Cracking the Code reviewed by Judge Buch

[Lambkin]

Interestingly, CtC wasn't even in evidence in the case in which this remarkable judicial agitation displays itself. The verbose judge apparently just decided to use his ruling in the case as an occasion to make a name for himself within his little special-interest world, like a 17th Century priest including a screed against Copernicus in his Sunday sermon.

Peter Hendrickson as Copernicus! As Leonardo DaVinci! He's too modest, but I'm not afraid to make that Einstein comparison either.

[operabuff]

Something I don't understand about the opinion itself: The judge seems to have allowed an awful lot of discovery, which is strange because the issues in question were almost pure law. Unless there is a compelling reason I am missing, then that also needs to stop. Discovery was worthless in this case and there's no point in pretending otherwise. There's a provision in the FRCP to just resolve a case on the basis of the papers, does that not work in tax court?

[Lawyer, but not a tax lawyer].

Oddly enough, discovery is a relatively recent development in the Tax Court. I don't recall exactly when they changed the rules to permit it, but I think it was in the seventies. Before then, only very limited discovery was allowed. (I think the theory was that the taxpayer was generally in possession of his own financial records and therefore didn't require much discovery. The Service was expected to already have the records it needed, gathered during the examination process.)

The Tax Court does not lean towards the degree of motion practice that you might be familiar with from District Court and other federal courts. Motions for summary judgment and for judgment on the pleadings are allowed under the rules, but relatively rarely granted. This is likely because roughly 2/3 of petitioners in the Tax Court are pro se. The Tax Court leans over backwards to make sure that unrepresented petitioners have the opportunity to bring their case to court.

[operabuff]

Actually something like this already was done.

Public Law 109-432, the Tax Relief and Health Care Act of 2006, enacted on Dec. 20, 2006, contained, at 120 Stat.L. 2960, a new 26 USC sec 6702, raising the penalties for frivolous returns and positions, and instructing the IRS to draw up and publish a list of frivolous positions so that taxpayers are suitably warned to not to try to use those arguments. The 2008 edition of this list, titled The Truth About Frivolous Tax Arguments, was IRS Notice 2008-14, which appears several places on the internet (sometimes with updating) (one place in 2010 was http://www.irs.gov/pub/irs-utl/friv_tax.pdf ). The previous version of sec. 6702 had been upheld as Constitutional. Herndon v. Egger (SDNY 2/13/87) 59 AFTR2d 732, 87 USTC 9193. The IRS provides people making such arguments with a copy of this compilation. Barry v. CIR, TC Memo 2011-127; Mooney v. CIR, TC Memo 2011-35; In re Verschoot (Bankr., D.Mont 4/4/05); or it will refer them to the internet link for it. Meyer v. CIR (D.Minn 9/27/10); Battle v. CIR, TC Memo 2009-171; Little v US (MDNC 11/7/05) 96 AFTR2d 7086 affd 178 Fed.Appx 230; and might even decline discussing issues that are dealt with in that list. Marcinek v. CIR (3d Cir 3/16/12) 467 Fed.Appx 153, 109 AFTR2d 1413, 2012 USTC 50248 cert.den (10/1/12) _US_, 133 S.Ct 199. Once the tax-dodger has been alerted to this compilation, he cannot claim a good faith defense in persisting in any of the arguments listed therein. US v. Beiter (11th Cir 10/11/11) 448 Fed.Appx 900, 108 AFTR2d 6747; Barry v. CIR, TC Memo 2011-127; Powell v CIR, TCM 2009-174, penalty against counsel affirmed as Barrington v. US District Court (DC Cir 12/2/10) 408 Fed.Appx 381, 108 AFTR2d 5368. Several courts have favorably mentioned The Truth About Frivolous Tax Arguments, primarily because its ubiquitous availability shows that the tax scofflaw knew or should have known with little effort that his schemes were bogus; e.g., Marcinek v. CIR (3d Cir 3/5/12) 467 Fed.Appx 153, 109 AFTR2d 1413, 2012 USTC 50248; US v. Beiter (11th Cir 10/11/11) 448 Fed.Appx 900, 108 AFTR2d 6747; US v. Hendrickson (ED Mich 2009) 664 F.Supp.2d 793; etc.

Not sure where this quote comes from, but it's not entirely accurate. The author seems to confuse two documents - the list of frivolous arguments referenced in section 6702 and the Truth About Frivolous Tax Arguments. The list of frivolous arguments was first published in the IRB as Notice 2007-30, then was expanded somewhat a year later in Notice 2008-14 (referenced in the above quotation). There have been some revisions since then as well. It is just a list of frivolous arguments, with no explanation of why the arguments are frivolous.

In 2003, Vernice Kuglin won her criminal case. There was speculation that the jury found persuasive her argument that the IRS never told her that her positions were frivolous. The Truth About Frivolous Tax Arguments appeared a year or two later and attempts to list all frivolous arguments and then explains why each frivolous argument is wrong. The Truth has never been published in the IRB, but is available on irs.gov.

Two distinct documents.

[fortinbras]

I am "the author" and will double-check and make appropriate corrections in my compilation. Thanks for setting me straight.

¶ You are correct. The 'official" list worked up pursuant to §6702 is, in its latest incarnation, IRS NOTICE 2010-33 (replacing the Notice 2008-14 that you mentioned), dated April 7, 2010, and found on the internet at:

http://www.irs.gov/pub/irs-drop/n-10-33.pdf

(which, unfortunately, has a format somewhat confusing to ordinary folk, since it seems to be part of a larger document, and also because the basic text references at least a dozen other documents, mostly Revenue Rulings, to add more frivolous positions to its list but only by reference). The same is 2010-1 CB 609, 2010-17 IRB 609, 2010 IRB Lexis 207, 2010 WL 1347082. This document simply lists the positions without any mention of statutory sections or court decisions.

Judging from IRS publications issued as recently as two months ago, this 2010 list is still the latest version.

But the IRS also publishes that list "The Truth About Frivolous Tax Arguments", which appears to cover all the same positions as in the Notice, but this time providing legal references (sections and decisions) to demonstrate the frivolousness, and it generally seems to be a bit more reader-friendly than the Notice. This "Truth About" has been revised more recently than Notice 2010-33. Both the Notice and the "Truth About" have been cited in court decisions as proving that a particular argument was bogus, but seldom have both been cited in the same decision.

[LPC]

CtC is apparently very popular and anybody who wants to take these positions is on notice, should they care to do the research.

People do "research" all the time and are able to "find" what they were looking for, which is that the federal income tax is unconstitutional or inapplicable, despite more than 100 years of court opinions to the contrary.

Good grief, we've even got two court opinions with Petey's own name in the caption, one finding him liable for the taxes he says he doesn't owe, and the other confirming his criminal conviction for knowingly filing false documents claiming he didn't owe any tax.

And a Google search for "Peter Hendrickson" takes you right to all the dirt.

But you think one more decision will put people on notice?

[operabuff]

But the IRS also publishes that list "The Truth About Frivolous Tax Arguments", which appears to cover all the same positions as in the Notice, but this time providing legal references (sections and decisions) to demonstrate the frivolousness, and it generally seems to be a bit more reader-friendly than the Notice. This "Truth About" has been revised more recently than Notice 2010-33. Both the Notice and the "Truth About" have been cited in court decisions as proving that a particular argument was bogus, but seldom have both been cited in the same decision.

I think you would find that the "Truth About" has been updated annually during filing season. I don't know whether they've released a 2014 version yet, or plan to.

Yet another similar document is something called "The Dirty Dozen" which is released by the IRS media relations folks every filing season.

[AndyK]

Is anyone else just as astonished as I am that Pete didn't read the Opinion, have a major face-palm moment, and fall on his knees; admitting his error and begging forgiveness of all those who he led astray?

Perhaps when pigs fly but likely not even then.

Pete is so wrapped in HIMSELF that he will never be able to admit any possibility of error on his part.

Even when he visits Doreen in prison after her conviction for criminal contempt, it won't be his fault.

He was right and everyone else is out to get him.

But, then again, we can use the power-editor to replace 'Pete' and 'Doreen' with just about any other tax deniers' names and still be stating reality.

So many starfish, so little time.

[notorial dissent]

Prattlin' Pete is right, and everyone else is wrong.

It is as simple as that, and that is why he'll never change or admit he was wrong, he simply couldn't possibly be wrong about any of it, it is after all his own divinely inspired teaching, so there couldn't be anything wrong with it.

Everything else that is put out there is just an attempt to distract from his inspired message.