TAX COURT OPINION

Case: Alexander H. Hyatt
Docket Number: 8771-08L
Judge: Colvin
Opinion Type: bench
Filed: 06/22/2009
Pages: 15

-To f 1 ti UNITED STATES TAX OURT WASHINGTON , DC 20217, ALEXANDER H . HYATT , Petitione r V . COMMISSIONER OF INTERNAL REVENUE, Respondent O R D E R Pursuant to Rule 152(b) of the Tax Court Rules of Practic e and Procedure, it is hereby ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy f the pages of the transcript of the hearing of the above ~ase before .Special Trial Judge Robert N . Armen , Jr . at New York , New York , on May 12, 2009 , containing his oral findings of f ct and opinion rendered at the conclusion of the hearing . In accordance with the oral findings of fact and opinion, an Order And Decision will be entered granting respondent's Motion For Summary Judgment filed May 29, 2008 and supplemented July 10, 2008, September 23, 2008, January 6 1 2009, and March 11, 2009 . (Signed ) Robert N . Armen, Jr. Special Trial Judg e Dated : Washington, D .C . June 22, 2009 SERVED JUN 2 3 2009 1 Bench Opinion by Special Trial Judge Robert N . Armen, Jr . 2 Hyatt v . Commissioner Docket No . 8771-08 L 3 I . 4 THE COURT : The C urt has decided to render 5 oral findings of fact and opinion in-this case, and 6 the following represents the court's oral findings of 7 fact and opinion . The oral findings of fact an d 8 opinion shall not be relied upon as precedent in any 9 other case . 10 II . 11 This proceeding was heard as a regular case 12 pursuant to the provisions of section 7443A(b)(4) of 13 the Internal Revenue Code of 1986, as amended, and 14 Rules 180, 181, and 182 of the Tax Court Rules o f Practice and Procedure . 1 5 16 17 This bench opinion is made pursuant to the 18 authority granted by section 7459(b) of the Internal 19 Revenue Code of 1986, as amended , and Rule 152 of the 20 Tax Court Rules of Practice and Procedure . 21 Hereinafter in this bench opinion, and unles s 22 otherwise indicated, all section numbers refer to the 23 Internal Revenue Code, as ame ded , and all Rul e 24 numbers refer to the Tax Court Rules of Practice an d 25 Procedure . Heritage Reporting Corporation (202) 628 488 8 4 1 IV . 2 Petitioner appeare on his own behalf . 3 Michelle L . Maniscalco appea ed on behalf o f 4 Respondent . 5 V . 6 This case is beford the Court o n 7 Respondent's Motion For Summ ry Judgment, filed May 8 29, 2008, and supplemented J ly 10, 2008, September 9 23, 2008, January 6, 2009, a d March 11, 2009 . 10 (Parenthetically, we note th t Respondent's motion was 11 originally titled "Motion To Dismiss For Failure To 12 State A Claim Upon Which Rel' of Can Be Granted And T o 13 Impose A Penalty Under I .R .C . § 6673" . By Order dated 14 June 6, 2008, the Court dee m d Respondent's motion t o 15 be a Motion For Summary Judgment . There has never 16 been any question that Respo dent's motion, a s 17 recharacterized, includes the request that a penalt y 18 be imposed 'on Petitioner under section 6673 .) 19 Petitioner resided in the State of New Yor k 20 at the time that the petition was filed with the 21 Court . 22 VI . 23 The facts relevant to the disposition o f 24 Respondent's motion are as follows : 25 At all times relevant to this case, Heritage Reporting Corporatio n (202) 628L 4888 j 5 1 Petitioner has resided at 60 East 19th Street, Apt . 2 4L, Brooklyn, New York 11226 Petitioner consistentl y 3 used this address in all of his dealings with the IRS , 4 and the IRS sent all notices and other correspondenc e 5 to Petitioner at this address . 6 Petitioner failed to file valid Federa l 7 income tax returns for 2001 nd 2002 . For example , 8 for 2002, Petitioner submitted a Form 1040, U .S . 9 Individual Income Tax Return on which he reported 10 wages on line 7 of $66,223 .9 received as a bu s 11 operator from MTA-New York City Transit . However, on 12 line 21 of his Form 1040, Petitioner subtracte d 13 $66,223 .98, resulting in total income of zero, and 14 concomitantly total tax of z ro . In support of the 15 subtraction, Petitioner attached Form 2555-EZ, Foreign 16 Earned Income Exclusion, on which form Petitione r 17 claimed that Brooklyn, New York was a foreign country . 18 Petitioner also attached to his Form 1040 a 19 Form W-2, Wage and Tax State~lent, issued by MTA-Ne w 20 York City Transit, which rep rted wages paid in 2002 21 of $66,223 .98 and no income ax withheld . 22 Respondent did not process Petitioner's 23 Forms 1040 because they were frivolous . Rather, b y 24 notice dated May 9, 2006, Respondent determine d 25 deficiencies in Petitioner's Federal income taxes, as Heritage Reporting Corporation (202) 628-4888 6 1 well as additions to tax under section 6651(a)(1) for 2 failure to file and section 6651(a)(2) for failure to 3 pay and accuracy-related penalties under sectio n 4 6662(a) for 2001 and 2002 . See sec . 6212 . Petitioner 5 did not file a petition for redetermination with this 6 Court . See sec . 6213(a) . Accordingly, on October 2, 7 2006, Respondent assessed the determined deficiencies, 8 additions to tax, and penalties, together wit h 9 statutory interest . See secs . 6213(c), 6601 . 10 (Parenthetically, we note that Respondent ultimately 11 abated the penalties under section 6662(a) after the 12 Court pointed out the limitation imposed by section 13 6664(b) ; also after inquiry b the Court, Respondent 14 abated a frivolous return penalty that had mistakenly 15 been made part of Petitioner's income tax account for 16 2002 . ) 17 Petitioner did not ay the amounts owing . 18 Accordingly, in due course, Respondent sent Petitioner 19 a final notice of intent to levy, see sec . 6330(a) , 20 and notice of filing of Federal tax lien, see sec . 21 6320(a) . 22 Petitioner requested administrative revie w 23 by filing with Respondent Fo 12153, Request for a 24 Collection Due Process Hearing . See secs . 6320(b) , 25 6330(b) . After a correspondence hearing, as opted fo r Heritage Reporting Corporation ( 202) 628 1,4888 7 1 by Petitioner, Respondent ' s ppeals Office issued a 2 Notice of Determination on March 13, 2008, sustaining 3 both the proposed levy and the filing of the tax lien . 4 Petitioner then filed a petition with this Court . See 5 sec . 6330(d)(1) ; see also sec . 6320(c) . 6 7 VII J Summary Judgment . In order to expedit e 8 litigation and avoid unnecessary and expensive trials, 9 the Court may grant summary j dgment when there is no 10 genuine issue of material fact and a decision may be 11 rendered as a matter of law . Rule 121(b ) ; Sundstrand 12 Corp . v . Commissioner , 98 T .C . 518, 520 ( 1992 ), affd . 13 17 F .3d 965 ( 7th Cir . 1994 ) . In deciding whether this 14 standard is satisfied , we are guided by, inter alia, 15 Rule 121 ( d), the final two sentences of which provide 16 as follows : 17 "When a motion for 3 ummary judgment is made 18 and supported as provided in his Rule, an advers e 19 party may not rest upon the m re allegations or 20 denials of such party 's pleading, but such party' s 21 response, by affidavits or as otherwise provided i n 22 this Rule, must set forth specific facts showing that 23 there is a genuine issue for rial . If the adverse 24 party does not so respond, th n a decision, i f 25 appropriate, may be entered against such party ." Heritage Reportin~ Corporation (202) 628114888 8 1 See also Celotex Corp . v . Cal rett , 477 U .S . 317, 32 2 2 (1986) . 3 Upon review of the record, and after hearing 4 on Respondent ' s motion, as sIpplemented , we conclude 5 that there are no genuine issues of material fact and 6 that Respondent is entitled to judgment as a matter of 7 law . 8 VIII . 9 Section 6321 imposes a lien in favor of the 10 United States on all property and rights to property 11 of a person when demand for payment of that person' s 12 liability for taxes has been made and the person fail s 13 to pay those taxes . The lien arises when th e 14 assessment is made . Sec . 632 . Section 6323(a) 15 requires the Secretary to fil notice of Federal tax 16 lien if such lien is to be vapid against an y 17 purchaser , holder of a securi y interest , mechanic's 18 lienor , or judgment lien creditor . Behling v . 19 Commissioner , 118 T .C . 572, 5 5 (2002 ) . Thus, a lien 20 is nothing other than a security device that assures 21 the Government of its priorit over other possibl e 22 creditors . Elliott , Federal ax Collections, Liens , 23 and Levies , par . 9 .05 (2d ed . 2005 ) . Unlike a levy , 24 lien does not deprive a taxpayer of property . Id . ; 25 see also United States v . Whiting Pools, Inc . , 46 2 Heritage Reporting Corporation (202) 628114 888 9 1 U .S . 198, 210-211 (1983) . 2 Section 6320 provi es that the Secretary 3 shall furnish the person des ribed in section 632 1 4 with written notice of the filing of a notice of lien 5 under section 6323 . Section 6320 further provide s 6 that the person may request administrative review o f 7 the matter in the form of an Appeals Office hearing . 8 Section 6320(c) provides tha the Appeals Offic e 9 hearing generally shall be conducted consistent wit h 10 the procedures set forth in s ection 6330(c), (d), and 11 (e) . 12 Section 6330 generally provides that the 13 Commissioner cannot proceed with collection by levy 14 until the person has been given notice and th e 15 opportunity for an administrative review of the matter 16 (in the form of an Appeals office hearing) and, if 17 dissatisfied , with judicial review of the 18 administrative determination . See Davis v . 19 20 Commissioner , 115 T .C . 35, 37 ( 2000 ) ; Goza v . Commissioner , 114 T .C . 176, 179 (2000) . 21 Section 6330 ( c) prescribes the matters that a person 22 may raise at an Appeals Offica hearing . Section 23 6330 ( d) provides for judicial review of the 24 administrative determination . 25 Heritage Reporting Corporation (202) 628 ;4888 1 2 IX . 1 0 Petitioner's petiti n does not comply with 3 the pleading requirements set forth in Rule 331(b)(4) 4 and (5) in that Petitioner's llegations are s o 5 generalized and non-specific s to leave in doub t 6 exactly what his complaints a e, other than the denial 7 of "substantive due process" . Nevertheless, it may be 8 presumed that Petitioner seek to challenge the 9 existence or amount of the un erlying tax liabilitie s 10 for 2001 and 2002 . 11 Section 6330(c)(2)( H provides that the 12 existence or the amount of thle underlying tax 13 liability may be contested b t only if the person did 14 not receive a notice of defic iency or did not 15 otherwise have an earlier op ortunity to dispute suc h 16 tax liability . Goza v . Commissioner, supra at 180- 17 181 ; see Sego v . Commissione , 114 T .C . 604, 60 9 18 (2000) . However, in the instant case, Respondent sen t 19 Petitioner a notice of deficiency for 2001 and 2002 b y 20 certified mail addressed to Lm at his last known 21 address, i .e ., his current a~dress . There is nothing 22 in the record to suggest tha Petitioner did no t 23 receive the notice of defici ncy . Indeed, Petitioner 24 has never denied receipt . S e Rule 121(d) ; see also 25 Zenco Engg . Corp . v . Commiss oner, 75 T .C . 318, 323 Heritage Reporti g Corporatio n (202) 628-4888 1 1 1 (1980)(" There is a strong pr sumption in the law that 2 a properly addressed letter ill be delivered, or 3 offered for delivery, to the addressee ."), affd . 4 without published opinion 67 F .2d 1332 (7th Cir . 5 1981) ; Clough v . Commissions 119 T .C . 183, 187-188 6 (2002)(in general , and in the absence of clea r 7 evidence to the contrary, co pliance with certified 8 mail procedures raises a presumption of officia l 9 regularity in delivery and receipt with respect t o 10 notices sent by the Commissioner) . Indeed, Petitione r 11 received other IRS notices t at were sent to him at 12 his residence address, e .g ., lien notice, final notice 13 of intent to levy, notice .of determination . Thus , 14 having forgone the opportunity of challenging the 15 notice of deficiency by commencing an action fo r 16 redetermination in this Court, Petitioner is barred 17 from challenging the existence or the amount of his 18 underlying liabilities for 2001 and 2002 in th e 19 instant proceeding . , 20 But even if Petitioner is not so barred, i t 21 is clear that his reporting position, i .e ., that wages 22 paid to him by MTA-New York City Transit for operating 23 a bus constitute foreign eared income, is frivolous 24 and groundless . See Crain v . Commissioner, 737 F .2d 25 1417, 1417 (5th Cir . 1984) ("We perceive no need t o Heritage Reporting Corporation (202) 628 .4888 1 2 1 refute these arguments with s omber reasoning and 2 copious citation of precedent ; to do so might suggest 3 that these arguments have so e colorable merit .") . 4 Suffice it to say that Petit' oner, a New Yor k 5 resident, is a taxpayer subj ct to the Federal income 6 tax who is obliged to file a Federal income tax return 7 and pay Federal income tax o his wages . See secs . 1, 8 61(a)(1), 6012(a)(1), 7701(a) (1) and (14) . Regarding 9 the taxability of compensati c n, see United States v . 10 Romero , 640 F .2d 1014, 1016 9th Cir . 1981 ) 11 ("Compensation for labor or s ervices, paid in the form 12 of wages or salary, has been niversally held by th e 13 courts of this republic to be income, subject to th e 14 income tax laws currently applicable .") . 15 Petitioner's generalized and non-specific 16 allegation that all legal an administrative 17 requirements were not satisfied is belied by the 18 record . Thus : Petitioner filed frivolous returns ; 19 Respondent determined deficie cies and additions to 20 tax and properly sent Petitio er a notice o f 21 deficiency ; Petitioner defaulted on the notice ; 22 Respondent properly assessed he deficiencies and 23 additions to tax, as well as statutory interest, and 24 sent Petitioner a notice and demand for payment ; 25 Petitioner failed to satisfy is liabilities ; Heritage Reportin Corporation (202) 628 4888 1 3 1 Respondent sent Petitioner, ursuant to sections 6320 2 and 6330, a notice of filing of Federal tax lien and 3 final notice of intent to lev y ; Petitioner timely 4 requested administrative revi ew ; and Respondent's 5 Appeals Office afforded Petit ioner a bearing, but 6 ultimately sustained both the tax lien and the 7 proposed levy and sent Petit i ner a notice o f 8 determination affording him recourse to this Court . 9 In short, Petitioner was provided all the due proces s 10 that the law requires . 1 1 In short, Petitione has raised no issu e 12 that would preclude the granting of summary judgment 13 in Respondent's favor . See a so Rule 331(b)(4) ("Any 14 issue not raised in the assigLments of error shall b e 15 deemed to be conceded .") . 16 X . 1 7 We turn now to that part of Respondent' s 18 motion, as supplemented, tha t asks for the impositio n 19 of a penalty on Petitioner pursuant to section 6673 . 2 0 2 1 2 2 2 3 2 4 25 As relevant herein, section 6673(a)(1 ) authorizes the Tax Court to r' quire a taxpayer to pay to the United States a penalt not in excess o f $25,000 whenever it appears t at proceedings have been instituted or maintained by t e taxpayer primarily for delay or that the taxpayer' s osition in such Heritage Reporting (202) 628- Corporatio n 4888 1 4 1 proceeding is frivolous or groundless . The Court ha s 2 indicated its willingness to impose such penalty i n 3 lien and levy cases, Pierson v . Commissioner , 115 T .C . 4 576, 580-581 (2000 ), and has in fact imposed a penalt y 5 in many such cases, e .g ., Ci!olla v . . Commissioner , 6 T .C . Memo . 2004-6 . 7 We are convinced t t Petitioner instituted 8 or maintained the present proceeding primarily fo r 9 delay . In this regard, it is clear that Petitioner 10 regards this case as nothing but a vehicle to protest 11 the tax laws of this country and to espouse his own 12 misguided views, which we regard as frivolous an d 13 groundless . In short, havin g to deal with this matte r 14 wasted the Court' s time, as w O1l as Respondent's, an d 15 taxpayers with genuine controtrersies may have bee n 16 inconvenienced . The direct a d immediate consequence 17 of filing a frivolous petitio is delay . 18 Petitioner was expressly advised b y 19 Respondent's Appeals office i the Attachment to th e 20 March 13, 2008 notice of determination of this Court's 21 opinion in Pierson v . Commissioner, supra , and th e 22 possibility of monetary sanctions up,to $25,000 . 23 Further, in a prior collectio review case commenced 24 and prosecuted by Petitioner t dkt . No . 7221-07L, the 25 Court imposed a $5,000 penalt on him pursuant to Heritage Reportin~ Corporation (202) 628114888 1 5 1 section 6673(a)(1) . And, in a prior action fo r 2 redetermination commenced an prosecuted by Petitioner 3 at dkt . No . 26157-08, Petitioner was the recipient of 4 a $7, 5 00 penalty under section 6673(a)(1) . 5 Many years ago, Su~'reme Court Justice Oliver 6 Wendell Holmes said : "Taxes are what we pay fo r 7 civilized society ." Unfortunately, Petitioner feels 8 no obligation to pay his fair share . 9 In view of the foregoing, and as Petitioner 10 remains undeterred, he deserves a significant penalty 11 under section 6673(a) . Accordingly, we shall grant 12 that part of Respondent's motion requesing a sanction 13 and impose a penalty on Petitioner in the amount of 14 $10,000 . 15 XI . 16 In conclusion : We hall enter an Order And 17 Decision (1) granting Respond nt's Motion For Summary 18 Judgment, filed May 29, 2008, and supplemented July 19 10, 2008, September 23, 2008, January 6, 2009, an d 20 March 11, 2009 ; (2) ordering nd deciding tha t 21 Respondent may proceed with t e collection actions 22 (lien and levy) for 2001 and 002, as determined i n 23 the March 13, 2008 notice of etermination, upon which 24 notice this case is based ; an (3) ordering an d 25 deciding that Petitioner is 1 able for a penalty under Heritage Reportin Corporation (202) 6284888 16 1 section 6673 ( a)(1) of $10,00 2 XII 3 This concludes the Court' s oral findings o f 4 fact and opinion in this cas .All right . Very well . 5 With the reading of this ben h opinion in the Hyatt 6 case, this completes the Cou is May 2009 session at 7 New York , New York . 8 The Court ' is adj our ed . 9 THE CLERK : All ri e . 10 (Whereupon , at 2 :57 p .m ., the bench opinion 11 in the above-entitled matter as concluded . ) 12 13 14 15 16 17 18 19 20 21 22 2 3 24 25 Heritage Reporting Corporation (202) 628- 888