Leggett v. Commissioner, Docket No. 17637-97.

• Court: United States Tax Court
• Writing for the Court: Chiechi
• Citation: 77 T.C.M. 1624
• Parties: David M. Leggett v. Commissioner.
• Docket Number: Docket No. 17637-97.
• Decision Date: 30 March 1999

77 T.C.M. 1624 T.C. Memo. 1999-100 David M. Leggett
v.
Commissioner. Docket No. 17637-97. United States Tax Court. Filed March 30, 1999.

[77 T.C.M. 1625]

David M. Leggett, pro se. Michael A. Pesavento, for the respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

CHIECHI, Judge:

Respondent determined the following deficiencies in, and additions to, petitioner's Federal income tax (tax):

 Additions to Tax
                 ------------------------
                Year Deficiency Sec. 6651(f) Sec. 6654
                1992 ................................. $17,383 $ 8,312 $ 408
                1993 ................................. 20,790 15,593 809
                1994 ................................. 25,676 19,257 1,199
                1995 ................................. 20,070 20,302 1,468
                

The issues remaining for decision are:

(1) Should respondent's determination that petitioner's filing status is married, filing separately be sustained? We hold that it should.

(2) Is petitioner liable for the addition to tax under section 6651(f)¹ for fraudulent failure to file a return for each of the years at issue? We hold that he is.

FINDINGS OF FACT

Some of the facts have been stipulated and are so found.

Petitioner's mailing address was in Florida at the time the petition was filed.

During the years at issue, petitioner, who dealt primarily in cash, worked as an employee of Biddle Painting and Drywall, Inc. (Biddle). On or about June 30, 1993, petitioner submitted to Biddle a false Form W-8 (Certificate of Foreign Status) in which he claimed not to be a U.S. citizen and to be exempt from backup withholding rules. As an employee, Biddle paid petitioner compensation for his services during 1992, 1993, 1994, and 1995 in the amounts of $52,456, $60,970, $74,925, and $79,360, respectively.

On January 24, 1995, petitioner and Biddle executed what purported to be a contract which was entitled "CONTRACT BETWEEN TRADESMAN/LABORER/CRAFTSMAN AND PROPERTY OWNER". That document stated in pertinent part:

In the absence of "real" money (commodity money), the TRADESMAN [petitioner] offers to trade his property at the rate of * * * * * Federal Reserve Notes (FRN's) for each hour of labor expended on behalf of the PROPERTY OWNER [Biddle]. The TRADESMAN does not receive the FRN's as equal trade value for his property, but for the potential opportunity to trade said FRN's for something of actual value. However, the PROPERTY OWNER is immediately, upon receipt of the FRN's by the TRADESMAN, relieved of any further obligations to the TRADESMAN for the labor for which said FRN's were given.

* * * * * * *

TRADESMAN is specifically NOT the employee of the PROPERTY OWNER, nor is he an "independent contractor"

During 1992 and 1993, petitioner received taxable interest income from Great Western Bank in the amounts of $149 and $88, respectively. During 1992, he also received self-employment income from NTS Sabal Golf Villas in the amount of $181.

77 T.C.M. 1626

Biddle and the other payors of income to petitioner during the years at issue reported the payment of such income to the Internal Revenue Service (Service).

Petitioner made estimated tax payments for 1992 in the amounts of $1,800, $2,000, and $2,500 on April 20, 1992, June 20, 1992, and September 23, 1992, respectively. Petitioner made no estimated tax payments for 1993, 1994, and 1995. No amounts were withheld by Biddle for any of the years at issue from the compensation that Biddle paid petitioner during those years.

Petitioner and his wife, Donna Leggett (Ms. Leggett), filed joint Federal income tax returns, Forms 1040 (returns), for 1988, 1989, 1990, and 1991, in which they reported the following adjusted gross income and tax liability:

Year Adjusted Gross Income Tax Liability
                1988 .................................. $38,495 $4,144
                1989 .................................. 37,280 3,551
                1990 .................................. 33,685 2,816
                1991 .................................. 31,970 2,651
                

On March 4, 1994, petitioner submitted to the Service Forms 1040NR, U.S. Nonresident Alien Income Tax Return (Forms 1040NR), for the years 1984 through 1992. Handwritten at the top of those forms were the words "AMENDED RETURN". Most of the lines in those forms were stricken out and other lines in those forms contained the notation "N/A". The word "(DEFERRED)" appeared on the line showing "Amount * * * REFUNDED TO YOU".

Around January 1994, respondent assessed frivolous return penalties (civil penalties) against petitioner and Ms. Leggett for filing frivolous Forms 1040NR. Thereafter, but prior to May 24, 1994, respondent commenced collection efforts against petitioner and Ms. Leggett for those penalties. In response to those collection efforts, petitioner wrote a letter to the Service's District Director in Jacksonville, Florida. That letter stated in pertinent part:

It has come to my attention that your thugs/agents locally have been making their rounds to local Natural Free Citizens to extort money from them, and to steal their property. The returns that you refer to in your 4/18/94 data have been Lawfully revoked as of 4/20/93 (Lawful Affidavit) and corrected Lawfully. My 4/29/94 NOTICE OF OBJECTION, NOTICE TO ABATE (enclosed) still stands. Any action on or against my property will be deemed as Fraud and WILLFUL TRESPASS.

By letter dated December 22, 1995, respondent disallowed the so-called "deferred" refunds that petitioner claimed in the Forms 1040NR for all taxes previously paid for 1984 through 1992.

Petitioner did not file returns for the years at issue. On August 30, 1995, a revenue agent of the Service (revenue agent) sent a letter (August 30, 1995 letter) to petitioner and Ms. Leggett, which stated in pertinent part:

The Internal Revenue Service does not have a record of you [sic] having filed your Federal Income Tax Returns for the years shown above [1992, 1993, and 1994].² In order to resolve this matter as expeditiously as possible, and make the matter as simple as possible, it is very important that you contact this office within 10 days from the date of this letter. Please call us at the telephone number shown above.

At the time you telephone, you will be informed by an Internal Revenue Agent of the Examination Division what procedures you will need to follow to file your delinquent returns. You may wish to commence gathering documentation to support the items of income and expense listed on delinquent return. * * *

Should you fail to telephone us within the 10 day period, you will leave us no choice but to proceed with other actions to bring you into compliance with the tax laws. This may include preparation of a report based upon information currently in our possession, and assessing any taxes, interest, and penalties for the year involved.

If you have previously filed returns for the years shown above, or have returns completed that can be processed as delinquent returns, please inform us at the time you telephone. You will be asked to provide copies of the returns previously filed, or the delinquent returns prepared and not filed. [Fn. added.]

Shortly after the August 30, 1995 letter was sent to petitioner, petitioner telephoned the revenue agent to request a meeting which he would be allowed to record by taping it with his tape recorder. In September 1995, the revenue agent and another revenue agent of the Service met (September 1995 meeting) with petitioner, his father William Leggett, and another individual named Toby Brown. Petitioner brought some papers with him to the September 1995 meeting,

77 T.C.M. 1627

and he started to read frivolous arguments from those papers about his being a nonresident alien. He also questioned the authority of the Service over him. The revenue agents attempted to ask petitioner several questions at the September 1995 meeting in order to ascertain his income and similar information that they needed to determine his tax liability for the years for which he did not file returns. However, petitioner refused to answer those questions. Instead, he continued to read from the papers that he had brought with him. When the revenue agents realized that petitioner did not intend to answer any of their questions, they informed him that the meeting was concluded and asked him and the individuals who accompanied him to leave. After the September 1995 meeting, petitioner sent a letter to the revenue agent's supervisor complaining that he had been denied due process. Petitioner did not provide to the Service at the September 1995 meeting, or at any other time, any documents or information from which his tax liability could be determined for the years for which he did not file returns.

The Service's audit of petitioner continued from August 1995 through October 1996. That audit took significantly longer than that type of audit should have taken because petitioner refused to cooperate with the revenue agent or any other representatives of the Service. As a result of petitioner's refusal to cooperate with the Service, the Service had to conduct an extensive investigation in order to determine petitioner's income for each of the years at issue and other information relevant to determining his tax liability for each such year.

On February 19, 1988, petitioner acquired his residence located at 5136 Neponset Avenue, Orlando, Florida (Neponset property) for $98,000. In acquiring that property, petitioner obtained on February 19, 1988, a mortgage loan from the California Federal Savings and Loan Association in the amount of $78,400. During 1992, petitioner paid principal and interest totaling $24,983 on the mortgage loan on the Neponset property, and that mortgage loan was completely paid off by December 22, 1992.

During August 1995, petitioner obtained from World Savings and Loan Association another mortgage loan on the Neponset property in the amount of $65,000. According to the application for that mortgage loan, the purpose of the loan was to acquire farmland in Tennessee.

On or about August 14, 1995, after...