TAX COURT OPINION

Case: Kevin C. Bowden
Docket Number: 14412-09
Judge: Colvin
Opinion Type: bench
Filed: 12/06/2010
Pages: 9

UNITED STATES TAX COURT WASHINGTON, DC 20217 KEVIN C. BOWDEN, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ) ) ) ) ) , O R D E R Docket Nos 14412-09. 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 Joseph Robert Goeke at Tampa, Florida, on October 28, 2010, containing his oral findings of fact and opinion rendered at the conclusion of the trial. In accordance with -the oral findings of- fact and opinion, a decision will be entered under Rule 155. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. December 6, 2010 SERVÈD DEC - 9 2010 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 Bench Opinion by Judge Joseph Robert Goeke Kevin C. Bowden v. Commissioner Docket No.: 14412-09 Thursday, October 28, 2010 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. This Bench Opinion is rendered pursuant to Internal Revenue Code Section 7459(b) and Rule 152 of the Tax Court Rule of Practice and Procedure. Hereinafter Section references will be to the Internal Revenue Code and Rule references will be to the Tax Court Rule of Practice and Procedure. The case is before the Court based upon the Court's jurisdiction to review timely petitions after Notice of Deficiency. A Notice of Deficiency was issued to the Petitioner for the taxable year ending December 31 , 2006, asserting a deficiency of $167,640 and additions to tax under Section 6651(a) (1), 6651(a) (2) and Section 6654(a). Prior to trial Respondent filed a motion to show cause why proposed facts and evidence should not Heritage Reporting Corporation (202) 628-4888 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 6 I 4 be accepted as established. After providing Petitioner an opportunity to respond to said motion, and his failure to respond; the Court granted the motion and accepted as established the attached St-ipulation of Facts to Respondent' s motion. Parties both filed trial memorandums which are also made part of the record in this case. Pursuant to Rule 142 (a) the Petitioner would have the burden of proof in this case apart from the application of Section 7491 if it might operate to shift the burden to Respondent. But Petitioner has failed to establish that he cooperated with Respondent during audit and there's no basis to shift the burden of proof to Respondent, therefore, Petitioner has the burden of proof in this case. There are two principal issues remaining relative to the underlying deficiency in this case. The first is whether the Petitioner received income based upon the sale of residential real property during 2006. The second issue is whether the Petitioner received income based upon the withdrawal of $32,882.11 from an individual retirement account in 2006. At the time the Petition was filed in this case the Petitioner resided in the State of Florida. Heritage Reporting Corporation (202) 628-4888 1 ! 1 2 3 4 5 7 8 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5 The Petitioner failed to file a Federal Income Tax Return for 2006, and the Petitioner did sell real property in Costa Mesa, California, for $480,000 in 2006. Petitioner also did withdrawM $32,882.11 from an individual retirement account in 2006. * Petitioner has made no income tax payments for 2006 with the exception of a payment of $60..98 on June 1st, 2010 . Petitioner did not make any estimated tax payments for 2006. Petitioner' s arguments, relative to the two significant deficiency adjustments are, first, relative to the real property adjustment, that Respondent had previously agreed that he was entitled to exclusion of the amount of gain on the sale of real property because it was a personal residence and such exclusion was appropriate under Section 121. Petitioner relies upon a letter which was sent to him by an Appeals Officer properly assigned to his case with settlement authority over his case. Respondent does not dispute that the Appeals Officer had settlement authority over Petitioner' s case nor that Petitioner received the letter which is attached to Petitioner' s trial memorandum. The pertinent part of the letter states: As Heritage Reporting Corporation (202) 628-4888 1 2 3 4 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 † previously discussed and advised in writing, the sale \ 6 of residence issue has been resolved. The resolution of that issue, as reflected in the letter, was a complete 'concession by Respondent. However, the letter also has information relative to the additions to tax and other issues in the case and included an attachment of a computation to settle the case in totality,. which Petitioner failed to sign. The question is whether the indication that the real property issue had been resolved should be treated as a resolution of that issue in a settlement which is binding upon Respondent. As stated, the Settlement Officer, in this case being an Appeals Officer, had authority to resolve the case pursuant to Rev Proc 87-24 1987-1 C.B. 720, and Treasury Reg Section 601.106. A comprehensive discussion of the ,case law relative to the binding nature of settlements can be found in FPL Group Inc. v. Commissioner T. C. Memoe 2008-144. In that case it is clear that a settlement is treated similar to a contract in that there has to be an offer and acceptance and the acceptance has to be by someone authorized to do so. In the present case the offer, as reflected Heritage Reporting Corporation (202) 628-4888 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 7 in the letter on the real estate issue, was a full concession by Respondent . So there is little concerns with whether it was accepted by Petitioner. The overriding question is whether it was in fact an offer or whether it was contingent upon the resolution of all the other issues in the case . We note that if read in the context of the overall letter there is no conditional aspect on the statement that the sale of residence issue has been resolved. The letter does not say resolved based upon your agreement to the remaining issues . It simply says, this issue has been resolved. At trial Petitioner appeared Pro Se and relied upon this assertion. Petitioner also put on evidence to establish that he owned the real property in question and that it was his residence . However, because he did not file a return and was not entitled to joint return treatment, even though he was married in 2006, Petitioner would not- be entitled to an exclusion of the full amount of the sale of the real estate based upon his status as an individual return filer. The settlement envisioned by the Appeals Officer obviously would have provided Petitioner treatment as a joint return filer together with his wife for 2006. Heritage Reporting Corporation (202) 628-4888 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 8 The question before us is whether this settlement should be treated as binding on Respondent on the facts and based upon the letter sent to the Petitioner in this case. We find that it should and that Petitioner should be relieved of liability associated with the adjustment to his real property, and that that issue was settled by an appropriately designated Appeals Officer and that settlement of that single issue should be binding upon Respondent . We next turn to the remaining issues in the case, the first being the withdrawal from the IRA account. Petitioner's sole argument is that he rolled that amount over into a bank account in Indonesia. He has failed to establish that the amount he rolled over was transferred to a qualified pension account, which would be necessary to avoid the current taxability of the withdrawal in 2006. Petitioner made no attempt to argue that the bank in Indonesia was qualified to set up an IRA account, nor did he argue that he had an IRA account in Indonesia where the money was redeposited. - In addition, Petitioner has failed to establish that he meets age requirements, such that he could avoid the early withdrawal penalty under Section 72(t) with respect to the IRA amount. Therefore, we sustain Respondent's Heritage Reporting Corporation (202) 628-4888 | 3 4 5 6 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 9 determination that Petitioner taxable on the IRA amount and that he is subject to the early withdrawal penalty under Section 72(t) for the amount withdrawn. With respect to the additions to tax for delinquency under Section 6651 (a) (1) and the addition to tax for failure to pay pursuant to Section 6651 (a) (2), Petitioner has failed to show reasonable cause for failure to file a return for 2006 and for his failure to pay tax associated with the IRA withdrawal. Therefore, we sustain those additions to tax with respect to the deficiency adjustments that will result from the adjustment to income based upon the IRA withdrawal. Finally, we - determine( whether Pet it ioner is liable for the addition to tax for failure to pay estimated tax under Section 6654(a).2 -Petitioner did not make estimated tax payments but there's no evidence in the record as to whether Petitioner was required to make those payments because we do not know what his income was for the taxable year 2005. Given that, we find that Respondent has not carried the threshold burden with respect to that addition to tax and we do not sustain the addition to tax under Section 6654(a). The Court's analysis of these issues will require a Rule 155 computation. Heritage Reporting Corporation (202) 628-4888 t ! I ! 1 1 2 3 4 s 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 2s This concludes the Court's Oral Findings of Fact and Opinion in this case. (Whereupon, at 1:17 p.m., the bench opinion in the above-entitled matter was concluded.) 10 / // // / // // // / // // // // // / // // // // / // // Heritage Reporting Corporation (202) 628-4888