4-Time 861 Loser Crashes and Burns to the Tune of $50k

[Red Cedar PM]

Rodriguez v. Commissioner
T.C.
No. 17099-07
T.C. Memo. 2009-92
April 30, 2009
T.C. Memo. 2009-92
UNITED STATES TAX COURT
ROBERT RODRIGUEZ, 1
Petitioner
1 The cases were consolidated by order of the Court dated Dec. 2, 2008.
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent
Docket Nos. 17099-07, 20488-07. Filed April 30, 2009.
Robert Rodriguez, pro se.
Heather D. Horton, for respondent.
MEMORANDUM OPINION
HALPERN, Judge: By notices of deficiency respondent determined deficiencies in, and additions to, petitioner's Federal income tax for his taxable (calendar) years 2004 and 2005 as follows:
Additions to Tax

Year Deficiency Sec. 6651(a)(1) Sec. 6651(a)(2)1 Sec. 6654
2004 $24,573 $1,210.05 $645.36 $94.19
2005 20,092 997.88 221.75 108.11

Respondent concedes the sec. 6651(a)(2) additions to tax for both years.
Respondent has also moved for the imposition of penalties under section 6673.
Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the years in issue. At the time the petitions in these cases were filed, petitioner lived in Arizona.
Background
Petitioner filed no Federal income tax return for either 2004 or 2005. Respondent based his determination of the 2004 and 2005 deficiencies principally on his receipt of information returns from Coxcom, Inc., Atlanta, Georgia, and Arizona Federal, Phoenix, Arizona (the information returns). The information returns report the following payments to petitioner:
Year Payor Nature of Payment Amount
2004 Coxcom Wages $110,898
Arizona Fed. Interest 17
2005 Coxcom Wages 99,536
Arizona Fed. Interest 38

Discussion
I. Deficiencies in Tax
Petitioner assigns error to the deficiencies in tax respondent determined and, in support of those assignments, avers that he “did not receive any taxable income from any taxable source during [either of the years in issue]”.
The calculation of “taxable income” begins with the determination of “gross income”. See secs. 61(a), 62, and 63(a) and (b). That both compensation for services and interest are items of gross income is beyond dispute. Sec. 61(a)(1), (4). Section 1.61-2(a)(1), Income Tax Regs., makes explicit that “Wages” are income to the recipient “unless excluded by law.” Petitioner does not argue that his wages are excluded from gross income by any provision of law. Nevertheless, these cases involve unreported income, and, unless the parties stipulate to the contrary, the venue for appeal is the Court of Appeals for the Ninth Circuit. See sec. 7482(b)(1)(A), (2). Petitioner does argue that we are bound by a line of cases of the Court of Appeals for the Ninth Circuit beginning with Weimerskirch v. Commissioner, 596 F.2d 358 (9th Cir. 1979), revg. 67 T.C. 672 (1977), to which we defer in accordance with the doctrine of Golsen v. Commissioner, 54 T.C. 742 (1970), affd. 445 F.2d 985 (10th Cir. 1971). E.g., Nicholls v. Commissioner, T.C. Memo. 2006-218. The general rule established by that line of cases is that, for the Commissioner to prevail in a case involving unreported income, there must be some evidentiary foundation linking the taxpayer with the alleged income-producing activity. See Weimerskirch v. Commissioner, supra at 362. 2 Transcripts of the information returns were received in evidence and show the payment to petitioner of both wages and interest. Petitioner does not challenge the accuracy of the information on the transcripts, only that he did not receive income from any taxable source. He claims: “I looked at section 861 and the definition in the Internal Revenue Code specifically states that sources of income are from foreign entities, corporations.” Apparently, petitioner is relying on the discredited tax-protester argument that the regulations under section 861 establish that a citizen's income in the form of remuneration for services and bank interest received from sources within the United States is not taxable income. See Takaba v. Commissioner, 119 T.C. 285, 294-295 (2002). We have said: “The 861 argument is contrary to established law and, for that reason, frivolous.” Id. at 295. Petitioner has no reasonable dispute with respondent's reliance on the information returns, see sec. 6201(d), and respondent has provided an evidentiary foundation linking petitioner with the wages and interest in issue to satisfy the rule established by the Weimerskirch line of cases.
2 Although Weimerskirch v. Commissioner, 596 F.2d 358 (9th Cir. 1979), revg. 67 T.C. 672 (1977), dealt specifically with illegal unreported income, it is now well established that the Court of Appeals for the Ninth Circuit applies the Weimerskirch rule in all cases of unreported income where the taxpayer challenges the Commissioner's determination on the merits. E.g., Edwards v. Commissioner, 680 F.2d 1268, 1270 (9th Cir. 1982) (in that case, involving unreported income from an income-generating auto repair business owned by the taxpayer, the court stated: “We note, however, that the Commissioner's assertion of deficiencies are presumptively correct once some substantive evidence is introduced demonstrating that the taxpayer received unreported income. Weimerskirch v. Commissioner, 596 F.2d 358, 360 (9th Cir. 1979).”); Petzoldt v. Commissioner, 92 T.C. 661, 689 (1989) (“the Ninth Circuit requires that respondent come forward with substantive evidence establishing a ‘minimal evidentiary foundation’ in all cases involving the receipt of unreported income to preserve the statutory notice's presumption of correctness”).
Petitioner has failed to show any error in the deficiencies, and we sustain them in whole.
II. Additions to Tax
A. Introduction
Section 6651(a)(1) provides for an addition to tax in the event a taxpayer fails to file a timely return (determined with regard to any extension of time for filing) unless the taxpayer shows that such failure is due to reasonable cause and not due to willful neglect. The amount of the addition is equal to 5 percent of the amount required to be shown as tax on the delinquent return for each month or fraction thereof during which the return remains delinquent, up to a maximum addition of 25 percent for returns more than 4 months delinquent.
Section 6654(a) and (b) provides for an addition to tax in the event of an individual's underpayment of a required installment of estimated tax. As relevant to these cases, each required installment of estimated tax is equal to 25 percent of the “required annual payment”, which in turn is equal to the lesser of (1) 90 percent of the tax shown on the individual's return for that year (or, if no return is filed, 90 percent of his or her tax for such year), or (2) if the individual filed a return for the immediately preceding taxable year, 100 percent of the tax shown on that return. Sec. 6654(d)(1)(A) and (B). The due dates of the required installments for a calendar taxable year are April 15, June 15, and September 15 of that year and January 15 of the following year. Sec. 6654(c)(2).
B. Burden of Production
In pertinent part, section 7491(c) provides: “the Secretary shall have the burden of production in any court proceeding with respect to the liability of any individual for any * * * addition to tax”. The Commissioner's burden of production under section 7491(c) is to produce evidence that imposing the relevant addition to tax is appropriate. Swain v. Commissioner, 118 T.C. 358, 363 (2002).
C. Discussion
1. Section 6651(a)(1)
Respondent's evidence shows that petitioner did not file a Federal income tax return for either 2004 or 2005, and we so find. Respondent's evidence also shows that, for each of those years, petitioner had income sufficient to require him to file a return, i.e., income above the exemption amounts, and we so find. 3 Petitioner claims: “Nobody has told me that I am required to file” and “There is no law specifically stating in the Internal Revenue Code that says that I am required to file a Form 1040.” The history that we recite infra in our discussion of the penalty makes perfectly clear that, given petitioner's history with the Federal income tax, those are ridiculous arguments. Petitioner has failed to show that his failures to file were due to reasonable cause and not due to willful neglect. Petitioner is liable for the section 6651(a)(1) additions to tax as computed by respondent.
3 Sec. 6012(a) requires every individual having gross income exceeding a certain minimum amount to file an income tax return. Petitioner's gross income exceeded the exemption amounts of $3,100 and $3,200 and the standard deductions of $4,850 and $5,000 for 2004 and 2005, respectively. See sec. 151(d); Rev. Proc. 2003-85, sec. 3.16(1), 2003-2 C.B. 1184, 1188; Rev. Proc. 2004-71, sec. 3.17(1), 2004-2 C.B. 970, 974.
2. Section 6654
Respondent's evidence also shows that petitioner did not file a Federal income tax return for 2003, and we so find. Petitioner's required annual payments for both 2004 and 2005 were therefore 90 percent of his tax for the year. Because petitioner failed to make the required installment payments of his Federal income tax for the 2 years in issue, section 6654 imposes on petitioner an addition to tax for each year. Petitioner is liable for the section 6654 additions to tax as computed by respondent.
III. Penalties
Under section 6673(a)(1), this Court may require a taxpayer to pay a penalty not in excess of $25,000 if (1) the taxpayer has instituted or maintained a proceeding primarily for delay, or (2) the taxpayer's position is “frivolous or groundless”. We can see no reason for these cases other than delay. Moreover, petitioner's cases are groundless, and his arguments are frivolous. 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., Nis Family Trust v. Commissioner, 115 T.C. 523, 544 (2000). Petitioner has offered no plausible argument that he is exempt from Federal income tax; indeed, his arguments employ familiar tax-protester rhetoric that has been universally rejected by this and other courts. See, e.g., Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984); Williams v. Commissioner, 114 T.C. 136 (2000). Petitioner has failed to report substantial amounts of income for 2 years and deserves a substantial penalty for initiating this proceeding.
Moreover, respondent has brought to our attention petitioner's history of incurring section 6673 penalties in this Court. In Rodriguez v. Commissioner, T.C. Memo. 2003-105, affd. 127 Fed. Appx. 914 (9th Cir. 2005), we dealt with petitioner's 1994 through 1996 tax years, and in Rodriguez v. Commissioner, T.C. Memo. 2005-12, we dealt with petitioner's 1997 through 2000 tax years. In both cases petitioner failed to file returns reporting income reported to the Commissioner by third parties, and in both cases he made arguments similar to those he makes here. In the first case, we imposed on him a section 6673 penalty of $10,000, and, in the second, we imposed on him a like penalty of $25,000. Subsequently, petitioner twice again petitioned the Court, in docket Nos. 7334-04 and 527-05, incurring in each case a section 6673 penalty.
Petitioner is disrupting the orderly processes of the Court and wasting both the Court's and the Government's limited resources with the meritless arguments he continues to make. We shall, therefore, require petitioner to pay a penalty under section 6673(a)(1) of $25,000 in each of these consolidated cases.
Appropriate orders and decisions will be entered for respondent.

This guy is giving Westy a run for his money - $85k in penalties imposed by the tax court alone! It looks like he was making decent money too - instead of continuing to be a productive member of society, he has effectively ruined himself financially with this garbage.

[.]

$50K in one shot. Guess this isn't a TP victory; they hit him for the max.

They may never collect a dime of it, but it sounds like certain judges have wised up and are getting more than a bit tired of the same old gibberish.

Petitioner filed no Federal income tax return for either 2004 or 2005

Also pleasant to see that the IRS seems to be getting rather more current and up to speed instead of churning out cases based on returns filed 15 years ago.

[Judge Roy Bean]

When do criminal charges get filed for serial offenders?

[ASITStands]

When do criminal charges get filed for serial offenders?

After a criminal investigation (which generally takes several years to complete).

And, criminal investigations are generally not active during deficiency procedures, though sometimes the information gathered during the civil process is used in the criminal process.

These cased were based on notice(s) of deficiency. Evasion requires the determination of a deficiency, and that has now occurred. However, I'd guess collection procedures are next.

If collection procedures fail, or if he continues failing to file returns, a criminal investigation along the lines of willful failure to file may ensue, and he'll face that down the road.

I doubt there's an active criminal investigation now. It's still civil, precisely because there's the possibility of collection due to his income and assets. Might change in the near future.

[Joey Smith]

But ... but ... but ... but ... I thought that Larken Rose (and it seems like Stevie too at some point) said that there was NO WAY that the 861 could lose ......

[LPC]

OMG, the 861 argument? That is SO last year.

And I'm glad that there's no insanity defense to sanctions, because he might have qualified.

[Weston White]

Great, perhaps you all could do the proactive thing you all preach about so much and make some phone calls, write some letters, calling on the government to issue a public conference to finally put an end to these ridiculous matters once and for all. I mean that is the final goal of this entire website and forum, right?

Seriously, just ask them to arrange a meeting, including all tax officials, make an entire day out of it, call for the MSM to be there and all citizens with "tax protester" questions... throw in coffee and donuts for good measure, and just go nuts, hog wild in fact, get it all out into the open, and they can just shoot it all down in public and on the record, it will be a hoot!

[Red Cedar PM]

Great, perhaps you all could do the proactive thing you all preach about so much and make some phone calls, write some letters, calling on the government to issue a public conference to finally put an end to these ridiculous matters once and for all. I mean that is the final goal of this entire website and forum, right?

Courts and the IRS have already put it out there on public record that this argument (as well as the argument made in CtC and most of the arguments you have made on this forum) is frivolous and to raise it will bring penalties because it does nothing but waste public resources to deal with it. What more do you want?

EDIT - the purpose of this forum is to expose tax denier gurus so that hopefully some readers of the forum will not be suckered into their BS and fall into the trap themselves. Not to call on the goverment to put on some stupid conference as you have suggested, which would be redundant. These arguments have been rejected so many times that to bring them up warrants these type of sanctions. They are a complete waste of everyone's time and delays legitimate cases that the courts could be dealing with.

[Demosthenes]

Great, perhaps you all could do the proactive thing you all preach about so much and make some phone calls, write some letters, calling on the government to issue a public conference to finally put an end to these ridiculous matters once and for all. I mean that is the final goal of this entire website and forum, right?

Seriously, just ask them to arrange a meeting, including all tax officials, make an entire day out of it, call for the MSM to be there and all citizens with "tax protester" questions... throw in coffee and donuts for good measure, and just go nuts, hog wild in fact, get it all out into the open, and they can just shoot it all down in public and on the record, it will be a hoot!

Gosh, I wish I'd thought of contacting politicians to make my opinions known...

[Nikki]

He wants a personal invitation, a series of explanations (as he proceeds through his series of questions and challenges), answers tailored to his specific circumstances and sixth-grade reading and comprehension level plus coffee and donuts.

[Red Cedar PM]

He wants a personal invitation, a series of explanations (as he proceeds through his series of questions and challenges), answers tailored to his specific circumstances and sixth-grade reading and comprehension level plus coffee and donuts.

I would suggest Weston doing three things:

1. Hold out one hand and ask, hope, pray, etc. for his invitation to arrive.
2. Shit in the other hand.
3. See which hand fills up first.

[Doktor Avalanche]

[LPC]

I think you're giving the petitioner too much credit, because I don't think he got that far.

[Doktor Avalanche]

C'mon, Dan; you know damn well that...



...doesn't play as well as....



We got circulation to think about here, buzzkiller!

[Weston White]

He wants a personal invitation, a series of explanations (as he proceeds through his series of questions and challenges), answers tailored to his specific circumstances and sixth-grade reading and comprehension level plus coffee and donuts.

Hahaa, see now this is sort of odd, because when I was in the 4th grade I was reading at a 12 grade level. But you all know best. It is not as if I usually ace my tests or anything.

[Nikki]

1 - Clearly this early level of excellence didn't carry over into the writing skills.

2 - There is a significant difference between being able to read big 12th-grade words and being able to comprehend simple 6th-grade ones -- which you constantly demonstrate.