TAX COURT OPINION

Case: Esther Dorival
Docket Number: 20719-15S
Judge: Leyden
Opinion Type: bench
Filed: 06/26/2017
Pages: 11

SYM UNITED STATES TAX COURT WASHINGTON, DC 20217 ESTHER DORIVAL, Petitioner, v. ) ) ) ) Docket No. 20719-15S. 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 herewith to petitioner and to respondent a copy of the pages of the transcript of the trial in the above case before Special Trial Judge Diana L. Leyden at Miami, Florida, on May 15, 2017, containing her oral findings of fact and opinion rendered at the conclusion of the trial. In accordance with the oral findings of fact and opinion, decision will be entered under Rule 155. (Signed) Diana L. Leyden Special Trial Judge Dated: Washington, D.C. June 26, 2017 SERVED Jun 27 2017 Capital Reporting Company 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Bench Opinion by Judge Diana L. Leyden May 17, 2017 Esther Dorival v. Commissioner Docket No. 20719-15S THE COURT HAS DECIDED TO RENDER ORAL FINDINGS OF FACT AND OPINION IN THIS CASE, AND THE FOLLOWING REPRESENTS THE COURT'S ORAL EINDINGS OF FACT AND OPINION. THE ORAL FINDINGS OF FACT AND OPINION SHALL NOT BE RELIED UPON AS PRECEDENT IN ANY OTHER CASE. See Rule 152(c), Tax Court Rules of Practice and Procedure. This proceeding was heard as a Small Tax Case pursuant to the provisions of section 7463 of the Internal Revenue Code of 1986, as amended, and Rules 170 through 175 of the Tax Court Rules of 16 Practice and Procedure. 17 18 19 20 21 22 23 This bench opinion is made pursuant to the authority granted by section .7459(b) of the Internal Revenue Code of 1986, as amended, and Rule 152 of the Tax Court Rules of Practice and Procedure. Hereinafter in this bench opinion, all section references are to the Internal Revenue Code, as amended and in effect for the relevant times, and 24 all Rule references are to the Tax Court Rules of 25 Practice and Procedure. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 4 The Court uses the term "IRS" to refer to administrative actions taken outside of these proceedings. The Court uses the term "Ñespondent" to refer to the hommissioner of Internal Revenue, who is the head of the IRS and is #espondent in this case, and to refer to actions taken in connection with this case. The trial of this case was conducted on May 17, 2017, in Miami, Florida. Petitioner appeared on her own behalf. Anthony Adane appeared on behalf of #espondent. n d In a ,Notice of peficiency dated July 21, 2015, the Internal Revenue Service (IRS) determined a deficiency in <Fetitioner' s 2013 Federal income tax of $6, 562. Respondent concedes that the unreported employment compensation, in the amount of $3, 736 is not etitioner' s income. Petitioner asserts that she was the victim of identity theft as to this unemployment compensation and filed an Identity Theft 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Affidavit with the IRS. Respondent also concedes 22 23 24 25 that titioner received wages totaling $2,014. Respondent clarified that the IRS is not asserting (1) a ban on the Earned Income Credit under section 32(k) or (2) the accuracy-related penalty 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 under section 6662(a). f After,R'espondent' s concession and clarifications, the issues for decision by the Court - 4 are as follows: (1) whether etitioner received 5 wages in the amount of $14,500 and (2) whether 6 #etitioner is entitled to a refundable American 7 Opportunity Credit for 2013. 8 9 10 11 12 13 14 15 16 17 18 19 20 1 Despite being instructed by the Court to comply with Rule 91 requiring the parties to stipulate, to the fullest extent, all relevant and unprivileged matters, Fetitioner refused to do so. The Court considered the following documents and admitted the same into evidence: (1) the -Itotice of n ,Beficiency dated July 21, 2015, (2) Form W-2 for 2013 issued by Newport Marketing LLC topF'etitioner, reporting wages, tips and other compensation of $457, and (3) Form W-2 for 2013 issued listing as the employer, "Esther Smith" tofE'etitioner for the amount of $1,157. The Court notes that both of the Forms W- 2 listed the employee name as "Esther Smith and that etitioner conceded that they were issued to her. In 22 her petition, Fetitioner asserts that she changed her 23 24 25 name to Esther Dorival upon her divorce. Petitioner resided in Florida at the time that the petition was timely filed with the Court. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 6 1 2 3 Petitioner's 2013 tax return reported wages of $16,514, unemployment compensation of $3,736, head of household filing status, the American Opportunity 4 Credit (AOC), the earned income credit, and the 5 6 7 additional child tax credit. The filed Forms W-2 report wages totaling $2,014. On July 21,2015, the IRS issued to 8 E'etitioner a Ñotice of 'eficiency for 2013 9 disallowing a portion of the reported wages of 10 11 12 13 14 15 16 17 18 19 20 21 22 $14,500 and the AOC. The IRS also determined that the Petitioner did not include $2,736 of unemployment compensation for 2013, but espondent now concedes that Fetitioner did not receive such unemployment compensation. Based on the changes to etitioner's adjusted gross income, the IRS made computational adjustments that reduced etitioner's earned income credit and additional child tax credit. These adjustments will not be discussed. Petitioner timely petitioned the Court for redetermination of the deficiency. We now turn to the substantive law. 23 Generally, the Commissioner's determination of a 24 25 deficiency is presumed correct, and the taxpayer bears the burden of proving it incorrect. Rule 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 7 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). Under section 7491(a), the burden of proof may shift to the Commissioner if the taxpayer produces credible evidence with respect to any relevant factual issue that meets other requirements. Petitioner does not argue, and the evidence does not establish, that the burden of proof shifts to Xespondent under section 7491(a) as to any issue of fact. The burden of proof remains with etitioner. 1. Wages Petitioner reported wages of $16,514 on her 2013 tax return. Respondent concedes that the IRS received information from two payors -showing that 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Fetitioner received wages totaling $2, 014, the 15 16 17 18 19 amounts reports on the two Forms W-2, not $16,514. Petitioner failed to present any evidence at trial to support her claim to wages in excess of the amounts reported to the IRS. She asserted that she had "given them the information" and "filed an 20 amended return" and "they said it was all se The 21 Court patiently explained many times that whatever 22 23 24 25 documents (etitioner provided to the IRS those documents were not in the possession of the Court and that the etitioner had to provide the documents to the Court. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 8 1 2 3 4 5 6 7 8 9 10 11 Petitioner also testified that the tax return preparer who prepared her 2013 tax return "made many mistakes". During a recess in the trial espondent reviewed the administrative file with titioner. Both parties agreed that etitioner had filed an amended tax return that excluded the unemployment compensation but that the IRS administrative file did not contain any documents to support what, if any, amount of the $14, 500 wages reported by etitioner were paid to her. Despite several requests by the 12 Court for titioner to focus on providing documents 13 14 15 16 or testimony about her wages,9Fetitioner did not do either. Petitioner has not substantiated that she received wages in excess of $2,014 for 2013. 17 Accordingly, the Court sustains the IRS' disallowance 18 19 20 21 22 23 24 25 of etitioner' s wages of $14, 500 for 2013. II. American Opportunity Credit The code allows for a variety of education credits, including the AOC, a modified version of the Hope Scholarship Credit that was in effect for 2013. See sec. 25A(i). The AOC provides for a credit against tax equal to 100 peeeent of qualified tuition and related expenses paid by a taxpayer during the 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 9 taxable year up to $2, 000, plus 25 pe-reent of such expenses paid that exceed $2,000 but not to exceed $4,000, allowing for a maximum credit of $2,500. Sec. 25A (i) (1) . Up to 40 of the AOC may be refundable. Sec. 25A(i)(5). The AOC is allowed for the first four years of post-secondary education for qualified tuition and expenses including required course materials. Sec. 25A(i)(2) and (3). To be eligible for the AOC a student must be enrolled in at least one academic period and must be taking at least one half of a normal full-time workload for a student in that course of study. Sec. 25A(b)(2) (B), (.3) (B). The AOC is limited to "eligible students" attending an "eligible education institutio An "eligible student" has two criteria: (1) the student is enrolled or accepted for enrollment in a degree, certificate, or other program leading to a recognized educational credential at an institution of higher education that is an eligible institution and (2) the student is carrying at least half the normal full- time workload for the course of study the student is pursuing. Sec. 25A(b)(3). An "eligible education institution" means an institution; "(A) which is described in section 481 of the Higher Education Act 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 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 Capital Reporting Company 10 of 1965 (20 U.S.C. 1088), as in effect on the dates of the enactment of this section [section 25A}, and (B) which is eligible to participate in a program under title IV of such Act." Sec. 25A(f)(2). Generally, "qualified tuition and related expenses means tuition and fees required for enrollment or attendance." Sec. 1.25A-2(d) (1), Income Tax Regs. A "required" fee is one that is "required to be paid to the eligible educational institution as a condition of the student's enrollment or attendance at the institution. Sec. 1.25A-2(d) (2)(i). Amounts paid for books, supplies, and equipment are eligible only if the fees must be paid.to the institution for the student's enrollment 3yøme Ta4 ee]S. or attendance. Sec. 1.25A-2(d)(2) (ii For example, if students are required to purchase books and reading materials for a course but can purchase them from another sources such as an off-campus bookstore, they are not required to be purchased from the institution for enrol ment or attendance. 1.25A-2(d)(6), Example (2). J.ttafMg,10¥ 5.3 See sec. ¯¯ A taxpayer ordinarily must maintain adequate records to substantiate the amounts of his or her income and entitlement to any deductions or credits claimed. Sec. 6001; sec. 1.6001-1(a), Income 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Tax Regs. When a taxpayer establishes that he or she paid or incurred a deductible expense but does not establish the amount of the expense, the Court may estimate the amount allowable in some circumstances. Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930). There must be sufficient evidence in the record, however, to permit the Court to conclude that the taxpayer paid or incurred a deductible expense in at least the amount allowed. See Williams v. United States, 245 F.2d 559, 560 (5th Cir. 1957); Vanicek v. Commissioner, 85 T.C. 731, 743 (1985). In estimating the amount allowable the Court bears heavily upon the taxpayer who failed to maintain required records and to substantiate deductions as the Code requires. See Cohan v. Commissioner, 39 E.2d at 544; Keenan v. Commissioner, T.C. Memo 2006-45, aff'd 233 F.App'x 719 (9th Cir. 2007). Again, Fetitioner failed to provide testimony or other evidence as to whether she paid any qualified tuition and related expenses that may qualify her for the AOC for 2013. Petitioner continued to assert that the tax return preparef' who f prepared her 2013 tax return "made many mistakes". 24 Accordingly, the Court sustains the IRS' disallowance 25 of the AOC for 2013. 866.488.DEPO www.Capita1ReportingCompany.com Capital Reporting Company 12 In order to give effect to our disposition of the disputed issues, decision will be entered under Rule 155. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 3:06 p.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