Reiff v. Comm'r of Internal Revenue

• Citation: 77 T.C. 1169
• Decision Date: 30 November 1981
• Docket Number: Docket No. 15778-79.
• Parties: CHARLES C. REIFF and MILDRED H. REIFF, PETITIONERS v. COMMISSIONER of INTERNAL REVENUE, RESPONDENT
• Court: United States Tax Court

77 T.C. 1169

CHARLES C. REIFF and MILDRED H. REIFF, PETITIONERS

v.COMMISSIONER of INTERNAL REVENUE, RESPONDENT

Docket No. 15778-79.

United States Tax Court

Filed November 30, 1981.

Petitioners filed a 32-page preprinted document with respondent. The Form 1040 portion of this document was signed under penalties of perjury. On the document, petitioners disclosed their names, address, and social security numbers, petitioner-husband's occupation, Federal income tax withheld, and estimated tax payments; they also asserted a variety of constitutional objections. Attached to this document was petitioner-husband's Form W-2, which contained a hand-written notation to the effect that the amounts shown thereon are Federal Reserve Notes. Held:

1. Petitioners are liable for an income tax deficiency in the increased amount asserted in respondent's answer.

2. The 32-page document does not constitute a “return”; addition to tax imposed under sec. 6651(a)(1) (failure to file return), I.R.C. 1954.

3. Addition to tax imposed under sec. 6653(a) (negligence), I.R.C. 1954. Charles C. Reiff and Mildred H. Reiff, pro se.

Howard Philip Newman, for the respondent.

CHABOT , Judge:

Respondent determined a deficiency in Federal individual income tax against petitioners for 1977 in the amount of $740. In his answer, respondent asserts under section 6214(a)¹ that the deficiency in income tax should be increased by $1,471 (for a total of $2,211) and that additions to tax should be imposed under sections 6651(a)(1) (failure to file return) and 6653(a) (negligence) in the amounts of $274.75 and $110.55, respectively. ²

The issues for decision are:

(1) Whether petitioners are liable for an income tax deficiency;

(2) Whether petitioners are liable for an addition to tax under section 6651(a)(1); and

(3) Whether petitioners are liable for an addition to tax under section 6653(a).

FINDINGS OF FACT

Some of the facts have been stipulated or deemed stipulated³ under Rule 91(f)(3);⁴ the stipulations and the stipulated exhibits are incorporated herein by this reference.

When the petition in this case was filed, petitioners Charles C. Reiff (hereinafter sometimes referred to as Charles) and Mildred H. Reiff (hereinafter sometimes referred to as Mildred), husband and wife, resided in Glenside, Pa.

During 1977, Charles was employed by Hale Fire Pump Co. (hereinafter referred to as Hale). Hale paid wages to Charles in 1977 in the amount of $9,874. In addition to the wages paid by Hale, Charles received a distribution of $784 in 1977 under Hale's tax-qualified profit-sharing plan. Contributions under Hale's profit-sharing plan were made only by Hale; no contributions were made by Charles. As of the end of 1976, the balance in Charles' account in this plan was $5,741.97; as of the end of 1977, it was $4,822.99.

Dividends and interest paid to petitioners in 1977 with respect to jointly owned stocks and bonds and with respect to Charles' savings accounts, Mildred's savings accounts, and Mildred's interest-bearing account at an insurance company are shown in table I.

+--------+
                ¦TABLE I ¦
                +--------¦
                ¦  ¦  ¦  ¦
                +--------+
                

 Dividends Interest  
                Colonial Option Income Fund (joint)         $1,005
                Corporate Securities Trust (joint)          1,103
                Philadelphia Electric Co. (joint)           1,720
                Pennsylvania Power & Light (joint)                      $975
                Commonwealth Federal Savings (Charles)                  363
                Philadelphia National Bank (Charles)                    16
                Pennsylvania Savings Fund Society (Charles)             352
                Pennsylvania Savings Fund Society (Charles)             615
                Home Life Insurance Co. (Mildred)                       22
                Pennsylvania Savings Fund Society (Mildred)             352
                Pennsylvania Savings Fund Society (Mildred)             261
                Totals                                      3,828       2,956
                

For 1977, petitioners filed with respondent a 32-page preprinted document entitled “Petition for Redress of Grievances.”⁵ The first and second pages of the document consist of a modified 1976 Form 1040 with various constitutional objections printed in the margins. The first page was signed by petitioners under penalties of perjury and is dated April 17, 1978; it shows petitioners' names, address, and social security numbers, Charles' occupation, Federal income tax withheld in the amount of $1,112.23, 1977 estimated tax payments in the amount of $316.42, and total payments, amount overpaid, and amount to be refunded—-all in the amount of $1,428.65. No information is provided with respect to petitioners' filing status or exemptions. The remaining lines on the Form 1040 contain one or two preprinted asterisks which are explained in the margin as objections under the 1st, 4th, 5th, 7th, 8th, 9th, 10th, 13th, 14th, and 16th Amendments. The remaining pages of the document consist of numerous statements and affidavits, a copy of the Declaration of Independence, and excerpts from the United States Constitution and various publications. Charles signed the first three of the preprinted pages after the Form 1040. The first signed page is a form letter to the Director of the Internal Revenue Service Center, which states:

We * * * [offer] to re-file, or to amend our return, if you will please show us how to do so without forcing us to waive our Constitutional Rights, and to receive your written guarantee against any criminal prosecution—-both federal, state and local—-as the result of furnishing you the information you seek.

The second signed page is an “Affidavit of My Understanding of a United States ‘Dollar.’ ” The third signed page is an affidavit about Charles' understanding as to a conviction of one W. Vaughn Ellsworth and as to Charles' rights under the Fifth Amendment.

Attached to the document is Charles' Form W-2 from Hale with handwritten notations that the dollar amounts shown thereon are Federal Reserve Notes.

Charles intended to file a “Fifth Amendment return” for 1977. Although Charles did not agree with all of the objections raised in the 32-page document petitioners filed with respondent for 1977, Charles was told in a class conducted by a group (whose name at the date of the trial was the Committee for Constitutional Taxation) that this was the way to file the return he desired. Charles became interested in Fifth Amendment returns as a result of some magazine articles he had read, and he first attended the classes of the Committee for Constitutional Taxation on the filing of such returns in January 1978. As of the date of trial, Charles was active in that group, and, in the course of such activities, had studied the tax laws to some degree.

Petitioners received a Form 3949—-Intelligence Information Item—-for 1977 from respondent by virtue of a request by petitioners under the Privacy Act and the Freedom of Information Act. Attached to that form was a printed sheet entitled “Illegal Tax Protester Initial Analysis Data Sheet” which contains the following notation: “T/P refused to totally fill out 1040, claiming 5th amendment, etc.; but did attach W-2, so it is processable.”

Petitioners failed to file an income tax return for 1977. This failure was deliberate and in open disregard of petitioners' obligations under the internal revenue laws; it was due to willful neglect and not due to reasonable cause.

Petitioners underpaid their income tax for 1977; a part of this underpayment was due to negligence or intentional disregard of respondent's rules or regulations.

OPINION

As a preliminary matter, we note that respondent's determinations as to matters of fact in the notice of deficiency are presumed to be correct, and petitioners have the burden of proving otherwise. Welch v. Helvering, 290 U.S. 111 (1933); Rule 142(a). However, respondent has the burden of proof with respect to the additional income tax deficiency and the additions to tax which were asserted in his answer.

I. Deficiency in Income Tax

Petitioners do not dispute that they received the wages, dividends, interest, and distribution from Hale's profit-sharing plan described in the findings of fact, supra, but maintain that the receipt of these items is not proof of any tax liability. In particular, they assert that “wages are not ‘income’ subject to tax.” Notwithstanding the notations on Charles' Form W-2 and Charles' signature on the “Affidavit of My Understanding of a United States Dollar,” petitioners now eschew any argument based on the meaning of “dollar.” Respondent asserts that petitioners are required to include in gross income their wages, dividends, and interest under section 61(a), and the distribution from Hale's profit-sharing plan under sections 402(a)(1) and 72(a).

We agree with respondent.

Under section 61(a),⁶ petitioners are required to include in gross income for 1977 the wages,⁷ dividends, and interest they received in that year.

Although petitioners refused to acknowledge receipt of dividends and interest, neither did they deny such receipt. Also, they did not deny that appropriate officials of the asserted payor corporations would testify that petitioners were paid dividends and interest in the amounts set forth in table I supra. Petitioners' only stated reason for refusing to stipulate as to such payments was their fear of self-incrimination. On several occasions during the proceedings in the instant case, respondent's attorney represented to the Court that there is no proposed or pending criminal tax investigation or proceeding against petitioners for any taxable year. The privilege against self-incrimination may be invoked only when an answer to the question posed would expose the petitioner to a real danger of prosecution; remote or speculative possibilities of prosecution for unspecified crimes are not sufficient to justify a failure to respond. E.g., McCoy v. Commissioner, 76 T.C. 1027, 1029 (1981), on appeal (9th Cir., Sept. 15, 1981), and cases cited therein. See note 3 supra. Petitioners received dividends⁸ and interest income in...