TAX COURT OPINION

Case: Delson Oral Richardson & Heather LaTrice Richardson
Docket Number: 14196-13S
Judge: Guy
Opinion Type: bench
Filed: 04/14/2014
Pages: 7

ALS UNITED STATES TAX COURT WASHINGTON, DC 20217 DELSON ORAL RICHARDSON & HEATHER LATRICE RICHARDSON, Petitioners, v. ) ) ) ) ) Docket No. 14196-13S. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORD ER 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 abovecaptioned case before Special Trial Judge Daniel A. Guy, Jr., at Atlanta, Georgia, on March 31, 2014, 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. Dated: Washington, D.C. April 14, 2014 (Signed) Daniel A. Guy, Jr. Special Trial Judge SERVED Apr 14 2014 Capital Reporting Company 3 1 2 Bench Opinion by Special Trial Judge Daniel A. Guy, Jr. 3 April 2, 2014 4 5 6 7 8 9 I 10 11 12 13 14 15 16 17 18 19 20 21 Delson Oral Richardson & Heather La Trice Richardson, Docket No. 14196-13S The Court: 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. The oral findings of fact and opinion shall not be relied upon as precedent in any other case. This proceeding for the redetermination of a deficiency is a small tax case conducted pursuant to the provisions of section 7463 of the Internal Revenue Code of 1986, as amended, and Rules 170 through 174 of the Tax Court Rules of Practice and Procedure. This bench opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court Rules of Practice and Procedure. 22 Hereinafter in this bench opinion, section references 23 24 25 are to the Internal Revenue Code of 1986, as amended, in effect for 2009, and Rule references are to the Tax Court Rules of Practice and Procedure. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 Petitioners, husband and wife, resided in 2 Georgia at the time the petition was filed, and they 3 4 5 6 7 8 9 appeared at trial pro se. Adam J. Smith appeared on behalf of respondent. The issues for decision are whether petitioners are entitled to credits and deductions for the taxable year 2009 as follows: (1) an education credit and an American Opportunity credit of $1,470 and $980, respectively, (2) an itemized 10 deduction reported on Schedule A, Itemized 11 Deductions, for charitable contributions of $3,570, 12 13 14 15 16 17 18 19 20 21 22 23 24 and (3) unreimbursed employee business expenses of $11,061 also reported on Schedule A (hereinafter the credits and deductions in dispute). During 2009 Mr. Richardson was employed as a forklift operator by the Kroger Company and he earned wages of $49,292 that year. Mrs. Richardson was not employed during 2009. Petitioners' tax return for 2009 was prepared by Heath's Income Tax Service (Heath's). In the return, petitioners authorized the Internal Revenue Service to discuss the return with Larry Heath. Mr. Richardson testified that he provided certain receipts to Heath's and that he expected that 25 Heath's would prepare a complete and correct return. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 Petitioners' tax return was filed electronically. 2 3 4 5 Petitioners reported on Form 1040, U.S. Individual Income Tax Return, Mr. Richardson's wages for 2009. Attachments to the return included a Schedule A, a Form 8863, Education Credits (American 6 Opportunity, Hope, and Lifetime Learning Credits), 7 8 9 10 11 12 13 14 15 and a Form 2106, Employee Business Expenses. The Form 2106 listed vehicle expenses, meals and entertainment expenses, and other business expenses. Petitioners reported that they had overpaid their taxes for 2009 and they requested a refund of $7,352. Petitioners offered evidence at trial that Larry Heath and the tax preparation services that he operates (under various names iñcluding Heath's) were the named defendants in a civil lawsuit filed by the 16 United States in the U.S. District Court for the 17 Northern District of Georgia. On May 9, 2013, the 18 19 20 21 22 23 24 25 parties to that suit entered into a stipulated final judgment of permanent injunction and order, entered by the District Court, permanently enjoining Larry Heath and his related entities from acting as a federal tax return preparer and otherwise engaging, inter alia, in the business of preparing tax returns. Respondent issued a notice of deficiency to petitioners for 2009 determining that they are liable 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 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 a deficiency of $4,670 attributable to the disallowance of the credits and deductions in dispute as described above. Petitioners timely filed a petition for redetermination with the Court pursuant to section 6213(a). The Commissioner's determination of a taxpayer's liability in a notice of deficiency normally is presumed correct, and the taxpayer bears the burden of proving that the determination is incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Because, as discussed below, petitioners have not complied with the Internal Revenue Code's substantiation requirements and have not maintained all required records, the burden of proof as to any relevant factual issue does not shift to respondent under section 7491(a). See sec. 7491(a)(1) and (2); Higbee v. Commissioner, 116 T.C. 438, 442-443 (2001). Deductions are a matter of legislative grace, and the taxpayer generally bears the burden of proving entitlement to any deduction claimed. Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934). A taxpayer must substantiate deductions claimed by keeping and producing adequate 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 records that enable the Commissioner to determine the taxpayer's correct tax liability. Sec. 6001; Hradesky v. Commissioner, 65 T.C. 87, 89-90 (1975), aff'd per curiam, 540 F.2d 821 (5th Cir. 1976). A taxpayer claiming a deduction on a Federal income tax return 6 must demonstrate that the deduction is allowable 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 pursuant to a statutory provision and must further substantiate that the expense to which the deduction relates has been paid or incurred. Sec. 6001; Hradesky v. Commissioner, 65 T.C. at 89-90. Under section 162(a), a deduction is allowed for ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. A deduction normally is not available, however, for personal, living, or family expenses. Sec. 262(a). Petitioners conceded at trial that they have no substantiation in respect of, and are not entitled to claim, the credits and deductions in dispute. Although petitioners did not clearly articulate their position at trial, we gather that petitioners assert that they should.not be held liable for a tax deficiency for 2009 because they were innocent victims of an unscrupulous tax return preparer. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 10 11 12 Although we sympathize with petitioners to the extent that they may have been victimized and find themselves in an unfortunate position, there is no question that petitioners authorized Heath's to prepare and electronically file their tax return for 2009 and, in the end, it remained petitioners' obligation to file a complete and accurate return. See, e.g., Ballantyne v. Commissioner, T.C. Memo. 2010-125. On this record, we hold that petitioners are liable for the deficiency determined by respondent in this case. Consistent with the foregoing, decision 13 will be entered for respondent. This concludes the 14 Court's oral findings of fact and opinion in this case. (Whereupon, at 11:19 a.m., the bench opinion was concluded.) 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com