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Protestor Theories De-Bunked > EXHIBIT:
Tax Protestor Dummies
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 (7 th 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
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 (seventy-five 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, 97 th Cong., 2d Sess. 277, reprinted in 1982 U.S.C.C.A.N.
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
An appeals court explained the rationale for the sanctions
in Coleman v. Commissioner, 791 F.2d 68, 72 (7 th 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.
Relevant Case Law:
Jones v. Commissioner, 688 F.2d 17 (6 th 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 (8 th
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
(8 th 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
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
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 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 (10 th 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 (10 th 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 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.