                               T.C. Memo. 2012-248



                         UNITED STATES TAX COURT



                  LISA WEBB LEYSHON, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 14071-11.                           Filed August 28, 2012.



      Lisa Webb Leyshon, pro se.

      Kimberly B. Tyson and Elizabeth M. Bux, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      GOEKE, Judge: This case is before the Court on a petition for

redetermination of a deficiency and additions to tax that respondent determined for

petitioner’s 2008 tax year. After concessions, the issues for decision are as follows:
                                           -2-

[*2] (1) whether petitioner failed to report wages of $20,721.22,

       (2) whether petitioner failed to report a retirement distribution of $6,600, and

       (3) whether petitioner is liable for an addition to tax pursuant to section

6651(a)(1)1 for failure to timely file a tax return.

       We hold that petitioner failed to report both the wages and the retirement

distribution at issue. We further hold that petitioner is liable for the section

6651(a)(1) addition to tax.

       Respondent has also moved that the Court impose a penalty pursuant to

section 6673 for petitioner’s purported frivolous or groundless litigation position.

We will deny respondent’s motion.

                                 FINDINGS OF FACT

       At the time the petition was filed, petitioner was a resident of North

Carolina.2


       1
       Unless otherwise indicated, all section references are to the Internal Revenue
Code in effect for the year in issue, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
       2
       Before trial, on March 27, 2012, respondent filed a motion to show cause
pursuant to Rule 91(f) to explain why the facts and evidence set forth in
respondent’s proposed stipulation of facts should not be accepted as established.
In an order to show cause dated March 28, 2012, we directed petitioner to respond

                                                                           (continued...)
                                        -3-

[*3] During petitioner’s taxable year 2008 she received aggregate wages of

$20,721 from Country Gourmet, Ltd. Petitioner also received a retirement plan

distribution of $6,600 from Merrill Lynch as custodian.

      Petitioner did not file a tax return for her 2008 taxable year. Respondent

prepared a substitute for return (SFR) on petitioner’s behalf for 2008 using

      2
        (...continued)
to respondent’s motion on or before April 18, 2012. On April 30, 2012, petitioner
filed the following lengthy and generally irrelevant documents with the Court: (1)
motion for court to take judicial notice of the Congressional Record; (2) motion for
court to take judicial notice of all holdings of the Supreme Court of the United
States and other courts; (3) motion for court to take judicial notice of all of the
Federal Register; and (4) opposition as to the Court’s order to show cause dated
March 28, 2012. We denied petitioner’s first three aforementioned motions and set
a hearing on our order to show cause for May 14, 2012.

      At the hearing petitioner failed to adduce any relevant evidence or facts and
refused to give any testimony under oath. We admonished petitioner that if she had
no additional facts to add, the record would be closed. Respondent further moved
for imposition of a penalty under sec. 6673. At the conclusion of the hearing, the
Court took the order to show cause and respondent’s motion for imposition of a
penalty under sec. 6673 under advisement.

       Following the hearing we directed respondent, in an order dated May 14,
2012, to serve on petitioner and to provide to this Court on or before June 27, 2012,
the exhibits listed in the proposed stipulation of facts. On June 25, 2012,
respondent provided to the Court the exhibits listed in his proposed stipulation of
facts and indicated that petitioner had received service of those documents as well.

       On July 9, 2012, the Court’s order to show cause was deemed absolute.
Petitioner was also ordered to submit any legal or factual arguments in support of
her position by July 18, 2012. On July 18, 2012, petitioner filed a response thereto,
submitting another document that referenced no relevant facts or law.
                                        -4-

[*4] information reported by the aforementioned third-party payers. See sec.

6020(b). On the basis of that SFR respondent issued to petitioner a notice of

deficiency. Attached to the notice of deficiency was Form 4549, Income Tax

Examination Changes, on which respondent indicated that petitioner had received

income and had had Federal income tax withheld as follows:

         Type of income             Amount            Income tax withheld

             Wages                  $20,721                    $252

             Retirement
              distribution             6,600                    -0-

               Total                  27,321                    252

Respondent also determined additions to tax pursuant to section 6651(a)(1) and

(2) of $621.68 and $290.12, respectively. Respondent later conceded the section

6651(a)(2) addition to tax.

                                     OPINION

I. Burden of Proof

      As a general rule, the Commissioner’s determination of a taxpayer’s liability

in the notice of deficiency is presumed correct, and the taxpayer bears the burden

of proving that the determination is improper. See Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933). On rare occasions this Court has recognized
                                         -5-

[*5] an exception to these rules in cases involving unreported income where the

Commissioner introduces no substantive evidence but relies solely on the

presumption of correctness. Jackson v. Commissioner, 73 T.C. 394, 401 (1979). In

such cases, if the taxpayers challenge the notice of deficiency on the ground that it is

arbitrary, then the determination is treated as a “naked” assessment and the

presumption of correctness does not attach.3 Id. However, this is a limited

exception, and it does not apply when the Commissioner has provided a minimal

evidentiary foundation. Petzoldt v. Commissioner, 92 T.C. 661, 687-688 (1989);

Fankhanel v. Commissioner, T.C. Memo. 1998-403, 1998 Tax Ct. Memo LEXIS

424, aff’d without published opinion, 205 F.3d 1333 (4th Cir. 2000).4


      3
        Additionally, if a taxpayer asserts a reasonable dispute with respect to any
item of income reported on an information return filed with the Secretary by a third
party and the taxpayer has fully cooperated with the Secretary, the Secretary shall
have the burden of producing reasonable and probative information concerning the
deficiency in addition to that information return. Sec. 6201(d). As discussed further
infra, petitioner has not asserted a “reasonable dispute” in this case, rendering the
aforementioned section inapplicable. See, e.g., Parker v. Commissioner, T.C.
Memo. 2012-66, 2012 Tax Ct. Memo LEXIS 62, at *8; Cook v. Commissioner,
T.C. Memo. 2010-137, 2010 Tax Ct. Memo LEXIS 173, at *8.
      4
        This exception to the presumption of correctness afforded to the
Commissioner’s determinations has been widely accepted among the Courts of
Appeals. See e.g., Blohm v. Commissioner, 994 F.2d 1542, 1549 (11th Cir. 1993),
aff’g T.C. Memo. 1991-636; Dodge v. Commissioner, 981 F.2d 350, 353 (8th Cir.
1992), aff’g in part, rev’g in part 96 T.C. 72 (1991); United States v. Walton, 909
F.2d 915, 919 (6th Cir. 1990); Ruth v. United States, 823 F.2d 1091, 1094 (7th Cir.
                                                                         (continued...)
                                          -6-

[*6] Once the Commissioner produces evidence linking the taxpayer with an

income-producing activity, the burden shifts to the taxpayer “to rebut the

presumption of correctness of respondent’s deficiency determination by establishing

by a preponderance of the evidence that the deficiency determination is arbitrary or

erroneous.” Petzoldt v. Commissioner, 92 T.C. at 689; see also Hardy v.

Commissioner, 181 F.3d 1002, 1004 (9th Cir. 1999), aff’g T.C. Memo. 1997-97.

      Respondent has introduced several relevant documents, including: (1) an

IRS Certificate of Official Record and Tax Return Transcript indicating that

petitioner did not file a tax return for 2008; (2) a copy of petitioner’s 2008

statutory notice of deficiency and corresponding Form 4549; (3) an IRS Certificate




      4
        (...continued)
1987); Llorente v. Commissioner, 649 F.2d 152, 156 (2d Cir. 1981), aff’g in part,
rev’g in part 74 T.C. 260 (1980); Weimerskirch v. Commissioner, 596 F.2d 358,
362 (9th Cir. 1979), rev’g 67 T.C. 672 (1977).

       However, the Court of Appeals for the Fourth Circuit, the court to which an
appeal in this case would lie, while recognizing the prerequisite evidentiary
foundation requirement for the Commissioner espoused in other circuits in
unreported income cases, has not had the occasion to expressly adopt or reject it.
See Williams v. Commissioner, 999 F.2d 760, 763-764 (4th Cir. 1993), aff’g T.C.
Memo. 1992-153. Accordingly, we will apply the rule we stated in Jackson v.
Commissioner, 73 T.C. 394, 401 (1979), which has been approved by the majority
of the Courts of Appeals. See Golsen v. Commissioner, 54 T.C. 742, 757 (1970),
aff’d, 445 F.2d 985 (10th Cir. 1971).
                                         -7-

[*7] of Official Record and Wage and Income Transcript for petitioner’s 2008

taxable year; (4) a 2008 Form W-2, Wage and Tax Statement, issued to petitioner

by Country Gourmet, Ltd., as well as authenticated pay stub records of Country

Gourmet, Ltd., for wages paid to petitioner in 2008; and (5) a 2008 Form 1099-R,

Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs,

Insurance Contracts, etc., issued to petitioner by Merrill Lynch as custodian. We

find that the submitted evidence clearly suffices to establish the requisite minimal

evidentiary foundation linking petitioner with the income-producing activities for

2008. Accordingly, petitioner bears the burden of proof. See, e.g., Banister v.

Commissioner, T.C. Memo. 2008-201, 2008 Tax Ct. Memo LEXIS 197, at *5

(holding that a notice of deficiency indicating that third-party payers paid the

taxpayer specific amounts in question satisfied the minimal evidentiary burden even

though direct evidence was not in the record), aff’d, 418 Fed. Appx. 637 (9th Cir.

2011).

II. Gross Income

         Section 61(a)(1) defines gross income as all income from whatever source

derived, including compensation for services, such as wages, salaries, and

bonuses. See also sec. 1.61-2(a)(1), Income Tax Regs. Gross income also

includes income from pensions. Sec. 61(a)(11). Respondent has established that
                                        -8-

[*8] petitioner was paid $20,721.22 in wages by Country Gourmet, Ltd., in 2008

and received a retirement plan distribution of $6,600 from Merrill Lynch, as

custodian, in the same year.

      Petitioner does not substantively refute these points but rather contends that

she was not given sufficient information concerning the procedures by which her

deficiency was determined. Further, she asserts that respondent is not authorized to

determine her tax liability. These “tax protester”5 arguments are without merit and

lack factual and legal foundation. “[W]e are not obligated to exhaustively review

and rebut petitioner’s misguided contentions.” See Sanders v. Commissioner, T.C.

Memo. 1997-452, 1997 Tax Ct. Memo LEXIS 536, at *13; see also Wnuck v.

Commissioner, 136 T.C. 498, 513 (2011) (“[L]itigants who present frivolous

arguments should not expect to see them answered in opinions of this Court.”). We

need not “refute these arguments with somber reasoning and copious citation of

precedent; to do so might suggest that these arguments have some colorable merit.”

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

sustain respondent’s deficiency determination.




      5
       Persons who make frivolous antitax arguments are often referred to as “tax
protesters”. Wnuck v. Commissioner, 136 T.C. 498, 502 n.2 (2011).
                                          -9-

[*9] III. Additions to Tax

      A. Burden of Proof

      Pursuant to section 7491(c), the Commissioner bears the initial burden of

producing sufficient evidence that it is appropriate to impose the additions to tax

under section 6651(a)(1). See also Higbee v. Commissioner, 116 T.C. 438, 446-

447 (2001). Where the Commissioner meets this evidentiary burden, the burden of

proof shifts to the taxpayer to show that the additions are improper. See id. at 447.

      B. Section 6651(a)(1)

      As a general rule, “any person made liable for any tax * * * shall make a

return or statement according to the forms and regulations prescribed by the

Secretary.” Sec. 6011(a). Section 6651(a)(1), in the case of a failure to file a return

on time, imposes an addition to tax of 5% of the tax required to be shown on the

return for each month or fraction thereof for which there is a failure to file, not to

exceed 25% in the aggregate. The penalty will not apply if it is shown that such

failure is due to reasonable cause and not due to willful neglect. Sec. 6651(a)(1).

      Petitioner did not timely file a tax return for 2008. Respondent has thus met

his burden of production. See Wheeler v. Commissioner, 127 T.C. 200, 207-208
                                          - 10 -

[*10] (2006), aff’d, 521 F.3d 1289 (10th Cir. 2008). Petitioner has not presented

any evidence that her failure to file was due to reasonable cause and not willful

neglect. Accordingly, we sustain the addition to tax under section 6651(a)(1).

IV. Sanctions

       Respondent has moved that the Court impose a penalty against petitioner

pursuant to section 6673. Section 6673(a)(1) authorizes the Tax Court to require a

taxpayer to pay to the United States a penalty not in excess of $25,000 when it

appears that proceedings have been instituted or maintained by the taxpayer

primarily for delay or that the taxpayer’s position in the proceeding is frivolous or

groundless. See also Burke v. Commissioner, 124 T.C. 189, 197 (2005).

       Petitioner’s arguments are manifestly frivolous. Indeed, petitioner submitted

several voluminous, irrelevant documents to the Court notwithstanding respondent’s

repeated efforts to apprise her of the legal futility of her assertions therein. At trial

this Court called to petitioner’s attention one such motion where a different person

was named as petitioner. When given the opportunity to reconcile this discrepancy

in Court, petitioner equivocated, indicating that her husband had drafted the

document in question.

       It appears that petitioner copied the substance of her documents from the

Internet and failed to change the offending names to her own. We have previously
                                         - 11 -

[*11] indicated that this “cut-and-paste” approach is of nugatory value and that

taxpayers should be forewarned of the consequences of pursuing such action. See

Wnuck v. Commissioner, 136 T.C. at 502-503 (“Frivolous anti-tax arguments are

often obviously downloaded from the Internet; and by cut-and-paste word

processing functions, these arguments are easily plunked into a party’s filing.

* * * For all a court can tell, the litigant may not even have carefully read the

arguments he submits.”).

      Nonetheless, it appears that this is petitioner’s first time in Federal court. In

the exercise of our discretion, we shall not impose a section 6673 penalty at this

time, but we sternly warn petitioner that we will likely impose this penalty if she

returns to this Court and makes similar arguments in the future.

V. Conclusion

      In accord with the aforementioned discussion, we will sustain respondent’s

determination of a deficiency and an addition to tax under section 6651(a)(1). We

will, however, deny respondent’s motion for penalty pursuant to section 6673.

      To reflect the foregoing,


                                                             An appropriate order and

                                                      decision will be entered.
