TAX COURT OPINION

Case: Bert C. Vieceli
Docket Number: 7459-07S
Judge: Colvin
Opinion Type: bench
Filed: 04/17/2008
Pages: 10

UNITED STATES TAX COURT WASHINGTON , D .C . 2021 7 BERT C . VIECELI, Petitioner , V . COMMISSIONER OF INTERNAL REVENUE, ) Respondent . Docket No . 7289-07S 7459-07 S 17485-07 S 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 Judge Diane L . Kroupa at Portland, Oregon on March 18, 2008, containing her oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral findings of fact and opinion, decisions will be entered for respondent . (Signed) Diane L . Kroupa Judg e Dated : Washington, D .C . April 17, 2008 SERVED APR 1 7 2008 I 3 1 Bench Opinion by Judge Diane L . Kroupa March 19, 2008 2 Bert C . Vieceli v . Commissioner Docket Nos . 7289-07S, 3 . 74659-07S, 17485-07S 4 THE COURT : The Court has decided to render oral 5 findings of fact and opinion in these consolidated cases , 6 and the following represents the Court's oral findings of 7 fact and opinion . These oral findings of fact and opinion 8 shall not be relief upon as precedent in any other case . 9 This proceeding was conducted as a small tax case 10 under Section 7463 and Rules 170 through 175 . This benc h 11 opinion is made pursuant to the authority granted by Section 12 7459(b) and Rule 152 . All section references are to th e 13 Internal Revenue Code for 2003, and all rule references are 14 to the Tax Court Rules of Practice and Procedure . 15 Bert Vieceli appeared on his own behalf, an d 16 Kimberly Kazda, specially recognized, and Shirley Francis 17 appeared on behalf of Respondent . 18 FINDINGS OF FACT 19 Certain facts have been stipulated . The 20 stipulation of facts the parties filed, with accompanying 21 exhibits, is incorporated by this reference, and the facts 22 are so found . 23 Petitioner resided in West Linn, Oregon at the time 24 he filed the petitions in these consolidated cases . 25 These consolidated cases revolve around a 14-year- Heritage Reporting Corporatio n (202) 628-4888 4 1 long unsettled dispute Petitioner has with the Commissioner . 2 Petitioner contends that the Commissioner apparently entered 3 into an agreement with Petitioner' s former busines s 4 associate, Mol Enterprises, Incorporated, an Orego n 5 corporation, the effect of which was to deny Petitioner 6 certain business expenses . The record reflects that 7 Petitioner received $245,000 from Mol in 1978, $210,612 .80 8 from Mol in 1979, and $55,600 from Mol in 1980 . 9 Because of this disagreement with the Commissioner, 10 Petitioner has refused to file tax returns . Petitioner has 11 failed to file tax returns because of this allege d 12 conspiracy the Internal Revenue Service, now referred to as 13 the IRS, has had with Petitioner' s former business partner, 14 Petitioner asserts that the IRS owes him money . For the 15 years at issue, namely, 2001, 2003 and 2004, Petitioner 16 failed to file tax returns before Respondent issued a 17 statutory notice of deficiency to Petitioner . Respondent 18 included a substitute for return in the deficiency notices 19 sent to Petitioner . 20 Petitioner reported that he incurred a $397,500 net 21 loss on a Schedule C, entitled Profit or Loss from Business, 22 for 1994 . Petitioner signed the return for 1994 on January 23 26, 2008, some two months ago . On the return for 2001 , 24 Petitioner claimed a $26,500 carry-forward, presumably from 25 the loss asserted in 1994 . On the return for 2003 that Heritage Reporting Corporatio n (202) 628-4888 5 1 Petitioner signed on August 7, 2007, Petitioner claimed a 2 $26,500 carryover, and Petitioner claimed a $26,50 0 3 carryover loss for 2004 as well . 4 Respondent determined a $6,874 deficiency against 5 Petitioner for 2001 and determined in the deficiency notice 6 that Petitioner was liable for a $709 .87 late filin g 7 addition under Section 6651(a)(1), a $788 .75 late payment 8 addition under Section 6651( a)(2), and a $108 .47 addition 9 under Section 6654 for failure to pay estimated tax . 10 Petitioner filed a return for 2001 on January 16 , 2007, some 11 five years late . 12 Respondent determined a $2,871 deficiency against 13 Petitioner for 2003 and determined in the deficiency notice 14 that Petitioner was liable for a $413 .78 late filin g 15 addition under Section 6651(a)(1) and a $340 .22 late payment 16 addition under Section 6651(a)(2) for 2003 . Petitione r 17 filed a return for 2003 on August 3, 2007, over three years 18 late . 19 Respondent determined a $2,574 deficiency against 20 Petitioner for 2004 and determined in the deficiency notice 21 that Petitioner was liable for a $444-6 5 late filing a q -30,c, 5 22 addition under Section 6651(a)(1) and a $172 .26 late payment 23 addition under Section 6651 ( a)(2) . It is unclear from the 24 record whether Petitioner ever filed a tax return for 2004, 25 but the record reflects that Petitioner attached a Schedule Heritage Reporting Corporatio n (202) 628-4888 6 1 C for 2004 to the tax return Petitioner filed for 2003 on 2 August 3, 2007, over two years late . 3 Petitioner timely filed a petition in each of these 4 consolidated cases . All issues have been resolved excep t 5 for the following four issues : first, whether Petitioner is 6 entitled to a Schedule C net operating loss carry-forward of 7 $26,500 for each of the years at issue ; second, whethe r 8 Petitioner is liable for late filing additions to tax under 9 Section 6651(a)(1) for each of the years at issue ; third, 10 whether Petitioner is liable for the late payment additions 11 under Section 6651(a)(2) for each of the years at issue ; and 12 fourth, whether Petitioner is liable for the addition to tax 13 under Section 6654 for 2001 for failure to pay estimate d 14 taxes . 15 OPINION 16 These consolidated cases involve strongly hel d 17 beliefs of Petitioner that the Commissioner somehow entered 18 into a conspiracy with Petitioner's former business partner 19 to deny Petitioner business expenses he incurred . We fear 20 that nothing that we can say will change Petitioner' s 21 misguided beliefs . 22 We begin with two fundamental principles of tax 23 litigation . First, the Commissioner's determinations are 24 generally presumed correct, and the taxpayer bears th e 25 burden of proving that those determinations are erroneous . Heritage Reporting Corporatio n (202) 628-4888 7 1 Rule 142(a) . This principle is not affected by Section 2 7491( a) because Petitioner failed to comply with th e 3 substantiation requirements and failed to maintain adequate 4 records . See Sec . 7491(a)(2)(A) and (B) ; see also Higbee v . 5 Commissioner , 116 T .C . 438 (2001) . 6 Second, deductions are a matter of legislative 7 grace, and the taxpayer must show that he or she is entitled 8 to any deduction claimed . Rule 142(a) ; Deputy v . dePont , 9 308 U .S . 488, 493 (1940) ; New Colonial Inc . Co . v . 10 Helvering, 292 U .S . 435, 440 (1934) ; Welch v . Helvering, 290 11 U .S . 111 (1933) . This includes the burden o f 12 substantiation . Hradesky v . Commissioner , 65 T .C . 87, 90 13 (1975), affd . per curiam 540 F .2d 821 (5th Cir . 1976) . 14 Substantiation means that a taxpayer shall keep suc h 15 permanent records or books of account as are sufficient to 16 establish the amount of deductions claimed on the return . 17 Sec . 6001 ; Sec . 1 .6001-1( a), (e), Income Tax Regs . The, 18 Court need not accept a taxpayer's self-serving testimony 19 when the taxpayer fails to present other probative evidence . 20 21 Beam v . Commissioner , T .C . Memo . 1990-304 (citing Tokarski v . Commissioner , 87 T .C . 74, 77 (1986)) . 22 A taxpayer is allowed a deduction for a ne t 23 operating loss, commonly referred to as an NOL . Sec . 172 . 24 The NOL may be carried back to years preceding the year of 25 the loss and carried over to years following the year of the Heritage Reporting Corporation (202) 628-4888 8 1 loss . Sec . 172(b) . Thus, for Petitioner to deduct a NOL 2 carryover, Petitioner must establish he sustained the NOL 3 before the years at issue and that any portion of the NOL 4 was available to carry over into the years at issue . 5 Petitioner has failed to substantiate that he is entitled to 6 the $26,500 NOL carryover that Petitioner claimed for eac h 7 of the years at issue . Petitioner did provide a copy o f 8 Schedule C for 1994 reporting that he incurred a net loss of 9 $397,500 . There is no itemization of the $397,500 amoun t 10 nor is there any supporting documentation . In addition, the 11 Court is troubled that Petitioner did not sign the retur n 12 for 1994 until January 26, 2008, some two months ago, when 13 the return was over 14 years past due . Moreover, a copy of 14 the taxpayer's federal tax return for a prior year, without 15 more, is not sufficient to establish that the taxpaye r 16 incurred an NOL or that any amount was available to be 17 carried forward . Wilkinson v . Commissioner , 71 T .C . 633, 18 639 (1979) . 19 We now focus on the additions to tax . Respondent 20 bears the burden of production with respect to an addition . 21 Sec . 7491(c) . 22 Respondent provided a certified transcript of 23 account for each of the years at issue showing tha t 24 Petitioner failed to timely file and pay any tax for any of 25 the years at issue . Petitioner filed a return for 2001 on Heritage Reporting Corporatio n (202) 628-4888 9 1 January 16, 2007, over five years late, a return for 2003 on 2 August 3, 2007, over three years late, and a return for 2004 3, on August 3, 2007, over two years late . We find tha t 4 Respondent has satisfied his burden of production tha t 5 Petitioner did not file his income tax returns timely under 6 Section 6651(a)(1) and pay the taxes timely under Sectio n 7 6651(a)(2) . Thus, the additions to tax under Sectio n 8 6651(a)(1) for delinquent filing and delinquent paying under 9 Section 6651(a)(2) apply to Petitioner for each of the years 10 at issue . 11 No additions to tax apply, however, if the failure 12 to file timely was due to reasonable cause and not willful 13 neglect . Sec . 6651(c)(1) . The taxpayer bears the burden of 14 proof as to reasonable cause and willful neglect . Higbee v . 15 Commissioner , 116 T .C . 438, 447 (2001) . 16 A taxpayer's failure to file timely is due to 17 "reasonable cause" if the taxpayer exercised ordinar y 18 business care anti prudence and was nevertheless unable to 19 file the return within the prescribed time . See Unite d 20 21 States v . Boyle , 469 U .S . 241, 246 (1985) ; Estate of Paxton v . Commissioner , 86 T .C . 785, 819 (1986) ; Sec . 22 301 .6651-1(c)(1), Procedure & Administration Regs . "Willful 23 neglect" is defined as "a conscious, intentional failure or 24 reckless indifference ." United States v . Boyle , 469 U .S . at 25 245 . Heritage Reporting Corporation (202) 628-4888 1 0 1 Petitioner admitted that he refused to file tax 2 returns because of the alleged conspiracy and because he 3 felt that the IRS owed him money . Petitioner has als o 4 failed to present any documents or information to show that 5 his failure to file a timely return for the years at issue 6 was due to reasonable cause and not willful neglect . 7 Accordingly, Petitioner is liable for the additions to tax 8 under Section 6651(a)(1) and Section 6651(a)(2) for each of 9 the years at issue . 10 Next, we address the addition to tax under Section 11 6654(a) for failure to pay estimated tax . Where payments of 12 tax, either through withholding or by making estimate d 13 quarterly tax payments during the course of the year, do not 14 equal the percentage of total tax liability required, then 15 the addition to tax is automatically imposed under Section 16 6654( a), unless one of the statutory exceptions applies . 17 Sec . 6654(e) . Niedringhaus v . Commissioner , 99 T .C . 202 , 18 222 (1992) ; Habersham-Bey v . Commissioner , 78 T .C . 304, 319- 19 320 (1982) . 20 The record reflects that Petitioner failed to have 21 sufficient amounts withheld and that he failed to pa y 22 estimated taxes for 2001 . We therefore sustain Respondent's 23 determination that Petitioner is liable for the $108 .4 7 24 addition to tax for the year 2001 for failure to pay 25 estimated taxes under Section 6654 . Heritage Reporting Corporation (202) 628-4888 1 1 1 To give effect to the foregoing, a decision will b e 2 entered for Respondent for each of the three years at issue . 3 This concludes the Court's oral findings of fac t 4 and opinion in these consolidated cases . 5 (Whereupon, at 9 :33 a .m ., the bench opinion in the 6 above-entitled matter was concluded . ) 7 8 9 10 11 12 13 / / 14 15 16 17 18 19 20 21 22 23 24 25 Heritage Reporting Corporation (202) 628-4888