Tax Court wrote:RMM
UNITED STATES TAX COURT
WASHINGTON, DC 20217
DAVID C. DIEMER,
Petitioner,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
Docket No. 13123-10 L.
ORDER AND DECISION
On January 6, 2011, respondent filed a motion for summary judgment and a motion for penalty under I.R.C. section 6673. On January 27, 2011, petitioner filed responses to respondent's motions.
The Internal Revenue Service (IRS) determined that petitioner filed a frivolous Federal income tax return for 2007 and assessed a $5,000 frivolous return penalty pursuant to I.R.C. section 6702(a). Petitioner failed to pay the penalty, and the IRS sent petitioner a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. Petitioner timely requested a collection due process hearing and challenged the assessment of the frivolous return penalty. The settlement officer assigned to petitioner's case concluded in a notice of determination that the IRS validly assessed the frivolous return penalty pursuant to I.R.C. section 6702(a) and that collection activity should proceed. Petitioner then filed a petition with this Court challenging the underlying tax liability. This case is before the Court on respondent's Motion for Summary Judgment and respondent's Motion for Penalty under I.R.C. Section 6673. We have jurisdiction under I.R.C. section 6330(d) (1) to review a notice of determination where the underlying tax liability consists of a frivolous return penalty. See Callahan v. Commissioner, 130 T.C. 44, 48-49 (2008).
Petitioner filed with the IRS Form 1040, U.S. Individual Income Tax Return, for 2007. He reported adjusted gross income of $90,249 and Federal income tax withheld of $11,045, both numbers consistent with the Forms W-2, Wage and Tax Statement, petitioner received from his two employers. Shortly thereafter petitioner filed Form 1040X, Amended U.S. Individual Income Tax Return, and amended his 2007 return to show adjusted gross income of $0 and Federal income tax withheld of $17,949. Petitioner attached to his 2007 amended tax return Forms 4852, Substitute for Form W-2, Wage and Tax Statement, on which he stated that "The company issued forms incorrectly listing payments of 'wages as defined in [I.R.C. §§] 3401(a) and 3121(a)'. The amounts listed as withheld on the W-2 it submitted are correct, however."
Under I.R.C. section 6702, a $5,000 civil penalty may be assessed against a taxpayer if: (1) The taxpayer files a document that purports to be an income tax return; (2) the purported return lacks the information needed to judge the substantial correctness of the self-assessment or contains information indicating the self-assessment is substantially incorrect; and (3) the taxpayer's position is frivolous or demonstrates a desire (which appears on the purported return) to delay or impede the administration of Federal income tax laws. Petitioner filed an amended income tax return that contained information indicating that the self-assessment was substantially incorrect. See Blaga v. Commissioner, T.C. Memo. 2010-170. Additionally, petitioner's arguments that wages do not constitute taxable income under I.R.C. sections 3401 and 3121 and that his private sector earnings are not taxable by the Federal government have long been considered frivolous positions. See id.; Pabon v. Commissioner, T.C. Memo. 1994-476. Accordingly, there are no material facts in dispute, and respondent is entitled to summary judgment as a matter of law.
I.R.C. section 6673 allows for the Court to impose a penalty on a taxpayer of up to $25,000 if the taxpayer's position in the proceeding is frivolous or groundless. At no point has petitioner asserted a legitimate argument as to how the IRS erred in assessing the frivolous return penalty or determining that collection activity should proceed. In addition to petitioner's frivolous arguments mentioned above, petitioner argued throughout the administrative proceedings, in his petition, and in his response to respondent's motion for summary judgment that he is not a "person" as defined in I.R.C. section 6671(b). Petitioner advanced frivolous arguments despite being warned by respondent that petitioner's arguments were frivolous and that respondent would seek a penalty under I.R.C. section 6673 if petitioner continued to advance them. Because of petitioner's persistence in asserting frivolous arguments, a penalty under I.R.C. section 6673(a) (1) of $2,500 is appropriate. Upon due consideration and for cause, it is
ORDERED that respondent's motion for summary judgment, filed January 6, 2011, is granted, and this case is stricken for trial from the Winston-Salem, North Carolina trial session of the Court. It is further
ORDERED that respondent's motion for penalty under I.R.C. section 6673, filed January 6, 2011, is granted. It is further
ORDERED and DECIDED that respondent may proceed with the collection activities as determined in the notice of determination concerning collection activities for the taxable year 2007 upon which this case is based; and
That petitioner shall pay to the United States a penalty in the amount of $2,500 under I.R.C. section 6673.
(Signed) Juan F. Vasquez
Judge
Entered: FEB 16 2011
