TAX COURT OPINION

Case: Oleg Blokhin & Lyana Blokhina
Docket Number: 23205-15
Judge: Goeke
Opinion Type: bench
Filed: 01/05/2018
Pages: 6

ALS UNITED STATES TAX COURT WASHINGTON, DC 20217 OLEG BLOKHIN & LYANA BLOKHINA, Petitioner(s), v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 23205-15. ) ) ) ) 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 the trial in the above case before Judge Joseph Robert Goeke at Miami, Florida containing his oral findings of fact and opinion rendered at the trial session at which this case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered for petitioners. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. January 5, 2018 SERVED Jan 08 2018 Bench Opinion Joy Judge Joseph Robert Goeke December 8, 2017 Oleg Blokhin and Lyana Blokhina v. Commissioner of Internal Revenue Docket No. 23205-15 3 . THE COURT: The Court has decided to render oral findi'ngs 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 1 2 3 4 5 6 7 8. 9 10 be relied upon as precedent in any other case. 11 12 13 14 This opinion is rendered pursuant to section 7459(b) of the Internal-Revenue Code and Rule 152 of the Tax Court Rules of Practice and Procedure. Hereinafter, section references are to the Internal Revenue Code and 15. Rule references are to the Tax Court Rules. 16 This case is before the Court based upon the 17 notice of deficiency issued to the petitioners who filed 18 joint Federal income tax returns for the years 2010, 2011, 19 20 21 22 and 2012. JU: the time the petitioners filed this petition in this case, they were residents of Florida. Thé notice of deficiency determined deficiencies in income tax in the amounts of $40,261; $87,961; and 23 $29,901 for the three years, respectively. The notice of 24 deficiency also determined additions to tax under section 25 6651(a)(1) for 2010 and 2011. However, the parties have 4 agreed, and respondent concedes that the petitioners are not liable for the addition to tax under section 6652(a)(1) for 2011. The notice of deficiency finally. determined addition.s to tax under 6662(a), as well, for all. three years. The primary issue for trial in this case was whether the petitioners had received unreported income, which respondent determined based upon the bank deposits.method. Prior to trial, parties entered into an 1 2 3 4 5 6 7 8 9 10 extensive stipulation of faóts and a stipulation of 11 12 settled issues. A Rule 155 computation will be necessary, regardless of the Court's determinaÈion, to reflect some .13 of the items that the parties settled in the stipulation 14 of settled issues. The stipulation of facts notes that 15 the petitioners were delinquent in filing their Federal 16 17 income tax return for the year 2010. It also nhtes that they timely filed an income tax return for 2011 after an 18 extension, and that they timely filed an income tax return 19 for 2012 after an extension. 20. As stated previonsly, the only issue remaining 21 .for.the Court to detèrmine is whether the petitioners 22 . received significant amounts of unreported income, which 23 respondent determined based upon a bank deposits analysis. 24 The stipulation of facts includes the stipulation of 25 extensive bank records of the petitioner, and respondent 1 2 3 4 5 6 7 8 has conceded significant amounts of the income originally determined in the notice of deficiency in the stipulation of facts as a result of the verification by the Petitioners that many of the deposits were from non-income sources. In addition to the stipulation of facts and the attached exhibits, three witnesses testified at trial. These included petitioner/husband Oleg Blokhin, his 9 mother, and his sister. Their testimony was consistent 10 and supports the fact that the-petitioners did not receive 11 any unreported income in the years 2010, 2011, and 2012, 12 but rather were forced nto rely upon loans from family 13 members in order to maintain their lifestyle. We found no 14 basis to suspect that the petitioners had a source of 15 unreported income. 16 The Commissioner's determination in a deficiency 17 notice are generally presumed to be correct, and-the 18 taxpayers, in most situations, bear the burden of proof 19 with respect to those determinations. See Rule 142(a)(1). 20 However, under section 7491, if a taxpayer introduces 21 22 credible evidence with respect to any factual issue which is relative to ascertaining the liability of the taxpayer, 23 the burden of proof with respect to that issue will shift 24 to the respondent. Respondent argues that that provision 25 is not applicable in the present case because respondent (973)406-2250loperat ns@escrders,net|v,wwescnbers.net 1 maintains petitioners did not maintain adequate books and 2 3 4 5 6 7 8 .9 records. We disagree with respondent's determination in that regar'd and find that petitioners were very cooperative and did everything they could to verify that the sources of funds that were in the bank accounts reviewed by respondent were nontaxable. The Court of Appeals for the 9th Circuit has recognized that the presumption of correctness normally attached to respondent's notice of deficiency is reversed 10 when the Commissioner of Internal Revenue fails to 11 establish a minimal evidentiary foundation linking the 12 taxpayer to the source of the unreported income. Palmer (cid:16)042 13 v..U.S., 116 F.3d 1309, 1312-1313 (9th Cir. 1997); 14 Weimerskirch v. Commissioner, 596 F.2d 358, 360-362 (9th 15 Cir. 1992). We believe we have interpreted section 7491 16 consistent with this analysis and that despite repeated 17 requests by the Court for the respondent to establish any 18 19 20 21 22 viable theory as to the source of the unreported income at issue in the case, respondent was unable to offer any credible explanatión on how the petitioners would have obtained this income. Given the credible testimony contrary to 2 respondent's determination, and our analysis that the 24 25 respondent has the burden of proof under section 7491, we find that respondent ^has failed to carry that burden of . proof, and we 'determine that petitioners did not receive the unreported income asserted in·the notice of deficiency 7 for the years in question. As previously stated, the other issues in the case will require a 155 computation, based upon the parties' settlement. Based upon our analysis of the unrepor£ed income, we determine that the section 6662(a) penalty is inapplicable. However, we do need ®o analyze whether.the petitioners are liable, if ahy tax liability 1 2 3 4 5 6 7 8 9 10 exists for the year 2010 in accord with respondent's 11 determination of a delinquency penalty under section 12 13 66.51(a) (1)'. In that regard, petitioner has provided evidence that they relied upon a return preparer to 14 Prepare their return, and that the return preparer became 15 suddenly ill. And despite his assertions that he had 16 filed the return, and assertions by his spouse that he had 17 filed the return, he. had not been able to file the return 18 before his ilíness and his subsequent death. . 19 20 We did find that the petitioners'.reliance upon the return 'preparer and their efforts to verify the filing 21 of the return were reasonable. And therefore, we 22 23 determine that they are not liable for the addition to tax under section 6651(a)(1).as we determined that their 24 delinquency.wAh based upon reasonable cause. 25 This conclude-s the Court's oral findings of fact