Wagenknecht v. Comm'r ( 2008 )

T.C. Memo. 2008-288
UNITED STATES TAX COURT
CARL ROBERT WAGENKNECHT, JR., Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 8293-07. Filed December 22, 2008.
Carl Robert Wagenknecht, Jr., pro se.
Katherine Lee Kosar, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
VASQUEZ, Judge: Respondent determined deficiencies of
$13,438, $11,533, and $16,014 in petitioner’s income tax for
2002, 2003, and 2004, respectively. Respondent also determined
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additions to tax pursuant to section 6651(a)(1) and (2) for
2004.1
The issues for decision are: (1) Whether petitioner is
liable for the deficiencies; (2) whether petitioner is liable for
an addition to tax for failing to file a Federal income tax
return for 2004; (3) whether petitioner is liable for an addition
to tax for failing to pay Federal income tax for 2004; (4)
whether petitioner is liable for a 10-percent additional tax
pursuant to section 72(t) for 2004; and (5) whether petitioner
engaged in behavior warranting the imposition of a penalty
pursuant to section 6673(a).
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
The stipulation of facts and the attached exhibits are
incorporated herein by this reference. At the time he filed the
petition, petitioner resided in Ohio.
Petitioner did not file a Form 1040, U.S. Individual Income
Tax Return, for 2002, 2003, or 2004. On or about December 29,
2004, for 2002 and 2003, respectively, and March 28, 2005, for
2004, petitioner mailed to respondent virtually identical
1
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
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“affidavits”,2 approximately 50 pages long, titled “Notice of
Affidavit Statement of :Carl R.: Wagenkneckt, Jr. In Protest of
Internal Revenue Code Section 6011 For Year Period Ending
December 31,” 2002, 2003, or 2004. The aforementioned three
affidavits contained frivolous and groundless arguments,
including (but not limited to):
1. The frivolous affidavits were submitted to
respondent under coercion and duress;
2. petitioner was neither an “employee” nor
“personnel” under a contract of employment for personal
services with the “United States” or [with] any
“regulated public utility” as “employer” as the
foregoing quoted terms are specially defined and used
under the “Public Salary Tax Act of 1939”;
3. petitioner was not a “person,” nor “individual,”
nor “U.S. person,” nor “U.S. individual,” nor
“taxpayer,” nor “non-resident alien,” nor any other
“legal entity” “made liable for” or “subject to” any
“internal revenue tax” or “U.S. Individual Income Tax”;
4. petitioner received no “wages” includable in “gross
income”;
5. petitioner was not domiciled “within” the borders
and jurisdiction of the “United States;” “a State” or
“a political subdivision thereof;” the District of
Columbia; any Federal Enclave; or Federal territory or
possession;
6. petitioner was not a “United States Person;”
7. arguments regarding the Sixteenth Amendment made
petitioner not liable for taxes;
8. Title 26 is not a positive law applicable to the
people of the United States;
2
We use the term “affidavit” for convenience only.
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9. petitioner was born “within” the outer borders and
jurisdiction of the compact dejure [sic] state of Ohio,
one of the compact states of the United States of
America;
10. petitioner is an American national; a national of
the grand republic of the United States; a Citizen of
the United States as the term “Citizen” is used in
Article I, Section 2, Clause b of the Constitution of
the United States of America; a Citizen of the compact
dejure [sic] state of Ohio, as the term “Citizen” is
used in the Constitution compact of the dejure [sic]
state of Ohio;
11. petitioner is a natural free-born man in propria
persona and consequently of freeman legal character; is
one of the sovereign people of America by the grace of
his God and Creator, and consequently of sui
juris legal character; is a member of the grantor class
entitled to grant power to a republican form of
government; am a child of God, created by God, not by
any government authority;
12. the Christian appellation of petitioner is “:Carl
R.: Wagenkneckt, Jr.” and any intentional abbreviation
or misspelling of said Christian appellation is legally
vague and consequently voidable by petitioner, or any
“unauthorized capitalization” is in violation of the
peonage laws;
13. petitioner was not domiciled in the District of
Columbia, a Federal Enclave, or Federal territory or
possession of the United States; petitioner was
domiciled “without” the “United States”; and petitioner
was not a “person,” nor “individual,” nor “U.S.
person,” nor “U.S. individual,” nor “taxpayer,” nor
“non-resident alien” nor any other “legal entity” “made
liable for” or “subject to” any “internal revenue tax”
as used under Title 26 U.S.C. and Title 26 C.F.R.;
14. petitioner was not a “person” required to either
“make such returns” or “keep such records” nor made
subject to the requirements of Title 26 U.S.C. § 6001;
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In summary petitioner claimed that he was not obligated to file a
Federal income tax return and that he did not have Federal income
tax liabilities for 2002, 2003, and 2004.
During 2002, 2003, and 2004 petitioner was a vice principal
of a high school and a licensed attorney. Petitioner earned
wages of $67,691, $66,542, and $69,107 from the Akron Public
Schools in 2002, 2003, and 2004, respectively. In 2004
petitioner also received $488 in interest and $9,942 from
qualified retirement plans.
Pursuant to section 6020(b), respondent filed Federal income
tax returns for petitioner for 2002, 2003, and 2004 (section
6020(b) returns).
OPINION
I. Burden of Proof
As a general rule, the taxpayer bears the burden of proving
the Commissioner’s deficiency determinations incorrect. Rule
142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Section
7491(a), however, provides that if a taxpayer introduces credible
evidence and meets certain other prerequisites, the Commissioner
shall bear the burden of proof with respect to factual issues
relating to the liability of the taxpayer for a tax imposed under
subtitle A or B of the Code.
We found petitioner’s testimony to be evasive, vague,
conclusory, and/or questionable. Petitioner introduced no
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credible evidence regarding his income for 2002, 2003, or 2004,
and he introduced no evidence to establish that he met the
prerequisites of section 7491(a). Accordingly, petitioner bears
the burden of proof.
II. Section 61
Section 61(a) defines gross income as all income from
whatever source derived.
A. Income From Akron Public Schools
Gross income includes compensation for services. Sec.
61(a)(1). In 2002, 2003, and 2004 petitioner earned wages of
$67,691, $66,542, and $69,107, respectively, from the Akron
Public Schools.
B. Interest Income
Gross income includes interest. Sec. 61(a)(4). In 2004
petitioner received $488 in interest.
C. Pension/Annuity Income
Gross income includes income from annuities and pensions.
Sec. 61(a)(9), (11). In 2004 petitioner received $9,942 from
qualified retirement plans.
D. Conclusion
In the petition, a status report, at trial, and on brief,
petitioner advanced shopworn arguments characteristic of tax-
defier rhetoric, see Custer v. Commissioner, T.C. Memo. 2008-266,
that has been universally rejected by this and other courts,
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Wilcox v. Commissioner, 848 F.2d 1007 (9th Cir. 1988), affg. T.C.
Memo. 1987-225; Carter v. Commissioner, 784 F.2d 1006, 1009 (9th
Cir. 1986). We shall not painstakingly address petitioner’s
assertions “with somber reasoning and copious citation of
precedent; to do so might suggest that these arguments have some
colorable merit.” Crain v. Commissioner, 737 F.2d 1417, 1417
(5th Cir. 1984). On the basis of the foregoing, we sustain
respondent’s determination of petitioner’s unreported income.
III. Section 72(t)
Section 72(t) provides for a 10-percent additional tax on
early distributions from a qualified retirement plan. However,
the 10-percent additional tax does not apply to certain
distributions. Section 72(t)(2) excepts qualified retirement
plan distributions from the 10-percent additional tax if the
distributions are, inter alia: (1) Made on or after the date on
which the employee attains the age of 59-1/2; (2) made to a
beneficiary (or to the estate of the employee) on or after the
death of the employee; (3) attributable to the employee’s being
disabled within the meaning of section 72(m)(7); (4) part of a
series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy)
of the employee or joint lives (or joint life expectancies) of
such employee and his designated beneficiary; or (5) dividends
paid with respect to stock of a corporation which are described
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in section 404(k). Sec. 72(t)(2)(A). A limited exception is
also available for distributions made to an employee for medical
care expenses. See sec. 72(t)(2)(B).
Petitioner has the burden of proving his entitlement to any
of these exceptions. See Bunney v. Commissioner, 114 T.C. 259,
265 (2000); see also supra p. 5. The evidence does not establish
that any of the exceptions set forth in section 72(t)(2) applies
in this case. Thus, the distributions to petitioner in 2004 are
subject to the 10-percent additional tax under section 72(t)(1).
IV. Additions to Tax
Section 7491(c) provides that the Commissioner shall bear
the burden of production with respect to the liability of any
individual for additions to tax. “The Commissioner’s burden of
production under section 7491(c) is to produce evidence that it
is appropriate to impose the relevant penalty”. Swain v.
Commissioner, 118 T.C. 358, 363 (2002); see also Higbee v.
Commissioner, 116 T.C. 438, 446 (2001). If a taxpayer files a
petition alleging some error in the determination of the penalty,
the taxpayer’s challenge generally will succeed unless the
Commissioner produces evidence that the penalty is appropriate.
Swain v. Commissioner, supra at 364-365. The Commissioner,
however, does not have the obligation to introduce evidence
regarding reasonable cause or substantial authority. Higbee v.
Commissioner, supra at 446-447.
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A. Section 6651(a)(1)
Respondent determined that petitioner is liable for an
addition to tax pursuant to section 6651(a)(1) for 2004. Section
6651(a)(1) imposes an addition to tax for failure to file a
return on the date prescribed (determined with regard to any
extension of time for filing) unless such failure is due to
reasonable cause and not due to willful neglect.
Petitioner stipulated he did not file a return for 2004.
Thus, petitioner must come forward with evidence sufficient to
persuade the Court that respondent’s determination is incorrect
or that an exception applies. See Rule 142(a); Welch v.
Helvering, 290 U.S. at 115; see also Higbee v. Commissioner,
supra at 447. Petitioner presented no evidence that his failure
to file was due to reasonable cause and not due to willful
neglect. We hold that petitioner is liable for the addition to
tax pursuant to section 6651(a)(1).
B. Section 6651(a)(2)
Section 6651(a)(2) provides for an addition to tax where
payment of tax is not timely “unless it is shown that such
failure is due to reasonable cause and not due to willful
neglect”. At trial petitioner stipulated a substitute return for
2004 that satisfied section 6020(b). The section 6020(b) return
for 2004 shows a $16,014 deficiency and a balance due of $2,615.
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On the basis of the evidence, we find that petitioner did
not pay on time a portion of his tax for 2004. Petitioner did
not present evidence indicating that his failure to pay was due
to reasonable cause and not due to willful neglect. See Higbee
v. Commissioner, supra at 446-447 (stating that the taxpayer
bears the burden of proof regarding reasonable cause).
Accordingly, on this issue we sustain respondent’s determination.
V. Section 6673(a)(1)
Section 6673(a)(1) authorizes this Court to penalize up to
$25,000 a taxpayer who institutes or maintains a proceeding
primarily for delay or pursues in this Court a position which is
frivolous or groundless.
Petitioner’s conduct has convinced us that he maintained
this proceeding primarily for delay and to advance his frivolous
and groundless arguments. At trial the Court advised petitioner
that his arguments were frivolous and groundless.
Petitioner’s actions have resulted in a waste of limited
judicial and administrative resources that could have been
devoted to resolving bona fide claims of other taxpayers. See
Cook v. Spillman, 806 F.2d 948 (9th Cir. 1986). Petitioner’s
insistence on making frivolous tax-defier arguments indicates an
unwillingness to respect the tax laws of the United States.
Accordingly, we shall require petitioner to pay a penalty of
$5,000 to the United States pursuant to section 6673.
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To reflect the foregoing,
Decision will be entered
for respondent.