                          T.C. Memo. 2004-107



                        UNITED STATES TAX COURT



    WILLIAM H. JOHNSTON AND NANCY S. JOHNSTON, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 3011-02.               Filed April 23, 2004.



     William H. Johnston and Nancy S. Johnston, pro sese.

     David B. Mora, for respondent.



              MEMORANDUM FINDINGS OF FACT AND OPINION


     COLVIN, Judge:     By separate notices of deficiency,

respondent determined deficiencies in each petitioner’s Federal

income taxes in the amounts of $2,111 for 1994, $5,563 for 1996,

and $2,126 for 1997.1    Respondent also determined that each


     1
         Respondent determined that, under Texas community
                                                    (continued...)
                                      - 2 -

petitioner is liable for additions to tax for failure to file

under section 6651(a)(1) of $100 for 1994 and $120 for 1997,2 and

for failure to pay estimated tax under section 6654 of $18.99 for

1997.        For the addition to tax for failure to file under section

6651(a)(1) for 1996, respondent determined that Nancy S. Johnston

is liable for $100 and that William H. Johnston is liable for

$61.3

        The issues for decision are:

        1.      Whether petitioners each have deficiencies in income

tax in the amounts respondent determined for 1994, 1996, and

1997.        We hold that they do.

        2.    Whether petitioners are each liable for additions to tax

for failure to file under section 6651(a)(1) for 1994, 1996, and

1997, and for failure to pay estimated tax under section 6654 for

1997.        We hold that they are.

        3.      Whether petitioners are liable for a penalty under

section 6673 for instituting proceedings primarily for delay and




        1
      (...continued)
property law, each petitioner received one-half of the total
income received by petitioners in 1994, 1996, and 1997. Tex.
Fam. Code Ann. secs. 3.001-3.309 (Vernon 2002).
        2
        Respondent also determined that petitioners are liable
for additions to tax for failure to pay tax under sec. 6651(a)(2)
for 1996 and 1997. Respondent concedes that petitioners are not
liable for additions to tax under sec. 6651(a)(2) for 1996-97.
        3
        Respondent determined a larger addition to tax under sec.
6651(a)(1) for 1996 for Nancy S. Johnston because less tax was
withheld from her than from William H. Johnston.
                                 - 3 -

for maintaining frivolous or groundless positions.          We hold that

they are in the amount stated below.

     Section references are to the Internal Revenue Code as

amended.    References to petitioner are to William H. Johnston.

                          FINDINGS OF FACT

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

     Petitioners were married and lived in Texas during the years

in issue and when the petition was filed.

     Petitioners received the following amounts of income:

                                 1994
    Description         Amount                     Source

  Wages                $22,109           Flour Daniel, Inc.
  Wages                  8,416           Aeroteck
  Interest                 348           All American
  Social Security        8,331           U.S. Treasury
  Pension                  155           International Brotherhood of
                                           Electrical Workers
  Pension                2,816           Dixie National Life Insurance,
                                           Co.
   Total               $42,175

                                 1996
   Description          Amount                     Source

  Wages                $47,300           Lebarge & Associates, Inc.
  Wages                 10,295           Apollo Industrial Services,
                                           Inc.
  Wages                  3,653           Austin Industries, Inc.
  Wages                  2,211           Cleveland Inspection Service,
                                           Inc.
  Interest                 264           All American
  Unemployment           1,554           State of Texas
  compensation
  Social Security        3,030           U.S. Treasury
  Pension                  468           International Brotherhood of
                                           Electrical Workers
  Pension                3,382           Dixie National Life Insurance,
                                           Co.
  Total                $72,157
                                   - 4 -

                                   1997
     Description        Amount                       Source

  Wages                $10,092             Mustang Engineering, Inc.
  Wages                  9,805             National Inspection
                                           Consultants
  Wages                   2,800            Selectek, Inc.
  Wages                     600            Apollo Industrial Services,
                                             Inc.
  Interest                  228            All American
  Unemployment            6,011            State of Texas
  compensation
  Social Security       10,261             U.S. Treasury
  Pension                  468             International Brotherhood of
                                             Electrical Workers
  Pension                 3,382            Dixie National Life Insurance,
                                             Co.
  Total                $43,647

       Petitioners did not file income tax returns for 1994, 1996,

and 1997.    Petitioners did not pay any estimated tax in 1997.

                                  OPINION

A.     Income Tax Deficiencies

       Petitioners contend that they are not liable for tax for the

years at issue because the notices of deficiency are invalid.

Petitioners contend that:    (1) The Commissioner may not determine

a deficiency for a year for which a taxpayer did not file a

return; (2) petitioners’ income is not taxable because they did

not file returns; and (3) respondent did not prepare a return for

each of the years in issue that qualified as a substitute return

under section 6020(b).4    We disagree.


       4
        The Commissioner may prepare substitute returns for
taxpayers who fail to file returns. Sec. 6020(b)(1). A Form
                                                   (continued...)
                                - 5 -

     Petitioners’ contention that the Commissioner cannot

determine a deficiency for a year for which a taxpayer did not

file a return is frivolous.    Scruggs v. Commissioner, T.C. Memo.

1995-355, affd. without published opinion 117 F.3d 1433 (11th

Cir. 1997); Roman v. Commissioner, T.C. Memo. 1995-175; Zyglis v.

Commissioner, T.C. Memo. 1993-341, affd. without published

opinion 29 F.3d 620 (2d Cir. 1994).     Petitioners’ contention that

failure to file a return shields the nonfiler from income tax

liability is also frivolous.    Where a taxpayer files no return,

the deficiency is determined as if a return had been filed on

which the taxpayer reported that the amount of tax due was zero;

thus, the deficiency is the amount of tax due.     Laing v. United

States, 423 U.S. 161, 174 (1976); Schiff v. United States, 919

F.2d 830, 832-833 (2d Cir. 1990); Roat v. Commissioner, 847 F.2d

1379, 1381 (9th Cir. 1988).    Finally, petitioners’ contention

that the Commissioner must file a substitute for return under

section 6020(b) before determining a deficiency is also

frivolous.   Schiff v. United States, supra; Roat v. Commissioner,

supra.


     4
      (...continued)
1040, U.S. Individual Income Tax Return, qualifies as a sec.
6020(b) return if it contains a taxpayer’s name, address, Social
Security number, filing status, and information sufficient to
compute the taxpayer’s tax liability, and if it is signed by an
authorized employee of the IRS. Cabirac v. Commissioner, 120
T.C. 163, 171-172 (2003); Millsap v. Commissioner, 91 T.C. 926
(1988).
                               - 6 -

     Petitioners received income in the amounts respondent

determined and did not file income tax returns for the years in

issue.5   Petitioners point out that respondent determined that

petitioners are not entitled to deductions for business expenses

to which petitioners claim they are entitled.   However,

petitioners offered no evidence contrary to respondent’s

determination.

     We conclude that petitioners are each liable for

deficiencies in the amounts that respondent determined for 1994,

1996, and 1997.

B.   Additions to Tax

     Petitioners admit that they did not file income tax returns

for 1994, 1996, and 1997, and that they received income in those

years in the amounts respondent determined.   The parties

stipulated to transcripts of account which show that (1) taxes

were underwithheld from petitioners’ income for 1997 and

(2) petitioners did not pay estimated tax for 1997.   Respondent

has met the burden of production under section 7491(c) as to the

additions to tax under section 6651(a) for failure to file for

1994, 1996, and 1997, and under section 6654 for failure to pay



     5
        Petitioners do not contend and have offered no evidence
showing that sec. 7491(a) applies in this case. Taxpayers bear
the burden of proving that they have met the requirements of sec.
7491(a). H. Conf. Rept. 105-599, at 239 (1998), 1998-3 C.B. 747,
993; S. Rept. 105-174, at 45 (1998), 1998-3 C.B. 537, 581.
                                  - 7 -

estimated tax for 1997.

       Petitioners do not contend that they had reasonable cause

for failure to file their 1994, 1996, and 1997 returns or failure

to pay estimated tax for 1997.      They offered no evidence showing

that they are not liable for those additions to tax.       We conclude

that petitioners are liable for the additions to tax under

section 6651(a) for failure to file for 1994, 1996, and 1997, and

under section 6654 for failure to pay estimated tax for 1997.

C.     Section 6673 Penalty

       Respondent moved that the Court impose a penalty on

petitioners under section 6673 on the grounds that petitioners

instituted and maintained this case primarily for delay and that

their position is frivolous.

       The Court may impose on a taxpayer a penalty of up to

$25,000 if the taxpayer instituted or maintained proceedings

primarily for delay, if the taxpayer’s position is frivolous or

groundless, or if the taxpayer unreasonably failed to pursue

administrative remedies.      Sec. 6673.   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).

Petitioners contend that their arguments are not frivolous and

that they are not using this case for delay.       We disagree.
                               - 8 -

     All of petitioners’ arguments at trial and in documents

filed with the Court are frivolous.    Petitioners did not offer

any evidence to support their claim that they had business

expenses in the years in issue.   The Court told petitioners that

their arguments before and during trial were frivolous and that

we would consider imposing a penalty under section 6673 if

petitioners continued to maintain frivolous positions.    Despite

this admonition, petitioners continued to make frivolous

arguments in this case.

     In a prior case, the U.S. Court of Appeals for the Fifth

Circuit affirmed the dismissal of petitioners’ bankruptcy claims

and admonished petitioners for making allegations that bordered

on frivolous, relying on tax-protester rhetoric, and engaging in

meritless and time-consuming dealings with the Internal Revenue

Service to delay those proceedings.    Johnston v. IRS, 80 AFTR 2d

97-7325, 97-2 USTC par. 50,867 (5th Cir. 1997).

     We conclude that petitioners maintained these proceedings

primarily for delay and that their positions are frivolous.    We

conclude that petitioners are liable for a penalty of $5,000

under section 6673.

     Accordingly,

                               An appropriate order and decision

                          will be entered for respondent in

                          amounts consistent with the foregoing.
