                               T.C. Memo. 2017-120



                         UNITED STATES TAX COURT



                   KENTON R. FLEMING, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 26391-14.                          Filed June 20, 2017.



      Kenton R. Fleming, pro se.

      Christopher D. Bradley, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      PUGH, Judge: Respondent determined deficiencies and additions to tax as

follows:1


      1
      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
                                                                       (continued...)
                                          -2-

 [*2]                                                    Additions to tax
            Year           Deficiency           Sec. 6651(a)(1)     Sec. 6651(a)(2)
            2010             $7,463                  $689                $582
            2011               7,844                1,092                   631

                                FINDINGS OF FACT

        Some of the facts have been deemed stipulated under Rule 91(f). Petitioner

lived in Georgia at the time he filed the petition. During 2010 and 2011 petitioner

was an employee of Southern Polytechnic State University (SPSU) in Marietta,

Georgia. In 2010 petitioner earned $56,078 in wages from SPSU, and in 2011 he

earned $56,364. Those wages were reflected on Forms W-2, Wage and Tax

Statement, and reported to respondent. Petitioner neither filed tax returns nor

made payments aside from withholdings for either tax year.

        Respondent filed substitutes for returns for petitioner pursuant to section

6020(b) reflecting a filing status of single and claiming standard deductions for

both 2010 and 2011. Respondent then issued notices of deficiency to petitioner

based on those substitutes for returns. On November 4, 2014, petitioner timely

petitioned the Court for redetermination of his tax liabilities. As shown on


        1
        (...continued)
Tax Court Rules of Practice and Procedure. Amounts are rounded to the nearest
dollar.
                                        -3-

[*3] respondent’s transcripts for petitioner’s accounts, on December 15, 2014,

respondent erroneously assessed the amounts determined in the notices of

deficiency for 2010 and 2011. On March 10, 2015, respondent entered a litigation

freeze (Code 520) on petitioner’s accounts. On June 1, 2015, respondent reversed

the erroneous assessments and sent petitioner two corresponding Notices CP21E,

one for each year, reflecting a “zero balance” for each year.

                                     OPINION

I. Petitioner’s Tax Liabilities

      Under section 61(a), gross income includes all income from whatever

source derived, including wages. The Commissioner may reconstruct a taxpayer’s

wages from third-party payer reports such as Forms W-2. Parker v.

Commissioner, 117 F.3d 785 (5th Cir. 1997); Andrews v. Commissioner, T.C.

Memo. 1998-316; White v. Commissioner, T.C. Memo. 1997-459. Items of gross

income are includible in gross income for the taxable year in which the cash-basis

taxpayer received them. Sec. 451.

      Petitioner testified that he received the wages from SPSU but offered no

evidence regarding deductions or credits, even after we explained that the purpose

of the trial was to redetermine his income and deductions. His sole challenge to

respondent’s notices of deficiency was that respondent issued him Notices CP21E
                                            -4-

[*4] on June 1, 2015, that each showed a zero balance, and his account transcripts

showed a zero balance. He argues that those documents should be presumed

correct and that they establish that he owes no tax. We agree that these documents

are correct but they do not prove he has no liability for 2010 or 2011. They show

only that no liability has been assessed.

      Under section 6212, if the IRS determines that there is a deficiency in

Federal income tax (defined in section 6211(a) as the amount by which taxes owed

exceeds taxes paid), then the IRS must issue a notice of deficiency to the taxpayer,

as was done here. The IRS must wait 90 days to assess the tax determined to be

owed in that deficiency notice (or 150 days for notices mailed to foreign

addresses). Additionally, under section 6213(a) the IRS is barred from assessing a

taxpayer’s outstanding tax liability if the taxpayer files a petition for

redetermination within that 90-day period; and the IRS will remain barred from

assessing the liability while the taxpayer’s case is pending before us. That is what

happened here. As we explained to petitioner, the trial was to establish

petitioner’s liabilities. Once we determine his liabilities and enter our decision,

respondent must assess those amounts. See sec. 6215(a). Assessment then will be

made by recording the liabilities for the tax owed on petitioner’s account

transcript. See sec. 6203. On the basis of evidence offered at trial we hold that
                                         -5-

[*5] petitioner’s liabilities are as respondent determined in the notice of

deficiency.

II. Additions to Tax

        Respondent determined that petitioner is liable for additions to tax for 2010

and 2011 under section 6651(a)(1), for failure timely to file a valid return; and

section 6651(a)(2), for failure timely to pay tax shown on a return.

        Section 6651(a)(1) authorizes the imposition of an addition to tax for failure

timely to file a return unless it is shown that such failure is due to reasonable cause

and not willful neglect. See United States v. Boyle, 469 U.S. 241, 245 (1985). A

failure timely to file a Federal income tax return is due to reasonable cause if the

taxpayer exercised ordinary business care and prudence but nevertheless was

unable to file the return within the prescribed time, typically for reasons outside

the taxpayer’s control. See McMahan v. Commissioner, 114 F.3d 366, 369 (2d

Cir. 1997), aff’g T.C. Memo. 1995-547; sec. 301.6651-1(c)(1), Proced. & Admin.

Regs.

        Section 6651(a)(2) imposes an addition to tax for failure timely to pay the

amount shown as tax on a return unless the failure was due to reasonable cause

and not willful neglect. A substitute for return constitutes “the return filed by the

taxpayer” for purposes of determining the amount of an addition to tax under
                                        -6-

[*6] section 6651(a)(2). See sec. 6651(g)(1); Wheeler v. Commissioner, 127 T.C.

200, 208-209 (2006), aff’d, 521 F.3d 1289 (10th Cir. 2008); Cabirac v.

Commissioner, 120 T.C. 163, 170 (2003), aff’d without published opinion, 94

A.F.T.R. 2d 2004-5490 (3d Cir. 2004).

      The Commissioner bears the burden of production with respect to a

taxpayer’s liability for additions to tax. See sec. 7491(c); Higbee v.

Commissioner, 116 T.C. 438, 446 (2001). Once the Commissioner carries the

burden of production, the taxpayer must come forward with persuasive evidence

that the Commissioner’s determination is incorrect or that the taxpayer had an

affirmative defense, such as reasonable cause and good faith. See Higbee v.

Commissioner, 116 T.C. at 446-447.

      We hold that respondent satisfied his burden of establishing that petitioner

was required to file returns for 2010 and 2011 but failed to do so. See sec.

6012(a)(1)(A) (providing that taxpayers must file returns unless their gross income

does not exceed the sum of the personal exemption and the standard deduction for

those years). We also hold that petitioner failed to pay tax shown as due on valid

substitutes for returns for 2010 and 2011 prepared by respondent under section

6020(b). See Wheeler v. Commissioner, 127 T.C. at 210 (2006). Petitioner failed

to offer any evidence of reasonable cause or raise any other challenge to these
                                         -7-

[*7] additions to tax beyond his argument that the IRS records showed he had a

“zero balance”. Accordingly, petitioner is liable for the additions to tax under

section 6651(a)(1) and (2).

III. Section 6673

      Section 6673(a)(1) authorizes the Court to require a taxpayer to pay a

penalty to the United States in an amount not to exceed $25,000 whenever it

appears to the Court that the taxpayer instituted or maintained the proceeding

primarily for delay or that the taxpayer’s position in the proceeding is frivolous or

groundless.

      Petitioner was warned about maintaining frivolous positions and should be

familiar with the consequences as we have imposed this penalty on him in the

past.2 In several prior cases he conceded his liability rather than going to trial.

We believe that he knew that the arguments in this case were frivolous. And the

record before us shows that this case was delayed unnecessarily by his vexatious

tactics, including his refusal to provide a working telephone number; his refusal to

stipulate certain issues, requiring respondent to move for an order to show cause


      2
        In Fleming v. Commissioner, docket No. 14357-10L, by Order and
Decision entered March 16, 2012, this Court granted respondent’s Motion for
Summary Judgment and to Impose a Penalty Under Sec. 6673 and imposed a
penalty of $1,500 against petitioner.
                                        -8-

[*8] why certain proposed facts and evidence should not be established pursuant

to Rule 91(f); and his repeated protestations at trial that no one had explained the

erroneous assessment to him, even though it was explained in connection with

respondent’s motion for summary judgment. Nonetheless, petitioner did respond

to these motions, and on the basis of those responses we denied respondent’s

motions in part. We therefore are constrained not to impose a penalty at this time

but again warn him that his arguments and tactics--including tactics that seem

intended primarily to delay--may result in further and greater penalties in the

future should he persist in making them.

      To reflect the foregoing,


                                              Decision will be entered for

                                       respondent.
