Judge Holds Back On Max FrivPen

[The Observer]

This is why TPs keep getting moral victories - because judges let them off light!

MICHAEL BURT,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent

Release Date: FEBRUARY 25, 2013

UNITED STATES TAX COURT

Filed February 25, 2013

Michael Burt, pro se.

A. Gary Begun, for respondent.

MEMORANDUM OPINION

CHIECHI, Judge: This case is before us on respondent's motion for summary judgment (respondent's motion). 1 We shall grant respondent's motion.

[*2] BACKGROUND

The record establishes and/or the parties do not dispute the following.

Petitioner resided in Michigan at the time he filed the petition.

On November 14, 2006, a Federal grand jury for the U.S. District Court for the Eastern District of Michigan returned a four-count indictment (indictment) against petitioner. In that indictment, petitioner was charged with violating section 7201 2 by willfully attempting to evade and defeat Federal income tax (tax) for each of the years 1998 through 2001. The indictment charged that petitioner had the following unreported taxable income and unpaid tax liabilities for those years:

Unreported Unpaid
Year taxable income tax liability
_____________________________________________________________________

1998 $ 49,263 $ 21,146
1999 55,400 23,478
2000 64,462 26,745
2001 90,394 34,452

[*3] On May 22, 2008, after a trial in the U.S. District Court (criminal proceeding), a jury found petitioner guilty on all counts in the indictment. The U.S. District Court sentenced petitioner, inter alia, to 27 months' imprisonment with two years of supervised release.

On December 5, 2008, petitioner appealed his conviction to the U.S. Court of Appeals for the Sixth Circuit. On June 4, 2010, the Court of Appeals affirmed petitioner's conviction.

On April 23, 2010, respondent issued a notice of deficiency (notice) to petitioner. In that notice, respondent determined the following deficiencies in, additions to, and fraud penalties on petitioner's tax for petitioner's taxable years 1998 through 2002: 3

Additions to tax under secs.
______________________________________________ Penalty
under sec.
Year Deficiency 6651(a)(1) 6651(a)(2) 6651(f) 6654(a) 6663(a)
______________________________________________________________________________

1998 $ 33,879 $ 8,470 -- -- -- $ 25,409
1999 1,606 (196) -- -- -- 19,135
2000 44,106 -- $ 11,027 $ 31,977 $ 2,372 --
2001 9,414 -- 2,354 6,825 376 --
2002 12,177 -- 3,044 8,828 407 --

[*4] On September 2, 2011, we issued an Order granting respondent's motion for partial summary judgment. In that Order, we held that "petitioner is estopped from denying liability for the fraud additions to tax and penalties for 1998 through 2001."

On October 15, 2012, we issued an Order in which we ordered petitioner to file a response to respondent's motion. In that Order, we also indicated that our review of the record suggested that petitioner might intend to advance in this case frivolous and/or groundless statements, contentions, arguments and/or questions. We reminded petitioner in the Order dated October 15, 2012, about section 6673(a)(1) and admonished him that if he advanced frivolous and/or groundless statements, contentions, arguments, and/or questions and/or instituted or maintained this proceeding primarily for delay, we would impose on him a penalty under section 6673(a)(1) in an amount not exceeding $ 25,000.

DISCUSSION

We may grant summary judgment where there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994).

[*5] In respondent's motion, respondent seeks summary adjudication that petitioner is liable for the following amounts 4 of deficiencies in, additions to, and fraud penalties on petitioner's tax for his taxable years 1998 through 2001: 5

Additions to tax under secs.
______________________________________________ Penalty
under sec.
Year Deficiency 6651(a)(1) 6651(a)(2) 6651(f) 6654(a) 6663(a)
______________________________________________________________________________

1998/1/ $ 21,146 $ 5,287 -- -- -- $ 15,860
1999/1/ -0- -0- -- -- -- 17,619
2000/1/ 26,745 -- $ 6,686 $ 19,390 $ 1,404 --
2001 9,414 -- 2,354 6,825 376 --
______________________________________________________________________________

/1/ year 1999 that respondent determined in the notice was ($ 196).

The respective amounts of the deficiencies in petitioner's tax for his taxable years 1998 and 2000 with respect to which respondent seeks summary adjudication equal the respective amounts of the unpaid tax liabilities that the indictment charged, and the jury agreed, petitioner had for those taxable years. The respective [*6] amounts of the deficiencies in petitioner's tax for his taxable years 1999 and 2001 with respect to which respondent seeks summary adjudication are less than the respective amounts of the unpaid tax liabilities that the indictment charged, and the jury agreed, petitioner had for those years.

It is petitioner's position that there are genuine disputes of material fact that preclude us from granting respondent's motion. In support of that position, petitioner argues (petitioner's withholding credit argument) that his "employer" withheld tax from his wages during each of his taxable years 1998 through 2002 and that any deficiency in his tax for each of those taxable years must be determined by allowing him a credit for tax withheld for each such year.

We have jurisdiction to redetermine the correct amount of a deficiency where the Commissioner of Internal Revenue has issued a valid notice of deficiency and the taxpayer has timely filed a petition. E.g., Versteeg v. Commissioner, 91 T.C. 339, 340 (1988). The term "deficiency" is defined in section 6211(a) to mean

the amount by which the tax imposed * * * exceeds
the excess of --

(1) the sum of

(A) the amount shown as the tax by the taxpayer upon
his return, if a return was made by the taxpayer
and an amount was shown as the tax by the taxpayer
thereon, plus

[*7] (B) the amounts previously assessed (or
collected without assessment) as a deficiency, over
--

(2) the amount of rebates * * * made.

Because the amount of a deficiency is determined "without regard to the credit under section 31", 6 sec. 6211(b)(1), we will not consider petitioner's withholding credit argument in determining whether to grant respondent's motion.

In addition to petitioner's withholding credit argument, petitioner advances in petitioner's response certain statements, contentions, arguments, and/or questions that we find to be frivolous and/or groundless.

Based upon our examination of the entire record before us, we conclude that there is no genuine dispute as to any material fact that requires a trial in this case. On that record, and taking into account the Order dated September 2, 2011, we further conclude that respondent is entitled as a matter of law to summary adjudication that petitioner is liable for deficiencies in, additions to, and fraud penalties on petitioner's tax for his taxable years 1998 through 2001 in the respective amounts set forth in respondent's motion.

[*8] We turn now sua sponte to section 6673(a)(1), 7 a provision that we brought to petitioner's attention in the Order dated October 15, 2012. In that Order, we ordered petitioner to file a response to respondent's motion. We also admonished petitioner in the Order dated October 15, 2012, that we would impose a penalty on him under section 6673(a)(1) if he advanced frivolous and/or groundless statements, contentions, arguments, and/or questions and/or instituted or maintained this proceeding primarily for delay. Nonetheless, petitioner advances in petitioner's response certain statements, contentions, arguments, and/or questions that we find to be frivolous and/or groundless.

On the record before us, we find that petitioner's position in this case is frivolous and groundless and that he instituted and maintained this case primarily for delay. Accordingly, we shall impose on petitioner a penalty under section 6673(a)(1) in the amount of $ 20,000.

We have considered any statements, contentions, arguments, and/or questions of petitioner that are not frivolous and/or groundless and that are not discussed herein, and we find them to be without merit and/or irrelevant.

[*9] On the record before us, we shall grant respondent's motion.

To reflect the foregoing, the concessions of respondent, and the Order dated September 2, 2011,

An appropriate order and decision will be entered.

FOOTNOTES:

/1/ Respondent filed a motion for entry of decision. By Order dated January 11, 2013, we recharacterized that motion as a motion for summary judgment and recharacterized petitioner's response to respondent's motion for entry of decision as petitioner's response to respondent's motion for summary judgment (petitioner's response).

/2/ All section references are to the Internal Revenue Code (Code) in effect for the years at issue. All Rule references are to the Tax Court Rules of Practice and Procedure.

/3/ All amounts are rounded to the nearest dollar.

/4/ All amounts are rounded to the nearest dollar.

/5/ In respondent's motion, respondent concedes the determinations that respondent made in the notice with respect to petitioner's taxable year 2002, a taxable year not involved in the criminal proceeding.

/6/ Sec. 31(a) provides that the amount withheld from wages as tax is to be allowed to the recipient of the income as a credit against the tax imposed by the Code.

/7/ Sec. 6673(a)(1) authorizes us to impose a penalty on a taxpayer in an amount not exceeding $ 25,000 if, inter alia, the taxpayer instituted or maintained a proceeding before us primarily for delay or the taxpayer's position in the proceeding is frivolous or groundless.

[LPC]

I saw this decision also, but wasn't sure what frivolous arguments were being made or what this guy's history was.

A quick search turned up this district court opinion denying him a judgment of acquittal following a guilty verdict by the jury. United States v. Michael Burt, No. 5:06-cr-20582-JCO-MKM (USDC ED Mich. 07/28/08).

According to the opinion, he raised the following tax denier arguments:

1. No law required him to pay income tax.

2. If there is a law, he didn't know about it, or believed it didn't apply to him (lack of willfulness).

3. He relied on the Paperwork Reduction Act.

Oldies, but goodies.

[LPC]

In Michigan court, Burt argued that Michigan had no power to tax his income because the 16th Amendment gave that power to the federal government, and so the 10th Amendment deprives the states of that power.

Also argued Paperwork Reduction Act, and inability to calculate his tax because the personal exemption cannot be found in the Internal Revenue Code.

All losers.

Michael Burt v. Dept. of Treasury, No. 290868 (Mich. Ct. App. 7/1/2010).

[LPC]

United States v. Michael Burt, No. 5:06-cr-20582-JCO-MKM (USDC ED Mich. 07/28/08).

Like most tax deniers, Burt had to appeal, but the conviction was affirmed, No. 08-2608 (6th Cir. 06/04/2010), cert. den., No. 10-10983 (U.S.S.C. 10/03/2011).

I'm not bothering to report the multiple requests for reconsideration.

The appellate opinion casts some light on the factual background:

Burt worked for Corporate Tax Services (CTS). For the years he was an employee, Burt filed income tax returns on Form 1040 and attached the W-2 statements he received from his employer. In 1998, Burt’s status changed from employee to independent contractor for CTS, and because of that change in status, CTS stopped withholding income taxes from Burt’s pay. Beginning that year, and through 2001, Burt failed to file returns or pay income taxes. A jury found Burt guilty on four counts of income tax evasion, and the district court sentenced him to an aggregate sentence of twenty-seven months of imprisonment to be followed by two years of supervised release.

And:

Sufficient evidence supports the jury’s finding of an affirmative act of tax evasion. In 2001, Burt filed a belated return for the tax year 1998 in which he failed to report any income from CTS. Filing a false return satisfied the § 7201 requirement of an affirmative act. See Sansone, 380 U.S. at 352. For the years 1999 through 2001, Burt attempted to transfer his income into “pure trust organizations” that he believed were immune from tax liability, and he transferred money “off shore” to the Turks and Caicos Banking Company, where the money was presumably more difficult to trace. Consequently, the jury heard sufficient evidence to support its verdicts, and Burt’s several claims challenging the sufficiency of the evidence are meritless.

[Famspear]

In Michigan court, Burt argued that Michigan had no power to tax his income because the 16th Amendment gave that power to the federal government, and so the 10th Amendment deprives the states of that power.

Well, it's refreshing to see what appears to be a brand new stupid argument instead of being limited to just the usual same old, same old, tired out, stupid arguments.

[The Observer]

For the years he was an employee, Burt filed income tax returns on Form 1040 and attached the W-2 statements he received from his employer. In 1998, Burt’s status changed from employee to independent contractor for CTS, and because of that change in status, CTS stopped withholding income taxes from Burt’s pay. Beginning that year, and through 2001, Burt failed to file returns or pay income taxes.

This is where one can argue that tax protestors are made, not born. Apparently prior to 1998, Burt had no problem with filing or paying returns. Quite possibly because he had an incentive to file to get his refund back (although that evades the question of why didn't he just underwithhold by overstating his exemptions on his W-4). But starting with his "liberation" as a 1099 recipient, Mr. Burt suddenly lurched into stop paying taxes. Did he immediately go into TP mode or did that come afterward when he realized that the IRS was after him and he needed some way to fight them?

Of course this does not mean that all TPs are made. I assume some of them come by it honestly (and by "honestly" I mean that it appears to be part of their genetic makeup). Born to be wild and all that.

[Pottapaug1938]

This is why TPs keep getting moral victories - because judges let them off light!

In the paraphrased famous words of King Pyrrhus of Epirus: one more such victory would utterly undo him.

[rogfulton]

Michael Burt tries second bite of the fruit. Burt argues he should get credit for overpayment for tax years he was convicted of tax fraud for here.

He even mentions that his proposition that the 1040 doesn't comply with PRA could be considered frivolous.

After that hearing, the settlement
officer made the following pertinent entries in his “Case Activity Records”:

He [petitioner] stated that the only alternative collection proposal he
can offer is that the government allow him his refunds for 1998-2001,
as they would fully pay or close to fully pay the * * * CDP liabilities.
* * * He questioned a cary forward from 2003. * * * He mentioned
several times during the conference that he’s hampered by loss of his
records due to the foreclosure on his home and the incarceration.[3]
* * * He contests that each of the latter * * * years’ returns were filed
late. He believes he filed them timely * * * within the extension
period, and the IRS may not have timely processed them due to the
criminal investigation. * * * Another issue he wants considered is
whether any collection actions * * * should have occurred during the
criminal proceedings. * * * Finally, he said he wanted it on record
that he believes there’s been an IRS coverup in his case, and that
several employees should be fired. * * * He sauid that the Commissioner
says in the ‘rendition’ * * * instruction booklet not to file the
[*6] form if it doen’t comly with the Paperwork Reduction Act of
1995. He said that he knows I might consider that issue to be frivolous.
* * * [Reproduced literally.]

He also seems to be questioning his conviction for tax fraud. Two of the footnotes refer to Burt v. Commissioner, T.C. Memo. 2013-58.