TAX COURT OPINION

Case: John L. Collins & Elisabeth J. De Telder-Collins
Docket Number: 6444-08
Judge: Colvin
Opinion Type: bench
Filed: 05/15/2009
Pages: 8

UNITED STATES TAX COURT WASHINGTON, DC 2021 7 JOHN L . COLLINS AND ELISABETH J . DE) TELDER-COLLINS, Petitioners v . Docket No . (cid:127)6444-08 . COMMISSIONER OF INTERNAL REVENUE, ) Respondent O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s ORDERED that the Clerk of the Court shall transmit herewith to Petitioners and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at Los Angeles, California, on May 5, 2009, 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, decision will be entered for respondent . f (Signed) Joseph Robert Goeke Judge Dated : Washington, D .C . May 15, 2009 . SERVED May 18 2009 3 -Bench Opinion by Judge Joseph Robert Goeke May 5, 200 9 Collins v . Commissioner Docket No . 64444-0 8 BENCH OPINION 4 THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT; AND OPINION IN THIS CASE AND THE FOLLOWINGREPRESENTS THE COURT'S ORAL FINDINGS OF FACT AND OPINION . THESE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE-RELIED UPON AS PRECEDENT IN ANY OTHER CASE . The oral . Findings of Fact and Opinion in this cas e 10 are made pursuant to the provisions of Section 7459,(b) of 11 the Internal Revenue Code and Rule 152 of the Tax Court .12 Rules of Practice and Procedure . Hereinafter, all Section 13 references are to the Internal Revenue Code and Rul e 14 . References are-to the Tax Court Rules of Practice and 15 Procedure . 16 This case involves a deficiency in income ta x 17 determined by Respondent and reflected in a Notice o f 18 Deficiency sent to Petitioners for the taxable year 2005 . 19 Respondent determined that Petitioners had a deficiency in_ 2 0 2 1 2 2 23 income tax in-the amount of $12,724 and that the additions to tax undr Sections 6651(a)(1) and 6662(a) were .applicable, each in the amount of $2,545 . Petitioners timely petitioned this Court and they 24 were residents of California when the Petition was filed . 25, this is a regular-.case of the Tax Court subject to appeal to Heritage Reporting Corporatio n (202) 628-4888 1 ..the Court of Appeals for the Ninth Circuit, unless otherwise 2 stipulated by the parties . After the case was dockete d 3 before this Court, Petitioners filed a Motion to amend their 4 Petition, and they attached an Amended Petition . The 5 Amended Petition which was attached to their Motion did no t contain allegations that conform with Rule 34(b)(4) .because the Petitioners did not allege errors that were committed by the Respondent in the determination of the deficiency i n 9 this case . Rather, the Petitioners alleged among othe r 10 things that Respondent's determinations were barred by their 11 Amended Tax Returns . The Court denied Petitioners' Motion 12 to Amend for these and other grounds stated in Respondent's 13 Notice of objection to Petitioners' Motion to Amend . 14 The trial of this case was conducted on May 4, 15 . 2009, in Los Angeles, California . The Petitioner wife 16 testified and certain Exhibits were admitted at trial . 17, -Petitioners filed an Income Tax Return for 2005 . O n 18 October. 11, 2006 1 this return was delinquent . The return 19 reported on $46 in interest income . but also reported $6,934 20 in withholding credits . In Respondent's Notice o f 21 Deficiency Respondent determined that Petitioners received 22 wage income of $90,715, gambling income of $1,350, an d 23 Social Security/Railroad Retirement Income of $10,680 . 24 At trial,-Petitioners offered into evidence a 25 1040X Amended Return for 2005 and a Form 4852 Substitute for Heritage Reporting Corporatio n (202) 628-4888 W-2 .' These documents were admitted as a representation o f Petitioners' position at trial . The . Form 1040X, again, reported , income . of only $46 and the Form 4852 attempted t restate Petitioner wife's earnings from wages by reflecting those earnings to be the amounts . withheld from her original earnings in 2005 . . These withholdings represented amounts which her employer had withheld for Federal Income Tax, Social Security Tax, .-State Income Tax, Local Income Tax an d 9 Medicare . 10 Petitioner wife testified at trial that she did 11 receive wages in 2005, . but she refused . to say what th e 12 amount of those wages were . She did not refute Respondent's 13 determination as to the amount of the wages, but rathe r 14 offered a somewhat incoherent explanation that her wages 15 were no reportable as tax because they were in barter fo r 16 her services . She also said she could offer no rebuttal to, . 17 Respondent's other income determinations in the Notice o f 18 Deficiency . Petitioner husband did not testify ; although he . 19 . did attend the trial an freely offered argument at certai n 20 points during the trial . 21 eIn general, the determinations made by the 22 Commissioner in a Notice of Deficiency are presumed to be 23 correct, and the language in the Notice of Deficiency must 24 be addressed and rebutted by the taxpayer . The taxpaye r 25 bears the burden of proving that the determinations made in Heritage Reporting Corporation . (202) 628-4888 6 1 the Notice of Deficiency are erroneous . Rule 142(a) . 2 Petitioners have failed to produce credible evidence 3 relevant to ascertain their liability for the taxe s 4 determined by Respondent, and Petitioners have also failed 5 to cooperate with reasonable requests by Respondent . 6 Therefore, Section 7491 does not cause the burden 7 of proof to be placed upon Respondent regarding Respondent's 8 income tax deficiency determinations in this case . 9 Respondent does bear the burden of production regarding the 10 additions to tax in this case pursuant to Section 74919(c) . 11 Petitioners' arguments in this case are nothing 12 other than a variation of the theme that wages are no t 13 income . Suffice it to say that both this and other Federal 14 Courts have consistently and uniformly held for many years 15 that-wages are income and that a taxpayer has no basis in 16 his or her labor . Beard v . Commissioner , 793 F .2d 13 9 17 (Sixth Circuit 1987) affirming Perperium , 82 T .C . 76 6 18 (1984) ; Carter v . Commissioner , 784 F .2d 1006, 1009 (Ninth 19 Circuit 1986) ; Olsen v . United States , 760 F .2d 1003, 1005 20 (Ninth Circuit 1985) ; United States v . Burton, 737 F .2d 439, 21' . 441 (Fifth-Circuit 1984) ; United States v . Romero , 640 F .2d 22 1014, 1016 (Ninth Circuit 1981) ., In Romero , the . Court 23 stated : 24 25 Heritage Reporting Corporation (202) 628-4888 7 1 "Compensation for labor or services 2 paid in the form of wages or salary has 3. universally been held by the Courts o f 5 6 7 this Republic to be income subject . to the Income-Tax Laws currently applicable . " The Court finds that Petitioners failed to carry Petitioners' burden of proof to rebut Respondent' s determination of an income tax deficiency . in this case . 10 Petitioners argue in their Pre-Trial Memo that Respondent 11 has made an improper assessment based upon a substitute for -12 return, but the allegations in this regard are in erro r 13 because Respondent made deficiency determinations based upon 14 Petitioners' filed Federal Income Tax Return and no tax has 15 been assessed regarding Petitioners' 2005'taxable year based 16 upon on the account transcript in Respondents' files- which 17 was admitted into evidence . 18 The remaining issues regard the additions to tax . 19 Section 6072(a) requires taxpayers to file their income tax 20 returns on or before the 15th day of the fourth month of the 21 close of t%;.Ze Calendar .Year after the year in question . If .22 the taxpayer fails to file a return on or before this date 23 and has not obtained an extension of time to file a return, 24 then the taxpayer is liable for the addition to tax imposed 25 by Section 6651(a)(1) unless the taxpayer can sho w Heritage Reporting Corporation (202) 628-4888 8 1- reasonable cause for the delinquent return . Reasonabl e 2 cause means that the taxpayer exercised ordinary busines s care and prudence but was nevertheless unable to timely fil e 4 the Income Tax Return in question . Treas . Reg . Sectio n 301 .6651-1(c)(1) . 6 Petitioners' 2005 Federal Income Tax Return wa s due on April 15, 2006 . However, Petitioners' return was not received by Respondent until October 2006 . Accordingly, it is Respondent's position that-Petitioners failed to timel y 10 file their income tax return . The Court finds tha t 11 Respondent has borne the burden of production relative t o 12 this addition to tax by showing that Petitioners' Income Tax 13 Return for 2005 was filed on a delinquent basis . 14 Petitioners have offered no reasonable basis for thi s 15 delinquent filing even when asked to do so at the trial of 16 this case . Therefore, the Court finds that the addition to 17 tax under Section 6651(a)(1) is applicable in this case . 18 Regarding the addition to tax under Section 6662, 19 the Court notes that Section 6662 imposes an accuracy- 20 related penalty if there is an underpayment which i s 21 attributar^le to negligence or disregard of the rules or any 22 substantial understatement of income tax . In this case, the 23 Court finds that the Petitioners received the income as 24 determined by Respondent ; but, nevertheless, they asserted 25 frivolous arguments as to why such income should not be Heritage-Reporting Corporatio n (202) 628-4888 9 taxed . In addition, Petitioners made a substantial understatement of their income tax as that term is defined in Section 6662(d) . Petitioners offered no reasonable basi s 4 for their understatement of tax . Therefore , the Court finds 5 that Section 6662 is . applicable and that the addition to tax 6 applies to the Petitioners tax in this case . . 7 . In accord with this Oral Findings of Fact and 8 Opinion , a Decision will be entered for Respondent . 9 THIS CONCLUDES THE COURT ' S ORAL FINDINGS OF FACT . 10 AND OPINION IN THIS CASE . 11 (Whereupon, at 1 :42 p .m ., the bench opinion in the 12 above-entitled matter was concluded . ) 13 14 15 16 17 18 19 20 21 22 23 // . 24 25 Heritage Reporting Corporation (202) 628-4888