Angela Matthews - Page 10

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            v. Commissioner, supra at 66.  Additionally, counsel had fair                             
            notice that costs might be imposed against him for pursuing such                          
            frivolous arguments.  At trial, after Mr. Ray made his opening                            
            statement, the Court read section 6673(a)(2) aloud and gave the                           
            following warning:                                                                        
                  The Court simply read that section to you, Mr. Ray,                                 
                  suggesting to you that you proceed at your peril.  And                              
                  if you want to proceed, you certainly may proceed.  It                              
                  may well be that there's something new that I've never                              
                  seen or heard of before, but I'd, frankly, be                                       
            Despite the warning, Mr. Ray proceeded to present argument with                           
            respect to the aforementioned issues.  When Mr. Ray asked the                             
            Court if briefs could be filed with respect to the issues raised,                         
            the Court initially declined.  At a later point in the                                    
            proceeding, the Court indicated that it would permit briefs on                            
            the issue of the application of penalties or costs under section                          
            6673.  Nevertheless, Mr. Ray submitted a brief which included                             
            other arguments previously made.  Mr. Ray also indicated in                               
            petitioners' brief as follows:                                                            
                  At trial the undersigned was unaware that no financial                              
                  information had been included on the Forms 1040 NR                                  
                  filed by Petitioners and would not have argued that                                 
                  said filing constitutes a return.  This attorney is                                 
                  without sufficient information on the subject to form                               
                  an opinion on the matter.                                                           
                  The record in this case demonstrates that petitioners'                              
            counsel acted in bad faith.  Bad faith relates not only to the                            
            commencement of litigation, but to the continuation of litigation                         
            vexatiously, wantonly, or for oppressive reasons.  Harper v.                              

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