Neil C. Hyslep v. United States

Appellant/taxpayer Hyslep filed a 1982 tax return form (Form 1040) on which he stated he received $44,232.64 in wages. He deducted, as an adjustment to income, the full amount of wages received, claiming that he was a “source-exchanger” and that therefore his wages were “non-taxable.” Accordingly, he sought a refund of all income taxes withheld from wages.

Hyslep was assessed a $500 civil penalty under I.R.C. (26 U.S.C.) § 6702 1 for filing a frivolous return. He then filed this suit under I.R.C. § 6703(c) for a refund of the penalty assessed. The district court granted summary judgment in…