TAX COURT OPINION

Case: Donald Gene Beadles
Docket Number: 23758-13
Judge: Marvel
Opinion Type: bench
Filed: 03/13/2015
Pages: 10

UNITED STATES TAX COURT WASHINGTON, DC 20217 DONALD GENE BEADLES, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent. KVC ) ) ) ) ) Docket No. 23758-13 ) ) ) ) ) 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 Oklahoma City, Oklahoma, on February 26, 2015, containing the Court's oral findings of fact and opinion. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) L. Paige Marvel Judge Dated: Washington, D.C. March 13, 2015 SERVED Mar 13 2015 Capital Reporting Company 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Bench Opinion by Judge L. Paige Marvel Donald Gene Beadles v. Commissioner Docket No. 23758-13 February 26, 2015 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. This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986 (Code) as amended and Rule 152 of the Tax Court Rules of Practice and Procedure. Unless otherwise indicated, subsequent section references made in this bench opinion are to the Code as amended in effect for the relevant period, and Rule references are to the Tax Court Rules of 19 Practice and Procedure. Monetary amounts have been 20 21 22 23 24 25 rounded to the nearest dollar. Petitioner appeared pro se. G. Chad Barton appeared on behalf of respondent. Petitioner resided in Oklahoma when he filed his petition in this case. Findings of Fact Petitioner was employed in 2010 and 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 received wages from Truman Cookson Freight. During 2010, he also received social security payments, interest, dividends, distributions from a retirement plan, and proceeds from the sale of various stocks. 5 All of the income items listed above were reported on 6 information returns that the third-party payors filed 7 with the Internal Revenue Service (IRS). 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Although the total income received by petitioner during 2010 was sufficient to require petitioner to file a Federal income tax return (Form 1040) for 2010, petitioner admits that he did not do so. Because petitioner failed to file a Form 1040 for 2010, respondent prepared a substitute-for-return (SFR) under section 6020(b) with the information received from the information returns, and he mailed petitioner a notice of deficiency in which respondent determined that petitioner was liable for an income tax deficiency of $4,238, and additions to tax under section 6651(a)(1) and (2) of $896 and $518, respectively. Petitioner filed a timely petition with this Court to contest respondent's determination. Discussion 23 Unreported Income and a Taxpayer's Return Filing 24 Obligations 25 The Commissioner's determinations in a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 10 11 12 notice of deficiency are presumed correct, and the taxpayer generally bears the burden of showing they are erroneous. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). However, when a case involves unreported income and is appealable to the U.S. Court of Appeals for the Tenth Circuit, as this case appears to be absent a stipulation to the contrary, see sec. 7482(b)(1) (A), (2), the Commissioner's determination of unreported income is entitled to a presumption of correctness only if the determination is supported by some reasonable foundation, such as evidence linking the taxpayer to an income-producing 13 activity. See Erickson v. Commissioner, 937 F.2d 14 15 16 17 18 19 20 21 22 23 24 25 1548, 1551-1552 (10th Cir. 1991), aff'g T.C. Memo. 1989-552. Once the Commissioner produces such evidence, the burden shifts to the taxpayer to rebut the presumption by establishing that the Commissioner's determination is arbitrary or erroneous. See Ruidoso Racing Ass'n v. Commissioner, 476 F.2d 502, 507-508 (10th Cir. 1973), aff'g in part, remanding in part T.C. Memo. 1971-194. Petitioner admitted during trial that he received wage and other income during 2010 and does not dispute the amounts that the payors reported to the IRS. Consequently, the burden of production 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 shifted to petitioner to prove that respondent's adjustments in the notice of deficiency were arbitrary or erroneous, and petitioner bears the burden of proof and the burden of production with respect to all adjustments affecting his liability for the tax deficiency. In addition, petitioner does not contend that section 7491(a) shifts the burden of proof to respondent, and the record establishes that petitioner does not satisfy the section 7491(a)(2) requirements. Petitioner's unfounded and vague assertions lead him to the conclusion that no provision of the Code requires him to file a Federal income tax return. We have rejected such shopworn arguments in the past. See, e.g., Schroeder v. Commissioner, T.C. Memo. 2002-190; Everett v. Commissioner, T.C. Memo. 1989-605. Petitioner cites Garber v. Commissioner, T.C. Memo. 2002-47, aff'd, 500 Fed. Appx. 540 (7th 2.0 12-. 19 Cir. 2013), to support his position. However, in that 20 21 22 23 24 25 case both this Court and the Court of Appeals for the Seventh Circuit imposed separate civil penalties on the taxpayer for advancing frivolous arguments. Although petitioner's arguments are not clear, we construe at least one of the arguments to be that that the Fifth Amendment privilege against 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 self-incrimination excuses him from filing a Form 1040. We reject it. The Fifth Amendment privilege does not discharge petitioner from his obligation to provide respondent with sufficient data from which his income tax liability can be computed, see Reiff v. Commissioner, 77 T.C. 1169, 1178-1179 (1981), and it cannot be used as a method for evading the payment of lawful taxes, see Rader v. Commissioner, 143 T.C. , (slip op. at 22-23) (Oct. 29, 2014) (citing Edelson v. Commissioner, 829 F.2d 828, 832 (9th Cir. 1987), aff'g T.C. Memo. 1986-223). Under settled law, the requirement that a taxpayer file tax returns in accordance with the provisions of the Internal Revenue Code and respondent's regulations does not violate the taxpayer's privilege against self- incrimination under the Fifth Amendment. E.g., White v. Commissioner, 72 T.C. 1126, 1130 (1979), and the cases cited therein. Petitioner did not file any Form 1040 for 2010, much less one that selectively and properly asserted any self-incrimination privilege. On the basis of the record in this case, we conclude that petitioner cannot defend his failure to file a Federal income tax return for 2010 otherwise required by law with a vague, generalized, and unfocused reference to the Fifth Amendment privilege against 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 Capital Reporting Company 8 self-incrimination. That petitioner was required by law to file an income tax return for 2010 cannot fairly be debated. The Code imposes a tax on the taxable income of every individual. See sec. 1. For purposes of calculating taxable income, section 61(a)(1) defines gross income as all income from whatever source derived, including compensation for services. Section 6011 provides that any person liable "for any tax imposed by this title * * * shall make a return or statement according to the forms and regulations prescribed by the Secretary [of the Treasury]." Section 6012, entitled "Persons required to make returns of income", provides that an individual possessing gross income for a taxable year in excess of a specified amount shall file a tax return. "[S]hall," as used in section 6012, means that a taxpayer must file an income tax return when required to do so by such section. United States v. Drefke, 707 F.2d 978, 981 (8th Cir. 1983). The return that the taxpayer must file, if required to do so under sections 6011 and 6012, must conform to the forms and regulations prescribed by the Secretary of the Treasury (Secretary). See sec. 1.6011-1(a), Income Tax Regs. The Form 1040, U.S. 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 4 Capital Reporting Company 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Individual Income Tax Return, is the form prescribed by the Secretary for use by individual taxpayers in filing returns. Petitioner's gross income in 2010 exceeded the amount described in section 6012 and related regulations. Therefore, he was required to file a return, i.e., Form 1040, for 2010 and pay taxes imposed in accordance with section 1(a). See sec. 6012. We need not refute petitioner's logic any further with somber reasoning and copious citation of precedent because doing so might suggest it might have some colorable merit. See Wnuck v. Commissioner, 136 T.C. 498, 501-513 (2011). As we have recently stated, taxpayers who present frivolous or groundless arguments in this Court should not expect to see them addressed in opinions of this Court. Id. at 504-505. We sustain respondent's determinations. 19 Additions to Tax 20 21 22 23 24 25 Section 6651 (a)(1) imposes an addition to tax for failure to file a return timely in the amount of 5% of the tax required to be shown on the return for each month during which such failure continues, not to exceed 25% in the aggregate, unless it is shown that such failure is due to reasonable cause 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 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 and not due to willful neglect. Petitioner admits that he did not file a Form 1040 for 2010 and does not dispute that he received the amounts enumerated in the notice of deficiency. Because the income amounts petitioner received were large enough in the aggregate to require the filing of a Form 1040 and because petitioner agrees that he did not file the Form 1040, respondent has satisfied his burden of production under section 7491(c). Petitioner did not argue that his failure to file returns was due to reasonable cause, and he presented no credible evidence on the issue. Accordingly, we hold that petitioner is liable for the additions to tax for 2010 under section 6651(a)(1). Section 6651(a)(2) imposes an addition to tax for failure to pay timely the amount of tax shown on a return. The section 6651 (a)(2) addition to tax applies only when an amount of tax is shown on a return. Cabirac v. Commissioner, 120 T.C. 163, 170 (2003). Although petitioner did not file a 2010 Form 1040, respondent prepared a substitute for return under section 6020(b). A return made by the Secretary under section 6020(b) is treated as the return filed by the taxpayer for purposes of determining whether the section 6651(a)(2) addition to tax applies. Sec. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 6651(g)(2); Wheeler Commissioner, 127 T.C. 200, 208-209 (2006), aff'd, 521 F.3d 1289 (10th Cir. 2008). Respondent satisfied his burden 9 production by introducing into evidence an IRC Section 6020(b) Certification for 2010. Consequently, petitioner had the burden of introducing evidence to show that his failure to pay was due to reasonable cause. He did not do so. Petitioner did not advance any argument regarding the section 6651(a)(2) addition to tax and introduced no credible evidence to show reasonable cause for his failure to pay tax shown on the return . Accordingly, we sustain respondent's determination with respect to the addition to tax under section 6651(a)(2) for 2010. We have considered the remaining arguments made by the parties and, to the extent not discussed above, conclude those arguments are irrelevant, moot, or without merit. 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 2:49 p.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