T.C. Mem o. 2 01 3- 18 5
UNITED STAT ES TAX COURT

MIC HAEL SCHLUSSEL, Peti ti on er v . COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 12 40 1- 12
. Fil edAug us t 1 4, 2 01 3.

Mi ch ael Sch lu ss el , forhi m se lf. Patric k F . Gall ag he r, fo r res po nd en t.

MEMORANDUM OPINION GUSTAFSON, Ju dg e: The In te rn al Rev enue Serv ic e (“ IRS” ) de te rm in ed de fic ie nc ie s o f Fed eral in co m e ta x fo r 20 06 an d 2 00 7 (a lo ng with a dd it io ns to tax- 2 -

[* 2] an d p en al ti es ) of

pe ti ti on er, Mi ch ael Sch lu ss el , pu rs uantto sec ti on 62 13
. 1 The m at te r is curren tl y

be fo re the Co urt o n am ot io n fo r su m m ary jud gm en t fi le d pu rs ua ntto Ru le 12 1 b y

res po nd en t, the Co m

m is si on er o f th e IRS . The i ss ue s fo r de ci si on are: (1) whet he r Mr. Sc hl us se l i s l iabl e fo r th e in co m e ta x d efi ci en ci es th atth e IRS de te rm in ed ; an d (2 ) whe th er h e is li ab le forth e fraudul en t fa il ur e-t ofil e ad di ti on to tax un de r se ct io n 6 65 1( f), th e fai lu re-t o- pay ad di ti on to tax un de r
se ct io n 6 65 1( a)(2 ), an d t he fai lu re-t o- pa y -es ti m at ed -ta x a dd it io n t o t ax un de r
se ct io n 6 65 4. We ho ldth athe is li ab le inall res pe ct s, an d we wi ll gra ntsu m m ary jud gm en t i n t he Co m

m is si on er’s fav or .

Bac kg ro un d The Co m m is si on er h as m ad e a s ho win g o f th e fo ll owi ng fact s. Th at sh owi ng is supp orte d p rin ci pa ll y by deem edadm is si on s re su lt in g fr om Mr. Sc hl us se l’s fa il ur e to fil e a rep ly to the Co m m is si on er’s an swe r, as di sc us se d be lo w, andMr. Sch lu ss el ha s n otdi sp ut edth e Co m m is si on er’s as se rte d fa ct s. The fal se in vo ic in g s ch em e Inth e y ears 20 06 an d 2 00 7, M r. Sch lu ss el parti ci pa te d i n acri m in al sch em e by whic h h e se ntfal se in vo ic es , inth e n am es of v ari ou s s he ll co m pa ni es , for Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o t he Int ern al 1 Rev enue Co de of 1 98 6 (2 6 U.S.C.) ineffec t fo r th e y ears at i ss ue , andall Ru le refe ren ces are t o t he Tax C ou rt Rul es of P ract ic e an d P ro cedur e.- 3 -

[* 3] go od s t ha t wer e n ev er d el iv eredan d wer e n ev er i n e xi st en ce. Unwi tt in g pa y or s p ai d t he in vo ic es , supp os in g t he y were l eg it im at e. By

th is m ean s M r. Sch lu ss el rece iv edch eck s i n the ag gr eg at e am ou nt s o f $1 29 ,35 0 i n 2 00 6 a nd $3 69 ,37 0 i n 2 00 7. As a re su ltof the fal se in vo ic in g s ch em e, in Marc h 2 00 9 M r. Sch lu ss el was fo un d g ui lt y

of two cr im in al co un ts --m ai l fr au d a ndco ns pi racy to c omm itm ai l frau d. He re cei ve d c on cu rren t s en te nc es of n in e y ears inpri so n o n e achco un t. Non -co m pl ia nc e wit h fi li ng an d p ay in g re qu ire m en ts Altho ug h M r. Sch lu ss el ha d fi le d t ax returns forpri ory ears , he f il edno ne fo r th e p re-s ui t year 20 05 no r fo r th e y ears at i ss ue , 20 06 an d 2 00 7. Hi s fa il ur e to fil e was kn owi ng an d fr au du le nt . He kep t n o b oo ks or r eco rd s o f hi s fa ls e in vo ic in g a ct iv it y . Mr. Sch lu ss el fai le d t o m ak e es ti m at edtax pa ym en ts for20 06
or20 07 or p aym en ts of t ax foreit he r y ear, an d h e h adno reas on ab le cau se forhi s fai lu re. Adm in is tra ti ve pro ceed in gs On Fe brua ry

14 , 20 12 , th e IRS is su edto Mr. Sch lu ss el a no ti ce o f de fic ie nc y

pu rs ua ntto sec ti on 62 13 (a), d et erm in in g fo r 20 06 an d 2 00 7 t he fo ll owi ng de fic ie nc ie s:- 4 -

[* 4] A dd it io ns to tax Year Defi ci en cy Sec. 6 65 1( f) Sec. 6 65 1( a)(2 ) Sec. 6 65 4 20 06 $3 3,8 39 $2 4,5 29 .65 $8 ,45 8.5 0 $1 ,60 1.1 2 20 07 11 3,5 35 82 ,30 9.2 5 [TBD] 5,1 67 .06 On Fe brua ry

20 , 20 12 , th e IRS pre pa redforMr. Sch lu ss el co rres po nd in g Fo rm s 1 34 96 , “ IRC S ect io n 6 02 0( b) Cert ifi cat io n” , as s ub st itut es forreturns (“ SFRs ”). On t ho se SFRs th e IRS in cl ud edth e in co m e fro m th e fal se in vo ic in g
sc he m e, al on g wi th rel at iv el y sm al l am ou nt s o f ot he r in co m e. Tax Co urt p ro ceed in gs On M ay 12 , 20 12 , Mr. Sch lu ss el ti m el y m ai le d h is pe ti ti on to th is Co urt. At th atti m e h e res id edinMas sa ch us et ts , wher e h e is in carc erat ed . The p et it io n al le ge s: I DISAGREE W ITH THE IRS DETE RMI NATION, BECAUSE I DID NOT MAKE T HE MONEY TH EY CLAIM I MADE. THEIR FIGURES ARE ERRONEOUS, AND INCORRECT. I DON’ T KNOW HOW THEY DERIVED AT T HEIR FIGURES. I AM UNDER THE IMP RESSION THAT THEYTOOK T HE FIGURES FROM THE FUND S THAT W ERE MENTIONED AT MY TRIAL, BUT IF THEY REVIEW THE RECORDS PROPERLY, AND THE Y W OULD GO OVER THE DISCOVERY INFO PROVIDED BY THE GOVERNMENT, TH EY W ILL NOTICE THA T THE CHECKS WAS LEGALL Y DEPOSITED BY THECOLLECTION COMP ANY, A VALID NEW YORK CORPORATION, AND THA T THE COMPANY, USED IT, TO PAY EMPLOYEE S WAGES, TAXES, 94 1s , FICA, RENT, PRINTING, POSTAGE, T ELEPHONE CHARGES, ETC. ALLIN THE N ORMAL DAY TO DAY OPERATIONS OF A BUSINESS. THE FUNDS W ERE USED- 5 -

[* 5] LEGALL Y, AND A T NO T IME DID I DEPOSIT THE FUNDS INTO MY PERSONAL ACCOUNT, NOR DID I DRAW ON THE FUNDS. I IN FACT DID NOT MAKE ANY INCOME, IN YEAR 20 06 , AND 200 7. I WAS HOSPITALIZED , AND SUBSEQUENTLY T AKEN CARE OF BY MY GIRL FRIEND W HO EARNED HER SALARY LEGA LLY AS W ELL. I AM PRESENTLY INCARCERATED ON A NINE YEAR SENTEN CE AND AM 59 + YEARS OLD. I IN FACT SUFFERED MULTIPLE CAPITAL LOSES FROM THE FORCED SALE OF MY HOUSE, CARS, AND ALL MY PERSONAL PROPERTY. ALLMY PERSONAL FUNDS W ERE EXHAUSTE D OR STOLEN FROM ME. I THEREFORE WANT THECHARGES EXPUNGED FROM TAXES AT THE EA RLIEST POSSIB LE. The Co m m is si on er fi le d h is an swe r to th e p et it io n o n J ul y 9, 2 01 2; an d t ha t
an swe r no t o nl y

de ni edMr. Sch lu ss el ’s all eg at io ns bu t al so m ad e it s o wn

“ affi rm at iv e al le ga ti on s” inparag rap h 8 , reco un ti ng th e cri m in al sch em e, Mr. Sc hl us se l’s p ro fitde riv edfro m it , andhi s fr au du le ntfai lure t o fi le tax returns . Mr. Sc hl us se l fi le d n o re pl y ; s o o n S ep te m be r 26 , 20 12 , th e Co m

m is si on er fi le d a
m ot io n u nd er Ru le 37 (c) re qu iri ng hi m to do so . By

ord er o f Oct ob er 1 , 20 12 , th e Co urt d ire ct edMr. Sch lu ss el as f ol lo ws: Und er Ru le 37 (a), M r. Sch lu ss el is requi redto fil e a rep ly eith er adm it ti ng or d en y in g t he IRS’s af firm at iv e al le ga ti on s, b uthe di d n ot do so . There fo re, o n S ep te m be r 26 , 20 12 , th e IRS fil eda m ot io n un de r Ru le 37 (c), as ki ng th e Co urt t o i ss ue anord er s ta ti ng th atth e al le ga ti on s i n t he an swe r th atMr. Sch lu ss el di d n otde ny sho ul d b e de em edadm it te d b y

Mr. Sch lu ss el . Upo n due co ns id erat io n, i t i s- 6 -

[* 6] ORDERED th at , onor b efo re Oct ob er 1 7, M r. Sch lu ss el sh al l fil e a rep ly as requi redby Rul e 3 7( a) an d (b ) of th e Tax Co urt Ru le s of Prac ti ce an d P ro cedur e. If Mr. Sc hl us se l d oe s n otfil e a rep ly as di rect edhe rei n, the n t he Co urt wi ll gra ntth e IRS ’s m ot io n a ndwil l de em forpu rp os es of t hi s ca se th atMr. Sch lu ss el ha s ad mit te d t he affi rm at iv e al le ga ti on s s etforth inth e an swe r. [Em ph as is ad de d.] Mr. Sc hl us se l fi le d n o re pl y , andinit s o rd er o f Oct ob er 3 1, 2 01 2, the Co urt s ta te d:

As o f th is da te th e Co urt h as rece iv edno rep ly from Mr. Sch lu ss el . Upo n due co ns id erat io n a ndforcau se , itis ORDERED th atth e IRS ’s m ot io n fo r en try of o rd er tha t the un de ni edall eg at io ns inpa rag rap h 8 of i ts an swe r be de em edadm it te d as setforth , is gra nt ed . Tho se affi rm at iv e al le ga ti on s i n t he IRS’s an swe r are de em edadm it te d b y Mr. Sch lu ss el
. On No ve m

be r 23 , 20 12 , th e Co m

mis si on er fi le d h is m ot io n fo r su m m ary jud gm en t (m ak in g fa ctua l as se rti on s o n t he ba si s o f Mr. Sc hl us se l’s d eem ed adm is si on s) ; an d o n t ha t s am e d at e th e Co urt o rd eredas f ol lo ws: Thi s ca se is sch edul edto be tri edat t he Co urt’s s es si on in Bo st on , beg in ni ng Feb ru ary 4, 2 01 3. Ho wev er, o n No ve m be r 23 , 20 12 , res po nd en t (t he IRS) f il eda m ot io n fo r su m

m ary jud gm en t. The IRS’s m ot io n a ss ert s t ha t n o t ria l i s n eces sa ry inth is cas e, be cau se (th e IRS says) n o re le va ntfact s ar e in di sp ut e. The m ot io n co nt en ds th at , onth e b as is of t he un di sp ut edfact s, the cas e can be de ci de d i n t he IRS’s fa vo r. The C ou rt wi ll ord er p et it io ne r Mi ch ael Sch lu ss el to fil e a res po ns e to th e IRS ’s m ot io n. If Mr . Sch lu ss el di sa gr ees with t he fact s s etou t i n t he IRS’s m ot io n, the n h is res po ns e sh ou ldpo in t o utth e sp eci fic fact s i n di sp ut e. If h e d is ag rees with the IRS’s ar gu m en t as to th e la w, th en hi s re sp on se sh ou ldals o s etou t h is po si ti on on th e d is pu te d l eg al is su es . Q&As tha t the Co urt h as pre pa redon th e subjec t “ Wha t i s a m ot io n fo r su m

m ary jud gm en t? How s ho ul d I r es po ndto on e? ”- 7 -

[* 7] are a va il ab le at u st ax co urt.g ov /t ax pay er_ in fo _s ta rt.h tm#S TART40 an d a re p rin te d o n t he pa ge att ach edto th is ord er. Mr. Sc hl us se l s ho ul d n ot e th atTax C ou rt Rul e 1 21 (d ) pr ov id es , “ If the adve rs e p arty

[i.e ., Mr. Sch lu ss el ] do es no t s o re sp on d [t o a m ot io n fo r su m

m ary jud gm en t], th ena de ci si on , if ap pr op ria te , m ay be en te redag ai ns t s uc h p arty ”--i .e., aga in stMr. Sch lu ss el
. To re so lv e th e IRS ’s m ot io n fo r su m m ary jud gm en t, i t i s ORDERED th at , no lat er tha n Dec em be r 21 , 20 12 , Mr. Sc hl us se l s ha ll fil e with t he Co urt an d s erv e o n t he IRS a res po ns e to th e IRS ’s m ot io n fo r su m m ary jud gm en t. On Dec em

be r 10 , 20 12 , Mr. Sch lu ss el fil eda m ot io n fo r a 1 80 -d ay
ex te ns io n. Th e m ot io n s ta te d:

I AM REQUESTING THE COURT T O ALLOW ME 18 0 DAYS ADJ OURNMENT, DUE TO THE FACT THAT I HAVE BEEN STRICKEN BY A STROKE, AND SUBSEQUENTLY H AD A SEIZURE, WHERE MY HEART STOPPED BEATING, AND, DUE TO THE PROXIMITY OF COMP ETENT MEDICAL STAFF, I WAS PROMP TLY REVIVED BACK TO LIFE. I HAVE BEEN FITTED, W ITH A PACEMAKER W HICH WAS FINALLY IMPLANTED INTO MY CHEST TO KEEP ME ALIVE. I HAVE HAD A FEW SEIZURES IN THE MIDDLE OF THE NIGHT , WHERE I FELL OU T OF BED ON ACONCRETE FLOOR. I AM PRES ENTLY ATTEMPTING TO G ET BACK TO FULL HEAL TH. I WANT YOUTO KNO W THAT I DO NOT HAVE AN Y OF MY TAX RECORDS W ITH ME AT THIS MEDICAL CTR.- 8 -

[* 8] ITS FOR THAT REASON, TH AT I AM REQUESTING A CONTINUANCE OF THIS CASE FOR AT LEA ST 18 0 DAYS, JUST SO THAT I CAN GET BACK TO HEALT H, AND BE ABLE TO REPRESENT MYSELF COMPETENTLY. I THANK YO U IN ADVAN CE FOR PROM PT REPLY TO MY REQUEST. By ord er o f Decem

be r 21 , 20 12 , we gra nt edMr. Sch lu ss el ’s reque st , andwe st at edas f

ol lo ws: The Co urt wi ll gra ntMr. Sch lu ss el ’s m ot io n, ev enth ou gh do in g s o wi ll requi re t ak in g t hi s ca se off of t he up co m in g c al en da r an d m ay co m pl ic at e fu rth er p ro ceed in gs , andev enth ou gh an ex te ns io n o f 18 0 d ay s (i .e., si x m on th s) is anex tra or di na ry ex te ns io n. Eve n fo r pe rs on s wh o a re i nc arce rat edan d wh o a re s ic k, the IRS i s requi redto pe rfo rm

it s dut ie s i m

po se d b y law, an d t he Co urt i s ob li ge d t o p ro ces s t he cas es on it s d oc ke t. Si ckor i nc arce rat ed pe rs on s ar e en ti tl edto reas on ab le acco m m od at io ns , bu t the y

are n ot en ti tl edto in de fin it e ex em pt io n fr om

th e ta x l aws . Six m on th s s ho ul d cert ai nl y su ffi ce, an d M r. Sch lu ss el is warn edth athe sh ou ldno t ex pe ctan y

furth er ex te ns io n. He s ho ul d i m m ed ia te ly beg in to ob ta in hi s re co rd s; an d i f fo rtu na te cir cu m st an ces all ow h im to res po nd earl ie r, he sh ou ldcert ai nl y do so , rathe r th anris k a n a dv ers e tu rnof ev en ts an d fi ndhi m se lf u nabl e to actinJu ne 20 13 . If Mr. Sch lu ss el were u nabl e to ob ta in hi s re co rd s an d t o p rep are h is res po ns e inth at si x- m on th pe rio d, the n i t wo ul d b e h ardto ass um e th atan y furth er ex te ns io n wo ul d a ctua ll y faci li ta te a res po ns e, rathe r th anjus t de la y in g t he cas e in de fin it el y , whi chth e Co urt wo ul d n otdo . It i s th eref or e ORDERED th atMr. Sch lu ss el ’s m ot io n fo r anex te ns io n i s gr an te d, an d t ha t h e sh al l fi le a res po ns e to res po nd en t's m ot io n n o la te r th anJu ne 21 , 20 13
. As o f th is da te , Mr. Sch lu ss el ha s fi le d n o re sp on se .- 9 -

[* 9] Dis cu ss io n I. St an dardforsu m

m ary jud gm en t Und er Ru le 12 1 (t he Tax C ou rt’s a na lo g t o R ul e 5 6 o f th e Fed eral Ru le s o f Ci vi l Pr oc edur e) the Co urt m ay gra ntsu m

m ary jud gm en t wh ere t he re i s n o ge nu in e d is pu te of a ny m at eri al factan d ade ci si on m ay be ren de redas am at te r of la w. The m ov in g p arty

(he re, the Co m

m is si on er) b ears th e b ur de n o f sh owi ng th at
no ge nu in e d is pu te of m at eri al factex is ts , an d t he Co urt wi ll vi ew an y factua l 2

m at eri al an d i nf

eren ces inth e li gh t m os t fa vo rab le to th e n on m ov in g p arty (he re, Mr. Sc hl us se l). Dah ls tro m v. Co m m is si on er, 8 5 T.C. 8 12 , 82 1 (1 98 5) ; cf
. And ers onv. Lib erty

Lob by, Inc., 4 77 U.S. 24 2, 2 55 (19 86 ) (s am e st an da rdun de r Fed . R. Civ . P. 56 ). “ The op po si ng pa rty [i.e., Mr. Sc hl us se l] is to be affo rd edth e be ne fitof a ll reas on ab le do ub t, an d a ny inf eren ce t o b e drawnfro m

th e und erl y in g fact s co nt ai ne d i n t he reco rdm us t b e v ie wedina li gh t m os t favo rab le to th e p arty op po si ng th e m ot io n fo r su m m ary jud gm en t.” Es pi no za v . Commis si on er, 7 8 T.C. 41 2, 4 16 (19 82 ).

The Co m m is si on er m ay

carry hi s b ur de n o f pr oo f as to frau d b y rel y in g o n 2 a p et it io ne r’s de em edadm is si on s ar is in g u nd er Ru le 37 (c) a s a r es ul t o f th e pe ti ti on er’s fai lu re t o fi le a rep ly to s pe ci fic all eg at io ns of f rau d. Do nc as te r v. Co m m is si on er, 7 7 T.C. 3 34 , 33 7 (1 98 1) . It the refo re fo ll ows th ata pa rty m ov in g fo r su m m ary jud gm en t m ay

rel y on su chde em edadmis si on s t o s up po rt t he factua l pr ed ic at e fo r hi s m ot io n.- 10 -

[* 10 ] Howev er, the no n- m ov in g p arty m ay no t s iton hi s h an ds . He is requi red by Rul e 1 21 (d ) to “ se t fo rth sp eci fic fact s s ho win g t ha t the re i s a g enui ne di sp ut e fo r tr ia l. If the adve rs e p arty do es no t s o re sp on d, the n ade ci si on , if ap pr op ria te , m ay be en te redag ai ns t s uc h p arty .” Desp it e h av in g t hi s re qu ire m en t ca ll edto hi s at te nt io n, M r. Sch lu ss el fai le d t o m ak e an y res po ns e to th e IRS ’s m ot io n fo r
su m m ary jud gm en t. II. Mr. Sc hl us se l’s l iabi li ty A. In co m e ta x Pro ceed s o f a cri m in al act iv it y are t ax ab le in co m e. The S up rem e Co urt “ ha s gi ve n ali be ral co ns tru ct io n t o t he bro adph ras eo lo gy of th e ‘gro ss in co m e’ de fin it io n s ta tu te s i n re co gn it io n o f th e in te nt io n o f Co ng res s t o t ax all ga in s
ex cep t tho se sp eci fic al ly exem pt ed .” Ja m es v. Un it edSta te s, 3 66 U.S. 21 3, 2 19 (19 61 ). In J am es , th e Supr em e Co urt h el d t ha t “ wro ng fu l ap pr op ria ti on s” are i nc lu di bl e in gro ss in co m e. Id . at 2 19 -2 20 . The Co m m is si on er h as sh own (an d M r. Sch lu ss el ha s n otco nt rad ic te d) th atin20 06
an d 2 00 7 M r. Sch lu ss el rece iv edin co m e fro m hi s cr im in al act iv it y

(an d o th er
so ur ces ) fo r whi ch he owes Fed eral in co m e ta x i n t he am ou nt s d et erm in edinth e
no ti ce o f de fic ie nc y .- 11 -

[* 11 ] B. Frau du le ntfai lu re-t o- fil e ad di ti on to tax The Co m m is si on er h as als o s ho wn tha t M r. Sch lu ss el ’s fai lu re t o fi le returns fo r 20 06 an d 2 00 7 was frau du le nt . Sect io n 6 65 1( f) p ro vi de s:

SEC. 6 65 1( f). In crea se inPen al ty for Fraudul en t Fa il ur e to Fi le .--If a ny fail ur e to fil e an y return i s fr au du le nt , par ag rap h (1 ) of subs ect io n (a ) sh al l b e ap pl ie d-

-

(1 ) by sub st itut in g “ 15 pe rcen t” for “ 5 p erce nt ” eac h pl ace i t ap pe ars , and (2 ) by sub st itut in g “ 75 pe rcen t” for “ 25 pe rcen t”
. The cro ss -ref

eren ced“pa rag rap h (1 ) of subs ect io n (a )” i s s ect io n 6 65 1( a)(1 ), whi chpro vi de s: Incas e o f fai lu re-- (1 ) to fil e an y

return re qu ire d und er au th or it y of s ub ch ap te r A of ch ap te r 61 * * * o n t he da te pre sc rib edth eref or(de te rm in edwith reg ardto an y

ex te ns io n o f ti m e fo r fi li ng ), un le ss itis sh own th atsu ch fai lu re i s due to reas on ab le cau se an d n otdu e to wil lfu l n eg le ct , th ere sh al l b e ad de d t o t he am ou ntrequi redto be sh ownas t ax on su ch return 5 pe rcen t o f th e am ou ntof s uc h t ax if t he fai lu re i s fo r no t m or e th an1 m on th , with a n a dd it io na l 5 pe rcen t fo r eac h a dd it io na l m on th or f

ract io n t he reo f du rin g wh ic h s uc h fa il ur e co nt in ue s, n ot ex ceed in g 2 5 p erce ntinth e ag gr eg at e * * * . [Em ph as is ad de d.] Thu s, fo r th e p eri odof M r. Sch lu ss el ’s no n- fil in g h e o wes anad di ti on al 15 % pe r
m on th up to a to ta l o f 75 %. Mr. Sch lu ss el ha s n otm ad e an y de fen se , andhe is li ab le forth is ad di ti on to tax
.- 12 -

[* 12 ] C. Fai lu re t o p ay Sect io n 6 65 1( a)(2 ) im

po se s an ad di ti on to tax forfai lure t o p ay th e am ou nt of tax sh own on a return, an d t he Co m m is si on er co nt en ds th atMr. Sch lu ss el is li ab le forth is ad di ti on for th e two y ears at i ss ue . The ad di ti on to tax un de r se ct io n 66 51 (a)( 2) ap pl ie s o nl y

when anam ou ntof t ax is sh own on a return, Cabi rac v . Co m m is si on er, 1 20 T.C. 16 3, 1 70 (20 03 ), an d the Co m mis si on er h as th e b ur de n o f pr oduc ti on to sh ow the fil in g o f a return, i .e., to sh ow an “ am ou ntsh ownas t ax on * * * [a ] return” , sec . 66 51 (a)( 2) . A retu rnm ad e b y th e Sec ret ary un de r se ct io n 60 20 (b )--i .e., an S FR-- is tre at edas “ th e return fi le d b y th e ta xp ay er fo r pu rp os es of de te rm in in g t he am ou ntof t he ad di ti on ” und er s ect io n 6 65 1( a)(2 ). Sec. 6 65 1( g) (2 ). The C omm is si on er’s m ot io n s ho ws tha t the IRS d idpre pa re SFRs forMr. Sch lu ss el inco m pl ia nc e wit h s ect io n 6 02 0( b) . Cf. Whe el er v . Co m m is si on er, 1 27 T.C. 20 0, 2 10 (20 06 ), aff’d, 5 21 F.3d12 89 (10 th Cir . 20 08 ). The Co m m is si on er h as th us carr ie d h is bu rd enof p ro du ct io n und er
se ct io n 7 49 1( c) t o s ho w th atMr. Sch lu ss el is li ab le forth e ad di ti on to tax un de r
se ct io n 6 65 1( a)(2 ). Mr. Sch lu ss el ha s n otm ad e an y de fen se , andhe is li ab le for th e fai lure-t o- pa y

ad di ti on to tax
.- 13 -

[* 13 ] D. Fai lu re t o p ay est im at edtax Sect io n 6 65 4 i m

po se s an ad di ti on to tax onanin di vi du al tax pa y er wh o
un de rp ay s h is est im at edtax . The Co m m is si on er d et erm in edth is ad di ti on for Mr. Sc hl us se l’s 2 00 6 a nd20 07 y ears . A tax pay er h as anob li ga ti onto pay
es ti m at edtax fora pa rti cu la r y ear i f he ha s a “ requi redan nu al pa ym en t” forth at y ear. Se c. 66 54 (d ). A “ requi redan nu al pa ym en t” is de fin edinsec ti on 66 54 (d )(1 )(B) , inpe rti ne ntpart, a s “ th e le ss er o f--(i ) 90 pe rcen t o f th e ta x s ho wn
on th e return fo r th e ta xabl e y ear ( or , if n o re tu rnis fil ed , 90 pe rcen t o f th e ta x fo r
su chy ear) ”, or

(ii ) if th e in di vi du al fil eda return fo r th e p rece di ng tax ab le y ear, th en“ 10 0 p erce ntof t he tax sh own onth e return o f th e in di vi du al for th e pr eced in g t ax ab le y ear” . Thu s, the Co m m is si on er’s b ur de n o f pr oduc ti on un de r
se ct io n 7 49 1( c) re qu ire s h im to pro du ce, fo r eac h year fo r whi chth e ad di ti on is
as se rte d, ev id en ce tha t the tax pay er h ada requi redan nu al pa ym en t u nd er s ect io n 66 54 (d ); a ndinord er t o d o s o h e m us t d em on st rat e th e ta x s ho wn o n t he ta xp ay er’s return fo r th e p rece di ng y ear o r th atth e ta xp ay er fi le d n o re tu rn . For th e y ear 2 00 7, the “pr eced in g t ax ab le y ear” is 20 06 ; fo r th e y ear 2 00 6, the

“pr eced in g t ax ab le y ear” is 20 05 ; an d fo r ne it he r of th es e “pr eced in g t ax ab le y ear[ s]” di d M r. Sch lu ss el fil e a return. Co ns eque nt ly, th e Co m m is si on er ca rri ed hi s b ur de n o f pr oduc ti on to sh ow tha t M r. Sch lu ss el is li ab le forth e se ct io n 6 65 4- 14 -

[* 14 ] ad di ti on for20 06 an d 2 00 7, an d h e m ad e n o d efen se . He is th eref or e li ab le fo r th is ad di ti on for

fai lu re t o p ay

est im at edtax
. III. Fai lu re t o re sp on d The for eg oi ng di sc us si on res ol ve s t hi s ca se on it s m eri ts . In the alt ern at iv e,
we wou ldreac h the same outc om e b y di sm is si ng th e cas e, on ou r own m ot io n, fo r Mr. Sc hl us se l’s fa il ur e to co m pl y with o ur ord ers of No ve m

be r 23 an d Decem be r 21 , 20 12 , di rect in g h im to fil e a res po ns e to th e Co m m is si on er’s m ot io n fo r su m m ary jud gm en t. As we advi se d h im inou r or de r, Tax Co urt Ru le 12 1( d) pro vi de s, “ If the adve rs e p arty [i.e ., Mr. Sc hl us se l] do es no t s o re sp on d [t o am ot io n fo r su m m ary jud gm en t], th ena de ci si on , if ap pr op ria te , m ay be en te redag ai ns t su chpa rty”--i .e., aga in stMr. Sch lu ss el
. Inad di ti on , Rul e 1 23 (“ Defau ltan d Di sm is sa l” ) pr ov id es :

(a) Defau lt : If any part y ha s fa il edto pl eador o th erwi se pr oc eedas p ro vi de d b y

th es e Ru le s o r as requi redby the Co urt, the n su chpa rty m ay

be he ldinde fau ltby the Co urt ei th er o n m ot io n o f an ot he r pa rty or o n t he in it ia ti ve of t he Co urt. The reaf te r, th e Co urt m ay en te r a d eci si on ag ai ns t the de fau lt in g p arty , up onsu chterm s an d c on di ti on s as th e Co urt m ay de em pro pe r * * *. (b ) Dis m is sa l: Forfai lu re o f a p et it io ne r pr op erl y to pr os ecu te or t o c om

pl y with t he se Ru le s o r an y

ord er o f th e Co urt * * *, the Co urt m ay

di sm is s a c as e atany

ti m e an d e nt er a d eci si on ag ai ns t the pe ti ti on er.- 15 -

[* 15 ] As we h av e n ot ed , th e Co m m is si on er h as th e b ur de n o f pr oo f on th e is su e o f frau d; bu t wh ere ( as he re) h is an swe r al le ge s s pe ci fic fact s s uf fic ie ntto su st ai n a fin di ng of f

rau d, a d eci si on of d efau ltcanbe en te redpurs ua ntto Ru le 12 3( a) ag ai ns t a p et it io ne r who “ ha s fa il edto pl eador o th erwi se pro ceed ”. See Sm it h v
. Co m m is si on er, 9 1 T.C. 1 04 9, 1 05 6 (1 98 8) , aff’d, 9 26 F.2d14 70 (6t h C ir. 1 99 1)
. Lik ewis e, whe re fraudis at i ss ue , a pe ti ti on canbe di sm is se d fo r “ fai lure * * * pr op erl y to pro se cu te or t o c om

pl y with t he se Ru le s o r an y

ord er” u nd er Ru le 12 3( b) , wher e “ th e Co m m is si on er * * * co m e[s ] fo rward , eit he r in th e pl ead in gs or a t tria l, wi th su ffi ci en t fa ct s t o s us ta in a fi nd in g o f frau d” . Fife r v. Co m m is si on er, T.C. Mem o. 1 99 3- 44
. The Co urt ex pl ai ne d t o M r. Sch lu ss el th e n atur e o f th e Co m m is si on er’s
m ot io n fo r su m

m ary jud gm en t an d t he pro pe r m anne r fo r res po nd in g t o t he m ot io n
an d t he n s ho wedex tra or di na ry len ie nc y by allo win g h im

anad di ti on al si x m on th s to fil e h is res po ns e--t ho ug h t ha t al lo wan ce s ub st an ti al ly del ay edde ci si on inth is
cas e an d c on se qu en tl y

(by op erat io n o f se ct io n 6 21 3( a)) d el ay edth e as se ss m en t ag ai ns t M r. Sch lu ss el of t he tax at i ss ue . Havi ng be engra nt edth e al lo wan ce h e reque st ed , Mr. Sch lu ss el th enm ad e n o fi li ng inres po ns e to th e Co urt’s o rd er. He th us in du cedde lay

inth es e p ro ceed in gs forno pu rp os e. Thi s ci rcu m st an ce
warra nt s d is mis sa l o f th e cas e fo r fai lu re t o c om pl y with t he Co urt’s o rd er.- 16 -

[* 16 ] Con cl us io n The Co m m is si on er i s en ti tl edto su m m ary jud gm en t. To r efl ectth e fo reg oi ng , An ap pr op ria te ord er an d d eci si on wil l b e en te red
.