The Tax Court in Brief
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Christiansen v. Commissioner, T.C. Memo. 2025-67 | June 26, 2025 | Pugh, J. | Dkt. No. 20159-23
Short Summary: This case was submitted under Tax Court Rule 122. The IRS issued a notice of deficiency to the taxpayer, determining that he was liable for a deficiency in income tax and an accuracy-related penalty under I.R.C. § 6662(a). The Taxpayer did not report any wages or taxable income on his federal tax return and sought a refund. The IRS mailed a letter to the taxpayer indicating that he “claimed one or more frivolous positions” on his tax return and requested that the taxpayer file a corrected return or be subject to a frivolous return penalty under I.R.C. § 6702.
The taxpayer did not dispute that he received wages and annuity payments reported on Forms W-2 and 1099-R nor did he provide evidence that such were not taxable. In a previous tax case of the taxpayer’s, he alleged nearly identical arguments to those he made in this case, which included that no federal statute exists that makes individuals liable for federal income tax. [1] Consequently, the Tax Court held that the taxpayer’s arguments were frivolous and that he was liable for the deficiency in income tax and accuracy-related penalty. Further, the Tax Court imposed an additional penalty on the taxpayer due to his Tax Court-deemed frivolous arguments.
Key Issue: Whether the taxpayer was liable for a deficiency due to unreported income and an accuracy-related penalty under I.R.C. § 6662(a).
Primary Holdings: The Tax Court sustained the IRS’s determination of a deficiency as to the taxpayer’s unreported income and accuracy-related penalty under I.R.C. § 6662(a). Additionally, the Tax Court imposed a penalty under I.R.C. § 6673(a)(1) due to taxpayer’s repeated frivolous arguments.
Key Points of Law:
Rule 122 Decisions:
- Where a case does not require a trial for the submission of evidence, it may be submitted at any time after joinder of issue by motion of the parties filed with the Court. Tax Court Rule 122(a).
- The burden of proof nor its requirements are altered in a case submitted pursuant to Rule 122. Tax Court Rule 122(b).
Burden of Proof:
- Generally, the taxpayer bears the burden of proving that the Commissioner’s determinations set forth in a Notice of Deficiency are in error. Tax Court Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933).
Burden of Production:
- In cases of unreported income, the Commissioner must establish “[s]ome reasonable foundation for the assessment.” Erickson v. Commissioner, 937 F.2d 1548, 1551 (10th Cir. 1991) (emphasis omitted), aff’gC. Memo. 1989-552.
- Once the Commissioner introduces substantive evidence linking the taxpayer with the unreported income, the burden shifts to the taxpayer to produce substantial evidence to overcome it. United States v. McMullin, 948 F.2d 1188, 1192 (10th Cir. 1991).
- The Commissioner generally bears the burden of production with respect to a taxpayer’s liability for accuracy-related penalties and must show compliance with the procedural requirements of section 6751(b) for the accuracy-related penalties imposed. I.R.C. § 7491(c).
Income:
- Gross income includes all income from whatever source derived, including wages, salaries, compensation for services, and annuities. I.R.C. § 61(a)(1), (8); see Reg. §§ 1.61-1(a), 1.61-2(a)(1); see also Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429–31 (1955).
Section 6662(a) Penalty:
- Section 6662(a) and (b)(2) imposes an accuracy-related penalty equal to 20% of the portion of an underpayment of tax required to be shown on a return that is attributable to a “substantial understatement of income tax.” An understatement of income tax is “substantial” if it exceeds the greater of 10% of the tax required to be shown on the return or $5,000. I.R.C. § 6662(d)(1)(A).
Section 6673 Penalty:
- The Tax Court is authorized to impose a penalty, not to exceed $25,000, on a taxpayer whenever it appears to the Court that the taxpayer instituted or maintained the proceeding primarily for delay or that the taxpayer’s position in the proceeding is frivolous or groundless. I.R.C. § 6673(a)(1).
Insights: While the taxpayer did file a tax return in this case and admittedly earned income in the tax year, he took the position, among others, that he was not liable for the income tax. This was not the first time the taxpayer was unsuccessful at his arguments. [1] In his previous case, the Tax Court warned the taxpayer that it deemed his arguments frivolous and is authorized to impose a penalty for such. Here, the taxpayer took his chances and made the same arguments. However, this time, the Tax Court not only found the taxpayer liable for the deficiency and accuracy-related penalty, but imposed the additional penalty. The lesson here: actions have consequences, especially repeated ones.
[1] Christiansen v. Commissioner, T.C. Memo. 2025-21.
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