Today the U.S. Tax Court issued an interesting opinion which provides a chapter-by-chapter refutation of Peter Hendrickson’s book “Cracking the Code: The Fascinating Truth About Taxation in America.” Waltner v. Commissioner, T.C. Memo. 2014-35. Cracking the Code is popular in the tax protester community and provides the basis for many frivolous arguments presented to the IRS and U.S. Tax Court.
In many cases involving frivolous tax arguments, instead of responding specifically to each of the frivolous arguments, the Tax Court simply refers to the oft-cited case Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1954), for the proposition that courts need not “refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable merit.” However, in Waltner, the Tax Court saw fit to address the positions presented in Cracking the Code in order to establish clear and articulate rules for the future, among other purposes.
The Tax Court held that the taxpayer was liable for a penalty under I.R.C. sec. 6673 in the amount of $2,500, and warned that “future litigants are on notice that the propositions advanced in Cracking the Code are frivolous and relying on those position may result in sanctions.”
