"Admit I'm Right" - $15,000 sec. 6673 penalty

[jcolvin2]

http://www.ustaxcourt.gov/InOpTodays/ja ... CM.WPD.pdf

Best parts of opinion in CDP case (Jackson v CIR, T.C. Memo 2012-58):

On January 7, 2010, petitioner filed a motion to vacate the assessments at
issue in this case because respondent’s counsel had allegedly failed to respond to his
purported request for admissions. The Court filed this document as petitioner’s
motion to review the sufficiency of respondent’s answers or objections to
petitioner’s request for admissions. By order dated January 19, 2010, the Court denied petitioner’s motion because he had not properly filed with the Court any
request for admissions as required by Rule 90(b).

On February 2, 2010, the Court received from petitioner a letter dated
January 25, 2010, accompanied by a document described in the letter as a request
for admissions, requesting discovery of information primarily in furtherance of
frivolous and groundless contentions.5 The Court filed these documents as
petitioner’s second motion to review the sufficiency of respondent’s answer or
objection to petitioner’s request for admissions. By order dated February 16, 2010,
the Court denied this motion because: (1) the motion was not timely filed with
the Court as required by Rule 90; (2) the document captioned “informal request for discovery” did not constitute a proper request for admissions within the meaning
of Rule 90(a); and (3) the discovery requests did not appear to advance the
development of the case.

On September 17, 2010, petitioner again filed the same “informal request for
discovery” but this time with a cover letter stating that it was a request for
admissions. On November 12, 2010, respondent filed a motion for a protective
order that the Court excuse him from answering petitioner’s so-called request for
admissions and prohibit petitioner from serving any further formal discovery
requests or requests for admissions without first obtaining leave of the Court. On
December 8, 2010, the Court granted respondent’s motion, finding that petitioner’s
September 17, 2010, request for admissions, like the substantially identical
document that was the subject of the Court’s February 16, 2010, order, did not
constitute a proper request for admissions within the meaning of Rule 90 and did not
appear to advance the development of the case. The Court further observed that the
purported requests for admissions appeared to have been propounded primarily in
furtherance of frivolous arguments and were not reasonably calculated to lead to the
discovery of admissible evidence. The Court’s order stated:

Furthermore, we are not persuaded that petitioner has complied
with Rule 70(a) and made reasonable attempts to obtain informally
facts that might be germane to any nonfrivolous issues in this case.
Petitioner’s repeated attempts to use improper requests for admissions,
even after being advised by the Court that they are improper,
constitutes an abuse of this Court’s procedures and convinces us that
respondent’s motion for protective order should be granted. See
Branerton Corp. v. Commissioner, 61 T.C. 691, 692 (1974); see also
Roat v. Commissioner, 847 F.2d 1379, 1382-1383 (9th Cir. 1988)
(upholding this Court’s granting of a protective order against discovery
where the taxpayers propounded interrogatories, dealing mainly with
the Government’s authority to tax, to which a response would have
been “onerous and pointless”, and made no effort to consult
informally).

In its order the Court encouraged the parties to consult informally to exchange
information and to stipulate facts pursuant to Rule 91(a). The Court warned
petitioner that the continued assertion of frivolous or groundless arguments may
result in the imposition of penalties pursuant to section 6673(a)(1).
By letter to petitioner dated December 2, 2010, respondent’s counsel
requested a conference so that the parties might consult informally and attempt to
prepare stipulations as required by this Court. The letter specified the types of
income, payors, and amounts of income that respondent alleged gave rise to
petitioner’s underlying liability for 2002. The letter requested that petitioner admit
or deny receiving the items of income listed in the letter and provide various other
information, including an income tax return for 2002 and documents to substantiate any expenses or deductions he intended to claim for 2002. On December 15, 2010,
respondent’s counsel had a telephone conference with petitioner and his
representative.

On December 17, 2010, respondent filed with the Court a request for
admissions, consisting of 11 numbered requests that petitioner admit or deny facts
identifying the sources and amounts of income that he received in 2002, as reported
to respondent by third parties. On January 24, 2011, petitioner filed an objection to
respondent’s request for admissions, asserting that each requested admission was
“irrelevant” and “not likely to lead to the discovery of admissible evidence.” On
January 31, 2011, respondent filed a motion to review the sufficiency of petitioner’s
objection to respondent’s request for admissions. In this motion respondent stated
that in the December 15, 2010, conference, petitioner had refused to answer
respondent’s questions and refused to stipulate any documents, including the
administrative record. By order dated February 11, 2011, the Court granted
respondent’s motion and deemed petitioner to have admitted the matters contained
in respondent’s request for admissions.6

On January 18, 2011, petitioner filed a motion for leave to engage in
discovery with respondent, seeking to discover the same information or type of
information as had been described in the “informal request for discovery” that had
been the subject of three previous Court orders denying the requested discovery.
By order dated January 25, 2011, the Court denied petitioner’s motion for
essentially the same reasons described in its December 8, 2010, order.

On December 20, 2011, respondent filed a motion for partial summary
judgment with respect to petitioner’s taxable years 1999, 2000, and 2001.7 On
February 11, 2011, the Court granted respondent’s motion for partial summary
judgment for 1999, 2000, and 2001, finding that there were no genuine issues of
material fact in dispute with respect to these years, that having received notices of deficiency for these years petitioner was not entitled to challenge his underlying
liabilities for these years in this collection proceeding, and that he had not otherwise
put forward any grounds on which we could find that respondent erred in his
determinations with respect to these years. On February 28, 2011, petitioner filed a
motion to vacate partial summary judgment on grounds that “basic discovery” had
been denied and the trial judge was biased and should recuse himself. On March 2,
2011, the Court denied petitioner’s motion.

On March 14, 2011, a trial was held. Petitioner appeared and made frivolous
and groundless arguments. He contended that respondent had “deliberately
concealed” the identity of the agent who had made the assessments and prepared the
substitutes for returns and therefore the agent “does not exist” and therefore, in his
view, there is no legal basis for the liens. Respondent filed a motion for penalties
under section 6673 on the grounds that petitioner has instituted these proceedings
primarily for delay and that petitioner’s positions are frivolous and groundless. The
Court invited petitioner to respond to this motion on brief. Petitioner has made no
response to the motion.

...

On brief the only issue that petitioner has raised is the Court’s denial of his
discovery requests. Initially we note, as explained in the Court’s various orders
denying petitioner’s recurring discovery request, that petitioner has failed to comply
with this Court’s Rules and procedures regarding discovery. In particular, he has failed to seek in good faith to attain the objectives of discovery through informal
consultation or communication before using formal discovery procedures.13 See
Rules 70(a)(1), 90(a). As explained in the Court’s December 8, 2010, order,
petitioner’s repeated attempts to make his improper discovery request, even after
being advised by the Court that it was improper, and his ongoing failure to make
good-faith attempts to obtain informally facts that might be germane to any
nonfrivolous issues in this case constituted an abuse of this Court’s procedures.
These failings would be reason enough to deny petitioner’s discovery requests. See,
e.g., Odend’hal v. Commissioner, 75 T.C. 400, 403-404 (1980), aff’d, 748 F.2d 908
(4th Cir. 1984); Int’l Air Conditioning Corp. v. Commissioner, 67 T.C. 89, 93 (1976);
Branerton Corp. v. Commissioner, 61 T.C. 691 (1974).

Moreover, as explained in the Court’s various orders, we do not believe that
petitioner’s discovery requests were “reasonably calculated to lead to discovery of
admissible evidence”, as required by Rule 70(b).14 As his arguments on brief demonstrate, his requested discovery is essentially aimed at challenging the
procedures that respondent used in arriving at his determinations of petitioner’s
deficiencies. In particular, petitioner seeks to discover the identities of IRS agents
who were involved in his audit and deficiency determinations so that he might, as he
states on brief, “confront” them. The identities of these agents are immaterial to the
de novo record on which we review petitioner’s underlying liability. It is well
established that this Court generally will not explore, either in deficiency cases or in
collection cases in which the underlying liability is properly at issue, the
underpinnings of a notice of deficiency to examine the Commissioner’s administrative
policy, motives, procedures, or evidence used in determining a deficiency. See
Lunsford v. Commissioner, 117 T.C. 159, 164 (2001) (holding that this general rule
applies to determination notices in collection cases); Dellacroce v. Commissioner, 83
T.C. 269, 280 (1984); Riland v. Commissioner, 79 T.C. 185, 201 (1982);
Greenberg’s Express, Inc. v. Commissioner, 62 T.C. 324, 327 (1974); Kovacevich v. Commissioner, T.C. Memo. 2009-160 n.6 (denying the taxpayer’s request to reopen
the trial record in a collection case to permit testimony of an IRS employee allegedly
responsible for the taxpayer’s tax audit because, in pertinent part, “what goes on
during audits is immaterial to the de novo record on which we decide deficiency
cases”).15

On brief petitioner asserts that because the Court denied his discovery request,
he has been improperly subjected to an “irrefutable presumption[]/opinion” that he is
a “taxpayer with taxable income”. Petitioner is mistaken. The simple fact of the
matter is that petitioner has presented no relevant evidence or cognizable argument to
overcome his deemed admissions or otherwise to properly challenge his 2002
underlying liability.


5. The first sentence of the purported request for admissions states: “This is an
informal request for discovery; please provide me with the following”. The
document lists six numbered requests for information, including the names and
badge numbers of every “witness” “personally involved [in] making decisions
against” petitioner; the names of any “witnesses” who are “experts in the
interpretation and application of United States tax law”; any “admissible evidence”
that petitioner is “subject to the laws of the United States”; any “admissible
evidence” that petitioner is a “taxpayer”; any “admissible evidence” that petitioner
received “taxable income”; and any “admissible evidence” that “petitioner has any
obligation to file tax returns imposed by laws of the United States.” The document
also lists 15 numbered “admissions * * * to be given to the witnesses the
Commissioner relies on to support his assessments against Dennis Jackson”,
requesting that these witnesses admit or deny various frivolous and groundless
contentions, such as that there is no evidence to prove that petitioner is a “taxpayer”
subject to U.S. laws and that the witness does not know the difference between a
“taxpayer” and a “non-taxpayer”.

6. The deemed admissions establish that in 2002 petitioner received the
following items of income: (1) $1,135 in net gains from sale of stock; (2) $34 in
dividends from Key National Bank Association; (3) $208 in royalties from Bidwell
and Co.; (4) $65 of interest income from Bidwell and Co.; (5) $2 of interest income from Delta Enterprises, L.P.; (6) $659 of partnership gain from Delta Enterprises, L.P.; (7) $19,068 of retirement income from Pacific Coast Pension Fund; and (8) $8 of interest income from Crown Pacific Partners, Limited Partnership.

13. Although his request for discovery stated that “This is an informal request
for discovery”, petitioner treated it as a formal discovery request, seeking to invoke
the Court’s discovery procedures to compel respondent’s compliance without the
requisite informal consultation with respondent’s counsel.

14. The only potentially nonfrivolous item included in petitioner’s discovery
requests was a request for evidence of his “taxable income”. But we believe that
this request was intended to subserve the frivolous argument, which appears repeatedly in his discovery request and in many other documents filed with the
Court, that he is not a “taxpayer” who is subject to U.S. laws and that
only foreign-earned income counts as “taxable income”. This belief is bolstered by
the fact that when respondent requested, months before trial, that he admit or deny
the specified amounts and sources of income that respondent had determined he had
received in 2002, petitioner refused to either admit or deny these items, objecting
that they were “irrelevant”.

15. On brief petitioner complains that the Court “granted summary judgment
when there was no discovery permitted”. For the sake of completeness and clarity,
we note that the Court granted partial summary judgment with respect to petitioner’s
taxable years 1999, 2000, and 2001. As previously explained, petitioner’s
underlying liabilities for those years, for which he admits having received notices of
deficiency, are not properly at issue in this collection proceeding.

[Quixote]

6. The deemed admissions establish that in 2002 petitioner received the
following items of income: (1) $1,135 in net gains from sale of stock; (2) $34 in
dividends from Key National Bank Association; (3) $208 in royalties from Bidwell
and Co.; (4) $65 of interest income from Bidwell and Co.; (5) $2 of interest income from Delta Enterprises, L.P.; (6) $659 of partnership gain from Delta Enterprises, L.P.; (7) $19,068 of retirement income from Pacific Coast Pension Fund; and (8) $8 of interest income from Crown Pacific Partners, Limited Partnership.

The guy's on a fixed income of less than $25,000. That $15,000 penalty might as well be a $1 million. I doubt it will have the desired effect. Should the Tax Court be able to impose some other sanction? Locking him up until he explains in his own words exactly why he lost might be educational.

[LPC]

On December 8, 2010, the Court granted respondent’s motion, finding that petitioner’s September 17, 2010, request for admissions, like the substantially identical document that was the subject of the Court’s February 16, 2010, order, did not constitute a proper request for admissions within the meaning of Rule 90 and did not appear to advance the development of the case. The Court further observed that the purported requests for admissions appeared to have been propounded primarily in furtherance of frivolous arguments and were not reasonably calculated to lead to the discovery of admissible evidence.

[snip]

On January 24, 2011, petitioner filed an objection to respondent’s request for admissions, asserting that each requested admission was “irrelevant” and “not likely to lead to the discovery of admissible evidence.”

I think of these as "monkey see/monkey do" kinds of motions. The tax nut sees the Commissioner's motion granted for reasons that are incomprehensible to him, so he makes the same motion against the Commissioner, on the same grounds.

With a completely different result, of course.

[The Observer]

Income is far different than the value of his investments - the bank stock, whatever is generating the interest income and the limited partnerships.

The amounts that generated the report interest, dividends, sales, etc., would appear to indicate that the investments in of themselves are not large amount. The only sizeable return was that from his pension fund disbursement; depending on how it is held, the IRS might not be able to levy it all (if he can demonstrate he is under severe economic hardship) or only a small portion, since the federal tax lien only attaches to his right to the fund, not to the fund itself.

Also, what are his other assets? Car? Paid for house? Cash value life insurance policy?

Good questions - all of which should be looked at when the IRS attempts to collect. But I suspect that our fearless TP, like most, never had much to begin with in the first place.

Which sort of puts to a lie to the following:

• Innkeeper's Wife: Has he got money to pay?
  
  Innkeeper: When did a poor man ever find time to run mad? He's got money. He's a gentleman.
  
  - from Man Of La Mancha