T.C. Memo. 1998-242
UNITED STATES TAX COURT
DEAN SCOTT HODGE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 8520-96, 16649-96. Filed July 6, 1998.
Dean Scott Hodge, pro se.
Thomas C. Pliske, for respondent.
MEMORANDUM OPINION
COUVILLION, Special Trial Judge: These consolidated cases
were heard pursuant to section 7443A(b)(3) and Rules 180, 181,
1
and 182.
1
Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the years at issue. All Rule
references are to the Tax Court Rules of Practice and Procedure.
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In separate notices of deficiency, respondent determined a
deficiency of $574 in petitioner's Federal income tax for 1992,
and a deficiency of $2,719 in petitioner's Federal income tax for
1994, and additions to tax, for 1994, of $429 and $31, under
sections 6651(a)(1) and 6654, respectively.
The issues for decision are: (1) Whether petitioner is
liable for Federal income taxes on income of $2,040.63 for 1992,
and $21,909 for 1994; (2) whether, for 1994, petitioner is liable
for the addition to tax under section 6651(a)(1) for failure to
file timely a Federal income tax return; and (3) whether, for
1994, petitioner is liable for the addition to tax under section
6654 for failure to make estimated tax payments.
Some of the facts were stipulated, and those facts, with the
annexed exhibits, are so found and are incorporated herein by
reference. At the time the petition was filed, petitioner's
legal residence was Bridgeton, Missouri.
Petitioner filed timely his Federal income tax return for
1992 reporting gross income of $24,304, consisting of wages,
$23,750; interest income, $379; and unemployment compensation,
2
$175. Petitioner also claimed itemized deductions of $7,009.
2
Attached to petitioner's 1992 return were six Forms W-2,
Wage and Tax Statement (Form W-2), from the following employers
reporting the following wages: (1) The Pasta House Company,
$1,917.22; (2) Crestwood Health and Fitness, Inc., $792.50;
(3) Navy Material Transportation Office, $332.26; (4) TAD
Technical and/or Consultants and Designers, $2,005.50;
(continued...)
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The return reflected a tax of $2,246, Federal income tax withheld
of $3,697, and an overpayment of $1,451.
Subsequently, in September 1994, petitioner filed a Form
1040X, Amended U.S. Individual Income Tax Return (1992 amended
return), to amend his previously filed 1992 return. On the 1992
amended return, petitioner decreased his total income to zero and
eliminated all his deductions, credits, and exemptions to reflect
a zero tax. Petitioner listed Federal income tax withheld of
$3,697, the overpayment shown on the original return of $1,451,
and claimed an additional refund of $2,246. Thus, with the
original and amended return, petitioner claimed a refund of the
entire 1992 withholdings. Petitioner signed the 1992 amended
return and stamped above his signature "Without Prejudice UCC 1-
207". In the explanation portion of the 1992 amended return,
petitioner stated that the Internal Revenue Code does not define
"U.S. Individual", and, since he could not determine whether he
was a "U.S. Individual", his original return was filed in error.
Based on the 1992 amended return, respondent abated $574 of
petitioner's tax liability for 1992. In the notice of deficiency
for 1992, respondent determined that this $574 abatement in tax
2
(...continued)
(5) Prudential Ins. Co. of America, $8,522.64; and (6) Kyle
Linden Asphalt Maintenance, $274.75. Also attached to the return
was a Form W-2C, Statement of Corrected Income and Tax Amounts,
from Defense Finance and Accounting Service, Cleveland Center,
reporting wages of $9,903.61.
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equated to $2,040 in income and made an income adjustment for
$2,040, which is characterized in the notice of deficiency as a
3
"Frivolous Deduction".
In November 1994, petitioner prepared and sent to respondent
another Form 1040X for 1992, in which petitioner listed the same
amount of gross income reported on the 1992 amended return,
$24,304; however, on this second amended return, petitioner
listed $12,087.49 as "nontaxable compensation, compensation
exclusion". This second amended return listed a tax of $416 and
claimed a refund of $1,256. Petitioner also signed the second
1992 amended return and stamped above his signature "Without
Prejudice UCC 1-207". In the explanation portion of the Form
1040X, petitioner included a compilation of tax protester
gibberish. This second 1992 amended return was not accepted for
filing by respondent.
3
The notice of deficiency states, in pertinent part:
The * * * [1992 amended return] was based on various
tax protestor arguments, including the taxpayer's
contention that income taxes are voluntary, wages are
not includable in taxable income, and that the
Sixteenth Amendment is limited to excise taxes. The
Service Center erroneously processed the taxpayer's
claim and abated $574 of his tax liability. The
taxpayer received a refund for this abatement.
The assessment of petitioner's 1992 taxes, based on the filed
1992 return, remained except for the $574 abatement resulting
from the 1992 amended return. Thus, the deficiency for 1992 is
limited to the $574 abatement.
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Petitioner's 1994 income tax return reported total income of
$21,575.12, consisting of wages, $21,515.13, and interest income,
4
$59.99. However, under Adjustments to Income on page 1 of Form
1040, petitioner made a material alteration to the form by
listing his salary and wage income of $21,515.13 as a deduction,
resulting in reported adjusted gross income of $59.99. Adjacent
to his improvised adjustment, petitioner whited out the
preprinted line descriptions and typed in "Compensation
exclusion, 26 CFR ('39)9.22(b) Knowlton vs Moore 178 U.S. 41
Right to Labor is nontaxable Murdoch vs Penn. 319 U.S. 105
Coppage vs. Kan. 236 U.S. 1". Petitioner also claimed the
standard deduction of $3,800 and one personal exemption of
$2,450. The return shows a zero total tax liability, Federal
income tax withheld of $1,006.70, and an overpayment of
$1,006.70. Petitioner signed his 1994 Federal income tax return
5
and stamped above his signature "Without Prejudice UCC 1-207".
4
Attached to petitioner's 1994 return were three Forms W-2,
from the following employers reporting the following wages:
(1) Clark Refining and Marketing, Inc., $18,764.34;
(2) Prudential Ins. Co. of America, $609.85; and (3) Staffing
Solutions, Inc., $2,140.94. Also attached to the return was a
Form 1099-R, Distributions From Pensions, Annuities, Retirement
or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., from
Prudential Ins. Co. of America reporting a gross distribution of
$84.43 from petitioner's retirement plan, with $4.33 being
taxable.
5
At trial, counsel for respondent stated "Respondent did not
accept this form for filing due to the qualification beneath his
signature and due to the material alterations." In Sloan v.
(continued...)
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In July 1995, petitioner mailed to respondent a Form 1040X
(1994 amended return) to amend his earlier 1994 return. On the
1994 amended return, petitioner reported the same items of
income, deduction, and exemption as he reported on the original
1994 return, as well as the same tax liability and refund amount.
As apparently had become a matter of routine, petitioner also
signed the 1994 amended return and stamped above his signature
"Without Prejudice UCC 1-207". Once again, in the explanation
portion of the 1994 amended return, petitioner recited tax
protester rhetoric similar to that stated on his previous
returns. Also, petitioner attached to his 1994 amended return a
letter and several documents asserting further tax protester
jargon. For similar reasons as recited above, respondent did not
accept petitioner's 1994 amended return for filing.
In the notice of deficiency for 1992, respondent disallowed
petitioner's "Frivolous deduction" of $2,040.63 and itemized
5
(...continued)
Commissioner, 102 T.C. 137, 146 (1994), affd. 53 F.3d 799 (7th
Cir. 1995), this Court held that a tampered return does not
constitute a return where the tampered portion of the return
affects the form's useability by respondent, requiring the
handling of the return through special procedures and removal of
the return from normal processing channels, thus substantially
impeding the Commissioner's physical task of handling and
verifying tax returns. Here, by claiming a "compensation
exclusion" of his salary from tax, reflected by a material
alteration of the Form 1040, would have required respondent to
withdraw petitioner's return from normal processing to ascertain
the merits of petitioner's claim that such income was excludable
from tax.
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deductions of $0.08, and determined a deficiency in tax of $574,
which equals the aforementioned abatement and refund respondent
6
had erroneously paid to petitioner. In the notice of deficiency
for 1994, respondent determined that petitioner had $21,513 in
wages, $55 in interest income, a $4 taxable distribution from an
Individual Retirement Account (IRA), and a $337 State income tax
refund. Respondent allowed petitioner the standard deduction of
$3,800. These adjustments resulted in a deficiency in tax of
$2,719. Respondent allowed a withholding credit of $1,004,
resulting in a balance due of $1,715. Adjustments in the notices
of deficiency were based on information reported to respondent by
various payers.
The determinations of the Commissioner in a notice of
deficiency are presumed correct, and the burden is on the
taxpayer to prove that the determinations are in error. Rule
142(a); Welch v. Helvering, 290 U.S. 111 (1933).
The first issue is whether petitioner is liable for Federal
income taxes on income of $2,040.63 for 1992, and income of
$21,909 for 1994, as determined by respondent in the notices of
deficiency. Petitioner admitted at trial that he was employed in
several different jobs during 1992, and that, during such year,
6
The Court notes that petitioner failed to advance an
argument, either in his pleadings or at trial, as to respondent's
disallowance of $0.08 in itemized deductions. Thus, the Court
considers this issue to have been abandoned by petitioner, and
respondent is sustained thereon.
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he received wages in compensation for his services. Petitioner
further admitted at trial that he received, for 1994, wages of
$21,513 in compensation for his services, interest income of $55,
taxable IRA distribution of $4, and a State income tax refund of
$337. Petitioner contends, however, that this income is not
subject to Federal income taxation because the words "income" and
"U.S. Individual" are not defined in the Internal Revenue Code,
and there is no explanation in the Internal Revenue Code of who
is subject to Federal income taxes. Petitioner also asserts a
series of disjointed and unsupported tax protester arguments such
as "the income tax is voluntary", "compensation is an direct item
of income not taxable by the federal government", "the 16th
amendment and the income tax is limited to indirect excise
taxes", and so forth. Petitioner did not challenge the amounts
of income determined by respondent and made no claim to
7
deductions, exemptions, or credits.
All of the arguments advanced by petitioner are completely
lacking in factual and legal foundation and constitute a textbook
case of a protest of the Federal tax laws. These types of tax
protester arguments have been heard on numerous occasions by this
7
Even though petitioner took the position that none of his
income was taxable, in his petition, he made no claim for an
overpayment of taxes for 1992 in excess of the amount abated by
respondent. As noted earlier, the only income adjustment for
1992 is the $2,040.63 for recovery of the $574 tax abatement by
respondent based on petitioner's September 1992 refund claim.
See supra note 3.
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Court, as well as other courts, and have been consistently
rejected. The Court sees no need to further respond to each of
petitioner's arguments with somber reasoning and copious
citations of precedent, to do so might suggest that petitioner's
arguments possess some measure of colorable merit. See Crain v.
Commissioner, 737 F.2d 1417 (5th Cir. 1984). In short,
petitioner is a taxpayer subject to the income tax laws and to
the jurisdiction of this Court. See Abrams v. Commissioner, 82
T.C. 403, 406-407 (1984).
On this record, the Court holds that petitioner is liable
for Federal income taxes on income of $2,040.63 for 1992, and
income of $21,909 for 1994, as determined by respondent in the
notices of deficiency. Respondent is, therefore, sustained on
this issue.
The second issue is whether petitioner is liable for the
addition to tax under section 6651(a)(1) for his failure to file
timely a Federal income tax return for 1994. Section 6651(a)(1)
imposes an addition to tax for a taxpayer's failure to file
timely returns, unless the taxpayer can establish that such
failure "is due to reasonable cause and not due to willful
neglect." Petitioner's 1994 income tax return was due to be
filed on or before April 15, 1995. Petitioner failed to file a
valid return for 1994. Sloan v. Commissioner, 102 T.C. 137
(1994), affd. 53 F.3d 799 (7th Cir. 1995); see supra note 5.
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Petitioner presented nothing to show that he filed timely his
1994 return, nor did he raise as an issue any claim or contention
that the tampered or altered Forms 1040 he submitted for 1994
constituted a valid return for that year. Respondent, therefore,
is sustained on the section 6651(a)(1) addition to tax.
The third issue is whether petitioner is liable for the
addition to tax under section 6654 for his failure to make
estimated tax payments in 1994. Section 6654 provides for an
addition to tax "in the case of any underpayment of estimated tax
by an individual". There is no exception contained therein
relating to reasonable cause and lack of willful neglect.
Subject to certain exceptions provided by statute, this addition
to tax is otherwise automatic if the amounts of the withholdings
and estimated tax payments do not equal statutorily designated
amounts. Niedringhaus v. Commissioner, 99 T.C. 202, 222 (1992).
Petitioner failed to produce any evidence to show that
respondent's determination of his liability for the addition to
tax under section 6654 is in error. Consequently, because
petitioner failed to make any estimated tax payments for 1994,
respondent's determination in this regard is sustained.
Grosshandler v. Commissioner, 75 T.C. 1, 20-21 (1980).
On a final note, section 6673(a)(1) authorizes this Court to
require a taxpayer to pay a penalty to the United States, in an
amount not to exceed $25,000, whenever it appears that
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proceedings have been instituted or maintained by such taxpayer
primarily for delay, or that the taxpayer's position in a
proceeding is frivolous or groundless. A petition in the Tax
Court is frivolous "if it is contrary to established law and
unsupported by a reasoned, colorable argument for change in the
law." Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986).
At trial, petitioner quite frankly stated to the Court that
his position was nothing more than an act of civil disobedience,
and that, if enough people would come forward to absorb
respondent's time, as well as the Court's time, with cases of
this nature, perhaps Congress would change the income tax system.
The Court is convinced that petitioner instituted these
proceedings primarily for purposes of delay. Certainly, his
contentions are frivolous. It is distressingly obvious that
petitioner had no intention of obeying the internal revenue laws
of this country, and that he deliberately wasted the time and
energy of this Court as he frankly admitted. Moreover, it
appears that petitioner intends to pursue similar tactics in the
future, as well as encourage others to do so, until his
grievances are heard by members of Congress. Petitioner is
reminded that this Court is not a forum for expressing "soap-box"
views condemning the unfairness of our Federal income tax laws or
the system by which such laws are enforced.
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On this record, the Court holds that petitioner has
instituted and maintained these proceedings primarily for
purposes of delay, and that petitioner's position that his
earnings are exempt from income tax is frivolous and groundless.
Thus, the Court hereby imposes upon petitioner a penalty in each
case, under section 6673, in the amount of $250 in favor of the
United States.
Decisions will be entered
for respondent.