TAX COURT OPINION

Case: William Russ Trible
Docket Number: 14448-11
Judge: Gustafson
Opinion Type: bench
Filed: 11/07/2012
Pages: 11

UNITED STATES TAX COURT WASHINGTON, DC 20217 JMP WILLIAM RUSS TRIBLE, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 14448-11. ) ) ) ) ) ) ) ) ) O R D E R Pursuant to the opinion of the Court as set forth in the pages of the transcript of the proceedings before Judge David Gustafson at Columbia, South Carolina, on September 11, 2012, containing his oral findings of fact and opinion, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Gustafson at Columbia, South Carolina, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155. (Signed) David Gustafson Judge Dated. Washington, D.C. November 7, 2012 SERVED Nov 07 2012 Capital Reporting Company Trible Bench Opinion 9-11-2012 3 1 Bench Opinion by Judge David Gustafson 2 September 11, 2012 3 William Russ Trible v. Commissioner 4 Docket No.: 14448-11 5 THE COURT: The Court has decided to render 6 oral Findings of Fact and Opinion in this case. The 7 following represents the Court's oral Findings of 8 Fact and Opinion, which shall not be relied on as 9 precedent in any other case. 10 This Bench Opinion is made pursuant to the 11 authority granted by section 7459(b) of the Internal 12 Revenue Code of 1986, as amended, and Rule 152 of the 13 Tax Court Rules of Practice and Procedure. 14 15 By a notice of deficiency dated March 14, 2011, the Internal Revenue Service (IRS) determined a 16 deficiency in the Federal income tax of petitioner 17 William Russ Trible for the year 2008, and additions 18 19 to tax for failure to file, failure to pay, and failure to pay estimated tax (under sections 20 6651(a) (1) and (a) (2) and 6654 (a)). For the reasons 21 explained hereafter, we will largely sustain the 22 23 IRS's adjustments. Trial of this case was conducted on 24 September 10, 2012, in Columbia, South Carolina. Mr. 25 Trible represented himself, and respondent was (866) 448 - DEPO www.CapitalReportingCompany.com 2012 Capital Reporting Company Trible Bench Opinion 9-11-2012 1 2 represented by Olivia Hyatt. Only Mr. Trible testified. The parties' Stipulation of Facts was 3 admitted into evidence, along with its Exhibits 1-J 4 through 11-J, and additional Exhibits 12-P and 13-P 5 were admitted into evidence. The Court reserved 6 7 ruling on the admissibility of Exhibits 14-P and 15-P but now receives them into 8 evidence. We find the following facts: 9 10 FINDINGS In 2008 Mr. Trible was employed and received 11 wage income totaling $38,738. (Stip. 8-9.) He also 12 operated an Internet webpage through which, under the 13 name "Summerseat", he sold Adirondack chairs that he 14 purchased from a supplier in Ohio. In 2008 he made 15 one sale of chairs for which he was paid $6,168 (see 16 Exs. 9-J, 15-P (02/06 entry)), and we are unable to 17 determine the amount he paid to his vendor for the 18 chairs. 19 20 21 Mr . Trible did not maintain books and records for his Summerseat activity. He set up a separate bank account (i.e., the Delta account) that 22 he intended to use for this activity, but he used 23 both this Delta account and his personal account 24 (i.e., the SunTrust account) both for expenditures 25 that he alleges were for the Summerseat chair-selling (866) 448 - DEPO www.CapitalReportingCompany.com 2012 Capital Reporting Company Trible Bench Opinion 9-11-2012 5 1 activity and for personal expenditures . He incurred 2 an $800 advertising expense for this Summerseat chair 3 activity. (See Exs. 13-P (check 2497) and 15-P 4 5 6 7 (02/26 entry for check 2497).) If he incurred other expenses in conducting this activity, we are unable to quantify them. He conducted this chair activity from a desk in the bedroom of his one-bedroom 8 apartment. 9 In 2008 Mr. Trible made charitable 10 contributions totaling $67. If he made additional 11 contributions, we are unable to quantify them. 12 13 Mr. Trible filed no tax return for 2007 nor for 2008 (Exs. 4-J, 5-J.) On March 14, 2011, the IRS 14 issued the notice of deficiency for 2008. (Ex. 1-J.) 15 Mr. Trible timely mailed his petition to this Court 16 on June 13, 2011. At that time he resided in the 17 State of Georgia. 18 19 OPINION At trial Mr. Trible admitted receiving the 20 wages and non-employment income at issue here, so the 21 dispute concerns solely his deductions and, to the 22 extent he owed tax, the additions to tax. The IRS's 23 determination is presumed correct, and the taxpayer 24 generally bears the burden to prove his entitlement 25 to any deductions he claims. Rule 142(a); Welch v. (866) 448 - DEPO www.CapitalReportingCompany.com 2012 Capital Reporting Company Trible Bench Opinion 9-11-2012 1 Helvering, 290 U.S. 111,115 (1933). Deductions are 2 strictly a matter of legislative grace, and taxpayers 6 3 must satisfy the specific requirements for any 4 deduction claimed. See INDOPCO, Inc. v. 5 Commissioner, 503 U. S . 79, 84 (1992) . Furthermore, 6 7 8 9 10 taxpayers are required to maintain records sufficient to substantiate their claimed deductions. See sec. 6001; 26 C.F.R. sec. 1.6001-1(a). I. Cost of goods sold To figure Mr. Trible's gain from the chair- 11 selling activity, one should take into account any 12 13 cost he bore to obtain the chairs. We believe that he did incur such cost in some amount, but we cannot 14 quantify it because he did not offer any evidence to 15 16 17 18 19 show payment of any amount to his vendor. He did show that a check from his SunTrust account payable to his Summerseat business in the amount of $5,251.63(Ex. 13-P) was negotiated (see Ex. 15-P (02/13 entry)); and he seemed to testify that he 20 wrote this check to Summerseat so that its account 21 would have sufficient funds to pay the vendor. 22 However, we are unable even to identify a deposit in 23 that amount into the Delta account, much less a 24 payment from the Delta account to the vendor. Mr. 25 Trible, therefore, failed to prove his cost of goods (866) 448 - DEPO www.CapitalReportingCompany.com 2012 Capital Reporting Company Trible Bench Opinion 9-11-2012 7 1 2 3 4 sold. II. Home office expense Section 280A (1) (A) allows a taxpayer to expenses for the business use of his residence, but 5 only to the extent the expenses are allocable to a 6 portion of the residence which is exclusively used on 7 8 9 a regular basis as the principal place of business for a trade or business of the taxpayer. We assume that Mr. Trible's chair- selling activity can be 10 characterized as a trade or business, and that he did 11 use his home office as the principal location of that 12 activity. However, he would be entitled to the home 13 office deduction only for the portion of his home 14 that he proved was exclusively used as the principal 15 place of his business. It appears, instead, that the 16 room in which the chair-selling activity occurred was 17 also his bedroom, so that no part of his apartment 18 was used exclusively for this activity. See Russell 19 v. Commissioner, T.C. Memo. 1994-96. He is therefore 20 not entitled to any home office deduction. 21 III. Other Schedule C expenses. 22 23 Mr. Trible argued that he should be able to deduct telephone expenses as a business expense. 24 However, he stated that he had only one telephone, 25 which he used for both business and personal calls. (866) 448 - DEPO www.CapitalReportingCompany.com 2012 Capital Reporting Company Trible Bench Opinion 9-11-2012 1 2 3 4 He is therefore not entitled to a deduction. See sec. 262 (b) ("in the case of an individual, any charge (including taxes thereon) for basic local telephone service with respect to the 1st telephone line 5 provided to any residence of the taxpayer shall be 6 7 treated as a personal expense"). At one point Mr. Trible claimed that he was 8 entitled to deduct automobile-related expenses from 9 his Summerseat income, but at trial he acknowledged 10 11 12 13 14 that the activity did not require driving, and he seemed to abandon the claim. Mr. Trible contended that he incurred "Internet Tools" expenses, mail expenses, office supplies expenses, advertising expenses, and bank 15 charges for overdrawn checks, but at trial he was 16 unable to establish for any of these both that he 17 actually incurred the expense and that it was 18 business-related, rather than personal. One 19 exception was an $800 portion of his advertising 20 21 expense, for which he was able to show an expenditure and a payee, and for which his testimony was credible 22 and was sufficient to establish the deductible 23 expense. 24 IV. Additions to tax 25 A. Failure to file (866) 448 - DEPO www.CapitalReportingCompany.com 2012 Capital Reporting Company Trible Bench Opinion 9-11-2012 9 1 Section 6651(a) (1) authorizes the imposition 2 of an addition to tax for failure to file a timely 3 4 return unless the taxpayer proves that such failure is due to reasonable cause and is not due to willful 5 neglect. See United States v. Boyle, 469 U.S. 6 241,245(1985). It is clear that Mr. Trible failed to 7 8 9 file a return for 2008. The addition applies "unless it is shown that such failure is due to reasonable cause and not 10 due to willful neglect". Sec. 6651(a) (1). Mr. 11 Trible does not claim reasonable cause, and the 12 13 14 15 16 record shows no basis for such a claim. We hold that he is liable for the addition to tax under section 6651(a) (1) for 2008. B. Failure to pay Section 6651(a) (2) imposes an addition to 17 tax for failure to pay the amount of tax shown on a 18 19 return, and the Commissioner contends that Mr. Trible is liable for this addition for 2008. The addition 20 to tax under section 6651(a) (2) applies only when an 21 amount of tax is shown on a return, Cabirac v. 22 Commissioner, 120 T.C. 163,170 (2003), and respondent 23 has the burden of production to show the filing of a 24 return, i.e., to show an "amount shown as tax on [a] 25 return, " sec . 6651 (a) (2 ) . A return made by the (866) 448 - DEPO www.CapitalReportingCompany.com 2012 Capital Reporting Company Trible Bench Opinion 9-11-2012 10 1 Secretary under section 6020 (b)--i.e., an SFR -- is 2 3 4 treated as "the return filed by the taxpayer for purposes of determining the amount of the addition" under section 6651(a) (2). Sec. 6651(g) (2). The 5 Commissioner did submit a section 6020 (b) 6 certification (on Form 13496), which is stipulated 7 Exhibit 6-J. We note that the form refers to "the 8 attached pages [that] constitute a valid return under 9 section 6020 (b)", when in fact no pages are attached 10 to the stipulated exhibit; but the parties stipulated 11 that the Commissioner did prepare an SFR and that 12 Exhibit 6-J is redacted; so we conclude that an SFR 13 was indeed prepared. The Commissioner has thus 14 carried his burden of production to show that Mr. 15 Trible is liable for the addition to tax under 16 section 6651(a) (2); and Mr. Trible has not made any 17 18 19 20 defense. Mr. Trible is therefore liable for the failure-to-pay addition to tax. C. Failure to pay estimated tax Section 6654 imposes an addition to tax on 21 an individual taxpayer who underpays his estimated tax. 22 A taxpayer has an obligation to pay estimated tax for 23 a particular year if he has a "required annual 24 payment" for that year. Sec. 6654 (d) . A "required 25 annual payment" is defined in section 6654 (d) (1) (B), (866) 448 - DEPO www.CapitalReportingCompany.com 2012 Capital Reporting Company Trible Bench Opinion 9-11-2012 11 1 in pertinent part, as "the lesser of (i) 90 percent 2 of the tax shown on the return for the taxable year 3 4 5 6 (or, if no return is filed, 90 percent of the tax for such year), " or (ii) if the individual filed a return for the preceding taxable year, then "100 percent of the tax shown on the return of the individual for the 7 preceding taxable year . " Thus, respondent ' s burden 8 of production under section 7491(c) requires him to 9 produce, for each year for which the addition is 10 asserted, evidence that the taxpayer had a required 11 12 13 14 15 annual payment under section 6654 (d); and in order to do so he must demonstrate the tax shown on the taxpayer's return for the preceding year or that the taxpayer filed no return. For the year 2008, the "preceding taxable year" is 2007, and for 2007 Mr. 16 Trible did not file a return. Consequently, the 17 Commissioner carried his burden of production to show 18 that Mr. Trible is liable for the section 6654 19 addition for 2008, and he made no defense. He is 20 therefore liable for this. addition for failure to pay 21 estimated tax. 22 The IRS's notice of deficiency is upheld in 23 part, to the extent shown above. So that the 24 liability can be recalculated, decision will be 25 entered pursuant to Rule 155. (866) 448 - DEPO www.CapitalReportingCompany.com 2012 Capital Reporting Company Trible Bench Opinion 9-11-2012 1 This concludes the Court's oral Findings of 12 2 Fact and Opinion in this case. 3 (Whereupon, at 11:20 a.m., the bench 4 opinion in the above-entitled matter was concluded.) 5 6 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 2 4 25 (866) 448 - DEPO www.CapitalReportingCompany.com 2012