crites v. cir tax court memo opinion annotated

8/11/2019 Crites v. CIR Tax Court Memo Opinion Annotated

1/13

m tb S

T .C .

Memo . 2 012-2 67

UNITED STATES

T X COURT

M RL J .

CR ITES ,

Peti t ioner v .

COMM ISS IONER OF INTERNAL REVENUE , Respondent

Docket

No. 19156 -10L. Fi led

September

1 7

2012.

Marla

J .

Cr i tes ,

p ro

s e .

Mat thew

D.

Carlson,

fo r

respondent .

ME MOR AN D U M OPINION

HOLMES ,

Judge:

The

Commiss ioner says Marla

Cri tes owes

a

5,000

penal ty

fo r

filing

a

f r i vo lous

amended

return.

She

had

f i led

a

perfect ly

norma l

2005 tax re tu rn nea rly

three

years

before , b u t argues

now

that she

is

no t a pe r son

and

that,

even

she

were,

the Commiss i one r

b lew th ro ugh

th e statute

of

S E RVE D S ep

17

2012


2/13

2

[ * 2 ] l i m i t a t i o n s b y no i m p o s i n g

th e p e n a l t y

within

t h r e e

y e a r s

of th e

filing

of

h e r

o r i g i n a l r e t u r n .

B a c k g r o u n d

I.

T h e R e t u r n s

O n April 1 5 2 0 0 6 , C r i t e s f i l e d a

r e t u r n

fo r h e r 2 0 0 5 ta x

y e a r . I t s h o w e d

a b o u t $ 4 5 , 0 0 0 in a d j u s t e d g r o s s i n c o m e an d a ta x liability of l e s s t h a n $ 4 , 0 0 0 .

M o r e

t h a n

tw o

y e a r s

l a t e r ,

in

O c t o b e r

2 0 0 8 , C r it e s

s e n t

a

F o r m

1 0 4 0 X ,

A m e n d e d

U . S .

I n d i v i d u a l T a x R e t u r n ,

to th e C o m m i s s i o n e r .

T h e C o m m i s s i o n e r

d id

n o t

p r o c e s s t h is 1 0 4 0 X as a r e t u r n .

H is

r e a s o n

is n o t

h a r d

to s e e : In

h e r 1 0 4 0 X , C r i t e s

a s k e d fo r a r e f u n d of a ll th e

2 0 0 5

t a x t h a t sh e h ad p a i d o n th e

g r o u n d

t h a t h e r

i n c o m e w as r a d i c a ll y l o w e r

t h a n

sh e h ad

o r i g i n a l l y

r e p o r t e d

b e c a u s e ,

sh e

w r o t e :

I w as in t h e s e rv i c e of a

n o n - F e d e r a l

e m p l o y e r , n o t e n g a g e d in a

t r a d e o r u s i n e s s an d n o t

an

o f f i c e r of

a

c o r p o r a t i o n .

A c c o r d i n

to

th e I R C s e c t i o n s 3 4 0 1

an d

3 1 2 1 t h e n ,

m y

i n c o m e c o n s i s t s o n l y

of

u n e m p l o y m e n t

c o m p e n s a t i o n

an d a

ta x

r e f u n d

f r o m

th e p r e v i o u s

y e a r .

T h i s is o n l y a v a r i a t i o n

of

th e f r i v o l o u s w a g e s - a r e n ' t - i n c o m e a r g u m e n t t h a t

ta x p r o t e s t e r s h a v e m a c e fo r y e a r s . C r i t e s 's p r o b l e m is

t h a t

sh e w as

a

w a g e

e a r n e r ,

an d th e s c h o o l s y s t e m s

t h a t . e m p l o y e d h e r

h ad w i t h h e l d

a

p o r t i o n of h e r w a g e s

an d

p a i d

t h e m

o v e r

to

th e

I R S . T h e

e m p l o y e r s

didn t s u p p o r t h e r

t h e o r y , an d s o

C r i t e s

a t t a c h e d

tw o

d i f f e r e n t I t o r m s 4 8 5 2 ,

S u b s t i t u t e

fo r F o r m W - 2 ,

to

h e r F o r m 1 0 4 0 X .


3/13

[*3] On these fo rms C rite s lis te d th e

employers '

name s a nd

th e

amounts t hey had

withheld. S he

cla imed

tha t he r employers would n o t

issue

forms correctly l ist ing

'wages '

a s def ined

[b y

the] IRC. 1

The Commiss ioner determined t ha t Cri tes 's Form 1040X fa i led

to

divulge

informat ion on which t h e subs tan tia l

correctness of

th e

sel f -assessment could

be

judged,

and served only to d ela y or impede the

adrninistrat ion

ofFedera l

ta x

laws.

This

made

Crites's

Form

1040X

frivolous

under sec t ion

6702 (a ),2 and he

imposed a 5,000 penal ty against her .

II . The Levy

Crites

didn t pa y, a nd

th e

Comniiss ioner moved

to col lect

by

s end ing he r

a

f inal

notice

t ha t he would

seize

he r

p rope rt y. C rite s

asked

for

a col lect ion due

process (CDP)

hear ing,

and at tached to he r re que s t was a rei terat ion of

he r v iew

t ha t

wages

are not

taxable. S he also th rew in arguments

t h a t

she isn t a pe rson

sub je c t t o levy under sect ion 6331 ,

t ha t

he r

employer-provided

Forms W-2 weren ' t

val id, t ha t wi t hou t Forms W-2 th e

Commiss ioner

had insuf f ic ien t informat ion to

Crites

had at tached

ordinary W-2s

to he r normal or iginal

2005

return.

They

of

cou rse showed t h a t

she

did earn

income.

All sect ion references are to th e In terna l Revenue

Code in

ef fec t at a ll

re levan t t imes , unless otherwise

indicated.

All Rule references are to th e

Tax

Cour t Rules ofPractice and

Procedure.


4/13

- 4 -

[*4] i m p o s e

ta x o n h e r , t h a t sh e d i d n ' t r e c e i v e a t i r n e l y n o t i c e of d e f i c ie n c y , t h a t

h e r a s s e s s m e n t w a s

n o t

a p p r o v e d b y

a

q u a l i f i e d a s s e s s m e n t

o f f i c e r , ' , ' an d o t h e r t a x -

p r o t e s t e r - t y p e a r g u m e n t s . T h e C o m m i s s i o n e r

t o l d h e r to

file

a n

a m e n d e d r e q u e s t

f r e e

of f r i v o l o u s

a r g u m e n t s

i s h e w a n t e d

a

h e a r i n g .

In h e r s e c o n d e f f o r t sh e t o o k c a r e

to a s s u r e

th e C o m m i s s i o n e r

t h a t

h e r

a r g u m e n t s

w e r e n o t

f r i v o l o u s .

S h e c l a i m e d t h a t

s h e

m a d e

n o C o n s t it u t i o n a l ,

m o r a l ,

p o l i t i c a l ,

r e l i g i o u s

o r

c o n s c i e n t io u s a r g u m e n t s ,

a n d h a d

n o

d e s i r e

to

d e l a y

o r i m p e d e

t a x a d m i n i s t r a t i o n

which m e a n t ,

s h e w r o t e ,

t h a t h e r

a r g u m e n t s c o u l d

n o t

b e f r i v o l o u s . S h e a l s o r g u e d t h a t :

0 4 2 s h e w as e n t i t l e d to

d i s p u t e

h e r liability

fo r

th e 2 0 0 5

f r i v o l o u s -

r e t u r n

p e n a l t y ;

0 4 2

th e

C o m m i s s i o n e r

r e l i e d

o n

o ld

i n f o r m a t io n w h i c h

w a s

s u p e r s e d e d b y a n o t h e r

1 0 4 0 X

f i l e d

in

F e b r u a r y

2 0 1 0 ; 3

0 4 2 T h e

C o m m i s s i o n e r ' s i m p o s i t i o n

of

th e f r i v o l o u s - r e t u r n

p e n a l t y

a g a i n s t h e r f a i l e d

to

p r o v i d e f a c t s e s t a b l i s h i n g

t h a t

s e c t i o n

6 7 0 2 ( a ) e v e n a p p l i e d t o h e r ;

0 4 2

th e


r e l i e d o n

i r r e l e v a n t

a n d

i n v a l i d

i n f o r m a t i o n

w h e n

h e

c o n c l u d e d

t h a t a w a g e l e v y c o u l d

a p p l y t o h e r ;

a n d

0 4 2

th e


didn t

s e n d

h e r

a

v a l i d

n o t i c e

a n d d e m a n d

for t a x .

C r i t e s a c t u a l l y filed f o u r a m e n d e d r e t u r n s fo r

2 0 0 5 .

T h e C o m m i s s i o n e r

m a r k e d

e a c h of t h e m i v o l o u s .

T h e n o t i c e

of d e t e r m i n a t i o n in t h i s

c a s e

a r i s e s

o n l y f r o m th e p e n a l t y

t h a t

th e C o m m i s s i o n e r

a s s e s s e d f o r

th e

first of t h e s e r e t u r n s .


5/13

5

[*5] The Commiss ioner sus ta ined the levy. He

denied

any relief t o C rit e s because

she failed

to propos e any

col lection

alternat ives and.had

raised

no

nonfrivolous

issues. He

conf i rmed

t ha t th e requirements of

any

applicable la w or

administ rat ive

procedure

had

been

me t

by th e

IRS . And

he

told

Crit es th a t

she

migh t

face

f ines of

up to 25,000

in

th e future fo r tak ing fr ivolous posit ions.

Crites filed a t imely

pet i t ion

with t h is c ou rt whi le a Cal i fornia re s ide nt. T h e

part ies

submi t ted

th e

case

fo r

dec is ion unde r Ru le

122 .

Discuss ion

Cri tes

is

correc t

t ha t th e

Commiss ioner

c an 't c o lle c t th e

pena l ty

b y le vy

wi thou t g iv ing he r wri t ten

notice

ofh is intent to do

so and

offer ing her

a

hear ing.

At

th e

hea ring, the Appeals of f icer mus t

address

any

re levant issues

t ha t she raises.

S e e

sec. 6330(c ) ( 2 ) . He mus t

also

obtain ver i f icat ion from

the

Secre ta ry t ha t

th e

requirements ofany app lic ab le law or adminis t rat ive procedure have been met .

S e e

s e c

6330(c ) (1 ) .

I. I ssues

Ra ised by

th e Taxpayer

Sect ion

6330(c ) (2 ) tells

Appeals

officers

t o cons ide r

issues raised by the

taxpayer . The

pr imary

issue t ha t

Crites

raises under

th is

subsect ion

is whe the r she

is

actual ly l iable fo r th e

f r ivolous-return

pena lt y t h a t th e Commiss ioner

imposed

on

her - -which

s h e

can raise

because s h e

has not

otherwise had

a chance

to dispute

th e


6/13

- 6 -

[ * 6 ] p e n a l t y . S e e s e c . 6 3 3 0 ( c ) ( 2 ) ( B ) ; C a l l a h a n v . C o m m i s s i o n e r , 1 3 0 T .C . 4 4 , 5 0

( 2 0 0 8 ) . 4

W h e n

th e

v a l i d i t y

of

t h e u n de r l yi n g t a x

l i a b i l i t y

is

a t

i s s u e

in

a

C D P

h e a r i n g ,

w e r e v i e w

it

de

n o v o .

S e g o v .

C o m m i s s i o n e r ,

1 1 4 . T . C .

6 0 4 , 6 1 0

( 2 0 0 0 ) .

T h i s m e a n s w e a re

n o t

l i m i t e d to l o o k i n g a t th e

a d m i n i s t r a t i v e

r e c o r d o r

r e v i e w i n g

o n l y th e

A p p e a l s officer s j u s t i f i c a t i o n s f o r

th e

p e n a l t y . W e

i n s t e a d l o o k

to

th e

r e c o r d w e h a v e

b e f o r e

u s . T i n m i o n s

v .

W h i t e ,

3 1 4

F . 3 d

1 2 2 9 , 1 2 3 3 - 1 2 3 4 ( 1 0 t h

C i r .

2 0 0 3 ) .

A . W h a t ' s a

R e t u rn U n d e r

S e c t i o n 6 7 0 2 ?

It

u s e d

to

b e

th e

d i s t r i c t

c o u r t s ' job to

r e v i e w c h a l l e n g e s

to s e c t i o n

6 7 0 2

p e n a l t i e s .

C a l l a h a n , 1 3 0 T . C .

a t 4 8 .

T h a t

c h a n g e d w h e n th e

P e n s i o n

P r o t e c t i o n

A c t

of 2 0 0 6 ,

P u b . L . N o . 1 0 9 - 2 8 0 , s e c .

8 5 5 ( a ) ,

1 2 0 S ta t a t 1 0 1 9 , a m e n d e d s e c t i o n

6 3 3 0 ( d ) ( 1 )

t o g iv e

o u r C o u r t jurisdiction

to

r e v i e w a ll

C D P d e t e r m i n a t i o n s

r e g a r d l e s s

of

th e t y p e ofu r i d e r l y i n g ta x liability a t i s s u e .

S e c .

6 3 3 0 ( d ) ( 1 ) ;

C a l l a h a n , 1 3 0 T . C .

a t 4 8 .

B u t

p r e c e d e n t s

u n d e r

th e

o l d a l l o c a t i o n

of

jurisdiction

ar e still r e l e v a n t .

T h o s e p r e c e d e n t s ar e

h e l p f u l h e r e . C o n s t r u i n , h e r a r g u m e n t s

a s

c h a r i t a b l y

as

p o s s i b l e , it s e e m s

C i t e s ' s first

a r g u m e n t

is

t h a t

h e r

f r i v o l o u s

a m e n d e d

r e t u r n

C r i t e s

initially

r e s e r v e d e v i d e n t i a r y o b j e c t i o n s to c e r t a i n e x h i b i t s .

S h e

a b a n d o n e d

t h e s e b y failing to a d d r e s s t h e m h e r

o p e n i n g

b r i e f . _ S _ e e R y b a k v .

C o m m i s s i o n e r , 9 1

T . C .

5 2 4 ,

5 6 6

( 1 9 8 8 ) .


7/13

7

[*7] wasn' t a return . Sect ion 6702(a)-- the sect ion that the Commiss i one r relies

on to penalize C r ites - -pun ishes only taxpayers who file what

purpor ts

to be a

re tu rn .

Cr i tes is wrong

she

thinks

her

amended return wasn ' t a return

unde r

this

sect ion.

She

was

us ing

it

to

try

to

ge t a

re fund, and

a taxpayer

can file

a re fund

claim

only

b y sending an amended income ta x return to

th e

IRS . Sec.

601.105(e) (1) ,

Statement ofProcedura l Rules .

We

have

a lr eady he ld

that amended

returns

subm i t ted

to

obta in

a

re fund

are

re tu rns

unde r sect ion

6702 .

Callahan

v .

Commiss ioner ,

130 T .C .

at

53 .

And

s o have

the

ci rcu i t courts

that

have

ru led on

th e

issue before

we

g o t jurisdiction ove r

cases

l ike this.

See Co l ton

v .

G ibbs , 902

F.2d

14 62, 1 46 4

(9th

Cir . 1990); S isemore

v. United

States, 797

F.2d 268,

270

(6th.

Cir.

1986).

B.

The efinition

of

Person

Cri tes next

argues

that

even

her

amended return counts a s a

return

unde r

section 6702, that

section's

penalt ies

do no t

apply to

her because s h e does no t

fall

within

its def in i t ion

of

a person. On

this poin t ,

she

falls

into the

o ld tax-protester

habi t

of

confusing inc lud es and m eans .

The

Code 's

def ini t ion

of

a

person

sub jec t

to

section

6702

penalt ies

include s

an off icer o r emp lo y e e

of

a

corporat ion,

o r

a membe r

o r

employee

of a

partnership .

Sec.

6671(b) (emphasis added). And


8/13

8

[ 8]

th e C o m m i s s i o n e r an d C r i t e s a g r e e t h a t sh e

is

n o t an

o f f i c e r

o r e m p l o y e e of

e i t h e r a

c o r p o r a t i o n

o r a p a r t n e r s h i p .

B u t

c a s e l a w

h as firmly e s t a b l i s h e d t h a t

s e c t i o n 6 6 7 1 ' s

d e f i n i t i o n

of

p e r s o n

i n c l u d e s

o f f i c e r s an d

e m p l o y e e s , b u t

c e r t a i n l y

d o e s n o t

e x c l u d e a ll

o t h e r s . U n i t e d

S t a t e s v. G r a h a m , 3 0 9

F . 2 d

2 1 0 , 2 1 2 ( 9 t h .

C i r .

1 9 6 2 ) . 5

I I . I s s u e s R e v i e w a b le U n d e r

S e c t i o n

6 3 3 0 ( c ) ( 1 )

W e

normally don t

a d d r e s s

i s s u e s

t h a t

a

t a x p a y e r

didn t

r a i s e

at

th e

C D P

h e a r i n g . S e c .

3 0 1 . 6 3 3

- 1 ( f ) ( 2 ) , Q & A - F 3 , P r o c e d . . &

Admiit

R e g s . B u t t h e r e is an

e x c e p t i o n fo r th e i s s u e s t h a t th e C o d e

l i s t s

in

s e c t i o n 6 3 3 0 ( c ) ( 1 ) . S e c t i o n

6 3 3 0 ( c ) ( 1 )

i m p o s e s a d u t y o n A p p e a ls o f f i c e r s to verify t h a t

th e

IR S h as m e t

th e

r e q u i r e m e n t s of

a ll

a p p l i c a b l e l a w s an d a d m i n i s t r a t i v e p r o c e d u r e s a t e v e r y h e a r in g .

In

H o y l e

v. C o m m i s s i o n e r ,

1 3 1 T . C .

1 9 7 , 2 0 1 - 2 0 2 ( 2 0 0 8 ) ,

w e

h e l d t h a t

i s s u e s t h a t

an A p p e a l s o f f i c e r h as o c o n s id e r u n d e r s e c t i o n 6 3 3 0 ( c ) ( 1 ) ar e th e

i s s u e s

r a i s e d at

th e

h e a r i n g ,

e v e n it s th e C o d e an d n o t th e t a x p a y e r - t h a t r a i s e s t h e m .

T h e s e

ar e

t h e r e f o r e

i s s u e s

t h a t w e h av e a u t h o r i t y to

r e v i e w

o n a p p e a l .

T h e

C o d e itself d

f i n e s ' ' p e r s o n

a s i n 5 4 0 l u d i n ga n

i n d i v i d u a l , a t r u s t ,

e s t a t e , p a r t n e r s h i p ,

ass c i a t i o n ,

c o m p a n y o r

c o r p o r a t i o n .

S e c .

7 7 0 1 ( a ) ( 1 ) .

T h e

C o d e a l s o

e x p l a i n s

th th e t e r m i n c lu d e s s h a l l n o t be d e e m e d to

e x c l d e o th e r

t h i n g s o t h e r w i s e

withi

th e m e a n i n g

of

th e t e r m d e f i n e d . S e c . 7 7 0 1 ( c ) ( e m p h a s i s

a d d e d ) .


9/13

[*9] We

review the Appeals off icer's determinat ion on these (c ) (1 )

issues

fo r

abuse

ofdiscretion.6 Sego, 114 T.C.

at

610.

A. Adm in is tra tive I rregularit ies

The

first ( c ) ( 1 ) issue

t h a t

Cri tes

ra is e s is

whe the r

th e

IR S compl ied

with

applicable administrative procedures

in

assessing the

penalty. She

argues t ha t the

compu te r t ransc rip ts tha t th e Appeals

off icer

used did not p rove th a t th e

IR S ever

ac tua l ly assessed th e penal ty .

This

won t work :

We

have consis ten t ly

he ld

t h a t

such t ranscr ipts

are sufficient

unless

a t axpayer can show some i r regular i ty ser ious

enough

t o unde rm ine

t he i r val idi ty.

Nes tor

v.

Commiss ioner , 118

T.C.

162 ,

166 -67

( 2002) ;

Davis v. Commissioner, 1 1 5 T.C. 35, 40-41 (2000).

Cri tes t h inks she

has

fo und two. S he first cla ims

t h a t

it is a violation of IR S

in ternal

procedure

to

use

t ransact ion

code 2 40

instead

of

penal ty

reference

number

(PRN)

66 6

to show the assessment of a civil penalty on th e transcripts. The

6 A decis ionmaker abuses

h is

discretion

when [he]

makes

an error

of la w

* * * or rests

[h is ]

determinat ion

on

a

clearly erroneous f inding

of fact

*

* * [or]

'appl ies th e correct

la w

to fa cts wh ich

are

no t c lea r ly erroneous

bu t

rules an

i r rat ional

manner. ' Uni ted

States

v.

Sherburne,

249

F.3d

1121,

1125-1126

(9th

Cir.

2001 ) (quot ing Fr iedk in v. S te rnbe rg ( In

re

Sternberg),

85 F.3d 1400, 1405

(9th

Cir.

1996), overruled

on o th e r grounds , Murray v.

Bammer

( In re Bammer ) ,

1 3 1 F.3d

788

(1997) (en banc) ) ; s e e also Cooter Gel l v. Har tmarx Corp., 496

U.S.

384, 402-403

(1990).


10/13

-

1 0

-

[ * 1 0 ] I n t e r n a l R e v e n u e M a n u a l (IRM) d o e s s t a te

t h a t

p e n a l t i e s a re

a s s e s s e d u s i n g

P R N 6 6 6 . IR M p t. 2 0 . . 1 0 . 1 0 . 1 . 2 ( 1 ) ( M a y 1 8 2 0 1 0 ) . B u t e v e n if a m i s c o d i n g

s o m e h o w i n v a l i d a t e d a n a s s e s s m e n t , C r i t e s ' s a r g u m e n t w o u l d

still

f a i l .

T r a n s a c t i o n c o d e 2 4 0

i s . l i s t e d a s a

m i s c e l l a n e o u s

p e n a l t y i n

th e

IR S

T r a n s a c t i o n

C o d e s

P o c k e t G u id e .

T r a n s a c t i o n C o d e s

P o c k e t G u i d e , D o c u m e n t

1 1 7 3 4 ,

a t

5

( R e v . 5 - 2 0 1 2 ) . . B u t th e C o m m i s s i o n e r

u s e d

c o d e

2 4 0

in c o n j u n c t i o n

w i t h

P R N

6 6 6 ,

a n d u s e d

th e

right

c o d e

to

identify

th e

p e n a l t y

o n

a n a s s e s s m e n t

a n d

a b a t e m e n t

f o r m . 7 N o e r r o r - - a n d c e r t a i n l y n o a b u s e of d i s c r e t i o n - - h e r e .

C r i t e s n e x t c la im s t h a t

th e a g e n t s

w h o m a d e

th e

a s s e s s m e n t w e r e n o t

a s s e s s m e n t o f f i c e r s a n d w e r e

t h e r e f o r e n o t a u t h o r i z e d

to

m a k e

a s s e s s m e n t s .

T h i s

a r g u m e n t

is a l s o m e r i t l e s s . D e l e g a t i o n O r d e r 2 9

g i v e s a

c a m p u s d i r e c t o r

th e

a u t h o r i t y

t o a p p o in t a s s e s s m n t

o f f i c e r s - - w h o

m a y

f u r t h e r d e le g a te t h e a u t h o r i t y

to

m a k e a s s e s s m e n t s . IRM p t. 3 . 1 7 . 6 3 . 2 0 ( 1 ) ( O c t. 1

2 0 0 5 ) . C r i t e s o f f e r e d

n o

e v i d e n c e o t h e r t h a n

t h e i r

job

t it le s 8 s u g g e s t n g

t h a t

th e

a g e n t s w h o w o r k e d

o n h e r

a c c o u n t d i d n o t h a v e t h e a u t h o r i t y

to

m a k e

a n

a s s e s s m e n t . T h i s

m e a n t

t h a t t h e r e

C r i t e s

a r g u e s

t h a t

t h e r e

is

y e t

a n o t h e r

i r r e g u l a r i t y

b e c a u s e

t h i s

r e f e r e n c e to

P R N

6 6 6

r e a d s 1 0 4 0

d a t e d

1 0 / 2 5 / 0 8 i n s t e a d of

1 0 4 0 X

d a t e d 1 0 / 2 5 / 0 8 . H e r

a r g u m e n t

is

f r i v o l o u s . T h e r e i s : n o m i s t a k i n g t h a t t h i s

is a

r e f e r e n c e to th e

a m e n d e d

r e t u r n .

8

T h e

a g e n t s w h o

w o r k e d o n

C r i t e s ' s

a c c o u n t h a d th e t i t l e s

C o r r e s p o n d e n c e

E x a m i n a t i o n

T e c h n i c i a n a n d

S u p e r v i s o r T a x

E x a m i n i n g

A s s i s t a n t .


11/13

-

1 1

-

[ * 1 1 ]

w e r e n o i r r e g u l a r i t i e s

i n

th e c o m p u t e r t r a n s c r i p t s , a n d

w e

t h u s

find

t h a t th e

A p p e a l s o f f i c e r

p r o p e r l y v e r i f i e d

th e I R S ' s

a s s e s s m e n t

of th e

f r i v o l o u s - r e t u r n

p e n a l t y a g a i n s t

C r i t e s .

B . S t a t u t e ofLimitations

T h e

s e c o n d

( c ) ( 1 ) i s s u e h e r e is w h e t h e r t h e . A p p e a ls

o f f i c e r v e r i f i e d

t h a t th e

IR S

a s s e s s e d th e p e n a l t y a g a i n s t C r i t e s within t h e s t a t u te of l i m i t a t i o n s . T h i s is a

( c ) ( 1 )

i s s ue b e c a u s e

it

is

l e g a l

r e q u i r e m e n t t h a t

a n

A p p e a l s

o f f i c e r

m u s t

c o n s i d e r a t

a

C D P h e a r i n g . B e e l e r

v .

C o m m i s s io n e r , T . C . M e m o . 2 0 0 9 - 2 6 6 , 2 0 0 9

W L

4 0 5 9 2 3 1 , a t *3 , v a c a t e d an d r e m a n d e d o n o t h e r g r o u n ds , 4 3 4 F e d . A p p x .

4 1

( 2 d C i r . 2 0 1 1 ) ;

s e e

a l s o H o y l e , 1 3 1 T . C . at 2 0 1 - 0 2 ( I R S

t i m e l y m a i l i n g

of a n o t i c e

of

d e f i c i e n c y is

a

l e g a l

r e q u i r e m e n t u n d e r

s u b s e c t i o n ( c ) ( 1 ) ) .

S e c t i o n 6 5 0 1 ( a )

d o e s p l a c e limits o n a s s e s s m e n t s . With c e r t a i n limited

e x c e p t i o n s n o t

r e l e v a n t

h e r e , th e C o m m i s s i o n e r m u s t . a s s e s s a ta x liability within

t h r e e

y e a r s a f t e r

a

r e t u r n

is f i l e d . . S e c . 6 5 0 1 ( a ) . C r i t e s a r g u e s t h a t b e c a u s e p e n a l t i e s

a re

g e n e r a ll y i n c lu d e d within th e d e f i n i t i o n of tax ,

s ie

s e c .

6 6 6 5 ( a ) ( 2 ) , s e c t i o n

6 5 0 . 1 ( a ) p r e v e n t s

th e C o m m i s s i o n e r f r o m a s s e s s i n g a p e n a l t y a g a i n s t h e r u n d e r

s e c t i o n 6 7 0 2 ( a ) m o r e t h a n t h r e e

y e a r s f r o m

th e t i m e s h e filed h e r

o r i g i n a l r e t u r n .

W e d i s a g r e e . A s th e C o m m i s s i o n e r o b s e r v e s , p e n a lt i e s u n d e r

s e c t i o n

6 7 0 2

do n o t h a v e a r e a d i l y o b s e r v a b l e

s t a t u t e

of l i m i t a t i o n s . T h e s e c t i o n p e n a l i z e s n o t


12/13

-

1 2

-

[ * 1 2 ] j u s t

f r i v o l o u s

r e t u r n s - : - a n d e v e n h e r e

C o n g r e s s

w a s c a r e f u l to

p e n a l i z e

n o t

just r e t u r n s b u t

w h a t

u r p o r t s to b e

a

r e t u r n ' 2 - - b u t f r i v o l o u s s u b m i s s i o n s . It

w o u l d

b e

o dd

i p e n a l t i e s

k e y e d t o s u b m i s s i o n s

h a d

s o m e h o w t o be

t i e d

to

th e

l i m i t a t i o n s p e r i o d

fo r

ta x

t h a t

is s u p p o s e d

to

be

s h o w n

o n a r e t u r n .

B u t le t us

a s s u m e - - a n d

h e r e w e a re e x p r e s s l y a s s u m i n g w i t h o u t

d e c i d i n g - -

t h a t

C r i t e s

is

r i g h t

t h a t th e

filing d a t e

of h e r

r e t u r n

is th e k e y d a t e . i S h e h a d t w o

r e t u r n s ,

a n d

th e

o n e thtt

th e


w a n t s to

p u n i s h

h e r

for

is

th e

a m e n d e d

r e t u r n t h a t s h e s e n t th e

IR S

in

O c t o b e r

2 0 0 8 .

H e a s s e s s e d

th e p e n a l t y

in

J u l y 2 0 0 9 ,

well within t h r e e y e a r s of

h e r

s u b m i t t i n g

i t . C r i t e s

of c o u r s e w o u l d p r e fe r t h a t w e

h o l d t h a t th e

c l o c k

fo r p e n a l i z i n g h e r u n de r s e c t i o n 6 7 0 2 b e g a n t o r u n w h e n sh e

filed h e r o r i g i n a l

r e t u r n ,

b u t

s h e

c i t e s n o

a u t h o r i t y

for h e r implicit p r o p o s i t i o n

t h a t a

s t a t u t e of l i m i t a t i o n s

c a n

s t a r t r u n n i n g b e f o r e a c a u s e

of

a c t i o n a c c r u e s o r , in

a

c a s e

l i k e h e r s ,

b e f o r e a

t a x p a y e r e v e n f i l e s

a

s a n c t i o n a b l e s u b m i s s i o n . ,

Q u i t e a p a r t

f r o m

C r i t e s ' s s u b t l e a t t e m p t

to

s h i f t o u r

f o c u s

f r o m

s u b m i s s i o n

to r e t u r n , h e r c o n s t r u c t i o n of

s e c t i o n t 6 7 0 2 ( a )

w o u l d b e e x c e p t i o n a l l y

u n r e a s o n a b l e . S e c t i o n

6 7 0 2 ' s

p u r p o s e - e v i d e n t f r o m it s

t e x t - - i s

to d e t e r f r i v o l o u s

s u b m i s s i o n s t h a t g u m

up

th e

I R S ' s

w o r k .

w e

h e l d t h a t

t h e s t a t u te

of

l i m i t a t i o n s

for th e C o m m i s s i o n e r t p e n a l i z e f r i v o l o u s a m e n d e d r e t u r n s b e g a n to

r u n

w i t h

th e

filing of

th e

o r i g i n a l

r e t u r n ,

s e c t i o n

6 7 0 2

w o u l d

q u i c k l y

l o s e

i t s d e t e r r e n t e f f e c t .


13/13

1 3

[ 13] T a x

p r o t e s t e r s w o u l d

h a v e n o d i s i n c e n t i v e to s u b m i t s u c h frivolities o n c e

m o r e t h a n

t h r e e y e a r s

h ad

p a s s e d f r o m th e

filing

d a t e

of

an

o r i g i n a l

r e t u r n .

W e

t h e r e f o r e h o l d t h a t th e

A p p e a l s

o f f i c e r c o m m i t t e d

n o

e r r o r in c o n c l u d i n g

t h a t th e

r e q u i r e m e n t s

of a ll

a p p l i c a b l e la w an d

a d m i n i s t r a t i v e

p r o c e d u r e w e r e

m e t .

T h a t l e a v e s

o n l y th e

C o m m i s s i o n e r ' s

s u g g e s t i o n

t h a t w e i m p o s e an

a d d i t i o n a l p e n a l t y

o n C r i t e s

u n d e r s e c t i o n 6 6 7 3

fo r

e v e n

b r i n g i n g

t h i s c a s e .

B u t

t h i s

is

C r i t e s ' s

first trip

to

T a x

C o u r t ,

an d

b y

s u b m i t t i n g

th e

c a s e

u n d e r R u l e

1 2 2 ,

sh e d id s a v e us th e b u r d e n of

t r i a l . A n d

on e

of

h e r a rg u m e n t s , t h e s t a t u t e - o f -

l i m i t a t i o n s i s s u e a s

a p p l i e d to

f r i v o l o u s

a m e n d e d r e t u r n s , w as on e w e

h ad n o t

y e t

a d d r e s s e d a nd w a s n o t

itself

o b v i o u s l y f r i v o l o u s . W e will

t h e r e f o r e

e x e r c i s e

o u r

d i s c r e t io n n o t to

s a n c t i o n h e r u n d e r s e c t i o n 6 6 7 3 .

T h i s t i m e .

An

a p p r o p r ia t e o r d e r

an d d e c i s i o n

will

be e n t e r e d .

crites v. cir tax court memo opinion annotated

Documents