T.C. Memo. 2010-137
UNITED STATES TAX COURT
CARL COOK, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 17963-08. Filed June 22, 2010.
Carl Cook, pro se.
Randall L. Eager, for respondent.
MEMORANDUM OPINION
COHEN, Judge: Respondent determined deficiencies and
additions to tax as follows:
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Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6651(a)(2) Sec. 6654
1
2003 $77,371 $17,408.48 $18,955.90 --
1
2004 13,731 3,089.48 $393.49
1
2005 15,206 3,421.35 609.96
1
2006 15,064 3,389.40 712.90
1
The addition to tax will continue to accrue from the due
date of the return at a rate of 0.5 percent for each month, or
fraction thereof, of nonpayment, not exceeding 25 percent.
The issue for decision is whether petitioner has shown any error
with respect to the amounts determined in the statutory notices.
As discussed below, none of the facts have been stipulated, and
the evidence is too sparse for meaningful findings of fact.
Unless otherwise indicated, all section references are to the
Internal Revenue Code in effect for the years in issue, and all
Rule references are to the Tax Court Rules of Practice and
Procedure.
Background
Petitioner resided in Detroit, Michigan, at the time he
filed his petition. During the years in issue, petitioner was
employed as a fireman for the City of Detroit.
Petitioner failed to file Federal income tax returns for the
years in issue. After receiving information returns reporting
income paid to petitioner, the Internal Revenue Service (IRS)
prepared a substitute for return under section 6020(b) for each
year. On May 8, 2008, the IRS sent petitioner two notices of
deficiency, one notice for 2003, 2004, and 2005 and a separate
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notice for 2006. The notices determined that petitioner received
wages of $66,263 in 2003, $75,273 in 2004, $81,927 in 2005, and
$82,483 in 2006, and that in 2003 petitioner received a
distribution of $156,747 from an individual retirement account
(IRA) administered by John Hancock Life Insurance Co. In
addition, the notices determined that petitioner had unreported
income from a State income tax refund in 2003 and interest income
in 2003, 2004, and 2005. The notices allowed petitioner the
standard deductions for single individuals of $4,750 for 2003,
$4,850 for 2004, $5,000 for 2005, and $5,150 for 2006.
The petition filed in this case reflected as its source
“http://www.patriotnetwork.info/Tax Court petition new.htm” and
contained a hodgepodge of frivolous, irrelevant, and spurious
arguments common to petitions filed by followers of Robert
Clarkson (Clarkson) and his Patriot Network, an organization that
promotes tax avoidance and frustration and delay of collection
efforts by the IRS. See, e.g., Rice v. Commissioner, T.C. Memo.
2009-169; Marett v. Commissioner, T.C. Memo. 2009-14, affd. 345
Fed. Appx. 869 (4th Cir. 2009). The form calls for a general
denial of tax liability; a claim of various deductions and
exemptions and filing status other than allowed in the statutory
notices; an assertion that the figures used “stem from illegal
immigrants” using the taxpayer’s Social Security number; an
allegation that penalties should be waived because “the Internal
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Revenue Code is so complex and confusing”; a claim for credit
“for the illegal telephone excise tax for each year”; a claim of
deductible expenses of tax preparation and advice on filing (even
though no returns were filed); and a claimed lack of records
justifying reconstruction and estimates, with a citation of and
quotation from Cohen v. Commissioner, 266 F.2d 5 (9th Cir. 1959)
[remanding T.C. Memo. 1957-172].
Although he resided in Detroit, petitioner requested
Columbia, South Carolina, as the place of trial, a common
practice among followers of Clarkson. By notice served September
29, 2009, this case was set for trial in Columbia on March 1,
2010. Included with the notice setting case for trial was the
Court’s standing pretrial order that, among other things,
required the parties to stipulate to matters in accordance with
Rule 91 and to exchange before trial documents to be used at
trial.
Petitioner refused to enter into any stipulation with
respect to the facts of this case. He refused to meet with
respondent’s counsel or to turn over any records of his alleged
deductions. Instead, he submitted frivolous and untimely motions
and a pretrial memorandum repeating allegations from the petition
and adding additional ones, such as an unexplained reference to
the Fifth Amendment privilege against self-incrimination. When
the case was called for trial, petitioner filed a motion in
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limine, requesting that respondent be denied the opportunity to
admit evidence not made available to petitioner before January
15, 2010, one of the many errors made by petitioner in
interpreting deadlines for discovery under the Tax Court Rules
and for the exchange of documents under the standing pretrial
order. (This is apparently another misguided tactic promoted by
petitioner’s source of documents. See Sullivan v. Commissioner,
T.C. Memo. 2010-138, filed this date.) Among his primary
contentions are that respondent is relying on hearsay and that
the third-party reports of his income relied on by respondent
have not been “authenticated or certified”.
Discussion
Petitioner testified that he failed to file tax returns for
the years in issue because he thought that his deductions for
business expenses and charitable contributions would result in no
tax liabilities. When describing his alleged deductions, he
acknowledged that he was employed by the City of Detroit as a
fireman, and he claimed to have incurred expenses for meals,
special clothing, travel, a vehicle, and a cellular telephone and
to have made charitable contributions and incurred medical
expenses. He denied, however, receiving Forms W-2, Wage and Tax
Statement, and he denied having any recollection of his earnings
during the years in issue. He also denied having any
recollection of receiving an IRA distribution in 2003.
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A well-established principle in tax litigation is “that the
Commissioner’s determination of tax liability is entitled to a
presumption of correctness and that the burden is on the taxpayer
to prove that the determination is erroneous.” Boles Trucking,
Inc. v. United States, 77 F.3d 236, 239 (8th Cir. 1996) (citing
Helvering v. Taylor, 293 U.S. 507, 515 (1935), and Day v.
Commissioner, 975 F.2d 534, 537 (8th Cir. 1992), affg. in part
and revg. in part T.C. Memo. 1991-140).
Two statutory provisions modifying that well-established
principle are relevant in the context of this case. Section
6201(d) provides that in any court proceeding, if a taxpayer
asserts a reasonable dispute with respect to any item of income
reported on an information return and has fully cooperated, the
Commissioner shall have the burden of producing reasonable and
probative information concerning the deficiency in addition to
the information return.
Section 7491(a) provides in part:
SEC. 7491. BURDEN OF PROOF.
(a) Burden Shifts Where Taxpayer Produces Credible
Evidence.--
(1) General rule.--If, in any court
proceeding, a taxpayer introduces credible
evidence with respect to any factual issue
relevant to ascertaining the liability of the
taxpayer for any tax imposed by subtitle A or B,
the Secretary shall have the burden of proof with
respect to such issue.
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(2) Limitations.--Paragraph (1) shall apply
with respect to an issue only if--
(A) the taxpayer has complied with the
requirements under this title to substantiate
any item;
(B) the taxpayer has maintained all
records required under this title and has
cooperated with reasonable requests by the
Secretary for witnesses, information,
documents, meetings, and interviews * * *
Neither of the above provisions alters petitioner’s burden
in this case. The records of the IRS received in evidence
pursuant to rules 803(8) and 902(4) of the Federal Rules of
Evidence reflect the information returns on which the notices of
deficiency were based. The evidence at trial included records of
John Hancock Life Insurance Co. showing the distribution to
petitioner of $156,747.19 in 2003 and a copy of a Form 1099-R,
Distributions From Pensions, Annutities, Retirement or Profit-
Sharing Plans, IRAs, Insurance Contracts, etc., used to report
the distribution. These records were received in accordance with
rules 803(6) and 902(11) of the Federal Rules of Evidence.
Petitioner admitted that he received wages from the City of
Detroit. He did not identify any error in amounts respondent
determined, choosing instead to deny any recollection of the
amounts received or his rates of pay during the years in issue.
He also denied recollection of a distribution from an IRA in 2003
or receipt of any Forms W-2 or 1099 showing the income reported
by the payors. His denials are not credible, and he has not
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asserted a “reasonable dispute” within the meaning of section
6201(d) with respect to the items of income included in the
notices of deficiency.
Petitioner’s implausible denials, along with his pursuit of
frivolous arguments, undermine the reliability of his testimony.
That testimony is not credible for purposes of section
7491(a)(1), and he did not substantiate any item, maintain any
records, or cooperate with reasonable requests for information
for purposes of section 7491(a)(2). The burden of proof did not
shift to respondent in this case. Unlike the circumstances in
Cohen v. Commissioner, 266 F.2d 5 (9th Cir. 1959) relied on by
petitioner, this record gives us no reason to doubt the validity
of the determinations in the notices of deficiency.
Even at face value, petitioner’s claims of deductible
business expenses and charitable contributions were less, in
total, than the standard deduction that he was allowed for each
year. He has not satisfied the requirements for deductions for
special clothing. See Yeomans v. Commissioner, 30 T.C. 757, 767-
769 (1958); Alami El Moujahid v. Commissioner, T.C. Memo. 2009-
42. To be entitled to employee business expense deductions for
meals, cellular phone usage, and vehicle expenses, he would have
to substantiate the amount, time, place, and business purpose of
each item in accordance with sections 274(d) and 280F(d)(1) and
(4). He has not produced any of the required substantiation, and
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no amounts in excess of the standard deductions are allowable.
He has not identified any entitlement to exemptions or credits or
shown that his filing status is other than single for the years
in issue.
Under section 7491(c), respondent has the burden of
production with respect to the additions to tax. Respondent
produced transcripts reflecting petitioner’s failure to file
returns and certificates of the preparation of substitutes for
returns under section 6020(b), and petitioner acknowledged his
failure to file. He has not shown reasonable cause for that
failure. His claim that he believed that he did not have tax
liabilities is not credible, and, in any event, the obligation to
file returns is based on receipt of gross income, such as wages,
not taxable income. See sec. 6012(a). Respondent has satisfied
the burden of production with respect to the additions to tax
under section 6651(a)(1) and (2). See, e.g., Higbee v.
Commissioner, 116 T.C. 438, 447-448 (2001).
The IRS records received under rules 803(8) and 902(4) of
the Federal Rules of Evidence, as described above, reflect the
absence of any withholding or other payments of taxes with
respect to the income attributed to petitioner for 2003, 2004,
2005, and 2006. Because he failed to file returns for the years
in issue, estimated payments of 90 percent of his taxes due for
2004, 2005, and 2006 were required and, because they were not
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made, additions to tax apply for those years. Sec. 6654(a),
(d)(1)(B). Respondent’s burden of production has been met, and
petitioner has not asserted, and the record does not suggest,
that any exception to this addition to tax is applicable. See
Grosshandler v. Commissioner, 75 T.C. 1, 20-21 (1980).
Respondent’s counsel requested at trial that a penalty under
section 6673 be imposed. The Court can only speculate that,
faced with a substantial tax liability in 2003 because of high
earnings and a large IRA distribution, petitioner began a course
of noncompliance and tax defiance. He did not seek competent tax
advice but adopted the tactics of others who publish or print
materials from the Internet, perpetuate specious legal arguments
suggested by those materials but unrelated to the facts of the
cases, and then plead for special treatment because of their pro
se status. Although we are not now imposing that penalty,
petitioner is cautioned that a penalty in an amount not in excess
of $25,000 may be awarded against him in the future if he
institutes or maintains proceedings in this Court primarily for
delay, takes positions that are frivolous or groundless, or
unreasonably fails to pursue available administrative remedies.
See sec. 6673(a)(1).
By petitioner’s reference to the Fifth Amendment privilege
against self-incrimination, we infer that he is also aware of
substantial civil and criminal penalties that may be imposed for
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noncompliance with his tax obligations. See secs. 6651(f)
(fraudulent failure to file penalty), 6663 (fraud penalty), 7201
(felony tax evasion), 7203 (misdemeanor willful failure to file).
He and others similarly situated should keep these possibilities
in mind when they engage in the misguided programs reflected in
the record here.
For the foregoing reasons,
Decision will be entered
for respondent.