Court Opinion

ID: 9378845
Source: CourtListenerOpinion
Date Created: 2023-03-13 19:01:13.016692+00
Date Added: 2024-06-11T17:16:10.700553
License: Public Domain

United States Tax Court

                       T.C. Summary Opinion 2023-8

           ALBERTO DELGADO AND VIRGINIA DELGADO,
                         Petitioners

                                        v.

              COMMISSIONER OF INTERNAL REVENUE,
                          Respondent

                                   —————

Docket No. 13919-19S.                                    Filed March 13, 2023.

                                   —————

Oscar Javier Ornelas, for petitioners.

David Sohn and Sheila R. Pattison, for respondent.

                            SUMMARY OPINION

       HALPERN, Judge: This case was heard pursuant to the
provisions of section 7463 of the Internal Revenue Code in effect when
the petition was filed. 1 Pursuant to section 7463(b), the decision to be
entered is not reviewable by any other court, and this opinion shall not
be treated as precedent for any other case.

       Respondent issued a Statutory Notice of Deficiency (Statutory
Notice) to petitioners determining a deficiency in, and an accuracy-
related penalty with respect to, their 2016 income tax of $5,795 and
$1,159, respectively. Petitioners assigned error to the determinations of
both the deficiency in tax and the penalty. Respondent has conceded the

       1 Unless otherwise indicated, all statutory references are to the Internal
Revenue Code (Code), Title 26 U.S.C., in effect at all relevant times, and all Rule
references are to the Tax Court Rules of Practice and Procedure. All dollar amounts
have been rounded to the nearest dollar.

                               Served 03/13/23
                                  2

penalty, which concession we accept. For the reasons set forth below,
we sustain the deficiency in tax.

                             Background

       The parties have filed a First Stipulation of Facts stipulating
certain facts and the authenticity of certain documents. The facts
stipulated are found, and the documents stipulated are accepted as
authentic. The parties have filed a Supplemental Stipulation of Facts
stipulating one additional exhibit, Exhibit 7–R, which comprises a
written declaration (Shanahan Declaration) of Kaaren Shanahan,
identified as an employee of respondent’s, and a “Note Transcript” from
the Internal Revenue Service (IRS) Automated Under Reporter (AUR)
program. For reasons discussed infra note 8, we do not receive into
evidence either the Shanahan Declaration or the Note Transcript.

       Neither party called any witnesses or proffered documents
beyond those stipulated. We need to find few facts beyond those
stipulated. We set forth those facts pertinent to our discussion.

Petitioners’ 2016 Return

     Petitioners timely filed IRS Form 1040, U.S. Individual Income
Tax Return, for their 2016 (calendar) tax year (2016 Return).

      Petitioner husband (Mr. Delgado) worked for Walgreen Co.
(Walgreen) in 2016. For 2016, Mr. Delgado received two tax information
returns from Walgreen. One, an IRS Form W–2, Wage and Tax
Statement, reported $8,437 of wages paid to him, and the second, an IRS
Form 1099–MISC, Miscellaneous Income, reported $49,062 of “other
income” paid to him. Walgreen also reported to respondent the
information on those two information returns. Petitioners included on
the 2016 Return the $8,437 reported to them on the Form W–2 but not
the $49,062 reported to them on the Form 1099–MISC.

       Petitioners claimed education credits of $2,000 and a child tax
credit of $1,000 on the 2016 Return.

Respondent’s AUR Program

      May CP 2000 Notice

     The 2016 Return drew notice under the AUR program, and, on
May 7, 2018, respondent sent petitioners a Notice CP 2000 (May CP
                                      3

2000 Notice), which is a notice sent to a taxpayer when the taxpayer’s
return information does not match data reported to the IRS by
employers, banks, and other third parties. Table 1 in the May CP 2000
Notice, titled “Changes to your 2016 Return,” shows the following among
other things.

                                   Table 1

 Changes to your 2016 Return

 Your income         Shown on 2016           As corrected by IRS       Difference
 and deductions      Return

 Other income                          $0                 $49,062           $49,062

 Change to taxable             —                      —                      49,062
 income

 Your tax            Shown on 2016           As corrected by IRS       Difference
 computations        Return

 Taxable income                    $41,578                $90,640           $49,062

 Tax                                 5,309                 14,199             8,890

 Education credits                   2,000                         0         −2,000

 Child tax credit                    1,000                   200               −800

 Total tax                     —                      —                      11,690

 Tax you owe                   —                      —                     $11,690

      Table 2, under the heading “Explanation of changes to your
2016 Form 1040,” shows the following.
                                     4

                                  Table 2

 Other Income

 Received       Address    Account       Shown on    Reported     Difference
 from                      information   Return      to IRS by
                                                     others

 WALGREEN       ...        SSN: . . .           $0      $49,062      $49,062
 CO.                       Form 1099–
                           MISC

       Following Table 2 is a description of the reason why a portion of
the child tax credit was disallowed (the credit was later allowed in full)
and the reason why the education credits were disallowed (i.e., for lack
of substantiation).

      Petitioners were advised, if they did not agree with the proposed
changes, to respond to the notice with a signed statement explaining
their disagreement and to include any documentation that would
support their claim. They were given until June 6, 2018, to respond or
respondent would send them a Statutory Notice.

      December CP 2000 Notice

       On December 24, 2018, respondent sent petitioners a second
Notice CP 2000 (December CP 2000 Notice), which began by thanking
petitioners for their response to the May CP 2000 Notice and continued:
“Based on your response, we’ve determined you owe $7,527 (including
interest), which you will need to pay by January 23, 2019.” 2 The
December CP 2000 Notice contains Table 3, similar to Table 1 but with
some revised entries, as follows.

       2 The $7,527 includes a deficiency of $5,795 as well as a substantial

understatement penalty of $1,159 and interest of $573.
                                          5

                                    Table 3

Changes to your 2016 Return

Your income          Shown on Return          As corrected by       Difference
and deductions                                IRS

Other income                        $0                    $25,312                $25,312

Change to                   —                         —                           25,312
taxable income

Your tax             Shown on Return          As corrected by       Difference
computations                                  IRS

Taxable income                  $41,578                   $66,890                $25,312

Tax                               5,309                     9,104                  3,795

Education credits                 2,000                         0                −2,000

Child tax credit                  1,000                     1,000                       0

Total tax                   —                         —                            5,795

Tax you owe                 —                         —                           $5,795

      Table 4, under the heading “Explanation of changes to your
2016 Form 1040,” shows the following.

                                    Table 4

Other Income

Received       Address     Account            Shown on       Reported to   Difference
from                       information        Return         IRS by
                                                             others

WALGREEN       ...         SSN: . . .             $49,062       $49,062              $0
CO.                        Form
                           1099–MISC
                                         6

      Following Table 4 is the same description as in the May CP 2000
Notice of the reason the education credits were disallowed (lack of
substantiation).

      Finally, like the May CP 2000 Notice, the December CP 2000
Notice invited petitioners to respond by January 23, 2019, or respondent
would send them a Statutory Notice.

Statutory Notice

       Respondent mailed the Statutory Notice to petitioners on April
22, 2019. The Statutory Notice is addressed to petitioners and consists
of seven pages. On each page but the last (a waiver for petitioners’ use
if they decide to concede the deficiency and the penalty) appears the
Social Security number of one of them (we assume petitioner husband
because his name appears first on the Statutory Notice). All the pages
reference the 2016 tax year. Immediately under petitioners’ address on
the first page is the following banner, in bold print: “Notice of
Deficiency[,] Proposed increase in tax and notice of your right
to challenge.” Table 5 follows.

                                     Table 5

          Summary of proposed changes

          Increase in tax (deficiency)                   $5,795

          Substantial tax understatement penalty          1,159

       The first substantial paragraph of text on the first page is as
follows.

      We have determined there is a deficiency (increase) in your
      2016 income tax based on information we received from
      third parties (such as employers or financial institutions)
      that doesn’t match the information you reported on your
      tax return. See below for an explanation of how this
      increase was calculated. This letter is your NOTICE OF
      DEFICIENCY, as required by law.

       The fifth page of the Statutory Notice contains two tables
identical to the two tables in the December CP 2000 Notice (Tables 3
                                   7

and 4) and the same description as follows Table 4 as to why the
Education Credits were disallowed (lack of substantiation).

Petition

      The following are among petitioners’ assignments of error:

      1. The Statutory Notice fails to specifically identify the income
         resulting in the increase in petitioners’ taxable income.

      2. Respondent failed to accord petitioners a deduction for
         attorney’s fees paid in connection with the collection of income.

      3. Respondent failed to give petitioners credit for qualified
         educational expenses incurred in 2016.

      Among petitioners’ averments is that petitioners “incurred . . .
deductible attorney’s fees in connection with the collection of income
from Walgreens [sic].”

Answer

      Respondent denied that he erred as petitioners assigned.

Premature Assessment

      Sometime soon after petitioners filed the Petition, respondent
assessed the tax and penalties determined in the Statutory Notice. Soon
thereafter, respondent abated those assessments.

                              Discussion

I.    Introduction

      In general, the parties agree as to the questions presented to the
Court. Petitioners frame those questions as follows.

      1. Is the Statutory Notice entitled to a presumption of
         correctness, and, if not, did respondent carry his burden to
         prove that the deficiency was assessed correctly?

      2. Is respondent’s Exhibit 7 admissible?

      3. Did respondent abate the deficiency assessed against
         petitioners before trial?
                                            8

       At trial and on brief, petitioners concede that if (1) the Court finds
that the Statutory Notice is valid, (2) respondent does not bear the
burden of proof, and (3) respondent did not concede error in the
deficiency by abating the tax assessed against petitioners, they have
nothing to rebut respondent’s adjustments increasing their income by
$25,312 and disallowing their claimed education credits.

II.     “Is the Statutory Notice Entitled to a Presumption of Correctness,
        and, If Not, Did Respondent Carry His Burden to Prove That the
        Deficiency Was Assessed Correctly?”

        A.      Introduction

       It is not clear what petitioners are driving at with this compound
question. 3 They begin their argument that the Statutory Notice should
not be presumed to be correct by citing Scar v. Commissioner, 814 F.2d
1363 (9th Cir. 1987), rev’g 81 T.C. 855 (1983), for the proposition that a
statutory notice “must reflect a consideration by the Service of
information that relates to the particular taxpayer to whom the notice
is directed.” In Scar, the Court of Appeals for the Ninth Circuit
considered a statutory notice that, on its face, revealed that no
determination of a deficiency had been made with respect to the
taxpayers for the year in question. See id. at 1370. The Court held that
the statutory notice was invalid and the petition contesting the
statutory notice should have been dismissed in the taxpayers’ favor for
lack of jurisdiction. See id. If the Commissioner fails to issue a valid
statutory notice, we will, on that ground, dismiss the case for lack of
jurisdiction. See, e.g., Abeles v. Commissioner, 91 T.C. 1019, 1038 (1988).
If the case is dismissed, however, then the burden of proof is no longer
of any consequence. It is only with respect to a valid statutory notice
that the allocation of the burden to prove facts necessary to determine
the correct amount of a deficiency in tax matters.

         3 It is also not clear whether petitioners (i.e., their counsel) comprehend that,

as used in the Code, the words “deficiency” and “assessment” are terms of art. A
deficiency is defined generally as the excess of tax owed over tax shown by the taxpayer
on a return plus the amount of tax previously assessed less any rebates. See § 6211(a).
An “assessment” is the recording of a taxpayer’s liability in the Commissioner’s books
and records. See § 6203. Assessment is necessary before the Commissioner may begin
collection of any unpaid tax by giving notice, and demanding payment, of the unpaid
tax. See, e.g., § 6303. In general, the Commissioner is prohibited from assessing the
deficiency in tax (or any remaining part of it) for a period after the mailing of a notice
of deficiency and until after the conclusion of any resulting proceedings in court. See
§ 6213(a).
                                    9

      We will first consider whether the Statutory Notice is valid.
Because we find that it is, we will then turn to petitioners’ arguments
concerning the burden of proof.

      B.     Validity of the Statutory Notice

             1.     Introduction

       Section 6212(a) authorizes the Secretary (i.e., the Commissioner
or his delegate) to send a statutory notice of deficiency when he
determines a deficiency in tax. But the Code does not specify the form
of the statutory notice. Section 7522(a) provides that the statutory
notice must “describe the basis for, and identify the amounts (if any) of,
the tax due, interest, additional amounts, additions to the tax, and
assessable penalties included in such notice.” “But even an inadequate
description does not invalidate a notice.” Dees v. Commissioner, 148 T.C.
1, 4 (2017). And the Commissioner does not need to explain how a
deficiency was determined. Ginsburg v. Commissioner, 127 T.C. 75, 82
(2006); see also Scar v. Commissioner, 814 F.2d at 1367.

       We have held that “[t]he essential purpose of a deficiency notice
is to provide a formal notification that a deficiency in taxes has been
determined.” Pietz v. Commissioner, 59 T.C. 207, 213–14 (1972). Our
view of what it takes to accomplish that purpose has been evolving. See
DeCrescenzo v. Commissioner, T.C. Memo. 2023-7. Three cases mark
that evolution: Scar, 81 T.C. 855, Campbell v. Commissioner, 90 T.C.
110 (1988), and Dees, 148 T.C. 1. The Statutory Notice passes muster
under each.

             2.     Scar, Campbell, and Dees

       The Statutory Notice is addressed to petitioners and, on the first
page, states the taxable year involved and sets forth the amounts of the
deficiency in tax and penalty determined. It thus satisfies the
requirements of section 6212(a) as we interpreted them in Scar. See
Scar, 81 T.C. at 860–61 (“The requirements of section 6212(a) are met if
the notice of deficiency sets forth the amount of the deficiency and the
taxable year involved.”).

       Because the Statutory Notice does not reveal on its face that
respondent failed to determine a deficiency in petitioners’ 2016 income
tax, a presumption arises under Campbell that he did determine such a
deficiency. See Campbell, 90 T.C. at 113. Petitioners offer nothing to
rebut the presumption, arguing only that the Statutory Notice “should
                                          10

not be presumed correct because no evidence exists to substantiate
where the $25,312 in supposed unreported income originated or why it
is taxable.” (Emphasis added.) Whether respondent is (or should be
presumed to be) correct in his determination of a deficiency in tax is a
different question from whether he determined a deficiency in the first
place. Petitioners have presented no evidence that respondent failed to
determine a deficiency (and penalty) with respect to petitioners for 2016.
The Statutory Notice passes muster under Campbell. See id. at 113–14.

       It likewise passes muster under Dees, 148 T.C. at 6, in which we
said: “[I]f the notice is sufficient to inform a reasonable taxpayer that
the Commissioner has determined a deficiency, our inquiry ends there;
the notice is valid.” Clearly the Statutory Notice would inform a
reasonable taxpayer that respondent determined a deficiency in his
2016 tax; it says as much on its first page. And, while our hypothetical
reasonable taxpayer might scratch his head over the “Explanation of
changes to your 2016 Form 1040,” see supra p. 7 and Table 4, showing a
zero difference between the amount reported by “WALGREEN Co.”
($49,062) and the amount shown on the 2016 Return ($49,062), he would
have no doubt from the explanation following Table 4 that the education
credit was disallowed for lack of substantiation, which, looking at the
computations in Table 3, would leave a deficiency in tax even if the
$25,312 “Change to taxable income” were eliminated.

               3.      Conclusion

      We will not dismiss this case for lack of jurisdiction on the
grounds that the Statutory Notice is invalid.

        C.     Burden of Proof

               1.      Introduction

      Generally, the burden of proving facts relevant to the
Commissioner’s determination of a deficiency in tax is on the taxpayer.
See Rule 142(a)(1). 4 “That . . . has often been interpreted to mean that
the taxpayer bears the ultimate burden of persuasion; i.e., the risk of
nonpersuasion, as well as the initial burden of production.” Westby v.
Commissioner, T.C. Memo. 2004-179, 2004 Tax Ct. Memo LEXIS 186,

        4 Petitioners have not raised the applicability of section 7491(a), which shifts

the burden of proof to the Commissioner in certain situations. We conclude that
section 7491(a) does not apply here because petitioners have not produced any evidence
that they have satisfied the preconditions for its application.
                                          11

at *22–23. There are, however, situations where the taxpayer is
relieved of either the initial burden of producing evidence relevant to the
Commissioner’s determination of tax or the full burden of proof with
respect thereto. 5 One situation where the initial burden of production
is on the Commissioner is in the case of what is sometimes called a
“naked assessment;” i.e., the determination of a tax liability “without
rational foundation and excessive.” United States v. Janis, 428 U.S. 433,
441 (1976) (quoting Helvering v. Taylor, 293 U.S. 507, 514 (1935)).
Petitioners devote almost a third of their Opening Brief to arguing that
respondent has made a naked assessment. 6

               2.      Arbitrariness

         The rule of Taylor may be simply put: A court is given sufficient
cause to set aside the Commissioner’s determination of a deficiency if it
is shown to the Court that the determination was arbitrarily made and
is excessive. See Helvering v. Taylor, 293 U.S. at 515. Petitioners argue
that the Statutory Notice is without foundation (i.e., “[n]othing in the
. . . record . . . explains the source of the $25,312 that Respondent claims

       5   For example, Rule 142(a) provides that, with respect to new matters,
increases in deficiency, or affirmative defenses pleaded in the answer, the burden of
proof is on the Commissioner.
       6  Another situation in which the Commissioner bears the initial burden of
production is in unreported income cases. We have said: “[T]he Commissioner must
establish a ‘minimal evidentiary showing’ connecting the taxpayer with the alleged
income-producing activity or demonstrate that the taxpayer actually received
unreported income.” Walquist v. Commissioner, 152 T.C. 61, 67 (2019) (citation
omitted). The requisite evidentiary foundation to connect a taxpayer with an income
producing activity is minimal and need not include direct evidence. See, e.g., Banister
v. Commissioner, T.C. Memo. 2008-201, 2008 WL 3925877, aff’d, 418 F. App’x 637 (9th
Cir. 2011). In Banister, 2008 WL 3925877, at *2, we held that a deficiency notice based
on information from third-party payors that they paid the taxpayers was enough to
meet the minimal evidentiary burden even though direct evidence of payment was not
in the record. Here, Mr. Delgado receive two information returns from Walgreen, one
a Form W–2 reporting wages of $8,437 paid him for 2016 (which petitioners reported
on the 2016 return) and the second a Form 1099–MISC reporting $49,062 of “other
income” paid him for that year. Those two forms evidence Mr. Delgado’s connection
with an income-producing activity. The fact that respondent’s adjustment for
unreported “other income” is for an amount less than the amount reported on the Form
1099–MISC does not alter the fact that respondent has connected Mr. Delgado with an
activity that, in addition to paying him wages, may have paid him “other income,”
which petitioners failed to report. Respondent has made the minimal evidentiary
showing required of him. Nonetheless, he will still bear the burden to produce evidence
of a deficiency in tax if petitioners can show his determination was arbitrary and
erroneous. See Walquist, 152 T.C. at 68.
                                          12

Petitioners received but failed to report . . . or why such amount is
taxable”) and is inherently arbitrary. Accordingly, petitioners argue
that the Statutory Notice constitutes a “naked assessment,” which is
“invalid” within the rule of Taylor. 7

       The burden is on the taxpayer to prove that the Commissioner
arbitrarily determined a deficiency in the taxpayer’s tax. See id. If the
taxpayer carries that burden, then the burden of going forward with
evidence of a deficiency in tax shifts to the Commissioner. See Berkery
v. Commissioner, 91 T.C. 179, 186 (1988), aff’d without published
opinion, 872 F.2d 411 (3d Cir. 1989). In Taylor, the Supreme Court used
the term “arbitrary” in its usual and ordinary sense meaning: for
example, “capricious, irresponsible,” or the like.          Calafato v.
Commissioner, 42 B.T.A. 881, 889 (1940), aff’d, 124 F.2d 187 (3d Cir.
1941). With that meaning in mind, we conclude that petitioners have
failed to prove that respondent arbitrarily determined a deficiency in
their 2016 income tax.

       For some or all of 2016, Mr. Delgado worked for Walgreen, and it
reported to both Mr. Delgado and to respondent that, for 2016, it had
paid Mr. Delgado wages of $8,437 and “other income” of $49,062.
Petitioners did not report the latter sum on the 2016 Return, and, as a
consequence, respondent sent petitioners the May CP 2000 Notice,
which (1) described the discrepancy between what Walgreen had
reported as other income received by Mr. Delgado and what petitioners
had reported, (2) questioned two tax credits petitioners had claimed,
(3) proposed changes to the amounts of income and tax they had
reported, and (4) invited petitioners, if they did not agree with the
proposed changes, to respond with a signed statement explaining their
disagreement and any documentation that would support their claim.
Apparently, petitioners took up the invitation to respond because
respondent begins the December CP 2000 Notice by thanking them for
their response to the May CP 2000 Notice. On the basis of their

        7 To hold that a statutory notice is invalid within the rule of Taylor because it

constitutes a “naked assessment” is not to hold that it is invalid in the sense that this
Court lacks jurisdiction over the notice. See supra Part II.B. “Helvering v. Taylor . . .
teaches that when a [taxpayer] makes a showing casting doubt on the validity of a
deficiency determination, the statutory notice itself is not rendered void; the result of
such showing is that the [Commissioner] must then come forward with evidence to
establish the existence and amount of any deficiency.” Suarez v. Commissioner, 58
T.C. 792, 814 (1972), overruled as to another issue, Guzzetta v. Commissioner, 78 T.C.
173 (1982). To avoid confusion, we will refer to a statutory notice held to constitute a
naked assessment as “arbitrary.”
                                          13

response, respondent reduced the amount of additional tax he believes
they owe. In the section of the December CP 2000 Notice in which he
proposes changes to the 2016 Return, respondent has reduced his
proposed change for unreported “other income” from $49,062 to $25,312.
In the explanation sections of both notices, see supra Tables 2 and 4, he
identifies Walgreen as the source of the unreported income and
references a Form 1099–MISC. Anomalously, the explanation section of
the December CP 2000 Notice states that petitioners reported $49,062
on their return as income received from Walgreen (which equals the
amount stated as the amount Walgreen reported to respondent,
resulting in a difference (unreported income) of zero). As in the May CP
2000 Notice, the December CP 2000 Notice invites petitioners to respond
if they do not agree with respondent’s proposed changes. There is no
evidence petitioners responded to the December CP 2000 Notice.

       The inference that we draw from that telling is that, because of
his intercourse with petitioners, respondent came to believe that, for
2016, Mr. Delgado had received income from Walgreen that petitioners
had failed to report but in an amount not greater than $25,312. We
must speculate as to respondent’s state of mind because neither party
called a witness to testify as to the intercourse nor has respondent
pursued admission of his Exhibit 7–R. 8 We are not much troubled by
the anomalous entry in the December CP 2000 Notice explanation that
petitioners reported $49,062 received from Walgreen (and, therefore, did
not understate their income from it). The 2016 Return is in evidence
and contradicts that entry (a “clerical error,” claims respondent).

       Moreover, besides the history of events leading up to the
Statutory Notice, we have petitioners’ assignment that respondent, in
error, disallowed them a deduction for attorney’s fees and their
averment that, for 2016, they “incurred . . . deductible attorney’s fees in
connection with the collection of income from Walgreens [sic].” We also

        8 Respondent’s Exhibit 7–R purportedly contains a business record of his (i.e.,

the Note Transcript) that would inform us of the intercourse between him and
petitioners. At trial, petitioners objected to our admitting Exhibit 7–R into evidence.
After some discussion of petitioners’ objections (relevancy, authenticity, and hearsay),
we instructed the parties to make their arguments about admissibility on brief.
Petitioners have done so, while respondent, under the heading “Exhibit 7–R is
admissible under the Federal Rules of Evidence,” announces that, because he
understands petitioners to concede the adjustment for unreported income if the
Statutory Notice is found valid, he “is no longer pursuing the evidence in Exhibit 7–R.”
Given respondent’s apparent ambivalence and his failure to make argument as we
directed, we consider him to have abandoned (withdrawn) Exhibit 7–R, and do not
address petitioners’ objections.
                                        14

have respondent’s counsel’s uncontested claim made at trial that
petitioners’ 2016 unreported income resulted from “a[n] employment
discrimination claim that Mr. Delgado had with Walgreens [sic].” That
is consistent with Mr. Delgado’s receiving from Walgreen for 2016 “other
income” reported to him on Form 1099–MISC in addition to wages
reported to him on Form W–2.

      We are satisfied that neither the $25,312 adjustment to income
nor the credit disallowance made in the Statutory Notice was made by
respondent capriciously, irresponsibly, or otherwise arbitrarily in the
usual and ordinary sense of those words. See Calafato, 42 B.T.A. 881.
In other words, petitioners have failed to prove that respondent’s
determination of a deficiency in tax for 2016 was arbitrarily made.
Respondent need not, on account of having made a “naked assessment,”
come forward with evidence of a deficiency.

               3.     Conclusion

       Before concluding our discussion of burden of proof, we note that
petitioners have not raised section 6201(d), which provides that, if a
taxpayer asserts a reasonable dispute with respect to any item of income
reported on a third-party information return and the taxpayer has fully
cooperated with the Secretary, the Secretary has the burden of
producing reasonable and probative information concerning that
deficiency in addition to that information return. Perhaps petitioners’
failure to raise section 6201(d) is due to their having no reasonable
dispute that they did not receive $25,312 of “other income” from
Walgreen. 9

       Petitioners have given us no reason to deviate from the general
rule that, in Tax Court litigation, the taxpayer bears the burden of proof,
and we find that petitioners do bear the burden of proof. See Rule 142(a).

III.   Premature Assessments

       Sometime soon after petitioners filed the Petition, respondent
assessed the tax and penalties determined in the Statutory Notice but,
quickly thereafter, abated those assessments. Petitioners argue that
respondent’s abatement of the assessments before trial signifies that
respondent “[intended] to abate the tax . . . previously assessed . . . and
close this case prior to trial.” Respondent counters that his abatement

       9 Nor is there evidence of their cooperation with the Secretary. Petitioners

responded to the May CP 2000 Notice but resist providing us their response.
                                    15

“does not mean that petitioners . . . [had no] additional tax liability for
. . . 2016.”

       Where a Petition has been filed, section 6213(a) prohibits
assessment or collection of a deficiency until our decision in the case
becomes final. None of the exceptions to section 6213(a) is applicable in
the present case. The assessment was prohibited by section 6213(a), and
the abatement was proper. In Connell Business Co. v. Commissioner,
T.C. Memo. 2004-131, 2004 WL 1194626, at *5, where the taxpayer
made an argument like petitioners’, we said:

      While the abatements might be construed to constitute an
      admission that the prior assessments were premature,
      they in no way constitute admissions as to the proper
      amount of the deficiencies. See Pfeifer v. Commissioner,
      T.C. Memo. 1983-437 (“There is no merit to [the taxpayer’s]
      contention that the abatement [of a premature assessment]
      was determinative of his tax liability.”).

      The same applies here.

IV.   Deficiency in Tax

       Having rejected petitioners’ arguments that the Statutory Notice
is invalid, that respondent bears the burden of proof, and that, by his
abatement of the premature assessment, respondent conceded error in
his determination of a deficiency in tax, we are left with petitioners’
concession that, if we reject those arguments, they have nothing to rebut
respondent’s adjustments increasing their income by $25,312 and
disallowing their claimed education credits. On the basis of petitioners’
concession, we sustain those adjustments.

V.    Section 6673(a)(1) Penalty

       Petitioners have no arguments on the merits to respondent’s
adjustments resulting in a deficiency in income tax. Their grounds for
this lawsuit are process related, and we have rejected all of those
grounds. The course of respondent’s determination of a deficiency in
petitioners’ 2016 income tax is fairly clear. There is, however, one
opaque chapter, i.e., petitioners’ intercourse with respondent in
response to the May CP 2000 Notice. Petitioners have not volunteered
that information, and they have objected to respondent’s attempts to
inform us. Petitioners’ response to the May CP 2000 Notice may well
have resolved the confusion resulting from the improbable statement
                                   16

both in the December CP 2000 Notice and in the Statutory Notice that
petitioners had reported $49,062 on the 2016 Return. Petitioners’
failure to be forthright and their lack of arguments on the merits lead
us to suspect that perhaps they have little or no reason for bringing this
lawsuit other than to delay collection of a tax rightfully owing.

       In pertinent part, section 6673(a)(1) allows us to impose a penalty
of up to $25,000 if (1) the taxpayer has instituted or maintained
proceedings before the Tax Court primarily for delay or (2) the
taxpayer’s position in the proceeding is frivolous or groundless.
“Groundless” means “lacking a basis or a rationale.” Groundless, Black’s
Law Dictionary (11th ed. 2019). Further, “[t]he purpose of section 6673
is to compel taxpayers to think and to conform their conduct to settled
principles before they file returns and litigate.”            Takaba v.
Commissioner, 119 T.C. 285, 295 (2002).

      Before entering decision in this case, we will order petitioners to
show cause why we should not impose a penalty on them under section
6673(a)(1) for instituting or maintaining this proceeding primarily for
delay by advancing groundless process-related arguments.

      To reflect the foregoing,

      An appropriate order will be issued.