TAX COURT OPINION

Case: Scott M. Hochmuth
Docket Number: 14245-09S
Judge: Colvin
Opinion Type: bench
Filed: 11/17/2010
Pages: 7

UNITED STATES TAX COURT WASHINGTON, DC 20217 CAESAR FEDERICO SEIJAS, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ) O R D E R Docket No. 30107-09S. 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 to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at Miami, Florida, on November 3, 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,- a decision will be entered under Rule 155. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. November 17, 2010 ! SEflVED NOV 2 3 2010 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 Joseph Robert Goeke Caesar Federico Seijas v. Commissioner Docket No. 30107-09S November 3, 2010 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. This case was heard pursuant to the provisions of Section 7463 of the Internal Revenue Code in effect at the time the petition was filed. Pursuant to Section 7463(b), the decision to be entered is not reviewable by any other court, and as stated previously, this opinion shall not be treated as precedent for any other case. Section references after this are to the Internal Revenue Code, and rule references are to the Tax Court Rules of Practice and Procedure. This opinion is rendered pursuant to Rule 152. This case is before the Court based upon the Court's jurisdiction to review deficiencies determined by Respondent when the Petitioner has filed a timely petition in the Tax Court. Respondent issued a notice 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 4 of deficiency to the Petitioner for the year 2007, asserting the deficiency in the amount of $2,163. Petitioner filed a timely petition in the cases before the Court based upon the question of whether Petitioner is entitled to certain interest deductions claimed in the federal income tax return the Petitioner filed for 2007. The total amount of interest deduction claimed on Petitioner's 2007 return was $27,448. Respondent has disallowed $15,109 of the claimed mortgage interest deduction. The sole basis for the disallowance is Petitioner's failure to substantiate that he paid the amounts in excess of the amount allowed by Respondent. During 2007, Petitioner owned a residence on 174th Street in Hialeah, Florida. He resided at that residence throughout the year. Respondent allowed Petitioner a mortgage interest deduction in the amount of $12,339 for the property at which Petitioner resided. Petitioner also was involved with ownership of the residence where his sister and his nephew resided, which was on 108th Street. Petitioner testified that his sister had difficulties with that property as far as maintaining her debt obligations, and that he entered into a mortgage in December of 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 5 2006, which was used not only to satisfy his prior mortgage obligation on his residence, but was also used to finance the mortgage obligations for his sister's residence. At trial, the dispute involving the additional amounts of mortgage deduction relate to three distinct mortgages. First-was a mortgage which was satisfied with a firm called Litton. This obligation was satisfied based upon a mortgage Petitioner took out on December 28th of 2006. Litton issued a 1099 to the Petitioner's father-in-law because he was the stated party on the Litton mortgage. The mortgage was satisfied from the proceeds of the mortgage Petitioner took out on December 28th, 2007. Respondent disputes the time of payment of this mortgage. Petitioner maintains that he signed the papers to have a new mortgage, which would satisfy the Litton mortgage, as of year-end 2006. And Respondent argues that 2006 is the year when Petitioner actually paid off the Litton mortgage for which he is claiming the deduction. The Litton mortgage related to Petitioner's own residence. Petitioner paid that mortgage off with a new mortgage on his residence, which was approved by Washington 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 6 Mutual Bank. The documentation in the record reflects that that loan was approved on December 28th, 2006. We believe that Petitioner did not directly pay off the Litton mortgage, but rather, based upon the facts in the record, the mortgage was paid off by Washington Mutual upon assuming Petitioner's new mortgage. The fact that Litton issued the Form 1099 for the amount in question for the year 2007 leads us to believe that Washington Mutual, on behalf of Petitioner, actually paid Litton in 2007. Therefore, we believe Petitioner is entitled to a deduction in 2007 for the amount of mortgage interest shown on the form 1099 issued by Litton to Petitioner's father-in-law for the year 2007, in the amount of approximately $5,000. The other two amounts remaining in dispute involve Petitioner's sister's home and who paid the second and first mortgage on that property in 2007. Petitioner maintains that he paid the second mortgage, which generates interest in the amount of $4,731. Respondent maintains that based upon the record, it is not clear who paid this mortgage interest. Respondent points to one entry in the record submitted by the Petitioner which shows that the monthly payment of the Heritage Reporting Corporation (202) 628-4888 i 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 second mortgage interest was paid from an account in which funds received by the Petitioner from the Social Security Administration have been deposited. Petitioner counters that he had forwarded funds into the account to cover the check in question, and he points to a transfer from his own account into the account used to pay the second mortgage. Petitioner also maintains that he was obligated on the second mortgage. We find Petitioner's testimony credible relative to the second mortgage on his sister's home, and find that he is entitled to a deduction of $4,731 on that interest. There is also interest deduction for the first mortgage on the sister's home at issue. This amount is $4,071.20. Respondent points to the fact that mortgage payments on this loan were paid by the Petitioner with funds that were deposited into the account in question used to pay the mortgage interest from the Petitioner's social security. Petitioner maintains that this should be netted against the amounts he paid to support his sister, and that he was actually responsible for the mortgage and directly made the mortgage payments. This issue is uncertain, and the extent to which Petitioner paid the interest on the GMAC loan 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 8 associated with his sister's home is not clear. Based upon the record, we determine that Petitioner should be entitled to an interest deduction in the amount of $1,500 relative to this GMAC loan, and that the remaining amount is not allowable as an interest deduction in the taxable year 2007. The Court's determinations regarding interest in this case result in the necessity of a Rule 155 computation. This concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 4:09 p.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888