TAX COURT OPINION

Case: Michael J. Berry & Deborah R. Powers
Docket Number: 8672-08
Judge: Colvin
Opinion Type: bench
Filed: 06/19/2009
Pages: 9

(1, A- U - wu-v-y~ UNITED STATES TA: COURT WASHINGTON , D .C . 021 7 MICHAEL J . BERRY & DEBORAH R . POWERS, Petitioners , V . Docket No . 8672-0 8 COMMISSIONER OF INTERNAL REVENUE, ) Respondent . O R D E R Pursuant to Rule 152(b), Tax Cou t Rules of Practice an d Procedure, it i s ORDERED that the Clerk of the Co to petitioners and to respondent a co transcript of the proceedings of the Diane L . Kroupa at San Diego, Califor containing her oral findings of fact ID rt shall transmit herewith y of the pages of the bove case before Judg e is on May 11, 2009, nd opinion . In accordance with the oral find4ngs of fact and opinion , decision will be entered for responde t (Signed) Diane L. Kroupa Judg e Date : Washington, D .C . June 19, 2009 SERVED JUN 2 2 2009 1 2 3 4 5 6 7 8 9 1 0 1 1 1 2 1 3 14 1 5 1 6 1 7 1 8 1 9 2 0 2 1 2 2 2 3 2 4 25 12 Bench Opinion by Judge Diane I~ . Kroup a May 11, 2 0 0 9 Powers v . Commissione r Docket No . 8672-0 8 THE COURT : The Court has decided to render ora l findings of fact and opinion i 1 this case, and .the following represents the Court's oral fi dings of fact and opinion . These oral findings of fact an opinion shall not be relied upon as precedent in any othe r case . This bench opinion is made pursuant to the authority granted by Section 7J59(b) of the Internal Revenu e Code and Rule 152 of the Tax Curt Rules of'Practic e and Procedure . All section refere ces are to the Interna l Revenue Code for 2005, the ye a at issue, and all Rul e references are to the Tax Court Rules of Practice and Procedure . Michael Berry appeare d pro se9 and Michael S . Hensley appeared on behalf of .R spondent . FINDINGS OF FA T & OPINION 4 The record establishes that Respondent issue d Petitioners a statutory notice f deficiency-dated January 7t- 2008 in which Respondent d termined a $7,102 deficiency in federal income tax against P titioners for 2005 and that Petitioners. were liable for a $ ,420 accuracy -related penalty under Section 6662 . Res ondent asserted in an answer to amended petition an increased deficiency o f $20,806 .30 in federal income tax against Petitioners fo r Heritage Reportin corporation (202) 628 4888 1 2005 and a $4,161 .26 accuracy-related penalty under Sectio n 2 6662 . Petitioners failed tI report substantial amounts o f income on the return for 2005 .1 Petitioner Mr . Berry assert s 5 that his income is not from the trade or business of 6 catching fish, nor has he received income from self- 7 employment . Mr . Berry makes his argument by taking portions 8 of the Code and IRS forms out of context . 9 Petitioners refused t cooperate in the examination 10 of their return for 2005 in an meaningful way . Rather than 11 comply with Respondent's reque t for information , 12 Petitioners responded that the received "$0 .00 dollars .of 13 non-employee compensation from the 'trade or business of 14 catching fish,' and/or SE (self-employment) ." Petitioners 15 simply attached to their response copies of falsified Forms 16 1099-MISC that they had previously attached to their return 17 for 2005 . 18 Petitioner Mr . Berry m de the same arguments durin g 19 the calendar call of this case when Respondent filed a 20 Motion for Penalty under Sectio 6673 and when this case was 21 called for trial . In addition, Mr . Berry asserts that h e 22 did not receive income because t is not the&type o f 23 compensation defined in Title 2~ to generate l' a liability fo r 24 income tax . Simply put, Petitioners question whether they 25 are subject to the Internal Revenue laws . Simply put, they Heritage Reporti g Corporatio n (202) 62 -4888 1 2 3 4 5 7 8 9 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 0 2 1 2 2 2 3 24 are . Secs . 61(a), 6001, 6012, and 6072 . Petitioners have bee repeatedly warned that the Court is authorized to impose a penalty against them unde r Section 6673 if they continuento pursue frivolous and groundless arguments . Respondent affirmatively alleged in the answer that he would reque t the Court to awar d sanctions and costs against P e itioners . Respondent's counsel also sent a letter t o etitioners on February 24th, 20099 again warning Petitioners of the penalty . In addition , Respondent's counsel met with Berry on March 31st, 2009 and warned Petitioners again o the penalty when Mr . Berry made the same ridiculous clai m that he is not in the trad e or business of . fishing and the efore has no taxable income . Respondent' s counsel also warn d Petitioners in Respondent' s pre-trial memorandum that the ourt should impose a penalty I under Section 6673 if Petitione s continued to make thei r frivolous and unfounded argumen s . The Court also warned Mr . Berry during calendar cal l d .during the trial that th e Court is authorized to impose alpenalty unde r Section 667 3 if Petitioners persisted with t e type of arguments tha t they had been making . 'Despite these numerous warnings , Petitioners persisted and wasted this Courts limited time and rOOL resource 25 Petitioners conduct is patently willful and, given Heritage Reporting Corporatio n (202) 628-4888 1 the number'of warnings, their positions were taken in ba d 2 faith . 3 The Court told Respondent that, given Mr . Berry's nonresponsive gibberish, it would entertain a motion to dismiss for failure to prosecute and requested that 6 Respondent put the motion in writing . Respondent's counse l 7 informed the Court,. of the increased deficiency and accuracy , 8 related penalty in Respondent' answer . The Court informe d 9 the parties that it intended t grant Respondent ' s motion 10 for sanctions and Respondent ' s counsel recommended that 11 $10,000 would be an appropriat amount given the facts of 12 this case . 13 Respondent filed a Motion for Judgment by Default, 14 asserting that Petitioners are liable for a $13,707 .3 0 15 deficiency in federal, income t and a $2,741 . 46 accuracy- F 16 related penalty under Section 6662 . The Court shall gran t 17 judgment to Respondent for the increased amounts . See Smith 18 v . Commissioner , 91,T .C . 1049, 058-1059 (1988), affd . 926 19 F .2d 1470 (Gth ;Cir . 1991) ; Rule 123(a) . Moreover, courts 20 have the inherent authority to issue orders as they dee m 21 necessary and prudent to achieve the orderly and expeditiou s 22 disposition of their cases . Se Roadway FiEg s , Inc . v . 23 24 Piper, 447. U .S . 752, 764-765 (1980) ; Williams v . Commissioner , 92 T .C . 920, 932-933,(1989) . 25 We now address whether it is appropriate to impos e Heritage Reporti g Corporation (202) 628-4888 1 a penalty against Petitioners finder Section 6673, whic h 2 authorizes the Tax Court to rejuire a taxpayer to pay to the 3 United States a penalty up to, 25,000 whenever it appear s 6 5 taxpayer primarily for delay or that the taxpayer's position[ 6 7 1 0 11 in said proceedings is frivolo s or groundless . See Scruggs v . Commissioner , T .C . Memo . 19 5-355, affd . without published opinion, 117 F .3d 14 3 (11th Cir . 1997) ; Zyglis .v . Commissioner , T .C . Memo . 1993- 41, affd . without publishe d opinion, 29 F .3d 620 (2nd Cir . 1994) . We note that the typ e of arguments Petitioners raise have been deemed by this 12 Court to be frivolous and o r~ e s anctionable under Sectio n 13 6673 . 14 15 Petitioners deserve a enalty under Section 6673(a)(1), and that penalty sh uld be substantial, if it i s 16 to have the desired deterrent e fect . Cf . Talmage v . 17 Commissioner , T .C . Memo . 1996-1 4, affd . without publishe d 18 opinion, 101 F .3d 695 (4th Cir . 1996) . The purpose o f 19 Section 6673 is to compel taxpayers to think and to confor m 20 their conduct to settleAtax principles . Coleman v . 21 22 Commissioner , 791 F .2d 68, 71 ('Ith Cir . 1986)-; see als o Grasselli v . Commissioner , T .C . Memo . 1994-581 . 23 In this proceeding now before the Court , 24 Petitioners assert nothing but rivolous and groundless 25 arguments . Petitioners' tactics have consumed valuable Heritage Reporting Corporatio n (202) 628-4888 1 Government resources . These tactics should not be condone d 2 They damage the integrity of t e (cid:127) € ederal tax litigation 3 system ecause of the time a d attention the Court an d b 4 Respondent' must devote to thes frivolous arguments deprive s .other taxpayers with genuine controversies . See Abrams v . 6 Commissioner , 82 T .C . 40.3, 412 (1984) . We are mindful that Petitioners are representing themselves and may not be familiar with all the Court's ules and Procedures . Pro se 9 10 status, however, is not a lice se to litter the dockets of the federal courts with ridicu ous allegations concernin g 11 the Code . Parker v . Commissioner , 117 F .3d 785 (5th Cir . 12 1997 ) 13 It is apparent from t e entire record that 14 Petitioners instituted . or main ained this proceedin g 15 primarily, if not exclusively,',-as a protest against th e 16 kfederal income tax system and their proceeding in this Cour t 17 is merely a continuation of Petitioners' refusal to 18 acknowledge and satisfy their tax obligations . We are 19 convinced that no purpose would be served in repeating all 20 that has been said about their frivolous and misguide d 21 arguments . 22 We are also convinced that Petitioners are aware of 23 and chose to ignore the warning this Court has given t o 24 them and other taxpayers who provide the type of arguments 25 Petitioners provided here, yet Petitioners persisted and Heritage Reporting Corporatio n (202) 62 -4888 1 wasted this Court's limited time and resources . We 2 therefore shall require Petitioners to pay a penalty of 3 $10,000 pursuant to Section 6 73(a)(1) . In addition,, 4 Petitioners are admonished that the Court will conside r imposing a larger penalty if they return to the Court and advance similar arguments in the future . 7 8 1 0 11 To reflect the foregoing, . decision will be entered for Respondent and an appropri to order will be issued sustaining the increased deficiency of $13,707 .30 and th e $2,741 .46 accuracy-related penalty against Petitioners for 2005, granting Respondent's mo ion for default judgment, an d 12 imposing a $10,000 penalty aga nst Petitioners under Section 13 6673 . We are hopeful that the Section 6673,penalty will be 14 more productive in,deterring P titioners' arguments an d 15 making Petitioners comply with their requirement to report 16 earnings in the future . 17 This concludes the Court's oral findings of fact 18 and opinion in this case . 19 (Whereupon, at 10 :23 a .m ., the bench opinion in the 20 above-entitled case was concluded .) . 21 22 23 24 / / 25 // Heritage Reporti Corporation (202) 62V4888 9 UNITED STAT S TAX COURT Certificate of Transcriber and Proofreader Case Docket No . : 8672-0 8 Case Name : Michael J . Berry & Deborah R . Powers, Petitioners, vs . Commissioner Of Internal Revenue , Respondent . We, the undersigned , hereby certify that th e foregoing pages, numbers 1 thr ugh 9, inclusive, are the true, accurate and complete tr nscript prepared from th e tape made by electronic recor d ng by Pamela,M . Hollinger, on Monday, May 11, 2009, before t e United States Tax Court a t its session in San Diego, Cali ornia in'accordance with the applicable provisions of .the c rrent verbatim reporting contract of the Court, 'and ha v verified the accuracy of th e transcript by comparing the ewritten transcript agains t the verbal recording . Pbggy Schuerger T-anscriber - HR C M P chael J . Williamson oof reader - . HR C Heritage Reporting Corporation (202) 628,-4888