DocketNumber: Docket No. 30500-12.
Citation Numbers: 2015 T.C. Memo. 10, 109 T.C.M. 1047, 2015 Tax Ct. Memo LEXIS 8
Judges: COHEN
Filed Date: 1/12/2015
Status: Non-Precedential
Modified Date: 11/20/2020
Decision will be entered for respondent.
COHEN,
Sec. | Sec. | Sec. | ||
2003 | $48,362 | $12,090.50 | $35,062.45 | $1,247.81 |
2004 | 60,685 | 15,171.25 | 43,996.63 | 1,739.07 |
2005 | 43,214 | 10,803.50 | 31,330.15 | 1,733.35 |
2006 | 27,525 | 6,881.25 | 19,955.63 | 1,302.61 |
*11 Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. The issue for decision is whether petitioner's failure to file returns for each year was fraudulent.
Some of the facts have been deemed stipulated under
Petitioner graduated from San Jose State University in 1986 with a bachelor's degree in accounting. Early in his career, petitioner worked in various positions in accounting, including three years at the firm KPMG, formerly KPMG Peat Marwick. He was licensed as a certified public accountant by California*9 on February 1, 1991. *12 Petitioner was employed by the Internal Revenue Service (IRS) as a special agent in the Criminal Investigation Division from 1993 to February 1999. In 1999 he authored a book entitled "Investigating the Federal Income Tax: A Preliminary Report". In the book petitioner presented a variety of arguments that he and other citizens were not obligated to pay Federal income tax for reasons including that such payment was voluntary, that the
On March 19, 2003, the Director of the Office of Professional Responsibility (OPR) of the U.S. Department of the Treasury filed a complaint initiating proceedings to bar petitioner from practicing before the Internal Revenue Service for disreputable conduct in violation of Circular 230, specifically
During the course of the proceedings commenced by the OPR, petitioner admitted that he had advised*10 taxpayers that they were not liable for income taxes for reasons including that the
In an amended complaint filed October 21, 2003, the OPR asserted petitioner's failure to file Federal income tax returns for 1999, 2000, 2001, and 2002 as additional grounds for disbarment or suspension. The OPR then moved for summary judgment, which was granted by an administrative law judge on November 24, 2003. The order granting the motion for summary judgment refuted petitioner's
Petitioner was disbarred from practice before the IRS by a decision issued December 24, 2003. In that decision the administrative law judge concluded that petitioner's advice to taxpayers, as alleged in the complaint, constituted disreputable conduct. In a subsequent administrative appeal within the IRS Office of Chief Counsel, that decision was affirmed June 25, 2004, by a Decision*11 on Appeal that reviewed numerous authorities showing that petitioner had advised taxpayers to rely on frivolous positions. The findings of the administrative law judge on the amended complaint were vacated because the record did not establish *14 that petitioner had the level of gross income giving rise to the return-filing requirement. The order disbarring petitioner was affirmed, however, because the allegations concerning his advice to clients were sufficient to establish disreputable conduct.
Petitioner filed a complaint in the U.S. District Court for the Northern District of California under the Administrative Procedure Act seeking review of his disbarment from practice before the IRS.
Petitioner's certified public accountant's license was revoked by the California Board of Accountancy in 2007 because of the conduct that led to his disbarment from practice before the IRS. Petitioner filed unsuccessful challenges *15 to that decision with the California Court of Appeals, the California Supreme Court, and the U.S. Supreme Court.
During 2003, 2004, 2005, and 2006, petitioner earned income from his tax consultation services, speeches, book sales, and other business activities promulgating his views of the Federal income tax system. In 2006 he received $71,497 in nonemployee compensation. He deposited his income into six bank accounts over which he maintained control. He earned interest income on some of them. Deposits into those accounts totaled $280,270.01, $522,418.98, $247,666.61, and $118,608.72 for 2003, 2004, 2005, and 2006, respectively. Petitioner did not file Federal income tax returns or pay taxes for any of those years.
The IRS commenced an audit for petitioner's 2003 through 2006 tax years. Petitioner failed to submit for examination complete and adequate books and accounts for the*13 years under audit. He resisted IRS efforts to obtain bank records through the use of summonses. The IRS ultimately prepared substitutes for returns under
Petitioner's tax year 2002 was the subject of an earlier case in this Court that was decided in
During the*14 course of this case, petitioner did not deny receipt of the income determined in the statutory notice and did not identify deductions that had not been allowed. His arguments, his motions, his attempts to conduct discovery, and his cross-examination of respondent's witnesses at trial have been directed to his claim that the statutory notice was invalid because it was not signed by an authorized person and that, as a result, this Court lacks jurisdiction over his case. *17 In his pretrial memorandum he also asserted that his U.S. income was not subject to tax and that he had no obligation to file tax returns, repeating or restating the arguments that had led to his disqualification to practice before the IRS and his loss of his certified public accountant's license. Petitioner refused to testify at trial, citing his
Shortly before trial respondent filed a motion for leave to file out of time a motion for partial summary judgment on the validity of the statutory notice,*15 but the motion was denied because it was too close to the trial date.
Courts have held consistently, in various contexts, that (1) a signature is not required on a notice of deficiency and that (2) provisions of the Internal Revenue Manual do not give rights to a taxpayer or affect the validity of a notice or this Court's jurisdiction.
Petitioner has a history of pursuing frivolous arguments and rejecting the conclusions of every agency or court that has considered them. His argument that domestic income is not subject to Federal income tax has been restated by him in various filings, but the same conclusion has been rejected as frivolous in his administrative proceedings and in the Court of Appeals' opinion sustaining his disbarment by the OPR. No further discussion*16 of petitioner's stale theories is warranted.
We must decide, however, whether petitioner's failure to file returns for 2003 through 2006 was accompanied by an intent sufficient to sustain the
Bank deposits are prima facie evidence of income.
Fraud may be proved by circumstantial evidence, and the taxpayer's entire course of conduct*17 may establish the requisite fraudulent intent.
The additions to tax for fraud have frequently been imposed on taxpayers like petitioner "who were knowledgeable about their taxpaying responsibilities * * * [and] consciously decided to unilaterally opt out of our system of taxation."
Petitioner was warned of the possibility of a penalty under
An order granting respondent's oral motion for a penalty under
Frank Tavano v. Commissioner of Internal Revenue , 986 F.2d 1389 ( 1993 )
Glenn Crain v. Commissioner of Internal Revenue , 737 F.2d 1417 ( 1984 )
Selgas v. Commissioner , 475 F.3d 697 ( 2007 )
Joseph Solomon v. Commissioner of Internal Revenue , 732 F.2d 1459 ( 1984 )
Norman E. Coleman v. Commissioner of Internal Revenue, Gary ... , 791 F.2d 68 ( 1986 )
Estate of Mary Mason, Deceased, Herbert L. Harris, ... , 566 F.2d 2 ( 1977 )
Winslow v. Comm'r , 139 T.C. 270 ( 2012 )
Stephen B. Scallen and Chacke Y. Scallen v. Commissioner of ... , 877 F.2d 1364 ( 1989 )
Helvering v. Mitchell , 58 S. Ct. 630 ( 1938 )
Ruth E. Urban v. Commissioner of Internal Revenue Service , 964 F.2d 888 ( 1992 )
Robert W. Bradford v. Commissioner of Internal Revenue , 796 F.2d 303 ( 1986 )
Grace M. Powell, of the Estate of O. E. Powell, Deceased v. ... , 252 F.2d 56 ( 1958 )
Gajewski v. Commissioner , 67 T.C. 181 ( 1976 )