T.C. Memo. 2000-26
UNITED STATES TAX COURT
RUSSELL S. GREENE, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 15225-98. Filed January 21, 2000.
P, maintaining that income tax could not
constitutionally be imposed on his earnings, did not file
income tax returns for the taxable years 1992 through 1996.
R determined deficiencies for individual income taxes and
self-employment taxes attributable to compensation,
interest, dividends, and capital gain received by P. R
further determined an addition to tax under sec. 6651(a),
I.R.C., for failure to file.
Held: P is subject to Federal income tax statutes and
is liable for the deficiencies determined by R.
Held, further, P is liable for the sec. 6651(a),
I.R.C., delinquency addition to tax for failure to file.
Held, further, on the Court’s own motion, P is liable
for a penalty in the amount of $1,000, pursuant to sec.
6673(a), I.R.C., for asserting a frivolous and groundless
position in this proceeding.
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Russell S. Greene, pro se.
Mark A. Weiner, for respondent.
MEMORANDUM OPINION
NIMS, Judge: Respondent determined the following
deficiencies and additions to tax with respect to petitioner’s
Federal income taxes for the taxable years 1992 through 1996:
Taxable Income Tax Addition to Tax
Year Deficiency Sec. 6651(a)(1)
1992 $4,494 $1,020
1993 3,757 730
1994 9,079 2,180
1995 7,764 1,914
1996 7,121 1,378
After concessions, the issues remaining for decision are:
(1) Whether petitioner failed to report income from wages,
nonemployee compensation, interest, dividends, and capital gain
upon which petitioner is liable for individual Federal income
taxes;
(2) whether petitioner is liable for self-employment taxes
pursuant to section 1401 on income earned in the form of
nonemployee compensation; and
(3) whether petitioner is liable for the section 6651(a)(1)
addition to tax for failure to timely file income tax returns for
the taxable years 1992 through 1996.
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Unless otherwise indicated, all section references are to
sections of 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.
This case was submitted fully stipulated, and the facts are
so found. The stipulations of the parties, with accompanying
exhibit, are incorporated herein by this reference.
Background
Russell S. Greene resided in Oxnard, California, at the time
of filing his petition in this case. Petitioner maintains that
he is not subject to Federal income taxes. He did not file tax
returns for the taxable years 1992, 1993, 1994, 1995, and 1996.
He stipulated, however, to having received income from the
following sources, in the amounts and of the types stated:
Payor & 1992 1993 1994 1995 1996
(Type)
of Income
Ventura County Shuttle, Inc. $6,712 $5,291 $308
(wages)
Survival Systems Staffing 9,134 35,976
Center
(wages)
St. Bernarine of Siena Church 600 1,800 $1,000
(wages)
Sandra Jo Ann Nickerson 21,249 $25,943
(wages)
Padre Serra Parish 2,955
(nonemployee compensation)
St. Maximilian Kolbe Church 1,600 5,585 8,000 9,540
(nonemployee compensation)
Patrick McDonald, Paddy Music 850
(nonemployee compensation)
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St. Judes Catholic Church 2,900
(nonemployee compensation)
Chesne Boren Music 850
(nonemployee compensation)
Bank of America 18
(interest)
Atlantic Financial Federal 33
Savings Bank
(interest)
Jobee Development Company 1,125 800 2,250 1,012
(dividend)
Marvin Goodson, Alvin Duras – 916
Co-Trustees
(capital gain)
The amounts listed above as wages and nonemployee
compensation were paid to petitioner in consideration of
contractual services performed by him. The amounts identified as
interest, dividend, and capital gain were likewise received by
petitioner as personal earnings.
Discussion
Petitioner contends that Federal income tax statutes,
including sections 1, 3, 61, and 1401, may not constitutionally
be applied to a private independent contractor or citizen such as
himself. He argues that to subject persons who are not employees
of a Government-created or -sanctioned entity to the tax laws
both contravenes the language of the statutes and constitutes a
violation of due process. He additionally claims that, because
he is contesting the power to tax rather than the amount of tax,
the burden of proof in this matter should rest upon respondent.
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Conversely, respondent asserts that income received by
petitioner is taxable pursuant to the explicit terms of the
Internal Revenue Code. Respondent further contends that
petitioner’s constitutional arguments are without merit, and, as
petitioner has presented no other evidence rebutting the
determinations made by respondent, the deficiencies and additions
to tax should be sustained.
We agree with respondent that the Federal income tax
statutes are properly applicable to petitioner. We therefore
conclude that petitioner is liable for the deficiencies as
determined by respondent and that petitioner’s failure to file
income tax returns justifies imposing the delinquency addition to
tax.
As a threshold matter, we observe that petitioner’s efforts
to shift the burden of proof to respondent on constitutional
grounds are meritless. The burden of proof rests on the
taxpayer, except in certain situations not relevant here. See
Rule 142(a). Furthermore, this burden of proof has been
uniformly applied, regardless of whether the taxpayer’s arguments
addressed the amount or the constitutionality of the tax. See,
e.g., Larsen v. Commissioner, 765 F.2d 939, 941 (9th Cir. 1985);
Abrams v. Commissioner, 82 T.C. 403, 405 (1984); Kish v.
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Commissioner, T.C. Memo. 1998-16; Minguske v. Commissioner, T.C.
Memo. 1997-573; Frami v. Commissioner, T.C. Memo. 1997-509;
Fisher v. Commissioner, T.C. Memo. 1996-277.
As a general rule, sections 1 and 3 impose a Federal tax on
the taxable income of every individual. Section 61(a) defines
gross income for purposes of calculating such taxable income as
“all income from whatever source derived” and specifies that
compensation for services, gains from dealings in property,
interest, and dividends are included within this broad
definition. See sec. 61(a)(1), (3), (4), (7).
Section 1401 then imposes an additional tax on the self-
employment income of every individual, both for old age,
survivors, and disability insurance and for hospital insurance.
The term “self-employment income” denotes “net earnings from
self-employment”. Sec. 1402(b). “Net earnings from self-
employment”, in turn, means “the gross income derived by an
individual from any trade or business carried on by such
individual, less the deductions allowed by this subtitle which
are attributable to such trade or business”. Sec. 1402(a).
Petitioner contends that private independent contractors and
citizens are not properly included within the meaning of
“individual” or “person” as used in the tax code and that to
treat them as such contravenes the principles of due process. In
petitioner’s view, only employees of Government-created or
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Government-sanctioned entities may constitutionally be subjected
to individual income tax. Under petitioner’s theory, the
prohibited disparity results from taxing those whose income
derives in some way from a legislatively authorized entity in the
same manner as those who do not receive a similar benefit.
This Court has repeatedly held taxpayers to be liable for
taxes on income accruing from self-employment, sole
proprietorship, or nonemployee activities, despite the tax
protester rhetoric advanced in contending for the opposite
result. See, e.g., Kish v. Commissioner, supra; Minguske v.
Commissioner, supra; Frami v. Commissioner, supra; Fisher v.
Commissioner, supra. Arguments by such individuals that they do
not hold the status of “taxpayer” or “person” within the meaning
of the Internal Revenue Code have been summarily dismissed as
well. See, e.g., Kish v. Commissioner, supra; Fisher v.
Commissioner, supra.
Petitioner’s position is untenable. Since petitioner has
offered no further evidence establishing that respondent’s
determinations are erroneous, we hold that petitioner is liable
for the deficiencies as determined by respondent.
In addition, section 6651(a) provides, in relevant part, as
follows:
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SEC. 6651. FAILURE TO FILE TAX RETURN OR TO PAY TAX.
(a) Addition to the Tax.--In case of failure-–
(1) to file any return required under
authority of subchapter A of chapter 61 * * * , on
the date prescribed therefor (determined with
regard to any extension of time for filing),
unless it is shown that such failure is due to
reasonable cause and not due to willful neglect,
there shall be added to the amount required to be
shown as tax on such return 5 percent of the
amount of such tax if the failure is for not more
than 1 month, with an additional 5 percent for
each additional month or fraction thereof during
which such failure continues, not exceeding 25
percent in the aggregate.
The Supreme Court has characterized the foregoing section as
imposing a civil penalty to ensure timely filing of tax returns
and as placing on the taxpayer “the heavy burden of proving both
(1) that the failure did not result from ‘willful neglect,’ and
(2) that the failure was ‘due to reasonable cause’”, in order to
escape the penalty. United States v. Boyle, 469 U.S. 241, 245
(1985). “Willful neglect” denotes “a conscious, intentional
failure or reckless indifference.” Id. “Reasonable cause”
correlates to “ordinary business care and prudence”. Id. at 246
& n.4; sec. 301.6651-1(c)(1), Proced. & Admin. Regs.
Here, petitioner did not file tax returns in 1992, 1993,
1994, 1995, or 1996. Furthermore, he has offered no reason for
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this failure to file other than his belief that income tax could
not constitutionally be imposed on his earnings. In light of the
extensive authority rejecting similar arguments, we conclude that
petitioner’s failure to file was not due to reasonable cause. We
therefore hold that petitioner is liable for the section 6651(a)
delinquency addition to tax.
Finally, section 6673(a) authorizes this Court to impose a
penalty on its own motion and reads in pertinent part:
SEC. 6673. SANCTIONS AND COSTS AWARDED BY COURTS.
(a) Tax Court Proceedings.--
(1) Procedures instituted primarily for
delay, etc.--Whenever it appears to the Tax Court
that–-
(A) proceedings before it have been
instituted or maintained by the taxpayer
primarily for delay,
(B) the taxpayer’s position in such
proceeding is frivolous or groundless, or
(C) the taxpayer unreasonably failed to
pursue available administrative remedies,
the Tax Court, in its decision, may require the
taxpayer to pay to the United States a penalty not
in excess of $25,000.
On this record, we find that petitioner’s position is
frivolous and groundless. The body of case law unequivocally
upholding the constitutionality of the income tax statues and
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rejecting countless tax protester challenges thereto leaves
petitioner’s contentions without merit or support. Accordingly,
a penalty is awarded to the United States in the amount of
$1,000.
To reflect the foregoing,
Decision will be entered
under Rule 155.