TAX COURT OPINION

Case: Conrad Liu
Docket Number: 4480-10
Judge: Colvin
Opinion Type: bench
Filed: 03/30/2011
Pages: 8

UNITED STATES TAX COURT WASHINGTON, DC 20217 RMM CONRAD LIU, Petitioner, v. ) Docket No. 4480-10 COMMISSIONER OF INTERNAL REVENUE, Respondent. 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 the pages of transmit the to petitioner and to respondent a copy of transcript of March 1, 2011, containing her oral rendered in this case. the above case before Judge Diane L. Kroupa on findings of fact and opinion In accordance with the oral findings of fact and opinion, decision will be entered for respondent as to the deficiency and for petitioner as to the additions to tax. (Signed) Diane L. Kroupa Judge Dated: Washington, D.C. March 30, 2011 SERVEDMar312011 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 3 Bench Opinion by Judge Diane L. Kroupa March 1, 2011 Conrad Liu v. Commissioner Docket No. 4480-10 THE COURT:! THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT AND OPINION IN THIS CASE AND THE FOLLOWING REPRESENTSITHE COURT'S ORAL FINDINGS OF FACT AND OPINION. THESE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. This bench opinion is made pursuant to the authority granted bys section 7459(b) and Rule 152. All section references are to the Internal Revenue Code as amended and in effect for 2007 the year at issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. This deficiency case is before the Court on multiple motions which the Court set for a hearing at Chicago, Illinois, on February 28, 2011. Conrad Liu appeared pro se. Spencer Hitt appeared on behalf of respondent. FINDINGS OF FACT Petitioner filed a Form 1040EZ for 2007. He reported $933 of taxable interest and "zero" on the line specified for "wages, salaries, tips, et cetera." Petitioner also claimed a $15,993 refund for all taxes withheld, including all wage Withholding amounts, by Heritage Reporting Corporation (202) 628-4888 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 4 attaching a Form 4852 entitled "Substitute for Form W-2." Petitioner signed the return under penalties of perjury that his wage income was zero. On the Substitute W-2, alsol signed under penalties of perjury, petitioner asserted that his "unprivileged pay was incorrectly characterized as privileged wages to an employee" as defined in the Code. Respondent issued a deficiency notice for 2007 to petitioner determining a $12,630 deficiency in Federal income tax against petitioner for 2007 as well as late filing additions and late payment additions. Respondent now conce es the additions to tax. Petitioner timely filed a petition with this Court asserting that his compensation is not "wages" as defined in sections 3401 and 3121. Petitioner sent numerous and lengthy documents to the Court containing, for the most part, frivolous and groundless arguments that caused the Court to revoke petitioner's E-filin privileges. Shortly before trial, petitioner filed a cross-motion for summary judgment and sought to amend his petition. He now concedes he owes the deficiency and seeks belatedly to claim certain itemized deductions such as charitable deductions. The Court held a hearing on the pending motions in Chicago, Illinois. Heritage Reporting Corporation (202) 628-4888 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 5 OPINION ina must address first whether to grant respondent's motion for summary judgment. Summary judgment is intended)to expedite litigation and avoid unnecessary and expensive trials. See, e.g., FPL Group; Inc. v. Commissioner; 116 T.C. 73, 74 (2001). A motion for summary judgment will be granted if the pleadings and other acceptable materials, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that a decision may be rendered as a matter of law. See Rule 121(b); Elect. Arts Inc. v. Commissioner, 118 T.C. 226, 238 (2002) . We are satisfied that there is no genuine issue as to any mate ial fact and that a decision may be rendered as a matter of law, as petitioner admits he is liable for the(2007 deficiency. We shall grant respondent ' s mot ion or summary judgment . It is a fundamental tax principle that gross income includes all income from whatever source der ived, including int ere s t . Sec . 61 (a) (1) . The income petitioner earned in 2007 constitutes gross income. VRa find tha petitioner has instituted and maintained this case as a protest against the Federal income tax system. Heritage Reporting Corporation (202) 628-4888 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 6 Petitioner s arguments are familiar to this Court and other Fede al courts and have soundly been rejected on numerous occasions. By citing, out of context, selected te t from the withholding tax provisions, petition r earlier concluded that only Federal employees ar subject to the Federal income tax on their wages. Petitioner has followed in the footsteps of numerous others who have unsuccessfully attempted to find a way to avoid paying Federal income tax. We find petitioner's pr or arguments to lack merit and not worthy of furthe analysis . We note that petitioner's earlier arguments are very similar to he positions promulgated in Peter Hendrickson's Crackihq The Code: The Fascinating Truth About Taxation in America, in which the author takes the position t at "income" is not defined in the Code and that wages arned by non-Federal employees are not subject to Federal income tax. Courts have found arguments frivploüs when taxpayers argue, as did petitioner and othe followers of Mr. Hendrickson's Cracking the Code book, that wages are not income. See, e.g., Tornichio! v. United States, 263 F..Supp.2d 1090 (N.D. Ohio 2002) ; Montero v. Commissioner, docket no. 23166,-07L, affirþed by the 5th Circuit in an Heritage Reporting Corporation (202) 628-4888 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 7 unpublished order dated Nov. 19, 2009; Scott v. Commissioner, docket no. 26392-06, affirmed by the 2nd Circuit in an unpublished order dated Nov. 5, 2009; Elias v. Commissione docket no. 24624-06L; Mills v. Commissioner, docket no. 3441-08. Petitioner s arguments that withholding applies only to gove nment workers and his filing of a Form 4852 are also f ivolous. See, e,g., United States v. Sullivan, 88 F.2d 813, 815 (1st Cir. 1986). Petitioner failed to present any valid argument contesting the defic ency and later conceded the deficiency. We ther fore sustain respondent's deficiency determina ion for 2007, and we accept respondent's concession of the additions to tax. We now add ess whether it is appropriate to impose a penalty aga nst petitioner under section 6673, which authorizes the Tax Court to require a taxpayer to pay to the United States a penalty up to $25,000 whenever it appears that proceedings have been instituted or mainta ned by the taxpayer primarily for delay or that the ta payer's position in such proceedings is frivolous or groundless. The Court warned petitioner th t he was at risk of subjecting himself to the penal y if he continued to raise only frivolous arguments nd waste the Court's and Heritage Reporting Corporation 202) 628-4888 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 8 respondent's limited time and resources. Petitioner s tactics have consunted valuable Government resources. These tactics should not be condoned. They dama e the integrity of the Federal tax litigation system because the time and attention the Court and respondent must devote to these frivolous arguments eprives other taxpayers with genuine controversies. See Abrams v. Commissioner, 82 T.C. 403, 412 (1984). When the Court has been faced with 1 groundless arguments that waste the Court' s and respondent's limited time and resources, we have consistently found tl at the taxpayer deserves a penalty under section 6673 (a) (1) , and that penalty should be substantial if it is to have the desired deterrent effect. The purpose of section 6673 is to compel taxpayers to think and to conform their conduct to settled tax principles. Coleman v. Commissioner 791 F.2d 68, 71 (7th Cir. 1986); see also Grasselli v. Commissioner, T.C. Memo. 1994-581. We note th t petitioner appears to have come around on his tax reporting and payment obligation. He concedes his wages are taxable. Good for him. We can only hope that his behavior will continue. We reluctantly do not inpose a penalty against petitioner Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 25 9 at this time. We stiongly caution him, however, that should he bring sinii ar :arguments before this Court in tl-le future, the Cour s likely to impose such a penalty, up to $2N, 0, against him. To reflect the foregoing, decision will be entered for resyondeht regarding the deficiency but for petitioner as to the additions based on respondent's concession. An appropriate order will be issued granting respondent's motion for summary judgment, denying pe it-ioner's cross-motion for summary judcjment and denying petitioner' s motion for leave to amend the petition. He simply waited too long to correct the error of his ways for 2007. The Court shall also den so much of respondent' s motion that seeks to impose a penalty against petitioner under section 6673 f r 2007. TH-IS CONC DES THE COURT' S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE . (Where por at 4:03 p.m., the bench opinion in the above-entit lec matter was concluded. ) Heritage Reporting Corporation (202) 628-4888