T .C. Su m m ary Op i n io n 2 01 7 -5 5

UNITED STATES TAX COURT

ATEF FAHM EY ISAAC, Pet i t i o n er v . COM M ISSIONER OF INTERNAL REVENUE, Res po n d en t

Do ck etNo . 1 6 8 26 -1 6 S. Fi l edJ u l y 2 0, 2 0 17
.
At ef Fah m ey

Is aac, p ro s e. San d eep Si n gh , fo r res p o n d en t .

SUM M ARY OPINION PANUTHOS, Ch i ef Sp eci al Tri al J u d g e: Th i s cas e was h eardp u rs u an tt o th e p ro v i s i o n s o f s ect i o n 7 4 6 3 o f t h e In t ern al Rev en u e Co d e i n effect wh en th e p et i t i o n was fi l ed
. 1 Pu rs u an t t o s ect i o n 7 4 6 3(b ), th e d eci si on t o b e en t eredi s n o t

1 Un l es s o th erwi s e i nd i cat ed , s ub s equ en ts ect i on referen ces are t o t h e (co n ti n u ed ...)- 2
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rev i ewab l e b y

an y o ther co u rt , an d t h i s o p i n i o n s h al l n o tb e t reat ed as p reced en t fo r an y o th er cas e. In a n o t ice o f d efi ci en cy d at edM ay 1 3, 2 0 16 , res p o n d en td et erm i n eda d efi ci en cy

o f $ 1 8 , 3 3 2 i n p et i t i o n er’ s 2 0 1 3 Fed eral i n co m e t ax an d a s ect i o n 6 6 6 2 (a) accu racy -rel at edp en al ty o f $ 3 ,6 67
. Aft er co n ces si o ns , 2 th e i s s u e fo r d eci s io n i s wh et h er p et it i on er i s l i ab l e fo r th e accu racy -rel at edp en al ty u nd er s ect io n 6 6 6 2 (a) fo r t h e y ear i n i s s u e. Back gro u n d Pet i t i o ner res i dedi n Cal ifo rn i a wh en h i s p et i t io n was t i m el y fi l ed
. Pet i t i o ner i s an el ect ri cal en gi n eer an dh as fi l edFed eral i n co m e t ax retu rn s
s i nce 2 0 0 1
. Pet i t i o ner t i m el y

fi l edh i s 2 0 13 Fo rm

1 04 0 , U.S. In d i vi du al In co m e Tax Retu rn , rep o rt in g wag es o f $ 1 3 2 ,9 6 2 , i n ves t m en t i n co m e o f $ 1 2 3 ,5 98 , an dt ax du e
o f $ 2 5,6 7 5 . Wh enp rep ari n g h i s 2 0 1 3 Fo rm 1 0 4 0 , p et i t i o n er d i dn o tp ro p erl y

1 (...co n t in u ed ) In t ern al Rev enu e Co d e i n effect fo r t h e y ear i n i s s u e. W e ro u n d m o n et ary am ou n t s t o th e n eares t d o l l ar.

2 Pet i t i on er co n ced edth e ad ju s t m en t s s etfo rt h i n th e n ot i ce o f d efi ci en cy as fo l l o w s : (1 ) i n cl u s i o n o f a t ax ab l e St at e i n co m e t ax refu n do f $ 2 ,9 69 ; (2 ) ad ju s tm en tt o i t em i zedd edu ct i o n s o f $ 5 9 ; (3 ) al t ern at i v e m i n i m u m t ax (AM T) o f $ 1 5,3 0 8 ; an d (4 ) n eti n v es t m en t i n co m e t ax o f $ 2 ,2 6 2 p urs u an t t o s ec. 1 4 1 1
. Pet i t io n er d i s p u t es th e accu racy -rel at edp en al ty .- 3
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acco u n t fo r an dco m

p u t e t h e AM T o r t h e n eti n ves t m en t i n co m e t ax , n o r d i dh e rep o rth i s t ax ab le St at e i n co m e t ax refu n d. Pet i t i o ner p rep aredh i s 2 0 1 3 Fo rm 1 0 4 0 wi tho u tthe u s e o f t ax p rep arat i o n
s o ft ware. Pet i t i o n er d i dn o t co n s u l t a cert i fi ed p ub l i c acco u n t an t(C.P.A.), a t ax retu rn p rep arer, o r an o th er p ro fes s i o n al i n the p rep arat io n o f h i s retu rn . As i n d i cat ed , p et i t i o n er d o es n o t d i s p u t e t h e ad ju s t m en t s d et erm in edi n th e n o t i ce o f d efi ci en cy

ex cep tfo r t h e accu racy -rel at ed p en al ty . Di s cu ss i o n Sect io n 6 6 6 2 (a) an d(b )(2 ) i m p o s es an accu racy -rel at edp en al ty o n an y p o rt i on o f an u n d erp aym en to f Fed eral i n co m e t ax th at i s at tri bu t ab le t o t h e t ax p ay er’ s “ s ubs t an t i al u n d ers tat em en to f i n co m e t ax .” Anu n d ers t at em en to f Fed eral i nco m e t ax i s s ubs t an t i al i f t h e am o u nto f t h e u n ders t at em en tfo r th e t ax ab l e y ear ex ceed s the g reat er o f 1 0 % o f t h e t ax req u ired t o b e s h o wn o n th e retu rn fo r t he t ax ab l e y ear o r $ 5,0 00 . Sec. 6 6 62 (d )(1 )(A). Th e Co m m is s i o n er b ears th e b u rd en o f p ro du ct i o n wi th res p ectt o a s ect i o n 6 6 6 2 p en al ty . Sec. 7 49 1 (c). In o rd er t o m eetth i s b urd en th e Co m m i s s i o ner n eed
o n l y m ak e a p ri m a faci e cas e t hati m p o s it i on o f t h e p en al ty

o r ad d i t i o n t o t ax i s ap p ro p ri at e. Hi g b ee v . Co m m i s s i o n er, 1 1 6 T.C. 4 3 8 , 4 4 6 (2 0 0 1 ). If th e
u n d ers t at em en to f i n co m e t ax fo r t he y ear i n i s s u e i s s ub s t an t i al , the Co m m i s s i o n er- 4
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h as s at i s fi edth e b urd en o f p ro du ci n g ev i d en ce t h atth e p en al ty i s ju s t i fi ed
. Res po n d en tm etthi s b u rd en becau se t h e am o u nto f p et i t i on er’ s u n d ers t at em en tfo r 2 0 1 3 i s s ub s t an ti al
. 3 On ce t h e Co m

m i s s io n er h as m eth i s b u rd en , th e t ax p ay er m ay av o i da
s ect i on 6 6 6 2 (a) accu racy -rel at edp en al ty i f h e can d em o ns trat e (1 ) reas o n ab l e
cau s e fo r t h e u n d erp aym en tan d(2 ) t h ath e act edi n g o o d fai th wi th res p ectt o th e
am ou n tp ai d . Sec. 6 6 64 (c)(1 ). A d et erm i n at i o n o f reas o n ab l e cau s e an dg o o d fai th “ i s m ad e o n a cas e-b y -cas e b as i s , t ak i n g i n t o acco u n tal l p ert i nen tfact s an d ci rcu m s t an ces ”, i ncl u d i ng : (1 ) th e t ax p ay er’ s effo rt s t o as s es s th e p ro p er t ax l i ab i l i ty ; (2 ) t h e kno wl ed g e an dth e ex p eri en ce o f t h e t ax p ay er; an d(3 ) an y rel i an ce o n th e ad v i ce o f a p ro fes s i o n al s u ch as an acco u n t an t . Sec. 1 .6 66 4
- 4 (b )(1 ), In co m e Tax Reg s . Ci rcu m s t an ces thati n d i cat e reas o n ab l e cau s e an dg o o d fai th in cl u d e an h o n es tm i s u n d ers tan d i ng o f l aw t h ati s reas on ab l e i n l ig hto f al l th e s u rro u n d i n g fact s . Id . Gen eral l y , th e m o sti m p o rt an tfact o r i s th e ex t en to f t he t ax p ay er’ s effo rtt o as s es s h i s o r h er p ro p er t ax l i ab i l i ty . Id
. St atu t o ry co m p l ex i t y

3 Th e am o un to f t ax req u i red t o b e s h own o n p et i t i o n er’ s 2 0 1 3 retu rni s $ 4 4 ,0 0 7 ($ 2 5 ,6 7 5 rep o rt edo n retu rn % $ 1 8 , 3 32 i n creas e i n t ax ' $ 44 ,0 0 7 ). Th i s $ 1 8 ,3 3 2 i n creas e i n t ax i s g reat er t h an $ 5 ,0 0 0 , wh i ch i s g reat er th an $ 4 ,4 01 , wh ich i s 1 0 % o f $ 4 4 ,0 07 . See s ec. 6 66 2 (d )(1 )(A).- 5
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al o n e d o es n o tco n s t i tu t e reas o n ab l e cau s e. Barn es v . Co m m is s i o n er, T.C. M em o . 2 0 1 2 -8 0 , 2 0 1 2 W L 9 5 2 76 0 , at* 1 5 , aff’ d , 7 12 F.3 d 5 81 (D.C. Ci r. 2 01 3 ). Pet i t i o ner o ffered l i t t l e arg u m en t o r ev i den ce t o m eeth i s b u rd en o f p ro o f th atth ere was reas o n ab l e cau s e fo r t h e u n d erp aym en t . Pet i ti o n er’ s o n l y arg u m en t
was th ath e d i dn o tu nd ers t an dth ath e o wedth e ad d i t i o nal t ax ; fo r ex am p l e, h e t es t i fi edth ath e was n o taware o f t h e AM T o r t h e n eti n v es t m en t i n co m e t ax u n t i l h e recei v edth e n o t i ce o f d efi ci en cy . Pet i ti o n er’ s as s ert i on s th ath e d i dn o t
u n d ers t an dth ath e o wedthe AM T o r t h e n eti n v es t m en ti n co m e t ax are i n s u ffi ci en tt o d em o n s trat e reas o n ab l e cau s e an dg o o dfai th
. See i d . Pet it i o n er i s
n o tan un s op h i s t i cat edt ax p ay er; h e i s a p ro fes s i o n al , an el ect ri cal en g i n eer, wh o h as fi l edFed eral i n co m e t ax retu rn s fo r a n u m b er o f y ears . Pet i t i o n er can n o trel y
o n th e ad v ice o f a p ro fes s i o n al b ecau s e h e d i d n o t co ns u l t a p ro fes s i o n al s u ch as a C.P.A. o r a t ax retu rn p rep arer. See s ec. 1 .6 6 6 4 -4 (b )(1 ), In co m e Tax Reg s . Pet i t i o ner d i dn o td em o n s trat e t h ath e m ad e a s u ffi ci en teffo rtt o as s es s th e p ro p er t ax l i ab i l i ty . Pet i t i o n er t es ti fi ed thath e read th e i ns tru ct i o n s fo r t h e fo rm s wh en p rep ari n g h i s 2 0 1 3 Fo rm 1 0 4 0 , b uti ti s u n cl ear wh i ch o f th es e i n s tru ct i o n s h e read . Pet i t i on er was aware o f t ax p rep arat i on s o ftw are an d o th er res o u rces- 6
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av ai l ab l e t o h i m

t o as s i s twi th p rep ari n g h i s Fed eral i n co m e t ax retu rn s . 4 Pet i t io n er d i dn o tco n s u l tan y res o u rces o u t s i d e o f t h e i n s tru ct i o n s , s u ch as an In t ern al Rev enu e Serv i ce p ubl icat i o n o r an y o n li n e res o u rces . See s ec. 6 6 64 (c)(1 );
s ec. 1 .6 6 64 -4 (b )(1 ), In co m e Tax Reg s . Th erefo re, we co n cl ud e t h atp et it i o n er d i d
n o tp ro v e t h ath e act edwi th reas o n ab le cau s e an d i n g o o d fai th
. Acco rd i ng l y , we s u s t ai n th e accu racy -rel at edp en al ty . W e h av e co n s id eredal l o f t h e p art i es ’ arg u m en t s , an d , t o th e ex t en tn o t ad dres s edh erei n , we co ncl u d e t h atth ey are m o o t, i rrel ev an t , o r wi tho u tm eri t . To refl ectthe fo reg o i n g , Deci s i o n wi ll b e en t eredfo r
res p o nd en t .

4 Pet i t i on er t es t i fi edthath e u s ed t ax p rep arat i o n s o ft ware t o as s i s twi th p rep ari n g h i s Fed eral i n co m e t ax retu rn s fo r o th er t ax y ears , an d i tap p ears th ath e u s ed tax p rep arat i o n s o ft ware fo r h i s 2 0 12 Fo rm 1 04 0 , wh i ch was el ect ro n i cal l y p rep aredan dt i m el y

fi l ed . Itd oes n o tap pear t h at res p on d en tm ad e an y ad ju s t m en t s t o p et i t i o n er’ s 2 01 2 retu rn .