# PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b),THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE.T.C. Sum m ary Opi ni on 20 13 -6 4 UNITED STAT ES TAX COURT MARGARET PAYNE, Peti ti on er v . COMM ISSI ONER OF INTERNAL REVENUE, Resp on de nt

Doc ke t No . 35 17 -1 2S . File d Au gu st13 , 20 13 . Mar ga retPayne , pro se. Fred eri ckC. Mu tt er, fo r res po nd en t.

SUMM ARY OPINION PANUTHOS, Chi ef Sp eci al Trial Ju dg e: Thi s ca se was h eardpu rs ua ntto th e p ro vi si on s o f se ct io n 7 46 3 o f th e In te rn al Rev enue Co de (Co de ) in effe ctwhen th e p et it io n was fil ed . Purs ua ntto sec ti on 74 63 (b ), th e d eci si on to be en te redis no t re vi ewab le by any

ot he r co urt, an d t hi s o pi ni onsh al l n otbe tre at edas- 2 -

pr eced en t fo r an y

ot he r cas e. Unl es s o th erwi se in di cat ed , subs eque ntsec ti on refe ren ces are t o t he Int ern al Rev enue Co de ineffe ctfor th e y ears inis su e, an d a ll 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. Ina no ti ce o f de fic ie nc y

da te d Dec em

be r 6, 2 01 1, re sp on de ntde te rm in ed de fic ie nc ie s i n p et it io ne r’s Fed eral in co m e ta x o f $1 ,95 1 a nd$4 ,55 0 fo r ta x years 20 08 an d 2 00 9, re sp ect iv el y . Res po nd en t al so de te rm in edsec ti on66 62 (a) accu racy-rela te d p en al ti es of $ 39 0.2 0 a nd$9 10 fortax y ears 20 08 an d 2 00 9, res pe ct iv el y . After c on ces si on s, th e is su es for de ci si on are: (1) whethe r 1 pe ti ti on er i s en ti tl edto de du ct io ns for ch ari tabl e co nt rib ut io ns forth e y ears in is su e; an d (2 ) whe th er s he is li ab le foraccu racy-rela te d p en al ti es un de r se ct io n 66 62 (a). Bac kg ro un d 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 an d t he att ach edex hi bi ts are i nc or po rat edhe rei n b y

th is refe ren ce. Pet it io ne r res id edinNew Yorkwhen he r pe ti ti on was fi le d.

Pet it io ne r ag rees th atsh e fai le d t o re po rt g am bl in g wi nn in gs of $ 11 ,03 4 fo r 1 20 08 . In the no ti ce o f de fic ie nc y res po nd en t i nc lu de d s ai d a m ou ntas a dd it io na l in co m e an d a ls o a ll owe d p et it io ne r anad di ti on al ga m bl in g l os s i n t he id en ti cal am ou nt .- 3 -

At the ti m e o f tr ia l p et it io ne r was em pl oyed b y th e In te rn al Rev enue Serv ic e (IRS ) as a rev enue ag en t i n the Man ha tt anoff ic e. At tha t t im e sh e h adwork edas a rev enue ag en t fo r 20 y ears an d h adbe enem pl oyed b y th e IRS for

28 y ears . Pet it io ne r gr adua te d fr om co ll eg e wit h two m ajor s an d am in orinacco un ti ng , fin an ce, an d e co no m ic s an d h as co m pl et edso m e g radua te workinfor en si c acco un ti ng . She ha s al so pa ss edso m e p art s o f th e C.P.A. ex am an d a t the ti m e o f tri al was wo rk in g a t p as si ng th e rem ai ni ng pa rts . Dur in g t he y ears inis su e p et it io ne r freque nt edcas in os inAtl an ti c Ci ty, New Je rs ey . Peti ti on er v is it edcas in os ap pr ox im at el y th ree t im es pe r m on th an d ge ne ral ly pla y edth e sl ot s an d s om et im es pl ay edcardga m es as we ll . Peti ti on er so m et im es us edcas h t o g am bl e, an d o th er t im es sh e u se d ali ne of c red itpro vi de d by the cas in o. Pet it io ne r as se rts th atas s he won m on ey at t he cas in os du rin g t he y ears in is su e, sh e m ad e cas h c on tri bu ti on s fr om he r win ni ng s t o the Liv in g S to ne Bap ti st Ch ur ch (LSBC) inBro ok lyn, New York . Lem ue l M . Mo bl ey

was t he pa st orof t he ch ur ch at the ti m e o f tr ia l an d h adbe enth e p as to r of LSBC fo r 12 y ears . Duri ng th e y ears inis su e th ere wer e ap pr ox im at el y 50 to 75 m em

be rs of t he ch ur ch . Pas to r Mo bl ey

kn ew al l the m em

be rs by nam e an d fa ce. Gue st s fr eque nt ly at te nd edLSBC, an d e ach Sund ay th e num be r of gu es ts va rie d fr om

no ne to a few.- 4 -

Each Sund ay

aft er s erv ic es Pas to r Mo bl ey wou ldpe rs on al ly greetall pe rs on s i n at te nd an ce. The re ar e b as ke ts inLSBC wh ere c on gr eg an ts canm ak e d on at io ns . The do na ti on s ar e g en eral ly m ad e in cas h, s om et im es pl acedinth e b as ke t wi th ou t an en ve lo pe an d o th er t im es pl acedin en ve lo pe s wi tha co ng reg an t’s n am e wri tt enon th e en ve lo pe . After t he Sund ay servi ce d es ig na te d c hu rchm em be rs an d/ or tru st ees co un t an d re co rdth e co nt rib ut io ns . A reco rdis ke ptof t he co nt rib ut io ns m ad e eac h S un da y , anda rep ort i s m ad e eac h wee k t o t he pa st or as t o t he am ou nt s of th e co nt rib ut io ns , in cl ud in g n am es of the co nt rib ut or s t o t he ex te ntth e co nt rib ut io ns were i de nt ifi ed . At th e en d o f eac h year LSBC p ro vi de d alet te r to each co ng reg an t, upo n re qu es t, re fle ct in g the co ng reg an t’s an nu al co ntrib ut io ns . LSBC re qu ire d t he co ng reg an t t o p ers on al ly pic k up h is or h er l et te r an d t o s ig n fo r itto ackno wled ge th athe or s he ha d re cei ve d alet te r refl ect in g a nn ua l co nt rib ut io ns . Ju an it a St ev en so n h as work edas asec ret ary fo r th e IRS si nc e 1 98 7. Ms . St ev en so n wo rk s atth e sa m e Ma nh at ta n o ffi ce b ui ld in g a s p et it io ne r, an d s he an d pe ti ti on er m etwhen th ey were b ot h wo rk in g i n t ax pay er s erv ic es at t he IRS. Ms . St ev en so n a ndpe ti ti on er h av e b een fri en ds an d s om et im es co worke rs , alt ho ug h th ey work edindi ffer en t s ect io ns at t he IRS atth e ti m e o f tr ia l. Ms . Ste ve ns on ha s- 5 -

be ena m em

be r of LSBC fo r 49 y ears . She reg ul arl y att en ds Sund ay

servi ces an d ha s v ol un te eredinva rio us m in is tri es of LSB C. Pet it io ne r ti m el y

fil edFo rm s 1 04 0, U.S. In di vi du al Inc om e Tax Return, fo r 20 08 an d 2 00 9. Th e returns were fi le d a s m arri edfil in g s ep arat el y . On h er 2 00 8 return p et it io ne r rep orte d g am bl in g wi nn in gs an d g am

bl in g l os se s o f $4 7,8 08 . As in di cat ed , th e p art ie s ag ree t ha t the ga m bl in g wi nn in gs an d l os se s fo r 20 08 were $5 8,8 42 . Peti ti on er al so cla im eda de du ct io n fo r ch ari tabl e co nt rib ut io ns of $1 2,0 25 for20 08 . Of th is am ou ntres po nd en t d is al lo weda pu rp orte d c as h co nt rib ut io n t o LSB C o f $6 ,04 7. Onhe r 20 09 return p et it io ne r rep orte d g am bl in g win ni ng s an d l os se s o f $1 3,2 50 . No ad jus tm en ts were m ad e to th e g am bl in g win ni ng s an d l os se s fo r 20 09 . Peti ti on er al so cla im eda de du ct io n fo r ch ari tabl e co nt rib ut io ns of $ 25 ,14 0 fo r 20 09 . Of th is am ou ntres po nd en t d is al lo weda de du ct io n fo r a p ur

po rte d c as h c on tri bu ti on to LSBC o f $1 4,0 00 . Dur in g t he ex am in at io n o f pe ti ti on er’s 2 00 8 and20 09 returns , res po nd en t’s ag en t que st io ne d p et it io ne r ab ou t the cla im edch ari tabl e co nt rib ut io n d educ ti on s. Inres po ns e to th e ex am in at io n p et it io ne r pr ov id edth e ex am in in g a ge ntwith co pi es of p ur

po rte d l et te rs fro m

LSBC. The let te rs pu rp orte d t o b e o n the le tt erh eadof LSB C, are d at edDecem be r 30 , 20 08 , andDecem be r 30 , 20 09 , and- 6 -

st at e th atpe ti ti on er m ad e co nt rib ut io ns to LSBC i n 2 00 8 a nd20 09 of $ 6,0 47 an d $1 4,0 00 , res pe ct iv el y . The l ette rs are p ur po rte dl y si gn edby Past orMo bl ey . Afte r rec ei ptof the afo rem en ti on edlet te rs th e ex am in in g a ge ntco nt act ed LSBC t o a sc ert ai n wh ethe r pe ti ti on er was a m em be r an d wh ethe r infactsh e h ad m ad e co nt rib ut io ns to LSBC. Pas to r Mo bl ey sp ok e wit h the ex am in in g a ge nt , Ms . Co he n, an d a dv is edth atpe ti ti on er was no t a m em be r of LSBC, tha t h e d idno t kn ow p et it io ne r, an d t ha t p et it io ne r ha d n otm ad e an y co ntrib ut io ns to LSBC. He advi se d t ha t the let te rs refl ect in g c on tri bu ti on s wer e n otsi gn edby him an d tha t the le tt erh ead s wer e a “ cu t an d p as te job ”. 2 Fo ll owi ng hi s m eet in g wi th th e rev enue ag en t, Pa st orMo bl ey advi se d t he co ng reg at io n a t a S un da y servi ce tha t an IRS ag en t was co nduc ti ng an in ve st ig at io n c on cern in g a ll eg edco nt rib ut io ns to LSBC an d a sk edth e co ng reg at io n wh ethe r an y on e kne w pet it io ne r. Afterth e se rv ic e, Ju an it a St ev en so n c am e fo rwardan d a dv is edPas to r Mo bl ey th atsh e kne w pet it io ne r. Ms . St ev en so n a dv is edth atpe ti ti on er s om et im es wentby the ni ckna m e “ Sch ou ch i” . At s om e la te r po in t p et it io ne r co nt act edPas to r Mo bl ey to di sc us s t hi s m at te r. The re ar e v arying acco un ts fro m th e p art ie s as to whatwas d is cu ss edan d wh at

Pas to r Mo bl ey

als o i nd ic at edth athi s n am e was m is sp el le d o n b ot h l et te rs . 2- 7 -

happ en edne xt . Past orMo bl ey wrot e a l et te r da te d M ay 6, 2 01 1, wh ere h e st at ed as fol lo ws: I am writ in g thi s l ette r to reca ntst at em en ts th atI m ad e in a pr ev io us le tt er d at edApri l 7 th , 20 11 , th atwas wri tt en , as i t re la te s t o M arg aret Payne. I st at edth atI di dn ’t kn ow wh o s he was b ecau se sh e was us in g an ot he r na m e. The am ou nt s o f m on ey sh e st at edth atsh e g av e were tru e. Sh e p ie cedto ge th er a fi nanc ia l s ta te m en t an d s ta te d t o m e th at sh e h adon e o f he r ch il dr ento si gnm y na m e. Afte r Su nd ay

m orni ng wors hi p o n S un da y Apri l 1 0t h, 2 01 1, Ni ta St ev en so n c am e to m

y off ic e an d a dm it te d t ha t s he was M arg aret Payne. Sh e st at edth atsh e was so rry forwhatsh e h addo ne . She as ke d fo r fo rg iv en es s an d I f or ga ve he r fo r wha t s he ha d d on e to m e as well as t o t he ch ur ch . I di d n otgi ve he r oran y on e el se pe rm is si on to si gn m y na m e o n a ny do cu m en t. Mrs . Coh enfro m

th e IRS off

ic e cal le d fo r a few d ay s atlea stth ree t o fo urti m es a da y . She st at edth atwho m ev er s he tal ke d t o t ol d h er tha t The Liv in g S to ne Ch ur ch was asm al l ch ur ch an d t ha t n ob od y inth is ch ur chco ul d g iv e th atam ou ntof m on ey . Her att itud e was no t ap pr op ria te an d e sp eci al ly whe n I f ou ndou t wh om

Marg aretPayne was sh e ta lk edto m e as if I d id n’t kno w whatI was d oi ng . I di dn ’t li ke th e way

sh e ta lk edto m e atall . Pas to r Mo bl ey

si gn edtwo let te rs da te d M ay 11 , 20 11 , in di cat in g t ha t pe ti ti on er h adm ad e co nt rib ut io ns to LSBC i n 2 00 8 a nd20 09 of $ 6,0 47 an d $1 4,0 00 , res pe ct iv el y . Past orMo bl ey pro vi de d t hr ee co nt rad ic to ry ex pl an at io ns as to th e ev en ts . At on e p oi nthe st at edth atth e le tt ers actua ll y rep res en t co nt rib ut io ns fro m

Ms . Ste ve ns on . At an ot he r po in t h e in di cat edth athe m ay ha ve co nf us edpe ti ti on er wi th Ms . Ste ve ns on , andat a no th er p oi nthe su gg es te d t ha t- 8 -

pe ti ti on er h adpro m is edto m ak e a co nt rib ut io n a t s om e la te r po in t i n re tu rnfor th es e le tt ers . Dis cu ss io n The Co m m is si on er’s d et erm in at io n s etforth ina no ti ce o f de fic ie nc y is pr es um edco rrec t, an d atax pa y er g en eral ly bears th e b ur de n o f pr ov in g o th erwi se . Ru le 14 2( a); W el chv. Hel ve rin g, 2 90 U.S. 11 1, 1 15 (19 33 ). Dedu ct io ns are a m at te r of leg is la ti ve gra ce, an d t he tax pa y er b ears th e b ur de n o f pr ov in g en ti tl em en t t o a ny deduc ti on cla im ed . Rul e 1 42 (a); New Co lo ni al Ice Co . v. Helv eri ng , 29 2 U.S. 4 35 , 44 0 (1 93 4) . Pu rs uantto sec ti on 74 91 (a), the burd enof p ro of m ay sh iftto th e Co m m is si on er i f th e ta xp ay er p ro du ces cred ib le ev id en ce wi th res pe ctto any rel ev an t fa ctua l i ss ue an d m eet s o th er requi rem en ts . Peti ti on er d oe s n otco nt en d th atsec ti on 74 91 (a) s hi fts th e b ur de n o f pr oo f to res po nd en t, n ordo es th e rec or d es tabl is h t ha t p et it io ne r sa ti sf ie s t he sec ti on 74 91 (a)( 2) requi rem en ts . I. Ch ari tabl e Co nt rib ut io ns Sect io n 1 70 all ows de du ct io ns forch ari tabl e co nt rib ut io ns m ad e dur in g a ta xabl e y ear, p ro vi de d t he tax pa y er v eri fie s t he co nt rib ut io ns . Taxp ay ers are requi redto subs ta nt ia te do na ti on s m ad e b y cas h o r ch eckvi a (1 ) can cel edch eck s, (2 ) rec ei pt s fr om

th e d on ee (s ho win g t he do ne e’s na m e an d t he da te an d a m ou ntof- 9 -

th e d on at io n) , or (3 ) othe r rel iabl e wri tt enreco rd s. Sec . 1.1 70 A-1 3( a)(1 ), In co m e Tax Reg s. W e m us t d eci de whethe r pe ti ti on er h as sat is fie d h er b ur de n o f es tabl is hi ng th atsh e m ad e co nt rib ut io ns of $ 6,0 47 an d $ 14 ,00 0 i n 2 00 8 a nd20 09 , res pe ct iv el y . The reco rdinth is m at te r is ful l o f in co ns is te nc ie s, co nt rad ic ti ng tes ti m on y , fab ric at eddo cu m en ts , andsi m pl e u nt ru th s. So rti ng th ro ug h the tes ti m on y of t hr ee witne ss es , each of wh om no t o nl y co nt rad ic te d t he tes ti m on y of t he ot he rs bu t al so co nt rad ic te d h is or h er o wn t es ti m on y an d d oc um en ts , lea ds th e Co urt t o c on cl ud e th atpe ti ti on er’s o nl y

m ot iv at io n i n t hi s ca se was am is gu id edan d i ne ptatt em ptto supp ort cl ai m edch ari tabl e co nt rib ut io n d educ ti on s t hr ou gh a fi ct io na l ac co un t o f th e p as t. Pet it io ne r was no t a m em be r of LSBC dur in g t he y ears inis su e. Pas to r Mo bl ey was c le ar tha t h e kne w all hi s co ng reg an ts by nam e an d fa ce an d t ha t h e di d n otkn ow p et it io ne r. Pas to r Mo bl ey ap pa ren tl y

fir stm etpe ti ti on er i n 2 01 1 aft er the ex am in at io n o f pe ti ti on er’s t ax returns co m m en ced . It s eem s i m

pr ob ab le th atpe ti ti on er ev er at te nd edLSBC an d e ve n l es s p ro babl e th atsh e m ad e d on at io ns in an y am ou nt . It ap pe ars hi gh ly pro babl e th atpe ti ti on er, i n c on certwith h er lo ng ti m e fri en d a ndfel lo w IRS em pl oyee, cutan d p as te d s ta ti on ery fro m LSBC an d p ro vi de d the same to t he IRS ag en t ex am in in g the returns inanatt em ptto- 10 -

supp ort the cla im edde du ct io ns . Thatatt em ptfai le d wh enth e IRS ag en t at te m pt ed to ve rif y th e rep orte d c on tri bu ti on s wi th Pas to r Mo bl ey . The p as to r m ad e cl ear th athe di d n otau th or iz e th e rec ei pt s t o b e p rep aredor i ss ue d o n LSB C s ta ti on ery, no r di d h e si gn an y

su chrece ip ts . Evenaft er the se fal se do cum en ts were ex po se d by the ex am in in g re ve nu e ag en t, p et it io ne r co nt in ue d t o p ur su e h er ef fo rts to ob ta in do cu m en ts insupp ort o f th e rep orte d c on tri bu ti on s. Pas to r Mo bl ey subs eque nt ly wro te let te rs ap pe ari ng to supp ort the cla im edch ari tabl e co nt rib ut io ns to LSBC. Pas to r Mo bl ey pre se nt edva rio us co nt rad ic ti ng ve rs io ns of th e p as t. Whil e th e p rev ai li ng st or ie s v ary, on e m at te r of whi ch we are ab so lu te ly cert ai n i s t ha t p et it io ne r ha s n otpre se nt edan y cred ib le ev id en ce tha t s he m ad e th e co nt rib ut io ns to LSBC re po rte d o n h er 2 00 8 a nd20 09 tax returns . Pet it io ne r ha s n otest ab li sh edth atsh e is en ti tl edto th e cl ai m edde du ct io ns , an d re sp on de nt ’s det erm in at io ns are ac co rd in gl y su st ai ne d. II. Accu racy-Rel at edPen al ti es Sect io n 6 66 2( a) an d (b )(1 ) an d (2 ) im po se s a p en al ty of 20 % of t he po rti on of anun de rp aym en t o f ta x a tt rib ut ab le to th e ta xp ay er’s n eg li ge nc e, di sr eg ardof ru le s o r reg ul at io ns , or s ub st an ti al un de rs ta te m en t o f in co m e ta x. “Neg li ge nc e” in cl ud es 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 Co de , in cl ud in g a ny fail ur e to ke ep ad equa te bo ok s an d re co rd s o r to subs ta nt ia te it em s- 11 -

pr op erl y . See s ec. 6 66 2( c); sec . 1.6 66 2- 3( b) (1 ), In co m e Tax Reg s. “ Dis reg ard ” in cl ud es an y

care le ss , reck le ss , or i nt en ti on al di sr eg ard . Sec. 6 66 2( c). Neg li ge nc e ha s al so be ende fin edas afai lu re t o e xe rci se du e car e o r th e fai lure t o d o wh ata reas on ab le an d o rd in ari ly pru de ntpe rs on wou lddo un de r th e ci rcu m st an ces . See All env. Co m

m is si on er, 9 2 T.C. 1 , 12 (19 89 ), aff’d, 9 25 F.2d34 8, 3 53 (9t h C ir. 19 91 ); Ne el y

v. Co m m is si on er, 8 5 T.C. 9 34 , 94 7 (1 98 5) . W it h re sp ectto a ta xp ay er’s l iabi li ty for an y pe na lt y , sec ti on 74 91 (c) p la ces on th e Co m

m is si on er the bu rd enof p ro du ct io n, the reb y requi rin g t he Co m m is si on er t o c om e fo rwardwith s uf fic ie ntev 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. Hig be e v . Comm is si on er, 1 16 T.C. 43 8, 4 46 - 44 7 (2 00 1) . Once t he Co m m is si on er m eet s h is bu rd enof p ro du ct io n, the tax pa y er m us t co m e fo rwardwith p ers ua si ve ev id en ce tha t the Co m m is si on er’s de te rm in at io n i s i nc orrect . See i d. at44 7; see als o R ul e 1 42 (a); W el ch v. Helv eri ng , 29 0 U.S. at11 5. Re sp on de ntde te rm in edth e acc ur acy-rela te d p en al ty fo r eac h year was du e to ne gl ig en ce o r di sr eg ardof rul es or r eg ul at io ns . Peti ti on er cl ai m edde du ct io ns on he r 20 08 an d 2 00 9 re tu rn s fo r pu rp orte d c on tri bu ti on s t ha t sh e is un ab le to subs ta nt ia te . Res po nd en t’s b ur de n o f pr oduc ti on un de r se ct io n 74 91 (c) h as be ensat is fie d.- 12 -

The sec ti on66 62 (a) a ccu racy-rela te d p en al ty doe s n otap pl y with re sp ectto an y po rti onof a n und erp aym en t i f th e ta xp ay er p ro ve s t ha t the re was reas on ab le cau se forsu ch po rti on an d tha t s he act edingo odfai th with re sp ectth eret o. Se c. 66 64 (c)( 1) . The d et erm in at io n o f whe th er a t axpa y er ac te d wi th reas on ab le cau se an d i n g oo d fa ith d ep en ds on th e p ert in en t fa ct s an d c irc um st an ces , in cl ud in g t he ta xp ay er’s eff

orts to ass es s the pro pe r ta x l iabi li ty, th e kno wled ge an d t he ex pe rie nc e o f th e ta xp ay er, an d t he rel ia nc e o n t he advi ce o f a p ro fes si on al , su ch as anacco un ta nt . Sec. 1 .66 64 -4 (b )(1 ), In co m e Tax Reg s. Pet it io ne r of

fere d n o a rg um en t o r ot he r ev id en ce t o s ho w th atth ere was reas on ab le cau se forth e d educ ti on s cl ai m edan d t ha t s he act edingo odfai th with res pe ctto th e u nd erp aym en ts . W e are sat is fie d t ha t p et it io ne r, who ha s b een em pl oyed as anIRS re ve nu e ag en t fo r a num be r of y ears , di d n otm ak e a g oo dfai th effo rt t o p ro pe rly det erm in e h er 2 00 8 a nd20 09 Fed eral in co m e ta x l iabi li ti es an d t ha t the un de rp aym en ts res ul t fr om he r ve ry de li be rat e an d kno win g a tt em ptto reduc e h er t ax li ab il it ie s. Acco rd in gl y , we ho ldth atpe ti ti on er i s l iabl e fo r th e se ct io n 6 66 2( a) ac cu racy-rela te d p en al ty for 2 00 8 a nd20 09 . To re fle ctth e fo reg oi ng , Deci si on wil l b e en te red fo r res po nd en t.