T.C. Memo. 1999-176

UNITED STATES TAX COURT

VERNON W. HARTMAN, JR. AND 

VIRGINIA M. HARTMAN, Petitioners v. 

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 23228-95. Filed May 25, 1999. 

Kenneth E. Ahl, for petitioners.

Keith L. Gorman and Michael D. Baker, for respondent.

MEMORANDUM OPINION

WHALEN, Judge: Respondent determined the following

deficiencies, additions, and penalty with respect to

petitioners' Federal income tax:
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 Penalty and Additions to Tax 

Year Deficiency Sec. 6651(a)(1) Sec. 6661(a) Sec. 6662(a)

1986 $14,882 $2,853 $2,442 --

1987 13,971 2,811 2,811 --

1988 3,527 882 -- --

1989 3,825 956 -- --

1990 10,182 2,546 -- $2,036

Unless stated otherwise, all section references are to the

Internal Revenue Code as in effect for the years in issue,

and all Rule references are to the Tax Court Rules of

Practice and Procedure. 

The parties have stipulated some of the facts. 

The stipulation of facts filed by the parties and the

accompanying exhibits are incorporated herein by this

reference. Petitioners resided in the Commonwealth of

Pennsylvania at the time they filed the instant petition.

Petitioners did not file income tax returns for the

years in issue, 1986 through 1990, until 1992. At the time

of trial, petitioners had not filed returns for the years

1993 through and including 1996. 

Respondent concedes that petitioners are not liable

for a small portion of the above deficiencies determined in

the notice of deficiency for 1989 and 1990. The issue for

decision is whether petitioners are liable for the subject

tax deficiencies, penalty, and additions to tax, other than

the portion of the deficiencies for 1989 and 1990 conceded
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by respondent. Resolution of this issue requires a

detailed review of the pleadings and other papers filed by

the parties.

In determining the above deficiencies in petitioners'

tax, respondent disallowed the following deductions claimed

on the subject returns:

 1986 1987 1988 1989 1990

Schedule C

 Travel and 

 entertainment $8,176 $7,839 $12,843 $15,878 $25,217

 Depreciation expense 1,545 -0- -0- -0- -0-

 Meals and 

 entertainment -0- 2,328 3,961 7,490 4,422

 Bad debts -0- -0- -0- 5,500 -0-

 Advertising 207 738 -0- -0- -0- 

 Commissions 2,171 3,246 4,899 5,537 7,101

 Insurance 575 1,899 2,045 1,310 1,598

 Employee business 

 expense 29,943 -0- 19,896 -0- -0-

 Itemized deductions 2,500 2,530 (1,278) (734) 2,580

 Miscellaneous 

 deductions -0- 22,088 -0- -0- 13,300

 Total adjustments 45,117 40,668 42,366 34,981 54,218

Respondent disallowed the above deductions principally because

petitioners had failed to substantiate their eligibility for

the deductions.

The initial petition in this case was in the form

of a typed letter to the Court, which states as follows: 

TO WHOM IT MAY CONCERN:

In re my telephone conversation with your office

today, please accept this letter as my petition

for redetermination of the deficiency shown on

the attached copy of notice. Please send me the

pertinent petition forms, as well as available

information, to the address shown below:
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* * * * * * *

Since I have been traveling pursuant to my

occupation continuously from mid-June until this

week, I have been unable to procure the necessary

forms.

Thank you for your kind assistance in this

matter.

After the Court informed petitioners that the above

petition did not comply with the Tax Court Rules of

Practice and Procedure as to form and content, the Court

received an amended petition, which states as follows:

I disagree with all the changes in the Notice

of Deficiency. Due to the recurring scheduling

difficulties with the local examiner, I was

unable to properly establish the validity of

the disputed deductions. This was partly due

to the examiner's unavailability and partly to

my extensive travel schedule as a professional

singer. Thus the findings were arbitrary and

incorrect.

By notice dated August 23, 1996, the Court set this

case for trial on January 27, 1997. A few weeks before

trial, petitioners sent a letter to the Court in which they

requested continuance of the case because of Mr. Hartman's

travel schedule and the fact that Mr. Hartman was working

with representatives of the Appeals Office "with the aim of

reaching a settlement in this case." The Court granted the

continuance with no objection by respondent. 
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By notice dated May 7, 1997, the Court set the case

for trial on October 14, 1997. When the case was called

for trial on October 14, 1997, respondent and Mr. Hartman

appeared before the Court and represented that they were

going to meet with a revenue agent to review Mr. Hartman's

records. Mr. Hartman represented to the Court that he had

all of his "documentation". In response, the Court

directed as follows: "All right. I'll recall the case on

Thursday [October 16, 1997], and at that point, I expect

everything to be taken care of. If not, we'll be ready to

go to trial."

When the parties appeared before the Court on

October 16, 1997, respondent's attorney advised the Court

that the parties had made progress, but they had not

finished reviewing petitioners' documentation. 

Respondent's attorney further represented that they needed

3 or 4 days to complete their review. On the basis of

these representations, the Court continued the case and

directed the parties to file a joint status report in 30

days with the expectation that the case would be resolved

in that period. The Court made the following comment to

Mr. Hartman: 
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THE COURT: * * * [I]t's also your responsibility,

Mr. Hartman, to have--have all that

documentation readily avail-able, and

I don't want long delays in terms 

of providing the Respondent with the

necessary information because we've

already delayed long enough.

MR. HARTMAN: It's all sitting in my car, Your Honor,

so we're going through it.

Subsequently, an attorney entered his appearance on

behalf of Mr. Hartman. Inexplicably, the attorney did not

enter his appearance on behalf of Mrs. Hartman. The

parties filed status reports pursuant to the Court's order

in which they stated that little progress had been made. 

Mr. Hartman's attorney filed petitioners' status report, 

in which he detailed Mr. Hartman's professional engagements that required cancellation of an appointment with

respondent and would make Mr. Hartman unavailable for

approximately 30 days.

Shortly thereafter, respondent filed a motion to

dismiss for lack of prosecution. Respondent's motion sets

forth the following summary of petitioners' failure to

prosecute this case from the time of the first continuance: 
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4. A subsequent Branerton letter [informal

request for information] to petitioners sent

certified mail was returned with the hand-written

notation: "out of country for the next three

months--will be back August 5, 1997."

5. In August, the aforementioned letter was

resent, again certified mail, with three

suggested dates to meet and go over documents

and prepare a stipulation for trial. The letter

was not returned, but no one called or appeared

on any of the three dates. 

6. On September 12, 1997, respondent mailed 

a proposed Joint Stipulation of Facts to

petitioners by certified mail, including copies

of all the tax returns and the statutory notice

of deficiency. This mailing was received.

7. In a conference call with the Court on

October 7, 1997, petitioner Vernon W. Hartman

was ordered to meet with respondent and a Revenue

Agent, with his documents, on Friday, October 10,

1997.

8. Petitioner and respondent met for the

first time on that date, but Mr. Hartman did

not produce any documentation. He stated that

his diaries were being sent to Pennsylvania. 

Mrs. Hartman did not appear for this conference.

* * * * * * *

20. * * * [R]espondent and the revenue agent

have offered and been scheduled to meet with

petitioner on nine separate occasions. 

Petitioner has cancelled every one of these

dates, often with less than 24 hours' notice.

21. Petitioners still have not provided any of

the documentation for 1986, 1987, and 1988 needed

to verify the expenses deducted.

* * * * * * *

24. This Court has given petitioners more than

adequate time to complete this process.
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In response, Mr. Hartman's attorney stated as follows:

5) Once the undersigned has an understanding 

as to what is included in Petitioner Vernon W.

Hartman, Jr.'s, documents, he will then proceed

to meet with Respondent's counsel whenever

necessary to fully and timely prosecute

Petitioner's case.

* * * * * * *

8) While Petitioner, Vernon W. Hartman, Jr.,

regrets not being able to spend as much time

as he would wish on this matter, he has now

retained the services of the undersigned who

is familiar with the United States Tax Court

Rules and will assist Petitioner in diligently

prosecuting this case and/or attempting to

settle same.

* * * * * * *

10) The undersigned believes that the time

table represented in Petitioners' Status Report

submitted to the Court will allow the parties

to hopefully settle this case and/or prepare it

for trial within 45 to 60 days from today's date.

Mrs. Hartman did not file a response. On the basis of the

representations of Mr. Hartman's attorney, the Court denied

respondent's motion to dismiss for lack of prosecution. 

By notice dated December 18, 1997, the Court set

the case for trial on May 18, 1998. On March 9, 1998,

Mr. Hartman's attorney asked the Court for leave to

withdraw. The attorney's motion states as follows:
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2. Based upon Mr. Hartman's representations, I

requested the Court to continue this matter and

also filed a reply to the Government's Motion to

Dismiss his case for failure to properly

prosecute.

* * * * * * * 

4. Based upon Petitioner Vernon W. Hartman,

Jr.'s, representations, I scheduled several

meetings with Respondent's counsel, Joellyn R.

Cattell, Esquire.

5. On each occasion, I was forced to cancel

such meetings because of my inability to get any

information from Petitioner Vernon W. Hartman,

Jr.

6. I have made myself available at all times,

both day and night, to meet with Petitioner

Vernon W. Hartman, Jr., including offering to

meet him at my home because of his "busy"

schedule.

7. Notwithstanding my flexibility and willingness to meet, I have been unable to have any

meaningful meetings and/or discussions with

Petitioner Vernon W. Hartman, Jr., to properly

prosecute his case.

After granting the motion of Mr. Hartman's attorney to

withdraw, the Court issued an order directing petitioners

to file a status report setting forth: 

(a) Each and every issue presented in the

case;

(b) as to each such issue, what efforts

peti-tioners have made to meet with

respondent's counsel and to exchange

documents and other information

necessary to agree upon and submit

the comprehensive stipulations for

trial required by Rule 91, Tax Court

Rules of Practice and Procedure; and
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(c) whether petitioners intend to retain a

new attorney.

The order further states as follows:

The Court calls petitioners' attention to

the Standing Pre-Trial Order dated December 18,

1997, especially to the following policy of the

Court:

Continuances will be granted only in

exceptional circumstances. See Rule

134, Tax Court Rules of Practice and

Procedure. Even joint motions for

continuance will not be routinely

granted.

In this connection petitioners should be warned

that the Court will not normally grant a continuance in order to allow a party to retain a

new attorney. 

Contrary to the above order, Mr. Hartman filed a

status report in which he failed to provide any of the

information requested by the Court, and he requested a

continuance "to allow time to retain new counsel". 

Mrs. Hartman did not file a status report. 

The Court denied Mr. Hartman's request for a continuance. In the order denying the continuance request,

dated April 1, 1998, the Court notes that Mr. Hartman's

status report:

Fails to set forth "each and every issue presented in the case". Mr. Hartman's response

also fails to detail "as to each such issue,

what efforts petitioners have made to meet with
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respondent's counsel and to exchange documents

and other information necessary to agree upon

and submit the comprehensive stipulations

required by Rule 91, Tax Court Rules of

Practice and Procedure".

The order further provides as follows: 

ORDERED that on or before April 28, 1998,

each petitioner shall file a separate statement

setting forth each and every issue presented in

this case for decision. Petitioners are warned

that the Court may refuse to consider any issue

that is not identified in their statements. 

Neither petitioner responded to the Court's order of

April 1, 1998, and both petitioners again failed to provide the Court with a statement of the issues for decision.

Subsequently, when this case was called for trial,

a new attorney entered his appearance on behalf of both

petitioners. Respondent also filed a second motion to

dismiss for lack of prosecution. The motion states as

follows: 

31. Due to petitioner's lack of cooperation

with his counsel, petitioner's counsel cancelled

several scheduled meetings with respondent that

he had promised to attend in his Status Report

and Response to Respondent's Motion to Dismiss.

32. On or about March 5, 1998, petitioner's

counsel sought to withdraw from this case due to

petitioner's lack of cooperation with him.
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33. By Order dated March 12, 1998, the

Court directed petitioners to file a Status

Report with the Court by March 27, 1998, stating

each issue in the case and the steps they had

taken to exchange information.

34. On March 30, 1998, petitioner filed 

a Status Report that was generally non-responsive

to the Court's Order. Petitioner's report

inferred [sic] he wanted a continuance.

35. By Order dated March 12, 1998 [sic],

the Court directed petitioners to file a list

of every issue in dispute by April 28, 1998,

warning petitioner that the Court might refuse

to consider any issues not raised therein. 

The Court denied the request for a continuance. 

The Court directed the parties to file a comprehensive stipulation of facts by April 28,

1998, warning that sanctions may result to

an uncooperative party. Both parties were

directed to identify proposed witnesses and 

a summary of their anticipated testimony by

April 28, 1998.

36. Respondent sent petitioners a letter on

April 7, 1998, asking that they call to schedule

a meeting on or before April 20, 1998, so that

there would be sufficient time to prepare the

stipulation.

37. On April 20, 1998, Mr. Hartman called

respondent and stated that he was unavailable

until April 27, 1998. Respondent advised

petitioner that this was not enough time to

ensure that a stipulation of facts could be

filed in accordance with the Court's Order.

38. On April 27, 1998, Mr. Hartman advised

respondent that he could not meet until April 28,

1998. Mr. Hartman appeared on April 28, 1998, at

2:00 P.M. but was totally unprepared to discuss

the stipulation and did not present any

additional records.

39. Due to petitioners' lack of cooperation, the parties could not file a stipulation
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of facts as directed by the Court. Petitioners

never responded to the stipulation sent by

respondent on September 12, 1997 and November 10,

1997.

Because both petitioners appeared for trial through their

attorney, the Court denied respondent's motion to dismiss

for lack of prosecution, and the case went to trial. 

Petitioners failed to submit a trial memorandum as directed

by the Court's standing pretrial order issued in this case,

and petitioners' attorney made no opening statement.

At trial, Mr. Hartman was the only witness called to

testify. Petitioners submitted a handwritten summary of

Mr. Hartman's travel schedule during the years in issue, 

two contracts with the Metropolitan Opera Association, Inc.

(Met), and a letter from the Met itemizing Mr. Hartman's

"performance and coverage schedule for the 1987/88 season". 

Mr. Hartman's testimony and the other evidence presented by

petitioners failed to substantiate any of the deductions

disallowed in the notice of deficiency.

At the conclusion of the trial, the Court directed the

parties to file simultaneous posttrial opening and reply

briefs. This was to allow the parties the opportunity to

explain their positions regarding the documents and the

testimony presented at trial. Petitioners failed to file a

posttrial brief.
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The issue for decision is whether respondent properly

determined the subject tax deficiencies, penalties, and

additions to tax. Petitioners bear the burden of proof as

to this issue. See Rule 142(a); New Colonial Ice Co. v.

Helvering, 292 U.S. 435 (1934).

Although petitioners bear the burden of proof, they

have failed or refused to provide the Court with a statement of the issues for decision in this case or their

position regarding any such issues for decision. In fact,

as mentioned above, on two occasions prior to trial, the

Court ordered petitioners to submit a statement of "each

and every issue presented in this case" for decision and,

on both occasions, petitioners failed to respond. 

Petitioners also disregarded orders of the Court to file

a trial memorandum and posttrial briefs.

The only basis for petitioners' disagreement with the

adjustments in the notice of deficiency that is contained

in the record of this case is the statement in the amended

petition that Mr. Hartman had "scheduling difficulties

with the local examiner" and was not able "to properly

establish the validity of the disputed deductions." That

statement is legally insufficient to overturn respondent's

determination in the notice of deficiency.
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In this case, we could hold petitioners in default,

pursuant to Rule 123(a) and dismiss the case for their

failure to respond to orders of the Court and for their

failure to file briefs under Rule 151. See Stringer v.

Commissioner, 84 T.C. 693 706-708 (1985), affd. without

published opinion 789 F.2d 917 (4th Cir. 1986). We could

also assume that, after trial, petitioners concluded that

their petition was not meritorious and they abandoned their

claims. See Calcutt v. Commissioner, 84 T.C. 716, 721-722

(1985). In that event, we would not dismiss the case by

reason of petitioners' failure to comply with the Court's

orders and Rules, but we would decide the case against

petitioners by reason of their failure to satisfy their

burden of proof. See id. On either theory the result is

the same. We must sustain the adjustments determined in

the notice of deficiency.

On the basis of the history of this case, including

petitioners' failure or refusal to provide the Court with 

a statement of the issues for decision, we find that the

proceedings have been instituted or maintained by

petitioners primarily for delay and that petitioners'

position in the proceeding is frivolous or groundless. 

Accordingly, we will require petitioners to pay to the
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United States a penalty pursuant to section 6673(a) in

the amount of $15,000. 

To reflect the foregoing,

Decision will be entered

under Rule 155.