Florida Wages not Earned in United States?

[LPC]

Guess how far that argument got in the Tax Court.

But no sanctions!

David Roy Callihan v. Commissioner, T.C. Memo. 2011-268, No. 14506-10 (11/10/2011)

DAVID ROY CALLIHAN,
Petitioner
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent

UNITED STATES TAX COURT

Filed November 10, 2011

David Roy Callihan, pro se.

Lynn M. Barrett, for respondent.

MEMORANDUM FINDINGS OF FACT AND OPINION

PARIS, Judge: Respondent determined a deficiency of $4,105 in petitioner's Federal income tax for tax year 2007. Petitioner timely petitioned the Court for redetermination.

The principal issue for decision is whether the payments petitioner received in exchange for services he provided are gross income on which taxes should be paid. Respondent also seeks a penalty under section 6673.[1]

FINDINGS OF FACT

Petitioner resided in Florida at the time he filed the petition.

During tax year 2007 petitioner worked for the School District of Desoto County and received $37,640 in wages. Petitioner also worked for the Sarasota Family YMCA, Inc., and received $616 in wages. These amounts were reported to the Internal Revenue Service (IRS) by each employer on Form W-2, Wage and Tax Statement. Petitioner also received a taxable grant from the State of Florida for $475 that was reported to the IRS by the State on a Form 1099-G, Certain Government Payments.

Petitioner timely filed his tax year 2007 return, disputing the taxable nature of the income received. On March 1, 2010, respondent mailed to petitioner a notice of deficiency setting forth respondent's determination of a deficiency in petitioner's income tax for tax year 2007. In response, petitioner filed a timely petition with the Court.[2]

OPINION

Tax Deficiency

While petitioner admits that he received the amounts on which the deficiency is based, he denies that they are taxable as income. He alleges 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 "the term 'United States' when used in a geographical sense includes the Commonwealth of Puerto Rico, the Virgin Islands, Guam, and America Samoa", sec. 3121(e)(2). Petitioner contends that the term "United States" therefore excludes all 50 States and that his services performed in Florida were not performed in the "United States" and his earnings from services performed in Florida are not taxable wages.

Petitioner's arguments are without merit and lack factual and legal foundation, and "we are not obligated to exhaustively review and rebut petitioner's misguided contentions." See Sanders v. Commissioner, T.C. Memo. 1997-452. The contention that the 50 States are not part of the "United States" is a thoroughly discredited and frivolous argument. See United States v. Collins, 920 F.2d 619, 629 (10th Cir. 1990) (citing Brushaber v. Union Pac. R.R., 240 U.S. 1, 12-19 (1916)); Rev. Rul. 2006-18, 2006-1 C.B. 743. Section 3121 pertains to employment taxes (not Federal income tax) and states to clarify that the "United States" does include areas that might not otherwise be thought to fall within the United States (Puerto Rico, the Virgin Islands, Guam, and America Samoa). Sec. 3121(e)(2); Ulloa v. Commissioner, T.C. Memo. 2010-68.

Section 6673 Penalty

Respondent has moved for a penalty under section 6673. Section 6673(a)(1) authorizes this Court to require a taxpayer who has instituted or maintained a proceeding primarily for delay, or whose position is frivolous or groundless, to pay a penalty of up to $25,000 to the United States. See Nis Family Trust v. Commissioner, 115 T.C. 523, 544 (2000). The purpose of section 6673, like that of section 6702, is to compel taxpayers to think and to conform their conduct to settled tax principles. See Coleman v. Commissioner, 791 F.2d 68, 71 (7th Cir. 1986).

The type of argument petitioner raised, especially that his wages are not taxable, is the type of argument that has been deemed by the Court to be frivolous and/or sanctionable under section 6673. Petitioner's continued reliance and insistence on advancing these arguments waste the Court's and respondent's limited resources, taking time away from taxpayers with legitimate disputes. After much consideration, the Court will deny respondent's motion to impose a penalty on petitioner. However, the Court explicitly admonishes petitioner that he may, in the future, be subject to a penalty under section 6673 for any proceedings instituted or maintained primarily for delay or for any proceedings which are frivolous or groundless. See Pierson v. Commissioner, 115 T.C. 576 (2000).

To reflect the foregoing,

An appropriate order and decision will be entered.

FOOTNOTES

1 All section references are to the Internal Revenue Code in effect for the year in issue.

2 On Sept. 5, 2011, petitioner received a final notice of intent to levy. This premature collection by levy has been abated pending the decision in this case.

END OF FOOTNOTES

[JamesVincent]

So hes claiming that the parts that arent actually parts of the United States but territories of the United States are the United States and the parts that are the United States arent the United States? So now its backwards day in tax court? Maybe the judge should just have told him, "No, you dont owe any back taxes at all" and stamped the order as owed and then it all would have made total sense to everyone.

[grixit]

Let's allow, for the nonce, that Florida is not part of the United States. In that case, it must still be part of the Spanish Empire. I wonder how that jurisdiction treated tax evasion. I'm thinking galley slave.

[notorial dissent]

I wonder how that jurisdiction treated tax evasion. I'm thinking galley slave.

Not kindly, is the answer. As I remember, you could be sold for your debts in Spain, and the galleys always needed extra "manpower" as it were. The Spanish just never seemed to have much of a sense of humor about debt and tax avoidance for some reason.

[Gregg]

And you have to wonder how much fun tax court could be in a country that brought us The Inquisition,

[AndyK]

After much consideration, the Court will deny respondent's motion to impose a penalty on petitioner

VICTORY

[Cathulhu]

And you have to wonder how much fun tax court could be in a country that brought us The Inquisition,

which nobody expects!

[Arthur Rubin]

And you have to wonder how much fun tax court could be in a country that brought us The Inquisition,

... and recognizes the concept of "universal jurisdiction" ... (Sorry, preparing notes for my Civil Procedure final.)

[LPC]

Section 3121 pertains to employment taxes (not Federal income tax) ....

An important point that is often mentioned here, but often not mentioned by the courts.

So, even if Hendrickson were right and private businesses were not "employers" within the meaning of section 3401, it would eliminate withholdings from wages but wouldn't eliminate the taxation of the wages, because sections 3121 and 3401 have no effect on section 61.

[LPC]

The knucklehead appealed to the 11th Circuit, which affirmed.

And still no sanctions.

David Roy Callihan v. Commissioner, No. 12-11586 (11th Cir. 9/25/2012)

DAVID ROY CALLIHAN,
Petitioner-Appellant,
v.
COMMISSIONER OF IRS,
Respondent-Appellee.

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT

Non-Argument Calendar

Agency No. 14506-10

Petition for Review of a Decision of the
U.S. Tax Court

(September 25, 2012)

Before MARCUS, MARTIN and KRAVITCH, Circuit Judges.

PER CURIAM:

David Roy Callihan, proceeding pro se, appeals the Tax Court's decision to sustain the Internal Revenue Service's ("IRS") determination of his income tax deficiency. Callihan concedes that in tax year 2007, he resided in Florida and that he worked for the School District of DeSoto County in exchange for $37,640, as well as the Sarasota Family YMCA, Inc. in exchange for $616. He insists, however, that none of his work constituted "employment" within the meaning of section 3121(b) of the Internal Revenue Code (IRC), 26 U.S.C. § 3121(b), and thus, the money he received in compensation for the services he rendered is not taxable.

Callihan acknowledges that section 3121(b) defines "employment" as "any service . . . performed . . . by an employee . . . within the United States." Id. But he notes that the section defines the term "State[s]" as "includ[ing] the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, and American Samoa," id. § 3121(e)(1), and that the term "United States" is similarly defined as "includ[ing]" some of these territories, id. § 3121(e)(2). According to Callihan, because these definitions do not specifically mention the fifty states, the work that he did in Florida did not constitute "employment" under section 3121(b).

The Tax Court rejected this argument as "thoroughly discredited and frivolous," and we are compelled to agree. Our precedent makes it abundantly clear that the term "United States" in the IRC is not limited to the District of Columbia and the territories and possessions of the United States. See United States v. Ward, 833 F.2d 1538, 1539 (11th Cir. 1987) (rejecting the argument as "utterly without merit"); see also United States v. Bennett, 448 F. App'x 991, 992 (11th Cir. 2011); United States v. Morgan, 419 F. App'x 958, 959 (11th Cir. 2011). The Tax Court thus correctly dismissed Callihan's assertion that Florida is not part of the "United States," and its judgment must therefore be affirmed.1

AFFIRMED.

FOOTNOTE

1 The IRS's tax deficiency determination also rested in part on Callihan's receipt of a $475 grant from the State of Florida in 2007. Although Callihan appears to challenge the Tax Court's conclusion that this was taxable, the only argument he makes here concerns the scope of the term "United States" in the definition of "employment." We therefore understand Callihan's argument to be that the grant was not taxable because he received it in Florida. This suggestion also fails for the reason stated above.

END OF FOOTNOTE

[fortinbras]

Even if this guy genuinely earned his money in another country, as a US citizen he has to pay US income tax on money he's made ANYWHERE in the world, even in outer space.