Beckelhimer v. United States, 623 F. Supp. 115 (M.D. Tenn. 1985)

Basil E. and Joe Ann Beckelhimer, pro se.

Paul M. Predmore, Washington, D.C. and Joe Brown, U.S. Atty., Nashville, Tenn., for defendants.

NEESE, Senior District Judge, Sitting by Designation and Assignment.

This is another pro se civil action challenging the assessment by the Internal Revenue Service (IRS) of a $500 civil-penalty against the plaintiffs for filing a "frivolous" tax-return.^[1] 28 U.S.C. §§ 1340, 1346(a); 26 U.S.C. §§ 6703(c), 7422(a). The event which triggered such action on the part of the IRS was the filing by the plaintiffs of an "Amended U.S. Individual Income Tax Return" (Form 1040X) on which they sought to reduce their federal income-tax liability for the calendar year 1980 by decreasing substantially the amount they had reported as taxable-income on their original return for that year. In support of their amended return and claim for a refund, the plaintiffs resurrected the long-defunct argument that wages (or salary) (that is, monetary compensation received in return for personal services rendered) did not constitute "income" and therefore was not subject to the federal income-tax.

This Court has ruled that wages and salary are taxable-income; that any contention *116 to the contrary is patently frivolous; that any document which purports to be a federal income-tax return (or an amended return) and which attempts to reduce one's tax-liability by excluding wages or salary from taxable-income, on the ground that they do not constitute taxable-income, is frivolous within the meaning of 26 U.S.C. § 6702(a); and that where one has filed such a document with the IRS, the assessment of the $500 civil-penalty mandated by § 6702(a), supra, is proper. Hill v. United States, 599 F. Supp. 118 (D.C.Tenn.1984). The Court also forewarned other litigants who might persist in claiming that wages or salary are not taxable-income that they risk being assessed with a reasonable attorney's fee in favor of the United States because "* * * it is highly unlikely that any similar lawsuit could be maintained in anything other than bad faith." Ib., 599 F. Supp. at 122.

For the reasons set forth in Hill v. United States, supra, the Court concludes that the plaintiffs herein have failed to state a claim upon which relief can be granted. Accordingly, the motion of the defendant for a dismissal of this action, Rule 12(b) (6), F.R.Civ.P., hereby is

GRANTED, and this action hereby is

DISMISSED for the failure of the plaintiffs to state a claim upon which relief can be granted.

Additionally, the Court FINDS that this action was frivolous and was maintained by the plaintiffs in bad-faith. Thus, the United States is entitled to recover, as a part of its costs herein, a reasonable attorney's fee and related expenses under 28 U.S.C. § 2412(a)^[2] and the bad-faith exception to the American rule, generally denying such recovery in the absence of a contractual or statutory provision therefor. See Reed v. United States, 581 F. Supp. 718, 720-721 (D.C.Col.1984); Lovell v. United States, 579 F. Supp. 1047, 1049 (D.C.Wis.1984); Tibbetts v. Secretary of the Treasury, 577 F. Supp. 911, 915[6] (D.C.N.C.1984); Collorafi v. United States, 579 F. Supp. 506, 507[2] (D.C.N.Y.1983); cf. Perkins v. Commissioner of Internal Revenue, 746 F.2d 1187, 1188-1189[4] (6th Cir. 1984).

Counsel for the defendant will file forthwith his declaration under penalty of perjury, see 28 U.S.C. § 1746, itemizing the number of hours he expended in representing his client in this proceeding, the approximate hourly-rate at which the United States has compensated (or will compensate) him for such representation, and any expenses incurred in such representation. The plaintiffs will be allowed 5 days after such filing in which to submit any desired response. Entry of a final judgment will await the Court's determination of the amount of allowable attorney's fee.

The Court hereby FINDS that $114.99 constitutes a reasonable attorney's fee and related expenses by the United States of America in its defense of this action. Accordingly, judgment will be entered by the clerk, dismissing this action for the failure of the plaintiffs to state a claim upon which relief can be granted herein and awarding the defendant its costs of action, including $114.99 in reasonable attorney's fees and related expenses. Rule 58(1), F.R.Civ.P.

[1] The Internal Revenue Service is not a proper party defendant herein and, as to such defendant, this action hereby is DISMISSED sua sponte for the failure of the plaintiffs to state a claim upon which relief can be granted. 26 U.S.C. § 7422(f); Myers v. Davis, 467 F. Supp. 8, 9 n. 2[2] (D.C.Tenn.1978).

[2] "Unless expressly prohibited by statute, a court may award reasonable fees and expenses of attorneys, in addition to the costs which may be awarded pursuant to subsection (a), to the prevailing party in any civil action brought by or against the United States or any agency and any official of the United States acting in his or her official capacity in any court having jurisdiction of such action. * * *" 28 U.S.C. § 2412(b).