United States Tax Court

T.C. Summary Opinion 2023-18

ANTHONY VENNARD HITCHMAN,

Petitioner

v.

COMMISSIONER OF INTERNAL REVENUE,

Respondent

—————

Docket No. 26739-21S. Filed May 2, 2023.

—————

Anthony Vennard Hitchman, pro se.

Adriana E. Vargas, Gregory Michael Hahn, Patsy A. Clarke, and Ara 

Derhartonian, for respondent.

SUMMARY OPINION

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

the provisions of section 7463 of the Internal Revenue Code in effect 

when the Petition was filed.1 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.

The Internal Revenue Service (IRS)2 examined petitioner’s 2018

federal individual income tax return. The IRS issued a notice of 

1 Unless otherwise indicated, all statutory references are to the Internal 

Revenue Code, Title 26 U.S.C., in effect at all relevant times, all regulation references 

are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant 

times, and all Rule references are to the Tax Court Rules of Practice and Procedure.

2 The Court uses the term “IRS” to refer to administrative actions taken outside 

of these proceedings. The Court uses the term “respondent” to refer to the

Commissioner of Internal Revenue, who is the head of the IRS and is respondent in 

this case, and to refer to actions taken in connection with this case.

Served 05/02/23
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deficiency dated April 26, 2021, and determined a deficiency of $1,962 

for 2018. Petitioner timely filed a Petition for redetermination pursuant 

to section 6213(a).

The issues for decision are whether for 2018 petitioner’s gross 

income includes (1) dividend and interest income received, but 

unreported, from his shares in Och-Ziff Capital Management Group, 

LLC (Och-Ziff), and (2) bond interest income, which is income in respect 

of a decedent from the redemption of a savings bond he inherited from 

his father. The Court concludes that petitioner’s gross income includes 

both the unreported dividend and interest income and the income in 

respect of a decedent.

Background

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

Petitioner resided in Washington State when he timely filed the 

Petition.

The First Stipulation of Facts is incorporated herein by this 

reference, except for Exhibits 4–J and 8–J. At trial petitioner objected 

to Exhibit 4–J on grounds of relevancy. The Court sustained petitioner’s 

objection, and it was not admitted. Respondent objected to Exhibits 7–J, 

8–J, and 10–J on grounds of hearsay because of handwritten notations 

on those documents. The Court sustained respondent’s objection to 

Exhibit 8–J, and it was not admitted. The Court overruled respondent’s 

objections to Exhibits 7–J and 10–J. Petitioner also introduced at trial 

Exhibits 11–P and 12–P. Respondent objected to those Exhibits on 

grounds of relevancy. The Court sustained respondent’s objection, and 

Exhibits 11–P and 12–P were not admitted.

I. Petitioner’s 2018 Tax Return

Petitioner filed his 2018 federal individual income tax return on 

April 15, 2019. For that tax year Och-Ziff issued him a Schedule K–1 

(Form 1065), Partner’s Share of Income, Deductions, Credits, etc., that 

reported interest income of $18. That Schedule K–1 also reported 

dividends of $223. For 2018 petitioner reported on his tax return 

interest income and dividend income from Och-Ziff of $7 and $2, 

respectively. For 2018 the Bureau of the Fiscal Service Treasury Direct 

Ops and Dev Branch issued to petitioner Form 1099–INT, Interest 

Income, that reported interest income of $13,992 from a U.S. series I 

savings bond (savings bond). Petitioner reported $260 in savings bond

interest on his 2018 return.
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II. Petitioner’s Father’s Passing and Petitioner’s Inheritance

On April 12, 2018, petitioner’s father, Leonard V. Hitchman, 

passed away. Petitioner inherited a savings bond from his father. 

Petitioner had the savings bond reissued in his name and redeemed it. 

A 2018 federal individual income tax return was filed on behalf of 

petitioner’s father on April 15, 2019. That return did not report interest 

income from the savings bond. The record does not show and the parties 

do not assert that petitioner’s father reported any interest income with 

respect to the savings bond during the time petitioner’s father owned 

the bond. Petitioner does not dispute receiving the savings bond or the 

accrued interest income. Petitioner reported interest income from the 

savings bond equal to the amount of interest income accumulated from 

the date the bond was reissued in his name until it was redeemed.

III. Notice of Deficiency

On April 26, 2021, the IRS issued petitioner a statutory notice of 

deficiency for tax year 2018 and proposed a deficiency of $1,962 based 

on unreported savings bond interest of $13,992,3 unreported interest 

income of $11, and unreported dividend income of $221 reported on a 

Schedule K–1.4

Discussion

I. Burden of Proof

Generally, the Commissioner’s determinations in a notice of 

deficiency are presumed correct, and the taxpayer bears the burden of 

proving those determinations erroneous. Rule 142(a)(1); Welch v. 

Helvering, 290 U.S. 111, 115 (1933). Gross income generally includes 

all income from whatever source derived, including dividends and 

interest income. I.R.C. § 61(a); Commissioner v. Glenshaw Glass Co., 

3 Based on the record, the Court understands the amount of unreported savings 

bond interest determined by the IRS to be the amount of accrued and unreported 

interest from the date petitioner’s father purchased the savings bond until the date 

before petitioner had the bond reissued. Petitioner reported $260 of savings bond 

interest on his 2018 tax return, which on the record was the amount of the accrued 

interest from the date the bond was reissued until petitioner redeemed it.

4 Petitioner reported on his 2018 tax return dividend income of $2 and interest 

income of $7 from Och-Ziff. Therefore, the notice of deficiency proposed a deficiency 

only with respect to the difference between the Schedule K-1 reported interest and 

dividend income and the amounts petitioner reported on his tax return.
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348 U.S. 426, 429–30 (1955); Wilcox v. Commissioner, 848 F.2d 1007, 

1008 (9th Cir. 1988), aff’g T.C. Memo. 1987-225; Treas. Reg. §§ 1.61-1(a), 

1.61-7(a), 1.61-9(a). The U.S. Supreme Court has held consistently that 

Congress defined gross income to exert “the full measure of its taxing 

power.” Commissioner v. Glenshaw Glass Co., 348 U.S. at 429 (quoting 

Helvering v. Clifford, 309 U.S. 331, 334 (1940)).

In the U.S. Court of Appeals for the Ninth Circuit the

presumption of correctness attaches in a case involving unreported 

income if the Commissioner first establishes some evidentiary 

foundation linking the taxpayer with the alleged income-producing 

activity. See Weimerskirch v. Commissioner, 596 F.2d 358, 361–62 (9th 

Cir. 1979), rev’g 67 T.C. 672 (1977); Rodriguez v. Commissioner, T.C. 

Memo. 2009-92. If the Commissioner connects the taxpayer with 

unreported income determined in a statutory notice of deficiency, the 

taxpayer has the burden of proving that the Commissioner’s 

determination is erroneous. See George v. Commissioner, T.C. Memo.

2002-163.

Respondent has established a sufficient evidentiary foundation as 

to the unreported income determined in the notice of deficiency. A

Schedule K–1 and a Form 1099–INT were issued to petitioner reporting 

Schedule K–1 interest and dividend income and savings bond interest 

income in petitioner’s name. Thus, respondent’s determination of 

unreported income is entitled to the presumption of correctness. 

Petitioner does not dispute receiving the savings bond interest income 

or the interest and dividend income from Och-Ziff.

II. Interest and Dividend Income

As to the interest and dividend income he received from Och-Ziff

and reported on the Schedule K–1, petitioner argues that it should have 

been split between him and his brother, the other beneficiary of his 

father’s estate. All income, unless expressly excluded, is taxable. I.R.C. 

§ 61. Petitioner concedes that he received taxable interest and dividend

income from Och-Ziff. He asserts, however, that he should be taxed only

on part of it because part of it belonged to his brother. Unfortunately, 

petitioner has not provided any documentary evidence to show that any 

partnership shares in Och-Ziff were owned by both him and his brother.

That assertion is contrary to how the Schedule K–1 reported the interest 

and dividend income, all in only petitioner’s name. Accordingly, the 

Court finds that petitioner has not met his burden of proof, and the 
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unreported interest income of $11 and the unreported dividend income 

of $221 are taxable to petitioner for 2018.

III. Savings Bond Interest Income

Petitioner asserts that the savings bond had been reissued and 

the basis in it was the value as of the date of reissuance. He asserts that 

he is liable for only the interest income that accrued from the time the 

savings bond was reissued until it was redeemed. Petitioner argues, 

without support, that a savings bond is property and gets a stepped-up 

basis when it is inherited.

Interest on U.S. savings bonds is fully taxable. Treas. Reg. § 1.61-

7(b)(3). A taxpayer who owns a U.S. savings bond can elect to report the 

income on his federal income tax return. Id. Under section 454(a) a 

bond owner for whom the entire interest is includible in income at the 

maturity of the bond may elect to treat the annual interest as income. 

An election is made simply by including the interest as income on a tax 

return, and that election is binding for all subsequent years. I.R.C. 

§ 454(a). If no such election is made, the interest accumulates, and when 

the bond matures, the accumulated interest is taxable in the year the 

bond matures or is redeemed. I.R.C. § 454(c) (flush language).

Accumulated interest on savings bonds may constitute income in 

respect of a decedent under section 691. See Apkin v. Commissioner, 86 

T.C. 692, 695 (1986). Regarding the tax treatment for recipients of 

income in respect of decedents, section 691(a) provides under the 

heading “Inclusion in Gross Income”:

(1) General rule.—The amount of all items of gross 

income in respect of a decedent which are not properly 

includible in respect of the taxable period in which falls the 

date of his death or a prior period . . . shall be included in 

the gross income, for the taxable year when received, of:

. . . .

(B) the person who, by reason of the death of 

the decedent, acquires the right to receive the 

amount . . . .

Petitioner inherited the savings bond when his father died in 

2018. Based on the record, the Court concludes that petitioner’s father 

did not report any interest income on the savings bond while he owned 

it. His father did not make an election under section 454(a) to have the 

annual interest on the bonds made taxable. The interest on the bonds 
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therefore accumulated, and when petitioner redeemed the bonds, the 

accumulated interest was includible in his income as income in respect 

of a decedent. Accordingly, the Court finds that petitioner had 

unreported interest income from his inherited savings bond for 2018 of 

$13,992.

To reflect the foregoing, 

Decision will be entered for respondent.