                                T.C. Memo. 2017-199



                          UNITED STATES TAX COURT



                   JOHN V. HAWKBEY, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 21099-16.                           Filed October 10, 2017.



      John V. Hawkbey, pro se.

      Brian S. Jones and Ina Susan Weiner, for respondent.



                            MEMORANDUM OPINION


      LAUBER, Judge: The Internal Revenue Service (IRS or respondent) deter-

mined a deficiency of $4,914 in petitioner’s Federal income tax for 2014. In an

effort to generate a refund for that year, petitioner claimed a fictitious loss deduc-

tion on Schedule C, Profit or Loss From Business, based on his contention that he

is exempt from Federal income tax under the Emancipation Proclamation of 1862.
                                          -2-

[*2] Respondent has moved for summary judgment. Finding no material facts in

dispute and concluding that petitioner’s contentions are frivolous, we will grant re-

spondent’s motion for summary judgment and sustain the deficiency.

                                       Background

      The following facts are derived from the parties’ pleadings and motion pa-

pers, including the attached declarations and exhibits. Petitioner resided in Penn-

sylvania when he filed his petition.

      Petitioner timely filed for 2014 a Form 1040, U.S. Individual Income Tax

Return, reporting wages of $468 and taxable pension distributions of $28,484. He

reported that he had received Social Security benefits of $21,829 but claimed that

the “taxable amount” of these benefits was zero.

      Petitioner included with his return a Schedule C for a business purportedly

engaged in “marketing, investing, historical research and development.” He re-

ported gross receipts of $76 and cost of goods sold of $297,000,745. The princi-

pal inputs to his “cost of goods sold” were “cost of labor,” “materials and sup-

plies,” and “other costs,” each in the amount of $98,999,999. He reported zero

expenses for his purported business.

      Petitioner claimed a Schedule C loss deduction of $297,000,669 and re-

ported adjusted gross income of ($296,971,717) and tax of zero on line 56. He
                                         -3-

[*3] reported Federal income tax withheld of $1,655 and total tax liability of $36

(attributable to uncollected Social Security tax on tips reported on line 62). He

accordingly requested a refund of $1,619.

      Petitioner attached to his Form 1040 a letter to the IRS demanding “emer-

gency restoration of tax exempt status.” He based his demand for tax-exempt sta-

tus on President Lincoln’s Emancipation Proclamation of September 22, 1862. He

asserted that the IRS had improperly revoked his tax-exempt status in 1984, noting

that he had thereafter been convicted on four counts of tax evasion after a jury trial

in the U.S. District Court for the Eastern District of Pennsylvania.

      On April 15, 2016, the IRS sent petitioner a Letter 525, noting that it was

examining his 2014 return and “needed information from * * * [him].” This letter

explained that the IRS proposed to disallow his claimed Schedule C loss deduction

in its entirety and treat $18,778 of his reported Social Security benefits as taxable.

Petitioner replied to this communication by letter dated June 9, 2016, enclosing a

package of documents that he “request[ed] to be included in your evaluation of my

2014 tax return.” These documents do not substantiate any cost of goods sold for

any Schedule C business.

      On June 29, 2016, the IRS sent petitioner a timely notice of deficiency for

2014. On the basis of the adjustments set forth above, the notice determined a cor-
                                        -4-

[*4] rected tax liability of $4,950, “total tax shown on return” of $36, and a

deficiency of $4,914.

       Petitioner timely petitioned this Court. He did not allege that the IRS had

erred in treating $18,778 of his reported Social Security benefits as taxable, other

than to assert that he was tax exempt under the Emancipation Proclamation. He

alleged as error the disallowance of his Schedule C loss deduction, asserting that

the documents he had sent the IRS on June 9, 2016, were sufficient to substantiate

a loss large enough to eliminate any taxable income.

      On July 26, 2017, respondent filed a motion for summary judgment accom-

panied by a declaration under penalties of perjury by respondent’s counsel. Re-

spondent’s counsel averred that in a meeting with petitioner on June 6, 2017, peti-

tioner admitted that he had not incurred any actual expenses for cost of goods sold

in 2014. Rather, petitioner stated that the $297,000,745 he reported as cost of

goods sold reflected his estimate of the value of the time he spent during 2014 on

“research and marketing” for which he believed he should be compensated.

      On August 31, 2017, petitioner filed a 59-page response to the motion for

summary judgment and a 31-page declaration in support of that response. No-

where in these documents does petitioner allege that he engaged in an actual trade

or business during 2014, that he incurred any costs of goods sold in connection
                                        -5-

[*5] with any business, or that he incurred any expenses deductible under section

162(a).1

      Neither in his response to the summary judgment motion nor in his declara-

tion does petitioner controvert the averments of respondent’s counsel concerning

the admissions he made during their June 6 meeting. To the contrary: He avers in

his declaration that he “claimed a Schedule C loss in the amount of $297,000,669

due to a delay in payments requested by petitioner in the form of tax exemption

from respondent.” He asserts that he was entitled to tax exemption because of his

efforts “to fulfill the actual freedom of petitioner, Moroccan Americans, and per-

sons of African descent,” which included his “historical research development that

produce[d] his job creation and restoration plan” pursuant to “paragraphs two and

three of the September 22, 1862, Emancipation Proclamation.”

                                    Discussion

A.    Summary Judgment Standard

      The purpose of summary judgment is to expedite litigation and avoid costly,

time-consuming, and unnecessary trials. Fla. Peach Corp. v. Commissioner, 90

T.C. 678, 681 (1988). Under Rule 121(b) the Court may grant summary judgment

      1
       All statutory references are to the Internal Revenue Code in effect for the
year in issue, and all Rule references are to the Tax Court Rules of Practice and
Procedure. We round all monetary amounts to the nearest dollar.
                                        -6-

[*6] when there is no genuine dispute as to any material fact and a decision may

be rendered as a matter of law. Sundstrand Corp. v. Commissioner, 98 T.C. 518,

520 (1992), aff’d, 17 F.3d 965 (7th Cir. 1994). In deciding whether to grant

summary judgment we construe factual materials and inferences drawn from them

in the light most favorable to the nonmoving party. Ibid. However, the

nonmoving party “may not rest upon the mere allegations or denials” of his

pleadings but instead “must set forth specific facts showing that there is a genuine

dispute for trial.” Rule 121(d); see Sundstrand Corp., 98 T.C. at 520.

      Petitioner has set forth no facts showing that there is a genuine dispute for

trial. He admits that he received Social Security benefits of $21,829 during 2014,

and he does not dispute that $18,778 of these benefits was taxable unless immu-

nized from taxation under the Emancipation Proclamation. And he has alleged no

facts to suggest that he engaged in a Schedule C business or that he incurred any

costs in connection with such a business. We conclude that there are no material

facts in dispute and that this case is appropriate for summary adjudication.

B.    Analysis

      Section 162(a) permits a taxpayer to deduct “ordinary and necessary” ex-

penses paid or incurred in carrying on any “trade or business.” Petitioner has ad-

mitted that he did not carry on a trade or business for profit during 2014 and that
                                        -7-

[*7] he did not incur any costs of goods sold or other expense in connection with

any business. Rather, he admits in his declaration that the $297,000,669 loss

deduction he claimed on his Schedule C was attributable entirely “to a delay in

payments requested by petitioner in the form of tax exemption from respondent.”

      It is unclear whether petitioner is contending that he is personally entitled to

reparations from the Government of $297,000,745 or that this figure represents the

value of services that he performed during 2014 in an effort to secure reparations

for others. In either event his contentions are frivolous as a matter of law, and

they cannot substantiate a Schedule C net operating loss. See Wilkins v. Commis-

sioner, 120 T.C. 109, 112-113 (2003) (“The Internal Revenue Code simply does

not provide a tax deduction, credit, or other allowance for slavery reparations.”);

Hyler v. Commissioner, T.C. Memo. 2005-26.

      His contention that the Emancipation Proclamation immunizes his wages,

pension distributions, and/or Social Security benefits from taxation is completely

without merit. See Pelletier v. Commissioner, T.C. Memo. 1997-391, 74 T.C.M.

(CCH) 412, 414 (rejecting claim for tax exemption based on the theory that “[t]he

Emancipation Proclamation * * * guarantees to every person the sanctity of his

own labor”). We note that petitioner’s argument for exemption has been made

numerous times by other members of the Moorish Science Temple to which he
                                        -8-

[*8] claims to belong. See, e.g., Habersham-Bey v. Commissioner, 78 T.C. 304

(1982); Ezekunu-Bey v. Commissioner, T.C. Memo. 1984-96; Cherry-El v. Com-

missioner, T.C. Memo. 1982-404; Bratton-Bey v. Commissioner, T.C. Memo.

1982-19, aff’d without published opinion, 698 F.2d 830 (4th Cir. 1982); Wiggins-

El v. Commissioner, T.C. Memo. 1981-495; Gaines-El v. Commissioner, T.C.

Memo. 1975-54. We accordingly sustain respondent’s determination that

petitioner during 2014 received taxable Social Security benefits of $18,778 and

that he is not entitled to any Schedule C loss deduction.

C.    Frivolous Position Penalty

      Section 6673(a)(1) authorizes this Court to impose a penalty not in excess

of $25,000 “[w]henever it appears to the Tax Court” that a taxpayer has instituted

or maintained a proceeding “primarily for delay” or has taken a position that is

“frivolous or groundless.” The purpose of section 6673 is to compel taxpayers to

conform their conduct to settled tax principles and to deter the waste of judicial

resources. See Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986); Bruh-

wiler v. Commissioner, T.C. Memo. 2016-18, 111 T.C.M. (CCH) 1071, 1074.

      The positions that petitioner has taken are unquestionably frivolous. But

because this appears to be his first appearance before this Court, we will show
                                      -9-

[*9] leniency and refrain from imposing any penalty now. We are unlikely to be

so generous next time.

      To implement the foregoing,


                                            An appropriate order and decision

                                    will be entered for respondent.
