TAX COURT OPINION

Case: Richards Asset Management Trust
Docket Number: 10764-00
Judge: Chiechi
Opinion Type: memo
Filed: 03/27/2002
Pages: 12

T. C. Memo. 2002-74 UNITED STATES TAX COURT RICHARDS ASSET MANAGEMENT TRUST, ET AL. , ¹ Petitioners y. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket Nos. 10764-00, 10765-00, 10766-00, 10767-00. Filed March 27, 2002. John M. Tkacik, Jr., for respondent. MEMORANDUM OPINION CHIECHI, Judge: These consolidated cases are before us on respondent's motion to hold petitioner in default in the case at docket No. 10764-00 (respondent's motion in the case at docket ¹Cases of the following petitioners are consolidated here- with: Everett D. Richards, docket No. 10765-00; Everett D. Richards, docket No. 10766-00; and Richards Charitable Trust, docket No. 10767-00. SERVED MAR 2 7 2002 - 3 - that respondent determined for the taxable year 1996 in the notice issued to Everett D. Richards (Mr. Richards)4 in the case at docket No. 10765-00; (3) the accuracy-related penalty under section 6662(a) for the taxable year 1997 that respondent deter- mined in the notice issued to Mr. Richards in the case at docket No. 10766-00; and (4) the addition to tax under section 6651(a)(1) for each of the taxable years 1996 and 1997 that respondent determined in the notice issued to Richards Charitable Trust5 in the case at docket No. 10767-00. Background . The record establishes and/or the parties do not dispute the following: At the time the respective petitions in these cases were filed, Richards Management Trust, Mr. Richards, and Richards Charitable Trust listed in those petitions the same address in Canton, Ohio. Richards Management Trust filed Form 1041, U.S. Income Tax 4In the case at docket No. 10765-00, respondent issued the notice to Mr. Richards and Joy A. Richards, deceased. Although the petition in that case was filed in the name of Mr. Richards and Joy A. Richards, deceased, on Oct. 12, 2001, dismissed the case for lack of jurisdiction as to Joy A. Richards, deceased. the notice issued with respect to the case at docket No. 10765-00 as the notice issued to Mr. Richards. For convenience, we shall refer hereinafter to the Court SWhen referring in this Opinion to Richards Charitable Trust, our use of convenience only and is not have any significance for Federal tax purposes. the word "Trust" and any similar words are for intended to convey any meaning or - 5 - the expense deductions claimed in Richards Management Trust's 1996 and 1997 trust returns. In the notice issued to.Richards Management Trust, respon- dent determined, inter alia, that Richards Management Trust is liable for each of the taxable years 1996 and 1997 for the accuracy-related penalty under section 6662(a). Respondent has no record of Richards Charitable Trust's having filed with respondent Form 990-PF, Return of Private Foundation (Form 990-PF), for either of the taxable years 1996 and 1997. Nor does respondent have a record of any other Federal tax returns having been filed by Richards Charitable Trust for those years. In response to a request by respondent for information with respect to Richards Charitable Trust, respondent was provided with a copy of Form 990-PF for the taxable year 1997 that showed Richards Charitable Trust as the organization to which such form pertained. However, as discussed above,.respondent has no record that Richards Charitable Trust filed with respondent Form 990-PF for the taxable year 1997. During respondent's examination of Richards Charitable Trust's taxable years 1996 and 1997 and thereafter, no books, records, or other information was provided to respondent estab- lishing (1) the jurisdiction under the laws of which Richards Charitable Trust was purportedly organized, (2) the person who is - 7 - liable for that taxable year for the accuracy-related penalty under section 6662(a). In the notice issued to Mr. Richards with respect to the taxable year 1997, respondent determined, inter alia, that he is liable for that taxable year for the accuracy- related penalty under section 6662(a). James Binge (Mr. Binge) was the return preparer for each of Richards Management Trust's 1996 and 1997 trust returns, Mr. Richards and Joy A. Richards' 1996 return, and Mr. Richards' 1997 return. Mr. Binge was also listed as the return preparer for Richards Charitable Trust's Form 990-PF for the taxable year 1997 that was provided to respondent during respondent's examination of Richards Charitable Trust but that respondent has no record of having been filed with respondent. Respondent has identified Mr. Binge as an individual involved with purported trusts used for tax avoidance purposes. On August 31, 2001, respondent filed separate motions to compel answers to interrogatories and to compel production of documents in each of the cases at docket Nos. 10765-00 and 10766- 00. On September 19, 2001, the Court granted each of those motions. Mr. Richards did not answer respondent's interrogato- ries or produce the documents requested by respondent, as ordered by the Court on September 19, 2001. On October 2, 2001, Richards Management Trust, Mr. Richards, and Richards Charitable Trust filed a joint motion to continue . - 9 - prosecution and to impose sanctions under section 6673 in each of the cases at docket Nos. 10765-00 and 10766-00. On December 3, 2001, the Court sua sponte issued separate Orders (December 3, 2001 Show Cause Orders) directing each party in the case at docket No. 10764-00 in which Richards Asset Management Trust is named as petitioner and in the case at docket No. 10767-00 in which Richards Charitable Trust is named as petitioner to show cause in writing why the Court has jurisdiction over this case, fiduciary of petitioner and a detailed analysis of why such purported fiduciary has the capacity to litigate in the Court on behalf of petitioner. including the identity of any purported On December 19, 2001, respondent filed separate written responses to the December 3, 2001 Show Cause Orders in the cases at docket Nos. 10764-00 and 10767-00 in which respondent con- tended, inter alia, that Richards Management Trust and Richards Charitable Trust, respectively, 11. * * * failed to establish that a trustee, if authorized, acted on its behalf when the purported petition was filed with the Court on October 16, 2000. 12. * * * failed to file a proper petition with this Court with the full descriptive name of tled to institute a case on its behalf. in that the petition was not brought by and the fiduciary enti- Respondent further argued in those separate responses to the December 3, 2001 Show Cause Orders in the cases at docket Nos. 10764-00 and 10767-00 that Since the petition in this case was not brought by a - 11 - On January 16, 2002, Richards Management Trust filed a response to respondent's motion to hold petitioner in default in the case at docket No. 10764-00, and Mr. Richards filed a re- 6(...continued) 2. . . [sic] order states ". This Courts' purports to be a trust trust, and the respondent has never been able to prove otherwise. Nor does the respondent have the right or ability to set aside a contract. ." Petitioner is a . petitioner . * * * * * * * 4. Petitioner does not want this false tax claim to be litigated in court, and has petitioned this Court to have this case removed from the docket as having been petitioned in error due to the erroneous instructions given by the respondent. WHEREFORE it is prayed that: 1. 2. 3. 4. This Court dismiss this case at petitioner's request as the original petition was issued in error due to false directions given to petitioner by respondent. Petitioner believes that he has the right to correct his mistake and withdraw the original petition. This Court and the respondent recognize the petitioner as a Trust and cease attempting to set aside a contract stitution of in direct opposition to the Con- the United States of America. tax claim as petitioner has noted to respon- This court sanction the respondent for using this Court for illegal purposes. Respondent has no legal dent and this Court on numerous occasions. Without a legal claim, structed petitioner to use this Court mize his illegal attempt his assets. to deprive petitioner of fraudulently in- to legiti- respondent This Court and forever, harassment of petitioner. instruct the respondent to cease, now - 13 - On February 15, 2002, Richards Management Trust, Mr. Rich- ards, and Richards Charitable Trust filed a joint brief in these cases. That brief sets forth statements, contentions, and arguments that the Court finds to be frivolous and/or ground- less.S "(...continued) taxpayer to pay to the United States a penalty not in excess of $25,000. 'Petitioners' joint brief in these cases states in pertinent part: This is a proceeding to determine if the Internal Revenue Service can ignore the strict limitations imposed on it by Congress, via the Code of Federal Regulations, and its' procedures to extort assets from unsuspecting inhabitants of one of States of America, the fifty (50) states of the United [sic] own required administrative to wit: Everett D. Richards, et al. * * * * * * * U.S.C. Title 26 Section 7602 is the I.R.S.'s authority to examine books and records regarding "internal revenue tax"--not income tax. This is corroborated by the fact that the implementing regulation for Section 7602 is located in C.F.R. Title 27, parts 70, 170 and 296. * * * * * * * In accordance with C.F.R. 1.861-8(f) petitioners, et al, do not receive any "income" or receipts from a "taxable source". * * * * * * * Petitioners, et al, have never been legally assessed any tax as required by U.S.C. Title 26 Section 6203 and C.F.R. regulation 301.6203-1 and corroborated in Bull v. U.S., 295 US 247 * * *. Petitioners, et al, determinations are based on Supreme Court decisions, Treasury Orders, U.S.C. Title 26 (continued...) - 15 - jurisdiction over the cases at docket Nos. 10764-00 and 10767-00. Rule 60 provides in pertinent part: (a) Petitioner: (1) Deficiency or Liability * * or by and with the full descriptive name of the A case shall be brought by and in the name of Actions: the person against whom the Commissioner determined the deficiency (in the case of a notice of deficiency) * fiduciary entitled to institute a case on behalf of such person. shall not be dismissed on the ground that it is not properly brought on behalf of a party until a reasonable time has been allowed after objection for ratification by such party of the bringing of the case; and such ratification shall have the same effect as if the case had been properly brought by such party. * * * See Rule 23(a)(1). A case timely brought * * * * * * * (c) Capacity: * * * The capacity of a fiduciary or other representative to litigate in the Court shall be determined in accordance with the law of the jurisdiction from which such person's authority is derived. . The record does not establish where Richards Management Trust and Richards Charitable Trust were organized. The respec- tive petitions in the cases at docket Nos. 10764-00 and 10767-00 listed an address for Richards Management Trust and Richards Charitable Trust in Canton, Ohio,¹° which is also the service address used by the Court in those cases. Assuming arguendo that Richards Management Trust and Richards Charitable Trust were trusts organized under the laws of the State of Ohio, the admin- istration of each of which is subject to the laws of that State, ¹°The Ohio address listed in the respective petitions in the cases at docket Nos. 10764-00 and 10767-00 is the same address listed by Mr. Richards in the respective cases at docket Nos. 10765-00 and 10766-00. - 17 - provide evidence establishing who has the authority to act on its behalf in each such proceeding. See Natl. Comm. to Secure Justice in the Rosenberg Case v. Commissioner, supra at 839-840; Coca-Cola Bottling Co. v. Commissioner, 22 B.T.A. 686, 700 (1931). On the instant record, we find that Richards Management Trust in the case at docket No. 10764-00 and Richards Charitable Trust in the case at docket No. 10767-00 have failed to establish who has the authority to act on their behalf in those respective proceedings. We further find on that record that neither of the cases at docket Nos. 10764-00 and 10767-00 was brought by and with the full descriptive name of the fiduciary entitled to institute each such case on behalf of Richards Management Trust or Richards Charitable Trust, as the case may be, as required by Rule 60(a)(1). On the record before us, we conclude that we do not have jurisdiction over the cases at docket Nos. 10764-00 and 10767-00. Accordingly, we shall dismiss those cases for lack of jurisdiction.¹² Mr. Richards Neither Mr. Richards nor any authorized representative of Mr. Richards appeared at the Court's Cleveland trial session on ¹²Becausewe shall dismiss the cases at docket Nos. 10764-00 and 10767-00 for lack of jurisdiction, we shall deny respondent's motion in the case at docket No. 10764-00 and respondent's motion in the case at docket No. 10767-00. - 19 - Section 6662(a) imposes an accuracy-related penalty equal to 20 percent of the underpayment of tax resulting from, inter alia, negligence or disregard of rules or regulations, sec. 6662(b)(1), or a substantial understatement of income tax, sec. 6662(b)(2). For purposes of section 6662(a), an understatement is equal to the excess of the amount of tax required to be shown in the tax return over the amount of tax shown in the tax return, sec. 6662(d)(2)(A), and is substantial in the case of an individual if it exceeds the greater of 10 percent of the tax required to be shown in the return or $5,000, sec. 6662(d)(1)(A). For purposes of section 6662(a), the term "negligence" includes any failure to make a reasonable attempt to comply with the Code, and the term "disregard" includes any careless, reckless, or intentional disregard. Sec. 6662(c). Negligence has also been defined as a lack of due care or failure to do what a reasonable person would do under the circumstances. Leuhsler v. Commissioner, 963 F.2d 907, 910 (6th Cir. 1992), affg. T.C. Memo. 1991-179; Antonides v. Commissioner, 91 T.C. 686, 699 (1988), affd. 893 F.2d 656 (4th Cir. 1990). The accuracy-related penalty under section 6662(a) does not apply to any portion of an underpayment if it is shown that there was reasonable cause for, and that the taxpayer acted in good faith with respect to, such portion. Sec. 6664(c)(1). The determination of whether the taxpayer acted with reasonable cause - 21 - shall grant respondent's motion in the case at docket No. 10765- 00 and respondent's motion in the case at docket No. 10766-00 in that we shall dismiss each of those cases for failure by peti- tioner in each such case to prosecute such case, and we shall enter a decision in each of those cases sustaining the determina- tions that respondent made in the notice to which each such case pertains but in the reduced amounts which respondent concedes are appropriate in order to reflect the duplication of certain income determinations in the respective notices issued to Mr. Rich- ards." In respondent's motions in the cases at docket Nos. 10765-00 and 10766-00, respondent also asks the Court to impose a penalty As explained in respondent's respective motions in the The amounts of such income attributed to Richards Chari- cases at docket Nos. 10765-00 and 10766-00, respondent attributed the income reported for the taxable year 1996 by Richards Management Trust 100 percent to Joy A. Richards, deceased, Mr. Richards, and Richards Charitable Trust, and respondent attributed the income reported for the taxable year 1997 by Richards Management Trust 100 percent to Mr. Richards and Richards Charitable Trust. table Trust for 1996 were reattributed for that year to Mr. Richards, and the amounts of such income attributed to Richards Charitable Trust for 1997 were reattributed to Mr. Richards, which resulted in a duplication of said amounts of income in the respective notices issued to Mr. Richards with respect to the taxable year 1996 and to Mr. Richards with respect year 1997. the cases at docket Nos. 10765-00 and 10766-00 and in the respective exhibits attached to those motions, the revised deficiencies for Mr. Richards for the taxable years 1996 and 1997 are $33,451 and $75,934, related penalties under sec. 6662(a) the taxable years 1996 and 1997 are $6,690.20 and $15,186.80, respectively. As set forth in respondent's respective motions in to the taxable respectively. Consistently, the revised accuracy- imposed on Mr. Richards for - 23 - 10766-00 sustaining respondent's determinations in reduced amounts and imposing a penalty under sec- tion 6673 (a) (1) in each of those two cases. •