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.