TAX COURT OPINION

Case: Joseph Allen May
Docket Number: 2030-14
Judge: Buch
Opinion Type: bench
Filed: 11/24/2015
Pages: 8

RMM UNITED STATES TAX COURT WASHINGTON, DC 20217 JOSEPH ALLEN MAY, Petitioner, v. ) ) ) ) Docket No. 2030-14. COMMISSIONER OF INTERNAL REVENUE, Respondent ) ) ) ) ORDER Pursuant to Rule 152(b), Tax Court Rules of Practice and Procedure, it is ORDERED that the Clerk of the Court shall transmit with this order to petitioner and respondent a copy of the pages of the transcript of the trial in this case before Judge Ronald L. Buch at St. Louis, Missouri, containing his oral findings 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 under Rule 155. (Signed) Ronald L. Buch Judge Dated: Washington, D.C. November 24, 2015 SERVED Nov 25 2015 Capital Reporting Company 3 1 Bench Opinion by Judge Ronald L. Buch 2 October 22, 2015 3 4 5 Joseph Allen May v. Commissioner Docket No. 2030-14 THE COURT: The following represents the 6 Court's Oral Findings of Fact and Opinion. The Oral 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Findings of Fact and Opinion may not be relied upon as precedent in any other case. This opinion is in conformity with Internal Revenue Code section 7459(b) and Rule 152(a) of the Tax Court Rules of Practice and Procedure. Any section references refer to the Internal Revenue Code or the Treasury regulations in effect during the year at issue, and Rule references are to the Tax Court Rules of Practice and Procedure. Prior to the trial the parties stipulated as to several issues, and per their stipulation of settled issues, the issues remaining for trial were (1) whether Mr. May overstated his gross receipts on his original Form 1120S, U.S. Income Tax Return for an S Corporation, by $14,799; and (2) whether Mr. May 21 must include on his Form 1040, U.S. Individual Income 22 23 24 25 Tax Return, a $3,000 payment that his dental practice paid to his wife Ana Mae May. At trial, respondent conceded that the $3,000 payment need not be included into income (consistent with respondent's position 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company that Mr. May is not entitled to file married filing jointly). PRELIMINARY MATTER 4 As an initial matter, there has been much 1 2 3 4 5 6 wrangling over whether Mr. May and Ms. May filed a 7 8 joint return, and if not, whether Mr. May is now precluded from filing a joint return with Ms. May. 9 Mr. May orally gave up this issue on the record 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 twice. First at docket entry 20, which is a transcript of a hearing before this Court during which Mr. May agreed at page 11 that the only remaining issue was the gross receipts for his dental practice. Then at docket entry 21, Mr. May agreed at pages five to six that he is not entitled to married filing jointly status. In addition, in a poorly worded stipulation of settled issues, Mr. May agreed that he is entitled to married filing separately status. In that same document, he also explicitly agreed as to what remains at issue, and the items at issue do not include filing status. When the stipulation of settled issues is taken together with his statements on the .record, Mr. May's concession of the filing status issue is well documented. In an apparent effort to counter his own 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 7 8 9 stipulations, both on and off the record Mr. May offered excuses to the Court as to why he should not be bound to his written and oral stipulations, excuses such as it being dark when he reviewed the stipulation or that he wasn't feeling well when he spoke on record. Based on these excuses, Mr. May argues that the Court should now let him contest the filing status issue. Before and during the trial, the Court held 10 Mr. May to his concessions, but nonetheless allowed 11 12 13 him to present what the Court characterized as an offer of proof on the filing status issue. Mr. May's argument and evidence consisted jx1 the following: 14 Mr. May argues that he and Ms. May filed a joint 2011 15 return before any separate return was filed by Ms. 16 May. The record contains a written document 17 18 19 20 21 22 23 24 25 submitted in response to an inquiry from the IRS. in that inquiry, the IRS notes that it received two 2011 returns for Ms. May; one a joint return filed in February 2012 and the other a separate return filed in July 2012. In response to the inquiry, Ms. May alleges that Mr. May forged her signature. In his questioning of Ms. May as a witness, Mr. May pressed the issue of whether Ms. May had prepared the document. Appearing frightened, Ms. May stated that 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 4 she was uncertain. When asked by the Court if the handwriting on the document was hers, appearing reluctant to answer, she stated that the handwriting was hers. While the Court cannot be certain whether 5 Mr. May had attempted to intimidate the witness, at this point, Mr. May tried to influence the witness by telling her that she would be the recipient of the tax benefit if Mr. May prevailed on this issue. Ms. May appeared uncomfortable during her testimony and hurriedly left the courtroom when her testimony concluded. Based on her testimony and demeanor, it is clear to the Court that Ms. May prepared the document. And based on Mr. May's questioning and demeanor, the Court found him generally not to be credible. Mr. May conceded the filing status issue. Even without that conc.ession, he would properly be held to married filing separate status, because there is no evidence in the record to support Mr. May's contention that he and Ms. May filed a bona fide return before Ms. May filed her separate return. We now turn to the remaining issues. 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 Capital Reporting Company Background 7 The sole remaining issue is the gross receipts for Mr. May's dental practice. On the original Form 1120S for his dental practice, Mr. May reported gross receipts (before returns and allowances) of $872,971. The IRS issued a notice of deficiency making various adjustments, none of which remain at issue. Subsequently, and while this case has been pending, Mr. May filed an amended Form 1120S.for his dental practice lowering the gross receipts to $858,172. The reason for the adjustment in the gross receipts number is that Mr. May lost confidence in his accountant and return preparer. He asked someone else to compile the numbers, and the amended return wa.s prepared based on the revised numbers. Mr. May provided as an exhibi s a "Transaction By Account" list dated in 2014 and totaling to the same number as 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 reported on the gross receipts on the amended return. 21 Mr. May does not know where the information came from 22 23 or how it was compiled. As he stated repeatedly, his background is in dentistry, not accounting. No 24 witness testified as to the accounting or bookkeeping 25 issues. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company Discussion In general, the Commissioner's 8 determination set forth in a notice of deficiency is presumed correct, and the taxpayer bears the burden of proving that the determination is in error. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). "We treat the gross receipts listed on petitioners' returns as admissions that petitioners had gross receipts of at least those amounts." Biazar v. Commissioner, T.C. Memo. 2004-270. Accordingly, the taxpayer bears the burden of proving that his or her gross receipts were overstated.. . Rule 142(a); see also Safakish v. Commissioner, T.C. Memo. 2014-242; 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Clark v. Commissioner, T.C. Memo. 2002-32. 15 16 17 18 19 20 21 22 23 24 25 To show that an overstatement occurred, the taxpayer must maintain and provide adequate and accurate records. Sec. 6001; see also Clark v. Commissioner, T.C. Memo. 2002-32. This Court has looked to evidence demonstrating the amounts, dates, or sources of the income to determine whether the taxpayer has shown that there- has been an overstatement. See Biazar v. Commissioner, T.C. Memo, 2004-270; Clark v. Commissioner, T.C. memo. 2002-32. Although Mr. May's "Transaction By Account" list provides this information, its reliability is 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 9 1 2 3 4 5 6 7 8 9 doubtful. Mr. May initially reported gross receipts of $872,971. He later amended his Form 1120S and reported gross receipts of $858,172. Although Mr. May offered a document showing transactions totaling his revised gross receipts number, he repeatedly admitted that he did not know how the numbers were derived for either the $872,971 initially reported or the $858,172 shown on the later, amended return. 10 Given his own uncertainty as to the accuracy and provenance of these totals, Mr. May' s evidence is insufficient to support lowering his gross receipts. Because there were concessions by both parties, a decision will be entered under Rule 155. (Whereupon, at 9:19 a.m., the above- entitled matter was concluded.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 866.488.DEPO www.CapitalReportingCompany.com