I haven’t blogged about a tax protester case at the Tax Court in some time. But one was decided today that had several humorous elements—more than enough to make it ripe for reporting.
Chester Davis didn’t file a 2001 tax return. In 2005, he received a notice of a lien from the IRS (based on having income in 2001 but not paying tax). He filed an abuse of discretion petition with the Tax Court. Both sides asked for summary judgment.
Mr. Davis hired a representative, Jeffrey Hubacek, who had been permanently barred from dealing with the IRS. So the IRS wouldn’t talk with Mr. Hubacek. “…[I]t was not an abuse of discretion to exclude Mr. Hubacek from representing petitioner….” Strike one.
So what about his arguments? Well, “[T]he record indicates that the only issues petitioner raised throughout the section 6320 administrative process and in his petition to this Court were frivolous and/or tax protester type arguments. We do not address petitioner’s frivolous arguments with somber reasoning and copious citations of precedent, as to do so might suggest that these arguments possess some degree of colorable merit.” Strike two.
What about the tax liability underlying the case? Well, Mr. Davis never filed a return; he wasn’t entitled to contest the liability, and “…he presented nothing more than an income tax return with a zero in each pertinent box.” That’s three strikes, and Mr. Davis was out. But he did get one of his wishes granted: summary judgment. Except it was summary judgment for the IRS and against Mr. Davis.
But the Court wasn’t done. “Respondent has requested that the Court impose a penalty under section 6673 on the ground that the arguments advanced by petitioner to respondent and the Court are frivolous.” Yes, if you file a frivolous case in Tax Court, you can be penalized. The Court found Mr. Davis’ case thoroughly frivolous, and so he found himself owing an additional $2,000 for the frivolity. And that might not be the last time we see Mr. Davis’ name mentioned as there are two other cases working there way through Tax Court brought by Mr. Davis; he was warned (in a footnote) to not be frivolous. Under section 6673 the Court could have penalized Mr. Davis up to $25,000. I expect that if there’s a recurrence he’ll see a five-digit fine.
So be careful what you ask for as you might just get your wish.