TAX COURT OPINION

Case: Jerry Eugene & Lorilee Lynn King
Docket Number: 2683-07
Judge: Colvin
Opinion Type: bench
Filed: 04/03/2008
Pages: 7

UNITED STATES TAX COURT WASHINGTON, D.C. 20217 JERRY EUGENE KING and LORILEE LYNN KIN G Petitioners , V . COMMISSIONER OF INTERNAL REVENUE Respondent . Docket No . 2683-0 7 * * * ORDE 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 petitioners and to respondent a copy of the pages of the transcript of the trial of the above case before Judge Joseph R . Goeke at Milwaukee, Wisconsin, on March 11, 2008, containing his oral findings of fact and opinion rendered at the conclusion of trial . In accordance with the oral f indings of fact and opinion, decision will be entered for respondent . (Signed ) Joseph Robert Goeke Judg e DATED : Washington, D .C . April 3, 2008 SERVED APR 16 2008 2 1 Bench Opinion by Judge Joseph Robert Goeke 2 March 11, 200 8 3 JERRY EUGENE & LORILEE LYNN KING Docket Number 2683-07 4 I . 5 THE COURT : THE COURT HAS DECIDED TO RENDER 6 ORAL FINDINGS OF FACT AND OPINION IN THIS CASE, AN D 7 THE FOLLOWING REPRESENTS THE COURT'S ORAL FINDINGS OF 8 FACT AND OPINION . THE ORAL FINDINGS OF FACT AN D 9 OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY 10 OTHER CASE . 11 II . 12 This proceeding was heard as a regular case, 13 pursuant to the provisions of section 7442 of th e Internal Revenue Code and Rules 140 through 141 of the 5 Tax Court Rules of Practice and Procedure . 16 Hereinafter in this bench opinion, section references 17 are to the Internal Revenue Code . 18 Petitioner appeared pro se, and Respondent 19 was represented by Frederic J . Fernandez . 20 III . 21 This bench opinion is made pursuant to the 22 authority granted by section 7459(b) and Rule 152 of 23 the Tax Court Rules . 2 4 25 IV . At the time of the filing of the petition i n Heritage Reporting Corporation (202) 628-4888 3 1 this case, the Petitioners resided at 7640 Red Fox 2 Run, Rhinelander, Wisconsin . 3 Respondent determined in a notice of 4 deficiency for the taxable year 2004 that the 5 Petitioners had a deficiency in income tax in th e 6 amount of $1,327 and additions to tax under sections 7 6662 (a) and 6651(a)(1) . 8 Respondent's determination was based upo n 9 Petitioners' failure to report $10,790 of income from 10 pensions and annuities and social security benefits, 11 of which $2,468 was determined to be taxable . 12 Petitioners stipulated they received these amounts but 13 claimed that they were not taxable income . Taxable income includes gross income, and 15 gross income includes pensions and annuities . Secs . 16 61(a)(9), (11) and 63(a) . Furthermore, taxpayers who 17 file a joint return and receive social securit y 18 benefits and whose modified adjusted gross income plus 19 half of social security benefits received in the year . 20 exceeds $32,000 are to include in taxable income a 21 portion of the social security benefits received in 22 the year . Sec . 86(a), (b) and (c)(1)(B) . Therefore, 23 the amounts that Respondent determined Petitioners 24 received but failed to report constitute taxabl e 25 income . Heritage Reporting Corporation (202) 628-4888 4 1 Petitioners argue that the Internal Revenue 2 Code is "incomprehensible" and therefore cannot b e 3 relied upon to support the imposition of federal 4 income taxes . 5 We have previously considered simila r 6 arguments and found them to be without merit . See 7 Halcott v . Commissioner , T .C . Memo . 2004-214 . Our 8 federal income tax system is complex, but we a s 9 American citizens share the burden of complying with 10 that system . In addition, the circumstances of this 11 case are not so complex that the complexity provides a 12 reasonable cause for the Petitioners' failures in this 13 case . 14 Section 6651(a)(1) imposes an addition to 15 tax of up to 25 percent of the amount required to be 16 shown as tax for failure to timely file a federa l 17 income tax return unless the taxpayers demonstrate 18 that the failure was due to reasonable cause and not 19 due to willful neglect . 20 Section 7491(c) places the burden o f 21 production on Respondent to show that the imposition 22 of an addition to tax is appropriate . To satisfy this 23 burden, the Respondent must present sufficien t 24 evidence that the particular addition to tax i s 25 appropriate . If the Respondent makes such a showing, Heritage Reporting Corporatio n (202) 628-4888 5 1 the burden of proof is on the taxpayers to raise any 2 issues that would negate the appropriateness of the 3 penalty, such as reasonable cause . Reasonable cause 4 exists if the taxpayers "exercise ordinary busines s 5 care and prudence and were nevertheless unable to file 6 the return within the prescribed time ." United States 7 v . Boyle , 469 U .S . 241, 243 (1985) (quoting sec . 8 301 .6651-1(c)(1) of the Proced . & Admin . Regs . ) 9 Petitioners were required to file their 2004 10 federal income tax return on or about April 15, 2005 . 11 Generally, pursuant to section 6011(a), taxpayers are 12 required to file returns that conform to the forms and 13 regulations prescribed by the Secretary . Sec . 1 .6011- 14 1(a), Income Tax Regs . ; Williams v . Commissioner , 114 15 T .C . 136, 139 (2000 ) 16 The record shows that Petitioners did not 17 file a conforming return until September 27, 2005, 18 thus Respondent has satisfied initial burden . 19 Petitioners have not provided the Court with a 20 reasonable explanation for the delay in their filing . 21 Accordingly, we find that Petitioners did not hav e 22 reasonable cause for failure to file their 2004 income 23 tax return on time and therefore we've sustai n 24 Respondent's determination that Petitioners are liable 25 for the additions to tax under section 6651(a)(1) . Heritage Reporting Corporatio n (202) 628-4888 6 1 Section 6662(1) and (b)(2) state tha t 2 taxpayers will be liable for a penalty equal to 20 3 percent of the portion of the underpayment of ta x 4 attributable to a substantial understatement of income 5 tax . Section 6662(d)(1)(A) states that a substantial 6 understatement of tax exists if the amount of th e 7 understatement exceeds the greater of 10 percent of 8 the tax required to be shown on the return or $5000 . 9 Respondent determined that Petitioners ar e 10 liable for an addition to tax of $265 .40 under section 11 6662 . Petitioners were required to report a ta x 12 liability of $1,398, and they underreported their tax 13 liability by $1,327 . Therefore Respondent ha s 14 satisfied his burden of production under section 15 7491(c), because Petitioners understated their income 16 tax by more than 10 percent . There's no substantial 17 authority for Petitioners' underreporting, nor wa s 18 their failure disclosed in any way on their return . 19 Therefore Petitioners are not entitled to a reduction 20 of their understatement under section 6662(d) . 21 Accordingly we sustain Respondent' s 22 determination that Petitioners are liable for the 23 addition to tax under section 6662 . Given these 24 determinations, a decision will be entered fo r 25 Respondent . Heritage Reporting Corporation (202) 628-4888 1 THIS CONCLUDES THE COURT'S ORAL FINDINGS OF 2 FACT AND OPINION IN THIS CASE . 3 (Whereupon , at 12 :55 p . m ., the bench opinion 4 in the above - entitled matter was concluded . ) 7 5 6 7 8 9 10 11 12 13 14 15 / / 16 // 1 7 18 19 2 0 21 22 23 2 4 25 Heritage Reporting Corporation (202) 628-4888