TAX COURT OPINION

Case: Chedley Aouriri
Docket Number: 4386-18S
Judge: Guy
Opinion Type: bench
Filed: 04/22/2019
Pages: 12

SEC UNITED STATES TAX COURT WASHINGTON, DC 20217 CHEDLEY AOURIRI, Petitioner, v. ) ) ) ) Docket No. 4386-18S. 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 trial in the abovecaptioned case before Special Trial Judge Daniel A. Guy, Jr. at Portland, Oregon, on April 3, 2019, 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, an appropriate decision will be entered. (Signed) Daniel A. Guy, Jr. Special Trial Judge Dated: Washington, D.C. April 22, 2019 SERVED Apr 22 2019 Received 4/9/2019 IN THE UNITED STATES TAX COURT SEC In the Matter of: CHEDLEY AOURIRI, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) Docket No. 4386-18S ) ) ) ) ) ) ) ) Pages: 1 through 10 Place: Portland, Oregon Date: April 3, 2019 IN THE UNITED STATES TAX COURT 1 In the Matter of: CHEDLEY AOURIRI, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) Docket No. 4386-18S ) ) ) ) ) ) ) ) United States District Court Mark O. Hatfield U.S. Courthouse 1000 Southwest Third Avenue Courtroom 13A Portland, Oregon 97204 April 3, 2019 The above-entitled matter came on for bench opinion, pursuant to notice at 8:39 a.m. BEFORE: HONORABLE DANIEL A. GUY, JR. Special Trial Judge APPEARANCES: For the Petitioner: No Appearance For the Respondent: No Appearance 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 P R O C E E D I N G S 2 (8:39 a.m.) THE CLERK: Docket number 4386-18S, Chedley Aouriri. (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 Bench Opinion by Special Trial Judge Daniel A. Guy, Jr. 3 APril 3, 2019 Chedley Aouriri v. Commissioner of Internal Revenue Docket No. 4386-18s 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. 1 2 3 4 5 6 7 8 9 10 This proceeding for the redetermination of a 11 deficiency is a small tax case conducted pursuant to the 12 Provisions of section 7463 of the Internal Revenue Code of 13 1986, as amended, and Rules 170 through 174 of the Tax 14 Court Rules of Practice and Procedure. 15 This bench opinion is made pursuant to the 16 authority granted by section 7459(b) of the Internal 17 Revenue Code of 1986, as amended, and Rule 152 of the Tax 18 Court Rules of Practice and Procedure. Hereinafter in 19 this bench opinion, unless otherwise indicated, section 20 21 22 23 references are to the Internal Revenue Code of 1986, as amended, in effect for 2015, and Rule references are to the Tax Court Rules of Practice and Procedure. Respondent issued a notice of deficiency to 24 Petitioner determining an income tax deficiency of $7,181 25 for the taxable year 2015 and an accuracy-related penalty under section 6662(a) of $1,436. Petitioner invoked the 4 Court's jurisdiction by filing a timely petition for redetermination under section 6213(a). At the time the petition was filed, petitioner resided in Oregon. He appeared at trial pro se. Amy B. Ulmer appeared on behalf of respondent. The parties stipulated to some of the underly facts in the case. At trial, respondent conceded that petitioner is not liable for any accuracy-related penalty under section 6662(a) for 2015, and petitioner conceded that he failed to report $308 of income attributable to a State tax refund. The sole issue remaining for decision is whether 1 2 3 4 5 6 7 8 9 10 11 12 13 petitioner was obliged to include in taxable income a 14 retirement distribution as described below. 15 Background 16 17 18 In 2015 petitioner received a distribution of $70,000 from an individual retirement account (IRA #1470) that he maintained with State Street Bank and Trust 19 Company (State Street). State Street issued to petitioner 20 21 a Form 1099-R, Distributions From IRAs, which reported the $70,000 distribution as a normal distribution (Code 7), 22 but stated that the taxable amount was not determined. 23 Petitioner reported the $70,000 Imh distribution on line 24 15a of his 2015 Form 1040, U.S. Individual Income Tax 25 Return, but he concluded that none of the distribution dbers 5 constituted taxable income and he therefore left line 15b of his tax return blank. Respondent determined in the notice of deficiency that petitioner should have included the full amount of the IRA distribution in taxable income. Petitioner contends that no part of the distribution should be included in taxable income because the funds that he contributed to the IRA were nondeductible (i.e., the funds had previously been subject to Federal income tax). Petitioner offered into evidence account statements for various retirement accounts that he 1 2 3 4 5 6 7 8 9 10 11 12 13 maintained for the calendar years ending in 2003 and 2004. 14 One such partial statement shows that petitioner withdrew 15 $135,915 from an "Intel 401(k) Savings Plan" in 2003. In 16 addition, a Form 5498, IRA Contribution Information, shows 17 18 that petitioner had three IRAs with State Street in 2004: IRA #1450 with a balance of $104,014, IRA #1470 with a 19 balance of $185,489, and IRA #1048 with a balance of 20 21 $152,170 The Form 5498 does not, however, provide any information about the source(s) 22 of contributions to the accounts. 23 Petitioner also offered into evidence a Notice 24 CP2000, dated May 9, 2005, indicating that the IRS had 25 proposed an increase of $16,217 to his Federal income tax ribers for 2003. Petitioner testified that 6 the Notice CP2000 was issued to him in connection with a botched roll-over of a retirement distribution (presumably the funds that he had withdrawn from his Intel 401(k) account) and that he subsequently contributed the balance of those funds (approximately $100,000) to an IRA at State Street. On cross examination, petitioner acknowledged that he had multiple retirement accounts between 2003 and 2015. He also acknowledged that he had taken multiple 1 2 3 4 5 6 7 8 9 10 distributions from his various retirement accounts between 11 2003 and 2015. 12 Discussion 13 14 15 16 The Commissioner's determination of a taxpayer's liability in a notice of deficiency normally is presumed correct, and the taxpayer bears the burden of proving that the determination is incorrect. Rule 142(a); Welch v. 17 Helvering, 290 U.S. 111, 115 (1933). Petitioner does not 18 19 20 21 contend, and the record does not establish, that the burden of proof shifts to respondent under section 7491(a) as to any issue of fact. Under section 408(d)(1), "any amount paid or 22 distributed out of an individual retirement plan shall be 23 included in gross income by the payee or distributee * * * 24 in the manner provided under section 72." See Campbell v. 25 Commissioner, 108 T.C. 54, 61 (1997). The term stem "individual retirement plan" includes an IRA. Secs. 7 7701(a)(37) and 408(a) and (b). Generally, taxpayers have no basis in an IRA. Sec. 1.408-4(a)(2), Income Tax Regs. A taxpayer may have basis in IRA contributions to the extent the contributions are considered an "investment in the contract". See secs. 72(e), 408(d); Alpern v. Commissioner, T.C. Memo. 2000- 246. Nondeductible contributions to an IRA minus any prior withdrawals or distributions of nondeductible contributions constitutes a taxpayer's investment in the contract--an amount that is not includable in the taxpayer's income. Sec. 72(e)(6); Campbell v. 1 2 3 4 5 6 7 8 9 10 11 12 13 Commissioner, 108 T.C. at 61-62; Hoang v. Commissioner, 14 15 16 17 18 19 T.C. Memo. 2006-47. Nondeductible contributions, however, normally must be designated as such and reported on Form 8606, Nondeductible IRAs, in the manner prescribed by the Internal Revenue Code. Sec. 408(o)(4). Petitioner testified and honestly believes that the funds that he deposited in the IRA in question were 20 nondeductible contributions, rendering the entire 2015 21 distribution nontaxable. This is not a case, however, 22 where the Court should rely on petitioner's testimony 23 alone to carry his burden of proof. See Hoang v. 24 Commissioner, T.C. Memo. 2006-47, and cases cited therein. 25 Unfortunately, petitioner was unable to provide the Court 8 with any solid, objective evidence to corroborate his testimony. The records that he produced provided only a Partial and incomplete picture of his retirement account activities. In particular, although petitioner apparently withdrew funds from an Intel 401(k) account in 2003, there is no evidence that petitioner included those funds in taxable income that year or that they were deposited to the IRA in question. In this regard, although the record shows that the IRS proposed to increase petitioner's 1 2 3 4 5 6 7 8 9 10 Federal income tax for 2003, there is no record 11 identifying the specific item of unreported income or 12 disallowed deduction or credit underlying the proposed 13 14 15 16 17 18 assessment. Similarly, petitioner offered no evidence that he reported any nondeductible contributions to an IRA on Form 8606. Sec. 408(o)(4). Instructions accompanying Form 8606 state that a taxpayer must keep copies of records, including completed Forms 8606 for all applicable years, in order for the taxpayer to verify the nontaxable 19 portion of an IRA withdrawal or distribution. 20 21 22 On this record, the Court is unable to conclude that petitioner's tax basis in the IRA in dispute was anything other than zero. Sec. 1.408-4(a)(2). Income Tax 23 Regs.; see sec. 72(e) (2) (B). Consequently, respondent's 24 25 determination as to that issue is sustained. To reflect the foregoing and the parties' ribers concessions, an appropriate decision will be entered. This concludes the Court's oral findings of fact and 9 opinion. (Whereupon, at 8:52 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 CERTIFICATE OF TRANSCRIBER AND PROOFREADER 10 CASE NAME: Chedley Aouriri v. Commissioner DOCKET NO.: 4386-18S We, the undersigned, do hereby certify that the foregoing pages, numbers 1 through 10 inclusive, are the true, accurate and complete transcript prepared from the verbal recording made by electronic recording by Bruce Carlson on April 3, 2019 before the United States Tax Court at its session in Portland, OR, in accordance with 1 2 3 4 5 6 7 8 9 10 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 Transcriber Jessica Hernandez Proofreader 4/9/19 Date 4/9/19 Date 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25