                                      SCOTT F. WNUCK, PETITIONER v. COMMISSIONER                                     OF INTERNAL
                                                      REVENUE, RESPONDENT *
                                                        Docket No. 26068–09.                       Filed May 31, 2011.

                                                 R determined a deficiency in P’s 2007 income tax on the
                                               basis of wages that P did not report. At trial P admitted, ‘‘I
                                               exchanged my skilled labor and knowledge for pay’’. In a
                                               bench opinion the Court held for R, ruled that P’s arguments

                                        * This Opinion supplements the bench opinion previously rendered in this case on January
                                      12, 2011, in Columbia, South Carolina.


                                      498




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                                      (498)                          WNUCK v. COMMISSIONER                                          499


                                               were frivolous, imposed on P a penalty of $1,000 pursuant to
                                               I.R.C. sec. 6673(a), and warned P that if he repeated his frivo-
                                               lous positions he faced the risk of a steeper penalty. After the
                                               Court entered decision, P moved for reconsideration on the
                                               grounds that the Court had not adequately addressed his
                                               arguments. Held: P was not entitled to a Court opinion
                                               addressing his frivolous arguments, and his motion for
                                               reconsideration will be denied. Held, further, P’s penalty
                                               under I.R.C. sec. 6673(a) is increased to $5,000.

                                           Scott F. Wnuck, pro se.
                                           David M. McCallum, for respondent.

                                                                     SUPPLEMENTAL OPINION

                                         GUSTAFSON, Judge: Courts confronting frivolous arguments
                                      against the constitutionality, validity, applicability, and
                                      mandatory character of the income tax often aptly quote
                                      Crain v. Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984),
                                      which stated, ‘‘We perceive no need to refute these argu-
                                      ments with somber reasoning and copious citation of prece-
                                      dent’’. We take this occasion to explain why it is usually not
                                      expedient to discuss and refute in detail the frivolous argu-
                                      ments that some litigants attempt to press in the Tax Court,
                                      and why litigants who press such arguments are not entitled
                                      to and should not expect to receive opinions rebutting their
                                      frivolous arguments.
                                         This case is before the Court on petitioner Scott F.
                                      Wnuck’s motion for reconsideration. When this case was
                                      tried January 12, 2011, Mr. Wnuck’s only contention was
                                      that his wages are not subject to income tax. The Court’s
                                      bench opinion, transcribed and served on January 21, 2011,
                                      characterized Mr. Wnuck’s position as ‘‘frivolous’’ and did not
                                      address his arguments at length. On January 26, 2011, the
                                      Court’s decision was entered sustaining the deficiency that
                                      the Internal Revenue Service (IRS) had determined against
                                      Mr. Wnuck and imposing against him a penalty of $1,000
                                      pursuant to section 6673(a)(1) 1 for maintaining frivolous
                                      positions.
                                         Mr. Wnuck then submitted a motion for leave to file a
                                      motion for reconsideration (which we treat as a motion to
                                      vacate the decision) and a separate motion for reconsider-
                                        1 Unless otherwise indicated, all citations of sections refer to the Internal Revenue Code of

                                      1986 (‘‘Code’’, 26 U.S.C.), as amended.




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                                      500                136 UNITED STATES TAX COURT REPORTS                                        (498)


                                      ation. The motion to vacate will be granted, but the motion
                                      for reconsideration will be denied, and decision will again be
                                      entered in favor of the IRS and against Mr. Wnuck, but this
                                      time with an increased penalty of $5,000.

                                                                               Background
                                        At trial the only issue was whether Mr. Wnuck received
                                      taxable income in 2007; and he frankly stated, ‘‘I do not dis-
                                      pute that I exchanged my skilled labor and knowledge for
                                      pay’’. (Tr. at 13.) However, he explained, ‘‘I have come to
                                      believe that the—my earnings from the companies that I
                                      worked for did not constitute taxable income.’’ (Tr. at 8.)
                                        Mr. Wnuck did admit, however, that he is not trained in
                                      the law:
                                      I work in the machinery industry, working on large power generators and
                                      paper machines, paper mills, and that sort of thing. I’ve got several years
                                      of college and served an apprenticeship in learning my trade, as in edu-
                                      cation, but I don’t have any training in the law * * *. * * * It’s a steep
                                      learning curve in the Internal Revenue world, you know. [Tr. at 33–34.]

                                      Nonetheless, in his closing argument at the conclusion of
                                      trial, Mr. Wnuck made a variety of supposed legal arguments
                                      (similar to arguments in his pretrial memorandum) to the
                                      effect that he does not owe income tax on his admitted
                                      earnings.
                                         The Court commented on some of Mr. Wnuck’s arguments
                                      at the time he made them. In its bench opinion, the Court
                                      later stated:
                                        Mr. Wnuck admits his receipt of the amounts at issue. Section 61(a)
                                      defines gross income as meaning ‘‘all income from whatever source derived,
                                      including (but not limited to) (1) Compensation for services . . . .’’ Mr.
                                      Wnuck’s payments from his employers clearly fall within this broad
                                      description. His arguments to the contrary, his arguments about his
                                      employment status, and all his other arguments are frivolous. See, e.g.,
                                      Ulloa v. Commissioner, T.C. Memo. 2010–68. The income items at issue
                                      are taxable to Mr. Wnuck.

                                      The Ulloa opinion that the Court cited addresses some but
                                      not all of the arguments that Mr. Wnuck had pressed.
                                        The Court both sustained the deficiency as determined by
                                      the IRS and imposed on Mr. Wnuck, pursuant to section
                                      6673(a), a penalty of $1,000 for taking frivolous positions.
                                      The Court stated:




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                                      (498)                          WNUCK v. COMMISSIONER                                          501


                                      We take no pleasure in doing so, and we there[fore] impose a relatively
                                      modest penalty, given that we have the discretion to impose a penalty as
                                      high as $25,000. Mr. Wnuck should be aware, however, that if he should
                                      ever repeat his maintenance of frivolous tax litigation, he would stand in
                                      peril of a much steeper penalty.

                                        Undeterred, Mr. Wnuck has now filed a motion for
                                      reconsideration, in which he reasserts (1) his argument that
                                      his earnings are not taxable ‘‘wages’’; (2) his argument based
                                      on provisions in title 27 of the Code of Federal Regulations;
                                      and (3) his argument about supposed errors in his ‘‘Indi-
                                      vidual Master File’’ maintained by the IRS—all three of which
                                      he had asserted at trial. Mr. Wnuck complains about the
                                      Court’s characterization of his arguments as ‘‘frivolous’’, espe-
                                      cially since the Court did not separately discuss each argu-
                                      ment:
                                      For him [the judge] to claim, ‘‘his arguments about his employment status,
                                      and all his other arguments are frivolous’’, as he did on page 5 ([line] 19),
                                      without even addressing them is disingenuous at best.

                                      We now explain why it is not ‘‘disingenuous’’ (or otherwise
                                      improper) for a court to give short shrift to frivolous argu-
                                      ments.

                                                                                Discussion
                                      I. Why we usually decline to refute frivolous anti-tax
                                         arguments
                                        The reasons that courts decline ‘‘to refute these [frivolous]
                                      arguments with somber reasoning and copious citation of
                                      precedent’’, Crain v. Commissioner, 737 F.2d at 1417, include
                                      the following.
                                           A. The number of potential frivolous anti-tax arguments is
                                              unlimited.
                                         If one is genuinely seeking the truth, if he focuses on what
                                      is relevant, and if he confines himself to good sense and logic,
                                      then the number of serious arguments he can make on a
                                      given point is limited. However, if one is already committed
                                      to a position regardless of its truth, if he is willing to say
                                      anything, if he is willing to ignore relevance, good sense, and
                                      logic, and if he is simply looking for subjects and predicates
                                      to put together into sentences in ostensible support of a given




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                                      502                136 UNITED STATES TAX COURT REPORTS                                         (498)


                                      point, then the number of frivolous arguments that he can
                                      make on that point is effectively limitless. When each frivo-
                                      lous argument is answered, there is always another, as long
                                      as there are words to be uttered. Such arguments are with-
                                      out number. Consequently, a Court that decides cases
                                      brought by persons willing to make frivolous arguments—
                                      such as ‘‘tax protesters’’ or ‘‘tax defiers’’ 2—would by defini-
                                      tion never be finished with the task of answering those frivo-
                                      lous arguments.
                                           B. A frivolous anti-tax argument may be unimportant even
                                              to its proponent.
                                        Experience shows that a given frivolous argument may
                                      have little actual importance to the person making it. Frivo-
                                      lous anti-tax arguments are often obviously downloaded from
                                      the Internet; and by cut-and-paste word processing functions,
                                      these arguments are easily plunked into a party’s filing. In
                                      other instances a promoter of frivolous anti-tax arguments is
                                      feeding those arguments to a litigant who adopts them
                                      uncritically and submits them to the Court. 3 For all a court
                                         2 Persons who make frivolous anti-tax arguments have sometimes been called ‘‘tax protesters’’.

                                      Section 3707 of the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L.
                                      105–206, 112 Stat. 778, provided that ‘‘The officers and employees of the Internal Revenue Serv-
                                      ice * * * shall not designate taxpayers as illegal tax protesters’’, because Congress was ‘‘con-
                                      cerned that taxpayers may be stigmatized’’. S. Rept. 105–174, at 105 (1998), 1998–3 C.B. 537,
                                      641. This prohibition applies only to IRS employees and not to the courts; and we use here the
                                      alternative term ‘‘tax defier’’ for a reason having nothing to do with any supposed stigma at-
                                      tached to being a ‘‘protester’’. Protest of the Government, if undertaken lawfully, is protected
                                      by the First Amendment to our Constitution and is as American as apple pie. In this country
                                      no stigma attaches to being a legitimate ‘‘protester’’. But people who file dishonest ‘‘zero returns’’
                                      or who otherwise try to shirk their civic responsibility, evade their fair share of the tax burden,
                                      waste tax enforcement resources, and clog the courts with pointless lawsuits are simply scoff-
                                      laws. They enjoy the benefits of American security and stability while refusing to shoulder their
                                      portion of the burden. They are not protesters but are defiers.
                                         3 In Mr. Wnuck’s motion for reconsideration, ‘‘Petitioner admits to assistance in the prepara-

                                      tion’’ of his pretrial memorandum. To the same effect, Mr. Wnuck testified—
                                      As I said, I don’t really completely understand how this works. I tried to read the rules of the
                                      court within the capacity that I could.
                                        And I had assistance in creating these pleadings, within, you know, some help, so there are
                                      some issues that are deeper than what I’ve known before and I’m learning. It’s a steep learning
                                      curve in the Internal Revenue world, you know.
                                        THE COURT: The persons that helped you, are they lawyers or accountants?
                                        THE WITNESS: No, sir.
                                        [Tr. at 33–34.]
                                      Of course, there is nothing necessarily sinister about receiving help in preparing court filings.
                                      However, this circumstance does involve the possibility of the off-stage participant’s effectively
                                      practicing law without a license; and where the recommended arguments are frivolous, the pro-
                                      moter of those arguments eludes responsibility while putting the Tax Court litigant at risk for
                                      an exaggerated tax liability and section 6673(a)(1) penalties. That is manifestly the case here.




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                                      (498)                          WNUCK v. COMMISSIONER                                          503


                                      can tell, the litigant may not even have carefully read the
                                      arguments he submits.
                                         Petitioners who make frivolous anti-tax arguments are
                                      sometimes intelligent people, but they tend to show great
                                      ignorance about the legal matters they argue. Tax defiers
                                      have learned to admit to the Court (as Mr. Wnuck did) that
                                      they have no legal background or training. The admission is
                                      often manifestly true. However, this admission is evidently
                                      made only to induce the Court to be lenient in overlooking
                                      the pro se litigant’s procedural lapses and to incline the
                                      Court to be liberal in construing his pleadings. The admis-
                                      sion of ignorance does not indicate a willingness to accept
                                      information from someone who does have that background
                                      and training in tax law.
                                         The frivolous argument, made from this position of witting
                                      and willful ignorance, seems to be merely an incidental orna-
                                      ment that adorns an article of faith—namely, the belief that
                                      I don’t owe taxes. The tax defier firmly holds that postulate
                                      above and apart from any arguments. Anything in favor of
                                      that postulate may be advanced, no matter how silly; any-
                                      thing against it can be ignored. If a given frivolous argument
                                      is decisively rebutted, then it may or may not be retired; but
                                      even if the individual argument is retired, the cause is not
                                      abandoned. Thus, the specific argument hardly matters even
                                      to the litigant.
                                         Consequently, the value of answering frivolous anti-tax
                                      arguments—even the subjective value to the individual liti-
                                      gant—is often doubtful.
                                           C. Many frivolous anti-tax arguments have already been
                                              answered.
                                        This Court and other courts have addressed and rejected
                                      many of the recurring frivolous anti-tax arguments, including
                                      (as is especially pertinent here) the general argument that
                                      wages are not subject to the income tax 4 and the particular
                                      However, the Court did warn Mr. Wnuck that his arguments were frivolous; and Mr. Wnuck
                                      even acknowledged the possibility that ‘‘maybe I’ve been lead down [sic] astray by some of these
                                      tax protester gurus. I don’t know. But I haven’t seen anything to upend the theories that I’ve
                                      been reading.’’ Consequently, we hold Mr. Wnuck responsible for the arguments he has persisted
                                      in making.
                                        4 Over 30 years ago, in Reading v. Commissioner, 70 T.C. 730 (1978), affd. 614 F.2d 159 (8th

                                      Cir. 1980), this Court explained the fallacy of the argument that wages are not taxable income.
                                                                                                   Continued




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                                      504                136 UNITED STATES TAX COURT REPORTS                                        (498)


                                      argument that the income tax does not apply to wages
                                      earned within the 50 States. 5 Moreover, the IRS publishes
                                      and occasionally updates ‘‘The Truth About Frivolous Tax
                                      Arguments’’, 6 a compendium of frivolous positions and the
                                      caselaw refuting them. That paper collects caselaw
                                      showing—contrary to Mr. Wnuck’s argument—that wages
                                      are indeed subject to the income tax, at 13–18, and that the
                                      income tax does indeed apply within the 50 States, at 26–28.
                                      Anyone with the inclination to do legal research relevant to
                                      the validity of the income tax as applied to wages—even
                                      mere research with an Internet search engine—will confront
                                      such authorities.
                                        Consequently, it is doubtful whether tax jurisprudence will
                                      be much advanced by issuing yet another opinion affirming
                                      the obvious truisms about tax law and refuting Mr. Wnuck’s
                                      already soundly refuted contentions.
                                           D. The litigant who presses the frivolous anti-tax argument
                                              often fails to hear its refutation.
                                         With some happy exceptions, the refutation of a frivolous
                                      anti-tax argument often seems to fall on deaf ears, and the
                                      litigant persists in making the same doomed argument. 7
                                      Since then, arguments that compensation for services is not taxable have been repeatedly and
                                      thoroughly rejected in cases too numerous to mention. Arguments equivalent to those pursued
                                      by Mr. Wnuck have resulted in criminal convictions, e.g., United States v. Sloan, 939 F.2d 499
                                      (7th Cir. 1991); United States v. Collins, 920 F.2d 619 (10th Cir. 1990); civil fraud penalties,
                                      e.g., Rowlee v. Commissioner, 80 T.C. 1111 (1983); Chase v. Commissioner, T.C. Memo. 2004–
                                      142; section 6673 penalties, e.g., Sawukaytis v. Commissioner, T.C. Memo. 2002–156, affd. 102
                                      Fed. Appx. 29 (6th Cir. 2004); and sanctions for frivolous appeals, e.g., Martin v. Commissioner,
                                      756 F.2d 38 (6th Cir. 1985), affg. T.C. Memo. 1983–473; Perkins v. Commissioner, 746 F.2d 1187
                                      (6th Cir. 1984), affg. T.C. Memo. 1983–474.
                                         5 Mr. Wnuck’s argument that the ‘‘United States’’ excludes the States has been rejected in

                                      cases going back 30 years. See Tinnerman v. Commissioner, T.C. Memo. 2010–150 (citing cases).
                                         6 Available at www.irs.gov/pub/irs-utl/friv—tax.pdf. In addition, the IRS publishes and up-

                                      dates, pursuant to section 6702(c), a list of frivolous positions. See Thornberry v. Commissioner,
                                      136 T.C. 356, 368 & n.4 (2011) (citing Notice 2007–30, 2007–1 C.B. 883 (effective for submis-
                                      sions made between Mar. 16, 2007, and Jan. 14, 2008), Notice 2008–14, 2008–1 C.B. 310 (effec-
                                      tive for submissions made between Jan. 15, 2008, and Apr. 7, 2010), and Notice 2010–33, 2010–
                                      17 I.R.B. 609 (effective for submissions made after Apr. 7, 2010)).
                                         7 For example, this Court’s patient and comprehensive explanation (and its imposition of a

                                      $2,500 penalty under section 6673(a)(1)) in Liddane v. Commissioner, T.C. Memo. 1998–259,
                                      affd. per curiam without published opinion 208 F.3d 206 (3d Cir. 2000) (table), 2000–1 U.S.T.C.
                                      (CCH) par. 50,190 (per curiam opinion), did not prevent the taxpayer in that case from repeat-
                                      ing his misguided arguments in a later case. See Liddane v. Commissioner, T.C. Memo. 1999–
                                      330. For recent examples, see Kubon v. Commissioner, T.C. Memo. 2011–41 (imposing a $20,000
                                      penalty under section 6673(a) in light of prior frivolous litigation in Kubon v. Commissioner,
                                      T.C. Memo. 2005–71); Holmes v. Commissioner, T.C. Memo. 2011–31 (imposing a $25,000 pen-
                                      alty under section 6673(a) in light of prior frivolous litigation in Holmes v. Commissioner, T.C.
                                      Memo. 2006–80, Holmes v. Commissioner, T.C. Memo. 2010–42, and Holmes v. Commissioner,




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                                      (498)                          WNUCK v. COMMISSIONER                                          505


                                      Sometimes this is because the litigant, though evidently
                                      aware of the reasons that courts have rejected the argu-
                                      ment, 8 is simply stubborn. Sometimes this is because the
                                      litigant seems not to understand either his argument or its
                                      refutation. And sometimes the reason for the litigant’s
                                      behavior remains a mystery.
                                         For example, at trial Mr. Wnuck made his argument, dis-
                                      cussed below, that ‘‘includes’’ (in the definition of ‘‘United
                                      States’’ in section 3121(e)(2)) means ‘‘includes only’’. The
                                      Court addressed Mr. Wnuck directly and explained, ‘‘the defi-
                                      nition that you rely on to make that point is not an income
                                      tax provision. It’s an employment tax provision that really
                                      doesn’t apply to your 1040 income tax return.’’ (Tr. at 65.)
                                      This point evidently did not sink in, because Mr. Wnuck
                                      repeats the argument in his motion for reconsideration. He
                                      does not attempt to correct the Court’s point and explain why
                                      he thinks that the provision is an income tax provision; he
                                      simply repeats the argument.
                                         Consequently, when a litigant is willing in the first
                                      instance to take a position that is frivolous, the chances are
                                      good that he will be unmoved by explanations of why his
                                      position is frivolous. A court that undertakes such expla-
                                      nations is often wasting its time. We now nonetheless make
                                      that undertaking here, regretful that Mr. Wnuck may not
                                      heed the explanation, in order to illustrate what such an
                                      undertaking requires.
                                           E. Many frivolous anti-tax arguments are patently so.
                                         The fallacies of some frivolous arguments are gross and
                                      palpable. All three of the arguments in Mr. Wnuck’s motion
                                      illustrate this point.



                                      T.C. Memo. 2010–50); and Mooney v. Commissioner, T.C. Memo. 2011–35 (imposing a $2,000
                                      penalty under section 6673(a) in light of prior frivolous litigation in Mooney v. Commissioner,
                                      docket No. 21647–06, affd. 309 Fed. Appx. 675 (4th Cir. 2009)).
                                        8 Mr. Wnuck (or whoever composed his arguments) obviously spent enough effort acquainting

                                      himself with tax law materials to be able to give citations (however misguided) of statutes, regu-
                                      lations, and court opinions. But it seems clear that in that effort he must have studiously ig-
                                      nored the available information, see pt. I.C. above, when composing his argument that his wages
                                      are not subject to the income tax. The wealth of information showing that the courts have al-
                                      ways and repeatedly discredited and rejected his argument was evidently of no interest to him.




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                                      506                136 UNITED STATES TAX COURT REPORTS                                        (498)


                                           1. Definition of ‘‘United States’’
                                         To resist paying income tax on his wages, Mr. Wnuck
                                      makes this frivolous argument: He points out 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 ‘‘[t]he term ‘United States’
                                      when used in a geographical sense includes the Common-
                                      wealth of Puerto Rico, the Virgin Islands, Guam, and Amer-
                                      ican Samoa’’, sec. 3121(e)(2) (emphasis added). Mr. Wnuck
                                      contends that the term ‘‘United States’’ therefore excludes
                                      everything else (such as the 50 States) and that his services
                                      performed in Pennsylvania (not in Puerto Rico, etc.) were not
                                      performed in the ‘‘United States’’ and therefore did not yield
                                      taxable wages. His argument fails for obvious reasons:
                                           a. ‘‘Includes’’ does not mean ‘‘includes only’’.
                                         Section 7701(c) provides that ‘‘includes’’ ‘‘shall not be
                                      deemed to exclude other things’’. Anyone fluent in English
                                      knows that the word ‘‘includes’’ cannot be assumed to mean
                                      ‘‘includes only’’—especially when such a meaning would have
                                      the ludicrous result of excluding from ‘‘United States’’ all 50
                                      States. No tax research at all is necessary to conclude that
                                      Mr. Wnuck’s position is frivolous.
                                           b. The cited statute does not apply.
                                        Moreover, if one goes only a little further and actually
                                      reads the statutes that Mr. Wnuck cites, another fallacy in
                                      his argument becomes obvious: The Code sections he cites
                                      pertain not to income tax but rather to employment taxes
                                      (such as Social Security tax). If his argument made any
                                      sense at all, it could not affect his liability for income tax.
                                      The relevant Code section for income tax is section 61(a),
                                      which does not use the word ‘‘wages’’ (so critical to Mr.
                                      Wnuck’s frivolous argument) but instead imposes tax on ‘‘all
                                      income from whatever source derived’’, including (in sub-
                                      section (a)(1)) ‘‘[c]ompensation for services’’. When Mr.
                                      Wnuck stated, ‘‘I do not dispute that I exchanged my skilled
                                      labor and knowledge for pay’’, he made obvious his liability
                                      for income tax. The error of his position is flagrant.




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                                      (498)                          WNUCK v. COMMISSIONER                                          507


                                           c. The cited case contradicts the argument.
                                         Both at trial and in his motion for reconsideration, Mr.
                                      Wnuck aggressively misconstrued Supreme Court precedent.
                                      He attempts to buttress his interpretation of ‘‘includes’’ with
                                      a citation of Helvering v. Morgan’s Inc., 293 U.S. 121, 125 n.1
                                      (1934), which states that ‘‘the verb ‘includes’ imports a gen-
                                      eral class’’. Mr. Wnuck evidently construes this phrase to
                                      suggest that ‘‘includes’’ means or defines an entire and exclu-
                                      sive class of things. This construction is exactly wrong and
                                      cannot survive a reading of the entire sentence from which
                                      this phrase is lifted. In fact, Morgan’s contrasts the verb
                                      ‘‘includes’’ with the verb ‘‘means’’ and states: ‘‘where ‘means’
                                      is employed [in a statutory definition], the term and its defi-
                                      nition are to be interchangeable equivalents, and * * * the
                                      verb ‘includes’ imports a general class, some of whose par-
                                      ticular instances are those specified in the definition.’’ Id.
                                      (emphasis added). That is, the Supreme Court expressly
                                      indicates that ‘‘includes’’ is non-exclusive, since it is used
                                      where only ‘‘some’’ of the members of the ‘‘general class’’ are
                                      specified. If section 3121(e)(2) said that United States
                                      ‘‘means’’ non-State territories, then it would be congruent
                                      with Mr. Wnuck’s argument; but in fact the statute employs
                                      the alternative word—‘‘includes’’—so that it indicates that
                                      ‘‘United States’’ comprises a general class of instances only
                                      some of which are the non-State territories (and the others
                                      of which are obviously the 50 States). The Morgan’s opinion
                                      is authority against Mr. Wnuck’s position, and his citation of
                                      it as if it were support for his position is frivolous.
                                           2. 27 C.F.R.
                                        Mr. Wnuck’s motion for reconsideration makes the fol-
                                      lowing argument, which cites title 27 of the Code of Federal
                                      Regulations (‘‘C.F.R.’’):
                                      Judge Gustafson also, in his opinion, ignored the Petitioner’s argument
                                      that the enforcement regulations for 26 USC section 6020, substitute for
                                      returns, appear under 27 CFR Part 53 & 70 which relate to Alcohol,
                                      Tobacco, Firearms and explosives, not income or employment taxes. USC
                                      Title 26 sections 6651, 6201 and 6203 among others that may have been
                                      applied in this case also have enforcement regulations under CFR 27. The




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                                      508                136 UNITED STATES TAX COURT REPORTS                                        (498)


                                      Petitioner informed Judge Gustafson that he had never engaged in any
                                      regulated activity such as alcohol, tobacco, firearms or explosives.[9]

                                      The background to this all-but-meaningless contention is
                                      this:
                                          Mr. Wnuck submitted a Form 1040, U.S. Individual
                                      Income Tax Return, that reported the amount of his wages
                                      as zero. The IRS did not treat the document as a tax return
                                      but instead prepared a so-called ‘‘substitute for return’’
                                      (‘‘SFR’’). It did so pursuant to section 6020(b), which provides:
                                        (1) AUTHORITY OF SECRETARY TO EXECUTE RETURN.—If any person fails
                                      to make any return required by any internal revenue law or regulation
                                      made thereunder at the time prescribed therefor, or makes, willfully or
                                      otherwise, a false or fraudulent return, the Secretary shall make such
                                      return from his own knowledge and from such information as he can
                                      obtain through testimony or otherwise.
                                        (2) STATUS OF RETURNS.—Any return so made and subscribed by the Sec-
                                      retary shall be prima facie good and sufficient for all legal purposes.

                                      By statute, it is the Secretary of the Treasury to whom this
                                      authority is given in the first instance; and the Secretary has
                                      authorized the Internal Revenue Service to execute SFRs by
                                      means of section 301.6020–1(b)(1) of the Procedure and
                                      Administration Regulations, that are codified in title 26 of
                                      the Code of Federal Regulations.
                                         Mr. Wnuck’s attention, however, has been called to other
                                      provisions—found in 27 C.F.R.—that also pertain to SFRs.
                                      Section 4181 of the Internal Revenue Code imposes a tax on
                                      firearms, and title 27 of the C.F.R. contains the regulation by
                                      which the Secretary of the Treasury authorizes not the IRS
                                      but the Alcohol and Tobacco Tax and Trade Bureau (‘‘the
                                      TTB’’) to execute an SFR pertaining to the firearms tax. See
                                      27 C.F.R. sec. 70.42(b)(1) (2010). Mr. Wnuck evidently claims
                                      that, because he has not sold firearms, an SFR cannot be pre-
                                      pared for him.
                                        9 Mr. Wnuck’s argument is similar to the ‘‘meritless’’ argument rebutted in United States v.

                                      Cochrane, 985 F.2d 1027, 1031 (9th Cir. 1993) (the defendant ‘‘argues that the indictment mere-
                                      ly informed him he had violated 26 U.S.C. § 7206; that the Code of Federal Regulations provi-
                                      sions dealing with the enforcement of section 7206 concern the Bureau of Alcohol, Tobacco and
                                      Firearms (BATF); and that since he had never dealt in anything relating to those matters, ‘he
                                      was at a loss to see how any of his conduct would come under BATF, or be chargeable under
                                      a provision of law administered by BATF’ ’’). The court observed that ‘‘Nothing in that section
                                      [7206] limits its applicability to the internal revenue laws concerning alcohol, tobacco and fire-
                                      arms, or even suggests that they are its primary focus. Under a reasonable construction of the
                                      statute, a person of ordinary intelligence could understand that it criminalizes lying on any form
                                      or document filed with the IRS.’’ Id.




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                                      (498)                          WNUCK v. COMMISSIONER                                              509


                                         Whether he realizes it or not, Mr. Wnuck is contending
                                      that, because there is a regulation in 27 C.F.R. providing for
                                      the TTB to prepare substitutes for firearms tax returns,
                                      therefore the IRS may not prepare substitutes for income tax
                                      returns, despite explicit authorization for income tax SFRs in
                                      26 C.F.R. Perhaps this argument arises from simple
                                      ignorance about the existence of 26 C.F.R. section 301.6020–
                                      1(b)(2). That regulation does indeed exist (in 26 C.F.R.), and
                                      it gave the IRS the necessary authority to prepare Mr.
                                      Wnuck’s SFR.
                                         Mr. Wnuck’s eye fell on a provision in 27 C.F.R., however,
                                      and from that provision he concocted an imaginary rule that
                                      he pretended would eliminate his tax liability. But the exist-
                                      ence of an additional (and unrelated) regulation in 27 C.F.R.
                                      has no implications whatsoever for this case. He had no rea-
                                      son to suppose that that provision was relevant here, and he
                                      had no reason to infer from that provision any rule that
                                      could have the effect he suggested. His argument is patently
                                      frivolous. 10
                                           3. Alleged errors in Individual Master File
                                        Mr. Wnuck’s third patently frivolous argument is based
                                      on—
                                      errors that appear in the Individual Master File that the Internal Revenue
                                      Service maintains on him. These errors include but are not limited to, use
                                      of the Petitioner’s social security number by two individuals, listing the
                                      Petitioner as a small business entity with gross receipts of fewer than ten
                                      million dollars instead of an individual human being and the fact that no
                                      code entry for the substitute for return created for this case on the pre-
                                      scribed date, August 10, 2009, exists.

                                      Mr. Wnuck admitted his receipt of the earnings that give rise
                                      to the deficiency that the IRS determined. Our inquiry ends
                                      there. If the IRS’s records reflect errors of the sort he alleges,
                                      they do not affect the outcome of this case. He does not allege
                                      that any other individual’s income has been attributed to
                                      him; the deficiency was determined on the basis of his being
                                         10 Moreover, even if the SFR that the IRS prepared had been somehow invalid, Mr. Wnuck’s

                                      tax liability would not be affected by it, since the IRS is not required to prepare an SFR but
                                      may simply issue a statutory notice of deficiency pusuant to section 6212(a). See Hartman v.
                                      Commissioner, 65 T.C. 542, 546 (1975); Tinnerman v. Commissioner, T.C. Memo. 2010–150
                                      (‘‘Neither a return nor a substitute for return is a prerequisite to a notice of deficiency’’) (citing,
                                      inter alia, Schiff v. United States, 919 F.2d 830, 832–833 (2d Cir. 1990), and Roat v. Commis-
                                      sioner, 847 F.2d 1379, 1381–1382 (9th Cir. 1988)).




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                                      510                136 UNITED STATES TAX COURT REPORTS                                        (498)


                                      an individual, not a corporation or any other entity; and the
                                      existence or non-existence of the SFR does not affect the fact
                                      or the amount of his liability. He ‘‘file[d] a petition with the
                                      Tax Court for a redetermination of the deficiency’’, pursuant
                                      to section 6213(a). He did not file a suit for mandamus to cor-
                                      rect the agency’s records—and the Tax Court would have no
                                      jurisdiction to entertain such a suit. See Larsen v. Commis-
                                      sioner, T.C. Memo. 2008–170. His argument about supposed
                                      errors in the IRS’s records has no bearing here and is frivo-
                                      lous.
                                        Where, as here, the fallacies in a position are obvious, it
                                      is doubtful whether any advantage results from stating the
                                      obvious. But having nonetheless undertaken to do so, we can
                                      now show disadvantages that may result from this effort.
                                           F. Addressing frivolous anti-tax arguments wastes
                                              resources.
                                        The time and money that are spent in addressing a frivo-
                                      lous position can be considerable. For example, the Court’s
                                      discussions of Mr. Wnuck’s three arguments (in part I.C.
                                      above) did not write themselves but required time to
                                      research and write. Admittedly, the research was not heavy
                                      intellectual lifting, but it did take time. Chaos can be spread
                                      quickly and easily; imposing order takes time and effort.
                                        For instance, Mr. Wnuck assailed an SFR issued pursuant
                                      to section 6020(b) by simply inserting into his brief a para-
                                      graph citing ‘‘27 CFR Part 53 & 70’’; but responding to that
                                      argument (see part I.E.2. above) was not so easy, even if the
                                      ultimate answer was obvious from the start. To actually
                                      address the frivolous argument, even if only summarily,
                                      required finding the particular regulations (none of which
                                      were cited by Mr. Wnuck) and explaining the applicability of
                                      section 6020(b) to both firearms tax and income tax, pursu-
                                      ant to both 26 C.F.R. section 301.6020–1(b)(1) and 27 C.F.R.
                                      section 70.42(b)(1). Or to choose another instance, Mr.
                                      Wnuck’s argument citing Helvering v. Morgan’s, Inc., 293
                                      U.S. 121 (1934), is obviously frivolous upon first reading; one
                                      never wondered whether Morgan’s might have the signifi-
                                      cance that Mr. Wnuck asserted; but to answer Mr. Wnuck’s
                                      argument (see part I.E.1.c. above) required finding, reading,
                                      and understanding the Morgan’s opinion and then composing




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                                      (498)                          WNUCK v. COMMISSIONER                                          511


                                      an explanation of just how badly Mr. Wnuck had misunder-
                                      stood it.
                                         Moreover, not only the authoring Judge’s time is involved
                                      in producing an opinion. To prepare a Tax Court opinion for
                                      public release requires substantial work by law clerks, cler-
                                      ical staff, and the Office of the Reporter of Decisions, as well
                                      as other Judges. 11 A Tax Court opinion is thus the product
                                      of considerable institutional effort.
                                         The substantial effort expended to produce a Tax Court
                                      opinion is well spent, even in a small case and even where
                                      the outcome is clear, if the contentions being adjudicated are
                                      made seriously and in good faith. Taxpayers with disputes
                                      both large and small need to know that their good-faith dis-
                                      agreements with the tax collector will get serious attention
                                      from this Court. However, the peddlers of frivolous anti-tax
                                      positions and their clients who file petitions advancing those
                                      positions should not be allowed to divert and drain away
                                      resources that ought to be devoted to bona fide disputes. If
                                      frivolous positions were to bog down the operations of this
                                      Court, the resulting disadvantage would accrue not mainly to
                                      the Court itself but rather to litigants with legitimate issues
                                      and to the public generally. To responsibly manage its
                                      resources, the Court should therefore not address every frivo-
                                      lous argument.
                                           G. The time taken to address frivolous anti-tax arguments
                                              delays the assessment of tax.
                                        The IRS is charged with the responsibility of assessing tax
                                      against taxpayers. Sec. 6201. When the IRS proposes to
                                      assess a deficiency in income tax, the taxpayer may file a
                                      petition asking the Tax Court to redetermine the deficiency;
                                      and the mere filing of the petition—even if it is a frivolous
                                      petition—has the effect of delaying the assessment of the tax
                                      until after the case has been decided by the Tax Court. Sec.
                                      6213(a). When the assessment is delayed, the collection of
                                      the tax is likewise delayed. 12 Where the petition is frivolous,
                                      there is no good reason for delay, and that assessment ought
                                      to occur as promptly as possible. Any time that the Court
                                         11 See sec. 7460(b); Cohen, ‘‘How to Read Tax Court Opinions’’, 2000 Hous. Bus. & Tax L.J.

                                      1, available at www.hbtlj.org/v01/v01—cohen.pdf.
                                         12 See secs. 6321 (lien arises upon demand), 6331(a) (levy follows notice and demand), 6303

                                      (notice and demand follows assessment).




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                                      512                136 UNITED STATES TAX COURT REPORTS                                        (498)


                                      spends in preparing and issuing an opinion results in an
                                      unfortunate delay.
                                           H. Addressing frivolous anti-tax arguments risks dignifying
                                              them.
                                         The oft-cited opinion in Crain v. Commissioner, 737 F.2d
                                      at 1417, observes that one reason not to refute frivolous
                                      arguments is that ‘‘to do so might suggest that these argu-
                                      ments have some colorable merit.’’ The observation is cer-
                                      tainly valid. It is this Court’s experience that taxpayers who
                                      take frivolous positions often have learned those positions
                                      from self-appointed anti-tax gurus with prepackaged pseudo-
                                      legal arguments that include inapposite citations from such
                                      sources as the Federal Register, inapplicable State and Fed-
                                      eral statutes, court opinions taken out of context, and the
                                      Internal Revenue Manual (IRM). Some taxpayers seem to
                                      understand their frivolous arguments imperfectly, if at all,
                                      and seem not to understand the nature of the authorities
                                      they cite. 13 If, as it seems, such a taxpayer has been per-
                                      suaded of these positions by the mere presence of legalese,
                                      then it is entirely possible (as Crain anticipated) that a
                                      serious discussion of a frivolous position will seem to him to
                                      confer respectability on that position.
                                         For example, when we take five paragraphs (in part I.E.2.
                                      above) to explain why 27 C.F.R. section 70.42(b)(1) has no
                                      effect on the validity of an income tax SFR, we incur a risk:
                                      A legally unsophisticated taxpayer may wrongly infer that, if
                                      it took that much reasoning and writing to defeat the argu-
                                      ment, then the argument must have had something going for
                                      it. The inference would be wrong, of course. Mr. Wnuck’s 27
                                      C.F.R. argument is hardly a legal argument at all; and all
                                      that is there is manifestly wrong for multiple reasons. But
                                        13 For example, Mr. Wnuck’s motion for reconsideration cites the Supreme Court’s opinion in

                                      Helvering v. Morgan’s, Inc., 293 U.S. 121 (1934) (which we discussed in part I.E.1.c. above); and
                                      then, as if to demonstrate the authority of Supreme Court precedent, he argues, ‘‘The Internal
                                      Revenue Manual clearly states that the Internal Revenue Service must rely on and abide by
                                      the decisions of the Supreme Court’’ (citing IRM pt. 4.10.7.2.9.8 (May 14, 1999) (‘‘Importance
                                      of Court Decisions’’). Of course, the truism that Supreme Court opinions are binding precedent
                                      in tax matters is hardly bolstered by the repetition of that truism in the IRM. Cf. First Fed.
                                      Sav. & Loan Association of Pittsburgh v. Goldman, 644 F. Supp. 101, 103 (W.D. Pa. 1986) (‘‘The
                                      procedures set forth in the IRM do not have the effect of a rule of law and, therefore, are not
                                      binding upon the IRS. The manual is not promulgated pursuant to any mandate or delegation
                                      of authority by Congress. * * * Moreover, the provisions in the IRM are directory rather than
                                      mandatory. * * * We conclude that the pertinent procedures of the IRM are not binding upon
                                      the IRS and convey no rights to taxpayers’’).




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                                      (498)                          WNUCK v. COMMISSIONER                                            513


                                      since the actual substance of the frivolous anti-tax issue
                                      often seems to elude the litigant, and since all that affects
                                      him is the superficial appearance of legal matter, an expla-
                                      nation of why his argument is wrong may even be counter-
                                      productive. Perversely, the seriousness of the refutation
                                      becomes, in his mind, imputed to the frivolous argument
                                      itself. This is sometimes a good reason not to address frivo-
                                      lous arguments.
                                         There is thus little advantage to be gained by addressing
                                      frivolous arguments, and there are disadvantages that may
                                      accrue from doing so. For that reason, litigants who present
                                      frivolous arguments should not expect to see them answered
                                      in opinions of this Court.
                                      II. Why we increase Mr. Wnuck’s penalty under section
                                          6673(a)(1)
                                         As we noted above (in part I.G.), the mere filing of a peti-
                                      tion in this Court has the effect of delaying the assessment
                                      until the case has been decided. Sec. 6213(a). This creates an
                                      opportunity for a cynical taxpayer to file a petition, even if
                                      he has no good-faith basis for doing so, in order to put off the
                                      inevitable assessment of tax against him. To deter this
                                      abuse, Congress enacted section 6673(a)(1), which provides:
                                        (1) PROCEDURES INSTITUTED PRIMARILY FOR DELAY, ETC.—Whenever it
                                      appears to the Tax Court that—
                                           (A) proceedings before it have been instituted or maintained by the
                                        taxpayer primarily for delay,
                                           (B) the taxpayer’s position in such proceeding is frivolous or ground-
                                        less, or
                                           (C) the taxpayer unreasonably failed to pursue available administra-
                                        tive remedies,
                                      the Tax Court, in its decision, may require the taxpayer to pay to the
                                      United States a penalty not in excess of $25,000.

                                      This Court is thus authorized under section 6673(a)(1) to
                                      impose a penalty not in excess of $25,000 when the tax-
                                      payer’s position is frivolous 14 or groundless or when it
                                        14 A position maintained by the taxpayer is ‘‘frivolous’’ where it is ‘‘contrary to established law

                                      and unsupported by a reasoned, colorable argument for change in the law.’’ Coleman v. Commis-
                                      sioner, 791 F.2d 68, 71 (7th Cir. 1986); see also Hansen v. Commissioner, 820 F.2d 1464, 1470
                                      (9th Cir. 1987) (sec. 6673 penalty upheld because taxpayer should have known claim was frivo-
                                      lous).




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                                      514                136 UNITED STATES TAX COURT REPORTS                                        (498)


                                      appears that proceedings before it have been instituted or
                                      maintained by the taxpayer primarily for delay.
                                         Mr. Wnuck advanced frivolous arguments, as we have
                                      shown. Both during Mr. Wnuck’s trial and in the bench
                                      opinion served several days later, the Court clearly stated to
                                      Mr. Wnuck that it found his positions not just unavailing but
                                      frivolous. For that reason the Court, in its original decision,
                                      imposed on Mr. Wnuck a $1,000 penalty pursuant to section
                                      6673(a); and the Court warned him of steeper penalties to
                                      follow if he persisted.
                                         Mr. Wnuck disregarded that explicit warning when he filed
                                      his subsequent motion for reconsideration. That motion made
                                      clear that Mr. Wnuck did not have new points to make; he
                                      simply repeated the arguments that had already been ruled
                                      frivolous and suggested that the Court should have
                                      addressed those arguments in more detail in an opinion. He
                                      had to know that his motion was foredoomed, but there was
                                      a reason (i.e., an improper reason) for him to file the motion
                                      nonetheless:
                                         By the interaction of the applicable rules (i.e., Rules 162
                                      and 190(a) of the Tax Court Rules of Practice and Procedure,
                                      rule 13(a)(2) of the Federal Rules of Appellate Procedure, and
                                      sections 6213(a), 7481(a)(1), and 7485(a)), Mr. Wnuck’s filing
                                      a motion to vacate had the effect of delaying his deadline for
                                      filing a notice of appeal and thereby delaying the date on
                                      which the IRS could assess the tax deficiency that it had
                                      determined and that this Court had upheld. Mr. Wnuck
                                      thereby required the Court to act on his case again, with the
                                      case remaining in limbo until that repetitive action is taken.
                                         Mr. Wnuck’s recent motion to vacate therefore was filed
                                      ‘‘primarily for delay’’, see sec. 6673(a)(1)(A), and was ‘‘frivo-
                                      lous’’, see sec. 6673(a)(1)(B). It is apparent that the Court’s
                                      prior warnings and the original $1,000 penalty were not
                                      sufficient to deter Mr. Wnuck from maintaining frivolous
                                      positions. We will therefore increase the penalty to $5,000, in
                                      the hope that the greater penalty will have the effect of
                                      deterring further frivolous litigation. Mr. Wnuck is again
                                      warned that, if in the future he maintains frivolous litiga-
                                      tion, he is at risk of a penalty as high as $25,000.




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                                      (498)                          WNUCK v. COMMISSIONER                                          515


                                           To reflect the foregoing,
                                                          An appropriate order and decision will be entered.
                                                                               f




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