David H. Kindred v. Commissioner of Internal Revenue

United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Argued December 4, 2012
Decided May 31, 2013
Before
WILLIAM J. BAUER, Circuit Judge
DAVID F. HAMILTON, Circuit Judge
JOHN J. THARP, JR., 1 District Judge
No. 10‐3904
DAVID H. KINDRED,
Petitioner‐Appellant,
v.
COMMISSIONER OF
INTERNAL REVENUE,
Respondent‐Appellee.
Appeal from the United States Tax Court
No. 13200‐07
O R D E R
David H. Kindred is an Illinois resident earning in excess of $2 million per year, and did not
file or pay his income taxes in 2001 or 2002. As a result, the Commissioner prepared substitute
returns and made assessments against Kindred. Kindred’s deficiencies were calculated to be
NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with
Fed. R. App. P. 32.1
1 The Honorable John J. Tharp, Jr., District Judge of the United States District Court for
the Northern District of Illinois, Eastern Division, sitting by designation.

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No. 12-2953 Page 2
$912,529 for taxable year 2001 and $1,184,115 for taxable year 2002, and additions to the
assessed tax in both years. The additions to Kindred’s tax liability were for failure to file timely
tax returns, I.R.C. § 6651(a)(1); failure to make timely tax payments, I.R.C. § 6651(a)(2), and for
underpayment of taxes I.R.C. § 6654(a).
On March 9, 2007, the Commissioner sent Kindred a notice of deficiency for 2001 and 2002.
Kindred then filed a petition requesting redetermination of the deficiencies with the Tax
Court. Thereafter, the parties entered into a stipulation of settled issues in which they agreed
that Kindred’s tax liability for 2001 (jointly owed with his wife) was $439,619 and that he was
entitled to an earned income credit of $6,000. The parties also agreed that for taxable year 2002,
Kindred’s liability (again jointly owed with his wife) was $325,890. The stipulation also stated
that the parties did not reach an agreement on the additions to the tax.
The case was ultimately submitted to the Tax Court as fully stipulated pursuant to Tax
Court Rule 122. In his brief before the Tax Court, Kindred argued that the funds seized by the
United States in United States v. Vallone et al., Case No. 04‐CR‐372, an unrelated criminal
forfeiture action, should be applied to his tax liability. However, when Kindred sought to
intervene in that case, the district court found that he was, at best, an unsecured creditor and
had no standing to contest the forfeiture in that action. Kindred also argued before the Tax
Court that he disagreed with the imposition of additions to tax; however, Kindred did not
provide any evidence, defense, or other rationalization supporting his “disagreement” with the
assessed penalties.
On May 13, 2010, the Tax Court issued a memorandum opinion upholding the
Commissioner. The Tax Court held that it lacked jurisdiction over the forfeited funds in
Vallone, and further noted that the district court had already rejected Kindred’s claims to the
forfeited funds and therefore those funds could not be credited against his outstanding tax
liability.
The Tax Court ultimately held that Kindred was liable for the additions as asserted by the
Commissioner. The Tax Court found nothing in the record to support Kindred’s
“disagreement” with the additions, and noted that he failed to offer any defense or exception
as required under the Code. The Court explained:
There is no evidence in the record that petitioner had reasonable cause for a late
filing or that an exception to the section 6654 addition to tax for failure to pay
estimated taxes applies, and petitioner thus cannot prevail on those issues.
Moreover, petitioners briefs proposed findings of fact unsupported by and
contrary to the record and did not address the merits of the additions to tax.
Thus he has conceded the absence of reasonable cause for the late filings of his

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No. 12-2953 Page 3
returns for the years in issue and the absence of an exception to the section 6654
addition to tax.
Now, on appeal, Kindred only challenges the Tax Court’s finding with regard to the
additions to tax. Kindred argues that the Tax Court committed clear error: (1) when it found
that Kindred did not address the merits of the additions to tax argument, and (2) when the
court failed to provide a basis for its finding that Kindred waived his additions to tax
argument, when he did not meaningfully address it before the court. We review the Tax
Courtʹs factual determinations, as well as the application of legal principles to those factual
determinations, for clear error. Pittman v. C.I.R., 100 F.3d 1308, 1312 (7th Cir. 1996) citing Eyler
v. Commissioner, 88 F.3d 445, 448 (7th Cir. 1996).
First, we agree with the Tax Court that Kindred did not address the merits of his argument
against the additions to tax. While it is clear from the record that Kindred “disagreed” with the
additions to tax, that fact alone is obviously not sufficient to avoid the additions. Penalties are
assessed by the IRS when a taxpayer fails to pay income taxes on time “unless it is shown that
such failure is due to reasonable cause and not due to willful neglect.” 26 U.S.C. § 6651(a)(2).
Unless both reasonable cause and a lack of willful neglect are established, imposition of these
penalties is mandatory. Matter of Carlson, 126 F.3d 915, 921 (7th Cir. 1997) (citations omitted).
Kindred failed to support his “disagreement” with the assessed additions with evidence of
reasonable cause. Accordingly, the Tax Court found in favor of the Commissioner and we
agree.
Next, Kindred confusingly argues that the Tax Court committed clear error “by failing to
address the additions to tax issue.” Kindred contends that the Tax Court treated his argument
in a cursory fashion when it determined that Kindred did not address the merits of the
additions to tax issue and therefore “has conceded the absence of reasonable cause for the late
filing of his returns . . . .”
Far from cursory, we find the Tax Court’s assessment on point. Outside of Kindred’s
general “disagreement” with the additions to tax, he offers no viable explanation that could be
considered reasonable cause or an exception to the § 6654 addition to tax. The Tax Court noted
that the undisputed facts are that Kindred did not file timely returns, did not pay the
deficiencies at the time they were due, and has failed to present any persuasive reason or
authority in support of his general “disagreement” with the additions to tax. We agree; and
hence, find no clear error and AFFIRM the decision of the Tax Court.

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