TAX COURT OPINION

Case: Carlos W. Smith
Docket Number: 21318-08
Judge: Colvin
Opinion Type: bench
Filed: 05/29/2009
Pages: 5

Ste,zy~,kr f UNITED STATES TAX COURT WASHINGTON , DC 2021 7 CARLOS W . SMITH, ET AL . , Petitioners, ) Docket Nos . 10907-08 21318-0 8 « v. ) COMMISSIONER OF INTERNAL REVENUE, Respondent . ORDE R Pursuant to Rule 152(b)_, Tax Court Rules of Practice Procedure, it i s ORDERED that the Clerk of-the Court shall transmit herewit to petitioner and to respondent a copy of the pages of the transcript of the trial of this case before Judge Haines at Lo s Angeles, California on May 13, 2009, containing his oral findings of fact and'opinion rendered at the conclusion of the trial . In accordance with the oral findings of fact and opinion, decision will be entered for respondent . (Signed) Harry A. Haines Judg e Dated : Washington, D .C . May 29, 2009 SERVED Jun 03 2009 A. 3 1 Bench Opinion by Judge Harry A . Haines May 13, 2009 2 Carlos W . Smith, Et Al ., v . Commissione r 3 Docket Nos . 10907-08, 21318-0 8 4 In this case, Carlos W . Smith represented himself 5 pro se . Attorney for Respondent was Edwin S . Herrera . 6 The Court has decided to render oral findings of 7 fact and opinion in this case, and the following represents 8 the Court's oral findings of fact and opinion . The ora l 9 findings of fact and opinion shall not be relied upon as 10 precedent in any other case . 11 These cases are before the Court consolidated for 12 purposes of trial, briefing, and opinion . Petitioner filed 13 petitions with this Court in response to notices o f 14 deficiency for 2005 and 2006 . Respondent determined 15 deficiencies for 2005 and 2006 of $5,527 and $5,750, 16 respectively, and Internal Revenue Code section 666 2 17 penalties of $1,051 and $1,152, respectively . The issues 18 for decision are : (i) whether Petitioner is entitled to 19 Schedule A Itemized Deductions for 2005 consisting o f 20 charitable contributions of $9,095, unreimbursed employee 21 business expenses of $15,860, tax preparation fees of $350, 22 and other miscellaneous expenses of $9,100, and for 2006 23 consisting of charitable contributions of $9,100 , 24 unreimbursed employee business expenses of $16,187, and 25 other expenses of $8,570, and (ii) whether Petitioner is Heritage Reporting Corporatio n (202) 628-4888 4 1 liable for the accuracy-related penalty for 2005 and 2006 . 2 Petitioner is an individual who maintained hi s 3 legal residence in the State of California at the time his 4 petitions were filed in this case . In 2005 and 2006 , 5 Petitioner was a special education teacher with the Compton 6 Unified School District and received wages of $59,274 i n 7 2005 and $69,135 in 2006, respectively . 8 Deductions are a matter of legislative grace, and 9 the taxpayer must prove he is entitled to the deductions . 10 New Colonial Ice Co . v . Halvering , 292 U .S . 435, 440 (1934) . 11 Petitioner has failed to prove any information t o 12 substantiate his deductions for 2005 or 2006 . Instead , 13 Petitioner argued at trial and on brief that Respondent has 14 harassed him . In the absence of any evidence in the record 15 to the contrary, we hold that Petitioner has failed to meet 16 his burden of proof to establish any of his claimed itemized 17 deductions . 18 Respondent determined Petitioner is liable for an 19 accuracy-related penalty under section 6662(a) for 2005 and 20 2006 . Section 6662(a) and (b)(2) imposes an accuracy- 21 related penalty upon any underpayment of tax resulting from 22 a substantial understatement of income tax . The penalty is 23 equal to 20 percent of the portion of any underpayment 24 attributable to a substantial understatement of income tax . 25 The term "substantial understatement" is defined under Heritage Reporting Corporatio n (202) 628-4888 5 1 section 662(d)(1)(A) as exceeding the treat of 10 percent of 2 the tax required to be shown on the return for the taxabl e 3 year, or $5,000 . Section 6662(a) and (b)(1) also imposes a 4 penalty equal to 20 percent of the amount of an underpayment 5 attributable to negligence or disregard of rules o r 6 regulations . Under section 6662(c), negligence includes any 7 failure to make a reasonable attempt to comply with the 8 provisions of the Internal Revenue Code . 9 Under section 7491(c), the Commissioner bears the 10 burden of production with respect to penalties . Once the 11 burden of production is met, the taxpayer must come forward 12 with evidence sufficient to show that the penalty does not 13 apply . Higbee v . Commissioner , 116 T .C . 438, 447 (2001) . 14 We hold that Petitioner is liable for the penalty 15 for substantial understatement of income tax in 2005 an d 16 2006 . Petitioner's understatement of income tax a s 17 reflected in the notices of deficiency is greater than 18 $5,000 and 10 percent of the tax required to be shown on the 19 return in each of the years 2005 and 2006 . Additionally , 20 Petitioner's failure to produce any receipts or other 21 credible evidence to support his Schedule A itemize d 22 deductions supports the imposition of the accuracy-related 23 penalty for negligence for 2005 and 2006 . Thus, Respondent 24 has met his burden of production under section 7491(c) . 25 Under section 6664(c)(1), an accuracy-relate d Heritage Reporting Corporation (202) 628-4888 6 1 penalty is not imposed on any portion of the underpayment as 2 to which the taxpayer acted with reasonable case and in good 3 faith . The taxpayer bears the burden of proof with regar d 4 to those issues . Higbee v . Commissioner , 116 T .C . 438, 456 5 (2001) . 6 Petitioner has failed to argue or show reasonable 7 cause, substantial authority, or any other basis fo r 8 reducing the penalties . Accordingly , we find Petitioner 9 liable for the section 6662 penalty for 2005 and 2006 . 10 In reaching our holding, we have considered all 11 arguments made, and, to the extent not mentioned, we 12 conclude that they are moot, irrelevant , or without merit . 13 To reflect the foregoing, Decision will be entered 14 for Respondent . 15 This concludes the Court ' s oral findings of facts 16 and opinion . 17 (Whereupon , at 9 :42 a .m ., the bench opinion in the 18 above-entitled matter was concluded . ) 19 20 21 2 2 23 1 2 Heritage Reporting Corporation (202) 628-4888