T.C. Memo. 2010-188
UNITED STATES TAX COURT
CHARLES RAYMOND WHEELER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 23596-07. Filed August 25, 2010.
Charles Raymond Wheeler, pro se.
Philip E. Blondin, for respondent.
MEMORANDUM OPINION
COHEN, Judge: Respondent determined deficiencies and
additions to tax for 2002, 2004, and 2005 as follows:
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Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6651(a)(2) Sec. 6654(a)
2002 $5,357 $1,079.55 $1,199.50 $158.26
1
2004 5,453 1,117.35 142.57
1
2005 5,589 1,151.78 203.28
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 deficiencies are attributable to petitioner’s failure to
report pension income he received from the Defense Finance and
Accounting Service (DFAS), the military’s paymaster, and modest
amounts of dividend income in 2004 and 2005 and interest income
in each year. The only bona fide issue for decision is whether
petitioner is liable for a penalty under section 6673 and, if so,
how much that penalty should be. 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
None of the facts have been stipulated, even though the
material facts are not fairly in dispute. See Rule 91(a).
Petitioner resided in Colorado at the time he filed his petition.
This is one of six cases brought by petitioner docketed in
this Court. Since at least 1994, petitioner has failed to file
timely Federal income tax returns, relying on a variety of
repetitious and frivolous arguments. See Wheeler v.
Commissioner, 127 T.C. 200 (2006) (determining petitioner’s
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liability for 2003), affd. 521 F.3d 1289 (10th Cir. 2008);
Wheeler v. Commissioner, T.C. Memo. 2006-109 (determining
petitioner’s liabilities for 1994 through 2001), affd. 528 F.3d
773 (10th Cir. 2008). In docket No. 15205-08L, he challenged
collection actions for 1994 through 2001 and 2003; summary
judgment was granted against petitioner in that case on March 25,
2009, with the Court concluding that “Petitioner has failed to
raise bona fide issues or any genuine issue relating to a
material fact.” That decision was affirmed by the Court of
Appeals for the Tenth Circuit on December 15, 2009. Wheeler v.
Commissioner, 356 Fed. Appx. 188 (10th Cir. 2009). In docket No.
615-10, he challenges a notice of deficiency for 2006.
On June 29, 2007, the Internal Revenue Service (IRS)
prepared substitutes for returns pursuant to section 6020(b)
using information reported by third-party payors that included
payments from DFAS to petitioner of $41,083, $42,530, and $43,678
for 2002, 2004, and 2005, respectively. The notice of deficiency
was sent on July 9, 2007.
The early history of this case is recounted in an Order and
Order to Show Cause (O&OSC) served January 11, 2008, in part as
follows:
Petitioner timely filed a petition for
redetermination. The petition was frivolous and
groundless.
Thereafter, following the filing of respondent’s
motion to dismiss and the Court’s Order dated November
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28, 2007, requiring the filing of a proper amended
petition, petitioner filed an amended petition. The
amended petition was frivolous and groundless.
On January 7, 2008, petitioner filed a second
amended petition. Other than the preamble, paragraphs
1., 3., and possibly 21., the second amended petition
is frivolous and groundless, and it will be struck from
the record except for the preamble and the three
specified paragraphs.
Paragraph 21. of the second amended petition
states as follows: “The respondent further erred by
failing to include any deductions or credits for
property taxes, mortgage interest, cost of producing
labor, etc.” This allegation fails to specifically
identify the amount of each particular deduction to
which petitioner thinks he is entitled; it also seeks
to avoid requisite specificity by use of the word
“etc.”. Finally, it suggests that there is some
allowable deduction for “cost of producing labor”, when
respondent’s determination of income reflects only
passive income, i.e., pensions, dividends, and interest
income. In short, the paragraph 21. is contrary to
Rule 34(b)(4) and (5), Tax Court Rules of Practice and
Procedure, as well as the Court’s Order dated November
28, 2007, requiring the filing of a proper amended
petition.
At no time has petitioner denied receipt of DFAS
retirement income, dividends, or interest income, nor
has petitioner at any time alleged receiving DFAS
retirement income, dividends, or interest income in any
amount less than that determined by respondent in the
July 9, 2007, notice of deficiency. See Parker v.
Commissioner, 117 F.3d 785 (5th Cir. 1997); White v.
Commissioner, T.C. Memo. 1997-459. Similarly, at no
time has petitioner denied that he failed to file
income tax returns for the years in issue, nor has he
alleged that such failure was due to what would
constitute reasonable cause and not willful neglect.
The same may be said regarding the additions to tax
under I.R.C. section 6651(a)(2) for failure to pay tax.
Further, at no time has petitioner denied that he
failed to pay estimated tax for the years in issue, nor
has he alleged that such failure was excused by any
legitimate statutory exception.
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The frivolous and groundless nature of
petitioner’s pleadings suggest that he instituted, and
is maintaining, the present action primarily for
purposes of delay. In this regard, I.R.C. section
6673(a)(1) authorizes the Tax Court to require a
taxpayer to pay to the United States a penalty not in
excess of $25,000 whenever it appears that proceedings
have been instituted or maintained by the taxpayer
primarily for delay or that the taxpayer’s position in
such proceeding is frivolous or groundless. See
Coleman v. Commissioner, 791 F.2d 68, 71-72 (7th Cir.
1986); Crain v. Commissioner, 737 F.2d 1417, 1417-1418
(5th Cir. 1984). Petitioner is certainly aware of that
section, having previously been the recipient of a
$3,000 penalty under I.R.C. section 6673(a)(1) in his
prior case, reported at T.C. Memo. 2006-109 (May 22,
2006), and a $1,500 penalty under I.R.C. section 6673
in his other prior case, reported at 127 T.C. 200, 212-
214 (December 6, 2006). Notwithstanding the imposition
of these penalties, petitioner remains undeterred.1
1
Given the fact that petitioner’s military
retirement income provides a ready source for
enforced collection by respondent, petitioner’s
persistence in pursuing a tax protest agenda is
inexplicable. In any event, given the further
fact that petitioner’s military retirement income
is funded by taxpayer dollars, petitioner’s
persistence in pursuing a tax protest agenda is
inexcusable.
The O&OSC ordered petitioner to file a further amendment setting
forth “each and every specific deduction and credit to which he
thinks he is entitled and the amount of each such deduction and
credit.” The O&OSC further directed petitioner to show cause why
the Court should not impose a penalty of $10,000, or some greater
amount not in excess of $25,000, pursuant to section 6673(a)(1).
Petitioner filed his third amended petition on February 13,
2008, along with a memorandum in which he challenged the
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preparation of section 6020(b) returns in this case. The O&OSC
was discharged, and the case was subsequently set for trial in
Denver, Colorado, on February 23, 2009. Petitioner appeared but
claimed that he was not prepared for trial as a result of an
accident and other physical ailments. Respondent moved for
dismissal of the case and a penalty under section 6673. The
Court permitted petitioner to file a response to the motion and
ultimately denied the motion, allowing petitioner another
opportunity to pursue his claimed deductions and credits. The
case was thereafter set for trial in Denver on May 17, 2010.
At no time before or during the proceedings on May 17, 2010,
did petitioner substantiate any deductions or dispute the receipt
of the income that was included in the statutory notice. He
relied solely on arguments about tax return filing requirements,
preparation of substitutes for returns, and procedures for
determination of tax deficiencies and additions to tax. At the
time of trial, petitioner raised various objections to exhibits
that should have been stipulated, and the Court ruled on those
objections. The exhibits received in evidence were official and
business records reflecting the reporting of petitioner’s income,
the preparation of substitutes for returns under section 6020(b),
and petitioner’s failure to file returns for the years in issue.
This evidence satisfied respondent’s burden of production under
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section 7491(c). See Higbee v. Commissioner, 116 T.C. 438, 446-
447 (2001).
Petitioner pleaded for time to file a posttrial brief. He
was warned by the Court that he had not presented a meritorious
or relevant argument to that time, but he was allowed to file a
brief.
Discussion
In his posttrial brief, petitioner asserts misguided
arguments about burden of proof, attacks the Court’s rulings
during trial, and claims that the prior rulings of the Court that
denied summary dismissal of his case were rulings accepting his
arguments. In essence, he asserts that determination of his
liabilities for 2002, 2004, and 2005 has not been and cannot be
accomplished.
Petitioner has never raised a reasonable dispute with
respect to the income reported by third parties for the years in
issue. Contrary to petitioner’s claims, respondent was not
required to produce witnesses. See sec. 6201(d). Although in
his prior cases deficiencies were reduced as a result of
concessions by respondent, no evidence in this case would justify
any reductions. Petitioner has not shown reasonable cause for
his failure to file returns or to pay tax and has not shown an
exception to the requirement that he make estimated tax payments.
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The additions to tax determined in the statutory notice are
appropriate.
Although the Court previously indulged petitioner’s pleas
for more time and his claims that he was entitled to deductions
and credits, at this stage it is apparent that his consistent
strategy has been to delay determination of his liabilities
without any intent to abandon the arguments that have been
characterized throughout as frivolous, irrelevant, and otherwise
totally lacking in merit. Petitioner’s only authority for his
arguments is his own convoluted reading of various provisions of
the Internal Revenue Code, the Internal Revenue Manual, official
IRS transcripts, the Federal Rules of Evidence, and cases cited
out of context. Because the Court advised him that his
interpretations were erroneous, he asserts that the Court is
biased against pro se taxpayers. He claims that he was prevented
from presenting his case at trial “for fear of threatened
retribution”--an argument similar to one raised in a prior appeal
that he entered into a stipulation because “‘the spectre of
sanctions hung close over [his] head’”. See Wheeler v.
Commissioner, 528 F.3d at 779. Petitioner’s repetitious rhetoric
claiming victimization has no credibility.
Petitioner’s contentions are merely stale and recycled
versions of unsuccessful arguments that he has made since 1994.
See id. at 776. Under these circumstances, we are not compelled
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to address at length his latest concoctions. To do so would be to
encourage the dilatory conduct that he has employed throughout the
history of this case and would neither dissuade petitioner nor
provide useful guidance to taxpayers with legitimate cases. The
Court’s attempts at trial to direct petitioner to relevant issues
and to explain the errors in his arguments are cited by petitioner
in attacking the Court. As the Court of Appeals for the Tenth
Circuit previously remarked: “We are confronted here with [a
taxpayer] who simply [refuses] to accept the judgments of the
courts.” Lonsdale v. United States, 919 F.2d 1440, 1448 (10th
Cir. 1990).
Petitioner was penalized $1,500 in each of three prior
docketed cases. See Wheeler v. Commissioner, 127 T.C. at 214;
Wheeler v. Commissioner, T.C. Memo. 2006-109. The Court of
Appeals for the Tenth Circuit, in affirming the decision entered
pursuant to Wheeler v. Commissioner, 127 T.C. 200 (2006), noted
that his appeal was frivolous and that sanctions might be awarded,
but declined to do so because of dissatisfaction with respondent’s
request for an $8,000 lump-sum award. See Wheeler v.
Commissioner, 521 F.3d at 1291-1292. In the appeal from the
decision entered pursuant to Wheeler v. Commissioner, T.C. Memo.
2006-109, the Court of Appeals for the Tenth Circuit awarded a
sanction of $4,000 against petitioner. See Wheeler v.
Commissioner, 528 F.3d at 785.
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Petitioner was warned in the January 11, 2008, O&OSC of the
likelihood of a penalty between $10,000 and $25,000 under section
6673 in this case. Petitioner has not cured the defects in his
approach identified in the portions of that O&OSC quoted above,
and the conclusion that he has maintained this action primarily
for delay is now unavoidable. His noncompliance with the tax
laws has continued for well over a decade and after repeated
rejections of his frivolous arguments in judgments of this Court
and the Court of Appeals rendered years before this case was
submitted. A penalty in the maximum amount of $25,000 is
appropriate when lesser amounts have not deterred a taxpayer’s
defiance of the tax laws and of the rulings of the courts. See,
e.g., Tinnerman v. Commissioner, T.C. Memo. 2010-150; Davenport
v. Commissioner, T.C. Memo. 2009-248. Such a penalty is
justified here, and the decision in this case will include a
determination that petitioner owes to the United States a penalty
of $25,000.
For the reasons explained above,
Decision will be entered
for respondent.