly at issue, we
review the determination for abuse of discretion. Sego v.
Commissioner, supra at 609-610.
The validity of the underlying tax liability is not properly
at issue. Petitioner concedes that during 2001 he received
$25,913 from Employee Management Concepts, $8,274 from Elite
Leasing Group LLC, and $1,800 from Michigan Employment Security
Commission. Petitioner also concedes that he submitted to
respondent a 2001 Form 1040 reporting that he had no income for
2001. Respondent has shown good cause not to suspend the levy,
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inasmuch as petitioner raised only frivolous arguments during his
appeal and has never proposed any collection alternatives. See
Burke v. Commissioner, 124 T.C. 189, 195-197 (2005). We conclude
that Appeals did not abuse its discretion as to the matter at
hand, and we sustain the determinations of Appeals that the
proposed levy is appropriate.
2. Section 6673(a)(1) Penalty
The Court now considers sua sponte whether to impose a
penalty against petitioner pursuant to section 6673(a)(1). That
section provides that the Court may require a taxpayer to pay to
the United States a penalty not in excess of $25,000 whenever,
among other reasons, it appears either that the taxpayer
instituted or maintained the proceeding primarily for delay or
that the taxpayer’s position in the proceeding is frivolous or
groundless.
Petitioner was warned repeatedly that his frivolous and
groundless positions in this proceeding could subject him to
penalties pursuant to section 6673; he has chosen to disregard
these warnings. We conclude that petitioner’s positions in this
proceeding are frivolous and groundless. On the record before
us, we are convinced that petitioner has instituted and
maintained this proceeding primarily for delay and has advanced
frivolous and groundless arguments. See Hodgson v. Commissioner,
T.C. Memo. 2003-122 (and the cases cited therein). In the light
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of the foregoing, we believe sanctions are necessary to deter
petitioner and other similarly situated taxpayers from comparable
dilatory conduct. Pursuant to section 6673(a)(1), we impose
against petitioner a penalty of $3,500.
We have considered all of petitioner’s contentions and
allegations that are not discussed herein, and we find them to be
without merit and/or irrelevant. To reflect the foregoing,
An appropriate order and
decision will be entered.