t c memo united_states tax_court ernesto p patacsil and marilyn e patacsil petitioners v commissioner of internal revenue respondent docket no filed date ernesto p patacsil and marilyn e patacsil pro sese bryant w h smith for respondent memorandum opinion chiechi judge this case is before us on respondent’s motion to dismiss for lack of prosecution we shall grant that motion background the record establishe sec_1 and or the parties do not dispute the following petitioners resided in california at the time they filed the petition on date petitioner ernesto p patacsil mr patacsil and petitioner marilyn e patacsil ms patacsil each submitted to the internal_revenue_service irs form_2848 power_of_attorney and declaration of repre- sentative in part i power_of_attorney of each of those respective forms each petitioner authorized julie doughty petitioners’ representative or ms doughty a certified_public_accountant to represent them before the irs with respect to federal_income_tax tax matters for their taxable_year sec_2010 sec_2011 sec_2012 and sec_2013 ms doughty did not represent petitioners during the irs’ examination of petitioners’ taxable_year sec_2010 through however she was familiar with the 1the court held an evidentiary hearing with respect to respondent’s motion to dismiss for lack of prosecution in order to allow the parties to introduce evidence relevant to the resolution of that motion after evaluating the evidence that the court allowed into the record at that hearing the court has found certain facts that are set forth herein 2although petitioners authorized ms doughty to represent them before the irs with respect to tax matters for their taxable_year as well as their taxable_year sec_2010 sec_2011 and sec_2012 the only years before the court are their taxable_year sec_2010 through with respect to which respondent mailed them a notice of continued determinations that respondent’s revenue_agent had proposed after examining those years on date respondent issued the notice to petitioners in that notice respondent determined to make certain adjustments to income for petitioners’ taxable_year sec_2010 sec_2011 and sec_2012 totaling dollar_figure dollar_figure and dollar_figure respectively most of those adjustments consisted of respon- dent’s determinations to increase gross_receipts or sales reported by petitioners and to disallow certain expenses claimed by petitioner sec_3 in certain schedules c profit or loss from business schedule c that they had included with the respective tax returns that they had filed for their taxable_year sec_2010 sec_2011 and sec_2012 returns another adjustment to income that respondent deter- mined in the notice for each of petitioners’ taxable_year sec_2010 sec_2011 and sec_2012 was to increase their gambling winnings for each of those years that petitioners had reported in their returns respondent also determined in the notice that petitioners are liable for each of their taxable continued deficiency notice and petitioners filed a petition thereby commencing this case 3the expenses that respondent determined to disallow in the notice included those for certain other expenses and certain mortgage interest_expenses year sec_2010 sec_2011 and sec_2012 for the accuracy-related_penalty under sec_6662 on date petitioners filed the petition the only determina- tions in the notice for their taxable_year sec_2010 through that petitioners contested in the petition were respondent’s disallowance of claimed schedule c mortgage interest_expenses and claimed schedule c other expenses for groceries and cleaning supplies and respondent’s increase of petitioners’ gambling winnings the consideration by respondent’s appeals_office appeals_office of petitioners’ taxable_year sec_2010 through was initiated on date by a request from an attorney in respondent’s chief counsel’s office chief counsel’s office that the appeals_office consider those years we shall sometimes refer to this case involving petitioners’ taxable_year sec_2010 through during the period the appeals_office was considering it as petitioners’ case 4all section references are to the internal_revenue_code in effect for the years at issue all rule references are to the tax_court rules_of_practice and procedure 5as noted above date was the day on which petitioners filed the petition joe session mr session an appeals officer was assigned to petitioners’ case on date on the same date he sent petitioners a letter that inter alia notified them that he was responsible for the appeals_office review of petitioners’ case on date he sent a copy of that letter to ms doughty from early february through date mr session spent a total of approximately hours considering petitioners’ case during that period he inter alia received and reviewed various documents that ms doughty provided to him6 in support of petitioners’ positions with respect to the various issues in petitioners’ case had several telephone discussions with ms doughty regarding those issues concluded that he was willing to make certain concessions regarding certain of those issues and believed on the basis of his discussions with ms doughty that petitioners would probably be willing to make certain concessions and that consequently petitioners’ case would probably be settled mr session maintained a so-called case activity record in which he made notes of any important activity that occurred the date of any such activity and the time he spent on any such activity during his consideration of petitioners’ case 6petitioners through ms doughty did not provide certain documents to mr session until date mr session made those notes in the case activity record contemporaneously with the occurrence of the activity about which he was making the notes during mr session’s consideration of petitioners’ case ms doughty kept ms patacsil7 informed of her discussions with mr session during that consider- ation ms doughty also communicated to ms patacsil what she and the account- ing firm for which she worked accounting firm believed was the possible resolution of the various issues that she was discussing with mr session on date the court served on petitioners and respondent a notice setting this case for trial notice of trial at the court’s trial session in san fran- cisco california commencing on date date san francisco trial session judge carolyn p chiechi judge chiechi was assigned to conduct the court’s date san francisco trial session on the same date on which the court served the notice of trial on the parties in this case the court also served the court’s standing_pretrial_order on them 7ms doughty communicated only with ms patacsil mr patacsil had no communications with her or mr session nor did mr patacsil open any mail that petitioners received regarding petitioners’ case ms patacsil handled all matters relating to petitioners’ case and kept mr patacsil informed about the status of that case the notice of trial stated in pertinent part the parties are hereby notified that this case is set for trial at the san francisco trial session beginning pincite am on monday date the calendar for that session will be called at that date and time and the parties are expected to be present and to be prepared to try the case your failure to appear may result in dis- missal of the case and entry of decision against you starting around date as the beginning of the court’s date san francisco trial session drew closer mr session kept sharyn ortega ms ortega the attorney with chief counsel’s office assigned to this case informed on a regular basis about his consideration of petitioners’ case including the status of his discussions with ms doughty on date the court served on petitioners and respondent a notice reminding them that this case was calendared for trial at the date san francisco trial session that notice stated in pertinent part this case will remain on the court’s trial calendar unless both parties sign an agreed decision and submit it to the court or unless the court otherwise notifies the parties that it is taking this case off the trial calendar if the case remains on the court’s trial calendar and you fail to appear at the trial session the case may be dismissed on date approximately a month before the beginning of the court’s date san francisco trial session ms patacsil telephoned mr session date telephone call and told him that she was ill and would not be able to appear at that trial session during that telephone call mr session told ms patacsil that he had recently received certain additional documents from ms doughty that he would review those documents and that he would contact ms doughty to discuss how to proceed with petitioners’ case and whether it could be resolved without the need for a trial mr session reminded ms patacsil that he had been discussing petitioners’ case with ms doughty petitioners’ representative and that in the future ms patacsil should contact ms doughty for any additional assistance in the notes that mr session made in the case activity record about the date telephone call that he had with ms patacsil he indicated inter alia note a concern exist s because the tp ms patacsil stated her illness involves some sort of voodoo that will prevent her from appearing at the calendar call at the court’s date san francisco trial session on date mr session telephoned ms doughty date telephone call and told her about the date telephone call that ms patacsil had made to him during the date telephone call mr session also informed ms doughty that he would start his review of the additional documents that she had just provided to him which he believed would take approximately one week to complete on date respondent filed respondent’s pretrial memorandum as required by the court’s standing_pretrial_order served on the parties on date in respondent’s pretrial memorandum respondent stated in pertinent part the case was sent by appeals back to exam for review petitioners did not file a pretrial memorandum as required by the court’s standing_pretrial_order on date which was less than days before the beginning of the court’s date san francisco trial session ms patacsil filed a motion for continuance ms patacsil’s motion in that motion she stated in pertinent part we request a continuance of our tax_court case the appeal s officer has not been able to complete his review of the documents which we submitted we have contacted him and he continues his thorough examination which we appreciate in addition i have been quite ill and off work please see the at- tached work status report 8rule provides in pertinent part continuances will be granted only in exceptional circumstances a motion for continuance filed days or less prior to the date to which it is directed here date may be set for hearing on that date but ordinarily will be deemed dilatory and will be denied unless the ground therefor arose during that period or there was good reason for not making the motion sooner please grant this continuance so the review can be completed and i will be in better health the so-called work status report that ms patacsil attached to ms patacsil’s motion ms patacsil’s work status report was a one-page document with the name kaiser permanente at the top of the page and the name truong thuhong thi m d immediately below the name kaiser permanente that report showed patacsil marilyn e as the patient name and pm as the encounter date time ms patacsil’s work status report stated in pertinent part this patient is placed off work from through the patient was evaluated and deemed able to return to work at full capacity on after reviewing ms patacsil’s motion and re-reviewing respondent’s pretrial memorandum judge chiechi was uncertain about the status of the appeals office’s consideration of petitioners’ case that was because respondent’s pretrial memorandum filed on date stated that t he case was sent by appeals back to exam for review whereas ms patacsil’s motion filed on novem- ber stated that t he appeal s officer has not been able to complete his review of the documents which we submitted in order to clarify the status of the appeals office’s consideration of petition- ers’ case on date judge chiechi initiated a very brief telephone conference with the parties date telephone conference during that telephone conference judge chiechi asked ms ortega why respondent’s pretrial memorandum filed on date stated that t he case was sent by appeals back to exam for review whereas ms patacsil’s motion filed on novem- ber stated that t he appeal s officer has not been able to complete his review of the documents which we submitted in response ms ortega informed judge chiechi that the statement that she had just read from respondent’s pretrial memorandum was incorrect and that petitioners’ statement in ms patacsil’s motion regarding that status was correct ms ortega further advised judge chiechi during the date telephone conference that the appeals officer had told her shortly after she filed respondent’s pretrial memorandum on date that he would complete his review around date of the additional documents that petitioners’ representative had very recently provided to him at the conclusion of the date telephone confer- ence judge chiechi scheduled another conference call with the parties for p m est p m pst on date in order to receive another status report with respect to the appeals office’s consideration of petitioners’ case on date mr session had a telephone conference with ms doughty date telephone conference during that telephone conference they agreed to a resolution of all but one of the issues in petitioners’ case with respect to that one remaining unresolved issue ms doughty made a proposal to settle that issue ms doughty’s settlement proposal during the date telephone conference mr session informed ms doughty that he would prepare a schedule of adjustments showing any changes that he agreed to make to the various determinations in the notice that he would send that schedule of adjustments to ms ortega and that ms ortega would thereafter prepare a stipulation of settled issues from that schedule and send it to petitioners for their signature after his date telephone conference with ms doughty mr session contacted ms ortega and told her that most of the issues in petitioners’ case were resolved and that he would prepare and send her shortly a schedule of adjustments reflecting that resolution thereafter on date mr session reviewed ms doughty’s settlement proposal on the one remaining unresolved issue in petitioners’ case did some research on that issue and con- cluded that he would accept that proposal consequently he revised the schedule of adjustments to reflect the resolution of that remaining issue revised schedule of adjustments left a voice mail message for ms doughty that he had ac- cepted ms doughty’s settlement proposal and sent to her and ms ortega the revised schedule of adjustments we shall sometimes refer to the proposed settlement of petitioners’ case to which mr session and ms doughty agreed but which was subject_to the approval of petitioners as reflected in the revised schedule of adjustments as the proposed settlement on date ms doughty telephoned mr session and discussed with him his decision to accept ms doughty’s settlement proposal mr session asked ms doughty whether petitioners would agree to the proposed settlement as reflected in the revised schedule of adjustments she responded that she and her accounting firm had already instructed petitioners to accept the proposed settle- ment and that she intended to contact ms ortega to indicate her agreement with the revised schedule of adjustments and to request computations of the respective deficiencies and the respective accuracy-related_penalties under sec_6662 for petitioners’ taxable_year sec_2010 sec_2011 and sec_2012 for which petitioners would be liable under the proposed settlement early on date mr session and ms ortega discussed the proposed settlement and the documentation needed to implement it ms ortega told mr session during those discussions that she would prepare a stipulation of settled issues proposed stipulation of settled issues to reflect the proposed settlement ms ortega also informed mr session that she would prepare for the telephone conference between judge chiechi and the parties regarding the consid- eration of petitioners’ case by the appeals_office that judge chiechi had sched- uled for p m est p m pst on date after ms ortega had discussed the proposed settlement with mr session on date she prepared and sent to ms doughty a proposed stipula- tion of settled issues that ms ortega had prepared on the basis of the revised schedule of adjustments that mr session had sent her ms ortega asked ms doughty to confirm that the proposed stipulation of settled issues was in accor- dance with the proposed settlement to which she and mr session had agreed subject_to the approval of petitioners ms doughty contacted ms ortega on date and confirmed that the proposed stipulation of settled issues was in accordance with the proposed settlement ms doughty told ms ortega on date that petitioners wanted to know how much the proposed settlement would cost them consequently on date ms ortega contacted a tax computation specialist and requested that that specialist prepare expeditiously computations of the respective deficiencies and the respective accuracy-related_penalties under sec_6662 for petitioners’ taxable years and for which petitioners would be liable under the proposed settlement tax computations on date before the telephone conference between the parties and judge chiechi scheduled for p m est p m pst on that day ms doughty had a telephone discussion of the proposed settlement with ms patacsil during that discussion ms patacsil told ms doughty that she was not happy with the proposed settlement and that petitioners would not accept it that was because ms patacsil believed that the proposed settlement was unfair ms patacsil also told ms doughty during their discussion of the proposed settlement that she believed that petitioners should have raised other issues in the petition in addition to the issues that they had raised that the documentation that was provided to mr session supported their positions on the various issues to which that documenta- tion pertained and that she did not believe that petitioners are liable for the respective deficiencies and the respective accuracy-related_penalties under sec_6662 for petitioners’ taxable_year sec_2010 sec_2011 and sec_2012 for which petitioners would be liable under the proposed settlement ms doughty told ms patacsil during their discussion of the proposed settlement on date that petitioners were not required to accept the proposed settlement that is to say ms doughty made it clear to ms patacsil that petitioners had a choice about whether to accept it however ms doughty reminded ms patacsil that ms doughty and her accounting firm recommended that petitioners accept the pro- posed settlement on date before the telephone conference between the parties and judge chiechi scheduled for p m est p m pst on that day ms ortega had a telephone discussion with ms patacsil during that call ms ortega asked ms patacsil whether she agreed with the proposed settlement that mr session and ms doughty had reached ms patacsil responded that petitioners did not agree with the proposed settlement on date judge chiechi had a very brief telephone conference with the parties date telephone conference during that telephone conference ms ortega told judge chiechi that the appeals officer ie mr session had completed his consideration of petitioners’ case and that petitioners’ representative ie ms doughty and he had reached a proposed settlement of that case which was subject_to acceptance by petitioners and that that representa- tive had recommended to petitioners that they accept that proposed settlement ms patacsil then advised judge chiechi that petitioners would not accept the proposed settlement judge chiechi told petitioners that because ms patacsil had indicated that petitioners would not accept the proposed settlement they would be required to appear for trial pincite a m on date at the decem- ber san francisco trial session ms patacsil then stated that judge chiechi was biased before the conclusion of the date telephone conference judge chiechi also informed the parties that she intended to deny ms patacsil’s motion on the morning of date the tax computation specialist sent the requested tax computations to ms ortega who then prepared proposed decision documents reflecting those computations around a m pst on date ms ortega sent by facsimile fax to ms doughty and at the request of ms doughty to petitioners9 the tax computations and the document showing the proposed decision reflecting the proposed settlement proposed decision ms ortega transmitted the tax computations and the proposed decision with a memorandum ms ortega’s date transmittal_memorandum which she addressed to petitioners and on which she copied ms doughty ms ortega’s date transmittal_memorandum stated in pertinent part 9although it was at about a m pst on date that ms ortega sent by fax the tax computations and the proposed decision to petitioners there was a transmission failure those documents were not received by fax by petitioners until shortly after p m pst on that date i’ve attached the revised deficiencies and penalties amounts based upon the discussions the appeals officer mr session had with your representatives ms doughty i have also included a copy of the decision that you will need to sign to settle your case without trial if you do not wish to appear on monday date i will need a copy with original signatures a faxed copy is not sufficient signed by both of you by the end of business today date in addition to sending to petitioners by fax on date the tax computations and the proposed decision ms ortega telephoned ms patacsil on that day date telephone call during that telephone call ms ortega informed her that petitioners had the following options with respect to their case that was calendared for trial at the date san francisco trial session one option that ms ortega discussed with ms patacsil during the date telephone call was that if petitioners had changed their minds about not agreeing with the proposed settlement and had concluded that they agreed with the proposed decision reflecting that proposed settlement that ms ortega had sent by fax to them they could sign it if petitioners agreed with and signed the proposed decision there would be no need for a trial in their case and therefore they would not be required to appear pincite a m on date at the date san francisco trial session another option that ms ortega discussed with ms patacsil during the date telephone call was that if petitioners did not agree with the proposed decision they did not have to sign it ms ortega told ms patacsil that if petitioners did not agree with and did not sign the proposed decision a trial would be needed in their case and therefore they would be required to appear pincite a m on date at the date san francisco trial session ms ortega cautioned ms patacsil during the date telephone call that if petitioners did not agree with and did not sign the proposed decision and did not appear pincite a m on date at the date san francisco trial session ms ortega would move to dismiss this case for lack of prosecution on date while at their home each petitioner signed the pro- posed decision but each of them qualified her his signature by writing the words under the duress immediately thereunder petitioners wrote those words immediately under their respective signatures because even though they were informed about the terms of the proposed settlement on date and refused to accept it they did not believe that they had enough time to review the proposed decision reflecting that proposed stipulation and felt pressured to sign it on date and deliver it to ms ortega’s office before that office closed pincite p m pst on that day because petitioners believed that they did not have enough time to review the proposed decision and felt pressured to sign it on date and deliver it to ms ortega’s office before that office closed pincite p m pst on that day they were unwilling to agree with the proposed decision by signing it without qualification consequently petitioners qualified their respective signatures on the proposed decision which indicated that they did not agree with that proposed decision we shall refer to the proposed decision that petitioners signed with the qualifying words under the duress appearing under their respective signatures as the unagreed proposed decision thereafter on date at some time before p m pst ms patacsil accompanied by maryann patacsil petitioners’ daughter drove to the office of the irs in sacramento california sacramento in order to give ms ortega the unagreed proposed decision ms patacsil telephoned ms ortega when she arrived at ms ortega’s office and as a courtesy to ms patacsil ms ortega told ms patacsil that she would meet her in the lobby of the office building building lobby or lobby after ms patacsil and petitioners’ daughter entered the lobby ms patacsil asked petition- ers’ daughter to make a video audio recording on petitioners’ daughter’s mobile telephone of the meeting that she was to have with ms ortega ms patacsil seemed very angry to ms ortega during the several conversa- tions that she had had with her about this case consequently ms ortega asked another attorney who also worked in chief counsel’s office in sacramento paul isherwood mr isherwood to accompany her to the building lobby where she was to meet ms patacsil ms ortega and mr isherwood took the elevator to the lobby after ms ortega and mr isherwood arrived in the lobby mr isherwood remained near the elevator and ms ortega approached ms patacsil and spoke with her when ms ortega first met with ms patacsil in the lobby ms patacsil gave her the unagreed proposed decision ms ortega signed the unagreed proposed decision in ms patacsil’s presence while they were meeting in the building lobby we shall refer to the unagreed proposed decision that ms ortega signed as the unagreed proposed decision signed by ms ortega ms ortega then went to her office to make copies of the unagreed proposed decision signed by ms ortega and returned to the building lobby to give ms patacsil a copy of that document when ms ortega returned to the lobby and met a second time with ms patacsil in order to give her a copy of the unagreed proposed decision signed by ms ortega ms ortega informed ms patacsil that judge chiechi would probably not accept that document because petitioners had qualified their respective signatures that appeared thereon ms patacsil did not appear to ms ortega to be concerned that judge chiechi would probably not accept the unagreed proposed decision signed by ms ortega ms ortega then asked ms patacsil whether she would appear on date at the date san francisco trial session ms patacsil responded that she would not and gave no reason to ms ortega as to why she would not appear other than to tell her that petitioners had signed the unagreed proposed decision even though she knew that they had qual- ified their respective signatures because they did not agree with the proposed de- cision by writing the words under the duress immediately thereunder while ms ortega was meeting initially with ms patacsil in the building lobby petitioners’ daughter made a video audio recording of that initial meeting on her mobile telephone first video audio recording ms ortega was unaware that petitioners’ daughter was making the first video audio recording when ms ortega returned to the lobby and met a second time with ms patacsil in order to give her a copy of the unagreed proposed decision signed by ms ortega petitioners’ daughter made another video audio recording of that second meeting on her mobile telephone second video audio recording ms ortega was unaware that petitioners’ daughter was making the second video audio recording the first video audio recording showed and recorded the conversation at the initial meeting between ms patacsil and ms ortega in the lobby when ms patacsil gave ms ortega the unagreed proposed decision in that recording the following exchange took place ms ortega hello ms patacsil anyway this -- this is the only one that you need right ms ortega we just need one copy yeah um would you like me to make you a photocopy of it ms patacsil um i think i did uh i took a copy ms ortega okay aft- on all once i sign it i will also um -- ms patacsil so do you want to sign it and unintelligible ms ortega yeah so i’m going to sign it and then do you want me to do a photocopy of my signed copy or do you want me to just fax it to you ms patacsil you know i can i can actually take it to him -- ms ortega okay ms patacsil -- if you want yeah yes ms ortega okay let me run up and make a photocopy for you and i’ll bring you something right down ms patacsil okay the second video audio recording showed and recorded the conversation between ms ortega and ms patacsil after ms ortega returned to the lobby with a copy of the unagreed proposed decision signed by ms ortega in that recording the following exchange took place ms ortega here’s your copy ms patacsil okay ms ortega um because you guys wrote extra language -- ms patacsil uh huh ms ortega on there though the judge probably isn’t going to accept it ms patacsil well he can uh he he he can she can do whatever she wants ms ortega okay so um are you you’re not going to be there are you going to be there on monday ms patacsil oh uh no i’m not i’m not ms ortega okay okay ms patacsil no you know what though because i signed this you know what though that’s sufficient and what -- ms ortega got you ms patacsil you know and i like i said you know what though we are under duress you know what though there is no time for review -- ms ortega okay ms patacsil -- or anything ms ortega well she will see it then ms patacsil and when and actually sharyn you know what though when you think about it you know what though the two million dollar you know what though income the payment alone on that one year of you might as well look at it because i’m sending all th ese boxes to the congress and the senate ms ortega okay ms patacsil because we are asking them to review it themselves so then you know what though i just want to make sure that you know what though even though we signed this we are pursuing it ms ortega okay ms patacsil to petitioners’ daughter alright thank you let’s go ms patacsil to petitioners’ daughter yeah cause you know what though it doesn’t make sense this case was called from the calendar calendar call at the date san francisco trial session there was no appearance by or on behalf of petitioners counsel for respondent appeared and informed judge chiechi that petitioners had signed the proposed decision that she had sent them but had qualified their respective signatures by writing the words under the duress immediately thereunder judge chiechi refused to accept the unagreed proposed decision signed by ms ortega respondent’s counsel then made an oral motion to dismiss this case for lack of prosecution on date judge chiechi issued an order in which she ordered that on or before date respondent was to file a written motion to dismiss for lack of prosecution or the parties were to submit decision documents signed by the parties judge chiechi indicated at the calendar call on date that any decision documents that the parties signed and intended to submit to her on or before date should not contain any language that in any way qualified those documents on date ms patacsil sent ms ortega a letter date letter in that letter ms patacsil inter alia expressed her frustrations concerning this case and made disparaging comments about various people and institutions including former president barack obama the irs irs employees other federal government agencies other federal government employees the state of california state of california employees and judge chiechi on date respondent filed respondent’s motion to dismiss for lack of prosecution respondent’s motion on date ms patacsil sent by fax a letter to the appeals officer that letter stated in pertinent part i’m totally outrage sic and don’t know how to express my disbelief on pincite 10pm reading the stipulation of settled issues faxed to my residence by irs atty ortega on top of not being given a sic time to review the documents and i was demanded to deliver the signed documents before the end of the business_day the irs must think i’m stupid and ignorant to expect i will be so scared for sic their demand i was put under duress i spoke to you once and you promised to give me a courtesy call after you review sic the documents unfortunately i never heard from you did you review the boxes of receipts and cancelled checks i personally and honestly think you never did because if you did the calculations will be different you can refer this case to whoever but i’m confident that the irs treated my case differently and i was singled out for standing up to the federal gov’t i’m sending you a copy of examples of legitimate business_expenses that the irs severely reduced if you treat all of the businesses this way i can assure you most of us will close it appeared that i’m responsible for most of the expenses are you really kidding me i received your letter dated post marked on unfortunately the mailbox is broken and i had to picked up sic the mail from the post office as i told atty ortega receipts and cancelled checks are being prepared to be sent to the us congress on and all copies of evidence will be sent to president elect donald j trump atty ortega took advantage of judge chieche sic being biased and prejudice d against us by order dated date judge chiechi calendared respondent’s motion for an evidentiary hearing on date in that order judge chiechi ordered inter alia that respondent will ensure that the ethical issues raised by ms ortega’s testifying at the evidentiary hearing will be resolved by respondent’s designating a different attorney to conduct the date hearing on respondent’s behalf respondent complied with that order and designated another attorney bryant w h smith to conduct the evidentiary hearing on respondent’s behalf on date this case was called for an evidentiary hearing with respect to respondent’s motion date evidentiary hearing petitioners and respondent’s counsel appeared at that hearing discussion before considering whether to grant respondent’s motion we summarize our evaluation of the following witnesses who were called to testify at the date evidentiary hearing mr session ms doughty ms ortega mr isherwood ms patacsil mr patacsil and maryann patacsil except for the respective testimonies of mr isherwood and ms patacsil we found the respective testimonies of the witnesses who testified at that hearing to be credible with respect to mr isherwood we found his inability to answer many questions posed to him because of his claimed lack of memory to be to say the least surprising in fact mr isherwood’s claimed lack of memory was such that it raised a question in our mind about his candor nonetheless we have no reason to question the responses which are not material to our deciding whether to grant respondent’s motion that he was able to give from memory to certain other questions with respect to ms patacsil before turning to specific aspects of her testimony at the date evidentiary hearing we will set forth our overall impression of her on the basis of that testimony the testimony of ms doughty the testimony of ms ortega certain documentary_evidence that was made part of the record at that hearing and her demeanor at that hearing our overall impression of ms patacsil is that she is inflexible in her belief that the determinations that respondent made in the notice are wrong and should not be sustaineddollar_figure we think that that inflexible belief has caused ms patacsil to conclude that petitioners have been treated unfairly by various persons and various institutions who have disagreed with her which frustrated her and which led her inter alia to send ms ortega her date letter in that letter ms patacsil expressed her frustrations concerning this case and made disparaging comments about various people and institutions including president barack obama the irs irs employees other federal government agencies other federal government 10we do not opine herein on whether or not the determinations that respondent made in the notice should be sustained we decide only whether to grant respondent’s motion employees the state of california state of california employees and judge chiechi with respect to specific aspects of ms patacsil’s testimony at the date evidentiary hearing we found her testimony to be internally inconsistent in certain material respects and inconsistent in certain other material respects with certain testimony of ms doughty and certain testimony of ms ortega for example ms patacsil testified that she was not aware that mr session and ms doughty had reached a proposed settlement in petitioners’ case however ms doughty and ms ortega each testified that each had discussed the proposed settlement with ms patacsil on date before the telephone conference between the parties and judge chiechi scheduled for p m est p m pst on that date in addition ms patacsil told judge chiechi during that telephone conference that petitioners would not accept the proposed settlement as noted above we found the respective testimonies of inter alia ms doughty and ms ortega to be credible we need not and do not decide whether ms patacsil’s testimony was internally inconsistent in certain material respects and inconsistent in certain other material respects with the respective testimonies of ms doughty and ms ortega because she had a faulty memory and or because she was not telling the truth and or for some other reason we conclude only that we are unwilling to rely on ms patacsil’s testimony in certain material respects we turn now to respondent’s motion the notice of trial informing the parties that this case was calendared for trial at the date san francisco trial session which the court served on the parties on date stated in pertinent part the parties are hereby notified that this case is set for trial at the san francisco trial session beginning pincite am on monday date the calendar for that session will be called at that date and time and the parties are expected to be present and to be prepared to try the case your failure to appear may result in dismissal of the case and entry of decision against you last emphasis added the notice reminding the parties that this case was calendared for trial at the date san francisco trial session which the court served on the parties on date stated in pertinent part this case will remain on the court’s trial calendar unless both parties sign an agreed decision and submit it to the court or unless the court otherwise notifies the parties that it is taking this case off the trial calendar if the case remains on the court’s trial calendar and you fail to appear at the trial session the case may be dismissed emphasis added during the date telephone conference between the parties and judge chiechi ms patacsil informed her that petitioners would not accept the proposed settlement to which petitioners’ representative ie ms doughty and the appeals officer ie mr session had agreed judge chiechi told petitioners that because ms patacsil had indicated that petitioners would not accept the proposed settlement they would be required to appear for trial pincite a m on date at the date san francisco trial session ms patacsil then stated that judge chiechi was biased before the conclusion of the date telephone conference judge chiechi also informed the parties that she intended to deny ms patacsil’s motion during the date telephone call that ms ortega had with ms patacsil ms ortega informed her that petitioners had the following options with respect to their case that was calendared for trial at the date san francisco trial session one option that ms ortega discussed with ms patacsil during the date telephone call was that if petitioners had changed their minds about not agreeing with the proposed settlement and had concluded that they agreed with the proposed decision reflecting that proposed settlement that ms ortega had sent by fax to them they could sign it if petitioners agreed with and signed the proposed decision there would be no need for a trial in their case and therefore they would not be required to appear pincite a m on date at the date san francisco trial session another option that ms ortega discussed with ms patacsil during the date telephone call was that if petitioners did not agree with the proposed decision they did not have to sign it ms ortega told ms patacsil that if petitioners did not agree with and did not sign the proposed decision a trial would be needed in their case and therefore they would be required to appear pincite a m on date at the date san francisco trial session ms ortega cautioned ms patacsil during the date telephone call that if petitioners did not agree with and did not sign the proposed decision and did not appear pincite a m on date at the date san francisco trial session ms ortega would move to dismiss this case for lack of prosecution we have found that when ms ortega and ms patacsil were meeting a second time late in the afternoon on date in the lobby of ms ortega’s office building ms ortega cautioned her that judge chiechi would probably not accept the unagreed proposed decision signed by ms ortega ms ortega then asked ms patacsil whether she would appear on date at the date san francisco trial session ms patacsil responded that she would not and gave no reason to ms ortega as to why she would not appear other than to tell her that petitioners had signed the unagreed proposed decision even though she knew that they had qualified their respective signatures because they did not agree with the proposed decision by writing the words under the duress immediately thereunderdollar_figure 11the following exchange inter alia took place at the second meeting on date between ms ortega and ms patacsil ms ortega um because you guys wrote extra language -- ms patacsil uh huh ms ortega -- on there though the judge probably isn’t going to accept it ms patacsil well he can uh he he he can she can do whatever she wants ms ortega okay so um are you you’re not going to be there are you going to be there on monday ms patacsil oh uh no i’m not i’m not ms ortega okay okay ms patacsil no you know what though because i signed this you know what though that’s sufficient and what -- ms ortega got you ms patacsil you know and i like i said you know what though we are under duress you know what though there is no time for review -- ms ortega okay we have found that ms patacsil did not appear to ms ortega to be concerned that judge chiechi would probably not accept the unagreed proposed decision signed by ms ortega moreover as she indicated in her response to a question that judge chiechi asked her at the date evidentiary hearing ms patacsil was willing to take her chances with the consequences of not appearing on date at the date san francisco trial session if as ms ortega informed her judge chiechi would probably not accept the unagreed proposed decision signed by ms ortega the transcript of the exchange between judge chiechi and ms patacsil at the date evidentiary hearing during which judge chiechi asked that question states judge chiechi what’s the duress i still don’t understand the -- ms patacsil the duress means -- judge chiechi the duress was you’d have to go to court ms patacsil no judge chiechi what was the duress then ms patacsil because you know what we were put under pressure -- judge chiechi you had two choices you either sign it with no phrase under the duress and you don’t go to court which is what i told you on december or you don’t -- or you don’t sign it and then as i told you you don’t agree which is fine your right and then you’re required to go to court ms patacsil i was under pressure your honor judge chiechi so you had a choice ms patacsil i was under pressure your honor because there -- they faxed the documents on a friday afternoon and i -- they need it by i mean where you do put -- you know what this is big thing you know it’s a million dollar -- you know taxes and it’s all -- judge chiechi well you could have come to the court on monday to explain all that ms patacsil well you know what though like i said your honor -- judge chiechi but you told -- according to ms ortega you told her you weren’t going to go when she asked you you said you weren’t going to go to court ms patacsil i was not going -- because you know what though i already signed the document so of course that’s why -- judge chiechi but you signed it with the phrase and she told you that the court -- the judge might not accept it right ms patacsil yeah judge chiechi so you were going to take your chances ms patacsil yes i do in response to a direct question by judge chiechi to ms patacsil at the date evidentiary hearing ms patacsil gave a different reason as to why petitioners did not appear on date at the date san francisco trial session from the reason than she gave to judge chiechi at that same evidentiary hearing quoted above and that she gave to ms ortega when they met in the building lobby a second time on date quoted in second video audio recording that petitioners’ daughter made of that second meeting at the date evidentiary hearing judge chiechi asked ms patacsil why she did not appear on date at the date san francisco trial session ms patacsil responded ms patacsil because ms ortega told me that it’s hard to deal with you that’s the reason -- one of the reason why that i did -- i was so emotional that day that -- this is the -- just that it’s hard to deal with so it’s just like a threat to me that i don’t have no choice a powerful -- irs and a powerful judge your honor so what do you put -- you know the taxpayers this case was called from the calendar on date at the date san francisco trial session there was no appearance by or on behalf of petitioners counsel for respondent appeared and informed judge chiechi that petitioners had signed the proposed decision that she had sent them but had qualified their respective signatures by writing the words under the duress immediately thereunder judge chiechi refused to accept the unagreed proposed decision signed by ms ortega respondent’s counsel then made an oral motion to dismiss this case for lack of prosecution on the record before us we find that ms patacsil was totally dismissive of and had total disregard for the court’s two notices served on the parties on july and date informing petitioners that if their case had not settled before the commencement of the date san francisco trial session they were required to appear at that session pincite a m on date on that record we further find that ms patacsil was totally dismissive of and had total disregard for judge chiechi’s informing petitioners during the date telephone conference with the parties that because ms patacsil had indicated that petitioners would not accept the proposed settlement they would be required to appear for trial pincite a m on date at the date san francisco trial session on the record before us we also find that ms patacsil was totally dismissive of and had total disregard for ms ortega’s telling her during the date telephone call with her that if petitioners did not agree with and did not sign the proposed decision a trial would be needed in their case and therefore they would be required to appear pincite a m on date at the date san francisco trial session on that record we further find that ms patacsil was totally dismissive of and had total disregard for ms ortega’s cautioning her during the date telephone call that if petitioners did not agree with and did not sign the proposed decision and did not appear pincite a m on date at the date san francisco trial session ms ortega would move to dismiss this case for lack of prosecution at that date san francisco trial session on the record before us we also find that ms patacsil was totally dismissive of and had total disregard for ms ortega’s cautioning her when they met a second time on date that judge chiechi would probably not accept the unagreed proposed decision signed by ms ortega as evidenced by ms patacsil’s informing ms ortega that she nonetheless would not appear on date at the date san francisco trial session based upon our examination of the entire record before us we find that petitioners had no sufficient or justifiable reason for failing to appear for trial pincite a m on date at the date san francisco trial session on that record we shall grant respondent’s motiondollar_figure 12respondent’s motion seeks a decision in this case that reflects the proposed settlement to which ms doughty and mr session had agreed during the appeals office’s consideration of petitioners’ case we note that respondent determined in the notice issued to petitioners for their taxable years continued to reflect the foregoing an order granting respondent’s motion and an appropriate decision will be entered continued through that inter alia they have unreported gross_receipts sales schedule e rents gambling winnings and cancellation_of_indebtedness_income although respondent bears the initial burden of laying some evidentiary foun- dation connecting a taxpayer with income-producing activity see 596_f2d_358 9th cir rev’g 67_tc_672 except for the unreported gambling winnings petitioners alleged no error in the petition with respect to any of the other unreported income determinations that respondent made in the notice consequently they are deemed to have conceded those other unreported income issues see rule b with respect to the alleged unreported gambling winnings the proposed settlement that petitioners did not accept included a concession by the appeals officer with respect to those alleged winnings and that concession is reflected in the decision that respondent seeks if we were to grant as we have held we will respondent’s motion respondent also determined in the notice inter alia that petitioners are liable for each of petitioners’ taxable_year sec_2010 sec_2011 and sec_2012 for the accuracy-related_penalty under sec_6662 petitioners alleged no error in the petition with respect to those determinations consequently respondent has no obligation under sec_7491 to produce evidence with respect to the sec_6662 determinations in the notice see 123_tc_213


t c memo united_states tax_court james l jensen petitioner v commissioner of internal revenue respondent docket no 10576-02l filed date james l jensen pro_se stephen p baker for respondent memorandum opinion vasquez judge this case is before the court on respondent’s motion for summary_judgment and to impose a penalty under section motion for summary_judgment and unless otherwise indicated all section references are to the internal_revenue_code and all rule references are to the tax_court rules_of_practice and procedure petitioner’s motion to strike respondent’s motion for summary_judgment motion to strike rule a provides that either party may move for summary_judgment upon all or any part of the legal issues in controversy full or partial summary_judgment may be granted only if it is demonstrated that no genuine issue exists as to any material fact and a decision may be rendered as a matter of law rule b 98_tc_518 affd 17_f3d_965 7th cir we conclude that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law background petitioner is a commercial fisherman at the time he filed the petition petitioner resided in cordova alaska on or about date respondent received from petitioner his joint federal_income_tax return for petitioner listed his income_tax_liability as dollar_figure this liability was attributable to petitioner’s two children whose income_tax_liability petitioner elected to report on his return on form_8814 parents’ election to report child’s interest and dividends petitioner reported zero taxable_income and no tax due for himself on or about date respondent received from petitioner his joint federal_income_tax return for petitioner reported negative taxable_income and no tax due on or about date respondent received from petitioner his joint federal_income_tax return for petitioner listed his income_tax_liability as dollar_figure this liability was attributable to one of petitioner’s children dollar_figure reported on form whose income_tax_liability petitioner elected to report on petitioner’s return and to self-employment_tax dollar_figure petitioner reported zero taxable_income on or about date respondent received from petitioner his joint federal_income_tax return for petitioner listed his income_tax_liability as dollar_figure this liability was attributable to one of petitioner’s children dollar_figure reported on form whose income_tax_liability petitioner elected to report on petitioner’s return and to self-employment_tax dollar_figure petitioner reported zero taxable_income on date respondent sent petitioner a statutory_notice_of_deficiency for respondent determined a dollar_figure deficiency and a dollar_figure penalty pursuant to sec_6662 for petitioner received this notice_of_deficiency and responded to it with a 15-page letter containing frivolous and groundless arguments on date respondent sent petitioner a statutory_notice_of_deficiency for respondent determined a dollar_figure deficiency a dollar_figure penalty pursuant to sec_6651 and a dollar_figure penalty pursuant to sec_6662 for petitioner received this notice_of_deficiency and responded to it with a 15-page letter containing frivolous and groundless arguments on date respondent sent petitioner a letter advising him that his tax returns for and were under examination on date petitioner responded with a two-page letter containing frivolous and groundless arguments on date respondent sent petitioner a statutory_notice_of_deficiency for and respondent determined an dollar_figure deficiency and a dollar_figure penalty pursuant to sec_6662 for and a dollar_figure deficiency and a dollar_figure penalty pursuant to sec_6662 for this notice_of_deficiency was sent via certified mail to petitioner’s last known address-- which also is the address petitioner used in the petition and the amended petition this notice_of_deficiency was not returned as undeliverable petitioner did not petition the court for redetermination of the deficiencies or penalties with respect to or respondent assessed petitioner’s tax_liability along with penalties and interest as follows year assessment_date date date date date respondent sent petitioner notices and demand for payment of the assessments as follows in date for in date and date for in august and date for and in date for petitioner responded to the requests for payment for and with several 15-page letters containing frivolous and groundless arguments on or about date respondent filed a notice_of_federal_tax_lien regarding petitioner’s income_tax liabilities for and with the recording district of cordova anchorage alaska tax_lien the tax_lien listed dollar_figure owed for dollar_figure owed for dollar_figure owed for and dollar_figure owed for on date respondent issued to petitioner a notice_of_federal_tax_lien filing and your right to a hearing under sec_6320 regarding his income_tax liabilities for and hearing notice attached to the hearing notice was a copy of the tax_lien on date in response to the hearing notice petitioner submitted a 15-page letter containing frivolous and groundless arguments petitioner did not file a form request for a collection_due_process_hearing however respondent treated petitioner’s date letter as the equivalent of a form 12153--ie as a request for a sec_6330 hearing on date respondent sent petitioner a letter notifying him that his case had been assigned to an appeals officer on date petitioner responded to respondent’s date letter with frivolous and groundless arguments on date appeals officer donna chilton invited petitioner to attend a sec_6330 hearing with her pincite a m on date in anchorage alaska on date petitioner wrote to ms chilton to advise her that date was not a convenient time and that he was seeking an attorney to represent him petitioner requested that the hearing be held during the week of date as he would be in anchorage alaska during that time ms chilton rescheduled petitioner’s hearing on the basis of his request for date on date petitioner sent ms chilton a letter in lieu of a face-to-face hearing regarding and petitioner argued that the assessments were barred by the period of limitations regarding and petitioner claimed he did not receive any notices of assessment for and and complained that the forms certificate of assessments payments and other specified matters did not list the amounts demanded next to the entries listing demand for payment on date ms chilton responded to petitioner’s date letter ms chilton addressed each of petitioner’s claims and attached documents to support her conclusions on date respondent issued a notice_of_determination concerning collection action s under sec_6320 and or to petitioner regarding his and tax years notice_of_determination in the notice_of_determination respondent determined that the tax_lien should remain in place on date petitioner timely filed an imperfect petition for lien or levy action under sec_6320 or sec_6330 seeking review of respondent’s determination to proceed with collection of petitioner’s and tax_liabilities on date the court ordered that on or before date petitioner file a proper amended petition and pay the filing fee a request for payment for that petitioner received and responded to with frivolous and groundless arguments specifically lists the amount owed as dollar_figure a notice for that petitioner received and responded to with frivolous and groundless arguments specifically lists the amount owed as dollar_figure on date petitioner sent ms chilton two letters in response to the notice_of_determination in these letters petitioner raised frivolous and groundless arguments on date petitioner filed an amended petition for lien or levy action under sec_6320 or sec_6330 seeking review of respondent’s determination to proceed with collection of petitioner’s and tax_liabilities on date petitioner was served with the court’s notice setting case for trial and standing_pretrial_order setting the case for trial during the court’s 2-week session in anchorage alaska beginning on date the court advised petitioner that he needed to be ready and available during this 2-week period to try his case on date petitioner filed a motion to dismiss motion to dismiss in the motion to dismiss petitioner stated that the parties were in negotiations to settle the case on date the court ordered respondent to file a response to petitioner’s motion to dismiss on or before date on date respondent filed a response to petitioner’s motion to dismiss respondent stated that he had made a diligent inquiry and found that no negotiations were currently in progress with petitioner respondent further stated that he intended to file a motion for summary_judgment and would be requesting a penalty pursuant to sec_6673 on date the court denied petitioner’s motion to dismiss that same day respondent filed a motion for summary_judgment and to impose a penalty under sec_6673 motion for summary_judgment attached as exhibits to the motion for summary_judgment among other things were forms dated date and computer-generated transcripts txmoda dated date for petitioner’s and tax years on date the court ordered petitioner to file a response to respondent’s motion for summary_judgment on or before date and calendared the motion for hearing at the trial session of the court commencing on date after receiving a call from the parties that petitioner was a fisherman and it was difficult for him to get to anchorage alaska the court calendared the hearing for a date and time certain of a m on date on date pincite a m petitioner’s case was called petitioner failed to appear instead petitioner’ sec_3 pursuant to fed r evid we take judicial_notice of the following facts cordova alaska is approximately to miles from anchorage alaska as the crow flies and approximately miles away by car accordingly because of the distance and difficulty of getting from cordova to anchorage the appeals officer respondent and the court were willing to accommodate petitioner wife who is not an attorney or a party to this case appeared with a special power_of_attorney petitioner’s wife stated that petitioner was out on his boat fishing because it was fishing season after admonishing petitioner’s wife regarding petitioner’s failure to appear the court asked respondent’s counsel if he was prepared to file a written motion to dismiss for lack of prosecution respondent’s counsel answered that he was not the court rescheduled petitioner’s case for the next day date pincite a m respondent’s counsel advised the court that he would file a motion to dismiss for lack of prosecution if petitioner did not appear at that time and the court stated that the motion would be granted if petitioner did not appear the court further stated that we would hear argument on respondent’s request to impose sanctions on date that same day respondent filed a supplemental declaration with attached exhibits in support of his motion for summary_judgment on date pincite a m petitioner appeared at this hearing petitioner made frivolous and groundless arguments that same day petitioner filed a response to respondent’s motion for summary_judgment and imposition of a penalty that contained frivolous and groundless arguments petitioner also filed the motion to strike discussion i determination to proceed with collection sec_6320 provides that the secretary shall furnish the person described in sec_6321 with written notice ie the hearing notice of the filing of a notice of lien under sec_6323 sec_6320 further provides that the taxpayer may request administrative review of the matter in the form of a hearing within a 30-day period the hearing generally shall be conducted consistent with the procedures set forth in sec_6330 d and e sec_6320 pursuant to sec_6330 a taxpayer may raise at the sec_6330 hearing any relevant issue with regard to the commissioner’s collection activities including spousal defenses challenges to the appropriateness of the commissioner’s intended collection action and alternative means of collection 114_tc_604 114_tc_176 if a taxpayer received a statutory_notice_of_deficiency for the years in issue or otherwise had the opportunity to dispute the underlying tax_liability the taxpayer is precluded from challenging the existence or amount of the underlying tax_liability sec_6330 sego v commissioner supra pincite goza v commissioner supra pincite petitioner received the notices of deficiency for and the notice_of_deficiency for and was sent via certified mail to petitioner’s last known address--which also is the address petitioner used in the petition and the amended petition this notice_of_deficiency was not returned as undeliverable respondent submitted a certified mailing list to confirm these facts furthermore petitioner did not claim that he did not receive the notice_of_deficiency for and accordingly petitioner is deemed to have received this notice_of_deficiency sego v commissioner supra pincite petitioner chose not to file a petition for redetermination in response to these notices of deficiency accordingly petitioner cannot contest the underlying deficiencies for and sec_6330 sego v commissioner supra goza v commissioner supra pincite claims that the limitation period for assessment has expired are challenges to the underlying tax_liability 117_tc_127 therefore petitioner cannot raise these claims in this proceeding where the validity of the underlying tax_liability is not properly in issue we review the commissioner’s determination for an abuse_of_discretion sego v commissioner supra pincite petitioner’s remaining argument appears to be that the verification requirement of sec_6330 has not been met sec_6330 does not require the commissioner to rely on a particular document to satisfy the verification requirement imposed therein e g schnitzler v commissioner tcmemo_2002_159 citing five other cases to support this principle we have repeatedly held that the commissioner may rely on forms or transcripts of account to satisfy the verification requirement of sec_6330 hromiko v commissioner tcmemo_2003_ schnitzler v commissioner supra kaeckell v commissioner tcmemo_2002_114 obersteller v commissioner tcmemo_2002_106 weishan v commissioner tcmemo_2002_88 lindsey v commissioner tcmemo_2002_87 affd 456_fedappx_802 9th cir tolotti v commissioner tcmemo_2002_86 affd 70_fedappx_971 9th cir duffield v commissioner tcmemo_2002_53 kuglin v commissioner tcmemo_2002_51 petitioner has not alleged any irregularity in the assessment procedure that would raise a question about the validity of the assessments or the information contained in the forms or transcripts of account see 115_tc_35 mann v commissioner tcmemo_2002_48 accordingly we hold that the appeals officer satisfied the verification requirement of sec_6330 cf 117_tc_117 petitioner has failed to raise a spousal defense make a valid challenge to the appropriateness of respondent’s intended collection action or offer alternative means of collection these issues are now deemed conceded see rule b ii sec_6673 sec_6673 authorizes the court to require a taxpayer to pay to the united_states a penalty not to exceed dollar_figure if the taxpayer took frivolous positions in the proceedings or instituted the proceedings primarily for delay a position maintained by the taxpayer is frivolous where it is contrary to established law and unsupported by a reasoned colorable argument for change in the law 791_f2d_68 7th cir see also 820_f2d_1464 9th cir sec_6673 penalty upheld because taxpayer should have known claim was frivolous at the hearing the court warned petitioner that the arguments he was advancing were frivolous and groundless that the arguments had been rejected by the u s court_of_appeals for the ninth circuit the court to which this case is appealable and that we believed he filed the petition to delay collection our authority and willingness to impose penalties pursuant to sec_6673 on those taxpayers who abuse the protections afforded by sec_6320 and sec_6330 by instituting or maintaining actions under those sections primarily for delay or by taking frivolous or groundless positions in such actions are well established cf 115_tc_576 petitioner filed frivolous documents and motions with the court petitioner’s position based on stale and meritless contentions is manifestly frivolous and groundless and he has wasted the time and resources of the court we are convinced that petitioner instituted and maintained these proceedings primarily for delay accordingly we shall impose a penalty of dollar_figure pursuant to sec_6673 to reflect the foregoing an appropriate order and decision will be entered


- legend parent internal_revenue_service number release date index number --------------------------------------------- ------------------------------------------------- -------------------------------------------- ---------------------------- department of the treasury washington dc third party communication none date of communication not applicable_person to contact ------------------- id no ------------- telephone number --------------------- refer reply to cc corp b02 plr-150389-04 date date ty --------------------------- ty --------------------------- ----------------------------------------------------------------------- ---------------------------------------------------------------------------- ------------------------------------------------ ------------------------------- ----------------------- foreign domestic subsidiary ----------------------- -------------------- ----------------------------------------------------------------------- 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---------------------------- ------- ------------- plr-150389-04 state x year date date q v w y z company official ------------------------------------------------------------- dear -------------- --------------- --------------- -------------- -------- ----- ------------------------------------------------- this letter responds to a letter submitted on behalf of parent and electing subsidiaries dated date requesting an extension of time under sec_301_9100-3 of the procedure and administration regulations to file an election the extension is being requested in order to allow parent and electing subsidiaries to file an election to restore value under sec_1_382-8 of the income_tax regulations hereinafter referred to as the election the material information submitted in the request and subsequent correspondence is summarized below on date parent a state x corporation was the common parent of a consolidated_group of corporations the parent group and owned directly or indirectly percent or more of the stock of each of the electing subsidiaries electing subsidiaries are foreign entities treated as corporations for federal tax purposes and are not engaged in the conduct_of_a_trade_or_business within the united_states domestic subsidiary is a domestic subsidiary of one of the electing subsidiaries the only asset held by domestic subsidiary is stock of a member of the parent group from year to date the parent group was owned by foreign on date q shares of parent’s v outstanding shares were sold in an initial_public_offering the ipo reducing foreign’s ownership of parent from w percent to y percent more than a percentage_point decrease at the time of the ipo the parent group had consolidated_net_operating_loss carryovers of dollar_figurez thus the parent group constituted a loss group for purposes of sec_1_1502-91 as a result of the ipo the parent group plr-150389-04 underwent an ownership_change as defined under sec_382 of the code and the use of the parent group’s net_operating_loss carryovers are subject_to limitation under sec_382 pursuant to sec_1_382-8 the value of the parent group treated as a single corporation for this purpose under sec_1_382-8 was reduced by the value of the stock it owned directly in electing subsidiaries the value of each of the electing subsidiaries that owned directly other electing subsidiaries or domestic subsidiary was reduced by the value of such subsidiary and domestic subsidiary’s value was reduced by the value of the stock it owned in a member of the parent group sec_382 provides that the amount of the taxable_income of any new_loss_corporation for any post-change_year which may be offset by pre-change losses shall not exceed the sec_382 limitation for such year under sec_382 the sec_382 limitation is determined by multiplying the value of the old_loss_corporation by the applicable long term tax-exempt rate a special rule designed to prevent double counting by controlled groups is set forth in sec_1_382-8 sec_1_382-8 requires the value of the stock of each component_member of the controlled_group be reduced by the value of the stock directly owned by that component_member in any other component_member component members of a controlled_group can elect to restore some or all of the value to another component_member under sec_1_382-8 the election to restore value is made following the procedures set forth in sec_1_382-8 for purposes of applying sec_1_382-8 a consolidated_group loss group or loss subgroup is treated as a single corporation pursuant to sec_1_382-8 the parent group and electing subsidiaries are component members of a controlled_group under sec_1_382-8 an election to restore the value of electing subsidiaries was due on date however for various reasons parent and electing subsidiaries failed to make the election in a timely manner under sec_301_9100-1 the commissioner has discretion to grant a reasonable extension of time to make a regulatory election or a statutory election but no more than six months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i sec_301_9100-1 through provide the standards the commissioner will use to determine whether to grant an extension of time to make a regulatory election sec_301_9100-1 sec_301_9100-2 provides automatic extensions of time for making certain elections requests for relief under sec_301_9100-3 will be granted when the taxpayer provides evidence to establish that the taxpayer acted reasonably and in good_faith and that granting relief will not prejudice the interests of the government sec_301_9100-3 in this case the time for filing the election is fixed by the regulations ie sec_1_382-8 therefore the commissioner has discretionary authority under sec_301_9100-3 to grant an extension of time for parent and electing subsidiaries to file the election provided parent and electing subsidiaries show they acted reasonably and plr-150389-04 in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the government the information affidavits and representations submitted by parent and company official explain the circumstances that resulted in the failure to timely file the election the information establishes that parent and electing subsidiaries reasonably relied on a qualified_tax professional who failed to make or advise parent and electing subsidiaries to make the election and that the interests of the government will not be prejudiced if relief is granted see sec_301_9100-3 based on the facts and information submitted including the representations made we conclude that parent and electing subsidiaries have shown they acted reasonably and in good_faith the requirements of sec_301_9100-1 and sec_301_9100-3 are satisfied and granting relief will not prejudice the interests of the government accordingly an extension of time for parent and electing subsidiaries to file the statement described in sec_1_382-8 is granted under sec_301_9100-3 until days from the date on this letter a copy of this letter must be attached to the statement the above extension of time is conditioned on the taxpayers' parent's and its controlled_group members’ tax_liability if any being not lower in the aggregate for all years to which the election applies than it would have been if the election had been timely made taking into account the time_value_of_money no opinion is expressed as to the taxpayers' tax_liability for the years involved a determination thereof will be made upon audit of the federal_income_tax returns involved further no opinion is expressed as to the federal_income_tax effect if any if it is determined that the taxpayers' liability is lower sec_301_9100-3 except as expressly provided herein no opinion is expressed or implied concerning the tax consequences of any aspect of any transaction or item discussed or referenced in this letter in particular we express no opinion with respect to whether an ownership_change occurred whether parent domestic subsidiary and electing subsidiaries are component members of a controlled_group the amount of value if any that may be restored or as to values or amounts of nols in addition we express no opinion as to the tax effects or consequences of filing the return or the election late under the provisions of any other section of the code or regulations or as to the tax treatment of any conditions existing at the time of or effects resulting from filing the return or the election late that are not specifically set forth in the above ruling for purposes of granting relief under sec_301_9100-3 we relied on certain statements and representations made by parent parent's authorized representative and company official under penalties of perjury however the director should verify all essential facts moreover notwithstanding that the extension is granted under sec_301_9100-3 to file the election any penalties and interest that would otherwise be applicable still apply plr-150389-04 this letter is directed only to the taxpayer s who requested it sec_6110 provides that it may not be used or cited as precedent pursuant to a power_of_attorney on file in this office copies of this letter are being sent to your authorized representatives sincerely __ken cohen________________ ken cohen senior technician reviewer branch office of associate chief_counsel corporate