TAX COURT OPINION

Case: Matthias Haller
Docket Number: 11448-08
Judge: Wells
Opinion Type: memo
Filed: 07/06/2010
Pages: 15

T .C . Memo . 2010-14 7 UNITED STATES TAX COUR T MATTHIAS HALLER, Petitioner v . COMMISSIONER OF INTERNAL' REVENUE, Responden t Docket No . 11448-08 . Filed July 6, 2010 . Matthias Haller, pro s& . Richard J .'Hassebrock ,,,for respondent . MEMORANDUM FINDINGS OF FACT AND OPINION WELLS, Judge :, Respondent determined a deficiency of $6,32 3 in petitioner's Federal income tax for his 2003tax year , failure to file addition to tax pursuant to(cid:127)section 6651(a)(1) of $373, and a failure to pay addition to tax pursuant to sectio n SERVED JUL -- 6 2010 2 - 6651 (a) (2) of $357 .1 Respondent concedes that petitioner is no t liable for .the amounts set forth in the notice of deficiency an d contends that the period-of limitations is closed fo r petitioner's refund claim . Petitioner contends that the period of limitations is suspended pursuant to section 6511(h) o n account of his financial disability-and that he .is entitled to an ' overpayment of $17,044 (overpayment) . Respondent concedes tha t petitioner is entitled to a refund of the overpayment if th e period of limitations is suspended pursuant to section 6511(h) . Petitioner concedes that, absent a showing of financia l disability, the period,of limitations . for refund-of-the overpayment for his 2003 tax year is closed . Accordingly, we : must decide whether . petitioner was financially disabledpursuant .. to section 6511(h) . FINDINGS OF FACT Some of the facts and-certain exhibits have been stipulated . The stipulations of fact are incorporated in this opinion b y referenceand,are so found . At the time he filed his .petition, petitioner resided i n Ohio . 'Unless otherwise indicated, all section references are to the Internal Revenue Code, as amended . All amounts are rounded to the nearest whole dollar . _ 3 During 2002 petitioner and his wife, Maxine'Haller (Mrs .(cid:127) Haller) 2 owned and operated two businesses . named Restorative Solutions, L .L .C . (Restorative Solutions), and Orthocad, L .L .C . (Orthocad) .3 Restorative Solutions and . Orthocad provided custom wheelchairs to disabled individuals and performed maintenance .on them as necessary . During their 2003 tax year, petitioner and Mrs . : Haller paid through withholding $23,791 in . Federal income taxes. Restorative,Solutions and Orthocad were dissolved on- . December 1, 2005 . From sometime during, 2002 until mid=2007, petitioner suffered from stress-induced adrenal failure which affected his memory .4 Petitioner's illness caused him to forget to pay bills and miss appointments .. However, during his illness, petitioner would have clear days when'he thought he could accomplis h 'Mrs . Haller was a signatory to the petition in this proceeding . However, respondent filed a motion to dismiss Mrs . Haller for lack,of jurisdiction because no notice of . deficiency was issued to her . . By order dated July 15, 2008, Mrs . Haller was dismissed from this proceeding . 3Restorative Solutions and Orthocad were, limited liability companies pursuant to the laws . of Ohio and were formed .on Apr . 30, 2002 . 4At trial petitioner did not present expert testimony regarding the effects of his illness on his physical and mental capacity to carry on his . financial affairs . However, respondent does not refute the fact that petitioner was ill as he described in his testimony ; rather, respondent disputes whether petitioner's illness was sufficient to toll the period of limitations of sec . .6511(b), pursuant to sec . 6511(h) . We, therefore, accept as'true petitioner's testimony describing his illness and its effects on him . anything . Petitioner's illness-was a :result of stres s f rom work and Mrs . Haller's health problem discussed ; below . From.2003-to,2007, petitioner was-aware : of his obligation t o file a Federal income tax return for -his ,2003 -,tax year . .Petitioner and . Mrs . Haller made several attempts to have, their . 2003 tax return prepared for them . :During 2004 petitioner and , Mrs .-Haller :hired"an .accountant to prepare .their 2003,tax return . However, their accountant never finished .their. 2003wreturn- because :they could not afford his fee . Petitioner and'Mrs . Haller also contacted the Internal Revenue Service .-(-IRS)- and ., investigated pro-bono~taxpreparation services,~but-they were . ;; unable to obtain aid in filing their=2003 tax return . Mrs . Haller attempted to prepare their 2003 .return "every night fo r two weeks"-but did not complete the forms .. , During the period of'petitione.r's illness, petitioner .and Mrs . Haller' were physically and financially able to .car e, f or' their children . During 2004 to 2007 petitioner and Mrs . Haller . paid some of their bills, and their' utilities were never cut off . Petitioner . and Mrs . Haller earned $72,000 in wage 'income during= 2004 and over $47,000 during 2005 . . before the birth ,of her 'first son' . Mrs . Haller' s illnes s resulted .in a reduced ability to'participate in Re'st'orativ e Solutions and Orthocad during'2003 and 2004 . 5 During .2005, .:petitioner and Mrs . Haller-searched for'an d hired a bankruptcy attorney .' On October 7, 2005, petitioner and Mrs . Haller filed a joint chapter 7 petition'in the U . S . Bankruptcy Court for the Southern District of Ohio On February 10, 2006, petitioner ..and(cid:127)Mrs . "Haller-were granted 11 a discharge b y the bankruptcy court .- As a:result of the bankruptcy proceeding , petitioner and Mrs . Haller lost their home . After petitioner and Mrs . Haller failed to file,a Federal income tax return for their :2003 taxable year, responden t prepared,a section 6020(b) substitute return for 2003 . . February 11, 2008, respondent sent petitioner a notice of deficiency.in petitioner's Federal income tax for his 2003 tax year and additions, to tax pursuant to section ' 6651 (a) (1) and- (2) . While petitioner' s case was being considered by respondent, petitioner and Mrs . Haller submitted to respondent's Appeals Office a joint Form 1040, U .S . Individual Income Tax Return, for their 2003 'tax year,5 on which they claimed married~filing- jointly status, .tax payments of $23,791 , and a tax refund $1 .7,044 . On January 26, 2009,-petitioner provided respondent with copies of two physician's'statements signed by Dr .-Timoth y Kubacki, D .O ., one on behalf of-petitioner and one onb'ehalf o f 5The record is unclear as to whether petitioner and Mrs . Haller submitted their 2003 tax return before or after respondent sent the notice of deficiency . Mrs . ; .Haller . On February 5, 2009, petitioner faxed t o ,respondent's counsel a signed statement, dated February, 4, .,-.-2009, which reads : ; "With :my signature below, I confirm that for the period of my,impairment no other person was given authorizatio n to . act . on my behalf concerning financial matters ." ,^ .The physician's statements and petitioner's-signed statement wer e attached to petitioner's,$Federal .income tax return for his2003 , taxable .year . OPINIO N The .issue .we must decide is . whether petitioner wa s financially disabled pursuant to ' section . 6511 (h) . If, the perio d of limitations for refund of. the .overpayment was suspended' o ,account of petitioner's financial, disability, respondent concedes that the overpayment should be allowed . Section 6512, grants this Court limited . jurisdiction to decide overpayments of .tax an d 6Respondent objects to the physician's statements on the,, basis of hearsay and lack of authentication . See Fed .vR . 'Evid . ,801(c), 802, 901 . We conclude that the physician's statements . are . hearsay and, therefore, inadmissible for the truth of the matter asserted . However, we admit the physician's statements for the limited purpose of showing that petitioner sent the statements to respondent on Jan .. 26, 2009 . See Fed . R . Evid . 901 ;. . Moreover,even if we were to'consider the evidence to which respondent objects, we would hold for respondent .because we conclude that it is insufficient to establish financial disability pursuant to sec . 6511(h) . See infra ; see also Perkins v . Commissioner , T .C . Memo . .2008-261 ("We need not decide whethe r the evidence is admissible,, because we find that it is insufficient to establish that petitioner was financiall y disabled within the meaning of section 6511(h), .") .-.,', order the " refund . of such-overpayments to ,,,taxpayers- :' Section 651'2 (b)'(1) provides as follows : i f the Tax .Court' finds that there" is no def-iciency -and . further finds that the taxpayer :-has made an overpayment o f income tax *,* * or finds that there " i:s a"". deficiency, but that the taxpayer (cid:127)has made an overpayment of such tax, the Tax"Court shall have jurisdiction to determine the-amount of such overpayment, and such amount shall, ; when the decisio n of the Tax' Court has-Ybecbme, final,' -be credited= or refunde d to the taxpayer . The amount of . any .refund which this Court may award , however, is restricted to payments follows: -No .such credit or refund .shall be allowed or made of an y portion of the'tax unless-the Tax Court . determinesas par t of ..its decision :. that such portion was paid-- (B) "within the period which . would' . be applicable unde r section,-6511 (b)' (2) , (c),,,', : or mailing of the notice of deficiency a claim had been fi-led (whether or 'not- filed ) 'on the .,date-of the (d) Although "not elegant,, :"-- the . statutory scheme" i's straightforward .- Commissioner v . - Lun.dy , 516' U .-S . 235 ., 24 2 (1996) . " [A]°ll that" matters for the proper :application 'o f section 65'12 (b) (3) (B) is tha t the 'claim' contemplated in tha t .section be . treated as the only mechanism for determining whether a taxpayer can recover a .refund .11 Id . ' Accordingly, the statut e defines the limitation relevant-to the instant ca6e'b y incorporating the "lookback"';'provisions found in section , .651l(b ) and r'directs,the-Tax ; Court to determine the applicable period by inquiring into ;the timeliness,of a hypothetical claim-for refund' filed 'on the date of the mailing,of . the .notice. of ,,deficiency '' Id . "[A] taxpayer who, seeks a refund in the Tax Court,.*,* *,doe s not need to actually file a claim for'refund with the IRS ; the taxpayer need only show that the tax to'be refunded was,,pai d during the applicable look-back period :" Id . at 241 . In othe r words, the taxpayer need only timely file a petition contesting the notice of deficiency in the-Tax Court and prove an overpayment occurred during the applicable lookback period . Section 6511(b) limits the amount of tax .-to be refunded to , two "lookback" periods : (1) If-the claim is filed within 3 year s from the'time the return was filed, the taxpayer is .entitled t o refund of the portion of the tax paid within the 3 year s immediately preceding the'filing_of the claim (plus,the period' any extensions of time for filing :the return) ; or (2)'if the claim is not-- filed within that 3-year,period,-the taxpayer i s entitled to a refund of only, that "portion of the tax paid durin g the 2 . years immediately preceding the filing of the claim ." Sec . 'Generally, sec . 6511 provides the period during which a taxpayer must claim a refund or credit for overpaid taxes . ° The taxpayer must file a claim for refund "within 3° years from the time 'the .return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no 'return -was filed by 'the taxpayer, within '2 years from the timeR the tax was paid ." Sec . 6511(a) . 11 -9- 6511(b) (2) (A) and - ( B) see' Commissioner v . Lundy , supra at 240 .8 Petitioner is deemed to have paid on April 15, 2004, the taxes that were withheld from him and paid to the IRS for his 2003 ta x year . See sec ., 6513(b)-(1) . Respondent sent-petitioner a notice of deficiency dated February 11,2008, more than 3=years after petitioner's taxes for his 2003 tax year : were deemed paid . Consequently, the applicable lookback period is the 2 year s before February 11, 2008 . The period of limitations, therefore , closed on February 11, 2006, unless it was suspended . by section 6511(h) . Section 6511(h) provides equitable relief to suspend the period of limitations for . taxpayers seeking , arefund or credit for overpaid taxes ..9 Section 6511(h) provides-as follows : 'In Commissioner v . Lundy , 516 U .S . 235 (1996), the Supreme Court .,held that, where the .taxpayer does not file a return or a claim for refund before the, Commissioner issues a notice o f deficiency, the 2-year lookback period applies, measured from the date of the mailing of the notice of deficiency . Shortly after the Supreme-Court decided Lundy , Congress amended sec . 6512(b)(3) to extend the lookback rule to 3 years in a case where the taxpayer . fails to file a return or a claim for refund before the mailing of a notice of deficiency and the letter is mailed on a date "during the third year after the due date (with extensions) for filing the return of tax" . Taxpayer Relief Act of 1997, Pub . L . 105-34, sec . 1282(a), 111 Stat,1037 . The amended statute is effective for taxable years ending after Aug . 5, 1997 . 'Id . sec . 1282(b), 111 Stat . 1038 . 9Before the enactment of sec . 6511(h), the Supreme Court held that, although a taxpayer's mental disability might be a valid reason for equitable .-tolling, the period, of limitations could not be equitably tolled because the sec . 6511 deadline for filing a refund claim contained no "implie .d .'equitable tolling"' (continued . . .) - 10 - SEC . 6511(h) . Running of Periods of Limitation Suspended While Taxpayer Is Unable to Manage . Financia l Affairs Due to Disability . .- . (1) In' general . - - Ih the . case of an individual, the running of the periods specifie d in subsections HH (a) , suspended during any period-of such individual' s .life that such individual is financially,disabl'ed . , (b), and (c) shall b e (2) Financially;disabled .--: (A) In general .--For purposes o f paragraph (1), an individual'is financiall y , .disabled if such_individual .is unable to :- manage his financial affairs by reason of g medicallydeterminable'physical or menta l impairment of the individual which can b e expected to result in°death or which has, lasted or can be expected to last for a continuous period of not less ,than,12 months An individual shall . not be considered to have such an impairment,unless proof of th e existence thereof is furnished in such for m and manner as . the . Secretary may require . (B) Exception where individual has . guardian, etc .--An individual shall not b e treated as financially disabled during any period that such individual's spouse or any other person isauthorized to act on behalf ' of such individual in financial matters .- In,order~for a taxpayer to qualify as financially disabled Y e pursuant to section 6511(h), the physical or mental impairment must be that of'the taxpayer not of . some third person . Commissioner , 120 T .C . 5, 10 .(2003 ) 9( . . .continued ) United States V . Brockamp , 519 U .S .-347, 350,-351 ..-1 exception . (19 .97) . to allow equitable tolling in=, certain cases ., See .,H . -Conf . .Rept . 105-599,-i °at 255 (1998), 1998-3 C .B . 747, 1009 . In response to Brockamp , Congress -enacted'sec . :'~6511(h) 11 - intended that the'physical or mental impairment of"the taxpayer be substantial . Id . at il . The impairment must be one that is "expected to result in death or which has lasted or can be expected to last for a continuous period of not lessithan'12 months ." Sec . 6511(h)(2)(A) (cid:127) To-be eligible, the taxpayer must present proo f qualifying impairment in t(cid:127)h form and manner specified by the Secretary . Id . The Secrets,ry has established that"form and manner in Rev . Proc . 99-21, ::.1999-1 C .B . 960 . See Green v . Commissioner , T .C . Memo . 2009-105. . According to the revenue procedure, the taxpayer must provide .a physician's written . statement setting forth, inter alia' : (1) Aadescription of the taxpayer's physical or mental impairment ; (2)'the physician's medical opinion that the taxpayer's physical or mental impairment prevented him from managing his financial affairs ; (3) the, physician's medical opinion that the impairment was or couldb e expected to re'sult' in death-or lasted (or 'coul'd be expected t last) for a continuous period of not less than 12' months ; and (4) the specific period during which the taxpayer was prevented b y such physical or mental impairment from managing the taxpayer's financial-'affairs . Rev . Proc . 99-21, 'sec . 4 (1) . Additionally, the taxpayer must submit a written declaration' stating that n o person was authorized to act on behalf of the taxpayer in financial matters during the period of .financial disability . I~ The physician's statement and written-declaration must b e submitted along with the taxpayer :'s claim for credit or refund : , .Petitioner contends that he was financially disable d continuously from sometime during 2002 :tthrough the middle, 2007, a period o f contends that Mrs . Haller was not able to act on his behalf . Respondent contends that petitioner's .illnessi was not continuous , that Mrs . Haller.was authorized=to act on his behalf, and that " petitioner didnot .meet _ the procedural requirements of section We conclude that petitioner has, not shown that -h e financ ially disabled . Petitioner was . able . to take .,care of . his ' financial affairs,from 2002 to, 2007, . the period of his claime d illness .10 -We accept that petitioner,,suffered from stres s induced-adrena l to ' run his .businesses and perhaps his ability to earn 'money . However, during the period of his illness petitioner. and Mrs ..; Haller were physically and financially able to ;care . for their F children . Moreover during .2004 petitioner and , Mrs .. . Halle r earned $72,000 in wage,income ., See Perkins v . Commissioner , .T .C . Memo . 2008-261 (taxpayer who earned significant amounts o f ."Petitioner has not argued that his illness would're'sult'in ; death . Accordingly, we need not address that issue . income,, entered into lease ' agreements, and was predominantly i n charge of the household was not financially disabled) . Additionally, petitioner testified that he was'aware-of his obligation to file a Federal income tax return for his 2003 tax year and that during his iiiness=hewould have .clear-days when he thought he could accomplish anything . Petitioner also points to'a'lack of . funds and an inability to pay bills on time as_evidence of , financial' disability . However, during 2004 to 200 ;7,,-...petitioner and Mrs . Hauler pai d some=of their bills, and petitioner's utilities were never cut off during that period . See Glover v . United States, 96 AFTR,'2d 2005-5251 (E .D ."Mich . 2005)'(taxpayer who could make timely mortgage, car, and utility bill payments was=t financially disabled) . In any case, as stated above, a lack of funds may b e a symptom of financial disability ; it,isnot, standing alone, proofof financial disability for purposes of',section 6511(h ) Similarly, petitioner points to the loss of his home in a bankruptcy proceeding as evidence of financial, disability . While petitioner and Mrs . Haller did lose their house, petitioner has failed to show that the bankruptcy was due to other than a lac k of funds, as opposed to a physical or mental impairment that - .14 prevented him from the act of ; carrying on his -,financia l affairs . 1 1 .Petitioner's other actions'during the . relevant,period_are . also evidence-that he was not .finan.ciall.y disabled . Fo r instance, during 2004 petitioner and Mrs . Haller,wer.e able t o hire an accountant to prepare their 2003-tax .return .lz. Petitioner-and-Mrs .. Haller also contacted the IRS an d the basis of = the entire . :record, we hold that . petitione r has failed to prove that . he was ,financially .disabled ; i .e ., had a physical or mental impairment that prevented -him from :carrying o n his financial affairs for acontinuous period which,,lasted .or„wa s expected . .to 'last . not, less than 12 months as required by,sectio n 6511 (h ) Becausewe hold, that petitioner has not-shown that he wa s financially disabled for„the relevant period, we need . not decide whether Mrs . Haller was' authorized- to act on petitioner' s . behalf . See sec ". 6511 (h) (2) (B ) "During 2005, petitioner and. Mrs ., Haller . filed a voluntary petition in bankruptcy . While bankruptcy also may be a symptom of financial . disability, we believe that their voluntary , bankruptcy petition'is .evidence of their mental capacity to'mak e decisions about their affairs . 12However, petitioner and Mrs . Haller's accountant never , .finished their 2003 return because they could not afford his fee . 13Petitioner and Mrs . Haller were' unable to obtain aid in- filing their 20 .03 tax return . 15 - Asthe .period of limitations set forth in section 6511 is not suspended pursuant to section 6511(h), petitioner is not entitled to the refund of his overpayment of taxes for his 2003 taxable year . See secs . 6511 and 6512 . The Court has considered all of the arguments made by th e parties and, to the extent we have not addressed them herein, we consider them unnecessary to reach, moot, irrelevant, or without merit . To reflect the foregoing, Decision will be entere d . for respondent . e„J