                        T.C. Memo. 2008-143



                      UNITED STATES TAX COURT



                 MARTIN NITSCHKE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 696-07L.               Filed May 22, 2008.



     Martin Nitschke, pro se.

     David E. Whitcomb and Marilyn Ames, for respondent.



                        MEMORANDUM OPINION


     COHEN, Judge:   This proceeding was commenced in response to

a Notice of Determination Concerning Collection Action(s) Under

Section 6320 and/or 6330.   The only bona fide issue presented is

whether a penalty should be awarded under section 6673 and, if

so, how much.
                               - 2 -

     Unless otherwise indicated, all section references are to

the Internal Revenue Code.

                             Background

     Petitioner resided in Texas at the time that he filed his

petition.

     On August 6, 2001, the Internal Revenue Service (IRS) issued

a notice of determination regarding collection activity relating

to a frivolous return penalty assessed against petitioner with

respect to his 1999 Federal income tax return.   Petitioner filed

an action in the U.S. District Court for the District of Nevada

seeking to set aside the notice of determination.   On March 31,

2003, the District Court granted summary judgment in favor of the

United States.   Among other things, the District Court stated:

          Plaintiff argues that the hearing officer did not
     verify that the proper administrative procedures were
     followed with respect to the frivolous return penalty
     determination. However, the hearing officer indicated
     that the IRS had submitted sufficient verification that
     all applicable laws and procedures and [sic] been
     followed. The hearing officer was entitled to rely on
     the records and transcripts presented by the IRS in
     making that determination. Davis v. Commissioner, 115
     T.C. 35, 40 (2000). [Nitschke v. United States, 91
     AFTR 2d 2003-1991, at 2003-1992, 2003-1 USTC par.
     50,432, at 88,242 (D. Nev. 2003).]

The judgment of the District Court was affirmed by the Court of

Appeals for the Ninth Circuit on March 24, 2004.    92 Fed. Appx.

529 (2004).

     On January 7, 2002, while residing in Nevada petitioner

commenced a proceeding in this Court under docket No. 586-02,
                                  - 3 -

contesting a statutory notice of deficiency that he received for

1999.   In that case petitioner made several frivolous arguments,

including that no statute establishes an individual liability for

income tax.    At the conclusion of trial the Court rendered an

oral opinion rejecting petitioner’s arguments, determining a

deficiency of $1,728 and penalty of $339.60 under section 6662,

and awarding to the United States a penalty of $500 under section

6673.   The Court warned petitioner that the penalty likely would

be more if petitioner advanced similar frivolous arguments in

future proceedings in this Court.     On September 17, 2003, the

Court’s opinion in docket No. 586-02 was affirmed by the Court of

Appeals for the Ninth Circuit.     76 Fed. Appx. 137 (2003).

     On April 16, 2004, petitioner filed a proceeding in this

Court at docket No. 6510-04 in response to notices of deficiency

for 2000 and 2001.      On March 15, 2005, an order of dismissal and

decision was entered by reason of petitioner’s failure properly

to prosecute.    The decision reflected deficiencies of $10,301 and

$6,707.70 for 2000 and 2001, respectively, and additions to tax

for each year under sections 6651(a) and 6654.     In that order,

the Court stated, in part:

     With respect to the instant matter, we are convinced
     that petitioner instituted this proceeding primarily
     for delay. Throughout the litigation process,
     petitioner has advanced contentions and demands
     previously and consistently rejected by this and other
     courts.

           *        *        *       *       *       *         *
                               - 4 -

     Hence, although petitioner was well aware of the
     ramifications under section 6673 of pursuing frivolous
     actions, he failed in his various filings even to
     address respondent’s request for such a penalty in this
     case and instead continued to advance patently rejected
     arguments. The Court concludes that a penalty of
     $2,500 should be awarded to the United States in this
     case.

A copy of the Court’s order of dismissal and decision is attached

as an appendix to this opinion.

     On July 24, 2006, a notice of tax lien filing (notice of

lien) was sent to petitioner, advising him of his right to a

hearing under section 6330.   The notice of lien related to

outstanding income tax liabilities for 1993, 1997, 1998, 1999,

2000, 2001, and 2002.

     The notice of determination that is the basis of this

proceeding was sent to petitioner on December 1, 2006.   It

described how the verification of legal and procedural

requirements had been made.   Under the heading “Issues Raised by

the Taxpayer”, the notice of determination provided the following

rationale:

     Challenges to the Liability

     On you [sic] Form 12153 you stated: I request
     collection alternative including OIC and payment
     schedule. Collection actions are inappropriate.
     Procedural defects by Internal Revenue Service exist.
     I want to see copies of the 90 day letter, Notice and
     Demand letter (Form 17-A), also Summary Record of
     Assessment (Form 23-C) or replacement form, RACS Report
     and my form 4340 “Certificate of Assessment and
     Payments” and proof that they were sent. I contest the
     existence or the amount of the tax, because I did not
     receive a Notice of Deficiency. I also request proof
                               - 5 -

     of verification from the Secretary that all applicable
     the [sic] Service of my intention to make an audio
     recording of the hearing pursuant to IRC 7521.

     Because you have not identified any irregularity in the
     assessment for 1993, 1997, 1998, 1999, 2000, 2001 and
     2002, and because the Certificates of Assessments and
     Payments show the assessment of each of these
     liabilities, I find the assessments to be valid.

     In addition to claiming the assessments are
     procedurally invalid, you, [sic] assert general, non-
     specific challenges to the existence and amount of your
     liabilities. IRC § 6330(c)(2)(B) provides that the
     existence and amount of the underlying tax liability
     can only be contested in Appeals at a CDP hearing if
     the taxpayer did not receive a Notice of Deficiency for
     taxes in question or did not otherwise have an earlier
     opportunity to dispute such tax liability.

     Since there is documentation that you received the
     notices of deficiency and had a prior opportunity to
     meaningfully challenge the existence of the liability,
     you are precluded from raising liability issues before
     the Appeals Office. In any event, your arguments with
     respect to the existence of your liabilities have been
     rejected by courts as frivolous.

     Our records reveal that you received Notices of
     Deficiency for the taxable years 1993, 1997, 1998,
     1999, 2000, 2001 and 2002. You have also filed your
     petition with the Tax Court and they have made a
     Decision, therefore you cannot raise the liability here
     in Appeals.

     The petition in this case was filed January 8, 2007, and set

forth mostly unintelligible accusations against representatives

of the Office of Appeals.   When the case was called for trial,

petitioner declined to testify.   Petitioner contends that no

notices of deficiency were sent to him because a transcript of

his account does not show “Code No. 494”, which, according to

petitioner, indicates that a statutory notice of deficiency was
                                - 6 -

sent.   In the alternative petitioner argues that the IRS records

are not complete because if a notice of deficiency was sent, Code

494 should appear on the transcript.

                              Discussion

     Petitioner has engaged in long-term defiance of his Federal

tax obligations.   Normally we would respond, as we did in

petitioner’s case for 1999, by quoting from Crain v.

Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984), to the effect

that “to refute these arguments with somber reasoning and copious

citation of precedent * * * might suggest that these arguments

have some colorable merit.”    In this case, however, it is

worthwhile to examine petitioner’s contention to show the fallacy

of taking arguments out of context to support an untenable and

absurd result.

     Petitioner relies on Wiley v. United States, 20 F.3d 222

(6th Cir. 1994).   In that case, the Court of Appeals reversed

summary judgment in favor of the Government on the ground that a

genuine issue of material fact existed as to whether a

statutorily required notice of deficiency had been sent.      The

Court of Appeals explained:

          Wiley’s motion for summary judgment was based on
     his assertion that the Government had not mailed him a
     notice of deficiency for the 1982 tax year. Wiley
     submitted a copy of an IRS computer-generated
     transcript of his account, known as an Individual
     Master File (IMF), which reflected by numeric codes the
     dates certain transactions occurred. Wiley submitted
     an affidavit of an expert witness that stated the IMF
                               - 7 -

     transcript did not contain a record of a notice of
     deficiency being issued. According to the expert, the
     IMF transcript was missing the transaction code (“494”)
     that was required by IRS Publication 6209 to record the
     issuance of a notice of deficiency, and this omission
     indicated that a notice of deficiency was not sent.
     Wiley also submitted his own affidavit, which stated
     that he had not received the notice of deficiency.

           *       *       *       *       *       *        *

          * * * the evidence presented to the district court
     was in conflict. The PS Form 3877 presented by the
     Government provided proof that the notice of deficiency
     was mailed, while the IMF transcript presented by Wiley
     provided proof that the notice was not mailed. The
     Government’s evidence may be more persuasive than
     Wiley’s, but the court’s function when deciding motions
     for summary judgment is “not [it]self to weigh the
     evidence and determine the truth of the matter but to
     determine whether there is a genuine issue for trial.”
     Anderson, 477 U.S. at 249, 106 S.Ct. at 2511. Here,
     Wiley has presented probative evidence upon which a
     jury could reasonably find in his favor. A genuine
     issue of material fact as to whether a notice of
     deficiency was sent to Wiley by certified mail remains.
     Therefore, the district court’s grant of summary
     judgment to the Government was error. [Id. at 225-229;
     fn. ref. omitted.]

After remand by the Court of Appeals, the District Court

conducted a trial and found that a notice of deficiency had been

sent.   The finding was based in part on testimony that

     if a taxpayer does not file a tax return, or if a
     taxpayer’s income on a tax return does not match the
     income appearing on W-2 forms and 1099 forms, a
     notation “494” may appear on the taxpayer’s IRS
     transcript. The 494 notation means that a notice of
     deficiency was mailed to the taxpayer via certified
     mail. After the IRS audits a taxpayer, however, the
     494 notation will not appear on the taxpayer’s
     transcript. [Wiley v. United States, 77 AFTR 2d 96-
     640, at 96-641 to 96-642, 96-1 USTC par. 50,089, at
     88,344-88,345 (S.D. Ohio 1995).]
                                - 8 -

The court found that the Government had proved by a preponderance

of the evidence that the IRS sent the notice of deficiency in

dispute.   Id. at 96-643, 96-1 USTC par. 50,089, at 88,346.     The

District Court’s conclusion was affirmed in an unpublished

opinion on March 20, 1997.    Wiley v. United States, 108 F.3d 1378

(6th Cir. 1997).    Thus, while the absence of “Code 494” in the

transcript of account led to a trial, it had no ultimate effect.

     In this case we have none of the evidence like that

presented in relation to the motions for summary judgment in

Wiley or at the trial after the remand to explain the transcript

of account.   Petitioner’s argument is based on a single page from

the Internal Revenue Manual (IRM).      The IRM neither has the force

of law nor confers rights on taxpayers.       Fargo v. Commissioner,

447 F.3d 706, 713 (9th Cir. 2006), affg. T.C. Memo. 2004-13;

Thoburn v. Commissioner, 95 T.C. 132, 141 (1990).      We have here

compelling evidence that petitioner received statutory notices

for 1999, 2000 and 2001, by taking judicial notice of the records

of this Court showing that petitioner filed actions in response

to those notices.    See Fed. R. Evid. 201.    Petitioner declined to

testify, and in the face of compelling evidence for 3 years, his

denial of receipt of notices of deficiency for the other years

has no credibility.
                                - 9 -

     Petitioner argues that the notice of determination could not

have been sent after verification of the legal requirements for a

valid lien because of the missing code in the transcript.     He

also argues that the failure to indicate that a notice of

deficiency was sent by Code 494 violated Federal law concerning

maintenance and retention of accurate records.    Petitioner has

cited neither authority nor reason why a failure to follow a

particular format in recordkeeping, if it occurred, would

undermine the validity of the lien filed by reason of his failure

to fulfill his income tax obligations.

     Section 6321 creates a lien in favor of the United States on

all property and rights to property belonging to a person liable

for taxes when payment has been demanded and neglected.    The lien

arises by operation of law when the IRS assesses the amount of

unpaid tax.   Sec. 6322.   The IRS files a notice of Federal tax

lien to preserve priority and put other creditors on notice.       See

sec. 6323.

     Section 6320 provides that the Secretary shall furnish the

person described in section 6321 with written notice of the

filing of a lien under section 6323.    This notice must be

provided not more than 5 business days after the day the notice

of lien is filed and must advise the taxpayer of the opportunity

for administrative review in the form of a hearing.    Sec.

6320(a).   Petitioner has not shown or asserted any omission with
                               - 10 -

respect to the filing or notice of the lien, and none is

disclosed in the record.

     Section 6320 further provides that the taxpayer may request

a hearing within the 30-day period beginning on the day after the

5-day period.   The hearing generally shall be conducted

consistent with the procedures set forth in section 6330(c), (d),

and (e).   Sec. 6320(c).   A taxpayer may raise any relevant issue

at the hearing, including challenges to “the appropriateness of

collection actions” and may make “offers of collection

alternatives, which may include the posting of a bond, the

substitution of other assets, an installment agreement, or an

offer-in-compromise.”   Sec. 6330(c)(2)(A).   At the hearing, a

taxpayer may challenge the existence and amount of the underlying

tax liability only if he or she received no notice of deficiency

or did not otherwise have an opportunity to dispute such tax

liability.   Sec. 6330(c)(2)(B).   Because petitioner received

statutory notices of deficiency, he was not entitled to dispute

the underlying liabilities.    In any event, he has asserted no

credible challenge to them.

     The Appeals officer must consider issues raised by the

taxpayer, verify that the requirements of applicable law and

administrative procedures have been met, and consider “whether

any proposed collection action balances the need for the

efficient collection of taxes with the legitimate concern of the
                               - 11 -

person [involved] that any collection action be no more intrusive

than necessary.”   Sec. 6330(c)(3)(C).   The notice of

determination reflects that all the required steps were taken.

     For us to conclude that there was an abuse of discretion in

sustaining the lien, petitioner would have to show that the

determination was arbitrary, capricious, or without sound basis

in fact or law.    See Giamelli v. Commissioner, 129 T.C. 107, 111

(2007).   He has not done so here.

     Petitioner was repeatedly warned that section 6673 provides

for a penalty, not in excess of $25,000, whenever it appears to

the Tax Court that proceedings before it have been instituted or

maintained primarily for delay or the taxpayer’s position is

frivolous or groundless.   Petitioner’s history of making

frivolous and groundless claims for the obvious purpose of delay

justifies a penalty.   We will impose a penalty of $10,000.   Where

a taxpayer pursues proceedings in this Court merely as a

continuation of his refusal to acknowledge and satisfy his tax

obligations, his pro se status does not excuse his actions.

Moreover, further sanctions may be awarded on appeal.    See Tello

v. Commissioner, 410 F.3d 743 (5th Cir. 2005); Parker v.

Commissioner, 117 F.3d 785, 787 (5th Cir. 1997).



                                          An appropriate order

                                     and decision will be entered.
                       UNITED STATES TAX COURT
                               WASHINGTON, DC 20217




MARTIN NITSCHKE,                            )
                                            )
                  Petitioner                )
                                            )
             v.                             )         Docket No.    6510-04.
                                            )
COMMISSIONER OF INTERNAL REVENUE,           )
                                            )
                  Respondent                )



            ORDER AND ORDER OF DISMISSAL AND DECISION


     On January 14, 2004, respondent issued to petitioner a
separate notice of deficiency with respect to each of the taxable
years 2000 and 2001. Respondent therein determined deficiencies
and additions to tax under sections 6651(a)(1) and 66541 as
follows:

                                            Additions to Tax
     Year         Deficiency         Sec. 6651(a)(1)     Sec. 6654

     2000         $10,301.00             $3,811.37                 $554.02
     2001           6,707.70              1,949.49                  265.44

Because respondent had no record of having received a return from
petitioner for either of these years, respondent computed
petitioner’s tax liabilities based on information returns from
third parties reflecting income received from wages, dividends,
stock sales, and a premature distribution from a retirement
account. Respondent permitted petitioner the standard deduction
for a single taxpayer and one exemption.

     Petitioner filed a petition with this Court contesting the
notices of deficiency on April 16, 2004. The petition asserted
with little elaboration that respondent had produced no evidence
that petitioner received taxable income and had failed to
consider deductions, allowances, and credits. Petitioner prayed



     1
       Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the years in issue, and Rule
references are to the Tax Court Rules of Practice and Procedure.
                             - 13 -

that the Court “dismiss” the notice of deficiency and award to
petitioner costs and fees.

     On July 2, 2004, the Court issued to petitioner a notice
setting this case for trial in Las Vegas, Nevada, at the session
beginning on December 6, 2004, and attaching a copy of the
Court’s standing pretrial order. In the months leading up to
trial, petitioner refused to participate in the process of
preparing a stipulation of facts and answered each statement in a
request for admissions served by respondent with an invocation of
his Fifth Amendment privilege against self-incrimination.

     The case was called from the calendar on December 6, 2004,
and was recalled on December 8, 2004. There was no appearance on
either date by, or on behalf of, petitioner. However, a motion
to dismiss for lack of jurisdiction received from petitioner was
filed on December 7, 2004. Respondent appeared and filed a
motion to dismiss for lack of prosecution on December 8, 2004.
In that motion, respondent recounted unsuccessful attempts to
communicate with petitioner and various warnings given to
petitioner explaining the possible consequences of failure to
appear at trial.

     On January 11, 2005, the Court issued an order to show cause
directing petitioner to show cause in writing on or before
February 1, 2005, why respondent’s motion to dismiss should not
be granted. The Court on the same date issued an order directing
respondent to file any response to petitioner’s motion to dismiss
on or before February 1, 2005.

     Respondent on January 21, 2005, filed a notice of objection
to petitioner’s motion and a request to impose a penalty under
section 6673. Petitioner, after an extension of time was granted
by the Court, filed a response on March 4, 2005, opposing
respondent’s motion and offering further argument in support of
his own motion.

     It is petitioner’s position that this case should be
dismissed for lack of jurisdiction because the notice of
deficiency is void. Petitioner contends that definition of
“deficiency” in section 6211 requires the existence of a return
executed either by the taxpayer or by the Secretary or his
delegate.

     The jurisdiction of this Court rests on a valid notice of
deficiency and a timely filed petition. Rule 13(a), (c).
Section 6211 provides in relevant part:
                                   - 14 -

     SEC. 6211.    DEFINITION OF A DEFICIENCY.

          (a) In General.--For purposes of this title in the
     case of income, estate, and gift taxes imposed by
     subtitles A and B * * * the term “deficiency” means the
     amount by which the tax imposed by subtitle A or B * *
     * exceeds the excess of--

                  (1) the sum of

                       (A) the amount shown as tax by the
                  taxpayer upon his return, if a return was
                  made by the taxpayer and an amount was shown
                  as the tax by the taxpayer thereon, plus

                       (B) the amounts previously assessed (or
                  collected without assessment) as a deficiency
                  over--

                  (2) the amount of rebates * * * made.

Regulations promulgated under section 6211 explicitly clarify:
“If no return is made, or if the return * * * does not show any
tax, for the purpose of the definition ‘the amount shown as the
tax by the taxpayer upon his return’ shall be considered as
zero.” Sec. 301.6211-1(a), Proced. & Admin. Regs.

     Petitioner contends that the language of the above-quoted
regulation represents an impermissible extension of the current
statute, reflecting instead section 271 of the Internal Revenue
Code of 1939. He further posits that cases contrary to his
position are therefore distinguishable in that they relied at
least in part on the regulation, the validity of which was not
directly challenged by the taxpayers in those proceedings.

     This and other courts have long rejected petitioner’s
interpretation of section 6211 in cases such as Laing v. United
States, 423 U.S. 161, 173-174 (1976); Roat v. Commissioner, 847
F.2d 1379, 1381-1382 (9th Cir. 1988); and Hartman v.
Commissioner, 65 T.C. 542, 545-546 (1975). The plain language of
section 6211(a) simply does not support petitioner’s stance. In
words of the Court of Appeals for the Ninth Circuit: “As section
6211(a) makes plain, only ‘if a return was made by the taxpayer’
does the tax shown on a return figure in the Commissioner’s
determination of deficiency.” Roat v. Commissioner, supra at
1381. Accordingly, section 301.6211-1(a), Proced. & Admin.
Regs., is in no way irreconcilable with the statute. The Court
concludes that the notices of deficiency issued in the instant
case are valid, and petitioner’s motion to dismiss for lack of
jurisdiction is without merit.
                             - 15 -


     The next question then is whether this case should be
dismissed for lack of prosecution. Rule 123(b) provides in
relevant part as follows:

          (b) Dismissal: For failure of a petitioner
     properly to prosecute or to comply with these Rules or
     any order of the Court or for other cause which the
     Court deems sufficient, the Court may dismiss a case at
     any time and enter a decision against the petitioner.
     The Court may, for similar reasons, decide against any
     party any issue as to which such party has the burden
     of proof, and such decision shall be treated as a
     dismissal * * *

     In the present matter, as regards the deficiency
determination, the burden of proof lies with petitioner under the
general premise of Rule 142(a) and has not shifted pursuant to
section 7491(a). Concerning the additions to tax, although
section 7491(c) places the burden of production on respondent,
the ultimate burden of establishing an exception thereto remains
with petitioner. Higbee v. Commissioner, 116 T.C. 438, 446-447
(2001).

     Here, petitioner has failed to comply with the Court’s
standing pretrial order, has not cooperated with respondent in
preparing his case for trial, did not appear at the session in
Las Vegas, and has submitted no meritorious allegations or
arguments in response to the order to show cause. Petitioner
therefore has presented to the Court no evidence showing error in
respondent’s deficiency determinations.

     As regards the additions to tax for failure to file a
return, respondent provided a Form 3050, Certification of Lack of
Record, reflecting that the Internal Revenue Service has no
record of petitioner having filed an income tax return for the
2000 or 2001 taxable years. Concerning the additions to tax for
failure to pay estimated taxes, the notices of deficiency on
their face show insufficient withholding or other estimated
payments. Petitioner has at no time offered any evidence or
argument directed to the additions to tax under section 6651(a)
or 6654.

     Given the above circumstances, it is appropriate to dismiss
this case and to sustain respondent’s determinations as to the
deficiencies and the additions to tax. Additionally, respondent
has now moved for imposition of a penalty under section 6673.

     Section 6673(a)(1) authorizes the Court to require the
taxpayer to pay a penalty not in excess of $25,000 when it
                             - 16 -

appears to the Court that, inter alia, proceedings have been
instituted or maintained by the taxpayer primarily for delay or
that the taxpayer’s position in such proceeding is frivolous or
groundless. With respect to the instant matter, we are convinced
that petitioner instituted this proceeding primarily for delay.
Throughout the litigation process, petitioner has advanced
contentions and demands previously and consistently rejected by
this and other courts.

     The Court also notes that petitioner was previously before
us with respect to his 1999 taxable year, at which time a penalty
under section 6673 in the amount of $500 was imposed, and the
decision was affirmed on appeal. Nitschke v. Commissioner, 76
Fed. Appx. 137 (9th Cir. 2003), affg. an Oral Opinion of this
Court; see also Nitschke v. United States, 92 Fed. Appx. 529 (9th
Cir. 2004) (sustaining collection action regarding a $500
frivolous return penalty imposed for 1999).

     Hence, although petitioner was well aware of the
ramifications under section 6673 of pursuing frivolous actions,
he failed in his various filings even to address respondent’s
request for such a penalty in this case and instead continued to
advance patently rejected arguments.   The Court concludes that a
penalty of $2,500 should be awarded to the United States in this
case. Thus, premises considered, it is

     ORDERED that the order to show cause dated January 11, 2005,
is hereby made absolute. It is further

     ORDERED that petitioner’s motion to dismiss for lack of
jurisdiction filed December 7, 2004, is denied. It is further

     ORDERED that respondent’s motion to dismiss for lack of
prosecution filed December 8, 2004, is granted. It is further

     ORDERED that so much of respondent’s document filed
January 21, 2005, as requests to impose a penalty under section
6673 is granted. It is further

     ORDERED and DECIDED that there are deficiencies in income
tax due from petitioner and additions to tax due under sections
6651(a)(1) and 6654 for the taxable years and in the amounts as
follows:

                                     Additions to Tax
     Year      Deficiency     Sec. 6651(a)(1)     Sec. 6654

     2000      $10,301.00        $3,811.37         $554.02
     2001        6,707.70         1,949.49          265.44
                             - 17 -

It is further

     ORDERED AND DECIDED: That damages are due from petitioner
which are hereby awarded to the United States under section 6673,
in the amount of $2,500.




                              (signed) Robert A. Wherry, Jr.

                                   Robert A. Wherry, Jr.
                                          Judge




ENTERED:   March 15, 2005
