T.C. Mem o. 2 01 5- 46

UNITED STAT ES TAX COURT

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

Doc ke t No . 22 23 5- 13
. Fi le d M arch 16 , 20 15
.
Mi ch ael Bal ic e, pr o s e. Kath le enK. Raup an d In a Su sa n Wein er, fo r res po nd en t.

MEMORANDUM OPINION LAUBER, Ju dg e: W ith re sp ectto pe ti ti on er’s Fed eral in co m e ta x fo r 20 07
an d 2 00 8, the Int ern al Rev enue Serv ic e (IR S o r res po nd en t) d et erm in edde fici en ci es an d a dd it io ns to tax un de r se ct io n 6 65 1 inth e fo ll owi ng am ou nt s: 1
Unl es s o th erwi se in di cat ed , all st atut ory refe ren ces are t o the Int ern al 1 Rev enue Co de ineffe ctforth e ta x years a t i ss ue , andall Ru le refe ren ces are t o the (co nt in ue d...)- 2 -

[* 2] Add it io ns to tax Year Defici en cy Sec. 6 65 1( a)(1 ) Sec. 6 65 1( a)(2 ) Sec. 6 65 1( f) 20 07 $3 5,9 47 $8 ,08 8 $8,9 87 $2 6,0 62 20 08 3,8 10 85 7 95 3 --- Pet it io ne r m ark et eddu rin g the se y ears pro du ct s tha t p ur po rte d t o e nabl e in di vi du
al s t o a vo idtax at io n o f th ei r in co m e b y us e o f sh am

“ tru st s.” Pr act ic in g wh athe pr each ed , pet it io ne r em

pl oyed the se tru st s h im se lf. He re po rte d n o i nc om e fro m sa le of h is tax ev as io n p ro du ct s t o o th ers , andhe di d n otfil e a Fed eral in co m e ta x return fo r ei th er y ear. He was co nv ic te d o f ta x c rimes an d i s cu rren tl y in carcera te d. The IRS re co ns tru ct edpe ti ti on er’s i nc om e o n the ba si s o f hi s b an k d ep os it s, pr ep aredforeachy ear asubs ti tu te forreturn (S FR) tha t m etth e requi rem en ts of
se ct io n 6 02 0( b) , andsen t p et it io ne r a n ot ic e o f de fic ie nc y de te rm in in g the de fic ien ci es an d a dd it io ns to tax setforth ab ov e. Res po nd en t h as m ov edforsu m m ary jud gm en t u nd er Ru le 12 1, co nt en di ng th atth ere are n o d is pu te d i ss ue s o f fac t an d th athe is en ti tl edto jud gm en t as a m at te r of law. Pet it io ne r ha s re sp on de d t o thi s m ot io n b y

co nt en di ng (am on g o th er thi ng s) th athe is no t s ub ject t o IR S d efi ci en cy (...co nt inue d) 1 Tax Co urt Ru le s o f Prac ti ce an d P ro cedur e. W e ro un d a ll m on et ary am ou nt s t o th e n eare stdo ll ar.- 3 -

[* 3] pro cedur es an d tha t wag es are n ot“ in co m e” b ecau se th ey res ul t fr om

th e ex erci se of h is “ irr efu tabl e ri gh t t o wo rk .” W e wil l g ran t the m ot io n fo r su m m ary jud gm en t an d s us ta inth e ta x d efi ci en ci es an d a dd it io ns to tax de te rm in edby the IRS. We will als o re qu ire pe ti ti on er t o p ay un de r se ct io n 6 67 3( a) a p en al ty to the Uni te d S tate s i n the am ou ntof $ 25 ,00 0 fo r as se rti ng fri vo lo us po si ti on s i n thi s Co urt. Bac kg ro un d The re i s n o d is pu te co nc ern in g the fol lo win g fa ct s. Th es e fac ts are d eri ve d fro m th e p art ie s’ pl ead in gs an d m ot io n p ap ers , fro m un de ni edall eg at io ns of r esp on de nt ’s am en de d ans wer tha t p et it io ne r is de em edto have adm it te d, an d fr om th e d ecl arat io n andth e at ta ch edex hi bi ts th atres po nd en t fi le d i n s up po rt o f hi s su m m ary jud gm en t m ot io n. Pe ti ti on er res id edina Fed eral co rrec ti on al faci li ty in Fo rt Di x, New J ers ey , when he pe ti ti on edth is Co urt. Dur in g the tax y ears at i ss ue pe ti ti on er was a pr in ci pa l o f Mi d- Atl an ti c Trus te es an d Ad m in is tra to rs (MATA). MATA so ldpro du ct s, i nc lu di ng th e “ Pure Trus t Org an iz at io n” (PTO), de si gn edto ass is t i nd iv idua ls inev ad in g the ir F ed eral ta x o bl ig at io ns . Inc om e fro m th e sa le of M ATA’ s p ro du ct s was de po si te d i nt o a Ban k o f Am eri ca ac co un t en di ng in68 19 ti tl edto “ MATA Irrev oc ab le Trus t” of whi chpe ti ti on er was a trus te e (MATA acc ou nt ).- 4 -

[* 4] Pet it io ne r m ai nt ai ne d andex erci se d c on tro l o ve r two othe r ba nkacco un ts du rin g the se y ears . One was a Ban k o f Am eri ca ac co un t en di ng in55 71 ti tl edto

“ Map le Aven ue Fund in g Irrev oc ab le Trus t” of wh ic h p et it io ne r was a trus te e (Mapl e Ave nu e acc ou nt ). The s eco ndbankacco un t was a Ban k o f Am eri ca ac co un t en di ng in49 16 ti tl edto Mi ch ael Bal ic e (Ba li ce ac co un t). Pe ti ti on er was a si gn at ory to bo th of t he se acco un ts . BetweenJan uary

1, 2 00 7, an d Dec em

be r 31 , 20 07 , $1 44 ,65 0 i n c as h was tra ns ferr edfro m

th e MATA acc ou ntto th e Mapl e Ave nu e acc ou ntan d the Bal ic e acco un t. As s ho wn i n the rel ev an t b an k s ta te m en ts , th is m ov em en t o f fund s i nt o th e Mapl e Ave nu e acc ou ntan d the Bal ic e acc ou ntwas e ffec te d i n 4 0 s ep arat e tra ns act io ns by checkor i nt er-a cco un t tran sf er. BetweenJan uary

1, 2 00 8, an d Dec em

be r 31 , 20 08 , $3 7,0 00 incas h was tra ns ferr edfro m

th e MATA acc ou ntto th e Mapl e Ave nu e acc ou ntan d the Bal ic e acco un t. As s ho wn i n the rel ev an t b an k s ta te m en ts , th is m ov em en t o f fund s i nt o th e Mapl e Ave nu e acc ou ntan d the Bal ic e acc ou ntwas e ffec te d i n 1 3 s ep arat e tra ns act io ns by checkor i nt er-a cco un t tran sf er. On the ba si s o f th es e tr an sf ers in to bankacco un ts ov er wh ic h p et it io ne r ex erci se d c on tro l, the IRS d et erm in edth atpe ti ti on er h adrece iv edin co m e o f $1 44 ,65 0 and$3 7,0 00 in20 07 an d 2 00 8, re sp ect iv el y . For the 20 07 tax ab le y ear- 5 -

[* 5] th e IRS rece iv edfro m Ch as e Ban k USA a F orm 10 99 -C, Can cel la ti on of Deb t, re po rti ng th atpe ti ti on er al so ha d c an cel la ti onof i nd eb te dn es s i nc om e o f $3 ,41 1 i n 2 00 7 fr om

Ch as e Ban k USA. On J un e 1 0, 2 01 1, a s up ers ed in g i nd ic tm en t was fil edag ai ns t p et it io ne r in Uni te d S tate s v . Bal ic e, No. 2 :1 0- CR-0 04 85 -0 2, i n the U.S. Dist ric t Co urt fo r th e Dis tri ctof Ne w Jer se y . Cou nt13 of t hi s i nd ic tm en t d es cri be d p et it io ne r’s us e o f th e PTO ta x e va si on sch em e an d c ha rg edhi m with c riminal tax ev as io n fo r 20 07 invi ol at io n o f se ct io n 7 20 1. OnJu ne 20 , 20 11 , a jury fo un d p et it io ne r gu il ty of (am on g o th er thi ng s) vi ol at in g s ect io n 7 20 1 fo r th e 2 00 7 t ax ab le y ear. OnJan ua ry 9, 2 01 3, the Dis tri ctCo urt en te redit s amend edjud gm en t p ur su an t t o the ve rd ic t. On M ay 30 , 20 12 , th e IRS pre paredSFRs forpe ti ti on er fo r 20 07 an d 2 00 8
an d e xe cu te d fo r eac h year th e certi fic at io n re qu ire d b y sec ti on60 20 (b ). Thes e returns co ns ti tu te d v al idFed eral in co m e ta x re tu rn s o f pe ti ti on er fo r 20 07 an d 20 08 . On Ju ly 2, 20 13 , th e IRS ti m el y m ai le d p et it io ne r a n ot ic e o f de fic ie nc y ba se d o n the se SFRs , det erm in in g t ax de fic ie nc ie s fo r eac h year an d a dd it io ns to ta x fo r frau du le ntfai lure t o fi le (fo r 20 07 ), fo r fai lu re t o fi le ti m el y (fo r 20 08 ), an d fo r fai lu re t o p ay

ti m el y (fo r bo th y ears ). 2
Res po nd en t as se rte d an a dd it io n t o t ax un de r se ct io n 6 65 1( a)(1 ) fo r 20 07 in 2 th e ev en t we d o n otsu st ai n the frau du le ntfai lure-t o- fil e p en al ty.- 6 -

[* 6] On Se pt em

be r 23 , 20 13 , pet it io ne r ti m el y pe ti ti on edth is Co urt fo r rev ie w of th e n ot ic e o f de fic ie nc y . As th e b as is forhi s d is ag reem en t wi thres po nd en t’s d ete rm in at io ns , pet it io ne r st at edas f ol lo ws: Pet it io ne r is no t the pe rs on m ad e li ab le by law un de r IRC §§ 14 61 & 14 63 forth e p aym en t o f th e ta x, o r th e p en al ty. The d efi ci en cy vi ol at es IRC § § 6 21 1 and62 12 be cau se itha s b eenba se d o n S ub ti tl e C wag es , no t Subt it le A. Per IRC § § 6 00 1 and60 11 , Pet it io ne r is no t a p ers onrequi redby law to fil e a t ax return b ecau se he ha s n o s ta tu to ry li ab il ity forth e p aym en t o f an y

tax . IRC § 60 20 (b ) ha s b een vi ol at edas t he re i s n o s ub sc rib edSFR. IRM 52 91 ha s b eenvi ol at ed as Fo rm 10 40 is no t au th or iz edforus e as anSFR d oc um en t u nd er IRC § 60 20 (b ). Pet it io ne r di d n otearn th e wag es de fin edun de r IRC § 1 44 1( b) th atare s ub

ject t o the Subt it le A bas edde fic ie nc y cal cu la te d u nd er IR C § 62 11 . Peti ti on er d is pu te s the ap pl ic at io n o f th e d efi ci en cy

au th or ity , andth e in co m e ta x l aw, as a di recttax witho utap po rti on m en t, wh ic h i s s ti ll co nt ro ll edan d p ro hi bi te d b y Arti cl e I o f th e U.S. Co ns ti tu ti on . On J ul y 16 , 20 14 , th e Co urt g ran te d re sp on de nt ’s m ot io n fo r le av e to fil e an am en dm en t t o ans wer, whi chset s fo rth th e d et ai ls of p et it io ne r’s ta x e va si on sc he m e an d c riminal co nv ic ti on an d m ak es (am on g o th ers ) th e fo ll owi ng affi rm ati ve all eg at io n: The pri orcri m in al co nv ic ti onof p et it io ne r un de r I.R.C. § 72 01 for th e ta xabl e y ear 2 00 7 i s co nc lu si ve an d b in di ng onpe ti ti on er, an d b y reas on th ereo f pe ti ti on er i s es to pp edinth e in st an t ca se , un de r th e do ctrin e o f co ll at eral est op pe l (e st op pe l b y jud gm en t), fr om

de nyin g he rei n tha t h e fraudul en tl y fai le d t o fi le anin co m e ta x re tu rnforth e ta xabl e y ear 2 00 7 u nd er I.R.C . § 6 65 1( f) an d tha t, the refo re, p et iti on er i s l iabl e fo r th e ad di ti on to tax im po se d b y I.R.C. § 66 51 (f).- 7 -

[* 7] Res po nd en t’s am en dm en t t o ans wer al so all eg es affi rm at iv el y th at

“ [p ]etit io ne r rec ei ve d i nc om e o f $1 48 ,06 1 i n 2 00 7.” Thi s re pr es en ts th e su m of th e in co m e p et it io ne r rec ei ve d fr om MATA ($1 44 ,65 0) an d the in co m e h e rea li zed fro m can cel la ti on of i nd eb te dn es s ($ 3,4 11 ). Ourord er g ran ti ng res po nd en t l eav e to am en d h is an swe r al so ord eredpe ti
ti on er t o fi le , by Aug us t 2 9, 2 01 4, a r ep ly to the fir stam en dm en t t o ans wer. Thi s or de r warn edpe ti ti on er tha t i f he “ fai ls to fil e a rep ly, ev ery affi rm at iv e al le ga ti on se t o utinth e Fi rs t Am en dm en t t o An swe r m ay be de em edadm it te d u nd er Tax Co urt Ru le 37 (c).” Pet it io ne r di d n otfil e a rep ly to the fir stam en dm en t t o ans wer; in st ead , he f

il eda 12 9- pa ge “ Mem or an du m at Law o n F ed eral Inc om e Tax at io n an d the Pers on al Fed eral Inc om e Tax .” Thi s d oc um en t co nt ai ns th e u su al gi bb eri sh em

br acedby tax pro te st ers . On Sep te m be r 12 , 20 14 , res po nd en t m ov ed fo r en try of anord er u nd er Ru le 37 (c) tha t p et it io ne r be de em edto ha ve adm it te d th e und en ie d a ffi rm at iv e al le ga ti on s o f th e fi rs t am en dm en t t o ans wer. W e g ran te d th atm ot io n o n S ep te m

be r 17 , 20 14
. On Oct ob er 9 , 20 14 , res po nd en t fi le d am ot io n fo r su m m ary jud gm en t, t o whi chpe ti ti on er re sp on de d o n No ve m be r 10 , 20 14 . His r es po ns e as se rts th atth ere ex is t “ m an y

factua l d is pu te s” bu t m ak es no refe ren ce wh at ev er t o the actua l fa ct s of th is cas e. Rathe r, th e “ factua l d is pu te s” he all eg es are s ai d t o c on cern (fo r ex -- 8 -

[* 8] am pl e) wh ethe r “ th e o rig in al in co m e ta x l eg is la ti on was e na ct edun de r a t ari ff act , as atar iff

, or n ot ”; whet he r “ se ct io n 1 46 1 i de nt ifi es th e p ers on s wh o are actua ll y m ad e li ab le ” fo r pa ym en t o f in co m e ta x; whet he r se ct io ns 60 01 an d 6 01 1

“ requi re a l iabi li ty for a t ax to be de te rm in edto ex is t as a pr erequi si te to a pe rs on be in g re qu ire d t o fi le returns or k eep reco rd s” ; wh ethe r “wag es ” co ns ti tu te

“ in co m e”; an d wh ethe r “ th e im pr op er cre at io n andun au th or iz edsubs ti tu te for return d oc um en ts inth is cas e b y th e IRS em

pl oyees c on st itut es ev id en ce o f a cri m e.” Dis cu ss io n A. Su m

m ary Ju dg m en t St an da rd The pu rp os e o f su m

m ary jud gm en t i s t o e xp ed it e li ti ga ti on an d a vo idco st ly, ti m e-co ns um in g, an d u nn eces sa ry tri al s. Fl a. Peac h C or

p. v . Comm is si on er, 9 0 T.C. 67 8, 6 81 (19 88 ). Und er Ru le 12 1( b) th e Co urt m ay gra ntsu m

m ary jud gm en t whe n the re i s n o g enui ne di sp ut e as to any m at eri al factan d ade ci si on m ay be
ren de redas am at te r of

law. Su nd st ran d C or

p. v . Comm is si on er, 9 8 T.C. 5 18 , 52 0 (1 99 2) , aff’d, 1 7 F .3d96 5 (7 th Cir . 19 94 ). Ru le 12 1( d) pro vi de s tha t wh ere the
m ov in g p arty

pro pe rly m ak es an d s up po rts a m ot io n fo r su m m ary jud gm en t, “ an adve rs e p arty

m ay no t re stup on th e m ere a ll eg at io ns or d en ia ls of s uc h p arty ’s pl ead in g” bu t ra th er m

us t s etforth sp eci fic fact s, b y affi davi ts or o th erwi se ,- 9 -

[* 9] “ sh owi ng th atth ere i s a g enui ne di sp ut e fo r tr ia l.” In li gh t o f res po nd en t’s
m ot io n, h is supp orti ng de cl arat io n andex hi bi ts , th e d eem edadm is si on by pe ti ti on er o f th e und en ie d a ffi rm at iv e al le ga ti on s o f th e fi rs t am en dm en t t o an swe r, an d p et it io ne r’s res po ns e to th e su m m ary jud gm en t m ot io n, wh ic h a ll eg es no co lo rab le di sp ut e as to any m at eri al fact , we con cl ud e th atth is cas e m ay be ad jud ic at edsu m

m ari ly. B. Unr ep orte d In co m e The IRS’ det erm in at io ns ina no ti ce o f de fic ie nc y are g en eral ly pres um ed
co rrec t, an d the tax pa y er b ears th e b ur de n o f pr ov in g tho se de te rm in at io ns erro ne ou s. Ru le 14 2( a); W el chv. Hel ve rin g, 2 90 U.S. 11 1, 1 15 (19 33 ). Forth is pre su m pt io n t o a dh ere i n c as es in vo lv in g re cei ptof unr ep orte d i nc om e, res po nd en t
m us t p ro vi de so m e p red ic at e ev id en ce co nn ect in g the tax pa y er t o the in co m epr oduc in g a ct iv ity . See, e.g ., De Cav al can te v. Co m m is si on er, 6 20 F.2d23 (3d Ci r. 19 80 ), aff’g T.C. Me m o. 1 97 8- 43 2; Tuck er v . Commis si on er, T.C. Mem o. 20 14 -5 1, at*1 2. On ce re sp on de ntha s p ro du cedev id en ce l in ki ng th e ta xp ay er t o anin co m e-p ro du ci ng act iv ity , th e b ur de n o f pr oo f sh ift s t o the tax pa y er t o p ro ve by a prep on de ran ce o f th e ev id en ce tha t re sp on de nt ’s det erm in at io ns are arbi tra ry orerro ne ou s. Hel ve rin g v . Tay lo r, 29 3 U.S. 5 07 , 51 5 (1 93 5) ; To ka rs ki v. Co m m is si on er, 8 7 T.C. 7 4 (1 98 6)
.- 10 -

[* 10 ] Res po nd en t h as supp li edbankreco rd s d em on st rat in g tha t ca sh of $ 14 4,6 50 fo r 20 07 an d $ 37 ,00 0 fo r 20 08 was tran sf erre d fr om

th e MATA acc ou ntin to th e Map le Aven ue acco un t an d the Bal ic e acc ou nt , ov er wh ic h p et it io ne r ha d s ig na to ry auth or ity an d e xe rci se d c on tro l. Res po nd en t h as supp li edev id en ce tha t the IRS re cei ve d fr om

Ch as e Ban k USA a F orm 10 99 -C fo r 20 07 rep orti ng th at pe ti ti on er re al iz edcan cel lati on of i nd eb te dn es s i nc om e o f $3 ,41 1 i n 2 00 7. Th es e reco rd s es tabl is h tha t p et it io ne r rec ei ve d, b utdi d n otrep ort, i nc om e o f $1 48 ,06 1 fo r 20 07 an d $ 37 ,00 0 fo r 20 08
. On the ba si s o f th is cred ib le ev id en ce, we are sat is fie d tha t the IRS’ det erm in at io ns setforth inth e n ot ic e o f de fic ie nc y are en ti tl edto th e g en eral pre su mpti onof c orrectne ss . See Hardy v. Co m m is si on er, 1 81 F.3d10 02 , 10 04 (9t h C ir. 19 99 ), aff’g T.C. Me m o. 1 99 7- 97 ; Po wers te inv. Co m m is si on er, T.C. Mem o. 20 11 -2 71 . Peti ti on er’s res po ns e to th e m ot io n fo r su m m ary jud gm en t d oe s n ot al le ge an y

di sp ut e as to th e co rrec tn es s o f th e IRS ’ de te rm in at io ns . Ind eed , for 20 07 , pet it io ne r is de em edto ha ve adm it te d the all eg at io n i n the fir stam en dm en t to an swe r th athe “ rece iv edin co m e o f $1 48 ,06 1 i n 2 00 7,” rep res en ti ng th e su m of hi s ca nc el la ti on of i nd eb te dn es s i nc om e ($ 3,4 11 ) an d the in co m e h e rec ei ve d fr om MATA ($ 14 4,6 50 ). W e wil l ac co rd in gl y su st ai n re sp on de nt ’s det erm in at io n o f
un rep orte d i nc om e fo r eac h year.- 11 -

[* 11 ] C. Add it io ns to Tax 1. Fai lu re To Fil e Sect io n 6 65 1( a)(1 ) pr ov id es foranad di ti on to tax when a ta xp ay er fa il s t o fil e a return t im el y , un le ss th e ta xp ay er p ro ve s tha t the fai lu re was du e to reas on ab le cau se an d n otdu e to wil lfu l n eg le ct . Late fi li ng of areturn i s due to reas on ab le cau se “ [i]f th e ta xp ay er ex erci se d o rd in ary bu si ne ss care an d p ru de nc e an d
was ne ve rth el es s u nabl e to fil e th e return wi th inth e p res cri be d t im e.” Sec
. 30 1.6 65 1- 1( c)(1 ), Pro ced . & Adm in . Reg s. Fo r eac h m on thor f ract io n the reo f fo r whi chsu chfai lu re co nt in ue s, s ect io n 6 65 1( a)(1 ) ad ds 5% o f th e ta x re qu ire d t o b e sh own on su chreturn, up t o am ax im um ad di ti on of 2 5%. “ If an y fai lu re t o fi le
an y return i s fr au du le nt ,” ho wev er, the m on th ly add it io n t o t ax ris es fro m 5% t o 15 %, andth e m ax im

um ag gr eg at e ad di ti on to tax is in crea se d t o 7 5%. Sec
. 66 51 (f)(1 ) an d (2 ). Res po nd en t b ears th e b ur de n o f pr ov in g fr au d b y “ cl ear a nd
co nv in ci ng ev id en ce.” Re edy v. Co m m is si on er, T.C. Mem o. 2 00 8- 10 0. Res po nd en t h as sh own , andpe ti ti on er d oe s n otdi sp ut e, th athe fai le d t o fi le Fed eral in co m e ta x re tu rn s fo r 20 07 an d 2 00 8. Pe ti ti on er d oe s n otco nt en d, an d h e co ul d n otpl au si bl y

co nt en d, tha t h e ex erci se d “ or di na ry bu si ne ss care an d p ru de nc e” i n the di sc ha rg e o f hi s Fe de ral tax ob li ga ti on foreit he r y ear. Fo r 20 07 pe ti ti on er was co nv ic te d u nd er s ect io n 7 20 1 o f wil fu ll y att em pt in g t o e va de or- 12 -

[* 12 ] de feathi s Fe de ral in co m e ta x o bl ig at io n, an d h e is th us co ll at eral ly esto pp ed fro m de nyin g tha t h is fai lu re t o fi le forth aty ear was frau du le nt . See DiLe o v . Co m m is si on er, 9 6 T.C. 8 58 , 88 5 (1 99 1) , aff’d, 9 59 F.2d16 (2dCir .19 92 ). In a ny ev en t, p et it io ne r is bo un d b y hi s d eem edadmis si on of the affi rm at iv e al le ga ti on s inres po nd en t’s fi rs t am en dm en t t o ans wer tha t “pe ti ti on er i s l iabl e fo r th e ad di ti on to tax im po se d b y I.R.C. § 66 51 (f).” Se e Don cas te r v. C omm is si on er, 7 7 T.C. 33 4, 3 36 -3 40 (19 81 ) (n ot in g tha t d eem edadm is si on s u nd er Ru le 37 (c) are su ffi ci en t t o s at is fy

res po nd en t’s b ur de n o f pr ov in g fr au d) . W e acc or di ng ly
su st ai n re sp on de nt ’s det erm in at io n tha t p et it io ne r is li ab le forad di ti on s t o t ax of $2 6,0 62 for20 07 un de r se ct io n 6 65 1( f) an d $ 85 7 fo r 20 08 un de r se ct io n 66 51 (a)( 1)
. 2. Fai lu re To Pay Sect io n 6 65 1( a)(2 ) pr ov id es foranad di ti on to tax when a ta xp ay er fa il s t o pa y ti m el y th e ta x s ho wn o n areturn, unl es s the tax pa y er p ro ve s tha t the fai lu re was du e to reas on ab le cau se an d n otdu e to wil lfu l n eg le ct . A sub st itut e fo r return pr ep aredby the IRS p ur su an t t o s ect io n 6 02 0( b) is tre at edas t he “ return” fil edby th e ta xp ay er fo r pu rp os es of s ect io n 6 65 1( a)(2 ). See s ec. 6 65 1( g) . For e ach m on th
orfrac ti on th ereo f fo r whi cha fai lu re t o p ay co nt in ue s, s ect io n 6 65 1( a)(2 ) ad ds- 13 -

[* 13 ] 0.5 % of t he tax requi redto be sh own on su chreturn, up t o am ax im um ad di ti on of 2 5%. Res po nd en t h as sh own , andpe ti ti on er d oe s n otdi sp ut e, th athe fai le d t o p ay hi s Fe de ral in co m e o bl ig at io ns for20 07 an d 2 00 8. Re sp on de ntha s es tabl is he d th atth e IRS pre pa redforeach y ear a n S FR tha t m etth e requi rem en ts of s ect io n 60 20 (b ). Pet it io ne r do es no t co nt en d, an d h e co ul d n otpl au si bl y co nt en d, tha t h is fai lu re was du e to “ reas on ab le cau se .” W e acc or di ng ly sus ta inth e se ct io n 66 51 (a)( 2) ad di ti on s t o t ax . D. Sect io n 6 67 3 P en al ty Sect io n 6 67 3( a)(1 ) au th or iz es th is Co urt t o re qu ire a ta xp ay er t o p ay to th e Uni te d S tate s a p en al ty notinex ces s o f $2 5,0 00 if i t ap pe ars th athe ha s i ns ti tu te d
orm ai nt ai ne d p ro ceed in gs pri m ari ly for d el ay or t he tax pay er’s p os it io n “ is fri vo lo us or g ro un dl es s.” Th e p ur po se of s ect io n 6 67 3 i s t o c om pe l t axpa y ers to co nfo rm th ei r co nduc t t o s et tl edtax pri nc ip le s an d t o d et er the wast e o f jud ic ia l re
so ur ces . See Co le m anv. Co m m is si on er, 7 91 F.2d68 , 71 (7t h C ir. 1 98 6) ; Sa lz er v . Co m m is si on er, T.C. Mem o. 2 01 4- 18 8. Pet it io ne r was pre vi ou sl y be fo re thi s C ourt i n B al ic e v . Commis si on er, T.C. Mem o. 2 00 5- 16 1, 9 0 T.C.M . (CCH) 1 , wher e h e ch al le ng eda no ti ce o f Fed eral tax li en . In g ran ti ng th e Co m m is si on er’s m ot io n fo r su m m ary jud gm en t, the Co urt- 14 -

[* 14 ] no te d tha t p et it io ne r adva nc edco nt en ti on s “ th atth e Co urt fi nd s t o b e fri vo lo us an d/ orgro un dl es s.” 9 0 T.C.M . (CCH) at3. We the n c on si de redsu a sp on te whet he r to im

po se onpe ti ti on er a p en al ty und er s ect io n 6 67 3( a)(1 ). Altho ug h we d eci de d n otto im po se a pe na lty

inth atcas e, we warn edpe ti ti on er

“ th athe m ay

be subjec t t o s uc h ape na lty if i n the futur e h e in st itut es or m ai nt ai ns a p ro ceed in g i n thi s C ourt p rimaril y forde lay an d/ orhi s p os it io n i n any suc h pr oc eed in g i s fr iv ol ou s o r gr ou nd le ss .” Ib id
. On J ul y 9, 2 01 4, re sp on de ntfil edinth e in st an t ca se a m ot io n fo r pr ot ect iv e or de r. Thi s m ot io n re pr es en te d tha t p et it io ne r ha d s erv eda reque stforan swe rs to in te rro ga to rie s d em an di ng th atres po nd en t admitor d en y pro po si ti on s tha t i nc lu
de d m ul ti pl e v ari at io ns on th e fo ll owi ng th em es : (1 ) se ct io n 6 1 d oe s n otco nt ai n th e wor d “ wag es ” o r “ li ab le ”; (2) pe ti ti on er i s n ota “pe rs on ” who is li ab le fortax ; (3 ) pe ti ti on er’s wag es are n ot“ wag es ” subjec t t o t ax un de r subt it le A; an d (4 ) pe ti ti on er’s wag es are n otsubjec t t o s tatu to ry de fic ie nc y

pro cedur es . Con te nt io ns li ke th es e are a fam il iar refr ai n o f th e ta x- pr ot es t m ov em en t. See , e.g., Bo na cco rs o v. Co m m is si on er, T.C. Mem o. 2 00 5- 27 8; Co pe landv. Co m m is si on er, T.C. Mem o. 20 03 -4 6; Guerrie r v. C omm is si on er, T.C. Mem o. 2 00 2- 3; Sm ith v . Comm is si on er, T.C. Mem o. 2 00 0- 29 0; Rev . Rul . 20 07 -2 0, 2 00 7- 1 C .B. 86 3. Re sp on de ntsubm it
-- 15 -

[* 15 ] tedth athe sh ou ldno t b e requi redto an swe r th es e in te rro ga to rie s b ecau se th ey were d es ig ne d t o b ur de n the IRS an d c on st itut edab us e o f th e jud ic ia l s y st em . On J ul y 16 , 20 14 , we gra nt edres po nd en t’s m ot io n fo r a p ro te ct iv e o rd er an d advi se d p et it io ne r th at“ [t]he Co urt wi ll als o c on si de r, as part o f it s u lt im at e d eci
si oninth is cas e, whe th er p et it io ne r sh ou ldbe requi redto pay a pe na lty un de r se cti on66 73 (a)( 1) forth e fri vo lo us po si ti on s h e h as m ai nt ai ne d i n thi s ca se to da te .” W e warn edpe ti ti on er tha t, “ if h e co nt in ue s t o m ai nt ai n s uc h fr iv ol ou s p os it io ns , th e m ag ni tu de of t he pe na lty co ns id eredby thi s C ou rt wi ll in crea se .” Des pi te th es e warn in gs pe ti ti on er h as co nt inue d t o m ak e subm is si on s t o thi s Co urt-- in cl ud in g the do cu m en ts he fil edon Ju ly 31, Au gu st4, Au gu st11 , Sep te m be r 26 , andNov em

be r 11 , 20 14 --tha t co nt ai n n um ero us arg um en ts th atare u tt erl y fri vo lo us . W e wil l ac co rd in gl y requi re h im

to pay un de r se ct io n 6 67 3( a)(1 ) a p en al ty to the Uni te d S ta te s i n the am ountof $ 25 ,00 0. To re fle ctth 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
.