                         T.C. Memo. 2003-223



                       UNITED STATES TAX COURT



                   RICHARD WOS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12651-02.              Filed July 29, 2003.



     Richard Wos, pro se.

     Thomas D. Yang, for respondent.



                         MEMORANDUM OPINION


     CHIECHI, Judge:    Respondent determined the following defi-

ciencies in, and additions to, petitioner’s Federal income tax

(tax):
                                     - 2 -

                                            Additions to Tax
 Year       Deficiency   Sec. 6651(a)(1)1     Sec. 6651(a)(2)   Sec. 6654(a)
 1996         $62,718       $13,661.55           $3,946.67        $3,164.00
 1997          42,929         3,893.63            2,941.85         2,296.75

        The issues remaining for decision are:2

        (1) Is the net profit for each of the years at issue from

petitioner’s washing machine repair business subject to tax?              We

hold that it is.

        (2) Is the pension income that petitioner received during

1997 subject to tax?       We hold it is.

        (3) Is petitioner liable for 1997 for the 10-percent addi-

tional tax under section 72(t)(1) with respect to the pension

income that he received during that year?            We hold that he is.

        (4) Is petitioner liable for each of the years at issue for

an addition to tax under section 6651(a)(1)?             We hold that he is.

        (5) Is petitioner liable for each of the years at issue for


        1
      All section references are to the Internal Revenue Code in
effect for the years at issue. All Rule references are to the
Tax Court Rules of Practice and Procedure.
        2
      Before trial, the parties filed a stipulation of settled
issues setting forth their agreement as to the disposition of
certain determinations in the notice of deficiency (notice) that
respondent issued to petitioner for the years at issue. After
trial, respondent conceded the determinations in the notice under
sec. 6651(a)(2).

     In addition to the issues remaining for decision listed
below, there are other questions relating to certain determina-
tions in the notice that are computational in that their resolu-
tion flows automatically from our resolution of the remaining
issues that we address herein, from the parties’ stipulation of
settled issues, and from respondent’s concession of the determi-
nations under sec. 6651(a)(2).
                              - 3 -

an addition to tax under section 6654(a)?   We hold that he is.

                           Background

     Some of the facts have been deemed established pursuant to

the Court’s Order under Rule 91(f) dated March 13, 2003.   In

addition, the record establishes and/or the parties do not

dispute the following.3

     At the time he filed the petition in this case, petitioner’s

address was in Morton Grove, Illinois.

     During 1996 and 1997, petitioner was engaged in a washing

machine repair business from which he had net profit of

$30,200.31 and $30,227.02, respectively.

     On April 18, 1996, respondent received from petitioner an

estimated tax payment for 1996 in the amount of $2,000.

     On April 17, 1997, respondent received from petitioner a

payment of $25,624 with respect to his taxable year 1996 and a

document dated April 12, 1997 (petitioner’s document for 1996).

Respondent did not receive from petitioner any tax return or

other document pertaining to his taxable year 1997.

     Petitioner’s document for 1996 consisted of Form 1040, U.S.

Individual Income Tax Return (Form 1040), for 1996 from which

petitioner had stricken much of the preprinted language, includ-

ing the declaration that appeared above the place for the tax-



     3
      At trial, the parties called no witnesses, and respondent
introduced into the record certain exhibits.
                               - 4 -

payer’s signature, and on which petitioner had made certain

entries and had written certain language, including the phrase

“Without Prejudice” that appeared above his signature on that

document.   In petitioner’s document for 1996, petitioner showed

$9,237 of interest, $1,632 of dividend, $97,284 of capital gain,

$-803 with respect to rental real estate, and tax due of $25,624.

Petitioner did not include in petitioner’s document for 1996

Schedule C, Profit or Loss From Business (Schedule C), or any

other schedule showing receipts and expenses with respect to the

washing machine repair business that petitioner conducted during

1996.

     Respondent did not file petitioner’s document for 1996 as

petitioner’s tax return for that year.   Nor did respondent file a

tax return for petitioner for 1997.

     Respondent issued to petitioner a notice for his taxable

years 1996 and 1997.   In that notice, respondent determined,

inter alia, that petitioner had Schedule C net profit subject to

tax of $67,703 and $116,306 for 1996 and 1997, respectively.

Respondent further determined in the notice that during 1997

petitioner received pension income of $3,852 and that he is

liable for that year for the 10-percent additional tax under

section 72(t)(1) on that income (i.e., a 10-percent additional

tax under section 72(t)(1) of $385).   Respondent also determined

in the notice that petitioner is liable for each of the years at
                               - 5 -

issue for additions to tax under sections 6651(a)(1) and 6654(a).

     On March 7, 2003, petitioner submitted a document to the

Court entitled “Trial Memorandum of Petitioner” that the Court

had filed (petitioner’s trial memorandum).     Petitioner’s trial

memorandum contained various statements, contentions, and argu-

ments with respect to what constitutes income for tax purposes

that the Court found in an Order dated March 10, 2003 (March 10,

2003 Order) to be frivolous and groundless.     In the Court’s March

10, 2003 Order, the Court reminded petitioner about section

6673(a)(1) and informed him that if he continued to advance

frivolous and/or groundless statements, contentions, and argu-

ments, the Court would be inclined to impose a penalty on him

under section 6673(a)(1).

                            Discussion

     Respondent concedes that the examination of the years at

issue commenced after July 22, 1998.     Consequently, respondent

has the burden of production under section 7491(c) with respect

to the additions to tax determined in the notice under sections

6651(a)(1) and 6654(a).   As for whether petitioner’s burden under

Rule 142(a) and Welch v. Helvering, 290 U.S. 111, 115 (1933), of

proving error in respondent’s determinations relating to his net

profit for each of the years at issue from his washing machine

repair business, his pension income for 1997, and the 10-percent

additional tax under section 72(t)(1) has shifted to respondent
                               - 6 -

under section 7491(a), respondent maintains that that burden has

not shifted.   That is because, according to respondent, peti-

tioner failed to comply with section 7491(a)(2)(A) and (B).

Petitioner takes no position as to whether his burden of proof

has shifted to respondent under section 7491(a) with respect to

the determinations in question.   We conclude that resolution of

those determinations does not depend on who has the burden of

proof with respect to them.   We now turn to those determinations.

     Petitioner acknowledges (1) that he has net profit for 1996

and 1997 from his washing machine repair business in the amounts

of $30,2014 and $30,227,5 respectively, and (2) that he has

pension income for 1997 of $3,852.     However, it is petitioner’s

position that neither his net income for each of the years at

issue from his washing machine repair business nor his pension

income for 1997 is subject to tax.

     In support of his position with respect to his net profit

for each of the years at issue from his washing machine repair

business, petitioner argues, inter alia, that that profit was

“directly derived from the exchange of Petitioner’s personal


     4
      Petitioner rounded his net profit for 1996 from his washing
machine repair business to $30,201. According to the parties’
stipulation of settled issues, the actual net profit for 1996
from that business is $30,200.31.
     5
      Petitioner rounded his net profit for 1997 from his washing
machine repair business to $30,227. According to the parties’
stipulation of settled issues, the actual net profit for 1997
from that business is $30,227.02.
                               - 7 -

property (labor and time)” and that such profit, which petitioner

refers to as “non-statutory wages”, is not subject to tax.    In

support of his position with respect to his pension income for

1997, petitioner argues that, because such income “was derived

from non-statutory wages of previous years * * * the withdrawal

of the earlier deposited non-statutory wages, which are non

taxable funds, does not convert them to taxable gross income.”6

     Petitioner’s position that his net profit for each of the

years at issue from his washing machine repair business and his

pension income for 1997 are not subject to tax is frivolous and

groundless.   On the record before us, we hold that petitioner’s

net profit for each of the years at issue from his washing

machine repair business is subject to tax.   We further hold on

that record that petitioner’s pension income for 1997 is subject

to tax and that petitioner is liable for that year for the 10-

percent additional tax under section 72(t)(1) on such pension

income.

     We turn now to the addition to tax under section 6651(a)(1)

that respondent determined for each of the years at issue.    With

respect to 1996, petitioner contends that petitioner’s document



     6
      Petitioner introduced no evidence and makes no argument
about the 10-percent additional tax under sec. 72(t)(1) for 1997
that respondent determined in the notice. We presume that it is
petitioner’s position that he should not be liable for that
additional tax because it is his position that his pension income
for 1997 is not subject to tax.
                                - 8 -

for 1996 that respondent received from him on April 17, 1997,

constitutes a tax return for that year and that consequently he

filed a tax return for 1996.    With respect to 1997, petitioner

suggests that he filed a tax return for that year, but he “does

not recall the date he filed and did not retain a copy of his tax

return.”7   On the instant record, we reject petitioner’s position

regarding the additions to tax under section 6651(a)(1) for the

years at issue.   The record establishes that respondent did not

file petitioner’s document for 1996 as petitioner’s tax return

for that year and that petitioner did not submit to respondent

any document that respondent filed as petitioner’s tax return for

1997.

     With respect to petitioner’s document for 1996, respondent’s

explanation as to why respondent did not file that document as

petitioner’s tax return for 1996 is that petitioner did not sign

that document under penalties of perjury, as required by section

6065.    We agree with respondent’s decision not to file peti-

tioner’s document for 1996 as his tax return for that year.

Although petitioner claims that he intended petitioner’s document

for 1996 to be his tax return for that year, he did not sign that




     7
      Petitioner argues that, regardless of whether and when he
filed a tax return for 1997, the issue under sec. 6651(a)(1) is
moot as to 1997 because he was not required to file a return for
that year. On the instant record, we disagree.
                               - 9 -

document under penalties of perjury.8   On the instant record, we

find that petitioner’s document for 1996 is not a valid tax

return for that year.   See United States v. Moore, 627 F.2d 830,

834 (7th Cir. 1980); Williams v. Commissioner, 114 T.C. 136, 139-

140 (2000); Sloan v. Commissioner, 102 T.C. 137, 143 (1994),

affd. 53 F.3d 799 (7th Cir. 1995); Cupp v. Commissioner, 65 T.C.

68, 78-79 (1975), affd. without published opinion 559 F.2d 1207

(3d Cir. 1977).   On the record before us, we find that respondent

has carried respondent’s burden of production with respect to the

additions to tax under section 6651(a)(1) for the years at issue.

On that record, we further find that petitioner is liable for

each of those years for such an addition to tax.

     With respect to the addition to tax under section 6654(a)

that respondent determined for each of the years at issue, the

record establishes that on April 18, 1996, petitioner made an

estimated tax payment for 1996 of $2,0009 and that petitioner

made no estimated tax payments for 1997.10   On the record before

us, we find that respondent has satisfied respondent’s burden of



     8
      Petitioner struck from Form 1040 for 1996 that he used in
preparing petitioner’s document for 1996, inter alia, the decla-
ration that appeared above the place where he signed that docu-
ment.
     9
      On Apr. 17, 1997, respondent also received a payment of
$25,624 from petitioner with respect to his taxable year 1996.
     10
      The record also establishes that petitioner reported total
tax of $11,477 in the tax return that he filed for 1995.
                              - 10 -

production with respect to the additions to tax under section

6654(a) for the years at issue.   On that record, we further find

that petitioner has failed to establish that any of the excep-

tions in section 6654(e) apply in the instant case.   On the

record before us, we find that petitioner is liable for each of

the years at issue for an addition to tax under section 6654(a).

     Although respondent does not ask the Court to impose a

penalty on petitioner under section 6673(a)(1), the Court will

sua sponte determine whether to impose such a penalty.   Section

6673(a)(1) authorizes the Court to require a taxpayer to pay to

the United States a penalty in an amount not to exceed $25,000

whenever it appears to the Court, inter alia, that the taxpayer’s

position in a proceeding before the Court is frivolous or ground-

less, sec. 6673(a)(1)(B).

     In the Court’s March 10, 2003 Order, at the call of this

case from the calendar on March 24, 2003, and at the call of this

case on that date for trial, the Court reminded petitioner about

section 6673(a)(1) and indicated that, in the event petitioner

continued to make statements, contentions, and arguments as to

why his net profit for each of the years at issue from his

washing machine repair business and his pension income for 1997

are not subject to tax that the Court finds to be frivolous

and/or groundless, the Court would be inclined to impose a

penalty under that section.   Nonetheless, petitioner continued to
                             - 11 -

adhere to those statements, contentions, and arguments at trial

and after trial, thereby causing the Court to waste its limited

resources in addressing such matters.   As a result of peti-

tioner’s position that his net profit for each of the years at

issue from his washing machine repair business and his pension

income for 1997 are not subject to tax, we shall impose a penalty

on petitioner pursuant to section 6673(a)(1) in the amount of

$3,000.

     We have considered all of petitioner’s statements, conten-

tions, and arguments that are not discussed herein, and we find

them to be without merit and/or irrelevant.

     To reflect the foregoing and the concessions of the parties,


                                   Decision will be entered

                              under Rule 155.
