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T.C. 523, 544 (2000). It is unclear to us whether petitioner is
defending his initial arguments on the ground that, in good
faith, he made those arguments in reliance on what he claims to
be professional advice.2 In any event, that reliance is
unsubstantiated.
Petitioner relies on the 861 argument to defend against
imposition of a section 6673(a)(1) penalty. The 861 argument is
that the regulations under section 861 establish that
petitioner’s income in the form of remuneration for services and
bank interest received from sources within the United States is
not taxable income (or is not “non-exempt income”). The 861
argument is contrary to established law and, for that reason,
frivolous. In Corcoran v. Commissioner, T.C. Memo. 2002-18, the
taxpayer made a similar argument. We characterized the
taxpayer’s argument as “without factual or legal foundation”, and
addressed it as follows:
Section 1 imposes an income tax on the income of
every individual who is a citizen or resident of the
United States. Sec. 1.1-1(a)(1), Income Tax Regs.
Section 61(a) provides that except as otherwise
provided in subtitle A (income taxes) gross income
2 There is some question whether it is necessary for a
court to find that a taxpayer acted in bad faith in order to
impose a penalty on him under sec. 6673(a)(1)(B) for putting
forth a frivolous or groundless position. Compare Branch v.
I.R.S, 846 F.2d 36, 37 (8th Cir. 1988) (“A taxpayer’s asserted
good faith is not relevant to the assessment of frivolous return
[sec. 6702] penalties.”) with May v. Commissioner, 752 F.2d 1301,
1306 (8th Cir. 1985) (“showing of willfulness or lack of good
faith is required [for section 6673(a)(1) damages]”).
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