TAX COURT OPINION

Case: Bob Paxton
Docket Number: 6057-08S
Judge: Colvin
Opinion Type: bench
Filed: 11/18/2008
Pages: 12

S1ib sW 4r4 ►„~- UNITED STATES TAX COURT WASHINGTON , DC 2021 7 BOB PAXTON, Petitione r v . ) Docket No . 6057-08S . COMMISSIONER OF INTERNAL REVENUE, ) R espon en d t 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 of the above case before Special Trial Judge Robert N . Armen, Jr . at Kansas City, Missouri on November 4, 2008, containing his oral findings of fact and opinion rendered at the conclusion of the trial . In accordance with the oral findings of fact and opinion, a decision will be entered for respondent . (Signed ) Robert N . Armen, Jr. Special Trial Judg e Dated : Washington, D .C . November 18, 2008 SERVED Nov 24 2008 1 Bench Opinion by Special Trial Judge Robert M . Armen, Jr . 2 Docket No . 6057-08S Paxton v . Commissione r 3 3 November 4, 200 8 4 I . 5 THE COURT : The Court has decided to render 6 oral findings of fact and opinion in this case , and the 7 following represents the Court ' s oral findings of fac t 8 and opinion . The oral findings of fact and opinion shall 9 not be relied upon as precedent in any other case . 10 II . 11 This proceeding was heard as a Small Tax Case 12 pursuant to the provisions of section 7463 of th e 13 Internal Revenue Code of 1986, as amended , and Rules 170 14 through 175 of the Tax Court Rules of Practice and 15 Procedure . 16 17 This bench opinion is made pursuant to th e 18 authority granted by section 7459 ( b) of the Interna l 19 Revenue Code of 1986, as amended , and Rule 152 of the Tax 20 Court Rules of Practice and Procedure . 21 Hereinafter in this bench opinion , and unless 22 otherwise indicated, all section numbers refer to th e 23 Internal Revenue Code, as amended and in effect for 2004 24 and 2005 , the taxable years in issue , and all Rul e 25 numbers refer to the Tax Court Rules of Practice and Heritage Reporting Corporatio n (202) 628-4888 4 1 Procedure . 2 3 IV . Bob Paxton appeared on his own behalf . Vick i 4 L . Miller appeared on behalf of respondent . 5 V . 6 Respondent determined deficiencies i n 7 petitioner ' s Federal income taxes for 2004 and 2005 in 8 the amounts of $4,678 and $ 4,307, respectively . 9 Respondent subsequently recomputed the deficiencies to be 10 $2,008 for 2004 and $ 2,548 for 2005 , and those were the 11 amounts in issue at the time of trial . 12 VI . 13 The issues for decision, as raised b y 14 petitioner in his petition and at trial , are as follows : 15 (1) Whether petitioner is entitled t o 16 deductions for charitable contributions in 2004 and 2005 17 in amounts greater than those allowed by respondent in 18 the notice of deficiency . 19 (2) Whether petitioner's filing status in 20 2004 and 2005 was married filing jointly , as petitioner 21 contends , or single, as respondent contends . 22 (3) Whether petitioner is liable for self- 23 employment tax on the $2,100 of "other income" reported 24 on line 21 of his 2005 Form .1040 . 25 Any other matter is deemed to be either Heritage Reporting Corporatio n (202) 628-4888 5 1 conceded , see Rule 34 ( b)(4), or abandoned, see Leahy v . 2 Commissioner , 87 T .C . 56, 73-74 (1986) . 3 VII . 4 Some of the facts have been stipulated, and 5 they are so found . 6 Petitioner resided in the State of Missouri 7 at the time that the petition was filed with the Court . 8 During 2004 and 2005, the taxable years in 9 issue , petitioner was employed by the United State s 10 Postal Service on a full-time basis as a mail handler . 11 Petitioner ' s wages were electronically deposited into his 12 checking account . Petitioner used his checking account 13 to pay personal , family , and living expenses . 14 Petitioner has been married 5 times . I n 15 March 2003 , a marriage ceremony was performed purporting 16 to marry petitioner and a woman by the name of Chin Han . 17 However , at that time , petitioner was still married to 18 another woman by the name of Stacee Lee Paxton , from whom 19 he was subsequently divorced . Ultimately, by a Judgment 20 entered in November 2007, the Family Court Division o f 21 the Circuit Court of Greene County, Missouri , declared 22 the purported marriage between petitioner and Chin Han to 23 be " null and void , and of no legal effect . " 24 Prior to the aforementioned Judgment entered 25 by the Greene County Circuit Court , petitioner and Chin Heritage Reporting Corporation (202) 628-4888 6 1 Han submitted to respondent purported joint Federa l 2 income tax returns for 2004 and 2005, both of which were 3 processed as joint returns . Respondent's subsequen t 4 deficiency determination , as embodied in the notice o f 5 deficiency , was made on the basis that these returns were 6 valid joint returns . However, after the aforementioned 7 November 2007 Judgment , Chin Han filed her own Federa l 8 income tax returns for 2004 and 2005 as a single person . 9 The filing of those returns prompted respondent t o 10 recompute the deficiencies in petitioner's income taxes 11 for 2004 and 2005 . However, because petitioner' s 12 position at trial rests upon deductions claimed on the 13 purported joint returns, and further because petitioner 14 (unlike Chin Han ) never filed his own returns for 2004 15 and 2005 as a single person , we shall in due cours e 16 describe the purported joint returns and refer to them 17 (for the sake of convenience ) as petitioner ' s returns . 18 Returning now to the underlying facts : 19 At all relevant times , petitioner was a 20 member of Ridgecrest Baptist Church and Chin Han was a 21 member of the First Korean Presbyterian Church . 22 In the months of January , April , August, 23 November , and December 2004 , six checks in the total 24 amount of $820 were written to the First Korea n 25 Presbyterian Church by petitioner or Chin Han . In the Heritage Reporting Corporation (202) 628-4888 7 1 months of May and June 2004, three checks in the total 2 amount of $800 were written to the Ridgecrest Baptist 3 Church by petitioner or Chin Han . In the month of May 4 2004, one check in the amount of $300 was written to A/G 5 Immaculate Church by petitioner and/or Chin Han . These 6 10 checks totaled $1,920 . 7 In 2005, checks in the total amount of $7,960 8 were written to the First Korean Presbyterian Church b y 9 petitioner and/or Chin Han . 10 Records of Ridgecrest Baptist Church reflect 11 contributions by petitioner of $800 in 2004 and $0 i n 12 2005 . 13 On Schedule A of his 2004 return, petitioner 14 claimed charitable contributions by cash or check in the 15 amount of $20,300 . Of this amount, respondent allowed 16 $1,920 (as described above) and disallowed the balance, 17 or $18,380 . Petitioner contends that the disallowe d 18 amount represents church contributions made by him (and 19 not by Chin Han) in cash . 20 On Schedule A of his 2005 return, petitioner 21 claimed charitable contributions by cash or check in the 22 amount of $24,528 . Of this amount, respondent allowed 23 $7,960 (as described above) and disallowed the balance, 24 or $16,838 . Petitioner again contends that th e 25 disallowed amount represents church contributions made by Heritage Reporting Corporation (202) 628-4888 8 1 him (and not Chin Han) in cash . 2 At trial, petitioner introduced copies o f 3 pocket calendars for 2004 and 2005 purportedly recording 4 amounts of cash contributions to "church" . The pocke t 5 calendars are not reliable as evidence . For example, the 6 last day in the pocket calendar for 2004 is Sunday , 7 January 2, 2005, and the entry thereunder is "$40 0 8 church" . However, the entry for that same date in the 9 pocket calendar for 2005 is "$250 church" . 10 VIII . 11 We turn now to several fundamental principles 12 of tax litigation that inform our disposition of th e 13 disputed issues . 14 First, as a general rule, the Commissioner's 15 determinations are presumed correct, and the taxpaye r 16 bears the burden of proving that those determinations are 17 erroneous . Rule 142(a) . This principle was firml y 18 established by the United States Supreme Court as early 19 as 1933 and has been reaffirmed by the Supreme Court as 20 recently as 1992 . See INDOPCO Inc . v . Commissioner , 503 21 U .S . 79, 84 (1992) ; Welch v . Helvering , 290 U .S . 111, 115 22 (1933) . 23 Although section 7491(a) may serve to shift 24 the burden of proof to the Commissioner, that section has 25 no application to the present case in view of the fac t Heritage Reporting Corporation (202) 628-4888 9 1 that : ( 1) Petitioner has not asserted its applicability ; 2 (2) petitioner has failed to demonstrate that he 3 satisfied the conditions precedent for the applicability 4 of that section , see sec . 7491 ( a)(2) ; and (3) petitioner 5 failed to introduce credible evidence sufficient t o 6 establish a prima facie case, see sec . 7491(a)(1) . 7 Second , deductions are a matter o f 8 legislative grace , and the taxpayer bears the burden of 9 proving that he or she is entitled to any deductio n 10 claimed . Rule 142(a ) ; Deputy V . duPont , 308 U . S . 488, 11 493 ( 1940 ) ; New Colonial Ice Co . v . Helvering , 292 U .S . 12 435, 440 (1934 ) ; Welch v . Helvering , supra . Thi s 13 includes the burden of substantiation . Hradesky v . 14 Commissioner , 65 T .C . 87, 90 ( 1975), affd . per curiam 540 15 F .2d 821 ( 5th Cir . 1976) . 16 Third , the Court is not bound to accept as 17 gospel the unverified and undocumented testimony of a 18 taxpayer . Hradesky v . Commissioner , supra ; Tokarski v . 19 20 Commissioner , 87 T .C . 74 , 77 (1986) . Indeed , in Krupp v . Commissioner , T .C . Memo . 2000 - 148, we stated that "As a 21 trier of fact , it is our duty to listen to the testimony, 22 observe the demeanor of the witnesses, weigh the 23 evidence , and determine what we believe ." Similarly, in 24 Diaz v . Commissioner , 58 T .C . 560, 564 ( 1972), w e 25 observed that the process of distilling truth from the Heritage Reporting Corporatio n (202) 628-4888 1 0 1 testimony of witnesses , whose demeanor we observe and 2 whose credibility we evaluate , is the daily grist of 3 judicial life . 4 In view of the foregoing , we could easily 5 conclude that we simply do not believe petitioner' s 6 testimony that he contributed hundreds of dollars in cash 7 each week when he went to church . Apart from our 8 assessment of his credibility, petitioner maintained a 9 checking account and regularly used that account to pay 10 personal , family, and living expenses . Checks were also 11 written to the Baptist Church and to the Presbyteria n 12 Church . Moreover , petitioner ' s wages were electronically 13 deposited into his checking account, and petitioner never 14 introduced bank records to show large and consisten t 15 withdrawals of cash necessary to fund the purported cash 16 contributions . 17 But we need not conclude that petitioner's 18 credibility is suspect because his testimony simply does 19 not satisfy the statutory and regulatory requirement s 20 surrounding the deduction of charitable contributions in 21 the amounts claimed . See sec . 170(f) ; sec . 1 .170A-13(a), 22 (f), Income Tax Regs . Preferably , a canceled check or a 23 receipt from the donee organization is required , but, in 24 the absence thereof , reliable written records showing the 25 name of the donee and the date and amount of the Heritage Reporting Corporation (202) 628-4888 1 contribution must be maintained . But, as previousl y 2 stated, petitioner's pocket calendars are not reliable as 3 evidence, and petitioner offered no other documentar y 11 4 proof . 5 In short, we sustain respondent's 6 disallowance of petitioner's deductions . 7 IX . 8 We turn now to the issue of petitioner' s 9 marital status . The resolution of that issue turns on 10 State law . 11 As previously stated, the Greene Count y 12 Circuit Court decreed that the purported marriage between 13 petitioner and Chin Han in March 2003, was "null an d 14 void, and of no legal effect ." Therefore, in 2004 and 15 2005 petitioner was not married to Chin Han . 16 Respondent implicitly takes the position that 17 by December 31, 2004, Stacee Lee Paxton's divorce from 18 petitioner was final, so that petitioner's filing status 19 for the taxable years 2004 and 2005 was that of a single 20 individual . (We note that married filing separately is a 21 much less advantageous filing status from a taxpayer' s 22 point of view . ) 23 In view of the foregoing, we hold tha t 24 petitioner's filing status for 2004 and 2005 was single 25 and not married filing jointly . Heritage Reporting Corporation (202) 628-4888 1 2 1 X . 2 Finally, we turn to the self-employment tax 3 issue . 4 During the years in issue, petitione r 5 moonlighted as a carpenter and built some sets for a 6 theater group for which he was paid $2 , 800 in 2004 and 7 $2,100 in 2005 . On his 2004 return, petitioner reported 8 and paid self-employment tax in respect of this income ; 9 in contrast, he did not report or pay self-employment tax 10 on his 2005 return . 11 At trial, petitioner initially denied having 12 any self - employment income whatsoever in 2005 . However, 13 on cross-examination he admitted to the aforementioned 14 carpentry work for the theater group, but he was unable 15 to explain why he should not be liable for self- 16 employment tax on that income . 17 In view of the foregoing , we sustain 18 respondent ' s determination . 19 XI . 20 In order to give effect to the foregoing, 21 decision will be entered reflecting deficiencies in 22 petitioner's income taxes for 2004 and 2005 in the 23 amounts of $2,008 and $2 , 548, respectively . 2 4 25 XII . This concludes the Court's oral findings o f Heritage Reporting Corporation (202) 628-4888 1 fact and opinion in this case . 2 (Whereupon , at 4 :15 "p .m ., the bench opinion 3 in the above - entitled matter was concluded . ) 1 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 / 1 /1 20 21 2 2 23 2 4 25 Heritage Reporting Corporation (202) 628-4888