TAX COURT OPINION

Case: Jeffery Dominic Giraldi
Docket Number: 1288-23
Judge: Jones
Opinion Type: bench
Filed: 04/09/2024
Pages: 13

United States Tax Court Washington, DC 20217 JEFFERY DOMINIC GIRALDI, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 1288-23. 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 Judge Courtney D. Jones at Philadelphia, Pennsylvania, on March 19, 2024, containing her oral findings of fact and opinion rendered at the conclusion of the trial. In accordance with the oral findings of fact and opinion, an appropriate order and decision will be entered. (Signed) Courtney D. Jones Judge Served 04/09/24 Bench Opinion by Judge Courtney D. Jones March 19, 2024 Jeffery Dominic Giraldi v. Commissioner of Internal 3 Revenue Docket No. 1288-23 THE COURT: 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 opinion shall not be relied upon as precedent in any other case. The oral findings of fact and opinion are made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code and Tax Court Rule 152. Rule references in this opinion are to the Tax Court Rules of Practice and Procedure and section references are to the Internal Revenue Code, in effect at all relevant times. All monetary amounts are rounded to the nearest dollar. By notice of deficiency (NOD) dated November 16, 2022, the Internal Revenue Service (IRS) determined a deficiency totaling $13,359 and an accuracy-related penalty under section 6662(a) of $2,672 against petitioner Jeffery Dominic Giraldi, for taxable year 2019. Respondent now concedes the section 6662(a) penalty. For the reasons explained hereafter, we will sustain the IRS's deficiency determination. We will also 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 impose a penalty under section 6673(a). FINDINGS OF FACT 4 On the evidence before us, and using the burden of proof principles explained below, the Court finds the following facts: Mr. Giraldi resided in Harleysville, Pennsylvania, when he timely filed the Petition. During taxable year 2019, Mr. Giraldi was an employee of JefferyV FW LP (JFW) and worked there as a finance manager. Mr. Giraldi timely filed a federal income tax return for taxable year 2019. He reported that he had no sources of income, including wages. He also reported federal income tax withholdings of $9,868, for which he claimed a refund. On the line for listing his occupation, he wrote "private." With the 2019 income tax return, Mr. Giraldi included Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. On Form 4852, Mr. Giraldi listed his employer as JFW and stated that he was unable to obtain a corrected Form W-2 from JFW. He also stated on Form 4852 that he paid all withholdings as reported on his 2019 tax return because he did not receive any "wages, tips and other compensation" 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 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 under his own interpretation of certain statutes. 5 According to Mr. Giraldi, the $9,868 claimed refund is comprised of the following withholdings, which he claims were improperly withheld from his paychecks: (1) $4,941 for federal income tax; (2) $3,993 for social security tax; and (3) $934 for Medicare tax. Mr. Giraldi testified that he files a form each taxable year, purporting to correct the filings of third-party payors. The IRS began an examination of Mr. Giraldi's 2019 income tax return. The Commissioner determined that Mr. Giraldi failed to report three sources of income for taxable year 2019: (1) wage income that he earned from JFW, totaling $64,404; (2) income from Fidelity Warranty Services (Fidelity), totaling $15,845; and (3) income from Volvo Car USA LLC (Volvo), totaling $1,550. On November 16, 2022, the IRS issued the NOD to Mr. Giraldi, determining a deficiency of income tax totaling $13,359 and a section 6662(a) accuracy-related penalty totaling 19 $2,672. 20 21 22 23 24 25 On February 13, 2023, Mr. Giraldi filed the Petition in this Court. He attached an exhibit to the Petition, alleging that the NOD was issued without authorization and that "[r]espondent erred in increasing [Mr. Giraldi's] amount of trade or business income in any amount whatsoever." However, Mr. Giraldi did not dispute 1 2 3 4 5 6 7 8 9 10 11 12 13 14 that he received the amounts from JFW, Fidelity, and 6 Volvo. Further, at trial, he acknowledged working at JFW as a finance manager. But he nevertheless insisted that he was not paid for his work and that the amounts listed above do not constitute "wages" or "monies" he received. Thus, he argues that the money is not subject to tax. I. Burden of proof and credibility OPINION Generally, the Commissioner's determinations in a notice of deficiency are presumed correct, and the taxpayer bears the burden of proving those determinations erroneous. Rule 142(a)(1); Welch v. Helvering, 290 U.S. 15 111, 115 (1933). 16 17 18 19 20 21 22 23 24 25 In deciding whether a taxpayer has carried his burden of proof, witness credibility is an important consideration. Ishizaki v. Commissioner, T.C. Memo. 2001- 318, 2001 WL 1658189, at *7. "[T]he distillation of truth from falsehood . . . is the daily grist of judicial life." Diaz v. Commissioner, 58 T.C. 560, 564 (1972). "As a trier of fact, it is our duty to listen to the testimony, observe the demeanor of the witnesses, weigh the evidence, and determine what we believe." Kropp v. Commissioner, T.C. Memo. 2000-148, 2000 WL 472840, at *3. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 II. Procedural History and Evidentiary Issues 7 This case was tried during a trial session in Philadelphia, Pennsylvania, and the parties filed several motions before trial. On December 15, 2023, Mr. Giraldi filed his First Requests for Admission (RFAs). In the document, Mr. Giraldi propounds several RFAs that appear to take the position that he cannot be taxed on his income because he did not work for certain government entities or a bank. Respondent filed a Response, and Mr. Giraldi filed a Motion to Review Sufficiency of Answers or Objections to the RFAs (Sufficiency Motion). On January 10, 2024, respondent filed a Motion to Impose Penalty (Penalty Motion) and a Motion for Protective Order Pursuant to Rule 103 (Protective Order Motion). In the Penalty Motion, respondent correctly notes that the Court may impose a section 6673 penalty if the taxpayer proceeds with a position that is frivolous or 18 groundless. 19 20 21 22 23 24 25 Both parties submitted proposed trial exhibits. Mr. Giraldi also filed a Motion in Limine and a Motion to Strike Portions of Respondent's Proposed Trial Exhibits, seeking exclusion of certain proposed exhibits and evidence at trial. Prior to trial, the Court issued an Order, denying the Sufficiency Motion, denying without prejudice 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 the Penalty Motion, and setting a hearing on respondent's 8 Protective Order Motion. We also warned Mr. Giraldi that he may face a section 6673 penalty if he proceeded with any frivolous arguments. Both parties appeared for trial and executed a Stipulation of Facts. The Court admitted certain exhibits and took under advisement Exhibits 1000-R, 1006-R, and 1009-R. Having considered the parties' arguments, the Court grants Mr. Giraldi's motion to exclude proposed Exhibit 1000-R because it is the same document in substance that has been offered by Mr. Giraldi as proposed Exhibit 6-P. The Court overrules Mr. Giraldi's objections as to Exhibits 1006-R and 1009-R and receives those exhibits into evidence. Further, the parties agreed at trial that the items disputed in the Motion in Limine overlap with items disputed in the Motion to Strike. Thus, we deny the Motion to Strike as moot and grant in part, and deny in part, the Motion in Limine as set forth on the record. Finally, at trial, the Court once again warned Mr. Giraldi that he may face a section 6673 penalty if he advanced any frivolous arguments. Nonetheless, when the Court conducted a hearing on the pending motions and advised Mr. Giraldi of its concern that his RFAs suggested frivolous positions, Mr. Giraldi declined to give a 1 2 3 4 5 6 7 8 9 responsive answer. Further, although Mr. Giraldi later 9 retracted his initial position that the NOD was issued without authorization, his filings before the Court are strongly associated with typical frivolous and groundless arguments. III. Gross Income & Deficiency Determination It is well settled that gross income includes all income from whatever source derived. See § 61(a). Section 6012(a) requires individuals with gross income 10 (equal or exceeding a certain exemption amount) to file a 11 tax return. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 There is no credible dispute that Mr. Giraldi received money from JFW, Fidelity, and Volvo for taxable year 2019. The record is also clear that Mr. Giraldi worked at JFW during taxable year 2019. Mr. Giraldi's testimony that he was not paid for his work as a finance manager at JFW wholly lacked credibility. Further, Mr. Giraldi filed an income tax return for taxable year 2019, reporting $0 of income. Thus, he failed to report his income on his 2019 tax return as required by section 6012(a). At trial, Mr. Giraldi repeated the frivolous position that he did not receive "wages" or "monies" for work and therefore could not be taxed on the money he received from JFW, Fidelity, or Volvo. Courts have 1 2 3 4 5 6 7 8 9 acknowledged that there is no need to devote resources to 10 refuting such arguments "with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit." Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984). Mr. Giraldi's arguments that his earnings are "nontaxable" are frivolous, and we will not spend further time and effort refuting them for the reasons we explained in Wnuck v. Commissioner, 136 T.C. 498, 501-13 (2011). Accordingly, 10 we will sustain the Commissioner's deficiency 11 determination. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 IV. Section 6673 Penalty Section 6673(a)(1) authorizes the Tax Court to impose a penalty not in excess of $25,000 whenever it appears that 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. A position maintained by the taxpayer is "frivolous" where it is "contrary to established law and unsupported by a reasoned, colorable argument for change in the law." Wnuck, 136 T.C. at 513 n.14 (quoting Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986)). The statute grants the Court discretion in deciding whether to impose the penalty. Respondent proposed that we impose such a 1 2 3 4 5 6 7 8 9 10 11 12 13 14 penalty on Mr. Giraldi because he has no basis in law for 11 arguing that his income is nontaxable. Though we denied respondent's Penalty Motion without prejudice to refile, we will impose a penalty on the Court's own motion. The positions taken in the Petition and throughout this litigation-including through the RFAs-are certainly frivolous. Mr. Giraldi's motion practice before the Court is troubling. For example, in the RFAs, he propounded multiple questions that strongly suggested frivolous positions. When the Court conducted its hearing on respondent's pending motions, the Court advised Mr. Giraldi of its concern that these questions suggested frivolous positions and inquired about their relevance to the case. Mr. Giraldi declined to give a responsive 15 answer. 16 17 18 19 20 21 22 23 24 25 Further, the transcript of the proceedings is replete with Mr. Giraldi's evasive responses when questioned regarding the nature of the amounts he received from JVW, Fidelity, and Volvo. In a misguided effort to maintain a frivolous position while purporting to do otherwise, Mr. Giraldi suggested under oath that he worked for no compensation. We warned Mr. Giraldi prior to trial and at trial that if he proceeded with his frivolous arguments, we would impose a penalty. In addition, we observe that 1 2 3 4 5 6 7 8 9 10 11 12 13 Mr. Giraldi never made or supported-in addition to his 12 frivolous contentions-any non-frivolous contentions, despite being given numerous opportunities to do so. In his favor, we note that Mr. Giraldi appeared at trial and participated in submitting a Stipulation of Facts. Although he had to be reminded of the Court's requirement that he not interrupt respondent's counsel, he ultimately complied. Nonetheless, he continued to advance frivolous and groundless positions during his testimony. His frivolous positions throughout this litigation prevented the IRS from assessing tax that he owed. And he burdened both the Court and the IRS with all the chores necessary for the adjudication of an inevitable tax 14 liability. 15 16 17 18 19 20 21 22 23 The penalty of section 6673(a) is designed to address taxpayers who conduct themselves in this manner. In determining the amount of the penalty, we take account of all the foregoing facts. We impose today a $1,000 penalty, which is a relatively modest penalty, given that we have the discretion to impose a penalty twenty-five times that high. Mr. Giraldi should be aware, however, that if he should ever repeat his maintenance of frivolous tax litigation, he would stand in peril of a much steeper 24 penalty. 25 V. Conclusion Decision will be entered in favor of the IRS, 13 sustaining the deficiency determination as set forth herein, except as to the penalty conceded by the IRS. The Motion in Limine (Doc. 37) is granted in part, and denied in part, as set forth on the record, and the Motion to Strike (Doc. 40) is denied as moot. The Motion for Protective Order (Doc. 18) is also granted as set forth on the record. We also impose on Mr. Giraldi a penalty under section 6673(a) in the amount of $1,000. We have considered the parties' remaining arguments, and to the extent not discussed, conclude that those arguments are irrelevant, moot, or without merit. This concludes the Court's oral Findings of Fact and Opinion in this case. An appropriate order and decision will be CDJ entered. (Whereupon, at 4:33 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 CERTIFICATE OF TRANSCRIBER AND PROOFREADER 14 CASE NAME: Jeffery Dominic Giraldi v. Commissioner DOCKET NO.: 1288-23 We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 14 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Lee Miller on March 19, 2024 before the United States Tax Court at its session in Philadelphia, PA, in accordance with the applicable provisions of the current verbatim reporting contract of the Court and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording. _______________________________________________ Susan Patterson, CDLT-174 3/28/24 Transcriber Date _______________________________________________ Lori Rahtes, CDLT-108 Proofreader 3/28/24 Date 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