TAX COURT OPINION

Case: Theodore Revoalta Padua
Docket Number: 27575-12
Judge: Kroupa
Opinion Type: bench
Filed: 06/04/2014
Pages: 12

UNITED STATES TAX COURT WASHINGTON, D.C. 20217 THEODORE REVOALTA PADUA, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) Docket No.27575-12 ORDE R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit to petitioner and to respondent a copy of the pages of the transcript of this case before Judge Diane L. Kroupa in San Francisco, California on May 8, 2014, containing her oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, an appropriate decision will be entered. (Signed) Diane L. Kroupa Judge Date: Washington, DC June 4, 2014 SERVED JUN - 4 2014 Capital Reporting Company 3 Bench Opinion by Judge Diane L. Kroupa May 8, 2014 Theodore Revoalta Padua v. Commissioner Docket No. 27575-12 THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT AND OPINION IN THIS CASE AND THE FOLLOWING REPRESENTS THE COURT'S ORAL FINDINGS OF FACT AND OPINION. THESE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. This bench opinion is made pursuant to the authority granted in section 7459(b) and Rule 152. I 1 2 3 4 5 6 7 8 9 10 11 12 13 All section references are to the Internal Revenue 14 15 16 17 18 19 20 21 22 Code as amended and in effect for 2006, and all Rule references are to the Tax Court Rules of Practice and Procedure. Petitioner appeared pro se, and Lesley Hale appeared on behalf of respondent. FINDINGS OF FACT Petitioner failed to stipulate to any facts as required by Rule 91. At trial the Court went through each paragraph of the stipulation with petitioner. 23 Petitioner voiced no reason why he could not 24 25 stipulate to these facts. The facts are so found. Petitioner resided in California at the time he 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 filed the petition. Petitioner did not file a Federal income tax return for 2006. Respondent prepared a substitute for return on behalf of petitioner for 2006. Respondent relied on third-party payor information from Forms 1099-MISC regarding miscellaneous income, a Form 1099-C regarding cancellation of indebtedness, a Form 1099-INT for interest payments, a Form 1099-DIV for dividend payments, and a Form 1099-R regarding distributions from pensions, annuities, etc. (collectively the information returns). These information returns showed that petitioner received and failed to report $247,881 of non- employee compensation, $16,336 of taxable pension distributions and approximately $17,000 of cancellation of indebtedness income, dividends, social security income and interest. All together, he received approximately $300,000 of income in 2006 from various sources. Respondent issued a deficiency notice to petitioner for 2006. Respondent determined that there was a $91,966 deficiency in petitioner's Federal income tax for 2006. Respondent also determined a $20,653 delinquent failure to file addition under section 6651(a)(1), a $22,948 late payment addition under section 6651(a)(2) and a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 $4,343 addition for failure to pay estimated tax payments. Petitioner timely filed a petition with this 4 Court. Petitioner failed to raise any assignment of 5 6 7 8 9 10 11 12 13 14 15 16 17 18 error in the petition. Instead, he provides a list of various law enactments that have no relevance to this case. He starts by stating that the Internal Revenue Service is a private corporation incorporated in Delaware as a collection agency for a Puerto Rico Company. Most importantly, he failed to raise that he received no income and failed to raise that he was not liable for the additions to tax for 2006. Failure to raise an assignment of error shall be deemed to be conceded. Rule 34(b)(4). Thus, these items are deemed conceded. In addition, respondent served on petitioner respondent's Request for Admissions. Petitioner did not file a response to the Request for Admissions 19 within the required time under Rule 90 ( c). 20 Accordingly, each matter in respondent's Request for 21 22 23 24 25 Admissions is deemed admitted. See Rule 90 ( c). At trial, respondent asked that we impose a penalty under section 6673(a) against petitioner for advancing frivolous arguments. The first indication that petitioner may be making frivolous arguments 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 12 13 starts with the petition in which he raises accusations of law violations under 15 U.S.C. Chapter 41 subchapter V section 1692. Petitioner makes no reference or claim under Title 26 U.S.C. involving taxes. On December 2, 2013, petitioner provided a document entitled Motion for Leave and Motion for Amend, which the Court recharateriized as a Statement. Petitioner stated that he "would like to amend my pleas for reason that I don't really want to sue the IRS Commissioner, the persons I want to sue are the IRS Revenue agents for their violation of the law." On January 23, 2014, petitioner provided a 14 Motion for Leave and Amend For Violation of 15 Constitutional Rights and United States Code, which 16 17 18 19 the Court recharacterized as a Report. Petitioner in this document states that he is suing respondent's counsel for violation of "Constitutional Laws and USC," Violation of "Oath of Office and Fiduciary 20 Duty" and "Conspiracy and Negligence." The Court 21 22 23 24 25 issued an Order on February 11, 2014, advising petitioner that the arguments he makes are the type of arguments that this Court and other Courts have found to be frivolous. The Court warned petitioner that he was at risk of being fined up to $25,000 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 7 under section 6673 if he continued to make the type of arguments he has been making. Petitioner has had a consistent pattern of providing non-traditional documents to the Court that needed to be recharacterized as a document that could be filed. For example, he provided the Court a document entitled "Request for Declaratory Judgment 8 Motion for Leave and Amend for Violation of 9 Constitutional Rights and United States Law." He next 10 11 provided a document entitled "Entry of Appearance Request for Declaratory Judgment Motion for Amend." 12 Petitioner also provided a document entitled "Motion 13 14 15 16 17 18 19 20 21 22 23 24 25 for the Attendance of the Contemors for Crime Contempt Constitution." Petitioner's arguments in each of these documents are nonsensical. The Court has given petitioner numerous warnings that the Court may impose sanctions under section 6673 if he continued to make thse types of arguments. The Court warned petitioner in orders and at calendar call and at trial. Respondent has also warned petitioner numerous times. Despite these warnings petitioner asserted at trial that he was not a "taxpayer" subject to tax and that the amounts he received are not taxable. Petitioner also asserts that he has no tax obligations because he is a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 private person, not a Federal employee. Also at trial, petitioner submitted a document entitled "Petitioner Motion for Leave and Motion to Amend for Reporting a Crime." Respondent filed a 5 Motion for Sanctions recommending the Court impose a 6 7 8 9 10 11 12 $15,000 penalty under section 6673 against petitioner. Petitioner makes his arguments by taking portions of the Code, the Constitution and United States Supreme Court opinions out of context. Again and again petitioner failed to heed the Court's and respondent's warnings. Petitioner uses war-torn arguments that this 13 Court and other courts have found frivolous and 14 15 16 17 18 19 20 21 22 23 24 25 sanctionable. Petitioner has disregarded the Court's and respondent's repeated warnings. Petitioner defied the Court and argued that he had not brought this case for delay purposes or that he was raising only frivolous arguments. Despite the numerous warnings from the Court, petitioner persisted in making frivolous arguments and wasting the Court's time and limited resources. OPINION We begin by discussing two fundamental principles of tax litigation. First, the presumption of correctness attaches to the deficiency 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 4 5 determination because the deficiency notice shows that respondent possessed direct evidence of payments to petitioner, and nothing in the record reflects that petitioner failed to receive the amount. See Edwards v. Commissioner, 680 F.2d 1268, 1270 (9th 6 Cir. 1982); Banister v. Commissioner, T.C. Memo. 7 8 9 10 11 12 2008-201. It is also a fundamental tax principle that gross income includes all income from whatever source derived, including non-employee compensation, interest, dividends, cancellation of indebtedness and taxable pension distributions. Sec. 61(a)(1). 13 Petitioner argues, however, that he is not a person 14 15 16 17 18 19 20 21 required to file a return and pay tax. Simply put, he is a taxpayer required to file a return and pay tax. See secs. 61(a), 6001, 6012, and 6072. Petitioner follows in the footsteps of numerous others who have unsuccessfully attempted to avoid paying Federal income taxes. We need not discuss petitioner's erroneous positions at length. See Wnuck v. Commissioner, 136 T.C. 498 (2011). To refute 22 petitioner's arguments with somber reasoning and 23 24 25 conspicuous citation of precedent might suggest that these arguments have some colorable merit. Crain v. Commissioner, 737 F.2d 1417, 1418 (5th Cir. 1984). We 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 therefore sustain the deficiency determined in the deficiency notice. We now focus on the additions to tax. An addition to tax is imposed if a taxpayer fails to file a timely Federal income tax return. Sec. 6651(a)(1). The record reflects that petitioner failed to file a Federal income tax return by the prescribed due date for 2006. Petitioner presented no evidence showing that his failure to file or pay was due to reasonable cause and not due to willful neglect. As already mentioned, petitioner has advanced several specious arguments as to why he should not have to pay tax. None of his arguments establishes that he had "reasonable cause." 15 Accordingly, we hold that petitioner is liable for 16 17 18 19 20 21 22 23 24 25 the late filing addition to tax under section 6651(a)(1). Next, we address the late payment addition to tax imposed under section 6651(a)(2) for the late payment of tax shown as due on the SFR that respondent prepared for petitioner. An SFR made by the Secretary under section 602003) is treated as the return filed by the taxpayer for purposes of determining whether the late payment addition to tax applies. Sec. 6651(g)(2). We sustain respondent's 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 5 6 7 8 9 determination of the late payment addition to tax under section 6651(a)(2). There is no information in the record, however, whether respondent met his burden of production as to the addition to tax under section 6654 for failing to make estimated tax payments. Respondent must produce evidence sufficient for us to conclude that petitioner had a required annual payment under section 6654(d)(1)(B) (relating to tax liability for the preceding tax year) to 10 determine whether one of the exceptions apply. See 11 Wheeler v. Commissioner, 127 T.C. 200 (2006). We 12 13 14 15 16 17 18 therefore do not sustain respondent's determination in the deficiency notice as to this addition to tax. We next determine whether to impose a penalty against petitioner under section 6673. Section 6673 authorizes the Tax Court to require a taxpayer to pay to the United States a penalty up to $25,000 whenever it appears that proceedings have been instituted or 19 maintained primarily for delay or that the taxpayer's 20 21 22 23 24 25 position in such proceedings is frivolous or groundless. See sec. 6673; Scruggs v. Commissioner, T.C. Memo. 1995-355, aff'd without published opinion, 117 F.3d 1433 (11th Cir. 1997). The purpose of section 6673, like that of section 6702, is to compel taxpayers to think and to conform 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 1 2 3 4 their conduct to settled tax principles. See Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986). Despite numerous warnings from the Court and respondent, petitioner persisted and wasted this 5 Court's limited time and resources. Petitioner 6 7 8 9 10 11 12 13 14 15 16 17 18 asserts that he neither delayed the proceeding nor made frivolous arguments. We disagree. In this proceeding now before the Court, petitioner asserts nothing but frivolous and groundless arguments. It is apparent from the entire record that petitioner instituted or maintained this proceeding primarily, if not exclusively, as a protest against the Federal income tax system. We are convinced that no purpose would be served in repeating all that has been said about his frivolous and misguided arguments. Wnuck v. Commissioner, 136 T.C. 498 (2011). Petitioner's tactics have consumed valuable 19 Government resources. These tactics should not be 20 21 22 23 24 25 condoned. They damage the integrity of the Federal tax litigation system because the time and attention the Court and respondent must devote to these frivolous arguments deprives other taxpayers with genuine tax controversies. See Abrams v. Commissioner, 82 T.C. 403, 412 (1984). We are mindful 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that petitioner is representing himself and may not be familiar with all the Court's rules and procedures. Pro se status, however, is not a license to litter the dockets of the Federal courts with ridiculous allegations concerning the Code. Parker v. Commissioner, 117 F.3d 785 (5th Cir. 1997). Respondent recommends the Court should impose $15,000 under section 6673 against petitioner. We rely upon respondent's recommendation and shall impose a $15,000 -penalty against petitioner under section 6673(a)(1). In addition, we take this opportunity to admonish petitioner that the Court may consider imposing a greater penalty if he returns to the Court and advances similar arguments and wastes the Court's and respondent's limited resources. To reflect the foregoing, decision will be entered for respondent except with respect to the section 6654 addition to tax. In addition, an appropriate order will also be issued imposing a $15,000 penalty under section 6673 against petitioner. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 12:01 p.m., the above- entitled matter was concluded.) 866.488.DEPO www.CapitalReportingCompany.com