T.C. Memo. 2006-77
UNITED STATES TAX COURT
KENNETH DAVID PERRY AND LINDA RUTH PERRY, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket Nos. 619-04, 18226-04. Filed April 18, 2006.
Ps’ claimed net capital losses were disallowed to the
extent they exceeded $3,000, on authority of sec. 1211(b),
Held: This limitation does not prevent the taxes
imposed by secs. 1 and 55, I.R.C. 1986, from being taxes on
income within the meaning of the Sixteenth Amendment to the
Kenneth David Perry and Linda Ruth Perry, pro sese.
Roger W. Bracken, for respondent.
CHABOT, Judge: Respondent determined deficiencies in
individual income tax against petitioners in the amounts of
- 2 -
1 $252 of the 2003 determined deficiency is alternative
minimum tax under section 55; the remaining amount for 2003 and
the entire amount for 2001 are section 1 income tax.
Unless indicated otherwise, all section and subtitle
references are to sections and subtitles of the Internal Revenue
Code of 1986 as in effect for the years in issue.
2 Initially, petitioners also disputed whether the Congress
intended the $3,000 limitation to apply to real economic losses.
However, on reply brief, petitioners specifically abandon the
Congressional intent issue and ask us to determine only “whether
Congress exceeded its power granted in Amendment XVI of the US
Constitution.” See infra note 4.
$2,465 for 2001 and $21,233.37 for 2003.1 On their 2003 income
tax return, petitioners claimed a $14,543.74 refund on account of
excess withholding. Respondent acknowledged the prepayment, but
withheld refund or credit of this amount. On brief, petitioners
renew their claim for refund.
After concessions by petitioners, the issue for decision is
whether the $3,000 capital loss allowance limitation of section
1211(b) keeps the sections 1 and 55 taxes from being taxes on
income, within the meaning of the Sixteenth Amendment to the
The instant cases were consolidated for trial, briefin