Prout v. Commissioner

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
MAR 21 2002
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
JAMES R. PROUT,
Petitioner-Appellant,
v. No. 01-9005
(T.C. No. 13122-99)
COMMISSIONER OF INTERNAL (Petition for Review)
REVENUE,
Respondent-Appellee.
ORDER AND JUDGMENT *
Before HENRY , ANDERSON , and LUCERO , Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Petitioner James R. Prout, proceeding pro se, appeals the decision of the
Tax Court assessing taxes and penalties against him for the tax years 1992
through 1997. The Tax Court imposed sanctions in the amount of $2,500 because
Mr. Prout pursued frivolous claims. We exercise jurisdiction under 26 U.S.C.
§ 7482(a)(1) and affirm.
Mr. Prout admitted that he received the income stated in the notice of
deficiency. He does not appeal the sanctions order, nor does he challenge the
merits of the deficiencies and penalties charged in the notice of deficiency. He
appeals on the following grounds: (1) he cannot fairly be required to pay the same
rate of tax as the rate imposed on federal employees and officers because he does
not receive the same benefits as federal employees and officers; (2) he was
incorrectly characterized as “self-employed” when, in fact, he is a “private
independent contractor,” as distinguished from an “independent contractor,” who
could contract to do work for the federal government; (3) the taxes assessed
against him were employee taxes levied for the privilege of government
employment, so he does not owe them; (4) no evidence supports the Tax Court’s
finding that he is a “sole proprietor;” (5) he is not similarly situated to a federal
employee or officer and is not eligible for government employment benefits;
(6) he cannot be required to pay income taxes because he receives no direct
federal employment benefits; and (7) the Tax Court applied the wrong standard
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when evaluating his disparate-treatment constitutional challenge to the income
taxes assessed against him. Mr. Prout’s seven arguments can be condensed into
two claims: (1) federal income taxes apply only to federal employees, and
(2) applying to him the same tax laws that are applied to federal employees
violates the Equal Protection Clause.
We review Tax Court decisions “in the same manner and to the same extent
as decisions of the district courts in civil actions tried without a jury.” 26 U.S.C.
§ 7482(a)(1). Thus, we review purely factual issues under a clearly erroneous
standard, and we review purely legal questions de novo. Twenty Mile Joint
Venture, PND, Ltd. v. Commissioner , 200 F.3d 1268, 1275 (10th Cir. 1999).
We first reject the argument that the income-tax laws apply only to
employees of the federal government. Mr. Prout, like every individual, whether
or not employed by the federal government, is subject to the income-tax laws.
26 U.S.C. § 1 (taxable income of every individual is subject to tax). “‘All
individuals, natural or unnatural, must pay federal income tax on their wages,’
regardless of whether they requested, obtained or exercised any privilege from
the federal government .” United States v. Sloan , 939 F.2d 499, 501 (7th Cir.
1991) (quoting Lovell v. United States , 755 F.2d 517, 519 (7th Cir. 1984))
(emphasis added); cf. Lonsdale v. United States , 919 F.2d 1440, 1448 (10th Cir.
1990) (listing frivolous tax-protester arguments, including claims that individuals
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are not subject to income tax, the tax laws apply only in the District of Columbia,
and wages are not income).
Mr. Prout’s equal protection argument is also unavailing. “The Equal
Protection Clause of the Fourteenth Amendment commands that no State shall
deny to any person within its jurisdiction the equal protection of the laws, which
is essentially a direction that all persons similarly situated should be treated
alike.” City of Cleburne v. Cleburne Living Ctr. , 473 U.S. 432, 439 (1985)
(quotation omitted). Mr. Prout, who is not employed by the federal government,
alleges that he is not similarly situated to employees of the federal government
because he is not eligible for federal employees’ benefits. Accordingly, he
demands different treatment, arguing that his ineligibility for federal employee
benefits exempts his income from taxation. This argument does not invoke the
Equal Protection Clause which requires that similarly-situated persons be treated
the same. Mr. Prout, like others who are not employed by the government as well
as those who are, is subject to the income-tax laws. The Tax Court properly
treated Mr. Prout the same as other individuals, whether employed by the federal
government or not.
Mr. Prout’s arguments are frivolous. Even after the Tax Court warned him
that his claims were frivolous and he was therefore subject to sanctions, Mr. Prout
continued to press his claims. The Commissioner has filed a motion seeking
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sanctions against him for pursuing a frivolous appeal in the amount of $4,000.
Mr. Prout was served with the motion and has had an opportunity to oppose the
request for sanctions. See Braley v. Campbell , 832 F.2d 1504, 1515 (10th Cir.
1987) (party against whom sanctions are sought must have notice and an
opportunity to be heard). He has not responded. Because Mr. Prout’s arguments
on appeal are legally frivolous, we impose sanctions against him in the amount of
$4,000. Stafford v. United States , 208 F.3d 1177, 1179 (10th Cir. 2000) (adopting
flat fee of $4,000 as sanction for frivolous appeal from a Tax Court decision).
The judgment of the United States Tax Court is AFFIRMED. The
Commissioner’s motion for sanctions is GRANTED in the amount of $4,000.
Entered for the Court
Stephen H. Anderson
Circuit Judge
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