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commissions on the interests that he sold. Petitioner’s written
contract as to those services provided that petitioner would not
be considered by the parties thereto to be an employee but an
independent contractor. The contract also provided that
petitioner was fully responsible for the Federal, State, and
local taxes and Social Security contributions payable with
respect to those services. During 1999, petitioner received
$106,077 from LLC. Petitioner also received a tax refund of $266
from the State of California during that year.
Petitioner filed his 1999 Federal income tax return on
December 14, 2000, and reported therein that he had “zero” income
and “zero” tax. He attached a letter to his return indicating,
among other things, that he was unaware of any section of the
Internal Revenue Code which established an income tax liability.
This letter was similar to tax protester letters we have seen in
other cases, e.g., Copeland v. Commissioner, T.C. Memo. 2003-46,
and Smith v. Commissioner, T.C. Memo. 2003-45.
On March 21, 2001, respondent sent to petitioner a letter
advising him that his tax-reporting position was frivolous and
giving him the opportunity to correct his position in order to
avoid imposition of frivolous return penalties under section
6702. On April 1, 2001, petitioner responded to respondent’s
letter. Petitioner stated in part:
The only Code sections identified in the 1040's
Privacy Act Notice as allegedly applying to income
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