T.C. Memo. 2002-313
UNITED STATES TAX COURT
DALE CURTIS KINSLOW, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8937-01. Filed December 27, 2002.
Dale Curtis Kinslow, pro se.
Helen H. Keuning, for respondent.
MEMORANDUM OPINION
JACOBS, Judge: Respondent determined deficiencies in
petitioner’s Federal income tax and additions to tax for failure to
file a tax return and pay tax pursuant to section 6651(a)(1) and
(2), as follows:
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Additions to Tax
Year Deficiency Sec. 6651(a)(1) Sec. 6651(a)(2)
1
1997 $5,427 $348.75
1
1998 7,422 409.28
1
1999 7,146 464.40
1
To be computed on the date of payment.
All section references are to the Internal Revenue Code for
the years at issue.
The deficiencies arise from petitioner’s failure to file
required Federal income tax returns for 1997, 1998, and 1999.
Background
Petitioner resided in Fargo, North Dakota, at the time he
petitioned this Court seeking a review of respondent’s
determinations.
There are no disputed facts in this case. During each of the
3 years at issue (i.e., 1997, 1998, and 1999), petitioner received
wages from Peterson Mechanical, Inc., for services rendered as a
pipe fitter, as well as interest income from United Savings Credit
Union, as follows:
1997 1998 1999
Wages $37,166 $45,196 $44,482
Interest 51 48 49
In addition, in 1997, petitioner received a $398 income tax
refund from the State of North Dakota.
Petitioner claims that he has the right to “voluntarily opt
out” of the Federal tax system and that he chooses to do so in
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order to do more for his community, his wife to be, the State of
North Dakota, and his country.
Respondent’s representative informed petitioner on several
occasions that the Federal tax system is not voluntary, as
petitioner maintains, and that the position taken by petitioner is
frivolous. In this regard, respondent’s representative sent
petitioner a 33-page document entitled “The Truth About Frivolous
Tax Arguments”, detailing responses to some of the more common
arguments raised by individuals and groups who oppose compliance
with the Federal tax laws.
Discussion
Petitioner does not contest that he received the aforestated
amounts of wages and interest during 1997, 1998, and 1999. Nor
does he contest that he received a $398 income tax refund from the
State of North Dakota in 1997. Rather, he contends there is no law
that requires him to pay taxes and “with corporations moving their
monies to offshore islands and basically becoming tax-free”, there
is no “fairness” in the tax laws. He asks to “be free from [the
tax] chains that bind [him] financially.”
Petitioner’s arguments relating to the validity, as well as
the voluntary nature, of the Federal income tax system are similar
to those who oppose compliance with the Federal tax laws and which
have been rejected on countless occasions by this and other courts.
Woods v. Commissioner, 91 T.C. 88, 90 (1988); United States v.
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Gerads, 999 F.2d 1255, 1256 (8th Cir. 1993); Wilcox v.
Commissioner, 848 F.2d 1007 (9th Cir. 1988), affg. T.C. Memo. 1987-
225; Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984). Suffice
to say, section 61(a)(1) and (a)(4) includes in the definition of
“gross income” (i.e., income that is subject to Federal income tax)
compensation for services rendered and interest, respectively; and
pursuant to the so-called “tax benefit rule”, State income tax
refunds are taxable if the amount of the tax refund was deducted in
a prior year and such deduction resulted in a reduction of tax for
that year. See sec. 111.
We therefore sustain respondent’s tax deficiency
determinations for 1997, 1998, and 1999. We now turn our attention
to the additions to tax for failure to file a tax return and pay
tax. Sec. 6651(a)(1) and (2).
Section 6651(a)(1) imposes an addition to tax for failure to
timely file a return. Petitioner can avoid the section 6651(a)(1)
addition to tax by proving that his failure to file was: (1) Due
to reasonable cause, and (2) not due to willful neglect. Sec.
6651(a)(1); Rule 142(a); United States v. Boyle, 469 U.S. 241, 245-
246 (1985); United States v. Nordbrock, 38 F.3d 440 (9th Cir.
1994). “Reasonable cause” requires a taxpayer to demonstrate that
he exercised ordinary business care and prudence and was
nevertheless unable to file a return within the prescribed time.
United States v. Boyle, supra at 246; sec. 301.6651-1(c)(1),
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Proced. & Admin. Regs. Willful neglect means a conscious,
intentional failure to file or reckless indifference. United
States v. Boyle, supra at 245.
Petitioner was required to file Federal income tax returns for
1997, 1998, and 1999. Sec. 6012. He failed to do so and offered
no satisfactory explanation. Nor has he presented any evidence to
prove that his failure to file was due to reasonable cause and not
willful neglect. We therefore sustain respondent’s determination
with respect to the section 6651(a)(1) addition to tax for
petitioner’s failure to timely file a return for 1997, 1998, and
1999.
In general, section 6651(a)(2) imposes an addition to tax for
failure to timely pay the amount of tax shown on a required income
tax return. In the case before us, as stated, no tax return was
filed for 1997, 1998, or 1999; a fortiori, no amount of tax was
shown on a return for these years. To the contrary, petitioner’s
tax liability for 1997, 1998, and 1999 was determined in the
revenue agent’s report, and the deficiency computation for each of
these years was stated in the notice of deficiency.
Pursuant to section 6651(g)(2), in the case of a substituted
income tax return made by the Secretary under section 6020(b), such
substituted return is treated, for purposes of determining the
addition to tax under section 6651(a)(2), as the return filed by
the taxpayer. The record does not reveal, and respondent does not
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assert, that the Secretary prepared substituted tax returns for
petitioner for 1997, 1998, and 1999 pursuant to section 6020(b).
Consequently, because petitioner filed no tax returns (nor were
substituted tax returns prepared by the Secretary) for 1997, 1998,
or 1999, the addition to tax for failure to pay tax pursuant to
section 6651(a)(2) cannot be sustained. See Heisey v.
Commissioner, T.C. Memo. 2002-41.
Finally, respondent has requested us to require petitioner to
pay to the United States a penalty for instituting a frivolous
proceeding pursuant to section 6673. Section 6673(a)(1) authorizes
the Court to require a taxpayer to pay to the United States a
penalty, up to $25,000, whenever it appears that proceedings in
this Court have been instituted or maintained by the taxpayer
primarily for delay or that the taxpayer’s position in such
proceeding is frivolous or groundless. A taxpayer’s position is
frivolous or groundless “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).
Petitioner was informed on several different occasions by
respondent that his position regarding the voluntary nature of
Federal income taxes was both frivolous and groundless. In
addition, he was cautioned by this Court that if he continued to
pursue his frivolous tax arguments, he could be required to pay a
penalty to the United States pursuant to section 6673(a).
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Although petitioner is not liable for the section 6651(a)(2)
addition to tax, his position with respect to the substance of this
case is both frivolous and groundless. His insistence on pursuing
his fruitless argument has consumed the time and effort of both
this Court and the Commissioner, whose time and effort could
otherwise have been devoted to resolving bona fide claims of other
taxpayers. See Cook v. Spillman, 806 F.2d 948 (9th Cir. 1986).
Accordingly, pursuant to section 6673, we shall require petitioner
to pay a penalty to the United States in the amount of $1,000.
To reflect the foregoing,
An appropriate order and
decision will be entered.