TAX COURT OPINION

Case: Lauri L. Wright
Docket Number: 18508-14
Judge: Holmes
Opinion Type: bench
Filed: 06/21/2016
Pages: 7

UNITED STATES TAX COURT WASHINGTON, DC 20217 LAURI L. WRIGHT, Petitioner . v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 18508-14. ) ) ) O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith the pages of the to petitioner and to respondent a copy of transcript of Holmes at Buffalo, New York on May 16, 2016, containing his oral findings of trial. fact and opinion rendered after the conclusion of the above case before Judge Mark V. the trial of In accordance with the oral findings of fact and opinion, a decision for respondent will be entered. (Signed) Mark V. Holmes Judge Dated: Washington, D.C. June 21, 2016 SERVED JUN 2 4 2016 Capital Reporting Company 3 1 2 Bench Opinion by Judge Mark V. Holmes May 16, 2016 3 Wright v. Commissioner 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Docket No. 18508-14 THE COURT: In the case of Lauri L. Wright v. Commissioner, Docket No. 18508-14, the Court has decided to render oral findings of fact and opinion in this case. And the following is the Court's oral findings of fact and opinion. This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court's Rules of Practice and Procedure. Ms. Wright is a resident of New York, and was when she filed her petition. There was no stipulation between the parties, but the pleadings included the notice of deficiency and the fact that there was no return filed. At issue is a $3,171 understatement of tax and penalties under 6651(a)(1) and 6651(a)(2) of the Internal Revenue Code, respectively, the failure to timely file and failure to timely pay penalties. There is one tax year at issue, and that's 2011. Ms. Wright worked during that year for two employers as an office assistant. One was Masco 866.488.DEPO www.CapitalReportingCompany.com I Capital Reporting Company 4 1 Cabinetry, the other the Mary Imogene Bassett 2 Hospital. The case began because Ms. Wright did not 3 4 5 6 7 8 9 10 11 12 13 14 15 file a tax return for the 2011 year. The IRS prepared a substitute for return using its authority under Section 6020(b). Some idea of what prompted this case is what happened in the first request for admissions from the Government, where instead of saying that she had received slightly more than $25,000 in income from the cabinetry company, she instead replied that she had received checks that had the equivalent of approximately $25,492 in federal reservé notes rather than dollars. She also alleged that she was not a taxpayer and not a U.S. citizen and that there was no 16 withholding agent authorized under Sections 1441 17 18 19 20 21 22 23 24 25 through 1443 of the Code, even though those sections are limited to dealing with the withholding obligations for non-resident aliens and foreign corporations. She argued at points during the pleadings that she had no legal duty to file. She claimed an exemption from income tax returns because she had put exempt on her withholding forms. In other words, numerous, numerous other staples of tax protestor 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 rhetoric stretched over, in her case, 26 pages of a memorandum attached to her petition. Some of the key examples of this were the allegation that wages are not income. Of course, wages are income and are taxable. Just to cite a case from the Second 7 Circuit, the Circuit to which this case would 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ordinarily be appealable, "The taxpayer next argues that wages are not income, but an exchange of property as money is property and labor is property, so his argument goes, his work for wages is a non- taxable exchange of property." Wrong again. Wages are income; see, for example, Schiff v. Commissioner, 751 F.2d, 116, 117 (Second Circuit, 1984). The argument that they are not has been rejected so frequently that the very raising of it justifies the imposition of sanctions, Connor v. Commissioner, 770 F.2d 17, 20, (Second Circuit, 1985). One of the other allegations made during the course of the hearing this morning was that she was only a citizen of New York, not of the United States and therefore beyond the reach of federal tax jurisdiction. This is an old staple of tax protestor rhetoric. Usually, as the 11th Circuit said, this twisted conclusion is reached by misinterpreting "A 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 portion of the income tax code, the 1913 Act defines the words "state" or "United States" to include U.S. territories and the District of Columbia; (the taxpayer) asks that this Court to interpret the word "include" as a term of limitation rather than of definition. This doesn't work. It has never worked. It 8 won't work here. Lastly, there was also an 9 allegation during the lead up to the case that the 10 11 12 13 14 notice of deficiency in this case was a defective instrument under the Uniform Commercial Code. This has no meaning, see Nagy v. Commissioner, 71 TCM 1854 (1996). In other words, there's not much here. 15 Wages are indeed income. They are subject to the 16 17 18 19 20 21 22 23 24 25 income tax. Since there was no return here, the Government is, of course, right that there is not only an understatement, but a failure to timely file and a failure to timely pay. In rejecting this last argument about the defective statement under the UCC, the Court warned Ms. Wright that persistence in making arguments like this would subject her to a penalty under 6673. The Court again warned her at the beginning of trial, warned her when her husband began testifying as to 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 these legal points. The Government had already sent her a guide that the IRS provides to legally challenged taxpayers, The Truth About Frivolous Tax Arguments, and yet she persisted. So I do find that a penalty under 6673 is appropriate. However, this was a first offense for Ms. Wright. I recognize that her education ended in high school. So she's not one of these people who comes up with this stuff as an original matter, or in light of a legal education, or occasionally IRS employment. There were only modest stakes involved in this case. So I will fine her under 6673 only $100. But I do note that she has a second case before our Court. She had a case in district court as well, in which she raised the same kind of arguments. But in light of these facts that I've already stated and the fact that she seems to be very deferential to her husband, who believes in them somewhat more and too fervently, I will give her only $100 today, but with the warning that they only go in one direction if she continues to make these arguments, and that direction is up. This concludes the Court's oral findings of 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 fact in this case, and we are adjourned until 2 Wednesday at 10:00 a.m. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 (Whereupon, at 2:13 p.m., the above- entitled matter was concluded.) 866.488.DEPO www.CapitalReportingCompany.com