771 F.2d 471

             Paul E. CHARCZUK and Victoria Charczuk, Appellants,
                                      v.
                COMMISSIONER OF INTERNAL REVENUE, Appellee.
                                 No. 83-2370.
                       United States Court of Appeals,
                                Tenth Circuit.
                                Aug. 29, 1985.

	Thomas J. Carley, Rockville Centre, N.Y., for appellants.
	Thomas A. Gick, Tax Div., Dept. of Justice (Glenn L. Archer, Jr.,
Asst. Atty. Gen. and Michael L. Paup, and Gary R. Allen, Tax Div.,
Dept. of Justice, with him on brief), Washington, D.C., for appellee.

	Before HOLLOWAY and SEYMOUR, Circuit Judges, and BOHANON, Senior
District Judge. [FN*]

	FN* Honorable Luther Bohanon, Northern, Eastern and Western
Districts of Oklahoma, sitting by designation.

	BOHANON, District Judge.
	Paul E. Charczuk and Victoria Charczuk jointly filed a Form 1040
for the taxable year 1977 reflecting income of $4,763.00.  This amount was
entered on the line for "business income" rather than on the line for
"wages, salaries, tips and other employee compensation."  Attached to the
taxpayers' return were seven Form W-2 Wage and Tax Statements showing that
the taxpayers received wages during 1977 totaling $12,276.00.  Also
attached was a Schedule C for each taxpayer claiming a "net profit" of
$2,668.00 for Paul Charczuk and $2,095.00 for Victoria Charczuk. [FN1]  On
June 9, 1980, the Commissioner sent taxpayers a notice of deficiency
informing them that they owed $1,148.00 in taxes for 1977 based on
disallowance of all expenses claimed on Schedule C for lack of
verification.  Subsequently, the taxpayers petitioned the Tax Court for a
redetermination of the deficiency.  In those proceedings the taxpayers did
not attempt to challenge the Commissioner's determination by presenting
evidence in support of their claimed deductions, but rather argued that
the income tax itself was invalid as a matter of law.  The Tax Court
granted summary judgment in favor of the Commissioner.
T.C. Memo. 1983-433.  Taxpayers appeal from this judgment claiming the Tax
Court misconstrued their arguments against the income tax and that its
decision was contrary to law and "illogical."  We affirm.

	FN1. Each Schedule C (entitled Profit or (Loss) from Business or
Profession (Sole Proprietorship) ) gave the taxpayers' name, address,
social security number and the amount claimed as "net profit."  To the
right of the area for deductions on both schedules was the instruction
"See Form-21."  A "Form-21" was attached for Paul Charczuk which detailed
various "subtractions" for taxes, rent, subsistence, interest, auto,
telephone, utilities, supplies, dues and subscriptions from "receipts" of
$6,676.00.  No "Form-21" or similar explanation of calculations was
attached for Victoria Charczuk.

	The issues taxpayers press on appeal are, stated in their own
words, as follows: 1. Whether there is any Constitutional authority
granted to Congress to impose an income tax on the individuals who are
appellants herein for the year 1977, and if such authority is claimed to
exist, what precise words of the Constitution are claimed as authority to
impose an income tax on appellants for the year 1977? 2. Whether there is
any law or statute imposing an income tax on appellants for the year 1977
and, if such a law or statute is claimed to exist, what is the precise
citation of such law or statute? 3. Whether the word "income," as used in
taxing statutes, is unconstitutionally vague and indefinite and, if it is
claimed not to be unconstitutionally vague and indefinite: a. What is the
precise definition of "income" for income tax purposes?;  and b. Precisely
how is "income" measured for income tax purposes? It takes little
consideration to determine that the arguments presented by taxpayers with
respect to these issues are meritless and unreasonable. However, to
forestall taxpayers' patently false claim that "[t]he issues in this case
have never been addressed and answered by any Federal Article III Court"
we will quote at length from the opinion of the United States Court of
Appeals for the Second Circuit in Ficalora v. Commissioner of Internal
Revenue, 751 F.2d 85 (1984), cert. denied --- U.S. ----, 105 S.Ct. 1869,
85 L.Ed.2d 162 (1985), which involved taxpayers who were represented by
the same Thomas J. Carley who represents the taxpayers in the instant
appeal.  The quoted text which follows reveals that the Second Circuit in
Ficalora was responding to arguments substantially identical to those
taxpayers advance in this case. 
	I. Constitutional Authority to Impose An Income Tax on Individuals.
We first address ourselves to the appellant's contention that neither the
United States Congress nor the United States Tax Court possess the
constitutional authority to impose on him an income tax for the taxable
year 1980.  Appellant argues that an income tax is a "direct" tax and that
Congress does not possess the constitutional authority to impose a
"direct" tax on him, since such a tax has not been apportioned among the
several States of the Union.  In support of his argument, appellant cites
Article I, Section 9, clause 4 of the United States Constitution which
provides that: "No Capitation, or other direct, Tax shall be laid, unless
in Proportion to the Census or Enumeration herein before directed to be
taken." He also relies on the case of Pollock v. Farmer's Loan and Trust
Co., 157 U.S. 429, 15 S.Ct. 673, 39 L.Ed. 759 (initial decision), 158
U.S. 601, 15 S.Ct. 912, 39 L.Ed. 1108 (decision on rehearing) (1895),
wherein the United States Supreme Court held that a tax upon income from
real and personal property is invalid in the absence of apportionment. In
making his argument that Congress lacks constitutional authority to impose
a tax on wages without apportionment among the States, the appellant has
chosen to ignore the precise holding of the Court in Pollock, as well as
the development of constitutional law in this area over the last ninety
years.  While ruling that a tax upon income from real and personal
property is invalid in the absence of apportionment, the Supreme Court
explicitly stated that taxes on income from one's employment are not
direct taxes and are not subject to the necessity of apportionment.
Pollock v. Farmer's Loan and Trust Co., 158 U.S. at 635, 15 S.Ct. at 919.
Furthermore, the Sixteenth Amendment to the United States Constitution,
enacted in 1913, provides that: "The Congress shall have the power to lay
and collect taxes on income, from whatever source derived, without
apportionment among the several States, and without regard to any census
or enumeration." Finally, in the case of New York, ex rel. Cohn v. Graves,
300 U.S. 308, 57 S.Ct. 466, 81 L.Ed. 666 (1937), the Supreme Court in
effect overruled Pollock, and in so doing rendered the Sixteenth Amendment
unnecessary, when it sustained New York's income tax on income derived
from real property in New Jersey. Id. at 314-15, 57 S.Ct. at 468-69.
Hence, there is no question but that Congress has the constitutional
authority to impose an income tax upon the appellant. 
	II. Statutory Authority to Impose an Income Tax on Individuals
and Definition of Taxable Income.  The appellant contends that "[n]owhere in
any of the Statutes of the United States is there any section of law
making any individual liable to pay a tax or excise on 'taxable income.' "
...  The essence of the appellant's argument is that 26 U.S.C. s 1 does
not impose a tax on any individual for any stated period of time;  rather,
it imposes a tax on an undefined:  "taxable income". Section 1 of the
Internal Revenue Code of 1954 (26 U.S.C.) (hereinafter the Code) provides
in plain, clear and precise language that "[t]here is hereby imposed on
the taxable income of every individual ... a tax determined in accordance
with" tables set-out later in the statute.  In equally clear language,
Section 63 of the Code defines taxable income as "gross income, minus the
deductions allowed by this chapter ...", gross income, in turn, is defined
in Section 61 of the Code as "all income from whatever source derived,
including (but not limited to) ...:  (1) Compensation for services
...". Despite the appellant's attempted contorted construction of the
statutory scheme, we find that it coherently and forthrightly imposes upon
the appellant a tax upon his income for the year 1980.
* * *
	III. "Income" Lastly, the appellant asserts that the term
"income", as used in the taxing statutes, has no defined meaning and is
unconstitutionally vague and indefinite.  As discussed above, Section 61
of the Code defines gross income as "all income from whatever source
derived".  Even if we were to assume, arguendo, that this phrase is
somehow vague or indefinite, Section 61 of the Code specifically cites
"[c]ompensation for services ..." as a concrete example of what is meant
by the term income.  The wages which the appellant received for his
services rendered to [his employer] in taxable year 1980, fall squarely
within the definition of income contained in Section 61(a)(1) of the Code.
The appellant's argument that the term "income", as used in the Code, is
unconstitutionally vague and indefinite, is totally without merit. Id. 751
F.2d at 87-88 (emphasis added).
	Ficalora was decided on December 13, 1984.  Thus some six months
before oral argument in this case, taxpayers, through their counsel, knew
that the arguments they raise in this case had in fact been considered in
detail by an Article III court and, further, that that court had rejected
these arguments as clearly lacking merit.
	Ficalora, however, was not the first time an Article III court had
rejected as without merit these same contentions argued by this same
Thomas J. Carley. Lively v. Commissioner of Internal Revenue, 705 F.2d
1017 (8th Cir.1983) involved taxpayers who had used precisely the same
tactic used by the Charczuks to understate their taxable income in this
case.  The following portion of the Eighth Circuit's brief opinion is
quite relevant to the instant case: The taxpayers argue further that the
income tax is unconstitutional because it is a direct tax which is not
apportioned, that there is no law imposing an income tax on them for 1977,
... that income cannot be defined or measured, and that an individual's
"gross receipts" cannot be taxed.  These arguments are wholly without
merit. This appeal is frivolous.  Pursuant to Rule 38 of the Federal Rules
of Appellate Procedure, we impose on the appellants double the costs of
the Commissioner. Id. at 1018.  When Carley importuned for a rehearing in
Lively, the court responded to him personally with great clarity: the
court finds that the petition for rehearing is frivolous.  Therefore, in
accordance with 8th Cir.R. 16(e), counsel is deemed to have multiplied the
proceedings in the case and to have increased costs unreasonably and
vexatiously in the sum of $250.  Counsel is directed to pay $250
personally to the opposing party. Lively, No. 83-1070 (8th Cir. Jun. 8,
1983) (order denying petition for rehearing and rehearing en banc).  The
Lively opinion and order on rehearing were handed down more than four
months before Carley noticed the appeal on behalf of the Charczuks in the
instant case.
	Although it is not an Article III court, we also find the
following comments of the Tax Court in Manley v. Commissioner of Internal
Revenue, 46 T.C.M. (CCH) 1359, 1361 (1983), another case in which
taxpayers who attempted to claim their wages as business income were
represented by Carley, to be particularly relevant: In the instant case,
petitioners and their counsel could not have had any reasonable
expectation of receiving a favorable decision in this
proceeding. Nevertheless, their counsel conducted himself in such a manner
as to precipitate an inordinate amount of wasted time and effort on the
part of the Court, even for a tax protester case.  Accordingly, we find
that the proceedings in this case were instituted merely for delay and
consider the following language previously adopted by this Court
particularly apropos to the instant case: When the costs incurred by this
Court and respondent are taken into consideration, the maximum damages
authorized by the statute ($500) do not begin to indemnify the United
States for the expenses which petitioner's frivolous action has
occasioned.  Considering the waste of limited judicial and administrative
resources caused by petitioner's action, even the maximum damages
authorized by Congress are wholly inadequate to compensate the United
States and its other taxpayers.  These costs must eventually be borne by
all of the citizens who honestly and fairly participate in our tax
collection system. * * *  (Sydnes v. Commissioner, [74 T.C. 864, 872-873
(1980), affd. 647 F.2d 813 (8th Cir.1981) ].) The memorandum opinion of
the Tax Court in Manley was filed on September 12, 1983, several months
after Carley was sanctioned by the Lively court and more than a month
before the present appeal was taken.
	At oral argument in the present matter, Carley was asked about
Lively and whether it did not answer his arguments completely.  In
response Carley claimed to have learned so much since Lively that he
practically possessed a new revelation about the issues involved.  We
disagree.  It is obvious that despite having full knowledge of the learned
opinions of two different Article III courts and the accurate reasoning of
the Tax Court in Manley concerning his arguments, Carley has failed to
learn that he has no right to occupy the time of such courts with
frivolous, unreasonable and vexatious proceedings, and that if he does so,
he exposes not only his clients but also himself personally to sanctions.
	Fortunately, we are not limited by the $500 maximum placed on the
Manley court's ability to sanction by the version of 26 U.S.C. s 6673 then
in force.  (Even the Tax Court can now award up to $5,000 damages in this
type of case pursuant to Congress' amendment of s 6673 by Pub.L. 97-248 s
292(b), 96 Stat. 574 (Sept. 3, 1982).)  We have noted that "[c]ourts have
the inherent power to impose a variety of sanctions on both litigants and
attorneys in order to regulate their docket, promote judicial efficiency,
and deter frivolous filings."  Clark v. Commissioner of Internal Revenue,
744 F.2d 1447 (10th Cir.1984) citing Roadway Express, Inc. v. Piper, 447
U.S. 752, 764-67, 100 S.Ct. 2455, 2463-65, 65 L.Ed.2d 488 (1980);  see
also In Re Baker, 744 F.2d 1438, 1441 (10th Cir.1984) (en banc ).  Further
authority for this court to impose sanctions on the Charczuks can be found
in 28 U.S.C. s 1912 (1982) and Federal Rule of Appellate Procedure 38
which permit single or double costs and "just damages" to a prevailing
appellee.  This court may also impose damages under 26 U.S.C. s 7482(c)(4)
(1982) "in any case where the decision of the Tax Court is affirmed and it
appears that the notice of appeal was filed merely for delay."  See Clark
v. Commissioner, 744 F.2d at 1448.  Mr. Carley may be personally assessed
an amount determined in accordance with 28 U.S.C. s 1927 (1982) which
provides: Any attorney or other person admitted to conduct cases in any
court of the United States or any Territory thereof who so [sic]
multiplies the proceedings in any case unreasonably and vexatiously may be
required by the court to satisfy personally the excess costs, expenses,
and attorneys' fees reasonably incurred because of such conduct. [FN2]

	FN2. See Morris v. Adams-Millis Corp., 758 F.2d 1352, 1357 n. 7
(10th Cir.1985) and Glass v. Pfeffer, 657 F.2d 252, 257 n. 4 (10th
Cir.1981) for discussions of the effect of Congress' amendment of s 1927
in 1980 in response to the Supreme Court's holding in Roadway Express,
Inc. v. Piper, 447 U.S. 752, 757-63, 100 S.Ct. 2455, 2459-62, 65 L.Ed.2d
488 (1980).

	Mr. Carley's theory of argument in this case, as well as the other
cases referenced supra, appears to be based on a belief that it is
acceptable conduct for an attorney to repeatedly claim that basic matters
of common understanding are in fact meaningless and
incomprehensible. [FN3]  This belief is mistaken.

	FN3. The preposterous and nearly silly character of the arguments
advanced on behalf of the taxpayers in this case is well illustrated by
the following statement made in a brief filed in the Tax Court below to
resist a reasonable stipulation of facts proposed by the government:
Petitioners will no more concede there is any such thing or concept as
"income from wages" than they will concede there is any such thing or
concept as "income from depreciation" or "depreciation income";  all such
characterizations are rejected as meaningless and an attempt to cloud the
minds of intelligent and not-so-intelligent individuals. Record on Appeal
at 68.  The arguments on appeal have been equally ludicrous as exemplified
in this passage from appellants' brief in chief: Income is not a real live
human being--it is merely a concept or attempted concept.  As a concept or
attempted concept, it is an undefined concept. No Congress has ever
defined "income".  No Article III Federal Court has ever defined "income"
or the concept "income".  As a concept, "income" is undefined and for our
purposes and all practical and other purposes, does not exist. Nowhere in
any of the Statutes of the United States is there any section of law
making any individual liable to pay a tax on "income" or "taxable income".
If there were such a statute, that statute would violate the Constitution
and protections it affords individuals in Art. I, Sec. 2, cl. 3 and
Art. I, Sec. 9, cl. 4 ... Appellants' brief at 8, 9.  Needless to say, the
Internal Revenue Code obviously makes individuals liable to pay taxes on
their taxable income, and Article III Federal Courts have in fact defined
"income."  See e.g. Eisner v. Macomber, 252 U.S. 189, 207, 40 S.Ct. 189,
193, 64 L.Ed. 521 (1920).

	Courts are in no way obligated to tolerate arguments that
thoroughly defy common sense.  Such conduct is permissible in our society
for the very young, those attempting to make a joke or, occasionally,
philosophers, but it cannot be allowed of one engaged in the serious work
of a practicing attorney appearing before a court of law.  Mr. Carley's
conduct in this suit has been a paradigm of unreasonable behavior, and it
has been exceedingly vexatious as that term is understood by the Supreme
Court.  See Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421, 98
S.Ct. 694, 700, 54 L.Ed.2d 648 (1978).  (In a case arising under Title VII
of the Civil Rights Act of 1964, the Court stipulated that "the term
'vexatious' in no way implies that the plaintiff's subjective bad faith is
a necessary prerequisite to a fee award against him.").  Given the
continued character of Mr. Carley's intransigence, justice requires that
he and his clients bear the full weight of the sanctions allowed by law so
that the government, and ultimately all law abiding taxpayers, will not be
taxed with the expense of opposing meritless contentions such as his.
	Accordingly, the decision of the Tax Court is affirmed and Paul
E. Charczuk and Victoria Charczuk are ordered to pay the government double
its costs on appeal.  In addition, the government is ordered to submit
within twenty (20) days to the court clerk, and to Thomas J. Carley, an
appropriate accounting of all expenses (other than costs of the appeal)
and attorneys' fees it has reasonably incurred as a result of this appeal.
Thomas J. Carley may file with the court clerk a challenge to the
government's accounting within ten (10) days of the government's filing
only with regard to whether the expenses and fees were in fact incurred on
this appeal.  Upon approval of the government's accounting or any part of
it by the court, Thomas J. Carley will be ordered to personally pay to the
government the entire amount approved. [FN4]

	FN4. Courts imposing sanctions on an attorney under s 1927 must
"afford the attorney all appropriate protections of due process available
under the law."  House Conf.Rep. No. 96-1234, 96th Cong., 2d Sess. 8,
reprinted in 1980 U.S.Code Cong. & Ad.News 2716, 2781, 2783.  At oral
argument in this case, Mr. Carley was offered an opportunity to explain
why sanctions should not be imposed against him personally.  This
satisfies any right he may have had to a hearing on the matter.
Cf. McConnell v. Critchlow, 661 F.2d 116, 119 (9th Cir.1981).