                         T.C. Memo. 1999-325



                       UNITED STATES TAX COURT



  KENNETH LEE ANDERSON AND CAROL JANE ANDERSON, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 6825-97.              Filed September 29, 1999.




     Kenneth Lee Anderson and Carol Jane Anderson, pro sese.

     Christine V. Olsen, for respondent.



                         MEMORANDUM OPINION

     BEGHE, Judge:    Respondent determined the following

deficiencies in petitioners' Federal income taxes, additions to

tax, and penalties:
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                             Sec. 6651(a)(1)1    Sec. 6662(a)
     Year     Deficiency        Addition          Penalty

     1992       $95,829         $23,723            $18,978
     1993        19,503           4,738              3,790
     1994         4,939             237                189
     1995         5,156             ---              1,031

     Respondent has two motions pending before the Court:    Under

Rule 121, respondent's motion for summary judgment on all issues

remaining unresolved in this case after the Court, in an opinion

filed in this case as Anderson v. Commissioner, T.C. Memo. 1998-

253, granted partial summary judgment for respondent on some

issues raised in respondent's prior motion for partial summary

judgment; and, under Rule 53, respondent's motion to dismiss for

lack of prosecution.

     We shall grant respondent's motion for summary judgment,

rendering moot respondent's motion to dismiss.   Sua sponte, we

shall require petitioners to pay a penalty of $1,000 under

section 6673, to be added to the $10,000 penalty already decided

in the Court's prior opinion in this case.

Background

     We incorporate herein the background statement and

discussion set forth in the Court's prior opinion in this case at

T.C. Memo. 1998-253.   In that opinion, the Court granted partial


     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.
                               - 3 -


summary judgment for respondent on the basis of deemed admissions

by petitioners on the issues of wage income and liability for

additions to tax under section 6651(a) for unexcused late filing

of their returns.   The Court also decided that a $10,000 penalty

would be imposed on petitioners under section 6673 for advancing

frivolous and groundless contentions.   However, the Court

concluded that it would not be appropriate on the then existing

record to grant summary judgment in favor of respondent on the

self-employment tax issue for 1992-93 and the gain from the sale

of real estate and commissions and expenses on the sale.     Other

issues raised in the statutory notices of deficiency that were

not covered by the original motion for summary judgment were

whether petitioners received taxable unemployment compensation of

$3,480 during 1992, whether petitioners had $275,000 of

cancellation of indebtedness income in connection with the sale

of real estate, and the accuracy-related penalties and deductions

for 1992-95.

     On December 31, 1998, following issuance of the order

pursuant to the Court's prior opinion in this case, the Court

served on the parties its notice setting this case for trial at

the Court's San Diego, California, trial session scheduled to

begin June 7, 1999.

     On March 22, 1999, the Court received Respondent’s Third

Request for Admissions, attached to which was a Certificate of
                               - 4 -


Service showing that, on March 16, 1999, respondent served

Respondent’s Third Request for Admissions on petitioners at 12009

Kiowa Road, Apple Valley, CA   92307 (the Apple Valley address).

Because petitioners' address as shown on the Court's records was

different from that used by respondent, the Court, by order dated

March 23, 1999, filed Respondent’s Third Request for Admissions

as of the date of the Court's order and served that request on

petitioners at the address shown on the Court's records, 12759

Foothill Blvd., C-178, Rancho Cucamonga, CA   91739 (the Rancho

Cucamonga address).   The Court further ordered petitioners, by

April 13, 1999, to notify the Court in writing of their current

address, and, by April 23, 1999, to "serve upon respondent their

responses to Respondent’s Third Request for Admissions".

     Respondent's Third Request for Admissions sets forth the

following requested admissions:

          1. In 1990, petitioner Kenneth Anderson purchased
     a residence at 1639 Calmin Drive, Fallbrook, California
     [hereinafter referred to as the Calmin Drive property].

          2. With respect to the purchase of the Calmin
     Drive property, petitioner Kenneth Anderson executed a
     note and a deed of trust.

          3. On February 10, 1992, a Notice of Default was
     recorded with respect to the Calmin Drive property.

          4. On June 8, 1992, a trustee's sale was held
     with respect to the Calmin Drive property.

          5. At the time of the trustee's sale, petitioner
     Kenneth Anderson's outstanding balance on his loan on
     the Calmin Drive property was $331,831.
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     6. As a result of the foreclosure of the Calmin
Drive property, petitioner Kenneth Anderson received
relief of indebtedness income in the amount of $275,000
during 1992.

     7. Petitioners have not provided any information
or documentation establishing Kenneth Anderson's basis
in the Calmin Drive property.

     8. Petitioners have not provided any information
or documentation establishing that they were insolvent
at the time of the Trustee's sale of the Calmin Drive
property.

     9. Petitioners have not presented any information
or documentation establishing that they are entitled to
any deductions for the year 1992.

     10. Petitioners are not entitled to any
deductions for the year 1992.

     11. Petitioners have not presented any
information or documentation establishing that they are
entitled to any deductions for the year 1993.

     12. Petitioners are not entitled to any
deductions for the year 1993.

     13. Petitioners have not presented any
information or documentation establishing that they are
entitled to any deductions for the year 1994.

     14. Petitioners are not entitled to any
deductions for the year 1994.

     15. Petitioners have not presented any
information or documentation establishing that they are
entitled to any deductions for the year 1995.

     16. Petitioners are not entitled to any
deductions for the year 1995.

     17. Petitioner Kenneth Lee Anderson received
unemployment compensation in the amount of $3,480
during 1992.
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          18. Petitioner Kenneth Lee Anderson is subject to
     self-employment tax for 1992 and 1993.

           19. Petitioners are liable for the accuracy-
     related penalty under I.R.C. § 6662(a) for the year
     1992.

           20. Petitioners are liable for the accuracy-
     related penalty under I.R.C. § 6662(a) for the year
     1993.

           21. Petitioners are liable for the accuracy-
     related penalty under I.R.C. § 6662(a) for the year
     1994.

           22. Petitioners are liable for the accuracy-
     related penalty under I.R.C. § 6662(a) for the year
     1995.

     Petitioners did not file a response to Respondent's Third

Request for Admissions within the 30-day period required by Rule

90(c) or at any time thereafter.

     On April 14, 1999, the copies of the Court's March 23, 1999,

order and Respondent’s Third Request for Admissions, which the

Court had attempted to serve on petitioners at the Rancho

Cucamonga address, were returned with a Postal Service stamp

stating: "Return to Sender   Not at this address   No Forwarding

Address".

     On May 3, 1999, respondent filed a motion for summary

judgment, supporting memorandum of law, and attorney's

declaration.   By order dated May 4, 1999, the Court ordered

petitioners, by May 19, 1999, to file a written response to

respondent's motion for summary judgment and to serve a copy of
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their written response on respondent.   The copy of the Court's

May 4, 1999, order, which the Court attempted to serve on

petitioners by Certified Mail, at the Rancho Cucamonga address,

was returned by the Postal Service stamped:   "Return to Sender

Attempted - Not Known".   On May 19, 1999, the Court re-served its

May 4, 1999, order on petitioners at the Apple Valley address.

The Court assumes that service of its order on petitioners was

completed because no return mail has been received.   The Court

received no response from petitioners to respondent's motion for

summary judgment or the Court's May 4, 1999, order.

     On June 7, 1999, when this case was called from the trial

calendar at the Court's San Diego, California, trial session,

petitioners did not appear.   On June 14, 1999, when this case was

recalled from the Court's calendar, respondent filed a motion to

dismiss for lack of prosecution.   Respondent's motion to dismiss

states, among other things, that, when respondent attempted to

serve petitioners with copies of respondent's motion for summary

judgment and supporting memorandum of law at the Rancho Cucamonga

address and the Apple Valley address, both envelopes were

returned "marked 'RETURN TO SENDER' and indicated petitioners

were no longer at the address."    Respondent's motion also states

that directory assistance in Rancho Cucamonga has a listing for a

Kenneth Anderson, but that, by the subscriber's request, this

listing is unpublished.
                               - 8 -


     In an order dated June 29, 1999, the Court changed

petitioners' address on its records to the Apple Valley address,

ordered petitioners, on or before July 30, 1999, to file written

responses to respondent's May 3, 1999, motion for summary

judgment and respondent's June 14, 1999, motion to dismiss, and

ordered that there be served on petitioners by both certified

mail and first class mail copies of that order, the Court's

orders of March 23 and May 4, 1999, respondent's Third Request

for Admissions, respondent's May 3, 1999, motion for summary

judgment, and respondent's June 14, 1999, motion to dismiss.    The

Court received no return mail of its order of June 29, 1999, and

petitioners have filed no response thereto.   Nor have petitioners

otherwise filed any document or made any other attempt to get in

touch with the Court since filing their last response to

respondent's prior motion for partial summary judgment that the

Court, in Anderson v. Commissioner, T.C. Memo. 1998-253, found to

be the culmination of a pattern of making frivolous and

groundless arguments that prompted the Court to decide to impose

the $10,000 penalty described and explained in that opinion.

Discussion

Issue 1.   Dismissal v. Summary Judgment

     This Court, like every court, has the inherent power, in the

exercise of its discretion, to dismiss a case for want of

prosecution.   Link v. Wabash R.R., 370 U.S. 626, 629-632 (1962)
                               - 9 -


(failure of counsel with history of dilatory conduct of case to

appear at pretrial conference); Steyr-Daimler-Puch of Am. Corp.

v. Pappas, 852 F.2d 132, 134 (4th Cir. 1988) (failure to obey

numerous court orders); Ducommun v. Commissioner, 732 F.2d 752,

754 (10th Cir. 1983), affg. Orders of this Court (failure to

comply with subpoena duces tecum or to settle or enter into

meaningful stipulation of facts); Harper v. Commissioner, 99 T.C.

533, 540 (1992) (failure to comply with discovery requests and

orders or to prepare for trial); Levy v. Commissioner, 87 T.C.

794, 803 (1986) (failure to stipulate facts or to prepare for

trial).

     The legal standard for involuntary dismissals under Federal

Rule of Civil Procedure 41(b) governs dismissals in the Tax Court

under our Rule 123(b).   Freedson v. Commissioner, 565 F.2d 954,

954-955 (5th Cir. 1978), affg. 67 T.C. 931 (1977) and 65 T.C. 333

(1975); Harper v. Commissioner, supra at 540; Explanatory Note to

Rule 123(b), 60 T.C. 1129-1130.

     We have dismissed, for failure properly to prosecute, the

cases of taxpayers who made arguments that we found frivolous or

groundless.   McCoy v. Commissioner, 76 T.C. 1027, 1030 (1981),

affd. 696 F.2d 1234 (9th Cir. 1983) (frivolous and groundless

arguments, but also failure to respond to interrogatories and to

produce requested documents); cf. May v. Commissioner, 752 F.2d

1301, 1303-1304 (8th Cir. 1985), affg. an Order of this Court
                             - 10 -


(frivolous and groundless arguments, including denial that wages

are income; dismissal for failure to state a claim).   However, in

Mathes v. Commissioner, 788 F.2d 33, 34 (D.C. Cir. 1986), affg.

on other grounds an Order of this Court, Justice (then Judge)

Scalia expressed the view that the mere weakness of a party's

arguments can never by itself justify dismissal for failure to

prosecute--"The substantive merits of a claim are of course

irrelevant to the propriety of a dismissal for failure to

prosecute"--and affirmed our order to dismiss for failure to

prosecute not because the taxpayer's arguments were frivolous but

because he had disobeyed orders and failed to appear at trial.

     The Court solicited respondent's motion to dismiss, after

petitioners had failed to appear at the calendar call.   On

reflection, however, in the exercise of our discretion, we shall

address and dispose of the substantive issues in the case on the

basis of respondent's motion for summary judgment.

     Rule 121(a) authorizes either party to move for summary

judgment on "all or any part of the legal issues in controversy".

Rule 121(b) requires the opposing party to file a written

response "within such period as the Court may direct" and

provides that decision shall be rendered in favor of the moving

party "if the pleadings, answers to interrogatories, depositions,

admissions, and any other acceptable materials, together with the

affidavits, if any, show that there is no genuine issue as to any
                                - 11 -


material fact and that a decision may be rendered as a matter of

law."     Rule 121(b); see Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 247 (1986); Sundstrand Corp. v. Commissioner, 98 T.C. 518,

520 (1992), affd. 17 F.3d 965 (7th Cir. 1994); Zaentz v.

Commissioner, 90 T.C. 753, 754 (1988); Naftel v. Commissioner, 85

T.C. 527, 529 (1985).

        Respondent's Third Request for Admissions covers all

remaining substantive issues in the case that were not disposed

of by the Court's prior opinion Anderson v. Commissioner, T.C.

Memo. 1998-253.     Petitioners filed no response thereto within the

30-day period required by Rule 90(c).     Petitioners did not

respond to the Court's subsequent orders to respond to

respondent's motions, and the opportunities thereby afforded

petitioners to move to vacate their deemed admissions if they had

shown any desire to provide answers or otherwise dispute the

conclusory facts embodied in respondent's Third Request for

Admissions.

        Each matter set forth in respondent's Third Request for

Admissions is deemed admitted.     See Rule 90(c); Marshall v.

Commissioner, 85 T.C. 267, 272 (1985).     As a result, respondent

has carried his burden of proving that there is no genuine issue

of material fact that remains to be decided by the Court.       See

Marshall v. Commissioner, supra at 271; see also Fajardo v.

Commissioner, T.C. Memo. 1999-308.
                              - 12 -


     It would serve no useful purpose to recount the deemed

admitted facts at length; they are set forth supra pp. 4-6.       It

suffices to say that they cover all matters set forth in the

statutory notice of deficiency that were not disposed of by the

Court's prior opinion in this case.    We therefore hold that, as a

result of the foreclosure of the Calmin Drive property,

petitioner Kenneth Anderson had cancellation of indebtedness

income of $275,000 in 1992.   In the absence of the furnishing by

petitioners of any information regarding their basis in the

Calmin Drive property, the gain determined by respondent on the

disposition of the property in 1992 is sustained.    In the absence

of presentation by petitioners of any information or

documentation that they are entitled to deductions for the years

1992-95 inclusive, petitioners are not entitled to any deductions

in computing their adjusted gross income or taxable income for

those years.   Petitioner Kenneth Anderson received unemployment

compensation of $3,480 in 1992, and he is subject to self-

employment taxes for 1992 and 1993.    Finally, petitioners are

liable for the accuracy-related penalty under section 6662(a) for

each of the years 1992 through 1995.

Issue 2.   Section 6673 Penalty

     The Court, in its prior opinion in this case, decided to

impose a penalty of $10,000 under section 6673 on the grounds of
                              - 13 -


petitioners' course of conduct in asserting frivolous and

groundless arguments.

     Following issuance of that opinion and the order that

accompanied it, petitioners have gone to ground and have not been

heard from since.   They have not responded to respondent's Third

Request for Admissions or to either of respondent's motions.

This has been in the face of the Court's repeated orders to

respond to respondent's filings and to the Court's order to

furnish their current address.   Petitioners' failures to notify

the Court of their changes of address are in violation of the Tax

Court's Rules of Practice and Procedure, see Rule 34(b)(7), and

the Court's order of March 23, 1999.   Petitioners did not appear

at the call of the calendar for their case at the June 7, 1999,

commencement of the Court's San Diego trial session.

     In contrast to petitioners' affirmative misconduct during

the first phase of this case, leading to the Court's prior

opinion and accompanying order, petitioners thereafter, during

the second phase of this case, have been guilty of nonfeasance--

passive inactivity--that has nevertheless required the

expenditure of administrative and judicial resources to dispose

of the case.   These costs would not have been incurred if

petitioners had simply conceded the remaining issues and signed a

decision document that respondent would have been happy to

prepare.   On the other hand, if petitioners had provided
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responsive answers and denials to respondent's Third Request for

Admissions, the case could have been settled or tried on the

merits, which would have resulted in the Court's exercise of its

judicial function in the traditional way.

     We conclude, with respect to the second phase of this case,

that petitioners' failures to respond and appear have caused the

further proceedings herein to have been "maintained by the

taxpayer primarily for delay" within the meaning of section

6673(a)(1).   We therefore shall require petitioners to pay an

additional penalty of $1,000, to be added to the $10,000 penalty

previously decided by reason of petitioners' frivolous and

groundless arguments with respect to the first phase of this

case.



                                    An appropriate order and

                               decision will be entered.
