TAX COURT OPINION

Case: Gary C. Lizalek
Docket Number: 3202-07L
Judge: Goeke
Opinion Type: memo
Filed: 06/01/2009
Pages: 21

T.C. Memo. 2009-122 UNITED STATES~-TAX COURT GARY C. LIZALEK, ET AL.}! Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent "Docket Nos. 3202-07L, 14297-07, Filed June 1, 2009. 14298-07, . 14299-07. 7 Gary C. Lizalek and Karen N. Lizalek, pro sese. "Frederic J..Fernandez and Mark J. Miller, for respondent , ie 'Cases of- the. following petitioners are consolidated herewith: Karen N. Lizalek, docket No: 14297-07; Gary C. if - Lizalek, docket No. 14298-07;. Gary C, Lizalek,. docket No. 14299-07. ' | a . ee JUN - 1 2009. -2- MEMORANDUM FINDINGS OF FACT AND OPINION GOEKE, Judge: These consolidated cases are before the Court on petitions for redetermination of three statutory notices of deficiency and a notice of intent to levy. Respondent. determined Federal income tax deficiencies, additions to tax, and penalties against Gary C. Lizalek (petitioner) and Karen N. Lizalek for 2001 through 2005 arising ' a from inéome petitioner received as follows: J Gary ¢. tnizalek, docket No. 14298-07: 4 be + . Additions to Tax - Year .. Deficiency Sec. 6651 (a) (1) Sec. 6651(a) (2) Sec. 6654 2001 * $518,988. $3,111 $3,457 - $530 2002. 4,114 926 : 987 137 2003 ,*! 4,254 957 766 111 .. 2004° 4 11,794 2,654 1,415 342 2005 % 3,329 749 200 134 ah, Karen N. Lizalek, docket No. 14297-07: : Additions to Tax/Penalty Year Deficiency Sec. 6651(a) (1) . Sec. 6651 (a) (2) Sec. 6654 Sec. 6662 2001 $13,864 $3,119 $3,466 - $554 2002 4,613 --- --- --- . $923 2003 4,254 957 766 111 --- 2004 11,794 2,654 : 1,415 138. --- 2005 *3,329 749 200 134 --- Respondent seeks increased deficiencies and additions to tax against petitioner in the event the Court finds that his income is not attributable to Karen Lizalek pursuant to the Wisconsin Uniform Marital Property Act. Wisc. Stat. Ann. ch. 766 (West 2009) "Respondent also assessed a $500 civil penalty against oth ~ 3 - petitioner in docket No. 3202-07L under section 6682 for 2005 "providing a false Form W-4, Employee's Withholding Allowance |' Certificate. . Co As. a protective measure, respondent issued a notice of. 'fy deficiency to the Gary C. Lizalek Trust (Lizalek Trust) for 210 2004, and 2005 in the event that we/find that petitioner and/b Karen Lizalek are not subject to tax on the income at issue.?| Respondent determined Federal income: tax deficiencies and penalties against the Lizalek Trust jas. follows: Gary C. Lizalek, docket. No. 14299-07: , o To Penalty Year Deficiency | Sec. 6662 2003 = .-i<'<-~*é'«'S 2S, BS $5,088 2004 (59,448. Sas 11,890 2005 23,432 4,686 Unless otherwise indicated, alll section references are to the Internal Revenue Code, and all Rule references are to the| Court Rules of Practice and Procedure. Amounts are rounded to: - the nearest dollar. The issues for decision are: : (1) Whether petitioner is subject to tax on wages, capit gains, dividends, and/or interest income at issue for 2001 The term "trust" is used in this opinion for convenience ' only and is not intended to be conclusive as to the © i}. characterization of the Lizalek Trust for Federal tax purposes. 'for 03, i Tax t al - 4 - through 2005 or whether the income may be reported on trust. returns. We hold he is subject to tax; b BS (2) whether Karen Lizalek is taxable on half of petitioner's income as community property. We hold she is not; | (3) whether petitioner is liable for additions to tax for failure 'to file under section 6651(a) (1), failure to pay under section 6651(a) (2), and failure to pay estimated tax under section 6654(a) for 2001 through 2005. 'We hold he is; (4) whether Karen Lizalek is liable for additions to tax for failure to file under section -6651(a) (1), failure to pay under section 6651.(a) (2), and failure to pay estimated tax under section 6654(a) for 2001, 2003, 2004, and 2005 and for a section 6662 (a) .accuracy-related penalty for 2002. We hold she is not liable; , . , (5) whether petitioner is liable for a section 6682 penalty for 2005 for submitting false withholding information to his employer. We hold he is liable; , (6) whether petitioner is liable for a penalty under section 6673 for instituting these proceedings primarily for delay and for maintaining frivolous or groundless positions. We if hold he is not liable; and | ~i (7) whether -respondent -is liable for-a section 6673 perardy for violation of his fiduciary duties and. for failing to provide exculpatory evidence. We hold resporident is not liable.? FINDINGS 'OF; FACT Some of the facts, have been. stipulated. The stipulations dé facts and the accompanying ome ess incorporated by this,|- reference. Petitioner and Karen Lizalek resided in Wisconsin] at the time of filing their petitions. In 2001 petitioner was an, employee of both. Motorola, Inc}, and Innovatec Communications, LLC "innovatec}, and earned wage, Zé { income of $22,172 and $62,019, respectively. In 2001 petitioner] received retirement distributions from Advanced Clearing, Inch, | Arrowhead Trust, Inc.,°Sterling Trust Co., and First Trust Corp.} of $29,322, #3, 000, $2,925, and $16,481, respectively. In. (2001 petitioner received a capital gain distribution of $14 from Salomon Smith Barney, Inc. 1 a Lye - . i | in 2002 petitioner was an employee of Innovatec and Administaff Cos. "Tt, LP (Administaff), and earned -wage income |.of $32,539. and $34,473, respectively. in 2002 petitioner also received interest -income of $11 from Sovereign. Bank. In 2003 petitioner was an employee of Administaff and earned. wage income of $75,122. | | rly wr 3Because we hold that petitioner is subject to tax on thel' income at issue, we do 'not sustain the deficiencies and penalties determined against the Lizalek Trust. - 6 - In'2004 petitioner was an employee of Administaff and Silver Springs Networks and earned wage income of $21,131 and $61,216, respectively. In 2004 petitioner sold a 50-percent interest ina residence located in Glendale, 'Wisconsin, for $90,000. In :2005 petitioner was an employee of both Silver Springs Networks and Invivo Corp. & Subs. (Invivo) and earned wage income of $59,141 and $6,460, respectively. . For the years at issue petitioner's employers reported his wages on Forms W-2, Wage and Tax Statement. None of the employers withheld Federal or State income taxes from petitioner's wages. Some of the Forms W-2. listed various. Wisconsin addresses for petitioner. Others listed petitioner's address .as Oak Lawn, Illinois. In addition, petitioner received a. Form. 1099-R,. Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., for each retirement distribution, and Form 1099-B, Proceeds from Broker and Barter Exchange Transactions, for the capital gain distribution. The Forms 1099-R and Form 1099-B listed a" Wisconsin address for petitioner. Petitioner reported the wages 'and other income on Forms 1041, U.S. Income Tax Return for Estates.and Trusts, filed for the Lizalek Trust, listing an address in Milwaukee, Wisconsin. On each Form 1041 filed for the Lizalek Trust for the years at issue, the Lizalek Trust claimed deductions that offset any roy a 2 -7- income reported. 'Accordingly, the Forms 1041 did not report. any tax due. - Respondent prepared substitute 'returns under section | 6020(b) for petitioner for 2001 chrbugh 2005 and for Karen ie Lizalek for 200%, 2003, 2004, and 2005. Karen "Lizalek filed la Form 1040, U.S. Individual Income Tax Return, for "2002. 1. Assessment and Levy of: Section 6682 Penalty: i} + Petitioner submitted.a Form W-4 to Silver Springs Networks |» for 2005 that indicated he was "exempt" from withholding. On} 'thle Form W-4 petitioner certified that he had no tax: liability for, a 2004 and he did not expect to have a tax liability for 2005... i | respondent assessed a $500 civil: 'penalty against petitioner fbr During 2005-Silver Springs Networks jdid not withhold Federal income tax from pétitioner's® wages: On January 9, 2006, submitting a false Form W-4. Before assessing the penalty, respondent :provided petitioner with Jan opportunity 'to provide a new Form W-4.: However, petitioner continued to' claim that helwas- . exempt from withholding. - After making several unsuccessful - |# requests for payment of the civil penalty, respondent issued at final notice of intent to levy on July 1, 2006, with respect to the unpaid civil penalty. On July 11, 2006, petitioner requested . ny wk Be a collection due. process hearing (CDP 'hearing) for the levy../| On October 31, 2006, the settlement officer assigned toli- |. petitioner's case held" a hearing by. telephone: During the CDP' | : hearing petitioner claimed 'that he. was exempt 'from withholding: - 8 - because the Lizalek Trust earned the wages at issue.. He argued that the Internal Revenue Service (IRS). accepted that the Lizalek Trust existed when it assigned an employer identification number (EIN) to the Lizalek Trust in 2000. Petitioner refused to discuss payment of the penalty and did not. provide any collection alternatives. The settlement officer determined that petitioner' s position was frivolous. On January 16, 2008, respondent issued a notice of determination sustaining the assessment of the section 6682 penalty .and the levy. 2. Sanctions On March 11, 2008, respondent filed a motion to impose sanctions against petitioner in docket No. 14298-07 for instituting the: action primarily for delay. and for advancing frivolous and groundless arguments. .On April 28, 2008, petitioners filed a motion to impose sanctions against respondent in each-of the docketed cases claiming respondent violated his fiduciary duties and withheld exculpatory evidence relating to tax forms. OPINION A. Reporting of Income Section 61(a) defines gross income as "all income from whatever source derived". A fundamental principle of income taxation is that income is taxable to the person who earns it. Lucas v. Earl, 281 U.S. 111, 114-115 (1930). An anticipatory - 9 -| id, assignment. of income from a true income earner to another entity by means of a contractual arrangement does not relieve the tite | income earner from tax and is not effective for Federal:income . ' a i . tax purposes -regardless of whether the contract is valid-.under State law. Id.; Vercio v. Commissioner, 73° T.C. 1246, 1253 (1980). . Although taxpayers are entitled to arrange and condtict their affairs and structure their transactions to minimize taxed: a trust is disregarded for Federal tax purposes if ait lacks : economic substance and was formed sdlely for 'tax avoidance purposes. Gregory v. Helvering, 293 U.S. 465, 469 (1935); Zintdal v. Commissioner,. 79 T.C. 714, 719-720 (1982),+ aff. 731 F.2d vay (9th Cir. 1984).-0° 0 a : re oe i Hy Petitioner contends that the sdcial Security Administration}, (SSA) created the Lizalek -Trust when it. issuéd a Social Security} card to petitioner, 'which constituted a transfer of property.' Petitioner further contends that. he serves as trustee and the : i United States is the sole beneficiary. Petitioner asserts that. | he submitted a written. indenture for the Lizalek Trust to -the] SSA reflecting this relationship that che SSA accepted based! on its + failure to respond as required by the Privacy Act and the | . Administrative, Procedure Act. Similarly, petitioner argues that] the IRS accepted that the Lizalek Trust existed when it assigned ew sete forme fe an EIN to the. Lizalek. Prust upon submission of a Form SS~ 4, Application for Employer | Identification Number. Finally, 8° - 10 - petitioner argues that the Lizalek Trust was the employee 'that earned 'the wages and other income at issue and that the trust properly: reported the income on Form 1041. Respondent contends that the purported trust does not exist in fact or alternatively the Lizalek Trust is a sham or grantor trust.! , 'Petitioner has not established that a valid trust exists. The 'issuance of a Social Security card is not a transfer of property that creates a trust as petitioner contends. Petitioner' s submission of a purported trust document to the SSA and a Form SS-4 to the IRS does not create or in any way acknowledge the existence of a trust. Petitioner has not, provided any legitimate trust documents forming the purported trust. 'The purported trust does not reflect economic reality and is not recognized for Federal tax purposes. Accordingly, we hold that petitioner earned the wages and other income at issue, and the income is includable in his gross income. See McManus Vv. Commissioner, T.C. Memo. 2006-68; Nichols v. Commissioner, T.C. Memo,.. 2003-24, affd. 79 Fed. Appx. 282 (9th Cir. 2003). , For 2004 respondent determined that petitioner is subject to capital gains tax on $90,000 from the sale of a 50-percent interest in real estate. Although petitioner claims that he had 'On brief petitioners raise evidentiary issues with respect to certain exhibits respondent offered. The Court addressed the admissibility of the exhibits at trial, and there is no basis to reconsider the admission of the exhibits into evidence. -1 a basis of $67, 000 in the: property, he did not attempt to. substantiate his basis. Nor did petitioner establish that he. qualifies for the exclusion of gain) from the sale of a principal residence under section 121 because| he did not show that: he guned and used the property 'as his principal residence for 2 or mone : years during the 5-year period preceding the sale. Finally, | petitioner did not establish that he is entitled to a long- term | capital loss carryover as reported on the 2004 Form 1041. ifs 7 Accordingly, petitioner is subject to tax.-on $90,000 inicapital | gain for:2004 from the sale ofthe teal estate.o. ae 'J B. : Income Attributable.to Karen Ligalek Under. Community - i oo Property Laws : : The deficiency determinations against Karen Lizalek are based upon Wisconsin commana ty, prophatiy laws that attribute aki undivided | one~half. interest in one. spouse' s income during thel marriage to the other spouse. See Wis. Stat. Ann. sec. 766.311; a ae Gerczak v. Estate of Gerczak, 702- N. Ww. 2a 12, 78 (Wis. Ct. "ABP, 2005). Respondent argues that petitioner and Karen Lizalek were married and were domiciled in the State of Wisconsin during the * + years at issue and were subject to the Wisconsin Uniform Marital: é $ ' a) Property . Act. See Wis. Stat. Ann. dee. 166. 31. Petitioner contends that he was a resident and idomicitiary of the. State bE - So |! 'The trust also reported the sale, of a. 50-percent interest - in the same property in 2002. Respondent did not determine at 'deficiency with respect to the 2002 sale. Fae - 12 - Illinois during the years at issue. "Petitioner and Karen Lizalek further contend that they are not legally married. ; For, Federal tax purposes the. State law of the marital domicile -generally controls the determination of marital status. See Dunn v. Commissioner, 70 T.C. 361, 365-366 (1978), affd. without published opinion 601 F.2d 599 (7th Cir. 1979) ; Eccles v. Commissioner, 19 T.C. 1049, 1051 (1953), affd. per curiam 208 F.2d 796 (4th Cir. 1953). In addition, the State law of the taxpayer's domicile, rather than a place of temporary residence, controls the application of State community property laws: Park v. Commissioner, 79 T.C. 252, 287 (1982), affd. without published opinion 755 F.2d 181 (D.C. Cir. 1985); Webb v. Commissioner, T.Ce Memo. 1996-550. , Although petitioner denies that he was domiciled in Wisconsin during the years at issue, it is not necessary to determine his State of domicile because we find that petitioner and Karen Lizalek were not married during the years at issue. Accordingly, they are not subject to Wisconsin community property laws irrespective o of petitioner's State of domicile. Petitioner testified that he is married to Karen Lizalek under the laws of God. However, he 'testified that they do not have a valid _ Stateissued marriage | license and they did not participate in a civil marriage ceremony. We find petitioner's testimony to be credible. Common law marriage is not recognized in the State of i . - 13 - | Wisconsin. .Watts v. Watts, 405 NiW.2d 303, 309 (Wis. 1987); }see. Wis. 'Stat. Ann~ sec. 765.16 (West 2009). We hold: 'that petitioner and "Karen Lizalek were not married during 'the years at issue [for purposes of Wisconsin community property laws and Karen ' Lazalek \ is not liable for taxes:+on one-halflof petitioner's income. || Accordingly, there .is:no. deficiency} in Karen Lizalek's taxes |for ~ "any year. at issue? Respondent amended his anSwer to assert increased . itd deficiencies and- additions to tax' against petitioner in-the event that we find that~the° income at. issue.is not marital property, " , i | Respondent bears the burden of* 'proof with: regard' to any. increased deficiencies. See Rule. 142(a) (1). lror-the reasons stated above, respondent has met'-his -burden of proof with respect to the. increased deficiencies. We sustain] respondent' Ss determination of increased deficiencies against petitioner for each year at issue on the basis that. the. entire amount of income at issue is |: includable:in-his gross income." °- | we . Cc. Additions to Tax and "Penalty of he os 7 af Respondent determined that petitioner is liable for . ne additions: to. tax for failure 'to .timely file a-return under section 6651(a) (1), 'failure to'timely pay tax under section 4 e i 6651 (a)(2), and failure to pay estimated income tax under section 6654(a), for each year 'at issue. 'THe 'Commissioner bears the |! -burden of production with respect toa taxpayer's liability for. -~ 14 - additions to tax under sections 6651(a)(1) and (2) and 6654 (a). Sec. 7491(c); Rule 142(a); Higbee v. Commissioner, 116.T.C. 438, 446-447 (2001). Once respondent meets his burden of production, petitioner bears the burden of proof as to substantial authority,' reasonable cause, or similar provisions. See sec. 7491(c); Rule 142 (a); Higbee v. Commissioner, supra at 446-447. In. an | amendment to answer, respondent asserted increased additions to tax based on the asserted increased deficiencies for each year at issue. . To the extent respondent bears. the burden of proof for the increased additions to tax, we find that respondent has met that burden. See Bhattacharyya v. Commissioner, T.C. Memo. 2007-19 n.19; Howard v. Commissioner, T.C. Memo. 2005-144. Section 6651(a) (1) imposes an addition to tax for failure to file a return on the date prescribed unless such failure is due _to reasonable cause and not due to willful neglect. Petitioner did not file individual returns for the years at issue. He argues that the Lizalek Trust properly. reported the income at issue on Forms 1041. Petitioner's frivolous trust arguments do not constitute reasonable cause for his. failure to file. Accordingly, we hold that petitioner is liable for the section 6651(a) (1) addition to tax for each year at issue. Section 6651 (a) (2) imposes an addition to tax for failure to timely pay the amount shown as tax on a return unless such failure'is due to reasonable cause and not willful neglect. The - 15. a oes addition to tax. applies to an amount of tax shown ona return. Cabirac v. Commissioner, 120 T.C.. 163, 170 (2003). Respondent prepared substitutes for returns. for petitioner that meet the. requirements of section 6020(b). The, substitutes for: returng sane treated as returns filed by. the taxpayer for purposes of i i : determining. the amount of a- ssection/ e681 a) (2). .addition. to tax. 'Sec. 6651(g) (2). Petitioner has not paid the tax due and. has inot 1 established that his failure to timely pay was due to reasonable . . ; 1 ; ai . ' . . a ia ; ; cause. Accordingly, petitioner is liable for the section 6651 (a) (2) addition to tax for each;year at issue. | | iti Section 6654(a) imposes an addition to tax on an . - ae underpayment af estimated tax. A 'taxpayer generally must payl ; estimated tax for a particular year lit he has a "required ann 211 (2006), affd. 521 FB, 3d 1289 «aot Cir. 2008). A taxpayer required annual payment is equal to the lesser of: (1) 90 "percent of the tax shown. on the individual' s return for that |; year, or if. no. return is filed, 90 dercent of the tax for such. £ year, or (2) if the taxpayer filed a "return for the immediately | preceding tax year, 100 percent of the tax shown on. that returt ~The Commissioner must produce 'evidence that the taxpayer failed Re | é i to file a return for the preceding year to establish a require annual payment. dheeler ve Commissioner, Supra at 210-212. 1 if ot payment" for that year. "Wheeler Vv. _lconmi ssioner, 127 T.C.. 200. a ' Sec. 6654 (d) (1) (B); Wheeler Vv. Commissioner, supra at 210- nau} | " i x ee) i all. A Ss n. 4 ; d 4 an t 1 z ~- 16 - Petitioner did not file individual returns for 2001 through 2005 and did not. pay estimated tax for those years. In addition, he ) did not file an individual return for 2000. We do not find that .a statutory exception to the addition to tax applies for any year at issue. Therefore, petitioner is liable for the section 6654 (a)..additions to tax for 2001 through 2005. Respondent also determined additions to tax anda penalty against Karen Lizalek. Because we hold that Karen Lizalek does not have unreported income and does not owe a tax deficiency for. any year at issue, she is not liable for the additions to'tax or the penalty. D. section 6682 Penalty for Providing False Withholding: Information ; 'Taxpayers have a right to a hearing before a levy is made on any property. Sec. 6330(a). At the hearing a taxpayer may raise any relevant issues relating to the unpaid tax or lien filing, including challenges to the appropriateness of the collection action and possible collection alternatives. Sec. 6330(c) (2) (A). Taxpayers may raise challenges to the existence or amount of the underlying tax liability at a CDP hearing if they did not receive a notice of deficiency or otherwise have an opportunity to 'dispute the underlying tax liability. Sec. 6330(c) (2) (B). "Following the hearing, the Appeals officer must determine whether to proceed with the collection action, taking into account verification that the requirements of applicable law and t r - 17 ; | 4 ' y 4 . administrative procedures have been} met,. any. relevant issues the oo . : . t taxpayer raised, and whether the collection action balances the | 4 need for the efficient collection of taxes with the legitimate 2 .concern of the. 'taxpayer 'that any collection action be no more: | ie intrusive than necessary. Sec.. 6330 (c) (3 ye The 4 . | rel For determinations made after October 16, 2006, we;have| i a : ' { . : . i jurisdiction to -review all determinations. in.section 6330 M | 7 : ioe proceedings. Sec. 6330(d)(1)7 Pensioh Protection Act of 2006, Pub., L.» 109-280, ""sec.. 855, 120 Stat, 1019... Respondent éoncedés that the Court should. consider the underlying merits of: the i: section 6682 penalty. Where the validity of the underlying tla | liability is properly' at issue, the |Court will review the mattey de novo. Sego v.. Commissioner, 114|1.c. 604, 610 (2000); cone. t Ro Commissioner, 114 T.C. 176, 181+182! (2000). > Otherwise, .the Cou | % t reviews the administrative: determination regarding the collectiicn 7 4 action for abuse of. discretion. . Sedo _v. Commissioner, 'supra bt 7 . i . . a : 610; Goza v. Commissioner, supra at 182. The abuse of discretion © standard. requires. the Court to decide whether the Appeals'. | pete ek. officer' s determination was. arbitrary, capricious, or withoutf oe sound, basis in fact or aw. "Mailman _v. Commissioner, 91: T.C.} 4 | : | 1079, 1084 (1988)... a, |: q i Section 6682 (a) "imposes a $500 jcivil penalty for providing i , false information with respect to inlcome.-tax withholding where' there is no. reasonable' basis .for: such information. Respondent! | - 18 - imposed a section 6682 penalty against petitioner for submitting a false Form W-4 for 2005. on which he claimed to be exempt from Federal' income tax withholding. Petitioner received substantial wages during 2004 and 2005 that he was required to report 'on his individual returns. He did not substantiate that he was entitled to deductions for 2005 "that would offset his tax liability from his 2005 wages. On the Form W-4 submitted petitioner falsely claimed that he had no tax liability for 2004 or 2005, in order to avoid Federal income tax withholding. Petitioner argues that he is not liable for the penalty because the Form W-4 was submitted for the Lizalek Trust. Petitioner's arguments are without merit and do not provide a reasonable basis for claiming an exemption from withholding for 2005. Accordingly, petitioner is liable for the section 6682 penalty. : In addition, the settlement officer did not abuse his discretion in sustaining the levy against petitioner. 'The settlement officer verified that all requirements of applicable _law and administrative procedure were met and considered the arguments petitioner raised. See sec. 6330(c) (3). During the CDP hearing, petitioner made frivolous arguments that he was not liable for taxes on his wages because the Lizalek Trust earned the wages and reported them for both 2004 and 2005. He refused to discuss payment of the penalty and did not provide any collection alternatives, stating that he would rather file for - 19 bankruptcy . than pay the $500 civil penalty. We hold that fa ' 'respondent did not abuse his. discretion in 'sustaining the levy. : |: ' E. Sanctions Under Section 6673 {| .. a rs ea Fy be Section 6673(a) (1) authorizes the Court. to impose sanctions. against a taxpayer of up to $25, 000) where (the taxpayer (1), institutes | 'Or maintains a proceeding primarily for delay, (2)} - ; ifs > nce mt advances frivolous or. .groundless positions, or (3) unreasonably fails to pursue available administrative remedies. Section 6673 (a ) (2) (B) authorizes the Court £0 impose sanctions against | ! 'the Commissioner ,for attorney misconduct by ordering the i|o3 iho { i | x ' ' 1 t ; wi. Commissioner to pay attorney's fees; excess costs, and: expensiles fo je , ' . : i : . Pf incurred because of such conduct... ; : sy of Respondent filed a motion for sanctions -against petitioner . . ~ i . &' : : ee in docket No. 14298-07, for maintaining this action primarily fox . | ' delay and asserting frivolous arguments. Petitioners filed a) cross~ -motion for sanctions against Hespondent, in each of "the | docketed cases alleging that respondent breached his fiduciary duties and withheld exculpatory evidence. Petitioners assert}. numerous frivolous arguments to" cupyert sanctions against i respondent relating to the Office of Management and Budget | Doe Hy ; numbers on tax forms and the- Paperwork Reduction Act of 1995, 44 U.S.C. secs. 3501-3520 (2000), respondent's alleged intimidation} | . threats of liens, and extortion to interfere with petitioner' s obligations as the trustee of the nikatek Trust, and respondent' 5 A : r -- 20 - purported attempts to defraud the United States as the - beneficiary of the Lizalek Trust. There is no evidence of attorney misconduct and no basis to impose sanctions against respondent. Accordingly, we shall deny petitioners' motions for sanctions. - Although petitioner raised frivolous arguments in these proceedings, we decline to impose sanctions against him at this time because this is the first instance that he presented*the arguments in Federal court.' Accordingly, we shall deny respondent's motion for sanctions without prejudice to renew. We warn petitioner that his argument that an SSA-created trust earned the wages and other income at issue and his use of Form 1041 to report his personal income are frivolous and without | merit. 'This Court may impose a section 6673 penalty of up to $25,000 if he institutes subsequent proceedings that advance similar .groundless arguments or if he engages in any conduct that: delays the final resolution of these proceedings. To reflect. the foregoing, 21 i j | "docket No. 3202-071. decision will be entered tin | Decision will be entered for petitioner in docket No. | , 14297-07. if. | 7 Decision will be entered : i] under Rule 155 in docket No. 4298-07. | | | ' Decision will be entelred | ifoe 4 for petitioner in docket No. | 4299-07. ale An appropriate order |and k Y | { ! q