Holmes v. Comm'r

T.C. Memo. 2010-42
UNITED STATES TAX COURT
SCOTT RAY HOLMES, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 23291-07. Filed March 4, 2010.
Scott Ray Holmes, pro se.
Ann L. Darnold, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
THORNTON, Judge: Respondent determined a $17,197 deficiency
in petitioner’s 2003 Federal income tax and additions to tax of
$1,516 under section 6651(a)(1) for failure to file, $1,246 under
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section 6651(a)(2) for failure to pay tax, and $275 under section
6654(a) for failure to make sufficient estimated tax payments.1
The issues for decision are: (1) Whether petitioner
received taxable income in the amounts respondent determined; (2)
whether petitioner is liable for a 10-percent additional tax
under section 72(t)(1); (3) whether petitioner is liable for
additions to tax as respondent determined; and (4) whether
petitioner is liable for a penalty under section 6673 for
instituting proceedings primarily for delay and for maintaining
frivolous or groundless positions.
FINDINGS OF FACT
The parties have stipulated some facts, which we incorporate
herein by this reference. Petitioner, born in 1952, resided in
Texas when he filed his petition. In 2003 he received $82,978 of
wages from Cooper Tire & Rubber Co., $51 of interest, and a
qualified retirement plan distribution, $2,735 of which was
taxable.
Petitioner made no Federal income tax payments for 2003
apart from the $10,461 his employer withheld from his wages
during the year. On his 2003 Form 1040, U.S. Individual Income
Tax Return, petitioner reported zero wages and $2,735 of taxable
pension and annuity income; he claimed the standard deduction and
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue.
Amounts have been rounded to the nearest dollar.
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a refund in the amount of his $10,461 of withholdings. In
addition to the Form 1040, petitioner submitted Form 4852,
Substitute for Form W-2, Wage and Tax Statement, which also
reflected zero wages. Petitioner wrote the phrase “non assumpsit
by” next to his signature on both Form 1040 and Form 4852.
Petitioner attached to the Form 1040 a 51-page document
entitled “Notice of Affidavit Statement in Rebuttal to Internal
Revenue Code Section 6011 For Year Period Ending December 31,
2003”. In this document petitioner asserted that he was not
subject to tax for 2003 because, inter alia: (1) Filing Federal
income tax returns is voluntary; (2) paying income tax based on a
Form 1040 is an illegal kickback; (3) taxable income applies only
to sources from international or foreign commerce; (4)
petitioner’s domicile is outside the United States because he
lives in the “compact state of Texas state republic”; (5) he is
not a “United States Person”, domestic partnership, domestic
corporation, estate or trust; (6) the term “employee” applies
only to those working for public service; (7) “the income tax is
a slave tax prohibited by the Thirteenth Amendment”; (8) the term
“Secretary of the Treasury” in the Internal Revenue Code applies
only to the Secretary of the Treasury of Puerto Rico; (9) the
capitalization of the letters of petitioner’s name in Court
documents creates a false legal impression that he is a
“fictional legal entity” and not entitled to his constitutional
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rights; and (10) his wages are not includable in gross income.
Petitioner attached about 60 pages of exhibits to the 51-page
document.
By notice of deficiency respondent determined that for 2003
petitioner had a deficiency of $17,197. Respondent also
determined that petitioner owed additional tax under section
72(t) and additions to tax under sections 6651(a)(1) and (2) and
6654(a). In response to the notice of deficiency, petitioner
sent to respondent a letter that asserted more frivolous
arguments and repeated a demand for a refund of his withholdings
plus interest.
OPINION
I. Taxable Income
In 2003 petitioner received wages and other income as
respondent determined. Petitioner’s assertions that this income
is not taxable are similar to assertions that he raised
unsuccessfully in Holmes v. Commissioner, T.C. Memo. 2006-80
(Holmes I), with respect to his 2002 tax liability. These
groundless and frivolous assertions warrant no further
discussion. See Crain v. Commissioner, 737 F.2d 1417 (5th Cir.
1984) (“We perceive no need to refute these arguments with somber
reasoning and copious citation of precedent; to do so might
suggest that these arguments have some colorable merit.”). We
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sustain respondent’s determination as to petitioner’s deficiency
for 2003.
II. Section 72(t) Additional Tax
Respondent determined that petitioner is liable for a
10-percent additional tax on the $2,735 taxable portion of his
distribution from a qualified retirement plan in 2003. Section
72(t)(1) generally imposes, subject to various exceptions under
section 72(t)(2), a 10-percent additional tax on early
distributions from a qualified retirement plan. Petitioner
reported the distribution on his Form 4852, thereby admitting
that he received it in 2003, when he had not yet attained age
59-1/2. Petitioner has not shown and the evidence does not
suggest that any exception under section 72(t)(2) applies. We
sustain respondent’s determination.
III. Other Additions to Tax
The petition contains no specific allegations or supporting
statements of facts regarding any of the additions to tax that
respondent determined in the notice of deficiency pursuant to
sections 6651(a)(1) and (2) and 6654(a). Petitioner’s frivolous
challenges to his obligation to pay tax do not specifically
address any issue regarding the additions to tax. We deem
petitioner to have conceded these issues and hold that respondent
has no burden of production under section 7491(c) as to the
additions to tax. See Funk v. Commissioner, 123 T.C. 213 (2004);
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Swain v. Commissioner, 118 T.C. 358 (2002). We sustain
respondent’s determinations as to the additions to tax under
sections 6651(a)(1) and (2) and 6654(a).
IV. Section 6673 Penalty
Respondent has moved to impose a penalty under section
6673(a)(1), which authorizes this Court to require a taxpayer to
pay to the United States a penalty not in excess of $25,000
whenever it appears that proceedings have been instituted or
maintained by the taxpayer primarily for delay or that the
taxpayer’s position in such proceedings is frivolous or
groundless. In Holmes I, we found that petitioner was liable for
a $2,000 penalty under section 6673 because he “took frivolous
positions before and during trial despite ample warnings before
trial from respondent.” Holmes v. Commissioner, supra.
Notwithstanding the sanctions imposed in Holmes I, issued more
than a year before he filed his petition in this case, petitioner
has persisted in his misguided course of conduct. In furtherance
of the purpose of section 6673(a)(1) to deter such conduct, we
believe a more significant sanction is now appropriate. Pursuant
to section 6673(a)(1) we shall require petitioner to pay to the
United States a penalty of $10,000.
To reflect the foregoing,
Decision will be entered
for respondent.