TAX COURT OPINION

Case: Emil P. Tolotti, Jr.
Docket Number: 285-15
Judge: Kerrigan
Opinion Type: bench
Filed: 12/30/2015
Pages: 10

UNITED STATES TAX COURT WASHINGTON, DC 20217 EMIL P. TOLOTTI, JR., Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 285-15. ) ) ) ) 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 petitioner and respondent a copy of the pages of the transcript of the trial in the above case before Judge Kathleen Kerrigan at Reno, Nevada, on December 15, 2015, containing her oral findings of fact and opinion rendered at the conclusion of the trial. In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155, Tax Court Rules of Practice and Procedure. (Signed) Kathleen Kerrigan Judge Dated: Washington, D.C. December 30, 2015 SERVED Jan 04 2016 1 2 3 4 5 6 7 8 9 10 11 12 13 15 16 17 18 19 20 21 22 23 24 25 Capital Reporting Company 3 Bench Opinion by Judge Kathleen Kerrigan December 15, 2015 Emil P. Tolotti, Jr v. Commissioner Docket No. 285-15 The Court has decided to render in this case the following as its oral findings of facts and opinion, which shall not be relied upon as precedent in any other case. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code and Rule 152 of the Tax Court Rules of Practice and Procedure. Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the h.ax] year t issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. By notice of deficiency dated September 29, 2014, the Internal Revenue Service (IRS) determined a deficiency in the Federal income tax of petitioner for tax year 2011, along with additions to tax under section 6651(a)(1) and (2), and section 6654. Respondent determined that petitioner failed to report $69 of dividends, $17 of interest, and $50,697 of distributions from pensions for tax year 2011. Respondent conceded that $32,004 of petitioner's distributions from pensions were non-taxable. The 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 9 issues for consideration are: (1) whether petitioner is liable for unreported income for tax year 2011; and (2) whether petitioner is liable for additions to tax under 6651(a)(1), 6651(a)(2), and 6654(a) for tax year 2011. Trial of this case was conducted on December 14, 2015, in Reno, NV. Petitioner represented himself and Adam W. Dayton represented respondent. The parties offered exhibits which were admitted. 10 Petitioner was the only witness. We find the 11 12 13 14 15 16 17 18 19 20 21 22 following facts: FINDINGS OF FACT Petitioner resided in Nevada when he filed his petition. Petitioner failed to file his 2011 Federal income tax return, pay estimated tax, and pay the tax due. Petitioner earned income from dividends, interest, and distributions from pensions. Pursuant to section 6020(b), respondent prepared a substitute for return for 2011 using third-party information to calculate petitioner's unreported information. Respondent utilized Form 2866, Certificate of 23 Official Record, which contained a computer-generated 24 25 IRS "Wage and Income Transcript" reflecting petitioner's receipt of several 1099 Forms. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 In the notice of deficiency respondent determined that petitioner's distributions from pensions totaled $50,697. Respondent also determined that petitioner had unreported dividend income of $69 and unreported interest income of $17. Before trial, respondent conceded that the $32,004 of disability/ retirement income received by petitioner was non- taxable. Against these incomes, respondent allowed petitioner a standard deduction of $5,800, and exemption deductions of $3,700. At trial petitioner argued that the dividends, interest, and distributions from pensions he received were not taxable income. OPINION Generally, the Commissioner's determination in a notice of deficiency are presumed correct, and a taxpayer bears the burden of proving those determinations are incorrect. Rule 142(a); Welch v. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Helvering, 290 U.S. 111, 115 (1933). Petitioner does 20 21 22 23 24 not contend that the burden of proof should be shifted to respondent under section 7491(a), and the record does not suggest any basis for a shift. Pursuant to section 6201(d), if, in any court proceeding, a taxpayer asserts a reasonable dispute 25 with respect to the income reported on an information 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 return and the taxpayer has fully cooperated with the IRS, then the IRS has the burden of producing reasonable and probative information in addition to the information return. Petitioner has not asserted a reasonable dispute with respect to any item of income reported by the payors on the Forms 1099. Section 6201(d) does not apply and respondent is entitled to rely on the Forms 1099 to establish unreported income. I. Unreported Income Gross income includes "all income from whatever source derived", including dividends, interest, and the distributions from retirement pensions. See sec. 61(a). The United States Supreme Court has held consistently that "gross income" was meant to bear "'the full measure of the taxing power.'" Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 429 (1955) (quoting Helvering v. Clifford, 309 U.S. 331, 334 (1940)). The liability for the payment of income tax is on the individual earning the income. Lucas v. Earl, 281 U.S. 111, 114-115 (1930). The taxpayer has the burden of demonstrating that his accession to 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 wealth is exempt from taxation. Commissioner v. 24 25 Glenshaw Glass Co., supra at 430. Petitioner, a resident of Nevada, is a taxpayer 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company I 7 1 2 3 4 5 6 7 8 9 subject to Federal income tax who is obliged to file Federal income tax returns and pay Federal income tax on his income, specifically including dividends, interest and distributions from pensions. See secs. 1,61(a), 6012(a), 7701(a)(1). Respondent determined that for 2011 petitioner received and failed to report gross income in the form of dividends, interest and distributions from pensions. These dividends, interest and 10 distributions from pensions are not excludable from 11 12 13 14 15 16 17 his gross income. Petitioner argues that the dividends, interest, and distributions from pensions are not taxable income. He also argues that Congress has not enacted a law making it mandatory to either file a tax return or pay Federal income tax. Petitioner further argues that respondent violated the United States 18 Constitution by creating a substitute fo.r return for 19 20 21 22 23 24 25 tax year 2011. Petitioner's arguments in this case are frivolous tax-protester arguments that have been rejected by this and other courts. See Wilcox v. Commissioner, 848 F.2d 1007 (9th Cir. 1998), aff'g T.C. Memo. 1987-225. Petitioner did not make a valid argument that his dividends, interest, and 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 1 2 distributions from pensions are excludable from gross income because of any specific provision of law. See 3 Rodriguez v. Commissioner, T.C. Memo. 2009-92. We do 8 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 not need to discuss petitioner's frivolous and groundless arguments. See Crain v. Commissioner, 737 F.2d 1417 (5th Cir. 1984). To do so might suggest that these arguments have some colorable merit. See id. We therefore sustain respondent's determination that petitioner's $69 of dividends, $17 of interest, and $18,693 of distributions from retirement pensions constitute gross income for tax year 2011. II. Additions to Tax Respondent determined that petitioner is liable for additions to tax for tax year 2011 under section 6651(a)(1), for failure to timely file a valid return; section 6651(a)(2), for failure to timely pay tax shown on a return; and section 6654, for failure to pay estimated tax. The Commissioner bears the burden of production with respect to a taxpayer's liability for additions to tax. See sec. 7491(c); Higbee v. Commissioner, 116 T.C. 438, 446 (2001). Once the Commissioner carries the burden of production, the taxpayer must come forward with persuasive evidence that the Commissioner's determination is incorrect or that the taxpayer had 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company an affirmative defense. See Higbee v. Commissioner, 9 supra at 446-447. A. Failure to File Section 6651(a) (1) authorizes the imposition of an addition to tax for failure to timely file a return unless it is shown that such failure is due to reasonable cause and not due to willful neglect. See 1 2 3 4 5 6 7 8 United States v. Boyle, 469 U.S. 241, 245 (1985). A 9 failure to timely file a Federal income tax return is 10 11 12 13 14 15 16 17 due to reasonable cause if the taxpayer exercised ordinary business care and prudence but nevertheless was unable to file the return within the prescribed time, typically for reasons outside the taxpayer's control. See McMahan v. Commissioner, 114 F.3d 366, 369 (2d Cir. 1997), aff'g T.C. Memo. 1995-547. Petitioner was required to file a return for 2011 and failed to do so. See sec. 6012(a)(1) (A). 18 Accordingly, respondent has carried his burden of 19 20 21 22 23 24 25 producing evidence showing that the addition to tax under section 6651(a)(1) is appropriate. Petitioner failed to introduce any credible evidence showing that he had reasonable cause for failing to timely file his 2011 return. His only arguments against his obligation to file a return (or pay tax) are frivolous. Petitioner is liable for the addition to 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 4 5 6 7 8 tax under section 6651(a) (1). B. Failure to Pay Section 6651(a)(2) imposes an addition to tax for failure to timely pay the amount shown as tax on a return. . Respondent satisfied his burden of production under section 7491(c) by introducing evidence that a substitute for return for 2011 that satisfies the requirements of section 6020(b) was 9 made. See sec. 6020(b). A substitute for return 10 11 12 constitutes "the return filed by the taxpayer" for purposes of determining the amount of an addition to tax under section 6651(a)(2). See sec. 6651(g)(2). 13 Petitioner did not establish that his failure to 14 timely pay was due to reasonable cause and not 15 willful neglect. See sec. 6651(a)(2). Accordingly, 16 17 18 19 20 21 22 23 24 25 petitioner is liable for the addition to tax under section 6651(a)(2). C. Underpayment of Estimated Tax Section 6654(a) imposes an addition to tax for failure to make timely and sufficient payments for estimated tax. For tax year 2011 petitioner failed to file a return and make estimated tax payments. He had an actual tax liability for that tax year and he has not paid. Petitioner also failed to file a return for 2010. Therefore, petitioner's required 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 annual payment for 2011 is 90% of his tax for that . year, as redetermined in this proceeding. See sec. 6654(d)(1)(B). Respondent has satisfied his burden of production. See Wheeler v. Commissioner, 127 T. C. 200, 211 (2006), aff'd, 521 F.3d 1289 (10th Cir. 2008). Section 6654 provides no exception for reasonable cause. See sec. 664-1(e) (3) (B) . Instead, the addition to tax under section 6654 is mandatory unless the taxpayer establishes that one of the exceptions under section 6654(e) applies. Recklitis v. Commissioner, 91 T.C. 874, 913 (1988) . Petitioner has not shown that any of the statutory exceptions under section 6654(e) applies. Accordingly, petitioner is liable for the addition to tax under section 6654. III. Conclusion We sustain the deficiency and additions to tax determined by respondent and a decision will be entered for respondent under Rule 155. This concludes the Court's oral Findings of Fact and 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Opinion in this case. 23 24 25 (Whereupon, at 2:53 p.m., the above- entitled matter was concluded.) 866.488.DEPO www.CapitalReportingCompany.com