William C. Reichenbach v. Commissioner, T.C. Memo. 1998-42

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U.S. Tax Court

William C. Reichenbach v. Commissioner

T.C. Memo. 1998-42 · Docket 27706-96 · Decided Feb 4, 1998 · Laro · T.C. Memo.

Rule 155 computation

Source ↗

Addresses I.R.C. § 6654, I.R.C. § 72

T.C. Memo. 1998-42

UNITED STATES TAX COURT

WILLIAM C. REICHENBACH, Petitioner v

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 27706-96. Filed February 5, 1998.

William C. Reichenbach, pro se.

Lynn M. Brimer

, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

LARO, Judge

: On September 30, 1996, respondent issued a notice of deficiency to petitioner based on his failure to file Federal income tax returns for 1993 and 1994 and report income from the receipt of wages, gain from the sale of property, and taxable distributions from qualified retirement plans.

Respondent determined deficiencies and additions to tax as follows:

Additions to Tax

Sec. Sec.

Year

Deficiency

6651(a)(1)

6654 1993 $37,428 $6,397 $1,017 1994 41,918 8,829 1,782 Petitioner petitioned the Court on December 30, 1996, to redetermine respondent's determination of these deficiencies and additions to tax.

We must decide: (1) Whether petitioner is liable for the deficiencies determined by respondent; (2) whether petitioner is liable for the additions to tax determined by respondent under section 6651(a)(1); (3) whether petitioner is liable for the additions to tax determined by respondent under section 6654; and (4) whether petitioner is liable for a penalty under section 6673. We hold for respondent on all issues. We also hold that petitioner is liable for a penalty under section 6673 and require him to pay to the United States a penalty of $5,000. Unless otherwise stated, section references are to the Internal Revenue Code in effect for the years in issue, and Rule references are to the Tax Court Rules of Practice and Procedure. Dollar amounts are rounded to the nearest dollar.

within the prescribed time. Sec. 301.6651-1(c)(1), Proced. & Admin. Regs. Willful neglect means a conscious, intentional failure or reckless indifference. United States v. Boyle , 469 U.S. 241, 245 (1985). Petitioner admittedly filed no returns for 1993 and 1994 although the amount of income he received required him to do so. See sec. 6012. We find that petitioner's failure to file was not due to reasonable cause. We sustain respondent's determination on this issue.

III. Section 6654 -- Failure To Pay Estimated Income Tax

Respondent determined that petitioner underpaid his estimated income tax and is liable for additions to tax under section 6654. Where payments of tax, either through withholding or by making estimated tax payments, do not equal the percentage of the total liability required under the statute, imposition of the addition to tax under section 6654 is automatic, absent a showing that the taxpayer has met one of the exceptions contained therein. See Recklitis v. Commissioner , 91 T.C. 874, 913 (1988);

Tillman v. Commissioner

, T.C. Memo. 1996-8. Because petitioner has not shown that any one of the exceptions applies, we sustain respondent's determination on this issue.

IV. Section 6673--Penalty Awarded by Court

We decide sua sponte to impose a penalty upon petitioner under section 6673(a). Section 6673(a)(1) authorizes the Court to require a taxpayer to pay to the United States a penalty not On the basis of the record, we conclude that the proceedings herein were instituted primarily for delay and that petitioner's position is both frivolous and groundless. Accordingly, we exercise our discretion and award a penalty to the United States under section 6673 in the amount of $5,000. See Coulter v. Commissioner , 82 T.C. 580, 584-586 (1984); Abrams v.

Commissioner

, 82 T.C. 403, 408-411 (1984).

We have reviewed petitioner's other arguments and find them to be without merit.

To reflect the foregoing, An appropriate order will be issued, and decision will be entered under Rule 155 .

Footnotes

¹ During 1993 and 1994, petitioner did not file Federal income tax returns or make any estimated tax payments; petitioner had $11,842 and $6,603, respectively, in Federal income taxes withheld from his wages. Respondent determined that petitioner should have reported income as follows: For 1993, $69,805 in wages and $73,140 in net capital gains;

² (...continued) capital gain as $73,140, based on petitioner's sale of property at a sale price of $79,900 and a basis of $6,760. Respondent now concedes that petitioner's basis in the property is $15,500, and that his net capital gain is $64,400. distributions. Respondent also determined that petitioner was liable for additional tax under section 72(t). After an adjustment for the standard deduction of a married-filing-separate individual, respondent calculated petitioner's 1993 and 1994 tax liabilities at $37,428 and $41,918, respectively. Respondent credits petitioner for $11,842 and $6,603 in Federal income taxes withheld for 1993 and 1994, respectively, to be applied against the determined deficiencies. OPINION As an initial matter, petitioner moved during trial to have his case dismissed for lack of jurisdiction. He contends that the Court lacks jurisdiction to hear cases involving withholding taxes and that withholding taxes are in issue in this case. We disagree. Petitioner failed to file Federal income tax returns and report income. Petitioner's Federal income tax liabilities are in issue. Respondent issued a valid notice of deficiency, and petitioner filed a timely petition with the Court. Consequently, the Court has jurisdiction over this case, and we shall deny petitioner's motion. See secs. 6212, 6213, and 6214; see also Cross v. Commissioner , 98 T.C. 613, 615 (1992); Pyo v. Commissioner , 83 T.C. 626, 632 (1984).

³ We shall not address petitioner's assertions as to the validity of the Federal income tax system "with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit." Crain v. Commissioner , 737 F.2d 1417, 1417 (5th Cir. 1984). Section 61(a) defines an individual's gross income as "all income from whatever source derived". Respondent determined that compensation for services, gains derived from dealings in

⁴ and distributions from qualified retirement plans

⁵ were includable in petitioner's gross income for the years in issue, and that the distributions from qualified retirement plans were subject to additional tax under section 72(t). Petitioner presented neither evidence nor argument that showed error in respondent's determinations. Consequently, with the one modification to reflect respondent's concession as to petitioner's increased basis in the property sold, we sustain the deficiencies determined by respondent. II. Section 6651 -- Failure To File Respondent determined that petitioner is liable for additions to tax under section 6651(a)(1). Section 6651(a)(1) imposes an addition to tax for failure to file a return timely unless the taxpayer shows that the failure was due to reasonable cause and not willful neglect. See Kotmair v. Commissioner , 86 T.C. 1253, 1263 (1986). A failure to file timely is due to reasonable cause if the taxpayer exercised ordinary business care and prudence and, nevertheless, was unable to file the return

⁶

Sections addressed

I.R.C. § 6654
I.R.C. § 72 Annuities; certain proceeds of endowment and life…
(t) (t)(2)(A)(i)