TAX COURT OPINION

Case: Clovus M. Sykes
Docket Number: 9793-13
Judge: Kroupa
Opinion Type: bench
Filed: 06/06/2014
Pages: 11

ßLlô=K(2 22 UNITED STATES TAX COURT WASHINGTON, D.C. 20217 CLOVUS M. SYKES, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) Docket No. 9793-13 ORDE 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 this case before Judge Diane L. Kroupa in San Francisco, California on May 21, 2014, containing her oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, an appropriate decision will be entered. . (Signed) Diane L. Kroupa Judge Date: Washington, DC June 6, 2014 SERVED JUN - 9 2014 Capital Reporting Company 3 1 2 3 4 5 6 7 8 9 10 11 12 13 Bench Opinion by Judge Diane L. Kroupa May 21, 2014 Clovus M. Sykes v. Commissioner Docket No. 9793-13 BENCH OPINION 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. THESE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. This bench opinion is made pursuant to the authority granted in section 7459(b) and Rule 152. 14 All section references are to the Internal Revenue 15 Code for 2009, and all Rule references are to the Tax 16 Court Rules of Practice and Procedure. 17 18 19 20 21 22 23 Petitioner appeared pro se, and Christopher Groboske appeared on behalf of respondent. FINDINGS OF FACT Petitioner failed to stipulate to any facts in violation of Rule 91(f). The Court admitted all exhibits that the parties moved to be admitted. We base the following facts on the admitted exhibits and 24 petitioner's testimony. 25 Petitioner resided in California at the time he 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 9 10 11 12 13 filed the petition. Petitioner did not file a Federal income tax return for 2009. Respondent prepared a substitute for return (SFR) on behalf of petitioner for 2009 based on third-party payor information returns. Respondent issued a deficiency notice to petitioner showing respondent's determinations as to the deficiency and the additions to tax for 2009. Petitioner timely filed a petition with this Court. At trial, respondent filed a Motion for Penalties Under I.R.C.§ 6673. OPINION Petitioner is no stranger to this Court. 14 Petitioner has had a consistent pattern of providing 15 16 17 18 19 20 21 22 23 24 25 the IRS and this Court with information on why he has had no requirement to file a return or pay income taxes. Here, petitioner argues that he is a " payee, who is a U.S. person." He admits to receiving payments but says that they are not reportable payments. He faults the payors for making incorrect and improper information returns. He also faults respondent by arguing that respondent has no authority to prepare an SFR. In addition, he argues that the deficiency notice is invalid because it lacks a jurat made under penalties of perjury. He 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 also makes a nonsensical argument that the deficiency notice is invalid because respondent creates a "dummy" Form 4549 (SFR) purported to be an IRS Form 1040. Petitioner makes his arguments by taking portions of the Code, the Constitution and United States Supreme Court opinions out of context. He also uses Code terms incorrectly. For example, he refers to a Notice of Determination (page 2 of Exhibit 1-P). This is incorrect. This is not a collection case under sections 6230 and 6330 like the two previous cases (docket nos. 10386-11L and 18787-12L. This is a deficiency case and the only relevant "ticket to the Tax Court" is a deficiency notice, not a determination notice. His arguments here are similar if not identical to those he made after filing separate petitions challenging the previous collection actions. We rejected those arguments as frivolous, sustained the collection action and ultimately imposed the maximum $25,000 penalty under section 6673(a) in each of the two previous cases. Petitioner uses war-torn arguments that this Court and other courts have found frivolous and sanctionable. Specifically, he argues that 25 withholding agents/payors are to determine if 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 petitioner is a U.S. or foreign person under section 1441. If he is a U.S. person, as here, then the 3 withholding provisions do not apply. The fallacy with 4 5 petitioner's arguments is that section 1441 applies to foreign withholding at source rather than 6 withholding under sections 3401 and 3121 that apply 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 to withholding of payments to payees, who are U.S. persons. Petitioner follows in the footsteps of numerous others who have unsuccessfully attempted to avoid paying Federal income taxes. We need not discuss petitioner's erroneous positions at length. See Wnuck v. Commissioner, 136 T.C. 498 (2011). To refute petitioner's arguments with somber reasoning and conspicuous citation of precedent might suggest that these arguments have some colorable merit. Crain v. Commissioner, 737 F.2d 1417, 1418 (5th Cir.1984). We now go to the determinations made in the deficiency notice. There are two fundamental principles of tax litigation. First, the presumption of correctness attaches to the deficiency determination because the deficiency notice shows that respondent possessed direct evidence of payments to petitioner, and nothing in the record reflects that petitioner failed to receive the amount. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 In fact, he admits to receiving the payments. See Edwards v. Commissioner, 680 F.2d 1268, 1270 (9th 3 Cir. 1982); Banister v. Commissioner, T.C. Memo. 7 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 2008-201. It is also a fundamental tax principle that gross income includes all income from whatever source derived, including non-employee compensation, interest, dividends and taxable pension distributions. Sec. 61(a)(1). Petitioner argues, however, that he is a payee who is a U.S. person not required to file a return and pay tax. Simply put, he is a taxpayer required to file a return and pay tax. See secs. 61(a), 6001, 6012, and 6072. We therefore sustain the deficiency determined in the deficiency notice. We now focus on the additions to tax. An addition to tax is imposed if a taxpayer fails to file a timely Federal income tax return. Sec. 6651(a)(1). The record reflects that petitioner failed to file a Federal income tax return by the prescribed due date for 2009. Petitioner presented no evidence showing that his failure to file or pay was due to reasonable cause and not due to willful neglect. As already mentioned, petitioner has advanced several specious arguments as to why he 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 should not have to pay tax. None of his arguments establishes that he had "reasonable cause." 3 Accordingly, we hold that petitioner is liable for 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the late filing addition to tax under section 6651(a)(1). Next, we address the late payment addition to tax imposed under section 6651(a)(2) for the late payment of tax shown as due on the SFR that respondent prepared for petitioner. An SFR made by the Secretary under section 6020(b) is treated as the return filed by the taxpayer for purposes of determining whether the late payment addition to tax applies. Sec. 6651(g)(2). We sustain respondent's determination of the late payment addition to tax under section 6651(a)(2). We now turn to the addition to tax that petitioner failed to pay estimated tax payments under section 6654. Respondent presented evidence sufficient for us to conclude that petitioner had a required annual payment under section 6654(d)(1)(B) (relating to tax liability for the preceding tax year). See Wheeler v. Commissioner, 127 T.C. 200 (2006). Petitioner failed to present any information that one of the mechanical exceptions apply. We therefore sustain respondent's determination in the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 1 2 3 4 5 6 deficiency notice as to this addition to tax. We next determine whether to impose a penalty against petitioner under section 6673. Section 6673 authorizes the Tax Court to require a taxpayer to pay to the United States a penalty up to $25,000 whenever it appears that proceedings have been instituted or 7 maintained primarily for delay or that the taxpayer's 8 9 10 11 12 13 14 15 16 17 position in such proceedings is frivolous or groundless. See sec. 6673; Scruggs v. Commissioner, T.C. Memo. 1995 355, aff'd without published opinion, 117 F.3d 1433 (11th Cir. 1997). The purpose of section 6673, like that of section 6702, is to compel taxpayers to conform their conduct to settled tax principles. See Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986). Despite numerous warnings from the Court and respondent, petitioner persisted and wasted this 18 Court's limited time and resources. Petitioner defied 19 20 21 22 23 24 25 the Court and argued that he had not brought this case for delay purposes or that he was raising only frivolous arguments. We give no weight to this argument. He has filed four cases with this Court and appealed two of these cases to the 9th Circuit. We find these to be delay tactics to prolong the time respondent has had to wait before collection may 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 4 5 6 7 begin. Petitioner's tactics again have consumed valuable Government resources. These tactics should not be condoned. They damage the integrity of the Federal tax litigation system because the time and attention the Court and respondent must devote to these frivolous arguments deprives other taxpayers 8 with genuine tax controversies. See Abrams v. 9 Commissioner, 82 T.C. 403, 412 (1984) . We are mindful 10 that petitioner is representing himself and may not 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 be familiar with all the Court's rules and procedures. Pro se status, however, is not a license to litter the dockets of the Federal courts with ridiculous allegations concerning the Code. Parker v. Commissioner, 117 F.3d 785 (5th Cir. 1997) . Respondent contends the Court should impose the maximum penalty under section 6673 against petitioner as this is one of four cases petitioner has brought before this Court. In addition to the two collection cases; namely docket no. 10386-11L (regarding the collection of frivolous return penalties under section 6702 for six years at issue) and docket no. 18787-12L (regarding the collection of taxes due for 2008), petitioner has brought two deficiency cases. The deficiency cases include this case for 2009 and 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 5 6 7 8 9 the case at docket no. 20594-13 for 2010 that is scheduled on the October 20, 2014, San Francisco calendar. We also note that petitioner has appealed our sustaining the collection actions in both docket nos. 10386-11L and 18787-12L. He appealed the case at docket no. 10386-11L to the 9th Circuit on December 12, 2013 (9th Circuit docket no. 13-7429). Briefing has finished on this 9th Circuit case as of last 10 Wednesday, May 14, 2014. He also appealed the case at 11 12 docket no. 18787-12L to the 9th Circuit on February 18, 2014 (9th Circuit docket no. 14-70446). The 9th 13 Circuit granted extensions to the briefing schedules 14 as to the case at 9th Circuit docket no 14-70446. 15 Briefing on this 9th Circuit case will be done by 16 17 18 19 20 21 22 23 24 25 July 9, 2014. We rely upon respondent' s recommendation and shall impose a $25,000 penalty against petitioner under section 6673(a)(1). Petitioner is warned, however, that the Court will consider imposing another penalty for each year at issue if he returns to the Court and advances similar arguments and wastes the Court's and respondent's limited resources. To reflect the foregoing, decision will be 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 entered for respondent and an appropriate order will be issued imposing a $25,000 penalty under section 6673 against petitioner. In addition, petitioner shall be prohibited from filing documents in this case without leave from the Court and for good cause shown. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 10:10 a.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 25 866.488.DEPO www.CapitalReportingCompany.com