TAX COURT OPINION

Case: Rondell L. Jackson
Docket Number: 11543-10S
Judge: Cohen
Opinion Type: bench
Filed: 05/02/2011
Pages: 6

UNITED STATES TAX COURT - WASHINGTON, DC 20217 RONDELL L . JACKSON, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ) Docket No. 11543-10S. Order of Service of Transcript Pursuant to Rule 152 (b) , Tax Court Rules of Practice aand Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith the trial in the above case before Judge Mary Ann the pages of the to Petitioner and to respondent a copy of transcript of Cohen at oral the trial. Indianapolis, findings of Indiana, on.April 20, 2011, containing her fact and opinion rendered at the conclusion of In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Mary Ann Cohen Judge Date: Washington, D.C. May 2, 2011 ŠERNO MAY 2 2011 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 3 BENCH OPINION BY JUDGE MARY ANN COHEN RONDELL L. JACKSON V. COMMISSIONER DOCKET NO.: 11543-10S DATE: April 20, 2011 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. In this Bench Opinion, citations to the Internal Revenue Code will be for the year at issue, 2006. And citation to rules will be to the Tax Court Rules of Practice and Procèdure. This opinion is rendered pursuant to Section 7459(b) and rule 152. The Respondent determined a deficiency of $7,381 in Petitioner's federal income taxes for 2007. The Respondent also determined an addition to tax, an accuracy related penalty under Section'6662(a) in the amount of $1, 476 . Some of the facts have been stipulated and the stipulated facts are incorporated in this opinion by this reference. Specifically, paragraph 3 of the stipulation is that.during 2007 Petitioner was the President and Corporate Executive Officer of Comtex Technologies Company, which will be referred to as Heritage Reporting Corporation (202) 628-4888 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 Comtex in the rest of this opinion. Comtex was formed as a-sole-proprietorship in 2000. However, in 2005 Comtex was incorporated and elected S Corporation status. Petitioner owns a 90% interest in the company and the remaining 10% is-owned by his current spouse Jiri, J-I-R-I, Kudzai, K-U-D-Z-A-I. Comtex is a consulting firm involved in the installation of computer systems. During 2007 Comtex was contracted for only one project, to build a data center for the City of Indianapolis. On March 1st, 2008, Petitioner signed as President and CEO a Form 1120S, Corporation for Comtex. Reporting total income of $128,746, of which $51,927 represented gross receipts and $76,819 represented other income. On the schedule attached to the return, Petitioner reported that the income was comprised of investment, credit and consulting fees. And the return, as a result, reported ordinary business income of $47,122. Those fees were not further explained and Petitioner today says he cannot explain them. Attached to the Form 1120S was a Schedule K which showed-distribution of 90% of the corporate income to Petitioner. And that would be $42,410. Heritage Reporting Corporation (202) 628-4888 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 5 Petitioner failed to report this amount on his personal income tax return for 2007. On March 8th, 2010, Respondent mailed a statutory notice attaching copies of the third party reporting that Comtex had sent to the Internal Revenue Service. Only in December of 2010 did Comtex file an amended Form 1120S reporting to back out the income reported for 2007 and claiming a loss of $11,733. Petitioner thereafter filed an amended Form 1040 in which he purported to deduct that loss. But he häs not provided any information that would substantiate the omission of the previously reported income or :would substantiate any deductible loss either on the corporate return or on- his personal return. Petitioner has refused to produce Comtex's records on the frivolous claim that the corporation refused to allow him to do so. Inasmuch as he is the owner, director and officer.of Comtex, this position is frivolousa In any event, he has the burden of proving the loss that he's claimed and he has not done so. The Form 1120S bearing Petitioner's signature is an admission as to the amount of income earned by Comtex and passed through to Petitioner in Heritage Reporting Corporation (202) 628-4888 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 6 2007. Admissions cannot be overcome without cogent proof of the current claim, see Estate of Hall V Commissioner, 72 TC 312, at pages. 337 through 338, that's a 1989·case. Petitioner has presented no proof, merely his uncorroborated assertions. With respect to the penalty, Section 6662(a) imposes an accuracy related penalty on a substantial understatement of income tax. This section provides that if there is a substantial understatement of income tax there should be added to the tax an amount equal to 20% of the amount of any underpayment attributable to such, understatement. An understatement :Us the difference -between the amount required to be'shown on the return and the amount actually shown on the -return. An understatement is substantial if it exceeds the greater of 10% of the tax required to be shown on the return or $5,000. And in this instance the understatement exceeds $5,000. - Under Section 7491(c), Respondent has the burden of production when an addition to tax or penalty is imposed. To satisfy this burden, Respondent must produce sufficient evidence to show that the relevant penalty is appropriate. Respondent has done so in this case by the returns submitted by Heritage Reporting Corporation (202) 628-4888 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 7 Petitioner. Once the burden of production is met, the taxpayer continues to have the burden of proof with regard to whether Respondent's determination was incorrect. Hidbee v Commissioner, 116 TC 438, at page 446. That's a 2001 case. Respondent has met his burden of production and Petitioner has not presented any evidence establishing reasonable cause for the understated tax. According the Section 6662(a) penalty will be sustained. That conclûdes the Court's opinion. // // // / // // // // // // // Heritage Reporting Corporation (202) 628-4888