T.C. Memo. 2009-154
UNITED STATES TAX COURT
RICHARD JOHN FLORANCE, JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 26283-07. 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
a Penalty Under Section 6673 and petitioner Richard John
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Florance’s cross-motions for the same.1
Background
Florance did not file an income tax return for the calendar
year 2003. On August 14, 2007, the IRS sent Florance a notice of
deficiency (Notice) for the 2003 taxable year in which it
determined a deficiency of $1,131, and additions to tax under
section 6651(a)(1) of $254.48 and under section 6651(a)(2) of
$214.89. Florance filed a petition with this Court on November
14, 2007 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. On January 14, 2008, the IRS filed a Motion to Dismiss
for Failure to State a Claim Upon Which Relief Can Be Granted and
to Impose a Penalty Under Section 6673. On January 23, 2008,
this Court ordered Florance to file an amended petition stating
with specificity each error the IRS is alleged to have made in
the Notice and stating facts upon which Florance based each
allegation of error; the Court also permitted Florance to file an
objection to the IRS motion. On February 7, 2008 Florance filed
three documents with this Court. The first was Florance’s
Response to Commissioner’s Motion to Dismiss, which put forward
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.
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tax-defier2 arguments in a tone disrespectful to this Court. The
second was Florance’s Motion to Strike, in which he sought to
“strike Comm’r’s [sic] improperly joined motionS [sic] under TCR
54,” and generally challenged the assignment of his case to any
Special Trial Judge. In the third, Florance’s Declination to
Amend, Florance declined to amend his petition, arguing that he
had “satisfied all the requirements for a petition in this forum”
and once again objected to the assignment of his case to a
Special Trial Judge. The case was called from the calendar for
the motions session of this Court on March 5, 2008, before Chief
Special Trial Judge Peter J. Panuthos.3 There was no appearance
by or on behalf of Florance. Counsel for the IRS appeared and
requested that the Court deny the IRS’s own motion to dismiss
because it discovered that Florance had earned additional income
beyond that determined in the Notice. The Court agreed and
extended the time in which the IRS had to file an answer to
Florance’s petition until April 4, 2008. The IRS, in its answer
2
Custer v. Commissioner, T.C. Memo. 2008-266 (using the term “tax
defier”).
3
In his filings with this Court, Florance challenged the authority of
Special Trial Judges to rule in his case. Special Trial Judges are authorized
to preside over motions sessions of this Court and to make any appropriate
order disposing of motions not dispositive of a case. See sec. 7443A(b)(7)
(“The chief judge may assign–- * * * any other proceeding which the chief
judge may designate, to be heard by the Special Trial Judges of the court.”);
Rule 181; Deleg. Order No. 45, 126 T.C. VI, sec. 3(a) (2006). Moreover, a
Special Trial Judge may hear and make the decision of the Court in a case,
such as this one, where the amount of the deficiency placed in dispute does
not exceed $50,000. Sec. 7443A(b)(3), (c); Rule 182; Deleg. Order No. 44, 126
T.C. V, sec. 1(c) (2006).
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filed on March 26, 2008, asserted that Florance received an
additional $54,000 of nonemployee compensation that was omitted
from the Notice. The IRS therefore asserted that the total
deficiency increased to $18,026, and the additions to tax under
section 6651(a)(1) and (2) increased to $4,055.85 and $4,326.24,
respectively. Exhibit A to the answer included calculations of
the increased deficiency and additions to tax.
Florance’s bounty of motions continued unabated. In
Florance’s Motion to Strike I.R.C. Section 7443A and Florance’s
Motion to Strike TCR 182, both filed June 9, 2008 he again
challenged the authority of Special Trial Judges to rule in his
case. In Florance’s Motion for Default Judgment, filed on the
same date, he made the moot argument that the IRS did not file
its motion to dismiss timely. All of Florance’s motions up to
this point were denied by this Court. 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
2003 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 was heard. This case was recalled from the calendar
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on December 3, 2008. Again 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 Section 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 2003
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 for return on his behalf, and
that he paid no estimated taxes nor had any income tax
withholding credits in 2003. 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 again to the authority of Special
Trial Judges, 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.
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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).
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 defier 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
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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
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 $1,131 determined in the Notice. Rule 142(a). The
deficiency corresponds to $8,000 in nonemployee compensation, $4
of partnership losses of an ordinary character, and $6 of
interest income, as shown by the certified Information Returns
Processing transcript attached as an exhibit to the motion for
summary judgment. 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
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increased deficiency asserted in its answer. Rule 142(a). The
increased deficiency corresponds to $54,000 in nonemployee
compensation, as shown by the certified Information Returns
Processing transcript. This amount is includable in gross
income. See sec. 61. The IRS also provided an accurate
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-
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365. The IRS, however, does not have the obligation to introduce
evidence regarding reasonable cause or substantial authority.
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 $4,055.85
addition to tax under section 6651(a)(1) for 2003. 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 under to tax section 6651(a)(2) for
failure to pay, that is, 0.5 percent for each month in which both
additions to tax 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 2003 taxable year. The transcript states that he
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did not file a return nor pay any tax for 2003. His failure to
file was not due to reasonable cause. Accordingly, the IRS has
met its burdens of production and proof for the late filing
addition to tax for 2003. Florance is therefore liable for the
section 6651(a)(1) addition to tax for 2003.
3. Section 6651(a)(2) Failure-To-Pay Addition to Tax
The IRS determined that Florance was liable for a $4,326.24
addition to tax under section 6651(a)(2) for 2003. 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
tax return filed by the taxpayer for 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 2003 taxable year. The transcript states that
Florance did not pay any estimated taxes nor have any income tax
withheld for 2003; he did not file a return accompanied by any
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payment. The IRS prepared a substitute for return on his behalf
for 2003 that meets the requirements of section 6020(b). The
calculations in Schedule 4 of Exhibit A to the answer reflect the
amount of the addition to tax through the date the schedule was
produced, as noted on the bottom of the schedule itself.
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 2003. Florance is
therefore liable for the section 6651(a)(2) addition to tax for
2003.
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 numerous frivolous motions challenging the
authority of this Court and more generally the internal revenue
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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).
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 $15,000 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
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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.
To reflect the foregoing,
An appropriate order and
decision will be entered.