Opinion
6634-20
11-08-2021
Jamie Michelle Gammel & Celeste Colleen Gammel, Petitioners v. Commissioner of Internal Revenue, Respondent
ORDER
Alina I. Marshall Judge
This case was previously calendared for a remote trial at the session of the Court scheduled to commence on June 14, 2021, for cases in which Denver, Colorado, was the place of trial. The Court's standing pretrial order, issued February 11, 2021, notified petitioners that their pretrial memorandum must be filed by 21 days before the first day of the trial session (i.e., May 24, 2021) and that the parties shall file a stipulation of facts and any unagreed exhibits no later than 14 days before the first day of the trial session (i.e., May 31, 2021). Petitioners did not file any such documents with the Court.
On April 9, 2021, the Court issued an order requiring the parties to file a joint status report providing the parties' respective current contact information by May 14, 2021. Petitioners did not file any such status report with the Court. On May 14, 2021, respondent filed a status report stating therein that respondent "attempted to contact petitioners by letter, telephone, and email" and that "petitioners have not responded."
On May 21, 2021, respondent filed a motion to dismiss for lack of prosecution (respondent's motion). On May 28, 2021, the Court issued an order setting respondent's motion for hearing on June 14, 2021, and directing petitioners to file, on or before June 7, 2021, a response to respondent's motion. Petitioners did not file any such response with the Court. Instead of a response to respondent's motion as ordered by the Court, petitioners filed a motion for continuance on June 8, 2021.
On June 11, 2021, the Court conducted a conference call with the parties. During that call, petitioners requested that this case be continued, to which respondent objected. After some discussion, the Court reluctantly agreed to continue this case, and directed petitioners to communicate with respondent's counsel and to file a status report by August 10, 2021.
To implement the decisions articulated during the June 11, 2021 conference call, the Court issued an order on June 14, 2021. The Court's order denied respondent's motion without prejudice, continued the case, and the undersigned retained jurisdiction. The Court stated in its June 14, 2021 order that "the Court reluctantly agreed to continue this case, directed petitioners to communicate with respondent's counsel, and asked the parties to file a status report representing their views on calendaring this case for trial on the Court's remote trial session commencing October 18, 2021." The order further stated that "on or before August 10, 2021, the parties shall file a joint status report reflecting the then-present status of this case, including petitioners' communications with respondent's counsel and the parties' efforts to resolve this case or to prepare this case for trial."
On August 6, 2021, respondent filed a status report. In that report, respondent emphasized petitioners' continued lack of prosecution of their case. Furthermore, respondent stated that "he does not believe calendaring this case on * * * [the Court's October 18, 2021] session is appropriate given petitioners' complete lack of effort to resolve their case." Petitioners did not file any such status report as directed by the Court on the June 11, 2021 conference call and in the June 14, 2021 order.
On August 18, 2021, the Court issued an order directing that the parties may file any appropriate dispositive motion(s) and shall file a joint status report by September 13, 2021. In that order, the Court warned that "petitioners' failure to respond to the Court's June 14, 2021 order and continued lack of communication with respondent are unacceptable" and that "continued failure to prosecute their case may be deemed consent to the relief sought in any appropriate dispositive motion filed by respondent." Neither party filed any such status report with the Court. On September 13, 2021, respondent timely filed a motion to dismiss for lack of prosecution (respondent's motion to dismiss). Respondent's motion to dismiss details petitioners' ongoing lack of effort in prosecuting their case and states that "[n]o evidence has been adduced in support of the assignments of error raised in the petition." On September 14, 2021, petitioners filed an untimely motion to dismiss, requesting therein that the Court dismiss the case for lack of jurisdiction, because "there is not a deficiency for [the] 2017 taxes", and "due to statute of limitations."
On September 24, 2021, the Court issued an order directing petitioners to file a response to respondent's motion to dismiss and directing respondent to file a response to petitioners' motion to dismiss, each by October 8, 2021. On October 8, 2021, respondent filed a response to petitioners' motion to dismiss. Petitioners did not file any such response. Petitioners again are declining to explain their ongoing failure to properly prosecute their case, and petitioners have again failed to comply with the Court's Rules and orders. Rule 123(b).
All Rule references are to the Tax Court Rules of Practice and Procedure, unless otherwise indicated, and all section references are to the Internal Revenue Code in effect at all relevant times.
I. Petitioners' Request for Dismissal for Lack of Jurisdiction
Petitioners make an unsupported, unexplained statement that the Court lacks jurisdiction with respect to this case. The Court's jurisdiction in a deficiency case is predicated on the Commissioner's issuing a valid notice of deficiency and the taxpayer's timely filing a petition with the Court to challenge the notice. Secs. 6212, 6213, and 7442; Rules 13 and 20; see, e.g., Midland Mortg. Co. v. Commissioner, 73 T.C. 902, 907 (1980). Petitioners do not appear to challenge the validity of the notice of deficiency nor the timeliness of their petition, and the Court sees no basis on which they could do so. The Court will deny petitioners' motion to dismiss.
II. Petitioners' Argument Regarding the Merits of the Case
Petitioners state that "there is not a deficiency for [the] 2017 taxes". The Court interprets this statement as an argument that petitioners should prevail on the merits. In the petition, petitioners disputed the deficiency determined by respondent for the 2017 tax year in the amount of $5,975 and an accuracy-related penalty under section 6662(a) in the amount of $1,195. Specifically, petitioners disputed disallowed Schedule A deductions of $26,085 and charitable contribution deductions of $3,626. Those deductions cannot be allowed without petitioners providing evidence. See sec. 6001; sec. 1.6001-1(a), Income Tax Regs; Hradesky v. Commissioner, 65 T.C. 87 (1975), aff'd. per curiam 540 F.2d 821 (5th Cir. 1976). Petitioners represented in their petition that they have substantiation documents for their deductions, but no such documents or other evidence has been presented to the Court. The Court has no basis on which to conclude that petitioners should prevail on the merits.
If the Court were to interpret petitioners' motion to dismiss as a request to withdraw their petition or dismiss their case, we would again deny their motion. In a deficiency case, once a taxpayer has filed a petition with the Court, the taxpayer cannot withdraw that petition. See Estate of Ming v. Commissioner, 62 T.C. 519 (1974). When the Court dismisses a deficiency case for a reason other than for lack of jurisdiction, we are generally required by section 7459(d) to enter a decision for respondent for the amount of tax determined against the taxpayer in the notice of deficiency. Settles v. Commissioner, 138 T.C. 372, 374 (2012); Estate of Ming v. Commissioner, 62 T.C. at 522. Rule 123(d) requires that a decision entered pursuant to a dismissal on a ground other than lack of jurisdiction operates as an adjudication on the merits of the taxpayer's case. Accordingly, we conclude that petitioners' motion to dismiss on the merits of the case was submitted improvidently.
III. Petitioners' Argument Regarding the Statute of Limitations
Petitioners also move to dismiss the case "due to statute of limitations." Petitioners argue that we lack jurisdiction over the 2017 tax year because the period for assessing and collecting tax under section 6501 has expired. Generally, section 6501(a) requires that the Commissioner assess tax within three years after the taxpayer filed his or her return. This three-year period begins on the due date of the return if it is timely filed, or on the actual filing date if the return is filed late. See sec. 6501(a), (b)(1). Section 6503(a)(1) provides, however, that the mailing of a notice of deficiency tolls the running of the period of limitations on assessment or collection of any deficiency. If a petition is timely filed with the Court, the Commissioner is generally barred from making any assessment or collection of the deficiency until the decision of the Court has become final and for 60 days thereafter. Sec. 6503(a)(1).
Petitioners state in their motion to dismiss that they timely filed Form 1040, U.S. Individual Income Tax Return, for the 2017 tax year on April 8, 2018. The notice of deficiency upon which this case is based was mailed on March 2, 2020. Because the Commissioner mailed the notice of deficiency before the expiration of the relevant three-year period and because petitioners timely filed a petition with the Court, the three-year period for assessing and collecting tax under section 6501 is tolled. Accordingly, we conclude that the period for assessing and collecting tax under section 6501 has not expired.
IV. Respondent's Motion to Dismiss for Lack of Prosecution
Respondent filed a motion to dismiss for a second time on September 13, 2021. Respondent requests that the Court enter a decision that petitioners have a deficiency in the amount of $5,975 with respect to the 2017 tax year. Respondent concedes the accuracy-related penalty under section 6662(a). In support of the motion to dismiss, respondent recites respondent's counsel's efforts to communicate with petitioners and petitioners' ongoing failures to respond, as directed, to the Court's orders.
Petitioners failed to comply with the Court's September 24, 2021 order directing them to respond to respondent's motion to dismiss filed September 13, 2021, just as they had done with respect to Court's order addressing respondent's motion initially filed. Petitioners declined to produce documentation to respondent, declined to respond to respondent's motion, and instead made cursory, unsupported arguments about the Court's jurisdiction, reduction of their deficiency, and expiration of the period of limitations.
The Court may, under Rule 123(b), dismiss a case for failure of a petitioner properly to prosecute or to comply with the Court's Rules and orders. Failure properly to prosecute includes a taxpayer's unexcused failure to participate in the resolution of his claim. Rule 149(a); Rollercade, Inc. v. Commissioner, 97 T.C. 113, 116-117 (1991); Smith v. Commissioner, T.C. Memo. 2003-266, aff'd, sub nom Hook v. Commissioner, 103 Fed.Appx. 661 (10th Cir. 2004). Dismissal is appropriate where the taxpayer's failure to comply with the Court's Rules and orders is due to willfulness, bad faith, or fault. See Dusha v. Commissioner, 82 T.C. 592, 599 (1984).
Petitioners' noncompliance with Court orders and failure to address either of respondent's motions to dismiss for lack of prosecution are not excused, and appear to be willful and in bad faith. In order to allow them one last opportunity to cure their defaults and to have this case resolved on the merits, it is hereby
ORDERED that on or before November 23, 2021, petitioners shall file a response to respondent's motion to dismiss for lack of prosecution filed September 13, 2021. Any such response shall be timely filed and shall outline in detail: (1) petitioners' reasons for asserting that respondent's notice of deficiency is erroneous; (2) the evidence they would present at trial (if the Court were to deny respondent's motion to dismiss) to support their assertions that respondent's notice of deficiency is erroneous; (3) the efforts they have made to present documentation to respondent's counsel, prepare a stipulation of facts, or otherwise work to prepare their case for trial; (4) why their failures to respond to either of respondent's motions to dismiss for lack of prosecution and Court orders were not due to petitioners' negligence or disregard for the Court's Rules and orders; and (5) why respondent would not be prejudiced if the Court were to deny the motion to dismiss and set another date for trial. Any such writing shall include copies of all documents that petitioners contend support their position. It is further
ORDERED that petitioners' motion to dismiss, filed September 14, 2021, is denied.
Petitioners are hereby advised that their failure to comply with this order may be deemed abandonment of this case. Petitioners are cautioned that further efforts at delay may justify a penalty against them in an amount not to exceed $25,000 under section 6673(a). See Suri v. Commissioner, T.C. Memo. 2004-71, aff'd., appeal dismissed No. 04-4968-AG, 2005 WL 2650065 (2d Cir. 2005); Griest v. Commissioner, T.C. Memo. 1995-165 ($1,000 penalty imposed where taxpayer repeatedly failed to meet prior to trial and belatedly produced substantiating documentation).