PETITIONER APPEARING PRO SE: ATTORNEYS FOR RESPONDENT:
DAVID W. BUCKER STEVE CARTER
Camby, IN ATTORNEY GENERAL OF INDIANA
Indianapolis, IN
JOHN SNETHEN
DEPUTY ATTORNEY GENERAL
Indianapolis, IN
______________________________________________________________________
IN THE
INDIANA TAX COURT
DAVID W. BUCKER, )
)
Petitioner, )
)
v. ) Cause No. 49T10-0211-TA-128
)
INDIANA DEPARTMENT OF )
STATE REVENUE, )
)
Respondent. )
______________________________________________________________________
ORDER ON RESPONDENT’S
MOTION FOR SUMMARY JUDGMENT
______________________________________________________________________
FOR PUBLICATION
March 4, 2004
FISHER, J.
David W. Bucker (Bucker) challenges the final determination of the Indiana Department of
State Revenue (Department) denying his claim for refund of adjusted gross income tax
for the 2001 tax year. The matter is currently before this Court
on the Department’s motion for summary judgment, in which it raises the following
issue: whether Bucker’s wages are subject to Indiana’s adjusted gross income tax.
For the following reasons, the Court GRANTS the Department’s motion.
FACTS AND PROCEDURAL HISTORY
The material facts as they relate to this case are undisputed. Bucker,
an Indiana resident, received a Form W-2 “Wage and Tax Statement 2001” from
his employer, Banc One Management Corporation, indicating $31,766.89 in wages. When he
subsequently filed his individual state income tax return for the 2001 tax year,
however, Bucker declared zero income and requested a refund in the amount of
$1,353.82 to recover state and county taxes withheld by Banc One. (See
Resp’t Designation of Evidence at 23-26.)
On August 9, 2002, the Department denied the refund claim. On November
1, 2002, Bucker initiated an original tax appeal. On June 30, 2003,
the Department filed a motion for summary judgment. This Court held a
hearing on the Department’s motion on November 17, 2003. Additional facts will
be supplied as necessary.
ANALYSIS AND OPINION
Standard of Review
A motion for summary judgment will be granted only when there is no
genuine issue of material fact, and a party is entitled to judgment as
a matter of law. Ind. Trial Rule 56(C). If no genuine
issue of material fact exists, either the movant or the non-movant may be
granted summary judgment. Ziegler v. Indiana Dep't of State Revenue, 797 N.E.2d
881, 884 (Ind. Tax Ct. 2003) (citation and quotation marks omitted).
Discussion
In Indiana, individuals pay a tax on their adjusted gross income. See
Ind. Code Ann. § 6-3-1 through 6-3-7 (West 2000). “Adjusted gross income”
is, “in the case of an individual, gross income minus . . .
[certain] deductions[.]” See A.I.C. § 6-3-1-3.5; see also 26 U.S.C. § 62
(2001). In turn, “gross income” is defined as “all income from whatever
source derived, including (but not limited to) . . . [c]ompensation for services[.]”
See A.I.C. § 6-3-1-8; see also 26 U.S.C. § 61(a)(1) (2001).
See generally Snyder v. Indiana Dep't of State Revenue, 723 N.E.2d 487, 491
(Ind. Tax Ct. 2000) (finding that wages are income for purposes of Indiana’s
adjusted gross income tax), review denied.
Bucker insists, however, that he “did not have any gross income, as []he
did not have any remuneration paid to him from any of the specific
U.S. sources per 26 CFR § 1.861-8(f)(1) and . . . 26 CFR
§ 1.861-8T(d)(2)(iii)[.]” (Resp’t Designation of Evidence at 27.) Generally, section 1.861
contains rules for determining the taxability of income derived from sources both within
and without the United States. See 26 CFR § 1.861, et seq.
(2001). The provision Bucker cites, section 1.861-8, “provides . . . for
the allocation and apportionment of deductions between statutory groupings of gross income for
the purposes of calculating taxable income for nonresident aliens and foreign corporations.”
See United States v. Bell, 238 F.Supp.2d 696, 701 (M.D. Pa. 2003).
See also 26 CFR § 1.861-8(f)(1)(iv). Bucker claims that because the source
of his income is not listed in section 1.861, it does not constitute
“gross income” and, therefore, is not taxable. (See Oral Argument Tr. at
11-14.)
Bucker’s argument is commonly referred to as the “Section 861 argument” or the
“U.S. Sources argument.” See Bell, 238 F.Supp.2d at 699. Courts have
uniformly rejected these arguments. Id. at 701. Indeed:
[The] argument that wages are not income has been unequivocally rejected by every
court which has ever considered the issue.
***
[R]ecent United States Tax Court cases hold that taxpayers alleging that only foreign
source income (IRC 861(b) and Treasury Reg[.] 1.861-8(f)) is taxable are making frivolous
arguments.
Raby v. Dep’t of Revenue, No. TC-MD 021028D, 2003 WL 21241349 at 1
(Or. T.C. 2003) (citations and internal quotation marks omitted) (emphasis added).
While this Court is not obligated to adhere to the holdings of other
tax courts, their interpretations of the “section 861 argument” are persuasive in this
matter. In Takaba v. Commissioner of Internal Revenue, the United States Tax
Court stated that the “section 861 argument” must fail because it
takes section 1.861-8(f) . . . out of context. The rules of
sections 861-865 have significance in determining whether income is considered from sources within
or without the United States. The source rules do not exclude from
U.S. taxation income earned by U.S. citizens from sources within the United States.
Takaba v. Comm’r, 119 T.C. 285, 295 (U.S. Tax Ct. 2002) (quotations omitted)
(internal citations omitted). This Court agrees.
CONCLUSION
Therefore, the Court GRANTS the Department’s motion for summary judgment.
SO ORDERED this 4th day of March 2004.
_____________________________
Thomas G. Fisher, Judge
Indiana Tax Court
Distribution :
David W. Bucker
12530 North Sheryl Avenue
Camby, IN 46113
Steve Carter
Attorney General of Indiana
By: John Snethen
Deputy Attorney General
Indiana Government Center South, Fifth Floor
402 West Washington Street
Indianapolis, Indiana 46204-2770