TAX COURT OPINION

Case: Gary & Janet Will
Docket Number: 15454-11L
Judge: Armen
Opinion Type: bench
Filed: 03/15/2013
Pages: 17

UNITED STATES TAX COURT WASHINGTON, DC 20217 GARY AND JANET WILL, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, ) ) ) ) ) Docket No. 15454-11L. ) Respondent ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioners and to respondent a copy of the pages of the transcript of the hearing in the above case before Special Trial Judge Robert N. Armen, Jr. at Dallas, Texas, on February 13, 2013, containing 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 order and decision will be entered for respondent. (Signed) Robert N. Armen, Jr. Special Trial Judge Dated: Washington, D.C. March 15, 2013 SERVED MAR 15 2013 Capital Reporting Company 3 1 2 Bench Opinion by Judge Robert N. Armen, Jr. February 13, 2013 3 Gary & Janet Will v. Commissioner 4 5 6 7 8 Docket No. 15454-11L THE COURT: 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 9 Opinion shall not be relied upon as precedent in any 10 11 12 13 14 other case. . This proceeding was heard as a regular case pursuant to the provisions of section 7443A(b) (4) of the Internal Revenue Code of 1986, as amended, and Rules 180, 181, and 182 of the Tax Court Rules of 15 Practice and Procedure. 16 17 18 19 20 21 22 This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code·of 1986, as amended/ and Rule 152 of the Tax Court Rules of Practice and Procedure. Hereinafter in this bench opinion, all section numbers refer to the Internal Revenue Code, as amended, and all Rule numbers refer to the Tax 23 Court Rules of Practice and Procedure. Petitioner 24 Gary Will appeared on his own behalf. Meredith Stuart 25 appeared on behalf of the respondent. There was no 866.483.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 3 4 5 6 7 8 9 10 11 12 appearance by petitioner Janet Will. This case represents an action for collection review. See sec. 6330(d) (1). The case is presently before the Court on respondent's Motion For Summary Judgment And To Impose A Penalty Under I.R.C. § 6673, filed December 7, 2012, pursuant to Rule 121 and section 6673. Petitioners resided in the State of Illinois at the time that the petition was filed with the Cour t . The facts relevant to the disposition of respondent's motion are as follows: 13 Origin of Petitioners' Liabilities for the Years in 14 15 16 17 18 19 20 21 22 23 24 25 Issue By notice dated April 10, 2008, respondent determined deficiencies in petitioners' Federal income taxes for 2005 and 2006 of $9, 687 and $16,816, respectively. See sec. 6212(a). Respondent also determined in that same notice accuracy-related penalties under section 6662(a) for 2005 and 2006 of $1,937.40 and $3,363.20, respectively. See id.;. sec. 6665(a). Petitioners received the April 10, 2008 notice of deficiency but id not commence· an action for redetermination in this Court. See sec. 6213(a). 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 Rather, petitioner Gary Will sent a lengthy letter 2 3 4 dated May 20, 2008, to respondent's Buffalo, New York office, which was the office that had issued the notice of deficiency. The first paragraph of 5 petitioner's letter read as follows: 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 "I am in receipt of your letter dated April 10, 2008 and hasten to reply with my protest and disagreement. I do not wish to have this matter heard by the United States Tax Court because doing so will allow a court that has no jurisdiction over me to obtain jurisdiction over me. If you wish to have this heard in a court, I demand due process, which means that it will have to be heard in a court of competent jurisdiction. Such a court will have to have been established and ordained pursuant to Article 3 of the Constitution. No other court is a judicial court, and I do not wish to appear in an administrative court." Petitioner's letter went on to espouse various positions, among them the contention that income "does not include he earnings of private sector workers who are engaged in an occupation of common right. So, though I have earnings, and readily admit to them, they are not taxable income." 866.4 8.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Because petitioners did not commence an action for redetermination, respondent assessed the determined deficiencies and accuracy-related penalties for 2005 and 2006, together with statutory interest, on October 6, 2008. See secs. 6213(c), 6601(a) . Respondent then sent petitioners, on that same date, notice and demand for payment, commonly referred to as a statutory notice of balance due. See sec. 6303 (a) . . Federal Tax Lien Petitioners did not pay their outstanding liabilities in response to the notice and demand for payment, which prompted respondent to send petitioners various collection notices. Ultimately, as relevant herein, respo dent sent petitioners in September 2010 a Notice Of Federal Tax Lien Filing And Your Right To A Hearing Under IRC 6320. The lien notice advised of the fil.ing a notice of Federal tax lien in respect of petitioners' outstanding liabilities for 2005 and 2006. (The notice of Federal tax lien was filed with the Lake County Recorder of Deeds in Waukegan, Illinois.) 23 Petitioners responded by filing with respondent a 24 25 Request For A Collection Due Process Hearing (Form 12153) . Petitioners also responded with a letter 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 dated September 24, 2010, stating, inter alia, that "All revenue law fall under Admiralty jurisdiction. 3 Admiralty demands that any such lien must first have 7 4 5 6 7 8 9 10 11 12 an order issued by an Admiralty court directing such a lien be filed." Administrative Review In addition to an exchange of correspondence, the administrative process included a telephone conference in April 2011 between respondent's Appeals officer, petitioner Gary Will, and pe.titioners' power of ttorney, and the process concluded with the issuanc of a Notice Of 13 Determination Concerning C llection Action(s) Under 14 15 16 17 18 19 20 21 22 Section 6320 and/or 6330, ated May 5, 2011. The Summary of Determination s ated as follows: "The Notice of Federal Tax Lien (NFTL) filing is appropriate and is therefore sustained. Taxpayers may not raise the liability issue before the Office of Appeals. Taxpayers did not raise any other legitimate issues and all other issues raised are frivolous or reflect a desire to delay or impede federal tax administration " The Attachment to the 23 Notice Of Determination in icates that during the 24 25 course of the telephone conference the Appeals officer advised that "the Tax Court has the authority 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 to impose a $25,000 penalty if the taxpayers raise frivolous issues before the court." 3 Petitioners' Lien Action in this Court 4 Petitioners responded to the Notice Of 5 Determination by timely commencing an action in this 6 Court pursuant to section 6330 (d) (1) . See sec. 7 8 9 1Ö 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 6320(c); see also sec. 7502. In their petition, petitioners "deny they have a tax liability". Respondent filed an answer to the petition and, in defense to petitioners' attempt to challenge the existence or amount of their underlying liabilities, respondent expressly invoked section 6330 (c)·(2) (B), which section we shall discuss shortly. In September 2010, while this case was. pending trial, petitioners sought to subpoena Secretary of the Treasury Timothy Geithner and Commissioner of Internal Revenue Donglas Schulman. By Order dated December 12 2013, the Court granted respondent's Motion To Quash Subpoenas. Respondent' s Summary Judgment Motion On December 7, 2012, after this case had been calendared for trial at the Court' s session commencing February 11, 2013, in Dallas, Texas, respondent filed his Motio For Summary Judgment And 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 To Impose A Penalty Under I.R.C. § 6673. Thereafter, on February 5, 2013, petit·ioners filed their Response, objecting to the granting of respondent' s 4 motion. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Although lengthy, the crux of the Response reflects petitioners' arg ment that they are not taxpayers and therefore are not subject to Federal income tax. Thus, for example, petitioners allege that: "Neither petitioner considers themselves to be 'taxpayers' by any d finition of that term found in the IRC [Internal Revenue Code] ." In similar vein "petitioners submit that there isn't a section in the IRC that makes petitioners liable for the income tax, period." Further, petitioners expound the following view regarding employment and wages: "So, to recap, wages are paid to an employee for performing employment for an employer within the United States. The fifty states of the Union, by definition of the IRC and the implementing regulations, are excluded from that definition. Petitioners live and work within the confines of at least one of the fifty states of the Union, and do not work at any time outside of the fifty 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 4 states of the Union. Therefore, petitioners do not engage in employment, nor are they considered 'employees', nor do they receive 'wages.'" 5 Hearing 6 7 8 9 Pursuant to notice, respondent' s motion was called for hearing in Dallas, Texas, on February 13, 2013. Petitioner Gary Will and counsel for respondent appeared and presented argument. 10 Petitioner Gary Will stated that in his view the 11 12 13 14 15 16 17 18 19 central issue is what constitutes "income" for tax purposes, and he introduced a lengthy document setting forth his views regarding the concept of income. He also stated that he "is not a taxpayer and has never been one" and that he "is not within the United States" for tax purposes . Summary judgment is intended to expedite litigation and avoid unnecessary and expensive trials. Fla. Peach Corp. v. Commissioner, 90 T.C. 20 678, 681 (1988) . Summary judgment may be granted 21 with respect to all or any part of the legal issues 22 23 24 25 in controversy "if the pleadings, answers to interrogato.ries, depositicns, admissions, and any other acceptable materials, together with the affidavits, if any, show that there is no genuine 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company issue as to any material act and that a decision may be rendered as a matter of law." Rule 121(a) and 11 (b). After carefully reviewing the record, we are satisfied that there 1s no genulne 1ssue as to any material fact, and a decision may be rendered as a matter of law. Accordingly, we shall grant summary judgment in respondent's favor. Section 6321 imposes a lien in favor of the United States on all prop rty and rights to property of a person when demand f r payment of that person' s liability for. taxes has b en made and the person fails to pay those taxes. The lien arises when the assessment is made. Sec. 6322. Section 6323(a) requires the Secretary to file notice of Federal tax lien if such lien is to be valid against any purchaser, holder of a sec rity interest, mechanic' s lienor, or judgment lien creditor. Behling v. Commissioner, 118 T.C. 572 575 (2002). Thus, a lien is a security device that assures the Government of 1ts priority over other possible creditors. Elliott, Federal Tax Collections, Liens, and Levies, par. 9.05 (2d ed. 2005). Unlike a levy, a lien does not deprive a taxpayer of property. Id.; see also United States 1 2 3 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Repbrting Company 12 Whiting Pools, Inc., 462 U.S. 198, 210-211 (1983) . Section 6320 provides that the Secretary shall furnish the person described in section 6321 with written notice of the filing of a notice of lien under section 6323. Section 6320 further provides that the person may request administrative review of the matter in the form of an Appeals Office hearing. Section 6320 (c) provides that the Appeals Office hearing generally shall be conducted consistent with the procedures set forth in section 6330 (c), (d), and (e) . Section 6330 (c) provides for review with respect to collection issues, the appropriateness of the Commissioner's intendëd collection action, and possible alternative means of collection. Section 6330 (c) (2) (B) provides that the existence or the amount of the underlying tax liability may be contested at an Appeals Office hearing, but only if the person did not receive a notice of deficiency or did not otherwise have an earlier opportunity to dispute such tax liability. Goza v. Commissioner, 114 T.C. 176, 180-181 (2000); see Sego v. Commissioner, 114 T.C. 604, 609 (2000). Section 6330 (d) provides for judicial review of the administrative determination in the Tax Court. 1 2 3 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalRep rtingCompany.com Capital Repdrting 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 2 4 25 We return to section 6330 (c) (2) (B) . By virtue of that section, if a taxpayer received a notice of deficiency for the year or years in issue or otherwise had the opportunity to dispute the underlying tax liability, the taxpayer is precluded from challenging the exist nce or amount of the underlying tax liability. Sego v. Commissioner, supra at 610-611; Goza v. Commissioner, supra at 182- 183. In the instant case petitioners admit receiving the April 10, 20 8 notice of deficiency, and they expressly chose n t to commence an action for redetermination in this Court. Accordingly, petitioners may not, as a m tter of law, challenge their underlying liabilities for the two years in issue in this collection re 1ew proceeding. See sec. 6330 (c) (2) (B); Sego v. Comm1ssloner, supra; Goza v. Commissioner, supra. To the extent that petitioners may have raised any collection-related issue other than their underlying liability, we add the following: Insofar as verification of procedures is concerned, it is well settled that no particular form of verification is required, that no particular document needs to be provided to a taxpayer at a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 14 1 2 hearing conducted under section 6330, and that Form 4340, Certificate of Assessments, Payments, and Other 3 Specified Matters, and tr nscripts of account may be 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 used to satisfy the requirements of section 6330 (c) (:1) . See Roberts . Commissioner, 118 T . C . 365, 371 n..10 (2002), affd. 329 F.3d 1224 (11th Cir. 2003) ; Nestor v. Commissioner, 118 T . C. 162, 166 (2002); Lunsford v. Commissioner, 117 T.C. 183 (2001). Copies of the transcripts of account (Forms 4340) for 2005 and 2006 th t are attached as exhibits to respondent's summary judgment motion, along with the statements-of the Appeals officer in the Attachment to the Notice Of Determiriation, show that required assessment and collection procedures were followed. Our own independent review of the record confirms that matter. . The appropriateness of the collection (cid:16)042 action in this case, i.e., he filing of a notice of Federal tax lien, is the leäst intrusive action that respondent could have taken and is fully justified by the amount of petitioners' chutstanding liabilities and respondent' s desire to insure lien priority under section 6323 vis-a-vis thir parties. In addition, as previously mentioned, a ien, unlike a levy, does not deprive a taxpayer of property. 866.488.IDEPO www.CapitalReportingCompany.com Capital Repòrting Company 15 1 2 3 4 5 6 7 8 9 10 11 12 13 Petitioners never ralsed any spousal defenses or collection al ernatives, so neither of those matters needs to be addressed. See Giamelli v. Commissioner, 129 T.C. 107, 114-115 (2007); Magana v. Commissioner, 118 T.C. 488, 493 (2002). In sum, we conclude that there are no genuine issues of materia fact for trial and that respondent is entitled to udgment as a matter of law. Accordingly, we shall grant that portion of respondent's motion seeking to confirm the propriety of the filing of the lien. Imposition of. Penalty Under Section 6673 (a) We turn now to t at part of respondent's 14 motion that seeks the impo ition of a penalty against 15 16 17 18 19 20 21 22 23 24 25 petitioners under section 6673(a). As relevant herein, section 6673 (a) (1) authorizes the Tax Court to require a taxpayer to pay to the United States a penalty not in excess of $25,000 whenever it appears that proceedings have been instituted or maintained by the taxpayer primarily for delay or that the taxpayer' s position in such proceeding is frivolous or groundless. The Court has indicated its willingness to impose such penalty in lien and levy cases, Pierson v. Commissioner, 115 T.C. 576, 580-581 (2000), and has 866.488.DEPO www.CapitalReportingCompany.com Capital Repo ting Company 16 1 in fact imposed a penalty n many such cases, e.g., 2 Cipolla v. Commissioner, T.C. Memo. 2004-6. 3 4 5 6 7 The record in this case convinces us that petitioners were not interested in raising legitimate issues; rather, the record demonstrates that petitioners regard this case as a vehicle to protest the tax laws of this country, espouse their own 8 misguided views, and frustEate the administration of 9 the internal revenue laws related to the collection 10 11 12 13 14 of outstanding tax liabilities. A petition to the Tax Court is frivolous "if it is contrary to established law and unsupported by a reasoned, colorable argmment for change in the law." Coleman v. Commissioner, 791 F.2d 68, 71 (7th 15 Cir. 1986) . Petitioners' positions, as set forth in 16 17 18 19 20 21 22 23 24 their petition, in their Re ponse. to respondent' s summary judgment motion, an at the hearing are replete with tax protestor rhetoric and related pseudo-legal babel. Based ön well-established law, petitioners' positions are rivolous and groundless. We are also convi ced that petitioners instituted and maintained t is proceeding primarily, if not exclusively, for pur oses of.delay. Having to deal with this matter waste the Court's time, as 25 well as respondent's. .Moreòver, taxpayers with 866.488.DEPO www.CapitalReport ngCompany.com Capital Repor ing Company 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 genuine controversies may have been delayed. Many years ago, Supreme Court Justice Oliver Wendell Holmes said Taxes are what we pay for civilized society." P titioners undoubtedly feel themselves to be entitled t o every benefit that civilized society has to offer, such as the receipt of Social Security benefit that are funded by the payment of taxes by other taxpayers; unfortunately, petitioners feel no obligation to pay their fair share. In view of the foregoing, we shall grant that portion of respondent s motion that seeks the imposition of a penalty and require petitioners to pay a penalty to the Unite 1 States pursuant to section 6673 (a) (1) . See C leman v. Commissioner, supra at 71-72; Crain v. Commissioner, 737 F.2d 141.7, 1417-1418 (5th Cir. 1984) . We think a penalty of $5, 000 is appropriate; however, we shall impose only a penalty of $2,500 here, as petitioners have another docket before the Court and a section 6673 penalty in a similar amount has been imposed on them in that other docket. In order to ref ect the foregoing, an Order And Decision will be entered (1) granting respondent' s Motion For S mmary Judgment And To 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 18 1 2 3 4 5 6 Impose A Penalty Under I.R.C. § 6673, filed December 7, 2012; (2) finding that respondent may proceed with the collection action (lien) in respect of petitioners' outstanding income tax liabilities for the taxable (calendar) yea s 2005 and 2006, as determined by respondent's Appeals Office in its 7 Notìce of Determination Cor cerning Collection 8 Action (s) Under Section 63 0 and/or 6330, dated May 9 5, 2011, upon which notice this case is based; and (3) imposing on petitioners a penalty under section 6673(a) (1) in the amount of $2,500. This concludes t e Court ' s Oral Findings of Fact and Opinion in this case. (Whereupon, at 2 13 p.m., the above- entitled matter as concluded.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com