                          T.C. Memo. 2010-240



                        UNITED STATES TAX COURT



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



     Docket No. 22223-07.               Filed November 1, 2010.



     David Lee Smith and Mary Julia Hook, pro sese.

     Miles B. Fuller and Joan E. Steele, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COHEN, Judge:   Respondent determined deficiencies in

petitioners’ Federal income tax and additions to tax and

penalties as follows:
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                             Addition to Tax          Penalty
    Year      Deficiency     Sec. 6651(a)(1)         Sec. 6662

    2001       $84,482           $20,881.75         $16,896.40
    2002        98,419            24,572.50          19,683.80
    2003       105,143            21,861.75          21,028.60
    2004       126,057               -0-             25,211.40
    2005        52,099               -0-             10,419.80

     Petitioner Mary Julia Hook (Hook) has entered into a

settlement with respondent, but petitioner David Lee Smith

(Smith) has not.   The issues for decision as to Smith are whether

assessment of the amounts in dispute is barred by the statute of

limitations; whether Smith is entitled to any reductions in the

deficiencies not conceded by respondent in the settlement with

Hook; whether the additions to tax and penalties are appropriate;

and whether Smith is entitled to relief under section 6015.      All

section references are to the Internal Revenue Code in effect for

the years in issue.

                           FINDINGS OF FACT

     None of the facts have been stipulated.      Petitioners resided

in Colorado at the time the petition was filed.      They graduated

from law school and were married in 1972, and at all material

times they were married but living apart.      Hook practiced law

successfully with the U.S. Department of Justice and with various

private law firms.    She also received rental income from rental

property that she owned.

     Beginning in or about 1993, Smith was disbarred by courts in

Colorado.   He moved to Texas in 1998 in order to practice law
                                 - 3 -

there.   After being disbarred by Federal courts in Texas, he

returned to Colorado in 2002.    Although he has been reinstated by

some jurisdictions, he did not earn income from the practice of

law during the years in issue.    Smith traded in securities and

withdrew funds from a retirement account during the years in

issue.   He also received Social Security payments.   However, Hook

supported Smith and permitted him to reside on property that she

purchased in Denver for that purpose.

     Hook prepared joint Federal income tax returns for

petitioners for the years in issue and signed Smith’s name

pursuant to a power of attorney Smith executed in 1984.    The

returns for 2001, 2002, and 2003 were not received by the

Internal Revenue Service (IRS) before July 29, 2004, September

26, 2005, and September 24, 2005, respectively.    Petitioners’

returns for 2004 and 2005 were received September 26, 2005, and

April 15, 2006, respectively.    The notice of deficiency for tax

years 2001 through 2005 was sent July 3, 2007.

     The returns Hook prepared omitted income Hook received in

2002, retirement account distributions to Smith in 2004 and 2005,

and other income.   Deductions were claimed for, among other

things, business expenses of Smith’s law practice of $73,381,

$75,732, $87,437, $71,047, and $42,190 for 2001, 2002, 2003,

2004, and 2005, respectively.    Those expenses, if incurred at

all, related primarily to Smith’s activities in controversies
                                 - 4 -

with the IRS concerning petitioners’ income tax liabilities for

1992 through 1996.

     This case was set for trial during the trial session of the

Court commencing September 8, 2008, in Denver.     After several

unsuccessful motions by Smith to continue or stay the

proceedings, the parties announced that they had reached a

settlement.   In open court on September 9, 2008, Hook,

represented by counsel, stipulated recomputed deficiencies,

additions to tax, and penalties, eliminating some of the income

adjustments contained in the notice of deficiency but disallowing

disputed deductions.     The settlement was set aside for reasons

described in Smith v. Commissioner, T.C. Memo. 2009-33, filed

February 11, 2009.

     On September 21, 2009, Hook, represented by counsel,

stipulated that the correct deficiencies, additions to tax, and

penalties for the years in issue are as follows:

                              Addition to Tax        Penalty
     Year     Deficiency       Sec. 6651(a)(1)      Sec. 6662

    2001       $10,073          $2,310.75           $2,014.60
    2002        27,592           6,898.00            5,518.40
    2003        37,696           5,041.00            7,539.20
    2004       123,807              -0-             24,761.40
    2005        50,752              -0-             10,150.40

     While this case was pending, Hook was engaged in bankruptcy

litigation involving, in part, collection of petitioners’ tax

liabilities for 1992 through 1996 as determined in docket Nos.

8747-00 and 11725-02, which were the subject of the opinion in
                               - 5 -

Smith v. Commissioner, T.C. Memo. 2003-266, affd. sub nom. Hook

v. Commissioner, 103 Fed. Appx. 661 (10th Cir. 2004).     On or

about April 9, 2010, approximately a month before this case was

to be tried in Denver, Smith filed a refund suit in the U.S.

Court of Federal Claims disputing the outstanding liabilities for

1992 through 1996 and seeking to oust this Court of jurisdiction

over his liabilities for 2001 through 2005.

                              OPINION

     Petitioners’ longstanding war with the IRS has been

recounted in prior opinions reported as Smith v. Commissioner,

T.C. Memo. 2003-266, relating to petitioners’ liabilities for

1992 through 1996, and Smith v. Commissioner, T.C. Memo. 2009-33,

relating to an unsuccessful effort to settle this case before a

scheduled trial.   From the first time this case was set for trial

by notice served April 8, 2008, through trial and submission of

this case in May 2010, petitioners’ strategy has been to delay

the determination of their tax liabilities by dilatory motions

for continuance, obstruction of discovery, repetitious and

meritless motions, and attacks on respondent’s counsel.    In

addition, Smith has verbally attacked the courts that disbarred

him and the judges that have heard various aspects of the

disputes between petitioners and the IRS, including a bankruptcy

judge and three Judges of this Court.   Most of the record in this

case, including the trial transcript, is made up of Smith’s
                               - 6 -

arguments, in which he quotes himself at length, argues about

matters related to the final decisions concerning liabilities for

1992 through 1996 and collection proceedings relating to them,

and reargues motions decided in this case.    (His conduct can best

be described as an ongoing tantrum.)

Period of Limitations and Deficiencies

     Respondent introduced official records of the IRS reflecting

receipt of petitioners’ 2001 return on July 29, 2004, and their

2002, 2003, and 2004 returns in September 2005.   If we accept

that evidence as to the filing dates of the returns for purposes

of section 6501(a), the notice of deficiency sent July 3, 2007,

was timely as to all of the years in issue.   See, e.g., Moseley

v. Commissioner, T.C. Memo. 1993-4.    From time to time, Smith has

asserted that assessments for all years are barred because they

were not accomplished within 3 years from the dates the returns

were filed, but that position is erroneous as a matter of law.

The petition in this case suspended running of the period of

limitations because no assessment can take place until the

decision becomes final.   See sec. 6213(a).

     Because Smith has disavowed any knowledge of the preparation

and filing of the tax returns for the years in issue, he relies

entirely on Hook’s testimony about the filing dates, the

timeliness of the returns, and the records that she used in

determining the deductions claimed on the returns.   Her testimony
                               - 7 -

consists of general assertions that she filed a return for each

year before an October extended due date and that the returns

were correct as filed.

     Hook’s testimony that she filed timely tax returns for 2001,

2002, and 2003 is not corroborated by any documentary evidence

and is contradicted by the official records of the IRS.   There is

no evidence of payments sent with returns or of pursuit of

refunds claimed on returns.   The 2003 return, for example,

claimed a refund of $57,000, and Hook testified that the return

was mailed on the date signed, October 12, 2004.   Hook claims

that the refund was applied to taxes owed for 1992 through 1996

but that she has not been given credit for that amount.

Petitioners have not identified that unpaid refund in their

demand for accounting.   In view of the long history of their

disputes with the IRS, we do not believe that petitioners would

not have vigorously pursued a refund claimed on a 2003 return

filed in October 2004.

     Hook testified that collection efforts with respect to the

1992 through 1996 liabilities began in about 2005.   Reasonable

inferences are that petitioners delayed filing the returns for

2001 through 2003 because of then-ongoing litigation with the

Commissioner over their liabilities for 1992 through 1996 and

that they filed the late returns when collection efforts began

for those earlier years because noncompliance with filing
                                 - 8 -

obligations prevents consideration of collection alternatives.

See Vinatieri v. Commissioner, 133 T.C. 392, 400 (2009); Orum v.

Commissioner, 123 T.C. 1, 4, 12 (2004), affd. 412 F.3d 819 (7th

Cir. 2005).   We conclude that the more reliable evidence and the

more likely fact is that the returns were not filed before the

dates they were received as reflected in the IRS records.

     Hook also asserts that she maintained adequate records to

support the deductions claimed on the returns but that the

records were destroyed by a roof leak in November or December

2009.   The roof leak and resulting damage petitioners described

occurred long after the records were to be produced in this case

during pretrial discovery, pursuant to an order of this Court

dated August 13, 2008; after the previous trial setting, on

September 9, 2008, was vacated because of the representations

that settlement had been reached; and after Hook’s stipulation of

the deficiencies set forth above.    If the records existed to

substantiate the deductions, the failure to turn them over before

the roof leak is inexplicable.    In any event, Hook’s testimony

did not identify or substantiate any of the disallowed deductions

or identify or establish any errors in respondent’s determination

of unreported income for any of the years in issue.

     Moreover, cross-examination of Hook revealed that some of

the deductions claimed were improper.    For example, Hook claimed

deductions for malpractice insurance coverage provided by her
                                 - 9 -

employer and not paid for by her.    She merely assumed and

deducted amounts based on quoted premiums that she would have

paid had she obtained the coverage independently.    She also

deducted office rent, utilities, and other office expenses based

on her calculation of amounts she would have paid if she had

obtained an office independently.    She claimed that her employer

reduced her earnings to reflect these expenses, but she admitted

that she did not report the income allegedly retained by her

employer to cover those items.

     On the tax returns that she prepared, Hook claimed business

expense deductions attributable to Smith despite her knowledge

that he was not practicing law or engaged in a business to which

the claimed deductions related.    She testified that she signed

blank checks that he completed and claimed deductions of amounts

shown on the canceled checks returned to her.    She deducted

alleged expenses of Smith’s stock trading activities, car and

truck expenses, insurance, and office expenses related to the

residence that she provided for him, knowing that he had no

income from the alleged activities.

     Smith testified that when he returned to Colorado in 2002:

     Julia was embroiled in this aggressive action by the
     IRS with respect to the 1992 through 1996 tax returns,
     so I started spending a lot of time. I consider it
     practicing law in the sense I’m a pro se, trying to get
     a Court to not have hundreds of thousands of dollars
     wrongfully imposed against me for the 1992 through 1996
     tax years.
                              - 10 -

We infer, and we have found, that expenses claimed as Smith’s

business expenses included expenses of petitioners’ personal

litigation with the IRS.   They are not deductible business

expenses, even if substantiated.

     Petitioners’ testimony is implausible and insufficient to

support findings that tax returns were filed on time or that

deductible business expenses were incurred.     We reject

categorically Smith’s assertion that he has satisfied the

conditions for shifting to respondent the burden of proof under

section 7491(a), because petitioners have not introduced credible

evidence, did not substantiate deductions, did not maintain

required records, and did not cooperate with reasonable requests

for information and documents.     See sec. 7491(a)(2).

     We conclude that assessment of the amounts in dispute in

this case, after the decision becomes final, is not barred by

limitations, and that no adjustments in the reduced amounts

conceded by respondent in the settlement with Hook are justified.

(Smith’s liabilities are limited to the stipulated amounts).

Addition to Tax and Penalty

     Respondent has the burden of producing evidence that the

section 6651(a) addition to tax and the section 6662 penalty are

appropriate.   See sec. 7491(c).    Proof of the late filing of the

returns, which we have accepted because of the lack of credible

evidence of timely filing, satisfies respondent’s burden.     See
                              - 11 -

Higbee v. Commissioner, 116 T.C. 438, 446-448 (2001).

Petitioners have failed to establish or even argue that the late

filing was due to reasonable cause and not willful neglect.        See

sec. 6651(a)(1).   The additions to tax for late filing are

sustained.

     The deficiencies stipulated by Hook and sustained in this

opinion result in substantial understatements within the meaning

of section 6662(d).   In any event, the omission of income and the

improper deduction of Smith’s expenses and certain of Hook’s

claimed business expenses, as is apparent from cross-examination

of each of them, constitute negligence as defined in section

6662(c).   See Higbee v. Commissioner, supra at 448-449.     The

section 6662(a) penalties are appropriate.    Petitioners’

unsupported assertions that the returns were correct do not

constitute reasonable cause or any other defense to the

penalties.   The penalty for each year will be sustained.

Section 6015

     Generally, married taxpayers may elect to file a joint

Federal income tax return.   Sec. 6013(a).   After making the

election, each spouse is jointly and severally liable for the

entire tax due for that taxable year.   Sec. 6013(d)(3).     A spouse

(requesting spouse) may, however, seek relief from joint and

several liability by following procedures established in section

6015.   A requesting spouse may request relief from liability
                              - 12 -

under section 6015(b) or, if eligible, may allocate liability

according to provisions under section 6015(c).   Sec. 6015(a).   If

relief is not available under section 6015(b) or (c), an

individual may seek equitable relief under section 6015(f).

Section 6015(f) authorizes the Commissioner to grant equitable

relief from joint and several liability if “taking into account

all the facts and circumstances, it is inequitable to hold the

individual liable for any unpaid tax or any deficiency (or any

portion of either)”.

     Respondent argues that actual knowledge of the

understatements is attributable to Smith.   Although Smith did not

personally sign the joint tax returns that petitioners filed, he

authorized Hook to sign his name.   He did not satisfy his duty of

inquiry but turned a blind eye to the contents of the returns.

See Bokum v. Commissioner, 94 T.C. 126, 148 (1990), affd. 992

F.2d 1132 (11th Cir. 1993); Adams v. Commissioner, 60 T.C. 300,

303 (1973).   Moreover, at the time that the tax returns for the

years in issue were due, Smith was well aware that the returns

for 1992 through 1996 had been challenged by the Commissioner for

similar reasons and that substantial deficiencies and penalties

had been determined for those years.   Smith’s knowledge is a

disqualifying factor for relief under section 6015(b)(1)(C) or

(c)(3)(C).
                                - 13 -

     Although they were living separately during the years in

issue, Smith has not shown grounds for allocation under section

6015(c) and (d), and the record of omitted income withdrawn from

his retirement account and the erroneous deductions attributable

to him negate such allocation.    Nothing in this record suggests

that it would be inequitable to hold him liable for the

deficiencies, which is the showing required under section

6015(b)(1)(D) or (f)(1).   Smith has not presented evidence of any

factor favoring relief among those generally considered in

determining entitlement under section 6015, and discussion of

those factors is therefore not necessary.    Smith is not entitled

to relief under section 6015.

Other Issues Raised by Smith.

     Much of the voluminous record in this case is based on

Smith’s complaints, joined by Hook, about the final decisions in

the cases involving their 1992 through 1996 tax liabilities and

the collection efforts that followed assessment of the

liabilities for those years.     Smith’s attacks on the Court in

relation to the prior cases will not be addressed in this

opinion.   His several motions to disqualify Judges involved in

this case are based on adverse rulings that are not grounds for

disqualification.   See United States v. Conforte, 624 F.2d 869,

882 (9th Cir. 1980); United States v. Carroll, 567 F.2d 955, 958
                              - 14 -

(10th Cir. 1977); United States v. Haldeman, 559 F.2d 31, 136

(D.C. Cir. 1976); United States v. Ming, 466 F.2d 1000, 1002-1004

(7th Cir. 1972).

     Petitioners argue that the deficiencies in this case should

be reduced by alleged overpayments resulting from excess

collections of the earlier years’ liabilities.   They filed a

motion for refund of the amounts the IRS collected from them

after the petition in this case was filed.   The Court ordered a

response from respondent, to “include an accounting that shows

whether any collection of funds from petitioners has been ‘in

respect of the deficiency that is the subject of’ the petition in

this case, over which the Court has jurisdiction under section

6213(a).”   Section 6213(a) prohibits assessment of a deficiency

or collection efforts during the pendency of a case in this Court

and provides in relevant part that a refund may be ordered of any

amount collected during the time that the prohibition is in

effect but “only in respect of the deficiency that is the subject

of such petition.”   Thus the Court has no jurisdiction here to

order refunds of amounts collected with respect to deficiencies

finally determined for 1992 through 1996.    See Beane v.

Commissioner, T.C. Memo. 2009-152.

     The purpose of the Court’s order for an accounting was to

determine whether any amounts had been collected with respect to

the deficiencies for 2001 through 2005.   Petitioners claim that
                             - 15 -

amounts collected in relation to Hook’s bankruptcy must have been

applied to the years before the Court in this case because the

official transcripts for those years show zero balances.    The

transcripts show zero balances because the amounts due have not

been assessed during the pendency of this case and not because

any amounts have been collected for those years.

     Respondent filed an objection to the motion for refund and

an accounting of funds collected during the relevant period and

the application of those funds.   Forms 4340, Certificate of

Assessments, Payments, and Other Specified Matters, for

petitioners’ accounts were attached to the objection.    The report

also described a dispute about if and when credits were due for

the value of real properties quitclaimed by Hook to the

Government in response to a bankruptcy court order.    In any

event, the accounting reported that none of the funds collected

were applied or applicable to the deficiencies in this case.

     Despite repetitious filings (and trial testimony) claiming

overpayments, petitioners have not identified any payments or

collections not accounted for in respondent’s report.

Nonetheless, petitioners sought modification of the Court’s order

to include alleged errors with respect to liabilities determined

for 1992 through 1996; demanded that respondent’s counsel be held

in contempt and sanctioned; and filed a complaint in the U.S.

Court of Federal Claims seeking similar relief.    Petitioners’
                              - 16 -

motion for refund was denied for lack of jurisdiction.   Cf.

Ryals v. Commissioner, 127 T.C. 178, 182 (2006); Savage v.

Commissioner, 112 T.C. 46, 49-51 (1999); Porter v. Commissioner,

T.C. Memo. 2010-154.

     At the time the case was called for trial, Smith claimed

that his filing of the complaint with the U.S. Court of Federal

Claims divested this Court of jurisdiction.   Smith cited section

6015(e)(3).   His motion was denied as another dilatory tactic

without merit.

     Section 6015(e)(3) provides:

          (3) Limitation on Tax Court jurisdiction.--If a
     suit for refund is begun by either individual filing
     the joint return pursuant to section 6532--

               (A) the Tax Court shall lose jurisdiction of
          the individual’s action under this section to
          whatever extent jurisdiction is acquired by the
          district court or the United States Court of
          Federal Claims over the taxable years that are the
          subject of the suit for refund, and

               (B) the court acquiring jurisdiction shall
          have jurisdiction over the petition filed under
          this subsection.

     That section assumes, however, that the U.S. Court of

Federal Claims has jurisdiction over the taxable years that are

the subject of the suit for refund.    It must be reconciled with

section 7422(e), which gives the Tax Court sole jurisdiction of

cases, such as this one, in which a notice of deficiency has been

sent and a timely petition filed in this Court.   Section

6015(e)(3) merely gives the U.S. Court of Federal Claims
                                - 17 -

jurisdiction over a “stand-alone” proceeding under section

6015(e) brought when a refund suit is commenced in that court for

the same years as the section 6015(e) petition.   It cannot be

used to oust this Court of jurisdiction obtained as a result of a

petition filed in response to a notice of deficiency.   Because

the U.S. Court of Federal Claims does not acquire jurisdiction

over the tax liabilities for 2001 through 2005, section

6015(e)(3) does not apply here.

     We have considered the other arguments raised, including

petitioners’ claims that the notice of deficiency is void and

that they have been denied due process.   None of petitioners’

arguments have merit.   Addressing them in detail would be a

further waste of judicial resources and would only serve

petitioners’ intent to delay.

     Smith will be given the benefit of respondent’s settlement

with Hook, and the reduced deficiencies, related additions to

tax, and penalties will be sustained.    His pointless rehashing of

the decisions for 1992 through 1996, his repetitious motions, and

his attacks on respondent’s counsel and on the Court were not

designed to accomplish anything favorable to petitioners in this

proceeding; thus they appear to have been pursued primarily for

delay.   Smith is hereby warned that any additional proceedings

brought by him in which he makes similar groundless arguments for
                             - 18 -

the same purpose may result in imposition of a penalty not in

excess of $25,000 under section 6673.

     To reflect the foregoing,


                                        Decision will be entered in

                                 accordance with the stipulation

                                 between Hook and respondent.
