TAX COURT OPINION

Case: Pat Whaley
Docket Number: 15362-12
Judge: Laro
Opinion Type: bench
Filed: 06/28/2013
Pages: 7

UNITED STATES TAX COURT WASHINGTON, DC 20217 PAT WHALEY, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent KVC ) ) ) ) ) Docket No. 15362-12. ) ) ) ) ) ) OR D E R 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 abovereferenced case before Judge David Laro at Detroit, Michigan, containing his Oral Findings of Fact and Opinion, rendered at the trial session at which this case was heard. In accordance with the Oral Findings of Fact and Opinion, a Decision will be entered under Rule 155. (Signed) David Laro Judge Dated: Washington, D.C. June 28, 2013 SERVED Jun 28 2013 Capital Reporting Company Bench Opinion by Senior Judge David Laro 3 May 22, 2013 Pat Whaley v. Commissioner Docket No. 15362-12 THE COURT: The Court has decided to render 1 2 3 4 5 6 Oral Findings of Fact and Opinion in this case, and 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the following are the Court's oral findings of fact and opinion. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. Section references are to the Internal Revenue Code. Petitioner refers to Pat Whaley. Petitioner, while residing in Michigan, petitioned the Court for a redetermination of a notice of deficiency in which respondent determined petitioner had a $1,196 tax deficiency for 2010. The issue for decision is whether petitioner underreported income of $3,827 for 2010. Background The parties submitted a stipulation of facts. Petitioner also testified at trial. In 2010, petitioner received $3,827 in unemployment compensation for which petitioner received a Form 1099-G, Certain Government Payments. The payment records of the Michigan Employment Security Commission also show that petitioner received $3,827 866.488.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 in unemployment compensation. Petitioner filed her Federal income tax return for 2010 but failed to report the $3,827 in unemployment compensation on the return. The Michigan Employment Security Commission determined in a later year (i.e., not 2010) that petitioner was overpaid in unemployment compensation by $2,172. In 2011, petitioner repaid the Michigan Employment Security Commission $1,031 of the unemployment compensation that she received in 2010. In 2012, petitioner repaid $1,141 of the 2010 unemployment compensation. On March 19, 2012, respondent issued a notice of deficiency to petitioner and determined petitioner had a $1,196 tax deficiency. The statutory notice also contained computational adjustments to certain tax credits petitioner claimed on her 2010 return. Petitioner subsequently filed a timely petition for review. Discussion Gross income includes all income from whatever source derived, unless otherwise specifically excluded. Sec. 61(a). The definition of gross income broadly includes any instance of undeniable accessions to wealth, clearly realized, 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 and over which the taxpayer has complete dominion and control. Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 431 (1955). Generally, determinations of the Commissioner in a deficiency notice are presumed correct, and the taxpayer bears the burden of proving otherwise. Welch v. Helvering, 290 U.S. 111, 115, 54 S.Ct. 8, 78 L.Ed. 212 (1933); Rule 142(a). But in the U.S. Court of Appeals for the Sixth Circuit, the court to which this case is appealable, the Commissioner bears the initial burden of producing at least a minimal evidentiary foundation linking the taxpayer to the tax-generating activity or the receipt of funds before the general presumption of correctness attaches to determinations of unreported income. United States v. Walton, 909 F.2d 915, 919 (6th Cir. 1990). Once the Commissioner meets his burden of production on this issue, the burden of persuasion shifts to the taxpayer to produce credible evidence that she did not earn the income being charged. Walton, 909 F.2d at 919. Respondent has placed in evidence 23 petitioner's Form 1099-G and Michigan Employment 24 25 Security Commission's payment records, both showing that petitioner received $3,827 in unemployment 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 5 6 7 8 9 compensation in 2010. This evidence is sufficient for respondent to carry his initial burden of production. In rebutting respondent's prima facie case, petitioner argued only that in 2011 and 2012, she paid back to the Michigan Employment Security Commission a total of $2,172 that she previously received. Nonetheless, petitioner agreed that she received $3,827 in unemployment compensation in 2010 10 without restrictions and did not report that amount 11 12 13 14 15 on her 2010 Federal income tax return. If a taxpayer receives income under a claim of right and without restrictions, the income is taxable ·in the year received, Corliss v. Bowers, 281 U.S. 376, 378 (1930), even though the taxpayer may 16 still be found liable to restore its equivalent in a 17 18 19 20 21 22 23 24 25 later year. North America Oil Consolidated v. Burnet, 286 U.S. 417, 424 (1932). When, in a later year, a taxpayer is required to restore an amount that she received and included in income in a prior year, the taxpayer may deduct the repayment from income·in the year repayment is made. If the repayment exceeds$3,000, she may alternatively reduce her tax liability in the year of repayment by the amount of tax for the earlier year that was 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 attributable to inclusion in income of the repaid amount, unless a deduction of the repayment from income in the year of repayment results in a lesser tax liability. Sec. 1341(a); section 1.1341-1, Income Tax Regs. Thus petitioner is not entitled to exclude from her 2010 gross income the amount of unemployment compensation that she subsequently repaid to the Michigan Employment Security Commission. See Fisher v. Commissioner, T.C. Memo. 1987-88, 53 T.C.M. (CCH) 128, 132 (1987). As a corollary, the $3,827 in unemployment compensation was income to petitioner for 2010. In reaching this conclusion, we have considered all arguments made at trial and, to the extent not mentioned above, we conclude that they are 16 moot, irrelevant, or without merit. Decision will be 17 entered under Rule 155. This concludes the Court's 18 Oral Findings of Fact and Opinion in this case. 19 20 21 22 23 24 25 THE COURT: Okay. We now go off the record for a moment. (Discussion had off the record.) MR. SLEDZ: Nothing further, Your Honor. THE COURT: Ms. Whaley? MS. WHALEY: No, Your Honor. THE COURT: You have nothing further. All 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 right. Very good. Thank you very much. That concludes this matter. This case is now submitted and concluded. Is there any other business to come before the Court during this Detroit session? Seeing none, the court is adjourned in this session. Thank you all for your courtesy. I thank the marshal and the reporter and the clerk. (Whereupon, at 10:10 a.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 25 866.488.DEPO www.CapitalReportingCompany.com