TAX COURT OPINION

Case: Oscar A. Portillo
Docket Number: 16152-13
Judge: Holmes
Opinion Type: bench
Filed: 01/07/2015
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 OSCAR A. PORTILLO, Petitioner v. )) )) )) )) ) COMMISSIONER OF INTERNAL REVENUE, Respondent ORDER Docket No. 16152-13. 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 Mark V. Holmes on November 17, 2014 at Los Angeles, California, 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, a Decision will be entered under Rule 155. (Signed) Mark V. Holmes Judge Dated: Washington, D.C. January 7, 2015 SERVED JAN - 9 2015 Capital Reporting Company 3 1 2 Bench Opinion by Judge Mark V. Holmes November 17, 2014 3 Oscar A. Portillo 4 5 6 7 Docket No. 16152-13 THE COURT: In the case of Oscar Portillo v. Commissioner, Docket Number 16152-13, the Court has decided to render oral Findings of Fact and 8 Opinion, and the following is the Court's oral 9 Findings of Fact and Opinion. 10 11 12 13 14 15 16 17 18 19 This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code of 1986 as amended, and Rule 152 of the Tax Court's Rules of Practice and Procedure. Mr. Portillo is a resident of California and was when he filed his petition. He was able to reach a brief stipulation with the Government, which together with his testimony constituted the record in this case. I found him to be a completely credible 20 witness. He's telling me the truth. The question is 21 22 23 24 how to apply the law to the things that he said. This case began when Mr. Portillo got a notice of deficiency from the IRS. A notice of deficiency is an assertion by the IRS that you owe 25 more tax than you put on your income tax return, and 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 this was a notice of deficiency for the 2010 tax year. There were two items that the IRS said were wrong on Mr. Portillo's return. The first was the amount of unemployment compensation he received. 2010 was not a good year for Mr. Portillo, and really his only main source of income was his unemployment compensation. He had reported about $15,000, actually $15,600, in unemployment compensation but the State of California reported that he had received $22,286. I think this was just an honest mistake and he readily admitted both in testimony and by filing an amended return, which was part of the exhibits, that he in fact received $22,286 in unemployment compensation. So I have to rule in favor of the IRS on this one and say that, in fact, he did receive the $22,286 in unemployment compensation. Unemployment compensation is included in taxable income under section 85(a) of the Internal Revenue Code. So you've got to pay tax on that difference between what you reported and what was on the initial return. The second item was gain from the sale of 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 Mr. Portillo's home that he owned with ex-wife in the 2 3 year that they got divorced. The property seems to have been heavily 4 mortgaged, but there was a little bit of gain on it, 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 in the sense that the $359,000 in gross proceeds ended up being reported as $354,873; not much of this was gain but the difference between those two numbers, $4,127, was added by the IRS in its computation of Mr. Portillo's deficiency. Here, I completely believe him when he said that what he did is split this $4,127 with his wife. That makes this not his income entirely. Half of it is what's called a property transfer incident to divorce. What this means is that half of it's hers, and that's under 1041(a)(2) of the Internal Revenue Code. So I can't give the IRS all of this; I can't give Mr. Portillo all of this. He gets half, she gets half. So in that case the deficiency is too large by $2,064, and I'll decrease the deficiency amount by that. Now, what this all really comes down to is that Mr. Portillo wanted an additional child tax credit under section 24 of the Code. This is a provision of the Code that gives people who are down 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 on their luck, who have very little income, what's called a refundable tax credit. That means even if they don't owe taxes, they still get a check from the 4 Government. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 In Mr. Portillo's case he wanted a check for $1,890, which under his return as originally filed he would have been entitled to. No one doubts that Mr. Portillo has a son and a daughter who are kids at that time; I completely believe him about that. There's no doubt that he would qualify for the child tax credit. The problem here is that by increasing his income, and remember we have to increase the income for that unemployment compensation and a tiny bit for the split of the profit from the sale of the marital house, Mr. Portillo's income goes up, and as a person's income goes up the amount of the child tax credit goes down. I can't tell yet if it will go down a little bit or be lost entirely, because I am ruling in Mr. Portillo's favor a little bit on this split of the $4,000 with his wife, so that number will require what we call computations. When you run it through the computers and figure out what the final number is. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 So the Code does give this credit to taxpayers like Mr. Portillo, but whether it gives it to them when we add the extra unemployment compensation and $2,064 in that proceeds from the sale of the home, I don't know. We have a procedure in Tax Court that will give us the final answer for that, it's computation under Rule 155, and that is where this case will end up. So I rule in favor of both parties, at least a bit, but the decision will be entered pursuant to Rule 155. This concludes the Court's oral Findings of Fact and Opinion in this case. (Whereupon, at 4:18 p.m., the above- entitled matter was concluded.) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.capita1ReportingCompany.com