TAX COURT OPINION

Case: Martin Nitschke
Docket Number: 696-07L
Judge: Cohen
Opinion Type: memo
Filed: 05/22/2008
Pages: 17

T .C . Memo . 2008-14 3 UNITED STATES TAX COUR T MARTIN NITSCHKE, Petiti ner V . COMMISSIONER OF INTERNAL REVEN E, Responden t Docket No . 696-07L . F i ed May 22, 2008 . Martin Nitschke, pro se . David E . Whitcomb and Marilyn Ames , for respondent . MEMORANDUM OPINIO N COHEN, Judge : This proceeding was commenced in response to a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 . The only bona fliide issue presented i s whether a penalty should be awarded under section 6673 and, i f so, how much . SERVED MAY 2 2 2008 Unless otherwise indicated, all section references are t o the Internal Revenue Code . Background Petitioner resided in Texas at the time that he filed his petition . On August 6, 2001, the Internal Revenue Service (IRS) issued a notice of determination regarding collection activity relating to a frivolous return penalty assessed against petitioner with respect to his 1999 Federal income tax return . Petitioner filed an action in the U .S . District Court for the District of Nevada seeking to set aside the notice of determination . On March 31, 2003, the District Court granted summary judgment in favor of the United States . Among other things, the District Court stated : Plaintiff argues that the hearing officer did not verify that the proper administrative procedures were followed with respect to the frivolous return penalty determination . However, the hearing officer indicated that the IRS had submitted sufficient verification that all applicable laws and procedures and [sic] been followed . The hearing officer was entitled to rely on the records and transcripts presented by the IRS in making that determination . T .C . 35, 40 (2000) . [ Nitschke v . United States , 91 AFTR 2d 2003-1991, at 2003-1992, 2003-1 USTC par . 50,432, at 88,242 (D . Nev . 2003) . ] Davis v . Commissioner , 115 The judgment of the District Court was affirmed by the Court of Appeals for the Ninth Circuit on March 24, 2004 . 92 Fed . Appx . 529 (2004) . On January 7, 2002, while residing in Nevada petitioner commenced a proceeding in this Court under docket No . 586-02, contesting a statutory notice of deficie n y that he received for 1999 . In that case petitioner made sever 1 frivolous arguments, including that no statute establishes an ndividual liability for income tax . At the conclusion of trial t e Court rendered an oral opinion rejecting petitioner's argum nts, determining a deficiency of $1,728 and penalty of $339 . under section 6662 , and awarding to the United States a penal y of $500 under section 6673 . The Court warned petitioner that t e penalty likely woul d be more if petitioner advanced similar frivolous arguments i n future proceedings in this Court . On September 17, 2003, the Court's opinion in docket No . 586-02 was affirmed by the Court of Appeals for the Ninth Circuit . 76 Fed . ppx . 137 (2003) . On April 16, 2004, petitioner filed a proceeding in thi s Court at docket No . 6510-04 in response o notices of deficiency for 2000 and 2001 . On March 15, 2005, a order of dismissal an d decision was entered by reason of petitioner's failure properl y to prosecute . The decision reflected deficiencies of $10,301 and $6,707 .70 for 2000 and 2001, respectivel , and additions to tax for each year under sections 6651(a) and 6654 . In that order, the Court stated, in part : With respect to the instant matter, we are convinced that petitioner instituted this pro eeding primarily for delay . Throughout the litigati n process , petitioner has advanced contentions and demands previously and consistently rejected by this and other courts . Hence, although petitioner was well aware of the ramifications under section 6673 of pursuing frivolous actions, he failed in his various filings even to address respondent's request for such a penalty in this case and instead continued to advance patently rejected arguments . The Court concludes that a penalty of $2,500 should be awarded to the United States in this case . A copy of the Court's order of dismissal and decision is attached as an appendix to this opinion . On July 24, 2006, a notice of tax lien filing (notice of lien) was sent to petitioner, advising him of his right to a hearing under section 6330 . The notice of lien related to outstanding income tax liabilities for 1993, 1997, 1998, 1999, 2000, 2001, and 2002 . The notice of determination that is the basis of this proceeding was sent to petitioner on December 1, 2006 . It described how the verification of legal and procedura l requirements had been made . Under the heading "Issues Raised by the Taxpayer", the notice of determination provided the following rationale : Challenges to the Liabilit y On you [sic] Form 12153 you stated : I request collection alternative including OIC and payment schedule . Collection actions are inappropriate . Procedural defects by Internal Revenue Service exist . I want to see copies of the 90 day letter, Notice and Demand letter (Form 17-A), also Summary Record of Assessment (Form 23-C) or replacement form, RACS Report and my form 4340 "Certificate of Assessment and Payments" and proof that they were sent . I contest the existence or the amount of the tax, because I did not receive a Notice of Deficiency . I also request proof of verification from the Secretary t the [sic] Service of my intention to recording of the hearing pursuant t o at all applicable make an audio IRC 7521 . Because you have not identified any assessment for 1993, 1997, 1998, 199 2002, and because the Certificates o Payments show the assessment of each liabilities, I find the assessment s rregularity in the , 2000, 2001 an d Assessments and of thes e o be valid . In addition to claiming the assessme procedurally invalid, you, [sic] ass specific challenges to the existence liabilities . IRC § 6330(c)(2)(B) pr existence and amount of the underlyi can only be contested in Appeals at the taxpayer did not receive a Notic taxes in question or did not otherwi opportunity to dispute such tax lia b is ar e rt general, nonand amount of your vides that th e g tax liability a CDP hearing i f e of Deficiency for se have an earlier ility . Since there is documentation that y o notices of deficiency and had a prix meaningfully challenge the existenc~ you are precluded from raising liab the Appeals Office . In any event, respect to the existence of your li rejected by courts as frivolous . u received th e r opportunity to of the liability, lity issues before our arguments wit h bilities have bee n Our records reveal that you receive Notices of Deficiency for the taxable years 19 3, 1997, 1998, 1999, 2000, 2001 and 2002 . You hay also filed your petition with the Tax Court and the have made a Decision, therefore you cannot rais the liability her e in Appeals . The petition in this case was filed January 8, 2007, and set forth mostly unintelligible accusations gainst representatives of the Office of Appeals . When the case was called for trial , petitioner declined to testify . Petitio er contends that no notices of deficiency were sent to him b cause a transcript o f his account does not show "Code No . 494"k which, according t o petitioner, indicates that a statutory notice of deficiency was - 6 - sent . In the alternative petitioner argues that the IRS records are not complete because if a notice of deficiency was sent, Code 494 should appear on the transcript . Discussion Petitioner has engaged in long-term defiance of his Federal tax obligations . Normally we would respond, as we did in petitioner's case for 1999, by quoting from Crain v . Commissioner , 737 F .2d 1417, 1417 (5th Cir . 1984), to the effect that "to refute these arguments with somber reasoning and copious citation of precedent * * * might suggest that these arguments have some colorable merit ." In this case, however, it is worthwhile to examine petitioner's contention to show the fallacy of taking arguments out of context to support an untenable and absurd result . Petitioner relies on Wiley v . United States , 20 F .3d 222 (6th Cir . 1994) . In that case, the Court of Appeals reversed summary judgment in favor of the Government on the ground that a genuine issue of material fact existed as to whether a statutorily required notice of deficiency had been sent . The Court of Appeals explained : Wiley's motion for summary judgment was based on his assertion that the Government had not mailed him a notice of deficiency for the 1982 tax year . Wile y submitted a copy of an IRS computer-generated transcript of his account, known as an Individual Master File (IMF), which reflected by numeric codes the dates certain transactions occurred . Wiley submitted an affidavit of an expert witness that stated the IMF transcript did not contain a record of a notice of deficiency being issued . According to the expert, the IMF transcript was missing the transaction code ("494") that was required by IRS Publication 6209 to record the issuance of a notice of deficiency, nd this omission indicated that a notice of deficiency was not sent . Wiley also submitted his own affidavit, which stated that he had not received the notice of deficiency . * * * * the evidence presented to the district court was in conflict . The PS Form 3877 presented by the Government provided proof that the notice of deficiency was mailed, while the IMF transcript presented by Wiley provided proof that the notice was not mailed . The Government's evidence may be more persuasive than Wiley's, but the court's function when deciding motions for summary judgment is "not [it]self to weigh the evidence and determine the truth of he matter but to determine whether there is a genuine issue for trial ." Anderson , 477 U .S . at 249, 106 S .Ct . at 2511 . Here, Wiley has presented probative evidence upon which a jury could reasonably find in his favor . A genuine issue of material fact as to whether a notice of deficiency was sent to Wiley by certified mail remains . Therefore, the district court's gran of summary judgment to the Government was error, [ Id . at 225-229 ; fn . ref . omitted . ] After remand by the Court of Appeals, th e District Cour t conducted a trial and found that a notice of deficiency had been sent . The finding was based in part on testimony tha t if a taxpayer does not file a tax return, or if a taxpayer ' s income on a tax return do ,s not match the income appearing on W-2 forms and 1099 forms, a notation " 494" may appear on the taxpayer's IRS transcript . The 494 notation means that a notice of deficiency was mailed to the taxpayer via certified mail . 494 notation will not appear on the taxpayer's transcript . [ Wiley v . United States 77 AFTR 2d 96-640, at 96 - 641 to 96-642, 96 - 1 USTC ar . 50,089, at 88,344 - 88,345 (S .D . Ohio 1995) .] After the IRS audits a taxpayer, however, the - 8 - The court found that the Government had proved by a preponderance of the evidence that the IRS sent the notice of deficiency in dispute . Id . at 96-643, 96-1 USTC par . 50,089, at 88,346 . The District Court's conclusion was affirmed in an unpublished opinion on March 20, 1997 . Wiley v . United States , 108 F .3d 1378 (6th Cir . 1997) . Thus, while the absence of "Code 494" in the transcript of account led to a trial, it had no ultimate effect . In this case we have none of the evidence like that presented in relation to the motions for summary judgment in Wiley or at the trial after the remand to explain the transcript of account . Petitioner's argument is based on a single page from the Internal Revenue Manual (IRM) . The IRM neither has the force of law nor confers rights on taxpayers . Fargo v . Commissioner , 447 F .3d 706, 713 (9th Cir . 2006), affg . T .C . Memo . 2004-13 ; Thoburn v . Commissioner , 95 T .C . 132, 141 (1990) . We have here compelling evidence that petitioner received statutory notices for 1999, 2000 and 2001, by taking judicial notice of the records of this Court showing that petitioner filed actions in response to those notices . See Fed . R . Evid . 201 . Petitioner declined to testify, and in the face of compelling evidence for 3 years, his denial of receipt of notices of deficiency for the other years has no credibility . - 9 - Petitioner argues that the notice of determination could not have been sent after verification of the legal requirements for a valid lien because of the missing code in the transcript . He also argues that the failure to indicate that a notice of deficiency was sent by Code 494 violated ederal law concerning maintenance and retention of accurate rec~rds . Petitioner has cited neither authority nor reason why a failure to follow a particular format in recordkeeping, if it occurred, would undermine the validity of the lien filed by reason of his failure to fulfill his income tax obligations . Section 6321 creates a lien in favor of the United States o n all property and rights to property belonging to a person liable for taxes when payment has been demanded and neglected . The lien arises by operation of law when the IRS assesses the amount of unpaid tax . Sec . 6322 . The IRS files a otice of Federal tax lien to preserve priority and put other c editors on notice . See sec . 6323 . Section 6320 provides that the Secretary shall furnish the person described in section 6321 with wri ten notice of the filing of a lien under section 6323 . This notice must be provided not more than 5 business days after the day the notic e of lien is filed and must advise the taxpayer of the opportunity for administrative review in the form of a hearing . Sec . 6320(a) . Petitioner has not shown or asserted any omission with - 10 - respect to the filing or notice of the lien, and none is disclosed in the record . Section 6320 further provides that the taxpayer may request a hearing within the 30-day period beginning on the day after the 5-day period . The hearing generally shall be conducte d consistent with the procedures set forth in section 6330(c), (d), and (e) . Sec . 6320(c) . A taxpayer may raise any relevant issue at the hearing, including challenges to "the appropriateness of collection actions" and may make "offers of collection alternatives, which may include the posting of a bond, the substitution of other assets, an installment agreement, or an offer-in-compromise ." Sec . 6330(c)(2)(A) . At the hearing, a taxpayer may challenge the existence and amount of the underlying tax liability only if he or she received no notice of deficiency or did not otherwise have an opportunity to dispute such tax liability . Sec . 6330(c)(2)(B) . Because petitioner received statutory notices of deficiency, he was not entitled to dispute the underlying liabilities . In any event, he has asserted no credible challenge to them . The Appeals officer must consider issues raised by the taxpayer, verify that the requirements of applicable law and administrative procedures have been met, and consider "whether any proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the - 11 - person [involved] that any collection act on be no more intrusive than necessary ." Sec . 6330(c)(3)(C) . Th notice o f determination reflects that all the requ i ed steps were taken . For us to conclude that there was an abuse of discretion in sustaining the lien, petitioner would hav to show that th e determination was arbitrary, capricious, r without sound basi s in fact or law . See Giamelli v . Comm issioner , 129 T .C . 107, 11 1 (2007) . He has not done so here . Petitioner was repeatedly warned that section 6673 provide s for a penalty, not in excess of $25,000, henever it appears to the Tax Court that proceedings before it ave been instituted or maintained primarily for delay or the tax ayer's position i s frivolous or groundless . Petitioner's hi tory of makin g frivolous and groundless claims for the o vious purpose of dela y justifies a penalty . We will impose a penalty of $10,000 . Wher e a taxpayer pursues proceedings in this Co rt merely as a continuation of his refusal to acknowledge and satisfy his ta x obligations, his pro se status does not e cuse his actions . Moreover, further sanctions may be awarded on appeal . See Tell o v . Commissioner , 410 F .3d 743 (5th Cir . 2005) ; Parker v . Commissioner , 117 F .3d 785, 787 (5th Cir ., 1917) . Ai appropriate orde r and decision will be entered . UNITED STATES TAX COUR T WASHINGTON , DC 2021 7 MARTIN NITSCHKE, Petitione r v . ) Docket No . 6510-04 . COMMISSIONER OF INTERNAL REVENUE , Responden t ORDER AND ORDER OF DISMISSAL AND DECISION On January 14, 2004, respondent issued to petitioner a separate notice of deficiency with respect to each of the taxable years 2000 and 2001 . Respondent therein determined deficiencies and additions to tax under sections 6651(a)(1) and 6654' as follows : Year 2000 2001 Deficiency Sec . 6651 ( a)(1) Sec . 665 4 Additions to Ta x $10 ,301 .00 6 ,707 .70 $3,811 .37 1, 949 .49 $554 .02 265 .4 4 Because respondent had no record of having received a return from petitioner for either of these years, respondent computed petitioner's tax liabilities based on information returns from third parties reflecting income received from wages, dividends, stock sales, and a premature distribution from a retirement account . Respondent permitted petitioner the standard deduction for a single taxpayer and one exemption . Petitioner filed a petition with this Court contesting the The petition asserted notices of deficiency on April 16 , 2004 . with little elaboration that respondent had produced no evidence that petitioner received taxable income and had failed t o consider deductions , allowances , and credits . Petitioner praye d 1 Unless otherwise indicated, section references are to the Internal Revenue Code in effect for the years in issue, and Rule references are to the Tax Court Rules of Practice and Procedure . - 13 - that the Court "dismiss" the notice of deficiency and award to petitioner costs and fees . On July 2, 2004, the Court issued t setting this case for trial in Las Vegas beginning on December 6, 2004, and attac Court's standing pretrial order . In the trial, petitioner refused to participate preparing a stipulation of facts and ans request for admissions served by respond his Fifth Amendment privilege against s e petitioner a notice Nevada, at the sessio n ing a copy of the months leading up to in the process o f ered each statement in a nt with an invocation of f-incrimination . The case was called from the calend and was recalled on December 8, 2004 . T either date by, or on behalf of, petitio to dismiss for lack of jurisdiction rece filed on December 7, 2004 . Respondent a motion to dismiss for lack of prosecutio In that motion, respondent recounted uns communicate with petitioner and various petitioner explaining the possible consequences of failure to appear at trial . r on December 6, 2004, ere was no appearance on er . However, a motio n 'ved from petitioner was peared and filed a on December 8, 2004 . ccessful attempts to arnings given t o On January 11, 2005, the Court issu directing petitioner to show cause in wr February 1, 2005, why respondent's motio be granted . The Court on the same date respondent to file any response to petit on or before February 1, 2005 . d an order to show cause iting on or befor e to dismiss should not issued an order directing Toner's motion to dismis s Respondent on January 21, 2005, fil to petitioner's motion and a request to section 6673 . Petitioner, after an exte by the Court, filed a response on March respondent's motion and offering further his own motion . ed a notice of objection impose a penalty under nsion of time was granted 4, 2005, opposin g argument in support o f It is petitioner's position that t dismissed for lack of jurisdiction beca deficiency is void . Petitioner contends "deficiency" in section 6211 requires t executed either by the taxpayer or by t delegate . is case should be se the notice o f that definition o f e existence of a return e Secretary or hi s The jurisdiction of this Court rests on a valid notice of deficiency and a timely filed petition . Rule 13(a), (c) . Section 6211 provides in relevant part :I SEC . 6211 . DEFINITION OF A DEFICIENCY . - 14 - (a) In General .--For purposes of this title in the case of income, estate, and gift taxes imposed by subtitles A and B * * * the term "deficiency" means the amount by which the tax imposed by subtitle A or B * exceeds the excess of-- (1) the sum o f (A) the amount shown as tax by the taxpayer upon his return, if a return was made by the taxpayer and an amount was shown as the tax by the taxpayer thereon, plu s (B) the amounts previously assessed .(or collected without assessment) as a deficiency over-- (2) the amount of rebates * * * made . Regulations promulgated under section 6211 explicitly clarify : "If no return is made, or if the return * * * does not show any tax, for the purpose of the definition 'the amount shown as the tax by the taxpayer upon his return' shall be considered as zero ." Sec . 301 .6211-1(a), Proced . & Admin . Regs . Petitioner contends that the language of the above-quoted regulation represents an impermissible extension of the current statute, reflecting instead section 271 of the Internal Revenue Code of 1939 . He further posits that cases contrary to hi s position are therefore distinguishable in that they relied at least in part on the regulation, the validity of which was not directly challenged by the taxpayers in those proceedings . This and other courts have long rejected petitioner's interpretation of section 6211 in cases such as Laing v . United States , 423 U .S . 161, 173-174 (1976) ; Roat v . Commissioner , 847 F .2d 1379, 1381-1382 (9th Cir . 1988) ; and Hartman v . Commissioner , 65 T .C . 542, 545-546 (1975) . The plain language of section 6211(a) simply does not support petitioner's stance . In words of the Court of Appeals for the Ninth Circuit : "As section 6211(a) makes plain, only 'if a return was made by the taxpayer' does the tax shown on a return figure in the Commissioner's determination of deficiency ." 1381 . Accordingly, section 301 .6211-1(a), Proced . & Admin . Regs ., is in no way irreconcilable with the statute . The Court concludes that the notices of deficiency issued in the instant case are valid, and petitioner's motion to dismiss for lack of jurisdiction is without merit . Roat v . Commissioner , supra at - 15 - The next question then is whether t dismissed for lack of prosecution . Rule relevant part as follows : his case should be 123(b) provides i n (b) Dismissal : For failure of properly to prosecute or to comply any order of the Court or for other Court deems sufficient, the Court m any time and enter a decision again The Court may, for similar reasons, party any issue as to which such pa of proof, and such decision shall b dismissal * * * a petitione r ith these Rules or cause which th e y dismiss a case at 3t the petitioner . decide against any ty has the burden treated as a In the present matter, as regards t e deficienc y determination, the burden of proof lies general premise of Rule 142(a) and has n section 7491(a) . Concerning the additio section 7491(c) places the burden of pro the ultimate burden of establishing an exception thereto remains Higbee v . Commissioner , 116 T .C . 438, 446-447 with petitioner . (2001) . t shifted pursuant t o s to tax, although suction on respondent , with petitioner under the Here, petitioner has failed to comply with the Court's standing pretrial order, has not cooperated with respondent in preparing his case for trial, did not appear at the session in Las Vegas, and has submitted no meritorious allegations or arguments in response to the order to show cause . Petitioner therefore has presented to the Court nolevidence showing error in respondent's deficiency determinations . As regards the additions to tax for failure to file a return, respondent provided a Form 3050,1 Certification of Lack of Record, reflecting that the Internal Re~enue Service has no record of petitioner having filed an income tax return for the 2000 or 2001 taxable years . Concerning the additions to tax for failure to pay estimated taxes, the notices of deficiency on their face show insufficient withholding or other estimated payments . Petitioner has at no time offered any evidence or argument directed to the additions to t x under section 6651(a) or 6654 . Given the above circumstances, it is appropriate to dismiss this case and to sustain respondent's determinations as to the deficiencies and the additions to tax . Additionally, respondent has now moved for imposition of a penalty under section 6673 . Section 6673(a)(1) authorizes the gourt to require the taxpayer to pay a penalty not in excess of $25,000 when it - 16 - appears to the Court that, inter alia, proceedings have been instituted or maintained by the taxpayer primarily for delay or that the taxpayer's position in such proceeding is frivolous or groundless . With respect to the instant matter, we are convinced that petitioner instituted this proceeding primarily for delay . Throughout the litigation process, petitioner has advanced contentions and demands previously and consistently rejected by this and other courts . The Court also notes that petitioner was previously before us with respect to his 1999 taxable year, at which time a penalty under section 6673 in the amount of $500 was imposed, and the decision was affirmed on appeal . Fed . Appx . 137 (9th Cir . 2003), affg . an Oral Opinion of this Court ; see also Nitschke v . United States , 92 Fed . Appx . 529 (9th Cir . 2004) (sustaining collection action regarding a $500 frivolous return penalty imposed for 1999) . Nitschke v . Commissioner , 76 Hence, although petitioner was well aware of the ramifications under section 6673 of pursuing frivolous actions, he failed in his various filings even to address respondent's request for such a penalty in this case and instead continued to advance patently rejected arguments . The Court concludes that a penalty of $2,500 should be awarded to the United States in this case . Thus, premises considered, it i s ORDERED that the order to show cause dated January 11, 2005, is hereby made absolute . It is furthe r ORDERED that petitioner's motion to dismiss for lack of jurisdiction filed December 7, 2004, is denied . It is furthe r ORDERED that respondent's motion to dismiss for lack of prosecution filed December 8, 2004, is granted . It is furthe r ORDERED that so much of respondent's document filed January 21, 2005, as requests to impose a penalty under section 6673 is granted . It is furthe r ORDERED and DECIDED that there are deficiencies in income tax due from petitioner and additions to tax due under sections 6651(a)(1) and 6654 for the taxable years and in the amounts as follows : Year Deficiency Sec . 6651(a)(1) Sec . 665 4 Additions to Ta x 2000 $10,301 .00 $3,811 .37 $554 .02 2001 6,707 .70 1,949 .49 265 .44 It is furthe r ORDERED AND DECIDED : That damages which are hereby awarded to the United S in the amount of $2,500 . are due from petitioner tates under section 6673 , (signed) Robert A . Wherry, J r Robert A . Wherry, Jr . Judg e ENTERED : March 15, 2005