Wallmeyer v. Commissioner
| Decision Date | 28 March 1990 |
| Docket Number | Docket No. 10727-87. |
| Citation | 1990 TC Memo 166,59 TCM (CCH) 271 |
| Parties | Joseph B. Wallmeyer v. Commissioner. |
| Court | U.S. Tax Court |
Joseph B. Wallmeyer, pro se. John C. McDougal, for the respondent.
This matter is before the Court on respondent's motion for summary judgment. On December 1, 1986, a jeopardy assessment was made against petitioner for taxable years 1980, 1981, 1982, 1983, and 1984, pursuant to section 6861(a).1 In a notice of deficiency dated January 29, 1987, respondent determined deficiencies in petitioner's Federal income taxes and additions to tax as follows:
Additions to Tax
Year Deficiency Sec. 6653(b) Sec. 6654(a)
1980....................$5,031.84 $2,515.92 --
1981.................... 5,579.00 2,789.50 $336.82
Additions to Tax
Year Deficiency Sec. 6653(b)(1) Sec. 6654(b)(2) Sec. 6661 Sec. 6654(a)
1982................$ 6,683.00 $3,341.50 50 percent of $1,670.75 $650.21
the interest due
on $6,683.00
1983................ 6,162.00 3,081.00 50 percent of 270.58 --
the interest due
on $6,162.00
1984................ 12,745.00 6,372.50 50 percent of 1,608.00 305.27
the interest due
on $12,745.00
Respondent's motion for summary judgment raises the following issues: (1) Whether petitioner failed to report income for taxable years 1980 through 1984;2 (2) whether petitioner is liable for additions to tax pursuant to sections 6654(a) and 6661;3 and (3) whether petitioner is liable for the additions to tax for fraud for the taxable years 1981 through 1984.4
Respondent contends in his motion for summary judgment that all of the facts necessary for a decision in this case have been established pursuant to Rule 90(c) by reason of petitioner's failure to respond to respondent's request for admissions, and that he is entitled to decision under Rule 121 as a matter of law.
Petitioner resided in Richmond, Virginia, at the time he filed his petition in this case.
Rule 121(b) provides that a decision may be rendered on a motion for summary judgment if it is shown "that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law." The factual materials presented and the inferences to be drawn from such materials must be viewed in the light most favorable to the party opposing the motion. Naftel v. Commissioner Dec. 42,414, 85 T.C. 527, 528-529 (1985); Gauntt v. Commissioner Dec. 40,935, 82 T.C. 96, 101 (1984); Jacklin v. Commissioner Dec. 39,278, 79 T.C. 340, 344 (1982). Respondent, as the moving party, has the burden of proving that no genuine issue exists as to any material fact, and that he is entitled to judgment as a matter of law. Marshall v. Commissioner Dec. 42,301, 85 T.C. 267, 271 (1985); Naftel v. Commissioner, supra at 529; Gulfstream Land & Development Corp. v. Commissioner Dec. 35,833, 71 T.C. 587, 596-597 (1979).
On October 17, 1988, respondent served upon petitioner a 13page, 114-paragraph request for admissions pursuant to Rule 90. Because petitioner failed to respond to respondent's request for admissions, the facts set forth therein are deemed admitted and conclusively established. Freedson v. Commissioner Dec. 33,511, 65 T.C. 333, 335-336 (1975), affd. 78-1 USTC ¶ 9171 565 F.2d 954 (5th Cir. 1978); Morrison v. Commissioner Dec. 40,506, 81 T.C. 644 (1983); Rule 90(c) and (f).
On March 29, 1989, we held a hearing to consider an oral motion to dismiss for lack of jurisdiction, made by petitioner at a previous hearing. At the conclusion of the hearing, we denied petitioner's oral motion to dismiss for lack of jurisdiction. We then explained to petitioner that the facts contained in respondent's request for admissions are considered conclusively established due to his failure to timely respond pursuant to Rule 90. We further advised petitioner that if he disagreed with any of the facts deemed admitted, he should file a motion requesting to be relieved of those admissions.
During the hearing, petitioner asked about his Fifth Amendment right against self-incrimination. We advised him that he could raise his right against self-incrimination, but that unless he could establish that he faced a realistic possibility of criminal prosecution, the privilege would most likely be unavailable to him with respect to the years in issue. During the hearing, respondent's counsel stated that his only objective in this case was to dispose of the civil tax issues. Respondent's counsel also stated that petitioner was not under criminal investigation for any of the years in issue or for any subsequent years.5
On June 21, 1989, petitioner filed a letter with the Court which stated:
Having read the admissions I received from the IRS, I find myself in a precarious position. If I answer the admissions truthfully, there is a possibility of future prosecution for the years 1980 thru sic 1985. Therefore, unless the IRS can give me immunity against futher sic prosecution, I must stand on my rights under the Fifth Amendment of the United States Constitution.
Absent any evidence of a real threat of criminal prosecution, the Fifth Amendment privilege against selfincrimination cannot be used to justify petitioner's refusal to answer the request for admissions. United States v. Reis 85-2 USTC ¶ 9550, 765 F.2d 1094, 1096 (11th Cir. 1985); McCoy v. Commissioner Dec. 37,967, 76 T.C. 1027 (1981), affd. 83-1 USTC ¶ 9152 696 F.2d 1234 (9th Cir. 1983). Petitioner has introduced no evidence to support his contention that he faces a substantial and real hazard of criminal-prosecution. Under these circumstances, we will not allow petitioner to use the Fifth Amendment as a basis for relieving him from his deemed admissions. Petitioner has made no other allegations regarding the deemed admissions and they will therefore be accepted as true.
On July 31, 1989 respondent filed his motion for summary judgment. By Court order, dated August 4, 1989, we ordered petitioner to file a response to respondent's motion. On September 6, 1989, petitioner filed the following response:
The 114 paragraphs of deemed admissions establish that petitioner had taxable income and tax liabilities in the amounts determined in the notice of deficiency.6 The admissions specify individual sources and amounts of income, deductions, and total annual taxable income and tax. We therefore grant respondent's motion regarding the deficiencies.
The next issue for decision is whether petitioner is liable for the additions to tax under section 6654(a) for underpayment of estimated tax for the taxable years 1981 and 1982. For purposes of section 6654(a), taxes withheld from wages are deemed to be a payment of estimated tax for the taxable year. Sec. 6654(e)(2).7 Facts deemed admitted establish that petitioner is liable for the additions to tax under section 6654(a). See Grosshandler v. Commissioner Dec. 37,317, 75 T.C. 1, 20-21 (1980).
We must also decide whether petitioner is liable for the additions to tax under section 6661. Section 6661 imposes an addition to tax in an amount equal to 25 percent of the amount of any underpayment attributable to a substantial understatement of income tax.8 Pallottini v. Commissioner Dec. 44,671, 90 T.C. 498 (1988). An understatement is substantial if it exceeds the greater of 10 percent of the tax required to be shown on the return, or $5,000. Sec. 6661(b)(1). The amount of the understatement is equal to the excess of the amount of tax required to be shown on the return for the tax year less the amount of the tax shown on the return. Woods v. Commissioner Dec. 44,903, 91 T.C. 88, 94 (1988). For purposes of calculating the amount of the understatement, withheld taxes are disregarded. Woods v. Commissioner, supra at 95 n.12. Because no returns were filed by petitioner, the amount of tax shown on the returns is considered to be zero. Sec. 1.6661-2(d)(2), Income Tax Regs.
To calculate the addition to tax under section 6661, the amount of petitioner's withholding credits must be subtracted from the understatement to determine the amount of any underpayment. Woods v. Commissioner, supra at 99. The deficiencies that we uphold for 1982, 1983, and 1984 qualify as "substantial understatements" as defined in section 6661(b). The facts establish that petitioner did not file income tax returns for the years in issue even though all of the items of income determined by respondent were clearly taxable. None of the provisions for reduction of the section 6661 addition to tax contained in section 6661(b)(2)(B) are applicable. The facts clearly demonstrate that petitioner did not act in good faith or have reasonable cause within the meaning of section 6661(c). Respondent is therefore entitled to summary judgment that the section 6661 addition to tax applies to each of these years. Due to respondent's...
To continue reading
Request your trial