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Tuesday, May 25, 2004

Among the dumbest tax protestor arguments out there is the so-called "861 argument" which wrongly concludes that people who live in the United States are not required to file taxes, and that only foreign persons and corporations are taxpayers. This is the argument put forth by Larken Rose, who legal and constitutional background is derived not from any accredited law school, but rather from his years of transcribing medical records. Still, it sounds good to the tax protestors and they are of course dumb enough to fall for it even though the DOJ is pitching a total shutout against this particular bogus theory.

FOR IMMEDIATE RELEASE
FRIDAY, MAY 21, 2004
WWW.USDOJ.GOV
TAX
(202) 514-2007
TDD (202) 514-1888

FEDERAL COURT IN WASHINGTON STATE HALTS TAX-SCAM PROMOTION

Tacoma Man Who Promoted False Tax Claims Required To Disclose Names Of Customers

WASHINGTON, D.C. - The Justice Department announced today that a federal court in Seattle has barred Jack Cohen of Tacoma, Washington, from selling his tax fraud schemes. The schemes are based on a discredited argument, repeatedly found frivolous by many courts, called the “U.S. Sources” or “Section 861 argument.” The “argument,” named after the provision of the federal tax code it misinterprets, posits that U.S. citizens are not required to pay taxes on income they receive from sources within the United States.

“Tax-scam promoters cheat not only their customers and the Federal treasury but also all law-abiding taxpayers. Some scams even teach people how to harass their employers and obstruct the administration of the tax system,” said Eileen J. O’Connor, Assistant Attorney General for the Justice Department’s Tax Division. “The Department of Justice is working methodically to shut down tax fraud scams of all varieties.”

The court issued an order, called a preliminary injunction, which will remain in effect while the case remains pending. Pursuant to the court’s order, Cohen is barred from selling the Section 861 argument and any other abusive tax schemes. He must post a copy of the injunction on his website and must remove all false statements about the tax laws on the site. The order also requires Cohen send a copy of the court’s order to his customers and requires him to give the Justice Department a list of his customers.

Papers filed in the case show that Cohen, through his “Tax Ax” website, told employers to stop withholding federal income and social security taxes from the wages of their employees, and sold products such as the “W-4 Killer Pack,” which he advertised as “a kit for employees who wish to stop the withholding process.” He also sold the “Tax-Collecting Employer Challenge” for $250, a kit which told employees to send letters to their employers threatening to sue them unless they stopped withholding taxes from their paychecks. More information on this case is available at http://www.usdoj.gov/tax/04_tax_092.htm.

This is the latest in a series of injunctions the Justice Department has obtained in its continuing effort to shut down tax-scam promotions. Information on other recent injunctions entered and suits filed can be found at the Justice Department Tax Division website, http://www.usdoj.gov/tax/taxpress2004.htm.
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Wednesday, May 19, 2004

Dan Evan's has pointed out that crazy old Irwin Schiff has already appealed to the 9th Circuit, although his criminal case has just started. Why he bothers is anybody's guess, as they have always given him the "thumbs down" before. This time the Vegas money is bettng that crazy old Irwin dies in prison.



Court of Appeals Docket #: 04-72364
Filed: 5/12/04
Nsuit: 0
Schiff, et al v. USDC-NVL
Appeal from: District of Nevada (Las Vegas)

Lower court information:
District: 0978-2 : CR-04-00119-1-LRL
presiding judge: Lawrence R. Leavitt, District Judge


5/12/04 FILED PETITION FOR WRIT OF MANDAMUS, DOCKETED CAUSE AND ENTERED APPEARANCES OF COUNSEL. NOTIFIED REAL PARTIES IN INTEREST OF FILING. (MOATT) [04-72364] (ft)
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Meanwhile, this tax protestor got caught with foreign accounts and is considered a "flight risk" so he'll probably have to sit in jail awaiting trial, which is OK since his trial will be a slam-dunk for the U.S. Attorney and he might as well build credits towards what will probably be a very long sentence.



Erie Times-News

May 13, 2004

Tax protester appeals decision to keep him in jail
By LISA THOMPSON

The way Meadville tax protester Daniel Leveto sees it, the government took seven years to create its tax-fraud case against him.

He thinks he'll need more than an hour a week in the prison law library to prepare his defense.

Leveto filed a handwritten motion in U.S. District Court Tuesday seeking his release from jail before he goes on trial.

Leveto said he realizes it took him two years to turn himself in on the federal tax-fraud charges he faces. But he says that now he wants to answer the allegations in court.

He asked a judge to overturn U.S. District Magistrate Judge Susan Paradise Baxter's April decision to hold Leveto in Erie County Prison until his trial.

Leveto says in prison, he's housed with "sentenced convicted criminals." He does not have access to the records and resources he needs for his defense and cannot prepare for trial in that setting, he claims.

Leveto, a veterinarian, dismisses the government's claim that he belongs to militant groups. He said his history of peacefulness "speaks louder" than those claims.

Leveto wants to live with his mother in Conneaut Lake. Bond and home-monitoring "can surely assuage the government's fear of Leveto's flight," he wrote.

The appeal will be considered by U.S. District Judge Sean J. McLaughlin.

The U.S. Marshals Service arrested Leveto, 53, in March at an Ohio truck stop more than two years after a federal tax-fraud indictment was returned against him.

The indictment alleges Leveto, whose last known address was the 18000 block of Conneaut Lake Road, did not divulge foreign bank accounts and withheld veterinary business receipts.

At his detention hearing, authorities told a judge they believe a link existed between Leveto and Darrell Sivik, the Crawford County gunsmith who officials say led the Braveheart Militia Company and who they claim committed federal firearm violations.

Sivik and Atlantic resident George Bilunka's arrests the week of March 21 revealed the existence of two local militias and plans for armed resistance to government forces.

Special Agent Richard Adams, a criminal investigator for the Internal Revenue Service, testified that Sivik told authorities that he stored three machine guns for Leveto and moved them twice at Leveto's orders while Leveto was on the run.

Following the hearing, Baxter ordered Leveto to be held in prison pending his trial.

Baxter found Leveto fled the day an indictment was returned against him and apparently lived a transient life in a trailer for more than two years, at times traveling to Canada and using the name Chester Leveto.

She said Leveto doesn't recognize the authority of the IRS investigators who brought the case against him, she said. Moreover, Leveto recently renewed a commercial pilot's license, Baxter said.

In his motion, Leveto says when he left the area, the indictment against him had not been unsealed. He said he fled to get away from personal problems stemming from a "stormy" divorce.

He said he respects the court.

"Leveto's issues are with the IRS," he said.

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The United States Court of Appeals for the Fifth Circuit recently affirmed the conviction of a tax protestor who failed to file. This is more cumulative proof that jury acquittals like the Kuglin case are rarities, and that much more often than not, the ordinary jurors who hear these cases refuse to see tax protestors as the patriots they fantasize they are, but instead the jurors see them as criminal deadbeats just trying to dodge their legitimate tax obligations.

UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
DON FREDERICK SCHUTT,
Defendant-Appellant.

Release Date: MAY 17, 2004

Published by Tax AnalystsTM

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

Summary Calendar

Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 4:01-CR-90-ALL

Before HIGGINBOTHAM, DAVIS, and PRADO, Circuit Judges.

PER CURIAM:/*/

[1] Don Frederick Schutt appeals from his conviction following a jury trial on two counts of failing to file income tax returns for the years 1995 and 1996, in violation of 26 U.S.C. section 7203. Schutt argues that the evidence was insufficient to prove that he willfully failed to file his tax returns because, based on his own research of the tax laws, he did not believe he was liable to pay taxes. Because Schutt did not move for judgment of acquittal at trial, we review to determine whether there was a miscarriage of justice. United States v. Delgado, 256 F.3d 264, 274 (5th Cir. 2001). A miscarriage of justice exists "only if the record is devoid of evidence pointing to guilt" or "the evidence on a key element of the offense was so tenuous that a conviction would be shocking." United States v. Laury, 49 F.3d 145, 151 (5th Cir. 1995)(internal quotations and citation omitted). After reviewing the record, we conclude that the evidence was sufficient for the jury to find that Schutt was aware of his duty to file tax returns and willfully failed to do so. See United States v. Shivers, 788 F.2d 1046, 1048-49 (5th Cir. 1986); see also Cheek v. United States, 498 U.S. 192, 201 (1991).

[2] Schutt also argues that the magistrate judge erroneously excluded from evidence documents that he used to form his beliefs about the federal tax system. Schutt was permitted to testify about the documents upon he which relied, to read the contents of the documents to the jury, and to explain the effect of the documents on his beliefs. There was no abuse of discretion in the court's exclusion of the documents from evidence. See United States v. Stafford, 983 F.2d 25, 27-28 (5th Cir. 1993); United States v. Barnett, 945 F.2d 1296, 1301 (5th Cir. 1991); United States v. Flitcraft, 803 F.2d 184, 186 (5th Cir. 1986).

[3] AFFIRMED.

FOOTNOTE

/*/Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.

END OF FOOTNOTE



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This tax protestor idiot kept filing junk motions in an attempt to tie up the courts and finally got hit with a $10,000 sanction for doing so.

UNITED STATES TAX COURT

Filed May 17, 2004

James L. Jensen, pro se.

Stephen P. Baker, for respondent.

MEMORANDUM OPINION

[1] VASQUEZ, Judge: This case is before the Court on respondent's motion for summary judgment and to impose a penalty under section 6673/1/ (motion for summary judgment) and petitioner's motion to strike respondent's motion for summary judgment (motion to strike).

[2] Rule 121(a) provides that either party may move for summary judgment upon all or any part of the legal issues in controversy. Full or partial summary judgment may be granted only if it is demonstrated that no genuine issue exists as to any material fact, and a decision may be rendered as a matter of law. Rule 121(b); Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th Cir. 1994).

[3] We conclude that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law.

Background

[4] Petitioner is a commercial fisherman. At the time he filed the petition, petitioner resided in Cordova, Alaska.

[5] On or about April 15, 1995, respondent received from petitioner his joint Federal income tax return for 1994. Petitioner listed his income tax liability as $ 147. This liability was attributable to petitioner's two children, whose income tax liability petitioner elected to report on his return on Form 8814, Parents' Election to Report Child's Interest and Dividends. Petitioner reported zero taxable income and no tax due for himself.

[6] On or about August 26, 1996, respondent received from petitioner his joint Federal income tax return for 1995. Petitioner reported negative taxable income and no tax due.

[7] On or about April 15, 1997, respondent received from petitioner his joint Federal income tax return for 1996. Petitioner listed his income tax liability as $ 4,040. This liability was attributable to one of petitioner's children ($ 73 reported on Form 8814), whose income tax liability petitioner elected to report on petitioner's return, and to self-employment tax ($ 3,967). Petitioner reported zero taxable income.

[8] On or about April 15, 1998, respondent received from petitioner his joint Federal income tax return for 1997. Petitioner listed his income tax liability as $ 8,121. This liability was attributable to one of petitioner's children ($ 98 reported on Form 8814), whose income tax liability petitioner elected to report on petitioner's return, and to self-employment tax ($ 8,023). Petitioner reported zero taxable income.

[9] On June 3, 1999, respondent sent petitioner a statutory notice of deficiency for 1994. Respondent determined a $ 5,387 deficiency and a $ 1,077.40 penalty pursuant to section 6662(a) for 1994. Petitioner received this notice of deficiency and responded to it with a 15-page letter containing frivolous and groundless arguments.
[10] On August 10, 1999, respondent sent petitioner a statutory notice of deficiency for 1995. Respondent determined a $ 97,021 deficiency, a $ 4,851 penalty pursuant to section 6651(a)(1), and a $ 19,404 penalty pursuant to section 6662(a) for 1995. Petitioner received this notice of deficiency and responded to it with a 15-page letter containing frivolous and groundless arguments.

[11] On December 2, 1999, respondent sent petitioner a letter advising him that his tax returns for 1996 and 1997 were under examination. On December 12, 1999, petitioner responded with a two- page letter containing frivolous and groundless arguments.
[12] On April 4, 2000, respondent sent petitioner a statutory notice of deficiency for 1996 and 1997. Respondent determined an $ 8,338 deficiency and a $ 1,667.60 penalty pursuant to section 6662(a) for 1996 and a $ 9,317 deficiency and a $ 1,863.40 penalty pursuant to section 6662(a) for 1997. This notice of deficiency was sent via certified mail to petitioner's last known address -- which also is the address petitioner used in the petition and the amended petition. This notice of deficiency was not returned as undeliverable.

[13] Petitioner did not petition the Court for redetermination of the deficiencies or penalties with respect to 1994, 1995, 1996, or 1997. Respondent assessed petitioner's tax liability, along with penalties and interest, as follows:

Year Assessment Date
1994 Oct. 18, 1999
1995 Dec. 27, 1999
1996 Aug. 28, 2000
1997 Sept. 4, 2000

[14] Respondent sent petitioner notices and demand for payment of the assessments as follows: In October 1999 for 1994, in December 1999 and February 2000 for 1995, in August and September 2000 for 1996, and in September 2000 for 1997. Petitioner responded to the requests for payment for 1994 and 1997 with several 15-page letters containing frivolous and groundless arguments.

[15] On or about December 28, 2000, respondent filed a notice of Federal tax lien regarding petitioner's income tax liabilities for 1994, 1995, 1996, and 1997 with the Recording District of Cordova, Anchorage, Alaska (tax lien). The tax lien listed $ 9,523.39 owed for 1994, $ 164,595.94 owed for 1995, $ 13,249.99 owed for 1996, and $ 13,659.98 owed for 1997.

[16] On January 3, 2001, respondent issued to petitioner a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320 regarding his income tax liabilities for 1994, 1995, 1996, and 1997 (hearing notice). Attached to the hearing notice was a copy of the tax lien.

[17] On January 31, 2001, in response to the hearing notice, petitioner submitted a 15-page letter containing frivolous and groundless arguments. Petitioner did not file a Form 12153, Request for a Collection Due Process Hearing; however, respondent treated petitioner's January 31, 2001, letter as the equivalent of a Form 12153 -- i.e., as a request for a section 6330 hearing.

[18] On February 26, 2001, respondent sent petitioner a letter notifying him that his case had been assigned to an Appeals officer.

[19] On March 8, 2001, petitioner responded to respondent's February 26, 2001, letter with frivolous and groundless arguments.

[20] On April 2, 2002, Appeals Officer Donna Chilton invited petitioner to attend a section 6330 hearing with her at 10 a. m. on April 24, 2002, in Anchorage, Alaska.

[21] On April 15, 2002, petitioner wrote to Ms. Chilton to advise her that April 24, 2002, was not a convenient time and that he was seeking an attorney to represent him. Petitioner requested that the hearing be held during the week of May 19, 2002, as he would be in Anchorage, Alaska, during that time. Ms. Chilton rescheduled petitioner's hearing, on the basis of his request, for May 21, 2002.

[22] On May 14, 2002, petitioner sent Ms. Chilton a letter in lieu of a face-to-face hearing. Regarding 1994 and 1996, petitioner argued that the assessments were barred by the period of limitations. Regarding 1995 and 1997, petitioner claimed he did not receive any "notices of assessment" for 1995 and 1997 and complained that the Forms 4340, Certificate of Assessments, Payments, and Other Specified Matters, did not list the amounts demanded next to the entries listing demand for payment./2/

[23] On May 16, 2002, Ms. Chilton responded to petitioner's May 14, 2002, letter. Ms. Chilton addressed each of petitioner's claims and attached documents to support her conclusions.

[24] On May 30, 2002, respondent issued a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 to petitioner regarding his 1994, 1995, 1996, and 1997 tax years (notice of determination). In the notice of determination, respondent determined that the tax lien should remain in place.

[25] On June 17, 2002, petitioner timely filed an imperfect petition for lien or levy action under section 6320(c) or 6330(d) seeking review of respondent's determination to proceed with collection of petitioner's 1994, 1995, 1996, and 1997 tax liabilities.

[26] On June 20, 2002, the Court ordered that on or before July 18, 2002, petitioner file a proper amended petition and pay the filing fee.

[27] On June 24, 2002, petitioner sent Ms. Chilton two letters in response to the notice of determination. In these letters, petitioner raised frivolous and groundless arguments.

[28] On July 1, 2002, petitioner filed an amended petition for lien or levy action under section 6320(c) or 6330(d) seeking review of respondent's determination to proceed with collection of petitioner's 1994, 1995, 1996, and 1997 tax liabilities.

[29] On January 16, 2003, petitioner was served with the Court's notice setting case for trial and standing pretrial order setting the case for trial during the Court's 2-week session in Anchorage, Alaska, beginning on June 16, 2003. The Court advised petitioner that he needed to be ready and available during this 2- week period to try his case.

[30] On April 22, 2003, petitioner filed a motion to dismiss (motion to dismiss). In the motion to dismiss, petitioner stated that the parties were in negotiations to settle the case.

[31] On May 1, 2003, the Court ordered respondent to file a response to petitioner's motion to dismiss on or before May 15, 2003.

[32] On May 15, 2003, respondent filed a response to petitioner's motion to dismiss. Respondent stated that he had made a diligent inquiry and found that no negotiations were currently in progress with petitioner. Respondent further stated that he intended to file a motion for summary judgment and would be requesting a penalty pursuant to section 6673.

[33] On May 21, 2003, the Court denied petitioner's motion to dismiss. That same day, respondent filed a motion for summary judgment and to impose a penalty under section 6673 (motion for summary judgment). Attached as exhibits to the motion for summary judgment, among other things, were Forms 4340, dated June 19, 2001, and computer-generated transcripts (TXMODA), dated June 14, 2001, for petitioner's 1994, 1995, 1996, and 1997 tax years.

[34] On May 22, 2003, the Court ordered petitioner to file a response to respondent's motion for summary judgment on or before June 5, 2003, and calendared the motion for hearing at the trial session of the Court commencing on June 16, 2003.

[35] After receiving a call from the parties that petitioner was a fisherman and it was difficult for him to get to Anchorage, Alaska, the Court calendared the hearing for a date and time certain of 9 a.m. on June 26, 2003./3/

[36] On June 26, 2003, at 9:30 a.m., petitioner's case was called. Petitioner failed to appear. Instead, petitioner's wife, who is not an attorney or a party to this case, "appeared" with a "special power of attorney". Petitioner's wife stated that petitioner was out on his boat fishing because it was fishing season.

[37] After admonishing petitioner's wife regarding petitioner's failure to appear, the Court asked respondent's counsel if he was prepared to file a written motion to dismiss for lack of prosecution. Respondent's counsel answered that he was not. The Court rescheduled petitioner's case for the next day, June 27, 2003, at 10 a.m. Respondent's counsel advised the Court that he would file a motion to dismiss for lack of prosecution if petitioner did not appear at that time, and the Court stated that the motion would be granted if petitioner did not appear. The Court further stated that we would hear argument on respondent's request to impose sanctions on June 27, 2003.

[38] That same day, respondent filed a supplemental declaration, with attached exhibits, in support of his motion for summary judgment.

[39] On June 27, 2003, at 10:55 a.m., petitioner appeared. At this hearing, petitioner made frivolous and groundless arguments. That same day, petitioner filed a response to respondent's motion for summary judgment and imposition of a penalty that contained frivolous and groundless arguments. Petitioner also filed the motion to strike.
Discussion

I. Determination To Proceed With Collection

[40] Section 6320 provides that the Secretary shall furnish the person described in section 6321 with written notice (i.e., the hearing notice) of the filing of a notice of lien under section 6323. Section 6320 further provides that the taxpayer may request administrative review of the matter (in the form of a hearing) within a 30-day period. The hearing generally shall be conducted consistent with the procedures set forth in section 6330(c), (d), and (e). Sec. 6320(c).

[41] Pursuant to section 6330(c)(2)(A), a taxpayer may raise at the section 6330 hearing any relevant issue with regard to the Commissioner's collection activities, including spousal defenses, challenges to the appropriateness of the Commissioner's intended collection action, and alternative means of collection. Sego v. Commissioner, 114 T.C. 604, 609 (2000); Goza v. Commissioner, 114 T.C. 176, 180 (2000). If a taxpayer received a statutory notice of deficiency for the years in issue or otherwise had the opportunity to dispute the underlying tax liability, the taxpayer is precluded from challenging the existence or amount of the underlying tax liability. Sec. 6330(c)(2)(B); Sego v. Commissioner, supra at 610-611; Goza v. Commissioner, supra at 182-183.

[42] Petitioner received the notices of deficiency for 1994 and 1995. The notice of deficiency for 1996 and 1997 was sent via certified mail to petitioner's last known address--which also is the address petitioner used in the petition and the amended petition. This notice of deficiency was not returned as undeliverable. Respondent submitted a certified mailing list to confirm these facts. Furthermore, petitioner did not claim that he did not receive the notice of deficiency for 1996 and 1997. Accordingly, petitioner is deemed to have received this notice of deficiency. Sego v. Commissioner, supra at 610-611.

[43] Petitioner chose not to file a petition for redetermination in response to these notices of deficiency. Accordingly, petitioner cannot contest the underlying deficiencies for 1994, 1995, 1996, and 1997. Sec. 6330(c)(2)(B); Sego v. Commissioner, supra; Goza v. Commissioner, supra at 182-183. Claims that the limitation period for assessment has expired are challenges to the underlying tax liability. Boyd v. Commissioner, 117 T.C. 127, 130 (2001). Therefore, petitioner cannot raise these claims in this proceeding.

[44] Where the validity of the underlying tax liability is not properly in issue, we review the Commissioner's determination for an abuse of discretion. Sego v. Commissioner, supra at 610.

[45] Petitioner's remaining argument appears to be that the verification requirement of section 6330 has not been met. Section 6330(c)(1) does not require the Commissioner to rely on a particular document to satisfy the verification requirement imposed therein. E. g., Schnitzler v. Commissioner, T.C. Memo. 2002-159 (citing five other cases to support this principle). We have repeatedly held that the Commissioner may rely on Forms 4340 or transcripts of account to satisfy the verification requirement of section 6330(c)(1). Hromiko v. Commissioner, T.C. Memo. 2003-107; Schnitzler v. Commissioner, supra; Kaeckell v. Commissioner, T.C. Memo. 2002-114; Obersteller v. Commissioner, T.C. Memo. 2002-106; Weishan v. Commissioner, T.C. Memo. 2002-88; Lindsey v. Commissioner, T.C. Memo. 2002-87, affd. 456 Fed. Appx. 802 (9th Cir. 2003); Tolotti v. Commissioner, T.C. Memo. 2002-86, affd. 70 Fed. Appx. 971 (9th Cir. 2003); Duffield v. Commissioner, T.C. Memo. 2002-53; Kuglin v. Commissioner, T.C. Memo. 2002-51.

[46] Petitioner has not alleged any irregularity in the assessment procedure that would raise a question about the validity of the assessments or the information contained in the Forms 4340 or transcripts of account. See Davis v. Commissioner, 115 T.C. 35, 41 (2000); Mann v. Commissioner, T.C. Memo. 2002-48. Accordingly, we hold that the Appeals officer satisfied the verification requirement of section 6330(c)(1). Cf. Nicklaus v. Commissioner, 117 T.C. 117, 120-121 (2001).

[47] Petitioner has failed to raise a spousal defense, make a valid challenge to the appropriateness of respondent's intended collection action, or offer alternative means of collection. These issues are now deemed conceded. See Rule 331(b)(4).

II. Section 6673

[48] Section 6673(a)(1) authorizes the Court to require a taxpayer to pay to the United States a penalty not to exceed $ 25,000 if the taxpayer took frivolous positions in the proceedings or instituted the proceedings primarily for delay. A position maintained by the taxpayer is "frivolous" where it is "contrary to established law and unsupported by a reasoned, colorable argument for change in the law." Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986); see also Hansen v. Commissioner, 820 F.2d 1464, 1470 (9th Cir. 1987) (section 6673 penalty upheld because taxpayer should have known claim was frivolous).

[49] At the hearing, the Court warned petitioner that the arguments he was advancing were frivolous and groundless, that the arguments had been rejected by the U.S. Court of Appeals for the Ninth Circuit (the court to which this case is appealable), and that we believed he filed the petition to delay collection.

[50] Our authority and willingness to impose penalties pursuant to section 6673(a) on those taxpayers who abuse the protections afforded by sections 6320 and 6330 by instituting or maintaining actions under those sections primarily for delay or by taking frivolous or groundless positions in such actions are well established. Cf. Pierson v. Commissioner, 115 T.C. 576, 581 (2000). Petitioner filed frivolous documents and motions with the Court. Petitioner's position, based on stale and meritless contentions, is manifestly frivolous and groundless, and he has wasted the time and resources of the Court. We are convinced that petitioner instituted and maintained these proceedings primarily for delay. Accordingly, we shall impose a penalty of $ 10,000 pursuant to section 6673.

[51] To reflect the foregoing,

[52] An appropriate order and decision will be entered.

FOOTNOTES

/1/Unless otherwise indicated, all section references are to the Internal Revenue Code, and all Rule references are to the Tax Court Rules of Practice and Procedure.

/2/A request for payment for 1997 that petitioner received and responded to with frivolous and groundless arguments, specifically lists the amount owed as $ 17,384.38. A notice for 1994 that petitioner received and responded to with frivolous and groundless arguments, specifically lists the amount owed as $ 9,567.31.

/3/ Pursuant to Fed. R. Evid. 201, we take judicial notice of the following facts: Cordova, Alaska, is approximately 125 to 145 miles from Anchorage, Alaska, "as the crow flies" and approximately 390 miles away by car.

Accordingly, because of the distance and difficulty of getting from Cordova to Anchorage, the Appeals officer, respondent, and the Court were willing to accommodate petitioner.

END OF FOOTNOTES
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Another day, another bad day for tax protestors, including a couple who apparently drank heavily of the tax protestor koolaid and will now spend several years brewing hootch in their prison toilets.

OFFICE OF THE UNITED STATES ATTORNEY SOUTHERN DISTRICT OF CALIFORNIA

San Diego
California United States Attorney
Carol C. Lam
For Further Information Contact:
Department of Justice, Tax Division Trial Attorney,
Lori Hendrickson (619) 446-3528

For Immediate Release NEWS RELEASE SUMMARY -

May 13, 2004 Carol C. Lam, United States Attorney for the Southern District of California, Eileen J. O’Connor, Assistant Attorney General for the Tax Division, Department of Justice, and Denise L. Rubin, Special Agent-in-Charge, Internal Revenue Service, Criminal Investigation Division, today announced that a federal grand jury in San Diego handed up an indictment charging San Diego attorney Richard D. Corona and his wife Tracy D. Corona with federal criminal tax offenses. The five-count indictment contains charges of conspiracy to defraud the United States, income tax evasion, and failure to pay income tax.

According to Count One of the indictment, Richard and Tracy Corona conspired to defraud the United States from May 1997 through October 2001 by claiming they were not U.S. citizens, and thus challenging the authority and jurisdiction of the IRS to collect income tax from them. In one letter sent to the IRS, and quoted in the indictment, Richard Corona challenged the authority and jurisdiction of the IRS and stated that he was a “natural born free American National Sovereign Citizen of the California Republic, non-resident alien of the federal ‘United States.’” Richard and Tracy Corona furthered this “non-citizen” claim by filing several fraudulent Nonresident Alien income tax returns. The indictment states that Richard and Tracy Corona were U.S. citizens, and filed these returns in an effort to obstruct the collection efforts of the IRS. As noted in IRS Publication 519 (found on the Internal Revenue Service’s website (www.irs.gov)), “For tax purposes, an alien is an individual who is not a U.S. citizen.”

The indictment also alleges that, in furtherance of the conspiracy, Tracy Corona instructed tenants of property owned by Richard Corona not to honor an IRS levy which required the tenants to make their rental payments to the IRS instead of Richard Corona.

In Count Two of the indictment, Richard Corona is charged with one count of tax evasion for tax year 1997. That count alleges that, in order to evade the payment of significant individual tax, Richard Corona concealed his ownership in Park Centre Properties by creating a fictitious trust. Park Centre Properties is a partnership which owned commercial property in San Diego.

Lastly, Richard and Tracy Corona are each charged with three counts of failure to pay income tax due for 1998, 1999, and 2000 (Counts Three through Five). As alleged in the indictment, they filed joint income tax returns for those three years reporting over $2.5 million in income, which resulted in over $600,000 in total income tax due, but not paid.

This case was investigated by Special Agents with the Internal Revenue Service, Criminal Investigation Division, and prosecuted by Department of Justice, Tax Division, Trial Attorneys Lori A. Hendrickson and Nicholas D. Dickinson. For more information on the “non-citizen” strategy and other tax evasion schemes, visit the IRS website at www.irs.gov, and click on the link “Phony Tax Arguments.”


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Saturday, May 08, 2004

Meanwhile, on the same day the insanity defense apparently didn't work as planned for Donald Donovan of Delaware, who contended that while he is an "American" citizen, that he wasn't a citizen of the United States. This is an old -- and totally failed -- argument that has been put forward by tax protestors on literally dozen of occasions, all without success, and usually causing much laughter by onlookers who are amazed that anybody could be so dumb as to put forth such an argument.

Anyhow, Donovan will be able to rejoin the Union sometime in 2007.


Seaford man jailed for tax evasion
Donald Donovan given 3-year sentence
By Mary Allen
Gannett News Service
May 8, 2004
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SEAFORD -- A Seaford man who acted as his own defense attorney and argued the federal tax code did not require him to pay income taxes was ordered Friday to serve three years in prison.

Judge Kent A. Jordan ordered the term plus a $7,500 fine for Donald Donovan, 53. The judge said he thought Donovan had lied and perjured himself during his January jury trial at U.S. District Court in Wilmington. He said he believed a man Donovan named as responsible for his business finances was a fictional character contrived in an attempt to hide income and thwart law enforcement.

"I believe you are still trying to hide the truth today," he said.

Jordan ordered Donovan to pay $1,737 to cover the costs of his prosecution, provide his probation officer with access to any requested financial information after his release from prison and pay all taxes. He also must pay no less than 20 percent of his gross monthly income toward back taxes upon his release.

Prosecutors said at his trial that Donovan owed more than $95,000 in income taxes over four years. A jury convicted Donovan of four counts each of failing to file a tax return and tax evasion.

In remarks to the court, Donovan reinforced his stance that the tax code applied to the wealthy, corporations and possibly officers of corporations. By his calculations, anyone who makes under $240,000 annually does not owe taxes. Donovan said he is a member of the Little Shell Pembina Indian tribe, an affiliation that should also exempt him from taxes. He did not raise that argument at his trial.

He took issue with a background report prepared for his sentencing that identified him as a U.S. citizen. Donovan said he is an American, but not a U.S. citizen.

"I intend on requesting an investigation by the Supreme Court on the conduct of everyone involved in this case," he said. "I just feel due process has not been served properly."

Prosecutor Andrew J. Kameros, who was assigned to the case from the tax division of the Justice Department in Washington, was pleased with the sentence.

"We hope it sends a message to other people who might be considering engaging in similar conduct that they'll be treated seriously by the justice system," he said.




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Another day, another bad day for tax protestors . . . this time for William Tiner of Florida who will be taking a vacation thorugh 2009 courtesy of the Federal Bureau of Prisons for filing false returns.

Tax Evasion To Cost Clearwater Man 5 Years
Published: May 8, 2004

TAMPA - A Clearwater man was sentenced Friday to five years in federal prison after being convicted of income tax evasion and filing false corporate income tax returns.

William Tiner was ordered by U.S. District Judge Richard A. Lazzara to serve three years' probation after his prison term and to pay $984,863 in restitution to the Internal Revenue Service. Lazzara also fined Tiner $25,000, the U.S. attorney's office said.

Officials said Tiner failed to report more than $2.5 million in income between 1996 and 1999, not paying more than $900,000 in income taxes.


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Another day, another bad day for tax protestors . . . this time for David Hinkson of Idaho, whom the jury of 12 good men and women found guilty of 26 counts of various tax-related and other crimes. Like so many other tax protestors, Hinkson was also scamming people with bogus products on the side.

Water company owner found guilty of tax evasion

01:26 PM MDT on Thursday, May 6, 2004
Associated Press

BOISE -- The owner of a mineral water company in Grangeville has been found guilty of 26 tax and financial reporting charges.

David Hinkson was convicted in federal court of failing to file income taxes, failing to collect withholding tax and structuring transactions to avoid reporting requirements.

Prosecutors say Hinkson paid his employees in cash and made sure his payroll withdrawals were under ten-thousand dollars each so the amounts would not be reported to the federal government.

Earlier this year Hinkson pleaded guilty to distributing a misbranded drug for selling lithium water that wasn't labeled as a drug.

He also pleaded guilty to distributing an adulterated medical devices for selling a so-called "ozone machine," that he claimed would cure various diseases.
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Use a Pure Trust and Go to Jail, Go Directly to Jail, Do Not Pass Go, and Do Not Collect $200. Is there a more sure way to go to Club Fed than to either sell Pure Trusts or try to use them to avoid federal income taxes? Anyway, David "Big Dave" Struckman, Dan Anderson and Lorenzo "Zo" LaMantia have been indicted for one of the largest and most notorious tax scams of all time, that involving the Institute for Global Prosperity, a spin-off of the amorphous Global Prosperity Group.

Global Prosperity Criminal Complaint (05/04/2004) (pdf) -- http://www.quatloos.com/Global_Prosperity_Criminal_Complaint_05_04_2004.pdf

Arrests warrants have been issued for Dave, Dan and Zoe.


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Get the TRUTH about Paytriots and Tax Protestor Scams at http://quatloos.com

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Tuesday, May 04, 2004

Another day, another bad day for tax protestors . . . and especially for Bonita Lynne Meredith and Gayle Bybee and the others of Meredith's group who were just convicted on all counts of tax evasion and conspiracy. Lynne is one of the most high-profile promoters of all time, who wrote several (cheesy and false) books about how to avoid income taxes. She made millions, which she flaunted, including having a multi-million beachfront home in Southern California and a collection of exotic automobiles. Because she had falsified a passport, the federal judge consider her to be a flight risk and ordered her into incarceration immediately. Boy, that would be weird: One day you get up in your own bed, go down to the federal courthouse, and never get to see your house again, or even taste freedom for over a decade. If Dorothy Henderson's sentence is any indication, then Lynne will probably get around 14 years.


United States Attorney's Office
Central District of California (Los Angeles)
(213) 894-6947
www.usdoj.gov/usao/cac

Issued Monday, May 3 at 2:35 p.m. PDT

TAX FRAUD PROMOTERS ASSOCIATED WITH 'WE THE PEOPLE' CONVICTED FOR SELLING BOGUS 'PURE TRUSTS' THAT FALSELY PROMISED TO PROTECT INCOME FROM TAXES

Seven individuals associated with a tax fraud group known as "We the People" were convicted today on various federal charges related to the promotion of bogus tax shelters that falsely promised to limit exposure to federal income taxes.

A federal jury in Los Angeles convicted the seven on charges that included conspiring to defraud the Internal Revenue Service, fraudulently using Social Security Numbers and failing to file income tax returns.

The California residents convicted today are:

* Lynne Meredith, 54, of Sunset Beac h, the owner and operator of We the People;
* Gayle Bybee, 56, of Sunset Beach;
* Gregory Paul Karl, 54, of Solana Beach;
* Teresa Manharth Giordano, 41, of Murrieta;
* Willie Watts, 45, of Murrieta;
* Betty Erickson, 59, of Windsor; and
* Nora Moore, 55, of Huntington Beach.

Following the guilty verdicts, Meredith and Bybee were remanded into custody by United States District Judge Dean D. Pregerson.

The defendants are scheduled to be sentenced by Judge Pregerson on July 23.

The evidence presented during a 13-week trial showed that beginning in 1991 and continuing until April 2002, Meredith conducted seminars at which she sold books and bogus "pure trusts" to people with the purpose of leading them to believe they could legally shield inco me and assets from taxation. Meredith and her co-defendants encouraged and assisted taxpayers by forming phony "pure trusts," opening bank accounts with phony Taxpayer Identification Numbers, filing fraudulent income tax returns and encouraging taxpayers not to file income tax returns.

We the People sold the "pure trusts" for approximately $500 to $1,000 at seminars that were held throughout the United States and internationally. To entice potential "trust" purchasers at seminars, Meredith said that each "trust" was customized for the particular customer, who would retain complete control over their businesses and assets placed in trust without incurring and tax liability.

Meredith also encouraged taxpayers to file frivolous tax returns that falsely reported that taxpayers did not have any taxable income and fraudulently requested a refund of all income taxes paid. The defendants also encouraged taxpayers to send protest correspondence to the IRS with the purpose of impeding and obstructing the IRS from collecting these taxpayers' taxes.

Meredith wrote books, including How To Cook A Vulture and Vultures In Eagle's Clothing, in which she falsely claimed that individuals could lawfully stop paying income taxes, stop their employer from withholding income taxes, and refuse to produce books and records to the IRS. The books contained examples of frivolous tax returns and protest letters.

The defendants falsely told their customers that paying taxes is "voluntary," and that they could file a W-4 or W-8 form with their employer claiming to be exempt from federal income tax withholdings. In fact, under federal law, anyone who earns income more than approximately $8,000 must file a tax return and pay taxes. There is no vehicle into which businesses or income may be placed to avoid the payment of income taxes. Those customers who purchased and u sed the "pure trusts" to hide income face serious financial penalties and interest for the income taxes they failed to pay.

From 1991 until 2002, Meredith caused thousands of taxpayers to file fraudulent income tax returns with the IRS. Those fraudulent tax returns sought refunds for as much as $32,822.

The jury heard evidence that Meredith earned more than $8.5 million as a result of the scheme. Meredith did not file a Federal income tax return during these years, and she did not pay any federal income taxes. Furthermore, none of the other six defendants filed or paid any income taxes on income they earned in the scheme.

* Meredith was convicted of conspiracy, four counts of mail fraud, two counts of using a false social security number, making a false statement in a passport application and five counts of failing to file a tax return.

* Bybee was convicted of conspiracy and three counts of failing to file a tax return.

* Karl, a former CPA, was convicted of conspiracy and four counts of mail fraud.

* Giordano was convicted of conspiracy, four counts of mail fraud and two counts of failing to file a tax return.

* Watts, also a former CPA, was convicted of conspiracy, three counts of mail fraud and three counts of failing to file a tax return.

* Erickson was convicted of three counts of failing to file a tax return.

* Moore was convicted of three counts of failing to file a tax return.

The charges of conspiracy, mail fraud and false representation of a social security number each carry a maximum possible penalty of five years in federal priosn. The passport fraud charge carries a potential 10-year sentence. Failing to file a tax return carries a maximum penalty of one year in prison for each count.

The prosecution of this case reflects the increased focus the IRS has on the anti-tax movement. Although courts have continuously rejected frivolous arguments such as those presented by Meredith, the use of false, misleading and unorthodox tax advice has gained followers, which has led many to financial ruin. The investigation of this case and others in the country, including the indictment of Irwin Schiff in Las Vegas last month, is part of the IRS's strategy to stem the flow of misinformation produced by anti-tax promoters.

The case against Meredith and the other promoters of We the People was the result of an investigation by IRS-Criminal Investigation.
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