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were denied. On June 22, 2000, petitioner responded by sending
the IRS a letter making frivolous arguments. Petitioner’s
frivolous arguments included, among others, that he derived none
of his income from sources outside the United States and
therefore his income was not taxable under section 861 and
various associated regulations. On August 11, 2000, the IRS sent
petitioner notice that his refund claims for the 1996, 1997, and
1998 taxable years were disallowed, informed him that the Tax
Court and other Federal courts have repeatedly rejected his
position, and again informed him that a penalty of $500 may be
assessed under section 6702. On September 4, 2000, the IRS
assessed the Frivolous Return Penalty under section 6702 against
petitioner for his 1996, 1997, and 1998 taxable years.
During 1999, petitioner purchased a package of documents for
$9,000 from John P. Ellis (Mr. Ellis) and Jeff Pollard (Mr.
Pollard). Petitioner used the package of documents to establish
a sham trust under the name of Bay Point Enterprises (Bay Point).
When petitioner purchased the package, petitioner knew that
Messrs. Ellis and Pollard were being investigated by a grand jury
for promoting the sham trusts.
Petitioner transferred to Bay Point his limited partnership
interest in Winthrop Venture Capital that he had acquired in 1997
for $100,000. Petitioner directed Winthrop Venture Capital to
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Last modified: May 25, 2011