TAX COURT OPINION

Case: Ramiro Tizcareno
Docket Number: 14577-16S
Judge: Guy
Opinion Type: bench
Filed: 01/05/2018
Pages: 7

ALS UNITED STATES TAX COURT WASHINGTON, DC 20217 RAMIRO TIZCARENO, Petitioner, v. ) ) ) ) Docket No. 14577-16S. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORDER 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 Special Trial Judge Daniel A. Guy, Jr., at Fresno, California, 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 petitioner. (Signed) Daniel A. Guy, Jr. Special Trial Judge Dated: Washington, D.C. January 5, 2018 SERVED Jan 05 2018 .. 3 1 2 3 4 5 6 7 8 9 Bench O inion by Special Trial Judge Daniel A. Guy, Jr. December 13, 2017 Ramiro Tizcareno v. Commissioner of Internal Revenue Docket No. 14577-16S 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. 10 This proceeding for the redetermination of a 11 deficiency is a small tax case conducted pursuant to the 12 provisions of section 7463 of the Internal Revenue Code of 13 1986, as amended, and Rules 170 through 174 of the Tax Court 14 Rules of Practice and Procedure. 15 This bench opinion is made.pursuant to the. 16 authority granted by section 7459(b) of the Internal Revenue 17 Code of 1986, as amended, and Rule 152 of the Tax Court 18 Rules of Practice and Procedure. Hereinafter in this bench 19 opinion, unless otherwise indicated, section references are 20 21 to the Internal Revenue Code of 1986, as amended, in effect for 2014, and Rule references are to the Tax Court Rules of 22 Practice and Procedure. 23 Petitioner resided in California at the time the 24 petition was filed, and he appeared at trial pro se. Sandeep 25 Singh appeared on behalf of res ondent. The parties (973)406-2250loperationsdescribers.netjwww.escribersmet 4 1 2 3 4 5 6 7 8 9 stipulated to some of the underlying facts in this case. Respondent issued a notice of deficiency to petitioner determining a Federal income tax deficiency of $390 for the taxable year 2014. Petitioner invoked the Court's jurisdiction by filing a timely petition for redetermination. The issue for decision is whether petitioner is liable for Federal income tax attributable to discharge of indebtedness income. In 2011, petitioner maintained a checking account 10 with JP Morgan Chase Bank (Chase). On August 12, 2011, 11 petitioner received an email from Chase stating that 12 Martha Jameson had sent $1,740 to him using "Chase Person- 13 to-Person Quickpay" (Quickpay). Petitioner accepted the 14 electronic transfer of funds by clicking the "Accept Money" 15 16 17 18 19 20 21 22 link in the email and the funds were deposited to his checking account on August 15, 2011. Petitioner understood that funds transferred to him through Quickpay normally would be available in his checking account within four days after acceptance of the transfer. On August 19 and 25, 2011, petitioner received separate emails from Chase stating that Eva Gialelis had sent $1,850 and $1,950 to him, respectively, using Quickpay. 23 Petitioner accepted these two electronic transfers and the 24 25 funds were deposited to his account on August 22 and 29, 2011, respectively. shun (973)406-2250|oper t ons@escribersmetlwww.escribersnet As part of a prearranged plan, on August 19 and .5 29, 2011, petitioner transferred $1,565 and $1,665 from his checking account, respectively, using a service provided by Western Union. In the .meantime, on August 26, 2011, Chase sent a letter to petitioner stating that his checking account would be closed in 10 business days "in accordance with your Chase deposit agreement terms and conditions." On August 31 and September 2, 2011, Chase reversed the three Quickpay deposits described above, debiting petitioner's account a total of 1 2 3 4 5 6 7 8 9 10 $5, 540 and leaving his account overdrawn by $2, 603.51. 11 12 Petitioner testified that he immediately contacted the Chase fraud unit but he was never provided a clear 13 explanation why Chase had reversed the Quickpay deposits 14 15 16 17 18 19 20 21 22 23 24 25 described above and why his checking account was abruptly closed. Chase subsequently issued to petitioner a Form 1099- C, Cancellation of Debt, indicating that his purpgrted debt of $2,603.51 to the bank had been cancelled on December 31, 2014. Petitigner testified that he did not receive a copy of the Form 1099-C until sometime in 2017. Petitioner filed a Federal income tax return for 2014 reporting adjusted gross income of $22,245. He did not report the $2, 603.51 of cancellation of indebtedness income that Chase had reported gn Form 1099-C. Gross income includes all income from whatever source derived, and income from discharge of indebtedness is 73)406-2250|operationsèescri rs t|www scribers.net 1 2 3 4 5 6 7 8 9 included in this broad definition. Sec. 61(a) (12); United States v. ,Ki.rby Lumber Co., 284sU.S. 1 (1931); sec. 1.61.- 12(a)., Income Tax Regs. "The underlying rationale for such inclusion is that to the extent a taxpayer ·is released from indebtedness, he dr she realizes an accession to income due to the freeind of assets previously offset by the liability." Jelle v: Commissioner, 116 T.C. 63, 67 (2001) (citing Kirby Lumber); see Cozzi v. Commissioner., 88 T.tC.2435, 445 (1987). The amount 10 includable in income generalry is the difference between 11 12 13 14 15 16 17 18 19 the face. value of the debt and the amount paid in satisfaction of the debt. nabin v. Commissioner, 23 F.3d 1032, 1034 (6th Cir. 1994), afffg T.C. Memo. 199(cid:0)575-673. The income normally is recognized in the year the debt is canceled. Montgomery v. Commissioner, 65 T.C. 511, 520 (1975) . In cases where the Commissioner determines that the taxpayer received and failed to report some item of gross income, the Commissioner bears the initial burden 20 of producing at least minimal évidence linking the 21 taxpayer tó the income-producing activity- or the receipt 22 of funds. Rapp v. Commïssioner, 774 F.2d 932, 935 (9th 23 Cir. 1985). Once the Commissioner meets the burden of 24 production, the burden of proof shifts to the taxpayer to 25 produce credible evidence that he or she did not receive shes (973)406:2250|operations@escrií>ers.net|www.escribers.net 1 2 3 4 5 6 7 8 9 10 11 . the alleged income or of proving that the Commissioner's deficiency calculations were not grounded on a minimal evidentiary foundatiòn. Id.; see also Fisher v. Commissioner, T.C. Memo. 2014-219, at *7. If a taxpayer raises a reasonable dispute with respect to a third-party ..information return and has otherwise fully cooperated with the Commissioner, the burden of production may.shift to the Commissioner to present réasonable and probative evidence to verify the information return. Sec. 6201(d). While there is no question that petitioner received the Quickpay deposits, it is likewise clear that 12 Chase reversed those deposits and debited petitioner's 13 account. What is not cleat on this record is why Chase took 14 15 16 17 18 19 these adverse actions against petitioner. The transactions that petitioner engaged in.certainly seemed out of the ordinary,. but there is no evidence that the transactions were illegal.. Petitioner testified credibly that he immediately questioned Chase's actions in reversing the Quickpay deposits and in closing his checking account, but got no 20 meaningful response from Chase. It is worth noting that the 21 first Quickpay deposit was reversed more than two weeks after 22 petitioner had accepted the electronic transfer. 23 24 25 Petitioner clearly stated the grounds for his challenge to the validity of the Form 1099-C issued by Chase in his petition fbr redetermination filed June 27, 2016. (973)406-2250|opeirations@e'scribers.net|wwwescribers.net 8 1 2 3 4 Respondent did not offer any evidence to show that petitioner refused to provide access to and inspection of any witnesses, information, and.do'cuments within his control. Under the circumstances, we conclude that the 5 . burden of production in this case sliifted to respondent in 6 7 8 9 10 11 accordance with the provisions of section 6201 (d) , but respondent failed to produce reasonable and probative information. regarding the accuracy of the Form 1099 C in .dispute. Although respondent provided the Court with a copy of the disputed Form 1099-C, there is no evidence, such as Chase ' s terms and conditions governing the Quickpay service, 12 explaining why Chase abruptly closed petitioner's checking 13 account. Absent such information, neither the parties nor the 14 Court. can verify that petitioner was properly charged with 15 16 discliarged indebtedness income as reported by Chase. Consistent with the preceding discussion, a decision 17 will be entered for petitioner. This concludes the Court's 18 oral findings of fact and opinion in this case. (Whereupon, at 12:39 p.m., the above-entitled matter was concluded.) 19 20 21 22 23 24 25 (973)406-2250|operations@escrilmrs.net|www.escribers.net