Court Opinion

ID: 5125045
Source: CourtListenerOpinion
Date Created: 2021-11-10 19:00:36.371879+00
Date Added: 2024-06-11T08:22:46.563302
License: Public Domain

Case: 21-60397     Document: 00516088115         Page: 1     Date Filed: 11/10/2021

              United States Court of Appeals
                   for the Fifth Circuit                                United States Court of Appeals
                                                                                 Fifth Circuit

                                                                               FILED
                                  No. 21-60397                         November 10, 2021
                                Summary Calendar                          Lyle W. Cayce
                                                                               Clerk

   Kenneth Warren Sauter,

                                                           Petitioner—Appellant,

                                       versus

   Commissioner of Internal Revenue,

                                                           Respondent—Appellee.

                          Appeal from a Decision of the
                            United States Tax Court
                                  No. 18389-19

   Before Wiener, Dennis, and Haynes, Circuit Judges.
   Per Curiam:*
          Kenneth Sauter appeals the tax court’s order granting summary
   judgment in favor of the Internal Revenue Service (“IRS”). Sauter’s
   primary contention is that the $85,106 he failed to report on his 2016 tax

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 21-60397         Document: 00516088115                Page: 2        Date Filed: 11/10/2021

                                            No. 21-60397

   return was nontaxable income. The tax court concluded that this argument
   was frivolous and imposed a $2500 penalty. We AFFIRM.
           We review the tax court’s grant of summary judgment de novo.
   MoneyGram Int’l, Inc. v. Comm’r, 999 F.3d 269, 273 (5th Cir. 2021). With
   respect to the motion for sanctions, we review that decision for abuse of
   discretion. Stearman v. Comm’r, 436 F.3d 533, 535 (5th Cir. 2006) (per
   curiam).
           Here, Sauter does not dispute that he received $85,106 from a third
   party, Alma Products, as compensation for his engineering design work. He
   maintains, however, that he was not required to report this income, making
   several arguments based on his own interpretation of the Internal Revenue
   Code. He primarily asserts that the income in question was nontaxable
   because Internal Revenue Code § 7701(a)(26) defines a “trade or business”
   as “includ[ing] the performance of the functions of a public office” and that
   definition must necessarily exclude compensation for an “engineering
   design.” 1
           Sauter presented a virtually identical argument regarding his 2015 tax
   return in a prior case before this court. 2 We previously concluded that
   Sauter’s argument was “frivolous and without merit.” Sauter v. Comm’r,
   773 F. App’x 188, 189 (5th Cir. 2019) (per curiam). Again, we reach the same
   conclusion. The Internal Revenue Code is clear that: (1) “gross income” is
   “all income from whatever source derived, including . . . [c]ompensation for

           1
              Sauter maintains that “[o]nly what is within the meaning of ‘performing the
   functions of a public office’ can be legally classified as a trade or business for tax purposes.”
   He fails to cite any authority supporting this proposition.
           2
             There are only two meaningful differences between his 2015 and 2016 tax return
   interpretative arguments: (1) the amount of money claimed as nontaxable, and (2) the
   relevant tax year.

                                                  2
Case: 21-60397             Document: 00516088115              Page: 3      Date Filed: 11/10/2021

                                              No. 21-60397

   services”; and (2) “‘includes’ and ‘including’ when used in a definition
   ‘shall not be deemed to exclude other things otherwise within the meaning of
   the term defined.’” Id. (emphasis added) (quoting I.R.C. §§ 61(a), 7701(c)).
   Because Sauter admitted to receiving compensation for his engineering
   design work, which is not excluded from taxable income, there is no genuine
   dispute of material fact as to the interpretation issue. 3
              As for Sauter’s $2500 sanction, as we have previously noted, “a party
   who continues to advance long-defunct arguments invites sanctions.”
   Stearman, 436 F.3d at 538. Under the circumstances, it should be no surprise
   to Sauter that he was eventually sanctioned. Indeed, he had been warned of
   the possibility of penalties multiple times, and he had been put on notice that
   his arguments were frivolous by this very court. We therefore conclude that
   the tax court did not abuse its discretion in sanctioning Sauter. Sauter is
   warned that continuing to assert frivolous defenses to tax obligations may
   lead to additional sanctions.
              AFFIRMED.

              3
                  The other arguments presented are similarly frivolous, so we do not address them
   further.

                                                    3