TAX COURT OPINION

Case: Ashley M. Huber
Docket Number: 10742-24
Judge: Buch
Opinion Type: bench
Filed: 07/14/2025
Pages: 10

ASHLEY M. HUBER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent United States Tax Court Washington, DC 20217 Docket No. 10742-24. ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit with this order to petitioner and respondent a copy of the pages of the transcript of the trial in this case before Judge Ronald L. Buch at St. Paul, Minnesota, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered for the Commissioner. (Signed) Ronald L. Buch Judge Served 07/14/25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Bench Opinion by Judge Ronald L. Buch June 10, 2025 3 Ashley M. Huber v. Commissioner of Internal Revenue Docket No. 10742-24 THE COURT: The Court has 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. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. The oral findings of fact and opinion are made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code and Tax Court Rule 152. Rule references in this opinion are to the Tax Court Rules of Practice and Procedure, and section references are to the Internal Revenue Code, in effect at all relevant times. Petitioner, Ashley Huber, disputes a notice of deficiency in which the Commissioner determined a $5,852 deficiency in her income tax for 2021, an accuracy penalty under section 6662, and an addition to tax under section 6651(a)(1). The Commissioner has conceded the addition to tax. Because Ms. Huber offers only protestor arguments, we resolve the remaining issues in the Commissioner's 23 favor. 24 25 FINDINGS OF FACT In 2021, Ms. Huber worked for Sanford Health 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 Plan, which reported paying her $58,484. Sanford paid Ms. 4 Huber by direct deposit, and she does not dispute receiving the deposits. According to the Form W-2, Wage and Tax Statement, filed by Sanford, it withheld $500.35 of federal income tax, $3,632.50 of social security, and $849.54 of Medicare tax from the amounts paid to Ms. Huber. Ms. Huber filed a 2021 Form 1040, U.S. Individual Income Tax Return, which was received by the Commissioner on October 26, 2022. The return reported zero wages and claimed total payments of $4,982 along with a refund of the same amount. The claimed payments of $4,982 is equal to the total of all taxes withheld from Ms. Huber's wages by Sanford. Attached to her return was a Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. On the Form 4852, Ms. Huber reported zero wages and the withheld income, social security, and Medicare taxes. On March 25, 2024, the Commissioner mailed a Notice of Deficiency to Ms. Huber. In his notice, the Commissioner determined that Ms. Huber omitted wage income and ultimately determined a deficiency of $5,852. The notice included penalty for a substantial understatement 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 and a section 6651(a)(1) addition to tax for failure to 5 timely file a return. The Commissioner has since conceded the section 6651(a)(1) addition to tax. While residing in South Dakota, Ms. Huber filed a petition challenging the determinations in the Commissioner's notice. I. Burden of Proof OPINION As a general matter, the Commissioner's determinations in a Notice of Deficiency are presumed correct, and the taxpayer bears the burden of proving an error. Rule 142(a), Welch v. Helvering, 290 U.S. 111, 115 (1933). Determinations of unreported income must be supported by a "minimal evidentiary foundation" before the presumption of correctness applies. Weimerskirch v. Commissioner, 596 F.2d 358, 361 (9th Cir. 1979), rev'g 67 T.C. 672 (1977). The United States Court of Appeals for the Eighth Circuit, to which an appeal in this case would ordinarily lie, has likewise written, "it is generally accepted that the Commissioner also must provide evidence linking a taxpayer to a legal tax-generating activity before being entitled to the presumption of correctness." Day v. Commissioner, 975 F.2d 534, 537 (8th Cir. 1992); see I.R.C. § 7482(b); Golsen v. Commissioner, 54 T.C. 742, 756-58 (1970), aff'd, 445 F.2d 985 (10th Cir. 1971). But, as noted and distinguished in Day, Weimerskirch involved a 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 naked assessment. Day, 975 F.2d at 537. 6 This case involves no such naked assessment. The income item attributed to Ms. Huber was reported to the Commissioner by a third party, thus linking Ms. Huber to income producing activities. Further, evidence introduced at trial showed a clear connection between Ms. Huber and Sanford, the source of the income. The Commissioner provided sworn declarations from Sanford, biweekly earnings statements, and a Form W-2 to support Ms. Huber received wages from Sanford. Accordingly, the Commissioner has more than sufficiently linked Ms. Huber to the income-producing activity. See, e.g., Silver v. Commissioner, T.C. Memo. 2021-98, at *5. II. Wages Are Income In this case, Ms. Huber only offered frivolous arguments as to why her earnings are not taxable. As the Fifth Circuit wrote in Crain v. Commissioner, "We perceive no need to refute those frivolous arguments with somber reasoning and copious citation to precedent; to do so might suggest that these arguments have some colorable merit." 737 F.2d 1417 (5th Cir. 1984). We have further explained in Wnuck v. Commissioner, "it is doubtful whether tax jurisprudence will be much advanced by issuing yet another opinion affirming the obvious truisms about tax law." 136 T.C. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 498, 504 (2011). For example, we have previously spilled 7 ink addressing the frivolous argument that income tax is an excise tax and cannot be imposed as a non-apportioned direct tax under the 16th Amendment, an argument Ms. Huber repeats in this case. See Waltner v. Commissioner, T.C. Memo. 2014-35, at *47-48. Ms. Huber additionally argued at trial that the Internal Revenue Code defines employers and wages to include only certain types of persons or payments received, arguments also addressed in Waltner. Id. at 63. Nearly every argument Ms. Huber presented during her case was directly addressed in Waltner. As that opinion and others make clear, Ms. Huber's arguments have been addressed and rejected by this Court and many others. We won't address them further 15 here. 16 17 18 19 20 21 22 23 24 25 III. Substantial Understatement Penalty With respect to the accuracy related penalty, section 6662(a) provides that a taxpayer may be liable for a penalty of 20% of the portion of an underpayment of tax required to be reported on a return that is attributable to, among other things, negligence or disregard of the rules or regulations or a substantial understatement of income tax. See I.R.C. § 6662(b)(1) and (2). Under section 7491(c), the Commissioner bears the burden of production with respect to penalties and must produce 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 evidence that a penalty is appropriate. Higbee v. 8 Commissioner, 116 T.C. 438, 446 (2001). For those section 6662 penalties that require managerial approval pursuant to section 6751(b), the Commissioner must establish compliance with section 6751(b). Walquist v. Commissioner, 152 T.C. 61, 68 (2019). Under section 6751(b)(2)(B), supervisory approval is not required for a substantial understatement penalty that is automatically calculated without human review through the Automated Underreporter program. See Ball v. Commissioner, T.C. Memo. 2020-152, at *12-13. The record establishes that the substantial understatement penalty initially asserted against Ms. Huber was "automatically calculated through electronic means." See I.R.C. § 6751(b)(2)(B). The Commissioner provided Ms. Huber's 2021 Case History Transcript from the Automated Underreporter system which shows Ms. Huber did not respond to the computer-generated notice. As such, it is excepted from the written supervisory approval requirement of section 6751(b)(1) and thus respondent has no burden of production as to the approval of the initial penalty assertion. See Walquist, 152 T.C. at 73-74. As just noted, the Commissioner determined an accuracy-related penalty on the basis of a substantial understatement of income tax. Section 6662(d)(1)(A) 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 defines a substantial understatement as an understatement 9 of tax that exceeds the greater of 10% of the tax required to be shown on the tax return or $5,000. Ms. Huber reported zero tax on her tax return, and neither party is disputing the validity of that return. The understatement of tax was $5,852, i.e., 100% of the tax required to be shown on the return. Ms. Huber did not offer any defenses to the accuracy-related penalty. The substantial understatement penalty applies. Application of the accuracy-related penalty may be avoided with respect to any portion of an underpayment for which the taxpayer shows that he had reasonable cause and acted in good faith. I.R.C. § 6664(c)(1); Higbee, 116 T.C. at 446-47. The determination of whether the taxpayer had reasonable cause and acted in good faith depends upon the facts and circumstances of a particular case. Treas. Reg. § 1.6664-4(b)(1). We consider, among other factors, the experience, education, and sophistication of the taxpayer; however, the principal consideration is the extent of the taxpayer's efforts to assess the proper tax liability. Id.; see also Higbee, 116 T.C. at 448. Taking into consideration the taxpayer's experience, education, and sophistication, an honest misunderstanding of fact or law may indicate reasonable cause and good faith. Higbee, 116 T.C. at 449 (citing Remy v. Commissioner, T.C. Memo. 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 1997-72). 10 Ms. Huber failed to present any persuasive evidence of effort to assess her proper tax liability or reasonable cause for her understatement. Ms. Huber put forth frivolous tax arguments. She did not have reasonable cause and did not act in good faith. Accordingly, we sustain the substantial understatement penalty under section 6662(d). IV. Section 6673 Section 6673(a)(1) authorizes the Tax Court to impose a penalty not in excess of $25,000 whenever it appears that proceedings have been instituted or maintained by the taxpayer primarily for delay or whenever the taxpayer's position in such proceeding is frivolous or groundless. "The purpose of section 6673 is to compel taxpayers to conform their conduct to settled tax principles and to deter the waste of judicial and IRS resources." Clarkson v. Commissioner, T.C. Memo. 2022-92 at *13. "Frivolous and groundless claims divert the Court's time, energy, and resources away from more serious claims and increase the needless cost imposed on other litigants." Id. Given the public policy interest in deterring the abuse and waste of judicial resources, the Court is given broad authority in deciding when to impose the penalty and the amount of the penalty. See Leyshon v. 1 2 3 4 5 6 7 8 9 Commissioner, T.C. Memo. 2015-104, at *17-18, aff'd, 649 11 Fed. Appx. 299 (4th Cir. 2016). We will not impose sanctions in this case, but we caution Ms. Huber against taking frivolous positions in future litigation. Although we previously warned Ms. Huber about the possibility of a sanction in another case, Huber v. Commissioner, T.C. Memo. 2025-29, that opinion was issued mere days before this case was called. On this record, we will not impose a sanction under section 6673. 10 V. Conclusion We sustain the deficiency of $5,852 and the accuracy-related penalty under section 6662(a) of $1,070. We will enter a decision accordingly. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 10:44 a.m., the above-entitled matter was concluded.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25