TAX COURT OPINION

Case: Teresa D. Moss Kelnhofer
Docket Number: 4713-14S
Judge: Goeke
Opinion Type: bench
Filed: 05/18/2015
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 ROBERT C. KELNHOFER, III & TERESA D. MOSS KELNHOFER, ET AL., Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 20921-13S, ) ) ) ) 4713-14S. ORDER 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 petitioners and to respondent a copy of the pages of the transcript of the trial in the above cases before Judge Joseph Robert Goeke at San Francisco, California, on May 1, 2015, containing his oral findings of fact and opinion rendered at the trial session at which these cases were heard. In accordance with the oral findings of fact and opinion, a decision in each case will be entered under Rule 155, Tax Court Rules of Practice and Procedure. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. May 18, 2015 SERVED MAY 2 0 2015 Capital Reporting Company 3 1 2 Bench Opinion by Judge Joseph Robert Goeke May 1, 2015 3 Robert C. Kelnhofer, III & Teresa D. Moss Kelnhofer, 4 et al., v. Commissioner, 5 Consolidated 6 7 Docket Nos. 20921-13S; 4713-14S THE COURT: The Court has decided to render 8 Oral Findings of Fact and0pinion in this case, and 2 9 the following represents the Court's Oral Findings of 10 Fact and Opinion. The Oral Findings of Fact and 11 Opinion shall not be relied upon as precedent in any 12 13 14 15 16 17 18 19 20 21 22 23 24 25 other case. This case was heard pursuant to the provisions of Internal Revenue Code section 7463 in effect when the petition was filed. Pursuant to section 7463(b), the decision to be entered is not reviewable by any other court. The present dockets are before the Court based upon timely filed petitions after Respondent issued Notices Of Deficiency. There are three distinct issues in these dockets which have been consolidated for purposes of this opinion, although they were not consolidated for purposes of trial. The first is whether Robert C. Kelnhofer is 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 an Innocent Spouse for the taxable year 2008, pursuant to Internal Revenue Code section 6015(c). The second issue is what is the basis of 4 Petitioner Teresa D. Moss Kelnhofer for purposes of 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 net operating losses claimed relative to a pharmacy business on her joint return with Mr. Kelnhofer for 2008 and the separate returns she filed for the years 2009 through 2012. Finally, Respondent asserted the addition to tax under section 6662(a) for 2008, and under section 6651(a)(1) for 2010. Regarding the addition to tax under section 6651(a)(1) for 2010, Petitioners offered no evidence to rebut Respondent's determination which is based upon facts stipulated in the record, and we sustain the $371 addition to tax for 2010. First addressing the question of the status of Robert as an Innocent Spouse in 2008, we find, based upon the facts in the record, that 20 Mr. Kelnhofer did participate in the pharmacy 21 22 23 24 25 business in 2008 such that he was aware of the financial losses associated with that business, and that despite his testimony that he was forced to sign the return, we believe he should be held responsible for the taxes related to the year 2008, if there are 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 any deficiencies after our determination relative to basis, because we find that there was actual knowledge, pursuant to section 6015(c), and that he should not be deemed to be an Innocent Spouse in 2008. Regarding the question of basis, parties have stipulated a determination of basis which isolates the amounts in dispute for the years in question. There was significant testimony, and the focus of that testimony was on a note and a loan received by Petitioner Teresa Moss Kelnhofer from her father in the amount of $178,119. We believe that she testified credibly and that the documentation supports that she did receive a loan from her father in 2008 which was used in the pharmacy business in that year, and in subsequent years, until it was exhausted. Obviously there's been limited, if any, repayment of that loan, and it is possible that there may be forgiveness-of-indebtedness income to the 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Petitioner in the future. However, we determine that 22 23 24 25 there was a legitimate loan in 2008 and that loan should be accepted as basis. There are two other basis items which appear to be in dispute based upon the record. One 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 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 is an $8,446.68 loan from the then shareholders to the corporation in 2006. Based upon Respondent's records and the testimony at trial, we believe this amount should be allowed as basis, beginning in 2006. In addition, there is a $25,000 item in 2007 which was generated, based upon the testimony, as a result of a mortgage obtained by both of the Kelnhofers in 2007 and then contributed to the pharmacy business. We believe the testimony in that regard was credible and we believe the $25,000 should be added to basis in 2007. We note that these three basis items will not provide sufficient basis to the Petitioner in order for her to sustain losses through all the years in question, and we rely upon the parties to submit a Rule 155 computation to determine the actual amount of the deficiencies generated by our determinations relative to basis. Finally, regarding the section 6662(a) penalty for the year 2008. We think Petitioners' position on the return was reasonable and that the addition to tax is not appropriate after the application of section 6664(c)(1) because we believe the claimed losses were made in good faith in the year 2008. 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company This concludes the Court's Oral Findings Of 7 Fact And Opinion in this case. (Whereupon, at 11:25 a.m., in the above- entitled matter was concluded.) 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