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Parties Involved:
Commissioner of Internal Revenue
Appellee
Joseph R. Lam
Appellant

Document Text:

♦ 

FILED 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

Unil'C'd Scare. Court of Appeals 

Tench Circuit 

MAY 2 ;j 1991 

JOSEPH R. LAM, 

Petitioner-Appellant, 

v. 

COMMISSIONERS OF INTERNAL REVENUE, 

Respondent-Appellee. 

ORDER AND JUDGMENT* 

ltOBERT L. HOECKER 

Clerk 

No. 87-2720 

(C.I.R. No. 48892-86) 

Before HOLLOWAY, Chief Judge, MCWILLIAMS, and BARRETT, Circuit 

Judges. 

After examining the briefs and the appellate record, this 

panel has determined unanimously that oral argument would not 

materially assist the determination of this appeal. See Fed. R. 

App. P. 34(a); Tenth Cir. R. 34.1.9. The cause is therefore 

ordered submitted without oral argument. 

Joseph Lam appeal the Tax Court's dismissal of his complaint 

pursuant to Fed. R. Civ. P. 12(b)(6). We review de novo the 

sufficiency of a complaint in the context of a motion to dismiss. 

* This Order and Judgment has no precedential value and shall not 

be cited, or used by any court within the Tenth Circuit, except 

for purposes of establishing the doctrines of the law of the case, 

res judicata, or collateral estoppel. 10th Cir. R. 36.3. 

Appellate Case: 87-2720 Document: 010110116602 Date Filed: 05/23/1991 Page: 1 
N.L.R.B. v. Weathercraft Company of Topeka, Inc., 832 F.2d 1229 

(10th Cir. 1987). 

Lam alleges in his complaint that (1) he is not a taxpayer; 

(2) his wages are not taxable; and (3) the court has no 

jurisdiction over him. The Tax Court carefully analyzed each of 

Lam's contentions, and it dismissed the petition. 

We affirm the Tax Court's dismissal for failure to state a 

claim upon which relief can be granted and its award of $1200 in 

damages for the United States for substantially the same reasons 

set forth in the Court's Memorandum Sur Order, a copy of which is 

attached hereto. 

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Entered for the Court: 

James E. Barrett, 

Senior United States 

Circuit Judge 

Appellate Case: 87-2720 Document: 010110116602 Date Filed: 05/23/1991 Page: 2 
UNITED STATES TAX COURT 

WASHINGlON, D.C. 20217 

.... -!..<?.~ .~?.~ .... ~ .. ~ .... ~.~.~. ! .... ................................... .......... . 

Petitioner, 

V. Docket No. 48892-86 

COMMISSIONER OF INTERNAL REVENUE, 

Respondent. 

MEMORANDUM SUR ORDER 

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This case was assigned to the undersigned for consideration 

and ruling pursuant to the provisions of section 7456(c) and (d) 

(redesignated as section 7443A by the Tax Reform Act of 198~, 

Pub. L. 99-514, section 1556, 100 Stat. 2755) and Rule 180. It 

is before the Court on respondent's motion to dismiss for failure 

to state a claim upon which relief can be granted under Rule 40, 

filed April 21, 1987. In the motion, respondent requests damages 

against petitioner under section 6673. On May 4, 1987, 

petitioner filed an objection to respondent's motion and, in the 

same pleading, moved to dismiss the case for lack of 

jurisdiction. Respondent filed a reply on May 26, 1987, and an 

objection to petitioner's motion to dismiss. Petitioner then 

filed, on June 8, 1987, a "Response to Respondent's Response." 

Respondent issued a notice of deficiency on September 22, 

1986, in which a deficiency of $1,876.00 in Federal income tax 

was determined with respect to petitioner's 1984 tax year, and 

additions to tax under sections 665l(a), 6653(a) (1) and (2), and 

6654(a), in the amounts of $419.00, $93.80, 50% of the interest 

due on an underpayment of $1,676.00, and $102.00, respectively. 

These determinations are based on the following adjustments to 

petitioner's income for 1984: 

1 

$ 2,038.00 

5,263.00 

5,911.00 

36.00 

28.00 

598.00 

Flint Engineering & Construction Co. 

Project Construction Corporation 

Calcon Corporation 

Omaha Woodmen Life Insurance Society 

Connecticut Mutual Life Insurance Co. 

Unemployment Compensation 

All section references are to the Internal Revenue Code of 

1954, as amended, and all Rule references are to the Tax Court 

Rules of Practice and Procedure, except as otherwise noted. 

Form 50 

Rev. Apr. 1970 

I , I : , 

Appellate Case: 87-2720 Document: 010110116602 Date Filed: 05/23/1991 Page: 3 
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1 000.00) Personal Exemption 

12,874.00 Total Adjustments 

At the time this action was instituted, petitioner alleged 

his legal residence to be Evanston, Wyoming. 

In his initial petition, petitioner essentially challenged the legality of the notice of deficiency, claiming the deficiency 

notice was based upon a "fabricated 1040 form;" that such forms 

(1040) were designated for use by "taxpayers" and that.he, 

petitioner, was a "nontaxpayer," therefore, the notice of 

deficiency was not applicable to him. Petitioner further 

expounded on his position by stating that a "taxpayer" was a 

person having liability for tax and was, therefore, one who was 

subject to "tax law." He, petitioner, having exercised his 

"constitutional rights" elected not to be a taxpayer and, 

therefore, this action by respondent really did not apply to him. 

Petitioner further alleged invalidity of the notice of deficiency 

under the Administrative Procedure Act, 5 u.s.c. section 554. 

On January 6, 1987, the Court, by order, advised petitioner 

that his petition did not comply with the Rules of the Court as 

to form and that he should file an amended petition on or before 

March 9, 1987. An amended petition was filed on March 9, 1987; 

however, the substantive portions of this filing added very 

little to what petitioner previously pleaded: (1) lack of 

jurisdiction, · (2) the Administrative Procedure Act, and (3) that 

his wages were not subject to taxes. · 

In his objection to respondent's motion to dismiss, 

petitioner admitted he did not file a Federal income tax return 

for 1984 and alleged, moreover, that the filing of a return "is 

not and cannot be required of anyone" since to require the filing 

of a return is contrary to the "voluntary nature of complicity to 

self assessment." In his "Response to Respondent's Response," petitioner contends he is entitled to a jury trial under the 

Sixth and Seventh Amendments of the U.S. Constitution. 

Petitioner's motion to dismiss for lack of jurisdiction is 

based on a conglomeration of all the above recited allegations, including, in particular, the failure of respondent to follow the 

Administrative Procedure Act. 

We reject petitioner's contention that the Administrative 

Act, 5 u.s.c. section 500 et seq, precludes this Court from 

jurisdiction of his tax case or renders invalid the notice of 

deficiency. Section 554(a) of the Administrative Procedure Act 

states that the provisions of the act are not applicable where 

there is involved a matter subject to a subsequent trial of the 

law and the facts de novo in a court. A notice of deficiency, 

therefore, which is issued by the Internal Revenue Service under 

Appellate Case: 87-2720 Document: 010110116602 Date Filed: 05/23/1991 Page: 4 
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section 6212 is an administrative determination by the Internal 

Revenue service that taxes are due; however, it is not a final 

determination. Under section 6213{a), the taxpayer receiving a 

notice of deficiency is allowed a right to institute a proceeding 

in this court to have judicially determined the accuracy of that 

determination. Section 6213{a), therefore, is clearly the type 

proceeding envisioned by section 554{a) of the Administrative · Procedure Act. Moreover, even if a timely petition is not filed 

with the Tax Court, there are other legal remedies available to 

the taxpayer for adjudication of the dispute. We further dismiss 

petitioner's reliance on 5 u.s.c. section 703 as a basis for his 

motion to dismiss for lack of jurisdiction. The statute relied 

on by petitioner relates to the judicial review of decisions of 

Federal agencies. Section 703 clearly provides that the form of 

proceeding for judicial review is the special statutory review 

proceeding relevant to the subject matter in a court specified by 

statute. Petitioner here has a tax problem under a statute, the 

Internal Revenue Code. That statute, the Internal Revenue Code, 

specifies the Tax court as one court in which tax disputes may be 

adjudicated. Petitioner has availed himself of this Court, 

therefore; he has no basis for citing 5 u.s.c. section 703 in 

support of his motion for lack of ljurisdiction. 

In this connection, petitioner is reminded that this Court 

generally will not look behind a deficiency notice to examine the 

evidence used or the propriety of the Commissioner's motives or 

the administrative policy -or procedures which were involved in 

making the determinations which led to issuance of the notice. 

Proesel v. Commissioner, 73 T.C. 600 {1979); Greenber1•s Express, 

Inc. v. commissioner, 62 T.C. 324, 327 {1974). A def ciency 

notice may have .no ground, and it need not be signed at all to be 

valid. Indeed, a notice of deficiency is only to advise the 

person to whom the notice is addressed that the Commissioner 

means to assess him; anything that does this unequivocally is 

good enough. Olsen v. Commissioner, 88 F.2d 650, 651 {2d Cir. 

1927). The determinations made by respondent in a notice of 

deficiency are presumed correct; the burden of proof is on the 

person to whom the notice is addressed to show that the 

determinations are wrong and the imposition of the burden of 

proof is constitutional. Welch v. Helvering, 290 U.S. 111 

(1933); Rockwell v. Commissioner, 512 F.2d 882, 887 (9th Cir. 

1975); Rule 142(a). 

For those reasons, petitioner's motion to dismiss is denied. 

Addressing respondent's motion to dismiss for failure to 

state a claim upon which relief can be granted, Rule 34{b) (4) 

requires a petitioner challenging a notice of deficiency to 

allege "clear and concise assignments of each and every error 

which the petitioner alleges to have been committed by the 

Commissioner in the determination of the deficiency or 

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liability." Rule 34(b)(5) requires the petitioner to allege "clear and concise lettered statements of the facts on which 

petitioner bases the assignments of error***·" 

We dismiss petitioner's allegations that he is not a 

"taxpayer" and, therefore, not subject to the Internal Revenue 

laws; that his wages are not subject to tax; and that he is 

entitled to a jury trial. 

All taxpayers with taxable income are generally required by 

law to file Federal income tax returns. Section 6012. Under 

sections 6651 and 7203, taxpayers who fail to file returns may be 

subject to civil additions to the tax and prosecution for 

criminal offenses. Therefore, the matter of filing tax returns 

and paying taxes is not voluntary. Petitioner has no right to 

"opt out" or elect "nontaxpayer" status as he claims. 

It is well settled that wages constitute taxable income. 

Section 61 encompasses all realized accessions to wealth. 

Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955). Income 

as defined under the Sixteenth Amendment is "gain derived from 

capital, from labor, or from both combined." Eisner v. Macomber, 

252 U.S. 189, 207 (1920). 

With respect to a jury trial, there is no authority or 

procedure authorized for the Tax court to hear its cases before a 

jury. There is no deprivation of a constitutional right under 

the Seventh Amendment because that amendment does not apply to 

actions against the United States. See McElrath v. United 

States, 102 U.S. 426, 440 (1880). It has been repeatedly held 

that there is no constitutional right to a jury trial in the Tax 

Court. Phillips v. Commissioner, 283 U.S. 589, 599 n. 9 (1931); 

Dorl v. Commissioner, 507 F.2d 406 (2d Cir. 1974), affg. 57 T.C. 

720 (1972). 

Under these circumstances, petitioner has failed to plead facts or advance any legal theory which would indicate that 

respondent's determinations are incorrect. Since the presumption 

of correctness is in favor of respondent, we find that 

respondent's motion is in order and is, therefore, granted. 

Petitioner, therefore, is liable for the tax and the additions to 

tax shown on the notice of deficiency. 

We are convinced from the record that petitioner well knows 

his income is taxable and that this proceeding is not only 

frivolous, but has been instituted and maintained by him 

primarily for delay. Under section 6673, we are empowered to 

award damages in favor of the United States up to $5,000. 

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Respondent has requested the imposition of damages. This request is granted, and damages are awarded the United States in the 

amount of $1,200.00. 

AUG 7 1907 

I) n. \ ~ 'll'l ' '4Y. ~~ .a...c. .. ~...___ 

D. Irvin Couvillion 

Special Trial Judge 

Appellate Case: 87-2720 Document: 010110116602 Date Filed: 05/23/1991 Page: 7