T.C. Mem o. 2 01 4- 22 8

UNITED STAT ES TAX COURT

EUGENEJ. KERNAN, Peti ti on er v . COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 19 67 2- 11
. Fi le d No ve m be r 3, 2 01 4.
Eug en e J. Kerna n, p ro se. Mi ch ael W . Llo y d, fo r res po nd en t.

MEMORANDUM FINDINGS OF FACT AND OPINION BUCH, Ju dg e: Sin ce s om et im e in th e 1 99 0s , Eug en e Kern anha s n otfil ed ta x re turn s, an d a s i s m os t n ot ab le he re h e d idno t fi le tax returns for20 01 th ro ug h 20 06 , th e y ears at i ss ue . Res po nd en t i ss ue d n ot ic es of d efi ci en cy forth os e y ears in whi chhe de te rm in edde fic ie nc ie s an d re la te d a dd it io ns to tax un de r se ct io ns- 2 -

[* 2] 66 51 (a)( 2) an d 6 65 4 a s wel l as a frau du le ntfai lu re t o fi le ad di ti on to tax
un de r se ct io n 6 65 1( f). 1 Mr. Kern ancla im edat t ria l an d o n b rie f th athe is no t re qu ire d t o fi le a ta x return unl es s an d u nt il he is pe rs on al ly not ifi edby the Co m m is si on er tha t h e is requi redto do so . All o f hi s b rie fs , ho wev er, ex ceed edth e g en ero us pa ge li m it s th atth e Co urt al lo wed . As a res ul t, the Co urt wi ll de em Mr. Kern an ’s bri efs to be st ric ke n. As forhi s ar gu m en t tha t h e is no t re qu ire d t o fi le a ta x re tu rnun ti l pe rs on al ly inv it edto do so , th atarg um en t i s fr iv ol ou s. Mr . Kern anis requi redto fil e ta x re tu rn s fo r th e y ears at i ss ue , andwe su st ai n re sp on de nt ’s def ic ie nc y de te rm in at io ns forth os e y ears . Bec au se res po nd en t fa il edto pro ve th atMr. Kern anact edfrau du le nt ly in fai li ng to fil e h is returns , th e ad di ti on to tax un de r se ct io n 6 65 1( f) d oe s n otap pl y . Mr. Kern anis li ab le forth e ad di ti on s t o t ax un de r se ct io n 6 65 1( a)(1 ) fo r fai lu re t o t im el y

fil e, whi chres po nd en t as se rte d i n h is an swe r, un de r se ct io n 66 51 (a)( 2) for

fai lu re t o t im el y

pa y tax , andun de r se ct io n 6 65 4 fo r fai lu re t o m ak e es ti m at edtax pa ym en ts . Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o t he Int ern al 1 Rev enue Co de ineffe ctforth e y ears at i ss ue , andall Ru le refe ren ces are t o t he Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e. All m on et ary am ou nt s ar e ro un de d t o th e n eare stdo ll ar.- 3 -

[* 3] FINDINGS OF FACT Eug en e Kern andi d n otfil e ta x re tu rn s fo r ta x years 2 00 1 t hr ou gh 20 06 , th e y ears at i ss ue . Alth ou ghMr. Kern andi d n otfil e ta x re tu rn s, h e h adin co m e fo r th os e y ears an d o wedtax . I. In co m e an d B us in es s Act iv it ie s Dur in g t he y ears at i ss ue Mr. Kern anha d i nc om e fro m at l eas t two s ou rces : he so ldva rio us tax av oi da nc e p ro du ct s, an d h e p erfo rm edva rio us pa ral eg al func ti on s, i nc lu di ng advi si ng pe op le inm at te rs be fo re the Int ern al Rev enue Serv ic e (IR S). Dep os it s i nt o M r. Kern an ’s per so na l ch eck in g a cco un t fr om th os e bu si ne ss act iv it ie s ex ceed ed$7 9,0 00 pe r y ear. Mr . Kern anst ip ul at edth e d ep os it s an d “ ne t g ro ss in co m e” as setforth inth e tabl e b el ow. “Net g ro ss in co m e” i s the pa rti es ’ euph em is ti c te rm to de sc rib e g ro ss ba nkde po si ts les s amoun ts rece iv ed fro m no nt ax ab le so ur ces . W e wil l re fer t o t hi s b y th e m or e acc ur at e p hr as e “ gr os s in co m e”. Yea

r Deposits Gross income 2001 $84,368 $84,212 2002 99,721 99,610 2003 79,094 78,943 2004 90,269 88,814 2005 124,346 124,207 2006 103,672 103,672- 4 -

[* 4] Mr. Kern anfai le d t o re po rt t hi s i nc om e an d d idno t o fferan y ev id en ce t o sh ow tha t the se de po si ts cam e fro m no nt ax ab le so ur ces . A. In te ll ectua l Pr op erty Sal es Mr. Kern anrece iv edin co m e fro m va rio us bu si ne ss act iv it ie s. Mr . Kern an own eda W eb si te ti tl ed“ The Am eri canRep ub li c”. In19 99 he wrot e th e co nt en ts of a CD-ROM ti tl ed“ How t o S TOP th e IRS ”, an d h e la te r publ is he d ash ort b oo k ti tl ed“ The Zen o f Lib erty ”. Mr. Kern anso ldth es e p ro du ct s an d o th er i nt el le ctua l pr op erty on hi s Web s it e. Whe n c us to m ers pa idby credi t card , Mr. Kern anus ed D.A.K. Co ns ul ta nt s, a s ep arat e co m pa ny owne d b y

Delo res Krai ns ki , to pro ces s th e cre di t ca rdch arg es . D.A. K. Con su lt an ts wou ldth enwrit e ch eck s t o M r. Kern anfor

th es e cre di t cardpa ym en ts les s the pro ces si ng fees . Mr. Kern anwou ld de po si t the se ch eck s i nt o h is pe rs on al ch eck in g a cco un t. B. Para le ga l Work Inad di ti on , Mr. Kern anrece iv edin co m e fro m pe rfo rm in g p aral eg al work
. His W eb si te adve rti se d t ha t h e se t up b us in es s en ti ti es , setup tru st s, an d pe rfo rm edot he r le ga l func ti on s. Ineit he r la te 19 95 or e arl y 19 96 Mr. Kern an be ga n p ro vi di ng in fo rm al rep res en ta ti on to cli en ts who were i nv ol ve d i n IR S
ex am in at io ns . Thes e cl ie nt s p ai d M r. Kern an , andhe de po si te d the fees he
rece iv edin to hi s p ers on al ch eck in g a cco un t.- 5 -

[* 5] II. Return F il in g Mr. Kern andi d n otfil e returns rep orti ng th is in co m e. Lik ewis e, he di d n ot pa y tax on hi s i nc om e o r m ak e es ti m at edtax pa ym en ts . Mr. Kern an ’s dec is io n n otto fil e ta x re tu rn s i s b as edon hi s i nt erp ret at io n o f
se ct io n 6 00 1, wh ic h h e in te rp ret s t o m eanth athe do es no t h av e to fil e a t ax return un le ss an d u nt il th e Co m m is si on er n ot ifi es hi m

inwrit in g t ha t h e m

us t d o s o. Mr.

2 Kern anne ve r rec ei ve d s uc h n ot ic e. Mr. Kern anha s co ns is te nt ly hel d t hi s b el ie f an d h as co m m un ic at editto va rio us go ve rn m en ta l b od ie s. Alt ho ug h M r. Kern anfil edreturns form an y y ears be fo re 1 99 3, h e h as no t fi le d atax return s in ce the n. In19 95 he wrot e a l et te r to th e So ci al Secu rit y

Adm in is tra ti on ask in g fo r cl ari fic at io n a s t o wh ethe r he ha d be engi ve n n ot ic e o f hi s o bl ig at io n t o m ai nt ai n re co rd s an d fi le tax returns . Altho ug h h e rec ei ve d ares po ns e d at edNov em be r 1, 1 99 5, fr om

th e Dep art m en t o f Sect io n 6 00 1 p ro vi de s, i n p art : 2 Eve ry

pe rs on li ab le foran y

tax im po se d b y th is ti tl e, orforth e co ll ect io n t he reo f, sh al l k eep su chreco rd s, re nd er s uc h s ta te m en ts , m ak e su chreturns , andco m pl y with s uc h ru le s an d re gu la ti on s as th e Secr et ary m ay

fro m ti m e to ti m e p res cri be . Whe ne ve r inth e jud gm en t o f th e Sec ret ary itis ne ces sa ry , he m ay requi re an y

pe rs on , by no ti ce s erv edup on su chpe rs on or b y reg ul at io ns , to m ak e su ch returns , ren de r su chst at em en ts , or k eep su chreco rd s, as th e Sec ret ary de em s s uf

fic ie ntto sh ow wh ethe r orno t s uc h p ers onis li ab le fortax un de r th is ti tl e. * * *- 6 -

[* 6] Heal th an d Hu m anServ ic es , itdi d n otsp eci fic al ly addres s h is qu es ti on s. He al so m ad e si m il ar i nqui rie s t o t he Co m mis si on er o f In te rn al Rev enue an d t he Secr et ary of

th e Treas ury , bu t h e n ev er rec ei ve d re sp on se s. Mr. Kern anwas n otsh y

ab ou t s ha rin g h is vi ews . Ind eed , he app eare d o n TV adv oc at in g h is be li efs . Mr. Kern ansp ok e in a TV in te rv ie w th atair edon Apr il 14 , 20 01 , st at in g h is in te rp ret at io n o f se ct io n 6 00 1 andask in g t he IRS t o ad dr es s wh ethe r he ha d re cei ve d n ot ic e. III. IRS Ex am in at io n A. IRS Pr om ot er In ve st ig at io n a ndSubs eque ntInc om e Tax Aud it The IRS b eg ana pr om ot er i nv es ti ga ti on of M r. Kern anbu t l at er s hi fte d i ts in ve st ig at io n t o h is in co m e ta x l iabi li ty. Agen t Cr is Co rb inco m pl et edth e au di t. Age ntCo rb in de te rm in edMr. Kern an ’s gro ss in co m e u si ng ba nkreco rd s s ho win g de po si ts m ad e in to Mr. Kern an ’s per so na l ch eck in g a cco un t. Age ntCo rb in reco ns tru ct edMr. Kern an ’s in co m e b y an al yzi ng hi s d ep os it s in st eadof r el y in g o n b us in es s re co rd s b ecau se Mr. Kern anrefu se d t o turn o ve r an y bo ok s o r rec or ds . The o nl y it em s tha t h e p ro du cedwere co pi es of t he in te ll ectua l pr op erty pro du ct s tha t h e so ldon hi s Web s it e. The IR S se ntsu m m on se s t o t he ba nkwher e Mr. Kerna n m ai nt ai ne d h is pe rs on al ch eck in g a cco un t t o o bt ai n- 7 -

[* 7] reco rd s. Mr . Kern anpe ti ti on edto qu as h t he su m m on se s, b utall of t he
su m m on se s wer e en fo rced
. Usi ng th e th ird -p arty

ba nkreco rd s fo r Mr. Kerna n’s ch eck in g a cco un t, the IRS c om pu te d h is un rep orte d g ro ss in co m e b y ad di ng th e sp eci fic de po si ts th at were m ad e in to th e acc ou ntan d s ub tra ct in g a ny ite m s tha t the IRS d et erm in ed
were n on ta xabl e. Then th e IRS pu t t og ethe r a l is t o f eac h d ep os itfro m va rio us cl ie nt s an d c us to m ers th atha d p ur ch as edhi s i nt el le ctua l p ro pe rty anden ga ge d h is he lp with p aral eg al workor t ax co nt ro ve rs y is su es . B. Oth er Ba nkReco rd s No t Co ll ect ed Dur in g t he IRS au di t Ag en t Co rb in co ll ect edba nkreco rd s o nl y for Mr. Kern an ’s per so na l ch eck in g a cco un t; sh e d idno t s umm on reco rd s fr om an y ot he r ba nk s wi th whi chMr. Kern anha d app aren t re la ti on sh ip s. At t ria l Ag en t Co rb in te st ifi edth atth ere wer e d ep os it s i nt o M r. Kern an ’s per so na l ch eck in g a cco un t fro m va rio us so ur ces th at , intu rn , ledhe r to ot he r acc ou nt s wi th whi chMr. Kern anwas p ot en ti al ly con ne ct ed . Agen t Co rb in di d n otsu m m on bankreco rd s fo r th os e acc ou nt s, an d wh enreco ns tru ct in g M r. Kern an ’s in co m e, sh e u se d o nl y de po si ts in to Mr. Kern an ’s per so na l ch eck in g a cco un t.- 8 -

[* 8] C. Not ic es of De fic ie nc y The IRS p rep aredsubs ti tu te s fo r returns un de r se ct io n 6 02 0( b) fortax y ears 20 01 to 20 06 . The IR S is su edtwo no ti ces of d efi ci en cy ba se d o n t ho se subs ti tu te returns on May 26, 2 01 1. Th e fi rs t n ot ic e o f de fic ie nc y co ve redtax y ears 20 01 th ro ug h 2 00 3. Th e se co ndno ti ce o f de fic ie nc y co ve redtax y ears 20 04 th ro ug h 20 06 . In the no ti ces th e IRS de te rm in edth e fo ll owi ng de fic ie nc ie s an d a dd it io ns to tax un de r se ct io ns 66 51 (a)( 2) an d (f ) an d 6 65 4: Add it io ns to tax Year Defi ci en cy Sec. 66 51 (a)( 2) Sec.

66 51 (f) Sec.

66 54 20 01 $2 7,8 53 $6 ,96 3 $2 0,1 93 $1 ,11 3 20 02 33 ,10 8 8,2 77 24 ,00 3 1,1 06 20 03 24 ,35 8 6,0 90 17 ,66 0 62 8 20 04 28 ,05 7 7,0 14 20 ,34 1 80 4 20 05 39 ,44 6 9,8 62 28 ,59 8 1,5 82 20 06 33 ,45 3 8,0 29 24 ,25 3 1,5 83 IV. Tax Co urt Pr oc eed in gs Mr. Kern anti m el y

fil edhi s p et it io n t o s eekred et erm in at io n o f th e de fic ie nc ie s an d a dd it io ns to tax de te rm in edinth e n ot ic es of d efi ci en cy . He
res id edinHawaii onth e d at e th e p et it io n was fil ed . Res po nd en t t im el y an swe red- 9 -

[* 9] an d a ss ert edad di ti on s t o t ax un de r se ct io n 6 65 1( a)(1 ) if th e Co urt wer e to fin d t ha t s ect io n 6 65 1( f) d idno t ap pl y . Tria l was he ldonDecem be r 10 , 20 13 , inPh oe ni x, Ari zo na . At th e cl os e o f tri al res po nd en t m ov edforsan ct io ns un de r se ct io n 6 67 3, ar gu in g t ha t M r. Kern an sh ou ldbe san ct io ne d b ecau se Mr. Kern anha d t ak ena po si ti on th atwas fr iv ol ou s. Fo ll owi ng tri al th e Co urt o rd eredsi m ul ta ne ou s b rie fs , bu t the Co urt im po se d p ag e li m it s o n the parti es ’ br ie fs . Both p art ie s t im el y fil edth es e b rie fs , bu t M r. Kern an ’s bri efs ex ceed edth e Co urt’s p ag e li m it s. Mr . Kern an ’s 88 -p ag e op en in g b rie f ex ceed edth e 7 5- pa ge li m itim po se d b y th is Co urt; hi s 8 8- pa ge an swe rin g b rie f ex ceed edth e 3 0- pa ge li m itth atth e Co urt i m po se d. Res po nd en t fi le d am ot io n t o s tri ke Mr. Kern an ’s bri efs , to whi chMr. Kern anres po nd ed
. OPINION Ju dg es im

po se pa ge li mit s fo r a rea so n. Th ey for ce p art ie s t o h on e th ei r arg um en ts an d t o s ta te th os e arg um en ts su cci nc tl y . Pag e li mit s caus e, orsh ou ld
cau se , parti es to di sp en se with a rg um en ts of l it tl e o r no m eri t i n fa vo r of th os e arg um en ts th atha ve a be tt er ch an ce o f carry in g t he da y . They en co ur ag e p art ie s t o av oi d re du nd an cy . Andrep et it io n.- 10 -

[* 10 ] Part ie s o fte n a re qui te crea ti ve inth ei r effo rts to cir cum ve ntpa ge li m it s. Am on g the m os t b la tantm etho ds is to pu t m at eri al in to anap pe nd ix an d t o n ot co un t tha t ap pe nd ix as f

al li ng withi n t he pa ge li mit s. Ano th er i s t o i nc or po rat e 3
an ot he r do cu m en t b y

refe ren ce. Less bl at an t, b utst il l o bv io us , are tho se in st an ces

4 in whi chpa rti es sh rin k t he m arg in s o r th e fo ntsi ze s o t ha t the y cansque eze m or e te xtwithi n t he pa ge li m it s tha t wer e im po se d. All of t he se vi ol at e Ru le 23 (d ).

5 The n t he re ar e m etho ds th at , whi le pe rh ap s i n t ech ni cal co nf orm ity with o ur Ru le s, d im in is h the qu al ity of abri ef. Exa m

pl es in cl ud e m ov in g t ex t i nt o fo ot no te s o r us in g e xt en si ve bl oc k quo ta ti on s s o t ha t the au th orcansi ng le -s pa ce m or e o f th e te xt .
See, e.g ., Flem in g v . Cnt y . of Kan e, 85 5 F .2d49 6, 4 98 (7t h C ir. 1 98 8) ; 3 Uni te d S tate s v . Mazz on e, 78 2 F .2d75 7, 7 65 (7t h C ir. 1 98 6) ; St or ey v. Co m m is si on er, T.C. Mem o. 2 01 2- 11 5, 2 01 2 WL 14 09 27 3, at*1 7 (s tri ki ng Co m m is si on er’s ap pe nd ix be cau se itex ceed edth e Co urt’s p ag e li m it s) ; Weis s v . Co m m is si on er, T.C. Mem o. 1 99 5- 70 , 19 95 W L 57 33 7, at*7 (st rik in g Co m m is si on er’s ap pe nd ix be cau se itcau se d the bri ef t o e xc eedth e Co urt’s 5 0- pa ge li m itsetat t ria l). See F le min g, 8 55 F.2dat 4 98 ; Prud en ti al Ins . Co. v . Sip ul a, 77 6 F .2d15 7, 4 16 1 n .1 (7 th Cir . 19 85 ); B ob se e Co rp . v. Un it edSta te s, 4 11 F.2d23 1, 2 34 n.2 (5t h Ci r. 19 69 ). See Kan o v . Nat’l Co ns um er Co op . Ban k, 2 2 F .3d89 9, 8 99 (9t h C ir. 1 99 4) ; 5 TK-7 Co rp . v. Est at e o f Bar bo ut i, 9 66 F.2d57 8, 5 79 (10 th Cir . 19 92 ); W es ti ng ho us e Ele c. Co rp . v. N.L.R.B., 80 9 F .2d41 9, 4 25 n.* (7t h C ir. 1 98 7)
.- 11 -

[* 11 ] Mr. Kern anav oi de d the Co urt’s p ag e li m it s i n p erh ap s the lea stcrea ti ve way of a ll ; h e jus t i gn or edth em . At th e co nc lu si onof t ria l the Co urt h adth e fo ll owi ng co ll oquy with th e p art ie s co nc ern in g b rie fs :

THE COURT: Okay . So, h ere’s wh atwe’re go in g t o d o o n the br ie f. Open in g b rie fs , bri ef l en gt h a ndwhen I’m tal ki ng ab ou t b rie f le ng this whatI wou ldcal l the tex t o f th e b rie f, th at ’s eve ryth in g. If y ouha ve a tabl e o f co nt en ts , itdo es n’t co un t. If you h av e a t ab le of au th or it ie s, i t d oe sn ’t cou nt . If y ouha ve a ti tl e p ag e, itdo es n’t co un t. Eve ryth in g a fte r th os e up t hr ou ghan d i nc lu di ng th e si gn atur e p ag e no t i nc lu di ng att ach m en ts , ok ay ? MR. KERNAN: In cl ud in g t he cert ifi cat e o f se rv ic e? THE COURT: Notin cl ud in g t he cert ifi cat e o f se rv ic e. So , in es se nc e, th e b od y

of t he bri ef i nc lu di ng th e fi nd in gs of f act , 75 pa ge s fo r th e o pe ni ng bri ef, 3 0 p ag es foran y rep ly brie f. The ge ne ro us pa ge li m itforth e o pe ni ng bri ef was to acco m m od at e p ro po se d fin di ng s o f fac t, y etMr. Kern an ’s pro po se d fi nd in gs of f actwere o nl y

two pa ge s an d c on si st edof a rg um en t, n otfin di ng s o f fac t. Co un ti ng pa ge s i n t he m anne r in st ru ct edby the Co urt, Mr . Kern an ’s op en in g b rie f cam e in at 8 8 p ag es . The Co urt d idno t n eedto go to gre ateffo rt t o d is co ve r Mr. Kerna n’s ex ces s p ag es ; h e nu m be redth em

as i ns tru ct ed . His p ag e 1 be gi ns aft er h is tab le of aut ho rit ie s, an d hi s s ig na tu re ap pe ars on pa ge 88 . Perh ap s M r. Kern anis fon d o f th e num be r 88 ; hi s an swe rin g b rie f al so cam e in at awho pp in g 8 8 p ag es , no t co un ti ng at ta ch m en ts .- 12 -

[* 12 ] Res po nd en t fi le d am ot io n t o s tri ke Mr. Kern an ’s bri efs , to whi chMr. Kern anob

jecte d. The Co urt was well withi n i ts po wer wh enitim po se d p ag e li m it s o n t he pa rti es ’ op en in g a ndrep ly brie fs . The Co urt d eri ve s i ts po wer t o p res cri be rul es fo r it s p ro ceed in gs un de r se ct io n 7 45 3, wh ic h p ro vi de s tha t “ th e p ro ceed in gs of th e Tax Co urt * * * sh al l b e co nduc te d i n a cco rd an ce wi th su chrul es of p ract ic e an d p ro cedur e * * * as t he Tax C ou rt m ay pre sc rib e”. The re ar e n o e xp res s p ag e li mit s fo r br ie fs inou r Ru le s; ho wev er, o urRu le s p ro vi de th at“ [w]here i n a ny in st an ce the re i s n o app li cab le rul e o f pr oc edur e, th e Co urt * * * m ay pre sc rib e th e pr oc edur e, gi vi ng pa rti cu la r wei gh t t o t he Fed eral Ru le s o f Ci vi l Pr oc edur e”. W e 6 ha ve pre vi ou sl y

he ldth at“ [t]he im

pl ie d aut ho rity

of t he Tax C ou rt t o e nf

or ce i ts Ru le s i s a n eces sa ry

ad jun ctto th e fu ll an d e ffec ti ve im pl em en ta ti on of t he ba si c ru le m ak in g p owe r gr an te d b y sec ti on 74 53 . This do ctrin e o f im pl ie d aut ho rit y

is well set tl edan d h as be enap pl ie d b y th e Supr em e Co urt s pe ci fic al ly to t ax tri bu na ls .” 7

Ru le 1(b ). 6 W es tre co , Inc . v. Co m

m is si on er, T.C. Mem o. 1 99 0- 50 1, 1 99 0 Tax Ct. 7 Mem o LEXIS 5 54 , at * 50 (rel y in g o n Go ld sm ith v . Bd. o f Tax App eal s, 2 70 U.S. 11 7 (1 92 6) ).- 13 -

[* 13 ] In de ed , pag e li m it s ar e u su al an d c us to m ary am on g F ed eral co urts inord er to pro m ot e jud ic ia l ef

fic ie nc y . Rul e 3 2( a)(7 )(A) o f th e Fed eral Ru le s o f App el la te Pro cedur e im

po se s p ag e li m it s o f 30 pa ge s o r 14 ,00 0 wo rd s fo r op en in g b rie fs an d of 15 pa ge s o r 7,0 00 word s fo r rep ly brie fs
. Thi s ca se is ap pe al ab le to th e Co urt 8 of App eal s fo r th e Nin th Cir cu it , and14 ou t o f th e 1 5 Di st ric t Co urts withi n t ha t ci rcu itha ve lo cal rul es im po si ng pa ge li mit s o n t he pa rti es . The Di st ric t o f 9 Hawai i, wh ere M r. Kern anres id edat t he ti m e h e fi le d h is pe ti ti on , im po se s a 3 0- pa ge or 9 ,00 0- wor d l im iton bri efs an d a15 -p ag e o r 4,5 00 -wo rdli m iton rep ly br ie fs
. Arizo na , wher e Mr. Kerna n re si de d a t the ti m e o f tr ia l, i m po se s a 1 7- pa ge 1 0

Fed . R. App . P. 32 (a)( 7) (A); cf. 9 thCir . R. 32 -2 (st at in g t ha t m ot io ns to 8 ex ceedpa ge li m it s ar e d is fav or edan d “ gr an te d o nl y up on a sh owi ng of d il ig en ce an d s ub st an ti al ne ed .”) See U.S. Di st . Ct. D. Alas kaL.R. 39 .2(b ); U.S. Di st . Ct. D. Ariz . LRCiv 9 7.2 (e); U.S. Dist . Ct. C.D. Cal . L.R. 11 -6 ; U.S. Dis t. Ct . N.D. Cal . Civ il L.R. 7- 4( b) ; U.S. Dis t. Ct . S.D. Cal. Ci vLR 7.1 (h ); U.S. Di st . Ct. D. Gua m , LR 7.1 (g ); U.S. Dis t. Ct . D. Haw. L R 7 .5; U.S. Dist . Ct. D. Id ah o Lo c. Ci v. R. 7 .1; U.S. Dist
. Ct . D. Mon t. L.R. 7 .1(d )(2 ) (wo rdli m it ); U.S. Di st . Ct. D. Nev . LR 7-4 ; U.S. Dis t. Ct . D. N. Mar. I. LR 7 .1(d ); U.S. Di st . Ct. D. Or. LR 7-2 (b ); U.S. Di st . Ct. E.D. W as h. LR 7 .1(e ); U.S. Di st . Ct. W.D. W as h. LCR 7(e ); c f. U.S. Dis t. Ct . E.D. Cal
. L.R. (st at in g t ha t al th ou gh th is is th e o nl y Dis tri ctCo urt i n t he Nin th Cir cu it witho utlo cal rul es im

po si ng pa ge li m it s, i ts rul es co nt ai n p ag e li mit s fo r ba nkrupt cy

pro ceed in gs , andon e jud ge ha s s ta nd in g o rd ers im po si ng pa ge li m it s)
. U.S. Dis t. Ct . D. Haw. L R 7 .5 (2 01 4)
. 1 0- 14 -

[* 14 ] li m iton m ot io ns an d m em or an daan d a n 1 1- pa ge li m iton rep li es . Andall 1 1 of th os e lo cal rul es , as wel l as th e Fed eral Ru le s o f App el la te Pro cedur e, im po se pa ge li m it s tha t ar e a m ere f ract io n o f wha t the Co urt al lo wedinth is cas e. The Co urt h as th e in he ren t p owe r to de em Mr. Kern an ’s bri efs stric ke n be cau se he vi ol at edth e Co urt’s p ag e li m it s. “ The Tax C ou rt i nd is pu tabl y ha s the in he ren t au th or ity

to pro te ctth e in te gr ity

of i ts pro ceed in gs an d t o p rev en t a p arty fro m un de rm in in g i ts Ru le s.” Thi s i nh eren t p owe r of co urts is no t l im it edto 1 2 Arti cl e III c ou rts . It i s p os se ss edby Arti cl e I co urts su chas t he Tax C ou rt, a s well , bec au se “ itis th e n atur e o f a co urt quaco urt tha t g iv es ris e to th es e in he ren t po wers ”. Ju stas c ou rts ha ve th e in he ren t au th or ity to im po se pa ge li mit s, the y 1 3 al so ha ve th e in he ren t au th or ity to im po se san ct io ns when a pa rty exce ed s tho se li mit s. The Co urt o f App eal s fo r th e Nin th Cir cu itha s h el d t ha t “ [a]ll fed eral

1 4
U.S. Dis t. Ct . D. Ariz. LRCi v 7 .2 (2 01 4) . Butsee U.S. Dist . Ct. D. Ariz
. 1 1 LRCi v. 1 6.1 (d ) (i m

po si ng lo ng er l im it s i n S oc ia l Se cu rity cas es : 2 5 p ag es for br ie fs ; 1 1 p ag es forrep li es ). W es tre co v. Co m

mis si on er, 1 99 0 Tax Ct. M em o LEXIS 5 54 , at * 55 . 1 2 W es tre co v. Co m

mis si on er, 1 99 0 Tax Ct. M em o LEXIS 5 54 , at * 56 1 3 (“ ‘Any cou rt wh ic h h as th e p owe r to adm itatt orne y s t o p ract ic e m ay als o s an ct io n th em forunpr of

es si on al co nduc t.’” (qu ot in g S ta nd in g C omm . onDis ci pl in e v . Ro ss , 73 5 F .2d11 68 , 11 70 (9th C ir. 1 98 4) )). Alo e Vera o f Am ., Inc . v. Un it edSta te s, 3 76 F.3d96 0, 9 64 -9 65 (9t h C ir. 1 4 (co nt in ue d...)- 15 -

[* 15 ] co urts are v es te d wi th in he ren t p owe rs en ab li ng th em to m an ag e th ei r cas es an d c ou rtr oo m s ef

fect iv el y an d t o e ns ur e o be di en ce wi th th ei r or de rs . * * * As a func ti on of t hi s p owe r, co urts candi sm is s ca se s i n t he ir e nt ire ty, ba r witne ss es , awardatt orne y ’s fees [,] an d a ss es s fi ne s.” Mr. Kern anvi ol at edth e expr es s p ag e 1 5 li mit s s etby the Co urt; th eref or e, th e Co urt i s wel l wi th in it s p owe r to san ct io n hi m by deem in g h is bri efs stric ke n i n t he ir e nt ire ty. The Co urt’s i nh eren t p owe r to de em Mr. Kern an ’s bri efs stric ke n fo r vi ol at in g t he Co urt’s p ag e li m it s i s d em on st rat edby frequ en t i ns ta nc es wher e co urts ha ve san ct io ne d p art ie s fo r vi ol at io ns of p ag e li m it s o r th ei r fu nc ti on al equi va le nt . In St or ey

we stru cka 31 4- pa ge ap pe nd ix to th e Co m m is si on er’s b rie f fo r ex ceed in g the pre sc rib edpa ge li mit , st at in g t ha t n oton ly w as th e ap pe nd ix in adm is si bl e as ne w evi de nc e attri al , bu t “ ev enif * * * [th e 3 14 -p ag e ap pe nd ix ]
were ar gu m en t i ns te adof e vi de nc e, [i t] cau se s the bri ef t o e xc eedth e p ag e li m it s
(...co nt in ue d) 1 4 20 04 ) (“ San ct io ns are an ap pr op ria te res po ns e to ‘ wil lfu l d is ob ed ie nc e o f a co urt or de r[.]’ ” (quo ti ng Fin k v . Gom ez, 2 39 F.3d98 9, 9 91 (9t h C ir. 2 00 1) )). F.J. Han sh aw Ent ers ., Inc . v. Em eral d R iv er Dev ., Inc ., 24 4 F .3d11 28 , 1 5 11 36 (9t h C ir. 2 00 1) (ci ta ti on s o m it te d) (rel y in g o n C ha m be rs v. NASCO, In c., 50 1 U.S. 3 2, 4 3- 44 (19 91 ) in pa rtn ers hi p d is so lu ti on cas e whe re co urt i m po se d m on et ary sa nc ti on s, uph ol di ng civ il san ct io ns on ap pe al , bu t o ve rtu rn in g c riminal sa nc ti on s)
.- 16 -

[* 16 ] th e Co urt es tabl is he d a t tria l.” Sim il arl y , inW ei ss we stru ckanap pe nd ix 1 6 to th e Co m

m is si on er’s o pe ni ng bri ef b ecau se th e ap pe nd ix cau se d t he bri ef t o ex ceedth e 5 0- pa ge li m itsetby the Co urt attri al
. The Co urt o f App eal s fo r th e 1 7 Nin thCir cu itinKano san ct io ne d t he ap pe ll an t’s co un se l fo r us in g s m al le r sp aci ng be twee n l in es an d s m al le r typefa ce fo r fo ot no te s tha n was pe rm it te d u nd er the
ru le s. The b rie f wou ldha ve be enat l eas t 1 5 p ag es ov er the li m itha d app el la nt ’s 1 8
co un se l fo ll owe d t he co urt’s ru le s. The Co urt o f App eal s fo r th e Ten th Cir cu itin 1 9 TK-7 Co rp . stru ckth e ap pe ll ees ’ br ie f fo r “ [u ]sin g afav or it e und erg radua te ga m bi t” to ex ceedth e co urt’s p ag e li m itby ins ert in g 1 02 foo tn ot es with s m al l ty pe an d s pa ci ng to sh rin k t he ir b rie f do wn t o h al f th e si ze i t wo ul d h av e b eenif the ap pe ll ees ha d c om

pl ie d wi th th e li m it s. 2 0 In de ed , Mr. Kern anackno wled ge d i n h is ob jecti on to res po nd en t’s m ot io n to strik e th at“ th ere i s n o d oubtth atth e Tax Co urt ‘has th e ri gh t t o s etli m it [s ] as to br ie f le ng th an d h as di sc ret io n a s t o wh ethe r to acce ptan d/ orno t co ns id er
St or ey v. Co m m is si on er, 2 01 2 WL 14 09 27 3, at*1 7. 1 6 W ei ss v. Co m

m is si on er, 1 99 5 WL 57 33 7, at*7
. 1 7 Kan o, 2 2 F .3dat 8 99
. 1 8 Kan o, 2 2 F .3dat 8 99
. 1 9 TK-7 Co rp ., 96 6 F .2dat 5 79
. 2 0- 17 -

[* 17 ] de fic ie ntbri efs ’. ” Acco rd in gl y , we wil l d eem Mr. Kern an ’s op en in g and
an swe rin g b rie fs stric ke n i n asep arat e o rd er. I. Requi rem en t To Fil e Mr. Kern anis no t p utto a di sa dv an ta ge by hav in g h is bri efs de em ed st ric ke n b ecau se , forall of t he ve rb ia ge he us edto fil l h is pa ge s, h is arg um en t ca n be di st il le d d own to a si ng le sen te nc e th athe ut te redat t ria l: “ No o ne ev er s en t m e a n ot ic e sa y in g wh ere i s yourreturn.” He elabo rat edon th is po in t. Itsee m s tha t Mr. Kern an ’s po si ti on is th athe is no t re qu ire d t o fi le a ta x re tu rnun ti l the Co m m is si on er n ot ifi es hi m

th athe sp eci fic al ly is re qu ire d t o fi le a return. Fo r th is pr op os it io n, M r. Kern anrefe rredat t ria l t o myria d o f irrel ev an t au th or it ie s tha t we ne edno t ad dr es s i n d et ai l. He lam en ts th at , inhi s m eet in gs an d c on ve rs at io ns 2 1

See C rai n v . Commis si on er, 7 37 F.2d14 17 , 14 17 (5th C ir. 1 98 4) (“ W e 2 1 pe rcei ve no ne edto refu te th es e [fri vo lo us ] arg um en ts with s om be r rea so ni ng an d co pi ou s ci ta ti on of p rece de nt ; t o d o s o m ig htsu gg es t tha t the se arg um en ts ha ve so m e co lo rab le m eri t.”) ; Wnu ckv. Co m mis si on er, 1 36 T.C. 49 8, 5 04 (20 11 ) (“ [I]t is do ub tfu l wh ethe r ta x juris prud en ce wi ll be m uc h a dv an cedby iss ui ng y et an ot he r op in io n a ffi rm in g t he ob vi ou s tru is m s ab ou t t ax law[ .] ”); Wnu ckv. Co m m is si on er, 1 36 T.C. at 5 11 (“ [P]edd le rs of f riv ol ou s an ti -ta x p os it io ns an d th ei r cl ie nt s wh o fi le pe ti ti on s ad va nc in g t ho se po si ti on s s ho ul d n otbe all owe d t o di ve rt a nddra in away

res ou rces th atou gh t t o b e d ev ot edto bo nafid e d is pu te s.”) ; San de rs v. Co m

mis si on er, T.C. Mem o. 1 99 7- 45 2, 1 99 7 WL 60 28 41 , at * 4 (“ [W] e are n otob li ga te d t o e xh au st iv el y rev ie w andreb utpe ti ti on er’s m is gu id ed co nt en ti on s.”)
.- 18 -

[* 18 ] with o ne rep res en tati ve of t he IRS o r an ot he r, “ [n ]ot o nc e d idhe tel l m e h ow I was wron g o r if

, ho w I was wro ng , if I was wron g.” Si m pl y pu t, Mr . Kern anis wron g. Mr . Kern anarg ue s tha t the IRS “ m ay requi re an y

pe rs on , by no ti ce s erv edup on su chpe rs on ” to fil e a t ax return, an d th enarg ue s tha t h e h as no t b eenserve d wi th an y su chno ti ce. Mr. Kern an ’s

2 2 read in g o f a p orti on of asi ng le Int ern al Rev enue Co de pro vi si on is in co m pl et e in th e se ns e th athe no t o nl y om it s wo rd s fr om

th atsec ti on , bu t al so fai ls to he ed ot he r Co de pro vi si on s. Mr. Kern anis requi redto fil e a t ax return, ev enwitho uta pe rs on al in vi ta ti on to do so . Sect io n 6 01 2( a)(1 )(A) p ro vi de s tha t “ [r]etu rn s wi th res pe ctto in co m e ta xe s u nd er s ub ti tl e A sh al l b e m ad e b y * * * [e ]very in di vi du al ha vi ng for th e ta xabl e y ear g ro ss in co m e whi chequa ls or e xc eed s the ex em pt io n a m ou nt ”. W e h av e p rev io us ly addres se d t hi s i ss ue an d re ach edth e sa m e co nc lu si on . 2 3

See s ec. 6 00 1. 2 2 See Zo okv. Co m

m is si on er, T.C. Mem o. 2 01 3- 12 8, at*9 & n .5; Fo x v . 2 3 Co m m is si on er, T.C. Mem o. 1 99 7- 44 0, 1 99 7 WL 59 38 72 , at * 1,* 3; cf. Fu nkv. Co m m is si on er, T.C. Mem o. 2 00 1- 29 1, 2 00 1 WL 13 98 38 2, at*5 , app . A, para . 5.- 19 -

[* 19 ] II. Unr ep orte d In co m e As a g en eral m at te r, th e Co m m is si on er’s d et erm in at io ns ina no ti ce o f de fic ie nc y

are p res um edco rrec t, an d t he tax pa y er b ears th e b ur de n o f pr ov in g a n erro r. Howev er, i n u nr ep orte d i nc om e cas es , “be fo re the Co m m is si on er ca n re ly 2 4
on th is pre su m

pt io n o f co rrec tn es s, the Co m m is si on er m

us t o fferso m e subs ta nt iv e ev id en ce s ho win g t ha t the tax pa y er re cei ve d i nc om e fro m th e ch arg edact iv ity .” 2 5 Onc e th e Co m

m is si on er s uf

fic ie nt ly con ne ct s the tax pa y er wi th th e unr ep orte d in co m e, th enth e ta xp ay er “be ars [s ] th e b ur de n o f pr ov in g t ha t * * * [th e Co m m is si on er’s] det erm in at io n o f un de rrep orte d i nc om e, co m pu te d u si ng th e ba nkde po si ts m etho d o f rec on st ru ct in g i nc om e, is in co rrec t.” 2 6 Res po nd en t s uf

fic ie nt ly con ne ct edMr. Kern anwith t he un rep orte d i nc om e, an d M r. Kern anha s n otsh own th atth es e am ou nt s ar e in co rrec t o r no nt ax ab le
. Res po nd en t u se d abankde po si ts an al y si s o f Mr. Kerna n’s p ers on al ch eck in g acco un t t o d et erm in e Mr. Kerna n’s u nr ep orte d g ro ss in co m e fo r th e y ears at i ss ue . Mr. Kern anst ip ul at edth es e am ou nt s o f gr os s i nc om e an d d idno t s ho w th atth ey Ru le 14 2( a); W el chv. Hel ve rin g, 2 90 U.S. 11 1, 1 15 (19 33 ). 2 4 W ei m ers ki rchv. Co m

m is si on er, 5 96 F.2d35 8, 3 60 (9th C ir. 1 97 9) , rev ’g 2 5 67 T.C. 67 2 (1 97 7)
. DiLeo v. Co m

m is si on er, 9 6 T.C. 8 58 , 87 1 (1 99 1) , aff’d, 9 59 F.2d16 (2d 2 6 Ci r. 19 92 ).- 20 -

[* 20 ] are n on ta xabl e. He arg ue d o nl y th athe di d n otha ve to fil e a t ax return o r pa y tax un ti l h e rec ei ve d n ot ic e. Res po nd en t’s d et erm in at io ns of g ro ss in co m e am ou nt s wer e g reat er tha n t he ap pl ic ab le ex em pt io n a m ou nt s fo r 20 01 to 20 06
. Acco rd in gl y , we su st ai n re sp on de nt ’s tax de fic ie nc y de te rm in at io ns forth e y ears atis su e. III. Frau du le ntFai lu re To Fil e Sect io n 6 65 1( a) i m

po se s an ad di ti on to tax forth e fai lu re t o t im el y fil e ta x returns , andth atad di ti on is en ha nc edun de r se ct io n 6 65 1( f) i f th atfai lu re t o fi le is frau du le nt . W

he n ape rs on do es no t t im el y fil e, se ct io n 6 65 1( a) i m

po se s a m ax im um ad di ti on of 2 5% o f th e am ou ntof t ax requi redto ha ve be ensh own on th e return unl es s the tax pa y er p ro ve s tha t the fai lu re was forreas on ab le cau se an d
no t due to wil lfu l n eg le ct . Sect io n 6 65 1( f) i nc reas es th atli m itto 75 % if the fai lu re to fil e was frau du le nt . For t he ad di ti on to tax to ap pl y at t he in crea se d ra te , res po nd en t m

us t p ro ve by clearan d c on vi nc in g e vi de nc e th atMr. Kern an

“ (1 ) * * * h as un de rp ai d h is tax es foreach y ear; an d (2 ) so m e p artof t he
un de rp aym en t i s due to frau d.” 2 7 Res po nd en t p ro ve d t he fir stele m en t: th atMr. Kern anun de rp ai d h is tax for th e y ears at i ss ue . Mr. Kern anst ip ul at edth athe ha d g ro ss in co m e fo r 20 01 See Di Leo v. Co m

m is si on er, 9 6 T.C. at87 3. 2 7- 21 -

[* 21 ] th ro ug h 2 00 6. Re sp on de ntpro ve d h e h adno t p ai d t ax forth es e y ears . The se fact s es tabl is h t ha t M r. Kern anun de rp ai d h is tax foreach of t he y ears at is su e. The re m ai ni ng ele m en t tha t re sp on de ntm us t p ro ve is frau du le ntin te nt . The Co m m is si on er h as th e b ur de n t o p ro ve frau du le ntin te nt , andhe m us t de m on st rat e fraudby clearan d c on vi nc in g e vi de nc e. Mo re s pe ci fic al ly, th e 2 8 Co m m is si on er m

us t p ro ve th atth e ta xp ay er d el ib erat el y fai le d t o fi le , andals o, th atby fail in g t o fi le , th e ta xp ay er i nt en de d t o e va de tax th athe kn ew was owed
. 2 9 The Co urt ev al ua te s the tax pa y er’s b el ie f an d i nt en t atth e ti m e th e ta xp ay er de ci de d n otto fil e. Becaus e d ire ctpro of of t he tax pa y er’s fraudul en t i nt en t i s 3 0
rare ly avai labl e, we rel y

on cir cu m st an ti al ev id en ce t o s ho w frau du le ntin te nt . 3 1

See s ec. 7 45 4( a); Ru le 14 2( b) ; Cl ayto n v . Comm is si on er, 1 02 T.C. 63 2, 2 8 65 2- 65 3 (1 99 4)
. Cl ayto n v . Comm is si on er, 1 02 T.C. at 6 46 -6 47 ; s ee al so , e.g., Pro f’l Serv s. 2 9 v. Co m m is si on er, 7 9 T.C. 8 88 , 93 0 (1 98 2) ; Ho lm es v. Co m m is si on er, T.C. Mem o. 20 12 -2 51 , at * 30 (ci ti ng DiLeo v. Co m m is si on er, 9 6 T.C. at87 3)
. See M oh am edv. Co m

mis si on er, T.C. Mem o. 2 01 3- 25 5, at*2 0- *2 3. 3 0 See B rad fo rdv. Co m

m is si on er, 7 96 F.2d30 3, 3 07 (9t h C ir. 1 98 6) , aff’g 3 1 T.C. Mem o. 1 98 4- 60 1; DiLeo v. Co m m is si on er, 9 6 T.C. at89 0; Ro wlee v. Co m m is si on er, 8 0 T.C. 1 11 1, 1 12 3 (1 98 3) ; M oh am edv. Co m m is si on er, T.C. Mem o. 2 01 3- 25 5.- 22 -

[* 22 ] A. Dis cl os ur e as a Mi ti ga ti ng Fact or Mr. Kern anpubl ic ly decl aredth athe was n otrequi redto fil e a t ax return witho utpri orno ti ce. He in qu ire d o f th e So ci al Secu rit y Adm in is tra ti on whet he r he ha d b eengi ve n n ot ic e o f hi s o bl ig at io n t o m ai nt ai n re co rd s an d fi le tax returns . Mr. Kern anli ke wis e se ntlet te rs to th e Co m m is si on er o f In te rn al Rev enue an d t he Secr et ary of

th e Treas ury

ask in g t he m

to tel l h im

whet he r he was m is ta ke n abo ut hi s i nt erp ret at io n u nd er s ect io n 6 00 1. Mr . Kern anals o app eare d i n aTV int erv ie w an d e sp ou se d h is vi ews reg ard in g re tu rnfil in g. He t ol d re po rte r St ev e Kraff t o f hi s erro ne ou s p os it io n a ndask edth e IRS to co m e fo rwardan d t el l h im wher e h e was wron g. Th es e act io ns rai se th e is su e o f whe th er Mr . Kern an ’s di sc lo su re ca n m it ig at e th e fraudad di ti on . The Co urt o f App eal s fo r th e Thi rdCir cu itha s h el d tha t d is cl os ur e can be a m it ig at in g fa ct or . In R al ey v. Co m m is si on er, Mr . Ral ey

fai le d t o t im el y

fil e 3 2 returns fortax y ears 19 72 th ro ug h 1 97 6. Mr. Ral ey fil eda Fo rm

W -4 E, 3 3 Exe m pt io n fr om

W ithh ol di ng , with h is em pl oyer st at in g h e d idno t h av e a t ax li ab il ity for th e p rio r y ear a nddi d n otan ti ci pa te a ta x l iabi li ty for the curren t year
Ral ey v. Co m m is si on er, 6 76 F.2d98 0 (3 d C ir. 1 98 2) , rev ’g T.C. Mem o. 3 2 19 80 -5 71
. Ral ey v. Co m m is si on er, 6 76 F.2dat 9 82
. 3 3- 23 -

[* 23 ] eit he r, fo r eac h o f th e ta x years f ro m 19 73 th ro ug h 1 97 6. Hi s emplo y er d id
no t wi th ho ldFed eral in co m e ta x fr om hi s i nc om e fo r y ears 19 73 th ro ug h 1 97 6. Mr. Ra le y

sen t m ul ti pl e le tt ers to th e IRS , th e Sec ret ary of th e Treas ury , andot he r hi gh ly rank in g F ed eral off ic ia ls st at in g t ha t h e wou ldno t p ay be cau se tax es were un co ns ti tu ti on al . Thenin19 76 he fil edpu rp orte d a m en de d re tu rn s fo r ta x years 19 72 an d 1 97 3 t ha t h e d idno t s ig n a ndth atdi d n otrep ort an y in co m e. Mr.

3 4 Ral ey pl ead edgu il ty to the ch arg e o f wil lfu l fa il ur e to fil e a return fo r ta x year 19 74
. At h is subs eque ntciv il tri al th is Co urt h el d t ha t h e was li ab le for 3 5 frau du le ntfai lu re t o p ay

tax un de r fo rm er s ect io n 6 65 3( b)
. The Co urt o f App eal s 3 6 fo r th e Thi rdCir cu itrev ers ed , ho ld in g t ha t M r. Ral ey ’s let te rs m it ig at eda fi nd in g of frau d. [Mr . Ral ey ] wen t o utof h is way to in fo rm

ev ery pe rs on in vo lv edin th e co ll ect io n p ro ces s tha t h e was no t g oi ng to pa y an y fed eral in co m e ta xe s. Th e le tt ers do no t s up po rt acla im of f rau d; to th e co nt rary, th ey m ak e itcle ar tha t Ra le y

in te nd edto cal l at te nt io n t o h is fai lu re t o pa y tax es . It wo ul d b e an om al ou s t o s ug ge stth atRal ey ’s nu m ero us at te m pt s t o n ot ify the Gov ern m en t ar e supp orti ve , letalo ne su gg es ti ve , of an i nt en t t o d efraud
. [ 3 7 ]
Ral ey v. Co m m is si on er, 6 76 F.2dat 9 82 -9 83
. 3 4 Ral ey v. Co m m is si on er, 6 76 F.2dat 9 82
. 3 5 Ral ey v. Co m m is si on er, 6 76 F.2dat 9 83
. 3 6 Ral ey v. Co m m is si on er, 6 76 F.2dat 9 83 -9 84
. 3 7- 24 -

[* 24 ] The Co urt o f App eal s fo r th e Nin th Cir cu ithe ldth e o pp os it e in Edel so n v . Co m m is si on er. In tha t ca se Mr. Ede ls on fil edreturns th atth e IRS reject ed

3 8 be cau se th e returns st at edin co m e o f “ ‘less th an$1 0’ annu al ly calcu la te d i n ‘con st itut io na l d ol la rs of s il ve r an d/ or go ld .’ ” Mr. Ede ls on hi d a ss et s b y

3 9 tra ns ferr in g the m

to hi s wi fe b efo re h e fi le d t he in va li d re tu rn s. He was 4 0
co nv ic te d u nd er s ect io n 7 20 3 fo r wil lfu l fa il ur e to fil e fo r th e ta x years a t i ss ue . 4 1 The Co urt o f App eal s uph el d t he fin di ng of f rau d u nd er fo rm er s ect io n 6 65 3( b) , st at in g: “ [d ]iscl os edde fia nc e, st an di ng alo ne , wou ldno t b ar a fi nd in g o f frau d.” 4 2 The co urt ex pl ai ne d t ha t fr au du le ntin te nt“ do es no t re qu ire th atth e ta xp ay er h id e hi s d efi an ce fr om

th e IRS . Whe th er o r no t Ed el so n d is cl os edhi s wi ll fu l re fu sa l t o fil e is th eref

or e irrel ev an t t o t he Tax C ou rt’s fi nd in g o f frau d”
. In the li gh t o f 4 3 th is Nin th Cir cu itpre ced en t, we fi ndth atMr. Kern an ’s rep eat eddi sc lo su res do no t

Ede ls on v. Co m

mis si on er, 8 29 F.2d82 8 (9 th Cir . 19 87 ), aff’g T.C. Me m o. 3 8 19 86 -2 23
. Ede ls on v. Co m

mis si on er, 8 29 F.2dat 8 29 -8 30
. 3 9 Ede ls on v. Co m

mis si on er, 8 29 F.2dat 8 30
. 4 0 Ede ls on v. Co m

mis si on er, 8 29 F.2dat 8 29 -8 30
. 4 1 Ede ls on v. Co m

mis si on er, 8 29 F.2dat 8 33
. 4 2 Ede ls on v. Co m

mis si on er, 8 29 F.2dat 8 33
. 4 3- 25 -

[* 25 ] pre ve ntth e ap pl ic at io n o f th e frau du le ntfai lu re t o fi le ad di ti on . Ins te ad , th e qu es ti on is whet he r he ha d t he requi si te frau du le ntin te nt . B. Frau du le ntInt en t Bec au se di rectev id en ce o f frau du le ntin te ntis rare , we lo okfor ci rcu m st an ti al ev id en ce, o r “ba dg es of f rau d” , to de m on strat e fraudul en t i nt en t. The se ba dg es of f

rau d s ho w a tax pa y er’s i nt en t t o c on ceal , m is le ad , or o th erwi se pr ev en t the co ll ect io n o f ta x. Bad ge s o f frau d i nc lu de : (1 ) fai li ng to fil e returns ; 4 4 (2 ) fai li ng to m ak e es ti m at edtax pa y m en ts ; (3 ) m ai nt ai ni ng in ad equa te reco rd s; (4 ) fai li ng to co op erat e wit h t ax au th or it ie s; (5) fil in g fa ls e d oc um en ts ; (6 ) en ga gi ng inil le ga l ac ti vi ti es ; (7 ) co nc eal in g i nc om e o r as se ts ; (8 ) ev id en ci ng anin te ntto m is le ad ; (9 ) de al in g i n c as h; (10 ) pr ov id in g i m pl au si bl e o r in co ns is te nt ex pl an at io ns of b eh av io r; ( 11 ) un de rs ta ti ng in co m e; (12 ) fai li ng to be forth rig ht with o ne ’s tax pre pa rer; (13 ) ev id en ci ng in te ll ig en ce, educ at io n, an d t ax ex pe rti se ; an d (1 4) de m on st rat in g alac k o f cre di bi li ty. “ Altho ug h n o s in gl e fac to r is 4 5

DiLeo v. Co m

m is si on er, 9 6 T.C. at87 4. 4 4 See, e.g ., Clayto n v . Comm is si on er, 1 02 T.C. at 6 47 ; M oh am edv. 4 5 Co m m is si on er, at*3 2- *3 3; DeVrie s v . Comm is si on er, T.C. Mem o. 2 01 1- 18 5, 20 11 W L 34 18 24 8, at*6
.- 26 -

[* 26 ] ne ces sa ril y

su ffi ci en t t o e st ab li sh frau d, a c om bi na ti on of f

act or s i s m or e li ke ly to co ns ti tu te pe rs ua si ve ev id en ce.” 4 6 Res po nd en t h as pro ve n s om e o f th e b ad ge s o f frau d i n t hi s ca se . Mr. Kern anfai le d t o fi le tax returns an d fa il edto m ak e es ti m at edpa ym en ts . Mr. Kern andi d n otm ai nt ai n a de qu at e rec or ds . Mr. Kern anrefu se d t o c oo pe rat e wit h ta x aut ho rit ie s, re pe at ed ly atte m pt in g t o qua shIRS s umm on se s fo r hi s re co rd s. Altho ug h M r. Kern anco rrec tl y ass ert s tha t h e was withi n h is rig ht s t o c ha ll en ge th e IRS su m

m on se s, h is rep eat edfai le d a tt em pt s t o d o s o wer e unc oo pe rat iv e, ev enif l eg al ly perm is si bl e. Add it io na ll y , Mr. Kern anrefu se d t o p ro du ce b us in es s reco rd s. Res po nd en t as se rte d a dd it io na l b ad ge s o f frau d b utfai le d t o p ro ve th em by cl ear a ndco nv in ci ng ev id en ce. Mr. Kerna n d idno t fi le fal se do cu m en ts . Res po nd en t as se rts Mr. Kern an ’s pas t ef fo rts to pro m ot e ta x s he lt ers is ev id en ce o f il le ga l ac ti vi ty, bu t re sp on de ntha s n otsh own Mr. Kern anwas i nv ol ve d i n i ll eg al act iv ity ; p ro m ot in g t ax av oi da nc e p ro du ct s i s n otil le ga l. Mr . Kern anwas n ei th er in di ct edno r co nv ic te d o f an y cri m es . Furt he r, th e ti es res po nd en t trie d t o m ak e

Mo ha m edv. Co m

m is si on er, at*3 3; Hol m es v. Co m mis si on er, at*3 1; 4 6 Bro wni ng v. Co m

m is si on er, T.C. Mem o. 2 01 1- 26 1, 2 01 1 WL 52 89 63 6, at*1 3.- 27 -

[* 27 ] be twee n M r. Kern anan d o th ers who ha d b eenco nv ic te d o f “ il le ga l act iv it ie s” were t oo att enua te d. Add it io na ll y , res po nd en t fa il edto pro ve Mr. Kern anhi d a ss et s an d i nc om e. Mr. Kern ande po si te d t he in co m e h e rec ei ve d i nt o ach eck in g a cco un t tha t h e h el d in hi s o wn n am e. In de ed , he d idno t co nc eal in co m e b utst ip ul at edres po nd en t’s cal cu la ti on s o f gr os s i nc om e fo r th e y ears at i ss ue th atwere b as edon th es e b an k de po si ts . Sim il arl y , we are n otpe rs ua de d t ha t M r. Kern anwas try in g t o c on ceal in co m e whe n h e h adD.A.K. Co ns ul ta nt s p ro ces s cr ed itcardpa ym en ts for hi m . D.A.K. Co ns ul ta nt s s im

pl y pro ces se d t he pa ym en ts an d wro te ch eck s t o M r. Kern anfor

th es e am ou nt s l es s i ts pro ces si ng fees . Thenhe de po si te d t he se ch eck s in to hi s p ers on al ch eck in g a cco un t, an d re sp on de ntdi d n otpro ve th atth ere wer e ad di ti on al , un rep orte d c red itcardpaym en ts . Furt he r, th ere was no ev id en ce tha t Mr. Kern anke pttwo set s o f bo ok s o r de al t i n c as h. Re sp on de ntdi d n otpro ve th at Mr. Kern anha d a dd it io na l i nc om e in ot he r ba nkacco un ts th athe fai le d t o re po rt. The IRS ch os e n otto ob ta in ad di ti on al bankacco un t i nf orm at io n a ndus edon ly de po si t re co rd s fr om

Mr. Kern an ’s per so na l ch eck in g a cco un t t o d et erm in e h is gr os s i nc om e. So m e o f th e b ad ge s o f frau d l is te d abo ve do no t ap pl y to th e fac ts of thi s cas e. Mr. Kern andi d n otpro vi de anim pl au si bl e o r in co ns is te ntex pl an at io n o f hi s- 28 -

[* 28 ] be havi or . Mr. Kern andi d n ot“un de rs ta te ” h is in co m e b ecau se he ne ve r fil edreturns an d d idno t re po rt a ny inc om e atall . Whi le a “ fai lu re t o re po rt subs ta nt ia l am ou nt s o f in co m e o ve r a num be r of y ears ” m ay

be pe rs ua si ve ev id en ce o f frau du le ntin te nt , itis no t d is po si ti ve . Add it io na ll y , th e b ad ge of 4 7 fai li ng to be forth rig htwith o ne ’s tax pre pa rer d oe s n otap pl y he re. Fi na ll y , th e la sttwo ba dg es of f rau d l is te d abo ve were n otpro ve n: in te ll ig en ce, educ at io n, an d t ax ex pe rti se ; an d alac k o f cre di bi li ty. Reg ard in g t he fo rm er, al th ou gh he ho ld s h im se lf o utas atax pro fes si on al , Mr. Kern ando es no t, in fact , hav e an y

sp eci al iz edtax educ at io n o r ex pe rti se . His l ackof e xp ert is e is de m on st rat edby his ha vi ng reac he d aco nc lu si onab ou t re tu rnfil in g re qu ire m en ts th atpl ai nl y

co nt rad ic ts well -es tabl is he d l eg al pre ced en t. As t o t he lat te r, Mr. Kern anwas fo rth rig htan d c red ib le inpre se nt in g h is erro ne ou sl y he ldbe li efs
. The refo re, we fi ndth ere i s n otcle ar an d c on vi nc in g e vi de nc e o f frau du le ntin te nt .

See DeVr ie s v . Comm is si on er, 2 01 1 WL 34 18 24 8, at*7
. 4 7- 29 -

[* 29 ] C. Goo d- Fai th Bel ie f The fact s i n M r. Kern an ’s cas e cl os el y res em bl e th e fac ts inRan ey

v. Co m m is si on er. In R an ey , th e Co urt re fu se d t o i m po se anad di ti on to tax un de r 4 8
se ct io n 6 65 1( f), h ol di ng th atMr. Ran ey ’s go od -fai th be li ef tha t h e d idno t h av e to pa y tax es ne ga te d fr au du le ntin te nt . Mr. Ran ey cla im ed15 withh ol di ng 4 9 al lo wan ces on hi s Fo rm

W -4 , to okth e p os it io n t ha t the re was no t a s ta tu te th at requi redhi m

to pa y tax on hi s i nc om e earne d fr om th e U.S. Po st al Serv ic e, an d d id
no t re po rt i nc om e o n h is Fo rm s 1 04 0, U.S. In di vi du al Inc om e Tax Return. The 5 0 Co urt ex pl ai ne d: “ A go odfai th m is un de rs ta nd in g * * * canex is t ev enif the
m is un de rs ta nd in g i s o bjec ti ve ly unr eas on ab le . W e * * * cau ti o[ n], ho wev er, tha t a go odfai th m is un de rs ta nd in g o f th e la w is di ffer en t fr om di sa gr eem en t wi th th e la w or abe li ef tha t the law i s o r m ay be un co ns ti tu ti on al .” W e ref us edto im

po se 5 1
anad di ti on un de r se ct io n 6 65 1( f), s ta ti ng : Whi le we be li ev e th atpe ti ti on er’s p os it io n i s o bjec ti ve ly un reas on ab le , th e sp ars e ev id en ce i n the reco rdbe fo re u s d oe s n ot cl earl y an d c on vi nc in gl y

ne ga te pe ti ti on er’s i m

pl ic itcla im

th athe was act in g o n h is go odfai th un de rs ta nd in g o f th e la w. Of cou rs e, we m ay Ran ey v. Co m m is si on er, T.C. Mem o. 2 00 0- 27 7, 2 00 0 WL 12 27 12 8. 4 8 Ran ey v. Co m m is si on er, 2 00 0 WL 12 27 12 8, at*2
. 4 9 Ran ey v. Co m m is si on er, 2 00 0 WL 12 27 12 8, at*1 -* 2. 5 0 Ran ey v. Co m m is si on er, 2 00 0 WL 12 27 12 8, at*2 (ci ta ti on om itte d)
. 5 1- 30 -

[* 30 ] qu es ti on whet he r pe ti ti on er’s p ur po rte d m is un de rs tand in g o f th e la w was the pro du ctof g oo d fa ith. Ho wev er, s us pi ci on s ar e n ota subs ti tu te for

ev id en ce. Res po nd en t b ears th e b ur de n o f pr ov in g frau du le ntin te ntby clearan d c on vi nc in g e vi de nc e. Res po nd en t h as no t d on e so . W e th eref

or e h ol d t ha t p et it io ne r is no t l iabl e fo r th e ad di ti on s t o t ax un de r se ct io n 6 65 1( f). [ 5 2 ] Lik ewis e, we are n otco nv in cedby clearan d c on vi nc in g e vi de nc e th atMr. Kern an ’s bel ie fs were n othe ldingo odfai th . The fri vo li ty of hi s l eg al arg um en ts is no t en ou gh , eve n wh enad de d t o t he ba dg es of f rau d p res en t i n t hi s ca se , to es tabl is h fr au du le ntin te ntby clearan d c on vi nc in g e vi de nc e. Res po nd en t s ug ge st s tha t M r. Kern an ’s bel ie f was di si ng enuo us an d m erel y a g ui se to hi de be hi ndso he di d n othave to pa y tax es , bu t M r. Kern anha s ac te d
co ns is te nt ly w ith h is be li ef b efo re, dur in g, an d a fte r th e y ears at i ss ue . His b el ie f
was th athe di d n otha ve to fil e a return u nl es s the Co m mis si on er s en t h im

writ te n no ti fic at io n t ha t h e h adanob li ga ti on to do so . He wrot e m ul ti pl e le tt ers to Gov ern m en t ag en ci es ask in g t he m for cla rif ic at io n. He i nf

orm edth e p ub li c at la rg e o f hi s p os it io n wh enhe ap pe aredon tel ev is io n a ndwas i nt erv ie wedinApri l 20 01 on a FOX ne two rkaffi li at e’s ne ws b ro ad cas t, es po us in g h is in te rp ret at io n o f
se ct io n 6 00 1.

Ran ey v. Co m m is si on er, 2 00 0 WL 12 27 12 8, at*2 (fn . ref. o m it te d) 5 2 (ci ta ti on s o m it te d)
.- 31 -

[* 31 ] In de ed , he g av e a co ns is te ntm es sa ge when he in fo rm al ly repre se nt edcli en ts atIRS au di t m eet in gs . At tri al Mr. Kern ansai d: “ Peo pl e wou ldco m e to m e an d
sa y I ne edy outo tel l m e h ow I d on ’t hav e to pa y tax es . I can ’t do th at . I wou ldn’t do th atif I c ou ld . I’ m

no t the auth or ity . The IR S is th e au th or ity .” At tria l h e rep eat edm an y

ti m es th athe be li ev edhe was n otrequi redto fil e o r pa y witho ut no ti ce an d t ha t h e n ev er re cei ve d s uc h n ot ic e. Mr. Kern an ’s con si st en t ac ti on s supp ort a g oo d- fai th , alb ei t m is gu id ed , bel ie f rathe r th anfrau du le ntin te ntto ev ad e ta xe s. Insu m , res po nd en t h as fai le d t o p ro ve frau d u nd er s ect io n 6 65 1( f) b y cle ar an d c on vi nc in g e vi de nc e fo r ta x years 2 00 1 t hr ou gh20 06
. IV. Fai lu re To Fil e Res po nd en t as se rte d a n a dd it io n t o t ax un de r se ct io n 6 65 1( a)(1 ) fo r eac h o f th e y ears at i ss ue if the Co urt wer e to fin d t ha t re sp on de ntha d n otcarr ie d h is bu rd enun de r se ct io n 6 65 1( f); ho wev er, res po nd en t as se rte d i t i n h is an swe r. The Co urt h as juri sd ic ti on to de ci de th is is su e und er s ect io n 6 21 4( a). Becaus e 5 3
res po nd en t d idno t ra is e th is ad di ti on un ti l h is an swe r, res po nd en t b ears th e b ur de n of pro of un de r Ru le 14 2( a)(1 ).
See, e.g ., Moh am edv. Co m m is si on er, at*1 5- *1 6. 5 3- 32 -

[* 32 ] Sect io n 6 65 1( a)(1 ) im po se s an ad di ti on to tax forfai li ng to ti m el y fil e a Fed eral in co m e ta x re tu rnun le ss th e fai lu re t o fi le was fo r rea so nabl e cau se an d
no t due to wil lfu l n eg le ct . A tax pa y er m ay have reas on ab le cau se if the tax pa y er ex erci se d o rd in ary bu si ne ss care an d p ru de nc e b utwas n otab le to ti m el y fil e. 5 4 W il lfu l n eg le ctm ean s a “ co ns ci ou s, i nt en ti on al fai lu re o r rec kl es s i nd iff eren ce.” 5 5 Mr. Kern anst ip ul at edgro ss in co m e fo r th e y ears at i ss ue . Furthe r, Mr. Kern anst ip ul at edth athe di d n otfil e returns fortax y ears 20 01 th ro ug h 2 00 6. He fai le d t o fi le returns be cau se of h is fri vo lo us arg um en t tha t h e was no t re qu ire d t o do so . Mr. Kern andi d n otpro vi de an y ev id en ce o f a d efen se to th is ad di ti onto ta x; acco rd in gl y , res po nd en t h as m ethi s b ur de n. Th e fai lu re t o t im el y fil e ad di ti on un de r se ct io n 6 65 1( a)(1 ) ap pl ie s fo r eac h o f th e y ears at i ss ue . V. Fai lu re To Pay Sect io n 6 65 1( a)(2 ) im

po se s an ad di ti on to tax forfai li ng to ti m el y pa y th e am ou ntof t ax requi redto ha ve be ensh ownonth e return u nl es s the tax pa y er pr ov es th athi s fa il ur e was forreas on ab le cau se an d n otdu e to wil lfu l n eg le ct . The Co m m is si on er b ears th e b ur de n o f pr oduc ti on with re sp ectto an y ad di ti on to

See s ec. 3 01 .66 51 -1 (c)( 1) , Pro ced . & Adm in . Reg s. 5 4 Uni te d S ta te s v . Boyle, 4 69 U.S. 24 1, 2 45 (19 85 ). 5 5- 33 -

[* 33 ] tax . The t ax pay er the n b ears th e b ur de n o f pr ov in g a ny defe ns es . If no

5 6 5 7 returns ha ve be enfil edby the tax pa y er, the n t he Co m m is si on er m

us t s ho w th athe pr ep aredsubs ti tu te s fo r returns th atm etth e requi rem en ts un de r se ct io n 6 02 0( b)
. 5 8 W e h av e h el d t ha t i n o rd er fo r subs ti tu te s fo r returns to co m pl y with the sec ti on 60 20 (b ) requi rem en ts “ th e return[ s] m us t b e subs cri be d, * * * [th ey ] m us t co nt ai n su ffi ci en t i nf

orm at io n fr om

whi chto co m

pu te th e ta xp ay er’s t ax li ab il ity , andth e return fo rm [s ] an d a ny att ach m en ts m us t p ur po rt t o b e a ‘retu rn ’. ” The Co urt h as 5 9 fo un d tha t the sec ti on 60 20 (b ) requi rem en ts “ have be enm etwher e th e subs ti tu te s fo r returns co ns is t o f Fo rm s 4 54 9- A, Forms 88 6- A, andFo rm s 1 34 96 , andth e fo rm s co nt ai n t he tax pa y er’s n am e an d S oc ia l Se cu rit y nu m be r an d s uf

fic ie nt in fo rm at io n t o c om

pu te a ta x l iabi li ty.” 6 0 Res po nd en t m ethi s b ur de n u nd er s ect io n 6 65 1( a)(2 ) be cau se he m ad e subs ti tu te s fo r returns fortax y ears 20 01 to 20 06 th atm etth e requi rem en ts of
Sec. 7 49 1( c). 5 6 See Hi gb ee v . Comm is si on er, 1 16 T.C. 43 8, 4 47 (20 01 ). 5 7 See s ec. 6 65 1( g) ; Wheel er v . Commis si on er, 1 27 T.C. 20 0, 2 08 -2 09 5 8 (2 00 6) , aff’d, 5 21 F.3d12 89 (10 th Cir . 20 08 ). Sp ur lo ckv. Co m

m is si on er, T.C. Mem o. 2 00 3- 12 4, 2 00 3 WL 19 87 15 6, at 5 9 *1 0. Nix v. Co m

m is si on er, T.C. Mem o. 2 01 2- 30 4, at*1 3. 6 0- 34 -

[* 34 ] sec ti on 60 20 (b ), an d re sp on de ntpro ve d t ha t M r. Kern anowedtax an d d id
no t t im el y

pa y hi s t ax li ab il ity

for each of t he y ears at i ss ue . Res po nd en t’s
subs ti tu te s fo r returns fortax y ears 20 01 to 20 06 in cl ud edFo rm s 4 54 9- A, Inc om e Tax Exam in at io n C ha ng es , Form s 8 86 -A, Exp la na ti on of I te m s, an d F orm s 1 34 96 , IRC S ect io n 6 02 0( b) Cert ifi cat io n, as well as M r. Kern an ’s nam e an d S oc ia l Secu rit y nu m be r an d s uf

fic ie ntin fo rm at io n t o c om pu te hi s t ax li ab il ity . Becau se res po nd en t h as m ethi s b ur de n o f pr oduc ti on , Mr. Kern anha s the bu rd enof pr ov in g a ny defe ns es . Mr. Kern andi d n otch al le ng e th e am ou nt s o f de fic ie nc ie s de te rm in edby the IRS an d arg ue d o nl y th athe was n otrequi redto fil e an d p ay un ti l h e rec ei ve d n ot ic e. His fri vo lo us arg um en t i s n ota va li d d efen se . Co ns eque nt ly, th e ad di ti on to tax un de r se ct io n 6 65 1( a)(2 ) ap pl ie s fo r eac h o f th e y ears at i ss ue be cau se Mr. Kern andi d n otti m el y pa y th e ta x h e o wed
. VI. Fai lu re To Mak e Est im at edTax Pa y m en ts Sect io n 6 65 4( a) i m

po se s an ad di ti on to tax forfai li ng to m ak e es ti m at edtax pa ym en ts . Whe re a t ax pa y er h as a “ requi redan nu al pay m en t” , th e se ct io n 6 65 4

6 1 ad di ti on to tax is “ au to m at ic al ly im po se d u nl es s the tax pa y er p ro ve s tha t o ne of
se ve ral st atut ory

ex cep ti on s ap pl ie s” or t ha t the Co m m is si on er’s d et erm in at io n

Sec. 6 65 4( d)
. 6 1- 35 -

[* 35 ] was i n e rro r. Und er s ect io n 6 65 4( d) , a tax pa y er h as a requi redan nu al 6 2 pa ym en t o f 90 % of t he tax forsu chy ear i f th e ta xp ay er h as no t fi le d areturn. If a ta xp ay er h as a requi redan nu al pa ym en t, the n t he tax pa y er m us t m ak e fo ur es ti m at edtax pa ym en ts of 2 5% o f th e requi redan nu al pa ym en t fo r th aty ear. 6 3 The Co m m is si on er b ears th e b ur de n o f pr oduc ti on with re sp ectto ad di ti on s t o t ax , an d t he tax pa y er b ears th e b ur de n o f pr ov in g a ny defe ns es . 6 4 Mr. Kern anis li ab le forth e ad di ti on to tax un de r se ct io n 6 65 4 fo r eac h o f th e y ears at i ss ue be cau se he fai le d t o m ak e es ti m at edtax pa ym en ts an d d oe s n ot ha ve a va li d d efen se . Res po nd en t p ro ve d M r. Kern anha d g ro ss in co m e an d o wed ta x fo r 20 01 to 20 06 . Accor di ng ly, Mr. Kern anha d re qu ire d a nn ua l p aym en ts of 90 % of t he tax foreach y ear at i ss ue , was re qu ire d t o m ak e es ti m at edtax pa ym en ts on th is requi redannu al pa ym en t, an d d idno t d o s o. Th e b ur de n s hi fts to Mr. Kern an , andhe ha s fa il edto rai se any de fen se .

See S an de rs v. Co m

m is si on er, 1 99 7 WL 60 28 41 , at * 6 (c it in g Hab ers ha m 6 2 Bey v. Commis si on er, 7 8 T.C. 3 04 , 31 9- 32 0 (1 98 2) , andGros sh an dl er v . Co m m is si on er, 7 5 T.C. 1 , 20 -2 1 (1 98 0) ). See s ec. 6 65 4( c) an d (d ). 6 3 Sec. 7 49 1( c); see Hig be e v . Comm is si on er, 1 16 T.C. at 4 47
. 6 4- 36 -

[* 36 ] VII. San ct io ns At the clo se of t ria l re sp on de ntm ov edth atth e Co urt i m po se san ct io ns un de r se ct io n 6 67 3. Sanc ti on s ar e warra nt edif the tax pa y er h as in st itut edth e pr oc eed in gs pri m ari ly for d el ay , has tak ena po si ti on th atis fri vo lo us or gr ou nd le ss , or h as un reas on ab ly fail edto pu rs ue av ai labl e adm in is tra ti ve rem ed ie s. The Co urt h as di sc ret io n t o i m po se a m ax im

um pe na lty of $ 25 ,00 0. 6 5 6 6 Res po nd en t as se rts th atMr. Kern ansh ou ldbe san ct io ne d b ecau se he ha s in st itut edth e p ro ceed in gs pri m ari ly for d el ay an d h as tak ena po si ti on th atis fri vo lo us or g ro un dl es s. A ta xp ay er ev id en ces a pr im ary pu rp os e o f de la y if h e fil es m ul ti pl e fri vo lo us m ot io ns or d oc um en ts , ask s fo r m ul ti pl e co nt in ua nc es 6 7
an d fa il s t o app ear, fai ls to m eetde ad li ne s fo r br ie f subm is si on s an d re fu se s t o 6 8

Sec. 6 67 3( a)(1 ). 6 5 Sec. 6 67 3( a)(1 ). 6 6 See M oo re v . Comm is si on er, T.C. Mem o. 2 00 7- 20 0 (t ax pay er fi le d 6 7 m ul ti pl e fri vo lo us do cu m en ts with t he Co urt), a ff’d, 2 96 Fed . App x. 8 21 (11 th Cir
. 20 08 ). See Lo es ch er v . Comm is si on er, T.C. Mem o. 1 99 3- 74 (ta xp ay er as ke d fo r

6 8 two co nt in ua nc es forcla im edm ed ic al reas on s, fa il edto ap pe ar attri al for an ot he r m ed ic al ex cu se , andfai le d t o re sp on d t o C ou rt’s o rd er t o s ho w cau se why cas e sh ou ldno t b e d is mis se d)
.- 37 -

[* 37 ] fo ll ow the Co urt’s o rd ers , refu se s t o c oo pe rat e in th e st ip ul at io n p ro ces s, 6 9 7 0
orm erel y us es fri vo lo us or g ro un dl es s ar gu m en ts to de la y pa y in g h is tax es . A 7 1 po si ti onis fri vo lo us “ if i t i s co nt rary to es tabl is he d l aw an d uns up po rte d b y a reas on ed , col or ab le arg um en t fo r ch an ge inth e la w.” The wo rd“ gr ou nd le ss ” 7 2
m ean s “ ha vi ng no gro un d o r fo un da ti on : l ack in g c au se or r eas on forsupp ort.” 7 3 Mo re s pe ci fic al ly, a p os it io n i s g ro un dl es s i f itlac ks m eri t o r st at es no jus ti ci ab le fact s i n t he pe ti ti on an d h as no va li d g ro un d o r fo un da ti on . Friv ol ou s an d 7 4 gr ou nd le ss cla im s d iv ertth e Co urt’s t im e, en erg y , andres ou rces away fro m m or e See Wil li am s v . Comm is si on er, 1 19 T.C. 27 6, 2 80 -8 1 (2 00 2) (ta xp ay er 6 9 fai le d t o c om

pl y with C ou rt’s p retria l o rd ers an d i m pr op erl y in vo ke d aut om at ic st ay of the Ban krup tc y

Co de to de la y

Tax C ou rt p ro ceed in gs ); Ke at in g v . Co m m is si on er, T.C. Mem o. 1 98 5- 31 2 (t axpa y er fa il edto co m pl y with C ou rt o rd er an d fa il edto ap pe ar athe ari ng ); Lynchv. Co m m is si on er, T.C. Mem o. 1 98 3- 42 8 (ta xp ay er fa il edto ap pe ar atcal en da r cal l an d fa il edto pro se cu te hi s ca se ). See Go ff v . Comm is si on er, 1 35 T.C. 23 1, 2 37 (20 10 ) (t ax pa y er re fu se d t o 7 0 co op erat e in th e st ip ul at io n p ro ces s an d fa il edto co m pl y with C ou rt o rd ers ). See B eardv. Co m

m is si on er, 8 2 T.C. 7 66 , 78 1 (1 98 4) , aff’d, 7 93 F.2d13 9 7 1 (6 th Cir . 19 86 ) (t ax pa y er ad m itte d i n h is bri ef tha t h e kne w th e Co urt h adreject ed arg um en ts si m il ar t o h is as f riv ol ou s an d g ro un dl es s i n m an y pri orcas es ). Co le m anv. Co m

m is si on er, 7 91 F.2d68 , 71 (7t h C ir. 1 98 6)
. 7 2 Nies v. Co m

mis si on er, T.C. Mem o. 1 98 5- 21 6, 1 98 5 Tax Ct. M em o LEXIS 7 3 41 8, at*1 4 (quo ti ng W eb st er’s Thi rdNew Int ern at io na l Di ct io na ry Unab rid ge d)
. See Kea ti ng v. Co m

m is si on er, T.C. Mem o. 1 98 5- 31 2, 1 98 5 Tax Ct. M em o 7 4 LEXIS 32 9, at*1 3- *1 4; Nies v. Co m m is si on er, 1 98 5 Tax Ct. M em o LEXIS 4 18 , at*1 4- *1 5.- 38 -

[* 38 ] ser io us cla im s an d i nc reas e th e n eed le ss co stim po se d o n o th er l it ig an ts by th es e types of l aws ui ts . And“we canno lo ng er t ol erat e ab us e o f th e jud ic ia l 7 5
rev ie w pro ces s b y

irr es po ns ib le tax pa y ers who pre ss st al e an d fr iv ol ou s arg um en ts , witho utho pe of s uc ces s o n t he m eri ts , inord er t o d el ay or h aras s the
co ll ect io n o f publ ic rev enue s fo r ot he r no nwo rth y pu rp os es .” 7 6 The Co urt m

us t b e cau ti ou s wh enim

po si ng a pe na lty

un de r se ct io n 6 67 3 be cau se “ [t]he do or s o f ou r co urts m us t al way s re m ai n o pe n t o p ers on s s eek in g i n go odfai th to in vo ke th e p ro te ct io n o f th e law”. Taxp ay ers ass ert in g t he same 7 7 fri vo lo us arg um en ts on m ul ti pl e o ccas io ns are m or e li ke ly to b e subjec te d t o a pe na lty un de r se ct io n 6 67 3 t han t ho se ap pe ari ng forth e fi rs t t im e b efo re o ur Co urt. 7 8 W e m us t d et erm in e whe th er Mr . Kern anwas a ct in g i n g oo d fa ith o r kn ew hi s cl ai m s wer e fri vo lo us an d a ct edm erel y “ to de la y pay m en t o f ta xe s, cl og up th e Co le m anv. Co m

m is si on er, 7 91 F.2dat 7 2. 7 5 Kil e v . Comm is si on er, 7 39 F.2d26 5, 2 69 -2 70 (7t h C ir. 1 98 4) , aff’g Ba si c 7 6 Bi bl e Ch ur chv. Co m

m is si on er, 7 4 T.C. 8 46 (19 80 ). May v. Co m

m is si on er, 7 52 F.2d13 01 , 13 06 (8t h C ir. 1 98 5)
. 7 7 Co m pa re Wheel er v . Comm is si on er, T.C. Mem o. 2 01 1- 27 8, Ho wardv. 7 8 Co m m is si on er, T.C. Mem o. 2 00 5- 14 4, an d F un k v . Comm is si on er, T.C. Mem o. 20 01 -2 91 , with Lewi s v . Comm is si on er, T.C. Mem o. 2 00 6- 73 , Shi rem anv. Co m m is si on er, T.C. Mem o. 2 00 4- 15 5, Si de s v . Comm is si on er, T.C. Mem o. 2 00 4- 14 1, an d Kae ck el l v . Comm is si on er, T.C. Mem o. 2 00 2- 11 4.- 39 -

[* 39 ] co urts , or a s a s ym

bo li c p ro te stag ai ns t a s y st em with wh ic h * * * [he di d]
no t ag ree.” W e h av e al read y co nc lu de d t ha t M r. Kern ansi nc erel y be li ev edhi s 7 9 po si ti oninth is li ti ga ti on , friv ol ou s as itis
. The Co urt o fte n i ss ue s a warn in g i n l ie u o f sa nc ti on s wh ena ta xp ay er as se rts a fri vo lo us po si ti on inou r Co urt fo r th e fi rs t t im e. The ra ti on al e is th ata 8 0
warn in g wi ll di sc ou rag e th e ta xp ay er fro m tak in g fr iv ol ou s p os it io ns inth e fu tu re. W e wil l n otim

po se a m on et ary sa nc ti on ag ai ns t M r. Kern anbe cau se th is 8 1
was th e fi rs t t im e h e p et it io ne d o urCo urt. We are m in df ul th atMr. Kern anha s im pl ie d t ha t h e m ay

no t fo ll ow thi s C ou rt’s o pi ni on on th e m eri ts . As he st at edat tri al : My un de rs ta nd in g o f th e la w is st il l wh atm y un de rs ta nd in g o f th e la w is . There ha s b eenno , andI do n’t m eanto be di sr es pe ct fu l, Yo ur Hon or . It’s m

y un de rs ta nd in g t ha t ac co rd in g t o a dm in is tra ti ve law an d a cco rd in g t o p rimary juri sd ic ti on , it ’s no t up t o youto tel l m e th at I’m requi red . It’s n otup to th e Dis tri ctCo urt t o t el l m e I’m requi red
. It’s n otup to th e g uy do wn the street . It’s n otup to th e In te rn al May v. Co m

m is si on er, 7 52 F.2dat 1 30 8. 7 9 See Leysh on v. Co m

m is si on er, T.C. Mem o. 2 01 2- 24 8; Liza le k v
. 8 0 Co m m is si on er, T.C. Mem o. 2 00 9- 12 2; Sh ire m anv. Co m m is si on er, T.C. Mem o. 20 04 -1 55 . See Whi te v. Co m

m is si on er, 7 2 T.C. 1 12 6, 1 13 5- 11 36 (19 79 ); Ha tfi el d v
. 8 1 Co m m is si on er, 6 8 T.C. 8 95 , 89 9- 90 0 (1 97 7) ; Co okv. Co m m is si on er, T.C. Mem o. 20 10 -1 37 ; Sk eri ot is v. Co m m is si on er, T.C. Mem o. 2 00 7- 52 ; Lewi s v . Co m m is si on er, T.C. Mem o. 2 00 6- 73
.- 40 -

[* 40 ] Rev enue ag en t o f an y sh ap e o r fo rm

or a ny lev el . It’s up t o th e Dis tri ctDire ct orto serve m e n ot ic e th atI’m requi red
. Bu t we warn M r. Kern anth atif h e as se rts fri vo lo us arg um en ts inth is Co urt ag ai n we wil l l ik el y

im po se san ct io ns un de r se ct io n 6 67 3.

Co nc lu si on Bec au se Mr. Kern an ’s bri efs ex ceed edth e g en ero us pa ge li m it s tha t the Co urt al lo wed , th e Co urt, i n i ts in he ren t p owe r to bo th im po se pa ge li m it s an d
sa nc ti on pa rti es , wil l d eem hi s b rie fs stric ke n. As for hi s ar gu m en t o n t he m eri ts th athe is no t re qu ire d t o fi le a ta x re tu rnun ti l p ers on al ly inv it edto do so , th at arg um en t i s fr iv ol ou s. Mr . Kern anis requi redto fil e ta x re turn s, an d we s us ta in
res po nd en t’s d efi ci en cy

de te rm in at io ns forth e y ears at i ss ue . W e fi ndth atres po nd en t h as fai le d t o m eethi s b ur de n o f pr ov in g fr au d
un de r se ct io n 6 65 1( f) b y

cle ar an d c on vi nc in g e vi de nc e. Sp eci fic al ly, res po nd en t ha s fa il edto pro ve th atMr. Kern anact edwith fr au du le ntin te ntwhen he fai le d t o fil e h is returns forth e y ears at i ss ue ; the refo re, the sec ti on 66 51 (f) ad di ti onto tax do es no t ap pl y . Howev er, we fi ndMr. Kern anli ab le for th e se ct io n 6 65 1( a)(1 ) ad di ti on to tax forfai lu re t o t im el y fil e ta x re tu rn s fo r th e y ears at i ss ue . Bec au se Mr. Kern anis requi redto pa y hi s i nc om e ta x l iabi li ti es an d m ak e es ti m at edtax pa ym en ts , we fin d h im li ab le forbo th th e se ct io n 6 65 1( a)(2 )- 41 -

[* 41 ] ad di ti on to tax forfai lu re t o t im el y pay tax owedan d t he sec ti on 66 54 (a) ad di ti on to tax forfai lu re t o m ak e es ti m at edtax pa ym en ts forth e y ears at i ss ue . Fi na ll y , we wil l n otim

po se sec ti on66 73 san ct io ns ag ai ns t M r. Kern an be cau se th is was h is fir stti m e to ap pe ar b efo re o urCo urt. To re fle ctth e fo reg oi ng , An ap pr op ria te ord er wi ll be is su ed , an d d eci si on wil l b e en te redun de r Ru le 15 5.