TAX COURT OPINION

Case: J. Frank Durham
Docket Number: 2585-08S
Judge: Colvin
Opinion Type: bench
Filed: 03/19/2009
Pages: 7

UNITED STATES TAX COURT Washington, D .C . 2021 7 J . FRANK DURHAM, Petitioner , V . Docket No . 2585-08 S STAT . COMMISSIONER OF INTERNAL REVENUE, Respondent . O R D E R 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 petitioner and to respondent a copy of th e pages of the transcript of the trial of the above case before Special Trial Judge Lewis .R . Carluzzo at Atlanta, Georgia, on February 25, 2009, containing his oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155 . . (Signed) Lewis R. Carluzzo Special Trial Judg e Dated : Washington, D .C . March 19, 2009 SERVED Mar 20 2009 3 1 Bench Opinion by Special Trial Judge Lewis R . Carluzzo 2 Docket Number 2585-08S February 25, 2009 3 Durham v . Commissione r 4 The Court has decided to render ora l 5 findings of fact and opinion in this case, and th e 6 following represents the Court's oral findings of fact 7 and opinion . The oral findings of fact and opinio n 8 shall not be relied upon as precedent in any other 9 case . 10 This proceeding for the redetermination of a 11 deficiency is a Small Tax Case conducted pursuant to 12 the provisions of Section 7463 of the Internal Revenue 13 Code of 1986, as amended, and Rules 170 through 175 of 14 the Tax Court Rules of Practice and Procedure . 15 This bench opinion is made pursuant to the 16 authority granted by Section 7459(b) of the Internal 17 Revenue Code of 1986, as amended, and Rule 152 of the 18 Tax Court Rules of Practice and Procedure . 19 Hereinafter in this bench opinion section 20 references are to the Internal Revenue Code of 1986, 21 as amended, in effect for 2002 . Rule references are 22 to the Tax Court Rules of Practice and Procedure . 23 J . Frank Durham appeared pro se . Jennifer 24 K . Martwick appeared on behalf of Respondent . 25 In a notice of deficiency dated December 31, Heritage Reporting Corporatio n (202) 628-4888 1 2007, Respondent determined a deficiency in an d 2 various additions to tax with respect to Petitioner's 3 2002 Federal income tax . The issues for decision are : 4 (1) whether Petitioner is entitled to an allowance for 5 basis in excess of the amount now allowed b y 6 Respondent in connection with the sale of certai n 7 shares of stock ; (2) whether Petitioner is liable for 8 a Section 6651(a)(1) addition to tax ; and (3) whether 9 Petitioner is liable for a Section 6651(a)(2) addition 10 to tax . 11 During 2002 Petitioner engaged in dozens of 12 transactions involving the purchase and sale of shares . 13 of stocks and/or other securities . Many, if not all, 14 of the transactions were negotiated through Scottrade 15 and those that were are reported on a summary prepared . 16 by Scottrade (the broker's summary) apparently a t 17 Petitioner's request made during Respondent's 18 examination of his 2002 income tax liability . 19 Because Petitioner did not file a 200 2 20 Federal income tax return, Respondent first learned of 21 the transactions shown on the broker's . summary fro m 22 information reports filed by Scottrade . Thos e 23 information reports show that stock sales transactions 24 resulted in proceeds totaling $57,334 . That amoun t 25 was used by Respondent in computing Petitioner's 2002 Heritage Reporting Corporatio n (202) 628-4888 5 1 liability on a return prepared pursuant to Section 2 6020(b) as well as in the notice of deficiency that 3 forms the basis for this case . 4 Gains from the sale of disposition of stock 5 are included with the definition of income given i n 6 the Internal Revenue Code . See sec . 61(a)(3) . On the 7 other side of the coin, generally losses incurred by 8 an individual in such transactions may be deducted . 9 See sec . 165(a),(c)(2) . Gains and losses from the 10 sale of stock are computed on a sale by sale basis 11 that takes into account the taxpayer's basis (or 12 adjusted basis) in the stock (in many cases, th e 13 purchase price of the stock) and the proceeds received' 14 by the taxpayer .(in many cases cash or it s 15 equivalent) . See secs . 1001, 1011 and 1012 . 16 The proceeds received by Petitioner i n 17 connection with the transactions shown in the broker's 18 summary are not in dispute . It is Petitioner' s 19 obligation to establish the basis, or cost of th e 20 stock involved in each transaction, but he has refused 21 or otherwise failed to do so . See sec . 6001 . 22 Nevertheless, because of the efforts expended b y 23 Respondent's counsel in preparing this case for trial, 24 Respondent now agrees to take into account 25 Petitioner's basis in all but three of the sales Heritage Reporting Corporation (202) 628-4888 L. 6 1 transactions shown on the broker's summary . Those 2 three transactions involve the sale of FSR . T stoc k 3 (the disputed stock ) the sale proceeds of which total 4 in excess of $10,000 . 5 According to Petitioner he paid more tha n 6 $1S,000 for the disputed stock in purchase r1 ISSJ~(cid:127) 1 7 transactions that occurred years before the year/ I n 8 support of his claim , he produced ee' money order 9 receipts that total $ 5,330 . Each receipt show s 10 Southwest Securities as the payee . According t o 11 Petitioner the only transactions he negotiated through 12 that company involve the purchase of the dispute d 13 stock . 14 Petitioner ' s evidence regarding his basis in 15 the disputed stock is best described as too little too 16 late . Had he produced those receipts to Responden t 17 earlier in this proceeding, the opportunity to explore 18 the information shown on the receipts would hav e 19 presented itself, and his claim with respect to the 20 significance of the receipts could have bee n 21 confirmed . Petitioner foreclosed that opportunity by 22 waiting to produce the receipts until the day o f 23 trial . 24 Petitioner has failed to establish his basis 25 in the disputed stock . The sale proceeds shown on the Heritage Reporting Corporation (202) 628-4888 7 1 broker's summary may be reduced only as now allowed by 2 Respondent . 3 With respect to the additions to ta x 4 remaining in dispute ( Respondent now concedes th e 5 imposition of the Section 6654 addition to tax), we 6 stmpa:ue note that Respondent has met his burden o f 7 production with respect to the imposition of thos e 8 additions . See Section 7491(c) . We further note that 9 Petitioner's claim that he did not file a return for 10 2002 because he mistakenly believed he had no ta x 11 liability for that year, even if sincere, does not 12 insulate him from the imposition of the additions to 13 tax under Section 6651(a)(1) or Section 6651(a)(2) . 14 We see little point in any further discussion with 15 respect to the details regarding these additions to 16 tax . After all, Respondent is well aware of th e 17 controlling principles that give rise to a taxpayer' .s 18 liability for such additions, and the procedura l 19 history of these case demonstrate that Petitione r 20 could not care less . Petitioner is liable for the 21 additions to tax under Section 6651 ( a)(1) and Section 22 6651 ( a)(2) albeit in amounts less than imposed in the 23 notice of deficiency . 24 To reflect the foregoing, decision will be 25 entered under Rule / Heritage Reporting Corporation (202) 628-4888 1 This concludes the Court's oral findings of 2 fact and opinion in this case . 3 (Whereupon, at 11 :01 a .m, the bench opinion 4 in the above-entitled matter was concluded . ) 8 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 .21 22 23 24 25 Heritage Reporting Corporation (202) 628-4888