TAX COURT OPINION

Case: Michael S. MacDougall
Docket Number: 1754-11
Judge: Holmes
Opinion Type: bench
Filed: 12/21/2011
Pages: 8

UNITED STATES TAX COURT WASHINGTON, DC 20217 MICHAEL S. MACDOUGALL, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) Docket No. 1754-11. ORDER OF SERVICE OF TRANSCRIPT Pursuant to Rule 152(b), Rules of Practice of Procedure of there is transmitted herewith to petitioner and to this Court, respondent a copy of the trial of the above case before Judge Mark V. Holmes, at Buffalo, New York, on November 15, 2011, containing his oral opinion.rendered at the transcript of the conclusion of the trial. the pages of findings of fact and (Signed) Mark V. Holmes Judge Dated: Washington, D.C. December 21, 2011 SERVED DEC 2 8 2011 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 3 Bench Opinion by Judge Mark V. Holmes November 15, 2011 MacDougall V. Commissioner Docket No. 1754-11 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. 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's Rules of Practice and Procedure. There was no stipulation in this case, although Mr. MacDougall is a resident of New York State, and he declined to call any witnesses or introduce any evidence, despite repeated urgings by the Court that he do so. Mr. MacDougall was an employee of Nice-N- Easy Grocery Shops, in Mid-State New York. He earned $56,154 in wages from Nice-N-Easy in 2008 as reported by the company, and indicated on IRS records. Nevertheless, he did not file a tax return for 2008. The Commissioner filed a substitute for return for 2008 prepared under Section 6020(b), and issued a statutory notice of deficiency to him for that year in 2010. In his petition, Mr. MacDougall argued that Heritage Reporting Corporation (202) 628-4888 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 "there do not appear to be any witnesses, nor admissible evidence, that the Petitioner is a taxpayer,- with taxable income, and that he has an obligation to file a tax return." This is of course no real argument going to the merits of whether he owes income tax on his wage income for the year 2008, and indeed, it is an argument that has repeatedly been held to be frivolous. The Code defines the term person to include any individual, see Code Section 7701(a) (1), and the term taxpayer in turn refers to, "Any person subject to any Internal Revenue Tax." Section 7701(a) (14). The Code imposes a tax on all income. See United States v. Sloan, 939 F.2d 499-500 (7th Circuit, 1991,1-;---t+&t ny person required to pay any tax must file a return. See Sections 6001, 6011, and 7203. The duty to pay Federal Income Tax is "manifested on the face of the statutes without any regard to IRS forms, rules, or regulations." See United States v. Bowers, 920 F.2d 205-222 (4th Circuit, 1990). Mr. MacDougall is an individual, and thus, of course, a person under the tax laws. He received earned taxable income during the year of 2008, and so Heritage Reporting Corporation (202) 628-4888 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 5 he meets the definition of a taxpayer subject to the requirements of the Internal Revenue Code. Federal Courts have consistently rejected his non-payer-status arguments. See, for example, United States v. Sloan, 939 F.2d 499-501 (7th Circuit 1991), United States.v. Karlin, 785 F.2d 90, 91 (3rd Circuit, 1986), United States v. Studley, 783 F.2d 934, 937 (9th Circuit, 1985); United States v. Dreske, 707 F.2d 978-981 (8th Circuit, 1983). This Court regards it as frivolous, as well as all the other courts, to argue that a person who has wage income and is a resident of the United States is not somehow a taxpayer, and we had live testimony from the IRS stating the same. Our conclusion then is that Mr. MacDougall is in fact a taxpayer, and earned taxable income during 2008, which he did not pay any taxes did not file a return. The Commissioner's determination is therefore sustained. The Commissioner also determined that additions to tax were owed. The Commissioner bears the burden of production with respect to Mr. MacDougall's liability for these additions to meet its burden, and he has to come forward with sufficient evidence to indicate that the additions to tax are Heritage Reporting Corporation (202) 628-4888 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 6 appropriate. Once he meets his burden of production, Mr. MacDougall has to come forward with evidence sufficient to persuade the Court that the Commissioner's determinations were wrong. The first of these additions to tax is under Section 6651(a) (1), which imposes an addition for failing to file a return on the date prescribed, unless the taxpayer establishes that his failure was to due reasonable cause and not through willful neglect. We find that Mr. MacDougall did not establish any reasonable cause and that indeed he willfully neglected to file his return. The Court finds that the Commissioner has met its burden of production with regard to the addition to tax under Section 6651(a) (1), and that Mr. MacDougall presented no evidence indicating that his failure to file was due to reasonable cause, or that the Commissioner's determination in this matter was otherwise incorrect. That determination is therefore sustained. The second addition to tax was determined under Section 6651(a) (2), which imposes an addition to tax for failing to pay the tax due on a return. Here Heritage Reporting Corporation (202) 628-4888 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 Commissioner met its burden of moving forward by showing that there was no estimated tax payment or withholding, and that Section 6020(b) allowed him to draft a substitute for return. This constitutes a return for the Commissioner determining the addition to tax under Section 6651(a) (2). See IRC Section 6651(g). That addition to tax is also sustained. Finally, there is the addition to tax under Section 6654 (a). The Commissioner determined that Mr. MacDougall was liable for this addition to tax for failing to pay estimated tax payments for 2008. Mr. MacDougall, like all taxpayers, has an obligation to pay estimated tax for a given year only if he has "a required annual payment" for that year. See Section 6654 (b). The Commissioner, however, introduced evidence in the form of a W-2 to prove that the Petitioner was required to file a Federal Income Tax Return for 2008. He failed to file a return for 2008, and failed to make any estimated tax payments for the year at issue. He also somehow arranged for nothing to be withheld from his wages for that year. Thus, the Court finds that the Commissioner has met its burden of production with regard to the Heritage Reporting Corporation (202) 628-4888 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 addition to tax under Section 6654 (a). Mr. MacDougall offered no evidence to dispute the Commissioner's evidence, or to establish a defense to the Commissioner's literal translation. Therefore, the Court finds that Mr. MacDougall is liable for an addition to tax under Section 6654 (a) for the tax year 2008 as well. Finally, throughout the pretrial preparation and in the trial of this case, the Commissioner's counsel moved for a penalty under 6673(a) (1). Section 6673(a) (1) authorizes the Court to require a taxpayer to pay the United States a penalty in an amount not to exceed $25,000 whenever the taxpayer's position is frivolous or groundless, or where the taxpayer has instituted or pursued proceedings primarily for delay. The Commissioner doesn't even need to ask for this penalty, and the Court can impose it sua sponte. In this case, Mr. MacDougall declined to testify on the issue of this penalty, and he declined to testify on the issue of how much tax he owed, and he failed to suggest any reason why the penalty should not be imposed for arguments that have been identified by other courts, as well as the Tax Court, as fundamentally frivolous.. Nevertheless, he appears to be a first-time Heritage Reporting Corporation (202) 628-4888 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 9 offender. He earned relatively modest wages, and had a relatively small tax bill, and probably paid somebody for this bogus advice. So the Court finds that the penalty is appropriate, but will set it for this first time at the low end in the amount of $500. We find for the Commissioner as to the following deficiencies and additions to tax: a deficiency for tax year 2008 in the amount of $7,497 and an addition to tax under Section 6651(a) (1) of $1,686.82; and an addition to tax under Section 6651(a) (2) of $599.76; and an addition to tax under Section 6654 (a) of $240.94; and a penalty under Section 6673 of $500. This concludes the Court's Oral Findings of Fact and Opinion in this case. (Whereupon, at 10:25 a.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // Heritage Reporting Corporation (202) 628-4888