Cabirac v. Commissioner

Michael Cabirac (plaintiff) filed purported tax returns for 1997 and 1998. However, the returns contained zeros on all the relevant lines for computing his tax liability. The commissioner (defendant) of the Internal Revenue Service (IRS) rejected the returns as frivolous and, pursuant to 26 U.S.C. § 6020, prepared a substitute for return (SFR) for each of the years in place of the frivolous returns. Like Cabirac’s rejected returns, the SFRs showed zeros on the relevant lines for computing Cabirac’s tax liability, showed no tax due, and generally contained the same information and entries as the rejected returns. The SFRs were not subscribed by the secretary of the Treasury Department (secretary), as was required by § 6020(b)(2). The commissioner subsequently prepared a notice of proposed adjustments, which he sent to Cabirac along with the report of a revenue agent. However, the notice and the revenue agent’s report were not attached to the SFRs. The commissioner eventually determined deficiencies in Cabirac’s taxes for 1997 and 1998, which included additions to tax (i.e., penalties) pursuant to 26 U.S.C. § 6651(a)(2) for Cabirac’s failure to pay the tax shown on a return. Cabirac petitioned the United States Tax Court for a redetermination of the claimed deficiencies. Among other things, Cabirac contended that he was not subject to a § 6651(a)(2) failure to pay addition to tax because there were no valid returns for 1997 and 1998, meaning that he could not have failed to pay the tax shown on a return. The commissioner responded that the SFRs, in conjunction with the notice of proposed adjustments and the revenue agent’s report, constituted valid returns for § 6651(a)(2) purposes.