Rader v. Commissioner
143 T.C. No. 19
Tax Ct.2014Background
- Petitioners Vivian L. Rader and Steven R. Rader failed to file 2003-06 and 2008 federal returns.
- IRS used bank deposits and information returns to reconstruct petitioners' income for the years in issue.
- Respondent prepared SFRs under 6020(b) and later amended answers to change filing status to married filing separately for 2003-06.
- Trial lawfully attributed all deficiencies and penalties to Mr. Rader; Mrs. Rader's liabilities were conceded moot for the issues here.
- Two 2006 real property sales triggered 10% withholding under §1445(a); withholding was treated as a §33 credit, not a §31 withholding credit.
- Court sanctioned petitioners under §6673(a)(1) for frivolous position and delay tactics; otherwise, SFRs were held valid and deficiencies sustained.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the §6020(b) SFRs valid? | Rader argues SFRs are insufficient to compute tax. | Rader contends SFRs under §6020(b) are valid and properly reflect income. | SFRs valid under §6020(b). |
| Must the 2006 withholding offset the deficiency attributable to 2006? | Rader seeks offset for §1445 withholding against 2006 liability. | Withholding credit under §1445 is not a factor in determining the deficiency; §33 credit applies. | Withholding credits are not used to reduce the 2006 deficiency; §33 credit applies and is disregarded in deficiency. |
| Do petitioners' Fifth Amendment objections defeat the notices? | Rader asserts Fifth Amendment privilege due to perceived CID involvement. | No real danger of prosecution; privilege not applicable in civil tax audit. | Fifth Amendment claim rejected; statements were admissible. |
| Are the §6651(a)(1), §6651(a)(2), and §6654 additions proper? | SFRs and notices do not constitute proper bases for additions. | Respondent satisfied burden; no reasonable-cause showing; penalties upheld with some adjustments. | Additions sustained; but §6651(a)(2) overstated for 2003-06 and reduced accordingly. |
| May the court impose §6673(a)(1) on petitioners? | Not argued in favor of sanctions. | Petitioners pursued frivolous, delay-fomenting arguments. | Penalty under §6673(a)(1) of $10,000 affirmed. |
Key Cases Cited
- Gleason v. Commissioner, 2011 WL 2600917 (T.C. Memo. 2011-154) (validity of §6020(b) SFRs without a Form 1040)
- Spurlock v. Commissioner, 2003 WL 1987156 (T.C. Memo. 2003-124) (SFRs under §6020(b) sufficient to constitute returns)
- Millsap v. Commissioner, 91 T.C. 926 (1988) (binding election of MFJ vs MFS after §6013 eligibility limits)
- Smalldridge v. Commissioner, 804 F.2d 125 (10th Cir. 1986) (when MFJ election bound by circuit precedent)
- Lundy v. Commissioner, 516 U.S. 235 (Supreme Court 1996) (two-year lookback rule for refunds on deficiency actions)
- Nix v. Commissioner, 553 F. App’x 960 (11th Cir. 2014) (T.C. Memo. 2012-304 affirmed SFR validity and related reasoning)
- Holloway v. Commissioner, 2012 WL 1727685 (T.C. Memo. 2012-137) (SFRs do not require Form 1040 attachments to be valid returns)
- Edelson v. Commissioner, 829 F.2d 828 (9th Cir. 1987) (Fifth Amendment considerations in tax proceedings)