                          T.C. Memo. 1999-180



                        UNITED STATES TAX COURT



                KERMIT W. KINKADE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 604-98.                           Filed June 1, 1999.



     Kermit W. Kinkade, pro se.

     D. Lyndell Pickett, for respondent.



                          MEMORANDUM OPINION


     BEGHE, Judge:     Respondent determined the following

deficiencies in and additions to petitioner's Federal income

taxes:

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

   1992       $4,008              $1,002               ---
   1993       10,387               2,597              $318
   1994        8,861               2,215               359
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     All section references are to the Internal Revenue Code in

effect for the years in issue.    All monetary amounts have been

rounded to the nearest dollar.

Background

     Petitioner filed a pro se petition using a form that had

obviously been prepared by someone else.    Petitioner disputed

respondent's determinations, but he failed to allege any facts in

support of his position.    Petitioner attached to his petition

Exhibit "A", stating as follows:

                           EXHIBIT "A"

     DEMAND IS MADE THAT THE TAX COURT TRANSFER THIS CASE TO
     THE APPELLATE DIVISION OF THE IRS ON THE GROUNDS THAT
     THIS TAXPAYER HAS BEEN DENIED DUE PROCESS OF LAW, AND
     HAS A SUBSTANTIAL CLAIM UNDER THE "NEW" TAXPAYER BILL
     OF RIGHTS, AGAINST THE AGENT AND THE IRS, PLUS OTHER
     CAUSES OF ACTION THAT HAVE NOT BEEN FULLY DETERMINED AS
     OF THE PRESENT DATE.

              AVOIDANCE AND/OR AFFIRMATIVE DEFENSES
     PETITIONER ALLEGES AS AN AVOIDANCE AND/OR AFFIRMATIVE
     DEFENSE EACH OF THE FOLLOWING THAT HAVE BEEN MARKED BY
     AN "X" ON THE LINE BEFORE THE ITEM LISTED:

      X   RES JUDICATA

      X   ESTOPPEL

      X   WAIVER

      X   DURESS

      X   FRAUD

      X   STATUTE OF LIMITATIONS

      X   INVALID NOTICE OF DEFICIENCY NOT COMPLYING
          WITH THE TAX CODE PROVISIONS
                               - 3 -


      X    FAILURE TO PROVIDE FREEDOM OF INFORMATION ACT
           DOCUMENTS AND MATERIALS NECESSARY FOR
           PETITIONER TO PREPARE FOR TRIAL

      X    FAILURE OF RESPONDENT TO "FULLY COOPERATE" AS
           PROVIDED BY THE STANDING ORDER

      X    FAILURE OF RESPONDENT TO EXHAUST
           ADMINISTRATIVE REMEDIES. NO PRIOR CONTACT

      X    LACHES

      X    THE "CLEAN HANDS" DOCTRINE (UNCLEAN HANDS OF
           RESPONDENT)

      X    ILLEGALITY

      X    FAILURE OF JURISDICTION OVER PETITIONER

           DISCHARGE IN BANKRUPTCY

           OTHER

     This case was calendared for trial at the Court's

Louisville, Kentucky, trial session beginning January 11, 1999.

It came to the Court's attention that petitioner had another case

for 1995, docket No. 7944-98, that was calendared for trial at

the Court's Louisville, Kentucky, trial session beginning

February 16, 1999.   The petition disputing respondent's

determinations in petitioner's 1995 case interposed the same

laundry list of "Avoidance and/or Affirmative Defenses".

     The Court calendared the case at docket No. 7944-98 for oral

report with this case at the January 11, 1999, Louisville trial

session.
                               - 4 -


     Respondent served a timely trial memorandum alerting

petitioner that respondent would seek a penalty under section

6673 against petitioner for asserting groundless and frivolous

positions.   The Court attempted to have a pretrial telephone

conference with the parties, but was unable to do so because

petitioner had not provided a current address and telephone

number.   At the calendar call, respondent filed a motion for the

imposition of a penalty under section 6673, reciting that

respondent had furnished petitioner copies of section 6673 and

relevant court opinions.   Petitioner submitted a "trial

memorandum", consisting of a 10-page canned brief replete with

frivolous arguments about the invalidity of the Federal income

tax laws as applied to him, and a "Supplement Stipulation of

Facts" with more than 200 pages of exhibits, including a copy of

a 158-page preprinted document entitled "RELIANCE DEFENSE" as

Exhibit 7-J, prepared by "William Drexler, Esq., Juris Doctor",

which petitioner characterized as follows:

          This Petitioner relies on the knowledge that he is
     subject to an income tax if he was involved in any
     activity that is harmful or evil or detrimental to the
     well being of a sovereign Citizen of the United States;
     and any one involved in a privilege granted or licensed
     by the State or Federal Government is also subject to
     income tax.

          This Petitioner informed and hereby relies on
     Reliance Defense, supra, which is the compilation of
     many scholars that have spent years gathering the
     information that is relevant to this case and which
                               - 5 -


     addresses the relevant issues as designated in the
     parties' Trial Memorandums and in particular as set
     forth by William T. Conklin, Pages 19-34 of Exhibit
     7-J.

     At the calendar call, the Court gave petitioner copies of

opinions in four cases to read before trial, which was set for

the afternoon of the same day, to "demonstrate to you the error

of your ways * * * that the position that you are taking as set

forth in your trial memorandum is not going to prevail".1    The

Court suggested that, rather than pursuing frivolous arguments,

petitioner should attempt to present evidence of deductible

expenses that might reduce the deficiencies and additions.

     When the case was recalled in the afternoon, respondent's

counsel reported that a basis of settlement had not been reached

and handed up a bare-bones stipulation of facts.   Petitioner had

refused to stipulate that he had not filed Federal income tax

returns for the years in question or the amounts of compensation

he had received.   Petitioner's refusal to stipulate led to a

trial on these issues, with the introduction of documentary

evidence to support respondent's determinations that petitioner

had not filed income tax returns and the testimony of four

witnesses (petitioner's two employers and their respective


     1
       Coleman v. Commissioner, 791 F.2d 68 (7th Cir. 1986);
Ghalardi Income Tax Educ. Found. v. Commissioner, T.C. Memo.
1998-460; Liddane v. Commissioner, T.C. Memo. 1998-259; Talmage
v. Commissioner, T.C. Memo. 1996-114, affd. without published
opinion 101 F.3d 695 (4th Cir. 1996).
                                     - 6 -


accountants) as to the amounts of compensation that he had

received from his employers.         Petitioner presented no evidence.

     At all relevant times, including the time of filing his

petition, petitioner has been a resident of Jeffersonville,

Indiana.    Petitioner did not file Federal income tax returns for

any of the taxable years 1992, 1993, or 1994.         Petitioner is a

skilled craftsman in the jewelry trade, doing designing,

engraving, wax carving, stone setting, casting, finishing,

polishing, and general repair.        For his services as a jewelry

craftsman, petitioner received the following amounts of

compensation:

                                             Payer
                        Aesthetics in                   G. Metry
     Year               Jewelry, Inc.                Jewelers, Inc.

     1992                  $27,940                           ---
     1993                   29,963                         $14,735
     1994                   23,708                          15,544

Petitioner also received unemployment compensation of $105 in

1994.   During the years in question, the following amounts of

Federal income tax were withheld from petitioner's wages by

Aesthetics in Jewelry, Inc.:

                 Taxable                        Amounts
                  Year                          Withheld

                 1992                            $2,715
                 1993                             2,516
                 1994                             1,677
                                - 7 -


The amounts of tax withheld from petitioner's wages by Aesthetics

in Jewelry, Inc., did not satisfy his obligations to pay

estimated tax in 1993 and 1994.

     At the conclusion of the testimony of respondent's

witnesses, petitioner said that he wanted to submit additional

briefs.    The Court warned him that would mean more work for

respondent and the Court, which could result in a larger penalty

under section 6673 than if the Court just ruled from the bench.

Petitioner replied:    "I am willing to take that risk".   The Court

set a briefing schedule, and briefs have been filed by the

parties.

     Notwithstanding that this case has been submitted to the

Court for decision as described above, the case at docket No.

7944-98 was disposed of, on February 18, 1999, by entry of an

agreed decision that reduced the amounts of the deficiencies and

additions originally determined by respondent.

Discussion

     Respondent's determinations in this case were based upon

third-party information returns for compensation paid to

petitioner.    Petitioner refused to stipulate the amounts

received.    In the face of petitioner's refusal, respondent, out

of an abundance of caution in the face of section 6201(d), proved

the amounts received by the testimony and records of petitioner's

former employers and their accountants.    Petitioner has not
                               - 8 -


disputed respondent's determination that he received unemployment

compensation in 1994 from the Commonwealth of Kentucky.

Respondent proffered evidence that convinces the Court that

petitioner did not file income tax returns or pay any estimated

tax (in addition to the tax withheld) with respect to any of the

taxable years at issue.

     Petitioner's brief contains outworn arguments about the

unconstitutionality of the Federal income tax in its application

to earned income that are refuted by numerous court opinions,

including the opinions cited supra note 1, which were provided to

petitioner before the trial resulting from his refusal to concede

respondent's determinations.   Those opinions establish that the

compensation paid to petitioner during the taxable years in

question is included in his gross income and is subject to

Federal income tax.   Petitioner's arguments are without merit,

and he is liable for income tax and additions to tax as

determined by respondent.   No useful purpose would be served by

any further explanation.

     Turning to respondent's motion for a penalty under section

6673, we observe that, in each of the cases cited supra note 1, a

penalty had been imposed under section 6673, which now provides

for imposition of a penalty of up to $25,000 against a party who

advances frivolous or groundless positions or institutes or

maintains a proceeding primarily for delay.   Petitioner has
                              - 9 -


chosen to ignore the Court's precedents and admonitions and has

continued to assert frivolous and groundless positions.

Petitioner has wasted valuable time and imposed additional costs

on respondent, the Court, and petitioner's employers and their

accountants by refusing to stipulate the amounts of compensation

that he received from his employers during the taxable years in

question and other facts that were not reasonably in dispute,

including his failures to file returns.

     Petitioner apparently followed the Court's advice in

settling the case at docket No. 7944-98, but he has continued to

play his hopeless hand in this case, consciously choosing to risk

the imposition of a penalty under section 6673.

     In the face of petitioner's refusal to deal with this case

on the merits, respondent has asked the Court to impose a penalty

under section 6673 in the full amount permitted by law, $25,000.

The Court agrees with respondent that a substantial penalty is

appropriate, but, considering the total amount owed by

petitioner, not in the full amount of $25,000.    We will exercise

our discretion under section 6673 to require petitioner to pay a

penalty to the United States in the amount of $10,000.


                                      An appropriate order will

                              be issued, and decision will be

                              entered for respondent.
