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includes “all income from whatever source derived,”
including compensation for services and interest.
Secs. 61(a)(1), (4). * * *
Ignoring these statutory provisions, petitioners
argue that their compensation for services * * * and
interest do not constitute gross income because these
items of income are not listed in section 1.861-8(f),
Income Tax Regs. Their argument is misplaced and takes
section 1.861-8(f), Income Tax Regs., out of context.
The rules of sections 861-865 have significance in
determining whether income is considered from sources
within or without the United States. The source rules
do not exclude from U.S. taxation income earned by U.S.
citizens from sources within the United States. See,
e.g., Williams v. Commissioner, 114 T.C. 136, 138-139
(2000) (rejecting claim that income is not subject to
tax because it is not from any of the sources listed in
sec. 1.861-8(a), Income Tax Regs.); Aiello v.
Commissioner, T.C. Memo. 1995-40 (rejecting claim that
the only sources of income for purposes of sec. 61 are
listed in sec. 861); Great-West Life Assur. Co. v.
United States, 230 Ct. Cl. 477, 678 F.2d 180, 183
(1982) (“The determination of where income is derived
or ‘sourced’ is generally of no moment to either United
States citizens or United States corporations, for such
persons are subject to tax under section 1 and section
11, respectively, on their worldwide income.”).
Petitioner’s position, that respondent erred in determining
a deficiency in, and additions to, petitioner’s 1996 Federal
income tax, is frivolous, since all of petitioner’s arguments in
support of that position are frivolous. Petitioner deserves a
penalty under section 6673(a)(1), and that penalty should be
substantial, if it is to have the desired deterrent effect. Cf.
Talmage v. Commissioner, T.C. Memo. 1996-114 (text at n.5), affd.
without published opinion 101 F.3d 695 (4th Cir. 1996). The
purpose of section 6673 is to compel taxpayers to think and to
conform their conduct to settled principles before they file
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