T.C. Summary Opinion 2002-43

UNITED STATES TAX COURT

JOHN H. WEBSTER, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 7243-01S. Filed April 24, 2002.

John H. Webster, pro se.

Davis G. Yee, for respondent.

WOLFE, Special Trial Judge: This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed. The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority. Unless otherwise indicated,

subsequent section references are to the Internal Revenue Code in

effect for the year in issue, and all Rule references are to the

Tax Court Rules of Practice and Procedure.
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1Respondent concedes that petitioner is not liable for an

addition to tax under sec. 6651(a)(2).

Respondent determined the following deficiency in and

additions to petitioner’s 1997 Federal income tax:

 Additions to Tax 

Deficiency Sec. 6651(a)(1) Sec. 6651(a)(2) Sec. 6654(a)

 $9,296 $1,998.22 $1,598.58 $475.95

After a concession by respondent,1 the issues for decision are: 

(1) Whether petitioner’s wages, nonemployee compensation, prizes

and awards, interest, and distribution from an individual

retirement account (IRA) received during 1997 constitute gross

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

for failing to file a 1997 Federal income tax return; and (3)

whether petitioner is liable for an addition to tax for failing

to pay estimated income tax.

Some of the facts have been stipulated and are so found.

Petitioner resided in Santa Clara, California, at the time the

amended petition was filed with the Court.

Petitioner has a bachelor of science degree in electrical

engineering from the University of Washington and a master of

science degree in computer science from the University of Santa

Clara. Petitioner has been employed for many years as a computer

programmer.
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In 1990 petitioner pleaded no contest to two felony charges

of attempted child pandering and was sentenced to 1 year in jail

with credit for time served and suspension of the balance of the

sentence and probation. Since his conviction, petitioner has

encountered difficulties securing a job meeting his financial

expectations.

Petitioner did not file a Federal income tax return for

1997. During 1997 petitioner received wages of $1,680,

nonemployee compensation of $10,201, prizes and awards of

$33,720, interest of $62, and a distribution of $1,000 from an

IRA. These amounts total $46,663 as determined by respondent in

the notice of deficiency.

Petitioner contends: (1) No provision of law makes him

liable for Federal income tax; and (2) he is not liable for

Federal income tax for 1997 because the Federal Government

allegedly owes him compensation for violating his rights in

connection with certain felony charges in 1990.

The facts in this case have been established by written and

oral stipulation, and there are no material facts in dispute. 

Since only legal issues remain, the burden of proof with respect

to the deficiency is irrelevant. Nis Family Trust v.

Commissioner, 115 T.C. 523, 538 (2000).

Petitioner’s first argument, that no provision of law makes

him liable for Federal income tax, is frivolous. Section 61(a)
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defines gross income as all income from whatever source derived,

with exceptions not relevant here. Compensation for services,

income derived from business, interest, prizes and awards, and

distributions from individual retirement plans are all

specifically included in gross income. See secs. 61(a)(1), (2),

(4), 74(a), 408(d).

Petitioner states his second argument as follows:

The bottom line is that when an agency of the US

Government intentionally violates my rights and then

proceeds to cover up that fact; and other agencies

(such as the FBI) refuse to investigate my allegations,

then the US Government has forfeited any right to levy

taxes against me that it might have had. In other

words, the Government has failed to live up to its part

of this Social Contract when its agencies violated my

rights.

In short, petitioner argues that he is entitled to offset his

unrelated claims against the Federal Government against his

Federal income tax obligations.

We have rejected similar setoff arguments in the past. We

have concluded that we lacked jurisdiction over the taxpayers’

unrelated claims against the Federal Government. E.g., Watts v.

Commissioner, T.C. Memo. 1995-196; Akins v. Commissioner, T.C.

Memo. 1993-256, affd. without published opinion 35 F.3d 577 (11th

Cir. 1994); Randall v. Commissioner, T.C. Memo. 1993-207, affd.

without published opinion 29 F.3d 621 (2d Cir. 1994). 

Petitioner’s 1990 felony conviction and the actions taken by

governmental authorities in connection with that conviction have
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2The Internal Revenue Service Restructuring and Reform Act

of 1998, Pub. L. 105-206, sec. 3001, 112 Stat. 685, 726, added

sec. 7491(c), which places the burden of production on the

Secretary with respect to a taxpayer’s liability for penalties

and additions to tax in court proceedings arising in connection

with examinations commencing after July 22, 1998. Sec. 7491(c)

applies because the examination in this case commenced in 1999.

no bearing on his 1997 tax liability. This Court is a court of

limited statutory jurisdiction and lacks general equitable

powers. Commissioner v. McCoy, 484 U.S. 3, 7 (1987). 

Accordingly, we do not have jurisdiction over petitioner’s claims

against the Federal Government arising from his 1990 felony

conviction. Therefore, we sustain respondent’s determination of

the deficiency. 

Respondent determined that petitioner is liable for an

addition to tax pursuant to section 6651(a)(1) and an addition to

tax pursuant to section 6654(a). Respondent bears the burden of

production with respect to both additions to tax. Sec. 7491(c).2

To meet his burden of production, respondent must come forward

with sufficient evidence indicating that it is appropriate to

impose the relevant penalty. The burden of proof remains with

petitioner. See Higbee v. Commissioner, 116 T.C. 438, 446-447

(2001). 

Section 6651(a)(1) imposes an addition to tax for failure to

file a Federal income tax return, unless it is shown that such

failure is due to reasonable cause and not due to willful

neglect. United States v. Boyle, 469 U.S. 241, 245 (1985). A
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3We have jurisdiction over the sec. 6654(a) addition to tax

in this case because an income tax return was not filed for the

year at issue. See sec. 6665(b)(2); Meyer v. Commissioner, 97

T.C. 555, 562 (1991); Heisey v. Commissioner, T.C. Memo. 2002-41.

failure to file is due to reasonable cause if the taxpayer

exercised ordinary business care and prudence and, nevertheless,

was unable to file the return within the prescribed time. 

Crocker v. Commissioner, 92 T.C. 899, 913 (1989); sec. 301.6651-

1(c)(1), Proced. & Admin. Regs. Willful neglect means a

conscious, intentional failure to file or reckless indifference

to the obligation to file. United States v. Boyle, supra.

Petitioner has stipulated that he did not file a Federal

income tax return for the year in issue. Thus respondent has

satisfied his burden of production with respect to the addition

to tax for failure to file a timely return. Higbee v.

Commissioner, supra; Burr v. Commissioner, T.C. Memo. 2002-69.

Petitioner has failed to show that his failure to file was due to

reasonable cause and not due to willful neglect. Accordingly, we

sustain respondent’s determination on this issue.

Section 6654 imposes an addition to tax in the case of any

underpayment of estimated tax by an individual.3 The addition to

tax under section 6654(a) is mandatory in the absence of

statutory exceptions. Sec. 6654(a), (e); Recklitis v.

Commissioner, 91 T.C. 874, 913 (1988); Grosshandler v.

Commissioner, 75 T.C. 1, 20-21 (1980). With limited exceptions

that are inapplicable here, section 6654 “has no provision
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relating to reasonable cause and lack of willful neglect. It is

mandatory and extenuating circumstances are irrelevant.” Estate

of Ruben v. Commissioner, 33 T.C. 1071, 1072 (1960). Petitioner

does not argue, nor do we find, that any statutory exception

under section 6654 applies in this case. Accordingly, we sustain

respondent’s determination on this issue.

The Tax Court is authorized under section 6673(a)(1) to

require a taxpayer to pay to the United States a penalty not in

excess of $25,000 when it appears to the Court that the

taxpayer’s position in the proceeding is frivolous or groundless. 

Petitioner’s position, based on stale and meritless contentions,

is manifestly frivolous and groundless, and his action has

resulted in the waste of limited judicial and administrative

resources. At trial we warned petitioner of these penalty

provisions, and he promptly brought his arguments to an end. 

Under these circumstances we shall not impose a penalty under

section 6673(a)(1) at this time, but we caution petitioner that

the imposition of the penalty is likely if he returns to this

Court with similar arguments in the future.

Reviewed and adopted as the report of the Small Tax Case

Division.

To reflect respondent’s concession,

Decision will be entered

under Rule 155.