Page v. C.I.R.

• Court: U.S. Court of Appeals — Eighth Circuit
• Writing for the Court: Before LAY; TIMBERS
• Citation: Page v. C.I.R., 823 F.2d 1263 (8th Cir. 1987)
• Decision Date: 13 August 1987
• Docket Number: No. 86-2327,86-2327
• Parties: -5301, 87-2 USTC P 9420 Douglas A. PAGE and Carolyn Page, Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.

Page 1263

823 F.2d 1263

60 A.F.T.R.2d 87-5301, 87-2 USTC P 9420

Douglas A. PAGE and Carolyn Page, Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Appellee.

No. 86-2327.

United States Court of Appeals Eighth Circuit.

Submitted May 15, 1987.

Decided July 14, 1987.

Rehearing Denied Aug. 13, 1987.

Randall D.B. Tigue, Minneapolis, Minn., for appellants.

Michael L. Paup and Roger M. Olsen, Washington, D.C., for appellee.

Appeal from the United States Tax Court.

Before LAY, Chief Judge, MAGILL and TIMBERS, ^* Circuit Judges.

TIMBERS, Circuit Judge.

Douglas A. Page and Carolyn Page ("appellants") appeal from a decision (No. 18580-84) entered August 5, 1986 in the United States Tax Court, Joel Gerber, Judge, 51 T.C.M. (CCH) 1351, which determined a deficiency in appellants' federal income tax for the tax year 1980 and in Douglas' federal income tax for the tax year 1981. The Court imposed additions to tax with respect to these deficiencies under Int.Rev.Code of 1954, Sec. 6653(a). ¹ Douglas appeals also from a decision (No. 822-85) entered July 10, 1986 in the Tax Court, Joel Gerber, Judge, which determined a deficiency in his federal income tax for the tax year 1982. The Court imposed additions to tax with respect to this deficiency under Secs. 6651(a), 6653(a) and 6654. Appellants on October 14, 1986 filed a single notice of appeal from the Tax Court decisions.

Appellants organized and operated Chapter 8035 of the Basic Bible Church of America and later changed its name to the American Fundamentalist Church. Shortly after organizing this "church", appellants took a vow of poverty and transferred their home to themselves as trustees for the church. Assuming themselves exempt from federal income taxation because of their relationship with this religious organization, appellants did not pay any tax on the income they received from secular employment. Consequently, the Commissioner of Internal Revenue ("Commissioner") issued notices of tax deficiency to appellants. Appellants contested the deficiency by filing petitions with the Tax Court.

After a trial, the Tax Court held that appellants were not entitled to any charitable deductions for sums they purportedly transferred to the Basic Bible Church and to the American Fundamentalist Church ("the churches"). The Court further held that appellants received income during each of the tax years as principals, not as agents of the churches, and that these sums were subject to the federal income tax. The Court accordingly sustained the Commissioner's determination of a deficiency in appellants' income tax for the 1980 and 1981 taxable years and his assessments against appellants (No. 18580-84) of additions to tax under Sec. 6653(a) for negligence and intentional disregard of the rules and regulations of the IRS, and held that appellants failed to prove that these assessments were improper.

The Tax Court also sustained the Commissioner's determination of a deficiency in Douglas' income tax for the taxable year 1982 (No. 822-85) and the additions to tax under Sec. 6654 for failure to pay the estimated tax for that year, and held that Douglas had failed to prove that this assessment was improper. (As stated below, we do not have appellate jurisdiction with respect to the appeal in No. 822-85, which accordingly is dismissed.)

On appeal, appellants argue, first, that the Tax Court erred in refusing to grant appellants a continuance for the purpose of conducting discovery on the issue of denominational preference in the administration of IRS policies and regulations with respect to the assignment of income earned by clergymen; second, that the Tax Court erred in determining that appellants received income as principals and not as agents of the churches; third, that the Tax Court erred in finding that appellants were not entitled to a charitable deduction for income transferred to the churches; and, fourth, that the Tax Court erred in sustaining the Commissioner's determination of deficiencies in appellants' income tax for the 1980 and 1981 tax years and his imposition of additions to tax for negligence and intentional disregard of the rules and regulations of the IRS.

The Commissioner argues that this Court does not have jurisdiction to consider the appeal from the Tax Court's July 10, 1986 decision regarding Douglas' 1982 tax deficiency. The Commissioner argues, however, that the Tax Court correctly held that appellants were liable for deficiencies in their income tax for the 1980 and 1981 tax years and for the additions to tax imposed by the Commissioner. In addition, the Commissioner requests that this Court impose sanctions upon appellants for bringing this frivolous appeal.

We hold, first, that this Court does not have appellate jurisdiction to consider the appeal from the decision regarding Douglas' 1982 tax deficiency; second, that the Tax Court correctly denied appellants' motion for a continuance; third, that appellants received the income as agents of the churches and that appellants are not entitled to any charitable deductions for any amounts transferred to either of the churches; fourth, that the Tax Court correctly sustained the Commissioner's determination of deficiencies in appellants' income tax for the 1980 and 1981 tax years and that the imposition of additions to tax under Sec. 6653(a) was proper; and, fifth, that, inasmuch as this is a wholly frivolous appeal, our imposition of sanctions against appellants in this Court is appropriate.

I.

We summarize only those facts believed necessary to an understanding of the issues raised on appeal.

In 1978, appellants, husband and wife, ² joined the Basic Bible Church of America. The philosophy of that church is that big government is driving apart the family unit and that the country is "headed to the dogs". Specifically, the by-laws of the church expound its philosophy as follows: "The basic Doctrines, Principles and Beliefs held as 'Truth' of the Basic Bible Church are the Declaration of Independence and the Constitution of the United States, and the sacred Bible. (16th ³ and 25th Amendments ⁴ are not included in the Doctrine of B.B.C.)" (footnotes added). The by-laws provide further:

"[t]hat public servants holding the power of force in any country in any age are the most dangerous threat to man's life. These publi[c] servants, who after having taken a solemn, sworn oath to support the constitution, and then, with uninhibited abandon, ride down the natural rights of the Individual, constitute the Citizen's deadliest enemy.... That at all times it is required that, in the protection of the morals of society as a whole, the membership of this Order shall support a 'Free-enterprise, capitalistic society['] as opposed to all 'Statist Societies' based upon communism, collectivism, monarchy, fascism or other dictatorship of any kind or nature. It is a sacred principle that complete soverignty [sic] resides in the Individual. Further, that a government of laws is the best and that public servants can only act as deputies in carrying out the soverign [sic] authority of the people.... The Sacerdotal functions performed by this Order shall consist of the dispensation and recieving [sic] of natural vitamins, including Laetrille [sic] or vitamin B-17 in such manner as complies with reason for the purpose of aid, comfort and healing the sick and injured. In each instance appropriate ceremony, rites and formalities shall be entered into."

An aggregation of separate Chapters constitutes the church membership. All of these Chapters are under the leadership of Jerome Daly, who has the sole power to form Chapters and to appoint the "Head" of each Chapter.

Appellants organized Chapter 8035 in May 1978. At that time Jerome Daly sent them forms which ordained them as ministers of the Basic Bible Church, chartered their Chapter and appointed Douglas Page as the Head of this Chapter. Under the terms of the by-laws of Chapter 8035, Douglas, as the Head of the Chapter, holds his position for life and is vested with the sole authority of the Chapter. He named three trustees of the Chapter: Carolyn, Wayne Chermack, and himself. The trustees, however, have no right to vote; their sole function is to hold property in trust for the Chapter and to advise Douglas. The latter also has the sole power to control and disburse the funds and property of the Chapter for his own support and for the support of other members of the Basic Bible Church. ⁵ The record does not disclose exactly how many members appellants' Chapter had, but it appears that there were never more than a very few.

The package of forms Jerome Daly sent to appellants in connection with the organization of their Chapter included advice on how to comply with Sec. 501(c)(3) of the Internal Revenue Code. Following this advice, appellants opened a checking and savings account in the name of the Basic Bible Church. At all times relevant to this appeal, appellants were the only authorized signatories on these accounts.

Appellants also transferred title to their residence from themselves as husband and wife to themselves "as joint trustees, with the right of survivorship, for the Basic Bible Church of America, Ch. 8035". This residence is a two-story home. Appellants resided on the second floor. They built a workshop, office and chapel on the first floor. The chapel contains two pews, some chairs, a bookshelf and a pool table.

The forms Daly sent to appellants directed them to take a vow of poverty; to obtain gainful employment in their respective occupations, as agents of the church; and to turn over to the church the income earned from their work. In 1980, Carolyn obtained a secretarial position with the Employers Overload Company. She earned a total of $1,402.51 that year. Her employer did not withhold any federal income tax because she submitted a letter stating that her position as a minister of the Basic Bible Church exempted her from taxation. Appellants...