Cabirac v. Comm'r of Internal Revenue
| Decision Date | 22 April 2003 |
| Docket Number | No. 4068–02.,4068–02. |
| Citation | 120 T.C. No. 10,120 T.C. 163 |
| Parties | Michael A. CABIRAC, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Taxpayer petitioned for redetermination of deficiencies arising from substitutes for returns and penalties. The Tax Court, Ruwe, J., held that: (1) wages, interest, and distributions from retirement plans and stock funds were taxable income; (2) additions to tax for failure to file return were warranted; (3) additions to tax for failure to pay amounts of tax shown on returns were not warranted; and (4) penalty for frivolous, delaying positions was warranted.
Decision for IRS in part, and for taxpayer in part.
P received wages, interest, and distributions from a pension fund and individual retirement accounts in 1997 and 1998. He filed Forms 1040 and 1040A for those years, respectively, but entered zeros on the relevant lines for computing his tax liability. P argues that the income tax is an excise tax and that he is not engaged in taxable excise activities. R did not accept P's return forms for 1997 and 1998 as valid returns because they contained no information upon which P's tax liability could be determined. R prepared substitutes for return for P for 1997 and 1998. R's substitutes for return consisted of the first two pages of a Form 1040 and contained zeros on the relevant lines for computing a tax liability, showed a tax liability of zero, and were not subscribed. R subsequently mailed to P a notice showing proposed tax adjustments. A revenue agent's report was attached to the notice.
Held: The wages, interest, and distributions that P received represent taxable income in the amounts determined by R.
Held, further, that P is liable for a 10–percent additional tax on the taxable amounts of his pension and IRA distributions. Sec. 72(t)(1), I.R.C.
Held, further, that P is liable for sec. 6651(a)(1), I.R .C., additions to tax for failure to file a return on or before the specified filing date. The Forms 1040 and 1040A that P filed showing zeros are not “returns” for Federal income tax purposes. P is also liable for sec. 6654, I.R.C., additions to tax for a failure to pay estimated taxes.
Held, further, that the sec. 6651(a)(2), I.R.C., additions to tax for failure to pay amounts of tax shown on returns do not apply because there was no tax shown on any returns attributable to P, and the unsubscribed substitutes for return showing zero taxes do not meet the requirements for a sec. 6020(b), I.R.C., return. The subsequently prepared notice of proposed adjustments and the revenue agent's report, which were not attached to the unsubscribed substitutes for return, whether viewed separately or in conjunction with the substitutes for return, do not constitute returns for purposes of sec. 6020(b), I.R.C.
Held, further, that a penalty of $2,000 is imposed under sec. 6673(a)(1), I.R.C.
Michael A. Cabirac, pro se.
James N. Beyer, for respondent.
Respondent determined the following deficiencies in petitioner's Federal income taxes and additions to tax as follows:
+----------------------------------------------------------+
¦ ¦ ¦Additions to tax ¦
+----+----------+------------------------------------------¦
¦Year¦Deficiency¦Sec. 6651(a)(1)¦Sec. 6651(a)(2) ¦Sec. 6654¦
+----+----------+---------------+----------------+---------¦
¦ ¦ ¦ ¦ ¦ ¦
+----+----------+---------------+----------------+---------¦
¦1997¦$10,371 ¦$2,592.75 ¦To be determined¦$459.70 ¦
+----+----------+---------------+----------------+---------¦
¦1998¦13,521 ¦3,380.25 ¦To be determined¦618.69 ¦
+----------------------------------------------------------+
The issues for decision are: (1) Whether petitioner received wages, interest, and pension and individual retirement plan distributions as taxable income in the amounts that respondent determined; (2) whether petitioner is liable for a 10–percent additional tax under section 72(t)(1); 1 (3) whether petitioner is liable for additions to tax under sections 6651(a)(1) and (2) and 6654; and (4) whether to impose a penalty under section 6673 (a)(1).
Some of the facts have been stipulated and are so found. The stipulation of facts, the attached exhibits, and the supplemental stipulation of facts are incorporated herein by this reference. At the time of filing the petition, petitioner resided in Brandamore, Pennsylvania.
Petitioner was employed by Environmental Compliance Services, Inc .(ECS). ECS paid petitioner $47,051.55 in 1997 and $50,871.48 in 1998 as salary. ECS issued to petitioner Forms W–2, Wage and Tax Statement, which reflected those amounts as wages. In 1997, petitioner received $200 in interest from the Internal Revenue Service. In 1998, petitioner received $247 in interest from Fulton Bank.
In 1997, petitioner received a $20,356 distribution from his pension fund at ECS.2 In 1998, petitioner received distributions of $11,000 from an individual retirement account (IRA) that he maintained with Vanguard Fiduciary Trust. Also in 1998, petitioner received a $2,534 distribution from an IRA that he maintained with Warburg Pincus International Equity Fund.3
Petitioner submitted to respondent a Form 1040, U.S. Individual Income Tax Return, dated April 14, 1998, for his 1997 taxable year. Petitioner entered zeros on line 7 for wages and salaries, line 22 for total income, lines 32 and 33 for adjusted gross income, line 38 for taxable income, line 39 for tax, and line 53 for total tax.4 Attached to the Form 1040 is a two-page document in which petitioner explains his position regarding his entering zeros on that form in which he argues, inter alia, that no section of the Internal Revenue Code establishes an income tax liability or provides that income taxes have to be paid on the basis of a return, that he is protected by the Fifth Amendment of the Constitution from providing information on a return, and that he had “zero” income since he had no earnings taxable as income under the Corporation Excise Tax Act of 1909, ch. 6, 36–1 Stat. 11.
In a letter dated January 19, 1999, petitioner submitted to respondent a Form 4852, Substitute for Form W–2, Wage and Tax Statement, correcting the Form W–2 that ECS issued to petitioner for 1997. The Form 4852 indicates that lines 7a, b, and c of the Form W–2 should contain zeros. Petitioner also submitted a document entitled “Asseveration of Claimed Gross Income” and a document entitled “Detailed Explanation of Determination of Taxable Sources of Income for the Year 1997” in which he explained his position. He claimed that the Form W–2 submitted by ECS for 1997 was incorrect because he did not have any gross income from a source listed in the regulations promulgated under section 861.
Petitioner submitted a Form 1040A, U.S. Individual Income Tax Return, for taxable year 1998. Petitioner entered zeros on line 7 for wages and salaries, line 14 for total income, lines 18 and 19 for adjusted gross income, and line 24 for taxable income.5 Petitioner attached a Form 4852 to the Form 1040A. He also attached a one-page untitled document and a five-page document entitled “Asseveration of Exclusion of Remuneration from Gross Income for 1998” in which he raised arguments similar to those raised in the attachment to his 1997 Form 1040 and in the Form 4852 that he submitted for 1997.
Respondent did not accept petitioner's 1997 Form 1040 or the 1998 Form 1040A as valid returns. Respondent prepared substitute for return documents (SFRs) for petitioner for 1997 and 1998. Each of the SFRs consists of pages 1 and 2 of a Form 1040, and each contains zeros on line 7 for wages and salaries, line 22 for total income, line 39 for taxable income, line 40 for tax, and line 56 for total tax. Respondent stamped those documents as received by his service center on February 23, 2000. Respondent mailed to petitioner a letter dated May 31, 2000, notifying him of proposed changes to petitioner's taxes and various penalties for the years 1997 and 1998. A revenue agent's report dated May 31, 2000, is attached to that letter. The letter informed petitioner that he had 30 days to request a conference with respondent's Office of Appeals if petitioner did not agree to the proposed adjustments. Respondent mailed a notice of deficiency to petitioner on September 28, 2001.
Petitioner had no Federal income taxes withheld from his wages for the taxable years 1997 and 1998. He made no estimated tax payments for those years.
OPINIONGross income means all income from whatever source derived. Sec. 61(a). It is beyond contention that wages represent taxable income. See sec. 61(a)(1); United States v. Connor, 898 F.2d 942, 943 (3d Cir.1990); Grimes v. Commissioner, 82 T.C. 235, 237, 1984 WL 15536 (1984). It is also clear that interest, pension and IRA distributions are taxable as income. Secs. 61(a)(4), (11), 408(d)(1).
Respondent determined that petitioner received taxable wages, interest, and pension and IRA distributions in 1997 and 1998. Petitioner stipulated that he received the amounts determined by respondent as income. However, he argues that the income tax is an excise tax and that he did not engage in taxable excise activities during the taxable years in question. We have previously rejected petitioner's argument as frivolous, and we see no need to address petitioner's argument with any further discussion. Sawukaytis v. Commissioner, T.C. Memo.2002–156; Heisey v. Commissioner, T.C. Memo.2002–41, affd. ––– Fed. Appx. –––– (9th Cir.2003); Hart v. Commissioner, T.C. Memo.2001–306. Accordingly, we sustain respondent's determinations of deficiencies.6
Respondent determined that petitioner is liable for a 10–percent additional tax on the taxable amounts of his pension and IRA distributions in 1997 and 1998. If any individual taxpayer...
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