T.C. Summary Opinion 2007-162

UNITED STATES TAX COURT

WILLIE ALBERT, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 17520-05S. Filed September 10, 2007.

George L. Willis and Jeffrey Alberty (specially recognized),

for petitioner.

Susan S. Hu, for respondent.

DEAN, Special Trial Judge: This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed. Pursuant to section

7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent

for any other case. Unless otherwise indicated, subsequent
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1 Form 5754 (2002) states the following above the signature

line: 

Under penalties of perjury, I declare that, to the

(continued...)

section references are to the Internal Revenue Code in effect for

the year in issue, and all Rule references are to the Tax Court

Rules of Practice and Procedure.

Respondent determined a $1,364 deficiency in the 2003

Federal income tax of Willie Albert, a.k.a. Guillermo Gonzalez,

(petitioner). Respondent determined that petitioner failed to

report $6,974 as compensation for services and $12,258 in

gambling income. Petitioner conceded that he received and failed

to report $6,974 as compensation for services in 2003. The issue

for decision is whether petitioner had $12,258 in taxable

gambling income.

Background

Some of the facts have been stipulated and are so found.

The stipulation of facts and the exhibits received into evidence

are incorporated herein by reference. At the time the petition

was filed, petitioner resided in Moreno Valley, California. 

Petitioner was an attendee at an off-track betting site

operated by the Los Angeles Turf Club, Inc. In 2003, petitioner

presented for payment winning tickets totaling $12,258, for which

he signed Forms 5754, Statement by Person(s) Receiving Gambling

Winnings.1 
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1(...continued)

best of my knowledge and belief, the names, addresses,

and taxpayer identification numbers that I have

furnished correctly identify me as the recipient of

this payment and correctly identify each person

entitled to any part of this payment and any payments

from identical wagers.

2 Form SSA-795 (2002) states the following above the

signature line:

I declare under penalty of perjury that I have

examined all the information on this form, and on any

accompanying statements or forms, and it is true and

correct to the best of my knowledge. I understand that

anyone who knowingly gives a false or misleading

statement about a material fact in this information, or

causes someone else to do so, commits a crime and may

be sent to prison, or may face other penalties, or

both.

In November 2003, the Social Security Administration sent a

letter to petitioner, directing him to provide statements from

the individuals for whom he collected winnings, the dates and

amounts thereof, and any commissions or fees received. In reply,

petitioner submitted several Social Security Administration Forms

SSA-795, Statement of Claimant or Other Person,2 signed by one

Romeo N. Umali (Mr. Umali), stating that he had petitioner sign

for the winning tickets “so my wife will not know I’m playing the

horses” and setting forth the dates thereof, the amounts of the

winnings, and the fees paid to petitioner for the 2003 taxable 
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year as follows: 

 Date Amount Fee Received

 1/8/03 $4,123 $25

 1/23/03 1,435 25

 1/30/03 1,400 25

 1/31/03 948 25

 3/23/03 604 25

 4/6/03 1,191 25

 4/13/03 719 25

 4/19/03 920 25

 Total 11,340 200

Respondent issued a notice of deficiency for petitioner’s

2003 taxable year. Respondent determined a $1,364 deficiency,

arising from $12,258 in unreported gambling income and $6,974 as

compensation for services. 

Discussion

The Commissioner’s determinations in a notice of deficiency

are presumed correct, and the burden is on the taxpayer to prove

that the determinations are in error. Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933). However, pursuant to

section 7491(a)(1), the burden of proof on factual issues that

affect the taxpayer’s tax liability may be shifted to the

Commissioner where the “taxpayer introduces credible evidence

with respect to * * * such issue.” The burden will shift only if

the taxpayer has complied with the substantiation requirements

and “has cooperated with reasonable requests by the Secretary for

witnesses, information, documents, meetings, and interviews”. 

Sec. 7491(a)(2). Petitioner has not alleged or proven that
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section 7491(a) applies. Accordingly, the burden remains on

petitioner.

Petitioner contends that he should not be held liable for a 

tax on the additional $12,258 of gambling income for the 2003

taxable year because he was a mere “conduit” (i.e., a “runner” or

“ten percenter”) and that Mr. Umali was the actual recipient of

the gambling income.

In general, section 61(a) defines the term “gross income” to

include “all income from whatever source derived” unless it is

specifically excepted. 

Under the claim of right doctrine, if a taxpayer receives

money under a claim of right and without restriction as to its

disposition, then he has received income that he is required to

report even though it may still be claimed that he is not

entitled to retain the money and may be ordered to restore its

equivalent. N. Am. Oil Consol. v. Burnet, 286 U.S. 417 (1932). 

But under the conduit theory, if a person receives funds merely

to enable him to act as a conduit of the funds to another, then

he does not have a claim of right to the funds, and the funds

received are not income to him to the extent that he passes them

on to the person for whom the funds were intended. Goodwin v.

Commissioner, 73 T.C. 215, 232 (1979). 
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3 Throughout the trial, petitioner stated that Mr. Umali

liked petitioner to cash his tickets because petitioner did not

charge Mr. Umali anything. But petitioner also testified that

Mr. Umali gave petitioner $25 at most or “lunch or something”, 

while Forms SSA-795 stated that petitioner received $25 on each

occasion. 

The outcome in this case rests on petitioner’s credibility 

and on his evidence, which consisted of his testimony, his bank

statements, and the Forms SSA-795 signed by Mr. Umali. 

Petitioner testified that he cashed the tickets and signed

the Forms 5754 for Mr. Umali because Mr. Umali did not want his

wife to find out he was gambling “when the information goes to

the house”. But respondent entered into evidence a certified

copy of a transcript of Mr. Umali’s tax return, showing that Mr.

Umali received gambling income in his own name for that year. 

Petitioner testified that he did not gamble or cash tickets

for any other persons in 2004. But respondent entered into

evidence a certified copy of a transcript of petitioner’s 2004

tax return showing that a Form W-2G, Certain Gambling Winnings,

was issued to him under his alias. Thereafter, petitioner

changed his testimony to state that he had no “recollection”, and

“it could if there is a spillover.” There are other

inconsistencies in petitioner’s testimony.3

When questioned by the Court, petitioner testified that he

did not know that because he signed the Forms 5754, the IRS would

look to him to pay the tax even though the information would be
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sent to his house because he “did not know the implication” of

the forms. Petitioner also testified that he did not know that

the forms he signed were official Government forms because he did

not read or scrutinize them. The Court simply does not accept

petitioner’s self-serving testimony. See Geiger v. Commissioner,

440 F.2d 688, 689 (9th Cir. 1971), affg. per curiam T.C. Memo.

1969-159; Urban Redev. Corp. v. Commissioner, 294 F.2d 328, 332

(4th Cir. 1961), affg. 34 T.C. 845 (1960).

Petitioner submitted into evidence copies of his bank

statements in an attempt to show that his Social Security

benefits were not reduced because the Social Security

Administration had accepted Mr. Umali’s statements that the

winnings did not belong to petitioner. But petitioner did not

submit any documentation from the Social Security Administration

to corroborate his claim. Moreover, petitioner’s Social Security

benefits fluctuated by as much as $100 from month to month. 

Therefore, the Court cannot determine whether his Social Security

benefits were reduced on account of his receipt of the gambling

income. 

Additionally, petitioner submitted into evidence copies of

his bank statements in an attempt to show that he did not receive

the gambling income because there were no extreme influxes or

withdrawals of income for the year. But the bank statements do

not shed any light on this issue. The Court cannot make a
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4 For example, statement period Apr. 2--May 1, 2003, showed

deposits of $1,240, $1,000, $650, $1,000, and $1,100. Statement

period May 2--June 2, 2003, showed deposits of $650, $150, $290,

and $30 (other than the $1,280 that petitioner claimed was from

his wife’s paycheck). 

5 Respondent represents that Mr. Umali has been out of the

country since January 2006.

determination based on an examination of petitioner’s bank

statements as to whether he received the gambling income or not. 

The Court cannot make that determination because there is no

evidence as to the sources of the other deposits4 or charges for

recurring items. 

Finally, petitioner did not call any witnesses to

corroborate the statements contained in the Forms SSA-795 or his

testimony. Moreover, petitioner failed to call Mr. Umali himself

as a witness to testify to the veracity of the statements that

Mr. Umali made in the Forms SSA-795 or to corroborate

petitioner’s testimony.5 Accordingly, respondent’s determination

is sustained.

To reflect the foregoing,

Decision will be entered for 

 respondent.