TAX COURT OPINION

Case: Gregory G. Williams
Docket Number: 32187-15
Judge: Thornton
Opinion Type: bench
Filed: 11/17/2016
Pages: 10

15 UNITED STATES TAX COURT WASHINGTON, DC 20217 GREGORY G. WILLIAMS, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) Docket No. 32187-15. ) ) ) ) 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 trial in the above case before Judge Michael B. Thornton at Winston-Salem, North Carolina, containing his oral findings 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 for respondent. (Signed) Michael B. Thornton Judge Dated: Washington, D.C. November 17, 2016 SERVED NOV 1 8 2016 Capital Reporting Company 3 1 Bench Opinion by Judge Michael B. Thornton 2 October 24, 2016 3 Gregory G. Williams v. Commissioner 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Docket No. 32187-15 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. Except as otherwise provided by Rule 152(c) of the Tax Court Rules of Practice and Procedure, the oral findings of fact and opinion shall not be relied upon as precedent. This bench opinion is made pursuant to the authority granted by section 7459'(b) and Rule 152. Section references are to the Internal Revenue Code in effect for the taxable years at issue. All rule references are to the Tax Court Rules of Practice and Procedure. All monetary amounts are rounded to the nearest dollar. This case was tried on October 24, 2016 in 20 Winston-Salem, North Carolina. Petitioner appeared 21 22 23 24 25 pro se. Tammie A. Geier appeared on behalf of respondent. Petitioner resided in North Carolina when the petition was filed. . By notice of deficiency, respondent determined a deficiency in petitioner's 20.12 Federal 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 2 3 4 5 6 7 8 income tax of $7,543 and a penalty under section 6662(a) of $1,219; respondent also determined a deficiency in petitioner's 20·13 Federal income tax of $44,'787 and a penalty under section 6662(a) of $4,677. The issues for decision are: (1) whether petitioner received taxable retirement distributions in the amount of $82,642 during 201G; (2) whether 9 petitioner is liable for a tax of $8,264 under 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 section 72(t) for early withdrawals from qualified plans in 2013; (3) whether petitioner must recognize' short-term capital gain from stock sales during 2013; (4) whether petitioner is entitled to charitable contribution deductions claimed on his Schedules A, Itemized Deductions, for'2012 and 2Ól3; (5) whbther petitioner is entitled to deductions claimed on his Schedules C, Profit or Loss From Business, for 2012 and 2013; and (6) whether petitioner is liable for penalties under section 6662(a) of $1,219 for 2012 and $4,677 for 2013. For the reasons explained, we hold in favor of respondent on all issues. FINDINGS OF FACT Petitioner and his spouse filed joint Forms 1040, U.S. Individual·Income Tax Return, for 2012 and 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 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 2013. Third parties reported to the IRS that petitioner received taxable retirement distributions in the total amount of $82, 6É2 during 20Î3: $40, 500 from Merrill Lynch; $25,016 from First Clearing LLC; $10,474 from State Street Retiree Services; $5,500 from Well Fargo Bank; and $1,152 from Vanguard Fiduciary Trust. All of the distributions were reported as "early distributions, with no knòwn exceptions". Petitioner turned 59 1/2 on December 19, 201-3. These distributions were not reported on petitioner's 2013 Form 1040. Third parties reported to the IRS that petitioner had taxable short-term capital gain of $655 in 2013 from the sale of Bank of America stock. This capital gain was not reported on petitioner's' 2013 Form 1040. Respondent disallowed portions of the cash charitable contribution deductions claimed by petitioner in 2012 and 2013 on his Schedules A. Respondent also disallowed portions of various deductions claimed by petitioner on Schedules C for 2012 and 2013. OPINION The Commissioner' s determinations in a 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 6 1 2 3 notice of deficiency are generally presumed correct, and the taxpayer bears the burden of proving those determinations erroneous. 'Rule 142(a); Welch v. 4 Helvering, 290 U.S. 111, 115 (1933). Petitioner does 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 not contend that the burden of production or proof should shift to respondent under sections 6201(d) or 7491(a); nor has he introduced any evidence to support such a burden shift. Petitioner therefore has the burden of proof. Section 61 provides that gross income includes "all income from whatever source derived, including * * * gains derived from dealings in property * * * [and] pensions". Third parties reported that petitioner received various taxable' retirement distributions in the total amount of $82,642 during 2013 and that petitioner had taxable short term capital gain of $655 from several sales of Bank of America stock in 2013. Petitioner has not disputed receiving these distributions or realizing such capital gain and has offered no evidence to the contrary. Consequently, we sustain respondent's determination that the entire amounts of the retirement distributions and capital gain are gross income to petitioner. Section 72(t) imposes a 10-percent tax on 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 7 the taxable amount of an early distribution from a qualified retirement plan unless an exception applies. Under Section 72(t)(2) (A)(i), a retirement distribution is early if made to an individual who has not attained the age of 59-1/2. All the aforementioned retirement- distributions were reported as "early distributions, 8 with no known exceptions". Petitioner has not 9 claimed that he received these distributions after-he 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 turned 59-1/2, nor has he argued that any other exception applies. Petitioner has offered no evidence to support such claims. Because petitioner has failed to challenge the tax on early distributions and because he has offered no evidence to meet his burden of proof, w'e hold that petitioner is liable for a tax under section 72(t) of $8,Ï64. Deductions are a matter of legislative grace; the taxpayer bears the burden of. substantiating his claimed deductions by keeping and producing records sufficient to enable the Commissioner to determine the correct tax liabi-ljty. Sec'. 6001; INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992-); sec. 1.6001+1(a), (e), Income Tax h Regs. Section 170 allows a deduction for 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 charitable contributions only if the deduction is properly verified according to various requirements set out in section 170 and associated regulations. Respondent disallowed portions of the cash charitable contribution deductions claimed by petitioner on his Schedules A for 2012 and 2013. Section 162(a) allows the deduction of "all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business". Respondent disallowed portions of various deductions claimed by petitioner on his Schedules C for 2012 and 2013. Petitioner has offered no evidence to substantiate deductions greater than respondent has allowed. We sustain respondent's determinations in this regard. Section 6662 imposes a penalty for an underpayment of tax attributable to, among other things, negligence or substantial understatement of income tax; the amount of the penalty is 20-percent of the portion of the underpayment so attributable. Under section 6664(c) (1), no section 6662 penalty.may be imposed if there was a reasonable cause for the underpayment and the taxpayer acted in good faith. Respondent asserts petitioner is liable 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 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 section 6662 penalties for 2012 and 2013 because he was negligent or because he substantially understated his income tax. Because we find that petitioner substantially understated his income tax, we do not consider whether petitioner was also negligent. Under section 6662(d)(1) (A), a substantial understatement of tax is defined as an understatement- of tax that exceeds the greater of 10-percent of the tax required to be shown on the tax return or $5,000. Based on our foregoing findings, petitioner understated tax owed for 2012 by $7,543. Respondent has determined: (1) that the section 6662 penalty is applicable to $6,095 of this amount; (2) that the total amount of tax required to be shown on (cid:16)042 petitioner's 2012 return was $10,574; and (3) that the amount of the section 6662 penalty for 2012 is $1,219. Based on our foregoing findings, petitioner understated tax owed for 2013 by $44,7'87. Respondent has determined: (1) that the section 6662 penalty is applicable to $23,v385 of this amount; (2) that the . total amount of tax required to be shown on 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 petitioner's 2013 return was $65,2804 and (3) that 24 25 the amount of the section 6662 penalty for 2013 is $4,%Ú7. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 The portions of petitioner's underpayments for 2012 and 2013 to which section 6662 applies each exceeded the greater of $5,000 or 10-percent of the tax required to be shown on the return. Respondent has therefore carried his burden of production with respect to showing a substantial understatement. Petitioner has not challenged the imposition of section 6662 penalties nor has he offered any evidence to show that such penalties- should not be imposed due to reasonable cause and good faith, or for any other reason. We therefore- hold that petitioner failed to meet his burden of persuasion and is liable for section 6662 penalties of $1,219 for 2012 and $4,677 for 2013. Petitioner seems to suggest that respondent made statements favorable to petitioner's case during the audit process; petitioner appears to imply that respondent should be bound by those statements. Yet even if evidence of such statements had been provided, "[a]s a general rule, this Court will not look behind a deficiency notice to examine the evidence used or the propriety of respondent's 23 motives or of the administrative policy or procedure 24 25 involved in making his determinations." Greenberg's Expre-ss, Inc. v. Commissioner, 62 T.C. 324, 327 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 (1974). Petitioner has given us no reason to depart from this rule in this case. Decision will be entered for respondent. This concludes the Court's oral findings of fact and opinion in these cases.. (Whereupon, at 11:35 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 25 866.488.DEPO www.CapitalReportingCompany.com