## Facts

- Robert D. Beard earned approximately $24,401.89 in wages in tax year 1981.
- He submitted an altered Form 1040 that changed captions and margins to characterize wages as “Non-taxable receipts.”
- Beard attached a memorandum asserting an “equal exchange” theory: labor exchanged for wages of equal value produces no taxable income.
- The Commissioner issued a notice of deficiency determining a $6,535 income tax deficiency for 1981 and asserted additions to tax for failure to file and negligence/intentional disregard, plus damages for frivolous litigation.
- The Commissioner moved for summary judgment; Beard filed a written response but did not appear at the motion hearing.

## Issues

1. Whether Beard’s wages constituted taxable gross income for 1981.
2. Whether Beard’s altered Form 1040 qualified as a “return” under I.R.C. §§ 6011, 6012, 6072, and 6651(a)(1).
3. Whether Beard was liable for additions to tax under § 6651(a)(1) (failure to file) and § 6653(a) (negligence or intentional disregard).
4. Whether damages should be imposed under § 6673 because the case was instituted merely for delay.
5. How the burden of proof was allocated between the parties as to the deficiency and additions to tax.
6. Whether Beard was entitled to a jury trial in the Tax Court.

## Decision

- Granted the Commissioner’s motion for summary judgment.
- Held that wages are taxable gross income and rejected the “equal exchange” argument.
- Held that the altered Form 1040 was not a valid return; imposed an addition to tax under § 6651(a)(1).
- Held that Beard willfully failed to file and imposed an addition to tax under § 6653(a).
- Awarded $500 in damages to the United States under § 6673 for instituting the proceeding merely for delay.
- Held that the taxpayer bears the burden on determinations in the notice of deficiency, while the Commissioner bears the burden on issues first raised in the answer.
- Held that there is no right to a jury trial in the Tax Court.

## Legal Principles

- Wages constitute “gross income” taxable under I.R.C. § 61; labor-for-wages “equal exchange” arguments do not negate taxable income.
- A document qualifies as a federal income tax “return” only if it: (1) contains sufficient data to calculate tax, (2) purports to be a return, (3) reflects an honest and reasonable attempt to comply with tax law, and (4) is executed under penalties of perjury.
- An altered or protest-based Form 1040 that mischaracterizes wages and is not an honest and reasonable attempt at compliance is not a return, supporting the § 6651(a)(1) addition for failure to file.
- Intentional disregard of clear filing and reporting obligations supports an addition to tax under § 6653(a).
- The Tax Court may impose damages under I.R.C. § 6673 when a proceeding is instituted primarily for delay or rests on frivolous positions.
- In deficiency cases, the taxpayer generally bears the burden of proving the notice of deficiency is erroneous; the Commissioner bears the burden on new matters pleaded in the answer.
- Tax Court proceedings are tried to the court; there is no jury trial right in that forum.

## Conclusion

The Tax Court sustained the deficiency and imposed additions to tax and § 6673 damages, holding that wages are taxable and that an altered Form 1040 advancing protest theories is not a valid return because it is not an honest and reasonable attempt to comply with the tax laws.


Beard v. Commissioner, 82 T.C. 766 (1984)