TAX COURT OPINION

Case: Elamin Hamoda Elbasha & Leyla A. Hashim
Docket Number: 6917-14S
Judge: Carluzzo
Opinion Type: bench
Filed: 04/02/2015
Pages: 8

UNITED STATES TAX COURT WASHINGTON, DC 20217 ELAMIN HAMODA ELBASHA & LEYLA A. HASHIM, Petitioner(s), v. KVC ) ) ) ) ) ) Docket No. 6917-14S COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ORDER Pursuant to the determination of the Court as set forth in its bench opinion rendered on March 20, 2015, 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 Special Trial Judge Lewis R. Carluzzo at Philadelphia, Pennsylvania, 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 for respondent. (Signed) Lewis R. Carluzzo Special Trial Judge Dated: Washington, D.C. April 2, 2015 SERVED Apr 03 2015 Capital Reporting Company 3 1 Bench Opinion by Special Trial Judge Lewis R. 2 Carluzzo 3 March 20, 2015 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Elamin Hamoda Elbasha & Leyla A. Hashim v. Commissioner Docket No. 6917-14S 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 (bench opinion). Unless otherwise noted, section references made in this bench opinion are to the Internal Revenue Code of 1986, as amended, in effect for the relevant period, and Rule references are to the Tax Court Rules of Practice and Procedure. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. This proceeding for the redetermination of a deficiency is a small tax case subject to the provisions of section 7463 and Rules 170 through 175. Pursuant to section 7463(b) the decision entered in this case shall not be treated as precedent for any other case. Except as provided in Rule 152(c), this bench opinion shall not be cited as authority. Elamin Mamoda Elbasha (petitioner) appeared 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 4 on his own behalf. Leyla A. Hashim appeared, unrepresented, after the trial had started. She did not sign the stipulation of facts entered into evidence or otherwise meaningfully participate in the trial. The case will be dismissed as to her for lack of prosecution. The decision to be entered against her will reflect the resolution of the disputed issues in this case. Kathleen K. Raup appeared behalf of respondent. In a notice of deficiency dated December 31, 2013 (notice), respondent determined a $14,988 deficiency in petitioners' 2011 Federal income tax and imposed a $2,997.60 section 6662(a) penalty. The issues for decision are: (1) whether petitioners are entitled to a charitable contribution deduction claimed on a Schedule A, Itemized Deductions, included with their 2011 joint Federal income tax return (return); and (2) whether petitioners are liable for a section 6662(a) penalty. Some of the facts have been stipulated and are so found. Petitioners resided in Pennsylvania at the time the petition was filed. Petitioner was born, raised, and educated in an under developed country. He came to the United States in 1991 where he continued his education. He 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 presently holds masters and PhD degrees in economics. In 2006 he became a United States citizen. During 2011 petitioner made wire transfers totaling $44,000 from his bank account(s) to two individuals living in a foreign country. We proceed, 6 without finding, that the $44,000 was, in turn, given 7 8 9 10 11 12 13 to several organizations (donees) located outside of the United States pursuant to his plan to enhance the living, educational and medical conditions of the people served by the donees. Nothing in the record suggests, much less establishes that any of the donees was "created or organized in the United States or in any possession thereof, or under the law of the 14 United States, any State, the District of Columbia, 15 16 17 18 19 20 21 22 23 24 25 or any possession of the United States." Sec. 170 (c) (2) . Petitioners' return was prepared by petitioner. On the Schedule A included with that return petitioners claimed a $44,000 charitable contribution deduction. The deduction relates to the above-described transfers. The entire deduction was disallowed in the notice and is here in dispute, as is the imposition of the section 6662(a) penalty. The parties dispute which of them bears the burden of proof. See sec. 7941. Proceeding as noted 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 above, we resolve the issue relating to petitioners' entitlement to the charitable contribution deduction upon legal rather than factual grounds, and petitioners' liability for a section 6662 penalty upon the preponderance of the evidence. That being so, we need not resolve the dispute between the parties on which of them bears the burden of proof on each issue. Turning our attention first to the disputed 10 charitable contribution deduction, we need to little 11 more than refer back to the above-quoted language 12 13 14 15 16 17 18 19 20 21 22 23 24 25 from section 170(c)(2). Because none of the donees fits within the description of organizations contained in that section of the Internal Revenue Code, petitioners are not entitled to a deduction for any contributions that might have been made to any of them. Furthermore, the disallowance of any such deduction for that reason is more than a "technicality" as suggested by petitioner in his presentation. After all, it is well settled that a taxpayer claiming a deduction on a Federal income tax return must demonstrate that the deduction is allowable pursuant to some statutory provision and further that the taxpayer has satisfied the requirements of the relevant statutory provisions. 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 Subject to various limitations and verification requirements, section 170(a) provides for a deduction for a charitable contribution made during the year, but a donation to an organization not described in section 170(c)(2) is not a charitable contribution 6 within the meaning.of section 170(a). Respondent's 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 disallowance of the deduction here in dispute is based upon petitioners' failure to satisfy a statutory requirement. That disallowance is hardly due to a technicality and is sustained. Next we consider whether petitioners should be held liable for a section 6662(a) penalty. Subsection (a) of section 6662 imposes an accuracy- related penalty of 20 percent of any underpayment that is attributable to various reasons specified in section 6662(b). IN this case, the deficiency and the underpayment of tax required to be shown on petitioners' return are computed in the same manner. See secs. 6211 and 6664(a). The section 6662(1) penalty is not imposed if a taxpayer can demonstrate (1) reasonable cause for the underpayment and (2) that the taxpayer acted in good faith with respect to the underpayment. Sec. 6664(c)(1). Regulations promulgated under section 6664(c) further provide that the determination of 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 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 reasonable cause and good faith "is made on a case- by-case basis, taking into account all pertinent facts and circumstances." Sec.1.6664-4(b) (1), Income Tax Regs. Some of the "facts and circumstances" include the taxpayer's level of education and the complexity of the tax issue in dispute. Here we have at least one highly educated petitioner. Although the many conditions and limitations set forth in section 170 make for a complex statute, the definition of a charitable contribution for purposes of that section are relatively straight forward and not difficult to comprehend. See sec. 170(c). That definition clearly requires that the contributions be made to a corporation, trust, community chest, fund or foundation created or organized in the United States or in any possessions thereof, or under the law of the United States, any State, the District of Columbia, or any possession of the United States. It should have been obvious to petitioners that the none of the donees were so "created or organized" and that any amounts donated to any of the donees would not give rise to a deduction under section 170. Petitioners are liable for a section 6662(a) penalty if only because the underpayment of 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 9 tax required to be shown on the return is a substantial understatement of income tax. See sec. 6662 (d) . To reflect the foregoing, decision will be entered for respondent. This concludes the Court's bench opinion. (Whereupon, at 9:52 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 25 866.488.DEPO www.CapitalReportingCompany.com