TAX COURT OPINION

Case: Scott F. Wnuck
Docket Number: 26068-09
Judge: Colvin
Opinion Type: bench
Filed: 01/21/2011
Pages: 11

UNITED STATES TAX COURT WASHINGTON, DC 20217 SCOTT F. WNUCK, Petitioner, v. Docket No. 26068-09 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 transmit herewith to petitioner and to respondent a copy of transcript of Gustafson at Columbia, South Carolina, on January 12, 2011, containing his oral findings of conclusion of the trial in the above case before Judge , David the pages of fact and opinion rendered at the the trial. the In accordance with the oral findings of fact and opinion, decision will be entered for respondent. | | Dated: Washington, D.C. January 21, 2011 (Signed) David Gustafson Judge $ÈRVED JAN 2 6 2011 l * 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 David Gustafson January 12, 2011 Scott F. Wnuck v. Commissioner Docket No. 26068-09 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 on as precedent in any other case. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court Rules of Practice and Procedure. . I r notice of deficiency dated October 13, 2009, respondent determined a deficiency-in the Federal income tax of Petitioner Scott F. Wnuck in the amount of $16,595 for the year 2007, plus additions to tax under section 6651(a) (1) in the amount of $1,198.13, under section 6651(a) (2) in the amount of $426, and under section 6654(a) in the amount of $185.37. For the reasons explained hereafter, we will sustain the deficiency, except for the addition to tax under section 6651 (a) (2) , which respondent conceded at the conclusion of the trial. Trial of this case was conducted on Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 January 12, 2011, in Columbia South Carolina, and petitioner Scott F. Wnuck was the only witness. We find the following facts: Findings Mr. Wnuck resided in Pennsylvania when he filed the petition in this suit. In 2007 Mr. Wnuck was employed by various employers to perform work related to heavy machinery in manufacturing. Mr. Wnuck acknowledges that, as listed in the IRS's notice of deficiency, he received wages from those employers (who issued him Forms W-2) as well as other payments from other third-party payors. Mr. Wnuck filed a Form 1040 tax return (Ex. 1-J) on whi-ch he reported $254 of interest income and $4,590 of unemployment compnsation, but on which he did not report his wages or several other payments. as income . Rather, he attached to the return Forms 4852 purporting to correct the figures on the Forms W-2 by writing the digit- zero on line 7a ("Wages, tips, and other compensation"). The IRS treated the return as frivolous and issued the notice of deficiency on.October 13, 2009 (Ex. 2-J). On November 2, 2009, Mr. Wnuck timely filed a document that was treated as his petition. In his petition, his pretrial memorandum 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 5 filed December 28, 2010, and memoranda he presented at the trial (Exs. 20 P, 21-P), Mr. Wnuck has made various contentions to the effect that he does not owe federal income tax on his wages and other income. Opïnion The IRS's determination is,presumed" dorrect, and the taxpayer bears the burden,to prove any adjustment to the income the IRS determined and to prove his entitlement to many deductions he claims. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). I . Inc ome Mr. Wnuck admits his receipt of the amounts at issue . Sect ion 61 (a) def ines .gross income as meaning "all income from whatever source derived, including (but not limited to) (1) Compensation for services ....". Mr. Wnuck's payments from his employers clearly fall within this broad description. His arguments to the contrary, his arguments about his employment status, and all his other arguments are frivolous. See, e.g., Ulloa v. Commissioner, T.C. Memo. 2010-68. The income items at issue are taxable to Mr. Wnuck. II. Deductions Paragraph 4 (3 ) of Mr . Wnuck' s amended 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 6 petition generally asserts his entitlement to deductions and credits. Such items might have reduced his tax liability. However, at trial he did not argue for any deductions or credits and when asked by the Court, stated that he had brought to trial no substantiation for any deductions or credits . He is therefore entitled to none, other than the standard deduction allowed in the IRS's notice of deficiency. III. Additions to tax A. Section 6651(a) (1) Section 6651(a) (1) authorizes the imposition of an addition to tax for failure to file a timely return unless the taxpayer proves that such failure is due to reasonable cause and is not due to willful neglect. See also United States v. Boyle, 469 U.S. 241, 245 (1985); Harris v. Commissioner, T.C. Memo. 1998-332. The only purported return that Mr. Wnuck filed was frivolous and did not constitute a return for purposes of section 6651(a) (1). See Oman v. Commissioner, T.C. Memo. 2010-276. The addition appliës "unless it is shown that such failure is due to reasonable cause and not due to'willful neglect". Mr. Wnuck does not claim reasonable cause, and the record shows no basis for such a claim. Mr. Wnuck failed to timely file a valid Heritage Reporting Corporation (202) 628-4888 7 return for the 2007 tax year, and we hold that he is liable for the addition to tax under section 6651(a) (1) for that year. B. Section 6651(a) (2) Respondent conceded the addition to tax under section 6651(a) (2), so we do not address it further. C. Section 6654 Section 6654 imposes an addition to tax on an individual taxpayer who underpays his estimated - tax. A taxpayer has an obligation to pay estimated tax for a particular year if he has a "required annual payment" for that year. Sec. 6654(d). A "required annual payment" is defined in section.6654(d) (1) (]B), in pertinent part, as "the lesser of ( ) 90 percent of the tax shown on the return for the taxable year (or, if no return is filed, 90 percent of the tax for such year), or (ii) 100 percent of the tax shown on the return of the individual for the preceding taxable year " Thus, respondent's burden of production under section 7491(c) requires him to produce, for each year for which the addition is asserted, evidence that the taxpayer had a required annual payment under section 6654(d); and in order to do so he must demonstrate the tax shown on the taxpayer's return for the preceding 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 I 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 8 year. The year at- issue is 2007, and tihe"preceding taxable year" is therefore 2006. For 2006 respondent put in evidence of Mr. Wnuck's relevant fact s for 2006 (Exs. 16-J, -17-J) The Commissioner has thus carried his burden of production under section 7491(c) with respect to the.section 6654 additions for the years at ssue . Mr . Wnuck made no crit ic ism of respondent ' s calculation of the section 6654 addition to tax. The section 6654 addition to tax is mandatory (i.e., it says that the addition "shall be added", and it provides no "reasonable cause" exception) unless the taxpayer can place himself within one of the computational exceptions provided for in subsection (e) thereof. Grosshandler v. aommissioner, 75 T.C. 1, 20-21 (1980). Mr. Wnuck has not made any argument about section 6654, and there is no showing that any of the exceptions applies. Accordingly, we hold that Mr. Wnuck is liable for the addition to tax under section 6654 .for the 2007 tax year. IV. Penalty under 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 Heritage Reporting Corporation (202) 628-4888 9 maintained by the taxpayer primarily for delay or that the taxpayer' s position in such proceeding is frivolous or groundless. A pos¢ition maintained by the taxpayer is "frivolous" where it is "contrary to established law and unsupported by a reasoned, colorable argument f or change in the law . " Coleman v . Commissioner, 791 F.2d 68, 71 (7th Cir. 1986) ; see also Hansen v. Commissioner, 820 F.2d 1464, 1470 (9th Cir. 1987) - (section 6673 penalty upheld because taxpayer should have known claim was frivolous) . The statute grants the Court discretion in deciding whether to impose the penalty. See Neonatology Associates, P.A. v. Commissioner, 115 T.C. 43, 102 (2000), affd. 299 F.3d 221 (3d Cir. 2002) . Respondent proposes that we impose such a penalty on Mr . Wnuck . We will do so . Mr . Wnuck' s position is indeed frivolous, and he persisted in maintaining that position after he was warned of the section 6673 penalty by his opponent. It is true, as Mr. Wnuck stated, that construction of the Internal Revenue Code is "A completely foreign element to me" and that he sometimes finds the Code difficult to understand. But his admitted self -awareness on this point did not cause him to show a:ny reserve or caution in making and 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 20 21 22 23 24 25 10 defending his arguments. Rather, despite his admitted ignorance, he persisted,in positions that he knows are not followed by the great majority of taxpayers. He sought no advice from tax lawyers or accountants, but relied on the writings of persons he called "tax protestor gurus". We conclude that, at some level of his consciousness, Mr. Wnuck has been sincere in maintaining his frivolous positions, but this is a manifestation of a sad fact about human nature--i.e., that we can talk ourselves into things that we know, on some other level of our consciousness, cannot be true. Therefore, whatever sincerity he has will not exempt him completely from liability, though we do take it into account. We also observe that this is Mr. Wnuck's first Tax Court case (i.e., he is not yet a recidivist); that he has been forthright about his frivolous positions, rather than attempting to hide his receipt of income; and that he conducted himself civilly before the Court. Nonetheless, after all the good that we could say about Mr. Wnúck, it remains true that he took frivolous positions that prevented the IRS from assessing tax that he certainly owed, and that burdened both the IRS and this Court with all the 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 11 chores necessary for the adjudication of an inevitable tax liability. The penalty of section 6673 is designed to address petitioners who conduct themselves in this manner. In determining the amount of the penalty, we take account of all the foregoing facts, and of the additional faat, admitted by Mr. Wnuck, that he had previously been assessed a $500 frivolous return penalty. That $500 penalty evidently did not deter him, so we double that amount and impose today a $1,000 penalty. We take no pleasure in doing so, and we thereby impose a relatively modest penalty, given that we have the discretion to impose a penalty as high as $25,000. Mr. Wnuck should be aware, however, that if he should ever repeat his maintenance of frivolous tax litigation, he would stand in peril of a much steeper penalty. Decision will be entered in favor of respondent, except as to the section addition to tax that he conceded. In addition a penalty under section 6673 will be imposed upon Mr. Wnuck in the amount of $1,000. This concludes the Court's oral Findings of Fact and Opinion in this case. // Heritage Reporting Corporation (202) 628-4888 l 1 2 3 4 6 7 8 9 io 11 12 13 14 is 16 17 is 19 20 21 22 23 24 2s (Whereupon, at 2:44 p.m., the bench opinion in the above-entitled matter was concluded.) 12 // / / // // // // // // // // // // / // // // // // // // // Heritage Reporting Corporation (202) 628-4888