T.C. Memo. 2015-114



                        UNITED STATES TAX COURT



                   STEPHAN FORYAN, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 10732-13.                         Filed June 22, 2015.



      Stephan Foryan, pro se.

      Julie L. Payne and Alicia Eyler, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      PUGH, Judge: In a notice of deficiency dated February 11, 2013,

respondent determined a deficiency in petitioner’s 2009 Federal income tax

(including self-employment tax) plus additions to tax as follows:
                                          -2-

[*2]                                                Additions to Tax

       Deficiency       Sec. 6651(a)(1)         Sec. 6551(a)(2)      Sec. 6654(a)

        $44,092           $9,920.70               $6,834.26            $1,055.68

        The issues for decision are: (1) whether petitioner has unreported income as

respondent determined; (2) whether petitioner is liable for the additions to tax

under sections 6651(a)(1) and (2) and 6654(a) of $9,920.70, $6,834.26, and

$1,055.68, respectively; and (3) whether petitioner is liable for a penalty pursuant

to section 6673.1

                                FINDINGS OF FACT

        Some of the facts have been stipulated, and the stipulated facts are

incorporated in our findings by this reference. At the time the petition was filed,

petitioner resided in the State of Washington. Petitioner failed to file his 2009

Federal income tax return, pay estimated tax, and pay the tax due.

        Petitioner earned income from providing hay loading services for

agricultural businesses. Pursuant to section 6020(b), respondent prepared a

substitute for return for 2009 using third-party information to calculate petitioner’s

unreported income. In the notice of deficiency respondent determined petitioner’s

        1
       Unless otherwise indicated, section references are to the Internal Revenue
Code of 1986, as amended, in effect for the year in issue. Rule references are to
the Tax Court Rules of Practice and Procedure.
                                       -3-

[*3] nonemployee compensation to be $137,282. Against these payments

respondent allowed petitioner a self-employment income tax deduction of $8,460,

a standard deduction of $5,700, and exemption deductions of $3,650. At trial

petitioner appeared and stipulated receipt of the payments respondent charged to

him as income but argued those amounts were not taxable. The amounts in the

stipulation exceeded the total nonemployee compensation in the notice of

deficiency, but respondent did not assert an increased deficiency in his answer.

      Respondent also moved to impose a penalty under section 6673.

                                    OPINION

I. Burden of Proof

      Ordinarily, the burden of proof in cases before the Court is on the taxpayer.

Rule 142(a); Welch v. Helvering, 

, 115 (1933). However, if the

Commissioner raises a new issue or seeks an increase in the deficiency, the

Commissioner bears the burden of proof as to the new issue or the increased

deficiency. See Rule 142(a)(1).

      The record establishes, and petitioner concedes, that he received payments

for services from various agricultural businesses in 2009. Petitioner does not

dispute respondent’s determinations of the amounts of his taxable income. He

disputes only the characterization of these payments as taxable income. Because
                                         -4-

[*4] petitioner raises only legal issues, we decide whether he is liable for the

deficiency at issue without regard to the burden of proof.2

II. Nonemployee Compensation

       Section 61(a) provides that “gross income means all income from whatever

source derived,” including compensation for services. Petitioner does not dispute

that he received the payments in exchange for services he provided to various

agricultural businesses in 2009. Rather, he argues that the payments are not

taxable income. He also argues that Congress has not enacted a law making it

mandatory to either file a tax return or pay Federal income tax. In a previous case

before the Court petitioner argued that the Federal income tax is unconstitutional.

The Court dismissed that case for failure to prosecute properly and upheld the

deficiency and penalties determined in the notice by respondent. Foryan v.

Commissioner, T.C. Memo. 2012-177. The opinion put petitioner on notice that

he had raised tax-protester arguments rejected by this and other courts. Id.

      Petitioner’s arguments in this case likewise are frivolous tax-protester

arguments that have been rejected by this and other courts. See Wilcox v.

Commissioner, 

 (9th Cir. 1988), aff’g T.C. Memo. 1987-225; Carter


      2
        Respondent, however, bears the initial burden of production with respect
to the additions to tax. See sec. 7491(c).
                                         -5-

[*5] v. Commissioner, 

, 1009 (9th Cir. 1986); Ficalora v.

Commissioner, 

, 87-88 (2d Cir. 1984); Abrams v. Commissioner, 

 (1984); Randall v. Commissioner, T.C. Memo. 2008-138; Watson v.

Commissioner, T.C. Memo. 2007-146, aff’d, 277 Fed. Appx. 450 (5th Cir. 2008);

Brunner v. Commissioner, T.C. Memo. 2004-187, aff’d, 142 Fed. Appx. 53 (3d

Cir. 2005).

      For example, petitioner relies on Eisner v. Macomber, 

 (1920),

for the proposition that payments received are not income. Petitioner’s reliance on

Eisner is misplaced. In Commissioner v. Glenshaw Glass Co., 

, 430-

431, 477 (1955), the Supreme Court said that gross income includes all accessions

to wealth and that the definition of income in Eisner “was not meant to provide a

touchstone to all future gross income questions.” See also Hanson v.

Commissioner, T.C. Memo. 1980-197.

      Petitioner also argues that Congress never enacted a law requiring

individuals to file returns and pay Federal income tax. At trial petitioner

summarized his challenge to respondent’s notice of deficiency as follows:

“The only statement I would like to make is when by the United States of America

that there has been a law submitted that everyone is to file a tax and pay it, the law

from the United States? We’ve got all kinds of laws here, Code books, but I
                                         -6-

[*6] haven’t seen the law from our Congress passed down and made a law that it is

a mandatory law.”

      In general, we do not address frivolous arguments “with somber reasoning

and copious citation of precedent; to do so might suggest that these arguments

have some colorable merit.” See Crain v. Commissioner, 

, 1417

(5th Cir. 1984); Rowlee v. Commissioner, 

, 1120 (1983) (rejecting

the taxpayer’s claim that he is not a “person liable” for tax); Ebert v.

Commissioner, T.C. Memo. 1991-629 (rejecting the taxpayer’s assertion that there

is no section of the Internal Revenue Code that makes a taxpayer liable for the

taxes claimed), aff’d without published opinion, 

 (10th Cir. 1993).

      We will answer petitioner’s question to the Court directly because he has

two additional petitions pending before the Court with the same frivolous

arguments. In short, petitioner is subject to tax on his income under the Internal

Revenue Code. As currently organized, it was first enacted into law on August 16,

1954, when Congress enacted a major revision of the revenue laws as the “Internal

Revenue Code of 1954”. Pub. L. No. 83-591, ch. 736, 68A Stat. 3. Congress

made significant amendments in the Tax Reform Act of 1986, Pub. L. No. 99-514,

100 Stat. 2085, and redesignated the Internal Revenue Code as the “Internal

Revenue Code of 1986”, id. sec. 2, 100 Stat. at 2095. Congress has made other
                                         -7-

[*7] changes in the intervening years. In each case the changes were made by

statutes passed by Congress and signed by the President as required under the

Constitution. See, e.g., Urban v. Commissioner, T.C. Memo. 1984-85.

      Therefore we find that petitioner received $137,282 in compensation for

services performed at various farms during the year in issue and that amount is

includable in his gross income for 2009.

III. Addition to Tax

      Respondent determined that petitioner is liable for additions to tax for 2009

under section 6651(a)(1), for failure timely to file a valid return; section

6651(a)(2), for failure timely to pay tax shown on a return; and section 6654, for

failure to pay estimated tax. The Commissioner bears the burden of production

with respect to a taxpayer’s liability for additions to tax. See sec. 7491(c); Higbee

v. Commissioner, 

, 446 (2001). Once the Commissioner carries the

burden of production, the taxpayer must come forward with persuasive evidence

that the Commissioner’s determination is incorrect or that the taxpayer had an

affirmative defense. See Higbee v. Commissioner, 116 T.C. at 446-447.

      A. Addition to Tax Under Section 6651(a)(1)

      Section 6651(a)(1) authorizes the imposition of an addition to tax for failure

timely to file a return unless it is shown that such failure is due to reasonable cause
                                         -8-

[*8] and not due to willful neglect. See United States v. Boyle, 

, 245

(1985). A failure timely to file a Federal income tax return is due to reasonable

cause if the taxpayer exercised ordinary business care and prudence but

nevertheless was unable to file the return within the prescribed time, typically for

reasons outside the taxpayer’s control. See McMahan v. Commissioner, 

, 369 (2d Cir. 1997), aff’g T.C. Memo. 1995-547; sec. 301.6651-1(c)(1),

Proced. & Admin. Regs.

      Petitioner was required to file a return for 2009 and failed to do so. See sec.

6012(a)(1)(A); Rev. Proc. 2008-66, 2008-45 I.R.B. 1107. Accordingly,

respondent has carried his burden of producing evidence showing that the addition

to tax under section 6651(a)(1) is appropriate. Petitioner failed to introduce any

credible evidence showing that he had reasonable cause for failing timely to file

his 2009 return. His only arguments against his obligation to file a return (or pay

tax) are frivolous, and he has been told as much previously. Accordingly,

petitioner is liable for the addition to tax under section 6651(a)(1).

      B. Addition to Tax Under Section 6651(a)(2)

       Section 6651(a)(2) imposes an addition to tax for failure timely to pay the

amount shown as tax on a return. Respondent satisfied his burden of production

under section 7491(c) by introducing evidence that a substitute for return for 2009
                                          -9-

[*9] that satisfies the requirements of section 6020(b) was made. See sec.

6020(b); Wheeler v. Commissioner, 

, 210 (2006), aff’d, 

 (10th Cir. 2008). A substitute for return constitutes “the return filed by the

taxpayer” for purposes of determining the amount of an addition to tax under

section 6651(a)(2). See sec. 6651(g)(2); Wheeler v. Commissioner, 127 T.C. at

208-209; Cabirac v. Commissioner, 

, 170 (2003). Petitioner did not

establish that his failure to timely pay was due to reasonable cause and not willful

neglect. See sec. 6651(a)(2). Accordingly, petitioner is liable for the addition to

tax under section 6651(a)(2).

      C. Addition to Tax Under Section 6654

      Section 6654(a) imposes an addition to tax for failure to make timely and

sufficient payments for estimated tax. The addition to tax under section 6654 is

calculated by reference to four required installment payments of the taxpayer’s

estimated income tax. Sec. 6654(c)(1); Wheeler v. Commissioner, 127 T.C. at

210. Each required installment of estimated income tax is equal to 25% of the

“required annual payment.” Sec. 6654(d)(1)(A). The required annual payment is

generally equal to the lesser of: (1) 90% of the tax shown on the taxpayer’s return

for the year (or, if no return is filed, 90% of the taxpayer’s tax for the year) or (2)

100% of the tax shown on the return, if the taxpayer filed a return, for the
                                        - 10 -

[*10] immediately preceding taxable year. Sec. 6654(d)(1)(B); Wheeler v.

Commissioner, 127 T.C. at 210-211.

       For tax year 2009 petitioner failed to file a return and make required

installment payments. He had an actual tax liability for that tax year that he has

not paid. Petitioner also failed to file a return for 2008. Therefore, petitioner’s

required annual payment for 2009 is 90% of his tax for that year, as redetermined

in this proceeding. Respondent has satisfied his burden of production for the

section 6654 addition to tax with respect to 2009. See Wheeler v. Commissioner,

127 T.C. at 211(finding that the Commissioner did not satisfy the burden of

production because the Commissioner failed to show whether the taxpayer filed a

return for the preceding taxable year and, if he did, the amount of tax shown on

that return).

       Except in very limited circumstances not applicable in this case, see sec.

6654(e)(3)(B), section 6654 provides no exception for reasonable cause, Mendes

v. Commissioner, 

, 323 (2003). Instead, the addition to tax under

section 6654 is mandatory unless the taxpayer establishes that one of the

exceptions in section 6654(e) applies. Recklitis v. Commissioner, 

,

913 (1988).
                                        - 11 -

[*11] Petitioner has not shown that any of the statutory exceptions under section

6654(e) applies. Accordingly petitioner is liable for the addition to tax under

section 6654 for 2009.

IV. Section 6673 Sanction

      Respondent moved that the Court impose sanctions against petitioner

pursuant to section 6673(a)(1). Section 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 to the Court that the taxpayer instituted or maintained

the proceeding primarily for delay or that the taxpayer’s position in the proceeding

is frivolous or groundless.

      We will grant respondent’s motion and impose a penalty of $1,000 under

section 6673(a)(1) on petitioner. We also warn petitioner, as we did at trial, that if

he does not abandon his misguided positions, e.g., that his payments received for

services are not taxable income, and file timely and proper tax returns in the future

and pay his taxes when due, it is very likely that in future cases before this Court a

greater penalty will be imposed.

      We have considered petitioner’s remaining arguments, and we conclude that

they also are frivolous and devoid of any basis in law. See Crain v. Commissioner,

737 F.2d at 1417; Wnuck v. Commissioner, 

 (2011).
                                  - 12 -

[*12] To reflect the foregoing,


                                                 An appropriate order and

                                           decision will be entered.