TAX COURT OPINION

Case: Amy Elizabeth Loveless
Docket Number: 13970-17
Judge: Goeke
Opinion Type: bench
Filed: 10/01/2019
Pages: 6

JRB UNITED STATES TAX COURT WASHINGTON, DC 20217 AMY ELIZABETH LOVELESS, Petitioner(s), v. ) ) ) ) ) Docket No. 13970-17. 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 petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Judge Joseph Robert Goeke at Seattle, Washington containing his oral findings of fact and opinion rendered at the trial session at which this case was heard. In accordance with the oral findings of fact and opinion, a decision will be entered under Rule 155. (Signed) Joseph Robert Goeke Judge Dated: Washington, D.C. October 1, 2019 SERVED Oct 01 2019 P R O C E E D I N G S 2 (10:04 a.m.) THE CLERK: I'm calling for the calendar docket number 13970-17 Amy Elizabeth Loveless. 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 precedent in any other case. This opinion 1 2 3 4 5 6 7 8 9 10 is rendered pursuant to section 7459(b) of the Internal 11 Revenue Code and Rule 152 of the Tax Court Rules of 12 Practice and Procedure. Section references in the . 13 remainder of this bench opinion are to the Internal 14 Revenue Code in effect for the.year at issue in this case 15 16 17 18 19 20 21 22 and rule references are to the Tax Court Rules of Practice and Procedure. FINDINGS OF FACT The parties entered into a stipulation of facts in this case, and the Petitioner testified. At the time she filed her petition in this case, the Petitioner was a resident of Washington state. Respondent issued a notice of deficiency to the 23 Petitioner, and she timely petitioned that notice to this 24 Court. We have jurisdiction pursuant to section 6213(a). 25 The primary issue in this case is the treatment 973)40 .2250 äperat cribers seescribersat www:escribers et I of $33,334, which the Petitioner received as a result of 3 her entering into a settlement agreement with Corcoran Trucking, Inc. She did not include this amount on her federal income tax return, and Respondent adjusted that item and included the amount as income in the notice of deficiency. Respondent also determined the addition to tax under section 6662(d) for substantial understatement based upon a mathematical calculation generated by the tax liability of Petitioner's failure to include the amount from Corcoran Trucking, Inc. The parties have stipulated that Corcoran 1 2 3 4 5 6 7 8 9 10 11 12 Trucking, Inc., here and after referred to as Corcoran, 13 14 15 16 employed the Petitioner from October 10th, 2011 until May 2nd, 2014. Petitioner testified that she became uncomfortable with certain practices of Corcoran and felt like she was being required to work overtime and not being 17 Paid for that, so once she had reduced her hours to 40 18 hours per week, tension was created with her -supervisor, 19 20 21 22 and this ultimately led to her termination on May 2nd, 2014. She sought the assistance of an attorney, and the attorney sent two pieces of correspondence to 23 Corcoran, which led to a negotiation and the payment of 24 the amount at issue in this case. The agreement she 25 entered into with Corcoran on May 2nd, 2014 was actually heribers 198)406-1250|ope†atbnseescribers.net1wwwescnbersaet executed by counsel and the Petitioner later in 2014. executed the agreement on July 30th, 2014, and counsel executed the agreement earlier in July 2014. 4 She The agreement, in addition to providing for the Payment of the $33,334 previously referred to, contains a description of the claims which the Petitioner waived, and that includes various claims associated with unlawful 4sem'•n ) as provided for in the statutes of the State of Montana. In addition, the agreement includes, in paragraph 10, the following: "Employee is and shall be solely responsible for all federal, state, and local taxes that may be owed by employee by receiving the monetary 1 2 3 4 5 6 7 8 9 10 11 12 13 Payment provided under this agreement, " and_o.f__cym.t-e4 14 15 16 17 18 In her testimony, Petitioner's explanation for the ,failure to include the amount paid to her pursuant to the settlement agreement was that it was not included on her W-2 form. She gave no other explanation and did not 19 assert that the payment was for any claim other unlawful 4haA 20 21 22 termination. . OPINION The burden of proof in this case remains on the 23 Petitioner as she did not assert, and we do not find that 24 section 7491 would apply to shift the burden of proof. 25 Respondent has the burden of going forward with respect to cribèrs the addition to tax, but that is met if we sustain the deficiency because it is simply a computational adjustment 5 based upon substantial understatement. We note that in this case there is no assertion that section 104 would apply to make the income, which Petitioner received, not taxable. There was no assertion that Petitioner suffered from physical injuries or was reimbursed for physical injuries. We also note that the amount Petitioner received, clearly, is income under 1 2 3 4 5 6 7 8 9 10 section 61 and that Respondent's adjustment in the notice 11 of deficiency increasing Petitioner's income tax liability 12 13 is therefore sustained. In her testimony, Petitioner indicated that she 14 Paid $2,435 in legal fees. We'believe this amount is 15 appropriately deductible as an itemized deduction under 16 Schedule A pursuant to section 212 and direct that it be 17 18 19 allowed to the Petitioner as provided by statute in a Rule 155 computation of the tax liability in this tax. Regarding the addition to tax, we note that 20 Petitioner was admonished to address the tax liability in 21 22 the agreement she entered into. She did not indicate that she took any steps to obtain legal advice or any other 23 advice about whether the amount in question was taxable. 24 We find her explanation to be inadequate and do not find 25 that she had reasonable cause for the failure to include this amount in her income. Therefore, we sustain the 6 addition to tax. We also note that the addition to tax in question in this case is not subject to section 51 -- strike that -- section 6751(b) because the amount was determined electronically. Therefore, it is not necessary for Respondent to demonstrate that there was supervisory approval of the assertion of this addition to tax. Accordingly, we sustain the addition to tax under section 6662(d) and the deficiency with the exception of any adjustment that is required based upon the allowance of $2,435 as legal fees as an itemized deduction. This concludes the Court's opinion, and as we've 1 2 3 4 5 6 7 8 9 10 11 12 13 14 previously stated, a Rule 155 computation will be necessary. This concludes the Court's oral findings of fact and opinion in this case. Off the record in that case. (Whereupon, at 10:14 a.m., the above-entitled matter was concluded.) 15 16 17 18 19 20 21 22 23 24 25 (9733406-2250loperatiotts@esciibertnet|weiwasalbershet