                          T.C. Memo. 1998-253



                        UNITED STATES TAX COURT



    KENNETH LEE ANDERSON AND CAROL JANE ANDERSON, Petitioners v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 6825-97.                   Filed July 8, 1998.



      Kenneth Lee Anderson and Carol Jane Anderson, pro sese.

      Christine V. Olsen, for respondent.



                          MEMORANDUM OPINION

      CHIECHI, Judge:    This case is before the Court on

respondent’s motion for a partial summary adjudication pursuant

to Rule 1211 of those issues in this case relating to unreported

compensation, unreported income from the sale of certain real

1
  All Rule references are to the Tax Court Rules of Practice and
Procedure. All section references are to the Internal Revenue
Code in effect for the years at issue.
                               - 2 -


property, and the addition to tax under section 6651(a)(1)

(respondent’s motion).2

Background

     Petitioners resided in Temecula, California, at the time

they filed the petition.

     On December 5, 1997, respondent filed a request for

admissions with the Court, a copy of which respondent had served

on petitioners on December 2, 1997.    On January 7, 1998,

petitioners filed a response to respondent’s request for

admissions, a copy of which petitioners had served on respondent

on January 2, 1998.   That response stated, inter alia:

     Admissions OF WHAT?

          I request your (DOA) or (TDO) DELEGATION OF
     AUTHORITY Order from the Secretary of the Treasury.

              *       *    *     *      *     *    *

     On Feb. 27, 1986 the Federal Register (51 Fed. Reg.
     95711) published the following Treasury Department
     Order No. 150-01:

          “The Commissioner shall, to the extent of
     authority otherwise vested in him, provide for the
     administration of the United States internal revenue
     laws in the U.S. Territories and insular possessions
     and other authorized areas of the world.” [These areas
     include countries with which the U.S. has Tax Treaties
     in force and DO NOT include the 50 Republic States.]

     2
        Issues not covered by respondent's motion are whether
petitioners (1) have $3,480 of unemployment compensation for
1992, (2) are entitled to any deductions for 1992, 1993, 1994,
and 1995 (the years at issue), (3) are subject to self-employment
tax for 1992 and 1993, and (4) are liable for the years at issue
for the accuracy-related penalty under sec. 6662(a).
                               - 3 -


     On February 2, 1998, respondent filed a second request for

admissions with the Court, a copy of which respondent had served

on petitioners on January 26, 1998.    On March 5, 1998,

petitioners filed a response to respondent’s second request for

admissions, a copy of which petitioners had served on respondent

on February 26 and 27, 1998.   That response stated, inter alia:

     I/we do not deny, nor have I/we ever denied Articles
     [paragraphs] 1 through 5 [of respondent’s second
     request for admissions]. Taxes were withheld and paid
     for the named years. What we are declaring is we
     received an exchange/compensation for labor and the use
     of our truck, for services rendered to the below named
     Companies * * *.

     In petitioners’ response to respondent’s second request for

admissions, petitioners acknowledged having received during 1992

and 1993 “compensation for labor” in the amounts and from the

companies listed in that request.   However, in that response,

petitioners did not admit that such compensation was “nonemployee

compensation" as described in respondent’s second request for

admissions, and they denied that they owed self-employment tax.

     In an Order dated May 4, 1998, the Court, inter alia, found

petitioners’ response to respondent’s request for admissions to

be evasive and totally inadequate, and, consequently, the Court

treated that response as a failure to answer or respond to

respondent’s request for admissions pursuant to Rule 104(d).

However, the Court allowed petitioners an opportunity to

supplement on or before May 26, 1998, their response to
                                - 4 -


respondent’s request for admissions in such a manner so as to

comply with Rule 90(c).    No such supplement was received by the

Court from petitioners.    The Court concludes that each matter set

forth in respondent’s request for admissions is deemed admitted.

Rule 90(c); Marshall v. Commissioner, 85 T.C. 267, 272 (1985).

     Petitioners have admitted, or are deemed to have admitted

pursuant to Rule 90(c), the following facts.   On April 10, 1996,

petitioners filed with the Internal Revenue Service a Federal

income tax return (return) for each of the years 1992 through

1994.   On a date not disclosed by the record, petitioners timely

filed a return for 1995.   The returns for the years 1992 through

1995 listed the occupations of (1) petitioner Kenneth Lee

Anderson (Mr. Anderson) as “truck driver” during 1992, 1993, and

1994 and “driver” during 1995 and (2) petitioner Carol Jane

Anderson (Ms. Anderson) as “housewife” during 1992 and “clerk”

during 1993, 1994, and 1995.   Attached to the returns for the

years at issue were Forms W-2 (Wage and Tax Statements) which

showed certain amounts of wages as having been paid to

petitioners during those years.   The return filed by petitioners

for each of the years at issue showed, inter alia, zero amounts

of income and claimed refunds of Federal income tax withheld.

     During 1992, Mr. Anderson received compensation in the

following amounts from the payors indicated:
                               - 5 -


                                  Compensation Received by
            Payor                 Mr. Anderson During 1992

     Universal Construction
          Corp.                               $200
     Valley Welding                          8,109
     Rancho Trucking, Inc.                  22,326
     American Containers Trans.             15,012


     On September 17, 1992, Mr. Anderson sold real property for

$275,000.

     During 1993, Ms. Anderson received compensation from

Temecula Valley Unified Schools of Riverside County and Dedicated

Retail Services in the amounts of $1,020.54 and $357.69,

respectively.   During that year, Mr. Anderson received

compensation in the following amounts from the payors indicated:

                                      Compensation Received by
             Payor                    Mr. Anderson During 1993

     Zip Truck Lines, Inc.                     $1,625
     American Container Trans.                 29,298
     American Container Trans.                 32,935
     American Pacific Forwarders, Inc.          2,590
     Envirospectrum, Inc.                       3,330
     EMC Production Management, Inc.              630

     During 1994, Ms. Anderson received compensation from

Murrieta Valley Unified Schools of Riverside County and Temecula

Valley Unified Schools of Riverside County in the amounts of

$19.97 and $9,595.55, respectively.    During that year, Mr.

Anderson received compensation in the following amounts from the

payors indicated:
                                 - 6 -


                                         Compensation Received by
              Payor                      Mr. Anderson During 1994

       Petrolane Incorporated                 $22,559.07
       Transport Drivers, Inc.                  7,749.00
       T.B.M. Chemical Transport, Inc.          2,070.00
       Envirospectrum, Inc.                     2,160.00

       During 1995, Ms. Anderson received compensation in the

amount of $7,352.76 from Temecula Valley Unified Schools of

Riverside County.     During that year, Mr. Anderson received

compensation in the amount of $38,590.13 from Amerigas Propane,

Inc.

Discussion

       Rule 121(b) provides that a partial summary adjudication may

be made that does not dispose of all the issues in a case if,

inter alia, the pleadings and admissions show that there is no

genuine issue of material fact as to those issues on which

partial summary adjudication is sought.       The moving party, in

this case respondent, bears the burden of proving that there is

no such genuine issue of material fact.        Marshall v.

Commissioner, supra at 271.

       The facts admitted and deemed admitted in this case

establish that petitioners received compensation during the years

1992, 1993, 1994, and 1995 in the amounts of $45,647, $71,786.23,

$44,153.59, and $45,942.89, respectively, none of which was

reported in the respective returns for those years.          We find that

all of that compensation is income to petitioners for those
                                 - 7 -


years.    Respondent determined that all of that compensation is

wage income except (1) $37,338 that Mr. Anderson received during

1992 from Rancho Trucking, Inc. and American Containers Trans.

and (2) $66,448 that he received during 1993 from Zip Truck

Lines, Inc., America Container Trans., and America Pacific

Forwarders, Inc., which respondent determined to be nonemployee

compensation income subject to self-employment tax.    We sustain

respondent's determinations regarding petitioner's wage income

for the years 1992 through 1995.    However, petitioners denied

that they owe any self-employment tax.    Consequently, the self-

employment tax issue for 1992 and 1993 relating to the

compensation that respondent determined to be nonemployee

compensation income remains for adjudication, and respondent

agrees.

     While the facts admitted or deemed admitted in this case

establish that during 1992 Mr. Anderson sold real estate for

$275,000, they do not show whether or not he had any basis in

that real estate and/or paid any commissions or other expenses

relating to that sale.    Consequently, the issue relating to the

gain, if any, for 1992 from that sale remains for adjudication.

     The record in this case also shows that petitioners filed

their return for each of the years 1992, 1993, and 1994 after the

due date for each such return.    It does not establish any facts

relating to whether such failure to file timely was due to
                                - 8 -


reasonable cause and not due to willful neglect.   Nonetheless, it

is clear from petitioners' response to respondent's motion that

petitioners contend that they were not required, as a matter of

law, to file returns for the years at issue.   Such a contention

and the reasons therefor which are stated in that response are

frivolous and groundless.3   We find that petitioners are liable

for each of the years 1992, 1993, and 1994 for the addition to

tax under section 6651(a)(1).

     From the time petitioners filed the petition herein through

the filing of their response to respondent’s motion, they have



     3
        In petitioners’ response to respondent’s motion,
petitioners assert, inter alia:

          Only an “individual” is required to file a tax
     return (26 USC 6012) and then only under certain
     circumstances. In looking at Section 7701(a)(30), I/we
     understand that a “United States Person” as meaning a
     “citizen of the United States,” “resident of the United
     States.” “domestic corporation,” “domestic partnership”
     and a “domestic trust or estate.” There is no
     INDIVIDUAL defined under 7701(a)(30) and therefore I/we
     cannot be an “individual” within the meaning of
     7701(a)(1) and/or 26 USC 6012. Also, the Supreme
     Court, in the case of Wills vs Michigan State Police,
     105 L.Ed.2d 45 (1989) made it perfectly clear that
     I/we, the sovereigns, cannot be named in any statute as
     merely a “person,” or “any person.” I/we are members
     of the “sovereignty” as defined in Yick Wo vs Hopkins,
     118 U.S. 356 and the Dred Scott case, 60 U.S. 393.
     Therefore I/we want you to know we have filed 1040's
     with “0’s” knowing we are exempt. Therefore, and until
     you can prove otherwise, I/we are not a “taxpayer,” nor
     an “individual” that is required to file a tax return.
     Please forward me/us a letter stating that I/we are not
     liable for any future tax returns, or produce the
     documentation that requires me/us to file. * * *
                                 - 9 -


persisted in advancing contentions that the Court finds to be

frivolous and/or groundless.   In its Order dated January 9, 1998,

denying petitioners’ motion to dismiss this case, the Court

cautioned petitioners that if they “continue to advance frivolous

and/or groundless contentions, the Court will be inclined to

impose a penalty not in excess of $25,000 on petitioners under

section 6673.”   Pursuant to section 6673, we will impose a

penalty on petitioners in the amount of $10,000.4

     To reflect the foregoing,



                                              An appropriate order

                                         will be issued.




     4
        In the event that petitioners continue to advance
groundless and/or frivolous contentions and/or maintain this
proceeding primarily for delay, the Court will be inclined to
impose an additional penalty under sec. 6673 up to an aggregate
amount of $25,000.
