T.C. Memo. 2005-211

UNITED STATES TAX COURT

THIELE L. WETZEL, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 20579-03L. Filed September 12, 2005.

Thiele L. Wetzel, pro se.

Lorraine D. Massano, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

COLVIN, Judge: Respondent sent petitioner a Notice of

Determination Concerning Collection Action Under Section 6320

(the lien determination) in which respondent determined that the

notice of Federal tax lien regarding petitioner’s income tax

liabilities for 1994-99 was appropriate and would not be

withdrawn.
- 2 -

The issues for decision are:

1. Whether petitioner may dispute the existence or amount

of his tax liability for 1994-99. We hold that he may not.

2. Whether respondent’s determination was an abuse of

discretion. We hold that it was not. 

3. Whether petitioner is liable for a penalty under

section 6673 for instituting proceedings primarily for delay and

for maintaining frivolous or groundless positions. We hold that

he is.

Section references are to the Internal Revenue Code.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found.

A. Petitioner

Petitioner lived in Daytona Beach, Florida, when he filed

the petition. In 1994-99, petitioner was a professional income

tax return preparer who did business through an S corporation

called Diversified Accounting Services. Petitioner was its sole

officer and shareholder. Petitioner filed no Federal income tax

returns for 1994-99.

B. Respondent’s Examination of Petitioner’s 1994-99 Tax Years

Respondent’s revenue agent notified petitioner that he had

not filed Federal income tax returns for 1994-99 and asked for

information to determine his tax liability for those years.
- 3 -

To reconstruct petitioner’s income, respondent’s revenue

agent sent letters to petitioner’s accounting clients and asked

them to provide copies of canceled checks written to petitioner. 

The revenue agent also sent copies of those letters to

petitioner. Petitioner demanded that the revenue agent stop

contacting his clients. Petitioner contended that the requests

to his clients were an unconstitutional invasion of his privacy.

The revenue agent issued summonses to petitioner’s banks. 

Petitioner wrote letters to the revenue agent stating that the

summonses were invalid for several reasons, including: (1)

Issuance of the summonses violated (a) the U.S. Constitution; (b)

the Internal Revenue Manual; and (c) the Internal Revenue Service

Restructuring and Reform Act of 1998 (RRA 1998); and (2) the

revenue agent failed to provide petitioner with (a) a Privacy Act

statement; (b) a certificate of service of summons; (c) proof of

delegation of authority; and (d) notice stating whether the

documents sought by the revenue agent were for a civil or

criminal investigation.

Respondent sent petitioner proposed adjustments to his

income tax for 1994-99, letters, notice of amounts due, and

statements of account. Those notices and statements showed

amounts respondent had concluded petitioner owed for 1994-99. 

Petitioner stamped those letters, notices, and statements of

account “Refused for Fraud F.R.C.P. 9(b)” and returned them to
- 4 -

respondent, with an attachment in which he raised numerous

frivolous contentions, such as he was not a taxpayer, he had

engaged in no taxable activity, and respondent had not prepared

proper substitute for returns. Petitioner asked respondent to

show him the statute that made him liable for Federal income tax.

C. Notice of Deficiency

Respondent sent and petitioner received a notice of

deficiency for 1994-99 dated September 12, 2001. In it,

respondent determined, based on information that respondent

obtained from petitioner’s clients and banks, that petitioner had

the following amounts of unreported income from Diversified

Accounting Services:

Year Income

1994 $34,067

1995 27,848

1996 30,639

1997 35,579

1998 30,772

1999 43,284

Respondent determined that petitioner had income tax deficiencies

and liability for additions to tax as follows:

 Additions to tax 

Year Deficiencies Sec. 6651(f) Sec. 6654(a)

1994 $4,834 $3,625.50 $250.84

1995 3,214 2,410.50 174.26

1996 3,621 2,625.22 192.71

1997 4,853 3,518.42 259.63

1998 3,574 2,591.15 163.53

1999 6,796 4,927.10 328.88

Respondent also determined that petitioner was liable for the

addition to tax for failure to pay under section 6651(a)(2) in
- 5 -

amounts that could not be computed at the time of the

determination. Petitioner did not file a petition with this

Court.

Petitioner stamped the notice of deficiency “Refused for

Fraud F.R.C.P. 9(b)” and returned it to respondent with an

attachment in which petitioner alleged: (1) The notice of

deficiency was fraudulent; (2) he did not receive notice of the

examination; (3) he is not liable for tax; and (4) respondent

failed to prepare proper substitutes for returns.

D. Notice of Federal Tax Lien

On January 22, 2003, respondent filed a notice of Federal

tax lien relating to petitioner’s unpaid income tax liabilities

of $14,777.63 for 1994, $9,035.91 for 1995, $9,316.57 for 1996,

$11,563.38 for 1997, $7,871.54 for 1998, and $13,809.37 for 1999. 

On January 27, 2003, respondent sent petitioner a notice that the

notice of Federal tax lien for 1994-99 had been filed.

Petitioner timely requested a hearing under sections 6320

and 6330 on February 25, 2003. In the hearing request,

petitioner claimed that he was not a “taxpayer” as defined in the

Internal Revenue Code or by any regulation thereunder, and he

asked: (1) What, if any Federal tax liability does he have? (2)

for which Federal tax is he liable? (3) what action made him

liable for Federal tax? (4) why was he not told that he owed

Federal tax? and (5) who assessed the Federal tax?
- 6 -

Petitioner attached a letter to his hearing request in which

he alleged: (1) He had received no taxable income and had no

taxable activity and thus had no filing requirement; (2)

respondent had not prepared proper substitute for returns under

section 6020(b) in that they were not signed by the Secretary and

were not on a form approved by the Office of Management and

Budget (OMB); (3) the lien was fabricated; and (4) the assessment

was unlawful.

On May 29, 2003, respondent sent petitioner copies of Forms

4340, Certificates of Assessment, Payments, and Other Specified

Matters, for 1994-99. Petitioner sent numerous letters to

respondent replete with the arguments described above and

additional arguments including: (1) Respondent failed to provide

him with Form 23C, Assessment Certificate - Summary Record of

Assessments; (2) imposition of the lien was a denial of due

process; and (3) respondent’s agents who worked on petitioner’s

case should be prosecuted.

On October 31, 2003, respondent sent petitioner a Notice of

Determination Concerning Collection Actions under section 6320

and/or 6330, in which respondent stated that all applicable laws

and administrative procedures had been met and that collection

from petitioner of his tax liability for 1994-99 would proceed.

Respondent determined that petitioner had raised only frivolous

issues and warned petitioner that he may be held liable for a
- 7 -

1 Petitioner does not contend that the burden of proof

shifts to respondent under sec. 7491(a) in this case.

penalty of up to $25,000 for instituting or maintaining an action

primarily for delay or for taking frivolous or groundless

positions.

OPINION

A. Whether Petitioner May Dispute the Underlying Tax Liability

Petitioner contends that he had no taxable income or

activities in 1994-99, and thus he had no tax liability for those

years. 

A taxpayer may dispute the existence or amount of his or her

tax liability at a section 6330(b) hearing if he or she did not

receive a notice of deficiency or did not otherwise have an

opportunity to dispute the tax liability. Sec. 6330(c)(2)(B). 

Petitioner received the notice of deficiency for 1994-99. Thus,

petitioner may not dispute the existence or amount of his tax

liabilities for those years under sections 6320 and 6330. Id.

B. Whether Respondent’s Determination Was an Abuse of

Discretion

Petitioner contends that respondent’s determination was an

abuse of discretion because: (1) He had no taxable income or

activities; (2) payment of Federal income tax is voluntary; (3)

the assessment was not proper; (4) the lien was premature; and

(5) the conduct of respondent’s employee was fraudulent and

subject to sanctions.1 We disagree because: (1) Petitioner had
- 8 -

taxable income; (2) payment of Federal income tax is not

voluntary; (3) respondent’s settlement officer verified that the

requirements of applicable law and administrative procedures had

been met; (4) the certified transcripts of petitioner’s tax

account for 1994-99 show that assessment was proper and the lien

was not premature; and (5) there is no evidence that the

conclusions of the settlement officer are incorrect or that any

sanctions against IRS personnel are warranted. 

We conclude that respondent’s determination not to withdraw

the notice of Federal tax lien was not an abuse of discretion.

C. Whether Petitioner Is Liable for a Penalty Under Section

6673

Respondent moved at trial to impose a penalty under section

6673 on grounds that petitioner made only frivolous arguments and

instituted these proceedings primarily for delay. Petitioner

responded to respondent’s motion with frivolous arguments. 

The Court may impose a penalty of up to $25,000 if the

taxpayer’s position or positions are frivolous or groundless or

the proceedings were instituted primarily for delay. Sec.

6673(a)(1)(B). A taxpayer’s position is frivolous or groundless

if it is contrary to established law and unsupported by a

reasoned, colorable argument for change in the law. Coleman v.

Commissioner, 791 F.2d 68, 71 (7th Cir. 1986); Gilligan v.

Commissioner, T.C. Memo. 2004-194. 
- 9 -

Petitioner took frivolous positions at trial, including that

(1) he was not a taxpayer as defined by the Internal Revenue

Code; (2) income from his tax return preparation business was not

taxable; (3) payment of Federal income tax is voluntary; (4) he

can only be taxed based on substitutes for returns that qualify

under section 6020(b) and that are on forms approved by OMB and

signed by the Secretary; and (5) no proper assessment was made

because respondent did not provide Form 23C. Respondent’s

settlement officer warned petitioner that he might be held liable

for a penalty under section 6673. Petitioner continued to make

frivolous arguments in his petition, during pretrial proceedings,

at trial, and in his brief. 

A taxpayer may be liable for a penalty under section 6673 if

the taxpayer knew or should have known that his or her claim or

argument was frivolous. Hansen v. Commissioner, 820 F.2d 1464,

1470 (9th Cir. 1987); Nis Family Trust v. Commissioner, 115 T.C.

523, 544 (2000); Corcoran v. Commissioner, T.C. Memo. 2002-18,

affd. 54 Fed. Appx. 254 (9th Cir. 2002). Petitioner is a

professional tax return preparer who knew or should have known

that his arguments are frivolous. We conclude that petitioner

instituted and maintained these proceedings primarily for delay. 
- 10 -

We will impose a penalty under section 6673 in the amount of

$15,000. 

To reflect the foregoing,

Respondent’s motion to

impose a penalty under section

6673 will be granted, and

decision will be entered for

respondent.