Beard v. Comm'r of Internal Revenue
| Decision Date | 24 May 1984 |
| Docket Number | Docket No. 29420–82. |
| Citation | 82 T.C. No. 60,82 T.C. 766 |
| Parties | ROBERT D. BEARD, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Petitioner tampered with an official Form 1040 by modifying margin and item captions in order to categorize his wages as “Non-taxable receipts” that he claims are not gross income subject to tax. He purports this tampered form was his return for the 1981 taxable year.
1. Held, wages are subject to tax.
2. Held further, the tampered form was not a return within the meaning of secs. 6011, 6012, 6072 and 6651(a)(1), I.R.C. 1954, and an addition to tax is due under section 6651(a)(1), I.R.C. 1954.
3. Held further, petitioner willfully failed to file a return for the 1981 year and an addition to tax under sec. 6653(a), I.R.C. 1954, is due.
4. Held further, this proceeding was instituted in this Court merely for delay so that damages are awarded to the United States in the amount of $500.
5. Held further, the burden of proof in this case is on petitioner for determinations made by the statutory notice and on respondent for issues raised in the answer.
6. Held further, petitioner is not entitled to a trial by jury in this proceeding.
Robert D. Beard, pro se.
Timothy S. Murphy, for the respondent.
This case is before us on respondent's Motion for Summary Judgment.1 Pursuant to Rule 121,2 a response to the motion was filed by petitioner on February 13, 1984 (the Response). On February 22, 1984, the Motion for Summary Judgment was heard. Respondent was represented by counsel but there was no appearance by or on behalf of petitioner. The motion was taken under advisement.
In the notice of deficiency issued to petitioner, respondent determined a deficiency in petitioner's 1981 Federal income tax in the amount of $6,535. In the answer, respondent alleged that additions to tax were due under section 6651(a)(1) for failure to file a return and section 6653(a) for negligence or intentional disregard of the rules and regulations. Additionally, damages pursuant to section 6673 for instituting proceedings before the Tax Court merely for delay were requested.
The petition alleged as errors in the Notice of Deficiency that petitioner's wages are not taxable income and were wrongfully included in his gross income. He claims that his receipts are a product of the exchange of labor for wages. Since the fair market value of the labor transferred is equivalent to the amount of wages received, there is no excess gain to be reported as taxable income.3 The “equal exchange” theory was also set forth in a memorandum signed by petitioner and submitted to the Internal Revenue Service as part of the purported “return” for the 1981 year. A copy of the memorandum was attached to his petition.
In his Reply, petitioner alleges “* * * the petition contains specific justiciable errors of law and/or fact in relation to the recognition by the Respondent of the Petitioner's ‘labor’ to be ‘property,’ * * *.”4 Petitioner asserts that he has arrived at his conclusions by lengthy study and research of the rules and regulations. He contends that no additions to tax are due under sections 6653(a) and 6651(a)(1). Petitioner denies he was required to file a 1981 income tax return on or before April 15, 1982, in that he owed no tax liability for that year. He admits that the document in question in this case is the only submission he made to the Internal Revenue Service for the 1981 year, claiming that it is a return under section 6012 because it contains figures and numbers from which to compute a tax. Furthermore, he requests a trial by jury on all issues raised by the pleadings and alleges respondent has the burden of proof on all issues. Finally, he denies he has begun this proceeding before this Court merely for the purpose of delay.
We must first decide whether any genuine issue of material fact exists to prevent our summary adjudication of the legal issues in controversy. Rule 121. If summary judgment is warranted we must decide whether (1) petitioner or respondent has the burden of proof as to the issues raised in the pleadings; (2) the wages earned by petitioner are taxable; (3) petitioner is entitled to a trial by jury; (4) the purported “return” filed by petitioner was a return for the purposes of sections 6011, 6012, 6072 and 6651(a)(1); (5) the failure to include these wages in taxable income was due to negligence or intentional disregard of the rules and regulations for section 6653(a) purposes; and (6) under section 6673 an award of damages for instituting a proceeding before this Court merely for the purpose of delay is merited.
Certain facts are not disputed by the parties. Pursuant to Rule 121, respondent filed an affidavit with exhibits in connection with the instant motion.5 Petitioner did not file any affidavits or exhibits. The undisputed documents supplied by respondent and the undisputed facts in the pleadings constitute the facts used for the purposes of this motion. Rule 121(c).
Petitioner resided in Carleton, Michigan, when the petition was filed in this case. During the 1981 taxable year petitioner was employed by and received wages from Guardian Industries totaling $24,401.89. Such amounts were actually received by petitioner during that year.6
He submitted to the Internal Revenue Service the below-described form and an accompanying memorandum dated February 22, 1982, as his 1981 return, thus indicating his protest to the Federal income tax laws. No other document alleged to be a return for the 1981 year was submitted.7 This document (the tampered form) was prepared by or for petitioner by making changes to an official Treasury Form 1040 in such fashion (by printing or typing) that the changes may not be readily apparent to a casual reader. 8
In that part of the first page of the official form intended to reflect income, petitioner deleted the word “income” from the item captions in lines 8a, 11, 18 and 20 and inserted in those spaces the word “gain.” On line 21 of the form he obliterated the word “income” from the item caption. In addition, in the margin caption to this section, petitioner deleted the word “Income” and inserted the word “Receipts.”
In that part of the first page of the form intended to reflect deductions from income, he deleted the words “Employee business expense (attach Form 2106)” from line 23 of the form and inserted “Non-taxable receipts.” In addition, in the marginal caption to this section, petitioner deleted the word “Income” and inserted the word “Receipts,” so that the caption reads “Adjustments to Receipts” instead of “Adjustments to Income.”
Petitioner filled in his name, address, Social Security number, occupation, and filing status in addition to the name, occupation and Social Security number of his spouse. He claimed one exemption on the tampered form. The relevant information entries are as follows: On line 7 entitled “Wages, salaries, tips, etc.” taxpayer inserted the amount of $24,401.89. On line 23, under the category of “Non-taxable receipts,” petitioner claimed an adjustment to “Receipts” of $29,401.89. He therefore showed a tax liability of zero. On line 55, entitled “Total Federal income tax withheld,” he showed an amount of $1,770.75. The total $1,770.75 that had been withheld from his wages was claimed as a refund. This tampered form was signed by petitioner and dated February 22, 1982. Petitioner's Form W-2 issued by Guardian Industries was attached.
Petitioner's scheme in submitting this tampered form apparently was to conceal from the Service Center operators the fact that his inclusion of his wages on the tampered form was negated by his fabrication of “Non-taxable receipts” on line 23 thus simultaneously excluding the wages theoretically reported. The net effect of the two steps was to create a zero tax liability. Since his employer had withheld against the amounts paid to him for the 1981 year, this scheme allowed him to claim a refund for that year.
Petitioner has not always protested against his duty to pay taxes. For taxable year 1979 petitioner and his spouse, cash basis, calendar year taxpayers, reported jointly on an official Treasury Form 1040A wages they received as taxable income, and showed the appropriate tax on such income. Their taxes withheld exceeded their tax liability and they were due a small refund. The Treasury Form 1040A was fully completed and correctly reflected the wages shown on the Forms W-2 they received.
Petitioner has studied court cases, statutes, rules and regulations pertaining to income tax. He recognizes that this Court has on numerous occasions categorized the “equal exchange” theory that wages are not subject to income tax as frivolous and utterly without merit.9
The instant case is one of 23 cases that were on the March 5, 1984, trial calendar for Detroit, Michigan, in which tampered forms are at issue. 10 Many other similar cases are pending before this Court. All of these 23 cases contain a fabricated adjustment for “Non-taxable receipts.” All were submitted to the Internal Revenue Service in the year 198011 or 1981.12 All but two of the 23 were submitted with two- or three-page memorandums advocating that wages are not taxable income. Twenty-two of the petitions in these cases contained identical language except for entries relevant to the petitioners' personal data. The remaining case contained a handwritten, individually composed petition. In cases in which replies or responses to respondent's motion for summary judgment were filed, all but one were the same format and language with minor deviations to suit the petitioners in each case. It is abundantly clear that these docketed cases and documents represent a coordinated protest effort—an attempt to obtain refunds where employers had withheld against amounts paid, as well as to drain further the limited resources of this Court with these frivolous contentions.
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