TAX COURT OPINION

Case: James A. Rogers & Laurie J. Rogers
Docket Number: 25435-11S
Judge: Guy
Opinion Type: bench
Filed: 07/05/2013
Pages: 8

CMS UNITED STATES TAX COURT WASHINGTON, DC 20217 JAMES A. & LAURIE J. ROGERS, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 25435-11S. ) ) ) ) OR D E R 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 the trial in the abovecaptioned case before Special Trial Judge Daniel A. Guy, Jr., at Columbus, Ohio, on June 19, 2013, 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 petitioners. (Signed) Daniel A. Guy, Jr. Special Trial Judge Dated: Washington, D.C. July 5, 2013 SERVED Jul 05 2013 Capital Reporting Company Bench Opinion by Special Trial Judge Daniel A. Guy, 3 Jr. June 19, 2013 James A. & Laurie J. Rogers v. Commissioner Docket No. 25435-11S 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 proceeding for the redetermination of a deficiency is a small tax case conducted pursuant to the provisions of section 7463 of the Internal Revenue Code of 1986, as amended, and Rules 170 through 174 of the Tax Court Rules of Practice and Procedure. 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 Rules of Practice and Procedure. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Hereinafter in this bench opinion, section references 23 24 25 are to the Internal Revenue Code of 1986, as amended, in effect for 2009, and Rule references are to the Tax Court Rules of Practice and Procedure. 866A88.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 Petitioners, husband and wife, resided in 2 Ohio at the time the petition was filed, and they 3 4 appeared at trial pro se. Anita A. Gill appeared on behalf of respondent. The parties filed with the 5 Court a stipulation of facts, with accompanying 6 7 exhibits, that are incorporated herein by this reference. The issue remaining in dispute is whether 8 · petitioners are liable for an accuracy-related 9 penalty for the taxable year 2009. 10 11 Petitioners are both insurance professionals. Mr. Rogers earned a bachelor's degree 12 with a major in Finance from Ohio State University. 13 Mr. Rogers is an independent insurance agent, and he 14 15 16 also works for Massachusetts Mutual Life Insurance Company. Mrs. Rogers earned a bachelor's degree with a major in Zoology from the University of 17 Massachusetts. Mrs. Rogers operates her own 18 19 insurance brokerage business. During 2008 and 2009, Mr. Rogers received 20 monthly distributions from a retirement account that 21 22 23 24 25 he maintained with UNUM Group, Inc. (UNUM). He used the distributions to pay his daughter's college tuition expenses. For the taxable year 2008, Mr. Rogers received a single Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit- 866.488.DEPO www.CapitalReportingCompany.com I i ' Capital Reporting Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Sharing Plans, from UNUM. In the middle of 2009, however, UNUM hired a new pension administrator. As a result, the distributions that Mr. Rogers received from UNUM during 2009 were reported to the Internal Revenue Service in two separate Forms 1099-R: one issued by UNUM and the other issued by Benefit Disbursement Paying Agent (BDPA). Petitioners received the Form 1099-R issued by UNUM, and they included a distribution of $19,478 in their taxable income for 2009. Mr. Rogers testified, however, that petitioners did not receive a copy of the Form-1099-R issued by BDPA, reporting an additional disbursement of $19,478, and that amount was not reported on petitioners' return for 2009.. Petitioners testified that, consistent with their normal practice, they collected their tax records for 2009, including multiple Forms 1099 generated in connection with their insurance 20 activities, and turned them over to their tax return 21 22 23 24 25 preparer. After petitioners' tax return was prepared, petitioners reviewed it and signed it. Mr. Rogers conceded that if he had more closely examined the Form 1099 issued by UNUM, he probably would have noticed that it did not include the total of the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 distributions that he received from his retirement account during 2009. Respondent issued a notice of deficiency to petitioners determining a Federal income tax deficiency of $6,330 and an accuracy-related penalty of $1,071 pursuant to section 6662 (a). Petitioners promptly paid the tax deficiency and filed a timely a petition for redetermination with the Court challenging only the imposition of the accuracy- related penalty. Section 6662(a) and (b) (1) imposes a penalty equal to 20% of the amount of any underpayment attributable to negligence or disregard of rules or regulations. The term "negligence" includes any failure to make a reasonable attempt to comply with tax laws, and "disregard" includes any careless, reckless, or intentional disregard of rules or regulations. Sec. 6662 (c). Negligence also includes any failure to keep adequate books and records or to substantiate items properly. Sec. 1.6662-3(b) (1), Income Tax Regs. Section 6664 (c) (1) provides an exception to the imposition of the accuracy- related penalty if the taxpayer establishes that there was reasonable cause for, and the taxpayer acted in good faith with 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 7 respect to, the underpayment. Sec. 1.6664-4 (a), Income Tax Regs. The determination of whether the taxpayer acted with reasonable cause and in good faith is made on a case-by-case basis, taking into account the pertinent facts and circumstances. Sec. 1.6664-4 (b) (1), Income Tax Regs. Circumstances that may indicate reasonable cause and good faith include an honest misunderstanding of fact or law that is reasonable in light of all the facts and circumstances, including the taxpayer's experience, knowledge, and education. Sec. 1.6664-4 (b) (1), Income Tax Regs. With respect to a taxpayer's liability for any penalty, section 7491(c) places on the Commissioner the burden of production, requiring the Commissioner to come forward with sufficient evidence indicating that it is appropriate to impose the penalty. Higbee v. Commissioner, 116 T.C. 438, 446- 447 (2001). Once the Commissioner meets his burden of production, the taxpayer must come forward with persuasive evidence that the Commissioner's determination is incorrect. Id. at 447; see Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). 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 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Respondent has discharged his burden of production under section 7491(c) by showing that petitioners failed to report a distribution of $19,478 from the UNUM retirement account. See sec. 1.6662-3(b) (1), Income Tax Regs. Petitioners testified credibly that they did not receive the Form 1099-R issued by BDPA. Although Mr. Rogers conceded that he should have scrutinized the Form 1099-R issued by UNUM more closely, we are persuaded, considering all the facts and circumstances, that petitioners made an honest and good faith effort to properly report their tax liability for the year in issue. Without the second Form 1099-R in hand, petitioners honestly believed they had submitted all necessary tax records to their return preparer. Upon learning of their mistake, petitioners promptly paid the resulting tax deficiency. On the record presented, we conclude that petitioners have shown that there was reasonable cause for, and they acted in good faith with respect to, the underpayment in question. Sec. 6664 (c) (1). 22 Accordingly, petitioners are not liable for the 23 24 25 accuracy-related penalty in dispute. Consistent with the preceding discussion, an appropriate decision will be entered. This 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 concludes the Court's oral findings of fact and opinion in this case. (Whereupon, at 11:06 a.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.CapitalReportingCompany.com