                            T.C. Memo. 2003-237



                       UNITED STATES TAX COURT



              JAMES AND TERRI CARSKADON, Petitioners v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



       Docket No. 356-00.                Filed August 11, 2003.


       James and Terri Carskadon, pro sese.

       Robert S. Scarbrough, for respondent.


                            MEMORANDUM OPINION

       GOLDBERG, Special Trial Judge:     This case is before the

Court on respondent’s motion to dismiss for failure to state a

claim upon which relief may be granted, filed pursuant to Rule

40.1



       1
        Unless otherwise indicated, 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.
                               - 2 -

     By notice of deficiency, respondent determined a deficiency

in petitioners’ Federal income tax for the taxable year 1997 of

$6,495, and an accuracy-related penalty of $655.80 pursuant to

section 6662(a) and (b)(1).

     In the notice of deficiency, respondent determined that

petitioners failed to report $50,847 of taxable wages petitioner2

received during 1997.   Petitioner’s wages were reported by five

separate employers on Forms W-2, Wage and Tax Statement, as

follows:

           ALIC                               $411
           Department of the Air Force       3,264
           The Boeing Company               39,295
           Volt Management                   7,678
           Morning Sun, Inc.                   199
                   Total                   $50,847

     When petitioners filed their 1997 tax return, they attached

a statement explaining their position for the difference between

the amounts reported as gross income on their tax return and the

amounts reported on the Forms W-2.     Evidently, petitioners raised

arguments that wages were not includable in gross income.      In the

attachment, petitioners requested advice from the Commissioner as

to the validity of their position.     On June 23, 1998, the

Commissioner sent petitioners a correspondence notifying them

that the position taken on their 1997 tax return was frivolous

and without merit.   The June 23, 1998, correspondence commenced


     2
        References to petitioner in the singular are to James
Carskadon.
                               - 3 -

the examination of petitioners’ 1997 tax return.

     At the time the petition was filed, petitioners resided in

Tacoma, Washington.   In their petition, petitioners dispute the

entire amount of the deficiency and penalty for 1997.    Further,

they state that the Commissioner’s determination is erroneous

based on the following:   (1) Time is a right, not a privilege;

thus, the exchange of time is not a taxable transaction; (2)

petitioners are not liable for the additions to tax; and (3)

respondent’s determinations in the notice of deficiency are

arbitrary and capricious.

     The facts upon which petitioners rely as a basis for the

assigned errors are as follows:   (1) The Internal Revenue Code

(Code) does not contain a provision including “time reimbursement

transactions” as taxable wages, salaries, or gross income; (2)

time is a right that Congress cannot tax, because Congress can

only tax a privilege; (3) Congress did not supply petitioners

with an entry visa or green card; therefore, Congress has no

control over petitioners’ time; and (4) since time is transferred

in return for money, the transaction is a reimbursement or equal

exchange of property and is not a taxable transaction.

     Respondent filed the subject motion to dismiss on March 13,

2000.   By order dated March 15, 2000, the Court: (1) Directed

petitioners to file, on or before May 5, 2000, an Amended

Petition which complies with our Rules; and (2) calendared
                                - 4 -

respondent’s motion for hearing at the Seattle, Washington trial

session beginning June 5, 2000.   Defying the Court’s order,

petitioners failed to file an Amended Petition in this case.       On

June 5, 2000, when the case was called from the calendar,

respondent’s counsel appeared and was heard.      However,

petitioners did not appear at the proceeding, nor did anyone

appear on their behalf.

     Thereafter, respondent filed the present motion to dismiss

on the grounds that the petition fails to allege any justiciable

error with respect to respondent’s determinations and fails to

allege any facts in support of the alleged errors.      Respondent

asks the Court to grant the motion, to enter a decision in favor

of respondent, and to require petitioners to pay a penalty to the

United States pursuant to section 6673.

     Prior to the Court ruling on respondent’s motion to dismiss,

petitioners, on September 8, 2000, filed a petition with the

United States Bankruptcy Court.   The filing of a bankruptcy

petition operates as a stay of the commencement or continuation

of proceedings in this Court.   See Allison v. Commissioner, 97

T.C. 544, 545 (1991).   The stay is lifted upon the earlier of the

closing of the case, the dismissal of the case, or upon the

granting or denial of a discharge.      11 U.S.C. sec. 362(c)(2)

(2000); see Guerra v. Commissioner, 110 T.C. 271, 275 (1998).

     On November 17, 2000, this Court ordered that all proceeding
                               - 5 -

relating to this case were automatically stayed pursuant to 11

U.S.C. sec. 362(a)(8).   On May 28, 2003, the Bankruptcy Court

issued an order granting petitioners a discharge under 11 U.S.C.

sec. 727, which served to terminate the automatic stay.     See 11

U.S.C. sec. 362(c)(2)(C).   Accordingly, on July 8, 2003, this

Court ordered that the stay of proceedings in this case is

lifted.

     Rule 34(b)(4) provides that a petition filed in this Court

shall contain clear and concise assignments of each and every

error which petitioners allege to have been committed by

respondent in the determination of the deficiencies and additions

to tax in dispute.   Rule 34(b)(5) provides that the petition

shall contain clear and concise lettered statements of the facts

on which petitioners base the assignments of error.   No

justiciable error has been alleged in the petition filed by

petitioners.   By order dated March 15, 2000, we provided

petitioners an opportunity to file an amended petition which

would comply with Rule 34(b)(4) and (5).   Petitioners, however,

chose not to file the amended petition.    Further, petitioners did

not appear at the June 5, 2000, motion to dismiss hearing.

     Rule 40 provides that a party may file a motion to dismiss

for failure to state a claim upon which relief can be granted.

Generally, we may dismiss a petition for failure to state a claim

upon respondent’s motion when it appears beyond doubt that
                                - 6 -

petitioner can prove no set of facts in support of his claim

which would entitle him to relief.      Conley v. Gibson, 355 U.S.

41, 45-46 (1957); Price v. Moody, 677 F.2d 676, 677 (8th Cir.

1982).

     The determinations of the Commissioner in a notice of

deficiency are presumed correct, and the burden is on the

taxpayer to show that the determinations are incorrect.      Rule

142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933).3     In

addition, any issue not raised in the pleadings is deemed

conceded.    Rule 34(b)(4); Jarvis v. Commissioner, 78 T.C. 646,

658 n.19 (1982); Gordon v. Commissioner, 73 T.C. 736, 739 (1980).

Because petitioners failed to raise any justiciable facts or

issues in their petition, failed to file an amended petition, and

failed to appear for hearing, we grant respondent’s motion to

dismiss.    See Klein v. Commissioner, 45 T.C. 308 (1965);

Goldsmith v. Commissioner, 31 T.C. 56 (1958); Weinstein v.

Commissioner, 29 T.C. 142 (1957).

     Finally, we turn to the portion of respondent’s motion that

moves for a penalty pursuant to section 6673.     Section 6673(a)(1)

authorizes the Tax Court to require a taxpayer to pay to the


     3
        Sec. 7491 does not apply in this case to place the burden
of proof on respondent because, among other reasons, the
examination was commenced prior to July 22, 1998. Further, the
burden of proof is irrelevant in this case because there are no
material facts in dispute. See Nis Family Trust v. Commissioner,
115 T.C. 523, 537-538 (2000); Corcoran v. Commissioner, T.C.
Memo. 2002-18, affd. 54 Fed. Appx. 254 (9th Cir. 2002).
                                - 7 -

United States a penalty not in excess of $25,000 whenever it

appears that proceedings have been instituted or maintained by

the taxpayer primarily for delay or that the taxpayer’s position

in such proceedings is frivolous or groundless.

     Petitioner has not denied that he received $50,847 from his

employers during 1998.    Further, in their petition, petitioners

concede that the $411 received from ALIC and the $3,264 received

from the Department of the Air Force are taxable wages.

Petitioners theorize that since petitioner did not expend any

time in exchange for the funds from ALIC and the Air Force, these

wages are taxable.   Conversely, petitioners argue that the funds

received from petitioner’s other employers are not taxable

because petitioner obtained the funds in exchange for his time.

Petitioners assert that petitioner’s wages are not taxable

because the Code, which states exactly what is taxable, does not

specifically state that “time reimbursement transactions”, a term

of art coined by petitioners, are taxable.    However, the Code

does not limit gross income to the list provided in section

61(a).   Gross income means all income from whatever source

derived.   Sec. 61(a).   Petitioners’ arguments completely

disregard the definition of gross income.

     Petitioners have failed to raise any bona fide dispute as to

the amounts reported by petitioner’s various employers as wages.

Petitioners’ arguments that petitioner’s wages are not taxable
                               - 8 -

are without merit and are groundless.   Petitioners’ contentions

are patently absurd, based on mere semantics, and are unsupported

by the law.   Petitioners’ assertions have been considered and

consistently rejected by this and other courts.   See Eisner v.

Macomber, 252 U.S. 189, 207-208 (1920); United States v. Romero,

640 F.2d 1014, 1016 (9th Cir. 1981); Abrams v. Commissioner, 82

T.C. 403, 407-408 (1984), and cases cited therein; Rowlee v.

Commissioner, 80 T.C. 1111, 1119-1122 (1983); Bumgarner v.

Commissioner, T.C. Memo. 1997-48.

     Gross income means all income from whatever source derived,

including (but not limited to) compensation for services.     Sec.

61(a).   Gross income includes income realized in any form,

whether in money, property, or services.    Sec. 1.61-1(a), Income

Tax Regs.   Income as defined under the 16th Amendment is “gain

derived from capital, from labor, or from both combined”.     Eisner

v. Macomber, supra at 207.   Even if wages could be characterized

as the product of an exchange, the amount received in the

exchange is still income within the Code.    Rice v. Commissioner,

T.C. Memo. 1982-129.   Although the wages received by petitioner

“may represent no more than the time-value of his work, they are

nonetheless the fruit of his labor, and therefore represent gain

derived from labor which may be taxed as income.”    Id.   Clearly,

the $50,847 petitioner received as compensation from his

employers during 1997 is taxable income.
                               - 9 -

     A petition to the Tax Court is frivolous if it is contrary

to established law and unsupported by a reasoned, colorable

argument for change in the law.   Coleman v. Commissioner, 791

F.2d 68, 71 (7th Cir. 1986).   As set forth in their petition,

petitioners have raised only frivolous arguments which can be

characterized as tax protester rhetoric.   Based on well-

established precedent, petitioners’ arguments are frivolous and

groundless.

     Further, the record in this case establishes that

petitioners had no interest in disputing either the deficiency or

the penalty determined by respondent.   Petitioners’ failure to

file an amended petition in compliance with the Court’s order of

March 15, 2000, coupled with their failure to appear at the June

5, 2000, hearing, convinces us that these proceedings were

instituted primarily for delay.   Petitioners with genuine

controversies were delayed while we considered this case.

     Based on our findings that (1) petitioners’ arguments are

frivolous and groundless, and (2) these proceedings were

instituted primarily for delay, we require petitioners to pay a

penalty to the United States in the amount of $2,000.    See sec.

6673(a)(1); Abrams v. Commissioner, supra at 412-413.
                        - 10 -

To reflect the foregoing,

                                  An appropriate order of

                             dismissal and decision will be

                             entered.
