                       T.C. Memo. 2009-225



                      UNITED STATES TAX COURT



               BRIAN M. DIMERCURIO, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7113-07.              Filed October 1, 2009.



     Brian M. DiMercurio, pro se.

     A. Gary Begun, for respondent.



                        MEMORANDUM OPINION


     GOEKE, Judge:   The only issue remaining for disposition in

this deficiency case is whether petitioner is subject to the

additions to tax for fraudulent failure to file income tax

returns for 2001 through 2004 under section 6651(f).1


     1
      Unless otherwise indicated, all section references are to
                                                   (continued...)
                               - 2 -

     Petitioner, a wage earner, asserts he is not a taxpayer, but

rather his “Social Security Trust” is the taxable entity.    We

find for the reasons explained herein that petitioner’s claim of

good faith in failing to file Forms 1040, U.S. Individual Income

Tax Return, for the years at issue is not credible, and we

further find that respondent has proven by clear and convincing

evidence that petitioner’s failure to file income tax returns was

fraudulent.

     At the time petitioner filed his petition, he resided in

Michigan.

                             Background

     Petitioner was an employee of Compuware Corp. during the

years at issue.   He received a Form W-2, Wage and Tax Statement,

from his employer reflecting wages.    Petitioner filed a Form W-4,

Employee’s Withholding Allowance Certificate, in February 2000

claiming he was exempt from Federal income tax in order to avoid

any withholding of Federal income tax from his wages that year.

He subsequently filed similar State and Federal withholding forms

making the same assertion for subsequent years.   In 2003 he

signed a Form W-4 in which he claimed allowances for 12

dependents.   Petitioner was not exempt from Federal income tax

and did not have 12 dependents.   As a result of filing the Forms



     1
      (...continued)
the Internal Revenue Code.
                                - 3 -

W-4, petitioner did not have any Federal income tax withholding

in 2001 and 2003.   He received wages of $85,791.34 and $86,623,

respectively, in 2001 and 2003.    The 2002 Form W-2 his employer

prepared reflects $826.75 of Federal income tax withheld in that

year and wages of $89,772.32.   In 2004 petitioner received wages

of $80,565.09, and $4,267.28 was withheld from his wages for

Federal income tax.

     Petitioner last filed a Form 1040 for the tax year 1999.     In

December 1999 petitioner sent a letter to his employer claiming

to “hereby withdraw my authorization for Compuware to withhold

tax from my personal earnings.”    He thus began his efforts to

avoid paying Federal income tax.

     His failure to file a Federal income tax return for 2000 did

not go unnoticed, and respondent issued a notice of deficiency to

petitioner on April 19, 2004.

     Petitioner petitioned this Court relative to the 2000 year

in Brian M. DiMercurio (A Trust) v. Commissioner, docket No.

13304-04, and on December 7, 2004, the Court issued an order and

decision dismissing the case for failure to state a claim.    The

order and decision states that there is no legal basis to support

the argument that the “trust” was the true party in interest and

that the “trust” earned the wages petitioner was paid in 2000.

The Tax Court’s decision was affirmed by the U.S. Court of

Appeals for the Sixth Circuit via a mandate issued on November 8,
                                 - 4 -

2005.    DiMercurio v. Commissioner, No. 05-1052 (6th Cir. Sept.

16, 2005).     The Court of Appeals awarded costs of $6,000 to the

Commissioner.

        Petitioner has pursued his position in other cases,

including an appeal from a Tax Court order involving 2005 Federal

income tax which resulted in an order filed by the U.S. Court of

Appeals for the Sixth Circuit in DiMercurio v. Commissioner, No.

08-1256 (6th Cir. Oct. 7, 2008).     On page 2 of that order, the

Court of Appeals stated:

          DiMercurio argues that the Social Security
     Administration, in assigning him a unique Social
     Security number, created a federal trust. That trust,
     he asserts, earned the funds owed to the IRS and should
     have been identified in the notice of deficiency. This
     argument, which is clearly fantastic and delusional,
     does not deserve extensive refutation.

Nevertheless, petitioner continues to pursue the same position in

the present case.

     In an order dated February 27, 2008, in this docket,

respondent’s motion for partial summary judgment was granted, and

the deficiencies in income tax and additions to tax under section

6654(a) were sustained.

     In 2004 petitioner submitted Forms 1041, U.S. Income Tax

Return for Estates and Trusts, for tax years 2000 through 2004

and also submitted amended versions of these returns.     On these

returns he consistently claimed the amounts of the wages he

received from Compuware as “Fiduciary fees” expense deductions.
                                 - 5 -

Petitioner did not contact a tax professional at any time to seek

advice about his position that he was exempt from Federal income

tax, and he has continued to maintain the same frivolous position

until the present.

     Respondent issued a notice of deficiency to petitioner on

January 4, 2007, which determined additions to tax under section

6651(f) as follows:

               Year                        Amount

               2001                      $11,684.63
               2002                       29,084.83
               2003                       10,269.63
               2004                        6,202.38

Petitioner timely petitioned this Court for redetermination of

the deficiencies and additions to tax.       The additions to tax

under section 6651(f) are the only amounts remaining at issue

following the February 27, 2008, order.       Regarding these

additions to tax, a trial was held in Detroit, Michigan.

                           Discussion

     Section 6651(a) imposes additions to tax upon taxpayers who

fail to file Federal income tax returns without reasonable cause

according to the net amount of tax due.       Sec. 6651(b).   Section

6651(f) provides for an increased addition to tax when the

failure to file is fraudulent.    The amount of each addition to

tax respondent seeks pursuant to section 6651(f) is 75 percent of

the tax required to be shown on the unfiled return.
                               - 6 -

     Respondent has the burden of proving, by “clear and

convincing evidence” that there is an underpayment of tax and

that petitioner intended to evade taxes known or believed to be

owing by conduct intended to conceal, mislead, or otherwise

prevent the collection of taxes.   See sec. 7454(a); Korecky v.

Commissioner, 781 F.2d 1566, 1568 (11th Cir. 1986), affg. T.C.

Memo. 1985-63; Stoltzfus v. United States, 398 F.2d 1002, 1005

(3d Cir. 1968); Webb v. Commissioner, 394 F.2d 366, 377 (5th Cir.

1968), affg. T.C. Memo. 1966-81; Rowlee v. Commissioner, 80 T.C.

1111, 1123 (1983).

     Fraud is not to be imputed or presumed, but rather must be

established by some independent evidence of fraudulent intent.

Beaver v. Commissioner, 55 T.C. 85, 92 (1970); Otsuki v.

Commissioner, 53 T.C. 96, 106 (1969).   Fraud may be established

by surveying the taxpayer’s entire course of conduct and drawing

reasonable inferences therefrom.   Spies v. United States, 317

U.S. 492, 499 (1943); Korecky v. Commissioner, supra at 1568;

Rowlee v. Commissioner, supra at 1123; Stephenson v.

Commissioner, 79 T.C. 995, 1006 (1982), affd. 748 F.2d 331 (6th

Cir. 1984).   Although fraud may not be found under

“‘circumstances which at the most create only suspicion’”, the

intent to defraud may be inferred from any conduct the likely

effect of which would be to conceal, mislead, or otherwise

prevent the collection of taxes believed to be owing.   Spies v.
                                - 7 -

United States, supra at 499; Petzoldt v. Commissioner, 92 T.C.

661, 700 (1989) (quoting Davis v. Commissioner, 184 F.2d 86, 87

(10th Cir. 1950), remanding a Memorandum Opinion of this Court).

     Courts have relied on a number of indicia or badges of fraud

in deciding whether to sustain the Commissioner’s determinations

with respect to the addition to tax for fraud.   Although no

single factor may be necessarily sufficient to establish fraud,

the existence of several indicia may be persuasive circumstantial

evidence of fraud.   Solomon v. Commissioner, 732 F.2d 1459, 1461

(6th Cir. 1984), affg. per curiam T.C. Memo. 1982-603; Beaver v.

Commissioner, supra at 93.

     Circumstantial evidence that may give rise to a finding of

fraudulent intent includes, but is not limited to, the following:

     •    Understatement of income;

     •    inadequate records;

     •    pattern of failure to file tax returns;

     •    awareness of obligation to file returns, report income,

          and pay taxes;

     •    implausible or inconsistent explanations of behavior;

     •    concealment of assets;

     •    failure to cooperate with tax authorities;

     •    filing false Forms W-4;
                                - 8 -

     •      failure to make estimated tax payments;

     •      dealing in cash.

     These “badges of fraud” are nonexclusive.    The taxpayer’s

background and the context of the events in question may be

considered as circumstantial evidence of fraud.       Spies v. United

States, supra at 497; United States v. Murdock, 290 U.S. 389, 395

(1933).

     While these badges of fraud may be present, the taxpayer may

still have a “good faith understanding of the law” that may

negate the Internal Revenue Service’s (IRS) allegation of fraud.

See Raney v. Commissioner, T.C. Memo. 2000-277.       In Raney, the

taxpayer received wages and pension income and then reported zero

income on his tax returns on the meritless claim that the income

represented nontaxable receipts.    Nevertheless, the Court

rejected the Commissioner’s position to impose the fraud penalty

under section 6651(f) on account of the taxpayer’s allegation of

good-faith misunderstanding of the application of the law.

     Petitioner falsely claimed he had a trust, filed trust tax

returns (i.e., Forms 1041), and intentionally failed to file

individual income tax returns (i.e., Forms 1040) for the years at

issue.    In other instances, similar actions by taxpayers have

been construed as sufficient willfulness to warrant criminal

conviction.    See, e.g., Christians v. Commissioner, T.C. Memo.

2008-220.    Petitioner’s conduct is unquestionably deliberate.
                                 - 9 -

     In Niedringhaus v. Commissioner, 99 T.C. 202 (1992), we held

that a taxpayer who acts willfully cannot avail himself of the

“good-faith misunderstanding” defense explained in Cheek v.

United States, 498 U.S. 192 (1991).      See also Lopez v.

Commissioner, T.C. Memo. 2001-211.       In Niedringhaus v.

Commissioner, supra at 217 (citing United States v. Burton, 737

F.2d 439, 442-443 (5th Cir. 1984), and United States v. Ware, 608

F.2d 400, 405 (10th Cir. 1979)) we stated:      “There is a

difference, however, between a good-faith misunderstanding of the

laws and a good-faith belief that the law is invalid or a good-

faith disagreement with the law.”

     Petitioner, who is college-educated, conducted his own

research using the Internet.   He formulated his own conclusions,

failed to consult with a competent tax adviser, and manifested

his intent by taking action to eliminate withholding.         Having

observed petitioner’s testimony at length, we found that his

intention was to evade tax and his “trust theory” was little more

than an artifice to evade tax.    We find petitioner’s claims of

good faith lack credibility.

     Petitioner intentionally took aggressive steps to stop the

withholding of Federal income tax from his wages and failed to

file personal income tax returns for the years in question.

These actions and omissions were part of his plan to evade the

payment of income tax.   He points to the Forms 1041 he filed on
                               - 10 -

the theory that a trust earned the income, but these “trust”

returns were filed only years after the failure to file began and

after he had been confronted with his failure to file by

respondent’s revenue agents.   These trust returns provide no

support for petitioner’s claim of good faith because his true

intent to evade tax is evidenced by the matching of every dollar

of wage income he was paid to a specious claim of fiduciary fee

expense on a Form 1041.

     Given these facts, we find respondent has proven by clear

and convincing evidence that petitioner’s failure to file for

2001, 2002, 2003, and 2004 was fraudulent.    Therefore we sustain

the additions to tax under section 6651(f).    Because of this

result and the previous order of this Court,


                                         Decision will be entered

                                    for respondent.
