                  T.C. Summary Opinion 2001-98



                     UNITED STATES TAX COURT



               DAREL GUY TAKEN, JR., Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 10728-00S.                     Filed June 26, 2001.


     Darel Guy Taken, Jr., pro se.

     J. Anthony Hoefer, for respondent.


     ARMEN, Special Trial Judge:     This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time that the petition was filed.1    The decision to

be entered is not reviewable by any other court, and this opinion

should not be cited as authority.

     Respondent determined deficiencies in, and additions to,


     1
        Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for 1995,
1996, and 1997, the taxable years in issue.
                                    - 2 -

petitioner’s Federal income taxes for the years and in the

amounts as follows:

                                       Additions to tax
     Year   Deficiency   Sec. 6651(a)(1) Sec. 6651(a)(2)   Sec. 6654(a)
     1995     $7,852        $1,860.00           —–-           $403.63
     1996     15,917         2,472.75        $2,088.10         555.80
     1997     12,210         2,747.25         1,587.30         657.80

     The issues for decision are as follows:

     (1) Whether petitioner filed a Federal income tax return for

any of the years in issue.        We hold that he did not.

     (2) Whether petitioner is liable for the deficiencies in

income taxes and the additions to tax as determined by respondent

in the notices of deficiency.        We hold that he is.

     (3) Whether respondent erroneously credited overpayments

allegedly claimed by petitioner on returns for prior years

against past due child support, liability for which petitioner

disputes.     We hold that we lack jurisdiction to decide this

matter.

Background2

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

found.    Petitioner resided in North Buena Vista, Iowa, at the

time that his petition was filed with the Court.




     2
        The documentary record that was developed at trial was
unsatisfactory. Accordingly, the Court held the record open for
60 days so that the parties could produce specific documentary
evidence. Respondent produced what was requested; petitioner did
not.
                               - 3 -

A.   Facts Relating to Petitioner’s Tax Liabilities for the Years
     in Issue

      During 1995, 1996, and 1997, the taxable years in issue,

petitioner was employed by the Chicago, Central & Pacific

Railroad (the Railroad) and received compensation in the amounts

of $45,282, $63,640, and $61,825, respectively.    The Railroad

withheld Federal income tax from petitioner’s compensation in the

amounts of $412 and $4,677 for 1995 and 1996, respectively.     The

Railroad did not withhold any Federal income tax from

petitioner’s compensation for 1997.

      During 1995, 1996, and 1997, petitioner received interest

income as follows:

      Payor                         1995    1996      1997
      Homeland Bank NA               $5      $13        --
      Firstar Bank of Iowa NA         -       30       $14
      Iowa Community Credit Union     -       39        --
      Magna Bank NA                           --        13
                                       5      82        27

      During 1996, petitioner received gambling winnings paid by

two casinos: (1) Belle of Sioux City, Iowa, in the amount of

$5,000; and (2) Harvey’s of Council Bluffs, Iowa, in the amount

of $4,867.   Belle of Sioux City withheld Federal income tax in

the amount of $250 from petitioner’s gambling winnings.      Harvey’s

of Council Bluffs did not withhold any Federal income tax from

petitioner’s gambling winnings.

      During the years in issue, petitioner was unmarried and had

no dependents within the meaning of section 152.
                                 - 4 -

       Petitioner did not file a Federal income tax return for any

of the years in issue, nor did petitioner pay estimated tax for

any of those years.

B.   Facts Relating to the Setoff of Alleged Overpayments for
     Prior Years

       Petitioner and his ex-wife separated in 1983 and were

divorced in 1985.     By virtue of the separation and divorce,

petitioner became obligated to pay child support.

       1.   Petitioner’s Testimony

       At trial, petitioner testified that from 1983 through early

1988, he paid child support directly to his ex-wife by personal

and certified check; that in December 1987, his ex-wife filed a

complaint against him with the Iowa State support enforcement

office for nonpayment of child support; and that his ex-wife’s

complaint was completely unfounded.      According to petitioner, the

support enforcement office would not “recognize the payments”

that he had made by check, and that, as a consequence, the

enforcement office improperly commenced collection action against

him.

       The collection action to which petitioner alludes was

described by him at trial as follows:
                                - 5 -

          PETITIONER: In December ‘87, my ex-wife went to
     the support enforcement office here in Iowa –- I was
     living in the State of Washington –- and she made the
     complaint to them that I had never paid her. And there
     was absolutely no truth to that.

           THE COURT:   Okay.

          PETITIONER: But the support enforcement office
     is, to this day, using that same complaint, to take my
     Federal and State income taxes, and always have.

          THE COURT: Well, no, wait a minute, Mr. Taken.
     You’re saying the support enforcement office is taking
     your Federal income tax refunds?

          PETITIONER: In letters that I have received from
     them, they are claiming that they are taking them.
     But, when I come back and say, What have I paid for the
     year, there’s no record of it. Between ‘87 and ‘94,
     there is no record of them taking any of my wages,
     which they did do.

          They started in ‘89, they started garnishing my
     wages. But from ‘83 until December ‘87, when she [the
     ex-wife] filed this complaint, they won’t recognize the
     payments that I’ve made. And this is why they’re
     taking my income tax returns [sic].

     According to petitioner, he claimed overpayments on his tax

returns for 1987 through 1994 but never received a refund check.

     2.   Petitioner’s Strategy To Avoid Withholding

     In 1995, petitioner began writing “exempt” on Form W-4,

Employee’s Withholding Allowance Certificate, which he filed with

the Railroad.   Using this stratagem, petitioner virtually

eliminated withholding in 1995, significantly reduced withholding

in 1996, and completely eliminated withholding in 1997.   At

trial, petitioner testified that he adopted this strategy “out of

pure frustration” because no one would inform him regarding the
                                  - 6 -

disposition of his alleged refunds for prior years.

      3.   Respondent’s Records

      Respondent introduced a certification, under seal, attesting

to the fact that respondent’s master file does not include any

record of petitioner's having filed a Federal income tax return

for any of the years in issue.     Respondent introduced a second

certification, under seal, attesting to the lack of record of

petitioner having filed a Federal income tax return for any of

the years 1988 through 1993.

      In contrast, respondent introduced certificates, under seal,

reflecting transcripts of account for 1987 and 1994, years for

which the transcripts demonstrate that petitioner filed Federal

income tax returns.    The transcript for 1987 indicates that

petitioner claimed an overpayment in the amount of $384.41, which

was refunded on May 16, 1988.     The transcript for 1994 indicates

that on March 6, 1995, petitioner claimed an overpayment in the

amount of $2,720, which was offset against an outstanding

liability on that same date.

C.   The Notices of Deficiency

      In July 2000, respondent issued separate notices of

deficiency to petitioner determining deficiencies in and

additions to petitioner’s income taxes for 1995, 1996, and 1997.

For each of those years, respondent determined that petitioner

failed to file an income tax return and that petitioner received
                               - 7 -

gross income in the form of compensation, interest, and (for

1996) gambling winnings.

Discussion

A.   Petitioner’s Status as a Nonfiler

      Petitioner testified at trial that he filed a Federal income

tax return for each of the years in issue.    However, we are

unable to accept petitioner’s testimony at face value.    See

Tokarski v. Commissioner, 87 T.C. 74, 77 (1986); Diaz v.

Commissioner, 58 T.C. 560, 564 (1972); Kropp v. Commissioner,

T.C. Memo. 2000-148.   At trial, petitioner did not offer a

retained copy of any such purported return, nor did petitioner

ever offer a retained copy to respondent during either the

examination or pretrial stage of this case.    Indeed, petitioner

offered nothing more than his own testimony in support of his

contention that he filed a return for each of the years in issue.

      In contrast, respondent introduced certificates, under seal,

attesting to the lack of record of petitioner having filed a

Federal income tax return for any of the years in issue.    This

evidence, coupled with what appears to be a substantial history

of nonfiling, as well as what we regard as the infinitesimal

possibility that respondent (or the Postal Service) would lose

petitioner’s return for 3 years in a row, supports our finding of

fact, supra, that petitioner did not file a Federal income tax

return for any of the years in issue.
                                  - 8 -

B.   Petitioner’s Tax Liabilities

      Section 1(c) imposes a tax on the taxable income of

unmarried individuals.     Section 63(b) defines “taxable income”,

as applicable to petitioner’s situation, as gross income less the

standard deduction and one personal exemption.       Section 61(a)

defines gross income to mean “all income from whatever source

derived”, specifically including compensation for services and

interest.   Sec. 61(a)(1), (4).    Given the broad phraseology of

section 61(a), courts have consistently held that gambling

winnings are also includable in gross income.     See, e.g.,

Lyszkowski v. Commissioner, T.C. Memo. 1995-235, and cases cited

therein, affd. without published opinion 79 F.3d 1138 (3rd Cir.

1996).

     As detailed above, petitioner's taxable income for the years

in issue is as follows:

                                  1995       1996        1997
      Compensation              $45,282    $63,640     $61,825
      Interest income                 5         82          27
      Gambling winnings            –--       9,867        –--
      Gross income               45,287     73,589      61,852
      Less:
        Personal exemption        -2,500    -2,550      -2,650
        Standard deduction        -3,900    -4,000      -4,150
      Taxable income              38,887    67,039      55,052


      Pursuant to section 1(c), petitioner’s tax liabilities for

the years in issue are as follows:

                   1995         1996         1997
                  $7,852       $15,917      $12,210
                                - 9 -

      Because petitioner did not file income tax returns for the

years in issue, petitioner’s tax liabilities for those years

constitute deficiencies in income taxes.    See sec. 6211(a).3

      In view of the foregoing, we hold that petitioner is liable

for the deficiencies in income taxes as determined by respondent

in the notices of deficiency.

C.   Additions to Tax For Failure To File

      As applicable to petitioner, section 6012(a)(1)(A)(i)

requires that an income tax return be filed by every individual

who has gross income equal to, or greater than, the sum of the

standard deduction and one personal exemption.     For an individual

who is a calendar-year taxpayer, the return is due on or before

the 15th day of April following the close of the taxable year.

See sec. 6072(a).

      Section 6651(a)(1) imposes an addition to tax for failure to

file a timely return.   The addition to tax may be avoided if the

failure to file is due to reasonable cause and not willful

neglect.   “Reasonable cause” contemplates that the taxpayer

exercised ordinary business care and prudence and was nonetheless


      3
        As acknowledged by respondent, petitioner’s net tax
liabilities for the years in issue are as follows:

                                 1995     1996      1997
      Tax liability             $7,852   $15,917   $12,210
      Less: Withholding
        By the Railroad           -412    -4,677       ---
        By Belle/Sioux City        ---      -250       ---
      Net tax liability          7,440    10,990     12,210
                              - 10 -

unable to file a return within the prescribed time.    United

States v. Boyle, 469 U.S. 241, 246 (1985); sec. 301.6651-1(c)(1),

Proced. & Admin. Regs.   “Willful neglect” means a conscious,

intentional failure or reckless indifference.   United States v.

Boyle, supra at 245.

      In the present case, petitioner failed to file income tax

returns for the years in issue notwithstanding the fact that his

gross income far exceeded the threshold amount that triggered the

filing requirement for each year.   Petitioner offered no evidence

whatsoever that would support a finding that his failure to file

was due to reasonable cause and not willful neglect.

      In view of the foregoing, we hold that petitioner is liable

for the additions to tax under section 6651(a)(1) as determined

by respondent in the notices of deficiency.

D.   Additions to Tax for Failure To Pay (1996 and 1997)

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

pay the amount shown as tax on a return on or before the date

prescribed for payment of such tax.4   The addition to tax may be

avoided if the failure to pay is due to reasonable cause and not


      4
        Sec. 6651(g)(2) provides that in the case of any return
made by the Commissioner under sec. 6020(b), such return shall be
treated as the return filed by the taxpayer for purposes of
determining the amount of the addition to tax under sec.
6651(a)(2). Sec. 6651(g)(2) applies in the case of any return
the due date for which (determined without regard to extensions)
is after July 30, 1996. See Taxpayer Bill of Rights 2, Pub. L.
104-168, sec. 1301(b), 110 Stat. 1475. Thus, sec. 6651(g)(2)
applies only to petitioner’s 1996 and 1997 returns.
                                - 11 -

willful neglect.    “Reasonable cause” contemplates that the

taxpayer exercised ordinary business care and prudence in

providing for payment of the taxpayer’s tax liability and was

nonetheless unable to pay the tax or would suffer an undue

hardship if the tax were paid within the prescribed time.      Sec.

301.6651-1(c)(1), Proced. & Admin. Regs.    “Willful neglect” means

a conscious, intentional failure or reckless indifference.

United States v. Boyle, supra at 245.

      In the present case, petitioner paid only a relatively small

portion of his tax liability for 1996 and failed to pay any of

his tax liability for 1997.    Petitioner offered no evidence

whatsoever that would support a finding that his failure to pay

was due to reasonable cause and not willful neglect.

      In view of the foregoing, we hold that petitioner is liable

for the additions to tax under section 6651(a)(2) as determined

by respondent in the notices of deficiency.

E.   Additions to Tax for Failure To Pay Estimated Tax

      Section 6654 imposes an addition to tax for failure to pay

estimated tax.     As applicable herein, imposition of the addition

is mandatory whenever prepayments of tax, either through

withholding or the making of estimated quarterly tax payments

during the course of the taxable year, do not equal the

percentage of total liability required under the statute.      See

sec. 6654(a); Niedringhaus v. Commissioner, 99 T.C. 202, 222
                              - 12 -

(1992); Grosshandler v. Commissioner, 75 T.C. 1, 20-21 (1980).

Thus, in the present case, we need not address any issue relating

to reasonable cause and lack of willful neglect; extenuating

circumstances are simply irrelevant.5   See Estate of Ruben v.

Commissioner, 33 T.C. 1071, 1072 (1960); see also Grosshandler v.

Commissioner, supra at 21.

      In the present case, petitioner failed to pay estimated tax

for any of the years in issue.   Moreover, only a negligible

portion of petitioner’s tax liability for 1995 was paid through

withholding; only a relatively small portion of petitioner’s tax

liability for 1996 was paid through withholding; and none of

petitioner’s tax liability for 1997 was paid through withholding.

      In view of the foregoing, we hold that petitioner is liable

for the additions to tax under section 6654 as determined by

respondent in the notices of deficiency.

F.   Jurisdiction Over the Crediting of Alleged Overpayments

      As we understand his argument, petitioner contends that his

Federal tax refunds for 1987 through 1994 were intercepted and

applied against child support obligations for 1983 through 1988

that he did not owe.6   Because, in petitioner’s view, his refunds



      5
        We should not be understood to imply that petitioner had
reasonable cause or that there were any extenuating circumstances
relating to petitioner’s failure to pay estimated tax.
      6
        Factually, the record does not fully support petitioner’s
contention.
                              - 13 -

for 1987 through 1994 were improperly intercepted, those refunds

are now available to satisfy his liabilities for the 3 years in

issue.

     Section 6402(c) provides in part as follows:

          SEC. 6402(c). Offset Of Past-Due Support Against
     Overpayments.–-The amount of any overpayment to be
     refunded to the person making the overpayment shall be
     reduced by the amount of any past-due support * * *
     owed by that person of which the Secretary has been
     notified by a State * * * . The Secretary shall remit
     the amount by which the overpayment is so reduced to
     the State collecting such support * * * .

     To the extent that petitioner may be seeking to invoke the

overpayment jurisdiction of this Court, see sec. 6512(b), it is

clear that we have no jurisdiction under that section to restrain

or review any credit or reduction made by the Secretary under

section 6402.   See sec. 6512(b)(4); see also sec. 6402(e), which

bars any court of the United States, including this Court, from

hearing any action that is commenced to restrain or review a

reduction authorized by section 6402(c);7 Columbus v.

Commissioner, T.C. Memo. 1998-60, affd. without published opinion

162 F.3d 1172 (10th Cir. 1998).

     To the extent that petitioner may be seeking to minimize his

liabilities for the years in issue, it is equally clear that we


     7
        Sec. 6402(e) was redesignated sec. 6402(f) by the
Internal Revenue Service Restructuring and Reform Act of 1998
(RRA 1998), Pub. L. 105-206, sec. 3711(a), 112 Stat. 779. Sec.
6402(e), prior to redesignation, applies to refunds payable under
sec. 6402 on or before Dec. 31, 1999. See RRA 1998 sec. 3711(d),
112 Stat. 781.
                             - 14 -

lack jurisdiction to restrain or review any credit or reduction

made by the Secretary under section 6402(c).   See sec. 6402(e).

Further, with exceptions not relevant to the present case,

payments are not taken into account in determining (or

redetermining) the amount of a deficiency.   See, e.g., Logan v.

Commissioner, 86 T.C. 1222, 1227-1230 (1986); Clarke v.

Commissioner, T.C. Memo. 1999-199 (“payments made by a taxpayer

* * * do not serve to reduce the ‘deficiency’ within the meaning

of section 6211(a).”).

     Reviewed and adopted as the report of the Small Tax Case

Division.

     In order to give effect to the foregoing,



                                        Decision will be entered

                                   for respondent.
