TAX COURT OPINION

Case: Keith Allen Levesque
Docket Number: 24158-10S
Judge: Goeke
Opinion Type: bench
Filed: 06/27/2011
Pages: 8

UNITED STATES TAX COURT WASHINGTON, DC 20217 DM KEITH ALLEN LEVESQUE, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Res ondent ) ) ) ) ) ) ) O R D E R Docket No. 24158-10S. 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 Tampa, Florida, on June 10, 2011, containing his oral findings of fact and opinion renßered at the conclusion of the trial. In accordance with the oral fact and öpinion, a decision will be entered under Rule 155, Tax Court Rules of Practice and Procedure. findings of (Signed) Joseph Robert Goeke Judge Dated: Washington,. D.C. June 27 2011 1 ; f ERVED 4UN 3 0 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 ROBERT JOSEPH GOEKE, KEITH ALLEN LEVESQUE v. COMMISSIONER DOCKET NO.: 24158-10S DATE: June 10, 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. Section references after this are to the Internal Revenue Code in effect for the years in issue, and Rule references are to the Tax Court Rules of Practice and Procedure. The present case is before the Court based upon our jurisdiction to review deficiency determi ations by Respondent which are followed by timely petitions to the Court. In the present case Respondent issued a Notice of Deficiency to the Petitioner for the years 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 2006 and 2007. In that Notice of Deficiency Respondent determined deficiencies of income tax of $14,768 and $12,585 for the years 2006 and 2007 respectively. Respondent also determined the application of the addition to tax under Section 6651(a) (1) for the year 2006 because Petitioner's Federal Income Tax Return was not filed timely for that year. Finally, Respondent determined the application of the addition to tax under Section ,6662 (a) for both years, 2006 and 2007. The issues which underlie Respondent's deficiency determinations relate to the disallowance of expenses claimed by the Petitioner·on Schedule C of Petitioner's Federal Income Tax Returns for 2006 and 2007, and Respondent's determination that Petitioner had additional income which was not reported on the Schedule C for the year 2006. Petitioner was a contractor engaged in the construction business . Petitioner admitted at trial that his return preparer had overstated expenses on his returns for 2006 and 2007 and he did not contest the adj stments Respondent made to his Schedule C expenses, including the disallowance of certain supplies claimed on the Schedule C and the disallowance of of.f road fuel expenses claimed on 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 Schedule C, and subcontract labor expense disallowed for the year 2007. Petitioner did contest at trial the inclusion of additional gross income in the amount of $19,847 for the year 2006. Respondent's adjustments to gross income were based upon specific deposits to Petitioner's business and personal account in 2006. Petitioner maintains that deposits to his business account of cash in the amount of $13,000, consisting of two distinct deposits of $5,000 and $8,000 in September and October of 2006, were not income items but rather items he received from his aunt who was holding those amounts following dispositions from Petitioner's deceased mother many years before. We found Petitioner's testimony in this regard to be credible, and, therefore, we determine that these two deposits were not income. Thus reducing Respondent's adjustment by $13,000. Petitioner also contested $¾500 of the inclusion of $3,000 in his income based upon a deposit on October 11th, 2005 to Petitioner's personal account. Petitioner maintains that 500 of this amount was amounts he received from non-income items. We also found Petitioner's testimony in this regard to be credible, and we would reduce Respondent'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 adjustment by $¼500 regarding that deposit. With respect to the other deposits reflected in Respondent's determination, we find that the $70 deposit on October 7th was not income as well. Therefore, Respondent's adjustment to income, based upon our determinations, should be reduced by the total amount of $14,570 in 2006. This resolves all of the adjustment to income and expenses based upon the testimony at trial and our determinations. We now turn to the additions to tax. Petitioner testified that his 2006 return was filed late because he relied upon his return preparer and expected his return preparer to request an extension for 2006. However, Petitioner has a personal responsibility to determine that his return is filed on time and he cannot rely upon his return preparer to file a return on time when he took no efforts to inquire as to whether the return prep,arer had actually submitted a request for an extension. Petitioner would have realized a request for extension had been filed because he was required to sign such a request for extension. Given these circumstances we do.not find Petitioner's reliance upon his return preparer 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 relative to the delinquent filing of this Federal Income Tax Return for 2006 to be sufficient to create reasonable cause. Therefore, Respondent having established in the Stipulations of Facts and the record of trial that Petitioner filed the 2006 return in a fashion which was not timely, we sustain Respondeht's determination of the addition to tax under Section 6651(a) (1), Respondent having carried the burden of going forward to establish the application of the addition to tax and Petitioner having failed to establish reasonable cause. Regarding the additions to tax under Section 6662(a) for substantial understatement and negligence, Petitioner once again relies upon his return preparer. It is clear that Petitioner is unsophisticated in matters of tax and that the Petitioner did fully supply the return preparer with his records. We do not deem the Petitioner's failure to carefully review all the expenses claimed on the returns to be fatal to his request to rely upon his return preparer as reasonable cause for the overstatement of his expenses on his 2006 and 2007 returns, because Petitioner's review of those returns would have yielded nothing since he is so unsophisticated as to tax matters as not to have been able to discern whether the return 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 .preparer had overstated expenses in any event. Given Petitioner's unique situation and the fact that he did supply the return preparer with the informat on required to prepare his return, we think it is reasonable for the Petitioner to have relied upon the return preparer relative to the items shown on his Schedule C for 2006 and 2007. And, although Respondent has established understatement sufficient to apply Section 6662(a) as a threshold matter, we do believe Petitioner has established reasonable cause based upon his reliance upon his return preparer and we determine that the addition the tax under Section 6662(a) is not applicable to the Petitioner for 2006 and 2007.; Given our analysis of this case a computation under Rule 155 of the Tax Court Rules of Practice and Procedure will be necessary relative to the underlying deficiencies, and the addition to tax for delinquent filing of the 2006 return. As stated previously we find that the Petitioner's not liable for the addition to tax under Section 6662(a) and no further computation will be necessary relative to that addition to tax. This concludes the Court's oral findings of fact and opinion in this case. 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 (Whereupon, at 9:36 a.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // // // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888