T.C. Mem o. 2 01 4- 13 4

UNITED STAT ES TAX COURT

JOHN LEW IS HILL, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 29 33 2- 12 L. Fi le d J ul y 7, 2 01 4.

Jo hn Lewis Hil l, p ro se. Ann e M. Cra ig , forres po nd en t.

MEMORANDUM OPINION VASQUEZ, Ju dg e: Pur su an t t o s ect io ns 63 20 (c) and63 30 (d )(1 ), 1 pe ti ti on er, J oh n Lewi s Hi ll , see ks rev ie w of re sp on de nt ’s det erm in at io n t o p ro ceed

Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o the Int ern al 1 Rev enue Co de ineffe ctat a ll rel ev an t t im es , andall Ru le refe ren ces are t o the Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e.- 2 -

[* 2] with c ol le ct io n. Th e m atte r is be fo re the Co urt o n re sp on de nt ’s m ot io n fo r su m m ary jud gm en t, fi le d p ur su an t t o R ul e 1 21 , andto im

po se a pe na lty

un de r se ct io n 6 67 3. Mr . Hil l o bjec ts to res po nd en t’s m ot io n. Afte r a co nc es si on , th e is su es forde ci si on are: (1) whet he r Mr. Hi ll is 2 li ab le fora $5 ,00 0 fr iv ol ou s re tu rnpe na lty un de r se ct io n 6 70 2 fo r 20 05 ; (2 ) whe th er re sp on de ntab us edhi s d is cret io n i n s us ta in in g apro po se d l ev y an d a
no ti ce o f Fed eral tax li enfor20 05 ; an d (3 ) whe th er the Co urt s ho ul d i m po se a pe na lty un de r se ct io n 6 67 3( a). W e co nc lu de th atth ere i s n o g enui ne di sp ut e as to
an y m at eri al fact
. Bac kg ro un d Mr. Hi ll res id edinFlo rid a atth e ti m e th atth e p et it io n was fil edwith the Co urt. Mr. Hi ll fil edhi s Fo rm 10 40 , U.S. Ind iv idua l In co m e Tax Return, fo r 20 05
on Jan uary

14 , 20 09 . W ith the ex cep ti on of l in es 40 an d 4 1 (s ho win g the st an da rd de du ct io n a s a p os it iv e am ou ntan d ane ga ti ve am ou nt , res pe ct iv el y ) an d l in e 4 2 (s ho win g the ex em

pt io n a m ou nt ), each li ne on Mr. Hil l’s Fo rm 10 40 was e ithe r
The In te rn al Rev enue Serv ic e (IR S) as se ss edtwo sep arat e $ 5,0 00 2 fri vo lo us return p en al ti es un de r se c. 67 02 for20 05 : o ne on Marc h 1 2, 2 01 2, an d th e o th er o n Ap ril 30 , 20 12 . Res po nd en t n ow co nc ed es th atth e March 12 pe na lty was in va li d a ndwil l ab at e it
.- 3 -

[* 3] le ft b lankor f

il le d i n wi th a zero . Mr. Hil l re po rte d t ax ab le in co m e o f zer o fo r 20 05 an d d idno t m ak e an y est im at edtax pa ym en ts . Mr. Hi ll att ach edto hi s Fo rm 10 40 a do cum en t p ur

po rti ng to “ co rrec t” to
zero th e am ou nt s re po rte d o n v ari ou s Fo rm s 1 09 9- MIS C, Mi sc el lane ou s In co m e. 3 The do cu m en t at ta ch edto Mr. Hil l’s Fo rm 10 40 in cl ud edth e fo ll owi ng st at em en t: 4 The pu rp os e o f th is do cum en t i s t o re bu t an d c orrectpa ym en ts m ad e to m y se lf, J oh n L. Hil l, b y

th irdpa rty “ PAYERS,” fo r th e y ear 2 00 5, tha t erro ne ou sl y

all eg e “ ga in s, p ro fit , or i nc om e” m ad e in th e co ur se of a“ tra de orbu si ne ss ” as th e te rm

“ tra de or b us in es s” is de fin edun de r [s ]ecti on 77 01 (a)( 26 ), “ in co m e” fo r th e p ur po se of a n “ in co m e ta x,” or “ gr os s in co m e” fo r th e p ur

po se of a n “ in co m e ta x.” The co rrec te d a m ou nt s in di cat e th e p ro pe r am ou ntof “ ga in s, p ro fit , or i nc om e” m ad e in th e co ur se of a “ tra de or b us in es s” as t he term “ tra de or b us in es s” is de fin edun de r [s ]ecti on 77 01 (a)( 26 ), “ in co m e” fo r th e p ur po se of a n “ in co m e ta x,” or “ gr os s i nc om e” fo r th e p ur po se of a n “ in co m e ta x” pa idto m e, th e “ RECIP IENT,” by th os e th irdpa rty “ PAYERS.” On Ap ril 7, 2 01 2, m or e th anth ree years a fte r Mr. Hi ll fil edhi s Fo rm 10 40 , th e IRS co m

pl et eda Fo rm

82 78 , Ass es sm en t an d Ab at em en t o f Mi sc el lane ou s Ci vi l Pe na lt ie s, b as edon th e Fo rm 10 40 . On Apr il 30 , 20 12 , th e IRS ass es se d a $5 ,00 0 c iv il pe na lty

ag ai ns t M r. Hil l fo r fi li ng a fri vo lo us in co m e ta x re tu rn . The The d oc um en t at ta ch edto Mr. Hil l’s Fo rm 10 40 for20 05 pu rp orte d t o 3 co rrec t Fo rm s 1 09 9, fi le d b y Blu e Cro ss & Bl ue Sh ie ldof F lo rid a, In c., Uni te d Heal th Care Ins ur an ce Co ., andNort h Am eri canHeal thPla ns , Inc ., anda co ns ol id at edFo rm

10 99 -MI SC fi le d b y

Am eri tra de
. Mr. Hil l al so att ach edto hi s Fo rm 10 40 a le tt er i n wh ic h h e o bjec te d t o 4 fil in g aFo rm

10 40 an d que st io ne d re sp on de nt ’s aut ho rit y to reque ston e.- 4 -

[* 4] IRS s ub se qu en tl y

is su edMr. Hil l a F in al Not ic e--No ti ce o f In te ntto Levy and Not ic e o f Your Ri gh t t o aHeari ng (le vy no ti ce), d at edJu ly 3, 20 12 , an d aNot ic e 5 of Fed eral Tax Li enFil in g a ndYou r Ri gh t t o aHeari ng Und er IR C 6 32 0 (NF TL), da te d J ul y

17 , 20 12
. On Au gu st1, 2 01 2, M r. Hil l t im el y subm it te d aFo rm

12 15 3, Re qu es t fo r a Co ll ect io n Du e Pro ces s o r Equ iv al en t Hea rin g, i n re sp on se to th e le vy no ti ce an d th e NFTL. The IRS rece iv edth e Fo rm 12 15 3 o n Au gu st2, 2 01 2, an d M r. Hil l’s
cas e was ass ig ne d t o S et tl em en t Offi cer J oe Brea zeal e (Se tt le m en t Offi cer Brea zeal e) o f th e IRS Offic e o f App eal s (Ap pe al s) inJac ks on vi ll e, Fl or id a. Mr. Hil l re qu es te d tha t co m

m un ic at io ns be co nduc te d e xc lu si ve ly viaU.S. m ai l. As a
res ul t, Mr . Hil l an d S et tl em en t Offi cer B reaz eal e ex ch an ge d s ev eral let te rs , and th e co ll ect io n due pro ces s h eari ng (CDP h eari ng ) was co nduc te d thr ou gh th is
ex ch an ge . In h is let te rs Mr. Hil l t oo k s ev eral fri vo lo us po si ti on s, ar gu in g tha t h e was no t l iabl e fo r in co m e ta x b ecau se he is no t a wi th ho ld in g a ge ntun de r se ct io n 14 61 , was n otin vo lv edina tr ad e o r bu si ne ss , anddi d n otha ve an y in co m e fro m

a tra de or b us in es s. He al so cla im edth athi s Fo rm 10 40 ha d b een“ st am

pe d a nd
The l ev y

no ti ce s ta te d tha t M r. Hil l o wedov er $ 10 ,00 0 i n c iv il pe na lt ie s 5 an d i nt eres t. Thi s amoun t i nc lu de d the $5 ,00 0 p en al ty ass es se d o n Ap ril 30 , 20 12 , as well as t he $5 ,00 0 p en al ty ass es se d o n M arch12 , 20 12 , whi chres po nd en t h as si nc e co nc ed ed . See s up ra n ot e 2
.- 5 -

[* 5] pr oc es se d a s v al id ” an d tha t the IRS was th eref or e requi redto tre atitas v al id
. He di d n otoff

er an y co ll ect io n a lt ern at iv es . Inhi s l et te rs to Mr. Hil l, Se tt le m en t Offi cer B reaz eal e st at edth atMr. Hil l’s Fo rm 10 40 “ was no t p ro ces se d a s v al id ” expl ai ni ng th at“ whe n the IRS re cei ve s a ta x re turna da te st am

p i s p la cedon th e return t o s ho w th e d at e th atitwas rece iv ed . The d at e st am

p d oe s n otm ak e th e return v al id .” Settl em en t Offi cer Brea zeal e al so in fo rm edMr. Hil l tha t the arg um en ts rai se d i n the do cu m en t at ta ch edto Mr. Hil l’s Fo rm 10 40 were fri vo lo us . On No ve m

be r 2, 2 01 2, Ap pe al s i ss ue d M r. Hil l a No ti ce o f Det erm in at io n Co nc ern in g C ol le ct io n Act io n( s) Und er Se ct io n 6 32 0 a nd/o r 63 30 (Not ic e o f Dete rm in at io n) su st ai ni ng th e p ro po se d l ev y an d the no ti ce o f li enfil in g. Mr . Hil l ti m el y pe ti ti on edth e Co urt. Dis cu ss io n I. Su m

m ary Ju dg m en t The pu rp os e o f su m

m ary jud gm en t i s t o e xp ed it e li ti ga ti on an d a vo idco st ly, ti m e-co ns um in g, an d u nn eces sa ry tri al s. Fl a. Peac h C or

p. v . Comm is si on er, 9 0 T.C. 67 8, 6 81 (19 88 ). W e m ay gra ntsu m

m ary jud gm en t wh enth ere i s n o g enui ne di sp ut e as to an y

m at eri al factan d ade ci si on m ay be ren de redas am at te r of law. Ru le 12 1( b) ; Sund st ran d C or p. v . Comm is si on er, 9 8 T.C. 5 18 , 52 0 (1 99 2) , aff’d,- 6 -

[* 6] 17 F.3d96 5 (7 th Cir . 19 94 ). In d eci di ng whet he r to gra ntsu m m ary jud gm en t,
we co ns tru e fac tu al m at eri al s an d i nf eren ces dra wn fr om

th em inth e li gh t m os t fav or ab le to th e n on m ov in g p arty . Sun ds tra ndCo rp . v. Co m m is si on er, 9 8 T.C. at 52 0. Ho wev er, the no nm ov in g p arty “ m ay no t re stup on * * * m ere a ll eg at io ns or de ni al s” bu t i ns te ad“ m

us t s etforth sp eci fic fact s s ho win g tha t the re i s a g enui ne di sp ut e”. Ru le 12 1( d) ; s ee Su nd st ran d C or p. v . Commis si on er, 9 8 T.C. at52 0. Bec au se we fin d tha t the re i s n o g enui ne di sp ut e as to an y m at eri al fact , th is cas e is rip e fo r su m

m ary jud gm en t. II. Ju ris di ct io n A. St atut ory

Fram ewo rk Sect io n 6 32 1 i m

po se s a l ie n i n fa vo r of

th e Uni te d S ta te s o n a ll pro pe rty and rig ht s t o p ro pe rty of a t ax pa y er l iabl e fo r ta x wh ena de m an d fo r pa y m en t o f th e ta x h as be enm ad e an d the tax pay er fa il s t o p ay th e ta x. Se ct io n 6 32 0( a) p ro vi de s th atth e Sec ret ary sh al l furn is h the tax pa y er wi th anNFTL with in fiv e b us in es s da y s af te r th e n ot ic e o f li enis fil ed
. Sect io n 6 33 1( a) au th or iz es th e Sec ret ary to lev y up onpro pe rty andpro pe rty rig ht s o f a t ax pa y er l iabl e fo r ta x i f th e ta xp ay er fa il s t o p ay th e ta x wi th in 10 da y s aft er n ot ic e an d d em an d fo r paym en t i s m ad e. See s ec. 6 67 1( a); see als o B la gav. Co m m is si on er, T.C. Mem o. 2 01 0- 17 0, s li p o p. at11 . Sect io n 6 33 0( a) p ro vi de s- 7 -

[* 7] th atno lev y

m ay be m ad e o n a ny pro pe rty or ri gh t t o p ro pe rty of an y pe rs on un le ss th e Sec ret ary ha s n ot ifi edsu chpe rs on inwrit in g o f th e ri gh t t o ahe ari ng be fo re the lev y

is m ad e. If a t ax pa y er re qu es ts a he ari ng inres po ns e to anNFTL or a n ot ic e o f le vy pu rs ua ntto sec ti on 63 20 or 6 33 0, a h eari ng sh al l b e h el d b efo re an im pa rti al of fic er o r em

pl oyee of App eal s. Sec s. 6 32 0( b) (1 ), (3 ), 63 30 (b )(1 ), (3 ). The he ari ng un de r se ct io n 6 32 0 g en eral ly sha ll be co nduc te d i n am anne r co ns is te nt with the pro cedur es setforth insec ti on 63 30 (c), (d ), an d (e ). Sec. 6 32 0( c). At the he ari ng th e ta xp ay er m ay rai se an y rel ev an t i ss ue , in cl ud in g app ro pr ia te sp ou sa l de fen se s, ch al le ng es to th e ap pr op ria te ne ss of t he co ll ect io n a ct io n, an d c ol le ct io n al te rn at iv es . Sec. 6 33 0( c)(2 )(A). Inad di ti on to co ns id eri ng is su es rai se d b y th e ta xp ay er u nd er s ect io n 6 33 0( c)(2 ), th e App eal s o ffi cer m us t v eri fy th atth e requi rem en ts of a ny app li cab le law o r admin is tra ti ve pro cedur e h av e b eenm et . Sec. 6 33 0( c)(1 ), (3 ). A tax pa y er i s p recl ud edfro m co nt es ti ng th e ex is te nc e o r am ou ntof t he
un de rlyin g t ax li ab il ity

un le ss th e ta xp ay er d idno t re cei ve a no ti ce o f de fic ie nc y fo r th e li ab il ity

inqu es ti on or d idno t o th erwi se have anearl ie r op po rtu ni ty to di sp ut e th e li ab il ity . Sec. 6 33 0( c)(2 )(B) ; s ee al so Seg o v . Comm is si on er, 1 14 T.C.- 8 -

[* 8] 60 4, 6 09 (20 00 ). The p hr as e “un de rlyin g t ax li ab il ity ” in cl ud es th e se ct io n 67 02 fri vo lo us return p en al ty. See Ca ll ah anv. Co m m is si on er, 1 30 T.C. 44 , 49 (2 00 8)
. Fo ll owi ng a he ari ng App eal s m us t d et erm in e whe th er t o s us ta in th e fi li ng of th e li enan d wh ethe r pr oc eed in g wi th th e p ro po se d l ev y is ap pr op ria te . In m ak in g th atde te rm in at io n Ap pe al s i s re qu ire d t o t ak e in to co ns id erat io n: (1) th e ve rif ic at io n re qu ire d b y

sec ti on 63 30 (c)( 1) , (2) rel ev an t i ss ue s ra is edby the ta xp ay er, an d (3 ) whe th er the pro po se d l ie n o r le vy acti on ap pr op ria te ly bal an ces th e n eedfor

effi ci en t co ll ect io n o f ta xe s wi th th e ta xp ay er’s co nc ern s re ga rd in g th e in tru si ve ne ss of t he pro po se d c ol le ct io n a ct io n. Se c. 63 30 (c)( 3)
. B. St an dardof R ev ie w Sect io n 6 33 0( d) (1 ) gr an ts th is Co urt juris di ct io n t o re vi ew App eal s’ de te rm in at io n i n c on ne ct io n wi th a co ll ect io n h eari ng . W he re the un de rlyin g t ax li ab il ity is pro pe rly at is su e, we rev ie w th e ta xp ay er’s l iabi li ty de n ov o. Se e Goz a v. Co m m is si on er, 1 14 T.C. 17 6, 1 81 -1 82 (20 00 ). W e rev ie w all othe r de te rm in at io ns forab us e o f di sc ret io n. Luns fo rdv. Co m m is si on er, 1 17 T.C. 18 3, 18 5 (2 00 1) ; Se go v. Co m mis si on er, 1 14 T.C. at 6 10 ; Go za v . Comm is si on er, 1 14 T.C. at 1 82 . App eal s ab us es it s d is cret io n i f itact s “ arb itrari ly, cap ric io us ly, or- 9 -

[* 9] witho utso un d b as is infactor l aw.” W oo dr al v. Co m m is si on er, 1 12 T.C. 19 , 23 (19 99 ). Mr. Hi ll m ay

ch al le ng e th e as se ss m en t o f th e fri vo lo us return p en al ty und er se ct io n 6 70 2 b ecau se he ha s n otha d apri orop po rtu ni ty to d is pu te th e as se ss m en t. Acco rd in gl y , we rev ie w Mr. Hil l’s l iabi li ty for the sec ti on 67 02 pe na lty de no vo . W e o th erwi se rev ie w App eal s’ det erm in at io n t o p ro ceedwith c ol le ct io n a ct io ns reg ard in g M r. Hil l’s u np ai d s ect io n 6 70 2 p en al ty for ab us e o f di sc ret io n. III. Sect io n 6 70 2 P en al ty A tax pa y er i s l iabl e fo r a fri vo lo us return p en al ty und er s ect io n 6 70 2 i f th ree requi rem en ts are m et . See Ca ll ah anv. Co m m is si on er, 1 30 T.C. at 5 1; Lin db erg v. Co m m is si on er, T.C. Mem o. 2 01 0- 67 . Firs t, the tax pa y er m us t h av e fi le d a do cu m en t tha t p ur

po rts to be anin co m e ta x re tu rn . Sec. 6 70 2( a)(1 ). Seco nd , th e pu rp orte d re turnm

us t h av e ei th er n otco nt ai ne d i nf orm at io n o n wh ic h the
subs tant ia l co rrec tn es s o f th e se lf- as se ss m en t m ay be jud ge d o r co nt ai ne d in fo rm at io n tha t o n i ts face in di cat edth atth e se lf- as se ss m en t was subs tant ia ll y in co rrec t. Id . Thir d, the de fectm us t h av e b eenba se d o n apo si ti on whi chth e Secr et ary ha s i de nt ifi edas f riv ol ou s o r refl ect eda de si re (wh ic h app eare d o n the pu rp orte d re turn ) to de lay or i m pe de th e adm in is tra ti on of F ed eral tax laws . Sec.- 10 -

[* 10 ] 67 02 (a)( 2) . The am ou ntof t he pe na lty is $5 ,00 0. Sec. 6 70 2( a). The

6 Co m m is si on er b ears th e b ur de n o f pr oo f with re sp ectto whet he r a t ax pa y er i s li ab le fora fri vo lo us return p en al ty. Sec. 6 70 3( a). Res po nd en t p ro du cedMr. Hil l’s Fo rm 10 40 for20 05 , inwhi chMr. Hil l rep orte d z ero in co m e, cl ai m edth e st an dardde du ct io n a ndtwo pe rs on al
ex em pt io ns , andrep orte d n o t ax li ab il ity . The Fo rm 10 40 co ns ti tu te s a d oc um en t th atpu rp orts to be anin co m e ta x re tu rn . See Ca ll ah anv. Co m mis si on er, 1 30 T.C. at51 ; Sh irl ey

v. Co m m is si on er, T.C. Mem o. 2 01 4- 10 , at * 19 . Mr. Hil l’s Fo rm 10 40 was azero return c on ta in in g i nf orm at io n tha t, o n i ts face , in di cat edth atth e se lf- as se ss m en t was subs tant ia ll y in co rrec t. Bl ag a v . Comm is si on er, s li p o p. at14
. Co urts ha ve he ldrep eat ed ly tha t a z ero return re po rti ng no in co m e an d n o t ax li ab il ity refl ect s a f

riv ol ou s p os it io n. Id ., sl ip op . at 1 4- 15 ; s ee al so Tick el v. Uni te d S tate s, 8 15 F.2d70 6 (6 th Cir . 19 87 ); Hi m es v. Un it edSta te s, 8 02 F.2d45 8
In 2 00 6 C on gr es s amend edsec . 67 02 , in crea si ng th e p en al ty from $5 00 to 6 $5 ,00 0 a ndbro ad en in g i ts reac h t o i nc lu de othe r types of f riv ol ou s t ax subm is si on s. Tax Rel ie f an d Hea lth C are Actof 2 00 6, Pub. L. No. 1 09 -4 32 , di v. A, sec . 40 7( a), 1 20 Sta t. at29 60 ; s ee al so Alex an de r v. C omm is si on er, T.C. Mem o. 2 01 2- 75 , sl ip op . at 6 -7 . The am en dm en t was effe ct iv e fo r subm is si on s m ad e an d i ss ue s ra is edaft er the da te th e Sec ret ary fir stpre sc rib eda li stof fri vo lo us po si ti on s p ur su an t t o s ec. 6 70 2( c). The Secr et ary fir stpre sc rib eda li stof fri vo lo us po si ti on s o n M arch 15 , 20 07 , inNot ic e 2 00 7- 30 , 20 07 -1 C.B. 8 83 . Mr. Hil l fi le d h is Fo rm

10 40 on Jan ua ry

14 , 20 09 . There fo re, s ec. 6 70 2, as am en de d, ap pl ie s i n thi s ca se .- 11 -

[* 11 ] (6 th Cir . 19 86 ). The Se cret ary al so ha s i de nt ifi edth is po si ti on as f riv ol ou s. See No ti ce 2 00 8- 14 , 20 08 -1 C.B. 3 10 , 31 0, m od ifyin g a ndsupe rs ed in g No ti ce 20 07 -3 0, 2 00 7- 1 C .B. 31 0. Acco rd in gl y , res po nd en t h as m ethi s b ur de n o f pr oo f by sh owi ng th atMr. Hil l’s Fo rm

10 40 sat is fie d a ll th ree r equi rem en ts of s ect io n 6 70 2. We fin d M r. Hil l l iabl e fo r a s ect io n 6 70 2 p en al ty of $5 ,00 0 fo r fi li ng a zero return fo r th e 2 00 5 ta x year. IV. Dete rm in at io n To Pro ceedwith C ol le ct io n Inhi s “ Res po ns e to Res po nd en t’s Mo ti onforSu m m ary Ju dg m en t an d Pen al ty Und er Se ct io n 6 67 3” an d dur in g the su m m ary jud gm en t h eari ng Mr. Hil l rai se d arg um en ts th atth is Co urt an d o th ers have co ns is te nt ly det erm in edto be fri vo lo us . See Hi ll v. Co m m is si on er, T.C. Mem o. 2 01 3- 26 5, at*7 ; Gar be r v. 7 Co m m is si on er, T.C. Mem o. 2 01 2- 47 , sl ip op . at 5 -6 , aff’d, 5 00 Fed . App x. 5 40 (7 th Cir . 20 13 ). Howev er, dur in g the su m m ary jud gm en t h eari ng , res po nd en t’s
co un se l i nv it edth e Co urt’s at te nt io n t o apo te nt ia l s ta tu te of l im it at io ns is su e.
As we h av e sa idof s im il ar ar gu m en ts on pre vi ou s o ccas io ns , th es e 7 arg um en ts are fr iv ol ou s an d d ev oi d o f an y ba si s i n the law. We needno t re fu te th em with s om be r rea so ni ng an d c op io us cit at io n o f pr eced en t; to do so m ig ht su gg es t tha t the y

have so m e co lo rab le m eri t. See Crai n v . Comm is si on er, 7 37 F.2 d 1 41 7, 1 41 7 (5 th Cir . 19 84 ); Wnu ckv. Co m m is si on er, 1 36 T.C. 49 8 (2 01 1) ; Gut hr ie v. Co m

m is si on er, T.C. Mem o. 2 00 6- 81
.- 12 -

[* 12 ] As res po nd en t’s co un se l ex pl ai ne d, the sec ti on 67 02 pe na lty was a ss es se d
on Apri l 7 , 20 12 --m or e th anth ree years a fte r Mr. Hi ll ’s Form 10 40 was fi le d. Sect io n 6 50 1( a) es tabl is he s a g en eral rul e th attax es im po se d u nd er t it le 26 m

us t be ass es se d wi th inth ree years a fte r a return i s fi le d. If ( 1) th e se ct io n 6 70 2 pe na lty is co ns id ereda ta x fo r pu rp os es of s ect io n 6 50 1 and(2) Mr. Hil l’s Fo rm 10 40 do es no t fa ll withi n a ny of th e ex cep ti on s t o the ge ne ral th ree- y ear rul e, th en as se ss m en t o f th e se ct io n 6 70 2 p en al ty w ou ldbe ba rred . The Co urt d ire ct edth e pa rti es to subm itbri efs on th is is su e. On b rie f, Mr. Hi ll ad op ts as h is ownarg um en t the sec ti on 65 01 st atut e o f li mit at io ns is su e rai se d b y res po nd en t’s co un se l. He arg ue s tha t the sec ti on 67 02 pe na lty is a ta x fo r pu rp os es of s ect io n 6 50 1, tha t the pe na lty was a ss es se d m or e th anth ree years a fte r he fil edhi s 2 00 5 t ax return, an d tha t h is Fo rm 10 40 was a va li d re tu rn . Res po nd en t ar gu es th atth e se ct io n 6 70 2 p en al ty is n ota ta x fo r pu rp os es of s ect io n 6 50 1( a); an d e ve n i f itwere, Mr . Hil l’s Fo rm 10 40 di d n ot
co ns ti tu te a va li d re tu rnforpu rp os es of s ect io n 6 50 1. Be cau se we fin d tha t M r. Hil l’s Fo rm

10 40 was n ota va li d re tu rn , we nee d n otad dr es s wh ethe r th e se ct io n 67 02 pe na lty

is co ns id ereda ta x fo r pu rp os es of s ect io n 6 50 1( a). A do cu m en t i s s uf

fic ie ntforco m

m en ci ng th e p eri odof l im it at io ns un de r se ct io n 6 50 1( a)(1 ) if

itm eet s the fou r-p arttes t enun ci at edinBear d v
.- 13 -

[* 13 ] Co m

m is si on er, 8 2 T.C. 7 66 , 77 7 (1 98 4) , aff’d p er cu ria m , 79 3 F .2d13 9 (6 th Cir . 19 84 ): “ Fi rs t, the re m us t b e su ffi ci en t d at a to cal cu la te tax li ab il ity ; se co nd , th e d oc um en t m

us t p ur po rt t o b e a return; th ird , th ere m us t b e anho ne st
an d re as on ab le att em

ptto sat is fy

th e requi rem en ts of t he tax law; an d fo urth , th e ta xp ay er m

us t ex ecu te th e return u nd er p en al ti es of p erjury .” See, e.g ., ICI Pen si on Fundv. Co m

m is si on er, 1 12 T.C. 83 , 88 (19 99 ). Res po nd en t ar gu es th atMr. Hil l’s Fo rm 10 40 fai ls th e Bea rdtes t b ecau se it do es no t p ro vi de su ffi ci en t d at a to cal cu la te Mr. Hil l’s t ax li ab il ity an d d oe s n ot
co ns ti tu te anho ne stan d re as on ab le att em ptto sat is fy

th e ta x l aw. Mr. Hil l d en ie s th athi s Fo rm

10 40 was fr iv ol ou s an d a rg ue s tha t re sp on de ntha s fa il edto sh ow an y “ ev id en ce tha t d is pu te s p et it io ne r’s ev id en ce tha t s ho ws ce rta in am ou nt s h e rece iv eddu rin g the y ear 2 00 5 a re n ottax ab le in co m e, as th e in co m e ta x l aws ap pl y to hi m se lf.” 8 Mr. Hi ll als o c it es Serv ic e Cen te r Adv ic e 2 00 11 40 33 , at 1 (Apr . 6, 2 00 1) , fo r th e p ro po si ti on th at“ [o ]nce an othe rwis e fri vo lo us return i s treat edas v al id , it is a va li d re tu rnforall tax pu rp os es .” Thi s ar gu m en t d oe s n othave m eri t. As we
In d oi ng so , Mr. Hil l ag ai n re ve rts to th e sa m e fri vo lo us arg um en ts th athe 8 ha s u ns uc ces sf

ul ly reli edup on th ro ug ho utth es e p ro ceed in gs an d i n o th er pr oc eed in gs be fo re thi s C ou rt. Se e, e.g ., Hill v. Co m mis si on er, T.C. Mem o. 2 01 3- 26 5.- 14 -

[* 14 ] ha ve pre vi ou sl y

st at ed : “ Serv ic e Cen te r Adv ic e is no t p rece de nt , is no t l aw,
an d i s n otbi nd in g. * * * [Mo reo ve r, Serv ic e Cen te r Adv ic e 2 00 11 40 33 ] do es no t st at e th atif the Co m

m is si on er m is take nl y

be gi ns to pro ces s a f

riv ol ou s re tu rnas va li d, the Co m

m is si on er m ay

no t co rrec t the erro r.” Lau e v . Comm is si on er, T.C. Mem o. 2 01 2- 10 5, s li p o p. at10 -1 1. We als o n ot e th atth ere i s n o c red ib le
ev id en ce tha t M r. Hil l’s re tu rnwas p ro ces se d a s v al id . Whi le Mr. Hil l p la ces gre at weig htonth e fac t tha t the IRS s ta m pe d h is return “ RECEIVED” an d “No St atut e Is su e”, n ei th er s ta m

p i nd ic at es th atth e IRS co ns id eredhi s re tu rnva li d a t an y po in t. 9 Mr. Hi ll ’s Form

10 40 for20 05 was afri vo lo us zero return tha t fa il edto pr ov id e “ su ffi ci en t d at a to cal cu la te tax li ab il ity ” o r to reas on ab ly “ at te m ptto
sa ti sf y th e requi rem en ts of t he tax law.” C f., e.g., Un it edSta te s v . Pil ch er, 6 72 F.2 d 8 75 , 87 7 (1 1t h C ir. 1 98 2) (“ Pro te stdo cu m en ts dupl ic at in g i n p artU. S. in di vi du al in co m e ta x re tu rnform 10 40 ’s bu t co nt ai ni ng no fin an ci al da taare n ot ta x ‘returns ’ fo r th e p ur

po se s o f se ct io n 7 20 3.” ); Un it edSta te s v . Sm ith, 6 18 F.2d 28 0, 2 81 (5t h C ir. 1 98 0) (“ The ba re ac t o f fi li ng a fo rm 10 40 do es no t co ns ti tu te a ta x ‘return’ un de r se ct io n 7 20 3.” ). Co ns eque nt ly, ev enif the sec ti on 65 01 (a)
Set tl em en t Offi cer B reaz eal e al so in fo rm edMr. Hil l tha t the IRS h adno t 9 pr oc es se d h is return a s v al id
.- 15 -

[* 15 ] li m it at io ns pe rio d app li es to th e se ct io n 6 70 2 p en al ty--whi chwe do no t de ci de --M r. Hil l’s Fo rm

10 40 was n otva li d a ndth e li m it at io ns pe rio d wo ul d n ot ha ve be gu n t o ru n. Se e se c. 65 01 (c)( 3) (“ Inth e cas e o f fai lu re t o fi le a return, the ta x m ay be ass es se d * * * at any tim e.”). W e fi ndth atres po nd en t’s as se ss m en t o f th e se ct io n 6 70 2 p en al ty is n ot ba rredby the st atut e o f li mit at io ns , th atApp eal s’ det erm in at io n t o p ro ceedwith
co ll ect io n was no t an ab us e o f di sc ret io n, an d tha t the pro po se d c ol le ct io n a ct io n is su st ai ne d. V. Sect io n 6 67 3 S an ct io n Sect io n 6 67 3( a)(1 ) au th or iz es th e Co urt t o i m po se a pe na lty

no t t o e xc eed $2 5,0 00 if the tax pa y er t oo k fr iv ol ou s o r gr ou nd le ss po si ti on s i n the pro ceed in g o r in st itut edor m ai nt ai ne d the pro ceed in g p rimaril y forde lay . Res po nd en t s eek s a pe na lty be cau se Mr. Hil l ra is edfri vo lo us arg um en ts . Mr. Hi ll is no stran ge r to th is Co urt an d h as be ensan ct io ne d o n s ev eral
oc cas io ns . Desp it e th e reb uk es he ha s re cei ve d i n p rio r cas es , Mr. Hil l i ni ti at ed

1 0 Res po nd en t h as ask edth e Co urt t o i m po se a se c. 66 73 pe na lty

onMr. 1 0 Hil l o n m ul ti pl e o ccas io ns . In the cas e atdo ck etno . 13 26 7- 09 L, we warne d M r. Hil l n otto rai se fri vo lo us arg um en ts ag ai n b utde cl in edto im po se a se c. 66 73 pe na lty . In the cas e atdo ck etno . 15 45 2- 10 L, we im po se d a$5 ,00 0 p en al ty. In th e cas e atdo ck etno . 14 62 5- 12 , we im po se d a$1 0,0 00 pe na lty . And , ina co ns ol id at edpro ceed in g u nd er d oc ke t n os . 22 1- 10 an d 1 55 01 -1 0, we i m po se d (co nt in ue d...)- 16 -

[* 16 ] th es e p ro ceed in gs us in g a rg um en ts th atth is Co urt h as fou ndto be fri vo lo us . Hil l v . Comm is si on er, T.C. Mem o. 2 01 3- 26 5, at*7 ; Gar be r v. C omm is si on er, T.C. Mem o. 2 01 2- 47 , sl ip op . at 5 -6 . Mr. Hil l co nt inue d t o e sp ou se th es e fri vo lo us arg um en ts lea di ng up to an d thr ou gh ou t the su m m ary jud gm en t h eari ng . Howev er, Mr . Hil l p iv ot edaway fro m th es e fri vo lo us arg um en ts aft er the Co urt di rect edth e p art ie s t o s ub m itbri efs on th e st atut e o f li m it at io ns is su e. Mr. Hi ll ’s che ck eredhi st ory no twi th st an di ng , he h as su ccee de d h ere i n arg ui ng anis su e th atm eri ts co ns id erat io n. Whil e we h ol d tha t M r. Hil l’s Fo rm 10 40 was i nv al idan d tha t the pe rio d o f li m it at io ns is op en , Mr. Hil l m ad e so m e arg um en ts , onbri ef, tha t wer e n otfri vo lo us . Alth ou gh a ta xp ay er wh o m ak es fri vo lo us arg um en ts is no t i m m un e fro m pe na lty jus t b ecau se so m e o f hi s arg um en ts are n otfri vo lo us , we dec li ne to san ct io n M r. Hil l i n thi s ca se . W e d o, ho wev er, s tro ng ly w arnMr. Hil l, o nc e ag ai n, tha t h e m ay be subjec t t o fu rth er se ct io n 6 67 3 p en al ti es infutur e cas es if h e p ers is ts inm ai nt ai ni ng pro ceed in gs to de lay or t o a dv an ce fr iv ol ou s ar gu m en ts .

(...con ti nu ed ) 1 0 $1 0,0 00 foreach of t he co ns ol id at edcas es forto ta l p en al ti es of $ 20 ,00 0.- 17 -

[* 17 ] Inreac hi ng ou r ho ld in gs he rei n, we h av e co ns id eredall arg um en ts m ad e,
an d t o the ex te ntno t m en ti on edab ov e, we fi ndth em to be m oo t, i rrel ev an t, o r witho utm eri t. To r efl ectth e fo reg oi ng , An ap pr op ria te ord er an d de ci si on wil l b e en te red
.