A Most Wonderful Read/Decadent Worker

http://decadentworker.com/conspiracy/1987/01/

Monthly Archive for January, 1987
Decadent Worker #7 - 29Jan87
Published by workeron January 29, 1987in American Nazi, Co-Man Ra, Lee Harvey Oswald, Sander A. Diamond, The Decadent Worker and cant. 0 Comments
Any attentive reader of this wall newspaper must ask sometimes — besides: “Is this guy nuts or what?” — how did I ever get involved in conspiracies to begin with? You and me, we both wonder. When I was in the Marines with Oswald, I used to think. But even then a gnawing uncertainty caused me to ask Co-Man Ra in the mid-seventies how I originally became involved, a question to which he made no reply.

In 1978 I began creating my own cant language with which to communicate with agents without their seeming to the casual observer to be passing on information — a precaution upon which they insist. Before long I realized there was already an older language, much like my own — consisting of puns, both unique symbols and universal ones, free associations and archtypes, innuendos, archaic meanings, ambiguities in syntax, etc. — of which I eventually picked up a smattering.

Speaking in canted double entendre is, for example, called going inside in the older cant, whereas expressing yourself as nearly all ordinary non-conspirators do is called talking outside. (Since I wrote up one of my first codes in a notebook with an Almond Joy ad on the cover, to speak of something in my cant language is called, to “enjoy” it.)

A result of my studies has been the gradual realization that all my life I have been surrounded by individuals who were communicating with one another in the older language. Why? I think my more recent studies in American Nazism are furnishing clues.

According to Sander A. Diamond’s The Nazi Movement in the United States 1924-1941 (Cornell University Press, 1974): “Goebbels maintained…the German element in America should not be bombarded with Nazi literature; racial awareness would have to be achieved by means of a ‘well-camouflaged German propaganda network.’… By the all of 1933, then, two alternative — though not necessarily contradictory — methods of approaching Americans of German ancestory had emerged. On the one hand, men like Bohle, Hess, and Hoffmann hoped to create a German bloc in America favorable to Nazi ermany by using a broadly-based, German-sponsored party or a bund movement. On the other hand, Goebbels discounted the need for either a political party or a bund movement and favored a well-organized but camouflaged propaganda campaign directed at thousands of German-American organizations throughout the United States.” (pp. 126-7)

Now it so happens that although my father’s family is of English ancestory, their perchant for marrying people with names that sound German to me is notable: Switzer, Geiger, Minnix, Orim and Doering. Only my dad’s youngest brother, Rex, married someone definitely not German, and that wasn’t until after World War II. There are nagging additional factors: all through the war as I was growing up the Switzers claimed they were Irish; ater the war my uncle Will Switzer went to Ireland and returned with the news: our ancestors were only there for a generation, having migrated from Germany. A switzer is a royal guard among European monarchs; the Pope is guarded by Swiss soldiers called switzers. Intelligence community rumors indicate that Richard Nixon and the Switzers in my family were involved in the deliberate, racist conspiracy to escalate the Vietnam war. My maternal grandfather, Ed Switzer, was perhaps the most bigoted man I’ve ever known.

– Kerry Wendell Thornley

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Decadent Worker #6 - 26Jan87
Published by workeron January 26, 1987in British intelligence, Nazi, Samuel Hoare, The Decadent Worker, Wormwood and philosopher-king. 0 Comments
THAT OLD-TIME RELIGION

“Brainwashing Nazi-pagans go underground after World War II, perfect techniques of emotional control of masses, and emerge in the 80s as fundamentalist Xtians bent on TOTAL ANNIHILATION of freedom! They are FUNDAMENTALLY APOCALYPTIC……” — Wild Magick Bulletin, Autumn ‘86 ELF, Box 1082, Bloomington, Ind. 47402

“‘You know the angel in the Book o Revelations, Kerry, that rules the world for a thousand years with a rod of iron? What do you figure that could symbolize?… Rods are used in nuclear energy reactors. They are also used in computers.’” — Brother-in-law in The Dreadlock Recollections (c) 1984 by Kerry Wendell Thornley, p.148 original MS

“One West German-based expert on Russian history… stressed that the Soviets are enormously sensitive to questions like the mark on Gorbachov’s brow, because of the strong and unpredictable ‘apocalyptic Old Believer tradition’ in the population… According to Revelations 8:10-11, ‘And the third angel sounded, and there fell a great star from heaven, burning as it were a lamp, and it fell upon the third part of the rivers, and upon the fountains of waters; And the name of the star is called Wormwood: and the third part of the waters became wormwood; and many men died of the waters, because they were made bitter.’ And the Ukrainian word for wormwood, as the babushki knew, is chornobil — or in Russian translation, chernobyl….

“Sir Samuel Hoare, the chief of the British Military Intelligence mission in Russia in 1917, shows in his memoir, The Fourth Seal (1930), how the Western oligarchical forces involved in creating the Bolshevik Revolution, identified it with the Apocalypse. His book is illustrated with woodcuts from Revelation, taken from the Old Believers’ Apocalypse. Hoare was himself a leading figure of the Trust, and was close to A. I. Guchkov, the head of the Moscow Old Believer circles that heavily financed the Bolsheviks.” — Rachel Douglas and Susan Welsh, “The man with the mark of the beast,” Executive Intelligence Review, Vol. 13, No. 41, 17 October 1986

“‘They’ll all have to take you/ ’cause we’re gonna make you/ into our Philosopher-King;/ in the words of their own God,/ you’ll rule with an iron rod.’/ He winked if you know what I mean/ They call me the Wreck of the old Armageddon/ since nineteen and sixty-three.” — “Wreck of the Armageddon” by Kerry Wendell Thornley

“Hitler’s coming back, olks, and boy is he pissed.” — The Amazing Colossal MindBlaster-Newsletter of the Gods, Vol., #2. (Remote Control Institute, Buck Rt., Box 111, Hinton WV 25951) Single copy: $1.50

———–
“What a lot of people are following MIGHT NOT BE JESUS.” — “Bob”

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Decadent Worker #5 - 22Jan87
Published by workeron January 22, 1987in Castro, Illuminati, The Decadent Worker, Thule Society, cant, central banking and intelligence community. 0 Comments
A 1981 afternoon found me sitting behind a typewriter in Tampa, Florida, dredging up miscellaneous memories of conversations that happened between twenty and eighteen years earlier. I was finally organizing my material about the John Kennedy assassination. Most of the important stuff had already been recorded in affidavits, notebooks and tapes, if not also in the stack of large filing cards behind me. By now I was involved in the loose ends — the scraps of repartee which even in retrospect did not seem to make much sense, or at least not much history when they did, the irrelevant and the mundane. Things about Castro — I was thinking: What did Slim’s weird Nazi brother-in-law say about Fidel Castro? Not much in view of what a hotbed of anti-Castro activity New Orleans was between 1961 and the end of 1963. Most of the time Brother-in-law had been predictably rightwing here as about other things. Only twice that I recalled did he say anything I could interpret as pro-Castro at all.

“You know, Kerry, people like Fidel Castro aren’t going to respect you unless you have to struggle the same way they did.” Why, I wondered aloud, would I possibly ever want Fidel’s respect? A laugh was the only answer Brother-in-law gave me.

What was the other thing? Oh yeah, something about how very few Spaniards in Cuba had married in with the Indians — repeating the same thing, almost word for word, Slim had told me once before. And that leading up to something else. What was it? Oh yeah: his opinion that it would be a shame to fight white people in Cuba.

Anything else? Maybe. What was it? Oh yeah, something about how it would be preferable to go to war against an Asian race, instead.

Oh Jesus: That would have been, it occurred to me for the first time, the war in Indochina!

“Not only that,” I was soon told in the cant language I had developed in 1978 for communicating with the intelligence community, “it is also the source of censorship about the JFK murder.”

Finding out why all this shit is being covered up has been something more than a hobby with me since 1975. My collection of rumors and speculations involved Thule Society terrorism and sabotage intended to undermine public confidence in government and the media, energy cartel supression of anti-profitable technology and, of course, the Illuminati central banking conspiracy. So I added this one — the deliberate escalation of the Vietnam War by racists — to my already unwieldy collection.

On another afternoon a year later just north of Santa Barbara, California, I was sitting beside the road hitch-hiking and smoking my pipe. Only after I rather carelessly dumped out the smoldering ashes in front of me did I remember that it was summer in California where a few sparks can destroy miles of field and forest. As I rubbed the embers out with a pebble I thought about what would’ve happened if I had caused a horrible fire. “Hell,” I said out loud, “I could burn everything in sight, admit it and tell everybody about why the Vietnam war was escalated and I’d be doing more good than harm.” Instead, I met another vagabond up the coast who kindled a small fire in an improvised stone oven and wound up taking the rap when half a dozen firetrucks and forest rangers with extinguishers busted us or an unauthorized fire. I told them about the Vietnam war; they didn’t seem interested, but then the fire only covered about six square inches. I was fined fifty dollars. –Kerry Wendell Thornley

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Decadent Worker #4 - 19Jan87
Published by workeron January 19, 1987in Alan Watts, FreFanZine, The Decadent Worker, Ti-Grace Atkinson, Timbuk 3, W.E.B. duBois and Zen. 0 Comments
“Hairstyles and attitudes, how do they relate?/How well do we use/ Our freedom to choose/ The illusions we create?/ Scientists, they done lots of research; it may be just hype/ But the latest findings cause me to tremble:/ ‘Categorize us into three basic types/ By which of the Three Stooges we most closely resemble.”
— Timbuk 3

“My original point was that lunatic fringe types should package themselves to fit their audience. Forward-thinking people dressed well and using good manners can sway mundanes more than filthy radicals suspected of inciting riots. You have to package the product to sell, especially if the product is new ideas. An LP (Libertarian Party) friend of mine found people more receptive to his ideas if he wore a three-piece suit with an American lag pin stuck in his lapel.” — Karl Sackett, FreFanZine #61

“Looking Good: A Zen abbot went dressed in rags to the door of a rich man and was turned away with an empty bowl. So he returned in his formal robe of office, and was invited in and served a sumptuous meal. Removing his robe and folding it, he placed it in front of the feast and departed with the words, ‘This meal is not for me; it is for the robe.’” — Ho Chi Zen “Zenarchy Stories,” Inside Joke #40, Box 1609 Madison Square Station, New York City 10159, $1.00

In a speech to the National Organization o Women (NOW) which appears in her book, Amazon Odyssey, Ti-Grace Atkinson argues that the function of revolutionaries is to make people think, not to worry about what people will think.

In 1967 the W.E.B. duBois Clubs more or less represented the official thinking of the American Communist Party, which was that revolutionaries must work within the culture of the Old Order, a principle which in practices was carried to masochistic extremes. Party members could not divorce their spouses. Young Communists were to wear suits and refrain from smoking marijuana. Group gropes were for deviationists. Meanwhile, the hippies were dressing in gaudy robes and beads, anointing themselves with scented oils and handing flowers to strangers for no reason. Who captured, the public imagination? Who is remembered and praised wistfully twenty years later?

Don’t be misled by the title. The Right to be Greedy ($6.95: Loompanics, Box 1197, Port Townsend, WA 98368) is not an exposition of the Objectivism of Ayn Rand. Instead, it reads more like situationist polemic for Communist Egoism. You don’t have to live in imitation of Oliver Cromwell to make revolution. Excellent!

Neckties, says Alan Watts in Does It Matter? were first worn in royal courts for the convenience of kings by their servants. The purpose: to facilitate instant strangulation of wrongdoers.

—-
Democracy has been defined as the principle that “one man is as good as another, if not a little better.” Anarchy may be defined as the principal that one government is as bad as another, if not a little worse. Liberty, May 12, 1883.

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Decadent Worker #2 - 12Jan87
Published by workeron January 12, 1987in Discordia, John Kenneth Galbraith and The Decadent Worker. 0 Comments
#2 12Jan87

“You will find that the STATE is the kind of ORGANIZATION which, though it does big things badly, does small things badly too.” - John Kenneth Galbraith

The Myth of the Apple of Discord

It seems that Zeus was preparing a wedding banquet for Peleus and Thetis and did not want to invite Eris because of Her reputation as a trouble maker.*

This made Eris angry, and so She fashioned an apple of pure gold** and inscribed upon it KALLISTI (”To The Prettiest One”) and on the day of the fete She rolled it into the banquet hall and then left to be alone and joyously partake of a hot dog.

Now, three of the invited goddesses,*** Athena, Hera, and Aphrodite, each immediately claimed it to belong to hersel because of the inscription. And they started fighting, and they started throwing punch all over the place and everything.

Finally Zeus calmed things down and declared that an arbitrator must be selected, which was a resonable suggestion, and all agreed. He sent them to a shepherd of Troy, whose name was Paris because his mother had had a lot of gaul and had married a Frenchman; but each of the sneaky goddesses tried to outwit the others by going early and offering a bribe to Paris.

Athena offered him Heroic War Victories, Hera offered him Great Wealth, and Aphrodite offered him The Most Beautiul Woman on Earth. Being a healthy young Trojan lad, Paris promptly accepted Aphrodite’s bribe and she got the apple and he got screwed.

As she had promised, she maneuvered earthly happenings so that Paris could have Helen (the Helen) then living with her husband Menelaus, King of Sparta. Anyway, everyone knows that the Trojan War ollowed when Sparta demanded their Queen back and that the Trojan War is said to be The First War among men.

And so we sufer because of The Original Snub. And so a Discordian is to partake of No Hot Dog Buns.

Do you believe that?

———————
* This is called THE DOCTRINE OF THE ORIGINAL SNUB.
** There is historic disagreement concerning whether this apple was of metallic gold or acupulco.
*** Actually there were five goddesses, but the Greeks did not know of the Law of Fives.

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Decadent Worker #1 - 8Jan87
Published by workeron January 8, 1987in Bob Black, Charles Cabell, Communism, JFK, New Orleans and The Decadent Worker. 1 Comment
The Decadent Worker
Revolutionary Surrealist Vandalist Party (RSVP) Wall Newspaper - 25c - #1 8Jan87

The New Year seems as good a time as any to change names and review priorities.

“Kerry,” said the man with whom I also discussed assassinating JFK, “the Cubans are mostly of Spanish blood, and Spaniards are white people. So if there is another war, and if there is some way of influencing where it occurs, I think it would be good if that war was against somebody other than the Cubans — such as an Oriental race. Don’t you?”

What he actually said, I have remembered since first writing that in my book (unpublished) about the assassination, was “if there is another war against Communism.” And what I actually answered, gung-ho Objectivist that I then was: “I think, though, there should be a war against Communism.”

In The Real Torch of Liberty, Bob Black’s latest pamphlet attacking everything that moves, he complains: “For most of us, our memories get worse as we age, we forget things. For Thornley it’s exactly the opposite. The further away he gets from these ancient supposed 60’s events the better his memory gets.”

Thirteen years after JFK was murdered I realized that I was involved, because the Watergate revelations demonstrated the relevance of things till then dismissed — conversations that occurred near New Orleans between 1961 (April or May) and November of 1963. If you understood, too late, the importance of discussions which happened long ago, your memory would also improve with age — because, believe me, you would think about it day and night, year after year.

Bob Black is most known these days for his brilliant tract against work, for which activity he omits any suggestion of an alternate means of livelihood. As for how Black makes it, he told me plainly in his own words once that he receives a grant from the Department of Justice. Enough said.

Another theory in circulation which dismisses my claim of direct knowledge in advance of a conspiracy to make war in Asia for racist reasons, is the contention that was mind controlled by the World-wide Church of God to remember something that in fact never happened. Although it is true that the technology exists to plan false memories, it is also true that the technology exists to find out once and for all if there was such a conspiracy — a little gizmo called a Psychological Stress Evaluator. You simply ask Edward Howard Hunt on tape if he ever spoke to me about killing Kennedy and making war in Asia in order to prevent an invasion of Cuba. Evidence indicates Hunt was passing himself off in Guy Banister’s office at that time as one Maurice Brooks Gatlin, Sr. According to Betrayal by Robert Murrow, Gatlin was spying on the FBI for Charles Cabell of CIA — the man who, according to David Emory, sabotaged air support in the Bay of Pigs. That individual is dead. His brother, Earl, who was mayor of Dallas when JFK was killed is, I think, still living — as are Richard Nixon, Pamela Churchill, Dean Rusk and many of the members of my mother’s side of my family, the Switzers, who were also allegedly involved. Question people like that on tape; find out if they had prior knowledge of the Vietnam war.

Every half hour a thousand people die of starvation. Do you think it coincidental that they happen to belong to what the Nazis regard as inferior races?

Kerry Wendell Thornley
PACKRAT PRESS
2981 Lookout
Atlanta 30305

The Truth About Frivolous Tax Arguments

http://www.quatloos.com/taxscams/taxprotestorbsexposed.pdf

THE TRUTH ABOUT FRIVOLOUS TAX ARGUMENTS

I. The Voluntary Nature of the Federal Income Tax System . . . . . . . . . . . . . . . . 3

A. Contention: The filing of a tax return is voluntary . . . . . . . . . . . . . . . . . . . . . . 3

B. Contention: Payment of tax is voluntary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

C. Contention: The IRS must prepare federal tax returns for a person who fails

to file . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

II. The Meaning of Income: Taxable Income and Gross Income . . . . . . . . . . . . 6

A. Contention: Wages, tips, and other compensation received for personal

services are not income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

B. Contention: Only foreign-source income is taxable . . . . . . . . . . . . . . . . . . . . 9

C. Contention: Federal Reserve Notes are not income . . . . . . . . . . . . . . . . . . 10

III. The Meaning of Certain Terms Used in the Internal Revenue Code . . . . . . 11

A. Contention: Taxpayer is not a “citizen” of the United States, thus not subject

to the federal income tax laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

B. Contention: The “United States” consists only of the District of Columbia,

federal territories, and federal enclaves . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

C. Contention: Taxpayer is not a “person” as defined by the Internal Revenue

Code, thus is not subject to the federal income tax laws

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

D. Contention: The only “employees” subject to federal income tax are

employees of the federal government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

IV. Constitutional Amendment Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

A. Contention: Federal income taxes constitute a “taking” of property without

due process of law, violating the Fifth Amendment . . . . . . . . . . . . . . . . . . . 16

B. Contention: Taxpayers do not have to file returns or provide financial

information because of the protection against self-incrimination found in the

Fifth Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

C. Contention: Compelled compliance with the federal income tax laws is a

form of servitude in violation of the Thirteenth Amendment

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

D. Contention: The Sixteenth Amendment to the United States Constitution

was not properly ratified, thus the federal income tax laws are

unconstitutional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

E. Contention: The Sixteenth Amendment does not authorize a direct nonapportioned

federal income tax on United States citizens . . . . . . . . . . . . . 22

V. Fictional Legal Bases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

A. Contention: The Internal Revenue Service is not an agency of the United

States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

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B. Contention: Taxpayers are not required to file a federal income tax return,

because the instructions and regulations associated with the Form 1040 do

not display an OMB control number as required by the Paperwork Reduction

Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

C. Contention: African Americans can claim a special tax credit as reparations

for slavery and other oppressive treatment . . . . . . . . . . . . . . . . . . . . . . . . . . 25

D. Contention: Taxpayers are entitled to a refund of the Social Security taxes

paid over their lifetime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

VI. “Untaxing” Packages or “Untaxing” Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

A. Contention: An “untaxing” package or trust provides a way of legally and

permanently avoiding the obligation to file federal income tax returns and pay

federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

PENALTIES FOR PURSUING FRIVOLOUS TAX ARGUMENTS . . . . . . . . . . . . . . . . 29

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THE TRUTH ABOUT FRIVOLOUS TAX ARGUMENTS

This responds to some of the more common frivolous “legal” arguments made by individuals and groups who oppose compliance with the federal tax laws. These arguments are grouped under six general categories, with variations within each category.

Each contention is briefly explained, followed by a discussion of the legal authority that

rejects the contention. A final section explains the penalties that the courts may impose on

those who pursue tax cases on frivolous grounds.

I. The Voluntary Nature of the Federal Income Tax System

A. Contention: The filing of a tax return is voluntary.

Some assert that they are not required to file federal tax returns because the

filing of a tax return is voluntary. Proponents point to the fact that the IRS

itself tells taxpayers in the Form 1040 instruction book that the tax system is

voluntary. Additionally, the Supreme Court’s opinion in Flora v. United

States, 362 U.S. 145, 176 (1960), is often quoted for the proposition that

"[o]ur system of taxation is based upon voluntary assessment and payment,

not upon distraint."

The Law: The word “voluntary,” as used in Flora and in IRS publications,

refers to our system of allowing taxpayers to determine the correct amount of

tax and complete the appropriate returns, rather than have the government

determine tax for them. The requirement to file an income tax return is not

voluntary and is clearly set forth in Internal Revenue Code §§ 6011(a),

6012(a), et seq., and 6072(a). See also Treas. Reg. § 1.6011-1(a).

Any taxpayer who has received more than a statutorily determined amount of

gross income is obligated to file a return. Failure to file a tax return could

subject the noncomplying individual to criminal penalties, including fines and

imprisonment, as well as civil penalties. In United States v. Tedder, 787

F.2d 540, 542 (10th Cir. 1986), the court clearly states, “although Treasury

regulations establish voluntary compliance as the general method of income

tax collection, Congress gave the Secretary of the Treasury the power to

enforce the income tax laws through involuntary collection . . . . The IRS’

efforts to obtain compliance with the tax laws are entirely proper.”

Relevant Case Law:

Helvering v. Mitchell, 303 U.S. 391, 399 (1938) – the U.S. Supreme Court

stated that “[i]n assessing income taxes, the Government relies primarily

upon the disclosure by the taxpayer of the relevant facts . . . in his annual

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return. To ensure full and honest disclosure, to discourage fraudulent

attempts to evade the tax, Congress imposes [either criminal or civil]

sanctions.”

United States v. Tedder, 787 F.2d 540, 542 (10th Cir. 1986) – the court

upheld a conviction for willfully failing to file a return, stating that the premise

“that the tax system is somehow ‘voluntary’ . . . is incorrect.”

United States v. Richards, 723 F.2d 646, 648 (8th Cir. 1983) – the court

upheld conviction and fines imposed for willfully failing to file tax returns,

stating that the claim that filing a tax return is voluntary “was rejected in

United States v. Drefke, 707 F.2d 978, 981 (8th Cir. 1983), wherein the court

described appellant’s argument as ‘an imaginative argument, but totally

without arguable merit.’”

Woods v. Commissioner, 91 T.C. 88, 90 (1988) – the court rejected the

claim that reporting income taxes is strictly voluntary, referring to it as a “‘tax

protester’ type” argument, and found Woods liable for the penalty for failure

to file a return.

Johnson v. Commissioner, T.C. Memo. 1999-312, 78 T.C.M. (CCH) 468,

471 (1999) – the court found Johnson liable for the failure to file penalty and

rejected his argument “that the tax system is voluntary so that he cannot be

forced to comply” as “frivolous.”

B. Contention: Payment of tax is voluntary.

In a similar vein, some argue that they are not required to pay federal taxes

because the payment of federal taxes is voluntary. Proponents of this

position argue that our system of taxation is based upon voluntary

assessment and payment.

The Law: The requirement to pay taxes is not voluntary and is clearly set

forth in section 1 of the Internal Revenue Code, which imposes a tax on the

taxable income of individuals, estates, and trusts as determined by the

tables set forth in that section. (Section 11 imposes a tax on the taxable

income of corporations.) Furthermore, the obligation to pay tax is described

in section 6151, which requires taxpayers to submit payment with their tax

returns. Failure to pay taxes could subject the noncomplying individual to

criminal penalties, including fines and imprisonment, as well as civil

penalties.

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In discussing section 6151, the Eighth Circuit Court of Appeals stated that

“when a tax return is required to be filed, the person so required ‘shall’ pay

such taxes to the internal revenue officer with whom the return is filed at the

fixed time and place. The sections of the Internal Revenue Code imposed a

duty on Drefke to file tax returns and pay the . . . tax, a duty which he chose to

ignore.” United States v. Drefke, 707 F.2d 978, 981 (8th Cir. 1983).

Relevant Case Law:

United States v. Bressler, 772 F.2d 287, 291 (7th Cir. 1985) – the court

upheld Bressler’s conviction for tax evasion, noting, “[he] has refused to file

income tax returns and pay the amounts due not because he

misunderstands the law, but because he disagrees with it . . . . [O]ne who

refuses to file income tax returns and pay the tax owing is subject to

prosecution, even though the tax protester believes the laws requiring the

filing of income tax returns and the payment of income tax are

unconstitutional.”

Schiff v. United States, 919 F.2d 830, 833 (2d Cir. 1990), cert. denied, 501

U.S. 1238 (1991) – the court rejected Schiff’s arguments as meritless and

upheld imposition of the civil fraud penalty, stating “[t]he frivolous nature of

this appeal is perhaps best illustrated by our conclusion that Schiff is

precisely the sort of taxpayer upon whom a fraud penalty for failure to pay

income taxes should be imposed.”

Packard v. United States, 7 F. Supp. 2d 143, 145 (D. Conn. 1998) – the

court dismissed Packard’s refund suit for recovery of penalties for failure to

pay income tax and failure to pay estimated taxes where the taxpayer

contested the obligation to pay taxes on religious grounds, noting that “the

ability of the Government to function could be impaired if persons could

refuse to pay taxes because they disagreed with the Government’s use of

tax revenues.”

United States v. Gerads, 999 F.2d 1255, 1256 (8th Cir. 1993) – the court

stated that “[taxpayers’] claim that payment of federal income tax is voluntary

clearly lacks substance” and imposed sanctions in the amount of $1,500 “for

bringing this frivolous appeal based on discredited, tax-protestor

arguments.”

C. Contention: The IRS must prepare federal tax returns for a person

who fails to file.

Proponents of this argument contend that section 6020(b) obligates the IRS

to prepare a federal tax return for a person who does not file a return. Thus,

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those who subscribe to this contention believe that they are not required to

file a return for themselves.

The Law: Section 6020(b) merely provides the IRS with a mechanism for

determining the tax liability of a taxpayer who has failed to file a return.

Section 6020(b) does not require the IRS to prepare tax returns for persons

who do not file and it does not excuse the taxpayer from civil penalties or

criminal liability for failure to file.

Relevant Case Law:

United States v. Lacy, 658 F.2d 396, 397 (5th Cir. 1981) – the court, in

upholding the taxpayer’s conviction for willfully and knowingly failing to file a

return, stated that “ . . . the purpose of section 6020(b)(1) is to provide the

Internal Revenue Service with a mechanism for assessing the civil liability of

a taxpayer who has failed to file a return, not to excuse that taxpayer from

criminal liability which results from that failure.”

Schiff v. United States, 919 F.2d 830, 832 (2nd Cir. 1990) – the court

rejected the taxpayer’s argument that the IRS must prepare a substitute

return pursuant to section 6020(b) prior to assessing deficient taxes, stating

“[t]here is no requirement that the IRS complete a substitute return.”

Moore v. Commissioner, 722 F.2d 193, 196 (5th Cir. 1984) – the court

stated that “section [6020(b)] provides the Secretary with some recourse

should a taxpayer fail to fulfill his statutory obligation to file a return, and does

not supplant the taxpayer’s original obligation to file established by 26

U.S.C. § 6012.”

II. The Meaning of Income: Taxable Income and Gross Income

A. Contention: Wages, tips, and other compensation received for

personal services are not income.

This argument asserts that wages, tips, and other compensation received for

personal services are not income, because there is allegedly no taxable gain

when a person “exchanges” labor for money. Under this theory, wages are

not taxable income because people have basis in their labor equal to the fair

market value of the wages they receive; thus, there is no gain to be taxed.

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Some take a different approach and argue that the Sixteenth Amendment to

the United States Constitution did not authorize a tax on wages and salaries,

but only on gain or profit.

The Law: For federal income tax purposes, “gross income” means all

income from whatever source derived and includes compensation for

services. I.R.C. § 61. Any income, from whatever source, is presumed to be

income under section 61, unless the taxpayer can establish that it is

specifically exempted or excluded. In Reese v. United States, 24 F.3d 228,

231 (Fed. Cir. 1994), the court stated, “an abiding principle of federal tax law

is that, absent an enumerated exception, gross income means all income

from whatever source derived.”

The Sixteenth Amendment provides that Congress shall have the power to

lay and collect taxes on income, from whatever source derived, without

apportionment among the several states, and without regard to any census

or enumeration. U.S. Const. amend. XVI. Furthermore, the U.S. Supreme

Court upheld the constitutionality of the income tax laws enacted subsequent

to ratification of the Sixteenth Amendment in Brushaber v. Union Pacific

R.R., 240 U.S. 1 (1916). Since that time, the courts have consistently upheld

the constitutionality of the federal income tax. For a further discussion of the

constitutionality of the federal income tax laws, see section IV. of this outline.

All compensation for personal services, no matter what the form of payment,

must be included in gross income. This includes salary or wages paid in

cash, as well as the value of property and other economic benefits received

because of services performed, or to be performed in the future.

Furthermore, criminal and civil penalties have been imposed against

individuals relying upon this frivolous argument.

Relevant Case Law:

Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429-30 (1955) –

referring to the statute’s words “income derived from any source whatever,”

the Supreme Court stated, “this language was used by Congress to exert in

this field ‘the full measure of its taxing power.’ . . . And the Court has given a

liberal construction to this broad phraseology in recognition of the intention of

Congress to tax all gains except those specifically exempted.”

Commissioner v. Kowalski, 434 U.S. 77 (1977) – the Supreme Court found

that payments are considered income where the payments are undeniably

accessions to wealth, clearly realized, and over which a taxpayer has

complete dominion.

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United States v. Connor, 898 F.2d 942, 943-44 (3d Cir.), cert. denied, 497

U.S. 1029 (1990) – the court stated that “[e]very court which has ever

considered the issue has unequivocally rejected the argument that wages

are not income.”

Lonsdale v. Commissioner, 661 F.2d 71, 72 (5th Cir. 1981) – the court

rejected as “meritless” the taxpayer’s contention that the “exchange of

services for money is a zero-sum transaction . . . .”

McCoy v. United States, 88 A.F.T.R.2d (RIA) 7116, 2001 U.S. Dist. LEXIS

18986 (N.D. Tex. Nov. 16, 2001) – the court rejected the taxpayer’s

argument that wages received were not income and described this position

as meritless.

Cheek v. United States, 498 U.S. 192 (1991) – the Supreme Court reversed

and remanded Cheek’s conviction of willfully failing to file federal income tax

returns and willfully attempting to evade income taxes solely on the basis of

erroneous jury instructions. The Court noted, however, that Cheek’s

argument, that he should be acquitted because he believed in good faith that

the income tax law is unconstitutional, “is unsound, not because Cheek’s

constitutional arguments are not objectively reasonable or frivolous, which

they surely are, but because the [law regarding willfulness in criminal cases]

does not support such a position.” Id. (emphasis added). On remand,

Cheek was convicted on all counts and sentenced to jail for a year and a

day. Cheek v. United States, 3 F.3d 1057 (7th Cir. 1993), cert. denied, 510

U.S. 1112 (1994).

Reading v. Commissioner, 70 T.C. 730 (1978), aff’d, 614 F.2d 159 (8th Cir.

1980) – the court said the entire amount received from the sale of one’s

services constitutes income within the meaning of the Sixteenth Amendment.

United States v. Richards, 723 F.2d 646, 648 (8th Cir. 1983) – the court

upheld conviction and fines imposed for willfully failing to file tax returns,

stating that the taxpayer’s contention that wages and salaries are not income

within the meaning of the Sixteenth Amendment is “totally lacking in merit.”

United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981) – the court

affirmed Romero’s conviction for willfully failing to file tax returns, finding, in

part, that “[t]he trial judge properly instructed the jury on the meaning of

[‘income’ and ‘person’]. Romero’s proclaimed belief that he was not a

‘person’ and that the wages he earned as a carpenter were not ‘income’ is

fatuous as well as obviously incorrect.”

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Abrams v. Commissioner, 82 T.C. 403, 413 (1984) – the court rejected the

argument that wages are not income, sustained the failure to file penalty, and

awarded damages of $5,000 for pursuing a position that was “frivolous and

groundless . . . and maintained primarily for delay.”

Cullinane v. Commissioner, T.C. Memo. 1999-2, 77 T.C.M. (CCH) 1192,

1193 (1999) – noting that “[c]ourts have consistently held that compensation

for services rendered constitutes taxable income and that taxpayers have no

tax basis in their labor,” the court found Cullinane liable for the failure to file

penalty, stating that “[his] argument that he is not required to pay tax on

compensation for services does not constitute reasonable cause.”

B. Contention: Only foreign-source income is taxable.

Some maintain that there is no federal statute imposing a tax on income

derived from sources within the United States by citizens or residents of the

United States. They argue instead that federal income taxes are excise

taxes imposed only on nonresident aliens and foreign corporations for the

privilege of receiving income from sources within the United States. The

premise for this argument is a misreading of sections 861, et seq., and 911,

et seq., as well as the regulations under those sections.

The Law: As stated above, for federal income tax purposes, “gross

income” means all income from whatever source derived and includes

compensation for services. I.R.C. § 61. Further, Treasury Regulation § 1.1-

1(b) provides, “[i]n general, all citizens of the United States, wherever

resident, and all resident alien individuals are liable to the income taxes

imposed by the Code whether the income is received from sources within or

without the United States.” I.R.C. sections 861 and 911 define the sources

of income (U.S. versus non-U.S. source income) for such purposes as the

prevention of double taxation of income that is subject to tax by more than

one country. These sections neither specify whether income is taxable, nor

do they determine or define gross income. Further, these frivolous

assertions are clearly contrary to well-established legal precedent.

Relevant Case Law:

Great-West Life Assur. Co. v. United States, 678 F.2d 180, 183 (Ct. Cl.

1982) – the court stated that “[t]he determination of where income is derived

or ‘sourced’ is generally of no moment to either United States citizens or

United States corporations, for such persons are subject to tax under I.R.C. §

1 and I.R.C. § 11, respectively, on their worldwide income.”

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Williams v. Commissioner, 114 T.C. 136, 138 (2000) – the court rejected the

taxpayer’s argument that his income was not from any of the sources listed in

Treas. Reg. § 1.861-8(a), characterizing it as “reminiscent of tax-protester

rhetoric that has been universally rejected by this and other courts.”

Corcoran v. Commissioner, T.C. Memo. 2002-18, 83 T.C.M. (CCH) 1108,

1110 (2002) – the court rejected the taxpayers’ argument that his income

was not from any of the sources in Treas. Reg. § 1.861-8(f), stating that the

“source rules [of sections 861 through 865] do not exclude from U.S. taxation

income earned by U.S. citizens from sources within the United States.” The

court further required the taxpayers to pay a $2,000 penalty under section

6673(a)(1) because “they . . . wasted limited judicial and administrative

resources.”

Aiello v. Commissioner, T.C. Memo. 1995-40, 69 T.C.M. (CCH) 1765

(1995) – the court rejected the taxpayer’s argument that the only sources of

income for purposes of section 61 are listed in section 861.

Madge v. Commissioner, T.C. Memo. 2000-370, 80 T.C.M. (CCH) 804

(2000) – the court labeled as “frivolous” the position that only foreign income

is taxable.

Solomon v. Commissioner, T.C. Memo. 1993-509, 66 T.C.M. (CCH) 1201,

1202 (1993) – the court rejected the taxpayer’s argument that his income

was exempt from tax by operation of sections 861 and 911, noting that he

had no foreign income and that section 861 provides that “compensation for

labor or personal services performed in the United States . . . are items of

gross income.”

C. Contention: Federal Reserve Notes are not income.

Some assert that Federal Reserve Notes currently used in the United States

are not valid currency and cannot be taxed, because Federal Reserve Notes

are not gold or silver and may not be exchanged for gold or silver. This

argument misinterprets Article I, Section 10 of the United States

Constitution.

The Law: Congress is empowered “[t]o coin Money, regulate the value

thereof, and of foreign coin, and fix the Standard of weights and measures.”

U.S. Const. Art. I, § 8, cl. 5. Article I, Section 10 of the Constitution prohibits

the states from declaring as legal tender anything other than gold or silver,

but does not limit Congress’ power to declare the form of legal tender. See

31 U.S.C. § 5103; 12 U.S.C. § 411. In United States v. Rifen, 577 F.2d

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1111 (8th Cir. 1978), the court affirmed a conviction for willfully failing to file a

return, rejecting the argument that Federal Reserve Notes are not subject to

taxation. “Congress has declared federal reserve notes legal tender . . . and

federal reserve notes are taxable dollars.” Id. at 1112. The courts have

rejected this argument on numerous occasions.

Relevant Case Law:

United States v. Rickman, 638 F.2d 182, 184 (10th Cir. 1980) – the court

affirmed the conviction for willfully failing to file a return and rejected the

taxpayer’s argument that “the Federal Reserve Notes in which he was paid

were not lawful money within the meaning of Art. 1, § 8, United States

Constitution.”

United States v. Condo, 741 F.2d 238, 239 (9th Cir. 1984) – the court upheld

the taxpayer’s criminal conviction, rejecting as “frivolous” the argument that

Federal Reserve Notes are not valid currency, cannot be taxed, and are

merely “debts.”

United States v. Daly, 481 F.2d 28, 30 (8th Cir.), cert. denied, 414 U.S. 1064

(1973) – the court rejected as “clearly frivolous” the assertion “that the only

‘Legal Tender Dollars’ are those which contain a mixture of gold and silver

and that only those dollars may be constitutionally taxed” and affirmed Daly’s

conviction for willfully failing to file a return.

Jones v. Commissioner, 688 F.2d 17 (6th Cir. 1982) – the court found the

taxpayer’s claim that his wages were paid in “depreciated bank notes” as

clearly without merit and affirmed the Tax Court’s imposition of an addition to

tax for negligence or intentional disregard of rules and regulations.

III. The Meaning of Certain Terms Used in the Internal Revenue Code

A. Contention: Taxpayer is not a “citizen” of the United States, thus not

subject to the federal income tax laws.

Some individuals argue that they have rejected citizenship in the United

States in favor of state citizenship; therefore, they are relieved of their federal

income tax obligations. A variation of this argument is that a person is a free

born citizen of a particular state and thus was never a citizen of the United

States. The underlying theme of these arguments is the same: the person is

not a United States citizen and is not subject to federal tax laws because

only United States citizens are subject to these laws.

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The Law: The Fourteenth Amendment to the United States Constitution

defines the basis for United States citizenship, stating that “[a]ll persons born

or naturalized in the United States, and subject to the jurisdiction thereof, are

citizens of the United States and of the State wherein they reside.” The

Fourteenth Amendment therefore establishes simultaneous state and federal

citizenship. Claims that individuals are not citizens of the United States but

are solely citizens of a sovereign state and not subject to federal taxation

have been uniformly rejected by the courts.

Relevant Case Law:

O'Driscoll v. I.R.S., 1991 U.S. Dist. LEXIS 9829, at *5-6 (E.D. Pa. 1991) –

the court stated, “despite [taxpayer’s] linguistic gymnastics, he is a citizen of

both the United States and Pennsylvania, and liable for federal taxes.”

United States v. Sloan, 939 F.2d 499, 500 (7th Cir. 1991), cert. denied, 502

U.S. 1060, reh’g denied, 503 U.S. 953 (1992) – the court affirmed a tax

evasion conviction and rejected Sloan’s argument that the federal tax laws

did not apply to him because he was a “freeborn, natural individual, a citizen

of the State of Indiana, and a ‘master’ – not ‘servant’ – of his government.”

United States v. Ward, 833 F.2d 1538, 1539 (11th Cir. 1987), cert. denied,

485 U.S. 1022 (1988) – the court found Ward’s contention that he was not an

“individual” located within the jurisdiction of the United States to be “utterly

without merit” and affirmed his conviction for tax evasion.

United States v. Sileven, 985 F.2d 962 (8th Cir. 1993) – the court rejected

the argument that the district court lacked jurisdiction because the taxpayer

was not a federal citizen as “plainly frivolous.”

United States v. Gerads, 999 F.2d 1255, 1256 (8th Cir. 1993) – the court

rejected the Gerads’ contention that they were “not citizens of the United

States, but rather ‘Free Citizens of the Republic of Minnesota’ and,

consequently, not subject to taxation” and imposed sanctions “for bringing

this frivolous appeal based on discredited, tax-protestor arguments.”

Solomon v. Commissioner, T.C. Memo. 1993-509, 66 T.C.M. (CCH) 1201,

1202-03 (1993) – the court rejected Solomon’s argument that as an Illinois

resident his income was from outside the United States, stating “[he]

attempts to argue an absurd proposition, essentially that the State of Illinois

is not part of the United States. His hope is that he will find some semantic

technicality which will render him exempt from Federal income tax, which

applies generally to all U.S. citizens and residents. [His] arguments are no

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more than stale tax protester contentions long dismissed summarily by this

Court and all other courts which have heard such contentions.”

B. Contention: The “United States” consists only of the District of

Columbia, federal territories, and federal enclaves.

Some argue that the United States consists only of the District of Columbia,

federal territories (e.g., Puerto Rico, Guam, etc.), and federal enclaves (e.g.,

American Indian reservations, military bases, etc.) and does not include the

“sovereign” states. According to this argument, if a taxpayer does not live

within the “United States,” as so defined, he is not subject to the federal tax

laws.

The Law: The Internal Revenue Code imposes a federal income tax upon

all United States citizens and residents, not just those who reside in the

District of Columbia, federal territories, and federal enclaves. In United

States v. Collins, 920 F.2d 619, 629 (10th Cir. 1990), cert. denied, 500 U.S.

920 (1991), the court cited Brushaber v. Union Pac. R.R., 240 U.S. 1, 12-19

(1916), and noted the United States Supreme Court has recognized that the

“sixteenth amendment authorizes a direct nonapportioned tax upon United

States citizens throughout the nation, not just in federal enclaves.” This

frivolous contention has been uniformly rejected by the courts.

Relevant Case Law:

In re Becraft, 885 F.2d 547, 549-50 (9th Cir. 1989) – the court, observing that

Becraft’s claim that federal laws apply only to United States territories and

the District of Columbia “has no semblance of merit,” and noting that this

attorney had previously litigated cases in the federal appeals courts that had

“no reasonable possibility of success,” imposed monetary damages and

expressed the hope “that this assessment will deter Becraft from asking this

and other federal courts to expend more time and resources on patently

frivolous legal positions.”

United States v. Ward, 833 F.2d 1538, 1539 (11th Cir. 1987), cert. denied,

485 U.S. 1022 (1988) – the court rejected as a “twisted conclusion” the

contention “that the United States has jurisdiction over only Washington,

D.C., the federal enclaves within the states, and the territories and

possessions of the United States,” and affirmed a tax evasion conviction.

Barcroft v. Commissioner, T.C. Memo. 1997-5, 73 T.C.M. (CCH) 1666,

1667, appeal dismissed, 134 F.3d 369 (5th Cir. 1997) – noting that

Barcroft’s statements “contain protester-type contentions that have been

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rejected by the courts as groundless,” the court sustained penalties for failure

to file returns and failure to pay estimated income taxes.

C. Contention: Taxpayer is not a “person” as defined by the Internal

Revenue Code, thus is not subject to the federal income tax laws.

Some maintain that they are not a “person” as defined by the Internal

Revenue Code, and thus not subject to the federal income tax laws. This

argument is based on a tortured misreading of the Code.

The Law: The Internal Revenue Code clearly defines “person” and sets

forth which persons are subject to federal taxes. Section 7701(a)(14)

defines “taxpayer” as any person subject to any internal revenue tax and

section 7701(a)(1) defines “person” to include an individual, trust, estate,

partnership, or corporation. Arguments that an individual is not a “person”

within the meaning of the Internal Revenue Code have been uniformly

rejected. A similar argument with respect to the term “individual” has also

been rejected.

Relevant Case Law:

United States v. Karlin, 785 F.2d 90, 91 (3d Cir. 1986), cert. denied, 480

U.S. 907 (1987) – the court affirmed Karlin’s conviction for failure to file

income tax returns and rejected his contention that he was “not a ‘person’

within meaning of 26 U.S.C. § 7203” as “frivolous and requir[ing] no

discussion.”

McCoy v. Internal Revenue Service, 88 A.F.T.R.2d (RIA) 5909, 2001 U.S.

Dist. LEXIS 15113, at *21, 22 (D. Col. Aug. 7, 2001) – the court dismissed

the taxpayer’s complaint, which asserted that McCoy was a nonresident

alien and not subject to tax, describing the taxpayer’s argument as “specious

and legally frivolous.”

United States v. Rhodes, 921 F. Supp. 261, 264 (M.D. Pa. 1996) – the court

stated that “[a]n individual is a person under the Internal Revenue Code.”

Biermann v. Commissioner, 769 F.2d 707, 708 (11th Cir.), reh’g denied, 775

F.2d 304 (11th Cir. 1985) – the court said the claim that Biermann was not “a

person liable for taxes” was “patently frivolous” and, given the Tax Court’s

warning to Biermann that his positions would never be sustained in any

court, awarded the government double costs, plus attorney’s fees.

-15-

Smith v. Commissioner, T.C. Memo. 2000-290, 80 T.C.M. (CCH) 377, 378-

89 (2000) – the court described the argument that Smith “is not a ‘person

liable’ for tax” as frivolous, sustained failure to file penalties, and imposed a

penalty for maintaining “frivolous and groundless positions.”

United States v. Studley, 783 F.2d 934, 937 n.3 (9th Cir. 1986) – the court

affirmed a failure to file conviction, rejecting the taxpayer’s contention that

she was not subject to federal tax laws because she was “an absolute,

freeborn, and natural individual” and went on to note that “this argument has

been consistently and thoroughly rejected by every branch of the government

for decades.”

D. Contention: The only “employees” subject to federal income tax are

employees of the federal government.

Some argue that the federal government can tax only employees of the

federal government; therefore, employees in the private sector are immune

from federal income tax liability. This argument is based on an apparent

misinterpretation of section 3401, which imposes responsibilities to withhold

tax from “wages.” That section establishes the general rule that “wages”

include all remuneration for services performed by an employee for his

employer. Section 3401(c) goes on to state that the term “employee”

includes “an officer, employee, or elected official of the United States, a

State, or any political subdivision thereof . . . .”

The Law: Section 3401(c) defines “employee” and states that the term

“includes an officer, employee or elected official of the United States . . . .”

This language does not address how other employees’ wages are subject to

withholding or taxation. Section 7701(c) states that the use of the word

“includes” “shall not be deemed to exclude other things otherwise within the

meaning of the term defined.” Thus, the word “includes” as used in the

definition of “employee” is a term of enlargement, not of limitation. It clearly

makes federal employees and officials a part of the definition of “employee,”

which generally includes private citizens.

Relevant Case Law:

United States v. Latham, 754 F.2d 747, 750 (7th Cir. 1985) – calling the

instructions Latham wanted given to the jury “inane,” the court said, “[the]

instruction which indicated that under 26 U.S.C. § 3401(c) the category of

‘employee’ does not include privately employed wage earners is a

preposterous reading of the statute. It is obvious within the context of [the

law] the word ‘includes’ is a term of enlargement not of limitation, and the

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reference to certain entities or categories is not intended to exclude all

others. ”

Sullivan v. United States, 788 F.2d 813, 815 (1st Cir. 1986) – the court

rejected Sullivan’s attempt to recover a civil penalty for filing a frivolous

return, stating “to the extent [he] argues that he received no ‘wages’ . . .

because he was not an ‘employee’ within the meaning of 26 U.S.C.

§ 3401(c), that contention is meritless. . . . The statute does not purport to

limit withholding to the persons listed therein.” The court imposed sanctions

on Sullivan for bringing a frivolous appeal.

Peth v. Breitzmann, 611 F. Supp. 50, 53 (E.D. Wis. 1985) – the court

rejected the taxpayer’s argument “that he is not an ‘employee’ under I.R.C. §

3401(c) because he is not a federal officer, employee, elected official, or

corporate officer,” stating, “[he] mistakenly assumes that this definition of

‘employee’ excludes all other wage earners.”

Pabon v. Commissioner, T.C. Memo. 1994-476, 68 T.C.M. (CCH) 813, 816

(1994) – the court characterized Pabon’s position – including that she was

not subject to tax because she was not an employee of the federal or state

governments – as “nothing but tax protester rhetoric and legalistic gibberish.”

The court imposed a penalty of $2,500 on Pabon for bringing a frivolous

case, stating that she “regards this case as a vehicle to protest the tax laws

of this country and espouse her own misguided views.”

IV. Constitutional Amendment Claims

A. Contention: Federal income taxes constitute a “taking” of property

without due process of law, violating the Fifth Amendment.

Some assert that the collection of federal income taxes constitutes a “taking”

of property without due process of law, in violation of the Fifth Amendment.

Thus, any attempt by the Internal Revenue Service to collect federal income

taxes owed by a taxpayer is unconstitutional.

The Law: The Fifth Amendment to the United States Constitution provides

that a person shall not be “deprived of life, liberty, or property, without due

process of law . . . .” The U.S. Supreme Court stated in Brushaber v. Union

Pacific R.R., 240 U.S. 1, 24 (1916), that “it is . . . well settled that [the Fifth

Amendment] is not a limitation upon the taxing power conferred upon

Congress by the Constitution; in other words, that the Constitution does not

conflict with itself by conferring upon the one hand a taxing power, and taking

the same power away on the other by limitations of the due process clause.”

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Further, the Supreme Court has upheld the constitutionality of the summary

administrative procedures contained in the Internal Revenue Code against

due process challenges, on the basis that a post-collection remedy (e.g., a

tax refund suit) exists and is sufficient to satisfy the requirements of

constitutional due process. Phillips v. Commissioner, 283 U.S. 589, 595-97

(1931).

The Internal Revenue Code provides methods to ensure due process to

taxpayers: (1) the “refund method,” set forth in section 7422(e) and 28

U.S.C. §§ 1341 and 1346(a), where a taxpayer must pay the full amount of

the tax and then sue in a federal district court or in the United States Court of

Federal Claims for a refund; and (2) the “deficiency method,” set forth in

section 6213(a), where a taxpayer may, without paying the contested tax,

petition the United States Tax Court to redetermine a tax deficiency asserted

by the IRS. Courts have found that both methods provide constitutional due

process.

In recent years, Congress passed new laws providing further protection for

taxpayers’ due process rights in collection matters. In the Internal Revenue

Service Restructuring and Reform Act of 1998, Pub. L. 105-206, § 3401,

112 Stat. 685, 746, Congress enacted new sections 6320 (pertaining to

liens) and 6330 (pertaining to levies) establishing collection due process

rights for taxpayers, effective for collection actions after January 19, 1999.

Generally, the IRS must provide taxpayers notice and an opportunity for an

administrative appeals hearing upon the filing of a notice of federal tax lien

(section 6320) and prior to levy (section 6330). Taxpayers also have the right

to seek judicial review of the IRS’s determination in these due process

proceedings. I.R.C. § 6330(d). These reviews can extend to the merits of

the underlying tax liability, if the taxpayer has not previously received the

opportunity for review of the merits, e.g., did not receive a notice of

deficiency. I.R.C. § 6330(c)(2)(B). However, the Tax Court has indicated

that it will impose sanctions pursuant to section 6673 against taxpayers who

seek judicial relief based upon frivolous or groundless positions.

Relevant Case Law:

Flora v. United States, 362 U.S. 145, 175 (1960) – the court held that a

taxpayer must pay the full tax assessment before being able to file a refund

suit in district court, noting that a person has the right to appeal an

assessment to the Tax Court “without paying a cent.”

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Schiff v. United States, 919 F.2d 830 (2d Cir. 1990) – the court rejected a

due process claim where the taxpayer chose not to avail himself of the

opportunity to appeal a deficiency notice to the Tax Court.

Goza v. Commissioner, 114 T.C. 176 (2000) – the court rejected the

taxpayer’s attempt to use the judicial review process as a forum to contest

the underlying tax liability, since the taxpayer had an opportunity to dispute

that liability after receiving the statutory notice of deficiency.

Pierson v. Commissioner, 115 T.C. 576, 581 (2000) – the court considered

imposing sanctions against the taxpayer, but decided against doing so,

stating, “we regard this case as fair warning to those taxpayers who, in the

future, institute or maintain a lien or levy action primarily for delay or whose

position in such a proceeding is frivolous or groundless.”

Davis v. Commissioner, T.C. Memo. 2001-87, 81 T.C.M. (CCH) 1503

(2001) – the court imposed a $4,000 penalty for frivolous and groundless

arguments, after warning that the taxpayer could be penalized for presenting

them.

B. Contention: Taxpayers do not have to file returns or provide financial

information because of the protection against self-incrimination

found in the Fifth Amendment.

Some argue that taxpayers may refuse to file federal income tax returns, or

may submit tax returns on which they refuse to provide any financial

information, because they believe that their Fifth Amendment privilege

against self-incrimination will be violated.

The Law: There is no constitutional right to refuse to file an income tax

return on the ground that it violates the Fifth Amendment privilege against

self-incrimination. In United States v. Sullivan, 274 U.S. 259, 264 (1927), the

U.S. Supreme Court stated that the taxpayer “could not draw a conjurer’s

circle around the whole matter by his own declaration that to write any word

upon the government blank would bring him into danger of the law.” The

failure to comply with the filing and reporting requirements of the federal tax

laws will not be excused based upon blanket assertions of the constitutional

privilege against compelled self-incrimination under the Fifth Amendment.

Relevant Case Law:

United States v. Schiff, 612 F.2d 73, 83 (2d Cir. 1979) – the court said that

“the Fifth Amendment privilege does not immunize all witnesses from

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testifying. Only those who assert as to each particular question that the

answer to that question would tend to incriminate them are protected . . . .

[T]he questions in the income tax return are neutral on their face . . . [h]ence

privilege may not be claimed against all disclosure on an income tax return.”

United States v. Brown, 600 F.2d 248, 252 (10th Cir. 1979) – noting that the

Supreme Court had established “that the self-incrimination privilege can be

employed to protect the taxpayer from revealing the information as to an

illegal source of income, but does not protect him from disclosing the amount

of his income,” the court said Brown made “an illegal effort to stretch the Fifth

Amendment to include a taxpayer who wishes to avoid filing a return.”

United States v. Neff, 615 F.2d 1235, 1241 (9th Cir.), cert. denied, 447 U.S.

925 (1980) – the court affirmed a failure to file conviction, noting that the

taxpayer “did not show that his response to the tax form questions would

have been self-incriminating. He cannot, therefore, prevail on his Fifth

Amendment claim.”

United States v. Daly, 481 F.2d 28, 30 (8th Cir.), cert. denied, 414 U.S. 1064

(1973) – the court affirmed a failure to file conviction, rejecting the taxpayer’s

Fifth Amendment claim because of his “error in . . . his blanket refusal to

answer any questions on the returns relating to his income or expenses.”

Sochia v. Commissioner, 23 F.3d 941 (5th Cir. 1994), cert. denied, 513 U.S.

1153 (1995) – the court affirmed tax assessments and penalties for failure to

file returns, failure to pay taxes, and filing a frivolous return. The court also

imposed sanctions for pursuing a frivolous case. The taxpayers had failed to

provide any information on their tax return about income and expenses,

instead claiming a Fifth Amendment privilege on each line calling for

financial information.

C. Contention: Compelled compliance with the federal income tax laws

is a form of servitude in violation of the Thirteenth Amendment.

This argument asserts that the compelled compliance with federal tax laws is

a form of servitude in violation of the Thirteenth Amendment.

The Law: The Thirteenth Amendment to the United States Constitution

prohibits slavery within the United States, as well as the imposition of

involuntary servitude, except as punishment for a crime of which a person

shall have been duly convicted. In Porth v. Brodrick, 214 F.2d 925, 926 (10th

Cir. 1954), the Court of Appeals stated that “if the requirements of the tax

laws were to be classed as servitude, they would not be the kind of

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involuntary servitude referred to in the Thirteenth Amendment.” Courts have

consistently found arguments that taxation constitutes a form of involuntary

servitude to be frivolous.

Relevant Case Law:

Porth v. Brodrick, 214 F.2d 925, 926 (10th Cir. 1954) – the court described

the taxpayer’s Thirteenth and Sixteenth Amendment claims as “clearly

unsubstantial and without merit,” as well as “far-fetched and frivolous.”

United States v. Drefke, 707 F.2d 978, 983 (8th Cir. 1983) – the court

affirmed Drefke’s failure to file conviction, rejecting his claim that the

Thirteenth Amendment prohibited his imprisonment because that

amendment “is inapplicable where involuntary servitude is imposed as

punishment for a crime.”

Ginter v. Southern, 611 F.2d 1226 (8th Cir. 1979) – the court rejected the

taxpayer’s claim that the Internal Revenue Code results in involuntary

servitude in violation of the Thirteenth Amendment.

Kasey v. Commissioner, 457 F.2d 369 (9th Cir. 1972) – the court rejected as

without merit the argument that the requirements to keep records and to

prepare and file tax returns violated the Kaseys’ Fifth Amendment privilege

against self-incrimination and amount to involuntary servitude prohibited by

the Thirteenth Amendment.

Wilbert v. Internal Revenue Service (In re Wilbert), 262 B.R. 571, 578, 88

A.F.T.R.2d 6650 (Bankr. N.D. Ga. 2001) – the court rejected the taxpayer’s

argument that taxation is a form of involuntary servitude prohibited by the

Thirteenth Amendment, stating that “[i]t is well-settled American

jurisprudence that constitutional challenges to the IRS’ authority to collect

individual income taxes have no legal merit and are ‘patently frivolous.’”

D. Contention: The Sixteenth Amendment to the United States

Constitution was not properly ratified, thus the federal income tax

laws are unconstitutional.

This argument is based on the premise that all federal income tax laws are

unconstitutional because the Sixteenth Amendment was not officially ratified,

or because the State of Ohio was not properly a state at the time of

ratification. This argument has survived over time because proponents

mistakenly believe that the courts have refused to address this issue.

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The Law: The Sixteenth Amendment provides that Congress shall have the

power to lay and collect taxes on income, from whatever source derived,

without apportionment among the several states, and without regard to any

census or enumeration. U.S. Const. amend. XVI. The Sixteenth

Amendment was ratified by forty states, including Ohio, and issued by

proclamation in 1913. Shortly thereafter, two other states also ratified the

Amendment. Under Article V of the Constitution, only three-fourths of the

states are needed to ratify an Amendment. There were enough states

ratifying the Sixteenth Amendment even without Ohio to complete the

number needed for ratification. Furthermore, the U.S. Supreme Court

upheld the constitutionality of the income tax laws enacted subsequent to

ratification of the Sixteenth Amendment in Brushaber v. Union Pacific R.R.,

240 U.S. 1 (1916). Since that time, the courts have consistently upheld the

constitutionality of the federal income tax.

Relevant Case Law:

Miller v. United States, 868 F.2d 236, 241 (7th Cir. 1989) (per curiam) – the

court stated, “We find it hard to understand why the long and unbroken line of

cases upholding the constitutionality of the sixteenth amendment generally,

Brushaber v. Union Pacific Railroad Company . . . and those specifically

rejecting the argument advanced in The Law That Never Was, have not

persuaded Miller and his compatriots to seek a more effective forum for

airing their attack on the federal income tax structure.” The court imposed

sanctions on them for having advanced a “patently frivolous” position.

United States v. Stahl, 792 F.2d 1438, 1441 (9th Cir. 1986), cert. denied,

479 U.S. 1036 (1987) – stating that “the Secretary of State’s certification

under authority of Congress that the sixteenth amendment has been ratified

by the requisite number of states and has become part of the Constitution is

conclusive upon the courts,” the court upheld Stahl’s conviction for failure to

file returns and for making a false statement.

Knoblauch v. Commissioner, 749 F.2d 200, 201 (5th Cir. 1984), cert. denied,

474 U.S. 830 (1986) – the court rejected the contention that the Sixteenth

Amendment was not constitutionally adopted as “totally without merit” and

imposed monetary sanctions against Knoblauch based on the frivolousness

of his appeal. “Every court that has considered this argument has rejected

it,” the court observed.

United States v. Foster, 789 F.2d 457 (7th Cir.), cert. denied, 479 U.S. 883

(1986) – the court affirmed Foster’s conviction for tax evasion, failing to file a

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return, and filing a false W-4 statement, rejecting his claim that the Sixteenth

Amendment was never properly ratified.

E. Contention: The Sixteenth Amendment does not authorize a direct

non-apportioned federal income tax on United States citizens.

Some assert that the Sixteenth Amendment does not authorize a direct

non-apportioned income tax and thus, U.S. citizens and residents are not

subject to federal income tax laws.

The Law: The courts have both implicitly and explicitly recognized that the

Sixteenth Amendment authorizes a non-apportioned direct income tax on

United States citizens and that the federal tax laws as applied are valid. In

United States v. Collins, 920 F.2d 619, 629 (10th Cir. 1990), cert. denied,

500 U.S. 920 (1991), the court cited to Brushaber v. Union Pac. R.R., 240

U.S. 1, 12-19 (1916), and noted that the U.S. Supreme Court has

recognized that the “sixteenth amendment authorizes a direct

nonapportioned tax upon United States citizens throughout the nation.”

Relevant Case Law:

In re Becraft, 885 F.2d 547 (9th Cir. 1989) – the court affirmed a failure to file

conviction, rejecting the taxpayer’s frivolous position that the Sixteenth

Amendment does not authorize a direct non-apportioned income tax.

Lovell v. United States, 755 F.2d 517, 518 (7th Cir. 1984) – the court

rejected the argument that the Constitution prohibits imposition of a direct

tax without apportionment, and upheld the district court’s frivolous return

penalty assessment and the award of attorneys’ fees to the government

“because [the taxpayers’] legal position was patently frivolous.” The appeals

court imposed additional sanctions for pursuing “frivolous arguments in bad

faith.”

Broughton v. United States, 632 F.2d 706 (8th Cir. 1980) – the court rejected

a refund suit, stating that the Sixteenth Amendment authorizes imposition of

an income tax without apportionment among the states.

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V. Fictional Legal Bases

A. Contention: The Internal Revenue Service is not an agency of the

United States.

Some argue that the Internal Revenue Service is not an agency of the United

States but rather a private corporation, because it was not created by

positive law (i.e., an act of Congress) and that, therefore, the IRS does not

have the authority to enforce the Internal Revenue Code.

The Law: There is a host of constitutional and statutory authority

establishing that the Internal Revenue Service is an agency of the United

States. The U.S. Supreme Court stated in Donaldson v. United States, 400

U.S. 517, 534 (1971), “[w]e bear in mind that the Internal Revenue Service is

organized to carry out the broad responsibilities of the Secretary of the

Treasury under § 7801(a) of the 1954 Code for the administration and

enforcement of the internal revenue laws.”

Pursuant to section 7801, the Secretary of Treasury has full authority to

administer and enforce the internal revenue laws and has the power to

create an agency to enforce such laws. Based upon this legislative grant,

the Internal Revenue Service was created. Thus, the Internal Revenue

Service is a body established by “positive law” because it was created

through a congressionally mandated power. Moreover, section 7803(a)

explicitly provides that there shall be a Commissioner of Internal Revenue

who shall administer and supervise the execution and application of the

internal revenue laws.

Relevant Case Law:

Salman v. Dept. of Treasury, 899 F. Supp. 471 (D. Nev. 1995) – the court

described Salman’s contention that the Internal Revenue Service is not a

government agency of the United States as wholly frivolous and dismissed

his claim with prejudice.

Young v. I.R.S., 596 F. Supp. 141 (N.D. Ind. 1984) – the court granted

summary judgment in favor of the government, rejecting Young’s claim that

the Internal Revenue Service is a private corporation, rather than a

government agency.

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B. Contention: Taxpayers are not required to file a federal income tax

return, because the instructions and regulations associated with the

Form 1040 do not display an OMB control number as required by the

Paperwork Reduction Act.

Some argue that taxpayers are not required to file tax returns because of the

Paperwork Reduction Act of 1980, 44 U.S.C. § 3501, et seq. ("PRA"). The

PRA was enacted to limit federal agencies' information requests that burden

the public. The "public protection" provision of the PRA provides that no

person shall be subject to any penalty for failing to maintain or provide

information to any agency if the information collection request involved does

not display a current control number assigned by the Office of Management

and Budget [OMB] Director. 44 U.S.C. § 3512. Advocates of this

contention claim that they cannot be penalized for failing to file Form 1040,

because the instructions and regulations associated with the Form 1040 do

not display any OMB control number.

The Law: The courts have uniformly rejected this argument on different

grounds. Some courts have simply noted that the PRA applies to the forms

themselves, not to the instruction booklets, and because the Form 1040

does have a control number, there is no PRA violation.

Other courts have held that Congress created the duty to file returns in

section 6012(a) and "Congress did not enact the PRA’s public protection

provision to allow OMB to abrogate any duty imposed by Congress." United

States v. Neff, 954 F.2d 698, 699 (11th Cir. 1992).

Relevant Case Law:

United States v. Wunder, 919 F.2d 34 (6th Cir. 1990) – the court rejected

Wunder’s claim of a PRA violation, affirming his conviction for failing to file a

return.

Salberg v. United States, 969 F.2d 379 (7th Cir. 1992) – the court affirmed

Salberg’s conviction for tax evasion and failing to file a return, rejecting his

claims under the PRA.

United States v. Holden, 963 F.2d 1114 (8th Cir.), cert. denied, 506 U.S. 958

(1992) – the court affirmed Holden’s conviction for failing to file a return and

rejected his contention that he should have been acquitted because tax

instruction booklets fail to comply with the PRA.

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United States v. Hicks, 947 F.2d 1356, 1359 (9th Cir. 1991) – the court

affirmed Hicks’ conviction for failing to file a return, finding that the

requirement to provide information is required by law, not by the IRS. “This

is a legislative command, not an administrative request. The PRA was not

meant to provide criminals with an all-purpose escape hatch.”

Lonsdale v. United States, 919 F.2d 1440, 1445 (10th Cir. 1990) – the court

found that the PRA “is inapplicable to ‘information collection request’ forms

issued during an investigation against an individual to determine his or her

tax liability.”

C. Contention: African Americans can claim a special tax credit as

reparations for slavery and other oppressive treatment.

Proponents of this contention assert that African Americans can claim a socalled

“Black Tax Credit” on their federal income tax returns as reparations

for slavery and other oppressive treatment suffered by African Americans. A

similar frivolous argument has been made that Native Americans are entitled

to a credit on their federal income tax returns as a form of reparations for

past oppressive treatment.

The Law: There is no provision in the Internal Revenue Code which allows

taxpayers to claim a “Black Tax Credit” or a credit for Native American

reparations. It is a well settled principle of law that deductions and credits

are a matter of legislative grace. See e.g., Wilson v. Commissioner, T.C.

Memo. 2001-139, 81 T.C.M. (CCH) 1745 (2001). Unless specifically

provided for in the Internal Revenue Code, no deduction or credit may be

allowed.

The IRS indicated in News Release IR-2002-08, 2002 I.R.B. LEXIS 30, that

it will crack down on promoters of “slavery reparation tax credit” and “Native

American reparations“ scams. See 2002 TNT 17-15 (January 24, 2002).

Further, according to the News Release, the IRS will implement a new policy

under which these reparation claims will be treated as a frivolous tax return

which could result in a potential $500 penalty. Id.

Furthermore, section 7408 provides a cause of action for injunctive relief to

the United States against a party suspected of violating the tax laws. On

March 6, 2002, the United States filed civil suits to enjoin two tax return

preparers (Andrew L. Wiley and Robert L. Foster) from preparing federal

income tax returns claiming refunds based on a non-existent tax credit for

slavery reparations. United States v. Wiley, No. 3:02-cv-209WS (S.D. Miss.

2002); United States v. Foster, No. 3:02-cv-133 (E.D. Va. 2002).

-26-

Relevant Case Law:

United States v. Bridges, 86 A.F.T.R.2d (RIA) 5280 (4th Cir. 2000) – the

court upheld Bridges’ conviction of aiding and assisting the preparation of

false tax returns, on which he claimed a non-existent “Black Tax Credit.”

D. Contention: Taxpayers are entitled to a refund of the Social Security

taxes paid over their lifetime.

Proponents of this contention encourage individuals to file claims for refund

of the Social Security taxes paid during their lifetime, on the basis that the

claimants have sought to waive all rights to their Social Security benefits.

Additionally, some advise taxpayers to claim a charitable contribution

deduction as a result of their “gift” of these benefits or of the Social Security

taxes to the United States.

The Law: There is no provision in the Internal Revenue Code, or any other

provision of law, which allows for a refund of Social Security taxes paid on

the grounds asserted above. In Crouch v. Commissioner, T.C. Memo. 1990-

309, 59 T.C.M. (CCH) 938 (1990), the Tax Court sustained an IRS

determination that a person may not claim a charitable contribution

deduction based upon the waiver of future Social Security benefits.

VI. “Untaxing” Packages or “Untaxing” Trusts

A. Contention: An “untaxing” package or trust provides a way of legally

and permanently avoiding the obligation to file federal income tax

returns and pay federal income taxes.

Advocates of this idea believe that an “untaxing” package or trust provides a

way of legally and permanently “untaxing” oneself so that a person would no

longer be required to file federal income tax returns and pay federal income

taxes. Promoters who sell such tax evasion plans and supposedly teach

individuals how to remove themselves from the federal tax system rely on

many of the above-described frivolous arguments, such as the claim that

payment of federal income taxes is voluntary, that there is no requirement for

a person to file federal income tax returns, and that there are legal ways not

to pay federal income taxes.

The Law: The underlying claims for these “untaxing” packages are

frivolous, as specified above. Promoters of these “untaxing” schemes as

well as willful taxpayers have been subjected to criminal penalties for their

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actions. Taxpayers who have purchased and followed these “untaxing” plans

have also been subjected to civil penalties for failure to timely file a federal

income tax return and failure to pay federal income taxes.

Furthermore, section 7408 provides a cause of action for injunctive relief to

the United States against a party suspected of violating the tax laws. On

November 15, 2001, the United States filed complaints for permanent

injunctions pursuant to section 7408 against three individuals (David Bosset,

Thurston Bell, and Harold Hearn) for failing to sign tax returns, promoting

schemes that they knew were false or fraudulent, and engaging in the

preparation of documents that understate tax liability. United States v.

Bosset, No. 8:01-cv-2154-T-26TBM (M.D. Fla. 2001); United States v. Bell,

No. 1:CV-01-2159 (M.D. Penn. 2001); United States v. Hearn, No. 1:01-CV-

3058 (N.D. Ga. 2001).

On January 29, 2002, a consent order was entered in United States v. Hearn

in favor of the United States that permanently enjoined Mr. Hearn and his

representatives from, among other things, promoting or selling tax shelter

plans (including but not limited to the § 861 argument). In the order, Mr.

Hearn agreed that he relied upon the frivolous § 861 argument in making

false or fraudulent statements on federal income tax returns regarding the

excludibility of wages and other items from income.

Relevant Case Law:

United States v. Andra, 218 F.3d 1106 (9th Cir. 2000) – in affirming the

conviction of a promoter of an untaxing scheme for tax evasion and

conspiracy, the court found that it was proper to include the tax liabilities of

persons Andra recruited into a tax fraud conspiracy when calculating the

effect of his actions for sentencing.

United States v. Clark, 139 F.3d 485 (5th Cir.), cert. denied, 525 U.S. 899

(1998) – the court upheld convictions of defendants involved with The Pilot

Connection Society for conspiracy to defraud the United States and aiding

and abetting the filing of fraudulent Forms W-4.

Robinson v. Commissioner, T.C. Memo. 1995-102, 69 T.C.M. (CCH) 2061,

2062 (1995) – the court quoted language from Hanson v. Commissioner,

696 F.2d 1232, 1234 (9th Cir. 1983) that “[n]o reasonable person would have

trusted this scheme to work.”

King v. Commissioner, T.C. Memo. 1995-524, 70 T.C.M. (CCH) 1152

(1995) – the court found King, who had followed the Pilot Connection’s

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“untaxing” techniques, liable for penalties for failure to file returns and for

failing to make sufficient estimated tax payments.

United States v. Raymond, 228 F.3d 804, 812 (7th Cir. 2000), cert. denied,

121 S. Ct. 2242 (2001) – the court affirmed a permanent injunction against

taxpayers who promoted a “De-Taxing America Program,” forbidding them

from engaging in certain activities that incited others to violate tax laws. The

court said, “[W]e conclude that the statements the appellants made in the

Just Say No advertisement were representations concerning the tax benefits

of purchasing and following the De-Taxing America Program that the

appellants reasonably should have known were false.”

United States v. Kaun, 827 F.2d 1144 (7th Cir. 1987) – the court affirmed the

district court’s injunction prohibiting the taxpayer from inciting others to

submit tax returns based on false income tax theories.

United States v. Krall, 835 F.2d 711 (8th Cir. 1987) – the court held that the

trusts used were shams. The defendant, an optometrist, exercised the same

dominion and control over the corpus and income of the trusts as he had

before the trusts were executed. The court further found the defendant

illegally attempted to assign his earned income to the various trusts.

United States v. Scott, 37 F.3d 1564 (10th Cir. 1994) – the court concluded

the true grantor of the trusts was in substance the purchaser, who was also

the trustee, as well as the beneficiary. It was as if there were no transfers at

all. Therefore the purchaser was subject to tax on all the income of the

various trusts. The defendants were the promoters of a multi-tiered trust

package marketed to purchasers as a device to eliminate tax liability without

losing control over their assets or income.

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PENALTIES FOR PURSUING FRIVOLOUS TAX ARGUMENTS

Those who act on frivolous positions risk a variety of civil and criminal penalties. Those

who adopt these positions may face harsher consequences than those who merely

promote them. As the Seventh Circuit Court of Appeals noted in United States v. Sloan,

939 F.2d 499, 499-500 (7th Cir. 1991), “Like moths to a flame, some people find

themselves irresistibly drawn to the tax protestor movement’s illusory claim that there is no

legal requirement to pay federal income tax. And, like moths, these people sometimes get

burned.”

Taxpayers filing returns with frivolous positions may be subject to the accuracy-related

penalty under section 6662 (twenty percent of the underpayment attributable to negligence

or disregard of rules or regulations) or the civil fraud penalty under section 6663 (seventyfive

percent of the underpayment attributable to fraud). Tax preparers who submit returns

maintaining groundless positions may be subject to penalties in addition to those imposed

on their clients.

Moreover, section 6702 provides for the imposition of a $500 penalty against any

individual who files a frivolous income tax return. The legislative history underlying this

section states, “the Committee is concerned with the rapid growth of deliberate defiance of

the tax laws by tax protesters. The Committee believes that an immediately assessable

penalty on the filing of protest returns will help deter the filing of such returns.” S. Rep. No.

494, 97th Cong., 2d Sess. 277, reprinted in 1982 U.S.C.C.A.N. 781, 1023-24.

In the 1980s, Congress showed its concern about taxpayers misusing the courts and

obstructing the appeal rights of others when it enacted tougher sanctions for bringing

frivolous cases before the courts. Section 6673 allows the courts to impose a penalty of

up to $25,000 when they come to any of three conclusions:

- a taxpayer instituted a proceeding primarily for delay,

- a position is frivolous or groundless, or

- a taxpayer unreasonably failed to pursue administrative remedies.

An appeals court explained the rationale for the sanctions in Coleman v. Commissioner,

791 F.2d 68, 72 (7th Cir. 1986): “The purpose of § 6673 . . . is to induce litigants to

conform their behavior to the governing rules regardless of their subjective beliefs.

Groundless litigation diverts the time and energies of judges from more serious claims; it

imposes needless costs on other litigants. Once the legal system has resolved a claim,

judges and lawyers must move on to other things. They cannot endlessly rehear stale

arguments . . . . [T]here is no constitutional right to bring frivolous suits . . . . People who

wish to express displeasure with taxes must choose other forums, and there are many

available.”

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Relevant Case Law:

Jones v. Commissioner, 688 F.2d 17 (6th Cir. 1982) – the court found the taxpayer’s claim

that his wages were paid in “depreciated bank notes” as clearly without merit and affirmed

the Tax Court’s imposition of an addition to tax for negligence or intentional disregard of

rules and regulations.

Baskin v. United States, 738 F.2d 975 (8th Cir. 1984) – the court found that the IRS’s

assessment of a frivolous return penalty without a judicial hearing was not a denial of due

process, since there was an adequate opportunity for a later judicial determination of legal

rights.

Holker v. United States, 737 F.2d 751, 752-53 (8th Cir. 1984) – the court upheld the

frivolous return penalty even though the taxpayer claimed the documents he filed to claim a

refund did not constitute a tax return. Noting that “[t]axpayers may not obtain refunds

without first filing returns,” the court then found that “[h]is unexplained designation of his W-

2 forms as ‘INCORRECT’ and his attempt to deduct his wages as the cost of labor on

Schedule C also establish the frivolousness and incorrectness of his position.”

Rowe v. United States, 583 F. Supp. 1516, 1520 (D. Del. 1984) – the court upheld section

6702 against various objections, including that it was unconstitutionally vague because it

does not define a “frivolous” return. “Frivolous is commonly understood to mean having no

basis in law or fact,” the court stated.

Monaghan v. Commissioner, T.C. Memo. 2002-16, 83 T.C.M. (CCH) 1102, 1104 (2002) –

the court rejected the taxpayer’s frivolous arguments and imposed sanctions in the amount

of $1,500, stating that “[h]e has caused this Court to waste its limited resources on his

erroneous views of the tax law which he should have known are completely without merit.”

Hart v. Commissioner, T.C. Memo. 2001-306, 82 T.C.M. (CCH) 934 (2001) – the court

imposed sanctions in the amount of $15,000 against the taxpayer, because his delaying

actions caused the Service and the court to needlessly spend time preparing for the trial

and writing the opinion.

Haines v. Commissioner, T.C. Memo. 2000-126, 79 T.C.M. (CCH) 1844, 1846 (2000) –

stating, “[p]etitioner knew or should have known that his position was groundless and

frivolous, yet he persisted in maintaining this proceeding primarily to impede the proper

workings of our judicial system and to delay the payment of his Federal income tax

liabilities,” the court imposed a $25,000 penalty.

Sigerseth v. Commissioner, T.C. Memo 2001-148, 81 T.C.M. (CCH) 1792, 1794 (2001) –

pointing out that this case involving the use of trusts to avoid taxes was “a waste of limited

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judicial and administrative resources that could have been devoted to resolving bona fide

claims of other taxpayers,” the court imposed a $15,000 penalty.

MatrixInfoSys Trust v. Commissioner, T.C. Memo. 2001-133, 81 T.C.M. (CCH) 1726, 1729

(2001) – in claiming that his income belonged to his trust, the court stated that the taxpayer

had made “shopworn arguments characteristic of the tax-protester rhetoric that has been

universally rejected by this and other courts,” and imposed a $12,500 penalty.

The Nis Family Trust v. Commissioner, 115 T.C. 523, 545-46 (2000) – concluding that the

Nis chose “to pursue a strategy of noncooperation and delay, undertaken behind a

smokescreen of frivolous tax-protester arguments,” the court imposed a $25,000 penalty

against them, and also imposed sanctions of more than $10,600 against their attorney for

arguing frivolous positions in bad faith.

Madge v. Commissioner, T.C. Memo. 2000-370, 80 T.C.M. (CCH) 804 (2000) – after

having warned the taxpayer that continuing with his frivolous arguments – that he was not a

taxpayer, that his income was not taxable, and that only foreign income was taxable –

would likely result in a penalty, the court imposed the maximum $25,000 penalty.

Davis v. Commissioner, T.C. Memo. 2001-87, 81 T.C.M. (CCH) 1503 (2001) – after

warning that the taxpayer could be penalized for presenting frivolous and groundless

arguments, the court imposed a $4,000 penalty.

Gass v. United States, 2001 U.S. App. LEXIS 1513 (10th Cir., Feb. 2, 2001) – the court

imposed an $8,000 penalty for contending that taxes on income from real property are

unconstitutional. The court had earlier penalized the taxpayers $2,000 for advancing the

same arguments in another case.

Brashier v. Commissioner, 2001 U.S. App. LEXIS 6270 (10th Cir., Apr. 13, 2001) – the

court imposed $1,000 penalties on taxpayers who argued that filing sworn income tax

returns violated their Fifth Amendment privilege against self-incrimination, after the Tax

Court had warned them that their argument – rejected consistently for more than seventy

years – was frivolous.

McAfee v. United States, 2001 U.S. Dist. LEXIS 7131, at *4 (N.D. Ga., Apr. 4, 2001) –

after losing the argument that his wages were not income and receiving a $500 penalty,

the taxpayer returned to court to try to stop the government from collecting that penalty by

garnishing his wages. The court stated that “bringing this ill-considered, nonsensical

litigation before this court for yet a second time is nothing but contumacious foolishness

which wastes the time and energy of the court system,” and imposed a $1,000 penalty.

United States v. Rempel, 87 A.F.T.R.2d (RIA) 1810, 2001 U.S. Dist. LEXIS 8518, at *5 (D.

Ak. Feb. 14, 2001) – the court warned the taxpayers of sanctions and stated: “It is

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apparent to the court from some of the papers filed by the Rempels that they have at least

had access to some of the publications of tax protester organizations. The publications of

these organizations have a bad habit of giving lots of advice without explaining the

consequences which can flow from the assertion of totally discredited legal positions

and/or meritless factual positions.”