TAX COURT OPINION

Case: Sergey Gradov
Docket Number: 13145-10
Judge: Goeke
Opinion Type: bench
Filed: 10/03/2011
Pages: 10

UNITED STATES TAX COURT WASHINGTON, DC 20217 SERGEY GRADOV, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ) O R D _E R Docket No. 13145-10. 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 Petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at Boston, Massachusetts, on September 16, 2011, containing his oral findings of the trial. fact and opinion rendered . at the conclusion of In accordance with the oral findings of fact and opinion, a decision will be antered under Rule 155. n /'¯\ ll I (Signed) Joseph Robert Goeke Judge Dated: Washington, D . C. October 3. 2011 SERVED OCT -5 2011 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 3 Bench Opinion by Judge Joseph Robert Goeke September 16, 2011 Sergey Gradov v. Commissioner Docket No. 13145-10 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. Section references in this bench opinion are to the Internal Revenue Code in effect in 2008. Rule references are to the Tax Court Rules of Practice and Procedure. This opinion is rendered pursuant to the authority in Section 7459(B) and Rule 152. This case is before the Court based upon the Court's jurisdiction to determine deficiencies after Respondent has issued a notice of deficiency and the Petition3r has filed a timely petition. Respondent's deficiency determinations in this cas for the year 2008 are an income tax in the amount o- $9328 and an addition to tax under Section 6662(A) in the amount of $1866. The facts of the case involved a transpor:ation company which was incorporated under 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 4 the name of Ladoga Transit Inc., Ladoga being spelled L-A-D-O- G-A. The Petitioner is originally the person who formed this corporation and was its 100 percent owner until sometime prior to 2008. The actual extent of the Petitioner's ownership and control of the corporation in 2008 is in dispute as Petitioner denies that he signed a document which transferred ownership to another party. However, there was testimony at trial that Petitior.er did, in fact, sign the document in question. It is not necessary for the Court to resolve this ownership dispute to resolve the questiorls before the Court. It is clear that the Petitioner did receive direct payments from Ladoga Transit Inc. in 2008 and that there were other payments made on Petitioner's behalf in 2008. Ladoga issued a Form 1099 to the Petitioner in the spring of 2009 based upon a computation of income Petitioner allegedly received in 2008. The form 1099 reflects income of $43,062. At trial, Respondent maintained that Petitioner actually received income in the amount of $44,152.07 from the corporation in 2008, but Respondent did not 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 assert 2ny additional deficiencies for this increased income 2.djustment. *The Petitioner does not deny that he received some payments from the corporation. The testimory at trial focused on a check which was made out to ladoga Transit in the amount of $18,764.07. This check was issued by the Montachusett Regional Transit Authority. And Montachusett is spelled M-O-N- T-A-C-H-U-S-E-T-T. The check was received by the Petitioner and deposited into an account that he opened in the name of the corporation at an entity which was not previously the banking agency of the corporation. The account was at Citizens Bank. And the checks normally issued by the corporation in the checking account of the corporation in 2008 was at Century Bank. Petitioner maintained that he had previously had a cocporate checking account at Citizens Bank in the years prior to 2008 and that he deposited the check inbo Citizens Bank because he discovered that control of the corporation had been taken from him. And he, in fact, still considered himself to be the controlling owner of the corporation. He further explained that, in order to cash the Ladoga Transit Inc. check, he had to open an 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 account in the name of the corporation. We believe this waE his primary motiva ion in gpening the.account at Citî2ens.Bank fcr at lcaat, in depociting the check w415 o CASh in the amount of $18,764.07eiß. The facts of the case were presented based upon a stipulation of facts·and the testimony of the Petitioner and the day to day bookkeeper and accounting manager of the corporation in 2008. The Petitioner resided in Framingham, Massachusetts at the time he filed the petition in the case. 1he facts that have been stipulated are incorporated into this opinion by this reference. The stipulated facts and the testimony establish that the Petitioner received directly numerous cash and check payments from the corporation in 2008. The stipulation also reflects that Petitioner's rent was paid on four occasions by the corporation and that a child support payment was made on Petitioner's behalf by the corporation. The Petitioner's testimony at trial was directed primarily to whether he was taxable on the complete amount of the $18,764.07. He stated that $1500 of this amount was paid to an individual named Dmitry Kovalev and that Mr. Kovalev had provided transpor:ation services for the corporation in 2008 Heritage Reporti g 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 and needed to be reimbursed for those services. Petitioner also stated that the bank retained $1500 asepast due ·fees-relative to the Ladoga Transit Inc. account. The Petitioner did not provide any substantiation of these fees. He did provide evidence that the $18,763.07 check wa.s deposited into the account at Citizens Bank, which he testified he opened in 2008. The other amount that Petitioner maintains is not taxable to him of this $18,764.07 check is paymente that he claims to have made to an individual named Bcris Lainer in repayment of a loan which Petitior.er maintains was on behalf of the corporation which had been taken out in years before 2008. One of the checks which is stipulated that was paic on behalf of the Petitioner by the corporation in 2008 also went to Mr. Lainer in the amount cf $1000. Respondent maintains that this check also represents income to the Petitioner in 2008. The Court is left with an issue of how to treat the $10,800 which, based upon the testimony, and the $1000 check referenced earlier, were paid to Mr. Lainer on behalf of the Petitioner. The Petitioner maintains that these are expenses of the corporation because he claims that Mr. Lainer was owed a debt by Heritage Reporting Corporation (202) 628-4888 8 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 the corporation. However, Petitioner has failed to substant.iate that, in fact, there was a loan agreement between Mr. Lainer and the corporation. We accept Petitioner's testimony that he, in fact, owed Mr. Lainer money, and that the payments were made to Mr. Lainer on behalf of the Petitioner. However, the Petitioner had the burden of showing that these payments were for other than his own personal benefit. The question of the burden of proof moves us to the legal analysis of this case. Petitioner does, in fact, have the burden of proof under Rule 140( ). . We have considered whether the burden of proof should be transferred to the Respondent pursuant to code Section 7491. And on the facts of this case, we find that the evidence which the Petitioner has produced and that his cooperation in the course of this investigation does not merit shifting the burden of proof to Respondent under Section 7491. So, we find that the Petitioner does have the burd n of demonstrating the facts of this case to substantiate the allegation that he is made. The burden OE proof is important because Petitioner's testimony alone is contested and inconsistent with the other teatimony in the case. And the documentation 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 9 which he has submitted is insufficient to support his asserti ns that the amounts paid to Mr. Lainer were not his income. Section 61 is very broad in reaching amounts paid to a taxpayer in treating those amounts as income to the taxpayer. The record in the present case clearly establishes that payments were made and that the Petitioner controlled or directed payments which total the amount asserted by Respondent at trial in the amount of $44,152.07. This amount includes the check in the a.nount of $18,764.07, which Petitioner took control over and had deposited into a corporate account. We believe, however, that Petitioner's efforts to have the amount transferred to a corporate account øere largely so that he could obtain the cash from the check because he needed a corporate account to cash and deposit the check. We do, however, find Petitioner's testimony regardinÿ the two payments in the amount of $1500 to be credi!1e, the one to Dmitry Kovalev and the other, based upon prior corporate expenses, withheld by the bank. Therefore, we determined that, of the $44,152.07, which was established to have either have 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 10 been in Petitioner's control or paid on his behalf at trial, 3000 is properly treated as payments Petitiorer made on behalf of the corporation. This leaves $41,152.07 as the·amount of the appropriate income 2djustment we determined based upon the evidenCE at trial. We now turn to whether the Petitioner is subject to the addition to tax. Petitioner offered no reasonable cause for his failure to include the . amounts from the corporation on his Federal income tax return for 2008. He did not, in fact, include any of these aMounts on his income tax return. Petitioner's failure to include these amounts, despite the fact that he disputed the ownership of the corporation, is negligent. He did, in fact, receive payments. There is no question in the record that he knew he was receiving payments and these pafments were substantial and were used by the Petitioner for his personal purposes. Given these circumstances, the addition to tax is appropriate and Petitioner has failed to establish a reasonable cause for his failure to report these pa ments on his income tax return for 2008. Given the determinations we have made, a Rule 155 computation will be necessary to determine 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 11 the cor ect amount of the deficiency and the addition to tax. This concludes the Court's oral findings of fact an opinion in this case. We are off the record. (whereupon, at 12:05 p.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // .// // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888