TAX COURT OPINION

Case: Bill H. & Shirley J. Brooke
Docket Number: 19825-12
Judge: Kroupa
Opinion Type: bench
Filed: 11/22/2013
Pages: 5

UNITED STATES TAX COURT WASHINGTON, D.C. 20217 BILL H. & SHIRLEY J. BROOKE, Petitioners, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. ) ) ) ) ) ) ) ) ) Docket No. 19825-12 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 to petitioners and to respondent a copy of the pages of the transcript of this case before Judge Diane L. Kroupa in San Francisco, California on October 23, 2013, containing her 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, an appropriate order will be issued granting respondent's Motion for Summary Judgment. (Signed) Diane L. Kroupa Judge Date: Washington, DC November 22, 2013 NOV 2 6 2015 Capital Reporting Company 3 1 Bench Opinion by Judge Diane L. Kroupa 2 October 23, 2013 3 Bill H. And Shirley J. Brooke v. Commissioner 4 5 6 7 8 9 10 11 12 Docket No. 19825-12 THE COURT: The Court has decided to render oral findings of fact and opinion in this case, and the following represents the Court's oral findings of fact and opinion. These oral findings of fact and opinion shall not be relied upon as precedent in any other case. This bench opinion is made pursuant to the authority granted by section 7459(b) and Rule 152. 13 All section references are to the Internal Revenue 14 15 Code for 1984, 1986, 1987, 1988 and 1989, the years at issue, and all Rule references are to the Tax 16 Court Rules of Practice and Procedure. 17 18 19 20 21 This deficiency case is before the Court on respondent's Motion for Summary Judgment. The Court ordered petitioners to file a response or objection to respondent's motion. The Court also scheduled respondent's motion for a hearing on the Court's 22 October 21, 2013 San Francisco, California trial sess1on. 23 24 Petitioners appeared pro se and Thomas 25 Rohall appeared on behalf of respondent. 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company FINDINGS OF FACT 4 The record establishes and parties do not ÞO dispute the following facts. Petitioners resided in 1 2 3 4 California when they filed the petition. Petitioners 5 6 7 were partners in various Hoyt-related partnerships, subject to the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), Pub. L. 97-248, sec. 402, 96 8 Stat. 648. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Jay Hoyt (Hoyt) organized, promoted, sold and managed these partnerships. Hoyt organized over 100 similar "investor" partnerships for owning and breeding cattle. This Court determined in 2000 that Hoyt cattle operations constituted a tax shelter. Durham Farms #1 J.V. v. Commissioner, T.C. Memo. 2000-159, aff'd, Fed. Appx. 952 (9th Cir. 2003). Respondent subsequently removed all Hoyt income and deductions from the investor partnership returns, and then he made computational adjustments to the individuals partners' returns following their respective partnership proceedings. Respondent determined in the affected items notices of deficiency, upon which this case is based, that petitioners were liable for additions to tax and penalties under sections 6653(a), 6661 and 6662. Petitioners did not seek any professional 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 5 1 2 3 4 5 6 tax help outside of the Hoyt organization to understand the Hoyt partnerships. Petitioners also did not consult any outside professionals before signing the income tax returns. As mentioned previously, respondent filed a motion for summary judgment. The Court held a hearing on respondent's 7 motion. 8 9 OPINION We must address whether to grant 10 respondent's motion for summary judgment. 11 Petitioners concede that they are liable for the tax 12 13 14 15 deficiency, but seek to show whether they are victims of Hoyt's scheme. The Court understands that several other partners have claimed a theft loss. Some investors may have been successful. Others are still 16 waiting for the partnership proceedings to be 17 18 19 20 21 22 23 24 25 completed. We now focus on the several penalties and additions to tax at issue. Taxpayers are not liable for any additions to tax or penalties if the taxpayers establish that they acted with reasonable cause and not willful neglect. Higbee v. Commissioner, 116 T.C. 438, 447-48 (2001). establish that they had reasonable cause. etitioners failed to 866.488.DEPO www.CapitalReportingCompany.com Capital Reporting Company 1 Accordingly, we hold that petitioners are liable for 6 the additions to tax and penalties set forth in the affected items notices of deficiency. Petitioners are pro se and seek leniency from the Court. We sought to be liberal in listening to petitioners' sad but true dilemma. They may be victims. This is not the proper forum, however, to bring an action against Hoyt. Petitioners must establish reasonable cause and not willful neglect. They have failed to do so. They simply submit that they observed Hoyt's cattle operation. This is not enough to absolve petitioners of liability for the additions to tax and penalties. To reflect the foregoing, decision will be entered for respondent. An appropriate order will be issued granting respondent's summary judgment motion, and sustaining the determinations in the affected items notice of deficiency for the years at issue. THIS CONCLUDES THE COURT'S ORAL FINDINGS OF FACT AND OPINION IN THIS CASE. (Whereupon, at 2:13 p.m., the above- entitled matter was concluded.) 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