Court Opinion

ID: 179257
Source: CourtListenerOpinion
Date Created: 2010-11-16 00:29:05+00
Date Added: 2024-06-11T17:25:47.904283
License: Public Domain

Case: 10-60200 Document: 00511293496 Page: 1 Date Filed: 11/15/2010

             IN THE UNITED STATES COURT OF APPEALS
                      FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                      Fifth Circuit

                                                   FILED
                                                                         November 15, 2010

                                     No. 10-60200                           Lyle W. Cayce
                                   Summary Calendar                              Clerk

GARY L. THOMASON,

                                                   Petitioner-Appellant
v.

COMMISSIONER OF INTERNAL REVENUE,

                                                   Respondent-Appellee

                               Appeal from the Decision
                            of the United States Tax Court
                                   TC No. 21182-08

Before REAVLEY, DENNIS, and CLEMENT, Circuit Judges.
PER CURIAM:*
         Gary Thomason appeals pro se the tax court’s order sustaining an IRS tax
determination that he owed $2,313.13 in taxes and penalties, and imposing a
$2,000 sanction on Thomason under 26 U.S.C. § 6673. We affirm the tax court’s
order.
         In 2001, Thomason received $21,084 in wages and other taxable income
from sources within the United States. But Thomason filed a 2001 federal

         *
         Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
    Case: 10-60200 Document: 00511293496 Page: 2 Date Filed: 11/15/2010

                                  No. 10-60200

income tax return reporting zero income and requesting a refund of $2,616 for
income, Social Security, and Medicare taxes that had been withheld from his
wages. The Internal Revenue Service (IRS) refused to accept Thomason’s return
on the grounds that the return was frivolous and required that a proper return
be filed. Thomason resubmitted the same tax return. The IRS then prepared
a substitute tax return for Thomason pursuant to 26 U.S.C. § 6020(b) and
calculated that Thomason owed the federal government $1,926 in taxes and
$387.13 in tax penalties. Thomason appealed the tax deficiency to the tax court,
which denied his appeal and imposed a $2,000 sanction on Thomason under 26
U.S.C. § 6673.
         Thomason raises numerous arguments before this court as to why the tax
court’s order was incorrect. All of Thomason’s arguments as to his tax deficiency
raise questions of law, which we review de novo. Whitehouse Hotel Ltd. v.
Comm’r, 615 F.3d 321, 333 (5th Cir. 2010). He first argues that the § 6020(b)
substitute tax return that the IRS prepared for him was invalid because it did
not have a § 6020(b) certification, as required by IRS regulations. He also
argues that the IRS tax penalties were invalid because they were based on an
invalid § 6020(b) substitute tax return. But the record shows that the IRS did
submit a § 6020(b) certification, prepared by a tax technician. Thomason argues
that the tax technician did not have the authority to prepare the IRS
certification, but IRS internal regulations specifically allow tax auditors,
including tax technicians, to prepare the certification. See IRM 1.2.44.5(3); IRM
4.9.2.3(1). The § 6020(b) substitute tax return and corresponding penalties were
valid.
         Thomason next asserts that United States resident citizens are exempt
from paying income tax on income sourced in the United States. Thomason’s
argument, a variant of the “U.S. Sources argument” or “861 argument,” has been
universally discredited.    United States v. Bell, 414 F.3d 474, 475-76 (3d Cir.

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                                   No. 10-60200

2005) (per curiam); see also United States v. Clayton, 506 F.3d 405, 412 (5th Cir.
2007). “In general, all citizens of the United States . . . are liable to the income
taxes imposed by the Code whether the income is received from sources within
or without the United States.” Rayner v. Comm’r, 70 F. App’x 739, 740 (5th Cir.
2003) (unpublished) (quoting Treas. Reg. § 1.1-1(b) (2003)) (internal quotation
marks omitted).
       Thomason also raises several other arguments as to why he did not have
to file an income tax return or pay income taxes. He argues that, as a United
States citizen residing in the United States, he is exempt from paying income
taxes under Treas. Reg. § 1.6049-4(c)(1)(ii). But United States citizens are not
on the list of tax-exempt entities set forth in § 1.6049-4(c)(1)(ii). Thomason avers
that his bank erroneously withheld $9 in interest, but 26 U.S.C. § 61(a)(4) makes
interest, in any amount, part of a recipient’s gross income. He argues that
United States citizens residing in the United States do not have to pay income
tax because resident citizens are not on a list of taxpayers eligible for an
extension under Treas. Reg. § 1.6081-5(a). This argument is illogical: The fact
that resident citizens are not eligible for an extension has no bearing on their tax
liability.
       Thomason finally argues that the tax court abused its discretion in
imposing a $2,000 penalty on Thomason under 26 U.S.C. § 6673(a)(1). We
review the tax court’s imposition of a penalty under § 6673 for abuse of
discretion. Sandvall v. Comm’r, 898 F.2d 455, 459 (5th Cir. 1990). Section
6673(a)(1) states: “Whenever it appears to the Tax Court that . . . (B) the
taxpayer’s position in such proceeding is frivolous or groundless . . . the Tax
Court, in its decision, may require the taxpayer to pay to the United States a
penalty not in excess of $25,000.”       The tax court found that Thomason’s
arguments were “frivolous and groundless, and . . . were made for the purpose
of delaying or avoiding entirely his tax reporting and payment obligations.” As

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                                 No. 10-60200

explained above, Thomason’s arguments are either gross distortions of IRS
regulations or stale arguments that this court and others have consistently
rejected. See Clayton, 506 F.3d at 412; Bell, 414 F.3d 475-76. The tax court
warned Thomason before trial that if he continued to pursue frivolous
arguments at trial, he would be subject to sanctions. Thomason did not heed
this warning, and the tax court did not abuse its discretion in imposing a $2,000
fee under § 6673(a)(1).
      The judgment of the tax court is AFFIRMED.

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