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Seventh Circuit has held that a finding of bad faith is necessary
before an attorney may be sanctioned under section 6673(a)(2).
Johnson v. Commissioner, 289 F.3d 452, 456 (7th Cir. 2002), affg.
116 T.C. 111 (2001). The Court of Appeals added, however, that
bad faith under section 6673(a)(2) is not a subjective concept:
“‘reckless’ or ‘extremely negligent’ conduct will satisfy it.”
Id. Because we are unsure of appellate venue, and because we
find that Mr. Jones’s conduct would constitute bad faith under
the Court of Appeals for the Seventh Circuit’s test for bad
faith, we shall for purposes of this case (and without deciding
the standard in this Court), adopt that standard. See Takaba v.
Commissioner, supra at 298.
We believe that Mr. Jones intentionally abused the judicial
process by bringing and continuing these cases on behalf of
petitioners knowing their claims to be without merit. In support
of our determination to impose a section 6673(a)(1) penalty on
petitioners, we found that they initiated and maintained these
proceedings primarily for delay and, in support of that goal,
raised frivolous arguments and relied on groundless positions.
In other words, petitioners present no meritorious claims.
Moreover, we have no doubt that Mr. Jones has known all along
that petitioners’ claims lack merit. We have no doubt of that
because of Mr. Jones’s candor in responding to the orders to show
cause. In those responses, Mr. Jones admits that, while, on
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Last modified: November 10, 2007