TAX COURT OPINION

Case: Samuel D. & Joyce M. Bates
Docket Number: 1586-08
Judge: Colvin
Opinion Type: bench
Filed: 03/30/2009
Pages: 5

UNITED STATES TAX COURT WASHINGTON, DC 2021 7 SAMUEL D . & JOYCE M . BATES, Petitioners v . ) Docket No . 1586-08 . COMMISSIONER OF INTERNAL REVENUE, Respondent O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s 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 trial of the above case before Judge James S . Halpern at San Francisco, California on March 18, 2009, containing his oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral findings of fact and opinion, an appropriate order and decision .will be entered for respondent . (Signed ) James S . Halpern Judg e Dated : Washington, D .C . March 30, 2009 SERVED Mar 31 2009 3 1 Bench Opinion by Judge James S . Halpern March 18, 2009 2 Samuel D . & Joyce M . Bates v . Commissioner 1586-08 3 THE COURT : The Court has decided to render ora l 4 findings of fact and opinion in this case , and the following 5 represents the Court ' s oral findings of fact and opinion . 6 This bench opinion is made pursuant to the 7 authority granted by section 7459 ( b) of the Internal Revenue 8 Code of 1986, as amended , and Rule 152 of the Tax Cour t 9 Rules of Practice & Procedure . 10 Unless otherwise indicated , all section references 11 are to the Internal Revenue Code in effect for the tax years 12 in issue , and all rule references are to the Tax Court Rules 13 of Practice & Procedure . 14 By .notice of deficiency dated October 16th, 2007 , 15 Respondent-.ice deficiencies of $8516 and $1574 i n 16 Petitioners ' federal income taxes for 2003 and 2004 , 11 17 respectively , and additions to tax under section 6662(a) of 18 $1703 . 20 and $314 . 40 cents for those years, respectively . 19 The parties have stipulated certain facts . The 20 stipulation of facts with attached exhibits is incorporated 21 herein by this reference . Petitioners bear the burden of 22 proof . Rule 142(a) . 23 The principal issue in this case comes down to our 24 resolution of Petitioners ' argument that, although durin g 25 2003 and 2004 , they were US citizens who were domiciled and Heritage Reporting Corporatio n (202) 628-4888 1 maintained their home and abode in California, and wh o 2 derived all of their earnings and losses from sources within 3 the United States, they were not resident in the Unite d 4 States . 4 5 They agree that section 1 and section 1 .1-1(a)(1) , 6 income tax, regulations, impose an income tax on the income a 7 of every individual who is a citizen of the United States . 5,4- 8 They further agree that those sections impose an income tax 9 on the income of every individual who is a resident of th e 10 United States . They argue, however , that a US citizen who 11 is domiciled in the United States does not reside in th e 12 United States and is not therefore subject to the federal -r 13 income tax . 14 Petitioners ignore the plain language of section 15 1 .1-1 ( b), income tax regulations , which, in pertinent part 16 states , ' In general , all citizens of the United State s 17 wherever residente liable for the income imposed 18 by the code Pe titioners do not challen ge the validity o f 19 that regulatio ecause Petitioners are United states XL=- 20 citizens, thei r place of residence is irrelevant . 21 The regulations state that United States citizen s 22 are liable for federal income tax 'wherever resident' . On r 23 this point, we conclude by quoting the Court of Appeals fo r 24 the Fifth Circuit, which in response to other arguments ~ I 25 similarly lacking in meritsaidA 'We perceive no need to Heritage Reporting Corporatio n (202) 628-4888 1 refute these arguments with somber reasoning and copious 2 citation of precedent* ' o do so might suggest that thes e 3 arguments have some colorable merit .' Crain v . Commissioner , 4 737 F .2d 1417 (5th Circ . 1984) . 5 Petitioners also claim they have no duty to file . ~ 5 6 income tax returns, but since they did so for the years in 7 question, we fail to see the pertinence of that argumentand Y we reject it . 9 Petitioners have failed to show error in th e 10 deficiencies determined by Respondent, and we sustain them 11 in full . 12 Since Petitioners concede that they are subject to 13 the negligence penalties imposed by section 6662(b)(1) if we 14 determine that they are subject to the L;ederal income tax, 15 which we have determined, they are subject to the section 16 6662 penalties imposed by Respondent, and we sustain those 17 penalties . 18 In pertinent part', section 6673(a)(1) provides a 19 penalty of up to $25,000 if the taxpayer has instituted or 20 maintained proceedings before the-Tax Court primarily for 21 . delay, or the taxpayer's position in the proceeding i s 22 frivolous or groundless . 'The purpose of section 6673 is to 23 compel taxpayers to think and to conform their conduct to, 24 settled principles before they file returns and litigate' . 25 Takaba v . Commissioner , 119 T .C . 285, page 295 (2002) . Heritage Reporting Corporatio n (202) 628-4888 1 A taxpayer's position is frivolous if it i s 2 contrary to established law and unsupported by a reasoned , 3 colorable argument for change in the law . E .g ., Nis Famil y 4 Trust v . Commissioner , 115 T . C ., page 544 (2000) . ::~_S 6 5 Petitioners' principal argument in this cas e 6 concerning residence and their other argumentslas summarized 7 in Respondent' pretrial memorandum are frivolous . 8 Petitioners have failed to report substantial amounts o f 9 income, and they deserve a substantial penalty fo r 10 initiating this proceeding . . We shall therefore require them 11 to pay a penalty under section 6673(a)(1) of $2500 . 12 That concludes this bench opinion . Decision will 13 be entered for Respondent . 14 (Whereupon, at 10 :06 a .m ., the bench opinion in 15 the above-entitled matter was concluded . ) 16 17 18 19 20 21 22 23 24 25 Heritage Reporting Corporation (202) 628-4888