United States Tax Court

T.C. Summary Opinion 2024-12

GREGORY ALEXANDER MORINO, 

Petitioner 

v. 

COMMISSIONER OF INTERNAL REVENUE,

Respondent

————— 

Docket No. 33689-21S. Filed July 2, 2024.

————— 

Gregory Alexander Morino, pro se. 

James P.A. Caligure, Noelle T. Geiger, Michael D. Kohanim, and Brian 

E. Peterson, for respondent.

SUMMARY OPINION

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

the provisions of section 74631 of the Internal Revenue Code in effect 

when 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.

In a notice of deficiency dated October 7, 2021, the Internal 

Revenue Service (IRS) determined deficiencies in Mr. Morino’s federal 

income tax of $7,632 and $4,244 for 2018 and 2019 (years in issue), 

respectively. The IRS also determined an addition to tax, pursuant to 

section 6651(a)(1), of $933 for 2018, and accuracy-related penalties, 

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

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

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

and Rule references are to the Tax Court Rules of Practice and Procedure. We round 

all monetary amounts to the nearest dollar.

Served 07/02/24
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pursuant to section 6662(a), of $1,382 and $849 for the years in issue, 

respectively. 

 The issues for decision are whether Mr. Morino (1) received and 

failed to report wages of $9,993 and a state tax refund of $354 for 2018;

(2) is entitled to deduct commissions and fees expenses of $6,000 and 

$5,500, respectively, for the years in issue as reported on Schedules C, 

Profit or Loss From Business; (3) is entitled to deduct car and truck

expenses of $26,978 and $32,190, respectively, for the years in issue as 

reported on Schedules C; (4) is entitled to deduct other expenses of 

$8,920 and $5,820, respectively, for the years in issue as reported on 

Schedules C; (5) is liable for an addition to tax, pursuant to section 

6651(a)(1), for 2018; and (6) is liable for accuracy-related penalties, 

pursuant to section 6662(a), for the years in issue. 

All remaining proposed adjustments are computational. We 

resolve each of these questions in the Commissioner’s favor.

Background

While a stipulation of facts was not agreed to, the Commissioner 

offered six proposed Exhibits to which Mr. Morino did not object. We find 

the facts contained herein from the notice of deficiency, issued October 

7, 2021; Mr. Morino’s Forms 1040, U.S. Individual Income Tax Return,

for the years in issue; an uncertified account transcript and wage and 

income transcript for 2018; the Commissioner’s civil penalty lead sheet 

and civil penalty approval form for the years in issue; and the testimony 

of Mr. Morino. Mr. Morino resided in New Jersey when the Petition was 

timely filed.

During 2018 Mr. Morino was employed as a “W-2 wage earner” at 

Marcus L. Ward Home, Inc. (Ward), and Am Law Corp. (Am Law). Ward 

issued Mr. Morino Form W–2, Wage and Tax Statement, reporting that 

it paid him wages of $9,994 during 2018. Also, the State of New Jersey

issued to Mr. Morino Form 1099–G, Certain Government Payments,

reporting that the state paid him during 2018 a $354 refund of state 

income tax. In addition to being a wage earner whose earnings were 

reported on Form W–2, Mr. Morino operated an unincorporated 

business called Total Life Transformation (TLT). Mr. Morino filed his 

2018 Form 1040 on April 17, 2020. On that return Mr. Morino reported 

wages paid by Am Law totaling $7,917; unemployment compensation of 

$17,706; a business loss of $19,129 from TLT, which he detailed on two
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Schedules C attached to his 2018 Form 1040; and a student loan interest 

deduction of $2,500.

On the first 2018 Schedule C Mr. Morino reported gross income

of $22,249 based on three Forms 1099–MISC, Miscellaneous Income,

received from Pinnacle Insurance Solutions, LLC, Bell Processing 

Solutions, Inc. (Bell), and JJ&AA Enterprise, LLC. Mr. Morino reported 

total expenses, deducted as a management fee paid to himself, of 

$22,249. On the second 2018 Schedule C for TLT Mr. Morino reported 

gross income of $41,499, which included the previously deducted 

management fee, and total expenses of $60,628. The deducted expenses 

consisted of, inter alia, $26,978 in car and truck expenses, $6,000 in

commissions and fees, and $15,050 in other expenses. The other 

expenses are itemized as follows:

Description Amount Description Amount

Bank fees $1,600 Internet $1,200

Marketing 

expenses

7,450 Telephone 1,800

Charitable 

contributions

1,500 Other fees paid 1,500

During 2019 Mr. Morino continued to operate TLT. He timely 

filed his 2019 Form 1040. On that return he reported a business loss of 

$19,297 from TLT, which he again detailed on two Schedules C attached 

to his 2019 Form 1040.

On the first 2019 Schedule C Mr. Morino reported gross income

of $26,163 received from Bell and reported total expenses, consisting 

again of a management fee paid to himself, of $26,163. On the second 

2019 Schedule C for TLT he reported gross income of $48,543, which 

included the deducted management fee, and total expenses of $67,840. 

The deducted expenses consisted of, inter alia, $32,190 in car and truck 

expenses, $5,500 in commissions and fees, and $11,100 in other 

expenses. The other expenses consisted of the following:
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Description Amount Description Amount

Bank fees $1,900 Internet $1,200

Marketing 

expenses

4,450 Telephone 1,800

Charitable 

contributions

1,000 Other fees paid 750

After examination, the IRS determined that Mr. Morino had 

failed to (1) report all income received for 2018 and (2) substantiate most 

of the deducted business expenses for the years in issue. The IRS issued 

a notice of deficiency determining the receipt of the unreported income 

and disallowing the unsubstantiated deductions for commissions and 

fees, car and truck expenses, and other expenses for the years in issue.

A trial was held on February 5, 2024, in New York City, New 

York. At trial Mr. Morino did not present any evidence supporting his 

position that he (1) did not receive the unreported income for 2018 or

(2) properly deducted the business expenses reported on the Forms 1040 

for the years in issue. Mr. Morino offered testimony regarding only 

frivolous and groundless issues.

Discussion

I. Burden of Proof

In general, the Commissioner’s determinations set forth in a 

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

burden of proving that the determinations are in error. Rule 142(a); 

Welch v. Helvering, 290 U.S. 111, 115 (1933). Mr. Morino did not assert,

and the evidence does not establish, that the burden of proof should shift 

to the Commissioner. See § 7491(a).

II. Unreported Income

Gross income means “all income from whatever source derived.” 

§ 61(a); see also Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429–

31 (1955). The definition of gross income includes gross income derived 

from business. § 61(a)(2). 

Generally, under section 111 and the regulations 

thereunder, if State income tax was deducted on a prior 

year’s Federal income tax return and resulted in a 
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reduction of Federal income tax and a tax benefit to the 

taxpayer, the taxpayer’s subsequent recovery of the State 

income tax must be included in gross income for the year 

in which the recovery is received. 

Cutting v. Commissioner, T.C. Memo. 2020-158, at *22 (citing Kay v. 

Commissioner, T.C. Memo. 2011-159), aff’d, No. 21-70235, 2021 U.S. 

App. LEXIS 37928 (9th Cir. Dec. 22, 2021).

In cases of unreported income, “the Commissioner must establish 

a ‘minimal evidentiary showing’ connecting the taxpayer with the 

alleged income-producing activity,” Walquist v. Commissioner, 152 T.C. 

61, 67 (2019) (quoting Blohm v. Commissioner, 994 F.2d 1542, 1548–49 

(11th Cir. 1993), aff’g T.C. Memo. 1991-636), “or demonstrate that the 

taxpayer actually received unreported income,” id. (citing Edwards v. 

Commissioner, 680 F.2d 1268, 1270 (9th Cir. 1982)). “Once the 

Commissioner makes the required threshold showing, the burden shifts 

to the taxpayer to prove by a preponderance of the evidence that the 

Commissioner’s determinations are arbitrary or erroneous.” Id. at 67–

68 (first citing Helvering v. Taylor, 293 U.S. 507, 515 (1935); and then 

citing Tokarski v. Commissioner, 87 T.C. 74 (1986)). The IRS may rely 

on a third-party income report if the taxpayer does not raise a 

reasonable dispute about its accuracy. See § 6201(d).

The Commissioner met his threshold burden here. Mr. Morino’s 

wage and income transcript states that he received wages of $9,994 from 

Ward as shown on the 2018 Form W–2 and a tax refund of $354 received 

from the State of New Jersey Department of the Treasury in 2018. Mr. 

Morino did not dispute the accuracy of the transcript or his receipt of 

this income. Mr. Morino neither alleged nor proved that he did not 

receive a tax benefit from the prior year deduction of the $354 state tax

refund. See Brobst v. Commissioner, T.C. Memo. 1988-456. We find that 

the wage and income transcript establishes a sufficient evidentiary 

basis to connect Mr. Morino with the unreported income. We therefore

sustain the Commissioner’s determination of unreported income, as set 

forth in the notice of deficiency for tax year 2018.

III. Claimed Business Deductions on Schedules C

Deductions are a matter of legislative grace. See INDOPCO, Inc. 

v. Commissioner, 503 U.S. 79, 84 (1992). A taxpayer bears the burden of 

proving that he is entitled to any deduction claimed. See id. Section 

162(a) permits a taxpayer to deduct all ordinary and necessary expenses 
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paid or incurred during the taxable year in carrying on a trade or 

business. A taxpayer must substantiate deductions claimed by keeping 

and producing adequate records to enable the Commissioner to 

determine the taxpayer’s correct tax liability. § 6001; Treas. Reg. 

§ 1.6001-1(a); see Hradesky v. Commissioner, 65 T.C. 87, 89–90 (1975), 

aff’d per curiam, 540 F.2d 821 (5th Cir. 1976); Roberts v. Commissioner, 

62 T.C. 834, 836 (1974).

If a taxpayer establishes that an expense is deductible but is

unable to substantiate the precise amount, the Court may estimate the 

allowable amount (Cohan rule). See Cohan v. Commissioner, 39 F.2d 

540, 543–44 (2d Cir. 1930). The taxpayer must present sufficient 

evidence to permit the Court to make an estimate. Vanicek v. 

Commissioner, 85 T.C. 731, 742–43 (1985). Section 274(d) overrides the 

Cohan rule for certain expenses. See Sanford v. Commissioner, 50 T.C. 

823, 827–28 (1968), aff’d per curiam, 412 F.2d 201 (2d Cir. 1969); Treas. 

Reg. § 1.274-5(c)(2)(iii); Temp. Treas. Reg. § 1.274-5T(a). Under section 

274(d), a taxpayer must meet stricter substantiation requirements to 

deduct certain expenses under section 162, including expenses with 

respect to the business use of any listed property (such as a passenger 

automobile). See §§ 274(d)(1), (3), 280F(d)(4)(A).

The Commissioner disallowed the disputed deductions for 

commissions and fees, car and truck expenses, and other expenses for 

the years in issue for lack of substantiation. At trial Mr. Morino failed 

to provide any testimony or other evidence to substantiate the claimed 

deductions. We conclude that Mr. Morino is not entitled to deduct the

business expenses reported for the years in issue.

IV. Addition to Tax Pursuant to Section 6651(a)(1)

Section 6651(a)(1) provides for an addition to tax of 5% of the tax 

required to be shown on a return for each month (or fraction thereof) for 

which there is a failure to file a timely return, not to exceed 25% in the 

aggregate, unless it is shown that such failure was due to reasonable 

cause and not due to willful neglect. See United States v. Boyle, 469 U.S. 

241, 245 (1985); see also Treas. Reg. § 301.6651-1(a)(1). Willful neglect 

is defined as a “conscious, intentional failure or reckless indifference.”

Boyle, 469 U.S. at 245. A failure to file a federal income tax return timely 

is due to reasonable cause if the taxpayer exercised ordinary business 

care and prudence but nevertheless was unable to file the return within 

the prescribed time, typically for reasons outside the taxpayer’s control. 

See id. at 243; Treas. Reg. § 301.6651-1(c)(1).
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Mr. Morino requested an extension of time to file his 2018 Form 

1040, until October 15, 2019, as permitted by section 6081(a). However, 

Mr. Morino filed his 2018 Form 1040 on April 17, 2020. There is no 

evidence in the record, and Mr. Morino failed to argue, that reasonable 

cause existed for his failure to timely file his 2018 Form 1040. 

Accordingly, we sustain the addition to tax, pursuant to section 

6651(a)(1), as determined by the Commissioner for 2018.

V. Accuracy-Related Penalty Pursuant to Section 6662(a)

The Commissioner determined a 20% accuracy-related penalty

against Mr. Morino for an underpayment of tax required to be shown on 

a return attributable to negligence or disregard of rules or regulations. 

See § 6662(a) and (b)(1). An underpayment is defined as the difference 

between the tax imposed on the taxpayer and the tax reported on the 

tax return. § 6664(a). Negligence “includes any failure to make a 

reasonable attempt to comply with the provisions of [the Code],”

§ 6662(c), including “any failure by the taxpayer to keep adequate books 

and records or to substantiate items properly,” Treas. Reg. § 1.6662-3(b). 

Disregard includes “any careless, reckless, or intentional disregard.” 

§ 6662(c).

To assert the accuracy-related penalty regarding a deficiency, 

section 7491(c) places the burden of production on the Commissioner to 

demonstrate sufficient evidence to support the penalty. See Higbee v. 

Commissioner, 116 T.C. 438, 446 (2001). As part of his burden of 

production, the Commissioner must show that he has complied with the 

requirements of section 6751(b)(1). See Graev v. Commissioner, 149 T.C. 

485, 492–93 (2017), supplementing and overruling in part 147 T.C. 460 

(2016). Section 6751(b)(1) provides that “[n]o penalty under this title 

shall be assessed unless the initial determination of such assessment is 

personally approved (in writing) by the immediate supervisor of the 

individual making such determination or such higher level official as the 

Secretary may designate.” “[O]nce the Commissioner meets his burden 

of production, the taxpayer must come forward with evidence sufficient 

to persuade a Court that the Commissioner’s determination is 

incorrect.” Higbee, 116 T.C. at 447.

The Commissioner has met his initial burden of production. The 

record shows that, as to each year in issue, Mr. Morino was “negligent” 

and “disregarded rules and regulations.” The record also shows that the 

immediate supervisor of the IRS employee who made the “initial 

determination” to impose the section 6662(a) penalties in dispute for the 
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years in issue approved the penalties in compliance with section 

6751(b)(1). Section 6664(c)(1) provides an exception to the accuracyrelated penalty “if it is shown that there was a reasonable cause for such 

portion [of an underpayment of tax] and that the taxpayer acted in good 

faith with respect to such portion.” The determination as to whether “a 

taxpayer acted with reasonable cause and in good faith is made on a 

case-by-case basis,” considering all pertinent facts and circumstances. 

Treas. Reg. § 1.6664-4(b)(1). Mr. Morino did not offer a reasonable cause

defense to the imposition of the accuracy-related penalties. Accordingly, 

we hold Mr. Morino liable for the accuracy-related penalties for the 

years in issue under section 6662(a) and (b)(1).

VI. Penalty for Maintaining a Frivolous Position

Section 6673(a)(1) authorizes this Court to impose on a taxpayer 

a penalty payable to the United States of not more than $25,000 

whenever it appears that “(A) proceedings before it have been instituted 

or maintained by the taxpayer primarily for delay, (B) the taxpayer’s 

position in such proceeding is frivolous or groundless, or (C) the taxpayer 

unreasonably failed to pursue available administrative remedies.” This 

statutory provision serves to compel taxpayers to conform their conduct 

to settled tax principles and to deter the waste of judicial resources. 

Salzer v. Commissioner, T.C. Memo. 2014-188, at *11 (first citing 

Coleman v. Commissioner, 791 F.2d 68 (7th Cir. 1986); and then citing

Grasselli v. Commissioner, T.C. Memo. 1994-581).

Since Mr. Morino failed to file a pretrial memorandum as 

required by the Standing Pretrial Order for Small Tax Cases, we held a

telephone conference with the parties on January 24, 2024. During this 

call Mr. Morino articulated many statements which were frivolous and 

groundless. By Order served January 24, 2024, we directed Mr. Morino’s 

attention to section 6673(a) and warned him that we would consider

imposing a penalty if he continued to advance such arguments.

After Mr. Morino began his direct testimony, we briefly

interrupted him to warn him that we might impose a penalty if he 

continued to make frivolous or groundless statements. After the 

reminder, Mr. Morino continued with such statements. Since this is Mr. 

Morino’s first time proceeding before this Court, we will not impose a 

penalty now. Mr. Morino is admonished that we will consider imposing 

a penalty under section 6673 if he files a petition commencing another 

case asserting tax protester rhetoric.
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VII. Conclusion

We have considered all the arguments that the parties have 

made, and to the extent they are not addressed herein, we find the 

arguments to be moot, irrelevant, or without merit.

To reflect the foregoing,

Decision will be entered for respondent.