TAX COURT OPINION

Case: Gary L. Barrett & Carol D. Barrett
Docket Number: 372-11
Judge: Halpern
Opinion Type: bench
Filed: 04/11/2012
Pages: 4

UNITED STATES TAX COURT WASHINGTON, DC 20217 GARY L. BARRETT & CAROL D. BARRETT, ) Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 372-11. ) ) 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 petitioners and to respondent a copy of the pages of the transcript of the trial in the above case before Judge James S. Halpern at Los Angeles, California on March 1, 2012, containing his oral findings of fact and opinion rendered at the conclusion of trial. In accordance with the oral findings of fact and opinion, a decision will be entered under Rule 155. (Signed) James S. Halpern Judge Dated: Washington, D.C. April 11, 2012 ED 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 3 Bench Opinion by Judge James S. Halpern Barrett v. Commissioner Docket No. 372-11 March 1, 2012 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 made pursuant to the authority granted by Section 7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court Rules of Practice and Procedure. Unless otherwise indicated, all section references are to the Internal Revenue Code in effect for the year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure. Respondent determined a deficiency of $26,855 in Petitioners' Federal income tax for 2007 and also determined an accuracy-related penalty of $5,371 for 2007. The only issue remaining for decision is whether Petitioners had reasonable cause for the underpayment giving rise to the penalty. Section 6662 (a) imposes an accuracy-related 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 penalty of 20.percent of the portion of an underpayment of tax attributable to, among other things, any substantial understatement of income tax. Section 6664 (c) (1) provides that the accuracy-related penalty does not apply to any part of an underpayment if it is shown that the taxpayer acted with reasonable cause and in good faith. Section 1.6664-4(b), Income Tax Regs., provides in pertinent part "The j7C determination of whether a taxpayer acted with reasonable cause and in good faith is made on a case- by-case basis;taking into account all pertinent facts and circumstances. Generally, the most important factor is the extent of the taxpayer's effort to assess the taxpayer's proper tax liability." Petitioners concede a substantial understatement of tax but argue with respect to their omission of $55,030 of taxable partnership income that Petitioner husband failed to receive a Form K-1 from the partnership showing that income. Petitioner husband knew of his partnership interest, and he understood that it could have produced income. He also knew that partnership income is taxed to a partner without the necessity of distribution. The unavailability of information or records does not necessarily establish reasonable cause for failure to 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 file a timely return. Elec. & Neon, Inc. v. Commissioner, 56 T.C. 1324, 1342-1343 (1971), aff'd without published opinion, 496 F2d 876 (5* Cir. 1974). More specifically, a third party's failure to provide a necessary Schedule K-1 is not sufficient to establish reasonable cause. See Van Ryswyk v. Commissioner, T.C. Memo, 2009-189; Dunne v. Commissioner, T.C. Memo 2008-63. Petitioners have failed to show reasonable cause for any portion of the underpayment. This concludes the Court's oral findings of fact and opinion in this case. Because Respondent in his pretrial memorandum states that there is an error in the notice of deficiency with respect to dividend income, decision will be entered under Rule 155. (Whereupon, at 10:15 a.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // Heritage Reporting Corporation (202) 628-4888