TAX COURT OPINION

Case: Clint R. Conger
Docket Number: 204-19
Judge: Marvel
Opinion Type: bench
Filed: 02/13/2020
Pages: 15

SR UNITED STATES TAX COURT WASHINGTON, DC 20217 CLINT R. CONGER, Petitioner(s), v. ) ) ) ) ) Docket No. 204-19. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ORDER 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 of the above case before Judge L. Paige Marvel at Phoenix, Arizona, on January 29, 2020, containing the Court's oral findings of fact and opinion. In accordance with the oral findings of fact and opinion, an appropriate order will be issued and a decision will be entered under Rule 155, Tax Court Rules of Practice and Procedure. (Signed) L. Paige Marvel Judge Dated: Washington, D.C. February 13, 2020 SERVED Feb 14 2020 RECEIVED 2/5/2020 IN THE UNITED STATES TAX COURT SD In the Matter of: CLINT R. CONGER, ) ) Petitioner, ) Docket No. 204-19 ) ) v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) Pages: 1 through 13 Place: Phoenix, Arizona Date: January 29, 2020 4973)406-2250|operations escribers.net|www.esalbers.net IN THE UNITED STATES TAX COURT 1 In the Matter of: ) CLINT R. CONGER, Petitioner, ) Docket No. 204-19 ) ) v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) Sandra Day O'Connor U.S. Cthse. 401 West Washington Street Room 406, 4th Floor Phoenix, Arizona 85003 January 29, 2020 The above-entitled matter came on for bench opinion, pursuant to notice at 11:02 a.m. BEFORE: HONORABLE L. PAIGE MARVEL Judge APPEARANCES: For the Petitioner: No Appearance For the Respondent: No Appearance 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 cribers 1973;406-2250)opeistionscextitwrnnetiwww.escribeismet P R O C E E D I N G S 2 (11:02 a.m.) THE CLERK: Docket number 204-19, Clint R. Conger. (Whereupon, a bench opinion was rendered.) 1 2 3 4 5 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ©73)406-2250loperations erribersnett www.esaibersmet 1 2 Bench Opinion by Judge L. Paige Marvel January 29, 2020 3 Clint R. Conger v. Commissioner 3 4 5 6 7 8 9 Docket No. 204-19 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. 10 This bench opinion is made pursuant to the 11 authority granted by section 7459(b) of the Internal 12 Revenue Code of 1986 (Code) as amended and Rule 152 of the 13 14 15 16 Tax Court Rules of Practice and Procedure. Unless otherwise indicated, subsequent section references in this bench opinion are to the Code as amended in effect for the years at issue, and Rule references are to the Tax Court 17 Rules of Practice and Procedure. Some monetary amounts 18 19 have been rounded to the nearest dollar. Petitioner Clint R. Conger appeared pro se. 20 Rebecca Elene Layne appeared on behalf of t e respondent. 21 22 23 24 25 Respondent determined income tax deficiencies of $9,975 and $15,515 for e petitioner's 2015 and 2016 tax h years, respectively. Respondent concedes that petitioner is entitled to an unclaimed capital loss and is not liable for the section 6662 accuracy-related penalty for 2016. MEllB $73)4f‰2250lopeestions@errbers.net|www.escribe<5net 4 After concessions, the issues for decision are whether: (1) petitioner received unreported income of $65,408 and $91,233 in e tax years 2015 and 2016, respectively; (2) petitioner received unreported capital gain income of $1,601 in tax year 2015; and (3) petitioner is liable for a penalty under section 6673(a)(1). Findings of Fact Some of the facts have been stipulated, and the stipulation of facts is incorporated herein by this 1 2 3 4 5 6 7 8 9 10 reference. Petitioner resided in Arizona when he 11 petitioned this Court. 12 During the years at issue, petitioner worked for 13 GoDaddy.com, LLC (GoDaddy). In 2015 petitioner received 14 wages from GoDaddy of $65,408 from which GoDaddy withheld 15 Federal employment taxes of $11,033. In 2016 petitioner 16 received wages from GoDaddy of $91,233 from which GoDaddy 17 withheld Federal employment taxes of $17,344. GoDaddy 18 19 20 21 22 23 24 25 issued to petitioner Forms W-2, Wage and Tax Statement, for 2015 and 2016 reporting the wage and tax withholding amounts. Petitioner also engaged in certain securities transactions through Apex Clearing Corporation (Apex) that resulted in a capital gain of $1,601 in 2015 and a capital loss in 2016 of $1,896. Apex issued to petitioner Forms 1099-MISC, Miscellaneous Income, for 2015 and 2016 cdbes $73)406-2250|opentions@escriberwet!wwwascribers.net 5 reporting the capital gain and the loss, respectively. Petitioner filed a timely Form 1040, U.S. Individual Income Tax Return, for 2015 on which he entered a wage amount of $0 and failed to report the capital gain. Petitioner attached 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., to his 2015 income tax return. On Form 4852, petitioner checked a box indicating that he did not receive or received an incorrect Form W-2, and reported a wage amount of $0. The Internal Revenue Service (IRS) wrote to 1 2 3 4 5 6 7 8 9 10 11 12 13 petitioner, requesting a copy of his Form W-2, and 14 referred his 2015 return for its Frivolous Return Program 15 unit for consideration. Thereafter, on March 9, 2016, the 16 IRS mailed a Letter 3176 to petitioner informing him of 17 18 19 20 21 the possible imposition of a $5,000 penalty under section 6702 for filing a frivolous return and requesting that he submit a corrected return. Petitioner responded by letter in which he enclosed a redacted copy of his Form W-2 for 2015 and asserted that the money he was paid for his labor 22 did not constitute taxable wages. Petitioner later 23 submitted a Form 1040X, Amended U.S. Individual Income Tax 24 Return, on which he also claimed a wage amount of $0 and 25 continued to assert his misguided and frivolous arguments {P73)406-2250loperations@erribers.nettwwwmaíbeasmet . that his income was not taxable. The IRS assessed a penalty under section 6702 of $5,000 for the submission of a frivolous income tax return for tax year 2015. That 6 penalty is not at issue here. For tax year 2016, petitioner again submitted a Form 1040 with a Form 4852 reporting wages in the amount of $0 and did not claim the capital loss. He also filed an amended income tax return for 2016, claiming that his wages were not taxable and that the information on his Form W-2 for 2016 was bad payer data. On September 26, 2018, the IRS issued notices of 1 2 3 4 5 6 7 8 9 10 11 12 deficiency for tax years 2015 and 2016 proposing 13 deficiencies of $9,975 and $15,515, respectively. In the 14 15 2015 notice, the IRS increased petitioner's income to reflect the wage and capital gain income reported on Form 16 W-2 and Form 1099-MISC. In the notice for 2016, the IRS 17 18 19 20 adjusted petitioner's income to reflect the wage income reported on Form W-2 and a capital loss reported on Form 1099-MISC. On December 24, 2018, petitioner timely 21 petitioned this Court for redetermination of his 22 deficiencies for 2015 and 2016. In the petition, 23 petitioner did not dispute any of the specific adjustments 24 to income; he made only baseless arguments that respondent 25 did not lawfully determine a deficiency, failed to provide A CdbeS (9733 406-2250 [ operations@escribers.ne t j www.exnben.net a certified record of assessment, and did not follow the 7 Proper procedures under section 6020. Respondent repeatedly warned petitioner both before and after he issued the notices of deficiency that Petitioner's arguments were frivolous and groundless, and if pursued in this Court, could lead to the imposition of a penalty under section 6673(a)(1). See, e.g., Waltner v. Commissioner, T.C. Memo. 2014-32, aff'd 659 Fed. Appx. 440 (9th Cir. 2016). At the beginning of the trial, the 1 2 3 4 5 6 7 8 9 10 Court also warned petitioner that the arguments contained 11 12 in his pretrial memorandum were frivolous and if made at trial, could expose him to a section 6673(a) (1) penalty. 13 During trial, petitioner continued to take the position 14 15 16 that his wages were not income and that respondent had failed to provide information that he followed the proper procedures in determining the deficiencies. At trial, 17 petitioner admitted that his arguments were derived from 18 Peter Hendrickson's book, Cracking the Code, and related 19 website. Following the trial, respondent filed a motion 20 21 22 23 for penalties pursuant to section 6673(a) (1). I. Unreported Income Discussion Ordinarily, the taxpayer has the burden of 24 proving that the Commissioner's determinations in the 25 nbtice of deficiency are in error. Rule 142(a). The U.S. 733 406-2250| operations@erribersnet t www.enriberinet Court of Appeals for the Ninth Circuit, 8 to which an appeal in this case would lie absent a stipulation to the con.trary, see sec. 7482(b) (1)(A), has held that for the presumption of correctness to attach to the notice of deficiency in unreported income cases, the Commissioner must establish "some evidentiary foundation" connecting the taxpayer with the income-producing activity, see 1 2 3 4 5 6 7 8 Weimerskirch v. Commissioner, 596 F.2d 358, 361-362 (9th 9 Cir. 1979), rev'g 67 T.C. 672 (1977), or demonstrating 10 that the taxpayer actually received unreported income, 11 Edwards v. Commissioner, 680 F.2d 1268, 1270-1271 (9th 12 Cir. 1982)(holding that the ommissioner's assertion of a / 13 deficiency is presumptively correct once some substantive 14 15 evidence is introduced demonstrating that the taxpayer received unreported income). If the Commissioner 16 introduced some evidence that the taxpayer received 17 unreported income, the burden shifts to the taxpayer, who 18 must establish by a preponderance of the evidence that the 19 deficiency was arbitrary or erroneous. See Hardy v. 20 Commissioner, 181 F.3d 1002, 1004 (9th Cir. 1999), aff'g 21 22 T.C. Memo. 1997-97. The record amply demonstrates that petitioner 23 was employed by GoDaddy, and received wages in the amounts 24 25 of $65,408 and $91,233 in tax years 2015 and 2016, respectively. The record also shows that petitioner p73) 406-2250 j oper ations@escr lbersne t j wwwsscribersnet earned $1,601 of capital gain income in 2015. Accordingly, the burden of proof shifted to petitioner to prove that respondent's adjustments in the notice of 9 deficiency were arbitrary or erroneous. Section 61(a) defines gross income as "all income from whatever source derived" including compensation paid for services and profit from the sale of securities. Even though petitioner bears the burden of proving that respondent's determination in the notice of 1 2 3 4 5 6 7 8 9 10 deficiency are incorrect, he offered no credible evidence 11 challenging the amounts of the adjustments. Instead, he 12 13 argued only tiresome and frivolous legal theories challenging t1 respondent's authority to determine 14 petitioner's income tax liability and the applicability of 15 16 17 the tax code to petitioner. Specifically, petitioner contends, inter alia, that: (1) he is not a taxpayer; (2) he is not engaged in a trade or business; (3) respondent 18 did not provide a certified record of assessment; and (4) 19 20 21 22 various errors related to substitutes for return. We need not linger on these spurious and shopworn theories, other than to note that petitioner--not respondent--bears the burden of proof in this proceeding, 23 and he has introduced no credible evidence in support of 24 25 his position. As to petitioner's legal arguments, they have consistently been rejected by the IRS and by many cribers (973)406-2250|opwations@erritsmetIwwwascibermet 10 1 2 3 4 5 6 7 8 9 tribunals. The IRS has compiled these opinions in its Publication, The Truth About Frivolous Tax Arguments, readily available on the IRS's website at www.irs.gov /pub/taxpros/frivolous truth march 2018.pdf. See also, Waltner v. Commissioner, T.C. Memo 2014-35 (addressing and soundly refuting arguments based on "Cracking the Code".), aff'd, 659 Fed. Appx. 440 (9th Cir. 2016). We need not address petitioner's frivolous arguments further. As was aptly stated by the Court of 10 Appeals in Crain v. Commissioner, 737 F.2d 1417, 1417 (5th 11 Cir. 1984), "We perceive no need to refute these arguments 12 with somber reasoning and copious citation of precedent; 13 14 to do so might suggest that these arguments have some colorable merit." They do not. Petitioner has offered 15 only frivolous, irrelevant or groundless arguments. We 16 therefo tsustain respondent's determinations with respect 17 18 19 20 21 22 to the unreported income. III. Section 6673 Penalty Section 6673(a) (1) authorizes the Court to require a taxpayer to pay to the United States a penalty not to exceed $25,000 whenever it appears that the taxpayer's position in a proceeding is frivolous or 23 groundless. Sec. 6673(a)(1) (B). It is within our 24 discretion whether to impose the section 6673 penalty. 25 For example, we have often imposed the penalty in cases cribers 73)406-2250|operati ns@escribertnet|www.escibeis.net 11 where taxpayers have persisted in presenting arguments in administrative and judicial proceedings after fair warning that those arguments were frivolous. See Burke v. Commiss1oner, 124 T.C. 189, 197 (2005); Rodriguez v. Commissioner, T.C. Memo. 2009-92; Ioane v. Commissioner, T.C. Memo. 2009-68, aff'd, 442 F. App'x 269 (9th Cir. 2011). Both respondent and this Court repeatedly warned petitioner that if he advanced frivolous arguments in this 1 2 3 4 5 6 7 8 9 10 case, the Court may impose a penalty under section 6673. 11 Respondent warned petitioner of the penalty risk at every 12 13 level of the administrative process and after petitioner filed his petition in this case. The Court also warned 14 petitioner before and during the trial about the risks of 15 a penalty that he faced if he continued to assert his 16 misguided arguments. Petitioner neverthele'ss steadfastly 17 18 refused to abandon the arguments the Court warned him against pursuing. Rather than present a case contesting 19 the merits of respondent's determinations in the notice of 20 deficiency--by providing evidence that some portio'n of 21 moneys received were properly not taxable--petitioner 22 chose to continue headlong with his frivolous arguments. 23 This is unacceptable. Under the circumstances, we 24 exercise our discretion and impose a penalty pursuant to 25 section 6673(a)(1) of $500. This amount reflects the criben (973)406-2250 ] operations®escribetsmet | vemescribersnet 12 numerous warnings petitioner elected to ignore, but reflects the fact that he did not repeat at trial some of the more egregious of his arguments. We hope that the penalty is sufficient in amount to serve as a deterrent to the assertion by petitioner in the future of frivolous and groundless arguments that waste respondent's and the Court's valuable time and resources. We have considered the remaining arguments made by the parties and, to the extent not discussed above, 1 2 3 4 5 6 7 8 9 10 conclude those arguments are irrelevant, moot, or without 11 merit. 12 To reflect the foregoing, an appropriate 13 decision and order will be entered. 14 THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT 15 And OPINION IN THIS CASE. 16 17 18 19 20 21 22 23 24 25 (Whereupon, at 11:20 a.m., the above-entitled matter was concluded.) ) cribers 9733406-2250|operations@escribesnet iwww.escribesnt CERTIFICATE OF TRANSCRIBER AND PROOFREADER 13 CASE NAME: Clint R. Conger v. Commissioner DOCKET NO.: 204-19 We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 13 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Deborah Gonzalez on January 29, 2020 before the United States Tax Court at its session in Phoenix, AZ, in accordance with the applicable provlslons of the current verbatim reporting contract of the Court and have verified the accuracy of the transcript by comparing the typewritten 1 2 3 4 5 6 7 8 9 10 11 12 13 transcript against the verbal recording. 14 15 16 17 18 19 20 22 23 24 25 Meribeth Ashley, CET-507 Transcriber Lori Rahtes, CDLT-108 Proofreader 2/4/20 Date 2/4/20 Date Cribers (973)406-2250{operations@escobr3.net[www.escribersnet