The opinion
T.C. Memo. 2003-260
UNITED STATES TAX COURT
JAMES BENSON DUNHAM AND MELANIE A. DUNHAM, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 7029-02L. Filed September 8, 2003.
Jerry Arthur Jewett, for petitioners.
Michelle M. Lippert, for respondent.
MEMORANDUM OPINION
HAINES, Judge: The petition in this case was filed in
response to the Notice of Determination Concerning Collection
Action(s) Under Section 6320 and/or 6330. After concessions,1
1
The notice of determination was issued for, and this
petition was filed for, 1997 and 1999. The parties subsequently
(continued...)
- 2 -
the issues for decision are whether respondent abused his
discretion in determining that collection action could proceed
for 1997 and whether the Court should impose a penalty under
section 6673.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue.
Amounts are rounded to the nearest dollar.
Background
All of the facts have been stipulated. The stipulated facts
and the attached exhibits are incorporated herein by this
reference.
Petitioners resided in Havelock, North Carolina, at the time
they filed their petition.
Petitioners untimely filed a Form 1040, U.S. Individual
Income Tax Return, for 1997, reporting a tax liability of $8,826
and income tax withheld of $1,462. No payment accompanied the
return.
Respondent assessed petitioners’ 1997 income tax, together
with statutory penalties and interest, on the basis of
information contained in the filed return. Although petitioners
1
(...continued)
stipulated that respondent incorrectly assessed petitioners’
income tax liability for 1999, and respondent has abated the
assessment for that year.
- 3 -
entered into an installment agreement with respondent to pay the
tax liabilities, no payments were made.
On April 16, 2000, petitioners filed a claim for refund for
1997 based on zero entries for all categories of income.
Respondent denied the claim by letter dated June 21, 2000,
stating: “The amounts you received are gross income, as defined
by the Internal Revenue Code”. On July 15, 2000, petitioners
sent respondent a letter requesting information and demanding
proof of respondent’s authority. Petitioners also requested that
a meeting be scheduled.
On December 13, 2000, Jerry Arthur Jewett (Mr. Jewett)
executed a Form 2848, Power of Attorney and Declaration of
Representative, on behalf of petitioners.
A Final Notice--Notice of Intent to Levy and Notice of Your
Right to a Hearing was sent to petitioners on March 13, 2001.
The tax owed for 1997 with penalties and interest, as set forth
in the final notice, was $13,378. On April 7, 2001, petitioners
filed a Form 12153, Request for a Collection Due Process Hearing,
that included a 19-page letter signed by Mr. Jewett. The letter
asserted tax-protester boilerplate, including:
1. The individual or individuals named above are
not “persons or a person” liable for the income tax or
required to file a Form 1040, by virtue of non-
residence in, or lack of income earned within, or
effectively connected to, any U.S. Territory,
Possession and/or enclave deriving authority from
Article I, Sec. 2 Cl. 17 or Article 4, Sec. 3, Cl.2 of
the Constitution of the United States. The individual
- 4 -
or individuals named herein are natural born Citizens
of one of the 50 Republic states, under the
Constitution and Law.
A hearing pursuant to petitioners’ request was conducted on
February 12, 2002, with a court reporter present. A transcript
of the proceedings was made. A Certificate of Assessments and
Payments for 1997 had been mailed to petitioners before the
hearing. At the hearing attended by petitioner James Benson
Dunham (Mr. Dunham), Mr. Jewett repeated his frivolous arguments.
Among other things, Mr. Jewett argued:
MR. JEWETT: * * * Most importantly, and of course,
we’ll get around to this, but I think that it’s
important to make sure that it’s clear from the
beginning that one of the arguments that my clients are
making is that they’re not liable for the so-called
income tax. And I would point out that if one opens
the index to the code, a copy of which I have in front
of me, one will find a listing of many different types
of taxes for which there is liability in the Internal
Revenue Code. Nowhere, therein, is there a liability
listed for an income tax.
HEARING OFFICER GEORGE: Those arguments that your
clients raise in their appeal request and on their form
1040s have been refuted by the judicial authorities and
have been called frivolous. And I’m going to hand to
you and your client News Release Number IR-2001-59.
That gives you an idea and lists the cases that have
made similar arguments such as those that you’re making
today and those that you have made. The Tax Court has
determined that those types of arguments are frivolous
and it could cost your client more money if you
advocate in court the same arguments that you’re
advocating today because the taxpayers and their
representatives who make those kinds of arguments are
being sanctioned.
MR. JEWETT: Well, let me just say this, in
response to that, Ms. George. I think you’ll agree
with me that James and Melanie Dunham’s name is not
- 5 -
anywhere on this, that there have been no
determinations made with regard to James and Melanie
Dunham. I don’t know what the facts are in the cases
and I’m not going to address each of these arguments in
any great exhausting detail, but there’s a reason why
horse races are held, because you never know who’s
going to win that race until the race is over.
On February 27, 2002, a Notice of Determination Concerning
Collection Action(s) Under Section 6320 and/or 6330 was sent to
petitioners. The notice indicated the frivolous nature of
petitioners’ arguments and stated:
All statutory, administrative and procedural
requirements have been met by the Internal Revenue Service
prior to proposing the Notice of Levy.
No viable alternatives to such action were established
during Appeals consideration; accordingly, such action is
not considered to be overly intrusive at this time.
In the petition in this case, petitioners asserted: (1) No
provision of the Internal Revenue Code makes them liable for the
income tax and penalties determined in the statutory notice; (2)
there was “no valid assessment” of taxes; (3) they did not
receive a “notice and demand for payment” of the taxes at issue;
(4) they did not receive a valid notice of deficiency; and (5) at
the hearing they did not receive “verification from the Secretary
that the requirements of any applicable law or administrative
procedure have been met”. The same arguments were repeated in
petitioners’ trial memorandum signed by Mr. Jewett and filed with
the Court.
- 6 -
Before the calendar call, Mr. Jewett had been advised by the
Court in a conference call with respondent’s counsel, in an
essentially identical case, that the arguments presented were
frivolous and that petitioners could have penalties imposed
against them under section 6673.
At the call of the calendar, Mr. Jewett acknowledged the
Court’s warning to him. Mr. Jewett also confirmed that he had
informed petitioners of the possibility that penalties could be
imposed against them. Petitioners authorized Mr. Jewett to
proceed with the same arguments in spite of the warning.
Discussion
During the trial session held in Cleveland, Ohio, beginning
June 2, 2003, four cases, including the instant case, were
submitted on the basis of fully stipulated facts.2 Mr. Jewett
represented the taxpayers in each of the four cases.
Brodman v. Commissioner, T.C. Memo. 2003-230, was the first
of the four cases to be decided. We held in Brodman that no bona
fide issues were raised, no alternatives to collection were
proposed, and the arguments presented were frivolous. No abuse
of discretion was found, collection was allowed to proceed, and a
2
James Benson and Melanie A. Dunham, docket No. 7029-02L;
Gregory R. Brown, docket No. 8368-02L; Harold V. and Imogene N.
Pahl, docket No. 11572-02L; Charles and Teresa Brodman, docket
No. 16598-02L.
- 7 -
penalty of $5,000 under section 6673 was imposed upon the
taxpayers.
Similarly, petitioners did not raise any bona fide issues or
collection alternatives. Rather, petitioners presented a
“hodgepodge of unsupported assertions, irrelevant platitudes and
legalistic gibberish” similar to those previously rejected by
this Court. Crain v. Commissioner, 737 F.2d 1417, 1418 (5th Cir.
1984); see Brodman v. Commissioner, supra; Kish v. Commissioner,
T.C. Memo. 1998-16; Fisher v. Commissioner, T.C. Memo. 1996-277.
“We perceive no need to refute these arguments with somber
reasoning and copious citation of precedent; to do so might
suggest that these arguments have some colorable merit”. Crain
v. Commissioner, supra at 1417. The Court rejects these
boilerplate tax-protester types of arguments as frivolous and
without merit. As a result, we hold that respondent did not
abuse his discretion in determining that collection should
proceed.
In the instant case, petitioners were specifically warned on
two occasions of the likelihood of a penalty under section
6673(a)(1) if they continued with these arguments.3 Despite the
3
Sec. 6673(a)(1) provides:
(1) Procedures instituted primarily for delay, etc.--
Whenever it appears to the Tax Court that--
(A) proceedings before it have been instituted or
(continued...)
- 8 -
warning given at the section 6330 hearing and the warning given
by the Court, petitioners did not abandon their frivolous
arguments but authorized Mr. Jewett to continue to assert them.
Petitioners should be treated the same as other taxpayers
similarly situated. As we stated in Brodman v. Commissioner,
supra: “The taxpayers who continue to pursue those claims are
not entitled to a free ride.” As a result, we hold that a
penalty of $5,000 against petitioners should be awarded to the
United States pursuant to section 6673(a)(1).
Moreover, we are concerned by the representation of Mr.
Jewett, an experienced attorney, in petitioners’ pursuit of these
frivolous claims. All of Mr. Jewett’s arguments on behalf of
petitioners had been rejected by the Court in numerous cases.
Although, as in Brodman, we have decided not to impose a
penalty against Mr. Jewett under section 6673(a)(2),4 he is
3
(...continued)
maintained by the taxpayer primarily for delay,
(B) the taxpayer’s position in such proceeding is
frivolous or groundless, or
(C) the taxpayer unreasonably failed to pursue
available administrative remedies,
the Tax Court, in its decision, may require the taxpayer to
pay to the United States a penalty not in excess of $25,000.
4
Sec. 6673(a)(2) provides, in part:
(2) Counsel’s liability for
excessive costs.--Whenever it appears to
(continued...)
- 9 -
reminded of the consequences if he repeats or persists in similar
claims in the future. See sec. 6673(a)(2); Takaba v.
Commissioner, 119 T.C. 285, 296-305 (2002); Edwards v.
Commissioner, T.C. Memo. 2003-149.
In reaching our holdings herein, we have considered all
arguments made, and to the extent not mentioned above, we
conclude them to be moot, irrelevant, or without merit.
To reflect the foregoing,
An appropriate
decision will be entered.
4
(...continued)
the Tax Court that any attorney or other
person admitted to practice before the
Tax Court has multiplied the proceedings
in any case unreasonably and
vexatiously, the Tax Court may require--
(A) that such attorney or other person
pay personally the excess costs, expenses,
and attorneys’ fees reasonably incurred
because of such conduct * * *