Wnuck v. Commissioner, 2011 U.S. Tax Ct. LEXIS 27

IRS determined a deficiency for 2007 based on unreported wages; Wnuck admitted he exchanged labor for pay; bench opinion found his position frivolous and imposed a $1,000 penalty under §6673(a)(1); Wnuck moved for reconsideration to address his arguments; the court vacated the prior decision granting vacatur and increased the penalty to $5,000; the court sustained the deficiency and explained why frivolous arguments need not be rebutted in detail; the final order reconfirms the IRS assessment and the higher penalty.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Taxable income from wages	Wnuck contends wages are not taxable income	IRS treats wages as taxable under §61(a)	Wages are taxable income to Wnuck
§6673(a) penalty applicability	Argues no or lesser penalty warranted	Penalty appropriate for frivolous positions	Penalty increased to $5,000
Motion to vacate/reconsideration	Seeks reconsideration of arguments	Motion to vacate granted; reconsideration denied	Motion to vacate granted; decision entered again with higher penalty
Court's treatment of frivolous arguments in opinions	Requests detailed rebuttal of each frivolous point	Refutation of each frivolous point is inefficient and unnecessary	Court limits detailed refutation of frivolous arguments to conserve resources

Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984) (reason not to refute frivolous arguments with lengthy precedents)
Reading v. Commissioner, 70 T.C. 730 (Tax Court 1978) (longstanding rejection of wages-not-taxable arguments)
United States v. Sloan, 939 F.2d 499 (7th Cir. 1991) (criminal consequences for frivolous tax arguments)
United States v. Collins, 920 F.2d 619 (10th Cir. 1990) (rejection of frivolous wage-not-taxable theories)
United States v. Cochrane, 985 F.2d 1027 (9th Cir. 1993) (indicts that lying on IRS filings can be criminal)
Helvering v. Morgan's, Inc., 293 U.S. 121 (1934) (includes imports a general class; nonexclusive usage)