TAX COURT OPINION

Case: Butch Rose
Docket Number: 4795-09
Judge: Colvin
Opinion Type: bench
Filed: 01/21/2010
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 2021 7 BUTCH ROSE, Petitioner, v . ) Docket No . 4795-09 . COMMISSIONER OF INTERNAL REVENUE , Respondent . O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it i s 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 above case before Judge David Gustafson at New York, New York, on January 12, 2010, containing his oral findings of fact and opinion rendered at the conclusion of the trial . decision will be entered entered under Rule 155 . In accordance with the oral findings of fact and opinion, I (Signed ) David Gustafson Judge Dated : Washington, D .C . January 21, 2010 S E ED JMN 2 5 2010 3 1 BENCH OPINION BY JUDGE DAVID GUSTAFSO N 2 BUTCH ROSE V . COMMISSIONER DOCKET NO . : 4795-09 3 January 12, 201 0 4 The Court has decided to render oral 5 Findings of Fact and opinion in this case, and th e 6 following represents the Court's oral Findings of Fact 7 and Opinion . The oral Findings of Fact and opinio n 8 shall not be relied on as precedent in any other case . 9 This Bench Opinion is made pursuant to the 10 authority granted by section 7459(b) of the Internal 11 Revenue Code of 1986, as amended, and Rule 152 of the 12 Tax Court Rules of Practice and Procedure . 13 By a statutory notice of deficiency dated 14 November 24, 2008, the Internal Revenue Service (IRS) 15 determined a deficiency in the Federal income tax of 16 petitioner Butch Rose for the year 2006, in the amoun t 17(cid:127) of $10,481, with an accuracy-related penalty o f 18 $2,096 .20 . The issue in dispute is whether the notice 19 of deficiency is invalid because it was not preceded 20 by an examination . For the reasons explaine d 21 hereafter, we will sustain the deficiency and penalty 22 assessed against Mr . Rose . 23 Trial of this case was conducted on January- 24 11, 2010, in New York City, where Mr . Rose maintains 25 his address . We find the following facts : Heritage Reporting Corporation (202) 628-4888 4 1 Findings 2 Mr . Rose filed a tax return for the yea r 3 2006, but that return is not in evidence in this case . 4 Thereafter, on November 24, 2006, the IRS issued the 5 notice of deficiency described above and mailed it to 6 the same address that Mr . Rose still uses . Mr . Rose 7 alleges, and we assume, that the notice of deficiency 8 was not preceded by any audit or examination by th e 9 IRS . Mr . Rose contends that this fact renders the 10 notice of deficiency invalid and requires tha t 11 decision be entered in his favor . He made no 12 allegation and attempted no proof of any specific 13 error in the notice of deficiency . 14 Opinion 15 The IRS's determination reflected on a 16 notice of deficiency is presumed correct, and the 17 taxpayer bears the burden to prove his entitlement to 18 the exemptions and credits he claimed . Rule 142(a) ; 19 Welch v . Helvering , 290 U .S . 111, 115 (1933) . Section 20 6212(a) does require the IRS to "determine[] tha t 21 there is a deficiency" before issuing a notice of 22 deficiency ; and if a purported notice of deficiency 23 revealed on its face that no determination of a tax 24 deficiency had been made with respect to the taxpayer 25 who is named in the notice, then it would not meet the Heritage Reporting Corporation (202) 628-4888 9 5 1 requirements of section 6212(a), and this Court would 2 have no jurisdiction to hear a case arising therefrom . 3 Scar v . Commissioner , 814 F .2d 1363, 1370 (9th Cir . 4 1987), revg . 81 T .C . 855 (1983) . 5 However, under Campbell v . Commissioner , 90 6 T .C . 110, 113 (1988), if "the notice of deficienc y 7 does not reveal on its face that the Commissione r 8 failed to make a determination, a presumption arises 9 that there was a deficiency determination ." Mr . Rose 10 did not rebut that presumption by showing that th e 11 adjustments on the notice of determination bore no 12 relation to him . On the contrary, he did not offer 13 his tax return into evidence ; and when he was asked 14 whether on his return he had claimed particula r 15 deductions to which the adjustments purported to 16 relate, he testified that he could not recall what he 17 - claimed on his return . 18 The purpose of a notice of deficiency is to 19 inform a taxpayer that a deficiency has bee n 20 determined, to specify the year for which th e 21 deficiency is determined, and to state the amount of 22 the deficiency in unequivocal terms, all in a 23 communication sent to the right-taxpayer at his last 24 known address . In rare cases, such as Scar v . 25 Commissioner , where the calculation of the deficiency Heritage Reporting Corporatio n (202) 628-4888 6 1 in the notice of deficiency has no connectio n 2 whatsoever to the taxpayer who is named in the notice, 3 the notice is invalid on its face . 4 In the instant case, however, the notice of 5 deficiency is facially valid and the presumption o f 6 correctness applies, because the notice states a 7 deficiency and the tax years for which the deficiency 8 is determined, correctly refers to Mr . Rose, and wa s 9 sent to his last known address . Furthermore, although 10 "the Commissioner need not explain how th e 11 deficiencies were determined" for a determination and 12 a notice of deficiency to be valid, Scar , supra , 814 13 F .2d at 1367, the notice of deficiency issued t o 14 Mr . Rose does explain the IRS's calculation of the 15 deficiency by reference to various items on th e 16 return . Consequently, the notice of deficiency i s 17 valid ; we have jurisdiction to hear this case pursuant 18 to 6213(a) ; and, in the absence of proof by Mr . Rose 19 that the determination is incorrect, the deficiency 20 determined in the notice must be sustained . 21 The notice of determination also reflects 22 the determination of an accuracy-related penalty 23 against Mr . Rose . Under section 7491(c) the IRS has 24 the burden of going forward with evidence to show 25 Mr . Rose's liability for this penalty, and the facts Heritage Reporting Corporatio n (202) 628-4888 :4 7 1 needed to do so are clear on the record : 2 Section 6662(a) and (b)(2) imposes a penalty equal to 3 20 percent of the underpayment of tax upon "an y 4 substantial understatement of income. tax", whic h 5 exists "if the amount of the understatement for the 6 taxable year exceeds the greater of * * * (i) 1 0 7 percent of the tax required to be shown on the return 8 for the taxable year, or (ii) $5,000 ." See sec . 9 6662(d)(1)(A) . The notice of determination determined 10 that the tax required to be shown was $11,164 . Te n 11 percent of that amount was $1,116, so the statute 12 looks to the greater amount of $5,000 . Mr . Rose' s 13 understatement of $10,481 obviously exceeds $5,000, so 14 the penalty does apply . 15 Consequently, the deficiency and penalty 16 determined by the IRS will be sustained . 17 This concludes the Court's oral Findings of 18 Fact and Opinion in this case . 19 (Whereupon, at 2 :05 p .m ., the bench opinion 20 in the above-entitled matter-was concluded . ) 21 2 2 23 24 25 // Heritage Reporting Corporation (202) 628-4888