TAX COURT OPINION

Case: Clinton D. Bone
Docket Number: 19155-18S
Judge: Goeke
Opinion Type: bench
Filed: 10/01/2019
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 DRC CLINTON D. BONE, Petitioner(s), v. ) ) ) ) ) Docket No. 19155-18S. 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 Judge Joseph Robert Goeke at Seattle, Washington containing his oral findings of fact and opinion rendered at the trial session at which this case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered under Rule 155. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. October 1, 2019 SERVED Oct 01 2019 Bench Opinion by Judge Joseph Robert Goeke 3 September 13, 2019 Clinton T. Bone v. Commissioner Docket No. 19155-18S 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 up on precedent in any other case. This case 4 5 6 7 8 9 10 was conducted under section 7463(a) of the Internal 11 Revenue Code, which the Petitioner elected. Pursuant to 12 13 14 15 16 section 7463(b), the decision we enter in this case shall not be reviewed in any other court. This opinion is rendered pursuant to section 7459(b) and Rule 152 of the Tax Court Rules of Practice and Procedure. Hereinafter, references to sections are to the Internal Revenue Code in 17 effect for the year at issue in this case and rule 18 19 20 references are to the Internal Revenue Code. FINDINGS OF FACT This case centers on Schedule C deductions 21 claimed by the Petitioner, which were disallowed in 22 Respondent's notice of deficiency for the year 2015. 23 Petitioner then timely petitioned this Court, and at the 24 time he petitioned this Court, Petitioner was a resident 25 of the State of Washington. cribers 1 2 3 4 5 6 7 8 9 The Petitioner was an individual who, for the vast majority of his adult life, engaged in the construction business, He attended several seminars involving real estate activity and determined that he should form an LLC called Bluewater Housing. 'ph Bluewater Housing was the company or the business which he associated with the Schedule C, which generated the controversy in this case. That Schedule C reflects, in part, the following 10 information: gross receipts of $8,948 and other expenses 11 of $48,504, reflecting a loss of $39,556. Based upon the 12 Petitioner's own testimony, we find that that Schedule C 13 14 is totally fictitious. Both the income and all the expenses are not associated with an actual trade or 15 business. 16 17 18 Petitioner testified that he intended to be in the real estate business and buy and sell real estate, but he never did. And he stated that he naively believed that 19 his return preparer had determined expenses, which were 20 largely personal in nature, and included them in his 21 Schedule C correctly. 22 23 24 25 OPINION We find the Petitioner's testimony in this regard to lack credibility. However, Respondent has conceded the addition to tax under section 6662(d). Cribers 79)4064250)operationsøescribersnetlwwwescribersnet Petitioner filed his income tax return for the period in question late and the additions to tax under section 6651(a)(1) for delinquent filing remains at issue in this 5 case. We find based upon Petitioner's testimony that the net expenses he claimed on his 2015 federal income tax return in connection with the Schedule C for Bluewater Housing should be disallowed. This includes not simply all the expenses, but also that the income should not be 1 2 3 4 5 6 7 8 9 10 included as income because we find that b e was not 11 actual income, 12 This determination will require a 13 Rule 155 computation. 14 15 16 17 18 19 Relative to the addition to tax for delinquency, we note that a defense to this addition to tax is reasonable cause. We do find that Petitioner testified credibly, as supported by emails, that he attempted to determine whether his income tax return for 2015 had been filed by the return preparer. He sent an email early in 20 April of 2016 seeking confirmation that the return was 21 22 23 24 filed. Therefore, we find that the delinquent return filing was not the fault of the Petitioner and that he did act reasonably in attempting to determine that his return 25 preparer had acted in responsible manner. Accordingly, we cribers 913)40 2250}operationsøescritesmef}wwwescribérsnet 6 find Petitioner had reasonable cause for the delinquent failure to file and that the delinquent penalty under section 6651(a)(1) is not applicable. The remaining issue concerns Petitioner's testimony that he incurred $1,200.38 in pursuing his dream to be involved in a real estate business. These expenses are associated with various literature and activities he engaged in involving real estate sales. There's no dispute that he incurred these expenses. The only dispute is whether they are as ociated with a trade or business and should be taken as a Schedule C expenses or whether they would be deductible under section 212 as a Schedule A itemized deduction. We do not find that the Petitioner was actively engaged in a trade or business involving the housing 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 business in 2015. He testified he had never made any 17 18 housing sales to this date, and while he had a dream to engage in such business, that does not constitute active 19 work in a trade or business. 20 Therefore, these expenses would not be Schedule 21 Court expense, but rather would be allowable as an 22 itemized deduction under Schedule A pursuant to the 23 applicable statutory limitations. 24 25 This concludes the Court's oral findings of fact and opinion in this case. #3}406-2250) öperat Cribers s ezrdaersnet l wwwiscribetsnet i 1 2 We're off the record. (Whereupon, at 10:23 a.m., the above-entitled 7 3 matter was concluded.) 4 5 6 7 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 çribers