TAX COURT OPINION

Case: Carlos Eduardo Espinosa
Docket Number: 23477-08S
Judge: Colvin
Opinion Type: bench
Filed: 01/08/2010
Pages: 6

UNITED STATES TAX COURT WASHINGTON, D .C . 2021 7 CARLOS EDUARDO ESPINOSA, Petitioner, v . COMMISSIONER OF INTEiNAL REVENUE , i Respondent . Docket No . 23477-08 S 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 Lewis R . Carauzzo at Miami, Florida, on November 17" 2009, containing his oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral findings of fact and opinion, an appropriate order granting respondent's oral motion to dismiss for lack of prosecution will be entered and an order of dismissal and decision will belentered for respondent . (Signed) Lewis R . Carluzzo Special Trial Judg e Dated : Washington, D .C . January 8, 2010 SERVED JAN 13 2010 3 1 Bench Opinion by Special Trial Judge Lewis R . Carluzz o 2 November 1 7 200 9 3 Espinosa v . Commissioner Docket No . 23477-08 5 4 ]HE 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 . The oral findings of fact and 8 opinion shall not be relied upon as precedent in any 9 other case : 10 This proceeding for the redetermination o f 11 the deficiency is a small tax case conducted pursuant 12 to the provisions of § 7463 of the Internal Revenu e 13 Code of 1986 as amended and Rules 170 through 175 of 14 the Tax Court Rules of Practice and Procedure . This 15 bench opinion is made pursuant to the authorit y 16 granted by § 7459(b) of the Internal Revenue Code o f 17 1986, as amended, and Rule 152 of the Tax Court Rule s 18 of Practice and Procedure . 19 Hereinafter in this bench opinion, unless 20 otherwise notes, section references are to th e 21 Internal Revenue Code of 1986, as amended, in effect 22 for 2001 . Rule references are to the Tax Court Rule s 23 of Practice and Procedure . Timothy Sloan appeared on 24 behalf of[Respondent . In a notice of deficiency dated 25 June 25, 2008, Respondent determined a $15,70 6 Heritage Reporting Corporation (202) 628-4888 4 1 deficiency in Petitioner's 2001 federal income tax and 2 imposed a ;$1,565 .25 § 6651(a) addition to tax and a 3 $1,763 .80?§ 6662 (a) accuracy-related penalty . 4 The issues for decision are 1) whethe r 5 Petitioner is liable for a late filing addition to tax 6 under § 6651(a), and 2) whether Petitioner is liabl e 7 for an accuracy-related penalty under § 6662(a) . The 8 resolution of the first issue depends upon whethe r 9 Petitioner's 2001 federal income tax return was timely 10 filed and ; the resolution of the second issue depends 11 at least in part upon whether the underpayment of tax 12 required to be shown on that return is a substantial 13 understatement of income tax . 14 Respondent bears the burden of production 15 with respect to .both issues . Section 7491(c) . All of 16 the facts have been deemed stipulated and are s o 17 found . See Rule 91(f) . At the time the petition was 18 filed, Petitioner resided in Florida . Petitioner' s 19 income for 2001 obligated him to file a federal income 20 tax return for that year . See § 6012(a) . That return 21 was due on or before Monday, April 15, 2002, see § 22 6072(a), but it was not filed until April 6, 2006 . 23 There is no income tax liability reported on 24 Petitioner's 2001 return . Taking into account 25 Sections!1 (income tax) and 1401 (tax on self- Heritage Reporting Corporation (202) 628-4888 5 1 employment income), . the income tax liability that 2 should have been shown on that return is $15,706 . 3 There arefprepayment credits of $ 6,887 to be take n 4 into account against that liability for 2001, and the 5 amounts of the addition to tax and accuracy - related 6 penalty 'imposed in the notice of deficiency take those 7 prepayment credits into account . 8 In the case of a failure to file a federa l 9 income tax return, § 6651(a)(1) provides that there 10 shall beladded to the tax required to be shown on the 11 return five percent of the amount of such tax if th e 12 failure is for not more than one month with a n i 13 additional five percent for each additional month o r 14 fraction,thereof during which such failure continues, 15 not exceeding 25 percent in the aggregate . 16 I The addition to tax is not applicable if the 17 taxpayer demonstrates that the failure was due t o 18 reasonable cause and not willful neglect . Section 19 6651(a)(1) . The addition to tax is computed on the 20 net tax due, not on the deficiency . Sectio n 21 6651(b)(~1) . Respondent's evidence establishes tha t 22 for 2001, Petitioner's failure to file his federa l 23 income tax return continued for a period that exceed s 24 four months, and therefore the maximum amount of 25 addition to tax is due .. Heritage Reporting Corporation (202) 628-4888 4W 6 1 The burden of production imposed upo n 2 Respondent pursuant to § 7491(c) does not require 3 Respondent to establish that Petitioner's failure was 4 due to willful neglect and not due to reasonabl e 5 cause . Higbee v . Commissioner , 116 T .C . 438, 447 6 (2001 ) . Because Petitioner ' s 2001 return was no t timely filed, Respondent's imposition of the § 6651(a)(l), addition to tax is sustained . 9 Respondent also imposed a § 6662(a ) 10 accuracy-related penalty . That section provides for 11 an accuracy-related penalty if, among other reasons, 12 an underpayment of tax required to be shown .on a 13 return is'a substantial understatement of income tax . 14 The penalty is 20 percent of the portion of the 15 underpayment that is attributable to th e 16 understatement . See § 6662 ( a) and (b)(2) . 17 In this case, the understatement of income 18 tax is corimputed in the same manner as and is equal to 19 the deficiency that is $15,706 . See § 6662(d)(2) . 20 Nothing in the record suggests that the understatement 21 should bejreduced in accordance with § 6662 (d)(2)(B) . 22 The understatement of Petitioner's 2001 income tax is 23 a substantial understatement of income tax within th e 24 meaning o~f § 6662 ( d) because it exceeds $ 5,000 . See § 25 6662 (d)(1)(A) . The penalty however is imposed upon Heritage Reporting Corporation (202) 628-4888 7 1 the underpayment, which is $8,819, not on the amount 2 of the understatement . 3 The amount of the underpayment is less than 4 the understatement (and less than the deficiency ) 5 because of prepayment credits that exceed the amount 6 of tax shown on the return . See § 1 .6664-2, Income 7 Tax Regs . Respondent has produced sufficient evidenc e to support the imposition of the § 6662(a) penalt y 9 here in dispute . Respondent's burden under § 7491(c) 10 does not require him to establish that the provisions 11 of § 6664(c) are not applicable . Higbee v . 12 Commissioner ., supra . 13 It follows that Petitioner is liable for the 14 § 6662(a) accuracy-related penalty for 2001, an d 15 Respondent's imposition of that penalty is sustained . I 16 To reflect the foregoing and the disposition o f 17 Respondent's oral motion to dismiss for lack o f 18 prosecution made on November 16, 2009, an appropriat e 19 order will be will be issued and decision will b e 20 entered for Respondent . This concludes the Court's 21 oral findings of fact and opinion in this case . 22 (Whereupon, at 10 :00 a .m ., the bench opinion 23 in the above-entitled matter was concluded .) 2 4 25 Heritage Reporting Corporation (202) 628-4888