TAX COURT OPINION

Case: Gary Lee Amy
Docket Number: 18368-19S
Judge: Carluzzo
Opinion Type: bench
Filed: 01/21/2021
Pages: 13

Docket No.: 18368-19S Page of United States Tax Court Washington, DC 20217 Gary Lee Amy Petitioner v. Commissioner of Internal Revenue Respondent Docket No. 18368-19S 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 the parties a copy of the pages of the transcript of the trial in this case before Chief Special Trial Judge Lewis R. Carluzzo containing his oral ﬁnds 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 pursuant to Rule 155 of the Tax Court Rules of Practice and Procedure. (Signed) Lewis R. Carluzzo Chief Special Trial Judge Served 01/21/21 RECEIVED 11/24/20 IN THE UNITED STATES TAX COURT In the Matter of: GARY LEE AMY, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. Docket No. 18368-19S ) ) ) ) ) ) ) ) ) ) ) ) Pages: 1 through 11 Place: San Diego, California (Remote Proceeding) Date: October 30, 2020 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1 IN THE UNITED STATES TAX COURT In the Matter of: GARY LEE AMY, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. Docket No. 18368-19S ) ) ) ) ) ) ) ) ) ) ) ) Federal Building 880 Front Street Room 4228, 4th Floor San Diego, California 92101-8828 (Remote Proceeding) October 30, 2020 The above-entitled matter came on for bench opinion, 15 pursuant to notice at 10:12 a.m. HONORABLE LEWIS R. CARLUZZO Chief Special Trial Judge BEFORE: APPEARANCES: For the Petitioner: No Appearance For the Respondent: No Appearance 16 17 18 19 20 21 22 23 24 25 2 P R O C E E D I N G S (10:12 a.m.) THE CLERK: Calling for bench opinion docket number 18368-19S, Gary Lee Amy. (Whereupon, a bench opinion was rendered.) 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 1 2 3 4 5 6 7 8 Bench Opinion by Judge Lewis R. Carluzzo 3 October 30, 2020 Gary Lee Amy v. Commissioner Docket No. 18368-19S 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 (bench opinion). 9 Unless otherwise noted, section references made 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 in this bench opinion are to the Internal Revenue Code of 1986, as amended, in effect for the relevant period, and Rule references are to the Tax Court Rules of Practice and Procedure. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. This proceeding for the redetermination of a deficiency is a small tax case subject to the provisions of section 7463 and Rules 170 through 174. Except as provided in Rule 152(c), this bench opinion shall not be cited as authority, and pursuant to section 7463(b) the decision entered in this case shall not be treated as precedent for any other case. Gary Lee Amy appeared on his own behalf. Michael K. Park appeared on behalf of respondent. In a notice of deficiency dated July 8, 2019 (notice), respondent determined a $40,039 deficiency in 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 petitioner's 2016 Federal income tax and imposed a 4 $4,800.82 section 6651(a)(1) addition to tax, a $2,773.81 section 6651(a)(2) addition to tax, and a $460.36 section 6654 addition to tax. After concessions, the issues for decision are whether petitioner is liable for the section 6651(a) additions to tax. Some of the facts have been stipulated and are so found. At the time the petition was filed petitioner lived in California. Petitioner was married at all times relevant. According to petitioner, he and his spouse had filed timely joint Federal income tax returns for all years prior to 2016, a point not disputed by respondent during the trial. However, neither petitioner nor his spouse filed a timely 2016 Federal income tax return. During 2016 petitioner was employed as an air traffic controller for Serco Inc. Petitioner's spouse owned and operated a Schedule C business during that year. Sometime before April 15, 2017, petitioner timely filed a Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, extending the due date of his 2016 Federal income tax return to October 16, 2017. Because petitioner failed to submit the return when due, on April 1, 2019, 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 respondent prepared a substitute for return pursuant to 5 section 6020(b) for petitioner's 2016 tax year. During 2017 petitioner suffered emotionally and physically from several personal tragedies that he and his wife experienced that year. To make matters worse, the day before Thanksgiving a water pipe broke in their house and severely flooded much of it. Petitioner's tax records, which were apparently stored in one of the flooded areas were packed into boxes and then placed in a storage locker. Those tax records were unavailable to petitioner until March of 2019. On June 19, 2020, after the petition in this case was filed, petitioner and his spouse submitted a 2016 joint Federal income tax return to an Internal Revenue Service Appeals Officer, which apparently was accepted with minor adjustments. With the exception of the section 6651(a)(1) and (2) additions to tax, all other determinations and adjustments made in the notice have been resolved by agreement of the parties. That being so, we turn out attention to those additions to tax. Section 6651(a)(1) provides for an addition to tax of 5% of the tax required to be shown on the return for each month or fraction thereof for which there is a failure to file, not to exceed 25%. Section 6651(a)(2) provides for an addition to tax of one-half per month up 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 to 25% for failure to pay the amount shown or required to 6 be shown on a return. Under section 7491(c) the Commissioner bears the burden of production as to whether a taxpayer is liable for an addition to tax and must provide sufficient evidence showing that imposing the addition to tax is appropriate in the particular case. See Higbee v. Commissioner, 116 T.C. 438, 446 (2001). As to the addition to tax under section 6651(a)(1) for failure to timely file, respondent has met this burden of production by showing that petitioner's 2016 return was due to be filed on or before April 16, 2017, and that it was not submitted to respondent until June 19, 2020. See secs. 6072(a), 7503. As to the addition to tax under section 6651(a)(2) for failure to timely pay the amount shown as tax on the return, there must first be an amount of tax shown on a return. Cabirac v. Commissioner, 120 T.C. 163, 170 (2003), aff'd without published opinion, 94 A.F.T.R.2d (RIA) 2004-5490 (3d Cir. 2004). For this purpose, a return made by the Commissioner under section 6020(b) that meets certain requirements is treated as the return filed by the taxpayer. See sec. 6651(g)(2); Ulloa v. Commissioner, T.C. Memo. 2010-68. Respondent introduced a valid substitute for 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 return pursuant to section 6020(b). See Gleason v. 7 Commissioner, T.C. Memo. 2011-154; see also Hennard v. Commissioner, T.C. Memo. 2005-275. Accordingly, respondent has satisfied his burden of production under section 7491(c) for the section 6651(a)(2) addition to tax. A taxpayer will not be liable for the additions to tax under section 6651(a)(1) or (2) if the taxpayer can show that the failure to file and/or pay was due to reasonable cause and not due to willful neglect. United States v. Boyle, 469 U.S. 241, 245-246 (1985). Reasonable cause exists if a taxpayer exercises ordinary business care and prudence and is nonetheless unable to file his return by the date prescribed by law. Sec. 301.6651- 1(c)(1), Proced. & Admin. Regs. Willful neglect is defined as "conscious, intentional failure or reckless indifference." United States v. Boyle, 469 U.S. at 245. According to petitioner, his failure to timely file and pay was due to a confluence of personal tragedies and the temporary lack of access to his tax records because his house was flooded by a broken water pipe. As petitioner views the matter, the combined effects of these circumstances constitutes a reasonable cause sufficient to excuse him from the liability for the 23.10 additions to 25 tax. 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 In other cases, the Court has found reasonable 8 cause for failure to timely file a return where the taxpayer or a member of the taxpayer's family experiences an illness or incapacity that prevents the taxpayer from filing a tax return. See, e.g., Tabbi v. Commissioner, T.C. Memo. 1995-463 (finding reasonable cause where the taxpayers' son had heart surgery, the taxpayers spent four months in the hospital with him, and they filed their joint tax return two months after their son's death). On the other hand, the Court has rejected a taxpayer's reasonable cause claim if the taxpayer does not timely file but is able to continue to conduct his or her business affairs despite the illness or incapacity, see, e.g., Ruggeri v. Commissioner, T.C. Memo. 2008-300, slip op. at 7-8 (and cases cited thereat), as petitioner was apparently able to do in this case. On balance, we find that the scale tips ever so slightly in petitioner's favor, although probably not to the extent that he would prefer. We give petitioner the benefit of the doubt and assume, without finding, that the personal tragedies and unfortunate circumstances he faced in 2017 precluded the timely filing of his 2016 return and timely payment of his 2016 Federal income tax liability. But we cannot extend that period beyond April 2019, one month after petitioner regained access to the records that 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 would have allowed him to prepare the return. 9 Under the circumstances presented, and taking into account the agreement between the parties, it would seem that petitioner's decision to prepare and submit his 2016 Federal income tax was prompted more by his desire to file jointly with his spouse, an election that can only be made on the return, than it was to fulfil his obligation to have timely filed. That being so, we think it appropriate to give petitioner some, but not all of the relief he now seeks. We also think it appropriate to note that none of our findings should frustrate petitioner's entitlement to relief under respondent's first time abate policy if he otherwise qualifies for such relief. To summarize, we find that petitioner had reasonable cause for failing to file his 2016 return and pay his 2016 Federal income tax when due, but further find that his failure to file by the end of April 2019, renders him liable for both additions to tax computed from that date. Accordingly, respondent's imposition of the section 6651(a)(1) and (2) additions to tax is sustained to the extent the additions are computed consistent with the 22 foregoing. 23 24 25 To reflect the foregoing, decision will be entered Under Rule 155. This concludes the Court's bench opinion in this case. 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 (Whereupon, at 10:28 a.m., the above-entitled 10 matter was concluded.) CERTIFICATE OF TRANSCRIBER AND PROOFREADER 11 CASE NAME: Gary Lee Amy v. Commissioner DOCKET NO.: 18368-19S We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 11 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Roger Meyers on October 30, 2020 before the United States Tax Court at its session in San Diego, CA, in accordance with the applicable provisions of the current verbatim reporting contract of the Court and have verified the accuracy of the transcript by comparing the typewritten transcript against the verbal recording. _______________________________________________ Meribeth Ashley, CET-507 11/19/20 Transcriber Date _______________________________________________ Lori Rahtes, CDLT-108 11/19/20 Proofreader Date 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