TAX COURT OPINION

Case: Rudolph & Norma J. Buriani
Docket Number: 8859-12
Judge: Haines
Opinion Type: bench
Filed: 06/17/2013
Pages: 8

UNITED STATES TAX COURT WASHINGTON, DC 20217 SEC RUDOLPH & NORMA J. BURIANI, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ORDER Docket No. 8859-12. Pursuant to Rule 1 2(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit with this order to petitioners and respondeËt a copy of the pages of the transcript of the trial in this case before Judge Harry A. Haines at San Francisco, California, on May 2, 2013, containing the oral findings of fact and opinion that was rendered at the conclusion of the trial. In accordance with the oral findings of fact and opinion, a decision will be entered for respondent. (Signed) Harry A. Haines Judge Dated: Washington, D.C. June 17, 2013 SERVED Jun 17 2013 Capital Reporting Company 3 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 Bench Öpinion by Judge Harry Haines May 2, 2013 Rudolph & Norma J. Buriani v. Commissioner Docket No. 8859-12 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 a d opinion. The oral findings of fact and opinior5 shall not be relied upon as precedent in any other case. Rudolph and Norma J. Buriani, Petitioners, filed a petition with the Court in response to a notice of deficiency for 2009 that asserted a deficiency of $37,139 due to a failure to report $96,674 of gambling income and $7980 of interest income. The notice of deficiency also assessed an accurac -related penalty under section 6662(a) of $7428. The parties ' stipulation of facts and the attached exhibits are incorporated herein by this reference. cLn uca g 3% , 2013 ~ On , Respondent filed with this Court a motion to show cause why proposed facts and evidence should not be accepted as established. The motion contained a stipulation of facts. On 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 March 9th, 2013, this Court ordered that 2 3 4 5 Respondent's motion was accepted as established, and the order to show cause dated February 7, 2013, was made absolute. At the time of filing their petition, 6 Petitioners resided in Vacaville, California. 7 8 9 10 11 12 13 14 15 16 Petitioners timely filed their 2009 federal income tax return. On their return, Petitioners reported receiving the following items of income: (1), $64 of taxable interest income; (2), $3 of ordinary dividend income; (3), $2998 of taxable refunds; (4), $63,944 of taxable pension income; (5), $21,791 of taxable social security income; and (6), $2000 of other income from gambling 17 winnings . 18 19 20 21 22 23 24 25 Petitioners attached Schedule A, itemized deductions, to their return and claimed a deduction of $96,670 for gambling losses. Petitioner Rudolph Buriani received a number of forms W-2-G, certain gambling winnings, from the Cache Creek Casino, listing $94,764 of gambling income, and Petitioner Norma Jean Buriani received a number of forms W-2-G from the Cache Creek 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 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 Casino listing $3910 of gambling income. Additionally, Petitioner Rudolph Buriani in 2009 sustained gambling losses of $134,179 at the Cache Greek Casino, and Petitioner Norma Jean Buriani in 2009 sustained gambling losses of $43,989 at the Cache Greek Casino. Petitioners also received $7980 of interest income from the Bureau of Public Debt in 2009. On April 9, 2012, Petitioners filed a petition with this Court seeking review of the notice of defi.ciency. Respondent claims that Petitioners, though reporting $96,670 of gambling losses on their 2009 jo;int federal income tax return, failed to report '96,674 of their gambling income on their joint return. Respondent also claims that Petitioners failed to report the $7980 of interest income from the Bureau of Public Debt on their joint return. Gross income includes all income from whatevey source derived, including gambling. See sec. 61: McClanahan v. United States, 292 F.2d 630, 631-632 (5th Cir. 1961). In the case of a taxpayer not engaged in the trade or business of gambling, gambling losses are allowable as an itemized deduction, but only to the extent of gains from such transactions. Sec. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 165(d);¡ McClanahan v. United States, supra at 632 n.1 (citing Winkler v. United States, 230 F.2d 766 (1st 3 Cir. 1 56)). 4 5 6 7 8 9 In order to establish entitlement to a deducti'on for gambling losses, the taxpayer must prove the losses sustained during the taxable year. Mack v. Commissioner, 429 F.2d 182 (6th Cir. 1970), affg. T.C. Memo. 1969-26; Stein v. Commissioner, 322 F.2d 78 (5th Cir. 1963), affg. T.C. Memo. 1962-19. 10 The parties stipulated to the fact that 11 Petitioner Rudolph Buriani had $94,764 of gambling 12 winnings and $134,179 of gambling losses, and that 13 Petitioner Norma Jean BurianÍ had $3910 of gambling 14 winning , and $43, 989 of gambling losses in 2009. 15 Petitioner must include $94,764 of gambling income 16 17 18 19 received by Rudolph Buriani on their 2009 joint return. Petitioners are also entitled to a corresponding Schedule A gambling loss deduction of $94,764 for Rudolph Buriani's losses in 2009. 20 Similarly, Petitioners must include $3910 of gambling 21 22 23 24 25 income received by Norma Jean Buriani on their 2009 joint return. Petitioners are also entitled to a correspènding Schedule A gambling loss deduction of $3910 in 2009. Section 61(a) (4) includes interest in a 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 taxpayer's gross income. The parties stipulated to the fact that Petitioners received $7980 of interest income from the Bureau of Public Debt in 2009. 4 Petitioners failed to. report such income on their 5 6 7 joint return. Such income must be included as income on Petitioners' 2009 joint return. Thus we sustain Respondent's determination 8 with respect to the interest income from Bureau of 9 Public Debt. 10 11 12 13 14 15 16 17 18 19 Respondent also determined that Petitioners are liable for the accuracy-related penalty under section 6662(a) for 2009. Section 6662(a) and (b) (2) imposes a 20 percent accuracy-related penalty upon any underpayment of tax resulting from a substantial understatement of income tax. An understatement is ·suba-t-a-m-t-i,s-1 if it exceeds the greater of 10 percent of tax required to be shown on the return, or $5000. Sec. 6662 (d) (1) (A). Respondent bears the burden of production 20 with respect to Petitioners' liability for the 21 22 23 24 25 accuracy-related penalty determined in the notice of deficiency and must therefore produce evidence that it is a propriate to impose that penalty. See sec. 7491(c) see also Higbee v. Commissioner, 116 T.C. 438, 446 (2001). 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 Petitioners did not accurately report their income on their 2009 federal income tax return, as they failed to include ??420 of interest income, and failed to include $44-;t/t of gambling income while taking a corresponding deduction for gambling losses. Thus Respondent calculated that Petitioners understated their tax liability by $37,139. 8 Petitioners claimed a refund of $9333 on their 2009 9 return. Thus the amount of the understatement is 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 substantial, because it exceeded the greater of (1), 10 percent of the tax required to be shown on the return for the taxable year, or (2), $5000. Consequently, respondent has satisfied his burden of production. The accuracy-related penalty is not imposed, however, with respect to any portion of the underpayment of tax if the taxpayer can establish that he acted with reasonable cause and in good faith. Sec. 6664 (c) (1). Petitioners have not made any argument with respect to whether they acted with reasonable cause and in cjood faith, and therefore we hold them liable for the accuracy-related penalty under section 6662 (a) for 2009. In reaching these holdings, the Court has 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 considered all arguments made, and to the extent not mentioped, concludes that they are moot, irrelevant, or without merit. To reflect the foregoing, decision will be entered for Respondent . This concludes the Court's oral findings of facts and opinion. (Whereupon, at 10 : 30 a . m. , the above- entitled matter was concluded.) 1 2 3 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