"Water Tresspass" - New TP Theory or Just Plain Crazy?

[jcolvin2]

T.C. Memo. 2015-75
UNITED STATES TAX COURT
GEORGE H. PATTON AND FELOMINA F. PATTON, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 16365-12L. Filed April 16, 2015.
George H. Patton and Felomina F. Patton, pro sese.
Rebecca M. Clark, for respondent.

MEMORANDUM OPINION

LAUBER, Judge: In this collection due process (CDP) case, petitioners
seek review pursuant to sections 6320(c) and 6330(d)(1)1 of the determination by [*2] the Internal Revenue Service (IRS or respondent) to uphold a notice of
Federal tax lien filing. Respondent has moved for summary judgment under Rule
121, contending that there are no disputed issues of material fact and that his
determination to sustain the proposed collection action was proper as a matter of
law. We agree and accordingly will grant the motion. We will also consider
whether petitioners should be required to pay a penalty under section 6673(a) for
taking frivolous positions or instituting or maintaining Tax Court proceedings
primarily for delay.

Background

The following facts are based on the parties’ pleadings and motion papers,
including attached exhibits and affidavits. See Rule 121(b). Petitioners resided in
Michigan when they petitioned this Court.

Petitioners filed Federal income tax returns for 2005, 2006, 2007, and 2008
but did not pay the full amounts of tax shown as due on those returns. The IRS
assessed the unpaid portions of these self-reported tax liabilities. On April 14,
2011, in an effort to collect the unpaid tax, respondent sent petitioners Letter 3172,
Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320.
Petitioners timely submitted Form 12153, Request for a Collection Due Process or [*3] Equivalent Hearing, seeking an installment agreement and withdrawal of the
notice of lien.

On October 6, 2011, a settlement officer (SO) from the IRS Appeals Office
conducted a telephone CDP hearing with petitioners and determined that they
qualified for an installment agreement with monthly payments of $750. Petitioners
rejected this offer. Their principal contention was that “the government”--by
which they apparently meant their local or county government in Michigan--had
destroyed their tax records by allowing water to “trespass” on their property
beginning in 2001. This allegedly made it impossible for them to determine their
correct Federal tax liabilities for 2005-2008.2 The SO was unpersuaded by
petitioners’ arguments and, on May 30, 2012, the IRS issued them a Notice of
Determination Concerning Collection Action(s) under Section 6320 and/or 6330
sustaining the notice of tax lien filing.

[*4] Petitioners timely petitioned this Court and, on April 16, 2013, respondent
filed a motion for summary judgment. On May 20, 2013, the Court held a hearing
on that motion and issued a bench opinion granting it in part. The Court found
that the SO had not abused his discretion in declining to offer petitioners a more
generous installment agreement, in declining to withdraw the notice of tax lien, or
in any other respect. However, the Court concluded that the SO had not adequately considered petitioners’ challenge to their underlying tax liabilities for 2005-
2008; the Court remanded the case to the IRS Appeals Office for the sole purpose
of considering that challenge. We reminded petitioners that “in presenting their
arguments to Appeals to dispute their underlying tax liabilities, they should not
make any frivolous arguments or arguments that lack any basis in law or fact.”The Court stated that the supplemental hearing should be held by November 2,
2013.

On October 30, 2013, the SO sent petitioners a letter proposing November
21, 2013, as the date for the supplemental CDP hearing. This letter included thirdparty
information reports the IRS had received regarding petitioners’ income for
2005-2008. The letter invited petitioners to file amended returns for 2005-2008 if
they contended that the income they had reported on their original returns was
incorrect. On November 10, 2013, petitioners sent the SO a letter that again [*5] discussed the “water trespass" but failed to provide any information or documentation regarding their 2005-2008 tax liabilities.

Petitioners did not participate in the supplemental telephone CDP hearing
scheduled for November 21, 2013. On December 4, 2013, the SO sent petitioners
a letter giving them an additional two weeks to supply information relevant to
their 2005-2008 tax liabilities. This letter advised that, if petitioners supplied no
information, the SO would resolve the case on the basis of information in the administrative
file. The SO telephoned petitioners and left voice mail messages for
them on December 9 and 18 to remind them of this deadline. Petitioners did not
respond by that deadline, and the SO accordingly determined that the case should
be closed. On January 16, 2014, the IRS sent petitioners a supplemental notice of
determination sustaining the notice of tax lien filing.

On December 17, 2013, petitioners submitted to the Court a letter that we
filed as a motion for default and dismissal. Petitioners asserted that the tax lien
should be lifted and the case dismissed because the SO did not hold a supplemental
hearing by November 2, 2013. On February 20, 2014, the Court denied petitioners’
motion, finding that respondent had complied with the spirit of the remand
order by providing petitioners with at least two separate opportunities to supply
additional documentation to determine their correct tax liabilities for 2005-2008.

[*6] “Rather than take advantage of th[ese] opportunities,” we noted, “petitioners
repeatedly refer to an illegal government trespass by their local government and
their resulting inability to determine their correct tax liability. These arguments
are frivolous and must be rejected.”

On March 6, 2014, petitioners filed a motion for reconsideration of our
February 20, 2014, order, which we denied on March 19, 2014. On May 12, 2014,
petitioners filed a motion for reconsideration of our March 19, 2014, order, which
we denied on May 20, 2014. On June 18, 2014, petitioners filed a motion for
leave to file a response to our May 20, 2014, order, which we denied on June 24,
2014. Each of these motions advanced (among others) the contentions that their
“tax records had been destroyed by the government” and that it was therefore
“impossible to calculate their tax liabilities” for 2005-2008.

On November 25, 2014, respondent filed a second motion for summary
judgment. In their response, petitioners do not allege any facts or provide any
documentation suggesting that the amounts of income they self-reported on their
2005-2008 tax returns were incorrect. Instead, petitioners seek to relitigate, for
the fifth time, their contention that the tax lien should be lifted because the SO did
not convene a supplemental CDP hearing by November 2, 2013. And they contend, in defiance of our prior warnings, that the government has “refused to abate [*7] its continuous trespass with water flowing in”; that the government “stole
petitioners’ confidence with lies and deceit that filled them with hope that the
highway flooding would at any moment be abated”; and that they “had been
rendered unable to file a correct tax” because of “rogue governments that ruin
taxpayers.”
Discussion

A. Summary Judgment

The purpose of summary judgment is to expedite litigation and avoid
unnecessary and time-consuming trials. Fla. Peach Corp. v. Commissioner, 90
T.C. 678, 681 (1988). Under Rule 121, the Court 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); Sundstrand Corp. v. Commissioner, 98
T.C. 518, 520 (1992), aff’d, 17 F.3d 965 (7th Cir. 1994). Where the moving party
properly makes and supports a motion for summary judgment, “an adverse party
may not rest upon the mere allegations or denials of such party’s pleading,” but
must set forth specific facts, by affidavit or otherwise, showing that there is a genuine
dispute for trial. Rule 121(d).

Petitioners’ response alleges no dispute as to any material fact. In light of
respondent’s motion, the attached exhibits, and petitioners’ response thereto, we [*8] conclude that no material facts are in dispute and that this case may be
adjudicated summarily.

B. The Merits

In our May 20, 2013, bench opinion, we held that the SO did not abuse his
discretion in declining to offer petitioners a more generous installment agreement,
in declining to withdraw the notice of tax lien, or in any other respect. The remaining
question, which was the sole subject of the remand, concerns petitioners’
challenge to their underlying tax liabilities for 2005-2008. On this point we review
the Commissioner’s determination de novo. Goza v. Commissioner, 114
T.C. 176, 181-182 (2000).

This Court may consider a taxpayer’s challenge to his underlying tax liability
in a CDP case only if he properly raised that challenge at his CDP hearing.
See sec. 301.6320-1(f)(2), Q&A-F3, Proced. & Admin. Regs. An issue is not
properly raised at a CDP hearing if the taxpayer fails to request consideration of
that issue or if he requests consideration but fails to present any evidence after
being given a reasonable opportunity to do so. Id.; see Thompson v. Commissioner,
140 T.C. 173, 178 (2013).

This Court and the IRS clearly informed petitioners that, in order to contest
their 2005-2008 tax liabilities at the supplemental hearing, they needed to file [*9] amended returns and submit documentation substantiating any revisions to
the amounts reported on their original returns. The SO provided petitioners with
third-party information reports documenting their income for 2005-2008 and
invited them to point out any discrepancies. Petitioners repeatedly ignored these
overtures, despite the many opportunities the SO gave them and his (commendably
patient) efforts to secure this information from them. Petitioners’ sole argument was that they could not calculate their correct tax liabilities because a “water trespass” by local government beginning in 2001 had destroyed their tax records for
2005-2008. We have already found that this argument is frivolous and has been
interposed primarily for delay. We will not address it again.
We conclude that petitioners did not properly raise their underlying tax liabilities
at their CDP hearing and thus cannot raise them here. We find that the SO
did not abuse his discretion--quite the opposite is true--in the manner in which he
conducted the proceedings on remand. See sec. 6330(c)(3); Caudle v. Commissioner,
T.C. Memo. 2014-196, at *10 (finding an SO did not abuse his discretion
when the taxpayer was given a reasonable opportunity for a hearing but failed to
avail himself of it). We will accordingly uphold the supplemental notice of
determination sustaining the proposed collection action.

[*10] C. Sanctions

Section 6673(a)(1) authorizes the imposition of a penalty not in excess of
$25,000 whenever it appears to this Court that a taxpayer has instituted or maintained
Tax Court proceedings primarily for delay or has taken a position that is
“frivolous or groundless.” In its May 20, 2013, bench opinion, the Court warned
petitioners against making frivolous arguments. On February 20, 2014, the Court
issued an order finding that petitioners’ “water trespass” arguments were
frivolous. On May 20, 2014, in an order denying petitioners’ motion for reconsideration,
the Court again warned them that, “if they continue to assert these same
frivolous arguments, the Court may impose sanctions” under section 6673. On
December 2, 2014, in ordering petitioners to respond to the instant motion for
summary judgment, we recounted the history of their delay tactics and warned as
follows: “Petitioners are again advised that persistence with groundless and
frivolous positions will result in the imposition of a penalty in an amount that
* * * may be as high as $25,000.”

In their response to the summary judgment motion, petitioners have persisted
in advancing the same frivolous arguments that they have repeatedly been
warned not to make. They have wasted many hours of respondent’s time and of [*11] this Court’s time. We will accordingly order them to pay a penalty to the
United States of $3,500. An appropriate order and decision
will be entered.

1 All statutory references are to the Internal Revenue Code in effect at the
relevant times, and all Rule references are to the Tax Court Rules of Practice and
Procedure (Rule). All dollar amounts are rounded to the nearest dollar.

2 Petitioners have also argued that: (1) the government prevented them from
keeping correct records; (2) they were forced by the government to file incorrect
tax forms; (3) their due process rights have been abridged by government actions;
(4) if they had been afforded equal protection under the law they would have been
able to pay the correct tax on time; (5) government action prevented them from
participating in interstate commerce and then penalized them in violation of their
First, Fifth, and Fourteenth Amendment rights; and (6) the government has forced
them into debt bondage in violation of the Thirteenth Amendment.

[.]

Victory. The 25K blustering, bogus threat turned into a minor 3.5K slap on the wrist.

The courts, including the TC need to wake up to reality, which is that there is an almost inexhaustible supply of pro se idiots who will file junk suits.

25K a pop, inflicted regularly and without mercy and that nonsense stops in its tracks. Even total dopes get the message eventually if you actually give it to them, good and hard.

[operabuff]

Looks like the petitioner was born in 1945 - I wonder who his parents had in mind when they gave him George as a first name.

But seriously - I can't agree with a $25K penalty the first time out. This is his first try at Tax Court and he did come up with a novel theory.

[notorial dissent]

OK, I give up, I've read through this mish mash, and other than the usual TP nonsense, the only oddiment I see is the Water Trespass business, and that I don't remember coming across before or having any idea what they are trying to claim.

[Red Cedar PM]

Looks like a case of just plain crazy. Some quick googling indicates that he has sued the Village of Cassopolis and its Manager both in state circuit court (which he appealed after losing) and in federal court. Both the lawsuits are related to the Village's action to condemn and demolish a crumbling commercial building that Patton owned. In both cases Patton appeared pro se and went down in flames. He does appear batshit crazy and made claims that are likely ridiculous, but none of them appear to be TP or sovrun-related.

i.e., here is an excerpt from the Michigan Court of appeals opinion:

Plaintiff filed the instant complaint, asserting claims titled “gross negligence,”
“simulating legal process,” “ethnic intimidation,” “conversion,” “severe physical and emotional
distress,” and “Violation of Michigan Laws.”

He also appealed to the Michigan Supreme Court who declined to hear the case.

Full opinion from the MI Court of Appeals:

http://publicdocs.courts.mi.gov:81/opin ... 54.opn.pdf

Opinion from USDC for West MI, Southern Division:

https://cases.justia.com/federal/distri ... 1376341631

[notorial dissent]

Sounds like the old throw it all up against the wall and see if something sticks ploy, but yeah bedbug crazy sounds about right. I still don't get the "water trespass" bit though.

[Pottapaug1938]

Sounds like the old throw it all up against the wall and see if something sticks ploy, but yeah bedbug crazy sounds about right. I still don't get the "water trespass" bit though.

It sounds like the cellar where the tax records were being kept got flooded (burst pipe, water main leak or something like that); and Numnutz decided that, by failing to stop the water from "trespassing" inside the cellar, the local gummint make it impossible for him to Do The Right Thing And Pay His Taxes.

[notorial dissent]

Well that at least sorta makes sense in a not really real way, and since a doesn't really have anything to do with b or c, it still is nonsense.

[Gregg]

What am I missing? Am I reading this wrong or was the assessment originally based upon the filers originally submitted tax returns? He's essentially arguing with his own numbers?

Petitioners filed Federal income tax returns for 2005, 2006, 2007, and 2008
but did not pay the full amounts of tax shown as due on those returns. The IRS
assessed the unpaid portions of these self-reported tax liabilities. On April 14,
2011, in an effort to collect the unpaid tax, respondent sent petitioners Letter 3172,
Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320.
Petitioners timely submitted Form 12153, Request for a Collection Due Process or [*3] Equivalent Hearing, seeking an installment agreement and withdrawal of the
notice of lien.

[notorial dissent]

I thought it sounded like he was of two or three minds about most of what he was doing. There is none of this one that makes any great amount of sense.

[Hyrion]

Am I reading this wrong or was the assessment originally based upon the filers originally submitted tax returns? He's essentially arguing with his own numbers?

Yup, that's pretty close to how I understand the situation.

He filed his taxes and paid part of them. Was assessed for the unpaid amounts and is now basically claiming:

• since water damaged his tax papers, and the authorities did nothing to stop/fix that, he can't possible know how much he actually owes

Even when the taxman provided him with documents from third parties (and I assume copies of his original filings) he is still insistent that nothing else matters but the water damage.

[wserra]

he is still insistent that nothing else matters but the water damage.

Likely hydrocephalus.

[Red Cedar PM]

I thought it sounded like he was of two or three minds about most of what he was doing. There is none of this one that makes any great amount of sense.

While there is no TP / Sovrun stuff here, Mr. Patton exhibits much of the same mentality that appears to be feeding the TP / Sovrun movements. I can't pay my taxes because the Village did something that flooded my property! The Village is trying to discriminate against me for demolishing my decrepit building that is a public hazard!

I see this quite often working in real estate and having to go to various local public meetings (planning commissions, city council, etc.). There are always at least 1 or 2 crazies in every community that just have to get up during their 2 minutes of fame at the public comment periods of these meetings and rail about how something is ruining their lives and destroying their community. Usually the "something" is the local government, but sometimes it's a certain policy or ordinance, sometimes its a private real estate developer or company. However, it's always something OTHER THAN the aggrieved who is the cause of all their problems. I find it really amazing that people can spend so much time worrying about these various cause celebres when they usually have substantial personal problems (family, financial, health, legal, etc.) that they should be spending their time dealing with.

You see these same jokers posting idiotic public comments on news articles all the time, many times with racist or other bigoted remarks thrown in since they feel they can hide behind their computer screen.

When did we become a nation of whiners who cannot take responsibility for their own problems? Are these the kind of people that potential TPs / Sovruns really aspire to emulate?

[grixit]

Someone should have warned then-- let the government flood your basement and you're under admiralty jurisdiction.

[Famspear]

Someone should have warned then-- let the government flood your basement and you're under admiralty jurisdiction.

[Randall]

I see this quite often working in real estate and having to go to various local public meetings (planning commissions, city council, etc.). There are always at least 1 or 2 crazies in every community that just have to get up during their 2 minutes of fame at the public comment periods of these meetings and rail about how something is ruining their lives and destroying their community.

Going off topic here, but when I sat on City Council I often found 1 or 2 of those crazies were realtors who were trying to push through some zoning change or other variance just so they could earn a commission and disregarding the community at large. It was usually the same folks time after time to the point where one becomes skeptical about anything they brought forward which likely hurt them if they ever had a reasonable proposal.

[Pottapaug1938]

I see this quite often working in real estate and having to go to various local public meetings (planning commissions, city council, etc.). There are always at least 1 or 2 crazies in every community that just have to get up during their 2 minutes of fame at the public comment periods of these meetings and rail about how something is ruining their lives and destroying their community.

Going off topic here, but when I sat on City Council I often found 1 or 2 of those crazies were realtors who were trying to push through some zoning change or other variance just so they could earn a commission and disregarding the community at large. It was usually the same folks time after time to the point where one becomes skeptical about anything they brought forward which likely hurt them if they ever had a reasonable proposal.

When I was active in my local civic association, I used to see a lot of crazies from time to time. Clearly, these were people who felt powerless in their daily lives; and when they had a chance to exert any sort of power on their own, they neglected no opportunity to do so. Tax protestors/deniers were in this group; and there were more than a couple who would show up, with all-caps, single-spaced screeds ready to hand out, to get their viewpoints across. The issue could be as trivial as some guy wanting the Association's endorsement for a zoning variance; but the crazies would insist on using their "moment in the sun" to make the pickiest criticisms of the proposal.

[Gregg]

My neiborhood (recently featured on the reality TV show "Neighbors with Benefits" BTW, has a HMO that I went to twice. We had one twit of a woman who had to give her take on every issue, and began every one of her appeals with "I'm Maddelyn DIngbat, I live in the only house in the development with a wrap around porch" I used to swear I was going to build a wrap around porch just to take that away from her. She moved out in less than a year, but not before she got stop signs posted on every single corner in the development that it then took us two years to get removed, making it possible to drive more than 20 feet without coming to a complete stop.

I'm shocked I didn't get in on the reality TV sex show, though, it looked like just my thing.....

[Randall]

Petitioners’ sole argument was that they could not calculate their correct tax liabilities because a “water trespass” by local government beginning in 2001 had destroyed their tax records for
2005-2008. We have already found that this argument is frivolous and has been
interposed primarily for delay.

A water leak in 2001 destroys tax records from 7 years later? Did the petitioner call David and his Magical Time Machine as en expert witness?

[wserra]

It's heavy water.