T.C. Memo. 2009-167

UNITED STATES TAX COURT

WILLIAM GREGORY SAMPLES, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 22527-08. Filed July 14, 2009. 

William Gregory Samples, pro se.

Lynette Mayfield, for respondent.

MEMORANDUM OPINION

DAWSON, Judge: This case is before the Court on a petition

for redetermination of a deficiency and additions to tax for the

year 2004. In a notice dated June 30, 2008, respondent

determined a deficiency of $4,539 in petitioner’s Federal income

tax for 2004 and additions to tax pursuant to section 6651(a)(1)
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1Unless otherwise indicated, all section references are to

the Internal Revenue Code, as amended and in effect for the tax

year at issue, and all Rule references are to the Tax Court Rules

of Practice and Procedure. The failure to pay addition is at the

rate of 0.5 percent for each month or fraction thereof that the

failure to pay continues, not exceeding 25 percent in the

aggregate.

of $740.02 and section 6651(a)(2) of $592.02.1 In an amendment

to answer filed May 18, 2009, respondent alleged and claimed for

2004 an increased deficiency of $7,136 and an increased addition

to tax under section 6651(a)(1) of $1,324.

The issues for decision are: (1) Whether petitioner

received in 2004 wages and other compensation of $39,159.67 and

business income of $6,938, all of which is includable in his

gross income and subject to tax; (2) whether petitioner is liable

for an addition to tax pursuant to section 6651(a)(1) for failing

to file a Federal income tax return for 2004; (3) whether

petitioner is liable for an addition to tax pursuant to section

6651(a)(2) for failing to pay Federal income tax for 2004; and

(4) whether petitioner should be required to pay a penalty to the

United States pursuant to section 6673(a).

Background

There is no stipulation of facts. However, respondent’s

Exhibits 1-R through 5-R were received in evidence and are

incorporated herein by this reference. Petitioner resided in

Tennessee at the time he filed his petition. In 2004 petitioner

was employed by Bluegreen Corp. (Bluegreen) of Boca Raton,
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Florida. As provided by section 6041(a) and (d), Bluegreen

reported to respondent that it paid wages and other compensation

to petitioner during 2004. It issued to petitioner a Form W-2,

Wage and Tax Statement, for 2004 showing wages and other

compensation of $39,159.67, Federal income tax withheld of

$1,250.54, Social Security tax withheld of $2,427.90, and

Medicare tax withheld of $567.82. Petitioner did not timely file

a Form 1040, U.S. Individual Income Tax Return, for 2004 and did

not report the income received for that year from Bluegreen.

On or about June 13, 2008, petitioner submitted to

respondent’s Fresno Service Center for filing as a purported 2004

Form 1040 a document to which petitioner attached a letter and a

7-page affidavit of frivolous arguments. The purported return

showed $39,159 as wages received, income of $6,938 from Schedule

C, Profit or Loss From Business, and total income of $46,097. 

Petitioner reported his adjusted gross income as zero and his

total tax as zero. The Fresno Service Center determined that the

purported return was “unprocessible” and rejected it as a

frivolous document.

On September 8, 2008, respondent sent a letter to petitioner

cautioning him that, if the frivolous document was not withdrawn

and a proper return was not filed within 30 days, a civil penalty

for filing a frivolous tax return would be imposed.
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Petitioner did not withdraw his document submitted on June

13, 2008. Accordingly, a civil penalty of $5,000 for filing a

frivolous tax return was imposed pursuant to section 6702(a), and

it was assessed by respondent on December 15, 2008.

Respondent then prepared a substitute for return for

petitioner pursuant to section 6020(b) and the return was

audited. Upon audit, since the parties did not agree, respondent

issued a notice of deficiency.

On September 12, 2008, petitioner filed his petition and

made the same frivolous arguments that caused the civil penalty

for filing a frivolous tax return to be imposed for 2004.

On March 6, 2009, respondent’s counsel sent petitioner a

letter cautioning him that, if he continued to make the same

frivolous and groundless arguments at trial, respondent would

request the Court to impose sanctions pursuant to section

6673(a).

On or about May 1, 2009, petitioner sent to the Court and to 

respondent his pretrial memorandum in which he cited the same

authorities for his previously rejected frivolous and groundless

arguments. He continued to repeat them in his statements and

testimony at trial. Consequently, respondent filed at trial a

motion to impose sanctions under section 6673(a).
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Discussion

Throughout this case petitioner presented tax-protester

arguments, stating that he is not liable for the Federal income

tax deficiencies and additions to tax determined in respondent’s

notice and asserted in his amendment to answer.

I. Parties’ Contentions

In summary, petitioner argues that the income tax is an

indirect excise tax; excise taxes can be laid only upon certain

specified events or on privileges; the labor and income of a

natural person are his property and a natural right, not a

privilege granted by government; and, since none of his income

was produced from taxable activity (i.e., the manufacture, sale,

or consumption of commodities) and he is a natural person, not a

corporation, none of the income he earned in 2004 is taxable.

To the contrary, respondent points out that petitioner’s

arguments are erroneous for several reasons. First, petitioner’s

reliance on the historical discussion contained in Brushaber v.

Union Pacific Railroad Co., 240 U.S. 1, 17-19 (1916), of direct

versus indirect taxes as supporting his position is misguided and

does not sustain it. As explained by the Supreme Court in

Brushaber, the purpose of the 16th Amendment to the Constitution

was to eliminate the source from which taxed income was derived

as the criterion by which to determine the applicability of the

constitutional requirement for the apportionment of taxes. Thus,
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the Brushaber holding negates petitioner’s attempt to

recharacterize his wages and other compensation income as

property on which no income tax may be imposed. Second,

petitioner’s contention that his wages and other compensation are

not taxable because they are property and that an indirect income

tax on property is impermissible under the Constitution is merely

a variation on the frivolous argument that wages are not income. 

Third, Courts of Appeals have consistently rejected as frivolous

the argument that wages are not income. E.g., United States v.

Becker, 965 F.2d 383, 389 (7th Cir. 1992); United States v.

Connor, 898 F.2d 942, 943-944 (3d Cir. 1990). We agree with

respondent. In Rowlee v. Commissioner, 80 T.C. 1111, 1119-1122

(1983), this Court thoroughly analyzed, explained, and rejected

the same frivolous and groundless arguments made by petitioner.

II. Wages and Other Compensation

Section 61(a)(1) defines gross income for purposes of

calculating taxable income as “all income from whatever source

derived, including (but not limited to) the following items: (1)

Compensation for services, including fees, commissions, fringe

benefits, and similar items”. Section 61(a)(2) provides for

gross income derived from business. Section 1 imposes a tax on

taxable income received by an individual. 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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The evidence clearly shows that petitioner received wages

and other compensation totaling $39,159.67 as an employee of

Bluegreen in 2004. He also received $6,938 as gross income, with

no claimed expenses, in his business as an alternative health

educator.

In Perkins v. Commissioner, 746 F.2d 1187 (6th Cir. 1984),

affg. T.C. Memo. 1983-474, the U.S. Court of Appeals for the

Sixth Circuit decided in a per curiam opinion the same issues

involved in the instant case by rejecting the taxpayer’s claims

that (1) wages paid for his labor were nontaxable receipts, and

(2) the 16th Amendment does not permit an imposition of tax on

wages. The Court of Appeals stated:

These assertions are totally without merit. 

First, gross income means all income from whatever

source derived including compensation for services. 26

U.S.C. sections 61(a) and 61(a)(1); Commissioner v.

Glenshaw Glass Co., 348 U.S. 426, 75 S.Ct. 473, 99

L.Ed. 483 (1955); Brushaber v. Union Pacific Railroad,

240 U.S. 1, 12, 36 S.Ct. 236, 239, 60 L.Ed. 493 (1916);

Funk v. Commissioner, 687 F.2d 264, 265 (8th Cir. 1982)

(wages received for services are taxable as income). 

Second, 26 U.S.C. section 61(a) is in full accordance

with Congressional authority under the Sixteenth

Amendment to the Constitution to impose taxes on income

without apportionment among the states. * * * 

Id. at 1188.

The decision of the Court of Appeals in the Perkins case

controls the disposition of the issues in this case. In

addition, there are, of course, numerous decisions by other

Courts of Appeals holding that wages received for services are
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taxable as income. See, e.g., Wilcox v. Commissioner, 848 F.2d

1007, 1008 (9th Cir. 1988); Motes v. United States, 785 F.2d 928

(11th Cir. 1986), Stelly v. Commissioner, 761 F.2d 1113, 1115

(5th Cir. 1985).

Accordingly, on the basis of this record, we sustain

respondent’s determination of the deficiency and the asserted

increased deficiency.

III. Additions to Tax

A. Burden of Production

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 an

addition to tax pursuant to section 6651(a)(1) for 2004. Section

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

return on the date prescribed (determined with regard to any
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extension of time for filing) unless such failure is due to

reasonable cause and not due to willful neglect.

Petitioner did not file a return for 2004. Thus, respondent

has met his burden of production. Petitioner must come forward

with evidence sufficient to persuade the Court that respondent’s

determination is incorrect or that an exception applies. See

Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933); see

also Higbee v. Commissioner, supra at 447. Petitioner alleged no

error in his petition with respect to the section 6651(a)(1)

addition to tax. Furthermore, he presented no evidence that his

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

willful neglect. Therefore, we hold that petitioner is liable

for the addition to tax pursuant to section 6651(a)(1).

C. Section 6651(a)(2)

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

payment of tax is not timely “unless it is shown that such

failure is due to reasonable cause and not due to willful

neglect”. Respondent prepared a substitute for return for 2004

that satisfied section 6020(b). After the substitute return was

audited and the parties failed to agree, respondent determined a

deficiency of $4,538 which was later increased to $7,136 in an

amended answer. Petitioner has paid only a portion of the tax

due.
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On the basis of the evidence, we find that petitioner did

not pay on time some of his tax due for 2004. Petitioner also

did not present evidence indicating that his failure to pay was

due to reasonable cause and not due to willful neglect. See

Higbee v. Commissioner, supra at 446-447 (stating that the

taxpayer bears the burden of proof regarding reasonable cause). 

Accordingly, we sustain respondent’s determination on this issue

and hold that petitioner is liable for the addition to tax

pursuant to section 6651(a)(2).

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

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

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

to exceed $25,000 if (1) the taxpayer has instituted or

maintained a proceeding primarily for delay, or (2) the

taxpayer’s position is “frivolous or groundless”. We think

petitioner obviously brought this proceeding to delay payment of

the income tax he owes. Moreover, his case is groundless, and

his arguments are frivolous. A taxpayer’s position is frivolous

if it is contrary to established law and unsupported by a

reasoned, colorable argument for change in the law. E.g., Nis

Family Trust v. Commissioner, 115 T.C. 523, 544 (2000). 

Petitioner has offered no plausible argument that he is exempt

from Federal income tax. His arguments simply employ familiar

tax-protester rhetoric that has been universally rejected by this
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and other courts. See, e.g., Crain v. Commissioner, 737 F.2d

1417 (5th Cir. 1984); Williams v. Commissioner, 114 T.C. 136

(2000); see also Rodriguez v. Commissioner, T.C. Memo. 2009-92;

Wagenknecht v. Commissioner, T.C. Memo. 2008-288.

During the present difficult economic situation, when the

courts are confronted with resolving an increasing number of

legitimate tax controversies, what we stated 32 years ago in

Hatfield v. Commissioner, 68 T.C. 895, 899 (1977), bears

repeating:

In recent times, this Court has been faced with

numerous cases, such as this one, which have been

commenced without any legal justification but solely

for the purpose of protesting the Federal tax laws. 

This Court has before it a large number of cases which

deserve careful consideration as speedily as possible,

and cases of this sort needlessly disrupt our

consideration of those genuine controversies. * * * 

Many citizens may dislike paying their fair share

of taxes; everyone feels that he or she needs the money

more than the Government. On the other hand, as

Justice Oliver Wendell Holmes so eloquently stated: 

“Taxes are what we pay for civilized society.” 

Compania de Tabacos v. Collector, 275 U.S. 87, 100

(1927). The greatness of our nation is in no small

part due to the willingness of our citizens to honestly

and fairly participate in our tax collection system

which depends upon self-assessment. Any citizen may

resort to the courts whenever he or she in good faith

and with a colorable claim desires to challenge the

Commissioner’s determination; but that does not mean

that a citizen may resort to the courts merely to vent

his or her anger and attempt symbolically to throw a

wrench at the system. * * *

Petitioner’s actions and arguments have resulted in a waste

of limited judicial and administrative resources that could have
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been devoted to resolving bona fide claims of other taxpayers. 

And his insistence on making such discredited and meritless

contentions has shown an unwillingness to comply with the tax

laws of the United States.

Accordingly, we shall grant respondent’s motion to impose

sanctions, and we shall require petitioner to pay a penalty of

$5,000 to the United States pursuant to section 6673(a)(1).

To reflect the foregoing,

An appropriate order and

decision will be entered for

respondent.