                  T.C. Memo. 2005-168



                UNITED STATES TAX COURT



            GLENN S. HODGES, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 8582-03.             Filed July 11, 2005.



     P filed no income tax return for 2000, and R
determined a deficiency in tax and additions to tax on
account thereof. P disputes his obligation to file an
income tax return and pay tax on constitutional
grounds, disputes R’s disallowance of basis in various
securities sold by P, and challenges the additions to
tax.

     1. Held: P’s claim that he has no obligation to
file a tax return and pay tax is without merit.

     2. Held, further, P has failed to prove that his
basis in any of the securities is greater than zero.

     3. Held, further, P is liable for an addition to
tax under sec. 6651(a)(1), I.R.C., for failure to file
a return.
                                 - 2 -

          4. Held, further, P is liable for an addition to
     tax under sec. 6654, I.R.C., for failure to pay
     estimated tax.

          5. Held, further, P is penalized $15,000 under
     sec. 6673(a)(1), I.R.C., because his position in this
     proceeding is frivolous.


     Glenn S. Hodges, pro se.

     John W. Sheffield III, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


     HALPERN, Judge:     By notice of deficiency dated March 4,

2003, respondent determined a deficiency in petitioner’s 2000

Federal income tax of $84,014 and additions to tax of $18,903,

$7,561, and $4,519, under sections 6651(a)(1) and (2) and

6654(a), respectively.    Petitioner assigns error to all of those

determinations.   By the answer, respondent concedes the addition

to tax determined under section 6651(a)(2) and claims an increase

in the addition to tax determined under section 6651(a)(1) of

$2,100 (for a total addition under that section of $21,003).

Taking into account certain concessions made by petitioner, the

issues remaining for decision are (1) petitioner’s constitutional

challenge to the income tax, (2) petitioner’s gain, if any, from

certain sales of securities, (3) the additions to tax, and (4)

our imposition of a penalty upon petitioner under section 6673.
                               - 3 -

     Unless otherwise indicated, all section references are to

the Internal Revenue Code of 1986, as amended, and all Rule

references are to the Tax Court Rules of Practice and Procedure.

     For convenience, monetary amounts have been rounded to the

nearest dollar amount.

                          FINDINGS OF FACT

     Some facts are stipulated and are so found.   The stipulation

of facts, with accompanying exhibits, is incorporated herein by

this reference.   At the time he filed the petition, petitioner

resided in Duluth, Georgia.

     Petitioner did not file a Form 1040, U.S. Individual Income

Tax Return (tax return), for 2000, nor did he file any tax return

from 1996 through 2003.   He did file tax returns from 1971 to

1995.

     During 2000, petitioner received proceeds of $225,390 from

the sale of securities (the securities) as follows:

      Date
     of Sale         Security Sold                     Proceeds

     Unknown         SBC Communications Inc.               $43
     02/04/00        AT&T Corp.                         51,623
     10/03/00        Avaya Inc.                             32
     02/01/00        AT&T Corp.                         49,686
     07/25/00        AT&T Corp.                             31
     12/28/00        AT&T Corp.                          6,638
     02/01/00        Bell Atlantic Corp.                22,983
     02/01/00        BellSouth Corp.                     6,516
     02/01/00        Honeywell Intl Inc.                 8,535
     02/01/00        Lucent Technologies Inc.            7,467
     02/03/00        MediaOne Group Inc.                 5,636
     07/21/00        MediaOne Group Inc.                 6,800
     07/25/00        MediaOne Group Inc.                 1,020
                                  - 4 -

       06/30/00         Qwest Communications Intl.             46
       02/01/00         SBC Communications Inc.             8,637
       02/03/00         SBC Communications Inc.                46
       02/03/00         SBC Communications Inc.                46
       02/04/00         SBC Communications Inc.            44,594
       02/04/00         U.S. West Inc.                      5,011

       Petitioner also received ordinary dividends and capital

gains in the amounts of $13,572 and $11,378, respectively.

                                 OPINION

I.    Introduction

       We first address petitioner’s constitutional challenge to

the income tax.      We then determine petitioner’s gain from the

sale of the securities.      Finally, we address the additions to tax

and section 6673 penalty.

II.    Petitioner’s Constitutional Challenge to the Income Tax

       In the amended petition, in support of his assignments of

error, petitioner claims that he has books and records

substantiating his deductions, business expenses, credits, and

charitable contributions.      At the trial of this case, petitioner

conceded that, during 2000, the sale of the securities produced

proceeds of $225,390 and he received ordinary dividends and

capital gains in the amounts of $13,572 and $11,378,

respectively.     He offered nothing to show any business expenses,

credits, or charitable contributions.      He conceded that he did

not file a tax return for 2000.      His wife, apparently speaking

for him, claimed that, even if the Court were to find that he had
                               - 5 -

income in the amount determined by respondent, he was not

obligated to file an income tax return (or pay any tax):

     We [petitioner and his wife] didn’t file a return
     because we feel like we are not liable to file a
     return. Just based on research and the taxation
     clauses in the Constitution that specifically address
     how taxes can be taken, and based on Supreme Court
     cases after the 16th Amendment that says that it didn’t
     grant Congress any more taxing authority, its our
     position, our good faith position as citizens, that we
     are not liable to file for this income.

     On brief, petitioner restates his claim that he has no

obligation to file an income tax return:

          After careful study and review of the Constitution
     of the United States and the Internal Revenue Laws,
     Petitioner has been brought clearly to the conclusion
     that the Internal Revenue Laws pertain to taxpayers and
     not to non-taxpayers. If one searches the index of the
     IRC under heading of “Liability for tax” one finds
     listed 51 different taxes, none of which refer to an
     “income tax”. All tax returns filed by Petitioner
     prior to 1998 were filed due to lack of wisdom,
     knowledge and understanding. The enormity and
     ambiguity of the Internal Revenue Codes [sic] combined
     with a service that has operated with intimidation and
     fear tactics hinders the common man or woman from
     question [sic] the legality.

     Section 6012(a) requires every individual having gross

income exceeding certain minimum amounts to file an income tax

return.   For 2000, petitioner’s gross income exceeded the

applicable section 6012 minimum for filing a return.1   The cases


     1
        During 2000, petitioner received ordinary dividends and
capital gains in the amounts of $13,572 and $11,378,
respectively. Both dividends and gains derived from dealings in
property are items of gross income. See sec. 61(a)(3) and (7).
Together, the two items total $24,950, which is above the
                                                   (continued...)
                                   - 6 -

are legion that individuals required by the Internal Revenue Code

to file a return must file a return and pay tax.      E.g., Bassett

v. Commissioner, 67 F.3d 29, 31 (2d Cir. 1995), affg. 100 T.C.

650 (1993); Stubbs v. Commissioner, 797 F.2d 936, 938 (11th Cir.

1986); Steinbrecher v. Commissioner, 712 F.2d 195, 198 (5th Cir.

1983), affg. T.C. Memo. 1983-12; United States v. Chrane, 529

F.2d 1236, 1237 (5th Cir. 1976); Hatfield v. Commissioner, 68

T.C. 895, 898 (1977); Hicks v. Commissioner, T.C. Memo. 1992-649;

Zegel v. Commissioner, T.C. Memo. 1989-522.

       Petitioner’s claim that he has no obligation to file a

return or pay any tax is without merit, and we reject it.

III.       Petitioner’s Gain

       At issue is the amount of petitioner’s gain from the sale of

the securities.       At trial, petitioner conceded that, during 2000,

his brokerage account at Solomon Smith Barney (Smith Barney) was

credited with $225,390, the proceeds from sales of the

securities.       He claimed, however, that, the securities were sold

at a net loss of $18,888 and, taking into account fees in the

amount of $1,400 he paid Smith Barney, his total loss on the

sales of the securities was more than $20,000.      Petitioner

determines that he suffered a net loss on the sales of the


       1
      (...continued)
threshold for which a return was required from an individual for
2000, no matter what the individual’s filing status (single,
married filing jointly, etc.). See Instructions accompanying
2000 Form 1040, U.S. Individual Income Tax Return, p. 15.
                                - 7 -

securities by comparing the sales price of each security with its

tax basis, as he computes those bases.   With one exception, i.e.,

shares of stock in Honeywell Intl. Inc. (the Honeywell shares),

he computes the tax basis of each of his various security

holdings as being the fair market value of the security on May

28, 1993, the date he claims is the date of his grandmother’s

death.

      Petitioner’s wife testified that, to the best of her

recollection, petitioner’s grandmother died on May 28, 1993.     She

testified that, except for the Honeywell shares, all of the

securities were received by petitioner on account of his

grandmother’s death.   She testified that the Honeywell shares

were a gift to petitioner from his mother.   Petitioner did not

testify to those matters.   There is in evidence a letter from

Smith Barney that, for some of the securities, states prices for

the securities on May 28, 1993.

      Section 1001(a) deals with the computation of gain or loss

on the sale or other disposition (without distinction, sale) of

property.   Gain is the excess of the amount realized on the sale

of property over the property’s adjusted basis (basis) for

determining gain.   Id.   Loss is the excess of the property’s

basis for determining loss over the amount realized on its sale.

Id.   The basis of property may be different for purposes of

determining whether property is sold at a gain or whether it is
                                - 8 -

sold at a loss.   See, e.g., section 1015(a), which provides that

the basis of property acquired by gift is the same in the hands

of the donee as it was in the hands of the donor, except that, if

such basis exceeds the fair market value of the property at the

time of the gift, then, for purposes of determining loss, the

basis shall be such fair market value.   In general, the basis of

property received by bequest is the fair market value of the

property on the date of death of the decedent.   See sec.

1014(a)(1).   The basis of property received by purchase is its

cost.   See sec. 1012.

     For the reasons that follow, we do not find petitioner’s

wife’s testimony as to the origin of the securities in

petitioner’s hands to be credible, and we give it no weight.

First, her testimony was self-serving (in that we assume, as

petitioner’s wife, she has an economic stake in the outcome of

this case).   We need not accept self-serving testimony, even if

unopposed.    Fleischer v. Commissioner, 403 F.2d 403, 406 (2d Cir.

1968), affg. T.C. Memo. 1967-85; see also Tokarski v.

Commissioner, 87 T.C. 74, 77 (1986) (“Under all the

circumstances, we are not required to accept the self-serving

testimony of petitioner or that of his mother as gospel.”).

Second, with respect to the securities that she testified were

received by bequest from petitioner’s grandmother, her testimony

involved two crucial facts: one, the fact of the grandmother’s
                                - 9 -

death on or about May 28, 1993, and, two, the transfer of the

securities on account of her death.     Death is not exclusively a

private event.   It is usually accompanied by public recognition,

in the form of a death certificate and, sometimes, court records

evidencing the administration or probate of the decedent’s

estate.   Often there is a will, and there are newspaper articles

reporting the decedent’s death.   There is a substantial amount of

money involved here, and the lack of any evidence supporting

petitioner’s wife’s testimony on crucial points causes us to

distrust that testimony as to the fact or date of the

grandmother’s death.    With respect to the fact of the transfer of

the securities, stock transfers (especially of the stock of

traded companies) are evidenced by record entries.    The

securities in question here were sold by Smith Barney, who, we

assume, would not have sold them and deposited the proceeds to

petitioner’s account unless Smith Barney was satisfied petitioner

owned the securities.   Petitioner produced no evidence of the

transfer of any of the securities from his grandmother to him.

We cannot, therefore, conclude that petitioner acquired

securities from his grandmother or that, even if he did, he

acquired them on or about May 28, 1993.    We have similar

difficulty with the petitioner’s wife’s testimony about the gift

of the Honeywell shares.
                                 - 10 -

      Petitioner bears the burden of proving his basis in the

securities.   See Rule 142(a).    Petitioner has failed to prove

that the securities, other than the Honeywell shares, were

acquired from his grandmother on or about May 28, 1993, or that

the Honeywell shares were received from his mother by gift.

Since petitioner has failed to prove that the securities have any

basis in excess of zero, we sustain respondent’s adjustment

including in full the proceeds from the sale of the securities in

petitioner’s gross income.

IV.   Additions to Tax

      A.   Respondent's Section 6651(a)(1) Determination

      Section 6651(a)(1) provides for an addition to tax in the

event a taxpayer fails to file a timely return (determined with

regard to any extension of time for filing), unless it is shown

that such failure is due to reasonable cause and not due to

willful neglect.    The amount of the addition is equal to 5

percent of the amount required to be shown as tax on the

delinquent return for each month or fraction thereof during which

the return remains delinquent, up to a maximum addition of 25

percent for returns more than 4 months delinquent.     Reasonable

cause contemplates that the taxpayer exercised ordinary business

care and prudence and was nonetheless unable to file a return

within the prescribed time.      United States v. Boyle, 469 U.S.

241, 246 (1985); sec. 301.6651-1(c)(1), Proced. & Admin. Regs.
                              - 11 -

Willful neglect means a conscious, intentional failure or

reckless indifference.   Boyle, supra at 245.

     Petitioner failed to file a tax return for 2000 and, thus,

is liable for the addition to tax imposed by section 6651(a)(1)

unless the failure was due to reasonable cause and not due to

willful neglect.   Petitioner had sufficient gross income for 2000

so that he was required to file a return.2   He had filed tax

returns from 1971 to 1995, when he stopped because, as his wife

testified, they had done research and “realized that there had

been a lot of unconstitutional things happening in the tax laws

and we decided that we weren’t going to be robbed anymore.”     As

the cases we cited above show, petitioner’s reasons for not

filing are spurious.   Petitioner’s failure in his duty to file a

tax return for 2000 was both conscious and intentional.   A person

with gross income equal to petitioner’s gross income for 2000,

exercising ordinary business care and prudence, would have filed

a tax return for 2000.   Petitioner consciously and intentionally

failed to file a tax return for 2000.   Petitioner was willfully

neglectful in failing to do so, and we so find.

     We sustain an addition to tax under section 6651(a)(1) in

the amount of $21,003.




     2
         See supra note 1.
                                   - 12 -

       B.     Respondent's Section 6654 Determination

       Section 6654 provides for an addition to tax in the event of

an underpayment of a required installment of individual estimated

tax.       Sec. 6654(a) and (b).   As relevant to this case, each

required installment of estimated tax is equal to 25 percent of

the "required annual payment", which in turn is equal to the

lesser of (1) 90 percent of the tax shown on the individual's

return for that year (or, if no return is filed, 90 percent of

his or her tax for such year), or (2) if the individual filed a

return for the immediately preceding taxable year, 100 percent of

the tax shown on that return.        Sec. 6654(d)(1)(A) and (B)(i) and

(ii).       The due dates of the required installments for a calendar

taxable year are April 15, June 15, and September 15 of that year

and January 15 of the following year.         Sec. 6654(c)(2).

       Petitioner filed no return for 1999 or 2000.       Petitioner’s

“required annual payment” of estimated tax was, therefore, equal

to 90 percent of his tax for 2000.          Petitioner paid none of the

required installments of that amount.

       We sustain an addition to tax under section 6654(a) in the

amount of $4,519.3




       3
        Petitioner does not challenge the computation of the sec.
6654 addition to tax, which we have not computed.
                              - 13 -

V.   Section 6673(a)(1) Penalty

      Section 6673(a)(1) authorizes the Tax Court to impose a

penalty on a taxpayer, not to exceed $25,000, if the Court finds,

among other things, that the taxpayer’s position is frivolous or

groundless.   Sec. 6673(a)(1)(B).   The purpose of section 6673 is

to compel taxpayers to think and to conform their conduct to

settled principles before they file returns and litigate.     Takaba

v. Commissioner, 119 T.C. 285, 295 (2002).     A taxpayer's position

is frivolous if it is contrary to established law and unsupported

by a reasoned, colorable argument for change in the law.    E.g.,

Nis Family Trust v. Commissioner, 115 T.C. 523, 544 (2000).      We

need not find specific damages to invoke section 6673(a)(1);

rather, that section is a penalty provision, intended to deter

and penalize frivolous claims and positions in proceedings before

this Court.   Bagby v. Commissioner, 102 T.C. 596, 613-614 (1994).

      Petitioner does not here argue for any change in the law,

and there is no plausible argument that he did not have to file a

tax return for 2000.   Petitioner’s argument to the contrary is

frivolous, and we so find.   The Court twice warned petitioner--at

a pretrial conference in March 2004 and at trial in May 2004--

that the argument he was advancing was of the sort that might

subject him to a penalty under section 6673.    We have little

sympathy for petitioner’s obstinacy in the face of our warnings.

We believe that petitioner is deserving of a substantial penalty
                                - 14 -

under section 6673.   We therefore impose on him under that

section a penalty of $15,000.

VI.   Conclusion

      We shall enter decision for respondent reflecting (1) the

deficiency in tax determined by respondent, (2) the increased

addition to tax asserted by respondent under section 6651(a)(1),

(3) respondent’s concession of the addition to tax determined

under section 6651(a)(2), (4) the addition to tax

determined by respondent under section 6654, and (5) the penalty

we imposed under section 6673(a)(1).

      To reflect the foregoing,


                                          Decision will be entered

                                     for respondent.
