TAX COURT OPINION

Case: Jean P. Jean Baptiste & Marie C. Nicolas
Docket Number: 7918-16
Judge: Foley
Opinion Type: bench
Filed: 10/17/2018
Pages: 7

RS UNITED STATES TAX COURT WASHINGTON, DC 20217 JEAN P. JEAN BAPTISTE & MARIE C. NICOLAS, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) Docket No. 7918-16. ) ) ) ) ) ) ) ) ORDER On May 16, 2018, the Court filed respondent's Notice of Proceeding in Bankruptcy. Pursuant to 11 U.S.C. sec. 362(a)(8), on May 18, 2018, the Court vacated the Court's Order dated May 2, 2018, and stayed the proceedings in this Court. Petitioner filed his bankruptcy petition on December 5, 2017. The Court was not notified of the bankruptcy proceedings before the Court's April 30, 2018, Miami, Florida Trial Session. On July 25, 2018, respondent filed a status report stating that petitioner's Chapter 13 bankruptcy case was dismissed, thereby terminating the automatic stay. Accordingly, by Order dated August 8, 2018, the Court lifted the stay in this case and issued to petitioners an order to show cause as to why this Court should not issue its opinion and enter a decision in this case. Petitioners have not responded to that Order. The order to show cause has been made absolute. Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith to petitioners and to respondent a copy of the pages of the transcript of the trial in the above case SERVED Oct 17 2018 - 2 - before Judge Maurice B. Foley at Miami, Florida, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Maurice B. Foley Chief Judge Dated: Washington, D.C. October 17, 2018 Bench Opinion by Judge Maurice B. Foley May 4, 2018 Jean P. Jean Baptiste & Marie C. Nicolas v. Commissioner 3 of Internal Revenue Docket No. 7918-16 The Court has decided to render oral findings of fact and opinion. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. This bench opinion is made pursuant to the 1 2 3 4 5 6 7 8 9 10 authority granted by section 7459(b) of the Internal 11 Revenue Code of 1986, as amended, and Rule 152 of the Tax 12 Court Rules of Practice and Procedure. Unless otherwise 13 indicated, section references are to the Internal Revenue 14 15 16 17 18 Code relating to the years in issue, and Rule references are to the Tax Court Rules of Practice and Procedure. The issues for decision are whether petitioner received unreported income relating to 2008 and 2009 (i.e., the years in issue); whether petitioner is entitled 19 to the first-time homebuyers credit relating to 2008, an 20 additional child tax credit relating to 2008 and 2009, the 21 earned income tax credit relating to 2008 and 2009, the 22 American Opportunity credit relating to 2009, and the 23 ffaking rk ay credit relating to 2009; and whether 24 petitioner is liable for section 6663 fraud penalties 25 relating to the years in issue. PM)406-2250|operationsoescribers.netlwwwascribersmet Petitioner graduated from Northeastern 4 University in Massachusetts with a Bachelor's Degree in International Business and Accounting in 1997. Petitioner took several courses in taxation. Between January 2007 and June 2011 petitioner, through his business JP & Sons Enterprises, Inc., provided tax return preparation services. During the years in issue petitioner prepared approximately 210 tax returns in addition to his own. In preparing returns for his customers, petitioner supplied 1 2 3 4 5 6 7 8 9 10 false income and deduction figures, attached Schedules C 11 which he knew were incorrect, and claimed earned income 12 13 tax credits, additional child tax credits, and first-time homebuyer credits that he knew his customers were not 14 entitled to. Petitioner did not maintain books and 15 16 17 18 records relating to his income-producing activities. Petitioner timely filed his Federal income tax returns relating to the years in issue. Petitioner received but did not report the following items on those 19 returns: (1) $154,351 and $222,485 of Schedule C gross 20 receipts relating to 2008 and 2009, respectively; (2) 21 22 23 24 $7,911 of non-employee compensation relating to 2008; (3) $10,700 and $5,322 of Schedule E rental income relating to 2008 and 2009, respectively; and (4) a $968 taxable retirement distribution relating to 2008. Petitioner also 25 claimed, but was not entitled to, the additional child tax (973)406-2250|operationseescribers.net|wwwAsaibers.net 5 1 2 3 4 5 6 7 8 9 credit, first-time homebuyers credit, and earned income tax credit relating to 2008 and the additional child tax credit, the American Opportunity credit, and the M king gg6 J rk F y credit relating to 2009. . Petitioner's 2008 and 2009 Federal income tax returns were examined by Special Agents Tecza and Leighton. Petitioner did not provide any books, records, or documents requested by the special agents. On April 9, 2015, petitioner was indicted for 10 filing false tax returns, relating the years in issue, in 12 13 14 206 On J ne 4 20 5 pe oner p d gu t o he charges set forth in the indictment and on October 28, 2015, the United States District Court for the Southern 15 District of Florida entered judgment pursuant to 16 petitioner's guilty plea. The District Court also 17 18 convicted petitioner, pursuant to Title 26 U.S.C. section 7206(2), of aiding the filing of false tax returns through 19 his tax preparation business. 20 21 On March 16, 2016, respondent issued petitioner a Notice of Deficiency relating to the years in issue. 22 Respondent asserted deficiencies of $64,255.80 and $79,016 23 relating to 2008 and 2009, respectively. Respondent also 24 asserted section 6663 fraud penalties of $48,191.85 and 25 $59,262 relating to 2008 and 2009, respectively. The 73)406-2250|operationsoestrisertnet|www.escribers.net section 6663 penalties were approved in writing by the immediate supervisor of the revenue agent who proposed the penalties, pursuant to section 6751(b). On April 4, 2016, while residing in Jesup, Georgia, petitioner timely filed 6 his petition. Discussion of Legal Authorities: The parties have stipulated that petitioner received unreported income and was not entitled to the above-referenced tax credits. Accordingly, we sustain 1 2 3 4 5 6 7 8 9 10 respondent's determination that petitioner understated his 11 12 13 14 15 income relating to the years in issue. Respondent established by clear and convincing evidence that petitioner understated his income relating to the years in issue with the intent to commit fraud. See secs. 6663(a), 7454(a); Petzoldt v. Commissioner, 92 16 T.C. 661, 699 (1989). Petitioner knew that his unreported 17 18 income was subject to tax, and yet he intentionally failed to report that income in order to claim various tax 19 credits. As a result, he underreported substantial 20 amounts of income relating to the years in issue. See 21 Holland v. United States, 348 U.S. 121, 139 (1954) 22 (holding that a pattern of consistently and substantially 23 underreporting income may justify an inference of fraud). 24 Petitioner also failed to maintain adequate records or to 25 cooperate with respondent. See Rowlee v. Commissioner, 80 51EilE (973)406-2250|operationseescrbersnet|www.escribe:smet T.C. 1111, 1123 (1983) (stating that a taxpayer's attempts to mislead the Internal Revenue Service or prevent the collection of income tax may establish the requisite fraudulent intent). Because respondent established by clear and convincing evidence that petitioner filed false or fraudulent returns with the intent to evade tax, the assessment period remains open. See secs. 6501(c)(1), 7454(a); Rule 142(b). Contentions we have not addressed are irrelevant, moot, or meritless. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 12:57 p.m., the above-entitled matter was concluded.) I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 2 4 25 (973)406-2250loperationseestrbersmet|www.esaibersnet