                         T.C. Memo. 2010-258



                       UNITED STATES TAX COURT



                  JOHN LASZLOFFY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8015-09.              Filed November 24, 2010.



     John Laszloffy, pro se.

     Erin K. Salel, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     VASQUEZ, Judge:    Respondent determined the following

deficiencies in and additions to petitioner’s Federal income tax:
                                     - 2 -

                                          Additions to Tax
Year       Deficiency   Sec. 6651(a)(1)    Sec. 6651(a)(2)   Sec. 6654(a)

2004       $4,966        $1,117.35           $1,067.69         $142.29
2005        6,330         1,424.25              981.15          253.90
2006        4,477         1,007.33              425.32          211.85

       The issues for decision are:       (1) Whether petitioner

received taxable income in 2004, 2005, and 2006; (2) whether

petitioner is liable for self-employment taxes for 2004, 2005,

and 2006; (3) whether petitioner is liable for additions to tax

under section 6651(a)(1)1 for failure to timely file his 2004,

2005, and 2006 Federal income tax returns; (4) whether petitioner

is liable for additions to tax under section 6651(a)(2) for

failure to timely pay his 2004, 2005, and 2006 Federal income

taxes; (5) whether petitioner is liable for additions to tax

under section 6654(a) for failure to make estimated tax payments

for 2004, 2005, and 2006; and (6) whether the Court should impose

on petitioner a penalty under section 6673(a)(1) for advancing

frivolous arguments.

                              FINDINGS OF FACT

       The facts have been deemed stipulated under Rule 91(f) and

are so found.2      The stipulated facts and accompanying exhibits


       1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code of 1986, as in effect for the years in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
       2
        Under Rule 91(f), respondent moved the Court to issue an
order requiring petitioner to show cause why the facts and
                                                   (continued...)
                               - 3 -

are incorporated herein by this reference.   Petitioner resided in

California at the time the petition was filed.

     Petitioner failed to file Federal income tax returns for

2004, 2005, and 2006.   During this period petitioner, doing

business as JL Masonry, completed construction and/or masonry

projects for Hal Hays Construction, Inc., Striano Construction

Co., and Joshua Bailey Construction (the companies).   The

companies filed Forms 1099-MISC, Miscellaneous Income, with

respondent reporting the following amounts paid to petitioner:

             Year   Hal Hays    Striano   Joshua Bailey

             2004   $18,963      $4,250       -0-
             2005     -0-        26,795      $1,450
             2006    21,808       -0-         -0-

     Petitioner does not dispute receiving these payments.3

Pursuant to section 6020(b)(1) respondent executed substitutes

for returns for the years at issue using the Forms 1099-MISC




     2
      (...continued)
evidence set forth in respondent’s proposed stipulations of facts
should not be accepted as established for the purposes of this
case. The Court granted respondent’s motion and ordered
petitioner to file a response in compliance with Rule 91(f)(2).
Although petitioner timely filed his response, the Court found it
evasive and not fairly directed to respondent’s proposed
stipulations of fact, and as a result, the Court ordered that
pars. 1 through 32 of the proposed stipulations are deemed
established for purposes of this case.
     3
        At trial petitioner invoked the Fifth Amendment when
respondent and the Court questioned him about his income-
producing activities during the years at issue.
                                 - 4 -

filed by the companies.4    Respondent issued three separate

notices of deficiency to petitioner in which he determined the

above Federal income tax deficiencies and additions to tax, and

petitioner filed a timely petition with the Court challenging

respondent’s determinations for all 3 years.

     Petitioner has sent respondent volumes of correspondence

throughout the proceeding.     Therein petitioner asserts, among

other arguments, that:     (1) Federal law is inapplicable to him;

(2) he is not a Federal taxpayer obligated to pay Federal income

tax; and (3) the Federal income tax system is purely voluntary.

Petitioner also alleges that respondent acted fraudulently.

     Respondent advised petitioner that his arguments were

frivolous and could result in a penalty under section 6673,5 but

petitioner continued to make the same arguments in his pretrial

memorandum and at trial.    At trial the Court warned petitioner

that his arguments were frivolous and should not be placed in his

posttrial brief.   However, petitioner disregarded the Court’s

warning and asserted the same frivolous arguments.

     This is not the first time petitioner has made frivolous

arguments in this Court.    In 1993 petitioner challenged



     4
        The substitutes for returns meet the requirements of sec.
6020(b).
     5
        Sec. 6673(a)(1)(B) provides that the Court may require a
taxpayer to pay a penalty if the taxpayer’s position in the
proceeding is frivolous or groundless.
                               - 5 -

respondent’s deficiency determinations for tax years 1984, 1985,

1988, and 1989 that resulted from petitioner’s failure to file

Federal income tax returns.   Laszloffy v. Commissioner, docket

No. 2687-93.   At the calendar call preceding the trial date the

Court warned petitioner that he would be subject to a penalty if

he continued to advance frivolous arguments.     On March 9, 1994,

the Court entered an order of dismissal for lack of prosecution

because petitioner failed to appear at trial.6

     In Laszloffy v. Commissioner, T.C. Memo. 2007-31, affd. 297

Fed. Appx. 628 (9th Cir. 2008), the Court granted summary

judgment for respondent after petitioner challenged respondent’s

Appeals Office’s determination to proceed with a proposed levy

action against petitioner’s property related to tax years 1992

and 1993.   As in the current case, petitioner had failed to file

Federal income tax returns for the years at issue and was warned

by the Court that he was asserting frivolous arguments.7




     6
         No penalty under sec. 6673(a)(1) was imposed.
     7
        In Laszloffy v. Commissioner, T.C. Memo. 2007-31, affd.
297 Fed. Appx. 628 (9th Cir. 2008), petitioner argued, among
other things, that he “is not a taxpayer within the purview of
the Internal Revenue Code” and “is not located in any area of
jurisdiction subject to the United States Congress”.
                                  - 6 -

                                 OPINION

I.   Deficiency Determinations

      A.   Receipt of Unreported Taxable Income

      Generally, the Commissioner’s determination of a deficiency

is presumed correct, and the taxpayer has the burden of proving

it wrong.     Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115

(1933).    However, in an unreported income case appealable to the

Court of Appeals for the Ninth Circuit, such as this one, the

presumption of correctness does not attach unless the

Commissioner first establishes some evidentiary foundation

linking the taxpayer with the alleged income-producing activity.

See Weimerskirch v. Commissioner, 596 F.2d 358 (9th Cir. 1979),

revg. 67 T.C. 672 (1977); Golsen v. Commissioner, 54 T.C. 742,

756-757 (1970), affd. 445 F.2d 985 (10th Cir. 1971); Rodriguez v.

Commissioner, T.C. Memo. 2009-92.      If respondent meets his burden

of connecting petitioner with the income determined in the

statutory notice of deficiency, the burden then shifts to

petitioner to prove that respondent’s determination is

erroneous.8    See George v. Commissioner, T.C. Memo. 2002-163.

     Respondent has established a sufficient evidentiary

foundation linking petitioner with the income determined in the



      8
        Petitioner has neither claimed nor shown that he
satisfied the requirements of sec. 7491(a) to shift the burden
of proof to respondent with regard to any factual issue affecting
the deficiencies in his tax.
                                  - 7 -

notices of deficiency; i.e., the stipulations of fact establish

that petitioner received the unreported income as determined in

the notices of deficiency.    See Mandeville v. Commissioner, T.C.

Memo. 2007-332 (finding taxpayer’s stipulation as to receipt of

unreported income sufficient to attach presumption of correctness

to notices of deficiency).    Consequently, respondent has met his

burden of connecting petitioner with the income determined in the

notices of deficiency and respondent’s deficiency determinations

are presumed to be correct.

     Petitioner presented no evidence that respondent erroneously

determined the amounts of taxable income petitioner received in

2004, 2005, and 2006.   When asked about his income-producing

activities during the years at issue petitioner invoked the Fifth

Amendment.   Accordingly, we sustain respondent’s determinations

regarding the amounts of taxable income petitioner received in

2004, 2005, and 2006.

     B.   Self-Employment Taxes

     Section 1401 imposes self-employment tax on self-employment

income.   Section 1402 defines net earnings from self-employment

as the gross income derived by an individual from the carrying on

of any trade or business by such individual less allowable

deductions attributable to such trade or business.

     Respondent determined that petitioner’s income during 2004,

2005, and 2006 is subject to self-employment tax.    Petitioner
                                - 8 -

presented no evidence that respondent’s determinations are

erroneous.    Petitioner did business as JL Masonry, and the income

he received was classified as nonemployee compensation on the

Forms 1099-MISC filed by the companies.     Accordingly, we sustain

respondent’s determinations regarding petitioner’s liability for

self-employment taxes for 2004, 2005, and 2006.

II.   Additions to Tax

      A.   Burden of Proof and Production

      Section 7491(c) provides that the Commissioner will bear the

burden of production with respect to the liability of any

individual for additions to tax.    “The Commissioner’s burden of

production under section 7491(c) is to produce evidence that it

is appropriate to impose the relevant penalty, addition to tax,

or additional amount”.    Swain v. Commissioner, 118 T.C. 358, 363

(2002); see also Higbee v. Commissioner, 116 T.C. 438, 446

(2001).    If a taxpayer files a petition alleging some error in

the determination of an addition to tax or penalty, the

taxpayer’s challenge will succeed unless the Commissioner

produces evidence that the addition to tax or penalty is

appropriate.    Swain v. Commissioner, supra at 363-365.   The

Commissioner, however, does not have the obligation to introduce

evidence regarding reasonable cause.    Higbee v. Commissioner,

supra at 446-447.
                                 - 9 -

     B. Section 6651(a)(1)

     Section 6651(a)(1) imposes an addition to tax for failure to

file a return on the date prescribed (determined with regard to

any extension of time for filing), unless the taxpayer can

establish that such failure is due to reasonable cause and not

willful neglect.

     Petitioner failed to file Federal income tax returns for the

years at issue.    The Court finds respondent has met his burden of

production with regard to the additions to tax under section

6651(a)(1).    Petitioner has presented no evidence indicating his

failures to file were due to reasonable cause and not willful

neglect or that respondent’s determinations are otherwise

incorrect.    Accordingly, petitioner is liable for additions to

tax under section 6651(a)(1) for 2004, 2005, and 2006 as

respondent determined.

     C.   Section 6651(a)(2)

     Section 6651(a)(2) imposes an addition to tax for failure to

timely pay the amount shown as tax on a return, unless the

taxpayer can establish that such failure is due to reasonable

cause and not willful neglect.

     The Commissioner’s burden of production requires him to

introduce evidence that the tax was shown on a Federal income tax

return. Cabirac v. Commissioner, 120 T.C. 163 (2003).    When a

taxpayer has not filed a return, the section 6651(a)(2) addition
                               - 10 -

to tax may not be imposed unless the Secretary has prepared a

substitute for return that meets the requirements of section

6020(b).    Wheeler v. Commissioner, 127 T.C. 200, 208-209 (2006),

affd. 521 F.3d 1289 (10th Cir. 2008).

     Petitioner failed to make income tax payments for the years

at issue.    Respondent introduced into evidence valid substitutes

for returns for the years at issue, thereby satisfying his burden

of production.    Petitioner has presented no evidence indicating

that his failures to pay were due to reasonable cause and not

willful neglect or that respondent’s determinations are otherwise

incorrect.    We therefore hold that petitioner is liable for the

additions to tax under section 6651(a)(2) for 2004, 2005, and

2006 as respondent determined.

     D.    Section 6654(a)

     Section 6654(a) imposes an addition to tax “in the case of

any underpayment of estimated tax by an individual”.    A taxpayer

has an obligation to pay estimated tax for a particular year only

if he has a “required annual payment” for that year.    Sec.

6654(d).    A required annual payment generally 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 taxable year, 100 percent of the tax shown

on that return.    Sec. 6654(d)(1)(B); Wheeler v. Commissioner,
                               - 11 -

supra at 210-211; Heers v. Commissioner, T.C. Memo. 2007-10.

Respondent’s burden of production under section 7491(c) requires

him to produce evidence that petitioner had required annual

payments for 2004, 2005, and 2006 under section 6654(d).

       Petitioner made no payments of estimated tax for any of the

years 2004 through 2006.    The record establishes that petitioner

had a required annual payment for each of those years.

Petitioner did not file Federal income tax returns for tax years

2003 through 2006.    Thus, petitioner’s required annual payment

for each year at issue was equal to 90 percent of the tax for

that year, and respondent has carried his burden of production

with respect to the section 6654 additions to tax for the years

at issue.

       Petitioner has not argued that any of the exceptions to the

section 6654 addition applies.    We therefore hold that petitioner

is liable for the additions to tax under section 6654 for 2004,

2005, and 2006 as respondent determined.

III.    Penalty Under Section 6673

       Respondent moved the Court to impose a penalty on petitioner

under section 6673(a)(1).    Section 6673(a)(1) authorizes the

Court to impose a penalty not to exceed $25,000 if the taxpayer

took frivolous positions in the proceeding or instituted the

proceeding primarily for delay.
                               - 12 -

     A position “is frivolous if it is contrary to established

law and unsupported by a reasoned, colorable argument for change

in the law.”   Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir.

1986).   This Court has ruled that arguments such as those

petitioner asserts here are frivolous and wholly without merit.

See Williams v. Commissioner, T.C. Memo. 1999-277 (imposing

section 6673 penalty for tax-protester arguments).

     In addition, petitioner has advanced frivolous arguments

before the Court on two prior occasions.   Section 6673 “was

intended to apply to situations where a taxpayer repeatedly

brings the same appeal * * * after having been informed that his

basis * * * is groundless.”    Greenberg v. Commissioner, 73 T.C.

806, 814 (1980).   In Laszloffy v. Commissioner, docket No. 2687-

93, the Court warned petitioner that his arguments were frivolous

and would result in the imposition of a penalty if he continued

to raise them.    In Laszloffy v. Commissioner, T.C. Memo. 2007-31,

the Court again advised petitioner that many of his arguments

were frivolous.

     Accordingly, we shall grant respondent’s motion and require

petitioner to pay a penalty of $2,500 to the United States

pursuant to section 6673(a)(1).   We also warn petitioner that we

will consider imposing a larger penalty if he returns to the
                             - 13 -

Court and advances frivolous or groundless arguments in the

future.

     To reflect the foregoing,


                                         An appropriate order and

                                   decision will be entered.
