TAX COURT OPINION

Case: David A. Shincovich
Docket Number: 15031-08S
Judge: Colvin
Opinion Type: bench
Filed: 12/01/2010
Pages: 5

UNITED STATES TAX COURT WASHINGTON, DC 20217 Docket No. 15031-08S DAVID A. SCHINCOVICH, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Pursuant Procedure, it is to Rule 152(b), Tax Court Rules of Practice and ORDERED that the Clerk of the Court shall transmit herewith to petitioners and to respondent a copy of transcript of the trial of this case before Judge Haines at San Francisco, California on November 15, 2010, containing his oral findings of fact and opinion rendered at trial. the conclusion of the the pages of the In accordance with the oral findings of fact and opinion, d cision will be entered under Rule 155. (Signed) Harry A. Haines Judge Dated: Washington, D.C. December 1, 2010 SERVED DEC -- 2 2010 1 2 3 4 5 § 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Bench Opinion by Senior Judge Harry A. Haines David A. Shincovich v. Commissioner Docket No. 15031-08S November 18, 2010 3 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. Petitioner filed a petition with this Court in response to a notice of deficiency for 2005. Respondent determined deficiencies for 2005 of $13,656. Petitioner concedes he is not entitled to an additional depreciation deduction; and deductions claimed on Schedule C, profit and loss from business, for car and truck expenses; repair and maintenance expenses; and travel, meals and entertainment expenses. Petitioner likewise concedes he is not entitled to a net operating loss deduction for 2005 carried forward from prior years in an amount greater than allowed by Respondent. After such concessions, the remaining issue for decision is whether Petitioner is entitled to a claimed partnership loss deduction for 2005. Petitioner is an individual who maintained his legal residence in the state of California at the time his Heritage Reporting Corporation (202) 628-4888 i 3 4 5 ( 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 petition was filed in this case. For the year at issue, Petitioner was a partner in Apex USA, LLC, which is treated as a partnership for federal tax purposes. Petitioner argued in his petition that he should be allowed a partnership loss in the amount of $104,218 for the 2005 tax year. However, after filing the petition, Petitioner filed his 2005 form 1065, US return of partnership income, claiming a smaller partnership loss than the amount alleged in his petition. On the partnership return, Petitioner reported gross receipts of $2950, costs of goods sold of $1917, and total deductions in the amount of $72,086, resulting in a claimed partnership loss of $71,053. Generally, the Commissioner's determinations in a notice of deficiency are presumed correct, and the taxpayer has the burden of proving that those determinations are erroneous. See Rule 142(a); Welch v. Helvering, 290 US 111, 115 (1933). Deductions are a matter of legislative grace and the taxpayer must prove he is entitled to the deductions. New Colonial Ice Co. v. Helvering, 292 US 435, 440 (1934). In some cases, the burden of proof with respect to relevant factual issues may shift to the Commissioner under section 7491(a). Section 7491(a) (1) provides that if a taxpayer introduces credible evidence with respect to a 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 5 factual issue, the Secretary shall have the burden of proof with respect to such issue, but only if (A) the taxpayer has complied with applicable substantiation requirements, and (]B) the taxpayer has maintained required records and has cooperated with reasonable requests by the Secretary for witnesses, information, documents, meetings, and interviews. Petitioner did not argue or present evidence that he satisfied the requirements of section 7491(a). Therefore, the burden of proof with respect to the issues in the notice of deficiency does not shift to Respondent and remains on Petitioner. Petitioner claims that he should be allowed a deduction for a partnership loss from Apex USA, LLC, for 2005, the year when it closed down its business. However, Petitioner disavowed the accuracy of Apex's federal partnership returns that had been filed, including the 2005 return, and was unable to reconstruct the components of the claimed partnership loss in the absence of accurate returns for prior years. Moreover, the partnership deductions that were claimed for 2005 were not substantiated at the time of trial. Therefore, we find that Petitioner has failed to meet his burden of proof to establish the partnership loss for 2005, and we uphold Respondent's disallowance. In reaching our holdings, we have considered all Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 6 a 9 10 11 1 13 14 16 16 17 18 19 20 2i 22 23 24 24 6 arguments made, and to the extent not mentioned, we conclude that they are moot, irrelevant, or without merit. To reflect the foregoing, decision will be entered for Respondent, pursuant to Rule 155. This concludes the Court's oral findings of facts and opinion. (Whereupon, at 1:06 p.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888