“Don’t frivol,” says long-time CPA and tax attorney of the year for several years Judge Elizabeth A. (“Tex) Copeland to Vito Manente, Docket No. 1013-23, filed 6/18/24, as she tags Vito, a CPA, not only for his deficiency but that of loved-once Denise. Though they’ve since split, they were married and filed MFJ for year at issue, and her signature on the petition is sufficiently imperfect to put Denise out of court.

Vito tries a “wages aren’t income until you buy something with them” variation on the wages-aren’t taxable Subtitle A – Subtitle C gambit.

“As to the… receipts, Mr. Manente admitted at trial that he would be subject to taxation on ‘gains from labor.’ However, he advanced the unsupported legal proposition that such gains were only taxable if the monies received in return for labor were invested and then sold to convert them to ‘gains.’ He claims wages are not taxable in and of themselves and cited to select text from multiple cases including Supreme Court cases. However, he entirely ignored the ultimate holdings of the cases he cited.” Transcript, at p. 7.

Judge Tex Copeland plays the Crain-Wnuck defense, classic variation.

“We will not further dissect Mr. Manente’s additional unsupported arguments or refute them with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have colorable merit.” Transcript, at pp. 8-9. (Citations omitted).

However, IRS’ trial prep is a wee bit less than stellar.

Vito is in line for a five-and-ten substantial understatement chop, but IRS’ papering only includes a belated declaration from one claiming to be a supervisor, which doesn’t get into evidence because too late for Vito to cross-examine the alleged supe. Judge Tex Copeland isn’t best pleased.

“The evidence accepted into the record does not identify the name of the examining agent who proposed the penalty, so we cannot determine that [alleged supe] was in fact the immediate supervisor of the examining agent who proposed the penalty. While it is clear that Mr. Manente has advanced only frivolous arguments in support of his return position and that his underpayment was substantial, the Commissioner has not met his burden of production for the section 6662 penalty and we cannot sustain the penalty determination.” Transcript, at p. 12.

Wot, no CPAF?

And IRS fails to show Vito and Denise got a tax benefit from a year-at-issue NJ income tax refund in any prior year, thus failing to get that into the deficiency.

Judge Tex Copeland can’t send off Vito without the obligatory Section 6673 yellow card.

“We end by noting that Mr. Manente’s return positions are unbecoming to his position as a CPA. We warn Mr. Manente that under section 6673(a), this Court has authority to impose a penalty of up to $25,000 for making frivolous or groundless arguments in proceedings before us. Because this appears to be the first case that Mr. Manente has brought to trial in our Court, we will not impose a penalty at this time. We may not be so lenient if he repeats his performance in the future.” Transcript, at p. 13.