TAX COURT OPINION

Case: Robin A. Murphy
Docket Number: 2955-13
Judge: Holmes
Opinion Type: bench
Filed: 02/27/2014
Pages: 7

Suß=Holn6 UNITED STATES TAX COURT WASHINGTON, DC 20217 ROBIN A. MURPHY, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ORDER Docket No. 2955-13. 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 Mark V. Holmes at San Francisco, California, on January 31, 2014, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. (Signed) Mark V. Holmes Judge Dated: Washington, D.C. February 27, 2014 SERVED MAR - 6 2014 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 Capital Reporting Company Bench Opinion by Judge Mark V. Holmes 3 January 31, 2014 Robin A. Murphy Docket No. 2955-13 THE COURT: In the case of Robin A. Murphy v. Commissioner, Case No. 2955-13, the Court has decided to render oral findings of fact and opinion, and the following is the Court's oral findings of fact and opinion. This bench opinion is made pursuant to the authority granted by Section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court's Rules of Practice & Procedure. Ms. Murphy began this case with a petition in which she claimed "the notice of tax deficiency disallows legitimate tax deductions from my tax filings for the years 2009 and 2010, stating that I did not 'establish that the business expense shown on my tax return was paid or incurred during the taxable year'. I was not audited and therefore not asked to establish these expenses. I did pay/incur these expenses during these years and am able to show this." On the portion of the form, petition, in which taxpayers are asked to state the facts upon 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 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 which they rely, Ms. Murphy wrote, "I rely on my receipts, bank statements, and business and personal records used to support my tax return at the time of filing. I used a licensed tax preparer, an "AE" -- I believe she means EA here -- "KeAloha Couch of Couch & Associates, to file my taxes and legitimize my return. I have no reason to believe that Ms. Couch filed my returns erroneously." Ms. Murphy was a resident of California when she filed the petitions and in the usual course exchanged information with the IRS and reached an agreement on the various substantiation items that were in dispute between them. This was read into the record at calendar call and when the case was recalled. It resolved all the issues except for two, both involving Ms. Murphy's attempt to amend her petition, and, first, to claim that she was an employee and not an independent contractor during one of the years at issue; and the second, to amend her petition to claim that she never authorized the filing of her 2010 return, which would, of course, make her a nonfiler for that year. These were first raised to the Court's attention at calendar call. They had apparently been raised to Commissioner only a short time before. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 Changing the theory of the case in such radical way implicates Tax Court Rule 41, which directs, "Otherwise a party may amend a pleading only by leave of Court or by written consent of the adverse party, and leave shall be given freely when justice so requires." If Ms. Murphy had wanted to change her theory of the case, she should have done so a long time ago. Naturally, given the short period of time that the government had to respond to this, it objected and did not consent in writing. The Court, of course, was surprised by this as well, having learned about it, as I said, only at calendar call. Nevertheless, the rule requires that I allow the amended petition if justice so requires. That's a sort of loose standard, but case law has made it more specific, and, for instance, in the Estate of Quick v. Commissioner, 110 TC 132, 198 (1998), we stated, "In determining the justice of a proposed amendment, we must examine the particular circumstances in the case before us . . . . we consider, among other factors whether an excuse for the delay exists and whether the opposing party would suffer unfair surprise, disadvantage, or prejudice if the motion to amend were granted." 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 So I look at both the reason and the potential prejudice. As to the reason that Ms. Murphy offered, she did describe the emotional trauma that she's been suffering recently in the last couple of years where an unidentified stalker has affected her life, as well as a terrible roommate situation in which the roommate, a self-proclaimed 8 witch, put black magic curses on her and left voodoo 9 objects. I want to be careful that we are not saying 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that she was asserting that she was herself ensorcelled here, but only that she had a very bad roommate situation that caused her emotional trauma and ultimately led to an order of protection to Seek enable her to move from her apartment. But all that happened some time ago and doesn't really suffice as a good reason for not bringing this very different theory of the case to the Court's attention until the calendar call, or to the government's attention, apparently, at the earliest, a couple weeks ago. Moreover, the government would clearly be disadvantaged by this change in the theory of Ms. Murphy's case. Changing one's status from independent contractor to employee or vice versa involves an examination of a whole list of factors. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 it's a multifactor test that varies from circuit to circuit and would have required the government, for instance, to come up with witnesses who know exactly what she did or what the conditions of her employment were during the year in question. They would have had to look at any employee manuals and other conditions of employment, and they simply had, government simply had, no opportunity to do any of this in the short period of time that Ms. Murphy gave them. As to her second effort to amend her petition to say that she in fact had filed no return in 2010, this directly contradicts what she put in her petition, of course, and would have required or strongly suggested to the government that it needed to interview Ms. Couch to figure out what exactly was going on here. Ms. Murphy offered some e-mails in the stipulation, but again, those e-mails came in very late in the process and did not allow the government a fair chance to contest this new theory. In addition, that theory would have consequences to Ms. Murphy in the form that she would become a nonfiler and be subject to the penalties and additions to tax for nonfiling. All in all, I find therefore that the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 prejudice to the government of allowing this amendment to Ms. Murphy's petition would be extreme, and that the reason offered is inadequate. So I 4 won't allow Ms. Murphy's oral motion to amend her 5 petition. 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The consequences that settlement of the issues that were reached will be honored. This will require entry of decision under Rule 155. And this concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 10:17 a.m., the above- entitled matter was concluded.) I 1 866.488.DEPO www.CapitalReportingCompany.com