TAX COURT OPINION

Case: James Stephen Fennel
Docket Number: 4697-11L
Judge: Marvel
Opinion Type: bench
Filed: 06/05/2013
Pages: 12

ALS UNITED STATES TAX COURT WASHINGTON, DC 20217 JAMES STEPHEN FENNEL, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) Docket No. 4697-11 L ) ) ) ) ) OR 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 to petitioner and to respondent a copy of the pages of the transcript of the proceedings of the above case before Judge L. Paige Marvel at Jacksonville, Florida, on May 24, 2013, containing her oral findings of fact and opinion. In accordance with the oral findings and fact and opinion, a decision will be entered under Rule 155. (Signed) L. Paige Marvel Judge Dated: Washington, D.C. June 5, 2013 SERVED Jun 06 2013 Capital Reporting Company 3 Bench Opinion by Judge L. Paige Marvel May 24, 2013 James Stephen Fennel v. Commissioner Docket No. 4697-11L 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 1 2 3 4 5 6 7 8 9 10 OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY 11 12 13 14 15 16 17 18 19 20 21 22 23 24 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. Hereinafter in this bench opinion, unless otherwise indicated, section references are to the Internal Revenue Code of 1986 as amended. Rule references are to the Tax Court Rules of Practice and ·Procedure. Petitioner James Stephen Fennel appeared pro se. Randall B. Childs appeared on behalf of . respondent. Mr. Fennel resided in Florida when he petitioned the Court. 25 . The parties have stipulated some of the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 3 4 5 6 7 8 relevant facts and we find facts in accordance with those stipulations, which we incorporate in this opinion by this reference. We also find facts on the basis of the stipulated exhibits, and to the extent we find it credible, sworn testimony. Facts On June 6, 2007, petitioner submitted to respondent a Form 1040, U.S. Individual Income Tax 9 Return, for 2003. On this Form 1040 petitioner 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 claimed that he had zero income, owed zero tax, and was entitled to a refund. Respondent determined that this purported return was frivolous and, on February 28, 2008, assessed a section 6702 penalty of $5,000 against petitioner. On June 11, 2007, petitioner submitted to respondent Forms 1040 for 1999, 2001, and 2002. On each of these Forms 1040 petitioner claimed that he had zero income, owed zero tax, and was entitled to a refund. Respondent determined that all of these purported returns were frivolous and, on April 14, 2008, assessed section 6702 penalties of $5,000 against petitioner for each Form 1040. On August 4, 2007, petitioner submitted to respondent Forms 1040 for 2004 and 2005. On each of these returns petitioner claimed that he had zero 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 8 income, owed zero tax, and was entitl.ed to a refund. Respondent determined that both of these purported returns were frivolous and, on October 20, 2008, and August 18, 2008, assessed section 6702 penalties of $5,000 against petitioner with respect to the 2004 and 2005 Forms 1040. On November 3, 2007 petitioner submitted to respondent a Form 1040 for 2006. On that Form 1040 9 petitioner claimed that he had zero income, owed zero 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 tax, and was entitled to a refund for 2006. Respondent determined that this purported return was frivolous and, on October 20, 2008, assessed a section 6702 penalty of $5,000 against petitioner. On July 22, 2008, petitioner sent a letter to respondent enclosing copies of his previously filed 1999, 2001, 2002, and 2003 Forms 1040. These returns were each conspicuously marked as copies and did not bear original signatures. Respondent again determined that these returns were frivolous and, on February 9, 2009, assessed an additional section 6702 penalty of $5,000 against petitioner for each copy. On December 31, 2008, petitioner sent a letter to respondent enclosing a copy of his previously filed 2005 Form 1040. This return was also conspicuously marked as a copy and did not bear 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 an original signature. Respondent again determined that this return was frivolous and, on February 23, 2009, assessed an additional section 6702 penalty of $5,000 against petitioner with respect to the copy. On January 17, 2009, petitioner sent a letter to respondent with copies of his previously filed 1999, 2001, 2002, 2003, 2004, 2005, and 2006 Forms 1040. These returns were also conspicuously 9 marked as copies and did not bear original 10 11 12 13 14 15 16 17 18 19 20 signatures. Respondent again determined that these returns were frivolous and, on December 14, 2009, assessed an additional section 6702 penalty of $5,000 against petitioner for each copy. On July 6, 2009, petitioner sent a letter to respondent enclosing a copy of his previously filed 2004 Form 1040. This return was also conspicuously marked as a copy and did not bear an original signature. Respondent again determined that this return was frivolous and assessed an additional section 6702 penalty of $5,000 against petitioner 21 with respect to the copy. 22 23 Petitioner attached to each of his purported returns and copies of returns a Form 4852, 24 Substitute for Form W-2, Wage and Tax Statement, or 25 Form 1099-R, Distributions From Pensions, Annuities, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 Retirement or Profit-Sharing Plans, IRAs, I1nsurance 2 Contracts, Etc., which listed petitioner's employers 3 4 5 6 7 8 9 10 11 12 but reflected zero wages. On May 5, 2010, respondent issued a Letter 1058, Final Notice of Intent to Levy and Your Right to a Hearing, for the 1999, 2001, 2002, 2003, 2004, 2005, and 2006 section 6702 liabilities. Petitioner timely requested a hearing. Petitioner did not request a collection alternative during the hearing, and the only issue during the hearing was petitioner's underlying liability. On January 26, 2011, Settlement Officer Florence Barba issued a 13 Notice of Determination sustaining the proposed levy 14 15 16 17 action with respect to the 2001, 2002, 2003, 2004, 2005, and 2006 section 6702 liabilities. Petitioner timely filed a petition with this Court. When it was discovered that Settlement 18 Officer Barba failed to provide petitioner with a 19 20 21 hearing for his 1999 section 6702 liabilities, respondent moved to remand the case for a new hearing on those liabilities. We granted respondent's 22 motion. A hearing was held for the 1999 section 6702 23 liabilities by Settlement Officer Brian Blue. In 24 October 2012 the Appeals Office issued a Supplemental 25 Notice of Determination with respect to petitioner's 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 1999 se·ction 6702 liabilities, sustaining respondent's proposed levy action. 3 Discussion 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Section 6330(a) provides that no levy may be made on any property or right to property of any person unless the Secretary has notified such person in writing of hi.s right to a hearing under section 6330 before the levy is made. The notice must be given in person, left at the dwelling or usual place of business of such person, or sent by certified or registered mail, return receipt requested, to such person's last known address not less than 30 days before the day of the first levy with respect to the unpaid tax liability. Sec. 6330(a) (2). If a taxpayer who receives a notice pursuant to section 6330 timely requests a hearing in accordance with the provisions of section 6330, that person is entitled to a hearing before respondent's Appeals Office. Sec. 6330(b). A hearing under section 6330 is conducted in accordance with section 6330(c). In a section 6330 hearing, the hearing officer must obtain verification that the requirements of any applicable law or administrative procedure have been met. Sec. 6330(c) (1). The taxpayer may raise any relevant issue relating to the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 4 5 6 7 8 unpaid tax or the levy at issue in the hearing. Sec. 6330 (c) (·2). However, the taxpayer may not raise an issue regarding the existence or amount of the underlying tax liability for any tax period with respect to which the taxpayer received a notice of deficiency or otherwise had an opportunity to dispute the tax liability. Sec. 6330 (c) (2) (B). Following the hearing, the hearing officer 9 must make a determination whether the collection 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 action at issue may proceed. In making that determination, the hearing officer must take into consideration the verification presented and any relevant issues raised by the taxpayer and must determine whether the proposed collection action balances the need for the efficient collection of taxes with any legitimate concern of the taxpayer that any collection action be no more intrusive than necessary. Sec. 6330 (c) (3). Section 6330(d) (1) grants this Court jurisdiction to review the determination made by the Appeals Office in connection with a hearing under section 6330. Where the underlying tax liability is properly in dispute, see sec. 6330 (c) (2) (B), we review the determination of the Appeals Office de novo. Lunsford v. Commissioner, 117 T.C. 183, 185 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 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 (2001); Sego v. Commissioner,, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). Respondent concedes that petitioner was entitled to dispute the underlying liabilities in the section 6330 hearing because he had no prior opportunity to do so. See Callahan v. Commissioner, 130 T.C. 44, 50 (2008). Section 6702(a) provides that the Internal Revenue Service may impose a penalty for filing a frivolous tax return if the following requirements are met: (1) the taxpayer files a purported tax return; (2) the purported return either does not contain information on which the substantial correctness of the self-assessment may be judged or contains information which on its face indicates that the self-assessment is substantially incorrect; and (3) the conduct is either based on a position the Secretary has identified as frivolous or reflects a desire to delay or impede the administration of Federal tax laws. Sec. 6702(a). We have repeatedly characterized returns that show the taxpayer was employed but that reflect zero income and zero tax as frivolous. See, e.g., Grunsted v. Commissioner, 1.36 T.C. 455, 460 (2011); Blaga v. Commissioner, T.C. Memo. 2010-170. The Commissioner bears the burden of 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 proof with respect to section 6702 penalties in all proceedings . See se·c . 6703 (a) . Petitioner submitted for filing original 1999, 2001, 2002, 2003, 2004, 2005, and 2006 Forms 1040 that purported to be returns. See sec. 6702(a) (1). Petitioner's purported returns contained information on the face of the returns that indicated the self-assessments were substantially incorrect. See sec. 6702 (a) (1) (A) and (B) . For example, the returns claimed a refund of amounts that petitioner's employer withheld as FICA and Medicare tax from wages paid to petitioner. Petitioner's purported Forms 1040, showing zero income and zero tax, also "reflect [] a desire to delay or impede the administration of Federal tax laws . " Sec . 6702(a) (2) (B); see Grunsted v. Commissioner, 136 T.C. at 460; Blaga v. Commissioner, T.C. Memo. 2010-170. 18 Accordingly, we find that respondent has met his 19 20 burden of showing that petitioner filed the original purported returns and that the returns were frivolous 21 within the meaning of section 6702(a), and we hold 22 23 24 25 that petitioner is liable for the section 6702 penalties assessed with respect to the original purported returns. After trial, respondent conceded that the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 copies of returns were not purported returns within the meaning of section 6702. Accordingly, we hold that petitioner is not liable for the section 6702 penalties assessed with respect to the copies of returns that he mailed to respondent. Petitioner did not propose any collection alternatives. The Appeals Office properly verified that the requirements of any applicable law and administrative procedures were met and that the proposed levy balances the Government's need for the efficient collection of taxes with petitioner's concerns that the collection action be no more intrusive than necessary. Accordingly, we sustain the determination of the Appeals Office with respect to the section 6702 penalties assessed with respect to the original purported returns but not with respect to the copies of those returns. We have considered the remaining arguments made by the parties, and to the extent not discussed above, we conclude those arguments are irrelevant, 21 moot, or without merit. 22 23 24 25 To reflect the foregoing and respondent's concession, decision will be entered under Rule 155. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. 866.488.DEPO www.CapitalReportingCompany.com 1 2 3 5 6 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Capital Reporting Company (Whereupon, ,at 10:17 a.m., the above- entitled matter was concluded.) 13 866.488.DEPO www.CapitalReportingCompany.com