T.C. Memo. 2008-266
UNITED STATES TAX COURT
RICHARD A. CUSTER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 5317-07. Filed December 1, 2008.
Richard A. Custer, pro se.
Emly B. Berndt, for respondent.
MEMORANDUM OPINION
VASQUEZ, Judge: This case is before the Court on
respondent’s motion to dismiss for lack of prosecution pursuant
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to Rule 123(b).1 By notice of deficiency, respondent determined
a deficiency of $16,854 in petitioner’s 2004 Federal income tax.
Background
In the notice of deficiency, respondent determined that
petitioner failed to report wage income of $28,463 from
ExpressJet Airlines, Inc., and $52,527 from Continental Airlines,
Inc. Respondent also determined that petitioner failed to report
from Fidelity Destiny II a $64 dividend and a $5,000 capital
gain. Respondent made these determinations based on Forms W-2,
Wage and Tax Statement, and Forms 1099-DIV, Dividends and
Distributions, issued to petitioner.
On March 6, 2007, petitioner invoked the jurisdiction of
this Court by timely filing a petition containing numerous
frivolous and groundless “tax defier”2 arguments including:
1
Unless otherwise indicated, all Rule references are to
the Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code in effect for the
year in issue.
2
On Apr. 8, 2008, the U.S. Department of Justice announced
the creation of “the National Tax Defier Initiative or TAXDEF.”
Press Release, U.S. Department of Justice, Nathan J. Hochman, Tax
Division’s Assistant Attorney General, Announces the Creation of
the National Tax Defier Initiative (Apr. 8, 2008) (available at
www.usdoj.gov/opa/pr/2008/April/08_tax_275.html); see also
Lukacs, “Justice Launches National Tax Fraud Crackdown”, 119 Tax
Notes 141 (Apr. 14, 2008); 2008 TNT 70-57 (Apr. 10, 2008); Finet,
“Hochman Addresses Tax Protestor Initiative, Tax Accrual
Workpapers, Other Tax Issues”, Daily Tax Rept. (BNA) No. 50, at
K-1 (Mar. 14, 2008). The purpose of TAXDEF “is to reaffirm and
reinvigorate the Tax Division’s commitment to investigate,
pursue, and where appropriate, prosecute those who take concrete
(continued...)
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4) The determination of the tax at issue in the
Notice of Deficiency is based upon the following
errors:
a) The Commissioner erred in considering the
petitioner to be an “employee” during the tax
year 2004.
b) The Commissioner erred in considering the
petitioner to have had “wages” during the tax
year 2004.
c) The commission erred in determining for the
tax year 2004 that the petitioner omitted
$86,054 of income.
5) The facts upon which the petitioner relies, as the
basis of the petitioners case, are as follows:
a) The petitioner does not fall within the
definition of “employee” as defined by
section 3401(c) of the Internal Revenue Code.
b) The petitioner did not have “wages” as
defined by section 3401(a) of the Internal
Revenue Code for the tax year 2004.
c) The petitioner's W-2s for the tax year 2004
incorrectly showed a total of $86,054 of
“wages”.
d) On Sept. 14, 2006 the Commissioner issued the
petitioner a form 4549 for the tax year 2004
using incorrect W-2 information as a basis
for calculating the petitioner's
“deficiency”.
e) On Dec. 4, 2006 the Commissioner issued the
petitioner a Notice of Deficiency for the tax
year 2004 using incorrect W-2 information as
a basis for calculating the petitioner's
“deficiency”.
2
(...continued)
action to defy and deny the fundamental validity of the tax
laws.” Press Release, U.S. Department of Justice, supra.
Additionally, “one of the initiative’s goals is to address the
data gap created by the Internal Revenue Service Restructuring
and Reform Act of 1998, which prohibits the * * * [IRS] from
labeling any taxpayer as an illegal tax protester or using a
similar designation.” Lukacs, “Justice Launches National Tax
Fraud Crackdown”, 119 Tax Notes at 142.
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On April 24, 2007, respondent filed an answer denying the
material allegations of the petition.
By notice dated December 27, 2007, the Court set this case
for trial at the Court’s Cleveland, Ohio, session beginning June
2, 2008. This notice specifically stated: “YOUR FAILURE TO
APPEAR MAY RESULT IN DISMISSAL OF THE CASE AND ENTRY OF DECISION
AGAINST YOU.”
On June 2, 2008, the Court called this case from the
calendar. Petitioner did not appear at the calendar call, nor
did anyone appear on his behalf. At that time, respondent orally
moved to dismiss for lack of prosecution. Respondent stated:
I, as counsel for Respondent, sent a letter to Mr.
Custer on February 29th [2008], setting a Brannerton
[sic] conference. He did not respond to that letter or
call to reschedule the hearing [i.e., Branerton
conference] we had set for March 12th [2008].
I sent a follow-up letter, on April 22nd [2008],
to the Petitioner containing a stipulation of facts and
requesting that he return the stipulation of facts, if
he was in agreement, or provide additional
documentation to include the stipulation of facts. I
have received no response to that.
Additionally, Mr. Custer, the Petitioner, did not
cooperate with IRS Appeals.
The Court asked respondent to file the motion in writing, and we
set the case for recall on June 3, 2008.
On June 3, 2008, the Court recalled this case. Petitioner
again failed to appear in person or through a representative. At
that time, respondent filed a written motion that the case be
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dismissed for lack of prosecution and that the Court impose
sanctions on petitioner under section 6673(a) (respondent’s
motion). Respondent attached to respondent’s motion the
previously mentioned Branerton letter3 dated February 29, 2008,
and the followup letter dated April 22, 2008. In the followup
letter dated April 22, 2008, respondent advised petitioner that
continuing to maintain frivolous arguments could subject
petitioner to sanctions pursuant to section 6673(a) of up to
$25,000, and that respondent would move for such sanctions if
petitioner’s behavior warranted it.
At the recall, respondent stated the following:
Your Honor, I’d like to point out for the record
that in the Respondent’s motion to dismiss for lack of
prosecution, we are seeking sanctions under § 6673 for
the Petitioner’s continued pursuit of frivolous and
groundless arguments. Specifically, in this case, the
only issue he raised in his petition was that he was
not an employee and did not have wages pursuant to
Internal Revenue Code § 3401. Therefore, he had no
income tax liability.
The Court had previously sanctioned the
Petitioner, Mr. Custer, in Docket No. 21335-05 when the
Court granted Respondent’s motion for summary judgment.
They [sic] sanctioned Mr. Custer $5,000 under § 6673.
In respondent’s motion, respondent moved that the Court impose
sanctions on petitioner pursuant to section 6673(a) “for
petitioner’s continued assertion of frivolous and groundless
arguments.” That same day, the Court also filed respondent’s
3
See Branerton Corp. v. Commissioner, 61 T.C. 691 (1974).
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pretrial memorandum, which stated that respondent expected to
file a motion to dismiss for lack of prosecution and a motion for
imposition of sanctions. In support of the imposition of
sanctions pursuant to section 6673(a) respondent wrote in his
pretrial memorandum: “Petitioner has made frivolous arguments in
a past Tax Court case and continues to maintain these arguments
in the current case. In his previous Tax Court Case, Docket No.
21335-05L, the Court imposed a § 6673 penalty in the amount of
$5,000.” The opinion in docket No. 21335-05L was rendered as a
bench opinion.
Discussion
I. Rule 123(b)
The Court may dismiss a case and enter a decision against a
taxpayer for his failure to properly prosecute or to comply with
the Rules of this Court. Rule 123(b). Rule 123(b) generally
applies in situations where the taxpayer bears the burden of
proof. As a general rule, the taxpayer bears the burden of
proving the Commissioner’s deficiency determinations incorrect.
Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Section 7491(a), however, provides that if a taxpayer introduces
credible evidence and meets certain other prerequisites, the
Commissioner shall bear the burden of proof with respect to
factual issues relating to the liability of the taxpayer for a
tax imposed under subtitle A or B of the Internal Revenue Code.
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Petitioner failed to appear and did not introduce any
evidence. We conclude that the burden of proof regarding the
deficiency determined in the statutory notice of deficiency is
not placed on respondent pursuant to section 7491(a).
Furthermore, petitioner advanced shopworn arguments
characteristic of tax-protester/tax defier rhetoric that has been
universally rejected by this and other courts. See Wilcox v.
Commissioner, 848 F.2d 1007 (9th Cir. 1988), affg. T.C. Memo.
1987-225; Carter v. Commissioner, 784 F.2d 1006, 1009 (9th Cir.
1986); Charczuk v. Commissioner, 771 F.2d 471 (10th Cir. 1985),
affg. T.C. Memo. 1983-433; Michael v. Commissioner, T.C. Memo.
2003-26; Knelman v. Commissioner, T.C. Memo. 2000-268, affd. 33
Fed. Appx. 346 (9th Cir. 2002). We shall not painstakingly
address petitioner’s assertions “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).
Respondent has connected, insofar as he is required to,
petitioner with the unreported income (i.e., via the Forms W-2
and Forms 1099-DIV). See Mills v. Commissioner, T.C. Memo. 2007-
270. Accordingly, we will grant respondent’s motion to dismiss
this case for lack of prosecution.
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II. Section 6673(a)(1)
Section 6673(a)(1) authorizes this Court to penalize up to
$25,000 a taxpayer who institutes or maintains a proceeding
primarily for delay or pursues a position in this Court which is
frivolous or groundless. Petitioner’s conduct has convinced us
that he maintained this proceeding primarily for delay.
Petitioner’s actions have resulted in a waste of limited judicial
and administrative resources that could have been devoted to
resolving bona fide claims of other taxpayers. See Cook v.
Spillman, 806 F.2d 948 (9th Cir. 1986). Petitioner’s insistence
on making frivolous tax-protester/tax defier types of arguments
indicates an unwillingness to respect the tax laws of the United
States. Accordingly, we shall grant the motion for sanctions and
require petitioner to pay a penalty to the United States pursuant
to section 6673 of $10,000.
To reflect the foregoing,
An appropriate order of
dismissal and decision will
be entered.