                        T.C. Memo. 2002-102



                      UNITED STATES TAX COURT



                WILLIAM A. WHEELIS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 4033-01.               Filed April 16, 2002.



     William A. Wheelis, pro se.

     Rachael J. Zepeda, for respondent.


                        MEMORANDUM OPINION


     COHEN, Judge:   Respondent determined deficiencies of

$20,000.60 and $15,230 in petitioner’s Federal income taxes for

1995 and 1996, respectively.   Respondent also determined

additions to tax for failure to file tax returns under section

6651 and for failure to pay estimated taxes under section 6654(a)

for both years.   The only bona fide issue for decision is whether
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a penalty should be imposed against petitioner under section

6673(a)(1).

     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the years in issue, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.

                            Background

     The facts in this case have been deemed stipulated pursuant

to Rule 91(f).   Petitioner was a resident of Morristown, Arizona,

at the time that the petition in this case was filed.

     During 1995, petitioner received interest income totaling

$48 and an Arizona tax refund of $755.   He received a

distribution of $13,586 from an individual retirement account.

Petitioner’s age did not exceed 59-1/2 at the time of the

distribution.

     During 1995 and 1996, petitioner was employed by Arizona

Public Service Co.   He received compensation of $64,090.49 in

1995 and $68,123 in 1996 from Arizona Public Service Co.    The

Arizona Public Service Co. withheld $4,088.67 from petitioner’s

wages in 1995 and $5,649.98 from petitioner’s wages in 1996.

     Petitioner submitted to the Internal Revenue Service

documents purporting to be 1995 and 1996 Federal income tax

returns.   Those documents reported petitioner’s compensation

earned in each year and then deducted the equivalent amount as
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“Property (money) exchanged for property (labor not subject to

tax)”.   By those documents, petitioner sought refunds of income,

Social Security, and Medicare taxes withheld from his wages.    The

documents set forth various frivolous arguments.

     On June 26, 1998, petitioner filed a complaint in the U.S.

District Court for the District of Arizona seeking refunds of

withheld taxes.   On August 2, 1999, the District Court granted a

motion by the United States for summary judgment.   In its order,

the District Court held that petitioner’s arguments were without

merit.   The Court of Appeals for the Ninth Circuit affirmed the

District Court’s order on July 26, 2000.

     In the amended petition filed in this case on May 29, 2001,

petitioner alleged that he “did not receive any income from any

taxable source as alleged in the Notices of Deficiency.”

Petitioner designated Phoenix, Arizona, as the place of trial.

     By notice served August 24, 2001, this case was set for

trial in Phoenix, Arizona, on January 28, 2002.    Attached to the

Notice Setting Case For Trial was a Standing Pre-Trial Order that

provided, among other things:

          ORDERED that all facts shall be stipulated to the
     maximum extent possible. All documentary and written
     evidence shall be marked and stipulated in accordance
     with Rule 91(b), unless the evidence is to be used to
     impeach the credibility of a witness. Objections may
     be preserved in the stipulation. If a complete
     stipulation of facts is not ready for submission at
     trial, and if the Court determines that this is the
     result of either party’s failure to fully cooperate in
     the preparation thereof, the Court may order sanctions
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     against the uncooperative party. Any documents or
     materials which a party expects to utilize in the event
     of trial (except for impeachment), but which are not
     stipulated, shall be identified in writing and
     exchanged by the parties at least 15 days before the
     first day of the trial session. The Court may refuse
     to receive in evidence any document or material not so
     stipulated or exchanged, unless otherwise agreed by the
     parties or allowed by the Court for good cause shown.
     * * *

     On December 13, 2001, respondent’s Motion to Show Cause Why

Proposed Facts and Evidence Should Not be Accepted as Established

was filed.    Attached to respondent’s motion was a letter from

petitioner in which he refused to stipulate “to any fact or

authenticate any document related to proving the receipt of the

income.”   The Court’s order to show cause was issued pursuant to

Rule 91(f).   Petitioner’s response to the order to show cause

consisted of arguments about his Fifth Amendment privilege, and

he showed neither reasonable fear of incrimination nor reasonable

doubt as to the accuracy of the proposed stipulations.    The

Court’s order to show cause was made absolute.

     When the case was called for trial, petitioner declined to

testify.   He stated that “As I understand it, the burden of proof

is on the Government to prove that I had taxable income.    I see

no reason for me to testify.    I did not stipulate to the facts

for that very reason”.    Respondent filed a Motion for Damages

Under I.R.C. Sec. 6673(a)(1).
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                            Discussion

     The stipulation proposed by respondent, the motion for order

to show cause, the order to show cause, and the order deeming

facts stipulated for purposes of this case were all consistent

with Rule 91.   The statements made in the stipulation and the

documents attached to it were all matters “which fairly should

not be in dispute.”   Rule 91(a).   Petitioner did not raise at any

time a dispute as to the factual accuracy of the stipulation.

His objections relate solely to his erroneous theory about

respondent’s burden of proof and his Fifth Amendment privilege.

     Petitioner’s assertion that respondent has the burden of

proof is not a sufficient objection to a proposed stipulation.

Rule 91(a) specifically states that “The requirement of

stipulation applies under this Rule without regard to where the

burden of proof may lie with respect to the matters involved.”

See, e.g., Console v. Commissioner, T.C. Memo. 2001-232.

     Petitioner’s argument that Rule 91(f) could not be applied

without violating his Fifth Amendment privilege must be rejected.

The phrase that comes readily to mind was first used by the U.S.

Supreme Court in United States v. Sullivan, 274 U.S. 259, 264

(1927), to wit, a taxpayer may not “draw a conjurer’s circle

around the whole matter” of his or her tax liability.   See also

Steinbrecher v. Commissioner, 712 F.2d 195, 198 (5th Cir. 1983),

affg. T.C. Memo. 1983-12; McCoy v. Commissioner, 696 F.2d 1234
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(9th Cir. 1983), affg. 76 T.C. 1027 (1981); Edwards v.

Commissioner, 680 F.2d 1268 (9th Cir. 1982); United States v.

Carlson, 617 F.2d 518, 523 (9th Cir. 1980).       In a civil tax case,

the taxpayer must accept the consequences of asserting the Fifth

Amendment and cannot avoid the burden of proof by claiming the

privilege and attempting to convert “the shield * * * which it

was intended to be into a sword”.        United States v. Rylander, 460

U.S. 752, 758 (1983); see Steinbrecher v. Commissioner, supra;

Traficant v. Commissioner, 89 T.C. 501 (1987), affd. 884 F.2d 258

(6th Cir. 1989).

     Petitioner also contends that respondent erroneously relied

on third-party information to determine that he had unreported

income for the years in issue.    He has not, however, raised any

bona fide dispute as to the amounts reported on the third-party

documents.   The only dispute that petitioner raised with respect

to the amounts of compensation is his frivolous arguments that

his wages are not taxable.   Those arguments, as petitioner was

advised in the District Court order, citing United States v.

Studley, 783 F.2d 934, 937 (9th Cir. 1986), have been

consistently and thoroughly rejected and may be the basis for

sanctions.   See also Rowlee v. Commissioner, 80 T.C. 1111, 1119-

1122 (1983).   In these circumstances, respondent was entitled to

rely on the third-party information.       See Parker v. Commissioner,

117 F.3d 785 (5th Cir. 1997); see also sec. 6201(d).       In any
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event, the facts and documents that were deemed stipulated

establish petitioner’s receipt of taxable income.    Petitioner had

the burden of identifying and proving any deductions to which he

might be entitled.    See, e.g., Rockwell v. Commissioner, 512 F.2d

882 (9th Cir. 1975), affg. T.C. Memo. 1972-133.    He failed to do

so and has not shown that respondent’s determination is in any

way erroneous.    Because he failed to present any credible

evidence, he is not entitled to have the burden of proof shifted

under section 7491(a).

     The stipulated facts also satisfy respondent’s burden of

production with respect to the penalties in issue.    See sec.

7491(c); Higbee v. Commissioner, 116 T.C. 438, 446-449 (2001).

Respondent, however, recomputed the addition to tax under section

6654 for 1995 and concedes that that amount should be reduced

from the $838.17 determined in the statutory notice to $251.05.

     Section 6673(a)(1) provides:

     SEC. 6673.    SANCTIONS AND COSTS AWARDED BY COURTS.

          (a) Tax Court Proceedings.--

               (1) Procedures instituted primarily for
          delay, etc.--Whenever it appears to the Tax Court
          that–-

                       (A) proceedings before it have been
                  instituted or maintained by the taxpayer
                  primarily for delay,

                       (B) the taxpayer’s position in such
                  proceeding is frivolous or groundless, or
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                     (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.

     Petitioner had actual notice by the District Court order and

in this case that his arguments that his wages were not taxable

income were without merit.   The various arguments that he made in

this case have been long discredited and patently were asserted

for purposes of delay.   We conclude that a penalty under section

6673(a) should be awarded to the United States in the amount of

$10,000.

     To reflect the foregoing,

                                           An appropriate order and

                                      decision will be entered.
