                        T.C. Memo. 1996-79



                      UNITED STATES TAX COURT



                 FREDERICK M. FOX, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 19361-89, 16560-90.     Filed February 26, 1996.



     Frederick M. Fox, pro se.

     Alice M. Harbutte and Stuart Spielman, for respondent.



                        MEMORANDUM OPINION



     DAWSON, Judge:   These cases were assigned to Chief Special

Trial Judge Peter J. Panuthos, pursuant to the provisions of

section 7443A(b)(4) and Rules 180, 181, and 183.1   The Court


     1
        Section references are to the Internal Revenue Code as
amended. Rule references are to the Tax Court Rules of Practice
and Procedure.
                                           - 2 -

agrees with and adopts the opinion of the Chief Special Trial

Judge, which is set forth below.

                      OPINION OF THE SPECIAL TRIAL JUDGE

       PANUTHOS, Chief Special Trial Judge:                    These related cases

are before the Court on the parties' cross-motions for summary

judgment.         As explained in more detail below, we will grant

respondent's motions for summary judgment.

Background

       On May 12, 1989, respondent mailed a statutory notice of

deficiency to Frederick M. Fox (petitioner) and his former

spouse, Michelle B. Fox, determining deficiencies in and

additions to their Federal income taxes for the taxable years

1982, 1983, 1984, and 1985.               On that same date, respondent mailed

a separate statutory notice of deficiency to petitioner

determining a deficiency in and additions to his Federal income

tax for the taxable year 1986.                Respondent's determinations are

summarized in the following table:
                                                                        Additions to Tax

                       Sec.         Sec.           Sec.          Sec.           Sec.              Sec.
Year   Deficiency   6653(a)(1)   6653(a)(2)     6653(b)(1)   6653(b)(1)(A)   6653(b)(2)      6653(b)(1)(B)

1982    $775           $39       50% of the        ---          ---            ---               ---         -
                                 interest due
                                 on $775

1983     10,864        ---          ---          $5,432          ---         50% of the           ---
                                                                              interest due
                                                                              on $10,864

1984     19,376        ---          ---           9,688           ---         50% of the           ---
                                                                              interest due
                                                                              on $19,376

1985     25,784        ---          ---           12,892          ---         50% of the           ---
                                     - 3 -
                                                           interest due
                                                           on $25,784

1986       28,196   ---        ---     ---       $21,147        ---        50% of the
                                                                          interest due
                                                                          on $28,196

       Respondent further determined that part or all of the

underpayments of petitioner's taxes for the taxable years 1982,

1985, and 1986 constitute substantial underpayments attributable

to tax-motivated transactions within the meaning of section

6621(c).

       Petitioner and Michelle B. Fox filed a timely joint petition

for redetermination with the Court on August 7, 1989, assigned

docket No. 19361-89, disputing respondent's determinations for

the taxable years 1982 through 1986.2

       On April 26, 1990, respondent mailed a statutory notice of

deficiency to petitioner determining a deficiency in and

additions to his Federal income tax for the taxable year 1987 as

follows:

                                       Additions to Tax
                           Sec.         Sec.          Sec.             Sec.
Deficiency                6653(a)      6653(b)       6654(a)          6659(a)

 $32,226                  $1,611       $24,170         $1,741         $1,133


Petitioner filed a timely petition for redetermination with the

Court on July 23, 1990, assigned docket No. 16560-90, disputing

respondent's determinations for the taxable year 1987.           At the


       2
        By order dated Apr. 1, 1994, Michelle B. Fox was severed
from docket No. 19361-89, and assigned docket No. 5450-94 in the
name of Michelle B. Fox, a.k.a. Michelle B. Serre.
                                 - 4 -

time that he filed his petitions, petitioner resided at San Juan

Capistrano, California.

     In the answer to the petition in docket No. 16560-90, which

respondent filed on September 21, 1990, it is asserted that the

statutory notice of deficiency incorrectly identified the

additions to tax for negligence and fraud.      The correct

references are as follows:

        Sec.             Sec.                Sec.            Sec.
    6653(a)(1)(A)   6653(a)(1)(B)        6653(b)(1)(A)   6653(b)(1)(B)
                             1                                2
         $1,611                            $24,170
     1
        50 percent of the interest due on the portion of the
underpayment due to negligence or intentional disregard of rules
and regulations.
     2
        50 percent of the interest due on that portion of the
underpayment due to fraud.

The answer further asserts that the only portion of the

underpayment due to fraud is that portion relating to unreported

W-2 wages of $135,618.    The remaining portion of the underpayment

is due to negligence.    In the alternative, respondent has

asserted that if the Court does not find that the portion of the

underpayment from the unreported wages is attributable to fraud,

then it is attributable to negligence or intentional disregard of

rules and regulations.

     The deficiencies and additions to tax set forth above are

based on a number of adjustments, the most substantial of which

is respondent's determination that petitioner failed to report
                               - 5 -

the wages that he earned as a pilot for American Airlines during

the taxable years 1983 through 1987.

     Respondent's answers in these cases include specific

assertions that petitioner failed to report wage income from

American Airlines and that he filed false Forms W-4 with American

Airlines claiming to be exempt from income tax withholding with

the fraudulent intent to evade tax.

     Petitioner filed replies to respondent's answers alleging in

pertinent part that:   (1) He is not a "taxpayer" but rather is a

"sovereign citizen and resident of the Republic of the State of

California"; (2) his wages from American Airlines do not

constitute taxable income; and (3) Form W-4 does not apply to him

on the ground that he is not a taxpayer.3

     Subsequent to the filing of petitioner's replies, respondent

filed motions for partial summary judgment that petitioner is

liable for tax deficiencies attributable to his failure to report

the wages that he received from American Airlines for the taxable

years 1983 through 1987.   Petitioner filed oppositions to

respondent's motions again asserting that he is a nonresident


     3
        Petitioner made similar tax protester type arguments in
separate proceedings before this Court concerning his liability
for the 1980 and 1988 taxable years. In response, the Court, on
its own motions, awarded damages to the United States in the
respective amounts of $5,000 and $2,000 pursuant to sec. 6673(a).
See Fox v. Commissioner, T.C. Memo. 1993-277, affd. without
published opinion 69 F.3d 543 (9th Cir. 1995) (1988 tax year);
Fox v. Commissioner, T.C. Memo. 1989-232, affd. without published
opinion 943 F.2d 55 (9th Cir. 1991) (1980 tax year).
                               - 6 -

alien and is not subject to the Federal income tax.   Following a

hearing on the matter, we granted respondent's motions for

partial summary judgment.   Fox v. Commissioner, T.C. Memo. 1993-

37.

      As previously indicated, these cases are now before the

Court on the parties' cross-motions for summary judgment.

Respondent seeks judgments in her favor with respect to all

remaining issues.4   The issues remaining in dispute are:   (1)

Whether petitioner failed to report interest and dividend income

on his 1983, 1984, and 1985 tax returns; (2) whether petitioner

is entitled to a loss of $3,880 reported on Schedule C attached

to his 1983 tax return; (3) whether petitioner is entitled to a

loss in the amount of $2,410 claimed on his 1986 tax return; (4)

whether petitioner is liable for additions to tax pursuant to

section 6661 (substantial understatement of liability) for the

taxable years 1983 through 1987; and (5) whether petitioner is

      4
        For the sake of completeness, we note that by order dated
Dec. 6, 1995, we granted respondent's motion to dismiss for lack
of jurisdiction and to strike with respect to the sec. 6654
addition to tax, filed in docket No. 16560-90. In addition,
respondent conceded (by way of stipulation) that petitioner is
entitled to the full amount of losses reported on his returns
with respect to his investment in Coram Taxvest Windfarms for the
taxable years 1985, 1986, and 1987. Respondent also conceded
that petitioner is not liable for any additions to tax with
respect to his investment in Coram Taxvest Windfarms for the
taxable years 1985, 1986, and 1987, or for the addition to tax
under sec. 6653(a) for the taxable year 1982. Although not
mentioned in the stipulations regarding petitioner's investment
in Coram Taxvest Windfarms, respondent likewise concedes that
petitioner is not liable for increased interest pursuant to
section 6621(c) for the taxable years 1982, 1985, and 1986.
                               - 7 -

liable for additions to tax for fraud for the taxable years 1983

through 1987.   Respondent asserts that she is entitled to summary

judgment with respect to these issues.

     Petitioner responded to respondent's motions for summary

judgment by filing his own motions for summary judgment.

Petitioner's motions are based on the same frivolous arguments

set forth in his replies to respondent's answers.

    A hearing was held on the pending motions in Washington,

D.C., on December 6, 1995.   Counsel for respondent appeared at

the hearing and presented argument on the pending motions.

Although petitioner did not appear at the hearing, he filed

written statements with the Court pursuant to Rule 50(c).5

Discussion

     Summary judgment is intended to expedite litigation and

avoid unnecessary and expensive trials.    Florida Peach Corp. v.

Commissioner, 90 T.C. 678, 681 (1988).    Summary judgment may be

granted with respect to all or any part of the legal issues in

controversy--

     if the pleadings, answers to interrogatories,
     depositions, admissions, and any other acceptable
     materials, together with the affidavits, if any, show
     that there is no genuine issue as to any material fact
     and that a decision may be rendered as a matter of law.
     * * * [Rule 121(b).]



     5
        Petitioner's Rule 50(c) statements consist of the same
tax protestor arguments that he has relied upon throughout these
proceedings.
                               - 8 -

Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd.

17 F.3d 965 (7th Cir. 1994); Zaentz v. Commissioner, 90 T.C. 753,

754 (1988); Naftel v. Commissioner, 85 T.C. 527, 529 (1985).    The

moving party bears the burden of proving that there is no genuine

issue of material fact, and factual inferences will be read in a

manner most favorable to the party opposing summary judgment.

Dahlstrom v. Commissioner, 85 T.C. 812, 821 (1985); Jacklin v.

Commissioner, 79 T.C. 340, 344 (1982).   However, Rule 121(d)

states:

     When a motion for summary judgment is made and
     supported as provided in this Rule, an adverse party
     may not rest upon the mere allegations or denials of
     such party's pleading, but such party's response, by
     affidavits or as otherwise provided in this Rule, must
     set forth specific facts showing that there is a
     genuine issue for trial. If the adverse party does not
     so respond, then a decision, if appropriate, may be
     entered against such party.

See Parkinson v. Commissioner, 647 F.2d 875, 876 (9th Cir. 1981),

affg. per curiam T.C. Memo. 1979-319; King v. Commissioner, 87

T.C. 1213, 1217 (1986); Marshall v. Commissioner, 85 T.C. 267,

271 (1985).

Petitioner's Motions for Summary Judgment

     Petitioner's motions for summary judgment are founded upon

tax protester type arguments with respect to the deficiencies and

additions to tax determined by respondent.   All of the arguments

raised by petitioner have been uniformly rejected by this and

other courts.   See Abrams v. Commissioner, 82 T.C. 403 (1984);

Rowlee v. Commissioner, 80 T.C. 1111 (1983); McCoy v.
                               - 9 -

Commissioner, 76 T.C. 1027 (1981), affd. 696 F.2d 1234 (9th Cir.

1983); see also Fox v. Commissioner, T.C. Memo. 1993-37; Fox v.

Commissioner, T.C. Memo. 1989-232, affd. without published

opinion 943 F.2d 55 (9th Cir. 1991).   Aside from the Coram

Taxvest Windfarms issues that the parties settled, petitioner has

failed to allege any triable issue of fact.

     We see no need to catalog petitioner's contentions and

painstakingly address them.   We have dealt with many of them

before.   E.g., Nieman v. Commissioner, T.C. Memo. 1993-533;

Solomon v. Commissioner, T.C. Memo. 1993-509, affd. without

published opinion 42 F.3d 1391 (7th Cir. 1994).   Further, as the

Court of Appeals for the Fifth Circuit has remarked:     "We

perceive no need to 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).     Suffice it to

say that petitioner's motions for summary judgment are wholly

without merit and will be denied.

Respondent's Motions for Summary Judgment

     As previously mentioned, the first four issues on which

respondent seeks summary judgment are that petitioner (1) failed

to report interest and dividend income on his 1983, 1984, and

1985 tax returns, (2) is not entitled to a loss of $3,880

reported on Schedule C attached to his 1983 tax return, (3) is

not entitled to a loss in the amount of $2,410 claimed on his
                              - 10 -

1986 tax return, and (4) is liable for additions to tax pursuant

to section 6661 (substantial understatement of liability) for the

taxable years 1983 through 1987.

     Although respondent, as the moving party, bears the burden

of proving that there are no material facts in dispute with

respect to these issues, petitioner is not entitled to rest upon

a mere denial of the allegations contained in respondent's

motions, but instead petitioner must set forth specific facts

showing that there is a genuine issue for trial.   Rule 121(d).

Petitioner's unsupported denials of the allegations contained in

respondent's motions for summary judgment are grounded solely on

discredited tax protest arguments and are insufficient to provide

a basis for denying respondent's motions.   Parkinson v.

Commissioner, 647 F.2d 875, 876 (9th Cir. 1981), affg. per curiam

T.C. Memo. 1979-319.   Consequently, we will grant respondent's

motions for summary judgment in respect of the adjustments

described above.

     Respondent also seeks summary judgment that petitioner is

liable for additions to tax for fraud for the years 1983 through

1987.   The addition to tax in the case of fraud is a civil

sanction provided primarily for the protection of the revenue and

to reimburse the Government for the heavy expense of

investigation and the loss resulting from the taxpayer's fraud.

Helvering v. Mitchell, 303 U.S. 391, 401 (1938).
                                - 11 -

     Respondent has the burden of proving, by clear and

convincing evidence, that some part of an underpayment for each

year was due to fraud.6   Sec. 7454(a); Rule 142(b).   Respondent's

burden with respect to fraudulent intent is met if it is shown

that the taxpayer intended to evade taxes known to be owing by

conduct intended to conceal, mislead, or otherwise prevent the

collection of such taxes.   Stoltzfus v. United States, 398 F.2d

1002, 1004 (3d Cir. 1968); Webb v. Commissioner, 394 F.2d 366,

377 (5th Cir. 1968), affg. T.C. Memo. 1966-81.    Fraud is not

presumed.   Beaver v. Commissioner, 55 T.C. 85, 92 (1970).

However, fraud may be proved by circumstantial evidence because

direct proof of the taxpayer's intent is rarely available.

Stephenson v. Commissioner, 79 T.C. 995, 1005-1006 (1982), affd.

748 F.2d 331 (6th Cir. 1984).    The taxpayer's entire course of

conduct may establish the requisite fraudulent intent.    Stone v.

Commissioner, 56 T.C. 213, 223-224 (1971); Otsuki v.

Commissioner, 53 T.C. 96, 105-106 (1969).

     Fraudulent intent may be inferred from various kinds of

circumstantial evidence or "badges of fraud", including


     6
        For the taxable years 1983, 1984, and 1985 respondent
must prove the specific portion of the underpayment of tax
attributable to fraud for purposes of establishing the addition
to tax under sec. 6653(b)(2). However, for the taxable years
1986 and 1987, sec. 6653(b)(2) provides that, if respondent
establishes that any portion of an underpayment is attributable
to fraud, the entire underpayment shall be treated as
attributable to fraud unless the taxpayer shows that some portion
of the underpayment is not attributable to fraud.
                               - 12 -

understatement of income, inadequate records, or implausible or

inconsistent explanations of behavior.    Bradford v. Commissioner,

796 F.2d 303, 307 (9th Cir. 1986), affg. T.C. Memo. 1984-601.

     We previously granted respondent's motions for partial

summary judgment that petitioner is liable for income tax

deficiencies attributable to his failure to report the wages that

he received from American Airlines for the taxable years 1983

through 1987.    Fox v. Commissioner, T.C. Memo. 1993-37.   It is

undisputed that petitioner filed false Forms W-4 with American

Airlines during the years in issue to avoid the withholding of

Federal income taxes from his wages.    See Miller v. Commissioner,

94 T.C. 316, 335-336 (1990); Castillo v. Commissioner, 84 T.C.

405, 410 (1985).   His failure to report wages and his filing of

false Forms W-4, when considered in conjunction with the

frivolous arguments that petitioner has relied upon throughout

these proceedings, amount to clear and convincing evidence of

fraud justifying the addition to tax under section 6653(b).

Rowlee v. Commissioner, 80 T.C. at 1125-1126; Habersham-Bey v.

Commissioner, 78 T.C. 304, 313-314 (1982); Granado v.

Commissioner, T.C. Memo. 1985-237, affd. 792 F.2d 91 (7th Cir.

1986).   In short, we are satisfied that petitioner's entire

course of conduct provides clear and convincing evidence of

petitioner's fraudulent intent, and, therefore, we will grant

respondent's motions for summary judgment as to the additions to

tax for fraud.
                               - 13 -

     As a final matter, we raise on our motion the question of

whether we should impose a penalty against petitioner under

section 6673(a)(1).   As relevant herein, 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 whenever it

appears that 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.

     A petition to the Tax Court is frivolous "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).   Aside from the issues which were

settled concerning petitioner's investment in Coram Taxvest

Windfarms, petitioner's position, as articulated in his

pleadings, motions for summary judgment, and Rule 50(c)

statements, consists solely of tax protester rhetoric and

legalistic gibberish.   Based on well-established law, we find

that petitioner's position is frivolous and groundless.

     We are also satisfied that, following settlement of the

Coram Taxvest Windfarms issues, petitioner maintained these

proceedings primarily for purposes of delay.   We flatly rejected

petitioner's tax protester arguments earlier in these proceedings

when we granted respondent's motions for partial summary

judgment.   Fox v. Commissioner, T.C. Memo. 1993-37.   In this

light, it is clear that petitioner filed his motions for summary
                              - 14 -

judgment with the willful intent to protract these proceedings

and that petitioner regards these cases as a means to protest the

tax laws of this country and nothing more.   Having to deal with

this matter wasted the Court's time, as well as respondent's.

     Petitioner is no stranger to this Court and is aware that

section 6673(a)(1) is available to be used against him.   In fact,

the Court imposed a penalty upon petitioner pursuant to section

6673(a)(1) in Fox v. Commissioner, T.C. Memo. 1993-277, affd.

without published opinion 69 F.3d 543 (9th Cir. 1995), and in Fox

v. Commissioner, T.C. Memo. 1989-232.   Regrettably, petitioner

has failed to grasp that his tactics will not be tolerated in

this Court.   Considering all of the circumstances, we will

exercise our discretion under section 6673(a)(1) and require

petitioner to pay a penalty to the United States in the amount of

$5,000 in each of the two dockets herein.    Coleman v.

Commissioner, supra at 71-72; Crain v. Commissioner, 737 F.2d at

1417-1418; Abrams v. Commissioner, 82 T.C. 403, 408-411 (1984).7




     7
        See also Granado v. Commissioner, T.C. Memo. 1985-237,
affd. 792 F.2d 91, 94 (7th Cir. 1986), where the Court of Appeals
held that the raising of one nonfrivolous argument among many
frivolous arguments was not enough to negate the imposition of
the penalty.
                        - 15 -

To reflect the foregoing,

                                   An order denying

                            petitioner's motions for summary

                            judgment, granting respondent's

                            motions for summary judgment,

                            and imposing a penalty upon

                            petitioner pursuant to section

                            6673(a)(1) will be issued in

                            each docket; and decisions

                            will be entered pursuant to Rule

                            155.
