T.C. Summary Opinion 2008-85
UNITED STATES TAX COURT
KAREN HODSDON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 1089-07S. Filed July 15, 2008.
Karen Hodsdon, pro se.
Kim Nguyen, for respondent.
HAINES, 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
Internal Revenue Code as in effect for the year at issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure. Amounts are rounded to the nearest dollar.
-2-
this opinion shall not be treated as precedent for any other
case.
Respondent determined a deficiency in petitioner’s 2004
Federal income tax of $944 and additions to tax under section
6651(a)(1) and (2) of $212 and $76, respectively.
The issues are: (1) Whether petitioner received income
during 2004; (2) whether petitioner is liable for the additions
to tax; and (3) whether the Court should impose a penalty under
section 6673(a).
Background
Petitioner resided in California at the time her petition
was filed.
During 2004 petitioner earned wages of $16,632 from her
employer, Goodwill Industries of Orange County. Petitioner and
her husband, Michael E. Hodsdon, submitted a joint Federal income
tax return for 2004 that reported zeros on all lines, except the
return reported a standard deduction, two exemptions, Federal
income tax withheld, and a refund requested. Respondent
determined the return was not valid and did not process it.
On August 2, 2006, respondent prepared for petitioner a
substitute return under section 6020(b) for 2004. On October 13,
2006, respondent issued petitioner a notice of deficiency.
Petitioner timely petitioned this Court. Trial was held in Los
Angeles, California, on March 10, 2008.
-3-
Discussion
I. Unreported Income
Generally, a taxpayer bears the burden of proving the
Commissioner’s determinations incorrect. Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933). However, the U.S. Court of
Appeals for the Ninth Circuit, the court to which appeal in this
case would lie, has held that the Commissioner must establish
“some evidentiary foundation” connecting the taxpayer with the
income-producing activity, or otherwise demonstrate that the
taxpayer received unreported income, for the presumption of
correctness to attach to the deficiency determination in
unreported income cases. Weimerskirch v. Commissioner, 596 F.2d
358, 361-362 (9th Cir. 1979), revg. 67 T.C. 672 (1977). If the
Commissioner introduces such evidence demonstrating that the
taxpayer received unreported income, the burden shifts to the
taxpayer to show by a preponderance of the evidence that the
deficiency was arbitrary or erroneous. See Hardy v.
Commissioner, 181 F.3d 1002, 1004 (9th Cir. 1999), affg. T.C.
Memo. 1997-97.
Respondent introduced into evidence a computer-generated
form stating that respondent received from Goodwill Industries of
Orange County a Form W-2, Wage and Tax Statement, reporting that
it paid petitioner wages of $16,632 during 2004. Respondent has
therefore made the requisite connection between petitioner and
-4-
the unreported income. See id. at 1005 (evidentiary foundation
requirement satisfied when the taxpayer’s employer reported the
taxpayer’s income to the Commissioner).
Petitioner does not deny that she received the income at
issue. Rather, she raises frivolous and groundless challenges to
the taxation of the income at issue. For example, petitioner
argues that private citizens are not liable for income tax.
Petitioner’s arguments have been rejected by this Court and other
courts, and “We perceive no need to refute these arguments 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); see
United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981)
(compensation for labor or services, paid in the form of wages or
salary, has been universally held by the courts of the United
States to be income subject to the income tax laws currently
applicable). We therefore find that petitioner received the
income at issue and she is liable for Federal income tax upon it.
II. Additions to Tax
The Commissioner bears the initial burden of production with
respect to a taxpayer’s liability for additions to tax under
section 6651(a)(1) and (2). Sec. 7491(c); Rule 142(a); Higbee v.
Commissioner, 116 T.C. 438, 446-447 (2001). To meet this burden
the Commissioner must come forward with sufficient evidence
-5-
indicating it is appropriate to impose the additions to tax.
Higbee v. Commissioner, supra at 446-447. Once the Commissioner
meets his burden, the taxpayer must come forward with evidence
sufficient to persuade the Court that the Commissioner’s
determinations are incorrect.
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 the taxpayer can
establish that such failure is due to reasonable cause and not
due to willful neglect. A return that reports zeros on all
relevant lines is not a valid return for purposes of section
6651(a)(1). Cabirac v. Commissioner, 120 T.C. 163, 169-170
(2003). Petitioner’s 2004 return reported zeros on all relevant
lines, and she did not make an honest and reasonable attempt to
supply the information required by the Internal Revenue Code. We
therefore find that petitioner did not file a valid 2004 return.
Petitioner did not establish that her failure to file was due to
reasonable cause. Accordingly, we sustain the section 6651(a)(1)
addition to tax as determined.
Section 6651(a)(2) imposes an addition to tax of 0.5 percent
per month (up to a maximum of 25 percent) for failure to make
timely payment of the tax shown on a return unless the taxpayer
shows that the failure is due to reasonable cause and not due to
willful neglect. The addition to tax applies only when an amount
-6-
of tax is shown on a return. Cabirac v. Commissioner, supra at
170. Under section 6651(g), a return prepared by the Secretary
pursuant to section 6020(b) is treated as a return filed by the
taxpayer for the purpose of determining the amount of an addition
to tax under section 6651(a)(2). For these purposes, a section
6020(b) return, in the context of section 6651(a)(2) and (g)(2),
“must be subscribed, it must contain sufficient information from
which to compute the taxpayer’s tax liability, and the return
form and any attachments must purport to be a ‘return’.”
Spurlock v. Commissioner, T.C. Memo. 2003-124; see also Cabirac
v. Commissioner, supra at 170-171. Respondent prepared a
substitute for return that satisfied the requirements of sections
6651(a)(2) and (g)(2) and 6020(b). Petitioner has not paid the
tax due and has not established that her failure to timely pay
was due to reasonable cause. Accordingly, we sustain the section
6651(a)(2) addition to tax as determined.
III. Section 6673 Penalty
Section 6673(a)(1) authorizes the Court to require a
taxpayer to pay the United States a penalty in an amount not to
exceed $25,000 whenever it appears to the Court that the
proceedings were instituted primarily for delay or the taxpayer’s
position is frivolous or groundless. The Court may sua sponte
determine whether to impose such a penalty.
-7-
This is not the first time petitioner has been faced with
the imposition of a section 6673(a)(1) penalty by this Court. In
docket No. 23930-04S the Court imposed a penalty of $1,000
against petitioner and her husband for instituting the
proceedings for the purpose of delay and for raising frivolous
arguments. In docket No. 15420-05S, the Court did not impose a
penalty but warned petitioner and her husband that they could be
held liable for a section 6673(a)(1) penalty because they
insisted on raising frivolous and groundless arguments.
The record shows that petitioner regards this case as a
vehicle to protest the tax laws of this country and espouse her
own misguided views. She has repeatedly wasted the Court’s time
and resources. The Court previously imposed upon petitioner a
$1,000 penalty in the hope that she would cease this unacceptable
behavior. However, it appears that the $1,000 penalty was
insufficient to deter her from behaving in a similar fashion in
this case. For that reason we now require petitioner to pay a
penalty of $2,000 pursuant to section 6673(a)(1). Petitioner and
her husband are warned that if they insist on taking frivolous or
groundless positions in this Court, much harsher penalties will
be imposed in the future.
In reaching our holdings herein, we have considered all
arguments made, and to the extent not mentioned above, we
conclude they are moot, irrelevant, or without merit.
-8-
To reflect the foregoing,
Decision will be entered for
respondent.