T.C. Memo. 2001-291

UNITED STATES TAX COURT

 DAVID R. AND DARLENE FUNK, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 10317-00. Filed November 2, 2001.

David R. and Darlene Funk, pro sese.

Jeremy McPherson, for respondent.

MEMORANDUM OPINION

DAWSON, Judge: This case was assigned to Special Trial

Judge Daniel J. Dinan pursuant to the provisions of section

7443A(b)(5) and Rules 180, 181, and 183. Unless otherwise

indicated, section references are to the Internal Revenue Code as

amended, and all Rule references are to the Tax Court Rules of
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Practice and Procedure. The Court agrees with and adopts the

opinion of the Special Trial Judge, which is set forth below.

OPINION OF THE SPECIAL TRIAL JUDGE

DINAN, Special Trial Judge: This matter is before the Court

on respondent’s Motion to Dismiss for Failure to State a Claim

and to Impose a Penalty under I.R.C. Section 6673, filed 

November 2, 2000. A hearing was held on the motion. As

explained below, we shall grant respondent’s motion.

Respondent determined a deficiency of $555,943 in

petitioners’ Federal income tax for the year 1996 and a penalty

of $111,188.60 pursuant to section 6662(h).

Background

The deficiency in issue is based on respondent’s

determinations as follows: (a) Petitioners received and failed

to include in income on their 1996 return, $2,722 of capital

gains; (b) petitioners are not entitled to a $3,000 capital loss

deduction for 1996; (c) $48 of dividend income, which had been

reported in income by a trust created by petitioners, was taxable

to petitioners in 1996; (d) petitioners are not entitled to

$15,300 of exemption deductions for 1996 because of increases to

petitioners’ income (a computational adjustment); (e) $53 of

interest income which had been reported in income by a trust

created by petitioners was taxable income to petitioners in 1996;

(f) petitioners were not entitled to a $137,002 net operating
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loss carryback to 1996; (g) petitioner David R. Funk received and

failed to include $555,508 in gross income on petitioners’ 1996

return which had been reported on trust income tax returns of

which he was grantor, relating to rental and royalty income; (h)

petitioner Darlene Funk received and failed to include $531,508

in gross income on petitioners’ 1996 return which had been

reported on trust income tax returns of which she was grantor,

relating to rental and royalty income; (i) petitioners are liable

for additional self-employment tax for 1996 of $45,304; and (j)

the trusts created by petitioners are shams, or, in the

alternative are grantor trusts, or, in the alternative that the

income reported by the trusts is taxable to petitioners under the

assignment of income doctrine.

Respondent also determined that for the year 1996

petitioners are liable for an accuracy-related penalty under the

provisions of section 6662, computed on the full deficiency

determined in the notice of deficiency.

When the petition was filed in this case on October 3, 2000,

petitioners resided in Rocklin, California.

In his motion to dismiss, respondent avers, inter alia:

9. * * * Tax Court Rule 34(b)(5) provides that the

petition in a deficiency action shall also contain

“[Clear] and concise lettered statements of the facts

on which petitioner bases the assignments of error,

except with respect to those assignments of error as to

which the burden of proof is on the Commissioner.”
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10. The petitioners alleged in their petition no

facts in support of any of their allegations of error;

instead, the petitioners have alleged only “facts”

which are irrelevant to their allegations of error, or

are not allegations of fact but are instead allegations

of law and legal conclusions.

11. In the petition, the petitioners did not

address, or allege as erroneous, any of the specific

determinations of the respondent in the notice of

deficiency * * *.

12. In the petition, the petitioners did not

allege facts regarding any of the specific

determinations of the respondent in the notice of

deficiency.

Paragraph 4 of the petition in this case challenges the

notice of deficiency in this case as follows:

(1) Respondents Notice of Deficiency claims a

deficiency. Petitioner denies having a deficiency.

(2) Respondents Notice of Deficiency claims unreported

and under reported income. Petitioner denies having

unreported or under reported income. (3) Respondents

IRS Form 4549A-CG, income tax examination changes,

claims a tax liability. Petitioner denies having a tax

liability. (4) Respondent has failed to provide

petitioners with certified assessment information as

per Internal Revenue Regulation 301.6203-1. (5)

Respondent claims a deficiency, but has failed to

provide petitioners with the USC Title 26 taxing statue

that applies. (6) Respondent claims a deficiency, but

has failed to provide petitioners with any certified

facts or evidence. (7) Respondents Notice of

Deficiency is null and void as it is based on hearsay

facts and evidence. (8) Petitioner has been denied a

meaningful administrative hearing where certified facts

or evidence from respondent was provided. (9)

Petitioners declaration, signed under penalty of

perjury, is attached and made part of this matter.

Attached to the petition is a Declaration of David R. Funk

(attached hereto as Appendix). A substantially identical

Declaration of Darlene Funk was also attached to the petition.
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When respondent filed his motion to dismiss, on November 2,

2000, the Court, in an Order dated November 2, 2000:

ORDERED that the petitioners shall on or before

December 18, 2000, file with the Court an amended

petition in which they set forth with specificity each

error they allege was made by the respondent in the

determination of the deficiency and separate statements

of every fact upon which petitioners base the

assignment of each error.

On December 19, 2000, petitioners filed an Amended Petition

in which petitioners alleged, inter alia:

5. The determination of the tax set forth in the said 

 notice of deficiency (or liability), and the 

 deficiency itself, is based upon the following 

 errors:

(a) Respondent errored in that respondent, as per

the USC Title 26 sec. 1313(a), does not have authority

to make a “determination.”

(b) Respondent errored in that the “deficiency”

claimed by respondent, is not in compliance with USC

Title 26 sec. 6211(a) and USC Title 26 sec. 6212(a), in

that respondent failed to identify the statute, under

USC Title 26, Subtitle A or B, that was relied on to

claim a deficiency.

(c) Respondent errored as to a claim that

petitioner has a deficiency (tax liability), as

respondent has failed to providence (sic) facts or

evidence, as per USC Title 26, Regulation 301.6203-1,

of a statutory procedurally correct assessment to

support respondents claim.

(d) Respondent errored in that respondent has

failed to provide a competent witness to support any

claimed unreported or under reported income.
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1 Petitioners signed their 1996 income tax return on July

31, 1997, and filed it with the IRS at Ogden, Utah, on Aug. 4,

1997. The statutory notice of deficiency for 1996 was mailed to

petitioners on July 5, 2000. Sec. 6503(a)(1) (issuance of

statutory notice) therefore suspended the running of the 3-year

period of limitations provided for in sec. 6501(a). 

(e) Respondent errored as the statute of

limitation has expired for the year 1996 and has

furnished no evidence that it has been extended.[1]

(f) Respondent errored in that all respondents

facts and evidence submitted to the court are

unsupported, based on hearsay, and not in compliance

with Federal Rules of Evidence.

(g) In support of petitioners facts and evidence,

petitioners declaration, signed under penalty of

perjury, is attached and made part of this matter.

6. The basis of the petitioners case, and the facts 

 and law upon which petitioner relies, are as 

 follows:

(a) IRC Sec. 1313(a), Determination--For purposes

of this part, the term “determination” means--

1313(a)(1) a decision by the Tax Court or a judgment,

decree, or other order by any court of competent

jurisdiction, which has become final.

Petitioner states that IRC sec. 1313(1) clearly

states, as it applies to the current matter, that only

Tax Court has the authority to make a “determination.” 

Neither the respondent, and/or the District Director

who rubber stamped her signature to the Notice of

Deficiency, as per IRC sec. 1313(a), have the authority

to make a “determination.”

(b) IRC Sec. 6211(a), in General, states--For

purposes of this title in the case of income estate,

and gift taxes imposed by subtitles A and B and excise

taxes imposed by chapter 41, 42, 43, and 44 the term

“deficiency” means the amount by which the tax imposed

by subtitle A or B, or chapter 41, 42, 43, or 44

exceeds the excess of–- * * *
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IRC Sec. 6212(a), in General, states--If the

Secretary determines that there is a deficiency in

respect of any tax imposed by subtitles A or B or

chapter 41, 42, 43, or 44 he is authorized to send

notice of such deficiency to the taxpayer by certified

mail or registered mail.

The petitioner interprets both of these sections

to mean, the respondent will identify the IRC section

that was relied on to “determine” the “deficiency.” 

For a tax to be imposed under subtitle A or B, the

respondent must identify the section relied on. 

Neither the respondent, and/or the District Director

who rubber stamped her signature to the Notice of

Deficiency, have identified the IRC section, under USC

Title 26, Subtitle A or B, that was relied on to claim

a tax due (liability). If respondent can not identify

any section under subtitle A or B, then respondents

determination and deficiency is based on fraud.

Discussion

Rule 34(b)(4) provides that a petition filed in this Court

shall contain:

(4) Clear and concise assignments of each and

every error which the petitioner alleges to have been

committed by the Commissioner in the determination of

the deficiency or liability. The assignments of error

shall include issues in respect of which the burden of

proof is on the Commissioner. Any issue not raised in

the assignments of error shall be deemed to be

conceded. Each assignment of error shall be separately

lettered.

The petition and amended petition filed in this case do not

conform with the provisions of Rule 34(b)(4) and (5). There is

no assignment of error or allegation of fact to establish any

justiciable claim. The petition and amended petition contains

little more than unintelligible gobbledygook.

We perceive no need to refute these arguments with

somber reasoning and copious citation of precedent; to
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do so might suggest that these arguments have some

colorable merit. [Crain v. Commissioner, 737 F.2d 1417

(5th Cir. 1984)].

Because the petition and amended petition fail to state a

claim upon which relief can be granted, we shall grant

respondent’s motion to dismiss.

Section 6673

In his motion to dismiss, respondent further moved the Court

to impose a penalty, in an appropriate amount, pursuant to

section 6673, based upon the fact that petitioners have

instituted these proceedings primarily for the purpose of delay

and/or their position in the present case is frivolous or

groundless.

Section 6673(a)(1) authorizes this Court to require a

taxpayer to pay to the United States a penalty not in excess of

$25,000 whenever it appears that proceedings before it have been

instituted or maintained by the taxpayer primarily for delay, or

the taxpayer’s position in such proceeding is frivolous or

groundless.

Petitioners are not strangers to this Court. In Funk v.

Commissioner, T.C. Memo. 2000-169, this Court dismissed under

similar circumstances the petitioners’ petition for failure to

state a claim upon which relief can be granted and required them

to pay a penalty of $3,000 pursuant to section 6673(a)(1).
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When the instant case was called from the calendar of the

trial session of the Court in San Francisco, California, on

January 22, 2001, petitioners appeared for hearing on

respondent’s motion to dismiss filed in this case. At the

hearing, the Court inquired as to whether petitioners had

received a copy of the above-mentioned Memorandum Opinion filed

by the Court on May 23, 2000, before they filed the petition in

this case, and petitioner David R. Funk responded that they had

received a copy of the Memorandum Opinion before filing their

petition in the instant case. Nevertheless, petitioners informed

the Court that they wished to continue with the proceedings in

this case.

We find that this case is frivolous and was brought by

petitioners primarily for delay.

In view of the foregoing, we shall exercise our discretion

under section 6673(a)(1) and require petitioners to pay a penalty

of $25,000 to the United States.

To reflect the foregoing,

An order and decision

will be entered for

respondent.
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APPENDIX A

DECLARATION OF DAVID R. FUNK

I, David R. Funk, declare to the best of my knowledge that the

following facts are true and correct.

Declaration of Material Facts

This declaration of material facts pertaining to David R. Funk,

establishes my relationship to Internal Revenue Code taxing

authority. This declaration of material facts is intended to

comply with the “substantial authority standard” (26 CFR Sec.

1.6662-4(d)) and the “good faith and reasonable cause standard”

(26 CFR Sec. 1.6664-4(a)). This declaration is also intended to

comply with requirements of Rule 601 of the Federal Rules of

Evidence. I have personal knowledge of facts set forth herein

(Rule 43(e), F.R.Civ.P. & Rule 602, F.R.Evid.). Declarations of

material fact are as follows:

1. My name is David R. Funk; I am a living, moral being endowed

with unalienable rights to life, liberty and property, and all

rights and benefits secured by the Constitution of the United

States of America and the Constitution of the State of

California.

2. I am a native and Citizen of the State of California, which

is a State of the Union.

3. My abode and dwelling is geographically located in the State

of California, one of the States of the Union.

4. I do not have a foreign tax home, as defined in the Internal

Revenue Code.

5. To the best of my knowledge, I have never received notice

from a District Director of an Internal Revenue Service district,

nor the Assistant Commissioner of Internal Revenue

(International), that I have ever been required to keep books and

records and file returns (Letter 978 (DO) & Notice 555). (See

also, 26 U.S.C. sec. 6001, 26 CFR secs. 1.6001-1(d), 31.6001-6,

and Treasury Delegation Order No. 24).

6. To the best of my knowledge, I have never received lawful and

procedurally proper assessments of Federal taxes, penalties, or

interest for calendar year ending December 31, 1996. (26 U.S.C.

sec. 6203, 26 CFR sec. 301.6203-1, and Internal Revenue Manual
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secs. 3(17)(63)(14).1 (1-1-89), 3(17)(46)2.3 (1-1-89),

3(17)(63)(14).5 (4-1-96), 3(17)(63)(14).6 (4-1-96) and

3(17)(63)(14).7 (4-1-96)).

7. To the best of my knowledge, for calendar year ending

December 31, 1996, I have no outstanding Federal Tax liability

that is evidenced by a lawful and procedurally proper assessment. 

(26 U.S.C. sec. 6303 and 26 CFR sec. 301.6303-1).

8. To the best of my knowledge, I have never received certified

notice and demand for payment of Federal taxes subsequent to

lawful and procedurally proper assessment being made for calendar

year ending December 31, 1996. (26 U.S.C. sec. 6303 and 26 CFR

sec. 301.6303-1).

9. To the best of my knowledge, for calendar year ending

December 31, 1996, all of my earnings and/or income has been from

sources in California and/or other States of the Union.

10. To the best of my knowledge, for calendar year ending

December 31, 1996, all of my earnings and/or income has been

reported.

11. To the best of my knowledge, for calendar year ending

December 31, 1996, I have no unreported earnings and/or income of

any type.

12. To the best of my knowledge, for calendar year ending

December 31, 1996, I have never been notified by any government

agent or agency that I have unreported earnings and/or income of

any type.

13. To the best of my knowledge, for calendar year ending

December 31, 1996, all of my wages, salaries, commissions,

remuneration and other forms of compensation have been as an

employee of private enterprise located in California and/or other

States of the Unions, or from my own private enterprise in

California and/or other States of the Union.

14. To the best of my knowledge, I have never stipulated or

agreed to allow any part of my administrative record be entered

as evidence in any administrative or tax court proceeding.

15. To the best of my knowledge, I have never stipulated or

agreed to allow any affidavit, declaration, statement, work

papers, or other documents, be entered as evidence in any

administrative or court proceeding.
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16. To the best of my knowledge, for calendar year ending

December 31, 1996, I have never been provided certified or

attested evidence by any government agent or agency that I have

unreported earnings and/or income, a tax liability, or a lawful

assessment.

Since I am relying solely on the U.S.C. Title 26 Code,

Regulations, and the Internal Revenue Manual, to the best of my

knowledge, I am not in violation of any law or statute that I

know of.

I so declare under penalty of perjury,

David R. Funk Date