TAX COURT OPINION

Case: Allan L. Blank
Docket Number: 31250-09S
Judge: Colvin
Opinion Type: bench
Filed: 12/01/2010
Pages: 7

UNITED STATES TAX COURT WA SHINGTON, DC 20217 Docket No. 31250-09S ALLAN L . BLANK, Petitioner, v. 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 petitioners and to respondent a copy of the trial of this case before Judge Haines at San transcript of Francisco, California on November 15, 2010, containing his oral findings of trial. fact and opinion rendered at the pages of the the conclusion of the In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) Harry A. Haines Judge Dated: Washington, D.C. December 1, 2010 SERVED DEC - 2 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 Senior Judge Harry A. Haines Allan L. Blank v. Commissioner Docket No. 31250-09S November 17, 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. Petitioner is an individual who maintained his legal residence in the state of California at the time his petition was filed. All section references are to the Internal Revenue Code in effect for 2005. Petitioner failed to file a federal income tax return for 2005 and failed to make any estimated payments with respect to his 2005 income tax liability, even though his 2004 federal income tax return reported a tax liability of approximately $4000, which Petitioner paid. During 2005, Petitioner received distributions from an individual retirement account at Citibank, MA, totaling $65,028, and interest payments from Citibank West, FSB, in the amount of $27. On July 14th, 2008, Respondent prepared a substitute for return for Petitioner's 2005 tax year, in accordance with section 6020(b). On October 20, 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 4 2008, Respondent mailed Petitioner a notice of deficiency for tax year 2005 in which Respondent determined a deficiency of $10,878, and additions to tax for failure to file under section 6651(a) (1) of $2447.55, for failure to pay under section 6651(a) (2) of $1522.92, and for failure to make estimated payments under section 6654(a) of $436.34. Petitioner contests the taxability of the distributions from the individual retirement account and the determination that Petitioner is liable for additions to tax under sections 6651(a) (1), 6651(a) (2), and 6654(a) for 2005. Petitioner has the burden of proving that the distributions he received from the individual retirement account were not taxable. Rule 142(a); section 6001. Under section 61(a), gross income includes all income from whatever source derived. Section 408(d) (1) states that 'except as otherwise provided in this subsection, any amount paid or distributed out of an individual retirement plan shall be included in gross income by the payee or distributee, as the case may be, in the manner provided under section 72'. Petitioner has not established that the amounts received from the individual retirement account are not taxable. Therefore, we hold that the distributions totalling $65,028 from Citibank, NA, are taxable in 2005, pursuant to sections 408(d) (1) and 61. 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 5 Petitioner disputes the additions to tax determined by Respondent. If a taxpayer assigns error to the Commissioner's determination that the taxpayer is liable for an addition to tax or penalty, the Commissioner bears the burden under section 7491(c) of producing evidence that the addition to tax or penalty applies. See Swain v. Commissioner, 118 Tax Court Reports 358, 364-365 (2002); Higbee v. Commissioner, 116 TC 438, 446 (2001). In order to meet his burden of production the Commissioner must come forward with sufficient evidence that it is appropriate to impose a relative addition to tax or penalty. Higbee v. Commissioner, supra at 446. Once the Commissioner meets his initial burden of production, the taxpayer must come forward with persuasive evidence that the Commissioner's determination is incorrect. Id. at 447. Section 6651(a) (1) imposes an addition to tax for failure to file a timely federal income tax return, and section 6651(a) (2) imposes an addition to tax for failure to pay the amount of tax shown on a return, unless it is shown that such failures are due to reasonable cause and not due to willful neglect. See United States vs. Boyle, 469 US 241, 245 (1985). A failure to file a timely return is due to reasonable cause if the taxpayer exercised ordinary business 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 care and prudence but nevertheless was unable to file the return within the prescribed time. See section 301.6651- 1(c) (1), Proced. & Admin. Regs. Willful neglect means a conscious, intentional failure to file or reckless indifference toward filing. See United States v. Boyle, supra at 245. Willful neglect is not present in this case. Petitioner stipulated that he did not file a return for 2005 and did not make payments to the IRS with respect to his 2005 tax liability. These admissions satisfy Respondent's burden of production und'er section 7491(c), and establish Petitioner's liability for the section 6651(a) (1) and 6651(a) (2) additions to tax, unless Petitioner can prove that the failure to file a timely return and to pay was due to reasonable cause. Petitioner failed to introduce any evidence showing that the penalties do not apply because of the reasonable cause, and thus we hold that Petitioner is liable for the additions to tax under such sections. Section 6654(a) imposes an addition to tax on an individual taxpayer who underpays his estimated tax. Unless a statutory exception'applies, the section 6654(a) addition to tax is mandatory. See section 6654(a), -(e); Recklitis v. Commissioner, 91 TC 874, 913 (1988). And section 6654 does not contain a general 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 exception for reasonable cause or absence of willful neglect. See Wheeler v. Commissioner, 127 TC 200, 212 (2006). None of the statutory exceptions under section 6654(e) applies. To satisfy his burden of production under 7491(c), Respondent established that Petitioner was required to file federal income tax returns for 2005; that Petitioner did not file a return; that Petitioner paid federal income taxes on his 2004 federal income tax return; and that Petitioner did not make any other tax payments for 2005. This evidence is sufficient to satisfy Respondent's burden of production, establishing that Petitioner was required to make quarterly installments of the income taxes due for 2005 under section 6654 and that Petitioner underpaid his estimated tax liability for such year. See Wheeler v. Commissioner, supra. Petitioner has failed to introduce any evidence showing that the penalty under section 6654 should not apply, and therefore we hold that Petitioner is liable for the addition to tax. In reaching our holding we have considered all arguments made, and tŠ the extent not mentioned, we conclude that they are moot, -irrelevant-r-and without merit. To reflect the foregoing, the Court holds that the additions to tax under 6651(a) (1), section 6651(a) (2), and 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 section 6654 apply for 2005. A decision will be entered for Respondent. This concludes the Court's oral findings of fact and opinion. (Whereupon, at 10:18 a.m., the bench opinion in the above-entitled matter was concluded.) // // // // // // // // // // // // // // // // // // // Heritage Reporting Corporation (202) 628-4888