Ulloa v. Comm'r
This text of 2010 T.C. Memo. 68 (Ulloa v. Comm'r) is published on Counsel Stack Legal Research, covering United States Tax Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
P received wages and other income in 2003-2006 from third-party payers who reported the income to the IRS. P filed untimely"zero returns", reporting no income and no tax liability. Pursuant to
MEMORANDUM OPINION
GUSTAFSON,
| Year | Deficiency | |||||||||||||||||||||||||||
| 2003 | $ 22,515 | $ 2,257.43 | $ 2,508.25 | $ 223.10 | ||||||||||||||||||||||||
| 2004 | 63,486 | 12,891.60 | 11,745.68 | 1,622.23 | ||||||||||||||||||||||||
| 2005 | 19,603 | 4,410.68 | 2,842.44 |
| Year | Deficiency | |||
| 2003 | $ 22,515 | $ 2,257.43 | $ 2,508.25 | $ 223.10 |
| 2004 | 63,486 | 12,891.60 | 11,745.68 | 1,622.23 |
| 2005 | 19,603 | 4,410.68 | 2,842.44 | 786.32 |
| 2006 | 28,217 | 4,490.55 | 1,696.43 | 901.06 |
Mr. Ulloa brings this case pursuant to
The following facts are based on Mr. Ulloa's pleadings and other filings in this case and on the assertions in respondent's motion papers that are supported in accordance with
In 2003 Mr. Ulloa received wages totaling $ 104,424 -- i.e., $ 99,224 from Candle Corporation and $ 5,200 from another payer named Richard Ulloa, perhaps a relative. From those wages only $ 12,482 had been withheld as Federal income tax. Federal Insurance Contributions Act tax (FICA tax) was also withheld from his wages, pursuant to
In 2004 Mr. Ulloa received wages totaling $ 131,449 -- i.e., $ 73,031 from Candle Corporation, $ 54,018 from IBM, and $ 4,400 from the other Richard Ulloa. From those wages only $ 6,190 had been withheld as Federal income tax. He had submitted to *70 IBM in 2004 a Form W-4, Employee's Withholding Allowance Certificate, reporting himself exempt from income tax withholding. This submission presumably accounts for the small amount of income tax withholding ($ 3,371) from his IBM wages. The record does not show his Form W-4 submission to Candle Corporation. FICA tax was also withheld from his wages. Mr. Ulloa also received in 2004 proceeds of $ 105,000 from the sale of real estate in Florida (as reported on Form 1099-S, Proceeds From Real Estate Transactions, by American United Title Company), interest income of $ 38, and qualified dividends of $ 11.
In 2005 Mr. Ulloa received wages totaling $ 97,680 -- i.e., $ 96,580 from IBM and $ 1,100 from the other Richard Ulloa. FICA tax was withheld from his wages, but zero Federal income tax was withheld. Mr. Ulloa submitted to IBM in November 2004 a Form W-4 reporting 20 allowances; 2*71 and that submission and his prior claim of being exempt from withholding apparently account for the non-withholding from his IBM wages. He also received in 2005 interest income of $ 70 and qualified dividends of $ 100.
In 2006 Mr. Ulloa received wages from IBM totaling $ 110,794. Beginning in July 2006, he submitted a series of Forms W-4 on which he first claimed 99 allowances, then claimed 4 allowances, then claimed 5 allowances, and then (in late November) claimed to be exempt from withholding. However, on August 31, 2006, the IRS instructed IBM to withhold tax on the basis of three allowances, and IBM informed Mr. Ulloa that a change to three allowances would be reflected in his pay statement of October 1, 2006. From his 2006 IBM wages, $ 8,259 was withheld as Federal income tax. FICA tax was also withheld from his wages. Mr. Ulloa also received in 2006 profits from the sale of securiti! es of $ 15,483, distributions from a partnership of $ 2,893, and interest income of $ 63.
Mr. Ulloa did not file a timely Federal income tax return for any of the years 2003 through 2006. It was not until February 2007 that Mr. Ulloa submitted to the *72 IRS purported returns for 2003 (on Form 1040X, Amended U.S. Individual Income Tax Return) and for 2004 and 2005 (on Form 1040, U.S. Individual Income Tax Return); and in June 2007 he submitted to the IRS a purported return for 2006 (on Form 1040). Each of the purported returns reported zero income and zero tax liability. Each of the purported returns claimed a refund resulting from "Excess social security * * * tax withheld", in an amount that was equal to or greater than the entire withholding of the "social security" portion of FICA tax (under
On the Form 1040X for 2003, Mr. Ulloa gave the following "Explanation of Changes to Income, Deductions, and Credits": Line 1. Original W-2 Forms attached to our submission of 2004[ 3] Form 1040 were in error. No Need I explain the changes that occur to Lines 3, 5, 6, and 10 through the application *73 of basic math and reading comprehension skills?
To each of the purported returns Mr. Ulloa attached one or two Forms 4852, Substitute for Form W-2, Wage and Tax Statement, on which he reported that he had received an "incorrect" Form W-2 from Candle Corporation in 2003, from IBM in 2005 and 2006, and from both payers in 2004. On the Forms 4852 he stated amounts of income tax, Social Security tax, and Medicare tax as having been withheld, and the amounts approximate those that the payers reported on Forms W-2. However, on the Forms 4852 Mr. Ulloa left blank lines 7a ("Wages, tips, and other compensation"), thus indicating his position that the correct wage *74 amounts were zero, rather than the substantial amounts that the payers had reported.
The IRS did not treat Mr. Ulloa's zero returns as proper tax returns. Rather, pursuant to
Mr. Ulloa timely filed petitions in this Court challenging the deficiencies and additions to tax for all four years: his petition for 2003, 2005, and 2006 in docket No. 2053-09 and his petition for 2004 in docket No. 4514-09. The Court consolidated the cases by order and served notice that the cases were scheduled to be tried at the session beginning January 11, 2010, in New York City.
On December 8, 2009, respondent filed in each case a motion for summary judgment and for imposition of a penalty under On December 8, 2009, respondent filed motions for summary judgment in each of the two consolidated cases. Without prejudging the motions, the Court advises petitioner Richard Enrique Ulloa that, if the motions are correct, it appears that Mr. Ulloa has made frivolous arguments in this case. The Court warns Mr. Ulloa that if this is correct, and if he persists in making frivolous arguments, then he will be liable for a penalty of up to $ 25,000 pursuant to In view of the foregoing, it is ORDERED that, no later than December 28, 2009 (which is also the due date for exchange of exhibits and submission of pretrial memoranda identifying witnesses), Mr. Ulloa shall file with the Court and serve on respondent a response to respondent's motions for summary judgment. It is further ORDERED that respondent's motions for summary judgment will be the subject of a hearing at the trial calendar to be called at the Court's session commencing January 11, 2010, in New York City, New York.
Mr. Ulloa filed an opposition and his own cross-motion for summary judgment in each case on December 31, 2009. *76 Each of his oppositions states, "I respectfully request the indulgence of this court as I am not schooled in law. This is provided by the precedent set by Haines vs. Kerner at Comes now Richard-Enrique Ulloa, Secured Party-Creditor, by special visitation and not appearing generally, before this court seeking a remedy in Admiralty as is provided by "The Saving to the Suitors Clause" at * * * * * * * * * [T]he Respondent has not proved that the Documents purporting to be w-2's have a valid payer, or were issued by a valid payer. * * * [S]ince the one and only issue that needed addressing was and is the purported w-2 documents and was NEVER RESPONDED to by the Respondent, therefore making my case that the purported W-2 are not valid documents, and therefore the Service cannot procedurally move into an Examination and issue a Deficiency. You cannot collect two hundred dollars without passing Go, or get to taxes, income and wages unless you address this, basic document issue, which thus *77 far, Respondent FAILED to address and has avoided.
With his motions Mr. Ulloa submitted papers showing that the entities that had paid him wages and other income amounts in the years at issue were authorized to do business in New York and California -- evidently making them, in his view, not "valid payers". His papers included his own affidavits, which state: 8. As a non-privileged private-sector[ 6] worker, I received NOTHING in the way of "wages," as defined at 9. I deny participating in any activity as an officer or employee of a corporation,[ 7*79 ] or a member or employee of a partnership, or as any other individual in an enterprise, who as such officer, employee, member, or other individual in an enterprise is under the duty to perform the act of filing tax returns. 10. I deny participating in any activity as an officer or employee of a corporation, or a member or employee of a partnership, or as any other individual in an enterprise, who as such officer, employee, member, or other individual in an enterprise that makes my [sic] liable for any tax on income. 11. I expressly reserve the
The Court and the parties held a telephone conference on January 5, 2010, and these cases were called from the calendar on January 11, 2010, at which time the Court heard argument on the parties' cross-motions for summary judgment. Respondent argued that Mr. Ulloa should be held liable for tax on his wages and other income reported to the IRS by the payers and liable also for the additions to tax. Mr. Ulloa argued: [I]f you go by the definition on So that's the only argument that I'm bringing into -- and they [i.e., the IRS] haven't proved otherwise that this section of code and that these companies are either an American vessel or American aircraft [or] even within the United States. They haven't defined what the United States means.
His reference to American vessels and aircraft relates to MR. ULLOA: Well, sub-section (a) is -- defines wages, sub-section(b) defines employment, sub-section (e)(2) defines the United States and section (f) defines an American employer. THE COURT: So (e)(2) is what you're relying on? MR. ULLOA: (e)(2) is the United States, right. THE COURT: Okay. It says, the term United States when used in a geographical * * * [sense], includes the Commonwealth of Puerto Rico, The Virgin Island, Guam, and American Samoa. MR. ULLOA: Exactly. * * * It includes that just those are considered the United States. THE COURT: So you say that the word "includes" there means includes only -- MR. ULLOA: Only those, right. THE COURT: All right. That is a frivolous position that's been rejected over and over by the courts. Do you have anything else you want to say? MR. ULLOA: Well, that is my argument and that's, as far as I'm concerned, if -- you know, we had a conversation, a pre-trial conversation [on January 5, 2010], and * * * you were biased about that whole situation * * *. * * * I considered your statement biased because it's not a frivolous *82 argument. THE COURT: * * * [I]f you're granted a trial, will you be testifying that you did not receive that money? MR. ULLOA: No, I'll be testifying that they are not an American company. THE COURT: So you admit that you received the money? MR. ULLOA: That's irrelevant, Your Honor. THE COURT: Well, no, I -- MR. ULLOA: We're not saying we received money or didn't receive money. The only thing we're questioning is the document itself.* * * THE COURT: What I'm questioning now is, did you receive that money from those payors? MR. ULLOA: I can't say that. THE COURT: Pardon me? THE COURT: What do you mean you can't say that? MR. ULLOA: That's a private matter. I mean whether I did or not doesn't matter at all. The document is what matters, what the document says. THE COURT: Well, what matters is the fact about how much income you received that year. That's what I have to find. And unless you intend to show that you didn't receive the money, then I have no basis for finding in your favor. What you want to prove instead is that you have a quibble with the paperwork. But since you're not going to disprove that you received *83 the money * * * I don't know how I could find in your favor even if we agreed that we didn't like the paperwork. MR. ULLOA: Then, Your Honor, then you have to rule for them and I'll bring it up on appeal.
Where the pertinent facts are not in dispute, a party may move for summary judgment to expedite the litigation and avoid an unnecessary trial. When a motion for summary judgment is made and supported as provided in this Rule, an adverse party may not rest upon the mere allegations or denials of such party's pleading, but such party's response, by affidavits or as otherwise provided in this Rule, must set forth specific facts showing that there is a genuine issue for trial. * * *
Respondent's statement of facts is therefore uncontroverted and is accepted for purposes of ruling on the motion, leaving us to decide whether Mr. Ulloa is exempt from tax on the money he received because the entities *85 that paid him were, he says, not "valid payers".
Mr. Ulloa argues that the IRS's determination of tax deficiencies must not be sustained because respondent has not shown that the Forms W-2 9*86 reporting the income were submitted by "valid payers" -- with "valid" evidently meaning in the "United States" as defined in (2) United States. -- The term "United States" when used in a geographical sense includes the Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American Samoa. [Emphasis added.]
This is a thoroughly discredited and frivolous argument. See
Mr. Ulloa's motion must be denied.
Mr. Ulloa's legal theory has no merit, and he must pay income tax on his income. As we noted above in part I, respondent supported his assertions that Mr. Ulloa received money from employers and others, and Mr. Ulloa did not even deny the assertions, much less submit evidence to raise any genuine issue of material fact.
Mr. Ulloa does not cite In any court proceeding, if a taxpayer asserts a reasonable dispute with respect to any item of income reported on an information return filed with the Secretary under subpart B or C of part III of subchapter A of chapter 61 by a third party and the taxpayer has fully cooperated with the Secretary (including providing, within a reasonable period of time, access to and inspection of all witnesses, information, and documents within the control of the taxpayer as reasonably requested by the Secretary), the Secretary shall have the burden of producing reasonable *88 and probative information concerning such deficiency in addition to such information return.
But
Pursuant to
The notices of deficiency also reflect the determination of additions to tax under
(1) Authority of Secretary to execute return. -- If any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed *92 therefor, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise. (2) Status of returns. -- Any return so made and subscribed by the Secretary shall be prima facie good and sufficient for all legal purposes.
In this case, the IRS has shown the preparation of SFRs that were made from the information the IRS obtained! and were subscribed by an IRS employee as agent of the Secretary. Respondent has met his burden of production, and the additions to tax under
Because Mr. Ulloa sometimes claimed exemption from withholding and at other times claimed numerous "allowances" to reduce his withholding, his tax was substantially underwithheld. the lesser of -- (i) 90 percent of the tax shown *93 on the return for the taxable year (or, if no return is filed, 90 percent of the tax for such year), or (ii) 100 percent of the tax shown on the return of the individual for the preceding taxable year. Clause (ii) shall not apply if * * * the individual did not file a return for such preceding taxable year.
Thus, the Commissioner's burden of production under
For 2002 -- i.e., the "preceding taxable year" for taxable year 2003 -- the transcript submitted with respondent's motion appears to show that a return
However, we have already found that Mr. Ulloa's zero returns for the taxable years 2003 through 2006 were not qualifying tax returns, so for the second, third, and fourth of those years-2004, 2005, and 2006 -- respondent has shown for each year that Mr. Ulloa did not file a return for the preceding year. Consequently, respondent has carried his burden of production under
The
Respondent proposes that we impose such a penalty on Mr. Ulloa. We will do so. Mr. Ulloa's position is indeed frivolous, as we showed above in part II, and he persisted in maintaining that position after he was warned of the
It is true, as Mr. Ulloa urged four times in his motion papers, that he is "not schooled in the law". 14 He makes this assertion to request a benefit (the "indulgence" of the Court), but in fact it is detrimental to him here. Mr. Ulloa truly is not schooled in the law, but his admitted awareness of this fact did not cause him to show any reserve or caution in making and defending his arguments, and it evidently has not made him receptive of any schooling in the law. Rather, despite his admitted *98 ignorance, he is uncurious about contrary authority, scornful of opposition, and dismissive of correction.
Moreover, a lack of sophisticated knowledge of the law is not really what makes Mr. Ulloa's case problematic. Rather, at the level of mere common sense, his principal argument (i.e., that "the United States" includes none of the States) is radically counter-intuitive. His reasoning, if it can be called reasoning, bears a fallacy (i.e., that "includes" means "includes only") that is obvious to anyone fluent in English. Mr. Ulloa concluded that he owes no Federal income *99 tax because neither he nor his payers resides in Puerto Rico, the Virgin Islands, Guam, or American Samoa; he must have noticed that this conclusion would apply equally well to all of his neighbors and fellow employees; yet most of them pay their taxes every year.
The Tax Court is fully accustomed to -- and fully accommodating of -- taxpayers who are not "schooled in the law" but must represent themselves. The Court reads their pleadings by "less stringent standards",
To reflect the foregoing,
An appropriate order *100 and decision will be entered in docket No. 4514-09.
Footnotes
1. Unless otherwise indicated, all citations of sections refer to the Internal Revenue Code of 1986 (26 U.S.C.), as amended, and all citations of Rules refer to the Tax Court Rules of Practice and Procedure.↩
2. Under
section 3402(f) an employee may claim exemptions for himself, his spouse, and his dependents that reduce the amount of income tax withholding. Undersection 3402(m)↩ an employee may further reduce his Federal income tax withholding by claiming "allowances" that correspond to his estimated deductions and credits for the year.3. Mr. Ulloa's Form 1040X refers to a prior "submission of 2004", as if he were filing an amended return for 2004, not 2003; and Form 1040X is the form! used for an amended return. However, the record shows no evidence (and Mr. Ulloa makes no allegation) that any form (such as Form 1040) was submitted for 2003 before the Form 1040X, and the Form 1040X for 2003 does claim a refund of income tax withholding in an amount that was actually withheld for 2003. We therefore conclude that the Form 1040X was submitted for 2003, as it states.↩
4. Mr. Ulloa also repeats his mantra that he is "not schooled in the law" in (a) an unagreed "Stipulation of Facts" that he submitted unilaterally and that the Court filed as his pretrial memorandum on December 31, 2009; (b) his affidavits in support of his cross-motions for summary judgment, filed December 31, 2009; and (c) an objection, filed January 4, 2010, to the affidavit submitted in support of respondent's motions for summary judgment. The case he cites --
Haines v. Kerner , 404 U.S. 519, 92 S. Ct. 594, 30 L. Ed. 2d 652↩ (1972)6. Mr. Ulloa's identification of himself as a "private-sector worker" evidently alludes to the frivolous position that only Federal employees are subject to income tax. See
Rev. Rul. 2006-18, 2006-1 C.B. 743↩ .7. Mr. Ulloa's denial of participation in a corporation, partnership, or enterprise may be an allusion to the frivolous argument that an individual is not a person subject to tax. See
Rev. Rul. 2007-22, 2007-1 C.B. 866↩ . In any event, such participation is not a precondition to income tax liability.8. Mr. Ulloa's assertion about the value of his time evidently alludes to the frivolous position that a wage earner is allowed a deduction for his basis in his time and effort, measured by its value. See
Carskadon v. Commissioner , T.C. Memo. 2003-237section 61(a) . Gross income means all income from whatever source derived.Sec. 61(a) . Petitioners' arguments completely disregard the definition of gross income"). Courts have consistently held that compensation for services rendered constitutes taxable income and that taxpayers have no tax basis in their labor.Carter v. Commissioner , 784 F.2d 1006, 1009 (9th Cir. 1986)Olson v. United States , 760 F.2d 1003, 1005 (9th Cir. 1985)States v. Romero , 640 F.2d 1014, 1016 (9th Cir. 1981)Abrams v. Commissioner , 82 T.C. 403, 407 (1984)Rowlee v. Commissioner , 80 T.C. 1111, 1119-1122↩ (1983)9. One of the largest income items at issue here is proceeds of $ 105,000 that Mr. Ulloa received in 2004 from the sale of real estate in Florida, as reported by American United Title Company. The proceeds were reported not on Form W-2 but on Form 1099-S, and a real estate sale transaction would not implicate an employment relationship pertinent to
section 3121↩ .10.
Section 3121(e) provides that its definitions are "[f]or purposes ofthis chapter " (emphasis added) -- i.e., chapter 21 (Federal Insurance Contributions Act,sections 3101-3128 ). An equivalent definition appears insection 3306(j) for purposes of chapter 23 (Federal Unemployment Tax Act,sections 3301-3311↩ ).11. Because Mr. Ulloa fails to meet the threshold requirement for invoking
section 6201(d)↩ , we do not reach the issue of whether, if he could invoke it, respondent could nevertheless carry the "burden of producing reasonable and probative information concerning such deficiency in addition to such information return". Respondent's submission in support of his motion does rely on information returns, but not solely on those information returns. Rather, respondent obtained and submitted payroll information from IBM and Candle Corporation, and Mr. Ulloa did not dispute its authenticity or accuracy.12. See
Barnes v. Commissioner , T.C. Memo 2010-30 2010, Tax Ct. Memo LEXIS 30 at 15-16Chief Counsel Notice CC-2009-010, 2009 CCN LEXIS 20↩ (Feb. 13, 2009) )).13. Mr. Ulloa's liability for the penalty for maintaining a frivolous position is unaffected by our inability to resolve the estimated tax addition to tax under
section 6654 for 2003. Docket No. 2053-09 will remain open pending resolution of thesection 6654↩ addition for 2003. On the other hand, we resolve docket No. 4514-09 today; and while we could impose the penalty in both cases, we will exercise our discretion and require Mr. Ulloa to pay a $ 5,000 penalty in docket No. 4514-09 only.14. In this connection Mr. Ulloa cites
Haines v. Kerner , 404 U.S. 519, 92 S. Ct. 594, 30 L. Ed. 2d 652 (1972)Fed. R. Civ. P. 12(b)(6) to dismiss a petition for failure to state a claim. The petition had been filed by a pro se prisoner, and the Court observed that "the allegations of thepro se complaint" are held "to less stringent standards than formal pleadings drafted by lawyers".Id.↩ at 520
Related
Cite This Page — Counsel Stack
2010 T.C. Memo. 68, 99 T.C.M. 1280, 2010 Tax Ct. Memo LEXIS 67, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ulloa-v-commr-tax-2010.