                        T.C. Memo. 2009-65



                      UNITED STATES TAX COURT



                 THOMAS M. LANGSTON, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16671-05.             Filed March 25, 2009.



     Thomas M. Langston, pro se.

     Lauren B. Epstein, for respondent.



                        MEMORANDUM OPINION

     SWIFT, Judge:   This matter is before us under Rule 121 on

respondent’s motion for summary judgment with respect to

respondent’s determination of deficiencies and fraud penalties in

petitioner’s 1994, 1995, and 1996 Federal income taxes, as

follows:
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                                        Fraud Penalty
                 Year    Deficiency       Sec. 6663
                 1994      $1,960          $1,470
                 1995      12,206           9,155
                 1996      39,556          29,667


     Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the years in issue, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.


                           Background

     Under Rule 91(f)(3), many of the facts have been deemed

stipulated and are so found.1

     At the time the petition was filed, petitioner was a

resident of Wesley Chapel, Florida.

     In 1994, 1995, and 1996 petitioner received zero or only

nominal income and paid zero or only nominal Federal income taxes.

However, for those years petitioner filed with respondent Federal



     1
        On Feb. 20, 2007, respondent filed a motion to show cause
why proposed facts in evidence should not be accepted as
established (Rule 91(f) motion). On Feb. 23, 2007, the Court
issued an order granting respondent’s Rule 91(f) motion and
directing petitioner to file a response to the motion by Mar. 15,
2007. The Feb. 23, 2007, order also explained that petitioner’s
failure to respond to any matter set forth in respondent’s Rule
91(f) motion, including the proposed stipulation of facts, would
result in such matters being deemed stipulated. Petitioner
failed to respond to respondent’s Rule 91(f) motion, and, on Apr.
5, 2007, the Court made absolute its Feb. 23, 2007, order, and
the facts set forth in respondent’s proposed stipulation of facts
were deemed stipulated for purposes of trial and opinion.
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income tax returns and erroneously reported thereon substantial

income and Federal tax withholdings (Tax W/Holdings), and

petitioner claimed tax refunds for reported overpayments, as

follows:


                        1994                  1995                   1996
                  Received Reported     Received Reported      Received Reported

Income                 $0   $17,402           $171   $66,231   $4,389   $129,132
Tax liability           0         0              0     6,814        0     15,805
Tax w/holdings          0     1,960              3    19,023      173     55,534
Claimed refunds               1,960                   12,209              39,729


     Attached to his 1994, 1995, and 1996 filed Federal income tax

returns were false Forms W-2, Wage and Tax Statement, which

petitioner had prepared and which reflected the overreported wages

and tax withholdings.       At the time he filed his 1994, 1995, and

1996 Federal income tax returns, petitioner knew that the wages

and tax withholdings he reported thereon were false.

     For 1994 and 1995 respondent processed petitioner’s Federal

income tax returns and paid to petitioner the claimed refunds of

$1,960 and $12,209, respectively.

     However, due to the large amount, respondent did not refund

to petitioner the reported $39,729 overpayment for 1996; rather,

respondent flagged petitioner’s 1996 Federal income tax return for

audit and investigation.

     On October 30, 2002, petitioner was indicted on several

criminal charges relating to his 1996 Federal income taxes.
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     On July 18, 2003, petitioner pleaded guilty to a felony under

section 7206(1) for filing a false 1996 Federal income tax return.

     In his plea agreement petitioner admitted that at the time he

filed his 1996 Federal income tax return he knew his reported tax

overpayments were false.   Petitioner also admitted that he

attached to his 1996 Federal income tax return two false Forms W-2

which he prepared and filed in an attempt to support the reported

1996 erroneous tax overpayment.

     For 1994, 1995, and 1996 respondent audited petitioner and

determined deficiencies of $1,960, $12,206, and $39,556,

respectively.   Respondent requested that petitioner produce his

bank statements for 1994, 1995, and 1996, but petitioner failed to

comply with respondent’s request.

     Petitioner appealed respondent’s determination to

respondent’s Appeals Office.   Respondent’s Appeals Office

scheduled a conference with petitioner for February 25, 2005;

petitioner, however, failed to attend the conference.

     On June 10, 2005, respondent mailed to petitioner a

notice of deficiency reflecting the above deficiencies in

petitioner’s 1994, 1995, and 1996 Federal income taxes.

Respondent also determined that the deficiencies were due to fraud

and therefore that petitioner was liable for a section 6663(a) 75-

percent civil fraud penalty on the entire deficiency for each

year.
                                 - 5 -
     On petitioner’s motions, two scheduled trials were continued.

Those continuances did not suspend respondent’s motion for summary

judgment.    Petitioner has failed to file a meaningful response to

respondent’s motion for summary judgment.

                               Discussion

     Where no material fact remains at issue, we may grant summary

judgment as a matter of law.    Rule 121(b); Fla. Country Clubs,

Inc. v. Commissioner, 122 T.C. 73, 75-76 (2004), affd. on other

grounds 404 F.3d 1291 (11th Cir. 2005).

     Where it is established that any part of an underpayment of

tax required to be shown on a return is due to fraud, there is

added to the tax under section 6663(a) a penalty equal to 75-

percent of the portion of the underpayment attributable to fraud.

     To prove a taxpayer’s tax fraud, respondent must establish by

clear and convincing evidence:    (1) The existence of an

underpayment of tax; and (2) the taxpayer’s fraudulent intent.

Sadler v. Commissioner, 113 T.C. 99, 102 (1999); Parks v.

Commissioner, 94 T.C. 654, 660-661 (1990).


Underpayment of Tax

     Section 6664(a) defines an “underpayment” as:


     the amount by which any tax imposed by this
     title exceeds the excess of--

            (1) the sum of--
                              - 6 -
               (A) the amount shown as the
          tax by the taxpayer on his return,
          plus

               (B) amounts not so shown
          previously assessed (or collected
          without assessment), over

          (2) the amount of rebates made.


     Section 1.6664-2(c)(1)(i) and (ii), Income Tax Regs.,

provides that in making the above computation, “the ‘amount shown

as the tax by the taxpayer on his return’” is reduced by the

excess of:


          (i) The amounts shown by the taxpayer on his
     return as credits for tax withheld under section 31
     (relating to tax withheld on wages) * * * over

          (ii) The amounts actually withheld, actually
     paid as estimated tax, or actually paid with respect
     to a taxable year before the return is filed for such
     taxable year.


     Accordingly, with regard to a taxpayer who has overstated

credits for tax withholdings, we have held that “the overstatement

decreases the amount shown as the tax by the taxpayer on his

return and increases the underpayment of tax.”   Sadler v.

Commissioner, supra at 103; see also sec. 1.6664-2(g), Example

(3), Income Tax Regs.

     The facts establish petitioner’s liability for the

underpayments determined by respondent.   As a result of

petitioner’s overstatements of his tax withholdings, petitioner
                              - 7 -
has underpayments of taxes for 1994 of $1,960, for 1995 of

$12,206, and for 1996 of $39,556.


Fraudulent Intent

     Respondent may satisfy his burden of proving a taxpayer’s

fraudulent intent by use of the taxpayer’s deemed admissions.

Doncaster v. Commissioner, 77 T.C. 334, 337 (1981); Vogt v.

Commissioner, T.C. Memo. 2007-209.    We have held that fraud is

never to be imputed or presumed; however, “its proof may depend to

some extent upon circumstantial evidence, and may rest upon

reasonable inferences properly drawn from the evidence of record.”

Stone v. Commissioner, 56 T.C. 213, 224 (1971); see also Rowlee v.

Commissioner, 80 T.C. 1111, 1123 (1983).

     Petitioner has admitted or stipulated that he prepared false

Forms W-2, that he knowingly overstated the amount of Federal

income tax withholdings for 1994, 1995, and 1996, and that he

knowingly claimed the illegal tax refunds for each year.

     Petitioner failed to cooperate with respondent and failed to

comply with respondent’s request to provide bank statements for

1994, 1995, and 1996.

     The deemed stipulated facts establish that petitioner’s

purpose for knowingly filing false Forms W-2 was to fraudulently

induce respondent to refund money petitioner was not owed.    Based

on those stipulated facts, respondent has met his burden of
                              - 8 -
proving by clear and convincing evidence that petitioner

fraudulently underpaid his taxes.

     Petitioner’s liability for the fraud penalties determined by

respondent is sustained, and the fraud penalty for each year

applies to the entire tax deficiency for each year.

     For the reasons stated, we sustain respondent’s deficiency

determinations and respondent’s imposition on petitioner of the

fraud penalties.


                                      An appropriate order and

                              decision will be entered.
