Unpublished Disposition, 886 F.2d 1320 (9th Cir. 1989)

MEMORANDUM^** 

Carl H. Beery appeals from the judgment of conviction entered by the district court for four counts of attempted tax evasion under 26 U.S.C. § 7201 and one count of falsely representing a number to be the social security number assigned to him by the Secretary in violation of 42 U.S.C. § 408(g) (2). Beery seeks reversal on the grounds that (1) the district court erred in instructing the jury that wages are as a matter of law subject to the income tax and (2) he was denied due process at the administrative level of the Internal Revenue Service procedure. We affirm and grant the government's request for sanctions.

Beery contends that the district court erred in instructing the jury that wages were subject to the income tax because such a charge resulted in a directed verdict for the government on at least one material element of the crime. Beery contends that reversal is warranted because the instruction negated his theory of defense that wages are not taxable income. Specifically, Beery argues that (1) his wages were not income because his wages were an even exchange for his services; (2) Congress cannot "legislate" a definition of income because income is a term used in the sixteenth amendment which Congress cannot define; and (3) to tax wages the same as an increase in wealth derived from capital investment deprives a wage earner of due process and equal protection of the law.

Beery's contentions are frivolous. Contrary to Beery's beliefs, whether wages constitute income is not a factual question to be determined by the jury. Wages constitute income as a matter of law. United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981). The district court properly instructed the jury that wages are subject to the income tax law. The court's instruction did not invade the fact-finding province of the jury.

Beery's argument that wages are an exchange for services and do not constitute gain has been repeatedly rejected by this court and numerous other courts. United States v. Buras, 633 F.2d 1356, 1361 (9th Cir. 1980); accord Casper v. Commissioner of Internal Revenue, 805 F.2d 902, 904-905 (10th Cir. 1986) (citing cases).

Moreover, Congress has the authority to define income as it has in 26 U.S.C. § 61(a). See Buras, 633 F.2d at 1361 ("the Sixteenth Amendment is broad enough to grant Congress the power to collect an income tax regardless of the source of the taxpayer's income."). Beery's due process and equal protection arguments are also meritless. The income tax on wages is constitutional. Stelly v. Commissioner of Internal Revenue, 761 F.2d 1113, 1115 (5th Cir.) ("It is clear beyond peradventure that the income tax on wages is constitutional.") (citing numerous cases), cert. denied, 474 U.S. 851 (1985).

Beery contends that he was denied administrative due process in the fact-finding procedure conducted by the Internal Revenue Service prior to his indictment. Beery relies on 26 C.F.R. Sec. 601.105 and United States v. Mendoza-Lopez, 481 U.S. 828 (1987). Section 601.105(g) by its very terms provides that the procedure described in section 601.105 does not apply in any case in which criminal prosecution is under consideration.

Beery's reliance on Mendoza-Lopez is also misplaced. Mendoza-Lopez dealt with a criminal prosecution for illegal entry into the United States after deportation under 8 U.S.C. § 1326. 481 U.S. at 830. The Court held that a collateral challenge to the use of a deportation proceeding as an element of a criminal offense must be permitted where the deportation proceeding effectively eliminates the right of the alien to obtain judicial review. Id. at 838-39. The Court explained that "where a determination made in an administrative proceeding is to play a critical role in the subsequent imposition of a criminal sanction, there must be some meaningful review of the administrative proceeding." Id. at 837-38 (emphasis in original).

In the instant matter, there was no element of the criminal offense established in any Internal Revenue Service proceeding. The government was required to, and did, prove every element of the criminal offense beyond a reasonable doubt. Beery was not denied administrative due process. See also Wilcox v. Commissioner of Internal Revenue, 848 F.2d 1007, 1008 (9th Cir. 1988) ("failing to provide a taxpayer with an administrative fact finding hearing does not violate due process.").

The government has requested damages for Beery's frivolous appeal pursuant to Federal Rule of Appellate Procedure 38. We have previously awarded sanctions against pro se litigants who have brought frivolous tax appeals. Id. at 1008-1009; Grimes v. Commissioner of Internal Revenue, 806 F.2d 1451, 1454 (9th Cir. 1986). Counsel for Beery chose to ignore clearly established principles of law and the precedent of this circuit. We expect more from a member of the bar. Accordingly, we award damages to the government in the amount of $1500. Counsel is ordered not to look to his client for reimbursement for payment of these sanctions.

II

CONCLUSION

The judgment of the district court is AFFIRMED.