Unpublished Disposition, 923 F.2d 861 (9th Cir. 1991)

MEMORANDUM^** 

The Commissioner determined that the Braytons were deficient in paying their 1984 federal income taxes. The Braytons challenged the Commissioner's notice of deficiency in the tax court, which granted the Commissioner judgment on the pleadings. 58 T.C.M. 993 (CCH) (1989).¹  We affirm and sanction the Braytons for bringing a frivolous appeal.

A judgment on the pleadings in the tax court is appropriate "only where the pleadings do not raise a genuine issue of material fact, but rather involve only issues of law. The motion is to be granted only if, on the admitted facts, the moving party is entitled to a decision." Tax Court Rule of Practice and Procedure 120 note, 60 T.C. 1057, 1126 (1973). The Braytons do not raise any factual issues. We review the tax court's granting of a motion for judgment on the pleadings de novo. Grimes v. Commissioner, 806 F.2d 1451, 1453 (9th Cir. 1986) (per curiam).

The Brayton's contention in their Reply Brief that they are not "taxpayers" within the meaning of the Internal Revenue Code is frivolous. The Code defines "taxpayer" as "any person subject to any internal revenue tax." I.R.C. Sec. 7701(a) (14). Every individual United States citizen is subject to income taxation. I.R.C. Sec. 1; 26 C.F.R. Sec. 1.1-1(a) (1) ("Section 1 of the Code imposes an income tax on the income of every individual who is a citizen or resident of the United States"); see U.S. Const.Amend. XVI (granting Congress authority to collect income tax); Wilcox v. Commissioner, 848 F.2d 1007, 1008 n. 3 (9th Cir. 1988) ("income may be taxed without apportionment under the Sixteenth Amendment"). The Braytons admit they are citizens of the United States. Therefore, they are "taxpayers" within the meaning of the Code.

The Braytons' challenge to the placement of the burden of proof also fails. Id. at 1008 (petitioner who failed to file income tax return still had burden).

The Braytons are incorrect in claiming they were owed a full hearing before the Commissioner issued a notice of deficiency. This contention

mistakes the nature of the notice of deficiency. The notice of deficiency does not result in final liability on the part of the taxpayer. If the taxpayer files a petition in the Tax Court, liability will be adjudicated prior to payment. 26 U.S.C. § 6213 [footnote omitted]. The notice of deficiency merely hails the taxpayer into court. ... Issuing a notice of deficiency is in many ways analogous to filing a civil complaint.

Clapp v. Commissioner, 875 F.2d 1396, 1403 (9th Cir. 1989).

The Braytons claim that the Administrative Procedure Act (APA), 5 U.S.C. §§ 551 et seq. & 701 et seq., governs "review" of the notice of deficiency is misplaced. Section 554 of the APA applies only to cases "of adjudication required by statute to be determined on the record after opportunity for an agency hearing," but not to "matter [s] subject to a subsequent trial of the law and the facts de novo in a court." 5 U.S.C. § 554(a). The tax court "exercises de novo review," Clapp, 875 F.2d at 1403, and is therefore not a reviewing court within the meaning of the APA. O'Dwyer v. Commissioner, 266 F.2d 575, 580 (4th Cir.), cert. denied, 361 U.S. 862 (1959).

There was no denial of due process. " [D]ue process rights are adequately protected by the statutory scheme which allows [a taxpayer] to contest his tax liability in the Tax Court prior to paying the disputed tax or to sue for a refund in federal district court or in the Court of Claims." Stonecipher v. Bray, 653 F.2d 398, 403 (9th Cir. 1981), cert. denied, 454 U.S. 1145 (1982); see Wilcox, 848 F.2d at 1008; Western Reserve Oil & Gas Co. v. New, 765 F.2d 1428, 1433-34 (9th Cir. 1985), cert. denied, 474 U.S. 1056 (1986). Summary disposition does not violate due process. As the Fifth Circuit explained in affirming a tax court grant of summary judgment, "Since [the petitioner] has never alleged any facts at all, and his legal arguments were all clearly without merit, he has failed to demonstrate that there is any issue the resolution of which could possibly be affected by a hearing; thus, there is simply no point in having one. the Constitution does not require such futile exercises." Knighten v. Commissioner, 702 F.2d 59, 61 (5th Cir.) (per curiam), cert. denied, 464 U.S. 897 (1983).

The Braytons failed to raise before the tax court their contentions that the Commissioner was required to examine a tax return before issuing a notice of deficiency and that the Commissioner failed to follow certain IRS procedures. "As a general rule, we will not consider an issue raised for the first time on appeal, although we have the power to do so." Bolker v. Commissioner, 760 F.2d 1039, 1042 (9th Cir. 1985) (citations omitted). We have discretion to address issues not previously raised where "the issue presented is purely one of law and either does not depend on the factual record developed below, or the pertinent record has been fully developed." Id. We need no further factfinding to decide these claims. For that reason, and because we give the benefit of doubt to pro se litigants, see Bretz v. Kelman, 773 F.2d 1026, 1027 n. 1 (9th Cir. 1985) (en banc), we address these new arguments.

Neither contention has merit. The Commissioner "must consider information that relates to a particular taxpayer before it can be said that the Commissioner has 'determined' a 'deficiency' in respect to that taxpayer." Scar v. Commissioner, 814 F.2d 1363, 1368 (9th Cir. 1987). The record reflects that the Commissioner examined the Braytons' tax return in issuing the notice of deficiency. The Braytons' contention to the contrary is frivolous.

The procedural irregularities the Brayton's assert, even if true, do not affect the validity of the notice of deficiency. " [R]ules of agency organization, procedure or practice" do not have the force of law. Ward v. Commissioner, 784 F.2d 1424, 1430-31 (9th Cir. 1986) (citing Rank v. Nimmo, 677 F.2d 692 (9th Cir.), cert. denied, 459 U.S. 907 (1982)); see also Luhring v. Glotzbach, 304 F.2d 560, 563 (4th Cir. 1962) (compliance with procedural rules for issuance of notice of deficiency is not essential to its validity).

The Braytons devote much discussion to the principle that pro se petitions must be construed liberally. We agree. Nevertheless, even the most liberal reading of their petition fails to reveal a valid legal argument. Their pro se status does not excuse them from presenting a tenable legal theory to this court.

Federal Rule of Appellate Procedure 38 empowers us to "award just damages and single or double costs to the appellee" if we "determine that an appeal is frivolous." It is the law of this circuit that "an appeal is frivolous when the result is obvious or the arguments of error are wholly without merit." In re Becraft, 885 F.2d 547, 548 (9th Cir. 1989). The Braytons were on notice, the tax court having assessed the maximum allowable sanctions against them, that the arguments they presented there were frivolous, yet they persisted in bringing this appeal. Their new arguments regarding the validity of the notice of deficiency are likewise wholly without merit. The Braytons' pro se status does not insulate them from sanctions for wasting this court's resources with untenable legal claims, Grimes, 806 F.2d at 1454, especially so given that the tax court put them on notice of the lack of merit in their claims. We award damages to the government in the amount of $1,000.

AFFIRMED WITH SANCTIONS.