                        T.C. Memo. 2005-216



                      UNITED STATES TAX COURT



               JOSEPH JOHN MARTELLA, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 7504-04.              Filed September 19, 2005.


          P failed to file Federal income tax returns for
     the 1998 and 2001 years. R determined deficiencies and
     additions to tax, which P contested primarily on the
     basis of inapplicability of the filing requirement and
     tax protester arguments.

          Held: P is liable for deficiencies in his income
     taxes and additions to tax under secs. 6651(a)(1) and
     6654, I.R.C., for 1998 and 2001.


     Joseph John Martella, pro se.

     Fred E. Green, Jr., for respondent.


             MEMORANDUM FINDINGS OF FACT AND OPINION


     WHERRY, Judge:   For petitioner’s 1998 taxable year,

respondent determined a Federal income tax deficiency in the
                               - 2 -

amount of $1,476 and an addition to tax pursuant to section

6651(a)(1) in the amount of $701.10.1   For petitioner’s 2001

taxable year, respondent determined a Federal income tax

deficiency in the amount of $10,872 and additions to tax pursuant

to section 6651(a)(1) in the amount of $3,370.32 and pursuant to

section 6654(a) in the amount of $430.23.   After concessions,2

the issues for decision are:

     (1) Whether petitioner is liable for a deficiency in the

amount of $1,476 for taxable year 1998;

     (2) whether petitioner is liable for a deficiency in the

amount of $9,282 for taxable year 2001;

     (3) whether petitioner is liable for additions to tax under

sections 6651(a) and 6654(a); and



     1
       Unless otherwise indicated, all section references are to
the Internal Revenue Code (Code) in effect for the years in
issue, and all Rule references are to the Tax Court Rules of
Practice and Procedure.
     2
       Respondent conceded in his pretrial memorandum the sec.
6651(a)(2) addition to tax for both 1998 and 2001 and sought a
correlative increase in the sec. 6651(a)(1) addition to tax for
both years. The appropriate sec. 6651(a)(1) addition to tax for
both years is to be calculated per Rule 155, as it appears that
the sec. 6651(a)(1) additions to tax as shown on the notice of
deficiency are in error as they exceed the 25-percent aggregate
maximum as permitted by this section.

     At trial, respondent stated that the parties agreed that
petitioner is liable for Federal income tax deficiencies in the
amounts of $1,476 and $9,282, for the years 1998 and 2001,
respectively. Petitioner at trial sought to discuss only his
liability for additions to tax; however, his main argument on
brief and in his pretrial memorandum was that he was not liable
for an income tax. Given petitioner’s arguments, the Court
considers both the deficiency and the additions to tax issues.
                              - 3 -

     (4) whether the Court should impose a penalty, sua sponte,

under section 6673.

                        FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulations of the parties, with accompanying exhibits, are

incorporated herein by this reference.   At the time this petition

was filed, petitioner resided in Henderson, Nevada.

     On October 31, 2001, petitioner signed Form 2848, Power of

Attorney and Declaration of Representative, designating Milton H.

Baxley II (Mr. Baxley) and Bryan Malatesta (Mr. Malatesta), a

Texas certified public accountant, as his representatives for tax

matters regarding Form 1040, U.S. Individual Income Tax Return,

before the Internal Revenue Service for the taxable years 1985-

2004.3

     Petitioner did not file a Federal income tax return for

either the 1998 or 2001 taxable year.    The last time petitioner

filed a tax return was either in the year 1996 or 1997.   It was

during 1996 or 1997 that petitioner decided he was not liable for

filing income tax returns.

     On April 28, 2003, the Internal Revenue Service (Service)

wrote petitioner a letter entitled:   “Request for your Tax

Return”, informing petitioner that respondent did not receive a



     3
       Mr. Baxley and Mr. Malatesta also represented petitioner
during the levy of his nonemployee income from Beyer
Entertainment Group with respect to petitioner’s 1995 tax year
deficiency.
                               - 4 -

Form 1040 for 2001 from petitioner.    Petitioner’s representative,

Mr. Malatesta, responded to this letter and requested the

“authority, referencing code and regulation or statute, that

requires Joseph J. Martella to file a Form 1040.   I have seen no

documents that require my client to file such a form.”   Mr.

Malatesta further informed respondent that his client “will file

any form due, upon receipt of the Verified Statement signed under

the penalty of perjury by someone in the IRS who has the

authority and firsthand knowledge pursuant to 26 USC §§6061 and

6065 or any copy of a judgment ordering my client to file the

form.”   Mr. Malatesta drafted and attached to his response letter

a form which he called a “Verified Satement” (sic):

     I, __________________, Pocket Commission Serial No.
     ____________, hereby affirm that Joseph J. Martella is
     obligated by law to file a Form ______ tax return. My
     demand that Joseph J. Martella file the Form 1040 is
     authorized by law. I am an authorized agent of the
     United States government and acting within delegated
     authority as evidenced by the documents I have produced
     for Bryan D. Malatesta CPA. This statement is made
     under penalty of perjury, and is true, correct,
     complete and not misleading.
     __________________________________
     Signature and Title

Mr. Malatesta’s closing remarks notified the Service that it had

“a firm offer to file the Form 1040.   My client gives his firm

promise to file any form legally required by law upon receipt of

the requested documents.”

     On June 24, 2003, the Service responded to Mr. Malatesta’s

letter by informing petitioner and Mr. Malatesta that a search
                              - 5 -

for petitioner’s 2001 tax return was unsuccessful.   Further, the

Service stated that its records showed that in 2001 petitioner

had nonemployee compensation income of $41,075 and that if

petitioner “had net earnings of $400 or more from non-employee

compensation * * * [he] needed to file a Schedule SE and pay

self-employment tax.”

     Petitioner testified that he viewed several Internet Web

sites proclaiming that there was no law that required him to file

a Form 1040 and no law that made him liable for an income tax.

At trial and on brief, petitioner cited the fact that Internal

Revenue Service Commissioner, Mark Everson, during a press

conference on September 16, 2003, did not provide petitioner with

a satisfactory answer for petitioner to determine which law made

petitioner liable for an income tax and which law required

petitioner to file a Federal tax return.

     On February 4, 2004, respondent issued petitioner notices of

deficiency determining deficiencies and additions to tax for the

1998 and 2001 taxable years as stated above.

                             OPINION

I.   Contentions of the Parties

     Petitioner contends that he should not be liable for any

income taxes or additions to tax because he believes that there

is no law requiring him to file a Federal tax return and no law

that makes him liable for an income tax.   He argues that the

information found on various Internet Web sites and the fact that
                                 - 6 -

no one has answered the questions, “what law requires me to file

a 1040 and what law makes me liable to pay an income tax?” allow

him to conclude that “there is no law that makes him liable for

an income tax”.4

      Respondent claims that since petitioner did not file a

Federal income tax return for both the 1998 and 2001 taxable

years, he is liable for an addition to tax under section

6651(a)(1) for 1998 and 2001.    Furthermore, as petitioner did not

make any estimated tax payments during 2001, respondent asserts

that petitioner is also liable for an addition to tax under

section 6654 for 2001.

II.   Petitioner’s Tax Liability

      A.   Burden of Proof

      Respondent’s determination of petitioner’s tax liability is

presumed correct, and petitioner bears the burden of proving that

the determination is improper.     Rule 142(a); Welch v. Helvering,

290 U.S. 111, 115 (1933).    Although section 7491 may shift the

burden to respondent in specified circumstances, petitioner here




      4
       The Court informs petitioner that our tax system, the
Code, and the Tax Court have been firmly established as
constitutional. Crain v. Commissioner, 737 F.2d 1417, 1417-1418
(5th Cir. 1984); Ginter v. Southern, 611 F.2d 1226, 1229 (8th
Cir. 1979). Specifically, the Court notes that the “Federal
income tax laws are constitutional. * * * The whole purpose of
the 16th Amendment was to relieve all income taxes when imposed
from apportionment and from a consideration of the source whence
the income was derived.” Abrams v. Commissioner, 82 T.C. 403,
406-407 (1984).
                                  - 7 -

did not satisfy the prerequisites under section 7491(a)(1) and

(2) for such a shift.

     The Commissioner bears the burden of production in any court

proceeding with respect to an individual’s liability for

penalties or additions to tax.      Sec. 7491(c).   To meet this

burden, the Commissioner must come forward with sufficient

evidence indicating that it is appropriate to impose the relevant

penalty or addition to tax.      Higbee v. Commissioner, 116 T.C.

438, 446 (2001).    In instances where an exception to the penalty

or addition to tax is afforded upon a showing of reasonable

cause, the taxpayer bears the burden of showing such cause.           Id.

at 447.

     B.     Filing Requirement

     The Code imposes a Federal tax on the taxable income of

every individual.    Sec. 1.    Gross income for the purposes of

calculating taxable income is defined as “all income from

whatever source derived”.      Sec. 61(a).   This means that

compensations for services, including fees, commissions, and

fringe benefits are considered sources of gross income.        Sec.

61(a)(1).    Every U.S. resident individual whose gross income for

the taxable year equals or exceeds the exemption amount is (with

enumerated exceptions not applicable here) required to make an

income tax return.    Sec. 6012(a)(1)(A).     Petitioner had gross

income totaling $8,976 from self-employment for 1998 and gross
                               - 8 -

income totaling $41,075 from self-employment for 2001.5   The

filing thresholds for a taxpayer filing as a single person, for

taxable years 1998 and 2001, were $6,950 and $7,450,

respectively.   Petitioner’s gross income in 1998 and 2001

exceeded these filing thresholds, and petitioner was, therefore,

required to file an income tax return.

     C.   Petitioner’s Taxable Income

     Petitioner did not present any witnesses in support of his

position, nor did he address his underlying tax liability either

at trial or on brief.   Instead, petitioner reiterated his

position that he was not liable for an income tax because he was

not satisfied that there was any law that required him to pay an

income tax.

     Presumably, many facts relevant to a determination of

petitioner’s taxable income would be peculiarly within

petitioner’s personal knowledge and purview.   The fact that

petitioner did not offer any evidence regarding his taxable

income and did not call any witnesses is an indication that any

facts which could have been presented by him at trial would have

been unfavorable to his position.   See McKay v. Commissioner, 886

F.2d 1237, 1238 (9th Cir. 1989), affg. 89 T.C. 1063 (1987);

Wichita Terminal Elevator Co. v. Commissioner, 6 T.C. 1158, 1165


     5
       Although the parties agreed to a lesser deficiency than
the $10,872 amount determined in the notice of deficiency for
2001, this adjustment did not affect petitioner’s total gross
income for 2001.
                                 - 9 -

(1946) (“The rule is well established that the failure of a party

to introduce evidence within his possession and which, if true,

would be favorable to him, gives rise to the presumption that if

produced it would be unfavorable.”), affd. 162 F.2d 513 (10th

Cir. 1947); see also Little v. Commissioner, T.C. Memo. 1996-270

(“The Wichita Terminal presumption generally applies where the

party failing to produce the evidence has the burden of proof.”).

Petitioner had the opportunity to call witnesses to testify and

present evidence on his behalf.     However, petitioner did neither.

The Court therefore sustains the deficiency determined by

respondent.6

III. Additions to Tax

     Section 6651(a) provides for a 5-percent addition to tax for

each month or portion thereof that the tax return is filed late,

not to exceed 25 percent in the aggregate, unless such failure to

file is due to reasonable cause and not due to willful neglect.

Although not defined in the Code, “reasonable cause” is viewed in

the applicable regulations as the “exercise of ordinary business

care and prudence”.     Sec. 301.6651-1(c)(1), Proced. & Admin.

Regs; see also United States v. Boyle, 469 U.S. 241, 246 (1985).

“Willful neglect” can be interpreted as a “conscious, intentional

failure or reckless indifference.”       United States v. Boyle, supra

at 245.   With respect to section 6651(a) additions to tax,

     6
       This is subject to the agreement between the parties to
reduce the deficiency to $9,282 for 2001 due to petitioner’s
substantiation of certain deductions. See also supra note 2.
                              - 10 -

reliance on misguided constitutional beliefs is not reasonable.

Edwards v. Commissioner, 680 F.2d 1268, 1271 n.2 (9th Cir. 1982);

see also Ginter v. Southern, 611 F.2d 1226, 1229 (8th Cir. 1979).

     On the basis of the record in this case, the Court concludes

that respondent’s burden of production has been met.   Petitioner

is not entitled to rely on the advice of unofficial non-

governmental third parties provided on an Internet Web site, and

petitioner did not allege that such third-party information

constituted advice from a tax expert.   See United States v.

Boyle, supra at 251 (“one does not have to be a tax expert to

know that tax returns have fixed filing dates and that taxes must

be paid when they are due”); Flahertys Arden Bowl, Inc. v.

Commissioner, 115 T.C. 269 (2000) (holding that reliance on

lawyer with extensive experience in subject area constituted

reasonable cause), affd. 271 F.3d 763 (8th Cir. 2001).

     In addition, petitioner stated with respect to the 1996

and/or 1997 taxable years that he “decided in my own mind that I

wasn’t liable for income tax, and I stopped filing returns”.

Petitioner admits that he did not file a tax return for either

the year 1998 or 2001.   His unreasonable conclusion that he had

no duty to file a return or pay tax based on his faulty research

and Internet contacts does not constitute reasonable cause.

Therefore, the Court sustains the imposition of additions to tax

under section 6651(a)(1) for 1998 and 2001.
                              - 11 -

      Section 6654(a) provides for an addition to tax for failure

to pay estimated income tax where there has been an underpayment

of estimated taxes by a taxpayer.   Respondent produced evidence

that petitioner did not pay any estimated tax for 2001.    Since

the Court finds that petitioner’s situation does not fall within

any of the specified exceptions under section 6654(e), petitioner

is also liable for this addition to tax.

IV.   Section 6673 Penalty

      Section 6673 allows this Court to award a penalty to the

United States in an amount not in excess of $25,000 for

proceedings instituted by the taxpayer primarily for delay or for

proceedings in which the taxpayer’s position is frivolous or

groundless.   “A petition to the Tax Court, or a tax return, 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) (imposing

penalties on taxpayers who made frivolous constitutional

arguments in opposition to the income tax).   Courts have ruled

that tax protester arguments and defenses to the filing

requirement, such as petitioner has apparently espoused, are

groundless and wholly without merit.   Ginter v. Southern, supra

at 1229; see also Williams v. Commissioner, T.C. Memo. 1999-277;

Morin v. Commissioner, T.C. Memo. 1999-240; Sochia v.

Commissioner, T.C. Memo. 1998-294 (all of which imposed a section

6673 penalty for tax protester arguments).
                              - 12 -

     Groundless litigation diverts the time and energies of
     judges from more serious claims; it imposes needless costs
     on other litigants. Once the legal system has resolved a
     claim, judges and lawyers must move on to other things.
     They cannot endlessly rehear stale arguments. Both
     appellants say that the penalties stifle their right to
     petition for redress of grievances. But there is no
     constitutional right to bring frivolous suits, see Bill
     Johnson’s Restaurants, Inc. v. NLRB, 461 U.S. 731, 743, 103
     S.Ct. 2161, 2170, 76 L.Ed.2d 277 (1983). People who wish to
     express displeasure with taxes must choose other forums, and
     there are many available. * * * [Coleman v. Commissioner,
     supra at 72.]

     Respondent has not sought a section 6673 penalty in this

case.   Because petitioner did eventually work cooperatively with

respondent to help resolve the alleged tax deficiencies

themselves and because petitioner was not previously fully warned

of the section 6673 penalties, the Court declines to impose such

a penalty today.   Nevertheless, the Court notes petitioner

submitted frivolous documents to the Court in the form of copies

of Internet Web site pages and copies of advertisements, which

provided specious arguments against the filing of an income tax

return.   Petitioner, at trial and on brief, contended that no law

made him liable for an income tax or required him to file a Form

1040.   The Court explicitly admonishes petitioner that he may, in

the future, be subject to a penalty under section 6673 for any

proceedings instituted or maintained primarily for delay or for

any proceedings which are frivolous or groundless.

     The Court has considered all of petitioner’s contentions,

arguments, requests, and statements.   To the extent not discussed

herein, we conclude that they are meritless, moot, or irrelevant.
                        - 13 -

To reflect the foregoing and concessions made by respondent,



                                   Decision will be entered

                              under Rule 155.
