TAX COURT OPINION

Case: Harold A. Lange
Docket Number: 7178-03
Judge: Gale
Opinion Type: memo
Filed: 07/19/2005
Pages: 11

C. Memo 2005 176 HA.ROLD ANLANGE, Èetitioner y. COMMISSIiONÉR OF INTERNAL REVENUE, . Respondent ohket No. 7178÷03. Filed July 19, 2005. Ha old A. Langp, pro se. Beth A. Ñunnink, far spoñdent. F MÉMORANDUM FINDIÑGS OF FACT AND ,ÒPINION- GALE, Jüdgé:. Responden determined a defici-ency of $8, 301 nd acic tions to. tâx of $2y075.25 .and 443.40 under secitions¹ . . 6651(a) (I) and 6654, respechiv@ly, with res,pect to petitionér 2 ¹ Úrless ·otherwise indiÒated, all section references are to the Inte(cid:0)576nalRd entie de irFïÉfect f6r t e yed in ihst e, and . aÎl Ruthreferences a e to the iax p,ou t ulés of Praétice dnd Procedtire . SERV D JUL i 9.2005 - 3 - with a Schedule A, Itemized Deductions/ two Forms 1099-R, Distributions From ·Pensions, Annuities, Retirement or Profit- Sharing Plans, IRAs, Insurance Contracts, etc.; and a Form W-2G, . Certain Gambling Winnings. Attached to the front of the 2000 Form 1040 was a cover page which stated: for explanation, please see the attached 38 This.tax return is being filed under protest, .without prejudice, page protest document and memorandum, marked and identified by its U.S. federal crime under Title 18 U.S.C. protest document remain a.permanent part of return. from the attached returò, it is to the records with this registered mail number. It is a to rèmove this As indicated on the foregoing cover page, a 38-page protest document2 (protest document) was attached to the.2000 Form 1040. In the "label" box on the front page of the 2000 Form 1040, the phrase "Spouse's Social Security number" was lined through, and in the·space reserved for entry of a spouse's social security number there was written.^"under protest without prejudice". In the jurat/signature box on the back page, immediately beloW petitioner's signature, the phrase, "Spouse's signature, if a joint return, both. must sign", had also been lined through and replaced with the handwritten phrase, "under protest, without prejudice". The 2000 Form 1040 reported $34,508 on line 7, "Wages salaries, tips, etc.", $11,501 on line 20b, "Social security 2 The protest document had attached to it an.additional 17- page exhibit. unconstitutional, constituting a "crime·of extortion and perjury". . The protest document concludes by stating that unless the Internal Revenue.Service responds to the protest document and rebuts.each of the arguments raised, then the IRS "agrees to the complete contents of this * * * [protest document], and will raise no defenses to the contents, nor claim a tax liability imposed under 26 U.S.C. § 1 or 3, to be due and owing upon the undersigned by your agency or in a court of law". The document further explains that "a failure to anséer in rebuttal" by the IRS will constitute agreement that the IRS "will not raise in court, any defense or collateral attack on.the issues of * * * [petitioner's] position as to the procedures, facts, or law as set forth herein". Pension Distributions Petitioner was retired during 2000. In that year, he received distributions from the National Electrical Benefit Fund (NEBF) .of $11,082 and the.Electrical Workers Trust Fund (EWTF) of $22,723._ These receipts were reported as fully taxable distributions on Forms 1099-R by NEBF and EWTF. The NEBF's plan summary provides that "all contributions to the NEBF are made by covered employers. Employees are neither required nor permitted to make contributions". According to the plan, the employer contributes three percent of the covered· - 7 - the mortgage loan being replaced, and various closing costs totaling $948.95, described on the settlement sheet as follows: fee Loan origination .fee 0.218% Appraisal Flood Attorney's fees Recording fees State tax/stamps Computer filing fee $167.00 .250.00 17.00 (cid:16)042 391.00 32.00 87.95 4.00 On Schedule A of the 2000 Form 1040, petitioner claimed an itemized deduction for "closing costs on hóuse" of $1,367.73, a figure which closely approximates the $1,371..73 total of the foregoing payments.4 Notice of Deficiency After the 2000 Form 1040 was referred to three units of respondent, a notice of deficiency was issued to petitioner for the 2000 taxable year in which it was determined that petitioner had failed to file a return and had taxable income of $39,831,5 resulting .in a deficiency of $8,301 and additions to tax under section 6651(a) (1) for failure to file and section 665.4 for failure to pay estimated tax. Petitioner timely ,filed a petition for redetermination. 4 The $4 discrepancy is not explained in the record. s This taxable income figure represented gross income of $46,306 from pension distributions, Social Security benefits and gambling winnings, exemption. less the standard deduction and a personal _ 9 _ Even where the taxpayer fails to follow the prescribed forms, a document will be treated as a valid return for purposes of section 6651(a) if it satisfies the following: (i) It contains sufficient data to calculate tax liability; (ii) it purports to be a return; (iii) it represents an honest and reasonable attempt to satisfy the requirements of the tax law; and (iv) it is executed under penalties of perjury. Beard v. Commissioner, 82 (cid:16)042T.C. 766, 777 (1984), affd. 793 F.2d 139 (6th Cir. 1986). In determining the validity of a return,·this and other courts have generally held that alterations of the language of the jurat itself invalidates a return. See Hettig v. United States, 845 F.2d 794, 795 (8th Cir. 1988) (per curiam);. Mosher v. Commissioner, 775 F.2d 1292, 1294 (5th Cir. 1985) (per curiam); Borgeson v. United States, 757 F.2d 1071, 1073 (10th Cir. 1985) (per curiam); United States v. Moore, 627 F.2d 830, 834 (7th Cir. 1980); Cupp v. Commissioner, 65 T.C. 68, 78-79, affd. without published opinion 559 F.2d 1207 (3d Cir. 1977); Andrews v. Commissioner, T.C. Memo. 1999-281; Hodge v. Commissioner, T.C. Memo. 1998-242; Counts v. Commissioner, T.C. Memo. 1984-561, affd. 774 F.2d 426 (11th Cir. 1985). Where statements are added that do not modify the specific language of the jurat, the validity of the return depends upon whether the additional statements disclaim liability or otherwise qualify the jurat by casting doubt on the jurat's declaration - 11 - for any tax shown on the form." Commissioner, 102 T.C. at 141.] .[Sloan v. We concluded that the attached statement "[raised] serious questions about whether petitioner [was] 'denying' the accuracy of the information contained in the return, 'disclaiming' the jurat altogether, or simply protesting the tax laws". Id. at 145. Consequently, we held that the return was invalid. We reached the same result in Williams v. Commissioner., supra, where the extraneous entry. was made as an asterisk to the "amount owed" line on the return rather than near the jurat, and stated: "The admitted liability is zero. See attached Disclaimer Statement." Id. at 138. The attached statement provided: The above named taxpayer respectfully declines to volunteer concerning assessment and payment of any tax balance due on the return or any redetermination of said tax. Be it known that the above said taxpayer, therefore, denies tax liability and does not admit that the stated amount of collectable. tax on return is due and [Id.] * * * Relying in part on Sloan, we concluded that the attached statement rendered the return invalid, because it "called into question the veracity, accuracy, and completeness" of the . purported return, thereby vitiating the jurat. Id. at 142. Here, petitioner signaled the inclusion of a disclaimer stätement to the 2000 Form 1040 by means of an attached cover page, which stated that the 2000 Form 1040 was being filed "under protest, without prejudice" and that an explanation of the protest-without-prejudice was contained in an "attached 38 page - 13 - pet-itioner affirms the veracity, accuracy, and completeness of the return, as declared in the jurat. Following Williams and Sloan, we therefore hold that the 2000 Form 1040.is not a valid return, as the jurat has been vitiated by an accompanying statement. The declarations in the protest document produce just the kind of "guessing game" about the document's .import that we refused to require the Commissioner to undertake in Sloan and (cid:16)042Williams.6 Moreover, as. was the case in Williams, the 2000 Form 1040 herein would also fail at least two -parts of the four-part test of a.valid return enunciated in Beard v. Commissioner, 82 T.C. at 777. First, because the jurat has been vitiated, the 2000 Form 1040 has not been executed under penalties of perjury. Second, we conclude that the 2000 Form 1040 does.not represent an honest and reasonable attempt to satisfy the requirements of the tax law. Petitioner's contention in the protest document that he is not an "individual" as that term is used in sections 1 and 3 is frivolous. While items of income are.reported.and taxable income is purportedly còmputed, the entries on the lines for "tax" and "total tax" are blank and. $Ò, respectively. Inexplicably, after reporting both "total tax" and "total payments" as $0, petitioner 6 We note that the 2000 Form 1040 was considered by three units of respondent before respondent concluded that the document could not serve as the basis for assessing any Federal income tax liability for petitioner for 2000. - 15 - argument misconstrues the nature of an employee contribution, however. The pension plans for NEBF and EWTF each prohibit employee contributions. We are persuaded that no portion of the pension disbursements at issue constituted the return of an employee contribution and consequently sustain respondent's determination. B. Gambling Winnings Respondent determined that the $1,000 lottery proceeds received by petitioner in 2000 were includible in gross income as gambling winnings. Lottery proceeds arë gambling winnings, taxable under section 61(a). See, e.g., Solomon v. Commissioner, 25 T.C. 936 (1956); Rusnak v. Commissioner, T.C. Memo. 1987-249. Petitioner makes a series of arguments on brief concerning the nature of "income" for Federal income tax purposes that 'do not persuade us of any error in respondent's determination. Accordingly, respondent's determination is sustained. C. Social Security Benefits Respondent determined that $11,501 of the $13,531 in Social Security benefits received by petitioner in 2000 was includible in his gross income for that year.7 7 On brief, respondent erroneously states that the includible portion is the total amount of benefits received ($13,531) determined in the notice of deficiency. (c)(1) and (2). rather than 85 percent of that amount ($11,501) as See sec. 86 (a)(2), - 17 - that amount. Petitioner's unchallenged testimony at trial was that he purchased the same amount of lottery tickets each week, .at a cost of.approximately $80 per month, and that he began . saving his (losing) tickets after he won the $1,000 in March 2000. The $851 total for the tickets purchased from March through December 2000 corroborates petitioner's testimony. Petitioner's testimony is unimpeached and should not be disregarded. See Loesch .& Green Constr. Co. v. Commissioner, 211 F.2d 210, 212 (6th Cir. 1954). We accordingly conclude that petitioner has provided reasonable evidentiary support for invocation of the Cohan rule, and .find that he had additional gambling losses.of $160 in January and February of 2000. See Cohan v. Commissioner, 39 F.2d 540, 543-544 (2d Cir. 1930), Vanicek v. Commissioner, 85 T.C. 731, 743 (1985). These losses fully offset the gambling winnings for 2000, but are not further deductible. See sec. 165(d).; see also Offutt v. Commissioner, 16 (cid:16)042T.C. 1214 (1951). . B. Charitable Contribution Deductions Section 170 provides that charitable contributions may be deducted from gross income "if verified under regulations prescribed by the Secretary". Under the regulations, a taxpayer must maintain records of each contribution, such as a canceled check, a receipt, or other reliable records from the charitable organization. Sec. 1.170A-13(a)(1), Income Tax Regs. / , . _ 19 -_ is not deductible. Sec. 1.262-1(b)(2), Income Tax Regs. Thus, petitioner is not entitled to deduct the foregoing amount.8 Also included in the closing costs that petitioner seeks to deduct is a $167 "loan origination fee", which is further described on the settlement sheet as "0.218%". Petitioner has offered no evidence concerning whether this amount represents prepaid interest or instead a payment for services rendered by (cid:16)042the financial institution that provided the financing. Thus, this amount is not deductible as interest under section 163. Goodwin v. Commissioner, 75 T.C. 424, 440-442 (1980), affd. 691 F.2d 490 (3d Cir. 1982); Wilkerson v. Commissioner, 70 T.C. 240, 253 (1978), revd. on another issue 655 F.2d 980 (9th Cir. 1981); Enoch v. Commissioner, 57 T.C. 781, 794-795 (1972); Cao v. Commissioner, T.C. Memo. 1994-60, affd. 78 F.3d 594 (9th Cir. 1996); Dozier v. Commissioner, T.C. Memo. 1982-569. Since petitioner has failed to show that the loan origination fee .is interest, it falls into the same category as the bulk of the remaining closing costs that he seeks to deduct; namely, the $250 appraisal feé, the $391 attorney's fee, and the 8 Petitioner also seeks to deduct $17 listed on the settlement sheet as for "flood". Other than the settlement sheet, petitioner offered no evidence concerning what item rep.resents. Given the evidence, we conclude that the item is either flood insurance, in which case it is not deductible under the authority cited above, or it is something else, not deductible for lack of proof concerning the nature of the expenditure. the "flood" - 21 - We have.sustained respondent's determinations that petitioner had gross income of $46,306 in 2000. Petitioner admitted on the 2000 Form 1040 that no estimated taxes were paid nor was any tax withheld with respect to 2000. The information returns of NEBF, EWTF, and the Kentucky Lottery Corporation likewise corroborate that no tax was withheld with respect to petitioner's pension disbursements and lottery winnings. We accordingly conclude that respondent has met his burden of production with respect to the section 6654 addition. As petitioner's only argument is that "there is no longer legislation which authorizes" the section 6654 addition to tax, we sustain respondent's determination. VI. Conclusion We have considered all remaining arguments made by the parties for contrary holdings and, to the extent not addressed, find them to be irrelevant, moot, or meritless. To reflect.the foregoing, Decision will be entered under Rule 155.