Unpublished Disposition, 919 F.2d 145 (9th Cir. 1990)

MEMORANDUM^** 

Leo and Barbara Masters appeal pro se the tax court's order granting the Commissioner of Internal Revenue's (CIR) motion for judgment on the pleadings pursuant to Tax Court Rule 120, denying the Masters's motion for summary judgment, and imposing damages against the Masters. The tax court found that the Masters failed to allege any specific assignments of error in the CIR's calculation of the Masters's tax deficiency, as required under Tax Court Rule 34(b) (4) and (5). We have jurisdiction pursuant to 26 U.S.C. § 7482(a). We affirm the tax court's decision, as well as its imposition of damages pursuant to 26 U.S.C. § 6673. In addition, we award sanctions of $1,500 against the Masters pursuant to Fed. R. App. P. 38 and 28 U.S.C. § 1912 for bringing a frivolous appeal.

An order granting judgment on the pleadings on the ground that the petition fails to state a claim is a conclusion of law reviewable de novo. See Wilcox v. Commissioner, 848 F.2d 1007, 1008 (9th Cir. 1988).

In the tax court, the Masters had the burden of demonstrating that the CIR's deficiency determination was incorrect. Hokanson v. Commissioner, 730 F.2d 1245, 1249 (9th Cir. 1984). Pursuant to Rules 34(b) (4) and (5) of the Tax Court Rules of Practice and Procedure, the Masters were required to give clear and concise assignments of each error allegedly committed by the CIR in its determination of their deficiency, and clear and concise statements of the facts upon which they based their assignments of error. 26 U.S.C. § 7453 Tax Ct.R. 34(b) (4) and (5).

The Masters failed to allege any specific errors that the CIR made in computing the amount of their tax deficiency. Instead, the Masters argued that the CIR's failure to provide them with a full administrative hearing prior to issuing the notice of deficiency as required by the Administrative Procedure Act (APA) violated due process. Further, they argued that the Commissioner did not have authority to send the deficiency notices, that the deficiency notices were not sufficient, that wages are not taxable income, that they are exempt from a direct unapportioned tax because they are citizens and residents of California, and that they are exempt from tax because they are not "U.S. individuals living abroad." Finally, the Masters argue on appeal that because they are appearing pro se, their petition should be construed liberally. These arguments all lack merit.

Failing to provide a taxpayer with an administrative fact finding hearing prior to issuing a notice of deficiency does not violate due process. Wilcox, 848 F.2d at 1008. Section 554(a) (1) of the APA provides that the APA does not apply to matters "subject to subsequent consideration of the law and facts de novo in a court." 5 U.S.C. § 554(a) (1). Thus, because the tax court reviews de novo the CIR's determination of a deficiency, the APA is not applicable. See id.; Clapp v. Commissioner, 875 F.2d 1396 (9th Cir. 1989). Further, "no particular form is required for a valid notice of deficiency, and the Commissioner need not explain how the deficiencies were determined." Scar v. Commissioner, 814 F.2d 1363, 1367 (9th Cir. 1987).

Section 1 of the Internal Revenue Code ("Code") imposes an income tax on the income of every individual who is a citizen or resident of the United States. 26 U.S.C. § 1. Wages are taxable income. Wilcox, 848 F.2d at 1008. Finally, while pro se pleadings are viewed liberally, a pro se petitioner must nevertheless comply with court rules. See Swimmer v. IRS, 811 F.2d 1343, 1345 (9th Cir. 1987). Thus, the Masters's arguments are meritless and fail to meet the requirements of Tax Court Rules 34(b) (4) and (5). Accordingly, the tax court did not err in granting the CIR's motion for judgment on the pleadings pursuant to Tax Court Rule 120.

"The [t]ax [c]ourt may impose a penalty [, not to exceed $5,000,] on a taxpayer ... for bringing an action which is frivolous or groundless." Larsen v. Commissioner, 765 F.2d 939, 941 (9th Cir. 1985) (per curiam) (citing 26 U.S.C. § 6673). We review the tax court's imposition of damages pursuant to section 6673 of the Code for abuse of discretion. Id.

Here, the tax court found that the Masters's claims were frivolous and filed primarily for delay and awarded the CIR $5,000 in damages pursuant to section 6673 of the Code. Because we agree that the Masters's contentions are frivolous, especially in light of the repeated claims the Masters have brought in the past, we find that the tax court did not abuse its discretion by imposing damages.

The CIR requests sanctions against the Masters for bringing this appeal. This court has discretion to impose damages against litigants, even pro se, as a sanction for bringing a frivolous appeal. Fed. R. App. P. 38; 28 U.S.C. § 1912; Wilcox, 848 F.2d at 1008-09 ($1,500 sanction imposed on pro se litigant for bringing a frivolous appeal). An appeal is frivolous if the results are obvious or the arguments of error are wholly without merit. Id. at 1009 (citation omitted). The Masters's claims are wholly without merit. Further, the Masters have repeatedly brought frivolous arguments before this court and the tax court. Accordingly, we impose $1,500 damages as a sanction, payable to the Internal Revenue Service.

AFFIRMED.