TAX COURT OPINION

Case: Gary L. Thomason
Docket Number: 21182-08
Judge: Colvin
Opinion Type: bench
Filed: 12/07/2009
Pages: 12

UNITED STATES TAX COURT WASHINGTON, DC 2021 7 GARY L . THOMASON , Petitione r V . Docket No . 21182-08 . COMMISSIONER OF INTERNAL REVENUE , Respondent O R 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 herewith .to petitioner and to respondent a copy of the pages of the transcript of the trial of the above case before Judge L . Paige Marvel at New Orleans, Louisiana, on November 17, 2009, containing her oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral findings of fact and opinion, decision will entered for respondent . (Signed) L . Paige Marvel Judg e Dated : Washington, D .C . December 7, 2009 SERVED DEC - 8 2009 3 1 Bench Opinion by Judge L . Paige Marve l 2 Docket No . 21182-08 November 19, 2009 3 Gary L . Thompson v . Commissione r 4 THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT 5 AND OPINION IN THIS CASE, AND THE FOLLOWING REPRESENTS 6 THE COURT'S ORAL FINDINGS OF FACT AND OPINION . TH E 7 ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED 8 UPON AS PRECEDENT IN ANY OTHER CASE . 9 These oral findings of fact and opinion are 10 rendered in accordance with and pursuant to section 11 7459(b) of the Internal Revenue Code and Rule 152 of 12 the Tax Court Rules of Practice and Procedure . Unless 13 otherwise indicated, subsequent section reference s 14 made in this opinion are to the Internal Revenue Lode L.J 1 15 of 1986 as amended and in effect for the relevan t 16 period, and rule references are to the Tax Court Rules 17 of Practice and Procedure . 18 Petitioner Gary L . Thomason appeared pro se . 19 Emile L . Hebert III appeared on behalf of respondent . 20 Petitioner filed this deficiency case t o 21 challenge respondent's determination, made in a notice 22 of deficiency dated May 23, 2008, that petitioner is 23 liable for an income tax deficiency of $1,926 an d 24 additions to tax of $183 .38 and $203 .75 under section 25 6651(a)(1) and 6651(a)(2), respectively, for 2001 . Heritage Reporting Corporatio n (202) 628-4888 4 Petitioner has challenged respondent' s determinations on several grounds including th e following : ( 1) Petitioner was not required to file a return for 2001 that included his gross income ; (2 ) petitioner nevertheless filed a return for 2001 tha t respondent improperly disallowed and refused t o process ; ( 3) respondent ' s employee , who was no t delegated to do so, prepared and certified a substitute return under section 6020 ( b) for 2001 ; (4 ) petitioner ' s gross income was excludable from income GC. 1 1 under sections 861 and /or 911 ; and ( 5) by reason o f the above , petitioner is not liable for the 200 1 deficiency and additions to tax . FINDINGS OF FAC T Some of the facts have been stipulated . The stipulations of fact are incorporated herein by thi s reference . When he petitioned the Court , petitioner resided in Shreveport , Louisiana . On September 13, 2005, the Internal Revenu e Service , hereafter the IRS, received a document tha t purported to be a Form 1040, U .S . Individual Incom e Tax Return , filed by petitioner for 2001 . Th e purported return showed zeros for all income lines , reflected zero tax liability , and asserted a claim fo r 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 refund of an alleged overpayment of $2,616 . Attache d Heritage Reporting Corporation (202) 628-4888 5 1 to the purported return were four Forms 4852 , 2 Substitute for Form W-2, Wage and Tax Statement, or 3 Form 1099-R, Distributions From Pensions, Annuities, 4 Retirement or Profit-Sharing Plans, IRAs, Insurance 5 Contracts, et cetera, with respect to Forms W-2 and 6 1099 that petitioner had received from Troubadou r 7 Enterprises, Inc . ; Capital One F .S .B . (2 forms), and 8 BDS Marketing, Inc . On each of the forms petitioner 9 took the position that he received no income from the 10 payor . On the Form 4832 with respect to BD S 11 Marketing, petitioner disclosed that federal income 12 tax of $1,111, Social Security tax of $1,220 an d 13 Medicare tax of $285 had been withheld . 14 By letter dated February 14, 2006, the IRS 15 informed petitioner that his purported 2001 return was 16 frivolous and that his position had no basis in law . 17 The letter stated that the IRS would not respond t o 18 future correspondence relating to the frivolous 19 positions, and it warned that the assertion o f 20 frivolous positions could have adverse consequences, 21 including criminal prosecution and imprisonment, and 22 monetary penalties . The letter asked petitioner to 23 file a proper return within 30 days . Petitioner did 24 not do so . 25 On or about March 11, 2008, the IRS prepared Heritage Reporting Corporatio n (202) 628-4888 6 1 a substitute for return pursuant to section 6020(b) 2 for petitioner's 2001 taxable year . An IRS officer 3 who was authorized to act by Delegation Order 18 2 4 certified the return on March 11, 2008, as reflected 5 on Form 13496, IRC Section 6020(b) Certification , which was admitted into evidence . 7 On May 23, 2008, respondent timely mailed to petitioner a notice of deficiency in which he determined that petitioner had Form 1099 income fro m 10 Troubadour Enterprises, Inc ., and Capital One FSB and 11 Form W-2 income from BDS Marketing, and tha t 12 petitioner was liable for a deficiency of $1,926 and 13 additions to tax under section 6651 . Petitione r 14 timely filed a .petition contesting respondent's 15 determinations . 16 On November 17, 2009, petitioner' s case was 17 called for trial . Before beginning the trial, th e 18 Court warned petitioner that if he continued to assert 19 frivolous and groundless arguments regarding hi s 20 obligation to file a return and to pay tax, it would 21 consider imposing the penalty under section 6673 . 22 Petitioner testified at trial and/or stipulated that 23 he received the items of income included in the notice 24 of deficiency, that he resided in Californi a 25 throughout 2001, that he was a citizen of the United Heritage Reporting Corporatio n 11 (202) 628-4888 7 1 States, and that he did not reside in Puerto Rico at 2 any time during 2001 . 3 Upon completion of the trial, we permitte d 4 the parties to make closing arguments in lieu of post- trial briefing . Throughout his closing argument, petitioner continued to assert that he was not oblige d 7 to file a return, that his income was not taxable, and 8 that sections 861 and 911 authorized him to exclud e 9 his income from the purported return he filed for 10 2001 . 11 OPINION 12 Ordinarily, the taxpayer has the burden of 13 proving that the Commissioner's determinations in the 14 notice of deficiency are in error . Rule 142(a) . In 15 certain circumstances, section 7491(a) may shift the 16 burden of proof with respect to any factual issu e 17 relevant to ascertaining the liability of the taxpayer 18 to the Commissioner if the taxpayer introduce s 19 credible evidence regarding the factual issue and the 20 taxpayer satisfies the requirements of sectio n 21 7491(a)(2) regarding the maintenance of all required 22 records and the substantiation of items claimed on the 23 taxpayer's return . 24 In this case, petitioner did not introduce 25 credible evidence regarding the adjustments made by Heritage Reporting Corporatio n (202) 628-4888 8 1 respondent , and he did not satisfy the requirements of 2 section 7491 ( a)(2) . Consequently , petitioner has the 3 burden of proving respondent ' s determinations are in 4 error . 5 Petitioner constructed his case on a 6 tortured reading of Code sections and regulations that 7 have no application to his personal situation, and he 8 engaged in an ill-advised and misguided attempt during 9 trial to convince the Court that he was immune fro m 10 the obligations imposed on every U .S . citizen residing 11 in the United States who has sufficient income to file .12 a proper return and to pay any tax that is due and 13 owing . We reject that effort for what it is -- a 14 futile attempt to justify his refusal to pay tax on 15 the income he agrees he earned during 2001 . 16 It is well-established that this Court i s 17 under no obligation to refute shop-worn and groundless 18 arguments such as petitioner ' s with detaile d 19 explanations of why the arguments are in error . 20 Williams v . Commissioner , 114 T .C . 136 , 138-3-9-(2000 ) F 3 '~ I4 21 (o 3Q-t--n Crain v . Commissioner , 737 F .2d 1417 , 141 7 ~.LcT{'iM 22 (5th Cir . 1984)) . Suffice it to say that petitioner, 23 like every other taxpayer, is required to file a 24 Federal income tax return if he has sufficient income 25 to require that a return be filed . Sec . 6012(a) . Heritage Reporting Corporatio n (202) 628-4888 9 1 In this case, petitioner received income 2 during 2001 in an amount sufficient to require the 3 filing of a return . Although petitioner filed a 4 purported return, it contained entries of zero o n 5 every income line, as well as information indicating 6 that petitioner was disputing that he received income 7 as reflected on information returns filed by third- 8 party payors . 9 Courts have routinely held that a return 10 containing zeros with respect to every income line 11 item and insufficient information from which t o 12 determine the taxpayer's correct tax liabilit y 13 ordinarily is not a valid return . United States v . 14 15 16 Smith , 618 F .2d 280, 281 (5th Cir . 1980) ; Cabirac v . Commissioner , 120 T .C . 163, 169 (2003) ; and Beard v . Commissioner , 82 T .C . 766, 777 (1984) . The return 17 that petitioner filed did not contain sufficient 18 information from which respondent could determine 19 petitioner's correct tax liability . 20 Section 6020(b) authorizes the IRS t o 21 prepare a substitute for return whenever a taxpayer 22 fails to file a valid return . Although petitioner 23 attempts to suggest that section 6020(b) does no t 24 apply to income tax returns, that position is clearly 25 wrong and must be rejected . Sec . 6020(b) (stating Heritage Reporting Corporatio n (202) 628-4888 1 0 1 that the Commissioner shall prepare a substitut e 2 return for "any person [who] fails to make any return 3 required by any internal revenue law or regulation") ; 4 see Cabirac v . Commissioner , supra at 170-173 . 5 Petitioner also contends that the IR S 6 officer who prepared the section 6020(b) certification 7 did not have authority pursuant to a proper delegation 8 order to make the section 6020(b) certification . 9 However, the information submitted and arguments made 10 at trial were insufficient to satisfy petitioner' s 11 burden of proving that the substitute for return was 12 invalid or that the certification was not authorized . 13 Having disposed of petitioner's procedural 14 arguments, we reluctantly turn our attention t o 15 petitioner's misguided and frequently incomprehensible 16 argument that he properly excluded his gross incom e 17 from the purported 2001 return he filed . 18 When pressed by the Court at trial , 19 petitioner argued that he was entitled to exclude his 20 income, which he conceded was otherwise includible in 21 income under section 61, under sections 861 and 911 . 22 Petitioner also tried to assert that th e 23 interrelationship of Code sections 1, 3401, and others 24 supported his conclusion . 25 Sections 861 and 911 are simply not Heritage Reporting Corporation (202) 628-4888 1 1 1 applicable to petitioner . Section 861, whic h 2 establishes rules for determining whether and to what 3 extent income of a nonresident alien or foreig n 4 corporation, henceforth foreign taxpayer, is sourced 5 within the United States, obviously does not apply to 6 petitioner because petitioner is not a foreig n 7 taxpayer and all of his income is sourced in the 8 United States . 9 Section 911, which authorizes an exclusion 10 from gross income for citizens or residents of the 11 United States living abroad, also is inapplicable to 12 petitioner because he did not reside abroad at any 13 time during 2001 . Because the Code sections are not 14 applicable to petitioner, related regulations are also 15 inapplicable and do not support petitioner' s 16 arguments . 17 Petitioner's arguments are the result of a 18 distorted and misguided reading of Code provisions . 19 Petitioner has constructed the arguments b y 20 irresponsibly extracting language from Code provisions 21 and related regulations that simply do not apply t o 22 petitioner . Petitioner's actions reflect an appalling 23- lack of competent research and analysis and sugges t 24 that he was motivated by goals that are simply not 25 consistent with a good faith attempt to comply with Heritage Reporting Corporatio n (202) 628-4888 1 the obligations imposed on taxpayers by the,f-ederal I-' F 12 2 tax system . 3 We reject petitioner's arguments as 4 frivolous and groundless, and we find that th e 5 arguments were made for the purpose of delaying or 6 avoiding entirely his tax reporting and paymen t 7 obligations . We sustain respondent's determinations . 8 Finally, we consider whether sanctions are 9 appropriate under 6673 . Section 6673 (a)(1) provide s 10 that "Whenever it appears to the Tax Court that (A) 11 proceedings before it have been instituted o r 12 maintained by the taxpayer primarily for delay, (B) 13 the taxpayer's position in such proceeding i s 14 frivolous or groundless, or (C) the taxpaye r 15 unreasonably failed to pursue available administrativ e 16 remedies, the Tax Court in its decision may require I P 17 the taxpayer to pay to the United States a penalty no t 18 in excess of $25,000 . " 19 Before trial began, we warned petitioner 20 that if he continued making the arguments and taking 21 positions he had taken before the trail, we might 22 impost the section 6673 penalty . Despite this warning L-P 23 and other warnings he received during th e 24 administrative consideration of his case, petitioner 25 persisted in wasting the time and resources of the Heritage Reporting Corporatio n (202) 628-4888 13 1 Court and respondent with yet another regurgitation . of 2 shop-worn positions designed to avoid petitioner's tax 3 obligations . See IRS Publication , " The Truth Abou t 4 Frivolous Tax Arguments" [www .irs .gov./ pub/irs- 5 utl / f riv_tax .pdf] . 6 We shall impose a penalty under section 6673 7 (a)(1) of $2,000 , and we warn petitioner that the 8 penalty will likely be imposed again and increase in 9 amount if he persists in making similar arguments to 10 this Court in other cases . 11 Decision will be entered for respondent . 12 THIS CONCLUDES THE COURT ' S ORAL FINDINGS OF 13 FACT AND OPINION IN 1IIS CASE . 14 (Whereupon , at 10 :45 a .m ., the bench opinion 15 in the above - entitled matter was concluded .-) 16 17 18 19 20 / / 21 22 23 2 4 25 Heritage Reporting Corporation (202) 628-4888