TAX COURT OPINION

Case: Ariel A. Diaz
Docket Number: 13004-09S
Judge: Colvin
Opinion Type: bench
Filed: 05/12/2010
Pages: 7

UNITED STATES TAX COURT Washington, D .C . 2021 7 ARIEL A . DIAZ, Petitioner, v . ) J' Docket No . 13004-09S 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 th e pages of the transcript of the trial of the above case before Special Trial Judge Lewis R . Carluzzo at Miami, Florida, on April 23, 2010, containing his oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155 . Dated : Washington, D .C . May 12, 2010 (Signed ) Lewis R. Carluzzo Special Trial Judg e ED MAY 13 201'0 ' 3 1 Bench Opinion by Special Trial Judge Lewis R . Carluzzo 2 Ariel A . Diaz v . Commissioner Docket No . 13004-095 3 April 23, 201 0 4 THE COURT : The Court has decided to render 5 oral findings of fact and opinion in this case, an d 6 the following represents the Court's oral findings of 7 fact and opinion . The oral findings of fact an d 8 opinion shall not be relied upon as precedent in any other case . 10 This proceeding for the redetermination of a 11 deficiency is a Small Tax Case conducted pursuant to 12 the provisions of section 7463 of the Internal Revenue 13 Code of 1986, as amended, and Rules 170 through 175 of 14 the Tax 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 18 Tax Court Rules of Practice and Procedure . 19 Hereinafter in this bench opinion, section 20 references are to the Internal Revenue Code of 1986, 21 as amended, in effect for 2007 . Rule references are 22 to the Tax Court Rules of Practice and Procedure . 23 Ariel A . Diaz appeared pro se . Derek P . 24 Richman appeared on behalf of respondent . 25 In a notice of deficiency dated March 9, Heritage Reporting Corporatio n (202) 628-4888 4 1 2009, respondent determined a $9,330 deficiency in 2 petitioner's 2007 Federal income tax and imposed a 3 $1,866 section 6662(a) accuracy-related penalty . The 4 issues to be decided are : (1) Whether petitione r 5 received and failed to include in income certain 6 compensation ; if so (2) whether such compensation 7 constitutes self-employment income subject to the tax 8 imposed by section 1401 ; and (3) whether petitioner is 9 liable for the above-referenced penalty . 10 Some of the facts have been stipulated and 11 are so found . At the time the petition was filed, 12 petitioner resided in Florida . 13 Petitioner is an automobile mechanic . Over 14 the years he worked as such for various ca r 15 dealerships . In 2007 he began working for New New 16 Concept, Co . Auto Repair (Repair) . Repair was owned 17 by a friend or the wife of a friend . For a brie f 18 period after he began working there he helped t o 19 relocate the shop . Afterwards he provided services as 20 a mechanic and was compensated on a commission basis . 21 Repair treated petitioner as an independent 22 contractor . Repair did not withhold any Federa l 23 income taxes, did not pay any employment taxes wit h 24 respect to him, and did not offer any benefits to him . . 25 Checks from Repair introduced into evidence show a Heritage Reporting Corporatio n (202) 628-4888 5 1 pattern that suggests that petitioner was paid on a 2 weekly basis . Many if not most of the checks ar e 3 dated on a Saturday . There is at least one notable 4 exception to this pattern . There is a check dated 5 January 20, 2007, for $900 . January 20, 2007 was a 6 Saturday . The record also contains a check date d 7 January 23, 2007, for $450 . January 23, 2007 was the 8 following Tuesday . No other sequence of check s 9 entered into the record suggest payment over such a 10 short duration . 11 Repair issued a Form 1099-MISC , 12 Miscellaneous Income, to petitioner for 2007 . That 13 form shows "nonemployee compensation" totalin g 14 $26,274 .58 . As best as can be determined from th e 15 record, that amount includes all of the checks issued 16 to the petitioner by Repair during 2007 . 17 By the time petitioner received the For m 18 1099, he had already filed his 2007 Federal income tax 19 return . He did not include any of the income earned 20 from Repair on that return . 21 In the above-referenced notice of deficiency 22 respondent : (1) Increased petitioner's income by the 23 amount shown on the Form 1099 ; (2) imposed the section 24 1401 tax on that amount ; and (3) imposed a section 25 6662(a) accuracy-related penalty . Heritage Reporting Corporation (202) 628-4888 6 1 Compensation for services obviousl y 2 constitutes income and petitioner does not'suggest 3 otherwise . See section 61(a)(1) . Furthermore , 4 petitioner readily admits that he received and cashed 5 the checks from Repair that represented hi s 6 compensation from that company during that year . 7 According to petitioner, he did not report the income 8 from Repair because he received the Form 1099 afte r 9 his return had been filed . Had petitioner reported 10 the wrong amount from Repair we would be more willing 11 to give some effect to his explanation for an y 12 discrepancy, but he reported none . 13 Further, petitioner claims that some of the 14 checks although made payable to him, actuall y 15 represent compensation for other individuals . 16 According to petitioner, he merely acted as a conduit 17 for the proceeds by cashing the check for that other 18 individual . With one exception, the pattern of checks 19 greatly undermines his claim . The exception is the 20 check previously referred to ; the check number is 21 2182, the amount is $450 . We find that hi s 22 compensation from Repair should not include thi s 23 amount . Otherwise respondent's adjustment increasing 24 petitioner's 2007 income is sustained . 25 At trial petitioner repeated his belief that Heritage Reporting Corporatio n (202) 628-4888 7 1 Repair should be responsible for any tax liabilit y 2 resulting from the compensation he received from that 3 company . Construing his argument broadly, we take it 4 to be a suggestion that he should have been treated as 5 an employee of Repair and should not be responsibl e 6 for the section 1401 tax imposed in the notice o f 7 deficiency . We have our suspicions on the issue, but 8 suspicions are no substitute for evidence . There is 9 insufficient evidence in the record to find tha t 10 respondent's imposition of the section 1401 tax o n 11 self-employment income should be rejected . Petitioner 12 is liable for that tax on the compensation receive d 13 from Repair . 14 Lastly, little need be said with respect to 15 the section 6662(a) accuracy-related penalty here in 16 dispute . The underpayment of tax required to be shown 17 on petitioner's 2007 Federal income tax return is a 18 substantial understatement of income tax within the 19 meaning of section 6662(b)(2) and (d) because it will 20 exceed $5,000 . His explanation for his failure t o 21 report the compensation from Repair hardly constitutes 22 reasonable cause . See section 6664(c) . He is liable 23 for the penalty imposed by section 6662(a) . 24 To reflect the foregoing, decision will be 25 entered under Rule 155 . Heritage Reporting Corporation (202) 628-4888 1 This concludes the Court's oral findings of 2 fact and opinion in this case . 3 (Whereupon, at 10 :04 a .m ., the bench opinion 4 in the above-entitled matter was concluded . ) 8 5 6 7 9 10 11 12 13 14 15 16 17 18 19 20 21 / / 22 23 24 25 Heritage Reporting Corporation (202) 628-4888