T.C. Summary Opinion 2004-161
UNITED STATES TAX COURT
JOHN E. BURAS, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 13004-03S. Filed November 29, 2004.
John E. Buras, pro se.
Wendy S. Harris, for respondent.
COUVILLION, Special Trial Judge: This case was heard
pursuant to section 7463 in effect for the time when the petition
was filed.1 The decision to be entered is not reviewable by any
other court, and this opinion should not be cited as authority.
1
Unless otherwise indicated, subsequent section
references are to the Internal Revenue Code in effect for the
years at issue.
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Pursuant to the stipulation of the parties, petitioner has
deficiencies of $949, $896, and $1,843 in Federal income taxes
for 1999, 2000, and 2001; section 6651(a)(1) additions to tax of
$237, $224, and $451, respectively, for those years; and a
section 6654(a) addition to tax of $39 for 2001.2 At trial,
respondent orally moved to impose the section 6673 addition to
tax.
The issues for decision are: (1) Whether petitioner was
required to file Federal income tax returns for the years at
issue, and (2) whether petitioner’s pension and Social Security
income is exempt from Federal income taxes.
Some of the facts were stipulated. Those facts, with the
exhibits annexed thereto, are so found and are made part hereof.
Petitioner’s legal residence at the time the petition was filed
was Springfield, Oregon.
Petitioner worked as a truck driver for the Motion Picture
Industry in Studio City, California, for 30 years. During his
employment, petitioner traveled throughout the United States
hauling any equipment necessary for the Motion Picture Industry.
2
In the notice of deficiency issued to petitioner,
respondent had determined deficiencies of $2,287.50, $2,234.50,
and $3,811.70 in petitioner’s Federal income taxes and added sec.
6651(a)(1) additions of $571.88, $558.63, and $952.92, and sec.
6654(a) additions of $110.72, $119.35, and $152.32, for the
taxable years 1999, 2000, and 2001, respectively. The
stipulation of facts agreed to and submitted by both parties to
the Court listed, without explanation, the new, adjusted amounts.
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When he retired in 1991, petitioner qualified for a pension from
the Motion Picture Industry.
Petitioner received benefits from his retirement account
with the Motion Picture Industry Pension Plan of Studio City,
California (Pension Plan), of $13,385 during taxable year 1999.
During the same year, petitioner also received Social Security
benefits of $15,570. Petitioner did not file a Federal income
tax return for taxable year 1999. During taxable year 2000,
petitioner received Pension Plan retirement proceeds of $14,185
and Social Security benefits of $15,954. Petitioner also did not
file a Federal income tax return for 2000. Finally, for taxable
year 2001, petitioner did not file a Federal income tax return
even though he had received Pension Plan retirement proceeds of
$19,878 and Social Security benefits of $16,548. Petitioner
contends he had no obligation to file income tax returns for the
taxable years 1999, 2000, and 2001.
Sometime after his retirement from the Motion Picture
Industry, petitioner became an evangelist and associate pastor in
World’s Prayers Answered Church of God. Petitioner grew up in
the church; his mother was a minister and ordained pastor in the
church. Although petitioner was not an ordained minister, he had
assisted his mother in her capacity for 50 or 60 years.
Petitioner’s specific church duties were unclear, although he
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testified that he gave much of his income to the poor “for God’s
work”.
Petitioner presented two arguments as to why he should not
be required to pay Federal income tax on his Pension Plan
payments and Social Security benefits. He first argued that his
Pension Plan payments and Social Security benefits qualified as
exempt income because he serves as an evangelist and associate
pastor in the World’s Prayers Answered Church of God. In the
alternative, petitioner considered himself an agent of his
religious order, the church, and viewed his income as
remuneration directly to the principal, the church, to be used
for its charitable purposes.
To support his assertion that his Pension Plan payments and
Social Security benefits were exempt from Federal income tax,
petitioner cited section 31.3401(a)(9)-1, Employment Tax Regs.
He interpreted this section to mean that any wages, regardless of
source, that a minister earns while serving in a church are
exempt from Federal income tax. The Court rejects that argument.
Section 31.3401(a)(9)-1, Employment Tax Regs., expressly states
that the definition of “wages” does not include moneys paid for
services performed by a member of a religious order that are
required by that order.
Petitioner was not paid any salary, wages, or other
compensation by the church for his services to the church. His
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sole income was his Pension Plan payments and Social Security
benefits. He did not receive this income as a minister but as a
direct result of his 30 years of employment with the Motion
Picture Industry. Petitioner’s Pension Plan payments and Social
Security benefits were based on past services and are expressly
includable in gross income. See sec. 61(a)(11); sec. 1.61-11(a),
Income Tax Regs. The income he received is not exempt from tax,
and petitioner is required to pay Federal income taxes on it.
Petitioner’s second argument appears to be that he was an
agent of his religious order and his Pension Plan payments and
Social Security benefits were remuneration directly to the
principal, the order, and that, since charitable organizations
are not taxed, his retirement income is not taxable. His
testimony basically concluded that, because the church was not
taxed, and he was acting on behalf of the church by giving his
money to do the “work of the Lord”, then he likewise should not
be taxed. The Court rejects that argument, which has no more
merit than petitioner’s first argument.
Respondent cited Fogarty v. United States, 780 F.2d 1005
(Fed. Cir. 1986). In Fogarty, a Catholic priest contracted to
teach religion classes at a public university. He taught for 2
years, and, during his tenure, the university deposited checks in
a checking account in the name of the church, an account on which
the priest was an authorized signatory. Id. at 1007. Under the
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Canon Law of the church, the priest had no right to receive,
direct the use of, or dispose of the salary for his own benefit.
His salary went directly to the church, and the church provided
him with a place to live and minimal living expenses. The court
held that the priest was not exempt from filing a Federal income
tax return and paying taxes on the income, even though he taught
at the express direction of the church, and his earnings were
paid directly to the church.
Unlike the taxpayer's income in Fogarty, petitioner’s income
was wholly unconnected with his work for the church.
Additionally, petitioner first paid his rent and living expenses
before dispersing the remainder as he saw fit. Unlike the
taxpayer in Fogarty, petitioner did not transfer his entire
paycheck to his church but merely dispersed funds to various
people and causes. Although petitioner contends he gave much of
his Pension Plan payments and Social Security benefits to “do the
work of the Lord” on behalf of the church, this does not relieve
him from the obligation of paying Federal income taxes on his
income. These actions do not bestow a tax-exempt status on him.
Respondent, therefore, is sustained. As a result, petitioner is
also liable for the sections 6651(a)(1) and 6654(a) additions to
tax.
At trial, respondent orally moved for the imposition of the
section 6673 penalty. Section 6673 allows the Court to impose a
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penalty, in an amount up to $25,000, on a taxpayer if the
position or positions asserted in the case are frivolous or
groundless. Sec. 6673(a)(1)(B).
Petitioner’s arguments were those of a classic tax
protester. Petitioner stated at trial that he “was taught that
taxes were a slavery upon the people”. While petitioner
professed that he was not opposed to taxes, he was of the view
that he should pay only a “legal, lawful, constitutional tax”.
Petitioner did not define what he considered to be a legal tax,
asserting simply he did not believe he should be required to pay
taxes, even though he admitted his income did not come from the
church. Finally, petitioner acknowledged that he had appeared
before this Court at least once before and argued the same issue.
The Court also notes that in United States v. Buras, 633 F.2d
1356 (9th Cir. 1980), petitioner was convicted of willful failure
to file Federal income tax returns. On this record, the Court
will grant respondent’s oral motion and impose a penalty of $500
on petitioner for instituting a frivolous and groundless
petition.
Reviewed and adopted as the report of the Small Tax Case
Division.
An appropriate order and decision
for respondent will be entered.