TAX COURT OPINION

Case: Julio Perez, III
Docket Number: 10259-10S
Judge: Kroupa
Opinion Type: bench
Filed: 12/29/2011
Pages: 8

UNITED STATES TAX COURT WASHINGTON, DC 20217 RMM JULIO PEREZ, III, Petitioner, Docket No. 10259-10S COMMISSIONER OF INTERNAL REVENUE, Respondent. O R 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 the to petitioner and to respondent a copy of the above case before Judge transcript of Diane L. Kroupa at San Antonio, Texas, on December 14, 2011, containing her oral the proceedings of the pages of findings of fact and opinion. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Diane L. Kroupa Judge Dated: Washington, D.C. December 29, 2011 SERVED Dec 30 2011 3 Bench Opinion by Judge Diane L. Kroupa Perez v. Commissioner Docket No. 10259-10S December 14, 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. THESE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE . This proceeding was heard as a small tax case pursuant to the·provisions of section 7463 and Rules 170 through 175. This bench opinion is made pursuant to the authority granted in section 7459(b) and Rule 152. All section references are to the Internal Revenue Code as amended and in effect for 2007, and all Rule references are to the Tax Court Rules of Practice and Procedure. Petitioner appeared on his own behalf. Jeffrey Heiderscheit appeared on behalf of respondent. Respondent determined a $1,009 Federal income tax deficiency against petitioner for 2007. In addition, respondent determined that petitioner was liable for additions to tax under section 6651(a) (1) for failure to file a return timely (late filing) and section 6651(a) (2) for failure to pay tax (late 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 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 payment) for 2007. The parties have resolved a number of issues in their Stipulation of Settled Issues. The only issues remaining are whether petitioner is liable for the late filing and late payment additions to tax. We hold that he is liable. FINDINGS OF FACT Some of the facts have been stipulated and they are so found. The stipulation of facts and accompanying exhibits are incorporated by this reference. Petitioner resided in Texas at the time he filed the petition with the Court. Petitioner worked as an engineering assistant, operated a farm and owned rental properties in 2007 and 2008. Petitioner did not timely file a tax return for 2007 or file an application for automatic extension of time to file a tax return. Respondent prepared a substitute for return for petitioner in November 2009. Respondent then issued a deficiency notice to petitioner in Marich 2010, determining the deficiency in Federal income tax for 2007 and determining late filing.and late payment additions to tax. Petitioner.timely filed a petition with this Court. Petitioner worked with a tax return preparer to complete a Form 1040 income tax return for 2007, which 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 he finally filed in June 2010. Petitioner did not timely file income tax returns for tax years 1997 through 2003. As of September 2011, petitioner had not yet filed a Federal income tax return for 2010. As previously mentioned, the parties resolved nearly all issues in their Stipulation of Settled Issues. The only issues remaining are whether petitioner is liable for the late filing and late payment additions to tax. The amounts for the additions to tax have been increased because the parties agreed to an increased deficiency in income tax due for 2007. OPINION Petitioner contests only his liability for the late filing and late payment additions to tax for. 2007. The late filing addition to tax is imposed for failure to file a tax return on or before the specified filing date unless it is shown that such failure is due to reasonable cause and not due to willful neglect. Sec. 6651(a) (1); United States v. Boyle, 469 U.S. 241, 245 (1985). The Commissioner has the burden of production with respect to additions to tax. Sec. 7491(c); Higbee v. Commissioner, 116 T.C. 438, 446 (2001). Respondent has met his burden in this 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 case, as petitioner adsits that his income exceeded the filing threshold and he failed to file a return timely. See sec. 6012 (a) (1) (A). In fact, petitioner did not file the return for 2007 until after he filed the petition. Respondent has.also met his burden of production with respect to the late payment addition because respondent prepared a substitute for return under section 6020(b), which is treated as the return filed by the taxpayer for púrposes of determining whether the late payment addition to tax applies. Sec. 6651(g) (2). Petitioner concedes that he did not pay the tax liability respondent determined. We now address whether petitioner's failure to file a timely return and to timely pay the liability was due to reasonable cause. The taxpayer bears the burden of proving that the late filing was due to reasonable cause and.not willful neglect. See Higbee v. Commissioner, supra, at 446-447. The determination of whether reasonable cause exists is . based on all the facts and.circumstances. See Estate of Hartsell v. Commissioner, T.C. Memo. 2004-211. Petitioner essentially gives us three arguments to show reasonable cause. First, petitioner argues that confusion regarding whether he or his father owned 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 certain income-producing property constitutes reasonable cause. Second, he argues he was working with a tax return preparer to prepare the return and that constitutes reasonable.cause. Third, he argues his father's and stepmother's illness constitutes reasonable cause. We find petitioner's arguments unpersuasive. Petitioner's confusion regarding whether he or his father owned certain;property..is irrelevant. Petitioner's self-employment income was sufficient to require him to file a tax return for 2007 regardless of whether he owned the property. See sec. 6012(a) (1) (A). Petitioner failed to exercise ordinary business care and prudence.!See Bank of the West v. Commissioner, 93 T.C. 462, 471-472 (1989). The Court recognizes that petitioner was working with a tax return preparer. The Court also recognizes that the tax code is complex. Petitioner cannot, however, delegate his duty to file a timely return. See United States vi. Boyle, supra, at 249-250. A preparer's negligence does not constitute reasonable cause for a failure to timely file. See Baclit v. Commissioner, T.C. Memo. 1989-576. Moreover, petitioner argues that we should abate the additions to tax for 2007 because of his Heritage Reporting Corporation (202) 628-4888 8 father's and stepmother's illness. The Court has found reasonable cause where the taxpayer or a member of the taxpayer's family experiences an illness or incapacity that prevents the taxpayer from filing his or her tax return. See, e.g., Tabbi v. Commissioner, T.C. Memo. 1995-463. On the other hand, the Court has-not found . reasonable cause where the taxpayer fails to timely file but is able to continue his or her business affairs despite the illness or incapacity. See, e.g., Judge v. Commissioner, 88 T.C. 1175, 1189-1191 (1987); Jordan v. Commissioner, T.C. Memo. 2005-266. We find that petitioner worked as an engineering assistant, operated a farm and owned rental properties in 2007 and 2008. Petitioner was able to continue his business affairs despite his father's and stepmother's illness, so these sad circumstances do not constitute reasonable cause for purposes of the late filing penalty.. See Judge v. Commissioner, supra, at 1189-1191; Jordan v. Commissioner, supra. We note that petitioner's history of late filing further undercuts his reasonable cause defense. See Judge v. Commissioner, supra, at 1189-1191. We hold that petitioner has failed to satisfy his burden of proving reasonable cause and that he is liable for the late filing addition to tax 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 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 for 2007. We also reject petlitioner's argument that these same three circumstances may be considered reasonable cause for petitioner's late payment of. the taxes due for 2007. This Court and other courts have held that the determination of reasonable cause under the late payment addition should receive simi.lar analysis to that under the late filing addition. See Russell v. Commissioner, T.C. Memo. 2011-81. Therefore, for the same reasons we stated for the late filing.addition, we also hold that petitioner is liable for the late payment!addition to tax for 2007. To reflect the foregoing, we sustain the late filing and late payment additions to tax liabilities for 2007 as calculated on the basis of the increased deficiency but, due to the parties' Stipulation of Settled Issues, decision will be entered under Rule 155. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 10i29 a.m., the bench opinion in the above-entitled matter was concluded.) // // // Heritage Reporting Corporation (202) 628-4888