TAX COURT OPINION

Case: Andy Atighi
Docket Number: 31555-21
Judge: Foley
Opinion Type: bench
Filed: 12/02/2024
Pages: 6

United States Tax Court Washington, DC 20217 ANDY ATIGHI, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent Docket No. 31555-21 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 Maurice B. Foley at Los Angeles, California, on October 22, 2024, containing his oral ﬁndings of fact and opinion rendered during the trial session at which the case was heard. In accordance with the oral ﬁndings of fact and opinion, a decision will be entered pursuant to Rule 155. (Signed) Maurice B. Foley Judge Served 12/02/24 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 3 Bench Opinion by Judge Maurice B. Foley October 22, 2024 Andy Atighi v. Commissioner of Internal Revenue Docket No. 31555-21 THE COURT: The Court has decided to render oral findings of fact and opinion, which are made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code and Tax Court Rule 152 and shall not be relied upon as precedent in any other case. Unless otherwise indicated, statutory references are to the Internal Revenue Code, Title 26 U.S.C., in effect at all relevant times, regulation references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all relevant times, and Rule references are to the Tax Court Rules of Practice and Procedure. After concessions, the issues remaining for decision are whether petitioner is entitled to claim a casualty loss; entitled to deductions relating to car and truck expenses; required to include retirement distributions in taxable income; and liable for a section 6662(a) accuracy-related penalty. The facts are as follows: During 2018 (year at issue), petitioner owned and operated a wholesale clothing business in Los Angeles, California; owned rental property in Oxnard, California; 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 and received $17,129 of retirement distributions from 4 Fidelity Workplace Services LLC (Fidelity). He timely filed his 2018 Federal income tax return and claimed a $40,000 casualty loss deduction and a $10,392 deduction relating to car and truck expenses. Respondent disallowed the claimed deductions and determined that petitioner received but did not report any retirement distributions. On September 7, 2021, respondent issued petitioner a Notice of Deficiency relating to 2018 determining a deficiency of $21,501 and a section 6662(a) accuracy-related penalty of $4,300.20. The accuracy- related penalty received timely, written supervisory approval. On September 21, 2021, petitioner, while residing in California, filed his Petition with the Court. A taxpayer bears the burden of proving entitlement to any claimed deduction. INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). A taxpayer must meet all requirements for each deduction and keep books or records that substantiate the underlying expenses. I.R.C. § 6001; Treas. Reg. § 1.6001-1(a). Section 162(a) allows a deduction for "ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business." Section 274(d) provides that no deduction shall be allowed with respect to any listed property defined in section 280F(d)(4), unless the taxpayer 1 2 3 4 5 6 7 8 9 10 11 12 13 substantiates: the amount of the expense, the time and 5 place of the use of the property, the business purpose of the expense, and the business relationship to the taxpayer of the property used. See Boyd v. Commissioner, 122 T.C. 305, 320 (2004). Section 165 allows a deduction for casualty losses sustained during the taxable year and not compensated for by insurance or otherwise. I.R.C. § 165(a), (c)(3). Petitioner contends that he is entitled to deductions relating to a casualty loss and car and truck expenses. Petitioner's testimony with respect to those deductions was not credible, and the evidence presented falls woefully short of meeting the substantiation 14 requirements. 15 16 17 18 19 20 21 22 23 24 25 Except as otherwise provided, gross income includes income from all sources. I.R.C. § 61(a); Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955). Generally, respondent's determinations in a notice of deficiency are presumed correct, and petitioner bears the burden of proving them erroneous by a preponderance of the evidence. Rule 142(a)(1); Welch v. Helvering, 290 U.S. 111, 115 (1933). This presumption applies if respondent introduces some substantive evidence that petitioner received the unreported income. Hardy v. Commissioner, 181 F.3d 1002, 1004 (9th Cir. 1999), aff'g T.C. Memo. 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 1997-97; Rapp v. Commissioner, 774 F.2d 932, 935 (9th Cir. 6 1985). Respondent produced copies of checks, statements, and the Forms 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., issued to petitioner indicating he received $17,129 of retirement distributions. Petitioner failed to establish that the distributions were not taxable. Accordingly, we sustain respondent's determination relating to the casualty loss, car and truck expenses, and unreported retirement income. Respondent determined that petitioner is liable for a section 6662(a) accuracy-related penalty relating to 2018. Section 6662(a) and (b)(2) imposes a 20 percent penalty on any portion of an underpayment of tax required to be shown on a return attributable to any substantial understatement of income tax. An understatement is substantial if it exceeds the greater of 10 percent of the tax required to be shown on the return or $5,000.00. I.R.C. § 6662(d)(1)(A). There is no credible evidence that petitioner made reasonable efforts to assess his proper Federal income tax liability or believed in good faith that the liability was accurately reported. Accordingly, petitioner will be liable for a section 6662(a) accuracy-related penalty if he substantially understated his liability. Contentions we have not addressed are 7 irrelevant, moot, or meritless. This concludes the Court's oral findings of fact and opinion. (Whereupon, at 2:56 p.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