Kramer v. Comm'r
| Decision Date | 16 February 2021 |
| Docket Number | T.C. Memo. 2021-16,Docket No. 15368-17.,Docket No. 15224-17 |
| Parties | DON KRAMER AND LELA ARABULI, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent DON KRAMER, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
Don Kramer and Lela Arabuli, pro sese.
Mark J. Tober, Sean P. Deneault, and William T. Maule, for respondent.
GALE, Judge: Respondent has moved in these consolidated cases for entry of default and decision (motion). The motion was set for a hearing at which petitioners failed to appear.1 Because petitioners neither cooperated in preparing these cases for trial nor appeared for trial, we will grant respondent's motion and enter decisions in his favor.
The petitions in these cases seek redetermination of adjustments in two notices of deficiency.2 One of the notices, in the case at docket No. 15224-17, was addressed to both petitioner Don Kramer and petitioner Lela Arabuli. In that notice of deficiency, respondent determined the following deficiencies, as well as section 66513 failure-to-file additions to tax, a section 6662 accuracy-related penalty, and section 6663 fraud penalties:4 Addition to tax Penalties Year Deficiency sec. 6651 Sec. 6662 Sec. 6663 2006
$49,559 $12,349.00 --- $37,169 2007
30,735 9,306.75 --- 23,051 2008
16,467 4,116.75 --- 12,350 2010
4,424 971.50 $777.20 ---
Respondent determined that Mr. Kramer, but not Ms. Arabuli, is liable for section 6663 fraud penalties. Petitioners timely petitioned for redetermination with respect to this notice of deficiency. In his answer, respondent affirmatively pleaded numerous allegations in support of his fraud penalty determinations against Mr. Kramer for 2006, 2007, and 2008.
In the other notice of deficiency, in the case at docket No. 15368-17, addressed only to Mr. Kramer, respondent determined a section 6651 failure-to-file addition to tax and section 6663 fraud penalties5 as follows: Addition to tax Penalties Year Deficiency sec. 6651 Sec. 6662 Sec. 6663 2004
--- --- --- $17,295.00 2005
--- $2,039 --- 8,724.75
Mr. Kramer timely petitioned for redetermination with respect to the adjustments in this notice of deficiency.6 In his answer, respondent affirmatively pleaded numerous allegations in support of his fraud penalty determinations against Mr. Kramer for 2004 and 2005.
First set for trial in November 2018, these cases were continued and consolidated at the parties' joint request. They were rescheduled for trial as described below.
A notice setting the cases for trial (trial notice), setting the trial date in each of these cases for November 18, 2019, was mailed on June 18, 2019, to petitioners at the address they provided in their petitions. The trial notice warned: "Yourfailure to appear may result in dismissal of the case and entry of decision against you." This mailing was not returned.
A standing pretrial order was attached to the trial notice. The standing pretrial order directed petitioners, among other things: (1) to communicate and cooperate with respondent's counsel regarding settlement or, if the case could not be settled, the preparation of a stipulation of facts; (2) to identify in writing and exchange with respondent's counsel, no later than November 4, 2019, any documents or materials that petitioners expected to offer at trial; (3) to serve on respondent's counsel and file with the Court a pretrial memorandum no later than November 4, 2019; and (4) to be present on the trial date and prepared to try the case. The standing pretrial order warned: "The Court may impose appropriate sanctions, including dismissal, for any unexcused failure to comply with this Order."
A second notice (reminder notice), mailed on October 4, 2019, to petitioners at the address they provided in their petitions, reminded them that their cases had been set for trial on November 18, 2019, and warned that failure to appear could result in dismissal of their cases. This mailing was not returned.
Petitioners did not file a pretrial memorandum in either of these cases. Additionally, respondent's counsel sent petitioners several letters seeking their cooperation in preparing these cases for trial. Respondent's counsel also attempted to contact petitioners by telephone on several occasions. Although these efforts did yield some communications between the parties, they made little progress in preparing these cases for trial. Indeed, there was no successful communication between the parties for roughly an entire year after the Court continued these cases from their initial trial setting.7
When respondent's efforts to pursue informal discovery proved unsuccessful, he turned to formal discovery. Respondent's formal discovery efforts began with a request for admissions under Rule 90, which was filed with the Court and served on petitioners on August 30, 2019. While his request for admissions was pending, respondent sent petitioners a proposed stipulation of facts. Although respondent's counsel took steps to ensure that petitioners were aware of the procedures set forth in Rule 90(c) for serving and filing a proper response to the request for admissions, petitioners did not do so.8 Respondentthereafter incorporated the matters addressed in the request for admissions in a proposed first supplemental stipulation of facts.
On October 1, 2019, respondent's counsel sent a copy of the first supplemental stipulation of facts to petitioners, accompanied by a letter that explained the parties' joint obligation under Rule 91 to reach, to the fullest extent possible, comprehensive stipulations regarding matters relevant to the pending cases. The letter also informed petitioners that respondent planned to seek an order compelling stipulation under Rule 91(f).
On October 4, 2019, respondent filed a motion for an order to show cause why proposed facts and evidence should not be accepted as established pursuant to Rule 91(f), which included as exhibits the proposed stipulation of facts and the proposed first supplemental stipulation of facts. The Court then issued an order to show cause directing petitioners to show cause by October 28, 2019, why the matters set forth in the proposed stipulation of facts and first supplemental stipulation of facts should not be treated as established.
In response, Mr. Kramer filed a document on November 1, 2019, entitled "Tax Statement Affidavit". Instead of addressing respondent's proposed stipulations, the Tax Statement Affidavit set forth hundreds of pages of tax-protester rhetoric. Ms. Arabuli did not file any response to the order to show cause. Accordingly, the Court deemed stipulated all matters set forth in the proposed stipulation of facts and the first supplemental stipulation of facts.
Rule 123(a) provides that the Court may hold a party in default and enter a decision against that party if he or she has "failed to plead or otherwise proceed as provided by these Rules or as required by the Court". Rule 123(b) allows the Court broad discretion to dismiss a case "[f]or failure of a petitioner properly to prosecute or to comply with these Rules or any order of the Court or for other cause which the Court deems sufficient". In general, entry of default under Rule 123(a) is appropriate as to issues where the Commissioner bears the burden of proof, while dismissal under Rule 123(b) is appropriate where the taxpayer bears the burden of proof. See Smith v. Commissioner, 926 F.2d 1470, 1476 (6th Cir. 1991), aff'g 91 T.C. 1049 (1988); Putnam v. Commissioner, T.C. Memo. 2015-160, at *12-*13.
Id. at *10-*11. We have also pointed out that in cases where "a taxpayer does not think well enough of his case to defend it where the government has the burden of proof, this Court should default him." Bosurgi v. Commissioner, 87 T.C. 1403, 1408 (1986).
Petitioners' conduct in these cases establishes that they have failed to proceed both as provided by the Court's Rules and as we have otherwise directed by order. Although the Court's Rules required petitioners to cooperate with respondent's counsel to prepare stipulations of facts, they failed to do so. Additionally, petitioners did not appear for trial, despite being warned by the trial notice, standing pretrial order, and reminder notice that failure to appear could result in dismissal of these cases and entry of decisions against them. Finally, petitioners have failed to cooperate with respondent's counsel to prepare for trial or otherwise resolve these cases as directed in the standing pretrial order. Petitioners have not advanced any justification for their failures. Consequently, we conclude that petitioners are in default under Rule 123(a).
Although petitioners are in default, respondent bears certain burdens of production or proof with respect to the deficiencies, additions to tax, and penalties at issue in these cases. Accordingly, we must also determine whether respondent has carried his various burdens in order to decide whether it is appropriate to enter decisions in his favor on all issues determined in the notices of deficiency. See Hill v. Commissioner, at...
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