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8/11/2019 Crites v. CIR Tax Court Memo Opinion Annotated
1/13
m tb S
T .C .
Memo . 2 012-2 67
UNITED STATES
T X COURT
M RL J .
CR ITES ,
Peti t ioner v .
COMM ISS IONER OF INTERNAL REVENUE , Respondent
Docket
No. 19156 -10L. Fi led
September
1 7
2012.
Marla
J .
Cr i tes ,
p ro
s e .
Mat thew
D.
Carlson,
fo r
respondent .
ME MOR AN D U M OPINION
HOLMES ,
Judge:
The
Commiss ioner says Marla
Cri tes owes
a
5,000
penal ty
fo r
filing
a
f r i vo lous
amended
return.
She
had
f i led
a
perfect ly
norma l
2005 tax re tu rn nea rly
three
years
before , b u t argues
now
that she
is
no t a pe r son
and
that,
even
she
were,
the Commiss i one r
b lew th ro ugh
th e statute
of
S E RVE D S ep
17
2012
8/11/2019 Crites v. CIR Tax Court Memo Opinion Annotated
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2
[ * 2 ] l i m i t a t i o n s b y no i m p o s i n g
th e p e n a l t y
within
t h r e e
y e a r s
of th e
filing
of
h e r
o r i g i n a l r e t u r n .
B a c k g r o u n d
I.
T h e R e t u r n s
O n April 1 5 2 0 0 6 , C r i t e s f i l e d a
r e t u r n
fo r h e r 2 0 0 5 ta x
y e a r . I t s h o w e d
a b o u t $ 4 5 , 0 0 0 in a d j u s t e d g r o s s i n c o m e an d a ta x liability of l e s s t h a n $ 4 , 0 0 0 .
M o r e
t h a n
tw o
y e a r s
l a t e r ,
in
O c t o b e r
2 0 0 8 , C r it e s
s e n t
a
F o r m
1 0 4 0 X ,
A m e n d e d
U . S .
I n d i v i d u a l T a x R e t u r n ,
to th e C o m m i s s i o n e r .
T h e C o m m i s s i o n e r
d id
n o t
p r o c e s s t h is 1 0 4 0 X as a r e t u r n .
H is
r e a s o n
is n o t
h a r d
to s e e : In
h e r 1 0 4 0 X , C r i t e s
a s k e d fo r a r e f u n d of a ll th e
2 0 0 5
t a x t h a t sh e h ad p a i d o n th e
g r o u n d
t h a t h e r
i n c o m e w as r a d i c a ll y l o w e r
t h a n
sh e h ad
o r i g i n a l l y
r e p o r t e d
b e c a u s e ,
sh e
w r o t e :
I w as in t h e s e rv i c e of a
n o n - F e d e r a l
e m p l o y e r , n o t e n g a g e d in a
t r a d e o r u s i n e s s an d n o t
an
o f f i c e r of
a
c o r p o r a t i o n .
A c c o r d i n
to
th e I R C s e c t i o n s 3 4 0 1
an d
3 1 2 1 t h e n ,
m y
i n c o m e c o n s i s t s o n l y
of
u n e m p l o y m e n t
c o m p e n s a t i o n
an d a
ta x
r e f u n d
f r o m
th e p r e v i o u s
y e a r .
T h i s is o n l y a v a r i a t i o n
of
th e f r i v o l o u s w a g e s - a r e n ' t - i n c o m e a r g u m e n t t h a t
ta x p r o t e s t e r s h a v e m a c e fo r y e a r s . C r i t e s 's p r o b l e m is
t h a t
sh e w as
a
w a g e
e a r n e r ,
an d th e s c h o o l s y s t e m s
t h a t . e m p l o y e d h e r
h ad w i t h h e l d
a
p o r t i o n of h e r w a g e s
an d
p a i d
t h e m
o v e r
to
th e
I R S . T h e
e m p l o y e r s
didn t s u p p o r t h e r
t h e o r y , an d s o
C r i t e s
a t t a c h e d
tw o
d i f f e r e n t I t o r m s 4 8 5 2 ,
S u b s t i t u t e
fo r F o r m W - 2 ,
to
h e r F o r m 1 0 4 0 X .
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[*3] On these fo rms C rite s lis te d th e
employers '
name s a nd
th e
amounts t hey had
withheld. S he
cla imed
tha t he r employers would n o t
issue
forms correctly l ist ing
'wages '
a s def ined
[b y
the] IRC. 1
The Commiss ioner determined t ha t Cri tes 's Form 1040X fa i led
to
divulge
informat ion on which t h e subs tan tia l
correctness of
th e
sel f -assessment could
be
judged,
and served only to d ela y or impede the
adrninistrat ion
ofFedera l
ta x
laws.
This
made
Crites's
Form
1040X
frivolous
under sec t ion
6702 (a ),2 and he
imposed a 5,000 penal ty against her .
II . The Levy
Crites
didn t pa y, a nd
th e
Comniiss ioner moved
to col lect
by
s end ing he r
a
f inal
notice
t ha t he would
seize
he r
p rope rt y. C rite s
asked
for
a col lect ion due
process (CDP)
hear ing,
and at tached to he r re que s t was a rei terat ion of
he r v iew
t ha t
wages
are not
taxable. S he also th rew in arguments
t h a t
she isn t a pe rson
sub je c t t o levy under sect ion 6331 ,
t ha t
he r
employer-provided
Forms W-2 weren ' t
val id, t ha t wi t hou t Forms W-2 th e
Commiss ioner
had insuf f ic ien t informat ion to
Crites
had at tached
ordinary W-2s
to he r normal or iginal
2005
return.
They
of
cou rse showed t h a t
she
did earn
income.
All sect ion references are to th e In terna l Revenue
Code in
ef fec t at a ll
re levan t t imes , unless otherwise
indicated.
All Rule references are to th e
Tax
Cour t Rules ofPractice and
Procedure.
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- 4 -
[*4] i m p o s e
ta x o n h e r , t h a t sh e d i d n ' t r e c e i v e a t i r n e l y n o t i c e of d e f i c ie n c y , t h a t
h e r a s s e s s m e n t w a s
n o t
a p p r o v e d b y
a
q u a l i f i e d a s s e s s m e n t
o f f i c e r , ' , ' an d o t h e r t a x -
p r o t e s t e r - t y p e a r g u m e n t s . T h e C o m m i s s i o n e r
t o l d h e r to
file
a n
a m e n d e d r e q u e s t
f r e e
of f r i v o l o u s
a r g u m e n t s
i s h e w a n t e d
a
h e a r i n g .
In h e r s e c o n d e f f o r t sh e t o o k c a r e
to a s s u r e
th e C o m m i s s i o n e r
t h a t
h e r
a r g u m e n t s
w e r e n o t
f r i v o l o u s .
S h e c l a i m e d t h a t
s h e
m a d e
n o C o n s t it u t i o n a l ,
m o r a l ,
p o l i t i c a l ,
r e l i g i o u s
o r
c o n s c i e n t io u s a r g u m e n t s ,
a n d h a d
n o
d e s i r e
to
d e l a y
o r i m p e d e
t a x a d m i n i s t r a t i o n
which m e a n t ,
s h e w r o t e ,
t h a t h e r
a r g u m e n t s c o u l d
n o t
b e f r i v o l o u s . S h e a l s o r g u e d t h a t :
0 4 2 s h e w as e n t i t l e d to
d i s p u t e
h e r liability
fo r
th e 2 0 0 5
f r i v o l o u s -
r e t u r n
p e n a l t y ;
0 4 2
th e
C o m m i s s i o n e r
r e l i e d
o n
o ld
i n f o r m a t io n w h i c h
w a s
s u p e r s e d e d b y a n o t h e r
1 0 4 0 X
f i l e d
in
F e b r u a r y
2 0 1 0 ; 3
0 4 2 T h e
C o m m i s s i o n e r ' s i m p o s i t i o n
of
th e f r i v o l o u s - r e t u r n
p e n a l t y
a g a i n s t h e r f a i l e d
to
p r o v i d e f a c t s e s t a b l i s h i n g
t h a t
s e c t i o n
6 7 0 2 ( a ) e v e n a p p l i e d t o h e r ;
0 4 2
th e
C o m m i s s i o n e r
r e l i e d o n
i r r e l e v a n t
a n d
i n v a l i d
i n f o r m a t i o n
w h e n
h e
c o n c l u d e d
t h a t a w a g e l e v y c o u l d
a p p l y t o h e r ;
a n d
0 4 2
th e
C o m m i s s i o n e r
didn t
s e n d
h e r
a
v a l i d
n o t i c e
a n d d e m a n d
for t a x .
C r i t e s a c t u a l l y filed f o u r a m e n d e d r e t u r n s fo r
2 0 0 5 .
T h e C o m m i s s i o n e r
m a r k e d
e a c h of t h e m i v o l o u s .
T h e n o t i c e
of d e t e r m i n a t i o n in t h i s
c a s e
a r i s e s
o n l y f r o m th e p e n a l t y
t h a t
th e C o m m i s s i o n e r
a s s e s s e d f o r
th e
first of t h e s e r e t u r n s .
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5
[*5] The Commiss ioner sus ta ined the levy. He
denied
any relief t o C rit e s because
she failed
to propos e any
col lection
alternat ives and.had
raised
no
nonfrivolous
issues. He
conf i rmed
t ha t th e requirements of
any
applicable la w or
administ rat ive
procedure
had
been
me t
by th e
IRS . And
he
told
Crit es th a t
she
migh t
face
f ines of
up to 25,000
in
th e future fo r tak ing fr ivolous posit ions.
Crites filed a t imely
pet i t ion
with t h is c ou rt whi le a Cal i fornia re s ide nt. T h e
part ies
submi t ted
th e
case
fo r
dec is ion unde r Ru le
122 .
Discuss ion
Cri tes
is
correc t
t ha t th e
Commiss ioner
c an 't c o lle c t th e
pena l ty
b y le vy
wi thou t g iv ing he r wri t ten
notice
ofh is intent to do
so and
offer ing her
a
hear ing.
At
th e
hea ring, the Appeals of f icer mus t
address
any
re levant issues
t ha t she raises.
S e e
sec. 6330(c ) ( 2 ) . He mus t
also
obtain ver i f icat ion from
the
Secre ta ry t ha t
th e
requirements ofany app lic ab le law or adminis t rat ive procedure have been met .
S e e
s e c
6330(c ) (1 ) .
I. I ssues
Ra ised by
th e Taxpayer
Sect ion
6330(c ) (2 ) tells
Appeals
officers
t o cons ide r
issues raised by the
taxpayer . The
pr imary
issue t ha t
Crites
raises under
th is
subsect ion
is whe the r she
is
actual ly l iable fo r th e
f r ivolous-return
pena lt y t h a t th e Commiss ioner
imposed
on
her - -which
s h e
can raise
because s h e
has not
otherwise had
a chance
to dispute
th e
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- 6 -
[ * 6 ] p e n a l t y . S e e s e c . 6 3 3 0 ( c ) ( 2 ) ( B ) ; C a l l a h a n v . C o m m i s s i o n e r , 1 3 0 T .C . 4 4 , 5 0
( 2 0 0 8 ) . 4
W h e n
th e
v a l i d i t y
of
t h e u n de r l yi n g t a x
l i a b i l i t y
is
a t
i s s u e
in
a
C D P
h e a r i n g ,
w e r e v i e w
it
de
n o v o .
S e g o v .
C o m m i s s i o n e r ,
1 1 4 . T . C .
6 0 4 , 6 1 0
( 2 0 0 0 ) .
T h i s m e a n s w e a re
n o t
l i m i t e d to l o o k i n g a t th e
a d m i n i s t r a t i v e
r e c o r d o r
r e v i e w i n g
o n l y th e
A p p e a l s officer s j u s t i f i c a t i o n s f o r
th e
p e n a l t y . W e
i n s t e a d l o o k
to
th e
r e c o r d w e h a v e
b e f o r e
u s . T i n m i o n s
v .
W h i t e ,
3 1 4
F . 3 d
1 2 2 9 , 1 2 3 3 - 1 2 3 4 ( 1 0 t h
C i r .
2 0 0 3 ) .
A . W h a t ' s a
R e t u rn U n d e r
S e c t i o n 6 7 0 2 ?
It
u s e d
to
b e
th e
d i s t r i c t
c o u r t s ' job to
r e v i e w c h a l l e n g e s
to s e c t i o n
6 7 0 2
p e n a l t i e s .
C a l l a h a n , 1 3 0 T . C .
a t 4 8 .
T h a t
c h a n g e d w h e n th e
P e n s i o n
P r o t e c t i o n
A c t
of 2 0 0 6 ,
P u b . L . N o . 1 0 9 - 2 8 0 , s e c .
8 5 5 ( a ) ,
1 2 0 S ta t a t 1 0 1 9 , a m e n d e d s e c t i o n
6 3 3 0 ( d ) ( 1 )
t o g iv e
o u r C o u r t jurisdiction
to
r e v i e w a ll
C D P d e t e r m i n a t i o n s
r e g a r d l e s s
of
th e t y p e ofu r i d e r l y i n g ta x liability a t i s s u e .
S e c .
6 3 3 0 ( d ) ( 1 ) ;
C a l l a h a n , 1 3 0 T . C .
a t 4 8 .
B u t
p r e c e d e n t s
u n d e r
th e
o l d a l l o c a t i o n
of
jurisdiction
ar e still r e l e v a n t .
T h o s e p r e c e d e n t s ar e
h e l p f u l h e r e . C o n s t r u i n , h e r a r g u m e n t s
a s
c h a r i t a b l y
as
p o s s i b l e , it s e e m s
C i t e s ' s first
a r g u m e n t
is
t h a t
h e r
f r i v o l o u s
a m e n d e d
r e t u r n
C r i t e s
initially
r e s e r v e d e v i d e n t i a r y o b j e c t i o n s to c e r t a i n e x h i b i t s .
S h e
a b a n d o n e d
t h e s e b y failing to a d d r e s s t h e m h e r
o p e n i n g
b r i e f . _ S _ e e R y b a k v .
C o m m i s s i o n e r , 9 1
T . C .
5 2 4 ,
5 6 6
( 1 9 8 8 ) .
8/11/2019 Crites v. CIR Tax Court Memo Opinion Annotated
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7
[*7] wasn' t a return . Sect ion 6702(a)-- the sect ion that the Commiss i one r relies
on to penalize C r ites - -pun ishes only taxpayers who file what
purpor ts
to be a
re tu rn .
Cr i tes is wrong
she
thinks
her
amended return wasn ' t a return
unde r
this
sect ion.
She
was
us ing
it
to
try
to
ge t a
re fund, and
a taxpayer
can file
a re fund
claim
only
b y sending an amended income ta x return to
th e
IRS . Sec.
601.105(e) (1) ,
Statement ofProcedura l Rules .
We
have
a lr eady he ld
that amended
returns
subm i t ted
to
obta in
a
re fund
are
re tu rns
unde r sect ion
6702 .
Callahan
v .
Commiss ioner ,
130 T .C .
at
53 .
And
s o have
the
ci rcu i t courts
that
have
ru led on
th e
issue before
we
g o t jurisdiction ove r
cases
l ike this.
See Co l ton
v .
G ibbs , 902
F.2d
14 62, 1 46 4
(9th
Cir . 1990); S isemore
v. United
States, 797
F.2d 268,
270
(6th.
Cir.
1986).
B.
The efinition
of
Person
Cri tes next
argues
that
even
her
amended return counts a s a
return
unde r
section 6702, that
section's
penalt ies
do no t
apply to
her because s h e does no t
fall
within
its def in i t ion
of
a person. On
this poin t ,
she
falls
into the
o ld tax-protester
habi t
of
confusing inc lud es and m eans .
The
Code 's
def ini t ion
of
a
person
sub jec t
to
section
6702
penalt ies
include s
an off icer o r emp lo y e e
of
a
corporat ion,
o r
a membe r
o r
employee
of a
partnership .
Sec.
6671(b) (emphasis added). And
8/11/2019 Crites v. CIR Tax Court Memo Opinion Annotated
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8
[ 8]
th e C o m m i s s i o n e r an d C r i t e s a g r e e t h a t sh e
is
n o t an
o f f i c e r
o r e m p l o y e e of
e i t h e r a
c o r p o r a t i o n
o r a p a r t n e r s h i p .
B u t
c a s e l a w
h as firmly e s t a b l i s h e d t h a t
s e c t i o n 6 6 7 1 ' s
d e f i n i t i o n
of
p e r s o n
i n c l u d e s
o f f i c e r s an d
e m p l o y e e s , b u t
c e r t a i n l y
d o e s n o t
e x c l u d e a ll
o t h e r s . U n i t e d
S t a t e s v. G r a h a m , 3 0 9
F . 2 d
2 1 0 , 2 1 2 ( 9 t h .
C i r .
1 9 6 2 ) . 5
I I . I s s u e s R e v i e w a b le U n d e r
S e c t i o n
6 3 3 0 ( c ) ( 1 )
W e
normally don t
a d d r e s s
i s s u e s
t h a t
a
t a x p a y e r
didn t
r a i s e
at
th e
C D P
h e a r i n g . S e c .
3 0 1 . 6 3 3
- 1 ( f ) ( 2 ) , Q & A - F 3 , P r o c e d . . &
Admiit
R e g s . B u t t h e r e is an
e x c e p t i o n fo r th e i s s u e s t h a t th e C o d e
l i s t s
in
s e c t i o n 6 3 3 0 ( c ) ( 1 ) . S e c t i o n
6 3 3 0 ( c ) ( 1 )
i m p o s e s a d u t y o n A p p e a ls o f f i c e r s to verify t h a t
th e
IR S h as m e t
th e
r e q u i r e m e n t s of
a ll
a p p l i c a b l e l a w s an d a d m i n i s t r a t i v e p r o c e d u r e s a t e v e r y h e a r in g .
In
H o y l e
v. C o m m i s s i o n e r ,
1 3 1 T . C .
1 9 7 , 2 0 1 - 2 0 2 ( 2 0 0 8 ) ,
w e
h e l d t h a t
i s s u e s t h a t
an A p p e a l s o f f i c e r h as o c o n s id e r u n d e r s e c t i o n 6 3 3 0 ( c ) ( 1 ) ar e th e
i s s u e s
r a i s e d at
th e
h e a r i n g ,
e v e n it s th e C o d e an d n o t th e t a x p a y e r - t h a t r a i s e s t h e m .
T h e s e
ar e
t h e r e f o r e
i s s u e s
t h a t w e h av e a u t h o r i t y to
r e v i e w
o n a p p e a l .
T h e
C o d e itself d
f i n e s ' ' p e r s o n
a s i n 5 4 0 l u d i n ga n
i n d i v i d u a l , a t r u s t ,
e s t a t e , p a r t n e r s h i p ,
ass c i a t i o n ,
c o m p a n y o r
c o r p o r a t i o n .
S e c .
7 7 0 1 ( a ) ( 1 ) .
T h e
C o d e a l s o
e x p l a i n s
th th e t e r m i n c lu d e s s h a l l n o t be d e e m e d to
e x c l d e o th e r
t h i n g s o t h e r w i s e
withi
th e m e a n i n g
of
th e t e r m d e f i n e d . S e c . 7 7 0 1 ( c ) ( e m p h a s i s
a d d e d ) .
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[*9] We
review the Appeals off icer's determinat ion on these (c ) (1 )
issues
fo r
abuse
ofdiscretion.6 Sego, 114 T.C.
at
610.
A. Adm in is tra tive I rregularit ies
The
first ( c ) ( 1 ) issue
t h a t
Cri tes
ra is e s is
whe the r
th e
IR S compl ied
with
applicable administrative procedures
in
assessing the
penalty. She
argues t ha t the
compu te r t ransc rip ts tha t th e Appeals
off icer
used did not p rove th a t th e
IR S ever
ac tua l ly assessed th e penal ty .
This
won t work :
We
have consis ten t ly
he ld
t h a t
such t ranscr ipts
are sufficient
unless
a t axpayer can show some i r regular i ty ser ious
enough
t o unde rm ine
t he i r val idi ty.
Nes tor
v.
Commiss ioner , 118
T.C.
162 ,
166 -67
( 2002) ;
Davis v. Commissioner, 1 1 5 T.C. 35, 40-41 (2000).
Cri tes t h inks she
has
fo und two. S he first cla ims
t h a t
it is a violation of IR S
in ternal
procedure
to
use
t ransact ion
code 2 40
instead
of
penal ty
reference
number
(PRN)
66 6
to show the assessment of a civil penalty on th e transcripts. The
6 A decis ionmaker abuses
h is
discretion
when [he]
makes
an error
of la w
* * * or rests
[h is ]
determinat ion
on
a
clearly erroneous f inding
of fact
*
* * [or]
'appl ies th e correct
la w
to fa cts wh ich
are
no t c lea r ly erroneous
bu t
rules an
i r rat ional
manner. ' Uni ted
States
v.
Sherburne,
249
F.3d
1121,
1125-1126
(9th
Cir.
2001 ) (quot ing Fr iedk in v. S te rnbe rg ( In
re
Sternberg),
85 F.3d 1400, 1405
(9th
Cir.
1996), overruled
on o th e r grounds , Murray v.
Bammer
( In re Bammer ) ,
1 3 1 F.3d
788
(1997) (en banc) ) ; s e e also Cooter Gel l v. Har tmarx Corp., 496
U.S.
384, 402-403
(1990).
8/11/2019 Crites v. CIR Tax Court Memo Opinion Annotated
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1 0
-
[ * 1 0 ] I n t e r n a l R e v e n u e M a n u a l (IRM) d o e s s t a te
t h a t
p e n a l t i e s a re
a s s e s s e d u s i n g
P R N 6 6 6 . IR M p t. 2 0 . . 1 0 . 1 0 . 1 . 2 ( 1 ) ( M a y 1 8 2 0 1 0 ) . B u t e v e n if a m i s c o d i n g
s o m e h o w i n v a l i d a t e d a n a s s e s s m e n t , C r i t e s ' s a r g u m e n t w o u l d
still
f a i l .
T r a n s a c t i o n c o d e 2 4 0
i s . l i s t e d a s a
m i s c e l l a n e o u s
p e n a l t y i n
th e
IR S
T r a n s a c t i o n
C o d e s
P o c k e t G u id e .
T r a n s a c t i o n C o d e s
P o c k e t G u i d e , D o c u m e n t
1 1 7 3 4 ,
a t
5
( R e v . 5 - 2 0 1 2 ) . . B u t th e C o m m i s s i o n e r
u s e d
c o d e
2 4 0
in c o n j u n c t i o n
w i t h
P R N
6 6 6 ,
a n d u s e d
th e
right
c o d e
to
identify
th e
p e n a l t y
o n
a n a s s e s s m e n t
a n d
a b a t e m e n t
f o r m . 7 N o e r r o r - - a n d c e r t a i n l y n o a b u s e of d i s c r e t i o n - - h e r e .
C r i t e s n e x t c la im s t h a t
th e a g e n t s
w h o m a d e
th e
a s s e s s m e n t w e r e n o t
a s s e s s m e n t o f f i c e r s a n d w e r e
t h e r e f o r e n o t a u t h o r i z e d
to
m a k e
a s s e s s m e n t s .
T h i s
a r g u m e n t
is a l s o m e r i t l e s s . D e l e g a t i o n O r d e r 2 9
g i v e s a
c a m p u s d i r e c t o r
th e
a u t h o r i t y
t o a p p o in t a s s e s s m n t
o f f i c e r s - - w h o
m a y
f u r t h e r d e le g a te t h e a u t h o r i t y
to
m a k e a s s e s s m e n t s . IRM p t. 3 . 1 7 . 6 3 . 2 0 ( 1 ) ( O c t. 1
2 0 0 5 ) . C r i t e s o f f e r e d
n o
e v i d e n c e o t h e r t h a n
t h e i r
job
t it le s 8 s u g g e s t n g
t h a t
th e
a g e n t s w h o w o r k e d
o n h e r
a c c o u n t d i d n o t h a v e t h e a u t h o r i t y
to
m a k e
a n
a s s e s s m e n t . T h i s
m e a n t
t h a t t h e r e
C r i t e s
a r g u e s
t h a t
t h e r e
is
y e t
a n o t h e r
i r r e g u l a r i t y
b e c a u s e
t h i s
r e f e r e n c e to
P R N
6 6 6
r e a d s 1 0 4 0
d a t e d
1 0 / 2 5 / 0 8 i n s t e a d of
1 0 4 0 X
d a t e d 1 0 / 2 5 / 0 8 . H e r
a r g u m e n t
is
f r i v o l o u s . T h e r e i s : n o m i s t a k i n g t h a t t h i s
is a
r e f e r e n c e to th e
a m e n d e d
r e t u r n .
8
T h e
a g e n t s w h o
w o r k e d o n
C r i t e s ' s
a c c o u n t h a d th e t i t l e s
C o r r e s p o n d e n c e
E x a m i n a t i o n
T e c h n i c i a n a n d
S u p e r v i s o r T a x
E x a m i n i n g
A s s i s t a n t .
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-
1 1
-
[ * 1 1 ]
w e r e n o i r r e g u l a r i t i e s
i n
th e c o m p u t e r t r a n s c r i p t s , a n d
w e
t h u s
find
t h a t th e
A p p e a l s o f f i c e r
p r o p e r l y v e r i f i e d
th e I R S ' s
a s s e s s m e n t
of th e
f r i v o l o u s - r e t u r n
p e n a l t y a g a i n s t
C r i t e s .
B . S t a t u t e ofLimitations
T h e
s e c o n d
( c ) ( 1 ) i s s u e h e r e is w h e t h e r t h e . A p p e a ls
o f f i c e r v e r i f i e d
t h a t th e
IR S
a s s e s s e d th e p e n a l t y a g a i n s t C r i t e s within t h e s t a t u te of l i m i t a t i o n s . T h i s is a
( c ) ( 1 )
i s s ue b e c a u s e
it
is
l e g a l
r e q u i r e m e n t t h a t
a n
A p p e a l s
o f f i c e r
m u s t
c o n s i d e r a t
a
C D P h e a r i n g . B e e l e r
v .
C o m m i s s io n e r , T . C . M e m o . 2 0 0 9 - 2 6 6 , 2 0 0 9
W L
4 0 5 9 2 3 1 , a t *3 , v a c a t e d an d r e m a n d e d o n o t h e r g r o u n ds , 4 3 4 F e d . A p p x .
4 1
( 2 d C i r . 2 0 1 1 ) ;
s e e
a l s o H o y l e , 1 3 1 T . C . at 2 0 1 - 0 2 ( I R S
t i m e l y m a i l i n g
of a n o t i c e
of
d e f i c i e n c y is
a
l e g a l
r e q u i r e m e n t u n d e r
s u b s e c t i o n ( c ) ( 1 ) ) .
S e c t i o n 6 5 0 1 ( a )
d o e s p l a c e limits o n a s s e s s m e n t s . With c e r t a i n limited
e x c e p t i o n s n o t
r e l e v a n t
h e r e , th e C o m m i s s i o n e r m u s t . a s s e s s a ta x liability within
t h r e e
y e a r s a f t e r
a
r e t u r n
is f i l e d . . S e c . 6 5 0 1 ( a ) . C r i t e s a r g u e s t h a t b e c a u s e p e n a l t i e s
a re
g e n e r a ll y i n c lu d e d within th e d e f i n i t i o n of tax ,
s ie
s e c .
6 6 6 5 ( a ) ( 2 ) , s e c t i o n
6 5 0 . 1 ( a ) p r e v e n t s
th e C o m m i s s i o n e r f r o m a s s e s s i n g a p e n a l t y a g a i n s t h e r u n d e r
s e c t i o n 6 7 0 2 ( a ) m o r e t h a n t h r e e
y e a r s f r o m
th e t i m e s h e filed h e r
o r i g i n a l r e t u r n .
W e d i s a g r e e . A s th e C o m m i s s i o n e r o b s e r v e s , p e n a lt i e s u n d e r
s e c t i o n
6 7 0 2
do n o t h a v e a r e a d i l y o b s e r v a b l e
s t a t u t e
of l i m i t a t i o n s . T h e s e c t i o n p e n a l i z e s n o t
8/11/2019 Crites v. CIR Tax Court Memo Opinion Annotated
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-
1 2
-
[ * 1 2 ] j u s t
f r i v o l o u s
r e t u r n s - : - a n d e v e n h e r e
C o n g r e s s
w a s c a r e f u l to
p e n a l i z e
n o t
just r e t u r n s b u t
w h a t
u r p o r t s to b e
a
r e t u r n ' 2 - - b u t f r i v o l o u s s u b m i s s i o n s . It
w o u l d
b e
o dd
i p e n a l t i e s
k e y e d t o s u b m i s s i o n s
h a d
s o m e h o w t o be
t i e d
to
th e
l i m i t a t i o n s p e r i o d
fo r
ta x
t h a t
is s u p p o s e d
to
be
s h o w n
o n a r e t u r n .
B u t le t us
a s s u m e - - a n d
h e r e w e a re e x p r e s s l y a s s u m i n g w i t h o u t
d e c i d i n g - -
t h a t
C r i t e s
is
r i g h t
t h a t th e
filing d a t e
of h e r
r e t u r n
is th e k e y d a t e . i S h e h a d t w o
r e t u r n s ,
a n d
th e
o n e thtt
th e
C o m m i s s i o n e r
w a n t s to
p u n i s h
h e r
for
is
th e
a m e n d e d
r e t u r n t h a t s h e s e n t th e
IR S
in
O c t o b e r
2 0 0 8 .
H e a s s e s s e d
th e p e n a l t y
in
J u l y 2 0 0 9 ,
well within t h r e e y e a r s of
h e r
s u b m i t t i n g
i t . C r i t e s
of c o u r s e w o u l d p r e fe r t h a t w e
h o l d t h a t th e
c l o c k
fo r p e n a l i z i n g h e r u n de r s e c t i o n 6 7 0 2 b e g a n t o r u n w h e n sh e
filed h e r o r i g i n a l
r e t u r n ,
b u t
s h e
c i t e s n o
a u t h o r i t y
for h e r implicit p r o p o s i t i o n
t h a t a
s t a t u t e of l i m i t a t i o n s
c a n
s t a r t r u n n i n g b e f o r e a c a u s e
of
a c t i o n a c c r u e s o r , in
a
c a s e
l i k e h e r s ,
b e f o r e a
t a x p a y e r e v e n f i l e s
a
s a n c t i o n a b l e s u b m i s s i o n . ,
Q u i t e a p a r t
f r o m
C r i t e s ' s s u b t l e a t t e m p t
to
s h i f t o u r
f o c u s
f r o m
s u b m i s s i o n
to r e t u r n , h e r c o n s t r u c t i o n of
s e c t i o n t 6 7 0 2 ( a )
w o u l d b e e x c e p t i o n a l l y
u n r e a s o n a b l e . S e c t i o n
6 7 0 2 ' s
p u r p o s e - e v i d e n t f r o m it s
t e x t - - i s
to d e t e r f r i v o l o u s
s u b m i s s i o n s t h a t g u m
up
th e
I R S ' s
w o r k .
w e
h e l d t h a t
t h e s t a t u te
of
l i m i t a t i o n s
for th e C o m m i s s i o n e r t p e n a l i z e f r i v o l o u s a m e n d e d r e t u r n s b e g a n to
r u n
w i t h
th e
filing of
th e
o r i g i n a l
r e t u r n ,
s e c t i o n
6 7 0 2
w o u l d
q u i c k l y
l o s e
i t s d e t e r r e n t e f f e c t .
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[ 13] T a x
p r o t e s t e r s w o u l d
h a v e n o d i s i n c e n t i v e to s u b m i t s u c h frivolities o n c e
m o r e t h a n
t h r e e y e a r s
h ad
p a s s e d f r o m th e
filing
d a t e
of
an
o r i g i n a l
r e t u r n .
W e
t h e r e f o r e h o l d t h a t th e
A p p e a l s
o f f i c e r c o m m i t t e d
n o
e r r o r in c o n c l u d i n g
t h a t th e
r e q u i r e m e n t s
of a ll
a p p l i c a b l e la w an d
a d m i n i s t r a t i v e
p r o c e d u r e w e r e
m e t .
T h a t l e a v e s
o n l y th e
C o m m i s s i o n e r ' s
s u g g e s t i o n
t h a t w e i m p o s e an
a d d i t i o n a l p e n a l t y
o n C r i t e s
u n d e r s e c t i o n 6 6 7 3
fo r
e v e n
b r i n g i n g
t h i s c a s e .
B u t
t h i s
is
C r i t e s ' s
first trip
to
T a x
C o u r t ,
an d
b y
s u b m i t t i n g
th e
c a s e
u n d e r R u l e
1 2 2 ,
sh e d id s a v e us th e b u r d e n of
t r i a l . A n d
on e
of
h e r a rg u m e n t s , t h e s t a t u t e - o f -
l i m i t a t i o n s i s s u e a s
a p p l i e d to
f r i v o l o u s
a m e n d e d r e t u r n s , w as on e w e
h ad n o t
y e t
a d d r e s s e d a nd w a s n o t
itself
o b v i o u s l y f r i v o l o u s . W e will
t h e r e f o r e
e x e r c i s e
o u r
d i s c r e t io n n o t to
s a n c t i o n h e r u n d e r s e c t i o n 6 6 7 3 .
T h i s t i m e .
An
a p p r o p r ia t e o r d e r
an d d e c i s i o n
will
be e n t e r e d .