TAX COURT OPINION

Case: Louie Elias
Docket Number: 24624-06L
Judge: Colvin
Opinion Type: bench
Filed: 03/25/2009
Pages: 12

UNITED STATES TAX COURT WASHINGTON , D.C . 2021 7 LOUIE ELIAS, Petitioner, v . COMMISSIONER OF INTERNAL REVENUE , Respondent . Docket No . 24624-06 L O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice an Procedure, it i s ORDERED that the Clerk of the Court shall transmit here to petitioner and to respondent a copy of the pages of th e transcript of the trial of the above case before Judge Diane L . Kroupa at Los Angeles, California on February 26, 2009, containing her oral findings of fact and opinion rendered after the hearing on respondent's motion . In accordance with the oral findings of fact and opinion, an order and decision will be entered for respondent . (Signed) Diane L . Kroupa Judg e Dated : Washington, D .C . March 25, 2009 SERVED MAR 2 6 2009 3 1 Bench Opinion by Judge Diane-L . Kroupa February 26, 2009 2 LOUIE ELIAS V . COMMISSIONER Docket No . 24624-06 L 3 BENCH OPINION 4 The Court has decided to render oral findings of 5 fact and opinion in this case and the following represents 6 the Court's oral findings of fact and opinion . These oral 7 findings of fact and opinion shall not be relied upon a s 8 precedent in any other case . 9 This bench opinion is made pursuant to th e 10 authority, granted by section 7459(b) and Rule 152 . All 11 section references are to the Internal Revenue Code a s 12 amended and in effect for 2001, the year at issue, and all 13 Rule references are to the Tax Court Rules of Practice and 14 Procedure . 15 This is a collection review case involving a 16 proposed levy to collect Petitioner's unpaid liabilities for 17 2001, including Petitioner's . liability for the frivolou s 18 return penalty under section 6702 for 2001 . This collection 19 review matter is before the Court on respondent's Motion for 20 Summary Judgment And To Impose A Penalty Under I .R .C . 21 Section 6673, filed on January 22, 2009 . 22 - There was no appearance by or on behalf o f 23 Petitioner . Donna Herbert appeared on behalf of respondent . 2 4 25 FINDINGS OF FACT Heritage Reporting Corporation (202) 628-4888 4 1 The record establishes or the parties do no t 2 dispute the following : Petitioner resided in California at 3 the time he filed the collection review petition in thi s 4 case . Petitioner failed to file a valid return for 2001 5 asserting that he is not a "taxpayer" nor did he receive 6 "wages ;" principles articulated by Peter Hendrickson in his 7 book "Cracking the Code : The Fascinating Truth Abou t 8 Taxation in America ." Respondent prepared a substitute for 9 return based upon information from third-party payors . 10 Respondent also asserted a frivolous return penalty against 11 Petitioner of $500 under section 6702 . Petitioner failed to 12 file a petition to contest respondent's determinations for 13 2001 . Respondent thereafter assessed the tax liabilitie s 14 for 2001 along with additions to tax and interest, including 15 Petitioner's liability for the frivolous return penalty for 16 2001 . 17 Petitioner failed to pay the amount assessed so 18 respondent issued to Petitioner a letter entitled "Final 19 Notice - Notice of Intent to Levy and Notice of Your Right 20 to a-Hearing," dated August 15, 2005, for the outstanding 21 liabilities for 2001 (referred to as the Levy Notice) . 22 Petitioner requested a hearing in response to the 23 Levy Notice . 24 The settlement officer assigned to Petitioner's 25 hearing informed Petitioner that she had scheduled a Heritage Reporting Corporatio n (202) 628-4888 L,, 5 1 telephonic hearing with Petitioner . She also offered a 2 face-to-face conference to Petitioner if Petitione r 3 responded by a certain date . After that date, Petitioner 4 sent a letter stating that he wanted to postpone th e 5 conference for six weeks and that he wanted a face-to-face 6 conference in Ventura County . The settlement office r 7 rescheduled the hearing for the requested time but informed 8 him that there were no settlement officers in Ventur a 9 County . If Petitioner wanted a face-to-face conference, he 10 needed to come to the Los Angeles office . Petitione r 11 responded by stating that he would need to record th e 12 hearing . Petitioner also explained that he had requeste d 13 numerous documents from the Disclosure Office, and he wanted 14 to postpone the hearing even further . The settlemen t 15 officer complied and rescheduled the hearing . The 16 settlement officer enclosed certificates of assessment t o 17 Petitioner regarding the tax liabilities for 2001, including 18 the liability for the frivolous return penalty . 19 Petitioner wrote another letter asking to change 20 the face-to-face conference to a correspondence conference . 21 And, instead of attending a hearing with the settlemen t 22 officer, Petitioner sent a large package to the settlement 23 officer including the book entitled : . " Cracking the Code : 24 The Fascinating Truth About Taxation in America " along wit h 25 various tax protestor materials . Heritage Reporting Corporation (202) 628-4888 1 Petitioner never completed a Form 433-A, entitled 2 "Collection Information Statement" so that the settlemen t 3 officer could consider collection alternatives . Without the 6 4 necessary information from Petitioner, the settlemen t 5 officer did as she explained in an earlier letter . The 6 settlement officer issued a determination notice t o 7 Petitioner based on the information in respondent's administrative file . The settlement officer sustained the 9 proposed collection action by levy in a Notice o f 10 Determination Concerning Collection Action(s) under Section 11 6320 and/or 6330, dated October 31, 2006, regardin g 12 Petitioner's unpaid tax liabilities for 2001 . Th e 13 settlement officer also sustained the proposed collection 14 action by levy in a Notice of Determination Concerning 15 Collection Action(s) under Section 6320 and/or 6330,,dated 16 October 27, 2006, regarding Petitioner's liability for the 17 frivolous tax return penalty under section 6702 for 2001 . 18 As previously stated, respondent filed a Motion for Summary 19 Judgment And To Impose A Penalty Under I .R .C . Section 6673 . 20 Petitioner filed an opposition that denied every allegation 21 set forth in the motion and admitted only those items that 22 related to Petitioner's actions . 23 Petitioner failed to appear at the hearing o n 24 respondent's motion and Petitioner failed to appear at the 25 calendar call of the February 23, 2009 trial session of the Heritage Reporting Corporatio n (202) 628-4888 7 1 Court in Los Angeles, California . 2 OPINION 3 We are asked to decide whether to grant summar y 4 judgment . Summary judgment is intended to expedit e 5 litigation and avoid unnecessary and expensive trials . See, 6 e .g ., FPL Group .Inc . v . Commissioner , 116 T .C . 73, 7 4 7 (2001) . A motion for summary judgment will be granted if 8 the pleadings, answers to interrogatories, depositions , 9 admissions, and other acceptable materials, together with 10 the affidavits, if any, show that there is no genuine issue 11 as to any material fact and that a decision may be rendered 12 as a matter of law . See Rule 121(b) ; Elect . Arts . Inc . v . 13 Commissioner , 118 T .C . 226, 238 .(2002) . The moving party 14 has the burden of proving that no genuine issue of material 15 fact exists and that it is entitled to judgment as a matter 16 of law . See, e .g ., Rauenhorst v . Commissioner , 119 T .C . 17 157, 162 (2002) . The party opposing summary judgment must 18 set forth specific facts that show . that a genuine question 19 of material fact exists and may not rely merely o n 20 allegations or denials in the pleadings . Grant Creek Water .21 Works . Ltd . v . Commissioner , 91 T .C . 322, 325 (1988) . 22 We begin with the standard of review . Where, as 23 is the case here ; the validity of the underlying ta x 24 liability is not properly placed at issue, the Court will 25 review respondent's determination for abuse of discretion . Heritage Reporting Corporatio n (202) 628-4888 8 1 2 Sego v . Commissioner , 114 T .C . 604, 610 (2000) ; Goza v . Commissioner , 114 T .C . 176, 181-182 (2000) . We must decide 3 whether respondent exercised his discretion arbitrarily , 4 capriciously, or without sound basis in fact or law . Se e 5 Woodral v . Commissioner , 112 T .C . 19, 23 (1999) . Based upon 6 our examination of the entire record before us, we find that 7 respondent did not abuse his discretion in determining that 8 the collection action should proceed with respect t o 9 Petitioner's unpaid liabilities for 2001, includin g 10 Petitioner's liability for the frivolous return penalty 11 under section 6702 . 12 We next briefly describe collection proceedings . 13 If any person liable for Federal tax liability neglects or 14 refuses to make payment within ten days of notice an d 15 demand, the Commissioner . is authorized to collect the tax by 16 levy on that person's property . See sec . 6331(a) . At least 17 30 days before enforcing collection by levy on the person's 18 property, the Secretary is obliged to provide the perso n 19 with a final notice of intent to levy, including notice of 20 the administrative appeals available to the person . See 21 sec . 6331 (d) . 22 The person is entitled, upon request, to an 23 administrative review hearing before Appeals . Sec . 24 6330(b)(1) . If the person requests a hearing, he or she may 25 raise at that hearing any relevant issues relating to the Heritage Reporting Corporatio n (202) 628-4888 a 9 1 unpaid tax or the proposed levy . Sec . 6330(c)(2) . Relevant 2 issues include any appropriate spousal defenses, challenges 3 to the appropriateness of collection, and possibl e 4 alternative means of collection such as an installmen t 5 agreement or an offer-in-compromise . Sec . 6330(c)(2)(A) . 6 After the hearing, the Appeals officer is required to make a 7 determination that addresses issues the taxpayer raised , 8 verifies that all requirements of applicable law an d 9 administrative procedures have been met, and balances the 10 need for the efficient collection of taxes with th e 11 legitimate concern of the person that any collection action 12 be no more intrusive than necessary . Sec . 6330(c)(3)(C) . 13 The record reflects that the settlement officer 14 properly verified that all the legal and procedura l 15 requirements have been met . The settlement office r 16 confirmed, using a certificate of assessment of Petitioner's 17 accounts-, that assessments were properly made for 2001, that 18 appropriate and timely notices were sent regarding the 19 assessments, and that Petitioner was properly informed of 20 his rights with respect to the proposed levy actions . 21 The record also reflects that Petitioner did not 22 raise any relevant issue nor provide any financia l 23 information . We have frequently and consistently held that 24 an officer does not abuse any discretion if the taxpaye r 25 fails to submit the required and requested financial Heritage Reporting Corporatio n (202) 628-4888 Q 1 0 1 information . Sapp v . Commissioner , T .C . Memo . 2006-104 . 2 Furthermore, we consider only arguments, issues and matters 3 that were raised at the collection hearing or otherwis e 4 brought to the attention of Appeals . Magana v . 5 Commissioner , 118 T .C . 488, 493 (2002) . 6 Finally, the record reflects that the settlemen t officer properly balanced the need for efficient collection of taxes with Petitioner's legitimate concern that any 9 collection be no more intrusive than necessary . 1 0 Petitioner has not asserted any spousal defenses , 11 or otherwise offered any additional collection alternatives . 12 See sec . 6330(c)(2) . Accordingly, these issues are no w 13 deemed conceded . Rule 331(b)(4) . 14 Petitioner has not presented any evidence o r 15 persuasive arguments to convince us that respondent abused 16 his discretion . We therefore conclude that the settlement 17 officer did not abuse her discretion in upholdin g 18 respondent's proposed levy action to collect from Petitioner 19 outstanding tax liabilities for 2001, including Petitioner's 20 liability for the frivolous return penalty under sectio n 21 6702 for 2001 . 22 We now address whether to impose a penalty against 23 Petitioner under section 6673, which authorizes the Tax 24 Court t require a taxpayer to pay to the United States a 25 penally up to $25,000 whenever it appears that proceedings Heritage . Reporting Corporatio n (202) 628-4888 S 11 1 have been instituted or maintained by the taxpayer primarily 2 for delay or that the taxpayer's position in suc h 3 proceedings is frivolous or groundless . 4 Petitioner deserves a penalty under sectio n 5 6673(a)(1), and that penalty should be substantial, if it is 6 to have the desired deterrent effect . Cf . Talmage v . 7 Commissioner , T .C . Memo . 1996-114, affd . without published 8 opinion 101 F .3d 695 (4th Cir . 1996) . The purpose o f 9 section 6673 is to compel taxpayers to think and to conform 10 their conduct to settled tax principles . Coleman v . 11 Commissioner , 791 F .2d 68, 71 (7th Cir . 1986) . 12 Respondent warned Petitioner that his arguments 13 have been repeatedly rejected by the courts and that, if 14 Petitioner persisted in making these arguments, he was at 15 risk of having the penalty imposed against him . In thi s 16 proceeding now before the Court, Petitioner asserts nothing 17 but frivolous and groundless arguments . The Court is aware 18 that Petitioner has pursued the same frivolous argument s 19 here as he has for other years . Apparently, responden t 20 asserting the frivolous return penalty under section 6702 21 against Petitioner has not deterred Petitioner from wasting 22 the Court's and respondent's limited time and resources . It 23 is apparent from the entire record that Petitione r 24 instituted or maintained this proceeding primarily, if not 25 exclusively, as a protest against the Federal income tax Heritage Reporting Corporatio n (202) 628-4888 1 2 1 system, and his proceeding in this Court is merely a 2 continuation of Petitioner's refusal to acknowledge and 3 satisfy his tax obligations . We are convinced that no 4 purpose would be served in repeating all that has been said 5 about his frivolous and misguided arguments . 6 We do point to certain cases, however, t o 7 emphasize that the arguments made by Petitioner and other 8 followers of Mr . Hendrickson's Cracking the Code book have 9 been found to be frivolous . See, e .g ., United States v . 10 Latham , 754 F .2d 747, 750 (7th . Cir . 1985) (cour t 11 characterized argument that category of 'employee' does not 12 include privately employed wage earners is a preposterous 13 reading of the statute .") ; Abdo v . United States , 23 4 14 F .Supp .2d 553, 563 (M .D .N .C . 2002), affd 63 Fed . Appx . 163 15 (4th Cir . 2003) (court noted claim that wages are not income 16 "has been rejected as many times as it has been asserted .") 17 Even the author of the book, Peter Hendrickson, has bee n 18 found to be an employee within the meaning of section 3401 19 (c) . United States v . Hendrickson , 2007 WL 238501 (E .D . 20 Mich .), 100 A .F .T .R .2d 2007-5395 . We shall therefore impose 21 a penalty against Petitioner under section 6673 of $10,000 . 22 We also take this opportunity to admonis h 23 Petitioner that the Court will consider imposing a larger 24 penalty against Petitioner under section 6673 if Petitioner 25 returns to the Court and advances similar arguments in the Heritage Reporting Corporation (202) 628-4888 1 3 1 future . 2 To reflect the foregoing, decision will be entered 3 for respondent and an appropriate order will be issue d 4 sustaining the determinations set forth in the Notice o f 5 Determination Concerning Collection Action(s) Under Section 6 6320 and/or 6330, dated October 27, 2006, regardin g 7 Petitioner's unpaid tax liabilities for 2001, plu s 8 sustaining the determinations set forth in the Notice o f 9 Determination Concerning Collection Action(s) Under Section 10 6320 and/or 6330, dated October 31, 2006, regardin g 11 Petitioner's liability for the frivolous return penalty 12 under section 6702 for 2001 . The order will also grant 13 respondent's Motion for Summary Judgment And To Impose A 14 Penalty Under I .R .C . Section 6673, filed on January 22 , 15 2009, and shall impose a $10,000 penalty against Petitioner 16 under section 6673 for 2001 . 17 This concludes the court's oral findings of fact 18 and opinion in this case . 19 (Whereupon, at 11 :15 a .m ., the bench opinion in 20 the above-entitled matter was concluded . ) 21 22 // 23 // 24 // 25 (cid:127)// Heritage Reporting Corporation (202) 628-4888