TAX COURT OPINION

Case: Christopher Gyorgy
Docket Number: 19240-11L
Judge: Paris
Opinion Type: bench
Filed: 03/22/2013
Pages: 24

UNITED STATES TAX COURT WASHINGTON, DC 20217 CZ CHRISTOPHER GYORGY, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 19240-11 L. ) ) ) ) ) OR D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit to petitioner and to respondent a copy the pages of the transcript of the proceedings in this case before Judge Elizabeth Crewson Paris at Chicago, Illinois, on January 31, 2013, containing her oral findings of fact and opinion rendered at the trial session at which this case was calendared. In accordance with the oral findings of fact and opinion, an appropriate decision will be entered. (Signed) Elizabeth Crewson Paris Judge Dated: Washington, D.C. March 22, 2013 SERVEDMar252013 Capital Reporting Company 5 1 2 Bench Opinion by Judge Elizabeth Crewson Paris January 31, 2013 3 Christopher Gyorgy v. Commissioner Docket No. 19240-11L I. THE COURT: So, the Court has decided to render oral findings of fact and opinion in this case and the following represents the court's Oral Findings of Fact and Opinion. The Oral Findings of Fact and Opinion shall not be relied upon as precedent in any other case. II. This bench opinion is made pur.suant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court Rules of Practice and Procedure. Hereinafter in this bench opinion, all section numbers refer to the Internal Revenue Code of 1986, as amended, and all Rule numbers refer to the Tax Court Rules of Practice and Procedure. III. Petitioner Christopher Gyorgy appeared on his own behalf. Justin Scheid and John Spencer Hitt appeared on behalf of respondent. 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company IV. 6 This collection review case involving the filing of a notice of Federal Tax Lien to collect petitioner's unpaid tax liabilities for tax years 2001, 2002, and 2003. The issue for decision is 1 2 3 4 5 6 whether respondent may proceed with collection action 7 8 9 10 11 12 13 as determined in the Notice of Determination Concerning Collection Actions Under Section 6320 and/or 6330, dated July 15, 2011. v. Some of the facts have been stipulated, and they are so found. The stipulation of facts and attached exhibits are incorporated by this reference. 14 Petitioner resided in Illinois when he filed his 15 petition. 16 17 18 19 20 21 22 23 24 25 Petitioner failed to file Federal income tax returns for any of the years at issue. In fact, he has not voluntarily filed a Federal income tax return since tax year 2000. Respondent therefore filed substitutes for returns for the three years at issue using information provided to the Internal Revenue Service (IRS) by third parties. The third party information provided to respondent for tax year 2001 reflects that petitioner had income of $123,065 consisting of wages of 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 $122,790 and interest of $275. Based on this information, respondent determined that petitioner had an income tax deficiency of $33,073 for 2001, and was liable for additions to tax of $1,726.42 under section 6651(a) (1), $1,112.58 under section 6651(a) (2), and $191.93 under section 6654 (a). Third party information provided to respondent for tax year 2002 reflects that petitioner had income of $152,536 consisting of wages of $124,751, interest of $313, dividends of $76, taxable insurance proceeds of $5,029, and income from the sale of stocks or bonds of $22,367. Based on this information, respondent determined that petitioner had an income tax deficiency of $42,709 for 2002, and was liable for additions to tax of $3,570.07 under section 6651(a) (1), $3,887.41 under section 6651(a(2) and $430.56 under section 6654 (a). Third party information provided to respondent for tax year 2003 reflects that petitioner had income of $167,063, consisting of wages of $166,820, interest of $96, and dividends of $147. Based on this information, respondent determined that petitioner had an income tax deficiency of $44,412 for 2003, and was liable for additions to tax of $9,880.20 under section 6651(a) (1), $6,147.68 under 866.488.DEPO www.CapitalReportingCompany.com r Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 section 6651(a) (2), and $1,131.60 under section 6654 (a). According to respondent's account transcripts, deficiency notices were sent by certified mail to petitioner at his last known address at the time, but were returned to the IRS by the U.S. Postal Service as undeliverable. Petitioner did not petition the Court to dispute any of the deficiency notices. Respondent therefore assessed the tax, penalties, and interest for the years at issue. Petitioner failed to pay the assessed liabilities, so respondent sent petitioner a Notice of Federal Tax Lien Filing and Your Right to a 15 Hearing under Section 6320 for the years at issue. 16 Petitioner timely filed a request for a hearing in 17 18 19 20 21 22 23 24 25 response to the lien notice. Respondent's settlement officer scheduled a telephone Collection Due Process (CDP) hearing and notified petitioner of the date and time. She gave petitioner the opportunity to dispute the underlying liabilities for the years at issue and asked petitioner to provide tax returns for those years. She also asked petitioner to submit a completed Form 433-A, Collection Information Statement for Wage 866.488.DEPO www.CapitalReportingCompany.com / Capital Reporting Company 9 1 2 3 4 5 6 7 8 9 Earners and Self-Employed Individuals, and signed tax returns for other delinquent tax years.. Petitioner did not participate in the telephone CDP hearing. After petitioner failed to participate in the CDP hearing, the settlement officer sent petitioner two more letters allowing him the opportunity to submit his tax returns for the years at issue. Petitioner's only response was a letter dated June 27, 2011, requesting proof that he 10 received the statutory notices of deficiency. 11 Petitioner did not provide the settlement officer 12 with tax returns for the years at issue or any of the 13 14 15 information requested. On July 15, 2011, respondent sent petitioner a Notice of Determination Concerning 16 Collection Action(s) Under Section 6320 and/or 6330 17 sustaining the filed lien for the years at issue. 18 Petitioner timely filed a petition with this Court 19 20 21 22 23 24 for review of respondent's determination. Petitioner contends, inter alia, that he did not receive the deficiency notices for the years at issue. At trial respondent submitted into evidence copies of the deficiency notices, Postal Service Forms 3877, and the properly-addressed 25 mailing envelopes for tax years 2002 and 2003. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 Respondent could not, however, produce a copy of the deficiency notice, a Postal Service Form 3877, or a 3 mailing envelope for tax year 2001. 4 5 6 7 8 VI. We turn now to the substantive law. Before collecting an unpaid Federal income tax, respondent must properly assess the income tax deficiency. Therefore, as a threshold matter, the 9 Court must consider whether respondent's assessment 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of petitioner's unpaid Federal income tax liability for the years at issue was valid. Tax Year 2001 Generally, except as otherwise provided, the Commissioner may not assess a deficiency in tax unless he first sends a notice of deficiency to the taxpayer's last known address by certified or registered mail. Secs. 6212 and 6213(a). Where the taxpayer maintains that he did not receive a notice of deficiency and the Commissioner is unable to produce a copy of the notice, the Commissioner "[bears] the burden of establishing both the existence of a notice of deficiency [mailed] to [the taxpayer] for *** [that] year as well as the date of its mailing." Pietanza v. Commissioner, 92 T.C. 729, 736 (1989), aff'd without published opinion 935 F.2d 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 5 6 7 8 9 10 11 1282 (3d Cir. 1991). The Court examines respondent's evidence noting that the issue is decided on the basis of the preponderance of the evidence. See Sego v. Commissioner, 114 T.C. 604, 611 (2000); Casey v. Commissioner, T.C. Memo. 2009-131. At trial respondent could not produce the notice of deficiency or a Postal Service Form 3877 reflecting its delivery for tax year 2001. Instead, to meet his burden, respondent relies on the certificate of assessment, the internal transcripts compiled by the IRS, and the testimony of Appeals 12 Officer Debra Dufek explaining the meaning of those 13 14 15 16 17 18 19 20 transcripts. The certificate of assessments and internal transcripts show entries, without elaboration, reflecting that the IRS sent a notice of deficiency on March 9, 2004. Ordinarily, a certified certificate of assessments is a self-authenticating document providing sufficient evidence that the Commissioner mailed a notice of deficiency. See 21 United States v. Ryan, 969 F.2d 238, 239-240 (7" Cir. 22 23 24 25 1992); Craig v. Commissioner, 119 T.C. 252, 262 (2002). However, in instances as here where the taxpayer challenges the existence of the notice of deficiency and the Commissioner fails to produce a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 copy of the notice, the Commissioner must produce additional corroborating evidence. Typically the Commissioner produces a Postal Service Form 3877. Among other information, Form 3877 shows a taxpayer's name and address included among the list of mail recipients for a particular day's mailed notices of deficiency, the type of delivery method used, and the signature of a Postal Service employee. Where the taxpayer does not dispute the existence of the notice of deficiency, the Commissioner's production of a properly completed Form 3877 is sufficient evidence by itself, absent evidence to the contrary, that the Commissioner properly mailed the deficiency notice to the taxpayer 15 United States v. Zolla, 724 F.2d 808, 810 (9th Cir. 16 17 18 19 20 21 22 23 24 1984); Coleman v. Commissioner, 94 T.C. 82, 91 (1990). However, as here where the taxpayer disputes the existence of the notice of deficiency, Form 3877 by itself is not sufficient to establish the presumption of regularity that the Secretary mailed the notice of deficiency to the taxpayer. Butti v. Commissioner, T.C. Memo 2008-82. Instead the Commissioner must come forward with additional evidence, such as testimonial habit evidence of 25 mailing procedures. Coleman v. Commissioner, 94 T.C. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 13 1 2 3 4 5 6 7 8 9 at 92. The Court again notes that respondent failed to produce a Postal Service form 3877 for tax year 2001. With respect to the testimonial evidence, Ms. Dufek, an IRS appeals officer was called to explain and clarify the meaning of the internal transcripts as well as explain IRS procedures with regard to taxpayer changes of address. Respondent failed to establish that Ms. Dufek had any knowledge 10 with respect to the preparation or mailing of notices 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of deficiency. Consequently, respondent may not rely on the testimony of Ms. Dufek to establish a presumption of regularity with respect to respondent's mailing practices and her testimony is not helpful to respondent in meeting his burden of proving the existence of a notice of deficiency for tax year 2001 or its proper mailing. When the existence of a notice of deficiency is at issue, proper testimonial evidence of customary mailing practices is critical to defeat a taxpayer's denial of receipt. See Pietanza v. Commissioner, 92 T.C. 729 (1989); Butti v. Commissioner, T.C. Memo. 2008- 82. Weighing the totality of the evidence in the record the Court finds that respondent has failed 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 14 1 2 3 to meet his burden of proving that he properly mailed a notice of deficiency to petitioner at petitioner's last known address using certified or registered 4 mail. Consequently the assessment is invalid and 5 respondent is prohibited from conducting collection 6 activity. Respondent's determination to proceed with 7 8 9 10 11 12 13 collection by the filing of a Notice of Federal Tax Lien for tax year 2001 is not sustained. Tax Years 2002 and 2003 Petitioner also maintains that he did not receive a notice of deficiency for tax years 2002 and 2003. Unlike 2001, however, respondent established that notices of deficiency for 2002 and 2003 were 14 mailed to petitioner on July 30, 2007 and December 15 16 17 18 11, 2006, respectively, by certified mail, At trial respondent produced copies of the notices of deficiency, substitutes for returns, and evidence of certified mailing to petitioner's address at 3355 19 Octavia Street, Apartment 301, San Francisco, 20 California 94123-2253766 (his San Francisco address). 21 22 23 24 25 Respondent therefore met his burden of proving that the notices of deficiency for 2002 and 2003 were properly mailed to petitioner. Nonetheless, petitioner argues that respondent did not mail the notices of deficiency to 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 15 1 2 3 4 his last known address and, consequently, the assessments for these years are invalid. Petitioner relies in part on the holdings in Mulvania v. Commissioner, 769 F.2d 1376 (9th Cir. 1985) and 5 Council v. Burke, 713 F. Supp. 181 (1988). However, 6 7 8 9 in both of those cases the notices of deficiency were improperly addressed due to a clerical error. Here, the point of contention is not that a clerical error was made in addressing the notice of deficiency to an 10 otherwise proper address, but that the notice was 11 mailed to an improper address. Accordingly, 12 13 14 15 16 17 18 19 20 21 22 23 24 25 petitioner's reliance on these cases is misplaced and the Court will consider instead whether the deficiency notices for 2002 and 2003 were sent to the proper address. As a general rule, a taxpayer' s "last known address" is the address shown on his or her most recently filed tax return. Sec. 301.6216-2(a), Proced. & Admin. Regs. If, however, the Commissioner becomes aware of a different address, he may not rely on the address listed on the last filed tax return but must exercise reasonable care and diligence to ascertain and mail the notice to the taxpayer's correct address. Pyo v. Commissioner, 83 T.C. 626, 633 (1984 ) . 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 16 1 2 3 4 5 6 7 8 9 10 11 12 In 2006 and 2007, when respondent sent petitioner the notices of deficiency for 2002 and 2003, his address of record with the IRS was the San Francisco address. At trial petitioner acknowledged that he did not file a tax return to update his address with the IRS; however, .he maintained that he updated his address by either calling the IRS or sending them a letter. He also claimed that he filled out a post office card updating his address. To support his claims, petitioner submitted a form letter, Letter 2797, dated November 29, 2004, addressed to him at 555 Jean Street Apartment 426, 13 Oakland, CA 94610-1961 (the Oakland address). 14 15 16 17 18 19 20 21 According to Internal Revenue Manual (IRM) section 5.19.16.1 (Oct. 25, 2011), a Letter 2797, also known as an "R-U-There" letter, is a letter sent by the address research (ADR) system to research potential address for undelivered mail. ADR can send up to 50 R-U-There letters on one account. Therefore, petitioner's Letter 2797 does not prove that he updated his address with the IRS to the 22 Oakland address. In fact the letter indicates to the 23 24 25 contrary, that the IRS did not have a correct address for petitioner but was making attempts to locate one. The Court would also like to add that if, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 17 1 2 3 4 5 6 7 8 9· 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 as petitioner claims, his proper address during 2004 was the Oakland address, then he should have received his Goodby/ Silverstein Form W-2, Wage and Tax Statement, for tax year 2003 that was addressed to petitioner at the Oakland address. Upon receiving the Form W-2, petitioner would have been on notice that he received $166,820 of taxable income in 2003 and was required to file a tax return for that year. Because petitioner did not file a return since tax year 2000 and did not otherwise update his address with the IRS, the San Francisco address was his last known address when respondent mailed the deficiency notices for 2002 and 2003. Petitioner did not petition the Court to dispute any of the deficiency notices. Respondent therefore properly assessed the tax, penalties, and interest for 2002 and 2003, and the Court will proceed with its review of respondent's determination to uphold the lien for those years. Section 6321 provides that if any person liable to pay any tax neglects or refuses to do so after demand, the amount shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person. Section 6320 (a) requires the Commissioner to 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 send written notice to the taxpayer of the filing of a notice of lien and of the taxpayer's right to an administrative hearing on the matter. See Katz v. Commissioner, 115 T.C. 329, 333 (2000). At the hearing, the taxpayer may raise any relevant issue relating to the unpaid tax or lien, including collection alternatives such as an offer in compromise. Sec. 6330(c) (2). A taxpayer may challenge the existence or amount of the underlying tax liability if he did not receive a notice of deficiency or did not otherwise have an opportunity to dispute the tax liability. Sec. 6330(c) (2) (B); See also Sego v. Commissioner, 114 T.C. at 609 (2000) . Following the hearing, respondent's Appeals 16 Office issueØ a notice of determination. In making a 17 18 19 20 21 22 determination, the Appeals officer is required to take into consideration: (1) the verification presented by the Commissioner that the requirements of any applicable law and administrative procedure have been met, (2) the relevant issues raised by the taxpayer, and (3) whether the proposed collection 23 - action appropriately balances the need for efficient 24 25 collection of taxes with the taxpayer's concerns regarding the intrusiveness of the proposed 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 19 1 2 3 4 5 collection action. Sec. 6330 (c) (3). Taxpayers who disagree with the Appeals officer's determination may seek judicial review by appealing to this Court. Sec. 6330(d). Where the underlying tax liability is properly at issue, the 6 Court reviews any determination of the underlying tax 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 liability de novo. Sego v. Commissioner, 114 T.C. at 610. The Court reviews all other determinations for abuse of discretion. Lunsford v. Commissioner, 117 T.C. 183, 185 (2001). Petitioner did not file a return for tax· years 2002 and 2003. In addition, he did not receive a notice of deficiency for 2002 and 2003, which were returned to the IRS as undeliverable, or otherwise have an opportunity to dispute the underlying liability. Therefore, petitioner is allowed to contest his income tax liability for 2002 and 2003. See Montgomery v. Commissioner, 122 T.C. 1, 9 (2004). As discussed earlier, respondent determined deficiencies in petitioner's Federal income tax for 2002 and 2003 based on unreported income. It is well established that the Commissioner's determinations, as embodied in his statutory notices of deficiency, are presumed correct. Welch v. Helvering, 290 U.S. 111 (1933). The presumption is procedural and 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 20 1 2 3 transfers to the taxpayer the burden of proving that the Commissioner's determinations are incorrect. Barnes v. Commissioner, 408 F.2d 65 (7th Cir. 1969) 4 aff'g Barnes Theatre Ticket Services, Inc. v. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Commissioner, T.C. Memo. 1967-250. The presumption, however, is not irrebuttable. In certain limited circumstances, if the taxpayer proves by a preponderance of the evidence that the Commissioner's determinations are arbitrary and excessive, or without rational foundation, then the presumption no longer applies. See Page v. Commissioner, 58 F.3d 1342, 1347 (8th Cir. 1995), aff'g T.C. Memo. 1993-398; Tinsman v. Commissioner, T.C. Memo. 2000-55. Courts have identified an exception to the presumption of correctness where the Commissioner, in a case involving unreported income, introduces no direct evidence but rests on the presumption of correctness and the taxpayer challenges to the deficiency on the grounds that it is arbitrary. See Schad v. Commissioner, 87 T.C. 609, 618 (1986); Tinsman v. Commissioner, T . C. Memo . 2000-55. Thus, to rebut the presumption of correctness and shift the burden of producing evidence to the Commissioner, the taxpayer 25 must demonstrate that the Commissioner' s deficiency 866.488.DEPO www.CapitalReportingCompany.com 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Capital Reporting Company assessment lacks a rational foundation or is arbitrary and excessive. Tinsman v. Commissioner, T.C. Memo. 2000-55. Section 61(a) Incemt includes in grossAall income T9 21 from whatever source derived including, but not limited to, compensation for services, interest, and dividends. Sec. 61(a) (1), (4) and (7). In the notice of deficiency for tax year 2002, respondent determined that petitioner received taxable income of $152,536, of which: (1) $375 was reported as wages by Talent Partners on Form W-2, Wage and Tax Statement, and $124,376 was reported as wages by Goodby Silverstein & Partners Inc. on Form W-2; (2) $22,367 was reported as stocks and bonds by Merrill Lynch on Form 1099-B, Proceeds from Broker and Barter Exchange Transactions; (3) $76 was reported as ordinary dividends by Prudential Financial Inc. on Form 1099-DIV, Dividend Income; (4) $313 was reported as interest by Merrill Lynch on Form 1099-INT, Interest Income; and (5) $5,029 was reported as a taxable 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 22 distribution of retirement funds by Prudential Insurance Co. of America on Form 1099-R, Distributions from Pensions, Annuities, Retire or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. In the notice of deficiency for tax year 2003, respondent determined that petitioner received taxable income of $167,063, of which: (1) $166,820 was reported as wages by Goodby Silverstein & Partners Inc. on Form W-2; (2) $52 was reported as ordinary dividends and $52 as qualified dividends by Omnicom Employee Stock Purchase Plan on Form 1099- DIV, and $95.as ordinary dividends and $95 as qualified dividends by Prudential Financial Inc. on Form 1099-DIV; and (3) $68 was reported as interest by Merrill Lynch on Form 1099-INT, and $28 as interest by Patelco Credit Union on Form 1099-INT. Petitioner did not address these issues in his petition and did not forward any arguments in his pleadings or present any evidence at trial to show that respondent's determination were incorrect. Indeed, by failing to participate 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 meaningfully in this proceeding, petitioner missed 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 23 1 2 3 4 5 6 7 8 9 10 11 12 13 an opportunity to substantiate any basis he had in the stocks and bonds he sold in 2002. Therefore, the stock and bond sale proceeds, which included petitioner's basis, are treated as taxable income in their entirety. Petitioner likewise failed to show that the determinations lacked a rational foundation or were arbitrary and excessive. Consequently he has failed to rebut the presumption that respondent's determinations are correct. Accordingly, respondent's determinations that petitioner received $152,536 and $167,063 of taxable income in tax years 2002 and 2003, respectively, are sustained. 14 Additions to Tax 15 16 17 18 19 20 21 22 23 24 25 In the notices of deficiency for tax years 2002 and 2003, respondent also determined additions to tax under sections 6651(a) (1) and (2) and 6654 (a). Under section 7491(c), the Commissioner has the burden of production with respect to any penalty, addition to tax, or additional amount. See Higbee v. Commissioner, 116 T.C. 438, 446 (2001). To meet the burden of production, the Commissioner must come forward with sufficient evidence indicating that it is appropriate to impose the relevant penalty. Id. The burden of proof remains on the taxpayer with 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 24 1 2 3 4 5 6 respect to issues such as reasonable cause or substantial authority. Id. Section 6651(a) (1) imposes an addition to tax on taxpayers who fail to file a timely tax return for any given tax period. When a taxpayer's failure to timely file is due to reasonable cause and not 7 willful neglect, an addition to tax will not be 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 imposed. Sec. 6651(a); See United States v. Boyle, 469 U.S. 241, 245 (1985). Respondent introduced evidence that petitioner received taxable income in 2002 and 2003, but did not file income tax returns reporting that income. Moreover, petitioner stipulated that he did not file returns for 2002 and 2003. Respondent has therefore met the burden of production under section 7491(c) with respect to the s.ection 6651(a) (1) addition to tax. Petitioner did not present any arguments in his pleadings or at trial to show that he had reasonable cause for his failure to file returns for 2002 and 2003. The Court therefore sustains the section 6651(a) (1) additions to tax for 2002 and 2003. Section 6651(a) (2) imposes an addition to tax on taxpayers for their failure to pay the amount of tax shown on a return. The addition to tax under 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 25 section 6651(a) (2) applies only when an amount of tax is shown on a return. Cabirac v. Commissioner, 120 T.C. 163, 170 (2003). A substitute for return prepared by the Secretary under section 6020(b) is treated as a return filed by the taxpayer for purposes of section 6651(a) (2). Sec. 6651 (g) (2); See also, e.g., Wheeler v. Commissioner, 127 T.C. 200, 208-209 (2006), aff'd, 521 F.3d 1289 (10* Cir. 2008). Respondent introduced evidence that substitutes for returns satisfying the requirements of section 6020(b) were made for tax years 2002 and 2003. Therefore, returns showing petitioner's tax liabilities for 2002 and 2003 were filed for purposes of section 6651(a) (2). Respondent also introduced official transcripts which show that, except for withholdings of $26,820 in 2002 and $500 in 2003, no deposits or payments were made on petitioner's accounts. In addition, petitioner stipulated that he did not make any payments toward his Federal income tax liabilities for 2002 and 2003. Respondent has therefore satisfied the burden of production under section 7491(c) with respect to the section 6651(a) (2) addition to tax for 2002 and 2003. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Petitioner did not introduce evidence to show that this failure to pay was due to reasonable cause. The Court therefore finds that petitioner did not make any payments other than the withholdings described earlier toward his tax liability for 2002 and 2003 and, consequently, sustains the additions to tax under section 6651(a) (2) for those years. Section 6654 (a) imposes an addition to tax for a taxpayer's failure to pay estimated income tax. The addition to tax is calculated with reference to four installment payments each equal to 25% of the required annual payment. Sec. 6654 (c) (1), (d) (1) (A) . For 2002 and 2003 respondent introduced evidence to prove that petitioner had Federal income tax liabilities, was required to file Federal income tax returns, did not file, and did not make any estimated tax payments. Respondent also introduced evidence that petitioner did not file a return for tax year 2001. Therefore, respondent met his burden under section 7491(c) to show that for tax year 2002 and 2003 petitioner had a required annual payment under section 6654 (d) (1) (B) but did not make any estimated tax payments. Petitioner failed to introduce any evidence to show that he did not have required annual payments 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 2 3 for 2002 and 2003. Moreover, in his filings with the Court petitioner did not allege that any of the statutory exemptions under section 6654 (e) apply. 4 Petitioner is therefore liable for the section 27 6654 (a) additions to tax for 2002 and 2003. VII. In order to give effect to our disposition of the disputed issues, an appropriate decision will be entered. VIII. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 2:12 p.m., the above- entitled matter was concluded.) 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com