Hendrickson - Tax Court Sustains Civil Tax Liabilities

[Famspear]

Prevaricatin', paralogistic Pete is now expressing his frustration at the lack of postings in his forum:

What's Going On Here, People?

I won't say that anyone reading these words owes me anything. But I will say that I need your help looking out for your interests, and I'm not getting it.

HAS ANYONE NOTICED the volume of comments posted on the National Forum? Those comments are the best indicator to the many forum visitors that this is an active, vibrant and inviting community of the sort to which they want to belong, and to which they can contribute ever-more energy and muscle to our hugely-important effort to restore the rule of law where it matters most. (Follow that link, people, and remind yourselves of what's at stake.)

You'll find that volume indicated in the numbers in the "Replies" column of the forum (the middle column). Go look.

Pretty impressive, yes? Well... Not.

Definitely not impressive.

Doubtless most of those thousands that have found their way to the forum have turned away in either scorn or despair. Their critically-important numbers, which might have been added to ours in an exponential improvement in our political, social and legal throw-weight, just drifted off, more likely to tell their friends not to bother looking themselves than to encourage a visit.

Oh, boo-hoo!

[ . . . ]

All told, this is the behavior of morbidity.

[ . . . ]

The point is, the good guys [Pete's description of himself and his clueless followers] are now on the verge of winning.

Ah, yes, the Fabulous Felon and his Witless Warriors are always on the "verge" of "winning".

This community [Pete's Cracking the Code tax evasion scam web site] should be a beehive of bright-eyed, high-energy activism, shoring up our gains and momentum with more and more warriors for the truth.

Instead, it's the morgue. And those gains and momentum can still slip away from cold, dead fingers, my friends.

from:

http://losthorizons.com/N/70.htm#4

Boo-hoo!

[notorial dissent]

Or just no one cares and/or is biting at this point. I think his proven trackable verifiable fail track record is probably scaring them away. The spectacular detailed and long fail record in Tax court can't be helping either.

[Famspear]

This latest language from Hendrickson (quoted above) seems to indicate what I believe some psychologists and psychiatrists call decompensation. Not a good sign.

[Pottapaug1938]

How can General Pete Hendrickson lead the mighty armies of Cracking the Code Warriors, if the crowd following him is at best, maybe, platoon or company strength?

[notorial dissent]

I seriously doubt that at the very best when Suckering the Crowd was at it's height if Pompous Pete ever managed more than a squad, and a light squad at that.

[Arthur Rubin]

I seriously doubt that at the very best when Suckering the Crowd was at it's height if Pompous Pete ever managed more than a squad, and a light squad at that.

Definitely a squad light of a platoon.

[jcolvin2]

The Hendricksons filed an Opening Brief in the Sixth Circuit (Case No. 19-2139). It was mailed on Friday, November 15, 2019 (the due date) and docketed by the Circuit on Monday, November 18, 2019. It is 59 pages long, but I would be happy to provide a copy to anyone who wants to review it. Who knows, maybe Pete will post it on the new improved Lost Horizons website?

[notorial dissent]

Oh, goody, 59 more pages of Prevaricatin' Pete's bloviation. Ought to be nice and chewy.

[Famspear]

The Hendricksons filed an Opening Brief in the Sixth Circuit (Case No. 19-2139). It was mailed on Friday, November 15, 2019 (the due date) and docketed by the Circuit on Monday, November 18, 2019. It is 59 pages long, but I would be happy to provide a copy to anyone who wants to review it. Who knows, maybe Pete will post it on the new improved Lost Horizons website?

I haven't made a thorough search of Paralogistic Pete's web site, but so far I have never seen him mention his Tax Court case -- much less his big loss in that case earlier this year. Posting his brief filed with the Court of Appeals might generate some questions from his followers, which in turn could lead to some, umm, shall we say . . . . .

. . . . . . awkwardness.

[notorial dissent]

One could say, yes.... Anymore than he has ever mentioned his, and let's be honest here his followers, consistent record of FAIL.

[Famspear]

If Hendrickson were to disclose his latest court loss in the lost horizons forum itself, he arguably would be making it more likely that one or more of his clueless followers would then use the forum to seek advice about the reason for Hendrickson's loss, and maybe violate the rules he has set for the forum:

WHAT THE FORUM IS FOR: Helping and encouraging each other (and those reading forum posts from behind the glass) in outreach efforts (an exciting new example of which is discussed further on in this article).

What it is NOT for: Seeking advice from each other on what to do about some tax agency stall or balkiness or intimidation tactic.

LET ME SAY AGAIN what I have said so often before: All tax agency stalls or balkiness or intimidation efforts are made in order to distract you from doing the only thing that will actually defeat the schemers: Waking up other people. [ . . . ]

http://losthorizons.com/N/36.htm#PageOne

That's a lie, of course. "Waking up other people" in Hendrickson's parlance means scamming even more people into using (or believing in) the Cracking the Code scheme. And none of that will "defeat" the Internal Revenue Service or the Federal courts.

And, here are some more of Hendrickson's lies:

Once a "frivolous submission" allegation has been timely and properly [sic] rebutted there is nothing else needed except steadfastness (which may include a need to repeat yourself a few times) and perhaps eventually a lawsuit.

The simple fact is, all the balky bad-apple tax agency bs in the world can't legitimately beat you by any mechanism in the law once those accurate [sic] and proper [sic] rebuttals of adverse allegations have been timely made.

That, of course, is false -- and Prevaricatin' Pete knows it's false. No "rebuttal" based on one or more of Hendrickson's frivolous arguments can be legally "accurate" or "proper." "Steadfastness" has never worked for Pete or any of his followers with respect to any of the frivolous arguments contained in "Cracking the Code." Further, no lawsuit by Pete or any of his followers has ever been successful in getting any court to agree that any of the frivolous arguments found in "Cracking the Code" are somehow valid. Both he and his wife have spent time in Federal prison for using the scam, as have many of his followers.

[Dr. Caligari]

One of Hendrickson's heroes, Alan David Cooper, filed a Tax Court Petition explicitly relying on "Cracking the Code." The Tax Court gave him a stern warning that he is facing both summary judgment and a frivolous-litigation penalty:
https://www.ustaxcourt.gov/UstcDockInq/ ... ID=7671967

[notorial dissent]

Man, that's harsh. They don't even leave them dangling in false hope and stupid expectation, just go straight for the sharp rap up the side of the head. For all the good it'll do. Any bet on him going for the gold and doubling down on the friv pens???? He's a Hendrickson's Hero after all.... What are the odds?

[Famspear]

One of Hendrickson's heroes, Alan David Cooper, filed a Tax Court Petition explicitly relying on "Cracking the Code." The Tax Court gave him a stern warning that he is facing both summary judgment and a frivolous-litigation penalty:
https://www.ustaxcourt.gov/UstcDockInq/ ... ID=7671967

On December 5, 2019, the Tax Court rendered a decision rejecting Mr. Cooper's "Cracking the Code" nonsense, with the Court again specifically mentioning Cooper's references to "Cracking the Code". Cooper had falsely contended that income that is not "federally connected" is not subject to the U.S. Federal income tax. Cooper had year 2015 wage income from Wal-Mart, some Social Security benefits, and some pension benefits from a Wausau Paper Corp. pension plan.

The Court ruled that Cooper has a year 2015 tax deficiency of $2,430 and a penalty of $238.70.

The Court ruled that "Mr. Cooper's position is frivolous, and he did not ever raise in this case any non-frivolous arguments [ . . . ]." However, the Court declined to impose a penalty for engaging in frivolous litigation, noting that Cooper had no previous record of engaging in frivolous litigation.

See Order and Decision, Dec. 5, 2019, Cooper v. Commissioner, case no. 004123-19.

[Pottapaug1938]

Another edjumacated CtC tax return goes down in flames.

[jcolvin2]

One of Hendrickson's heroes, Alan David Cooper, filed a Tax Court Petition explicitly relying on "Cracking the Code." The Tax Court gave him a stern warning that he is facing both summary judgment and a frivolous-litigation penalty:
https://www.ustaxcourt.gov/UstcDockInq/ ... ID=7671967

On December 5, 2019, the Tax Court rendered a decision rejecting Mr. Cooper's "Cracking the Code" nonsense, with the Court again specifically mentioning Cooper's references to "Cracking the Code". Cooper had falsely contended that income that is not "federally connected" is not subject to the U.S. Federal income tax. Cooper had year 2015 wage income from Wal-Mart, some Social Security benefits, and some pension benefits from a Wausau Paper Corp. pension plan.

The Court ruled that Cooper has a year 2015 tax deficiency of $2,430 and a penalty of $238.70.

The Court ruled that "Mr. Cooper's position is frivolous, and he did not ever raise in this case any non-frivolous arguments [ . . . ]." However, the Court declined to impose a penalty for engaging in frivolous litigation, noting that Cooper had no previous record of engaging in frivolous litigation.

See Order and Decision, Dec. 5, 2019, Cooper v. Commissioner, case no. 004123-19.

Link:https://www.ustaxcourt.gov/InternetOrde ... sID=309116

[notorial dissent]

One of Hendrickson's heroes, Alan David Cooper, filed a Tax Court Petition explicitly relying on "Cracking the Code." The Tax Court gave him a stern warning that he is facing both summary judgment and a frivolous-litigation penalty:
https://www.ustaxcourt.gov/UstcDockInq/ ... ID=7671967

So when the court gave Cooper the "warning" was that essentially an offer to him to redo and come back with a not frivolous/stupid explanation for his behavior? That he failed to avail himself of?

[jcolvin2]

The Sixth Circuit issued an order affirming the Tax Court opinion in Peter and Doreen Hendrickson v. CIR on April 2, 2020:

NOT RECOMMENDED FOR PUBLICATION

No. 19-2139

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

PETER E. HENDRICKSON; DOREEN M. HENDRICKSON,

Petitioners-Appellants,

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent-Appellee.

ON APPEAL FROM THE UNITED STATES TAX COURT

O R D E R

Before: COOK and THAPAR, Circuit Judges; HOOD, District Judge.*

Peter E. Hendrickson and Doreen M. Hendrickson (the Hendricksons), Michigan residents
proceeding pro se, appeal from a judgment of the United States Tax Court upholding their liability
for various income tax deficiencies and penalties for the years 2002 through 2006. This case has
been referred to a panel of the court that, upon examination, unanimously agrees that oral argument
is not needed. See Fed. R. App. P. 34(a).

The Hendricksons are tax protesters. In addition to criminal and civil cases concerning
their own fraudulent tax activities, Mr. Hendrickson has been convicted of conspiracy to place a
firebomb in a post-office box as a tax protest, see United States v. Scarborough, 43 F.3d 1021,
1023 (6th Cir. 1994), and has authored a book promoting frivolous tax-protester schemes, see Waltner v. Comm’r, T.C. Memo. 2014-35, 2014 WL 775179, at *12-22 (2014), aff’d, 659 F. App’x
440 (9th Cir. 2016).

In 2002 and 2003, Mr. Hendrickson received checks from Lost Horizons Corp. in the
amounts of $7,000 and $6,513.50. He was also employed by Personnel Management, Inc., from
2002 through 2006, earning wages of $58,965 in 2002; $60,608 in 2003; $62,433 in 2004; $64,310
in 2005; and $20,494 in 2006. In 2002 and 2003, Mrs. Hendrickson received payments from Una
E. Dworkin of $3,773 and $3,188. Mr. Hendrickson did not report his earnings from Lost
Horizons, and he submitted Forms 4852 with his income tax returns in which he adjusted to zero
the wages that he earned from Personnel Management. The Hendricksons also filed corrected
Forms 1099 reflecting that Mrs. Hendrickson received zero nonemployee compensation from
Dworkin. The Hendricksons received their requested refunds for the 2002 and 2003 tax years,
while their returns for the 2005 and 2006 tax years were rejected and replaced with substitute
returns. Mr. Hendrickson did not pay the amounts due in the substitute returns.

In 2006, the government filed a civil complaint against the Hendricksons. The district
court ordered the Hendricksons to pay back the erroneous refunds, to file amended returns
reporting their correct income, and enjoined them from filing anything with the Internal Revenue
Service (IRS) based on the false and frivolous claims espoused in Mr. Hendrickson’s book. United
States v. Hendrickson, No. Civ.A. 06-11753, 2007 WL 2385071, at *1, *4 (E.D. Mich. May 2,
2007), aff’d, No. 07-1510 (6th Cir. June 11, 2008).

In 2009, a jury found Mr. Hendrickson guilty of filing false tax returns for the 2002 through
2006 tax years. This court affirmed his convictions but remanded for resentencing. United States
v. Hendrickson, 460 F. App’x 516, 520 (6th Cir. 2012) (per curiam). On remand, Mr. Hendrickson
was sentenced to 27 months of imprisonment, and he claims to have paid $15,672 in restitution
that was imposed in the criminal case. Mrs. Hendrickson has also been convicted for criminal
contempt in connection to filing false tax returns. See United States v. Hendrickson, 822 F.3d 812
(6th Cir. 2016).

In 2013, the Commissioner of Internal Revenue (Commissioner) determined income tax
deficiencies and penalties against the Hendricksons for the 2002 and 2003 tax years and against Mr. Hendrickson for the 2004, 2005, and 2006 tax years. The Hendricksons filed a petition in the
United States Tax Court challenging the notices of deficiency. After two trials and substantial
briefing, the Tax Court issued its ruling. First, it rejected as frivolous the Hendricksons’ tax
protester arguments concerning the taxability of their income. It then concluded that: (1) the
statute of limitations did not bar the assessments because the fraud exception applied; (2) the
Commissioner had established that the Hendricksons had received taxable income during the years
in question; (3) the Hendricksons’ filing status should have been “married filing separately” rather
than “single” in 2005 and 2006; (4) penalties for failing to file a return due to fraud under 26 U.S.C.
§ 6651(f) were applicable for the years 2002 through 2006; (5) penalties for failing to timely pay
the amounts due under 26 U.S.C. § 6651(a)(2) were applicable for the years 2005 and 2006;
(6) supervisory approval was not required for penalties under 26 U.S.C. § 6651; and (7) the
restitution ordered in the criminal case did not preclude the determination of deficiencies in this
case. The Hendricksons filed a motion for reconsideration, which was denied. After the
submission of computations, the Tax Court issued its specific deficiency and penalty amounts.
The Hendricksons then filed a motion to vacate, which was also denied.

On appeal, the Hendricksons argue that: (1) the statute of limitations barred the notices of
deficiency; (2) their income and wages did not qualify for income taxation; (3) the deficiency
proceedings were precluded by prior adjudications in the district court; (4) the Commissioner’s
substitute returns were deficient; and (5) the tax penalties were improperly imposed.

“The Commissioner’s determination of a tax deficiency is generally presumptively correct
and the taxpayer has the burden of proving that the determination is erroneous or arbitrary.”
Kearns v. Comm’r, 979 F.2d 1176, 1178 (6th Cir. 1992). We review the Tax Court’s legal
determinations de novo and generally review its factual findings for clear error. Glass v. Comm’r,
471 F.3d 698, 706 (6th Cir. 2006).

The Hendricksons first argue that the notices of deficiency were invalid due to the statute
of limitations. Generally, a tax must be assessed within three years after the return was filed. 26
U.S.C. § 6501(a). An exception to this general rule applies in instances of fraud, a willful attempt
to evade tax, or the failure to file a return. 26 U.S.C. § 6501(c); see Garavaglia v. Comm’r, 521 F. App’x 476, 478 n.1 (6th Cir. 2013); Mullikin v. United States, 952 F.2d 920, 928 (6th Cir. 1991).

The Tax Court did not err by concluding that the “Hendricksons’ tax-protester positions, civil
refund proceeding, and criminal convictions under [26 U.S.C. §] 7206(1) show a clear fraudulent
and willful intent to evade tax.” See Crummey v. Comm’r, 684 F. App’x 416, 421 (5th Cir. 2017)
(per curiam); Morse v. Comm’r, 419 F.3d 829, 833 (8th Cir. 2005). Accordingly, the statute of
limitations did not bar the notices of deficiency. The Hendricksons’ arguments concerning the
correctness of the results of their prior cases and the Commissioner’s failure to file substitute
returns for some years do not alter this analysis.

The Hendricksons next protest the application of the income tax to them, arguing through
a tortured syllogism that their income and wages were not taxable. The Hendricksons’ tax
protester theories have been thoroughly rebutted in the past, see Waltner, 2014 WL 775179, at
*12-22, and the arguments presented in their present brief are similarly unpersuasive. They also
fail to show that the Forms W-2 and 1099 submitted as evidence by the Commissioner were
inadmissible hearsay or that they did not qualify for the business-records exception because the
documents “alleged” that their income is taxable. See Major v. Comm’r, T.C. Memo. 2005-141,
2005 WL 1405978, at *3-4 (2005), aff’d, 224 F. App’x 686 (9th Cir. 2007). They also did not
present any credible evidence challenging the accuracy of these documents.

The Hendricksons also argue that the Tax Court was precluded from ruling on the notices
of deficiency because the issue had already been adjudicated in their earlier civil and criminal
proceedings. For collateral estoppel to apply,

1) the precise issue raised in the present case must have been raised and actually litigated in the prior proceeding; 2) determination of the issue must have been necessary to the outcome of the prior proceeding; 3) the prior proceeding must have resulted in a final judgment on the merits; and 4) the party against whom estoppel is sought must have had a full and fair opportunity to litigate the issue in the prior proceeding.

United States v. Cinemark, 348 F.3d 569, 583 (6th Cir. 2003). In 2007, the Hendricksons were
ordered to pay back their erroneous refunds from the 2002 and 2003 tax years. Hendrickson, 2007 WL 2385071, at *1. In 2009, as part of his convictions for filing false tax returns for the 2002
through 2006 years, Mr. Hendrickson was ordered to pay restitution as part of his sentence.

The Tax Court correctly determined that the Hendricksons had forfeited their argument
that the 2007 civil-refund action had preclusive effect because they did not raise the issue until their post-judgment motion to vacate.1 See Berkun v. Comm’r, 890 F.3d 1260, 1264 (11th Cir.
2018). Moreover, the recovery of erroneous refunds, or the imposition of criminal penalties, are
separate issues from the determination of a tax deficiency. See Schwartz v. Comm’r, No. 16-2502,
2017 WL 5125662, at *2 (6th Cir. Sept. 5, 2017) (order); Morse, 419 F.3d at 834; Hickman v.
Comm’r, 183 F.3d 535, 537-38 (6th Cir. 1999).

The Hendricksons claim that the Commissioner submitted fraudulent substitutes of returns
for the 2005 and 2006 tax years. Their argument that the substitutes of returns are fraudulent is
conclusory and unsupported, however. They actually appear to object to an assertion in the
substitutes of returns that Mr. Hendrickson believed only federal employees are liable for income
taxes, as well as questioning the returns’ credibility. They do not, however, provide any concrete
reason to doubt the accuracy of the contents of the substitutes of returns. Nor do they demonstrate
that Mr. Hendrickson filed valid returns in either 2005 or 2006, as he fraudulently failed to report
his income from Personnel Management for those years.

Lastly, the Hendricksons object to the imposition of penalties under § 6651(f). For the
Hendricksons’ 2002 and 2003 returns and Mr. Hendrickson’s 2004 return, the Tax Court
concluded that penalties were appropriately leveled for fraudulent failure to file, pursuant to
§ 6651(f). The Hendricksons object to these penalties, arguing that the Tax Court improperly
applied penalties that the Commissioner had not asserted, that the penalties were based on an
allegedly incorrect proposition that the Hendricksons had failed to file returns for 2002 through 2004, and that penalties under § 6651(f) required supervisory approval. All of these arguments fail.

First, penalties under § 6651(f) were asserted for the 2002 through 2004 tax years by the
Commissioner prior to the hearing, as required by statute. 26 U.S.C. § 6214(a). These penalties
were therefore properly before the Tax Court, and the Hendricksons provide no legal basis to
conclude that the penalties should be nullified because the Commissioner asserted them “in the
alternative.” Second, the returns that the Hendricksons filed for 2002 through 2004 were invalid
because they fraudulently failed to make an honest and genuine attempt to supply the information
required by the tax code, specifically by omitting their income from Personnel Management,
Dworkin, and Lost Horizons. See Waltner v. United States, 679 F.3d 1329, 1333 (Fed. Cir. 2012);
United States v. Mosel, 738 F.2d 157, 158-59 (6th Cir. 1984) (per curiam). Finally, penalties under
§ 6651 are explicitly excluded from the requirement for supervisory approval. 26 U.S.C.
§ 6751(b)(2)(A). The Hendricksons argue that the Internal Revenue Manual nonetheless instructs
IRS employees to obtain supervisory approval for penalties under § 6651(f), and that § 6751(b)(2)
is inherently ambiguous and should be resolved in their favor under the rule of lenity. However,
the Internal Revenue Manual does not carry the force of law, see United States v. Rohner, 634 F.
App’x 495, 501 (6th Cir. 2015), and the statute plainly and unambiguously excludes penalties
under § 6651 from the supervisory-approval requirement, see § 6751(b)(2)(A).

Accordingly, we AFFIRM the Tax Court’s judgment.

ENTERED BY ORDER OF THE COURT

Deborah S. Hunt, Clerk

*The Honorable Joseph M. Hood, United States District Judge for the Eastern District of Kentucky, sitting by designation.

1 In order to avoid waiver, the Hendricksons attempt to reframe the issue by claiming the Tax Court lacked jurisdiction to do anything other than completely nullify their deficiencies, but they provide no legal basis for that conclusion. Moreover, it is the Hendricksons who initiated the present proceeding challenging the Commissioner’s deficiency determinations. See, e.g., In re Hindenlang, 164 F.3d 1029, 1031 n.1 (6th Cir. 1999).

[Famspear]

Will Paralogistic, Pontificating, Prevaricating Pete pursue the promulgation of a pointless petition for writ of certiorari at the U.S. Supreme Court?

Perhaps . . . . .

[Gregg]

The Hendricksons also argue that the Tax Court was precluded from ruling on the notices
of deficiency because the issue had already been adjudicated in their earlier civil and criminal
proceedings. For collateral estoppel to apply,

I'm sorry, but its my understanding that the only way a xase comes before the Tax Court is because the tax(non)payer files it there.

It takes a special stupid to file a case in a court and then argue the court hasn't got jurisdiction.