Tax Court in Brief | Marin v. Comm’r | Unreported Income, Late Filing, and Frivolous Arguments

Marin v. Commissioner, T.C. Memo. 2026-79 | September 2, 2026 | Vasquez, J. | Docket No. 6381-24

Short Summary

The Taxpayer filed her 2021 return in January 2023 reporting $15,150 of state unemployment benefits and nothing else. Third-party information returns showed she had also received $154,566 in rents, $50,596 in gambling winnings, $107 in dividends, and $12 in interest.

She stipulated before trial that she received every dollar, but argued the payments were not taxable income. Judge Vasquez sustained the deficiency and the late-filing addition to tax, and imposed a $2,500 penalty under section 6673(a)(1). The Commissioner had conceded the accuracy-related penalty.

Key Issues

Does undisputed third-party reporting establish the evidentiary foundation for unreported income? Are gambling winnings gross income? And how many warnings does a taxpayer get before a frivolous-position penalty attaches?

Primary Holdings

The petitioner failed to report $205,281 of income for 2021, all of which is gross income under section 61. She is liable for the section 6651(a)(1) addition to tax for late filing. She is liable for a $2,500 penalty under section 6673(a)(1).

Key Points of Law

Determinations in a notice of deficiency are presumed correct, and the taxpayer bears the burden of proving them erroneous. In an unreported income case appealable to the Ninth Circuit, the presumption attaches once the Commissioner introduces an evidentiary foundation showing the taxpayer received the income. Undisputed third-party information returns supply that foundation, and section 6201(d) points the same direction. Here the Commissioner had the information returns, the wage and income transcript, and the petitioner’s own stipulation.

Gross income means income from whatever source derived, and section 61(a) lists interest, rents, and dividends by name. Gambling winnings are gross income too, as the Ninth Circuit held in Campodonico more than seventy years ago. The petitioner claimed no deductions against any of it.

On the late-filing addition, section 6651(a)(1) applies unless the failure was due to reasonable cause and not willful neglect, and the Commissioner carries the burden of production. The petitioner stipulated she filed on January 23, 2023, against an April 18, 2022, deadline. She offered no explanation, so no reasonable cause.

The frivolous-argument analysis is short by design. Section 6673(a)(1) authorizes a penalty up to $25,000 where a taxpayer institutes or maintains a proceeding primarily for delay or takes a frivolous or groundless position. Judge Vasquez declined to address the petitioner’s contentions with, in the Fifth Circuit’s words from Crain, “somber reasoning and copious citation of precedent,” because doing so might suggest the arguments have some colorable merit.

What earned the penalty was persistence. She attached signed “rebuttal statements” to each information return, asserting that payments delivered by the payer “did not result from any federal taxable activity whatsoever.” She repeated the same contentions at trial. The Court told her on the record that extensive case law rejects those arguments and that section 6673 was available. She then filed an opening brief developing them further.

Insight

The stipulation is the whole case. Once a taxpayer concedes receipt of the money, the only question left is characterization, and characterization is a question of law that has been answered since 1955. Anyone tempted by the argument that a payment is not connected to “federal taxable activity” should look at what it cost here: a $47,846 deficiency, an $11,041 addition to tax, and $2,500 out of pocket to the United States.

There’s a lesson for practitioners in what the Commissioner did as well as what he won. He conceded the accuracy-related penalty. Conceding a penalty he could not comfortably support did not weaken his position on anything else, and it kept the opinion focused. Compare our brief on Hatfield v. Commissioner for the same pattern.

The Court’s warning system also matters. Judge Vasquez advised the petitioner at trial that a penalty was available, and imposed one only after she briefed the arguments anyway. A taxpayer who hears that warning and stops usually keeps the money.

If you have received a notice of deficiency built on third-party information returns, Freeman Law’s Tax Court litigation attorneys can tell you which arguments are worth making. The Tax Court in Brief collects prior weeks, and the full opinion is available from CourtListener.

The information contained in this post is general in nature, is provided for informational and educational purposes only, and does not constitute legal advice or create an attorney-client relationship. The law is fact-specific and subject to change. Consult qualified counsel regarding your particular circumstances.