                       T.C. Memo. 2010-40



                      UNITED STATES TAX COURT



          JAMES ROBERT AND KATHY MORSE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

         JAMES ROBERT AND KATHY S. MORSE, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 17809-08, 26521-08.      Filed February 25, 2010.



     James Robert and Kathy S. Morse, pro sese.

     Rollin G. Thorley, for respondent.



                        MEMORANDUM OPINION


     GERBER, Judge:   These consolidated cases were submitted

fully stipulated pursuant to Rule 122.1    For petitioners’ 2005


     1
      Unless otherwise indicated, all Rule references are to the
Tax Court Rules of Practice and Procedure, and all section
references are to the Internal Revenue Code in effect for the
                                                   (continued...)
                                    - 2 -

and 2006 tax years respondent determined the following income tax

deficiencies and an accuracy-related penalty:

                                                Accuracy-
                                              Related Penalty
          Year         Deficiency                Sec. 6662

          2005          $3,511                   $702.20
          2006           1,761                     -0-

The deficiencies are attributable to petitioners’ failure to

report income.     The questions for our consideration are whether

petitioners’ income from wages is taxable for both years and

whether they are liable for an accuracy-related penalty for 2005.

                                 Background

     Petitioners James Robert Morse (petitioner) and Kathy S.

Morse (Mrs. Morse) were residents of Arizona at the time their

petitions were filed.    Mrs. Morse died on December 18, 2008,

after the filing of the petitions.2

     For 2005 petitioners timely filed a joint Form 1040, U.S.

Individual Income Tax Return, reflecting zero gross and zero

adjusted gross income and claiming a $3.02 overpayment of

withholding tax.    Respondent applied the $3.02 overpayment to

petitioners’ outstanding 2002 income tax liability.             On their


     1
      (...continued)
years at issue.
     2
      Respondent has moved, with respect to both cases, to
dismiss Mrs. Morse for failure to prosecute as no representative
of her estate has come forward to pursue this proceeding.
Respondent’s motions to dismiss will be granted.
                                - 3 -

2005 income tax return, petitioners reported $29,500.59 and

$14,833.05 as wages solely for purposes of Social Security and

Medicare along with an explanation as to why said wages were not

taxable as income.

       For 2006 petitioners timely filed a joint Form 1040EZ,

Income Tax Return for Single and Joint Filers With No Dependents,

reporting $4,225 of adjusted gross income from unemployment

compensation and claiming a $2,287.39 overpayment of withholding

tax.    Respondent applied $2,148.86 of the $2,287.39 to

petitioners’ outstanding income tax liability for 2003 and the

remaining $138.53 to petitioners’ outstanding income tax

liability for 2004.    On their 2006 return petitioners reported

wages solely for Social Security and Medicare purposes but not as

gross income.

       Subsequently, respondent, on January 25, 2008, sent

petitioners letters advising that their 2005 and 2006 income tax

returns contained reporting positions that are considered to be

“Frivolous Tax Submissions” and that they might be subject to a

penalty under section 6702.    Those same letters provided

petitioners with an opportunity to correct their 2005 and 2006

returns.    In responses dated February 27, 2008, petitioner

advised respondent that his returns were correct and that his

position was fully explained therein.    In addition, petitioner

posed numerous questions as to why respondent considered his tax
                                - 4 -

reporting position to be “frivolous”.     Subsequently, respondent

assessed a $500 penalty against petitioner and against Mrs. Morse

under section 6702.   Petitioners did not pay the $500 penalties,

and respondent proceeded to pursue collection activity.

     Thereafter respondent verified the existence of petitioners’

wages and advised petitioners of the intention to determine

income tax deficiencies.   Petitioners retorted that respondent

had no right to change their 2005 and 2006 returns.    Respondent

issued notices of deficiency for the tax years 2005 and 2006 on

September 17 and May 5, 2008, respectively, from which

petitioners petitioned this Court.

                             Discussion

     Petitioner admits that petitioners received “wages” during

2005 and 2006 but argues that those wages are not taxable.3

Petitioner’s argument is familiar to this and other courts and

has been soundly rejected on numerous occasions.     Petitioner, in

an attempt to construct an argument, begins with definitions of

the terms “includes” and “including” and some general principles

of statutory construction.   He then defines certain terms, such

as “United States”, “employee”, and related terms.     Finally, he

refers the Court to section 3401(c), which concerns withholding

of tax from wages.    By citing, out of context, selected text from

     3
      Petitioner also made arguments concerning the sec. 6702
penalties that had been assessed, but this Court is without
jurisdiction to address the merits of that assessment.
                               - 5 -

the withholding tax provisions, petitioner concludes that only

residents of the District of Columbia and Federal employees are

subject to the Federal income tax on their wages.   Petitioner’s

position is without substance and has been rejected on numerous

occasions by this and other courts.

     By selectively analyzing statutes out of context, petitioner

has reached the conclusion that petitioners’ wages received for

2005 and 2006 do not constitute taxable income.   Petitioner has

followed in the footsteps of numerous others who have

unsuccessfully attempted to find a way to avoid paying Federal

income tax.   We find petitioner’s arguments to be wholly without

merit and not worthy of further analysis.   For example, it has

been explained that “Compensation for labor or services, paid in

the form of wages or salary, has been universally, held by the

courts of this republic to be income, subject to the income tax

laws currently applicable.”   United States v. Romero, 640 F.2d

1014, 1016 (9th Cir. 1981); see Funk v. Commissioner, 687 F.2d

264 (8th Cir. 1982), affg. per curiam T.C. Memo. 1981-506;

Broughton v. United States, 632 F.2d 706, 707 (8th Cir. 1980);

Hayward v. Day, 619 F.2d 716, 717 (8th Cir. 1980); Rowlee v.

Commissioner, 80 T.C. 1111, 1120 (1983).    Moreover, we are not

obligated to exhaustively review and/or rebut petitioner’s

misguided contentions.   Crain v. Commissioner, 737 F.2d 1417 (5th

Cir. 1984).
                                - 6 -

     We accordingly hold that petitioners’ wage income is subject

to the income tax and that respondent did not err in determining

income tax deficiencies against petitioners.

     Finally, we consider whether petitioners are liable for an

accuracy-related penalty under section 6662.   Section 6662(a) and

(b)(1) and (2) imposes an accuracy-related penalty of 20 percent

on the portion of an underpayment attributable to negligence or

disregard of rules or regulations, or to a substantial

understatement of income tax.   An understatement is substantial

if it exceeds the greater of:   (1) 10 percent of the tax required

to be shown on the return for the taxable year, or (2) $5,000.

Sec. 6662(d)(1)(A).

     Petitioners did not have a substantial understatement as

their underpayment fell short of the statutory threshold.

Accordingly, we consider whether petitioners are subject to an

accuracy-related penalty attributable to negligence.   Respondent

has carried the burden of production by showing that petitioners

failed to report income and that their reason for doing so was

frivolous.

      An underpayment is not subject to an accuracy-related

penalty to the extent that the taxpayer shows that the

underpayment is due to reasonable cause and good faith.   Sec.

6664(c); Neonatology Associates, P.A. v. Commissioner, 115 T.C.
                                 - 7 -

43, 98 (2000), affd. 299 F.3d 221 (3d Cir. 2002); see also secs.

1.6662-3(a), 1.6664-4(a), Income Tax Regs.

     Petitioners’ position reflected on their income tax returns

and the position presented to this Court are without substance

and have no support in case precedent.       It is of no consequence

that petitioners presented a detailed explanation of their

statutory analysis, because it has been rejected by numerous

courts and because it is nothing more than sophistry.

Accordingly, we hold that petitioners were negligent and are

subject to the accuracy-related penalty for the 2005 tax

underpayment.

     To reflect the foregoing,

                                              Appropriate orders and

                                         decisions will be entered.
