                                T.C. Memo. 2017-2



                         UNITED STATES TAX COURT



                 BARRY JOHN SULLIVAN, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 22203-15.                          Filed January 3, 2017.



      Barry John Sullivan, pro se.

      Karen O. Myrick, for respondent.



                           MEMORANDUM OPINION


      GERBER, Judge: Respondent, on August 22, 2016, filed a motion for

summary judgment (motion) under Rule 121(b),1 and petitioner, on September 13,


      1
       Unless otherwise indicated, all Rule references are to Tax Court Rules of
Practice and Procedure and all section references are to the Internal Revenue Code
                                                                       (continued...)
                                           -2-

[*2] 2016, filed a response. The issues for our consideration are whether: (1)

petitioner properly excluded certain income from gross income on his 2012 return;

(2) petitioner’s timely submitted unsigned 2012 return, which respondent returned

to him, is sufficient to avert the addition to tax for late filing under section

6651(a)(1); (3) petitioner is liable for an accuracy-related penalty under section

6662(a); and (4) this Court has jurisdiction over section 31 payments and credits

and, if so, whether petitioner overstated his withholding credits.

                                     Background2

       Petitioner resided in St. Louis, Missouri, at the time his petition was filed.

During 2012 petitioner worked as a part-time faculty member for St. Louis

Community College and he was paid $3,883.42. Of that amount, $232.58 was

withheld and remitted to the United States Treasury. Petitioner also worked for

Eggering Construction, LLC, during 2012 and he was paid $2,148. Of that

amount, $220.59 was withheld and remitted to the United States Treasury. During

2012 petitioner received $6,975 as remuneration for work performed for Alfie

Entertainment, Inc., Santa’s Magical Kingdom.


       1
        (...continued)
in effect for the year in issue.
       2
     The parties entered into a stipulation of facts, which included stipulated
documents.
                                            -3-

[*3] Petitioner received $25,150 from Pacific Life Insurance Co. (Pacific) during

2012. The moneys he received from Pacific were not: (1) attributable to a

disability; (2) a part of a series of substantially equal payments; (3) dividends with

respect to a corporation described in section 404(k); (4) due to a levy under

section 6331; received for medical care use; (5) pursuant to a qualified domestic

relations order; (6) received while petitioner was unemployed and intended for

payment of health insurance premiums; (7) received for paying higher education

expenses; (8) received for the purpose of purchasing a new home; or (9) due to

petitioner’s being called to active duty.

      Petitioner timely submitted an unsigned 2012 Form 1040, U.S. Individual

Income Tax Return, that respondent did not treat as “filed”. Instead, on June 4,

2013, respondent returned the 2012 Form 1040 to petitioner for signature.

Petitioner signed the Form 1040 and resubmitted it to respondent on July 1, 2013,

and respondent filed it. On the 2012 Form 1040 petitioner reported Federal

income tax withholding of $453.17, which comprised $99.18 of income tax

withholding, $263.14 of Social Security withholding, and $90.85 of Medicare

withholding. Petitioner reported zero wages, a $15,276.86 I.R.A. distribution as

taxable, and a $25,150 pension or annuity as not taxable. Petitioner computed

$553 of income tax liability; and after subtracting the $453.17 of income, Social
                                         -4-

[*4] Security, and Medicare withholding, he reported a tax due of $99.83, which

he paid by check with his timely submitted but unsigned 2012 Form 1040.

       Although entities for which petitioner worked during 2012 reported wages

to respondent and sent Forms W-2, Wage and Tax Statement, to petitioner,

petitioner prepared and attached to his return Forms 4852, Substitute for Form

W-2, Wage and Tax Statement, or Form 1099-R, reflecting zero wages or

compensation from Steve Eggering Construction, LLC, St. Louis Community

College, and Alfie Entertainment, Inc. Petitioner also prepared and attached a

Form 4852 with respect to Pacific reflecting that the $25,150 distribution was not

taxable.

       During April 2014 petitioner submitted an amended 2012 income tax return

claiming a $3,000 capital loss carryover deduction. On June 30, 2014, respondent

accepted the change and advised petitioner that he was entitled to a $200 refund.

       On June 1, 2015, respondent mailed to petitioner a statutory notice of

deficiency for 2012 determining that petitioner had a $6,640 income tax

deficiency, a $1,399 accuracy-related penalty, and a $1,019 addition to tax for

failure to timely file.

       Before and after the mailing of the notice of deficiency, petitioner engaged

in extensive correspondence concerning his disagreement with respondent’s
                                         -5-

[*5] determinations. In particular, petitioner contended that the amounts he

received are not taxable because respondent has failed to “show a legal connection

between his activity and payments from * * * [the entities for whom he worked

and the insurance company], and any specifically defined imposition of tax with

the IRC.” As a subset of that contention, petitioner further contended that his

understanding of the taxable income concept would require respondent to show

some nexus between the payments to him for his activity and the Federal

Government. As part of petitioner’s correspondence with respondent, he

attempted to show that there was no connection between his employers or the

insurance company and the Federal Government.

                                     Discussion

      Summary judgment is intended to expedite litigation and to avoid

unnecessary and expensive trials. Shiosaki v. Commissioner, 61 T.C. 861, 862

(1974). Summary judgment may be granted where the pleadings and other

materials show that there is no genuine dispute as to any material fact and that a

decision may be rendered as a matter of law. Rule 121(b); see Schlosser v.

Commissioner, T.C. Memo. 2007-298, 2007 Tax Ct. Memo LEXIS 300, at *6,

aff’d, 287 F. App’x 169 (3d Cir. 2008). The burden is on the moving party to

demonstrate that no genuine dispute as to any material fact remains and that he is
                                         -6-

[*6] entitled to judgment as a matter of law. FPL Grp., Inc. & Subs. v.

Commissioner, 116 T.C. 73, 74-75 (2001). In all cases the evidence is viewed in

the light most favorable to the nonmoving party. Bond v. Commissioner, 100 T.C.

32, 36 (1993). However, the nonmoving party is required “to go beyond the

pleadings and by * * * [his] own affidavits, or by the ‘depositions, answers to

interrogatories, and admissions on file,’ designate ‘specific facts showing that

there is a genuine issue for trial.’” Celotex Corp. v. Catrett, 477 U.S. 317, 324

(1986); see also Rauenhorst v. Commissioner, 119 T.C. 157, 175 (2002); FPL

Grp., Inc. & Subs. v. Commissioner, 115 T.C. 554, 559 (2000).

      The parties agree that there is no dispute about a material fact. The

questions before the Court can be decided on the facts stipulated by the parties.

I. Whether Certain Amounts Petitioner Received Were Income

      The first issue we consider is whether petitioner properly excluded certain

income from gross income on his 2012 return. Initially, respondent bears a burden

of production because he relied on third-party payor information to determine an

income tax deficiency. Portillo v. Commissioner, 932 F.2d 1128 1133-1134 (5th

Cir. 1991), aff’g in part, rev’g in part T.C. Memo. 1990-68. Unlike the situation in

Portillo, here there is no question that petitioner was paid certain amounts by

employers and an insurance company during 2012. He confirmed that information
                                         -7-

[*7] on his return where he treated those amounts as nontaxable, relying upon his

interpretation of what constitutes income, wages, or payments that are taxable.

Respondent has also carried his burden under section 7491 by producing

documentation from employers and the insurance company and relying on the

admissions in petitioner’s 2010 return. Accordingly, respondent has met his

burden and we next consider petitioner’s legal position underlying his reporting

position that the amounts received are not taxable.

      Respondent, relying on section 61, states that gross income includes all

income from whatever source derived, including compensation for services.

Petitioner disagrees, arguing as follows:

      I.R.C § [61] does indeed define gross income as “all income from
      whatever source derived, . . .”, and the similarity of the wording
      between it and the 16th Amendment [to the U.S. Constitution] is
      unmistakable. There is no specific definition of a term “income” in
      the IRC, which lends to a semantic hall-of-mirrors of confusing
      usages. However, the meaning of “income” and the meaning of the
      16th Amendment itself are subordinate to Supreme Court of the
      United States ruling which establish collateral estoppel on both
      subjects. In Brushaber v. Union Pacific. R., [240 U.S. 1 (1916)] [t]he
      Supreme Court has established that the 16th [A]mendment did not
      extend the taxing power beyond the limitations imposed by Article 1.
      Section 9. Clause 4 of the Constitution and did not invalidate it.

Although it is difficult to follow the logic of petitioner’s argument, similar

arguments have been advanced numerous times without success and rejected as a
                                          -8-

[*8] reason for not including or reporting income. See, e.g., Briggs v.

Commissioner, T.C. Memo. 2016-86, at *10 (and cases cited thereat). Petitioner’s

argument is without substance and relies on selected phrases out of context from a

1916 Supreme Court case which upheld the Revenue Act of 1913. That case

permitted the imposition of income tax, and petitioner’s arguments ignore 100

years of Federal tax law and cases contrary to his arguments. Under the

circumstances, we need not address the merits of petitioner’s legal reasoning for

contending that his wages and an insurance company annuity payment are not

taxable income. Accordingly, we sustain respondent’s determination that the

amounts petitioner received during 2012 are taxable income.

II. Failure To File Under Section 6651(a)

      Next we consider whether petitioner’s attempt to file a timely but unsigned

tax return for 2012 is sufficient to avoid the imposition of the late filing addition

to tax under section 6651(a)(1).

      Section 6651(a) provides for an addition to tax for failure “to file any

return” timely unless a taxpayer shows that the failure was due to reasonable cause

and not due to willful neglect. Petitioner admits that an unsigned return is not a

valid return, but he argues that it was an honest mistake and that he resubmitted

the return with a signature after he learned of his mistake. Petitioner also notes
                                           -9-

[*9] that he submitted a signed check for $99.83 dated April 14, 2013, along with

the timely, but unsigned 2012 Form 1040. It is petitioner’s position that his failure

to sign the first return submitted was due to an honest mistake and therefore there

was reasonable cause for and no willful neglect in his submitting the signed return

late.

        This Court has held that an unsigned return is “no return at all.” See Vaira

v. Commissioner, 52 T.C. 986, 1005 (1969), aff’d on this issue, rev’d and

remanded on other grounds, 44 F.2d 770 (3d Cir. 1985); see also Elliott v.

Commissioner, 113 T.C. 125, 128 (1999) (holding that an unsigned return is not a

“return” that would start the running of the period of limitations on assessment).

        The facts in this case are substantially similar to the facts in Vaira. Like

petitioner, the taxpayer in Vaira timely submitted an unsigned return along with a

signed check for full payment of the tax due as reported by the taxpayer. Vaira v.

Commissioner, 52 T.C. at 1005. However, in this case the sequence of events

regarding filing are somewhat different. While respondent rightfully did not treat

the original submitted return as “filed”, it was not returned to petitioner for

signature until almost two months later, on June 4, 2013. Shortly after receiving

the unsigned return, petitioner signed and resubmitted it to respondent on July 1,

2013, at which time it was officially filed by respondent.
                                         -10-

[*10] Those circumstances clearly do not indicate willful neglect but appear to be

a reasonable attempt on petitioner’s part to timely file and correct the lack of

signature. However, we held in Vaira that the mere fact that the taxpayer failed to

sign the return because he “overlooked it” was not reasonable cause within the

meaning of section 6651(a). See id. at 1006. While we sympathize with

petitioner’s position and recognize the harshness of the outcome, we accept this

Court’s previous holding in Vaira. Accordingly, we sustain respondent’s

determination of the addition to tax for late filing.

III. Accuracy-Related Penalty Under Section 6662(a)

      Under section 6662(a) and (b)(1) and (2), 20% of the portion of an

underpayment attributable to negligence or disregard of rules or regulations or a

substantial understatement of income tax shall be added to the tax. A substantial

understatement of income tax exists where the amount of tax to be shown on a

return exceeds the amount shown on the return by the greater of 10% of the tax

required to be shown or $5,000. Sec. 6662(d). Respondent determined a $6,640

income tax deficiency and petitioner had shown tax due of $99.83 on his 2012

return. Accordingly, there is a “substantial understatement”.

      “Negligence” includes any failure to make a reasonable attempt to comply

with the provisions of the tax law, and “disregard” includes any careless, reckless,
                                         -11-

[*11] or intentional disregard. Sec. 6662(c). Petitioner received Forms W-2 and

1099 reflecting that he had received wages or payments from Alfie Entertainment,

Inc., Santa’s Magical Kingdom, St. Louis Community College, Steve Eggering

Construction, LLC, and Pacific. Instead of attaching those documents to his 2012

return and showing the wages and payments as taxable, he prepared and submitted

Forms 4852 reflecting zero wages or compensation, and none of the amounts

received were shown as taxable. These actions demonstrate that petitioner acted

with negligence or disregard within the meaning of section 6662(b)(1).

      Under these circumstances respondent’s burden of production is met for the

determination of the section 6662(a) and (b)(2) penalty, and it becomes

petitioner’s responsibility to show either that there was substantial authority for

his failure to include receipts in income, or that the relevant facts affecting the

items’ tax treatment are adequately disclosed in the return or in a statement

attached to the return, or that he had a reasonable basis for his tax treatment of the

items. See sec. 6662(d)(2)(B).

      Petitioner has not shown substantial or credible authority for his failure to

include the receipts in income. His use of the Forms 4852 was an attempt to mask

the true nature of the payments received and instead to characterize them as

nontaxable for reasons lacking a basis in law or fact. The caselaw and reasoning
                                        -12-

[*12] proffered by petitioner on his return and in this case have been repeatedly

rejected by the Courts for many years before his attempt to file his 2012 tax return.

Accordingly, respondent’s determination of an accuracy-related penalty is

sustained.

IV. Jurisdiction Over Section 31 Payments and Credits

      In the notice of deficiency, respondent adjusted the amount of petitioner’s

reported “withholding tax” by reducing the amount of income tax withholding

reported by the withholding for Medicare and Social Security. Respondent

contends that this Court does not have jurisdiction over tax payments and credits

and, accordingly, that petitioner does not have a remedy in this Court with respect

to respondent’s determination to reduce the income tax withholding credits by the

amount of the Medicare and Social Security credits. Petitioner contends that the

withholding credit issue was “not raised” in the notice of deficiency and is

therefore new matter within the meaning of Rule 142(a). Contrary to petitioner’s

contention, the notice of deficiency clearly shows a $354 reduction or decrease in

withholding credits.

      In Forrest v. Commissioner, T.C. Memo. 2011-4, slip op. at 7-8, this Court’s

lack of jurisdiction over withholding credit issues was explained as follows:
                                         -13-

[*13]          Section 6213(a) allows the taxpayer to seek judicial review of a
        proposed deficiency before this Court. Under section 6211(b)(1) a
        deficiency is determined “without regard to payment on account of
        estimated tax, without regard to the credit under section 31”. Section
        31 generally allows the taxpayer to claim a credit for Federal income
        tax withheld from wages for that taxable year. The amount of an
        overstated credit may be summarily assessed and is not subject to
        deficiency procedures. Sec. 6201(a)(3); Bregin v. Commissioner, 74
        T.C. 1097, 1104-1105 (1980).

        Accordingly, we are without jurisdiction to address respondent’s adjustment

to petitioner’s withholding credits in this case.

        To reflect the foregoing,

                                                An appropriate order and

                                        decision will be entered.
