                         T.C. Memo. 2003-266



                       UNITED STATES TAX COURT



         DAVID LEE SMITH AND MARY JULIA HOOK, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 8747-00, 11725-02.       Filed September 11, 2003.


     David Lee Smith and Mary Julia Hook, pro sese.

     Joan E. Steele, for respondent.



                         MEMORANDUM OPINION


     GERBER, Judge:   Respondent, on May 19, 2003, moved to

dismiss these consolidated cases1 for petitioners’ failure to

properly prosecute and to enter income tax deficiencies and

penalties (some in reduced amounts) by default against



     1
       These cases were consolidated for purposes of trial,
briefing, and opinion.
                                - 2 -

petitioners with respect to their 1992 through 1996 tax years.

The trial in these cases had been scheduled for the Court’s

Denver, Colorado, Trial Session commencing May 12, 2003.2       These

cases had been set for a time and date certain of May 19, 2003.

On the morning of May 19, 2003, these cases were called, and

petitioners failed to appear.   Respondent moved to dismiss both

cases for petitioners’ lack of prosecution.      We shall grant

respondent’s motion to dismiss for lack of prosecution, and

decisions will be entered by default.    Given the serious

consequences of this action, we find it appropriate to explain

the events in these cases.

     In the notices of deficiency for docket Nos. 8747-00 and

11725-02, dated May 18, 2000, and April 17, 2002, respectively,

respondent determined the following income tax deficiencies and

additions to tax for petitioners:

  Docket                               Additions to Tax
  Number    Year   Deficiency     Sec. 6651(a)(1)   Sec. 6662

  8747-00   1992     $6,736              none          $1,347
  8747-00   1993     21,167             $7,981          4,233
  8747-00   1994     15,394              7,198          3,079
 11725-02   1995     82,929             20,325         16,586
 11725-02   1996     55,290             13,822         11,058




     2
       With respect to docket No. 8747-00, the May 12, 2003,
setting was a continuation of a trial that had commenced during
spring 2002, resumed in summer 2002, and had been delayed to
enable the parties to incorporate and consolidate docket No.
11725-02, which involves subsequent tax years for the same
petitioners.
                               - 3 -

     The following is a chronological summary of the history of

these cases.

     On August 15, 2000, petitioners filed a petition in docket

No. 8747-00 (Case I) alleging that respondent erred in

determining deficiencies in income tax and penalties for 1992,

1993, and 1994.   By an April 10, 2001, notice of trial, Case I

was set for trial on September 10, 2001, in Denver, Colorado.

     On August 10, 2001, petitioners moved for a continuance on

the grounds that petitioner Hook had learned during June 2001,

that petitioner Smith (to whom petitioner Hook was married) was

having an extramarital affair, and, as a result, they were living

separately and not communicating.   Petitioner Hook also stated,

in the continuance motion, that she recognized “that continuances

of trial dates are not routinely granted” and that additional

time would permit petitioners “to prepare this case and be in a

position to present it to the Court.”

     Respondent objected to a continuance, explaining that

petitioners, during the pretrial period, including the time prior

to petitioner Hook’s June 2001 revelation, had been uncooperative

and avoided any meetings with the Appeals officer or respondent’s

counsel, as required by the Court’s standing pretrial order and
                               - 4 -

the Court’s Rules.3   Respondent outlined a series of

communications between petitioners and respondent wherein

pretrial meetings were scheduled and, in each instance re-

scheduled or canceled by petitioners.

     Petitioners’ continuance motion was set for hearing at the

September 10, 2001, Trial Session, at which time respondent moved

for a dismissal due to petitioners’ lack of prosecution.    At the

hearing petitioner Hook advised the Court that, although she

remained at the location described in the petition, petitioner

Smith had moved to another State and probably did not receive

service of the Court’s Orders or respondent’s motion to dismiss.

Petitioner Smith’s address was provided to the Court, and all

subsequent service of papers was made to petitioners Hook and

Smith at their separate addresses.     Petitioners were permitted to

file a written response to respondent’s dismissal motion.    The

Court, by an order dated October 12, 2001, denied respondent’s

motion to dismiss and granted petitioners’ continuance motion.

     By a November 28, 2001, notice setting case for trial, along

with an attached standing pretrial order, petitioners were

notified that Case I had been set for trial at the Court’s

Denver, Colorado, Trial Session scheduled for April 29, 2002.



     3
       All section references are to the Internal Revenue Code in
effect for the years at issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
                                 - 5 -

Six days before the scheduled April 29, 2002, Trial Session, the

Court received from petitioners a document entitled “MOTION

REQUESTING IMMEDIATE INFORMATION ABOUT TRIAL SETTING, AND, IF

NECESSARY, MOTION REQUESTING NEW TRIAL SETTING”.    Said document

was filed at the April 29, 2002, Trial Session as “Petitioners’

Motion To Continue”.

     At the trial session, respondent filed a second motion to

dismiss for lack of prosecution alleging that since the

continuance from the September 2001 Trial Session, petitioners

once more failed to meet or meaningfully communicate with

respondent, as required by the Court’s Orders and Rules.

Respondent’s counsel established that petitioners had been

notified by mail on January 9, 2002, of the need for a meeting

prior to the April 29, 2002, Trial Session and a February 5,

2002, conference date was set.

     On the night of February 4, 2002, petitioner Hook left a

message on respondent’s counsel’s telephone answering machine

canceling the conference.    During February 2002, respondent’s

counsel served discovery on petitioners, but they did not respond

to the discovery requests.    By a March 18, 2002, letter to

petitioners, respondent’s counsel again invited petitioners to

confer on April 9, 2002, regarding the April 29, 2002, Trial

Session.   In an April 8, 2002, letter, petitioner Hook advised
                               - 6 -

respondent’s counsel that she was not aware that Case I had been

scheduled for trial on April 29, 2002.

     At the April 29, 2002, Trial Session, the Court asked

petitioner Hook if she was aware that her case had been scheduled

for trial and she responded that when she heard about the trial

setting (about 4 months before), she had written to the Court to

inquire about the trial session and because she did not receive a

response back from the Court, she ignored respondent’s counsel’s

January and March notifications of the impending April trial

date.

     The Court’s files maintained for Case I do not reveal any

such letter from petitioner.   In addition, the Court’s records

reveal that all Court notifications, Orders, etc., had been sent

to petitioners Hook and Smith at their separate addresses by

certified mail, and that the notices of trial and Orders sent by

the Court to petitioners were not returned as undeliverable.

Under the circumstances, the Court found petitioner Hook’s

explanations to be disingenuous.   Accordingly, petitioners’

explanation or excuses were not accepted and Case I was set for

trial on May 2, 2002, at 9:00 a.m.     The Court admonished

petitioners that failure to appear would result in a dismissal or

default of their case.

     On May 2, 2002, petitioners Hook and Smith appeared and

attempted, as a preliminary matter, to offer four boxes of
                               - 7 -

records, each containing hundreds or perhaps thousands of

documents on the ground that respondent had refused to stipulate

after petitioner had proffered them on May 1, 2002, only 1 day

before the trial date.

     Respondent’s counsel explained that she refused to blindly

stipulate four boxes of materials without some explanation or

understanding of the individual documents and their relevance

and/or relation to the controverted expense or income items.    The

adjustments for petitioners’ 1992, 1993, and 1994 tax years

involved:   Underreported gross receipts and disallowed expenses

and depreciation on Schedules C (Profit or Loss From Business),

income from a distribution from a retirement account for 1993,

increase and decrease of reported rental income, disallowance of

miscellaneous itemized deductions, self-employment tax, and

additions to tax under sections 6651(a)(1) and 6662.   The

adjustments involved numerous individual items.

     During the May 2, 2002, hearing, the Court inquired of

petitioners as to the organization of the contents of the four

boxes.   Petitioner Smith, in response, explained that the

documents were not necessarily in chronological order and that

individual folders did not necessarily relate to any particular

adjustment in the notice of deficiency.   The Court inspected one

of the numerous documents, a folder, and found that it contained

a large volume of loose papers and miscellaneous documents.
                               - 8 -

     It was apparent to the Court that the boxes could not be

received in evidence in the state that they were being offered by

petitioners.   The Court required the parties to organize the

records in a manner that would provide for an orderly and

meaningful trial, including any decisions about whether such

documents were relevant and/or otherwise admissible into

evidence.

     The trial was recessed for 2 hours, and the parties were

required to go through the individual documents and to organize

them in some reasonable manner.   The trial was reconvened after 2

hours, and it appeared to the Court that the parties had made a

limited amount of progress in organizing the documents, so the

parties were required to continue their organization of the

documents and the stipulation process until July 15, 2002, at

10:00 a.m. (approximately 60 days later) when the trial would

resume.

     On July 15, 2002, upon the resumption of trial, one of the

first matters brought to the Court’s attention was respondent’s

Motion to Dismiss For Failure To Properly Prosecute, which had

been held in abeyance from the April 29 and May 2, 2002,

hearings.   In a July 15, 2002, supplement to his earlier motion

to dismiss, respondent, after reiterating the history up through

May 2, 2002, stated that meetings with petitioners concerning the

organization and stipulation of the contents of the four boxes of
                                - 9 -

records had not progressed beyond the limited progress that had

been made at the May 2, 2002, Court-supervised session, with the

limited exception of one adjustment involving the amounts claimed

for State income tax for 1992, 1993, and 1994.

     Accordingly, the Court spent most of July 15, 2002

supervising the stipulation process and receiving documents into

evidence.    This waste of the Court’s time was precipitated by

petitioners’ failure to comply with the Court’s Rules and Orders

that they meet with respondent and propose evidence for

stipulation, even though respondent had offered to meet with

petitioners on several occasions.

     On July 16, 2002, after the examination of the first witness

had begun by petitioners, it became apparent to the Court that a

further exchange of documents and information was required by the

parties before the witnesses could be properly examined.    The

Court, for the third time, recessed Case I (for approximately 30

days) until August 19, 2002.    In addition, the Court provided the

parties with guidance as to the material that must be exchanged

between the parties and as to the proper organization of those

materials.

     On August 19, 2002, the trial of Case I resumed and, after

some preliminary matters, a witness was recalled to the stand.

At that point, respondent moved for a continuance on the ground

that a second case involving similar issues for petitioners’ next
                               - 10 -

2 taxable years would soon be docketed, and it would conserve the

parties’ and Court’s time to try both cases together.

Petitioners joined in the motion to continue on the grounds that

it would provide time for the parties to further refine

documentary evidence.

     A continuance was granted, and the Court provided the

parties with additional guidance regarding trial preparation,

including an admonition to spend the time in recess to prepare

the two cases for trial, including organizing documents and

interviewing witnesses.

     In a status report filed on November 19, 2002, respondent

advised that petitioners’ 1995 and 1996 tax years were now in

issue (Case II) and that petitioners had been requested in

writing, as early as October 15, 2002, to begin the trial

preparation process.    The adjustments to petitioners’ 1995 and

1996 tax years are substantially the same as those for

petitioners’ 1992, 1993, and 1994 tax years.4   As of the date of

respondent’s report, petitioners had not contacted respondent

regarding Case I or Case II.

     On December 13, 2002, the Court’s notice setting cases for

trial on May 12, 2003, along with a standing pretrial order was

issued to the parties ordering, among other matters, the parties


     4
       The examination of petitioners’ 1992, 1993, and 1994 tax
years began during November 1995 and the examination of
petitioners’ 1995, and 1996 tax years began during November 1997.
                              - 11 -

to fully cooperate in the stipulation of facts in accord with the

Court’s Rules and to comply with the requirements of the Court’s

Rules and Orders for trial.   Shortly thereafter, respondent moved

to consolidate Case I and Case II, and the Court ordered

petitioners to respond or object by January 31, 2003.

Petitioner, in a motion filed February 10, 2003, moved for

additional time to respond, and in a response dated February 19,

2003, petitioners contended that the cases should not be

consolidated because they would not be able to prepare for trial

by May 12, 2003.   The consolidation motion was granted, and Case

I and Case II were not continued from the May 12, 2003, Trial

Session.

     On April 9, 2003, respondent moved that the trial of the

consolidated cases be set to begin on a date certain of May 19,

2003 (the second week of the scheduled calendar in Denver,

Colorado), in part to accommodate nine Government employees whose

testimony had been subpoenaed by petitioners.   In their April 25,

2003, response to respondent’s motion, petitioners requested that

the case be scheduled for a date certain on or after October 1,

2003.   As a reason for the extended time, petitioner Hook

explained that other matters connected with her law practice had

been or were being scheduled during May and through September of

2003.   The trial of both cases was set by an Order, dated April
                              - 12 -

28, 2003, for a time and date certain of 10:00 a.m., May 19,

2003.

     On May 16, 2003, petitioners attempted to file a motion

entitled “Petitioners’ Emergency Motion To Strike Trial Date And

Reset Trial” in Washington, D.C., even though petitioners knew

that the Court was sitting in Denver, Colorado, for a 2-week

period beginning May 12, 2003.   In that Motion, it was alleged

that each petitioner had been debilitated for approximately 2

weeks and that they were suffering from different illnesses.    In

their untimely motion, petitioners advised that they would not

appear on May 19, 2003, at the scheduled trial.

     The trial Judge was not made aware of petitioners’

“Emergency Motion” until immediately before the scheduled May 19,

2003, trial setting.   On the morning of May 19, 2003,

petitioners’ cases were called, but petitioners did not appear or

send anyone in their stead.   Even though petitioners failed to

appear, 10 witnesses (who were current and former employees of

respondent) appeared pursuant to subpoenas issued by petitioners.

Petitioners failed to advise the witnesses not to appear, even

though petitioners knew they did not intend to appear themselves.

Petitioners did not comply with the Court’s Order or Rules and

Procedures as fully outlined in respondent’s Motion to Dismiss

For Failure To Properly Prosecute, filed on the morning of May

19, 2003.
                                - 13 -

     The Court took respondent’s Motion under advisement and, by

Order, permitted petitioners until July 3, 2003, within which to

show cause why respondent’s Motion should not be granted and a

decision be entered against petitioners.   In a response to an

order to show cause filed July 3, 2003, petitioners, in essence,

presented the following reasons why respondent’s Motion should

not be granted:

     (a) Insufficient time to prepare for trial.

     (b) Petitioners are lawyers and are not paid to work on

their own cases.

     (c) Each petitioner became ill with a different illness, and

in addition, both had laryngitis and were therefore unable to

speak or appear in Court.

     (d) When respondent moved for a continuance the Court was

disposed to grant it.

                            Discussion

     Rule 123 of this Court’s Rules of Practice and Procedure

provides that the Court may, at any time, dismiss a case and

enter a decision against a petitioner.   As described above,

petitioners have, on several occasions, not been prepared for

trial, although they have been given several opportunities and

almost 2 years to do so.    In addition, petitioners have ignored

this Court’s Orders and Rules and protracted these proceedings.

For the reasons stated in respondent’s Motion To Dismiss For
                              - 14 -

Failure To Properly Prosecute and the record and transcripts in

these cases (as described in the historical summary set forth

above) respondent’s Motion will be granted and decisions entered

for respondent.5

     “The sanction of dismissal is the most severe sanction that

a court may apply, and its use must be tempered by a careful

exercise of judicial discretion.”   Durgin v. Graham, 372 F.2d

130, 131 (5th Cir. 1967); Freedson v. Commissioner, 67 T.C. 931,

937 (1977), affd. 565 F.2d 954 (5th Cir. 1978).   Petitioners,

both of whom are experienced practicing lawyers, ignored this

Court’s Orders and process.   Further, they have failed to comply

with Pretrial Orders and Court Rules requiring the preparation of

their cases, including the requirement to meet and/or work with

counsel for respondent to exchange documents and information,

stipulate facts, and otherwise to prepare for trial.   Since

September 2001, petitioners were provided with additional time to

remedy their failure to comply.   In each of the numerous

instances that petitioners’ cases were called for trial, or trial

was resumed, they failed to correct or to remedy their prior

failures, and little or no progress had been made from the time

before, even though the Court took great pains to detail what was



     5
       Respondent, in his Motion for dismissal under
consideration seeks the entry of decisions for deficiencies that,
in some instances, are reduced in amount from the amounts
determined in the notices of deficiency.
                               - 15 -

expected.    Petitioners have been admonished that their failure to

prepare for trial and/or comply with this Court’s Orders, Rules

and Procedures would result in a default.

     In each instance where petitioners have attempted to provide

explanations of their failure to properly proceed and/or

prosecute their cases, their explanations were found to be

disingenuous and without foundation.    For example, petitioner

Hook stated that she did not believe that her case was set for

trial, even though so advised by respondent on two different

occasions.   Petitioner Hook, a lawyer, suggested that it was

sufficient that she sent a letter to the Court asking whether her

case was set for trial.   No such letter has been located.

Moreover, none of the Court’s Notices of Trial, Orders, Pretrial

Orders, and related matters, that were served on and mailed to

petitioners has been returned for failure of delivery.

Petitioners, who are practicing lawyers, could have easily

determined the status of their cases.

     On December 13, 2002, petitioners’ consolidated cases were

scheduled for trial at the Denver, Colorado, Trial Session that

commenced on May 12, 2003.   Petitioners were well aware of that

date, and yet they did not meet with respondent’s counsel to

prepare their cases for trial.   Petitioners did not advise

respondent or the Court that they did not intend to appear until

the eve of trial.   Curiously, both petitioners claimed to have
                              - 16 -

different debilitating illnesses which they alleged made them

unable to appear for the longstanding trial date.   We must note

that petitioners alleged that the onset of their physical

conditions began more than 2 weeks prior to the trial session.

It is also quite curious and hugely coincidental, that both

petitioners contracted laryngitis, in addition to their

debilitating illness, so that they were “conveniently” unable to

orally communicate with the Court.

     Although petitioner Hook has filed some responses to the

Court’s Orders and/or respondent’s inquiries of petitioners,

petitioner Smith has not responded to any orders, notices, or

inquiries.6

     “There must come a time when even at some risk of error, a

court is justified in accepting as conclusive a series of

apparent subterfuges.”   Freedson v. Commissioner, 565 F.2d at 955


     6
       Respondent’s counsel pointed out that petitioner Smith has
been sanctioned by other courts. In particular, the Court of
Appeals for the Tenth Circuit stated that

          Mr. Smith has a long history with this court
     marred by repetitive, frivolous filings and general
     abuse of the judicial process. This well-documented
     course of misconduct began during his tenure as a
     practicing attorney, prompting the imposition of
     numerous monetary sanctions, his suspension from Tenth
     Circuit practice, and ultimately his disbarment by this
     court.   * * *

Howard v. Mail-Well Envelope Co., 150 F.3d 1227, 1231 (10th Cir.
1998). The Court of Appeals also noted that Mr. Smith had been
disbarred by the U.S. Supreme Court. See In re Disbarment of
Smith, 516 U.S. 984 (1995).
                              - 17 -

(quoting Katz v. Commissioner, 188 F.2d 957, 959 (2d Cir. 1951),

affg. a Memorandum Opinion of this Court).   Petitioners have had

numerous opportunities to present the merits of their cases.     At

this juncture, after three false starts and a total of five

separate opportunities to present the merits of their claims,

petitioners have not meaningfully done so.   The taxable years in

question are 1992 through 1996, and these cases have been pending

and/or docketed for a sufficient amount of time for petitioners

to have prepared for and presented the merits of their cases.

     Although petitioners alleged that the period for assessment

of any deficiency expired, respondent has shown that at the time

the notices of deficiency were mailed, the period for assessment

remained open due to extensions of the assessment period agreed

to by the parties.   In particular, respondent provided the Court

with copies of petitioners’ income tax returns which reflect the

filing dates and copies of agreements extending the periods for

assessment to a time beyond the date the notice of deficiency was

issued.

     Respondent has also shown that he does not bear the burden

of proof, burden of going forward with evidence, or burden of

production on any other matter in issue.   In that regard, the

examination of petitioners’ 1992, 1993, and 1994 tax years began

November 1995 and the examination of petitioners’ 1995 and 1996

tax years began November 1997.   Section 7491 applies to cases in
                               - 18 -

which the examination commenced after July 22, 1998.

Accordingly, that section does not apply to the taxable years

before the Court.    In their response to respondent’s motion to

dismiss and this Court’s Order to Show Cause, petitioners offer

little to refute respondent’s allegations.

     Respondent’s frustration with petitioners is longstanding,

and several motions for dismissal have been filed, the first of

which was during October 2001.    Petitioners subpoenaed at least

10 witnesses, all of whom appeared on the specific trial date of

May 19, 2003.   These same witnesses also had been required to

appear on two different occasions during summer 2002.

Petitioners did nothing to notify the witnesses not to appear.

At some point during this extended process, petitioners must

accord these proceedings some priority over their other affairs

or risk dismissal.    Montgomery v. Commissioner, 367 F.2d 917 (9th

Cir. 1966).

     Accordingly,

                                      Respondent’s Motion To Dismiss

                                 for Failure To Properly Prosecute

                                 in Docket Nos. 8747-00 and 11725-02

                                 will be granted, and decisions

                                 entered for respondent.
