DocketNumber: Docket No. 21774-92
Citation Numbers: 68 T.C.M. 464, 1994 Tax Ct. Memo LEXIS 412, 1994 T.C. Memo. 403
Judges: JACOBS
Filed Date: 8/18/1994
Status: Non-Precedential
Modified Date: 11/21/2020
*412 An order and decision for respondent will be entered.
MEMORANDUM FINDINGS OF FACT AND OPINION
JACOBS,
Additions to Tax | ||||||
Sec. | Sec. | Sec. | Sec. | Sec. | ||
Year | Deficiency | 6651(f) | 6653(b) 1 | 6654(a) | 6653(a) | 6651(a) |
1981 | $ 6,961 | $ 3,481 | $ 297 | $ 348 | $ 1,123 | |
1982 | 5,091 | 2,546 2 | 493 | 255 | 1,268 | |
1983 | 10,535 | 5,268 | 357 | 527 | 1,692 | |
1984 | 8,410 | 4,205 | 512 | 421 | 2,051 | |
1985 | 7,757 | 3,879 | 445 | 388 | 1,939 | |
1986 | 8,890 | 6,668 | 430 | 445 | 2,223 | |
1987 | 8,988 | 6,741 | 505 | 449 | 2,093 | |
1988 | 6,605 | 4,954 | 422 | 330 | 1,651 | |
1989 | 9,286 | $ 6,965 | 628 | 2,322 | ||
1990 | 6,075 | 4,556 | 399 | 1,519 |
We granted respondent's*413 motion to dismiss for failure to state a claim with respect to the deficiencies in Federal income taxes for 1981 through 1990 and the respective additions to tax pursuant to section 6654(a). 1 The remaining issues for decision are: (1) Whether petitioner is liable for additions to tax for fraud for 1981 through 1988, and for fraudulent failure to file for 1989 and 1990, or, in the alternative, whether petitioner is liable for additions to tax for negligence for 1981 through 1988, and for failure to timely file Federal income tax returns for all of the years in issue; and (2) whether a penalty should be imposed pursuant to
All section references are to the Internal Revenue Code in effect for the years in issue. All Rule references are to the Tax Court Rules of Practice and Procedure.
FINDINGS OF FACT
Some of the facts have been stipulated and are found accordingly. The stipulation of facts and accompanying exhibits are*414 incorporated herein by this reference.
Petitioner was a resident of Reseda, California, at the time he filed his petition.
Petitioner worked as a general machinist for McDonnell Douglas during the years in issue. On 13 different occasions, between March 1981, and December 1989, petitioner filed with his employer Forms W-4, "Employee's Withholding Allowance Certificates", falsely claiming that he was exempt from Federal income tax withholding. Petitioner failed to file an individual Federal tax return for each of the years in issue.
In March 1986, respondent began an examination of petitioner's returns for 1981 through 1984. When respondent contacted petitioner, petitioner responded with tax protester type arguments. Shortly thereafter, respondent began a criminal investigation of petitioner for 1981 through 1984. On June 17, 1988, petitioner was convicted of four counts of income tax evasion for 1981 through 1984 in violation of
In July 1991, respondent began working on the civil aspects of petitioner's case. After reviewing petitioner's files, respondent sent a letter to petitioner stating that respondent had no record of petitioner's tax returns for tax years*415 1981 through 1990. Respondent asked petitioner to call and make an appointment to discuss those years. Petitioner did not respond to the appointment letter.
On June 29, 1992, respondent issued a notice of deficiency for 1981 through 1990. On September 28, 1992, petitioner filed a petition disputing all of the deficiencies and additions to tax by stating: THE ENTIRE ADJUSTMENT/CHANGES, KIND OF TAX, ANY AMOUNT IS DISAGREED. OUR CHRISTIAN FOREFATHERS SOUGHT A CHRISTIAN GOV'T -- NOT A JEWISH-CAPITALIST-COMMUNIST-MAFIA-S&L MONETARY SYSTEM; I NEVER HAD INCOME TO QUALIFY TO FILE; NO U.S/CA CONSTITUTIONAL REQUIREMENTS; FED. RES. NOTES ARE CONSIDERED BY CONGRESS AS "TOKEN VALUE", NOT MONEY NOR DOLLARS; NO PERMISSION GIVEN BY THE SOVEREIGNTY TO BE TAXED;
On November 16, 1992, respondent filed a motion to dismiss for failure to state a claim for relief pursuant to Rule 40. Petitioner filed an objection thereto. Petitioner asked the Court to find that there were no deficiencies or additions to tax due, and requested that we award him $ 300 million in damages. Petitioner alleged that money is not money, that respondent violated his constitutional*416 rights, and that the
We partially granted respondent's motion to dismiss for failure to state a claim for relief. 2 We held that petitioner was liable for deficiencies in Federal income taxes for 1981 through 1990 and for the respective additions to tax pursuant to section 6654(a).
*417 An order was issued, and this case was restored to the general docket. At the subsequent trial, petitioner's testimony consisted of the same type of protester arguments that he had used in his reply to respondent's Answer.
OPINION
For tax year 1981,
*418 Fraud is an intentional wrongdoing by a taxpayer motivated by a specific purpose to evade a tax known or believed to be owing.
Over the years, courts have developed various factors, or "badges", which tend to establish fraud.
Respondent contends that petitioner, by virtue of his criminal conviction, is collaterally estopped from denying the specific intent requirement of
The remaining years require an additional factual determination revolving around the badges of fraud. Many of the badges of fraud are present in this case: (1) An understatement of income; (2) a pattern of failure to file personal income tax returns; (3) implausible or inconsistent explanations of behavior; (4) failure to cooperate with tax authorities; and (5) filing false Forms W-4. Respondent has convinced us that petitioner's underpayments for 1985 through 1990 are due to fraud; accordingly, we sustain respondent's determination with regard to the additions to tax for fraud for tax years 1985 through 1988. In this regard, we find that the full amount of the underpayments is attributable to fraud. Further, we hold that petitioner is liable for the increase in penalty for fraudulent failure to file under
Because we have found petitioner liable for the additions to tax for fraud, we need not address respondent's alternative arguments that petitioner is liable*422 for additions to tax due to negligence or failure to timely file.
Respondent filed a motion for a penalty of $ 25,000, pursuant to
(a) Tax Court Proceedings. -- (1) Procedures instituted primarily for delay, etc. -- Whenever it appears to the Tax Court that -- (A) proceedings before it have been instituted or maintained by the taxpayer primarily for delay, (B) the taxpayer's position in such proceeding is frivolous or groundless, or * * * the Tax Court, in its decision, may require the taxpayer to pay to the United States a penalty not in excess of $ 25,000.
In the instant case, petitioner knew or should have known that his arguments were frivolous. See
Petitioner is a tax protester. He is a frequent litigant in this Court. See
Petitioner's course of conduct convinces us that he instituted this case primarily to delay the payment of his taxes. Moreover, the position he took herein is frivolous and groundless. A petition to the Tax Court is frivolous if it is contrary to established law and unsupported by a reasoned, colorable argument for change in *424 the law.
To reflect the foregoing,
1. The fraud addition to tax is codified under
2. Plus 50 percent of the interest due on the portion of the underpayment attributable to fraud.↩
1.
2. We treated respondent's motion to dismiss as a motion for partial judgment on the pleadings.↩
3. For tax years, 1986 through 1988, the fraud addition to tax is 75 percent of the underpayment. See
4.
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John W. Amos v. Commissioner of Internal Revenue , 360 F.2d 358 ( 1965 )
Haldane M. Plunkett v. Commissioner of Internal Revenue , 465 F.2d 299 ( 1972 )
Aleksandrs v. Laurins Cathie Laurins v. Commissioner ... , 889 F.2d 910 ( 1989 )
Norman E. Coleman v. Commissioner of Internal Revenue, Gary ... , 791 F.2d 68 ( 1986 )
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John E. Hansen Imelda M. Hansen v. Commissioner of Internal ... , 820 F.2d 1464 ( 1987 )
Joseph Edelson and Harriet Edelson v. Commissioner of ... , 829 F.2d 828 ( 1987 )
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 )