                        T.C. Memo. 2006-80



                      UNITED STATES TAX COURT



                 SCOTT RAY HOLMES, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3423-05.                Filed April 19, 2006.



     Scott Ray Holmes, pro se.

     Beth A. Nunnink, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COLVIN, Judge:   Respondent determined a deficiency in

petitioner’s income tax of $13,676.50 for 2002, and additions to

tax of $1,997.80 for failure to file under section 6651(a)(1)1

     1
        Section references are to the Internal Revenue Code as
amended and in effect in 2002. Rule references are to the Tax
Court Rules of Practice and Procedure.

                                                     (continued...)
                                - 2 -

and $239.28 for failure to pay estimated tax under section 6654.

      The issues for decision are:

      1.   Whether petitioner is liable for income tax in the

amount determined by respondent.     We hold that he is.

      2.   Whether petitioner is liable for additions to tax for

failure to file under section 6651(a)(1) and for failure to pay

estimated tax under section 6654.     We hold that he is.

      3.   Whether petitioner is liable for the addition to tax for

failure to pay under section 6651(a)(2).     We hold that he is not.

      4.   Whether petitioner is liable for a penalty under section

6673 for instituting proceedings primarily for delay and for

maintaining frivolous or groundless positions.     We hold that he

is.

                          FINDINGS OF FACT

      Some of the facts have been stipulated and are so found.

A.    Petitioner

      Petitioner resided in Texarkana, Texas, when he filed the

petition.    In 2002, he received wages of $70,332 from Cooper Tire

& Rubber Co., interest of $28 and savings bond income of $1 from

Texar Federal Credit Union, a distribution of $348 from GE


      1
      (...continued)
     Respondent stated in the explanation of income tax
examination changes attached to the notice of deficiency and
alleged in the answer that petitioner was liable for additions to
tax of $1,450.01 for failure to file under sec. 6651(a)(1) and
$547.78 for failure to pay tax under sec. 6651(a)(2) totaling
$1,997.79.
                                - 3 -

Capital Section 401k Asset Maintenance Plan, and a distribution

of $4,7992 from Cooper Tire & Rubber Cash Clear.

     Petitioner made no income tax or estimated tax payments for

2002.    Federal income tax was withheld from his income for 2002

in the amount of $7,232.    Petitioner did not file a Federal

income tax return for 2002.    He mailed a 32-page document

entitled “Notice of Affidavit Statement in Rebuttal to Internal

Revenue Code Section 6011 For Year Period Ending December 31,

2002” to respondent’s national office on May 8, 2003.    In it,

petitioner argued that he was not subject to tax for 2002

because, inter alia:    (1) Filing Federal income tax returns is

voluntary; (2) paying income tax based on a Form 1040, U.S.

Individual Income Tax Return, is an illegal kickback; (3) taxable

income applies only to sources from international or foreign

commerce; (4) petitioner’s domicile is outside the United States

because he lives in the “compact state of Texas state republic”;

(5) he is not a “United States Person”, domestic partnership,

domestic corporation, estate or trust; (6) the term “employee”

applies only to those working for public service; and (7) his

wages are not included in gross income.    Petitioner attached

about a hundred pages of exhibits to the 32-page document,

including purported copyright notices published in a newspaper of



     2
        The parties agree that $767 of the $4,799 distribution is
taxable if petitioner is subject to Federal income tax.
                                 - 4 -

general circulation, UCC financing statements, and 58 pages of

tax protester information by Larken Rose.3

     Respondent determined that petitioner had a $13,676.50

deficiency and had $7,232 tax withheld, leaving a balance due of

$6,444.50.

     During informal discovery, respondent wrote petitioner and

stated, inter alia, that petitioner’s arguments were frivolous

and that he might be subject to a penalty under section 6673.

Respondent again warned petitioner about his potential liability

for a penalty under section 6673 in the amendment to answer and

in respondent’s pretrial memorandum.

                                OPINION

A.   Whether Petitioner Is Liable for Income Tax for 2002 in the
     Amount Determined by Respondent

     Petitioner contends that he is not liable for income tax for

2002 in the amount determined by respondent.   We disagree.

     Petitioner stipulated that he received wages, interest,

savings bond income, and distributions in 2002 as determined by

respondent.   However, he continues to contend that those items

are not taxable for reasons provided in the statement that he

filed in lieu of a Form 1040.    Petitioner’s arguments are

frivolous, and we perceive no need to refute them with somber


     3
        Larken Rose was sentenced to 15 months in prison for not
filing returns and advancing frivolous arguments. See United
States v. Rose, 2005 WL 3216739 (E.D. Pa., Nov. 28, 2005).
                                - 5 -

reasoning and copious citation of precedent; to do so might

suggest that these arguments have some colorable merit.      See

Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984).        We

conclude that petitioner is liable for income tax for 2002 in the

amount determined by respondent.

B.     Whether Petitioner Is Liable for Additions to Tax for 2002

       Section 7491(c) places on the Commissioner the burden of

producing evidence that it is appropriate to impose a particular

addition to tax or penalty.    To meet that burden, the

Commissioner need not produce evidence relating to defenses such

as reasonable cause or substantial authority.    Higbee v.

Commissioner, 116 T.C. 438, 446 (2001); H. Conf. Rept. 105-599,

at 241 (1998), 1998-3 C.B. 747, 995.

       Respondent has met the burden of production with respect to

the additions to tax for failure to file a return under section

6651(a)(1) for 2002 by showing that petitioner did not file a

return for that year and for failure to pay estimated tax under

section 6654 by showing that petitioner did not pay estimated

tax.    However, respondent did not do so with respect to section

6651(a)(2).

       Section 6651(a)(2) provides for an addition to tax in

instances where there is a failure to pay the amount of tax shown

on a return.    The addition to tax under section 6651(a)(2)

applies only when an amount of tax is shown on a return.       Cabirac
                                - 6 -

v. Commissioner, 120 T.C. 163, 170 (2003).   Petitioner did not

file a valid return for 2002.   Section 6651(g)(2) provides that a

return prepared by the Secretary under section 6020(b) is the

return filed by the taxpayer for purposes of determining an

addition to tax under section 6651(a)(2).    Id.

     Respondent alleged in the pretrial memorandum that

respondent had prepared a substitute for petitioner’s 2002 income

tax return and a Form 13496, IRC Section 6020(b) Certification,

and attached to the Form 13496 transcripts of account for

petitioner’s 2002 tax year, Form 4549, Income Tax Examination

Changes, and Form 886-A, Explanation of Items.     However, those

documents are not in the record, and respondent produced no

evidence showing that it is appropriate to impose the addition to

tax for failure to pay tax shown on petitioner’s return for the

year in issue.   Thus, respondent has not met the burden of

production under section 7491(c) with respect to the addition to

tax for failure to pay under section 6651(a)(2).

     Petitioner made no argument that he was not liable for the

additions to tax for 2002 for failure to file under section

6651(a)(1), or failure to pay estimated tax under section 6654.

     We conclude that petitioner is liable for the additions to

tax for 2002 for failure to file under section 6651(a)(1) and for

failure to pay estimated tax under section 6654.
                                 - 7 -

C.   Whether Petitioner Is Liable for a Penalty Under Section
     6673

     In the amendment to answer and at trial, respondent contends

that petitioner is liable for a penalty under section 6673 on the

grounds that petitioner made only frivolous arguments and

instituted these proceedings primarily for delay.

     The Court may impose a penalty of up to $25,000 if the

taxpayer’s position or positions are frivolous or groundless or

the proceedings were instituted primarily for delay.      Sec.

6673(a)(1)(B).   A taxpayer’s position is frivolous or groundless

if it is contrary to established law and unsupported by a

reasoned, colorable argument for change in the law.       Coleman v.

Commissioner, 791 F.2d 68, 71 (7th Cir. 1986); Gilligan v.

Commissioner, T.C. Memo. 2004-194.       Petitioner took frivolous

positions before and during trial despite ample warnings before

trial from respondent.   We conclude that petitioner instituted

and maintained these proceedings primarily for delay.      We find

that petitioner is liable for a penalty under section 6673 in the

amount of $2,000.

     To reflect the foregoing,


                                                  Decision will be

                                             entered under Rule 155.
