TAX COURT OPINION

Case: William A. Bott
Docket Number: 622-07
Judge: Colvin
Opinion Type: bench
Filed: 11/03/2008
Pages: 7

UNITED STATES TAX COURT WASHINGTON , DC 2021 7 WILLIAM A . BOTT, Petitione r V . COMMISSIONER OF INTERNAL REVENUE , Respondent ORDE R Docket Nos . j22.- 7 17741-07 . s :Avic~ 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 in the above cases before Judge Joseph Robert Goeke at Detroit, Michigan, on September 17, 2008, containing his oral findings of fact and opinion rendered at the conclusion of the trial . In accordance with the oral findings of fact and opinion, decisions will be entered under Rule 155 . (Signed ) Joseph Robert Goeke Judge Dated : Washington, D .C . November 3, 2008 SERVED Nov 06 2008 2 1 Bench Opinion by Judge Joseph R . Goeke September 17, 200 8 2 Bott v . Commissioner Docket Nos . 622-07 , 17741-07 3 THE COURT : The Court has decided to render 4 oral findings of fact and opinion in this case, an d 5 the following represents the Court ' s oral findings of 6 fact and opinion . 7 This bench opinion is made pursuant to the 8 authority granted by section 7459(b) of the Internal 9 Revenue Code as amended and Rule 152 of the Tax Cour t 10 Rules of Practice and Procedure . Herein, references 11 to the Internal Revenue Code are designated b y 12 section . 13 The oral findings of fact and opinio n 14 rendered today shall not be relied upon as precedent 15 in any other case . 16 This case involves deficiency determinations 17 by the Respondent for 2003 and 2004 . For 2003 , 18 Respondent determined a deficiency in income tax in 19 the amount of $8,081 and additions to tax unde r 20 section 6651 ( a)(1), 6651 ( a)(2), and 6654(a) . 21 For 2004 , Respondent determined a deficiency 22 in Federal income tax in the amount of $12 , 699 an d 23 additions to tax under section 6651(a)(1), 6651(a)(2) 24 and 6654(a) . 25 The case was submitted based upon testimony Heritage Reporting Corporatio n (202) 628-4888 3 1 and exhibits entered into the record of trial . The 2 issues before the Court concern Respondent' s 3 allegations of unreported income and Petitioner's 4 assertions that there were expenses related to the 5 income in question . 6 First, regarding the burden of proof , 7 section 7491(a) would provide that Respondent woul d 8 have the burden of proof where the taxpayers introduce 9 credible evidence with respect to factual issue s 10 relevant to ascertain the taxpayer's liability . 11 However, the provisions of section 7491(a) 12 are not applicable, because the taxpayer has no t 13 established that he complied with the substantiation 14 requirements of the Internal Revenue Code in that he 15 maintained the records required by the Interna l 16 Revenue Code . Therefore, the burden of proof in this 17 case with respect to the underlying income ta x 18 deficiencies remains upon the Petitioner . 19 With respect to the additions to tax , 20 Respondent has the burden of going forward with the 21 additions to tax . Those additions to tax primarily 22 relate to the failure to pay and the failure to file 23 and the failure to pay estimated tax payments . The 24 Petitioner has admitted that he did not file Federal 25 income tax returns for the years in question, an d Heritage Reporting Corporation (202) 628-4888 4 1 therefore, Respondent has carried the burden of goin g 2 forward . 3 However, with respect to the section 6664(a) 4 penalty for 2003, Petitioner has been credited wit h 5 withholding, and Respondent has not established what 6 the Petitioner's prior liabilities were in the yea r 7 2002, and therefore, the Court deems that the addition 8 to tax under section 6664(a) with respect to 2003 i s 9 not applicable . 10 With respect to the additions to tax under 11 section 6651(a)(1), 6651(a)(2) for the years 2003 and 12 2004, to the extent there are deficiencies based upon 13 the Court's analysis in this case after a Rule 15 5 14 computation, those additions to tax would b e 15 applicable, because the Respondent has established 16 that the Petitioner failed to file returns for 2003 17 and 2004, and the Petitioner failed to establish a 18 reasonable cause for his failure to file for those 19 years . 20 With respect to the additions to tax under 21 section 6664(a) for 2004, to the extent there ar e 22 deficiencies for 2004, that addition to tax would also 23 be applicable, Petitioner having failed to make any 24 estimated tax payments in that year . 25 Regarding the deficiencies, we'll start with Heritage Reporting Corporatio n (202) 628-4888 5 1 the taxable year 2003 . The gross income amounts as 2 determined in the notice of deficiency for 200 3 3 include two items : one, wages in the amount of $9,621 4 and self-employment income in the amount of $28,950 . 5 Respondent has produced evidence in the record of this 6 case which establishes that Petitioner received these 7 amounts . 8 However , Petitioner has testified and cited 9 other evidence which establishes that Petitioner i s 10 entitled to offsetting expenses to the self-employment 11 income in the year 2003 . Those expenses include the 12 following : material costs in the amount of $116 .3 9 13 and $80 . 56 ; per diem expense in the amount of $35 for 14 six days, so that would be total per diem expense of 15 $210 ; hotel expense in the amount of $45 .50 ; 16 additional per diem expense in the amount of $170 ; 17 airfare expense which has been documented pursuant to 18 section 274 in the amount of $351 .50 ; other trave l 19 expenses which have been documented in the amount of 20 $30 ; car rental expense in the amount of $636 . 29 ; and 21 related expenses in the amount of $60 ; and additional 22 materials expense in the amount of $45 . The amounts 23- listed would all be expenses allowable to th e 24 Petitioner in the taxable year 2003 as a reduction of 25 self-employment income . Heritage Reporting Corporation (202) 628-4888 6 1 In addition, the Court has determined, based 2 upon the Petitioner's testimony, that the application 3 of the rule in Cohan v . Commissioner , 39 F .2d 540 , 4 543-555 (2nd Circ ., 1930), would allow the Court to 5 provide the Petitioner with additional expenses t o 6 reduce self-employment income in the year 2003 based 7 upon the Petitioner's testimony concerning hi s 8 acquisition and use in the business activities of a 9 computer . That additional expense associated with the 10 computer would be $500 which would be allowable in the 11 taxable year 2003 . 12 Turning now to the taxable year 2004, the 13 evidence at trial and Respondent's stipulation 14 indicates that the income determined in the notice of 15 deficiency for 2004 is greater than the incom e 16 Petitioner actually received . The Court determines, 17 based upon the evidence in the record, that th e 18 Petitioner received gross income in 2004 of $23,265, 19 all of which is in the nature of self-employmen t 20 income . 21 Petitioner asserted various expenses, some 22 of which are subject to the requirements of section 23 274 which have not been met and are disallowed . 24 However, the Court applying Cohan , supra, determines 25 that Petitioner is entitled to certain expenses in Heritage Reporting Corporatio n (202) 628-4888 7 1 2004 related to equipment used in its business 2 activities and would allow a reduction of self- 3 employment income for equipment in the amount of $800 . 4 In addition, Petitioner has provide d 5 documentation of expenses in 2004 associated with 6 materials used in his self-employment activities . 7 That documentation totals $20,865 .92, and thos e 8 amounts are also allowable as a reduction in self- 9 employment income of the Petitioner in 2004 . . 10 In summary, the Court has determined and 11 expenses allowable for the years 2003 and 2004 a s 12 stated herein and would determine that the additions 13 to tax as stated previously would be applicable to the 14 extent of the deficiencies determined in a computation 15 under Tax Court Rule 155 based upon the amounts stated 16 in this oral findings of fact and bench opinion . 17 This ends the Court's oral findings of fact 18 and bench opinion in this case . 19 (Whereupon, at 4 :05 p .m ., the bench opinion 20 in the above-entitled matter was concluded . ) 21 22 23 24 25 Heritage Reporting Corporation (202) 628-4888