                        T.C. Memo. 2009-88



                      UNITED STATES TAX COURT



                  JOHN M. COBIN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 16905-05L.            Filed April 28, 2009.



     John M. Cobin, pro se.

     Steven M. Webster, for respondent.



                        MEMORANDUM OPINION


     WELLS, Judge:   Petitioner seeks review, pursuant to section

6330,1 of respondent’s determination to proceed with the




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

collection of petitioner’s tax liabilities of $51,428.76 and

$87,526.49, respectively, for his 1991 and 1992 taxable years.

The issues we must decide are:    (1) Whether this Court has

jurisdiction to review respondent’s determination to proceed with

collection of a frivolous return penalty assessed against

petitioner pursuant to section 6702; (2) whether petitioner

received and failed to report taxable income for his 1991 and

1992 taxable years; (3) whether petitioner is liable for the

addition to tax assessed pursuant to section 6651(a)(1) for the

failure to timely file a Federal income tax return for his 1991

and 1992 taxable years; (4) whether petitioner is liable for the

addition to tax assessed pursuant to section 6654(a) for failure

to pay estimated taxes for his 1991 and 1992 taxable years; and

(5) whether respondent’s settlement officer abused her discretion

in determining that respondent’s collection actions may proceed.

                              Background

     None of the facts have been stipulated, because petitioner

claimed the protection of the Fifth Amendment to the U.S.

Constitution.   In his petition, petitioner stated that he was a

resident of South Carolina.

     In documents that he sent to respondent, petitioner made

various tax-protester arguments.    He argued that, because he was

white, he was a “sovereign citizen of Oregon” and a “non-resident

alien of the United States”.    He claimed that his sovereign
                                 -3-

status made his body real property, gave him the ability to opt

out of paying Federal taxes by revoking an election he had

purportedly made under section 871(d), and allowed him to keep

all of the income his labor generated.    Otherwise, he argued,

making him pay taxes would subject him to involuntary servitude.

     For his 1991 taxable year petitioner filed a Form 1040NR,

U.S. Nonresident Alien Income Tax Return, on which he listed an

Oregon address.    Petitioner crossed out large portions of the

Form 1040NR, wrote “N/A” on several lines, reported tax of $163

on income not effectively connected with a U.S. trade or

business, sought a refund of $837 based on $1,000 paid with an

extension request, and altered the jurat by adding “with express

reservation of all my rights in law and equity, and all other

natures of law.”    Petitioner also attached a page from a Form

1040X, Amended U.S. Individual Income Tax Return, on which he

attempted to revoke his purported section 871(d) election.    In

the Form 1040X petitioner stated in pertinent part:

    I am a nonresident alien individual who at no time
    during the year was either engaged in or received
    gross income that was effectively connected with the
    conduct of a trade or business within the political
    jurisdiction of the United States and pursuant to the
    authority of 26 U.S.C. 871(d) and 26 C.F.R.
    1.871-10(d)(1)(i) and the controlling underlying
    substantive law, I hereby revoke without the consent
    of the Commissioner the previous election made under
    26 U.S.C. 871(d). Each of the changes in column B,
    page 1, are caused by this revocation (1040NRs
    attached in support thereof). We have arrived at
    these determinations after study of the I.R.C.,
    C.F.R., Constitution, and court cases. If you have
                               -4-

     reason to believe that we are wrong in our   reasons,
     please inform us in writing at the address   given on
     the reverse side. If we have not received    an
     answer within 30 days, we will assume that   you agree
     with our conclusions; This document serves   as a
     confirmatory writing between merchants.

     Petitioner did not file any nonfrivolous Federal income tax

returns for taxable years 1991 and 1992.   Using third-party

information returns and a bank deposits analysis, respondent

determined tax deficiencies and additions to tax for petitioner’s

taxable years 1991 and 1992 as follows:

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

     1991      $33,519           $ 8,380           $1,929
     1992       61,440            15,360            2,683

      Petitioner earned nonemployee compensation of $18,563

during 1991, had capital gains of $1,577 and $17,240 during 1991

and 1992, respectively, and had other income of $494 and $1,995

during 1991 and 1992, respectively.   On the basis of bank

deposits, petitioner also had gross receipts from a business

activity of $77,961 and $165,695 respectively, for his 1991 and

1992 taxable years.

     On March 31, 1994, using the addresses on petitioner's

earlier correspondence, respondent sent petitioner a notice of

deficiency for petitioner’s taxable years 1991 and 1992 (notice

of deficiency) to three different addresses:   (a) 900 Rancho

Vista Drive, Grants Pass, Oregon 95726-3746 (Grants Pass

address); (b) P.O. Box 665, Rogue River, Oregon 97537; (c) 510 E.
                                -5-

Main, Suite 2, Rogue River, Oregon 97537.   All three of the

envelopes containing the notice of deficiency were returned with

a postage label that stated “Moved Left No Address Unable To

Forward Return to Sender.”   The record contains copies of the

returned envelopes.   At that time petitioner had not filed a

Federal income tax return for any taxable year after 1991, but

the Grants Pass address is the address petitioner used on the

1040NR he submitted to respondent.

     The tax liabilities for 1991 and 1992, including additions

to tax, were assessed on September 12, 1994.   On May 9, 1994,

respondent assessed against petitioner a penalty of $500 under

section 6702 for taxable year 1992 for filing a frivolous

document purporting to be an income tax return.

     On November 21, 2003, respondent sent petitioner a final

notice of intent to levy and notice of his right to a hearing

regarding his tax liabilities for taxable years 1991 and 1992

including the frivolous return penalty for 1992.

     On November 24, 2003, respondent issued a notice of Federal

tax lien regarding the 1991 and 1992 income tax liabilities and

the frivolous return penalty for 1992.   On November 28, 2003,

respondent sent petitioner a notice of the filing of a Federal

tax lien and of his right to a hearing regarding the lien.

     On December 22, 2003, petitioner timely mailed to respondent

a Form 12153, Request for a Collection Due Process Hearing, in
                                -6-

which he requested a face-to-face meeting (Appeals hearing

request).   In his Appeals hearing request petitioner contended

that the proposed collection actions were inappropriate in part

because he had six dependent children and little income.   He did

not substantiate his claims.

     On May 19, 2004, respondent’s Appeals Office (Appeals

Office) sent petitioner a letter scheduling a correspondence

hearing for June 9, 2004.   The letter stated that if petitioner

wanted a face-to-face meeting, he had to submit to the Appeals

Office by June 2, 2004, the specific collection alternatives he

was proposing and a completed and signed financial information

statement with all necessary attachments.   The letter further

stated that the Appeals Office would not consider collection

alternatives unless petitioner filed tax returns for 1993 through

2003.   Respondent attached to the letter a computerized

transcript for each of the periods in issue.

     In a letter dated May 26, 2004, petitioner responded to the

settlement officer assigned to the case by the Appeals Office.

In his response petitioner contended that the requested face-to-

face meeting “was (and is) not for you to hear a response from me

to you about your allegations, but rather for us to hear you

explain why you have made these false accusations and taken these

wrongful actions against me.”   Petitioner also asserted that he

had not received the notice of deficiency and challenged the
                                -7-

underlying tax liability.   Petitioner claimed that during the

years in issue he had several dependents and low pay and did not

owe any income tax.   Petitioner asserted that he could produce

documentation to support his claim that he did not owe income tax

for the years in issue.   Petitioner did not provide, at the

administrative level or at trial, any testimony or documentary

evidence to dispute the underlying tax liability set out in the

notice of deficiency. Petitioner did not propose specific

collection alternatives, nor did he provide the requested

financial information and tax returns.

     On July 8, 2004, the settlement officer sent petitioner

two notices of determination upholding the lien and levy to

collect petitioner's 1991 and 1992 tax liabilities,

including the frivolous return penalty.   The notices stated that:

(1) Respondent had followed all administrative, procedural, and

statutory requirements in filing the notice of Federal tax lien

and issuing the notice of intent to levy; (2) petitioner had

failed to successfully challenge the assessed liabilities; (3)

petitioner had failed to propose a viable collection alternative;

and (4) the proposed collection actions balanced the need for

efficient tax collection with petitioner’s concern that they not

be more intrusive than necessary.
                                -8-

                             Discussion

     Section 6330 provides that no levy may be made on any

property or right to property of a person unless the Commissioner

first notifies the person in writing of the right to a hearing

before the Appeals Office.   Section 6330(c), (d), and (e) governs

the conduct of a hearing requested under section 6330.

     Section 6320(a)(1) requires the Commissioner to give any

person liable to pay tax written notice of the filing of a tax

lien upon that taxpayer’s property.   The notice must inform the

taxpayer of the right to request a hearing in the Commissioner’s

Appeals Office.   Sec. 6320(a)(3)(B), (b)(1).   Section 6330(c),

(d), and (e) governs the conduct of a hearing requested under

section 6320.   Sec. 6320(c).

I.   Jurisdiction Over Frivolous Return Penalty

     This Court does not have jurisdiction to review a section

6330 determination, issued before 2006, to proceed with

collection of a frivolous return penalty assessed under section

6702.2   Wagenknecht v. United States, 533 F.3d 412, 416 (6th Cir.

2008); Van Es v. Commissioner, 115 T.C. 324, 328 (2000); Dunbar

v. Commissioner, T.C. Memo. 2006-184.     Accordingly, we will


     2
      Sec. 6330(d)(1) was amended by the Pension Protection Act
of 2006 (PPA), Pub. L. 109-280, sec. 855, 120 Stat. 1019. For
sec. 6330 determinations issued after the effective date of the
PPA, this Court does have jurisdiction over frivolous return
penalties. See Callahan v. Commissioner, 130 T.C. 44, 48-49
(2008). The PPA is effective for determinations made after Oct.
16, 2006. Id. at 48 n.4. Because the notice of determination in
the instant case was issued in 2004, the PPA does not apply.
                                -9-

dismiss on our own motion so much of the petition as seeks review

of the notice of determination as it relates to the frivolous

return penalty under section 6702.3

II.   Respondent’s Determination To Proceed With Collection

      At a hearing requested under section 6320 or 6330 the

taxpayer may raise any relevant issues including appropriate

spousal defenses, challenges to the appropriateness of collection

actions, and collection alternatives.   Sec. 6330(c)(2)(A).

However, the taxpayer may challenge the underlying tax liability

only if the taxpayer did not receive a statutory notice of

deficiency for the tax liability and did not otherwise have an

opportunity to dispute the tax liability.   Sec. 6330(c)(2)(B).

In addition to considering issues the taxpayer raised under

section 6330(c)(2), the Appeals Officer must also obtain

verification that requirements of any applicable law or

administrative procedure have been met.   Sec. 6330(c)(1).

      Where the validity of the underlying tax liability is

properly in issue, the Court will review the matter de novo.




      3
      To the extent that this Court does not have jurisdiction,
the appeal must be filed in the appropriate District Court. See
sec. 6330(d)(1)(B). Generally, petitioner would have 30 days
after a determination that this Court lacks jurisdiction to file
an appeal in the appropriate court. See sec. 6330(d)(1).
However, it appears that the collection determination with
respect to the frivolous return penalty has already been reviewed
in District Court. See Cobin v. United States, 96 AFTR 2d 2005-
5681 (D.S.C. 2005), affd. 164 Fed. Appx. 387 (4th Cir. 2006).
                               -10-

Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v.

Commissioner, 114 T.C. 176, 181-182 (2000).    Where the validity

of the underlying tax is not properly in issue, however, the

Court will review the Commissioner’s determination for abuse of

discretion.   Sego v. Commissioner, supra at 610; Goza v.

Commissioner, supra at 182.

     Respondent concedes that petitioner did not receive a copy

of the notice of deficiency when it was mailed to him during 1994

and that petitioner’s underlying tax liability is properly in

issue.   As a general rule, the Commissioner’s determinations in a

notice of deficiency are presumed correct, Welch v. Helvering,

290 U.S. 111, 115 (1933), and Rule 142(a) places the burden of

proving an error on the taxpayer.4    For the presumption of

correctness to apply with regard to unreported income, the

Commissioner must provide a minimal evidentiary foundation

showing that there is a link between the taxpayer and either the

taxable income or the income-producing activity.    Petzoldt v.

Commissioner, 92 T.C. 661, 687-688 (1989); Dunn v. Commissioner,

T.C. Memo. 2008-63.




     4
      For court proceedings arising in connection with
examinations commenced after July 22, 1998, the Commissioner has
the burden of production with respect to additions to tax. Sec.
7491(c). In the instant case, because the notice of deficiency
was issued in 1994, sec. 7491(c) does not apply.
                                -11-

     Respondent’s revenue agent who conducted the audit of

petitioner’s taxable years 1991 and 1992 testified at trial.      The

revenue agent indicated that she used third-party information

returns and a bank deposits analysis to determine petitioner’s

tax deficiencies for 1991 and 1992.    Respondent introduced copies

of petitioner’s bank statements and a summary of the third-party

information returns upon which the 1991 and 1992 deficiencies

were based.   Respondent provided a minimal evidenciary foundation

linking petitioner to the income that respondent sought to tax,

so the presumption of correctness applies.    Petitioner did not

offer any evidence at trial to refute respondent’s determination

of petitioner’s unreported income.     On the basis of the record,

petitioner has failed to show that respondent’s determination of

deficiencies in petitioner’s income tax for 1991 and 1992 was not

correct.

     The only arguments that petitioner has raised are frivolous

tax-protester type arguments.   We do not address petitioner’s

frivolous and groundless arguments with “somber reasoning and

copious citation of precedent; to do so might suggest that these

arguments have some degree of colorable merit.”    See Crain v.

Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984).    Likewise, we

see no reason to remand the instant case to respondent’s Appeals

Office since petitioner offered no substantive evidence at trial

contravening the determinations in the notice of deficiency.      See
                                -12-

Lunsford v. Commissioner, 117 T.C. 183, 189 (2001).    Accordingly,

we uphold respondent’s determination of deficiencies in

petitioner’s income tax for the 1991 and 1992 taxable years.

     Also to be decided is whether petitioner is liable for the

additions to tax assessed by respondent under section 6651(a)(1)

for failure to timely file tax returns and section 6654 for

failure to make estimated tax payments.   Section 6012 requires

the filing of an income tax return by all individuals receiving

gross income in excess of certain minimums.   Section 6651(a)(1)

imposes an addition to tax for failure to file an income tax

return.    Because petitioner’s gross income for 1991 and 1992, as

determined by respondent in the notice of deficiency and upheld

by this Court above, exceeded the section 6012 minimum,

petitioner was required to file Federal income tax returns for

1991 and 1992.   Respondent determined on the basis of certified

transcripts that petitioner did not file a valid tax return for

taxable year 1991 or 1992.5   Petitioner did not introduce any

evidence to persuade us that respondent’s determination was not

correct.

     Even where a taxpayer failed to file a return, the taxpayer

may be relieved of the addition to tax if he can demonstrate that


     5
      Petitioner’s Form 1040NR and Form 1040X were not valid tax
returns for purposes of sec. 6651(a)(1) because neither contained
sufficient data to calculate petitioner’s tax liability. See
Beard v. Commissioner, 82 T.C. 766, 777 (1984), affd. 793 F.2d
139 (6th Cir. 1986); Dunham v. Commissioner, T.C. Memo. 1998-52.
                                 -13-

the “failure is due to reasonable cause and not due to willful

neglect”.    Sec. 6651(a).   Willful neglect means conscious

intentional failure or reckless indifference.     United States v.

Boyle, 469 U.S. 241, 245 (1985).    Section 301.6651-1(c)(1),

Proced. & Admin. Regs., states that, if a taxpayer exercises

ordinary business care and prudence and is nevertheless unable to

file on time, then the delay is due to reasonable cause.

Petitioner has failed to demonstrate reasonable cause for his

failure to file for 1991 and 1992, citing only frivolous, tax-

protester arguments.   See Yoder v. Commissioner, T.C. Memo. 1990-

116 (holding misguided interpretations of the Constitution are

not reasonable cause).   The additions to tax under section

6651(a)(1) for the taxable years in issue are accordingly

sustained.

     Section 6654(a) imposes an addition to tax for failure to

pay estimated income tax.    Section 6654 applies where prepayments

of tax, either through withholdings or by making estimated

quarterly payments, do not equal the percentage of total

liability required under the statute, unless one of the several

exceptions under section 6654(e) applies.     Niedringhaus v.

Commissioner, 99 T.C. 202, 222 (1992).     Petitioner had tax

liabilities for the taxable years in issue yet failed to make any

estimated payments.    The additions to tax under section 6654 for

the taxable years in issue are accordingly sustained.
                                 -14-

       We conclude that respondent’s determination of petitioner’s

underlying tax liabilities for 1991 and 1992, as set out in the

notice of deficiency, is correct.       Respondent’s settlement

officer verified that the requirements of section 6330(c)(1) were

met.    Petitioner did not raise any spousal defenses, nor did

petitioner offer any collection alternatives to the settlement

officer.     Accordingly, we hold that respondent’s settlement

officer committed no error and did not abuse her discretion in

determining that collection could proceed.

III. Section 6673 Penalty

       Section 6673(a)(1) provides that this Court may require the

taxpayer to pay a penalty not in excess of $25,000 whenever it

appears to this Court that:    (a) The proceedings were instituted

or maintained by the taxpayer primarily for delay; (b) the

taxpayer’s position is frivolous or groundless; or (c) the

taxpayer unreasonably failed to pursue available administrative

remedies.    Petitioner was warned that this Court could impose a

penalty if he persisted in raising frivolous tax-protester

arguments.    Despite being warned, petitioner raised frivolous

arguments throughout the Appeals process, in his petition to this

Court, and in his briefs.    Accordingly, we shall impose a $15,000

penalty on petitioner pursuant to section 6673.
                            -15-

To reflect the foregoing,


                                        Decision will be entered

                                   for respondent.
