T. C. Memo. 1995-476
UNITED STATES TAX COURT
CHARLES P. DEWITT, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3715-95. Filed October 4, 1995.
Charles P. DeWitt, pro se.
Donald R. Gilliland, for respondent.
MEMORANDUM OPINION
SCOTT, Judge: This case is before us on respondent's motion
for judgment on the pleadings.
Respondent determined deficiencies in petitioner's Federal
income taxes and additions to tax for the calendar years 1987 to
1992 in the amounts as follows:
Additions to tax
Year Deficiency Sec. 6651(a)(1) Sec. 6654
1987 $4,921 $1,230 $266
1988 4,455 1,114 283
1989 1,946 342 87
1990 3,540 282 57
1991 3,971 291 49
1992 5,142 803 132
All section references are to the Internal Revenue Code in
effect for the years in issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated.
In the notice of deficiency respondent determined that
petitioner failed to file a Federal income tax return for any of
the years here involved. The income determined as received by
petitioner was primarily self-employment income for the years
1987 and 1988, and wage income for the other years.
Petitioner placed in issue in his petition all the
deficiencies and additions to tax determined by respondent and
claimed an overpayment of $7,726. In the petition, petitioner
states that he disagrees with the deficiencies determined
because:
As a result of the adoption of the 16th Amendment to
the U.S. Constitution, the income tax is an indirect
tax. Indirect taxes are never upon property, money or
otherwise, but only upon taxable activities. All
income received by Petitioner during tax years 1987-
1992 arose from sources other than taxable activities.
All the above is claimed in accordance with, but not
limited to, 26 C.F.R. (1939) Section 39.22(b)-1(a),
(see attached copy).
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There is no other statement of facts or assignment of errors in
the petition.
Respondent in her answer to the petition denied all
allegations. Respondent affirmatively alleged that petitioner's
position was frivolous, that petitioner had unreasonably failed
to pursue administrative remedies before commencing this case,
and, therefore, is liable for a penalty under section 6673.
Attached to the answer were copies of letters sent by petitioner
to respondent's agents during the course of the investigation of
his tax liabilities, which show that petitioner failed to
cooperate with respondent's agents in the conduct of the
investigation on alleged constitutional grounds.
Petitioner attached a document to his reply to respondent's
affirmative allegations in her answer called "Memorandum of Law",
in which he argued that the income tax was an excise tax that was
applicable only to income that arose from taxable activities, and
that none of his activities were taxable activities.
This case is set for trial on the calendar of this Court in
Birmingham, Alabama, commencing October 30, 1995. On August 7,
1995, respondent filed a motion for judgment on the pleadings in
which she asked that the Court hold that no ground assigned in
the petition raised any factual issue with respect to the
correctness of the determination in the notice of deficiency, but
petitioner merely alleged fictitious constitutional issues, which
had been determined contrary to petitioner's position in a number
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of cases. Respondent stated that since claims comparable to
those made by petitioner had been rejected by this Court and
other courts that this case be decided in her favor on the
pleadings. In the motion respondent also requests the Court to
award damages to the United States in an appropriate amount under
section 6673.
By order dated August 9, 1995, petitioner was given until
September 8, 1995, to reply to respondent's motion for judgment
on the pleadings. In the order giving petitioner until September
8, 1995, to respond to respondent's motion, the Court pointed out
that this Court and other courts had rejected arguments similar
to petitioner's arguments, and that if petitioner responded
without satisfactorily showing any distinction between the
allegations he now makes and those uniformly rejected by this and
other courts as frivolous, respondent's motion would be granted
and the deficiencies and additions to tax as set forth in the
notice of deficiency would be determined against petitioner. The
order directed petitioner to file an amended petition, if he
contended there were any factual errors in respondent's
computation of his tax liability for any year here in issue. The
order also directed petitioner to state the reasons, if any, why
this Court should not award damages to the United States under
section 6673 based on the fact that this case was instituted
primarily for delay and that petitioner's position in the case is
frivolous or groundless.
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Petitioner on September 11, 1995, in his response to
respondent's motion for judgment on the pleadings apparently
recognizes that in Lonsdale v. Commissioner, 661 F.2d 71 (5th
Cir. 1981), affg. T.C. Memo. 1981-122, the Court of Appeals
affirmed our holding that a taxpayer's argument that the income
tax is a direct tax that must be apportioned among the several
States, which is similar to the argument petitioner makes in this
case, was without merit in view of the provisions of the
Sixteenth Amendment to the Constitution. He states in his
response to respondent's motion that our prior holdings and those
of Courts of Appeals do not mean that this Court is not bound by
decisions of the U.S. Supreme Court, and that the holdings of the
Supreme Court of the United States in Stanton v. Baltic Mining
Co., 240 U.S. 103 (1916), and Brushaber v. Union Pac. R.R., 240
U.S. 1 (1916), support his position. Petitioner cites United
States v. Gaumer, 972 F.2d 723 (6th Cir. 1992), in support of his
position. The Gaumer case cited by petitioner was an appeal by a
defendant from a conviction for willful failure to file income
tax returns. The Court of Appeals reversed the conviction and
directed a new trial, since it found error in the ruling of the
trial judge that materials which the defendant testified he had
read and believed supported his position that he was not required
to file income tax returns were not admitted in evidence.
Relying on Cheek v. United States, 498 U.S. 192 (1991), the court
stated in United States v. Gaumer, supra at 724:
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In the case at bar, Mr. Gaumer testified that his
study of Defendant's Exhibit A--a book that purports to
tell the reader "[w]hy you are not legally required to
file tax returns"--led him to do further research to
verify the author's claims that people like himself had
no such obligation. This research led him to Exhibits
B through E, consisting of photocopies of Brushaber v.
Union Pacific R.R. Co., 240 U.S. 1, 36 S.Ct. 236, 60
L.Ed. 493 (1916), Flint v. Stone Tracy, 220 U.S. 107,
31 S.Ct. 342, 55 L.Ed. 389 (1911), Stanton v. Baltic
Mining Co., 240 U.S. 103, 36 S.Ct. 278, 60 L.Ed. 546
(1916), and pages 2578-81 of the Congressional Record
of March 27, 1943. Gaumer testified that he learned
from Brushaber and the Congressional Record excerpt
that income taxes are excise taxes. * * *
As a legal matter, the exhibits do not validate
Mr. Gaumer's views. As a factual matter, however, we
think a jury might have discerned a nexus between these
materials and Mr. Gaumer's stated belief that he was
not required to file income tax returns. Brushaber and
the Congressional Record excerpt do indeed state that
for constitutional purposes, the income tax is an
excise tax. This statement is reiterated in Stanton,
and Flint discusses the scope of the term "excise tax"
in a way that could conceivably be thought to provide
some comfort to a person in defendant Gaumer's station.
Mr. Gaumer should therefore have been allowed to
present the contents of the exhibits to the jury to the
extent that the material was relevant.
Clearly, the case of United States v. Gaumer, supra, does
not support petitioner's position in the present case, since it
is stated therein that the cases of Stanton v. Baltic Mining Co.,
supra, and Brushaber v. Union Pac. R.R., supra, on which
petitioner relies in the instant case, as a legal matter, do not
validate the views that a taxpayer is not required to file income
tax returns because an income tax is an excise tax. The Court's
holding merely was that the evidence should have been permitted
to be introduced in connection with the issue of whether the
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defendant's failure to file returns was willful, which was a
necessary element of proof in that criminal case.
In Coleman v. Commissioner, 791 F.2d 68 (7th Cir. 1986),
affg. an order of this Court granting summary judgment in favor
of respondent, in a case similar to this case, cited by
respondent in her motion for judgment on the pleadings, the court
specifically held that the arguments made by the taxpayer that
the Sixteenth Amendment authorizes only excise taxes and excise
taxes will be imposed only on Government granted privileges, were
"tired arguments that were frivolous". In Martin v.
Commissioner, 756 F.2d 38, 40 (6th Cir. 1985), affg. T.C. Memo.
1983-473, also cited by respondent in her motion for judgment on
the pleadings, the Court of Appeals, in disposing of a taxpayer's
argument that the Supreme Court had held that an income tax is an
excise tax, which can only be assessed against those either
licensed or incorporated, stated:
This argument is baseless. In Brushaber
[Brushaber v. Union Pacific R.R. Co., 240 U.S. 1
(1916)], the Court found the 1913 income tax law to be
constitutional. The Court also noted that in Pollock
[Pollock v. Farmers Loan & Trust Co., 158 U.S. 601
(1895)] it had previously found the taxing of income
from professions, trades, employments or vocations to
be constitutional in the form of an excise tax. In
light of the sixteenth amendment, however, all taxation
of income, "from whatever source derived," was found to
be constitutional in Brushaber. A multitude of cases
following Brushaber have held that the type of revenues
and receipts earned by appellant, a substantial farmer,
constitute taxable income under the Internal Revenue
Code. * * *
Martin v. Commissioner, supra at 40.
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Since petitioner has raised only frivolous legal issues in
his petition, which, as a matter of law, do not sustain his
position, the respondent's motion for judgment on the pleadings
is properly taken. Rule 123; Abrams v. Commissioner, 82 T.C.
403, 408 (1984).
Respondent in her answer in this case affirmatively asserted
the application to this case of section 6673. In view of the
facts that: (1) Respondent's motion cited cases holding a
position identical to that taken in this case is frivolous;
(2) the order of this Court dated August 9, 1995, also cited
cases holding positions similar to the position taken by
petitioner in the instant case to be frivolous; (3) the order of
this Court dated August 9, 1995, stated that if petitioner did
not elect to amend his petition to allege factual disagreements
with respondent's determination, respondent's motion would be
granted, and (4) the order dated August 9, 1995, stated that if
petitioner did not elect to amend his petition he should state
his reasons, if any, why this Court should not award damages to
the United States under section 6673 on the grounds that this
case was instituted primarily for delay and that petitioner's
position in the case is frivolous or groundless, we conclude that
a penalty under section 6673 should be determined against
petitioner. Petitioner in his response to respondent's motion
for judgment on the pleadings stated no reason why this Court
should not award damages to the United States under section 6673
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on the grounds that this case was instituted primarily for delay
and that petitioner's position in the case is frivolous or
groundless, except the argument that the income tax is an excise
tax which is not applicable to his income.
The Court, therefore, determines that respondent's motion
for judgment on the pleadings is granted. The Court further
holds that petitioner is required to pay to the United States a
penalty of $5,000 under the provisions of section 6673.
An order granting respondent's motion for
judgment on the pleadings will be entered, and
decision will be entered for respondent in
accordance with the determination in the notice
of deficiency and the penalty determined herein.