TAX COURT OPINION

Case: Frank Dowd & Nicole Dowd
Docket Number: 14595-15
Judge: Goeke
Opinion Type: bench
Filed: 11/20/2017
Pages: 8

UNITED STATES TAX COURT WASHINGTON, DC 20217 FRANK DOWD & NICOLE DOWD, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 14595-15. ) ) ) ) ORDER 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 petitioners and to respondent a copy of the pages of the transcript of this case before Judge Joseph Robert Goeke at Louisville, Kentucky 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, an appropriate order will be issued granting respondent's Motion to Dismiss for Failure to Properly Prosecute, filed September 5, 2017. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. November 20, 2017 SERVED NOV 2 2 2017 A 3 1 2 3 4 5 6 7 8 9 Bench Opinion by Judge Joseph R. Goeke November 2, 2017 Frank Dowd and Nicole Dowd v. Commissioner of Internal Revenue Docket No. 014595-15 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 10 opinion. The oral findings of fact and opinion shall not 11 12 13 14 15 be relied upon as precedent in any other case. This opinion is rendered pursuant to the authority provided in Internal Revenue Code section 7459(b) and Rule 152 of the Tax Court Rules of Practice and Procedure. Hereinafter, rule references are to the Tax Court Rules of Practice and 16 Procedure and section references are to the Internal 17 Revenue Code sections applicable to the periods involved. 18 This case is before the Court on Respondent's 19 motion to dismiss for failure to properly prosecute. This 20 21 is a deficiency case, and the Court has jurisdiction based upon a timely petition filed after the issuance of a 22 notice of deficiency. 23 24 Petitioners were residents of Kentucky when they filed their petition in this case. The background of the 25 deficiency in the case involves a timely filed federal (973)406-2250|operations@escribersnet|www.escribersaet 4 1 2 3 4 5 6 7 8 9 joint income tax return for 2012. On that return, the Petitioners claimed expenses on Schedule C for business activities. They characterized the business as "Better Living Therapy". The notice^the deficiency challenging of these expenses was issued on March 3rd, 2015 and determined a deficiency in federal income tax in the amount of $274,562. The notice of deficiency also determined an Addition to Tax under section 6662(a). The disallowed expenses in the notice of 10 deficiency include rental expense in the amount of $40,450 11 of which $30,550 was disallowed; commission expense in the 12 amount of $740,000 of which $740,000 was disallowed; 13 office expense in the amount of $12,000, of which $11,210 14 was disallowed; and legal and professional services in the 15 16 17 amount of $15,000, of which $5,000 was disallowed. The petition was timely filed on June the 10, 2015, together with the petition^trial in Louisville, e a re quc4 br- 18 Kentucky. A notice of trial was initially sent to the 19 Petitioners on October 3rd, 2016 requiring the Petitioners 20 to appear at a trial session in Louisville, Kentucky. 21 22 23 24 25 The Petitioners filed a motion for continuance from that October 3rd, 2016 trial session on September 14th, 2016. Respondent did not object to that motion, and the Court granted themotion for continuance on September leer 23rd, 2016 and the case was continued from the Louisville ) cribers (973)406-2250|operations@escribersmet|www.escribers.net 5 trial session. On September 14th, 2106, the Petitioner submitted the notice of change of address form and stated their new address was 70 River Road, Prospect, Kentucky 40059. They listed their phone number as 502-216-0708 on this notice of change of address form. This form was submitted on a form provided by the ax 6ourt pursuant to Rule 21(b)(4). On May 30th, 2017, the Petitioners were given a 1 2 3 4 5 6 7 8 9 10 notice of trial for the trial session held this week in 11 Louisville, Kentucky. They received a notice reminding 12 13 14 15 16 17 18 19 them of the trial session or wer.e sent a notice reminding them of the trial session on September 18th, 2017. They were served with an order from this Court on October 25th, 2017 telling them that the case was calendared for trial at the session of the court commencing this week in Louisville, Kentucky on October 30th, 2017. On September 5th, 2017, Respondent filed a 20 motion to dismiss for failure to properly prosecute. By 21 order dated September 5th, 2017, the Court directed 22 Petitioners on or before October 5th, 2017 to file with 23 24 25 the Court a response to that motion. Petitioners did not file such response and have not done so as of this date. The Court then ordered that the motion to (973)406-2250|operations@escribersmet|www4scribers.net 6 1 2 3 4 5 6 dismiss for failure to properly prosecute should be set for hearing on October 30th, 2017 at 10:00 a.m. Petitioners failed to appear for that hearing. Pursuant to section 7453, the Íax fourt is authorized and directed to adopt rules regarding its procedures and practice before the Court. The Sixth 7 Circuit Court of Appeals has recognized that the power to 8 9 10 11 12 13 sanction or dismiss a case is essential to the management of the trial court's docket én the interest of the KL litigants before that docket. Smith v. Commissioner 926 F2d 470, 1480 (6th Cir. 1991) aff'g 91 T.C. 1049, 1052 n.3 (1988). The Petitioner bears the burden of proof with 14 respect to the determinations in the notice of deficiency. 15 Respondent acknowledges that Respondent bears a burden of 16 production with respect to the Addition to Tax under 17 18 section 6662(a). Respondent's counsel tried to contact the 19 Petitioner repeatedly prior to this trial session and the 20 Court, after the call of this case of October 30th, 21 attempted to call the telephone numbers that had 22 previously been made available by the Petitioners. These 23 attempts were unsuccessful as the number listed in 24 Petitioners change of address form is no longer operable 25 and the other number available through Respondent's (973)406-2250loperations@ercribers.net|www.escribers.net 7 1 2 3 4 5 6 7 8 9 counsel was never answered. The Court has no reason to believe that the Petitioners' address is different from the address shown in their change of address form filed in 2016. However, the Court notes that the Petitioners have an obligation to notify the Court should they change their address, and they have not submitted any subsequent change of address form. The fact that they initially filed a change of address form demonstrates that they were aware of their 10 obligation pursuant to Rule 21(b)(4). 11 The fact that the Petitioners previously filed a 12 motion for continuance when this case was set for trial in 13 14 15 16 17 18 the fall of 2016 also demonstrates that they were aware of their obligations to this Court and necessity to bring to the attention of the Court any motions or reasons why they should not be subject to trial of their case. The fact that they failed to communicate with the Court and failed to communicate with Respondent's counsel preceding the 19 scheduling of this case for trial demonstrates that the 20 Petitioners, apparently, have abandoned their efforts to 21 22 23 24 25 litigate this case. In any event, the Court is left with no recourse, given the need to orderly administer its docket, but to grant Respondent's motion and find deficiency as determined by Respondent as the Petitioner bears the cribers (973)406-2250|operations®escribersnet|www.esaibers.net 8 1 2 3 4 5 6 7 8 9 burden of proof with respect to that deficiency. Regarding the Additions to Tax, we take into the record of the hearing of Respondent's motion to dismiss for failure to properly prosecute several documents submitted in connection with Respondent's motion. Respondent acknowledges that Respondent has the burden of production with respect to the Addition to Tax. We believe the position taken by Respondent that they have met that burden is correct, given the fact that the 10 deficiency established in the notice of deficiency exceeds 11 the threshold amount to establish an understatement which 12 will trigger the application of section 6662(a). 13 We also note that Respondent submits a document 14 which supports the fact that Respondent has met the 15 requirement of section 6751(b)(1) which establishes that 16 17 supervisor properly approved the assertion of the Addition to Tax as provided by section 6751 as follows: "No 18 penalty under this title shall be assessed unless the 19 20 21 22 initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination". The Civil Penalty Approval Form attached to 23 Respondent's motion to dismiss establishes that an 24 appropriate supervisor did, in fact, approve the 25 application of the section 6662 penalty for substantial (973)4D6-2250|operati ns@escribersaet|www.escribers.net 9 1 2 3 4 5 6 7 understatement asserted in the present case. Accordingly, we find that Respondent has met the burden of production with respect to the Addition to Tax and that the Petitioners are precluded from challenging the Addition to Tax because they failed to appear and failed to respond to Respondent's motion to dismiss for failure to properly prosecute. Accordingly, Respondent's 8 motion is granted and a decision will be entered for the 9 Respondent. This concludes the Court's oral findings of fact in this case. (Whereupon, at 10:24 a.m., the above-entitled matter was concluded.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ) cribers (973)406-2250|operations@escribersnet|www.escribersmet