Scott Williams & Virginia May Smith, Petitioner

T .C . Summary Opinion 2009-5 2

UNITED STATES TAX COURT

SCOTT WILLIAMS SMITH AND VIRGINIA MAY SMITH, Petitioners v . COMMISSIONER OF INTERNAL REVENUE, Responden t Docket No . 4616-08S .

Filed April 15, 2009 .

Scott Williams Smith and Virginia May Smith, pro sese .

A . Gary Begun , for respondent .

CHIECHI, Judge : This case is before the Court on respon- dent's motion for summary judgment (respondent's motion) ' shall grant respondent's motion . Petitioners filed the petition in this case pursuant to the provisions of section 7463 of'the Internal Revenue Code in effect at that time .' Pursuant :t o 'Hereinafter, all section references are to the Internal Revenue Code in effect for the year at issue . All Rule refer- (continued .

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) SERVED Apr 15 2009 section 7463(b), the decision to be entered is not reviewable by any other court, and this opinion shall not be treated as prece- 2 - dent for any other case .

Backgroun d Many of the facts are deemed established pursuant to Rule 90(c) . The record establishes and/or the parties do not dispute other facts .

Petitioners resided in Michigan at the time they filed the petition in this case .

During 2005, the year at issue, petitioner Virginia May Smith (Ms . Smith) worked for the organizations listed below and received the compensation indicated :

Name of Organization Compensation Received Avci Medical Center, P .C . $13,57 0 Michigan Neurosurgical 14,785 Specialists, P .C .

' 'In paragraph 8 of respondent's request for admissions, respondent identified the organization for which Ms . Smith worked and from which she received $14,785 during 2005 as Michigan Neurological Specialists, P .(cid:127)C . In paragraph 16 of that request for admissions, respondent identified that organization as Michigan Neurosurgical Specialists, P .C . Other portions of the record for purposes of respondent's motion also identified that organization as Michigan Neurosurgical Specialists, P .C . We find that the organization for which Ms . Smith worked and from which she received $14,785 during 2005 is Michigan Neurosurgical Specialists, P .C .

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. .continued) ences are to the Tax Court Rules of Practice and Procedure .

j - 3 Avci Medical Center, P .C . (Avci Medical Center), and . Michigan Neurosurgical Specialists, P .C . (Michigan Neurosurgical Special, ists), each-reported the amount of . compensation that each paid to Ms . Smith and that she received during 2005 in Form W-2, Wage and Tax Statement (Form W-2) .

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During 2005, Ms . Smith also received a distribution of $1,265 from Metropolitan Life Insurance Co . (Metropolitan Life) . .

Metropolitan Life reported that distribution in Form 1099 . 2 During 2005, Ms . Smith also received compensation of $1,448 from the Michigan Department of Labor and Economic Growth Unem- ployment Insurance Agency (Michigan Unemployment Insurance Agency) . The Michigan Unemployment Insurance Agency reported that compensation in Form 1099-G, Certain Government Payments .

During 2005, petitioner Scott Williams Smith (Mr . Smith) worked for the organizations listed below and received the compensation indicated :

Name of Organization Compensation Received Unilock Michigan, Inc . $1,823 Quality Carriers, Inc . 6,36 0 TNL Enterprises, LLC 19,53 3 Unilock Michigan, Inc . (Unilock), Quality Carriers, Inc . (Qualit y Carriers), and TNL Enterprises, LLC (TNL), each reported th e 2The record does not disclose the type of Form 1099 the payor used .

compensation, that each-paid to Mr . Smith and : that he received during 2005 in Form :W-2 :

During 2005, Mr . Smith also received compensation of-$549 from DJJS Leasing, Inc .,(DJJS Leasing) . DJJS Leasing reported that compensation in Form 1099 . 3 Petitioners submitted to respondent Form 1040, U .S . Individ- ual Income Tax,Return, for their taxable year .2005 (2005 return ) that they signed on August 4, 2006 . The following-appeared above their respective signatures : "american citizens" . In,the 2005 return, petitioners entered zero on each line on page 1 relating to "Income" and to "Adjusted Gross Income" except : Line 19 on which they, reported "Unemployment compensation" of $1,448 ; line 22 on which they reported "total income" of $1,448 ; and line 37 on which they reported "Adjusted-Gross Income" of .the same amount . In the 2005-return, petitioners entered zero on each line on page 2 except : Line 40 on which petitioners claime d $10,000 of :"Itemized deductions" ; line 42,on which-they claime d $6,400 of "exemptions" ; line 64 on which they claimed "Federal income tax withheld from Forms W-2 and 1099" of $11 .18 ; line 67 on which they . claimed "Excess'social security and tier 1 RRTA tax withheld" of $4',289 .53 ; . line 71 on which they claimed "total payments" of $4,300 .71 ; line 72 on which they claimed "amoun t 3See supra note 2 .

* * * overpaid" of $4,300 .71 ; and line,73a on which they claimed, a refund due of $4,300 .71 .

Petitioners included with the 2005 return Form 4852, Substi- tute for Form W-2, Wage and Tax Statement , or Form 1099-R, Distributions From Pensions , Annuities, Retirement or Profit- Sharing Plans, IRAs, Insurance Contracts, etc . (Form 4852), that pertained to each of-the five organizations from which Ms . Smith or Mr . Smith received compensation during 2005 that the organiza- tion reported in Form W-2 . According to Form 4852, the purpose of that form is to serv e as a substitute for Forms W-2., W-2c and 1099-R and is completed by taxpayers or their representatives when (a) their employer or payer did not give them a Form W- 2 or Form 1099-R and (b) when an employer or payer has issued an incorrect Form W-2 or Form 1099-R .

If you received an incorrect Form W-2 or Form , 1099-R, you should always attempt to have your employer or payer issue a corrected form before filing Form 4852 .

On August 4, 2006, Ms . Smith signed two of . the five Forms 4852 included with the 2005 return . The following appeared next to her signature : " american citizen" . On August 4, 2006, Mr .

Smith signed three of the five Forms 4852 included with the 2005 joint return . The following appeared next . to his signature :

"american citizen" .

One . of the two Forms 4852 that Ms . Smith signed pertained to Avci Medical Center, and one pertained to Michigan Neurosurgical S Specialists . One of the three Forms 4852 that Mr . Smith signed pertained to Unilock, one pertained to Quality Carriers, and one pertained to TNL . . In each of those respective forms, Ms . Smith or Mr . Smith, as the case may be, indicated : , For,the tax year ending December 31, 2005, I have bee n * unable to obtain (or have received an incorrect) Form W-2 * * * .

I have notified the IRS : of this fact . The amounts shown on line 7 are my best estimates for all wages or payments made to me and tax withheld by my employer or payer named on line 5 .

Ms . Smith completed part 7 of Form 4852 that she signed and that pertained to Avci Medical Center as follows :

7(A) Form W - 2 . Enter wages , tips, other compensation , and taxes withheld .

a Wages, tips , and other compensation . b Social security wages . . c Medicare wages and tips . . . . d Advance EIC payment . e Social security tips . . . f Federal income tax withheld .

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0 .00 0 .00 0 .00 0 .00 0 .00 0 .00 g State income tax withheld (Name of state ) Michigan h Local income tax withheld . (Name of locality ) Michiga n i Social security tax withheld j Medicare tax withheld .

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0 .0 0 .

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0 1.0 0 . 841 .3'6 . 196 .7 7 7(B) Form~1099 - R . Enter distributions from pensions , annuities , retirement / profit-sharing plans, IRAs, insurance contracts, etc .

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Total distribution .

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0 .0 0 0 .0 0 0 .0 0 0 .0 0 0 .0 0 Ms . Smith completed part 7 of Form 4852 that she signed and that pertained to Michigan Neurosurgical Specialists as follows :

q 7(A) Form W-2 . Enter wages , tips, other compensation , and taxes withheld .

a Wages, tips , and other compensation . . b Social security wages . . c Medicare wages and tips . . . . d Advance EIC payment . . e Social security tips . . . f Federal income tax withheld .

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0 .00 0 .00 0 .00 0 .00 0 .00 0 .00 g State income tax withheld . ( Name of state ) Michigan h Local income tax withheld .

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0 .00 0 .00 (Name of locality) Michigan i Social security tax withheld . . j Medicare tax withheld .

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. 916 .68 . 214 .3 8 7(B) Form 1099-R . Enter distributions from pensions , annuities , retirement/profit - sharing plans, IRAs, insurance contracts, etc .

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Total distribution .

. 3 Capital gain ( included in 2a ) .

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0 .00 0 .00 0 .00

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0 .00 0 .00 0 .0 0 0 .00 0 .0 0 Mr . Smith completed part '7 of Form 4852 that he signed an d that pertained to Unilock as follows :

. 7(A) Form W-2 . Enter wages, tips , other compensation , and taxes withheld .

a Wages, tips , and other compensation . b Social security wages . . . c Medicare wages and tips . . . d Advance EIC payment . e Social security tips . . f Federal income tax withheld . .

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0 .00 0 .00 0 .00 0 .00 0 .00 11 .18 g State income tax withheld .

( Name of state ) Michiga n h Local income tax withheld . (Name of locality ) Michigan i Social security tax withheld j Medicare tax withheld .

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0 .00 . 113 .05 26 .4 4 .

7(B) Form 1099 - R . Enter distributions from pensions , annuities , retirement /profit-sharing plans, IRAs, insurance contracts, etc .

. 1 Gross distribution 2a Taxable amount . . 2b Taxable amount not determined q . .

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Total distribution .

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0 .00 0 .00 0 .0 0 0 .00 0 .0 0 Mr . Smith completed part 7 of Form 4852 that he signed'and that pertained to Quality Carriers as follows :

q q q 7(A) Form W-2 . Enter wages, tips , other compensation , and taxes withheld .

a Wages, tips , and other compensation b Social security wages c Medicare wages and tips d Advance EIC payment . e Social security tips . f Federal income tax withheld . . . . .

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( Name of state ) Michigan g State income tax withheld 0 .00 0 .00 0 .00 0 .00 . (Name of locality) Michigan 0 .00 0 .00 i Social security tax withheld . j Medicare tax withheld .

h Local income tax withheld .

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46 .96 0 .00 . 394 .33 92 .2 2 .

7(B) Form 1099 - R . Enter distributions from pensions , annuities , retirement / profit-sharing plans, IRAs, insurance contracts, etc .

.2a Taxable amount .

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0 .00 0 .00 2b Taxable amount not determined q Total distribution .

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3 Capital gain ( included in 2a ), 0 .00

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0 .00 0 .0 0 0 .00 0 .00 0 .0 0 Mr . Smith completed part 7 of Form 4852 that he signed and that pertained to TNL as follows :

7(A) Form W-2 . Enter wages, tips , other compensation , and taxes withheld .

a wages, tips , and other compensation b Social security wages . . . . . . c Medicare wages and tips . d Advance EIC payment . . . . . e Social security tips . . f Federal income tax withheld . .

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0 .00 0 .00 0 .00 0 .00 0 .00 0 .00 g State income tax withheld .

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( Name of state ) Michigan h Local income tax withheld' . (Name of locality) Michiga n i Social security tax withheld . . j Medicare tax withheld .

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0 .00 0 .00 1211 .07 283 .2 3 7(B) Form 1099 - R . Enter distributions from pensions , annuities , retirement / profit-sharing plans, IRAs, insurance contracts, etc .

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2a Taxable amount . . 26 Taxable amount not determined q .

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Total distribution .

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0 .00 0 .00 0 .0 0 0 .00 0 .0 0 In each of the respective Forms 4852 that Ms . Smith signed and that pertained to Avci Medical Center and Michigan Neurosurgical Specialists and in each of the respective Forms 4852 that Mr . Smith signed and that pertained to Unilock, Quality Carriers , and TNL, Ms . Smith or Mr . Smith, as the case may be, gave the following answer to a question asking each of them to "Explain your efforts to obtain Form W-2, Form 1099-R, or Form W- 2c, Corrected Wage and Tax Statement " : " Requested , but the q q 9 company refuses to issue forms correctly listing payments a s `wages as defined in 3401(a) and 3121(a) for fear of IRS Retalia- tion . The amounts listed as withheld, on the W-2 if submitted are correct however" . (Reproduced literally .

) Respondent issued a notice of deficiency to petitioners with respect to their taxable year 2005 (2005 notice) . In that notice, respondent determined that-petitioners had taxable wages of $56,071, nonemployee compensation of $549, and taxable retire- ment income of $1,265 and that they were entitled . to a self-- employment tax deduction of $39 . In the 2005 notice, respondent also . determined that petitioners are liable for an addition under section 6651(x)(1) to, and an accuracy-related penalty under section 6662(a) on, petitioners' tax for their taxable year 2005 of $1,179 and $1,181, respectively .

In an attachment to the petition, petitioners gave the following explanation as to why they disagreed with the determi- nations in the 2005 notice :

1 . 2005 1040 was mailed on August 6, 2006 . Included with this return was form 4852 for "Avci Medical Cen- ter", "Unilock Michigan, Inc", "TNL Enterprises LLC", "Quality Carriers, Inc ." and "Michigan Neurosurgical Specialists . " 2 . Scott and Virginia work in the private-sector and we have not been paid with Federally connected money for federally connected services performed, nor do we have anything to do with the performance of the func- tions of a public office .

3 . Since there is no requirement to report private- sector payments for private work, the form 4852 is used to correct the amounts listed on the W-2 forms as a "substitute for form W-2, Wage and Tax Statement, or form 1099-R, Distributions from pension, Annuities, Retirement or Profit Sharing Plan, IRA, Insurance Contract, Etc " 4 . Explanation Section of form CP 2000, does not match what was reported, unless the form 4852 was taken into consideration . As mentioned above we have, Under the penalty of perjury, declared that our corrected 4852 form is true and correct to the best of our knowledge . This is our sworn testimony . It could be construed that you are tempting us to change this testimony or other wise tamper with our evidence .

5 . A letter was written after our initial submission of-,our 2005, 1040 . This was afer speaking with Mr . Evans Badge #5909013 on September 12, 2006 . Mr . Evan's informed me that a computer error occurred on Line 67 ., of our submitted'1040 form . A letter was submitted allowing 10 days via certified mail w/return receipt requested #7005 1820 0008 0997 9832, asking for written clarification . This clarification was requesting written authorities with specific IRC section/s autho- rizing the alteration of submitted forms . As of this writing this still has not been received . On October 24, 2006 we were asked by the IRS to allow 45 days for., response, signature stamped by Dorothy M . Baylis, Operations Manager .

6 . I Do not have wages as defined .in Internal Revenue Code sections n 3401(a) and 3121(a) . [Reproduced literally . ] In another attachment to the petition, petitioners allege d the following as the facts upon which they were relying i n support of their disagreement with the determinations in the 200 5 notice : 4 'At a hearing held on Apr . 23, 2008, respondent orally moved that the Court strike paragraphs 3 through 11, 14 through 16, and 18 of the facts that petitioners alleged in an attachment to the petition in support of their disagreement with the determination s . .)

(continued .

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* 12 . IRS error in the presumption that Social Security Taxes withheld by Private Company Name was authorized by Proper Name signing a W-4 Voluntary Withholdin g Agreement . When the fact is no W-4 was every signed by . Proper Name and any withholding made have been unlawful extortion'.

13 . IRS error as W-4 information from Private Company Name used to create the Notice of Deficiency is unveri- fied hearsay and IRS Agents under Rules of Evidence Rule 602 "Lack of Personal Knowledge" have no personal knowledge in this matter .

17 . IRS error in relying on inaccurately reported W-2 statement from Private Company Name that mistakenly reported ALL CAPS NAME and Estate and/or Gift taxable income . IRS Agent failed to do the required Verifica- tion of Information Return Processing (IRP) Documents after being notified the reported W-2 was inaccurate per IRM 4 .19 .1 .6 .13 (10-01-2001) Non-filer Case Pro- cessing " circumstances suggest that the information report -is not reliable or accurate, do not include the income item in the non-filers income " [Reproduced literally .

] On February 5, 2009, the Court issued-an order (February 5, 2009 Order) in which the Court ordered . petitioners to-file a written response to respondent's motion, which was to be'receive d .

. .continued) in the 2005 notice . On the same date, the Court issued an order granting respondent's oral motion to strike and deeming stricken all paragraphs of that attachment to the petition except para- graphs 1, 2, 12, 13, and 17 .

by the Court on or before February 20, 2009 . Petitioners did not file a response to respondent's motion .

In the. February 5, 2009 Order, the Court indicated that in considering respondent's motion the Court reviewed, inter alia, the petition and the attachments to the petition . The Court found in the February 5, 2009 Order that those attachment s contain statements, contentions, and/or arguments that are frivolous and/or groundless . In the February 5, 2009 Order, the Court reminded petitioners about section 6673(a)(1) and admon- ished them that if they continued to advance frivolous and/or groundless statements, contentions, and/or arguments, the Court would impose a penalty not in excess of $25,000 on them under section 6673(a)(1) .

Discussion The Court may, grant summary judgment where there is no genuine issue of material fact and a decision may be rendered as a matter'of law . See Rule 121(b) ; Sundstrand Corp .

.v . Commis- sioner , 98 T .C . 518, 520 (1992), affd . 17 F .3d 965 (7th Cir .

1994) . We conclude that there is no genuine issue of material fact regarding the questions raised in respondent's motion .

We find petitioners' position in this case to be frivolous and groundless . The record establishes that during 2005 eac h petitioner received certain income that petitioners did not 13 - report in the 2005 return .5 We sustain respondent's deficiency determination in the 2005 notice .

We turn now to the addition to tax under section 6651(a)(1) that respondent determined-in the 2005 notice . In the petition, petitioners alleged that they mailed the'2005 return to respon- dent on August 6, 2006 . Except for, unemployment compensation of $1,448, petitioners reported zero income in that return . We hold, that "under no circumstances can (cid:127)* * * [the 2005 return]ibe rationally construed as a return ."

United States v . Mosel , 738 F .2d 157, 159 (6th Cir . 1984) ;6'see Beard v . Commissioner ," 8 2 T .C . 766, 777 .(1984), affd . 793 F .2d 139 (6th Cir . 1986) . : We conclude that respondent has satisfied respondent's burden of production under section 7491(c) with respect to the addition t o 'The only item of income reported in the 2005 return was $1,448 of "Unemployment compensation" that Ms . Smith received .

6The,United States Court of Appeals for the Sixth Circuit, the Court to which an appeal in this case would normally lie, observed in United States v . Mosel , 738 F .2d 157, 158 (6th Cir . 1984) :

We particularly agree with the Seventh Circuit's obser- vation in United States v . Moore [, 62 .7 F .2d 830, 835, (7th Cir . 1980)] that . . [I]t is not enough for a form to contain . some income information ; there must also be an honest and reasonable intent to supply the` information required by the tax code In our self-reporting tax system the government should not be forced to accept as a return a document which plainly is not intended to give the required information .

- 14(cid:127) - tax under section 6651(a)(1) that respondent determined in the 2005 notice . We sustain that determination .

We turn finally to the accuracy-related penalty under section 6662(a) that respondent determined in the 2005 notice .

We have found petitioners' position in this case to be frivolous and . groundless, and we have sustained the deficiency determina- tion in the 2005 notice . We conclude that respondent has satis- fied respondent's burden of production under section 7491(c) with, respect to the accuracy-related penalty under section 6662(a ) that respondent determined in the 2005 notice . We sustain . that determination .

Although respondent does not ask the Court to impose a penalty . on petitioners under section 6673(a)(1), the Court considers sua sponte whether to impose such a penalty . Sectio n 6673(a)(1) authorizes the Court to require a taxpayer to pay a penalty to .the United States in an amount .not to exceed $25,000 whenever it appears that a taxpayer instituted or maintained a proceeding in the Court primarily for delay or that a taxpayer's position in such a proceeding is frivolous or groundless .

We believe that petitioners instituted and maintained the instant proceeding primarily for delay . We have found petition- ers' position to be frivolous and groundless . Nonetheless, we shall not impose a penalty under section 6673(a)(1) on petition- ers .7 We caution them that they may be subject to such a penalty if in the future they institute or maintain a proceeding in this Court primarily for delay and/or their position in any such proceeding is frivolous or groundless . See Abrams V . Commis- .

sioner , 82 T .C . 403, 409-413 (1984) ; White v . Commissioner , 72 T .C . 1126, 1135-1136 (1979) .

, We have considered all of petitioners' statements, conten- tions,, and arguments that are not discussed herein, and we find them to be without merit and/or irrelevant .

On the record before us, we shall grant respondent's motion .

To reflect the foregoing, An order granting respondent's motion and decision for respondent will be .entered .

7Petitioners made no filings in this case after the Court issued its February 5, 2009 Order in which the Court reminded them about sec . 6673 ( a)(1) and admonished them that 'the Court would impose a penalty on them under that section if they contin- ued to advance frivolous and/or groundless statements, conten- tions, and / or arguments .

1. Gross distribution 2a Taxable amount . 2b Taxable amount not determined q . .
3. Capital gain ( included in 2a ) .
4. Federal income tax withheld . . 5 State income tax withheld . 6 Local income tax withheld . . 7 Employee contributions 8 Distribution codes .
5. State income tax withheld . 6 Local income tax withheld . . 7 Employee contributions . 8 Distribution codes .
6. Local income tax withheld . . 7 Employee contributions 8 Distribution codes .
7. Employee contributions 8 Distribution codes .