Rowlee v. Comm'r of Internal Revenue

• Decision Date: 15 June 1983
• Docket Number: Docket No. 12096-81.
• Citation: 80 T.C. 1111
• Parties: E. KEVAN ROWLEE, PETITIONER v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

80 T.C. 1111

E. KEVAN ROWLEE, PETITIONER

v.COMMISSIONER of INTERNAL REVENUE, RESPONDENT

Docket No. 12096-81.

United States Tax Court

Filed June 15, 1983.

Taxpayer, a wage earner, failed to file tax returns. No tax was withheld by his employers because he submitted W-4 forms on which he claimed either that he was exempt or that he was entitled to 10 withholding allowances. Held: The constitutional status of the Tax Court under art. I is not impacted by Northern Pipeline Construction Co. v. Marathon Pipe Line, Co., 458 U.S. (1982). Other procedural contentions and his claim that he had no duty to file returns lack merit, and the additions to tax for fraud were properly determined. E. Kevan Rowlee, pro se.

Sandra Gilmore and John E. White, for the respondent.

OPINION

COHEN , Judge:

In a notice of deficiency dated March 12, 1981, respondent determined deficiencies and additions to tax as follows:

+--------------------------------------+
                ¦      ¦            ¦Additions to tax  ¦
                +------+------------+------------------¦
                ¦Year  ¦Deficiency  ¦sec. 6653(b) 1   ¦
                +------+------------+------------------¦
                ¦      ¦            ¦                  ¦
                +------+------------+------------------¦
                ¦1977  ¦$1,589      ¦$794.50           ¦
                +------+------------+------------------¦
                ¦1978  ¦980         ¦490.00            ¦
                +------+------------+------------------¦
                ¦1979  ¦509         ¦254.00            ¦
                +--------------------------------------+
                

The only genuine controversy concerns the correctness of respondent's determination with respect to the additions to tax. Other procedural and substantive issues are discussed, however, because the lack of merit in petitioner's position as to each is relevant to the issue of fraud.

Factual Background

Petitioner resided in Fulton, N.Y., at the time he submitted his petition herein. Petitioner completed high school and, although he did not graduate from college, attended a total of 3 or 4 years of college classes at Wesley College, Oswego State College, Lester College, Syracuse University, and the University of Maryland. Beginning in the early 1970's, petitioner belonged to a philosophy study class, which studied philosophy, economics, the Bible, different religions, and the Constitution. In about 1975, the class studied law cases and the Constitution. Petitioner proclaims that he has knowledge of “the laws.”

Petitioner and his wife timely filed a joint 1975 income tax return. On that return, petitioner reported wages, dividend, interest, and rental income. Petitioner also itemized his deductions, claiming deductions for medical expenses, taxes, interest, and charitable contributions. He reported a long-term capital loss from the sale of shares of two mutual funds, and claimed depreciation and other expenses attributable to rental property, employee business expense deductions related to the use of his automobile for business purposes, and a home office expense deduction.

During 1977 and 1978, petitioner worked with Oswego Warehousing, Inc. (Oswego Warehousing), in Oswego, N.Y., and received compensation of $10,345.92 and $7,830.01, respectively. Petitioner exchanged his labor for the checks or cash he received from Oswego Warehousing during those years. On or about March 9, 1978, petitioner submitted a W-4 form to Oswego Warehousing on which he claimed that he was exempt from tax. No Federal tax other than social security tax was withheld by Oswego Warehousing from payments made to petitioner during 1977 and 1978.

During 1979, petitioner worked with W. T. Anderson Ford, Inc. (Anderson Ford), in Fulton, N.Y., and received $5,854.25. Petitioner exchanged his labor for checks or cash received from Anderson Ford during that year. On or about June 18, 1979, petitioner submitted a W-4 form to Anderson Ford on which he claimed 10 exemptions. No Federal tax other than social security was withheld by Anderson Ford from payments made to petitioner during 1979. The only reason that petitioner initially claimed 10 exemptions on the W-4 form submitted to Anderson Ford was that he was informed by that company that he would be fired if he claimed more than 10 exemptions or that he was exempt from tax. On or about May 11, 1980, petitioner submitted a W-4 form to Anderson Ford on which he claimed that he was exempt from tax; petitioner was shortly thereafter fired by Anderson Ford.

Oswego Warehousing and Anderson Ford sent to petitioner copies of W-2 forms reporting payments made to petitioner during the years in issue. Petitioner did not file any Federal income tax returns for the calendar years 1977, 1978, or 1979. Petitioner claims that he was not required to file returns because he is a “natural unfranchised individual and freeman”; that the 16th Amendment to the Constitution only permits a tax on income rather than on the source of income; that the tax laws set forth in the Internal Revenue Code are unconstitutional because they tax the source rather than the income; that gain is a prerequisite to income; and that he received no gain or profit because his labor was capital and the compensation received for his services was equal to the value of his labor.

After respondent began an investigation of petitioner's failure to file income tax returns for the years in issue, petitioner became very vocal in espousing his political beliefs, particularly his disagreement with the income tax laws. Petitioner was unsuccessful in attempts to cause various officials of the Internal Revenue Service to discuss his legal theories. Petitioner refused to submit any financial information to respondent, contending that he was not obligated to do so because he did not have any income. On or before April 15, 1982, petitioner sent to the Syracuse Post-Standard newspaper a copy of an undated letter to Donald Regan, Secretary of the Treasury, stating petitioner's views as to the income tax.

Petitioner has attached to his brief hundreds of pages of books on various subjects, including a totally unapt comparison of the United States to Nazi Germany. The credibility and persuasiveness of petitioner's arguments are adversely affected by his penchant for hyperbole. We address only those points dealing with petitioner's liability for income tax and additions to tax and ignore the balance of his political statements. Before dealing with substantive issues, however, it is appropriate to dispose of certain procedural contentions of petitioner.

Procedural Issues

First, petitioner contends that the Tax Court is unconstitutional because it is not created under article III of the Constitution. The constitutionality of the Tax Court has been repeatedly upheld on the basis of congressional authority to create specialized courts under article I of the Constitution. See, e.g., Raetzsch v. United States, 575 F.2d 549 (5th 1978); Stix Freidman & Co. v. Coyle, 467 F.2d 474 (8th Cir. 1972); Nash Miami Motors, Inc. v. Commissioner, 358 F.2d 636 (5th Cir. 1966), cert. denied 385 U.S. 918 (1966); Martin v. Commissioner, 358 F.2d 63 (7th Cir. 1966), cert. denied 385 U.S. 920 (1966); Jennemann v. Commissioner, 67 T.C. 906 (1977). Petitioner's reliance on Northern Pipeline Construction Co. v. Marathon Pipe Line, Co., 458 U.S. (1982), is misplaced. The Supreme Court, there, held unconstitutional the broad grant of jurisdiction to bankruptcy courts over, inter alia, State law contract claims by the Bankruptcy Act of 1978. The Supreme Court noted that the act did not constitute bankruptcy courts legislative courts under article I. (458 U.S. at n. 13.) Compare sec. 7441. The Court further noted that legislative courts had been upheld where created to resolve public rights, i.e., cases between the Government and its citizens, but that the Bankruptcy Act unconstitutionally gave bankruptcy courts jurisdiction over disputes between private parties. Compare sec. 7442.²

Second, petitioner claims that he has been wrongfully denied a jury trial. The Seventh Amendment does not apply to suits against the United States, because there was no common law action against the sovereign. McElrath v. United States, 102 U.S. 426, 440 (1880). Thus, it has repeatedly been held that there is no constitutional right to a jury trial in the Tax Court. Phillips v. Commissioner, 283 U.S. 589, 599 n. 9 (1931); McCoy v. Commissioner, 696 F.2d 1234 (9th Cir. 1983), affg. 76 T.C. 1027 (1981); Lonsdale v. Commissioner, 661 F.2d 71, 72 (5th Cir. 1981), affg. a Memorandum Opinion of this Court; Dorl v. Commissioner, 507 F.2d 406 (2d Cir. 1974), affg. 57 T.C. 720 (1972).

Third, petitioner claims that he was wrongfully denied discovery and a continuance of the trial for purposes of discovery. Petitioner served on respondent a set of 218 purported interrogatories, which were in essence rhetorical questions ranging from whether or not the Government acknowledges the Constitution and various Supreme Court cases through contentions concerning monopoly; George Orwell's novel 1984; and the Law Merchant. The interrogatories were not reasonably calculated to lead to the discovery of admissible evidence. See Rule 70(b). They served no useful purpose, and continuance of the case would merely have prolonged the dilatory course of conduct engaged in by petitioner. See Mid-Continent Supply Co. v. Commissioner, 571 F.2d 1371, 1376 (5th Cir. 1978), affg. 67 T.C. 37 (1976).

Fourth, petitioner complains of an order that certain matters be deemed stipulated pursuant to Rule 91(f). The order was made after petitioner refused to stipulate to the amount of his wages, the W-4 forms he had submitted to employers, W-2 forms issued by his employers, and other essentially undisputed items. Petitioner's objection to the proposed stipulation was based upon the characterization of the amounts paid to him as wages or income, and he proposed certain stipulations in lieu of those proposed by respondent. In ordering the facts and evidence recited in respondent's proposed stipulation to be established for...