Willie Watts; Mary Watts, Plaintiffs-appellants, v. United States of America, Defendant-appellee, 52 F.3d 336 (9th Cir. 1995)

MEMORANDUM^** 

Willie and Mary Watts appeal pro so the district court's order enforcing two Internal Revenue Service ("IRS") summonses issued to third-party record keepers for the purpose of determining their income tax liability for tax years 1989 through 1992. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we affirm.

We review for clear error the district court's order enforcing an IRS summons. United States v. Derr, 968 F.2d 943, 945 (9th Cir. 1992).

The Wattses contend that the district court lack subject matter jurisdiction to order enforcement of the summonses because (1) the statutory provisions authorizing the IRS to issue summons do not apply to the individual income tax, and (2) they do not receive taxable income. These contentions lack merit.

The Wattses contend that the government lacked authority to issue the summons because the IRS's authority to issue summons does not apply to the provisions to Title 26, U.S.C., which deal with the individual income tax. The Wattses argue that the statutory section and the accompanying regulations cited by the IRS as authority for issuing the summons in this case, 26 U.S.C. § 7602, only apply to the provisions of Title 27, U.S.C., which the Wattses claim deal exclusively with alcohol, tobacco and firearms taxes.

It is clear that 26 U.S.C. § 7602 is not limited in the manner argued by the Wattses. The wording of the statutes gives the IRS broad authority to issue summons in enforcing all types of taxes.¹  See Derr, 968 F.2d at 945.

The Wattses contends that the IRS lacked authority to issue the summons because they have not received taxable income. Specifically, the Wattses argue that the amounts they received for their labor constitute an equal, nontaxable exchange of property rather than taxable income. This argument has repeatedly been rejected. Harris v. Commissioner, 758 F.2d 456, 458 (9th Cir. 1985); United States v. Romero, 640 F.2d 1014, 1016 (9th Cir. 1981); accord Casper v. Commissioner, 805 F.2d 902, 904-05 (10th Cir. 1986).

The government requests sanctions against the Wattses for bringing this appeal. This court has discretion to impose damages against litigants as a sanction for bringing a frivolous appeal. Fed. R. App. P. 38; 28 U.S.C. § 1912; Wilcox v. Commissioner, 848 F.2d 1007, 1008 (9th Cir. 1988) ($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. Wilcox, 848 F.2d at 1009. The Wattses' contentions on appeal are wholly without merit. Accordingly, we impose $1,500 damages as a sanction.

AFFIRMED.