ARNOLD BRUCE WINSLOW, PETITIONER v. COMMISSIONER OF
INTERNAL REVENUE, RESPONDENT
Docket No. 18177–11. Filed September 25, 2012.
P filed no tax return for either 2005 or 2006. R prepared
substitutes for returns and issued notices of deficiency for
those years. P principally argues that he is not liable for the
deficiencies because the individuals who prepared the sub-
stitutes for returns and issued the notices of deficiency were
not delegated authority to do so. R also determined additions
to tax for failure to timely file a return and failure to timely
pay tax due and asks that we sanction P for making frivolous
arguments.
1. Held: The individuals who certified the substitutes for
returns and issued the notices of deficiency had the delegated
authority to do so; generally, intervening line supervisors
enjoy the same delegated authority as their specifically dele-
gated subordinates.
2. Held, further, additions to tax are sustained.
3. Held, further, P is sanctioned for maintaining frivolous
positions.
Arnold Bruce Winslow, pro se.
Mayer Y. Silber and Robert M. Romashko, for respondent.
HALPERN, Judge: By notices of deficiency dated May 9,
2011 (notices), respondent determined deficiencies in, and
270
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(270) WINSLOW v. COMMISSIONER 271
additions to, petitioner’s 2005 and 2006 Federal income tax
as follows: 1
Additions to tax
Year Deficiency Sec. 6651(a)(1) Sec. 6651(a)(2)
2005 $2,706 $479 $532
2006 2,491 441 461
Petitioner assigned error to those determinations, averring
only: ‘‘The true amount of the tax and interest and penalties
owing is $0.00.’’ Petitioner did not, as required by our
standing pretrial order, file a pretrial memorandum, which,
among other things, would have described his view of the
issues in the case. From his testimony at trial, we under-
stand petitioner’s principal objections to respondent’s deter-
minations to be that the determinations are not based on
properly made substitutes for returns and that the notices
are invalid because improperly issued. At trial, respondent
moved for the imposition of a sanction against petitioner
under section 6673(a)(1), which, as pertinent, empowers us to
sanction a taxpayer on account of instituting or maintaining
a proceeding primarily for delay or for maintaining a frivo-
lous or groundless position.
Petitioner bears the burden of proof. See Rule 142(a), Tax
Court Rules of Practice and Procedure. 2
FINDINGS OF FACT
At the time the petition was filed, petitioner resided in
Illinois.
During 2005 and 2006 (the years in issue), petitioner was
employed by Dell Medical Corp. and, in return for his serv-
ices, received compensation from it of $28,630 and $27,529
for those years, respectively. During the years in issue, he
also received dividend payments of $24 and $28 for those
years, respectively. Because for the years in issue he received
no income tax returns from petitioner, respondent, using
1 Section references are to the Internal Revenue Code of 1986, as amended and in effect for
the years in issue.
2 Petitioner has not raised the issue of sec. 7491(a), which shifts the burden of proof to the
Commissioner in certain situations. In any event, sec. 7491(a) does not apply here because peti-
tioner has not shown that he has satisfied the preconditions for its application. See sec.
7491(a)(2).
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272 139 UNITED STATES TAX COURT REPORTS (270)
information returns he received from third parties, made
returns (substitutes for returns) for petitioner. In part, the
substitutes for returns consist of an Internal Revenue Service
(IRS) Form 13496, IRC Section 6020(b) Certification, executed
in each case by Maureen Green, whose title is stated on the
form to be ‘‘Operations Manager, Examination’’. Ms. Green,
whose title now may be program manager, is employed by
the IRS in its Ogden, Utah, Service Center. She is a super-
visory employee who supervises Small Business/Self
Employed Division (SB/SE) compliance officers. The notices
followed the substitutes for returns, each notice being
executed for the Commissioner by Henry Slaughter, under
whose signature appeared the designation ‘‘Service Center,
Ogden Service Center’’. Mr. Slaughter’s position in the
service center is ‘‘Director, Collection Area-Western’’, and he
serves as one of several field directors of SB/SE’s collection
activities.
OPINION
I. Introduction
Although petitioner’s objections to respondent’s determina-
tions concern principally procedural aspects of those deter-
minations, he did at trial argue that the compensation and
dividends he received were not taxable. The short answer is
that compensation for services and dividends are items of
gross income and, as such, are taxable. See sec. 61(a)(1), (7).
Petitioner’s arguments to the contrary—i.e., that he is not an
employee under the Internal Revenue Code unless he works
for a controlled group of corporations; the attribution rules
applicable to farming corporations bring into question the
taxability of dividends generally—are nonsense and require
no further discussion. See Crain v. Commissioner, 737 F.2d
1417, 1417 (5th Cir. 1984) (‘‘We perceive no need to refute
these arguments with somber reasoning and copious citation
of precedent; to do so might suggest that these arguments
have some colorable merit.’’); see also Wnuck v. Commis-
sioner, 136 T.C. 498 (2011). Petitioner had sufficient gross
income for the years in issue that, for each year, he was
required to file a Federal income tax return. See sec.
6012(a)(1).
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(270) WINSLOW v. COMMISSIONER 273
II. Delegation of Authority
Petitioner argues that the substitutes for returns were not
properly made because the individual certifying them, Ms.
Green, had not been delegated the authority to do so. Like-
wise, he argues that the notices were invalid because the
individual executing them, Mr. Slaughter, had not been dele-
gated the authority to do so.
The Secretary is responsible for collecting the taxes
imposed by the internal revenue laws of the United States.
See sec. 6301. Because one individual cannot be responsible
for so much, Congress has enacted statutes authorizing the
delegation of that authority. The delegation of authority is
contained in a clear line of statutory provisions. With respect
to substitutes for returns, section 6020(b)(1) provides: ‘‘If any
person fails to make any return required by any internal rev-
enue law or regulation * * * the Secretary shall make such
return from his own knowledge and from such information as
he can obtain through testimony or otherwise.’’ With respect
to deficiencies in tax determined by the Secretary, section
6212(a) authorizes him to send notice of the deficiency to the
taxpayer. The term ‘‘Secretary’’ is defined as meaning ‘‘the
Secretary of the Treasury or his delegate.’’ Sec.
7701(a)(11)(B). The term ‘‘ ‘or his delegate’ * * * when used
with reference to the Secretary of the Treasury, means any
officer, employee, or agency of the Treasury Department duly
authorized by the Secretary of the Treasury directly, or
indirectly by one or more redelegations of authority, to per-
form the function mentioned or described in the context’’.
Sec. 7701(a)(12)(A)(i).
Delegation Order 5–2, set forth in Internal Revenue
Manual (IRM) pt. 1.2.44.3 (May 5, 1997), delegates to specific
agents and managers, including SB/SE tax compliance offi-
cers, the authority to ‘‘prepare or execute returns required by
any internal revenue law or regulation when the person
required to file such return fails to do so.’’ Delegation Order
4–8, set forth in IRM pt. 1.2.43.9 (Feb. 10, 2004), delegates to
specific managers, case leaders, reviewers, and directors,
including SB/SE field directors, the authority to ‘‘sign and
send to the taxpayer by registered or certified mail any
notice of deficiency.’’
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274 139 UNITED STATES TAX COURT REPORTS (270)
Ms. Green was authorized to prepare and execute the sub-
stitutes for returns. While her position is not among those
specified in Delegation Order 5–2 as being delegated
authority to prepare substitutes for returns, she supervises
SB/SE tax compliance officers, who are specifically delegated
that authority by Delegation Order 5–2. With respect to the
delegation of authority to those in intervening positions (i.e.,
in positions between the delegating official and the delegated
official), IRM pt. 1.11.4.4.1 (1)(A) (Oct. 10, 2008) states the fol-
lowing general rule: ‘‘Every intervening line supervisory posi-
tion up to and including the Commissioner has the same
authority.’’ Because we are satisfied that Ms. Green is in an
intervening line supervisory position with respect to SB/SE
tax compliance officers, who are delegated authority to pre-
pare and execute substitutes for returns, we are satisfied
(and find) that she had authority to prepare and execute the
substitutes for returns. While provisions of the IRM are gen-
erally considered not to have the force of law, e.g., Fargo v.
Commissioner, 447 F.3d 706, 713 (9th Cir. 2006) (citing cases
from five other U.S. Courts of Appeals), aff ’g T.C. Memo.
2004–13; accord Vallone v. Commissioner, 88 T.C. 794, 807–
808 (1987), we think that in this instance the IRM reasonably
interprets the delegation authority of the Secretary.
Mr. Slaughter was authorized to issue the notices. Mr.
Slaughter’s position is ‘‘Director, Collection Area—Western’’;
he ‘‘serves as one of several field directors of SB/SE’s collection
activities’’. Delegation Order 4–8 specifically delegates the
authority to issue notices of deficiency to SB/SE field directors.
Mr. Slaughter was delegated that authority.
The substitutes for returns were properly made and
executed, and the notices were properly issued.
III. Section 6651(a)(1) Additions to Tax
Section 6651(a)(1) provides for an addition to tax in the
event a taxpayer fails to timely file a return (determined
with regard to any extension of time for filing) unless the
taxpayer shows that such failure is due to reasonable cause
and not due to willful neglect. The amount of the addition is
equal to 5% of the amount required to be shown as tax on
the delinquent return for each month or fraction thereof
during which the return remains delinquent, up to a max-
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(270) WINSLOW v. COMMISSIONER 275
imum addition of 25% for returns more than four months
delinquent. Id. With respect to both the section 6651(a)(1)
and (2) additions to tax, respondent bears the burden of
coming forth with evidence that imposition of the addition is
appropriate. See Higbee v. Commissioner, 116 T.C. 438, 446–
447 (2001); see also sec. 7491(c).
Respondent’s account transcripts for petitioner for the
years in issue indicate that he filed no Federal income tax
returns for those years, and that is sufficient for us to find,
and we do, that petitioner filed no return for either year. See,
e.g., Green v. Commissioner, T.C. Memo. 2007–262, 2007 WL
2783107, at *5–*6. Respondent has met his burden under
section 7491(c) to produce evidence that imposition of the
section 6651(a)(1) addition to tax for failure to timely file a
return is appropriate. See Higbee v. Commissioner, 116 T.C.
at 447. Petitioner has not come forth with evidence that his
failure to file was due to reasonable cause and not due to
willful neglect. Consequently, we find that petitioner is liable
for the additions to tax under section 6651(a)(1).
IV. Section 6651(a)(2) Additions to Tax
Section 6651(a)(2) imposes an addition to tax when a tax-
payer fails to pay the amount of tax shown on a return by
the prescribed date unless the taxpayer shows that such
failure is due to reasonable cause and not due to willful
neglect. The amount of the addition is equal to 0.5% of the
tax for each month or fraction thereof during which the tax
remains unpaid, up to a maximum addition of 25%. Under
section 6651(g)(2), a substitute for return prepared pursuant
to section 6020(b) is treated as the taxpayer’s return for pur-
poses of section 6651(a)(2). 3
Petitioner filed no return for either of the years in issue,
and respondent properly made substitutes for returns for
him. Petitioner has not paid the tax shown on those sub-
stitutes for returns. Respondent has, therefore, met his bur-
den under section 7491(c) to produce evidence that imposi-
3 We note in passing that, while a properly made substitute for return is necessary before a
sec. 6651(a)(2) addition to tax for failure to pay the tax shown on return can be imposed on
a nonfiler, a substitute for return is not a prerequisite to the Commissioner’s determining a defi-
ciency in tax. E.g., Roat v. Commissioner, 847 F.2d 1379, 1381–1382 (9th Cir. 1988) (‘‘Deficiency
procedures set out in the Internal Revenue Code * * * do not require the Commissioner to pre-
pare a return on a taxpayer’s behalf before determining and issuing a notice of deficiency.’’); ac-
cord Watson v. Commissioner, T.C. Memo. 2007–146, aff ’d, 277 Fed. Appx. 450 (5th Cir. 2008).
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276 139 UNITED STATES TAX COURT REPORTS (270)
tion of the section 6651(a)(2) addition to tax for failure to
timely pay tax shown on a return is appropriate. See Tilley
v. Commissioner, T.C. Memo. 2009–83. Petitioner has not
come forth with evidence that his failure to pay was due to
reasonable cause and not due to willful neglect. Con-
sequently, we find that petitioner is liable for the additions
to tax under section 6651(a)(2).
V. Section 6673(a)(1) Penalty
In pertinent part, section 6673(a)(1) provides for a penalty
of up to $25,000 if the taxpayer has instituted or maintained
proceedings before the Tax Court primarily for delay or the
taxpayer’s position in the proceeding is frivolous or ground-
less. We described as nonsense petitioner’s arguments that
the compensation and dividends he received were not tax-
able. ‘‘The purpose of section 6673 is to compel taxpayers to
think and to conform their conduct to settled principles
before they file returns and litigate.’’ Takaba v. Commis-
sioner, 119 T.C. 285, 295 (2002). ‘‘A taxpayer’s position is
frivolous if it is contrary to established law and unsupported
by a reasoned, colorable argument for a change in the law.’’
Goff v. Commissioner, 135 T.C. 231, 237 (2010). Petitioner’s
nonsensical arguments are, within that definition, frivolous.
Moreover, we suspect that, in part, petitioner brought this
proceeding in order to delay the collection of income tax due
and owing. Principally for making frivolous arguments, we
impose upon him a penalty under section 6673(a)(1) of
$2,500.
VI. Conclusion
For the foregoing reasons, petitioner is liable for the defi-
ciencies, section 6651(a)(1) additions to tax, and section
6651(a)(2) additions to tax. Additionally, we impose a penalty
on petitioner pursuant to section 6673(a)(1).
An appropriate order and decision will be
entered.
f
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