T.C. Summary Opinion 2009-52
UNITED STATES TAX COURT
SCOTT WILLIAMS SMITH AND VIRGINIA MAY SMITH, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4616-08S. Filed April 15, 2009.
Scott Williams Smith and Virginia May Smith, pro sese.
A. Gary Begun, for respondent.
CHIECHI, Judge: This case is before the Court on respon-
dent’s motion for summary judgment (respondent’s motion). We
shall grant respondent’s motion. Petitioners filed the petition
in this case pursuant to the provisions of section 7463 of the
Internal Revenue Code in effect at that time.1 Pursuant to
1
Hereinafter, all section references are to the Internal
Revenue Code in effect for the year at issue. All Rule refer-
(continued...)
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section 7463(b), the decision to be entered is not reviewable by
any other court, and this opinion shall not be treated as prece-
dent for any other case.
Background
Many of the facts are deemed established pursuant to Rule
90(c). The record establishes and/or the parties do not dispute
other facts.
Petitioners resided in Michigan at the time they filed the
petition in this case.
During 2005, the year at issue, petitioner Virginia May
Smith (Ms. Smith) worked for the organizations listed below and
received the compensation indicated:
Name of Organization Compensation Received
Avci Medical Center, P.C. $13,570
Michigan Neurosurgical 14,785
Specialists, P.C.1
1
In paragraph 8 of respondent’s request for admissions,
respondent identified the organization for which Ms. Smith worked
and from which she received $14,785 during 2005 as Michigan
Neurological Specialists, P.C. In paragraph 16 of that request
for admissions, respondent identified that organization as
Michigan Neurosurgical Specialists, P.C. Other portions of the
record for purposes of respondent’s motion also identified that
organization as Michigan Neurosurgical Specialists, P.C. We find
that the organization for which Ms. Smith worked and from which
she received $14,785 during 2005 is Michigan Neurosurgical
Specialists, P.C.
1
(...continued)
ences are to the Tax Court Rules of Practice and Procedure.
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Avci Medical Center, P.C. (Avci Medical Center), and Michigan
Neurosurgical Specialists, P.C. (Michigan Neurosurgical Special-
ists), each reported the amount of compensation that each paid to
Ms. Smith and that she received during 2005 in Form W-2, Wage and
Tax Statement (Form W-2).
During 2005, Ms. Smith also received a distribution of
$1,265 from Metropolitan Life Insurance Co. (Metropolitan Life).
Metropolitan Life reported that distribution in Form 1099.2
During 2005, Ms. Smith also received compensation of $1,448
from the Michigan Department of Labor and Economic Growth Unem-
ployment Insurance Agency (Michigan Unemployment Insurance
Agency). The Michigan Unemployment Insurance Agency reported
that compensation in Form 1099-G, Certain Government Payments.
During 2005, petitioner Scott Williams Smith (Mr. Smith)
worked for the organizations listed below and received the
compensation indicated:
Name of Organization Compensation Received
Unilock Michigan, Inc. $1,823
Quality Carriers, Inc. 6,360
TNL Enterprises, LLC 19,533
Unilock Michigan, Inc. (Unilock), Quality Carriers, Inc. (Quality
Carriers), and TNL Enterprises, LLC (TNL), each reported the
2
The record does not disclose the type of Form 1099 the
payor used.
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compensation that each paid to Mr. Smith and that he received
during 2005 in Form W-2.
During 2005, Mr. Smith also received compensation of $549
from DJJS Leasing, Inc. (DJJS Leasing). DJJS Leasing reported
that compensation in Form 1099.3
Petitioners submitted to respondent Form 1040, U.S. Individ-
ual Income Tax Return, for their taxable year 2005 (2005 return)
that they signed on August 4, 2006. The following appeared above
their respective signatures: “american citizens”. In the 2005
return, petitioners entered zero on each line on page 1 relating
to “Income” and to “Adjusted Gross Income” except: Line 19 on
which they reported “Unemployment compensation” of $1,448; line
22 on which they reported “total income” of $1,448; and line 37
on which they reported “Adjusted Gross Income” of the same
amount. In the 2005 return, petitioners entered zero on each
line on page 2 except: Line 40 on which petitioners claimed
$10,000 of “Itemized deductions”; line 42 on which they claimed
$6,400 of “exemptions”; line 64 on which they claimed “Federal
income tax withheld from Forms W-2 and 1099” of $11.18; line 67
on which they claimed “Excess social security and tier 1 RRTA tax
withheld” of $4,289.53; line 71 on which they claimed “total
payments” of $4,300.71; line 72 on which they claimed “amount
3
See supra note 2.
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* * * overpaid” of $4,300.71; and line 73a on which they claimed
a refund due of $4,300.71.
Petitioners included with the 2005 return Form 4852, Substi-
tute for Form W-2, Wage and Tax Statement, or Form 1099-R,
Distributions From Pensions, Annuities, Retirement or Profit-
Sharing Plans, IRAs, Insurance Contracts, etc. (Form 4852), that
pertained to each of the five organizations from which Ms. Smith
or Mr. Smith received compensation during 2005 that the organiza-
tion reported in Form W-2. According to Form 4852, the purpose
of that form is to serve
as a substitute for Forms W-2, W-2c and 1099-R and is
completed by taxpayers or their representatives when
(a) their employer or payer did not give them a Form W-
2 or Form 1099-R and (b) when an employer or payer has
issued an incorrect Form W-2 or Form 1099-R. * * *
* * * * * * *
If you received an incorrect Form W-2 or Form
1099-R, you should always attempt to have your employer
or payer issue a corrected form before filing Form
4852.
On August 4, 2006, Ms. Smith signed two of the five Forms
4852 included with the 2005 return. The following appeared next
to her signature: “american citizen”. On August 4, 2006, Mr.
Smith signed three of the five Forms 4852 included with the 2005
joint return. The following appeared next to his signature:
“american citizen”.
One of the two Forms 4852 that Ms. Smith signed pertained to
Avci Medical Center, and one pertained to Michigan Neurosurgical
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Specialists. One of the three Forms 4852 that Mr. Smith signed
pertained to Unilock, one pertained to Quality Carriers, and one
pertained to TNL. In each of those respective forms, Ms. Smith
or Mr. Smith, as the case may be, indicated:
For the tax year ending December 31, 2005, I have been
unable to obtain (or have received an incorrect) * * *
Form W-2 * * *.
I have notified the IRS of this fact. The amounts
shown on line 7 are my best estimates for all wages or
payments made to me and tax withheld by my employer or
payer named on line 5.
Ms. Smith completed part 7 of Form 4852 that she signed and
that pertained to Avci Medical Center as follows:
7(A) Form W-2. Enter wages, tips, other compensation, and taxes withheld.
a Wages, tips, and other compensation 0.00 g State income tax withheld . . . . . . 0.00
b Social security wages . . . . . . . 0.00 (Name of state) Michigan
c Medicare wages and tips . . . . . . 0.00 h Local income tax withheld . . . . . . 0.00
d Advance EIC payment . . . . . . . . 0.00 (Name of locality) Michigan
e Social security tips . . . . . . . 0.00 i Social security tax withheld . . . . 841.36
f Federal income tax withheld . . . . 0.00 j Medicare tax withheld . . . . . . . . 196.77
7(B) Form 1099-R. Enter distributions from pensions, annuities, retirement/profit-sharing plans,
IRAs, insurance contracts, etc.
1 Gross distribution . . . . . . . . 0.00 4 Federal income tax withheld . . . . . 0.00
2a Taxable amount . . . . . . . . . . 0.00 5 State income tax withheld . . . . . . 0.00
2b Taxable amount not determined 9 6 Local income tax withheld . . . . . . 0.00
Total distribution . . . . . 9 7 Employee contributions . . . . . . . 0.00
3 Capital gain (included in 2a) . . . 0.00 8 Distribution codes . . . . . . . . . 0.00
Ms. Smith completed part 7 of Form 4852 that she signed and
that pertained to Michigan Neurosurgical Specialists as follows:
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7(A) Form W-2. Enter wages, tips, other compensation, and taxes withheld.
a Wages, tips, and other compensation 0.00 g State income tax withheld . . . . . . 0.00
b Social security wages . . . . . . . 0.00 (Name of state) Michigan
c Medicare wages and tips . . . . . . 0.00 h Local income tax withheld . . . . . . 0.00
d Advance EIC payment . . . . . . . . 0.00 (Name of locality) Michigan
e Social security tips . . . . . . . 0.00 i Social security tax withheld . . . . 916.68
f Federal income tax withheld . . . . 0.00 j Medicare tax withheld . . . . . . . . 214.38
7(B) Form 1099-R. Enter distributions from pensions, annuities, retirement/profit-sharing plans,
IRAs, insurance contracts, etc.
1 Gross distribution . . . . . . . . 0.00 4 Federal income tax withheld . . . . . 0.00
2a Taxable amount . . . . . . . . . 0.00 5 State income tax withheld . . . . . . 0.00
2b Taxable amount not determined 9 6 Local income tax withheld . . . . . . 0.00
Total distribution . . . . . . 9 7 Employee contributions . . . . . . . 0.00
3 Capital gain (included in 2a) . . . 0.00 8 Distribution codes . . . . . . . . . 0.00
Mr. Smith completed part 7 of Form 4852 that he signed and
that pertained to Unilock as follows:
7(A) Form W-2. Enter wages, tips, other compensation, and taxes withheld.
a Wages, tips, and other compensation 0.00 g State income tax withheld . . . . . . 16.36
b Social security wages . . . . . . . 0.00 (Name of state) Michigan
c Medicare wages and tips . . . . . . 0.00 h Local income tax withheld . . . . . . 0.00
d Advance EIC payment . . . . . . . . 0.00 (Name of locality) Michigan
e Social security tips . . . . . . . 0.00 i Social security tax withheld . . . . 113.05
f Federal income tax withheld . . . . 11.18 j Medicare tax withheld . . . . . . . . 26.44
7(B) Form 1099-R. Enter distributions from pensions, annuities, retirement/profit-sharing plans,
IRAs, insurance contracts, etc.
1 Gross distribution . . . . . . . . 0.00 4 Federal income tax withheld . . . . . 0.00
2a Taxable amount . . . . . . . . . . 0.00 5 State income tax withheld . . . . . . 0.00
2b Taxable amount not determined 9 6 Local income tax withheld . . . . . . 0.00
Total distribution . . . . . 9 7 Employee contributions . . . . . . . 0.00
3 Capital gain (included in 2a) . . . 0.00 8 Distribution codes . . . . . . . . . 0.00
Mr. Smith completed part 7 of Form 4852 that he signed and
that pertained to Quality Carriers as follows:
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7(A) Form W-2. Enter wages, tips, other compensation, and taxes withheld.
a Wages, tips, and other compensation 0.00 g State income tax withheld . . . . . 46.96
b Social security wages . . . . . . 0.00 (Name of state) Michigan
c Medicare wages and tips . . . . . 0.00 h Local income tax withheld . . . . . 0.00
d Advance EIC payment . . . . . . . 0.00 (Name of locality) Michigan
e Social security tips . . . . . . . 0.00 i Social security tax withheld . . . . 394.33
f Federal income tax withheld . . . 0.00 j Medicare tax withheld . . . . . . . 92.22
7(B) Form 1099-R. Enter distributions from pensions, annuities, retirement/profit-sharing plans,
IRAs, insurance contracts, etc.
1 Gross distribution . . . . . . . 0.00 4 Federal income tax withheld . . . . . 0.00
2a Taxable amount . . . . . . . . . 0.00 5 State income tax withheld . . . . . . 0.00
2b Taxable amount not determined 9 6 Local income tax withheld . . . . . . 0.00
Total distribution . . . . . 9 7 Employee contributions . . . . . . . 0.00
3 Capital gain (included in 2a) . . 0.00 8 Distribution codes . . . . . . . . . 0.00
Mr. Smith completed part 7 of Form 4852 that he signed and
that pertained to TNL as follows:
7(A) Form W-2. Enter wages, tips, other compensation, and taxes withheld.
a Wages, tips, and other compensation 0.00 g State income tax withheld . . . . . 0.00
b Social security wages . . . . . . . 0.00 (Name of state) Michigan
c Medicare wages and tips . . . . . . 0.00 h Local income tax withheld . . . . . 0.00
d Advance EIC payment . . . . . . . . 0.00 (Name of locality) Michigan
e Social security tips . . . . . . . 0.00 i Social security tax withheld . . . 1211.07
f Federal income tax withheld . . . . 0.00 j Medicare tax withheld . . . . . . 283.23
7(B) Form 1099-R. Enter distributions from pensions, annuities, retirement/profit-sharing plans,
IRAs, insurance contracts, etc.
1 Gross distribution . . . . . . . . 0.00 4 Federal income tax withheld . . . . . 0.00
2a Taxable amount . . . . . . . . . . 0.00 5 State income tax withheld . . . . . . 0.00
2b Taxable amount not determined 9 6 Local income tax withheld . . . . . . 0.00
Total distribution . . . . . 9 7 Employee contributions . . . . . . . 0.00
3 Capital gain (included in 2a) . . . 0.00 8 Distribution codes . . . . . . . . . 0.00
In each of the respective Forms 4852 that Ms. Smith signed
and that pertained to Avci Medical Center and Michigan
Neurosurgical Specialists and in each of the respective Forms
4852 that Mr. Smith signed and that pertained to Unilock, Quality
Carriers, and TNL, Ms. Smith or Mr. Smith, as the case may be,
gave the following answer to a question asking each of them to
“Explain your efforts to obtain Form W-2, Form 1099-R, or Form W-
2c, Corrected Wage and Tax Statement”: “Requested, but the
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company refuses to issue forms correctly listing payments as
‘wages as defined in 3401(a) and 3121(a) for fear of IRS Retalia-
tion. The amounts listed as withheld on the W-2 if submitted are
correct however”. (Reproduced literally.)
Respondent issued a notice of deficiency to petitioners with
respect to their taxable year 2005 (2005 notice). In that
notice, respondent determined that petitioners had taxable wages
of $56,071, nonemployee compensation of $549, and taxable retire-
ment income of $1,265 and that they were entitled to a self-
employment tax deduction of $39. In the 2005 notice, respondent
also determined that petitioners are liable for an addition under
section 6651(a)(1) to, and an accuracy-related penalty under
section 6662(a) on, petitioners’ tax for their taxable year 2005
of $1,179 and $1,181, respectively.
In an attachment to the petition, petitioners gave the
following explanation as to why they disagreed with the determi-
nations in the 2005 notice:
1. 2005 1040 was mailed on August 6, 2006. Included
with this return was form 4852 for “Avci Medical Cen-
ter”, “Unilock Michigan, Inc”, “TNL Enterprises LLC”,
“Quality Carriers, Inc.” and “Michigan Neurosurgical
Specialists.”
2. Scott and Virginia work in the private-sector and
we have not been paid with Federally connected money
for federally connected services performed, nor do we
have anything to do with the performance of the func-
tions of a public office.
3. Since there is no requirement to report private-
sector payments for private work, the form 4852 is used
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to correct the amounts listed on the W-2 forms as a
“substitute for form W-2, Wage and Tax Statement, or
form 1099-R, Distributions from pension, Annuities,
Retirement or Profit Sharing Plan, IRA, Insurance
Contract, Etc”
4. Explanation Section of form CP 2000, does not match
what was reported, unless the form 4852 was taken into
consideration. As mentioned above we have, Under the
penalty of perjury, declared that our corrected 4852
form is true and correct to the best of our knowledge.
This is our sworn testimony. It could be construed
that you are tempting us to change this testimony or
other wise tamper with our evidence.
5. A letter was written after our initial submission
of our 2005, 1040. This was afer speaking with Mr.
Evans Badge #5909013 on September 12, 2006. Mr. Evan’s
informed me that a computer error occurred on Line 67,
of our submitted 1040 form. A letter was submitted
allowing 10 days via certified mail w/return receipt
requested #7005 1820 0008 0997 9832, asking for written
clarification. This clarification was requesting
written authorities with specific IRC section/s autho-
rizing the alteration of submitted forms. As of this
writing this still has not been received. On October
24, 2006 we were asked by the IRS to allow 45 days for
response, signature stamped by Dorothy M. Baylis,
Operations Manager.
6. I Do not have wages as defined in Internal Revenue
Code sections n 3401(a) and 3121(a). [Reproduced
literally.]
In another attachment to the petition, petitioners alleged
the following as the facts upon which they were relying in
support of their disagreement with the determinations in the 2005
notice:4
4
At a hearing held on Apr. 23, 2008, respondent orally moved
that the Court strike paragraphs 3 through 11, 14 through 16, and
18 of the facts that petitioners alleged in an attachment to the
petition in support of their disagreement with the determinations
(continued...)
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1 Notice of Deficiency issued before the required
“assessment” was made as required per 26 CFR 601.103(a)
2. IRS error as proper jurisdiction was properly
challenged each step of the administrative process but
was ignored and unanswered.
* * * * * * *
12. IRS error in the presumption that Social Security
Taxes withheld by Private Company Name was authorized
by Proper Name signing a W-4 Voluntary Withholding
Agreement. When the fact is no W-4 was every signed by
Proper Name and any withholding made have been unlawful
extortion.
13. IRS error as W-4 information from Private Company
Name used to create the Notice of Deficiency is unveri-
fied hearsay and IRS Agents under Rules of Evidence
Rule 602 “Lack of Personal Knowledge” have no personal
knowledge in this matter.
* * * * * * *
17. IRS error in relying on inaccurately reported W-2
statement from Private Company Name that mistakenly
reported ALL CAPS NAME and Estate and/or Gift taxable
income. IRS Agent failed to do the required Verifica-
tion of Information Return Processing (IRP) Documents
after being notified the reported W-2 was inaccurate
per IRM 4.19.1.6.13 (10-01-2001) Non-filer Case Pro-
cessing “circumstances suggest that the information
report is not reliable or accurate, do not include the
income item in the non-filers income” [Reproduced
literally.]
On February 5, 2009, the Court issued an Order (February 5,
2009 Order) in which the Court ordered petitioners to file a
written response to respondent’s motion, which was to be received
4
(...continued)
in the 2005 notice. On the same date, the Court issued an Order
granting respondent’s oral motion to strike and deeming stricken
all paragraphs of that attachment to the petition except para-
graphs 1, 2, 12, 13, and 17.
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by the Court on or before February 20, 2009. Petitioners did not
file a response to respondent’s motion.
In the February 5, 2009 Order, the Court indicated that in
considering respondent’s motion the Court reviewed, inter alia,
the petition and the attachments to the petition. The Court
found in the February 5, 2009 Order that those attachments
contain statements, contentions, and/or arguments that are
frivolous and/or groundless. In the February 5, 2009 Order, the
Court reminded petitioners about section 6673(a)(1) and admon-
ished them that if they continued to advance frivolous and/or
groundless statements, contentions, and/or arguments, the Court
would impose a penalty not in excess of $25,000 on them under
section 6673(a)(1).
Discussion
The Court may grant summary judgment where there is no
genuine issue of material fact and a decision may be rendered as
a matter of law. See Rule 121(b); Sundstrand Corp. v. Commis-
sioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir.
1994). We conclude that there is no genuine issue of material
fact regarding the questions raised in respondent’s motion.
We find petitioners’ position in this case to be frivolous
and groundless. The record establishes that during 2005 each
petitioner received certain income that petitioners did not
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report in the 2005 return.5 We sustain respondent’s deficiency
determination in the 2005 notice.
We turn now to the addition to tax under section 6651(a)(1)
that respondent determined in the 2005 notice. In the petition,
petitioners alleged that they mailed the 2005 return to respon-
dent on August 6, 2006. Except for unemployment compensation of
$1,448, petitioners reported zero income in that return. We hold
that “under no circumstances can * * * [the 2005 return] be
rationally construed as a return.” United States v. Mosel, 738
F.2d 157, 159 (6th Cir. 1984);6 see Beard v. Commissioner, 82
T.C. 766, 777 (1984), affd. 793 F.2d 139 (6th Cir. 1986). We
conclude that respondent has satisfied respondent’s burden of
production under section 7491(c) with respect to the addition to
5
The only item of income reported in the 2005 return was
$1,448 of “Unemployment compensation” that Ms. Smith received.
6
The United States Court of Appeals for the Sixth Circuit,
the Court to which an appeal in this case would normally lie,
observed in United States v. Mosel, 738 F.2d 157, 158 (6th Cir.
1984):
We particularly agree with the Seventh Circuit’s obser-
vation in United States v. Moore[, 627 F.2d 830, 835
(7th Cir. 1980)] that
... [I]t is not enough for a form to contain
some income information; there must also be
an honest and reasonable intent to supply the
information required by the tax code .... In
our self-reporting tax system the government
should not be forced to accept as a return a
document which plainly is not intended to
give the required information.
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tax under section 6651(a)(1) that respondent determined in the
2005 notice. We sustain that determination.
We turn finally to the accuracy-related penalty under
section 6662(a) that respondent determined in the 2005 notice.
We have found petitioners’ position in this case to be frivolous
and groundless, and we have sustained the deficiency determina-
tion in the 2005 notice. We conclude that respondent has satis-
fied respondent’s burden of production under section 7491(c) with
respect to the accuracy-related penalty under section 6662(a)
that respondent determined in the 2005 notice. We sustain that
determination.
Although respondent does not ask the Court to impose a
penalty on petitioners under section 6673(a)(1), the Court
considers sua sponte whether to impose such a penalty. Section
6673(a)(1) authorizes the Court to require a taxpayer to pay a
penalty to the United States in an amount not to exceed $25,000
whenever it appears that a taxpayer instituted or maintained a
proceeding in the Court primarily for delay or that a taxpayer’s
position in such a proceeding is frivolous or groundless.
We believe that petitioners instituted and maintained the
instant proceeding primarily for delay. We have found petition-
ers’ position to be frivolous and groundless. Nonetheless, we
shall not impose a penalty under section 6673(a)(1) on petition-
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ers.7 We caution them that they may be subject to such a penalty
if in the future they institute or maintain a proceeding in this
Court primarily for delay and/or their position in any such
proceeding is frivolous or groundless. See Abrams v. Commis-
sioner, 82 T.C. 403, 409-413 (1984); White v. Commissioner, 72
T.C. 1126, 1135-1136 (1979).
We have considered all of petitioners’ statements, conten-
tions, and arguments that are not discussed herein, and we find
them to be without merit and/or irrelevant.
On the record before us, we shall grant respondent’s motion.
To reflect the foregoing,
An order granting respondent’s
motion and decision for respondent
will be entered.
7
Petitioners made no filings in this case after the Court
issued its February 5, 2009 Order in which the Court reminded
them about sec. 6673(a)(1) and admonished them that the Court
would impose a penalty on them under that section if they contin-
ued to advance frivolous and/or groundless statements, conten-
tions, and/or arguments.