TAX COURT OPINION

Case: Dennis J. Johnson, P.S., and Jody Fitts, Representative
Docket Number: 29877-14
Judge: Goeke
Opinion Type: bench
Filed: 10/01/2019
Pages: 7

CT UNITED STATES TAX COURT WASHINGTON, DC 20217 DENNIS J. JOHNSON, P.S., AND JODY FITTS, REPRESENTATIVE, Petitioner(s), v. ) ) ) ) ) ) Docket No. 29877-14. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) 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 petitioner and to respondent a copy of the pages of the transcript of the hearing in the above case before Judge Joseph Robert Goeke at Seattle, Washington containing his oral findings of fact and opinion rendered at the trial session at which this case was heard. In accordance with the oral fimdings of fact and opinion, respondent's Motion for Default Judgment, filed September 10, 2019, will be granted. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. October 1, 2019 SERVED Oct 01 2019 Bench Opinion by Judge Joseph Robert Goeke September 13, 2019 Dennis J. Johnson, P.S., & Jody Fitts Representative v. 3 Commissioner Docket No. 29877-14 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. This opinion is rendered pursuant Internal 1 2 3 4 5 6 7 8 9 10 11 12 Revenue Code section 7459(b) and Rule 152 of the Tax Court 13 Rules of Practice and Procedure. In the remainder of this 14 bench opinion, section references are to the Internal 15 Revenue Code and rule references are to the Tax Court 16 Rules of Practice and Procedure. Before the Court is 17 18 19 20 21 22 23 24 respondent's motion for default judgement. We first clarify the proper party in this matter so as to alleviate any confusion generated by the changes in the caption of this case. The notice of determination sent to the taxpayer, which triggers our jurisdiction in this matter, was sent to Dennis J. Johnson, P.S., a corporation. The petition was filed by Dennis J. Johnson, ang individual, who is now deceased. This Court, in an 25 earlier order, determined after the case was docketed that cribers the proper party was Dennis J. Johnson, P.S., the 4 corporation. When Mr. Johnson passed away the caption was changed to reflect the estate of Dennis J. Johnson as a party, including his daughter as the party who represented the corporate petitioner. The inclusion of the estate in the caption was incorrect as the corporation has always been the sole party in this case. Accordingly, the caption has been changed by my order during the pending Tax Court session. During his life Mr. Johnson acted for the corporation in this case. When he passed away, his daughter, Jody Fitts, asked to be substituted as the corporate representative in the case, and she remains the 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 only person who acts for the corporation in the Court's records. 16 17 We have jurisdiction in this matter pursuant to 18 section 7436(a) and (d). The notice of determination, 19 which began the current case, found that Dennis Johnson 20 and Kari Johnson were employees of the corporation in 2008 21 22 and 2009. In the notice of determination, the respondent calculated employment tax liabilities and additions to tax 23 for the four quarters of 2008 and 2009. The taxes and 24 additions to tax, determined in the notice of 25 determination, are reflected on pages 2 and 3 of Cribers (973y406-2250|operations@eicribetsmetlwww.escdbersaet respondent's motion and will not be reiterated in this 5 bench opinion. It is uncontested that the corporation was located in the State of Washington when the petition was filed. The facts that relate to respondent's motion to default are straightforward. This case was regularly called for tr,ial. At the trial session of this Court on September 9th, 2019 in Seattle, Washington, counsel for respondent appeared, but there was no appearance on behalf 1 2 3 4 5 6 7 8 9 10 of the petitioner. Since September 2018, counsel for 11 respondent has not received any communication from the 12 petitioner's representative. 13 In a status report, which was filed with this 14 Court on January 17th, 2018, respondent informed the Court 15 16 17 18 19 20 that Dennis J. Johnson had passed away and that his daughter, Jody Fitts, was appointed the personal representative of the estate. She hæ4L subsequently sent a letter to the Court and this led to her status as a representative of the corporate petitioner in the matter. Respondent's counsel then began to deal with Ms. 21 Fitts to proceed with the preparation of the case for 22 litigation. At one point, Ms. Fitts indicated that she 23 wished to concede the case on behalf of the corporation, 24 but when decision documents were forwarded to her, she did 25 not execute them. cribers Subsequently, respondent sent her various 6 correspondence throughout the course of 2018 and into the year 2019. This correspondence was to no avail, and Ms. Fitts did not participate in any preparation of the case for trial. On September 13th, 2018, respondent spoke to Ms. Fitts by telephone. This is when Ms. Fitts indicated that she wished to concede the case, but as I stated, after that event, she took no action to actually formalize her concession or to take any further action to prepare the case for litigation. On April 11th, 2019, the Court scheduled this case for trial on the trial session 1 2 3 4 5 6 7 8 9 10 11 12 13 beginning September 9th, 2019 in Seattle. 14 15 Rule 123(a) provides that if a party has failed to proceed in accord with the rules or the requirements of 16 the Court, the Court may find such party in default. The 17 18 19 20 21 22 circumstances of this case merit that determination relative to the corporate petitioner. The one aspect of the case, which requires further discussion, is the fact that respondent has determined additions to tax for fraud upon which respondent bears the burden of proof in litigation. In 23 Smith v. Commissioner, 91 T.C. 1049 (1988), the Court 24 25 found that it was appropriate to enter a default judgement under Rule 123(a) even in the case of fraud where the Cribers (973)406.2250l operationseerribersnet | www.esedbersbet allegations of fraud had been pled properly by respondent and petitioner had failed to respond to those allegations. The present case contains a stronger record to 7 establish fraud than in Smith. In the present case, respondent filed a motion under Rule 91(f) to have the facts and critical documents in the case deemdstipulated. The Court granted that motion. PemF hased upon those facts in the stipulated documents, it is clear that Mr. Johnson, acting through the corporation, engaged in a pattern of conduct that was intended to deceive the Internal Revenue Service and avoid the payment of employment taxes. Therefore, his failure to file the appropriate employment tax returns was fraudulent based upon the stipulated documents. And Based upon the precedent of this Court and Smith und the record 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 established under Rule 91(f), fraud is found and failure 17 18 to file fraud is appropriately determined by respondent. Generally, section 6751(b)(1) requires personal, 19 written supervisory approval of a determination by the 20 21 22 23 24 25 respondent to apply a penalty for fraud under section 6663. Producing evidence of such compliance has been deemed to be part of respondent's burden of production under Section 7491(c). However, section 7491(c) does not apply in this case because petitioner is a corporation and respondent does not have a burden of production with $73)4064250 operationseescribersnet www.esalbersect respect to section 6751(b)(1). 8 Dynamo Holdings Limited v. Commissioner, 150 T.C. No. 10 (2018). In conclusion, we sustain respondent's motion for default judgement and will enter a decision in accord with the taxes and additions to tax determined as reflected in respondent's motion. This concludes the Court's oral findings of facts and opinion in this case. (Whereupon, at 9:33 a.m., the above-entitled matter was concluded.) 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 ) aibers