TAX COURT OPINION

Case: Jennifer Rochelle Hart
Docket Number: 18469-13
Judge: Gustafson
Opinion Type: bench
Filed: 09/19/2014
Pages: 6

UNITED STATES TAX COURT WASHINGTON, DC 20217 PA JENNIFER ROCHELLE HART, Petitioner, v. ) ) ) ) Docket No. 18469-13. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ORDER Pursuant to the opinion of the Court as set forth in the pages of the transcript of the proceedings before Judge David Gustafson at Columbia, South Carolina, on September 9, 2014, containing his oral findings of fact and opinion, 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 Gustafson at Columbia, South Carolina, containing his oral fimdings of fact and opinion rendered at the trial session at which the case was heard. In accordance with the oral findings of fact and opinion, decision will be entered for respondent. (Signed) David Gustafson Judge Dated: Washington, D.C. September 19, 2014 SERVED Sep 19 2014 Capital Reporting Company Bench Opinion by Judge David Gustafson 3 September 9, 2014 JENNIFER ROCHELLE HART Docket No. 18469-13 THE COURT: The Court has decided to render the following as its oral Findings of Fact and Opinion in this case. This Bench Opinion is made pursuant to the authority granted by section 7459(b) of the Internal Revenue Code, and Tax Court Rule 152; and it shall not be relied on as precedent in any other case. By a notice of deficiency dated June 24, 2013 (Ex. 2-J), the Internal Revenue Service ("IRS") determined a deficiency in the Federal income tax of petitioner Jennifer Rochelle Hart for the year 2011, along with an accuracy-related penalty under section 6662(a). The principal issue for decision is whether compensation that Ms. Hart received from her employers and retirement income that she received from a bank were subject to income tax. The parties filed a stipulation of facts on July 8, 2014, and the case was called from the calendar on September 8, 2014, in Columbia, South Carolina. Ms. 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 Hart did not appear. The Commissioner was 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 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 represented by Olivia Hyatt Rembach. The Commissioner moved under Rule 122 that the case be submitted for decision on that stipulation without trial. In the absence of any objection by Ms. Hart, we granted the motion. (The alternative would have been to the same ultimate effect--i.e., to dismiss the case for failure to prosecute, thereby sustaining the IRS's determination in any event. See sec. 7459(d).) FINDINGS OF FACT In 2011 Ms. Hart received $70,756 in wage income from one dentist and $8,073 in wage income from another (Stip. 4-5) and received $4,343 in retirement income from USAA Federal Savings Bank (Stip. 6). This income totaled $83,172. The parties stipulate that "Petitioner attempted to file Form 1040EZ and Form 4852 for the taxable year 2011. Attached hereto as Exhibit 1-J is a copy of these forms signed and dated April 9, 2012". (Stip. 2.) The return is date-stamped as having been received by the IRS on April 26, 2013, so we infer it was filed no later than that date. On that return, Ms. Hart reported none of the $83,172 of income described above. However, the payors of that income reported it 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 to the IRS on Forms W-2 and 1099. The IRS examined Ms. Hart's return and issued to her a notice of deficiency (Ex. 2-J) on June 24, 2013. In the notice the IRS determined that all of Ms. Hart's income described above is gross income subject to tax and that there is therefore a deficiency of income tax in the amount of $14,978 and an accuracy-related penalty of $2,996. On August 12, 2013, Ms. Hart timely filed a petition in this Court challenging the IRS's deficiency determination. At that time she resided in South Carolina. I. Income tax liability OPINION Ms. Hart has stipulated her receipt of the income on which the IRS's notice of deficiency is based. There is therefore no factual dispute that 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 must be resolved in order to determine Ms. Hart's 18 19 20 21 22 gross income subject to income tax and her income tax liability, since section 61(a) broadly defines gross income as "all income from whatever source derived". Rather, in her petition Ms. Hart advances only arguments that lack merit entirely, based on a 23 misinterpretation of the term "deficiency" and on the 24 25 IRS's supposed failures to grant her requests for information, none of which could exempt her from 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 income tax liability. II. Accuracy-related penalties Section 6662 1mposes an "accuracy-related penalty" of 20% of the portion of the underpayment of tax that is, inter alia, attributable to any substantial understatement of income tax. Sec. 6662(a), (b)(1), (2). The Commissioner asserts that Ms. Hart's understatements of income tax were substantial. Under section 7491(c), the Commissioner bears the burden of production and must produce sufficient evidence that the imposition of the penalty is appropriate in a given case. Once the Commissioner meets this burden, the taxpayer must come forward with persuasive evidence that the 15 Commissioner's determination is incorrect. Rule 16 17 18 19 20 21 22 23 24 25 142(a); Higbee v. Commissioner, 116 T.C. at 446-447. An understatement of an individual's income tax is substantial if it exceeds the greater of 10% of the tax required to be shown on the return or $5,000. Sec. 6662(d)(1). Ms. Hart reported a tax liability in the amount of zero on her Federal income tax return for the taxable year 2011, so she understated her income tax liability by $14,978, the amount she actually owes. This understatement is "substantial" because it is greater than both 10 percent of the 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 amount of tax required to be shown on the return, i.e., $1,497.80, and $5,000. Accordingly, the Commissioner has met his burden to establish that Ms. 4 Hart' s return reflected a "substantial understatement". Ms. Hart therefore owes the accuracy-related penalty on the entire amount of the underpayment in the absence of a successful invocation of a defense to the penalty. The section 6662(a) penalty is not imposed if a taxpayer can demonstrate (1) reasonable cause for the underpayment and (2) that the taxpayer acted in good faith. Sec. 6664(c)(1). Ms. Hart has not argued that she had reasonable cause and good faith, and we see no basis in this record for such an argument. Decision will therefore be entered in favor of respondent. This concludes the Court's oral Findings of Fact and Opinion in this case. (Whereupon, at 12:29 p.m., the above-entitled matter was concluded.) 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com