Angela Matthews - Page 4

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            The cases were set for trial on the following day, June 13, 1995.                         
            At the calendar call, petitioner Angela Matthews conceded that                            
            she received $59,147 in income during 1991, and petitioner                                
            Richard Matthews conceded that he received $113,048 in income                             
            during 1991.  At trial, petitioners conceded the amounts of the                           
            deficiencies and the additions to tax as determined and claimed                           
            by respondent.                                                                            
                  At trial, Mr. Ray made a number of arguments including:  (1)                        
            The substitute for return prepared by respondent does not                                 
            constitute a valid return; (2) the IRS does not have the                                  
            statutory authority to determine a deficiency since petitioners                           
            failed to file returns; (3) petitioners do not bear the burden of                         
            proof as mandated by Rule 142(a) because said rule is not                                 
            explicitly authorized by statute; (4) the IRS is seeking to                               
            collect a "penalty * * * in regard to a W-4, which is a subtitle                          
            C tax" that is not collectible by the IRS; and (5) the addition                           
            to tax is a non-compliance penalty which may only be asserted                             
            through an action maintained in U.S. District Court.  Respondent                          
            argues that petitioners' claims are frivolous and groundless, and                         
            asks this Court to impose penalties against petitioners and costs                         
            against counsel pursuant to section 6673(a)(1) and (2),                                   
            respectively.  Petitioners oppose respondent's motion as                                  
            unwarranted and excessive.                                                                
                  At the outset we note that the arguments made by Mr. Ray are                        
            without factual and legal foundation and appear to represent a                            

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