TAX COURT OPINION

Case: Carrie Rae Eldridge
Docket Number: 14744-18
Judge: Marvel
Opinion Type: bench
Filed: 12/19/2019
Pages: 12

17 CLC UNITED STATES TAX COURT WASHINGTON, DC 20217 CARRIE RAE ELDRIDGE, Petitioner(s), v. ) ) ) ) ) Docket No. 14744-18. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit to petitioner and to respondent a copy of the pages of the transcript of the proceedings of the above case before Judge L. Paige Marvel at San Diego, California, on November 6, 2019 containing the Court's oral findings of fact and opinion. In accordance with the oral findings of fact and opinion, an appropriate decision will be entered. (Signed) L. Paige Marvel Judge Dated: Washington, D.C. December 19, 2019 SERVED Dec 20 2019 RECEIVED IN THE UNITED STATES TAX COURT DRC In the Matter of: CARRIE RAE ELDRIDGE, Petitioner, ) ) ) ) Docket No. 14744-18 ) ) v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) Pages: 1 through 11 Place: San Diego, California Date: November 6, 2019 73) 406-2250 j operations4Þescriberuwt j wwwascibers.net IN THE UNITED STATES TAX COURT In the Matter of: CARRIE RAE ELDRIDGE, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, ) ) ) Docket No. 14744-18 ) ) ) ) ) ) Respondent. ) Federal Building 880 Front Street Room 4228, 4th Floor San Diego, California 92101-8828 November 6, 2019 The above-entitled matter came on for bench opinion, pursuant to notice at 11:45 a.m. BEFORE: HONORABLE L. PAIGE MARVEL Judge APPEARANCES: For the Petitioner: No Appearance For the Respondent: No Appearance 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 cribers 973)406-2250loperatiens®esotbers.net|www.escribers.net 3 1 2 3 4 5 6 8 9 Bench Opinion by Judge L. Paige Marvel November 6, 2019 Carrie Rae Eldridge v. Commissioner Docket No. 14744-18 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. 10 This bench opinion is made pursuant to the 11 authority granted by section 7459(b) of the Internal 12 Revenue Code of 1986 (Code) as amended and Rule 152 of the 13 14 Tax Court Rules of Practice and Procedure. Unless otherwise indicated, subsequent section references in this 15 bench opinion are to the Code as amended in effect for the 16 year at issue, and Rule references are to the Tax Court 17 Rules of Practice and Procedure. Some monetary amounts 18 19 have been rounded to the nearest dollar. Petitioner Carrie Rae Eldridge appeared pro se. 20 Heather K. McCluskey appeared on behalf of respondent. 21 Respondent determined an income tax deficiency 22 of $4,630 for petitioner's 2015 tax year. The issues for 23 decision are: (1) whether petitioner received unreported 24 25 income of $49,012 in tax year 2015; (2) whether petitioner is entitled to claim the American Opportunity Tax Credit i.cábers 7334062250|operations@escribets.net jwww.escribersmet under section 25A; and (3) whether petitioner is liable for a penalty under section 6673 for asserting frivolous 4 or groundless positions. This Court has jurisdiction because petitioner received a valid notice of deficiency and timely petitioned this Court. Monge v. Commissioner, 93 T.C. 22, 27 (1989). , Findings of Fact yome of the facts have been stipulated, and the stipulation of facts is incorporated herein by this reference. Petitioner resided in California when she 1 2 3 4 5 6 7 8 9 10 11 12 petitioned this Court. 13 14 15 16 During 2015, petitioner worked for. Jeffrey H. Lind, DMD (Lind), and Malcolm J. Boykin, DDS, Inc. (Boykin). In 2015 petitioner received wages of $40,674 and $8,338 from Lind and Boykin, respectively. Lind and 17 Boykin withheld taxes in the amounts of $3,068 and $387, 18 respectively. Both employers issued to petitioner Forms 19 W-2, Wage and Tax Statement, for 2015, reporting the 20 21 22 23 24 25 amount of wages and tax withholding. Petitioner filed a timely Form 1040, U.S. Individual Income Tax Return, for 2015 on which she claimed a refund of $5,379. On that return, petitioner failed to report her wage income of $49,012, and she claimed the American Opportunity Tax Credit under section cdbes (97334062250lopention5@esaibers.netlwww.esenbers.net 25A. 5 Petitioner's 2015 return, which claimed a refund, was selected for examination; the refund she claimed on the return was frozen. At some point during the examination, petitioner submitted to the Internal Revenue Service (IRS) an amended tax return for 2015 but the IRS did not file or process it presumably because it asserted frivolous positions. Following the examination, the IRS mailed a notice of deficiency dated April 25, 1 2 3 4 5 6 7 8 9 10 2018, to petitioner, which proposed an income tax 11 deficiency of $4,630. In the notice, the IRS increased 12 petitioner's income to reflect the wage·income reported by 13 14 her employers on Forms W-2 that she did not report on her 2015 return and disallowed the American Opportunity Tax 15 Credit that she claimed on her 2015 return but did not 16 17 18 substantiate. On July 30, 2018, petitioner timely petitioned this Court for redetermination of her deficiency. In the 19 petition, petitioner did not dispute any of the specific 20 adjustments to income and credits; she only challenged 21 22 23 24 25 respondent's statutory authority to determine a tax liability against her. I. Unreported Income Discussion Ordinarily, the taxpayer has the burden of Cribers $73)406-22501operations@escribers.net]www.escribers.net proving that the Commissioner's determinations in the notice of deficiency are in error. Rule 142(a). The U.S. Court of Appeals for the Ninth Circuit, to which an appeal 6 in this case would lie absent a stipulation to the contrary, see sec. 7482(b)(1)(A), has held that for the presumption of correctness to attach to the notice of deficiency in unreported income cases, the Commissioner must establish "some evidentiary foundation" connecting the taxpayer with the income-producing activity, see 1 2 3 4 5 6 7 8 9 10 Weimerskirch v. Commissioner, 596 F.2d 358, 361-362 (9th 11 Cir. 1979), rev'g 67 T.C. 672 (1977), or demonstrating 12 that the taxpayer actually received unreported income, 13 Edwards v. Commissioner, 680 F.2d 1268, 1270-1271 (9th 14 Cir. 1982) (holding that the Commissioner's assertion of a 15 deficiency is presumptively correct once some substantive 16 evidence is introduced demonstrating that the taxpayer 17 18 19 received unreported income). If the Commissioner introduces some evidence that the taxpayer received unreported income, the burden shifts to the taxpayer, who 20 must establish by a preponderance of the evidence that the 21 deficiency was arbitrary or erroneous. See Hardy v. 22 Commissioner, 181 F.3d 1002, 1004 (9th Cir. 1999), aff'g 23 T.C. Memo. 1997-97. 24 25 The record amply demonstrates that, during the year at issue, petitioner was employed by Lind and Boykin, c F Cribers $73) 406-2250l opentions@esce iters.ne t | wwwascribers,net and received wages in the amounts of $40,674 and $8,338, respectively. Accordingly, the burden of proof shifted to 7 petitioner to prove that respondent's adjustments in the notice of deficiency were arbitrary or erroneous. Section 61(a) defines gross income as "all income from whatever source derived" including compensation paid for services. Although petitioner bore the burden of proving that respondent's determinations in the notice of deficiency are incorrect, she offered no credible evidence challenging the amounts of the adjustments. Instead, she argued only tiresome and frivolous legal theories challenging respondent's 1 2 3 4 5 6 7 8 9 10 11 12 13 authority to determine petitioner's income tax liability 14 and his reliance on third-party information returns. 15 specifically, petitioner seems to contend, inter alia, 16 17 18 19 that: (1) the information returns relied upon by respondent in determining her deficiency were invalid and not verified independently; (2) respondent exceeded statutory authority in adjusting her income; (3) she is 20 not a taxpayer; (4) she is -not subject to tax because she 21 22 23 24 25 is not a public officer; and (5) she is not a citizen of the United States. We need not linger on these spurious and shopworn theories, other than to note that petitioner--not respondent--bears the burden of proof in this proceeding, cribers fM33406-2250|opentions@escribers.net(www.escriben.net 8 and she has introduced no credible evidence in support of her position. As to her legal arguments, they have consistently been rejected by the Internal Revenue Service (IRS) and by many tribunals. The IRS has compiled these opinions in its publication, The Truth About Frivolous Tax Arguments, readily available on the IRS's website at www.1rs .gov/pub/taxpros/frivolous truth march 2018.pdf. We need not address petitioner's frivolous arguments further. As was aptly stated by the Court of Appeals in 1 2 3 4 5 6 7 8 9 10 Crain v. Com'missioner, 737 F.2d 1417, 1417 (5th Cir. 11 12 13 1984), "We perceive no need to refute these arguments with somber reasoning and copious citation of precedent; to do so might suggest that these arguments have some colorable 14 merit." They do not. Petitioner has offered only 15 16 17 18 19 20 frivolous and groundless arguments. We therefore sustain respondent's determinations with respect to the unreported income. II. American Opportunity Tax Credit The American Opportunity Tax Credit provides for a credit against tax equal to 100% of so much of the 21 qualified tuition and related expenses paid by the 22 23 24 25 taxpayer during the taxable year as does not exceed $2,000, plus 25% of such expenses so paid as exceeds $2,000 but does not exceed $4,000. Sec. 25A(b) (1). Petitioner failed to offer any credible evidence EllEER (973)406-2250|operations@escribetsmet!www.escdbersnet 9 that she incurred qualified tuition and related expenses in 2015. Petitioner has therefore failed to substantiate her entitlement to the American Opportunity Tax Credit for 2015. Accordingly, we sustain respondent's disallowance of petitioner's claimed American Opportunity Tax Credit for tax year 2015. III. Section 6673 Penalty Section 6673(a) (1) authorizes the Court to require a taxpayer to pay to the United States a penalty 1 2 3 4 5 6 7 8 9 10 not to exceed $25,000 whenever it appears that the 11 12 taxpayer's position in a proceeding is frivolous or groundless. Sec. 6673(a)(1) (B). It is within our 13 discretion whether to impose the section 6673 penalty. 14 For example, we have often imposed the penalty in cases 15 where taxpayers have persisted in presenting arguments in 16 administrative and judicial proceedings after fair warning 17 that those arguments were frivolous. See Burke v. 18 Commissioner, 124 T.C. 189, 197 (2005); Rodriguez v. 19 Commissioner, T.C. Memo. 2009-92; Ioane v. Commissioner, 20 21 22 23 T.C. Memo. 2009-68, aff'd, 442 F. App'x 269 (9th Cir. 2011). we repeatedly warned petitioner that if she advanced frivolous arguments in this case, we may impose a 24 penalty under section 6673. Specifically, we warned 25 petitioner before, during, and after trial. Petitioner cribers (973)406-2250loperation5@esciben.ner|www.escriber3net 10 nevertheless steadfastly refused to abandon the arguments we warned her against pursuing. Rather than present a case contesting the merits of respondent's determinations in the notice of deficiency--either by providing evidence that some portion of moneys received or by providing substantiation in support of her claimed American Opportunity Tax Credit--petitioner chose to continue headlong with her frivolous arguments. This is unacceptable. Under the circumstances, we exercise our 1 2 3 4 5 6 7 8 9 10 discretion and impose a penalty pursuant to section 11 6673(a)(1) of $3,000. This amount reflects the numerous 12 warnings petitioner elected to ignore, and is sufficient 13 in amount to serve as a deterrent against petitioner 14 asserting frivolous and groundless arguments that waste 15 this Court's valuable time and resources. 16 17 18 We have considered the remaining arguments made by the parties and, to the extent not discussed above, conclude those arguments are irrelevant, moot, or without 19 merit. 20 To reflect the foregoing, an appropriate 21 decision will be entered. 22 THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT 23 AND OPINION IN THIS CASE. 24 25 (Whereupon, at 12:00 p.m., the above-entitled matter was concluded.) [9733406-2250lopentions escribersnettwww.escibersnet --I 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 CERTIFICATE OF TRANSCRIBER AND PROOFREADER 11 CASE NAME: Carrie Rae Eldridge v. Commissioner DOCKET NO.: 14744-18 We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 11 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Deborah Gonzalez on November 6, 2019 before the United States Tax Court at its session in San Diego, CA, in accordance with the applicable provisions of the current verbatim reporting contract of the Court and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording. Meribeth Ashley, CET-507 Transcriber 11/12/19 Date Traci Fine, CDLT-169 Proofreader 11/13/19 Date cribers (973)406-2250}operations@esedbersaetlwww.escribersaet