                        T.C. Memo. 2011-268



                      UNITED STATES TAX COURT



                DAVID ROY CALLIHAN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 14506-10.               Filed November 10, 2011.



     David Roy Callihan, pro se.

     Lynn M. Barrett, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     PARIS, Judge:   Respondent determined a deficiency of $4,105

in petitioner’s Federal income tax for tax year 2007.    Petitioner

timely petitioned the Court for redetermination.

     The principal issue for decision is whether the payments

petitioner received in exchange for services he provided are
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gross income on which taxes should be paid.    Respondent also

seeks a penalty under section 6673.1

                          FINDINGS OF FACT

     Petitioner resided in Florida at the time he filed the

petition.

     During tax year 2007 petitioner worked for the School

District of Desoto County and received $37,640 in wages.

Petitioner also worked for the Sarasota Family YMCA, Inc., and

received $616 in wages.   These amounts were reported to the

Internal Revenue Service (IRS) by each employer on Form W-2, Wage

and Tax Statement.   Petitioner also received a taxable grant from

the State of Florida for $475 that was reported to the IRS by the

State on a Form 1099-G, Certain Government Payments.

     Petitioner timely filed his tax year 2007 return, disputing

the taxable nature of the income received.    On March 1, 2010,

respondent mailed to petitioner a notice of deficiency setting

forth respondent’s determination of a deficiency in petitioner’s

income tax for tax year 2007.   In response, petitioner filed a

timely petition with the Court.2




     1
      All section references are to the Internal Revenue Code in
effect for the year in issue.
     2
      On Sept. 5, 2011, petitioner received a final notice of
intent to levy. This premature collection by levy has been
abated pending the decision in this case.
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                              OPINION

Tax Deficiency

     While petitioner admits that he received the amounts on

which the deficiency is based, he denies that they are taxable as

income.   He alleges 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

“the term ‘United States’ when used in a geographical sense

includes the Commonwealth of Puerto Rico, the Virgin Islands,

Guam, and America Samoa”, sec. 3121(e)(2).   Petitioner contends

that the term “United States” therefore excludes all 50 States

and that his services performed in Florida were not performed in

the “United States” and his earnings from services performed in

Florida are not taxable wages.

     Petitioner’s arguments are without merit and lack factual

and legal foundation, and “we are not obligated to exhaustively

review and rebut petitioner’s misguided contentions.”    See

Sanders v. Commissioner, T.C. Memo. 1997-452.    The contention

that the 50 States are not part of the “United States” is a

thoroughly discredited and frivolous argument.   See United States

v. Collins, 920 F.2d 619, 629 (10th Cir. 1990) (citing Brushaber

v. Union Pac. R.R., 240 U.S. 1, 12-19 (1916)); Rev. Rul. 2006-18,

2006-1 C.B. 743.   Section 3121 pertains to employment taxes (not

Federal income tax) and states to clarify that the “United
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States” does include areas that might not otherwise be thought to

fall within the United States (Puerto Rico, the Virgin Islands,

Guam, and America Samoa).   Sec. 3121(e)(2); Ulloa v.

Commissioner, T.C. Memo. 2010-68.

Section 6673 Penalty

     Respondent has moved for a penalty under section 6673.

Section 6673(a)(1) authorizes this Court to require a taxpayer

who has instituted or maintained a proceeding primarily for

delay, or whose position is frivolous or groundless, to pay a

penalty of up to $25,000 to the United States.   See Nis Family

Trust v. Commissioner, 115 T.C. 523, 544 (2000).   The purpose of

section 6673, like that of section 6702, is to compel taxpayers

to think and to conform their conduct to settled tax principles.

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

     The type of argument petitioner raised, especially that his

wages are not taxable, is the type of argument that has been

deemed by the Court to be frivolous and/or sanctionable under

section 6673.   Petitioner’s continued reliance and insistence on

advancing these arguments waste the Court’s and respondent’s

limited resources, taking time away from taxpayers with

legitimate disputes.   After much consideration, the Court will

deny respondent’s motion to impose a penalty on petitioner.

However, the Court explicitly admonishes petitioner that he may,

in the future, be subject to a penalty under section 6673 for any
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proceedings instituted or maintained primarily for delay or for

any proceedings which are frivolous or groundless.       See Pierson

v. Commissioner, 115 T.C. 576 (2000).

     To reflect the foregoing,


                                              An appropriate order and

                                         decision will be entered.
