Ryan David Funk v. Commissioner , 123 T.C. No. 11 ( 2004 )

123 T.C. No. 11UNITED STATES TAX COURT
RYAN DAVID FUNK, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 6743-04. Filed August 18, 2004.
R determined a deficiency in P’s 2001 Federal
income tax and an addition to tax under sec.
6651(a)(1), I.R.C. P filed a petition with the Court
in which he asserted nothing but frivolous and
groundless arguments. R moved to dismiss for failure
to state a claim upon which relief can be granted. In
response to the Court’s order directing P to file a
proper amended petition, P filed an amended petition
repeating the frivolous arguments contained in the
petition.
At the hearing on R’s motion, R asserted that he
did not bear a burden of production with regard to the
addition to tax determined in the notice of deficiency.
R filed a supplement to his motion in which he argued
that the burden of production imposed upon R under sec.
7491(c), I.R.C., with regard to additions to tax is not
applicable when the pleadings fail to state a claim for
relief.
- 2 -
Held: Because the petition and amended petition
fail to state a justiciable claim for relief, R is not
obliged to produce evidence in support of the addition
to tax determined by R in the notice of deficiency.
Held, further, R’s motion to dismiss will be
granted and this case will be dismissed and decision
entered in R’s favor.
Ryan David Funk, pro se.
David A. Abernathy, Peter K. Reilly, and Jeremy L.
McPherson, for respondent.
OPINION
DAWSON, Judge: This case was assigned to Chief Special
Trial Judge Peter J. Panuthos pursuant to the provisions of
section 7443A(b)(5) and Rules 180, 181, and 183.1 The Court
agrees with and adopts the opinion of the Special Trial Judge,
which is set forth below.
OPINION OF THE SPECIAL TRIAL JUDGE
PANUTHOS, Chief Special Trial Judge: This matter is before
the Court on respondent’s motion to dismiss for failure to state
a claim upon which relief can be granted. As explained in detail
below, we shall grant respondent’s motion.
1
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 -
Background
Respondent issued a notice of deficiency to petitioner
determining a deficiency of $1,369 in his 2001 Federal income tax
and an addition to tax of $308.032 for failure to file a tax
return under section 6651(a)(1).3 Respondent determined that
petitioner failed to report wages, interest, and dividend income.
Petitioner filed with the Court a petition for
redetermination contesting the above-referenced notice of
deficiency. In the 74-page petition, petitioner asserted that he
is a “non-taxpayer”, the Internal Revenue Service lacks
“jurisdiction” over him, and the Internal Revenue Code does not
include a provision that makes him liable for Federal income
taxes. The petition does not contain specific allegations
challenging respondent’s determination that petitioner is liable
for the addition to tax under section 6651(a)(1). Petitioner
2
Respondent conceded that the $424.39 amount listed as due
under sec. 6651(a)(1) on the cover page of the notice of
deficiency was overstated inasmuch as it erroneously included an
addition to tax of $116.37 under sec. 6651(a)(2). Respondent
conceded that petitioner is not liable for an addition to tax
under sec. 6651(a)(2) for the taxable year 2001.
3
Sec. 6651(a)(1) provides for an addition to tax in the
event a taxpayer fails to file a timely return (determined with
regard to any extension of time for filing), unless it is shown
that such failure is due to reasonable cause and not due to
willful neglect. The amount of the addition is equal to 5
percent of the amount required to be shown as tax on such return
for each month or fraction thereof during which such failure
continues, up to a maximum addition of 25 percent for returns
more than 4 months delinquent.
- 4 -
resided in Rocklin, California, at the time the petition was
filed.
Respondent filed a motion to dismiss for failure to state a
claim upon which relief can be granted. The Court subsequently
ordered petitioner to file a proper amended petition setting
forth with specificity each error allegedly made by respondent in
the determination of the deficiency and the addition to tax in
dispute and separate statements of every fact upon which the
assignments of error are based. In response to the Court’s
Order, petitioner filed an amended petition, an objection to
respondent’s motion, and a motion to dismiss for lack of subject
matter jurisdiction. In each of the above-referenced documents,
petitioner continued to assert the frivolous arguments set forth
in the petition.4
Respondent’s motion to dismiss was called for hearing at the
Court’s motions session held in Washington, D.C. Counsel for
respondent appeared at the hearing and presented argument in
support of respondent’s motion to dismiss. No appearance was
entered by or on behalf of petitioner at the hearing; however,
petitioner filed with the Court a written statement pursuant to
Rule 50(c).
4
We summarily denied petitioner’s motion to dismiss by Order
dated June 16, 2004.
- 5 -
During the hearing, counsel for respondent failed to offer
any evidence in support of respondent’s determination that
petitioner is liable for the addition to tax under section
6651(a)(1). Counsel for respondent asserted that it was
respondent’s position that he was not obligated to submit
evidence in support of the addition to tax.
Following the hearing, the Court directed respondent to file
a memorandum addressing the question whether respondent bears the
burden of production under section 7491(c) with regard to the
addition to tax under section 6651(a)(1). Respondent
subsequently filed a supplement to his motion to dismiss in which
he argued that, insofar as petitioner failed to state a claim
upon which relief may be granted with respect to any issue,
specifically including the addition to tax under section
6651(a)(1), respondent is not obliged to produce evidence in
support of that determination.
Discussion
Rule 34(b)(4) requires that a petition filed in this Court
shall contain clear and concise assignments of each and every
error that the taxpayer alleges to have been committed by the
Commissioner in the determination of the deficiency and the
additions to tax or penalties in dispute. Rule 34(b)(5) further
requires that the petition shall contain clear and concise
lettered statements of the facts on which the taxpayer bases the
- 6 -
assignments of error. Jarvis v. Commissioner, 78 T.C. 646, 658
(1982). Any issue not raised in the pleadings is deemed to be
conceded. Rule 34(b)(4); Jarvis v. Commissioner, supra at 658
n.19; Gordon v. Commissioner, 73 T.C. 736, 739 (1980). Further,
the failure of a party to plead or otherwise proceed as provided
in the Court’s Rules may be grounds for the Court to hold such
party in default, either on the motion of another party or on the
initiative of the Court. Rule 123(a); Ward v. Commissioner, T.C.
Memo. 2002-147.
Generally speaking, because the taxpayer bears the burden of
proof, the Commissioner’s determinations in a notice of
deficiency are presumed to be correct. See Rule 142(a); INDOPCO,
Inc. v. Commissioner, 503 U.S. 79, 84 (1992); Welch v. Helvering,
290 U.S. 111, 115 (1933); cf. sec. 7491(a).
On the other hand, section 7491(c) provides that the
Commissioner shall have the burden of production in any court
proceeding with respect to the liability of any individual for
any penalty, addition to tax, or additional amount.
Specifically, section 7491(c), which was enacted by the Internal
Revenue Service Restructuring and Reform Act of 1998 (RRA 1998),
Pub. L. 105-206, sec. 3001(a), 112 Stat. 726, provides as
follows:
SEC. 7491(c) Penalties.-–Notwithstanding any other
provision of this title, the Secretary shall have the
burden of production in any court proceeding with
respect to the liability of any individual for any
- 7 -
penalty, addition to tax, or additional amount imposed
by this title.
Section 7491(c) is effective with respect to court proceedings
arising in connection with examinations commencing after July 22,
1998. RRA 1998 sec. 3001(c)(1), 112 Stat. 727. There is no
dispute that the examination in the present case commenced after
July 22, 1998.
We agree with respondent that the petition and amended
petition fail to state a claim upon which relief can be granted.
Although it is evident that petitioner disagrees with
respondent’s determinations, the petition and amended petition
lack either a clear and concise statement of the errors allegedly
committed by respondent in the determination of the deficiency
and addition to tax or a statement of the facts on which
petitioner bases his assignments of error.5 The petition and
amended petition contain nothing more than frivolous rhetoric and
legalistic gibberish, as demonstrated by the summary of the
petition provided above.
5
In an unreported income case, such as the present case, a
taxpayer can reasonably be expected to state facts tending to
show that the taxpayer was unemployed, earned a lower amount of
income, or otherwise did not receive the payments reported to
respondent by third-party payors. See Parker v. Commissioner,
117 F.3d 785, 787 (5th Cir. 1997); White v. Commissioner, T.C.
Memo. 1997-459. Further, where the Commissioner has determined
an addition to tax under sec. 6651(a)(1) (failure to file) a
taxpayer can reasonably be expected to state facts tending to
show that the taxpayer’s failure to file a tax return was
reasonable or statutorily excused.
- 8 -
We see no need to catalog petitioner’s arguments and
painstakingly address them. As the Court of Appeals for the
Fifth Circuit has remarked: “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.” Crain v. Commissioner, 737 F.2d 1417, 1418
(5th Cir. 1984).
The question that remains is whether respondent nevertheless
must offer evidence in support of the addition to tax under
section 6651(a)(1). Respondent cites our holding in Swain v.
Commissioner, 118 T.C. 358 (2002), in support of his position
that he is not obliged to offer such evidence in this case.
In Swain v. Commissioner, supra, the taxpayer filed a
petition contesting a notice of deficiency in which the
Commissioner determined that the taxpayer was liable for income
tax deficiencies and accuracy-related penalties under section
6662(a) for the years in issue. In response to the petition, the
Commissioner filed (and we granted) a motion to strike the vast
majority of the allegations in the petition on the ground that
such allegations were frivolous and groundless. The only
allegation remaining in the petition related to the taxpayer’s
argument that the period of limitations on assessment had
expired.
- 9 -
The Commissioner filed a motion for summary judgment
asserting: (1) The undisputed facts showed that the notice of
deficiency was mailed to the taxpayer within the 3-year period of
limitations, and (2) no additional assignments of error remained
with regard to the deficiencies and accuracy-related penalties.
We granted the Commissioner’s motion for summary judgment.
In granting the Commissioner’s motion, we held that the
Commissioner was relieved of the obligation imposed under section
7491(c) to produce evidence in support of the accuracy-related
penalties determined in the notice of deficiency because the
taxpayer was deemed to have conceded the penalties. Id. at 363.
In so holding, we looked to Rule 34(b)(4) and the requirement
that the taxpayer must assign error to each and every
determination in a notice of deficiency, including issues with
respect to which the Commissioner bears the burden of proof. Id.
Consistent with our order striking all frivolous allegations from
the petition, we concluded that the taxpayer had failed to
challenge (and was deemed to have conceded) the penalties and,
therefore, the Commissioner was not obliged under section 7491(c)
to produce evidence that the penalties were appropriate. Id. at
364-365.
Extending and applying the rationale of Swain v.
Commissioner, supra, to the circumstances presented in the
present case, we agree with respondent that he has no obligation
- 10 -
under section 7491(c) to offer evidence in support of the
addition to tax under section 6651(a)(1). As we see it, in the
absence of a justiciable claim with respect to the addition to
tax under section 6651(a)(1), petitioner is deemed to have
conceded that item. See Rule 34(b)(4); Swain v. Commissioner,
supra at 364-365; Jarvis v. Commissioner, 78 T.C. at 658 n.19.
Stated differently, where a petition fails to state a claim in
respect of penalties, additions to tax, and/or additional
amounts, the Commissioner incurs no obligation to produce
evidence in support of such determinations pursuant to section
7491(c). See, e.g., Parker v. Commissioner, 117 F.3d 785, 787
(5th Cir. 1997) (the Commissioner has no obligation to
investigate (or produce evidence with respect to) a third-party
payment report that is not disputed by the taxpayer).
Consistent with the foregoing, we shall grant respondent’s
motion to dismiss, as supplemented, in that we shall enter a
decision in this case sustaining respondent’s determinations as
set forth in the notice of deficiency issued to petitioner. See
Rules 34(a)(1), 123(b); Scherping v. Commissioner, 747 F.2d 478(8th Cir. 1984).
We turn now to section 6673(a). As relevant herein, section
6673(a)(1) authorizes the Tax 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
- 11 -
the taxpayer primarily for delay or that the taxpayer’s position
in such proceeding is frivolous or groundless. Although we shall
not impose a penalty upon petitioner pursuant to section 6673, we
nevertheless take this opportunity to admonish petitioner that
the Court will consider imposing such a penalty should he return
to the Court and advance similar arguments in the future.
To reflect the foregoing,
An order of dismissal and
decision will be entered.