T.C. Memo. 2006-114

UNITED STATES TAX COURT

ROBERT E. AND MARY K. ADAMS, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 16464-04. Filed June 1, 2006.

Robert E. and Mary K. Adams, pro sese.

Paul K. Voelker and Wesley J. Wong, for respondent.

MEMORANDUM OPINION

VASQUEZ, Judge: This case is before the Court on

respondent’s motion for summary judgment and to impose a penalty

under section 6673. 
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1 Unless otherwise indicated, all section references are to

the Internal Revenue Code in effect for the year in issue, and

all Rule references are to the Tax Court Rules of Practice and

Procedure.

Respondent determined a deficiency of $10,286 in

petitioners’ 2001 Federal income tax and a section 6662(a)1

penalty of $2,057.20. The issues for decision are: (1) Whether

petitioners are liable for the deficiency determined by

respondent; (2) whether petitioners are liable for an accuracyrelated penalty pursuant to section 6662; and (3) whether

petitioners are liable for the penalty pursuant to section 6673.

Background

None of the facts have been stipulated. At the time they

filed the petition, petitioners resided in Las Vegas, Nevada. 

During 2001, petitioners received $216 from the Pennsylvania

State Employees Credit Union as interest income, $35,400 from

Advanced Entertainment Service as self-employment income, and

$19,522 from Defense Finance and Accounting Service as pension

income. Petitioners made no estimated tax payments for 2001. 

Petitioners submitted a Form 1040, U.S. Individual Income

Tax Return, for 2001 to respondent. Petitioners listed zero as

the amount of their wages, total income, adjusted gross income,

taxable income, and total tax. Petitioners attached two pages to

the Form 1040 reciting statements, contentions, and arguments

that the Court finds to be frivolous and/or groundless. 
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Discussion

I. Summary Judgment

Rule 121(a) provides that either party may move for summary

judgment upon all or any part of the legal issues in controversy. 

Summary judgment may be granted if it is demonstrated that no

genuine issue exists as to any material fact and a decision may

be rendered as a matter of law. Rule 121(b); Sundstrand Corp. v.

Commissioner, 98 T.C. 518, 520 (1992), affd. 17 F.3d 965 (7th

Cir. 1994). As the party that moved for summary judgment,

respondent has the burden of showing there is no genuine issue as

to any material fact and that he is entitled to judgment as a

matter of law. Nis Family Trust v. Commissioner, 115 T.C. 523,

536, 538 (2000).

We conclude that there is no genuine issue as to any

material fact and that a decision may be rendered as a matter of

law.

II. The Deficiency

Section 61 defines gross income as all income from whatever

source derived. Gross income includes, among other things,

compensation for services, interest, and pensions. Sec. 61(a).

Petitioners admit that they received the income listed in

the notice of deficiency. However, petitioners contend, inter

alia, that the earnings they derived are not income, that

therefore they are not liable for taxes, and that income
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reflected on Forms 1099-MISC, Miscellaneous Income, must be

apportioned, and since no tax is apportionable to them, they had

no tax liability. Petitioners advanced these and other arguments

in filings and at the summary judgment hearing. These arguments

are characteristic of tax-protester rhetoric that has been

universally rejected by this and other courts. Wilcox v.

Commissioner, 848 F.2d 1007 (9th Cir. 1988), affg. T.C. Memo.

1987-225; Carter v. Commissioner, 784 F.2d 1006, 1009 (9th Cir.

1986). We shall not painstakingly address petitioners’

assertions “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). 

Accordingly, we conclude that petitioners are liable for the

deficiency determined by respondent.

III. Penalties

A. Section 6662(a)

Pursuant to section 6662(a), a taxpayer may be liable for a

penalty of 20 percent on the portion of an underpayment of tax

due to negligence or disregard of rules or regulations or a

substantial understatement of income tax. Sec. 6662(b). An

“understatement” is the difference between the amount of tax

required to be shown on the return and the amount of tax actually

shown on the return. Sec. 6662(d)(2)(A). A “substantial
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understatement” exists if the understatement exceeds the greater

of (1) 10 percent of the tax required to be shown on the return

for a taxable year, or (2) $5,000. Sec. 6662(d)(1). The

understatement is reduced to the extent that the taxpayer (1) has

adequately disclosed facts affecting the tax treatment of an item

and there is a reasonable basis for such treatment, or (2) has

substantial authority for the tax treatment of an item. Sec.

6662(d)(2)(B). 

Respondent determined, and we sustained, a tax deficiency of

$10,286. Petitioners conceded that they earned the income

advanced in the notice of deficiency, and petitioners did not

present any evidence indicating reasonable cause or substantial

authority for not reporting the income. See secs. 6662, 6664. 

We sustain respondent’s penalty determination. 

B. Section 6673

Under section 6673, this Court may require a taxpayer to pay

a penalty not to exceed $25,000 if the taxpayer takes a frivolous

position in the proceeding or institutes the proceeding primarily

for delay. A position maintained by the taxpayer is “frivolous”

where 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). 

Petitioners’ protester rhetoric is manifestly frivolous and

groundless. They have wasted the time and resources of this
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2 Petitioners were before this Court regarding their 1998,

1999, and 2000 tax years, advancing similar protester arguments. 

We granted summary judgment for respondent with regard to the tax

years at issue and imposed a sec. 6673 penalty in the amount of

$1,000. Petitioners appealed our decision to the Court of

Appeals for the Ninth Circuit, which held that “the action was

frivolous and maintained by Mr. and Mrs. Adams primarily for

delay.” Adams v. Commissioner, 127 Fed. Appx. 963 (9th Cir.

2005). The Court of Appeals further imposed sanctions on

petitioners in the amount of $2,000 for filing a frivolous

appeal. Id.

Court on more than one occasion.2 Petitioners’ insistence on

making protester type arguments even after both this Court and

the U.S. Court of Appeals for the Ninth Circuit have summarily

dismissed them indicates an unwillingness on the part of

petitioners to respect the tax laws of the United States. 

Petitioners have had a fair warning that more penalties would be

imposed if they continued to make frivolous arguments. 

Accordingly, we shall impose a penalty on petitioners pursuant to

section 6673 in the amount of $10,000. 

To the extent not herein discussed, we have considered the

parties’ other arguments and found them to be meritless.

To reflect the foregoing,

An appropriate order and

decision will be entered.