TAX COURT OPINION

Case: Kamal Rashad Ellis
Docket Number: 15337-16S
Judge: Buch
Opinion Type: bench
Filed: 04/20/2018
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 KAMAL RASHAD ELLIS, Petitioner, v. ) ) ) CT ) Docket No. 15337-16S. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit with this order to petitioner and respondent a copy of the pages of the transcript of the trial in this case before Judge Ronald L. Buch at Little Rock, Arkansas, containing his oral findings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Ronald L. Buch Judge Dated: Washington, D.C. April 20, 201 8 SERVED Apr 20 2018 3 1 Bench Opinion by Judge Ronald L. Buch 2 April 9, 2018 3 4 5 6 7 8 9 Kamal Rashad Ellis v. Commissioner of Internal Revenue Docket No. 15337-16S The following represents the Court's oral findings of fact and opinion. The oral findings of fact and opinion may not be relied upon as precedent in any other case. This opinion is in conformity with Internal Revenue Code section 7459(b) and Rule 152(a) of the Tax 10 Court Rules of Practice and Procedure. Any section 11 references refer to the Internal Revenue Code or the 12 Treasury regulations in effect during the year at issue, 13 and Rule references are to the Tax Court Rules of Practice 14 15 16 17 18 and Procedure. This case was heard pursuant to section 7463 of the Internal Revenue Code in effect when the petition was filed. Under section 7463(b), the decision to be entered in this case is not reviewable by any other court, and 19 this opinion may not be treated as precedent for any other case. 20 21 22 Background Over the years, Mr. Ellis held at least three 23 different Discover credit cards. For 2013, Discover 24 Financial Services reported to the Commissioner on Forms 25 1099-C cancellation of indebtedness income from two of pngowsolop.<.=a.v.w w wwwmaibawe 1 2 3 4 those cards. The total amount of the cancellation of indebtedness income reported to the Commissioner was $7,347. Relying on the information provided by Discover, the Commissioner issued a notice of deficiency to Mr. 5 Ellis, determining an additional $7,347 of income 6 7 8 9 10 11 12 resulting in $2,058 of tax for 2013. Mr. Ellis filed a petition challenging that determination. Mr. Ellis questions whether the underlying charges on his Discover card were his. He does not recall receiving the two Forms 1099-C from Discover. He does not have any of his credit card statements; they were destroyed in a house fire. He was unable to obtain his 13 statements from Discover, but he was able to obtain some 14 15 limited information. It is Mr. Ellis's understanding that he had disputed three charges from 2006 that are 16 associated with one of his three credit cards. He 17 understands that the three charges were from CheapTickets 18 for $289 on July 12, 2006, creative Arts for $674 on 19 August 23, 2006, and PayPal for $1,900 on November 3, 20 2006. He does not know when he disputed these charges, 21 what action Discover took with respect to those charges, 22 or on what credit card those charges appeared. 23 24 Discussion The Connissioner's determinations in a notice of 25 deficiency are generally presumed correct, and taxpayers $7h406-2250lopentionseexidaeruwtiwwwasedtwrsmet bear the burden of proving those determinations incorrect. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Taxpayers are required to maintain sufficient records to "show whether or not such person is liable for tax". Sec. 5 6001. The burden may shift to the Commissioner under section 7491(a) if the taxpayer has complied with the necessary substantiation requirements and has maintained all records and cooperated with reasonable requests by the 1 2 3 4 5 6 7 8 9 10 Commissioner regarding information and documents. In this 11 12 case, Mr. Ellis has not provided any documents or records to challenge the deficiency and he does not assert that 13 the burden should shift to respondent. 14 Further, under section 6201(d) if a taxpayer 15 asserts a reasonable dispute with regard to income 16 reported on an information return and has fully cooperated 17 with the Commissioner, the Commissioner must supplement 18 the information return with additional reasonable and 19 probative information. 20 21 22 Generally, the term "income" as used in the Internal Revenue Code means income from any source, including income from the discharge of indebtedness. Sec. 23 61(a)(12). Therefore, a taxpayer who has incurred a 24 financial obligation that is later discharged or released 25 has realized an accession to income. United States v. enges.22sotopmnemeewatIwwwamtesma 6 Kirby Lumber Co., 284 U.S. 1, 3 (1931). The rationale underlying this principle is that the discharge of a debt for less than its face value results in an economic benefit equivalent to income to the debtor. Id.; Friedman v. Commissioner, 216 F.3d 537, 545 (6th Cir. 2000), aff'g T.C. Memo. 1998-196. A debt is considered discharged at the moment in time when it becomes clear that it will not be repaid. Cozzi v. Commissioner, 88 T.C. 435 at 445 (1987). Section 108(a) outlines exceptions where the discharge of the debt is not included in gross income. Those exceptions include that the discharge occurred in a title 11 bankruptcy case or the taxpayer is insolvent. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Mr. Ellis bears the burden of proving that he is entitled 15 to claim such an exclusion. Rule 142(a); Welch v. 16 Helvering, 290 U.S. at 115. But Mr. Ellis makes no such 17 18 19 claim. Although Mr. Ellis testified that he did not receive the Form 1099-C, he has not reasonably disputed 20 the income reported to him. His dispute is speculative, 21 at best. He understands from a phone call with Discover 22 that he, at some unknown point in time, disputed three 23 charges. He is not certain whether those three charges 24 are related to the debts that were forgiven or whether 25 they are even associated with the same cards that were 1 written off by Discover. The Commissioner's determinations are presumed correct. Other than his own wavering testimony, Mr. Ellis has provided no evidence that the debt that was written off was not his. Accordingly, decision will be entered for the Commissioner. (Whereupon, at 3:07 p.m., the above-entitled matter was concluded.) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25