Opinion
6546-19S
07-08-2021
Dustin S. Whitfield, Petitioner v. Commissioner of Internal Revenue, Respondent
ORDER OF DISMISSAL AND DECISION
Joseph H. Gale Judge
This case was calendared for a remote trial at the Nashville, Tennessee trial session commencing March 22, 2021. On March 1, 2021, respondent filed a Motion to Dismiss for Lack of Prosecution (Motion to Dismiss), wherein he requests that this case be dismissed for lack of prosecution and that a decision be entered sustaining the deficiency and a penalty under section 6662(a) for petitioner's 2017 taxable year, as determined in the notice of deficiency.
Section references are to the Internal Revenue Code of 1986, as amended and in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure.
By Order and Order to Show Cause served March 5, 2021, the Court (1) calendared respondent's Motion to Dismiss for hearing at the calendar call of the aforementioned trial session and (2) directed petitioner to file, on or before March 17, 2021, a response in writing, showing cause why respondent's Motion to Dismiss should not be granted and this case should not be dismissed for failure to properly prosecute. The Order warned petitioner that failure to respond or failure to appear at the remote hearing on March 22, 2021, could result in dismissal of the case and entry of decision against him. The copy of the Order mailed to petitioner at the address listed in the Petition was not returned. When this case was called from the calendar on March 22, 2021, there was no appearance by or on behalf of petitioner, and, to date, he has not responded to the Order to Show Cause.
A Notice Setting Case for Trial (Trial Notice), setting a trial date in this case for March 22, 2021, was mailed on November 10, 2020, to petitioner at the address listed in the Petition. The Trial Notice warned: "Your failure to appear may result in dismissal of the case and entry of decision against you."
A Standing Pretrial Order was attached to the Trial Notice. The Standing Pretrial Order directed petitioner, among other things: (1) to communicate and cooperate with respondent's counsel regarding settlement or, if the case could not be settled, the preparation of a stipulation of facts; (2) to file, jointly with respondent, a status report concerning a basis of settlement or other reason a trial would not be necessary, or separately, a pretrial memorandum or motion to dismiss, no later than March 1, 2021; (3) to file, jointly with respondent, the stipulation of facts together with all stipulated documents, and separately, all documents and materials that he expected to use at trial that were not in the stipulation of facts, no later than March 8, 2021; and (4) to be present on the trial date and prepared to try the case. The Standing Pretrial Order warned: "If you have not yet settled your case and you do not participate in conference calls and pretrial conferences, or appear at trial, the Judge may dismiss your case and enter a decision against you. The Judge may also dismiss your case and enter a decision against you if you do not follow this or other Court Orders." The copies of the Trial Notice and Standing Pretrial Order mailed to petitioner at the address listed in the Petition were not returned.
During the period after this case was set for trial, respondent's counsel made multiple attempts to contact petitioner by letter and by telephone in order to attempt to resolve this case or prepare it for trial. However, petitioner has not responded to respondent's counsel's repeated attempts at communication. Consequently, the parties have not filed a status report or a stipulation of facts. Nor has petitioner filed a pretrial memorandum or motion to dismiss, or any proposed trial exhibits.
Respondent's specific allegations concerning petitioner's failure to cooperate are detailed in the Motion to Dismiss, which petitioner had an opportunity to dispute by filing a response to the Court's Order to Show Cause or by appearing at the hearing on the Motion to Dismiss. Given petitioner's failure to dispute respondent's allegations, and the absence of any contrary evidence, we treat them as established for purposes of the Motion to Dismiss.
The Court may dismiss a case at any time and enter a decision against the taxpayer for failure properly to prosecute his case, failure to comply with the Rules of this Court or any order of the Court, or for any cause which the Court deems sufficient. Rule 123(b); Stearman v. Commissioner, 436 F.3d 533, 535-537 (5th Cir. 2006), aff'g T.C. Memo. 2005-39; Bauer v. Commissioner, 97 F.3d 45, 48-49 (4th Cir. 1996); Edelson v. Commissioner, 829 F.2d 828, 831 (9th Cir. 1987), aff'g T.C. Memo. 1986-223. In addition, the Court may dismiss a case for failure to properly prosecute if the taxpayer inexcusably fails to appear for trial and does not otherwise participate in the resolution of his claim. Rule 149(a); Tello v. Commissioner, 410 F.3d 743, 744 (5th Cir. 2005); Rollercade, Inc. v. Commissioner, 97 T.C. 113, 116-117 (1991).
Petitioner has failed to properly prosecute this case. Petitioner did not appear for trial on March 22, 2021, despite being warned by the Trial Notice and Standing Pretrial Order that failure to appear could result in dismissal of the case and entry of a decision against him. Moreover, petitioner has failed to cooperate with respondent's counsel to prepare for trial or otherwise resolve this case as directed in the Standing Pretrial Order. Furthermore, petitioner has failed to make any required filing under the Standing Pretrial Order. Finally, petitioner has failed to comply with the Court's Order to Show Cause directing him to file a response to respondent's Motion to Dismiss, despite being warned that a failure to respond could result in a dismissal of the case and entry of a decision against him.
Petitioner's failure to appear for trial and failure to comply with the terms of the Standing Pretrial Order requiring adequate pretrial preparation have prejudiced respondent by causing him to expend resources that could have been expended elsewhere. See Jarvis v. Commissioner, 735 Fed.Appx. 21 (Mem), 22 (2d Cir. 2018); Tebedo v. Commissioner, 676 Fed.Appx. 750, 752 (10th Cir. 2017); cf. Pickett v. Commissioner, 240 Fed.Appx. 883, 884 (2d Cir. 2007) (finding the Commissioner prejudiced where taxpayers refused to appear for trial, thereby forcing "the agency to waste its resources in pointless litigation, thus diverting its ability to collect taxes elsewhere"). Moreover, petitioner's failure to appear for trial and failure to comply with the Standing Pretrial Order have hindered the Court's management of its docket. See Tebedo v. Commissioner, 676 Fed.Appx. at 752 (finding taxpayer's "interference with the judicial process" was "obvious" where "he failed to comply with any of the court's orders, and decided not to appear for trial with no advance notice to the court"); Franklin v. Commissioner, 297 Fed.Appx. 307, 309-310 (5th Cir. 2008) (finding "a clear record of * * * delay and contumacious conduct" where taxpayer failed to appear for trial, failed to cooperate with the Commissioner, failed to comply with a court order, and failed to file a pretrial memorandum as directed by the standing pretrial order). None of petitioner's failures are excused.
We have balanced petitioner's interest in being heard, which has been diminished by his failure to meaningfully participate in these proceedings, against the Court's responsibility to manage its docket, and we have concluded that dismissal is warranted. See Jarvis v. Commissioner, 735 Fed.Appx. at 22; cf. Harris v. Commissioner, 748 Fed.Appx. 387, 389 (2d Cir. 2018); Pickett v. Commissioner, 240 Fed.Appx. at 884. We have also considered the efficacy of lesser sanctions and concluded that such sanctions would be futile in view of petitioner's previous disregard of the Court's warnings. See Tebedo v. Commissioner, 676 Fed.Appx. at 752 (finding that where taxpayer "consistently failed to obey the court's orders, there * * * [was] no reason to think a lesser sanction would have been effective"); Franklin v. Commissioner, 297 Fed.Appx. at 309 ("Lesser sanctions are futile when, despite a judge's explicit warnings, a plaintiff neither cooperates nor appears at trial.").
Accordingly, we conclude that it is appropriate to dismiss petitioner's case for failure to properly prosecute. See Tebedo v. Commissioner, 676 Fed.Appx. at 752 (affirming dismissal for failure to prosecute where taxpayer failed to comply with Court orders and failed to appear for trial); Zubasic v. Commissioner, 671 Fed.Appx. 31 (Mem), 32 (3d Cir. 2016) (affirming dismissal for failure to prosecute where taxpayers failed to cooperate with the Commissioner, failed to submit a pretrial memorandum, and failed to appear for trial); Roulett v. Commissioner, 534 Fed.Appx. 915, 916 (11th Cir. 2013) (affirming dismissal for failure to prosecute where taxpayers failed to appear for trial and failed to file a pretrial memorandum); De Haas v. Commissioner, 418 Fed.Appx. 637 (9th Cir. 2011) (affirming dismissal for failure to prosecute where taxpayer failed to appear for trial), aff'g T.C. Memo. 2009-25; Klootwyk v. Commissioner, 418 Fed.Appx. 635 (9th Cir. 2011) (same), aff'g T.C. Memo. 2008-214; Fisher v. Commissioner, 375 Fed.Appx. 603, 603-604 (7th Cir. 2010) (affirming dismissal for failure to prosecute where taxpayer failed to comply with Court orders and failed to appear for trial); Taylor v. Commissioner, 271 Fed.Appx. 414, 416 (5th Cir. 2008) (affirming dismissal for failure to prosecute where taxpayers failed to appear for trial); Taylor v. Commissioner, 29 Fed.Appx. 19, 21-22 (2d Cir. 2001) (affirming dismissal for failure to prosecute where taxpayer failed to cooperate with the Commissioner, failed to respond to numerous inquiries from the Court, and failed to appear for trial); Duran v. Commissioner, 12 Fed.Appx. 588, 589 (9th Cir. 2001) (affirming dismissal for failure to prosecute where taxpayers failed to appear for trial).
In the notice of deficiency respondent determined a deficiency of $7, 444 in petitioner's 2017 Federal income tax. Respondent further determined therein that petitioner failed to report wage income of $172 from Greystone Woods LLC. The Commissioner's determinations in a notice of deficiency are generally entitled to a presumption of correctness. See Rule 142(a). But if a taxpayer disputes a deficiency determination that is based on unreported income, the presumption of correctness does not apply unless the Commissioner can establish at least a "minimal" factual predicate or evidentiary foundation connecting the taxpayer to an income-generating activity or to the receipt of funds. See United States v. Walton, 909 F.2d 915, 918-919 (6th Cir. 1990) (citing Weimerskirch v. Commissioner, 596 F.2d 358, 361-362 (9th Cir. 1979), rev'g 67 T.C. 672 (1977)); Richardson v. Commissioner, T.C. Memo. 2006-69, 2006 WL 931912, at *14, aff'd, 509 F.3d 736 (6th Cir. 2007). Here, although petitioner has specifically disputed other adjustments in the notice of deficiency (such as respondent's disallowance of petitioner's claimed additional child tax credit under section 24(d) and partial disallowance of petitioner's claimed earned income tax credit under section 32(a)), he has not assigned error in the Petition to respondent's determination that he failed to report the $172 of wage income. We therefore deem petitioner to have conceded that he received such income. See Rule 34(b)(4).
A partial copy of the notice of deficiency was attached to the Petition. A complete copy was included in respondent's proposed trial exhibits filed March 8, 2021.
Moreover, a notice of deficiency alone may satisfy the Commissioner's evidentiary burden if it indicates that a third party has paid the taxpayer the amount in question and reported the payment to the Commissioner. See Banister v. Commissioner, T.C. Memo. 2008-201, 2008 WL 3925877, at *2, aff'd, 418 Fed.Appx. 637 (9th Cir. 2011). The notice of deficiency in this case identifies the name of a third-party payor that evidently reported the payment to the Commissioner. The Commissioner's burden of production with respect to the $172 payment therefore would be satisfied even if the Petition could be construed to dispute the unreported income determination. The presumption of correctness thus attaches to the notice of deficiency.
All of the material allegations set forth in the Petition in support of the assignments of error have been denied in respondent's Answer. Petitioner has not claimed or shown entitlement to any shift in the burden of proof under section 7491(a). See sec. 7491(a)(2)(B). Accordingly, the burden of proof rests with petitioner concerning any error in the deficiency determination. As petitioner adduced no evidence in support of the assignments of error in the Petition, he has failed to satisfy his burden of proof. We thus sustain the deficiency in full.
In the notice of deficiency respondent also determined that petitioner is liable for an unspecified accuracy-related penalty under section 6662(a) in the amount of $98.20. Section 6662(a) imposes a penalty equal to 20% of any underpayment of tax attributable to one or more of a variety of reasons, such as negligence or a substantial understatement of income tax. See sec. 6662(a) and (b). Generally, the deficiency, understatement of tax, and underpayment of tax for a taxable year are all computed in the same manner, see secs. 6211(a), 6662(d)(2), 6664(a), although the deficiency and underpayment may be greater than the understatement where, as here, respondent has disallowed refundable credits, see Galloway v. Commissioner, 149 T.C. 407, 414 n.3 (2017) (noting the similarity between the definitions of "deficiency" in section 6211(a) and "underpayment" in section 6664(a) following an amendment to section 6664(a) made by the Consolidated Appropriations Act, 2016, Pub. L. No. 114-113, div. Q, Protecting Americans from Tax Hikes Act of 2015, sec. 209(a), 129 Stat. at 3084); Gassoway v. Commissioner, T.C. Memo. 2015-203, at *13-*16 (describing differing definitions of "deficiency" in section 6211(a) and "understatement" in section 6662(d)(2)). For purposes of deciding respondent's Motion to Dismiss, it is sufficient to note that respondent determined that petitioner's underpayment of tax for 2017 is $491.
The Commissioner generally bears the burden of production with respect to a penalty where the taxpayer has contested it in his petition. See sec. 7491(c); Funk v. Commissioner, 123 T.C. 213, 216-218 (2004); Swain v. Commissioner, 118 T.C. 358, 363-365 (2002). While the Petition in this case does not explicitly assign error to respondent's penalty determination, it does assign error to other adjustments in the notice of deficiency (including respondent's disallowance of relatively large refundable credits), and it further alleges that petitioner should have no tax liability for the year at issue. A petition prepared without the assistance of counsel, as in this case, should be liberally construed. See Gray v. Commissioner, 138 T.C. 295, 298 (2012). As noted above, section 6662(a) imposes a penalty only in cases involving an underpayment of tax. Petitioner thus could not be liable for such a penalty if he were to prevail on his claim that, after correction of the disputed adjustments in the notice of deficiency, he would have no tax liability for the year at issue. Accordingly, in view of petitioner's pro se status, we conclude that the Petition adequately assigns error to the penalty determination. We therefore must determine whether respondent has satisfied his burden of production with respect thereto.
To satisfy his burden of production, the Commissioner must offer sufficient evidence to indicate that it is appropriate to impose the penalty. Higbee v. Commissioner, 116 T.C. 438, 446 (2001). The Commissioner's burden of production includes showing compliance with the supervisory approval requirement of section 6751(b). See Graev v. Commissioner, 149 T.C. 485, 492-493 (2017), supplementing and overruling in part 147 T.C. 460 (2016); see also Chai v. Commissioner, 851 F.3d 190, 221 (2d Cir. 2017), aff'g in part, rev'g in part T.C. Memo. 2015-42. Under section 6751(b)(1), the "initial determination" of a penalty must be "personally approved (in writing) by the immediate supervisor of the individual making such determination" or by a designated higher ranking official. See Chai v. Commissioner, 851 F.3d at 220-221; Graev v. Commissioner, 149 T.C. at 487. Section 6662 provides for several distinct penalties, and each specific penalty determined thereunder must be approved by a supervisor. See Palmolive Bldg. Inv'rs, LLC v. Commissioner, 152 T.C. 75, 87 (2019). Here, respondent has proffered no evidence that the unspecified section 6662(a) penalty was properly approved by a supervisor. Nor does respondent contend that the penalty was exempt from the supervisory approval requirement. Cf. Walquist v. Commissioner, 152 T.C. 61, 70 (2019) (holding that under section 6751(b)(2)(B), supervisory approval was not required for a section 6662(b)(2) substantial understatement penalty automatically calculated through the Correspondence Examination Automated Support program). We thus conclude that respondent has failed to satisfy his burden of production, and we will not sustain the section 6662(a) penalty determined in the notice of deficiency.
We note that the notice of deficiency in this case includes a cover letter (Letter 3219) signed by Charlotte Kieliszek, whose title is given as "Dir., Refundable Credits Exam OP", and a Form 4549, Income Tax Examination Changes, with the name "Ms. Wilson" typed in the space for the examiner's signature. While a supervisor's signature on a cover letter may, in certain circumstances, satisfy the supervisory approval requirement, see, e.g., Kramer v. Commissioner, T.C. Memo. 2021-16, at *16-*20, there is no evidence here concerning the supervisory relationship, if any, between Ms. Kieliszek and Ms. Wilson.
The foregoing considered, it is
ORDERED that the Court's Order to Show Cause served March 5, 2021, is hereby made absolute. It is further
ORDERED that respondent's Motion to Dismiss for Lack of Prosecution, filed March 1, 2021, is granted, in that this case is hereby dismissed for failure to properly prosecute. It is further
ORDERED and DECIDED that there is a deficiency in petitioner's 2017 Federal income tax due in the amount of $7, 444; and there is no penalty due from petitioner for the taxable year 2017 under the provisions of I.R.C. section 6662(a).