T.C. Summary Opinion 2007-6

UNITED STATES TAX COURT

DANIEL J. AND JOYCE A. RODERICK, Petitioners v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 23130-05S. Filed January 10, 2007.

Daniel J. and Joyce A. Roderick, pro se.

James H. Brunson, for respondent.

WELLS, Judge: This case was heard pursuant to the

provisions of section 7463 in effect at the time the petition was

filed. The decision to be entered is not reviewable by any other

court, and this opinion should not be cited as authority. All

section references are to the Internal Revenue Code, as amended,

and all Rule references are to the Tax Court Rules of Practice

and Procedure.
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1Petitioner Daniel J. Roderick (petitioner) concedes that he

received compensation from GMAC Mortgage Corporation (GMAC) and

pension and annuity income from Fidelity Investments and that he

should have reported both receipts on petitioners’ 2003 tax

return. Petitioner’s concessions support respondent’s position

that the sec. 6662(a) penalty is appropriate. Moreover,

petitioners did not assign error to the sec. 6662(a) penalty and

have therefore conceded the issue. See Rule 34(b)(4); Funk v.

Commissioner, 123 T.C. 213, 215 (2004). Accordingly, petitioners

are liable for the sec. 6662(a) penalty.

2Petitioners are now divorced, and petitioner Joyce A.

Roderick did not appear at trial on Oct. 30, 2006, in Atlanta,

Georgia. Petitioner and respondent sought to enter a stipulation

of facts signed by petitioner and respondent but not by

petitioner Joyce A. Roderick. By order dated Oct. 30, 2006, we

dismissed the instant case for lack of prosecution insofar as it

relates to petitioner Joyce A. Roderick. Respondent and

petitioner read the stipulation of facts into the record. 

Respondent determined a deficiency in petitioners’ Federal

income tax of $27,414 and a section 6662(a) penalty of $5,405 for

their 2003 taxable year. After concessions1 by petitioner Daniel

J. Roderick (petitioner),2 the issues we must decide are whether

petitioner must include in income for 2003 the entire amount of

nonemployee compensation he received from GMAC Mortgage

Corporation (GMAC) or whether a portion of that income belonged

to another taxpayer who worked with petitioner, and whether

petitioner is entitled to deduct certain nonreimbursed business

expenses. 

Background

Some of the facts have been stipulated. The parties’

stipulation of facts is incorporated in this opinion by 
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reference and are found as facts. At the time of filing the

petition, petitioners resided in Alpharetta, Georgia. Petitioner

entered into a short-term consulting agreement with his former

employer, GMAC, after his position was eliminated. Petitioner

submitted invoices to GMAC on February 1 and March 1, 2003,

totaling $43,977.76 and $34,967.70, respectively, for services

rendered and expenses incurred. Both invoices instructed GMAC to

wire transfer payment to a Bank of America account “For Benefit

of Daniel J. Roderick” and listed petitioner’s Bank of America

account number and Social Security number. GMAC paid

petitioner’s invoices on February 12 and March 26, 2003. Despite

receiving payment for the consulting services that petitioner

performed for GMAC, petitioners failed to include those amounts

on their 2003 tax return. Petitioners also failed to include on

their 2003 tax return $7,552 in pension and annuity distribution

income that petitioner received from Fidelity Investments. 

Discussion

Petitioner concedes that he received compensation from GMAC

and pension and annuity income from Fidelity Investments and that

he should have reported both receipts on petitioners’ 2003 tax

return. Petitioner contends, however, that he transferred

$39,249.70 to Kathleen A. Mulvey (Ms. Mulvey), who performed some
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3Ms. Mulvey reported to petitioner when they were both

employed by GMAC. Ms. Mulvey’s position at GMAC was also

eliminated.

4Petitioner does not contend that the burden of proof has

shifted to respondent under sec. 7491(a). 

of the consulting services for GMAC.3 Petitioner also contends

that he should be allowed to deduct certain business expenses

that he omitted from his 2003 tax return.

As a general rule, the Commissioner’s determinations in the

notice of deficiency are presumed correct and the burden of

proving an error is on the taxpayer. Rule 142(a); Welch v.

Helvering, 290 U.S. 111, 115 (1933).4 Gross income includes

compensation for services and pension income. Sec. 61(a)(1),

(11). Income tax cannot be avoided through an assignment of

income. Lucas v. Earl, 281 U.S. 111 (1930).

At trial, petitioner credibly testified that because Ms.

Mulvey had not timely submitted certain taxpayer identification

to GMAC, petitioner agreed he would let GMAC pay him and he would

then forward Ms. Mulvey her share. Petitioner offered as

evidence copies of the invoices that he sent to GMAC on 

February 1 and March 1, 2003. The February 1 invoice indicated

that Ms. Mulvey had provided $19,000 in professional services to

GMAC and incurred $282 in reimbursable expenses. The March 1

invoice indicated that Ms. Mulvey had provided $19,000 in
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professional services to GMAC and incurred $967.70 in

reimbursable expenses. 

Petitioner also credibly testified, and provided

corroborating bank statements showing, that $19,282 and

$19,967.70 were debited from his account on February 13 and 

March 27, 2003, respectively. On the basis of petitioner’s

testimony and corroborating evidence, we conclude that petitioner

was merely a conduit for the $39,249. Accordingly, we hold that

the $39,249 that petitioner received from GMAC and in turn paid

to Ms. Mulvey is not includable in petitioners’ gross income. 

Regarding the nonreimbursed business expenses petitioners

seek to deduct, deductions are a matter of legislative grace. 

INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). The

taxpayer bears the burden of proving he is entitled to deductions

and must present adequate documentation to support any deductions

claimed. Welch v. Helvering, supra at 115; see also Nowland v.

Commissioner, 244 F.2d 450, 453 (4th Cir. 1957) (holding the

taxpayer bears the “burden of proving the amount of the

deductible expenses since deductions are a matter of statutory

privilege and must be shown by substantial evidence”). At trial

petitioner submitted numerous receipts and documentation

substantiating his business expenses for taxable year 2003. With

the exception of three automobile payments to Saab Financial
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5Petitioner labeled these payments “company car” but

provided no further evidence. We infer from the Saab Financial

Services Corp.’s statements that petitioner has been making

payments on the automobile for some time before the taxable year

in issue and had numerous payments remaining. The combination of

the statements from Saab and the repair slip from Dents & Dings

suggests that petitioner’s automobile is for his personal use. 

Petitioner may not deduct personal expenses. See sec. 262(a). 

Service Corp. and one payment to “Dents & Dings”,5 we are

satisfied with petitioner’s showing and hold that petitioner is

entitled to the claimed business expense deductions for 2003. 

To reflect the foregoing,

Decision will be entered

under Rule 155.