TAX COURT OPINION

Case: Eugene & Virgie A. Majchrzak
Docket Number: 4651-08S
Judge: Colvin
Opinion Type: bench
Filed: 10/23/2008
Pages: 5

fib- ;'. k1A UNITED STATES TAX COURT WASHINGTON , DC 2021 7 EUGENE & VIRGIE A . MAJCHRZAK, Petitioner s v . ) Docket No . 4651-08S . COMMISSIONER OF INTERNAL REVENUE , Respondent STAT . 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 proceedings in the above case before Judge Robert P . Ruwe at Buffalo, New York, containing his oral findings of fact and opinion rendered on October 15, 2008 . In accordance with the oral findings of fact and opinion, decision will be entered for petitioners . (Signed) Robert P . Ruwe Judge Dated : Washington, D .C . October 23, 2008 SERVED OCT 2 4 2008 3 1 Bench Opinion by Senior Judge Robert P . Ruwe 2 October 15, 200 8 3 Eugene Majchrzak 4651-08S 4 Virgie A . Majchrza k 5 The Court has decided to render oral findings of 6 fact and opinion in this case, and the following represents 7 the Court's oral findings of fact and opinion . These oral 8 findings of fact and opinion shall not be relied upon a s 9 precedent in any other case . 10 This proceeding was heard as a small tax case, 11 pursuant to the provisions of Section 7463 and Rules 170 12 through 175 of the Tax Court Rules of Practice and 13 Procedure . 14 This bench opinion is made pursuant to th e 15 authority granted by Section 7459(b), as amended, and Rule 16 152 of the Tax Court's rules . 17 Eugene and Virgie Majchrzak appeared on their own 18 behalf, and Respondent's counsel appeared for Respondent . 19 Respondent determined a deficiency in Petitioners ' 20 Federal Income Tax for the taxable year 2004, whic h 21 consisted of an addition to tax, under Section 66 2(a) . responder 22 According to Respondent's pretrial memo, they wor Is R I% relying 23 on negligence and/or a substantial understatement of taxes . 24 Some of the facts have been stipulated and are so 25 found . Petitioners resided in Orchard Park, New York, a t Heritage Reporting Corporation (202) 628-4888 4 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 the time the petition was filed . During the year 2004, Petitioner's wife, Mrs . Majchrzak, withdrew $45,000 from her retirement account . One reason for the withdrawal was to cover some of he r medical expenses during that year . At the time of the withdrawal, she was not awar e that the withdrawal would be taxable to her, and she did no t inform her husband of the withdrawal at the time . During 2004, and, at least, the first four month s of 2005, Mrs . Majchrzak was suffering from a severe medica l condition that caused her great pain . During that time, sh e was receiving strong medication, including the drug , Percocet . Sometime after the withdrawal, Mrs . Majchrza k received a notice from the retirement account, apparently , the trustee, but, anyway, she received a notice that th e $45,000 was, in fact, taxable . Again, at the time this notice was received, sh e was heavily medicated for pain and failed to inform he r husband of this information about the withdrawal or that i t was taxable . Mr . Majchrzak was responsible for working with th e return preparer of the 2004 return . Being unaware of the $45,000 withdrawal, he, obviously, could not, and did not , inform the return preparer of the withdrawal, and it was no t Heritage Reporting Corporation (202) 628-4888 5 1 reported on the 2004 return of Petitioners . 2 When Petitioners were contacted by the IRS abou t 3 the withdrawal, they immediately agreed to the resulting tax 4 adjustments . However, they did not agree to the 20-percent 5 penalty, pursuant to Section 6662 . The Internal Revenue 6 Service sent them a notice of deficiency for that penalty, 7 which I have previously referred to . 8 Respondent argues that the only exception to 9 imposition of the 6662 penalty is contained in Section 10 6664(c)(1) . Section 6664(c)(1) provides that no penalty 11 shall be imposed under Section 6662 with respect to any 12 portion of an underpayment if it is shown that there was 13 reasonable cause for such portion and that the taxpayers 14 acted in good faith with respect to such portion . 15 Based on the evidence in this case, including th e 16 credibility of Petitioners, we find thatAthese unique facts, wino aAl 17 Mrs . Majchrzak's medical condition and her husband' s 18 complete ignorance of the $45,000 withdrawal at the time the 19 return was filed, constitute reasonable cause for 20 ~SSIOt1 (cid:127) . oft We find that Petitioners acted in good faith, I 21 asAdemonstrated by the fact that when they were contacted, 22 they did not contest the tax liability, and that was not an 23 issue in this case . 24 Accordingly, we hold that the Section 6664( G'1) RPR 25 exception applies, ers the Petitioners are not liable for th e Heritage Reporting Corporation (202) 628-4888 6 1 Section 6662 penalty . 2 A decision will be, therefore, entered fo r 3 Petitioners, and that concludes the Court's bench opinion . 4 This concludes the Court's oral findings of fact 5 and opinion in this case . 6 (Whereupon, at 10 :38 a .m ., the bench opinion in 7 the above-entitled matter was concluded . ) 8 // 9 10 11 // 12 // 13 // 14 // 15 // 1 6 17 // 1 8 19 20 21 22 23 f / 24 25 Heritage Reporting Corporation (202) 628-4888