                                       ARNOLD BRUCE WINSLOW, PETITIONER v. COMMISSIONER                                         OF
                                                 INTERNAL REVENUE, RESPONDENT
                                                    Docket No. 18177–11.                  Filed September 25, 2012.

                                                 P filed no tax return for either 2005 or 2006. R prepared
                                               substitutes for returns and issued notices of deficiency for
                                               those years. P principally argues that he is not liable for the
                                               deficiencies because the individuals who prepared the sub-
                                               stitutes for returns and issued the notices of deficiency were
                                               not delegated authority to do so. R also determined additions
                                               to tax for failure to timely file a return and failure to timely
                                               pay tax due and asks that we sanction P for making frivolous
                                               arguments.
                                                 1. Held: The individuals who certified the substitutes for
                                               returns and issued the notices of deficiency had the delegated
                                               authority to do so; generally, intervening line supervisors
                                               enjoy the same delegated authority as their specifically dele-
                                               gated subordinates.
                                                 2. Held, further, additions to tax are sustained.
                                                 3. Held, further, P is sanctioned for maintaining frivolous
                                               positions.

                                           Arnold Bruce Winslow, pro se.
                                           Mayer Y. Silber and Robert M. Romashko, for respondent.
                                       HALPERN, Judge: By notices of deficiency dated May 9,
                                     2011 (notices), respondent determined deficiencies in, and


                                     270




VerDate Nov 24 2008   10:32 Jun 05, 2014   Jkt 372897   PO 20012   Frm 00001   Fmt 2847   Sfmt 2847   V:\FILES\BOUND VOL. WITHOUT CROP MARKS\B.V.139\WINSLOW.SEP   JAMIE
                                     (270)                         WINSLOW v. COMMISSIONER                                       271


                                     additions to, petitioner’s 2005 and 2006 Federal income tax
                                     as follows: 1

                                                                                                 Additions to tax

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

                                             2005              $2,706                       $479                      $532
                                             2006               2,491                        441                       461

                                       Petitioner assigned error to those determinations, averring
                                     only: ‘‘The true amount of the tax and interest and penalties
                                     owing is $0.00.’’ Petitioner did not, as required by our
                                     standing pretrial order, file a pretrial memorandum, which,
                                     among other things, would have described his view of the
                                     issues in the case. From his testimony at trial, we under-
                                     stand petitioner’s principal objections to respondent’s deter-
                                     minations to be that the determinations are not based on
                                     properly made substitutes for returns and that the notices
                                     are invalid because improperly issued. At trial, respondent
                                     moved for the imposition of a sanction against petitioner
                                     under section 6673(a)(1), which, as pertinent, empowers us to
                                     sanction a taxpayer on account of instituting or maintaining
                                     a proceeding primarily for delay or for maintaining a frivo-
                                     lous or groundless position.
                                       Petitioner bears the burden of proof. See Rule 142(a), Tax
                                     Court Rules of Practice and Procedure. 2

                                                                         FINDINGS OF FACT

                                        At the time the petition was filed, petitioner resided in
                                     Illinois.
                                        During 2005 and 2006 (the years in issue), petitioner was
                                     employed by Dell Medical Corp. and, in return for his serv-
                                     ices, received compensation from it of $28,630 and $27,529
                                     for those years, respectively. During the years in issue, he
                                     also received dividend payments of $24 and $28 for those
                                     years, respectively. Because for the years in issue he received
                                     no income tax returns from petitioner, respondent, using
                                        1 Section references are to the Internal Revenue Code of 1986, as amended and in effect for

                                     the years in issue.
                                        2 Petitioner has not raised the issue of sec. 7491(a), which shifts the burden of proof to the

                                     Commissioner in certain situations. In any event, sec. 7491(a) does not apply here because peti-
                                     tioner has not shown that he has satisfied the preconditions for its application. See sec.
                                     7491(a)(2).




VerDate Nov 24 2008   10:32 Jun 05, 2014   Jkt 372897   PO 20012   Frm 00002   Fmt 2847   Sfmt 2847   V:\FILES\BOUND VOL. WITHOUT CROP MARKS\B.V.139\WINSLOW.SEP   JAMIE
                                     272                 139 UNITED STATES TAX COURT REPORTS                                    (270)


                                     information returns he received from third parties, made
                                     returns (substitutes for returns) for petitioner. In part, the
                                     substitutes for returns consist of an Internal Revenue Service
                                     (IRS) Form 13496, IRC Section 6020(b) Certification, executed
                                     in each case by Maureen Green, whose title is stated on the
                                     form to be ‘‘Operations Manager, Examination’’. Ms. Green,
                                     whose title now may be program manager, is employed by
                                     the IRS in its Ogden, Utah, Service Center. She is a super-
                                     visory employee who supervises Small Business/Self
                                     Employed Division (SB/SE) compliance officers. The notices
                                     followed the substitutes for returns, each notice being
                                     executed for the Commissioner by Henry Slaughter, under
                                     whose signature appeared the designation ‘‘Service Center,
                                     Ogden Service Center’’. Mr. Slaughter’s position in the
                                     service center is ‘‘Director, Collection Area-Western’’, and he
                                     serves as one of several field directors of SB/SE’s collection
                                     activities.

                                                                                  OPINION

                                     I. Introduction
                                        Although petitioner’s objections to respondent’s determina-
                                     tions concern principally procedural aspects of those deter-
                                     minations, he did at trial argue that the compensation and
                                     dividends he received were not taxable. The short answer is
                                     that compensation for services and dividends are items of
                                     gross income and, as such, are taxable. See sec. 61(a)(1), (7).
                                     Petitioner’s arguments to the contrary—i.e., that he is not an
                                     employee under the Internal Revenue Code unless he works
                                     for a controlled group of corporations; the attribution rules
                                     applicable to farming corporations bring into question the
                                     taxability of dividends generally—are nonsense and require
                                     no further discussion. See Crain v. Commissioner, 737 F.2d
                                     1417, 1417 (5th Cir. 1984) (‘‘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.’’); see also Wnuck v. Commis-
                                     sioner, 136 T.C. 498 (2011). Petitioner had sufficient gross
                                     income for the years in issue that, for each year, he was
                                     required to file a Federal income tax return. See sec.
                                     6012(a)(1).




VerDate Nov 24 2008   10:32 Jun 05, 2014   Jkt 372897   PO 20012   Frm 00003   Fmt 2847   Sfmt 2847   V:\FILES\BOUND VOL. WITHOUT CROP MARKS\B.V.139\WINSLOW.SEP   JAMIE
                                     (270)                         WINSLOW v. COMMISSIONER                                       273


                                     II. Delegation of Authority
                                        Petitioner argues that the substitutes for returns were not
                                     properly made because the individual certifying them, Ms.
                                     Green, had not been delegated the authority to do so. Like-
                                     wise, he argues that the notices were invalid because the
                                     individual executing them, Mr. Slaughter, had not been dele-
                                     gated the authority to do so.
                                        The Secretary is responsible for collecting the taxes
                                     imposed by the internal revenue laws of the United States.
                                     See sec. 6301. Because one individual cannot be responsible
                                     for so much, Congress has enacted statutes authorizing the
                                     delegation of that authority. The delegation of authority is
                                     contained in a clear line of statutory provisions. With respect
                                     to substitutes for returns, section 6020(b)(1) provides: ‘‘If any
                                     person fails to make any return required by any internal rev-
                                     enue law or regulation * * * the Secretary shall make such
                                     return from his own knowledge and from such information as
                                     he can obtain through testimony or otherwise.’’ With respect
                                     to deficiencies in tax determined by the Secretary, section
                                     6212(a) authorizes him to send notice of the deficiency to the
                                     taxpayer. The term ‘‘Secretary’’ is defined as meaning ‘‘the
                                     Secretary of the Treasury or his delegate.’’ Sec.
                                     7701(a)(11)(B). The term ‘‘ ‘or his delegate’ * * * when used
                                     with reference to the Secretary of the Treasury, means any
                                     officer, employee, or agency of the Treasury Department duly
                                     authorized by the Secretary of the Treasury directly, or
                                     indirectly by one or more redelegations of authority, to per-
                                     form the function mentioned or described in the context’’.
                                     Sec. 7701(a)(12)(A)(i).
                                        Delegation Order 5–2, set forth in Internal Revenue
                                     Manual (IRM) pt. 1.2.44.3 (May 5, 1997), delegates to specific
                                     agents and managers, including SB/SE tax compliance offi-
                                     cers, the authority to ‘‘prepare or execute returns required by
                                     any internal revenue law or regulation when the person
                                     required to file such return fails to do so.’’ Delegation Order
                                     4–8, set forth in IRM pt. 1.2.43.9 (Feb. 10, 2004), delegates to
                                     specific managers, case leaders, reviewers, and directors,
                                     including SB/SE field directors, the authority to ‘‘sign and
                                     send to the taxpayer by registered or certified mail any
                                     notice of deficiency.’’




VerDate Nov 24 2008   10:32 Jun 05, 2014   Jkt 372897   PO 20012   Frm 00004   Fmt 2847   Sfmt 2847   V:\FILES\BOUND VOL. WITHOUT CROP MARKS\B.V.139\WINSLOW.SEP   JAMIE
                                     274                 139 UNITED STATES TAX COURT REPORTS                                    (270)


                                        Ms. Green was authorized to prepare and execute the sub-
                                     stitutes for returns. While her position is not among those
                                     specified in Delegation Order 5–2 as being delegated
                                     authority to prepare substitutes for returns, she supervises
                                     SB/SE tax compliance officers, who are specifically delegated
                                     that authority by Delegation Order 5–2. With respect to the
                                     delegation of authority to those in intervening positions (i.e.,
                                     in positions between the delegating official and the delegated
                                     official), IRM pt. 1.11.4.4.1 (1)(A) (Oct. 10, 2008) states the fol-
                                     lowing general rule: ‘‘Every intervening line supervisory posi-
                                     tion up to and including the Commissioner has the same
                                     authority.’’ Because we are satisfied that Ms. Green is in an
                                     intervening line supervisory position with respect to SB/SE
                                     tax compliance officers, who are delegated authority to pre-
                                     pare and execute substitutes for returns, we are satisfied
                                     (and find) that she had authority to prepare and execute the
                                     substitutes for returns. While provisions of the IRM are gen-
                                     erally considered not to have the force of law, e.g., Fargo v.
                                     Commissioner, 447 F.3d 706, 713 (9th Cir. 2006) (citing cases
                                     from five other U.S. Courts of Appeals), aff ’g T.C. Memo.
                                     2004–13; accord Vallone v. Commissioner, 88 T.C. 794, 807–
                                     808 (1987), we think that in this instance the IRM reasonably
                                     interprets the delegation authority of the Secretary.
                                        Mr. Slaughter was authorized to issue the notices. Mr.
                                     Slaughter’s position is ‘‘Director, Collection Area—Western’’;
                                     he ‘‘serves as one of several field directors of SB/SE’s collection
                                     activities’’. Delegation Order 4–8 specifically delegates the
                                     authority to issue notices of deficiency to SB/SE field directors.
                                     Mr. Slaughter was delegated that authority.
                                        The substitutes for returns were properly made and
                                     executed, and the notices were properly issued.
                                     III. Section 6651(a)(1) Additions to Tax
                                       Section 6651(a)(1) provides for an addition to tax in the
                                     event a taxpayer fails to timely file a return (determined
                                     with regard to any extension of time for filing) unless the
                                     taxpayer shows 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 delinquent return for each month or fraction thereof
                                     during which the return remains delinquent, up to a max-




VerDate Nov 24 2008   10:32 Jun 05, 2014   Jkt 372897   PO 20012   Frm 00005   Fmt 2847   Sfmt 2847   V:\FILES\BOUND VOL. WITHOUT CROP MARKS\B.V.139\WINSLOW.SEP   JAMIE
                                     (270)                         WINSLOW v. COMMISSIONER                                         275


                                     imum addition of 25% for returns more than four months
                                     delinquent. Id. With respect to both the section 6651(a)(1)
                                     and (2) additions to tax, respondent bears the burden of
                                     coming forth with evidence that imposition of the addition is
                                     appropriate. See Higbee v. Commissioner, 116 T.C. 438, 446–
                                     447 (2001); see also sec. 7491(c).
                                        Respondent’s account transcripts for petitioner for the
                                     years in issue indicate that he filed no Federal income tax
                                     returns for those years, and that is sufficient for us to find,
                                     and we do, that petitioner filed no return for either year. See,
                                     e.g., Green v. Commissioner, T.C. Memo. 2007–262, 2007 WL
                                     2783107, at *5–*6. Respondent has met his burden under
                                     section 7491(c) to produce evidence that imposition of the
                                     section 6651(a)(1) addition to tax for failure to timely file a
                                     return is appropriate. See Higbee v. Commissioner, 116 T.C.
                                     at 447. Petitioner has not come forth with evidence that his
                                     failure to file was due to reasonable cause and not due to
                                     willful neglect. Consequently, we find that petitioner is liable
                                     for the additions to tax under section 6651(a)(1).
                                     IV. Section 6651(a)(2) Additions to Tax
                                       Section 6651(a)(2) imposes an addition to tax when a tax-
                                     payer fails to pay the amount of tax shown on a return by
                                     the prescribed date unless the taxpayer shows that such
                                     failure is due to reasonable cause and not due to willful
                                     neglect. The amount of the addition is equal to 0.5% of the
                                     tax for each month or fraction thereof during which the tax
                                     remains unpaid, up to a maximum addition of 25%. Under
                                     section 6651(g)(2), a substitute for return prepared pursuant
                                     to section 6020(b) is treated as the taxpayer’s return for pur-
                                     poses of section 6651(a)(2). 3
                                       Petitioner filed no return for either of the years in issue,
                                     and respondent properly made substitutes for returns for
                                     him. Petitioner has not paid the tax shown on those sub-
                                     stitutes for returns. Respondent has, therefore, met his bur-
                                     den under section 7491(c) to produce evidence that imposi-
                                       3 We note in passing that, while a properly made substitute for return is necessary before a

                                     sec. 6651(a)(2) addition to tax for failure to pay the tax shown on return can be imposed on
                                     a nonfiler, a substitute for return is not a prerequisite to the Commissioner’s determining a defi-
                                     ciency in tax. E.g., Roat v. Commissioner, 847 F.2d 1379, 1381–1382 (9th Cir. 1988) (‘‘Deficiency
                                     procedures set out in the Internal Revenue Code * * * do not require the Commissioner to pre-
                                     pare a return on a taxpayer’s behalf before determining and issuing a notice of deficiency.’’); ac-
                                     cord Watson v. Commissioner, T.C. Memo. 2007–146, aff ’d, 277 Fed. Appx. 450 (5th Cir. 2008).




VerDate Nov 24 2008   10:32 Jun 05, 2014   Jkt 372897   PO 20012   Frm 00006   Fmt 2847   Sfmt 2847   V:\FILES\BOUND VOL. WITHOUT CROP MARKS\B.V.139\WINSLOW.SEP   JAMIE
                                     276                 139 UNITED STATES TAX COURT REPORTS                                    (270)


                                     tion of the section 6651(a)(2) addition to tax for failure to
                                     timely pay tax shown on a return is appropriate. See Tilley
                                     v. Commissioner, T.C. Memo. 2009–83. Petitioner has not
                                     come forth with evidence that his failure to pay was due to
                                     reasonable cause and not due to willful neglect. Con-
                                     sequently, we find that petitioner is liable for the additions
                                     to tax under section 6651(a)(2).
                                     V. Section 6673(a)(1) Penalty
                                        In pertinent part, section 6673(a)(1) provides for 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. We described as nonsense petitioner’s arguments that
                                     the compensation and dividends he received were not tax-
                                     able. ‘‘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 a change in the law.’’
                                     Goff v. Commissioner, 135 T.C. 231, 237 (2010). Petitioner’s
                                     nonsensical arguments are, within that definition, frivolous.
                                     Moreover, we suspect that, in part, petitioner brought this
                                     proceeding in order to delay the collection of income tax due
                                     and owing. Principally for making frivolous arguments, we
                                     impose upon him a penalty under section 6673(a)(1) of
                                     $2,500.
                                     VI. Conclusion
                                       For the foregoing reasons, petitioner is liable for the defi-
                                     ciencies, section 6651(a)(1) additions to tax, and section
                                     6651(a)(2) additions to tax. Additionally, we impose a penalty
                                     on petitioner pursuant to section 6673(a)(1).
                                                                     An appropriate order and decision will be
                                                                   entered.

                                                                               f




VerDate Nov 24 2008   10:32 Jun 05, 2014   Jkt 372897   PO 20012   Frm 00007   Fmt 2847   Sfmt 2847   V:\FILES\BOUND VOL. WITHOUT CROP MARKS\B.V.139\WINSLOW.SEP   JAMIE
