An appropriate order and decision will be entered.
R determined a deficiency in P's 2007 income tax on the basis of wages that P did not report. At trial P admitted, "I exchanged my skilled labor and knowledge for pay". In a bench opinion the Court held for R, ruled that P's arguments were frivolous, imposed on P a penalty of $1,000 pursuant to
GUSTAFSON,
This case is before the Court on petitioner Scott F. Wnuck's motion for reconsideration. When this case was tried January 12, 2011, Mr. Wnuck's only contention was that his wages are not subject to income tax. The Court's bench opinion, transcribed and served on January 21, 2011, characterized Mr. Wnuck's position as "frivolous" and did not address his arguments at length. On January 26, 2011, the Court's decision was entered sustaining the deficiency that the Internal Revenue Service (IRS) had determined against Mr. Wnuck and imposing against him a penalty of $1,000 pursuant to
Mr. Wnuck then submitted a motion for leave to file a motion 2011 U.S. Tax Ct. LEXIS 27">*29 for reconsideration (which we treat as a motion to vacate the decision) and a separate motion for reconsideration. 136 T.C. 498">*500 The motion to vacate will be granted, but the motion for reconsideration will be denied, and decision will again be entered in favor of the IRS and against Mr. Wnuck, but this time with an increased penalty of $5,000.
At trial the only issue was whether Mr. Wnuck received taxable income in 2007; and he frankly stated, "I do not dispute that I exchanged my skilled labor and knowledge for pay" (Tr. at 13). However, he explained, "I have come to believe that the--my earnings from the companies that I worked for did not constitute taxable income." (Tr. at 8.)
Mr. Wnuck did admit, however, that he is not trained in the law: I work in the machinery industry, working on large power generators and paper machines, paper mills, and that sort of thing. I've got several years of college and served an apprenticeship in learning my trade, as in education, but I don't have any training in the law * * *. * * * It's a steep learning curve in the Internal Revenue world, you know. [Tr. 33-34.]
The Court commented on some of Mr. Wnuck's arguments at the time he made them. In its bench opinion, the Court later stated: Mr. Wnuck admits his receipt of the amounts at issue.
The Court both sustained the deficiency as determined by the IRS and imposed on Mr. Wnuck, pursuant to 136 T.C. 498">*501 We take no pleasure in doing so, and we there[fore] impose a relatively modest penalty, given that we have the 2011 U.S. Tax Ct. LEXIS 27">*31 discretion to impose a penalty as high as $25,000. Mr. Wnuck should be aware, however, that if he should ever repeat his maintenance of frivolous tax litigation, he would stand in peril of a much steeper penalty. For him [the judge] to claim, "his arguments about his employment status, and all his other arguments are frivolous", as he did on page 5 ([line] 19), without even addressing them is disingenuous at best.
The reasons that courts decline "to refute these [frivolous] 2011 U.S. Tax Ct. LEXIS 27">*32 arguments with somber reasoning and copious citation of precedent",
If one is genuinely seeking the truth, if he focuses on what is relevant, and if he confines himself to good sense and logic, then the number of serious arguments he can make on a given point is limited. However, if one is already committed to a position regardless of its truth, if he is willing to say anything, if he is willing to ignore relevance, good sense, and logic, and if he is simply looking for subjects and predicates to put together into sentences in ostensible support of a given 136 T.C. 498">*502 point, then the number of frivolous arguments that he can make on that point is effectively limitless. When each frivolous argument is answered, there is always another, as long as there are words to be uttered. Such arguments are without number. Consequently, a Court that decides cases brought by persons willing to make frivolous arguments--such as "tax protesters" or "tax defiers"22011 U.S. Tax Ct. LEXIS 27">*33 2011 U.S. Tax Ct. LEXIS 27">*34 --would by definition never be finished with the task of answering those frivolous arguments.
Experience shows that a given frivolous argument may have little actual importance to the person making it. Frivolous anti-tax arguments are often obviously downloaded from the Internet; and by cut-and-paste word processing functions, these arguments are easily plunked into a party's filing. In other instances a promoter of frivolous anti-tax arguments is feeding those arguments to a litigant who adopts them uncritically and submits them to the Court.32011 U.S. Tax Ct. LEXIS 27">*35 For all a court 136 T.C. 498">*503 can tell, the litigant may not even have carefully read the arguments he submits.
Petitioners who make frivolous anti-tax arguments are sometimes intelligent people, but they tend to show great ignorance about the legal matters they argue. Tax defiers have learned to admit to the Court (as Mr. Wnuck 2011 U.S. Tax Ct. LEXIS 27">*36 did) that they have no legal background or training. The admission is often manifestly true. However, this admission is evidently made only to induce the Court to be lenient in overlooking the pro se litigant's procedural lapses and to incline the Court to be liberal in construing his pleadings. The admission of ignorance does not indicate a willingness to accept information from someone who does have that background and training in tax law.
The frivolous argument, made from this position of witting and willful ignorance, seems to be merely an incidental ornament that adorns an article of faith--namely, the belief that I don't owe taxes. The tax defier firmly holds that postulate above and apart from any arguments. Anything in favor of that postulate may be advanced, no matter how silly; anything against it can be ignored. If a given frivolous argument is decisively rebutted, then it may or may not be retired; but even if the individual argument is retired, the cause is not abandoned. Thus, the specific argument hardly matters even to the litigant.
Consequently, the value of answering frivolous anti-tax arguments--even the subjective value to the individual litigant--is often doubtful.
This Court and other courts have addressed and rejected many of the recurring frivolous anti-tax arguments, including (as is especially pertinent here) the general argument that wages are not subject to the income tax42011 U.S. Tax Ct. LEXIS 27">*38 and the particular 136 T.C. 498">*504 argument that the income tax does not apply to wages earned within the 50 States.5 Moreover, the IRS publishes and occasionally updates "The Truth About Frivolous Tax Arguments",62011 U.S. Tax Ct. LEXIS 27">*39 a compendium of frivolous positions and the caselaw refuting them. That paper collects caselaw showing--contrary to Mr. Wnuck's argument--that wages are indeed subject to the income tax, at 13-18, and that the income tax does indeed apply within the 50 States, at 26-28. Anyone with the inclination to do legal research relevant to the validity of the income tax as applied to wages--even mere research with an Internet search engine--will confront such authorities.
Consequently, it is doubtful whether tax jurisprudence will be much advanced by issuing yet another opinion affirming the obvious truisms about tax law and refuting Mr. Wnuck's already soundly refuted contentions.
With some happy exceptions, the refutation of a frivolous anti-tax argument often seems to fall on deaf ears, and the litigant persists in making the same doomed argument.72011 U.S. Tax Ct. LEXIS 27">*40 136 T.C. 498">*505 Sometimes this is because the litigant, though evidently aware of the reasons that courts have rejected the argument,82011 U.S. Tax Ct. LEXIS 27">*41 is simply stubborn. Sometimes this is because the litigant seems not to understand either his argument or its refutation. And sometimes the reason for the litigant's behavior remains a mystery.
For example, at trial Mr. Wnuck made his argument, discussed below, that "includes" (in the definition of "United States" in
Consequently, when a litigant is willing in the first instance to take a position that is frivolous, the chances are good that he will be unmoved by explanations of why his position 2011 U.S. Tax Ct. LEXIS 27">*42 is frivolous. A court that undertakes such explanations is often wasting its time. We now nonetheless make that undertaking here, regretful that Mr. Wnuck may not heed the explanation, in order to illustrate what such an undertaking requires.
The fallacies of some frivolous arguments are gross and palpable. All three of the arguments in Mr. Wnuck's motion illustrate this point.
To resist paying income tax on his wages, Mr. Wnuck makes this frivolous argument: He points out that "wages" are remuneration for "employment", see
Moreover, if one goes only a little further and actually reads the statutes that Mr. Wnuck cites, another fallacy in his argument becomes obvious: The Code sections he cites pertain not to income tax but rather to employment taxes (such as Social Security tax). If his argument made any sense at all, it could not affect his liability for
Both at trial and in his motion for reconsideration, Mr. Wnuck aggressively misconstrued Supreme Court precedent. He attempts to buttress his interpretation of "includes" with a citation of
Mr. Wnuck's motion for reconsideration makes the following argument, which cites title Judge Gustafson also, in his opinion, ignored the Petitioner's argument that the enforcement regulations for
Mr. Wnuck submitted a Form 1040, U.S. Individual Income Tax Return, that reported the amount of his wages as zero. The 2011 U.S. Tax Ct. LEXIS 27">*47 IRS did not treat the document as a tax return but instead prepared a so-called "substitute for return" ("SFR"). It did so pursuant to (1) Authority of Secretary to execute return.--If any person fails to make any return required by any internal revenue law or regulation made thereunder at the time prescribed therefor, or makes, willfully or otherwise, a false or fraudulent return, the Secretary shall make such return from his own knowledge and from such information as he can obtain through testimony or otherwise. (2) Status of returns.--Any return so made and subscribed by the Secretary shall be prima facie good and sufficient for all legal purposes.
Mr. Wnuck's attention, however, has been called to other provisions--found in
136 T.C. 498">*509 Whether he realizes it or not, Mr. Wnuck is contending that, because there is a regulation in
Mr. Wnuck's eye fell on a provision in 27 C.F.R., however, and from that provision he concocted an imaginary rule that he pretended would eliminate his tax liability. But the existence of an additional (and unrelated) regulation in 27 C.F.R. has no implications whatsoever for this case. He had no 2011 U.S. Tax Ct. LEXIS 27">*49 reason to suppose that that provision was relevant here, and he had no reason to infer from that provision any rule that could have the effect he suggested. His argument is patently frivolous.10
Mr. Wnuck's third patently frivolous argument is based on-- errors that appear in the Individual Master File that the Internal Revenue Service maintains on him. These errors include but are not limited to, use of the Petitioner's social security number by two individuals, listing the Petitioner as a small business entity with gross receipts of fewer than 2011 U.S. Tax Ct. LEXIS 27">*50 ten million dollars instead of an individual human being and the fact that no code entry for the substitute for return created for this case on the prescribed date, August 10, 2009, exists.
Where, as here, the fallacies in a position are obvious, it is doubtful whether any advantage 2011 U.S. Tax Ct. LEXIS 27">*51 results from stating the obvious. But having nonetheless undertaken to do so, we can now show
The time and money that are spent in addressing a frivolous position can be considerable. For example, the Court's discussions of Mr. Wnuck's three arguments (in part I.C above) did not write themselves but required time to research and write. Admittedly, the research was not heavy intellectual lifting, but it did take time. Chaos can be spread quickly and easily; imposing order takes time and effort.
For instance, Mr. Wnuck assailed an SFR issued pursuant to
Moreover, not only the authoring Judge's time is involved in producing an opinion. To prepare a Tax Court opinion for public release requires substantial work by law clerks, clerical staff, and the Office of the Reporter of Decisions, as well as other Judges.11 A Tax Court opinion is thus the product of considerable institutional effort.
The substantial effort expended to produce a Tax Court opinion is well spent, even in a small case and even where the outcome is clear, if the contentions being adjudicated are made seriously and in good faith. Taxpayers with disputes both large and small need to know that their 2011 U.S. Tax Ct. LEXIS 27">*53 good-faith disagreements with the tax collector will get serious attention from this Court. However, the peddlers of frivolous anti-tax positions and their clients who file petitions advancing those positions should not be allowed to divert and drain away resources that ought to be devoted to bona fide disputes. If frivolous positions were to bog down the operations of this Court, the resulting disadvantage would accrue not mainly to the Court itself but rather to litigants with legitimate issues and to the public generally. To responsibly manage its resources, the Court should therefore
The IRS is charged with the responsibility of assessing tax against taxpayers.
The oft-cited opinion in
For example, when we take five paragraphs (in part I.E.2 above) to explain why
There is thus little advantage to be gained by addressing frivolous arguments, and there are disadvantages that may accrue from doing so. For that reason, litigants who present frivolous arguments should not expect to see them answered in opinions of this Court.
As we noted above (in part I.G), the mere filing of a petition in this Court has the effect of delaying the assessment until the case has been decided. (1) Procedures instituted primarily for delay, etc.--Whenever it appears to the Tax Court that-- (A) proceedings before it have been instituted or maintained by the taxpayer primarily for delay, (B) the taxpayer's position in such proceeding is frivolous or groundless, or (C) the taxpayer unreasonably failed to pursue available administrative remedies,
Mr. Wnuck advanced frivolous arguments, as we have shown. Both during Mr. Wnuck's trial and in the bench opinion served several days later, the Court clearly stated to Mr. Wnuck that it found his positions not just unavailing but frivolous. For that reason the Court, in its original decision, imposed on Mr. Wnuck a $1,000 penalty pursuant to
Mr. Wnuck disregarded that explicit warning when he filed his subsequent motion for reconsideration. 2011 U.S. Tax Ct. LEXIS 27">*59 That motion made clear that Mr. Wnuck did not have new points to make; he simply repeated the arguments that had already been ruled frivolous and suggested that the Court should have addressed those arguments in more detail in an opinion. He had to know that his motion was foredoomed, but there was a reason (i.e., an improper reason) for him to file the motion nonetheless:
By the interaction of the applicable rules (i.e.,
Mr. Wnuck's recent motion to vacate therefore was filed "primarily for delay", see
136 T.C. 498">*515 To reflect the foregoing,
*. This Opinion supplements the bench opinion previously rendered in this case on January 12, 2011, in Columbia, South Carolina.↩
1. Unless otherwise indicated, all citations of sections refer to the Internal Revenue Code of 1986 ("Code", 26 U.S.C.), as amended.↩
2. Persons who make frivolous anti-tax arguments have sometimes been called "tax protesters".
3. In Mr. Wnuck's motion for reconsideration, "Petitioner admits to assistance in the preparation" of his pretrial memorandum. To the same effect, Mr. Wnuck testified-- As I said, I don't really completely understand how this works. I tried to read the rules of the court within the capacity that I could. And I had assistance in creating these pleadings, within, you know, some help, so there are some issues that are deeper than what I've known before and I'm learning. It's a steep learning curve in the Internal Revenue world, you know. THE COURT: The persons that helped you, are they lawyers or accountants? THE WITNESS: No, sir. [Tr. 33-34.]
4. Over 30 years ago, in
5. Mr. Wnuck's argument that the "United States" excludes the States has been rejected in cases going back 30 years. See
6. Available at
7. For example, this Court's patient and comprehensive explanation (and its imposition of a $2,500 penalty under
8. Mr. Wnuck (or whoever composed his arguments) obviously spent enough effort acquainting himself with tax law materials to be able to give citations (however misguided) of statutes, regulations, and court opinions. But it seems clear that in that effort he must have studiously ignored the available information, see pt. I.C. above, when composing his argument that his wages are not subject to the income tax. The wealth of information showing that the courts have always and repeatedly discredited and rejected his argument was evidently of no interest to him.
9. Mr. Wnuck's argument is similar to the "meritless" argument rebutted in
10. Moreover, even if the SFR that the IRS prepared had been somehow invalid, Mr. Wnuck's tax liability would not be affected by it, since the IRS is not required to prepare an SFR but may simply issue a statutory notice of deficiency pusuant to
11. See
12. See
13. For example, Mr. Wnuck's motion for reconsideration cites the Supreme Court's opinion in
14. A position maintained by the taxpayer is "frivolous" where it is "contrary to established law and unsupported by a reasoned, colorable argument for change in the law."