William B. and Diane S. Meyer - Page 2

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                                     Background                                       
               Petitioners are husband and wife.  At the time of the filing           
          of the petition, petitioners resided in Las Vegas, Nevada.                  
               On April 15, 1997, petitioners filed a 1996 Form 1040, U.S.            
          Individual Income Tax Return (tax return), reporting zero gross             
          income for the 1996 tax year.  With the tax return, petitioners             
          submitted a document making the following assertions:  (1) The              
          Internal Revenue Code does not establish an income tax liability;           
          (2) the tax return is not being filed voluntarily but out of fear           
          of illegal governmental prosecution; (3) the “Privacy Act Notice”           
          contained in the Form 1040 booklet informed petitioners that they           
          are not required to file a return; (4) regulations requiring the            
          filing of a tax return apply only to foreign earned income; (5)             
          laws requiring taxpayers to provide information to the Federal              
          Government violate taxpayers’ Fifth Amendment rights; (6) courts            
          have held that a Form 1040 with zeros inserted in the spaces                
          provided qualifies as a tax return; (7) petitioners had zero                
          income according to the Supreme Court’s definition of income; (8)           
          petitioners’ 1996 tax return does not constitute a “frivolous”              
          return for purposes of section 6702; and (9) no statute allows              
          the IRS to change petitioners’ tax return.                                  
               On August 13, 1998, respondent mailed a statutory notice of            
          deficiency to petitioners.  In the notice, respondent determined            
          a corrected taxable income of $845,902, a deficiency of $312,721,           






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