                          T.C. Memo. 2002-313



                        UNITED STATES TAX COURT



               DALE CURTIS KINSLOW, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No.    8937-01.               Filed December 27, 2002.


     Dale Curtis Kinslow, pro se.

     Helen H. Keuning, for respondent.


                          MEMORANDUM OPINION


     JACOBS,   Judge:      Respondent   determined   deficiencies    in

petitioner’s Federal income tax and additions to tax for failure to

file a tax return and pay tax pursuant to section 6651(a)(1) and

(2), as follows:
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                                       Additions to Tax
     Year       Deficiency     Sec. 6651(a)(1)   Sec. 6651(a)(2)
                                                               1
     1997        $5,427            $348.75
                                                               1
     1998         7,422             409.28
                                                               1
     1999         7,146             464.40

     1
         To be computed on the date of payment.
     All section references are to the Internal Revenue Code for

the years at issue.

     The deficiencies arise from petitioner’s failure to file

required Federal income tax returns for 1997, 1998, and 1999.

                              Background

     Petitioner resided in Fargo, North Dakota, at the time he

petitioned   this     Court   seeking     a     review    of       respondent’s

determinations.

     There are no disputed facts in this case.           During each of the

3 years at issue (i.e., 1997, 1998, and 1999), petitioner received

wages from Peterson Mechanical, Inc., for services rendered as a

pipe fitter, as well as interest income from United Savings Credit

Union, as follows:

                       1997              1998              1999

     Wages          $37,166         $45,196              $44,482
     Interest            51              48                   49

     In addition, in 1997, petitioner received a $398 income tax

refund from the State of North Dakota.

     Petitioner claims that he has the right to “voluntarily opt

out” of the Federal tax system and that he chooses to do so in
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order to do more for his community, his wife to be, the State of

North Dakota, and his country.

     Respondent’s representative informed petitioner on several

occasions    that   the    Federal    tax   system   is    not   voluntary,    as

petitioner maintains, and that the position taken by petitioner is

frivolous.     In   this    regard,    respondent’s       representative   sent

petitioner a 33-page document entitled “The Truth About Frivolous

Tax Arguments”, detailing responses to some of the more common

arguments raised by individuals and groups who oppose compliance

with the Federal tax laws.

                                 Discussion

     Petitioner does not contest that he received the aforestated

amounts of wages and interest during 1997, 1998, and 1999.                    Nor

does he contest that he received a $398 income tax refund from the

State of North Dakota in 1997.        Rather, he contends there is no law

that requires him to pay taxes and “with corporations moving their

monies to offshore islands and basically becoming tax-free”, there

is no “fairness” in the tax laws.             He asks to “be free from [the

tax] chains that bind [him] financially.”

     Petitioner’s arguments relating to the validity, as well as

the voluntary nature, of the Federal income tax system are similar

to those who oppose compliance with the Federal tax laws and which

have been rejected on countless occasions by this and other courts.

Woods v.     Commissioner, 91 T.C. 88, 90 (1988); United States v.
                                      - 4 -

Gerads,      999   F.2d   1255,   1256     (8th      Cir.   1993);   Wilcox     v.

Commissioner, 848 F.2d 1007 (9th Cir. 1988), affg. T.C. Memo. 1987-

225; Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984). Suffice

to say, section 61(a)(1) and (a)(4) includes in the definition of

“gross income” (i.e., income that is subject to Federal income tax)

compensation for services rendered and interest, respectively; and

pursuant to the so-called “tax benefit rule”, State income tax

refunds are taxable if the amount of the tax refund was deducted in

a prior year and such deduction resulted in a reduction of tax for

that year.      See sec. 111.

       We     therefore     sustain      respondent’s         tax      deficiency

determinations for 1997, 1998, and 1999. We now turn our attention

to the additions to tax for failure to file a tax return and pay

tax.     Sec. 6651(a)(1) and (2).

       Section 6651(a)(1) imposes an addition to tax for failure to

timely file a return.      Petitioner can avoid the section 6651(a)(1)

addition to tax by proving that his failure to file was:                 (1) Due

to reasonable cause, and (2) not due to willful neglect.                      Sec.

6651(a)(1); Rule 142(a); United States v. Boyle, 469 U.S. 241, 245-

246 (1985); United States v. Nordbrock, 38 F.3d 440 (9th Cir.

1994).      “Reasonable cause” requires a taxpayer to demonstrate that

he     exercised   ordinary     business      care    and   prudence    and   was

nevertheless unable to file a return within the prescribed time.

United States v. Boyle, supra at 246; sec. 301.6651-1(c)(1),
                                     - 5 -

Proced.    &   Admin.    Regs.    Willful    neglect   means    a    conscious,

intentional failure to file or reckless indifference.                     United

States v. Boyle, supra at 245.

       Petitioner was required to file Federal income tax returns for

1997, 1998, and 1999.         Sec. 6012.    He failed to do so and offered

no satisfactory explanation.        Nor has he presented any evidence to

prove that his failure to file was due to reasonable cause and not

willful neglect.        We therefore sustain respondent’s determination

with    respect    to   the   section   6651(a)(1)   addition       to   tax   for

petitioner’s failure to timely file a return for 1997, 1998, and

1999.

       In general, section 6651(a)(2) imposes an addition to tax for

failure to timely pay the amount of tax shown on a required income

tax return.       In the case before us, as stated, no tax return was

filed for 1997, 1998, or 1999; a fortiori, no amount of tax was

shown on a return for these years.           To the contrary, petitioner’s

tax liability for 1997, 1998, and 1999 was determined in the

revenue agent’s report, and the deficiency computation for each of

these years was stated in the notice of deficiency.

        Pursuant to section 6651(g)(2), in the case of a substituted

income tax return made by the Secretary under section 6020(b), such

substituted return is treated, for purposes of determining the

addition to tax under section 6651(a)(2), as the return filed by

the taxpayer.      The record does not reveal, and respondent does not
                                        - 6 -

assert, that the Secretary prepared substituted tax returns for

petitioner for 1997, 1998, and 1999 pursuant to section 6020(b).

Consequently, because petitioner filed no tax returns (nor were

substituted tax returns prepared by the Secretary) for 1997, 1998,

or 1999, the addition to tax for failure to pay tax pursuant to

section     6651(a)(2)      cannot      be     sustained.       See   Heisey    v.

Commissioner, T.C. Memo. 2002-41.

     Finally, respondent has requested us to require petitioner to

pay to the United States a penalty for instituting a frivolous

proceeding pursuant to section 6673. Section 6673(a)(1) authorizes

the Court to require a taxpayer to pay to the United States a

penalty, up to $25,000, whenever it appears that proceedings in

this Court have been instituted or maintained by the taxpayer

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

proceeding is frivolous or groundless.               A taxpayer’s position is

frivolous or groundless “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).

     Petitioner was informed on several different occasions by

respondent that his position regarding the voluntary nature of

Federal    income   taxes    was   both      frivolous   and   groundless.      In

addition, he was cautioned by this Court that if he continued to

pursue his frivolous tax arguments, he could be required to pay a

penalty to the United States pursuant to section 6673(a).
                                 - 7 -

     Although petitioner is not liable for the section 6651(a)(2)

addition to tax, his position with respect to the substance of this

case is both frivolous and groundless.       His insistence on pursuing

his fruitless argument has consumed the time and effort of both

this Court and the Commissioner, whose time and effort could

otherwise have been devoted to resolving bona fide claims of other

taxpayers.   See Cook v. Spillman, 806 F.2d 948 (9th Cir. 1986).

Accordingly, pursuant to section 6673, we shall require petitioner

to pay a penalty to the United States in the amount of $1,000.

     To reflect the foregoing,



                                             An appropriate order and

                                         decision will be entered.
