                        T.C. Memo. 2004-202



                      UNITED STATES TAX COURT



                THOMAS G. BRENNER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8934-00.              Filed September 2, 2004.


     Thomas G. Brenner, pro se.

     Monica J. Miller, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     JACOBS, Judge:   Respondent determined deficiencies in

petitioner’s Federal income tax, delinquency additions to tax
                                    - 2 -

under section 6651(a)(1) and (2),1 and estimated tax additions to

tax under section 6654 for 1991-97 as follows:

                                          Additions to Tax
                                     Sec.         Sec.         Sec.
         Year      Deficiency    6651(a)(1)   6651(a)(2)      6654

         1991       $28,490        $7,123         no         $1,628
         1992        31,638         7,910         no          1,380
         1993        38,905         9,726         no          1,630
         1994        55,193        13,798         no          2,864
         1994        53,544        13,386         no          2,903
         1996        58,938        13,261        yes1         3,137
         1997        63,330        14,249        yes1         3,388
            1
             Sec. 6651(a)(2) provides for an addition to tax
         of 0.5 percent per month until payment, not to exceed
         25 percent.

     Respondent concedes that petitioner is not liable for the

addition to tax under section 6651(a)(2) for 1996-97.         The issues

remaining to be decided are:

     1.     Whether the notice of deficiency is invalid because

respondent did not prepare a substitute for return for each of

the years at issue; and

     2.     if the notice of deficiency is valid, then

                (a) whether respondent properly reconstructed

petitioner’s business income using the bank deposits method; and

                (b) whether petitioner is liable for the additions to

tax under sections 6651(a)(1) and 6654.


     1
      Section references are to the Internal Revenue Code in
effect for the years at issue, and Rule references are to the Tax
Court Rules of Practice and Procedure. Amounts are rounded to
the nearest dollar.
                                  - 3 -

                             FINDINGS OF FACT2

     Petitioner resided in Ormond Beach, Florida, at the time the

petition in this case was filed.

     During 1991-97, petitioner was in the insurance business.

He received the following income from commissions, interest,

dividends, and capital gain:

   Year        Commissions     Interest    Dividends    Capital Gain

   1991         $163,912         $438         --             --
   1992          157,399          220         --             --
   1993          230,581          173         $16            --
   1994          215,378          177          20            --
   1995          221,021          166         142            --
   1996          261,240          131       1,424          $5,953
   1997          342,891          118       2,157           9,551

     Petitioner filed Federal income tax returns for all years

before 1991.    He did not file returns for 1991-2001.        Petitioner

did not make estimated tax payments for 1991-97, and no tax was

withheld with respect to any income petitioner earned during

those years.

     In June 1998, the Internal Revenue Service began examining

petitioner’s records in order to determine petitioner’s income

tax liabilities for the years at issue.          Petitioner refused to

meet with the examination officer.        In addition, he refused to


     2
      Petitioner refused to execute a stipulation of facts. In
his answering brief, petitioner did not object to any of
respondent’s requested findings of fact and did not offer any of
his own. The record amply supports respondent’s requested
findings. Consequently, respondent’s requested findings of fact
are incorporated herein.
                              - 4 -

provide the examination officer with books, records, or any other

information, and he attempted to prevent the examination officer

from obtaining information from third parties.    During the

examination, petitioner asserted his Fifth Amendment privilege

against self-incrimination.

     The examination officer reconstructed petitioner’s insurance

business income using the bank deposits method.    The examination

officer allowed petitioner a deduction for estimated insurance

business expenses equal to 54.77 percent of his commissions based

on the Statistics of Labor Bulletin, Sole Proprietorship Returns,

1994, Table 2.--Nonfarm Sole Proprietorships: Income Statements,

by Selected Groups: Insurance agents and brokers (statistics for

insurance agents).

     On the basis of the examination officer’s reconstruction of

petitioner’s income, respondent determined deficiencies in

petitioner’s Federal income tax for 1991-97 and issued a notice

of deficiency for those years dated May 24, 2000.

     On August 21, 2000, petitioner timely filed a petition in

this Court requesting that we “dismiss the NOD [notice of

deficiency] for lack of jurisdiction” on the alleged ground it

“lacks any ligament or tendon of fact, is clearly arbitrary and

capricious and no real determination of deficiency has been made

by any authorized IRS employee.”   On September 29, 2000,

petitioner filed an amended petition claiming that respondent’s
                              - 5 -

determination that he had taxable income in the amounts stated in

the notice of deficiency was in error.    In the amended petition,

petitioner asserted that the notice of deficiency was invalid

because “the Internal Revenue Service failed to execute an

involuntary return as required by the IR Code.”

     On October 5, 2001, the Court sent the parties a notice

setting the case for trial at the trial session of the Court in

Jacksonville, Florida, beginning on March 11, 2002.   Accompanying

that notice was the Court’s Standing Pre-Trial Order, which

states in pertinent part as follows:

                             Policies

     You are expected to begin discussions as soon as
     practicable for purposes of settlement and/or
     preparation of a stipulation of facts. Valuation
     cases and reasonable compensation cases are generally
     susceptible of settlement, and the Court expects the
     parties to negotiate in good faith with this objective
     in mind. All minor issues should be settled so that
     the Court can focus on the issue(s) needing a Court
     decision.

               *    *    *    *       *   *    *

     If difficulties are encountered in communicating with
     another party, or in complying with this Order, you
     should promptly advise the Court in writing, with copy
     to each other party, or in a conference call among the
     parties and the trial judge.

     If any unexcused failure to comply with this Order
     adversely affects the timing or conduct of the trial,
     the Court may impose appropriate sanctions, including
     dismissal, to prevent prejudice to the other party or
     imposition on the Court. Such failure may also be
     considered in relation to disciplinary proceedings
     involving counsel. See Rule 202(a).
                               - 6 -

                           Requirements

     To effectuate the foregoing policies and an orderly and
     efficient disposition of all cases on the trial
     calendar, it is hereby

     ORDERED that all facts shall be stipulated to the
     maximum extent possible. All documentary and written
     evidence shall be marked and stipulated in accordance
     with Rule 91(b), unless the evidence is to be used to
     impeach the credibility of a witness. Objections may
     be preserved in the stipulation. If a complete
     stipulation of facts is not ready for submission at
     trial, and if the Court determines that this is the
     result of either party’s failure to cooperate fully in
     the preparation thereof, the Court may order sanctions
     against the uncooperative party. Any documents or
     materials which a party expects to utilize in the event
     of trial (except for impeachment), but which are not
     stipulated, shall be identified in writing and
     exchanged by the parties at least 15 days before the
     first day of the trial session. The Court may refuse
     to receive in evidence any document or material not so
     stipulated or exchanged, unless otherwise agreed by the
     parties or allowed by the Court for good cause shown. *
     * *

     Petitioner served on respondent a document entitled

“Interrogatories, Requests for Admission and Production of

Documents”.   On October 10, 2001, respondent filed a motion for

protective order.   On October 11, 2001, we issued an order

granting respondent’s motion, in which we stated:

     The attachment to respondent’s motion, which includes a
     copy of a document that petitioner served on
     respondent, entitled “Interrogatories, Requests for
     Admission and Production of Documents”, contains
     contentions and/or statements by petitioner that the
     Court finds to be groundless and/or frivolous. The
     Court reminds petitioner that section 6673(a)(1) of the
     Internal Revenue Code states in pertinent part:
                               - 7 -

          Whenever it appears to the Tax Court that --

               (A) proceedings before it have been
          instituted or maintained by the taxpayer
          primarily for delay, (or)

               (B) the taxpayer’s position in such
          proceeding is frivolous or groundless, * * *

          the Tax Court, in its decision, may require
          the taxpayer to pay to the United States a
          penalty not in excess of $25,000.

     In the event that petitioner continues to advance
     frivolous and/or groundless contentions and arguments,
     the Court will be inclined to impose a penalty not in
     excess of $25,000 on petitioner under section
     6673(a)(1).

     In an order dated February 4, 2002, the Court granted a

similar motion by respondent for a protective order.    In that

order, petitioner was again cautioned that the Court would be

inclined to impose a penalty under section 6673(a)(1) if he

continued to advance frivolous and/or groundless arguments.

     In December 2001, respondent served petitioner with

interrogatories and requests for the production of documents and

admissions.   Petitioner’s answers to respondent’s requests for

production of documents, interrogatories, and admissions

indicated that he was asserting his Fifth Amendment privilege

against self-incrimination.   Respondent filed motions to compel

production of documents, to compel responses to interrogatories,

and to review sufficiency of petitioner’s response to request for

admissions.   A hearing on respondent’s motions was held on March

11, 2002, in Jacksonville, Florida.    At the hearing, counsel for
                               - 8 -

respondent, after answering certain questions asked by the Court,

orally moved to be allowed to withdraw respondent’s motions and

that the case be continued.   The Court granted respondent’s

motion.

     On October 10, 2002, the Court sent the parties a notice

setting this case for trial at the trial session of the Court in

Jacksonville, Florida, beginning on March 3, 2003.   Accompanying

that notice was the Court’s Standing Pre-Trial Order.

     On January 9, 2003, petitioner filed a motion for summary

judgment in which he asserted that he was entitled to judgment as

a matter of law because respondent failed to prepare substitutes

for returns.   In respondent’s response to petitioner’s motion for

summary judgment, respondent, citing Schiff v. United States, 919

F.2d 830 (2d Cir. 1990), Roat v. Commissioner, 847 F.2d 1379,

1381 (9th Cir. 1988), and Hartman v. Commissioner, 65 T.C. 542

(1975), asserted that section 6211(a) does not require the

Commissioner to prepare a substitute for return before

determining a deficiency and issuing a notice.   Petitioner’s

motion for summary judgment was denied.

     The trial in this case was held in Jacksonville, Florida, on

March 4, 2003.   Petitioner took the stand but refused to testify

as to any facts relevant to his Federal income tax liabilities.

Petitioner stated that he feared that any statements he might

make could be used by the Government in a subsequent criminal
                               - 9 -

trial.   Petitioner refused to answer the sole question asked on

cross-examination, asserting his Fifth Amendment privilege

against self-incrimination.

     Respondent called several witnesses who established that,

during the years at issue, petitioner received substantial

commissions from various insurance companies.    Respondent

introduced bank records to establish the total amounts that

petitioner had deposited in his bank accounts.    Respondent called

Revenue Agent Glenn Dugger, who was not involved in the original

examination of petitioner’s income, to testify how petitioner’s

income was reconstructed using the bank deposits method.3

Revenue Agent Dugger had reviewed the original bank deposits

analysis and concluded that, giving petitioner the benefit of the

doubt, more of the deposits should have been treated as nonincome

transfers between accounts.   He deducted those deposits from the

total deposit amount.   Revenue Agent Dugger calculated

petitioner’s insurance business expenses at 54.77 percent of his

commissions on the basis of the Department of Labor statistics

for insurance agents.   Revenue Agent Dugger calculated

petitioner’s insurance commissions and expenses for the years at

issue to be as follows:




     3
      The examination officer who originally conducted the bank
deposits analysis had retired on disability following a stroke
and was unavailable to testify at the trial in this case.
                                - 10 -

               Year       Commissions     Expenses

               1991        $163,912       $89,775
               1992         157,399        86,208
               1993         230,581       126,289
               1994         215,378       117,962
               1995         221,021       121,053
               1996         261,240       143,081
               1997         342,891       187,801

     Petitioner did not challenge Revenue Agent Dugger’s

reconstruction of his income.

                                OPINION

A.   Validity of Notice of Deficiency

     Petitioner’s primary contention is that the notice of

deficiency is invalid because respondent did not prepare a

substitute for return for each of the years at issue.   We

disagree.

     If the Secretary determines a deficiency in income tax, he

is authorized to send to the taxpayer a notice of deficiency by

certified or registered mail before assessing the deficiency.

Secs. 6212(a), 6201(a).   Under section 6211(a), the term

“deficiency” is generally defined as the amount of tax imposed

less the amount shown as the tax by the taxpayer upon his return.

See Laing v. United States, 423 U.S. 161 (1976).

     Where a taxpayer fails to file a return, section 6020(b)

allows the Secretary (or the District Director or other

authorized internal revenue officer or employee, sec.

301.6020-1(b)(1), Proced. & Admin. Regs.) to prepare a substitute
                                - 11 -

for return “from his own knowledge and from such information as

he can obtain through testimony or otherwise.”    This section,

however, is permissive, not mandatory.     United States v.

Stafford, 983 F.2d 25, 27 (5th Cir. 1993); Roat v. Commissioner,

supra at 1381.    Thus, although section 6020(b) allows the

Commissioner to prepare a substitute for return for a nonfiling

taxpayer, it is firmly established that section 6211(a) does not

require the Commissioner to prepare a substitute for return

before determining a deficiency and issuing a notice.      Geiselman

v. United States, 961 F.2d 1, 5 (1st Cir. 1992); Schiff v. United

States, supra at 832; see also Roat v. Commissioner, supra at

1381-1382 (even when a substitute for return is prepared for a

taxpayer, the Commissioner need not use that “return” in

determining the taxpayer’s deficiency under section 6211(a)).

     As section 6211(a) makes plain, only “if a return was made

by the taxpayer” does the tax shown on a return figure in the

Commissioner’s determination of a deficiency.    When a taxpayer

fails to file a return, as petitioner here, “it is as if he filed

a return showing a zero amount for purposes of assessing a

deficiency.”     Schiff v. United States, supra at 832.   In such a

case the deficiency is “the amount of tax due.”     Laing v. United

States, supra.

     Petitioner argues that section 301.6211-1(a), Proced. &

Admin. Regs., is invalid because it is inconsistent with section
                                - 12 -

6211.     We previously have held to the contrary; i.e., the

regulation is not an unreasonable interpretation of section 6211.

Spurlock v. Commissioner, 118 T.C. 155, 161 n.8 (2002).        In so

holding, we noted that the Supreme Court cited the regulation in

Laing v. United States, supra at 174, stating:        “Where there has

been no tax return filed, the deficiency is the amount of tax

due.”

        Petitioner, having failed to file Federal income tax returns

for 1991-97, was sent a notice of deficiency by certified or

registered mail signed by the District Director.       The notice

unquestionably meets the minimum requirements; respondent

properly “determined” the deficiency within the meaning of

section 6212(a).     We hold that the notice of deficiency is valid.

        We see no need to catalog petitioner’s remaining arguments,

covering topics ranging from communism to separation of church

and state, and painstakingly address them.      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).

B.      Deficiencies and Additions to Tax

        1.   Deficiencies: Reconstruction of Income

        Taxpayers bear the responsibility to maintain books and
                               - 13 -

records that are sufficient to establish their income.    Sec.

6001; DiLeo v. Commissioner, 96 T.C. 858, 867 (1991), affd. 959

F.2d 16 (2d Cir. 1992); sec. 1.446-1(a)(4), Income Tax Regs.

When a taxpayer fails to keep adequate books and records, the

Commissioner is authorized to determine the existence and amount

of the taxpayer’s income by any method that clearly reflects

income.    Sec. 446(b); Mallette Bros. Constr. Co. v. United

States, 695 F.2d 145, 148 (5th Cir. 1983); Webb v. Commissioner,

394 F.2d 366, 371-372 (5th Cir. 1968), affg. T.C. Memo. 1966-81;

see also Holland v. United States, 348 U.S. 121, 131-132 (1954).

     Respondent employed the “bank deposits method” of

reconstructing petitioner’s income for the years at issue as a

means of calculating his tax liability.    A bank deposit is prima

facie evidence of income, and the “use of the bank deposits

method for computing unreported income has long been sanctioned

by the courts.”    Clayton v. Commissioner, 102 T.C. 632, 645

(1994); see also DiLeo v. Commissioner, supra at 868; Tokarski v.

Commissioner, 87 T.C. 74, 77 (1986); Estate of Mason v.

Commissioner, 64 T.C. 651, 657 (1975), affd. 566 F.2d 2 (6th Cir.

1977).    The bank deposits method of reconstruction assumes that

all of the money deposited into a taxpayer’s account is taxable

income unless the taxpayer can show that the deposits are not

taxable.    DiLeo v. Commissioner, supra at 868; see also Price v.

United States, 335 F.2d 671, 677 (5th Cir. 1964).
                             - 14 -

     The Commissioner need not show a likely source of the income

when using the bank deposits method, but the Commissioner must

take into account any nontaxable items or deductible expenses of

which the Commissioner has knowledge.   Price v. United States,

supra at 677; Tokarski v. Commissioner, supra at 77.   If the

taxpayer contends that the Commissioner’s use of the bank

deposits method is unfair or inaccurate, the burden is on the

taxpayer to show the unfairness or inaccuracy.4   Price v. United

States, supra at 677; see also Rule 142(a); Welch v. Helvering,

290 U.S. 111 (1933).

     Given that petitioner failed to file Federal income tax

returns for the subject years, and that he refused to cooperate

with the examination officer in the audit of his Federal income

tax liability for those years, we consider it proper for

respondent to reconstruct petitioner’s income for the subject

years using the bank deposits method.   Revenue Agent Dugger

adequately explained how petitioner’s income was computed.

Petitioner had an opportunity to show error in respondent’s

computations, e.g., that some or all of the deposits represented



     4
      Sec. 7491, which is effective for court proceedings arising
in connection with examinations commencing after July 22, 1998,
shifts the burden of proof to the Commissioner in certain
circumstances and places on the Commissioner the burden of
production with respect to penalties and additions to tax. Sec.
7491 is inapplicable in this case because the examination of
petitioner’s 1991-97 tax years commenced in June 1998.
                              - 15 -

nontaxable income and/or he was entitled to additional

deductions, but he failed to take advantage of that opportunity.

     Petitioner did not present at trial even a scintilla of

evidence to prove error in respondent’s computations.    Petitioner

chose, instead, to assert the Fifth Amendment privilege against

self-incrimination.   Assuming this was a valid assertion of the

privilege, it is not a substitute for evidence and is not

“intended to be * * * a sword whereby a claimant asserting the

privilege would be freed from adducing proof in support of a

burden which would otherwise have been his.”   United States v.

Rylander, 460 U.S. 752, 758 (1983); Tweeddale v. Commissioner,

841 F.2d 643, 645 (5th Cir. 1988), affg. T.C. Memo. 1987-197;

Petzoldt v. Commissioner, 92 T.C. 661, 684 (1989).   In a civil

tax case, the taxpayer cannot avoid the burden of proof by

asserting the Fifth Amendment privilege.   United States v.

Rylander, supra at 758; see Steinbrecher v. Commissioner, 712

F.2d 195, 198 (5th Cir. 1983), affg. T.C. Memo. 1983-12;

Traficant v. Commissioner, 89 T.C. 501 (1987), affd. 884 F.2d 258

(6th Cir. 1989); Wheelis v. Commissioner, T.C. Memo. 2002-102,

affd. 63 Fed. Appx. 375 (9th Cir. 2003).

     In view of all the evidence, we hold that resort to the bank

deposits method was necessary to determine petitioner’s income

for the taxable years involved and that respondent properly

applied this method in determining that income.   Therefore, we
                                - 16 -

sustain Revenue Agent Dugger’s computation of petitioner’s

unreported income.

     2.   Additions to Tax

          a. Section 6651(a)(1)

     Section 6651(a)(1) imposes an addition to tax for failing to

file timely a required Federal income tax return, unless it is

shown that the failure was due to reasonable cause and not

willful neglect.     Petitioner was required to file Federal income

tax returns for each of the subject years.    Secs. 6012, 6072.

     Petitioner never asserted or presented any evidence

indicating that he filed one or more of the required returns.

Nor did he establish reasonable cause for his failure to do so.

Consequently, we hold that petitioner is liable for the addition

to tax under section 6651(a)(1).    See United States v. Boyle, 469

U.S. 241, 245 (1985); Cluck v. Commissioner, 105 T.C. 324,

338-339 (1995).

          b. Section 6654(a)

     Section 6654 imposes an addition to tax on an underpayment

of estimated tax.    This addition to tax is mandatory unless the

taxpayer establishes that one of the exceptions listed in section

6654(e) applies.     Recklitis v. Commissioner, 91 T.C. 874, 913

(1988).   Given that the record does not establish that any of the

referenced exceptions applies, we conclude that petitioner has
                              - 17 -

failed to meet his burden of proof and sustain respondent’s

determination as to this issue.

     For the foregoing reasons, we hold that petitioner is liable

for deficiencies in Federal income taxes, as well as additions to

tax under sections 6651(a)(1) and 6654, for 1991-97.

C.   Penalty Under Section 6673(a)

     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 “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); Booker

v. Commissioner, T.C. Memo. 1996-261; see also Hansen v.

Commissioner, 820 F.2d 1464, 1470 (9th Cir. 1987) (trial court’s

finding that taxpayer should have known that claim was frivolous

allows for section 6673 penalty).    A taxpayer’s failure to

provide the Commissioner with information requested and his

failure to offer evidence at trial pertaining to the substantive

issues raised in the notice of deficiency are evidence that a

suit in this Court was instituted primarily for delay.     Stamos v.

Commissioner, 95 T.C. 624, 638 (1990), affd. without published

opinion 956 F.2d 1168 (9th Cir. 1992).
                               - 18 -

     A review of the record in this case convinces us that

petitioner’s position in this proceeding is both frivolous and

groundless and that petitioner maintained and prolonged these

proceedings primarily for delay.   In so ruling we take into

account all aspects of petitioner’s conduct in this case.

     Petitioner’s initial petition lacks any explanation of the

basis of his disagreement with respondent and fails to comply

with Rule 31(a), which states that the purpose of the pleadings

is to give the parties and the Court fair notice of the matters

in controversy and the basis for their respective positions.

Petitioner’s amended petition avers no particular facts with

respect to respondent’s determination but, for the most part,

asserts that the notice of deficiency was invalid because

respondent failed to execute substitutes for returns.   Petitioner

appeared to be intelligent and knew, or should have known, that

his arguments were contrary to well-established law and thus were

frivolous.   Moreover, the Court repeatedly informed petitioner

that his claims were frivolous and warned him of possible

sanctions.

     Rather than heed the warning of the Court, petitioner

elected to continue to proceed with time-worn tax protester

rhetoric.    He filed his motion for summary judgment claiming that

respondent’s failure to file substitutes for returns invalidated

the notice of deficiency and, consequently, he was entitled to
                               - 19 -

judgment as a matter of law.   In respondent’s response to

petitioner’s motion for summary judgment, respondent cited Schiff

v. United States, 919 F.2d 830 (2d Cir. 1990), Roat v.

Commissioner, 847 F.2d at 1381, and Hartman v. Commissioner, 65

T.C. 542 (1975).   We denied petitioner’s motion for summary

judgment.   Thus, petitioner had knowledge of well-established

authority that section 6211(a) does not require the Commissioner

to prepare a substitute for return before determining a

deficiency and issuing a notice.   Petitioner, however, persisted

in his frivolous and groundless arguments through trial and his

answering brief, which consists mainly of hackneyed tax protester

rhetoric and rambling legalistic gibberish.

     Petitioner unreasonably prolonged the proceedings by serving

on respondent and filing with the Court repetitious, groundless,

and frivolous documents.   Petitioner was not interested in

disputing the merits of the deficiencies or the additions to tax.

Sua sponte, the Court holds that petitioner must pay a penalty

under section 6673(a)(1) for instituting these proceedings

primarily for delay and for taking groundless positions.     See

Pierson v. Commissioner, 115 T.C. 576, 580 (2000); Jensen v.

Commissioner, T.C. Memo. 2004-120; Frey v. Commissioner, T.C.

Memo. 2004-87; Frank v. Commissioner, T.C. Memo. 2003-88;

Robinson v. Commissioner, T.C. Memo. 2003-77.
                               - 20 -

     Petitioner’s Fifth Amendment privilege does not prevent us

from imposing the penalty.    See, e.g., Cabirac v. Commissioner,

120 T.C. 163 (2003); Rodriguez v. Commissioner, T.C. Memo.

2003-105; Edwards v. Commissioner, T.C. Memo. 2002-169; Wheelis

v. Commissioner, T.C. Memo. 2002-102.     We do not impose sanctions

on petitioner for refusing to testify, but rather for instituting

and maintaining these proceedings primarily for delay and

persisting in advancing arguments that are frivolous.

     The Court’s time and resources have been wasted.    Petitioner

was specifically warned by the Court of the likelihood of a

penalty under section 6673 if he persisted in his frivolous

arguments, and he has persisted.   Petitioner could have avoided

the penalty we now award to the United States, and other people

should avoid it, by even the most minimal concern for settled

rules.   Serious sanctions are necessary to deter petitioner and

others similarly situated; the penalty must be substantial for it

to have a deterrent effect.   See Takaba v. Commissioner, 119 T.C.

285, 295 (2002) (citing Coleman v. Commissioner, supra at 71).

Consequently, a penalty under section 6673 will be awarded to the

United States in the amount of $15,000.

     The amounts of the deficiencies resulting from the corrected

amounts of petitioner’s business income as conceded by respondent
                             - 21 -

using Revenue Agent Dugger’s computations will be calculated

pursuant to a Rule 155 computation.

     Accordingly,


                                      Decision will be entered under

                              Rule 155.
