                         T.C. Memo. 2002-234



                       UNITED STATES TAX COURT



     MAURICE C. WILSON AND DORRIS E. WILSON, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5593-00.                  Filed September 19, 2002.



     Maurice C. Wilson and Dorris E. Wilson, pro sese.

     Steven M. Webster, for respondent.



                         MEMORANDUM OPINION


     CHIECHI, Judge:    This case is before the Court on respon-

dent’s motion for summary judgment (respondent’s motion).

Petitioner Maurice C. Wilson (Mr. Wilson) filed a response (Mr.

Wilson’s response) to respondent’s motion and a supplement (Mr.

Wilson’s supplement) to that response.    Respondent filed a reply

(respondent’s reply) to Mr. Wilson’s response as supplemented,
                                - 2 -

and Mr. Wilson filed a reply (Mr. Wilson’s reply) to respondent’s

reply.1   We shall grant respondent’s motion.

                            Background

     All of the facts on which respondent relies in respondent’s

motion have been deemed established pursuant to the Court’s Order

under Rule 91(f)2 dated September 24, 2001, and pursuant to Rule

90(c).

     At the time the petition in this case was filed, Mr. Wilson

resided in Goldsboro, North Carolina, and Ms. Wilson resided in

Myrtle Beach, South Carolina.

     During 1993 and 1994, Mr. Wilson operated Pleasantville

Medical Services (Pleasantville) as a pharmacy.   Pleasantville

was located in Baltimore, Maryland, within the operating location

of DK Medical Services, Inc., d/b/a Industrial Medical and

Physical Therapy (Industrial Medical).   Deborah Kolodner, Mr.

Wilson’s daughter, owned and operated Industrial Medical.


     1
      Petitioner Dorris E. Wilson (Ms. Wilson) did not sign Mr.
Wilson’s response, Mr. Wilson’s supplement to that response, or
Mr. Wilson’s reply. There is no indication in the record that
Ms. Wilson authorized Mr. Wilson to speak on her behalf in those
filings. We conclude that Ms. Wilson does not dispute that
respondent’s motion should be granted as to her. Assuming
arguendo that we had not concluded that Ms. Wilson does not
dispute that respondent’s motion should be granted as to her, on
the record before us, we conclude that respondent’s motion should
be granted as to Ms. Wilson.
     2
      All Rule references are to the Tax Court Rules of Practice
and Procedure. Unless otherwise indicated, all section refer-
ences are to the Internal Revenue Code in effect for the years at
issue.
                               - 3 -

     Although Mr. Wilson was not a licensed pharmacist in the

State of Maryland during 1993 and 1994, he distributed through

Pleasantville during those years medication and medical supplies

to patients of Industrial Medical.

     During 1993 and 1994, petitioners, as contractors for

Industrial Medical, received the following amounts of

compensation from that business in the form of checks written on

its business operating bank account:3


         Mr. Wilson’s Compensation from Industrial Medical
                Year             Amount of Compensation
                1993                     $44,000
                1994                      30,621


         Ms. Wilson’s Compensation from Industrial Medical
                Year             Amount of Compensation
                1993                     $7,315
                1994                     15,030


     Industrial Medical accounted for the foregoing amounts of

compensation paid to Mr. Wilson and to Ms. Wilson as “Contract

Service Expenses”.   In the corporate income tax return that

Industrial Medical filed for each of its taxable years 1993 and

1994, Industrial Medical deducted the respective amounts of

compensation that it had paid to Mr. Wilson and to Ms. Wilson



     3
      Industrial Medical also paid compensation to other contrac-
tors in the form of checks written on its business operating bank
account.
                              - 4 -

during each of those years.

     During 1994, Mr. Wilson received an additional $98,934 from

Industrial Medical in the form of checks written on a bank

account other than its business operating bank account.   Those

checks specifically identified the purpose of such checks as loan

repayments, and the proceeds of those checks represented loan

repayments.

     Petitioners jointly filed Form 1040, U.S. Individual Income

Tax Return, for 1993 (1993 joint return).   In their 1993 joint

return, petitioners did not report the $44,000 in compensation

and the $7,315 in compensation that Industrial Medical paid

during 1993 to Mr. Wilson and Ms. Wilson, respectively.

     Petitioners jointly filed Form 1040, U.S. Individual Income

Tax Return, for 1994 (1994 joint return).   In their 1994 joint

return, petitioners did not report the $30,621 in compensation

and the $15,030 in compensation that Industrial Medical paid

during 1994 to Mr. Wilson and to Ms. Wilson, respectively.

     After a trial by jury in the United States District Court

for the District of Maryland (U.S. District Court), the jury

found Mr. Wilson guilty, inter alia, of income tax evasion under

section 7201 for the taxable years 1993 and 1994 for

underreporting taxable income of approximately $50,969 and

approximately $49,253 and underpaying tax of approximately $9,476
                                - 5 -

and approximately $8,358 for those respective years.4   (We shall

refer to the proceeding in the U.S. District Court in which the

jury found Mr. Wilson guilty of, inter alia, income tax evasion

under section 7201 as Mr. Wilson’s criminal tax proceeding.)

Pursuant to the judgment imposed against Mr. Wilson in Mr.

Wilson’s criminal tax proceeding, the U.S. District Court ordered

Mr. Wilson, inter alia, to pay restitution to the Internal

Revenue Service (IRS) in the amount of $17,834.5   The amount of

restitution that the U.S. District Court ordered Mr. Wilson to

pay to the IRS was equal to the sum of the tax for each of the

taxable years 1993 and 1994 that the jury found Mr. Wilson

underpaid for each such year.

     On April 11, 2000, respondent issued to petitioners a notice

of deficiency (notice) for the taxable years 1993 and 1994.     In

that notice, respondent determined deficiencies in petitioners’

Federal income tax (tax), fraud penalties under section 6663, and

accuracy-related penalties under section 6662(a), as follows:




     4
      Mr. Wilson was also found guilty of aiding and abetting
under 18 U.S.C. sec. 2 (2000).
     5
      In a separate proceeding in the U.S. District Court, after
a trial by jury, the jury found Mr. Wilson guilty of mail fraud
under 18 U.S.C. sec. 1341 (2000) and aiding and abetting under 18
U.S.C. sec. 2. Pursuant to the judgment imposed against Mr.
Wilson in that criminal proceeding, the U.S. District Court
ordered Mr. Wilson, inter alia, to pay restitution to certain
insurance companies in the amount of $15,000.
                                    - 6 -

            Petitioners’    Fraud Penalty       Accuracy-Related Penalty
 Year       Deficiency     Under Sec. 6663        Under Sec. 6662(a)
                              1                         2
 1993        $16,209           $10,613.25                $411.60
                                1                        2
 1994         14,192              7,363.50                 874.80
        1
       Respondent determined to impose the fraud penalty under
sec. 6663 for the taxable years 1993 and 1994 on the portions of
the underpayments attributable to the $44,000 and $30,621 of
compensation that respondent determined Mr. Wilson received
during those respective years.
     2
       Respondent determined to impose the accuracy-related pen-
alty under sec. 6662(a) for the taxable years 1993 and 1994 on
the portions of the underpayments attributable to the $7,315 and
$15,030 of compensation that respondent determined Ms. Wilson
received during those respective years.

                                  Discussion

        The Court may grant summary judgment where there is no

genuine issue of material fact and a decision may be rendered as

a matter of law.       Rule 121(b); Sundstrand Corp. v. Commissioner,

98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994).            The

party moving for summary judgment bears the burden of proving

that there is no genuine issue of material fact.            The factual

materials and the inferences therefrom are to be read in the

light most favorable to the party opposing summary judgment.

Naftel v. Commissioner, 85 T.C. 527, 529 (1985); Jacklin v.

Commissioner, 79 T.C. 340, 344 (1982).         However, the party

opposing summary judgment cannot rest upon mere allegations or

denials set forth in that party’s pleadings, but must set forth

specific facts showing that there is a genuine issue for trial.

Rule 121(d); Marshall v. Commissioner, 85 T.C. 267, 271 (1985).

        In Mr. Wilson’s response as supplemented and Mr. Wilson’s
                                - 7 -

reply, Mr. Wilson disputes certain of the facts on which respon-

dent relies in respondent’s motion.6    For example, Mr. Wilson

contends that any money that he received from Industrial Medical

represented loan repayments.7   We reject that contention.   The

matters deemed established and deemed admitted in the instant

case establish, inter alia, that during 1993 and 1994 Industrial

Medical paid compensation to Mr. Wilson of $44,000 and $30,621,

respectively, and to Ms. Wilson of $7,315 and $15,030, respec-

tively, which they failed to include in their respective 1993 and

1994 joint returns.   We also reject Mr. Wilson’s contention that

there are factual disputes with respect to other matters on which

respondent relies in respondent’s motion.    That is because those

other matters have been deemed established and deemed admitted in

the instant case.8

     In Mr. Wilson’s response as supplemented and Mr. Wilson’s

reply, Mr. Wilson also alleges certain facts upon which respon-

     6
      Some of the facts on which respondent relies in respon-
dent’s motion and which Mr. Wilson disputes are not material to
resolving the issues raised in respondent’s motion. For example,
in Mr. Wilson’s supplement, Mr. Wilson asserts that he never
claimed to be a pharmacist and that he did not own or operate
Pleasantville.
     7
      Respondent does not dispute that, in addition to the unre-
ported compensation of $30,621 that Mr. Wilson received from
Industrial Medical during 1994, Mr. Wilson received $98,934 in
loan repayments from Industrial Medical during that year.
     8
      Moreover, as discussed below, the doctrine of collateral
estoppel precludes Mr. Wilson from litigating here matters
litigated in Mr. Wilson’s criminal tax proceeding.
                               - 8 -

dent does not rely in respondent’s motion.   For example, Mr.

Wilson alleges that his “fine & IRS obligation that was ruled by

Judge Legg [in the U.S. District Court] is settled and satisfied

and paid in full.”   Assuming arguendo that Mr. Wilson has in fact

paid what he refers to as a “fine”9 and the restitution ordered

by the judgment in Mr. Wilson’s criminal tax proceeding, those

facts are not material to our resolving the issues raised in

respondent’s motion.   The payment of a fine, an assessment, or

restitution for income tax evasion under section 7201 does not

bar imposition of the fraud penalty under section 6663.10    Addi-

tions to tax, like those imposed for fraud under section 6663,

are remedial, and not punitive.   Helvering v. Mitchell, 303 U.S.

391, 401 (1938); Thomas v. Commissioner, 62 F.3d 97, 100 (4th

Cir. 1995), affg. T.C. Memo. 1994-128; Ianniello v. Commissioner,

98 T.C. 165, 187 (1992).   Such additions to tax are provided

primarily as a safeguard for the protection of the revenue and to

reimburse the Government for the significant expense of investi-

gation and the loss resulting from a taxpayer’s actions or

omissions.   Helvering v. Mitchell, supra.


     9
      The judgment in Mr. Wilson’s criminal tax proceeding did
not order Mr. Wilson to pay a fine. That judgment, inter alia,
ordered Mr. Wilson to pay an assessment of $250.
     10
      We note that respondent states in respondent’s reply that
“assuming that the income tax liabilities were paid, the peti-
tioners’ [sic] shall receive credit for the payment upon assess-
ment of the tax liabilities.”
                              - 9 -

     All of the facts on which respondent relies in respondent’s

motion have been deemed established and deemed admitted.     Those

facts include the material facts on which we may proceed to

resolve the issues in respondent’s motion.   We conclude that

there are no genuine issues of material fact regarding those

issues.

     With respect to respondent’s determinations of deficiencies

and accuracy-related penalties for the taxable years 1993 and

1994, on the record presented, we sustain those determinations.

     With respect to the fraud penalties under section 6663 that

respondent determined against Mr. Wilson for the taxable years

1993 and 1994, respondent contends in respondent’s motion that,

under Amos v. Commissioner, 43 T.C. 50, 54-55 (1964), affd. 360

F.2d 358 (4th Cir. 1965), “the prior criminal judgments for tax

evasion are conclusive and binding on Mr. Wilson, and he is

estopped from denying in this case that * * * [he] willfully

filed a false and fraudulent income tax return for the taxable

years 1993 and 1994, with the intent to evade tax.”

     In Montana v. United States, 440 U.S. 147 (1979), the

Supreme Court of the United States (Supreme Court) examined and

discussed the doctrine of collateral estoppel.   The Supreme Court

stated in pertinent part:

     Under collateral estoppel, once an issue is actually
     and necessarily determined by a court of competent
     jurisdiction, that determination is conclusive in
     subsequent suits based on a different cause of action
                              - 10 -

     involving a party to the prior litigation. * * * To
     preclude parties from contesting matters that they have
     had a full and fair opportunity to litigate protects
     their adversaries from the expense and vexation attend-
     ing multiple lawsuits, conserves judicial resources,
     and fosters reliance on judicial action by minimizing
     the possibility of inconsistent decisions. [Id. at
     153-154; fn. ref. omitted.]

     We hold that the doctrine of collateral estoppel bars Mr.

Wilson from relitigating in the instant case the matters liti-

gated in Mr. Wilson’s criminal tax proceeding, i.e., whether Mr.

Wilson underreported his income and underpaid his tax for each of

the taxable years 1993 and 1994 and whether his underpayment of

such tax for each such year was due to fraud.      On the record

presented, we sustain respondent’s determinations with respect to

the respective fraud penalties under section 6663 that respondent

determined against Mr. Wilson for the taxable years 1993 and

1994.

     We have considered all of Mr. Wilson’s arguments and conten-

tions that are not discussed herein, and we find them to be

without merit and/or irrelevant.

     On the record presented for purposes of respondent’s motion,

we shall grant that motion.

     To reflect the foregoing,

                                      An appropriate Order will be

                                 issued and Decision will be entered

                                 for respondent.
