1 These cases were consolidated for trial, briefing, and

opinion.

T.C. Memo. 2008-225

UNITED STATES TAX COURT

ALEX B. RHODES, JR., Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket Nos. 1582-07, 21381-07.1 Filed October 2, 2008.

Alex B. Rhodes, Jr., pro se.

Christopher S. Kippes, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

VASQUEZ, Judge: Alex B. Rhodes, Jr., is no stranger to our

Court. Respondent determined the following deficiencies in and

additions to petitioner’s Federal income tax: 
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2 Unless otherwise indicated, all section references are to

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.

3 Respondent concedes that petitioner is not liable for

additions to tax pursuant to section 6651(a)(2) for the years in

issue.

 Additions to Tax Estimated

Docket No. Year Deficiency 1 Sec. 6651(a)(1) Sec. 6651(a)(2) Sec. 6654

 1582-07 2004 $30,319.70 $6,687.61 $2,080.59 $860.85

 21381-07 2005 25,846.00 5,522.00 1,227.25 978.75

1 The deficiencies for 2004 and 2005 include 10-percent additional tax

pursuant to sec. 72(t) of $543.70, and $336, respectively.

On February 19, 2008, petitioner provided respondent with signed,

completed Forms 1040, U.S. Individual Income Tax Return, for 2004

and 2005. On the basis of these returns the parties have

stipulated the following deficiencies in and additions to

petitioner’s Federal income tax, pending our decision on

petitioner’s argument, as follows:

 Additions to Tax

Docket No. Year Deficiency Sec. 6651(a)(1)

 1582-07 2004 $11,633 $2,759 

 21381-07 2005 7,838 1,634 

Additionally, respondent determined an addition to tax pursuant

to section 6654.2 

The issues for decision are: (1) Whether wages and a

distribution from a qualified retirement plan constitute taxable

income, (2) whether petitioner is liable for additions to tax

pursuant to sections 6651(a)(1) and 6654,3 and (3) whether
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petitioner is liable for a penalty pursuant to section 

6673(a)(1).

FINDINGS OF FACT

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

The stipulation of facts and the attached exhibits are

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

petition, petitioner resided in Texas. 

During the years at issue petitioner submitted to respondent

invalid “zero” returns. In 2004 petitioner received compensation

reported on Forms W-2, Wage and Tax Statement, of $119,360 from

MBNA Technology, Inc., and $1,142 from Coca-Cola Enterprises,

Inc. In addition, petitioner received an early distribution from

a qualified retirement plan of $5,437 from MBNA Corp. 

Attached to his Form 1040 petitioner submitted a letter

stating he had no income in 2004. The letter was filled with

protester arguments. The Internal Revenue Service rejected the

2004 return and assessed a $500 penalty pursuant to section

6702(a).

Aside from $597 withheld by MBNA Corp. from a qualified

retirement plan distribution, petitioner made no deposits towards

his Federal income tax liability for 2004. In 2005 petitioner

received compensation reported on Forms W-2 of $110,379 from MBNA

Technology, Inc., and $853 from Coca-Cola Enterprises, Inc., and

an early distribution from a qualified retirement plan of $3,358
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from Northern Trust Co. For 2005 petitioner failed to make

estimated tax payments other than $920 withheld by MBNA

Technology, Inc., and $301 withheld by Northern Trust Co.

On February 19, 2008, petitioner provided respondent with

signed, completed Forms 1040 for 2004 and 2005. 

At trial the Court warned petitioner on numerous occasions

that the arguments he was making were frivolous and it has

imposed penalties under section 6673 against taxpayers who raise

such arguments. Additionally, the Court reminded petitioner that

it had already twice imposed penalties under section 6673 against

him and that the U.S. Court of Appeals for the Fifth Circuit, to

which an appeal in this case would lie, had also sanctioned

petitioner. Despite the Court’s warnings, petitioner continued

to make the frivolous and groundless arguments at trial.

OPINION

I. Income Tax Deficiencies

Throughout this case petitioner presented tax-protester

arguments to assert that he was not liable for Federal income tax

deficiencies as determined in the notices of deficiency for the

years at issue, including: (1) He is not a taxpayer; (2)

respondent has no jurisdiction over him; (3) his wages did not

constitute gross income; and (4) respondent lacks authority to

assert income tax deficiencies. Petitioner’s assertions have

been rejected by this Court and other courts, and “We perceive no
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need to refute these arguments with somber reasoning and copious

citation of precedent; to do so might suggest that these

arguments have some colorable merit.” Crain v. Commissioner,

737 F.2d 1417, 1417 (5th Cir. 1984); see Stelly v. Commissioner,

761 F.2d 1113, 1115 (5th Cir. 1985) (“It is clear beyond

peradventure that the income tax on wages is constitutional”);

United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981)

(“compensation for labor or services, paid in the form of wages

or salary, has been universally held by the courts of this

republic to be income, subject to the income tax laws currently

applicable”); Wetzel v. Commissioner, T.C. Memo. 2005-211

(rejecting as frivolous the argument that the taxpayer was not a

taxpayer); Nunn v. Commissioner, T.C. Memo. 2002-250 (rejecting

as without merit the argument that the Commissioner had no

jurisdiction over the taxpayer or his documents). The Court

rejects petitioner’s tax-protester arguments as frivolous and

without merit.

Section 61(a) defines gross income for purposes of

calculating taxable income as “all income from whatever source

derived”. Section 1 imposes a tax on individuals for taxable

income received. The liability for the payment of the income tax

is on the individual earning the income. Lucas v. Earl, 281 U.S.

111, 114-115 (1930).
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Respondent determined that in the years at issue petitioner

received and failed to report gross income in the form of wages

and distributions from qualified retirement plans. Respondent

also determined that petitioner failed to file Federal income tax

returns for the years at issue and make estimated tax payments,

other than the tax withheld.

Generally, the taxpayer has the burden of proving the

Commissioner’s determinations are in error. Rule 142(a); Welch

v. Helvering, 290 U.S. 111, 115 (1933). The U.S. Court of

Appeals for the Fifth Circuit has held that in unreported income

cases “The Commissioner has no duty to investigate a third-party

payment report that is not disputed by the taxpayer.” Parker v.

Commissioner, 117 F.3d 785, 787 (5th Cir. 1997); see Andrews v.

Commissioner, T.C. Memo. 1998-316. Generally, a third-party

payment report is not in dispute unless the taxpayer files a Form

1040 or other sworn document denying receipt of unreported

income. Parker v. Commissioner, supra; Spurlock v. Commissioner,

T.C. Memo. 2003-248; Andrews v. Commissioner, supra.

Petitioner received from third-party payors: (1) In 2004

wage income of $119,360 and $1,142 from MBNA Technology, Inc.,

and Coca-Cola Enterprises, Inc., respectively, and a taxable

distribution of $5,437 from MBNA Corp; (2) in 2005 wage income of

$110,379 and $853 from MBNA Technology, Inc., and Coca-Cola

Enterprises, Inc., respectively.
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II. Additions to Tax

A. Burdens of Production and Proof

Respondent bears the burden of production with respect to

petitioner’s liability for the additions to tax. See sec.

7491(c); Higbee v. Commissioner, 116 T.C. 438, 446 (2001).

To meet his burden of production, respondent must come forward

with sufficient evidence indicating it is appropriate to impose

the additions to tax. See Higbee v. Commissioner, supra at 446. 

Once respondent meets his burden of production, petitioner must

come forward with evidence sufficient to persuade the Court that

respondent’s determinations are incorrect. See id. at 447.

B. Section 6651(a)(1)

Respondent determined that petitioner is liable for

additions to tax under section 6651(a)(1) for the years at issue.

Section 6651(a)(1) imposes an addition to tax for failure to file

a return on the date prescribed (determined with regard to any

extension of time for filing), unless the taxpayer can establish

that such failure is due to reasonable cause and not willful

neglect. Petitioner stipulated that he failed to file Federal

income tax returns for the years at issue. The Court finds

respondent has met his burden of production with regard to the

additions to tax under section 6651(a)(1). Petitioner has

presented no evidence indicating his failure to file was due to

reasonable cause or that respondent’s determination is otherwise
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incorrect. Accordingly, the Court finds petitioner is liable for

additions to tax under section 6651(a)(1) for the years at issue.

C. Section 6654(a)

Respondent determined that petitioner is liable for

additions to tax under section 6654(a) for failure to make

estimated tax payments for the years at issue. A taxpayer has an

obligation to pay estimated tax for a particular year only if he

has a “required annual payment” for that year. Sec. 6654(d). A

required annual payment generally is equal to the lesser of (1)

90 percent of the tax shown on the individual’s return for that

year (or, if no return is filed, 90 percent of his or her tax for

such year), or (2) if the individual filed a return for the

immediately preceding taxable year, 100 percent of the tax shown

on that return. Sec. 6654(d)(1)(B); Wheeler v. Commissioner, 127

T.C. 200, 210-211 (2006), affd. 521 F.3d 1289 (10th Cir. 2008);

Heers v. Commissioner, T.C. Memo. 2007-10.

Respondent introduced evidence to prove petitioner was

required to file Federal income tax returns for the years at

issue. Petitioner failed to file returns for the years at issue,

and petitioner failed to make any estimated tax payments for the

years at issue, other than the amounts withheld. Petitioner has

also failed to file Federal income tax returns since at least

1997. See Rhodes v. Commissioner, T.C. Memo. 2007-206; Rhodes v.

Commissioner, T.C. Memo. 2003-133, affd. 152 Fed. Appx. 340 (5th
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Cir. 2005). Thus, the Court finds that respondent has met

his burden of production with regard to the additions to tax

under section 6654(a). Petitioner offered no evidence to refute

respondent’s evidence or to establish a defense to respondent’s

determination that petitioner is liable for the section 6654

additions to tax. Therefore, the Court finds petitioner is

liable for additions to tax under section 6654 for the years at

issue.

III. Penalty Under Section 6673(a)(1)

Section 6673(a)(1) authorizes the Court to require a

taxpayer to pay the United States a penalty in an amount not to

exceed $25,000 whenever the taxpayer’s position is frivolous or

groundless or the taxpayer has instituted or pursued the

proceeding primarily for delay. Respondent has not asked the

Court to impose a penalty under section 6673(a) against

petitioner. However, the Court may, sua sponte, impose this

penalty. Pierson v. Commissioner, 115 T.C. 576, 580 (2000);

see Rewerts v. Commissioner, T.C. Memo. 2004-248.

In Rhodes v. Commissioner, T.C. Memo. 2007-206, and Rhodes

v. Commissioner, T.C. Memo. 2003-133, the Court imposed penalties

of $15,000 and $2,000, respectively, on petitioner pursuant to

section 6673(a)(1) because petitioner advanced frivolous

arguments. Additionally, the U.S. Court of Appeals for the Fifth

Circuit imposed sanctions of $6,000 on petitioner for bringing a
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frivolous appeal. Rhodes v. Commissioner, 152 Fed. Appx. at 

342-343. At trial in the instant case, the Court warned

petitioner on several occasions that it would impose a penalty

under section 6673(a)(1) if he continued to advance frivolous

arguments. Despite the warnings of the Court, petitioner

continued to assert groundless arguments. We conclude that in

both dockets petitioner’s position was frivolous and groundless

and that petitioner instituted and maintained these proceedings

primarily for delay. Accordingly, pursuant to section

6673(a)(1), we hold petitioner is liable for a $15,000 penalty in

docket No. 1582-07 and a $10,000 penalty in docket No. 21381-07. 

In reaching our holdings, we have considered all arguments

made, and, to the extent not mentioned, we conclude that they are

moot, irrelevant, or without merit.

To reflect the foregoing,

Decisions will be entered

under Rule 155.