TAX COURT OPINION

Case: Christopher Wollerman
Docket Number: 25600-09S
Judge: Goeke
Opinion Type: bench
Filed: 04/06/2012
Pages: 7

UNITED STATES TAX COURT WASHINGTON, DC 20217 CHRISTOPHER WOLLERMAN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 25600-09S. ) ) ) ) ORDE R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk ofthe Court shall transmit herewith to petitioner and to respondent a copy ofthe pages ofthe transcript ofthe trial in the above case before Judge Joseph Robert Goeke at Tampa, Florida, on March 20, 2012, 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, a decision will be entered under Rule 155. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. April 6, 2012 SERVED APR - 9 2012 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 3 BENCH OPINION BY JUDGE JOSEPH ROBERT GOEKE CHRISTOPHER WOLLERMAN v. COMMISSIONER DOCKET NO.: 25600-09S DATE: March 20, 2012 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. This case is before the Court pursuant to the provisions of section 7463 of the Internal Revenue Code in effect at the time the petition was filed. Pursuant to section 7463(c) the decision to be entered is not reviewable by any other court. Hereinafter Rule references are to the Tax Court Rules of Practice and Procedure and section references are to the Internal Revenue Code in effect for the taxable year 2006. This opinion is rendered pursuant to Rule 152 and pursuant to Rule 152 (b). A copy of this opinion will be served upon the parties. The burden of proof in this case is upon the Petitioner pursuant to Rule 142(a), except to the extent the burden is modified by the application of section 7491. The present case is before the Court based Heritage Reporting Corporation (202) 628-4888 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 4 upon the Court's deficiency jurisdiction as Respondent issued a notice of deficiency to the Petitioner for the year 2006. Respondent determined a deficiency of $15,986 and the addition to tax under section 6662(a) in the amount of $3,197.20. All the issues in this case flow from an item claimed as an expense on Schedule C of Petitioner's 2006 Federal Income Tax Return. At the time he filed the petition the Petitioner resided in New Jersey, and he filed his return for 2006 with a New Jersey address. On that return, which Petitioner filed jointly with his spouse, he reflected for himself wages from Peter A. Thompson Moving and Storage in the amount of $60,220. And he also reported Schedule C income related to moving across country, a business that he conducted through the operation of a truck which he owned and for which he employed a driver. He claimed as casual labor expense $56,500, and this amount is the focal point of the dispute in the case. Respondent maintains that Petitioner has not properly substantiated this Schedule C deduction. Respondent correctly points out that the Petitioner has the burden of proof with respect to Respondent's determinations in general, as we stated previously. Heritage Reporting Corporation (202) 628-4888 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 With respect to the burden of production on the accuracy related penalty, however, Respondent acknowledges that he bears the burden to provide sufficient evidence to indicate that it is appropriate to impose the accuracy related penalty provided by Internal Revenue Code section 6662(a). Respondent maintains that Petitioner's error in overstating this expense in the amount of $56,500 supports the accuracy related penalty. Petitioner's position relative to both the addition to tax and the disputed expense item is that he accurately reflected expenses of his moving business in 2006. During the course of the audit of Petitioner, Petitioner produced a Form 1099 Miscellaneous income statement which he issued to a gentleman named Norman Gethord, G-e-t-h-o-r-d. This Form 1099 reflects income allegedly paid to Mr. Gethord in the amount of $41,750. Petitioner testified at trial that he and Respondent's counsel had spoken to Mr. Gethord and Mr. Gethord had confirmed that he had driven Petitioner's truck in the moving business in 2006, and that he was in fact paid the $41,750. Although the Form 1099 produced by Petitioner was, by his own admission, three years late Heritage Reporting Corporation (202) 628-4888 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 since it was signed in 2009, we believe the evidence available in the record supports the fact that Petitioner did in fact pay Mr. Gethord $41,750 in 2006 for driving his truck as part of Petitioner's moving business. Petitioner was an employee, in addition to running the moving business, and had a full-time job. So it appears inconsistent with that fact that Petitioner himself could have driven the truck. The revenues generated by the moving business were significant in 2006 and are unchallenged. The Form 1040 Schedule C attached to the 2006 Joint Federal Income Tax Return filed by the·Petitioner and his spouse reflects gross income from the moving business in the amount of $107,226. Given this fact we find Petitioner's testimony to be credible in that we do find that he did in fact pay Mr. Gethord $41,750 in 2006. This does not end the matter because, as stated previously, Petitioner claimed casual wage expense of $56,500. In support of the additional amount Petitioner produced a log of receipts which he claims reflect payments to persons who Mr. Gethord would have engaged to assist him in unloading the truck at the various locations where he moved objects Heritage Reporting Corporation (202) 628-4888 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 7 on behalf of Petitioner's Schedule C business in 2006. The Court has carefully analyzed those receipts and they do appear to be a credible record of payments for casual labor. However, the receipts total only $2,240. The Court finds Mr. Wollerman's testimony to be credible that obviously casual labor was necessary to load and unload the truck, and the Court believes that the amount of $2,240 is certainly less than what was probably actually paid for the casual labor. However, Mr. Wollerman does have the burden of proof in establishing what is the amount of the casual labor, and he had significant time to establish additional evidence or provide supporting information from Mr. Gethord to support the payment of additional labor. He did not provide any such evidence, nor did he produce an affidavit from Mr. Gethord, which would have been admissible given the relaxed evidentiary procedures of the small case procedures in this case. Given those facts we find that Mr. Wollerman has substantiated $2,240 of additional casual labor expense to be added to the amount of $41,750 previously substantiated relative to Mr. Gethord. However, this leaves in excess of $10,000 of unsubstantiated expense and we sustain Respondent's determination that this amount should not be allowable Heritage Reporting Corporation (202) 628-4888 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 8 because Petitioner has failed to substantiate the entire amount of $56,500. In connection with the addition to tax we find that the Petitioner's failure to maintain proper records of the amounts paid and to produce those at trial supports Respondent's determination of the addition to tax. And to the extent there is a deficiency based upon the findings we've outlined, we find that the addition to tax is applicable and that Respondent has sustained the burden of going forward with the addition to tax with respect to the revised deficiency which will be determined under Rule 155 based upon this opinion. This concludes the Court's Oral Findings of Fact and Opinion in this case. (Whereupon, at 11:30 a.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // Heritage Reporting Corporation (202) 628-4888