T.C. Memo. 2010-226

UNITED STATES TAX COURT

HARRY EUGENE MATHEWS, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 3074-09. Filed October 19, 2010.

After P failed to file his 2004 tax return, R

determined a deficiency in income tax and additions to tax

under sec. 6651(a)(1) and (2), I.R.C. P contested the

deficiency, arguing that a State court garnishment order was

fraudulent and improperly caused the payment of his military

retirement funds to his former spouse and that he should not

be taxed on these funds. 

Held: P is liable for the deficiency and for 

additions to tax under sec. 6651(a)(1) and (2), I.R.C.

Held, further, P is liable for a sec. 6673, I.R.C.,

penalty. 

Harry E. Mathews, pro se.

Nancy L. Karsh, for respondent.
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MEMORANDUM FINDINGS OF FACT AND OPINION

WHERRY, Judge: After a concession by respondent,1 the

issues for decision are:

(1) Whether petitioner’s military retirement pay is

includable in gross income;

(2) whether petitioner is liable for an addition to tax

under section 6651(a)(1) for failure to file his 2004 tax

return;2

(3) whether petitioner is liable for an addition to tax

under section 6651(a)(2) for failure to pay his 2004 taxes; and

(4) whether the Court should impose a penalty under section

6673 for petitioner’s advancement of frivolous or groundless

arguments in proceedings instituted primarily for protest or

delay. 

FINDINGS OF FACT

Some of the facts have been stipulated and are so found. 

The stipulations of the parties, with accompanying exhibits, are

incorporated herein by this reference. At the time he filed his

petition with this Court, petitioner resided in Florida.

1See infra note 6. 

2All section references are to the Internal Revenue Code of

1986, as amended and in effect for the year at issue. All Rule

references are to the Tax Court Rules of Practice and Procedure. 
- 3 -

Petitioner served in the U.S. Air Force for 20 years before

retiring as a master sergeant. For his service petitioner is

entitled to military retirement pay (MRP). For 2004 the gross

amount petitioner was entitled to receive as his MRP was $1,322

per month.3 However, petitioner executed a Veterans

Administration waiver pursuant to which he waived receipt of $205

each month.4

The Defense Finance and Accounting Service (DFAS) is the

agency responsible for disbursing petitioner’s MRP. For each

month of 2004 the DFAS withheld approximately $716 from

petitioner’s MRP, $461 of which was subject to a Texas State

court garnishment order for child support, and deposited the

balance into petitioner’s bank account. No withholdings were

made for Federal income taxes.5

3All amounts have been rounded to the nearest whole dollar. 

4Petitioner was entitled to both an MRP and disability

benefits from the Veterans Administration (VA). However,

retirees are barred from receiving concurrent payments of both

MRP and VA disability benefits unless certain exceptions are met,

including that the retiree have a VA disability rating of 50

percent or more. 38 U.S.C. secs. 5304 and 5305 (2006); 10 U.S.C.

sec. 1414 (2006). Petitioner stated at trial that his disability

rating was 20 percent but he believed it should have been 40

percent. Instead of receiving the full amount of the MRP that a

retiree is entitled to, the retiree can file an election waiving

receipt of the portion of the MRP equal to the amount of the VA

disability benefit awarded. 38 U.S.C. sec. 5305. Presumably, it

is advantageous for a retiree to file such a waiver because the

VA disability benefit is excluded from gross income under sec.

104(a) and (b) whereas the MRP constitutes taxable income. 

5Neither party addressed why Federal income taxes were not

withheld from petitioner’s MRP. 
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Petitioner did not file a Federal income tax return for

2004. Therefore, respondent prepared a substitute for return for

petitioner under section 6020(b) showing a total amount due of

$1,872.6 On December 29, 2008, on the basis of this substitute

for return, respondent mailed to petitioner at his last known

address a notice of deficiency for the 2004 taxable year showing

a deficiency of $1,872 and additions to tax under section

6651(a)(1) and (2) of $421.20 and $402.48, respectively.

Petitioner timely petitioned this Court. In his petition as

well as in other filings made with this Court and at trial

petitioner made broad arguments disputing the validity of the

Texas State court garnishment order. He claims widespread fraud,

racial discrimination, and theft, conspiracy, and corruption on

the part of various governmental entities instead of identifying

or advancing specific arguments as to why he was not liable for

the deficiency or the additions to tax. 

This Court waived the filing fee for cause pursuant to

petitioner’s request. A trial was held in Miami, Florida.

6The substitute for return showed gross income of $13,340

consisting of petitioner’s MRP and after allowing a standard

deduction of $4,850 and personal exemption of $3,100 arrived at a

taxable income of $5,390 on which respondent determined a

deficiency of $538. Respondent also determined an additional

deficiency of $1,334 under sec. 72(t) for an early withdrawal

from a qualified retirement plan. Respondent has since

acknowledged that sec. 72(t) does not apply and petitioner is not

liable for the $1,334 additional deficiency. 
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OPINION

As stated above, petitioner has failed to identify or

advance specific arguments as to why he was not liable for the

deficiency or additions to tax. Thus, petitioner fails to meet

the requirement of Rule 34(b)(4) that a petition contain “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 liability.” Even ignoring

petitioner’s failure to satisfy Rule 34(b), for the reasons set

forth in this opinion we will sustain the deficiency and

additions to tax. 

I. Whether Petitioner’s MRP Is Taxable 

As a general rule, the Commissioner’s determination of a

taxpayer’s liability in the notice of deficiency is presumed

correct, and the taxpayer bears the burden of proving that the

determination is improper. See Rule 142(a); Welch v. Helvering,

290 U.S. 111, 115 (1933). However, pursuant to section 7491(a),

the burden of proof on factual issues that affect the taxpayer’s

tax liability may shift to the Commissioner where the

“taxpayer introduces credible evidence with respect to * * * such

issue.” The burden will shift only if the taxpayer has, inter

alia, complied with applicable substantiation requirements and

“cooperated with reasonable requests by the Secretary for

witnesses, information, documents, meetings, and interviews”. 
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Sec. 7491(a)(2). Petitioner did not raise the burden of proof

issue, did not introduce any credible evidence, and failed to

comply with the substantiation requirements. Accordingly, the

burden of proof remains on petitioner.

Petitioner’s main argument is that the garnishment order

issued by the Texas State court is fraudulent and “More than a

million dollars have been stolen through a very eleborate [sic]

scam.”7 Court records show this is at least the fifth time

petitioner has raised this argument.8 

For reasons discussed below, this Court holds that (1)

petitioner’s MRP, including the amount garnished, is included in

gross income and (2) this Court lacks jurisdiction to decide

whether the Texas State court garnishment order is fraudulent. 

7At trial, during cross-examination of respondent’s witness,

petitioner stated his taxable income should be lower because his

VA waiver should be based on a disability rating of 40 percent

instead of 20 percent. See supra note 4 discussing the impact of

a higher disability rating on such a waiver. However, petitioner

never raised this issue in his petition or any other pretrial

motion, never fully addressed the issue at trial, and never filed

a posttrial brief. Therefore, we deem this issue conceded. See

Levin v. Commissioner, 87 T.C. 698, 722-723 (1986), affd. 832

F.2d 403 (7th Cir. 1987); Zimmerman v. Commissioner, 67 T.C. 94,

105 n.7 (1976). Further, even if this issue had been fully laid

out, we lack jurisdiction to decide it. See Oppenheimer v.

Commissioner, T.C. Memo. 1986-537. We also lack jurisdiction to

decide Texas State child support issues. 

8In one case, Mathews v. Commissioner, T.C. Memo. 2005-84,

we granted respondent summary judgment. Two cases, docket Nos.

18366-90 and 5762-02L, were dismissed for lack of jurisdiction. 

A fourth case, docket No. 11601-05S, was dismissed for failure to

state a claim upon which relief can be granted pursuant to Rule

34. 
- 7 -

A. Whether Petitioner’s MRP Is Includable in Gross Income 

Section 61(a)(11) expressly defines gross income to include

pensions. Petitioner’s “Military retirement pay is pension

income within the meaning of sec. 61(a)(11).” Wheeler v.

Commissioner, 127 T.C. 200, 205 n.11 (2006), affd. 521 F.3d 1289

(10th Cir. 2008); see also Eatinger v. Commissioner, T.C. Memo.

1990-310; sec. 1.61-11, Income Tax Regs. 

The fact that part of petitioner’s MRP was garnished does

not change this result. “The discharge by a third person of 

* * * [a taxpayer’s obligation] is equivalent to receipt by the

person taxed.” Old Colony Trust Co. v. Commissioner, 279 U.S.

716, 729 (1929); see also Young v. Commissioner, 113 T.C. 152,

157 (1999), affd. 240 F.3d 369 (4th Cir. 2001). The fact that

the transfer is involuntary, such as by garnishment, has no

significance. See, e.g., Tucker v. Commissioner, 69 T.C. 675,

678 (1978); Chambers v. Commissioner, T.C. Memo. 2000-218

(holding amounts garnished from employee’s wages for alimony and

child support were includable in employee’s income), affd. 17

Fed. Appx. 688 (9th Cir. 2001); Vorwald v. Commissioner, T.C.

Memo. 1997-15 (holding that amounts transferred from taxpayer’s

retirement account to his former spouse in garnishment proceeding

constituted deemed distributions to taxpayer from his retirement

account and were, therefore, includable in his income).
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A portion of petitioner’s MRP was garnished pursuant to a

Texas State court garnishment order for child support. The

garnished funds were paid to satisfy a legal obligation

petitioner owed and thus constitute petitioner’s gross income. 

B. Whether This Court Has Jurisdiction to Address the

Validity of a Texas State Court Garnishment Order

Petitioner asserts that the Texas State court garnishment

order is a result of fraud. This Court, as petitioner has been

told on several occasions, lacks jurisdiction to address

petitioner’s allegations of fraud that may have occurred during

the garnishment proceedings in the Texas State court. Child

support determinations are matters of local law, and we are not

permitted to reassess the merits of those judgments. See, e.g.,

Blair v. Commissioner, 300 U.S. 5, 9-10 (1937) (holding that the

validity of a trust assignment is a matter of local law and a

State court’s determination with regards to such assignment is

not reviewable by this Court);9 Chambers v. Commissioner, supra

9This Court recognizes that in Commissioner v. Estate of

Bosch, 387 U.S. 456, 465 (1967), the Court held that where the

Federal estate tax liability turns upon the character of a

property interest under State law, Federal authorities are not

bound by a lower State trial court’s determination of such

property interest. Estate of Bosch has no effect on this case

because a Texas State court’s determination of petitioner’s

rights vis-a-vis his former wife is not relevant to our

determination that petitioner is liable for Federal income taxes

on money garnished to pay child support. Further, we note that

in the case at hand, we are simply acknowledging the binding

effect of a State court child support judgment rather than

concluding State law should take precedence over Federal tax law. 

See C.M. Thibodaux Co. v. United States, 723 F. Supp. 367 (E.D.

La. 1989) (stating that whether or not taxpayer made a transfer

(continued...)
- 9 -

(refusing to address the validity of a garnishment order for

alimony and child support after taxpayer alleged his civil rights

had been violated in the underlying divorce proceedings). 

The Court recognizes that petitioner does not agree with the

Texas State court ruling regarding his child support obligations

and subsequent garnishment. But we cannot address those

allegations, and petitioner has not shown a basis for excluding

any amount of his MRP from gross income. Therefore, the entire

amount of petitioner’s MRP, including the portion garnished, is

included in gross income. 

II. Whether Petitioner Is Liable for the Additions to Tax Under

Section 6651(a)(1) and (2) for the 2004 Taxable Year

Generally, “any person made liable for any tax * * * shall

make a return or statement according to the forms and regulations

prescribed by the Secretary.” Sec. 6011(a). Section 6651(a)(1)

provides that in the case of a failure to file a return on time,

there is imposed, unless it is shown that such failure is due to

reasonable cause and not due to willful neglect, an addition to

tax of 5 percent of the tax required to be shown on the return

for each month or fraction thereof for which there is a failure

to file, not to exceed 25 percent. 

9(...continued)

under State law did not matter in characterizing the interest for

Federal income tax purposes), affd. 915 F.2d 992 (5th Cir. 1990);

see also United States v. Boulware, 384 F.3d 794, 804 (9th Cir.

2004) (questioning the effect of Estate of Bosch outside the area

of estate tax law). 
- 10 -

Section 6651(a)(2) provides for an addition to tax of 0.5

percent per month up to 25 percent for failure to pay the amount

shown or required to be shown on a return unless it is shown that

such failure is due to reasonable cause and not due to willful

neglect.10

The respondent bears the burden of production with regard to 

the section 6651(a)(1) and (2) additions to tax.11 Sec. 7491(c);

see Higbee v. Commissioner, 116 T.C. 438, 446-447 (2001). To

meet his burden, respondent must produce sufficient evidence

establishing that it is appropriate to impose the additions to

tax. Id. 

As stipulated, petitioner admits that he did not file his

2004 tax return and that he has not paid his 2004 taxes. 

Further, petitioner has not presented any evidence that such

failure to file and pay was due to reasonable cause and not

willful neglect. Respondent has thus met his burden of

production and accordingly, we sustain the additions to tax under

both section 6651(a)(1) and (2). 

10The sec. 6651(a)(1) addition to tax is reduced by the

amount of the sec. 6651(a)(2) addition to tax for any month (or

fraction thereof) to which an addition to tax applies under both

sec. 6651(a)(1) and (2). See sec. 6651(c)(1).

11We acknowledge that petitioner failed to assign any error

to the additions to tax, and therefore petitioner is deemed to

have conceded them and respondent is relieved of the burden of

production. Because respondent nonetheless met the burden of

production, we briefly acknowledge he did so. See Funk v.

Commissioner, 123 T.C. 213, 217-218 (2004); Swain v.

Commissioner, 118 T.C. 358, 363-365 (2002).
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III. Section 6673 Penalty

Section 6673(a)(1) gives this Court discretion to “require

the taxpayer to pay to the United States a penalty not in excess

of $25,000” whenever it appears 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 * * * 

A position “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). Petitioner’s unsupported argument is frivolous or

groundless.12 Petitioner is a habitual nonfiler who has failed

to pay the taxes due on his MRP and failed to advance any

specific argument as to why he is not liable for the deficiency. 

Petitioner persists in arguing that his MRP was wrongfully

garnished despite the fact that this Court has rejected this

argument on jurisdictional grounds on several occasions.13

12See Mathews v. Commissioner, T.C. Memo. 2005-84, where

petitioner made the same argument as in this case and we stated:

“The Court considers petitioner’s position in this case to be

frivolous or groundless.” 

13Petitioner has not filed a Federal income tax return for

any year going as far back as 1976. He has instituted at least

five separate proceedings in this Court. See supra note 8. In

fact, in his petition in Mathews v. Commissioner, supra, he

stated: “I have filed a petition each year for the past 18

(continued...)
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Courts have ruled that arguments to avoid tax obligations

and requirements, such as those arguments petitioner espouses are

groundless and wholly without merit. See Williams v.

Commissioner, T.C. Memo. 1999-277 (imposing section 6673 penalty

for tax-protester arguments); Morin v. Commissioner,

T.C. Memo. 1999-240 (same); Sochia v. Commissioner, T.C. Memo.

1998-294 (same).

Groundless litigation diverts the time and energies of

judges from more serious claims; it imposes needless costs

on other litigants. Once the legal system has resolved a

claim, judges and lawyers must move on to other things.

They cannot endlessly rehear stale arguments. Both

appellants say that the penalties stifle their right to

petition for redress of grievances. But there is no

constitutional right to bring frivolous suits, see Bill

Johnson’s Restaurants, Inc. v. NLRB, 461 U.S. 731, 743 

* * * (1983). People who wish to express displeasure with

taxes must choose other forums, and there are many

available. * * * [Coleman v. Commissioner, supra at 72.] 

In addition to advancing a frivolous or groundless argument,

petitioner appears to have instituted this proceeding primarily

for delay. Section 6673 “was intended to apply to situations

where a taxpayer repeatedly brings the same appeal * * * after

having been informed that his basis * * * is groundless.” 

Greenberg v. Commissioner, 73 T.C. 806, 814 (1980). In Dew v.

Commissioner, 91 T.C. 615, 626 (1988), the Court imposed a

section 6673 penalty against taxpayer, when he “persisted in

13(...continued)

years. All you ever do is steal my filing fee.”
- 13 -

pursuing” the case even after being told his position was

frivolous or groundless. In Dew v. Commissioner, supra at 626,

the Court stated that “it seems inescapable that petitioner * * *

instituted or at least maintained the proceedings primarily for

delay.” In Stephens v. Commissioner, 88 T.C. 1529, 1531 (1987),

as in Coulter v. Commissioner, 82 T.C. 580, 582-583 (1984), the

Court imposed a section 6673 penalty after the taxpayer repeated

an argument that was deemed frivolous or groundless. By

comparison, petitioner has raised the same frivolous or

groundless argument in no less than five separate proceedings. 

Notwithstanding petitioner’s repeated failure to file

returns and incessant frivolous claims regarding the State

court’s ordered monthly child support, we note petitioner’s case

resulted in respondent’s concession of over half the determined

tax deficiency. At trial respondent conceded the section 72(t)

additional tax.14 Therefore, the petition was initially neither

frivolous nor dilatory in the sense that it caused to surface a

meritorious section 72(t) issue and resulted in respondent’s

14Respondent’s concession is presumably based upon sec.

72(t)(2)(A)(iv), which provides that the 10-percent additional

tax does not apply to distributions which are “part of a series

of substantially equal periodic payments (not less frequently

than annually) made for the life (or life expectancy) of the

employee”. 
- 14 -

concession of over half the deficiency.15 However, once

respondent conceded this issue at the beginning of the trial,

petitioner’s resolute determination to proceed with his child

support issue and argument was frivolous and resulted in a delay

in resolving his case. Further, after the trial had concluded,

petitioner continued to send this Court frivolous packets of

information such as newspaper clippings and copies of letters

sent to individuals including Katie Couric, Diane Sawyer, Brian

Williams, President Barack Obama, Tim Geithner, and Ann Curry

regarding this issue. 

The imposition of a section 6673 penalty should come as no

surprise to petitioner. We have given petitioner repeated

warnings that he was in danger of being penalized. For example,

in Mathews v. Commissioner, T.C. Memo. 2005-84, we told

petitioner:

15Even though the filing of the petition resulted in

respondent’s concession of the sec. 72(t) additional tax,

petitioner never specifically alleged in his petition that he did

not owe it. In fact, none of petitioner’s filings ever addressed

this issue except as to their general implied objection to any

tax deficiency. It was purely fortuitous that respondent had

improperly determined a sec. 72(t) additional tax and,

recognizing this error, conceded it at the start of the trial. 

Rather, the petition started and ended with the allegation that

“More than a million dollars have been stolen through a very

elebaorate [sic] scam. This scam can not and will not be exposed

because of the high profile status of the thieves.” The petition

went on to accuse both the “IRS and US Tax Court” of “racial

prejudice and discrimination.” 
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It is necessary to give petitioner a word of warning.

The Court considers petitioner’s position in this case to

be frivolous or groundless. It also appears that he has

instituted or maintained these proceedings primarily for

delay. * * * Petitioner is hereby warned that the Court will

not hesitate to impose a penalty under section 6673(a)

against him in any appropriate case in the future.

At the commencement of trial in this case this Court

reminded petitioner of the prior admonishment, reading directly

from the earlier opinion as well as stressing that we did not

have jurisdiction over the validity of the Texas State court

garnishment order. We told petitioner to restrict the

prosecution of his case to issues involving his 2004 Federal

income tax deficiency or we would not hesitate to impose a

section 6673 penalty against him. 

Petitioner responded to such warnings with allegations

imputing corruption and fraudulent schemes to various

governmental entities as well as accusations of racial bias. 

This Court then warned petitioner again that arguing issues we

have no jurisdiction over is frivolous or groundless and

manifestly for delay. Petitioner did not heed these numerous

warnings. Instead, his trial testimony as well as the filings

made in this case largely constitute an ongoing diatribe against

“old crooked judges”, “papers fraudulently obtained”, “fictitious

orders”, “Texas being backwards”, and racial prejudice against

“black men in Texas”. 
- 16 -

In an effort to deter petitioner from continuing to file

frivolous or groundless petitions, this Court concludes that a

section 6673 penalty of $500 is appropriate. It is

“inappropriate that taxpayers who promptly pay their taxes should

have the cost of Government and tax collection improperly

increased by citizens apparently unwilling to obey the law or

shoulder their assigned share of the Government cost.” Burke v.

Commissioner, 124 T.C. 189, 197 (2005). 

We note that $500 does not “begin to indemnify the United

States for the expenses which petitioner’s frivolous and

groundless action” have caused. Coulter v. Commissioner, supra

at 585. But if petitioner persists in instituting and

maintaining frivolous and groundless claims, we will be inclined

to impose a significantly higher section 6673 penalty in the

future. We call petitioner’s attention to Wheeler v.

Commissioner, T.C. Memo. 2010-188, a case that involved facts

very similar to those at hand. 

In Wheeler, the taxpayer received MRP from the DFAS but

refused to report it as income. In holding the taxpayer liable

for the deficiency and imposing the maximum section 6673 penalty

because modest penalties had not deterred the taxpayer, the Court

noted that “‘given the further fact that petitioner’s military
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retirement income is funded by taxpayer dollars, petitioner’s

persistence in pursuing a tax protest agenda is inexcusable’” and

“A penalty in the maximum amount of $25,000 is appropriate when

lesser amounts have not deterred a taxpayer’s defiance of the tax

laws and of the rulings of the courts.” Id. (quoting January 11,

2008, order and order to show cause). 

 The Court has considered all of petitioner’s contentions,

arguments, requests, and statements. To the extent not discussed

herein, we conclude that they are meritless, moot, or irrelevant.

To reflect the foregoing, 

Decision will be entered

under Rule 155.