United States Tax Court

T.C. Memo. 2023-95

REYNOLD HARVEY,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

—————

Docket No. 14439-22. Filed July 25, 2023.

—————

Reynold Harvey, pro se.

Karen Y. Leon and Thomas A. Deamus, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

LAUBER, Judge: With respect to petitioner’s Federal income tax

for 2018, the Internal Revenue Service (IRS or respondent) determined 

a deficiency of $12,058 and additions to tax under sections 6651 and 

6654.1 The principal question presented is whether petitioner is taxable 

on wages and a retirement distribution he received during 2018. He

urged that we answer that question in the negative, asserting: “I am 

exempt from Federal Income Tax, as defined by The House of Representatives.” Disagreeing with that submission, we will sustain respondent’s 

deficiency determinations and impose on petitioner a penalty of $1,000 

for advancing frivolous positions in this Court.

1 Unless otherwise indicated, statutory references are to the Internal Revenue 

Code, Title 26 U.S.C., in effect at all relevant times. We round all monetary amounts 

to the nearest dollar.

Served 07/25/23
2 

[*2] FINDINGS OF FACT

The following facts are derived from the parties’ pleadings, documentary exhibits admitted into evidence at trial, and petitioner’s trial 

testimony. Petitioner resided in the Bronx, New York, when his Petition 

was timely filed. Absent stipulation to the contrary, appeal of this case 

would lie to the U.S. Court of Appeals for the Second Circuit. See

§ 7482(b)(1)(A). We thus follow its precedent. See Golsen v. Commissioner, 54 T.C. 742, 757 (1970), aff’d, 445 F.2d 985 (10th Cir. 1971).

During 2018 petitioner was employed by the New York City 

Transit Authority. For that year it paid him wages of $80,764, reporting 

that amount to him on Form W–2, Wage and Tax Statement. He does 

not dispute that he received wages of $80,764 during 2018.

During 2018 petitioner received from the New York City Retirement Systems Trust a distribution of $3,099. It reported that payment 

to him on Form 1099–R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. The 

Form 1099–R reported that the “taxable amount” of this distribution 

was $3,099. Petitioner does not dispute that he received a retirement 

distribution of $3,099 during 2018. Nor does he dispute that this 

amount was taxable (apart from asserting that he is altogether exempt 

from Federal income tax).

Petitioner did not file a Federal income tax return for 2018. Nor 

did he remit any tax payments for 2018 beyond the amounts withheld 

by his employer. The IRS prepared a substitute for return (SFR) based 

on the information returns it received and, on March 14, 2022, mailed 

petitioner a notice of deficiency.2

The notice of deficiency determined that petitioner for 2018 received total income of $83,863, consisting of $80,764 in wages and a 

$3,099 taxable retirement distribution. Allowing him the standard deduction of $12,000, it determined taxable income of $71,863 and a tentative tax of $11,748. To that sum the IRS added tax of $310 under 

section 72(t), which imposes a 10% additional tax on early distributions

from qualified retirement plans. 

2 Petitioner’s IRS account transcript for 2018, which was admitted into evidence as Exhibit 2–R, references a “substitute for return” opposite the date July 11, 

2022. However, respondent did not submit the SFR into evidence or otherwise demonstrate that it met the requirements of section 6020(b).
3

[*3] Petitioner timely petitioned this Court. In his Petition he did not 

dispute his receipt of the income determined in the notice of deficiency. 

Nor did he dispute that his $3,099 retirement distribution was an “early

distribution” within the meaning of section 72(t). The sole argument he 

advanced was that he was exempt from Federal income tax.

Petitioner filed a Pretrial Memorandum in which he reiterated 

his position that he was not “liable to pay the federal income tax.” In 

support of that position he cited section 7701(a)(9), which defines the 

term “United States” (when used in a geographical sense) to “include[] 

only the States and the District of Columbia.” He asserted that “the 

term ‘income’ is defined nowhere in title 26 of the U.S. Code,” that “the 

meaning of income did not change after the passage of the 16th Amendment,” and that “the U.S. Supreme Court has ruled, not just once, but 

repeatedly, that the federal government cannot levee [sic] a tax on your 

property, and ultimately, your labor.”

We tried this case remotely on June 20, 2023, via Zoomgov. At 

trial petitioner did not dispute his receipt of the income in question, but 

he denied that he was taxable on it. We advised him that this Court and 

others have repeatedly characterized as frivolous the argument that 

wages are not income. We warned him that, by advancing this argument, he risked a penalty under section 6673. He nevertheless persisted 

in his position, asserting that he intended to take his argument “all the 

way to the Supreme Court.”

OPINION

A. Gross Income

The Internal Revenue Code provides that “gross income means all 

income from whatever source derived,” including “[c]ompensation for 

services.” § 61(a)(1). Gross income likewise includes distributions from 

a qualified retirement plan. See §§ 61, 72(a)(1), 408(d)(1). Such distributions are taxable in full unless the taxpayer has acquired a basis in 

his account (for example) by making nondeductible contributions to it. 

See §§ 72(b), (e)(6), 408(d)(2); Campbell v. Commissioner, 108 T.C. 54, 

66–67 (1997).

In cases of unreported income, the Commissioner must establish

an evidentiary foundation connecting the taxpayer to the incomeproducing activity, see Llorente v. Commissioner, 649 F.2d 152, 156 (2d 

Cir. 1981), aff’g in part, rev’g in part 74 T.C. 260 (1980), or demonstrate 

that the taxpayer actually received income, Edwards v. Commissioner, 
4

[*4] 680 F.2d 1268, 1270–71 (9th Cir. 1982). Information supplied to 

the IRS by the taxpayer’s employer on Form W–2, or by other payors on 

Forms 1099, is sufficient to meet this burden. See Hardy v. Commissioner, 181 F.3d 1002, 1004–05 (9th Cir. 1999), aff’g T.C. Memo. 1997-

97. “Once the Commissioner makes the required threshold showing, the 

burden shifts to the taxpayer to prove by a preponderance of the evidence that the Commissioner’s determinations are arbitrary or erroneous.” Walquist v. Commissioner, 152 T.C. 61, 67–68 (2019) (citing 

Helvering v. Taylor, 293 U.S. 507, 515 (1935)); see Texasgulf, Inc., & 

Subs. v. Commissioner, 172 F.3d 209, 214 (2d Cir. 1999), aff’g 107 T.C. 

51 (1996).

The IRS may not rely solely on a third-party report of income, 

such as a Form 1099, if the taxpayer raises a reasonable dispute concerning the accuracy of the report. See § 6201(d). Petitioner has not 

done so. To the contrary, he has admitted that he received during 2018 

the wages reported on the Form W–2 and the retirement distribution 

reported on the Form 1099–R. He does not contend that he made any 

nondeductible contributions to his retirement account. And he does not 

dispute the determination, set forth on the Form 1099–R by the New 

York City Retirement Systems Trust, that the “taxable amount” of his 

distribution was $3,099.

In contending that he is not taxable on the gross income he received, petitioner relies solely on the assertion that he is exempt from 

tax on the fruits of his labor, including his wages and the retirement 

distribution paid with respect to his labor in prior years. His pretrial 

memorandum, which is not a model of clarity, appears to allege that his 

wages and retirement benefits are tax exempt because he received them 

as an equal exchange for labor. He asserts that “[t]he term ‘income’ has 

repeatedly been held by the court to indicate ‘gain on capital’ and not 

receipt [of] wages or a fee received in exchange for selling an item of 

property.”

We have repeatedly rejected such arguments as frivolous. See, 

e.g., Rowlee v. Commissioner, 80 T.C. 1111, 1120–22 (1983) (rejecting 

the taxpayer’s claim that he did not have taxable income or “gain” because the wages he received were the product of his labor); Holland v. 

Commissioner, T.C. Memo. 2021-129, 122 T.C.M. (CCH) 311, 312–13, 

aff’d per curiam, No. 22-1007, 22 WL 1619849 (4th Cir. May 23, 2022).

And the Second Circuit has done the same. See, e.g., Connor v. Commissioner, 770 F.2d 17, 20 (2d Cir. 1985); Schiff v. Commissioner, 751 F.2d 

116, 117 (2d Cir. 1984) (ruling that the argument that taxation of wage 
5

[*5] income is unconstitutional is “wholly lacking in merit, is without 

any logical basis, and has been rejected countless times by [the Second 

Circuit] and others”), aff’g T.C. Memo. 1984-223. We accordingly hold 

that petitioner was taxable in 2018 on gross income of $83,863, as determined in the notice of deficiency.

B. Additional Tax

Section 72(t) imposes a 10% “additional tax” on early distributions from qualified retirement plans. An early distribution is defined 

as one made before “the date on which the employee attains age 59 1/2.” 

See § 72(t)(2)(A)(i). Petitioner did not contend, in his Petition, in his 

Pretrial Memorandum, or at trial, that he was age 59-1/2 or older when 

the $3,099 was distributed to him. Nor does he contend that any other

exception set forth in section 72(t)(2) applies. The sole argument he has 

advanced at any point in this case is that he is exempt from Federal 

income tax altogether. We accordingly sustain the IRS’s determination 

of a $310 additional tax for 2018.

C. Additions to Tax

With respect to the additions to tax under sections 6651 and 6654, 

respondent bears the burden of production, but petitioner bears the burden of proof. See § 7491(c). To meet his burden of production, respondent “must come forward with sufficient evidence indicating that it is appropriate to impose the relevant penalty.” See Higbee v. Commissioner, 

116 T.C. 438, 446 (2001). As explained below, the evidence required to 

meet this burden is not necessarily the same for each addition to tax. 

See, e.g., Spurlock v. Commissioner, T.C. Memo. 2003-124, 85 T.C.M. 

(CCH) 1236, 1242–45.

1. Failure to File

Section 6651(a)(1) provides for an addition to tax of 5% of the tax 

required to be shown on a return for each month (or a fraction thereof) 

for which there is a failure to file the return, not to exceed 25% in toto. 

Respondent has produced the account transcript for petitioner’s 2018 

tax year, which shows that petitioner did not file a return for 2018. This 

was sufficient to satisfy respondent’s burden of production. See Murray

v. Commissioner, T.C. Memo. 2017-67, 113 T.C.M. (CCH) 1314, 1317.

Petitioner has supplied no evidence that he filed a Federal income 

tax return for 2018. Indeed, by asserting frivolous arguments in support 

of his assertion that he had no obligation to file such a return, he has 
6

[*6] effectively admitted that he did not do so. He has alleged no facts 

and produced no evidence showing that his failure was “due to reasonable cause and not due to willful neglect.” See § 6651(a)(1). We will accordingly sustain the failure-to-file addition to tax of $2,713 determined 

by the IRS for 2018.

2. Failure to Pay

Section 6651(a)(2) provides for an addition to tax when a taxpayer 

fails to pay timely “the amount shown as tax on [a] return” unless the 

taxpayer proves that his failure was due to reasonable cause and not 

due to willful neglect. To meet his burden of production under section 

7491(c) for this addition to tax, the Commissioner must produce evidence of a tax return. Wheeler v. Commissioner, 127 T.C. 200, 208–10

(2006), aff’d, 521 F.3d 1289 (10th Cir. 2008); Gardner v. Commissioner, 

T.C. Memo. 2013-67, 105 T.C.M. (CCH) 1433, 1439, aff’d, 845 F.3d 971 

(9th Cir. 2017). An SFR prepared by the IRS pursuant to section 6020(b) 

is treated as the “return” filed by the taxpayer for this purpose. See

§ 6651(g).

Petitioner’s account transcript for 2018 indicates that the IRS 

prepared an SFR on his behalf. But respondent did not include, among 

his proposed trial exhibits, a certified copy of an SFR for 2018. Nor does

the record of this case otherwise include a copy of that document. Because respondent has not met his burden of production by producing evidence of a tax return for 2018, we are unable to sustain the addition to 

tax for failure to timely pay. See Gardner, 105 T.C.M. (CCH) at 1439

(holding that the reference in an account transcript to a “substitute tax

return prepared by IRS” was insufficient to satisfy the Commissioner’s 

burden of production).

3. Failure to Make Estimated Tax Payments

Section 6654(a) imposes an addition to tax on an individual who 

underpays his estimated tax. This addition to tax is calculated with reference to four required installment payments of the taxpayer’s estimated tax liability. § 6654(c) and (d). Each required installment is 

equal to 25% of the “required annual payment.” § 6654(d). Where a

taxpayer has not filed a return for the current tax year or the immediately preceding tax year, the “required annual payment” is equal to 90%

of the tax due for the current year. § 6654(d)(1)(B).

The Commissioner’s burden of production under section 7491(c) 

requires him to produce, for each year for which the addition to tax is 
7

[*7] asserted, evidence that the taxpayer had a “required annual payment” under section 6654(d). To do so, the Commissioner must establish 

the tax shown on the taxpayer’s return for the preceding year or demonstrate that the taxpayer filed no such return. See Wheeler, 127 T.C. 

at 212; Collins v. Commissioner, T.C. Memo. 2020-50, 119 T.C.M. (CCH) 

1319, 1330.

Respondent did not include among his proposed trial Exhibits a

copy of petitioner’s Federal income tax return for 2017 or evidence that 

petitioner failed to file a return for 2017. No information regarding petitioner’s 2017 tax year is included in the record of this case. Because 

respondent has not met his burden of production, we are unable to sustain the addition to tax under section 6654(a).

D. Penalty for Maintaining Frivolous Positions

Section 6673(a)(1) authorizes this Court to require a taxpayer to 

pay to the United States a penalty, not in excess of $25,000, “[w]henever 

it appears to the Tax Court that—(A) proceedings before it have been 

instituted or maintained . . . primarily for delay, [or] (B) the taxpayer’s 

position in such proceeding is frivolous or groundless.” The purpose of 

section 6673 is to compel taxpayers to conform their conduct to settled 

tax principles and to deter the waste of judicial and IRS resources. Coleman v. Commissioner, 791 F.2d 68, 71 –72 (7th Cir. 1986); Salzer v. Commissioner, T.C. Memo. 2014-188, 108 T.C.M. (CCH) 284, 287. “Frivolous 

and groundless claims divert the Court’s time, energy, and resources 

away from more serious claims and increase the needless cost imposed 

on other litigants . . . .” Kernan v. Commissioner, T.C. Memo. 2014-228, 

108 T.C.M. (CCH) 503, 512, aff’d, 670 F. App’x 944 (9th Cir. 2016).

Petitioner’s assertion that the income he concedes having received is not subject to Federal income tax is a frivolous argument. See

May v. Commissioner, 752 F.2d 1301, 1304 (8th Cir. 1985) (citing 

Abrams v. Commissioner, 82 T.C. 403, 406–07 (1984)); see also United 

States v. Gerads, 999 F.2d 1255, 1256 (8th Cir. 1993) (“[W]e have held 

that wages are within the definition of income under the Internal Revenue Code . . . and are subject to taxation.”); Coleman v. Commissioner, 

791 F.2d at 70–71 (same and collecting authorities); Waltner v. Commissioner, T.C. Memo. 2014-35 (same), aff’d, 659 F. App’x 440 (9th Cir. 

2016).

The assertion that wages are not income is a time-worn 

tax-protester argument. Variations on this theme have been compiled 
8

[*8] by the IRS in The Truth About Frivolous Tax Arguments, a compendium of frivolous positions and the caselaw refuting them. See Internal Revenue Serv., The Truth About Frivolous Tax Arguments 9–13 

(Mar. 2022), https://www.irs.gov/pub/irs-utl/2022-the-truth-aboutfrivolous-tax-arguments.pdf. In plain English, this document characterizes as frivolous the arguments that “wages . . . and other compensation 

received for personal services are not income” and that “there is no taxable gain when a person ‘exchanges’ labor for money.” See id. at 10. 

Although petitioner is not a lawyer, had he made even a modest inquiry 

using an internet search engine he would have found the copious authorities refuting his stance. See Wnuck v. Commissioner, 136 T.C. 498,

504 (2011) (“Anyone with the inclination to do legal research . . . will 

confront such authorities.”).

We warned petitioner at the outset of trial that he was advancing 

a frivolous argument that had repeatedly been rejected by the courts. 

He nevertheless adhered to his position, asserting that he intended to 

take his argument “all the way to the Supreme Court.” We will accordingly require that he pay to the United States a penalty of $1,000.

To reflect the foregoing,

An appropriate order and decision will be entered.