Florance v. Comm'r

T.C. Memo. 2009-155

UNITED STATES TAX COURT

RICHARD JOHN FLORANCE, JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 7364-08. Filed June 29, 2009.

Richard John Florance, Jr., pro se.

Adam Flick, for respondent.

MEMORANDUM OPINION

MORRISON, Judge: This case is before this Court on

respondent IRS’s Motion for Summary Judgment and Motion to Impose
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a Penalty under Section 6673 and petitioner Richard John

Florance’s cross-motions for the same.1

Background

Florance did not file an income tax return for the calendar

year 2005. On December 31, 2007, the IRS sent Florance a notice

of deficiency (Notice) for the 2005 taxable year in which it

determined a deficiency of $131,049, and additions to tax under

section 6651(a)(1) of $29,486.03, under section 6651(a)(2) of

$12,449.66,2 and under section 6654(a) of $5,256.61. Florance

filed a petition with this Court on March 26, 2008 challenging

the determinations in the Notice on the grounds that he did not

consent to becoming a taxpayer and therefore is not subject to

the income tax laws of the United States. The IRS, in its answer

filed on May 22, 2008, asserted that Florance received an

additional $486,780 of nonemployee compensation that was omitted

from the Notice. The IRS therefore asserted that the total

deficiency increased to $312,177, and the additions to tax under

sections 6651(a)(1) and 6654(a) increased to $70,239.83 and

1
Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect for the year in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure. Florance resided in the State
of Texas at the time he filed his petition and thus this case is appealable to
the Court of Appeals for the Fifth Circuit.
2
The IRS noted in the schedule entitled “Explanation of the Delinquency
Penalty” attached to the Notice that “[i]f an amount appears as the Failure to
Pay Penalty, the amount reflects only the addition to tax under Internal
Revenue Code section 6651(a)(2) through the date of this Notice. The addition
to tax will continue to accrue from the due date of the return at a rate of
0.5 percent each month, or fraction thereof, of nonpayment, not exceeding 25
percent.”
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$12,521.93 respectively. The addition to tax under section

6651(a)(2) was described in general terms as “0.5 percent of the

unpaid tax for each month that petitioner’s failure to pay the

tax continues, but not to exceed 25 percent of the unpaid tax”

without an estimate of the addition to tax. Exhibit A to the

answer included calculations of the increased deficiency and

additions to tax under sections 6651(a)(1) and 6654(a). The IRS

then filed a request for Admission of Facts on September 19, 2008

in which it requested that Florance admit that he filed no return

for the 2005 taxable year and that he earned the items of income

alleged in the Notice and the answer; Florance responded by

objecting on grounds of relevance.

This case was called from the calendar for the trial session

of this Court on December 2, 2008 at Dallas, Texas. There was no

appearance by or on behalf of Florance. Counsel for the IRS

appeared and filed with this Court a Motion for Summary Judgment

and a Motion to Impose a Penalty Under Sec. 6673. Attached to

the Motion for Summary Judgment were Exhibit A, a certified copy

of an Information Returns Processing transcript of Florance’s

account for the 2005 taxable year containing summaries of his

Form 1099 information returns and Exhibit B, a certified copy of

a transcript of his account for the same year showing that he

filed no tax return, that the IRS prepared a substitute return on

his behalf, and that he paid no estimated taxes nor had any
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income tax withheld in 2005. Also attached was Exhibit C, a

certified transcript of Florance’s account for the 2004 taxable

year showing that he had a tax liability for 2004. This Court

ordered that Florance file with this Court, on or before January

2, 2009, a response to both of the IRS’s motions. On January 5,

2009, Florance filed: (1) Petitioner’s Response to Commissioner’s

Motion for Summary Judgment, (2) Petitioner’s Response to Motion

for Sanctions (Sec. 6673), (3) Petitioner’s (Cross-)Motion for

summary Judgment, and (4) Petitioner’s Motion for Sanctions (Sec.

6673). In his response to Commissioner’s Motion for Summary

Judgment and (Cross-)Motion for Summary Judgment, he accused this

Court of criminal conduct, objected to the authority of Special

Trial Judges (even though none was assigned to or heard any

motions in this case), alleged that no material dispute of fact

existed in the case (entitling him to summary judgment), and

objected to the introduction into the evidentiary record of the

IRS’s exhibits. He also alleged that the IRS had no standing in

this Court. In his Response to Motion for Sanctions (Sec. 6673),

Florance argued that he is not a taxpayer as the term is used in

the Internal Revenue Code and therefore is not subject to the

sanctions regimes of section 6673. In his Motion for Sanctions

(Sec. 6673), Florance asserted that the IRS’s conduct was

“reprehensible” and therefore he should be awarded $250,000 in

sanctions under section 6673(a)(2).
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Discussion

Florance is no stranger to this Court. In Florance v.

Commissioner, T.C. Memo. 2005-60, affd. 174 Fed. Appx. 200 (5th

Cir. 2006) and Florance v. Commissioner, T.C. Memo. 2005-61,

affd. 174 Fed. Appx. 200 (5th Cir. 2006). Florance asserted

similar tax-defier3 arguments for the 1994 through 1997 tax years

and was sanctioned by this Court under section 6673 in the

respective amounts of $10,000 and $12,500. In this case he asks

us to consider his frivolous arguments once again.

I. Motion and Cross-Motion for Summary Judgment

The parties have cross-moved for summary judgment. Summary

judgment is intended to expedite litigation and avoid unnecessary

and expensive trials. FPL Group, Inc. & Subs. v. Commissioner,

116 T.C. 73, 74 (2001). A motion for summary judgment will be

granted if the pleadings, answers to interrogatories,

depositions, admissions, and other acceptable materials, together

with the affidavits, if any, show that there is no genuine issue

as to any material fact and that a decision may be rendered as a

matter of law. Rule 121(b); Elec. Arts, Inc. v. Commissioner,

118 T.C. 226, 238 (2002). A partial summary adjudication may be

made which does not dispose of all the issues in the case. Rule

121(b); Tracinda Corp. v. Commissioner, 111 T.C. 315, 323-324

(1998). The moving party has the burden of proving that no

3
Custer v. Commissioner, T.C. Memo. 2008-266 (using the term “tax-
defier”).
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genuine issue of material fact exists and that it is entitled to

judgment as a matter of law. Rauenhorst v. Commissioner, 119

T.C. 157, 162 (2002).

A. Deficiency Determined in the Notice of Deficiency

Florance bears the burden of proof with respect to the

deficiency of $131,049 determined in the Notice. Rule 142(a).

The deficiency corresponds to $367,005 in nonemployee

compensation, as shown by the certified Information Returns

Processing transcript attached as an exhibit to the motion for

summary judgment.4 He did not appear at the trial session to

contest the deficiency nor did he provide any evidence in any of

his submissions to this Court to prove that he did not earn the

income the IRS alleged. Accordingly, we sustain the IRS’s

deficiency determination in the Notice.

B. Increased Deficiency

The IRS bears the burden of proof with respect to the

increased deficiency asserted in its answer. Rule 142(a). The

increased deficiency corresponds to $486,780 in nonemployee

compensation, as shown by the certified Information Returns

4
The transcript shows that the IRS received 23 Forms 1099-MISC,
Miscellaneous Income, attributable to both the deficiency determined in the
notice of deficiency and the increased deficiency. The amounts on the forms
are as follows: $2,754, $12,362, $46,811, $19,150, $27,444, $60,241, $1,755,
$117,450, $287,774, $769, $16,486, $7,374, $12,324, $129,068, $3,928, $1,625,
$26,015, $20,455, $5,811, $2,398, $28,492, $19,160, and $4,139.
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Processing transcript.5 This amount is includable in gross

income. See sec. 61. The IRS also provided an explanation of

the calculations used to determine the additional deficiency

based on the additional income in the schedules attached as an

exhibit to the answer. We find that the IRS has met its burden

of proof with respect to the increased deficiency by producing

the certified transcript of information returns and the

calculation sheet.

C. Additions to Tax

1. Burdens of Production and Proof

Section 7491(c) provides that the IRS bears the burden of

production with respect to the liability of any individual for

any penalty or addition to tax. “The Commissioner’s burden of

production under section 7491(c) is to produce evidence that it

is appropriate to impose the relevant penalty, addition to tax,

or additional amount”. Swain v. Commissioner, 118 T.C. 358, 363

(2002); Higbee v. Commissioner, 116 T.C. 438, 446 (2001). If a

taxpayer files a petition alleging an error in the determination

of an addition to tax or penalty, the taxpayer’s challenge will

succeed unless the IRS produces evidence that the addition to tax

or penalty is appropriate. Swain v. Commissioner, supra at 364-

365. The IRS, however, does not have the obligation to introduce

evidence regarding reasonable cause or substantial authority.

5
See supra note 4 for details of nonemployee compensation.
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Higbee v. Commissioner, supra at 446. The IRS carries the burden

of proof, not merely the burden of production, with respect to

any amount of an addition to tax or penalty attributable to an

increased deficiency. Rule 142(a).

2. Section 6651(a)(1) Failure-To-File Addition to Tax

The IRS determined that Florance was liable for a $70,239.83

addition to tax under section 6651(a)(1) for 2005. 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 such failure is due to

reasonable cause and not due to willful neglect. The late filing

addition to tax is 5 percent for each month such failure

continues, not to exceed 25 percent in the aggregate. Sec.

6651(a)(1). The 5 percent addition to tax is reduced by the

amount of the addition to tax under section 6651(a)(2) for

failure to pay, that is, 0.5 percent for each month in which both

penalties apply. Sec. 6651(c)(1). Therefore, the effective late

filing rate for the maximum 5-month period in which both

additions to tax apply is 4.5 percent per month. Sec.

6651(a)(1), (c)(1).

The IRS submitted a certified transcript of Florance’s

account for the 2005 taxable year. The transcript states that he

did not file a return nor pay any tax for 2005. His failure to

file was not due to reasonable cause. Consequently, the IRS has
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met its burdens of production and proof for the late filing

addition to tax for 2005. Florance is therefore liable for the

section 6651(a)(1) addition to tax for 2005.

3. Section 6651(a)(2) Failure-To-Pay Addition to Tax

The IRS determined that Florance was liable for an addition

to tax under section 6651(a)(2) for 2005. Section 6651(a)(2)

imposes an addition to tax for failure to pay tax shown on a

return on or before the date prescribed for payment (determined

with regard to any extension of time for payment), unless such

failure is due to reasonable cause and not due to willful

neglect. Sec. 301.6651-1(a)(2), Proced. & Admin. Regs. The late

payment addition to tax is 0.5 percent for each month such

failure continues, not to exceed 25 percent in the aggregate.

Sec. 6651(a)(2). When a taxpayer does not file a return, the IRS

may create a substitute for return meeting the requirements of

section 6020(b). Such a return is treated as the return filed by

the taxpayer for the purposes of the section 6651(a)(2) addition

to tax. Secs. 6020(b), 6651(g)(2).

The IRS submitted a certified transcript of Florance’s

account for the 2005 taxable year. The transcript states that

Florance did not pay any estimated taxes nor have any income tax

withheld for 2005; he did not file a return accompanied by any

payment. The IRS prepared a substitute for return on his behalf

for 2005 that meets the requirements of section 6020(b).
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Florance’s failure to pay timely was not due to reasonable cause.

Consequently, the IRS has met its burdens of production and proof

for the late payment addition to tax for 2005. Florance is

therefore liable for the section 6651(a)(2) addition to tax for

2005.

4. Section 6654(a) Failure-To-Pay-Estimated-Tax
Addition to Tax
The IRS found that Florance was liable for a $12,521.93

addition to tax under section 6654(a) for failure to pay

estimated income tax. The addition to tax is calculated by

applying the section 6621 underpayment rate to the amount of the

underpayment from the due date of the particular installment

until the 15th day of the 4th month following the close of the

taxable year. Sec. 6654(a), (b)(2). The IRS submitted a

certified transcript of Florance’s account for 2004 showing that

he had a tax liability for that year but failed to file a return

for that year; therefore, he had to make estimated tax payments

for the 2005 taxable year. See sec. 6654(d)(1). The IRS also

submitted a certified transcript of Florance’s account for 2005

showing that he paid no estimated tax nor had any income tax

withheld for 2005 and providing calculations used to figure the

section 6654(a) addition to tax in Schedule 5 to the answer. We

conclude that the IRS has satisfied its burdens of production and

proof regarding this issue; no exception pursuant to section
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6654(e) applies. We therefore hold that Florance is liable for

the section 6654(a) addition to tax.

II. Sanctions Under Section 6673

Section 6673(a)(1) authorizes this Court to require a

taxpayer to pay to the United States a penalty not to exceed

$25,000 if the taxpayer took frivolous or groundless positions in

the proceedings or instituted the proceedings primarily for

delay. A position maintained by the taxpayer is frivolous where

it is “contrary to established law and unsupported by a reasoned,

colorable argument for change in the law.” Coleman v.

Commissioner, 791 F.2d 68, 71 (7th Cir. 1986); see also Hansen v.

Commissioner, 820 F.2d 1464, 1470 (9th Cir. 1987) (section 6673

penalty upheld because taxpayer should have known the claim was

frivolous).

Florance filed several frivolous motions challenging the

authority of this Court and more generally the internal revenue

laws of the United States. The motions also contained

disrespectful language directed at the Court’s Judges and

employees. We will 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).
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We conclude Florance’s position was frivolous and groundless

and that he instituted and maintained these proceedings primarily

for delay. Accordingly, pursuant to section 6673(a)(1), and in

view of Florance’s repetitive abuse of the resources of this

Court both at these proceedings and in the past, we hold Florance

is liable for a $17,500 penalty. See Stearman v. Commissioner,

436 F.3d 533, 540 (5th Cir. 2006), affg. T.C. Memo. 2005-39.

Finally, we address Florance’s Motion for Sanctions (Sec.

6673). Section 6673(a)(2) authorizes this Court to require

counsel or the United States, in the case of counsel for the IRS,

to pay excess costs, expenses, and attorneys’ fees if counsel has

multiplied the proceedings in any case unreasonably and

vexatiously. Florance’s motion is without merit. Counsel for

the IRS has filed appropriate motions before this Court and

otherwise conducted himself in a professional manner.

After carefully considering the parties’ submissions and the

issues presented, we conclude that we can decide this case in

full for respondent as a matter of law upon the existing record

as no material facts are in dispute.

In reaching our holding, we have considered all arguments

made, and to the extent not mentioned, we conclude that they are

moot, irrelevant, or without merit.
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To reflect the foregoing,

An appropriate order and

decision will be entered.