TAX COURT OPINION

Case: Thomas E. Mason
Docket Number: 10537-07S
Judge: Colvin
Opinion Type: bench
Filed: 01/09/2009
Pages: 7

emu.' .._. ADM . ~ RECORDE D __u SE-',' ' STAT . FILE S UNITED STATES TAX OURT WASHINGTON , DC 2021 7 THOMAS E . MASON, Petitione r V . Docket Nos . 10537-07S . COMMISSIONER OF INTERNAL REVENUE, Respondent O R D E R Pursuant to Rule 152(b), Tax Court Rules of Practice an d 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 Judge David Gustafson at Columbia, South Carolina, on December 9, 2008, containing his oral findings of fact and opinion rendered at the conclusion of the trial . In accordance with the oral findincs of fact and opinion, decision will be entered for respondent_.I - (Signed ) David Gustafson Judge Dated : Washington, D .C . January 9, 2009 SERVED JAN 12 2009 3 1 Bench Opinion by Judge David G stafson 2 December 9, 200 8 3 Mason v . Commissioner Docket No . 10537-07S 4 THE COURT : The Cour has decided to render 5 oral findings of fact and opinion in this case, an d 6 the following represents the C urt's oral findings of 7 fact and opinion . The oral findings of fact and 8 opinion shall not be relied up n as precedent in any 9 other case . --M;s 10 The bench opinion is made pursuant to th e 11 authority granted by Section 7 59(b) of the Internal 12 Revenue Code of 1986 as Amended, and Rule 152 of th e ->h 13 Tax Court Rules of Practice and Procedure . 14 This case was heard ~ursuant to th e 15 provisions of Section 7463 of he Internal Revenue 16 Code . Pursuant to that section, the decision to b e 17 entered is not reviewable by a y other court and thi s 18 opinion shall not be treated as precedent for any 19 other case . 20 By notice of deficie cy dated April 4, 2007, 21 Respondent determined that Pet tioner is liable for 22 the accuracy-related penalty u~der Section 6662 in the 23 amount of $40,663 .60 for the year 2000 . Respondent's 24 determination will be upheld . 25 The facts are largely stipulated and are not Heritage Reporting Corporatio n (202) 628-4888 4 1 disputed in any material resp ct . Petitioner resided 2 in Columbia, South Carolina, hen the petition in this 3 case was filed . Petitioner a d his spouse timel y 4 filed with Respondent a joint Form 1040 U .S . 5 Individual Income Tax Return f or the taxable year 6 2000 . The return reported tax due in the amount o f 7 $3,187 . 8 Petitioner was the defendant in the crimina l 9 case of United States of America v . Thomas Mason , 10 Criminal Case No . 05-583-01, in the United State s 11 District Court for the Eastern District o f 12 Pennsylvania . 13 On September 29th, 2 0 05, Petitioner wa s 14 charged with one count of fili ig a false federal income 15 tax return for the year 2000, -n violation of 26 U .S .C . 16 Section 7206(1) . On November 1, 2005, Petitioner 17 pleaded guilty to one count of filing a false federal 18 income tax return for the year 2000 . 19 Petitioner was sentenced to two years of 20 probation and was ordered to fully cooperate with th e 21 Internal Revenue Service . On February 14, 2006 , 22 Petitioner signed Form 4549, Income Tax Examinatio n 23 Changes, consenting to the assessment and collection of 24 deficiency in income tax in the' amount of $203,318 for 25 the taxable year 2000 . Heritage Reporting Corporation (202) 628-4888 5 On April 13, 2007, Rdespondent assesse d 2 against Petitioner a deficiency in income tax in th e 3 amount of $203,318 for the ta x ble year 2000 . 4 On April 4, 2007, Re Opondent issued th e 5 Petitioner a notice of deficiency for the year 2000 , 6 determining that Petitioner is liable for an accuracy- 7 related penalty under Section 662 in the amount o f 8 $40,663 .60, which constituted 0 percent of the tax 9 deficiency to which Petitionerlhad consented . 10 Petitioner timely filed a petition in thi s 11 court contesting that penalty . 12 Petitioner proved the following facts 1DE9 13 about his personal situation, w~ich Respondent did no t 14 challenge : Before he pleaded giilty to the tax crim e 15 concerning,,year 2000, Petitioned had spent 33 months in De l 16 prison on an unrelated convicti n . Petitioner is now 17 75 years old and in extremely p or health . He has 18 diabetes and has recently under one the amputation o f 19 one of his toes . He is unable to work . His wife is 78 20 years old and suffers from Alzheimer's . Petitioner ha s 21 difficulty making his house pay~ ents and putting foo d 22 on the table . 23 The Court has great sympathy for his 24 situation . ~C ) 25 Under Section 7491' Respondent has the Heritage Reporting Corporatio n (202) 628-4888 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 6 burden of production with resp ect to any penalty , addition to tax or additional mount imposed by th e Code . In this case, the stipu lated facts meet tha t b dur en . Section 6662(a) imposes an accuracy-relate d penalty in the amount of 20 pe rcent of any underpaymen t that is attributable to those causes specified i n Subsection (b) . Section 6662(b) then provides tha t among the causes justifying imposition of the penalt y is negligence or disregard of rules or regulations . Negligence is defined as any failure to mak e a reasonable attempt to comply'with the provisions o f the Internal Revenue laws . Sep 26 U .S .C . Section 666 2 and 26 C .F .R . Section 1 .6662-3 b)(1) . Negligence is the fai lure to exercise du e care or failure to do what a reasonable and pruden t person would do under the circumstance . See Neely v . Commissioner , 85 T .C . 934, 947(1985) . Disregard includes ca reless or reckless or intentional disregard~o€ the r i c)) les or regulations . Se e 26 U .S .C . Section 6662 and 26' C .F .R . Section 1 .6662 - 3 (b) (2) . Petitioner's guilty p lea to the charge o f filing a false tax return establishes his negligence . The 20 percent penalty of Section 6662 ma y Heritage Reporting Corporation (202) 628-4888 1 also be imposed on the basis f a substantia l 2 under yment of tax . Pursuan to Section 6662 (d)(1), a 1 L1 A 3 substantial understatement exists for any given taxable 7 4 year where the amount of the nderstatement exceeds the 5 greater of 10 percent of the ax required to be show n 6 on a return or $5,000 . 7 Petitioner understated his tax by over $200,000, more than 60 times what Petitioner reported . 9 The discrepancy was a substantial understatement . 10 Therefore, for two independent causes, both negligenc e 11 and substantial understatement,, Petitioner is liabl e 12 for the 20 percent penalty . 13 No penalty will be imposed with respect to a+^ 14 any portion of^underpayment if'llit is shown that there 15 was reasonable cause for such ortion and that th e 16 taxpayer acted in good faith with respect to suc h 17 portion . See Section 6664 . However, Petitioner has -t)~7) 18 produced no evidence that there was reasonable caus e 19 for any portion of his understatement of tax or that he 20 acted in good faith with respect thereto . His guilt y 21 plea establishes the contrary . ' 22 The facts about his ersonal and financial 23 hardship do not constitute rea onable cause . Those 24 facts may later be relevant in the collection du e 25 process context under Section 6330, but they are no t Heritage Reporting corporation (202) 628-4888 1 relevant to the determination Of his liability . 2 For the foregoing re sons decision will DL- 1 8 3 be entered in favor of Respondent . 4 This concludes the Court' s oral findings of 5 fact and opinion in this case .nd we are now adjourned . 6 (Whereupon , at 10 :50 !, a .m ., the bench opinion 7 in the above - entitled matter w s concluded . ) 8 9 10 11 12 13 14 15 16 17 18 19 20 / / 21 // 22 // 2 3 24 25 // Heritage Reporting Corporation (202) 628-4$88