Another Hendrickson acolyte bites the dust

[Saturdayking]

Thought this recent Vermont Supreme Court decision would be of interest to you all. Cheers!



http://www.vermontjudiciary.org/upeo/eo08-190.pdf

[ErsatzAnatchist]

Thought this recent Vermont Supreme Court decision would be of interest to you all. Cheers!

http://www.vermontjudiciary.org/upeo/eo08-190.pdf

Unfortunately, footnote 2 leaves part of the CTC argument open. Damn shame the Court did not squish that one too.

[Demosthenes]

Welcome to Quatloos, SatKing.

[Nikki]

This also happens to be Andrew D. Scott USTC 026392-06 -- currently on appeal to the 2nd Circuit?

It seems the Commissioner was unsatisfied with Scott's Response to Request for Admissions. Something about "I did not earn 'income' or 'wages'..." and "I was not an 'employee'..."

The Court was similarly unsatisfied -- Summary Judgment for the Commissioner.

[grixit]

Both links come up with a not found.

[Dezcad]

Both links come up with a not found.

Which is appropriate for a vacuous CrackHead......

[Nikki]

Both links come up with a not found.

My bad

You need to do a Tax Court Docket Inquiry against the name or case number.

The result then contains the links to the files of interest -- unless someone would like to capture the files and post them so they can be accessed outside the docket search.

[Quixote]

I would have been happier if the court had pointed out that the characterization of the Scott's income as wages or not wages is irrelevant to its inclusion in gross income. Better yet, accept as fact Scott's assertion that his income was not wages. That would make his withheld tax, not withheld tax. Result: no withholding credit. As icing on the cake, the Department of Taxes penalty computation would be correct, doubling Scott's pain. TPs need to learn that there are consequences for denying reality.

[1 of Them]

Maybe the $20,000 penalty the court imposed will bring him back to reality. This guy goes from expecting a $13,500 refund, fraudulent of course, to almost $33,000 due. If he had filed correctly he might have gotten a refund or owed very little. This won't sit well with the Lost Heads over in Loserville. I'm sure PH will find some way to weasel-word this away arguing the TP didn't argue it correctly or the evil gov't is corrupt. I can't wait to watch PH go down in flames soon enough. I'll bring the marshmellows for the book burning party!!

[Famspear]

From Andrew D. Scott v. Commissioner - at the United States Tax Court (among other things, a $20,000 penalty is imposed):

Bench Opinion by Judge Diane L . Kroupa June 4, 2008
2 Andrew D. Scott 26392-06
3 The Court has decided to render oral findings of
4 fact and opinion in this case , and the following represents
5 the Court ' s oral findings of fact and opinion . These oral
6 findings of fact and opinion shall not be relied upon a s
7 precedent in any other case .

[ . . . ]

14 This is a deficiency case in which Petitioner
15 asserts he is not an "employee " and did not receive "wages,"
16 as defined in the Code , although he acknowledges that he
17 received earnings in exchange for his services in 2004 .
18 This deficiency case is before the Court on Respondent's
19 motion for summary judgment , filed on May 2, 2008 .
20 Andrew D . Scott appeared on his own behalf, and
21 John R . Mikalchus appeared on behalf of Respondent .
22 Findings of Fact . Some of the facts have been
23 stipulated and are so found. The stipulation of facts and
24 accompanying exhibits are incorporated by this reference .
25 Petitioner resided in Vermont at the time he filed th e
1 petition.
2 Petitioner was a mortgage broker for the Manhattan
3 Mortgage Company during 2004 and earned $61,072, from which
4 Petitioner's employer withheld, as required by law ,
5 $8,828 .55 of federal income tax . Also required by law ,
6 Petitioner's employer issued Petitioner a Form W-2 entitled
7 "Wage and Tax Statement" reflecting that Petitioner received
8 $61,072 of wages, tips, and other compensation during 2004 .
9 Petitioner filed a return for 2004 and reported
10 "zero" on the line specified for "wages , salaries, tips ,
11 etc ." In addition, Petitioner attached a Form 4852 entitled
12 "Substitute for Form W- 2, Wage and Tax Statement, or Form
13 1099-R, Distributions from Pensions , Annuities, Retirement
14 or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc ."
15 Petitioner prepared the substitute to report that
16 Petitioner's employer paid him zero in wages while $8,828 .55
17 was withheld for federal income tax. Petitioner signed this
18 form, under penalties of perjury, as well as the return for
19 the year 2004 .
20 Respondent issued Petitioner a statutory notice of
21 deficiency, dated October 16, 2006, determining tha t
22 Petitioner was liable for a $10,031 deficiency in federal
23 income tax and determining that Petitioner was liable for a
24 $2,941 accuracy-related penalty, under Section 6662, fo r
25 2004 . The deficiency was based on the unreported $61,072 of
1 wage income from the Manhattan Mortgage Company and $16 of
2 interest from the United States Treasury .
3 Petitioner timely filed a petition with this Court
4 asserting that "[he] submitted under penalty of perjury and
5 in accordance with the law as mandated in the Internal
6 Revenue Code, Sections 3401 and 3121, that not only doe he
7 NOT owe $10, 031 in taxes plus interest and penalties for
8 2004, but he is OWED A REFUND OF $ 13,500 as per his
9 submitted Forms 1040 and 4852 ." Petitioner ' s claim for
10 refund appears to be the sum of $8,828 .55 of federal income
11 tax withheld , $ 3,786 .46 of Social Security tax withheld, and
12 $885 .55 of Medicare tax withheld from Petitioner' s
13 "earnings . "
14 Petitioner informed Respondent that he is a
15 follower of a book entitled Cracking the Code : The
16 Fascinating Truth about Taxation in America by Peter Eric
17 Hendrickson , in which the author takes the position that
18 "income " is not defined in the Code and that wages earned by
19 non-federal employees are not subject to federal income tax.
20 Petitioner also stated , in a letter , dated November 8, 2007,
21 to Respondent , that his earnings are his property , not that
22 of the State of Vermont or the Department of Treasury . He
23 is not an employee , as defined BY LAW in the Code .
24 Petitioner asserts that he had no taxable activity in 2004
25 and, therefore, has no tax consequences . Petitioner has a

four-year college degree but no graduate degree . Petitioner
2 did not consult with any tax attorney in filing the return
3 for 2004 or in checking Mr . Hendrickson's position in the
4 book .
5 Respondent warned Petitioner, in a letter, date d
6 October 10, 2007, that Mr . Hendrickson' s arguments have been
7 repeatedly rejected by the courts and gave Petitioner cites
8 to five different federal cases in which the courts rejected
9 Mr . Hendrickson's arguments. Respondent also warned
10 Petitioner, in the letter, that he was at risk that this
11 Court might impose a penalty, under Section 6673, up to
12 $25,000 if he continued to maintain such frivolou s
13 arguments . The Court also reminded Petitioner, at calendar
14 call on June 2, 2008, and at trial, that he was at risk of
15 the $25,000 penalty if he continued to maintain hi s
16 misguided arguments.
17 Respondent contacted Dominick Savino, controller
18 at the Manhattan Mortgage Company, to confirm that the W-2
19 issued to Petitioner for 2004 was correct . Petitioner was,
20 indeed, employed there during 2004 and was paid $61,072 in
21 wages .
22 Respondent timely served Respondent's request for
23 admission on Petitioner, in accordance with Rule 90(c )
24 before its amendment on March 1, 2008 . The requests for
25 admissions stated that Petitioner received $16 in interest
from the Treasury Department and $61,072 from the Manhattan
2 Mortgage Company . In addition, Petitioner was employed by,
3 and worked for , the Manhattan Mortgage Company during 2004
4 and was paid $61,072 by the Manhattan Mortgage Company in
5 2004 for services rendered . The Court granted Respondent's
6 motion, ruling that the statements set forth in the requests
7 for admissions were deemed admitted .
8 Respondent also filed a motion for leave to file
9 an amendment to the answer to affirmatively allege the fraud
10 penalty against Petitioner under Section 6663 . Petitioner
11 asserts that the only fraud in this case is the fraud the
12 Internal Revenue Service (referred to as the IRS) has
13 perpetrated against him for the 40-some years he has filed a
14 return and paid taxes . Petitioner has been "enlightened" by
15 Mr . Hendrickson's book and has filed zero returns for 2004,
16 the year at issue ; 2005 , 2006, and 2007 ( that is, the years
17 after Petitioner read Mr . Hendrickson's book). Transcripts
18 of his account for the tax years 2002 and 2003 ( that is, the
19 two years before the year at issue) indicate that Petitioner
20 was aware that his wages constituted income, and he was
21 required to file a return .
22 Respondent filed a motion for summary judgment on
23 May 2, 2008 , and Petitioner filed a response, on May 23 ,
24 2008 , to Respondent ' s motion for summary judgment .
25 Petitioner again asserts, in his response, that he was not
an "employee" of the Manhattan Mortgage Company, as defined
2 in the Code, nor did he earns " wages," as defined in the
3 Code . He does concede , however, receiving interest from the
4 Treasury Department.

5 Opinion . We are asked to decide whether to grant
6 summary judgment.

[ . . . ]


25 Petitioner argues that his income is not taxable
because he is not an " employee " of the Manhattan Mortgage
2 Company , nor did he earn "wages," as defined by the Code .
3 Petitioner's argument that withholding applies only to
4 government workers is frivolous and false . See e .g ., United
5 States v . Sullivan , 788 F .2d 813, 815 (1st Cir . 1986) .
6 Courts consistently have upheld that taxpayers like
7 Hendrickson, the author of the book, was an employee within
8 the meaning of Section 3401(c) . United States v .
9 Hendrickson , 2007 WL 238501 ( E .D . Mich .), 100 A .F .T .R .2d
10 2007-5395. More specifically, with respect to Petitioner's
11 arguments gained from Mr . Hendrickson and his book, we find,
12 as do other courts, where taxpayers like Petitioner argue
13 that earnings are not taxable, he is not an "employee," and
14 that he did not earn " wages," as defined in the Code are all
15 frivolous and false. United States v . Latham , 754 F . 2d 747,
16 750 ( 7th Cir . 1985 )( court characterized argument that
17 category of "employee" does not include privately employed
18 wage earners is "a preposterous reading of the statute .") ;
19 Abdo v . United States , 234 F .Supp .2d 553 , 563 (M . D .N .C .
20 2002) affd . 63 Fed . Appx 163 (4th Cir . 2003)(court noted
21 claim that wages are not income " has been rejected as many
22 times as it has been asserted .") We, therefore , find that
23 Petitioner is liable for the $10,031 deficiency in federal
24 income taxes for 2004.
25 We next address whether Petitioner is liable for
the $2,941 accuracy-related penalty, under Section 6662, for
2 2004 . Respondent bears the burden of production with
3 respect to the penalty . Sec . 7491(c) .
4 Section 6662(a) imposes a penalty equal to 2 0
5 percent of any underpayment of tax that is due to either (1)
6 negligence or disregard of rules or regulations, or (2) a
7 substantial understatement of income tax . See Sec .
8 6662(a)(b)(1) and (2) . The term "negligence" includes any
9 failure to make a reasonable attempt to comply with the
10 provisions of the internal revenue laws . The term
11 "disregard" includes any careless, reckless, or intentional
12 disregard . Sec . 6662 ( c) ; see Sec . 1 .6662-3(b)(2), Income
13 Tax Regs .
14 An individual substantially understates his or her
15 income tax when the reported tax is understated by th e
16 greater of 10 percent of the tax required to be shown on the
17 return, or $5,000 . Sec . 6662(d) (1) (A) . Tax is not
18 understated to the extent that the treatment of the item is
19 based on substantial authority or is adequately disclosed in
20 the return or in a statement attached to the return, and
21 there is a reasonable basis for the tax treatment of such
22 item by the taxpayer . Sec . 6662(d)(2)(B) .
23 In the present case, the record demonstrates that
24 Petitioner failed to report the entire amount of his wage
25 income for 2004 . As a consequence, he understated his

income tax, and the understatement was substantial, within
2 the meaning of Section 6662(d) . We find Respondent has
3 satisfied his burden of production, under Section 7491(c),
4 with respect to the accuracy-related penalty, under Section
5 6662, for substantial understatement . Moreover, Petitioner
6 failed to present any documents or information to show that
7 his substantial understatement was due to reasonable cause
8 and not willful neglect . Petitioner did not consult any tax
9 attorney to file the return or question any positions
10 advocated in Mr . Hendrickson's book. Petitioner advanced
11 only frivolous and groundless arguments. Finally, nothing
12 in the record suggests Petitioner had reasonable cause not
13 to report wages as income.
14 In view of the foregoing, we sustain Respondent's
15 determination that Petitioner is liable for the accuracy-
16 related penalty, under Section 6662(a), for 2004.
17 We now address whether it is appropriate to impose
18 a penalty against Petitioner, under Section 6673, which
19 authorizes the Tax Court to require a taxpayer to pay to the
20 United States a penalty up to $25,000 whenever it appear s
21 that proceedings have been instituted or maintained by the
22 taxpayer primarily for delay or that the taxpayer's position
23 in such proceedings is frivolous or groundless .

[ . . . ]

6 We note that the type of arguments Petitioner
7 raises have been deemed by this Court to be frivolous and/or
8 sanctionable under Section 6673 . The Court is aware that
9 Petitioner has pursued the same frivolous argument in this
10 case as he does for 2005, 2006, and 2007 . Apparently ,
11 Respondent asserting the fraud penalty, under Section 6663,
12 against Petitioner has not deterred Petitioner from wasting
13 the Court ' s and Respondent's limited time and resources .
14 Petitioner deserves a penalty, under Section
15 6673 ( a)(1), and that penalty should be substantial, if it is
16 to have the desired deterrent effect . Cf . Talmad a v .
17 Commissioner , T .C . Memo . 1996-114, affd . without published
18 opinion 101 F . 3d 695 ( 4th Cir . 1996 ) . The purpose of
19 Section 6673 is to compel taxpayers to think and to conform
20 their conduct to settled tax principles . Coleman v .
21 Commissioner , 791 F .2d 68 , 71 (7th Cir . 1986 ) ; see also
22 Grasselli v . Commissioner , T .C . Memo . 1994-581 .
23 In this proceeding now before the Court ,
24 Petitioner asserts nothing but frivolous and groundless
25 arguments . It is apparent from the entire record that

Petitioner instituted or maintained this proceedin g
2 primarily, if not exclusively, as a protest against th e
3 federal income tax system, and his proceeding in this Court
4 is merely a continuation of Petitioner's refusal to
5 acknowledge and satisfy his tax obligations . We are
6 convinced that no purpose would be served in repeating all
7 that has been said about his frivolous and misguided
8 arguments.
9 We are also convinced that Petitioner is aware of
10 the warnings this Court has given to taxpayers who provide
11 the type of arguments Petitioner provided in this case, yet
12 Petitioner persisted and wasted this Court's limited time
13 and resources. We, therefore, shall require Petitioner to
14 pay a penalty of $20,000, pursuant to Section 6673(a)(1).
15 In addition, we take this opportunity to admonish Petitioner
16 that the Court will consider imposing a larger penalty if
17 Petitioner returns to the Court and advances similar
18 arguments in the future .
19 To reflect the foregoing, decision will be entered
20 for Respondent, and an appropriate order will be issued
21 sustaining the determinations in the deficiency notice,
22 dated October 16, 2006, for 2004, granting Respondent' s
23 motion for summary judgment and imposing a $20,000 penalty
24 against Petitioner under Section 6673 . Respondent als o
25 affirmatively asserts the fraud penalty against Petitioner

for 2004 . Respondent must prove fraud by clear and
2 convincing evidence that some portion of the underpayment is
3 attributable to fraud . Sec . 7454(a) ; Rule 142(b) ;
4 Neidringhaus v . Commissioner , 99 T .C . 202, 210 (1992) . We
5 think the record is replete with evidence that Petitioner
6 falsified Form 4852 for the year 2004, filed a fraudulent
7 return reporting no wages for 2004, even though he had a
8 pattern of paying taxes and was thus aware that there was a
9 filing requirement to report the wages before the year at
10 issue . We are hopeful, however, that the Section 667 3
11 penalty will be more productive in deterring Petitioner's
12 arguments and making Petitioner comply with his requirement
13 to report his earnings as wages, as defined in the Code, and
14 acknowledging that he is an "employee," as defined in the
15 Code .
16 This concludes the Court's oral findings of fact
17 and opinion in this case .
18 (Whereupon, at 9 :35 a .m ., the bench opinion in the
19 above-entitled matter was concluded . )

(bolding added).

[webhick]

I can't wait to watch PH go down in flames soon enough. I'll bring the marshmellows for the book burning party!!

Flaming bullshit never smelled so good. We could bottle it and put a really edgy name on it like "FABIES."