Wheeler v. Comm'r of Internal Revenue

• Decision Date: 06 December 2006
• Docket Number: No. 15720–05.,15720–05.
• Citation: 127 T.C. No. 14,127 T.C. 200
• Parties: Charles Raymond WHEELER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
• Court: U.S. Tax Court

127 T.C. 200

127 T.C. No. 14

Charles Raymond WHEELER, Petitioner

v.COMMISSIONER OF INTERNAL REVENUE, Respondent.

No. 15720–05.

United States Tax Court.

Dec. 6, 2006.

P failed to file his Federal income tax return for 2003. R issued a notice of deficiency in which he determined that P was liable for an income tax deficiency and for additions to tax under secs. 6651 and 6654, I.R.C. At trial, R, who had the burden of production under sec. 7491(c), I.R.C., with respect to the additions to tax, produced evidence that P did not file a Federal income tax return for 2003 and that P did not make any estimated tax payments for 2003, but R did not introduce any evidence regarding P's 2002 taxable year. Specifically, R failed to introduce evidence as to whether P had filed a Federal income tax return for 2002 and, if so, whether P had any reported Federal income tax liability for 2002. R also failed to introduce evidence that the Secretary had made a return for 2003 satisfying the requirements of sec. 6020(b), I.R.C.

1. Held: In order to satisfy his burden of production under sec. 7491(c), I.R.C., with respect to the sec. 6651(a)(2), I.R.C., addition to tax, R must introduce evidence that the tax was shown on a return. When a taxpayer has not filed a return, the sec. 6651(a)(2), I.R.C., addition to tax may not be imposed unless the Secretary has prepared a substitute for return (SFR) that meets the requirements of sec. 6020(b), I.R.C. Because R failed to introduce evidence that the Secretary had prepared an SFR for 2003 that met the requirements of sec. 6020(b), I.R.C., R did not satisfy his burden of production under sec. 7491(c), I.R.C., with respect to the sec. 6651(a)(2), I.R.C., addition to tax.

2. Held, further, in order to satisfy his burden of production under sec. 7491(c), I.R.C., with respect to the sec. 6654, I.R.C., addition to tax, R must introduce evidence that P failed to make a required annual payment under sec. 6654(d), I.R.C., for 2003. Because R failed to introduce evidence showing whether P had filed a return for 2002 (the immediately preceding taxable year) and, if so, whether P had any reported income tax liability for that year, R failed to demonstrate that P was required to make any estimated tax payments for 2003. Consequently, R did not satisfy his burden of production under sec. 7491(c), I.R.C.

3. Held, further, P's liability for income tax, for the sec. 6651(a)(1), I.R.C., addition to tax, and for a penalty under sec. 6673, I.R.C., determined.

Charles Raymond Wheeler, pro se.

Joan E. Steele, for respondent.

OPINION

MARVEL, Judge.

Respondent determined a deficiency in tax under section 6651(a)(1) ¹ of $2,037, under section 6651(a)(2) of $498, and under section 6654 of $245. Petitioner petitioned for a redetermination of the deficiency and the additions to tax. After concessions,² the issues for decision are:

(1) Whether respondent issued a valid notice of deficiency for petitioner's 2003 taxable year;

(2) whether petitioner is liable for an addition to tax under section 6651(a)(1) for failing to file his 2003 Federal income tax return;

(3) whether petitioner is liable for an addition to tax under section 6651(a)(2) for failing to pay the amount shown as tax on a return;

(4) whether petitioner is liable for an addition to tax under section 6654 for failing to pay estimated taxes; and

(5) whether the Court should impose a penalty under section 6673.

Background

Petitioner resided in Colorado Springs, Colorado, when he petitioned the Court in this case.

Petitioner did not file a Federal income tax return for 2003. Respondent issued a notice of deficiency to petitioner determining that petitioner failed to report taxable retirement distributions of $41,657, dividend income of $241, and interest income of $3; that petitioner was liable for an income tax deficiency of $9,507; and that petitioner was liable for additions to tax under sections 6651(a)(1) and (2) and 6654.

On August 24, 2005, petitioner timely petitioned for redetermination of the deficiency and the additions to tax. In his petition, petitioner disputed the full amount of the deficiency and the additions to tax ³ and alleged that there was a multitude of errors in respondent's determinations. However, most of the allegations in the petition either were unintelligible or, if intelligible, were frivolous.⁴ Petitioner did not assign any error as required by Rule 34(b)(4) ⁵ to respondent's determinations that petitioner received income from a retirement distribution,⁶ interest, or dividends during 2003.⁷ With respect to the additions to tax respondent determined, petitioner prayed in his petition that this Court find that “The Petitioner is not liable for any determination of penalties and/ or interest in the notice of deficiency” and that “The Petitioner is not liable for a penalty at 26 U.S.C. § 6654.”

At a pretrial conference held on April 17, 2006, we warned petitioner several times that he had not raised any nonfrivolous issue regarding respondent's deficiency determination and that, should he continue with similar arguments at trial, we would consider imposing a penalty under section 6673. At trial, respondent moved for the imposition of a penalty under section 6673(a)(1), and we again warned petitioner of the risk he would assume by pursuing frivolous arguments.

This is not the first time that petitioner has made frivolous arguments in this Court. In two consolidated cases involving petitioner's 1994–2001 taxable years decided after this case was heard, this Court imposed on petitioner a penalty of $3,000 under section 6673 for instituting proceedings based upon a frivolous position.⁸ See Wheeler v. Commissioner, T.C. Memo.2006–109.

Discussion

I. Validity of the Notice of Deficiency

Petitioner did not offer any testimony or argument at trial regarding most of the assignments of error in the petition.⁹ Petitioner argued only that the notice of deficiency was not statutory and, therefore, was invalid. Specifically, petitioner argued that a valid notice of deficiency must reference the particular statute upon which the Commissioner's determination is based. We address petitioner's argument in order to clarify that the notice of deficiency in question satisfied the requirements of sections 6212 and 7522.

Section 6212(a) authorizes the Secretary ¹⁰ to send a notice of deficiency to a taxpayer by certified mail or registered mail if the Secretary determines that the taxpayer is liable for a deficiency in income tax. Ordinarily, a notice of deficiency involving income tax is sufficient if it is mailed to a taxpayer's last known address. Sec. 6212(b)(1). A notice of deficiency described in section 6212 must also comply with section 7522. Sec. 7522(b)(1). Section 7522(a) provides that “Any notice to which this section applies shall 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.” However, section 7522(a) also provides that an inadequate description “shall not invalidate such notice.”

Petitioner does not dispute that respondent addressed the notice of deficiency to petitioner at his last known address, see sec. 6212(b)(1), and that respondent mailed the notice by certified or registered mail as authorized by section 6212(a). Petitioner also does not dispute that the notice of deficiency described the income adjustments as unreported income, listed the specific items of unreported income, and identified the additions to tax, pursuant to section 7522(a). Petitioner's argument at trial focused solely on the fact that the notice of deficiency did not identify the specific Code section requiring respondent's income adjustments.

Petitioner's argument assumes a requirement for a valid notice of deficiency that neither section 6212 nor section 7522(a) imposes. Although the notice of deficiency did not cite the section of the Code requiring a taxpayer to include pension, dividend, and interest income in gross income, see sec. 61(a),¹¹ a notice's failure to include a statutory citation for each adjustment does not invalidate the notice under section 6212, see Jarvis v. Commissioner, 78 T.C. 646, 655–656, 1982 WL 11081 (1982) (neither section 6212 nor any other provision of the Code prescribes the form of a notice or the specifics to be contained therein); Rogers v. Commissioner, T.C. Memo.2001–20, affd. without published opinion 281 F.3d 1278 (5th Cir.2001). Likewise, a failure to include a statutory citation for each adjustment in a notice does not invalidate a notice under section 7522. Sec. 7522(a). Section 7522(a) requires a notice of deficiency to describe the bases for, and identify the amounts of, tax and additions to tax, but it contains no requirement that a notice of deficiency identify the specific statutory provision supporting each adjustment.

The notice of deficiency described the income adjustments in sufficient detail to put petitioner on notice of the adjustments against him. See Jarvis v. Commissioner, supra at 655. We hold, therefore, that the failure to identify the statutory provision requiring respondent's income adjustments in the notice of deficiency does not render the notice invalid.

II. Additions to TaxA. Respondent's Burden of Production Under Section 7491(c)

Section 7491(c) was enacted by section 3001(a) of the Internal Revenue Service Restructuring and Reform Act of 1998 (RRA 1998), Pub.L. 105–206, 112 Stat. 726, and applies to court proceedings arising in connection with examinations commencing after July 22, 1998. RRA 1998 sec. 3001(c)(1), 112 Stat. 727. Section 7491(c) provides:

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 penalty, addition to tax, or additional amount imposed by this title.

In order to satisfy his...