TAX COURT OPINION

Case: William C. Carron
Docket Number: 16049-09S
Judge: Colvin
Opinion Type: bench
Filed: 05/04/2010
Pages: 9

UNITED STATES TAX COURT WASHINGTON , DC 2021 7 WILLIAM C . CARRON, Petitioner , v . ) Docket No . 16049-09 S COMMISSIONER OF INTERNAL REVENUE, Respondent . ORDER . Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s 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 of this case before Judge Haines at Seattle Washington on April 12, 2010, containing his 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 for respondent . (Signed) Harry A. Haines Judge Dated : Washington, D .C . May 4, 2010, SERVED,. MAY - 5 2010 A 3 1 Bench Opinion By Judge Harry A . Haines April 15, 201 0 2 Carron v . Commissioner Docket No . : 16049-09 S 3 THE COURT : The Court has decided to render 4 oral findings of fact and opinion in this case and the 5 following represents the Court's oral findings of fact 6 and opinion . The oral findings of fact and opinio n 7 shall not be relied upon as precedent in any other 8 case . 9 On June 8, 2009, respondent issued separate 10 notices of deficiency to petitioner for 2003, 2004 , 11 2005, and 2006 (years at issue) based upon substitutes 12 for returns prepared by the Internal Revenue Service 13 pursuant to section 6020(b) . The 6020(b) return s 14 allowed the standard deduction . On July 1, 2009 , 15 petitioner filed a petition disputing the notices of 16 deficiency, and on January 28, 2010, filed Form 1040, 17 U .S . Individual Tax Returns, for each of the years at 18 issue claiming medical expenses as itemize d 19 deductions . Respondent has accepted the income tax 20 returns filed by petitioner which reduced th e 21 deficiencies for 2003 to $2,541, 2004 to $2,335, 2005 22 to $2,376 and 2006 to $3,234 . 23 However, respondent is asserting additions 24 to tax for failure to timely file a return unde r 25 section 6651(a)(1) and for failure to pay the amounts Heritage Reporting Corporation (202) 628-4888 4 1 of tax shown on his return under section 6651(a)(2) 2 for each of the years at issue . Respondent is also 3 asserting additions to tax for underpayment o f 4 estimated tax under section 6654 for 2005 and for 5 2006 . 6 The issues for decision are : (1 ) Whether 7 petitioner is liable for the section 6651(a)(1 ) 8 failure to file addition to tax and the sectio n 9 6651 ( a)(2) failure to pay addition to tax for the tax 10 years at issue, and (2) whether petitioner is subject 11 to the estimated tax addition under section 6654(a) 12 for 2005 and 2006 . 13 Petitioner is an individual who maintained 14 his legal residence in the state of Washington at the 15 time his petition was filed in this case . 16 If a taxpayer assigns error to th e 17 Commissioner ' s determination that the taxpayer is 18 liable for an addition to tax or penalty, th e 19 Commissioner bears the burden, under section 7491(c), 20 of producing evidence that the addition to tax o r 21 penalty applies . See Swain v . Commissioner , 118 T .C . 22 358, 364 - 365 (2002 ) ; Higbee v . Commissioner , 116 T .C . 23 438, 446 ( 2001 ) . In order to meet his burden o f 24 production, the Commissioner must come forward with 25 sufficient evidence that it is appropriate to impose Heritage Reporting Corporatio n (202) 628-4888 5 1 the relevant addition to tax or penalty . Higbee v . 2 Commissioner , supra at 446 . Once the Commissione r 3 meets his initial burden of production, the taxpayer 4 must come forward with persuasive evidence that the 5 Commissioner's determination is incorrect . Id . at 6 447 . 7 Section 6651(a)(1) imposes an addition to tax for failure to file a timely Federal income ta x 9 return and section 6651(a)(2) imposes an addition to 10 tax for failure to pay the amount of tax shown on a 11 return unless it is shown that such failures are due 12 to reasonable cause and not due to willful neglect . 13 See United States v . Boyle , 469 U .S . 241, 245 (1985) . 14 A failure to file a timely return is due to reasonable 15 cause if the taxpayer exercised ordinary business care 16 and prudence but nevertheless was unable to file the 17 return within the prescribed time . See sec . 301 .6651- 18 1(c)(1), Proceed . & Admin . Regs . Willful neglec t 19 means a conscious, intentional failure to file or 20 reckless indifference toward filing . See United 21 States v . Boyle , supra at 245 . 22 Petitioner admits that he did not fil e 23 returns for the years at issue until January 28, 2010, 24 and has not paid the taxes reported on his returns to 25 date . These admissions satisfy respondent's burden of Heritage Reporting Corporatio n (202) 628-4888 6 1 production under section 7491(c) and establis h 2 petitioner's liability for the section 6651(a)(1) and 3 6651(a)(2) additions to tax unless petitioner can 4 prove that the failure to file a timely return and to 5 pay was due to reasonable cause and not due to willful 6 neglect . Willful neglect is not present in this case . 7 Therefore, we must determine whether petitioner ha d 8 reasonable cause for the late filing of the returns 9 and nonpayment . 10 Petitioner claimed in a letter to an IRS 11 Appeals office dated December 14, 2009, that "[t]h e 12 IRS problem stems from a phone call I had with the IRS 13 in 2001 regarding disability income . I believe th e 14 confusion occurred because I initially had a private 15 policy which expired as well as an employer provided 16 policy . I was told by the IRS agent not to worry 17 about the disability income and my medical expenses 18 were so much there wouldn't be any concern . I never 19 heard anything more until April, 2009, when I was told 20 of a levy for tax year 2002 . I called the IRS and 21 finally straightened out that the initial privat e 22 disability policy wasn't taxable but the employr [sic] 23 based policy was ." Petitioner did not produce th e 24 employee who offered him tax advice at trial or show 25 that he or she had the authority to make such a Heritage Reporting Corporatio n (202) 628-4888 1 statement or had been presented all of the fact s 2 . available . See Fonte v . Commissioner , T .C . :Memo 1988- 3 227 ; Lust v . Commissioner , T .C . Memo . 1975-16 . 4 Petitioner likewise failed to offer any other evidence 5 to support such statements or to show that continued 6 reliance on such a statement was reasonable in ligh t 7 of the year-to-year changes in both his income and 8 medical expenses . 9 Petitioner is a physician whose work 10 primarily involved research in HIV . He was severely 11 injured in the 1990's and, after many operations, was 12 never able to go back to work due to extreme bone pain 13 and fatigue . Petitioner claims that the severity of 14 his illness affected his ability to file the returns . 15 The Court has found reasonable cause where 16 the taxpayer experiences an illness or incapacity that 17 prevents the taxpayer from filing his or her tax 18 return . See, e .g ., Harris v . Commissioner , T .C . Memo . 19 1969-49 (reasonable cause found where the taxpayer's 20 activities were severely restricted, and the taxpayer 21 was in and out of hospitals because of various severe 22 medical ailments) . On the other hand, the Court has 23 not found reasonable cause where the taxpayer does not 24 timely file but is able to continue his or he r 25 business affairs despite the illness or incapacity . Heritage Reporting Corporatio n (202) 628-4888 8 1 See, e .g ., Judge v . Commissioner , 88 T .C . 1175, 1189- 2 1191 (1987) (no reasonable cause found where the 3 taxpayer had a long history of delinquent filing of 4 returns and the taxpayer was actively involved in 5 preparing and executing business-related documents 6 despite illness during the years at issue) . 7 While we do not trivialize the medica l 8 problems facing petitioner, the record establishes 9 that in 2001 he did inquire into the filing o f 10 returns . The petitioner chose not to file timely 11 returns for the years at issue not because of his 12 medical problems, but because of his incorrec t 13 assumption that his disability income was not taxable 14 and medical expenses would offset any other income 15 rendering income tax returns unnecessary . We have 16 held that a mistaken belief that no tax is due is not 17 sufficient to establish reasonable cause . Se e 18 19 Shoemaker v . Commissioner , 38 T .C . 192, 202 (1962) ; French v . Commissioner , T .C . Memo . 1991-196 . 20 Petitioner's mistakes as to, or ignorance of, the law 21 do not constitute reasonable cause which would relieve 22 him of liability for the additions to tax . Joyce v . 23 Commissioner , 25 T .C . 13, 15 (1955) . 24 Section 6654 (a) imposes an addition to tax 25 on an individual taxpayer who underpays his estimated Heritage Reporting Corporatio n (202) 628-4888 9 1 tax . Unless a statutory exception applies, the 2 section 6654(a) addition to tax is mandatory, see sec . 3 6654(a), (e) ; Recklitis v . Commissioner , 91 T .C . 874, 4 913 (1988), and section 6654 does not contain a 5 general exception for reasonable cause or absence of 6 willful neglect, see Wheeler v . Commissioner , 127 T .C . 7 200, 212 (2006) . None of the statutory exception s 8 under section 6654(e) applies . To satisfy his burden 9 of production under section 7491(c), responden t 10 established that petitioner was required to file 11 Federal income tax returns for 2005 and 2006 ; that 12 petitioner did not file such returns ; and tha t 13 petitioner did not make any other tax payments fo r 14 2005 and 2006 . This evidence is sufficient to satisfy 15 respondent's burden of production establishing tha t 16 petitioner was required to make quarterly installments 17 of the income taxes due for 2005 and 2006 unde r 18 section 6654 and that petitioner underpaid hi s 19 estimated tax liabilities for such years . See Wheeler 20 v . Commissioner , supra . 21 In reaching our holdings, we have considered 22 all arguments made, and, to the extent not mentioned, 23 we conclude that they are moot, irrelevant, or without 24 merit . 25 To reflect the foregoing, the Court holds Heritage Reporting Corporation (202) 628-4888 10 1 that the additions to tax under section 6651(a)(1) an d 2 section 6651(a)(2) apply for the years at issue and 3 the addition to tax under section 6654 applies for 4 2005 and 2006 . After reflecting concessions b y 5 respondent as to the reduced deficiencies, decision 6 will be entered for respondent . 7 This concludes the Court's oral findings of 8 facts and opinion . 9 (Whereupon, at 3 :39 p .m ., the bench opinion 10 in the above-entitled matter was concluded . ) 11 12 13 14 15 16 17 18 19 20 2 1 22 2 3 24 25 Heritage Reporting Corporation (202) 628-4888