Court Opinion

ID: 4337985
Source: CourtListenerOpinion
Date Created: 2018-11-14 03:39:38.280216+00
Date Added: 2024-06-11T07:53:21.708916
License: Public Domain

T.C. Memo. 2010-29

                       UNITED STATES TAX COURT

               MICHAEL ANDREW BIGLEY, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent

     Docket No. 14223-08.               Filed February 22, 2010.

     Michael Andrew Bigley, pro se.

     Christopher J. Sheldon, for respondent.

                         MEMORANDUM OPINION

     VASQUEZ, Judge:    Respondent determined a deficiency in and

additions to petitioner’s 2004 Federal income tax as follows:

                                  Additions to Tax
  Deficiency    Sec. 6651(a)(1)     Sec. 6651(a)(2)   Sec. 6654(a)

   $29,5771        $6,654.83          $4,288.67         $858.54
     1
         The deficiency includes self-employment tax of $12,793.
                               - 2 -

     The issues remaining1 for decision are whether petitioner is

liable for the deficiency in his Federal income tax and whether

he is liable for a section 6673(a)(1)2 penalty.

                            Background

     The facts have been deemed stipulated under Rule 91(f) and

are so found.3   The stipulations, with accompanying exhibits, are

     1
        In the notice of deficiency respondent determined that
petitioner received interest income of $1,681. It is deemed
stipulated that petitioner received interest income of $1,664
from Washington Mutual (see infra note 3--we treat this as a
concession of the $17 difference by respondent). Petitioner
admits that his interest income is gross income subject to
Federal income tax.

     Petitioner is deemed to have conceded the additions to tax
under secs. 6651(a)(1) and (2) and 6654(a) because he did not
assign error to them in his petition. See Rule 34(b)(4); Funk v.
Commissioner, 123 T.C. 213, 217-218 (2004); see also Meeker v.
Commissioner, T.C. Memo. 2005-146.

     Petitioner failed to address respondent’s self-employment
tax determination, other than to assert frivolous and groundless
arguments. Accordingly, application of self-employment tax is
computational.
     2
        Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
     3
        Under Rule 91(f), respondent moved the Court to issue an
order requiring petitioner to show cause why the facts and
evidence set forth in respondent’s proposed stipulation of facts
should not be accepted as established for purposes of this case.
The Court granted respondent’s motion and ordered petitioner to
file a response in compliance with Rule 91(f)(2). Although
petitioner filed a response, the Court found it evasive and not
fairly directed to respondent’s proposed stipulation of facts and
as a result granted respondent’s motion.
                                 - 3 -

incorporated herein by this reference.    Petitioner resided in

Arizona when he filed his petition.

     During 2004 petitioner was an “Independent Business Owner”

of Ameriplan Corp.    Independent Business Owners are direct

marketing sales representatives of Ameriplan Corp. and sell its

provider access plans (i.e., discount medical and related

services).    Independent Business Owners receive payments based on

their direct sales of provider access plans and on sales

generated by other Independent Business Owners recruited for that

purpose.    In addition, Independent Business Owners receive

incentive awards (e.g., cash, prizes, or discounts) for meeting

certain goals.    In 2004 petitioner received nonemployee

compensation of $5,811 and incentive awards of $522 from

Ameriplan Corp.

     During 2004 petitioner also worked for KLA-Tencor Corp.

providing consulting services.    In 2004 he received nonemployee

compensation of $84,211 from KLA-Tencor Corp.

     Each corporation issued to petitioner a Form 1099-MISC,

Miscellaneous Income, reporting the nonemployee compensation it

paid him.    In addition, Ameriplan Corp. reported the incentive

awards it paid to petitioner as other income on a Form 1099-MISC.

Petitioner admits that he received the Forms 1099-MISC.
                               - 4 -

     Petitioner submitted to respondent a Form 1040, U.S.

Individual Income Tax Return, and attached “corrected” Forms

1099-MISC that reflected nonemployee compensation of zero.

     Respondent did not accept petitioner’s Form 1040 as filed

because he determined that it was frivolous and invalid for

processing purposes.   Respondent prepared a substitute for return

for petitioner for 2004.4   Respondent determined that petitioner

received nonemployee compensation of $84,211 and $5,811 from KLA-

Tencor Corp. and Ameriplan Corp., respectively, incentive awards

of $522 from Ameriplan Corp., and interest income of $1,681.

Respondent also determined that petitioner is liable for

additions to tax under section 6651(a)(1) of $6,654.83, section

6651(a)(2) of $4,288.67, and section 6654(a) of $858.54; that

petitioner is liable for self-employment tax of $12,793; and that

petitioner is liable for a deficiency in Federal income tax of

$29,577.   Respondent further determined that petitioner is

subject to a penalty under section 6702(a)(1) with respect to the

Form 1040 that he submitted to respondent.5

     Petitioner has sent respondent volumes of correspondence.

Therein petitioner asserts, among other arguments, that

compensation for labor is not “taxable according to the IRS Code

     4
        The substitute for return meets the requirements of sec.
6020(b).
     5
        The sec. 6702(a)(1) penalty is not before the Court.    See
sec. 6703(b).
                               - 5 -

or the Supreme Court.”   He also alleges fraudulent and criminal

acts by respondent’s employees.

     Respondent represents that he advised petitioner that

petitioner’s arguments were frivolous and warned petitioner the

Court might impose a penalty under section 6673(a)(1).

     At trial the Court also advised petitioner that his

arguments were frivolous and warned him that the Court might

impose a penalty under section 6673(a)(1) if he continued to

assert such arguments.   Undeterred, petitioner submitted a

posttrial brief in which he asserts, among other arguments, that

his earnings are not taxable income because earnings are not

profits or gains from some “federally privileged activity” and

therefore “he is not a taxpayer” as defined by section

7701(a)(14).   Thereafter, petitioner submitted a motion to

dismiss the deficiency and penalties with prejudice (motion to

dismiss) wherein he alleges fraud by respondent and the Court’s

complicity therein and asserts the same frivolous arguments about

his income, among other arguments.6

     6
        Petitioner also filed a pretrial memorandum and six other
motions with the Court that contain similar frivolous and
groundless arguments and allegations of fraud.
                               - 6 -

                            Discussion

I.   Deficiency in Federal Income Tax

      Since petitioner has failed to introduce credible evidence

and is deemed to have stipulated receipt of the items listed on

the information returns (i.e., Forms 1099-MISC), sections 6201(d)

and 7491(a) do not apply.   See Rhodes v. Commissioner, T.C. Memo.

2005-184.

      Section 61(a)(1) defines gross income as all income from

whatever source derived, including compensation for services.    In

addition, section 74(a) provides that the term “gross income”

includes amounts received as prizes and awards.

      Petitioner is deemed to have stipulated that he received

nonemployee compensation from KLA-Tencor Corp. and Ameriplan

Corp. and that he received the incentive awards from Ameriplan

Corp.   He disputes, however, whether those items are gross

income.

      Petitioner advances shopworn arguments characteristic of

tax-protester rhetoric that has been universally rejected by this

and other courts.   See Wilcox v. Commissioner, 848 F.2d 1007 (9th

Cir. 1988), affg. T.C. Memo. 1987-225; Carter v. Commissioner,

784 F.2d 1006, 1009 (9th Cir. 1986).     We shall not painstakingly

address petitioner’s assertions “with somber reasoning and

copious citation of precedent; to do so might suggest that these

arguments have some colorable merit.”     Crain v. Commissioner, 737
                                  - 7 -

F.2d 1417, 1417 (5th Cir. 1984).     Accordingly, we sustain

respondent’s deficiency determination.

II.   Section 6673(a)(1) Penalty

      Section 6673(a)(1) authorizes the Court to impose a penalty

not to exceed $25,000 if the taxpayer took frivolous or

groundless positions in the proceeding or instituted or

maintained the proceeding primarily for delay.

      Petitioner was warned by respondent and the Court that his

arguments were frivolous and that if he continued to advance

them, he could be subject to a penalty of up to $25,000.        Even

after receiving these repeated warnings, he continued to advance

frivolous and groundless arguments in his posttrial brief and

motion to dismiss.   We conclude that petitioner’s position was

frivolous and groundless and that he instituted and maintained

these proceedings primarily for delay.        Accordingly, we shall

grant respondent’s motion for a penalty and require petitioner to

pay a penalty to the United States pursuant to section 6673(a)(1)

of $5,000.   We also warn petitioner that we will consider

imposing a larger penalty if he returns to the Court and advances

frivolous or groundless arguments in the future or institutes or

maintains any proceeding primarily for delay.

      To reflect the foregoing,

                                               An appropriate order and

                                          decision will be entered.