TAX COURT OPINION

Case: Patrick G. Malloy
Docket Number: 19000-22L
Judge: Carluzzo
Opinion Type: bench
Filed: 03/21/2024
Pages: 6

United States Tax Court Washington, DC 20217 PATRICK G. MALLOY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 19000-22L. ORDER 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 the pages of the transcript of the trial in the above case before Chief Special Trial Judge Carluzzo at Atlanta, Georgia, on February 8, 2024, 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 under Rule 155. (Signed) Lewis R. Carluzzo Chief Special Trial Judge Served 03/21/24 Bench Opinion by Chief Spcl. Trial Judge Lewis R. Carluzzo 3 February 8, 2024 Patrick G. Malloy v. Commissioner of Internal Revenue Docket No. 19000-22L THE COURT: The Court has decided to render an oral findings of fact and opinion in this case. And the following represents the Court's oral findings of fact and opinion (bench opinion). Section references made in this bench opinion are to the Internal Revenue Code of 1986 as amended in effect for the relevant period. And rule references are to the Tax Court Rules of Practice and 1 2 3 4 5 6 7 8 9 10 11 12 Procedure. 13 14 15 16 17 18 19 20 21 22 23 24 25 This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. Except as provided in Rule 152(c), this bench opinion shall not be cited as authority. Trial in this section 6330(d) case was conducted in Atlanta, Georgia on February 5, 2024. Petitioner who lived in Georgia when the petition was filed appeared on his own behalf. Ephraim A. Lucas appeared on behalf of Respondent. Some of the facts have been stipulated and are so found. Findings of Fact In a Notice of Determination dated July 27, 2022 (Notice), a copy of which is attached to the petition, Respondent determined that the filing of a Notice of 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 Federal Tax Lien (NFTL) is an appropriate collection 4 action with respect to Petitioner's outstanding assessment for income tax liabilities and section 6702 penalties for 2014 and 2015 (underlying liabilities). Respondent now concedes that Respondent improperly assessed the 2014 Federal income tax liability and the section 6702 penalty shown in the NFTL. According to Respondent, those assessments have already been abated. As a result of prior proceedings and Respondent's concessions, the only issue before the Court is whether Petitioner is liable for a section 6702 penalty for 2015. Paragraph 3 of the first of Stipulation of Facts reads, "Petitioner was employed by Cygnus Aerospace, Inc. in the 2015 tax year". At trial, Petitioner quibbled over whether he was "employed" by Cygnus or merely "worked" for the company. Given the nature of the dispute in this proceeding, we need not worry about what might otherwise be a technical distinction between an employee and an independent contractor. Petitioner readily admits that he was paid or compensated for his services and regardless of whether he was treated as an employee of Cygnus (which he apparently was). Or otherwise, he takes the position that this compensation however characterized was not subject to Federal income tax. Petitioner's position that the compensation he 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 was paid in 2015 was not subject to Federal income tax is 5 contrary not only to section 61(a)(1) which expressly includes compensation for services in the definition of income but the holdings of this Court and every other Federal court that has ever ruled upon the issue, as well. Moreover, for purposes here, that position is specifically referenced and rejected in Respondent's Notice 2010-33, 2010-17 IRB 609. According to Petitioner, the Settlement officer that conducted the administrative hearing that resulted in the Notice referenced the wrong provision of that publication in upholding the penalty. But even if that is true, Petitioner's point is neither here nor there. His challenge to the section 6702 penalty for 2015 is a challenge to the existence of the underlying liability for purposes of cases such as this one. And we review de novo Respondent's assessment of that penalty. See Sego v. Commissioner 114 T.C. 604, 610 (2000), Goza v. Commissioner 114 T.C. 176, 181 (2000). Our de novo review takes into account that Respondent bears the burden of proof with respect to that penalty. See section 6703(a). For the following reasons, we find that Respondent has satisfied that burden. The stipulated evidence shows that supervisory approval preceded the assessment of the penalty. See section 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 6751(b). The evidence also includes Petitioner's 2015 6 Federal income tax return prepared by Petitioner who entered a "zero" on every line of that return where income should be reported. None of his compensation received during 2015 is reported on the return because, according to Petitioner, that compensation is not subject to Federal income tax. Section 6702(a) provides that a taxpayer "shall pay a penalty of $5,000" if as relevant here the person files what's purports to be a Federal income tax that "contains information that on its face indicates that the self-assessment is substantially incorrect", section 6702(a)(1)(B). And the position taken by the taxpayer is based on a position that Respondent has identified as frivolous, section 6702(a)(2)(A). Petitioner's 2015 Federal income tax return which reports no income while at the same time claims a refund for withholdings from wages is described in section 6702(a)(1)(B), and the position he has taken with respect to the manner his return has been filed is included in Notice 2010-3 at paragraph (4) of section III. Respondent has properly assessed the section 6702 penalty as a result of the filing of Petitioner's 2015 Federal income tax return, and we see no need to address Petitioner's frivolous arguments why that assessment is invalid. See Crain v. Commissioner 737 F.2d 1417 (5th Circuit 1984). 7 Paragraph 14 of the first Stipulation of Facts reads "Petitioner does not claim [Respondent's Settlement officer] abused her discretion when determining collection alternatives". We consider this Stipulation to be a concession by Petitioner that other than the Settlement Officer's determination with respect to the underlying -- the existence of the underlying liabilities which we have addressed above, Respondent has satisfied the requirements imposed by sections 6320 and 6330. To reflect the foregoing and Respondent's concession, decision will be entered under Rule 155. And this concludes the bench opinion in this case. (Whereupon, at 12:37 p.m., the above-entitled matter was concluded.) 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