793 F. 2d 1293 - Ernest Speck v. United States of America

E.D.Mich.

BEFORE: MERRITT and JONES, Circuit Judges, and THOMAS, Senior District Judge.*

Plaintiff appeals the order dismissing his pro se complaint. The case has been referred to a panel of this Court pursuant to Sixth Circuit Rule 9(a). Upon examination of the briefs and the record, the panel agrees unanimously that oral argument is not needed. Rule 34(a), Federal Rules of Appellate Procedure.

Plaintiff filed an income tax return for 1979 that deducted his wages from taxable income, referring to the wages as 'non-taxable receipts.' Attached to the return was a letter explaining plaintiff's position that wages were not taxable income. The Internal Revenue Service (IRS) found the return was frivolous and imposed a $500 penalty under 26 U.S.C. Sec. 6702. Plaintiff paid 15% of the penalty and filed suit for a refund in the district court under 26 U.S.C. Sec. 6703. The complaint alleged that the tax return was not frivolous because wages were not income. The IRS filed a motion to dismiss for failure to state a claim. The district court granted the motion to dismiss on the grounds that wages are income, and therefore a return asserting that wages are non-taxable receipts is frivolous under section 6702. We affirm.

26 U.S.C. Sec. 6702 provides that a civil penalty of $500 shall be imposed upon an individual who files a frivolous tax return. Plaintiff claims that his tax return was not frivolous because wages are non-taxable income, and therefore the penalty was wrongfully imposed. It is well-settled that wages are taxable income. Perkins v. Commissioner of Internal Revenue, 746 F.2d 1187 (6th Cir. 1984). It is clearly a frivolous position to assert otherwise. Id.; accord, Davis v. United States, 742 F.2d 171 (5th Cir. 1984); Holker v. United States, 737 F.2d 751 (8th Cir. 1984). The district court properly dismissed the complaint since plaintiff clearly was subject to the section 6702 penalty for filing a frivolous return.

The IRS has requested an award of costs and attorney's fees on appeal under Federal Rules of Appellate Procedure 38. This Court has recently indicated its disapproval of frivolous appeals in tax protester cases and its intention to impose Rule 38 sanctions. See e.g. Martin v. Commissioner of Internal Revenue, 756 F.2d 38 (6th Cir. 1985); Perkins v. Commissioner of Internal Revenue, supra. We find that the complaint and appeal in this case are frivolous and sanctions are appropriate.

Accordingly, it is ORDERED that the district court's judgment is affirmed. Sixth Circuit Rule 9(d)(3). It is further ORDERED that defendant's request for imposition of double costs and attorney's fees is granted. Federal Rules of Appellate Procedure 38.