TAX COURT OPINION

Case: Thomas Ford & Mary Ellen Kalil
Docket Number: 16024-10S
Judge: Gustafson
Opinion Type: bench
Filed: 12/21/2011
Pages: 24

RMM UNITED STATES TAX COURT WASHINGTON, DC 20217 THOMAS FORD & MARY ELLEN KALIL, Petitioners, Docket No. 16024-10S. COMMISSIONER OF INTERNAL REVENUE, Respondent O R D E R 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 transcript of Gustafson at Washington, D.C., on November 18, 2011, containing his oral of in the above case before Judge David fact and opinion rendered at the pages of the the conclusion the trial findings of the trial. In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155. (Signed) David Gustafson Judge Dated: Washington, D.C. December 21, 2011 SERVED Dec 21 2011 . 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 -3 Bench opinion by Judge David Gustafson Novembe± 18 , 2 011 Kalil v Commissioner Docket No. 16024-10S THE COURT: The Court has decided to render oral Findings of Fact and Opinion in this case . The following represents the Court's oral Findings of Fact and Opinion, which shall not be relied upon as prec,edent in any oth r case. This Bench Opìnion is made pursuant to the authorit.y granted by section. 7459 (b) of the Internal Revenue Code of 19.86 as amended, and Rule 152r of the Tax Court Rules of Practice and . Procedure . By notices of deficiency datåd April 22, 2010, (I:xs. 1-J and 2-J), respondent determined deficiencies in the Federal income tax of petitioners Thomas l'ord Kalil and Mary Ellen Kalil .for the ·years 2005 and 2006, plus penalties and additións to tax. Trial of t is case was conducted on November 16, 2011, in Washington, D.C., and 150th petitior ers, as well as a revenue agent of the Internal Revenue . Service (IRS) testif ied . The parties' Stipulation of Facts was admitted into evidence , along with its Exhibits 1-J through 8-J, and additior al exhibits offered by the Kalils~were admittec into evidence. We find the following facts: Heritáge Reporting Corporatión . (202) 628-4888 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 FINDINGS . Mr. and. Mrb. .Kalil.resided in Virginia when. they fi .ed the petition in this case. Mr. and Mr . Kalil have been married for over 30 years. Mr. alil works as a Federal. employee; he is an attorney but does not practice law. Mrs. Kalil is a registered nurse. During their marriage, they est ablished a routine under whié'h· Mrs ., Kalil assembled documents ecessary for the preparation of their t2.x return, Mr Kalil prepared the return, and Mrs . Kalil mailed th return to the IRS . Ms . Kalil was invólved in an a tomobile accident in 2003, in which she suffered brain injury. Since then she has had, as she testified, "little problems with memory". The Kali ls received taxable income in 2005 and 2006 (Exs. 5 and 6-J); t on the trial record before us, we find that they did not file timely Fedèral income tax rett rns f or thos years . . Third-party payors did file information returns with the TRS eporting their payment of income to the Falils in 2005 and 2006, (Exs. 12-P, 14-P), and hen the .IR$' s matching mechanisms noted the absence of incone tax return reporting that income, it'sent notices |to the Kalils (in March of the following year, about la months after the returns had been due) Heritage Reporting Corporation (l202) 628-4888 . 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 5 telling them that it had no record of their filing returns and asking them to make the f ilings . (Exs . 7 - J, 8-J. We find that as of August 2008 the Kalils had not'filed returns for 2005 and 2006, so the Automatic Substitute for Return (ASFR) unit in the IRS sent them a letter for each yeär (Exs. 12-P, 14 P) asking t hem to submit a return and proposing in the alternat ive, an assessment of tax that the IRS would make on the basis of the thïrd-party payors' informat ion. On Octc5ber 30, 2008 the IRS's Memphis Service Center -- no the .ASF1 unit received from the Kalilé a Form 1040, "U.S. Individual Income Tax Return", for each of the years 2005 añd 2006.. (Exs. 5-J, 6-J.) On each eturn the Kalils reported "Job expenses " on Schedule A - - i . e . , apparent legal expensee (totaling $i9, 291. 76 in 2005 and $42, 897 i36 in 2006) and professional nursing dues and bar dues -- and repc ted non cash charitable contributions on Schedule A and Form 8283 (totaling $25,300 in 2005 and $15, 750 in 2006) . The Forms 8283 indicated that the .contributed noncash property was "documentaries". The returns were undated, and each one bore a handwritten note oñ the bottom .of the signature page that stated, "This is a reconstruction' of the Heritage Reporting Corporation (202) 628-4888 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 origina._ Returns tha were sent in a timely manner. This Submission is b ing made as a -courtesy. in response to the requ st of the IRS. " We find, however, that these 'reconstructed" returns were the first returns that the IRS had received from' the Kalils for 2005 and 006 and that the IRS had received no prior "original 'R turns " . The IRS examined the Kalils returns*for 2005 and 200 ; and on April 22, 2010, the IRS issued the notices of deficiency (Exs. 1-J and.2-J): The notices eflected he IRS s isallowance of the job expenses and the non-cash cha itable contributions and determined the resul ing tax deficiencies and additior.s to tax and penalty. Mr. ahd Mrs. Kalil timely f iled their petition i this CoÜrt on July 14, 2010. '.. . OPINION The IRS's determination is presumed correct, and the taxpayer generally bears the burden to prove any adjt stment to the income the IRS determined and to prove his entitlement to any deductions he claims. . Rule 142 (a) ; Welch v. Helvering,· 290 U..S. 111, 115 (1933) . The Kalils ake three arguments to challenge the IRS'ls deficiency determinations, none of which is availing . Heritage Reportincf Corporation (202) 628-4888 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 7 I. Stütute of limitation The Kalils contend that they filed the timely return for 20 5 in 2006 and a timely return for 2006 in 2007 and.that the statute of limitations for assessment of tax, (section 6501(a), =requ1r1ng assessment "within three years after the return was filed") therefore expired before the IRS issuéd its notices of deficienc on April 22, 2010. As to the 2006 ret urn, it shou d be noted that both the Kalils testified that they believe they obtained extensions to file th return 1 te; .and the IRS's records (Ex. 43-P) conf m that t ey received an extension uritil October 15, 2007. If the 2006 return was filed even just a week after th regular due date -- i.e., if it was filed on any date on or after April 22, 2007 -- then a rotice of def1clency 1ssued April 22, 2010, was within the statute of limitations. More decisive, however, is our f inding that no returns for 2005 ór 2006 were filed before October 2008. The Kalils had the burden to prove the timely filing cf their retu ns, but their oniy evidence was their vague testimon . Neither of them professed to r call the actual mailing of either of the returns but simply insisted that they know they must have mailed them by April 15 or, if they obtained an extension Heritage Reporting Corporation (202) 628-4888 8 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 _(which they think thby did), then before the extended deadlins had lapsed. Mr. Kalil does not profess to have actual personal knowledge of the timely mailings but instead says he believes that his wife mailed them. After_testifying that she ",thought [she] had .mailed t,hem correctl ", she affirmed that, "I know I mailed all the returns" -- but she confesses to memory problems. The Kalils·do not have a copy òf any timely filed rèturn for either year (but only their "reconst.ructed" returns mailed.in October 2008). The Kalils do not have a mailing receipt for a timely return for either ye r. The Kalils thus failed to prove the timely filing of their 2005 and 2006 returns, even if we ignore the IRS's records. Those records, however, do show thit the IRS received no 2005 or 2006 return from .the Kalils until Octòber 20Ò8. With regard to the actions óf public officials and to official records, . we recocnize a presumption of their correctness. Riqqs Nôtl. Corp. & Subs. v. Commissioner, 295 F.3d 16, 20 (D.C. Cir. 2002); see also Webster v. Estelle, 505 F.2d 926, 929-93 (5th Cir. 1974) (."Official records are entitled to a presumption- of regularity"). Such a presumption i not absolute but rather is rebuttable "through clear or specific evidence." Heritage Reporting Corporation (f202) 628-4888 9 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 Riqqs, 295 F.3d .at 2ä; see also United States v. . Chemica Foundation, 272 U.S. 1, 14-15e (1926) ("The presumption of regularity süpports the official acts of publ: c officers, and, in the absence of clear evidence to the contrary, Courts presume that they have properly discha ged their official duties") . The Kalils' attempts to discredit the IRS's records were not convincing. For example, to show supposed disorganization and ncompetence on the part of the . IRS, the Kalils poin to the IRS's issuance of later- retracted notices of1deficienÊy on November 10, 2008 (Exs . 3 - J and 4 - J) , notwithstanding the IRS' s admit ted prior re ceipt of the returns on October 30, 2008, and they point to IRS requests for returns that the IRS had beer given. It appears, however, that this confusicn was the result- of the Kalils sending their returns not to t_he ASFR unit as requested (whiáh unit then issued the notices of deficiency when no returns were forthcoming) bu sending them instead to the Memphis Service Center (which did not know of the ASFR unit's dealings with the Kalils). The IRS's recordkeeping is no coubt imperfect, but there is no reason to .doubt the substantial correctness of the IRS' s records showing that. the agency did not rece1ve Heritage Reporting Corporation (202) 628-4888 . . 10 1 2 3 4 5 6 7 9 timely returns from the Kalils for 2005 and 2006. . Since the kalils did not file returns for 2005 and 2006 until ctober 2008, the three year statute òf limitatio s did not expire untïl October 2011; .and the October .2010 notices of deficiency were issued a year before that deadline. II.; Setklement agreement he Kalils contend that the asserted deficier c1es fòr 2005 and 2006 violate a settlement 10 agreement between themselves and the IRS. To "support .11 .. this contention, the Kalils pfof fer as evidence (a) a 12 13 14 15 16 17 18 19 20 21 22 23 24 25 canceled check for $ 52 from themselves to the United States Treasury (Ex. 9-P) , which bears their handwrit ten notation "AUR Control 500'72-7298 / See .Note on response Form #1",* and (b) not the alleged Form Nuniber 1 but a supposed attachment thereto entitled "Settlement Ágreement" (signed only by the Kalils 2nd not by an one from the IRS) (Ex. 10-P) . Mr. Kald I testified t hat he spoke by telephone with an IRS per(cid:0)541on(whose nd e he does not recall) and then, to be s2 fe, spoke wit h that person' s supervisor (whose name he also does not recall) , who both assured him, on behal f of tlie I S that if he would send in a check for $552, the IRS would accept that check "as complete and total settlement for any and all Federal Income Heritage Reporting Corporation (202) 628-4888 11 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 Tax debiis and/or penalties that are alleged to owe as claimed by the U. S. Department of Treasury IRS including for Tax yeärs 2002 through 2007 subject to the furi;her agreement . that the IRS owes Thomas and Mary Kaí.il a refund in the amount . of $27, 873 . 87 " ,. as is stated in the supposed agreement. Mr. Kalil testified that he read the language of this agreement . (apparently composed by himself) over the telephone to IRS perDonnel, who supposedly told him that the language would suf f i e . We are not persuaded that any conversations to this effect occurred. Mr. Kalil did not attempt to explain why the IRS Nould agree that he was entitled to an overpayment of $27, 873 . 87 (from a year or years not specified) but s ill require him to pay $552, nor why he vould ever ag ee , to make a- $.552 payment given the IRS' s supposed capitulation to his every demand. The IRS has established 'forms that it .uses to settle disputes, and Mr. Kalil's document is like none of them. lvr. Kalil's document is a strange mix of specif ic ity (such as the . dollar amount s) and gross lack of specificity (failing éven to state a·finite set of tax years that were to be settled) . For ·no evident reason, the agreement states that the IRS would .indicate. its acceptarice of the agreement not by Heritage Reporting Corporation . (202) 628-4888 - 1 signing the agreement but rather by "its negotiation 12 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of the enclosed check" -- which act neither required nor produced the signature or identification of any individual from the IRS. The scenario Mr. Kalil describes is not plausible. But even if the conversations occurred exactly as Mr. Kalil says, and even if he sent in the check along with the "agreement", and even if IRS personnel negotiated the check with full awareness of what the agreement p ovided, such facts would not give rise to an enforceable settlement agreement. Mr. Kalil iE not the first person to attempt to invoke "accord and satisfaction" against the IRS when it negotiates a check that purports to constitute payment in full, but this trick does not work. For example, in Stonehill v. United States, 2009 WL 2004385 (D.N.J. July 6, 2009), a taxpayer gave the IRS a check marked "ACCORD for 2003" and then argued that her liability for 2003 had been settled. The Court held: "Plaintiff * * * mistakenly relies on traditional creditor-debtor law and ignores Section 7122 of the Internal Revenue Code and relevant case law. * * * [T]he Ccurt cannot conclude that the check tendered for $2,865.14 constitutes an accord and satisfaction. See United States v. Asmar, 827 F.2d 907, 913 n.7 (3d Heritage Reporting Corporation (202) 628-4888 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 13 Cir. 1937) ('Any forgiveness or compromise of tax liabilïty must be effected in accordance with the provlslons of Internal Revenue Code § 7122, 26 U.S.C. 7122.·); see also Bowling v. Uriited States, 5.10 F.2d 112, 11 (5th Cir 1 75) ('.[T]he provisions for comprom: sing ta cas s are found in, [sections], 7121 and 7122 of the Internal Revenue Code . These provlslons are exclusive and strictly construed. Because of this excl sive method, no t.heory founded upon general .concepts of accord and satisfaction can be used :to impute a compromise settlement, and therefoi·e none resulted from the government's acceptance and cashing of appellant ' s che ck . ' ) ; Moskowitz v. United States, 152. Ct.Cl. 412, 285 F.2d 451, -45 (Cl.Ct. 1961) (' [T]he statutory prescription of an exclusive meth d for compromising tax liabilit ies, any the y founded .on general concepts of accord and satisfact .on cannot be utilized to impute comprom2 se settlemen to the agents of the Government'); Laurinä v. Comm'r Internal Revenue Service, 889 F.2d 910 912 (9th Cir. 1989) ('The regulations and procedures for compromises under 26 U.S.C. § 7122 are thé exclusive method of settling claims')." See also Parks v. Commissioner, 33 T.C. 298, 30 (1959) ("even if tihe subordinate revenue Hefitage eporting Corporation ( 02) 628-4888 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 14 officia s present at the second conference informally agreed to accept peti..tioner's payment as an 'accord and satisfaction' for 1952, such an agreement would not. be compromise pursuant- to the exclusive statuto2 y method of ompromise * * * and would not be binding on the Commissioner") . III. Sul stantiation of deductions The Kalils testified at trial that, if their other tl.eories did n t prevail, the Court should allow on their meritsi the eductions that the IRS disallowed. Deductions are strictly a matter of legislat ive. grace, añd taxpayers must satisfy the specific requirement for any deduction claimed. See INDOPCO, Inc. v Com issioner, 503 U.S. 79, 84 (1992) . Furthern ore, taxpaye s are required tó maintain records sufficient to substantiate their claimed deducticns. See sec 6001; 26 C.F.R. Section 1.6001- 1(a), Ircome Tax Regs. For the deductions at issue, however, the record includes no substantiating document s what soever A. Job expenses . Prior to t ial, respondent conceded that the legal expenses of $1 ,291.76 in 2005 and $42,897.36 in 2006 were deductible thus, the only job-related expenses still at issue are $339 in 2005 and $344 in Heritage Reporting Corporation (202) 628-4888 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 15 2006. . Mrs. Kalil testified in very general terms about the sorts of e penses, she incurred to maintain her license as a nurse (such as dues, malpractice insurance, and conti uing professional education),. However, the .Kalils did not attempt to state what expenses were. actua·lly incurred.in 2005 or 2006; much less did they offer documentation (such as receipts, invoices òr canceled checks) . Accordingly, the IRS' s disallowance of the kalils job related expenses of $339 for 2005 and $3 4 for 2006 must be sustained. B. Noncash ch ritable contributions Pertinent to the claimed noncash charitable contribLtion deduction, section 170 (a) allows as a deducticn any charit ble cóntribution made within the taxable year. However -- - 1. Verification Dëductions for charitable contributions are allowable only if ve i ied un er regulations prescribed by the Se retary. Sec. 170 (a) (1) . To veriÍy a cl3aritable contribution of property other than money, the regulations require the taxpayer to . maintain a receipt f om the donee for each contribution showing (1) the name of the donee; (2) the date and location of the contribut ion; and (3) a description of the property. A letter or other Heritage Reporting Corporation (202) 628-4888 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 16 written communication from the donee acknowledging receipt of the . contribution, showing the date thereof, and conkaining the r quired description of the property contributed constitutes a receipt. Where it is impráctical to .obtain a receipt, the taxpayer must maintain other reliable written records of the noncash contributions . . ' 26 C. F . R . Section 1. 170A-13 (b) (1) , Income Tax Regs. The reliability of tlie other reliable written recd>rds is determined on the basis of all of the facts and circumstances. 26 C.F.R. sec. 1. 170A- T3 (a) (2) , Income Tax Regs . Thosè are the general rules . Additional rules require even more substantiatïon for contribt tions of casl or property of $250 or more . They must be substantiated by a contemporaneous wri t ten acknowledgement f rom the donee . See sec . 170(f) (8); 26 C.F.R. sec. 1.170A-13(f) (1). A written acknowledgement is contemporaneous if it is obtained by the taxpayer on or before the earlier of the date the taxpayer files the original return for the taxable year of the contribution or the due date (including extensions). for filing the original return for the year . Sec . 170 (f) (8) (C) ; 26 C . F . R . sec . 1. 170A- 13 (f) (3) . That acknowledgement, which must be furnished by the don e, must (1) describe the property Heritage Reporting Corporation (202) 628-4888 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 17 . .contributed, (2) indicate whether the doneè . organization provide 1 any goods or ser ices in consideration of the contribution, and (3) provide a description and good faith estimate of the value of any goods or services provided by the donee. Sec. 170 (f) (R) (B) ; 26 C. F. R. sec. 1.170A-13 (f) (2) . In short, the Kalils failed utterly to satisfy any of these verification requirements. 2 . Valuation The Kalils contribution deductions also fail for lack of val ation evidence. Since the Kalils' allëged gifts were not cash but were "documer taries", the must substantiate thë values that they claimed. 26. C.F.R. sec. 1.170A- 13 (b) (2) (ii) (b) . However they gave no evidence at all to eubstantiate t hose values -- not even their own »testimory. For that reason, too, the IRS's disallowance must be sustained. IV. Additions and penalties .A. Section 6651 (a). (1) Section'6651(a) (1) authorizes the imposition of an addition to tax for failure to file a timely return unlëss the taxpayer proves that such failure is due to reasonablë catise and is not due to willful neglect. See also IJnited St-ates v. Boyle, 469 U.S. Heritage Reporting Corporation (202) 628 4888 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 . 18 241, 245 (1985) . The IRS determined this addition to tax for 2005 (but, for reasons we cannot tell, not for 2006) . We have foun hat the, 2005 return was not filed until..October 30, 2008, more than two years late and the addition therefore applies, "unless it is shown that such failure is due to reasonable cause and not due to willf 1 neglect". The i<alils do not claim reasonable. cause for nonfiling but rather insist without success that they did file. We hold that the Kal'ils 5.re liable for the addition to tax under Section 6651(a) (1 for 20Û5. B. Section 6662 (a) 1. General principles Section 6662 imposes a 20-percent penalty on an underpayment of tax that results from negligence or disregard of rules and regulations . See sec . 6662 (a) , (b) (1) . "Negligence is defined as any failure to make a reasonable attempt to 'comply with the provisicns of the Inte nal Revenue,. Code; this includes a failure to keep addquate books· and records or to substant iate items p: operly. Sec . 6662 (c) ; sec . .1.6662-3 (b) (1) . Negligence has also been defined as the. failure to exercise due care or the failure to do what a reasonable peirson would do under the circumstances. See Allen v. Commissioner, 92 T.C. 1, Heritage eporting Corporation (202) 628-4888 (cid:16)042 19 1 2 3 4 5 12 (198 ), affd. 925 F.2d 348, 353 (9th Cir. 1991), Neely v Commissione , 85 T. C: 934, 947 (1985) . "Disregard" means any careless, reckless, or intenti nal disregar 1. Sec . 6662 (c) . Pursuant to section 7491(c), the Commissioner bears the eburden of 6. produci tg sufficient evidence showing the imposition 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 of the enalty is appropriat-e in a given case. Higbee v. Comm1ssioner, 116 T.C. 438,. 445 (2001). Once the Commissjoner meets t is burden, the taxpayer must come . forward with persuasive evidence that the Commis s i oner' s deterátination is incorrect . Rule 142 (a) ; Higbee v. Cot missioner, supra at 447 . A taxpayer otherwise liable for the accuracy -related penálty may avoid the liability by successfully invoking one of'three other provisions: Section 6662 (d) (2) (B provides that an understatement may be reduced, first, where the taxpayer had substantial authority for his treatment of any item giving rise to the understatement, or, second, where the relevant facts a fecting the item's treatment are adequately disclosed and the taxpayer had a reasonable basis for his treatment of that item. Third, section 6664 (c) (i) provides that a taxpayer may avoid liability for the acguracy-r'elated penalty to the extent that he demonstrates that he had reasonable Heritage Reporting Corporation ( 02) 628-4888 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 cause for that portion.of the. underpayment .and that he ácted in good faith ith respect to that portion. . 26 20 C.F. R. mec. 1. 6664-4 (b) (1) . 2. AÓplic tion to the Kalils a. Negligence or disregard . . As a result of deducting the job expenses and noncash charitable contributions from their gross income, the Kalils reported reduced taxable income and tax liabilities for 2005 and 2006. Failing to keep adequate books and records or substantiate items properly is evidence of negligence. 26 C.F.R. sec. 1. 6662-1 (b) (1) . The Kalils did not attempt to comply with the relevant substantiation or valuation requirements for thë deductions at issue, and they were therefore negligent in claiming such deductions. Id . Accordingly, respondent has ~ thus . carried the burden of production imposed by section 7491(c) . See Linzy v. Commissione , T.C. Memo. 2011-264. The accuracy-related penalty is mandatory; the statute provides that it, "shall be added''. Sec. 6662 (a) . The Kalils bear the burden of proving any defenses, such as substantial áuthority, disclosure and reasonable basis and reasonable cause and good faith. See Higbee v. Commissioner, supra at 446. Heritage Reporting Corporation (202) 628-4888 21 1 2 3 4 5 6 7 8 9 10 11 12 b. Defenses As we explained, a taxpayer who is .otherwise I. " " liable : or the accuracy-related .penalty may avoid the liability if he succ ssfully invokes one of three other provisions, but the Kalils have not asserted and could not sustain any of those defensès:. First, as to section 6662 (d).(2) (B) , insofar as it provides that an understatement may be reduced where .the taxpayer had substantial authority for its treatment of any item. giving rise to the understatement, there is no authority that would support the Kalils' deduction of unverified and 13.- unsubstantiated dedu tions. 14 15 16 17 18 19 20 21 22 23 24 25 Second, as to section 6662 (d) (2) (B) , insofar as it provides tihat an understatement may be reduced where the relevant f cts affecting the item's treatment are adequahely disclósed and the taxpayer had a reasonable basis for its treatment of that item, neither of those criperia is met here. The facts relevant here are thé lack of records to substantiate the deductions, and hose facts are not diéclosed on the returns . Third, as to Section 6664 (c) (1) , . .which provides that, if ·the taxpayer shows that there was reasonable cause for a portion of an underpayment and Heritage Reporting Corporation; (202) 628-4888 22 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 that~ it acted in goo faith with respect to such portion then no acc racy related penalty shall be imposed with respect to that portion, the presence of reasonable cause and good faith depends on the pertinent facts and circumstances, including the . taxpayers' efforts to assess their proper tax liability, their knowledge and experience, and the extent t o which they felied an the advice of a tax professional. . 26 C.7. R. sec. 1. 6664-4 (b) (1) . The Kalils 2.llege no rellånce ,on professional advice, and they put, forth no evidence as to any attempts to comply with the tax laws concerning- the f charitable contribt.tions or jobjexpense deductions at issue. We therefore hold that the Kalils were . negliger.t in 2005 ançl 2006 and are subject to . accuracy-related penalties on any underpayments in those years. The Rui..e'155 computations will determine the existence and amount of the relevant underpayments V. Otl er contentions The Kalils made two additional contentions that we address here . A. 2004 The Kalils originally pleaded in their petition that the Court should redetermine art income Heritage Reporting Corporation (202) 628-4888 23 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 tax def:Eciency for 2004 . By our order of April 19, 2011, we dismissed 2 04 from this suit because no notice of deficiency was issued for 2004 in the 90 days preceding the f iling of the complaint . We therefore have no jurisdiction over the year 2004. . It appears frotn papers submitted in this suit that the Kalils have. been granted for 2004 a 'collect.ion due process" (CDP) hearing before the IRS Office of Appeals pursuant to section 6330. Tax Court review of such a proceeding can take place only after a notice of determinàtion has 'concluded a CDP hearing, and the Kalils have ot alleged that such a notice has been issued to confe jurisdiction on this Court. To the extent that the Kalils request· reconsiceration of o r dism s al of 2004 from this case, . tl-at request is denied. . B. Re funds The Kalils repeatedly. attempted to offer evidence relating to supposed overpayments in years other than 2Ó05 and 2006. None of that evidence is relevant, for the fo lowing reasons: We are . a Court of limited jurisdiction and may exercise our jurisdiction only to the extent . provided by Congre s s . See - GAF Corp . & Subs . v . Commissioner, 114 T. . 519, 521 (2000) . 'Our . . Heritage.Reporting Corporation (202) 628-4888 1 2 4 5 6 7 8 9 10 .11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 . 24 jurisdiction to rede ermine a deficiency is premised on the nssuance of a valid notice of deficiency followed by a timely filing of a petition. See id. Where we have defici ncy. jurisdiction, it "extends to the ent:.re subject m tter of the correct tax for the taxable year", Nafte L v. Commissioner, .85 T.C. 527, 533 (1985) , including the taxpayer' s claim of an overpaynent of tax, see sec . 6512 (b) (1) ; and sec . 6214 (b) allows us, ih determining the correct tax for the taxable year to consider such facts with relation to the t axes for other years * * * as may be necessary". However that same statute explicitly . deprives us of "jurïsdiction to determine whether or not the tax for any other year . . . has been .oirerpaid or underpaid. " Contrary to the statute, the Kalils ask us to order a refund fo the deficiency year based on a finding of an overpa ment that, in turn, results from creditir.g overpayments that. supposedly exist in prior years nct in our Jurisdiction. We may not expand our jurisdiction in this fashion. See Commissioner v. Gooch Milling & Elev tor Co., 320 U.S. 418, 420-421 (1943) decided under the predecessor of present section 6214 (b) ; Patronik'Holder v. Commissioner, 100 T.C. 374, 377 (1993) Porter«v. Commissioner, T.C. Heritage Reporting Corporation (202) 62814888 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 23 24 25 Memo. 2 10-154 . If the Kalils intended to disprove an ''underp yment " (unde section 6662 (a) ) by arguing that their t x liability ad been paid (or should be deemed to have been paid) by application .of overpayments from ot-her y árs, then.no only would that contention fall afoul o section 6512 (b) (1) (as is explained above) , but als it would fa 1 because it misunderstands the nature f an "underp yment " , which ' is~ not the amount of the iability lef unpaid but the amount not report-e (see sec . 6 64 (a) ) . Except to t he extent of the IRS' s concess ons, its not òes ðf deficiency for 2005 ánd 2006 will be upheld. To allow the recomputation of the lia ilities in 1 ght of those concessions, decisio ill bé entered under Rule 155. This concliides the Court s oral Findings of Facti and Opinion in his case. (Whe reupon, at 11: 50 a . m. , the bench opinion in the. aoove-entitled matter was concluded.) / Heritage 1 eporting. Corporation (202) 628-4888