TAX COURT OPINION

Case: Andrew B. Tam
Docket Number: 5103-11
Judge: Kroupa
Opinion Type: bench
Filed: 05/03/2012
Pages: 9

SEC UNITED STATES TAX COURT WASHINGTON, D.C. 20217 ANDREW B. TAM, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ORD E R Docket No. 5103-11 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 the proceedings in the above case before Judge Diane L. Kroupa at Las Vegas, Nevada, on March 15, 2012, containing her oral findings of fact and opinion. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Diane L. Kroupa Judge Dated: Washington, D.C. April 30, 2012 SERVED May 03 2012 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 BENCH OPINION BY JUDGE DIANE L. KROUPA ANDREW B. TAM V. COMMISSIONER DOCKET NO.: 5103-11 MARCH 15, 2012 3 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. 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 by Section 7459(b) and Rule 152. All section references are to the Internal Revenue Code as amended and in effect for 2008, and all Rule references are to the Tax Court Rules of Practice and Procedure. This is a deficiency case in which Petitioner contests the amounts shown on the substitute for return Respondent prepared for 2008 after Petitioner failed to file an income tax return for that year. Andrew Tam appeared Pro Se, and Fred Green appeared on behalf of Respondent. FINDINGS OF FACT Certain facts are stipulated. 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 4 stipulation of facts, with accompanying exhibits, is incorporated by this refèrence. The facts are so found. Petitioner resided in Nevada at the time he filed the petition. Petitioner worked at the University medical Center in 2008 as a Cardiac Monitor Technician earning over $25,000. Petitioner also earned nearly $25,000 as an employee of Wal-Mart in 2008. Petitioner's employers issued petitioner Forms W-2 reflecting his compensation. Petitioner also received, and admits to having received, a distribution of nearly $6,000 from an Individual Retirement Account at Hawaii State Federal Credit Union (Credit Union). The Credit Union issued Petitioner Form 1099-R reflecting his distribution. Petitioner earned other income, including interest, dividends and income from a stock sale in 2008. Petitioner did not file a Federal income tax return or make estimated tax payments for 2008. Respondent prepared a substitute for return for Petïtioner based upon information from the third- party payors. Respondent issued the deficiency notice to Petitioner determining an $10,675 deficiency in income tax for 2008, and determining a $2,332.35 late 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 filing addition under 6651(a) (1), a $881.11 late payment addition under Section 6651(a) (2), and a $332.03 failure to pay estimated taxes addition under Section 6654 for 2008. Petitioner timely filed a petition with this Court. Petitioner asserts that he owes no taxes for a myriad of reasons, all of which this Court and other courts have found to lack merit. We need not discuss Petitioner's erroneous positions at length. See Wnuck v. Commissioner, 136 T.C. No. 24 (2011). We note Petitioner argues he owes no taxes because there is no deficiency, yet admits to having received some income before pleading the Fifth Amendment. Petitioner also argues that Respondent followed an improper procedure for asserting the deficiency. Specifically, he argues that the deficiency notice is invalid because the IRS agent who signed it had no authority, and that Respondent's substitute for return is improper. Petitioner argues that, because there can be no deficiency given the improper substitute for return and deficiency notice, there can be no penalties either. OPINION This deficiency case involves a taxpayer's 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 protest against the Federal income tax system. By challenging Respondent's procedures, rather than preparing a belated income tax return, or raising meritorious arguments regarding his income, Petitioner seeks to protect the system and delay collection. We begin with the fundamental principle of tax litigation that the Commissioner's determinations in the deficiency notice are presumed correct, and the taxpayer bears the burden to establish those determinations are incorrect. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Petitioner argues that there can be no deficiency because Respondent's substitute for return is invalid. Petitioner has failed to establish the precise nature of his concern with Respondent's substitute for return. Nevertheless, no substitute for return is necessary to determine a deficiency. See, e.g., Roat v. Commissioner, 847 F.2d 1379, 1381-182 (9th Cir. 1988); Clark v. Campbell, 501 F.2d 108, 117 (5th Cir. 1974) ("the Service may determine a deficiency in the absence of a return"). Petitioner's argument lacks merit. Petitioner also challenges the authority of the signatory to the deficiency notice, asserting 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 7 the deficiency notice is invalid because the signatory was not authorized to sign. It is well settled that the Secretary or his delegate may issue deficiency notices. Secs. 6212(a), 7701(a) (11) (B), and (12) (A) (i) (allowing redelegations of that authority); e.g., Everman v. Commissioner, T.C. Memo 2003-137. Furthermore, there is no requirement that a notice of deficiency be signed. See, e.g. Pendola v. Commissioner, 50 T.C. 509, 513- 514 (1968). Petitioner's argument again lacks merit. Petitioner received wage income from University Medical Center and Wal-Mart in 2008. He also received an IRA distribution and other income, as Respondent identified based upon third-party payor information. It is a fundamental tax principle that gross income includes all income from whatever source derived, including wages, interest, and dividends. Sec. 62(a) (1). The income Petitioner earned in 2008, as determined both by Respondent, as well as by the facts found by the Court, constitutes gross income. We therefore sustain the deficiency determined in Respondent's deficiency notice for 2008. We now focus on the additions to tax. An addition to tax is imposed if a taxpayer fails to file 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 8 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 2008. 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's arguments focus on procedural technicalities. None of his arguments establish that he had "reasonable cause". Accordingly, we hold that Petitioner is liable for the late filing additions to tax under Section 6651(a) (1). We next consider whether Petitioner is liable for the late payment addition to tax for failure to timely pay the amount of tax shown on a taxpayer's Federal income tax return. Sec. 6651(a) (2). Respondent prepared a substitute for return under Section 6020(b) for 2008. Substitutes for return made by the Secretary under Section 6020(b) are treated as the returns 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). 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 We next address the additions to tax under Section 6654 (a) for failure to pay estimated tax. There are exceptions to the obligation to make estimated tax payments set forth in Section 6654. Petitioner has failed, however, to establish he fits within those exceptions. Accordingly, we hold that Petitioner is liable for the Section 6654 (a) addition to tax for failure to make estimated tax payments. Finally, we now address whether it is appropriate to impose a penalty against Petitioner under Section 6673, which 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 maintained by the taxpayer primarily for delay, or that the taxpayer's position in such proceedings is frivolous or groundless. See Sec. 6673; Scruqqs v. Commissioner, T.C. Memo. 1995-355, affd. without published opinion 117 F.3d 1433 (11th Cir. 1997). Respondent orally moved to impose a penalty under Section 6673 and recommended a $1,000 penalty. The purpose of Section 6673 is to compel taxpayers to think and to conform their conduct to settled tax principles. Coleman v. Commissioner, 791 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 10 F.2d 68, 71 (7th Cir. 1986); see also Grasselli v. Commissioner, T.C. Memo. 1994-581. It is apparent from the record that Petitioner instituted or maintained this proceeding primarily, if not exclusively, as a protest against the Federal income tax system and for delay. Petitioner failed to file for one year only. We do not condone his actions. We reluctantly do not impose a penalty against Petitioner at this time. We strongly caution him, however, that the Court may impose such a penalty, up to $25, 000, against him in the future if he again seeks to protest the system and delay collection. To reflect the foregoing, decision will be entered for Respondent. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 4:15 p.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // Heritage Reporting Corporation (202) 628-4888