TAX COURT OPINION

Case: Roy G. Magnuson
Docket Number: 24305-15
Judge: Gustafson
Opinion Type: bench
Filed: 11/03/2016
Pages: 10

UNITED STATES TAX COURT WASHINGTON, DC 20217 DRC ROY G. MAGNUSON, Petitioner, v. ) ) ) ) Docket No. 24305-15. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ORDER Pursuant to Rule 152(b) of the 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 proceedings in the above case before the undersigned judge at Columbia, South Carolina, on October 18, 2016, 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 under Rule 155. (Signed) David Gustafson Judge Dated: Washington, D.C. November 3, 2016 SERVED Nov 03 2016 Capital Reporting Company 3 1 Bench Opinion by Judge David Gustafson 2 October 18, 2016 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Roy G. Magnuson v. Commissioner Docket No. 24305-15 The Court has decided to render the following as its oral Findings of Fact and Opinion in this case. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code, and Tax Court Rule 152; and it shall not be relied on as precedent in any other case. Petitioner Roy G. Magnuson filed no tax return for the year 2012. (Stip. 2.) By a notice of deficiency dated June 22, 2015 (Ex. 3-J), the Internal Revenue Service ("IRS") determined a deficiency in Mr. Magnuson's 2012 Federal income tax, plus additions to tax. After respondent's concession of a mortgage interest deduction (Stip. 13; Ex. 7-J), the issues for decision are how much taxable compensation Mr. Magnuson received from his employer, 20 whether he is entitled to any deductions above those 21 22 23 24 25 the IRS allowed, and whether he was entitled to "single" filing status. The case was tried in Columbia, South Carolina, on October 17, 2016. Mr. Magnuson represented himself, and respondent was represented by Olivia 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 1 Hyatt Rembach. 2 3 4 5 6 7 FINDINGS OF FACT Mr. Magnuson was once married. Sometime before 2012 his wife left him. She moved to Ohio and lived in various other places. Mr. Magnuson alleges that they are divorced, but he has no court order or decree so stating and did not seem to know what court 8 might have actually issued any decree of divorce. He 9 did not prove that he is divorced or legally 10 11 separated. In 2012 Mr. Magnuson was employed by Detail 12 Roofing, Inc. ("DRI"). In 2012 he received from DRI 13 14 15 wage income of $27,000 and non-employee compensation of $35,437, totaling $62,437 (Stip. 6-7), and DRI reported those amounts to Mr. Magnuson and to the 16 Government on Form W-2 (Stip. 5, Ex. 4-J) and Form 17 18 19 20 21 1099. DRI did not withhold any income tax from that compensation. (Ex. 4-J.) Mr. Magnuson does not dispute his receipt of this compensation, but he alleges that it was devoted to ministry purposes. Mr. Magnuson considered himself devoted to 22 Christian ministry; and to that end he spent--to an 23 24 25 extent he did not document and that we cannot find-- some portion of his DRI compensation on ministry- related activities. He presented no documentation 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 whatsoever to corroborate those expenditures. He made some of the expenditures in connection with activities of "Muse Ministries", which is an entity he formed that, he admits, is not a section 501(c)(3) organization, since he reserves the right to use the entity to engage in political activity that is not permitted for 501(c)(3) organizations. We are unable to find any charitable contributions. Mr. Magnuson alleges that in 2012 he lived under a "vow of poverty", which he first signed in 2005. He did not offer into evidence a copy of this vow, and he did not describe any detail about the nature of this vow; he does not say that he surrendered to anyone else any control over the spending of his compensation; and he did not show that he was obliged to account to anyone for his expenditures or his activities. We find that Mr. Magnuson did not have any discernible or verifiable vow that affected his dominion over his earnings. Mr. Magnuson did not file a Federal income tax return for 2012. (Stip. 2.) The IRS received from DRI a Form W-2 and a Form 1099 reporting Mr. 23 Magnuson's 2012 compensation, so the IRS prepared a 24 25 substitute for return ("SFR") pursuant to section 6020(b) (Ex. 2-J), and on June 22, 2015, issued to 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 him a notice of deficiency (Ex. 3-J). In the notice the IRS determined: that all of Mr. Magnuson's compensation from DRI was taxable income (with the non-employee compensation portion being subject to self-employment tax); and that he was liable for the resulting deficiency plus additions to tax. On September 21, 2015, Mr. Magnuson timely mailed a 8 petition to this Court challenging the IRS's 9 deficiency determination. At that time he resided in 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 South Carolina. (Stip. 1.) OPINION I. General evidentiary principles The IRS's determination in the notice of deficiency is presumed correct. The taxpayer generally bears the burden to prove his entitlement to any deductions he claims, Rule 142(a); and a taxpayer must satisfy the specific requirements for any deduction he claims, see INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). Taxpayers are required to maintain records sufficient to substantiate their income and deductions. See sec. 6001; 26 C.F.R. sec. 1.6001-1(a); see also id. sec. -1(e) ("The books or records * * * shall be retained so long as the contents thereof may become material in the administration of any internal revenue law"). 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 7 1 Mr. Magnuson admits he did not do so. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 II. Taxable income Mr. Magnuson has conceded his receipt of the compensation that DRI reported and on which the IRS's notice of deficiency is based. Section 61(a) broadly defines gross income as "all income from whatever source derived", and Mr. Magnuson's intention to devote part of his compensation to ministry-related expenditures does not affect its character as taxable income to him. III. Deductions If Mr. Magnuson devoted a portion of his DRI compensation to religious purposes, then the manner in which that might affect his tax liability is as contributions to or for the benefit of a tax-exempt organization described in sections 501(c)(3) and 170(c)(2). However, Mr. Magnuson made no attempt to substantiate charitable contributions in the manner required by the regulations (cf. 26 C.F.R. sec. 1.170A-13(a)(1)), nor even to show that he made expenditures for the benefit of an exempt organization. We therefore cannot allow any deduction for a charitable contribution. IV. Filing status "Single" filing status is more advantageous to 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 the taxpayer than "married filing separately" status. See sections 1(c) and 1(d). The IRS's notice of deficiency presumes "married filing separately". Section 1(d) provides that "married" is as defined in section 7703, which provides that a person is not "married" if he is divorced or separated (see sec. 7703(a)(2)) or lives apart from his spouse with a dependent child (see sec. 7703(b)). At trial Mr. 9 Magnuson contended that in 2012 he was divorced and 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that he is therefore entitled to "single" filing status. But he did not prove that he was divorced or legally separated, or that he lived with a dependent child. V. Additions to tax The IRS has the burden of production to show that Mr. Magnuson is liable for the three additions to tax determined against him in the notice of deficiency. See section 7491(c). The Commissioner carried that burden in this case. A. Failure to file Section 6651(a)(1) authorizes the imposition of an addition to tax for failure to file a timely return, and Mr. Magnuson stipulated that he failed to file a return for 2012. (Stip. 2.) The addition applies "unless it is shown that such 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 9 1 failure is due to reasonable cause and not due to 2 willful neglect". Sec. 6651(a)(1). Mr. Magnuson 3 4 5 contended that his non-filing and non-payment were the result of ignorance or misunderstanding, arising from a supposed instance (in an unspecified year) in 6 which he filed a return, received a $7,000 refund, .7 discerned that his activities did not result in a tax 8 9 liability, and decided to forego filing returns thereafter in order to leave the money with the 10 Government. Especially given his history of disputes 11 with the IRS and his previous suit in this Court, 12 13 14 Docket No. 22368-13, we find that testimony incredible. Mr. Magnuson did not show reasonable cause for his non-filing of his 2012 tax return in 15 April 2013 or at any time thereafter. 16 17 18 19 B. Failure to pay Section 6651(a)(2) imposes an addition to tax for failure to pay the amount of tax shown on a return, and the Commissioner contends that Mr. 20 Magnuson is liable for this addition for 2012. A 21 22 23 24 25 return made by the Secretary under section 6020(b)--i.e., an SFR--is treated as "the return filed by the taxpayer for purposes of determining the amount of the addition" under section 6651(a) (2). See sec. 6651(g)(2). Mr. Magnuson stipulated that 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 23 24 25 the Commissioner prepared an SFR for him (see Stip. 4; Ex. 2-J), and the Commissioner has thus carried his burden of production to show that Mr. Magnuson is liable for the addition to tax under section 6651(a).(2). Mr. Magnuson has not made any defense, and he is liable for the failure-to-pay addition to tax. C. Failure to pay estimated tax Section 6654 imposes an addition to tax on an individual taxpayer who underpays his estimated tax. A taxpayer must pay estimated tax for any year in which he has a "required annual payment". Sec. 6654(d). A "required annual payment" is defined in section 6654(d)(1) (B), in pertinent part, as "the lesser of (i) 90 percent of the tax shown on the return for the taxable year (or, if no return is filed, 90 percent of the tax for such year)", or (ii) if the individual filed a return for the preceding taxable year, then "100 percent of the tax shown on the return of the individual for the preceding taxable year." Thus, the IRS's burden of production under section 7491(c) requires it to produce, for each year for which the addition.is asserted, evidence that the taxpayer had a required annual payment under section 6654(d); and in order to do so, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 5 6 7 8 9 10 11 12 13 it must demonstrate the tax shown on the taxpayer's return for the preceding year or that the taxpayer filed no return. The Commissioner met this burden here by showing that Mr. Magnuson did not file a return for 2009. (Ex. 5-J) . Consequently, the Commissioner carried his burden of production to show that Mr. Magnuson is liable for the section 6654 addition, and he made no defense. He is therefore liable for this addition for failure to pay estimated tax. So that the tax liability (and the corresponding additions to tax) can be recomputed, decision will be entered under Rule 155, during which process Mr. 14 Magnuson will have the opportunity to correct any errors in the recalculation in Exhibit 7-J. This concludes the Court's oral Findings of Fact and Opinion in this case. (Whereupon, at 5:41 p.m., the above- entitled matter was concluded.) 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com