                        T.C. Memo. 2003-287



                      UNITED STATES TAX COURT



 PEPPER POT TRUST, DAVID-KEITH JACOBS, TRUSTEE,1 Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 9111-02L, 9112-02L,     Filed October 7, 2003.
                 9113-02L, 9447-02L.



     David-Keith Jacobs (Trustee), for petitioners.

     Huong T. Duong, for respondent.



                        MEMORANDUM OPINION

     COLVIN, Judge:   This matter is before the Court on

respondent’s motions to dismiss for lack of prosecution, and for


     1
        The following cases are consolidated herewith for trial,
briefing, and opinion: Tuffy Ruffy Trust, David-Keith Jacobs,
Trustee, docket No. 9112-02L; Susan Bell Trust, David-Keith
Jacobs, Trustee, docket No. 9113-02L; and Brandy Dandy Trust,
David-Keith Jacobs, Trustee, docket No. 9447-02L.
                               - 2 -

summary judgment and to impose a penalty on each trust under

section 6673.2   Respondent filed motions for summary judgment and

to impose a penalty under section 6673 in each case.   Respondent

made the motion to dismiss at the time set for trial, for which

David-Keith Jacobs (Jacobs), the trustee of each trust, failed to

appear.3   For reasons stated below, we will grant respondent’s

motion to dismiss for lack of prosecution and so much of

respondent’s motions for summary judgment and to impose a penalty

under section 6673 as asks us to impose a penalty on each trust

under section 6673.4

                            Background

     The trusts’ mailing address was in Clovis, California, when

the petitions were filed.

A.   Notices of Deficiency, Notices of Intent To Levy, and
     Federal Tax Liens

     The trusts received notices of deficiency determining

deficiencies in the fiduciary income taxes of each trust for

1996-97.



     2
        Section references are to the Internal Revenue Code as
amended, and Rule references are to the Tax Court Rules of
Practice and Procedure.
     3
        No one representing any of the trusts in these cases
appeared for trial.
     4
        We will deny as moot so much of respondent’s motions for
summary judgment and to impose a penalty under sec. 6673 as asks
for summary judgment.
                                - 3 -

     On April 10, 2001, respondent issued to each trust a Final

Notice of Intent to Levy and Notice of Your Right to a Hearing

relating to each trust’s 1996-97 tax years as follows:

          Pepper Pot Trust      1996      $1,671.10
                                1997      27,511.54

          Tuffy Ruffy Trust     1996      59,840.09
                                1997      90,344.89

          Susan Bell Trust      1996      11,357.75
                                1997      44,049.10

          Brandy Dandy Trust    1996      21,323.94
                                1997      56,283.41

     On April 12, 2001, respondent filed with the Fresno County

Recorder’s Office a notice of Federal tax lien relating to each

trust’s income tax liabilities for tax years 1996-97.    On April

17, 2001, respondent sent a notice to each trust that the notice

of Federal tax lien had been filed.

B.   The Section 6330(b) Hearing

     On May 3, 2001, the trusts each filed a Form 12153, Request

for a Collection Due Process Hearing, for tax years 1996-97 in

which they contended that:    (1) Section 861 and the regulations

thereunder preclude the income at issue in these cases from being

taxable, and (2) the regulations upon which respondent relies are

invalid because they were not published in the Federal Register;

and asked that respondent give them case citations showing that

income is taxable.
                                 - 4 -

      In March 2002, respondent’s Appeals Office conducted a

section 6330(b) hearing in the trusts’ cases for tax years 1996-

97.   Shirley Clingenpeel (Clingenpeel), one of the grantors, and

Jacobs, the trustee, attended the hearing.   A reporter chosen by

the trusts recorded and transcribed the hearing.

      At the hearing, the hearing officer told Clingenpeel and

Jacobs that he had reviewed the administrative files and the

transcripts of accounts.   He used Forms 4340, Certificate of

Assessments and Payments, to verify the assessments; reviewed the

administrative record to verify that the requirements of all

applicable laws had been met; and concluded that the lien and

levy notices had been issued properly.

      At the hearing, Clingenpeel and Jacobs did not offer any

collection alternatives or challenge the appropriateness of the

intended method of collection.    Jacobs gave the hearing officer a

document which asked him to produce or admit to 25 items.   At the

hearing, Jacobs asked for Form 23C, Assessment Certificate --

Summary Record of Assessments.    The Appeals officer told Jacobs

that he would not provide Forms 23C but he would send the trusts

copies of the Forms 4340 to verify the assessments.   Sometime

after the hearing, respondent gave each trust Forms 2866,

Certificate of Official Record, and Forms 4340, which showed that

the amounts at issue were properly assessed.
                               - 5 -

C.   The Notice of Determination

     On April 10, 2002, respondent sent each trust a Notice of

Determination Concerning Collection Action(s) Under Section 6320

and/or 6330 (the determination letter), in which respondent

stated that collection from each trust of its tax for tax years

1996-97 would proceed.   Each trust filed a petition for review of

respondent’s notice of determination.   The petitions contain the

following contentions and disputed facts:   (1) Respondent has not

provided the trusts with Internal Revenue Code sections

establishing tax liability; (2) respondent has not provided the

trusts delegation authority for assessing tax; (3) respondent has

failed to provide Forms 23C; (4) the Forms 4340 for 1997 were

flawed and do not show the proper assessment of tax; (5) the

taxes for 1996 and 1997 were not legally assessed; (6) the

proposed levies were more intrusive than necessary; (7)

respondent’s determination of the trusts’ purported tax

liabilities, the filing of the Notices of Federal Tax Lien, and

respondent’s collection actions were based on hearsay evidence

and thus invalid; (8) respondent’s failure to give the trusts

Certificates of Assessment as requested denied them a meaningful

opportunity to dispute the lawful assessment of tax; and

(9) respondent cannot bring a collection action until respondent

gives the trusts certified evidence to support the claimed tax

liabilities.
                                - 6 -

     Respondent filed an answer in each of these cases denying

all errors alleged by the trusts.    The Court sent a Notice

Setting Case for Trial and Standing Pretrial Order to each trust

on October 8, 2002.    The Standing Pretrial Order states in part:

“YOUR FAILURE TO APPEAR MAY RESULT IN DISMISSAL OF THE CASE AND

ENTRY OF DECISION AGAINST YOU.”

D.   Respondent’s Discovery Requests

     On November 21, 2002, respondent informally asked the trusts

to answer questions and produce documents.    The trusts failed to

respond to respondent’s requests.

     On December 13, 2002, respondent again wrote to each trust

requesting informal discovery and warning them that respondent

might seek an award of damages under section 6673 if they

continued to maintain frivolous positions.

     On December 20, 2002, respondent served on each trust

interrogatories and a request for production of documents.

Respondent sent to each trust a request for admissions on

December 23, 2002.    Jacobs’s only response to the request for

admissions was that “The trustee does not have enough information

to admit or deny.”5   No other responses to respondent’s request

for admissions were filed on behalf of any of the trusts in these

cases.


     5
         Jacobs did not file the responses as required by Rule
90(c).
                                - 7 -

     On January 15, 2003, Jacobs wrote to respondent on behalf of

the trusts to request that respondent identify taxing statutes

and that respondent provide delegation orders showing that the

notices of deficiency and notices of determination were issued by

persons authorized to do so.

     On February 5, 2003, respondent again warned Jacobs that the

Court could impose sanctions under section 6673.

     Respondent filed motions for summary judgment and to impose

a penalty under section 6673.   The Court ordered the trusts to

file responses to respondent’s motions, but they did not do so.

No one representing any of the trusts in these cases appeared for

trial.   Respondent moved to dismiss for lack of prosecution when

these cases were called for trial.

                            Discussion

     The trusts bear the burden of proof on all issues.6

A.   Motion To Dismiss for Lack of Prosecution

     The Court may dismiss a case at any time and enter a

decision against the taxpayer for lack of prosecution or for

other cause which the Court deems sufficient.    Rule 123(b).

Dismissal of a case is a sanction resting in the discretion of

the trial court.   Levy v. Commissioner, 87 T.C. 794, 803 (1986).



     6
       The trusts do not claim that sec. 7491 applies in these
cases, nor have they introduced in these proceedings credible
evidence on any factual issue. Sec. 7491(a)(1).
                                - 8 -

A taxpayer’s failure to proceed as required by the Court’s Rules,

unexcused failure to appear at a trial, and failure to

participate in any meaningful way in the resolution of the case

can result in a dismissal of the action against him or her for

lack of prosecution.    Long v. Commissioner, 742 F.2d 1141, 1142-

1143 (8th Cir. 1984); Hart v. Commissioner, 730 F.2d 1206, 1208

(8th Cir. 1984); Brooks v. Commissioner, 82 T.C. 413 (1984),

affd. without published opinion 772 F.2d 910 (9th Cir. 1985);

Freedson v. Commissioner, 67 T.C. 931 (1977), affd. 565 F.2d 954

(5th Cir. 1978); Pleier v. Commissioner, T.C. Memo. 1989-360,

affd. without published opinion 911 F.2d 738 (9th Cir. 1990).     A

taxpayer’s unexcused failure to appear at trial may be grounds to

dismiss the case for lack of prosecution.   Rule 149(a).

     The trusts did not file meaningful responses to respondent’s

request for admissions and did not file responses to respondent’s

motions for summary judgment and to impose a penalty under

section 6673.    No one appeared for trial on behalf of the trusts.

The trusts did not submit a trial memorandum as required by the

Court’s Standing Pre-Trial Order or request a continuance.   In

view of the unexcused failure to appear at trial and the trusts’

failure to participate meaningfully in the resolution of these

cases, we will grant respondent’s motion to dismiss for lack of

prosecution.    Rules 123(b), 149(a).
                               - 9 -

B.   Section 6673 Penalty

     Respondent moves that the trusts be required to pay a

penalty to the United States of up to $25,000 on grounds that

they instituted or maintained these proceedings primarily for

delay, their positions are frivolous or groundless, and they

unreasonably failed to pursue administrative remedies.     Sec.

6673(a).

     A taxpayer’s position is frivolous or groundless 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).     The trusts’

section 861 argument clearly is frivolous.    See Takaba v.

Commissioner, 119 T.C. 285, 294-295 (2002); Williams v.

Commissioner, 114 T.C. 136, 138-139 (2000); Corcoran v.

Commissioner, T.C. Memo. 2002-18, affd. 54 Fed. Appx. 254 (9th

Cir. 2002).   The trusts’ contention that they are not liable for

tax because respondent did not identify the Code sections which

establish their liability for tax is frivolous.    See Nestor v.

Commissioner, 118 T.C. 162, 167 (2002).     The trusts’ argument

that the Commissioner and his or her delegates lack authority to

administer the internal revenue laws is frivolous.    See Lonsdale

v. United States, 919 F.2d 1440, 1445-1447 (10th Cir. 1990).

     Section 6330(c)(1) requires the Appeals officer to verify

that the requirements of any applicable law or administrative
                                - 10 -

procedure have been met.   However, section 6330(c)(1) does not

specify which document the Commissioner must use (e.g., the

summary record rather than a transcript of account) to satisfy

the verification requirement.    Kuglin v. Commissioner, T.C. Memo.

2002-51.   Even though Jacobs requested that respondent provide

Forms 23C, it was not an abuse of discretion for respondent to

give him Forms 4340 to verify the assessments.     See Hughes v.

United States, 953 F.2d 531, 535-536 (9th Cir. 1992); Roberts v.

Commissioner, 118 T.C. 365, 371 (2002), affd. 329 F.3d 1224 (11th

Cir. 2003); Nestor v. Commissioner, supra at 166.

     We conclude that the trusts’ positions are frivolous and

that they maintained these proceedings primarily for delay.    We

will require each trust to pay to the United States a $5,000

penalty under section 6673(a).

     Accordingly,

                                          Appropriate orders of

                                     dismissal and decision will

                                     be entered.
