                        T.C. Memo. 2005-200



                      UNITED STATES TAX COURT



                 HAROLD A. LANGE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 8704-04.             Filed August 16, 2005.



     Harold A. Lange, pro se.

     Beth A. Nunnink, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     KROUPA, Judge:   Respondent determined a $8,152 deficiency in

petitioner’s Federal income tax for 2002 and determined that

petitioner was liable for a $2,038 addition to tax under section

6651(a)(1)1 for failure to file timely (late filing addition) and


     1
      All section references are to the Internal Revenue Code in
effect for the year at issue, and all Rule references are to the
Tax Court Rules of Practice and Procedure, unless otherwise
indicated. All amounts have been rounded.
                                   - 2 -

a $272 addition to tax under section 6654 for failure to pay

estimated tax (estimated tax addition).      After concessions,2

there are five issues to be decided.

       First, does the document petitioner submitted for 2002

constitute a valid return, and consequently, is petitioner liable

for the late filing addition?      We hold that it does not

constitute a valid return, and therefore petitioner is liable for

the late filing addition.

       Second, are pension distributions and Social Security

benefits petitioner received in 2002 taxable?      We hold that they

are.

       Third, may petitioner claim itemized deductions for 2002 if

petitioner’s wife filed a “married, filing separate” return and

claimed the standard deduction for the same year?      We hold that

he may not.

       Fourth, is petitioner liable for the estimated tax addition

for 2002?    We hold that he is.




       2
      In respondent’s answer, respondent alleged that, because
petitioner’s wife filed a “married, filing separate” return for
2002, petitioner’s filing status for 2002 was also “married,
filing separate,” not “single” status as set forth in the
deficiency notice. The change in filing status increased the
deficiency to $8,663, increased the addition to tax under sec.
6651(a)(1) to $2,165, and increased the addition to tax under
sec. 6654 to $290. Respondent bears the burden as to the
increased amounts. Rule 142(a)(1). Petitioner does not dispute
that his filing status is “married, filing separately.”
Respondent also conceded that $702 from the Trust for the
International Brotherhood of Electrical Workers Pension Benefit
Fund petitioner received in 2002 was not taxable.
                                 - 3 -

     Fifth, shall we impose a penalty under section 6673 against

petitioner?    Because we find petitioner’s arguments to be

frivolous, we shall impose a penalty against petitioner.

                          FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the accompanying exhibits are

incorporated by this reference.    Petitioner resided in

Clarksville, Tennessee, at the time he filed the petition.

     Petitioner was a retired electrical worker in 2002 and

received retirement distributions.       Petitioner received $11,304

from the National Electrical Benefit Fund and $27,183 from the

Electrical Workers Trust Fund.    Each of the Forms 1099-R,

Distributions From Pensions, Annuities, Retirement or Profit-

Sharing Plans, IRAs, Insurance Contracts, etc. (Forms 1099-R),

from the National Electrical Benefit Fund and the Electrical

Workers Trust Fund indicated the full amount of the distribution

was taxable.    The Forms 1099-R also indicated that no Federal

income tax had been withheld from any of the distributions to

petitioner in 2002.

     Petitioner also received $14,388 in Social Security benefits

in 2002.

     Petitioner was married during 2002 to Janice E. Lange.         His

wife timely filed a Federal income tax return for 2002 as

“married, filing separate” status.       She claimed the standard

deduction rather than electing to itemize deductions.       Claiming

the standard deduction reduced her tax liability to zero.
                                - 4 -

     Petitioner sent a document to the Internal Revenue Service

(IRS) in Memphis, Tennessee, on April 14, 2003.   The document

included a Form 1040, U.S. Individual Income Tax Return (Form

1040) for 2002 along with Schedule A, Itemized Deductions,

Schedule EIC, Earned Income Credit, a warning against removing

any documents, a 38-page protest, a 17-page exhibit, and copies

of the Forms 1099-R.

     Petitioner included the pension distributions from the

National Electrical Benefit Fund and from the Electrical Workers

Pension Trust Fund, and reported taxable income of $47,513 on

Form 1040.   He also claimed $11,393 of itemized deductions, a

$600 child tax credit, a $600 earned income credit, and a $1,677

additional child tax credit.    Petitioner reported $1,345 as the

“amount you owe” on line 73 of Form 1040.

     Petitioner signed the Form 1040 without deleting anything

from the jurat but wrote “under protest, without prejudice” in

the space for the spouse’s Social Security number and in the

spouse’s signature line.   Petitioner’s warning against removing

any documents included a note stating that the 38-page protest

document explained what petitioner meant by “under protest,

without prejudice.”

     The 38-page protest included numerous arguments in which

petitioner challenged the authority of the IRS over him and his

obligation to pay income tax.   These arguments include that he is

not an “individual” subject to taxation, that only wages paid by

the Government are subject to taxation, that non-Government
                                - 5 -

employees should not be taxed at the same rate as Government

employees, and that applying tax rates to him is unconstitutional

and constitutes a “crime of extortion and perjury.”     Petitioner

also demanded in the 38-page protest that the IRS answer every

point petitioner raised or be deemed to have admitted each point,

and further, that the IRS could thereafter neither raise a

defense to the contents of the protest document nor claim a tax

liability against petitioner.

     Respondent treated petitioner’s documents as an invalid

return and did not process them.   Based on the Forms 1099-R,

respondent issued a Notice of Deficiency (deficiency notice) to

petitioner on February 27, 2004, determining the deficiency, the

late filing addition, and the estimated tax addition.     Petitioner

timely filed a petition with this Court contesting respondent’s

determinations in the deficiency notice.

     After receiving the deficiency notice, petitioner also sent

a document to the IRS in Ogden, Utah, on May 22, 2004.     This

document included a Form 1040X, Amended U.S. Individual Income

Tax Return (Form 1040X), for 2002 and a 30-page protest.     The 30-

page protest included the same “under protest, without prejudice”

language and the same arguments petitioner included in the 38-

page protest sent to the Memphis Service Center.     The 30-page

protest included due process and equal protection arguments that

the IRS is illegally taxing both private sector workers and

public employees at the same rate.      Petitioner also advanced the

“equal exchange theory” that essentially advocates that the
                               - 6 -

capital value of labor is equal to the value of wages and

therefore wages do not constitute income or create a zero gain.

     We warned petitioner at calendar call in Columbia, Tennessee

(Nashville session) and also during trial that, if he continued

to raise the type of arguments he was advancing, he was at risk

of having a penalty under section 6673 imposed.     He persisted in

advancing these arguments at trial.     The Court again warned

petitioner in a written order dated June 7, 2005, regarding

additional submissions petitioner sent the Court after trial.

                              OPINION

     Petitioner raises the same issues here as he did in docket

No. 7178-03 regarding 2000 on whether what he filed constituted a

valid return, whether the pension distributions and Social

Security benefits he received were taxable, and whether he is

liable for the estimated tax addition.     We issued an opinion on

July 19, 2005, in which we discussed in length all these issues

and petitioner’s arguments.   Lange v. Commissioner, T.C. Memo.

2005-176.   Because these issues in Lange are the same here, our

holdings on these issues apply here.     Take v. Commissioner, T.C.

Memo. 1985-388 (holding in a prior opinion on the same issue

applies to the later year); Frazier v. Commissioner, T.C. Memo.
1979-515 (same), affd. 638 F.2d 63 (8th Cir. 1981).     We briefly

discuss these issues.

     There are two additional issues we must also determine here

that were not raised in Lange.   First, we must decide whether

petitioner may claim itemized deductions if his wife filed a
                                - 7 -

“married, filing separate” return and claimed the standard

deduction.    Second, we must decide whether to impose a penalty

under section 6673 for raising frivolous arguments.     We address

each issue in turn.

Whether Petitioner Filed a Valid Return for 2002
     We begin with whether petitioner filed a valid return for

2002.    The documents that petitioner submitted for 2002 are

nearly identical, apart from the monetary amounts, to the

documents at issue in Lange.    We found that statements qualifying

the jurat and disclaiming liability in general vitiated the

jurat, and therefore no valid return had been filed.    See Lange

v. Commissioner, supra (citing Sloan v. Commissioner, 53 F.3d

799, 800 (7th Cir. 1995), affg. 102 T.C. 137; Williams v.

Commissioner, 114 T.C. 136 (2000); Beard v. Commissioner, 82 T.C.

766, 777 (1984), affd. 793 F.2d 139 (6th Cir. 1986)).    Because

petitioner vitiated the jurat in the same manner with respect to

the documents he submitted for 2002, and based on our holding in

Lange, we conclude that the documents petitioner submitted for

2002 do not constitute a valid return.3   Accordingly, petitioner

is liable for the late filing addition under section 6651(a)(1).4


     3
      Nor do the documents petitioner sent to the Ogden Service
Center on May 22, 2004, after the deficiency notice was issued to
petitioner, constitute a valid return. The Form 1040X had the
same “under protest, without prejudice” language and included the
same arguments petitioner included in the 38-page protest sent to
the Memphis Service Center.
     4
      We further find that petitioner’s frivolous protestations
constitute neither reasonable cause nor lack of willful neglect
for failure to file a return.
                               - 8 -

Pension Distributions

     Next, petitioner claims, as he did in Lange, that the

pension distributions he received in the relevant year are not

taxable on the mistaken belief that he had contributed to the

plan.   Based upon the record, and upon our holding in Lange, we

find that the pension distributions petitioner received in 2002

from the National Electrical Benefit Fund and from the Electrical

Workers Pension Trust Fund are taxable because they were derived

wholly from employer contributions.    Lange v. Commissioner, supra

(citing Ashman v. Commissioner, T.C. Memo. 1998-145, affd. 231

F.3d 541 (9th Cir. 2000); Knight v. Commissioner, T.C. Memo.

1989-219).   We further find no evidence to support petitioner’s

“new” argument that the pension distributions are excludable

under section 104 for personal injuries petitioner allegedly

sustained while he was employed.

Social Security Benefits

     We next address whether the $14,388 of Social Security

benefits petitioner received in 2002 was taxable.   Petitioner

claims, as he did in Lange, that the Social Security benefits he

received were not taxable.   He argues that Social Security

benefits are not taxable because they are a return of what he

earlier contributed to the “United States Trust Fund.”   As in

Lange, we conclude that 85 percent of the amount of Social
Security benefits petitioner received, or $12,230 in 2002, is

taxable.   See sec. 86(a)(2), (c)(1) and (2).
                                - 9 -

Estimated Tax Addition

     Next, we address whether petitioner is liable for the

estimated tax addition under section 6654(a) for failure to pay

estimated tax in 2002.    Respondent asked petitioner at trial

whether he had made any estimated tax payment in 2002, and he

answered that he had not.    In addition, petitioner’s Forms 1099-R

reflected that no amounts were withheld.    The record therefore

establishes that petitioner made no estimated tax payments during

2002, and no exception under section 6654(e) applies.    We

therefore find that petitioner is liable for the estimated tax

addition for 2002.

Whether Petitioner May Itemize Deductions in 2002

     The next issue is whether petitioner is entitled to itemize

deductions he allegedly paid during 2002.    A taxpayer may

generally elect to itemize deductions or claim the standard

deduction.   See sec. 63(b) and (c)(1).   If married individuals

file separately and one spouse elects to itemize deductions, then

the other spouse is not entitled to the standard deduction.      See

sec. 63(c)(6)(A).    Married taxpayers filing separately must be

consistent in their election to itemize deductions.    See Salati
v. Commissioner, T.C. Memo. 1989-192.     Here, petitioner’s wife

timely filed a return for 2002 and claimed the standard

deduction.   We need not address, however, whether petitioner was

entitled to itemize deductions, because he has not filed a valid

return.   Petitioner is therefore ineligible to itemize.   See

Brunner v. Commissioner, T.C. Memo. 2004-187 (taxpayer did not
                              - 10 -

file a tax return and, consequently, did not elect to itemize

deductions), affd. per curiam __ Fed. Appx. ___ (3d Cir., July

21, 2005); Andreas v. Commissioner, T.C. Memo. 1993-551 (section

63 and the relevant regulations do not authorize the election to

itemize deductions unless a return is filed).

Section 6673 Penalty

     We now address whether to impose a penalty against

petitioner pursuant to section 6673, which authorizes the Tax

Court to impose a penalty up to $25,000 on a taxpayer if the

Court finds, among other things, that the taxpayer instituted or

maintained proceedings primarily for delay or that the taxpayer’s

position in such proceedings is frivolous or groundless.   A

taxpayer’s position is frivolous if it is contrary to established

law and unsupported by a reasoned, colorable argument for change

in the law.   See Coleman v. Commissioner, 791 F.2d 68, 71 (7th

Cir. 1986); see also Hansen v. Commissioner, 820 F.2d 1464, 1470

(9th Cir. 1987); Nis Family Trust v. Commissioner, 115 T.C. 523,

544 (2000).

     Petitioner does not here argue for any change in the law.

Instead, petitioner argues that the tax laws do not apply to him.

Petitioner’s arguments are frivolous.   Petitioner deserves a

penalty under section 6673(a)(1), and that penalty should be

substantial, if it is to have the desired deterrent effect.     Cf.

Talmage v. Commissioner, T.C. Memo. 1996-114, affd. without
published opinion 101 F.3d 695 (4th Cir. 1996).   The purpose of

section 6673 is to compel taxpayers to think and to conform their
                              - 11 -

conduct to settled tax principles.     Coleman v. Commissioner,

supra; see also Takaba v. Commissioner, 119 T.C. 285, 295 (2002);

Grasselli v. Commissioner, T.C. Memo. 1994-581.     Section 6673 is

a penalty provision intended to deter and penalize frivolous

claims and positions in proceedings before this Court.     Bagby v.

Commissioner, 102 T.C. 596, 613-614 (1994).

     In this proceeding now before the Court, petitioner asserts

nothing but frivolous and groundless arguments.    We believe that

petitioner will continue to do so unless and until he is sent a

message that his behavior is unacceptable.    Petitioner raised the

same arguments in Lange involving his purported return for 2000.

We advised petitioner then that his arguments were frivolous and

that he risked a section 6673 penalty if he proceeded.    We also

advised petitioner on three occasions in the current proceeding

(at calendar call, at trial, and in a subsequent order) that he

risked incurring a section 6673 penalty if he persisted in

advancing frivolous arguments.   Following one warning that he was

wasting the Court’s time with his frivolous arguments, petitioner

replied:   “I understand what you are saying” but “I don’t

consider it a waste.”   It is apparent from the entire record that

petitioner instituted or maintained this proceeding primarily, if

not exclusively, as a protest against the Federal income tax

system and his proceeding in this Court is merely a continuation

of petitioner’s refusal to acknowledge and satisfy his tax

obligations.   We therefore shall require petitioner to pay a

penalty of $5,000 pursuant to section 6673(a)(1).    In addition,
                             - 12 -

we take this opportunity to admonish petitioner that the Court

will consider imposing a larger penalty if petitioner returns to

the Court and advances similar arguments in the future.

     In reaching our holding, we have considered all arguments

made, and, to the extent not mentioned, we conclude that they are

moot, irrelevant, or without merit.

     To reflect the foregoing,


                                           Decision will be entered

                                      for respondent.
