  VIVIAN L. RADER, ET AL., 1 PETITIONERS v. COMMISSIONER
            OF INTERNAL REVENUE, RESPONDENT

      Docket Nos. 11409–11, 11476–11,         Filed October 29, 2014.
                  27722–11.

         Ps failed to file returns for 2003–06 and 2008 (years in
      issue). The IRS examining agent, using the bank deposits
      method and information returns issued in connection with
      payments to P–H or to both Ps, reconstructed Ps’ income for
      the years in issue and determined tax deficiencies and addi-
      tions to tax under I.R.C. secs. 6651(a)(1) and (2) and 6654,
      which he incorporated on substitutes for returns (SFRs) for
      each P for 2003–06 and an SFR for P–H for 2008. The SFRs
      constituted the basis for the notices of deficiency issued to Ps.
      R filed amendments to answer in docket Nos. 11409–11 and
      11476–11 in which he changed the erroneous selection of
      ‘‘single’’ filing status on the 2003–06 SFRs for each P to ‘‘mar-
      ried filing separate’’, thereby increasing the tax deficiencies
      and additions to tax for each of those years, as set forth on
      attachments to the amendments to answer. During the trial,
      the parties stipulated that any and all deficiencies and addi-
      tions to tax arising therefrom would be imposed on P–H
      alone. Among the items of income that Ps received in 2006
      were proceeds from two sales of Colorado real property that
      were subjected to 10% withholding by the escrow agent pursu-
      ant to I.R.C. sec. 1445(a), which applies to dispositions of U.S.
      real property interests by foreign persons and gives rise to a
      credit under I.R.C. sec. 33. Ps failed to furnish the payor with
      a taxpayer identification number or a certification that Ps
      were not foreign persons, which would have exempted them
      from I.R.C. sec. 1445(a) withholding pursuant to I.R.C. sec.
      1445(b)(2). Ps attack the sufficiency of the SFRs, argue that
      the 2006 tax deficiency must be offset by the tax withheld
      under I.R.C. sec. 1445(a), raise a frivolous Fifth Amendment
      claim against having to testify at trial concerning their non-
      filing of returns for the years in issue, and contest R’s imposi-
      tion of additions to tax under I.R.C. secs. 6651(a)(1) and (2)
      and 6654.
         1. Held: P–H is liable for the income tax deficiencies that
      R determined for the years in issue and set forth on the SFRs,
      as revised by the amendments to answer.
         2. Held, further, P–W is not entitled to a refund of any por-
      tion of the tax withheld from the proceeds of the 2006 real
      property sales because the deemed filing date of P–W’s refund
      claim (the Feb. 11, 2011, notice of deficiency mailing date)

 1 Cases of the following petitioner are consolidated herewith: Steven R.

Rader, docket Nos. 11476–11 and 27722–11.

376
(376)                      RADER v. COMMISSIONER                                     377


        was more than two years after the overpayment (deemed to
        have occurred on the Apr. 15, 2007, due date of P–W’s 2006
        return). See I.R.C. secs. 6511(b)(2)(B), 6512(b)(3)(B); Healer v.
        Commissioner, 115 T.C. 316 (2000).
           3. Held, further, the amounts withheld from the proceeds of
        Ps’ 2006 sales of real property gave rise to an I.R.C. sec. 33
        credit, which, pursuant to I.R.C. sec. 6211(b)(1), may not be
        taken into account in determining P–H’s 2006 tax deficiency.
           4. Held, further, Ps’ Fifth Amendment claim is rejected.
           5. Held, further, P–H is liable for the additions to tax under
        I.R.C. secs. 6651(a)(1) and (2) and 6654 except that, because
        the attachments to the amendments to answer did not con-
        stitute amended SFRs, i.e., they did not set forth amounts
        ‘‘shown as tax on any return’’ within the meaning of I.R.C.
        sec. 6651(a)(2), the I.R.C. sec. 6651(a)(2) addition to tax for
        the years in issue must be based upon the tax liabilities
        shown on the original SFRs, not upon the larger tax liabilities
        set forth in the amendments to answer.
           6. Held, further, P–H is subject to sanction under I.R.C. sec.
        6673(a)(1) for procedures instituted primarily for delay, etc.

  Vivian L. Rader and Steven R. Rader, pro sese.
  Thomas G. Hodel, Matthew A. Houtsma, Luke D. Ortner,
and Robert A. Varra, for respondent.
   HALPERN, Judge: These consolidated cases involve the fol-
lowing determinations of deficiencies in and additions to peti-
tioners’ 2003–06 and petitioner Steven R. Rader’s 2008 Fed-
eral income tax: 2
                                              Additions to tax

    Year      Deficiency    Sec. 6651(a)(1)   Sec. 6651(a)(2) 1    Sec. 6654(a)

    2003      $139,964          $29,804              ---                ---
    2004       136,414           30,693              ---              $3,909
    2005       144,511           32,515              ---               5,797
    2006       212,648           47,846              ---              10,063
    2008         7,859            1,768            $1,061                253
       1 With respect to the sec. 6651(a)(2) addition to tax for 2003–06, the no-
    tices of deficiency for those years state: ‘‘The amount of the addition to tax
    cannot be determined at this time, but an addition to tax of 0.5 percent will
    be imposed for each month, or fraction thereof, of nonpayment, up to 25
    percent, based on the liability shown on this report.’’ Respondent included


  2 Unless otherwise indicated, all section references are to the Internal

Revenue Code of 1986, as amended and in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and Procedure.
We round all dollar amounts to the nearest dollar.
378             143 UNITED STATES TAX COURT REPORTS                             (376)

      the omitted amounts in his pretrial memorandum, which the Court re-
      ceived on May 22, 2013, after the maximum 50-month period for additions
      to tax under sec. 6651(a)(2) had run its course for petitioners’ 2003–06 tax
      years. Those amounts were $33,116 for 2003, $34,104 for 2004, $36,128 for
      2005, and $48,909 for 2006. Those same amounts were included as sec.
      6651(a)(2) additions to tax in the 2003–06 substitutes for returns that re-
      spondent prepared pursuant to sec. 6020(b) and which constituted the basis
      for the notices of deficiency pertaining to those years. Respondent does not
      explain the seemingly contrary statement in the notices that those
      amounts could not yet be determined.

   Respondent issued identical notices of deficiency (notices)
for 2003–06 to each petitioner on February 11, 2011, on the
grounds that he was unable ‘‘to determine which of the peti-
tioners received the income during * * * [2003–06]’’ and he
did not want to be ‘‘whipsawed’’ (i.e., lose the case because
he attributed the income to the wrong taxpayer). At the
conclusion of the trial, however, respondent conceded that
any tax deficiencies that the Court might determine and any
additions to tax and penalties, ‘‘to the extent that they follow
the deficiencies’’ that the Court might impose, would be
attributed to Mr. Rader, and no tax deficiencies, additions to
tax, or penalties would be attributed to petitioner Vivian L.
Rader. Thus, all tax deficiencies, additions to tax and pen-
alties at issue herein are directed to Mr. Rader (petitioner).
   In his petitions, petitioner states his intention to ‘‘contest’’
the notices, thus, in effect, assigning error to respondent’s
determinations.
   On June 6, 2013, we issued an order granting respondent’s
motions (1) for leave to file amendments to answer in docket
Nos. 11409–11 and 11476–11, which involve petitioners’
2003–06 taxable years, and (2) to consolidate for trial,
briefing, and opinion, all three cases. In his amendments to
answer, respondent acknowledged that the notices for 2003–
06 erroneously determined the deficiency amounts and addi-
tions to tax on the basis of an assumed ‘‘single’’ filing status
for each petitioner rather than a ‘‘married filing separate’’
filing status (appropriate because petitioners were married
during those years). Correcting for that error, in his amend-
ments to answer respondent increased his proposed defi-
ciency amounts and additions to tax for 2003–06 as follows:
(376)                     RADER v. COMMISSIONER                                379


                                             Additions to tax

    Year     Deficiency    Sec. 6651(a)(1)    Sec. 6651(a)(2)   Sec. 6654(a)

    2003     $146,235         $31,215            $34,684             ---
    2004      142,828          32,136             35,707           $4,093
    2005      151,072          33,991             37,768            6,060
    2006      219,412          49,368             54,853           10,383

  At the conclusion of the trial, the Court, on its own motion,
invoked the application of section 6673(a)(1), which, as perti-
nent, empowers the Court to sanction a taxpayer for insti-
tuting or maintaining a proceeding primarily for delay or for
maintaining a frivolous or groundless position.
  Except for the increases in the deficiency amounts and
additions to tax, petitioners bear the burden of proof. See
Rule 142(a). 3

                            FINDINGS OF FACT

   At the time the petitions were filed, petitioners resided in
Colorado.
   During the years in issue, petitioner was a self-employed
plumber, paid by his customers for plumbing services he pro-
vided to them. Petitioner did not file Federal income tax
returns for the years in issue, and, therefore, he failed to
report any income from his plumbing business or any other
income attributable to those years. One of respondent’s rev-
enue agents began an examination of petitioner’s failures to
file for the years in issue. After verifying that petitioner had
been issued (1) a plumbing license in 1995, which remained
in active status as of December 31, 2008, and (2) multiple
plumbing permits during 2003–06, the revenue agent
acquired and analyzed petitioner’s bank records for 2003–06
to determine deposits that might have represented unre-
   3 Petitioners have not invoked sec. 7491(a), which shifts the burden of

proof to the Commissioner in certain situations. In any event, sec. 7491(a)
is inapplicable herein because petitioners have failed to introduce credible
evidence that respondent’s adjustments were in error, see sec. 7491(a)(1),
nor have they shown that they have satisfied the preconditions for its ap-
plication, see sec. 7491(a)(2). Moreover, the revenue agent’s ability to estab-
lish that petitioner was a plumber and made substantial bank deposits
during the years in issue, see discussion infra, satisfied the requirement
to establish ‘‘some reasonable foundation’’ for the deficiency, see, e.g.,
Erickson v. Commissioner, 937 F.2d 1548, 1551 (10th Cir. 1991), aff ’g T.C.
Memo. 1989–552.
380        143 UNITED STATES TAX COURT REPORTS             (376)


ported income. For 2008, he examined information-return
documents filed by customers paying petitioner, as reported
under petitioner’s Social Security number, in order to estab-
lish his reportable gross income from his plumbing business
for 2008. In reconstructing petitioner’s reportable gross
income from his plumbing business for 2003–06, the exam-
ining agent subtracted from the gross deposits listed in the
bank statements loans, transfers, and other amounts that
would not constitute income. On the basis of his bank
deposits analysis for 2003–06 and the information returns for
2008, respondent concluded that petitioner’s income from his
plumbing business was $351,449, $387,714, $420,818, and
$577,811 for 2003–06, respectively, and at least $34,174 for
2008. In addition, respondent determined that petitioner
received additional income in the form of a ‘‘title wire
transfer’’ of $137,477 in 2003, a ‘‘limited international funds
check’’ of $1,500 in 2004, and ‘‘Colorado land title checks’’
totaling $66,352 representing the net proceeds from the sale
of two parcels of real property in 2006, all of which he
treated as long-term capital gain.
   In connection with the two 2006 payments, the payor with-
held and paid to the IRS $25,000 from one and $2,500 from
the other, which represented 10% of the gross proceeds from
the sale of each parcel. The withholdings were made and
reported by the title company as escrow agent (presumably
on behalf of the purchasers) on a Form 8288–A, Statement
of Withholding on Dispositions by Foreign Persons of U.S.
Real Property Interests, a form used pursuant to regulations
under section 1445(a). See sec. 1.1445–1(c)(1), Income Tax
Regs. Although petitioners were not foreign persons subject
to section 1445, it appears that the title company felt it nec-
essary to withhold in accordance with that section because
petitioners, as transferors, failed to furnish either a certifi-
cation of non-foreign-person status or a taxpayer identifica-
tion number (TIN), as required by section 1445(b)(2) and sec-
tion 1.1445–2(b)(2)(i), Income Tax Regs., for exemption from
withholding. See also the instructions for Form 8288, U.S.
Withholding Tax Return for Dispositions by Foreign Persons
of U.S. Real Property Interests, to which the Form 8288–A
must be attached.
   Petitioners have failed to furnish evidence of entitlement to
any deductions offsetting the foregoing items of income.
(376)                  RADER v. COMMISSIONER                             381


  On the basis of his reconstruction of petitioner’s income, as
aforesaid, respondent prepared substitutes for returns (SFRs)
for the years in issue, consisting, in each case, of a Form
13496, IRC Section 6020(b) Certification, signed by the IRS
revenue agent who prepared the SFR, a Form 4549–A,
Income Tax Discrepancy Adjustments, 4 and a Form 886–A,
Explanations of Items. Those SFRs incorporated the above-
described adjustments to income and the tax liabilities and
additions to tax set forth in the notices. Exhibit A attached
to respondent’s amendments to answer in docket Nos. 11409–
11 and 11476–11, in order to reflect petitioners’ filing status
as ‘‘married filing separate’’ (rather than ‘‘single’’) consists of
revised Forms 4549–A and Forms 5278, Statement—Income
Tax Changes, both of which incorporate the increased
amounts resulting from that change in filing status.

                                 OPINION

I. Tax Deficiencies
  A. Introduction
   Petitioners do not directly dispute respondent’s adjust-
ments to petitioner’s income during the years in issue as
reflected in the SFRs, and, indeed, petitioner’s admission at
trial that he earned income from his plumbing business and
the evidence of his real estate sales sufficiently link him to
income-producing activities that support respondent’s adjust-
ments. Instead, petitioners attack the sufficiency of the SFRs
on technical grounds and, thus, attack indirectly the contents
thereof. They also allege that the tax deficiency for 2006
must be offset by the taxes withheld and paid to the IRS on
their real estate sales, and they raise a Fifth Amendment (to
the United States Constitution) objection. 5
  4 The    2008 SFR included a Form 4549, Income Tax Examination
Changes, rather than a Form 4549–A.
   5 Petitioners also raise evidentiary objections and continue to argue that

the notice addressed to Mrs. Rader is invalid because she had no income
for the years in issue. The evidentiary objections were overruled at trial
and the dispute with respect to Mrs. Rader’s liability is moot because, as
noted supra, respondent conceded at trial that any deficiences and addi-
tions to tax and penalties related thereto will be attributed solely to peti-
tioner.
382           143 UNITED STATES TAX COURT REPORTS                      (376)


  B. Sufficiency of the SFRs
  Essentially, petitioners argue that the SFRs are invalid
because they fail ‘‘to cite a deficiency statute and/or a tax
statute from which a deficiency and penalties could arise.’’
They also cite the fact that the SFRs were not attached to
what petitioners refer to as a ‘‘nearly blank SFR 1040’’ that
petitioners believe (from IRS transcripts) ‘‘was filed, proc-
essed and posted to’’ petitioners’ account ‘‘three years prior to
the dates on the alleged certifications.’’
  To constitute a section 6020(b) SFR, ‘‘the return must be
subscribed, it must contain sufficient information from which
to compute the taxpayer’s tax liability, and the return form
and any attachments must purport to be a ‘return’.’’ Spurlock
v. Commissioner, T.C. Memo. 2003–124, 2003 WL 1987156,
at *10. The SFRs that respondent filed on petitioners’ behalf
each consisted of an IRC Section 6020(b) Certification (Form
13496), the income tax examination changes (either Form
4549–A or Form 4549), and an explanation of the changes
(Form 886–A). That combination of documents is sufficient to
constitute a valid SFR under section 6020(b). See Gleason v.
Commissioner, T.C. Memo. 2011–154, 2011 WL 2600917, at
*12. There is no requirement that a valid SFR include a
Form 1040, U.S. Individual Income Tax Return, executed on
behalf of the taxpayer. See id.; see also Nix v. Commissioner,
T.C. Memo. 2012–304, at *13–*14, aff ’d, 553 Fed. Appx. 960
(11th Cir. 2014); Holloway v. Commissioner, T.C. Memo.
2012–137, 2012 WL 1727685, at *2; sec. 301.6020–1(b)(2),
Proced. & Admin. Regs. Moreover, respondent had the right
under section 6020(b) to elect married filing separately
status for petitioners rather than joint filing status. See
Smalldridge v. Commissioner, 804 F.2d 125, 127–128 (10th
Cir. 1986), aff ’g T.C. Memo. 1984–434; Conovitz v. Commis-
sioner, T.C. Memo. 1980–22, 1980 Tax Ct. Memo LEXIS 567,
at *12. 6 In these cases, respondent elected that status by
  6 The   Court of Appeals for the Tenth Circuit in Smalldridge v. Commis-
sioner, 804 F.2d 125, 127–128 (10th Cir. 1986), aff ’g T.C. Memo. 1984–434,
held that the Commissioner’s election of married filing separately status
on an SFR was binding where, as in that case, the married taxpayers’
right to elect joint filing status had expired pursuant to sec. 6013(b)(2)(B)
(now sec. 6013(b)(2)(A)), which prohibits married taxpayers from electing
joint filing status more than three years after the initial due date of their
return. In Millsap v. Commissioner, 91 T.C. 926 (1988), however, we re-
(376)                  RADER v. COMMISSIONER                             383


way of amendments to answer rather than in connection
with the preparation of petitioners’ 2003–06 SFRs. The
change in filing status resulted in an increase in the tax defi-
ciencies and additions to tax set forth in the notice for 2003–
06. 7
  The SFRs executed by respondent pursuant to section
6020(b) were valid SFRs.
  C. Petitioners’ Right to an Offset
   In their brief, petitioners ask for a finding that ‘‘there
exists a failure on * * * [respondent’s] part * * * to recog-
nize receipt of a substantial payment from the closing on the
sale of a piece of property.’’ Although it is styled as a request
for a proposed finding of fact, we interpret petitioners’
request as their argument that they are entitled to an offset
for the amounts withheld from the proceeds of their 2006
real estate sales and remitted to respondent.
   Respondent acknowledges that $25,000 and $2,500 were
withheld from the proceeds of the two real estate sales,
respectively, and that those amounts were remitted to the
IRS Service Center in Philadelphia. After noting the
‘‘peculiarities’’ of applying a withholding regime directed at
foreign sellers of U.S. real property interests to peti-
tioners, who were Colorado residents, respondent argues
that (1) because ‘‘the withholding credit is not a factor in
determining a tax deficiency’’, we are without jurisdiction to
jected the court’s reasoning in Smalldridge, overruled or rejected several
of our precedents, two of which were cited with approval by the court in
Smalldridge, and held that the sec. 6013(b)(2) limitations on electing joint
filing status are not a bar to married taxpayers’ right to elect joint filing
status at any time after the Commissioner’s election of married filing sepa-
rately status in preparing an SFR for the taxpayers. See Millsap v. Com-
missioner, 91 T.C. at 936–938. Petitioners have not attempted to elect joint
filing status. Therefore, Millsap is inapplicable in these cases. Moreover,
even if petitioners had attempted to elect joint filing status, we would be
required to reject the attempt pursuant to Golsen v. Commissioner, 54 T.C.
742 (1970), aff ’d, 445 F.2d 985 (10th Cir. 1971), because of the likelihood
that any appeal of these cases would be to the Court of Appeals for the
Tenth Circuit, which decided Smalldridge. See Millsap v. Commissioner,
91 T.C. at 937 n.23 (‘‘In accord with our holding in Golsen * * * we will
follow Smalldridge * * * in all cases appealable to the 10th Circuit.’’).
   7 As discussed infra, because the amendments to answer do not incor-

porate corrected or amended SFRs for 2003–06, we must reject respond-
ent’s increases in the sec. 6651(a)(2) addition to tax for those years.
384          143 UNITED STATES TAX COURT REPORTS                      (376)


consider it, citing Forrest v. Commissioner, T.C. Memo. 2011–
4, 2011 WL 13626, discussed infra, and (2) even if Mrs.
Rader were entitled to a credit for the withholding applied to
her, we could not treat that withholding as a refundable
overpayment under section 6512(b)(1) because the notice
mailing date, February 11, 2011, which constitutes the
deemed filing date of Mrs. Rader’s refund claim for 2006, was
more than two years after the overpayment, deemed, pursu-
ant to section 6513(b)(1), to have occurred on April 15, 2007,
the due date of her 2006 return. See secs. 6512(b)(3)(B),
6511(b)(2)(B); see also Commissioner v. Lundy, 516 U.S. 235,
247–250 (1996); Healer v. Commissioner, 115 T.C. 316, 319–
323 (2000).
   We agree with respondent that we may not order a refund
of the deemed overpayment to Mrs. Rader for her share of
the amount withheld from the proceeds of the 2006 real
estate sales. 8 In Lundy, the Supreme Court applied the two-
year lookback (to date of payment) rule of section
6511(b)(2)(B) (rather than the three-year lookback (to date of
return filing) rule of section 6511(b)(2)(A)) under cir-
cumstances in which the taxpayer filed a return after
issuance of the notice of deficiency, and, in Healer, we fol-
lowed Lundy and rejected the taxpayer’s argument that an
SFR constituted a return filed by the taxpayer for purposes
of section 6511. Thus, the 2006 SFR that respondent
executed on Mrs. Rader’s behalf on January 21, 2011, did not
give her three years from that date in which to assert a
refund claim for 2006 pursuant to section 6511(b)(2)(A).
   We also agree with respondent that we may not offset peti-
tioner’s 2006 tax deficiency by the amount of the withheld
taxes, but not for the reasons stated by respondent.
   In Forrest, the Commissioner sought to increase a tax-
payer’s deficiency by the amount of Federal income taxes
withheld by the State of California and claimed as a credit
by the taxpayer from a 2005 settlement payment (on account
of the termination of an employment-related lawsuit) that
the parties agreed was not includible in the taxpayer’s
  8 We  reject, however, respondent’s argument that Mrs. Rader is entitled
to no credit simply because she stated that none of the sales proceeds were
hers. The record indicates that she and petitioner were coowners of the
properties, and the title company issued a Form 8288–A to each of them.
(376)                 RADER v. COMMISSIONER                            385


income until 2006. Thus, the credit for the withheld taxes
claimed by the taxpayer for 2005 constituted an overstated
credit. In considering the Commissioner’s claim with respect
to the withheld taxes we stated:
  Under section 6211(b)(1) a deficiency is determined ‘‘without regard to
  payment on account of estimated tax, without regard to the credit under
  section 31’’. Section 31 generally allows the taxpayer to claim a credit
  for Federal income tax withheld from wages for that taxable year. The
  amount of an overstated credit may be summarily assessed and is not
  subject to deficiency procedures. * * * [Forrest v. Commissioner, 2011
  WL 13626, at *3.]

We then concluded: ‘‘Since the [section 31] withholding credit
issue is not a factor in determining the tax deficiency, we
have no jurisdiction to consider it and therefore may not
decide whether petitioner is entitled to a Federal income tax
withholding credit * * * for the 2005 tax year.’’ Id.
  In pertinent part, section 6211(a), which provides the gen-
eral definition of a ‘‘deficiency’’, states:
  SEC. 6211. DEFINITION OF DEFICIENCY.
    (a) IN GENERAL.—For purposes of this title in the case of income * * *
  taxes imposed by subtitle[] A * * * the term ‘‘deficiency’’ means the
  amount by which the tax imposed by subtitle A * * * exceeds the excess
  of—
      (1) the sum of
         (A) the amount shown as the tax by the taxpayer upon his return,
      if a return was made by the taxpayer and an amount was shown
      as the tax by the taxpayer thereon, plus
         (B) the amounts previously assessed (or collected without assess-
      ment) as a deficiency, over—
      (2) the amount of rebates, as defined in subsection (b)(2), made.

  In its entirety, section 6211(b)(1), upon which our decision
in Forrest was based, provides:
    SEC. 6211(b). RULES FOR APPLICATION OF SUBSECTION (a).—For pur-
  poses of this section—
      (1) The tax imposed by subtitle A and the tax shown on the return
    shall both be determined without regard to payment on account of
    estimated tax, without regard to the credit under section 31, without
    regard to the credit under section 33, and without regard to any
    credits resulting from the collection of amounts assessed under section
    6851 or 6852 (relating to termination assessments).

  Thus, only the taxes, credits, etc., listed in section
6211(b)(1), i.e., estimated tax payments, the section 31 and
section 33 credits, and ‘‘credits resulting from the collection
386        143 UNITED STATES TAX COURT REPORTS             (376)


of amounts assessed under section 6851 or 6852’’, are to be
disregarded in determining the amount of any deficiency
under section 6211(a).
   Petitioners were subjected to income tax withholding under
section 1445, applicable to payments to foreign persons on
the sale of U.S. real property interests. Withholding under
section 1445 does not give rise to a section 31 credit. That
is because it does not constitute an ‘‘amount withheld as tax
under chapter 24 [sections 3401–3406]’’. See sec. 31(a)(1). In
reaching that conclusion, we note that the withholding from
the proceeds of petitioners’ 2006 real property sales, even
though prompted, in part, by petitioners’ failure to supply
the title company payor with a TIN, did not constitute
backup withholding under section 3406 because neither of
those sales involved a ‘‘reportable payment’’ under section
3406(b)(1)(A) and (B) and (3). Therefore, Forrest, which
involved a section 31 credit, is inapposite and not controlling.
   We conclude, however, that, although the section 1445
withholding herein was applied to U.S. rather than foreign
persons, (i.e., nonresident alien individuals, see sec. 1.1445–
2(b)(2)(i), Income Tax Regs. (flush language)), it gave rise to
a section 33 credit. Therefore, pursuant to section 6211(b)(1),
we must disregard it in determining petitioner’s 2006 defi-
ciency.
   Section 33 provides a credit for ‘‘the amount of tax with-
held at source under subchapter A of chapter 3 (relating to
withholding of tax on nonresident aliens and on foreign cor-
porations).’’ Subchapter A of chapter 3 encompasses section
1445. Section 1445(a) generally provides that ‘‘in the case of
any disposition of a United States real property interest
* * *, the transferee shall * * * withhold a tax equal to 10
percent of the amount realized on the disposition.’’ Section
1445(b) provides a list of exemptions from the section 1445(a)
withholding requirement. Section 1445(b)(2) generally pro-
vides such an exemption ‘‘if the transferor furnishes to the
transferee an affidavit by the transferor stating, under pen-
alty of perjury, the transferor’s United States * * * [TIN]
and that the transferor is not a foreign person.’’ See also sec.
1.1445–2(b)(2)(i), Income Tax Regs. (to the same effect). It is
clear on the face of the Forms 8288–A issued by the title
company payor that it did not have a TIN for petitioners, and
petitioners have failed to demonstrate that they furnished to
(376)                  RADER v. COMMISSIONER                            387


the title company either a TIN or the affidavit/certification of
non-foreign-person status required by section 1445(b)(2) and
the regulations thereunder. Moreover, although section
1.1445–2(b)(1), Income Tax Regs., states that section 1445
and the regulations thereunder ‘‘do not impose any obligation
upon a transferee to obtain a certification from the trans-
feror’’ and that ‘‘a transferee may instead rely upon other
means to ascertain the non-foreign status of the transferor’’,
it appears that the title company was unwilling to pursue
that option and risk becoming liable for the nonwithheld tax
pursuant to section 1.1445–1(e), Income Tax Regs., should its
ascertainment of non-foreign-person status prove to be incor-
rect. See sec. 1.1445–2(b)(1), Income Tax Regs. (last sentence
of first paragraph).
   Thus, rightly or wrongly, the title company payor withheld
tax pursuant to section 1445(a), thereby giving rise to peti-
tioners’ right to a section 33 credit. Because section
6211(b)(1) specifically excludes the section 33 credit from the
deficiency computation, we agree with respondent and hold
that the withheld taxes at issue herein are not to be taken
into consideration in determining petitioner’s 2006 defi-
ciency. 9
  D. Petitioners’ Fifth Amendment Objection
  During the trial, petitioner was asked whether he had filed
a return for 2003. Among petitioner’s grounds for initially
refusing to answer that question was his invoking of his
right, under the Fifth Amendment, not to ‘‘be compelled in
any criminal case to be a witness against himself ’’. U.S.
Const. amend. V. Mrs. Rader, who testified as to the issue,
attempted to justify petitioner’s assertion of a Fifth Amend-
ment privilege on the ground that the agent assigned to their
case appeared to be connected to the IRS Criminal Investiga-
  9 Also exempt from the requirement to withhold under sec. 1445(a) are
sales of U.S. real property interests for $300,000 or less if ‘‘the property
is acquired by the transferee for use by him as a residence’’. See sec.
1445(b)(5); sec. 1.1445–2(d)(1), Income Tax Regs. Petitioners’ 2006 real
property sales were for $250,000 and $25,000, respectively. The record is
silent regarding the buyers’ intended use of the properties, and we can
only assume that the title company payor did not avail itself of the sec.
1445(b)(5) exemption either because (1) the buyers did not intend to use
the properties as a residence or (2) it was not aware of the exemption.
388         143 UNITED STATES TAX COURT REPORTS             (376)


tion Division (CID). Therefore, his request to examine peti-
tioners’ books and records and make a ‘‘visual examination’’
of petitioners’ premises implied ‘‘that there was some kind of
criminal investigation going on.’’ We concluded that peti-
tioner had not ‘‘shown a well founded fear of prosecution’’,
overruled his Fifth Amendment claim, and compelled him to
answer the question, whereupon he acknowledged that he
had not filed returns for any of the years in issue.
   On brief, petitioner reiterates his claim of Fifth Amend-
ment protection and, impliedly, criticizes the Court for
rejecting that claim at trial, in what we can only assume is
an effort to have his admissions of nonfiling stricken from
the record. What that would accomplish is a mystery as there
is no evidence in the record on which to base a finding that
petitioner did file a return for any of the years in issue, nor
does petitioner claim that he filed a return for any of those
years.
   In any event, we hereby affirm our rejection at trial of peti-
tioner’s Fifth Amendment claim. There is no evidence that
petitioner was actually under criminal investigation for any
of the years in issue. In order for an individual to validly
claim the privilege against self-incrimination, there must be
a ‘‘real and appreciable danger’’ from ‘‘substantial hazards of
self incrimination’’, and the individual must have ‘‘reasonable
cause to apprehend (such) danger from a direct answer to
questions posed to him.’’ United States v. Neff, 615 F.2d
1235, 1239 (9th Cir. 1980) (internal quotation marks and
citations omitted); see also United States v. Schmidt, 816
F.2d 1477, 1481 (10th Cir. 1987) (stating that the risk of
incrimination resulting from compelled testimony must be
‘‘substantial and real, not merely trifling or imaginary’’
(internal quotation marks omitted)). Petitioner’s apprehen-
sion of criminal liability, upon the basis of an unconfirmed
suspicion that the examining agent was somehow connected
with CID, even if genuine, does not, in the context of a civil
audit examination with no actual threat of a criminal inves-
tigation, meet the foregoing standard. ‘‘The fifth amendment
privilege cannot be used as a method of evading payment of
lawful taxes.’’ Edelson v. Commissioner, 829 F.2d 828, 832
(9th Cir. 1987), aff ’g T.C. Memo. 1986–223.
(376)               RADER v. COMMISSIONER                  389


  E. Conclusion
  Petitioner is liable for the income tax deficiencies that
respondent determined for the years in issue.
II. Additions to Tax
  A. Introduction
   Respondent determined that petitioner is liable for addi-
tions to tax pursuant to sections 6651(a)(1) and (2) and 6654.
Respondent has the burden of production with respect to
those additions to tax. See sec. 7491(c). To meet that burden,
respondent must produce evidence showing that the addi-
tions to tax are appropriate. See id.; Higbee v. Commissioner,
116 T.C. 438, 446 (2001). Once respondent satisfies that bur-
den, petitioner has the burden of proof with respect to excul-
patory factors such as reasonable cause, see Higbee v.
Commissioner, 116 T.C. at 446–447, except that respondent
bears the overall burden of proof with respect to his
increases in the additions to tax, see Rule 142(a); Arnold v.
Commissioner, T.C. Memo. 2003–259, 2003 WL 22053838, at
*4, i.e., respondent must prove that there were not excul-
patory factors.
  B. Respondent’s Section 6651(a)(1) and (2) and 6654 Deter-
     minations
   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% of the amount required to be shown as tax on the delin-
quent return for each month or fraction thereof during which
the return remains delinquent, up to a maximum addition of
25% for returns more than four months delinquent.
   Section 6651(a)(2) provides for an addition to tax for
failure to timely pay ‘‘the amount shown as tax on any
return specified in paragraph (1)’’ unless the taxpayer estab-
lishes that the failure was due to reasonable cause and not
willful neglect. The addition is calculated as 0.5% of the
amount shown as tax on the return but not paid, with an
additional 0.5% for each month or fraction thereof during
which the failure to pay continues, up to a maximum of 25%.
390         143 UNITED STATES TAX COURT REPORTS               (376)


Id. The amount of the addition to tax under section
6651(a)(2) reduces the addition to tax under section
6651(a)(1) for any month for which both additions to tax
apply. See sec. 6651(c)(1). Pursuant to section 6651(g)(2),
SFRs prepared by the Commissioner under section 6020(b)
are treated as taxpayer returns for purposes of determining
the addition to tax under section 6651(a)(2).
   Section 6654(a) and (b) provides for an addition to tax in
the event of an underpayment of a required installment of
individual estimated tax. Each required installment of esti-
mated tax is equal to 25% of the ‘‘required annual payment’’,
which, in turn, is equal to the lesser of (1) ‘‘90 percent of the
tax shown on the return for the taxable year (or, if no return
is filed, 90 percent of the tax for such year)’’, or (2) if the
individual filed a return for the immediately preceding year,
100% of the tax shown on that return. Sec. 6654(d)(1)(A) and
(B). Except in very limited circumstances not applicable
herein, see sec. 6654(e)(3)(B), section 6654 provides no excep-
tion for reasonable cause or lack of willful neglect.
   It is undisputed that petitioner failed to (1) file returns, (2)
discharge his tax liabilities, or (3) pay any estimated tax for
the years in issue. Thus, respondent has satisfied his burden
of production, under section 7491(c), with respect to his
imposition of additions to tax under sections 6651(a)(1) and
(2) and 6654.
   Petitioners offer only meritless arguments against respond-
ent’s imposition of additions to tax; e.g., in opposition to
imposition of the section 6651(a)(1) addition to tax, that
nothing ‘‘he has read in his research of the law states he is
required to file a return’’; that the SFRs were not valid
returns ‘‘showing an amount due and unpaid’’ that could con-
stitute a basis for imposition of the section 6651(a)(2) addi-
tion to tax; and that ‘‘[n]othing on the * * * [notice] dem-
onstrates the computation of an ‘income’ tax upon which
* * * [the section 6654] penalty is based.’’ Petitioner’s first
argument ignores section 6012(a), pursuant to which he was
required to file returns for the years in issue; his second
argument is belied by the fact that the SFRs meet all of the
requirements, discussed supra, for a valid return; and his
third argument is belied by the notices themselves, which do,
in fact, compute income tax deficiencies for the years in
issue. We will not painstakingly further address petitioner’s
(376)              RADER v. COMMISSIONER                    391


assertions ‘‘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); see also Wnuck v. Commissioner, 136
T.C. 498, 501–505 (2011). Moreover, the complete absence of
evidence of exculpatory factors and petitioner’s exclusive reli-
ance on frivolous arguments as justification for his nonfiling
of returns and nonpayment of tax support a finding that
respondent has satisfied his burden of proof to show that no
such factors exist, thereby justifying his increases in the
additions to tax.
   We will sustain respondent’s imposition of additions to tax
under sections 6651(a)(1) and (2) and 6654 for the years in
issue. We conclude, however, that respondent has overstated
the addition to tax under section 6651(a)(2) for 2003–06 by
the amount of the increases in that addition to tax as set
forth in respondent’s amendments to answer.
   As stated supra, section 6651(a)(2) imposes an addition to
tax for failure to timely pay the amount shown as tax on a
return, and section 6651(g)(2), in effect, states that SFRs are
to be treated as taxpayer returns for purposes of determining
the section 6651(a)(2) addition to tax. The notice for 2003–
06 properly bases the section 6651(a)(2) additions to tax for
2003–06 on the amounts of tax shown on the 2003–06 SFRs.
Respondent’s amendments to answer with respect to peti-
tioner’s 2003–06 tax years, whereby he elects married filing
separately filing status for petitioner, increases both peti-
tioner’s tax deficiencies for those years and the proposed
additions to tax, which are based upon the increased tax defi-
ciencies. All of those increased amounts are computed on
attachments to the amendments to answer, which attach-
ments consist of a new Form 4549–A, a Form 5278, and com-
putations of the various penalty amounts and of petitioner’s
self-employment tax for 2003–06. Respondent has failed to
attach to his amendments to answer a Form 13496 for any
of the years covered by the amendments to answer. The
Form 13496, in pertinent part, states: ‘‘The officer of the IRS
identified below, authorized by Delegation Order 182, cer-
tifies the attached pages constitute a valid return under sec-
tion 6020(b).’’ The attachments to the amendments to answer
satisfy one of the requirements of Gleason, Spurluck, and
section 301.6020–1(b)(2), Proced. & Admin. Regs., for a valid
392        143 UNITED STATES TAX COURT REPORTS            (376)


return, i.e., that it ‘‘contain[ ] sufficient information from
which to compute * * * [petitioner’s] tax liability’’. However,
without their having been subscribed to or certified by an
authorized Internal Revenue Officer or employee, under
those same authorities, the attachments do not ‘‘purport[ ] to
be’’, and do not constitute, a section 6020(b) return for any
of the 2003–06 tax years. Therefore, we sustain the section
6651(a)(2) additions to tax set forth in the notice for 2003–
06 and reject the increases to those amounts set forth in
respondent’s amendments to answer.
III. Section 6673(a)(1) Penalty
   As noted supra, at the conclusion of the trial the Court, on
its own motion, invoked the application of section 6673(a)(1).
   In pertinent part, section 6673(a)(1) provides a penalty of
up to $25,000 if the taxpayer has instituted or maintained
proceedings before the Tax Court primarily for delay or the
taxpayer’s position in the proceeding is frivolous or ground-
less. ‘‘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. Commis-
sioner, 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.’’
Goff v. Commissioner, 135 T.C. 231, 237 (2010).
   Petitioner makes no principled defense of his failure to (1)
file returns or pay tax for the years in issue with respect to
the substantial earnings from his plumbing business or (2)
report and pay tax on his capital gains from the 2006 real
property sales. Nor would he cooperate with respondent in
reconstructing the income from his plumbing business.
Rather, petitioner makes groundless arguments attacking
the SFRs and the notices and makes unwarranted assertions
of Fifth Amendment rights. Petitioner’s meritless arguments
are frivolous within the foregoing definition of that term.
Moreover, petitioner’s testimony during the trial and argu-
ments on brief are consistent with an intent to delay the
collection of income taxes due and owing. See Winslow v.
Commissioner, 139 T.C. 270, 276 (2012). On that basis we
(376)                   RADER v. COMMISSIONER                               393


hereby impose on petitioner a penalty under section
6673(a)(1) of $10,000. 10
                       Decision will be entered for petitioner in
                     docket No. 11409–11, and appropriate
                     decisions will be entered in docket Nos.
                     11476–11 and 27722–11.

                               f




   10 We acknowledge that petitioner’s claim of offset for the taxes withheld

from the proceeds of the 2006 real property sales, although unsustainable,
is not frivolous. That has no bearing upon, and does not justify, however,
the frivolous nature of petitioners’ overall position in these cases. After all,
the fact that a broken clock tells the correct time twice each day does not
alter the fact that it is broken.
