Wnuck v. Commissioner

SCOTT F. WNUCK, PETITIONER v. COMMISSIONER OF INTERNAL

REVENUE, RESPONDENT *

Docket No. 26068–09. Filed May 31, 2011.

R determined a deficiency in P’s 2007 income tax on the

basis of wages that P did not report. At trial P admitted, ‘‘I

exchanged my skilled labor and knowledge for pay’’. In a

bench opinion the Court held for R, ruled that P’s arguments

* This Opinion supplements the bench opinion previously rendered in this case on January

12, 2011, in Columbia, South Carolina.

498

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(498) WNUCK v. COMMISSIONER 499

were frivolous, imposed on P a penalty of $1,000 pursuant to

I.R.C. sec. 6673(a), and warned P that if he repeated his frivo-

lous positions he faced the risk of a steeper penalty. After the

Court entered decision, P moved for reconsideration on the

grounds that the Court had not adequately addressed his

arguments. Held: P was not entitled to a Court opinion

addressing his frivolous arguments, and his motion for

reconsideration will be denied. Held, further, P’s penalty

under I.R.C. sec. 6673(a) is increased to $5,000.

Scott F. Wnuck, pro se.

David M. McCallum, for respondent.

SUPPLEMENTAL OPINION

GUSTAFSON, Judge: Courts confronting frivolous arguments

against the constitutionality, validity, applicability, and

mandatory character of the income tax often aptly quote

Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984),

which stated, ‘‘We perceive no need to refute these argu-

ments with somber reasoning and copious citation of prece-

dent’’. We take this occasion to explain why it is usually not

expedient to discuss and refute in detail the frivolous argu-

ments that some litigants attempt to press in the Tax Court,

and why litigants who press such arguments are not entitled

to and should not expect to receive opinions rebutting their

frivolous arguments.

This case is before the Court on petitioner Scott F.

Wnuck’s motion for reconsideration. When this case was

tried January 12, 2011, Mr. Wnuck’s only contention was

that his wages are not subject to income tax. The Court’s

bench opinion, transcribed and served on January 21, 2011,

characterized Mr. Wnuck’s position as ‘‘frivolous’’ and did not

address his arguments at length. On January 26, 2011, the

Court’s decision was entered sustaining the deficiency that

the Internal Revenue Service (IRS) had determined against

Mr. Wnuck and imposing against him a penalty of $1,000

pursuant to section 6673(a)(1) 1 for maintaining frivolous

positions.

Mr. Wnuck then submitted a motion for leave to file a

motion for reconsideration (which we treat as a motion to

vacate the decision) and a separate motion for reconsider-

1 Unless otherwise indicated, all citations of sections refer to the Internal Revenue Code of

1986 (‘‘Code’’, 26 U.S.C.), as amended.

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500 136 UNITED STATES TAX COURT REPORTS (498)

ation. The motion to vacate will be granted, but the motion

for reconsideration will be denied, and decision will again be

entered in favor of the IRS and against Mr. Wnuck, but this

time with an increased penalty of $5,000.

Background

At trial the only issue was whether Mr. Wnuck received

taxable income in 2007; and he frankly stated, ‘‘I do not dis-

pute that I exchanged my skilled labor and knowledge for

pay’’. (Tr. at 13.) However, he explained, ‘‘I have come to

believe that the—my earnings from the companies that I

worked for did not constitute taxable income.’’ (Tr. at 8.)

Mr. Wnuck did admit, however, that he is not trained in

the law:

I work in the machinery industry, working on large power generators and

paper machines, paper mills, and that sort of thing. I’ve got several years

of college and served an apprenticeship in learning my trade, as in edu-

cation, but I don’t have any training in the law * * *. * * * It’s a steep

learning curve in the Internal Revenue world, you know. [Tr. at 33–34.]

Nonetheless, in his closing argument at the conclusion of

trial, Mr. Wnuck made a variety of supposed legal arguments

(similar to arguments in his pretrial memorandum) to the

effect that he does not owe income tax on his admitted

earnings.

The Court commented on some of Mr. Wnuck’s arguments

at the time he made them. In its bench opinion, the Court

later stated:

Mr. Wnuck admits his receipt of the amounts at issue. Section 61(a)

defines gross income as meaning ‘‘all income from whatever source derived,

including (but not limited to) (1) Compensation for services . . . .’’ Mr.

Wnuck’s payments from his employers clearly fall within this broad

description. His arguments to the contrary, his arguments about his

employment status, and all his other arguments are frivolous. See, e.g.,

Ulloa v. Commissioner, T.C. Memo. 2010–68. The income items at issue

are taxable to Mr. Wnuck.

The Ulloa opinion that the Court cited addresses some but

not all of the arguments that Mr. Wnuck had pressed.

The Court both sustained the deficiency as determined by

the IRS and imposed on Mr. Wnuck, pursuant to section

6673(a), a penalty of $1,000 for taking frivolous positions.

The Court stated:

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(498) WNUCK v. COMMISSIONER 501

We take no pleasure in doing so, and we there[fore] impose a relatively

modest penalty, given that we have the discretion to impose a penalty as

high as $25,000. Mr. Wnuck should be aware, however, that if he should

ever repeat his maintenance of frivolous tax litigation, he would stand in

peril of a much steeper penalty.

Undeterred, Mr. Wnuck has now filed a motion for

reconsideration, in which he reasserts (1) his argument that

his earnings are not taxable ‘‘wages’’; (2) his argument based

on provisions in title 27 of the Code of Federal Regulations;

and (3) his argument about supposed errors in his ‘‘Indi-

vidual Master File’’ maintained by the IRS—all three of which

he had asserted at trial. Mr. Wnuck complains about the

Court’s characterization of his arguments as ‘‘frivolous’’, espe-

cially since the Court did not separately discuss each argu-

ment:

For him [the judge] to claim, ‘‘his arguments about his employment status,

and all his other arguments are frivolous’’, as he did on page 5 ([line] 19),

without even addressing them is disingenuous at best.

We now explain why it is not ‘‘disingenuous’’ (or otherwise

improper) for a court to give short shrift to frivolous argu-

ments.

Discussion

I. Why we usually decline to refute frivolous anti-tax

arguments

The reasons that courts decline ‘‘to refute these [frivolous]

arguments with somber reasoning and copious citation of

precedent’’, Crain v. Commissioner, 737 F.2d at 1417, include

the following.

A. The number of potential frivolous anti-tax arguments is

unlimited.

If one is genuinely seeking the truth, if he focuses on what

is relevant, and if he confines himself to good sense and logic,

then the number of serious arguments he can make on a

given point is limited. However, if one is already committed

to a position regardless of its truth, if he is willing to say

anything, if he is willing to ignore relevance, good sense, and

logic, and if he is simply looking for subjects and predicates

to put together into sentences in ostensible support of a given

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502 136 UNITED STATES TAX COURT REPORTS (498)

point, then the number of frivolous arguments that he can

make on that point is effectively limitless. When each frivo-

lous argument is answered, there is always another, as long

as there are words to be uttered. Such arguments are with-

out number. Consequently, a Court that decides cases

brought by persons willing to make frivolous arguments—

such as ‘‘tax protesters’’ or ‘‘tax defiers’’ 2—would by defini-

tion never be finished with the task of answering those frivo-

lous arguments.

B. A frivolous anti-tax argument may be unimportant even

to its proponent.

Experience shows that a given frivolous argument may

have little actual importance to the person making it. Frivo-

lous anti-tax arguments are often obviously downloaded from

the Internet; and by cut-and-paste word processing functions,

these arguments are easily plunked into a party’s filing. In

other instances a promoter of frivolous anti-tax arguments is

feeding those arguments to a litigant who adopts them

uncritically and submits them to the Court. 3 For all a court

2 Persons who make frivolous anti-tax arguments have sometimes been called ‘‘tax protesters’’.

Section 3707 of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L.

105–206, 112 Stat. 778, provided that ‘‘The officers and employees of the Internal Revenue Serv-

ice * * * shall not designate taxpayers as illegal tax protesters’’, because Congress was ‘‘con-

cerned that taxpayers may be stigmatized’’. S. Rept. 105–174, at 105 (1998), 1998–3 C.B. 537,

641. This prohibition applies only to IRS employees and not to the courts; and we use here the

alternative term ‘‘tax defier’’ for a reason having nothing to do with any supposed stigma at-

tached to being a ‘‘protester’’. Protest of the Government, if undertaken lawfully, is protected

by the First Amendment to our Constitution and is as American as apple pie. In this country

no stigma attaches to being a legitimate ‘‘protester’’. But people who file dishonest ‘‘zero returns’’

or who otherwise try to shirk their civic responsibility, evade their fair share of the tax burden,

waste tax enforcement resources, and clog the courts with pointless lawsuits are simply scoff-

laws. They enjoy the benefits of American security and stability while refusing to shoulder their

portion of the burden. They are not protesters but are defiers.

3 In Mr. Wnuck’s motion for reconsideration, ‘‘Petitioner admits to assistance in the prepara-

tion’’ of his pretrial memorandum. To the same effect, Mr. Wnuck testified—

As I said, I don’t really completely understand how this works. I tried to read the rules of the

court within the capacity that I could.

And I had assistance in creating these pleadings, within, you know, some help, so there are

some issues that are deeper than what I’ve known before and I’m learning. It’s a steep learning

curve in the Internal Revenue world, you know.

THE COURT: The persons that helped you, are they lawyers or accountants?

THE WITNESS: No, sir.

[Tr. at 33–34.]

Of course, there is nothing necessarily sinister about receiving help in preparing court filings.

However, this circumstance does involve the possibility of the off-stage participant’s effectively

practicing law without a license; and where the recommended arguments are frivolous, the pro-

moter of those arguments eludes responsibility while putting the Tax Court litigant at risk for

an exaggerated tax liability and section 6673(a)(1) penalties. That is manifestly the case here.

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(498) WNUCK v. COMMISSIONER 503

can tell, the litigant may not even have carefully read the

arguments he submits.

Petitioners who make frivolous anti-tax arguments are

sometimes intelligent people, but they tend to show great

ignorance about the legal matters they argue. Tax defiers

have learned to admit to the Court (as Mr. Wnuck did) that

they have no legal background or training. The admission is

often manifestly true. However, this admission is evidently

made only to induce the Court to be lenient in overlooking

the pro se litigant’s procedural lapses and to incline the

Court to be liberal in construing his pleadings. The admis-

sion of ignorance does not indicate a willingness to accept

information from someone who does have that background

and training in tax law.

The frivolous argument, made from this position of witting

and willful ignorance, seems to be merely an incidental orna-

ment that adorns an article of faith—namely, the belief that

I don’t owe taxes. The tax defier firmly holds that postulate

above and apart from any arguments. Anything in favor of

that postulate may be advanced, no matter how silly; any-

thing against it can be ignored. If a given frivolous argument

is decisively rebutted, then it may or may not be retired; but

even if the individual argument is retired, the cause is not

abandoned. Thus, the specific argument hardly matters even

to the litigant.

Consequently, the value of answering frivolous anti-tax

arguments—even the subjective value to the individual liti-

gant—is often doubtful.

C. Many frivolous anti-tax arguments have already been

answered.

This Court and other courts have addressed and rejected

many of the recurring frivolous anti-tax arguments, including

(as is especially pertinent here) the general argument that

wages are not subject to the income tax 4 and the particular

However, the Court did warn Mr. Wnuck that his arguments were frivolous; and Mr. Wnuck

even acknowledged the possibility that ‘‘maybe I’ve been lead down [sic] astray by some of these

tax protester gurus. I don’t know. But I haven’t seen anything to upend the theories that I’ve

been reading.’’ Consequently, we hold Mr. Wnuck responsible for the arguments he has persisted

in making.

4 Over 30 years ago, in Reading v. Commissioner, 70 T.C. 730 (1978), affd. 614 F.2d 159 (8th

Cir. 1980), this Court explained the fallacy of the argument that wages are not taxable income.

Continued

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504 136 UNITED STATES TAX COURT REPORTS (498)

argument that the income tax does not apply to wages

earned within the 50 States. 5 Moreover, the IRS publishes

and occasionally updates ‘‘The Truth About Frivolous Tax

Arguments’’, 6 a compendium of frivolous positions and the

caselaw refuting them. That paper collects caselaw

showing—contrary to Mr. Wnuck’s argument—that wages

are indeed subject to the income tax, at 13–18, and that the

income tax does indeed apply within the 50 States, at 26–28.

Anyone with the inclination to do legal research relevant to

the validity of the income tax as applied to wages—even

mere research with an Internet search engine—will confront

such authorities.

Consequently, it is doubtful whether tax jurisprudence will

be much advanced by issuing yet another opinion affirming

the obvious truisms about tax law and refuting Mr. Wnuck’s

already soundly refuted contentions.

D. The litigant who presses the frivolous anti-tax argument

often fails to hear its refutation.

With some happy exceptions, the refutation of a frivolous

anti-tax argument often seems to fall on deaf ears, and the

litigant persists in making the same doomed argument. 7

Since then, arguments that compensation for services is not taxable have been repeatedly and

thoroughly rejected in cases too numerous to mention. Arguments equivalent to those pursued

by Mr. Wnuck have resulted in criminal convictions, e.g., United States v. Sloan, 939 F.2d 499

(7th Cir. 1991); United States v. Collins, 920 F.2d 619 (10th Cir. 1990); civil fraud penalties,

e.g., Rowlee v. Commissioner, 80 T.C. 1111 (1983); Chase v. Commissioner, T.C. Memo. 2004–

142; section 6673 penalties, e.g., Sawukaytis v. Commissioner, T.C. Memo. 2002–156, affd. 102

Fed. Appx. 29 (6th Cir. 2004); and sanctions for frivolous appeals, e.g., Martin v. Commissioner,

756 F.2d 38 (6th Cir. 1985), affg. T.C. Memo. 1983–473; Perkins v. Commissioner, 746 F.2d 1187

(6th Cir. 1984), affg. T.C. Memo. 1983–474.

5 Mr. Wnuck’s argument that the ‘‘United States’’ excludes the States has been rejected in

cases going back 30 years. See Tinnerman v. Commissioner, T.C. Memo. 2010–150 (citing cases).

6 Available at www.irs.gov/pub/irs-utl/friv—tax.pdf. In addition, the IRS publishes and up-

dates, pursuant to section 6702(c), a list of frivolous positions. See Thornberry v. Commissioner,

136 T.C. 356, 368 & n.4 (2011) (citing Notice 2007–30, 2007–1 C.B. 883 (effective for submis-

sions made between Mar. 16, 2007, and Jan. 14, 2008), Notice 2008–14, 2008–1 C.B. 310 (effec-

tive for submissions made between Jan. 15, 2008, and Apr. 7, 2010), and Notice 2010–33, 2010–

17 I.R.B. 609 (effective for submissions made after Apr. 7, 2010)).

7 For example, this Court’s patient and comprehensive explanation (and its imposition of a

$2,500 penalty under section 6673(a)(1)) in Liddane v. Commissioner, T.C. Memo. 1998–259,

affd. per curiam without published opinion 208 F.3d 206 (3d Cir. 2000) (table), 2000–1 U.S.T.C.

(CCH) par. 50,190 (per curiam opinion), did not prevent the taxpayer in that case from repeat-

ing his misguided arguments in a later case. See Liddane v. Commissioner, T.C. Memo. 1999–

330. For recent examples, see Kubon v. Commissioner, T.C. Memo. 2011–41 (imposing a $20,000

penalty under section 6673(a) in light of prior frivolous litigation in Kubon v. Commissioner,

T.C. Memo. 2005–71); Holmes v. Commissioner, T.C. Memo. 2011–31 (imposing a $25,000 pen-

alty under section 6673(a) in light of prior frivolous litigation in Holmes v. Commissioner, T.C.

Memo. 2006–80, Holmes v. Commissioner, T.C. Memo. 2010–42, and Holmes v. Commissioner,

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(498) WNUCK v. COMMISSIONER 505

Sometimes this is because the litigant, though evidently

aware of the reasons that courts have rejected the argu-

ment, 8 is simply stubborn. Sometimes this is because the

litigant seems not to understand either his argument or its

refutation. And sometimes the reason for the litigant’s

behavior remains a mystery.

For example, at trial Mr. Wnuck made his argument, dis-

cussed below, that ‘‘includes’’ (in the definition of ‘‘United

States’’ in section 3121(e)(2)) means ‘‘includes only’’. The

Court addressed Mr. Wnuck directly and explained, ‘‘the defi-

nition that you rely on to make that point is not an income

tax provision. It’s an employment tax provision that really

doesn’t apply to your 1040 income tax return.’’ (Tr. at 65.)

This point evidently did not sink in, because Mr. Wnuck

repeats the argument in his motion for reconsideration. He

does not attempt to correct the Court’s point and explain why

he thinks that the provision is an income tax provision; he

simply repeats the argument.

Consequently, when a litigant is willing in the first

instance to take a position that is frivolous, the chances are

good that he will be unmoved by explanations of why his

position is frivolous. A court that undertakes such expla-

nations is often wasting its time. We now nonetheless make

that undertaking here, regretful that Mr. Wnuck may not

heed the explanation, in order to illustrate what such an

undertaking requires.

E. Many frivolous anti-tax arguments are patently so.

The fallacies of some frivolous arguments are gross and

palpable. All three of the arguments in Mr. Wnuck’s motion

illustrate this point.

T.C. Memo. 2010–50); and Mooney v. Commissioner, T.C. Memo. 2011–35 (imposing a $2,000

penalty under section 6673(a) in light of prior frivolous litigation in Mooney v. Commissioner,

docket No. 21647–06, affd. 309 Fed. Appx. 675 (4th Cir. 2009)).

8 Mr. Wnuck (or whoever composed his arguments) obviously spent enough effort acquainting

himself with tax law materials to be able to give citations (however misguided) of statutes, regu-

lations, and court opinions. But it seems clear that in that effort he must have studiously ig-

nored the available information, see pt. I.C. above, when composing his argument that his wages

are not subject to the income tax. The wealth of information showing that the courts have al-

ways and repeatedly discredited and rejected his argument was evidently of no interest to him.

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506 136 UNITED STATES TAX COURT REPORTS (498)

1. Definition of ‘‘United States’’

To resist paying income tax on his wages, Mr. Wnuck

makes this frivolous argument: He points out that ‘‘wages’’

are remuneration for ‘‘employment’’, see sec. 3121(a), that

‘‘employment’’ means service performed ‘‘within the United

States’’, see sec. 3121(b), and that ‘‘[t]he term ‘United States’

when used in a geographical sense includes the Common-

wealth of Puerto Rico, the Virgin Islands, Guam, and Amer-

ican Samoa’’, sec. 3121(e)(2) (emphasis added). Mr. Wnuck

contends that the term ‘‘United States’’ therefore excludes

everything else (such as the 50 States) and that his services

performed in Pennsylvania (not in Puerto Rico, etc.) were not

performed in the ‘‘United States’’ and therefore did not yield

taxable wages. His argument fails for obvious reasons:

a. ‘‘Includes’’ does not mean ‘‘includes only’’.

Section 7701(c) provides that ‘‘includes’’ ‘‘shall not be

deemed to exclude other things’’. Anyone fluent in English

knows that the word ‘‘includes’’ cannot be assumed to mean

‘‘includes only’’—especially when such a meaning would have

the ludicrous result of excluding from ‘‘United States’’ all 50

States. No tax research at all is necessary to conclude that

Mr. Wnuck’s position is frivolous.

b. The cited statute does not apply.

Moreover, if one goes only a little further and actually

reads the statutes that Mr. Wnuck cites, another fallacy in

his argument becomes obvious: The Code sections he cites

pertain not to income tax but rather to employment taxes

(such as Social Security tax). If his argument made any

sense at all, it could not affect his liability for income tax.

The relevant Code section for income tax is section 61(a),

which does not use the word ‘‘wages’’ (so critical to Mr.

Wnuck’s frivolous argument) but instead imposes tax on ‘‘all

income from whatever source derived’’, including (in sub-

section (a)(1)) ‘‘[c]ompensation for services’’. When Mr.

Wnuck stated, ‘‘I do not dispute that I exchanged my skilled

labor and knowledge for pay’’, he made obvious his liability

for income tax. The error of his position is flagrant.

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(498) WNUCK v. COMMISSIONER 507

c. The cited case contradicts the argument.

Both at trial and in his motion for reconsideration, Mr.

Wnuck aggressively misconstrued Supreme Court precedent.

He attempts to buttress his interpretation of ‘‘includes’’ with

a citation of Helvering v. Morgan’s Inc., 293 U.S. 121, 125 n.1

(1934), which states that ‘‘the verb ‘includes’ imports a gen-

eral class’’. Mr. Wnuck evidently construes this phrase to

suggest that ‘‘includes’’ means or defines an entire and exclu-

sive class of things. This construction is exactly wrong and

cannot survive a reading of the entire sentence from which

this phrase is lifted. In fact, Morgan’s contrasts the verb

‘‘includes’’ with the verb ‘‘means’’ and states: ‘‘where ‘means’

is employed [in a statutory definition], the term and its defi-

nition are to be interchangeable equivalents, and * * * the

verb ‘includes’ imports a general class, some of whose par-

ticular instances are those specified in the definition.’’ Id.

(emphasis added). That is, the Supreme Court expressly

indicates that ‘‘includes’’ is non-exclusive, since it is used

where only ‘‘some’’ of the members of the ‘‘general class’’ are

specified. If section 3121(e)(2) said that United States

‘‘means’’ non-State territories, then it would be congruent

with Mr. Wnuck’s argument; but in fact the statute employs

the alternative word—‘‘includes’’—so that it indicates that

‘‘United States’’ comprises a general class of instances only

some of which are the non-State territories (and the others

of which are obviously the 50 States). The Morgan’s opinion

is authority against Mr. Wnuck’s position, and his citation of

it as if it were support for his position is frivolous.

2. 27 C.F.R.

Mr. Wnuck’s motion for reconsideration makes the fol-

lowing argument, which cites title 27 of the Code of Federal

Regulations (‘‘C.F.R.’’):

Judge Gustafson also, in his opinion, ignored the Petitioner’s argument

that the enforcement regulations for 26 USC section 6020, substitute for

returns, appear under 27 CFR Part 53 & 70 which relate to Alcohol,

Tobacco, Firearms and explosives, not income or employment taxes. USC

Title 26 sections 6651, 6201 and 6203 among others that may have been

applied in this case also have enforcement regulations under CFR 27. The

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508 136 UNITED STATES TAX COURT REPORTS (498)

Petitioner informed Judge Gustafson that he had never engaged in any

regulated activity such as alcohol, tobacco, firearms or explosives.[9]

The background to this all-but-meaningless contention is

this:

Mr. Wnuck submitted a Form 1040, U.S. Individual

Income Tax Return, that reported the amount of his wages

as zero. The IRS did not treat the document as a tax return

but instead prepared a so-called ‘‘substitute for return’’

(‘‘SFR’’). It did so pursuant to section 6020(b), which provides:

(1) AUTHORITY OF SECRETARY TO EXECUTE RETURN.—If any person fails

to make any return required by any internal revenue law or regulation

made thereunder at the time prescribed therefor, or makes, willfully or

otherwise, a false or fraudulent return, the Secretary shall make such

return from his own knowledge and from such information as he can

obtain through testimony or otherwise.

(2) STATUS OF RETURNS.—Any return so made and subscribed by the Sec-

retary shall be prima facie good and sufficient for all legal purposes.

By statute, it is the Secretary of the Treasury to whom this

authority is given in the first instance; and the Secretary has

authorized the Internal Revenue Service to execute SFRs by

means of section 301.6020–1(b)(1) of the Procedure and

Administration Regulations, that are codified in title 26 of

the Code of Federal Regulations.

Mr. Wnuck’s attention, however, has been called to other

provisions—found in 27 C.F.R.—that also pertain to SFRs.

Section 4181 of the Internal Revenue Code imposes a tax on

firearms, and title 27 of the C.F.R. contains the regulation by

which the Secretary of the Treasury authorizes not the IRS

but the Alcohol and Tobacco Tax and Trade Bureau (‘‘the

TTB’’) to execute an SFR pertaining to the firearms tax. See

27 C.F.R. sec. 70.42(b)(1) (2010). Mr. Wnuck evidently claims

that, because he has not sold firearms, an SFR cannot be pre-

pared for him.

9 Mr. Wnuck’s argument is similar to the ‘‘meritless’’ argument rebutted in United States v.

Cochrane, 985 F.2d 1027, 1031 (9th Cir. 1993) (the defendant ‘‘argues that the indictment mere-

ly informed him he had violated 26 U.S.C. § 7206; that the Code of Federal Regulations provi-

sions dealing with the enforcement of section 7206 concern the Bureau of Alcohol, Tobacco and

Firearms (BATF); and that since he had never dealt in anything relating to those matters, ‘he

was at a loss to see how any of his conduct would come under BATF, or be chargeable under

a provision of law administered by BATF’ ’’). The court observed that ‘‘Nothing in that section

[7206] limits its applicability to the internal revenue laws concerning alcohol, tobacco and fire-

arms, or even suggests that they are its primary focus. Under a reasonable construction of the

statute, a person of ordinary intelligence could understand that it criminalizes lying on any form

or document filed with the IRS.’’ Id.

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(498) WNUCK v. COMMISSIONER 509

Whether he realizes it or not, Mr. Wnuck is contending

that, because there is a regulation in 27 C.F.R. providing for

the TTB to prepare substitutes for firearms tax returns,

therefore the IRS may not prepare substitutes for income tax

returns, despite explicit authorization for income tax SFRs in

26 C.F.R. Perhaps this argument arises from simple

ignorance about the existence of 26 C.F.R. section 301.6020–

1(b)(2). That regulation does indeed exist (in 26 C.F.R.), and

it gave the IRS the necessary authority to prepare Mr.

Wnuck’s SFR.

Mr. Wnuck’s eye fell on a provision in 27 C.F.R., however,

and from that provision he concocted an imaginary rule that

he pretended would eliminate his tax liability. But the exist-

ence of an additional (and unrelated) regulation in 27 C.F.R.

has no implications whatsoever for this case. He had no rea-

son to suppose that that provision was relevant here, and he

had no reason to infer from that provision any rule that

could have the effect he suggested. His argument is patently

frivolous. 10

3. Alleged errors in Individual Master File

Mr. Wnuck’s third patently frivolous argument is based

on—

errors that appear in the Individual Master File that the Internal Revenue

Service maintains on him. These errors include but are not limited to, use

of the Petitioner’s social security number by two individuals, listing the

Petitioner as a small business entity with gross receipts of fewer than ten

million dollars instead of an individual human being and the fact that no

code entry for the substitute for return created for this case on the pre-

scribed date, August 10, 2009, exists.

Mr. Wnuck admitted his receipt of the earnings that give rise

to the deficiency that the IRS determined. Our inquiry ends

there. If the IRS’s records reflect errors of the sort he alleges,

they do not affect the outcome of this case. He does not allege

that any other individual’s income has been attributed to

him; the deficiency was determined on the basis of his being

10 Moreover, even if the SFR that the IRS prepared had been somehow invalid, Mr. Wnuck’s

tax liability would not be affected by it, since the IRS is not required to prepare an SFR but

may simply issue a statutory notice of deficiency pusuant to section 6212(a). See Hartman v.

Commissioner, 65 T.C. 542, 546 (1975); Tinnerman v. Commissioner, T.C. Memo. 2010–150

(‘‘Neither a return nor a substitute for return is a prerequisite to a notice of deficiency’’) (citing,

inter alia, Schiff v. United States, 919 F.2d 830, 832–833 (2d Cir. 1990), and Roat v. Commis-

sioner, 847 F.2d 1379, 1381–1382 (9th Cir. 1988)).

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510 136 UNITED STATES TAX COURT REPORTS (498)

an individual, not a corporation or any other entity; and the

existence or non-existence of the SFR does not affect the fact

or the amount of his liability. He ‘‘file[d] a petition with the

Tax Court for a redetermination of the deficiency’’, pursuant

to section 6213(a). He did not file a suit for mandamus to cor-

rect the agency’s records—and the Tax Court would have no

jurisdiction to entertain such a suit. See Larsen v. Commis-

sioner, T.C. Memo. 2008–170. His argument about supposed

errors in the IRS’s records has no bearing here and is frivo-

lous.

Where, as here, the fallacies in a position are obvious, it

is doubtful whether any advantage results from stating the

obvious. But having nonetheless undertaken to do so, we can

now show disadvantages that may result from this effort.

F. Addressing frivolous anti-tax arguments wastes

resources.

The time and money that are spent in addressing a frivo-

lous position can be considerable. For example, the Court’s

discussions of Mr. Wnuck’s three arguments (in part I.C.

above) did not write themselves but required time to

research and write. Admittedly, the research was not heavy

intellectual lifting, but it did take time. Chaos can be spread

quickly and easily; imposing order takes time and effort.

For instance, Mr. Wnuck assailed an SFR issued pursuant

to section 6020(b) by simply inserting into his brief a para-

graph citing ‘‘27 CFR Part 53 & 70’’; but responding to that

argument (see part I.E.2. above) was not so easy, even if the

ultimate answer was obvious from the start. To actually

address the frivolous argument, even if only summarily,

required finding the particular regulations (none of which

were cited by Mr. Wnuck) and explaining the applicability of

section 6020(b) to both firearms tax and income tax, pursu-

ant to both 26 C.F.R. section 301.6020–1(b)(1) and 27 C.F.R.

section 70.42(b)(1). Or to choose another instance, Mr.

Wnuck’s argument citing Helvering v. Morgan’s, Inc., 293

U.S. 121 (1934), is obviously frivolous upon first reading; one

never wondered whether Morgan’s might have the signifi-

cance that Mr. Wnuck asserted; but to answer Mr. Wnuck’s

argument (see part I.E.1.c. above) required finding, reading,

and understanding the Morgan’s opinion and then composing

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(498) WNUCK v. COMMISSIONER 511

an explanation of just how badly Mr. Wnuck had misunder-

stood it.

Moreover, not only the authoring Judge’s time is involved

in producing an opinion. To prepare a Tax Court opinion for

public release requires substantial work by law clerks, cler-

ical staff, and the Office of the Reporter of Decisions, as well

as other Judges. 11 A Tax Court opinion is thus the product

of considerable institutional effort.

The substantial effort expended to produce a Tax Court

opinion is well spent, even in a small case and even where

the outcome is clear, if the contentions being adjudicated are

made seriously and in good faith. Taxpayers with disputes

both large and small need to know that their good-faith dis-

agreements with the tax collector will get serious attention

from this Court. However, the peddlers of frivolous anti-tax

positions and their clients who file petitions advancing those

positions should not be allowed to divert and drain away

resources that ought to be devoted to bona fide disputes. If

frivolous positions were to bog down the operations of this

Court, the resulting disadvantage would accrue not mainly to

the Court itself but rather to litigants with legitimate issues

and to the public generally. To responsibly manage its

resources, the Court should therefore not address every frivo-

lous argument.

G. The time taken to address frivolous anti-tax arguments

delays the assessment of tax.

The IRS is charged with the responsibility of assessing tax

against taxpayers. Sec. 6201. When the IRS proposes to

assess a deficiency in income tax, the taxpayer may file a

petition asking the Tax Court to redetermine the deficiency;

and the mere filing of the petition—even if it is a frivolous

petition—has the effect of delaying the assessment of the tax

until after the case has been decided by the Tax Court. Sec.

6213(a). When the assessment is delayed, the collection of

the tax is likewise delayed. 12 Where the petition is frivolous,

there is no good reason for delay, and that assessment ought

to occur as promptly as possible. Any time that the Court

11 See sec. 7460(b); Cohen, ‘‘How to Read Tax Court Opinions’’, 2000 Hous. Bus. & Tax L.J.

1, available at www.hbtlj.org/v01/v01—cohen.pdf.

12 See secs. 6321 (lien arises upon demand), 6331(a) (levy follows notice and demand), 6303

(notice and demand follows assessment).

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512 136 UNITED STATES TAX COURT REPORTS (498)

spends in preparing and issuing an opinion results in an

unfortunate delay.

H. Addressing frivolous anti-tax arguments risks dignifying

them.

The oft-cited opinion in Crain v. Commissioner, 737 F.2d

at 1417, observes that one reason not to refute frivolous

arguments is that ‘‘to do so might suggest that these argu-

ments have some colorable merit.’’ The observation is cer-

tainly valid. It is this Court’s experience that taxpayers who

take frivolous positions often have learned those positions

from self-appointed anti-tax gurus with prepackaged pseudo-

legal arguments that include inapposite citations from such

sources as the Federal Register, inapplicable State and Fed-

eral statutes, court opinions taken out of context, and the

Internal Revenue Manual (IRM). Some taxpayers seem to

understand their frivolous arguments imperfectly, if at all,

and seem not to understand the nature of the authorities

they cite. 13 If, as it seems, such a taxpayer has been per-

suaded of these positions by the mere presence of legalese,

then it is entirely possible (as Crain anticipated) that a

serious discussion of a frivolous position will seem to him to

confer respectability on that position.

For example, when we take five paragraphs (in part I.E.2.

above) to explain why 27 C.F.R. section 70.42(b)(1) has no

effect on the validity of an income tax SFR, we incur a risk:

A legally unsophisticated taxpayer may wrongly infer that, if

it took that much reasoning and writing to defeat the argu-

ment, then the argument must have had something going for

it. The inference would be wrong, of course. Mr. Wnuck’s 27

C.F.R. argument is hardly a legal argument at all; and all

that is there is manifestly wrong for multiple reasons. But

13 For example, Mr. Wnuck’s motion for reconsideration cites the Supreme Court’s opinion in

Helvering v. Morgan’s, Inc., 293 U.S. 121 (1934) (which we discussed in part I.E.1.c. above); and

then, as if to demonstrate the authority of Supreme Court precedent, he argues, ‘‘The Internal

Revenue Manual clearly states that the Internal Revenue Service must rely on and abide by

the decisions of the Supreme Court’’ (citing IRM pt. 4.10.7.2.9.8 (May 14, 1999) (‘‘Importance

of Court Decisions’’). Of course, the truism that Supreme Court opinions are binding precedent

in tax matters is hardly bolstered by the repetition of that truism in the IRM. Cf. First Fed.

Sav. & Loan Association of Pittsburgh v. Goldman, 644 F. Supp. 101, 103 (W.D. Pa. 1986) (‘‘The

procedures set forth in the IRM do not have the effect of a rule of law and, therefore, are not

binding upon the IRS. The manual is not promulgated pursuant to any mandate or delegation

of authority by Congress. * * * Moreover, the provisions in the IRM are directory rather than

mandatory. * * * We conclude that the pertinent procedures of the IRM are not binding upon

the IRS and convey no rights to taxpayers’’).

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(498) WNUCK v. COMMISSIONER 513

since the actual substance of the frivolous anti-tax issue

often seems to elude the litigant, and since all that affects

him is the superficial appearance of legal matter, an expla-

nation of why his argument is wrong may even be counter-

productive. Perversely, the seriousness of the refutation

becomes, in his mind, imputed to the frivolous argument

itself. This is sometimes a good reason not to address frivo-

lous arguments.

There is thus little advantage to be gained by addressing

frivolous arguments, and there are disadvantages that may

accrue from doing so. For that reason, litigants who present

frivolous arguments should not expect to see them answered

in opinions of this Court.

II. Why we increase Mr. Wnuck’s penalty under section

6673(a)(1)

As we noted above (in part I.G.), the mere filing of a peti-

tion in this Court has the effect of delaying the assessment

until the case has been decided. Sec. 6213(a). This creates an

opportunity for a cynical taxpayer to file a petition, even if

he has no good-faith basis for doing so, in order to put off the

inevitable assessment of tax against him. To deter this

abuse, Congress enacted section 6673(a)(1), which provides:

(1) PROCEDURES INSTITUTED PRIMARILY FOR DELAY, ETC.—Whenever it

appears to the Tax Court that—

(A) proceedings before it have been instituted or maintained by the

taxpayer primarily for delay,

(B) the taxpayer’s position in such proceeding is frivolous or ground-

less, or

(C) the taxpayer unreasonably failed to pursue available administra-

tive remedies,

the Tax Court, in its decision, may require the taxpayer to pay to the

United States a penalty not in excess of $25,000.

This Court is thus authorized under section 6673(a)(1) to

impose a penalty not in excess of $25,000 when the tax-

payer’s position is frivolous 14 or groundless or when it

14 A position maintained by the taxpayer is ‘‘frivolous’’ where it is ‘‘contrary to established law

and unsupported by a reasoned, colorable argument for change in the law.’’ Coleman v. Commis-

sioner, 791 F.2d 68, 71 (7th Cir. 1986); see also Hansen v. Commissioner, 820 F.2d 1464, 1470

(9th Cir. 1987) (sec. 6673 penalty upheld because taxpayer should have known claim was frivo-

lous).

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514 136 UNITED STATES TAX COURT REPORTS (498)

appears that proceedings before it have been instituted or

maintained by the taxpayer primarily for delay.

Mr. Wnuck advanced frivolous arguments, as we have

shown. Both during Mr. Wnuck’s trial and in the bench

opinion served several days later, the Court clearly stated to

Mr. Wnuck that it found his positions not just unavailing but

frivolous. For that reason the Court, in its original decision,

imposed on Mr. Wnuck a $1,000 penalty pursuant to section

6673(a); and the Court warned him of steeper penalties to

follow if he persisted.

Mr. Wnuck disregarded that explicit warning when he filed

his subsequent motion for reconsideration. That motion made

clear that Mr. Wnuck did not have new points to make; he

simply repeated the arguments that had already been ruled

frivolous and suggested that the Court should have

addressed those arguments in more detail in an opinion. He

had to know that his motion was foredoomed, but there was

a reason (i.e., an improper reason) for him to file the motion

nonetheless:

By the interaction of the applicable rules (i.e., Rules 162

and 190(a) of the Tax Court Rules of Practice and Procedure,

rule 13(a)(2) of the Federal Rules of Appellate Procedure, and

sections 6213(a), 7481(a)(1), and 7485(a)), Mr. Wnuck’s filing

a motion to vacate had the effect of delaying his deadline for

filing a notice of appeal and thereby delaying the date on

which the IRS could assess the tax deficiency that it had

determined and that this Court had upheld. Mr. Wnuck

thereby required the Court to act on his case again, with the

case remaining in limbo until that repetitive action is taken.

Mr. Wnuck’s recent motion to vacate therefore was filed

‘‘primarily for delay’’, see sec. 6673(a)(1)(A), and was ‘‘frivo-

lous’’, see sec. 6673(a)(1)(B). It is apparent that the Court’s

prior warnings and the original $1,000 penalty were not

sufficient to deter Mr. Wnuck from maintaining frivolous

positions. We will therefore increase the penalty to $5,000, in

the hope that the greater penalty will have the effect of

deterring further frivolous litigation. Mr. Wnuck is again

warned that, if in the future he maintains frivolous litiga-

tion, he is at risk of a penalty as high as $25,000.

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(498) WNUCK v. COMMISSIONER 515

To reflect the foregoing,

An appropriate order and decision will be entered.

f

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