                               T.C. Memo. 2019-134



                         UNITED STATES TAX COURT



                   MICHAEL JAMES WELLS AND
             LYNN ANITA KIRCHNER-WELLS, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 22852-17.                          Filed October 7, 2019.



      Michael James Wells and Lynn Anita Kirchner-Wells, pro sese.

      Thomas Lee Fenner, for respondent.



                           MEMORANDUM OPINION


      PUGH, Judge: This matter is before the Court on respondent’s Motion for

Summary Judgment, filed July 15, 2019, pursuant to Rule 121.1


      1
      Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect for the year in issue, and all Rule references are to the Tax
                                                                       (continued...)
                                         -2-

[*2] In a notice of deficiency dated September 2, 2017, respondent determined a

deficiency of $104,029 in petitioners’ 2014 Federal income tax and an accuracy-

related penalty of $17,251 under section 6662(a) which respondent later conceded.

                                   Background

      Some of the facts were stipulated and are so found. The stipulated facts are

incorporated in our findings by this reference. When the petition was filed,

petitioners resided in Texas.

      During the year in issue petitioner Michael James Wells worked for

TransCanada, and petitioner Lynn Anita Kirchner-Wells worked for Hewlett-

Packard. Petitioners filed a joint Form 1040, U.S. Individual Income Tax Return,

for 2014 that reported zero wages and zero income, claimed the standard

deduction, and sought refunds for the full amounts of tax withheld from their

paychecks. Attached to their Form 1040 were Forms W-2, Wage and Tax

Statement, from TransCanada and Hewlett-Packard which reflected the amounts of

wages and tax withholding, corrected Forms 1099-DIV, Dividends and

Distributions, and other documents.




      1
      (...continued)
Court Rules of Practice and Procedure.
                                       -3-

[*3] Petitioners also attached Forms 4852, Substitute for Form W-2, Wage and

Tax Statement, indicating zero wages and the same amounts of tax withheld as

was shown on each Form W-2. Each Form 4852 included the following statement:

      I am a private-sector worker, not an “employee” as defined in IRC
      3401(c) and IRC 3121. I worked with a private-sector company, not
      a federal employer as defined in IRC 3401(d). I did not engage in
      “trade or business” as defined in USC Section 7701(a)(26).

                         *      *     *      *     *     *      *

      Did not ask Payer to issue corrected forms listing my payments of
      “wages” as defined in IRC 3401(c) and IRC 3121 for fear of creating
      a conflicted work environment. Line 7(e)(h)(i) reflect accurately
      withheld values submitted by Payer on W-2.

      Respondent did not treat petitioners’ Form 1040 as valid. Instead,

respondent froze their claimed refund and assessed a frivolous return penalty

pursuant to section 6702(a) of $5,000 against each petitioner. After this case was

scheduled for trial, respondent timely filed a motion for summary judgment to

which petitioners objected.

                                    Discussion

      Summary judgment may be granted if there is no genuine dispute as to any

material fact and a decision may be rendered as a matter of law. Rule 121(b).

Factual inferences are viewed in the light most favorable to the nonmoving party,

and the moving party bears the burden of proving that there is no genuine dispute
                                         -4-

[*4] of material fact and that he is entitled to judgment as a matter of law.

Sundstrand Corp. v. Commissioner, 98 T.C. 518, 520 (1992), aff’d, 17 F.3d 965

(7th Cir. 1994). However, the nonmoving party “must set forth specific facts

showing that there is a genuine dispute for trial.” Rule 121(d); see Sundstrand

Corp. v. Commissioner, 98 T.C. at 520. Petitioners do not dispute any material

facts; rather, as in their prior case before us, Wells v. Commissioner, T.C. Memo.

2018-188, they make only frivolous legal arguments. In Wells we sustained

respondent’s determination of petitioners’ income tax liability for 2013 and Mr.

Wells’ income tax liability for 2012. Therefore, summary adjudication is

appropriate.

      Gross income includes “all income from whatever source derived”. Sec.

61(a). Payments that are “undeniable accessions to wealth, clearly realized, and

over which the taxpayers have complete dominion” are taxable as income unless

an exclusion applies. Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431

(1955). Petitioners do not dispute that they received the wages, dividends,

interest, and capital gains on which respondent’s deficiency determination is

based. Instead they argue that they are not liable for Federal income tax. As we

explained in Wells v. Commissioner, at *5 (and cases cited thereto), petitioners’

assertions that they are not employees and their wages do not constitute taxable
                                        -5-

[*5] income are groundless and frivolous. Petitioners’ objection illustrates why

we do not try to refute their arguments with somber reasoning and copious

citations as if their arguments possessed some colorable merit. See Crain v.

Commissioner, 737 F.2d 1417, 1417 (5th Cir. 1984). They are making the same

arguments that we rejected in Wells, except that now they also argue that

respondent was wrong to treat their 2014 return as frivolous. Petitioners have

alleged no facts in their objections to respondent’s motion for summary judgment

or argued that any material facts are in dispute relating to respondent’s

determination of their tax liability. Therefore, respondent’s deficiency

determination will be sustained.

      The Court may on its own determine whether to impose a penalty not to

exceed $25,000 when it appears to the Court that a taxpayer’s position is frivolous

or groundless. Sec. 6673. We did not impose this penalty on petitioners in Wells

v. Commissioner, at *9, but cautioned them that if they persisted in making these

or similar arguments in the future, the Court was likely to impose penalties of up

to $25,000 under section 6673. They then had over nine months to reconsider

their position in this case: We filed our opinion in Wells on November 8, 2018,

respondent filed the motion for summary judgment in this case on July 15, 2019,

and petitioners filed their response on August 15, 2019. They did prevail in Wells
                                        -6-

[*6] on one issue--the accuracy-related penalty--but respondent conceded that

issue in his pretrial memorandum filed on November 30, 2018. So the penalty was

not at issue when they filed their response in this case in August. By then they

knew the Court’s position on their arguments, but they persisted in making them

anyway. Because they persisted, we now will impose a penalty of $10,000. We

again warn them that a higher penalty may be imposed should they continue to

make these and similar arguments in the future.

      We have examined all the materials in the record and construed facts most

favorably for petitioners, and we conclude that there is no genuine dispute as to

any material fact for trial in this case. Therefore, respondent’s motion for

summary judgment will be granted.

      To reflect the foregoing,


                                              An appropriate order and decision

                                       will be entered.
