TAX COURT OPINION

Case: Andrew Ethan MacTaggart
Docket Number: 7648-22L
Judge: Carluzzo
Opinion Type: bench
Filed: 03/17/2023
Pages: 10

United States Tax Court Washington, DC 20217 ANDREW ETHAN MACTAGGART, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 7648-22L. 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 petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Chief Special Trial Judge Lewis R. Carluzzo at Houston, Texas, on February 15, 2023, containing his oral findings of fact and opinion rendered at the conclusion of the trial. In accordance with the oral findings of fact and opinion, an appropriate Decision will be entered. (Signed) Lewis R. Carluzzo Chief Special Trial Judge Served 03/17/23 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 3 Bench Opinion by Judge Lewis R. Carluzzo February 15, 2023 Andrew Ethan MacTaggart v. Commissioner of Internal Revenue Docket No. 7648-22L THE COURT: The Court 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 (bench opinion). Section references contained in this bench opinion are to the Internal Revenue Code of 1986, as amended, in effect for year in issue. Rule references are to the Tax Court Rules of Practice and Procedure. By Order served August 2, 2022, this case was assigned to me for trial or other disposition. See Section 7443A(b); Rule 182. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. Except as provided in Rule 152(c), this bench opinion shall not be treated as authority. The case was tried and submitted in Houston, Texas, on February 14, 2023. Andrew Ethan MacTaggart appeared on his own behalf. Christina D. Sullivan appeared on behalf of respondent. At the time the petition was filed petitioner lived in Texas, and absent a stipulation to the contrary, the decision entered in this 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 case is appealable to the United States Court of Appeals 4 for the Fifth Circuit. The issues in dispute in this case arise from a notice of deficiency issued pursuant to section 6212 and a notice of determination issued pursuant to section 6330. For clarity and convenience, these issues will be discussed in numbered paragraphs, some of which combine findings of fact, application of law, and conclusions. We'll start with the issues arising from the notice of deficiency. 1. In a notice of deficiency dated January 12, 2022, respondent determined a deficiency in petitioner's 2019 federal income tax and imposed a section 6662(a) penalty. The section 6662(a) penalty was conceded by respondent at trial and will not be considered further. 2. According to that notice of deficiency and other evidence introduced at trial, petitioner failed to report certain compensation he received during 2019 as an employee of Velaspan, Inc., on his 2019 federal income tax 19 return. 20 21 22 23 24 25 3. Petitioner has not denied receipt of that compensation, and evidence offered not only by respondent, but by petitioner as well, confirmed the payment and receipt of that compensation. 4. According to petitioner, the notice of deficiency is invalid because it was not signed by an 1 2 3 4 5 6 7 8 9 10 11 individual authorized to do so. Technically, petitioner 5 should have raised his argument in a motion to dismiss for lack of jurisdiction as the Court's jurisdiction to redetermine a deficiency depends upon the issuance of a valid notice of deficiency for the year placed in dispute. We see little point in insisting on technical precision at this late stage of the proceedings, however, and will address the argument even if not properly raised. 5. The notice of deficiency was signed by an executive officer of the Return Integrity and Compliance Service of respondent's Integrity and Verification 12 Operation. 13 14 15 16 17 18 19 20 21 22 23 24 25 6. To the extent that a notice of deficiency is even required to be signed, see, e.g., Urban v. Commissioner, 964 F.2nd 888, 889 (9th Cir. 1992) aff'g T.C. Memo. 1991-220, the notice of deficiency issued to petitioner on January 12, 2022, was signed by an individual who had the authority to do so. See Delegation Order 4-8 (Rev. 2), Internal Revenue Manual 1.2.2.5.8 (Dec. 7, 2020). Petitioner's challenge to the validity of the notice of deficiency is rejected. Petitioner's claims that other documents in evidence issued before the notice of deficiency were not signed by individuals authorized to do so need not be considered as those documents play no role in considering the determination made in the notice 1 2 3 4 5 6 7 8 9 10 11 of deficiency. 7. Petitioner next argues that the 6 compensation he received as an employee of Velaspan, Inc., is not subject to federal income tax. Suffice it to state that it is, see section 61(a)(1) and the many cases cited in the respondent's pretrial memorandum applying that statute, and nothing else need to be said on the point in response to his argument. See Crain v. Commissioner, 737 F.2d 1417(5th Cir. 1984). The compensation that petitioner received from Velaspan, Inc. is includable in his 2019 income and respondent's determination to that end 12 is sustained. 13 14 15 16 17 18 19 20 21 22 23 24 25 8. Although we consider it unnecessary to offer further support for upholding the determination made in the notice of deficiency, we note that petitioner was involved in a prior proceeding in this Court in docket number 6465-21. Docket number 6465-21 involved a challenge to the Commissioner's determination of a deficiency in petitioner's 2017 federal income tax. But for the year and amounts involved, the evidence in that case parallels the evidence in this case. The reasoning and analysis contained in the bench opinion rendered by Judge Goeke in that case, rendered on April 22, 2022, and served on May 11, 2022, have equal application here. We could repeat that reasoning in this bench opinion, but it 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 is unlikely that we could improve upon it. 7 Next we turn our attention to the issues raised in response to the notice of determination. 9. In a notice of determination dated March 28, 2022, respondent determined that a levy and the filing of a notice of federal tax lien are appropriate collection actions (proposed collection actions) with respect to outstanding income tax and section 6702(a) penalties assessed for various periods shown in the notice. 10. Petitioner challenges the existence and the amounts of all of the liabilities shown in the notice of determination in this proceeding, but because he received notices of deficiency for the years involving the outstanding income tax liabilities, his challenges to those liabilities may not be considered in this proceeding, see section 6330(c)(2)(B), and we turn our attention to his challenge to the section 6702(a) 18 penalties. 19 20 21 22 23 24 25 11. Section 6702(a) allows for the imposition of a penalty upon a taxpayer who files a document that "purports to be a return" but which "does not contain information on which the substantial correctness of the self-assessment may be judged" or "contains information that on its face indicates that the self-assessment is substantially incorrect," and the taxpayer's filing of 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 such document, in addition to another reason, "reflects a 8 desire to delay or impede the administration of Federal tax laws." 12. At trial respondent conceded the liabilities related to the assessments of some of the section 6702(a) penalties referenced in the notice of determination. We consider those remaining in dispute, ignoring section 6330(c)(4), which suggests petitioner is not entitled to raise any issues with respect to those penalties in cases such as this one. 13. Petitioner's position and behavior with respect to his 2019 federal income tax liability, as described above, and his position and behavior with respect to his 2017 federal income tax liability, as considered and described in docket number 6465-21, reflect a pattern of behavior that resulted in the imposition of a section 6702(a) penalty for those two years, as well as the other years shown in the notice of determination. 14. The evidence shows that petitioner was compensated by various employers for the years shown in the notice of determination, but he repeated filed federal income tax returns that reported no income and claimed refunds for amounts withheld not only as federal income tax withholdings, but also for amounts withheld attributable to the imposition of other employment taxes. 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 After all, it stands to reason that amounts of federal 9 income tax withheld that petitioner reported on his federal income tax returns for the various years must have been withheld from compensation he received during those years. 15. A review of the federal income tax returns filed by petitioner for the years referenced in the notice of determination demonstrates petitioner's pattern of behavior that for each year reflects his desire to delay or impede the administration of federal tax laws by the submission of purported returns that, (1) do not contain information on which the substantial correctness of the self-assessment may be judged, and/or (2) contain information that on its face indicates that the self- assessment is substantially incorrect. 16. Aside from the 6702(a) penalties conceded at trial by respondent, petitioner is liable for the section 6702(a) penalties that remain in dispute. 17. According to the administrative record created during the administrative hearing conducted pursuant to section 6320 and section 6330, petitioner requested a collection alternative to respondent's proposed collection actions. Apparently his request was denied by respondent's settlement officer. Petitioner has not denied that the events unfolded at the administrative 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 hearing as described in the notice of determination or 10 otherwise in the administrative record. Because petitioner did not provide the requested information, It was not an abuse of discretion for respondent's settlement officer to reject the collection alternative requested by petitioner at the administrative hearing. 18. In all other respects the administrative record introduced in evidence in support of respondent's proposed collection action shows that in all respects respondent's settlement officer proceeded as required by section 6320 and 6330, and nothing submitted by petitioner suggests, much less establishes, otherwise. Except with respect to liabilities conceded by respondent at trial, respondent may proceed with collection as determined in the notice of determination dated March 28, 2022. 19. At the conclusion of trial, respondent made an oral motion for the imposition of a section 6673(a) penalty because petitioner continued to argue that his compensation for services is not subject to federal income tax, even though he was warned in docket number 6465-21 that continuing to advance that position, as he has done here, could subject him to the penalty. Petitioner's position in this proceeding, that is, that compensation for services is somehow not subject to federal income taxes, is frivolous and has been found to be so in 1 2 3 4 5 6 7 8 9 10 11 numerous case cited in the respondent's pretrial 11 memorandum. Petitioner certainly deserves the imposition of a section 6673 penalty in this case, but we are concerned that the imposition of a section 6673(a) penalty in any amount could cause yet a further delay in the collection of justifiable and long overdue federal tax liabilities that petitioner owes. That being so, respondent's oral motion will be denied. To reflect the foregoing, an appropriate order and decision will be entered. This concludes the Court's bench opinion in this 12 matter. 13 14 15 16 17 18 19 20 21 22 23 24 25 (Whereupon, at 12:18 p.m., the above-entitled matter was concluded.)