This case is before the Court to determine whether respondent may proceed with the collection of petitioner's unpaid Federal income tax for 1996 through 2006 and unpaid civil penalties for filing frivolous income tax returns for 1997, 1999, 2000, 2003, and 2004 (collectively, petitioner's liabilities or, simply, the liabilities). We review the determinations under section 6330(d)(1).
All section references are to the Internal Revenue Code of 1986, as amended and as applicable to this case, and all Rule references are to the Tax Court Rules of Practice and Procedure unless otherwise indicated.
The case presents two questions:
(1) Whether a "Bonded Promissory Note" in the face amount of $5 million (the note) that petitioner submitted to the Internal Revenue Service (IRS) constitutes payment of the liabilities; and
(2) whether we should impose an additional penalty on petitioner pursuant to section 6673 for instituting this proceeding primarily for delay or advancing a position that is frivolous or groundless.
FINDINGS OF FACT 1
When she filed the petition, petitioner resided in Utah.
Respondent notified petitioner of his intent to collect petitioner's liabilities by levy, and, in response thereto, petitioner requested a pre-levy hearing with Appeals under section 6330.
During that hearing, petitioner argued that she had paid the liabilities by means of the note, which she had sent to the IRS. Respondent's Appeals Office (Appeals) team manager Sharon Patterson (Ms. Patterson) rejected petitioner's claim that the liabilities had been paid, and the determinations, signed by Ms. Patterson, followed.
Petitioner timely filed the petition, assigning error to the determinations primarily on the ground that "Payment for all liabilities alleged by IRS for LISA S GOFF, TIN * * * was tendered by Harvey Douglas Goff, Jr., hereinafter, `Undersigned' on or about January 17, 2008." Petitioner added:
Petitioner also assigned error on the ground that "The proposed levy, would trespass on a bona fide lien held by the Undersigned and thereby cause irreparable injury to the Undersigned."
The "Undersigned" referred to is petitioner's husband, Harvey D. Goff, Jr. (Mr. Goff). Both he and petitioner signed a document prepared by Mr. Goff, attached to the petition,
The note tendered in alleged payment of petitioner's liabilities contains in part the following:
BONDED PROMISSORY NOTE
Registered via Utah Department of Commerce, Division of Corporations and UCC File No. * * * USPS CERTIFIED MAIL TRACKING NO. * * *
— $5,000,000.00 —
Five Million and 00/100 United States Dollars
At the bottom of the note, the names and addresses of five individuals were listed, presumably to show the person who
Along with the note, petitioner sent processing instructions to the IRS on how the note was to be posted as payment of petitioner's liabilities. The note and processing instructions purported to place a legal duty on the IRS to apply up to $5 million toward the liabilities. The IRS ignored the note and processing instructions and did not on account thereof apply any amount in payment of petitioner's liabilities.
After filing the petition, petitioner attended a conference with respondent's counsel, who warned her that her position was frivolous.
Our notice setting this case for trial informed petitioner that, if the case could not be settled, then "the parties, before trial, must agree in writing to all facts and all documents about which there should be no disagreement." Our accompanying standing pretrial order required the parties to prepare and submit pretrial memoranda, setting forth basic information about the case.
Petitioner both refused to enter into a stipulation of facts and failed to submit a pretrial memorandum.
As discussed supra note 1, at the conclusion of the trial, we set a briefing schedule and directed the parties to submit briefs. When petitioner did not submit an opening brief on schedule, we extended the time for her to comply. In reply, we received documents from Mr. Goff, which we filed as petitioner's opening brief. Those documents in no way comply with Rule 151(e), addressing the form and content of briefs. In part, one of those documents states as follows:
I. Review of the Determinations
Section 6330(a) provides taxpayers with the opportunity to request an administrative review of the Commissioner's decision to take administrative action to collect by levy any tax owing. Appeals conducts that review, sec. 6330(b)(1), and, as stated, we review respondent's determinations under section 6330(d)(1). On the facts before us, we review those determinations de novo. See Boyd v. Commissioner, 117 T.C. 127, 131 (2001); Landry v. Commissioner, 116 T.C. 60, 62 (2001).
Respondent may proceed by levy to collect petitioner's liabilities. Simply put, neither the note nor anything in connection with the note constitutes payment of petitioner's liabilities. The United States Code provides that "coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues." 31 U.S.C. sec. 5103 (2006). Section 6311 addresses alternative methods of payment and authorizes the Secretary to receive for taxes any commercially acceptable means that he deems appropriate as prescribed by regulations. Sec. 6311(a), (d). No regulation issued by the Secretary allows private bonds or notes such as the note to be considered payment by commercially acceptable means. Other types of payment are not acceptable; e.g., the Commissioner has refused to accept real property in payment for tax liabilities. Rev. Rul. 76-350, 1976-2 C.B. 396. Similarly, the Commissioner is not obligated to accept an individual's personal property in satisfaction of her tax liabilities. E.g., Calafut v. Commissioner, 277 F.Supp. 266, 267 (M.D. Pa. 1967).
At the conclusion of the trial, the Court asked petitioner to provide the Court with any argument as to why the note discharged her obligation to pay the liabilities. Petitioner
II. Section 6673(a)(1) Penalty
Under section 6673(a)(1), this Court may require a taxpayer to pay a penalty not in excess of $25,000 if (1) the taxpayer has instituted or maintained a proceeding primarily for delay, or (2) the taxpayer's position is "frivolous or groundless". A taxpayer's position is frivolous if it is contrary to established law and unsupported by a reasoned, colorable argument for change in the law. E.g., Nis Family Trust v. Commissioner, 115 T.C. 523, 544 (2000). There is no support for petitioner's claim that the note discharged her obligation to pay the liabilities, and she has made no argument beyond her claim that the Government did not return the note or point out its defects. Moreover, she refused to enter into a stipulation of facts and disobeyed our order to submit a pretrial memorandum. She did not comply with the briefing schedule we set. When, in response to our order extending her time to file a brief, we received documents from her husband, they contained a ridiculous demand for money and a nonsensical claim that the Court is a for-profit corporation. Petitioner's principal position in this case is so weak as to be groundless, and her argument in support of that position is frivolous. Indeed, we can see no reason for this case other than delaying respondent's collection of tax liabilities and penalties for the 11 years in issue. Respondent's counsel warned petitioner that her position was frivolous. Petitioner has wasted both the Court's and respondent's limited resources and deserves a significant penalty. We shall, therefore,
An appropriate order and decision will be entered.