TAX COURT OPINION

Case: Dennis Klein
Docket Number: 27365-07
Judge: Colvin
Opinion Type: bench
Filed: 01/21/2010
Pages: 7

UNITED STATES TAX COUR T WASHINGTON , DC 2021 7 DENNIS KLEIN, Petitioner, V .- ) Docket No . 27365-07 . COMMISSIONER OF INTERNAL REVENUE , Respondent . O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages. of the transcript of the trial in the above case before Judge David Gustafson at New York, New York, on January 13, 2010, containing his oral findings of fact and opinion rendered at the conclusion of the trial . In accordance with the oral findings of fact and opinion, decision will be entered entered under Rule 155 . (Signed) David Gustafson Judge Dated : Washington, D .C . January 21, 2010 .V~p AN 2 5 Z01m 3 1 BENCH OPINION BY JUDGE DAVID GUSTAFSO N 2 DENNIS KLEIN V . COMMISSIONER DOCKET NO . : 27365-07 3 January 13, 201 0 4 The Court has decided to render ora l 5 Findings of Fact and Opinion in this case, and th e 6 following represents the Court's oral Findings of Fact 7 and Opinion . The oral Findings of Fact and Opinio n 8 shall not be relied on as precedent in any other case . 9 This Bench Opinion is made pursuant to the 10 authority granted by section 7459(b) of the Internal 11 Revenue Code of 1986, as amended, and Rule 152 of the 12 Tax Court Rules of Practice and Procedure . 13 By a statutory notice of deficiency dated 14 September 10, 2007, the Internal Revenue Service (IRS) 15 determined a deficiency in the Federal income tax of 16 petitioner Dennis Klein for the-year 2005, .. in the 17 amount of $3,006, with an addition to tax of $301 18 pursuant to section 6651(a)(1) . For the reason s 19 explained hereafter, we will sustain the deficiency 20 and addition determined against Mr . Klein . 21 Trial of this case was conducted on January 22 12, 2010, in New York City . We find the followin g 23 facts : 2 4 25 Findings Mr . Klein worked for many years for the Ne w Heritage Reporting Corporation (202) 628-4888 4 1 York City Transit Authority . The record does not show 2 that he made any contributions to his pension account 3 (such as by payroll withholding) . He retired in 2001 4 and became entitled to receive an annual pension o f 5 $30,652 . In 2005 he received that amount, paid to him 6 by monthly checks, which he negotiated . (Exs . 5-7 . ) 7 In 2005 he made mortgage payments on his house, o f 8 which the interest he paid totaled $5,356 . (The IRS 9 concedes that the deficiency it previously determined 10 should be reduced to reflect the allowance of a 11 mortgage interest deduction . ) 12 At some point Mr . Klein began filing "zero 13 returns" with the IRS . That is, he placed zeroes in 14 all the blanks on a Form 1040, U .S . Individual Tax 15 Return ; he wrote various phrases (such as "unde r 1.6. duress") beside his signature ; and he attached to the 17 Form 1040 a multi-page collection of legal arguments . 18 For the year 2005 Mr . Klein submitted such a document 19 (Ex . 4-R) to the IRS, which he claims was a ta x 20 return . The document reports zero income fro m 21 "Pensions and annuities" on line 16b, not the $30,652 22 that he received . 23 Thereafter, on November 24, 2006, the IRS 24 mailed to Mr . Klein the notice of deficiency . On 25 November 26, 2007, he timely filed his petition Heritage Reporting Corporation (202) 628-4888 5 1 commencing this suit ; and in the request for relief on 2 the form petition he gave citations to various lega l 3 opinions and statutes . At the time that Mr . Klein 4 filed his petition, he resided in Pennsylvania . 5 In a pretrial telephone conference, th e 6 Court advised Mr . Klein that the issue in this case is 7 his income tax liability, and that Mr . Klein should be 8 prepared to prove any errors in the notice o f 9 deficiency (as to items of income, or deductions to 10 which he is entitled) that cause that notice t o 11 overstate his tax liability . The Court warned him to 12 avoid frivolous and irrelevant arguments . ,13 Opinion 14 The IRS's determination reflected on a 15 notice of deficiency is presumed correct, and th e 16 taxpayer bears the burden to prove his entitlement to 17 the exemptions and credits he claimed . Rule 142(a) ; 18 Welch v . Helvering , 290 U .S . 111, 115 (1933) . 19 Consequently, except to the extent that Mr . Klein 20 proves that the determination is incorrect, the 21 deficiency determined in the notice must be sustained . 22 At trial Mr . Klein seemed to contend that he 23 did not owe the deficiency--because respondent' s 24 counsel lacked a "pocket commission" (required , 25 Mr . Klein says, by section 7608) ; because respondent's Heritage Reporting Corporatio n (202) 628-4888 6 1 counsel works for the IRS's Division entitled "Small 2 Business / Self-Employed", whereas Mr . Klein has no 3 business and is not at all employed ; because the IRS 4 is a private corporation ; because the IRS has some 5 particular relation to Puerto Rico ; because 15 U .S .C . 6 sec . 1681g (which concerns consumer credit) requires 7 that his assessment be "verified" ; because he is in 8 bankruptcy (but see respondent's filing o f 9 December 15, 2009) ; and because (he says) in 2002 he 10 received a refund from the IRS after submitting one of 11 his zero returns, which (he says) constitutes a 12 precedent . The Court advised Mr . Klein that all these 13 arguments are frivolous . Mr . Klein then argued that 14 respondent's position violated the "statute o f 15 limitations", for which he seemed to cite a statute 16 not in the Internal Revenue Code . The Court assured 17 Mr . Klein that the applicable statute of limitations 18 . is easily satisfied where a notice of deficiency was 19 issued in September 2007 for the taxable year ended in 20 December 2005 . See 26 U .S .C . secs . 6501, 6503(a)(1) . 21 The Court urged Mr . Klein to prove any deductions to 22 which he is entitled, but Mr . Klein offered no 23 substantiation for any . 24 Consequently, the income tax deficiency 25 determined in the notice of deficiency must be Heritage Reporting Corporatio n (202) 628-4888 7 1 sustained, except to the extent that the IRS has 2 conceded Mr . Klein's entitlement to a mortgag e 3 interest deduction . To give Mr . Klein that benefit, 4 the Court will order that decision be entered under 5 Rule 155 . 6 The notice of determination also reflects 7 the determination of an addition to tax unde r 8 section 6651(a)(1) for Mr . Klein's failure to file his 9 income tax return when due . Section 6651(a)(1 ) 10 authorizes the imposition of an addition to tax for 11 failure to file a timely return unless the taxpayer 12 proves that such failure is due to reasonable cause 13 and is not due to willful neglect . Sec . 6651(a)(1) ; 14 see United States v . Boyle , 469 U .S . 241, 245 (1985) . 15 Respondent met his burden of production under section 16 7491(c) by showing that Mr . Klein's only "return" was 17 not a return at all but was a list of zeroes . To 18 determine whether a taxpayer has filed a valid tax 19 return, we follow the test enunciated in Beard v . 20 Commissioner , 82 T .C . 766, 777 (1984), affd . 793 F .2d 21 139 (6th Cir . 1986), under which, "First, there must 22 be sufficient data to calculate tax liability ; second, 23 the document must purport to be a return ; third, there 24 must be an honest and reasonable attempt to satisf y 25 the requirements of the tax law ; and fourth, the Heritage Reporting Corporatio n (202) 628-4888 4 8 1 taxpayer must execute the return under penalties o f 2 perjury ." Mr . Klein's zero return fails at least two 3 of these tests : His zero return does not have 4 "sufficient data to calculate a tax liability", and it 5 does not constitute "an honest and reasonable attempt 6 to satisfy the requirements of the tax law" . On th e 7 contrary, it omits even Mr . Klein's principal source 8 of money--his pension . His document constitutes some 9 sort of a protest against the tax law, not an attemp t 10 to comply with it . See also Hattman v . Commissioner , 11 2006 WL 2506567 (3d Cir . 2006) (a "zero return is not 12 a 'return' for tax purposes") . 13 Consequently, the deficiency and addition to 14 tax determined by the IRS will be sustained, an d 15 decision will be entered under Rule 155 to allow the 16 mortgage interest deduction that respondent conceded . 17 This concludes the Court's oral Findings of 18 Fact and opinion in this case . 19 (Whereupon, at 9 :30 a .m ., the bench opinion 20 in the above-entitled matter was concluded . ) 21 22 23 2 4 25 Heritage Reporting Corporation (202) 628-4888