TAX COURT OPINION

Case: Charles C. Jardina, Jr. & Zehner D. Jardina
Docket Number: 15160-07
Judge: Colvin
Opinion Type: bench
Filed: 07/17/2009
Pages: 6

UNITED STATES TAX COURT WASHINGTON , D .C . 2021 7 CHARLES C . JARDINA, JR ., & ZEHNER D . JARDINA , $IRV ICE Petitioners, ) Docket No . 15160-0 7 v . .COMMISSIONER OF INTERNAL REVENUE , Respondent . O R D E R 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 of the above case before Judge Diane L . Kroupa at Houston, Texas on June 26, 2009, containing her oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155 . (Signed) Diane L . Kroupa Judge Dated : Washington, D .C . July 17, 2009 SERVED JUL 2 0 2009 3 1 Bench Opinion by Judge Diane L . Kroupa 2 June 26, 200 9 3 CHARLES C . JARDINA, JR ., & ZEHNER D . JARDINA, 4 Docket No . 15160-0 7 5 The Court has decided to render ora l 6 findings of fact and opinion in this case, and th e 7 following represents the Court's oral findings of fact 8 and opinion . These oral findings of fact and opinion 9 shall not be relied upon as precedent in any othe r 10 . case . 11 This bench opinion is made pursuant to the 12 authority granted by Section 7459(b) and Rule 152 . 13 All section references are to the Internal Revenue 14 Code for 1998, the year at issue, and all rul e 15 reference are to the Tax Court Rules of Practice and 16 Procedure . 17 George W . Connelly, Jr . appeared on behalf 18 of Petitioners, and Kathryn Bellis appeared on behal f 19 of Respondent . 20 FINDINGS OF FAC T 21 . Certain facts have been stipulated . 22 stipulation of facts the parties filed, wit h 23 accompanying exhibits, is incorporated by this 24 reference . The facts are so found . 25 Petitioners resided in Texas at . the time Heritage Reporting Corporatio n (202) 628-4888 4 1 they filed the petition . 2 The .parties have resolved all issues raised 3 in the deficiency notice issued to Petitioner s 4 regarding the years 1997, 1998, and 1999 . Th e 5 resolved issues are set forth in a stipulation o f 6 settled issues filed with the Court at the start o f 7 trial . The only issue before us is whether the gross .8 proceeds from a sale . in 1998 were reported incorrectly 9 on Petitioners' return for 1998 . This sale involve s 10 an eight-unit apartment building at 810 Kipp Street i n 11 Kemah, Texas, that Petitioner husband-sold to hi s 12 first cousin, Hubert Buffalo . We shall refer to this 13 property as the Kipp property in this bench opinion . 14 The sale of the Kipp property was reported 15 on the return for 1998 with a gross sales price o f 16 $185,000 . A 1099-S, Settlement Proceeds, was prepared 17 for the sale reporting that Petitioner husband 18 received $185,000 from the sale of the Kipp property 19 to his cousin . 20 The sales contract for the Kipp property 21 (Exhibit 6-J) stated, however, the gross sales price 22 was $195,000, including $70,000 as down payment . 23 Petitioner husband asserts that the sales contract is 24 incorrect . 25 First, Petitioner husband asserts that th e Heritage Reporting Corporation (202) 628-4888 5 1 sales price should have been $185,000, including a 2 $60,000 down payment . Moreover, Petitioner and his 3 cousin testified that they changed the payment terms 4 after the sales contract was signed to exclude th e 5 $60,000 down payment to account for needed repairs and 6 maintenance unbeknownst to either of them when the y 7 agreed upon the sales price . 8 Neither Petitioner husband nor his cousin 9 ever communicated any of the changed terms to the 10 title company . In addition, the closing statement 11 reflects that $185,000 was paid . Moreover, no 12 corrected 1099-S was ever completed . 13 Respondent examined Petitioners' books and 14 records for the three years at issue in the deficiency 15 notice . Some of Petitioners' books and records have 16 been damaged by the hurricane . This sale for $185,000 17 was accounted for in the deficiency notice issue d 18 April 5, 2007 . Two years later, on the eve of trial, 19 Petitioner noticed for the first time that th e 20 $185,000 sales price for the Kipp property in 1998 to 21 his cousin was incorrect . 22 OPINION 23 This is a substantiation case involving 24 whether Petitioner husband kept accurate records to 25 show the sales price of the Kipp property in 1998 . Heritage Reporting Corporation (202) 628-4888 6 1 All other issues have been resolved . 2 We begin with fundamental principles of tax 3 litigation . First, the Commissioner's determinations 4 are generally presumed correct, and the taxpayer bears 5 the burden of proving that those determinations ar e 6 erroneous . Rule 142(a) . This includes the burden of 7 substantiation . Hradesky v . Commissioner , 65 T .C . 87, 8 90 (1975), affd . per curiam 540 F .2d 821 (5th Cir . 9 1976) . 10 Substantiation means that a taxpayer shall 11 keep such permanent records or books of account as are 12 sufficient to establish the amount of income and 13 deductions claimed on the return . Sec . 6001 ; Sec . 14 1 .6001-1(a), (e), Income Tax Regs . The Court need not 15 accept a taxpayer's self-serving testimony when th e 16 taxpayer fails to present other probative evidence . 17 18 Beam v . Commissioner , T .C . Memo . 1990-304 (citing Tokarski v . Commissioner , 87 T .C . 74, 77 (1986)) . 19 We now consider whether the purchase price 20 of the Kipp property was $185,000, as reflected on 21 numerous documents, or whether it was the $125,000 22 Petitioner husband and his cousin now state was the 23 price paid for the Kipp property in 1998 . 24 We find that Petitioner husband has failed 25 to prove that the purchase price was $125,000 . We Heritage Reporting Corporatio n (202) 628-4888 7 1 find compelling that the 1099-S, the closin g 2 statement, and the return position reported the sales 3 price as $185,00 for the Kipp property . It does not 4 help Petitioner husband that Respondent has anothe r 5 sales contract reflecting that Petitioner husband sold 6 the Kipp property to an unrelated third party in 1998 7 as well, nor does it help him that the original sales 8 contract provided that the sales price was $195,000 . 9 The Court recognizes that some o f 10 Petitioners' records may have been destroyed or 11 damaged by a hurricane . This is sad . We find , 12 however, the major problem here is that Petitione r 13 husband failed to keep accurate records of his various 14 business activities to reflect what actually may have 15 happened . Moreover, the documents that do exist do 16 not show a $125,000 sales price . In weighing th e 17 totality of the evidence, we conclude that the sales 18 price for the Kipp property in 1998 was not $125,000 . 19 To reflect the foregoing and Respondent's 20 concessions, decision will be entered under Rule 155 . 21 THIS CONCLUDES THE COURT'S ORAL FINDINGS OF 22 FACT AND OPINION IN THIS CASE . 23 (Whereupon, at 9 :17 a .m ., the bench opinion 24 was concluded . ) 25 Heritage Reporting Corporation (202) 628-4888