118 T.C. No. 22

UNITED STATES TAX COURT

ELENA SWAIN, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 12881-00. Filed May 3, 2002.

R determined deficiencies in tax and 

accuracy-related penalties for 3 years. The Court

struck from the petition all assignments of error other

than the affirmative defense of the statute of

limitations for one of the years. R moved for summary

judgment. 

1. Held: Summary judgment is appropriate with

respect to the affirmative defense; stipulated facts

establish that the period of limitations did not expire

before R mailed the notice of deficiency, which

suspended the running of that period.

2. Held, further, summary judgment is appropriate

with respect to the deficiencies; under Rule 34(b), Tax

Court Rules of Practice and Procedure, P’s assignments

of error other than with respect to the statute of

limitations were struck from the petition; therefore, P

is deemed to have conceded the adjustments resulting in

deficiencies.

3. Held, further, a like result for the

penalties; the burden of production imposed by sec.
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7491(c), I.R.C., is of no consequence if P’s

assignments of error have been struck.

Elena Swain, pro se.

Jonathan H. Sloat, for respondent.

OPINION

HALPERN, Judge: This case is before the Court on

respondent’s motion for summary judgment (the motion). 

Petitioner objects.

Unless otherwise stated, all section references are to the

Internal Revenue Code in effect for the years in issue, and all

Rule references are to the Tax Court Rules of Practice and

Procedure.

Rule 121 provides for summary judgment. Summary judgment

may be granted with respect to all or any part of the legal

issues in controversy “if the pleadings, answers to

interrogatories, depositions, admissions, and any other

acceptable materials, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that a

decision may be rendered as a matter of law.” Rule 121(a) and

(b).
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We are satisfied that there is no genuine issue as to any

material fact and that a decision may be rendered as a matter of

law. For the reasons that follow, we shall grant the motion.

Background

By notice of deficiency dated September 20, 2000 (the

notice), respondent determined deficiencies in income tax

(deficiencies) and accuracy-related penalties (penalties) as

follows:

Taxable

 (Calendar) Penalty

 Year Deficiency Sec. 6662(a)

 1996 $82,807 $16,561

 1997 68,812 13,762

 1998 59,210 11,842

Enclosed with the notice was an explanation stating that the

deficiencies result principally from respondent’s disregard of

certain trust arrangements (as shams or for certain other stated

reasons) and that the penalties are due to negligence, an

understatement of tax, or a misstatement of value.

The petition states that petitioner disputes respondent’s

determinations and assigns the following errors: (1) Respondent

had no authority to make a determination, (2) the “deficiency”

failed to identify the statute that was relied on to claim the

deficiency, (3) respondent did not provide proof of a “statutory

procedurally correct” assessment, (4) respondent failed to

produce a witness, (5) the statute of limitations had expired as
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to 1996, (6) the deficiencies were not supported by facts and

evidence, and (7) petitioner’s declaration was supported by facts

and evidence. Attached to the petition is petitioner’s

declaration of facts (the declaration), in which she declares,

among other things, that she is a native and citizen of the State

of California, that she has never been notified that she is

required to keep books and records and file returns, that no

assessments of tax, penalties, or interest have been made against

her for the years in question, and that she has no unreported

income for those years. Nothing in the declaration challenges

respondent’s explanations of his bases for determining the

deficiencies and penalties.

Before answering the petition, respondent moved to strike

from the petition all assignments of error other than that the

period of limitations had expired for 1996 (the motion to

strike). In support of the motion to strike, respondent argued

that petitioner had failed to challenge the correctness of

respondent’s determinations in the notice:

Instead, the petitioner relies on various frivolous and

immaterial arguments challenging the respondent’s

authority to make a determination under I.R.C. § 1313,

the absence of assessments, and the manner in which the

respondent made his determination. None of those

assignments of error relate directly to the

respondent’s determinations.

Petitioner objected to the motion to strike. In support of that

objection, however, she added little to the petition. She made
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no effort to identify facts tending to show error in respondent’s

basis for the deficiencies and penalties. We granted the motion

to strike. By the answer, respondent denies that the period of

limitations expired for 1996.

Petitioner has not, in support of her objection to the

present motion, identified facts tending to show error in

respondent’s bases for the deficiencies and penalties.

The parties have stipulated a copy of petitioner’s Federal

income tax return for 1996, Form 1040, U.S. Individual Income Tax

Return 1996 (the 1996 Form 1040). They have stipulated that it

was mailed to respondent on October 14, 1997. They have further

stipulated a copy of the notice and that, by certified mail, it

was mailed to petitioner on September 20, 2000, less than 3 years

after the 1996 Form 1040 was filed. The notice is addressed to

petitioner at her address shown on the 1996 Form 1040.

Discussion

Period of Limitations

Petitioner has raised the statute of limitations as an

affirmative defense to respondent’s determinations of a

deficiency and a penalty for 1996. Respondent denies that

defense and asks for summary adjudication in his favor on that

issue.

With exceptions not here relevant, section 6501 provides a

3-year period from the time a return is filed for the assessment
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or collection (without assessment) of any tax, including income

taxes (the period of limitations). The running of the period of

limitations, however, is suspended under section 6503(a)(1) by

“the mailing of a notice under section 6212(a)”. Section 6212(a) 

authorizes the Secretary, upon determining that there is a

deficiency in income tax, to send a notice of deficiency “to the

taxpayer by certified mail or registered mail.” Section

6212(b)(1) provides that a notice of deficiency in respect of an

income tax “shall be sufficient” if it is “mailed to the taxpayer

at his last known address”.

The parties have stipulated that the notice was mailed to

petitioner by certified mail less than 3 years after the 1996

Form 1040 was filed. If the notice was mailed to petitioner at

her last known address, it was sufficient to suspend the running

of the period of limitations for 1996. The address to which the

notice was sent corresponds to the address on the 1996 Form 1040

and to petitioner’s address on the petition. Petitioner does not

claim that the notice was not mailed to her last known address,

and we conclude that the notice was mailed to petitioner at her

last known address.

The period of limitations for 1996 did not expire before the

mailing of the notice, and that period was suspended by the

mailing. Summary adjudication is appropriate in respondent’s
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1 In Nis Family Trust v. Commissioner, 115 T.C. 523 (2000),

a consolidated case, the Commissioner moved under Rule 120(a) for

judgments on the pleadings with respect to the various

deficiencies in tax at issue. We disregarded meritless taxprotester arguments made by the taxpayers in the amended

petitions and granted the Commissioner’s motion on the grounds

that the taxpayers had failed to make any legitimate challenges

to the deficiency determinations. We deemed the taxpayers to

have conceded the Commissioner’s adjustments under Rule 34(b)(4). 

With respect to 1997 and 1998, respondent could, here, have made

a motion under Rule 120(a) for judgment on the pleadings. The

standards for granting such a motion are similar to those for

granting a motion for summary judgment. See Nis Family Trust v.

Commissioner, supra at 537.

favor with respect to petitioner’s affirmative defense of the

statute of limitations.

Deficiencies

Respondent argues for summary adjudication in his favor with

respect to the deficiencies on the grounds that, because he

prevailed with respect to petitioner’s affirmative defense with

respect to 1996, no additional assignments of error remain with

respect to the deficiencies.

Each issue not addressed by a clear and concise assignment

of error in the petition is deemed to be conceded. Rule

34(b)(4); Nis Family Trust v. Commissioner, 115 T.C. 523, 538-539

(2000).1 We have struck from the petition all assignments of

error other than the assignment based on petitioner’s claim of an

affirmative defense for 1996, which we have rejected. Lacking

that defense, and with no other assignments of error (or any

averments tending to show error in respondent’s basis for the

deficiencies), petitioner is deemed to have conceded the
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correctness of respondent’s deficiency determinations. See

Daniels v. Commissioner, T.C. Memo. 1981-58. Respondent is

entitled to summary adjudication with respect to the deficiencies

in question, and we shall enter decision for respondent that

there are deficiencies in tax of $82,807, $68,812, and $59,210,

for 1996, 1997, and 1998, respectively.

Penalties

Respondent argues for summary adjudication in his favor with

respect to the penalties on the same grounds as with respect to

the deficiencies; viz, that, because he prevailed with respect to

petitioner’s affirmative defense with respect to 1996, no

additional assignments of error remain with respect to the

penalties. Respondent points out that, in Nis Family Trust v.

Commissioner, supra at 541 n.6, we left undecided whether,

pursuant to Rule 34(b), a taxpayer failing to assign error to the

Commissioner’s determinations of penalties under section 6662

would be deemed to have conceded those penalties. That is true. 

In Nis Family Trust, we had no need to decide that issue since

the Commissioner supported his motion for partial summary

judgment with respect to the section 6662 penalties with deemed

admissions made pursuant to Rule 90(c) that supported the

imposition of those penalties. Id. at 542-543. Here we have no

such deemed admissions or, except possibly with respect to 1996
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(the only year for which we have petitioner’s return), any other

factual basis upon which to impose such penalties.

The question we must decide is whether a taxpayer failing to

assign error to a penalty will be deemed to concede the penalty

notwithstanding that the Commissioner has failed to produce

evidence that imposition of the penalty is appropriate. The

question is suggested by section 7491(c) and Rule 142(a)(2). 

Section 7491 was enacted by section 3001(a) of the Internal

Revenue Service Restructuring and Reform Act of 1998 (RRA 1998),

Pub. L. 105-206, 112 Stat. 685, 726. As so added, section 7491

is effective with respect to court proceedings arising in

connection with examinations by the Commissioner commencing after

July 22, 1998, the date of the enactment of RRA 1998. See RRA

1998 sec. 3001(c), 112 Stat. 727. Section 7491 is effective with

respect to this court proceeding. Section 7491(c) provides:

SEC. 7491(c). Penalties.–-Notwithstanding any

other provision of this title, the Secretary shall have

the burden of production in any court proceeding with

respect to the liability of any individual for any

penalty, addition to tax, or additional amount imposed

by this title.

The Commissioner’s burden of production under section

7491(c) is to produce evidence that it is appropriate to impose

the relevant penalty, addition to tax, or additional amount

(without distinction, penalty). See Higbee v. Commissioner, 116

T.C. 438, 446 (2001). Unless the taxpayer puts the penalty into

play, however (by assigning error to the Commissioner’s penalty
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determination), the Commissioner need not produce evidence that

the penalty is appropriate, since the taxpayer is deemed to have

conceded the penalty.

That result follows from Rule 34(b)(4), which requires the

petitioner to assign error in the petition to each and every

error alleged to have been committed by the Commissioner,

including issues with respect to which the Commissioner bears the

burden of proof. Rule 34(b)(4) warns: “Any issue not raised in

the assignments of error shall be deemed to be conceded.” The

situation here is analogous to the situation where the

Commissioner determines a penalty (previously, an addition to

tax) for fraud. Section 6663 imposes a penalty if any part of

any underpayment of tax required to be shown on a return is due

to fraud. Section 7454(a) and Rule 142(b) provide that, in any

case involving the issue of fraud, the burden of proof in respect

to that issue is on the Commissioner. The Commissioner usually

determines the fraud penalty in the notice of deficiency. In

Gordon v. Commissioner, 73 T.C. 736 (1980), we dealt with the

predecessor addition to tax for fraud imposed by section 6653(b). 

We stated that, if the taxpayer wishes to contest an addition to

tax for fraud determined in the notice of deficiency, he must

assign error to that determination pursuant to Rule 34(b)(4). 

Id. at 739. Citing Rule 34(b)(4), we stated: “Any issue,

including addition to tax for fraud under section 6653(b), not
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raised in the assignment of errors is deemed conceded by the

petitioner.” Id. We added: “If petitioner assigns error to

respondent’s determination of the fraud addition to tax, then the

respondent must affirmatively plead the fraud, together with the

facts in support thereof, in his answer. Rule 36(b).” Id. We

held, however, that if the Commissioner pleads fraud in the

answer, and the taxpayer, in the reply, denies the allegations of

fraud, the Commissioner will not be put to his proof if the

taxpayer thereafter states that he will not contest the fraud

addition and defaults. Id. Implicit in our discussion of Rule

34(b) is the conclusion that, if the Commissioner determines

fraud and the taxpayer fails to assign error to that

determination, the fraud penalty is conceded, and the

Commissioner need not plead fraud together with supporting facts. 

See Brailsford v. Commissioner, T.C. Memo. 1991-639 (with respect

to whether statute of limitations remained open against jointreturn-filer on account of other joint-return-filer’s fraud: 

“Respondent had no duty to discuss or prove an issue that

petitioner had not raised, either directly (an assignment of

error as to the fraud determination) or indirectly (pleading the

statute of limitations).”).

Section 7491(c) imposes a burden on the Commissioner “in any

court proceeding with respect to the liability of any individual

for any penalty”. Rule 34(b)(4) and the statute are consistent. 
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An individual must first challenge a penalty by filing a petition

alleging some error in the determination of the penalty. If the

individual challenges a penalty in that manner, the challenge

generally will succeed unless the Commissioner produces evidence

that the penalty is appropriate. If an individual does not

challenge a penalty by assigning error to it (and is, therefore,

deemed to concede the penalty), the Commissioner need not plead

the penalty and has no obligation under section 7491(c) to

produce evidence that the penalty is appropriate.

We have disposed of petitioner’s affirmative defense for

1996. The only issue before us with respect to the penalties is

a legal issue: whether, by having failed to assign error to

respondent’s determinations of penalties (or averring facts

tending to show error in respondent’s basis for the penalties),

petitioner has conceded those penalties. The answer is yes. 

Rule 34(b). Respondent is entitled to summary adjudication with

respect to the penalties in question, and we shall enter decision

for respondent that petitioner is liable for penalties under

section 6662(a) of $16,561, $13,762, and $11,842, for 1996, 1997,

and 1998, respectively.

An appropriate order and

decision will be entered.