TAX COURT OPINION

Case: Cynthia J. Cook & Fred D. Cook, Sr.
Docket Number: 23439-05S
Judge: Colvin
Opinion Type: bench
Filed: 03/21/2008
Pages: 7

UNITED STATES TAX COURT WASHINGTON , DC 2021 7 ALVINO MURILLO, Petitioner v . ) Docket No . 25741-06S . 1 COMMISSIONER OF INTERNAL REVENUE, Respondent O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s 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 of the above case before Special Trial Judge John F . Dean at'Los Angeles, California, on February 26, 2008, containing his oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral findings of fact and opinion, decision will be entered for respondent . (Signed) John F . Dean Special Trial Judg e Dated : Washington, D .C . March 21, 2008 '"- APR 16 2008 3 1 Bench Opinion of Special Trial Judge John F . Dean 2 February 26, 200 8 3 Alvino Murillo Docket No . 25741-06S 4 THE COURT : The Court has decided to render 5 oral findings of fact and opinion in this case, an d 6 the following represents the Court's oral findings of 7 fact and opinion . 8 In this bench opinion all section numbers 9 refer to the Internal Revenue Code in effect for the 10 taxable year at issue and all rule references are to 11 the Tax Court Rules of Practice and Procedure . 12 This proceeding was heard as a small tax 13 case pursuant to the provisions of Section 7463 and 14 Rules 170 through 179 . 15 Respondent determined for 2004 a deficiency 16 in Petitioner's federal income tax in the amount of 17 $6,455 and an accuracy - related penalty in the amount 18 of $1,291 . 19 Petitioner conceded in his petition that he 20 is not entitled to the child tax credit . The issues 21 remaining for decision are whether : ( 1) Petitioner is 22 entitled to deductions for three dependenc y 23 exemptions ; ( 2) is entitled to head of household 24 filing status ; and ( 3) is liable for accuracy- 25 related penalty under Section 662(& ) Heritage Reporting Corporation (202) 628-4888 4 1 Petitioner resided in California at the time 2 the petition in this case was filed . 3 Petitioner claimed head of household filing 4 status and took dependency exemption deductions fo r 5 two of his nephews and a niece . Although he testified 6 that he was the only person who provided for thei r 7 financial support, the children lived wit h 8 Petitioner's mother in Tijuana, Mexico, for the entire 9 taxable year . 10 In general, Respondent's determinations as 11 set forth in a notice of deficiency are presume d 12 correct . Welch v . Helvering , 290 U .S . 111, 11 5 13 (1933) . In pertinent part, Rule 142(a)(1) provides 14 the general rule that the burden of proof shall'b e 15 upon the taxpayer . In certain circumstances, however, 16 if the taxpayer introduces credible evidence wit h 17 respect to any factual issue relevant to ascertaining 18 the proper tax liability, Section 7491 shifts th e 19 burden of proof to the Commissioner . Section 20 7491 (a) (1) ; Rule 142 (a) (2) . 21 Petitioner did not argue that Section 7491 22 is applicable in this case, and has not established 23 that the burden of proof should shift to Respondent . 24 Petitioner, therefore, bears the burden of proving 25 that Respondent's determinations in the notice o f Heritage Reporting Corporation (202) 628-4888 5 1 deficiency are erroneous . See Rule 142(a) Welch v . 2 Helveri ng , s at 115 . 3 Section 151 allows deductions for persona l 4 exemptions , including exemptions for dependents of the 5 taxpayer . See Section 151(c ) . Section 152(a) defines 6 the term "dependent " to include , as pertinent here, an 7 individual who, for the taxable year has as hi s 8 principal place of abode the home of the taxpayer and 9 is a member of the taxpayer ' s household . Petitioner's 10 nephews and niece did not reside with him and wer e 11 therefore not his dependents for 2004 . 12 In order to qualify for head of household 13 filing status, an individual must be single and not a 14 surviving spouse . Section 2 (b)(1) . In addition, the 15 taxpayer must, in Petitioner ' s case, maintain as his 16 home a household which constitutes for more than one- 17 half of the taxable year the principal place of abode 18 of a dependent , if the taxpayer is entitled to a 19 dependency deduction for the person under Section 151 . 20 Section 2(b) (1) (A) (ii) . 21 Because Petitioner had no dependents for the 22 year, he is not entitled to head of household filing 23 status . 24 Section 7491(c) imposes on the Commissioner 25 the burden of production in any court proceeding with Heritage Reporting Corporatio n (202) 628-4888 6 1 respect to the liability of any individual for 2 penalties and additions to tax . Higbee v . 3 4 Commissioner 116 T .C . 438, 446 (2001) ; Trowbridge v . Commissioner , T .C . Memo . 2003-164, affirmed 378 F .3d 5 432 (5th Circuit 2004) . In order to meet the burden 6 of production under Section 7491(c), the Commissioner 7 need only make a prima facie case that imposition o f 8 the penalty or addition to tax is appropriate . Higbee 9 v . Commissioner , supra . _ s C~ 10 Respondent determined hat Petitioner i s 11 liable for accuracy-related penalt under Sectio n 12 6662(a) . Section 6662( a) imposes a 20 percent penalty 13 on the portion of an underpayment attributable to any 14 one of various factors, including negligence o r 15 disregard of rules or regulations and a substantial 16 understatement of income tax . See Section 6662(b)(1) 17 and (2) . 18 Negligence includes any failure to make a 19 reasonable attempt to comply with the provisions of 20 the Internal Revenue Code, including any failure to 21 keep adequate books and records or to substantiate 22 items properly . See Section 6662 (c) ; Sectio n 23 1 .6662(c)(b)(1) Income Tax Regs . 24 A substantial understatement includes an 25 understatement of tax that exceeds the greater of 10 Heritage Reporting Corporatio n (202) 628-4888 7 1 percent of the tax required to be shown on the return 2 or $5,000 . See Section 6662(d)(1)(A) ; Section 1 .6662- 3 4(b), Income Tax Regs . 4 Section 6664 (c)(1) provides that the penalty 5 under Section 6662(a) shall not apply to any portio n 6 of an underpayment if it is shown that there wa s 7 reasonable cause for the taxpayer's position'and that 8 the taxpayer acted in good faith with respect to that 9 position . The determination of whether a taxpaye r 10 acted with reasonable cause and in good faith is made 11 on a case- by-case basis , taking into account all the 12 pertinent facts and circumstances . Section 1 .666- 13 4(b)(1), Income Tax Regs . The most important factor 14 is the extent of the taxpayer's effort to assess his 15 proper tax liability for the year . Id . 16 Petitioner substantially understated his tax 17 since the understatement amount exceeded the greate r 18 of 10 percent of the tax required to be shown on the 19 return or $5W00 . Petitioner claimed head o f 20 household filing status , deductions for child ta x 21 credits , and dependency exemptions to which he was not 22 entitled . 23 The Court concludes that Respondent has 24 produced sufficient evidence to show that the 25 accuracy-related penalty under Section 6662 is Heritage Reporting Corporation (202) 628-4888 8 1 appropriate . Petitioner has not shown that hi s 2 overreporting of deductions and credits and his choice 3 of filing status were actions taken with reasonabl e 4 cause and in good faith . Respondent's determination 5 of the accuracy-related penalty under Section 6662(a) 6 is sustained . 7 To reflect the foregoing, a decision will be 8 entered for Respondent . This concludes the Court' s 9 oral findings of fact and opinion in this case, and 10 the Court's Los Angeles Trial Calendar . 11 Thank you . 12 (Whereupon, at 10 :23 a .m ., the bench opinion 13 in the above-entitled matter was concluded . ) 14 15 // 1 6 17 18 19 20 21 22 23 24 25 Heritage Reporting Corporation (202) 628-4888