Attorney Facing Sanctions For Frivving

[The Observer]

HOWARD E. MAY AND ESTATE OF JUDITH A. MAY,
DECEASED, MARCIA M. MAY, PERSONAL REPRESENTATIVE,
Petitioners
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent

Release Date: SEPTEMBER 23, 2014

UNITED STATES TAX COURT

Filed September 23, 2014

Donald W. MacPherson and Bradley S. MacPherson, for petitioners.

Brandon A Keim, for respondent.

MEMORANDUM OPINION

LAUBER, Judge: This collection due process (CDP) case is before the Court on a motion for summary judgment filed by the Internal Revenue Service [*2] (IRS or respondent) pursuant to Rule 121. 1 We are asked to decide two questions: (1) whether the IRS settlement officer abused her discretion in sustaining the proposed collection action; and (2) whether petitioners should be sanctioned for advancing frivolous positions in this Court. We answer the first question "no" and the second question "yes." On our own motion, we consider a third question: whether petitioners' attorney Donald W. MacPherson should be sanctioned for unreasonably and vexatiously multiplying these proceedings. We will order him to show cause why he should not be sanctioned.

BACKGROUND

Neither Howard May nor Judith May, then husband and wife, filed a timely Federal income tax return for 2004. The IRS prepared a substitute for return (SFR) for petitioner-husband using third-party information and issued a notice of deficiency to him in 2010. The IRS did not prepare an SFR for petitioner-wife and did not issue a notice of deficiency to her. 2 Petitioner-husband did not seek [*3] redetermination of the deficiency in this Court, and the IRS thereafter assessed the deficiency.

In early 2011 petitioners jointly submitted a Form 1040, U.S. Individual Income Tax Return, for 2004. The IRS thereupon combined its computer-based tax modules for petitioner-husband and petitioner-wife. As a result of that combination, petitioners' consolidated Form 4340, Certificate of Assessments, Payments, and Other Specified Matters, for 2004 incorrectly indicated that the IRS had issued notices of deficiency both to petitioner-husband and to petitioner-wife. That was because the "notice of deficiency" transaction code, which was originally posted correctly to petitioner-husband's tax module, migrated to petitioners' consolidated tax module after the IRS received their untimely 2004 return. This computer entry was later corrected.

After receiving the late-filed 2004 return, the IRS abated the tax previously assessed against petitioner-husband in an amount necessary to conform the assessment to the amount petitioners had self-reported. Accordingly, petitioners' Form 4340 for 2004, as of yearend 2012, reflected the following: $ 16,465 of tax assessed on August 30, 2010; $ 4,407 of tax abated on May 2, 2011; and $ 12,058 [*4] of net assessed tax. The net assessed tax reflects the tax that petitioners self-reported on their late-filed return which they have not paid in full. 3

The IRS initiated proceedings, by lien and levy, to collect petitioners' unpaid 2004 tax liability. 4 On October 10, 2011, the IRS sent petitioners a Final Notice of Intent to Levy and Notice of Your Right to a Hearing. Petitioners timely requested a CDP hearing. In their request petitioners stated that they intended to seek relief through collection alternatives, hardship waivers, penalty abatement, and a challenge to their underlying tax liability for 2004. Petitioners also demanded that the IRS "produce 23c, RACS 006 and any other assessment documents"; a signed assessment document "with legible signatures and [the] typed name of [the] officer who signed"; and the delegation order authorizing the assessment officer to sign the assessment.

[*5] The CDP hearing was assigned to Settlement Officer Silva (SO Silva). SO Silva sent a letter to petitioners and Attorney MacPherson, scheduling a telephone CDP hearing for March 6, 2012. The letter explained that, if petitioners wished the IRS to consider collection alternatives, they should provide before the conference a completed Form 433-A, Collection Information Statement for Wage-Earners and Self-Employed Individuals, along with supporting financial information.

On February 7, 2012, Attorney MacPherson wrote SO Silva to request a two-week extension of time to provide the requested documents. SO Silva granted that request, but no documents were submitted by the extended deadline. On March 6, 2012, the day of the scheduled hearing, SO Silva received a fax from Attorney MacPherson stating that he was ill and requesting that the hearing be continued. SO Silva granted that request and rescheduled the hearing for March 14, 2012. SO Silva called Attorney MacPherson at the rescheduled hearing time, but he was not available.

Later that day, SO Silva sent petitioners a letter, with a copy to Attorney MacPherson, noting that she had not received any documents prerequisite to considering collection alternatives and that Attorney MacPherson had been unavailable for the hearing. Attorney MacPherson called SO Silva the next day to say [*6] that he had been ill and was confused about the rescheduled hearing. SO Silva granted him an extension of time until March 28, 2012, to submit the required financial information. Attorney MacPherson submitted no relevant documents by that date. Instead he submitted, on March 29, 2012, another letter demanding that the IRS produce delegation orders, certificates of assessment with original signatures, and so on.

At this point SO Silva reviewed the computer transcripts of petitioners' 2004 account and concluded that the requirements of applicable law and administrative procedure had been met. She confirmed that the net assessed tax for 2004, which corresponded to the tax liability petitioners had self-reported on their late-filed 2004 return, had been properly assessed. She determined that petitioners were not entitled to consideration of a collection alternative because they had failed to provide the required financial information despite several extensions of time in which to do so. She accordingly closed the case, and, on May 8, 2012, the IRS sent petitioners a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 sustaining the levy.

Petitioners timely petitioned this Court for review. The only ground of error alleged in the petition, prepared by Attorney MacPherson, concerns the supposed impropriety of the 2004 assessment. The petition acknowledges that petitioners [*7] "agreed to" the 2004 assessment amount by self-reporting a liability in that amount on their late-filed 2004 return. The petition nevertheless contends that the assessment "was not legally made" because the IRS had not supplied "a proper assessment document" bearing "the signature of the assessment officer" together with a copy of the delegation order authorizing the officer to make the assessment.

On August 1, 2012, after filing his answer, counsel for respondent notified Attorney MacPherson by letter that the assessment-focused arguments he advanced in the petition had been identified, in Notice 2010-33, 2010-17 I.R.B. 609, as frivolous tax positions. This letter advised Attorney MacPherson that, if he persisted in pressing such arguments, respondent would ask the Court to impose a penalty for taking a "frivolous or groundless" position in a Tax Court proceeding or instituting such proceeding "primarily for delay." See sec. 6673(a)(1)(A) and (B).

In early 2013 counsel for respondent discovered that petitioner-wife should have been afforded an opportunity to dispute her 2004 tax liability at the CDP hearing because she (unlike petitioner-husband) had not received a notice of deficiency. Respondent accordingly moved to remand the case to the IRS Appeals Office for a supplemental CDP hearing. Petitioners did not oppose that request, and we granted it.

[*8] At the supplemental hearing Attorney MacPherson advanced on behalf of petitioner-wife no arguments concerning her actual tax liability for 2004. Rather, he advanced the same series of assessment-focused contentions that he had previously been warned were frivolous. SO Silva again reviewed petitioners' account transcripts for 2004 and again confirmed that the net assessed tax for 2004 had been properly assessed. SO Silva further determined that petitioners had not submitted, either at the original or the supplemental CDP hearing, any documentation that would entitle them to consideration of a collection alternative. The IRS thereupon issued a supplemental notice of determination sustaining the proposed levy. The case is now before the Court on respondent's motion for summary judgment. Petitioners resided in Nevada when they filed the petition.

DISCUSSION

I. Summary Judgment Standard

Summary judgment is intended to expedite litigation and avoid unnecessary and costly trials. FPL Grp., Inc. & Subs. v. Commissioner, 116 T.C. 73, 74 (2001). We may grant summary judgment when there is no genuine dispute as to any material fact and a decision may be rendered as a matter of law. Rule 121(b). In deciding whether to grant summary judgment, we view all factual materials and the inferences drawn therefrom in the light most favorable to the nonmoving party. [*9] Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985). However, the nonmoving party may not rest upon mere allegations or denials but must set forth specific facts showing that there is a genuine dispute. Rule 121(d); see Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff'd, 17 F.3d 965 (7th Cir. 1994).

The arguments petitioners have advanced by way of opposition to SO Silva's determinations implicate no disputed issues of fact but raise questions of law. See Best v. Commissioner, T.C. Memo. 2014-72, at *12 (holding that the arguments advanced by Attorney MacPherson in that case, substantially identical to those advanced here, raise questions of law). These arguments focus on the assessment-related documents that the IRS provided to petitioners, and the parties agree on what those documents were. We conclude that the issues presented are appropriate for summary adjudication.

II. Standard of Review

Where the validity of the underlying tax liability is at issue, the Court reviews the Commissioner's determination de novo. Goza v. Commissioner, 114 T.C. 176, 181-182 (2000). Where there is no dispute concerning the underlying tax liability, the Court reviews the determination for abuse of discretion. Id. at 182. In reviewing for abuse of discretion, we must uphold the Commissioner's [*10] determination unless it is arbitrary, capricious, or without sound basis in fact or law. See Woodral v. Commissioner, 112 T.C. 19, 23 (1999). When faced with questions of law, as we are here, the standard we apply makes no difference. See Best, T.C. Memo. 2014-72, at *12. Whether we review for abuse of discretion or consider the matter de novo, we must reject erroneous views of the law. Kendricks v. Commissioner, 124 T.C. 69, 75 (2005).

III. Analysis

Following a CDP hearing, an SO must determine whether and how to proceed with collection. This determination must take into account, among other things, the collection alternatives (if any) the taxpayer has proposed and whether the proposed collection action balances the need for the efficient collection of taxes with the legitimate concern of the taxpayer that the collection action be no more intrusive than necessary. See sec. 6330(c)(2) and (3).

In response to the motion for summary judgment, Attorney MacPherson filed a response (including 17 exhibits) that totals 159 pages. From this welter of paper we discern two theories. The first is that SO Silva abused her discretion because she relied on computerized account transcripts, rather than physical source documents, to verify, as required by section 6330(c)(1), that respondent had properly assessed petitioners' unpaid tax liability. The second theory is that SO Silva [*11] abused her discretion by neglecting to furnish petitioners with copies of signed records of assessment accompanied by a delegation order attesting to the assessing official's capacity to assess. We address each theory in turn. 5

A. Reliance on Account Transcripts

The Commissioner may collect Federal taxes by administrative means after he assesses those taxes. Bull v. United States, 295 U.S. 247, 259 (1935). An assessment is a recording of a taxpayer's liability in the office of the Secretary in accordance with prescribed rules or regulations. Sec. 6203. An assessment officer assesses a tax by signing a summary record of assessment, which, through supporting records, must identify the taxpayer, the character of the liability, the taxable period (if applicable), and the assessed amount. Sec. 301.6203-1, Proced. & Admin. Regs. The summary record of assessment may be made either on IRS Form 23C or (more recently) on its computer-generated equivalent, the Revenue Accounting Control System Report 006. See, e.g., March v. IRS, 335 F.3d 1186, [*12] 1188 (10th Cir. 2003);Roberts v. Commissioner, 118 T.C. 365, 369-371 (2002), aff'd, 329 F.3d 1224 (11th Cir. 2003). Once an assessment is made, it becomes a part of the IRS' official records with respect to a taxpayer. A taxpayer's account transcripts reflect the information included in these official records. See Armstrong v. Commissioner, T.C. Memo. 2002-224, 84 T.C.M. (CCH) 287, 291 n.9. 6

Petitioners contend that SO Silva abused her discretion by relying on their account transcript to verify that the 2004 assessment had been properly made. There is no basis for this contention. Section 6330(c)(1) requires the SO to verify that the requirements of applicable law and procedure have been met, but it does not require her to rely on any particular document to satisfy this verification requirement. See Craig v. Commissioner, 119 T.C. 252, 262 (2002). Nor is the officer required to provide the taxpayer with a copy of the verification that she obtained. Nestor v. Commissioner, 118 T.C. 162, 166-167 (2002). An officer may rely on a computer transcript of the taxpayer's account to verify that the [*13] requirements of applicable law and administrative procedure have been met. See Sherwood v. Commissioner, T.C. Memo. 2005-268, 90 T.C.M. (CCH) 512, 515.

The parties agree on the documents SO Silva reviewed before determining that collection should proceed. They include the 2004 account transcripts, which SO Silva provided to petitioners. The transcripts identify petitioners and show the tax forms involved, the taxable year, the date the tax was assessed, and the amount assessed. SO Silva therefore satisfied the verification requirement of section 6330(c)(1).

Attorney MacPherson asserts that the account transcripts are unreliable and reveal a "gross irregularity" in the administrative process because they contain "blundering errors of ignominious bureaucrats." He observes that the 2004 account transcript at one point included notations that a deficiency notice was sent to petitioner-wife; that petitioner-wife received an SFR; and that an assessment of $ 16,465 was made against petitioner-wife. In fact, these three notations properly applied only to petitioner-husband.

These misleading or erroneous computer entries appear to stem from the fact the "notice of deficiency" transaction code, which was originally posted correctly to petitioner-husband's tax module, migrated to petitioners' consolidated [*14] tax module when the IRS received their untimely 2004 tax return. These mistakes, which may reflect no more than a computer keystroke error, do not lead to the result petitioners seek. It was because of these mistakes that this case was remanded to the IRS Appeals Office to enable petitioner-wife, who in fact had not received a notice of deficiency, to challenge her 2004 tax liability if she wished. At this point, we are reviewing the supplemental notice of determination, which was issued after these errors were detected and corrected. See Kelby v. Commissioner, 130 T.C. 79, 86 (2008). None of these errors has any bearing on the transcript entries showing $ 12,058 of net assessed tax for 2004, which is the exact amount of tax that petitioners self-reported on their late-filed 2004 return. 7

In sum, the misleading or erroneous computer entries petitioners cite indicate no irregularity in the IRS assessment procedure and raise no question as to whether the assessment was validly made in accordance with the requirements of section 301.6203-1, Proced. & Admin. Regs. SO Silva did not abuse her discretion when she relied on the computerized transcripts of petitioners' account to verify that their unpaid tax liability for 2004 had properly been assessed.

[*15] B. Assessments and Evidence Thereof

Petitioners next contend that the IRS cannot collect their tax liability for 2004 because SO Silva violated the requirement of section 6203 that, "pon request of the taxpayer, the Secretary shall furnish the taxpayer a copy of the record of the assessment." Here again, petitioners contend that the computerized transcript of their 2004 account and the Form 4340, Certificate of Assessments, Payments, and Other Specified Matters, are insufficient to satisfy the Secretary's duty. Petitioners insist that they are entitled to a copy of an assessment source document with original signatures coupled with a delegation order proving that the assessing officer was authorized to make the assessment. Petitioners contend that the SO abused her discretion by declining to supply them with copies of these documents.

Again we disagree. Upon request under section 6203, the taxpayer "shall be furnished a copy of the pertinent parts of the assessment which set forth the name of the taxpayer, the date of assessment, the character of the liability assessed, the taxable period, if applicable, and the amounts assessed." Sec. 301.6203-1, Proced. & Admin. Regs. We have consistently held that the IRS is not required to furnish the taxpayer with any particular document or form, so long as the document provided supplies the information listed in this regulation. See Roberts v. Commis-sioner, [*16] 118 T.C. at 370 n.7;Best, T.C. Memo. 2014-72, at *16; Battle v. Commissioner, T.C. Memo. 2009-171, 98 T.C.M. (CCH) 45, 48. The Court of Appeals for the Ninth Circuit agrees. See Koff v. United States, 3 F.3d 1297, 1298 (9th Cir. 1993).

SO Silva furnished Attorney MacPherson copies of the 2004 account transcripts, which supplied all the information listed in section 301.6203-1, Proced. & Admin. Regs. Respondent's counsel also furnished Attorney MacPherson with a copy of petitioners' Form 4340, which likewise supplies all of the required information. If petitioners' receipt of the account transcripts does not fulfill the IRS' obligation to furnish them the pertinent records of assessment, then their receipt of the Form 4340 certainly does. See Best, T.C. Memo. 2014-72, at *18. SO Silva's refusal to supply petitioners with delegation orders and assessment source documents containing original signatures, far from being an abuse of discretion, was entirely proper. We will accordingly grant respondent's motion for summary judgment and sustain the levy. 8

[*17] IV. Section 6673(a)(1) Penalty

We are authorized to require a taxpayer to pay to the United States a penalty of up to $ 25,000 whenever it appears that the taxpayer has instituted or maintained proceedings before us primarily for delay or that the taxpayer's position in the proceedings is frivolous or groundless. Sec. 6673(a)(1); see, e.g., Wnuck v. Commissioner, 136 T.C. 498, 513-514 (2011). A taxpayer's position is frivolous if it is contrary to established law and unsupported by a reasoned, colorable argument for change in the law. E.g., Goff v. Commissioner, 135 T.C. 231, 237 (2010). The purpose of section 6673 is to compel taxpayers to think and to conform their conduct to settled tax principles before they file returns and litigate. Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986); Best, T.C. Memo. 2014-72, at *22; Grasselli v. Commissioner, T.C. Memo. 1994-581.

Respondent has also moved that we impose a section 6673 penalty because petitioners instituted this proceeding primarily to delay collection and because their positions are frivolous or groundless. As shown above, many of the arguments advanced by Attorney MacPherson indeed lack merit and are contrary to established law. The IRS has issued public guidance clearly describing the requirements [*18] of section 6203, the procedures implementing that section, and the procedures for answering taxpayer requests for copies of records of assessment. See Rev. Rul. 2007-21, 2007-1 C.B. 865, 866. Additionally, Notice 2010-33, supra, lists positions that the IRS has identified as "frivolous" for purposes of the section 6702 penalty for making "frivolous tax submissions." This Notice explicitly characterizes as "frivolous" the submission that:

Verification under section 6330 that the requirements
of any applicable law or administrative procedure
have been met may only be based on one or more particular
forms or documents (which must be in a certain format),
such as a summary record of assessment, or that the
particular forms or documents or the ones on which
verification was actually determined must be provided
to a taxpayer at a collection due process hearing.

Id., 2010-17 I.R.B. at 611-612.

These are precisely the submissions that Attorney MacPherson, on petitioners' behalf, made to this Court. He nevertheless argues that petitioners should not be sanctioned because they are "far from sophisticated," have "no more than a high school education," and "in good faith relied upon their experienced, competent counsel of many years." We rejected these defenses in Best, T.C. Memo. 2014-72, at *20-*22, where Attorney MacPherson advanced substantially identical and equally frivolous theories on behalf of similarly situated taxpayers. For the same reasons, we reject those defenses here. However, since respondent [*19] (to his credit) did acknowledge an error that supported remand of this case to the IRS Appeals Office, there was at least a scintilla of support for a portion of petitioners' original position. We accordingly conclude that a relatively modest penalty is justified and that they should pay a section 6673(a)(1) penalty of $ 500 to the United States.

V. Section 6673(a)(2) Penalty and Rule 33(b)

Section 6673(a)(2)(A) provides that "[w]henever it appears to the Tax Court that any attorney * * * has multiplied the proceedings in any case unreasonably and vexatiously," we may require that the attorney "pay personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." We may sua sponte impose such costs on the offending attorney. See Waltner v. Commissioner, T.C. Memo. 2014-133, at *23; Best, T.C. Memo. 2014-72, at *23; Edwards v. Commissioner, T.C. Memo. 2002-169, aff'd, 119 Fed. Appx. 293 (D.C. Cir. 2005); Leach v. Commissioner, T.C. Memo. 1993-215. Rule 33(b) sets standards in connection with counsel's signature on a pleading and provides that the Court, on its own motion, may sanction counsel for failure to meet those standards.

We believe that Attorney MacPherson may be deserving of sanction for unreasonably and unnecessarily prolonging these proceedings. After the case was [*20] docketed in this Court, respondent's counsel explicitly notified him that his assessment-focused arguments had been identified as "frivolous" in Notice 2010-33, supra. The case was subsequently remanded to the IRS Appeals Office to enable petitioner-wife, if she wished, to challenge her underlying tax liability for 2004. Rather than advance a good-faith argument (if one existed) concerning that liability, Attorney MacPherson continued to press the same assessment-focused arguments that he had just been told were frivolous. He then persisted in advancing those same arguments, for a second time, in this Court. Attorney MacPherson, like the taxpayers in Best, T.C. Memo. 2014-72, at *21, "could have pulled the plug * * * [earlier] and very likely avoided any sanction." He chose not to do so.

Since Attorney MacPherson has not yet had an opportunity to defend against these potential sanctions, we will afford him that opportunity by ordering him to show cause why we should not sanction him pursuant to Rule 33(b) or impose on him excessive costs pursuant to section 6673(a)(2). We will also order respondent to express his position on the latter issue and provide us with computations of the excess costs, expenses, and attorney's fees reasonably incurred on account of Attorney MacPherson's conduct.

[*21] To reflect the foregoing,

Appropriate orders will be issued, and decision will be entered for respondent.

FOOTNOTES:

/1/ All statutory references are to the Internal Revenue Code in effect at all relevant times. All Rule references are to the Tax Court Rules of Practice and Procedure. We round all monetary amounts to the nearest dollar.

/2/ Judith May died in 2013 and was replaced as a party by her estate's personal representative. For convenience, we will continue to refer to Howard May's deceased wife as "petitioner-wife."

/3/ After receiving petitioners' late-filed 2004 return, the IRS also abated cer-tain assessments of additions to tax and interest. Those amounts are not at issue.

/4/ On November 15, 2011, the IRS sent petitioners a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 (lien notice) for 2004 (as well as for four other years). Petitioners timely requested a CDP hearing for the lien notice. Neither the notice of determination nor the supplemental notice of determination at issue here, however, makes a determination with respect to the lien notice. The lien notice is therefore not currently before us because the IRS did not make a determination with respect to it during the CDP hearing. See secs. 6320(c), 6330(d)(1).

/5/ The arguments Attorney MacPherson advances range from accusing the IRS of defrauding the public to asserting that sec. 301.6203-1, Proced. & Admin. Regs., should be invalidated because it mentions district and regional directors, positions that no longer exist. Many of his arguments, besides being frivolous, were not raised at the CDP hearing, and we will not address them. See Magana v. Commissioner, 118 T.C. 488, 493 (2002). We have boiled down his arguments to the two theories that we discerned him to have raised in Best, T.C. Memo. 2014-72, at *9. He attached his brief in Best as an exhibit to his response to the instant motion for summary judgment and to his submissions to SO Silva.

/6/ A settlement officer may obtain transcripts by entering various command codes (e.g., TXMODA, SUMRY, IMFOLI, ENMOD, BMFOLI, TXMODS, and CFINK) into the IRS' integrated data retrieval system (IDRS) to obtain a particular transcript. See Kaeckell v. Commissioner, T.C. Memo. 2002-114, 83 T.C.M. (CCH) 1617, 1619 n.2. The IDRS is essentially the interface between the IRS' employees and its various computer systems. Ibid.

/7/ Attorney MacPherson notes that petitioners' transcripts at one point indicated (incorrectly) that they had received a Letter 105C, Claim Disallowance Letter. This notation was corrected during the supplemental hearing process and thus is not an issue here. It neither indicates an irregularity in the IRS assessment procedure nor raises a question as to whether the assessment was validly made.

/8/ In this case, as in Nestor v. Commissioner, 118 T.C. 162 (2002), and Best, T.C. Memo. 2014-72, the Form 4340 was supplied to the taxpayers not by the settlement officer during the CDP hearing but by respondent's counsel after the case was docketed in this Court. We conclude here, as we concluded in those cases, that no purpose would be served by remanding this case a second time to the IRS Appeals Office so that SO Silva could supply petitioners with another copy of the Form 4340 that they already have. See Nestor, 118 T.C. at 167; Best, T.C. Memo. 2014-72, at *18.

[Famspear]

Here's another thread mentioning Donald MacPherson, the attorney:

viewtopic.php?f=51&t=9988

[Arthur Rubin]

So, the 6673(a)(1) penalty was reduced to $500, but there may be a 6673(a)(2) penalty. Any bets as to whether MacPherson will try to bill the clients for his penalty?

As an aside, would the 6673(a)(1) penalty be charged against the decedent or her representative (executor of the estate)? I can imagine circumstances in which the penalty should logically be charged, but there is no remaining culpable entity to charge.

[.]

"Frivving." I love it.

Frivving. verb. from the Latin frīvolus. To conduct a legal action when all else has failed and no non-silly, non-serious, or non-sanctionable legal action is possible.

A new Q-coined word that will slowly enter the lexicon. Probably mostly amongst lawyers who are rock-stupid enough to do it, but also may become very unpopular amongst sanctioned pro se TP losers.

Did you hear about John?

What happened?

He went frivving and got whacked for 25K, can you believe it?

[Pottapaug1938]

So, the 6673(a)(1) penalty was reduced to $500, but there may be a 6673(a)(2) penalty. Any bets as to whether MacPherson will try to bill the clients for his penalty?

Naah. He'll probably do something like file a motion to quash the frivpen because the Magna Carta and Common Law say nothing about frivpens, or something like that.

[The Observer]

"Frivving." I love it.

You might want to withhold judgment until after you see "frivving" being used by Famspear in a limerick...

[Pottapaug1938]

"Frivving." I love it.

You might want to withhold judgment until after you see "frivving" being used by Famspear in a limerick...

Careful. You'll wake him.

[Famspear]

"Frivving." I love it.

You might want to withhold judgment until after you see "frivving" being used by Famspear in a limerick...

Careful. You'll wake him.

This attorney MacPherson likes frivving --
Which is hard to do, and make a living.
He'll demand a retainer --
An easy no-brainer --
For the crappy advice that he's giving.

[notorial dissent]

"Frivving." I love it.

You might want to withhold judgment until after you see "frivving" being used by Famspear in a limerick...

Just had to go and blashspeme the Aspidastra, judt couldn't leave well enough alone, and now look what you've caused.

[.]

See what I mean?

"Frivving" is now forever a part of poetry, such as it is. Google never forgets.

Loser lawyers and pro se TPs will be upset that their idiocy has been controverted and shrunk down to a nifty term used to make fun of them. As it works its way into the lexicon.

Next will be a thread about a Frivver. And everyone will know what it's about.

[grixit]

The judge notes that this lawyer has frivved before in other cases. So he's a serial frivver, but merely *might* be sanctioned. How about referred for suspension?

[Burnaby49]

Since I'm Canadian and not familiar with a lot of your American technical terms "frivving" is somewhat obscure to me. Is this what you mean by it;



Note - cartoon no longer appropriate in context. Apparently it changes daily. So enjoy whichever one is currently up.

[fortinbras]

At first I thought this lawyer was either newly minted or else somehow related to his clients so that he knuckled under to their importuning for flaky arguments. I was wrong.

This lawyer was preaching flaky tax dodge arguments back in 1986:
http://law.justia.com/cases/federal/app ... 79/381312/

[jg]

I learned a new word today from the decision:

In response to the motion for summary judgment, Attorney MacPherson filed a response (including 17 exhibits) that totals 159 pages. From this welter of paper we discern two theories. The first is that SO Silva abused her discretion because she relied on computerized account transcripts, rather than physical source documents, to verify, as required by section 6330(c)(1), that respondent had properly assessed petitioners' unpaid tax liability. The second theory is that SO Silva [*11] abused her discretion by neglecting to furnish petitioners with copies of signed records of assessment accompanied by a delegation order attesting to the assessing official's capacity to assess. We address each theory in turn.

bold added

wel·ter
ˈweltər
verb literary
1. move in a turbulent fashion.
"the streams foam and welter"
noun
noun: welter; plural noun: welters

1. a large number of items in no order; a confused mass.
"there's such a welter of conflicting rules"
synonyms: confusion, jumble, tangle, mess, hodgepodge, mishmash, mass; informalrat's nest
"the notebook was a welter of half-finished stories"

It is always a good day when I can learn something new. This tends to occur in about each and every day in which I am paying attention.

[LPC]

A search for Donald W. MacPherson turned up some interesting stuff.

My conclusion is that he's more in the class of lawyers like Larry Becraft and Michael Minns, who are not completely delusional and seem to know what they're doing most of the time. In fact, MacPherson was co-counsel with Becraft in the Charles Clayton case.

And MacPherson has been effective in some cases. For example, he was apparently working on an appeal in a Cheeks-type case when Cheeks itself was decided by the Supreme Court, and got a remand for a new trial from the 7th Circuit.

However, he has written some very critical (one might say incendiary) things about tax laws and the IRS. (For example, his own website has the tagline "Freeing America from IRS tyranny since 1978.") As a result he is frequently cited in tax denier materials, such in Patriot Network, Family Guardian, and other tax denier writings. (Which I think is an example of the fallacy of authority. Quoting one "tax lawyer" about something doesn't make it true.)

One interesting item I ran across, and had never seen before, is a relatively long and somewhat-scholarly looking article on the role of lawyers in the tax protester movement.

Another interesting item is Family Guardian's "Who's Who in the Freedom and Anti-Freedom Movements", which is kind of like my own Tax Protester Dossiers, but from the other end of the telescope. (In the "Anti-Freedom" category, JJ and Quatloos both get shout-outs, but I'm not mentioned. I've never heard of the third guy.)

[Pottapaug1938]

Another interesting item is Family Guardian's "Who's Who in the Freedom and Anti-Freedom Movements", which is kind of like my own Tax Protester Dossiers, but from the other end of the telescope. (In the "Anti-Freedom" category, JJ and Quatloos both get shout-outs, but I'm not mentioned. I've never heard of the third guy.)

The least that these idiots could do is mention at least the Quatloosian regulars.

[fortinbras]

The third guy, Peter Kershaw, evidently runs a website for "unregistered" churches that instructs churches how they can avoid paying taxes without giving up politicking. The simple fact is that the vast majority of churches take in so little money that they are very truly nonprofit without having to do anything special with the IRS.

[darling]

"Frivving" is now forever a part of poetry, such as it is. Google never forgets.

Except in Europe, where you now have a 'right to be forgotten'.

Sure, mostly it's used by people to cover up embarrassing things from their past but, in this case perhaps, an exception could be made for limericks too.

[Famspear]

....in Europe, where you now have a 'right to be forgotten'.

Sure, mostly it's used by people to cover up embarrassing things from their past but, in this case perhaps, an exception could be made for limericks too.

Uh-oh.....

Ev'ry limerick might be forgotten
By a drunk who, with ale, is besotten.
So, I just can’t explain
Why this stuff’s in my brain!
Oh, the rhyme is so bad that it’s rotten!

[The Observer]

And our kool-ade sippin' attorney gets nearly 20K in sanctions for frivving


LEONARD L. BEST AND EVELYN R. BEST,
Petitioners
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent

Release Date: FEBRUARY 29, 2016


UNITED STATES TAX COURT

Filed February 29, 2016

Held: Order to show cause why Ps' counsel should
not pay excessive costs pursuant to I.R.C. sec. 6673(a)(2)
or be sanctioned pursuant to Rule 33(b), Tax Court
Rules of Practice and Procedure, will be made absolute
and excessive costs imposed on counsel.

Donald W. MacPherson, for petitioners.

Chris J. Sheldon, Doreen M. Susi, and Brandon A. Keim, for respondent.

[*2] SUPPLEMENTAL MEMORANDUM OPINION

HALPERN, Judge: Donald W. MacPherson is petitioners' counsel in this case. In a prior report, Best v. Commissioner, T.C. Memo. 2014-72, we held that respondent may proceed with collection of petitioners' unpaid 1993 and 1994 Federal income tax, determined that petitioners must pay a penalty of $ 5,000 pursuant to section 6673(a)(1), and contemplated sanctioning Mr. MacPherson for unnecessarily bringing and prolonging these proceedings. 1 By order dated April 28, 2014, we ordered Mr. MacPherson to show cause why we should not require him to pay respondent's excessive costs pursuant to section 6673(a)(2) or sanction him pursuant to Rule 33(b) (order to show cause). We also ordered respondent to express his view on whether the Court should sanction Mr. MacPherson and, if so, to provide a computation of the excess costs respondent incurred. Mr. MacPherson and respondent have complied with our order, and we have considered their responses. Although Mr. MacPherson initially asked for a hearing, he has withdrawn that request. For the reasons stated, we will make the order to show cause absolute and award to the United States $ 19,837.50. Because, [*3] in his response, Mr. MacPherson also addressed the penalty that we determined to impose on petitioners, we will briefly elaborate on our grounds for imposing that penalty.

BACKGROUND

This proceeding to review respondent's determination to proceed with collection of petitioners' unpaid 1993 and 1994 Federal income taxes is not the first proceeding in this Court addressing those taxes. Previously, petitioners challenged respondent's determination of deficiencies in, and additions to, petitioners' 1993 and 1994 income tax liabilities. That proceeding, Best v. Commissioner, T.C. Dkt. No. 22241-07 (Jan. 2, 2009) (stipulated decision), was ended by agreement of the parties. We entered a stipulated decision sustaining substantial portions of the deficiencies in tax along with additions to tax for both failure to file a return and failure to pay tax timely and also for failure to pay estimated tax (all amounts, without distinction, taxes). Mr. MacPherson represented petitioners in that proceeding. Respondent assessed the resulting taxes. Petitioners failed to pay the assessed amounts, and respondent issued to them a Final Notice of Intent to Levy and Notice of Your Right to a Hearing.

Petitioners requested a section 6330 hearing, stating that they wished to pursue collection alternatives and penalty abatement. Mr. MacPherson [*4] represented them at the hearing. Settlement Officer Irma Hernandez of the Internal Revenue Service Appeals Office (Appeals) reviewed various computer transcripts of petitioners' accounts for 1993 and 1994 and concluded that proper assessments had been made and that collection of the unpaid taxes could proceed. Mr. MacPherson requested account transcripts for both years, which Ms. Hernandez provided to him. The transcripts identified petitioners and the year and type of tax reported and showed the amounts and dates of assessments. During a telephone conference with Ms. Hernandez, Mr. MacPherson told her that petitioners had changed their minds about desiring a collection alternative and were withdrawing their request for such. He conceded that petitioners had stipulated a decision entered by the Tax Court and were not disputing the underlying liabilities. He stated that he was disputing the post decision procedural steps. Although he claimed that the assessments were neither timely nor proper, he gave no specifics. He reiterated his earlier request that Ms. Hernandez "provide a 'summary record of assessment', Form 23C and a Form 4340, plus a copy of the actual document signed by the officer delegated authority to assess in this case, his name, and the delegation order showing his authorization to assess in this case." In making that request, Mr. MacPherson had communicated to Ms. Hernandez: "Clients are doubting liability/contesting timely & proper assessment & delegated [*5] authority of assessment officer." Ms. Hernandez refused his request for those documents. She explained that there was no requirement in the Internal Revenue Code or the regulations that Appeals provide the taxpayer with any documents during the hearing process. She stated that, as a matter of practice, petitioners had been furnished the account transcripts, which "identify the taxpayers, the character of the liability assessed, the taxable period and the amount of the assessment". Ms. Hernandez informed Mr. MacPherson that Appeals would issue a determination sustaining the levy. On November 1, 2010, Appeals sent to petitioners a Notice of Determination Concerning Collection Actions(s) Under Section 6320 and/or 6330, informing them that the notice of intent to levy was correct and that respondent would proceed with collection.

On December 1, 2010, in response to the notice, petitioners filed the petition, which Mr. MacPherson signed on their behalf. By the petition, petitioners prayed that, "for lack of proper assessment", we determine that they have no tax liabilities for the years in issue. They averred that Ms. Hernandez abused her discretion by failing to give them copies of Form 4340, Form 23C, RACS 006, or a delegation order for the assessment officer who signed petitioners' [*6] assessment. 2 Respondent answered the petition and, eventually, the case was set for trial in June 2012, in Phoenix, Arizona.

In early February 2012, respondent's counsel contacted Mr. MacPherson to discuss the case. Among other things, he warned Mr. MacPherson that the issues petitioners had raised during their section 6330 hearing and had alleged in the petition were listed in respondent's frivolous position notice and were contrary to established law. At Mr. MacPherson's request, respondent's counsel provided him with copies of Notice 2010-33, 2010-17 I.R.B. 609, and Rev. Rul. 2007-21, 2007-14 I.R.B. 865, and he directed him to Craig v. Commissioner, 119 T.C. 252, 262 (2002) ("Nor does * * * [section 6330(c)(1)] mandate that the Appeals officer actually give a taxpayer a copy of the verification upon which the Appeals officer relied."), and Nestor v. Commissioner, 118 T.C. 162, 166 (2002) ("Section 6330(c)(1) does not require the Appeals officer to give the taxpayer a copy of the verification that the requirements of any applicable law or administrative procedure have been met."). Respondent's counsel warned Mr. MacPherson that, if petitioners proceeded, respondent would request the Court to impose a section [*7] 6673(a)(1) penalty against them. Sometime after they filed the petition, respondent provided to petitioners Certificates of Official Records attesting that the annexed Forms 4340 were true Forms 4340 for petitioners' 1993 and 1994 tax years.

On April 4, 2012, respondent filed a motion for summary judgment and for a continuance (to give the Court time to consider the motion for summary judgment). On April 11, 2012, in a conference call with the parties, we stated our reluctance to continue the case if there was a genuine dispute as to a material fact. Mr. MacPherson was unwilling to state that there was no such dispute. As a result, we denied the motions. Five days later, Mr. MacPherson contacted respondent's counsel to suggest that the parties submit the case to the Court fully stipulated under Rule 122 or that the parties make cross-motions for summary judgment. The time for making summary judgment motions having expired, the parties agreed to proceed with a fully stipulated case. They submitted a stipulation of facts and a Rule 122 motion, which we granted. They filed briefs.

In our prior report, we stated that we discerned from the petition two grounds underlying petitioners' assignments of error. Best v. Commissioner, T.C. Memo. 2014-72, at *9. One, collection could not proceed because Ms. Hernandez had abused her discretion in relying on transcripts to verify that their unpaid tax [*8] had been properly assessed. Two, collection could not proceed because neither the account transcripts nor the Forms 4340 provided to petitioners during pendency of this case meet respondent's duty imposed by section 6203 to furnish them with copies of the Commissioner's records of assessment for the unpaid tax in issue. We treated petitioners' grounds as raising questions of law.

We found substantial authority rebutting petitioners' claim that Ms. Hernandez could not rely on computer transcripts to verify that their unpaid tax had been properly assessed. We stated: "Nothing in evidence indicates any irregularity in the assessment procedure that would raise a question that the assessments were not validly made in accordance with the requirements of section 301.6203-1, Proced. & Admin. Regs." Id. at *14.

We likewise found substantial authority that respondent had satisfied his obligation under section 6203 to furnish petitioners with the records of assessments of their unpaid tax. We stated that the information in the account transcripts furnished to petitioners by Ms. Hernandez "constitutes all of 'the pertinent parts of the assessment', which, pursuant to section 301.6203-1, Proced. & Admin. Regs., on their request, respondent must furnish to them." Id. at *15. We cited both cases of this Court and of the Court of Appeals for the Ninth Circuit for the proposition that "[The Commissioner] may choose among documents so [*9] long as the form used identifies the taxpayer, states the character of the liabilities assessed, the tax period giving rise to the assessment, the amount of the assessment, and the date of assessment." Best v. Commissioner, at *16 (alteration in original) (quoting Battle v. Commissioner, T.C. Memo. 2009-171, 2009 WL 2151786, at *5). The Forms 4340 furnished to petitioners after this case commenced contained information much the same as that contained in the account transcripts. Id. at *16-*17.

We imposed a section 6673(a)(1) penalty on petitioners because their two grounds lacked merit and were contrary to established law. We found that their arguments were frivolous; that nothing supported their assignments of error, which caused us to further conclude that their claims were groundless; and, finally, that they maintained the proceedings primarily for delay. We rejected their reliance-on-counsel defense.

We contemplated levying excess costs on Mr. MacPherson for unreasonably and unnecessarily bringing and prolonging the proceedings. We said that we would accord him the opportunity to respond to that charge.

[*10] DISCUSSION

I. Requirements for an Award of Excess Costs

A. Introduction

Section 6673(a)(2) plainly imposes three prerequisites to an award of excess costs. First, the attorney or other practitioner (without distinction, attorney) must engage in "unreasonable and vexatious" conduct. Second, that "unreasonable and vexatious" conduct must be conduct that "multiplies the proceedings." Finally, the dollar amount of the sanction must bear a financial nexus to the excess proceedings; i.e., the sanction may not exceed the costs, expenses, and attorneys' fees reasonably incurred because of such conduct. See Gillespie v. Commissioner, T.C. Memo. 2007-202, 2007 WL 2120069, at *10, aff'd, 292 F. App'x 517 (7th Cir. 2008).

B. Unreasonable and Vexatious Conduct

The purpose of section 6673(a)(2) is to penalize an attorney for his misconduct in unreasonably and vexatiously multiplying the proceedings. Congress has not, however, specified the degree of culpability that an attorney must exhibit before we may conclude that his conduct in multiplying the proceedings is unreasonable and vexatious. We have previously relied on interpretations of 28 U.S.C. sec. 1927 (2012) to ascertain misconduct justifying [*11] sanctions under section 6673(a)(2) because both serve the same purpose and have substantially identical language. See, e.g., Takaba v. Commissioner, 119 T.C. 285, 296-297 (2002); Gillespie v. Commissioner, 2007 WL 2120069, at *10. The Courts of Appeals are not uniform on the level of misconduct required for sanctions. Moreover, appellate venue regarding section 6673(a)(2) is uncertain. Venue for appeal of Tax Court decisions is governed by section 7482(b). The venue for appeal is likely either the Court of Appeals for the Ninth Circuit (because of the legal residence of petitioners), see sec. 7482(b)(1)(A), or the Court of Appeals for the District of Columbia Circuit, see sec. 7482(b)(1) (flush language). The Court of Appeals for the Ninth Circuit is among the majority of the Courts of Appeals requiring a showing of bad faith. See Moore v. Keegan Mgt. Co. (In re Keegan Mgmt. Co. Sec. Litig.), 78 F.3d 431, 436 (9th Cir. 1996) (stating that 28 U.S.C. sec. 1927 sanctions must be supported by a finding of subjective bad faith). But it has held that bad faith is shown when an attorney "knowingly or recklessly" raises a frivolous argument. Id. The Court of Appeals for the District of Columbia Circuit may require only a showing of recklessness. See LaPrade v. Kidder Peabody & Co., 146 F.3d 899, 905 (D.C. Cir. 1998) ("This court has not yet established whether the standard for imposition of sanctions under 28 U.S.C. section 1927 should be 'recklessness' or the more stringent 'bad faith.'"); [*12] Dover v. Medstar Wash. Hosp. Ctr., Inc., 989 F. Supp. 2d 57, 63 (D.D.C. 2013) (repeating Court of Appeals' admonition). Because we are unsure of appellate venue, and because we find that Mr. MacPherson's conduct would constitute bad faith under the Court of Appeals for the Ninth Circuit's test for bad faith, we will for purposes of this case (and without deciding the standard in this Court), adopt that standard. See Takaba v. Commissioner, 119 T.C. at 298.

We have already found that petitioners' assignments of error are frivolous and groundless and were raised primarily for delay. See Best v. Commissioner, at *21. We believe that Mr. MacPherson intentionally abused the judicial process by bringing and continuing this case on behalf of petitioners knowing their claims to be without merit. Indeed, by his own declaration submitted in support of petitioners' response to respondent's motion to impose sanctions on petitioners, Mr. MacPherson appears to concede that at least one of petitioners' assignments was frivolous. Id. at *23. He states that he "concluded many years ago that the '23C issue' was a 'dead letter' in so far as obtaining the 23C," id., and yet, as described supra, he assigned error related to Form 23C. Despite Mr. MacPherson's now arguing that it was not a concession, his statement, along with cases cited in the petition, demonstrates an awareness on his part that petitioners are not legally entitled to any particular document for section 6203 purposes. Mr. [*13] MacPherson knowingly raised a frivolous argument by arguing otherwise, and so he acted in bad faith. See Keegan Mgmt. Co., 78 F.3d at 436.

Moreover, as to petitioners' remaining assignments of error, months before respondent made his motion for summary judgment respondent's counsel put Mr. MacPherson on notice that respondent considered those arguments frivolous and contrary to established law. At Mr. MacPherson's request, respondent's counsel provided to him the authority on which counsel relied. And so Mr. MacPherson had further knowledge that his claims were without merit.

C. Multiplication of the Proceedings

In the face of both the authority Mr. MacPherson knew at the time the petition was filed and the authority provided by respondent's counsel, Mr. MacPherson persisted. 3 At no point did he concede any of his assignments of [*14] error. It was reckless and unreasonable of Mr. MacPherson to disregard the authority respondent's counsel brought to his attention and to continue prosecution of petitioners' meritless claims.

Mr. MacPherson further multiplied the proceedings and vexatiously impeded the resolution of this case by objecting to respondent's motion for summary judgment on the grounds that there was a genuine dispute as to material facts and then, in less than a week, reversing course and suggesting that the parties submit the case to the Court fully stipulated under Rule 122 or make cross-motions for summary judgment. In response to the order to show cause, he states that his reason for wanting a trial was to allow petitioners to testify in defense to the section 6673(a)(1) penalty. He never made that clear to the Court in his objection and has not offered an explanation for his almost immediate change of mind.

Finally, we find Mr. MacPherson to have multiplied proceedings in his response to our order to show cause. He submitted over 400 pages purporting to support his claim that sanctions are not appropriate, but much of it consists of Mr. MacPherson's persistence with arguments we have already told him are frivolous. 4

[*15] D. Financial Nexus to Excess Proceedings

These proceedings never should have been brought. All of respondent's costs are, thus, in a sense, excessive. There is, however, some disagreement among the Courts of Appeals in interpreting 28 U.S.C. sec. 1927 as to whether it is only possible to multiply, or prolong, the proceedings after a case has been initiated; presumably because an attorney cannot begin to multiply the proceedings until some proceeding has come into existence for the attorney to multiply. Compare Keegan Mgmt. Co., 78 F.3d at 435 (stating that 28 U.S.C. sec. 1927 "applies only to unnecessary filings and tactics once a lawsuit has begun"), with In re TCI Ltd., 769 F.2d 441, 448 (7th Cir. 1985) (stating that, under 28 U.S.C. sec. 1927, trial judge "had the authority to award the fees incurred right from the beginning"). We have not addressed the analogous issue under section 6673(a)(2), and we are not compelled to do so today both because respondent has asked only for excessive costs associated with the work beginning more than a year after respondent answered the petition and because, as discussed infra, we find Mr. MacPherson independently sanctionable under Rule 33(b).

[*16] II. Violation of Rule 33(b)

Mr. MacPherson has also violated Rule 33(b) and the ABA Model Rules of Professional Conduct (Model Rules), which, by Rule 201(a), govern his practice before this Court.

In pertinent part, Rule 33(b) provides:

(b) Effect of Signature. The signature of counsel
* * * constitutes a certificate by the signer that
the signer has read the pleading; that, to the best
of the signer's knowledge, information, and belief
formed after reasonable inquiry, it is well grounded
in fact and is warranted by existing law or a good
faith argument for the extension, modification, or
reversal of existing law; and that it is not interposed
for any improper purpose, such as to harass or to
cause unnecessary delay or needless increase in the
cost of litigation. * * * If a pleading is signed
in violation of this Rule, the Court, upon motion
or upon its own initiative, may impose upon the person
who signed it, a represented party, or both, an appropriate
sanction, which may include an order to pay to the
other party or parties the amount of the reasonable
expenses incurred because of the filing of the pleading,
including reasonable counsel's fees.

In pertinent part, Model Rule 3.1 states: "A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law." As we have already stated, petitioners' arguments were frivolous. We further find that arguments to modify or reverse existing law were not made in good faith. [*17] Petitioners argued that section 301.6203-1, Proced. & Admin. Regs., is invalid and a denial of due process because, in response to a taxpayer's request for a copy of the record of the assessment, see sec. 6203, the regulation requires only that the Secretary provide "the pertinent parts of the assessment", which do not include the assessment source document (Form 23C or RACS 006), including the name and signature of the assessment officer and the date of assessment. 5 In response, respondent argued that petitioners were barred from arguing the invalidity of the regulation because they had not raised the issue during their section 6330 hearing and the issue played no role in Appeals' determination to proceed with collection. It is true that with rare exception we do not have authority to consider issues that were not raised before Appeals. See, e.g., Giamelli v. Commissioner, 129 T.C. 107, 115 (2007) (underlying liability); Magana v. Commissioner, 118 T.C. 488, 493-494 (2002) (abuse of discretion); secs. 301.6320-1(f)(2), Q&A-F3, 301.6330-1(f)(2), Q&A-F3, Proced. & Admin. Regs. Principally for that reason, we did not discuss the validity of the regulation in our prior report.

[*18] In any event, even if the validity of section 301.6203-1, Proced. & Admin. Regs., were properly before us, petitioners have made no plausible argument for its invalidity. The pertinent sentence of the regulation, providing that the Secretary fulfills his duty to a taxpayer requesting a copy of the record of assessment by furnishing him a copy of the pertinent parts of the assessment, has been a part of the regulation since its promulgation in 1954. See T.D. 6119, 1955-1 C.B. 145, 149-150. The Court of Appeals for the Ninth Circuit has stated with respect to that sentence: "This represents a permissible interpretation of section 6203, and we are therefore bound to give it deference." Koff v. United States, 3 F.3d 1297, 1298 (9th Cir. 1993). Also, numerous cases hold that, to satisfy a taxpayer's section 6203 request for the record of the assessment, the Secretary need not provide original documents, such as a Form 23C, RACS 006, or the name and signature of the assessment officer. E.g., Goodman v. United States, 185 F. App'x 725, 728 (10th Cir. 2006) ("No particular form or document is needed to satisfy the requirements of I.R.C. section 6203 and Treasury Regulation section 301.6203-1. Instead, an assessment record is sufficient if it provides the taxpayer with the required information.); Niemela v. United States, 995 F.2d 1061 (1st Cir. 1993) (unpublished table decision) (citing Gentry); Gentry v. United States, 962 F.2d 555, 558 (6th Cir. 1992) ("The Treasury Regulations specify that the taxpayer [*19] entitled to a copy of the pertinent parts of the assessment documents * * * [and] [n]either the Tax Code nor the Treasury Regulations require those pertinent parts to be original documents[.]"); United States v. Hart, 917 F.2d 26 (7th Cir. 1990) (unpublished table decision) (stating that the law is settled that the Government does not have to produce original documents to comply with section 6203 and section 301.6203-1, Proced. & Admin. Regs.); Battle v. Commissioner, 2009 WL 2151786, at *5. The long existence of section 301.6203-1, Proced. & Admin. Regs., and the weight of authority contrary to petitioners' argument that the regulation is invalid lead us to conclude that petitioners did not make their contrary argument in good faith.

While Mr. MacPherson may be dissatisfied that Congress has not given taxpayers carte blanche to search the Commissioner's records when the Commissioner must take action to collect unpaid taxes, 6 petitioners have no legal [*20] grounds to complain about Ms. Hernandez's treatment of them or Appeals' resulting determination to proceed with collection. Mr. MacPherson had no basis in fact and in law for bringing this proceeding and signing the petition.

"Rule 33(b) clearly imposes an affirmative duty on each attorney to conduct a reasonable inquiry into the viability of a pleading before it is signed. " Versteeg v. Commissioner, 91 T.C. 339, 343 (1988). Mr. MacPherson has signed pleadings and other papers to bring and defend these proceedings knowing petitioners' claims to be meritless. 7 He has done so in violation of our Rules and the Model Rules and, thus, has intentionally abused the judicial process. We may sanction him for that conduct.

Accordingly, sanctions should be imposed on Mr. MacPherson under both section 6673(a)(2) and Rule 33(b) for filing the petition and multiplying the proceedings unreasonably and vexatiously. Because only frivolous issues were raised, the bringing of this case in and of itself was nothing more than a meritless [*21] tactic requiring the use of Government and Court resources that could otherwise have been applied to hear legitimate taxpayer concerns. Respondent is entitled to his attorney's fees incurred in defending this case. The tactics Mr. MacPherson employed in this case were designed to impede respondent's legitimate efforts to collect petitioners' unpaid 1993 and 1994 taxes.

III. Amount of Sanctions

One option for determining the amount of sanctions to impose on Mr. MacPherson is to follow what we said in Harper v. Commissioner, 99 T.C. 533, 549 (1992): "Attorney's fees awarded under section 6673(a)(2) are to be computed by multiplying the number of excess hours reasonably expended on the litigation by a reasonable hourly rate. The product is known as the 'lodestar' amount." We ordered respondent to provide us with a computation of costs to assist us in computing a lodestar amount. In that regard, respondent has provided us with declarations of Attorneys Brandon A. Keim and Doreen M. Susi. Attached to both declarations are copies of respondent's internal timekeeping records, showing the time expended on this case by, among others, Mr. Keim and Ms. Susi.

Respondent submits for reimbursement 115.25 hours of Mr. Keim's time at $ 150 an hour. Mr. Keim is the attorney with day-to-day responsibility for this case. He is employed in the Office of Chief Counsel in Phoenix, Arizona. He has [*22] been admitted to practice law in Arizona since 2011. He has detailed time spent on this case since January 28, 2012, which involves time spent on research, drafting, telephone calls, and review of submissions to the Court. Respondent also submits for reimbursement 12.75 hours of Ms. Susi's time at $ 200 an hour. Ms. Susi is Mr. Keim's supervisor. She is an Associate Area Counsel in the Office of Chief Counsel in Phoenix, Arizona. She has been employed by that office since 1983. She has detailed time spent on this case since April 7, 2012, which principally involves review of various submissions to the Court.

Mr. MacPherson does not challenge the reasonableness of either Mr. Keim's or Ms. Susi's hourly rates. For the most part, he also does not challenge the time spent by either Mr. Keim or Ms. Susi. He claims that respondent did not provide time sheets/records showing time expended. That claim is untrue. Respondent's internal timekeeping records were attached to both Mr. Keim's and Ms. Susi's declarations. He also argues that Mr. Keim's expenditure of 27 hours to prepare a motion for summary judgment and motion for continuance, and Ms. Susi's expenditure of 2.25 hours to review those motions were not reasonable or necessary: "No award should be provided for time expended re the useless MSJ".

We do not find 27 hours expended to prepare a motion for summary judgment and a motion for continuance to be unreasonable. And the only reason [*23] that motion was "useless" was that Mr. MacPherson represented to respondent and the Court that trial was necessary as there were genuine issues of fact to be tried. As we have already stated, that representation was quickly refuted when, five days later and after we denied the motions, Mr. MacPherson suggested that the parties submit the case to the Court fully stipulated under Rule 122. If Mr. MacPherson had not made his initial representation, we could have fully resolved the case through respondent's motion for summary judgment. And so Mr. MacPherson prolonged these proceedings even further. We also find 2.25 hours expended to review a motion for summary judgment and motion for continuance to be reasonable.

Mr. MacPherson knew or should have known that this case should never have been commenced. And for that reason, we are inclined to hold that Mr. MacPherson is liable for all of the time spent by respondent, not to mention time expended by the Court in processing and reviewing all of Mr. MacPherson's submissions. We will limit our sanctions, however, to the lodestar amount submitted by respondent: 115.25 hours of Mr. Keim's time at $ 150/hour and 12.75 hours of Ms. Susi's time at $ 200/hour equals $ 19,837.50. We will sanction Mr. MacPherson and require him to pay that amount.

[*24] IV. Section 6673(a)(1)(B) Penalty Imposed on
Petitioners

In Mr. MacPherson's response to the order to show cause, he continues to address the section 6673(a)(1) penalty that we determined to impose on petitioners. See Best v. Commissioner, at *22. We will briefly expand on our reasons for imposing the penalty.

Section 6673(a)(1)(B) allows the Tax Court to sanction taxpayers for advancing frivolous or groundless positions. In our prior report, we stated that reliance on the advice of counsel is not a defense to the imposition of a section 6673(a)(1)(B) penalty. Best v. Commissioner, at *22. Mr. MacPherson points out that in Neonatology Assocs., P.A. v. Commissioner, 115 T.C. 43, 103 (2000), aff'd, 299 F.3d 221 (3d Cir. 2002), we allowed just such a defense. That is true. In that case, the Commissioner moved for the sanction, on the basis in part of the taxpayers' counsel's litigation conduct, i.e., "contest[ing] unreasonably the admissibility of documents", "fail[ing] to comply fully with discovery requests," unreasonably calling certain witnesses, and "unreasonabl[y] * * * defend[ing] against (1) respondent's motion to compel documents * * * and (2) respondent's offer of evidence as to certain marketing materials and other evidence." Id. at 102. With respect to those grounds, we said:

[*25] Petitioners are not directly responsible
for most of the actions listedby respondent in support
of his motion to impose penalties. Those actions
are best traced to petitioners' counsel, and, given
the facts of this case, we decline to impute the
actions of petitioners' counsel to petitioners themselves
for the purposes of imposing a penalty under section
6673(a)(1)(B). Petitioners have reasonably relied
on the advice of their trial counsel that their litigating
positions had merit.

* * * [Id. at 103.]

The facts that were before us in Neonatology Assocs. are distinguishable from the facts here before us. We are not here dealing with taxpayers relying on counsel for how to conduct litigation. We are dealing with petitioners' decisions to bring this case in the first place and then to maintain it. Their declarations, set forth in part in Best v. Commissioner, at *21-*22, make it clear that it was not their idea to raise before Appeals and in this Court the issues with respect to which they assigned error. Each declares: "I have relied totally on the tax advice of MACPHERSON concerning my Collection Due Process Hearing * * * request, petition to the Tax Court, and Tax Court litigation." Id. (alteration in original). Petitioners' assignments of error challenge established law. Neither declares that he (or she) either read the petition or asked Mr. MacPherson about its content. As we said, id. at *22, "[we] need * * * [not] excuse a taxpayer's failure to review pleadings and other documents filed on his behalf." Also: "The purpose of section 6673 is to compel taxpayers to think and to conform their conduct to [*26] settled principles before they file returns and litigate."Id. We have no evidence that petitioners fulfilled those obligations. Petitioners may not blindly rely on counsel to advance arguments and use ignorance as a shield to avoid a section 6673(a)(1)(B) penalty. We continue to believe that petitioners should pay a section 6673(a)(1) penalty of $ 5,000 to the United States in this case. 8

V. CONCLUSION

We will make absolute the order to show cause in that we will award the United States $ 19,837.50 as a penalty imposed against Mr. MacPherson under section 6673(a)(2).

The order to show cause will be made absolute.

//*//

This opinion supplements our previously filed Memorandum Opinion Best v. Commissioner, T.C. Memo. 2014-72.

FOOTNOTES:

/1/ Unless otherwise stated, all section references are to the Internal Revenue Code of 1986, as amended and in effect at all relevant times, and all Rule references are to the Tax Court Rules of Practice and Procedure.

/2/ Form 4340 is a "Certificate of Assessments, Payments, and Other Specified Matters". Form 23C is an "Assessment Certificate -- Summary Record of Assessments". RACS 006 is an "Revenue Accounting Control System Report 006", a computer-generated equivalent of Form 23C. They all evidence assessment. For clarity, we do not include the form names in the text.

/3/ One of the authorities respondent's counsel brought to his attention was Nestor v. Commissioner, 118 T.C. 162, 166 (2002) ("Section 6330(c)(1) does not require the Appeals officer to give the taxpayer a copy of the verification that the requirements of any applicable law or administrative procedure have been met."). Mr. MacPherson points to Judge Foley's dissenting opinion, id. at 179-180, in which he opined that the Appeals Officer's verification was erroneous because he had not complied with the requirement of sec. 6203 that, upon his request, "the Secretary shall furnish the taxpayer a copy of the record of the assessment." The facts here are distinguishable, because Ms. Hernandez provided petitioners with account transcripts containing the "pertinent parts of the assessment", which is all that is required by sec. 301.6203-1, Proced. & Admin. Regs. In any case, the dissenting opinion was not that adopted by the Court.

/4/ Despite Mr. MacPherson's inappropriate persistence with frivolous arguments, respondent has not asked and we will not impose on Mr. MacPherson excess costs for time spent reading and responding to his over 400 pages of submissions.

/5/ In pertinent part, sec. 301.6203-1, Proced. & Admin. Regs., provides: "If the taxpayer requests a copy of the record of assessment, he shall be furnished a copy of the pertinent parts of the assessment which set forth the name of the taxpayer, the date of assessment, the character of the liability assessed, the taxable period, if applicable, and the amounts assessed."

/6/ In his declaration submitted in support of petitioners' response to respondent's motion to impose sanctions on petitioners, Mr. MacPherson states that, since petitioners "had a major collection problem * * * [he] decided to try the assessment issue believing there is some chance of lack of proper assessment which will result in voiding the assessment and causing * * * [petitioners] to be free of the debt as a result of the statute of limitations". See Best v. Commissioner, T.C. Memo. 2014-72, at *23. We do not directly address whether the assessment was proper but, rather, whether Ms. Hernandez complied with sec. 6330(c)(1) and (3)(A) and whether petitioners received "a copy of the pertinent parts of the assessment", which is all that they were entitled to under sec. 301.6203-1, Proced. & Admin. Regs.

/7/ The pleadings and papers we have in mind are the petition, petitioners' brief, petitioners' reply brief, petitioners' response to respondent's motion to impose a penalty, supplement to petitioners' response to respondent's motion to impose a penalty, petitioners' motion for reconsideration, and petitioners' notice of relevant judicial decisions.

/8/ Respondent informed Mr. MacPherson that petitioners' position was frivolous, and Mr. MacPherson had a duty to inform petitioners of respondent's position. See Rule 201(a); Model Rules of Prof'l Conduct r. 1.4. It should have been petitioners' decision as to whether they wanted to proceed with arguments that respondent regarded as frivolous. See Model Rules of Prof'l Conduct r. 1.2(a), 1.4. If Mr. MacPherson did not communicate such important information to petitioners, that may resolve a matter between them, but it does not discharge petitioners' obligations before this Court. See United States v. Boyle, 469 U.S. 241, 250 (1985).