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Mr. and Mrs. Norton are liable for the additions to tax under
section 6651(a).
IV. Are Mr. and Mrs. Norton Liable for Penalties Imposed Under
Section 6673?
Respondent requests that we impose a penalty under section
6673 on Mr. and Mrs. Norton. Section 6673(a)(1) authorizes this
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 a taxpayer in the Tax Court is
frivolous “if 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). A
penalty is properly imposed when the taxpayer knew or should have
known that his claim or argument was frivolous. See Hansen v.
Commissioner, 820 F.2d 1464, 1470 (9th Cir. 1987).
We find that petitioners’ arguments are frivolous. They
have caused this Court to waste its limited resources on their
erroneous views of the tax law which they should have known are
completely without merit. In view of the foregoing, the Court
will exercise its discretion under section 6673(a)(1) and require
Mr. and Mrs. Norton to pay a penalty to the United States in the
amount of $5,000.
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