127 T.C. No. 14

UNITED STATES TAX COURT

CHARLES RAYMOND WHEELER, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 15720-05. Filed December 6, 2006. 

 P failed to file his Federal income tax return for

2003. R issued a notice of deficiency in which he

determined that P was liable for an income tax

deficiency and for additions to tax under secs. 6651

and 6654, I.R.C. At trial, R, who had the burden of

production under sec. 7491(c), I.R.C., with respect to

the additions to tax, produced evidence that P did not

file a Federal income tax return for 2003 and that P

did not make any estimated tax payments for 2003, but R

did not introduce any evidence regarding P’s 2002

taxable year. Specifically, R failed to introduce

evidence as to whether P had filed a Federal income tax

return for 2002 and, if so, whether P had any reported

Federal income tax liability for 2002. R also failed

to introduce evidence that the Secretary had made a

return for 2003 satisfying the requirements of sec.

6020(b), I.R.C.

1. Held: In order to satisfy his burden of

production under sec. 7491(c), I.R.C., with respect to
- 2 -

the sec. 6651(a)(2), I.R.C., addition to tax, R must

introduce evidence that the tax was shown on a return. 

When a taxpayer has not filed a return, the sec.

6651(a)(2), I.R.C., addition to tax may not be imposed

unless the Secretary has prepared a substitute for

return (SFR) that meets the requirements of sec.

6020(b), I.R.C. Because R failed to introduce evidence

that the Secretary had prepared an SFR for 2003 that

met the requirements of sec. 6020(b), I.R.C., R did not

satisfy his burden of production under sec. 7491(c),

I.R.C., with respect to the sec. 6651(a)(2), I.R.C.,

addition to tax.

2. Held, further, in order to satisfy his burden

of production under sec. 7491(c), I.R.C., with respect

to the sec. 6654, I.R.C., addition to tax, R must

introduce evidence that P failed to make a required

annual payment under sec. 6654(d), I.R.C., for 2003. 

Because R failed to introduce evidence showing whether

P had filed a return for 2002 (the immediately

preceding taxable year) and, if so, whether P had any

reported income tax liability for that year, R failed

to demonstrate that P was required to make any

estimated tax payments for 2003. Consequently, R did

not satisfy his burden of production under sec.

7491(c), I.R.C.

3. Held, further, P’s liability for income tax, 

for the sec. 6651(a)(1), I.R.C., addition to tax, and

for a penalty under sec. 6673, I.R.C., determined. 

Charles Raymond Wheeler, pro se.

Joan E. Steele, for respondent.

OPINION

MARVEL, Judge: Respondent determined a deficiency in

petitioner’s 2003 Federal income tax of $9,507 and additions to
- 3 -

1All section references are to the Internal Revenue Code

(Code) in effect for the year in issue, and all Rule references

are to the Tax Court Rules of Practice and Procedure. All

monetary amounts are rounded to the nearest dollar.

2Respondent concedes that petitioner had allowable

deductions and credits as follows: Mortgage interest of $9,032,

real estate taxes of $1,791, and a withholding credit of $452. 

Respondent also concedes that petitioner is not liable for

additional tax under sec. 72(t), and he is entitled to married

filing separate status with one exemption. Respondent further

concedes that, after taking the above-listed deductions and

exemptions into account, petitioner’s income tax deficiency for

2003 is reduced to $3,854.

tax under section 6651(a)(1)1 of $2,037, under section 6651(a)(2)

of $498, and under section 6654 of $245. Petitioner petitioned

for a redetermination of the deficiency and the additions to tax.

After concessions,2 the issues for decision are:

(1) Whether respondent issued a valid notice of deficiency

for petitioner’s 2003 taxable year;

(2) whether petitioner is liable for an addition to tax

under section 6651(a)(1) for failing to file his 2003 Federal

income tax return;

(3) whether petitioner is liable for an addition to tax

under section 6651(a)(2) for failing to pay the amount shown as

tax on a return; 

(4) whether petitioner is liable for an addition to tax

under section 6654 for failing to pay estimated taxes; and

(5) whether the Court should impose a penalty under section

6673.
- 4 -

3Petitioner alleged in his petition that respondent had

determined “deficiencies” in income tax for 2003 of $12,368, all

of which is in dispute. The amount represents the total tax,

penalties, and interest (computed to Apr. 24, 2005) due from

petitioner as shown on Form 4549, Income Tax Examination Changes

(included as part of the notice of deficiency).

4For example, petitioner argued that he was not required to

file an information request for 2003, that he was not required to

file a return because respondent’s form violated the provisions

of the Paperwork Reduction Act, and that he was not liable for

any increase in tax for 2003 “pursuant to 44 U.S.C. § 3512.”

Background

Petitioner resided in Colorado Springs, Colorado, when he

petitioned the Court in this case.

Petitioner did not file a Federal income tax return for

2003. Respondent issued a notice of deficiency to petitioner

determining that petitioner failed to report taxable retirement

distributions of $41,657, dividend income of $241, and interest

income of $3; that petitioner was liable for an income tax

deficiency of $9,507; and that petitioner was liable for

additions to tax under sections 6651(a)(1) and (2) and 6654.

On August 24, 2005, petitioner timely petitioned for

redetermination of the deficiency and the additions to tax. In

his petition, petitioner disputed the full amount of the

deficiency and the additions to tax3 and alleged that there was a

multitude of errors in respondent’s determinations. However,

most of the allegations in the petition either were

unintelligible or, if intelligible, were frivolous.4 Petitioner
- 5 -

5Rule 34(b)(4) provides that a petition shall contain clear

and concise assignments of each and every error which the

petitioner alleges that the Commissioner made in the 

determination of the deficiency. Rule 34(b)(4) further provides

that “Any issue not raised in the assignments of error shall be

deemed to be conceded.” 

6In his pretrial memorandum and at trial, petitioner

conceded that he received military retirement payments during

2003 in the amount determined in the notice of deficiency.

7Petitioner did not specifically assign error to the income

adjustments involving interest and dividends, and he did not

contest these adjustments at trial. Consequently, we conclude

that petitioner has conceded these adjustments. See, e.g., Rule

34(b)(4); Derksen v. Commissioner, 84 T.C. 355, 360 (1985).

did not assign any error as required by Rule 34(b)(4)5 to

respondent’s determinations that petitioner received income from

a retirement distribution,6 interest, or dividends during 2003.7

With respect to the additions to tax respondent determined,

petitioner prayed in his petition that this Court find that “The

Petitioner is not liable for any determination of penalties

and/or interest in the notice of deficiency” and that “The

Petitioner is not liable for a penalty at 26 U.S.C. § 6654.”

At a pretrial conference held on April 17, 2006, we warned

petitioner several times that he had not raised any nonfrivolous

issue regarding respondent’s deficiency determination and that,

should he continue with similar arguments at trial, we would

consider imposing a penalty under section 6673. At trial,

respondent moved for the imposition of a penalty under section 
- 6 -

8In Wheeler v. Commissioner, T.C. Memo. 2006-109, petitioner

argued, for example, that notices of deficiency were not valid,

that he is not an individual required to pay an income tax, and

that there is no law requiring him to file an income tax return. 

9The assignments of error in the petition pertaining to

respondent’s income adjustments and deficiency determination,

including allegations that petitioner was not required to file a

tax return for 2003 and that the requirement to file a tax return

is in violation of the Paperwork Reduction Act, are contrary to

well-established law. “We perceive no need to refute these

arguments with somber reasoning and copious citation of

precedent; to do so might suggest that these arguments have some

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

(5th Cir. 1984). Moreover, many of petitioner’s assignments of

error duplicate those he made in an earlier case, and this Court

has already rejected them. See Wheeler v. Commissioner, supra.

6673(a)(1), and we again warned petitioner of the risk he would

assume by pursuing frivolous arguments.

This is not the first time that petitioner has made

frivolous arguments in this Court. In two consolidated cases

involving petitioner’s 1994-2001 taxable years decided after this

case was heard, this Court imposed on petitioner a penalty of

$3,000 under section 6673 for instituting proceedings based upon

a frivolous position.8 See Wheeler v. Commissioner, T.C. Memo.

2006-109.

Discussion

I. Validity of the Notice of Deficiency

Petitioner did not offer any testimony or argument at trial

regarding most of the assignments of error in the petition.9

Petitioner argued only that the notice of deficiency was not

statutory and, therefore, was invalid. Specifically, petitioner
- 7 -

10The term “Secretary” is defined by sec. 7701(a)(11)(B) to

mean the Secretary of the Treasury or his delegate.

argued that a valid notice of deficiency must reference the

particular statute upon which the Commissioner’s determination is

based. We address petitioner’s argument in order to clarify that

the notice of deficiency in question satisfied the requirements

of sections 6212 and 7522.

Section 6212(a) authorizes the Secretary10 to send a notice

of deficiency to a taxpayer by certified mail or registered mail

if the Secretary determines that the taxpayer is liable for a

deficiency in income tax. Ordinarily, a notice of deficiency

involving income tax is sufficient if it is mailed to a

taxpayer’s last known address. Sec. 6212(b)(1). A notice of

deficiency described in section 6212 must also comply with

section 7522. Sec. 7522(b)(1). Section 7522(a) provides that

“Any notice to which this section applies shall describe the

basis for, and identify the amounts (if any) of, the tax due,

interest, additional amounts, additions to the tax, and

assessable penalties included in such notice.” However, section

7522(a) also provides that an inadequate description “shall not

invalidate such notice.” 

Petitioner does not dispute that respondent addressed the

notice of deficiency to petitioner at his last known address, see

sec. 6212(b)(1), and that respondent mailed the notice by
- 8 -

11Sec. 61(a) defines gross income generally as “all income

from whatever source derived,” including, but not limited to,

interest, dividends, and pensions. See sec. 61(a)(4), (7), (11). 

Military retirement pay is pension income within the meaning of

sec. 61(a)(11). See Weir v. Commissioner, T.C. Memo. 2001-184;

Eatinger v. Commissioner, T.C. Memo. 1990-310 (“A military

retirement pension, like other pensions, is simply a right to

receive a future income stream from the retiree’s employer.”);

sec. 1.61-11(a), Income Tax Regs. (“Pensions and retirement

allowances paid either by the Government or by private persons

constitute gross income unless excluded by law.”). 

certified or registered mail as authorized by section 6212(a). 

Petitioner also does not dispute that the notice of deficiency

described the income adjustments as unreported income, listed the

specific items of unreported income, and identified the additions

to tax, pursuant to section 7522(a). Petitioner’s argument at

trial focused solely on the fact that the notice of deficiency

did not identify the specific Code section requiring respondent’s

income adjustments. 

Petitioner’s argument assumes a requirement for a valid

notice of deficiency that neither section 6212 nor section

7522(a) imposes. Although the notice of deficiency did not cite

the section of the Code requiring a taxpayer to include pension,

dividend, and interest income in gross income, see sec. 61(a),11

a notice’s failure to include a statutory citation for each

adjustment does not invalidate the notice under section 6212, 

see Jarvis v. Commissioner, 78 T.C. 646, 655-656 (1982) (neither

section 6212 nor any other provision of the Code prescribes the
- 9 -

form of a notice or the specifics to be contained therein);

Rogers v. Commissioner, T.C. Memo. 2001-20, affd. without

published opinion 281 F.3d 1278 (5th Cir. 2001). Likewise, a

failure to include a statutory citation for each adjustment in a

notice does not invalidate a notice under section 7522. Sec.

7522(a). Section 7522(a) requires a notice of deficiency to

describe the bases for, and identify the amounts of, tax and

additions to tax, but it contains no requirement that a notice of

deficiency identify the specific statutory provision supporting

each adjustment. 

The notice of deficiency described the income adjustments in

sufficient detail to put petitioner on notice of the adjustments

against him. See Jarvis v. Commissioner, supra at 655. We hold,

therefore, that the failure to identify the statutory provision

requiring respondent’s income adjustments in the notice of

deficiency does not render the notice invalid.

II. Additions to Tax

A. Respondent’s Burden of Production Under Section 7491(c)

Section 7491(c) 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. 726, and applies to court

proceedings arising in connection with examinations commencing

after July 22, 1998. RRA 1998 sec. 3001(c)(1), 112 Stat. 727. 

Section 7491(c) provides:
- 10 -

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.

In order to satisfy his burden of production under section

7491(c), the Commissioner must produce evidence that it is

appropriate to impose the relevant penalty, addition to tax, or

additional amount (collectively, penalty). Higbee v.

Commissioner, 116 T.C. 438, 446 (2001). However, section 7491(c)

does not require the Commissioner to introduce evidence regarding

reasonable cause, substantial authority, or similar provisions. 

Id.; H. Conf. Rept. 105-599, at 241 (1998), 1998-3 C.B. 747, 995. 

The conference report explained the respective obligations of the

Commissioner and a taxpayer under section 7491(c) as follows:

Further, the provision provides that, in any court

proceeding, the Secretary must initially come forward

with evidence that it is appropriate to apply a

particular penalty to the taxpayer before the court can

impose the penalty. This provision is not intended to

require the Secretary to introduce evidence of elements

such as reasonable cause or substantial authority. 

Rather, the Secretary must come forward initially with

evidence regarding the appropriateness of applying a

particular penalty to the taxpayer; if the taxpayer

believes that, because of reasonable cause, substantial

authority, or a similar provision, it is inappropriate

to impose the penalty, it is the taxpayer’s

responsibility (and not the Secretary’s obligation) to

raise those issues.

H. Conf. Rept. 105-599, supra at 241, 1998-3 C.B. at 995.
- 11 -

In a proceeding before this Court, the Commissioner’s

obligation under section 7491(c) initially to come forward with

evidence that it is appropriate to apply a particular penalty to

a taxpayer is conditioned upon the taxpayer’s assigning error to

the Commissioner’s penalty determination. In Swain v.

Commissioner, 118 T.C. 358 (2002), we held that a taxpayer who

failed to assign error to a penalty is deemed under Rule 34(b)(4)

to have conceded the penalty, notwithstanding that the

Commissioner failed to produce evidence that the imposition of

the penalty is appropriate. We explained that Rule 34(b)(4) and

section 7491(c) are consistent and described the

interrelationship of Rule 34(b)(4) and section 7491(c) as

follows:

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.

Id. at 364-365.

Respondent has determined that petitioner is liable for

additions to tax under sections 6651(a)(1) and (2) and 6654. We

examine the record to decide whether petitioner assigned error to 
- 12 -

each addition to tax and, if so, whether respondent has satisfied

his burden of production with respect to each addition to tax. 

In the petition, petitioner contested his liability for the

additions to tax. Although the petition is unclear in many

respects and does not follow the format that Rule 34(b) requires

for a properly prepared petition, petitioner nevertheless

asserted in the petition that he was not liable for the additions

to tax, and respondent was put on notice that petitioner’s

liability for the additions to tax was an issue. We conclude,

therefore, that petitioner assigned error to the additions to

tax, see Swain v. Commissioner, supra at 364-365, and respondent

had the burden of production under section 7491(c) to come

forward with evidence that it is appropriate to hold petitioner

liable for the additions to tax. Therefore, we must review the

record with respect to each addition to tax to ascertain whether

respondent met his burden of production. 

B. Section 6651(a)(1) Addition to Tax

Section 6651(a)(1) authorizes the imposition of an addition

to tax for failure to file a timely return unless the taxpayer

proves that such failure is due to reasonable cause and is not

due to willful neglect. Sec. 6651(a)(1); see United States v.

Boyle, 469 U.S. 241, 245 (1985); Harris v. Commissioner, T.C.

Memo. 1998-332. 
- 13 -

12The Paperwork Reduction Act was enacted by Congress as a

“comprehensive scheme designed to reduce the federal paperwork

burden.” United States v. Dawes, 951 F.2d 1189, 1191 (10th Cir.

1991). Under the act, the Office of Management and Budget (OMB)

is given authority to review an agency “collection of

information” and to assign a control number to each collection of

information it approves. See 44 U.S.C. secs. 3502, 3504, 3507(a)

(2000 & Supp. III, 2003); see also United States v. Dawes, supra

at 1191. If an agency collection of information does not display

a current control number or fails to state that the request is

not subject to the act, the act provides that no person shall be

subject to any penalty for failure to maintain or provide

information pursuant to the collection request. See 44 U.S.C.

sec. 3512 (2000). Taxpayers have sometimes argued that, because

tax regulations and instructions do not contain control numbers,

the act protects taxpayers from failure to file prosecutions and

penalties for failure to file tax returns. These arguments

consistently have been rejected by the Federal courts that have

considered them. See United States v. Dawes, supra at 1191 (and

cases cited thereat). 

Respondent introduced evidence showing that petitioner did

not file his 2003 income tax return or an application for

additional time to file his 2003 return by the original due date

of the return. The evidence is sufficient to satisfy

respondent’s burden of production under section 7491(c), and we

so find.

Petitioner offered no evidence at trial regarding any of the

adjustments, including the addition to tax under section

6651(a)(1). The only argument petitioner made that could

conceivably be addressed to his failure to file a timely return

is contained in the petition. There, petitioner contends that he

is not liable for any increase in tax because of the Paperwork

Reduction Act.12 The Paperwork Reduction Act is not a defense to
- 14 -

the addition to tax under section 6651(a)(1), nor does it create

a loophole in the Code. See United States v. Dawes, 951 F.2d

1189, 1193 (10th Cir. 1991). 

Petitioner had the burden of producing evidence to prove

that he had reasonable cause for his failure to file his 2003

return. Sec. 6651(a)(1); Rule 142(a)(1). The record is devoid

of such evidence. We conclude, therefore, that petitioner is

liable for the section 6651(a)(1) addition to tax.

C. Section 6651(a)(2) Addition to Tax

Section 6651(a)(2) imposes an addition to tax for failure to

pay the amount of tax shown on a return. The addition to tax

under section 6651(a)(2) applies only when an amount of tax is 

shown on a return. Cabirac v. Commissioner, 120 T.C. 163, 170

(2003). Petitioner did not file a return for 2003. 

Nevertheless, respondent contends that he made a substitute for

return (SFR) for 2003 pursuant to section 6020(b) that qualifies

as a return for purposes of section 6651(a)(2).

A return made by the Secretary under section 6020(b) is

treated as “the return filed by the taxpayer for purposes of

determining the amount of the addition” under section 6651(a)(2). 

Sec. 6651(g)(2). However, the return must satisfy the

requirements of section 6020(b). Section 6020(b) provides:

SEC. 6020(b). Execution of Return by Secretary.--

(1) Authority of secretary to execute return.--If

any person fails to make any return required by any
- 15 -

internal revenue law or regulation made thereunder at

the time prescribed therefor, or makes, willfully or

otherwise, a false or fraudulent return, the Secretary

shall make such return from his own knowledge and from

such information as he can obtain through testimony or

otherwise.

(2) Status of returns.--Any return so made and

subscribed by the Secretary shall be prima facie good

and sufficient for all legal purposes.

We have addressed on several occasions what constitutes a

section 6020(b) return. In Phillips v. Commissioner, 86 T.C.

433, 437-438 (1986), affd. in part and revd. in part on another

issue 851 F.2d 1492 (D.C. Cir. 1988), we held that a “dummy

return”, i.e., page 1 of a Form 1040, U.S. Individual Income Tax

Return, showing only the taxpayer’s name, address, and Social

Security number, was not a section 6020(b) return. In Millsap v.

Commissioner, 91 T.C. 926, 930 (1988), we held that unsubscribed

Forms 1040 containing the taxpayer’s name, address, Social

Security number, and filing status but no information regarding

income or tax, to which were attached subscribed revenue agent’s

reports containing sufficient information from which to compute

the taxpayer’s tax liability, were returns under section 6020(b). 

In Cabirac v. Commissioner, supra at 170-173, we held that

unsubscribed SFRs showing zeros on the relevant lines for

computing a tax liability and no tax liability did not meet the

requirements of section 6020(b). We rejected the Commissioner’s

contention that we should evaluate the SFRs filed on February 23,

2000, in conjunction with a notice of proposed adjustments dated
- 16 -

May 31, 2000, in deciding whether the SFRs were section 6020(b)

returns. We distinguished Millsap because in Millsap the revenue

agent’s report was attached to the SFR. In Cabirac, there was no

evidence that the notice of proposed adjustments was attached to

the SFRs. We noted that the SFRs, which were stipulated

exhibits, appeared to have been prepared several months before

the notice of proposed adjustments, and there was no evidence

that the SFRs were ever put together with the notice of proposed

adjustments and filed as section 6020(b) returns. Id. at 172. 

We specifically rejected the Commissioner’s suggestion “that the

presence of what are essentially ‘dummy returns’ and a revenue

agent’s report somewhere in the record meets the requirements of

section 6020(b)”, and we emphasized that our decisions in

Phillips and Millsap “mandate a greater degree of formality” for

section 6020(b) returns. Id.

In each of the cases discussed above, the record included

the SFRs that the Commissioner contended met the requirements of

section 6020(b) and/or stipulations that the SFRs had been filed. 

In this case, however, although respondent alleged that an SFR

meeting the requirements of section 6020(b) was prepared and

filed, respondent did not introduce the SFR into evidence and did

not otherwise prove that an SFR meeting the requirements of

section 6020(b) had been made for 2003. The only evidence

regarding the SFR is a cryptic and summary reference to a
- 17 -

“Substitute for Return” contained in Form 4340, Certificate of

Assessments, Payments, and Other Specified Matters, for

petitioner’s 2003 taxable year. 

The Commissioner’s burden of production with respect to the

section 6651(a)(2) addition to tax requires that the Commissioner

introduce evidence that a return showing the taxpayer’s tax

liability was filed for the year in question. In a case such as

this where the taxpayer did not file a return, the Commissioner

must introduce evidence that an SFR satisfying the requirements

of section 6020(b) was made. See Cabirac v. Commissioner, supra. 

Respondent did not do so. 

Because the record does not contain evidence that petitioner

failed to pay tax shown on a return for 2003, we conclude that

respondent has failed to satisfy his burden of production under

section 7491(c) with respect to the section 6651(a)(2) addition

to tax.

D. Section 6654(a) Addition to Tax

Section 6654 imposes an addition to tax on an individual

taxpayer who underpays his estimated tax. The addition to tax is

calculated with reference to four required installment payments

of the taxpayer’s estimated tax liability. Sec. 6654(c)(1). 

Each required installment of estimated tax is equal to 25 percent

of the required annual payment. Sec. 6654(d)(1)(A). The

required annual payment is equal to the lesser of (1) 90 percent
- 18 -

13For purposes of sec. 6654, an individual’s tax consists of

his income tax and self-employment tax and is determined before

the application of any wage withholding credit but after the

application of other allowable credits. Sec. 6654(f). 

14If an individual’s adjusted gross income shown on the

previous year’s return exceeds $150,000, a higher percentage may

apply. See sec. 6654(d)(1)(C).

of the tax13 shown on the individual’s return for that year (or,

if no return is filed, 90 percent of his or her tax for such

year), or (2) if the individual filed a return for the

immediately preceding taxable year, 100 percent of the tax shown

on that return.14 Sec. 6654(d)(1)(B). The due dates of the

required installments for a calendar year taxpayer are April 15,

June 15, and September 15 of the calendar year in question and

January 15 of the following year. Sec. 6654(c)(2).

 Respondent introduced evidence to prove that petitioner

was required to file a Federal income tax return for 2003, that

petitioner did not file a 2003 return, and that petitioner did

not make any estimated tax payments for 2003. However,

respondent did not introduce evidence sufficient to prove that

petitioner had an obligation to make any estimated tax payments

for 2003. Specifically, respondent’s burden of production under

section 7491(c) required him to produce evidence that petitioner

had a required annual payment for 2003 under section 6654(d), and

respondent failed to do so. 
- 19 -

15Sec. 6654(d)(1)(B)(ii) does not apply if the preceding

taxable year was not a taxable year of 12 months or if the

individual did not file a return for the preceding taxable year.

Under section 6654(d)(1)(B), the required annual payment,

which dictates the amount, if any, of a taxpayer’s required

estimated tax installments, see sec. 6654(d)(1), is the lesser of

90 percent of the tax shown for the subject taxable year (or, if

no return was filed, 90 percent of the tax for such year), sec.

6654(d)(1)(B)(i), or a fixed percentage (usually 100 percent but

can be higher, see sec. 6654(d)(1)(C)(i)) of the tax shown on the

taxpayer’s return for the preceding taxable year, sec.

6654(d)(1)(B)(ii). In order to satisfy his burden of production

under section 7491(c) regarding petitioner’s liability for the

section 6654 addition to tax, respondent, at a minimum, must

produce evidence necessary to enable the Court to conclude that

petitioner had a required annual payment under section

6654(d)(1)(B). 

Respondent produced evidence establishing that petitioner

did not file a return for 2003 and that, after concessions,

petitioner had a revised income tax liability of $3,854 for 2003,

the year at issue. This evidence was sufficient to permit this

Court to make the analysis required by section 6654(d)(1)(B)(i). 

However, in order to permit this Court to make the analysis

required by section 6654(d)(1)(B)(ii)15 and to conclude that

respondent had met his burden of producing evidence that
- 20 -

petitioner had a required annual payment for 2003 payable in

installments under section 6654, respondent also had to introduce

evidence showing whether petitioner filed a return for the

preceding taxable year and, if he did, the amount of tax shown on

that return. Respondent did not do so. Without that evidence,

we cannot identify the number equal to 100 percent of the tax

shown on petitioner’s 2002 return, we cannot complete the

comparison required by section 6654(d)(1)(B), and we cannot

conclude that petitioner had a required annual payment for 2003

that was payable in installments under section 6654.

We recognize that section 6654 is a complex provision. It

sets forth the requirements for calculating and making

installment payments of estimated tax, see sec. 6654(c) and (d),

it contains special rules for estimated tax payments by certain

classes of taxpayers, see sec. 6654(i), (j), (l), it contains

exceptions to the general requirement that estimated tax payments

be made, see sec. 6654(e), and it imposes an addition to tax on

an individual who underpays his estimated tax that is calculated

with reference to the underpayment rate under section 6621, the

underpayment amount, and the underpayment period, see sec.

6654(a) and (b). We do not attempt in this Opinion to answer all

of the questions that may arise regarding the interrelationship

of section 7491(c) and section 6654. We hold only that the

Commissioner’s burden of production under section 7491(c) with
- 21 -

respect to the section 6654 addition to tax requires the

Commissioner, at a minimum, to produce evidence that a taxpayer

had a required annual payment under section 6654(d). Respondent

did not do so. Consequently, respondent’s determination

regarding the section 6654 addition to tax is not sustained.

III. Section 6673 Penalty

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

taxpayer to pay the United States a penalty, not to exceed

$25,000, if it appears that the taxpayer has instituted or

maintained a proceeding primarily for delay or that the

taxpayer’s position is frivolous or groundless. 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.’” Williams v. Commissioner, 114 T.C. 136,

144 (2000) (quoting Coleman v. Commissioner, 791 F.2d 68, 71 (7th

Cir. 1986)).

Petitioner’s arguments regarding such things as his

obligation to file a Federal income tax return and the effects of

the Paperwork Reduction Act on his tax reporting and payment

obligations are contrary to well-established law and are

frivolous. Although we provided petitioner with ample warning of

the potential implications of continuing to assert those

frivolous and groundless arguments, petitioner did not abandon

his arguments or acknowledge his liability for income tax on the
- 22 -

16 Petitioner’s pretrial memorandum was filled with

unintelligible and/or frivolous arguments reminiscent of taxprotester rhetoric. 

income he received during 2003. Instead, petitioner chose to

appear at trial, where he presented no evidence and argued that

the notice of deficiency was not statutory or valid. Moreover,

this is not the first time that petitioner has wasted the time

and resources of this Court. See Wheeler v. Commissioner, T.C.

Memo. 2006-109. 

While it is true that petitioner has prevailed with respect

to two of the additions to tax, his success is not attributable

to any meaningful effort on his part. Rather, his limited

success in this case is the result of respondent’s failure to

satisfy his burden of production under section 7491(c) regarding

the section 6651(a)(2) and section 6654 additions to tax. With

the exception of petitioner’s allegation that he was not liable

for the additions to tax, petitioner’s assignments of error in

the petition, his arguments in his pretrial memorandum,16 and his

argument at trial were either unintelligible or meritless. 

Moreover, petitioner did not abandon his frivolous arguments

despite repeated warnings. At trial, petitioner, while

courteous, did not testify regarding any disputed factual

matters, and he persisted in arguing that the notice of

deficiency was not valid. 
- 23 -

17During a pretrial conference, respondent confirmed that

petitioner had been cooperative in that he did not dispute the

amounts of the income adjustments, but the record demonstrates

that petitioner’s cooperation was extremely limited. 

Petitioner’s limited cooperation is insufficient to counteract 

his stubborn insistence on arguing positions consistently

rejected by this Court and others. See Wheeler v. Commissioner,

T.C. Memo. 2006-109.

The record convincingly demonstrates that petitioner

maintained these proceedings primarily for delay and that

petitioner’s positions regarding respondent’s deficiency

determination were frivolous and groundless. We believe that

petitioner’s conduct deserves an appropriate sanction under

section 6673. In setting the amount of the penalty, we recognize

that petitioner was courteous at trial and that he made a flawed

attempt to cooperate.17 We also recognize that this Court’s

opinion in Wheeler v. Commissioner, supra, was not released until

after the trial in this case. However, petitioner was warned

repeatedly by respondent and by this Court that his arguments in

this case could expose him to liability for the section

6673(a)(1) penalty, and he did not heed those warnings. 

Accordingly, we shall require petitioner to pay to the United

States a penalty under section 6673(a)(1) of $1,500.
- 24 -

To reflect the foregoing and concessions of the parties,

An appropriate order will

be issued, and decision will

be entered under Rule 155.