TAX COURT OPINION

Case: Hemant G. & Rashmi H. Kirpekar
Docket Number: 12987-10
Judge: Haines
Opinion Type: bench
Filed: 06/01/2011
Pages: 5

UNITED STATE$ TAX COURT WASHINGTON DC 20217 HEMANT G. & RASHMI H. KIRPEKAR, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) ) ) | ORDER Docket No. 12987-10 Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit herewith the pages of the to petitioner and to respondent a copy of transcript of Francisco, California on May 19, 2011, containing his oral findings of the conclusion of trial. fact and opinion rendëred at the trial of this case before Judge Haines at San the In accordance with the oral findings of fact and opinion, decision will be entered for resp ndent . (Signed) Harry A. Haines Judge Dated: Washington, D.C. June 1, 2011 Bench Opinion by Senior Judge Harry A. Haines May 19, 2011 Kirpekar v. Commissioner Docket No. 12987-10 3 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. Petitioners filed a petition with this Court in response to a notice of deficiency for 2007, issued on March 8, 2010. Respondent determined deficiencies for 2007 of $20,927, and Internal Revenue Code section 6662 penalties of $4,185. Petitioners conceded the deficiency and paid the tax and interest for 2007. Thus the only remaining issue for decision is whether Petitioners are liable for the accuracy-related penalty under section 6662 for 2007. Petitioners maintained their legal residence in the state of California at the time their petition was filed in this case. Gross income is defined as "all income from whatever source derived". Section 61(a). In the instant case, Petitioners concede that they failed to report over $100,000 in capital gain dividends, qualified dividends, and ordinary dividends -received during 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 Heritage Reporting Corporation (202) 628-4888 4 2007. Consequently, Respondent determined that Petitioners are liable for an accuracy-related penalty under section 6662(a) for 2007. Section 6662(a) imposes an accuracy-related penalty of 20 percent of the underpayment of tax attributable to negligence or attributable to a substantial understatement of income tax. Under section 7491(c), the Commissioner has the burden of production with respect to the taxpayer's liability for the penalty provided by section 6662 and must come forward with sufficient evidence to impose the penalty. Higbee v. Commissioner, 116 T.C. 438, 446, 447 (2001). The concession by Petitioners as to the omission of income satisfies the Commissioner's burden. Therefore, the taxpayer has the burden to show why the Commissioner's determination to impose the penalty is incorrect. Allen v. Commissioner, T.C. Memo. 2005-118. Under section 6664(c) (1), an accuracy-related penalty is not imposed on any portion of the underpayment as to which the taxpayer acted with reasonable cause and in good faith. The determination of whether a taxpayer acted with reasonable cause and in good faith is made on a case- by-case basis, taking :into account all pertinent facts and circumstances, including the extent of the taxpayer's efforts to assess his or her proper tax liability, and the 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 Heritage Reporting Corporation (202) 628-4888 5 taxpayer's education, knowledge, and experience. Section 1.6664-4(b) (1), Income Tax Regs. The extent of the taxpayer's efforts to assess the proper tax liability is generally the most important factor. Id. Petitioner husband is a computer consultant, and Petitioner wife is a medical doctor. Both were open and honest at trial, and credibly testified that the income was mistakenly unreported based upon confusion with reporting forms received from financial institutions. While we do not find that Petitioners Willfully failed to include that income, the unreported dividends were substantial in , relation to Petitioners' other reported income, and the omission of over $100,000 from the return should have put the Petitioners on notice that the return was incorrect. Given the amount in question, it is evident that Petitioners negligently failed to include such income. Accordingly, Petitioners are liable for the accuracy-related penalty under section 6662(a). In reaching our holding, we have considered all arguments made, and to the extent not mentioned, we conclude that they are moot, irrelevant, or without merit. To reflect the foregoing, decision will be entered for Respondent. This concludes the Court's oral findings of facts 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 Heritage Reporting Corporation (202) 628-4888 1 2 3 4 s 6 7 8 9 10 11 12 13 14 1s 16 17 18 19 20 21 22 23 24 2s and opinion. (Whereupon, at 12:00 p.m., the bench opinion in the above-entitled matter was concluded.) 6 // // // // // // // // // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888