Brian G. Takaba - Page 16




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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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