Beard v. Comm'r
82 T.C. 766, 82 T.C. No. 60, 1984 U.S. Tax Ct. LEXIS 66 (1984)
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Rule of Law:
A document submitted to the IRS does not constitute a valid tax 'return' if it is not an honest and reasonable attempt to satisfy the requirements of the tax law. An intentionally altered form designed to protest the tax system and deceive tax authorities fails this test, even if it contains sufficient numerical data to calculate a tax liability.
Facts:
- During 1981, Robert D. Beard was employed by Guardian Industries and received wages totaling $24,401.89.
- For the 1981 tax year, Beard submitted an altered official U.S. Individual Income Tax Return Form 1040.
- On this form, Beard changed captions like 'Income' to 'Receipts' and 'gain'.
- Beard reported his wages of $24,401.89 but then claimed an offsetting, fabricated deduction for 'Non-taxable receipts' for the exact same amount, resulting in a zero tax liability.
- The scheme was designed to allow Beard to claim a refund of the $1,770.75 that had been withheld from his wages by his employer.
- Beard attached a memorandum arguing that wages are not taxable income under an 'equal exchange' theory, citing the case Eisner v. Macomber.
- For the 1979 tax year, Beard and his spouse had filed a standard, correct Form 1040A, properly reporting their wages as taxable income.
Procedural Posture:
- The Commissioner of Internal Revenue (respondent) issued a notice of deficiency to Robert D. Beard (petitioner) for his 1981 federal income tax.
- Beard filed a petition in the U.S. Tax Court to challenge the deficiency.
- In its answer to the petition, the Commissioner asserted additions to tax for failure to file a return and for negligence, and also requested damages for instituting a frivolous proceeding for the purpose of delay.
- The Commissioner then filed a motion for summary judgment in the U.S. Tax Court.
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Issue:
Does an income tax form that has been intentionally altered with frivolous legal arguments to protest the tax system, and which does not represent an honest and reasonable attempt to comply with tax law, constitute a valid 'return' for the purposes of the Internal Revenue Code?
Opinions:
Majority - Whitaker, Judge
No, an intentionally altered form that makes a mockery of the tax system does not constitute a valid 'return' because it fails to represent an honest and reasonable attempt to satisfy the requirements of tax law. The court applied a four-part test established by the Supreme Court to determine if a document is a valid return: 1) it must contain sufficient data to calculate tax liability; 2) it must purport to be a return; 3) it must represent an honest and reasonable attempt to satisfy the tax law; and 4) it must be executed under penalties of perjury. While Beard's form was signed and may have purported to be a return, it failed the third prong. The alterations, the fabricated deduction, and the accompanying protest memorandum demonstrated an intent to deceive and disrupt the tax system, not comply with it. The purpose of standardized forms is to allow for uniform and efficient processing, a purpose which Beard's 'tampered form' deliberately subverted.
Concurring - Nims, J.
No, the petitioner’s submission is a 'travesty tax return' that does not qualify as a valid filing. This opinion agrees fully with the majority's reasoning and result. It explicitly rejects the dissent's application of Supreme Court precedent, stating that it is improper to apply cases like Badaracco so far out of context as to support a concerted effort to disrupt the tax system.
Concurring in part and dissenting in part - Chabot, J.
Yes, the document filed by the petitioner does constitute a tax return under the standards articulated by the Supreme Court. The dissent argues that the majority confuses the frivolousness of the deduction with the validity of the form itself. The form provided all the necessary information to determine Beard's tax liability—his wages were listed on the correct line. Under the Supreme Court's holding in Badaracco, a document that plausibly purports to be a return and is signed by the taxpayer is a return, despite its inaccuracies. The proper course is to penalize the petitioner for the frivolous claim and for instituting the proceeding for delay, not to declare that a facially complete form is a 'non-return'.
Analysis:
This case clarifies the 'honest and reasonable attempt' standard for what constitutes a valid tax return. It establishes a significant precedent that distinguishes between a return with errors or even fraudulent entries, and a document that is fundamentally a form of protest. By allowing the IRS to treat such 'tampered forms' as a complete failure to file, the decision strengthens the government's ability to assess penalties under Section 6651(a)(1). This ruling makes it more difficult for tax protesters to clog the system with frivolous filings while avoiding the more severe failure-to-file penalties.
