TAX COURT OPINION

Case: Gary Dean Livingston
Docket Number: 4832-10S
Judge: Kroupa
Opinion Type: bench
Filed: 04/26/2011
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 20217 RMM GARY DEAN LIVINGSTON, Petitioner, v. ) Docket No. 4832-10 S COMMISSIONER OF INTERNAL REVENUE, Respondent. O R D E R Pursuant to Rule 152 (b) , Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall the pages of transmit the to petitioner and to respondent a copy of transcript of February 16, 2011, containing her oral opinion rendered in this case. the above case before Judge Diane L. Kroupa on findings of fact and In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Diane L. Kroupa Judge Dated: Washington, D.C. April 26, 2011 SERVEDApr282011 3 Bench Opinion by Judge Diane L. Kroupa Gary Dean Livingston v. Comn issioner Docket No. 4832-10S February 16, 2011 THE COURT: The Cdurt has decided to render oral findings of Fact and Opinion in this case and the following represents the Codrt's oral findings of Fact and Opinion. These oral firidings of Fact and Opinion shall not be relied upon as precedent in any other case. This proceeding was conducted as a Small Tax Case under section 7463 and Rules 170 through 175. This bench opinion is made þursuant to the authority granted by section 7459(b) and Rule 152. All section references are to the Internal Revenue Code as amended and in effect for 2004, the year at issue, and all rule references are to the 'i'ax Court Rules of Practice and Procedure-. Gary Livingston aßpeared pro se . Aely Ullrich appeared on behalf of respondent. FINDINGS OF FACT Petitioner filed á Form 1040 for 2004. He reported $3.23 as an ordinary dividend and "zero" on the line specified fpr "wages, salaries, tips, etc." Petitioner also claimed a $2,199.30 refund for 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 Heritage Reporting Corporation (202) 628-4888 | 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 withheld from Forms W-2 and 1099, but he did not provide any information as t o income from which such tax was purportedly Aithheld. In fact, petitioner attached a Form 4852 entitled "Substitute for Form W- 2, Wage and Tax Statement, ór Form 1099-R, Distributions from Pensions Annuities, Retirement or Profit-Sharing Plans IRAs, Insurance Contracts, Etc. " claiming that the amount of income for 2004 was zero. Petitioner signed the retur4 under penalties of perjury. Respondent did not treat the Form 1040 as a valid and processable returA. Rather, respondent used information from thikd-part payors and prepared a substitute for return for p titioner under section 6020 (b) . The IRS ret'eived a Form W-2 from Edge . Business Services Co. that showed Petitioner received $29,749 of wages, e-f-saen-em±oyee-eompenset-i-eman&of d-i-v-i-dende, Form 10 9 9 MISC f om Gary D . Livingston nunc d pro tunc that showed that p titioner received $41,621, O 20 ^ andí>rm 1099-DIV from Emerson Electric that showed 21 22 23 24 25 that Petitioner received $3k./ oE dødends. Based on the substitute return prepared by respondent, respondent issu d petitioner a deficiency notice for 2004. Responden determined in the defíciency notice that peti ioner was liable for a Heritage Reporting Corporation (202) 6 8-4888 5 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 $17,487 deficiency in Federal income tax for 2004 as well as a $2, 984 penälty for failure to file under section 6651(a) (1) and a $3 316 late payment addition to tax under section 6651(a) (2) . Petitioner timely filed a petition with the Court asserting that his compensation is not "wages" . as defined in sections 3401 and 3121. He also claims that the Form 1040 he filed was a valid return and that he never filed a form 1099-MISC. OPINION Petitioner has inåtituted and maintained this case as a protest agaiÃát the federal income tax system. Petitioner's arguments are familiar to this Court and other federal courts and have been soundly rejected on numerous occasiáns. By citing out of context, selected text from the withholding tax provisions, Petitioner conc udes that only Federal employees are subject to the Federal income tax on their wages . Morever, peti ioner' s nunc pro tunc lànguage on his Formi 1099-MISC is commonly used by tax protestors claiming that th y have no tax liability. We find it incredible that petitioner asserts that he is not a tax protestor. He claims that he simply wants a copy of the Form 1099-MISC he previously provided to the IRS. Petitioner has Heritage Report: ng Corporation (202) . 628-4888 i 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 6 followed in the footåteps of numerous others who have unsuccessfully attem ted to find a way to avoid paying Federal income tax. We find petitioner's arguments to lack merit and not worthy of further analysis. We note that petit ioner's arguments are very similar to the positions pr mulgated in the Cracking the Code book, in which the author takes the position that "income" is not defin in the Code and that wages earned by non4Federal employees are not subject to Federal income tax. Courts have found arguments frivolous when taxp yers argue as do petitioner and other followers of Mr. Hendrickson's Cracking the Code boo, that wages are not income, e.g., Tomichio v. United States, 263 É.Supp.2d 1090, (N.D. Ohio 2002) ; Montero v. Commissióner, d cket no. 23166-07L, af f irmed by 5th Circuit in n unpublished order dated Nov. 19, 2009; Scott v Co missioner, docket no. 26392-06, affirmed 15y 2d Circuit in an unpublished order dated Nov. 5, 2009; Elias v. Commissioner, docket no. 24624-06Ip; Mills v. Commissioner, docket no . 3441-08 . Petit ioner ' s arguments that withholding applies only to government workers and his filing of a Form 1099-MISC are also frivolous. See e.g. United States v. Sullivan, ¡788 F.2d 813, 815, (1st Cir. 1986) . Petitioner faileid to present any valid Heritage Report. ng Corporation (202) 628-4888 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 argument contesting the deficiency. We therefore find that petitioner is iable for the deficiency in federal income taxed for 2004. We now focus on the additions to tax. Petitioner contends that he filed a valid return for 2004, and therefore should not be liable for the failure to file penalty. The Form 1040 filed by petitioner, however, lacke information sufficient to apprise respondent of his Federal income tax obligations. See sec. 6011. It showed $2,199.30 tax withheld but contained no information as to income from which such tax was purportedly withheld. Moreover, this Cour has fo nd that filing purported returns to advance frivolous tax arguments is not an honest and reasonab e attem t to comply with the tax law. Dunham v.. Commissioner, T.C. Memo, 1998-52. Accordingly, petitidner failed to file a valid return and is therefore liable for the failure to file penalty. The petition contains no specific allegations or supporting statements of facts regarding the failu e to pay penalty. We deem petitioner to have donceded this issue and hold that respondent has no burden of production under section 7491(c) as to the addition to tax. See Funk v. Heritage Reporting Corporation (202) 628-4888 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 l 8 Commissioner, 123 T.C. 213 (2004) , Swain v. Commissioner, 118 T.C. 358 (2002) . We now add ess whether it is appropriate to impose a penalty against petitioner under section 6673, which authoriges the I'ax Court to require a taxpayer to pay to t he United. States a penalty up to $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 proceedings is friv lous or groundless. We note that the type of argument s petit oner raises have been deemed by this Court to be rivolous and/or sanctionable under dection 673. The Court warned petitioner that he das at risk of subjecting himself to the penalty if he continued to raise only frivolous argument s and waste the Court ' s and re spondent ' s limited time and redources. Petitioner's tactics have consumed valuable Government resourced. These tactics should not be condoned They damàge the integrity of the Federal tax litigation systém because the time and attention the Court and resporident must devote to these frivolous arguments deprives other taxpayers with genuine controversi s. See Abrams v. Commissioner, 82 T.C. 403, 412 (1984) . When the Court has been faced Heritage Reporting Corporatiion (202) 628-4888 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 with groundless argtiments that waste the Court's and respondent's limitec time and resources, we have consistently found t hat the taxpayer deserves a penalty under secticn 6673(a) (1), and that penalty should be substantial if it is to have the desired deterrent effect. 'Éhe purpose of section 6673 is to compel taxpayers to think and to conform their conduct to settled tax princ iples . Coleman v. Commissioner, 791 F.2d 68, 71, (7th Cir. 1986); see also Grasselli v. Commissioner, T.C. Memo. 1994-581. Respondent did not seek to impose a penalty against petitioner tintil trial. Perhaps respondent gave him the benefit of the doubt. Apparently 2001 is the first year that petitioner started asserting that his earnings were not wages. We reluctantly do not impose a penalty ag inst petitioner at this time, but we strongly caution him, however, that should he bring similar arguments before this Court in the future, the Court is likely to mpose such a penalty, up to $25,000, against hid. To reflect the foregoing, decision will be entered for respondent . THIS CONCLIJDES THE COURT' S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. / Heritage Reporting Corporation (202) 628-4888 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 23 24 25 (Whereupon at 2: 2 p.m., the bench opinion in the above-entitl d mat er was concluded. ) 10 / / // // // [ // Heritage Reporting Corporation (202) 628-4888