TAX COURT OPINION

Case: Americus & Bernadine McIver
Docket Number: 22752-06
Judge: Colvin
Opinion Type: bench
Filed: 05/27/2008
Pages: 6

UNITED STATES T COURT WASHINGTON, D .C 20217 AMERICUS and BERNADINE MCIVE R Petitioners , V . COMMISSIONER OF INTERNAL REVENUE Respondent . * * * ORDER Docket No . 22752-0 6 RECORDED SERVICE CHILI STAT . { 9 firjP . JUDGE J FILE S Pursuant to Rule 152(b), Tax Cout Rules of Practice and Procedure, it i s ORDERED that the Clerk of th Court shall transmit herewith to petitioners and to respon ent a copy of the pages of the transcript of the trial of the above case before Judge Joseph R . Goeke at Baltimore, Mar land, on May 5, 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 under Rule 155 . (Signed) Joseph Robert Goeke Judge DATED : Washington, D .C . May 27, 2008 SERVED MAY 2 92008 3 1 Bench Opinion by Judge Josep Robert Goeke May 5, 2008 2 McIver v . Commissioner Docket No . 22752-0 6 3 THE COURT : The Cou t has decided to render 4 oral findings of fact and opi ion in this case, an d 5 the following represents the ourt's oral findings of 6 fact and opinion . The oral f ndings of fact an d 7 opinion shall not be relied u on as precedent in an y 8 other case . 9 This bench opinion is made pursuant t o 10 Section 7459(b) of the Interna Revenue Code and Rule 11 152 of the Tax Court Rules of ractice and Procedure . 12 Section references in this ben h opinion are to the 13 Internal Revenue Code, and Rul references are to th e 14 Tax Court Rules . 15 This case began with the notice o f 16 deficiency issued to the Petiti ners by Respondent in 17 August of 2006 . Respondent ass rted a deficiency in 18 income tax and the addition to ax, under Sectio n 19 6662, for the years 2002 and 20 3 . 20 The deficiencies are ased upon th e 21 disallowance of itemized deductions claimed by the 22 Petitioners, and the inclusion f certain unreported 23 income that was left off of the etitioners' federal 24 income tax returns for 2002 and 003 . 25 Petitioners' 2002 and 003 federal income Heritage Reporting Corporatio n (202) 628-4808 4 1 tax returns were prepared fo them by Jerome McFauld, 2 a return preparer they engaged . They relied upon thi s 3 return preparer in preparing he returns, and at trial 4 it became obvious that certai o f the itemized 5 deductions claimed on their r tu rn were admittedly 6 erroneous, based upon Petitio er s' own testimony . 7 Petitioners do not av e any records to 8 substantiate the amounts of i em ized deductions 9 claimed for either 2002 or 20 3 .. And as stated, based 10 upon their testimony, it is ap a rent that in larg e 11 part, the itemized deductions s claimed ar e 12 erroneous . 13 Petitioners did offe testimony concerning 14 charitable contributions the y ade, and we find that 15 testimony to be credible . How ver, the testimony 16 alone is insufficient to perm i the Court to allow the 17 charitable deductions in quest i on, in light of Sectio n 18 1 .170A-13(a)(1) of the Income T x Reg, which requires 19 specific written records in ord r for a taxpayer t o 20 claim a charitable deduction . 21 Given the Petitioners failure to compl y 22 with Section 170 and the applic4ble Income Tax Regs, 23 we are left with no recourse but, to deny the itemized 24 deductions claimed for charitable contributions i n 25 excess of those allowed by Respondent . Heritage Reporting C rporation (202) 628-48$8 1 Regarding additional interest expense s 5 2 claimed for 2002 and 2003, t 3 2003 is relatively minor, and 4 adjustment . For 2002, the Pe 5 explain the amount of $10,914 6 as a payment to Long and Forr 7 the lack of explanation and t 8 of this payment, once again w 9 recourse but to sustain Resp o 10 Likewise, with resp e t to the disallowance 11 of medical and dental expenses and other miscellaneous 12 deductions claimed on Petition rs' 2002 and 2003 13 income tax returns . A lack of substantiation and 14 Petitioners' own admission tha certain of these 15 expenses should not have bee n laimed causes us t o 16 find that we must sustain Respo dent's adjustment . 17 Respondent also made djustments including 18 additional income in Petitioner ' return for 2003 in 19 the amount of $14,167 . Petitio er, Mrs . McIver , 20 testified that this was an amo u t she received from 21 the estate of her father . Howe er, she did receive a 22 1099 showing that this amount was income, and o f 23 amounts withheld by National Fin ncial Services, LLC , 24 from the amount she received . And those amounts have 25 been credited by Respondent to t e Petitioners' 2003 Heritage Reporting C rporatio n (202) 628-4888 6 1 federal income tax liability . 2 The other income am unts at issue are 3 relatively minor, and the Pe t tioners have offered no 4 evidence to rebut the adjust m nts made by Respondent . 5 Therefore, we find that Resp o dent's adjustments both 6 as to itemized deductions an d unreported income shoul d 7 be sustained in full for 200 2 and 2003 . 8 The only other issu in dispute is the 9 application of the addition U tax under Section 6662 . 10 We find that Petitioners, who are unsophisticated i n 11 federal income tax matters, relied solely on thei r 12 return preparer . And under t e circumstances of this 13 case, and given their personal situation, we find that 14 it was reasonable for the Peti ioners to so rely . And 15 therefore, we find that the ap lication of Sectio n 16 6662 is inappropriate, and sho ld not be included as 17 an addition to tax for the tax liabilities for 200 2 18 and 2003 . 19 At the trial of this case it became apparent 20 that Respondent's calculations of the deficiencies for 21 2002 and 2003 had errors in th notice of deficiency . 22 And there is some question about the revise d 23 computations submitted by Respondent's counsel a t 24 trial . 25 Given the difficulties with th e Heritage Reporting orporation (202) 628-4 88 1 2 3 4 5 6 7 8 9 1 0 1 1 12 1 3 1 4 15 1 6 1 7 1 8 1 9 2 0 2 1 22 2 3 2 4 25 7 computations, we order that a Rule 155 be prepared i n order to clarify what is the ctual tax liability . of the Petitioners for 2002 and 003 . This concludes the ourt's oral findings of fact and opinion in this cas e (Whereupon, at 4 :05 p .m ., the bench opinion in the above-entitled matter as concluded . ) / / / / / / // Heritage Reporting orporation (202) 628-4$88