Opinion
14631-22
10-19-2023
RYAN CHARLES MINNIG, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
ORDER OF DISMISSAL AND DECISION
Patrick J. Urda Judge
Petitioner Ryan Charles Minnig challenges the determination of the Internal Revenue Service (IRS) of a federal income tax deficiency of $25,829 for his 2017 tax year, as well as an accuracy-related penalty of $5,165.80. [Doc. 1 at 5.] This case was calendared for trial on April 24, 2023, at our Denver, Colorado trial session. After Mr. Minnig refused to appear at trial (either in person or via Zoomgov), we ordered him to explain in writing why we should not dismiss this case for lack of prosecution. After considering Mr. Minnig's response and the record as a whole, we will dismiss this case pursuant to Rule 123, will sustain the tax deficiency and accuracy-related penalty determined by the IRS, and will impose an additional penalty under section 6673(a).
Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C. (I.R.C.), in effect at all relevant times and all Rule references are to the Tax Court Rules of Practice and Procedure. "Doc." references are to the documents in the record as compiled by the Clerk of this Court, using .pdf pagination.
Background
I. 2017 Tax Reporting
During 2017, Mr. Minnig worked for two companies, earning $116,000.08 from Tasco, Inc. (Tasco) and $7,020 from Radio Bridge, Inc (Radio Bridge). [Doc. 22 at 25, 32.] On his tax return for 2017, however, Mr. Minnig reported that he had not received any income. [Id. at 22-23.] He attached to tax return Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., on which he represented that his "'wage' classification was erroneous per IRC section 3121 + 3401" [id. at 24] and sought a refund equal to the amounts of tax withheld by that employer [id. at 23].
Tasco and Radio Bridge reported the amounts paid to Mr. Minnig on information returns filed with the IRS. [Doc. 22 at 25, 32.] The discrepancy between the tax reporting of Mr. Minnig and that of Tasco and Radio Bridge led to an IRS examination of Mr. Minnig's 2017 tax return. The examination culminated in the issuance of a notice of deficiency that determined a deficiency and accuracy-related penalty based on Mr. Minnig's failure to report the income that he had received in 2017. [Doc. 22 at 8-21.]
II. Tax Court Proceedings
Mr. Minnig timely filed his petition challenging the notice of deficiency on the grounds that his employer's tax reporting "ha[s] been rebutted . . . per IRC Section 3121 and Section 3401" and that the notice "was issued by a non-authorized agent per Delegation Order 4-8." [Doc. 1 at 2-3.] In the lead-up to the April 24 trial session, the Court held a telephonic pre-trial conference with Mr. Minnig and the Commissioner's counsel. After the Court advised Mr. Minnig that the contentions in his petition contained assertions previously rejected by the Court as frivolous arguments, Mr. Minnig averred that he would not pursue any frivolous challenges. He nonetheless was unable to identify any non-frivolous challenge to the IRS's deficiency determination.
On April 24, 2023, Mr. Minnig failed to appear when his case was called during our Denver trial session. [Docs. 12, 14 at 1.] The Court set his case for recall the next day, informing him by email. Again, Mr. Minnig did not appear. After the recall had concluded, Mr. Minnig responded to the Court's email, explaining that he believed that the parties had an agreement to submit the case under Rule 122. [Doc. 21 at 1.]
The Court set this case for a third recall on April 27, 2023, via Zoomgov. Mr. Minnig again did not appear, and the Commissioner rejected any suggestion that there had been an agreement to submit this case under Rule 122. [Doc. 20 at 3.] During that recall, the Commissioner orally moved to impose sanctions under section 6673(a) alleging Mr. Minnig's position is frivolous or groundless. [Doc. 13, Doc. 16 at 4-5.] We thereafter ordered Mr. Minnig to show cause why this case should not be dismissed for lack of prosecution. [Doc. 14.]
Discussion
I. Dismissal Under Rule 123
The Court may dismiss a case at any time and enter a decision against the petitioner for failure to properly 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); Ducommun v. Commissioner, 732 F.2d 752, 754 (10th Cir. 1983). In addition, the Court may dismiss a case for failure to properly prosecute if a petitioner inexcusably fails to appear for trial and does not otherwise participate in the resolution of his claim. Rollercade, Inc. v. Commissioner, 97 T.C. 113, 116-17 (1991); Smith v. Commissioner, T.C. Memo. 2003-266, 2003 WL 22100685, affd. Sub nom. Hook v. Commissioner, 103 Fed.Appx. 661 (10th Cir. 2004).
Dismissal of this case is warranted. Mr. Minnig began this case by asserting frivolous arguments that we have rejected oft times before. We do not believe that he wandered into such territory unknowingly. Mr. Minnig has filed several cases in this this Court, and we have warned him repeatedly against pursuing frivolous arguments. While he subsequently recanted such arguments, he has been unable to point to any non-frivolous argument that the IRS erred in its deficiency or penalty determinations. Moreover, Mr. Minnig failed to appear for Court proceedings despite being given multiple opportunities, both in-person and remote, to do so. Taken together, his conduct amply demonstrates a failure to properly prosecute his case.
II. Unreported Income
Mr. Minnig argues that we are unable to dismiss his case and enter a decision against him. Specifically, he contends that the Commissioner has failed to carry his burden to introduce substantive evidence linking Mr. Minnig to unreported income, as necessary for the presumption of correctness to attach the Commissioner's determination.
We have recently had occasion to explain to Mr. Minnig the legal standards governing this issue. Minnig v. Commissioner, T.C. Memo. 2023-1, at *3-4.
In general, the Commissioner's determination of a deficiency is presumed correct, and the taxpayer has the burden of proving otherwise. See Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115, 54 S.Ct. 8, 78 L.Ed. 212 (1933). In unreported income cases, however, the Tenth Circuit requires the Commissioner to establish "[s]ome reasonable foundation for the assessment" in order to preserve the presumption of correctness. Erickson v. Commissioner, 937 F.2d 1548, 1551 (10th Cir. 1991), aff'g T.C. Memo. 1989-552. Once the Commissioner introduces substantive evidence linking the taxpayer with the income, the presumption of correctness applies and the burden shifts to the taxpayer to produce substantial evidence overcoming it. United States v. McMullin, 948 F.2d 1188, 1192 (10th Cir. 1991); see also Bolles v. Commissioner, T.C. Memo. 2019-42, at *13. The Commissioner may not rely solely on a third-party report of income, such as a Form W-2, if the taxpayer raises a reasonable dispute concerning the accuracy of the report. Muhammad v. Commissioner, T.C. Memo. 2021-77, at *6; see § 6201(d).Id. (footnotes omitted).
In this case, the parties stipulated to the existence and receipt of a Form W-2, Wage and Tax Statement, reflecting wages of $116,000.08 from Tasco. [Doc. 22 at 25.] The Form 4852 attached to Mr. Minnig's 2017 return further connects him to this income. As part of his refund claim, Mr. Minnig reported on that form that Tasco, his employer, retained payroll taxes in the same amounts reported by Tasco on its Form W-2. [Id. at 24-25.] Mr. Minnig's contention implicitly supports the validity of the wage amounts reported on the W-2, from which the payroll taxes were derived. As to Radio Bridge, the Commissioner provided a wage and income transcript showing that it paid Mr. Minnig $7,020. [Id. at 27-32.] These documents suffice to meet the Commissioner's burden of production.
Even if we were to ignore Mr. Minnig's stipulation, he has not disputed at any point that he received payments from Tasco and Radio Bridge or the amounts that he received. These issues accordingly have been conceded. See Rule 34(b)(1)(G).
We note that, under section 6201(d), if a taxpayer in any court proceeding asserts a reasonable dispute with respect to any item of income reported on an information return and has fully cooperated with the Commissioner, then the Commissioner shall have the burden of producing reasonable and probative information concerning the deficiency, in addition to the information return. Mr. Minnig has not disputed the items of income reported by Tasco and Radio Bridge on their information returns. Nor did he fully cooperate with the Commissioner's counsel. Accordingly, section 6201(d) does not apply here.
We conclude that the Commissioner has sufficiently satisfied his burden of production by introducing substantive evidence that links Mr. Minnig with the unreported income. The Commissioner's deficiency determination is accordingly entitled to the presumption of correctness, which Mr. Minnig has failed to rebut.
III. Penalties
A. Section 6662 Penalty
Mr. Minnig likewise argues that the Commissioner failed to meet his burden with respect to penalties. Section 6662(a) and (b)(2) impose a 20% penalty on the portion of an underpayment of tax that is attributable to a "substantial understatement of income tax." Section 6662(d)(2) generally defines an "understatement" as the excess of the tax required to be shown on the return over the amount shown on the return as filed. 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).
The Commissioner generally bears the burden of production with respect to the liability of an individual for any penalty. I.R.C. § 7491(c). This includes showing compliance with section 6751(b), which provides that "[n]o penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate." See Graev v. Commissioner, 149 T.C. 485, 492-93 (2017), supplementing and overruling in part 147 T.C. 460 (2016).
The record before us demonstrates that Mr. Minnig reported no tax due for 2017, while his correct tax was $25,829. He failed to report income of $116,000.08 from Tasco and $7,030 from Radio Bridge. The Commissioner has met his burden to show an underpayment of income tax, attributable to a substantial understatement.
The Commissioner likewise has satisfied his burden to establish compliance with section 6751(b). The stipulation of facts includes a case history report reflecting supervisory approval before the issuance of the notice of deficiency that first communicated the accuracy-related penalty. See Belair Woods, LLC v. Commissioner, 154 T.C. 1, 15 (2020); see also Minemyer v. Commissioner, No. 21-9006, 2023 WL 314832, at *5 (10th Cir. Jan. 19, 2023), ("[T]he requirements of [section] 6751(b)(1) are met so long as written supervisory approval of an initial determination of an assessment is obtained on or before the date the IRS issues a notice of deficiency."), aff'g in part, rev'g in part and remanding T.C. Memo. 2020-99.
As the Commissioner met his burden in all respects, we will enter decision against Mr. Minnig on this point as well.
B. Section 6673 Penalty
Pursuant to section 6673(a)(1), we have the authority to impose a penalty of up to $25,000 on a taxpayer who, inter alia, institutes or maintains before this Court a proceeding primarily for delay or pursues a position that is frivolous or groundless. This authority is unrestrained by section 6751(b). Williams v. Commissioner, 151 T.C. 1, 10 (2018) (holding "that section 6751(b)(1) does not apply to the Tax Court when it imposes penalties under section 6673(a)(1)."). Although Mr. Minnig has disclaimed his original frivolous contentions, he has introduced no argument suggesting that the IRS's deficiency determination was wrong. We are left with the firm conviction that the instant case was instituted for tax avoidance and is being maintained despite its lack of merit simply in order to delay the day of reckoning. We will impose a sanction of $1,000 in the hopes that Mr. Minnig will think better of pursuing a similar course of conduct in any future cases.
Therefore, upon due consideration of the foregoing, it is
ORDERED that the Court's Order to Show Cause served May 2, 2023, is hereby made absolute, and this case is dismissed for lack of prosecution. It is further
ORDERED and DECIDED that there is a deficiency in federal income tax due from petitioner in the amount of $25,829 for taxable year 2017 and a penalty under I.R.C. § 6662(a) due from petitioner for taxable year 2017 in the amount of $5,165.80. It is further
ORDERED and DECIDED that the Commissioner's oral motion to impose sanctions is granted, in that, there is a penalty due from petitioner under I.R.C. § 6673(a)(1), in the amount of $1,000.