T.C. Mem o. 2 01 5- 17 6

UNITED STAT ES TAX COURT RONALD CRAIG FISH, Pet it io ne r v. COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 10 69 1- 13 . Fi le d S ep te m be r 10 , 20 15 . Ro na ldCrai g F is h, p ro se. Jo se phE. Nagy , forres po nd en t.

MEMORANDUM FINDINGS OF FACT AND OPINION HAINES, Ju dg e: Res po nd en t d et erm in eda $1 5,4 39 de fic ie nc y in pe ti ti on er’s Fed eral in co m e ta x a nda $3 ,08 7 a ccuracy-rela te d p en al ty und er se ct io n 6 66 2( a) for20 09 . The i ss ue s fo r ou r de ci si on are: (1) whet he r pe ti ti on er 1 Unl es s o th erwi se in di cat ed , all sec ti on refe ren ces are t o t he Int ern al 1 (co nt in ue d...)- 2 -

[* 2] is en ti tl edto a de du ct io n c la im edon hi s 2 00 9 i nd iv idua l Fe de ral in co m e ta x return fo r po rtf

ol io lo ss es real iz edin si de hi s i nd iv idua l re ti rem en t ac co un t (I RA) du rin g t ha t year; an d (2 ) whe th er p et it io ne r is li ab le forth e acc ur acy-rela te d pe na lty . FINDINGS OF FACT So m e o f th e fac ts ha ve be enst ip ul at edan d a re s o fo un d. Th e st ip ul at io n o f fact s, t og ethe r with t he att ach edex hi bi ts , is in co rp or at edhe rei n b y th is refe ren ce. Pet it io ne r is a se m ire ti redpa te ntatt orne y . He resi de d i n C al ifo rn iaat the ti m e th e p et it io n was fil ed . Pet it io ne r m ai nt ai ne d atra di ti on al IRA dur in g 2 00 9 a ndus editto bu y an d se ll va rio us sec ur it ie s, i nc lu di ng sh ares of t wo m as te r li m it edpa rtn ers hi ps th at were i nv ol ve d i n t he oi l an d g as pi pe li ne an d s to rag e in du st ry --At la s Pi pe li ne Part ne rs , L.P. (Atla s) , andCro ss te x En erg y , L.P. (Cro ss te x) . Peti ti on er re cei ve d a Sch edul e K-1 , Partne r’s Sh are o f In co m e, Deduc ti on s, Cr ed it s, et c., fro m Atl as rep orti ng a $6 6,0 75 ord in ary bu si ne ss lo ss for 20 09 . The Sc he du le K-1 i nd ic at ed

“ TradIRA VFTC as Cu st od ia n” an d s ta te d t ha t the pa rtn er was an

“ IRA/ SEP/ KEOGH”. Peti ti on er re po rte d t hi s l os s o n t he Sch edul e E, (...co nt inue d) 1 Rev enue Co de , as a m en de d a ndineffec t fo r th e y ear i n i ss ue , andall Ru le refe ren ces are t o t he Tax C ou rt Rul es of P ract ic e an d P ro cedur e.- 3 -

[* 3] Supp le m en ta l In co m e an d Lo ss , att ach edto hi s 2 00 9 F orm 10 40 , U.S. In di vi du al Inc om e Tax Return. Pe ti ti on er re cei ve d aSch edul e K-1 fro m Cro ss te x rep orti ng a $2 2,7 93 ord in ary bu si ne ss lo ss for 20 09 an d s ta ti ng th atth e p artne r was an“ IRA/ SEP/ KEOGH”. Peti ti on er al so rep orte d t hi s l os s o n t he Sch edul e E at ta ch edto hi s 2 00 9 F orm 10 40 . Pet it io ne r rec ei ve d aFo rm 10 99 -R, Dis tri bu ti on s Fr om Pen si on s, An nu it ie s, Ret ire m en t o r Pro fit -Sh ari ng Pla ns , IRAs, In su ran ce Co nt ract s, et c., fo r a p art ia l di st rib ut io n t ha t h e rec ei ve d fr om hi s IRA. The Fo rm

10 99 -R re po rte d tha t $4 0,5 85 ha d b eendi st rib ut edfro m th e IRA t o p et it io ne r in 20 09 , all of wh ic h was rep orte d o n l in e 1 5b , tax ab le am ou ntof I RA di st rib ut io ns , onpe ti ti on er’s 2 00 9 Fo rm 10 40 . Res po nd en t m ai le d p et it io ne r a n ot ic e o f de fic ie nc y da te d M arch 5, 2 01 3. Res po nd en t d is al lo wedth e d educ ti on forth e lo ss es forAtl as an d C ro ss te x t ha t pe ti ti on er cl ai m edon hi s 2 00 9 F orm 10 40 an d i m

po se d the sec ti on 66 62 (a) accu racy-rela te d p en al ty. Pet it io ne r ti m el y fil eda pe ti ti onwith t hi s C ou rt ch al le ng in g re sp on de nt ’s di sa ll owa nc e o f th e cl ai m edde du ct io n fo r th e Atl as an d Cro ss te x l os se s. 2

Pet it io ne r ag reedwith a ll ot he r ad jus tm en ts inth e n ot ic e o f de fic ie nc y . 2- 4 -

[* 4] OPINION I. Pet it io ne r May Not Deduc t IRA Portfo li o Lo ss es . The Co m m is si on er’s d et erm in at io n re gard in g atax pay er’s t ax li ab il ity is pr es um edco rrec t, an d t he tax pa y er b ears th e b ur de n o f pr ov in g o th erwi se . Rul e 14 2( a); W el chv. Hel ve rin g, 2 90 U.S. 11 1, 1 15 (19 33 ). Am ou nt s h el d i n t rad it io na l IRAs ar e n otsubjec t t o i nc om e ta x u nt il th ey are d is tri bu te d o r de em edto ha ve be endi st rib ut ed . Sec. 4 08 (d ). Sect io n 4 08 (d ) go ve rn s the tax tre atm en t o f di st rib ut io ns . Pet it io ne r ta ke s i ss ue with re sp on de nt ’s po si ti on th ata ta xp ay er m ay reco gn iz e a l os s fr om

IRA in ve st m en ts on ly whe n a ll am ou nt s fr om all IRA acco un ts ha ve be endi st rib ut edan d t he to ta l d is tri bu ti on s ar e le ss th anan y un reco ve redba se s i n t he acco un ts . Secs . 72 , 40 8( d) , 77 01 (a)( 37 ). Pet it io ne r as se rts th atth e la w andreg ul at io ns do no t s up po rt r es po nd en t’s p os it io n. Pet it io ne r arg ue s, i n p art , th atanIRA h as “ al l o f th e attri bu te s o f a g ran to r tru stan d i s the refo re a p as s thr ou gh en ti ty whi chm ak es all it em s o f in co m e, de du ct io n a ndcred ittre at edas b el on gi ng * * * [t o h im ] an d re po rtabl e o n * * * [h is ] in di vi du al tax return” . Peti ti on er ad va nc es va rio us tax po li cy arg um en ts whi chhe be li ev es supp ort thi s p os it io n. Fo r ex am pl e, he co nt en ds th atres tri ct in g anIRA h ol de r’s ab il ity

to de du cta lo ss th atoc cu rs when anin ve stm en t h el d b y- 5 -

[* 5] th e IRA i s s ol d t hwa rts co ng res si on al in te ntto en co ur ag e in di vi du al s t o s av e fo r ret ire m en t. He al so cla im s tha t re qu iri ng ret ire es to co m pl et el y li qu id at e th ei r IRAs inord er t o re co gn iz e a d educ ti bl e lo ss is “un reas on ab le , arb itrary, capri ci ou s an d c om pl et el y un workabl e fo r sa ve rs de pe nd en t upo n IRA/SEP i nc om e fo r th ei r ret ire m en t.” Whi le pe ti ti on er m ay

no t ag ree wi th th e way

th e la w is writ te n a ndm ay ha ve reas on s tha t h e b el ie ve s s up po rt c hang in g t he law, we ca nn otdo th atforhi m . Tax po li cy

is withi n C on gr es s’ pu rv ie w, no t wi th in th is Co urt’s. W e d eci de cas es on th e b as is of t he law en act edby Con gr es s ra th er tha n atax pa y er’s p ol ic y arg um en ts as t o h ow the law s ho ul d h av e b eenwrit te n. Tran sa ct io ns oc cu rri ng withi n t he IRA d o n otres ul t i n t ax ab le ev en ts whi ch are r ep orte d o n the ho ld er’s i nd iv idua l i nc om e ta x re tu rn . An IRA i s a t ax -ex em pt en ti ty, no t a p as st hr ou gh en ti ty. Sec. 4 08 (e)( 1) . The l aw is cle ar tha t d is tri bu ti on s fro m an d p aym en ts ou t o f anIRA tr ig ge r in co m e ta x c on se qu en ces forth e p ay ee ordi st rib ut ee. Sec . 40 8( d) . In 2 00 9 p et it io ne r rec ei ve d d is tri bu ti on s t ot al in g $4 0,5 85 th athe pro pe rly repo rte d o n h is return. He m ay no t u se lo ss es real iz ed withi n t he IRA dur in g t ha t year to off se t h is in co m e. W e h ol d t ha t re sp on de nt co rrec tl y di sa ll owe d the de du ct io n fo r th e lo ss es forAtl as an d C ro ss te x t ha t pe ti ti on er cl ai m edon hi s 2 00 9 F orm 10 40 .- 6 -

[* 6] II. Pet it io ne r Is Liab le forth e Sec ti on 66 62 (a) Pe na lty . A 20 % accu racy-rela te d p en al ty is i m po se d o n a ny po rti on of an un de rp aym en t o f ta x a ttrib ut ab le to : (1 ) ne gl ig en ce o r di sr eg ardof rul es an d reg ul at io ns ; o r (2 ) a s ub st an ti al un de rs ta te m en t o f in co m e ta x. Se c. 66 62 (a) and (b )(1 ) an d (2 ). Negl ig en ce i s d efi ne d t o i nc lu de an y fai lu re t o m ak e a rea so nabl e at te m ptto co m pl y with t he Int ern al Rev enue Co de . Sec. 6 66 2( c). The st atut e de fin es di sr eg ardto in cl ud e an y care le ss , reck le ss , or i nt en ti on al di sr eg ard . Id. An u nd ers ta te m en t o f in co m e ta x i s s ub st an ti al if i t ex ceed s the gre at er o f 10 % of th e ta x re qu ire d t o b e sh ownon th e return o r $5 ,00 0. Se c. 66 62 (d )(1 )(A). The Co m m is si on er b ears th e b ur de n o f pr oduc ti on with re sp ectto th e ta xp ay er’s l iabi li ty for the sec ti on 66 62 (a) p en al ty andm us t p ro du ce s uf

fic ie nt ev id en ce i nd ic at in g t ha t i t i s ap pr op ria te to im po se th e p en al ty. Sec. 7 49 1( c); Hig be e v . Comm is si on er, 1 16 T.C. 43 8, 4 46 -4 47 (20 01 ). Once th e Co m m is si on er ha s m etth is bu rd en , th e ta xp ay er m us t co m e fo rwardwith s uf fic ie ntev id en ce t o pe rs ua de th is Co urt tha t h is de te rm in at io n was in co rrec t. Pet it io ne r cl ai m eda de du ct io n fo r ne arl y $9 0,0 00 inlo ss es onhi s 2 00 9 return. Pe ti ti on er, as di sc us se d abo ve , adv an ces tax po li cy arg um en ts to jus ti fy

th e de du ct io n. Po si ti on s t ak enona return m us t b e supp orte d b y

th e la w and/o r reg ul at io ns , no t t ax po li cy arg um en ts . Peti ti on er al so cla im s tha t the po si ti on s- 7 -

[* 7] tak enon hi s re tu rnwere s up po rte d b y Int ern al Rev enue Serv ic e g ui da nc e as to ho w partn ers sh ou ldrep ort i te m s re po rte d o n aSch edul e K-1 . A seas on ed at to rn ey wou ldno t h av e ta ke n t he po si ti on pe ti ti on er t oo k o n h is return. Pet it io ne r’s 20 09 return s ho ul d h av e sh own th at$2 3,0 74 intax was due . Pet it io ne r’s un de rs ta te m en t o f in co m e ta x fo r 20 09 is equa l t o t he de fic ie nc y of $1 5,4 39 , whi chex ceed s the gre at er o f $5 ,00 0 o r $2 ,30 7, wh ic h i s 1 0% o f th e am ountth atsh ou ldhave be ensh own on th e return. Acco rd in gl y , pet it io ne r’s un de rs ta te m en t o f in co m e ta x was subs ta nt ia l. Res po nd en t h as m ethi s b ur de n o f pr oduc ti onan d s ho wn tha t i t i s ap pr op ria te to im

po se th e se ct io n 6 66 2( a) an d (b )(2 ) pe na lty , andpe ti ti on er h as fai le d t o p ers ua de us ot he rwis e. W e h ol d t ha t the 20 % accu racy-rela te d p en al ty ap pl ie s t o p et it io ne r’s un de rp aym en t o f ta x. W e h av e co ns id eredth e p art ie s’ rem ai ni ng arg um en ts , andto th e ex te ntno t di sc us se d abo ve , con cl ud e th os e arg um en ts are i rrel ev an t, m oo t, o r witho utm eri t. Deci si on wil l b e en te redfor res po nd en t.