Chay R. Stewart - Page 10

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          by the taxpayer is frivolous if it is contrary to established law           
          and is not supported by a reasoned, colorable argument for change           
          in the law.  Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir.             
          1986); Gilligan v. Commissioner, T.C. Memo. 2004-194.                       
               Petitioner’s contention that the Commissioner cannot                   
          determine a deficiency for a year for which a taxpayer did not              
          file a return is frivolous.  Scruggs v. Commissioner, T.C. Memo.            
          1995-355, affd. without published opinion 117 F.3d 1433 (11th               
          Cir. 1997); Zyglis v. Commissioner, T.C. Memo. 1993-341, affd.              
          without published opinion 29 F.3d 620 (2d Cir. 1994).                       
               However, not all of petitioner’s arguments are frivolous.              
          For example, petitioner contended in his pretrial memorandum that           
          respondent is required to reduce petitioner’s gross receipts by             
          the average business expense for the insurance industry.                    
          Petitioner pointed out that in Brenner v. Commissioner, T.C.                
          Memo. 2004-202, the Commissioner allowed as a business expense              
          deduction 54.77 percent of the gross receipts of a nonfiling                
          taxpayer from Ormond Beach, Florida, who sold insurance and                 
          financial products.                                                         
               We do not impose a penalty under section 6673 because not              
          all of petitioner’s arguments are frivolous.  However, we warn              
          petitioner that the Court may impose this penalty in the future             
          if he makes frivolous arguments or institutes proceedings                   
          primarily for delay.                                                        
               To reflect the foregoing,                                              




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