                          T.C. Memo. 2010-244



                        UNITED STATES TAX COURT



                   GREGORY Q. TEETERS, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



        Docket No. 24853-08.              Filed November 8, 2010.



        Gregory Q. Teeters, pro se.

        John M. Wall, for respondent.



                          MEMORANDUM OPINION


     HALPERN, Judge:     Respondent determined deficiencies in, and

additions to, petitioner’s Federal income tax for 2002, 2003, and

2005.     Unless otherwise stated, section references are to the

Internal Revenue Code in effect for the years in issue.      We round

all dollar amounts to the nearest dollar.       The amounts respondent

determined are as follows:
                               - 2 -

                                         Additions to Tax
                               Sec.            Sec.         Sec.
    Year      Deficiency    6651(a)(2)         6654       6651(f)

    2002        $6,100        $1,525          $204        $4,423
    2003        10,140         2,484           262         7,352
    2005        12,071         1,161           360         6,731

     At trial, petitioner conceded the deficiencies (the result

of unreported income) and the additions to tax under sections

6651(a)(2) and 6654.   (In section I of this report, we shall

discuss the effect of petitioner’s denial on brief that he had

any “unreported income”.)   We need decide only whether petitioner

is liable for the additions to tax under section 6651(f) for the

fraudulent failure to file tax returns for the years in issue.

We find that he is liable for those additions.1

                            Background

     Some facts are stipulated and are so found.     The three

stipulations of facts, with accompanying exhibits, are

incorporated herein by this reference.     When he filed the

petition, petitioner lived in California.

     In all 3 years in issue, petitioner worked for Golden Gate

Bridge Highway and Transportation District (Golden Gate).      In

2002, he also worked for MV Transportation, Inc. (MV

Transportation), and Urban Park Concessionaires (Urban Park).



     1
      In the alternative, respondent argues that petitioner is
liable for additions to tax under sec. 6651(a) for failure to
file tax returns. Because we find petitioner liable for the
additions under sec. 6651(f), we need not address that issue.
                                - 3 -

2002

       Petitioner submitted Forms W-4, Employee’s Withholding

Allowance Certificate, to Golden Gate, MV Transportation, and

Urban Park reporting that he was exempt from withholding for 2002

because he expected to have no Federal tax liability for 2002 and

had a right to a refund of all Federal income tax withheld for

2001 because he had no Federal tax liability for 2001.     Golden

Gate issued petitioner a Form W-2, Wage and Tax Statement,

reporting that, for 2002, Golden Gate paid petitioner $38,317 and

did not withhold any Federal income tax from that amount.

Petitioner also received wages of $3,336 and $1,961 from MV

Transportation and Urban Park, respectively.

2003

       Petitioner submitted a Form W-4 to Golden Gate reporting

that he was exempt from withholding for 2003 because he expected

to have no Federal tax liability for 2003 and had a right to a

refund of all Federal income tax withheld for 2002 because he had

no Federal tax liability for 2002.      Golden Gate issued petitioner

a Form W-2 reporting that, for 2003, Golden Gate paid petitioner

$58,909 and did not withhold any Federal income tax from that

amount.
                                - 4 -

2005

       Petitioner submitted a Form W-4 to Golden Gate reporting

that he was exempt from withholding for 2005 because he expected

to have no Federal tax liability for 2005 and had a right to a

refund of all Federal income tax withheld for 2004 because he had

no Federal tax liability for 2004.      Golden Gate issued petitioner

a Form W-2 reporting that, for 2005, Golden Gate paid petitioner

$62,540 and withheld Federal income tax of $2,787 from that

amount.    Golden Gate withheld Federal income tax from

petitioner’s wages because, in the fall of 2005, respondent had

directed Golden Gate to disregard petitioner’s Forms W-4 and to

withhold at the highest rate.    In response, in October,

petitioner submitted to Golden Gate a “sworn affidavit” stating

that Golden Gate would “‘not be required to deduct and withhold

any tax’” from his wages if he provided Golden Gate with the

“certified statement contained in this affidavit.”     When Golden

Gate refused to stop withholding, petitioner submitted a new Form

W-4 signed and dated December 31, 2005, not reporting that he was

exempt but rather claiming 10 withholding allowances.      Petitioner

was not entitled to 10 allowances.

Petitioner’s Tax Returns

       In September 2005, respondent mailed petitioner two letters

requesting that petitioner file his 2002 and 2003 Federal income

tax returns.    On October 27, 2005, respondent received
                                - 5 -

petitioner’s Form 1040, U.S. Individual Income Tax Return, for

2002 signed and dated October 25, 2005 (the 2002 return).    On

that return, petitioner reported $34 of interest income, $154 of

taxable refunds,2 and zero wages.   That return also reported zero

Federal income tax withheld and zero total Federal income tax.

Petitioner attached to the 2002 return three Forms 4852,

Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R,

Distributions From Pensions, Annuities, Retirement or Profit-

Sharing Plans, IRAs, Insurance Contracts, etc., for Golden Gate,

MV Transportation, and Urban Park, each signed and dated October

25, 2005.    Those Forms 4852 all listed zero wages.   On each Form

4852, petitioner stated that, although he had requested a Form W-

2c, Statement of Corrected Income and Tax Amounts,

     the company refuses to issue forms correctly listing
     payments of ‘wages’ as defined in [sections] 3401(a)
     and 3121(a) for fear of IRS retaliation. The amounts
     listed as withheld on the [Form] W-2 it submitted are
     correct, however.

Respondent did not file the 2002 return and did not accept it as

a valid return.

     On November 17, 2005, respondent received petitioner’s Form

1040 for 2003 signed and dated November 15, 2005 (the 2003

return).    On that return, petitioner reported $103 of interest



     2
      Petitioner incorrectly reported dividend income as a
taxable refund. The mistake was most likely inadvertent: On
Form 1040 a taxpayer reports “Ordinary dividends” and “Taxable
refunds” on consecutive lines.
                                - 6 -

income, $306 of dividend income, $1,850 of unemployment

compensation, and zero wages.   That return also reported zero

Federal income tax withheld, zero total Federal income tax,

$4,507 of Social Security tax withheld, and a claimed refund of

$4,507.   Petitioner attached to the 2003 return a Form 4852 for

Golden Gate listing zero wages signed and dated November 15,

2005.   That Form 4852 had the same statement regarding “‘wages’”

as the Forms 4852 attached to the 2002 return.    Respondent did

not file the 2003 return and did not accept it as a valid return.

     On February 28, 2006, respondent mailed a letter to

petitioner regarding the 2002 and 2003 returns.    In part, that

letter stated:

          We have determined that the information you sent is
     frivolous and your position has no basis in law. * * *
     If you intend to persist in making such arguments, we
     encourage you to seek advice from a reputable tax
     practitioner or attorney.

On March 9, 2006, petitioner replied to respondent’s letter.

Petitioner’s letter stated:

          You do not claim that my Returns for 2002 and 2003
     are frivolous. You state that the information I sent
     is frivolous. I have no contradictory information in
     the above returns, which is my testimony, signed under
     penalties of perjury, and to the best of my knowledge
     and belief, is true, correct, and complete. * * *

          *      *       *        *      *        *        *

     * * * I did not claim that “income” is exempt from tax,
     nor that “wages” are not “income”. What I reported was
     that, as a private sector worker, some of my pay was
     not “wages” as defined in IRC Sec. 3401(a) and IRC Sec.
                               - 7 -

     3121(a). Also that I was not an “employee” as defined
     in IRC Sec. 3401(c).

     On May 4, 2006, respondent received petitioner’s Form 1040

for 2005 signed and dated April 15, 2006 (the 2005 return).    On

that return petitioner reported $538 of interest income, $2,400

of capital gain, and zero wages.   That return also reported zero

total Federal income tax, $2,787 of Federal income tax withheld,

$4,784 of Social Security tax withheld, and a claimed refund of

$7,572.   Petitioner attached to the 2005 return a Form 4852 for

Golden Gate listing zero wages signed and dated April 11, 2006.

That Form 4852 had the same statement regarding “‘wages’” as the

Forms 4852 attached to the 2002 and 2003 returns.   Respondent did

not file the 2005 return and did not accept it as a valid return.

     On January 22, 2007, respondent mailed a letter to

petitioner with respect to his 2005 return.   In substance, that

letter was identical to the letter respondent sent petitioner

regarding the 2002 and 2003 returns.   On January 27, 2007,

petitioner replied to respondent’s letter about his 2005 return.

The letter, titled “An Affidavit”, stated:

     From 1995 to 2007:

     I have not been an “employee” (as defined in 26 U.S.C.
     § 3401(c)) * * * who earned “wages” (as defined in 26
     U.S.C. § 3401(a)) that were paid to me by an “employer”
     (as defined in 26 U.S.C. § 3401(d)). I have not been
     in a “trade or business[”] (as defined in 26 U.S.C. §
     7701(a)(26)).

     I have not been in the “employment” (as defined in 26
     U.S.C. § 3121(b)) of an “American employer” (as defined
                                   - 8 -

       in 26 U.S.C. § 3121(h)) * * * [and have not] earned
       “wages” (as defined in 26 U.S.C. § 3121(a))
       [therefrom].

                                Discussion

I.    Petitioner’s Concession

       At trial, petitioner conceded the deficiencies and the

additions to tax under sections 6651(a)(2) and 6654 for all

years.      On brief, however, petitioner states that he “did not

concede that he had unreported income * * * in 2002, 2003, and

2005”.      Petitioner, however, cannot disavow his concession at

trial.      See Church of Scientology v. Commissioner, 83 T.C. 381,

524 (1984) (“[a] concession in open court * * * [is] the

equivalent of a stipulation”), affd. 823 F.2d 1310 (9th Cir.

1987).      Moreover, even if we allowed petitioner to disavow his

concession, he would still not prevail.        Nowhere does petitioner

argue about facts; nowhere does he deny that his employers paid

him for his services.       Rather, petitioner relies on legal

arguments to show that the money he received from his employers

did not constitute taxable income.         Because his arguments (which

we discuss below) are frivolous, petitioner would not prevail

even had he challenged the deficiencies.

II.    Fraudulent Failure To File

       A.    Introduction

       Section 6651(f) provides an addition to tax of up to 75

percent of the amount required to be shown as tax on an unfiled
                                  - 9 -

return if the failure to file the return was fraudulent.

Petitioner stipulated that he failed to file timely returns and

that the returns he did file were invalid.        Respondent bears the

burden of proving fraud, and he must carry that burden by clear

and convincing evidence.      See sec. 7454(a).   “Fraud is

established by proving that a taxpayer intended to evade tax

believed to be owing by conduct intended to conceal, mislead, or

otherwise prevent the collection of such tax.”        Clayton v.

Commissioner, 102 T.C. 632, 647 (1994).      We find that respondent

has carried his burden; therefore, petitioner is liable for the

section 6651(f) additions.

     B.   Evidence of Fraud

     When a taxpayer’s failure to file tax returns is predicated

on frivolous arguments and when the Commissioner has shown

substantial amounts of unreported income on which withholding has

been reduced or prevented by the submission of false Forms W-4,

we have repeatedly held that fraud has been established by clear

and convincing evidence.      See Clayton v. Commissioner, supra at

652-653 (the Court considers the same elements to determine the

fraudulent failure to file addition under section 6651(f) as the

Court did to determine the fraud penalty under former section

6653(b) (present section 6663)); Castillo v. Commissioner, 84

T.C. 405, 410 (1985) (determining fraud penalty under former sec.

6653(b)).
                                - 10 -

            1.   Failure To Report Substantial Income

       The record reflects that petitioner failed to report

substantial income--i.e., all his wages--during the years in

issue.    Indeed, petitioner does not deny that he failed to report

substantial remuneration for his services; he denies only that he

received income from wages.

            2.   Submission of False Forms W-4

       In all 3 years in issue, petitioner filed Forms W-4 claiming

that he was exempt from Federal income tax, and, in 2005,

petitioner filed a Form W-4 claiming 10 withholding allowances

when he knew he was not so entitled.     Notwithstanding

petitioner’s purported belief that he is exempt from tax, filing

false Forms W-4 is inexcusable.    See Rowlee v. Commissioner, 80

T.C. 1111, 1125 (1983).     Petitioner effectively conceded that the

Form W-4 claiming 10 withholding allowances was fraudulent; the

other Forms W-4 were fraudulent because petitioner relied on

frivolous arguments in claiming to be exempt from Federal income

tax.    See id. (filing “false certificates claiming an excessive

number of exemptions or claiming that the taxpayer is exempt from

income tax is evidence of fraud”).

            3.   Assertion of Frivolous Arguments

       To support his objection to the deficiencies and additions

to tax, petitioner relies predominantly on a single frivolous

legal argument; viz, that he did not receive wages under section
                               - 11 -

3401(a).    Petitioner is wrong.   The companies that issued him

Forms W-2 were his employers under section 3401(d) and he was

their employee under section 3401(c).     Thus, the remuneration

those companies paid him for his services was wages under section

3401(a).    Those provisions are clear on their face.   See, e.g.,

United States v. Latham, 754 F.2d 747, 750 (7th Cir. 1985) (the

argument that “under 26 U.S.C. § 3401(c) the category of

‘employee’ does not include privately employed wage earners is a

preposterous reading of the statute”).     Moreover, petitioner

received several letters from respondent explaining that his

position was frivolous and suggesting that he seek advice.       At

trial, although petitioner acknowledged that seeking advice would

have been reasonable, he conceded that he did not do so.

Instead, petitioner persisted in advancing the same frivolous

argument.    We find that petitioner did not have a good faith

misunderstanding of the law.    Petitioner timely filed Federal

income tax returns for 1990, 1991, 1992, 1993, 1994, 1995, 1997,

and 1998.    Petitioner knew of his legal duty and sought to avoid

it.   Petitioner has no defense to the fraud additions.    See

Niedringhaus v. Commissioner, 99 T.C. 202, 217-218 (1992).

      C.    Conclusion

      We find that respondent has established fraud for all the

years in issue by clear and convincing evidence.     Petitioner is
                               - 12 -

liable for the fraudulent failure to file addition under section

6651(f) for 2002, 2003, and 2005.

III.    Conclusion

       Petitioner is liable for the deficiencies and additions to

tax that respondent determined.


                                          Decision will be entered

                                     for respondent.
