T.C. Memo. 2016-41



                        UNITED STATES TAX COURT



                  JOSEPH G. SPICKO, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 4069-14.                         Filed March 7, 2016.



      Joseph G. Spicko, pro se.

      Lewis A. Booth II and Paul C. Feinberg, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      GOEKE, Judge: In this income tax deficiency case for 2010 petitioner

maintains that he had previously made a valid mark-to-market election, under

section 475(f) and therefore he had no net taxable income and should not have
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[*2] been required to file an income tax return.1 Not surprisingly, respondent

disagrees and has determined a tax deficiency and additions to tax under sections

6651(a)(1) and (2) and 6654.

                               FINDINGS OF FACT

      Petitioner was a resident of Texas when the petition was timely filed. He

did not pay estimated tax, otherwise pay income tax, or file a Federal income tax

return for 2010. He received income from savings bonds of $25,685 and $75 of

dividend income in 2010.

      Petitioner admits he did not submit a mark-to-market election with an

income tax return. He alleges he submitted a notice of election to Ameritrade in

March 2006. There is no evidence this notice was ever submitted to the Internal

Revenue Service (IRS), but we find it was submitted to Ameritrade. He has not

filed an income tax return since at least 2005. Respondent made a substitute for

return (SFR) for 2010 pursuant to section 6020(b).

                                     OPINION

      A valid mark-to-market election is made by attaching a statement to a timely

filed income tax return or to a request for an extension of time to file an income

      1
       Unless otherwise indicated, all section references are to the Internal
Revenue Code as amended and in effect for the year in issue, and all Rule
references are to the Tax Court Rules of Practice and Procedure.
                                         -3-

[*3] tax return. Rev. Proc. 99-17, 1999-1 C.B. 503. Petitioner has the burden of

proof in this matter as the record demonstrates that section 7491 does not apply to

shift the burden. See Rule 142. He has failed to prove that a mark-to-market

election was ever submitted to the IRS, and by his own admission no such election

was submitted in accordance with the established procedures. We hold he has

failed to make a valid mark-to-market election.

      A mark-to-market election may be made without the consent of the

Secretary and, once made, applies to the taxable year for which it is made and all

subsequent taxable years unless revoked with the Secretary’s consent. Sec.

475(f)(3). In order for a trader in securities to make a valid section 475(f)

mark-to-market election, the trader must follow the procedure set forth in Rev.

Proc. 99-17, supra. Poppe v. Commissioner, T.C. Memo. 2015-205. Generally, in

order to make a valid mark-to-market election under section 475(f), a trader in

securities must file a statement electing the mark-to-market accounting method no

later than the due date for the tax return for the year immediately preceding the

election year. Rev. Proc. 99-17, sec. 5.03, 1999-1 C.B. at 504.

      The list of persons required to file income tax returns is found in section

6012. In general, section 6012 provides that returns with respect to income tax

shall be made by every individual having, for the taxable year, gross income which
                                          -4-

[*4] equals or exceeds the exemption amount for that year plus the standard

deduction. See sec. 6012(a)(1)(A). For taxable year 2010 the personal exemption

amount was $3,650 per person. See 2010 Instructions for Form 1040, U.S.

Individual Income Tax Return. The standard deduction amount was $5,700 for

individuals. See

with gross income above $9,350

for taxable year 2010 was required to file an income tax return.2

      Section 61 defines gross income as income from whatever source derived

and enumerates a nonexclusive list of items that constitute gross income.

      Petitioner has conceded that he received savings bond income of $25,685

and dividend income of $75 in taxable year 2010. The sum of these amounts

exceeds the sum of the personal exemption and standard deduction amounts

for taxable year 2010. Petitioner had a filing requirement for taxable year 2010

apart from the mark-to-market election as the sum of his gross dividend income

and his savings bond income exceeds the sum of the personal exemption and

standard deduction amounts.

      Taxpayers may not avoid their obligation under the Internal Revenue Code

to file a Federal tax return through reliance on the Paperwork Reduction Act

(PRA). Rev. Rul. 2006-21, 2006-1 C.B. 745. Courts repeatedly have rejected

      2
          All amounts listed apply to unmarried individuals.
                                         -5-

[*5] PRA-based arguments on a number of alternative grounds. United States v.

Neff, 

, 699 (11th Cir. 1992); see also Salberg v. United States, 

, 383 (7th Cir. 1992) (affirming conviction for tax evasion and failing to

file a return, rejecting claims under the PRA); United States v. Holden, 

, 1116 (8th Cir. 1992) (affirming conviction for failing to file a return and

rejecting argument in favor of acquittal premised on the fact that tax instruction

booklets fail to comply with the PRA); United States v. Hicks, 

,

1359 (9th Cir. 1991) (affirming conviction for failing to file a return, finding

requirement to provide information is required by statute, not by the IRS);

Lonsdale v. United States, 

, 1445 (10th Cir. 1990) (finding the PRA

inapplicable to “information collection request” forms issued during an

investigation of an individual to determine tax liability); United States v. Wunder,

, 37 (6th Cir. 1990) (rejecting claim of a PRA violation and affirming

conviction for failing to file a return). Some courts have simply noted that the

PRA applies to forms themselves, not to the instructions; and because the Form

1040 does have a control number, there is no PRA violation. See, e.g., United

States v. Dawes, 

(10th Cir. 1991). Other courts have held that

Congress created the duty to file Federal income tax returns in section 6012(a) and

“Congress did not enact the PRA’s public protection provision to allow OMB
                                         -6-

[*6] [Office of Management and Budget] to abrogate any duty imposed by

Congress.” 

; see also 

.

       Petitioner has argued that the IRS has violated the PRA on numerous

occasions because he has received several letters and notices from the IRS which

do not contain an OMB control number. He has not provided any evidence or

caselaw to support his position regarding the specific forms. However, the PRA

does not relieve a taxpayer from legal requirements. As discussed earlier,

petitioner had a legal obligation to file an income tax return pursuant to section

6012. Further, he was required to make a valid mark-to-market election pursuant

to section 475(f) once he decided to change his method of accounting. Any failure

by the IRS to conform to an administrative requirement does not relieve him of his

duty to comply with these statutory requirements. See, e.g., Salberg, 

.

       Petitioner did not have reasonable cause for failing to timely file his 2010

Form 1040 and failing to timely pay his 2010 tax liability. Section 6651(a)(1) and

(2) imposes additions to tax for failing to timely file a tax return and timely pay

the taxes due unless the taxpayer can establish that such failures were due to

“reasonable cause and not due to willful neglect”. United States v. Boyle, 

, 245 (1985) (quoting section 6651(a)(1)). Section 6654 likewise imposes
                                         -7-

[*7] additions to tax in the event of an underpayment of a required installment of

individual estimated tax but, as applicable herein, provides no exception for

reasonable cause or lack of willful neglect. Rader v. Commissioner, 

,

390 (2014), aff’d in part, 616 F. App’x 391 (10th Cir. 2015). The Commissioner

bears the initial burden of production to introduce evidence that the additions to

tax are applicable. See sec. 7491(c). The taxpayer then bears the burden of

proving that the failures to file timely and to pay timely were due to reasonable

cause and not willful neglect. 

; Higbee v. Commissioner,

, 447 (2001). Because the parties agree that petitioner did not file an

income tax return for taxable year 2009 or 2010, did not pay the tax due for

taxable year 2010, and did not make estimated tax payments for his 2010 tax

liability, respondent has met his burden. Accordingly, petitioner must prove that

the untimely payment and untimely filing were due to reasonable cause and not

willful neglect. See Rule 142(a); Higbee v. Commissioner, 

.

      If the Commissioner meets this burden, to avoid the addition the taxpayer

must present evidence sufficient to persuade the Court that the addition should not

apply. Higbee v. Commissioner, 

. Petitioner has not provided any

evidence of reasonable cause for his failure to timely file or failure to timely pay

his 2010 tax liability. The only potential defense petitioner has offered is that he
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[*8] did not have a filing obligation for taxable year 2010. As we have more fully

explained above, this is an incorrect position. When asked during trial whether he

had consulted with an adviser when formulating this position, he testified that he

had not but rather came up with it on his own. This explanation is not evidence of

reasonable cause. Petitioner has provided no other explanation for his behavior.

The additions to tax are properly applied against petitioner for taxable year 2010.

      The Court has considered all other arguments made by the parties and, to

the extent not specifically addressed herein, has concluded that they are irrelevant,

moot, or without merit.

      To reflect the foregoing,


                                                    Decision will be entered

                                              for respondent.